ION Media Networks Reports Second Quarter 2008 Financial Results

WEST PALM BEACH, Fla.--(BUSINESS WIRE)--ION Media Networks, Inc. (the “Company” or “ION”) announced today its financial results for the quarter ended June 30, 2008.

ION’s broadcast cash flow for the quarter ended June 30, 2008 was $4.1 million compared to $15.4 million in the second quarter of 2007. Broadcast cash flow for the six months ended June 30, 2008 was $17.1 million compared to $44.5 million in the first six months of 2007. Free cash flow after capital expenditures and interest expenses for the quarter ended June 30, 2008, was negative $22.5 million, compared to negative $9.9 million for the corresponding quarter in 2007. For the six months ended June 30, 2008, free cash flow after capital expenditures and interest expenses was negative $36.1 million, compared to negative $7.5 million for the six months ended June 30, 2007.

The decreases in cash flow reflect a softening infomercial revenue marketplace, as well as the Company's initiatives and spending on programming, staffing, R&D and capital projects designed to transition the Company to a programming and advertising-driven TV network business. The strategy behind this direction is to reduce the Company's historical reliance on the softening infomercial category and capitalize on its market share opportunity on the content and advertising side of the network business.

In the next several weeks, the Company will step up its on-air transition to broader high quality content, introducing several high profile major network shows on the ION Television prime time network schedule on September 8, 2008, starting with Boston Legal, NCIS and ER. This will coincide with a consumer marketing push, an upgraded on-air look-and-feel and new consumer positioning tagline. These changes will demonstrate the Company's commitment to evolving ION into a television platform with broad appeal for consumers, advertisers, and content creators.

The Company's strategy is to systematically expand its programming in coming television seasons, targeting a strong mix of quality major network TV series, as well as original content to be produced specifically for ION. Several key content additions are already secured, such as the successful Ghost Whisperer and Criminal Minds franchises, which will join the lineup in 2009. Beyond that, the Company will enter the next phase of its content expansion with a focus on adding original projects in 2009.

Consistent with these growth objectives, the Company continues to expand its creative, marketing, research, and sales leadership team. New York will become the principal base for these leadership roles over the course of 2009.

“We are entering a phase of increased programming, marketing and infrastructure investment for the television network,” said Brandon Burgess, ION’s Chairman and Chief Executive Officer, “while balancing investment with difficult TV market conditions.”

In managing its financial flexibility, the Company elected to pay interest on its $405 million principal amount of Floating Rate Second Priority Senior Subordinated Notes for the three month interest periods that commenced April 15, 2008 and July 15, 2008 by increasing the principal amount of the outstanding Notes rather than in cash, which will reduce the Company's cash interest expenditures by approximately $9 million in the third and fourth quarters of 2008, net of the effects of the Company's existing interest rate swap arrangements. The Company expects to continue to use the pay-in-kind option on these notes in future quarters, until such time as market conditions improve.

About ION Media Networks

ION Media Networks, Inc. owns and operates the nation's largest broadcast television station group and ion Television, which reaches over 94 million U.S. television households via its nationwide broadcast television, cable and satellite distribution systems, and features popular TV series and movies from the award-winning libraries of RHI Entertainment, CBS Television, NBC Universal, Sony Pictures Television, Twentieth Television and Warner Bros., among others. Using its digital multicasting capability, the Company has launched the digital TV brands qubo, a channel for children focusing on literacy and values, and ion Life, a channel dedicated to active living and personal growth. It also has launched Open Mobile Ventures Corporation (OMVION), a business unit focused on the research and development of portable, mobile and out-of-home transmission technology using over-the-air digital television spectrum. For more information, visit www.ionmedia.com.

Selected Financial Results
		Quarter ended June 30,								Six Months ended June 30,
			2008				2007				2008				2007
Net cash used in operating activities		$	(15,563	)		$	(7,944	)		$	(26,439	)		$	(4,804	)
Broadcast cash flow		$	4,139			$	15,355			$	17,052			$	44,515
Free cash flow		$	(22,494	)		$	(9,931	)		$	(36,130	)		$	(7,530	)

Reconciliation of Non-GAAP Measures

The Company believes that net cash (used in) provided by operating activities is the financial measure calculated and presented in accordance with accounting principles generally accepted in the United States ("GAAP") that is most directly comparable to Broadcast Cash Flow and Free Cash Flow. The Company’s net cash used in operating activities was $15.6 million for the quarter ended June 30, 2008, compared to net cash used in operating activities of $7.9 million for the quarter ended June 30, 2007. The Company’s net cash used in operating activities was $26.4 million for the six months ended June 30, 2008, compared to net cash used in operating activities of $4.8 million for the six months ended June 30, 2007.

The Company believes the presentation of Broadcast Cash Flow and Free Cash Flow is relevant and useful because these are metrics used by industry analysts and others in the financial community in evaluating the Company's operating performance. In addition, Broadcast Cash Flow is the primary indicator utilized by Company management in evaluating the Company's financial performance. In evaluating Broadcast Cash Flow and Free Cash Flow, investors should consider various factors, including the relationship of these metrics to the Company's reported cash flows from operating activities. Investors should be aware that Broadcast Cash Flow and Free Cash Flow may not be comparable to similarly titled measures presented by other companies and that such comparisons could be misleading unless all companies and analysts calculate such measures in the same manner. The use of Broadcast Cash Flow and Free Cash Flow is not intended to replace or supersede any information presented in accordance with GAAP.

The table below reconciles Broadcast Cash Flow and Free Cash Flow with net cash (used in) provided by operating activities, as derived from the Company’s financial statements.

ION Media Networks
Reconciliation of Non-GAAP Measures:
(in thousands)
		Quarter ended June 30,								Six Months ended June 30,
			2008				2007				2008				2007
Net cash used in operating activities		$	(15,563	)		$	(7,944	)		$	(26,439	)		$	(4,804	)
Less:
Capital expenditures			(6,931	)			(1,987	)			(9,691	)			(2,726	)
FREE CASH FLOW			(22,494	)			(9,931	)			(36,130	)			(7,530	)
Less:
Interest income			(312	)			(1,365	)			(1,006	)			(1,850	)
Add back:
Cash paid for interest			26,945				26,651				54,188				53,895
BROADCAST CASH FLOW		$	4,139			$	15,355			$	17,052			$	44,515