UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20152016
o           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 0-24796
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
(Exact name of registrant as specified in its charter)
BERMUDA 98-0438382
(State or other jurisdiction of incorporation and organization) (IRSI.R.S. Employer Identification No.)
   
O'Hara House, 3 Bermudiana Road, Hamilton, Bermuda HM 08
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (441) 296-1431
Title of each class Name of each exchange on which registered
Securities registered pursuant to Section 12(b) of the Act:
CLASS A COMMON STOCK, $0.08 PAR VALUE NASDAQ Global Select Market, Prague Stock Exchange
   
Securities registered pursuant to Section 12(g) of the Act:
UNIT WARRANTS TO PURCHASE SHARES OF CLASS A COMMON STOCK None.
15.0% FIXED RATE NOTES DUE 2017None.
Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the securities Act.  Yes £ No T
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes £No T
Indicate by check mark whether registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for each shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes T No £
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes T No £


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” or “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer £
Accelerated filer T
Non-accelerated filer £
Smaller reporting company £
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act) Yes £ No T



The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 20152016 (based on the closing price of US$ 2.182.11 of the registrant's Class A Common Stock, as reported by the NASDAQ Global Select Market on June 30, 2015)2016) was US$ 160.9128.1 million.
Number of shares of Class A Common Stock outstanding as of February 17, 2016:6, 2017: 135,804,221143,450,921
DOCUMENTS INCORPORATED BY REFERENCE
Document Location in 10-K in Which Document is Incorporated
Registrant's Proxy Statement for the 20162017 Annual General Meeting of Shareholders Part III




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CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
FORM 10-K
For the year ended December 31, 20152016
TABLE OF CONTENTSPage
  
PART I 
 
 
 
 
 
 
    
PART II 
 
 
 
 
 
 
 
 
    
PART III 
 
 
 
 
 
    
PART IV 
 
    
    
    


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I.    Forward-looking Statements
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 22E of the Securities Exchange Act of 1934 (the "Exchange Act"), including those relating to our capital needs, business strategy, expectations and intentions. Statements that use the terms “believe”, “anticipate”, “trend”, “expect”, “plan”, “estimate”, “forecast”, “should”,“intend” and similar expressions of a future or forward-looking nature identify forward-looking statements for purposes of the U.S. federal securities laws or otherwise. In particular, information appearing under the sections entitled "Business," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" includes forward looking-statements. For these statements and all other forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy or are otherwise beyond our control and some of which might not even be anticipated. Forward-looking statements reflect our current views with respect to future events and because our business is subject to such risks and uncertainties, actual results, our strategic plan, our financial position, results of operations and cash flows could differ materially from those described in or contemplated by the forward-looking statements contained in this report.
Important factors that contribute to such risks include, but are not limited to, those factors set forth under "Risk Factors” as well as the following: the successeffect of global economic uncertainty and Eurozone instability in our efforts to increase our revenuesmarkets and recapture advertising market share in the Czech Republic;extent, timing and duration of any recovery; levels of television advertising spending and the rate of development of the advertising markets in the countries in which we operate; the effect of global economic uncertainty and Eurozone instability in our markets and the extent, timing and duration of any recovery; the extent to which our liquidity constraints and debt service obligations restrict our business; our exposure to additional tax liabilities as well as liabilities resulting from regulatory or legal proceedings initiated against us; our ability to refinance our existing indebtedness; our success in continuing our initiatives to diversify and enhance our revenue streams; our ability to make cost-effective investments in our television businesses, including investments in programming; our ability to develop and acquire necessary programming and attract audiences; our ability to refinance our existing indebtedness;and changes in the political and regulatory environments where we operate and in the application of relevant laws and regulations; our exposure to additional tax liabilities; and the timely renewal of broadcasting licenses and our ability to obtain additional frequencies and licenses.regulations. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included in this report. All forward-looking statements speak only as of the date of this report. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law.

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Defined Terms
Unless the context otherwise requires, references in this report to the “Company”, “CME”, “we”, “us” or “our” refer to Central European Media Enterprises Ltd. (“CME Ltd.”) or CME Ltd. and its consolidated subsidiaries listed in Exhibit 21.01 hereto. Unless otherwise noted, all statistical and financial information presented in this report has been converted into U.S. dollars using period-end exchange rates. All references in this report to “US$” or “dollars” are to U.S. dollars, all references to “BGN” are to Bulgarian lev, all references to “HRK” are to Croatian kuna, all references to “CZK” are to Czech koruna, all references to “RON” are to the New Romanian lei and all references to “Euro” or “EUR” are to the European Union Euro. The exchange rates as at December 31, 20152016 used in this report are BGN/US$ 1.79; HRK//BGN 1.86; US$ 6.99; CZK//HRK 7.22; US$ 24.82; RON//CZK 25.64; US$ 4.15;/RON 4.30; and EUR/US$ 0.92./EUR 0.95.
The following defined terms are used in this Annual Report on Form 10-K:
the term “2015 Convertible Notes” refers to our 5.0% senior convertible notes due November 2015, redeemed in November 2015;
the term “2016 Fixed Rate Notes” refers to our 11.625% senior notes due 2016, redeemed in June 2014;
the term “2017 Fixed Rate Notes” refers to the 9.0% senior secured notes due 2017 issued by our wholly owned subsidiary, CET 21 spol. s r.o. (“CET 21”), redeemed in December 2014;
the term "2017 PIK Notes" refers to our 15.0% senior secured notes due 2017;2017, redeemed in April 2016;
the term "2017 Term Loan" refers to our 15.0% term loan facility due 2017, dated as of February 28, 2014, as amended and restated on November 14, 2014;repaid in April 2016;
the term "2018 Euro Term Loan" refers to our floating rate senior unsecured term credit facility due 2018 guaranteed by Time Warner, dated as of November 14, 2014 and amended on February 19, 2016 to, among other things. extend the maturity to 2018 with effect from the drawing of the 2021 Euro Term Loan;2016;
the term "2019 Euro Term Loan" refers to our floating rate senior unsecured term credit facility due 2019 guaranteed by Time Warner, dated as of September 30, 2015 and amended on February 19, 2016;
the term "2021 Euro Term Loan" refers to the undrawnour floating rate senior unsecured term credit facility due 2021 entered into by our wholly-owned subsidiary CME Media Enterprises B.V.BV (as defined below), guaranteed by Time Warner and CME Ltd., entered into ondated as of February 19, 2016;
the term "Euro Term Loans" refers collectively to the 2018 Euro Term Loan, 2019 Euro Term Loan and 2021 Euro Term Loan;
the term "2021 Revolving Credit Facility" refers to our amended and restated revolving credit facility dated as of February 28, 2014, as amended and restated as of November 14, 2014 and further amended and restated on February 19, 2016 to, among other things. extend the maturity to 2021 with effect from the drawing of the 2021 Euro Term Loan;2016;
the term "Senior DebtGuarantee Fees" refers to amounts accrued and payable to Time Warner as consideration for Time Warner's guarantees of the context may require, to the 2015 Convertible Notes, 2017 PIK Notes, 2017 Term Loan, 2018 Euro Term Loan, 2019 Euro Term Loan, 2021 Euro Term Loan and 2021 Revolving Credit Facility;
the term “2015 Refinancing Commitment Letter” refers to a commitment letter whereby Time Warner agreed to provide or assist with arranging a loan facility to refinance the 2015 Convertible Notes at or immediately prior to their maturity;Loans;
the term “Reimbursement Agreement" refers to an agreement with Time Warner which provides that we will reimburse Time Warner for any amounts paid by them under any guarantee or through any loan purchase right exercised by Time Warner, dated as of November 14, 2014 and amended and restated on February 19, 2016;
the term "CME BV" refers to CME Media Enterprises B.V., our 100% owned subsidiary;
the term "CME NV" refers to Central European Media Enterprises N.V., our 100% owned subsidiary;
the term "Time Warner" refers to Time Warner Inc.; and
the term “TW Investor” refers to Time Warner Media Holdings B.V.
PART I
ITEM 1.    BUSINESS
Central European Media Enterprises Ltd., a Bermuda company limited by shares, is a media and entertainment company operating in Central and Eastern Europe. Our assets are held through a series of Dutch and Curaçao holding companies. We manage our business on a geographical basis, with six operating segments, Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic and Slovenia, which are also our reportable segments and our main operating countries. We own 94% of our Bulgaria operations and 100% of our broadcast operating and license companies in our remaining countries.
We have market leading broadcast operations in six countries in Central and Eastern Europe broadcasting a total of 36 television channels. Each country also develops and produces content for their television channels. We generate advertising revenues in our country operations primarily through entering into agreements with advertisers, advertising agencies and sponsors to place advertising on the television channels that we operate. We generate additional revenues by collecting fees from cable and direct-to-home (“DTH”) operators for carriage of our channels.
General market information
Our main operating countries are members of the European Union (the “EU”). However, as emerging economies, they have adopted Western-style democratic forms of government within the last twenty-five years and have economic structures, political and legal systems, systems of corporate governance and business practices that continue to evolve. As the economies of our operating countries converge with more developed nations and their economic and commercial infrastructures continue to develop, we believe the business risks of operating in these countries will continue to decline.
The following table showsWe operate market leading television networks in each of these six countries, broadcasting a total of 36 television channels to approximately 50 million people living in the per capita nominal gross domestic product (“GDP”) (i.e., not adjustedregion. Each segment also develops and produces content for inflation) for the markets of Central and Eastern Europe in which we operate and for a combined group of 11 countries from within the European Union, predominantly from Western Europe, and the United States. (collectively, the “developed markets”). GDP is a measure of economic activity and represents the estimated total value of final goods and services produced by a country in a specified period. As our markets grow, the level of disposable income of the population increases, which provides an incentive for advertisers to advertise their products.
Comparative historical period amounts have been adjusted to present GDP at constant exchange rates.

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Nominal GDP per capita US$2015 2014 2013 2012 2011 2010 2009 2008
CME markets$11,760
 $11,283
 $10,872
 $10,584
 $10,347
 $9,910
 $9,655
 $9,966
Growth rate4% 4% 3% 2% 4% 3% (3)% 12%
Developed markets$45,304
 $44,117
 $42,972
 $42,167
 $41,315
 $40,170
 $39,014
 $40,308
Growth rate3% 3% 2% 2% 3% 3% (3)% 1%
Source: International Monetary Fund ("IMF"), CME estimates
The following table shows the ratio of per capita nominal GDP at purchasing power parity (“PPP”)television channels. We generate advertising revenues in our marketscountry operations primarily through entering into agreements with advertisers, advertising agencies and sponsors to place advertising on the television channels that we operate. We generate additional revenues by collecting fees from cable, direct-to-home (“DTH”) and internet protocol television ("IPTV") operators for carriage of developed markets.
Ratio of nominal GDP at PPP per capita2015 2014 2013 2012 2011 2010 2009 2008
CME markets as a % of developed markets51% 50% 49% 49% 49% 48% 49% 49%
Source: IMF, CME estimates
The level of nominal GDP per capita in our markets was converging towards the level of the developed markets at a fairly significant rate up until 2009, when the global recession impacted our markets to a greater extent than the developed markets and the rate of convergence slowed. The convergence stagnated somewhat in the years immediately following the global recession, but has improved each year since 2012. We believe that the convergence of GDP per capita in our markets with the developed markets will continue as economic conditions improve and sustained periods of higher growth return.
The following table shows total advertising spend per capita in the markets of Central and Eastern Europe in which we operate and for the developed markets at constant exchange rates:
Total advertising spend per capita US$2015 2014 2013 2012 2011 2010 2009 2008
CME markets$33
 $31
 $30
 $31
 $33
 $33
 $35
 $47
Growth rate5% 6% (5)% (7)% 0% (4)% (26)% 12 %
Developed markets$337
 $331
 $322
 $317
 $312
 $305
 $301
 $331
Growth rate2% 3% 2 % 2 % 2% 1 % (9)% (3)%
Source: CME estimates, Group M, IMF
The ratio of total advertising spend per capita to nominal GDP per capita, also known as advertising intensity, in our markets was converging with that of the developed markets until 2008 and had risen to a weighted average level in our markets of 0.47% in 2008 compared to 0.82% in the developed markets. Due to the protracted period of advertising market decline since 2008, the weighted average advertising intensity in CME markets fell to 0.27% in 2013 compared to 0.75% in developed markets. In 2014 and 2015, the weighted average advertising intensity in our markets improved slightly to 0.28%, while the developed markets regressed slightly to 0.74% in 2015. In the long term, we expect advertising intensity in our markets to converge towards the levels of the developed markets, but not at the rate of convergence seen before the global recession.
The convergence of advertising intensity is driven by several factors, including the introduction of premium products into the market by new or existing advertisers aiming to capture increased consumer disposable income. In the developed markets, the marketing of premium products, including finance, automotive, entertainment and travel products, makes up the majority of current television advertising spending. In the markets in which we operate, basic products such as food, beverages and household cleaning supplies comprise the main source of advertising revenues. The following table shows a comparison of the allocation of advertising budgets between basic and premium products in our markets versus those in more developed countries in 2015:
Mix of advertised productsCME markets Developed markets
Premium38% 66%
Basic59% 30%
Other3% 4%
Source: CME estimates, Group M
Similar to the trends described above, the proportion of premium goods advertised in our markets gradually increased over time up to 2009. In 2015, the percentage of advertising for premium products increased for the second time in the past three years. In the long term, we expect the historic trend of increased advertising of premium products to continue.

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The following table shows television advertising spend per capita in the markets of Central and Eastern Europe in which we operate and for the developed markets at constant exchange rates:
TV advertising spend per capita US$2015 2014 2013 2012 2011 2010 2009 2008
CME markets$17
 $16
 $15
 $16
 $17
 $17
 $18
 $23
Growth rate6% 4% (5)% (5)% 0% (4)% (24)% 14 %
Developed markets$142
 $142
 $138
 $138
 $137
 $134
 $128
 $139
Growth rate0% 3% 0 % 1 % 2% 5 % (8)% (1)%
Source: CME estimates, Group M, IMF
Television advertising spend per capita in our markets grew at a significantly faster rate than in developed markets prior to 2009, but was more heavily impacted than in developed markets during the recent prolonged period of advertising market decline from 2009 to 2013. Television advertising spend has grown as a percentage of total advertising spend in our markets, as shown below. Furthermore, since television was commercialized in our markets at the same time as other forms of media, television advertising generally accounts for a higher proportion of total advertising spend than in the developed markets, where newspapers, magazines and radio were established as advertising media well before the advent of television.
The following table shows television advertising spend as a percentage of total advertising spend in the markets of Central and Eastern Europe in which we operate and for the developed markets.
TV advertising spend
as a % of total advertising spend
2015 2014 2013 2012 2011 2010 2009 2008
CME markets54% 53% 52% 53% 52% 50% 50% 51%
Developed markets42% 43% 43% 43% 44% 44% 42% 42%
Source: Group M
As shown above, the share of television advertising as a proportion of total advertising in our markets has grown since 2008. We believe that television advertising will hold its share because of its greater reach and better measurement capabilities, which makes this medium more effective to advertisers compared to print, radio and outdoor advertising. Television is especially attractive to advertisers because it delivers high reach at low cost compared to other forms of media. More recently, internet advertising has grown at the expense of print and outdoor advertising, which has allowed us to offer additional advertising opportunities to complement our television advertising revenues.
In summary, we expect the economies of the countries in which we operate to resume their convergence with more developed markets, particularly Western Europe, resulting in higher rates of growth of GDP per capita in our markets compared to that of the developed countries.
Country operationschannels.
Our strategy is to maintain or increase our audience leadership in each of our countries in order to pursue sales strategies designed to maximize our revenues. We have built our audience leadership in each of our markets by operating a multi-channel business model with a diversified portfolio of television channels which appeal to a broad audience.
Content that consistently generates high audience shares is crucial to maintaining the success of each of our country operations. While content acquired from the Hollywood studios remains popular, our audiences increasingly demand content that is produced in their local language and reflects their society, attitudes and culture. We believe developing and producing local content is key to being successful in prime time and supporting market-leading channels and that maintaining a regular stream of popular local content at the lowest possible cost is operationally important over the long term.
As the distribution platforms in our region develop and become more diversified, our television channels and content will increasingly reach viewers through new distribution offerings, such as internet TV and smart devices. We offer viewers the choice of watching premium television content through a series of portals, including through Voyo, our subscription video-on-demand service, and advertising supported catch-up services on our websites.
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Sales
We continuegenerate advertising revenues primarily through entering into agreements with advertisers, advertising agencies and sponsors to believe that the Company is best served by a focusplace advertising on our television broadcasting assets in each country. Inchannels.
Our main unit of inventory is the commercial gross rating point (“GRP”), a measure of the number of people watching television when an advertisement is aired. We generally contract with a client to provide an agreed number of GRPs for an agreed price (“cost per point” or “CPP”). Much less frequently, and usually only for small niche channels, we may sell on a fixed spot basis where an advertisement is placed at an agreed time for a negotiated price that regard, we completedis independent of the divestiturenumber of viewers. The CPP varies depending on the season and time of day the advertisement is aired, the volume of GRPs purchased, requests for special positioning of the advertisement, the demographic group that the advertisement is targeting and other factors. Our larger advertising customers generally enter into annual contracts which set the pricing for a committed volume of GRPs.
We operate our television networks based on a business model of audience leadership, brand strength and strong local content. Our sales strategy is to maximize the monetization of our non-core assetsadvertising time by leveraging our high brand power and applying an optimal mix of pricing and sell-out rate. The effectiveness of our sales strategy is measured by our share of the television advertising market, which represents the proportion of our television advertising revenues in 2015, includingthe market compared to the total television advertising market. We also generate additional revenues by collecting carriage fees from cable, satellite and IPTV operators for broadcasting our remaining distribution businesschannels.
The public broadcasters in Romania, as well as our Romanian studios, radio, cinema and music businesses.the countries in which we operate are restricted in the amount of advertising that they may sell. See “Regulation of Television Broadcasting” below for additional information.
Programming
Our programming strategy in each country is tailored to match the expectations of key audience demographics by scheduling and marketing an optimal mix of programs in a cost effective manner. The programming that we provide drives our audience shares and ratings (see "Audience Share and Ratings" below) and consists of locally-produced news, current affairs, fiction, and reality and entertainment shows as well as acquired foreign movies, series and sports programming.
We focus our programming investments on securing leading audience share positions during prime time, where the majority of advertising revenues are delivered, and improving our cost efficiency through optimizing the programming mix and limiting the cost of programming scheduled off-prime time while maintaining all day audience shares.
Audience Share and Ratings
The following presentssets forth the channels operated by each of our segments operate.segments. The tables below provide a comparison of all day and prime time audience shares for 20152016 in the target demographic of each of our leading channels to the primary channels of our main competitors.
Audience share represents the viewers watching a channel in proportion to the total audience watching television. Ratings represent the number of people watching a channel in proportion to the total population. Audience share and ratings information are measured in each market by international measurement agencies using peoplemeters, which quantify audiences for different demographics and subgeographies of the population measured throughout the day. Our channels schedule programming intended to attract audiences within specific “target”target demographics that we believe will be attractive to advertisers.

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Bulgaria
We operate one general entertainment channel, BTV, and five other channels, BTV CINEMA, BTV COMEDY, RING, BTV ACTION and BTV LADY.
Target Demographic Channel Ownership All day audience share (2015) Prime time audience share (2015) Channel Ownership All day audience share Prime time audience share
  2016 2015 2016 2015
(18-49) BTV CME 31.5% 36.6%
18-49 BTV CME 30.5% 31.5% 33.6% 36.6%
 NOVA TV MTG 19.4% 21.8% NOVA TV MTG 19.2% 19.4% 21.1% 21.8%
 BNT 1 Public television 5.8% 7.0% BNT 1 Public television 7.0% 5.8% 8.9% 7.0%
  
Source: GARB
The combined all day and prime time audience shares of our Bulgaria operations in 2015 was 38.8%2016 were 39.6% and 42.9%42.6%, respectively.
Croatia
We operate one general entertainment channel, NOVA TV (Croatia) and three other channels, DOMA (Croatia), NOVA WORLD and MINI TV.
Target Demographic Channel Ownership All day audience share (2015) Prime time audience share (2015) Channel Ownership All day audience share Prime time audience share
  2016 2015 2016 2015
(18-54) Nova TV (Croatia) CME 21.8% 28.3%
18-54 Nova TV (Croatia) CME 20.9% 21.8% 27.0% 28.3%
 RTL RTL 16.4% 19.1% RTL RTL 14.9% 16.4% 17.5% 19.1%
 HTV 1 Public television 12.5% 11.6% HTV 1 Public television 11.5% 12.5% 10.1% 11.6%
  
Source: AGB Nielsen Media Research
The combined all day and prime time audience shares of our Croatia operations in 2015,2016, excluding NOVA WORLD and MINI TV, was 27.4%were 27.2% and 35.1%34.0%, respectively.
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Czech Republic
We operate one general entertainment channel, TV NOVA (Czech Republic), and seven other channels, NOVA CINEMA, NOVA SPORT 1, NOVA SPORT 2, a premium sport-related channel launched on September 5, 2015, FANDA, SMICHOV, TELKA,NOVA ACTION (formerly FANDA), NOVA 2 (formerly SMICHOV), NOVA GOLD (formerly TELKA) and NOVA INTERNATIONAL, a general entertainment channel broadcasting in the Slovak Republic launched on February 1, 2016.Republic.
Target Demographic Channel Ownership All day audience share (2015) Prime time audience share (2015) Channel Ownership All day audience share Prime time audience share
  2016 2015 2016 2015
(15-54) TV NOVA (Czech Republic) CME 25.0% 29.3%
15-54 TV NOVA (Czech Republic) CME 23.7% 24.9% 28.2% 29.2%
 Prima MTG / GME 10.8% 12.2% Prima MTG / GME 10.8% 10.9% 13.1% 12.2%
 CT 1 Public television 12.1% 14.4% CT 1 Public television 12.3% 12.2% 14.7% 14.5%
  
Source: ATO - Nielsen Admosphere; Mediaresearch
The combined all day and prime time audience shares of our Czech Republic operations in 2015,2016, excluding NOVA SPORT 1, NOVA SPORT 2 and NOVA INTERNATIONAL, was 36.0%were 34.1% and 40.2%37.7%, respectively.

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Romania
We operate one general entertainment channel, PRO TV, and eight other channels, ACASA, ACASA GOLD, PRO CINEMA, SPORT.RO, MTV ROMANIA, PRO TV INTERNATIONAL, PRO TV CHISINAU, a general entertainment channel broadcasting in Moldova, and ACASA IN MOLDOVA.
Target Demographic Channel Ownership All day audience share (2015) Prime time audience share (2015) Channel Ownership All day audience share Prime time audience share
  2016 2015 2016 2015
(18-49 Urban) PRO TV CME 18.9% 23.9%
18-49 Urban PRO TV CME 20.6% 18.9% 25.0% 23.9%
 Antena 1 Intact group 14.7% 14.0% Antena 1 Intact group 15.7% 14.7% 15.9% 14.0%
 TVR 1 Public television 1.8% 1.9% TVR 1 Public television 1.3% 1.8% 1.5% 1.9%
  
Source: Kantar Media
The combined all day and prime time audience shares of our Romania operations in 2015,2016, excluding PRO TV INTERNATIONAL, PRO TV CHISINAU and ACASA IN MOLDOVA, was 24.7%were 25.1% and 31.0%29.1%, respectively.
Slovak Republic
We operate one general entertainment channel, TV MARKIZA, and three other channels, DOMA (Slovak Republic), DAJTO and MARKIZA INTERNATIONAL, a general entertainment channel broadcasting in the Czech Republic launched on February 1, 2016.Republic.
Target Demographic Channel Ownership All day audience share (2015) Prime time audience share (2015) Channel Ownership All day audience share Prime time audience share
  2016 2015 2016 2015
(12-54) TV MARKIZA CME 22.9% 24.8%
12-54 TV MARKIZA CME 22.3% 22.9% 23.3% 24.9%
 TV JOJ J&T Media Enterprises 16.5% 20.0% TV JOJ J&T Media Enterprises 15.4% 16.5% 18.8% 20.0%
 Jednotka Public Television 7.5% 8.8% Jednotka Public Television 7.8% 7.5% 9.5% 8.8%
  
Source: PMT/ TNS SK
The combined all day and prime time audience shares of our Slovak Republic operations in 2015,2016, excluding MARKIZA INTERNATIONAL, was 31.1%were 30.7% and 33.3%32.2%, respectively.
Index

Slovenia
We operate two general entertainment channels, POP TV and KANAL A, and three other channels, KINO, BRIO and OTO.
Target Demographic Channel Ownership All day audience share (2015) Prime time audience share (2015) Channel Ownership All day audience share Prime time audience share
  2016 2015 2016 2015
(18-54) POP TV CME 19.5% 27.8%
18-54 POP TV CME 21.3% 19.5% 31.6% 27.8%
 Planet TV Antenna Group / TSmedia 8.6% 11.7% Planet TV Antenna Group / TSmedia 8.1% 8.6% 10.4% 11.7%
 SLO 1 Public Television 8.6% 9.4% SLO 1 Public Television 9.0% 8.6% 9.6% 9.4%
  
Source: AGB Nielsen Media Research
The combined all day and prime time audience shares of our Slovenia operations in 2015 was 34.3%2016 were 38.1% and 42.7%47.5%, respectively.
Sales
We generate advertising revenues primarily through entering into agreements with advertisers, advertising agencies and sponsors to place advertising on our television channels.
Our main unit of inventory is the commercial gross rating point (“GRP”), a measure of the number of people watching television when an advertisement is aired. We generally contract with a client to provide an agreed number of GRPs for an agreed price (“cost per point” or “CPP”). Much less frequently, and usually only for small niche channels, we may sell on a fixed spot basis where an advertisement is placed at an agreed time for a negotiated price that is independent of the number of viewers. The CPP varies depending on the season and time of day the advertisement is aired, the volume of GRPs purchased, requests for special positioning of the advertisement, the demographic group that the advertisement is targeting and other factors. Our larger advertising customers generally enter into annual contracts which set the pricing for a committed volume of GRPs.

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We operate our broadcast operations based on a business model of audience leadership, brand strength and strong local content. Our sales strategy is to maximize the monetization of our advertising time by leveraging our high brand power and applying an optimal mix of pricing and sell-out rate. The effectiveness of our sales strategy is measured by our share of the television advertising market, which represents the proportion of our television advertising revenues in the market compared to the total television advertising market. We also generate additional revenues by collecting fees from cable and satellite operators for carriage of our channels.
The public broadcasters in the countries in which we operate are restricted in the amount of advertising that they may sell. See “Regulation of Television Broadcasting” below for additional information.
Seasonality
We experience seasonality, with advertising sales tending to be lowest during the third quarter of each calendar year due to the summer holiday period (typically July and August), and highest during the fourth quarter of each calendar year.year due to the holiday season.
Regulation of Television Broadcasting
Television broadcasting in each of the countries in which we operate is regulated by a governmental authority or agency. In this report, we refer to such agencies individually as a “Media Council” and collectively as “Media Councils”. Media Councils generally supervise broadcasters and their compliance with national broadcasting legislation, as well as control access to the available frequencies through licensing regimes.
Programming and Advertising Regulation
Our main operating countries are member states of the EU, and as such, our broadcast operations in such countries are subject to relevant EU legislation relating to media.
The EU Audiovisual Media Services Directive (the “AVMS Directive”) came into force in December 2007March 2010 and provides the legal framework for audiovisual media services generally in the EU. The AVMS Directive covers both linear (i.e., broadcasting) and non-linear (e.g., video-on-demand and mobile television)catch-up) transmissions of audiovisual media services, with the latter subject to significantly less stringent regulation. Among other things, the AVMS Directive requires broadcasters where “practicableto comply with rules related to, but not limited to, program content, advertising content and quotas, product placement, sponsorship, teleshopping, accessibility by appropriate means,”persons with a visual or hearing disability, and minimum quotas with respect to reserve a majority of their broadcast time for “European works.” Such works are definedworks” (defined as originating from an EU member state or a signatory to the Council of Europe's Convention on Transfrontier Television as well as being written and produced mainly by residents of the EU or Council of Europe member states or pursuant to co-production agreements between such states and other countries.countries). In addition, the AVMS Directive requires that at least 10% of either broadcast time or programming budget is dedicated to programs made by European producers who are independent of broadcasters. News, sports, games, advertising, teletext services and teleshopping are excluded from the calculation of these quotas. In respect of advertising, the AVMS Directive provides that the proportion of television advertising spots and teleshopping spots within a given hour shall not exceed 20% (what is commonly referred to as the ‘12 minute per hour rule’). The AVMS Directive does not otherwise restrict when programming canmay be interrupted by advertising in linear broadcasting, except in the case of movies,films and news and children's programming where(where programming canmay be interrupted once every thirty minutes or more. In addition, broadcasters may use product placement in most genres, subject tomore) and children’s programming (where the identification of such practices and limitations on prominence.
Member states were required to implement the AVMS Directive by December 19, 2009, and of the countries in which we operate Croatia, the Czech Republic, Romania and the Slovak Republic have notified the European Commissionsame restriction applies providing that the regulations have been put in place. Legislation has been adopted in Bulgariaprogram is greater than thirty minutes) and Slovenia to implement the AVMS Directive.religious programming (where no advertising or teleshopping shall be inserted). Under the AVMS Directive, member states areproduct placement is prohibited subject to certain exceptions (for example it is permitted in films and series, sports programs and light entertainment programs) and providing that the use of product placement is not ‘unduly’ prominent, is not promotional and is appropriately identified to adopt stricter conditions than those set forth inviewers.
Legislation implementing the AVMS Directive has been adopted across our operating countries. On May 25, 2016, the European Commission adopted a proposal amending the AVMS Directive. As proposed the legislation liberalises many of the AVMS Directive requirements, including, for example, in respect of hourly advertising limits, product placement, teleshopping and sponsorship. The legislation enactedproposal is subject to consultation, review by the European Commission committees and voting in the European Parliament. Any amendments to the AVMS Directive would then need to be implemented by our operating countries is consistent with the EU rules.of operation.
Please see below for more detailed information on programming and advertising regulations that impact our channels.
Bulgaria: In Bulgaria, privately owned broadcasters are permitted to broadcast advertising for up to 12 minutes per hour. The public broadcaster, BNT, which is financed through a compulsory television license fee and by the government, is restricted to broadcasting advertising for 4four minutes per hour and no more than 15 minutes per day, of which only five minutes may be in prime time. There are also restrictions on the frequency of advertising breaks (for example, news and children's programs shorter than 30 minutes cannot be interrupted). These restrictions apply to both publicly and privately owned broadcasters. Further restrictions relate to advertising content, including a ban on tobacco advertising and restrictions on alcohol advertising, regulations on medical products advertising and regulations on advertising targeted at children or during children's programming. In addition, members of the news department of our channels are prohibited from appearing in advertisements. Our channels in Bulgaria are required to comply with several restrictions on programming, including regulations on the origin of programming. These channels must ensure that 50% of a channel's total annual broadcast time consists of EU- or locally-produced programming and 12% of such broadcast time consists of programming produced by independent producers in the EU. News, sports, games and teleshopping programs, as well as advertising and teletext services, are excluded from these restrictions.
Croatia: In Croatia, privately owned broadcasters are permitted to broadcast advertising for up to 12 minutes per hour with no daily limit, and direct sales advertising has to last continuously for at least 15 minutes. Additional restrictions apply to children's programming and movies. The public broadcaster, HRT, which is financed through a compulsory television license fee, is restricted to broadcasting nine minutes of advertising per hour generally and four minutes per hour from 6 p.m. to 10 p.m. HRT is not permitted to broadcast spots for teleshopping. There are other restrictions that relate to advertising content, including a ban on tobacco and alcohol advertising. NOVA TV (Croatia) is required to comply with several restrictions on programming, including regulations on the origin of programming. These include the requirement that 20% of broadcast time consists of locally produced programming and 50% of such locally produced programming be shown during prime time (between 4:00 p.m. and 10:00 p.m.). These restrictions are not applicable to DOMA (Croatia).
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Czech Republic: Privately owned broadcasters in the Czech Republic are permitted to broadcast advertising for up to 12 minutes per hour. In September 2011, legislation was implemented in the Czech Republic which restricts the amount of advertising that may be shown on the channels of the public broadcaster, CT. Pursuant to the regulation, no advertising may be shown on the public channels CT 1 and CT 24, while the channels CT 42 and CT 24 may show a limited amount of advertising. Also included in the legislation is the requirement that national private broadcasters must contribute annually to a Czech cinematography fund in an amount equal to 2% of their net advertising revenues. We are entitled to apply for financing from the fund. In the Czech Republic, all broadcasters are restricted with respect to the frequency of advertising breaks during and between programs, as well as being subject to restrictions that relate to advertising content, including a ban on tobacco advertising and limitations on advertisements of alcoholic beverages, pharmaceuticals, firearms and munitions.

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Romania: Privately owned broadcasters in Romania are permitted to broadcast advertising and direct sales advertising for up to 12 minutes per hour. There are also restrictions on the frequency of advertising breaks (for example, news and children's programs shorter than 30 minutes cannot be interrupted). Broadcasters are also required that from the total broadcasting time (except for the time allocated to news, sports events, games, advertising and teleshopping) (a) at least 50% must be European-origin audio-visual works and (b) at least 10% (or, alternatively, at least 10% of their programming budget) must be European audio-visual works produced by independent producers. The public broadcaster, TVR, which is financed through a compulsory television license fee, is restricted to broadcasting advertising for eight minutes per hour and only between programs. Further restrictions relate to advertising content, including a ban on tobacco advertising and restrictions on alcohol advertising, and regulations on advertising targeted at children or during children's programming. In addition, members of the news departmentanchors of all channels are prohibited from appearing in advertisements.advertisements and teleshopping programming.
Slovak Republic: Privately owned broadcasters in the Slovak Republic are permitted to broadcast advertising for up to 12 minutes per hour but not for more than 20% of their total daily broadcast time. Since January 2013, the public broadcaster RTVS, which is financed through a compulsory license fee, can broadcast advertising for up to 0.5% of its total broadcast time (up to 2.5% of total broadcast time including teleshopping programming), but between 7:00 p.m. and 10:00 p.m. may broadcast only 8eight minutes of advertising per hour. There are restrictions on the frequency of advertising breaks during and between programs. RTVS is not permitted to broadcast advertising breaks during programs. There are also restrictions that relate to advertising content, including a ban on tobacco, pharmaceuticals, firearms and munitions advertising and a ban on advertisements of alcoholic beverages (excluding beer and wine) between 6:00 a.m. and 10:00 p.m. Our operations in the Slovak Republic are also required to comply with several restrictions on programming, including regulations on the origin of programming. These include the requirement that 50% of the station's monthly broadcast time must be European-origin audio-visual works and at least 10% of a station's monthly broadcast time must be European audio-visual works produced by independent producers, at least 10% of which must be broadcast within five years of production.
Slovenia: Privately owned broadcasters in Slovenia are allowed to broadcast advertising for up to 12 minutes in any hour. The public broadcaster, SLO, which is financed through a compulsory television license fee and commercial activities, is allowed to broadcast advertising for up to 10 minutes per hour, but is only permitted up to 7seven minutes per hour between the hours of 6:00 p.m. and 11:00 p.m. There are also restrictions on the frequency of advertising breaks during programs and restrictions that relate to advertising content, including restrictions on food advertising during children's programming and a ban on tobacco advertising and a prohibition on the advertising of any alcoholic beverages from 7:00 a.m. to 9:30 p.m. and generally for alcoholic beverages with an alcoholic content of more than 15%. Our Slovenia operations are required to comply with several restrictions on programming, including regulations on the origin of programming. These include the requirement that 20% of a station's daily programming consist of locally produced programming, of which at least 60 minutes must be broadcast between 6:00 p.m. and 10:00 p.m. In addition, 50% of the station'sour niche channels' annual broadcast time must be European-origin audio-visual works and at least 10% of the stationssuch stations' annual broadcast time must be European audio-visual works produced by independent producers.
Licensing Regulation
The license granting and renewal process in our operating countries varies by jurisdiction and by type of broadcast permitted by the license (i.e., terrestrial, cable, terrestrial, satellite). Depending on the country, terrestrial licenses may be valid for an unlimited time period, may be renewed automatically upon application or may require a more lengthy renewal procedure, such as a tender process. Generally cable and satellite licenses are granted or renewed upon application. We expect each of our licenses will continue to be renewed or new licenses to be granted as required to continue to operate our business. All of our operatingthe countries in which we operate have transitioned from analog to digital terrestrial broadcasting and we have obtained digital licenses where requested. In January 2017, we ceased terrestrial distribution of our channels in the Slovak Republic and Slovenia, and channels in those countries are now available exclusively on cable, satellite and IPTV platforms. We will apply for additional digital licenses where such applications are permissibleprudent and prudent.permissible. Please see below for more detailed information on licenses for our channels.
Bulgaria: BTV operates pursuant to a national digital terrestrial license issued by the Council for Electronic Media, the Bulgarian Media Council, that expires in July 2024. BTV ACTION broadcasts pursuant to a national cable registration that is valid for an indefinite time period and also has a digital terrestrial license that expires in January 2025 which is not currently in use. BTV CINEMA, BTV COMEDY, RING and BTV LADY, as well as BTV, each broadcast pursuant to a national cable registration that is valid for an indefinite time period.
Croatia: NOVA TV (Croatia) broadcasts pursuant to a national terrestrial license granted by the Croatian Media Council, the Electronic Media Council, which expires in April 2025. DOMA (Croatia) broadcasts pursuant to a national terrestrial license that expires in January 2026. MINI TV broadcasts via satellite and cable pursuant to a license that expires in January 2022.
Czech Republic: Our channels in the Czech Republic operate under a variety of licenses granted by the Czech Republic Media Council, The Council for Radio and Television Broadcasting. TV NOVA (Czech Republic) broadcasts under a national terrestrial license that expires in January 2025. TV NOVA (Czech Republic) may also broadcast pursuant to a satellite license that expires in December 2020. NOVA CINEMA broadcasts pursuant to a national terrestrial digital license that expires in 2023. NOVA CINEMA also broadcasts via satellite pursuant to a license that is valid until November 2019. NOVA SPORT 1 broadcasts pursuant to a license that allows for both satellite and cable transmission that expires in October 2020. NOVA SPORT 2 broadcasts pursuant to a satellite license that expires in August 2027. In addition, NOVA SPORT 1 and NOVA SPORT 2 each have a license that permits internet transmission which expires in August 2027. FANDANOVA ACTION (formerly known as FANDA) broadcasts pursuant to a satellite license that expires in July 2024 and a national terrestrial license that expires in September 2023. SMICHOVNOVA 2 (formerly known as SMICHOV) broadcasts pursuant to a national terrestrial license that expires in December 2024 and a satellite license that expires in February 2025. TELKANOVA GOLD (formerly known as TELKA) broadcasts pursuant to a national terrestrial license and a satellite license that each expire in February 2025. NOVA INTERNATIONAL broadcasts pursuant to a license that permits internet transmission which expires in January 2028.
Romania: PRO TV broadcasts pursuant to a national satellite license granted by the Romanian Media Council, the National Audio-Visual Council. Our other Romanian channels (ACASA, ACASA GOLD, PRO CINEMA, SPORT.RO, MTV ROMANIA and PRO TV INTERNATIONAL) each has a national satellite license. PRO TV also broadcasts through the electronic communications networks pursuant to a series of local licenses and ACASA broadcasts in high-definition pursuant to a written consent from the Media Council. Licenses for our Romanian operations expire on dates ranging from April 2018 to January 2025. PRO TV CHISINAU broadcasts pursuant to an analoga cable license granted by the Audio-Visual Coordinating Council of the Republic of Moldova that expires in November 20162023 and ACASA IN MOLDOVA broadcasts pursuant to a cable license that expires in December 2017.
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Slovak Republic: TV MARKIZA, DOMA (Slovak Republic) and DAJTO each broadcast pursuant to a national license for digital licensebroadcasting granted by the Council for Broadcasting and Retransmission, the Media Council of the Slovak Republic, which is valid for an indefinite period. MARKIZA INTERNATIONAL is broadcast pursuant to the license granted to TV MARKIZA.
Slovenia: Our Slovenian channels POP TV, KANAL A, KINO, BRIO and OTO each have licenses granted by the Post and Electronic Communications Agency of the Republic of Slovenia, the Slovenia Media Council, that allow for broadcasting on any platform, including digital, cable and satellite. These licenses are valid for an indefinite time period.
OTHER INFORMATION
Employees
As of December 31, 20152016, we had a total of approximately 3,1002,950 employees (including contractors).

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Corporate Information
CME Ltd. was incorporated in 1994 under the laws of Bermuda. Our registered offices are located at O'Hara House, 3 Bermudiana Road, Hamilton HM 08, Bermuda, and our telephone number is +1-441-296-1431. Communications can also be sent c/o CME Media Services Ltd. at Krizeneckeho nam. 1078/5, 152 00 Praha 5, Czech Republic, telephone number +420-242-465-576.+420-242-465-605. CME's Class A common stock is listed on the NASDAQ Global Select Market and the Prague Stock Exchange under the ticker symbol “CETV”.
Financial Information by Operating Segment and by Geographical Area
For financial information by operating segment and geographic area, see Part II, Item 8, Note 21,19, "Segment Data".
Available Information
We make available, free of charge, on our website at http://www.cme.net our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.
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ITEM 1A    RISK FACTORS
This report and the following discussion of risk factors contain forward-looking statements as discussed on page 2 of this report. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks and uncertainties described below and elsewhere in this report. These risks and uncertainties are not the only ones we may face. Additional risks and uncertainties of which we are not aware, or that we currently deem immaterial, may also become important factors that affect our financial condition, results of operations and cash flows.
Risks Relating to Our Financial Position
Our operating results will continue to be adversely affected if we cannot generate strong advertising sales.
We generate most of our revenues from the sale of advertising airtime on our television channels. The reduction in advertising spending in our markets following the onset of the global financial crisis at the beginning of 2009 had a negative effect on television advertising prices because of pressure to reduce prices from advertisers and discounting by competitors. We attempted to combat this fall in prices by implementing a new pricing strategy in 2013. There was an adverse reaction to this strategy from agencies and advertisers, particularly in the Czech Republic, which resulted in a significant decrease in revenues and market share in 2013 compared to 2012.
In addition to general economic conditions (described below), other factors that may affect our advertising sales are the pricing of advertising time as well as competition from other broadcasters and operators of other distribution platforms, audience ratings, changes in programming strategy, changes in audience preferences, our channels’ technical reach, technological developments relating to media and broadcasting, seasonal trends in the advertising market, changing preferences in how and when people view content and the accompanying advertising, increased competition for the leisure time of audiences and shifts in population and other demographics. Accordingly, our advertising revenues also depend on our ability to maintain audience ratings and to generate GRPs, which requires maintaining investments in television programming and productions at a sufficient level to continue to attract audiences. Significant or sustained reductions in investments in programming that attracts such audiences or other operating costs in response to reduced advertising spending in our markets have had and may continue to have an adverse impact on our television viewing levels. Reduced advertising spending, resistance to price increases and discounting of television advertising prices in our markets as well as competition for ratings from broadcasters seeking to attract similar audiences have had and may continue to have an adverse impact on our ability to maintain our advertising sales. Failure to maintain and increase advertising sales could have a material adverse effect on our financial position, results of operations and cash flows.
Global or regional economic conditions and the credit crisis and concerns regarding the Eurozone have adversely affected our financial position and results of operations. We cannot predict if or when economic conditionsthe recovery in theour operating countries in which we operate will recovercontinue or how long any recoveryit may last. A failure to achieve lasting recoveries will continue to adversely affect our results of operations.
The results of our operations depend heavily on advertising revenue, and demand for advertising is affected by general economic conditions in the region and globally. The economic uncertainty affectingfollowing the onset of the global financial markets and banking system sincecrisis at the beginning of 2009 hasand the sustained recessionary period that followed had ana prolonged adverse impact on economic growth in our operating countries across Central and Eastern Europe. There has been a widespread withdrawal of investment funding from the Central and Eastern European markets and companies with investments in them. Furthermore, the economic downturn has adversely affected consumer and business spending, access to credit, liquidity, investments,investment spending, asset values and employment rates. These adverse economic conditions have had a material negative impact on the advertising spending in our markets, leading our customers to continue to spend less on advertising than at the peak period in 2008. This haswhich negatively impacted our financial position, results of operations and cash flows since 2008. Whileadvertising revenues in the periods that followed. Since 2014, our markets have experienced overall growth in real GDP (as adjusted for inflation) is estimated to have improved in our markets since 2014,and advertising spending; however we cannot predict if this represents the start of a sustained recovery that has begun will continue or how long it will last. Any significant deterioration of general economic conditions in our markets would have an adverse economic impact on our advertising revenues. In addition, although we believe the economiesadvertising spend per capita of the countries in which we operate and advertising intensity (the ratio of total ad spend per capita to nominal GDP per capita) will converge with the developed nations,markets (as defined in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations), such convergence may not occur in the time frame we expect, or at all.
Continued economic softness in the Eurozone, including a slow down in the growth of consumer prices, has prompted the European Central Bank to embark upon quantitative easing. Economic events related to the sovereign debt crisis in several European Union countries have also highlighted issues relating to the strength of the banking sector in Europe. Though the European Union has created external funding and stability mechanisms to provide liquidity and financial assistance to Eurozone member states and financial institutions, there can be no assurance that the market disruptions in Europe related to sovereign debt and the banking sector, including the increased cost of funding for certain governments and financial institutions, will not continue, nor can there be any assurance that future assistance packages will be available or, even if provided, will be sufficient to stabilize affected banks, countries and markets in Europe or elsewhere. The departure of a country from the Euro or the dissolution of the Euro could cause significant volatility and disruption in the global economy, which would negatively impact our business. In addition, Moreover, the occurrence of disasters, acts of terrorism, civil or military conflicts or general political instability and responses to it, such as the imposition of economic sanctions against Russia, may also cause a deterioration in general economic conditions that may reduce advertising spending. Any of these developments would have a significant negative effect on our financial position, results of operations and cash flows.
Concerns regarding the Eurozone and the impact on the region of the United Kingdom’s exit from the European Union (“EU”) may adversely affect our financial position and results of operations.
Continued economic softness in the Eurozone, including a slowdown in the growth of consumer prices, prompted the European Central Bank to embark upon quantitative easing in 2015. Economic events related to the sovereign debt crisis in several EU countries have also highlighted issues relating to the strength of the banking sector in Europe and the Euro. Although the EU has created external funding and stability mechanisms to provide liquidity and financial assistance to Eurozone member states and financial institutions, there can be no assurance that the market disruptions in Europe related to sovereign debt and the banking sector or otherwise, including the increased cost of funding for certain governments and financial institutions, will not continue and there can be no assurance that funding and stability packages utilized previously will be available or, if provided, will be sufficient to stabilize affected economies or institutions.
Economic conditions in the EU will be further impacted by the results of the referendum held in the United Kingdom on June 23, 2016 whereby the United Kingdom electorate voted in favor of the United Kingdom leaving the EU, commonly referred to as “Brexit”. While the overall economic impact of Brexit on the EU and the Euro is difficult to estimate at present, decisions to conserve cash and reduce spending by consumers and businesses in the United Kingdom would have a negative impact on economic growth rates in the United Kingdom and, to a lesser extent, in the EU, in particular those countries that are significant exporters to the United Kingdom. There is also significant uncertainty regarding the timing and terms on which the United Kingdom would leave the EU, and it is expected that a more protracted process to set those terms would have a more prolonged economic impact. In addition, there is concern that other countries may seek to leave the EU following the Brexit decision, increasing uncertainty in the region, which may have a further negative impact on investment and economic growth rates. Furthermore, the departure of the United Kingdom from the EU may affect the budgetary contributions and allocations among the EU member states in the medium term, including the countries in which we operate, which are net recipients of EU funding. Economic uncertainty caused by Brexit or other instability in the EU could cause significant volatility in EU markets and reduce economic growth rates in the countries in which we operate, which would negatively impact our business.
Our operating results will be adversely affected if we cannot generate strong advertising sales.
We generate the majority of our revenues from the sale of advertising airtime on our television channels. The reduction in advertising spending in our markets following the onset of the global financial crisis at the beginning of 2009 and the sustained recessionary period that followed had a negative effect on television advertising spending and prices. While we have attempted to combat this fall in prices by implementing new pricing strategies, the success of these strategies has varied from market to market and continues to be challenged by pressure from advertisers and discounting by competitors. In addition to advertising pricing, other factors that may affect our advertising sales include general economic conditions (described above), competition from other broadcasters and operators of other distribution platforms, changes in programming strategy, changes in distribution strategy, our channels’ technical reach, technological developments relating to media and broadcasting, seasonal trends in the advertising market, changing audience preferences and in how and when people view content and the accompanying advertising, increased competition for the leisure time of audiences and shifts in population and other demographics. Our advertising revenues also depend on our ability to maintain audience ratings and to generate GRPs. This requires us to have a distribution strategy that reaches a significant audience as well as to maintain investments in programming at a sufficient level to continue to attract audiences. Changes in the distribution of our channels, such as our decision to cease broadcasting on DTT in the Slovak Republic and Slovenia, may reduce the number of people who can view our channels, which may negatively impact our audience share and GRPs generated. Furthermore, significant or sustained reductions in investments in programming or other operating costs in response to reduced advertising revenues had and, if continued or repeated, may have an adverse impact on our television viewing levels. Reductions in advertising spending in our markets and resistance to price increases as well as competition for ratings from broadcasters seeking to attract similar audiences have had and may continue to have an adverse impact on our ability to maintain our advertising sales. A failure to maintain and increase advertising sales could have a material adverse effect on our financial position, results of operations and cash flows.

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Our liquidity constraints and debt service obligations may restrict our ability to fund our operations.
We have significant debt service obligations under the 2017 PIK Notes and the 2017 Term Loan (prior to their repayment), the 2018 Euro Term Loan and the 2019 Euro Term Loan,Loans as well as the 2021 Euro Term Loan and the 2021 Revolving Credit Facility (in each case when(when drawn). Having the option to pay interest in kind on the 2017 PIK Notes and the 2017 Term Loan has allowed us to reduce our cash interest costs, however each of these facilities has accrued interest at 15% per year and interest paid in-kind must be repaid at the repayment date. Furthermore, we are paying guarantee feesGuarantee Fees to Time Warner as consideration for its guarantees of the 2018 Euro Term Loan, the 2019 Euro Term Loan and the 2021 Euro Term Loan (when drawn)Loans (collectively, the "TW Guarantees"). Although the entire guarantee feeGuarantee Fee in respect of the 2018 Euro Term Loan and the 2019 Euro Term Loan are, and a portion of the guarantee feeGuarantee Fee in respect of the 2021 Euro Term Loan willcan be, non-cash pay at our option, accruing such fees will further increase the amounts to be repaid at the maturity of these facilities. Accordingly, the payment of interest expense and guarantee feesGuarantee Fees in kind will increase our already significant leverage. As a result of our debt service obligations and covenants contained in the related indenture and loan agreements, we are restricted under the 2017 PIK NotesReimbursement Agreement and the 2017 Term Loan (prior to their repayment), the 2021 Revolving Credit Facility (when drawn) and the Reimbursement Agreement in the manner in which our business is conducted, including but not limited to our ability to obtain additional debt financing to refinance existing indebtedness or to fund future working capital, capital expenditures, business opportunities or other corporate requirements. We may have a proportionally higher level of debt than our competitors, which may put us at a competitive disadvantage by limiting our flexibility in planning for, or reacting to, changes in our business, economic conditions andor our industry. For additional information regarding the Reimbursement Agreement and the TW Guarantees, see Part II, Item 8, Note 5,4, "Long-term Debt and Other Financing Arrangements".
Fluctuations in exchange rates may adversely affect our results of operations.
Our reporting currency is the dollar but our consolidated revenues and costs, including programming expenses and debt interest obligations, are divided across a range of currencies. The strengthening of the dollar had a negative impact on reported revenues in 2015 and while we expect our revenues will continue to increase in 2016 in our functional currencies, it is likely that a strong dollar will continue to have a negative impact on our reported revenues. In addition, a significant portion of our programming content is purchased pursuant to dollar-denominated agreements. If the dollar appreciates against our functional currencies, the cost of acquiring such content would be adversely affected. Furthermore, the 2018 Euro Term Loan and the 2019 Euro Term Loan are, and the 2021 Euro Term Loan will be, denominated in Euros. We have not attempted to hedge the foreign exchange exposure on the principal amount of these loans and therefore may experience significant gains and losses on the translation of drawings under these loans and related interest payments into dollars. General market conditions or the global macroeconomic environment may increase our exposure to currency fluctuations, which may have a material adverse effect on our financial position, results of operations and cash flows.
We may be unable to refinance our existing indebtedness and may not be able to obtain favorable refinancing terms.
We have a substantial amount of indebtedness. Under the Reimbursement Agreement and the 2021 Revolving Credit Facility (when drawn), we can incur only limited amounts of additional indebtedness, other than indebtedness incurred to refinance existing indebtedness. In addition, pursuant to the Reimbursement Agreement, the all-in rates on the 2021 Euro Term Loan and the 2018 Euro Term Loan increase to 13% and 11%, respectively, on the date that is 180 days following a change of control of CME Ltd. (as defined therein); and pursuant to the 2021 Revolving Credit Facility, all commitments terminate following a change of control (as defined therein) and the interest rate on amounts outstanding increases to 13% on the date that is 180 days following such change of control. We intend to repay the 2018 Euro Term Loan at maturity with cash flows from operations and the expected proceeds from warrant exercises. In the event the warrants are not exercised in full or cash flows from operations do not meet our forecasts, we would be required to refinance the 2018 Euro Term Loan in whole or in part. Pursuant to the Reimbursement Agreement, all commitments under the 2021 Revolving Credit Facility terminate on the refinancing of any Euro Term Loan. We face the risk that we will not be able to renew, repay or refinance our indebtedness when due, or that the terms of any renewal or refinancing will not be on better terms than those of such indebtedness being refinanced. Under the 2017 Term Loan Agreement (prior to repayment), the 2021 Revolving Credit Facility (when drawn), and the Reimbursement Agreement, we can incur only limited amounts of additional indebtedness, which includes indebtedness incurred to refinance existing indebtedness. In the event we are not able to refinance our indebtedness, we might be forced to dispose of assets on disadvantageous terms or reduce or suspend operations, any of which would materially and adversely affect our financial condition, results of operations and cash flows.
We may be subject to changes in tax rates and exposure to additional tax liabilities.
We are subject to taxes in a number of foreign jurisdictions, including in respect of our operations as well as capital transactions undertaken by us. We are subject to regular review and audit by tax authorities, and in the ordinary course of our business there are many transactions and calculations where the ultimate tax determination is uncertain.unknown. Significant judgment is required in determining our provision for taxes. The final determination of our tax liabilities resulting from tax audits, related proceedings or otherwise could be materially different from our tax provisions. Economic and political pressures to increase receipts in various jurisdictions may make taxation and tax rates subject to significant change and the satisfactory resolution of any tax disputes more difficult. The occurrence of any of these events could have a material adverse effect on our financial position, results of operations and cash flows.
A default by us in connection with our obligations under our outstanding indebtedness could result in our inability to continue to conduct our business.
Pursuant to the terms of the indenture governing the 2017 PIK Notes and the agreements governing the 2017 Term Loan (prior to their repayment),Reimbursement Agreement and the 2021 Revolving Credit Facility, (when drawn) and the Reimbursement Agreement, we pledged all of the shares of CME NV and of CME BV, which together own substantially all of the interests in our operating subsidiaries, as security for this indebtedness. If we or these subsidiaries were to default under the terms of any of the relevant indentures or agreements, the secured parties under such indentures and agreements would have the ability to sell all or a portion of the assets pledged to them in order to pay amounts outstanding under such debt instruments. This could result in our inability to conduct our business.
WeFluctuations in exchange rates may continue to adversely affect our results of operations.
Our reporting currency is the dollar and CME Ltd.'s functional currency is the Euro. Our consolidated revenues and costs are divided across a range of European currencies. The strengthening of the dollar had a negative impact on reported revenues in 2016 when translated from the functional currencies of our operations. Continued strengthening of the dollar would have a negative impact on our reported revenues. Furthermore, fluctuations in exchange rates may negatively impact programming costs. While local programming is generally purchased in local currencies, a significant portion of our content costs relates to foreign programming purchased pursuant to dollar-denominated agreements. If the dollar appreciates against the functional currencies of our operating segments, the cost of acquiring such content would be adversely affected, which could have a material adverse effect on our results of operations and cash flows.
Our strategies to enhance our carriage fees and diversify our revenues may not be successful in continuing our attempts to diversify and enhance our revenues.successful.
We are focused on creating additional revenue streams from our broadcast operations as well as increasing revenues generated from broadcast advertising, which is how we generate most of our revenues. Our main efforts with respect to this strategy are on increasing carriage fees from cable, satellite and satelliteIPTV operators for carriage of our channels as well as continuing to seek improvements in advertising pricing. We are also working to build-out our offeringsAgreements with operators generally have a term of advertising video-on-demand products and other opportunities for advertising online.one or more years, at which time agreements must be renewed. There can be no assurance that we will be successful in renewing carriage fee agreements on similar or better terms. During prior negotiations to implement our carriage fees strategy in prior years, some cable and satellite operators suspended the broadcast of our channels, which affectsnegatively affected the reach and audience shares of those operations and, as a result, advertising revenues. There is a risk that operators may refuse to carry our channels while carriage fee negotiations are ongoing, or thatwhich would temporarily reduce the reach of those channels and may result in clients withdrawwithdrawing advertising from our channels or reduce spending as a resultchannels. The occurrence of reduced coverage, or that going forward we will not be successful in renewing carriage fee agreements on the same or better terms, whichany of these events may have an adverse impact on our financial position, results of operations and cash flows. If we are ineffective in negotiations with carriers or in achieving further carriage fee increases, our profitability will continue to be dependent primarily on television advertising revenues, which increases the importance placed on our ability to improve advertising pricing and generate advertising revenues. In addition to carriage fees, we are also working to build-out our offerings of advertising video-on-demand products and other opportunities for advertising online. There can be no assurances that our revenue diversification initiatives will ultimately be successful, and if unsuccessful, this may have an adverse impact on our financial position, results of operations and cash flows.

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A downgrading of our ratings may adversely affect our ability to raise additional financing.
Moody’s Investors Service rates our corporate credit as Caa1,B2 with a stable outlook. Standard & Poor’s rates our corporate credit B,B+ with a stable outlook. TheseOur ratings reflectshow each agency’sagency's opinion of our financial strength, operating performance and ability to meet our debt obligations as they become due. Credit ratingThese ratings take into account the particular emphasis the ratings agencies viewplace on metrics such as leverage ratio and cash flow, which they use as measurements of a company's liquidity and financial strength. They also reflect an emphasis placed by the key ratios associated with it, such as gross leverage ratio, asratings agencies on a particular priority.track record of strong financial support from Time Warner. We may be subject to downgrades if our operating performance deteriorates or we fail to maintain adequate levels of liquidity. In addition, our ratings may be downgraded if the agencies form a view that material support from Time Warner is not as strong, or the strategic importance of CME to Time Warner is not as significant as it has been in the past. In the event our debt or corporate credit ratings are lowered by the rating agencies, it will be more difficult for us to refinance our existing indebtedness or raise new indebtedness that may be permitted under the indenture governing the 2017 PIK Notes or the 2017 Term LoanReimbursement Agreement (prior to their repayment),and the 2021 Revolving Credit Facility (when drawn), and the Reimbursement Agreement, and we will have to pay higher interest rates, which would have an adverse effect on our financial position, results of operations and cash flows.
If our goodwill, other intangible assets and long-lived assets become impaired, we may be required to record significant charges to earnings.
We review our long-lived assets for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. Goodwill and indefinite-lived intangible assets are required to be assessed for impairment at least annually. Factors that may be considered a change in circumstances indicating that the carrying amount of our goodwill, indefinite-lived intangible assets or long-lived assets may not be recoverable include slower growth rates in our markets, reduced expected future cash flows, increased country risk premium as a result of political uncertainty and a decline in stock price and market capitalization. We consider available current information when calculating our impairment charge. If there are indicators of impairment, our long-term cash flow forecasts for our operations deteriorate or discount rates increase, we may be required to recognize additional impairment charges in later periods. See Part II, Item 8, Note 4,3, "Goodwill and Intangible Assets" for the carrying amounts of goodwill in each of our reporting units.
Changes to our business could result in future costs or charges.
We periodically adjust our business strategy in response to particular events and circumstances, including economic conditions, industry changes and technological developments. In connection with the implementation of new strategies, we may decide to restructure certain of our operations, businesses or assets in order to optimize our cost structure and capture operating efficiencies. For example, we incurred charges of approximately US$ 9.9 million related to restructuring in 2014 and US$ 18.5 million in 2013 and total severance costs of approximately US$ 7.1 million during 2013. We pursued limited restructuring initiatives in 2015 and have incurred related restructuring charges. Similar events in the future could also result in restructuring and other charges and the incurrence of additional costs or may require significant management time to implement. If any such charges are material, they could have an adverse impact on our results of operations and cash flows.
Risks Relating to Our Operations
Programming contentContent may become more expensive to produce or acquire or we may not be able to develop or acquire content that is attractive to our audiences.
Television programming is one of the most significant components of our operating costs. The ability of our programming to generate advertising revenues depends substantially on our ability to develop, produce or acquire programming that matches audience tastes and attracts high audience shares, which is difficult to predict. The commercial success of a program depends on several tangible and intangible factors, including the impact of competing programs, the availability of alternate forms of entertainment and leisure time activities, our ability to anticipate and adapt to changes in consumer tastes and behavior, and general economic conditions. While we have been successful in reducing content costs compared to prior periods, the cost of acquiring content attractive to our viewers, such as feature films and popular television series and formats, may increase in the future. Our expenditures in respect of locally produced programming may also increase due to competition for talent and other necessary resources, and changes in audience tastes in our markets as well asor from the implementation of any new laws and regulations mandating the broadcast of a greater number of locally produced programs. In addition, we typically acquire syndicated programming rights under multi-year commitments before knowing how such programming will perform in our markets. In the event any such programming does not attract adequate audience share, it may be necessary to increase our expenditures by investing in additional programming, subject to the availability of adequate financial resources, as well as to write down the value of any underperforming programming. Any material increase in content costs could have a material adverse effect on our financial condition, results of operations andor cash flows.
Our operations are vulnerable to significant changes in viewing habits and technology that could adversely affect us.
The television broadcasting industry is affected by rapid innovations in technology. The implementation of these new technologies and the introduction of non-traditional content distribution systems have increased competition for audiences and advertisers. Platforms such as direct-to-home cable and satellite distribution systems, the Internet, subscription and advertising video-on-demand, user-generated content sites and the availability of content on portable digital devices have changed consumer behavior by increasing the number of entertainment choices available to audiences and the methods for the distribution, storage and consumption of content. This development has fragmented television audiences in more developed markets and could adversely affect our ability to retain audience share and attract advertisers as such technologies penetrate our markets. As we adapt to changing viewing patterns, it may be necessary to expend substantial financial and managerial resources to ensure necessary access to new technologies or distribution systems. Such initiatives may not develop into profitable business models. Furthermore, technologies that enable viewers to choose when, how, where and what content to watch, as well as to fast-forward or skip advertisements, may cause changes in consumer behavior that could have a negative impact on our advertising revenues. In addition, compression techniques and other technological developments allow for an increase in the number of channels that may be broadcast in our markets and expanded programming offerings that may be offered to highly targeted audiences. Reductions in the cost of launching new channels could lower entry barriers and encourage the development of increasingly targeted niche programming on various distribution platforms. This could increase the competitive demand for popular programming, resulting in an increase in content costs as we compete for audiences and advertising revenues. A failure to successfully adapt to changes in our industry as a result of technological advances may have an adverse effect on our financial position, results of operations and cash flows.
Our operating results are dependent on the importance of television as an advertising medium.
We generate most of our revenues from the sale of our advertising airtime on television channels in our markets. Television competes with various other media, such as the Internet, print, radio, the internet and outdoor advertising, for advertising spending. In all of the countries in which we operate, television constitutes the single largest component of all advertising spending. There can be no assurances that the television advertising market will maintain its current position among advertising media in our markets. Furthermore, there can be no assurances that changes in the regulatory environment or improvements in technology will not favor other advertising media or other television broadcasters. Increases in competition among advertising media arising from the development of new forms of advertising media and distribution could result in a decline in the appeal of television as an advertising medium generally or of our channels specifically. A decline in television advertising spending as a component of total advertising spending in any period or in specific markets would have an adverse effect on our financial position, results of operations and cash flows.

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We are subject to legal compliance risks and the risk of legal or regulatory proceedings being initiated against us.
We are required to comply with a wide variety of laws and other regulatory obligations in the jurisdictions in which we operate and compliance by our businesses is subject to scrutiny by regulators and other government authorities in these jurisdictions. Compliance with foreign as well as applicable U.S. laws and regulations related to our businesses, such as broadcasting content and advertising regulations, competition regulations, tax laws, employment laws, data protection requirements, and anti-corruption laws, increases the costs and risks of doing business in these jurisdictions. We believe we have implemented appropriate risk management and compliance policies and procedures that are designed to ensure our employees, contractors and agents comply with these laws and regulations; however, a violation of such laws and regulations or the Company’s policies and procedures could occur. A failure or alleged failure to comply with applicable laws and regulations, whether inadvertent or otherwise, may result in legal or regulatory proceedings being initiated against us.
We have become aware of provisions in the tax regulations of one of our markets that shift the liability for taxes on gains resulting from certain capital transactions from the seller to the buyer. This provision may have been applicable to an acquisition made by us, although we do not believe we have any liability connected to this transaction. In addition, the prosecuting authorities in Romania have requested information in respect of an investigation into certain transactions entered into by Pro TV in 2014 primarily with certain related parties. We believe that the transactions under review are fully supported and are cooperating with the authorities in responding to the information request. In Slovenia, the competition authorities have launched an investigation into whether our Slovenian subsidiary is dominant and abused its dominant position when concluding carriage fee agreements with platform operators. The investigation is in an early stage and there has been no determination that a breach of competition law has occurred; notwithstanding that, the competition authorities may seek to apply interim measures prior to any formal determination. If these or other contingencies result in legal or regulatory proceedings being initiated against us, or if developments occur in respect of our compliance with existing laws or regulations, or there are changes in the interpretation or application of such laws or regulations, we may incur substantial costs, be required to change our business practices, our reputation may be damaged or we may be exposed to unanticipated civil or criminal liability, including fines and other penalties that may be substantial. This could have a material adverse effect on our business, financial position, results of operations and cash flows.
Piracy of our content may decrease revenues we can earn from our content and adversely impact our business and profitability.
Piracy of our content poses significant challenges in our markets. Technological developments, including digital copying, file compressing, the use of international proxies and the growing penetration of high bandwidth internet connections, have made it easier to create, transmit and distribute high quality unauthorized copies of content in unprotected digital formats. Furthermore, there are a growing number of video streaming sites, increasing the risk of online transmission of our content without consent. The proliferation of such sites broadcasting content pirated from us could result in a reduction of revenues that we receive from the legitimate distribution of our content, including through video-on-demand and other services. Protection of our intellectual property is in large part dependent on the manner in which applicable intellectual property laws in the countries in which we operate are construed and enforced. We seek to limit the threat of content piracy. However, detecting and policing the unauthorized use of our intellectual property is often difficult and remedies may be limited under applicable law. Steps we take may not prevent the infringement by third parties. There can be no assurance that our efforts to enforce our rights and protect our intellectual property will be successful in preventing piracy, which limits our ability to generate revenues from our content.
Our operations are in developing markets where there are additional risks related to political and economic uncertainty, biased treatment and compliance with evolving legal and regulatory systems.
Our revenue-generating operations are located in Central and Eastern Europe and we may be significantly affected by risks that may be different to those posed by investments in more developed markets. These risks include, but are not limited to, social and political instability, inconsistent regulatory or judicial practice, and increased taxes and other costs. The economic and political systems, legal and tax regimes, regulatory practices, standards of corporate governance and business practices of countries in this region continue to develop. Policies and practices may be subject to significant adjustments, including following changes in political leadership. This may result in social or political instability or disruptions and the potential for political influence on the media as well as inconsistent application of tax and legal regulations, arbitrary treatment before regulatory or judicial authorities and other general business risks. Other potential risks inherent in markets with evolving economic and political environments include exchange controls, higher taxes, tariffs and other levies as well as longer payment cycles. The relative level of development of our markets and the influence of local politics also present a potential for biased treatment of us before regulators or courts in the event of disputes. If such a dispute occurs, those regulators or courts might favor local interests over our interests. Ultimately, this could lead to the loss of one or more of our business operations.
Furthermore, we must comply with a wide variety of laws and other regulatory obligations in these jurisdictions. Compliance with foreign as well as applicable U.S. laws and regulations related to our businesses, such as broadcasting content and advertising regulations, competition regulations, tax laws, employment laws, data protection requirements, and anti-corruption laws, increases the costs and risks of doing business in these jurisdictions. We have implemented policies and procedures that are designed to ensure our employees, contractors and agents comply with these laws and regulations; however, a violation of such laws and regulations or the Company’s policies and procedures could occur. For example, we have become aware of provisions in the tax regulations of one of our markets that shift the liability for taxes on gains resulting from certain capital transactions from the seller to the buyer, which may have been applicable to an acquisition made by us. While we do not believe we have any liability connected to this transaction, any failure to comply with applicable laws and regulations, whether inadvertent or otherwise, may result in legal or regulatory proceedings being initiated against us. Any legal and regulatory proceedings or developments in respect of our compliance with, or changes in the interpretation or application of, existing laws or regulations, may require us to incur substantial costs, cause us to change our business practices, damage our reputation or expose us to unanticipated civil or criminal liability, including fines and other penalties that may be substantial. This could have a material adverse effectimpact on our business, financial position, results of operations and cash flows.
We may not be aware of all related party transactions, which may involve risks of conflicts of interest that result in transactions being concluded on less favorable terms than could be obtained in arm’s-length transactions.
In our markets, the officers, general directors, other members of management or employees of our operating companies may have other business interests, including interests in television and other media-related companies. We may not be aware of all business interests or relationships that exist with respect to entities with which our operating companies enter into transactions. Transactions with related parties, whether or not we are aware of any such relationships between our employees and third parties, may present conflicts of interest and may result in the conclusion of transactions on terms that are not arm’s-length. It is likely that we and our subsidiaries will continue to enter into related party transactions in the future. In the event there are transactions with persons who subsequently are determined to be related parties or affiliates, we may be required to make additional disclosure and, if such contracts are material, may not be in compliance with certain covenants under the indenture governing the 2017 PIK Notes and the 2017 Term Loan Agreement (prior to their repayment), the 2021 Revolving Credit Facility (when drawn) or the Reimbursement Agreement. Any related party transaction that is entered into on terms that are not arm’s-length may result in a negative impact on our financial position, results of operations and cash flows.
We rely on network and information systems and other technology that may be subject to disruption or misuse, which could harm our business or our reputation.
We make extensive use of network and information systems and other technologies, including those related to our internal network management as well as our broadcasting operations. These systems are central to many of our business activities. Network and information systems-related events, such as computer hackings, computer viruses, worms or other destructive or disruptive software, process breakdowns, malicious activities or other security breaches could result in a disruption or degradation of our services, the loss of information or the improper disclosure of personal data. The occurrence of any of these events could negatively impact our business by requiring us to expend resources to remedy such a security breach or by harming our reputation. In addition, improper disclosure of personal data could subject us to liability under laws that protect personal data in the countries in which we operate. The development and maintenance of systems to prevent these events from occurring requires ongoing monitoring and updating as efforts to overcome security measures become more sophisticated. As technologies evolve, we will need to expend additional resources to protect our technology and information systems, which could have an adverse impact on our results of operations.

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Our broadcasting licenses may not be renewed and may be subject to revocation.
We require broadcasting and, in some cases, other operating licenses as well as other authorizations from national regulatory authorities in our markets in order to conduct our broadcasting business. While our broadcasting licenses for our operations in Slovenia and the Slovak Republic are valid for indefinite time periods, our other broadcasting licenses expire at various times through 2028. While we expect that our material licenses and authorizations will be renewed or extended as required to continue to operate our business, we cannot guarantee that this will occur or that they will not be subject to revocation, particularly in markets where there is relatively greater political risk as a result of less developed political and legal institutions. The failure to comply in all material respects with the terms of broadcasting licenses or other authorizations or with applications filed in respect thereto may result in such licenses or other authorizations not being renewed or otherwise being terminated. Furthermore, no assurances can be given that renewals or extensions of existing licenses will be issued on the same terms as existing licenses or that further restrictions or conditions will not be imposed in the future. Any non-renewal or termination of any other broadcasting or operating licenses or other authorizations or material modification of the terms of any renewed licenses may have a material adverse effect on our financial position, results of operations and cash flows.

Our success depends on attracting and retaining key personnel.
Our success depends partly upon the efforts and abilities of our key personnel and our ability to attract and retain key personnel. Our management teams have significant experience in the media industry and have made important contributions to our growth and success. Although we have been successful in attracting and retaining such people in the past, competition for highly skilled individuals is intense. There can be no assurance that we will continue to be successful in attracting and retaining such individuals in the future. The loss of the services of any of these individuals could have an adverse effect on our businesses, results of operations and cash flows.
Risks Relating to Enforcement Rights
We are a Bermuda company and enforcement of civil liabilities and judgments may be difficult.
We are a Bermuda company. Substantially all of our assets and all of our operations are located, and all of our revenues are derived, outside the United States. In addition, several of our directors and officers are non-residents of the United States, and all or a substantial portion of the assets of such persons are or may be located outside the United States. As a result, investors may be unable to effect service of process within the United States upon such persons, or to enforce against them judgments obtained in the United States courts, including judgments predicated upon the civil liability provisions of the United States federal and state securities laws. There is uncertainty as to whether the courts of Bermuda and the countries in which we operate would enforce (a) judgments of United States courts obtained against us or such persons predicated upon the civil liability provisions of the United States federal and state securities laws or (b) in original actions brought in such countries, liabilities against us or such persons predicated upon the United States federal and state securities laws.
Our bye-lawsBye-laws restrict shareholders from bringing legal action against our officers and directors.
Our bye-lawsBye-laws contain a broad waiver by our shareholders of any claim or right of action in Bermuda, both individually and on our behalf, against any of our officers or directors. The waiver applies to any action taken or concurred in by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty.
Risks Relating to our Common Stock
Our share price may be adversely affected by sales of unregistered shares or future issuances of our shares.
Time Warner is the largest holder of shares of our Class A common stock, holding 61,407,775 unregistered shares of Class A common stock, one share of Series A preferred stock, 200,000 shares of Series B preferred stock and warrants to acquire 100,926,996 shares of our Class A common stock (the "TW Warrants"). The share of Series A preferred stock is convertible into 11,211,449 shares of Class A common stock. Thestock and the shares of Series B preferred stock are convertible into shares of Class A common stock from June 25, 2016 at the option of Time Warner (subject to certain exceptions). As of December 31, 2015,2016, the 200,000 shares of Series B preferred stock were convertible into approximately 99.5105.2 million shares of Class A common stock. The TW Warrants are exercisable for shares of Class A common stock from May 2, 2016 until May 2, 2018 subject to the rightat an exercise price of Time Warner to exercise such warrants prior to May 2, 2016 in certain circumstances.US$ 1.00 per share. Time Warner has registration rights with respect to all its shares of Class A common stock now held or hereafter acquired. Furthermore, there are additional unregistered shares of our Class A common stock outstanding that we may be obligated to register and shares of Class A common stock underlying other warrants that may enter into trading. For additional information on the Series A preferred stock, Series B preferred stock and TW Warrants, see Part II, Item 8, Note 12,11, "Convertible Redeemable Preferred Shares" and Note 13,12, "Equity". In October 2016, Time Warner announced it has entered into a definitive merger agreement with AT&T Inc. under which AT&T Inc. will acquire Time Warner.  The merger is subject to approval by Time Warner shareholders and approval by a number of regulatory authorities, including the U.S. Department of Justice. Following a successful completion of such merger, AT&T Inc. will become the beneficial owner of equity securities currently beneficially owned by Time Warner and the successor to rights related to such securities granted to Time Warner.  
We cannot predict what effect, if any, the entry into trading of previously issued unregistered shares of Class A common stock will have on the market price of our shares. We may also issue additional shares of Class A common stock or securities convertible into our equity in the future. If more shares of our Class A common stock (or securities convertible into or exchangeable for shares of our Class A common stock) are issued to Time Warner, the economic interests of current shareholders may be diluted and the price of our shares may be adversely affected.
The interests of Time Warner may conflict with the interests of other investors.
Time Warner is able to exercise voting power in us with respect to 49.4%47.0% of our outstanding shares of Class A common stock. As such, Time Warner is in a position to exercise significant influence over the outcome of corporate actions requiring shareholder approval, such as the election of directors or certain transactions. Following the issuance of the TW Warrants, the aggregate economic interest of Time Warner in us is approximately 75.7%,76.0% (without giving effect to the accretion of the Series B Preferred Stockpreferred stock after December 31, 2015)2016). Furthermore, Time Warner has the right to appoint one less than the number required to constitute a majority of our board of directors, provided that Time Warner continues to own not less than 40% of the voting power of the Company. In addition, we
We are also party to an amended investor rights agreement with Time Warner and the other parties thereto under which, among other things, Time Warner was granted a contractual preemptive right (subject to certain exclusions) with respect to issuances of the Company’s equity securities, which permits it to maintain its pro rata economic interest as well as a right to top any offer that would result in a change of control of the Company. Under Bermuda law, there is no takeover code or similar legislation requiring an acquirer of a certain percentage of our Class A common stock to tender for the remaining publically held shares. In certain circumstances, the interests of Time Warner as our largest shareholder could be in conflict with the interests of minority shareholders.

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Furthermore, in addition to being our largest shareholder, Time Warner is our largest secured creditor, as it holds or guarantees 92.7% of our outstanding senior indebtedness as at December 31, 2015, and will hold or guarantee 100% of our outstanding senior indebtedness followingand is the completion of the transactions contemplated in Note 26, "Subsequent Events". Time Warner will be entitled to vote or otherwise make decisions in its capacity as a lender under the 2017 Term Loan (prior to its repayment) and the 2021 Revolving Credit Facility (when drawn) or as a guarantor under the Reimbursement Agreement.Facility. The 2017 Term Loan (prior to its repayment), the 2021 Revolving Credit Facility (when drawn) and the Reimbursement Agreement contain maintenance covenants in respect of interest cover, cash flow cover and total leverage ratios and have more restrictive provisions than equivalent provisions contained in the indenture governing the 2017 PIK Notes, includingincludes covenants in respect of the incurrence of indebtedness (including refinancing indebtedness), the provision of guarantees, making investmentsacquisitions and disposal and granting security and certain events of default.security. As such, Time Warner may be in a position to determine whether to permit transactions, waive defaults or accelerate such indebtedness or take other steps in its capacity as a secured creditor in a manner that might not be consistent with the interests of the holders of our Class A common stock or other holdersstock. Furthermore, in certain circumstances, the interests of Time Warner as our indebtedness.largest shareholder could be in conflict with the interests of minority shareholders.

The price of our Class A common stock is likely to remain volatile.
The market price of shares of our Class A common stock may be influenced by many factors, some of which are beyond our control, including but not limited to those described above under “Risks Relating to Our Operations” as well as the following: general economic and business trends, variations in quarterly operating results, license renewals, regulatory developments in our operating countries and the European Union, the condition of the media industry in our operating countries, the volume of trading in shares of our Class A common stock, future issuances of shares of our Class A common stock and investors’ and securities analysts’ perception of us and other companies that investors or securities analysts deem comparable in the television broadcasting industry. In addition, stock markets in general have experienced extreme price and volume fluctuations that have often been unrelated to and disproportionate to the operating performance of broadcasting companies. These broad market and industry factors may materially reduce the market price of shares of our Class A common stock, regardless of our operating performance.
Our business could be negatively impacted as a result of shareholder activism.
On November 18, 2015,January 17, 2017, TCS Capital Management, LLC ("TCS Capital"), a beneficial owner of more than 10%12% of our shares, submitted a letterfiled an amendment to the Board of Directors and filed aits Schedule 13D disclosing its ownership interest.opinion that the Company should hire an investment bank to run a process to sell the Company as well as replace current members of the Company's Board of Directors with new directors recommended by TCS Capital. In recent years, shareholder activists, such as TCS Capital, have become involved in numerous public companies. Shareholder activists frequently propose to involve themselves in the governance, strategic direction and operations of the Company. Such proposals may disrupt our business and divert the attention of our management and employees, and any perceived uncertainties as to our future direction resulting from such a situation could result in the loss of potential business opportunities, be exploited by our competitors, cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel and business partners, all of which could adversely affect our business. In addition, actions of activist shareholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

ITEM 1B.    UNRESOLVED STAFF COMMENTS
None.
ITEM 2.    PROPERTIES
We own and lease properties in the countries in which we operate. These facilities are fully utilized for current operations, are in good condition and are adequately equipped for purposes of conducting broadcasting, content production or such other operations as we require. We believe that suitable additional space is available on acceptable terms in the event of an expansion of our businesses. The table below provides a brief description of our significant properties.
Location Property Use
Hamilton, Bermuda Leased office Registered office, Corporate
Amsterdam, The Netherlands Leased office Corporate office, Corporate
Sofia, Bulgaria Leased buildings Office and studio space (Bulgaria segment)
Zagreb, Croatia Owned and leased buildings Office and studio space (Croatia segment)
Prague, Czech Republic Owned and leased buildings 
Administrative center, Corporate;
Office and studio space (Czech Republic segment)
Bucharest, Romania Owned and leased buildings Office and studio space (Romania segment)
Bratislava, Slovak Republic Owned buildings Office and studio space (Slovak Republic segment)
Ljubljana, Slovenia Owned and leased buildings Office and studio space (Slovenia segment)
For further information on the cash resources that fund these facility-related costs, see Part II, Item 7, III, "Liquidity and Capital Resources."
ITEM 3.    LEGAL PROCEEDINGS
General
We are from time to time party to legal proceedings, arbitrations and regulatory proceedings arising in the normal course of our business operations, including the proceeding described below. We evaluate, on a quarterly basis, developments in such matters and provide accruals for such matters, as appropriate. In making such decisions, we consider the degree of probability of an unfavorable outcome and our ability to make a reasonable estimate of the amount of a loss. An unfavorable outcome in any such proceedings, if material, could have an adverse effect on our business or consolidated financial statements.

Slovenian Competition Proceeding
On April 24, 2013,In late November and December 2016, CME’s Slovak subsidiary MARKIZA-SLOVAKIA, spol. s.r.o. (“Markiza”) was notified of claims that were filed in June 2016 in a court of first instance in Bratislava, the Competition Protection AgencySlovak Republic to collect amounts allegedly owing under four promissory notes. These four promissory notes were purportedly issued in June 2000 by Pavol Rusko in his personal capacity and were purportedly guaranteed by Markiza under the signature of Mr. Rusko, who was an executive director of Markiza at that time as well as one of its shareholders. The notes purport to be issued in favour of Marian Kocner, a controversial Slovak businessman, and to a former associate of Mr. Kocner, and were supposedly assigned several times, ultimately to Sprava a inkaso zmeniek, s.r.o., a company owned by Mr. Kocner that is the plaintiff in these proceedings. The four notes purport to be in the aggregate amount of approximately EUR 69 million. A court of first instance in Bratislava has suspended proceedings in respect of one of the Republicpromissory notes (in the amount of Slovenia (“CPA”) adoptedapproximately EUR 26 million) because the plaintiff failed to pay court fees. Two of the remaining notes allegedly matured in 2015 and the third in 2016. Despite a decision finding that our wholly-owned subsidiary Produkcija Plus d.o.o. (“Pro Plus”) has abused a dominant position onrandom case assignment system at the Slovenian television advertising market in breach of applicable competition law, by requiring exclusivity from its advertising customers and by applying loyalty discounts in favor of its customers. Pro Plus filed an appealBratislava court, the three cases dealing with the Slovenian Supreme Court on May 24, 2013. On December 3, 2013,other notes have all been assigned to the Slovenian Supreme Court affirmed the decisionsame judge. We do not believe that any of the CPA. Subsequent to this affirmation,promissory notes are authentic and are vigorously defending the CPA adopted a decision to impose a fine of EUR 5.1 million. Pro Plus appealed the decision and the fine was overturned and the proceedings to impose a fine were terminated. The CPA filed an appeal to this ruling, which an appellate court refused on October 9, 2015, confirming the ruling of the lower court to terminate the fining proceeding. As a result, no fine will be imposed.claims.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.
Index

PART II
ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Shares of Class A common stock of Central European Media Enterprises Ltd. began trading on the NASDAQ National Market (since renamed the NASDAQ Global Select Market) on October 13, 1994 under the trading symbol “CETV” and began trading on the Prague Stock Exchange on June 27, 20052005. On each market, the shares are traded under the tradingticker symbol "CETV".
On February 17, 20166, 2017, the last reported sales price for shares of our Class A common stock was US$ 2.382.70.
The following table sets forth the high and low prices for shares of our Class A common stock for each quarterly period during the last two fiscal years.years as reported by NASDAQ.
2015 20142016 2015
High
(US$ / Share)
 
Low
(US$ / Share)
 
High
(US$ / Share)
 
Low
(US$ / Share)
High
(US$ / Share)
 
Low
(US$ / Share)
 
High
(US$ / Share)
 
Low
(US$ / Share)
Fourth Quarter$2.80
 $1.92
 $3.23
 $2.12
$2.88
 $2.15
 $2.80
 $1.92
Third Quarter2.50
 1.84
 2.92
 2.25
2.48
 2.05
 2.50
 1.84
Second Quarter2.83
 1.97
 3.22
 2.45
2.96
 2.03
 2.83
 1.97
First Quarter3.22
 2.55
 5.17
 2.58
2.71
 2.17
 3.22
 2.55
At February 17, 20166, 2017, there were approximately 57 holders of record (including brokerage firms and other nominees) of shares of Class A common stock.
Under our 2015 Stock Incentive Plan (the "2015 Plan"), 6,000,000 shares have beenof Class A are authorized for issuance in respect of equity awards under 2015 Stock Incentive Plan inawards. In addition, to any shares available under theour Amended and Restated Stock Incentive Plan (which expired on June 1, 2015), including in respect of any awards that expire, terminate or are forfeited, will be available for awards under the 2015 Plan (see Item 8, Note 18,16, "Stock-based Compensation"). See Part III, Item 12, Security"Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersMatters" for further information.
DIVIDEND POLICY
We have not declared or paid and have no present intention to declare or pay in the foreseeable future any cash dividends in respect to any class of our shares of common stock.
PURCHASE OF OWN STOCK
We did not purchase any of our own stock in 2015.2016.

15

Index

PERFORMANCE GRAPH
The following performance graph is a line graph comparing the change in the cumulative total shareholder return of the Class A common stock against the cumulative total return of the NASDAQ Composite Index and the Dow Jones Europe Stock Index between December 31, 20102011 and December 31, 2015.2016. The graph below assumes the investment of US$ 100 on December 31, 2011 in our Class A common stock, the NASDAQ Composite and the Dow Jones Europe Stock Index, assuming dividends, if any, are reinvested.
Value of US$ 100 invested at December 31, 20102011 as of December 31, 20152016:
Central European Media Enterprises Ltd.$13.22
$39.11
NASDAQ Composite Index$190.96
$206.63
Dow Jones Europe Stock Index$108.80
$122.29
ITEM 6.    SELECTED FINANCIAL DATA
Our selected consolidated financial data should be read together with our consolidated financial statements and related notes included in Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
The following tables set forth the selected consolidated financial data for each of the years in the five-year period ended December 31, 20152016. The selected consolidated financial data is qualified in its entirety and should be read in conjunction with Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” and Item 8, “Financial Statements and Supplementary Data”. We have derived the consolidated statements of operations and comprehensive income / loss data for the years ended December 31, 20152016, 20142015 and 20132014 and the consolidated balance sheet data as of December 31, 20152016 and 20142015 from the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The consolidated statements of operations and comprehensive income / loss data for the years ended December 31, 20122013 and 20112012 and the balance sheet data as of December 31, 2014, 2013, 2012 and 20112012 were derived from consolidated financial statements that are not included in this Annual Report on Form 10-K.

16The consolidated balance sheet data as of December 31, 2015, 2014, 2013 and 2012 has been retrospectively adjusted in connection with our adoption of FASB Accounting Standards Update No. 2015-03 which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction of the carrying amount of that liability. As a result of adopting this guidance our current and non-current assets decreased with a corresponding decrease in our current and non-current liabilities.

Index

For The Year Ending December 31,For The Year Ended December 31,
(US$ 000's, except per share data)(US$ 000's, except per share data)
2015
 2014
 2013
 2012
 2011
2016
 2015
 2014
 2013
 2012
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME DATA:         
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / LOSS DATA:         
Net revenues$605,841
 $680,793
 $633,134
 $705,999
 $801,511
$638,013
 $605,841
 $680,793
 $633,134
 $705,999
Operating income / (loss)94,583
 38,280
 (180,017) (479,789) 27,183
111,589
 94,583
 38,280
 (180,017) (479,789)
Loss from continuing operations(102,285) (151,465) (276,434) (535,708) (157,517)(180,597) (102,285) (151,465) (276,434) (535,708)
Loss from discontinued operations, net of tax(13,287) (80,431) (5,099) (10,685) (22,088)
 (13,287) (80,431) (5,099) (10,685)
Net loss attributable to CME Ltd.$(114,901) $(227,428) $(277,651) $(535,680) $(174,611)$(180,291) $(114,901) $(227,428) $(277,651) $(535,680)
                  
PER SHARE DATA:                  
Net loss per common share from:                  
Continuing operations - Basic$(0.81) $(1.11) $(2.23) $(6.83) $(2.37)
Continuing operations - Diluted(0.81) (1.11) (2.23) (6.83) (2.37)
Discontinued operations - Basic(0.09) (0.55) (0.04) (0.13) (0.34)
Discontinued operations - Diluted(0.09) (0.55) (0.04) (0.13) (0.34)
Net loss attributable to CME Ltd. - Basic(0.90) (1.66) (2.27) (6.96) (2.71)
Net loss attributable to CME Ltd. - Diluted(0.90) (1.66) (2.27) (6.96) (2.71)
Continuing operations attributable to CME Ltd. - Basic and diluted$(1.28) $(0.81) $(1.11) $(2.23) $(6.83)
Discontinued operations attributable to CME Ltd. - Basic and diluted
 (0.09) (0.55) (0.04) (0.13)
Net loss attributable to CME Ltd. - Basic and diluted(1.28) (0.90) (1.66) (2.27) (6.96)
                  
Weighted average common shares used in computing per share amounts (000’s):                  
Basic146,866 146,509 125,723
 76,919
 64,385
Diluted146,866 146,509 125,723
 76,919
 64,385
Basic and diluted151,017 146,866 146,509
 125,723
 76,919
         
As at December 31,
(US$ 000's)
2016
 2015
 2014
 2013
 2012
           As adjusted
 As adjusted
 As adjusted
 As adjusted
CONSOLIDATED BALANCE SHEET DATA:                  
Cash and cash equivalents$61,679
 $34,298
 $102,322
 $136,543
 $181,301
$43,459
 $61,679
 $34,298
 $102,322
 $136,543
Other current assets296,605
 340,571
 424,958
 460,156
 443,529
296,961
 296,605
 340,330
 421,208
 455,415
Non-current assets1,095,917
 1,244,491
 1,434,593
 1,578,016
 2,056,939
1,050,297
 1,082,133
 1,230,200
 1,425,321
 1,561,129
Total assets$1,454,201
 $1,619,360
 $1,961,873
 $2,174,715
 $2,681,769
$1,390,717
 $1,440,417
 $1,604,828
 $1,948,851
 $2,153,087
                  
Current liabilities$146,308
 $450,527
 $322,681
 $298,047
 $262,241
$171,564
 $146,308
 $450,286
 $318,931
 $293,306
Non-current liabilities988,054
 667,725
 990,301
 1,245,401
 1,401,586
1,070,786
 974,270
 653,434
 981,029
 1,228,514
Temporary equity241,198
 223,926
 207,890
 
 
254,899
 241,198
 223,926
 207,890
 
CME Ltd. shareholders' equity77,260
 279,794
 440,108
 626,061
 1,001,692
CME Ltd. shareholders' (deficit) / equity(107,804) 77,260
 279,794
 440,108
 626,061
Noncontrolling interests1,381
 (2,612) 893
 5,206
 16,250
1,272
 1,381
 (2,612) 893
 5,206
Total liabilities and equity$1,454,201
 $1,619,360
 $1,961,873
 $2,174,715
 $2,681,769
$1,390,717
 $1,440,417
 $1,604,828
 $1,948,851
 $2,153,087

17


ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Please refer to page 2 of this Annual Report on Form 10-K for a list of defined terms used herein.
The exchange rates used in this report are as at December 31, 2015,2016, unless otherwise indicated.

18


I.    Executive SummaryOverview
CME Strategy
Our operations comprise a unique collection of broadcast assetstelevision networks across Central and Eastern Europe, that each enjoyof which enjoys a strong competitive positionsposition due to audience share leadership, brand strength, strong local content, and the depth and experience of country management. The reach and affinity we provide advertisers supports our model of pricing inventory at a premium pricing model.to our competition. We believe these competitive advantages position the company to benefit if forecast economic growth leads to continued growth of the television advertising markets in the countries in which we operate.
We are focused on enhancing the performance of our broadcast assetstelevision networks in each country, over the short- and medium-term, which we expect will continue improving operating margins and free cash flow generation.generation over the short- and medium-term. The main elements of our strategy are as follows:
leveraging popular content to maintain or increase our audience share leadership and advertising market shares in all of our operating countries;
driving growth in advertising revenues through our pricing strategies;
developing additional revenue streams;increasing carriage fees and subscription revenues to reduce reliance on advertising revenues;
optimizing content costs while safeguarding our brands and competitive strengths; and
maintaining a strict cost discipline by controlling other expenses.
As market leaders with experienced management teams in each country, we believe we are uniquelywell positioned to identify new challenges in a timely manner and adjust our strategy as new opportunities or threats arise.
Summary of Results
We manage our business on a geographical basis with six operating segments: Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic and Slovenia. These operating segments, which are also our reportable segments, reflect how our operating performance is evaluated by our chief operating decision makers, who we have identified as our Co-Chiefco-Chief Executive Officers;Officers ("co-CEOs"); how our operations are managed by segment managers; and the structure of our internal financial reporting.
We evaluate the performance of our segments based on net revenues and OIBDA.Non-GAAP Financial Measures
In this report we refer to several non-GAAP financial measures, including OIBDA, which includes amortization and impairment of program rights, is defined as operating income / loss before depreciation, amortization of intangible assets and impairments of assets and certain unusual or infrequent items that are not considered by our chief operating decision makers when evaluating our performance. Items that are not allocated to our segments for purposes of evaluating their performance and therefore are not included in their OIBDA, include stock-based compensation and certain other items.
Our key performance measure of the efficiency of our segments is OIBDA margin. We define OIBDA margin, as the ratio of OIBDA to net revenues.free cash flow and unlevered free cash flow. We believe OIBDAthat each of these metrics is useful to investors because it provides a meaningful representation of our performance as it excludes certain items that either do not impact our cash flows orfor the operating results of our operations. OIBDA and free cash flow, as defined below, are also used as components in determining management bonuses. Intersegment revenues and profits have been eliminated on consolidation.
Free cash flow is defined as cash flows from continuing operating activities, less purchases of property, plant and equipment, net of disposals of property, plant and equipment and excludes the cash impact of certain unusual or infrequent items that are not included in costs charged in arriving at OIBDA because they are not considered by our chief operating decision makers when evaluating performance. Free cash flow is useful as a measure of our ability to generate cash. OIBDA and free cash flow are non-GAAPreasons outlined below. Non-GAAP financial measures and may not be comparable to similar measures reported by other companies. Non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, US GAAP financial measures.
We evaluate our consolidated results and the performance of our segments based on net revenues and OIBDA. We believe OIBDA is useful to investors because it provides a meaningful representation of our performance, as it excludes certain items that do not impact either our cash flows or the operating results of our operations. OIBDA and unlevered free cash flow are also used as components in determining management bonuses.
OIBDA includes amortization and impairment of program rights and is calculated as operating income / loss before depreciation, amortization of intangible assets and impairments of assets and certain unusual or infrequent items that are not considered by our co-CEOs when evaluating our performance. Stock-based compensation and certain other items are not allocated to our segments for purposes of evaluating their performance and therefore are not included in their respective OIBDA. Our key performance measure of the efficiency of our consolidated operations and our segments is OIBDA margin. We define OIBDA margin as the ratio of OIBDA to net revenues.
We have previously used free cash flow as a measure of the ability of our operations to generate cash. We define free cash flow as net cash generated from continuing operating activities less purchases of property, plant and equipment, net of disposals of property, plant and equipment and excluding the cash impact of certain unusual or infrequent items that are not included in costs charged in arriving at OIBDA because they are not considered by our co-CEOs when evaluating performance. Following the refinancing transaction completed in April 2016, the amount of interest and related Guarantee Fees on our outstanding indebtedness that is paid in cash has increased. In addition to this obligation to pay more interest and related Guarantee Fees in cash, we expect to use cash generated by the business to pay Guarantee Fees that are payable in kind, including accrued Guarantee Fees. These cash payments are all reflected in free cash flow; accordingly we believe unlevered free cash flow, defined as free cash flow before cash payments for interest and Guarantee Fees, better illustrates the cash generated by our operations when comparing periods.
For additional information regarding our business segments, including a reconciliation of OIBDA to US GAAP financial measures, see Item 8, Note 21,19, "Segment Data". For a reconciliation of free cash flow and unlevered free cash flow to a US GAAP financial measure, see "Free Cash Flow and Unlevered Free Cash Flow" below.
The following sections contain references to like-for-like or constantWhile our reporting currency percentage movements (“% Lfl”). These references reflectis the impact of applying the current period average exchange rates to the prior perioddollar, our consolidated revenues and costs.costs are divided across a range of European currencies and CME Ltd.’s function currency is the Euro. Given the significant movement of the currencies in the markets in which we operate against the dollar, we believe that it is useful to provide percentage movements based on like-for-like percentage movements as well as actual (“% Act”) percentage movements, (whichwhich includes the effect of foreign exchange)exchange, as well as like-for-like percentage movements (“% Lfl”). Unless otherwise stated, allThe like-for-like percentage increases or decreasesmovement references reflect the impact of applying the current period average exchange rates to the prior period revenues and costs. Since the difference between like-for-like and actual percentage movements is solely the impact of movements in foreign exchange rates, our discussion in the following analysis referis focused on constant currency percentage movements in order to year-on-year percentage changes.highlight those factors influencing operational performance. The incremental impact of foreign exchange rates is presented in the tables preceding such analysis.


Executive Summary
Our operational and financial results in 2016 reflect significant progress in executing our strategy and position the company for continued growth in 2017 and beyond. We maintained our audience share leadership and television advertising market shares by leveraging our competitive advantages and making targeted investments in local programming in certain markets amid heavy competition. Building on our momentum from recent years, overall growth in our television advertising markets and our efforts to increase non-advertising based revenues, combined with our success in keeping overall costs broadly flat, contributed to a further improvement in profitability. As a result, our net leverage ratio (as defined in the Reimbursement Agreement) at the end of 2016 was less than seven times, which is down from eleven times at the start of 2015. We expect the net leverage ratio to decrease further due to sustained improvements in OIBDA, as well as a lower level of net debt from cash generated by the business, which will be used, together with expected proceeds from warrant exercises, to substantially repay our nearest debt maturity. Following the refinancing transaction completed in April 2016, further specified decreases in our net leverage ratio will automatically lower the cost of borrowing on approximately half of our debt, and in turn support further improvement in our free cash flow through lower Guarantee Fee obligations.
The following tables provide a summary of our consolidated results for the years ended December 31, 20152016, 20142015 and 2013:2014:
 For The Year Ending December 31, (US$ 000's)
     Movement     Movement
 2015
 2014
 % Act
 % Lfl
 2014
 2013
 % Act
 % Lfl
Net revenues$605,841
 $680,793
 (11.0)% 5.9% $680,793
 $633,134
 7.5% 10.4%
OIBDA122,815
 95,446
 28.7 % 52.9% 95,446
 (48,405) 
NM (1)

 
NM (1)

Operating income / (loss)94,583
 38,280
 147.1 % 198.2% 38,280
 (180,017) 
NM (1)

 
NM (1)

(1) Number is not meaningful.
 For The Year Ended December 31, (US$ 000's)
     Movement     Movement
 2016
 2015
 % Act
 % Lfl
 2015
 2014
 % Act
 % Lfl
Net revenues$638,013
 $605,841
 5.3% 5.4% $605,841
 $680,793
 (11.0)% 5.9%
Operating income111,589
 94,583
 18.0% 17.3% 94,583
 38,280
 147.1 % 198.2%
Operating margin17.5% 15.6% 1.9 p.p. 1.8 p.p. 15.6% 5.6% 10.0 p.p. 10.1 p.p.
OIBDA$150,049
 $122,815
 22.2% 21.4% $122,815
 $95,446
 28.7 % 52.9%
OIBDA margin23.5% 20.3% 3.2 p.p. 3.1 p.p. 20.3% 14.0% 6.3 p.p. 6.2 p.p.
Our consolidated net revenues increased 6%5% at actual and constant exchange rates in 20152016 compared to 2014 primarily2015 due to an increase in both television advertising revenue.revenues and carriage fee and subscription revenues. Television advertising spending in the markets of the countries in which we operate grew an estimated 6% at constant rates in 20152016 compared to 2014.2015. Our consolidated television advertising revenues grew 6%5% at actual and constant rates anddriven primarily by improvement in four out of six countries in which we operate, including our market share increased in three countries, most notably in our largest market,markets, the Czech Republic, Romania and the Slovak Republic. Carriage fees and subscription revenues also increased 8% at actual rates and 9% at constant rates due primarily to growth in the number of subscribers reported by cable, satellite and Internet protocol television ("IPTV") operators. However, since the dollar was significantly stronger against the currencies of our operations during 2015 than it was in 2014, the impact of foreign exchange rates more than offset the underlying improvement in our revenues, resulting in a decrease in consolidated net revenues of 11% atoperators as well as high definition channels and new channels available exclusively on these platforms.
On an actual rates compared to 2014.


19


On aand constant currency basis, costs charged in arriving at OIBDA decreased 2%increased 1% in 20152016 compared to 2014 primarily due to lower2015. We controlled costs overall, while spending more on popular local content, costsby offsetting this investment with savings in foreign fiction as well as reducing other operating and fewer restructuring charges. We continue tooverhead costs.
Our focus on controlling costs and content costs decreased, which reflected savings from better utilizationwhile improving revenues led to another year of our program library, more efficient own production, and foreign programming acquired at better prices and available for additional runs. These savings more than offset limited targeted investments in programming in certain countries to counter increased competition for audience share. Costs charged in arriving at OIBDA decreased by 17% at actual rates in 2015 compared to 2014.
We believe our focus on better monetization of our broadcast assets while maintaining a strict cost discipline resulted in a significant improvement in our OIBDA margin expansion, which increased to 24% in 2016 from 20% in 2015 from 14% in 2014.2015. We expect the trend of revenues growing at a faster pace than costs will continue for the next several years, leading to further margin expansion.
The tax audit of Pro TVimprovement in Romania was completedoperating income in 2016 compared to 2015 primarily reflects the third quarter of 2015. We releasedyear-on-year increase in OIBDA, excluding the US$ 12.0 million provision recordedbenefit in operating income from the reversal of charges in 2015 related to tax audits in Romania, which were accrued in the fourth quarter of 2014 and the US$18.2 million provision recorded in the first quarter of 2015 (see Item 8, Note 22, "Commitments and Contingencies").fully released in the third quarter of 2015. Since these charges were not included in OIBDA in 2014, our reversal of these charges during the third quarter of 2015 haswas similarly been excluded from OIBDA.
We completed the divestiture of all remaining non-core assets during 2015. This will allow us to continue to focus our efforts on our broadcast assets, a key element of which is the production of local content, keeping our television stations at the forefront of trends in media consumption and making them market leaders in their respective countries. The results of each of these businesses have been included as discontinued operations for all periods presented.
There were no impairment charges in respect of goodwill and intangible assets during 2015 or 2014. The improvement in OIBDA, as well as the reversal of the provision related to the tax audit in Romania, resulted in a significant increase in operating income for 2015 compared to 2014.
We remained marketaudience share leaders during 2015 in terms of audience share2016 in all of the countries in which we operate.operate and improved our relative position in all day audience share in four countries. These audience shares give us a strong advantage over our competition,offering for advertisers, and we believe we continue to provide the most efficient medium to reach consumers.
The progress made during 2016 and the continued improvement expected in the coming years positions the company for even higher profitability of our operations. Looking ahead to 2017 and beyond:
Analysts estimate that GDP growth in the countries in which we operate will continue to outpace that of the developed markets (as defined below), and projections from the International Monetary Fund forecast Romania to have the highest GDP growth rate in the European Union again in 2017. We anticipate the television advertising market in each of our countries will grow in 2017.
The increase in demand we have seen for television advertising in 2016 is leading to higher list prices in our sales policies for 2017. This is particularly true in Romania and the Slovak Republic, as both our operations and the respective markets were largely sold-out in 2016. Average realized prices for the year will ultimately depend on a number of factors, including the timing of commitments made for spending in 2017, the portion of those commitments that is prepaid, the volume of those commitments relative to 2016, and the seasonality of advertisements actually placed in 2017.
We expect non-advertising based carriage fees and subscription revenues to increase further. From January 2017, our channels in both the Slovak Republic and Slovenia have been available exclusively on cable, satellite and IPTV platforms. This may initially result in lower audience shares in these countries, which could negatively impact our television advertising revenues in 2017. However, we expect an increase in carriage fees and subscription revenues in 2017, as well as a significant decrease in transmission costs, which we believe will more than offset any negative impact on television advertising revenues and improve margins in each country. We also expect increases across our markets in the number of subscribers to cable, satellite and IPTV platforms to continue, which would benefit profitability in all countries.
Local content continues to attract larger audiences and competition for audience share remains significant. As a result, we continually refine our program grids and intend to maintain targeted investments in local content in a cost effective manner. As part of this strategy, we recently rebranded our niche channels in the Czech Republic to bring them under the umbrella of our flagship brand, NOVA. We intend to expand our offering of local content on some of these smaller channels, which historically have broadcast more foreign content, to make them more attractive to viewers. Although these investments will cause our content costs to increase in 2017, we expect much of this to be offset by other cost savings.

Management remains focused on long-term value creation and in the near term we should continue to benefit from specified decreases in our net leverage ratio from less than seven times at the end of 2016, which automatically reduces our cost of borrowing as well as our sensitivity to external shocks, and adds to our increasing cash flow generation. We anticipate using cash generated by the business, together with expected proceeds from warrant exercises and savings from lower debt service obligations, to substantially repay our nearest debt maturity in November 2018. We intend to commence repayment of such maturity beginning November 2017. To that end, we expect to pay all Guarantee Fees related to the 2018 Euro Term Loan in cash as they come due. We anticipate paying Guarantee Fees related to the 2019 Euro Term Loan and 2021 Euro Term Loan in kind, where we have the option.
In recent years, our liabilities for income taxes have not been significant. However, as the operating companies in each jurisdiction return to generating profits and previous net operating losses are utilized, the amount of cash paid for income taxes is expected to increase.
Competition from subscription video on demand ("SVOD") platforms may increase as Amazon Prime has recently joined Netflix in providing a primarily English language version of their service to viewers in our countries. We believe this will benefit each market in terms of conditioning consumers to pay for content they watch online. However, similar to television viewing trends in our countries, we expect local content to have better success in attracting SVOD audiences. Therefore, Voyo, our SVOD product launched in 2011, is better positioned to capitalize on any changes in viewing habits since the local productions that have made our television channels market leaders are also available in local language to Voyo subscribers. We will continue to monitor developments in the SVOD market for profitable investment strategies, including opportunities to offer Voyo with our linear channels for cable, satellite and IPTV operators, as well as build-out our offering of advertising video on demand products and other offerings for advertising online, supported by our investments in local content.
While some analysts forecast spending for online advertising to overtake television advertising in the United States during 2017, we don't expect to see a similar dynamic in our markets in the short- to medium-term due to various factors, including lower rates of broadband penetration, the type of products advertised and the broad reach that television provides in the desired target audiences.
Foreign exchange rates may again have a significant impact on our results when reported in dollars. Due to inflation in the Czech Republic hitting 2% in December 2016 and increasing inflation expectations for 2017, the Czech National Bank is expected to begin withdrawing its floor related to the EUR/CZK exchange rate during 2017, subject to fiscal policies of developed countries and monetary policies of other central banks. On its own, this by concentrating our efforts on improvingis expected to cause the monetizationCzech Koruna to strengthen relative to the dollar and therefore improve the results of our audiences.largest operation in dollar terms. Fluctuations in exchange rates for our currencies will otherwise not have a significant impact on either our day-to-day operations because revenues and operating expenses are generally denominated in local currencies or on our net leverage ratio. Following completion of the refinancing transactions in April 2016, the principal amount of our outstanding senior debt is denominated in Euros.
Free Cash Flow and Unlevered Free Cash Flow
For The Year Ending December 31, (US$ 000's)For The Year Ended December 31, (US$ 000's)
2015
 2014
 Movement
 2014
 2013
 Movement
2016
 2015
 Movement
 2015
 2014
 Movement
Net cash generated from / (used in) operating activities$85,877
 $(65,242) 
NM (1)

 $(65,242) $(61,070) (6.8)%$33,917
 $85,877
 (60.5)% $85,877
 $(65,242) 
NM (1)

Capital expenditures, net(30,426) (28,548) (6.6)% (28,548) (29,835) 4.3 %(29,356) (30,426) 3.5 % (30,426) (28,548) (6.6)%
Free cash flow$55,451
 $(93,790) 
NM (1)

 $(93,790) $(90,905) (3.2)%4,561
 55,451
 (91.8)% 55,451
 (93,790) 159.1 %
Cash paid for interest (including mandatory cash-pay Guarantee Fees)53,982
 18,457
 192.5 % 18,457
 76,154
 (75.8)%
Cash paid for Guarantee Fees that may be paid in kind37,440
 
 
NM (1)

 
 
  %
Unlevered free cash flow$95,983
 $73,908
 29.9 % $73,908
 $(17,636) 
NM (1)

(1) Number is not meaningful.
 December 31, 2015
 December 31, 2014
 Movement
Cash and cash equivalents$61,679
 $34,298
 79.8%
 December 31, 2016
 December 31, 2015
 Movement
Cash and cash equivalents$43,459
 $61,679
 (29.5)%
Our unlevered free cash flow increased 30% to US$ 96.0 million in 2016 from US$ 73.9 million in 2015, was US$ 55.5 million,due primarily to the increase in OIBDA. Free cash flow in 2016 decreased 92% compared to negative free2015 because we paid more interest in cash flowand elected to pay a total of US$ 93.837.4 million of Guarantee Fees in 2014. The improvementcash, including US$ 27.5 million of Guarantee Fees previously paid in free cash flow during 2015 reflected both the improvement in OIBDA and lower cash interest payments. Additionally, the level of payments for programming was more normalized in 2015 than in prior years, which also contributed to the improvement in free cash flow.kind. We ended the year with cash of US$ 61.743.5 million comparedand access to another US$ 34.3115.0 million of cash at December 31, 2014.
Financing Transactions
We reduced the Company's cost of borrowing and made improvements to the capital structure and maturity profile of our debt through the financing transactions entered into in 2015 and early 2016.
In June 2015 we repaid the principal amount outstanding underliquidity provided by the 2021 Revolving Credit Facility, which remains undrawn.
Capital Structure and Allocation
The refinancing transaction completed in April 2016 significantly reduced the facility remained undrawn thereafter.
On September 30, 2015, we entered intocompany's cost of borrowing and improved the 2019 Euro Term Loan, as contemplatedmaturity profile of our debt. We anticipate using increased cash generated by the 2015 Refinancing Commitment Letter,business, along with expected proceeds from warrant exercises and drew EUR 235.3 million (approximately US$ 273.0 million)savings from lower debt service obligations to substantially repay our nearest debt maturity in November 2018. We intend to commence repayment of such maturity beginning November 2017.
As part of the transaction completed on November 13, 2015 to repay the 2015 Convertible Notes and discharged their indenture.April 8, 2016:
On February 19, 2016, we entered into an agreement in respect of aThe new EUR 468.8 million (approximately US$ 510.4 million) 2021 Euro Term Loan the proceeds of which will be drawn on or about April 7, 2016 and be appliedwas used, together with corporate cash, to repay the 2017 Term Loan and redeemUS$ 502.5 million aggregate principal amount of the 2017 PIK Notes which we expect will be completed on or about April 8, 2016.and repay the US$ 38.2 million 2017 Term Loan, as well as accrued and unpaid interest.
Also on February 19, 2016, we agreed to extend theThe maturity date of the 2018 Euro Term Loanexisting EUR 250.8 million term loan was extended by one year so the Company’s nearest debt maturity is November 2018.
The maturity date of our existing US$ 115.0 million revolving credit facility was extended from 2017 to November 1, 2018,2021, with effect from the drawing of the 2021 Euro Term Loan.
Lastly, in February 2016 we agreedaccess to amend the 2021 Revolving Credit Facility to provide the Company with US$ 50.0 million of liquidity from January 1, 2018 to February 19, 2021, with effect from the drawing of the 2021 Euro Term Loan.2018.
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Following these transactions, our cost of borrowing will decrease and our nearestthe transaction:
All outstanding long-term debt maturity will be close to the end of 2018. is denominated in Euros.
The all-in rate applicable to the 2021 Euro Term Loan will range from 10.5% toand associated guarantee by Time Warner currently stands at 9.0%, an improvement of 600 basis points on the debt it replaced, and can go as low as 7.0% depending on our net leverage ratio, (as defined in the Reimbursement Agreement). Based on our leverage profile at the end of 2015, we expect the initial all-in rate will be 10.5%, an immediate improvement of 450 basis points inautomatically decreasing the cost of approximately half ofborrowing as the outstanding principal amount of our debt. The rate will also decrease gradually with reductions in ourCompany’s net leverage ratio falling as low as 7.0% when our net leverage decreases to five times. improves.
The rate applicable to any balances outstanding undercost of the 2021 Revolving Credit Facility, will also decrease graduallywhich is currently undrawn, similarly ranges from 10.0% inapproximately 9.0% to 7.0%, depending on our net leverage ratio.
We recorded a similar manner. So as our leverage decreases, our cost of borrowing under these instruments automatically decreases too. Once the transactions are completed, we expect to record anon-cash loss on extinguishment of debt amounting to approximately US$ 149.9150.2 million in the second quarter of 2016.

20With the flexibility afforded to us from this and previous financing transactions, we continue to look at ways to improve our capital structure. We expect our net leverage ratio, which was less than seven times at the end of 2016, to decrease in the coming years.

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MarketSlovak Republic
We operate one general entertainment channel, TV MARKIZA, and three other channels, DOMA (Slovak Republic), DAJTO and MARKIZA INTERNATIONAL, a general entertainment channel broadcasting in the Czech Republic.
Target Demographic Channel Ownership All day audience share Prime time audience share
      2016 2015 2016 2015
12-54 TV MARKIZA CME 22.3% 22.9% 23.3% 24.9%
  TV JOJ J&T Media Enterprises 15.4% 16.5% 18.8% 20.0%
  Jednotka Public Television 7.8% 7.5% 9.5% 8.8%
             
Source: PMT/ TNS SK
The combined all day and prime time audience shares of our Slovak Republic operations in 2016, excluding MARKIZA INTERNATIONAL, were 30.7% and 32.2%, respectively.
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Slovenia
We operate two general entertainment channels, POP TV and KANAL A, and three other channels, KINO, BRIO and OTO.
Target Demographic Channel Ownership All day audience share Prime time audience share
      2016 2015 2016 2015
18-54 POP TV CME 21.3% 19.5% 31.6% 27.8%
  Planet TV Antenna Group / TSmedia 8.1% 8.6% 10.4% 11.7%
  SLO 1 Public Television 9.0% 8.6% 9.6% 9.4%
             
Source: AGB Nielsen Media Research
The combined all day and prime time audience shares of our Slovenia operations in 2016 were 38.1% and 47.5%, respectively.
Seasonality
We experience seasonality, with advertising sales tending to be lowest during the third quarter of each calendar year due to the summer holiday period (typically July and August), and highest during the fourth quarter of each calendar year due to the holiday season.
Regulation of Television Broadcasting
Television broadcasting in each of the countries in which we operate is regulated by a governmental authority or agency. In this report, we refer to such agencies individually as a “Media Council” and collectively as “Media Councils”. Media Councils generally supervise broadcasters and their compliance with national broadcasting legislation, as well as control access to the available frequencies through licensing regimes.
Programming and Advertising Regulation
Our main operating countries are member states of the EU, and as such, our broadcast operations in such countries are subject to relevant EU legislation relating to media.
The EU Audiovisual Media Services Directive (the “AVMS Directive”) came into force in March 2010 and provides the legal framework for audiovisual media services generally in the EU. The AVMS Directive covers both linear (i.e., broadcasting) and non-linear (e.g., video-on-demand and catch-up) transmissions of audiovisual media services, with the latter subject to significantly less stringent regulation. Among other things, the AVMS Directive requires broadcasters to comply with rules related to, but not limited to, program content, advertising content and quotas, product placement, sponsorship, teleshopping, accessibility by persons with a visual or hearing disability, and minimum quotas with respect to “European works” (defined as originating from an EU member state or a signatory to the Council of Europe's Convention on Transfrontier Television as well as being written and produced mainly by residents of the EU or Council of Europe member states or pursuant to co-production agreements between such states and other countries). In addition, the AVMS Directive requires that at least 10% of either broadcast time or programming budget is dedicated to programs made by European producers who are independent of broadcasters. News, sports, games, advertising, teletext services and teleshopping are excluded from the calculation of these quotas. In respect of advertising, the AVMS Directive provides that the proportion of television advertising spots and teleshopping spots within a given hour shall not exceed 20% (what is commonly referred to as the ‘12 minute per hour rule’). The AVMS Directive does not otherwise restrict when programming may be interrupted by advertising in linear broadcasting, except in the case of films and news programming (where programming may be interrupted once every thirty minutes or more) and children’s programming (where the same restriction applies providing that the program is greater than thirty minutes) and religious programming (where no advertising or teleshopping shall be inserted). Under the AVMS Directive, product placement is prohibited subject to certain exceptions (for example it is permitted in films and series, sports programs and light entertainment programs) and providing that the use of product placement is not ‘unduly’ prominent, is not promotional and is appropriately identified to viewers.
Legislation implementing the AVMS Directive has been adopted across our operating countries. On May 25, 2016, the European Commission adopted a proposal amending the AVMS Directive. As proposed the legislation liberalises many of the AVMS Directive requirements, including, for example, in respect of hourly advertising limits, product placement, teleshopping and sponsorship. The proposal is subject to consultation, review by the European Commission committees and voting in the European Parliament. Any amendments to the AVMS Directive would then need to be implemented by our countries of operation.
Please see below for more detailed information on programming and advertising regulations that impact our channels.
Bulgaria: In Bulgaria, privately owned broadcasters are permitted to broadcast advertising for up to 12 minutes per hour. The public broadcaster, BNT, which is financed through a compulsory television license fee and by the government, is restricted to broadcasting advertising for four minutes per hour and no more than 15 minutes per day, of which only five minutes may be in prime time. There are also restrictions on the frequency of advertising breaks (for example, news and children's programs shorter than 30 minutes cannot be interrupted). These restrictions apply to both publicly and privately owned broadcasters. Further restrictions relate to advertising content, including a ban on tobacco advertising and restrictions on alcohol advertising, regulations on medical products advertising and regulations on advertising targeted at children or during children's programming. In addition, members of the news department of our channels are prohibited from appearing in advertisements. Our channels in Bulgaria are required to comply with several restrictions on programming, including regulations on the origin of programming. These channels must ensure that 50% of a channel's total annual broadcast time consists of EU- or locally-produced programming and 12% of such broadcast time consists of programming produced by independent producers in the EU. News, sports, games and teleshopping programs, as well as advertising and teletext services, are excluded from these restrictions.
Croatia: In Croatia, privately owned broadcasters are permitted to broadcast advertising for up to 12 minutes per hour with no daily limit, and direct sales advertising has to last continuously for at least 15 minutes. Additional restrictions apply to children's programming and movies. The public broadcaster, HRT, which is financed through a compulsory television license fee, is restricted to broadcasting nine minutes of advertising per hour generally and four minutes per hour from 6 p.m. to 10 p.m. HRT is not permitted to broadcast spots for teleshopping. There are other restrictions that relate to advertising content, including a ban on tobacco and alcohol advertising. NOVA TV (Croatia) is required to comply with several restrictions on programming, including regulations on the origin of programming. These include the requirement that 20% of broadcast time consists of locally produced programming and 50% of such locally produced programming be shown during prime time (between 4:00 p.m. and 10:00 p.m.). These restrictions are not applicable to DOMA (Croatia).
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Czech Republic: Privately owned broadcasters in the Czech Republic are permitted to broadcast advertising for up to 12 minutes per hour. In September 2011, legislation was implemented in the Czech Republic which restricts the amount of advertising that may be shown on channels of the public broadcaster, CT. Pursuant to the regulation, no advertising may be shown on the public channels CT 1 and CT 24, while the channels CT 2 and CT 4 may show a limited amount of advertising. Also included in the legislation is the requirement that national private broadcasters must contribute annually to a Czech cinematography fund in an amount equal to 2% of their net advertising revenues. We are entitled to apply for financing from the fund. In the Czech Republic, all broadcasters are restricted with respect to the frequency of advertising breaks during and between programs, as well as being subject to restrictions that relate to advertising content, including a ban on tobacco advertising and limitations on advertisements of alcoholic beverages, pharmaceuticals, firearms and munitions.
Romania: Privately owned broadcasters in Romania are permitted to broadcast advertising and direct sales advertising for up to 12 minutes per hour. There are also restrictions on the frequency of advertising breaks (for example, news and children's programs shorter than 30 minutes cannot be interrupted). Broadcasters are also required that from the total broadcasting time (except for the time allocated to news, sports events, games, advertising and teleshopping) (a) at least 50% must be European-origin audio-visual works and (b) at least 10% (or, alternatively, at least 10% of their programming budget) must be European audio-visual works produced by independent producers. The public broadcaster, TVR, is restricted to broadcasting advertising for eight minutes per hour and only between programs. Further restrictions relate to advertising content, including a ban on tobacco advertising and restrictions on alcohol advertising, and regulations on advertising targeted at children or during children's programming. In addition, news anchors of all channels are prohibited from appearing in advertisements and teleshopping programming.
Slovak Republic: Privately owned broadcasters in the Slovak Republic are permitted to broadcast advertising for up to 12 minutes per hour but not for more than 20% of their total daily broadcast time. Since January 2013, the public broadcaster RTVS, which is financed through a compulsory license fee, can broadcast advertising for up to 0.5% of its total broadcast time (up to 2.5% of total broadcast time including teleshopping programming), but between 7:00 p.m. and 10:00 p.m. may broadcast only eight minutes of advertising per hour. There are restrictions on the frequency of advertising breaks during and between programs. RTVS is not permitted to broadcast advertising breaks during programs. There are also restrictions that relate to advertising content, including a ban on tobacco, pharmaceuticals, firearms and munitions advertising and a ban on advertisements of alcoholic beverages (excluding beer and wine) between 6:00 a.m. and 10:00 p.m. Our operations in the Slovak Republic are also required to comply with several restrictions on programming, including regulations on the origin of programming. These include the requirement that 50% of the station's monthly broadcast time must be European-origin audio-visual works and at least 10% of a station's monthly broadcast time must be European audio-visual works produced by independent producers, at least 10% of which must be broadcast within five years of production.
Slovenia: Privately owned broadcasters in Slovenia are allowed to broadcast advertising for up to 12 minutes in any hour. The public broadcaster, SLO, which is financed through a compulsory television license fee and commercial activities, is allowed to broadcast advertising for up to 10 minutes per hour, but is only permitted up to seven minutes per hour between the hours of 6:00 p.m. and 11:00 p.m. There are also restrictions on the frequency of advertising breaks during programs and restrictions that relate to advertising content, including restrictions on food advertising during children's programming and a ban on tobacco advertising and a prohibition on the advertising of any alcoholic beverages from 7:00 a.m. to 9:30 p.m. and generally for alcoholic beverages with an alcoholic content of more than 15%. Our Slovenia operations are required to comply with several restrictions on programming, including regulations on the origin of programming. These include the requirement that 20% of a station's daily programming consist of locally produced programming, of which at least 60 minutes must be broadcast between 6:00 p.m. and 10:00 p.m. In addition, 50% of our niche channels' annual broadcast time must be European-origin audio-visual works and at least 10% of such stations' annual broadcast time must be European audio-visual works produced by independent producers.
Licensing Regulation
The license granting and renewal process in our operating countries varies by jurisdiction and by type of broadcast permitted by the license (i.e., terrestrial, cable, satellite). Depending on the country, terrestrial licenses may be valid for an unlimited time period, may be renewed automatically upon application or may require a more lengthy renewal procedure, such as a tender process. Generally cable and satellite licenses are granted or renewed upon application. We expect each of our licenses will continue to be renewed or new licenses to be granted as required to continue to operate our business. All of the countries in which we operate have transitioned from analog to digital terrestrial broadcasting and we have obtained digital licenses where requested. In January 2017, we ceased terrestrial distribution of our channels in the Slovak Republic and Slovenia, and channels in those countries are now available exclusively on cable, satellite and IPTV platforms. We will apply for additional digital licenses where such applications are prudent and permissible. Please see below for more detailed information on licenses for our channels.
Bulgaria: BTV operates pursuant to a national digital terrestrial license issued by the Council for Electronic Media, the Bulgarian Media Council, that expires in July 2024. BTV ACTION broadcasts pursuant to a national cable registration that is valid for an indefinite time period and also has a digital terrestrial license that expires in January 2025 which is not currently in use. BTV CINEMA, BTV COMEDY, RING and BTV LADY, as well as BTV, each broadcast pursuant to a national cable registration that is valid for an indefinite time period.
Croatia: NOVA TV (Croatia) broadcasts pursuant to a national terrestrial license granted by the Croatian Media Council, the Electronic Media Council, which expires in April 2025. DOMA (Croatia) broadcasts pursuant to a national terrestrial license that expires in January 2026. MINI TV broadcasts via satellite and cable pursuant to a license that expires in January 2022.
Czech Republic: Our channels in the Czech Republic operate under a variety of licenses granted by the Czech Republic Media Council, The Council for Radio and Television Broadcasting. TV NOVA (Czech Republic) broadcasts under a national terrestrial license that expires in January 2025. TV NOVA (Czech Republic) may also broadcast pursuant to a satellite license that expires in December 2020. NOVA CINEMA broadcasts pursuant to a national terrestrial digital license that expires in 2023. NOVA CINEMA also broadcasts via satellite pursuant to a license that is valid until November 2019. NOVA SPORT 1 broadcasts pursuant to a license that allows for both satellite and cable transmission that expires in October 2020. NOVA SPORT 2 broadcasts pursuant to a satellite license that expires in August 2027. In addition, NOVA SPORT 1 and NOVA SPORT 2 each have a license that permits internet transmission which expires in August 2027. NOVA ACTION (formerly known as FANDA) broadcasts pursuant to a satellite license that expires in July 2024 and a national terrestrial license that expires in September 2023. NOVA 2 (formerly known as SMICHOV) broadcasts pursuant to a national terrestrial license that expires in December 2024 and a satellite license that expires in February 2025. NOVA GOLD (formerly known as TELKA) broadcasts pursuant to a national terrestrial license and a satellite license that each expire in February 2025. NOVA INTERNATIONAL broadcasts pursuant to a license that permits internet transmission which expires in January 2028.
Romania: PRO TV broadcasts pursuant to a national satellite license granted by the Romanian Media Council, the National Audio-Visual Council. Our other Romanian channels (ACASA, ACASA GOLD, PRO CINEMA, SPORT.RO, MTV ROMANIA and PRO TV INTERNATIONAL) each has a national satellite license. PRO TV also broadcasts through the electronic communications networks pursuant to a series of local licenses and ACASA broadcasts in high-definition pursuant to a written consent from the Media Council. Licenses for our Romanian operations expire on dates ranging from April 2018 to January 2025. PRO TV CHISINAU broadcasts pursuant to a cable license granted by the Audio-Visual Coordinating Council of the Republic of Moldova that expires in November 2023 and ACASA IN MOLDOVA broadcasts pursuant to a cable license that expires in December 2017.
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Slovak Republic: TV MARKIZA, DOMA (Slovak Republic) and DAJTO each broadcast pursuant to a national license for digital broadcasting granted by the Council for Broadcasting and Retransmission, the Media Council of the Slovak Republic, which is valid for an indefinite period. MARKIZA INTERNATIONAL is broadcast pursuant to the license granted to TV MARKIZA.
Slovenia: Our Slovenian channels POP TV, KANAL A, KINO, BRIO and OTO each have licenses granted by the Post and Electronic Communications Agency of the Republic of Slovenia, the Slovenia Media Council, that allow for broadcasting on any platform, including digital, cable and satellite. These licenses are valid for an indefinite time period.
OTHER INFORMATION
Employees
As of December 31, 2016, we had a total of approximately 2,950 employees (including contractors).
Corporate Information
After adjustingCME Ltd. was incorporated in 1994 under the laws of Bermuda. Our registered offices are located at O'Hara House, 3 Bermudiana Road, Hamilton HM 08, Bermuda, and our telephone number is +1-441-296-1431. Communications can also be sent c/o CME Media Services Ltd. at Krizeneckeho nam. 1078/5, 152 00 Praha 5, Czech Republic, telephone number +420-242-465-605. CME's Class A common stock is listed on the NASDAQ Global Select Market and the Prague Stock Exchange under the ticker symbol “CETV”.
Financial Information by Operating Segment and by Geographical Area
For financial information by operating segment and geographic area, see Part II, Item 8, Note 19, "Segment Data".
Available Information
We make available, free of charge, on our website at http://www.cme.net our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.
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ITEM 1A    RISK FACTORS
This report and the following discussion of risk factors contain forward-looking statements as discussed on page 2 of this report. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks and uncertainties described below and elsewhere in this report. These risks and uncertainties are not the only ones we may face. Additional risks and uncertainties of which we are not aware, or that we currently deem immaterial, may also become important factors that affect our financial condition, results of operations and cash flows.
Risks Relating to Our Financial Position
Global or regional economic conditions and the credit crisis have adversely affected our financial position and results of operations. We cannot predict if the recovery in our operating countries will continue or how long it may last. A failure to achieve lasting recoveries will continue to adversely affect our results of operations.
The results of our operations depend heavily on advertising revenue, and demand for inflation,advertising is affected by general economic conditions in the region and globally. The economic uncertainty following the onset of the global financial crisis at the beginning of 2009 and the sustained recessionary period that followed had a prolonged adverse impact on consumer and business spending, access to credit, liquidity, investment spending, asset values and employment rates. These adverse economic conditions had a material negative impact on advertising spending in our markets, which negatively impacted our advertising revenues in the periods that followed. Since 2014, our markets have experienced overall growth in real GDP (as adjusted for inflation) and advertising spending; however we cannot predict if the recovery that has begun will continue or how long it will last. Any significant deterioration of general economic conditions in our markets would have an adverse economic impact on our advertising revenues. In addition, although we believe the advertising spend per capita of the countries in which we operate and advertising intensity (the ratio of total ad spend per capita to nominal GDP per capita) will converge with the developed markets (as defined in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations), such convergence may not occur in the time frame we expect, or at all. Moreover, the occurrence of disasters, acts of terrorism, civil or military conflicts or general political instability and responses to it, such as the imposition of economic sanctions against Russia, may also cause a deterioration in general economic conditions that may reduce advertising spending. Any of these developments would have a significant negative effect on our financial position, results of operations and cash flows.
Concerns regarding the Eurozone and the impact on the region of the United Kingdom’s exit from the European Union (“EU”) may adversely affect our financial position and results of operations.
Continued economic softness in the Eurozone, including a slowdown in the growth of consumer prices, prompted the European Central Bank to embark upon quantitative easing in 2015. Economic events related to the sovereign debt crisis in several EU countries have also highlighted issues relating to the strength of the banking sector in Europe and the Euro. Although the EU has created external funding and stability mechanisms to provide liquidity and financial assistance to Eurozone member states and financial institutions, there can be no assurance that the market disruptions in Europe related to sovereign debt and the banking sector or otherwise, including the increased cost of funding for certain governments and financial institutions, will not continue and there can be no assurance that funding and stability packages utilized previously will be available or, if provided, will be sufficient to stabilize affected economies or institutions.
Economic conditions in the EU will be further impacted by the results of the referendum held in the United Kingdom on June 23, 2016 whereby the United Kingdom electorate voted in favor of the United Kingdom leaving the EU, commonly referred to as “Brexit”. While the overall economic impact of Brexit on the EU and the Euro is difficult to estimate at present, decisions to conserve cash and reduce spending by consumers and businesses in the United Kingdom would have a negative impact on economic growth rates in the United Kingdom and, to a lesser extent, in the EU, in particular those countries that overall real GDPare significant exporters to the United Kingdom. There is also significant uncertainty regarding the timing and terms on which the United Kingdom would leave the EU, and it is expected that a more protracted process to set those terms would have a more prolonged economic impact. In addition, there is concern that other countries may seek to leave the EU following the Brexit decision, increasing uncertainty in the region, which may have a further negative impact on investment and economic growth rates. Furthermore, the departure of the United Kingdom from the EU may affect the budgetary contributions and allocations among the EU member states in the medium term, including the countries in which we operate, which are net recipients of EU funding. Economic uncertainty caused by Brexit or other instability in the EU could cause significant volatility in EU markets and reduce economic growth rates in the countries in which we operate, grew 3%which would negatively impact our business.
Our operating results will be adversely affected if we cannot generate strong advertising sales.
We generate the majority of our revenues from the sale of advertising airtime on our television channels. The reduction in 2015. Following Croatia's exitadvertising spending in our markets following the onset of the global financial crisis at the beginning of 2009 and the sustained recessionary period that followed had a negative effect on television advertising spending and prices. While we have attempted to combat this fall in prices by implementing new pricing strategies, the success of these strategies has varied from recession duringmarket to market and continues to be challenged by pressure from advertisers and discounting by competitors. In addition to advertising pricing, other factors that may affect our advertising sales include general economic conditions (described above), competition from other broadcasters and operators of other distribution platforms, changes in programming strategy, changes in distribution strategy, our channels’ technical reach, technological developments relating to media and broadcasting, seasonal trends in the year, 2015 marksadvertising market, changing audience preferences and in how and when people view content and the first yearaccompanying advertising, increased competition for the leisure time of positive GDP growthaudiences and shifts in population and other demographics. Our advertising revenues also depend on our ability to maintain audience ratings and to generate GRPs. This requires us to have a distribution strategy that reaches a significant audience as well as to maintain investments in programming at a sufficient level to continue to attract audiences. Changes in the distribution of our channels, such as our decision to cease broadcasting on DTT in the Slovak Republic and Slovenia, may reduce the number of people who can view our channels, which may negatively impact our audience share and GRPs generated. Furthermore, significant or sustained reductions in investments in programming or other operating costs in response to reduced advertising revenues had and, if continued or repeated, may have an adverse impact on our television viewing levels. Reductions in advertising spending in our markets and resistance to price increases as well as competition for ratings from broadcasters seeking to attract similar audiences have had and may continue to have an adverse impact on our ability to maintain our advertising sales. A failure to maintain and increase advertising sales could have a material adverse effect on our financial position, results of operations and cash flows.

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Our liquidity constraints and debt service obligations may restrict our ability to fund our operations.
We have significant debt service obligations under the Euro Term Loans as well as the 2021 Revolving Credit Facility (when drawn). Furthermore, we are paying Guarantee Fees to Time Warner as consideration for its guarantees of the Euro Term Loans (collectively, the "TW Guarantees"). Although the entire Guarantee Fee in respect of the 2018 Euro Term Loan and the 2019 Euro Term Loan are, and a portion of the Guarantee Fee in respect of the 2021 Euro Term Loan can be, non-cash pay at our option, accruing such fees will further increase the amounts to be repaid at the maturity of these facilities. Accordingly, the payment of Guarantee Fees in kind will increase our already significant leverage. As a result of our debt service obligations and covenants contained in the related loan agreements, we are restricted under the Reimbursement Agreement and the 2021 Revolving Credit Facility (when drawn) in the manner in which our business is conducted, including but not limited to our ability to obtain additional debt financing to refinance existing indebtedness or to fund future working capital, capital expenditures, business opportunities or other corporate requirements. We may have a proportionally higher level of debt than our competitors, which may put us at a competitive disadvantage by limiting our flexibility in planning for, or reacting to, changes in our business, economic conditions or our industry. For additional information regarding the Reimbursement Agreement and the TW Guarantees, see Part II, Item 8, Note 4, "Long-term Debt and Other Financing Arrangements".
We may be unable to refinance our existing indebtedness and may not be able to obtain favorable refinancing terms.
We have a substantial amount of indebtedness. Under the Reimbursement Agreement and the 2021 Revolving Credit Facility (when drawn), we can incur only limited amounts of additional indebtedness, other than indebtedness incurred to refinance existing indebtedness. In addition, pursuant to the Reimbursement Agreement, the all-in rates on the 2021 Euro Term Loan and the 2018 Euro Term Loan increase to 13% and 11%, respectively, on the date that is 180 days following a change of control of CME Ltd. (as defined therein); and pursuant to the 2021 Revolving Credit Facility, all sixcommitments terminate following a change of control (as defined therein) and the interest rate on amounts outstanding increases to 13% on the date that is 180 days following such change of control. We intend to repay the 2018 Euro Term Loan at maturity with cash flows from operations and the expected proceeds from warrant exercises. In the event the warrants are not exercised in full or cash flows from operations do not meet our forecasts, we would be required to refinance the 2018 Euro Term Loan in whole or in part. Pursuant to the Reimbursement Agreement, all commitments under the 2021 Revolving Credit Facility terminate on the refinancing of any Euro Term Loan. We face the risk that we will not be able to renew, repay or refinance our indebtedness when due, or that the terms of any renewal or refinancing will not be on better terms than those of such indebtedness being refinanced. In the event we are not able to refinance our indebtedness, we might be forced to dispose of assets on disadvantageous terms or reduce or suspend operations, any of which would materially and adversely affect our financial condition, results of operations and cash flows.
We may be subject to changes in tax rates and exposure to additional tax liabilities.
We are subject to taxes in a number of foreign jurisdictions, including in respect of our operations as well as capital transactions undertaken by us. We are subject to regular review and audit by tax authorities, and in the ordinary course of our business there are transactions and calculations where the ultimate tax determination is unknown. Significant judgment is required in determining our provision for taxes. The final determination of our tax liabilities resulting from tax audits, related proceedings or otherwise could be materially different from our tax provisions. Economic and political pressures to increase receipts in various jurisdictions may make taxation and tax rates subject to significant change and the satisfactory resolution of any tax disputes more difficult. The occurrence of any of these events could have a material adverse effect on our financial position, results of operations and cash flows.
A default by us in connection with our obligations under our outstanding indebtedness could result in our inability to continue to conduct our business.
Pursuant to the terms of the agreements governing the Reimbursement Agreement and the 2021 Revolving Credit Facility, we pledged all of the shares of CME NV and of CME BV, which together own substantially all of the interests in our operating subsidiaries, as security for this indebtedness. If we or these subsidiaries were to default under the terms of any of the relevant agreements, the secured parties under such agreements would have the ability to sell all or a portion of the assets pledged to them in order to pay amounts outstanding under such debt instruments. This could result in our inability to conduct our business.
Fluctuations in exchange rates may continue to adversely affect our results of operations.
Our reporting currency is the dollar and CME Ltd.'s functional currency is the Euro. Our consolidated revenues and costs are divided across a range of European currencies. The strengthening of the dollar had a negative impact on reported revenues in 2016 when translated from the functional currencies of our operations. Continued strengthening of the dollar would have a negative impact on our reported revenues. Furthermore, fluctuations in exchange rates may negatively impact programming costs. While local programming is generally purchased in local currencies, a significant portion of our content costs relates to foreign programming purchased pursuant to dollar-denominated agreements. If the dollar appreciates against the functional currencies of our operating segments, the cost of acquiring such content would be adversely affected, which could have a material adverse effect on our results of operations and cash flows.
Our strategies to enhance our carriage fees and diversify our revenues may not be successful.
We are focused on creating additional revenue streams from our broadcast operations as well as increasing revenues generated from broadcast advertising, which is how we generate most of our revenues. Our main efforts with respect to this strategy are on increasing carriage fees from cable, satellite and IPTV operators for carriage of our channels as well as continuing to seek improvements in advertising pricing. Agreements with operators generally have a term of one or more years, at which time agreements must be renewed. There can be no assurance that we will be successful in renewing carriage fee agreements on similar or better terms. During negotiations to implement our carriage fees strategy in prior years, some cable and satellite operators suspended the broadcast of our channels, which negatively affected the reach and audience shares of those operations and, as a result, advertising revenues. There is a risk that operators may refuse to carry our channels while carriage fee negotiations are ongoing, which would temporarily reduce the reach of those channels and may result in clients withdrawing advertising from our channels. The occurrence of any of these events may have an adverse impact on our financial position, results of operations and cash flows. If we are ineffective in negotiations with carriers or in achieving further carriage fee increases, our profitability will continue to be dependent primarily on television advertising revenues, which increases the importance placed on our ability to improve advertising pricing and generate advertising revenues. In addition to carriage fees, we are also working to build-out our offerings of advertising video-on-demand products and other opportunities for advertising online. There can be no assurances that our revenue diversification initiatives will ultimately be successful, and if unsuccessful, this may have an adverse impact on our financial position, results of operations and cash flows.
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A downgrading of our ratings may adversely affect our ability to raise additional financing.
Moody’s Investors Service rates our corporate credit as B2 with a stable outlook. Standard & Poor’s rates our corporate credit B+ with a stable outlook. Our ratings show each agency's opinion of our financial strength, operating performance and ability to meet our debt obligations as they become due. These ratings take into account the particular emphasis the ratings agencies place on metrics such as leverage ratio and cash flow, which they use as measurements of a company's liquidity and financial strength. They also reflect an emphasis placed by the ratings agencies on a track record of strong financial support from Time Warner. We may be subject to downgrades if our operating performance deteriorates or we fail to maintain adequate levels of liquidity. In addition, our ratings may be downgraded if the agencies form a view that material support from Time Warner is not as strong, or the strategic importance of CME to Time Warner is not as significant as it has been in the past. In the event our corporate credit ratings are lowered by the rating agencies, it will be more difficult for us to refinance our existing indebtedness or raise new indebtedness that may be permitted under the Reimbursement Agreement and the 2021 Revolving Credit Facility (when drawn), and we will have to pay higher interest rates, which would have an adverse effect on our financial position, results of operations and cash flows.
If our goodwill, other intangible assets and long-lived assets become impaired, we may be required to record significant charges to earnings.
We review our long-lived assets for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. Goodwill and indefinite-lived intangible assets are required to be assessed for impairment at least annually. Factors that may be considered a change in circumstances indicating that the carrying amount of our goodwill, indefinite-lived intangible assets or long-lived assets may not be recoverable include slower growth rates in our markets, reduced expected future cash flows, increased country risk premium as a result of political uncertainty and a decline in stock price and market capitalization. We consider available current information when calculating our impairment charge. If there are indicators of impairment, our long-term cash flow forecasts for our operations deteriorate or discount rates increase, we may be required to recognize additional impairment charges in later periods. See Part II, Item 8, Note 3, "Goodwill and Intangible Assets" for the carrying amounts of goodwill in each of our reporting units.
Risks Relating to Our Operations
Content may become more expensive to produce or acquire or we may not be able to develop or acquire content that is attractive to our audiences.
Television programming is one of the most significant components of our operating costs. The ability of our programming to generate advertising revenues depends substantially on our ability to develop, produce or acquire programming that matches audience tastes and attracts high audience shares, which is difficult to predict. The commercial success of a program depends on several tangible and intangible factors, including the impact of competing programs, the availability of alternate forms of entertainment and leisure time activities, our ability to anticipate and adapt to changes in consumer tastes and behavior, and general economic conditions. While we have been successful in reducing content costs compared to prior periods, the cost of acquiring content attractive to our viewers, such as feature films and popular television series and formats, may increase in the future. Our expenditures in respect of locally produced programming may also increase due to competition for talent and other resources, changes in audience tastes in our markets or from the implementation of any new laws and regulations mandating the broadcast of a greater number of locally produced programs. In addition, we typically acquire syndicated programming rights under multi-year commitments before knowing how such programming will perform in our markets. In the event any such programming does not attract adequate audience share, it may be necessary to increase our expenditures by investing in additional programming, subject to the availability of adequate financial resources, as well as to write down the value of any underperforming programming. Any material increase in content costs could have a material adverse effect on our financial condition, results of operations or cash flows.
Our operations are vulnerable to significant changes in viewing habits and technology that could adversely affect us.
The television broadcasting industry is affected by rapid innovations in technology. The implementation of these new technologies and the introduction of non-traditional content distribution systems have increased competition for audiences and advertisers. Platforms such as direct-to-home cable and satellite distribution systems, the Internet, subscription and advertising video-on-demand, user-generated content sites and the availability of content on portable digital devices have changed consumer behavior by increasing the number of entertainment choices available to audiences and the methods for the distribution, storage and consumption of content. This development has fragmented television audiences in more developed markets and could adversely affect our ability to retain audience share and attract advertisers as such technologies penetrate our markets. As we adapt to changing viewing patterns, it may be necessary to expend substantial financial and managerial resources to ensure necessary access to new technologies or distribution systems. Such initiatives may not develop into profitable business models. Furthermore, technologies that enable viewers to choose when, how, where and what content to watch, as well as to fast-forward or skip advertisements, may cause changes in consumer behavior that could have a negative impact on our advertising revenues. In addition, compression techniques and other technological developments allow for an increase in the number of channels that may be broadcast in our markets and expanded programming offerings that may be offered to highly targeted audiences. Reductions in the cost of launching new channels could lower entry barriers and encourage the development of increasingly targeted niche programming on various distribution platforms. This could increase the competitive demand for popular programming, resulting in an increase in content costs as we compete for audiences and advertising revenues. A failure to successfully adapt to changes in our industry as a result of technological advances may have an adverse effect on our financial position, results of operations and cash flows.
Our operating results are dependent on the importance of television as an advertising medium.
We generate most of our revenues from the sale of our advertising airtime on television channels in our markets. Television competes with various other media, such as print, radio, the internet and outdoor advertising, for advertising spending. In all of the countries since 2008. GDPin which we operate, television constitutes the single largest component of all advertising spending. There can be no assurances that the television advertising market will maintain its current position among advertising media in our markets. Furthermore, there can be no assurances that changes in the regulatory environment or improvements in technology will not favor other advertising media or other television broadcasters. Increases in competition among advertising media arising from the development of new forms of advertising media and distribution could result in a decline in the appeal of television as an advertising medium generally or of our channels specifically. A decline in television advertising spending as a component of total advertising spending in any period or in specific markets would have an adverse effect on our financial position, results of operations and cash flows.
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We are subject to legal compliance risks and the risk of legal or regulatory proceedings being initiated against us.
We are required to comply with a wide variety of laws and other regulatory obligations in the jurisdictions in which we operate and compliance by our businesses is subject to scrutiny by regulators and other government authorities in these jurisdictions. Compliance with foreign as well as applicable U.S. laws and regulations related to our businesses, such as broadcasting content and advertising regulations, competition regulations, tax laws, employment laws, data protection requirements, and anti-corruption laws, increases the costs and risks of doing business in these jurisdictions. We believe we have implemented appropriate risk management and compliance policies and procedures that are designed to ensure our employees, contractors and agents comply with these laws and regulations; however, a violation of such laws and regulations or the Company’s policies and procedures could occur. A failure or alleged failure to comply with applicable laws and regulations, whether inadvertent or otherwise, may result in legal or regulatory proceedings being initiated against us.
We have become aware of provisions in the tax regulations of one of our markets that shift the liability for taxes on gains resulting from certain capital transactions from the seller to the buyer. This provision may have been applicable to an acquisition made by us, although we do not believe we have any liability connected to this transaction. In addition, the prosecuting authorities in Romania have requested information in respect of an investigation into certain transactions entered into by Pro TV in 2014 primarily with certain related parties. We believe that the transactions under review are fully supported and are cooperating with the authorities in responding to the information request. In Slovenia, the competition authorities have launched an investigation into whether our Slovenian subsidiary is dominant and abused its dominant position when concluding carriage fee agreements with platform operators. The investigation is in an early stage and there has been no determination that a breach of competition law has occurred; notwithstanding that, the competition authorities may seek to apply interim measures prior to any formal determination. If these or other contingencies result in legal or regulatory proceedings being initiated against us, or if developments occur in respect of our compliance with existing laws or regulations, or there are changes in the interpretation or application of such laws or regulations, we may incur substantial costs, be required to change our business practices, our reputation may be damaged or we may be exposed to unanticipated civil or criminal liability, including fines and other penalties that may be substantial. This could have a material adverse effect on our business, financial position, results of operations and cash flows.
Piracy of our content may decrease revenues we can earn from our content and adversely impact our business and profitability.
Piracy of our content poses significant challenges in our markets. Technological developments, including digital copying, file compressing, the use of international proxies and the growing penetration of high bandwidth internet connections, have made it easier to create, transmit and distribute high quality unauthorized copies of content in unprotected digital formats. Furthermore, there are a growing number of video streaming sites, increasing the risk of online transmission of our content without consent. The proliferation of such sites broadcasting content pirated from us could result in a reduction of revenues that we receive from the legitimate distribution of our content, including through video-on-demand and other services. Protection of our intellectual property is in large part dependent on the manner in which applicable intellectual property laws in the countries in which we operate are construed and enforced. We seek to limit the threat of content piracy. However, detecting and policing the unauthorized use of our intellectual property is often difficult and remedies may be limited under applicable law. Steps we take may not prevent the infringement by third parties. There can be no assurance that our efforts to enforce our rights and protect our intellectual property will be successful in preventing piracy, which limits our ability to generate revenues from our content.
Our operations are in developing markets where there are additional risks related to political and economic uncertainty, biased treatment and compliance with evolving legal and regulatory systems.
Our revenue-generating operations are located in Central and Eastern Europe and we may be significantly affected by risks that may be different to those posed by investments in more developed markets. These risks include, but are not limited to, social and political instability, inconsistent regulatory or judicial practice, and increased taxes and other costs. The economic and political systems, legal and tax regimes, regulatory practices, standards of corporate governance and business practices of countries in this region continue to develop. Policies and practices may be subject to significant adjustments, including following changes in political leadership. This may result in social or political instability or disruptions and the potential for political influence on the media as well as inconsistent application of tax and legal regulations, arbitrary treatment before regulatory or judicial authorities and other general business risks. Other potential risks inherent in markets with evolving economic and political environments include exchange controls, higher taxes, tariffs and other levies as well as longer payment cycles. The relative level of development of our markets and the influence of local politics also present a potential for biased treatment of us before regulators or courts in the event of disputes. If such a dispute occurs, those regulators or courts might favor local interests over our interests. Ultimately, this could have a material adverse impact on our business, financial position, results of operations and cash flows.
We rely on network and information systems and other technology that may be subject to disruption or misuse, which could harm our business or our reputation.
We make extensive use of network and information systems and other technologies, including those related to our internal network management as well as our broadcasting operations. These systems are central to many of our business activities. Network and information systems-related events, such as computer hackings, computer viruses, worms or other destructive or disruptive software, process breakdowns, malicious activities or other security breaches could result in a disruption or degradation of our services, the loss of information or the improper disclosure of personal data. The occurrence of any of these events could negatively impact our business by requiring us to expend resources to remedy such a security breach or by harming our reputation. In addition, improper disclosure of personal data could subject us to liability under laws that protect personal data in the countries in which we operate. The development and maintenance of systems to prevent these events from occurring requires ongoing monitoring and updating as efforts to overcome security measures become more sophisticated. As technologies evolve, we will need to expend additional resources to protect our technology and information systems, which could have an adverse impact on our results of operations.
Our broadcasting licenses may not be renewed and may be subject to revocation.
We require broadcasting and, in some cases, other operating licenses as well as other authorizations from national regulatory authorities in our markets in order to conduct our broadcasting business. While our broadcasting licenses for our operations in Slovenia and the Slovak Republic are valid for indefinite time periods, our other broadcasting licenses expire at various times through 2028. While we expect that our material licenses and authorizations will be renewed or extended as required to continue to operate our business, we cannot guarantee that this will occur or that they will not be subject to revocation, particularly in markets where there is relatively greater political risk as a result of less developed political and legal institutions. The failure to comply in all material respects with the terms of broadcasting licenses or other authorizations or with applications filed in respect thereto may result in such licenses or other authorizations not being renewed or otherwise being terminated. Furthermore, no assurances can be given that renewals or extensions of existing licenses will be issued on the same terms as existing licenses or that further restrictions or conditions will not be imposed in the future. Any non-renewal or termination of any other broadcasting or operating licenses or other authorizations or material modification of the terms of any renewed licenses may have a material adverse effect on our financial position, results of operations and cash flows.
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Our success depends on attracting and retaining key personnel.
Our success depends partly upon the efforts and abilities of our key personnel and our ability to attract and retain key personnel. Our management teams have significant experience in the media industry and have made important contributions to our growth exceeded 3%and success. Although we have been successful in attracting and retaining such people in the past, competition for highly skilled individuals is intense. There can be no assurance that we will continue to be successful in attracting and retaining such individuals in the future. The loss of the services of any of these individuals could have an adverse effect on our businesses, results of operations and cash flows.
Risks Relating to Enforcement Rights
We are a Bermuda company and enforcement of civil liabilities and judgments may be difficult.
We are a Bermuda company. Substantially all of our assets and all of our operations are located, and all of our revenues are derived, outside the United States. In addition, several of our directors and officers are non-residents of the United States, and all or a substantial portion of the assets of such persons are or may be located outside the United States. As a result, investors may be unable to effect service of process within the United States upon such persons, or to enforce against them judgments obtained in the United States courts, including judgments predicated upon the civil liability provisions of the United States federal and state securities laws. There is uncertainty as to whether the courts of Bermuda and the countries in which we operate would enforce (a) judgments of United States courts obtained against us or such persons predicated upon the civil liability provisions of the United States federal and state securities laws or (b) in original actions brought in such countries, liabilities against us or such persons predicated upon the United States federal and state securities laws.
Our Bye-laws restrict shareholders from bringing legal action against our officers and directors.
Our Bye-laws contain a broad waiver by our shareholders of any claim or right of action in Bermuda, both individually and on our behalf, against any of our officers or directors. The waiver applies to any action taken or concurred in by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty.
Risks Relating to our Common Stock
Our share price may be adversely affected by sales of unregistered shares or future issuances of our shares.
Time Warner is the largest holder of shares of our Class A common stock, holding 61,407,775 unregistered shares of Class A common stock, one share of Series A preferred stock, 200,000 shares of Series B preferred stock and warrants to acquire 100,926,996 shares of our Class A common stock (the "TW Warrants"). The share of Series A preferred stock is convertible into 11,211,449 shares of Class A common stock and the shares of Series B preferred stock are convertible into shares of Class A common stock at the option of Time Warner (subject to certain exceptions). As of December 31, 2016, the 200,000 shares of Series B preferred stock were convertible into approximately 105.2 million shares of Class A common stock. The TW Warrants are exercisable for shares of Class A common stock until May 2, 2018 at an exercise price of US$ 1.00 per share. Time Warner has registration rights with respect to all its shares of Class A common stock now held or hereafter acquired. Furthermore, there are additional unregistered shares of our Class A common stock outstanding that we may be obligated to register and shares of Class A common stock underlying other warrants that may enter into trading. For additional information on the Series A preferred stock, Series B preferred stock and TW Warrants, see Part II, Item 8, Note 11, "Convertible Redeemable Preferred Shares" and Note 12, "Equity". In October 2016, Time Warner announced it has entered into a definitive merger agreement with AT&T Inc. under which AT&T Inc. will acquire Time Warner.  The merger is subject to approval by Time Warner shareholders and approval by a number of regulatory authorities, including the U.S. Department of Justice. Following a successful completion of such merger, AT&T Inc. will become the beneficial owner of equity securities currently beneficially owned by Time Warner and the successor to rights related to such securities granted to Time Warner.  
We cannot predict what effect, if any, the entry into trading of previously issued unregistered shares of Class A common stock will have on the market price of our shares. We may also issue additional shares of Class A common stock or securities convertible into our equity in the future. If more shares of our Class A common stock (or securities convertible into or exchangeable for shares of our Class A common stock) are issued to Time Warner, the economic interests of current shareholders may be diluted and the price of our shares may be adversely affected.
The interests of Time Warner may conflict with the interests of other investors.
Time Warner is able to exercise voting power in us with respect to 47.0% of our outstanding shares of Class A common stock. As such, Time Warner is in a position to exercise significant influence over the outcome of corporate actions requiring shareholder approval, such as the election of directors or certain transactions. Following the issuance of the TW Warrants, the aggregate economic interest of Time Warner in us is approximately 76.0% (without giving effect to the accretion of the Series B preferred stock after December 31, 2016). Furthermore, Time Warner has the right to appoint one less than the number required to constitute a majority of our board of directors, provided that Time Warner continues to own not less than 40% of the voting power of the Company.
We are also party to an amended investor rights agreement with Time Warner and the other parties thereto under which, among other things, Time Warner was granted a contractual preemptive right (subject to certain exclusions) with respect to issuances of the Company’s equity securities, which permits it to maintain its pro rata economic interest as well as a right to top any offer that would result in a change of control of the Company. Under Bermuda law, there is no takeover code or similar legislation requiring an acquirer of a certain percentage of our Class A common stock to tender for the remaining publically held shares. In addition to being our largest shareholder, Time Warner is our largest secured creditor, as it guarantees 100% of our outstanding senior indebtedness and is the lender under the 2021 Revolving Credit Facility. The 2021 Revolving Credit Facility and the Reimbursement Agreement contain maintenance covenants in respect of interest cover, cash flow cover and total leverage ratios and includes covenants in respect of the incurrence of indebtedness (including refinancing indebtedness), the provision of guarantees, acquisitions and disposal and granting security. As such, Time Warner may be in a position to determine whether to permit transactions, waive defaults or accelerate such indebtedness or take other steps in its capacity as a secured creditor in a manner that might not be consistent with the interests of the holders of our Class A common stock. Furthermore, in certain circumstances, the interests of Time Warner as our largest shareholder could be in conflict with the interests of minority shareholders.
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The price of our Class A common stock is likely to remain volatile.
The market price of shares of our Class A common stock may be influenced by many factors, some of which are beyond our control, including but not limited to those described above under “Risks Relating to Our Operations” as well as the following: general economic and business trends, variations in quarterly operating results, license renewals, regulatory developments in our operating countries and the European Union, the condition of the media industry in our operating countries, the volume of trading in shares of our Class A common stock, future issuances of shares of our Class A common stock and investors’ and securities analysts’ perception of us and other companies that investors or securities analysts deem comparable in the television broadcasting industry. In addition, stock markets in general have experienced extreme price and volume fluctuations that have often been unrelated to and disproportionate to the operating performance of broadcasting companies. These broad market and industry factors may materially reduce the market price of shares of our Class A common stock, regardless of our operating performance.
Our business could be negatively impacted as a result of shareholder activism.
On January 17, 2017, TCS Capital Management, LLC ("TCS Capital"), a beneficial owner of more than 12% of our shares, filed an amendment to its Schedule 13D disclosing its opinion that the Company should hire an investment bank to run a process to sell the Company as well as replace current members of the Company's Board of Directors with new directors recommended by TCS Capital. In recent years, shareholder activists, such as TCS Capital, have become involved in numerous public companies. Shareholder activists frequently propose to involve themselves in the governance, strategic direction and operations of the Company. Such proposals may disrupt our business and divert the attention of our management and employees, and any perceived uncertainties as to our future direction resulting from such a situation could result in the loss of potential business opportunities, be exploited by our competitors, cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel and business partners, all of which could adversely affect our business. In addition, actions of activist shareholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
ITEM 1B.    UNRESOLVED STAFF COMMENTS
None.
ITEM 2.    PROPERTIES
We own and lease properties in the countries in which we operate. These facilities are fully utilized for current operations, are in good condition and are adequately equipped for purposes of conducting broadcasting, content production or such other operations as we require. We believe that suitable additional space is available on acceptable terms in the event of an expansion of our businesses. The table below provides a brief description of our significant properties.
LocationPropertyUse
Hamilton, BermudaLeased officeRegistered office, Corporate
Amsterdam, The NetherlandsLeased officeCorporate office, Corporate
Sofia, BulgariaLeased buildingsOffice and studio space (Bulgaria segment)
Zagreb, CroatiaOwned and leased buildingsOffice and studio space (Croatia segment)
Prague, Czech RepublicOwned and leased buildings
Administrative center, Corporate;
Office and studio space (Czech Republic segment)
Bucharest, RomaniaOwned and leased buildingsOffice and studio space (Romania segment)
Bratislava, Slovak RepublicOwned buildingsOffice and studio space (Slovak Republic segment)
Ljubljana, SloveniaOwned and leased buildingsOffice and studio space (Slovenia segment)
For further information on the cash resources that fund these facility-related costs, see Part II, Item 7, III, "Liquidity and Capital Resources."
ITEM 3.    LEGAL PROCEEDINGS
General
We are from time to time party to legal proceedings, arbitrations and regulatory proceedings arising in the normal course of our business operations, including the proceeding described below. We evaluate, on a quarterly basis, developments in such matters and provide accruals for such matters, as appropriate. In making such decisions, we consider the degree of probability of an unfavorable outcome and our ability to make a reasonable estimate of the amount of a loss. An unfavorable outcome in any such proceedings, if material, could have an adverse effect on our business or consolidated financial statements.
In late November and December 2016, CME’s Slovak subsidiary MARKIZA-SLOVAKIA, spol. s.r.o. (“Markiza”) was notified of claims that were filed in June 2016 in a court of first instance in Bratislava, the Slovak Republic to collect amounts allegedly owing under four promissory notes. These four promissory notes were purportedly issued in June 2000 by Pavol Rusko in his personal capacity and were purportedly guaranteed by Markiza under the signature of Mr. Rusko, who was an executive director of Markiza at that time as well as one of its shareholders. The notes purport to be issued in favour of Marian Kocner, a controversial Slovak businessman, and to a former associate of Mr. Kocner, and were supposedly assigned several times, ultimately to Sprava a inkaso zmeniek, s.r.o., a company owned by Mr. Kocner that is the plaintiff in these proceedings. The four notes purport to be in the aggregate amount of approximately EUR 69 million. A court of first instance in Bratislava has suspended proceedings in respect of one of the promissory notes (in the amount of approximately EUR 26 million) because the plaintiff failed to pay court fees. Two of the remaining notes allegedly matured in 2015 and the third in 2016. Despite a random case assignment system at the Bratislava court, the three cases dealing with the other notes have all been assigned to the same judge. We do not believe that any of the promissory notes are authentic and are vigorously defending the claims.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Shares of Class A common stock of Central European Media Enterprises Ltd. began trading on the NASDAQ National Market (since renamed the NASDAQ Global Select Market) on October 13, 1994 and began trading on the Prague Stock Exchange on June 27, 2005. On each market, the shares are traded under the ticker symbol "CETV".
On February 6, 2017, the last reported sales price for shares of our Class A common stock was US$ 2.70.
The following table sets forth the high and low prices for shares of our Class A common stock for each quarterly period during the last two fiscal years as reported by NASDAQ.
 2016 2015
 
High
(US$ / Share)
 
Low
(US$ / Share)
 
High
(US$ / Share)
 
Low
(US$ / Share)
Fourth Quarter$2.88
 $2.15
 $2.80
 $1.92
Third Quarter2.48
 2.05
 2.50
 1.84
Second Quarter2.96
 2.03
 2.83
 1.97
First Quarter2.71
 2.17
 3.22
 2.55
At February 6, 2017, there were approximately 57 holders of record (including brokerage firms and other nominees) of shares of Class A common stock.
Under our 2015 Stock Incentive Plan (the "2015 Plan"), 6,000,000 shares of Class A are authorized for issuance in respect of equity awards. In addition, any shares available under our Amended and Restated Stock Incentive Plan (which expired on June 1, 2015), including in respect of any awards that expire, terminate or are forfeited, will be available for awards under the 2015 Plan (see Item 8, Note 16, "Stock-based Compensation"). See Part III, Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" for further information.
DIVIDEND POLICY
We have not declared or paid and have no present intention to declare or pay in the foreseeable future any cash dividends in respect to any class of our shares of common stock.
PURCHASE OF OWN STOCK
We did not purchase any of our own stock in 2016.
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PERFORMANCE GRAPH
The following performance graph is a line graph comparing the change in the cumulative total shareholder return of the Class A common stock against the cumulative total return of the NASDAQ Composite Index and the Dow Jones Europe Stock Index between December 31, 2011 and December 31, 2016. The graph below assumes the investment of US$ 100 on December 31, 2011 in our Class A common stock, the NASDAQ Composite and the Dow Jones Europe Stock Index, assuming dividends, if any, are reinvested.
Value of US$ 100 invested at December 31, 2011 as of December 31, 2016:
Central European Media Enterprises Ltd.$39.11
NASDAQ Composite Index$206.63
Dow Jones Europe Stock Index$122.29
ITEM 6.    SELECTED FINANCIAL DATA
Our selected consolidated financial data should be read together with our consolidated financial statements and related notes included in Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
The following tables set forth the selected consolidated financial data for each of the years in the five-year period ended December 31, 2016. The selected consolidated financial data is qualified in its entirety and should be read in conjunction with Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” and Item 8, “Financial Statements and Supplementary Data”. We have derived the consolidated statements of operations and comprehensive income / loss data for the years ended December 31, 2016, 2015 and 2014 and the consolidated balance sheet data as of December 31, 2016 and 2015 from the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The consolidated statements of operations and comprehensive income / loss data for the years ended December 31, 2013 and 2012 and the balance sheet data as of December 31, 2014, 2013 and 2012 were derived from consolidated financial statements that are not included in this Annual Report on Form 10-K.
The consolidated balance sheet data as of December 31, 2015, 2014, 2013 and 2012 has been retrospectively adjusted in connection with our adoption of FASB Accounting Standards Update No. 2015-03 which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction of the carrying amount of that liability. As a result of adopting this guidance our current and non-current assets decreased with a corresponding decrease in our current and non-current liabilities.
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 For The Year Ended December 31,
 (US$ 000's, except per share data)
 2016
 2015
 2014
 2013
 2012
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / LOSS DATA:         
Net revenues$638,013
 $605,841
 $680,793
 $633,134
 $705,999
Operating income / (loss)111,589
 94,583
 38,280
 (180,017) (479,789)
Loss from continuing operations(180,597) (102,285) (151,465) (276,434) (535,708)
Loss from discontinued operations, net of tax
 (13,287) (80,431) (5,099) (10,685)
Net loss attributable to CME Ltd.$(180,291) $(114,901) $(227,428) $(277,651) $(535,680)
          
PER SHARE DATA:         
Net loss per common share from:         
Continuing operations attributable to CME Ltd. - Basic and diluted$(1.28) $(0.81) $(1.11) $(2.23) $(6.83)
Discontinued operations attributable to CME Ltd. - Basic and diluted
 (0.09) (0.55) (0.04) (0.13)
Net loss attributable to CME Ltd. - Basic and diluted(1.28) (0.90) (1.66) (2.27) (6.96)
          
Weighted average common shares used in computing per share amounts (000’s):         
Basic and diluted151,017 146,866 146,509
 125,723
 76,919
          
 As at December 31,
 (US$ 000's)
 2016
 2015
 2014
 2013
 2012
   As adjusted
 As adjusted
 As adjusted
 As adjusted
CONSOLIDATED BALANCE SHEET DATA:         
Cash and cash equivalents$43,459
 $61,679
 $34,298
 $102,322
 $136,543
Other current assets296,961
 296,605
 340,330
 421,208
 455,415
Non-current assets1,050,297
 1,082,133
 1,230,200
 1,425,321
 1,561,129
Total assets$1,390,717
 $1,440,417
 $1,604,828
 $1,948,851
 $2,153,087
          
Current liabilities$171,564
 $146,308
 $450,286
 $318,931
 $293,306
Non-current liabilities1,070,786
 974,270
 653,434
 981,029
 1,228,514
Temporary equity254,899
 241,198
 223,926
 207,890
 
CME Ltd. shareholders' (deficit) / equity(107,804) 77,260
 279,794
 440,108
 626,061
Noncontrolling interests1,272
 1,381
 (2,612) 893
 5,206
Total liabilities and equity$1,390,717
 $1,440,417
 $1,604,828
 $1,948,851
 $2,153,087

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Please refer to page 2 of this Annual Report on Form 10-K for a list of defined terms used herein.
The exchange rates used in this report are as at December 31, 2016, unless otherwise indicated.
I.    Overview
CME Strategy
Our operations comprise a unique collection of television networks across Central and Eastern Europe, each of which enjoys a strong competitive position due to audience share leadership, brand strength, strong local content, and the depth and experience of country management. The reach and affinity we provide advertisers supports our model of pricing inventory at a premium to our competition. We believe these competitive advantages position the company to benefit if forecast economic growth leads to continued growth of the television advertising markets in the countries in which we operate.
We are focused on enhancing the performance of our television networks in each country, which we expect will continue improving operating margins and cash generation over the short- and medium-term. The main elements of our strategy are as follows:
leveraging popular content to maintain or increase our audience share leadership and advertising market shares in all of our operating countries;
driving growth in advertising revenues through our pricing strategies;
increasing carriage fees and subscription revenues to reduce reliance on advertising revenues;
optimizing content costs while safeguarding our brands and competitive strengths; and
maintaining a strict cost discipline by controlling other expenses.
As market leaders with experienced management teams in each country, we believe we are well positioned to identify new challenges in a timely manner and adjust our strategy as new opportunities or threats arise.
We manage our business on a geographical basis with six operating segments: Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic and Slovenia. These operating segments, which are also our reportable segments, reflect how our operating performance is evaluated by our chief operating decision makers, who we have identified as our co-Chief Executive Officers ("co-CEOs"); how our operations are managed by segment managers; and the structure of our internal financial reporting.
Non-GAAP Financial Measures
In this report we refer to several non-GAAP financial measures, including OIBDA, OIBDA margin, free cash flow and unlevered free cash flow. We believe that each of these metrics is useful to investors for the reasons outlined below. Non-GAAP financial measures may not be comparable to similar measures reported by other companies. Non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, US GAAP financial measures.
We evaluate our consolidated results and the performance of our segments based on net revenues and OIBDA. We believe OIBDA is useful to investors because it provides a meaningful representation of our performance, as it excludes certain items that do not impact either our cash flows or the operating results of our operations. OIBDA and unlevered free cash flow are also used as components in determining management bonuses.
OIBDA includes amortization and impairment of program rights and is calculated as operating income / loss before depreciation, amortization of intangible assets and impairments of assets and certain unusual or infrequent items that are not considered by our co-CEOs when evaluating our performance. Stock-based compensation and certain other items are not allocated to our segments for purposes of evaluating their performance and therefore are not included in their respective OIBDA. Our key performance measure of the efficiency of our consolidated operations and our segments is OIBDA margin. We define OIBDA margin as the ratio of OIBDA to net revenues.
We have previously used free cash flow as a measure of the ability of our operations to generate cash. We define free cash flow as net cash generated from continuing operating activities less purchases of property, plant and equipment, net of disposals of property, plant and equipment and excluding the cash impact of certain unusual or infrequent items that are not included in costs charged in arriving at OIBDA because they are not considered by our co-CEOs when evaluating performance. Following the refinancing transaction completed in April 2016, the amount of interest and related Guarantee Fees on our outstanding indebtedness that is paid in cash has increased. In addition to this obligation to pay more interest and related Guarantee Fees in cash, we expect to use cash generated by the business to pay Guarantee Fees that are payable in kind, including accrued Guarantee Fees. These cash payments are all reflected in free cash flow; accordingly we believe unlevered free cash flow, defined as free cash flow before cash payments for interest and Guarantee Fees, better illustrates the cash generated by our operations when comparing periods.
For additional information regarding our business segments, including a reconciliation of OIBDA to US GAAP financial measures, see Item 8, Note 19, "Segment Data". For a reconciliation of free cash flow and unlevered free cash flow to a US GAAP financial measure, see "Free Cash Flow and Unlevered Free Cash Flow" below.
While our reporting currency is the dollar, our consolidated revenues and costs are divided across a range of European currencies and CME Ltd.’s function currency is the Euro. Given the significant movement of the currencies in the markets in which we operate against the dollar, we believe that it is useful to provide percentage movements based on actual (“% Act”) percentage movements, which includes the effect of foreign exchange, as well as like-for-like percentage movements (“% Lfl”). The like-for-like percentage movement references reflect the impact of applying the current period average exchange rates to the prior period revenues and costs. Since the difference between like-for-like and actual percentage movements is solely the impact of movements in foreign exchange rates, our discussion in the following analysis is focused on constant currency percentage movements in order to highlight those factors influencing operational performance. The incremental impact of foreign exchange rates is presented in the tables preceding such analysis.

Index

Executive Summary
Our operational and financial results in 2016 reflect significant progress in executing our strategy and position the company for continued growth in 2017 and beyond. We maintained our audience share leadership and television advertising market shares by leveraging our competitive advantages and making targeted investments in local programming in certain markets amid heavy competition. Building on our momentum from recent years, overall growth in our television advertising markets and our efforts to increase non-advertising based revenues, combined with our success in keeping overall costs broadly flat, contributed to a further improvement in profitability. As a result, our net leverage ratio (as defined in the Reimbursement Agreement) at the end of 2016 was less than seven times, which is down from eleven times at the start of 2015. We expect the net leverage ratio to decrease further due to sustained improvements in OIBDA, as well as a lower level of net debt from cash generated by the business, which will be used, together with expected proceeds from warrant exercises, to substantially repay our nearest debt maturity. Following the refinancing transaction completed in April 2016, further specified decreases in our net leverage ratio will automatically lower the cost of borrowing on approximately half of our debt, and in turn support further improvement in our free cash flow through lower Guarantee Fee obligations.
The following tables provide a summary of our consolidated results for the years ended December 31, 2016, 2015 and 2014:
 For The Year Ended December 31, (US$ 000's)
     Movement     Movement
 2016
 2015
 % Act
 % Lfl
 2015
 2014
 % Act
 % Lfl
Net revenues$638,013
 $605,841
 5.3% 5.4% $605,841
 $680,793
 (11.0)% 5.9%
Operating income111,589
 94,583
 18.0% 17.3% 94,583
 38,280
 147.1 % 198.2%
Operating margin17.5% 15.6% 1.9 p.p. 1.8 p.p. 15.6% 5.6% 10.0 p.p. 10.1 p.p.
OIBDA$150,049
 $122,815
 22.2% 21.4% $122,815
 $95,446
 28.7 % 52.9%
OIBDA margin23.5% 20.3% 3.2 p.p. 3.1 p.p. 20.3% 14.0% 6.3 p.p. 6.2 p.p.
Our consolidated net revenues increased 5% at actual and constant exchange rates in 2016 compared to 2015 due to an increase in both television advertising revenues and carriage fee and subscription revenues. Television advertising spending in the markets of the countries in which we operate grew an estimated 6% at constant rates in 2016 compared to 2015. Our consolidated television advertising revenues grew 5% at actual and constant rates driven primarily by improvement in four out of six countries in which we operate, including our three largest markets, including growth of more than 4% in the Czech Republic, Romania and the Slovak Republic. Spending on infrastructure from European Union subsidies contributedCarriage fees and subscription revenues increased 8% at actual rates and 9% at constant rates due primarily to the growth in the Czech Republicnumber of subscribers reported by cable, satellite and Internet protocol television ("IPTV") operators as well as high definition channels and new channels available exclusively on these platforms.
On an actual and constant currency basis, costs charged in arriving at OIBDA increased 1% in 2016 compared to 2015. We controlled costs overall, while spending more on popular local content, by offsetting this investment with savings in foreign fiction as well as reducing other operating and overhead costs.
Our focus on controlling costs while improving revenues led to another year of OIBDA margin expansion, which increased to 24% in 2016 from 20% in 2015. We expect the trend of revenues growing at a faster pace than costs will continue for the next several years, leading to further margin expansion.
The improvement in operating income in 2016 compared to 2015 primarily reflects the year-on-year increase in OIBDA, excluding the US$ 12.0 million benefit in operating income from the reversal of charges in 2015 however this support isrelated to tax audits in Romania, which were accrued in the fourth quarter of 2014 and in the first quarter of 2015 and fully released in the third quarter of 2015. Since these charges were not included in OIBDA in 2014, our reversal of these charges during 2015 was similarly excluded from OIBDA.
We remained audience share leaders during 2016 in all of the countries in which we operate and improved our relative position in all day audience share in four countries. These audience shares give us a strong offering for advertisers, and we believe we continue to provide the most efficient medium to reach consumers.
The progress made during 2016 and the continued improvement expected in the coming years positions the company for even higher profitability of our operations. Looking ahead to decrease next year, resulting in forecast2017 and beyond:
Analysts estimate that GDP growth in GDPthe countries in which we operate will continue to outpace that of approximately 3% for 2016. Real private consumption is also estimatedthe developed markets (as defined below), and projections from the International Monetary Fund forecast Romania to have increased 3% overall during 2015 compared to 2014, supported by particularly strong retail salesthe highest GDP growth in our largest markets. The Czech Republic had the second lowest unemployment rate in the European Union which has contributed toagain in 2017. We anticipate the highest level of consumer confidence in that country since 2008.
The following table sets out our estimates of television advertising spending net of discounts by country (in US$ millions) for the years set forth below:
Country2015
 2014
 2013
Bulgaria$87
 $90
 $93
Croatia89
 85
 82
Czech Republic273
 263
 248
Romania*194
 179
 169
Slovak Republic124
 107
 103
Slovenia60
 57
 60
Total CME Markets$827
 $781
 $755
Growth rate6% 3% (5)%
* Romania market excludes Moldova.
Source: CME estimates, quoted using the 2015 average exchange rate for all periods presented above.
On a constant currency basis, we estimate television advertising spending in our markets increased by 6% in 2015 compared to the previous year. In Bulgaria spending on television advertising was higher in 2014 than 2015 primarily due to the timing of election campaigns, and also reflected some reduction in budgets from certain advertisers in 2015. Excluding spending on election campaigns, the market in Bulgaria decreased less than 1% year-on-year. The market growth in Croatia was due to an increase in average market prices as improving macro-economic conditions encouraged advertisers to increase their investments. The television advertising market in the Czech Republic increased an estimated 4% due to aneach of our countries will grow in 2017.
The increase in GRPs sold, which more than offset lower averagedemand we have seen for television advertising in 2016 is leading to higher list prices resulting from heavy competitionin our sales policies for advertising budgets. Growth in private consumption supported demand for advertising on television2017. This is particularly true in Romania and the Slovak Republic, as both our operations and ledthe respective markets were largely sold-out in 2016. Average realized prices for the year will ultimately depend on a number of factors, including the timing of commitments made for spending in 2017, the portion of those commitments that is prepaid, the volume of those commitments relative to market growth2016, and the seasonality of 8%advertisements actually placed in 2017.
We expect non-advertising based carriage fees and 16%, respectively, resulting from increasessubscription revenues to increase further. From January 2017, our channels in both GRPs sold and average prices. Thethe Slovak Republic also benefited fromand Slovenia have been available exclusively on cable, satellite and IPTV platforms. This may initially result in lower audience shares in these countries, which could negatively impact our television advertising revenues in 2017. However, we expect an increase in spending on informational campaigns by the public sector. The macro-economic backdropcarriage fees and subscription revenues in Slovenia has improved significantly compared to the same period2017, as well as a significant decrease in 2014 and this led to an acceleration of spendingtransmission costs, which we believe will more than offset any negative impact on television advertising duringrevenues and improve margins in each country. We also expect increases across our markets in the coursenumber of 2015.subscribers to cable, satellite and IPTV platforms to continue, which would benefit profitability in all countries.
Segment PerformanceLocal content continues to attract larger audiences and competition for audience share remains significant. As a result, we continually refine our program grids and intend to maintain targeted investments in local content in a cost effective manner. As part of this strategy, we recently rebranded our niche channels in the Czech Republic to bring them under the umbrella of our flagship brand, NOVA. We intend to expand our offering of local content on some of these smaller channels, which historically have broadcast more foreign content, to make them more attractive to viewers. Although these investments will cause our content costs to increase in 2017, we expect much of this to be offset by other cost savings.
 NET REVENUES
 For The Year Ending December 31, (US$ 000's)
     Movement     Movement
 2015
 2014
 % Act
 % Lfl
 2014
 2013
 % Act
 % Lfl
Bulgaria$73,090
 $87,078
 (16.1)% 0.2% $87,078
 $87,448
 (0.4)% 0.2 %
Croatia55,912
 62,026
 (9.9)% 7.8% 62,026
 61,864
 0.3 % 1.5 %
Czech Republic182,636
 202,779
 (9.9)% 6.3% 202,779
 174,939
 15.9 % 24.5 %
Romania157,578
 178,614
 (11.8)% 5.4% 178,614
 162,305
 10.0 % 11.1 %
Slovak Republic84,434
 90,556
 (6.8)% 11.0% 90,556
 82,404
 9.9 % 11.0 %
Slovenia54,233
 61,370
 (11.6)% 5.5% 61,370
 66,656
 (7.9)% (7.2)%
Intersegment revenues(2,042) (1,630) 
NM (1)

 
NM (1)

 (1,630) (2,482) 
NM (1)

 
NM (1)

Total Net Revenues$605,841
 $680,793
 (11.0)% 5.9% $680,793
 $633,134
 7.5 % 10.4 %
(1) Number is not meaningful.

21

Index

Management remains focused on long-term value creation and in the near term we should continue to benefit from specified decreases in our net leverage ratio from less than seven times at the end of 2016, which automatically reduces our cost of borrowing as well as our sensitivity to external shocks, and adds to our increasing cash flow generation. We anticipate using cash generated by the business, together with expected proceeds from warrant exercises and savings from lower debt service obligations, to substantially repay our nearest debt maturity in November 2018. We intend to commence repayment of such maturity beginning November 2017. To that end, we expect to pay all Guarantee Fees related to the 2018 Euro Term Loan in cash as they come due. We anticipate paying Guarantee Fees related to the 2019 Euro Term Loan and 2021 Euro Term Loan in kind, where we have the option.
In recent years, our liabilities for income taxes have not been significant. However, as the operating companies in each jurisdiction return to generating profits and previous net operating losses are utilized, the amount of cash paid for income taxes is expected to increase.
Competition from subscription video on demand ("SVOD") platforms may increase as Amazon Prime has recently joined Netflix in providing a primarily English language version of their service to viewers in our countries. We believe this will benefit each market in terms of conditioning consumers to pay for content they watch online. However, similar to television viewing trends in our countries, we expect local content to have better success in attracting SVOD audiences. Therefore, Voyo, our SVOD product launched in 2011, is better positioned to capitalize on any changes in viewing habits since the local productions that have made our television channels market leaders are also available in local language to Voyo subscribers. We will continue to monitor developments in the SVOD market for profitable investment strategies, including opportunities to offer Voyo with our linear channels for cable, satellite and IPTV operators, as well as build-out our offering of advertising video on demand products and other offerings for advertising online, supported by our investments in local content.
While some analysts forecast spending for online advertising to overtake television advertising in the United States during 2017, we don't expect to see a similar dynamic in our markets in the short- to medium-term due to various factors, including lower rates of broadband penetration, the type of products advertised and the broad reach that television provides in the desired target audiences.
Foreign exchange rates may again have a significant impact on our results when reported in dollars. Due to inflation in the Czech Republic hitting 2% in December 2016 and increasing inflation expectations for 2017, the Czech National Bank is expected to begin withdrawing its floor related to the EUR/CZK exchange rate during 2017, subject to fiscal policies of developed countries and monetary policies of other central banks. On its own, this is expected to cause the Czech Koruna to strengthen relative to the dollar and therefore improve the results of our largest operation in dollar terms. Fluctuations in exchange rates for our currencies will otherwise not have a significant impact on either our day-to-day operations because revenues and operating expenses are generally denominated in local currencies or on our net leverage ratio. Following completion of the refinancing transactions in April 2016, the principal amount of our outstanding senior debt is denominated in Euros.
Free Cash Flow and Unlevered Free Cash Flow
 OIBDA
 For The Year Ending December 31, (US$ 000's)
     Movement     Movement
 2015
 2014
 % Act
 % Lfl
 2014
 2013
 % Act
 % Lfl
Bulgaria$15,479
 $9,367
 65.3% 96.1 % $9,367
 $13,391
 (30.1)% (26.2)%
Croatia7,880
 7,835
 0.6% 21.9 % 7,835
 8,258
 (5.1)% (2.7)%
Czech Republic71,697
 61,964
 15.7% 35.1 % 61,964
 (9,604) 
NM (1)

 
NM (1)

Romania41,176
 37,259
 10.5% 31.9 % 37,259
 2,454
 
NM (1)

 
NM (1)

Slovak Republic10,585
 4,586
 130.8% 164.5 % 4,586
 (19,859) 
NM (1)

 
NM (1)

Slovenia6,057
 5,331
 13.6% 33.6 % 5,331
 9,254
 (42.4)% (40.2)%
Eliminations(229) (16) 
NM (1)

 
NM (1)

 (16) (46) 
NM (1)

 
NM (1)

Total operating segments152,645
 126,326

20.8%
42.5 %
126,326

3,848

NM (1)


NM (1)

Corporate(29,830) (30,880) 3.4% (11.4)% (30,880) (52,253) 40.9 % 39.1 %
Total OIBDA$122,815
 $95,446
 28.7% 52.9 % $95,446
 $(48,405) 
NM (1)

 
NM (1)

                
OIBDA margin20.3% 14.0% 6.3 p.p.
 6.2 p.p.
 14.0% (7.6)% 21.7 p.p.
 21.5 p.p.
 For The Year Ended December 31, (US$ 000's)
 2016
 2015
 Movement
 2015
 2014
 Movement
Net cash generated from / (used in) operating activities$33,917
 $85,877
 (60.5)% $85,877
 $(65,242) 
NM (1)

Capital expenditures, net(29,356) (30,426) 3.5 % (30,426) (28,548) (6.6)%
Free cash flow4,561
 55,451
 (91.8)% 55,451
 (93,790) 159.1 %
Cash paid for interest (including mandatory cash-pay Guarantee Fees)53,982
 18,457
 192.5 % 18,457
 76,154
 (75.8)%
Cash paid for Guarantee Fees that may be paid in kind37,440
 
 
NM (1)

 
 
  %
Unlevered free cash flow$95,983
 $73,908
 29.9 % $73,908
 $(17,636) 
NM (1)

(1) Number is not meaningful.


Bulgaria
 For the Year Ending December 31, (US$ 000's)
     Movement     Movement
 2015
 2014
 % Act
 % Lfl
 2014
 2013
 % Act
 % Lfl
Television advertising$50,717
 $61,464
 (17.5)% (1.6)% $61,464
 $65,569
 (6.3)% (5.7)%
Carriage fees and subscriptions17,853
 19,808
 (9.9)% 7.8 % 19,808
 16,179
 22.4 % 23.1 %
Other4,520
 5,806
 (22.1)% (6.9)% 5,806
 5,700
 1.9 % 3.3 %
Net revenues73,090
 87,078
 (16.1)% 0.2 % 87,078
 87,448
 (0.4)% 0.2 %
Costs charged in arriving at OIBDA57,611
 77,711
 (25.9)% (11.4)% 77,711
 74,057
 4.9 % 4.7 %
OIBDA$15,479
 $9,367
 65.3 % 96.1 % $9,367
 $13,391
 (30.1)% (26.2)%
                
OIBDA margin21.2% 10.8% 10.4 p.p.
 10.4 p.p.
 10.8% 15.3% (4.5) p.p.
 (3.8) p.p.
 December 31, 2016
 December 31, 2015
 Movement
Cash and cash equivalents$43,459
 $61,679
 (29.5)%
Television advertising spendingOur unlevered free cash flow increased 30% to US$ 96.0 million in Bulgaria declined an estimated 3%2016 from US$ 73.9 million in 2015, due primarily to the increase in OIBDA. Free cash flow in 2016 decreased 92% compared to the prior year. The Bulgaria segment reported net revenues2015 because we paid more interest in cash and elected to pay a total of US$ 73.137.4 million for 2015 compared toof Guarantee Fees in cash, including US$ 87.127.5 million of Guarantee Fees previously paid in 2014, a decrease of 16% at actual rates but broadly flat on a constant currency basis. Even though our market share in Bulgaria increased to 58% from 57%, television advertising revenues decreased at constant rates duringkind. We ended the year primarily duewith cash of US$ 43.5 million and access to spending on election campaigns in 2014, and also reflected some reduction in budgets from certain advertisers in 2015. The lackanother US$ 115.0 million of spending on election campaigns in 2015 impacted the market more than it did our results, therefore excluding spending on election campaigns, our television advertising revenues increased almost 1% year-on-year due to an increase in GRPs sold, which more than offset lower average prices. The decrease in television advertising revenues during 2015 was offset by an 8% increase in carriage fees and subscription revenues on a constant currency basis primarily due to growth in the number of cable, satellite and IPTV subscribers. Television advertising revenues declined in 2014 compared to 2013 due to heavy competition for market share, which resulted in sustained downward pressure on our average prices. Carriage fees and subscription revenues increased in 2014 due to increases in the number of subscribers reportedliquidity provided by the operators2021 Revolving Credit Facility, which remains undrawn.
Capital Structure and stronger prices.Allocation
Costs chargedThe refinancing transaction completed in arriving at OIBDA in 2015decreased by 26% at actual rates compared to 2014. On a constant currency basis, costs decreased by 11%, primarily due to lower bad debt expense, restructuring charges incurred during 2014 that were not repeated in 2015,April 2016 significantly reduced the company's cost of borrowing and lower transmission costs, as twoimproved the maturity profile of our niche channels are now distributed onlydebt. We anticipate using increased cash generated by cablethe business, along with expected proceeds from warrant exercises and satellite. Costs increased 5%savings from lower debt service obligations to substantially repay our nearest debt maturity in 2014 comparedNovember 2018. We intend to 2013, primarily duecommence repayment of such maturity beginning November 2017.
As part of the transaction completed on April 8, 2016:
The new EUR 468.8 million 2021 Euro Term Loan was used, together with corporate cash, to an increase in restructuring chargesrepay the US$ 502.5 million aggregate principal amount of the 2017 PIK Notes and bad debt expense,repay the US$ 38.2 million 2017 Term Loan, as well as airing two newaccrued and more expensive formats duringunpaid interest.
The maturity date of the fall seasonexisting EUR 250.8 million term loan was extended by one year so the Company’s nearest debt maturity is November 2018.
The maturity date of our existing US$ 115.0 million revolving credit facility was extended from 2017 to counter increased competition for audience share. This more than offset a decrease in transmission costs following the transition from analogue transmission to digital in 2013 as well as operating fewer channels.
Our Bulgaria segment reported OIBDA of US$ 15.5 million for 2015 compared2021, with access to US$ 9.450.0 million in 2014, an increase of US$ 6.1 million. OIBDA decreased by US$ 4.0 million in 2014 compared to 2013.liquidity from 2018.

22

Index

Croatia
Following the transaction:
 For the Year Ending December 31, (US$ 000's)
     Movement     Movement
 2015
 2014
 % Act
 % Lfl
 2014
 2013
 % Act
 % Lfl
Television advertising$49,616
 $56,260
 (11.8)% 5.5% $56,260
 $54,672
 2.9 % 4.3 %
Carriage fees and subscriptions2,331
 1,993
 17.0 % 39.8% 1,993
 1,725
 15.5 % 16.2 %
Other3,965
 3,773
 5.1 % 25.7% 3,773
 5,467
 (31.0)% (30.9)%
Net revenues55,912
 62,026
 (9.9)% 7.8% 62,026
 61,864
 0.3 % 1.5 %
Costs charged in arriving at OIBDA48,032
 54,191
 (11.4)% 5.8% 54,191
 53,606
 1.1 % 2.1 %
OIBDA$7,880
 $7,835
 0.6 % 21.9% $7,835
 $8,258
 (5.1)% (2.7)%
                
OIBDA margin14.1% 12.6% 1.5 p.p.
 1.6 p.p.
 12.6% 13.3% (0.7) p.p.
 (0.6) p.p.
All outstanding long-term debt is denominated in Euros.
Television advertising spending in Croatia increased an estimated 4% in 2015comparedThe all-in rate applicable to the prior year. 2021 Euro Term Loan and associated guarantee by Time Warner currently stands at 9.0%, an improvement of 600 basis points on the debt it replaced, and can go as low as 7.0% depending on our net leverage ratio, automatically decreasing the cost of borrowing as the Company’s net leverage ratio improves.
The Croatia segment reportedcost of the 2021 Revolving Credit Facility, which is currently undrawn, similarly ranges from approximately 9.0% to 7.0%, depending on our net revenuesleverage ratio.
We recorded a non-cash loss on extinguishment of US$ 55.9 million for 2015 compareddebt amounting to US$ 62.0150.2 million in 2014, a decrease of 10% on an actual basis, but an increase of 8% on a constant currency basis. The increase in television advertising revenues at constant rates was driven primarily by an increase in average prices due to advertisers spending more since the country exited recession in the second quarter of 2015. In 2014,2016.
With the increase in television advertising revenuesflexibility afforded to us from this and previous financing transactions, we continue to look at constant ratesways to improve our capital structure. We expect our net leverage ratio, which was driven by an increase in GRPs sold as well as an increase in average prices compared to 2013.
Costs charged in arriving at OIBDA in 2015 decreased by 11% compared to 2014. On a constant currency basis, costs increased by 6% due to an increase in content costs resulting from additional entertainment formats in the fall schedule and other targeted investments made to address an increase in competition for audience share. In 2014, costs increased 2% on a constant currency basis, driven by an increase in marketing costs related to the rebranding of a niche channel and an increase in staff-related costs, which moreless than offset decreases in content and transmission costs.
Our Croatia segment generated OIBDA of US$ 7.9 million for 2015 compared to US$ 7.8 millionin 2014, an increase of US$ 0.1 million. OIBDA decreased by US$ 0.5 million in 2014 compared to 2013.

23


Czech Republic
 For the Year Ending December 31, (US$ 000's)
     Movement     Movement
 2015
 2014
 % Act
 % Lfl
 2014
 2013
 % Act
 % Lfl
Television advertising$166,158
 $184,369
 (9.9)% 6.3 % $184,369
 $153,640
 20.0 % 28.9 %
Carriage fees and subscriptions7,176
 7,679
 (6.6)% 11.1 % 7,679
 11,243
 (31.7)% (27.4)%
Other9,302
 10,731
 (13.3)% 2.9 % 10,731
 10,056
 6.7 % 15.2 %
Net revenues182,636
 202,779
 (9.9)% 6.3 % 202,779
 174,939
 15.9 % 24.5 %
Costs charged in arriving at OIBDA110,939
 140,815
 (21.2)% (6.6)% 140,815
 184,543
 (23.7)% (18.4)%
OIBDA$71,697
 $61,964
 15.7 % 35.1 % $61,964
 $(9,604) 
NM (1)

 
NM (1)

                
OIBDA margin39.3% 30.6% 8.7 p.p.
 8.4 p.p.
 30.6% (5.5)% 36.1 p.p.
 36.5 p.p.
(1) Number is not meaningful.
Television advertising spending in the Czech Republic increased an estimated 4% in 2015 compared to the prior year. Net revenues from our Czech Republic segment amounted to US$ 182.6 million for 2015 compared to US$ 202.8 million in 2014, a decrease of 10% on an actual basis, but an increase of 6% on a constant currency basis. Television advertising revenues increased 6% on a constant currency basis due primarily to an increase in GRPs sold. Our relative pricing also strengthened, and as a result our market share in the Czech Republic increased to 61% in 2015 from 60% in 2014. Carriage fees and subscription revenues increased 11% on a constant currency basis during 2015, as high definition versions of our channels are now included in most cable and satellite platforms. We also launched an additional sports channel, Nova Sport 2, that is only available on cable and satellite platforms. In 2014, television advertising revenues increased 29% on a constant currency basis due to changes made to the sales policy for that year, which significantly increased the demand for advertising on our channels. Carriage fees and subscription revenues decreased during 2014 because we stopped transmitting MTV Czechseven times at the end of 2013 and because Nova Sport 1 was not carried by one cable operator in the Czech Republic during a portion of 2014.
Costs charged in arriving at OIBDA in 2015 decreased by 21% compared2016, to 2014. On a constant currency basis, costs decreased by 7%. Content costs decreased 9% due to more efficient own production, better use of the program library, and broadcasting more cost effective formats. There were also restructuring charges incurred in 2014 that were not repeated in 2015, which also decreased personnel costs in 2015. These savings more than offset some additional investments in local productions. Costs decreased 18% on a constant currency basis in 2014 reflecting significantly lower programming impairment, lower content and transmission costs, including cost savings from our ceasing to broadcast MTV Czech, and lower staff related costs due to restructuring completed in 2013.
Our Czech Republic segment reported OIBDA of US$ 71.7 million for 2015 compared to US$ 62.0 million in 2014, an increase of US$ 9.7 million. OIBDA increased by US$ 71.6 million in 2014 compared to 2013.

24


Romania
 For the Year Ending December 31, (US$ 000's)
     Movement     Movement
 2015
 2014
 % Act
 % Lfl
 2014
 2013
 % Act
 % Lfl
Television advertising$113,460
 $125,736
 (9.8)% 7.7 % $125,736
 $119,615
 5.1 % 6.3 %
Carriage fees and subscriptions40,292
 45,851
 (12.1)% 5.3 % 45,851
 24,792
 84.9 % 87.0 %
Other3,826
 7,027
 (45.6)% (34.9)% 7,027
 17,898
 (60.7)% (60.8)%
Net revenues157,578
 178,614
 (11.8)% 5.4 % 178,614
 162,305
 10.0 % 11.1 %
Costs charged in arriving at OIBDA116,402
 141,355
 (17.7)% (1.6)% 141,355
 159,851
 (11.6)% (10.1)%
OIBDA$41,176
 $37,259
 10.5 % 31.9 % $37,259
 $2,454
 
NM (1)

 
NM (1)

                
OIBDA margin26.1% 20.9% 5.2 p.p.
 5.2 p.p.
 20.9% 1.5% 19.4 p.p.
 18.8 p.p.
(1) Number is not meaningful.
Television advertising spending in Romania increased an estimated 8% in 2015 compared to the prior year. The Romania segment reported net revenues of US$ 157.6 million for 2015 compared to US$ 178.6 million in 2014, a decrease of 12% on an actual basis, but an increase of 5% on a constant currency basis. Our television advertising revenues increased 8% on a constant currency basis in 2015 due to an increase in GRPs sold, and we maintained our market share. Net revenues during 2015 also benefited from an increase in carriage fees and subscription revenues due to an increase in the number of subscribers and improved prices from certain contracts that only took effect during the first quarter of 2014. The decrease in other revenues in 2015 compared to 2014 was due primarily to the sale of content in 2014 from an entity that has now been disposed of that did not meet the criteria to be classified as discontinued operations. Net revenues increased 11% in 2014 compared to 2013 primarily from an increase in carriage fees and subscription revenues following the successful negotiation of contracts with all major cable and satellite operators in Romania. Television advertising revenues increased in 2014 compared to 2013 due to an increase in GRPs sold. The decrease in other revenues in 2014 compared to 2013 was due primarily to a significant decrease in the amount of commercials produced for third parties.coming years.
Costs charged in arriving at OIBDA in 2015 decreased by 18% compared to 2014. On a constant currency basis, costs decreased by 2% due to a decrease in content costs from fewer hours of foreign programming in the schedule and a reduction in the cost of abandoned development projects, which more than offset an increase in the number of hours of local programming in the schedule during 2015 compared to 2014. There were also fewer restructuring charges in 2015. The 10%decrease in costs in 2014 compared to 2013 on a constant currency basis reflected significantly lower programming impairment, which was partially offset by an increase in programming and local production costs in response to increased investment by competitors as well as higher restructuring charges.
The tax audit of Pro TV in Romania was completed in the third quarter of 2015. We released the US$ 12.0 million provision recorded in the fourth quarter of 2014 and the US$ 18.2 million provision recorded in the first quarter of 2015 (see Item 8, Note 22, "Commitments and Contingencies"). Since these charges were not included in OIBDA, our reversal of these charges during the third quarter of 2015 has similarly been excluded from OIBDA.
Our Romania segment generated OIBDA of US$ 41.2 million in 2015compared to US$ 37.3 million in 2014, an increase of US$ 3.9 million. OIBDA increased by US$ 34.8 million in 2014 compared to 2013.

25


Slovak Republic
 For the Year Ending December 31, (US$ 000's)
     Movement     Movement
 2015
 2014
 % Act
 % Lfl
 2014
 2013
 % Act
 % Lfl
Television advertising$79,135
 $85,355
 (7.3)% 10.3% $85,355
 $78,228
 9.1 % 10.3 %
Carriage fees and subscriptions1,324
 980
 35.1 % 61.9% 980
 1,106
 (11.4)% (11.1)%
Other3,975
 4,221
 (5.8)% 13.0% 4,221
 3,070
 37.5 % 36.7 %
Net revenues84,434
 90,556
 (6.8)% 11.0% 90,556
 82,404
 9.9 % 11.0 %
Costs charged in arriving at OIBDA73,849
 85,970
 (14.1)% 2.5% 85,970
 102,263
 (15.9)% (14.5)%
OIBDA$10,585
 $4,586
 130.8 % 164.5% $4,586
 $(19,859) 
NM (1)

 
NM (1)

                
OIBDA margin12.5% 5.1% 7.4 p.p.
 7.2 p.p.
 5.1% (24.1)% 29.2 p.p.
 28.3 p.p.
(1) Number is not meaningful.
Television advertising spendingWe operate one general entertainment channel, TV MARKIZA, and three other channels, DOMA (Slovak Republic), DAJTO and MARKIZA INTERNATIONAL, a general entertainment channel broadcasting in the Slovak Republic increased an estimated 16% in 2015 compared to the prior year. OurCzech Republic.
Target Demographic Channel Ownership All day audience share Prime time audience share
      2016 2015 2016 2015
12-54 TV MARKIZA CME 22.3% 22.9% 23.3% 24.9%
  TV JOJ J&T Media Enterprises 15.4% 16.5% 18.8% 20.0%
  Jednotka Public Television 7.8% 7.5% 9.5% 8.8%
             
Source: PMT/ TNS SK
The combined all day and prime time audience shares of our Slovak Republic operations reported net revenues of US$ 84.4 million for 2015 compared to US$ 90.6 millionin 2014, a decrease of 7% on an actual basis, but an increase of 11% on a constant currency basis. Television advertising revenues grew 10% on a constant currency basis in 2015 due to higher prices2016, excluding MARKIZA INTERNATIONAL, were 30.7% and an increase in GRPs sold. The second half of 2015 also included an increase in spending on informational campaigns by the public sector, and we expect some additional spending by the public sector also in 2016. This is contributing to an increase in demand for television advertising, and as a result we expect average prices to increase in the Slovak Republic in 2016. The 11%increase in net revenues in 2014 compared to 2013 on a constant currency basis was due primarily to an increase in the consumption of advertising on our channels as our clients' behavior in the Slovak Republic changed after the improvements made to the sales policy in the Czech Republic in 2014.32.2%, respectively.
Costs charged in arriving at OIBDA in 2015 decreased by 14% compared to 2014. On a constant currency basis, costs increased by 3% in 2015 compared to 2014 due to an increase in the quality and number of hours of own production following recent increased competition for audience share which was only partially offset by savings from lower transmission and marketing costs. The 15%decrease in costs in 2014 compared to 2013 on a constant currency basis reflected significantly lower programming impairment and a decrease in restructuring charges.
Our Slovak Republic segment reported OIBDA of US$ 10.6 million in 2015 compared to US$ 4.6 million in 2014, an increase of US$ 6.0 million. OIBDA increased by US$ 24.5 million in 2014 compared to 2013.


26


Slovenia
We operate two general entertainment channels, POP TV and KANAL A, and three other channels, KINO, BRIO and OTO.
 For the Year Ending December 31, (US$ 000's)
     Movement     Movement
 2015
 2014
 % Act
 % Lfl
 2014
 2013
 % Act
 % Lfl
Television advertising$46,412
 $52,417
 (11.5)% 5.8 % $52,417
 $57,054
 (8.1)% (7.5)%
Carriage fees and subscriptions4,082
 4,176
 (2.3)% 16.9 % 4,176
 3,945
 5.9 % 6.0 %
Other3,739
 4,777
 (21.7)% (7.1)% 4,777
 5,657
 (15.6)% (14.1)%
Net revenues54,233
 61,370
 (11.6)% 5.5 % 61,370
 66,656
 (7.9)% (7.2)%
Costs charged in arriving at OIBDA48,176
 56,039
 (14.0)% 2.8 % 56,039
 57,402
 (2.4)% (2.1)%
OIBDA$6,057
 $5,331
 13.6 % 33.6 % $5,331
 $9,254
 (42.4)% (40.2)%
                
OIBDA margin11.2% 8.7% 2.5 p.p.
 2.4 p.p.
 8.7% 13.9% (5.2) p.p.
 (4.8) p.p.
Target Demographic Channel Ownership All day audience share Prime time audience share
      2016 2015 2016 2015
18-54 POP TV CME 21.3% 19.5% 31.6% 27.8%
  Planet TV Antenna Group / TSmedia 8.1% 8.6% 10.4% 11.7%
  SLO 1 Public Television 9.0% 8.6% 9.6% 9.4%
             
TelevisionSource: AGB Nielsen Media Research
The combined all day and prime time audience shares of our Slovenia operations in 2016 were 38.1% and 47.5%, respectively.
Seasonality
We experience seasonality, with advertising spending in Slovenia increased an estimated 7% in 2015 comparedsales tending to be lowest during the third quarter of each calendar year due to the prior year. Our Slovenia segment reported net revenuessummer holiday period (typically July and August), and highest during the fourth quarter of US$ 54.2 million for 2015 compared to US$ 61.4 million in 2014, a decrease of 12% on an actual basis, but an increase of 6% on a constant currency basis, primarilyeach calendar year due to an increasethe holiday season.
Regulation of Television Broadcasting
Television broadcasting in television advertising revenues. Following recent growth in private consumption, the demand for television advertising accelerated during 2015. The 7% decrease in net revenues in 2014 compared to 2013 on a constant currency basis reflected a decrease in television advertising revenues because we sold fewer GRPs.
Costs charged in arriving at OIBDA in 2015 decreased by 14% compared to 2014. On a constant currency basis, costs increased by 3% due to investment in more hours of own produced programming during 2015 when compared to 2014, which was partially offset by savings in other costs as a result of restructuring efforts. The 2%decrease in costs in 2014 compared to 2013 on a constant currency basis was due primarily to a decrease in restructuring charges.
Our Slovenia segment generated OIBDA of US$ 6.1 million in 2015 compared to US$ 5.3 million in 2014, an increase of US$ 0.8 million. OIBDA decreased by US$ 4.0 million in 2014 compared to 2013.

27


Future Trends
Growth in real GDP across the six countries in which we operate is forecast to continue in 2016. Spending on infrastructure from European Union subsidies contributed to the growth in the Czech Republic during 2015, however this support is expected to decrease next year, resulting in growth forecasts of approximately 3% for 2016, in-line with the average for all six countries. The European Central Bank has implemented various policies during 2015 to promote economic growth and since rates of inflation remain below their target of 2%, accommodative policies are expected to remain in place or even be expanded further during 2016. We believe that the growth in real GDP and private consumption that is forecast for 2016 across all sixeach of the countries in which we operate will be supportiveis regulated by a governmental authority or agency. In this report, we refer to such agencies individually as a “Media Council” and collectively as “Media Councils”. Media Councils generally supervise broadcasters and their compliance with national broadcasting legislation, as well as control access to the available frequencies through licensing regimes.
Programming and Advertising Regulation
Our main operating countries are member states of the EU, and as such, our broadcast operations in such countries are subject to relevant EU legislation relating to media.
The EU Audiovisual Media Services Directive (the “AVMS Directive”) came into force in March 2010 and provides the legal framework for audiovisual media services generally in the EU. The AVMS Directive covers both linear (i.e., broadcasting) and non-linear (e.g., video-on-demand and catch-up) transmissions of audiovisual media services, with the latter subject to significantly less stringent regulation. Among other things, the AVMS Directive requires broadcasters to comply with rules related to, but not limited to, program content, advertising content and quotas, product placement, sponsorship, teleshopping, accessibility by persons with a visual or hearing disability, and minimum quotas with respect to “European works” (defined as originating from an EU member state or a signatory to the Council of Europe's Convention on Transfrontier Television as well as being written and produced mainly by residents of the EU or Council of Europe member states or pursuant to co-production agreements between such states and other countries). In addition, the AVMS Directive requires that at least 10% of either broadcast time or programming budget is dedicated to programs made by European producers who are independent of broadcasters. News, sports, games, advertising, teletext services and teleshopping are excluded from the calculation of these quotas. In respect of advertising, the AVMS Directive provides that the proportion of television advertising spots and teleshopping spots within a given hour shall not exceed 20% (what is commonly referred to as the ‘12 minute per hour rule’). The AVMS Directive does not otherwise restrict when programming may be interrupted by advertising in linear broadcasting, except in the case of films and news programming (where programming may be interrupted once every thirty minutes or more) and children’s programming (where the same restriction applies providing that the program is greater than thirty minutes) and religious programming (where no advertising or teleshopping shall be inserted). Under the AVMS Directive, product placement is prohibited subject to certain exceptions (for example it is permitted in films and series, sports programs and light entertainment programs) and providing that the use of product placement is not ‘unduly’ prominent, is not promotional and is appropriately identified to viewers.
Legislation implementing the AVMS Directive has been adopted across our operating countries. On May 25, 2016, the European Commission adopted a proposal amending the AVMS Directive. As proposed the legislation liberalises many of the AVMS Directive requirements, including, for example, in respect of hourly advertising limits, product placement, teleshopping and sponsorship. The proposal is subject to consultation, review by the European Commission committees and voting in the European Parliament. Any amendments to the AVMS Directive would then need to be implemented by our countries of operation.
Please see below for more detailed information on programming and advertising regulations that impact our channels.
Bulgaria: In Bulgaria, privately owned broadcasters are permitted to broadcast advertising for up to 12 minutes per hour. The public broadcaster, BNT, which is financed through a compulsory television license fee and by the government, is restricted to broadcasting advertising for four minutes per hour and no more than 15 minutes per day, of which only five minutes may be in prime time. There are also restrictions on the frequency of advertising breaks (for example, news and children's programs shorter than 30 minutes cannot be interrupted). These restrictions apply to both publicly and privately owned broadcasters. Further restrictions relate to advertising content, including a ban on tobacco advertising and restrictions on alcohol advertising, regulations on medical products advertising and regulations on advertising targeted at children or during children's programming. In addition, members of the news department of our channels are prohibited from appearing in advertisements. Our channels in Bulgaria are required to comply with several restrictions on programming, including regulations on the origin of programming. These channels must ensure that 50% of a channel's total annual broadcast time consists of EU- or locally-produced programming and 12% of such broadcast time consists of programming produced by independent producers in the EU. News, sports, games and teleshopping programs, as well as advertising and teletext services, are excluded from these restrictions.
Croatia: In Croatia, privately owned broadcasters are permitted to broadcast advertising for up to 12 minutes per hour with no daily limit, and direct sales advertising has to last continuously for at least 15 minutes. Additional restrictions apply to children's programming and movies. The public broadcaster, HRT, which is financed through a compulsory television license fee, is restricted to broadcasting nine minutes of advertising per hour generally and four minutes per hour from 6 p.m. to 10 p.m. HRT is not permitted to broadcast spots for teleshopping. There are other restrictions that relate to advertising content, including a ban on tobacco and alcohol advertising. NOVA TV (Croatia) is required to comply with several restrictions on programming, including regulations on the origin of programming. These include the requirement that 20% of broadcast time consists of locally produced programming and 50% of such locally produced programming be shown during prime time (between 4:00 p.m. and 10:00 p.m.). These restrictions are not applicable to DOMA (Croatia).

Czech Republic: Privately owned broadcasters in the Czech Republic are permitted to broadcast advertising for up to 12 minutes per hour. In September 2011, legislation was implemented in the Czech Republic which restricts the amount of advertising that may be shown on channels of the public broadcaster, CT. Pursuant to the regulation, no advertising may be shown on the public channels CT 1 and CT 24, while the channels CT 2 and CT 4 may show a limited amount of advertising. Also included in the legislation is the requirement that national private broadcasters must contribute annually to a Czech cinematography fund in an amount equal to 2% of their net advertising revenues. We are entitled to apply for financing from the fund. In the Czech Republic, all broadcasters are restricted with respect to the frequency of advertising breaks during and between programs, as well as being subject to restrictions that relate to advertising content, including a ban on tobacco advertising and limitations on advertisements of alcoholic beverages, pharmaceuticals, firearms and munitions.
Romania: Privately owned broadcasters in Romania are permitted to broadcast advertising and direct sales advertising for up to 12 minutes per hour. There are also restrictions on the frequency of advertising breaks (for example, news and children's programs shorter than 30 minutes cannot be interrupted). Broadcasters are also required that from the total broadcasting time (except for the time allocated to news, sports events, games, advertising and teleshopping) (a) at least 50% must be European-origin audio-visual works and (b) at least 10% (or, alternatively, at least 10% of their programming budget) must be European audio-visual works produced by independent producers. The public broadcaster, TVR, is restricted to broadcasting advertising for eight minutes per hour and only between programs. Further restrictions relate to advertising content, including a ban on tobacco advertising and restrictions on alcohol advertising, and regulations on advertising targeted at children or during children's programming. In addition, news anchors of all channels are prohibited from appearing in advertisements and teleshopping programming.
Slovak Republic: Privately owned broadcasters in the Slovak Republic are permitted to broadcast advertising for up to 12 minutes per hour but not for more than 20% of their total daily broadcast time. Since January 2013, the public broadcaster RTVS, which is financed through a compulsory license fee, can broadcast advertising for up to 0.5% of its total broadcast time (up to 2.5% of total broadcast time including teleshopping programming), but between 7:00 p.m. and 10:00 p.m. may broadcast only eight minutes of advertising per hour. There are restrictions on the frequency of advertising breaks during and between programs. RTVS is not permitted to broadcast advertising breaks during programs. There are also restrictions that relate to advertising content, including a ban on tobacco, pharmaceuticals, firearms and munitions advertising and a ban on advertisements of alcoholic beverages (excluding beer and wine) between 6:00 a.m. and 10:00 p.m. Our operations in the Slovak Republic are also required to comply with several restrictions on programming, including regulations on the origin of programming. These include the requirement that 50% of the station's monthly broadcast time must be European-origin audio-visual works and at least 10% of a station's monthly broadcast time must be European audio-visual works produced by independent producers, at least 10% of which must be broadcast within five years of production.
Slovenia: Privately owned broadcasters in Slovenia are allowed to broadcast advertising for up to 12 minutes in any hour. The public broadcaster, SLO, which is financed through a compulsory television license fee and commercial activities, is allowed to broadcast advertising for up to 10 minutes per hour, but is only permitted up to seven minutes per hour between the hours of 6:00 p.m. and 11:00 p.m. There are also restrictions on the frequency of advertising breaks during programs and restrictions that relate to advertising content, including restrictions on food advertising during children's programming and a ban on tobacco advertising and a prohibition on the advertising of any alcoholic beverages from 7:00 a.m. to 9:30 p.m. and generally for alcoholic beverages with an alcoholic content of more than 15%. Our Slovenia operations are required to comply with several restrictions on programming, including regulations on the origin of programming. These include the requirement that 20% of a station's daily programming consist of locally produced programming, of which at least 60 minutes must be broadcast between 6:00 p.m. and 10:00 p.m. In addition, 50% of our niche channels' annual broadcast time must be European-origin audio-visual works and at least 10% of such stations' annual broadcast time must be European audio-visual works produced by independent producers.
Licensing Regulation
The license granting and renewal process in our operating countries varies by jurisdiction and by type of broadcast permitted by the license (i.e., terrestrial, cable, satellite). Depending on the country, terrestrial licenses may be valid for an unlimited time period, may be renewed automatically upon application or may require a more lengthy renewal procedure, such as a tender process. Generally cable and satellite licenses are granted or renewed upon application. We expect each of our licenses will continue to be renewed or new licenses to be granted as required to continue to operate our business. All of the countries in which we operate have transitioned from analog to digital terrestrial broadcasting and we have obtained digital licenses where requested. In January 2017, we ceased terrestrial distribution of our channels in the Slovak Republic and Slovenia, and channels in those countries are now available exclusively on cable, satellite and IPTV platforms. We will apply for additional digital licenses where such applications are prudent and permissible. Please see below for more detailed information on licenses for our channels.
Bulgaria: BTV operates pursuant to a national digital terrestrial license issued by the Council for Electronic Media, the Bulgarian Media Council, that expires in July 2024. BTV ACTION broadcasts pursuant to a national cable registration that is valid for an indefinite time period and also has a digital terrestrial license that expires in January 2025 which is not currently in use. BTV CINEMA, BTV COMEDY, RING and BTV LADY, as well as BTV, each broadcast pursuant to a national cable registration that is valid for an indefinite time period.
Croatia: NOVA TV (Croatia) broadcasts pursuant to a national terrestrial license granted by the Croatian Media Council, the Electronic Media Council, which expires in April 2025. DOMA (Croatia) broadcasts pursuant to a national terrestrial license that expires in January 2026. MINI TV broadcasts via satellite and cable pursuant to a license that expires in January 2022.
Czech Republic: Our channels in the Czech Republic operate under a variety of licenses granted by the Czech Republic Media Council, The Council for Radio and Television Broadcasting. TV NOVA (Czech Republic) broadcasts under a national terrestrial license that expires in January 2025. TV NOVA (Czech Republic) may also broadcast pursuant to a satellite license that expires in December 2020. NOVA CINEMA broadcasts pursuant to a national terrestrial digital license that expires in 2023. NOVA CINEMA also broadcasts via satellite pursuant to a license that is valid until November 2019. NOVA SPORT 1 broadcasts pursuant to a license that allows for both satellite and cable transmission that expires in October 2020. NOVA SPORT 2 broadcasts pursuant to a satellite license that expires in August 2027. In addition, NOVA SPORT 1 and NOVA SPORT 2 each have a license that permits internet transmission which expires in August 2027. NOVA ACTION (formerly known as FANDA) broadcasts pursuant to a satellite license that expires in July 2024 and a national terrestrial license that expires in September 2023. NOVA 2 (formerly known as SMICHOV) broadcasts pursuant to a national terrestrial license that expires in December 2024 and a satellite license that expires in February 2025. NOVA GOLD (formerly known as TELKA) broadcasts pursuant to a national terrestrial license and a satellite license that each expire in February 2025. NOVA INTERNATIONAL broadcasts pursuant to a license that permits internet transmission which expires in January 2028.
Romania: PRO TV broadcasts pursuant to a national satellite license granted by the Romanian Media Council, the National Audio-Visual Council. Our other Romanian channels (ACASA, ACASA GOLD, PRO CINEMA, SPORT.RO, MTV ROMANIA and PRO TV INTERNATIONAL) each has a national satellite license. PRO TV also broadcasts through the electronic communications networks pursuant to a series of local licenses and ACASA broadcasts in high-definition pursuant to a written consent from the Media Council. Licenses for our Romanian operations expire on dates ranging from April 2018 to January 2025. PRO TV CHISINAU broadcasts pursuant to a cable license granted by the Audio-Visual Coordinating Council of the Republic of Moldova that expires in November 2023 and ACASA IN MOLDOVA broadcasts pursuant to a cable license that expires in December 2017.

Slovak Republic: TV MARKIZA, DOMA (Slovak Republic) and DAJTO each broadcast pursuant to a national license for digital broadcasting granted by the Council for Broadcasting and Retransmission, the Media Council of the Slovak Republic, which is valid for an indefinite period. MARKIZA INTERNATIONAL is broadcast pursuant to the license granted to TV MARKIZA.
Slovenia: Our Slovenian channels POP TV, KANAL A, KINO, BRIO and OTO each have licenses granted by the Post and Electronic Communications Agency of the Republic of Slovenia, the Slovenia Media Council, that allow for broadcasting on any platform, including digital, cable and satellite. These licenses are valid for an indefinite time period.
OTHER INFORMATION
Employees
As of December 31, 2016, we had a total of approximately 2,950 employees (including contractors).
Corporate Information
CME Ltd. was incorporated in 1994 under the laws of Bermuda. Our registered offices are located at O'Hara House, 3 Bermudiana Road, Hamilton HM 08, Bermuda, and our telephone number is +1-441-296-1431. Communications can also be sent c/o CME Media Services Ltd. at Krizeneckeho nam. 1078/5, 152 00 Praha 5, Czech Republic, telephone number +420-242-465-605. CME's Class A common stock is listed on the NASDAQ Global Select Market and the Prague Stock Exchange under the ticker symbol “CETV”.
Financial Information by Operating Segment and by Geographical Area
For financial information by operating segment and geographic area, see Part II, Item 8, Note 19, "Segment Data".
Available Information
We make available, free of charge, on our website at http://www.cme.net our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

ITEM 1A    RISK FACTORS
This report and the following discussion of risk factors contain forward-looking statements as discussed on page 2 of this report. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks and uncertainties described below and elsewhere in this report. These risks and uncertainties are not the only ones we may face. Additional risks and uncertainties of which we are not aware, or that we currently deem immaterial, may also become important factors that affect our financial condition, results of operations and cash flows.
Risks Relating to Our Financial Position
Global or regional economic conditions and the credit crisis have adversely affected our financial position and results of operations. We cannot predict if the recovery in our operating countries will continue or how long it may last. A failure to achieve lasting recoveries will continue to adversely affect our results of operations.
The results of our operations depend heavily on advertising revenue, and demand for advertising is affected by general economic conditions in the region and globally. The economic uncertainty following the onset of the global financial crisis at the beginning of 2009 and the sustained recessionary period that followed had a prolonged adverse impact on consumer and business spending, access to credit, liquidity, investment spending, asset values and employment rates. These adverse economic conditions had a material negative impact on advertising spending in our markets, which negatively impacted our advertising revenues in the periods that followed. Since 2014, our markets have experienced overall growth in real GDP (as adjusted for inflation) and advertising spending; however we cannot predict if the recovery that has begun will continue or how long it will last. Any significant deterioration of general economic conditions in our markets would have an adverse economic impact on our advertising revenues. In addition, although we believe the advertising spend per capita of the countries in which we operate and advertising intensity (the ratio of total ad spend per capita to nominal GDP per capita) will converge with the developed markets (as defined in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations), such convergence may not occur in the time frame we expect, or at all. Moreover, the occurrence of disasters, acts of terrorism, civil or military conflicts or general political instability and responses to it, such as the imposition of economic sanctions against Russia, may also cause a deterioration in general economic conditions that may reduce advertising spending. Any of these developments would have a significant negative effect on our financial position, results of operations and cash flows.
Concerns regarding the Eurozone and the impact on the region of the United Kingdom’s exit from the European Union (“EU”) may adversely affect our financial position and results of operations.
Continued economic softness in the Eurozone, including a slowdown in the growth of consumer prices, prompted the European Central Bank to embark upon quantitative easing in 2015. Economic events related to the sovereign debt crisis in several EU countries have also highlighted issues relating to the strength of the banking sector in Europe and the Euro. Although the EU has created external funding and stability mechanisms to provide liquidity and financial assistance to Eurozone member states and financial institutions, there can be no assurance that the market growth duringdisruptions in Europe related to sovereign debt and the year.banking sector or otherwise, including the increased cost of funding for certain governments and financial institutions, will not continue and there can be no assurance that funding and stability packages utilized previously will be available or, if provided, will be sufficient to stabilize affected economies or institutions.
ItEconomic conditions in the EU will be further impacted by the results of the referendum held in the United Kingdom on June 23, 2016 whereby the United Kingdom electorate voted in favor of the United Kingdom leaving the EU, commonly referred to as “Brexit”. While the overall economic impact of Brexit on the EU and the Euro is difficult to predict whatestimate at present, decisions to conserve cash and reduce spending by consumers and businesses in the United Kingdom would have a negative impact macro-economic developments will have on foreign exchangeeconomic growth rates in 2016. If the Euro weakensUnited Kingdom and, to a lesser extent, in the EU, in particular those countries that are significant exporters to the United Kingdom. There is also significant uncertainty regarding the timing and terms on which the United Kingdom would leave the EU, and it is expected that a more protracted process to set those terms would have a more prolonged economic impact. In addition, there is concern that other countries may seek to leave the EU following the Brexit decision, increasing uncertainty in the region, which may have a further this will continue tonegative impact on investment and economic growth rates. Furthermore, the departure of the United Kingdom from the EU may affect the budgetary contributions and allocations among the EU member states in the medium term, including the countries in which we operate, which are net recipients of EU funding. Economic uncertainty caused by Brexit or other instability in the EU could cause variances from results reported at historical exchange rates in comparable periods to be significantly different from variances at constant exchange rates. Similar to 2015, we have entered into a number of forward transactions to purchase dollars during 2016 in amounts corresponding to estimated dollar payments for foreign programming in order to minimize thesignificant volatility in our cash flows from movements in spot rates. The weakening of our currencies will not have a significant impact on our day-to-day operations because revenuesEU markets and operating expenses are generally denominated in local currencies. Following completion of the transactions entered into in February 2016, the principal amount of our debt outstanding will be denominated in Euros.
Continuing recent trendsreduce economic growth rates in the countries in which we operate, which would negatively impact our business.
Our operating results will be adversely affected if we cannot generate strong advertising sales.
We generate the majority of our revenues from the sale of advertising airtime on our television channels. The reduction in advertising spending in our markets following the onset of the global financial crisis at the beginning of 2009 and the sustained recessionary period that followed had a negative effect on television advertising spending and prices. While we have attempted to combat this fall in prices by implementing new pricing strategies, the success of these strategies has varied from market to market and continues to be challenged by pressure from advertisers and discounting by competitors. In addition to advertising pricing, other factors that may affect our advertising sales include general economic conditions (described above), competition from other broadcasters and operators of other distribution platforms, changes in programming strategy, changes in distribution strategy, our channels’ technical reach, technological developments relating to media and broadcasting, seasonal trends in the advertising market, changing audience preferences and in how and when people view content and the accompanying advertising, increased competition for the leisure time of audiences and shifts in population and other demographics. Our advertising revenues also depend on our ability to maintain audience ratings and to generate GRPs. This requires us to have a distribution strategy that reaches a significant audience as well as to maintain investments in programming at a sufficient level to continue to attract audiences. Changes in the distribution of our channels, such as our decision to cease broadcasting on DTT in the Slovak Republic and Slovenia, may reduce the number of people who can view our channels, which may negatively impact our audience share and GRPs generated. Furthermore, significant or sustained reductions in investments in programming or other operating costs in response to reduced advertising revenues had and, if continued or repeated, may have an adverse impact on our television viewing levels. Reductions in advertising spending in our markets and resistance to price increases as well as competition for ratings from broadcasters seeking to attract similar audiences have had and may continue to have an adverse impact on our ability to maintain our advertising sales. A failure to maintain and increase advertising sales could have a material adverse effect on our financial position, results of operations and cash flows.


Our liquidity constraints and debt service obligations may restrict our ability to fund our operations.
We have significant debt service obligations under the Euro Term Loans as well as the 2021 Revolving Credit Facility (when drawn). Furthermore, we are paying Guarantee Fees to Time Warner as consideration for its guarantees of the Euro Term Loans (collectively, the "TW Guarantees"). Although the entire Guarantee Fee in respect of the 2018 Euro Term Loan and the 2019 Euro Term Loan are, and a portion of the Guarantee Fee in respect of the 2021 Euro Term Loan can be, non-cash pay at our option, accruing such fees will further increase the amounts to be repaid at the maturity of these facilities. Accordingly, the payment of Guarantee Fees in kind will increase our already significant leverage. As a result of our debt service obligations and covenants contained in the related loan agreements, we are restricted under the Reimbursement Agreement and the 2021 Revolving Credit Facility (when drawn) in the manner in which our business is conducted, including but not limited to our ability to obtain additional debt financing to refinance existing indebtedness or to fund future working capital, capital expenditures, business opportunities or other corporate requirements. We may have a proportionally higher level of debt than our competitors, which may put us at a competitive disadvantage by limiting our flexibility in planning for, or reacting to, changes in our business, economic conditions or our industry. For additional information regarding the Reimbursement Agreement and the TW Guarantees, see Part II, Item 8, Note 4, "Long-term Debt and Other Financing Arrangements".
We may be unable to refinance our existing indebtedness and may not be able to obtain favorable refinancing terms.
We have a substantial amount of indebtedness. Under the Reimbursement Agreement and the 2021 Revolving Credit Facility (when drawn), we can incur only limited amounts of additional indebtedness, other than indebtedness incurred to refinance existing indebtedness. In addition, pursuant to the Reimbursement Agreement, the all-in rates on the 2021 Euro Term Loan and the 2018 Euro Term Loan increase to 13% and 11%, respectively, on the date that is 180 days following a change of control of CME Ltd. (as defined therein); and pursuant to the 2021 Revolving Credit Facility, all commitments terminate following a change of control (as defined therein) and the interest rate on amounts outstanding increases to 13% on the date that is 180 days following such change of control. We intend to repay the 2018 Euro Term Loan at maturity with cash flows from operations and the expected proceeds from warrant exercises. In the event the warrants are not exercised in full or cash flows from operations do not meet our forecasts, we would be required to refinance the 2018 Euro Term Loan in whole or in part. Pursuant to the Reimbursement Agreement, all commitments under the 2021 Revolving Credit Facility terminate on the refinancing of any Euro Term Loan. We face the risk that we will not be able to renew, repay or refinance our indebtedness when due, or that the terms of any renewal or refinancing will not be on better terms than those of such indebtedness being refinanced. In the event we are not able to refinance our indebtedness, we might be forced to dispose of assets on disadvantageous terms or reduce or suspend operations, any of which would materially and adversely affect our financial condition, results of operations and cash flows.
We may be subject to changes in tax rates and exposure to additional tax liabilities.
We are subject to taxes in a number of foreign jurisdictions, including in respect of our operations as well as capital transactions undertaken by us. We are subject to regular review and audit by tax authorities, and in the ordinary course of our business there are transactions and calculations where the ultimate tax determination is unknown. Significant judgment is required in determining our provision for taxes. The final determination of our tax liabilities resulting from tax audits, related proceedings or otherwise could be materially different from our tax provisions. Economic and political pressures to increase receipts in various jurisdictions may make taxation and tax rates subject to significant change and the satisfactory resolution of any tax disputes more difficult. The occurrence of any of these events could have a material adverse effect on our financial position, results of operations and cash flows.
A default by us in connection with our obligations under our outstanding indebtedness could result in our inability to continue to conduct our business.
Pursuant to the terms of the agreements governing the Reimbursement Agreement and the 2021 Revolving Credit Facility, we pledged all of the shares of CME NV and of CME BV, which together own substantially all of the interests in our operating subsidiaries, as security for this indebtedness. If we or these subsidiaries were to default under the terms of any of the relevant agreements, the secured parties under such agreements would have the ability to sell all or a portion of the assets pledged to them in order to pay amounts outstanding under such debt instruments. This could result in our inability to conduct our business.
Fluctuations in exchange rates may continue to adversely affect our results of operations.
Our reporting currency is the dollar and CME Ltd.'s functional currency is the Euro. Our consolidated revenues and costs are divided across a range of European currencies. The strengthening of the dollar had a negative impact on reported revenues in 2016 when translated from the functional currencies of our operations. Continued strengthening of the dollar would have a negative impact on our reported revenues. Furthermore, fluctuations in exchange rates may negatively impact programming costs. While local programming is generally purchased in local currencies, a significant portion of our content costs relates to foreign programming purchased pursuant to dollar-denominated agreements. If the dollar appreciates against the functional currencies of our operating segments, the cost of acquiring such content would be adversely affected, which could have a material adverse effect on our results of operations and cash flows.
Our strategies to enhance our carriage fees and diversify our revenues may not be successful.
We are focused on creating additional revenue streams from our broadcast operations as well as increasing revenues generated from broadcast advertising, which is how we generate most of our revenues. Our main efforts with respect to this strategy are on increasing carriage fees from cable, satellite and IPTV operators for carriage of our channels as well as continuing to seek improvements in advertising pricing. Agreements with operators generally have a term of one or more years, at which time agreements must be renewed. There can be no assurance that we will be successful in renewing carriage fee agreements on similar or better terms. During negotiations to implement our carriage fees strategy in prior years, some cable and satellite operators suspended the broadcast of our channels, which negatively affected the reach and audience shares of those operations and, as a result, advertising revenues. There is a risk that operators may refuse to carry our channels while carriage fee negotiations are ongoing, which would temporarily reduce the reach of those channels and may result in clients withdrawing advertising from our channels. The occurrence of any of these events may have an adverse impact on our financial position, results of operations and cash flows. If we are ineffective in negotiations with carriers or in achieving further carriage fee increases, our profitability will continue to be dependent primarily on television advertising revenues, which increases the importance placed on our ability to improve advertising pricing and generate advertising revenues. In addition to carriage fees, we are also working to build-out our offerings of advertising video-on-demand products and other opportunities for advertising online. There can be no assurances that our revenue diversification initiatives will ultimately be successful, and if unsuccessful, this may have an adverse impact on our financial position, results of operations and cash flows.

A downgrading of our ratings may adversely affect our ability to raise additional financing.
Moody’s Investors Service rates our corporate credit as B2 with a stable outlook. Standard & Poor’s rates our corporate credit B+ with a stable outlook. Our ratings show each agency's opinion of our financial strength, operating performance and ability to meet our debt obligations as they become due. These ratings take into account the particular emphasis the ratings agencies place on metrics such as leverage ratio and cash flow, which they use as measurements of a company's liquidity and financial strength. They also reflect an emphasis placed by the ratings agencies on a track record of strong financial support from Time Warner. We may be subject to downgrades if our operating performance deteriorates or we fail to maintain adequate levels of liquidity. In addition, our ratings may be downgraded if the agencies form a view that material support from Time Warner is not as strong, or the strategic importance of CME to Time Warner is not as significant as it has been in the past. In the event our corporate credit ratings are lowered by the rating agencies, it will be more difficult for us to refinance our existing indebtedness or raise new indebtedness that may be permitted under the Reimbursement Agreement and the 2021 Revolving Credit Facility (when drawn), and we will have to pay higher interest rates, which would have an adverse effect on our financial position, results of operations and cash flows.
If our goodwill, other intangible assets and long-lived assets become impaired, we may be required to record significant charges to earnings.
We review our long-lived assets for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. Goodwill and indefinite-lived intangible assets are required to be assessed for impairment at least annually. Factors that may be considered a change in circumstances indicating that the carrying amount of our goodwill, indefinite-lived intangible assets or long-lived assets may not be recoverable include slower growth rates in our markets, reduced expected future cash flows, increased country risk premium as a result of political uncertainty and a decline in stock price and market capitalization. We consider available current information when calculating our impairment charge. If there are indicators of impairment, our long-term cash flow forecasts for our operations deteriorate or discount rates increase, we may be required to recognize additional impairment charges in later periods. See Part II, Item 8, Note 3, "Goodwill and Intangible Assets" for the carrying amounts of goodwill in each of our reporting units.
Risks Relating to Our Operations
Content may become more expensive to produce or acquire or we may not be able to develop or acquire content that is attractive to our audiences.
Television programming is one of the most significant components of our operating costs. The ability of our programming to generate advertising revenues depends substantially on our ability to develop, produce or acquire programming that matches audience tastes and attracts high audience shares, which is difficult to predict. The commercial success of a program depends on several tangible and intangible factors, including the impact of competing programs, the availability of alternate forms of entertainment and leisure time activities, our ability to anticipate and adapt to changes in consumer tastes and behavior, and general economic conditions. While we have been successful in reducing content costs compared to prior periods, the cost of acquiring content attractive to our viewers, such as feature films and popular television series and formats, may increase in the future. Our expenditures in respect of locally produced programming may also increase due to competition for talent and other resources, changes in audience tastes in our markets or from the implementation of any new laws and regulations mandating the broadcast of a greater number of locally produced programs. In addition, we typically acquire syndicated programming rights under multi-year commitments before knowing how such programming will perform in our markets. In the event any such programming does not attract adequate audience share, it may be necessary to increase our expenditures by investing in additional programming, subject to the availability of adequate financial resources, as well as to write down the value of any underperforming programming. Any material increase in content costs could have a material adverse effect on our financial condition, results of operations or cash flows.
Our operations are vulnerable to significant changes in viewing habits and technology that could adversely affect us.
The television broadcasting industry is affected by rapid innovations in technology. The implementation of these new technologies and the introduction of non-traditional content distribution systems have increased competition for audiences and advertisers. Platforms such as direct-to-home cable and satellite distribution systems, the Internet, subscription and advertising video-on-demand, user-generated content sites and the availability of content on portable digital devices have changed consumer behavior by increasing the number of entertainment choices available to audiences and the methods for the distribution, storage and consumption of content. This development has fragmented television audiences in more developed markets and could adversely affect our ability to retain audience share and attract advertisers as such technologies penetrate our markets. As we adapt to changing viewing patterns, it may be necessary to expend substantial financial and managerial resources to ensure necessary access to new technologies or distribution systems. Such initiatives may not develop into profitable business models. Furthermore, technologies that enable viewers to choose when, how, where and what content to watch, as well as to fast-forward or skip advertisements, may cause changes in consumer behavior that could have a negative impact on our advertising revenues. In addition, compression techniques and other technological developments allow for an increase in the number of channels that may be broadcast in our markets and expanded programming offerings that may be offered to highly targeted audiences. Reductions in the cost of launching new channels could lower entry barriers and encourage the development of increasingly targeted niche programming on various distribution platforms. This could increase the competitive demand for popular programming, resulting in an increase in content costs as we compete for audiences and advertising revenues. A failure to successfully adapt to changes in our industry as a result of technological advances may have an adverse effect on our financial position, results of operations and cash flows.
Our operating results are dependent on the importance of television as an advertising medium.
We generate most of our revenues from the sale of our advertising airtime on television channels in our markets. Television competes with various other media, such as print, radio, the internet and outdoor advertising, for advertising spending. In all of the countries in which we operate, television constitutes the single largest component of all advertising spending. There can be no assurances that the television advertising market will maintain its current position among advertising media in our markets. Furthermore, there can be no assurances that changes in the regulatory environment or improvements in technology will not favor other advertising media or other television broadcasters. Increases in competition among advertising media arising from the development of new forms of advertising media and distribution could result in a decline in the appeal of television as an advertising medium generally or of our channels specifically. A decline in television advertising spending as a component of total advertising spending in any period or in specific markets would have an adverse effect on our financial position, results of operations and cash flows.

We are subject to legal compliance risks and the risk of legal or regulatory proceedings being initiated against us.
We are required to comply with a wide variety of laws and other regulatory obligations in the jurisdictions in which we operate and compliance by our businesses is subject to scrutiny by regulators and other government authorities in these jurisdictions. Compliance with foreign as well as applicable U.S. laws and regulations related to our businesses, such as broadcasting content and advertising regulations, competition regulations, tax laws, employment laws, data protection requirements, and anti-corruption laws, increases the costs and risks of doing business in these jurisdictions. We believe we have implemented appropriate risk management and compliance policies and procedures that are designed to ensure our employees, contractors and agents comply with these laws and regulations; however, a violation of such laws and regulations or the Company’s policies and procedures could occur. A failure or alleged failure to comply with applicable laws and regulations, whether inadvertent or otherwise, may result in legal or regulatory proceedings being initiated against us.
We have become aware of provisions in the tax regulations of one of our markets that shift the liability for taxes on gains resulting from certain capital transactions from the seller to the buyer. This provision may have been applicable to an acquisition made by us, although we do not believe we have any liability connected to this transaction. In addition, the prosecuting authorities in Romania have requested information in respect of an investigation into certain transactions entered into by Pro TV in 2014 primarily with certain related parties. We believe that the transactions under review are fully supported and are cooperating with the authorities in responding to the information request. In Slovenia, the competition authorities have launched an investigation into whether our Slovenian subsidiary is dominant and abused its dominant position when concluding carriage fee agreements with platform operators. The investigation is in an early stage and there has been no determination that a breach of competition law has occurred; notwithstanding that, the competition authorities may seek to apply interim measures prior to any formal determination. If these or other contingencies result in legal or regulatory proceedings being initiated against us, or if developments occur in respect of our compliance with existing laws or regulations, or there are changes in the interpretation or application of such laws or regulations, we may incur substantial costs, be required to change our business practices, our reputation may be damaged or we may be exposed to unanticipated civil or criminal liability, including fines and other penalties that may be substantial. This could have a material adverse effect on our business, financial position, results of operations and cash flows.
Piracy of our content may decrease revenues we can earn from our content and adversely impact our business and profitability.
Piracy of our content poses significant challenges in our markets. Technological developments, including digital copying, file compressing, the use of international proxies and the growing penetration of high bandwidth internet connections, have made it easier to create, transmit and distribute high quality unauthorized copies of content in unprotected digital formats. Furthermore, there are a growing number of video streaming sites, increasing the risk of online transmission of our content without consent. The proliferation of such sites broadcasting content pirated from us could result in a reduction of revenues that we receive from the legitimate distribution of our content, including through video-on-demand and other services. Protection of our intellectual property is in large part dependent on the manner in which applicable intellectual property laws in the countries in which we operate are construed and enforced. We seek to limit the threat of content piracy. However, detecting and policing the unauthorized use of our intellectual property is often difficult and remedies may be limited under applicable law. Steps we take may not prevent the infringement by third parties. There can be no assurance that our efforts to enforce our rights and protect our intellectual property will be successful in preventing piracy, which limits our ability to generate revenues from our content.
Our operations are in developing markets where there are additional risks related to political and economic uncertainty, biased treatment and compliance with evolving legal and regulatory systems.
Our revenue-generating operations are located in Central and Eastern Europe and we may be significantly affected by risks that may be different to those posed by investments in more developed markets. These risks include, but are not limited to, social and political instability, inconsistent regulatory or judicial practice, and increased taxes and other costs. The economic and political systems, legal and tax regimes, regulatory practices, standards of corporate governance and business practices of countries in this region continue to develop. Policies and practices may be subject to significant adjustments, including following changes in political leadership. This may result in social or political instability or disruptions and the potential for political influence on the media as well as inconsistent application of tax and legal regulations, arbitrary treatment before regulatory or judicial authorities and other general business risks. Other potential risks inherent in markets with evolving economic and political environments include exchange controls, higher taxes, tariffs and other levies as well as longer payment cycles. The relative level of development of our markets and the influence of local politics also present a potential for biased treatment of us before regulators or courts in the event of disputes. If such a dispute occurs, those regulators or courts might favor local interests over our interests. Ultimately, this could have a material adverse impact on our business, financial position, results of operations and cash flows.
We rely on network and information systems and other technology that may be subject to disruption or misuse, which could harm our business or our reputation.
We make extensive use of network and information systems and other technologies, including those related to our internal network management as well as our broadcasting operations. These systems are central to many of our business activities. Network and information systems-related events, such as computer hackings, computer viruses, worms or other destructive or disruptive software, process breakdowns, malicious activities or other security breaches could result in a disruption or degradation of our services, the loss of information or the improper disclosure of personal data. The occurrence of any of these events could negatively impact our business by requiring us to expend resources to remedy such a security breach or by harming our reputation. In addition, improper disclosure of personal data could subject us to liability under laws that protect personal data in the countries in which we operate. The development and maintenance of systems to prevent these events from occurring requires ongoing monitoring and updating as efforts to overcome security measures become more sophisticated. As technologies evolve, we will need to expend additional resources to protect our technology and information systems, which could have an adverse impact on our results of operations.
Our broadcasting licenses may not be renewed and may be subject to revocation.
We require broadcasting and, in some cases, other operating licenses as well as other authorizations from national regulatory authorities in our markets in order to conduct our broadcasting business. While our broadcasting licenses for our operations in Slovenia and the Slovak Republic are valid for indefinite time periods, our other broadcasting licenses expire at various times through 2028. While we expect that our material licenses and authorizations will be renewed or extended as required to continue to operate our business, we cannot guarantee that this will occur or that they will not be subject to revocation, particularly in markets where there is relatively greater political risk as a result of less developed political and legal institutions. The failure to comply in all material respects with the terms of broadcasting licenses or other authorizations or with applications filed in respect thereto may result in such licenses or other authorizations not being renewed or otherwise being terminated. Furthermore, no assurances can be given that renewals or extensions of existing licenses will be issued on the same terms as existing licenses or that further restrictions or conditions will not be imposed in the future. Any non-renewal or termination of any other broadcasting or operating licenses or other authorizations or material modification of the terms of any renewed licenses may have a material adverse effect on our financial position, results of operations and cash flows.

Our success depends on attracting and retaining key personnel.
Our success depends partly upon the efforts and abilities of our key personnel and our ability to attract and retain key personnel. Our management teams have significant experience in the media industry and have made important contributions to our growth and success. Although we have been successful in attracting and retaining such people in the past, competition for highly skilled individuals is intense. There can be no assurance that we will continue to be successful in attracting and retaining such individuals in the future. The loss of the services of any of these individuals could have an adverse effect on our businesses, results of operations and cash flows.
Risks Relating to Enforcement Rights
We are a Bermuda company and enforcement of civil liabilities and judgments may be difficult.
We are a Bermuda company. Substantially all of our assets and all of our operations are located, and all of our revenues are derived, outside the United States. In addition, several of our directors and officers are non-residents of the United States, and all or a substantial portion of the assets of such persons are or may be located outside the United States. As a result, investors may be unable to effect service of process within the United States upon such persons, or to enforce against them judgments obtained in the United States courts, including judgments predicated upon the civil liability provisions of the United States federal and state securities laws. There is uncertainty as to whether the courts of Bermuda and the countries in which we operate would enforce (a) judgments of United States courts obtained against us or such persons predicated upon the civil liability provisions of the United States federal and state securities laws or (b) in original actions brought in such countries, liabilities against us or such persons predicated upon the United States federal and state securities laws.
Our Bye-laws restrict shareholders from bringing legal action against our officers and directors.
Our Bye-laws contain a broad waiver by our shareholders of any claim or right of action in Bermuda, both individually and on our behalf, against any of our officers or directors. The waiver applies to any action taken or concurred in by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty.
Risks Relating to our Common Stock
Our share price may be adversely affected by sales of unregistered shares or future issuances of our shares.
Time Warner is the largest holder of shares of our Class A common stock, holding 61,407,775 unregistered shares of Class A common stock, one share of Series A preferred stock, 200,000 shares of Series B preferred stock and warrants to acquire 100,926,996 shares of our Class A common stock (the "TW Warrants"). The share of Series A preferred stock is convertible into 11,211,449 shares of Class A common stock and the shares of Series B preferred stock are convertible into shares of Class A common stock at the option of Time Warner (subject to certain exceptions). As of December 31, 2016, the 200,000 shares of Series B preferred stock were convertible into approximately 105.2 million shares of Class A common stock. The TW Warrants are exercisable for shares of Class A common stock until May 2, 2018 at an exercise price of US$ 1.00 per share. Time Warner has registration rights with respect to all its shares of Class A common stock now held or hereafter acquired. Furthermore, there are additional unregistered shares of our Class A common stock outstanding that we may be obligated to register and shares of Class A common stock underlying other warrants that may enter into trading. For additional information on the Series A preferred stock, Series B preferred stock and TW Warrants, see Part II, Item 8, Note 11, "Convertible Redeemable Preferred Shares" and Note 12, "Equity". In October 2016, Time Warner announced it has entered into a definitive merger agreement with AT&T Inc. under which AT&T Inc. will acquire Time Warner.  The merger is subject to approval by Time Warner shareholders and approval by a number of regulatory authorities, including the U.S. Department of Justice. Following a successful completion of such merger, AT&T Inc. will become the beneficial owner of equity securities currently beneficially owned by Time Warner and the successor to rights related to such securities granted to Time Warner.  
We cannot predict what effect, if any, the entry into trading of previously issued unregistered shares of Class A common stock will have on the market price of our shares. We may also issue additional shares of Class A common stock or securities convertible into our equity in the future. If more shares of our Class A common stock (or securities convertible into or exchangeable for shares of our Class A common stock) are issued to Time Warner, the economic interests of current shareholders may be diluted and the price of our shares may be adversely affected.
The interests of Time Warner may conflict with the interests of other investors.
Time Warner is able to exercise voting power in us with respect to 47.0% of our outstanding shares of Class A common stock. As such, Time Warner is in a position to exercise significant influence over the outcome of corporate actions requiring shareholder approval, such as the election of directors or certain transactions. Following the issuance of the TW Warrants, the aggregate economic interest of Time Warner in us is approximately 76.0% (without giving effect to the accretion of the Series B preferred stock after December 31, 2016). Furthermore, Time Warner has the right to appoint one less than the number required to constitute a majority of our board of directors, provided that Time Warner continues to own not less than 40% of the voting power of the Company.
We are also party to an amended investor rights agreement with Time Warner and the other parties thereto under which, among other things, Time Warner was granted a contractual preemptive right (subject to certain exclusions) with respect to issuances of the Company’s equity securities, which permits it to maintain its pro rata economic interest as well as a right to top any offer that would result in a change of control of the Company. Under Bermuda law, there is no takeover code or similar legislation requiring an acquirer of a certain percentage of our Class A common stock to tender for the remaining publically held shares. In addition to being our largest shareholder, Time Warner is our largest secured creditor, as it guarantees 100% of our outstanding senior indebtedness and is the lender under the 2021 Revolving Credit Facility. The 2021 Revolving Credit Facility and the Reimbursement Agreement contain maintenance covenants in respect of interest cover, cash flow cover and total leverage ratios and includes covenants in respect of the incurrence of indebtedness (including refinancing indebtedness), the provision of guarantees, acquisitions and disposal and granting security. As such, Time Warner may be in a position to determine whether to permit transactions, waive defaults or accelerate such indebtedness or take other steps in its capacity as a secured creditor in a manner that might not be consistent with the interests of the holders of our Class A common stock. Furthermore, in certain circumstances, the interests of Time Warner as our largest shareholder could be in conflict with the interests of minority shareholders.

The price of our Class A common stock is likely to remain volatile.
The market price of shares of our Class A common stock may be influenced by many factors, some of which are beyond our control, including but not limited to those described above under “Risks Relating to Our Operations” as well as the following: general economic and business trends, variations in quarterly operating results, license renewals, regulatory developments in our operating countries and the European Union, the condition of the media industry in our operating countries, the volume of trading in shares of our Class A common stock, future issuances of shares of our Class A common stock and investors’ and securities analysts’ perception of us and other companies that investors or securities analysts deem comparable in the television broadcasting industry. In addition, stock markets in general have experienced extreme price and volume fluctuations that have often been unrelated to and disproportionate to the operating performance of broadcasting companies. These broad market and industry factors may materially reduce the market price of shares of our Class A common stock, regardless of our operating performance.
Our business could be negatively impacted as a result of shareholder activism.
On January 17, 2017, TCS Capital Management, LLC ("TCS Capital"), a beneficial owner of more than 12% of our shares, filed an amendment to its Schedule 13D disclosing its opinion that the Company should hire an investment bank to run a process to sell the Company as well as replace current members of the Company's Board of Directors with new directors recommended by TCS Capital. In recent years, shareholder activists, such as TCS Capital, have become involved in numerous public companies. Shareholder activists frequently propose to involve themselves in the governance, strategic direction and operations of the Company. Such proposals may disrupt our business and divert the attention of our management and employees, and any perceived uncertainties as to our future direction resulting from such a situation could result in the loss of potential business opportunities, be exploited by our competitors, cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel and business partners, all of which could adversely affect our business. In addition, actions of activist shareholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
ITEM 1B.    UNRESOLVED STAFF COMMENTS
None.
ITEM 2.    PROPERTIES
We own and lease properties in the countries in which we operate. These facilities are fully utilized for current operations, are in good condition and are adequately equipped for purposes of conducting broadcasting, content production or such other operations as we require. We believe that suitable additional space is available on acceptable terms in the event of an expansion of our businesses. The table below provides a brief description of our significant properties.
LocationPropertyUse
Hamilton, BermudaLeased officeRegistered office, Corporate
Amsterdam, The NetherlandsLeased officeCorporate office, Corporate
Sofia, BulgariaLeased buildingsOffice and studio space (Bulgaria segment)
Zagreb, CroatiaOwned and leased buildingsOffice and studio space (Croatia segment)
Prague, Czech RepublicOwned and leased buildings
Administrative center, Corporate;
Office and studio space (Czech Republic segment)
Bucharest, RomaniaOwned and leased buildingsOffice and studio space (Romania segment)
Bratislava, Slovak RepublicOwned buildingsOffice and studio space (Slovak Republic segment)
Ljubljana, SloveniaOwned and leased buildingsOffice and studio space (Slovenia segment)
For further information on the cash resources that fund these facility-related costs, see Part II, Item 7, III, "Liquidity and Capital Resources."
ITEM 3.    LEGAL PROCEEDINGS
General
We are from time to time party to legal proceedings, arbitrations and regulatory proceedings arising in the normal course of our business operations, including the proceeding described below. We evaluate, on a quarterly basis, developments in such matters and provide accruals for such matters, as appropriate. In making such decisions, we consider the degree of probability of an unfavorable outcome and our ability to make a reasonable estimate of the amount of a loss. An unfavorable outcome in any such proceedings, if material, could have an adverse effect on our business or consolidated financial statements.
In late November and December 2016, CME’s Slovak subsidiary MARKIZA-SLOVAKIA, spol. s.r.o. (“Markiza”) was notified of claims that were filed in June 2016 in a court of first instance in Bratislava, the Slovak Republic to collect amounts allegedly owing under four promissory notes. These four promissory notes were purportedly issued in June 2000 by Pavol Rusko in his personal capacity and were purportedly guaranteed by Markiza under the signature of Mr. Rusko, who was an executive director of Markiza at that time as well as one of its shareholders. The notes purport to be issued in favour of Marian Kocner, a controversial Slovak businessman, and to a former associate of Mr. Kocner, and were supposedly assigned several times, ultimately to Sprava a inkaso zmeniek, s.r.o., a company owned by Mr. Kocner that is the plaintiff in these proceedings. The four notes purport to be in the aggregate amount of approximately EUR 69 million. A court of first instance in Bratislava has suspended proceedings in respect of one of the promissory notes (in the amount of approximately EUR 26 million) because the plaintiff failed to pay court fees. Two of the remaining notes allegedly matured in 2015 and the third in 2016. Despite a random case assignment system at the Bratislava court, the three cases dealing with the other notes have all been assigned to the same judge. We do not believe that any of the promissory notes are authentic and are vigorously defending the claims.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.

PART II
ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Shares of Class A common stock of Central European Media Enterprises Ltd. began trading on the NASDAQ National Market (since renamed the NASDAQ Global Select Market) on October 13, 1994 and began trading on the Prague Stock Exchange on June 27, 2005. On each market, the shares are traded under the ticker symbol "CETV".
On February 6, 2017, the last reported sales price for shares of our Class A common stock was US$ 2.70.
The following table sets forth the high and low prices for shares of our Class A common stock for each quarterly period during the last two fiscal years as reported by NASDAQ.
 2016 2015
 
High
(US$ / Share)
 
Low
(US$ / Share)
 
High
(US$ / Share)
 
Low
(US$ / Share)
Fourth Quarter$2.88
 $2.15
 $2.80
 $1.92
Third Quarter2.48
 2.05
 2.50
 1.84
Second Quarter2.96
 2.03
 2.83
 1.97
First Quarter2.71
 2.17
 3.22
 2.55
At February 6, 2017, there were approximately 57 holders of record (including brokerage firms and other nominees) of shares of Class A common stock.
Under our 2015 Stock Incentive Plan (the "2015 Plan"), 6,000,000 shares of Class A are authorized for issuance in respect of equity awards. In addition, any shares available under our Amended and Restated Stock Incentive Plan (which expired on June 1, 2015), including in respect of any awards that expire, terminate or are forfeited, will be available for awards under the 2015 Plan (see Item 8, Note 16, "Stock-based Compensation"). See Part III, Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" for further information.
DIVIDEND POLICY
We have not declared or paid and have no present intention to declare or pay in the foreseeable future any cash dividends in respect to any class of our shares of common stock.
PURCHASE OF OWN STOCK
We did not purchase any of our own stock in 2016.

PERFORMANCE GRAPH
The following performance graph is a line graph comparing the change in the cumulative total shareholder return of the Class A common stock against the cumulative total return of the NASDAQ Composite Index and the Dow Jones Europe Stock Index between December 31, 2011 and December 31, 2016. The graph below assumes the investment of US$ 100 on December 31, 2011 in our Class A common stock, the NASDAQ Composite and the Dow Jones Europe Stock Index, assuming dividends, if any, are reinvested.
Value of US$ 100 invested at December 31, 2011 as of December 31, 2016:
Central European Media Enterprises Ltd.$39.11
NASDAQ Composite Index$206.63
Dow Jones Europe Stock Index$122.29
ITEM 6.    SELECTED FINANCIAL DATA
Our selected consolidated financial data should be read together with our consolidated financial statements and related notes included in Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
The following tables set forth the selected consolidated financial data for each of the years in the five-year period ended December 31, 2016. The selected consolidated financial data is qualified in its entirety and should be read in conjunction with Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” and Item 8, “Financial Statements and Supplementary Data”. We have derived the consolidated statements of operations and comprehensive income / loss data for the years ended December 31, 2016, 2015 and 2014 and the consolidated balance sheet data as of December 31, 2016 and 2015 from the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The consolidated statements of operations and comprehensive income / loss data for the years ended December 31, 2013 and 2012 and the balance sheet data as of December 31, 2014, 2013 and 2012 were derived from consolidated financial statements that are not included in this Annual Report on Form 10-K.
The consolidated balance sheet data as of December 31, 2015, 2014, 2013 and 2012 has been retrospectively adjusted in connection with our adoption of FASB Accounting Standards Update No. 2015-03 which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction of the carrying amount of that liability. As a result of adopting this guidance our current and non-current assets decreased with a corresponding decrease in our current and non-current liabilities.

 For The Year Ended December 31,
 (US$ 000's, except per share data)
 2016
 2015
 2014
 2013
 2012
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / LOSS DATA:         
Net revenues$638,013
 $605,841
 $680,793
 $633,134
 $705,999
Operating income / (loss)111,589
 94,583
 38,280
 (180,017) (479,789)
Loss from continuing operations(180,597) (102,285) (151,465) (276,434) (535,708)
Loss from discontinued operations, net of tax
 (13,287) (80,431) (5,099) (10,685)
Net loss attributable to CME Ltd.$(180,291) $(114,901) $(227,428) $(277,651) $(535,680)
          
PER SHARE DATA:         
Net loss per common share from:         
Continuing operations attributable to CME Ltd. - Basic and diluted$(1.28) $(0.81) $(1.11) $(2.23) $(6.83)
Discontinued operations attributable to CME Ltd. - Basic and diluted
 (0.09) (0.55) (0.04) (0.13)
Net loss attributable to CME Ltd. - Basic and diluted(1.28) (0.90) (1.66) (2.27) (6.96)
          
Weighted average common shares used in computing per share amounts (000’s):         
Basic and diluted151,017 146,866 146,509
 125,723
 76,919
          
 As at December 31,
 (US$ 000's)
 2016
 2015
 2014
 2013
 2012
   As adjusted
 As adjusted
 As adjusted
 As adjusted
CONSOLIDATED BALANCE SHEET DATA:         
Cash and cash equivalents$43,459
 $61,679
 $34,298
 $102,322
 $136,543
Other current assets296,961
 296,605
 340,330
 421,208
 455,415
Non-current assets1,050,297
 1,082,133
 1,230,200
 1,425,321
 1,561,129
Total assets$1,390,717
 $1,440,417
 $1,604,828
 $1,948,851
 $2,153,087
          
Current liabilities$171,564
 $146,308
 $450,286
 $318,931
 $293,306
Non-current liabilities1,070,786
 974,270
 653,434
 981,029
 1,228,514
Temporary equity254,899
 241,198
 223,926
 207,890
 
CME Ltd. shareholders' (deficit) / equity(107,804) 77,260
 279,794
 440,108
 626,061
Noncontrolling interests1,272
 1,381
 (2,612) 893
 5,206
Total liabilities and equity$1,390,717
 $1,440,417
 $1,604,828
 $1,948,851
 $2,153,087


ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Please refer to page 2 of this Annual Report on Form 10-K for a list of defined terms used herein.
The exchange rates used in this report are as at December 31, 2016, unless otherwise indicated.
I.    Overview
CME Strategy
Our operations comprise a unique collection of television networks across Central and Eastern Europe, each of which enjoys a strong competitive position due to audience share leadership, brand strength, strong local content, and the depth and experience of country management. The reach and affinity we provide advertisers supports our model of pricing inventory at a premium to our competition. We believe these competitive advantages position the company to benefit if forecast economic growth leads to continued growth of the television advertising markets in the countries in which we operate.
We are focused on enhancing the performance of our television networks in each country, which we expect will continue improving operating margins and cash generation over the short- and medium-term. The main elements of our strategy are as follows:
leveraging popular content to maintain or increase our audience share leadership and advertising market shares in all of our operating countries;
driving growth in advertising revenues through our pricing strategies;
increasing carriage fees and subscription revenues to reduce reliance on advertising revenues;
optimizing content costs while safeguarding our brands and competitive strengths; and
maintaining a strict cost discipline by controlling other expenses.
As market leaders with experienced management teams in each country, we believe we are well positioned to identify new challenges in a timely manner and adjust our strategy as new opportunities or threats arise.
We manage our business on a geographical basis with six operating segments: Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic and Slovenia. These operating segments, which are also our reportable segments, reflect how our operating performance is evaluated by our chief operating decision makers, who we have identified as our co-Chief Executive Officers ("co-CEOs"); how our operations are managed by segment managers; and the structure of our internal financial reporting.
Non-GAAP Financial Measures
In this report we refer to several non-GAAP financial measures, including OIBDA, OIBDA margin, free cash flow and unlevered free cash flow. We believe that each of these metrics is useful to investors for the reasons outlined below. Non-GAAP financial measures may not be comparable to similar measures reported by other companies. Non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, US GAAP financial measures.
We evaluate our consolidated results and the performance of our segments based on net revenues and OIBDA. We believe OIBDA is useful to investors because it provides a meaningful representation of our performance, as it excludes certain items that do not impact either our cash flows or the operating results of our operations. OIBDA and unlevered free cash flow are also used as components in determining management bonuses.
OIBDA includes amortization and impairment of program rights and is calculated as operating income / loss before depreciation, amortization of intangible assets and impairments of assets and certain unusual or infrequent items that are not considered by our co-CEOs when evaluating our performance. Stock-based compensation and certain other items are not allocated to our segments for purposes of evaluating their performance and therefore are not included in their respective OIBDA. Our key performance measure of the efficiency of our consolidated operations and our segments is OIBDA margin. We define OIBDA margin as the ratio of OIBDA to net revenues.
We have previously used free cash flow as a measure of the ability of our operations to generate cash. We define free cash flow as net cash generated from continuing operating activities less purchases of property, plant and equipment, net of disposals of property, plant and equipment and excluding the cash impact of certain unusual or infrequent items that are not included in costs charged in arriving at OIBDA because they are not considered by our co-CEOs when evaluating performance. Following the refinancing transaction completed in April 2016, the amount of interest and related Guarantee Fees on our outstanding indebtedness that is paid in cash has increased. In addition to this obligation to pay more interest and related Guarantee Fees in cash, we expect to use cash generated by the business to pay Guarantee Fees that are payable in kind, including accrued Guarantee Fees. These cash payments are all reflected in free cash flow; accordingly we believe unlevered free cash flow, defined as free cash flow before cash payments for interest and Guarantee Fees, better illustrates the cash generated by our operations when comparing periods.
For additional information regarding our business segments, including a reconciliation of OIBDA to US GAAP financial measures, see Item 8, Note 19, "Segment Data". For a reconciliation of free cash flow and unlevered free cash flow to a US GAAP financial measure, see "Free Cash Flow and Unlevered Free Cash Flow" below.
While our reporting currency is the dollar, our consolidated revenues and costs are divided across a range of European currencies and CME Ltd.’s function currency is the Euro. Given the significant movement of the currencies in the markets in which we operate against the dollar, we believe that it is useful to provide percentage movements based on actual (“% Act”) percentage movements, which includes the effect of foreign exchange, as well as like-for-like percentage movements (“% Lfl”). The like-for-like percentage movement references reflect the impact of applying the current period average exchange rates to the prior period revenues and costs. Since the difference between like-for-like and actual percentage movements is solely the impact of movements in foreign exchange rates, our discussion in the following analysis is focused on constant currency percentage movements in order to highlight those factors influencing operational performance. The incremental impact of foreign exchange rates is presented in the tables preceding such analysis.


Executive Summary
Our operational and financial results in 2016 reflect significant progress in executing our strategy and position the company for continued growth in 2017 and beyond. We maintained our audience share leadership and television advertising market shares by leveraging our competitive advantages and making targeted investments in local programming in certain markets amid heavy competition. Building on our momentum from recent years, overall growth in our television advertising markets and our efforts to increase non-advertising based revenues, combined with our success in keeping overall costs broadly flat, contributed to a further improvement in profitability. As a result, our net leverage ratio (as defined in the Reimbursement Agreement) at the end of 2016 was less than seven times, which is down from eleven times at the start of 2015. We expect the net leverage ratio to decrease further due to sustained improvements in OIBDA, as well as a lower level of net debt from cash generated by the business, which will be used, together with expected proceeds from warrant exercises, to substantially repay our nearest debt maturity. Following the refinancing transaction completed in April 2016, further specified decreases in our net leverage ratio will automatically lower the cost of borrowing on approximately half of our debt, and in turn support further improvement in our free cash flow through lower Guarantee Fee obligations.
The following tables provide a summary of our consolidated results for the years ended December 31, 2016, 2015 and 2014:
 For The Year Ended December 31, (US$ 000's)
     Movement     Movement
 2016
 2015
 % Act
 % Lfl
 2015
 2014
 % Act
 % Lfl
Net revenues$638,013
 $605,841
 5.3% 5.4% $605,841
 $680,793
 (11.0)% 5.9%
Operating income111,589
 94,583
 18.0% 17.3% 94,583
 38,280
 147.1 % 198.2%
Operating margin17.5% 15.6% 1.9 p.p. 1.8 p.p. 15.6% 5.6% 10.0 p.p. 10.1 p.p.
OIBDA$150,049
 $122,815
 22.2% 21.4% $122,815
 $95,446
 28.7 % 52.9%
OIBDA margin23.5% 20.3% 3.2 p.p. 3.1 p.p. 20.3% 14.0% 6.3 p.p. 6.2 p.p.
Our consolidated net revenues increased 5% at actual and constant exchange rates in 2016 compared to 2015 due to an increase in both television advertising revenues and carriage fee and subscription revenues. Television advertising spending in the markets of the countries in which we operate grew an estimated 6% at constant rates in 2016 compared to 2015. Our consolidated television advertising revenues grew 5% at actual and constant rates driven primarily by improvement in four out of six countries in which we operate, including our three largest markets, the Czech Republic, Romania and the Slovak Republic. Carriage fees and subscription revenues increased 8% at actual rates and 9% at constant rates due primarily to growth in the number of subscribers reported by cable, satellite and Internet protocol television ("IPTV") operators as well as high definition channels and new channels available exclusively on these platforms.
On an actual and constant currency basis, costs charged in arriving at OIBDA increased 1% in 2016 compared to 2015. We controlled costs overall, while spending more on popular local content, by offsetting this investment with savings in foreign fiction as well as reducing other operating and overhead costs.
Our focus on controlling costs while improving revenues led to another year of OIBDA margin expansion, which increased to 24% in 2016 from 20% in 2015. We expect the trend of revenues growing at a faster pace than costs will continue for the next several years, leading to further margin expansion.
The improvement in operating income in 2016 compared to 2015 primarily reflects the year-on-year increase in OIBDA, excluding the US$ 12.0 million benefit in operating income from the reversal of charges in 2015 related to tax audits in Romania, which were accrued in the fourth quarter of 2014 and in the first quarter of 2015 and fully released in the third quarter of 2015. Since these charges were not included in OIBDA in 2014, our reversal of these charges during 2015 was similarly excluded from OIBDA.
We remained audience share leaders during 2016 in all of the countries in which we operate and improved our relative position in all day audience share in four countries. These audience shares give us a strong offering for advertisers, and we believe we continue to provide the most efficient medium to reach consumers.
The progress made during 2016 and the continued improvement expected in the coming years positions the company for even higher profitability of our operations. Looking ahead to 2017 and beyond:
Analysts estimate that GDP growth in the countries in which we operate will continue to outpace that of the developed markets (as defined below), and projections from the International Monetary Fund forecast Romania to have the highest GDP growth rate in the European Union again in 2017. We anticipate the television advertising market in each of our countries will grow in 2017.
The increase in demand we have seen for television advertising in 2016 is leading to higher list prices in our sales policies for 2017. This is particularly true in Romania and the Slovak Republic, as both our operations and the respective markets were largely sold-out in 2016. Average realized prices for the year will ultimately depend on a number of factors, including the timing of commitments made for spending in 2017, the portion of those commitments that is prepaid, the volume of those commitments relative to 2016, and the seasonality of advertisements actually placed in 2017.
We expect non-advertising based carriage fees and subscription revenues to increase further. From January 2017, our channels in both the Slovak Republic and Slovenia have been available exclusively on cable, satellite and IPTV platforms. This may initially result in lower audience shares in these countries, which could negatively impact our television advertising revenues in 2017. However, we expect an increase in carriage fees and subscription revenues in 2017, as well as a significant decrease in transmission costs, which we believe will more than offset any negative impact on television advertising revenues and improve margins in each country. We also expect increases across our markets in the number of subscribers to cable, satellite and IPTV platforms in our markets increased during 2015, leading to growth in our carriage fees and subscription revenues, and we expect that trend to continue, which would benefit profitability in 2016. Carriage feesall countries.
Local content continues to attract larger audiences and subscription revenues are now approximately 12%competition for audience share remains significant. As a result, we continually refine our program grids and intend to maintain targeted investments in local content in a cost effective manner. As part of consolidated net revenues, and approximately 25% of net revenues in Bulgaria and Romania, where pay television enjoys the highest penetration. Additionally, the launch of Nova Sport 2this strategy, we recently rebranded our niche channels in the Czech Republic during 2015to bring them under the umbrella of our flagship brand, NOVA. We intend to expand our offering of local content on some of these smaller channels, which historically have broadcast more foreign content, to make them more attractive to viewers. Although these investments will cause our content costs to increase in 2017, we expect much of this to be offset by other cost savings.

Management remains focused on long-term value creation and in the near term we should continue to benefit from specified decreases in our net leverage ratio from less than seven times at the end of 2016, which automatically reduces our cost of borrowing as well as our sensitivity to external shocks, and adds to our increasing cash flow generation. We anticipate using cash generated by the business, together with expected proceeds from warrant exercises and savings from lower debt service obligations, to substantially repay our nearest debt maturity in November 2018. We intend to commence repayment of such maturity beginning November 2017. To that end, we expect to pay all Guarantee Fees related to the 2018 Euro Term Loan in cash as they come due. We anticipate paying Guarantee Fees related to the 2019 Euro Term Loan and 2021 Euro Term Loan in kind, where we have the option.
In recent years, our liabilities for income taxes have not been significant. However, as the operating companies in each jurisdiction return to generating profits and previous net operating losses are utilized, the amount of cash paid for income taxes is expected to improve carriage fees and subscription revenues in that segment since the channel is available only on cable, satellite and IPTV platforms. During February 2016 we also launched Nova International and Markiza International, which will allow us to better monetize our content.increase.
The entry of an English language version of Netflix at the beginning of 2016 into all the countries in which we operate has raised the profile of allCompetition from subscription video on demand ("SVOD") platforms and wemay increase as Amazon Prime has recently joined Netflix in providing a primarily English language version of their service to viewers in our countries. We believe this will benefit each market in terms of conditioning consumers to pay for content they watch online. SimilarHowever, similar to television-viewingtelevision viewing trends in our countries, we expect local content to have better success in attracting SVOD audiences. Therefore, Voyo, our SVOD product launched in 2011, Voyo, is wellbetter positioned to capitalize on any changes in viewing habits since the local productions that have made our television channels market leaders are also available in local language to Voyo subscribers. We will continue to monitor developments in the SVOD market for profitable investment strategies, including opportunities to offer Voyo with our linear channels for cable, satellite and IPTV operators, as well as build-out our offering of advertising video on demand products and other offerings for advertising online, supported by our investments in local content.
While some analysts forecast spending for online advertising to overtake television advertising in the United States during 2017, we don't expect to see a similar dynamic in our markets in the short- to medium-term due to various factors, including lower rates of broadband penetration, the type of products advertised and the broad reach that television provides in the desired target audiences.
Foreign exchange rates may again have a significant impact on our results when reported in dollars. Due to inflation in the Czech Republic hitting 2% in December 2016 and increasing inflation expectations for 2017, the Czech National Bank is expected to begin withdrawing its floor related to the EUR/CZK exchange rate during 2017, subject to fiscal policies of developed countries and monetary policies of other central banks. On its own, this is expected to cause the Czech Koruna to strengthen relative to the dollar and therefore improve the results of our largest operation in dollar terms. Fluctuations in exchange rates for our currencies will otherwise not have a significant impact on either our day-to-day operations because revenues and operating expenses are generally denominated in local currencies or on our net leverage ratio. Following completion of the refinancing transactions in April 2016, the principal amount of our outstanding senior debt is denominated in Euros.
Free Cash Flow and Unlevered Free Cash Flow
 For The Year Ended December 31, (US$ 000's)
 2016
 2015
 Movement
 2015
 2014
 Movement
Net cash generated from / (used in) operating activities$33,917
 $85,877
 (60.5)% $85,877
 $(65,242) 
NM (1)

Capital expenditures, net(29,356) (30,426) 3.5 % (30,426) (28,548) (6.6)%
Free cash flow4,561
 55,451
 (91.8)% 55,451
 (93,790) 159.1 %
Cash paid for interest (including mandatory cash-pay Guarantee Fees)53,982
 18,457
 192.5 % 18,457
 76,154
 (75.8)%
Cash paid for Guarantee Fees that may be paid in kind37,440
 
 
NM (1)

 
 
  %
Unlevered free cash flow$95,983
 $73,908
 29.9 % $73,908
 $(17,636) 
NM (1)

(1) Number is not meaningful.
 December 31, 2016
 December 31, 2015
 Movement
Cash and cash equivalents$43,459
 $61,679
 (29.5)%
Our unlevered free cash flow increased 30% to US$ 96.0 million in 2016 from US$ 73.9 million in 2015, due primarily to the increase in OIBDA. Free cash flow in 2016 decreased 92% compared to 2015 because we paid more interest in cash and elected to pay a total of US$ 37.4 million of Guarantee Fees in cash, including US$ 27.5 million of Guarantee Fees previously paid in kind. We ended the year with cash of US$ 43.5 million and access to another US$ 115.0 million of liquidity provided by the 2021 Revolving Credit Facility, which remains undrawn.
Capital Structure and Allocation
The refinancing transaction completed in April 2016 significantly reduced the company's cost of borrowing and improved the maturity profile of our debt. We anticipate using increased cash generated by the business, along with expected proceeds from warrant exercises and savings from lower debt service obligations to substantially repay our nearest debt maturity in November 2018. We intend to commence repayment of such maturity beginning November 2017.
As part of the transaction completed on April 8, 2016:
The new EUR 468.8 million 2021 Euro Term Loan was used, together with corporate cash, to repay the US$ 502.5 million aggregate principal amount of the 2017 PIK Notes and repay the US$ 38.2 million 2017 Term Loan, as well as accrued and unpaid interest.
The maturity date of the existing EUR 250.8 million term loan was extended by one year so the Company’s nearest debt maturity is November 2018.
The maturity date of our existing US$ 115.0 million revolving credit facility was extended from 2017 to 2021, with access to US$ 50.0 million of liquidity from 2018.

Following the transaction:
All outstanding long-term debt is denominated in Euros.
The all-in rate applicable to the 2021 Euro Term Loan and associated guarantee by Time Warner currently stands at 9.0%, an improvement of 600 basis points on the debt it replaced, and can go as low as 7.0% depending on our net leverage ratio, automatically decreasing the cost of borrowing as the Company’s net leverage ratio improves.
The cost of the 2021 Revolving Credit Facility, which is currently undrawn, similarly ranges from approximately 9.0% to 7.0%, depending on our net leverage ratio.
We recorded a non-cash loss on extinguishment of debt amounting to US$ 150.2 million in the second quarter of 2016.
With the flexibility afforded to us from this and previous financing transactions, we continue to look at ways to improve our capital structure. We expect our net leverage ratio, which was less than seven times at the end of 2016, to decrease in the coming years.
Market Information
After adjusting for inflation, we estimate that overall real GDP in the countries in which we operate grew on average more than 3% in 2016, almost double the growth rate of the developed markets, which grew at less than 2%. In this respect, "developed markets" refers to a combined group of 11 countries from within the European Union, predominantly from Western Europe, and the United States. The economies of the countries in which we operate continue to depend on exports as a driver of economic growth. However, domestic demand is becoming an increasingly large component of GDP, especially in our largest markets, thereby slightly reducing their sensitivity to external shocks and contributing to higher levels of macro-economic growth in recent years. It has been reported that growth in real private consumption has been driven by higher retail sales, which have been supported by various factors in different countries. These range from fiscal stimulus due to lower VAT rates in Romania to wage growth in the Czech Republic resulting in part from a historically low rate of unemployment in the country that is among the lowest in the European Union.
In 2017, analysts estimate that GDP growth in the countries in which we operate will continue to outpace that of the developed markets, with projections from the International Monetary Fund forecasting Romania to have the highest growth rate in Europe for a second year in a row. Retail sales and consumer confidence are expected to continue as a driver of growth in real private consumption, and in particular for Romania where lower income tax rates in 2017 should result in higher disposable income. We anticipate the macro-economic backdrop will support television advertising market growth in each of our countries in 2017.
Over the long-term, we believe that the convergence of GDP per capita in our markets with that of the developed markets will continue as economic conditions improve and sustained periods of higher growth return. The higher rates of economic growth compared to the developed markets should result in even higher rates of growth in advertising spending, which is driven by a number of factors:
Per capita nominal GDP at purchasing power parity in our markets remains approximately half that of the developed markets;
Total advertising spend per capita remains less than 10% of levels in the developed markets;
The ratio of total advertising spend per capita to nominal GDP per capita, also known as advertising intensity, was approximately a third that of the developed markets in 2016; and
In the markets in which we operate, basic products such as food, beverages and household cleaning supplies comprise the main source of advertising revenues, whereas in the developed markets, the marketing of premium products, including finance, automotive, entertainment and travel products, makes up the majority of current television advertising spending.
Since television was commercialized in our markets at the same time as other forms of media, television advertising generally accounts for a higher proportion of total advertising spend than in the developed markets, where newspapers, magazines and radio were established as advertising media well before the advent of television. And contrary to trends in developed markets, television advertising spend as a percentage of total advertising spend has grown in our markets during recent years, and was estimated to be 54% in 2016 compared to 40% in the developed markets.
We believe that television advertising will continue to hold its share of total advertising spend in our markets because of its greater reach and effective measurement capabilities, which makes this medium more appealing to advertisers compared to print, radio and outdoor advertising. Television is especially attractive to advertisers because it delivers high reach at low cost compared to other forms of media. More recently, internet advertising has grown at the expense of print and outdoor advertising, and we offer additional advertising opportunities when clients seek to complement their television campaigns with campaigns online. While spending for digital advertising is expected to overtake spending on television in the near-term in the developed markets, we believe the strength of television as an advertising medium in our markets will continue for the forseeable future due to the reach it provides as well as lower rates of broadband penetration in the countries in which we operate.

The following table sets out our estimates of television advertising spending net of discounts by country (in US$ millions) for the years set forth below:
Country2016
 2015
 2014
Bulgaria$87
 $87
 $90
Croatia91
 89
 86
Czech Republic286
 275
 265
Romania*216
 191
 177
Slovak Republic134
 124
 107
Slovenia64
 60
 57
Total CME Markets$878
 $826
 $782
Growth rate6% 6% 3%
* Romania market excludes Moldova.
Source: CME estimates, using the 2016 average exchange rate for all periods presented above.
On a constant currency basis, we estimate television advertising spending in our markets increased by 6% in 2016 compared to the previous year. In Bulgaria the market was flat as heavy competition for market share continued to negatively impact average market prices, offsetting an increase in the volume of gross ratings points ("GRPs") sold. The market growth of 2% in Croatia was due to an increase in both average market prices and GRPs sold. In the Czech Republic sell-out rates increased in 2016 as advertisers placed more advertising than in 2015, but average prices were lower due to significant discounting by the competition to sell their incremental inventory so the market increased an estimated 4%. In Romania, the market maintained significant growth in the last nine months of the year and was largely sold-out during that period, so the combination of an increase in GRPs sold and higher average prices resulted in 13% growth in 2016. In the Slovak Republic, estimated market growth of 8% was driven by higher prices. Demand in the Slovak Republic in the first half of the year was also influenced by an increase in spending on informational and political campaigns, but this spending declined year-on-year in the third quarter and fourth quarters so fewer GRPs were sold in 2016 since this spending started in late 2015. In Slovenia, a more positive macro-economic environment has encouraged advertisers to increase investments resulting in an estimated 7% market growth driven by higher prices.
Segment Performance
 NET REVENUES
 For The Year Ended December 31, (US$ 000's)
     Movement     Movement
 2016
 2015
 % Act
 % Lfl
 2015
 2014
 % Act
 % Lfl
Bulgaria$72,651
 $73,090
 (0.6)% (0.3)% $73,090
 $87,078
 (16.1)% 0.2%
Croatia55,607
 55,912
 (0.5)% (1.6)% 55,912
 62,026
 (9.9)% 7.8%
Czech Republic190,372
 182,636
 4.2 % 3.5 % 182,636
 202,779
 (9.9)% 6.3%
Romania172,951
 157,578
 9.8 % 11.3 % 157,578
 178,614
 (11.8)% 5.4%
Slovak Republic90,549
 84,434
 7.2 % 7.5 % 84,434
 90,556
 (6.8)% 11.0%
Slovenia56,912
 54,233
 4.9 % 5.2 % 54,233
 61,370
 (11.6)% 5.5%
Intersegment revenues(1,029) (2,042) 
NM (1)

 
NM (1)

 (2,042) (1,630) 
NM (1)

 
NM (1)

Total Net Revenues$638,013
 $605,841
 5.3 % 5.4 % $605,841
 $680,793
 (11.0)% 5.9%
(1) Number is not meaningful.

 OIBDA
 For The Year Ended December 31, (US$ 000's)
     Movement     Movement
 2016
 2015
 % Act
 % Lfl
 2015
 2014
 % Act
 % Lfl
Bulgaria$12,242
 $15,479
 (20.9)% (20.7)% $15,479
 $9,367
 65.3% 96.1 %
Croatia8,578
 7,880
 8.9 % 5.6 % 7,880
 7,835
 0.6% 21.9 %
Czech Republic77,018
 71,697
 7.4 % 6.2 % 71,697
 61,964
 15.7% 35.1 %
Romania62,016
 41,176
 50.6 % 51.7 % 41,176
 37,259
 10.5% 31.9 %
Slovak Republic15,947
 10,585
 50.7 % 47.8 % 10,585
 4,586
 130.8% 164.5 %
Slovenia4,801
 6,057
 (20.7)% (20.6)% 6,057
 5,331
 13.6% 33.6 %
Eliminations2
 (229) 
NM (1)

 
NM (1)

 (229) (16) 
NM (1)

 
NM (1)

Total operating segments180,604
 152,645

18.3 %
17.7 %
152,645

126,326

20.8%
42.5 %
Corporate(30,555) (29,830) (2.4)% (2.4)% (29,830) (30,880) 3.4% (11.4)%
Total OIBDA$150,049
 $122,815
 22.2 % 21.4 % $122,815
 $95,446
 28.7% 52.9 %
(1) Number is not meaningful.

Bulgaria
 For the Year Ended December 31, (US$ 000's)
     Movement     Movement
 2016
 2015
 % Act
 % Lfl
 2015
 2014
 % Act
 % Lfl
Television advertising$49,111
 $50,717
 (3.2)% (3.0)% $50,717
 $61,464
 (17.5)% (1.6)%
Carriage fees and subscriptions18,703
 17,853
 4.8 % 5.3 % 17,853
 19,808
 (9.9)% 7.8 %
Other4,837
 4,520
 7.0 % 7.3 % 4,520
 5,806
 (22.1)% (6.9)%
Net revenues72,651
 73,090
 (0.6)% (0.3)% 73,090
 87,078
 (16.1)% 0.2 %
Costs charged in arriving at OIBDA60,409
 57,611
 4.9 % 5.2 % 57,611
 77,711
 (25.9)% (11.4)%
OIBDA$12,242
 $15,479
 (20.9)% (20.7)% $15,479
 $9,367
 65.3 % 96.1 %
                
OIBDA margin16.9% 21.2% (4.3) p.p.
 (4.3) p.p.
 21.2% 10.8% 10.4 p.p.
 10.4 p.p.
The television advertising market in Bulgaria was estimated to be the same size at constant rates in 2016 as it was in 2015.
Television advertising revenues declined slightly in 2016 compared to 2015 as significant competition for market share has flooded the market with inexpensive inventory, which continues to negatively impact our average prices and this has more than offset an increase in the volume of our GRPs sold. Carriage fees and subscription revenues increased because the number of cable, satellite and IPTV subscribers has grown during the course of the year and a distribution agreement was renewed at higher prices during the third quarter.
Television advertising revenues decreased at constant rates in 2015 compared to 2014 primarily due to spending on election campaigns in 2014, and also reflected some reduction in budgets from certain advertisers in 2015. The lack of spending on election campaigns in 2015 impacted the market more than it did our results, therefore excluding spending on election campaigns, our television advertising revenues increased almost 1% year-on-year due to an increase in GRPs sold, which more than offset lower average prices. The decrease in television advertising revenues during 2015 was offset by an increase in carriage fees and subscription revenues on a constant currency basis primarily due to growth in the number of cable, satellite and IPTV subscribers.
Costs charged in arriving at OIBDA increased at constant rates in 2016 compared to 2015 due primarily to a US$ 3.4 million bad debt charge related to our decision to cease cooperation with one agency during the fourth quarter of 2016 and instead started working directly with the clients that agency represented. We replaced the segment manager in December 2016 and continue to seek to recover the uncollected receivables. Content costs decreased less than 4% at constant rates, which was driven by savings in foreign acquired programming that more than offset a slight increase in sports rights.
On a constant currency basis, costs decreased significantly in 2015 compared to 2014 primarily due to lower bad debt expense, restructuring charges incurred during 2014 that were not repeated in 2015, and lower transmission costs, as two of our niche channels were available exclusively on cable and satellite platforms starting in 2015.



Croatia
 For the Year Ended December 31, (US$ 000's)
     Movement     Movement
 2016
 2015
 % Act
 % Lfl
 2015
 2014
 % Act
 % Lfl
Television advertising$49,096
 $49,616
 (1.0)% (2.2)% $49,616
 $56,260
 (11.8)% 5.5%
Carriage fees and subscriptions2,561
 2,331
 9.9 % 9.2 % 2,331
 1,993
 17.0 % 39.8%
Other3,950
 3,965
 (0.4)% (0.9)% 3,965
 3,773
 5.1 % 25.7%
Net revenues55,607
 55,912
 (0.5)% (1.6)% 55,912
 62,026
 (9.9)% 7.8%
Costs charged in arriving at OIBDA47,029
 48,032
 (2.1)% (2.8)% 48,032
 54,191
 (11.4)% 5.8%
OIBDA$8,578
 $7,880
 8.9 % 5.6 % $7,880
 $7,835
 0.6 % 21.9%
                
OIBDA margin15.4% 14.1% 1.3 p.p.
 1.0 p.p.
 14.1% 12.6% 1.5 p.p.
 1.6 p.p.
The television advertising market in Croatia increased an estimated 2% at constant rates in 2016 compared to 2015.
Our television advertising revenues decreased at constant rates in 2016 as we sold a lower volume of GRPs compared to 2015, albeit at a higher average price. There was also a decrease in sponsorship revenues.
The increase in television advertising revenues at constant rates in 2015 compared to 2014 was driven primarily by an increase in average prices due to advertisers spending more since the country exited recession in the second quarter of 2015.
Costs charged in arriving at OIBDA in 2016 decreased on a constant currency basis compared to 2015 due to a 1% decrease in content costs, as savings in the costs related to foreign acquired content more than offset additional local entertainment in the schedule compared to 2015. There was also a decrease in non-programming costs related to the reversal of a tax provision in 2016, which is not expected to repeat in future periods.
On a constant currency basis, costs increased in 2015 compared to 2014 due to an increase in content costs resulting from additional entertainment formats in the fall schedule and other targeted investments made to address an increase in competition for audience share.


Czech Republic
 For the Year Ended December 31, (US$ 000's)
     Movement     Movement
 2016
 2015
 % Act
 % Lfl
 2015
 2014
 % Act
 % Lfl
Television advertising$172,392
 $166,158
 3.8 % 3.0 % $166,158
 $184,369
 (9.9)% 6.3 %
Carriage fees and subscriptions10,325
 7,176
 43.9 % 43.0 % 7,176
 7,679
 (6.6)% 11.1 %
Other7,655
 9,302
 (17.7)% (18.1)% 9,302
 10,731
 (13.3)% 2.9 %
Net revenues190,372
 182,636
 4.2 % 3.5 % 182,636
 202,779
 (9.9)% 6.3 %
Costs charged in arriving at OIBDA113,354
 110,939
 2.2 % 1.7 % 110,939
 140,815
 (21.2)% (6.6)%
OIBDA$77,018
 $71,697
 7.4 % 6.2 % $71,697
 $61,964
 15.7 % 35.1 %
                
OIBDA margin40.5% 39.3% 1.2 p.p.
 1.1 p.p.
 39.3% 30.6% 8.7 p.p.
 8.4 p.p.
(1) Number is not meaningful.
The television advertising market in the Czech Republic increased an estimated 4% at constant rates in 2016 compared to 2015.
Advertisers bought more GRPs in 2016 resulting in higher television advertising revenues compared to 2015, however our average price for advertising was lower due to significant discounting by the competition to sell incremental inventory provided by channels they launched late in 2015, which partially offset the additional volumes sold. Carriage fees and subscription revenues increased due to high definition versions of our channels that were available exclusively on cable and satellite platforms for the entire year, as well as the contribution of NOVA SPORT 2, launched in September 2015, and the launch of news applicationsNOVA INTERNATIONAL during the first quarter of 2016.
Television advertising revenues increased on a constant currency basis in each country.2015 compared to 2014 due primarily to an increase in GRPs sold. Our relative pricing also strengthened. Carriage fees and subscription revenues also increased on a constant currency basis during 2015, as high definition versions of our channels were included in most cable and satellite platforms during the course of the year and also due to the launch of NOVA SPORT 2.
Competition for audience share remains significant. DuringCosts charged in arriving at OIBDA in 2016 increased slightly on a constant currency basis compared to 2015 due to an increase in content costs. Additional spending to introduce several entertainment formats in the program grid during 2016, including Your Face Sounds Familiar, was mostly offset by savings in local fiction, foreign acquired programming, and other non-programming costs.
We recently rebranded our niche channels in the Czech Republic to bring them under the umbrella of our flagship brand, NOVA, and will expand our offering of local content on some of these smaller channels, which historically have broadcast more foreign content, to make them more attractive to viewers. Although these investments will cause our content costs to increase in 2017, we made several targetedexpect much of this to be offset by other overall cost savings.
On a constant currency basis, costs decreased in 2015 compared to 2014 as a result of a 9% decrease in content costs due to more efficient own production, better use of the program library, and broadcasting more cost effective formats. There were also restructuring charges incurred in 2014 that were not repeated in 2015, which also decreased personnel costs in 2015. These savings more than offset some additional investments in local productions.


Romania
 For the Year Ended December 31, (US$ 000's)
     Movement     Movement
 2016
 2015
 % Act
 % Lfl
 2015
 2014
 % Act
 % Lfl
Television advertising$128,814
 $113,460
 13.5 % 14.9 % $113,460
 $125,736
 (9.8)% 7.7 %
Carriage fees and subscriptions40,202
 40,292
 (0.2)% 1.5 % 40,292
 45,851
 (12.1)% 5.3 %
Other3,935
 3,826
 2.8 % 4.2 % 3,826
 7,027
 (45.6)% (34.9)%
Net revenues172,951
 157,578
 9.8 % 11.3 % 157,578
 178,614
 (11.8)% 5.4 %
Costs charged in arriving at OIBDA110,935
 116,402
 (4.7)% (3.2)% 116,402
 141,355
 (17.7)% (1.6)%
OIBDA$62,016
 $41,176
 50.6 % 51.7 % $41,176
 $37,259
 10.5 % 31.9 %
                
OIBDA margin35.9% 26.1% 9.8 p.p.
 9.6 p.p.
 26.1% 20.9% 5.2 p.p.
 5.2 p.p.

The television advertising market in Romania increased an estimated 13% at constant rates in 2016 compared to 2015.
A fiscal stimulus is believed to have fueled improved consumer confidence and spending, which helped increase demand for advertising on television during the course of 2016. We fully monetized additional inventory generated by our main channel compared to the prior year, which led to a higher sell-out rate in 2016. Contributing to this was the broadcasting of UEFA European Championship matches in the second and third quarters. Since we sold more GRPs at significantly higher prices, our television advertising revenues increased during the year. Carriage fees and subscription revenues grew slightly on a constant currency basis due to an increase in the number of cable and satellite subscribers.
Our television advertising revenues increased on a constant currency basis in 2015 compared to 2014 due to an increase in GRPs sold. Net revenues during 2015 also benefited from an increase in carriage fees and subscription revenues due to an increase in the number of subscribers and improved prices from certain time slotscontracts that only took effect during the first quarter of 2014.
Costs charged in arriving at OIBDA in 2016 decreased at constant rates compared to 2015. Non-programming costs decreased, primarily as a result of lower bad debts and geographiesprofessional fees, savings from restructuring efforts, and lower transmission costs. This more than offset an increase in content costs as we invested more in the schedule to combatgenerate additional inventory, which included the costs associated with broadcasting UEFA European Championship matches.
On a constant currency basis, costs decreased in 2015 compared to 2014 due to a decrease in content costs from fewer hours of foreign programming in the schedule and a reduction in the cost of abandoned development projects, which more than offset an increase in the number of hours of local programming during 2015 compared to 2014. There were also fewer restructuring charges in 2015 than in 2014.



Slovak Republic
 For the Year Ended December 31, (US$ 000's)
     Movement     Movement
 2016
 2015
 % Act
 % Lfl
 2015
 2014
 % Act
 % Lfl
Television advertising$84,779
 $79,135
 7.1 % 7.4 % $79,135
 $85,355
 (7.3)% 10.3%
Carriage fees and subscriptions2,101
 1,324
 58.7 % 59.0 % 1,324
 980
 35.1 % 61.9%
Other3,669
 3,975
 (7.7)% (7.5)% 3,975
 4,221
 (5.8)% 13.0%
Net revenues90,549
 84,434
 7.2 % 7.5 % 84,434
 90,556
 (6.8)% 11.0%
Costs charged in arriving at OIBDA74,602
 73,849
 1.0 % 1.6 % 73,849
 85,970
 (14.1)% 2.5%
OIBDA$15,947
 $10,585
 50.7 % 47.8 % $10,585
 $4,586
 130.8 % 164.5%
                
OIBDA margin17.6% 12.5% 5.1 p.p.
 4.8 p.p.
 12.5% 5.1% 7.4 p.p.
 7.2 p.p.
The television advertising market in the Slovak Republic increased an estimated 8% at constant rates in 2016 compared to 2015.
Our television advertising revenues grew in 2016 compared to 2015 due primarily to higher prices, reflecting strong demand for advertising on television while the market remained largely sold-out. Spending on informational and political campaigns during the first half of 2016 began to decline in the third quarter and due to the level of this competition, offsetting this additional spending that began in the second half of 2015, fewer GRPs were sold in 2016 compared to 2015, which reduced the benefit of the increase in prices. Carriage fees and subscription revenues increased in 2016 as we entered into new agreements with a number of carriers and launched MARKIZA INTERNATIONAL during the first quarter of 2016.
Television advertising revenues grew on a constant currency basis in 2015 compared to 2014 due to higher prices and an increase in GRPs sold. The second half of 2015 also included an increase in spending on informational campaigns by the public sector.
From January 1, 2017 our channels in the Slovak Republic have been exclusively available on cable, satellite and IPTV platforms following our decision not to renew our contract for the terrestrial distribution of our channels there. This may initially result in lower audience shares, which could negatively impact our television advertising revenues in 2017 given our elevated sell-out rate. However, we expect a significant increase in carriage fees and subscription revenues in 2017, as well as a significant decrease in transmission costs, which we believe will more than offset any negative impact on television advertising revenues and contribute to higher margins for the segment.
Costs charged in arriving at OIBDA in 2016 increased slightly compared to 2015 due to increases in various non-programming costs. Content costs were flat year-on-year as investments in local content were offset by savings from foreign acquired content. We remain committedprogramming.
On a constant currency basis, costs increased in 2015 compared to 2014 due to an increase in the pillarsquality and number of our programming strategy,hours of own production following increased competition for audience share which include news, local fiction,was only partially offset by savings from lower transmission and local reality and entertainment, and will invest on a targeted basis to improve our competitive position when we believe it will benefit the reach that we are able to provide to ourmarketing costs.


Slovenia
 For the Year Ended December 31, (US$ 000's)
     Movement     Movement
 2016
 2015
 % Act
 % Lfl
 2015
 2014
 % Act
 % Lfl
Television advertising$48,408
 $46,412
 4.3 % 4.5 % $46,412
 $52,417
 (11.5)% 5.8 %
Carriage fees and subscriptions4,714
 4,082
 15.5 % 16.0 % 4,082
 4,176
 (2.3)% 16.9 %
Other3,790
 3,739
 1.4 % 1.6 % 3,739
 4,777
 (21.7)% (7.1)%
Net revenues56,912
 54,233
 4.9 % 5.2 % 54,233
 61,370
 (11.6)% 5.5 %
Costs charged in arriving at OIBDA52,111
 48,176
 8.2 % 8.4 % 48,176
 56,039
 (14.0)% 2.8 %
OIBDA$4,801
 $6,057
 (20.7)% (20.6)% $6,057
 $5,331
 13.6 % 33.6 %
                
OIBDA margin8.4% 11.2% (2.8) p.p.
 (2.8) p.p.
 11.2% 8.7% 2.5 p.p.
 2.4 p.p.
The television advertising clients. We have demonstratedmarket in Slovenia increased an ability to make incremental investments without increasing costs overall. We believe our focus on better monetization of our broadcast assets while maintaining a strict cost discipline should result in revenues growing at a faster pace than costsestimated 7% at constant rates and lead to continued margin expansion in 2016 compared to 2015.
Television advertising revenue increased during 2016 compared to 2015 as a result of higher average prices and overa slight increase in GRPs sold as advertisers invested more in their campaigns. Carriage fees and subscription revenues increased due to an increase in the next fivemonthly price for our Voyo subscription video on demand offering, as well as an increase in the number of cable and satellite subscribers.
Net revenues increased at constant rates in 2015 compared to 2014 primarily due to an increase in television advertising revenues. Following growth in private consumption, the demand for television advertising accelerated during 2015.
From January 16, 2017, our channels in Slovenia have been exclusively available on cable, satellite and IPTV platforms. This may initially result in lower audience shares, which could negatively impact our television advertising revenues in 2017. However, we expect a significant increase in carriage fees and subscription revenues in 2017, as well as a decrease in transmission costs, which we believe will more than offset any negative impact on television advertising revenues and contribute to higher margins for the segment.
Costs charged in arriving at OIBDA in 2016 increased at constant rates compared to 2015 primarily due to a 10% increase in content costs as the schedule in 2016 contained the most hours of local programming in the last ten years.
On a constant currency basis, costs increased in 2015 compared to 2014 due to investment in more hours of own produced programming, which was partially offset by savings in other costs as a result of restructuring efforts.











28


II.    Analysis of the Results of Operations and Financial Position
For The Year Ending December 31, (US$ 000's)For The Year Ended December 31, (US$ 000's)
    Movement     Movement    Movement     Movement
2015
 2014
 % Act
 % Lfl
 2014
 2013
 % Act
 % Lfl
2016
 2015
 % Act
 % Lfl
 2015
 2014
 % Act
 % Lfl
Revenue:                              
Television advertising$505,498
 $565,601
 (10.6)% 6.2 % $565,601
 $528,778
 7.0 % 9.9 %$532,600
 $505,498
 5.4 % 5.3 % $505,498
 $565,601
 (10.6)% 6.2 %
Carriage fees and subscriptions73,058
 80,487
 (9.2)% 8.6 % 80,487
 58,990
 36.4 % 38.9 %78,606
 73,058
 7.6 % 8.7 % 73,058
 80,487
 (9.2)% 8.6 %
Other revenue27,285
 34,705
 (21.4)% (6.4)% 34,705
 45,366
 (23.5)% (22.0)%26,807
 27,285
 (1.8)% (1.7)% 27,285
 34,705
 (21.4)% (6.4)%
Net Revenues605,841
 680,793
 (11.0)% 5.9 % 680,793
 633,134
 7.5 % 10.4 %638,013
 605,841
 5.3 % 5.4 % 605,841
 680,793
 (11.0)% 5.9 %
Operating expenses:                              
Content costs292,602
 358,379
 (18.4)% (2.7)% 358,379
 422,115
 (15.1)% (12.6)%306,013
 292,602
 4.6 % 4.9 % 292,602
 358,379
 (18.4)% (2.7)%
Other operating costs69,727
 85,478
 (18.4)% (2.8)% 85,478
 104,519
 (18.2)% (16.7)%69,353
 69,727
 (0.5)% (0.3)% 69,727
 85,478
 (18.4)% (2.8)%
Depreciation of property, plant and equipment27,943
 32,836
 (14.9)% 1.2 % 32,836
 37,175
 (11.7)% (9.2)%30,190
 27,943
 8.0 % 8.2 % 27,943
 32,836
 (14.9)% 1.2 %
Amortization of broadcast licenses and other intangibles12,271
 12,348
 (0.6)% 18.1 % 12,348
 14,761
 (16.3)% (13.0)%
Amortization of intangibles8,270
 12,271
 (32.6)% (32.6)% 12,271
 12,348
 (0.6)% 18.1 %
Cost of revenues402,543
 489,041
 (17.7)% (1.9)% 489,041
 578,570
 (15.5)% (13.2)%413,826
 402,543
 2.8 % 3.1 % 402,543
 489,041
 (17.7)% (1.9)%
Selling, general and administrative expenses107,001
 143,616
 (25.5)% (12.2)% 143,616
 136,393
 5.3 % 8.1 %112,598
 107,001
 5.2 % 5.3 % 107,001
 143,616
 (25.5)% (12.2)%
Restructuring costs1,714
 9,856
 (82.6)% (78.8)% 9,856
 18,512
 (46.8)% (43.6)%
 1,714
 (100.0)% (100.0)% 1,714
 9,856
 (82.6)% (78.8)%
Impairment charge
 
 
 
 
 79,676
 (100.0)% (100.0)%
Operating income / (loss)$94,583
 $38,280
 147.1 % 198.2 % $38,280
 $(180,017) 
NM (1)

 
NM (1)

Operating income$111,589
 $94,583
 18.0 % 17.3 % $94,583
 $38,280
 147.1 % 198.2 %
(1) 
Number is not meaningful.
Revenue:
Television advertising revenues: On a constant currency basis, television advertising revenues increased by 6%5% in 20152016 compared to 2014, and2015, while television advertising spending in our markets is also estimated to have increased by 6% for the same periods.. On a constant currency basis, television advertising revenues increased by 10%6% in 20142015 compared to 2013, while2014, in line with the increase in television advertising spending in our markets increased by 3%. See "Segment Performance" above for additional information on trends in television advertising revenues.the same period.
Carriage fees and subscriptions: Carriage fees and subscription revenues decreased by US$ 7.4 million, or 9%,increased during 20152016 compared to 2014.2015, primarily due to the inclusion of high definition versions of certain of our channels in our offering and the launch of additional channels in the Czech Republic. Carriage fees revenues also increased across a number of other segments due to higher cable, satellite and IPTV subscriber counts. On a constant currency basis, carriage fees and subscription revenues increased by 9% in 2015 compared to 2014, primarily due to higher subscriber numbers reported by the carriers, the full year benefit from certain contracts that took effect during the first quarter of 2014 in Romania and the new carriage fee contracts in the Czech and Slovak Republics. Carriage fees and subscription revenues increased by 39% in 2014 compared to 2013 on a constant currency basis, as a result of increased carriage fee pricing in Romania and higher subscriber counts in Bulgaria.
Other revenues: Other revenues, which includes primarily internet advertising, licensing and other services revenues, decreased by US$ 7.4 million, or 21%, during 20152016 compared to 2014. On a constant currency basis, other revenues decreased by 6%2015 and in 2015 compared to 2014 primarily due to lower license and sublicense revenues, particularly from cinemas, due to fewer titles being licensedrevenues.
See "Segment Performance" above for additional information on trends in 2015 and the sale of content in 2014 from an entity that has now been disposed of that did not meet the criteria to be classified as discontinued operations. The 22% decrease in 2014 compared to 2013 on a constant currency basis, is primarily due to a significant decrease in the amount of commercials produced for third parties in our Romania segment.revenues.
Operating Expenses:
Content costs: Content costs (including production costs and amortization of programming rights) increased during 2016 compared to 2015 due to including an increased volume of fiction and local programming in our broadcast schedules as well as our broadcasting of UEFA European Championship matches in Romania. Content costs decreased by US$ 65.8 million, or 18%, during 2015 compared to 2014. On a constant currency basis, content costs decreased by 3%2014 due to cost savings realized through better utilization of the program library and negotiation with suppliers, which was partly offset by an increase of programming costs in several of our countries, where heightened competition has required the use of more premium programming to maintain our audience share.
Content costs decreased by US$ 63.7 million, or 15%, during 2014 compared to 2013. On a constant currency basis, the decrease of 13% largely reflects lower programming impairment charges recorded in 2014 compared to 2013. We recorded programming impairment charges of US$ 9.2 million in 2014 compared to US$ 60.4 million in 2013.These decreases were partially offset by increased amortization of programming rights of US$ 7.7 million during the year ended December 31, 2014, due to the change in estimate of the relative value generated by each run of a program.
Other operating costs: Other operating costs decreasedduring 2016 were broadly in line with 2015 as cost savings from lower transmission costs were offset by US$ 15.8 million, or 18%, duringhigher authors’ rights association charges. Other operating costs for 2015 decreased compared to 2014. On a constant currency basis, the 3% decrease is2014 primarily due to lower transmission costs in Bulgaria, as two of our channels are no longer broadcast on aceased terrestrial network, and lower costs reflecting thebroadcasting in 2015, as well as full year savings of our restructuring efforts.
Other operating costs for 2014 decreased by US$ 19.0 million, or 18%, compared to 2013. The decrease was primarily due to lower transmission costs, including savings from operating fewer channels in 2014 and lower staff costs following our restructuring and cost reduction efforts.
Depreciation of property, plant and equipment: TotalOn a constant currency basis, depreciation of property, plant and equipment decreased by US$ 4.9 million, or 15%,increased in 2016 compared to 2015 and in 2015 compared to 2014 and by US$ 4.3 million, or 12%, in 2014 as compared to 2013. On a constant currency basis for the same periods, depreciation increased by 1% and decreased by 9%, respectively. The increase in 2015 is due to higher capital expenditures, which we had beendecreased significantly decreased in recentprior years.

29

Index

Amortization of broadcast licenses and other intangibles: Total amortizationAmortization of broadcast licenses and other intangibles decreased US$ 0.1 million, or 1%,in 2016 compared to 2015. The decrease is due to higher amortization expense in 2015 compared to 2014. On a constant currency basis, the increase of 18% is primarily due to amortization expense for certain of our trademarks in Romania that we determined were no longer indefinite-lived and began amortizing from January 1, 2015 prior to classifying these assets as held forwhich were subsequently divested with the sale of our Romanian studios in the thirdfourth quarter of 2015.
Total The lower amortization expense also reflects certain intangible assets in Bulgaria which were fully amortized in the fourth quarter of broadcast licenses and other intangibles decreased by US$ 2.4 million, or 16%, in 2014 compared to 2013.2015. On a constant currency basis, the decreaseamortization of 13% reflects lower amortization expenseintangibles increased in 2015 compared to 2014, primarily due to the impairmentamortization expense for certain of amortized intangible assets at the end of 2013 in Bulgaria and Slovenia.our Romanian trademarks noted above.
Selling, general and administrative expenses: Selling, general and administrative expenses decreased by US$ 36.6 million, or 26%,increased during 20152016 compared to 2014. On2015 primarily due to the reversal in the third quarter of 2015 of a constant currency basis,charge related to certain tax audits in Romania. Excluding the impact of the reversal of this charge, selling, general and administrative expenses decreased due to lower professional fees and the reversal of a tax provision in 2016 in Croatia. These decreases were offset by 12%increased bad debt in Bulgaria as we ceased cooperation with one agency during the fourth quarter of 2016 and instead started working directly with the clients that agency represented. Selling, general and administrative expenses decreased in 2015 compared to 2014, primarily due to the reversal of a charge in the fourth quarter of 2014 related to the tax audits inof Romania which was reversed in the third quarter of 2015.mentioned above.
Index

Selling, general and administrative expenses increased by US$ 7.2 million, or 5% in 2014 compared to 2013, primarily due to a charge in the fourth quarter of 2014 related to tax audits in Romania. Excluding this charge, selling, general and administrative expenses decreased as a result of our restructuring and cost reduction efforts.
Selling, general and administrative expenses2016 include a charge of US$ 2.43.5 million in respect of non-cash stock-based compensation, which is not allocated to our operating segments, an increase of US$ 1.1 million compared to 20142015 (see Item 8, Note 18,16, "Stock-based Compensation"). Non-cash stock-based compensation charges were US$ 4.21.3 million in 2013, reflecting the acceleration of certain employee awards upon termination.2014.
Restructuring costs: Restructuring costs totaled US$ 1.7 million duringThere were no restructuring charges in 2016. The decrease in restructuring charges in 2015 as we continuedcompared to optimize our cost base across a number2014 was primarily due to the elimination of departmentsfewer positions in our Romania segment. Our restructuring charges of US$ 9.9 million in 2014 were undertaken to streamline resources and operate with a more efficient cost base, particularly in our segment operations. See Item 8, Note 15, "Restructuring Costs".
Impairment charge: We did not recognize any impairment charges in respect of goodwill, tangible and intangible assets during 2015 or 2014.
We recognized impairment charges amounting to US$ 79.7 million in respect of goodwill and other intangible assets in 2013. The impairments recorded included US$ 12.3 million relatedplan as compared to the bTV trademark in Bulgaria, US$ 23.6 million related to the customer relationships intangible in Bulgaria, US$ 7.6 million to fully impair the broadcast license in Slovenia, and US$ 36.2 million related to goodwill in Bulgaria and Slovenia (see Item 8, Note 4, "Goodwill and Intangible Assets").2014 plan.
Operating income / (loss):income: Operating income for 2015 was US$ 94.6 million compared to anOn a constant currency basis, operating income of US$ 38.3 million in increased from 2014. The improvement is through 2016 largely due to increased television and carriage fee revenues while maintaining effective cost control efforts. The operating results of 2013 include impairment charges in respect of goodwill and other intangible assets which did not repeat in 2014 or 2015. Excluding the release of the reserves related to the Romanian tax audits (see Item 8, Note 22, "Commitments and Contingencies"), operating income in 2015 was US$ 82.6 million.
Operating income for 2014 was US$ 38.3 million compared to an operating loss of US$ 180.0 million in 2013. The improvement in profitability was largely due to increased televisionadvertising and carriage fee revenues while maintaining effective cost control efforts. Excluding the effect of the charge related to the Romanian tax audits, (see Item 8, Note 22, "Commitments and Contingencies") operating income in 20142015 was US$ 50.382.6 million.
Our operating margin, which is determined as operating income / loss divided by net revenues, was 17.5% in 2016, compared to 15.6% in 2015 compared to and 5.6% in 2014 and negative 28.4% in 2013.2014. Excluding the effects of the charge and the release of the reserves related to the Romanian tax audits, operating margin in 2015 and 2014 was 13.6% and 7.4%, respectively.
Other income / expense items for the years endingended December 31, 20152016, 20142015 and 20132014
Other Income / (Expense)Other Income / (Expense)
For The Year Ending December 31, (US$ 000's)For The Year Ended December 31, (US$ 000's)
2015
 2014
 % Act
 2014
 2013
 % Act
2016
 2015
 % Act
 2015
 2014
 % Act
Interest expense$(171,444) $(142,005) (20.7)% $(142,005) $(111,709) (27.1)%$(132,224) $(171,444) 22.9 % $(171,444) $(142,005) (20.7)%
Loss on extinguishment of debt(150,158) 
 (100.0)% 
 (39,203) 100.0 %
Non-operating expense, net:                      
Interest income440
 294
 49.7 % 294
 496
 (40.7)%592
 440
 34.5 % 440
 294
 49.7 %
Foreign currency exchange (loss) / gain, net(13,481) (12,767) (5.6)% (12,767) 20,187
 
NM (1)

Loss on extinguishment of debt
 (39,203) 100.0 % (39,203) (23,115) (69.6)%
Foreign currency exchange gain / (loss), net6,648
 (13,481) 
NM (1)

 (13,481) (12,767) (5.6)%
Change in fair value of derivatives4,848
 2,311
 109.8 % 2,311
 104
 
NM (1)

(10,213) 4,848
 
NM (1)

 4,848
 2,311
 109.8 %
Other (expense) / income(17,746) 267
 
NM (1)

 267
 (373) 
NM (1)

Credit for income taxes515
 1,358
 (62.1)% 1,358
 17,993
 (92.5)%
Other income / (expense), net486
 (17,746) 
NM (1)

 (17,746) 267
 
NM (1)

(Provision) / credit for income taxes(7,317) 515
 
NM (1)

 515
 1,358
 (62.1)%
Loss from discontinued operations, net of tax(13,287) (80,431) 83.5 % (80,431) (5,099) 
NM (1)


 (13,287) 100.0 % (13,287) (80,431) 83.5 %
Net loss attributable to noncontrolling interests671
 4,468
 (85.0)% 4,468
 3,882
 15.1 %306
 671
 (54.4)% 671
 4,468
 (85.0)%
Other comprehensive loss:                      
Currency translation adjustment(89,714) (156,236) 42.6 % (156,236) (58,200) (168.4)%
Currency translation adjustment, net1,649
 (89,714) 
NM (1)

 (89,714) (156,236) 42.6 %
Unrealized loss on derivative instruments(839) (581) (44.4)% (581) 
 
NM (1)

(3,031) (839) 
NM (1)

 (839) (581) (44.4)%
(1) 
Number is not meaningful.

30

Index

Interest expense: Interest expense fordecreased in 2016 compared to 2015, 2014primarily due to lower amortization of debt discount and 2013 was US$ 171.4 million, US$ 142.0 millionissuance costs following the extinguishment of the 2017 PIK Notes and US$ 111.7 million, respectively. The increase in2017 Term Loan and due to a lower cost of borrowing following the refinancing of such indebtedness (each bearing interest of 15% per annum) with the 2021 Euro Term Loan (with an all-in rate of 9.0% per annum as at December 31, 2016). Interest expense increased in 2015 wascompared to 2014, primarily due to the full year interest expense and amortization of debt issuance costs and original issuance discount related to the 2014 refinancing transactions. The increasetransactions conducted in 2014 was primarily due2015(see Item 8, Note 14, "Interest Expense").
Loss on extinguishment of debt: In 2016, we recognized a loss on extinguishment of debt related to the refinancing of the 2016 Fixed Rate Notes with the 2017 PIK Notesredemption and 2017 Term Loan, both of which bear a higher interest rate per annum. The increase was also due to the amortization of debt issuance costs and discount on issuancedischarge of the 2017 PIK Notes, andrepayment of the 2017 Term Loan (see Item 8, Note 16, "Interest Expense").and modifications of the 2018 Euro Term Loan and the 2019 Euro Term Loan, which were accounted for in a similar manner as a debt extinguishment. In 2014, we recognized losses on the redemption of the remaining outstanding portion of our 2016 Fixed Rate Notes and the redemption of the 2017 Fixed Rate Notes.
Interest income: We recognized interest income of US$ 0.4 million, US$ 0.3 million and US$ 0.5 million for 2015, 2014 and 2013, respectively. Our interest income is generated solely by interest accrued on our cash deposits.
Foreign currency exchange (loss)gain / gain,(loss), net: We are exposed to fluctuations in foreign exchange rates on the revaluation of monetary assets and liabilities denominated in currencies other than the local functional currency of the relevant subsidiary. This includes third party receivables and payables, including certain of our Senior Debt, which are denominated in Euros, as well as certain of our intercompany loans which are not considered of a long-term investment nature. Our subsidiaries generally receive funding via loans that are denominated in currencies other than the dollar, and any change in the relevant exchange rate will require us to recognize a transaction gain or loss on revaluation. Certain of our intercompany loans are classified as long-term in nature, and therefore gains or losses on revaluation are not recorded through the statement of operations and comprehensive income / loss. See the discussion under "Currency translation adjustment, net" below.
In 2015,2016, we recognized a net lossgain of US$ 13.56.6 million, comprised of transaction lossesgains of US$ 29.738.1 million relating to the revaluation of intercompany loans, transaction gainslosses of approximately US$ 31.528.4 million from the revaluation ofon our Senior Debt due to the overall strengthening of the dollar against the Euro in 2014,long-term debt and other financing arrangements and transaction losses of US$ 15.33.1 million relating to the revaluation of monetary assets and liabilities denominated in currencies other than the local functional currency of the relevant subsidiary.
In 2015, we recognized a net loss of US$ 13.5 million, comprised of transaction losses of US$ 29.7 million relating to the revaluation of intercompany loans, transaction gains of approximately US$ 31.5 million on our long-term debt and other financing arrangements and transaction losses of US$ 15.3 million relating to the revaluation of monetary assets and liabilities denominated in currencies other than the local functional currency of the relevant subsidiary.
In 2014, we recognized a net loss of US$ 12.8 million, comprised of transaction gains of US$ 1.3 million relating to the revaluation of intercompany loans, transaction gains of approximately US$ 4.3 million from the revaluation of the Senior Debt due to the overall strengthening of the dollar against the Euro in 2014,on our long-term debt and other financing arrangements and transaction losses of US$ 18.4 million relating to the revaluation of monetary assets and liabilities denominated in currencies other than the local functional currency of the relevant subsidiary.
In 2013, we recognized a net gain of US$ 20.2 million, comprised of transaction gains of US$ 63.1 million relating to the revaluation of intercompany loans, transaction losses of approximately US$ 42.3 million from the revaluation of the Senior Debt due to the overall weakening of the dollar against the Euro in 2013, and transaction losses of US$ 0.6 million relating to the revaluation of monetary assets and liabilities denominated in currencies other than the local functional currency of the relevant subsidiary.
Index
Loss on extinguishment of debt: During 2014 and 2013, we recognized net losses on the extinguishment of debt of US$ 39.2 million and US$ 23.1 million, respectively. In 2014, we recognized losses on the redemption of the remaining outstanding portion of our 2016 Fixed Rate Notes and the redemption of the 2017 Fixed Rate Notes. In 2013, we recognized a loss on the repurchase of a portion of our 2016 Fixed Rate Notes.
Change in fair value of derivatives: During 2016, we recognized a net loss primarily due to a loss on USD/EUR foreign currency forward contracts entered into in connection with the refinancing of the 2017 PIK Notes and 2017 Term Loan. During 2015, we recognized a net gain of US$ 4.8 million primarily as a result of a gain on a foreign currency forward contract entered into in connection with the refinancing of the 2015 Convertible Notes at maturity, which was partly offset by losses on certain other foreign currency forward contracts relating to certain dollar-denominated programming payments made in 2015. See Item 8, Note 14, "Financial Instruments and Fair Value Measurements".
During 2014, we recognized a net gain of US$ 2.3 million as a result of a gain on a foreign currency forward contract entered into in connection with the refinancing of the 2016 Fixed Rate Notes. During 2013, we recognized a net gain of US$ 0.1 million on the change in fair value of an interest rate swap.See Item 8, Note 13, "Financial Instruments and Fair Value Measurements".
Other (expense)income / income:(expense), net: We recognized otherOther income / expense, of US$ 17.7 million during 2015 compared to other income of US$ 0.3 millionnet was not material in 2014 and other expense of US$ 0.4 million in 2013.2016 or 2014. Other expense in 2015 was primarily due to the loss on sale of the parent company of our former Romanian studio operation, which did not meet the definition of a discontinued operation, and on the loss on sale of an excess facility in Bulgaria.
Credit(Provision) / credit for income taxes: The provision for income taxes during 2016 reflects tax charges on profits in the Czech Republic and Romania offset by the release of the valuation allowances in Bulgaria and the Slovak Republic.
The credit for income taxes during 2015 of US$ 0.5 million reflects the release of a valuation allowance in Romania offset by deferred tax charges on profits in the Czech Republic and Croatia.
The credit for income taxes during 2014 of US$ 1.4 million reflects the value of the deferred tax benefit that we have realized on the operating loss incurred by our Czech Republic segment, which was substantially lower in 2014 compared to 2013.
The credit for income taxes during 2013 of US$ 18.0 million reflects the value of the deferred tax benefit that we have realized on the operating loss incurred by our Czech Republic segment.
Our operating subsidiaries are subject to income taxes at statutory rates ranging from 10.0% in Bulgaria to 22.0% in Slovakia (see Item 8, Note 19,17, "Income Taxes"). From January 1, 2017, the statutory income tax rate in the Slovak Republic is 21%.
Net loss attributable to noncontrolling interests: We recognizedThe net losses attributable to noncontrolling interests of US$ 0.7 million, US$ 4.5 million and US$ 3.9 million for the years ended December 31, 2015, 2014 and 2013, respectively, related primarilyrelate to the noncontrolling interest share of the comprehensive losses in our Bulgaria operations.
Currency translation adjustment:adjustment, net: The underlying equity value of our investments (which are denominated in the functional currency of the relevant entity) are converted into dollars at each balance sheet date, with any change in value of the underlying assets and liabilities being recorded as a currency translation adjustment to the balance sheet.sheet rather than net income / loss.
In 2015, 2014 and 2013,2016, we recognized other comprehensive income of US$ 1.6 million compared to other comprehensive losses of US$ 89.7 million, US$ 156.2 million and US$ 58.2156.2 million respectively,in 2015 and 2014. Included in these amounts are foreign exchange gains and losses on the revaluationretranslation of our net investments in subsidiaries. Also, certain of our intercompany loans which are considered to be of a long-term investment nature, and as the repaymentsuch, are included in accumulated other comprehensive income / loss, a component of these loans is neither planned nor anticipated for the foreseeable future.shareholders' equity. For the years ended December 31, 2016, 2015 and 2014, and 2013, we recorded foreign exchangerecognized a gain of US$ 8.8 million and losses of US$ 89.0 million and US$ 164.4 million, and US$ 16.4 million, respectively, on the retranslation of these intercompany loans as an adjustment toin accumulated other comprehensive income a component of shareholders' equity, as the settlement of these loans is not planned or anticipated in the foreseeable future.

31

Index

The following table illustrates the amount by which the spot exchange rate of the dollar to the functional currencies of our operations moved between January 1 and December 31 in 2015, 2014 and 2013, respectively:
 For The Year Ending December 31,
 2015
 2014
 2013
Bulgarian Lev11% 13% (4)%
Croatian Kuna11% 14% (3)%
Czech Koruna9% 15% 4 %
Euro12% 14% (4)%
New Romanian Lei13% 13% (3)%
The dollar was stronger overall against each of the functional currencies of our operations between January 1 and December 31, 2015.
The following table illustrates the change in the average exchange rates of the dollar to the functional currencies of our operations for the years ending December 31, 2015, 2014 and 2013.
 For The Year Ending December 31,
 2015
 2014
 2013
Bulgarian Lev20% 0% (3)%
Croatian Kuna19% 1% (2)%
Czech Koruna18% 6% 0 %
Euro20% 0% (3)%
New Romanian Lei20% 1% (3)%
To the extent/ loss. In addition, management determined that our subsidiaries incur transaction losses in their localCME Ltd.'s functional currency income statement onis the revaluationEuro with effect from April 1, 2016. As a result of monetary assets and liabilities denominated in dollars,this change, we recognizerecognized a gaincharge of the same amount as aUS$ 4.2 million of currency translation adjustment within equity when we retranslate our net investment in that subsidiarythe second quarter of 2016 due to the translation of non-monetary assets into dollars.Euro as of the date of the change.
The following charts depict the movement of the dollar versus the functional currencies of our operations, based on monthly closing rates, during 2016, 2015 2014 and 2013.2014.
Percent Change During the Year Ended December 31, 2016
Index

Percent Change During the Year Ended December 31, 2015

32

Index

Percent Change During the Year Ended December 31, 2014
Percent Change During the Year Ended December 31, 2013
Unrealized loss on derivative instruments: The unrealized loss on derivatives of US$ 0.8 million and US$ 0.6 million for the years ended December 31, 2015 and 2014, respectively, is due to the effective portion of changes in the fair value of our interest rate swaps classified as cash flow hedges and recognized in accumulated other comprehensive income / loss.

33

Index

ConsolidatedSummarized consolidated balance sheetsheets as at December 31, 20152016 and December 31, 20142015
Summarized Consolidated Balance Sheet (US$ 000’s)
December 31, 2015
 December 31, 2014
 Movement
December 31, 2016
 December 31, 2015
 Movement
Current assets$358,284
 $374,869
 (4.4)%$340,420
 $358,284
 (5.0)%
Non-current assets1,095,917
 1,244,491
 (11.9)%1,050,297
 1,082,133
 (2.9)%
Current liabilities146,308
 450,527
 (67.5)%171,564
 146,308
 17.3 %
Non-current liabilities988,054
 667,725
 48.0 %1,070,786
 974,270
 9.9 %
Temporary equity241,198
 223,926
 7.7 %254,899
 241,198
 5.7 %
CME Ltd. shareholders’ equity77,260
 279,794
 (72.4)%
CME Ltd. shareholders’ (deficit) / equity(107,804) 77,260
 
NM (1)

Noncontrolling interests in consolidated subsidiaries1,381
 (2,612) 
NM (1)

1,272
 1,381
 (7.9)%
(1) 
Number is not meaningful.
During 2015, our functional currencies weakened significantly against the U.S. dollar. Our consolidated balance sheet at December 31, 2015, is impacted as a result.Note: The analysis below is intended to highlight the key business factors that led to the movements from December 31, 2014, and therefore excludes2015, excluding the impact of foreign currency translation.
Current assets: Current assets at December 31, 20152016 decreased by US$ 16.6 million compared to December 31, 20142015. Excluding the negative impact of foreign currency translation, current assets increased due to lower cash, which was primarily used to pay Guarantee Fees in respect of the 2018 Euro Term Loan (including Guarantee Fees previously paid in kind) and lower deferred tax assets which were reclassified to non-current upon the prospective adoption of new accounting guidance. These decreases were partly offset by higher cash and accounts receivables balancesreceivable as a result of improved revenue and OIBDA performance, which is partly offset by a decrease in assets held for sale as we completed the divestitures of our non-core businesses in 2015.increased revenue.
Non-current assets: Non-currentExcluding the effects of foreign currency translation, non-current assets at December 31, 20152016 decreased by US$ 148.6 millionincreased slightly compared to December 31, 20142015, primarily due to an increase in the impactamount of local productions ahead of the stronger U.S. dollar on our foreign currency denominated goodwill and intangible assetsspring schedule as well as lower acquired program rights reflecting amortization of existing contracts and a lower volume of new long-term contracts for acquired content.capital expenditures made during 2016. The decrease also reflectsincreases are partly offset by amortization expense related to debt issuance costs and our finite-lived intangible assets.
Current liabilities: Current liabilities at December 31, 20152016 decreased by US$ 304.2 millionincreased compared to December 31, 20142015, primarily as a result of the refinancing of the 2015 Convertible Notes at maturity in 2015. The decrease also reflects lowerhigher accrued interest (including Guarantee Fees) payable, programming liabilities as a result of payments made to programming content providers, the reversal in 2015 of the charge accrued in the fourth quarter of 2014 related to the Romanian tax audits,payables and a decrease in liabilities held for sale as we completed the divestitures of our non-core businesses in 2015.income taxes payable.
Non-current liabilities: Non-current liabilities at December 31, 20152016 increased by US$ 320.3 million compared to December 31, 20142015, reflectingprimarily due to the refinancing of the 2015 Convertible2017 PIK Notes and the 2017 Term Loan, both of which had significant issuance discounts, with the 20192021 Euro Term Loan, which matures in 2019. The increase also reflects our election to pay in kind the interest on the 2017 PIK Notes, the 2017 Term Loan and the Guarantee Fees. The increase was partly offset by the repayment of the outstanding balance of the 2021 Revolving Credit Facility in 2015had no such discount (see Item 8, Note 5,4, "Long-term Debt and Other Financing Arrangements").
Temporary equity: Temporary equity at December 31, 20152016 and 2014 was US$ 241.2 million and US$ 223.9 million, respectively, and2015 represents the accreted value of the Series B Preferred Shares issued to TW Investor on June 25, 2013.
CME Ltd. shareholders’ (deficit) / equity: CME Ltd. shareholders’ equity decreased by US$ 202.5 millionto a deficit in 2015,2016, primarily due to the net loss attributable to CME Ltd. of US$ 114.9 million, an increase in accumulated other comprehensive loss of US$ 91.1 million due to currency translation adjustments and by US$ 17.3 million of accretion of the preferred dividend paid in kind on our Series B Preferred Shares.Shares and unrealized losses on derivative instruments designated as interest rate hedges of the Euro Term Loans. These decreases were partly offset by the reclassificationexercises of the cumulative translation adjustment into net income of US$ 19.1 millioncommon stock warrants and stock-based compensation charges of US$ 2.4 million.charges.
Noncontrolling interests in consolidated subsidiaries: NoncontrollingThe noncontrolling interests in consolidated subsidiaries at December 31, 2015 and 2014 was positive US$1.4 million and negative US$ 2.6 million, respectively. The change primarily reflects the reclassification of the accumulated losses attributable to noncontrolling interest that was reclassified into net income upon sale of the entity. As at December 31, 2015, our noncontrolling interest is solely comprised ofrepresents the noncontrolling interest inshare of our BulgarianBulgaria operations.


34

Index

III.    Liquidity and Capital Resources
III(a)    Summary of Cash Flows
Cash and cash equivalents increaseddecreased by US$ 27.418.2 million during 2015.2016. The change in cash and cash equivalents for the periods presented below is summarized as follows:
For The Year Ending December 31, (US$ 000's)For The Year Ended December 31, (US$ 000's)
2015
 2014
 2013
2016
 2015
 2014
Net cash generated from / (used in) continuing operating activities$85,877
 $(65,242) $(61,070)$33,917
 $85,877
 $(65,242)
Net cash used in continuing investing activities(30,426) (28,548) (29,835)(29,356) (30,426) (28,548)
Net cash (used in) / provided by continuing financing activities(28,906) 38,995
 59,244
(22,743) (28,906) 38,995
Net cash provided by / (used in) discontinued operations3,503
 (2,578) (2,176)1,194
 3,503
 (2,578)
Impact of exchange rate fluctuations on cash(2,667) (10,651) (384)(1,232) (2,667) (10,651)
Net increase / (decrease) in cash and cash equivalents$27,381
 $(68,024) $(34,221)
Net (decrease) / increase in cash and cash equivalents$(18,220) $27,381
 $(68,024)
Operating Activities
Cash generated from continuing operations during 2015 was US$ 85.9 million2016 decreased as compared to 2015 as higher revenue and OIBDA were offset by higher cash usedpayments for interest and for Guarantee Fees, including Guarantee Fees previously paid in kind. Cash generated from continuing operations of US$ 65.2 million in 2014. The improvement over the prior year wasduring 2015 increased compared to 2014 due to better OIBDA performance and lower cash paid for interest as we elected to make certain interest payments paid in kind.cash. Additionally, the level of payments for programming was more normalized in 2015 than in prior years, which also contributed to the improvement in free cash flow.
Cash used in continuing operations during 2014 was US$ 65.2 million compared to US$ 61.1 million in 2013. While we generated more cash from higher revenues and paid less cash for interest due to our obligation or election to pay certain interest in kind, this was more than offset by higher payments made to suppliers of foreign programming in order to improve our payables position.
We paid cash interest (including in respect of Guarantee Fees) of US$ 91.4 million, US$ 18.5 million and US$ 76.2 million and US$ 108.3 million on our Senior Debtlong-term debt and credit facilities in 2016, 2015 and 2014, and 2013, respectively.
Investing Activities
Net cash used in continuing investing activities in 2015, 2014 and 2013 was US$ 30.4 million, US$ 28.5 million and US$ 29.8 million, respectively. Our continuing investing cash flows consistconsists primarily of capital expenditures for property, plant and equipment.
Financing Activities
Net cash used in continuing financing activities during 2015 was US$ 28.9 million compared to cash provided by continuing financing activities of US$ 39.0 million during 2014. The amount of net cash used in continuing financing activities in 2016 primarily reflected the current yearrefinancing of the 2017 PIK Notes and the 2017 Term Loan with the proceeds of the 2021 Euro Term Loan and cash on hand, including payments for transaction fees and to settle a foreign currency forward contract we entered into in connection with the refinancing. We received proceeds of US$ 7.0 million from the exercise of common stock warrants.
The net cash used in continuing financing activities in 2015 primarily reflected the repayment of the amounts outstanding under the 2021 Revolving Credit Facility and the refinancing of the 2015 Convertible Notes with the 2019 Euro Term Loan. We also received net proceeds of US$ 8.0 million from a foreign currency forward contract we entered into in connection with the refinancing of the 2015 Convertible Notes.
CashThe net cash provided by continuing financing activities during 2014 was US$ 39.0 million. The amount primarily reflected the proceeds of the rights offering conducted in 2014 and related financing transactions and a drawdown on the 2021 Revolving Credit Facility, partially offset by the payment made to redeem and discharge the 2016 Fixed Rate Notes and the 2017 Fixed Rate Notes.
Cash provided by continuing financing activities during 2013 of US$ 59.2 million reflected the proceeds from the public and private equity offerings offset by the repurchase of a portion of our 2016 Fixed Rate Notes, as well as the decrease in restricted cash deposited with the trustee of our 3.5% senior convertible notes due 2013 (the "2013 Convertible Notes") which were settled at maturity in March 2013.
Discontinued Operations
NetThe net cash provided by discontinued operations during 2016 and 2015 primarily reflected proceeds from the year ended December 31, 2015 was US$ 3.5 million compared todivestiture of businesses, including deferred proceeds. The net cash used in discontinued operations of US$ 2.6 million in 2014 and US$ 2.2 million in 2013, which primarily representsreflected the net operating cash flows used in our businesses classified as discontinued operations which was more than offset in 2015 by the proceeds received from the sale of our non-core assets (see Item 8, Note 3, "Discontinued Operations and Assets Held for Sale").operations.
III(b)    Sources and Uses of Cash
Our ongoing source of cash is primarily the receipt of payments from advertisers, advertising agencies and distributors of our television channels. We also have available the 2021 Revolving Credit Facility (see Item 8, Note 5,4, "Long-term Debt and Other Financing Arrangements"). As at December 31, 2015,2016, the undrawn aggregate principal amount available under the 2021 Revolving Credit Facility was US$ 115.0 million.million, which will be reduced to US$ 50.0 million from January 1, 2018. Surplus cash, after funding ongoing operations, may be remitted to us, where appropriate, by our subsidiaries in the form of debt interest payments and capital repayments, dividends, and other distributions and loans from our subsidiaries.
Corporate law in the Central and Eastern European countries in which we operate stipulates generally that dividends may be declared by the partners or shareholders out of yearly profits subject to the maintenance of registered capital, required reserves (if applicable) and after the recovery of accumulated losses. The reserve requirement restriction generally provides that before dividends may be distributed, a portion of annual net profits (typically at least 5.0%5%) be allocated to a reserve, which reserve is capped at a proportion of the registered capital of a company (ranging from 5.0%5% to 25.0%20%). The restricted net assetsThere are no third-party restrictions that limit our subsidiaries' ability to transfer amounts to us in the form of our consolidated subsidiaries and equity in earnings of investments accounted for under the equity method together, are less than 25.0% of consolidated net assets.loans or advances.

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III(c)    Contractual Obligations, Commitments and Off-Balance Sheet Arrangements
Our future contractual obligations as at December 31, 20152016 were as follows:
Payments due by period (US$ 000’s)Payments due by period (US$ 000’s)
Total
 Less than 1 year
 1-3 years
 3-5 years
 More than 5 years
Total
 Less than 1 year
 1-3 years
 3-5 years
 More than 5 years
Long-term debt – principal$1,069,954
 $
 $813,744
 $256,210
 $
$1,006,597
 $
 $512,435
 $494,162
 $
Long-term debt – interest370,021
 10,054
 274,763
 85,204
 
369,398
 35,497
 186,626
 147,275
 
Unconditional purchase obligations145,315
 74,646
 58,005
 10,139
 2,525
128,821
 44,071
 66,963
 15,506
 2,281
Operating leases9,536
 3,473
 3,838
 1,076
 1,149
8,610
 3,374
 3,000
 803
 1,433
Capital lease obligations3,784
 1,228
 1,971
 585
 
4,450
 1,570
 2,342
 538
 
Other long-term obligations39,465
 18,322
 9,891
 10,686
 566
34,275
 17,545
 16,008
 678
 44
Total contractual obligations$1,638,075
 $107,723
 $1,162,212
 $363,900
 $4,240
$1,552,151
 $102,057
 $787,374
 $658,962
 $3,758
Long-Term Debt
For more information on our long-term debt, see Item 8, Note 5,4, "Long-term Debt and Other Financing Arrangements". Interest payable on our long-term debt is calculated using interest rates and exchange rates as at December 31, 20152016. For the purposes of the above table, it is assumed that interest on the 2017 PIK Notes and the 2017 Term Loan will be paid in kind at each interest payment date up to maturity on December 1, 2017 and that the Guarantee Fees will be paid in kind at each interest payment date through November 1, 2018 and November 1, 2019, theuntil the maturity dates of the 2018related Euro Term Loan and the 2019 Euro Term Loan, respectively.such amounts are included under "Long-term debt - interest.".
As discussed in Item 8, Note 26, "Subsequent Events", on February 19, 2016, we entered into an agreement for the EUR 468.8 million (approximately US$ 510.4 million) 2021 Euro Term Loan, the proceeds of which will be drawn on or about April 7, 2016 and be applied to repay the 2017 Term Loan and redeem and discharge the 2017 PIK Notes, which we expect will be completed on or about April 8, 2016.
Also on February 19, 2016, we agreed to extend the maturity date of the 2018 Euro Term Loan by one year to November 1, 2018, reduce the interest cost of amounts drawn on the 2021 Revolving Credit Facility as our leverage ratio improves, and extend the maturity date of the 2021 Revolving Credit Facility at the current borrowing capacity until January 1, 2018 and with a borrowing capacity US$ 50.0 million from January 1, 2018 to the maturity date on February 19, 2021, with effect from the drawing of the 2021 Euro Term Loan.
Unconditional Purchase Obligations
Unconditional purchase obligations primarily comprise future programming commitments. At December 31, 20152016, we had commitments in respect of future programming of US$ 144.9128.2 million. This includes contracts signed with license periods starting after December 31, 20152016.
Operating Leases
For more information on our operating lease commitments see Item 8, Note 22,20, "Commitments and Contingencies".
Other Long-Term Obligations
Other long-term obligations are primarily comprised of digital transmission commitments.
Other
Top Tone Media Holdings Limited has exercised its right to acquire additional equity in CME Bulgaria B.V.Bulgaria. However, the closing of this transaction has not yet occurred because purchaser financing is still pending. If consummated, we would own 90.0% of our Bulgaria broadcast operations. The option strike price is the fair value of the equity in CME Bulgaria, as determined by an independent valuation.
III(d)    Cash Outlook
Prior to the difficult economic conditions in our markets that began at the end of 2008, our operations generated cash flows sufficient, in conjunction with equity and debt financing, to fund our operations and our investing activities. Since the end of 2008,Because cash flows from operating activities have declined and were negative in 2012, 2013 and 2014.2014, we relied on equity and debt financings to ensure adequate funding for our operations. While cash flows from operating activities were positive in 2015 and 2016, our election to pay certain interest on the 2017 PIK Notes and guarantee feesthe 2017 Term Loan (prior to their repayment) and Guarantee Fees in kind has increased our gross leverage. In response, we have sought other capital resources to fund our operations, our debt service and other obligations.obligations, including the refinancing transaction below.
The financing transactions undertaken in 2014 and 2015 have significantly reduced the amount of cash interest to be paid by refinancing cash pay indebtedness with non-cash pay indebtedness. We continue to take actions to address our maturity profile and cost of borrowing. On February 19,April 7, 2016, we entered into an agreement fordrew on the EUR 468.8 million (approximately US$ 510.4 million)534.0 million as at the transaction date) 2021 Euro Term Loan, the proceeds of which, will be drawntogether with cash on or about April 7, 2016 and behand, were applied to repaytoward the repayment of the 2017 Term Loan plus accrued interest and redeemthe redemption and discharge of the 2017 PIK Notes which we expect will be completed on or about April 8, 2016.

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Also on February 19, 2016, we agreed to extendplus accrued interest thereon. We also extended the maturity date of the 2018 Euro Term Loan by one year to November 1, 2018, reduce2018. In addition, we amended the interest cost ofrate applicable to amounts drawn on the 2021 Revolving Credit Facility assuch that interest is determined on the basis of our net leverage ratio improves,(as defined in the Reimbursement Agreement) and extendranges from LIBOR (subject to a floor of 1.0%) plus 9.0% if our net leverage ratio is greater than or equal to seven times, to LIBOR (subject to a floor of 1.0%) plus 6.0% per annum if our net leverage ratio is less than five times; and extended the maturity date of the 2021 Revolving Credit Facility atto February 19, 2021, with a reduction in the current borrowing capacity until January 1, 2018 and with a borrowing capacityfrom US$ 115.0 million to US$ 50.0 million from January 1, 2018 to the maturity date on February 19, 2021.2018. Following these transactions, our nearest debt maturity is November 1, 2018 and our cost of borrowing will decrease as a result of refinancing the 2017 Term Loan and the 2017 PIK Notes with effect from the drawing of the 2021 Euro Term Loan. The transactions contemplated above are subject to customary closing conditions (including the drawdown of the 2021 Euro Term Loan, the accuracy of representations, the absence of events of default and the absence of material adverse changes), certain of which are outside our direct control.has decreased.
We are continuing to take actions to conserve cash, including targeted reductions to our operating cost base through cost optimization programs. While we were freeimprove cash flow positive in 2015, this is largely dueincluding maintaining strict cost discipline and improving working capital management, with the intention of using cash generated by the business, together with expected proceeds from warrant exercises and savings from lower debt service obligations, to cash interest savings as a result of the financing transactions noted above. Following the refinancing of the 2015 Convertible Notes in November 2015 and the completion of the transactions entered into on February 19, 2016, we believe we will have adequate cash resources to continue operating as a going concern, withsubstantially repay our nearest debt maturity beingin November 1, 2018. We intend to commence repayment of such maturity beginning November 2017. In this respect, in 2016 we paid US$ 37.4 million of Guarantee Fees related to the 2018 Euro Term Loan, including amounts previously paid in kind, and we expect to pay all Guarantee Fees related to the 2018 Euro Term Loan in cash as they come due. We anticipate paying Guarantee Fees related to the 2019 Euro Term Loan and the 2021 Euro Term Loan, in kind where we have the option. We are also continuing to evaluate possibilities to further deleverage the business.
In addition, we expect the amounts of cash paid for income taxes to increase and begin converging with local statutory tax rates as our operating companies in each jurisdiction return to generating profits and previous net operating losses are utilized.
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Credit ratings and future debt issuances
Our corporate credit is rated Caa1B2 by Moody's Investors Service and BB+ by Standard & Poor's, both with stable outlook. RatingsOur ratings show each agency's opinion of our financial strength, operating performance and ability to meet our debt obligations as they become due. These ratings take into account the particular emphasis the ratings agencies have indicated that retentionplace on metrics such as leverage ratio and cash flow, which they use as measurements of thesea company's liquidity and financial strength.  They also reflect an emphasis by the ratings is dependentagencies on maintaining an adequate liquidity profile. Ifthe track record of strong financial support from Time Warner. We may be subject to downgrades if our operating performance deteriorates or we fail to meet this liquidity parameter,maintain adequate levels of liquidity. In addition, our ratings may be downgraded if the agencies form a view that material support from Time Warner is not as strong, or the strategic importance of CME to Time Warner is not as significant as it is likely thathas been in the rating agencies will downgrade us. The availability of additional liquidity is dependent upon our continued operating performance, improved financial performance and credit ratings. We are currently able to raise only a limited amount of additional debt (other than refinancing indebtedness) under the agreement for the 2021 Revolving Credit Facility and the Reimbursement Agreement.past.
Credit risk of financial counterparties
We have entered into a number of significant contracts with financial counterparties as follows:
Interest Rate Swap
We are party to interest rate swap agreements to mitigate our exposure to interest rate fluctuations on our 2018 Euro Term Loan and our 2019 Euro Term Loan.Loans. These interest rate swaps, designated as cash flow hedges, provide the Company with variable-rate cash receipts in exchange for fixed-rate payments over the lives of the agreements, with no exchange of the underlying notional amount.
In connection with the financing transactions entered into on February 19, 2016, we intend to enter into a number of interest rate swap agreements to mitigate our exposure to interest rate fluctuations until the maturity date of the 2021 Euro Term Loan similar to the instruments discussed above.
Foreign Exchange Forwards
We are exposed to movements in the USD to EUR exchange rates related to contractual payments under dollar-denominated agreements. To reduce this exposure, from time to time we enter into pay-Euro receive-dollar forward foreign exchange contracts. AsWe had no such agreements outstanding at December 31, 2015, we had outstanding two forward foreign exchange contracts with aggregate notional amounts of approximately US$ 49.5 million. In addition, on February 11, 2016 we entered into a forward foreign exchange contract with an aggregate notional amount of approximately US$ 54.4 million.
On February 17, 2016, we entered into a forward foreign exchange contract to limit our exposure to the USD to EUR exchange rates as we intend to repay the dollar-denominated 2017 PIK Notes and 2017 Term Loan with a drawing under the Euro-denominated 2021 Euro Term Loan.2016.
Cash Deposits
We deposit cash in the global money markets with a range of bank counterparties and review the counterparties we choose weekly. The maximum period of deposit is three months but we have more recently held amounts on deposit for shorter periods, from overnight to one month. The credit rating of a bank is a critical factor in determining the size of cash deposits and we will only deposit cash with banks of an investment grade of A or A3 or higher.grade. In addition we also closely monitor the credit default swap spreads and other market information for each of the banks with which we consider depositing or have deposited funds.
III(e)    Off-Balance Sheet Arrangements
None.
IV.    Critical Accounting Policies and Estimates
Our accounting policies affecting our financial condition and results of operations are more fully described in Item 8, Note 2, "Basis of Presentation and Summary of Significant Accounting Policies". The preparation of these financial statements requires us to make judgments in selecting appropriate assumptions for calculating financial estimates, which inherently contain some degree of uncertainty. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. Using these estimates we make judgments about the carrying amounts of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Program Rights
Program rights consist of programming (film and television) acquired from third parties and produced locally, which together form an important component of our station broadcasting schedules. Acquired program rights and the related liabilities are recorded at their gross value when the license period begins and the programs are available for use. Where the initial airing of content allowed by a license is expected to provide more value than subsequent airings, program rights are amortized over their expected useful lives in a manner which reflects the pattern we expect to use and benefit from the programming. These films and series are amortized with the amortization charged in respect of each airing calculated in accordance with a schedule that reflects our estimate of the relative economic value of each run. We review our programming amortization policy on a triennial basis or when events occur or circumstances change that would so require. 

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The program library is evaluated at least quarterly to determine if expected revenues are sufficient to cover the unamortized portion of each program. To the extent that the revenues we expect to earn from broadcasting a program are lower than the book value, the program rights are written down to their net realizable value by recording an impairment charge. Accordingly, our estimates of future advertising and other revenues, and our future broadcasting schedules have a significant impact on the value of our program rights on the consolidated balance sheet and the annual programming amortization charge recorded in the consolidated statement of operations and comprehensive income.income / loss.
Produced Program Rights
We also produce and license a variety of filmed content. The majority of this is television movies and series which are predominantly expected to be exploitedutilized by transmission on our broadcast stations. Produced program rights, which include direct costs, production overhead and development costs, are stated at the lower of cost, net of accumulated amortization, or net realizable value.
When we recognize revenue on a title, we also recognize a proportion of the capitalized film costs in the respective statements of operations using the individual film forecast model. The proportion of costs recognized is equal to the proportion of the revenue recognized compared to the total revenue expected to be generated throughout the title's life cycle (the "ultimate revenues").
Index

The process of evaluating a title's ultimate revenues requires management judgment and is inherently subjective. The calculation of ultimate revenue can be a complex one, however, the level of complexity and subjectivity is correlated to the number of revenue streams that management believes will be earned. Our process for evaluating ultimate revenues is tailored to the potential we believe a title has for generating multiple types of revenues. As already mentioned, the majority of our production is intended primarily for exploitation by our own broadcasters and we have few supportable expectations of generating revenue from other sources. In such cases, we consider mainly the free television window in our calculation of the ultimate revenue. For produced and acquired feature films or other projects where we do have supportable estimates of generating multiple revenue streams, we base our estimates of ultimate revenues for each film on factors such as the historical performance of similar films, the star power of the actors and actresses, the rating and genre of the film, pre-release market research (including test market screenings) and the expected number of theaters in which the film will be released. We update such estimates based on information available on the progress of the film's production and upon release, the actual results of each film. Changes in estimates of ultimate revenues from period to period affect the amount of film costs amortized in a given period and, therefore, could have an impact on our results for that period.
When the estimated ultimate revenues, less additional costs to be incurred (including exploitation costs), are less than the carrying amount of the film costs, the value of a film is deemed to be not recoverable and thus, an immediate write-off of unrecoverable film costs is recorded in the consolidated statements of operations and comprehensive income.income / loss.
Impairment of goodwill, indefinite lived-indefinite-lived intangible assets and long-lived assets
We assess the carrying amount of goodwill and other intangible assets with indefinite lives on an annual basis, or more frequently if events or changes in circumstances indicate that such carrying amount may not be recoverable. Other than our annual review, factors we consider important which could trigger an impairment review include: under-performance of reporting units or changes in projected results, changes in the manner of utilization of the asset, a severe and sustained decline in the price of our shares and negative market conditions or economic trends. Therefore, our judgment as to the future prospects of each business has a significant impact on our results and financial condition. We believe that our assumptions are appropriate. If future cash flows do not materialize as expected or there is a future adverse change in market conditions, we may be unable to recover the carrying amount of an asset, resulting in future impairment losses.
Impairment tests of our goodwill and indefinite-lived intangible assets are performed at the reporting unit level. If potential impairments of goodwill exist, the fair value of the reporting unit is subsequently measured against the fair value of its underlying assets and liabilities, excluding goodwill, to estimate an implied fair value of the reporting unit's goodwill. An impairment loss is recognized for any excess of the carrying amount of the reporting unit's goodwill over the implied fair value. If goodwill and another asset or asset group are tested for impairment at the same time, the other assets are tested for impairment before goodwill. If the other asset or asset group is impaired, this impairment loss is recognized prior to goodwill being tested for impairment. Impairment tests of other intangible assets with indefinite lives are performed at the asset level. An impairment loss is recognized for any excess of the carrying amount of the intangible asset over the fair value.
The fair value of each reporting unit, and consequently the implied fair value of the reporting unit's goodwill, is determined using an income methodology estimating projected future cash flows related to each reporting unit. These projected future cash flows are discounted back to the valuation date. Significant assumptions inherent in the methodology used include estimates of discount rates, future revenue growth rates and a number of other factors, all of which are based on our assessment of the future prospects and the risks inherent at the respective reporting units. We have identified six reporting units which consist of our six geographic operating segments: Bulgaria, Croatia, Czech Republic, Romania, Slovak Republic and Slovenia.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the respective asset. The same estimates are also used in planning for our long- and short-range business planning and forecasting. We assess the reasonableness of the inputs and outcomes of our undiscounted cash flow analysis against available comparable market data. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount exceeds the fair value of the respective asset.
Assessing the fair value of goodwill, indefinite-lived intangible assets and long-lived assets requires significant judgment and involves a great deal of detailed quantitative and qualitative business-specific analysis with several individual assumptions which fluctuate with the passage of time. The table below shows the key measurements involved and the valuation methods applied:
Measurement Valuation Method
Recoverability of carrying amounts Undiscounted future cash flows
Fair value of broadcast licenses Build-out method
Fair value of indefinite-lived trademarks Relief from royalty method
Fair value of reporting units Discounted cash flow model
Our estimate of the cash flows our operations will generate in future periods forms the basis for most of the significant assumptions inherent in our impairment reviews. Our expectations of these cash flows are developed during our long- and short-range business planning processes, which are designed to address the uncertainties inherent in the forecasting process by capturing a range of possible views about key trends which govern future cash flow growth.

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Index

Each method noted above involves a number of significant assumptions over an extended period of time which could materially change our decision as to whether assets are impaired. The most significant of these assumptions include: the discount rate applied, the total advertising market size, achievable levels of market share, forecast OIBDA and capital expenditure and the rate of growth into perpetuity, (see Item 8, Note 4, "Goodwilleach described in more detail below:
Cost of capital: The cost of capital reflects the return a hypothetical market participant would require for a long-term investment in an asset and Intangible Assets"can be viewed as a proxy for discussionthe risk of that asset. We calculate the cost of capital according to the Capital Asset Pricing Model using a number of assumptions, the most significant of which is a Country Risk Premium (“CRP”). The CRP reflects the excess risk to an investor of investing in markets other than the United States and generally fluctuates with expectations of changes in a country's macro-economic environment. The costs of capital that we have applied to cash flows for our 2016 annual impairment test are generally lower than those we had used in the 2015 impairment test due to a decrease in the US risk free rate. Further decreases were noted in Bulgaria, a result of an upgrade in risk rating, and in Romania due to reduced concerns over deflationary pressures.
Total advertising market: The size of the television advertising market effectively places an upper limit on the advertising revenue we can expect to earn in each country. Our estimate of the total advertising market is developed from a number of external sources, in combination with a process of on-going consultation with our segment management teams. In our 2016 annual impairment review, we increased our medium- and long-term view of the size of the television advertising markets compared to the estimates used in the 2015 annual impairment review based on our estimate of the macro economic outlook of our operating markets.
Index

Market share: This is a function of the audience share we expect our stations to generate, and the relative price at which we can sell advertising. Our estimate of the total advertising market is developed from a number of external sources, in combination with a process of on-going consultation with our segment management teams. Our estimates for our market share in our 2016 annual impairment review decreased slightly from those in our 2015 impairment review, however, revenues are expected to increase due to the estimated growth in the total advertising market.
Forecast OIBDA: The level of cash flow generated by each operation is ultimately governed by the extent to which we manage the relationship between revenues and costs. We forecast the level of operating costs by reference to (a) the historical absolute and relative levels of costs we have incurred in generating revenue in each reporting unit, (b) the operating strategy of each business and (c) specific forecast costs to be incurred. Our annual impairment review includes assumptions utilizedto reflect benefits of cost control measures taken to date, and contemplated further cost control efforts.
Forecast capital expenditure: The size and phasing of capital expenditure, both recurring expenditure to replace retired assets and investments in new projects, has a significant impact on cash flows. We forecast the level of future capital expenditure based on current strategies and specific forecast costs to be incurred. The absolute levels of capital expenditure forecast have generally increased since the prior year impairment review due to the replacement of end of life production equipment.
Growth rate into perpetuity: This reflects the level of economic growth in each of our markets from the final year in our discrete forecast period into perpetuity and is the sum of an estimated real growth rate, which reflects our belief that macro-economic growth in our markets will ultimately converge to Western European markets, and long-term expectations for inflation. Our estimates of these rates are based on observable market data and, in most operating countries, have remained broadly consistent with those used in our 2015 annual impairment review).test.
Upon conclusionAssessing goodwill and indefinite-lived intangible assets for impairment is a complex process that requires significant judgment and involves a great deal of detailed quantitative and qualitative business-specific analysis and many individual assumptions which fluctuate with the passage of time. Our estimate of the cash flows our operations will generate in future periods forms the basis for most of the significant assumptions inherent in our impairment reviews. Our expectations of these cash flows are developed during our long- and short-range business planning processes, which are designed to address the uncertainties inherent in the forecasting process by capturing a range of possible views about key trends which govern future cash flow growth. We have observed over many years a strong positive correlation between the macro economic performance of our 2015 annual review, we determined that the fair values of our goodwill and intangible assets were substantially in excess of their respective carrying values. The table below shows the percentage movement in the costs of capital that we applied to each reporting unit with goodwill between the 2015 annual impairment reviewmarkets and the annual impairment review performed in 2014 along with the adverse movement, in percentage terms, required to make the fair valuesize of the reporting unit equal their carrying amounts (with all other assumptions constant):
 Percentage change in cost of capital
Reporting UnitBetween 2014 and 2015 review Increase necessary to break even
Bulgaria0.6% 35.8%
Croatia1.4% 68.8%
Czech Republic0.2% 7.5%
Romania(0.2)% 52.1%
Slovak Republic(0.1)% 110.6%
Slovenia(0.6)% 
N/A 1
(1)
The goodwill in the Slovenia reporting unit was fully impaired in 2013.
For those reporting units with goodwill as at December 31, 2015,television advertising market and the following compoundcash flows we generate. With this in mind, we have considered macro economic trends in determining our cash flow growth rates are necessary to avoid failing Step 1 of the goodwill impairment test. For comparison, we have also included the compound average cash flow growth rates currently implied by our estimates of future cash flows:
Reporting Unit
Break-even growth rate (%)1
 
Growth rate currently implied (%)1
Bulgaria1.2% 15.0%
Croatia47.6% 92.5%
Czech Republic10.4% 13.8%
Romania0.7% 17.4%
Slovak Republic44.0% 66.5%
Slovenia
N/A 2
 
N/A 2
(1)
The break-even growth rates and the implied current growth rates reflect the level of cash currently generated by our operations. These growth rates are calculated by applying a constant annual growth rate to current year cash flow forecasts, with all other variables constant, such that the net present value of all future cash flows to perpetuity equals the carrying amount of the reporting unit’s assets for the break-even rate or our estimate of the fair value of the reporting unit for the rate currently implied. Such rates do not indicate our expectation of cash flow growth in any given year, nor are they necessarily comparable with actual growth rates achieved in previous years.
(2)
The goodwill in the Slovenia reporting unit was fully impaired in 2013.
The table below shows whether an adverse change of 10.0% in any of our most significant assumptions would result in impairment. Where an adverse change of less than 10.0% would result in an impairment, the level of that change is presented parenthetically.
10% Adverse Change in:Indefinite-lived trademarksGoodwill
Cost of CapitalNoneCzech Republic (7.5%)
Television Advertising MarketNoneCroatia (8.0%), Czech Republic (3.5%)
Market ShareNoneCroatia (8.0%), Czech Republic (3.5%)
Forecast OIBDANot applicableNone
Forecast Capital ExpenditureNot applicableNone
Perpetuity Growth RateNoneNone
The fair value of each reporting unit as of December 31, 2015 was substantially in excess of its carrying amount. The balance of goodwill allocated to each reporting unit is presented in Item 8, Note 4, "Goodwill and Intangible Assets".
We consider all current information in respect of performing our impairment reviews and calculating our impairment charges.forecasts. If our cash flow forecasts for our operations deteriorate, or if uncertainty surrounding the Eurozone and its periphery returns causing costs of capital to increase, we may be required to recognize impairment charges in later periods.

39Upon conclusion of our 2016 annual review, we determined that the fair values of our goodwill and indefinite-lived intangible assets were substantially in excess of their respective carrying values. We concluded that the total estimated fair values used for purposes of the test are reasonable by comparing our market capitalization to the results of the discounted cash flow analysis of our reporting units, as adjusted for unallocated corporate assets and liabilities. The balance of goodwill allocated to each reporting unit is presented in Item 8, Note 3, "Goodwill and Intangible Assets".

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Revenue Recognition
Net revenues predominantly comprise revenues from the sale of advertising time less discounts and agency commissions, and fees charged to cable and satellite operators for carriage of our channels. Net revenues are recognized when the advertisement is aired as long as there is persuasive evidence that an arrangement with a customer exists, the price of the delivered advertising time is fixed or determinable, and collection of the arrangement fee is reasonably assured. In the event that a customer falls significantly behind its contractual payment terms, revenue is deferred until the customer has resumed normal payment terms.
Agency commissions, where applicable, are calculated based on a stated percentage applied to gross billing revenue. Advertisers remit the gross billing amount to the agency and the agency remits gross billings, less their commission, to us when the advertisement is not placed directly by the advertiser. Payments received in advance of being earned are recorded as deferred income.
We maintain a bad debt provision for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, additional allowances may be required in future periods. We review the accounts receivable balances periodically and our historical bad debt, customer concentrations and customer creditworthiness when evaluating the adequacy of our provision.
Income Taxes
The provision for income taxes includes local and foreign taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences between the financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled. We evaluate the realizability of our deferred tax assets and establish a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized.
In evaluating the realizability of our deferred tax assets, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Any reduction in estimated forecasted results may require that we record additional valuation allowances against our deferred tax assets. Once a valuation allowance has been established, it will be maintained until there is sufficient positive evidence to conclude that it is more likely than not that such assets will be realized. An ongoing pattern of sustained profitability will generally be considered as sufficient positive evidence. If the allowance is reversed in a future period, our income tax provision will be reduced to the extent of the reversal. Accordingly, the establishment and reversal of valuation allowances has had and could continue to have a significant negative or positive impact on our future earnings.
We measure deferred tax assets and liabilities using enacted tax rates that, if changed, would result in either an increase or decrease in the provision for income taxes in the period of change.
From time to time, we engage in transactions, such as business combinations and dispositions, in which the tax consequences may be subject to uncertainty. Significant judgment is required in assessing and estimating the tax consequences of these transactions. We prepare and file tax returns based on interpretation of tax laws and regulations. In the normal course of business, our tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities. We only recognize tax benefits taken on tax returns when we believe they are “more likely than not” of being sustained upon examination based on their technical merits. There is considerable judgment involved in determining whether positions taken on the tax return are “more likely than not” of being sustained.
We recognize, when applicable, both accrued interest and penalties related to unrecognized benefits in income tax expense in the accompanying consolidated statements of operations and comprehensive income.income / loss.
Index

Foreign exchange
Our reporting currency is the dollar but a significant portion of our consolidated revenues and costs are in other currencies, including programming rights expenses and, following the financing transactions discussedconcluded in Item 8, Note 26, "Subsequent Events",April 2016, interest on all of our Senior Debt.long-term debt. Following the financing transactions, CME Ltd.'s income and expenses are primarily denominated in Euro. It is anticipated that CME Ltd.'s cash flows will primarily be in Euro. Accordingly, management has adetermined that CME Ltd.'s functional currency ofis the dollar.Euro with effect from April 1, 2016. Our other operations have functional currencies other than the dollar.
We record assets and liabilities denominated in a currency other than our functional currency using the exchange rate prevailing at each balance sheet date, with any change in value between reporting periods being recognized as a transaction gain or loss in our consolidated statements of operations and comprehensive income.income / loss. We are exposed to foreign currency on the revaluation of monetary assets and liabilities denominated in currencies other than the local functional currency of the relevant subsidiary. This includes third party receivables and payables, including certain of our Senior Debt which is denominated in Euros, as well as certain intercompany loans, which are generally provided in currencies other than the dollar.
Certain of our intercompany loans are considered to be of a long-term investment nature as the repayment of these loans is neither planned nor anticipated for the foreseeable future. For the yearyears ended December 31, 2016, 2015 2014 and 2013,2014, we recorded foreign exchangea gain of US$ 8.8 million and losses of US$ 89.0 million US$ 164.4 million and US$ 16.4164.4 million, respectively, on the retranslation of these intercompany loans as an adjustment to accumulated other comprehensive income / loss, a component of shareholders' equity.
The financial statements of our operations whose functional currency is other than the dollar are translated from such functional currency to dollars at the exchange rates in effect at the balance sheet date for assets and liabilities, and at weighted average rates for the period for revenues and expenses, including gains and losses. Translational gains and losses are charged or credited to accumulated other comprehensive income / loss, a component of equity.
Determination of the functional currency of an entity requires considerable management judgment. This includes our assessment of a series of indicators, such as the currency in which a majority of sales transactions are negotiated, expense incurred or financing secured. If the nature of our business operations changes, such as by changing the currency in which sales transactions are denominated or by incurring significantly more expenditure in a different currency, we may be required to change the functional currency of some of our operations, potentially changing the amounts we report as transaction gains and losses in the consolidated statements of operations and comprehensive income / loss as well as the translational gains and losses charged or credited to accumulated other comprehensive income.income / loss. In establishing functional currency, specific facts and circumstances are considered carefully, and judgment is exercised as to what types of information might be most useful to investors. Once the financing transactions discussed in Item 8, Note 26, "Subsequent Events" are completed, we plan to assess whether a change in the economic facts and circumstances indicate that the functional currency of CME Ltd. has changed.

40

Index

Contingencies
We are, from time to time, involved in certain legal proceedings and, as required, accrue our estimate of the probable costs for the resolution for these claims. These estimates are developed in consultation with legal counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings. See Item 8, Note 22,20, "Commitments and Contingencies" for more detailed information on our litigation and other contingencies.
Recent Accounting Pronouncements
See Item 8, Note 2, "Basis of Presentation and Summary of Significant Accounting Policies" for a discussion of accounting standards adopted and recently issued accounting standards not yet adopted.
V.    Related Party Matters
We consider our related parties to be thoseour officers, directors and shareholders who have direct control and/or influence andover the Company as well as other parties that can significantly influence management. As stated in Accounting Standards Codification 850, Related Party Disclosures, transactions involving related parties cannot necessarily be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. We have entered into related party transactions in all of our markets.markets, mainly for the purchase of program rights. In addition, Time Warner guarantees 100% of our outstanding senior indebtedness and is the lender under the 2021 Revolving Credit Facility. For a detailed discussion of all such transactions, see Item 8, Note 23,21, "Related Party Transactions" and Part III, Item 13, "Certain Relationships and Related Transactions, and Director Independence."

41

Index

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We engage in activities that expose us to various market risks, including the effect of changes in foreign currency exchange rates and interest rates. We do not engage in speculative transactions, nor do we hold or issue financial instruments for trading purposes. The table below sets forth our market risk sensitive instruments as at the following dates:
December 31, 2015:2016:
Expected Maturity Dates 2015
 2016
 2017
 2018
 2019
 Thereafter
 2017
 2018 2019
 2020
 2021
 Thereafter
Long-term Debt (000's):                        
Variable rate (EUR) 1
 
 
 250,800
 
 235,335
 
 
 250,800
 235,335
 
 468,800
 
Average interest rate 
 
 1.50% 
 1.50% 
 
 1.50% 1.50% 
 1.50% 
Fixed rate (US$) 
 
 540,698
 
 
 
Average interest rate 
 
 15.00% 
 
 
                        
Interest Rate Swaps (000's):                        
Variable to fixed (EUR) 
 
 250,800
 
 235,335
 
 250,800
 250,800
(2) 
 235,335
 
 468,800
 
Average pay rate 
 
 0.21% 
 0.31% 
 0.21% 0.14% 0.31% 
 0.28% 
Average receive rate 
 
 % 
 % 
 % % % 
 % 
(1) 
As discussed in Item 8, Note 5,4, "Long-term Debt and Other Financing Arrangements", as consideration for Time Warner's guarantee of the Euro Term Loans, we pay Guarantee Fees to Time Warner based on the amounts outstanding on the Euro Term Loans, each calculated such that the all-in borrowing rate on each the 2018 Euro Term Loan and the 2019 Euro Term Loan is 8.5% per annum and the all-in borrowing rate on the 2021 Euro Term Loan is 9.0% per annum.
(2)
The interest rate swaps maturing in 2018 are forward starting to coincide with the maturity date of the interest rate swaps maturing in 2017. See Item 8, Note 13, "Financial Instruments and Fair Value Measurements".
December 31, 2015:
Expected Maturity Dates 2016
 2017
 2018
 2019
 2020
 Thereafter
Long-term Debt (000's):            
Variable rate (EUR) 1
 
 250,800
 
 235,335
 
 
Average interest rate 
 1.50% 
 1.50% 
 
Fixed rate (US$) 
 540,698
 
 
 
 
Average interest rate 
 15.00% 
 
 
 
             
Interest Rate Swaps (000's):            
Variable to fixed (EUR) 
 250,800
 
 235,335
 
 
Average pay rate 
 0.21% 
 0.31% 
 
Average receive rate 
 % 
 % 
 
(1)
As discussed in Item 8, Note 4, "Long-term Debt and Other Financing Arrangements", as consideration for Time Warner's guarantee of the Euro Term Loans, we pay guarantee feesGuarantee Fees to Time Warner based on the amounts outstanding on the 2018 Euro Term Loan and the 2019 Euro Term Loan, each calculated such that the all-in borrowing rate on a per annum basis equal toeach is 8.5% minus the rate of interest paid by CME to the lenders under the 2018 Euro Term Loan and the 2019 Euro Term Loan, respectively..
2015 Pro Forma (Unaudited):
As discussed in Item 8, Note 26, "Subsequent Events", we entered into a series of related financing transactions on February 19, 2016. The table below sets forth our market risk sensitive instruments, as adjusted to give effect to (i) the funding of the 2021 Euro Term Loan, the proceeds of which will be drawn on or about April 7, 2016 and be applied to repay the 2017 Term Loan and redeem the 2017 PIK Notes and discharge their indenture, which we expect will be completed on or about April 8, 2016 and (ii) the extension of the maturity date of the 2018 Euro Term Loan by one year to November 1, 2018, with effect from the drawing of the 2021 Euro Term Loan. These transactions are subject to customary closing conditions (including the drawdown of the 2021 Euro Term Loan, the accuracy of representations, the absence of events of default and the absence of material adverse changes), certain of which are outside our direct control.
PRO FORMA
(Unaudited)
Expected Maturity Dates 2015
 2016
 2017
 2018
 2019
 Thereafter
Long-term Debt (000's):            
Variable rate (EUR) 
 
 
 
 250,800
 235,335
 468,800
Average interest rate (1)
 
 
 
 1.50% 1.50% 
(2) 

             
Interest Rate Swaps (000's):            
Variable to fixed (EUR) 
 
 
 250,800
 235,335
 468,800
Average pay rate 
 
 
 0.21% 0.31% 
(3) 

Average receive rate 
 
 
 % % 
(3) 

(1)
As discussed in Item 8, Note 5, "Long-term Debt and Other Financing Arrangements", as consideration for Time Warner's guarantee of the 2018 Euro Term Loan and the 2019 Euro Term Loan, we pay guarantee fees to Time Warner based on the amounts outstanding on the 2018 Euro Term Loan and the 2019 Euro Term Loan, each calculated on a per annum basis equal to 8.5% minus the rate of interest paid by CME to the lenders under the 2018 Euro Term Loan and the 2019 Euro Term Loan, respectively.
(2)
The interest rate on the 2021 Euro Term Loan will be set at prevailing three-month EURIBOR as of the date of the drawdown, plus a margin of between 1.07% and 1.90%. The rate on the 2021 Euro Term Loan, if available to be drawn at December 31, 2015, would have been 1.50%. As consideration for Time Warner's guarantee of the 2021 Euro Term Loan, we will pay a guarantee fee to Time Warner on the amount outstanding on the 2021 Euro Term Loan calculated on a per annum basis equal to 10.5% (based on our net leverage ratio at December 31, 2015) minus the actual rate of interest paid by CME to the lenders under the 2021 Euro Term Loan.
(3)
Prior to drawing the 2021 Euro Term Loan, we will enter into interest rate swaps to reduce our exposure to interest rate movements until the maturity of the 2021 Euro Term Loan on February 19, 2021. The rates on the interest rate swaps will be based on prevailing three-month EURIBOR.

42

Index

December 31, 2014:
Expected Maturity Dates 2015
 2016
 2017
 2018
 2019
 Thereafter
Long-term Debt (000's):            
Variable rate (EUR) 1
 
 
 250,800
 
 
 
Average interest rate 
 
 1.58% 
 
 
Variable rate (US$) 
 
 25,000
 
 
 
Average interest rate 
 
 10.00% 
 
 
Fixed rate (US$) 261,034
 
 467,885
 
 
 
Average interest rate 5.00% 
 15.00% 
 
 
             
Interest Rate Swaps (000's):            
Variable to fixed (EUR) 
 
 250,800
 
 
 
Average pay rate 
 
 0.21% 
 
 
Average receive rate 
 
 0.08% 
 
 
(1)
As discussed in Item 8, Note 5, "Long-term Debt and Other Financing Arrangements", as consideration for Time Warner's guarantee of the 2018 Euro Term Loan and the 2019 Euro Term Loan, we pay guarantee fees to Time Warner based on the amounts outstanding on the 2018 Euro Term Loan and the 2019 Euro Term Loan, each calculated on a per annum basis equal to 8.5% minus the rate of interest paid by CME to the lenders under the 2018 Euro Term Loan and the 2019 Euro Term Loan, respectively.
Foreign Currency Exchange Risk Management
We conduct business in a number of currencies other than our functional currencies, including our 2018 Euro Term Loan, 2019 Euro Term Loan and 2021 Euro Term Loan (once drawn) which are denominated in Euro.currencies. As a result, we are subject to foreign currency exchange rate risk due to the effects that foreign exchange rate movements of these currencies have on our costs and on the cash flows we receive from our subsidiaries. In limited instances, including the transaction noted below, we enter into forward foreign exchange contracts to minimize foreign currency exchange rate risk. We had no such agreements outstanding at December 31, 2016.
On January 31, 2017, we entered into a forward foreign exchange contract to reduce our exposure to movements in the USD to EUR exchange rates related to contractual payments under dollar-denominated agreements to be made during 2017 with an aggregate notional amount of approximately US$ 24.1 million.
We have not attempted to hedge the foreign currency exchange risk on the 2018 Euro Term Loan and the 2019 Euro Term LoanLoans and therefore may continue to experience significant gains and losses on the translation of these instruments into dollars due to movements in exchange rates between the Euro and the dollar.
On December 3, 2015, we entered into two forward foreign exchange contracts to reduce our exposure to movements in the USD to EUR exchange rates related to contractual payments under dollar-denominated agreements to be made during 2016. At December 31, 2015, forward foreign exchange contracts with aggregate notional amount of approximately US$ 49.5 million were outstanding.
Interest Rate Risk Management
The 2018 Euro Term Loan and the 2019 Euro Term LoanLoans each bear interest at a variable rate based on EURIBOR plus an applicable margin. We are party to a number of interest rate swap agreements intended to reduce our exposure to interest rate movements (see Item 8, Note 14,13, "Financial Instruments and Fair Value Measurements").

43

Index

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements and Supplementary data begin on the following page and end on the page immediately preceding Item 9.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Central European Media Enterprises Ltd.
We have audited the accompanying consolidated balance sheetssheet of Central European Media Enterprises Ltd. as of December 31, 2016, and the related consolidated statements of operations and comprehensive income / loss, equity and cash flows for the year ended December 31, 2016. Our audit also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Central European Media Enterprises Ltd. at December 31, 2016, and the consolidated results of its operations and its consolidated cash flows for the year ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Central European Media Enterprises Ltd.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organisations of the Treadway Commission (2013 Framework) and our report dated February 9, 2017 expressed an unqualified opinion thereon.
ERNST & YOUNG LLP
London, United Kingdom
February 9, 2017

Index

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Central European Media Enterprises Ltd.
We have audited, before the effects of the adjustments to retrospectively apply the change in accounting discussed in Note 2 to the consolidated financial statements related to the adoption of ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, the consolidated balance sheet of Central European Media Enterprises Ltd. and subsidiaries (the "Company") as of December 31, 2015, and 2014, and the related consolidated statements of operations and comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2015.2015 and 2014 (the 2015 and 2014 consolidated financial statements before the effects of the adjustments discussed in Note 2 to the consolidated financial statements are not presented herein). Our audits also included the financial statement schedule listed in the Index at Item 15.15 as it relates to 2015 and 2014. These financial statements and the financial statement schedule are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such 2015 and 2014 consolidated financial statements, before the effects of the adjustments to retrospectively apply the change in accounting discussed in Note 2 to the consolidated financial statements, present fairly, in all material respects, the financial position of Central European Media Enterprises Ltd. and subsidiaries as of December 31, 2015, and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 and 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedule, as it relates to 2015 and 2014, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in accounting discussed in Note 2 to the consolidated financial statements and, accordingly, we do not express an opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have alsobeen properly applied. Those retrospective adjustments were audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2016 expressed an unqualified opinion on the Company's internal control over financial reporting.other auditors.
DELOITTE LLP
London, United Kingdom
February 22, 2016

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Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONSOLIDATED BALANCE SHEETS
(US$ 000’s, except share and per share data)

 December 31, 2015
 December 31, 2014
ASSETS   
Current assets   
Cash and cash equivalents$61,679
 $34,298
Accounts receivable, net (Note 7)167,427
 175,866
Program rights, net (Note 6)85,972
 99,358
Other current assets (Note 8)43,206
 35,481
Assets held for sale
 29,866
Total current assets358,284
 374,869
Non-current assets   
Property, plant and equipment, net (Note 9)108,522
 114,335
Program rights, net (Note 6)169,073
 207,264
Goodwill (Note 4)622,243
 681,398
Broadcast licenses and other intangible assets, net (Note 4)151,162
 183,378
Other non-current assets (Note 8)44,917
 58,116
Total non-current assets1,095,917
 1,244,491
Total assets$1,454,201
 $1,619,360
LIABILITIES AND EQUITY   
Current liabilities   
Accounts payable and accrued liabilities (Note 10)$134,705
 $179,224
Current portion of long-term debt and other financing arrangements (Note 5)1,155
 252,859
Other current liabilities (Note 11)10,448
 7,812
Liabilities held for sale
 10,632
Total current liabilities146,308
 450,527
Non-current liabilities 
  
Long-term debt and other financing arrangements (Note 5)922,305
 621,240
Other non-current liabilities (Note 11)65,749
 46,485
Total non-current liabilities988,054
 667,725
Commitments and contingencies (Note 22)

 

Temporary equity   
200,000 shares of Series B Convertible Redeemable Preferred Stock of US$ 0.08 each
(December 31, 2014 - 200,000) (Note 12)
241,198
 223,926
EQUITY 
  
CME Ltd. shareholders’ equity (Note 13): 
  
One share of Series A Convertible Preferred Stock of US$ 0.08 each (December 31, 2014 – one)
 
135,804,221 shares of Class A Common Stock of US$ 0.08 each (December 31, 2014 – 135,335,258)10,864
 10,827
Nil shares of Class B Common Stock of US$ 0.08 each (December 31, 2014 – nil)
 
Additional paid-in capital1,914,050
 1,928,920
Accumulated deficit(1,605,245) (1,490,344)
Accumulated other comprehensive loss(242,409) (169,609)
Total CME Ltd. shareholders’ equity77,260
 279,794
Noncontrolling interests1,381
 (2,612)
Total equity78,641
 277,182
Total liabilities and equity$1,454,201
 $1,619,360
 December 31, 2016
 December 31, 2015
ASSETS   
Current assets   
Cash and cash equivalents$43,459
 $61,679
Accounts receivable, net (Note 6)178,339
 167,427
Program rights, net (Note 5)86,151
 85,972
Other current assets (Note 7)32,471
 43,206
Total current assets340,420
 358,284
Non-current assets   
Property, plant and equipment, net (Note 8)109,089
 108,522
Program rights, net (Note 5)179,356
 169,073
Goodwill (Note 3)602,069
 622,243
Other intangible assets, net (Note 3)138,340
 151,162
Other non-current assets (Note 7)21,443
 31,133
Total non-current assets1,050,297
 1,082,133
Total assets$1,390,717
 $1,440,417
LIABILITIES AND EQUITY   
Current liabilities   
Accounts payable and accrued liabilities (Note 9)$160,981
 $134,705
Current portion of long-term debt and other financing arrangements (Note 4)1,494
 1,155
Other current liabilities (Note 10)9,089
 10,448
Total current liabilities171,564
 146,308
Non-current liabilities 
  
Long-term debt and other financing arrangements (Note 4)1,002,028
 908,521
Other non-current liabilities (Note 10)68,758
 65,749
Total non-current liabilities1,070,786
 974,270
Commitments and contingencies (Note 20)

 

TEMPORARY EQUITY   
200,000 shares of Series B Convertible Redeemable Preferred Stock of $0.08 each (December 31, 2015 - 200,000) (Note 11)254,899
 241,198
EQUITY 
  
CME Ltd. shareholders’ equity (Note 12): 
  
One share of Series A Convertible Preferred Stock of $0.08 each (December 31, 2015 – one)
 
143,449,913 shares of Class A Common Stock of $0.08 each (December 31, 2015 – 135,804,221)11,476
 10,864
Nil shares of Class B Common Stock of $0.08 each (December 31, 2015 – nil)
 
Additional paid-in capital1,910,244
 1,914,050
Accumulated deficit(1,785,536) (1,605,245)
Accumulated other comprehensive loss(243,988) (242,409)
Total CME Ltd. shareholders’ (deficit) / equity(107,804) 77,260
Noncontrolling interests1,272
 1,381
Total (deficit) / equity(106,532) 78,641
Total liabilities and equity$1,390,717
 $1,440,417
The accompanying notes are an integral part of these consolidated financial statements.

45

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / LOSS
(US$ 000’s, except share and per share data)

 For The Year Ending December 31,
 2015

2014
 2013
Net revenues$605,841
 $680,793
 $633,134
Operating expenses:     
Content costs292,602
 358,379
 422,115
Other operating costs69,727
 85,478
 104,519
Depreciation of property, plant and equipment27,943

32,836

37,175
Amortization of broadcast licenses and other intangibles (Note 4)12,271

12,348

14,761
Cost of revenues402,543
 489,041
 578,570
Selling, general and administrative expenses107,001
 143,616
 136,393
Restructuring costs (Note 15)1,714
 9,856
 18,512
Impairment charge (Note 4)



79,676
Operating income / (loss)94,583

38,280
 (180,017)
Interest expense (Note 16)(171,444) (142,005) (111,709)
Loss on extinguishment of debt

(39,203)
(23,115)
Non-operating (expense) / income, net (Note 17)(25,939) (9,895) 20,414
Loss before tax(102,800) (152,823) (294,427)
Credit for income taxes (Note 19)515
 1,358
 17,993
Loss from continuing operations(102,285) (151,465) (276,434)
Loss from discontinued operations, net of tax (Note 3)(13,287) (80,431) (5,099)
Net loss(115,572) (231,896) (281,533)
Net loss attributable to noncontrolling interests671
 4,468
 3,882
Net loss attributable to CME Ltd.$(114,901) $(227,428) $(277,651)
      
Net loss$(115,572) $(231,896) $(281,533)
Other comprehensive loss:     
Currency translation adjustment(89,714) (156,236) (58,200)
Unrealized loss on derivative instruments (Note 14)(839) (581) 
Total other comprehensive loss(90,553) (156,817) (58,200)
Comprehensive loss(206,125) (388,713) (339,733)
Comprehensive (income) / loss attributable to noncontrolling interests(712) 3,505
 4,103
Comprehensive loss attributable to CME Ltd.$(206,837) $(385,208) $(335,630)
PER SHARE DATA (Note 20):     
Net loss per share:     
Continuing operations - Basic$(0.81) $(1.11) $(2.23)
Continuing operations - Diluted(0.81) (1.11) (2.23)
Discontinued operations - Basic(0.09) (0.55) (0.04)
Discontinued operations - Diluted(0.09) (0.55) (0.04)
Net loss attributable to CME Ltd. - Basic(0.90) (1.66) (2.27)
Net loss attributable to CME Ltd. - Diluted(0.90) (1.66) (2.27)
      
Weighted average common shares used in computing per share amounts (000’s):     
Basic146,866
 146,509
 125,723
Diluted146,866
 146,509
 125,723
 For The Year Ended December 31,
 2016

2015
 2014
Net revenues$638,013
 $605,841
 $680,793
Operating expenses:     
Content costs306,013
 292,602
 358,379
Other operating costs69,353
 69,727
 85,478
Depreciation of property, plant and equipment30,190

27,943

32,836
Amortization of intangibles8,270

12,271

12,348
Cost of revenues413,826
 402,543
 489,041
Selling, general and administrative expenses112,598
 107,001
 143,616
Restructuring costs
 1,714
 9,856
Operating income111,589

94,583
 38,280
Interest expense (Note 14)(132,224) (171,444) (142,005)
Loss on extinguishment of debt (Note 4)(150,158)


(39,203)
Non-operating expense, net (Note 15)(2,487) (25,939) (9,895)
Loss before tax(173,280) (102,800) (152,823)
(Provision) / credit for income taxes (Note 17)(7,317) 515
 1,358
Loss from continuing operations(180,597) (102,285) (151,465)
Loss from discontinued operations, net of tax
 (13,287) (80,431)
Net loss(180,597) (115,572) (231,896)
Net loss attributable to noncontrolling interests306
 671
 4,468
Net loss attributable to CME Ltd.$(180,291) $(114,901) $(227,428)
      
Net loss$(180,597) $(115,572) $(231,896)
Other comprehensive loss:     
Currency translation adjustment1,649
 (89,714) (156,236)
Unrealized loss on derivative instruments (Note 13)(3,031) (839) (581)
Total other comprehensive loss(1,382) (90,553) (156,817)
Comprehensive loss(181,979) (206,125) (388,713)
Comprehensive loss / (income) attributable to noncontrolling interests109
 (712) 3,505
Comprehensive loss attributable to CME Ltd.$(181,870) $(206,837) $(385,208)
PER SHARE DATA (Note 18):     
Net loss per share:     
Continuing operations attributable to CME Ltd. - Basic and diluted$(1.28) $(0.81) $(1.11)
Discontinued operations attributable to CME Ltd. - Basic and diluted
 (0.09) (0.55)
Net loss attributable to CME Ltd. - Basic and diluted(1.28) (0.90) (1.66)
      
Weighted average common shares used in computing per share amounts (000’s):     
Basic and diluted151,017
 146,866
 146,509
The accompanying notes are an integral part of these consolidated financial statements.

46

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONSOLIDATED STATEMENTS OF EQUITY
(US$ 000’s, except share data)

CME Ltd. 
 
CME Ltd. 
 
Series A Convertible Preferred Stock 
Class A
Common Stock
 
Class B
Common Stock
 
 
 
 
 
Series A Convertible Preferred Stock 
Class A
Common Stock
 
Class B
Common Stock
 
 
 
 
 
Number of sharesPar value Number of sharesPar value Number of sharesPar valueAdditional Paid-In Capital
Accumulated Deficit
Accumulated Other Comprehensive Income / (Loss)
Noncontrolling Interest
Total Equity
Number of sharesPar value Number of sharesPar value Number of sharesPar valueAdditional Paid-In Capital
Accumulated Deficit
Accumulated Other Comprehensive Loss
Noncontrolling Interest
Total Equity / (Deficit)
BALANCE
December 31, 2012
1
$
 77,185,129
$6,174
 
$
$1,556,250
$(982,513)$46,150
$5,206
$631,267
Stock-based compensation

 

 

6,116



6,116
Share issuance, stock based compensation

 519,382
42
 

(42)



Share issuances

 57,132,931
4,571
 

147,082



151,653
Acquisition of noncontrolling interest

 

 

(261)

261

Reclassification of capped call options

 

 

2,752
(2,752)


Preferred dividend paid in kind

 

 

(7,890)


(7,890)
Other

 

 

59



59
Dividends

 

 




(471)(471)
Net loss

 

 


(277,651)
(3,882)(281,533)
Currency translation adjustment

 

 



(57,979)(221)(58,200)
BALANCE
December 31, 2013
1
$
 134,837,442
$10,787
 
$
$1,704,066
$(1,262,916)$(11,829)$893
$441,001
1
$
 134,837,442
$10,787
 
$
$1,704,066
$(1,262,916)$(11,829)$893
$441,001
Stock-based compensation

 

 

1,344



1,344


 

 

1,344



1,344
Warrant issuance, net

 

 

239,586



239,586


 

 

239,586



239,586
Share issuance, stock based compensation

 497,816
40
 

(40)





 497,816
40
 

(40)



Preferred dividend paid in kind

 

 

(16,036)


(16,036)

 

 

(16,036)


(16,036)
Net loss

 

 


(227,428)
(4,468)(231,896)

 

 


(227,428)
(4,468)(231,896)
Unrealized loss on derivative instruments

 

 



(581)
(581)

 

 



(581)
(581)
Currency translation adjustment

 

 



(157,199)963
(156,236)

 

 



(157,199)963
(156,236)
BALANCE
December 31, 2014
1
$
 135,335,258
$10,827
 
$
$1,928,920
$(1,490,344)$(169,609)$(2,612)$277,182
1
$
 135,335,258
$10,827
 
$
$1,928,920
$(1,490,344)$(169,609)$(2,612)$277,182
Stock-based compensation

 

 

2,439



2,439


 

 

2,439



2,439
Share issuance, stock based compensation

 468,963
37
 

(37)



Preferred dividend paid in kind

 

 

(17,272)


(17,272)

 

 

(17,272)


(17,272)
Share issuance, stock-based compensation

 468,963
37
 

(37)



Net loss

 

 


(114,901)
(671)(115,572)

 

 


(114,901)
(671)(115,572)
Unrealized loss on derivative instruments

 

 



(839)
(839)

 

 



(839)
(839)
Currency translation adjustment

 

 



(91,097)1,383
(89,714)

 

 



(91,097)1,383
(89,714)
Reclassified to net income upon sale of subsidiaries

 

 



19,136
3,281
22,417


 

 



19,136
3,281
22,417
BALANCE
December 31, 2015
1
$
 135,804,221
$10,864
 
$
$1,914,050
$(1,605,245)$(242,409)$1,381
$78,641
1
$
 135,804,221
$10,864
 
$
$1,914,050
$(1,605,245)$(242,409)$1,381
$78,641
Stock-based compensation

 

 

3,510



3,510
Exercise of warrants (Note 12)

 6,996,955
560
 

6,437



6,997
Share issuance, stock-based compensation

 648,737
52
 

(52)



Preferred dividend paid in kind

 

 

(13,701)


(13,701)
Net loss

 

 


(180,291)
(306)(180,597)
Unrealized loss on derivative instruments

 

 



(3,031)
(3,031)
Currency translation adjustment

 

 



1,452
197
1,649
BALANCE
December 31, 2016
1
$
 143,449,913
$11,476
 
$
$1,910,244
$(1,785,536)$(243,988)$1,272
$(106,532)
The accompanying notes are an integral part of these consolidated financial statements.

47

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US$ 000’s)

For The Year Ending December 31,For The Year Ended December 31,
2015
 2014
 2013
2016
 2015
 2014
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss$(115,572) $(231,896) $(281,533)$(180,597) $(115,572) $(231,896)
Adjustments to reconcile net loss to net cash generated from / (used in) continuing operating activities: 
     
    
Loss from discontinued operations, net of tax (Note 3)13,287
 80,431
 5,099
Loss from discontinued operations, net of tax
 13,287
 80,431
Amortization of program rights292,602
 349,819
 415,931
306,013
 292,602
 349,819
Depreciation and other amortization96,928
 82,619
 63,325
60,557
 96,928
 82,619
Interest paid in kind81,529
 37,884
 
45,289
 81,529
 37,884
Loss on extinguishment of debt
 39,203
 23,115
150,158
 
 39,203
Impairment charge (Note 4)
 
 79,676
Loss / (gain) on disposal of fixed assets17,617
 (112) (109)
Stock-based compensation (Note 18)2,439
 1,344
 6,116
Change in fair value of derivatives (Note 14)(7,333) 
 (104)
Foreign currency exchange loss / (gain), net1,491
 (5,952) (18,856)
(Gain) / loss on disposal of fixed assets(299) 17,617
 (112)
Stock-based compensation (Note 16)3,510
 2,439
 1,344
Change in fair value of derivatives (Note 13)11,473
 (7,333) 
Foreign currency exchange (gain) / loss, net(8,604) 1,491
 (5,952)
Net change in (net of effects of disposals of businesses):   
     
  
Accounts receivable, net(8,077) (26,539) 4,382
(18,142) (8,077) (26,539)
Accounts payable and accrued liabilities6,161
 (10,549) 28,227
2,601
 6,161
 (10,549)
Program rights(303,111) (388,436) (357,369)(317,328) (303,111) (388,436)
Other assets and liabilities(7,384) 721
 2,256
628
 (7,384) 721
Accrued interest14,101
 (9,995) (8,682)(27,240) 14,101
 (9,995)
Income taxes payable(303) 2,948
 (6,419)5,319
 (303) 2,948
Deferred revenue3,913
 (1,012) (984)(2,000) 3,913
 (1,012)
Deferred taxes(1,671) (2,206) (14,512)1,494
 (1,671) (2,206)
VAT and other taxes payable(740) 16,486
 (629)1,085
 (740) 16,486
Net cash generated from / (used in) continuing operating activities$85,877
 $(65,242) $(61,070)$33,917
 $85,877
 $(65,242)
          
CASH FLOWS FROM INVESTING ACTIVITIES: 
  
   
  
  
Purchase of property, plant and equipment$(33,517) $(28,685) $(30,118)$(29,567) $(33,517) $(28,685)
Disposal of property, plant and equipment3,091
 137
 283
211
 3,091
 137
Net cash used in continuing investing activities$(30,426) $(28,548) $(29,835)$(29,356) $(30,426) $(28,548)
          
CASH FLOWS FROM FINANCING ACTIVITIES: 
  
   
  
  
Proceeds from debt533,963
 253,051
 550,421
Repayments of debt$(261,034) $(712,919) $(310,322)$(540,699) $(261,034) $(712,919)
Debt transactions costs(1,541) (14,206) (785)(9,541) (1,541) (14,206)
Issuance of debt253,051
 550,421
 
Change in restricted cash
 
 20,605
Proceeds from credit facilities
 25,000
 40

 
 25,000
Payment of credit facilities and capital leases(27,365) (1,080) (1,648)(1,357) (27,365) (1,080)
Issuance of common stock
 191,825
 157,116

 
 191,825
Settlement of forward currency swaps7,983
 
 
(12,106) 7,983
 
Issuance of preferred stock
 
 200,000
Equity issuance costs
 
 (5,410)
Proceeds from exercise of warrants6,997
 
 
Other
 (46) (352)
 
 (46)
Net cash (used in) / provided by continuing financing activities$(28,906) $38,995
 $59,244
$(22,743) $(28,906) $38,995
          
Net cash used in discontinued operations - operating activities(3,019) (1,408) (1,952)
 (3,019) (1,408)
Net cash provided by / (used in) discontinued operations - investing activities6,598
 (228) (301)1,194
 6,598
 (228)
Net cash (used in) / provided by discontinued operations - financing activities(76) (942) 77
Net cash used in discontinued operations - financing activities
 (76) (942)
          
Impact of exchange rate fluctuations on cash(2,667) (10,651) (384)(1,232) (2,667) (10,651)
Net increase / (decrease) in cash and cash equivalents$27,381
 $(68,024) $(34,221)
Net (decrease) / increase in cash and cash equivalents$(18,220) $27,381
 $(68,024)
CASH AND CASH EQUIVALENTS, beginning of period34,298
 102,322
 136,543
61,679
 34,298
 102,322
CASH AND CASH EQUIVALENTS, end of period$61,679
 $34,298
 $102,322
$43,459
 $61,679
 $34,298
The accompanying notes are an integral part of these consolidated financial statements.

48

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US$ 000’s)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash paid for interest$18,457
 $76,154
 $108,344
Cash paid for income taxes, net of refunds805
 (2,234) 6,478
Cash paid for interest (including mandatory cash-pay Guarantee Fees)$53,982
 $18,457
 $76,154
Cash paid for Guarantee Fees that may be paid in kind37,440
 
 
Cash paid / (received) for income taxes, net of refunds290
 805
 (2,234)
          
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:          
Accretion on Series B Convertible Redeemable Preferred Stock$17,272
 $16,036
 $7,890
$13,701
 $17,272
 $16,036
Interest paid in kind81,529
 37,884
 
Acquisition of property, plant and equipment under capital lease1,511
 1,088
 1,225
1,193
 1,511
 1,088
The accompanying notes are an integral part of these consolidated financial statements.

49

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)



1.    ORGANIZATION AND BUSINESS
Central European Media Enterprises Ltd., a Bermuda company limited by shares, is a media and entertainment company operating in Central and Eastern Europe. Our assets are held through a series of Dutch and Curaçao holding companies. We manage our business on a geographical basis, with six operating segments, Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic and Slovenia, which are also our reportable segments and our main operating countries. See Note 21,19, "Segment Data" for financial information by segment.
We have market leading broadcast operations in six countries in Central and Eastern Europe broadcasting a total of 36 television channels. Each country also develops and produces content for their television channels. We generate advertising revenues in our country operations primarily through entering into agreements with advertisers, advertising agencies and sponsors to place advertising on the television channels that we operate. We generate additional revenues by collecting fees from cable, and direct-to-home (“DTH”) and IPTV operators for carriage of our channels. Unless otherwise indicated, we own 100% of our broadcast operating and license companies in each country.
Bulgaria
We operate one general entertainment channel, BTV, and five other channels, BTV CINEMA, BTV COMEDY, RING, BTV ACTION and BTV LADY. We own 94% of CME Bulgaria B.V. ("CME Bulgaria"), the subsidiary that owns our Bulgaria operations.
Croatia
We operate one general entertainment channel, NOVA TV (Croatia) and three other channels, DOMA (Croatia), NOVA WORLD and MINI TV.
Czech Republic
We operate one general entertainment channel, TV NOVA (Czech Republic), and seven other channels, NOVA CINEMA, NOVA SPORT 1, NOVA SPORT 2, a premium sport-related channel launched on September 5, 2015, FANDA, SMICHOV, TELKANOVA ACTION (formerly FANDA), NOVA 2 (formerly SMICHOV), NOVA GOLD (formerly TELKA) and NOVA INTERNATIONAL, a general entertainment channel broadcasting in the Slovak Republic launched on February 1, 2016.Republic.
Romania
We operate one general entertainment channel, PRO TV, and eight other channels, ACASA, ACASA GOLD, PRO CINEMA, SPORT.RO, MTV ROMANIA, PRO TV INTERNATIONAL, PRO TV CHISINAU, a general entertainment channel broadcasting in Moldova, and ACASA IN MOLDOVA.
Slovak Republic
We operate one general entertainment channel, TV MARKIZA, and three other channels, DOMA (Slovak Republic), DAJTO, and MARKIZA INTERNATIONAL, a general entertainment channel broadcasting in the Czech Republic launched on February 1, 2016.Republic.
Slovenia
We operate two general entertainment channels, POP TV and KANAL A, and three other channels, KINO, BRIO and OTO.
2.    BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The terms the “Company”, “we”, “us”, and “our” are used in this Form 10-K to refer collectively to the parent company, Central European Media Enterprises Ltd. (“CME Ltd.”), and the subsidiaries through which our various businesses are conducted. Unless otherwise noted, all statistical and financial information presented in this report has been converted into U.S. dollars using period-end exchange rates. All references to “US$”, “USD” or “dollars” are to U.S. dollars, all references to “BGN” are to Bulgarian leva, all references to “HRK” are to Croatian kuna, all references to “CZK” are to Czech koruna, all references to “RON” are to the New Romanian lei and all references to “Euro” or “EUR” are to the European Union Euro.
Basis of Consolidation
The consolidated financial statements include the accounts of CME Ltd. and our subsidiaries, after the elimination of intercompany accounts and transactions. Entities in which we hold less than a majority voting interest but over which we have the ability to exercise significant influence are accounted for using the equity method. Other investments are accounted for using the cost method.
Change in Presentation
In the third quarter of 2015, we condensed our presentation of certain non-operating income and expenses in our consolidated statements of operations and comprehensive income. Prior period comparative amounts have been reclassified to conform to the current year presentation. See Note 17, "Other Non-operating Income / Expense" for further detail.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America ("US GAAP")GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.
Summary of Critical and Significant Accounting Policies
The following is a discussion of each of the Company’s critical accounting policies, including information and analysis of estimates and assumptions involved in their application, and other significant accounting policies.
Revenue Recognition
Revenue is recognized when there is persuasive evidence of an arrangement, delivery of products has occurred or services have been rendered, the price is fixed or determinable and collectibility is reasonably assured. A bad debt provision is maintained for estimated losses resulting from our customers' subsequent inability to make payments.

50

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Revenues are recognized net of discounts and customer sales incentives. Our principal revenue streams and their respective accounting treatments are discussed below:
Advertising revenue
Revenues primarily result from the sale of advertising time. Television advertising revenue is recognized as the commercials are aired. In many countries, we commit to provide advertisers with certain rating levels in connection with their advertising. Revenue is recorded net of estimated shortfalls, which are usually settled by providing the advertiser additional advertising time. Discounts and agency commissions are recognized at the point when the advertising is broadcast and are reflected as a reduction to gross revenue. Display advertising on our websites is recognized as impressions are delivered. Impressions are delivered when an advertisement appears in pages viewed by users.
Carriage fees and subscription revenues
Carriage fees from cable operators and direct-to-home broadcasters are recognized as revenue over the period for which the channels are provided and to which the fees relate. Subscriber revenue is recognized as contracted, based upon the number of subscribers.
Barter transactions
We enter into barter transactions which represent advertising time or other services exchanged for non-cash goods and/or other services, such as promotional items, advertising, supplies and equipment. Revenue from barter transactions is recognized as income when the services have been provided. Expenses are recognized when goods or services are received or used. We record barter transactions at the fair value of goods or services received or advertising surrendered, whichever is more readily determinable. Barter revenue amounted to US$ 1.52.0 million, US$ 1.5 million and US$ 2.21.5 million for the years endingended December 31, 20152016, 20142015 and 2013,2014, respectively.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of three months or less. Cash that is subject to restrictions is classified as restricted cash, if applicable.
Program Rights
Purchased program rights
Purchased program rights and the related liabilities are recorded at their gross value when the license period begins and the programs are available for broadcast.
Purchased program rights are classified as current or non-current assets based on anticipated usage, while the related program rights liability is classified as current or non-current according to the payment terms of the license agreement.
Program rights are evaluated to determine if expected revenues are sufficient to cover the unamortized portion of the program. To the extent that expected revenues are insufficient, the program rights are written down to their expected net realizable value. These programming impairment charges, along with programming impairment charges related to own-produced content, are presented as a component of content costs in our consolidated statements of operations and comprehensive income.income / loss.
The costs incurred to acquire program rights are capitalized and amortized over their expected useful lives in a manner which reflects the pattern we expect to use and benefit from the programming. If the initial airing of content allowed by a license is expected to provide more value than subsequent airings, we apply an accelerated method of amortization. These accelerated methods of amortization depend on the estimated number of runs the content is expected to receive, and are determined based on a study of historical results for similar programming. For programming that is not advertising supported, each program's costs are amortized on a straight-line basis over the license period. For content that is expected to be aired only once, the entire cost is recognized as expense on the first run.
Produced program rights
Program rights that are produced by us consist of deferred film and television costs including direct costs, production overhead and development costs. The costs are stated at the lower of cost, net of accumulated amortization, or fair value. The amount of capitalized production costs recognized as cost of revenues for a given production as it is exhibited in various markets is determined using the film forecast method. The proportion of costs recognized is equal to the proportion of the revenue recognized compared to the total revenue expected to be generated throughout the product's life cycle (the “ultimate revenues”). Our process for evaluating ultimate revenues is tailored to the potential we believe a title has for generating multiple revenues. The majority of our production is intended primarily for exploitation by our own broadcasters. In such cases, we consider mainly the free television window in our calculation of the ultimate revenues. For produced and acquired feature films or other projects where we have a supportable expectation of generating multiple revenue streams, we base ourChanges in estimates of ultimate revenues from period to period affect the amount of film costs amortized in a given period and, therefore, could have an impact on our results for each film on factors such as the historical performance of similar films, the star power of the actors and actresses, the rating and genre of the film, pre-release market research (including test market screenings) and the expected number of theaters in which the film will be released. These estimates are updated based on information available on the progress of the film's production and upon release, the actual results of each film.that period.
Produced program rights are amortized on an individual production basis using the ratio of the current period's gross revenues to estimated remaining total ultimate revenues from such programs. Produced program rights are evaluated to determine if expected revenues, less additional costs to be incurred (including exploitation costs) are sufficient to cover the unamortized portion of the program. To the extent that expected revenues are insufficient, the program rights are written down to their fair value.

51

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Property, Plant and Equipment
Property, plant and equipment is carried at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives assigned to each major asset category as below:
Asset categoryEstimated useful life
LandIndefinite
Buildings25 years
Machinery, fixtures and equipment4 - 8 years
Other equipment3 - 8 years
Software licenses3 - 5 years
Construction-in-progress is not depreciated until put into use. Capital leases are depreciated on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. Leasehold improvements are depreciated over the shorter of the related lease term or the life of the asset. Assets to be disposed of are reported at the lower of carrying amount or fair value, less expected costs of disposal.
Long-Lived Assets Including Intangible Assets with Finite Lives
Long-lived assets include property, plant, equipment and intangible assets with finite lives.
We evaluate the remaining useful life of intangible assets with finite lives each reporting period. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets are evaluated at the asset group level when there is an indication that they may be impaired. The carrying amounts of long-lived assets are considered impaired when the anticipated undiscounted cash flows from such assets are less than their carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill represents the excess of the fair value of consideration paid over the fair value of net tangible and other identifiable intangible assets acquired in a business combination.
We evaluateHistorically, we have assessed the carrying amount of our goodwill and other indefinite-lived intangibles for impairment annually as atof December 31, or more frequently if events or changes in circumstances indicate that such carrying amount may not be recoverable. During the third quarter of each year,2016, we elected to change the date of our assessment for all of our reporting units from December 31 to October 1. We believe this change will more closely align the assessment with our long- and short-range business planning and forecasting process. The voluntary change in accounting principle related to the annual testing date will not delay, accelerate or avoid an impairment charge. This change was not applied retrospectively as it was impracticable to do so because retrospective application would require application of significant estimates and assumptions with the use of hindsight. Accordingly, the change was applied prospectively.
We evaluate goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. An impairment exists whenSuch events and changes in circumstances include:
under-performance of operating segments or changes in projected results;
changes in the carrying amountmanner of utilization of an asset;
severe and sustained declines in the trading price of shares of our Class A common stock that are not attributable to factors other than the underlying value of our assets;
negative market conditions or economic trends; and
specific events, such as new legislation, new market entrants, changes in technology or adverse legal judgments that we believe could have a negative impact on our business.
Goodwill is evaluated at the reporting unit (including its goodwill), exceeds its fair value after adjustinglevel, which we have determined is each of our six operating segments. We have elected to bypass the qualitative assessment for any impairmentsall of long-lived assets or indefinite-lived intangible assets.
Goodwill impairment is measured asour reporting units in 2016 and proceed directly to performing the excessfirst step of the carrying amount of goodwill over its implied fair value, which is calculated by deducting the fair value of all assets and liabilities, including recognized and unrecognized intangible assets, from the fair value of the reporting unit. We have six operating segments, which were also our reportable segments and reporting units as described in Note 21, "Segment Data".impairment test. The fair value of our reporting units is determined based on estimates of future cash flows discounted at appropriate rates and on publicly available information, where appropriate. In the assessment of discounted future cash flows the following data is used: management's long-term plan, a terminal value at the end of the forecasted periods assuming an inflationary perpetual growth rate, and a discount rate selected with reference to the relevant cost of capital. An impairment exists when the carrying amount of a reporting unit (including its goodwill), exceeds its fair value after adjusting for any impairments of long-lived assets or indefinite-lived intangible assets.
Indefinite-lived intangible assets at December 31, 2015 consist solely of trademarks, which are not amortized. We evaluate the remaining useful life of each indefinite-lived intangible asset each reporting period. Each indefinite-lived intangible asset is evaluated for impairment individually. The fair value of our indefinite-lived intangible assets for impairment as at December 31 of each year, or more frequently if events or changes in circumstances indicate thatare determined using the asset might be impaired.relief from royalty method. An impairment loss is recognized if the carrying amount of an indefinite-lived intangible asset exceeds its fair value.
Income Taxes
We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to amounts which are more likely than not to be realized. In evaluating the realizability of our deferred tax assets, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.
We recognize in the consolidated financial statements those tax positions determined to be “more likely than not” of being sustained upon examination, based on the technical merits of the positions and we recognize, when applicable, both accrued interest and penalties related to uncertain tax positions in income tax expense in the accompanying consolidated statements of operations and comprehensive income.income / loss.
Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Foreign Currency
Functional Currency
Following the refinancing of the remaining outstanding dollar-denominated debt with Euro-denominated debt in April 2016, CME Ltd.'s income and expenses are primarily denominated in Euro. It is anticipated that CME Ltd.'s cash flows will primarily be in Euro. Accordingly, management has determined that CME Ltd.'s functional currency is the Euro with effect from April 1, 2016. As a result of this change, we recognized a loss of US$ 4.2 million of currency translation adjustment in the second quarter of 2016 due to the translation of non-monetary assets into Euro as of the date of the change. Our reporting currency continues to be the U.S. dollar.
Translation of financial statements
Our reporting currency is the dollar. The financial statements of our operations whose functional currency is other than the dollar are translated from such functional currency to dollars at the exchange rates in effect at the balance sheet date for assets and liabilities, and at weighted average rates for the period for revenues and expenses, including gains and losses. Translational gains and losses are charged or credited to accumulated other comprehensive income / loss, a component of equity.
Certain of our intercompany loans to our subsidiaries are of a long-term investment nature. We recorded a foreign exchangegain of US$ 8.8 million and losses of US$ 89.0 million US$ 164.4 million and US$ 16.4164.4 million for the years endingended December 31, 2016, 2015, 2014, and 2013,2014, respectively, on the retranslation of these intercompany loans as an adjustment to accumulated other comprehensive income / loss, a component of shareholders' equity, as settlement of these loans is not planned or anticipated in the foreseeable future.

52

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Transactions in foreign currencies
Gains and losses from foreign currency transactions are included in foreign currency exchange gain / (loss),loss, net in the consolidated statements of operations and comprehensive income / loss in the period during which they arise.
Leases
Leases are classified as either capital or operating. Those leases that transfer substantially all benefits and risks of ownership of the property to us are accounted for as capital leases. All other leases are accounted for as operating leases.
Capital leases are accounted for as assets and are depreciated on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. Commitments to repay the principal amounts arising under capital lease obligations are included in current liabilities to the extent that the amount is repayable within one year; otherwise the principal is included in non-current liabilities. The capitalized lease obligation reflects the present value of future lease payments. The financing element of the lease payments is charged to interest expense over the term of the lease.
Operating lease costs are expensed on a straight-line basis over the term of the lease.
Financial Instruments
Fair value of financial instruments
The carrying amount of financial instruments, including cash, accounts receivable, and accounts payable and accrued liabilities, approximate their fair value due to the short-term nature of these items. The fair value of our Senior Debtlong-term (as defined hereinafter) is included in Note 5,4, "Long-term Debt and Other Financing Arrangements".
Fair value is the price an asset or liability could be exchanged in an arm’s-length orderly transaction between knowledgeable, able and willing parties that is not a forced sale or liquidation. US GAAP requires significant management estimates in determining fair value. The extent of management’s judgments is highly dependent on the valuation model employed and the observability of inputs to the fair value model. The level of management judgment required in establishing fair value of financial instruments is more significant where there is no active market in which the instrument is traded. For financial instruments that are not remeasured through net income, we estimate fair value at issuance and account for the instrument at amortized cost. For financial instruments that are remeasured through net income, we assess the fair value of the instrument at each period end or earlier when events occur or circumstances change that would so require (see Note 14,13, "Financial Instruments and Fair Value Measurements").
Derivative financial instruments
We use derivative financial instruments for the purpose of mitigating currency and interest rate risks, which exist as part of ongoing business operations and financing activities. As a policy, we do not engage in speculative or leveraged transactions, nor do we hold or issue derivative financial instruments for trading purposes.
Forward exchange contracts and currency swaps are used to mitigate exposures to currency fluctuations on certain short-term transactions generally denominated in currencies other than our functional currency. These contracts are marked to market at the balance sheet date, and the resultant unrealized gains and losses are recorded in the consolidated statements of operations and comprehensive income / loss, together with realized gains and losses arising on settlement of these contracts.
Interest rate swaps and other instruments may be used to mitigate exposures to interest rate fluctuations on certain of our long-term debt instruments with variable interest rates. These contracts are marked to market at the balance sheet date, and the resultant unrealized gains and losses are recorded in the consolidated statements of operations and comprehensive income / loss, together with realized gains and losses arising on settlement of these contracts. From time to time, we may designate certain of these instruments as hedges and apply hedge accounting as discussed in Note 14,13, "Financial Instruments and Fair Value Measurements".
Stock-Based Compensation
Stock-based compensation is recognized at fair value. We calculate the fair value of stock option awards using the Black-Scholes option pricing model and recognizeon the compensation cost over the vesting period of the award.grant date. The grant date fair value of restricted stock units ("RSUs") is calculated as the closing price of our Class A common stock on the date of grant. ForStock-based compensation expense is recognized on a straight-line basis over the vesting period of the award. Stock-based compensation awards with market conditions, the grant date fair value is calculated using a Monte Carlo simulation model. The Monte Carlo simulation model requires the input of subjective assumptions, including the expected volatility of our common stock, interest rates, dividend yieldsare accounted for as equity-settled transactions.
Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and correlation coefficient between our common stock and the relevant market index.per share data)

Contingencies
The estimated loss from a loss contingency such as a legal proceeding or other claim is recorded in the consolidated statements of operations and comprehensive income / loss if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of a loss contingency is made if there is at least a reasonable possibility that a loss has been incurred.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense incurred for the years endingended December 31, 20152016, 20142015 and 20132014 totaled US$ 3.05.4 million, US$ 3.73.0 million and US$ 6.03.7 million, respectively.
Earnings Per Share
Basic and diluted net income / loss per share is calculated using the two-class method. Under the two-class method, basic net income / loss per common share is computed by dividing the net income available to common shareholders after deducting contractual amounts of accretion on our Series B Preferred Shares by the weighted-average number of common shares outstanding during the period. Diluted net income / loss per share is computed by dividing the adjusted net income by the weighted-average number of dilutive shares outstanding during the period.

53

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Discontinued Operations
We present our results of operations, financial position and cash flows of operations that have either been sold or that meet the criteria for "held-for-sale accounting" as discontinued operations if the disposal represents a strategic shift that will have a major effect on our operations and financial results. At the time an operation qualifies for held-for-sale accounting, the operation is evaluated to determine whether or not the carrying amount exceeds its fair value less cost to sell. Any loss as a result of carrying amounts in excess of fair value less cost to sell is recorded in the period the operation meets held-for-sale accounting. Management judgment is required to (1) assess the criteria required to meet held-for-sale accounting, and (2) estimate fair value. Changes to the operation could cause it to no longer qualify for held-for-sale accounting and changes to fair value could result in an increase or decrease to previously recognized losses. In 2014, we classified certain of our non-core businesses as discontinued operations and completed the divestitures in 2015 (see Note 3, "Discontinued Operations and Assets Held for Sale").
Recent Accounting Pronouncements
Accounting Pronouncements Adopted
On January 1, 2015,2016 we adopted the following guidance issued by the Financial Accounting Standards Board (the "FASB"“FASB”):
In November 2014, the FASB issued guidance which standardizes the method used in April 2014 (Accounting Standards Update No. 2014-08), which changed the requirementsaccounting for reporting discontinued operations. Subsequenthybrid financial instruments issued in the form of a share. The guidance requires an entity to January 1,consider all relevant terms and features in evaluating the nature of the host contract in a hybrid financial instrument, including the embedded derivative feature being evaluated for bifurcation. The adoption of this guidance did not have a material impact on our consolidated financial statements.
In April 2015, the disposalFASB issued guidance which simplifies the balance sheet presentation of debt issuance costs. The guidance requires that debt issuance costs related to a componentrecognized debt liability be presented in the balance sheet as a direct reduction of an entitythe carrying amount of that liability. The retrospective adoption of this guidance decreased our other non-current assets as at December 31, 2015 by US$ 13.8 million, with a corresponding decrease in our long-term debt and other financing arrangements in our consolidated balance sheet, with no impact to our consolidated statements of operations and comprehensive income / loss or a groupconsolidated statements of componentscash flows.
In November 2015, the FASB issued guidance which requires that deferred tax balances be classified as non-current in our consolidated balance sheet. The prospective adoption of an entity is required to be reported in discontinued operations only if the disposal represents a strategic shift that willthis guidance did not have a majorany effect on our operationsnet deferred income tax liability. Prior period amounts have not been adjusted.
In the third quarter of 2016, we adopted the FASB guidance issued in March 2016 intended to simplify accounting for share-based payment transactions, specifically with regard to accounting for forfeitures, income taxes, the classification as either equity or liabilities and the presentation in the statement of cash flows. We have made a policy election to account for forfeitures as they occur. The cumulative-effect adjustment to equity as a result of adopting this guidance was not material. The adoption of this guidance did not have any other material impacts on our consolidated financial results. In accordance with the adopted guidance, our operations classified as discontinued operationsstatements or held for sale prior to January 1, 2015, are accounted for under previous guidance.disclosures.
Recent Accounting Pronouncements Issued
In May 2014, the FASB issued new guidance which is intended to improve the comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The guidance supersedes existing revenue recognition guidance and requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issuedThe guidance which defers theis effective date of the new revenue standard for all entities by one year, which would extend the effective date to our fiscal year beginning January 1, 2018. We are currently in the process of evaluating the impact of the adoption of this guidance on our consolidated financial statements.
In November 2014,February 2016, the FASB issued new guidance to increase transparency and comparability among organizations by recognizing leasing assets and liabilities on the balance sheet and requiring additional disclosures about an entity's leasing arrangements. The guidance requires that a lessee recognize a liability to make lease payments and a right-of-use asset, with an available exception for leases shorter than twelve months. The guidance is effective for our fiscal year beginning January 1, 2019. We are currently in the process of evaluating the impact of the adoption of this guidance on our consolidated financial statements.
In August 2016, the FASB issued new guidance which is intended to standardizereduce the existing diversity in practice related to specific cash flow issues. As applicable to CME, the guidance requires that cash flows at the settlement of zero-coupon debt instruments or debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing be bifurcated between cash outflows for operating activities for the portion attributable to accrued interest, and cash outflows for financing activities for the portion attributable to the principal. The guidance requires a retrospective transition method and is effective for our fiscal year beginning January 1, 2018, with early adoption permitted. We expect to adopt this guidance as of January 1, 2018. Upon adoption, our net cash flows generated from / used in continuing operating activities will decrease by US$ 110.7 million and US$ 1.1 million for the years ended December 31, 2016 and 2015, respectively, with a corresponding increase in net cash used in / provided by continuing financing activities.
In October 2016, the FASB issued new guidance which is intended to improve the accounting for hybrid financial instruments issuedthe income tax consequences of intercompany transfers of assets other than inventory. The guidance would require an entity to recognize the income tax consequences of such transfers in the formperiod in which the transfer occurs, rather than defer recognition of current and deferred income taxes for the transfer until the asset is sold to a share.third party. The guidance requires an entitya modified retrospective transition method through a cumulative-effect adjustment to consider all relevant terms and features in evaluating the nature of the host contract in a hybrid financial instrument, including the embedded derivative feature being evaluated for bifurcation.retained earnings. The guidance is effective for theour fiscal year beginning January 1, 2016. We do not expect2018, with early adoption permitted. The cumulative-effect adjustment to equity as a result of early adopting this guidance toas of January 1, 2017 will not have a material impact on our consolidated financial statements.
In April 2015,January 2017, the FASB issued new guidance which is intended to simplify goodwill impairment testing by eliminating Step 2, and instead recognize an impairment charge for the balance sheet presentation of debt issuance costs. The guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction ofamount by which the carrying amount of that liability.the reporting unit exceeds the fair value of the reporting unit. The guidance also eliminates the requirement to perform a qualitative analysis for reporting units with a negative carrying value. The guidance is effective for our fiscal year beginningus for annual and interim impairment tests after January 1, 2016,2020, with early adoption permitted. When we adopt this guidance, our presentationpermitted for interim and annual impairment tests performed from January 1, 2017. We are currently in the process of debt issuance costs in our consolidated balance sheets will be affected, with noevaluating the impact to our consolidated statements of operations and comprehensive income or consolidated statements of cash flows.
In November 2015, the FASB issued guidance which is intended to change the presentation requirements for the balance sheet classification of deferred taxes. Upon adoption of the guidance, deferred tax balances are required to be classified as non-current. The guidance is effective for annual financial statements beginning after December 15, 2016 and interim periods therein, with early adoption permitted. The adoption of this guidance will impact how we present and disclose deferred tax assets and liabilities inon our consolidated balance sheet butfinancial statements and whether we will have no effect on our net deferred income tax liability.early adopt.
3.    DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
Discontinued operations and assets held for sale prior to the adoption of FASB Accounting Standards Update No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity
In the fourth quarter of 2013, we announced our intention to focus on our core television broadcast operations and commenced a process to divest certain non-core businesses. During 2014, we sold Bontonfilm, our theatrical and home video distribution business operating in the Czech Republic and Slovak Republic and a component of our Czech Republic reporting unit; and Pro Video Romania and Pro Video Hungary, our home video distribution businesses operating in those countries, both of which were components of our Romania reporting unit. During 2015, we completed our non-core divestiture plans with the sales of our Romanian studios, cinema, music, radio and remaining distribution businesses. The impact of these events has been retroactively applied to all periods presented.

54

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Loss from discontinued operations, net of taxes, comprised the following for the year ended December 31, 2015, 2014 and 2013:
 For The Year Ending December 31,
 2015
 2014
 2013
Net revenues$7,285
 $50,191
 $57,900
      
Loss from discontinued operations before income taxes and loss on sale(1,990) (17,893) (4,131)
Credit / (provision) for income taxes91
 1,987
 (968)
Loss from discontinued operations, net of taxes, before loss on sale(1,899) (15,906) (5,099)
Loss on sale of divested businesses, net of tax (1)
(11,388) (64,525) 
Loss from discontinued operations, net of tax$(13,287) $(80,431) $(5,099)
(1)
Amount includes realized gains / losses on completed disposal transactions in 2015 and 2014, and losses related to fair value adjustments required to measure our assets held for sale at fair value less costs to sell for businesses classified as discontinued operations in 2014. For the year ended December 31, 2015, the amount includes losses related to the reclassification of the cumulative translation adjustment into net income of US$ 7.7 million and the reclassification of accumulated losses attributable to noncontrolling interest of US$ 3.7 million. For the year ended December 31, 2014, the amount includes losses related to the reclassification of the cumulative translation adjustment into net income of US$ 3.1 million.
In the fourth quarter of 2014, we committed to a plan to sell a surplus facility and related land in Bulgaria. During the year ended December 31, 2015, we recognized a loss on sale of this facility of US$ 3.3 million within non-operating expense, net in our consolidated statements of operations and comprehensive income.
Discontinued operations and assets held for sale subsequent to the adoption of FASB Accounting Standards Update No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity
In the third quarter of 2015, we entered into an agreement to sell our Romanian studios along with its parent holding company on an as-is basis and completed the sale on October 16, 2015. For the year ended December 31, 2015, we recognized a loss on sale of US$ 14.6 million within non-operating expense, net in our consolidated statements of operations and comprehensive income as the parent holding company did not qualify as a discontinued operation.
4.3.    GOODWILL AND INTANGIBLE ASSETS
Goodwill:
Goodwill by reporting unit as at December 31, 20152016 and December 31, 20142015 is summarized as follows:
Bulgaria Croatia Czech Republic Romania Slovak Republic Slovenia TotalBulgaria Croatia Czech Republic Romania Slovak Republic Slovenia Total
Gross Balance, December 31, 2013$179,609
 $11,149
 $876,447
 $109,028
 $60,303
 $19,400
 $1,255,936
Gross Balance, December 31, 2014$175,494
 $11,065
 $800,640
 $94,777
 $53,088
 $19,400
 $1,154,464
Accumulated impairment losses(144,639) (10,454) (287,545) (11,028) 
 (19,400) (473,066)(144,639) (10,454) (287,545) (11,028) 
 (19,400) (473,066)
Balance, December 31, 201334,970
 695
 588,902
 98,000
 60,303
 
 782,870
Balance, December 31, 201430,855
 611
 513,095
 83,749
 53,088
 
 681,398
Foreign currency(4,115) (84) (75,807) (11,409) (7,215) 
 (98,630)(3,129) (60) (41,149) (9,334) (5,483) 
 (59,155)
Other (1)

 
 
 (2,842) 
 
 (2,842)
Balance, December 31, 201430,855
 611
 513,095
 83,749
 53,088
 
 681,398
Balance, December 31, 201527,726
 551
 471,946
 74,415
 47,605
 
 622,243
Accumulated impairment losses(144,639) (10,454) (287,545) (11,028) 
 (19,400) (473,066)(144,639) (10,454) (287,545) (11,028) 
 (19,400) (473,066)
Gross Balance, December 31, 2014$175,494
 $11,065
 $800,640
 $94,777
 $53,088
 $19,400
 $1,154,464
Gross Balance, December 31, 2015$172,365
 $11,005
 $759,491
 $85,443
 $47,605
 $19,400
 $1,095,309
(1)
Amount represents the goodwill allocated to businesses held-for-sale based on their fair value relative to the fair value of the reporting unit's continuing operations.
 Bulgaria Croatia Czech Republic Romania Slovak Republic Slovenia Total
Gross Balance, December 31, 2014$175,494
 $11,065
 $800,640
 $94,777
 $53,088
 $19,400
 $1,154,464
Accumulated impairment losses(144,639) (10,454) (287,545) (11,028) 
 (19,400) (473,066)
Balance, December 31, 201430,855
 611
 513,095
 83,749
 53,088
 
 681,398
Foreign currency(3,129) (60) (41,149) (9,334) (5,483) 
 (59,155)
Balance, December 31, 201527,726
 551
 471,946
 74,415
 47,605
 
 622,243
Accumulated impairment losses(144,639) (10,454) (287,545) (11,028) 
 (19,400) (473,066)
Gross Balance, December 31, 2015$172,365
 $11,005
 $759,491
 $85,443
 $47,605
 $19,400
 $1,095,309

55

Index
 Bulgaria Croatia Czech Republic Romania Slovak Republic Slovenia Total
Gross Balance, December 31, 2015$172,365
 $11,005
 $759,491
 $85,443
 $47,605
 $19,400
 $1,095,309
Accumulated impairment losses(144,639) (10,454) (287,545) (11,028) 
 (19,400) (473,066)
Balance, December 31, 201527,726
 551
 471,946
 74,415
 47,605
 
 622,243
Foreign currency(976) (17) (15,008) (2,657) (1,516) 
 (20,174)
Balance, December 31, 201626,750
 534
 456,938
 71,758
 46,089
 
 602,069
Accumulated impairment losses(144,639) (10,454) (287,545) (11,028) 
 (19,400) (473,066)
Gross Balance, December 31, 2016$171,389
 $10,988
 $744,483
 $82,786
 $46,089
 $19,400
 $1,075,135
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Broadcast licenses and otherOther intangible assets:
Changes in the net book value of our broadcast licenses and other intangible assets as at December 31, 20152016 and December 31, 20142015 is summarized as follows:
December 31, 2015 December 31, 2014December 31, 2016 December 31, 2015
Gross Accumulated Amortization Net Gross Accumulated Amortization NetGross Accumulated Amortization Net Gross Accumulated Amortization Net
Indefinite-lived:                      
Trademarks$83,188
 $
 $83,188
 $98,250
 $
 $98,250
$80,324
 $
 $80,324
 $83,188
 $
 $83,188
Amortized:                      
Broadcast licenses191,860
 (127,613) 64,247
 209,279
 (131,750) 77,529
185,686
 (130,325) 55,361
 191,860
 (127,613) 64,247
Trademarks614
 (614) 
 
 
 
591
 (591) 
 614
 (614) 
Customer relationships53,120
 (49,672) 3,448
 59,011
 (51,858) 7,153
51,338
 (48,997) 2,341
 53,120
 (49,672) 3,448
Other2,138
 (1,859) 279
 3,877
 (3,431) 446
1,522
 (1,208) 314
 2,138
 (1,859) 279
Total$330,920
 $(179,758) $151,162
 $370,417
 $(187,039) $183,378
$319,461
 $(181,121) $138,340
 $330,920
 $(179,758) $151,162
Our broadcastBroadcast licenses above representsconsist of our TV NOVA license in the Czech Republic, which is amortized on a straight-line basis through the expiration date of the license which isin 2025. Our customer relationships are deemed to have an economic useful life of, and are amortized on a straight-line basis, over five years to fifteen years.
The estimated amortization expense for our intangible assets with finite lives as of December 31, 20152016 is as follows:
2016$8,227
20178,013
$7,777
20187,828
7,703
20197,375
7,240
20207,150
7,020
20216,960
Impairment of goodwill, indefinite-lived intangible assets and long-lived assets:
Process of reviewing goodwill, indefinite-lived intangible assets and long-lived assets for impairment
We review both goodwill and indefinite-lived intangible assets for impairment as at December 31 of each year. Goodwill is evaluated at the reporting unit level and each indefinite-lived intangible asset is evaluated individually. Long-lived assets are evaluated at the asset group level when there is an indication that they may be impaired.
In addition, whenever events occur which suggest any asset in a reporting unit may be impaired, an evaluation of the goodwill and indefinite-lived intangible assets, together with the associated long-lived assets of each asset group, is performed. Outside our annual review, there are a number of factors which could trigger an impairment review, including:
under-performance of operating segments or changes in projected results;
changes in the manner of utilization of an asset;
severe and sustained declines in the trading price of shares of our Class A common stock that are not attributable to factors other than the underlying value of our assets;
negative market conditions or economic trends; and
specific events, such as new legislation, new market entrants, changes in technology or adverse legal judgments that we believe could have a negative impact on our business.
In testing the goodwill of each reporting unit, the fair value of the reporting unit is compared to the carrying amount of its net assets, including goodwill. If the fair value of the reporting unit is less than its carrying amount, the fair value of the reporting unit is then measured against the fair value of its underlying assets and liabilities, excluding goodwill, to estimate the implied fair value of the reporting unit's goodwill. The fair value of each reporting unit is determined using discounted estimated future cash flow models. Our expectations of these cash flows are developed during our long- and short-range business planning processes and incorporate several variables, including, but not limited to, discounted cash flows of a typical market participant, future market revenue and long-term growth projections, estimated market share for the typical participant and estimated profit margins based on market size and operation type. The cash flow model also assumes outlays for capital expenditures, future terminal values, an effective tax rate assumption and a discount rate based on a number of factors including market interest rates, and a weighted average cost of capital analysis of the media industry which includes adjustments for market risk.
An impairment loss is recognized for any excess of the carrying amount of the reporting unit's goodwill over the implied fair value. If goodwill and another asset or asset group are tested for impairment at the same time, the other assets are tested for impairment before goodwill. If the other asset or asset group is impaired, this impairment loss is recognized prior to goodwill being tested for impairment.
Indefinite-lived intangible assets are evaluated for impairment by comparing the fair value of the asset to its carrying amount. Any excess of the carrying amount over the fair value is recognized as an impairment charge.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to our estimate of the undiscounted future cash flows we expect that asset group will generate. If the carrying amount of an asset exceeds our estimate of its undiscounted future cash flows, an impairment charge is recognized equal to the amount by which the carrying amount exceeds the fair value of the respective asset.

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CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

AssessingImpairment of goodwill indefinite-livedand other intangible assetsassets:
As discussed in Note 2, "Basis of Presentation and long-lived assets for impairment is a complex iterative process that requires significant judgment and involves a great dealSummary of detailed quantitative and qualitative business-specific analysis and many individual assumptions which fluctuate withSignificant Accounting Policies", we elected to change the passage of time. Our estimate of the cash flows our operations will generate in future periods forms the basis for most of the significant assumptions inherent in our impairment reviews. Our expectations of these cash flows are developed during our long- and short-range business planning processes, which are designed to address the uncertainties inherent in the forecasting process by capturing a range of possible views about key trends which govern future cash flow growth. We have observed over many years a strong positive correlation between the macro economic performancedate of our markets and the size of the television advertising market and ultimately the cash flows we generate. With this in mind, we have placed a high importance on developing our expectationsassessment for the future development of the macro economic environment in general, the advertising market and our share of it in particular. While this has involved an appreciation of historical trends, we have placed a higher emphasis on forecasting these market trends, which has involved detailed review of macro-economic data, a range of both proprietary and publicly-available estimates for future market development, and a process of on-going consultation with our segment management teams.
In developing our forecasts of future cash flows, we take into account available external estimates in addition to considering developments in eachall of our markets, which provide direct evidencereporting units from December 31 to October 1, with effect from October 1, 2016. Upon conclusion of the state of the market and future market development. In concluding whether a goodwill impairment charge is necessary,this assessment, we perform the impairment test under a range of possible scenarios. In order to check the reasonableness ofdetermined that the fair values implied by our cash flow estimates we also calculate the value of shares of our Class A common stock implied by our cash flow forecastsgoodwill were substantially in excess of their respective carrying values.
We did not recognize any impairment charges in respect of goodwill and compare this to actual traded values to understandother intangible assets during the difference between the two.years ended December 31, 2016, 2015 or 2014.
The table below shows the key measurements involved and the valuation methods applied:
4.    LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS
Summary
 December 31, 2016
 December 31, 2015
Long-term debt$999,209
 $906,028
Other credit facilities and capital leases4,313
 3,648
Total long-term debt and other financing arrangements1,003,522
 909,676
Less: current maturities(1,494) (1,155)
Total non-current long-term debt and other financing arrangements$1,002,028
 $908,521
Financing Transactions
On April 7, 2016, we drew the EUR 468.8 million (approximately US$ 534.0 million as at the transaction date) 2021 Euro Term Loan in full, the proceeds of which, together with cash on hand, were applied toward the repayment of the outstanding US$ 38.2 million of the 15.0% term loan facility due 2017 (the "2017 Term Loan"), plus US$ 1.5 million of accrued and unpaid interest thereon, and toward the redemption and discharge of the outstanding US$ 502.5 million of the 15.0% Senior Secured Notes due 2017 (the "2017 PIK Notes"), plus US$ 26.6 million of accrued and unpaid interest thereon.
Also on April 7, 2016, we extended the maturity date of the 2018 Euro Term Loan by one year to November 1, 2018. In addition, we extended the maturity date of the 2021 Revolving Credit Facility to February 19, 2021, with the borrowing capacity reduced from US$ 115.0 million to US$ 50.0 million from January 1, 2018. We also amended the 2021 Revolving Credit Facility such that interest is determined on the basis of our net leverage ratio (as defined in the Reimbursement Agreement) and ranges from LIBOR (subject to a floor of 1.0%) plus 9.0% if our net leverage ratio is greater than or equal to seven times, to LIBOR (subject to a floor of 1.0%) plus 6.0% per annum if our net leverage ratio is less than five times. The modifications of the 2018 Euro Term Loan and the 2019 Euro Term Loan were accounted for in the same manner as a debt extinguishment.
As a result of the above transactions, we recognized a loss on extinguishment of debt of US$ 150.2 million in the second quarter of 2016.
During the year ended December 31, 2016, we paid US$ 48.6 million of Guarantee Fees (as defined below) related to the 2018 Euro Term Loan and the 2021 Euro Term Loan. The Guarantee Fee payments are presented as cash outflows from operating activities in our consolidated statements of cash flows.
Overview
Total long-term debt and credit facilities comprised the following at December 31, 2016:
 Principal Amount of Liability Component
 
Debt Issuance Costs (1)

 Net Carrying Amount
2018 Euro Term Loan264,368
 (634) 263,734
2019 Euro Term Loan248,067
 (473) 247,594
2021 Euro Term Loan494,162
 (6,281) 487,881
2021 Revolving Credit Facility
 
 
Total long-term debt and credit facilities$1,006,597
 $(7,388) $999,209
Measurement
(1)
Valuation Method
RecoverabilityDebt issuance costs related to the 2018 Euro Term Loan, 2019 Euro Term Loan and 2021 Euro Term Loan are being amortized on a straight-line basis, which approximates the effective interest method, over the life of carrying amountUndiscounted future cash flows (Level 3 inputs*)
Fair valuethe respective instruments. Debt issuance costs related to the 2021 Revolving Credit Facility are classified as non-current assets in our consolidated balance sheet and are being amortized on a straight-line basis over the life of broadcast licensesBuild-out method (Level 3 inputs*)
Fair value of indefinite-lived trademarksRelief from royalty method (Level 3 inputs*)
Fair value of reporting unitsDiscounted cash flow model (Level 3 inputs*)the 2021 Revolving Credit Facility.
*As described in Note 14, "Financial Instruments and Fair Value Measurements".
Each method noted above involves a number of significant assumptions over an extended period of time which could materially change our decision as to whether assets are impaired. The most significant of these assumptions include: the discount rate applied, the total advertising market size, achievable levels of market share, forecast OIBDA and capital expenditure and the rate of growth into perpetuity, each described in more detail below:
Cost of capital: The cost of capital reflects the return a hypothetical market participant would require for a long-term investment in an asset and can be viewed as a proxy for the risk of that asset. We calculate the cost of capital according to the Capital Asset Pricing Model using a number of assumptions, the most significant of which is a Country Risk Premium (“CRP”). The CRP reflects the excess risk to an investor of investing in markets other than the United States and generally fluctuates with expectations of changes in a country's macro-economic environment. The costs of capital that we have applied to cash flows for our 2015 annual impairment test were broadly in line with those we had used in the 2014 impairment test, with the exception of those applied for our Croatia and Slovenia reporting units. The cost of capital increase in Croatia is due to an increase in the CRP and synthetic risk free rate whereas a decrease in the same factors led to a decrease in the cost of capital in Slovenia.
Total advertising market: The size of the television advertising market effectively places an upper limit on the advertising revenue we can expect to earn in each country. Our estimate of the total advertising market is developed from a number of external sources, in combination with a process of on-going consultation with our segment management teams. In our annual impairment review performed in the fourth quarter of 2015, we increased our medium- and long-term view of the size of the television advertising markets compared to the estimates used in the 2014 annual impairment review based on our estimate of the timing and strength of the market recovery.
Market share: This is a function of the audience share we expect our stations to generate, and the relative price at which we can sell advertising. Our estimate of the total advertising market is developed from a number of external sources, in combination with a process of on-going consultation with our segment management teams. Our estimates for our market share in our 2015 annual impairment review decreased slightly from those in our 2014 impairment review, however, revenues are expected to increase due to the estimated growth in the total advertising market.
Forecast OIBDA: The level of cash flow generated by each operation is ultimately governed by the extent to which we manage the relationship between revenues and costs. We forecast the level of operating costs by reference to (a) the historical absolute and relative levels of costs we have incurred in generating revenue in each reporting unit, (b) the operating strategy of each business and (c) specific forecast costs to be incurred. Our annual impairment review includes assumptions to reflect benefits of cost control measures taken to date, and contemplated further cost control efforts.
Forecast capital expenditure: The size and phasing of capital expenditure, both recurring expenditure to replace retired assets and investments in new projects, has a significant impact on cash flows. We forecast the level of future capital expenditure based on current strategies and specific forecast costs to be incurred. In line with our ongoing efforts to protect our operating margins, the absolute levels of capital expenditure forecast remained broadly consistent with the prior year impairment reviews.
Growth rate into perpetuity: This reflects the level of economic growth in each of our markets from the final year in our discrete forecast period into perpetuity and is the sum of an estimated real growth rate, which reflects our belief that macro-economic growth in our markets will ultimately converge to Western European markets, and long-term expectations for inflation. Our estimates of these rates are based on observable market data and have declined in most of our operating countries since our 2014 annual impairment test.

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CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Results of goodwill, indefinite-lived intangible assets and long-lived assets impairment testing
The forecasts utilized for our 2015 annual impairment test continued to focus on building our core television broadcasting assets in each country and reflected the increases in revenue, OIBDA and free cash flow achieved in 2014 and 2015.
Upon conclusion of this review, we determined that the fair values of our goodwill and intangible assets were substantially in excess of their respective carrying values. We concluded that the total estimated fair values used for purposes of the test are reasonable by comparing our market capitalization to the results of the discounted cash flows analysis of our reporting units, as adjusted for unallocated corporate assets and liabilities.
In our review during the fourth quarter of 2014, we determined that the fair values of our goodwill and intangible assets were substantially in excess of their respective carrying values.
In 2013, we recorded a charge to impair broadcast licenses, customer relationships, trademarks and goodwill in certain reporting units, as presented below. The fair value of each reporting unit where goodwill was not impaired as of December 31, 2013 was substantially in excess of its carrying amount.
We recognized impairment charges in the following reporting units in respect of goodwill, tangible and intangible assets during the year ended December 31, 2013:
 For the Year ended December 31, 2013
 Trademarks
 Customer relationships
 Broadcast licenses
 Goodwill
 Total
Bulgaria$12,259
 $23,608
 $
 $16,813
 $52,680
Slovenia
 
 7,596
 19,400
 26,996
Total$12,259
 $23,608
 $7,596
 $36,213
 $79,676
5.    LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS
Summary
 December 31, 2015
 December 31, 2014
Senior Debt$919,812
 $867,367
Other credit facilities and capital leases3,648
 6,732
Total long-term debt and other financing arrangements923,460
 874,099
Less: current maturities(1,155) (252,859)
Total non-current long-term debt and other financing arrangements$922,305
 $621,240
Financing Transactions
On November 13, 2015 we drew on the 2019 Euro Term Loan and applied the proceeds toward the repayment and discharge the 2015 Convertible Notes at maturity on November 15, 2015.
On February 19, 2016, we entered into a series of related financing transaction to improve our maturity profile and reduce our interest costs. See Note 26, "Subsequent Events" for further information.
Overview
Total senior debt and credit facilities comprised the following at December 31, 2015:
 Principal Amount of Liability Component
 Unamortized Discount
 Net Carrying Amount
 Equity Component
2017 PIK Notes (1)
$502,504
 $(139,833) $362,671
 $178,626
2017 Term Loan (2) (3)
38,194
 (10,309) 27,885
 13,199
2018 Euro Term Loan273,046
 
 273,046
 
2019 Euro Term Loan256,210
 
 256,210
 
2021 Revolving Credit Facility (3)

 
 
 50,596
Total senior debt and credit facilities$1,069,954
 $(150,142) $919,812
  
(1)
The principal amount presented represents the original principal amount of US$ 400.0 million plus interest paid in kind by adding such amount to the original principal amount. The equity component represents the fair value ascribed to the Unit Warrants (see Note 13, "Equity"). The fair value of the equity component is accounted for as a discount on the 2017 PIK Notes and is being amortized over the life of the 2017 PIK Notes using the effective interest method.
(2)
The principal amount presented represents the original principal amount of US$ 30.0 million plus interest paid in kind by adding such amount to the original principal amount.
(3)
The equity component of the 2017 Term Loan and 2021 Revolving Credit Facility represents the fair value ascribed to the Initial Warrants (as described in Note 13, "Equity") issued in consideration for these facilities based on their relative borrowing capacities. The fair value is accounted for as a discount on the 2017 Term Loan, which is being amortized over the life of the 2017 Term Loan using the effective interest method; and as debt issuance costs for the 2021 Revolving Credit Facility, which is being amortized on a straight-line basis over the life of the 2021 Revolving Credit Facility.

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CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

SeniorLong-term Debt
Our seniorlong-term debt comprised the following at December 31, 20152016 and December 31, 2014:2015:
Carrying Amount Fair ValueCarrying Amount
December 31, 2015
 December 31, 2014
 December 31, 2015
 December 31, 2014
December 31, 2016
 December 31, 2015
2015 Convertible Notes$
 $251,669
 $
 $260,922
2017 PIK Notes362,671
 265,629
 552,338
 476,957

 359,789
2017 Term Loan27,885
 20,573
 41,525
 35,923

 27,592
2018 Euro Term Loan273,046
 304,496
 273,046
 304,496
263,734
 272,189
2019 Euro Term Loan256,210
 
 256,210
 
247,594
 246,458
2021 Revolving Credit Facility
 25,000
 
 25,000
2021 Euro Term Loan487,881
 
$919,812
 $867,367
 $1,123,119
 $1,103,298
$999,209
 $906,028
2017 PIK Notes
As at December 31, 2015, the principal amount of the 15.0% Senior Secured Notes due 2017 (the "2017 PIK Notes") outstanding was US$ 502.5 million. Interest is payable semi-annually in arrears on each June 1 and December 1, which we may pay on a semi-annual basis in cash or in kind by adding such accrued interest to the principal amount of the 2017 PIK Notes. The 2017 PIK Notes, which mature on December 1, 2017, are redeemable at our option, in whole or in part, at a redemption price equal to 100% of the principal amount thereof. We intend to draw on the 2021 Euro Term Loan and apply the proceeds to redeem and discharge the 2017 PIK Notes on or about April 8, 2016 (see Note 26, "Subsequent Events").
The fair value of the 2017 PIK Notes as at December 31, 2015 of US$ 552.3 million was calculated using comparable instruments that trade in active markets and, where available, actual trade history of the 2017 PIK Notes in a market that is not active. This measurement of estimated fair value uses Level 2 inputs as described in Note 14, "Financial Instruments and Fair Value Measurements".
The 2017 PIK Notes are senior secured obligations of CME, and are jointly and severally guaranteed by Central European Media Enterprises N.V. (“CME NV”) and CME Media Enterprises B.V. ("CME BV") and are secured by a pledge over 100% of the outstanding shares of each of CME NV and CME BV. Under the terms of the indenture governing the 2017 PIK Notes, CME is largely restricted from raising debt at the corporate level or making certain payments or investments if the ratio of Consolidated EBITDA to Consolidated Interest Expense of CME Ltd. and its Restricted Subsidiaries (as each is defined in the indenture) is less than 2.0 times. The terms of the 2017 PIK Notes also contain limitations on CME’s ability to incur guarantees, grant liens, enter into certain affiliate transactions, consolidate, merge or effect a corporate reconstruction, and make certain investments.
In the event that (A) there is a change in control by which (i) any party other than certain of our present shareholders becomes the beneficial owner of more than 35% of our total voting power; (ii) we agree to sell substantially all of our operating assets; (iii) there is a specified change in the composition of a majority of our Board of Directors; or (iv) the adoption by our shareholders of a plan to liquidate; and (B) on the 60thday following any such change of control the rating of the 2017 PIK Notes is either withdrawn or downgraded from the rating in effect prior to the announcement of such change of control, we can be required to repurchase the 2017 PIK Notes at a purchase price in cash equal to 101% of the principal amount of the 2017 PIK Notes plus accrued and unpaid interest to the date of purchase.
Certain derivative instruments, including contingent event of default and change of control put options, have been identified as being embedded in the 2017 PIK Notes. The embedded derivatives are not considered clearly and closely related to the 2017 PIK Notes, and as such are required to be accounted for separately. The probability-weighted fair value of the embedded derivatives was not material at issuance or at December 31, 2015.
2017 Term Loan
As at December 31, 2015, the principal amount outstanding of the 15% term loan facility due 2017 (the "2017 Term Loan") was US$ 38.2 million. The carrying value of the 2017 Term Loan is comprised of the original outstanding principal amount of US$ 30.0 million less an issuance discount, plus interest for which we paid in kind. Interest is payable semi-annually in arrears on each June 30 and December 31, which we may pay in cash or in kind. We have elected to pay interest in kind since the initial drawdown. The 2017 Term Loan, which matures on December 1, 2017, may be prepaid in whole, but not in part, subject to the concurrent repayment and discharge of the 2017 PIK Notes. We intend to draw on the 2021 Euro Term Loan and apply the proceeds to repay the 2017 Term Loan on or about April 8, 2016 (see Note 26, "Subsequent Events").
The fair value of the 2017 Term Loan as at December 31, 2015 of US$ 41.5 million was determined based on comparable instruments that trade in active markets. This measurement of estimated fair value uses Level 2 inputs as described in Note 14, "Financial Instruments and Fair Value Measurements".
The 2017 Term Loan is jointly and severally guaranteed by CME NV and CME BV and is secured by a pledge over 100% of the outstanding shares of each of CME NV and CME BV. The terms of the 2017 Term Loan contains limitations on CME’s ability to incur indebtedness, incur guarantees, grant liens, pay dividends or make other distributions, enter into certain affiliate transactions, consolidate, merge or effect a corporate reconstruction, make certain investments acquisitions and loans, and conduct certain asset sales. The 2017 Term Loan also contains maintenance covenants in respect of interest cover, cash flow cover and total leverage ratios, and has more restrictive provisions, including covenants in respect of incurring indebtedness, the provision of guarantees, making investments and disposals, granting security and certain events of defaults, than corresponding provisions contained in the indenture governing the 2017 PIK Notes.
Certain derivative instruments, including contingent event of default and change of control put options, have been identified as being embedded in the 2017 Term Loan. The embedded derivatives are not considered clearly and closely related to the 2017 Term Loan, and as such are required to be accounted for separately. The probability-weighted fair value of the embedded derivatives was not material at issuance or at December 31, 2015.

59

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

2018 Euro Term Loan
As at December 31, 2015,2016, the principal amount of our floating rate senior unsecured term credit facility (as amended, the "2018 Euro Term Loan") outstanding was EUR 250.8 million (approximately US$ 273.0264.4 million). The 2018 Euro Term Loan bears interest at three-month EURIBOR (fixed pursuant to customary hedging arrangements (see Note 14,13, "Financial Instruments and Fair Value Measurements")) plus a margin of between 1.07%1.1% and 1.90%1.9% depending on the credit rating of Time Warner andInc. ("Time Warner"). As at December 31, 2016, the all-in borrowing rate on amounts outstanding under the 2018 Euro Term Loan was 8.5% (the components of which are shown in the table below under the heading "Interest Rate Summary").
Interest on the 2018 Euro Term Loan is payable quarterly in arrears on each March 12, June 12, September 12 and December 12. As at December 31, 2015, the interest rate on amounts outstanding under theThe 2018 Euro Term Loan was 1.50%. With effect from the drawing of the 2021 Euro Term Loan (see Note 26, "Subsequent Events"), the 2018 Euro Term Loan maturity will be extended from November 1, 2017 tomatures on November 1, 2018 and may be prepaid at our option, in whole or in part, without premium or penalty, upon the occurrence of certain events, including if our net leverage (as defined in ourthe Reimbursement Agreement) decreases to below five times for two consecutive quarters. The fair value of the 2018 Euro Term Loan asquarters, or at December 31, 2015 approximates its carrying value. This measurement of estimated fair value uses Level 2 inputs as described in Note 14, "Financial Instruments and Fair Value Measurements".
any time from November 1, 2017. The 2018 Euro Term Loan is a senior unsecured obligation of CME Ltd., and is unconditionally guaranteed by our 100% owned subsidiary CME BVMedia Enterprises B.V. ("CME BV") and by Time Warner and certain of its subsidiaries. In connection with the Time Warner guarantee, we entered into a reimbursement agreement (as amended, the “Reimbursement Agreement") with Time Warner which provides that we will reimburse Time Warner for any amounts paid by them under any guarantee or through any loan purchase right exercised by Time Warner. Additionally, the loan purchase right allows Time Warner to purchase any amount outstanding under the 2018 Euro Term Loan from the lenders following an event of default under the 2018 Euro Term Loan or the Reimbursement Agreement. The covenants and events of default under the Reimbursement Agreement are substantially the same as under the 2017 Term Loan and the 2021 Revolving Credit Facility.
The Reimbursement Agreement is jointly and severally guaranteed by CME NV and CME BV and is secured by a pledge over 100% of the outstanding shares of each of CME NV and CME BV. As consideration for the guaranteefair values of the 2018 Euro Term Loan we are paying a guarantee fee to Time Warnerof US$ 233.3 million and US$ 273.0 million as at December 31, 2016 and December 31, 2015, respectively, were determined based on the amount outstanding on the 2018 Euro Term Loan. See the section headed 'Guarantee Fees' below.
comparable instruments that trade in active markets. This measurement of estimated fair value uses Level 2 inputs as described in Note 13, "Financial Instruments and Fair Value Measurements". Certain derivative instruments, including contingent event of default and change of control put options, have been identified as being embedded in the 2018 Euro Term Loan. The embedded derivatives are considered clearly and closely related to the 2018 Euro Term Loan, and as such are not required to be accounted for separately.
2019 Euro Term Loan
As at December 31, 2015,2016, the principal amount of our floating rate senior unsecured term credit facility (the "2019 Euro Term Loan") outstanding was EUR 235.3 million (approximately US$ 256.2248.1 million). The 2019 Euro Term Loan bears interest at three-month EURIBOR (fixed pursuant to customary hedging arrangements (see Note 14,13, "Financial Instruments and Fair Value Measurements")) plus a margin of between 1.07%1.1% and 1.90%1.9% depending on the credit rating of Time Warner, andWarner. As at December 31, 2016, the all-in borrowing rate on amounts outstanding under the 2019 Euro Term Loan was 8.5% (the components of which are shown in the table below under the heading "Interest Rate Summary").
Interest on the 2019 Euro Term Loan is payable quarterly in arrears on each February 13, May 13, August 13 and November 13, in accordance with the terms of 2019 Euro Term Loan Credit Agreement. As at December 31, 2015, the interest rate on amounts outstanding under the 2019 Euro Term Loan was 1.5%.13. The 2019 Euro Term Loan matures on November 1, 2019 and may currently be prepaid at our option, in whole or in part, from June 1, 2016, without premium or penalty. The fair value of the 2019 Euro Term Loan as at December 31, 2015 approximates its carrying value. This measurement of estimated fair value uses Level 2 inputs as described in Note 14, "Financial Instruments and Fair Value Measurements".
The 2019 Euro Term Loan is a senior unsecured obligation of CME Ltd., and is unconditionally guaranteed by CME BV and by Time Warner and certain of its subsidiaries. In connection with this guarantee, we amended the Reimbursement Agreement with Time Warner which provides that we will reimburse Time Warner for any amounts paid by them under any guarantee or through any loan purchase right exercised by Time Warner. Additionally, the loan purchase right allows Time Warner to purchase any amount outstanding under the 2019 Euro Term Loan from the lenders following an event of default under the 2019 Euro Term Loan or the Reimbursement Agreement. As consideration for the guarantee
The fair values of the 2019 Euro Term Loan we are paying a guarantee fee to Time Warnerof US$ 203.3 million and US$ 256.2 million as at December 31, 2016 and December 31, 2015, respectively, were determined based on the amount outstanding on the 2019 Euro Term Loan. See the section headed 'Guarantee Fees' below.
comparable instruments that trade in active markets, plus an applicable spread. This measurement of estimated fair value uses Level 2 inputs as described in Note 13, "Financial Instruments and Fair Value Measurements". Certain derivative instruments, including contingent event of default and change of control put options, have been identified as being embedded in the 2019 Euro Term Loan. The embedded derivatives are considered clearly and closely related to the 2019 Euro Term Loan, and as such are not required to be accounted for separately.
2021 Euro Term Loan
As at December 31, 2016, the principal amount of our floating rate senior unsecured term credit facility (the "2021 Euro Term Loan") outstanding was EUR 468.8 million (approximately US$ 494.2 million). The 2021 Euro Term Loan bears interest at three-month EURIBOR (fixed pursuant to customary hedging arrangements (see Note 13, "Financial Instruments and Fair Value Measurements")) plus a margin of between 1.1% and 1.9% depending on the credit rating of Time Warner. The all-in borrowing rate including the Guarantee Fee ranges from 10.5% (if our net leverage ratio is greater than or equal to eight times) to 7.0% per annum (if our net leverage ratio is less than five times). As at December 31, 2016, the all-in borrowing rate on amounts outstanding under the 2021 Euro Term Loan was 9.0% (the components of which are shown in the table below under the heading "Interest Rate Summary").
Interest on the 2021 Euro Term Loan is payable quarterly in arrears on each April 7, July 7, October 7 and January 7. The 2021 Euro Term Loan matures on February 19, 2021 and may be prepaid at our option, in whole or in part, without premium or penalty, upon the earlier of the occurrence of certain events, including if our net leverage (as defined in the Reimbursement Agreement) decreases to below five times for two consecutive quarters, or at any time from February 19, 2020. The 2021 Euro Term Loan is a senior unsecured obligation of CME BV, and is unconditionally guaranteed by CME Ltd. and by Time Warner and certain of its subsidiaries.
The fair value of the 2021 Euro Term Loan of US$ 369.7 million as at December 31, 2016 was determined based on comparable instruments that trade in active markets, plus an applicable spread. This measurement of estimated fair value uses Level 2 inputs as described in Note 13, "Financial Instruments and Fair Value Measurements". Certain derivative instruments, including contingent event of default and change of control put options, have been identified as being embedded in the 2021 Euro Term Loan. The embedded derivatives are considered clearly and closely related to the 2021 Euro Term Loan, and as such are not required to be accounted for separately.
Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Reimbursement Agreement and Guarantee Fees
In connection with Time Warner’s guarantees of the 2018 Euro Term Loan, 2019 Euro Term Loan and 2021 Euro Term Loan (collectively, the “Euro Term Loans”), we entered into a reimbursement agreement (as amended and restated, the “Reimbursement Agreement") with Time Warner which provides for the payment of guarantee fees (collectively, the "Guarantee Fees") to Time Warner as consideration for those guarantees, and that we will reimburse Time Warner for any amounts paid by them under any guarantee or through any loan purchase right exercised by Time Warner. The loan purchase right allows Time Warner to purchase any amount outstanding under the Euro Term Loans from the lenders following an event of default under the Euro Term Loans or the Reimbursement Agreement. The Reimbursement Agreement is jointly and severally guaranteed by both our 100% owned subsidiaries Central European Media Enterprises N.V. ("CME NV") and CME BV and is secured by a pledge over 100% of the outstanding shares of each of CME NV and CME BV. The covenants and events of default under the Reimbursement Agreement are substantially the same as under the 2021 Revolving Credit Facility.
We pay Guarantee Fees to Time Warner based on the amounts outstanding on the Euro Term Loans calculated on a per annum basis as shown in the table below. For the years ended December 31, 2016, 2015 and 2014, we recognized US$ 68.0 million, US$ 21.5 million and US$ 1.2 million, respectively, of Guarantee Fees as interest expense in our consolidated statements of operations and comprehensive income / loss.
The Guarantee Fees relating to the 2018 Euro Term Loan and the 2019 Euro Term Loan are payable semi-annually in arrears on each May 1 and November 1, in cash or in kind (by adding such semi-annual Guarantee Fees to any such amount then outstanding). The Guarantee Fees relating to the 2021 Euro Term Loan are payable semi-annually in arrears on each June 1 and December 1 with the first 5.0% (including the base rate and the rate paid pursuant to the hedging arrangements) paid in cash and the remainder payable at our election in cash or in kind.
The Guarantee Fees paid in kind are presented as a component of other non-current liabilities (see Note 10, "Other Liabilities") and bear interest per annum at their respective Guarantee Fee rate (as set forth in the table below), payable semi-annually in arrears in cash or in kind (by adding such semi-annual Guarantee Fees to any such amount then outstanding) on each respective payment date. Guarantee Fees paid in cash are included in cash flows from operating activities in our consolidated statements of cash flows.
Interest Rate Summary
 Base Rate
 Rate Fixed Pursuant to Interest Rate Hedges
 Guarantee Fee Rate
 All-in Borrowing Rate
 
2018 Euro Term Loan1.50% 0.21%
(1) 
6.79% 8.50% 
2019 Euro Term Loan1.50% 0.31% 6.69% 8.50% 
2021 Euro Term Loan1.50% 0.28% 7.22% 9.00% 
2021 Revolving Credit Facility (2)
9.00% 
 
 9.00% 
(1)
Effective until November 1, 2017. From November 1, 2017 through maturity on November 1, 2018, the rate fixed pursuant to interest rate hedges will decrease to 0.14%, with a corresponding increase in the guarantee fee rate, such that the all-in borrowing rate remains 8.50%.
(2)
As at December 31, 2016, the aggregate principal amount available under the 2021 Revolving Credit Facility was undrawn.
2021 Revolving Credit Facility
Following a repayment in the amount of US$ 26.1 millionin June 2015, weWe had no balance outstanding under athe US$ 115.0 million revolving credit facility (the “2021 Revolving Credit Facility”), all of which was available to be drawn as at December 31, 2015.2016.
The 2021 Revolving Credit Facility bears interest at a rate per annum based on, at our option, an alternativealternate base rate plus 8.0% or an amount equal to the greater of (i) an adjusted LIBO rate and (ii)1.0%, plus, in each case, 9.0%, which we may paywith the first 5.0% paid in cash and the remainder payable at our election in cash or in kind by adding such accrued interest to the applicable principal amount drawnoutstanding under the 2021 Revolving Credit Facility. With effect from the drawing of the 2021 Euro Term Loan (see Note 26, "Subsequent Events"), theThe interest rate on the 2021 Revolving Credit Facility will beis determined on the basis of our net leverage ratio (as defined in the Reimbursement Agreement) and can decreaseranges from LIBOR (subject to as low as 7.0%a floor of 1.0%) plus 9.0% if our net leverage is greater than or equal to seven times, to LIBOR (subject to a floor of 1.0%) plus 6.0% per annum to the extentif our net leverage ratio decreases to is less than five times, and the times. The maturity date will be extended toof the 2021 Revolving Credit Facility is February 19, 2021 with the available amount underdecreasing to US$ 50.0 million from January 1, 2018. When drawn, the 2021 Revolving Credit Facility decreasing to US$ 50.0 million.permits prepayment at our option in whole or in part without penalty.
The 2021 Revolving Credit Facility is jointly and severally guaranteed by CME NV and CME BV and is secured by a pledge over 100% of the outstanding shares of each of CME NV and CME BV. The covenants and events of default are substantially the same as under the 2017 Term Loan.
The 2021 Revolving Credit Facility permits prepayment at our optionagreement contains limitations on CME’s ability to incur indebtedness, incur guarantees, grant liens, pay dividends or make other distributions, enter into certain affiliate transactions, consolidate, merge or effect a corporate reconstruction, make certain investments acquisitions and loans, and conduct certain asset sales. The agreement also contains maintenance covenants in whole orrespect of interest cover, cash flow cover and total leverage ratios, and has covenants in part without penalty.respect of incurring indebtedness, the provision of guarantees, making investments and disposals, granting security and certain events of defaults.

60

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Guarantee Fees
As consideration for Time Warner's guarantees of the 2018 Euro Term Loan and 2019 Euro Term Loan, we are paying guarantee fees (collectively, the "Guarantee Fees") to Time Warner based on the amounts outstanding on the 2018 Euro Term Loan and the 2019 Euro Term Loan calculated on a per annum basis equal to 8.5% minus the rate of interest paid by CME Ltd. under the respective loans (the “Guarantee Fee Rate”). The Guarantee Fees are payable semi-annually in arrears on each May 1 and November 1, which we may pay in cash or in kind (by adding such semi-annual Guarantee Fees to any such amount then outstanding). We have elected to pay the Guarantee Fees in kind to date. The Guarantee Fees paid in kind are presented as a component of other non-current liabilities (see Note 11, "Other Liabilities") and bear interest per annum at the Guarantee Fee Rate, payable semi-annually in arrears in cash or in kind (by adding such semi-annual Guarantee Fees to any such amount then outstanding) on each respective payment date.
Other Credit Facilities and Capital Lease Obligations
Other credit facilities and capital lease obligations comprised the following at December 31, 20152016 and December 31, 20142015:
  December 31, 2015
 December 31, 2014
December 31, 2016
 December 31, 2015
Credit facilities (1) – (3)
 $
 $3,100
$
 $
Capital leases  3,648
 3,632
4,313
 3,648
Total credit facilities and capital leases  3,648
 6,732
4,313
 3,648
Less: current maturities  (1,155) (1,190)(1,494) (1,155)
Total non-current credit facilities and capital leases  $2,493
 $5,542
$2,819
 $2,493
(1) 
We have a cash pooling arrangement with Bank Mendes Gans (“BMG”), a subsidiary of ING Bank N.V. (“ING”), which enables us to receive credit across the group in respect of cash balances which our subsidiaries deposit with BMG. Cash deposited by our subsidiaries with BMG is pledged as security against the drawings of other subsidiaries up to the amount deposited.
As at December 31, 2015,2016, we had deposits of US$ 19.616.4 million in and no drawings on the BMG cash pool. Interest is earned on deposits at the relevant money market rate. As at December 31, 2014,2015, we had deposits of US$ 10.519.6 million in and no drawings on the BMG cash pool.
(2) 
As at December 31, 20152016 and December 31, 2014,2015, there were no drawings outstanding under a CZK 825.0735.0 million (approximately US$ 33.228.7 million) factoring framework agreement with Factoring Ceska Sporitelna (“FCS”). Under this facility, up to CZK 825.0735.0 million (approximately US$ 33.228.7 million) of receivables from certain customers in the Czech Republic may be factored on a recourse or non-recourse basis. The facility has a factoring fee of 0.3% of any factored receivable and bears interest at one-month PRIBOR plus 2.5% per annum for the period that receivables are factored and outstanding.
(3) 
As at December 31, 20152016 there were RON 8.9105.7 million (approximately US$ 2.224.6 million) of receivables factored under a RON 20.0 million (approximately US$ 4.8 million) factoring framework agreement with UniCredit BankGlobal Funds IFN S.A. entered into in the fourthfirst quarter of 2015.2016. Under this facility, receivables from certain customers in Romania may be factored on a non-recourse basis. The facility has a factoring fee of 4.0% of any factored receivable and bears interest at 2.3% for6.0% per annum from the period thatdate the receivables are factored and outstanding.to the due date of the factored receivable.
Total Group
At December 31, 20152016, the maturity of our senior debtlong-term and credit facilities was as follows:
2016$
2017 (1)
813,744
2018
2019256,210
2020
2021 and thereafter
Total senior debt and credit facilities1,069,954
Less: net discount(150,142)
Carrying amount of senior debt and credit facilities$919,812
2017$
2018264,368
2019248,067
2020
2021494,162
2022 and thereafter
Total long-debt and credit facilities1,006,597
Debt issuance costs(7,388)
Carrying amount of long-debt and credit facilities$999,209
(1)
On February, 19, 2016, we entered into an agreement for the EUR 468.8 million (approximately US$ 510.4 million) 2021 Euro Term Loan, the proceeds of which will be drawn on or about April 7, 2016 and be applied to repay the 2017 Term Loan and redeem and discharge the 2017 PIK Notes, which we expect will be completed on or about April 8, 2016. Also on February 19, 2016, we agreed to extend the maturity date of the 2018 Euro Term Loan to November 1, 2018, reduce the interest cost of amounts drawn on the 2021 Revolving Credit Facility as our leverage ratio improves, and extend the maturity date of the 2021 Revolving Credit Facility at the current borrowing capacity until January 1, 2018 and with a borrowing capacity US$ 50.0 million from January 1, 2018 to the maturity date on February 19, 2021, with effect from the drawing of the 2021 Euro Term Loan (see Note 26, "Subsequent Events"). These transactions are subject to customary closing conditions (including the drawdown of the 2021 Euro Term Loan, the accuracy of representations, the absence of events of default and the absence of material adverse changes), certain of which are outside our direct control.

61

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Capital Lease Commitments
We lease certain of our office and broadcast facilities as well as machinery and equipment under various leasing arrangements. The future minimum lease payments, by year and in the aggregate, under capital leases with initial or remaining non-cancellable lease terms in excess of one year, consisted of the following at December 31, 20152016:
2016$1,228
20171,112
$1,570
2018859
1,339
2019512
1,003
202073
525
2021 and thereafter
202113
2022 and thereafter
Total undiscounted payments3,784
4,450
Less: amount representing interest(136)(137)
Present value of net minimum lease payments$3,648
$4,313
6.    PROGRAM RIGHTS
Program rights comprised the following at December 31, 2015 and December 31, 2014:
 December 31, 2015
 December 31, 2014
Program rights:   
Acquired program rights, net of amortization$179,632
 $217,183
Less: current portion of acquired program rights(85,972) (99,358)
Total non-current acquired program rights93,660
 117,825
Produced program rights – Feature Films:   
Released, net of amortization1,298
 4,553
Completed and not released
 558
Produced program rights – Television Programs:   
Released, net of amortization56,125
 60,691
Completed and not released3,500
 7,370
In production13,783
 15,786
Development and pre-production707
 481
Total produced program rights75,413
 89,439
Total non-current acquired program rights and produced program rights$169,073
 $207,264
7.    ACCOUNTS RECEIVABLE
Accounts receivable comprised the following at December 31, 2015 and December 31, 2014:
 December 31, 2015
 December 31, 2014
Unrelated customers$176,628
 $186,404
Less: allowance for bad debts and credit notes(9,201) (10,692)
Related parties
 197
Less: allowance for bad debts and credit notes
 (43)
Total accounts receivable$167,427
 $175,866
Bad debt expense for the year ended December 31, 2015, 2014 and 2013 was US$ 2.1 million, US$ 4.2 million, and US$ 3.7 million, respectively.

62

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

8.5.    PROGRAM RIGHTS
Program rights comprised the following at December 31, 2016 and December 31, 2015:
 December 31, 2016
 December 31, 2015
Program rights:   
Acquired program rights, net of amortization$183,303
 $179,632
Less: current portion of acquired program rights(86,151) (85,972)
Total non-current acquired program rights97,152
 93,660
Produced program rights – Feature Films:   
Released, net of amortization1,039
 1,298
Produced program rights – Television Programs:   
Released, net of amortization54,149
 56,125
Completed and not released2,593
 3,500
In production23,712
 13,783
Development and pre-production711
 707
Total produced program rights82,204
 75,413
Total non-current acquired program rights and produced program rights$179,356
 $169,073
6.    ACCOUNTS RECEIVABLE
Accounts receivable comprised the following at December 31, 2016 and December 31, 2015:
 December 31, 2016
 December 31, 2015
Third-party customers$187,937
 $176,628
Less: allowance for bad debts and credit notes(9,598) (9,201)
Total accounts receivable$178,339
 $167,427
Bad debt expense for the year ended December 31, 2016, 2015 and 2014 was US$ 3.6 million, US$ 2.1 million, and US$ 4.2 million, respectively.
7.    OTHER ASSETS
Other current and non-current assets comprised the following at December 31, 20152016 and December 31, 20142015:
December 31, 2015
 December 31, 2014
December 31, 2016
 December 31, 2015
Current:
      
Prepaid acquired programming$22,761
 $19,162
$22,511
 $22,761
Other prepaid expenses6,941
 5,627
5,270
 6,941
Deferred tax10,425
 8,127

 10,425
VAT recoverable733
 835
713
 733
Income taxes recoverable249
 135
206
 249
Other2,097
 1,595
3,771
 2,097
Total other current assets$43,206
 $35,481
$32,471
 $43,206
      
December 31, 2015
 December 31, 2014
December 31, 2016
 December 31, 2015
Non-current: 
  
 
  
Capitalized debt costs$40,844
 $55,472
$15,018
 $27,060
Deferred tax124
 456
4,570
 124
Other3,949
 2,188
1,855
 3,949
Total other non-current assets$44,917
 $58,116
$21,443
 $31,133
Capitalized debt costs are being amortized over the term of the related debt instruments using either the straight-line method, which approximates the effective interest method, or the effective interest method.
9.    PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprised the following at December 31, 2015 and December 31, 2014:
 December 31, 2015
 December 31, 2014
Land and buildings$92,237
 $103,248
Machinery, fixtures and equipment164,503
 172,929
Other equipment32,314
 36,516
Software licenses55,656
 56,176
Construction in progress3,001
 3,325
Total cost347,711
 372,194
Less: accumulated depreciation(239,189) (257,859)
Total net book value$108,522
 $114,335
    
Assets held under capital leases (included in the above) 
  
Land and buildings$3,805
 $4,243
Machinery, fixtures and equipment4,646
 3,325
Total cost8,451
 7,568
Less: accumulated depreciation(3,556) (2,760)
Total net book value$4,895
 $4,808
Depreciation expense for the years ending December 31, 2015, 2014 and 2013 was US$ 27.9 million, US$ 32.8 million and US$ 37.2 million, respectively.

63

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

The movement in the net book value of property, plant and equipment during the years ended December 31, 2015 and 2014 is comprised of:
 For The Year Ending December 31,
 2015
 2014
Opening balance$114,335
 $142,907
Additions34,523
 27,860
Disposals(290) (25)
Depreciation(27,943) (32,836)
Foreign currency movements(10,810) (16,572)
Other (1)
(1,293) (6,999)
Ending balance$108,522
 $114,335
(1)
Other is comprised of property, plant and equipment which were classified as assets held for sale and subsequently sold in the fourth quarter of 2015 (see Note 3, "Discontinued Operations and Assets Held for Sale").
10.    ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities comprised the following at December 31, 2015 and December 31, 2014:
 December 31, 2015
 December 31, 2014
Accounts payable and accrued expenses$54,526
 $55,564
Related party accounts payable53
 43
Programming liabilities24,901
 42,828
Related party programming liabilities14,583
 24,980
Duties and other taxes payable12,856
 23,341
Accrued staff costs20,709
 21,168
Accrued interest payable914
 1,958
Related party accrued interest payable477
 173
Income taxes payable249
 460
Accrued legal contingencies and professional fees1,744
 3,004
Authors’ rights2,516
 4,434
Other accrued liabilities1,177
 1,271
Total accounts payable and accrued liabilities$134,705
 $179,224

64

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

11.8.    PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprised the following at December 31, 2016 and December 31, 2015:
 December 31, 2016
 December 31, 2015
Land and buildings$90,988
 $92,237
Machinery, fixtures and equipment202,110
 164,503
Other equipment33,752
 32,314
Software55,542
 55,656
Construction in progress5,316
 3,001
Total cost387,708
 347,711
Less: accumulated depreciation(278,619) (239,189)
Total net book value$109,089
 $108,522
    
Assets held under capital leases (included in the above) 
  
Land and buildings$3,684
 $3,805
Machinery, fixtures and equipment6,338
 4,646
Total cost10,022
 8,451
Less: accumulated depreciation(4,316) (3,556)
Total net book value$5,706
 $4,895
Depreciation expense for the years ended December 31, 2016, 2015 and 2014 was US$ 30.2 million, US$ 27.9 million and US$ 32.8 million, respectively.
The movement in the net book value of property, plant and equipment during the years ended December 31, 2016 and 2015 is comprised of:
 For The Year Ended December 31,
 2016
 2015
Opening balance$108,522
 $114,335
Additions34,371
 34,523
Disposals(88) (290)
Depreciation(30,190) (27,943)
Foreign currency movements(3,526) (10,810)
Other
 (1,293)
Ending balance$109,089
 $108,522
9.    ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities comprised the following at December 31, 2016 and December 31, 2015:
 December 31, 2016
 December 31, 2015
Accounts payable and accrued expenses$59,522
 $57,042
Related party accounts payable192
 53
Programming liabilities29,249
 24,901
Related party programming liabilities18,959
 14,583
Duties and other taxes payable13,446
 12,856
Accrued staff costs20,565
 20,709
Accrued interest payable2,941
 914
Related party accrued interest payable (including Guarantee Fees)9,588
 477
Income taxes payable5,514
 249
Other accrued liabilities1,005
 2,921
Total accounts payable and accrued liabilities$160,981
 $134,705
Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

10.    OTHER LIABILITIES
Other current and non-current liabilities comprised the following at December 31, 20152016 and December 31, 20142015:
December 31, 2015
 December 31, 2014
December 31, 2016
 December 31, 2015
Current:      
Deferred revenue$7,546
 $4,938
$5,333
 $7,546
Deferred tax
 279
Derivative liabilities650
 
477
 650
Restructuring provision458
 1,558

 458
Legal provisions1,520
 995
2,680
 1,520
Other274
 42
599
 274
Total other current liabilities$10,448
 $7,812
$9,089
 $10,448
      
December 31, 2015
 December 31, 2014
December 31, 2016
 December 31, 2015
Non-current: 
  
 
  
Deferred tax$25,990
 $27,370
$20,335
 $25,990
Related party programming liabilities
 316
Programming liabilities
 1,699
Related party commitment fee payable (1)
9,240
 9,136
9,905
 9,240
Related party guarantee fee payable (2)
22,655
 1,163
Accrued interest (3)
977
 846
Related party accrued interest (3)
5,304
 4,589
Related party Guarantee Fee payable (Note 4)34,492
 22,655
Accrued interest
 977
Related party accrued interest
 5,304
Other1,583
 1,366
4,026
 1,583
Total other non-current liabilities$65,749
 $46,485
$68,758
 $65,749
(1) 
Represents the commitment fee ("Commitment Fee") payable to Time Warner, including accrued interest, in respect of its obligation under a commitment letter dated November 14, 2014 (the “2015 Refinancing Commitment Letter”) between Time Warner and CMEus whereby Time Warner agreed to provide or assist with arranging a loan facility to repay the 2015 Convertible Notesour 5.0% senior convertible notes at maturity.maturity in November 2015. The commitment feeCommitment Fee is payable by November 1, 2019, the maturity date of the 2019 Euro Term Loan, or earlier if the repayment of the 2019 Euro Term Loan is accelerated. The commitment feeCommitment Fee bears interest at 8.5% per annum and such interest is payable in arrears on each May 1 and November 1, beginning May 1, 2016 and may be paid in cash or in kind, at our election.
(2)
Represents the fee payable to Time Warner for Time Warner's guarantees of the 2018 Euro Term Loan and the 2019 Euro Term Loan. The guarantee fee is calculated based on the amounts outstanding on the 2018 Euro Term Loan and the 2019 Euro Term Loan, each calculated on a per annum basis equal to 8.5% minus the rate of interest paid by CME to the lenders under the 2018 Euro Term Loan and the 2019 Euro Term Loan, respectively. The guarantee fee is payable, in cash or in kind on a semi-annual basis in arrears on each May 1 and November 1. We have elected to pay the guarantee fee in kind to date. Amounts of the guarantee fee paid in kind bear interest at the Guarantee Fee Rate, which is payable, in cash or in kind, in arrears on each May 1 and November 1.
(3)
Represents interest on the 2017 PIK Notes and the 2017 Term Loan, which we may pay in kind or in cash on a semi-annual basis in arrears by adding such accrued interest to the principal amount of the underlying instrument.
12.11.    CONVERTIBLE REDEEMABLE PREFERRED SHARES
200,000 shares of our Series B Convertible Redeemable Preferred Stock, par value US$ 0.08 per share (the “Series B Preferred Shares”) were issued and outstanding as at December 31, 20152016 and 2014.2015. As at December 31, 20152016 and December 31, 2014,2015, the carrying value of the Series B Preferred Shares was US$ 241.2254.9 million and US$ 223.9241.2 million, respectively. The Series B Preferred Shares are held by Time Warner Media Holdings B.V. ("TW Investor"). As of December 31, 2015,2016, the 200,000 shares of Series B preferred stock were convertible into approximately 99.5105.2 million shares of Class A common stock.

65

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

The initial stated value of the Series B Preferred Shares ofwas US$ 1,000 per share accretesshare. The Series B Preferred Shares accrete at an annual rate of 7.5%3.75%, compounded quarterly, from and including June 25, 2013, the date of issuance,2016 to but excluding the third anniversary of the date of issuance, and at an annual rate of 3.75%, compounded quarterly, from and including the third anniversary of the date of issuance to but excluding the fifth anniversary of the date of issuance.June 25, 2018. We have the right from June 25, 2016 to pay cash to the holder in lieu of any further accretion. From June 25, 2016, on the date that is 61 days after the date on which the ownership of our outstanding shares of Class A Common Stock by a group would not be greater than 49.9% of the outstanding shares of Class A Common Stock, eachEach Series B Preferred Share may, at the holder's option, be converted into the number of shares of our Class A common stock determined by dividing (i) the accreted stated value plus accrued but unpaid dividends, if any, in each case as of the conversion date, by (ii) the conversion price, which was approximately US$ 2.42 at December 31, 2015,2016, but is subject to adjustment from time to time pursuant to customary weighted-average anti-dilution provisions with respect to our issuances of equity or equity-linked securities at a price below the then-applicable conversion price (excluding any securities issued under our benefit plans at or above fair market value). We have the right to redeem the Series B Preferred Shares in whole or in part from June 25, 2016, upon 30 days' written notice. The redemption price of each outstanding Series B Preferred Share is equal to its accreted stated value plus accrued but unpaid dividends, if any, in each case as of the redemption date specified in the redemption notice. After receipt of a redemption notice, each holder of Series B Preferred Shares will have the right to convert, prior to the date of redemption, all or part of such Series B Preferred Shares to be redeemed by us into shares of our Class A common stock in accordance with the terms of conversion described above.
Holders of the Series B Preferred Shares will have no voting rights on any matter presented to holders of any class of our capital stock, with the exception that they may vote with holders of shares of our Class A common stock (i) with respect to a change of control event or (ii) as provided by our bye-laws or applicable Bermuda law. Holders of Series B Preferred Shares will participate in any dividends declared or paid on our Class A common stock on an as-converted basis. The Series B Preferred Shares will rank pari passu with our Series A Convertible Preferred Stock and senior to all other equity securities of the Company in respect of payment of dividends and distribution of assets upon liquidation. The Series B Preferred Shares have such other rights, powers and preferences as are set forth in the Certificate of Designation for the Series B Preferred Shares.
We concluded that the Series B Preferred Shares were not considered a liability and that the embedded conversion feature in the Series B Preferred Shares was clearly and closely related to the host contract and therefore did not need to be bifurcated. The Series B Preferred Shares are required to be classified outside of permanent equity because such shares can be redeemed for cash in certain circumstances. These sharesThe Series B Preferred Shares are not currently redeemable and thus have been recordedcarried on the consolidated balance sheet based on fair value at the time of issuance. We have determined that it is probable thatredemption value. As the Series B Preferred Shares will becomeare redeemable, and thuswe have accreted changes in the redemption value since issuance. For the years ended December 31, 20152016, 2015 and 2014, we recognized accretion on the Series B Preferred Shares of US$ 13.7 million, US$ 17.3 million and US$ 16.0 million, respectively, with corresponding decreases in additional paid-in capital.capital, net of the effect of foreign exchange.
13.
Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

12.    EQUITY
Preferred Stock
5,000,000 shares of Preferred Stock were authorized as at December 31, 20152016 and 2014.2015.
One share of Series A Convertible Preferred Stock (the “Series A Preferred Share”) was issued and outstanding as at December 31, 20152016 and 2014.2015. The Series A Preferred Share is convertible into 11,211,449 shares of Class A common stock on the date that is 61 days after the date on which the ownership of our outstanding shares of Class A common stock by a group that includes TW Investor and its affiliates would not be greater than 49.9% of the outstanding shares of Class A common stock.. The Series A Preferred Share is entitled to one vote per each share of Class A common stock into which it is convertible and has such other rights, powers and preferences, including potential adjustments to the number of shares of Class A common stock to be issued upon conversion, as are set forth in the Certificate of Designation for the Series A Preferred Share.
200,000 shares of Series B Preferred Shares were issued and outstanding as at December 31, 20152016 and 2015. (see Note 12,11, "Convertible Redeemable Preferred Shares"). Assuming conversion on June 25,As of December 31, 2016, and no further adjustments to the conversion price under the Certificate of Designations for the200,000 Series B Preferred Shares TW Investor would be issued 103.1were convertible into approximately 105.2 million shares of Class A common stock upon conversion.stock.
Class A and B Common Stock
440,000,000 shares of Class A common stock and 15,000,000 shares of Class B common stock were authorized as at December 31, 20152016 and December 31, 20142015. The rights of the holders of Class A common stock and Class B common stock are identical except for voting rights. The shares of Class A common stock are entitled to one vote per share and the shares of Class B common stock are entitled to ten votes per share. Shares of Class B common stock are convertible into shares of Class A common stock on a one-for-one basis for no additional consideration. Holders of each class of shares are entitled to receive dividends and upon liquidation or dissolution are entitled to receive all assets available for distribution to holders of our common stock. Under our bye-laws, the holders of each class have no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares.
There were 135.8143.4 million and 135.3135.8 million shares of Class A common stock outstanding at December 31, 20152016 and 2014,2015, respectively, and no shares of Class B common stock outstanding at December 31, 20152016 or 2014.2015.
As at December 31, 20152016, TW Investor owns 45.2%42.8% of the outstanding shares of Class A common stock and has a 49.4%47.0% voting interest in the Company due to its ownership of the Series A Preferred Share.
Common Stock Warrants
As at December 31, 2015,On May 2, 2014, we issued 114,000,000 warrants in connection with a rights offering. Each warrant may be exercised until May 2, 2018 and entitles the holder thereof to purchase 114,000,000 sharesreceive one share of our Class A common stock at an exercise price of US$ 1.00 per share generally exercisable from May 2,in cash. During 2016, 6,996,955 warrants were exercised resulting in proceeds to May 2, 2018, wereus of approximately US$ 7.0 million. As at December 31, 2016, 107,003,045 warrants remain outstanding. 100,926,996 (approximately 88.5%) of these warrants are held by Time Warner and TW Investor. Time Warner also holds the right to exercise its warrants prior to May 2, 2016 at such times and in such amounts as would allow Time Warner to own up to 49.9%Investor collectively hold 100,926,996 of the outstanding shares of the Class A Common Stock of the Company (including any shares attributed to it as part of a group under Section 12(d)(3) of the Securities Exchange Act).
these warrants. The warrants are classified in additional paid-in capital, a component of equity, and are not subject to subsequent revaluation. The fair value of the warrants issued in the rights offering we conducted in 2014 (the "Unit Warrants") is accounted for as a discount to the 2017 PIK Notes. The fair value of the warrants issued to Time Warner in certain related financing transactions (the "Initial Warrants") is accounted for as a discount on the 2017 Term Loan and as debt issuance costs for the 2021 Revolving Credit Facility (see Note 5, "Long-term Debt and Other Financing Arrangements").

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CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

14.13.    FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Accounting Standards CodificationASC 820, “Fair Value Measurements and Disclosure”, establishes a hierarchy that prioritizes the inputs to those valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are:
Basis of Fair Value Measurement
Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted instruments.
Level 2Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
We evaluate the position of each financial instrument measured at fair value in the hierarchy individually based on the valuation methodology we apply. The carrying amount of financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities, approximate their fair value due to the short-term nature of these items. The fair value of our long-term debt and other financing arrangements is included in Note 5,4, "Long-term Debt and Other Financing Arrangements".
Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Hedge Accounting Activities
Cash Flow Hedges of Interest Rate Risk
We are party to interest rate swap agreements to mitigate our exposure to interest rate fluctuations on the outstanding principal amount of our 2018 Euro Term Loan and our 2019 Euro Term Loan.Loans. These interest rate swaps, designated as cash flow hedges, provide us with variable-rate cash receipts in exchange for fixed-rate payments over the lives of the agreements, with no exchange of the underlying notional amount. These instruments are carried at fair value on our consolidated balance sheets, and the effective portion of changes in the fair value is recorded in accumulated other comprehensive income / loss and subsequently reclassified to interest expense when the hedged item affects earnings. The ineffective portion of changes in the fair value is recognized immediately in the change in fair value of derivatives in our consolidated statements of operations.operations and comprehensive income / loss. For the years ended December 31, 20152016 and 2015 and 2014, we did not recognize any charges related to hedge ineffectiveness.
Information relating to financial instruments is as follows:
Trade Date Number of Contracts
 Description Aggregate Notional Amount
 Maturity Date Objective Fair Value as at December 31, 2016
April 5, 2016 5
 Interest rate swap 468,800
 February 21, 2021 Interest rate hedge underlying 2021 Euro Term Loan $(1,711)
April 5, 2016 4
 Interest rate swap 250,800
 November 1, 2018 Interest rate hedge underlying 2018 Euro Term Loan, forward starting on November 1, 2017 $(284)
November 10, 2015 3
 Interest rate swap 235,335
 November 1, 2019 Interest rate hedge underlying 2019 Euro Term Loan $(1,658)
November 14, 2014 2
 Interest rate swap 250,800
 November 1, 2017 Interest rate hedge underlying 2018 Euro Term Loan $(477)
We value the interest rate swap agreements using a valuation model which calculates the fair value on the basis of the net present value of the estimated future cash flows. The most significant input used in the valuation model is the expected EURIBOR-based yield curve. These instruments were allocated to Level 2 of the fair value hierarchy because the critical inputs to this model, including current interest rates, relevant yield curves and the known contractual terms of the instrument,instruments, were readily observable.
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
BALANCE December 31, 2014$(581)
BALANCE December 31, 2015$(1,420)
Loss on interest rate swaps(1,418)(5,447)
Reclassified to interest expense579
2,416
BALANCE December 31, 2015$(1,420)
BALANCE December 31, 2016$(4,451)
Non-Hedge Accounting Activities
The change in fair value of derivatives not designated as hedging instruments comprised the following for the years ended December 31, 20152016, 20142015 and 2013:2014:
 For The Year Ending December 31,
 2015
 2014
 2013
Currency swaps$4,848
 $2,311
 $
Interest rate swap
 
 104
Change in fair value of derivatives$4,848
 $2,311
 $104
 For The Year Ended December 31,
 2016
 2015
 2014
Currency swaps$(10,213) $4,848
 $2,311
Foreign Currency Risk
On December 3, 2015,From time to time, we have entered into two forward foreign exchange contracts with aggregate notional amounts of approximately US$ 49.5 million to reduce our exposure to movements in the USD to EURforeign exchange rates related to contractual payments under certain dollar-denominated agreements expected to be made during 2016. Theagreements. As at December 31, 2016, we had no forward foreign exchange contracts mature on outstanding.
14.    INTEREST EXPENSE
Interest expense comprised the following for the years ended December 21, 2016. For31, 2016, 2015 and 2014:
 For The Year Ended December 31,
 2016
 2015
 2014
Interest on long-term debt and other financing arrangements$110,127
 $114,730
 $104,570
Amortization of capitalized debt issuance costs9,152
 15,484
 18,297
Amortization of debt issuance discount12,945
 41,230
 19,138
Total interest expense$132,224
 $171,444
 $142,005
We paid cash interest (including mandatory cash-pay Guarantee Fees) of US$ 54.0 million, US$ 18.5 millionandUS$76.2 million for years ended December 31, 2016, 2015 and 2014, respectively. In addition, we paid US$ 37.4 million of Guarantee Fees during the year ended December 31, 2015,2016, for which we recognized unrealized derivative loss on these instruments of US$ 0.7 million.
On July 2, 2015 we entered into a forward foreign exchange contract with a notional amount of US$ 261.0 million,had the option to reduce our exposure to USD to EUR exchange rate fluctuationspay in connection with the refinancing of the 2015 Convertible Notes at maturity with the proceeds of the 2019 Euro Term Loan. We recognized a derivative gain of US$ 8.0 million over the life of the instrument.kind.
On March 11, 2015, we entered into two forward foreign exchange contracts with aggregate notional amounts of approximately US$ 76.9 million to reduce our exposure to movements in the USD to EUR and USD to CZK exchange rates related to contractual payments under certain dollar-denominated agreements made during 2015. These forward foreign exchange contracts matured on December 21, 2015. We recognized an aggregate derivative loss of US$ 2.5 million over the lives of the instruments.

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CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

On March 24, 2014, we entered into a foreign currency forward exchange contract to reduce our exposure to movements in the USD to EUR exchange rate from the expected proceeds of the rights offering conducted in 2014. Under the contract, we received EUR 290.2 million in exchange for US$ 400.0 million on May 2, 2014, the maturity date. We recognized a derivative gain of US$ 2.3 million over the life of the instrument.
These forward foreign exchange contracts are considered economic hedges but were not designated as hedging instruments, so changes in the fair value of the derivatives were recorded in the consolidated statements of operations and comprehensive income and in the consolidated balance sheet in other current liabilities. We valued these contracts using an industry-standard pricing model which calculated the fair value on the basis of the net present value of the estimated future cash flows receivable or payable. These instruments were allocated to Level 2 of the fair value hierarchy because the critical inputs to this model, including foreign exchange forward rates and the known contractual terms of the instruments, were readily observable.
Interest Rate Risk
On February 9, 2010, we entered into an interest rate swap agreement to reduce the impact of changing interest rates on our previously outstanding floating rate CZK-denominated debt. The interest rate swap expired in April 2013 and was used to minimize interest rate risk and was considered an economic hedge. The interest rate swap was not designated as a hedging instrument so changes in the fair value of the derivative were recorded in the consolidated statements of operations and other comprehensive income and in the consolidated balance sheet in other current liabilities.
We valued the interest rate swap agreement using a valuation model which calculated the fair value on the basis of the net present value of the estimated future cash flows. The most significant input used in the valuation model was the expected PRIBOR-based yield curve. This instrument was allocated to Level 2 of the fair value hierarchy because the critical inputs to this model, including current interest rates, relevant yield curves and the known contractual terms of the instrument, were readily observable.
15.    RESTRUCTURING COSTS
Segment Reorganization Plan
In the first quarter of 2013, we changed the composition of its operating segments. From January 1, 2013, the Broadcast, Media Pro Entertainment and New Media operating segments were reorganized to streamline central resources and create six operating segments: Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic and Slovenia. In connection with this change in segments, we incurred restructuring costs to reorganize our businesses through these geographic segments (the "Segment Reorganization Plan"). Actions under the Segment Reorganization Plan were completed as of December 31, 2013; and payments related to these actions were completed in 2014.
2014 Initiatives
During 2014, we undertook restructuring actions to optimize our cost base across a number of country operations (the "2014 Initiatives"). Actions under the 2014 Initiatives were completed as at December 31, 2014 and the related payments were completed in 2015.

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CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

2015 Initiatives
During 2015, we continued to take limited restructuring actions to optimize our cost base across a number of departments (the "2015 Initiatives"). These actions were not contemplated under the 2014 Initiatives. Actions under the 2015 Initiatives were completed in the fourth quarter of 2015.
Information relating to restructuring by type of cost is as follows:
 Segment Reorganization Plan 2014 Initiatives  
 Employee Termination Costs
 Other Exit Costs
 Total
 Employee Termination Costs
 Other Exit Costs
 Total
 
Grand
Total

Balance, December 31, 2013$2,671
 $631
 3,302
 $
 $
 $
 $3,302
Costs incurred
 
 
 10,033
 383
 10,416
 10,416
Cash paid(2,671) (82) (2,753) (8,648) (206) (8,854) (11,607)
Accrual reversal
 (560) (560) 
 
 
 (560)
Foreign currency movements
 11
 11
 
 (4) (4) 7
Balance, December 31, 2014$
 $
 $
 $1,385
 $173
 $1,558
 $1,558
              
 2014 Initiatives 2015 Initiatives  
 Employee Termination Costs
 Other Exit Costs
 Total
 Employee Termination Costs
 Other Exit Costs
 Total
 
Grand
Total

Balance, December 31, 2014$1,385
 $173
 $1,558
 $
 $
 $
 $1,558
Costs incurred
 
 
 1,897
 
 1,897
 1,897
Cash paid(1,037) (172) (1,209) (1,213) 
 (1,213) (2,422)
Accrual reversal(183) 
 (183) 
 
 
 (183)
Foreign currency movements(64) (1) (65) (4) 
 (4) (69)
Other (1)
(101) 
 (101) (222) 
 (222) (323)
Balance, December 31, 2015$
 $
 $
 $458
 $
 $458
 $458
(1)
Other is comprised of restructuring costs which were classified as liabilities held for sale and subsequently sold in the fourth quarter of 2015 (see Note 3, "Discontinued Operations and Assets Held for Sale").

69

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

A summary of restructuring charges for the years ended December 31, 2015, 2014 and 2013 by operating segment is as follows:
 For The Year Ending December 31,
 2015 2014
 Employee Termination Costs
 Other Exit Costs
 Accrual Reversal
 Total
 Employee Termination Costs
 Other Exit Costs
 Accrual Reversal
 Total
Bulgaria$
 $
 $
 $
 $3,312
 $80
 $
 $3,392
Czech Republic
 
 
 
 1,861
 
 
 1,861
Romania1,897
 
 (183) 1,714
 4,149
 
 
 4,149
Slovak Republic
 
 
 
 429
 23
 (560) (108)
Slovenia
 
 
 
 282
 
 
 282
Corporate
 
 
 
 
 280
 
 280
Total restructuring costs$1,897
 $
 $(183) $1,714
 $10,033
 $383
 $(560) $9,856
 For The Year Ending December 31,
 2013
 Employee Termination Costs
 Other Exit Costs
 Accrual Reversal
 Total
Bulgaria$447
 $
 $
 $447
Croatia95
 
 
 95
Czech Republic2,316
 68
 
 2,384
Romania1,610
 2
 
 1,612
Slovak Republic1,943
 630
 
 2,573
Slovenia996
 
 
 996
Corporate10,308
 97
 
 10,405
Total restructuring costs$17,715
 $797
 $
 $18,512
16.    INTEREST EXPENSE
Interest expense comprised the following for the years ended December 31, 2015, 2014 and 2013:
 For The Year Ending December 31,
 2015
 2014
 2013
Interest on Senior Debt and other financing arrangements$114,730
 $104,570
 $100,320
Amortization of capitalized debt issuance costs15,484
 18,297
 4,101
Amortization of debt issuance discount and premium, net41,230
 19,138
 7,288
Total interest expense$171,444
 $142,005
 $111,709
We paid cash interest of US$ 18.5 million, US$ 76.2 millionandUS$108.3 million for years ended December 31, 2015, 2014 and 2013, respectively.

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CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

17.    OTHER NON-OPERATING INCOME / EXPENSE
Other non-operating income / expense comprised the following for the years ended December 31, 2016, 2015 2014 and 2013:2014:
 For The Year Ending December 31,
 2015
 2014
 2013
Interest income$440
 $294
 $496
Foreign currency exchange (loss) / gain, net(13,481) (12,767) 20,187
Change in fair value of derivatives (Note 14)4,848
 2,311
 104
Other (expense) / income, net(17,746) 267
 (373)
Total other non-operating (expense) / income$(25,939) $(9,895) $20,414
 For The Year Ended December 31,
 2016
 2015
 2014
Interest income$592
 $440
 $294
Foreign currency exchange gain / (loss), net6,648
 (13,481) (12,767)
Change in fair value of derivatives (Note 13)(10,213) 4,848
 2,311
Other income / (expense), net486
 (17,746) 267
Total other non-operating expense$(2,487)
$(25,939)
$(9,895)
Other income / expense for the year ended December 31, 2015 primarily reflects the loss on sale of our Romanian studios' parent holding company, which was classified as held for sale in the third quarter of 2015, but did not qualify as a discontinued operation, including the reclassification of the cumulative translation adjustment into net income of US$ 11.3 million, as well as the loss on the sale of a surplus facility and related land in Bulgaria of US$ 3.3 million.
18.16.    STOCK-BASED COMPENSATION
At the Company's annual general meeting held on June 1, 2015,Under our shareholders voted for the approval of the 2015 Stock Incentive Plan (the "2015 Plan"). Under the 2015 Plan,, 6,000,000 shares have beenof Class A common stock are authorized for grants of stock options, restricted stock units ("RSUs"RSU"), restricted stock and stock appreciation rights to employees and non-employee directors. In addition, any shares available under theour Amended and Restated Stock Incentive Plan (which expired on June 1, 2015), including in respect of any awards that expire, terminate or are forfeited, will be available for awards under the 2015 Plan. Under the 2015 Plan, awards are made to employees and to directors at the discretion of the Compensation Committee. Any awards previously issued under the Amended and Restated Stock Incentive Plan will continue to be governed by the terms of that plan.
The chargeFor the years ended December 31, 2016, 2015 and 2014, we recognized charges for stock-based compensation of US$ 3.5 million, US$ 2.4 million and US$ 1.3 million, respectively, presented as a component of selling, general and administrative expenses in our consolidated statements of operations and comprehensive income was as follows:
 For The Year Ending December 31,
 2015
 2014
 2013
Selling, general and administrative expenses$2,439
 $1,344
 $4,197
Restructuring costs (Note 15)
 
 1,919
Total stock-based compensation charge$2,439
 $1,344
 $6,116
/ loss.
Stock Options
Grants of options allow the holders to purchase shares of Class A common stock at an exercise price, which is generally the market price prevailing at the date of the grant, with vesting between one and four years after the awards are granted. A summary of option activity for the year ended December 31, 20152016 is presented below:
 Shares
 Weighted Average Exercise Price per Share
 Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value
Outstanding at December 31, 2014155,000
 $29.88
 0.92 $
Granted1,600,000
 2.29
    
Forfeited(20,000) 23.12
    
Expired(69,000) 28.23
    
Outstanding at December 31, 20151,666,000
 $3.53
 9.07 $640
Vested or expected to vest1,666,000
 3.53
 9.07 640
Exercisable at December 31, 201566,000
 $33.66
 0.42 $
 Shares
 Weighted Average Exercise Price per Share
 Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value
Outstanding at December 31, 20151,666,000
 $3.53
 9.07 $640
Granted411,392
 2.46
    
Expired(66,000) 33.66
    
Outstanding at December 31, 20162,011,392
 $2.32
 8.58 $453
Vested or expected to vest at December 31, 20162,011,392
 $2.32
 8.58 $453
Exercisable at December 31, 2016400,000
 $2.29
 8.42 $104
When options are vested, holders may exercise them at any time up to the maximum contractual life of the instrument which is specified in the option agreement. At December 31, 2015,2016, the maximum life of options that had been issued under the Plan was ten years. Upon providing the appropriate written notification, holders pay the exercise price and receive shares. Shares delivered in respect of stock option exercises are newly issued shares.
The fair value of stock options is estimated on the grant date using the Black-Scholes option-pricing model and recognized ratably over the requisite service period as a component of selling, general and administrative expenses. The weighted average grant date fair value of stock options granted during 20152016 was $1.54$1.56 per option.
The aggregate intrinsic value (the difference between the stock price on the last day of trading of the fourth quarter of 20152016 and the exercise prices multiplied by the number of in-the-money options) represents the total intrinsic value that would have been received by the option holders had they exercised all in-the-money options as at December 31, 20152016. This amount changes based on the fair value of our Class A common stock.

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CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

The weighted average assumptions used in the Black-Scholes model for grants made in the year endingended December 31, 2016 and 2015 were as follows:
For The Year Ended December 31,
For The Year Ending December 31, 2015
2016
 2015
Risk-free interest rate1.86%1.61% 1.86%
Expected term (years)6.25
6.25
 6.25
Expected volatility75.18%69.22% 75.18%
Dividend yield0%0% 0%
Weighted-average fair value$1.54
$1.56
 $1.54
As at December 31, 20152016, there was US$ 2.12.0 million unrecognized compensation expense related to stock options which is expected to be recognized over a weighted-average period of 3.42.6 years.
The following table summarizes information about stock option activity during 2016, 2015,, 2014, and 2013:2014:
2015 2014 20132016 2015 2014
Shares
 Weighted Average Exercise Price (per share)
 Shares
 Weighted Average Exercise Price (per share)
 Shares
 Weighted Average Exercise Price (per share)
Shares
 Weighted Average Exercise Price (per share)
 Shares
 Weighted Average Exercise Price (per share)
 Shares
 Weighted Average Exercise Price (per share)
Outstanding at January 1155,000
 $29.88
 390,500
 $27.26
 2,219,625
 $31.51
1,666,000
 $3.53
 155,000
 $29.88
 390,500
 $27.26
Awards granted1,600,000
 2.29
 
 
 
 
411,392
 2.46
 1,600,000
 2.29
 
 
Awards exchanged (1)

 
 
 
 (1,618,000) 31.54
Awards forfeited(20,000)
 23.12
 (114,500) 30.87
 (136,125) 33.36

 
 (20,000) 23.12
 (114,500) 30.87
Awards expired(69,000)
 28.23
 (121,000) 20.48
 (75,000) 49.71
(66,000)
 33.66
 (69,000) 28.23
 (121,000) 20.48
Outstanding at December 311,666,000
 $3.53
 155,000
 $29.88
 390,500
 $27.26
2,011,392
 $2.32
 1,666,000
 $3.53
 155,000
 $29.88
(1)
Options tendered in exchange for restricted stock units pursuant to an employee option exchange program completed in 2013.
Restricted Stock Units
Each RSU represents a right to receive one share of Class A common stock of the Company for each RSU that vests in accordance with a time-based vesting schedule, generally between one to four years from the date of grant. Upon vesting, shares of Class A common stock are issued from authorized but unissued shares. Holders of RSU awards are not entitled to receive cash dividend equivalents and are not entitled to vote. The grant date fair value of RSUs is calculated as the closing price of our Class A common shares on the date of grant. For awards with market conditions, the grant date fair value is calculated using a Monte Carlo simulation model. The Monte Carlo simulation model requires the input of subjective assumptions, including the expected volatility of our common stock, interest rates, dividend yields and correlation coefficient between our common stock and the relevant market index.
The following table summarizes information about unvested RSUs as at December 31, 20152016:
Number of
Shares / Units

 
Weighted-Average
Grant Date Fair Value

Number of
Shares / Units

 
Weighted-Average
Grant Date Fair Value

Unvested at December 31, 20141,367,234
 $3.06
Unvested at December 31, 20152,554,597
 $2.72
Granted1,661,430
 2.56
705,166
 2.41
Vested(465,136) 3.16
(626,126) 2.83
Forfeited(8,931) 3.85
(91,012) 2.47
Unvested at December 31, 20152,554,597
 $2.72
Unvested at December 31, 20162,542,625
 $2.61
As at December 31, 20152016, the intrinsic value of unvested RSUs was US$ 6.96.5 million. Total unrecognized compensation cost related to unvested RSUs as at December 31, 20152016 was US$ 3.82.9 million and is expected to be recognized over a weighted-average period of 2.71.9 years.

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CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

19.17.    INCOME TAXES
As our investments are predominantly owned by Dutch holding companies, the components of the provision / credit for income taxes and of the loss before tax have been analyzed between their Netherlands and non-Netherlands components. Similarly the Dutch corporate income tax rates have been used in the reconciliation of income taxes.
Loss from continuing operations before income taxes
The Netherlands and non-Netherlands components of loss from continuing operations before income taxes are:
For The Year Ending December 31,For The Year Ended December 31,
2015
 2014
 2013
2016
 2015
 2014
Domestic$(73,132) $(117,247) $(80,885)$(66,226) $(73,132) $(117,247)
Foreign(29,668) (35,576) (213,542)(107,054) (29,668) (35,576)
Total$(102,800) $(152,823) $(294,427)$(173,280) $(102,800) $(152,823)
Total tax (provision) / credit for the years ended December 31, 2016, 2015 2014 and 20132014 was allocated as follows:
 For The Year Ending December 31,
 2015
 2014
 2013
Income tax credit from continuing operations$515
 $1,358
 $17,993
Income tax credit / (provision) from discontinued operations91
 1,987
 (968)
Total tax credit$606
 $3,345
 $17,025
 For The Year Ended December 31,
 2016
 2015
 2014
Income tax (provision) / credit from continuing operations$(7,317) $515
 $1,358
Income tax credit from discontinued operations
 91
 1,987
Total (provision) / tax credit$(7,317) $606
 $3,345
Provision / Credit for Income Taxes
The Netherlands and non-Netherlands components of the provision / credit for income taxes from continuing operations consist of:
For The Year Ending December 31,For The Year Ended December 31,
2015
 2014
 2013
2016
 2015
 2014
Current income tax (expense) / credit:     
Current income tax provision:     
Domestic$
 $
 $57
$
 $
 $
Foreign(550) (558) (34)(5,261) (550) (558)
(550) (558) 23
(5,261) (550) (558)
Deferred tax credit:     
Deferred tax (provision) / credit:     
Domestic
 
 165

 
 
Foreign1,065
 1,916
 17,805
(2,056) 1,065
 1,916
1,065
 1,916
 17,970
(2,056) 1,065
 1,916
Credit for income taxes$515
 $1,358
 $17,993
(Provision) / credit for income taxes$(7,317) $515
 $1,358
In 2016, 2015 and 2014, the net (provision) / credit for income taxes is less than athe (provision) / credit computed at statutory tax rates primarily due to losses on which no tax benefit has been received.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Reconciliation of Effective Income Tax Rate
The following is a reconciliation of income taxes, calculated at statutory Netherlands rates, to the (provision) / credit for income taxes included in the accompanying Consolidated Statements of Operations and Comprehensive Income / Loss for the years ended December 31, 2016, 2015, 2014 and 2013:2014:
For The Year Ending December 31,For The Year Ended December 31,
2015
 2014
 2013
2016
 2015
 2014
Income taxes at Netherlands rates (25%)$25,689
 $38,193
 $73,594
$43,310
 $25,689
 $38,193
Jurisdictional differences in tax rates(17,462) (12,965) (13,231)(43,049) (17,462) (12,965)
Tax effect of goodwill impairment
 
 (4,979)
Unrecognized tax benefits(925) 
 
Losses expired(4,009) (4,899) (7,439)(1,847) (4,009) (4,899)
Change in valuation allowance3,614
 (7,012) (23,123)(5,863) 3,614
 (7,012)
Non-deductible expenses(1,859) (5,624) (7,538)(395) (1,859) (5,624)
Other(5,458) (6,335) 709
1,452
 (5,458) (6,335)
Credit for income taxes$515
 $1,358
 $17,993
(Provision) / credit for income taxes$(7,317) $515
 $1,358
In 2016, 2015 and 2014, the jurisdictional rate difference mainly arises as a result of a loss in Bermuda where there is no income tax. In 2013, it mainly arises as a result of the difference between the Bulgarian and Netherlands' tax rates.
Components of Deferred Tax Assets and Liabilities
The following table shows the significant components included in deferred income taxes as at December 31, 20152016 and 2014:2015:
December 31, 2015
 December 31, 2014
December 31, 2016
 December 31, 2015
Assets:      
Tax benefit of loss carry-forwards and other tax credits$111,526
 $114,858
$112,585
 $111,526
Programming rights4,052
 15,158
2,935
 4,052
Property, plant and equipment4,427
 7,533
3,427
 4,427
Accrued expenses4,544
 3,922
4,699
 4,544
Other1,718
 12,718
1,623
 1,718
Gross deferred tax assets126,267
 154,189
125,269
 126,267
Valuation allowance(109,481) (124,263)(110,920) (109,481)
Net deferred tax assets$16,786
 $29,926
$14,349
 $16,786
      
Liabilities:      
Broadcast licenses, trademarks and customer relationships$24,897
 $29,620
$22,704
 $24,897
Property, plant and equipment173
 177
142
 173
Programming rights7,082
 16,325
7,182
 7,082
Other75
 2,870
86
 75
Total deferred tax liabilities32,227
 48,992
30,114
 32,227
Net deferred income tax liability$15,441
 $19,066
$15,765
 $15,441

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CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Deferred tax is recognized on the consolidated balance sheet as follows:
December 31, 2015
 December 31, 2014
December 31, 2016
 December 31, 2015
Net current deferred tax assets(1)$10,425
 $8,127
$
 $10,425
Net non-current deferred tax assets124
 456
4,570
 124
10,549
 8,583
4,570
 10,549
      
Net current deferred tax liabilities(1)
 279

 
Net non-current deferred tax liabilities25,990
 27,370
20,335
 25,990
25,990
 27,649
20,335
 25,990
      
Net deferred income tax liability$15,441
 $19,066
$15,765
 $15,441
(1)
Reflects the prospective adoption in 2016 of accounting guidance requiring that deferred tax balances be classified as non-current in our consolidated balance sheets. See Note 2, "Basis of Presentation and Summary of Significant Accounting Policies".
We provided a valuation allowance against potential deferred tax assets of US$ 109.5110.9 million and US$ 124.3109.5 million as at December 31, 20152016 and 2014,2015, respectively, since it has been determined by management, based on the weight of all available evidence, that it is more likely than not that the benefits associated with these assets will not be realized. During 2015, a2016, valuation allowanceallowances of US$ 11.52.7 million wasand US$ 7.1 million were released in RomaniaBulgaria and the Slovak Republic, respectively, following a period of consistent profitability which resulted in a net credit to the income statement of US$ 6.77.4 million.
During 2015,2016, we had the following movements on valuation allowances:
Balance at December 31, 2014$124,263
Balance at December 31, 2015$109,481
Created during the period13,709
15,738
Utilized(10,631)(2,519)
Released due to changes in future profitability(6,692)(7,356)
Foreign exchange(11,168)(4,674)
Balance at December 31, 2015$109,481
Other250
Balance at December 31, 2016$110,920
As of December 31, 20152016 we had operating loss carry-forwards that will expire in the following periods:
2016
 2017
 2018
 2019
 2020-35
 Indefinite
2017
 2018
 2019
 2020
 2021-36
 Indefinite
Bulgaria$
 $
 $
 $
 $11,021
 $
$
 $
 $
 $6,182
 $
 $
Croatia1,488
 
 
 
 
 
Czech Republic
 48
 19,520
 
 
 
559
 3
 
 
 
 
The Netherlands6,991
 28,082
 26,680
 59,315
 259,740
 
27,190
 25,832
 57,430
 46,427
 268,060
 
Romania
 
 
 15,756
 14,493
 
Slovak Republic5,938
 5,938
 
 
 
 
5,749
 
 
 
 
 
Slovenia
 
 
 
 
 22,047

 
 
 
 
 21,898
United Kingdom
 
 
 
 
 1,698

 
 
 
 
 1,395
Total$14,417
 $34,068
 $46,200
 $75,071
 $285,254
 $23,745
$33,498
 $25,835
 $57,430
 $52,609
 $268,060
 $23,293
The losses are subject to examination by the tax authorities and to restriction on their utilization. In particular, the losses can only be utilized against profits arising in the legal entity in which they arose.
We have provided valuation allowances against most of the above loss carry-forwards. However, valuation allowances have not been provided against the loss carry-forwards in our main operating company in Bulgaria and in the CzechSlovak Republic on the basis of future reversals of existing taxable temporary differences.differences and taxable income from future trading. The tax benefits associated with the tax losses in the United Kingdom are onlywere recognized infollowing the financial statements as they are utilized.adoption of the FASB guidance simplifying accounting for share-based payment transactions. However, a valuation allowance was also recognized due to a lack of foreseeable future UK income.
As at December 31, 20152016 and 2014,2015, we had no undistributed earnings in subsidiaries giving rise to a temporary difference.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Balance at December 31, 2012$112
Increases for tax positions taken during a prior period51
Increases for tax positions taken during the current period20
Decreases resulting from the expiry of the statute of limitations(75)
Balance at December 31, 2013108
$108
Decreases resulting from the expiry of the statute of limitations(51)(51)
Other(4)(4)
Balance at December 31, 201453
53
Decreases resulting from the expiry of the statute of limitations(53)(53)
Balance at December 31, 2015$

Increases for tax positions taken during a prior period766
Increases for tax positions taken during the current period159
Balance at December 31, 2016$925
We do not anticipate a material increase or decrease in unrecognized tax benefits within the next 12 months.
Our subsidiaries file income tax returns in Thethe Netherlands and various other tax jurisdictions. As at December 31, 20152016, our subsidiaries are generally no longer subject to income tax examinations for years before:
Tax JurisdictionYear
Bulgaria2010
Croatia20112012
Czech Republic2011
The Netherlands20132014
Romania2014
Slovak Republic2010
Slovenia2008
United Kingdom20142015
We recognize, when applicable, both accrued interest and penalties related to unrecognized tax benefits in income tax expense in the accompanying consolidated statements of operations.
operations and comprehensive income / loss. There were no significant interest or penalties accrued in the years ended December 31, 2016, 2015 2014 and 2013.2014.
20.18.    EARNINGS PER SHARE
We determined that the Series B Preferred Shares are a participating security, and accordingly, our basic and diluted net income / loss per share is calculated using the two-class method. Under the two-class method, basic net income / loss per common share is computed by dividing the net income available to common shareholders after deducting contractual amounts of accretion on our Series B Preferred Shares by the weighted-average number of common shares outstanding during the period. Diluted net income / loss per share is computed by dividing the adjusted net income by the weighted-average number of dilutive shares outstanding during the period.
Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

The components of basic and diluted earnings per share are as follows:
For The Year Ending December 31,For The Year Ended December 31,
2015
 2014
 2013
2016
 2015
 2014
Loss from continuing operations$(102,285) $(151,465) $(276,434)$(180,597) $(102,285) $(151,465)
Net loss attributable to noncontrolling interests671
 4,468
 3,882
306
 671
 4,468
Less: preferred dividend paid in kind (Note 12)(17,272) (16,036) (7,890)
Less: preferred dividend paid in kind (Note 11)(13,701) (17,272) (16,036)
Loss from continuing operations available to common shareholders, net of noncontrolling interest(118,886) (163,033) (280,442)(193,992) (118,886) (163,033)
Loss from discontinued operations, net of tax (Note 3)(13,287) (80,431) (5,099)
Loss from discontinued operations, net of tax
 (13,287) (80,431)
Net loss attributable to CME Ltd. available to common shareholders - Basic$(132,173) $(243,464) $(285,541)$(193,992) $(132,173) $(243,464)
          
Effect of dilutive securities          
Preferred dividend paid in kind
 
 

 
 
Net loss attributable to CME Ltd. available to common shareholders - Diluted$(132,173) $(243,464) $(285,541)$(193,992) $(132,173) $(243,464)
          
Weighted average outstanding shares of common stock - Basic (1)
146,866
 146,509
 125,723
151,017
 146,866
 146,509
Dilutive effect of employee stock options and RSUs
 
 

 
 
Weighted average outstanding shares of common stock - Diluted146,866
 146,509
 125,723
151,017
 146,866
 146,509
          
Net loss per share:          
Continuing operations - Basic$(0.81) $(1.11) $(2.23)
Continuing operations - Diluted(0.81) (1.11) (2.23)
Discontinued operations - Basic(0.09) (0.55) (0.04)
Discontinued operations - Diluted(0.09) (0.55) (0.04)
Net loss attributable to CME Ltd. - Basic(0.90) (1.66) (2.27)
Net loss attributable to CME Ltd. - Diluted(0.90) (1.66) (2.27)
Continuing operations attributable to CME Ltd. - Basic and diluted$(1.28) $(0.81) $(1.11)
Discontinued operations attributable to CME Ltd. - Basic and diluted
 (0.09) (0.55)
Net loss attributable to CME Ltd. - Basic and diluted(1.28) (0.90) (1.66)
(1) 
For the purpose of computing basic earnings per share, the 11,211,449 shares of Class A common stock underlying the Series A Preferred Share are included in the weighted average outstanding shares of common stock - basic, because the holder of the Series A Preferred Share is entitled to receive any dividends payable when dividends are declared by the Board of Directors with respect to any shares of the common stock.
At December 31, 20152016, 3,221,575108,396,778 (December 31, 20142015: 1,324,9203,221,575) warrants, stock options, warrantsRSUs and RSUsshares underlying the Series B Preferred Shares were antidilutive to income from continuing operations and excluded from the calculation of earnings per share. These instruments may become dilutive in the future. Our Series B Preferred Shares were not considered for dilution as they are not convertible until June 25, 2016. As set forth in the Certificate of Designation for the Series B Preferred Shares, the holders of our Series B Preferred Shares are not contractually obligated to share in our losses.
21.19.     SEGMENT DATA
We manage our business on a geographical basis, with six operating segments: Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic and Slovenia, which are also our reportable segments and our main operating countries. These segments reflect how CME Ltd.’s operating performance is evaluated by our chief operating decision makers, who we have identified as our co-Chief Executive Officers; how operations are managed by segment managers; and the structure of our internal financial reporting.
Our segments generate revenues primarily from the sale of advertising and sponsorship on our channels. This is supplemented by revenues from cable and satellite television service providers to carry our channels on their platforms and from revenues through the sale of distribution rights to third parties. Intersegment revenues and profits have been eliminated in consolidation.
We evaluate our consolidated results and the performance of our segments based on net revenues and OIBDA. OIBDA which includes amortization and impairment of program rights, is(as defined as operating income / loss before depreciation, amortization of intangible assets, impairments of assets and certain unusual or infrequent items that are not considered by our chief operating decision makers when evaluating our performance. Items that are not allocated to our segments for purposes of evaluating their performance and therefore are not included in their OIBDA, include stock-based compensation and certain other items.
Our key performance measure of the efficiency of our segments is OIBDA margin. OIBDA margin is the ratio of OIBDA to net revenues.below). We believe OIBDA is useful to investors because it provides a more meaningful representation of our performance as it excludes certain items that either do not impact our cash flows or the operating results of our operations. OIBDA is also used as a component in determining management bonuses.
OIBDA mayincludes amortization and impairment of program rights and is calculated as operating income / loss before depreciation, amortization of intangible assets, impairments of assets and certain unusual or infrequent items that are not be comparableconsidered by our chief operating decision makers when evaluating our performance. Stock-based compensation and certain other items are not allocated to similar measures reported by other companies.our segments for purposes of evaluating their performance and therefore are not included in their respective OIBDA.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Below are tables showing our net revenues, OIBDA, total assets, capital expenditures and long-lived assets for our continuing operations by segment for the years ended December 31, 20152016, 20142015 and 20132014 for consolidated statements of operations and comprehensive income / loss data and consolidated statements of cash flow data; and as at December 31, 20152016 and 20142015 for consolidated balance sheet data.
Net revenues:For The Year Ending December 31,For The Year Ended December 31,
2015
 2014
 2013
2016
 2015
 2014
Bulgaria$73,090
 $87,078
 $87,448
$72,651
 $73,090
 $87,078
Croatia55,912
 62,026
 61,864
55,607
 55,912
 62,026
Czech Republic182,636
 202,779
 174,939
190,372
 182,636
 202,779
Romania157,578
 178,614
 162,305
172,951
 157,578
 178,614
Slovak Republic84,434
 90,556
 82,404
90,549
 84,434
 90,556
Slovenia54,233
 61,370
 66,656
56,912
 54,233
 61,370
Intersegment revenues (1)
(2,042) (1,630) (2,482)(1,029) (2,042) (1,630)
Total net revenues$605,841
 $680,793
 $633,134
$638,013
 $605,841
 $680,793
(1) 
Reflects revenues earned from the sale of content to other country segments in CME Ltd. All other revenues are third party revenues.
OIBDA:For The Year Ending December 31,
 2015
 2014
 2013
Bulgaria$15,479
 $9,367
 $13,391
Croatia7,880
 7,835
 8,258
Czech Republic71,697
 61,964
 (9,604)
Romania41,176
 37,259
 2,454
Slovak Republic10,585
 4,586
 (19,859)
Slovenia6,057
 5,331
 9,254
Elimination(229) (16) (46)
Total operating segments152,645
 126,326
 3,848
Corporate(29,830) (30,880) (52,253)
Total OIBDA$122,815

$95,446

(48,405)

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CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Reconciliation to consolidated statements of operations and comprehensive income:For The Year Ending December 31,
 2015
 2014
 2013
Total OIBDA:$122,815
 $95,446
 $(48,405)
Depreciation of property, plant and equipment(27,943) (32,836) (37,175)
Amortization of broadcast licenses and other intangibles(12,271) (12,348) (14,761)
Impairment charge
 
 (79,676)
Other items (1)
11,982
 (11,982) 
Operating income / (loss)94,583
 38,280
 (180,017)
Interest expense (Note 16)(171,444) (142,005) (111,709)
Loss on extinguishment of debt
 (39,203) (23,115)
Non-operating (expense) / income, net (Note 17)(25,939) (9,895) 20,414
Credit for income taxes515
 1,358
 17,993
Loss from continuing operations$(102,285) $(151,465) $(276,434)
OIBDA:For The Year Ended December 31,
 2016
 2015
 2014
Bulgaria$12,242
 $15,479
 $9,367
Croatia8,578
 7,880
 7,835
Czech Republic77,018
 71,697
 61,964
Romania62,016
 41,176
 37,259
Slovak Republic15,947
 10,585
 4,586
Slovenia4,801
 6,057
 5,331
Elimination2
 (229) (16)
Total operating segments180,604
 152,645
 126,326
Corporate(30,555) (29,830) (30,880)
Total OIBDA$150,049

$122,815

95,446
Depreciation of property, plant and equipment(30,190) (27,943) (32,836)
Amortization of intangibles(8,270) (12,271) (12,348)
Other items (1)

 11,982
 (11,982)
Operating income111,589
 94,583
 38,280
Interest expense (Note 14)(132,224) (171,444) (142,005)
Loss on extinguishment of debt (Note 4)(150,158) 
 (39,203)
Non-operating expense, net (Note 15)(2,487) (25,939) (9,895)
Loss before tax$(173,280) $(102,800) $(152,823)
(1) 
Other items consists solely of the charges related to tax audits of our Romanian operations, which were accrued in the fourth quarter of 2014 and fully released in the third quarter of 2015 (see Note 22, "Commitments and Contingencies").2015.
Total assets (1):
December 31, 2015
 December 31, 2014
December 31, 2016
 December 31, 2015
Bulgaria$134,418
 $141,055
$130,873
 $134,418
Croatia52,306
 58,000
49,135
 52,306
Czech Republic746,269
 803,361
700,190
 746,269
Romania261,984
 297,256
266,132
 261,984
Slovak Republic121,122
 134,544
131,220
 121,122
Slovenia70,911
 78,403
72,381
 70,911
Total operating segments1,387,010
 1,512,619
1,349,931
 1,387,010
Corporate67,191
 76,875
40,786
 53,407
Assets held for sale
 29,866
Total assets$1,454,201
 $1,619,360
$1,390,717
 $1,440,417
(1) 
Segment assets exclude any intercompany balances.
Capital Expenditures:For The Year Ending December 31,
 2015

2014

2013
Bulgaria$3,517
 $2,627
 $2,798
Croatia3,215
 2,701
 2,574
Czech Republic10,982
 9,139
 7,727
Romania5,794
 4,686
 5,194
Slovak Republic2,921
 2,240
 1,590
Slovenia3,197
 3,502
 4,018
Total operating segments29,626
 24,895
 23,901
Corporate3,891
 3,790
 6,217
Total capital expenditures$33,517
 $28,685
 $30,118

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CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Long-lived assets (1):
December 31, 2015
 December 31, 2014
Capital Expenditures:For The Year Ended December 31,
2016

2015

2014
Bulgaria$5,602
 $4,187
$3,304
 $3,517
 $2,627
Croatia5,497
 5,579
2,593
 3,215
 2,701
Czech Republic39,907
 40,940
8,043
 10,982
 9,139
Romania20,873
 22,110
6,863
 5,794
 4,686
Slovak Republic15,606
 17,374
1,693
 2,921
 2,240
Slovenia15,082
 16,647
4,128
 3,197
 3,502
Total operating segments102,567
 106,837
26,624
 29,626
 24,895
Corporate5,955
 7,498
2,943
 3,891
 3,790
Total long-lived assets$108,522
 $114,335
Total capital expenditures$29,567
 $33,517
 $28,685
Long-lived assets (1):
December 31, 2016
 December 31, 2015
Bulgaria$6,280
 $5,602
Croatia5,832
 5,497
Czech Republic39,529
 39,907
Romania22,796
 20,873
Slovak Republic15,326
 15,606
Slovenia14,177
 15,082
Total operating segments103,940
 102,567
Corporate5,149
 5,955
Total long-lived assets$109,089
 $108,522
(1) 
Reflects property, plant and equipment.
Revenue by type:For The Year Ending December 31,For The Year Ended December 31,
2015
 2014
 2013
2016
 2015
 2014
Television advertising$505,498
 $565,601
 $528,778
$532,600
 $505,498
 $565,601
Carriage fees and subscriptions73,058
 80,487
 58,990
78,606
 73,058
 80,487
Other27,285
 34,705
 45,366
26,807
 27,285
 34,705
Total net revenues$605,841
 $680,793
 $633,134
$638,013
 $605,841
 $680,793
We do not rely on any single major customer or group of major customers.
22.20.    COMMITMENTS AND CONTINGENCIES
Commitments
a)    Programming Rights Agreements and Other Commitments
At December 31, 20152016, we had total commitments of US$ $144.9128.2 million (December 31, 20142015: US$ 177.8144.9 million) in respect of future programming, including contracts signed with license periods starting after the balance sheet date. In addition, we have digital transmission obligations, future minimum operating lease payments for non-cancellable operating leases with remaining terms in excess of one year (net of amounts to be recharged to third parties) and other commitments as follows:
Programming purchase obligations
 Digital transmission obligations
 Operating leases
 Capital expenditures
Programming purchase obligations
 
Other
commitments

 
Operating
leases

 
Capital
expenditures

2016$74,226
 $18,322
 $3,473
 $420
201735,123
 6,691
 2,221
 
$43,462
 $17,545
 $3,374
 $609
201822,882
 3,200
 1,617
 
34,889
 5,157
 2,077
 
20198,812
 10,374
 746
 
32,074
 10,851
 923
 
20201,327
 312
 330
 
14,003
 356
 476
 
2021 and thereafter2,525
 566
 1,149
 
20211,503
 322
 327
 
2022 and thereafter2,281
 44
 1,433
 
Total$144,895
 $39,465
 $9,536
 $420
$128,212
 $34,275
 $8,610
 $609
For the years ended December 31, 20152016, 20142015 and 2013,2014, we incurred aggregate rent expense on all facilities of US$ 7.89.4 million, US$ 10.07.8 million and US$ 12.610.0 million, respectively.
b)    Factoring of Trade Receivables
CET 21 has a CZK 825.0 million (approximately US$ 33.2 million) factoring framework agreement with FCS. Under this facility up to CZK 825.0 million (approximately US$ 33.2 million) may be factored on a recourse or non-recourse basis. As at December 31, 2015, there were CZK 478.9 million (approximately US$ 19.3 million) (December 31, 2014: CZK 509.3 million, approximately US$ 20.5 million based on December 31, 2015 rates), of receivables subject to the factoring framework agreement.
In the fourth quarter of 2015, Pro TV entered into a RON 20.0 million (approximately US$ 4.8 million) factoring framework agreement with UniCredit Bank S.A. Under this facility up to RON 20.0 million (approximately US$ 4.8 million) may be factored on a non-recourse basis. As at December 31, 2015, there were RON 19.3 million (approximately US$ 4.7 million) of receivables subject to the factoring framework agreement.
c)    Call option
Top Tone Holdings has exercised its right to acquire additional equity in CME Bulgaria, however the closing of this transaction has not yet occurred because the purchaser financing is still pending. If consummated, we would own 90.0% of our Bulgaria operations.

79

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

b)    Factoring of Trade Receivables
CET 21 has a CZK 735.0 million (approximately US$ 28.7 million) factoring framework agreement with FCS. Under this facility up to CZK 735.0 million (approximately US$ 28.7 million) may be factored on a recourse or non-recourse basis. As at December 31, 2016, there were CZK 462.9 million (approximately US$ 18.1 million) (December 31, 2015: CZK 478.9 million, approximately US$ 18.7 million based on December 31, 2016 rates), of receivables subject to the factoring framework agreement.
In the first quarter of 2016, Pro TV entered into a RON 109.0 million (approximately US$ 25.3 million) factoring framework agreement with Global Funds IFN S.A. Under this facility up to RON 109.0 million (approximately US$ 25.3 million) may be factored on a non-recourse basis. As at December 31, 2016, there were RON 105.7 million (approximately US$ 24.6 million) of receivables subject to the factoring framework agreement.
Contingencies
a)    Litigation
We are from time to time party to legal proceedings, arbitrations and regulatory proceedings arising in the normal course of our business operations, including the proceeding described below. We evaluate, on a quarterly basis, developments in such matters and provide accruals for such matters, as appropriate. In making such decisions, we consider the degree of probability of an unfavorable outcome and our ability to make a reasonable estimate of the amount of a loss. An unfavorable outcome in any such proceedings, if material, could have an adverse effect on our business or consolidated financial statements.
b)    Restrictions on dividends from Consolidated SubsidiariesIn late November and Unconsolidated Affiliates
Corporate lawDecember 2016, CME’s Slovak subsidiary MARKIZA-SLOVAKIA, spol. s.r.o. (“Markiza”) was notified of claims that were filed in June 2016 in a court of first instance in Bratislava, the Slovak Republic to collect amounts allegedly owing under four promissory notes. These four promissory notes were purportedly issued in June 2000 by Pavol Rusko in his personal capacity and were purportedly guaranteed by Markiza under the signature of Mr. Rusko, who was an executive director of Markiza at that time as well as one of its shareholders. The notes purport to be issued in favor of Marian Kocner, a controversial Slovak businessman, and to a former associate of Mr. Kocner, and were supposedly assigned several times, ultimately to Sprava a inkaso zmeniek, s.r.o., a company owned by Mr. Kocner that is the plaintiff in these proceedings. The four notes purport to be in the Central and Eastern European countriesaggregate amount of approximately EUR 69.0 million. A court of first instance in which we have operations stipulates generally that dividends may be declared by shareholders, outBratislava has suspended proceedings in respect of yearly profits, subject to the maintenance of registered capital and required reserves after the recovery of accumulated losses. The reserve requirement restriction generally provides that before dividends may be distributed, a portion of annual net profits (typically 5.0%) be allocated to a reserve, which reserve is capped at a proportionone of the registered capitalpromissory notes (in the amount of a company (ranging from 5.0%approximately EUR 26.0 million) because the plaintiff failed to 25.0%). The restricted net assetspay court fees. Two of our consolidated subsidiaries and equitythe remaining notes allegedly matured in earnings of investments accounted for under the equity method together are less than 25.0% of consolidated net assets.
c) Romanian Tax Audits
As at December 31, 2014, certain of our subsidiaries in Romania were subject to audits by the Romanian tax authorities. The audits focused on a range of matters, including corporate income taxes, payroll tax liabilities and value added tax (“VAT”). In connection with these audits, we provided US$ 12.0 million in the fourth quarter of 2014 and an additional US$ 18.2 million in the first quarter of 2015 relating to the potential requalification of activities of certain persons engaged by our subsidiaries. During the third quarter of 2015, we released the reserves related to the Romanian tax audits.
Studiourile Media Pro SA ("MPS") and Media Pro Entertainment Romania SA ("MPE"), were sold on an as-is basis on October 16, 2015 and the buyer assumed all liabilities associatedthird in 2016. Despite a random case assignment system at the Bratislava court, the three cases dealing with the companies, includingother notes have all been assigned to the same judge. We do not believe that any potential assessments as a result of these tax audits.the promissory notes are authentic and are vigorously defending the claims. We are currently unable to estimate for what amount, if any, we may be liable if the plaintiff is ultimately successful in pursuing their claims.
23.21.    RELATED PARTY TRANSACTIONS
We consider our related parties to be thoseour officers, directors and shareholders who have direct control and/or influence andover the Company as well as other parties that can significantly influence management as well as our officers and directors; a “connected” party is one in relation to whom we are aware of the existence of a family or business connection to a shareholder, director or officer.management. We have identified transactions with individuals or entities associated with Time Warner, whowhich is represented on our Board of Directors and holds a 49.4%47.0% voting interest in CME Ltd. as at December 31, 20152016, as material related party transactions.
Time Warner
For The Year Ending December 31,For The Year Ended December 31,
2015
 2014
 2013
2016
 2015
 2014
Net revenues$198
 $59
 $119
$
 $198
 $59
Cost of revenues32,497
 20,713
 58,636
25,445
 32,497
 20,713
Interest expense127,970
 61,887
 
108,205
 127,970
 61,887

 December 31, 2015
 December 31, 2014
Programming liabilities$14,583
 $24,980
Other accounts payable and accrued liabilities53
 150
Accounts receivable, gross
 197
Long-term debt and other financing arrangements (1)
334,114
 269,862
Accrued interest payable (2)
5,781
 4,763
Other non-current liabilities (3)
31,895
 10,299
 December 31, 2016
 December 31, 2015
Programming liabilities$18,959
 $14,583
Other accounts payable and accrued liabilities192
 53
Long-term debt and other financing arrangements
 324,979
Accrued interest payable (1)
9,588
 5,781
Other non-current liabilities (2)
44,397
 31,895
(1) 
Amount represents the principal amount outstanding of the 2017 PIK Notes held by Time Warner and the amounts outstanding on the 2017 Term Loan and 2021 Revolving Credit Facility, if drawn, less respective issuance discounts, plus interestaccrued Guarantee Fees for which we have not yet paid in cash or made an election to pay in kind. See Note 4, "Long-term Debt and Other Financing Arrangements".
(2) 
Amount represents the accrued interest on the principal amount of the outstanding 2017 PIK Notes held by Time Warner, which is payable in kind in arrears until November 15, 2015, and on the outstanding balance of the 2017 Term Loan and the 2021 Revolving Credit Facility, if drawn.
(3)
Amount represents the commitment fee payable to Time Warner in connection with the 2015 Refinancing Commitment Letter,Fee, as well as the accrued fee payableGuarantee Fees for which we have made an election to Time Warner for guaranteeing the 2018 Euro Term Loan and the 2019 Euro Term Loan.pay in kind. See Note 5,4, "Long-term Debt and Other Financing Arrangements".
See Part III, Item 13, "Certain Relationships and Related Transactions, and Director Independence."

80

Index
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

24.22.    QUARTERLY FINANCIAL DATA
Selected quarterly financial data for the years ended December 31, 20152016 and 20142015 is as follows:
For the Year Ended December 31, 2015For the Year Ended December 31, 2016
First Quarter (Unaudited) Second Quarter (Unaudited) Third Quarter (Unaudited) Fourth Quarter (Unaudited)First Quarter (Unaudited) Second Quarter (Unaudited) Third Quarter (Unaudited) Fourth Quarter (Unaudited)
Consolidated Statements of Operations and Comprehensive Income Data:       
Consolidated Statements of Operations and Comprehensive Income / Loss Data:       
Net revenues$126,133
 $166,834
 $117,322
 $195,552
$129,000
 $175,206
 $126,706
 $207,101
Cost of revenues98,828
 101,229
 85,832
 116,654
97,777
 104,962
 91,141
 119,946
Operating (loss) / income(17,239) 36,441
 28,853
 46,528
Operating income7,763
 43,891
 8,384
 51,551
(Loss) / income from continuing operations(70,243) (11,669) (21,510) 1,137
(40,694) (141,249) (19,823) 21,169
(Loss) / income from discontinued operations, net of tax(3,288) 2,684
 (265) (12,418)
Net loss(73,531) (8,985) (21,775) (11,281)
Net loss attributable to CME Ltd.(73,274) (8,678) (21,522) (11,427)
Net (loss) / income(40,694) (141,249) (19,823) 21,169
Net (loss) / income attributable to CME Ltd.(40,435) (141,317) (19,627) 21,088
              
Net loss per share:       
Net (loss) / income per share:       
Basic EPS$(0.53) $(0.09) $(0.18) $(0.11)$(0.31) $(0.98) $(0.14) $0.07
Effect of dilutive securities
 
 
 

 
 
 (0.01)
Diluted EPS$(0.53) $(0.09) $(0.18) $(0.11)$(0.31) $(0.98) $(0.14) $0.06
For the Year Ended December 31, 2014For the Year Ended December 31, 2015
First Quarter (Unaudited) Second Quarter (Unaudited) Third Quarter (Unaudited) Fourth Quarter (Unaudited)First Quarter (Unaudited) Second Quarter (Unaudited) Third Quarter (Unaudited) Fourth Quarter (Unaudited)
Consolidated Statements of Operations and Comprehensive Income Data:       
Consolidated Statements of Operations and Comprehensive Income / Loss Data:       
Net revenues$140,705
 $192,811
 $131,081
 $216,196
$126,133
 $166,834
 $117,322
 $195,552
Cost of revenues119,579
 125,514
 105,823
 138,125
98,828
 101,229
 85,832
 116,654
Operating (loss) / income(14,682) 22,687
 (8,023) 38,298
(17,239) 36,441
 28,853
 46,528
Loss from continuing operations(41,000) (41,352) (51,308) (17,805)
Loss from discontinued operations, net of tax(7,633) (11,154) (1,174) (60,470)
(Loss) / income from continuing operations(70,243) (11,669) (21,510) 1,137
(Loss) / income from discontinued operations, net of tax(3,288) 2,684
 (265) (12,418)
Net loss(48,633) (52,506) (52,482) (78,275)(73,531) (8,985) (21,775) (11,281)
Net loss attributable to CME Ltd.(47,916) (52,437) (52,138) (74,937)(73,274) (8,678) (21,522) (11,427)
              
Net loss per share:              
Basic EPS$(0.35) $(0.39) $(0.38) $(0.54)$(0.53) $(0.09) $(0.18) $(0.11)
Effect of dilutive securities
 
 
 

 
 
 
Diluted EPS$(0.35) $(0.39) $(0.38) $(0.54)$(0.53) $(0.09) $(0.18) $(0.11)
25.    GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
As discussed in Note 5, "Long-term Debt and Other Financing Arrangements", our 100% owned subsidiaries, CME NV and CME BV (collectively, the "Guarantor Subsidiaries"), have agreed to fully and unconditionally, and jointly and severally, guarantee the 2017 PIK Notes (the “Guarantees”). The Guarantor Subsidiaries are subject to the requirements of Rule 3-10 of Regulation S-X regarding financial statements of guarantors and issuers of guaranteed securities registered or being registered with the SEC. Our remaining subsidiaries (the “Non-Guarantor Subsidiaries”) are presented separately from CME Ltd. (the “Parent Issuer”) and the Guarantor Subsidiaries in the condensed consolidating financial statements presented below.
The Guarantees are senior obligations of the Guarantors and rank equal in right of payment with all of the Guarantor Subsidiaries’ existing and future senior indebtedness, including in respect of their guarantees of the 2017 Term Loan and the 2021 Revolving Credit Facility. In addition, the Guarantees rank senior in right of payment to any other existing and future obligations of the Guarantor Subsidiaries expressly subordinated in right of payment to the Guarantees. The Guarantees effectively rank junior to all of the future indebtedness and other liabilities of our Non-Guarantor Subsidiaries, including with respect to their obligations in respect of the 2017 PIK Notes.
CME Ltd. and the Guarantor Subsidiaries are holding companies with no revenue-generating operations and rely on the repayment of intercompany indebtedness and the declaration of dividends to receive distributions of cash from our operating subsidiaries and affiliates. There are no significant restrictions on CME Ltd.'s ability to obtain funds from the Guarantor Subsidiaries.

81

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Subsequent to the issuance of our 2014 consolidated financial statements, we determined that the Non-Guarantor’s other comprehensive loss had been partially eliminated within its condensed statements of operations and comprehensive income rather than as a consolidating elimination. The amounts have been reclassified in our condensed consolidating statements of operations and comprehensive income for the years ended December 31, 2014 and 2013.
The following tables present condensed consolidating financial information relating to the Guarantor Subsidiaries as at December 31, 2015 and 2014, and for the years ended December 31, 2015, 2014 and 2013:
Condensed Consolidating Balance Sheets as at December 31, 2015
 Parent Issuer
 Guarantor Subsidiaries
 Non-Guarantor Subsidiaries
 Eliminations
 Consolidated
ASSETS         
Current assets         
Cash and cash equivalents$9,273
 $118
 $52,288
 $
 $61,679
Accounts receivable, net
 
 167,427
 
 167,427
Program rights, net
 
 85,972
 
 85,972
Other current assets681
 1,680
 40,845
 
 43,206
Intercompany current assets10,612
 1,788
 27,300
 (39,700) 
Total current assets20,566
 3,586
 373,832
 (39,700) 358,284
Non-current assets         
Investments in subsidiaries204,531
 1,266,585
 
 (1,471,116) 
Property, plant and equipment, net
 
 108,522
 
 108,522
Program rights, net
 
 169,073
 
 169,073
Goodwill
 
 622,243
 
 622,243
Broadcast licenses and other intangible assets, net
 
 151,162
 
 151,162
Other non-current assets40,844
 2,445
 1,628
 
 44,917
Intercompany non-current assets1,055,286
 34,894
 558,518
 (1,648,698) 
Total non-current assets1,300,661
 1,303,924
 1,611,146
 (3,119,814) 1,095,917
Total assets$1,321,227
 $1,307,510
 $1,984,978
 $(3,159,514) $1,454,201
LIABILITIES AND EQUITY         
Current liabilities         
Accounts payable and accrued liabilities$2,622
 $242
 $131,841
 $
 $134,705
Current portion of long-term debt and other financing arrangements
 
 1,155
 
 1,155
Other current liabilities650
 247
 9,551
 
 10,448
Intercompany current liabilities5,194
 31,635
 2,871
 (39,700) 
Total current liabilities8,466
 32,124
 145,418
 (39,700) 146,308
Non-current liabilities 
  
      
Long-term debt and other financing arrangements919,812
 
 2,493
 
 922,305
Other non-current liabilities39,596
 
 26,153
 
 65,749
Intercompany non-current liabilities34,895
 1,194,226
 419,577
 (1,648,698) 
Total non-current liabilities994,303
 1,194,226
 448,223
 (1,648,698) 988,054
Temporary equity241,198
 
 
 
 241,198
Total CME Ltd. shareholders’ equity77,260
 81,160
 1,389,956
 (1,471,116) 77,260
Noncontrolling interests
 
 1,381
 
 1,381
Total equity77,260
 81,160
 1,391,337
 (1,471,116) 78,641
Total liabilities and equity$1,321,227
 $1,307,510
 $1,984,978
 $(3,159,514) $1,454,201

82

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Condensed Consolidating Balance Sheets as at December 31, 2014
 Parent Issuer
 Guarantor Subsidiaries
 Non-Guarantor Subsidiaries
 Eliminations
 Consolidated
ASSETS         
Current assets         
Cash and cash equivalents$613
 $2,931
 $30,754
 $
 $34,298
Accounts receivable, net
 
 175,866
 
 175,866
Program rights, net
 
 99,358
 
 99,358
Other current assets1,007
 346
 34,128
 
 35,481
Assets held for sale
 
 29,866
 
 29,866
Intercompany current assets12,582
 14,333
 17,492
 (44,407) 
Total current assets14,202
 17,610
 387,464
 (44,407) 374,869
Non-current assets 
  
      
Investments in subsidiaries110,186
 1,516,707
 
 (1,626,893) 
Property, plant and equipment, net
 
 114,335
 
 114,335
Program rights, net
 
 207,264
 
 207,264
Goodwill
 
 681,398
 
 681,398
Broadcast licenses and other intangible assets, net
 
 183,378
 
 183,378
Other non-current assets55,471
 
 2,645
 
 58,116
Intercompany non-current assets1,252,708
 32,781
 291,589
 (1,577,078) 
Total non-current assets1,418,365
 1,549,488
 1,480,609
 (3,203,971) 1,244,491
Total assets$1,432,567
 $1,567,098
 $1,868,073
 $(3,248,378) $1,619,360
LIABILITIES AND EQUITY         
Current liabilities         
Accounts payable and accrued liabilities$5,109
 $286
 $173,829
 $
 $179,224
Current portion of long-term debt and other financing arrangements251,669
 
 1,190
 
 252,859
Other current liabilities271
 
 7,541
 
 7,812
Liabilities held for sale
 
 10,632
 
 10,632
Intercompany current liabilities7,003
 35,151
 2,253
 (44,407)

Total current liabilities264,052
 35,437
 195,445
 (44,407) 450,527
Non-current liabilities 
  
      
Long-term debt and other financing arrangements615,698
 
 5,542
 
 621,240
Other non-current liabilities16,315
 482
 29,688
 
 46,485
Intercompany non-current liabilities32,782
 1,392,535
 151,761
 (1,577,078) 
Total non-current liabilities664,795
 1,393,017
 186,991
 (1,577,078) 667,725
Temporary equity223,926
 
 
 
 223,926
Total CME Ltd. shareholders’ equity279,794
 138,644
 1,488,249
 (1,626,893) 279,794
Noncontrolling interests
 
 (2,612) 
 (2,612)
Total equity279,794
 138,644
 1,485,637
 (1,626,893) 277,182
Total liabilities and equity$1,432,567
 $1,567,098
 $1,868,073
 $(3,248,378) $1,619,360

83

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Condensed Consolidating Statements of Operations and Comprehensive Income for the year ended December 31, 2015
 Parent Issuer
 Guarantor Subsidiaries
 Non-Guarantor Subsidiaries
 Eliminations
 Consolidated
Net revenues$
 $
 $605,841
 $
 $605,841
Cost of revenues
 
 402,543
 
 402,543
Selling, general and administrative expenses18,916
 485
 87,600
 
 107,001
Restructuring costs
 
 1,714
 
 1,714
Operating (loss) / income(18,916) (485) 113,984
 
 94,583
Interest expense(174,257) (106,821) (15,307) 124,941
 (171,444)
Non-operating income / (expense), net97,480
 (19,627) 21,149
 (124,941) (25,939)
(Loss) / income from continuing operations before tax and (loss) / income from investment in subsidiaries

(95,693) (126,933) 119,826
 
 (102,800)
Credit / (provision) for income taxes
 16,007
 (15,492) 
 515
(Loss) / income from continuing operations before (loss) / income from investment in subsidiaries(95,693) (110,926) 104,334
 
 (102,285)
(Loss) / income from investment in subsidiaries(19,208) 92,772
 
 (73,564) 
(Loss) / income from continuing operations(114,901) (18,154) 104,334
 (73,564) (102,285)
Loss from discontinued operations, net of tax
 (1,054) (12,233) 
 (13,287)
Net (loss) / income(114,901) (19,208) 92,101
 (73,564) (115,572)
Net loss attributable to noncontrolling interests
 
 671
 
 671
Net (loss) / income attributable to CME Ltd.$(114,901) $(19,208) $92,772
 $(73,564) $(114,901)
          
Net (loss) / income$(114,901) $(19,208) $92,101
 $(73,564) $(115,572)
Other comprehensive (loss) / income(91,936) 13,065
 (139,966) 128,284
 (90,553)
Comprehensive loss(206,837) (6,143) (47,865) 54,720
 (206,125)
Comprehensive income attributable to noncontrolling interests
 
 (712) 
 (712)
Comprehensive loss attributable to CME Ltd.$(206,837) $(6,143) $(48,577) $54,720
 $(206,837)

84

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Condensed Consolidating Statements of Operations and Comprehensive Income for the year ended December 31, 2014
 Parent Issuer
 Guarantor Subsidiaries
 Non-Guarantor Subsidiaries
 Eliminations
 Consolidated
Net revenues$
 $
 $680,793
 $
 $680,793
Cost of revenues
 
 489,041
 
 489,041
Selling, general and administrative expenses19,026
 804
 123,786
 
 143,616
Restructuring costs
 
 9,856
 
 9,856
Operating (loss) / income(19,026) (804) 58,110
 
 38,280
Interest expense(138,480) (137,891) (31,226) 165,592
 (142,005)
Loss on extinguishment of debt(24,161) 
 (15,042) 
 (39,203)
Non-operating income / (expense), net144,257
 21,778
 (10,338) (165,592) (9,895)
(Loss) / income from continuing operations before tax and loss from investment in subsidiaries(37,410) (116,917) 1,504
 
 (152,823)
Credit / (provision) for income taxes
 12,170
 (10,812) 
 1,358
Loss from continuing operations before loss from investment in subsidiaries(37,410) (104,747) (9,308) 
 (151,465)
Loss on investment in subsidiaries(190,018) (85,271) 
 275,289
 
Loss from continuing operations(227,428) (190,018) (9,308) 275,289
 (151,465)
Loss from discontinued operations, net of tax


 
 (80,431) 
 (80,431)
Net loss(227,428) (190,018) (89,739) 275,289
 (231,896)
Net loss attributable to noncontrolling interests
 
 4,468
 
 4,468
Net loss attributable to CME Ltd.$(227,428) $(190,018) $(85,271) $275,289
 $(227,428)
          
Net loss$(227,428) $(190,018) $(89,739) $275,289
 $(231,896)
Other comprehensive loss(157,780) (315,291) (150,841) 467,095
 (156,817)
Comprehensive loss(385,208) (505,309) (240,580) 742,384
 (388,713)
Comprehensive loss attributable to noncontrolling interests
 
 3,505
 
 3,505
Comprehensive loss attributable to CME Ltd.$(385,208) $(505,309) $(237,075) $742,384
 $(385,208)

85

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Condensed Consolidating Statements of Operations and Comprehensive Income for the year ended December 31, 2013
 Parent Issuer
 Guarantor Subsidiaries
 Non-Guarantor Subsidiaries
 Eliminations
 Consolidated
Net revenues$
 $
 $633,134
 $
 $633,134
Cost of revenues
 
 578,570
 
 578,570
Selling, general and administrative expenses33,905
 5
 102,483
 
 136,393
Restructuring costs2,422
 24
 16,066
 
 18,512
Impairment charge
 
 79,676
 
 79,676
Operating loss(36,327) (29) (143,661) 
 (180,017)
Interest expense(88,102) (124,100) (43,537) 144,030
 (111,709)
Loss on extinguishment of debt(23,115) 
 
 
 (23,115)
Non-operating income / (expense), net167,318
 15,449
 (18,323) (144,030) 20,414
Income / (loss) from continuing operations before tax and loss from investment in subsidiaries19,774
 (108,680) (205,521) 
 (294,427)
Credit for income taxes
 9,510
 8,483
 
 17,993
Income / (loss) from continuing operations before loss from investment in subsidiaries19,774
 (99,170) (197,038) 
 (276,434)
Loss on investment in subsidiaries(297,425) (198,255) 
 495,680
 
Loss from continuing operations(277,651) (297,425) (197,038) 495,680
 (276,434)
Loss from discontinued operations, net of tax


 
 (5,099) 
 (5,099)
Net loss(277,651) (297,425) (202,137) 495,680
 (281,533)
Net loss attributable to noncontrolling interests
 
 3,882
 
 3,882
Net loss attributable to CME Ltd.$(277,651) $(297,425) $(198,255) $495,680
 $(277,651)
          
Net loss$(277,651) $(297,425) $(202,137) $495,680
 $(281,533)
Other comprehensive loss(57,979) (74,385) (5,428) 79,592
 (58,200)
Comprehensive loss(335,630) (371,810) (207,565) 575,272
 (339,733)
Comprehensive loss attributable to noncontrolling interests
 
 4,103
 
 4,103
Comprehensive loss attributable to CME Ltd.$(335,630) $(371,810) $(203,462) $575,272
 $(335,630)

86

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Condensed Consolidating Statements of Cash Flows for the year ended December 31, 2015
 Parent Issuer
 Guarantor Subsidiaries
 Non-Guarantor Subsidiaries
 Eliminations
 Consolidated
Net cash generated from / (used in) continuing operating activities$46,196
 $(84,922) $130,622
 $(6,019) $85,877
CASH FLOWS FROM INVESTING ACTIVITIES:         
Purchase of property, plant and equipment
 
 (33,517) 
 (33,517)
Disposal of property, plant and equipment
 
 3,091
 
 3,091
Intercompany investing receipts380,319
 110,377
 7,780
 (498,476) 
Intercompany investing payments(396,003) (53,127) (303,763) 752,893
 
Net cash (used in) / provided by continuing investing activities$(15,684) $57,250
 $(326,409) $254,417
 $(30,426)
          
CASH FLOWS FROM FINANCING ACTIVITIES:         
Repayments of Senior Debt(261,034) 
 
 
 (261,034)
Debt transactions costs(1,541) 
 
 
 (1,541)
Issuance of Senior Debt253,051
 
 
 
 253,051
Payment of credit facilities and capital leases(26,117) 
 (1,248) 
 (27,365)
Settlement of forward currency swaps7,983
 
 
 
 7,983
Intercompany financing receipts22,707
 132,090
 328,783
 (483,580) 
Intercompany financing payments(16,901) (108,093) (110,188) 235,182
 
Net cash (used in) / provided by continuing financing activities$(21,852) $23,997
 $217,347
 $(248,398) $(28,906)
          
Net cash used in discontinued operations - operating activities
 
 (3,019) 
 (3,019)
Net cash provided by discontinued operations - investing activities
 3,779
 2,819
 
 6,598
Net cash used in discontinued operations - financing activities
 
 (76) 
 (76)
          
Impact of exchange rate fluctuations on cash and cash equivalents
 (2,917) 250
 
 (2,667)
Net increase / (decrease) in cash and cash equivalents$8,660
 $(2,813) $21,534
 $
 $27,381
CASH AND CASH EQUIVALENTS, beginning of period613
 2,931
 30,754
 
 34,298
CASH AND CASH EQUIVALENTS, end of period$9,273
 $118
 $52,288
 $
 $61,679


87

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Condensed Consolidating Statements of Cash Flows for the year ended December 31, 2014
 Parent Issuer
 Guarantor Subsidiaries
 Non-Guarantor Subsidiaries
 Eliminations
 Consolidated
Net cash generated from / (used in) continuing operating activities$67,171
 $(132,570) $157
 $
 $(65,242)
CASH FLOWS FROM INVESTING ACTIVITIES:        

Purchase of property, plant and equipment
 
 (28,685) 
 (28,685)
Disposal of property, plant and equipment
 
 137
 
 137
Intercompany investing receipts703,941
 356,217
 
 (1,060,158) 
Intercompany investing payments(900,009) (418,504) (260,529) 1,579,042
 
Net cash used in continuing investing activities$(196,068) $(62,287) $(289,077) $518,884
 $(28,548)
          
CASH FLOWS FROM FINANCING ACTIVITIES:         
Repayments of Senior Debt(400,673) 
 (312,246) 
 (712,919)
Debt transactions costs(12,396) 
 (1,810) 
 (14,206)
Issuance of Senior Debt550,421
 
 
 
 550,421
Proceeds from credit facilities25,000
 
 
 
 25,000
Payment of credit facilities and capital leases
 
 (1,080) 
 (1,080)
Issuance of common stock191,825
 
 
 
 191,825
Other
 
 (46) 
 (46)
Intercompany financing receipts
 634,862

720,248

(1,355,110) 
Intercompany financing payments(243,778) (443,412) (149,036) 836,226
 
Net cash provided by continuing financing activities$110,399
 $191,450
 $256,030
 $(518,884) $38,995
          
Net cash used in discontinued operations - operating activities

(350) 
 (1,058) 
 (1,408)
Net cash used in discontinued operations - investing activities


 
 (228) 
 (228)
Net cash used in discontinued operations - financing activities
 
 (942) 
 (942)
          
Impact of exchange rate fluctuations on cash and cash equivalents
 916
 (11,567) 
 (10,651)
Net decrease in cash and cash equivalents$(18,848) $(2,491) $(46,685) $
 $(68,024)
CASH AND CASH EQUIVALENTS, beginning of period19,461
 5,422
 77,439
 
 102,322
CASH AND CASH EQUIVALENTS, end of period$613
 $2,931
 $30,754
 $
 $34,298

88

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

Condensed Consolidating Statements of Cash Flows for the year ended December 31, 2013
 Parent Issuer
 Guarantor Subsidiaries
 Non-Guarantor Subsidiaries
 Eliminations
 Consolidated
Net cash (used in) / generated from continuing operating activities$(80,304) 288,651
 (269,417) 
 (61,070)
CASH FLOWS FROM INVESTING ACTIVITIES:         
Purchase of property, plant and equipment
 
 (30,118) 
 (30,118)
Disposal of property, plant and equipment
 
 283
 
 283
Intercompany investing receipts609,801
 9,323
 
 (619,124) 
Intercompany investing payments(580,533) (266,355) 
 846,888
 
Net cash provided by / (used in) continuing investing activities$29,268
 $(257,032) $(29,835) $227,764
 $(29,835)
          
CASH FLOWS FROM FINANCING ACTIVITIES: 
        
Repayments of Senior Debt(310,322) 
 
 
 (310,322)
Debt transactions costs(785) 
 
 
 (785)
Change in restricted cash20,467
 
 138
 
 20,605
Proceeds from credit facilities
 
 40
 
 40
Payment of credit facilities and capital leases
 
 (1,648) 
 (1,648)
Issuance of common stock157,116
 
 
 
 157,116
Issuance of preferred stock200,000
 
 
 
 200,000
Equity issuance costs(5,410) 
 
 
 (5,410)
Other59
 
 (411) 
 (352)
Intercompany financing receipts
 580,533

266,355

(846,888) 
Intercompany financing payments
 (609,801)
(9,323)
619,124
 
Net cash provided by / (used in) continuing financing activities$61,125
 $(29,268) $255,151
 $(227,764) $59,244
          
Net cash used in discontinued operations - operating activities
 
 (1,952) 
 (1,952)
Net cash used in discontinued operations - investing activities


 
 (301) 
 (301)
Net cash provided by discontinued operations - financing activities


 
 77
 
 77
          
Impact of exchange rate fluctuations on cash and cash equivalents
 235
 (619) 
 (384)
Net increase / (decrease) in cash and cash equivalents$10,089
 $2,586
 $(46,896) $
 $(34,221)
CASH AND CASH EQUIVALENTS, beginning of period9,372
 2,836
 124,335
 
 136,543
CASH AND CASH EQUIVALENTS, end of period$19,461
 $5,422
 $77,439
 $
 $102,322


89

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in US$ 000’s, except share and per share data)

26.    SUBSEQUENT EVENTS
As disclosed in our Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on February 22, 2016, on February 19, 2016, we entered into an agreement for the EUR 468.8 million (approximately US$ 510.4 million) 2021 Euro Term Loan, the proceeds of which will be drawn on or about April 7, 2016 and be applied to repay the 2017 Term Loan and redeem and discharge the 2017 PIK Notes, which we expect will be completed on or about April 8, 2016. The 2021 Euro Term Loan will bear interest payable in cash at three-month EURIBOR plus a margin of between 1.07% and 1.90%, depending on the credit rating of Time Warner. The 2021 Euro Term Loan will mature on February 19, 2021.
As consideration for Time Warner's guarantee of the 2021 Euro Term Loan, we will pay a guarantee fee to Time Warner based on the amounts outstanding on the 2021 Euro Term Loan calculated on a per annum basis, initially equal to 10.5% (the "All-in Rate") minus the actual rate of interest paid by us under the 2021 Euro Term Loan. The All-in Rate will be based on our net leverage ratio (as defined in the Reimbursement Agreement) and can decrease to as low as 7.0% to the extent our net leverage ratio decreases below 5.0 times.
Also on February 19, 2016, we agreed to extend the maturity date of the 2018 Euro Term Loan by one year to November 1, 2018, reduce the interest cost of amounts drawn on the 2021 Revolving Credit Facility as our leverage ratio improves, and extend the maturity date of the 2021 Revolving Credit Facility at the current borrowing capacity until January 1, 2018 and with a borrowing capacity of US$ 50.0 million from January 1, 2018 to the maturity date on February 19, 2021, with effect from the drawing of the 2021 Euro Term Loan.
The transactions contemplated above are subject to customary closing conditions (including the drawdown of the 2021 Euro Term Loan, the accuracy of representations, the absence of events of default and the absence of material adverse changes), certain of which are outside our direct control. Once the transactions are completed on or about April 8, 2016, we expect to recognize a loss on extinguishment of debt of approximately US$ 149.9 million.

90


ITEM 9    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures designed to ensure that information required to be disclosed in our Annual Report on Form 10-K is recorded, processed, summarized and reported within the specified time periods and is designed to ensure that information required to be disclosed is accumulated and communicated to management, including the co-Chief Executive Officers and the Chief Financial Officer to allow timely decisions regarding required disclosure.
Our co-Chief Executive Officers and our Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31, 20152016 and concluded that our disclosure controls and procedures were effective as of that date.

Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. We have performed an assessment of the design and operating effectiveness of our internal control over financial reporting as of December 31, 2015.2016. This assessment was performed under the direction and supervision of our co-Chief Executive Officers and our Chief Financial Officer, and utilized the framework established in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on that evaluation, we concluded that as of December 31, 2015,2016, our internal control over financial reporting was effective. Our independent registered public accounting firm, DeloitteErnst & Young LLP, has audited our financial statements and issued a report on the effectiveness of internal control over financial reporting, which is included herein.
Changes in Internal Controls
There were no changes in our internal controls over financial reporting during the three month period ended December 31, 20152016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

91


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Central European Media Enterprises Ltd.
We have audited Central European Media Enterprises Ltd.’s (“the Company”) internal control over financial reporting of Central European Media Enterprises Ltd. and subsidiaries (the "Company") as of December 31, 2015,2016, based on criteria established in Internal Control - IntegratedControl-Integrated Framework (2013) issued by the Committee of Sponsoring OrganizationsOrganisations of the Treadway Commission. The Company'sCommission (2013 Framework) (the “COSO criteria”). Central European Media Enterprises Ltd.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Overover Financial Reporting. Our responsibility is to express an opinion on the Company'sCompany’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company'scompany’s internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsConsolidated Financial Statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizationsauthorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedunauthorised acquisition, use, or disposition of the company'scompany’s assets that could have a material effect on the financial statements.
Because of theits inherent limitations, of internal control over financial reporting including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be preventedprevent or detected on a timely basis.detect misstatements. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the CompanyCentral European Media Enterprises Ltd. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015,2016, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.COSO criteria.
We also have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2016 consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2015 of the CompanyCentral European Media Enterprises Ltd. and our report dated February 22, 20169, 2017 expressed an unqualified opinion on those financial statements and financial statement schedule.thereon.
DELOITTEERNST & YOUNG LLP
London, United Kingdom
February 22, 20169, 2017

92


ITEM 9B.    OTHER INFORMATION
None.
PART III
ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 is incorporated herein by reference to the sections entitled “Election of Directors,” “Executive Officers,” “Corporate Governance and Board of Director Matters” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement for the 20162017 Annual General Meeting of Shareholders.
ITEM 11.    EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference to the sections entitled “Compensation Discussion and Analysis”, “Summary Compensation Table”, “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” in our Proxy Statement for the 20162017 Annual General Meeting of Shareholders.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item 12 relating to the security ownership of certain beneficial owners and management is incorporated herein by reference to the section entitled “Security Ownership of Certain Beneficial Owners and Management" in our Proxy Statement for the 20162017 Annual General Meeting of Shareholders.
Equity Compensation Plan Information
The following table provides information as of December 31, 20152016 about common stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans.
Equity Compensation Plan Information
(a) (b) (c)(a) (b) (c)
Plan CategoryNumber of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders:    
Stock options1,666,000
 $3.53 (1)2,011,392
 $2.32 (1)
Restricted stock units2,554,597
 n/a (1)2,542,625
 n/a (1)
Equity compensation plans not approved by security holders
  
  
Total4,220,597
 $3.53 3,268,8184,554,017
 $2.32 3,269,084
(1) 
There were 3,268,8183,269,084 shares available for issuance under CME’s 2015 Stock Incentive Plan at December 31, 20152016 after reflecting both stock options and restricted stock units in column (a).
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 is incorporated herein by reference to the sections entitled “Certain Relationships and Related Party Transactions” and “Corporate Governance and Board of Director Matters” in our Proxy Statement for the 20162017 Annual General Meeting of Shareholders.
ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is incorporated herein by reference to the section entitled “Selection of Auditors” in our Proxy Statement for the 20162017 Annual General Meeting of Shareholders.

93



PART IV
ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) The following financial statements of Central European Media Enterprises Ltd. are included in Part II, Item 8 of this Report:
ReportReports of Independent Registered Public Accounting Firm;Firms;
Consolidated Balance Sheets as of December 31, 20152016 and 2014;2015;
Consolidated Statements of Operations and Comprehensive Income / Loss for the years ended December 31, 20152016, 20142015 and 2013;2014;
Consolidated Statements of Equity for the years ended December 31, 20152016, 20142015 and 2013;2014;
Consolidated Statements of Cash Flows for the years ended December 31, 20152016, 20142015 and 2013;2014; and
Notes to Consolidated Financial Statements.
(a)(2) Financial Statement Schedule (included at page S-1 of this Annual Report on Form 10-K).
(a)(3) The following exhibits are included in this report:

94


EXHIBIT INDEX
Exhibit Number Description
3.01* Memorandum of Association (incorporated by reference to Exhibit 3.01 to the Company's Registration Statement No. 3380344 on Form S-1 filed June 17, 1994).
   
3.02* Memorandum of Increase of Share Capital (incorporated by reference Exhibit 3.03 to Amendment No. 1 to the Company's Registration Statement No. 33-80344 on Form S-1, filed August 19, 1994).
   
3.03* Memorandum of Reduction of Share Capital (incorporated by reference to Exhibit 3.04 to Amendment No. 2 to the Company's Registration Statement No. 33-80344 on Form S-1, filed September 14, 1994).
   
3.04* Certificate of Deposit of Memorandum of Increase of Share Capital executed by the Registrar of Companies on May 20, 1997 (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1997).
   
3.05* Certificate of Deposit of Memorandum of Increase of Share Capital executed by the Registrar of Companies on July 11, 2012 (incorporated by reference to Exhibit 3.05 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012).
   
3.06* Certificate of Deposit of Memorandum of Increase of Share Capital executed by the Registrar of Companies on July 3, 2013 (incorporated by reference to Exhibit 3.02 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013).
   
3.07* 
Certificate of Deposit of Memorandum of Increase of Share Capital executed by the Registrar of Companies on April 28, 2014 (incorporated by reference to Exhibit 3.02 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014).

   
3.08* Bye-Laws of Central European Media Enterprises Ltd., as amended and restated on April 14, 2014 (incorporated by reference to Exhibit 3.01 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014).
   
4.01* Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.01 to Amendment No. 1 to the Company's Registration Statement No. 33-80344 on Form S-1, filed August 19, 1994).
   
4.02*

 
Indenture, dated May 2, 2014, between Central European Media Enterprises Ltd. (as Issuer), Central European Media Enterprises N.V., CME Media Enterprises B.V. (as Guarantors) and Deutsche Bank Trust Company Americas (as Trustee, Paying Agent, Transfer Agent and Registrar) (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on May 5, 2014).

4.03*
Warrant Agreement, dated May 2, 2014, between Central European Media Enterprises Ltd. and American Stock Transfer & Trust Company, LLC (as Warrant Agent) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed May 5, 2014).

   
4.04*4.03* Private Unit Warrant Agreement, dated May 2, 2014, between Central European Media Enterprises Ltd. and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 5, 2014).
   
4.05*4.04* 
Initial Warrant Agreement, dated May 2, 2014, between Central European Media Enterprises Ltd. and American Stock Transfer & Trust Company, LLC (as Warrant Agent) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 5, 2014).

   
4.06*4.05* Form of Warrant for Unit Warrants (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on May 5, 2014).
   
4.07*Form of Note for the 15.0% Senior Secured Notes due 2017 (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on May 5, 2014).
4.08*4.06* Registration Rights Agreement between the Company and Time Warner Holdings B.V., dated May 18, 2009 (incorporated by reference to Exhibit 4.11 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009).
   
4.09*4.07* Registration Rights Agreement, by and among Ronald S. Lauder, RSL Capital LLC and Central European Media Enterprises Ltd., dated as of April 30, 2012 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on April 30, 2012).
   

95


Exhibit NumberDescription
4.10*4.08* Certificate of Designation of the Series A Convertible Preferred Stock of Central European Media Enterprises Ltd., dated July 2, 2012 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on July 3, 2012).
   
4.11*4.09* Certificate of Designation of the Series B Convertible Redeemable Preferred Stock of Central European Media Enterprises Ltd., issued on June 25, 2013 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on June 25, 2013).
   

Exhibit NumberDescription
10.01*+ 
Central European Media Enterprises Ltd. Amended and Restated Stock Incentive Plan, as amended on June 13, 2012 (incorporated by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012).

   
10.02*+ 
Central European Media Enterprises Ltd. 2015 Stock Incentive Plan (incorporated by reference to Exhibit 10.01 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).

   
10.03*+ Form of Employee Stock Option (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004).
10.04*+
Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 13, 2012).

   
10.05*10.04*+ 
Form of Restricted Stock Unit Award Agreement (time-based vesting) (incorporated by reference to Exhibit 10.01 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014).

   
10.06*10.05*+ 
Form of Restricted Stock Unit Award Agreement (performance-based vesting) (for use from March 2015) (incorporated by reference to Exhibit 10.0110.10 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015)June 30, 2016).

   
10.07*10.06*+ 
Form of Restricted Stock Unit Award Agreement (Directors’ Version) (for use from June 2015) (incorporated by reference to Exhibit 10.02 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).

   
10.08*10.07*+ 
Form of Employee Non-Qualified Stock Option Agreement (for use from June 2015) (incorporated by reference to Exhibit 10.03 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).

   
10.09*10.08*+ 
Form of Restricted Stock Unit Award Agreement (time-based vesting) (for use from March 2015) (incorporated by reference to Exhibit 10.04 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).

   
10.10*10.09*+ 
FrameworkForm of Restricted Stock Unit Award Agreement among CME Media Pro B.V. (formerly knownas CME Production B.V.), CME Investments B.V. (formerly known as CME Romania B.V.), Alerria Management Company S.A. (formerly known as Media Pro Management S.A.), Metrodome B.V. (formerly known as Media Pro B.V.) and Adrian Sarbu, dated July 27, 2009(time-based vesting) (2015 Plan, for use from March 2016) (incorporated by reference to Exhibit 10.510.11 to the Company'sCompany’s Quarterly Report on Form 10-Q for the quarterly period ended SeptemberJune 30, 2009)2016).

   
10.11*10.10+ 
Amendment to the FrameworkForm of Employee Non-Qualified Stock Option Agreement among CME Media Pro BV (formerly knownas CME Production B.V.), CME Investments B.V. (formerly known as CME Romania B.V.), Alerria Management Company S.A. (formerly known as Media Pro Management S.A.), Metrodome B.V. (formerly known as Media Pro B.V.) and Adrian Sarbu, dated December 9, 2009 (incorporated by reference to Exhibit 10.66 to the Company's Annual Report on (co-CEOs version, 2015 Plan, for use from June 2015).
10.11+Form 10-Kof Restricted Stock Unit Award Agreement (time-based vesting) (co-CEOs version, 2015 Plan, for the fiscal year ended December 31, 2009)use from March 2016).

   
10.12* 
Investment Agreement between CME Media Enterprises B.V, and Top Tone Media Holdings Limited, dated April 22, 2010 (incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010).

   
10.13* Subscription Agreement, by and between Central European Media Enterprises Ltd. and TW Media Holdings LLC, dated March 22, 2009 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009).
   
10.14* 
Sale and Purchase Agreement in respect of Pro TV S.A., Media Pro International S.A. and Media Vision S.R.L. among CME Investments B.V., Central European Media Enterprises Ltd. and Adrian Sarbu, dated May 24, 2010 (incorporated by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010).

   
10.15* 
Subscription and Equity Commitment Agreement, by and between Time Warner Media Holdings B.V. and the Company, dated as of April 30, 2012 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on April 30, 2012).


96


Exhibit NumberDescription
   
10.16* 
Letter Agreement, by and among Time Warner Media Holdings B.V., the Company, RSL Savannah LLC, RSL Capital LLC, RSL Investments Corporation and Ronald S. Lauder, dated as of April 30, 2012 (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on April 30, 2012).

   
10.17* 
Subscription Agreement, by and among Ronald S. Lauder, RSL Capital LLC and the Company, dated as of April 30, 2012 (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on April 30, 2012).

   
10.18* Indemnity Agreement, by and among Central European Media Enterprises Ltd., Ronald S. Lauder and RSL Savannah LLC, dated as of March 22, 2009 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009).
   

Exhibit NumberDescription
10.19* Investor Rights Agreement among the Company, Ronald S. Lauder, RSL Savannah LLC, RSL Investment LLC, RSL Investments Corporation and Time Warner Media Holdings B.V., dated May 18, 2009 (incorporated by reference to Exhibit 10.71 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009).
   
10.20* 
First Amendment to the Investor Rights Agreement, by and among the Company, Ronald S. Lauder, RSL Savannah LLC, RSL Capital LLC, RSL Investments Corporation and Time Warner Media Holdings B.V., dated as of April 30, 2012 (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on April 30, 2012).

   
10.21* 
Subscription Agreement, dated as of April 29, 2013, by and between Central European Media Enterprises Ltd. and Time Warner Media Holdings B.V. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 29, 2013).

   
10.22* 
Letter Agreement, dated as of April 29, 2013, by and between RSL Savannah LLC, RSL Capital LLC, RSL Investments Corporation, Ronald S. Lauder and Time Warner Media Holdings B.V. (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on April 29, 2013).

   
10.23* 
Framework Agreement, dated as of February 28, 2014, among Central European Media Enterprises Ltd., Time Warner Inc. and Time Warner Media Holdings B.V. (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-3 filed February 28, 2014).

   
10.24* 
Standby Purchase Agreement, dated as of March 24, 2014, between Central European Media Enterprises Ltd. and Time Warner Media Holdings B.V. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 27, 2014).

   
10.25* 
Pledge Agreement on Shares in Central European Media Enterprises N.V., dated May 2, 2014, among Central European Media Enterprises Ltd. (as Pledgor), Deutsche Bank Trust Company Americas (as Pledgee) and Central European Media Enterprises N.V. (as the Company), with respect to the Indenture (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on May 5, 2014).

10.26*
Deed of Pledge of Shares (CME Media Enterprises B.V.), dated May 2, 2014, among Central European Media Enterprises N.V. (as Pledgor), Deutsche Bank Trust Company Americas (as Pledgee) and CME Media Enterprises B.V. (as the Company), with respect to the Indenture (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 5, 2014).

10.27*
Pledge Agreement on Shares in Central European Media Enterprises N.V., dated May 2, 2014, among Central European Media Enterprises Ltd. (as Pledgor), Time Warner Inc. (as Pledgee) and Central European Media Enterprises N.V. (as the Company), with respect to the Time Warner Revolving Credit Facility (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on May 5, 2014).

   
10.28*10.26* 
Deed of Pledge of Shares (CME Media Enterprises B.V.), dated May 2, 2014, among Central European Media Enterprises N.V. (as Pledgor), Time Warner Inc. (as Pledgee) and CME Media Enterprises B.V. (as the Company), with respect to the Time Warner Revolving Credit Facility (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on May 5, 2014).

   
10.29*10.27* 
Pledge Agreement on Shares in Central European Media Enterprises N.V., dated May 2, 2014, among Central European Media Enterprises Ltd. (as Pledgor), Time Warner Inc. (as Pledgee) and Central European Media Enterprises N.V. (as the Company), with respect to the Time Warner Term Loan Credit Agreement (incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on May 5, 2014).

10.30*
Deed of Pledge of Shares (CME Media Enterprises B.V.), dated May 2, 2014, among Central European Media Enterprises N.V. (as Pledgor), Time Warner Inc. (as Pledgee) and CME Media Enterprises B.V. (as the Company), with respect to the Time Warner Term Loan Credit Agreement (incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on May 5, 2014).


97


Exhibit NumberDescription
10.31*
Credit Agreement dated as of November 14, 2014 among Central European Media Enterprises Ltd., BNP Paribas, as administrative agent, Time Warner Inc., as guarantor, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report in Form 8-K filed on November 14, 2014).

   
10.32*10.28* 
Commitment Letter dated as of November 14, 2014 between Central European Media Enterprises Ltd. and Time Warner Inc. (incorporated by reference to Exhibit 10.2 to the Company's Current Report in Form 8-K filed on November 14, 2014).

   
10.33*10.29* 
Reimbursement Agreement dated as of November 14, 2014 between Central European Media Enterprises Ltd., as borrower, and Time Warner Inc., as guarantor (incorporated by reference to Exhibit 10.3 to the Company's Current Report in Form 8-K filed on November 14, 2014).

10.34*
Pledge Agreement on Shares in Central European Media Enterprises N.V. dated November 14, 2014 among Central European Media Enterprises Ltd., as pledgor, Time Warner Inc., as pledgee, and Central European Media Enterprises N.V. (incorporated by reference to Exhibit 10.5 to the Company's Current Report in Form 8-K filed on November 14, 2014).

10.35*
Deed of Pledge of Shares (CME Media Enterprises B.V.) dated November 14, 2014 among Central European Media Enterprises N.V., as pledgor, Time Warner Inc., as pledgee, and CME Media Enterprises B.V. (incorporated by reference to Exhibit 10.6 to the Company's Current Report in Form 8-K filed on November 14, 2014).

10.36*
Amended and Restated Term Loan Facility Credit Agreement dated as of November 14, 2014 among Central European Media Enterprises Ltd., Time Warner Inc., as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.9 to the Company's Current Report in Form 8-K filed on November 14, 2014).

10.37*
Amended and Restated Revolving Loan Facility Credit Agreement dated as of November 14, 2014 among Central European Media Enterprises Ltd., Time Warner Inc., as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.10 to the Company's Current Report in Form 8-K filed on November 14, 2014).

10.38*
Credit Agreement dated as of September 30, 2015 among Central European Media Enterprises Ltd., BNP Paribas, as administrative agent, Time Warner Inc., as guarantor, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 1, 2015).
10.30*

Credit Agreement dated as of February 19, 2016 among CME Media Enterprises B.V., as borrower, Central European Media Enterprises Ltd., as guarantor, BNP Paribas, as administrative agent, Time Warner Inc., as guarantor, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 22, 2016).
   
10.39*10.31*Amendment dated as of February 19, 2016 to the Credit Agreement dated as of November 14, 2014, among Central European Media Enterprises Ltd., as borrower, BNP Paribas, as administrative agent, Time Warner Inc., as guarantor, and the lenders party thereto (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 22, 2016).
10.32* 
Amendment dated as of February 19, 2016 to the Credit Agreement dated as of September 30, 2015, among Central European Media Enterprises Ltd., as borrower, BNP Paribas, as administrative agent, Time Warner Inc., as guarantor, and the lenders party thereto (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on February 22, 2016).
10.33*Amendment and Restatement Agreement in respect of the Amended and Restated Revolving Loan Facility Credit Agreement dated as of November 14, 2014, as amended and restated as of February 19, 2016 among Central European Media Enterprises Ltd., as borrower, Time Warner Inc. as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on February 22, 2016).

Exhibit NumberDescription
10.34*Amended and Restated Reimbursement Agreement dated as of November 14, 2014 as amended and restated as of February 19, 2016 among Central European Media Enterprises Ltd., CME Media Enterprises B.V., and Time Warner Inc., as credit guarantor (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on February 22, 2016).
10.35*Pledge Agreement on Shares in Central European Media Enterprises N.V. dated February 19, 2016 among Central European Media Enterprises Ltd., as pledgor, Time Warner Inc., as pledgee, and Central European Media Enterprises N.V. (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on February 22, 2016).
10.36*Deed of Pledge of Shares (CME Media Enterprises B.V.) dated February 19, 2016 among Central European Media Enterprises N.V., as pledgor, Time Warner Inc. as pledgee, and CME Media Enterprises B.V. (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on February 22, 2016).
10.37*Deed of Amendment dated 30 September 2015February 19, 2016 to the Intercreditor Agreement dated July 21, 2006, as amended and restated, among Central European Media Enterprises Ltd., Central European Media Enterprises N.V., CME Media Enterprises B.V., and the other parties thereto (incorporated by reference to Exhibit 10.210.12 to the Company’s Current Report on Form 8-K filed on October 1, 2015)February 22, 2016).

   
10.40*10.38* 
Intercreditor Agreement dated July 21, 2006, as amended and restated, among Central European Media Enterprises Ltd., Central European Media Enterprises N.V., CME Media Enterprises B.V., and the other parties thereto (incorporated by reference to Exhibit 10.310.13 to the Company’s Current Report on Form 8-K filed on October 1, 2015)February 22, 2016).

   
10.41*10.39*+ 
Amended and Restated Contract of Employment between CME Media Services Limited and Michael Del Nin, dated November 11, 2013July 1, 2016 (incorporated by reference to Exhibit 10.1 to the Company's CurrentQuarterly Report inon Form 8-K filed on November 15, 2013)July 1, 2016).

   
10.42*10.40*+ 
Amendment to Contract of Employment between CME Media Services LimitedAmended and Michael Del Nin, dated March 10, 2015 (incorporated by reference to Exhibit 10.38 to the Company’s Annual Report on Form 10-K for the fiscal period ended December 31, 2014).
.
10.43*+
Restated Contract of Employment between CME Media Services Limited and Christoph Mainusch, dated November 11, 2013July 1, 2016 (incorporated by reference to Exhibit 10.0210.2 to the Company's CurrentQuarterly Report inon Form 8-K filed on November 15, 2013)July 1, 2016).

   
10.44*10.41*+ 
Amendment to Contract of Employment between CME Media Services Limited and Christoph Mainusch, dated March 10, 2015 (incorporated by reference to Exhibit 10.40 to the Company’s Annual Report on Form 10-K for the fiscal period ended December 31, 2014).

10.45*+
Amended and Restated Contract of Employment between CME Media Services Limited and DaveDavid Sturgeon, dated July 27, 2010 (incorporated by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010).

   
10.46*10.42*+ 
Amendment to Amended and Restated Contract of Employment between David Sturgeon and CME Media Services Limited and David Sturgeon, dated June 5, 2014 (incorporated by reference to Exhibit 10.02 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014).

   

98


Exhibit NumberDescription
10.47*10.43*+ Amendment to Amended and Restated Contract of Employment between David Sturgeon and CME Media Services Limited and David Sturgeon, as amended, dated March 10, 2015 (incorporated by reference to Exhibit 10.43 to the Company’s Annual Report on Form 10-K for the fiscal period ended December 31, 2014).
   
10.48*10.44*+ 
Contract of Employment between CME Media Services Limited and Daniel Penn, dated February 20, 2012 (incorporated by reference to Exhibit 10.47 to the Company's Annual Report on Form 10-K for the fiscal period ended December 31, 2011).

   
10.49*10.45*+ Amendment to Contract of Employment between CME Media Services Limited and Daniel Penn, dated March 10, 2015 (incorporated by reference to Exhibit 10.45 to the Company’s Annual Report on Form 10-K for the fiscal period ended December 31, 2014).
   
10.50*10.46*+ 
Amended and Restated Contract of Employment between CME Media Services Limited and Adrian Sarbu, dated April 4, 2013 (incorporated by reference to Exhibit 10.01 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013).

   
10.51*10.47*+ 
Separation Agreement between CME Media Services Limited and Adrian Sarbu, dated August 21, 2013 (incorporated by reference to Exhibit 10.1 to the Company's Current Report in Form 8-K filed on August 21, 2013).

10.52*+
Contract of Employment between CME Media Services Limited and David Sach, dated February 26, 2010 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010).

10.53*+
Separation Agreement between CME Media Services Limited and David Sach, dated October 14, 2013 (incorporated by reference to Exhibit 10.1 to the Company's Current Report in Form 8-K filed on October 17, 2013).

10.54*+
Amended and Restated Contract of Employment between CME Media Services Limited and Anthony Chhoy, dated December 1, 2010 (incorporated by reference to Exhibit 10.45 to the Company's Annual Report on Form 10-K for the fiscal period ended December 31, 2010).

10.55*+
Separation Agreement between CME Media Services Limited and Anthony Chhoy, dated October 17, 2013 (incorporated by reference to Exhibit 10.2 to the Company's Current Report in Form 8-K filed on October 17, 2013).

12.01Computation of Ratio of Earnings to Fixed Charges.
   
21.01 List of subsidiaries.
   
23.01 Consent of Ernst & Young LLP.
23.02Consent of Deloitte LLP.
   
24.01 Power of Attorney, dated as of February 22, 2016.9, 2017.

Exhibit NumberDescription
   
31.01 Certification of co-Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.02 Certification of co-Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.03 Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.01 Certifications of co-Principal Executive Officers and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished only).
   
101.INS XBRL Instance Document
   
101.SCH XBRL Taxonomy Schema Document
   
101.CAL XBRL Taxonomy Calculation Linkbase Document

99


Exhibit NumberDescription
   
101.DEF XBRL Taxonomy Definition Linkbase Document
   
101.LAB XBRL Taxonomy Label Linkbase Document
   
101.PRE XBRL Taxonomy Presentation Linkbase Document
* Previously filed exhibits.
+ Exhibit is a management contract or compensatory plan.
b) Exhibits: See (a)(3) above for a listing of the exhibits included as part of this report.
c) Report of Independent Registered Public Accountants on Schedule II - Schedule of Valuation Allowances. (See page S-1 of this Annual Report on Form 10-K).

100


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  Central European Media Enterprises Ltd.
Date:February 22, 20169, 2017
/s/ David Sturgeon
David Sturgeon
Executive Vice President and Chief Financial Officer
Principal Financial Officer and Principal Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Title Date
     
* Chairman of the Board of Directors February 22, 20169, 2017
John K. Billock    
     
/s/ Michael Del Nin co-Chief Executive Officer February 22, 20169, 2017
Michael Del Nin (co-Principal Executive Officer)  
     
/s/ Christoph Mainusch co-Chief Executive Officer February 22, 20169, 2017
Christoph Mainusch (co-Principal Executive Officer)  
     
/s/ David Sturgeon Chief Financial Officer February 22, 20169, 2017
David Sturgeon

 
(Principal Financial Officer and
Principal Accounting Officer)

  
     
* Director February 22, 20169, 2017
Paul T. Cappuccio    
     
* Director February 22, 20169, 2017
Iris Knobloch    
     
* Director February 22, 20169, 2017
Charles R. Frank    
     
* Director February 22, 20169, 2017
Alfred W. Langer


    
     
* Director February 22, 20169, 2017
Bruce Maggin    
     
     

101


Signature Title Date
* Director
 February 22, 20169, 2017
Parm Sandhu

    
     
* Director
 February 22, 20169, 2017
Doug Shapiro    
     
* Director
 February 22, 20169, 2017
Kelli Turner

    
     
* Director
 February 22, 20169, 2017
Gerhard Zeiler    



 *By:/s/ David Sturgeon
   David Sturgeon
   Attorney-in-fact **
    
 **By authority of the power of attorney filed herewith
    


102


INDEX TO SCHEDULES
Schedule II
Schedule of Valuation Allowances
(US$ 000's)
Bad debt and credit note provision Deferred tax allowanceBad debt and credit note provision Deferred tax allowance
BALANCE December 31, 2012$12,393
 $105,002
Charged to costs and expenses3,683
 23,123
Deductions (1)
(1,802) 
Foreign exchange515
 4,893
BALANCE December 31, 201314,789
 133,018
$14,789
 $133,018
Charged to costs and expenses4,238
 7,012
4,238
 7,012
Deductions (1)
(6,303) 
(6,303) 
Foreign exchange(1,989) (15,767)(1,989) (15,767)
BALANCE December 31, 201410,735
 124,263
10,735
 124,263
Charged to costs and expenses2,071
 (3,614)2,071
 (3,614)
Deductions (1)
(2,402) 
(2,402) 
Foreign exchange(1,203) (11,168)(1,203) (11,168)
BALANCE December 31, 2015$9,201
 $109,481
9,201
 109,481
Charged to costs and expenses3,631
 5,863
Deductions (1)
(2,923) 250
Foreign exchange(311) (4,674)
BALANCE December 31, 2016$9,598
 $110,920
(1) 
Charged to other accounts for the bad debt and credit note provision consist primarily of accounts receivable written off.

S-1