UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2020

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~~Bermuda			98-0438382
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

O'Hara House,
3 Bermudiana Road, ~~Hamilton, Bermuda~~			HM 08
Hamilton,	Bermuda		(Zip Code)
(Address of principal executive offices)		~~(Zip Code)~~

Registrant's telephone number, including area code: (441)296-1431

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.08	CETV	Nasdaq Global Select Market

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. YesT☒ 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). YesT☒ No £☐

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~~ £ Filer	☐	Accelerated ~~filer~~ TFiler	☒
Non-accelerated ~~filer~~ £Filer	☐	Smaller reporting company£	☐
		Emerging growth company£	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £☐

Index

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act) Yes £☐ No T☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.



Class	Outstanding as of ~~October 20, 2017~~July 17, 2020
Class A Common Stock, par value $0.08	~~144,963,821~~254,598,523

Index

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

FORM 10-Q

For the ~~quarterly period ended~~ ~~September~~Quarterly Period Ended June 30, ~~2017~~2020



			Page
Part I Financial Information
	Item 1. Financial Statements		1
		Condensed Consolidated Balance Sheets as at ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019	1
		Condensed Consolidated Statements of Operations and Comprehensive Income / Loss for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019	2
		Condensed Consolidated ~~Statement~~Statements of Equity for the ~~Nine~~Three and Six Months Ended ~~September~~June 30, ~~2017~~2020 and 2019	3
		Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019	45
		Notes to the Condensed Consolidated Financial Statements	6
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		2425
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		3742
	Item 4. Controls and Procedures		3842
Part II Other Information
	Item 1. Legal Proceedings		3843
	Item 1A. Risk Factors		3843
	Item 6. Exhibits		4450
Signatures			4551

Index

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(US$ 000’s, except share data)

(Unaudited)

September 30, 2017
December 31, 2016
ASSETS
Current assets
Cash and cash equivalents $ 67,034
$ 40,606
Accounts receivable, net (Note 7) 122,406
141,371
Program rights, net (Note 6) 70,510
69,662
Other current assets (Note 8) 28,197
27,541
Current assets held for sale (Note 3) 135,171
61,242
Total current assets 423,318
340,422
Non-current assets

Property, plant and equipment, net (Note 9) 100,308
89,080
Program rights, net (Note 6) 188,484
143,428
Goodwill (Note 4) 693,142
601,535
Other intangible assets, net (Note 4) 147,073
134,705
Other non-current assets (Note 8) 20,365
21,273
Non-current assets held for sale (Note 3) —
60,274
Total non-current assets 1,149,372
1,050,295
Total assets $ 1,572,690
$ 1,390,717



	June 30, 2020		December 31, 2019
ASSETS
Current assets
Cash and cash equivalents	$	176,094	$	36,621
Accounts receivable, net of allowances for credit losses of $8,803 and $8,548	131,918		188,618
Program rights, net (Note 5)	—		75,909
Other current assets (Note 6)	32,883		48,832
Total current assets	340,895		349,980
Non-current assets
Property, plant and equipment, net (Note 7)	102,378		113,901
Program rights, net (Note 5)	238,096		166,237
Goodwill (Note 3)	639,414		667,988
Other intangible assets, net (Note 3)	120,838		127,589
Other non-current assets (Note 6)	20,921		22,167
Total non-current assets	1,121,647		1,097,882
Total assets	$	1,462,542	$	1,447,862

LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities (Note 10) $ 157,322
$ 134,378
Current portion of long-term debt and other financing arrangements (Note 5) 2,425
1,228
Other current liabilities (Note 11) 23,535
8,467
Current liabilities held for sale (Note 3) 32,246
27,492
Total current liabilities 215,528
171,565
Non-current liabilities

Long-term debt and other financing arrangements (Note 5) 1,067,153
1,001,408
Other non-current liabilities (Note 11) 87,230
67,963
Non-current liabilities held for sale (Note 3) —
1,414
Total non-current liabilities 1,154,383
1,070,785
Commitments and contingencies (Note 20)

TEMPORARY EQUITY
200,000 shares of Series B Convertible Redeemable Preferred Stock of $0.08 each (December 31, 2016 - 200,000) (Note 13) 262,115
254,899
EQUITY

CME Ltd. shareholders’ equity (Note 14):

One share of Series A Convertible Preferred Stock of $0.08 each (December 31, 2016 – one) —
—
144,881,732 shares of Class A Common Stock of $0.08 each (December 31, 2016 – 143,449,913) 11,590
11,476
Nil shares of Class B Common Stock of $0.08 each (December 31, 2016 – nil) —
—
Additional paid-in capital 1,905,449
1,910,244
Accumulated deficit (1,776,411 ) (1,785,536 )
Accumulated other comprehensive loss (199,906 ) (243,988 )
Total CME Ltd. shareholders’ deficit (59,278 ) (107,804 )
Noncontrolling interests (58 ) 1,272
Total deficit (59,336 ) (106,532 )
Total liabilities and equity $ 1,572,690
$ 1,390,717



LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities (Note 8)	$	130,913		$	135,650
Current portion of long-term debt and other financing arrangements (Note 4)	6,952			6,836
Other current liabilities (Note 9)	29,280			13,515
Total current liabilities	167,145			156,001
Non-current liabilities
Long-term debt and other financing arrangements (Note 4)	597,124			600,273
Other non-current liabilities (Note 9)	80,076			80,000
Total non-current liabilities	677,200			680,273
Commitments and contingencies (Note 19)
TEMPORARY EQUITY
200,000 shares of Series B Convertible Redeemable Preferred Stock of $0.08 each (December 31, 2019 - 200,000) (Note 12)	269,370			269,370
EQUITY
CME Ltd. shareholders’ equity (Note 13):
One share of Series A Convertible Preferred Stock of $0.08 each (December 31, 2019 – one)	—			—
254,548,180 shares of Class A Common Stock of $0.08 each (December 31, 2019 – 253,607,026)	20,364			20,288
Nil shares of Class B Common Stock of $0.08 each (December 31, 2019 – nil)	—			—
Additional paid-in capital	2,008,860			2,007,275
Accumulated deficit	(1,418,722		)	(1,458,942		)
Accumulated other comprehensive loss	(262,061		)	(226,916		)
Total CME Ltd. shareholders’ equity	348,441			341,705
Noncontrolling interests	386			513
Total equity	348,827			342,218
Total liabilities and equity	$	1,462,542		$	1,447,862

The accompanying notes are an integral part of these condensed consolidated financial statements.

Index

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / LOSS

(US$ 000’s, except per share data)

(Unaudited)

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017
2016
2017

2016
Net revenues $ 119,431
$ 107,527
$ 378,058
$ 356,147
Operating expenses:
Content costs 55,871
51,920
174,214
166,938
Other operating costs 12,612
13,482
35,747
40,773
Depreciation of property, plant and equipment 6,936
5,801
19,345
17,134
Amortization of broadcast licenses and other intangibles 2,187
2,073
6,349
6,247
Cost of revenues 77,606
73,276
235,655
231,092
Selling, general and administrative expenses 25,803
22,801
70,204
64,984
Operating income 16,022
11,450
72,199
60,071
Interest expense (Note 15) (18,352 ) (22,424 ) (54,773 ) (90,640 )
Loss on extinguishment of debt (Note 5) (101 ) —
(101 ) (150,158 )
Other non-operating income, net (Note 16) 3,643
350
12,783
1,638
Income / (loss) before tax 1,212
(10,624 ) 30,108
(179,089 )
Provision for income taxes (3,157 ) (1,145 ) (12,770 ) (6,706 )
(Loss) / income from continuing operations (1,945 ) (11,769 ) 17,338
(185,795 )
Loss from discontinued operations, net of tax (Note 3) (5,988 ) (8,054 ) (8,747 ) (15,971 )
Net (loss) / income (7,933 ) (19,823 ) 8,591
(201,766 )
Net loss attributable to noncontrolling interests 188
196
534
387
Net (loss) / income attributable to CME Ltd. $ (7,745 ) $ (19,627 ) $ 9,125
$ (201,379 )

Net (loss) / income $ (7,933 ) $ (19,823 ) $ 8,591
$ (201,766 )
Other comprehensive income
Currency translation adjustment 9,227
7,262
42,203
15,264
(Loss) / gain on derivative instruments (Note 12) (135 ) (1,360 ) 1,083
(5,581 )
Total other comprehensive income 9,092
5,902
43,286
9,683
Comprehensive income / (loss) 1,159
(13,921 ) 51,877
(192,083 )
Comprehensive loss attributable to noncontrolling interests 439
232
1,330
568
Comprehensive income / (loss) attributable to CME Ltd. $ 1,598
$ (13,689 ) $ 53,207
$ (191,515 )



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
Net revenues	$	135,545		$	183,599		$	279,361		$	330,158
Operating expenses:
Content costs	43,693			70,356			108,725			140,716
Other operating costs	12,549			13,806			26,196			27,054
Depreciation of property, plant and equipment	7,972			8,154			15,899			16,380
Amortization of broadcast licenses and other intangibles	2,110			2,113			4,277			4,307
Cost of revenues	66,324			94,429			155,097			188,457
Selling, general and administrative expenses	25,047			28,708			53,893			53,602
Operating income	44,174			60,462			70,371			88,099
Interest expense (Note 14)	(5,754		)	(7,735		)	(12,349		)	(15,977		)
Other non-operating income / (expense), net (Note 15)	328			2,237			(5,808		)	(860		)
Income before tax	38,748			54,964			52,214			71,262
Provision for income taxes	(7,646		)	(10,886		)	(12,142		)	(15,433		)
Net income	31,102			44,078			40,072			55,829
Net loss / (income) attributable to noncontrolling interests	77			(119		)	148			(112		)
Net income attributable to CME Ltd.	$	31,179		$	43,959		$	40,220		$	55,717

Net income	$	31,102		$	44,078		$	40,072		$	55,829
Other comprehensive income / (loss):
Currency translation adjustment	25,583			17,002			(35,466		)	1,159
Unrealized gain / (loss) on derivative instruments (Note 13)	122			(1,220		)	342			(4,551		)
Total other comprehensive income / (loss)	25,705			15,782			(35,124		)	(3,392		)
Comprehensive income	56,807			59,860			4,948			52,437
Comprehensive loss / (income) attributable to noncontrolling interests	230			(28		)	127			(158		)
Comprehensive income attributable to CME Ltd.	$	57,037		$	59,832		$	5,075		$	52,279

PER SHARE DATA (Note 18):
Net (loss) / income per share:
Continuing operations — basic $ (0.03 ) $ (0.09 ) $ 0.04
$ (1.31 )
Continuing operations — diluted (0.03 ) (0.09 ) 0.03
(1.31 )
Discontinued operations — basic (0.04 ) (0.05 ) (0.06 ) (0.11 )
Discontinued operations — diluted (0.04 ) (0.05 ) (0.06 ) (0.11 )
Net loss attributable to CME Ltd. — basic (0.07 ) (0.14 ) (0.02 ) (1.42 )
Net loss attributable to CME Ltd. — diluted (0.07 ) (0.14 ) (0.02 ) (1.42 )

Weighted average common shares used in computing per share amounts (000’s):
Basic 156,189
153,494
155,579
149,898
Diluted 156,189
153,494
233,761
149,898



PER SHARE DATA (Note 17):
Net income per share:
Attributable to CME Ltd. — basic	$	0.08	$	0.12	$	0.11	$	0.15
Attributable to CME Ltd. — diluted	0.08		0.12		0.11		0.15

Weighted average common shares used in computing per share amounts (000’s):
Basic	265,649		264,570		265,342		264,385
Diluted	266,776		265,932		266,790		265,628

The accompanying notes are an integral part of these condensed consolidated financial statements.

Index

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(US$ 000’s, except share data)

(Unaudited)


	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 shares	Par value		Number of shares	Par value		Number of shares	Par value		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total Deficit			Number of shares	Par value		Number of shares	Par value		Number of shares	Par value		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total Equity
BALANCE December 31, 2016	1	$	—	143,449,913	$	11,476	—	$	—	$	1,910,244		$	(1,785,536	)	$	(243,988	)	$	1,272		$	(106,532	)
BALANCE March 31, 2020																									1	$	—	254,298,255	$	20,343	—	$	—	$	2,008,151		$	(1,449,901	)	$	(287,919	)	$	616		$	291,290
Stock-based compensation	—	—		—	—		—	—		2,140			—			—			—			2,140			—	—		—	—		—	—		733			—			—			—			733
Exercise of warrants (Note 14)	—	—		563,325	45		—	—		518			—			—			—			563
Share issuance, stock-based compensation	—	—		868,494	69		—	—		(69		)	—			—			—			—			—	—		249,925	21		—	—		(21		)	—			—			—			—
Withholding tax on net share settlement of stock-based compensation	—	—		—	—		—	—		(168		)	—			—			—			(168		)	—	—		—	—		—	—		(3		)	—			—			—			(3		)
Preferred dividend paid in kind	—	—		—	—		—	—		(7,216		)	—			—			—			(7,216		)
Net income / (loss)	—	—		—	—		—	—		—			9,125			—			(534		)	8,591			—	—		—	—		—	—		—			31,179			—			(77		)	31,102
Gain on derivative instruments	—	—		—	—		—	—		—			—			1,083			—			1,083
Unrealized gain on derivative instruments																									—	—		—	—		—	—		—			—			122			—			122
Currency translation adjustment	—	—		—	—		—	—		—			—			42,999			(796		)	42,203			—	—		—	—		—	—		—			—			25,736			(153		)	25,583
BALANCE September 30, 2017	1	$	—	144,881,732	$	11,590	—	$	—	$	1,905,449		$	(1,776,411	)	$	(199,906	)	$	(58	)	$	(59,336	)
BALANCE June 30, 2020																									1	$	—	254,548,180	$	20,364	—	$	—	$	2,008,860		$	(1,418,722	)	$	(262,061	)	$	386		$	348,827

																									CME Ltd.
																									Series A Convertible Preferred Stock			Class A Common Stock			Class B Common Stock
																									Number of shares	Par value		Number of shares	Par value		Number of shares	Par value		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total Equity
BALANCE March 31, 2019																									1	$	—	253,279,975	$	20,262	—	$	—	$	2,004,188		$	(1,566,318	)	$	(235,961	)	$	431		$	222,602
Stock-based compensation																									—	—		—	—		—	—		1,124			—			—			—			1,124
Share issuance, stock-based compensation																									—	—		279,323	23		—	—		(23		)	—			—			—			—
Withholding tax on net share settlement of stock-based compensation																									—	—		—	—		—	—		(74		)	—			—			—			(74		)
Net income																									—	—		—	—		—	—		—			43,959			—			119			44,078
Unrealized loss on derivative instruments																									—	—		—	—		—	—		—			—			(1,220		)	—			(1,220		)
Currency translation adjustment																									—	—		—	—		—	—		—			—			17,093			(91		)	17,002
BALANCE June 30, 2019																									1	$	—	253,559,298	$	20,285	—	$	—	$	2,005,215		$	(1,522,359	)	$	(220,088	)	$	459		$	283,512

For the Nine Months Ended September 30,
2017
2016
Opening balance $ 89,080
$ 87,943
Additions 18,547
15,163
Disposals (71 ) (43 )
Depreciation (19,345 ) (17,134 )
Foreign currency movements 12,097
2,545
Ending balance $ 100,308
$ 88,474


⁽¹⁾	Includes assets acquired under finance leases. For additional information see Note 10, "Leases".

~~10.~~8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities comprised the following at ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019:



	June 30, 2020		December 31, 2019
Accounts payable and accrued expenses	$	47,357	$	56,343
Related party accounts payable	128		267
Programming liabilities	17,889		17,293
Related party programming liabilities	11,714		10,553
Duties and other taxes payable	11,102		9,426
Accrued staff costs ⁽¹⁾	23,141		24,027
Accrued interest payable	2,075		2,104
Related party accrued interest payable (including Guarantee Fees)	1,084		1,103
Income taxes payable	11,094		10,304
Other accrued liabilities	5,329		4,230
Total accounts payable and accrued liabilities	$	130,913	$	135,650

September 30, 2017
December 31, 2016
Accounts payable and accrued expenses $ 54,416
$ 45,037
Related party accounts payable 69
194
Programming liabilities 25,265
26,603
Related party programming liabilities 17,065
17,126
Duties and other taxes payable 7,797
10,325
Accrued staff costs 17,439
16,476
Accrued interest payable 3,228
2,935
Related party accrued interest payable (including Guarantee Fees) 24,176
9,588
Income taxes payable 7,159
5,091
Other accrued liabilities 708
1,003
Total accounts payable and accrued liabilities $ 157,322
$ 134,378
⁽¹⁾ Includes certain retention bonuses related to the proposed Merger.

9. OTHER LIABILITIES

Other current and non-current liabilities comprised the following at June 30, 2020and December 31, 2019:



	June 30, 2020		December 31, 2019
Current:
Deferred revenue	$	24,114	$	9,451
Legal provisions	637		635
Derivative instruments (Note 11)	949		—
Operating lease liabilities (Note 10)	3,380		3,203
Other	200		226
Total other current liabilities	$	29,280	$	13,515

	June 30, 2020		December 31, 2019
Non-current:
Deferred tax liabilities	$	23,062	$	21,294
Derivative instruments (Note 11)	11,326		12,670
Operating lease liabilities (Note 10)	8,503		8,434
Related party Guarantee Fee payable (Note 4)	33,465		33,465
Other	3,720		4,137
Total other non-current liabilities	$	80,076	$	80,000

During the three and six months ended June 30, 2020 and 2019, we recognized revenue of US$ 2.4 million and US$ 5.8 million, respectively; and US$ 2.8 million and US$ 5.6 million, respectively, which was deferred as at December 31, 2019 and 2018, respectively.

Index

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in US$ 000’s, except share and per share data)

(Unaudited)

~~11. OTHER LIABILITIES~~10. LEASES

~~Other current~~We enter into operating and ~~non-current~~finance leases for offices, production and related facilities, cars and certain other equipment. Our leases have remaining lease terms up to ten years.

The components of lease cost for the three and six months ended June 30, 2020 and 2019 were as follows:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Operating lease cost:
Short-term operating lease cost	$	545	$	1,128	$	1,691	$	2,812
Long-term operating lease cost	1,193		1,149		2,430		2,299
Total operating lease cost	$	1,738	$	2,277	$	4,121	$	5,111

Finance lease cost:
Amortization of right-of-use asset	$	1,625	$	1,464	$	3,213	$	2,719
Interest on lease liabilities	84		88		167		196
Total finance lease cost	$	1,709	$	1,552	$	3,380	$	2,915

The classification of cash flows related to our leases for the six months ended June 30, 2020 and 2019 was as follows:



	For the Six Months Ended June 30,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,322	$	2,749
Operating cash flows from finance leases	188		186
Financing cash flows from finance leases	3,918		3,395

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	2,169	$	2,607
Finance leases	1,599		2,746

Index

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in US$ 000’s, except share and per share data)

(Unaudited)

Our assets and liabilities related to our leasing arrangements comprised the following at ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019:



	June 30, 2020			December 31, 2019
Operating Leases
Operating lease right-of-use-assets, gross	$	17,026		$	15,396
Accumulated amortization	(5,086		)	(3,714		)
Operating lease right-of-use-assets, net	$	11,940		$	11,682

Other current liabilities	$	3,380		$	3,203
Other non-current liabilities	8,503			8,434
Total operating lease liabilities	$	11,883		$	11,637

Finance Leases
Property, plant and equipment, gross	$	33,345		$	35,875
Accumulated depreciation	(16,368		)	(15,799		)
Property, plant and equipment, net	$	16,977		$	20,076

Current portion of long-term debt and other financing arrangements	$	6,952		$	6,836
Long-term debt and other financing arrangements	7,671			9,496
Total finance lease liabilities	$	14,623		$	16,332

Weighted Average Remaining Lease Term in Years
Operating leases	4.8			4.9
Finance leases	2.6			2.7

Weighted Average Discount Rate
Operating leases	4.8		%	4.7		%
Finance leases	2.0		%	2.1		%

Our lease liabilities had the following maturities at June 30, 2020:



	Operating Leases			Finance Leases
2020	$	2,849		$	3,739
2021	2,558			6,107
2022	2,476			3,392
2023	1,886			1,614
2024	1,345			160
2025 and thereafter	2,307			—
Total undiscounted payments	13,421			15,012
Less: amounts representing interest	(1,538		)	(389		)
Present value of net minimum lease payments	$	11,883		$	14,623

September 30, 2017
December 31, 2016
Current:
Deferred revenue $ 19,413
$ 4,979
Legal provision 2,926
2,412
Other 1,196
1,076
Total other current liabilities $ 23,535
$ 8,467

September 30, 2017
December 31, 2016
Non-current:

Deferred tax $ 21,527
$ 19,710
Related party Commitment Fee payable ⁽¹⁾
10,322
9,905
Related party Guarantee Fee payable (Note 5) 49,682
34,492
Other 5,699
3,856
Total other non-current liabilities $ 87,230
$ 67,963

⁽¹⁾

Represents the commitment fee (the "Commitment Fee") payable to Time Warner, including accrued interest, in respect of its obligation under a commitment letter dated November 14, 2014 between Time Warner and us whereby Time Warner agreed to provide or assist with arranging a loan facility to repay our 5.0% senior convertible notes at maturity in November 2015. The Commitment 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 Fee bears interest at 8.5% per annum and such interest is payable in arrears on each May 1 and November 1, and may be paid in cash or in kind, at our election.

~~12.~~11. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

ASC 820, ~~“Fair~~"Fair Value Measurements and ~~Disclosure”~~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 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted instruments.


Level 2	Quoted 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 3	Prices 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.

Index

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in US$ 000’s, except share and per share data)

(Unaudited)

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 is included in Note 5,4, "Long-term Debt and Other Financing Arrangements".

Hedging 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 the Euro ~~Term~~ 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 condensed consolidated balance sheets as other current and other non-current liabilities based on their maturity, and the effective portion of the 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 other non-operating income, net in our condensed consolidated statements of operations and comprehensive income / loss. For the three and nine months ended September 30, 2017 and 2016, we did not recognize any charges related to hedge ineffectiveness.

~~Index~~

~~CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in US$ 000’s, except share and per share data)~~

~~(Unaudited)~~

~~Information relating to financial instruments is as follows:~~

Trade Date Number of Contracts
Description Aggregate Notional Amount
Maturity Date Objective Fair Value as at September 30, 2017
April 5, 2016 5
Interest rate swap EUR 468,800
February 21, 2021 Interest rate hedge underlying 2021 Euro Term Loan $ (1,798 )
April 5, 2016 4
Interest rate swap EUR 200,800
November 1, 2018 Interest rate hedge underlying 2018 Euro Term Loan, forward starting on November 1, 2017 $ (338 )
November 10, 2015 3
Interest rate swap EUR 235,335
November 1, 2019 Interest rate hedge underlying 2019 Euro Term Loan $ (1,587 )
November 14, 2014 2
Interest rate swap EUR 200,800
November 1, 2017 Interest rate hedge underlying 2018 Euro Term Loan $ (52 )
maturity.

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 instruments, were readily observable.

~~In August we settled~~As at June 30, 2020 each instrument is designated as a cash flow hedge. All changes in ~~part~~ the interest rate swaps underlying the 2018 Euro Term Loan to align with the EUR 50.0 million reduction of the principal balance of that loan following the repayment on August 1, 2017 (see Note 5, "Long-term Debt and Other Financing Arrangements"). Changes in fair value ~~for the settled portion~~ of these ~~interest rate swaps is recognized within other non-operating income, net in our condensed consolidated statements of operations and comprehensive income / loss.~~

The expected proceeds from the sale of the Croatia and Slovenia segments will be used to satisfy amounts owing in respect of the 2018 Euro Term Loan (see Note 5, "Long-term Debt and Other Financing Arrangements"). It is probable the sale will complete prior to the initial interest payment on the interest rate swap maturing November 1, 2018 which precludes recognition of the effective portion of the changes in fair value within accumulated other comprehensive income / loss. All related fair value adjustments and those previously recognizedinstruments are recorded in accumulated other comprehensive income / loss ~~are recognized in other non-operating income, net in our condensed consolidated statements of operations~~ and ~~comprehensive income / loss (see Note 14, "Equity").~~subsequently reclassified to interest expense when the hedged item affects earnings.

~~Foreign Currency Risk~~

We have entered into the below forward foreign exchange contracts to reduce our exposure to movements in foreign exchange rates related to contractual payments under certain dollar-denominated agreements. Information relating to financial instruments ~~as at September 30, 2017~~ is as follows:



Trade Date	Number of Contracts	Aggregate Notional Amount		Maturity Date	Objective	Fair Value as at June 30, 2020
April 5, 2016	5	EUR	468,800	February 19, 2021	Interest rate hedge underlying 2023 Euro Loan	$	(949	)
April 26, 2018	3	EUR	60,335	November 1, 2021	Interest rate hedge underlying 2021 Euro Loan	$	(427	)
April 26, 2018	4	EUR	468,800	April 26, 2023	Interest rate hedge underlying 2023 Euro Loan, forward starting on February 19, 2021	$	(10,899	)

Trade Date Number of Contracts
Description Aggregate Notional Amount
Maturity Date Objective Fair Value as at September 30, 2017
January 31, 2017 1
EUR / USD forward $ 7,720
December 21, 2017 USD-denominated operating payments $ (687 )
July 21, 2017 1
EUR / USD forward $ 18,530
December 20, 2017 USD-denominated operating payments $ (228 )

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 other non-operating income, net in the condensed consolidated statements of operations and comprehensive income / loss and in the condensed 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.

~~Fair Value of Derivatives~~

~~The change in fair value of derivatives not recognized within accumulated other comprehensive income / loss comprised the following for the three and nine months ended September 30, 2017 and 2016:~~

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017
2016
2017
2016
Loss on currency swaps $ (696 ) $ (398 ) $ (1,428 ) $ (11,904 )
Loss on interest rate swaps (454 ) —
(454 ) —
Change in fair value of derivatives $ (1,150 ) $ (398 ) $ (1,882 ) $ (11,904 )

~~Index~~

~~CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in US$ 000’s, except share and per share data)~~

~~(Unaudited)~~

~~13.~~12. 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 ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016. As at September 30, 2017 and December 31, 2016, the carrying value of the Series B Preferred Shares was US$ 262.1 million and US$ 254.9 million, respectively.~~2019. The Series B Preferred Shares are held by Time Warner Media Holdings B.V. ("TW Investor")., a wholly owned subsidiary of AT&T. As at June 30, 2020 and December 31, 2019, the accreted value of ~~September 30, 2017,~~ the ~~200,000~~ Series B Preferred Shares was US$ 269.4 million. The Series B Preferred Shares have a stated value of US$ 1,000 per share and no longer accrete subsequent to June 24, 2018. As of June 30, 2020, the 200,000 shares of Series B preferred stock were convertible into approximately ~~108.1~~111.1 million shares of Class A common stock.

~~The initial stated value~~Pursuant to the Certificate of Designation of the Series B Preferred Shares, of US$ 1,000 per share accretes at an annual rate of 3.75%, compounded quarterly, from June 25, 2016 to June 24, 2018. We have the right to pay cash to the holder in lieu of any further accretion. 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 ~~September~~June 30, ~~2017,~~2020, 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 upon 30 ~~days'~~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 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.~~not considered a liability and the embedded conversion feature does not require bifurcation. The Series B Preferred Shares are ~~carried on the balance sheet~~classified outside of permanent equity at redemption value. As the Series B Preferred Shares are redeemable, we have accreted changes in the redemption value since issuance. For the three and nine months ended September 30, 2017 and 2016, we recognized accretion on the Series B Preferred Shares of US$ 2.5 million and US$ 7.2 million; and US$ 2.4 million and US$ 11.3 million, respectively, with corresponding decreases in additional paid-in capital.

~~14.~~

Index

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in US$ 000’s, except share and per share data)

(Unaudited)

13. EQUITY

Preferred Stock

5,000,000 shares of Preferred Stock were authorized as at ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019.

~~One~~NaN share of Series A Convertible Preferred Stock (the "Series A Preferred Share") was issued and outstanding as at ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019. ~~The~~Pursuant to the Certificate of Designation of the Series A Preferred Share, 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%. 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.~~Designation.

200,000 shares of Series B Preferred Shares were issued and outstanding as at ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 (see Note ~~13,~~12, "Convertible Redeemable Preferred Shares"). As of ~~September~~June 30, ~~2017,~~2020, the 200,000 Series B Preferred Shares were convertible into approximately ~~108.1~~111.1 million shares of Class A common stock.

Class A and Class 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 ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019. 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~~1-for-~~one~~1 basis for no additional ~~consideration.~~consideration and automatically convert into shares of Class A common stock on a one-for-one basis when the number of shares of Class B common stock is less than 10% of the total number of shares of common stock outstanding. 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~~pre-emptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares.

There were ~~144.9~~254.5 million and ~~143.4~~253.6 million shares of Class A common stock outstanding at ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019, respectively, and no0 shares of Class B common stock outstanding at ~~September~~June 30, ~~2017~~2020 or December 31, ~~2016~~2019.

As at ~~September~~June 30, ~~2017~~2020, TW Investor owns ~~42.4%~~63.8% of the outstanding shares of Class A common ~~stock~~stock. In April 2018, Warner Media and ~~has a~~ ~~46.5%~~ ~~voting interest in~~TW Investor issued standing proxies to the independent directors of the Company, ~~due~~pursuant to which they granted the right to vote approximately 100.9 million shares of Class A common stock (the “Warrant Shares”) on all matters other than at any meeting where the agenda includes a change in control transaction. In accordance with these proxies, the Warrant Shares will be voted in proportion to votes cast at a general meeting of the Company, excluding such Warrant Shares. This proxy arrangement will remain in effect until April 2021. As a result of the standing proxies, after giving effect to its ownership of the Series A Preferred ~~Share.~~

~~Warrants~~

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 receive one share of our Class A common stock at an exercise price of US$ 1.00 per share in cash. During the nine months ended September 30, 2017, 563,325 warrants were exercised resulting in net proceeds to us of approximately US$ 0.6 million. As at September 30, 2017, 106,439,720 warrants remained outstanding. Time Warner andShare, TW Investor ~~collectively hold 100,926,996 of these warrants. The warrants are classified~~has a 44.1% voting interest in ~~additional paid-in capital, a component of equity, and are not subject to subsequent revaluation.~~the Company.

Accumulated Other Comprehensive Loss

The movement in accumulated other comprehensive loss during the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2020 and 2019 comprised the following:



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
BALANCE, beginning of period	$	(287,919	)	$	(235,961	)	$	(226,916	)	$	(216,650	)

Currency translation adjustment, net
Balance, beginning of period	$	(275,178	)	$	(223,648	)	$	(213,955	)	$	(207,668	)
Foreign exchange gain / (loss) on intercompany loans ⁽¹⁾	5,180			2,868			(12,894		)	2,256
Foreign exchange gain / (loss) on the Series B Preferred Shares	5,884			3,455			(866		)	(1,651		)
Currency translation adjustments	14,672			10,770			(21,727		)	508
Balance, end of period	$	(249,442	)	$	(206,555	)	$	(249,442	)	$	(206,555	)

Unrealized loss on derivative instruments designated as hedging instruments
Balance, beginning of period	$	(12,741	)	$	(12,313	)	$	(12,961	)	$	(8,982	)
Change in the fair value of hedging instruments	(316		)	(1,700		)	(535		)	(5,402		)
Amounts reclassified from accumulated other comprehensive loss:
Changes in fair value of hedging instruments reclassified to interest expense	438			480			877			851
Balance, end of period	$	(12,619	)	$	(13,533	)	$	(12,619	)	$	(13,533	)

BALANCE, end of period	$	(262,061	)	$	(220,088	)	$	(262,061	)	$	(220,088	)

Currency translation adjustment, net
(Loss) / Gain on derivative instruments designated as hedging instruments

TOTAL
Accumulated Other Comprehensive Loss

BALANCE December 31, 2016 $ (239,537 ) $ (4,451 ) $ (243,988 )
Other comprehensive income / (loss) before reclassifications:
Foreign exchange gain on intercompany transactions ⁽¹⁾
7,824
—
7,824
Foreign exchange gain on the Series B Preferred Shares 29,284
—
29,284
Currency translation adjustment 5,891
—
5,891
Change in the fair value of hedging instruments —
(1,484 ) (1,484 )
Amounts reclassified from accumulated other comprehensive loss:

Changes in fair value reclassified to interest expense —
2,120
2,120
Changes in fair value reclassified to other non-operating income, net ⁽²⁾
—
447
447
Net other comprehensive income 42,999
1,083
44,082
BALANCE September 30, 2017 $ (196,538 ) $ (3,368 ) $ (199,906 )


⁽¹⁾	Represents foreign exchange gains and losses on intercompany loans that are of a long-term investment nature and which are reported in the same manner as translation adjustments.

⁽²⁾

We will repay the 2018 Euro Term Loan with the expected proceeds from the sale of the Croatia and Slovenia segments (see Note 5, "Long-term Debt and Other Financing Arrangements"). It is probable the sale will complete prior to the initial interest payment on the interest rate swap maturing on November 1, 2018 which precludes recognition of the effective portion of the changes in fair value within accumulated other comprehensive income / loss. All related changes in fair value and those previously recognized in accumulated other comprehensive income / loss are recognized in other non-operating income, net in our condensed consolidated statements of operations and comprehensive income / loss. See Note 12, "Financial Instruments and Fair Value Measurements".

~~15. INTEREST EXPENSE~~

~~Interest expense comprised the following for the three and nine months ended September 30, 2017 and 2016:~~

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017
2016
2017
2016
Interest on long-term debt and other financing arrangements $ 16,850
$ 21,000
$ 50,491
$ 70,236
Amortization of capitalized debt issuance costs 1,502
1,424
4,282
7,459
Amortization of debt issuance discount —
—
—
12,945
Total interest expense $ 18,352
$ 22,424
$ 54,773
$ 90,640

~~We paid cash interest (including mandatory cash-pay Guarantee Fees) of US$ 22.2 million and US$ 38.3 million~~during the nine months ended September 30, 2017 and 2016, respectively. In addition, we paid US$ 1.4 million and US$ 5.5 million of Guarantee Fees in cash during the nine months ended September 30, 2017 and 2016, respectively, for which we had the option to pay in kind. Interest expense related to the 2018 Euro Term Loan has been allocated to results from discontinued operations (see Note 3, "Discontinued Operations and Assets Held for Sale").

Index

~~16. OTHER NON-OPERATING INCOME / EXPENSE~~

~~Other non-operating income / expense comprised the following for the three and nine months ended September 30, 2017 and 2016:~~

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017
2016
2017
2016
Interest income $ 139
$ 89
$ 326
$ 466
Foreign currency exchange gain, net 4,609
602
14,085
13,099
Change in fair value of derivatives (Note 12) (1,150 ) (398 ) (1,882 ) (11,904 )
Other income / (expense), net 45
57
254
(23 )
Total other non-operating income $ 3,643
$ 350
$ 12,783
$ 1,638

~~17. STOCK-BASED COMPENSATION~~

Under our 2015 Stock Incentive Plan (the "2015 Plan"), 6,000,000 shares of Class A common stock are authorized for grants of stock options, restricted stock units ("RSU"), restricted stock and stock appreciation rights to employees and non-employee directors. 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. Under the 2015 Plan, awards are made to employees and 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.

For the three and nine months ended September 30, 2017 and 2016, we recognized charges for stock-based compensation of US$ 0.5 million and US$ 2.1 million; and US$ 0.7 million and US$ 2.5 million, respectively, presented as a component of selling, general and administrative expenses in our condensed consolidated statements of operations and comprehensive income / loss.

~~The charge for stock-based compensation in our condensed consolidated statement of operations and comprehensive income / loss was as follows:~~

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017
2016
2017
2016
Stock-based compensation expense from continuing operations $ 431
$ 722
$ 2,044
$ 2,364
Stock-based compensation expense from discontinued operations 34
26
96
101

~~Stock Options~~

~~There was no option activity during the nine months ended~~ ~~September 30, 2017. The summary of stock options outstanding as at September 30, 2017 and December 31, 2016 is presented below:~~

Shares
Weighted Average Exercise Price per Share
Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value
Outstanding at December 31, 2016 2,011,392
$ 2.32
8.58 $ 453
Outstanding at September 30, 2017 2,011,392
2.32
7.83 3,470
Vested and expected to vest 2,011,392
2.32
7.83 3,470
Exercisable at September 30, 2017 902,848
$ 2.31
7.76 $ 1,572

~~Index~~

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in US$ 000’s, except share and per share data)

(Unaudited)

~~The fair value~~14. INTEREST EXPENSE

Interest expense comprised the following for the three and six months ended June 30, 2020 and 2019:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Interest on long-term debt and other financing arrangements	$	4,934	$	6,882	$	10,708	$	14,250
Amortization of capitalized debt issuance costs	820		853		1,641		1,727
Total interest expense	$	5,754	$	7,735	$	12,349	$	15,977

We paid cash interest (including Guarantee Fees) of US$ 10.5 million and US$ 14.0 millionduring the six months ended June 30, 2020 and 2019, respectively.

15. OTHER NON-OPERATING INCOME / EXPENSE, NET

Other non-operating income / expense, net comprised the following for the three and six months ended June 30, 2020 and 2019:



	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2020		2019			2020			2019
Interest income	$	151	$	115		$	293		$	267
Foreign currency exchange gain / (loss), net	7		2,155			(6,335		)	(922		)
Change in fair value of derivatives	—		—			—			(36		)
Loss on extinguishment of debt	—		(84		)	—			(235		)
Other income, net	170		51			234			66
Total other non-operating income / (expense), net	$	328	$	2,237		$	(5,808	)	$	(860	)

16. STOCK-BASED COMPENSATION

Our 2015 Stock Incentive Plan (the "2015 Plan") has 16,000,000 shares of Class A common stock authorized for grants of stock options, restricted stock units ("RSU"), restricted stock and stock appreciation rights to employees and non-employee directors. Under the 2015 Plan, awards are made to employees and directors at the discretion of the Compensation Committee.

For the three and six months ended June 30, 2020 and 2019, we recognized charges for stock-based compensation of US$ 0.8 million and US$ 1.7 million; and US$ 1.1 million and US$ 2.1 million respectively, as a component of selling, general and administrative expenses in our condensed consolidated statements of operations and comprehensive income / loss.

Stock Options

Grants of options allow the holders to purchase shares of Class A common stock at an exercise price, which is ~~estimated on~~generally the market price prevailing at the date of the grant, ~~date using~~with vesting between one and four years after the ~~Black-Scholes option-pricing model~~awards are granted. There was no option activity during the six months ended June 30, 2020. The summary of stock options outstanding as at June 30, 2020 and ~~recognized ratably over~~December 31, 2019 is presented below:



	Shares	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at December 31, 2019	2,011,392	$	2.32	5.58	$	4,436
Outstanding and Exercisable at June 30, 2020	2,011,392	$	2.32	5.08	$	2,444

When options are vested, holders may exercise them at any time up to the ~~requisite service period.~~ maximum contractual life of the instrument which is specified in the option agreement. At June 30, 2020, the maximum life of options that were issued under the 2015 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 aggregate intrinsic value (the difference between the stock price on the last day of trading of the ~~third~~second quarter of ~~September 30, 2017~~2020 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 ~~September~~June 30, ~~2017.~~2020. This amount changes based on the fair value of our Class A common stock. ~~As at September 30, 2017, there was US$ 1.4 million of unrecognized compensation expense related to stock options which is expected to be recognized over a weighted-average period of 1.9 years.~~

Restricted Stock Units with Time-Based Vesting

Each RSU represents a right to receive ~~one~~1 share of Class A common stock ~~according to its vesting conditions. The majority~~ of the Company for each RSU ~~issued have~~that vests in accordance with a time-based vesting ~~conditions and vest ratably over~~schedule, generally between one to four years from the date of grant. Vesting of RSU with performance-based vesting conditions ("PRSU") is contingent on the achievement of cumulative OIBDA and unlevered free cash flow targets over a multi-year period. Upon vesting, shares of Class A common stock are issued from authorized but unissued shares. Holders of RSU ~~and PRSU~~ awards are not entitled to receive cash dividend equivalents prior to the vesting of awards and are not entitled to ~~vote. The grant date fair values of RSU and PRSU are calculated as the closing price of our Class A common stock on the date of grant.~~

~~The following table summarizes information about unvested RSU and PRSU as at~~ ~~September 30, 2017~~:vote shares underlying awards.

Number of
Shares / Units

Weighted Average
Grant Date
Fair Value

Unvested at December 31, 2016 2,542,625
$ 2.61
Granted 1,158,887
3.62
Vested (912,246 ) 2.65
Forfeited (75,582 ) 1.53
Unvested at September 30, 2017 2,713,684
$ 3.06

~~As at~~ ~~September 30, 2017, the intrinsic value of unvested RSUs was US$~~ ~~11.0 million. Total unrecognized compensation cost related to unvested RSUs as at~~ ~~September 30, 2017~~ ~~was US$~~ ~~5.1 million~~ ~~and is expected to be recognized over a weighted-average period of~~ ~~2.1 years~~.

Index

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in US$ 000’s, except share and per share data)

(Unaudited)

~~18.~~The following table summarizes information about unvested RSUs as at June 30, 2020 and December 31, 2019:



	Number of Shares / Units		Weighted Average Grant Date Fair Value
Unvested at December 31, 2019	2,332,681		$	3.69
Vested	(994,270	)	3.58
Unvested at June 30, 2020	1,338,411		$	3.77

The intrinsic value of unvested RSUs was US$ 4.7 million as at June 30, 2020. Total unrecognized compensation cost related to unvested RSUs as at June 30, 2020 was US$ 4.3 million and is expected to be recognized over a weighted-average period of 2.07 years.

Restricted Stock Units with Performance Conditions

Each RSU with performance conditions (“PRSU”) represents a right to receive one share of Class A common stock of the Company for each PRSU that vests in accordance with a performance-based vesting schedule. The performance-based vesting schedule sets forth specified objectives for unlevered free cash flow and OIBDA over defined periods and by defined dates. Holders of PRSU awards are not entitled to receive cash dividend equivalents prior to the vesting of awards and are not entitled to vote shares underlying awards.

Vesting of the currently outstanding PRSUs is subject to the achievement of cumulative unlevered free cash flow and OIBDA targets corresponding to two, three or four-year performance periods ending December 31, 2020, 2021 and 2022, respectively. The maximum number of PRSUs that may be earned is 200% of the corresponding target. At June 30, 2020 and December 31, 2019 there were 501,572 unvested shares with a weighted-average grant date fair value of US$ 3.19. During the three and six months ended June 30, 2020 there were 0 new PRSU awards granted or vested.

The intrinsic value of unvested PRSUs was US$ 1.8 million as at June 30, 2020. Total unrecognized compensation cost related to unvested PRSUs as at June 30, 2020 was US$ 1.3 million of which US$ 0.1 million is related to performance targets currently considered probable of being achieved and will be recognized over a period of less than one year.

17. 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 and the income allocated to these 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.~~period after adjusting for the impact of those dilutive shares on the allocation of income to the Series B Preferred Shares.

The components of basic and diluted earnings per share are as follows:

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017
2016
2017
2016
(Loss) / income from continuing operations $ (1,945 ) $ (11,769 ) $ 17,338
$ (185,795 )
Net loss attributable to noncontrolling interests 188
196
534
387
Less: preferred share accretion paid in kind (Note 13) (2,454 ) (2,364 ) (7,216 ) (11,314 )
Less: income allocated to Series B Preferred Shares —
—
(4,334 ) —
(Loss) / income from continuing operations available to common shareholders, net of noncontrolling interest (4,211 ) (13,937 ) 6,322
(196,722 )
Loss from discontinued operations, net of tax (Note 3) (5,988 ) (8,054 ) (8,747 ) (15,971 )
Net loss attributable to CME Ltd. available to common shareholders — basic (10,199 ) (21,991 ) (2,425 ) (212,693 )

Effect of dilutive securities
Dilutive effect of Series B Preferred Shares —
—
—
—
Net loss attributable to CME Ltd. available to common shareholders — diluted $ (10,199 ) $ (21,991 ) $ (2,425 ) $ (212,693 )

Weighted average outstanding shares of common stock — basic ⁽¹⁾
156,189
153,494
155,579
149,898
Dilutive effect of common stock warrants, employee stock options and RSUs —
—
78,182
—
Weighted average outstanding shares of common stock — diluted 156,189
153,494
233,761
149,898

Net (loss) / income per share:
Continuing operations — basic $ (0.03 ) $ (0.09 ) $ 0.04
$ (1.31 )
Continuing operations — diluted (0.03 ) (0.09 ) 0.03
(1.31 )
Discontinued operations — basic (0.04 ) (0.05 ) (0.06 ) (0.11 )
Discontinued operations — diluted (0.04 ) (0.05 ) (0.06 ) (0.11 )
Net loss attributable to CME Ltd. — basic (0.07 ) (0.14 ) (0.02 ) (1.42 )
Net loss attributable to CME Ltd. — diluted (0.07 ) (0.14 ) (0.02 ) (1.42 )



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
Income from operations	$	31,102		$	44,078		$	40,072		$	55,829
Net loss / (income) attributable to noncontrolling interests	77			(119		)	148			(112		)
Less: income allocated to Series B Preferred Shares	(9,197		)	(13,003		)	(11,873		)	(16,490		)
Net income attributable to CME Ltd. available to common shareholders — basic	21,982			30,956			28,347			39,227

Effect of dilutive securities
Dilutive effect of RSUs and employee stock options	27			47			45			54
Net income attributable to CME Ltd. available to common shareholders — diluted	$	22,009		$	31,003		$	28,392		$	39,281

Weighted average outstanding shares of common stock — basic ⁽¹⁾	265,649			264,570			265,342			264,385
Dilutive effect of employee stock options and RSUs	1,127			1,362			1,448			1,243
Weighted average outstanding shares of common stock — diluted	266,776			265,932			266,790			265,628

Net income per share:
Attributable to CME Ltd. — basic	$	0.08		$	0.12		$	0.11		$	0.15
Attributable to CME Ltd. — diluted	0.08			0.12			0.11			0.15

⁽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~~rights of the Series A Preferred Share ~~is entitled~~are considered substantially similar to ~~receive any dividends payable when dividends are declared by the Board~~that of ~~Directors with respect to any shares of~~our Class A common stock.

The following weighted-average, equity awards and convertible shares were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive for the periods presented:

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017
2016
2017
2016
Employee stock options —
2,014
—
2,014
RSUs 719
1,290
719
1,469
Series B Preferred Shares 107,643
103,699
—
104,182
Total 108,362
107,003
719
107,665

These instruments may become dilutive in the future. 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.

Index

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in US$ 000’s, except share and per share data)

(Unaudited)

~~19.~~Weighted-average equity awards and convertible shares are excluded from the calculation of diluted earnings per share if their effect would be anti-dilutive. The following instruments were anti-dilutive for the periods presented but may be dilutive in future periods:



	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2020	2019	2020	2019
RSUs	836	1,233	836	1,233
Total	836	1,233	836	1,233

18. SEGMENT DATA

We manage our business on a geographical basis, with ~~four~~5 operating segments: Bulgaria, the Czech Republic, Romania, ~~and~~ 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.~~channels and digital properties. This is supplemented by revenues from cable and satellite television service providers that carry our channels on their platforms and from revenues through the sale of distribution rights to third parties. We do not rely on any single major customer or group of major customers. 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 (as defined below). We believe OIBDA 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 or do not impact the operating results of our operations. OIBDA is also used as a component 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, impairments of assets and certain unusual or infrequent items that are not considered by our chief operating decision makers 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.~~

Below are tables showing our net revenues, OIBDA, total assets, capital expenditures and long-lived assets ~~for our continuing operations~~ by segment for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 for condensed consolidated statements of operations and comprehensive income / loss data and condensed consolidated statements of cash flow data; and as at ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 for condensed consolidated balance sheet data.


Net revenues:	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2017			2016			2017			2016			2020			2019			2020			2019
Bulgaria	$	16,039		$	13,789		$	52,118		$	50,103		$	15,276		$	22,607		$	32,231		$	41,900
Czech Republic	42,681			39,031			135,526			128,558			45,886			64,379			95,101			114,695
Romania	40,469			36,970			127,983			118,269			37,197			48,362			76,712			87,172
Slovak Republic	20,384			17,864			63,348			59,466			21,085			27,313			43,244			48,645
Slovenia													17,094			22,276			33,828			40,126
Intersegment revenues ⁽¹⁾	(142		)	(127		)	(917		)	(249		)	(993		)	(1,338		)	(1,755		)	(2,380		)
Total net revenues	$	119,431		$	107,527		$	378,058		$	356,147		$	135,545		$	183,599		$	279,361		$	330,158

~~Index~~

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following defined terms are used in this Quarterly Report on Form 10-Q:

"~~2017 PIK Notes" refers to our 15.0% senior secured notes due 2017, redeemed in April 2016;~~

"~~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;~~

"~~2018 Euro Term Loan~~" refers to CME Ltd.'s floating rate senior unsecured term credit facility due 2018, guaranteed by CME BV and Time Warner, dated as of November 14, 2014 and amended on March 9, 2015, February 19, 2016 and June 22, 2017;

"~~2019 Euro Term Loan~~" refers to CME Ltd.'s floating rate senior unsecured term credit facility due 2019, guaranteed by CME BV and Time Warner, dated as of September 30, 2015 and amended on February 19, 2016 and June 22, 2017;

"~~2021 Euro Term Loan" refers to CME BV's floating rate senior unsecured term credit facility due 2021, guaranteed by Time Warner and CME Ltd., dated as of February 19, 2016 and amended on June 22, 2017;~~

"~~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, further amended and restated on February 19, 2016 and amended on June 22, 2017;

"~~CME BV" refers to CME Media Enterprises B.V., our 100% owned subsidiary;~~

"~~CME NV" refers to Central European Media Enterprises N.V., our 100% owned subsidiary;~~

"~~Divestment Transaction~~" refers to the framework agreement dated July 9, 2017 with Slovenia Broadband S.à r.l. for the sale of our Croatia and Slovenia operations (see Note 3, "Discontinued Operations and Assets Held for Sale" for further information);

"~~Euro Term Loans" refers collectively to the 2018 Euro Term Loan, 2019 Euro Term Loan and 2021 Euro Term Loan;~~

"~~Guarantee Fees" refers to amounts accrued and payable to Time Warner as consideration for Time Warner's guarantees of the Euro Term Loans;~~

"~~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, amended and restated on February 19, 2016 and amended on March 2, 2017 and June 22, 2017;

"~~Time Warner" refers to Time Warner Inc.; and~~

"~~TW Investor" refers to Time Warner Media Holdings B.V.~~


•	"2021 Euro Loan" refers to our floating rate senior unsecured term credit facility due November 1, 2021, guaranteed by Warner Media (as defined below), dated as of September 30, 2015, as amended on February 19, 2016, June 22, 2017 and April 25, 2018;


•	"2023 Euro Loan" refers to our floating rate senior unsecured term credit facility due April 26, 2023, entered into by CME BV (as defined below), guaranteed by Warner Media and CME Ltd., dated as of February 19, 2016, as amended on June 22, 2017 and April 25, 2018;


•	"Euro Loans" refers collectively to the 2021 Euro Loan and 2023 Euro Loan;


•	"2023 Revolving Credit Facility" refers to our revolving credit facility due April 26, 2023, dated as of May 2, 2014, as amended and restated as of February 19, 2016, and as further amended and restated on April 25, 2018;


•	"Guarantee Fees" refers to amounts accrued and payable to Warner Media as consideration for Warner Media's guarantees of the Euro Loans;


•	"Reimbursement Agreement" refers to our reimbursement agreement with Warner Media which provides that we will reimburse Warner Media for any amounts paid by them under any guarantee or through any loan purchase right exercised by Warner Media, dated as of November 14, 2014, as amended and restated on February 19, 2016, and as further amended and restated on April 25, 2018;


•	"CME BV" refers to CME Media Enterprises B.V., our 100% owned subsidiary;


•	"AT&T" refers to AT&T, Inc.;


•	"Warner Media" refers to Warner Media, LLC. (formerly Time Warner, Inc.), a wholly owned subsidiary of AT&T;


•	"TW Investor" refers to Time Warner Media Holdings B.V., a wholly owned subsidiary of Warner Media;


•	"Merger" refers to the merger of Merger Sub (as defined below) with and into the Company pursuant to the Merger Agreement (as defined below);


•	"Merger Agreement" refers to the agreement and plan of merger dated October 27, 2019 by and among the Company, Parent (as defined below) and Merger Sub (as defined below);


•	"Merger Sub" refers TV Bermuda Ltd., a Bermuda exempted company limited by shares and a wholly-owned subsidiary of Parent (as defined below);


•	"Parent" refers TV Bidco B.V., a Netherlands private limited liability company; and


•	"PPF" refers PPF Group N.V., a Netherlands public limited liability company.

The exchange rates used in this report are as at ~~September~~June 30, ~~2017,~~2020, unless otherwise indicated.

Please note that we may announce information using SEC filings, press releases, public conference calls, webcasts and posts to the "Investors" section of our website, www.cme.net. We intend to continue to use these channels to communicate important information about CME Ltd. and our operations. We encourage investors, the media, our customers and others interested in the Company to review the information we post at www.cme.net.

Index

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”~~"believe", ~~“anticipate”~~"anticipate", ~~“trend”~~"trend", ~~“expect”~~"expect", ~~“plan”~~"plan", ~~“estimate”~~"estimate", ~~“forecast”~~"forecast", ~~“should”~~"should",~~“intend”~~ "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 ~~expected timing~~effect of the ~~closing~~ongoing COVID-19 pandemic and actions taken by governmental authorities in response to the pandemic; the effect of the ~~sale~~proposed Merger on our business; the risks that the closing conditions to the proposed Merger may not be satisfied or that necessary governmental approvals are not obtained or are obtained with conditions; the impact of any failure to complete the proposed Merger on our ~~operations in Croatia and Slovenia and~~business; the ~~application~~effect of ~~proceeds from it;~~ changes in global orand regional economic ~~conditions~~conditions; the effect of the quantitative easing programs and ~~Eurozone instability in~~the stability mechanism implemented by the European Central Bank on our ~~markets;~~business; the economic, political and monetary impacts of Brexit; levels of television advertising spending and the rate of development of the advertising markets in the countries in which we operate; our ability to refinance our existing indebtedness; the extent to which our ~~liquidity constraints and~~ debt service obligations and covenants may 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; and changes in the political and regulatory environments where we operate and in the application of relevant laws and 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.

Index

II. Overview

Central European Media Enterprises Ltd. ("CME Ltd.") is a media and entertainment company operating mainly in ~~four~~five countries in Central and Eastern Europe. We manage our business on a geographical basis, with ~~four~~five operating segments: Bulgaria, the Czech Republic, Romania, ~~and~~ the Slovak Republic and Slovenia, which are also our reportable segments. These operating 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 our operations are managed by segment managers, and the structure of our internal financial reporting.

On ~~July 9, 2017, we~~October 27, 2019, the Company entered into the Merger Agreement with Parent and Merger Sub, pursuant to which Merger Sub will merge with and into the Company, with the Company continuing as the surviving company in the proposed Merger as a ~~framework agreement with Slovenia Broadband S.à r.l., a wholly owned~~wholly-owned subsidiary of ~~United Group B.V., relating~~Parent. The closing of the proposed Merger is subject to several conditions, including, but not limited to, the ~~sale~~requisite vote of ~~our Croatia~~the Company’s shareholders in favor of the Merger Agreement and the proposed Merger, the receipt of certain competition and other regulatory approvals, compliance with covenants and agreements in the Merger Agreement (subject to certain materiality qualifications) and the absence of any governmental order prohibiting completion of the proposed Merger. A special general meeting of shareholders of the Company was held on February 27, 2020, where more than 99% of the votes cast by shareholders were in favor of approving the Merger Agreement, the related statutory merger agreement and the Merger. In addition, regulatory approvals required under the Merger Agreement in Romania and Slovenia ~~operations. Accordingly, these operations are classified as held for sale and they are presented as discontinued operations for all periods in this report; and~~have been obtained. For additional information on the ~~discussion below relates~~Merger, please see the proxy statement of the Company related to ~~our continuing operations~~the special general meeting of shareholders, filed with the SEC on January 10, 2020. Parent is currently expecting to file the required notification with the European Commission in the ~~four remaining operating segments.~~third quarter, and based on our expected timing of that, we expect the proposed Merger to be completed prior to October 27, 2020.

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-Chief Executive Officers 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.

Following a repricing of our Guarantee Fees ~~completed~~ in March 2017 ~~the proportion of~~and April 2018, we pay interest and related Guarantee Fees on our outstanding indebtedness ~~that must be paid~~ in ~~cash has increased.~~cash. 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 certain Guarantee Fees that ~~are payable~~were previously paid in kind. 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, best illustrates the cash generated by our operations when comparing periods. 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-Chief Executive Officers when evaluating performance.

For additional information regarding our business segments, including a reconciliation of OIBDA to US GAAP financial measures, see Item 1, Note ~~19,~~18, "Segment Data". For a reconciliation of free cash flow and unlevered free cash flow to a US GAAP financial ~~measure,~~measures, 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 functional 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 percentage movements (“% Act”), which includes the effect of foreign exchange, as well as like-for-like percentage movements (“% Lfl”). on a constant currency basis. 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. Unless otherwise stated, all percentage increases or decreases in the following analysis refer to year-on-year percentage changes between the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016.~~2019.

Executive Summary

The following table provides a summary of our consolidated results of our continuing operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016:~~2019:


	For the Three Months Ended September 30, (US$ 000's)										For the Nine Months Ended September 30, (US$ 000's)										For the Three Months Ended June 30, (US$ 000's)										For the Six Months Ended June 30, (US$ 000's)
							Movement										Movement										Movement										Movement
	2017			2016			% Act		% Lfl		2017			2016			% Act		% Lfl		2020			2019			% Act		% Lfl		2020			2019			% Act		% Lfl
Net revenues	$	119,431		$	107,527		11.1	%	4.8	%	$	378,058		$	356,147		6.2	%	6.0	%	$	135,545		$	183,599		(26.2	)%	(23.2	)%	$	279,361		$	330,158		(15.4	)%	(12.1	)%
Operating income	16,022			11,450			39.9	%	34.8	%	72,199			60,071			20.2	%	21.4	%	44,174			60,462			(26.9	)%	(23.8	)%	70,371			88,099			(20.1	)%	(16.5	)%
Operating margin	13.4		%	10.6		%	2.8 p.p.		3.0 p.p.		19.1		%	16.9		%	2.2 p.p.		2.4 p.p.		32.6		%	32.9		%	(0.3) p.p.		(0.2) p.p.		25.2		%	26.7		%	(1.5) p.p.		(1.3) p.p.
OIBDA	$	25,145		$	19,324		30.1	%	23.6	%	$	97,893		$	83,452		17.3	%	17.8	%	$	54,509		$	73,342		(25.7	)%	(22.5	)%	$	91,680		$	111,399		(17.7	)%	(14.1	)%
OIBDA margin	21.1		%	18.0		%	3.1 p.p.		3.2 p.p.		25.9		%	23.4		%	2.5 p.p.		2.6 p.p.		40.2		%	39.9		%	0.3 p.p.		0.3 p.p.		32.8		%	33.7		%	(0.9) p.p.		(0.8) p.p.

Index

Our consolidated net revenues increased in the three and nine months ended September 30, 2017 compared to the corresponding periods in 2016 due to growth in both television advertising revenues and carriage fees and subscription revenues. Television advertising spending in the markets of the countries in which we operate grew an estimated 6% overall at constant rates in the first nine months of 2017 compared to 2016. Our television advertising revenues grew 5% at actual rates and 4% at constant rates during the same period due primarily to significant year-on-year growth in Romania, as well as higher levels of spending in Bulgaria and the Czech Republic. Carriage fees and subscription revenues increased 16%decreased at actual and constant rates in the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2020, compared to the corresponding periods in 2019. This was due to declines in television advertising revenues of 30% and 17% at constant rates in the three and six months ended June 30, 2020, respectively, which was partially offset by increases in carriage fees and subscription revenues of 11% at constant rates in both the quarter- and year-to-date periods. Television advertising spending overall in the markets in which we operate decreased an estimated 17% at constant rates in the first six months of 2020 compared to 2019 due to lower demand for advertising, as clients reduced, postponed, or canceled their advertising campaigns in response to restrictive measures imposed in March to address the COVID-19 pandemic and the resulting economic uncertainty. These declines were partially offset by higher demand for advertising in the first two months of 2020 compared to the same period in ~~2016 primarily~~2019 in our three largest markets. Across all markets, the decline in ad spending was more significant in the months of April and May, with spending beginning to recover in June in connection with the lifting of restrictive measures in our markets and the resumption of economic activity that had been suspended earlier in the quarter. Carriage fees and subscriptions revenue increased on a constant currency basis in the quarter- and year-to-date periods due to ~~additional carriage fees from contracts with cable, satellite~~an increase in both overall prices and ~~internet protocol television ("IPTV") operators in~~ the ~~Slovak Republic since January~~number of ~~this year.~~

~~Index~~

subscribers.

Costs charged in arriving at OIBDA ~~increased 7% and 3%~~in the second quarter of 2020 decreased 27% at actual rates ~~in the three~~ and ~~nine months ended September 30, 2017~~24% at constant rates compared to the corresponding ~~periods~~period in ~~2016. At~~2019, due primarily to savings from content costs, which decreased 36% at constant ~~rates, costs~~rates. The spring schedule in each of our country segments was adjusted in response to the COVID-19 pandemic to utilize more of our existing program library, as well as foreign acquired content and news programming that was more cost effective, which replaced premier episodes of local fiction and entertainment, including productions that we were ~~broadly flat~~required to temporarily suspend. In addition, virtually all live sporting events in the ~~third~~ quarter were postponed, and ~~increased 2%~~as a result there were fewer costs from sports rights in the period. Costs charged in arriving at OIBDA in the first ~~nine months~~half of ~~2017 compared to 2016. Content costs increased~~2020 decreased 11% at constant rates, as savings in the second quarter were partially offset by an increase of 2% ~~and 5%~~ at constant rates in the ~~third~~first three months of the year, which was driven by the reversal of provisions in the comparative period and higher staff costs.

By making adjustments to the cost base in response to changes in television advertising spending patterns, our consolidated OIBDA margin of 40% in the three months ended June 30, 2020 remained consistent with the same period in 2019, and decreased by less than 100 basis points in the first half of 2020. The declines in operating income were consistent with the decreases in OIBDA in the quarter- and year-to-date periods, although operating income declined less than OIBDA due to fewer costs related to the proposed Merger, which are not included within OIBDA, being incurred in 2020 compared to 2019.

In March 2020, governments in our markets declared various forms of states of emergency in response to the COVID-19 pandemic, social distancing measures, including closures of schools and non-essential businesses, and restrictions around the free movement of people. At the end of April and the beginning of May, governmental authorities in our markets began to relax these measures and restrictions to varying degrees according to plans set by the respective governments reflecting their ability to manage the health effects of the COVID-19 pandemic, which has permitted the resumption of previously suspended economic activity. In certain limited instances where rates of COVID-19 infections have again increased, governmental authorities have re-imposed certain measures and restrictions, although both the geographical scope and duration have been more limited.

While the COVID-19 pandemic had a negative impact on advertising spending in the second quarter of 2020, the level of the declines in April and May were more significant than in June, as advertising spending began to recover in connection with the relaxation of measures and restrictions and the resumption, in large part, of previously suspended economic activity. Based on current bookings in July and August, overall advertising spending appears to be returning to comparable levels seen in the same periods in 2019, and it is possible that a portion of the advertising spending not placed in the six months ended June 30, 2020 could be deferred until the second half of this year. We anticipate the increase in carriage fees and subscription revenues realized in the first half of 2020 will continue for the remainder of the year and help mitigate the impact of lower advertising spending on net revenue. We also expect ongoing content cost saving measures will offset a portion of any shortfalls in television advertising revenue in the remainder of 2020.

In response to the COVID-19 pandemic, each of our operations adopted precautionary procedures in March designed to safeguard the health and wellbeing of our employees and business partners, including key personnel critical to the function of our television channels to ensure the ongoing broadcast of our networks. Personnel have been encouraged to work remotely whenever possible, and we do not believe there has been a significant adverse impact on either our operations or our internal control over financial reporting as a result of this remote work policy. Our businesses incurred costs in the second quarter and first ~~nine months~~half of ~~2017,~~2020 adjusting to these changes in the operating environment, although the amounts were not material.

As more restrictive social distancing measures, including limitations on the size of gatherings, were introduced in March, we were required to temporarily suspend all in-process production of own-produced titles. In addition to the associated changes in the program schedules to replace or reduce the number of premier episodes of local content broadcasted, our stations increased the amount of news and current affairs programming covering the COVID-19 pandemic. Following the relaxation of social distancing measures, we have resumed production of local titles in each of our country operations and adjusted our scheduling and procedures in order to do so in a safe manner. We believe this content, together with our existing extensive program library of already completed own-produced titles as well as acquired content, is more than sufficient to provide attractive programming line-ups for the fall season and maintain or increase audience leadership in our markets.

Our financial position and cash generation remains robust and we do not expect any near-term liquidity constraints. Net cash generated from operations and unlevered free cash flow during the first half of 2020 increased 11% and 8% at actual rates, respectively, reflecting a significant decline in payments for own-produced programming, including during the temporary suspension of productions between March and May 2020, as well as lower cash paid for taxes as we ~~made targeted investments in our programming line-up~~utilized national stimulus plans, such as provisions relating to ~~monetize additional ratings in Romania when available, to improve our competitive positioning in Bulgaria and~~delaying the ~~Czech Republic, and to support the change~~payment of corporate income tax. While cash flow is normally lower in the ~~way~~second half of the year and we expect cash collections will be lower compared to 2019 from the year-on-year decline in second quarter net revenues, we are able to take steps to bolster our ~~channels are distributed~~cash position, including through changes in programming and production described above, as well as the deferral of all non-essential capital expenditures and reductions in discretionary spending.

As a result of significant debt repayments in the ~~Slovak Republic. Other operating costs decreased in the third quarter and first nine months of 2017 due to savings from transmission costs, which offset higher bad debt charges.~~

Since the growth in revenue outpaced the increase in costs, our OIBDA margin increased in the three and nine months ended September 30, 2017. This dynamic also drove an increase in operating income, with a similar improvement in operating margin. We expect revenues to grow at a faster pace than costs in 2017 and for the nextlast few years, ~~leading to continued OIBDA margin expansion year on year although trends may vary from quarter to quarter.~~

~~The improvement in~~ our ~~operations during the twelve month period ended September~~nearest long-term debt maturity is only EUR 60.3 million (approximately US$ 67.6 million at June 30, ~~2017 reduced our~~2020 rates) and is not due until November 2021. Our net leverage ratio ~~to 5.8x~~was 2.4x at the end of the second quarter, which ~~will result in our~~is unchanged from the start of 2020. Our cost of borrowing ~~decreasing by 125 basis points to 6.0% from the end of October 2017.~~

We rolled-out the fall season in the third quarter, and its results contributed to our prime time and all day audience shares increasing in three out of four countries during the first nine months of 2017 compared to the same period in 2016. We continue to leverage popular content we produce for our prime time schedules, and supplement that with both foreign and locally acquired content to ensure we continue to attract the largest audience in each of our countries in the most profitable manner.

~~Divestment Transaction to Accelerate Deleveraging~~

On July 9, 2017, we agreed to sell our operations in Croatia and Slovenia to Slovenia Broadband S.à r.l., a subsidiary of United Group B.V. (“United Group”), subject to obtaining regulatory approvals and other customary closing conditions. The transaction is expected to close by the end of 2017 or early 2018.

Total cash consideration for the transaction is EUR 230.0 million (approximately US$ 271.5 million), subject to customary working capital adjustments. Upon closing, the proceeds will be used to repay the remaining balance of the 2018 Euro Term Loan in full, with any excess proceeds applied to repay the Commitment Fee and a portion of the 2019 Euro Term Loan and related Guarantee Fees, which will result in a significant decrease in our indebtedness and independs on our net leverage ~~ratio. Based on~~ratio; and if that increases above 3.0x in a future period then our ~~results for~~interest expense would increase (see Item 1, Note 4, "Long-term Debt and Other Financing Arrangements").

We ended the ~~period ended September 30, 2017, this would reduce CME’s net leverage ratio from 5.8x to 4.8x.~~

~~Once debt is repaid following closing~~second quarter of the transaction, our current average borrowing cost is expected to decrease from 6.0% to 4.5%. We estimate the annual savings from interest and Guarantee Fees resulting from the transaction will exceed both income2020 with US$ 176.1 million of cash and cash ~~generated by~~equivalents. Additionally, we have access to US$ 75.0 million under the ~~combined operations~~2023 Revolving Credit Facility, which remained undrawn as of ~~Croatia and Slovenia in 2016. The net assets of these businesses, which are presented as held for sale on the Condensed Consolidated Balance Sheet, were approximately US$ 102.9 million as at September~~June 30, ~~2017.~~2020.

Index

Free Cash Flow and Unlevered Free Cash Flow


	For the Nine Months Ended September 30, (US$ 000's)								For the Six Months Ended June 30, (US$ 000's)
	2017			2016			Movement		2020			2019			Movement
Net cash generated from continuing operating activities	$	90,638		$	56,972		59.1	%
Net cash generated from operating activities									$	154,995		$	140,280		10.5	%
Capital expenditures, net	(16,250		)	(14,762		)	(10.1	)%	(8,658		)	(8,266		)	4.7	%
Other items ⁽¹⁾									291			—			NM ⁽²⁾
Free cash flow	74,388			42,210			76.2	%	146,628			132,014			11.1	%
Cash paid for interest (including mandatory cash-pay Guarantee Fees)	22,206			38,317			(42.0	)%
Cash paid for Guarantee Fees that may be paid in kind	1,411			5,483			(74.3	)%
Cash paid for interest (including Guarantee Fees)									10,507			14,017			(25.0	)%
Unlevered free cash flow	$	98,005		$	86,010		13.9	%	$	157,135		$	146,031		7.6	%

~~Index~~

Item 4. Controls and Procedures

We have established disclosure controls and procedures designed to ensure that information required to be disclosed in our Quarterly Report on Form 10-Q 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-Principal Executive Officers and the Principal Financial Officer, to allow timely decisions regarding required disclosure.

Our co-Principal Executive Officers and our Principal Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of ~~September~~June 30, ~~2017~~2020 and concluded that our disclosure controls and procedures were effective as of that date. There has been no change in our internal control over financial reporting during the three months ended ~~September~~June 30, ~~2017~~2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Index

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~General~~

~~We are from time to time party to legal proceedings, arbitrations~~See Part 1, Item 1, Note 19, "Commitments and ~~regulatory proceedings arising in the normal course~~Contingencies" for a discussion 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 the fourth quarter of 2016, our 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. Two of the notes allegedly matured in 2015 and the other two in 2016. The four notes purport to be in the aggregate amount of approximately EUR 69 million.

Despite a random case assignment system in the Slovak Republic, claims in respect of three of the notes were initially assigned to the same judge. The judge who was assigned the claim in respect of the fourth promissory note (in the amount of approximately EUR 26 million) terminated proceedings in January 2017 because the plaintiff failed to pay court fees. The plaintiff refiled this claim in June 2017; the judge who was assigned the refiled claim terminated proceedings in September after the plaintiff again failed to pay court fees. In responses to the claims in respect of the other three promissory notes that were filed in August 2017, Mr. Rusko asserted that he signed the three notes in June 2000. We do not believe that the notes were signed in June 2000 or that any of the notes are authentic. We are vigorously defending the claims.ongoing litigation.

Item 1A. Risk Factors

This report and the following discussion of risk factors contain forward-looking statements as discussed in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations". 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 business, results of operations and financial condition may be adversely affected by the ongoing COVID-19 pandemic and the actions taken by governmental authorities in response to the pandemic.

The ongoing COVID-19 pandemic and the measures taken to address the public health concerns associated with the pandemic have resulted in significant disruptions to business activity worldwide, volatility in the equity markets and credit markets, and uncertainty in the global economic outlook. Such measures have included travel restrictions and national border closings, restrictions on the conduct of non-essential business, closures of workplaces and schools, quarantines, shelter in place orders and social distancing orders. While governments in the countries in which we operate have taken steps to relax or lift a number of restrictions (including restrictions on the conduct of non-essential business, shelter in place orders, certain social distancing orders and certain travel restrictions and border controls), the imposition of these various measures has impacted our business and the continuation of such measures or the re-imposition of similar or stricter measures may further impact our business.

Restrictions implemented on business activity and uncertainty in the global economic outlook has caused advertisers to adjust their purchasing plans and reduce their spending on advertising and a deterioration in economic conditions globally or in the markets in which we operate may cause advertisers to further adjust purchases of advertising in the future. Risks related to changes in global or regional economic conditions are described in more detail below. Furthermore, uncertainty in the global or regional economic outlook may adversely affect our ability to develop information in order to prepare accurate financial forecasts.

In addition, restrictive measures imposed in the countries in which we operate as well as health-related concerns related to working conditions have had and may continue to have an impact on our day-to-day business operations, including the availability of people necessary to our operations, the deferral or suspension of certain productions, decisions regarding programming acquisitions and scheduling. While we are not anticipating any material impact to our internal ability to operate our business as a result of the COVID-19 pandemic, we may temporarily lose the services of employees or experience interruptions in the normal conduct of businesses or operation of our systems, which could lead to inefficiencies, interruptions in our regular operations and potential reputational harm.

Although we have undertaken a number of steps to mitigate the impact of the COVID-19 pandemic on our business, including a series of initiatives to control or reduce costs, such cost control measures are unlikely to completely offset declines in revenues. The extent to which COVID-19 impacts our business and financial position will depend on future developments, which are difficult to predict, including the ability of governmental authorities to contain the COVID-19 virus, the severity and scope of any future COVID-19 outbreaks as well as the types and scope of measures imposed by governmental authorities to contain future outbreaks of the virus or address its impact and the duration of those actions and measures. While governments in the countries in which we operate have relaxed or lifted a number of the restrictive measures, the measures that remain in place and the re-imposition of similar or more restrictive measures by governmental authorities to contain the COVID-19 virus or a prolonged period during which any such measures are kept in place would have an adverse impact on our business, financial position, results of operations and cash flows.

Changes in global or regional economic conditions may adversely affect our financial position and 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. ~~Our~~While our markets have experienced overall growth in real GDP (as adjusted for inflation) and advertising spending ~~since 2014; however, we cannot predict if~~over the ~~recovery that has begun~~last several years, it is unlikely those growth trends will continue in the immediate future, given the uncertain economic outlook globally and increased volatility in the equity markets and credit markets caused by the COVID-19 pandemic. While a number of governments and central banks have introduced fiscal and monetary measures in an effort to mitigate the economic impact of the COVID-19 pandemic and the governments in our markets have taken steps to relax or ~~how long~~lift several restrictive measures, it ~~will last.~~is not yet possible to establish the impact of such steps. Recessions or periods of low or negative growth in the region or globally, inincluding as a result of the ~~future may~~COVID-19 pandemic, would cause a deterioration of general economic conditions in one or more of our markets, which would have an adverse ~~economic~~ impact on our advertising ~~revenues.~~revenues and our financial position (including our leverage levels), results of operations and cash flows. Other factors that may affect general economic conditions in our markets include defaults by sovereigns or systemically important companies, austerity programs, the widespread use of tariffs and other protectionist trade policies, natural disasters, public health pandemics, acts of terrorism, civil or military conflicts or general political instability and responses to it, any of which may also reduce advertising spending. 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 developed markets in Europe, such convergence may not occur in the time frame we expect, or at all. Any of these developments would have a significant negative effect on our financial position, results of operations and cash flows.

~~Concerns regarding~~

Index

The quantitative easing programs implemented by the ~~Eurozone~~European Central Bank ("ECB") and the ~~impact on the region of the United Kingdom’s exit from the European Union (“EU”)~~stability mechanism may not provide adequate assistance to stabilize markets, which may adversely affect our financial position and results of operations.

~~Continued economic softness in~~In 2015 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 hasECB created ~~external~~ funding and stability mechanisms to provide liquidity and financial assistance to Eurozone member states and financial institutions, ~~there~~including embarking on quantitative easing to address economic softness and a slowdown in growth of consumer prices in the Eurozone. The ECB’s quantitative easing program, which assisted economic growth, was recalibrated in January 2018. Although the ECB ended its original quantitative easing program at the end of December 2018, it resumed quantitative easing in November 2019 and in March 2020 authorized a new quantitative easing program with fewer restrictions than prior programs in response to the COVID-19 pandemic. In addition, European Union ("EU") leaders have agreed on a COVID-19 recovery fund of EUR 750 billion; the recovery fund, which must be approved by the European parliament , is to be comprised of grants, particularly for EU member states most affected by the pandemic, and loans. There can be no assurance that the ~~market disruptions~~stability mechanism in Europe, ~~related~~any quantitative easing program or the recovery fund, when adopted, will be sufficient to ~~sovereign debt and~~support economies in the ~~banking sector~~European Union affected by the COVID-19 pandemic or ~~otherwise, including the increased cost of funding for certain governments and~~will provide adequate liquidity or financial ~~institutions, will not continue and~~assistance to any affected financial institution or country, nor can there ~~can~~ be noany assurance that ~~funding and stability~~future assistance packages ~~utilized previously~~ will be available or, even if provided, will be sufficient to ~~stabilize~~address these concerns. The failure of these programs to mitigate the impact of the COVID-19 pandemic on the markets and economies of Europe may result in periods of low or negative growth in the markets in which we operate as well as further adverse events, including the dissolution of the Euro or the departure of a country from the Euro, any of which would negatively impact our business, financial position and results of operations.

Our financial position and results of operations may be adversely affected ~~economies or institutions.~~

~~Index~~

as a result of the United Kingdom’s decision to end its membership in the European Union.

On ~~March 29, 2017,~~January 31, 2020, the United Kingdom formally ~~initiated the process to leave~~left the EU ~~commonly~~(generally referred to as ~~"Brexit", triggering~~“Brexit”); however, it remains in the single market and is subject to the EU’s rules and regulations during a ~~two-year~~transition period ~~to finalize the terms for its leaving the EU. It~~ending December 31, 2020. While it is expected that economic conditions in the EU will be impacted by ~~Brexit. While~~Brexit, the impact on our business will depend, in part, on the outcome of tariff, trade, regulatory and other negotiations during this transition period and on the ultimate manner and terms of the U.K.’s future relationship with the EU. Given the ongoing uncertainty over the final terms to be negotiated during the transition period, the overall economic impact of Brexit on the EU and the Euro iscontinues to be difficult to ~~estimate at present, decisions~~estimate. 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 terms on which the United Kingdom will 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, if other countries seek to leave the EU, that would increase 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 further affect the budgetary contributions and allocations among the EU member states in the medium term, including the countries in which we operate, which ~~are~~have historically been net recipients of EU funding. Economic uncertainty caused by Brexit or other instability in the EU following the end of the transition period could cause significant volatility in EU markets and reduce economic growth rates in the countries in which we operate, which would negatively impact the demand for advertising and consequently our ~~business.~~financial position, results of operations and cash flows.

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. While we have implemented ~~new~~ pricing strategies to increase sales and television advertising spending, 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 ability to secure distribution on cable, satellite or IPTV operators, 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~~digital terrestrial television ("DTT") in the Slovak Republic and Slovenia in 2017, 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 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 may 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 a portion of the Guarantee Fees in respect of each of the Euro Term Loans 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. In addition, if the Divestment Transaction does not close, the warrants are not exercised in full or cash flows from operations do not meet our forecasts, we would not be able to reduce our indebtedness as planned and would continue to bear higher average borrowing costs on our senior debt and pay more interest and Guarantee Fees. 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 and debt service obligations 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 the 2021 Revolving Credit Facility and the TW Guarantees, see Part I, Item 1, Note 5, "Long-term Debt and Other Financing Arrangements".

We may be unable to repay or 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 each of the Euro Term Loans increase to a maximum of 10.0% (or 3.5% above the then-current all-in rate, if lower), 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 or prior to maturity with cash flows from operations and the expected proceeds from the Divestment Transaction or if the Divestment Transaction does not close, the expected proceeds from warrant exercises. In the event the ~~Divestment Transaction does~~proposed Merger is not ~~close,~~completed and instability in global credit markets caused by the ~~warrants are not exercised in full or cash flows from operations do not meet our forecasts,~~COVID-19 pandemic persists, 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. Furthermore, pursuant to the Reimbursement Agreement, the all-in rates on each of the Euro Loans increase to a maximum of 10.0% (or 3.5% above the then-current all-in rate, if lower), on the date that is 365 days following a change of control of CME Ltd. (as defined therein); and pursuant to the 2023 Revolving Credit Facility, all commitments terminate following a change of control (as defined therein) and the interest rate on amounts outstanding increases to 10% plus LIBOR or 9% plus the alternate base rate on the date that is 365 days following such change of control. 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.

Our debt service obligations and covenants may restrict our ability to conduct our operations.

We have debt service obligations under the Euro Loans as well as the 2023 Revolving Credit Facility (when drawn), including the Guarantee Fees to Warner Media as consideration for its guarantees of the Euro Loans (collectively, the "WM Guarantees"). In addition, if our financial performance deteriorates, we may bear higher average borrowing costs on our senior debt and pay more interest and Guarantee Fees. 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 2023 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, which may limit our flexibility in planning for, or reacting to, changes in our business, economic conditions or our industry. For additional information regarding the Reimbursement Agreement, the 2023 Revolving Credit Facility and the WM Guarantees, see Part I, Item 1, Note 4, "Long-term Debt and Other Financing Arrangements".

Index

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.

~~Index~~

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 Reimbursement Agreement and the ~~2021~~2023 Revolving Credit Facility, we pledged all of the shares of CME ~~NV and of CME~~ BV, which ~~together own substantially~~owns all of ~~the~~our interests in our operating subsidiaries, in favor of ~~Time~~ Warner Media as security for this indebtedness. If we or ~~these subsidiaries~~CME BV were to default under the terms of any of the relevant agreements, ~~Time~~ Warner Media would have the ability to sell all or a portion of the assets pledged to it 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~~Any 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~~will have a negative impact on our reported revenues. Furthermore, fluctuations in exchange rates, which may be more volatile as a result of the COVID-19 pandemic, may negatively impact programming costs. While local programming is generally purchased in local currencies, we purchase a significant ~~portion~~amount 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~~television 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 corporate credit ratings may adversely affect our ability to raise additional financing.

Moody’s Investors Service rates our corporate credit as B2B1 with a ~~positive~~stable outlook. Standard & Poor’s rates our corporate credit B+ ~~(currently on CreditWatch~~(on watch with ~~developing~~negative implications due to the ~~announced Divestment Transaction)~~proposed Merger). Our ratings show each agency's opinion of our financial strength, operating performance and ability to meet our debt obligations as they become ~~due.~~due, as well as the proposed Merger. 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~~the consideration placed by the ratings agencies on ~~a track record of~~the historically strong financial support from ~~Time Warner.~~Warner Media. 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 Ltd. 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~~we may not be ~~more difficult for us~~able to refinance our existing indebtedness or raise new indebtedness that may be permitted under the Reimbursement Agreement and the ~~2021~~2023 Revolving Credit Facility (when drawn), and we will have to pay higher interest rates, all of 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 I, Item 1, Note 4,3, "Goodwill and Intangible Assets" for the carrying amounts of goodwill in each of our reporting units.

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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.

~~Index~~

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.

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. In that regard, we suspended all in-process productions of own-produced titles and deferred certain other productions in response to restrictive social distancing measures that were imposed earlier in the year in the countries in which we operate in response to the COVID-19 pandemic. Following the relaxation of social distancing measures, we have resumed production of local titles in each of our country operations and adjusted our procedures in order to do so in a safe manner. The resumption and continuation of all productions will depend on the timing and scope of the relaxation of these measures as well as the absence of a need to reimpose relevant restrictive measures in the future. 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. The cost of acquiring content attractive to our viewers, such as feature films and popular television series and formats, is likely to increase in the future. Our expenditures in respect of locally produced programming may also increase due to competition for talent and other resources, wage inflation, 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 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~~assurance 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 (including the Economic Substance Act in Bermuda which came into force in July 2019), employment laws, data protection requirements including the EU General Data Protection Regulation, 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 and fines or other penalties being levied 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, in 2016 the prosecuting authorities in Romania 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 law authorities ~~have~~ launched an investigation in 2017 into whether our ~~Slovenian~~Slovenia subsidiary is dominant and abused its dominant position when concluding carriage fee agreements with platform operators in connection with its decision to cease broadcasting on DTT there. To date there has been no determination that a breach of competition law has occurred. 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 (including on what terms and conditions we offer our channels under carriage agreements), 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.

Index

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, changes in local regulatory requirements (including restrictions on foreign ownership), arbitrary or biased regulatory or judicial practice, corruption and increased taxes, fines 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, as well as to the influence of commercial and governmental actors. This may result in inconsistent application of tax and legal regulations, arbitrary or biased treatment, and other general business risks as well as social or political instability or disruptions and the potential for political influence on the media. The relative level of development of our markets, the risk of corruption, and the influence of local commercial and governmental actors also present a potential for biased or unfair treatment of us before regulators or courts in the event of disputes. If such a dispute occurs, those regulators or courts may not act with integrity or may favor local interests over our interests. Other potential risks inherent in markets with evolving economic and political environments include exchange controls, higher taxes, tariffs, fines, penalties and other costs as well as longer payment cycles. Ultimately, the occurrence of any of these 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, security breaches 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 if we are required to expend resources to remedy such a security breach or if they result in legal claims or proceedings or our reputation is harmed. In addition, improper disclosure of personal data could subject us to liability under laws, including the EU General Data Protection Regulation, 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 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~~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.

~~Index~~

~~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, changes in local regulatory requirements including restrictions on foreign ownership, 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 and Slovenia are valid for indefinite time periods, our other broadcasting licenses expire at various times from October 2020 through 2028. While we expect that our material licenses and authorizations will continue to 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. In particular, the proposed Merger may adversely impact our ability to attract and retain such individuals. 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.

Index

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.

~~Index~~

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 ("Series A Preferred Share"), 200,000 shares of Series B preferred stock ("Series B Preferred Shares") and warrants to acquire 100,926,996 shares of our Class A common stock (the "TW Warrants"). The share of Series A Preferred Shares is convertible into 11,211,449 shares of Class A common stock and the Series B Preferred Shares are convertible into shares of Class A common stock at the option of Time Warner (subject to certain exceptions). As of September 30, 2017, the 200,000 Series B Preferred Shares were convertible into approximately 108.1 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 Shares, Series B Preferred Shares and TW Warrants, see Part I, Item I, Note 13, "Convertible Redeemable Preferred Shares" and Note 14, "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 regulatory approvals, 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~~AT&T may conflict with the interests of other investors.

~~Time~~Through its wholly owned subsidiaries Warner Media and TW Investor, the aggregate beneficial ownership interest of AT&T in the Company is ~~able to~~approximately 75.5%. In connection with the exercise voting power in us with respect to 46.5% 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 warrants by Warner Media and TW ~~Warrants,~~Investor in April 2018, each of them issued standing proxies to the ~~aggregate economic interest~~independent directors of ~~Time Warner~~the Company, pursuant to which it granted the independent directors the right to vote the 100,926,996 shares received on the exercise of those warrants (the “Warrant Shares”) on all matters other than at any meeting where the agenda includes a change in ~~us is approximately 76.0% (without~~control transaction. In accordance with these proxies, the Warrant Shares will be voted in proportion to votes cast at such a meeting of the Company, excluding such Warrant Shares. This proxy arrangement will remain in effect until April 2021. After giving effect to ~~the accretion~~its ownership of the Series BA Preferred Share, AT&T has a 44.1% voting interest in the Company at any meeting where the Warrant Shares ~~after September 30, 2017).~~are voted pursuant to the standing proxies. Furthermore, ~~Time Warner~~AT&T has the right to appoint one less than the number required to constitute a majority of our board of directors, provided that ~~Time Warner~~AT&T continues to own not less than 40% of the voting power of the Company. As such, AT&T is in a position to exercise significant influence over the outcome of corporate actions requiring shareholder approval, such as the proposed Merger, the election of directors, amendments to our Bye-laws, or certain transactions, including transactions resulting in a change of control.

We are also party to an amended investor rights agreement with ~~Time~~ Warner Media and the other parties thereto under which, among other things, ~~Time~~ Warner Media was granted a contractual ~~preemptive~~pre-emptive 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~~publicly held shares. ~~In addition to being our largest shareholder, Time~~ Warner Media is also our largest secured creditor, as it guarantees 100% of our outstanding senior indebtedness and is the lender under the ~~2021~~2023 Revolving Credit Facility. The ~~2021~~2023 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 ~~include~~includes covenants in respect of the incurrence of indebtedness (including refinancing indebtedness), the provision of guarantees, ~~the payment of dividends or making other distributions,~~ acquisitions and ~~disposals,~~disposal and granting security. As such, ~~Time~~ Warner Media 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~~AT&T as our largest ~~shareholder~~beneficial owner could be in conflict with the interests of minority shareholders.

The price of our Class A common stock ~~has been~~may be 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"~~,"Risks~~ and “Risks Relating to ~~Our Financial Position"~~the Proposed Merger - The failure to complete the proposed Merger within the expected time frame or at all could adversely affect our business, financial condition, results of operations, liquidity and the price of our Class A common stock” 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 EU, 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~~impact the market price of shares of our Class A common stock, regardless of our operating performance.

~~Our~~Risks Relating to the Proposed Merger

The proposed Merger may cause disruption to our business.

The Merger Agreement generally requires CME to operate its business ~~could be negatively impacted as a result~~in the ordinary course during the pendency of ~~shareholder activism.~~

~~On January 17, 2017, TCS Capital Management, LLC ("TCS Capital"), a beneficial owner of 7.0% of our shares, filed an amendment~~the proposed Merger and contains customary covenants which restrict CME, without Parent’s consent, from taking certain specified actions until the proposed Merger closes or the Merger Agreement terminates. These restrictions may prevent us from taking actions or making changes with respect to ~~its Schedule 13D disclosing its opinion that~~ the Company ~~should hire an investment bank~~that we may otherwise consider 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 directionbe advantageous 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~~our inability to respond effectively to competitive pressures, industry developments and future opportunities, which may adversely affect our business, financial condition, results of ~~potential business opportunities, be exploited by our competitors,~~operations and cash flows.

The proposed Merger could cause ~~concern~~disruptions to our ~~current~~business or ~~potential~~business relationships. Uncertainty associated with the proposed Merger may cause business partners, customers and ~~make it more difficult~~other counterparties to ~~attract and retain qualified personnel and~~delay or defer decisions concerning our business ~~partners, all~~or seek alternative relationships with third parties. Any delay or deferral of ~~which~~those decisions or changes to our business relationships could adversely affect our ~~business.~~financial conditions, results of operations and cash flows, regardless of whether the proposed Merger is ultimately completed.

We have allocated, and expect to continue to allocate, significant management and financial resources towards the proposed Merger and its completion. The diversion of management’s attention away from day-to-day operations and other opportunities could adversely affect our business and results of operations. In addition, ~~actions~~employee retention, recruitment and motivation may be challenging before the completion of ~~activist~~the proposed Merger, as employees may experience uncertainty about their future roles following the proposed Merger. If, despite our retention and recruiting efforts, key employees depart because of issues relating to the uncertainty and potential outcome of the proposed Merger or a desire not to remain following the proposed Merger, our business and results of operations could be adversely affected.

Index

Completion of the proposed Merger is subject to conditions, including the receipt of certain competition and other regulatory approvals, and if these conditions are not satisfied or waived or if the required approvals are not granted or are subject to conditions, completion of the proposed Merger may not occur.

Completion of the proposed Merger is subject to several conditions, including, but not limited to, the requisite vote of the Company's shareholders, the receipt of certain competition and other regulatory approvals, compliance with covenants and agreements in the Merger Agreement (subject to certain materiality qualifications), and the absence of any governmental order prohibiting completion of the proposed Merger, some of which are beyond our control. At a special general meeting of shareholders of the Company on February 27, 2020, more than 99% of the votes cast by shareholders were in favor of approving the Merger. We cannot predict with certainty whether and when all of the other conditions will be satisfied or waived, which may ~~cause significant fluctuations~~prevent, delay or otherwise adversely affect the completion of the proposed Merger in a material way. In addition, Parent’s obligation to complete the proposed Merger is subject to the receipt of certain regulatory approvals without the requirement that Parent agree to take any action or commit to any condition or restriction necessary to secure such approval that would constitute a “burdensome condition” as defined in the Merger Agreement. There can be no assurance that regulators will not seek to impose conditions, terms, obligations or restrictions that would constitute burdensome conditions or that such conditions, terms, obligations or restrictions would not result in the termination of the Merger Agreement.

The failure to complete the proposed Merger within the expected time frame or at all could adversely affect our ~~stock~~business, financial condition, results of operations, liquidity and the price ~~based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects~~ of our ~~business.~~Class A common stock.

If the proposed Merger is not completed by October 27, 2020, which date may be extended to January 27, 2021, by CME or Parent under certain circumstances if the receipt of certain competition and other regulatory approvals is not satisfied by October 27, 2020, CME or Parent may choose not to proceed with the proposed Merger. Each of CME and Parent may also elect to terminate the Merger Agreement in certain other circumstances. If the Merger Agreement is terminated, CME may be required to pay to Parent a termination fee of $50 million. The termination of the Merger Agreement may also result in the share price of our Class A common stock declining. Additionally, we have already incurred, and we expect to continue to incur, significant costs in connection with the proposed Merger for which we will receive little or no benefit if the completion of the proposed Merger does not occur. In the event the proposed Merger is not completed, CME could also be subject to litigation related to any failure to complete the proposed Merger.

Therefore, if the proposed Merger is not completed, our business, financial condition, results of operations and cash flows may be adversely affected, and the share price of our Class A common stock may decline. Moreover, if the Merger Agreement is terminated and we decide to seek another business combination, we may not be able to negotiate or consummate a transaction with another party on terms comparable to, or better than, the terms of the Merger Agreement.

The Merger Agreement contains provisions that could discourage a potential competing acquirer.

The Merger Agreement contains certain provisions that restrict our ability to, among other things, solicit, knowingly encourage, knowingly facilitate, knowingly induce or initiate the submission of, enter into, or participate in any discussions or any negotiations regarding any "competing proposal" as defined in the Merger Agreement or the announcement of a competing proposal. The Merger Agreement also provides that the Board of Directors (or any committee thereof, including the Special Committee) will not make a "change of recommendation" as defined in the Merger Agreement except as permitted by the terms of the Merger Agreement. In addition, CME may be required to pay a termination fee of $50 million to Parent if the proposed Merger is not consummated under specified circumstances.

CME believes these provisions are reasonable, customary and not preclusive of other offers. Nevertheless, these provisions might discourage a third party that has an interest in acquiring all or a significant part of CME from considering or proposing such acquisition, even if such party were prepared to pay consideration with a higher value than the currently proposed aggregate merger consideration. Furthermore, the requirement that CME pay a termination fee under certain circumstances may result in a third party proposing to pay a lower per-share price to acquire CME, than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable by CME in certain circumstances.

Index

Item 6. Exhibits

EXHIBIT INDEX



Exhibit Number		Description
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

101.DEF		XBRL Taxonomy Definition Linkbase Document

101.LAB		XBRL Taxonomy Label Linkbase Document

101.PRE		XBRL Taxonomy Presentation Linkbase Document

Index

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:	~~October 24, 2017~~July 21, 2020	/s/ David Sturgeon David Sturgeon Executive Vice President and Chief Financial Officer Principal Financial Officer and Principal Accounting Officer

4551



	For the Six Months Ended June 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	40,072		$	55,829
Adjustments to reconcile net income to net cash generated from operating activities:
Amortization of program rights and other content costs	108,725			140,716
Depreciation and other amortization	21,817			22,414
Loss on extinguishment of debt	—			235
Gain on disposal of fixed assets	(100		)	(11		)
Deferred income taxes	2,847			(46		)
Stock-based compensation (Note 16)	1,672			2,127
Change in fair value of derivatives	—			36
Foreign currency exchange loss, net	5,218			(198		)
Changes in assets and liabilities:
Accounts receivable, net	53,463			16,551
Accounts payable and accrued liabilities	(1,693		)	1,349
Program rights	(103,588		)	(120,040		)
Other assets and liabilities	1,070			(918		)
Accrued interest	(76		)	(229		)
Income taxes payable	839			4,153
Deferred revenue	16,017			18,508
VAT and other taxes payable	8,712			(196		)
Net cash generated from operating activities	$	154,995		$	140,280

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment	$	(8,759	)	$	(8,272	)
Disposal of property, plant and equipment	101			6
Net cash used in investing activities	$	(8,658	)	$	(8,266	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt	$	—		$	(113,988	)
Settlement of derivative instruments	—			(1,173		)
Payment of credit facilities and finance leases	(3,918		)	(3,395		)
Payments of withholding tax on net share settlement of share-based compensation	(11		)	(373		)
Net cash used in financing activities	$	(3,929	)	$	(118,929	)

Impact of exchange rate fluctuations on cash and cash equivalents	(2,935		)	(477		)
Net increase in cash and cash equivalents	$	139,473		$	12,608
CASH AND CASH EQUIVALENTS, beginning of period	36,621			62,031
CASH AND CASH EQUIVALENTS, end of period	$	176,094		$	74,639



	For the Nine Months Ended September 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income / (loss)	$	8,591		$	(201,766	)
Adjustments to reconcile net income / (loss) to net cash generated from continuing operating activities:
Loss from discontinued operations, net of tax (Note 3)	8,747			15,971
Amortization of program rights	174,214			166,938
Depreciation and other amortization	29,976			43,785
Interest and related Guarantee Fees paid in kind	14,733			14,300
Loss on extinguishment of debt (Note 5)	101			150,158
Gain on disposal of fixed assets	(68		)	(45		)
Deferred income taxes	(1,300		)	6,783
Stock-based compensation (Note 17)	2,044			2,364
Change in fair value of derivatives	1,204			11,722
Foreign currency exchange gain, net	(12,459		)	(13,683		)
Changes in assets and liabilities:
Accounts receivable, net	35,280			19,530
Accounts payable and accrued liabilities	(5,435		)	(5,986		)
Program rights	(183,625		)	(174,346		)
Other assets and liabilities	(1,559		)	(1,470		)
Accrued interest	10,668			11,665
Income taxes payable	991			(255		)
Deferred revenue	11,645			12,576
VAT and other taxes payable	(3,110		)	(1,269		)
Net cash generated from continuing operating activities	$	90,638		$	56,972

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment	$	(16,389	)	$	(14,850	)
Disposal of property, plant and equipment	139			88
Net cash used in continuing investing activities	$	(16,250	)	$	(14,762	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt	$	—		$	533,963
Repayment of debt	(59,060		)	(540,699		)
Debt transaction costs	(106		)	(9,541		)
Payment of credit facilities and capital leases	(1,757		)	(755		)
Settlement of forward currency swaps	—			(12,106		)
Proceeds from exercise of warrants	563			5,947
Proceeds from sale-leaseback transactions	2,746			—
Payments of withholding tax on net share settlement of share-based compensation	(168		)	—
Net cash used in continuing financing activities	$	(57,782	)	$	(23,191	)

Net cash provided by / (used in) discontinued operations - operating activities	3,273			(17,308		)
Net cash used in discontinued operations - investing activities	(3,125		)	(4,789		)
Net cash used in discontinued operations - financing activities	(210		)	(181		)

Impact of exchange rate fluctuations on cash and cash equivalents	9,884			2,005
Net increase / (decrease) in cash and cash equivalents	$	26,428		$	(1,254	)
CASH AND CASH EQUIVALENTS, beginning of period	40,606			59,120
CASH AND CASH EQUIVALENTS, end of period	$	67,034		$	57,866



SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest (including Guarantee Fees)	$	10,507	$	14,017
Cash paid for income taxes, net of refunds	8,427		11,348



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Net revenues	$	22,742		$	19,179		$	80,973		$	74,765
Cost of revenues	18,893			17,866			61,120			62,788
Selling, general and administrative expenses	5,394			4,378			14,484			12,004
Operating (loss) / income	(1,545		)	(3,065		)	5,369			(27		)
Interest expense ⁽¹⁾	(4,913		)	(5,212		)	(14,220		)	(15,695		)
Other non-operating income / (expense), net	294			36			621			(8		)
Loss from discontinued operations, before tax	(6,164		)	(8,241		)	(8,230		)	(15,730		)
Credit / (provision) for income taxes	176			187			(517		)	(241		)
Loss from discontinued operations, net of tax	$	(5,988	)	$	(8,054	)	$	(8,747	)	$	(15,971	)



	Bulgaria			Czech Republic			Romania			Slovak Republic		Total
Gross Balance, December 31, 2016	$	171,389		$	744,483		$	82,786		$	46,089	$	1,044,747
Accumulated impairment losses	(144,639		)	(287,545		)	(11,028		)	—		(443,212		)
Balance, December 31, 2016	26,750			456,938			71,758			46,089		601,535
Foreign currency	3,208			75,461			7,386			5,552		91,607
Balance, September 30, 2017	29,958			532,399			79,144			51,641		693,142
Accumulated impairment losses	(144,639		)	(287,545		)	(11,028		)	—		(443,212		)
Gross Balance, September 30, 2017	$	174,597		$	819,944		$	90,172		$	51,641	$	1,136,354



	September 30, 2017		December 31, 2016
ASSETS
Current assets
Cash and cash equivalents	$	67,034	$	40,606
Accounts receivable, net (Note 7)	122,406		141,371
Program rights, net (Note 6)	70,510		69,662
Other current assets (Note 8)	28,197		27,541
Current assets held for sale (Note 3)	135,171		61,242
Total current assets	423,318		340,422
Non-current assets
Property, plant and equipment, net (Note 9)	100,308		89,080
Program rights, net (Note 6)	188,484		143,428
Goodwill (Note 4)	693,142		601,535
Other intangible assets, net (Note 4)	147,073		134,705
Other non-current assets (Note 8)	20,365		21,273
Non-current assets held for sale (Note 3)	—		60,274
Total non-current assets	1,149,372		1,050,295
Total assets	$	1,572,690	$	1,390,717



PER SHARE DATA (Note 18):
Net (loss) / income per share:
Continuing operations — basic	$	(0.03	)	$	(0.09	)	$	0.04		$	(1.31	)
Continuing operations — diluted	(0.03		)	(0.09		)	0.03			(1.31		)
Discontinued operations — basic	(0.04		)	(0.05		)	(0.06		)	(0.11		)
Discontinued operations — diluted	(0.04		)	(0.05		)	(0.06		)	(0.11		)
Net loss attributable to CME Ltd. — basic	(0.07		)	(0.14		)	(0.02		)	(1.42		)
Net loss attributable to CME Ltd. — diluted	(0.07		)	(0.14		)	(0.02		)	(1.42		)

Weighted average common shares used in computing per share amounts (000’s):
Basic	156,189			153,494			155,579			149,898
Diluted	156,189			153,494			233,761			149,898



	September 30, 2017		December 31, 2016
Assets held for sale
Current assets held for sale
Cash and cash equivalents	$	7,061	$	2,853
Accounts receivable, net	29,064		36,969
Program rights, net	66,449		16,489
Property, plant and equipment, net	20,909		—
Other current assets	11,688		4,931
Total current assets held for sale	$	135,171	$	61,242
Non-current assets held for sale
Program rights, net	$	—	$	35,927
Property, plant and equipment, net	—		20,008
Other non-current assets	—		4,339
Total non-current assets held for sale	$	—	$	60,274

Liabilities held for sale
Current liabilities held for sale
Accounts payable and accrued liabilities	$	27,922	$	26,603
Other current liabilities	4,324		889
Total current liabilities held for sale	$	32,246	$	27,492
Non-current liabilities held for sale
Other non-current liabilities	$	—	$	1,414
Total non-current liabilities held for sale	$	—	$	1,414



	September 30, 2017							December 31, 2016
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Indefinite-lived:
Trademarks	$	86,448	$	—		$	86,448	$	76,731	$	—		$	76,731
Amortized:
Broadcast licenses	213,532		(155,054		)	58,478		184,195		(128,876		)	55,319
Trademarks	420		(420		)	—		380		(380		)	—
Customer relationships	57,813		(55,863		)	1,950		51,338		(48,997		)	2,341
Other	1,723		(1,526		)	197		1,522		(1,208		)	314
Total	$	359,936	$	(212,863	)	$	147,073	$	314,166	$	(179,461	)	$	134,705



	June 30, 2020			December 31, 2019
Long-term debt	$	589,453		$	590,777
Other credit facilities and finance leases	14,623			16,332
Total long-term debt and other financing arrangements	604,076			607,109
Less: current maturities	(6,952		)	(6,836		)
Total non-current long-term debt and other financing arrangements	$	597,124		$	600,273



	Principal Amount of Liability Component		Debt Issuance Costs ⁽¹⁾			Net Carrying Amount
2021 Euro Loan	$	67,564	$	(71	)	$	67,493
2023 Euro Loan	524,962		(3,002		)	521,960
2023 Revolving Credit Facility	—		—			—
Total long-term debt and credit facilities	$	592,526	$	(3,073	)	$	589,453



	Carrying Amount				Fair Value
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
2018 Euro Term Loan	$	236,713	$	263,734	$	225,679	$	233,297
2019 Euro Term Loan	277,426		247,594		251,012		203,314
2021 Euro Term Loan	547,661		487,881		464,212		369,738
	$	1,061,800	$	999,209	$	940,903	$	806,349


Consolidated Net Leverage	Consolidated Net Leverage			Cash Rate⁽¹⁾		PIK Fee Rate		Total Rate ⁽²⁾		Consolidated Net Leverage			2021 Euro Loan		2023 Euro Loan
≥	7.0x			5.00	%	3.50	%	8.50	%	7.0x			6.00	%	6.50	%
<	7.0x	-	6.0x	5.00	%	2.25	%	7.25	%	7.0x	-	6.0x	5.00	%	5.50	%
<	6.0x	-	5.0x	5.00	%	1.00	%	6.00	%	6.0x	-	5.0x	4.25	%	4.75	%
<	5.0x			5.00	%	—	%	5.00	%	5.0x	-	4.0x	3.75	%	4.25	%
<										4.0x	-	3.0x	3.25	%	3.75	%
<										3.0x			3.25	%	3.50	%


⁽¹⁾	~~Includes cash paid for interest for the Euro Term Loans and the related customary hedging arrangements.~~


⁽²⁾	Subject to certain adjustments in respect of specified debt repayments, if we reduce our long-term debt to less than EUR 815.0 million prior to September 30, 2018, a 50 basis point reduction in the all-in rate would be applied.



	Base Rate		Rate Fixed Pursuant to Interest Rate Hedges			Guarantee Fee Rate		All-in Borrowing Rate
2021 Euro Loan	1.28	%	0.47	%		1.50	%	3.25	%
2023 Euro Loan	1.28	%	0.28	%	⁽¹⁾	1.94	%	3.50	%
2023 Revolving Credit Facility (if drawn)	4.25	%	—	%		—	%	4.25	%


⁽²⁾	~~As at September 30, 2017, the 2021 Revolving Credit Facility was undrawn.~~


⁽³⁾	~~Based on the three month LIBOR of 1.33% as at September 30, 2017.~~remains unchanged.



Consolidated Net Leverage				Alternate Base Rate Loans		Eurodollar Loans
≥	7.0x			5.25	%	6.25	%
<	7.0x	-	6.0x	4.25	%	5.25	%
<	6.0x	-	5.0x	3.50	%	4.50	%
<	5.0x	-	4.0x	3.00	%	4.00	%
<	4.0x	-	3.0x	2.50	%	3.50	%
<	3.0x			2.25	%	3.25	%



	September 30, 2017			December 31, 2016
Credit facilities ^{(1) – (3)}	$	—		$	—
Capital leases	7,778			3,427
Total credit facilities and capital leases	7,778			3,427
Less: current maturities	(2,425		)	(1,228		)
Total non-current credit facilities and capital leases	$	5,353		$	2,199


⁽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 deposited with BMG. Cash deposited by our subsidiaries with BMG is pledged as security against the drawings of other subsidiaries up to the amount deposited.



			December 31, 2019
	June 30, 2020		(As Adjusted)
Program rights:
Acquired program rights, net of amortization	$	127,025	$	135,352
Less: current portion of acquired program rights	—		(75,909		)
Total non-current acquired program rights	127,025		59,443
Produced program rights – Feature Films:
Released, net of amortization	417		504
Produced program rights – Television Programs:
Released, net of amortization	71,878		69,707
Completed and not released	13,389		4,061
In production	24,980		32,248
Development and pre-production	407		274
Total produced program rights	111,071		106,794
Total non-current acquired program rights and produced program rights	$	238,096	$	166,237



2017	$	—
2018	237,064
2019	277,837
2020	—
2021	553,465
2022 and thereafter	—
Total long-term debt and credit facilities	1,068,366
Debt issuance costs	(6,566		)
Carrying amount of long-term debt and credit facilities	$	1,061,800



	June 30, 2020
	First year		Second year		Third year		Thereafter
Acquired program rights	$	64,901	$	43,679	$	16,836	$	1,609
Produced and released program rights	13,899		11,281		9,044		38,071



2017	$	696
2018	2,512
2019	2,153
2020	1,872
2021	708
2022 and thereafter	—
Total undiscounted payments	7,941
Less: amount representing interest	(163		)
Present value of net minimum lease payments	$	7,778



	September 30, 2017			December 31, 2016
Unrelated customers	$	132,051		$	149,957
Less: allowance for bad debts and credit notes	(9,645		)	(8,586		)
Total accounts receivable	$	122,406		$	141,371



	June 30, 2020			December 31, 2019
Land and buildings	$	98,241		$	100,502
Machinery, fixtures and equipment	209,633			212,810
Other equipment	34,668			36,007
Software	68,902			70,294
Construction in progress	1,560			4,774
Total cost	413,004			424,387
Less: accumulated depreciation	(310,626		)	(310,486		)
Total net book value	$	102,378		$	113,901

Assets held under finance leases (included in the above)
Land and buildings	$	—		$	3,914
Machinery, fixtures and equipment	33,345			31,961
Total cost	33,345			35,875
Less: accumulated depreciation	(16,368		)	(15,799		)
Total net book value	$	16,977		$	20,076



	Currency translation adjustment, net			(Loss) / Gain on derivative instruments designated as hedging instruments			TOTAL Accumulated Other Comprehensive Loss
BALANCE December 31, 2016	$	(239,537	)	$	(4,451	)	$	(243,988	)
Other comprehensive income / (loss) before reclassifications:
Foreign exchange gain on intercompany transactions ⁽¹⁾	7,824			—			7,824
Foreign exchange gain on the Series B Preferred Shares	29,284			—			29,284
Currency translation adjustment	5,891			—			5,891
Change in the fair value of hedging instruments	—			(1,484		)	(1,484		)
Amounts reclassified from accumulated other comprehensive loss:
Changes in fair value reclassified to interest expense	—			2,120			2,120
Changes in fair value reclassified to other non-operating income, net ⁽²⁾	—			447			447
Net other comprehensive income	42,999			1,083			44,082
BALANCE September 30, 2017	$	(196,538	)	$	(3,368	)	$	(199,906	)



	Number of Shares / Units		Weighted Average Grant Date Fair Value
Unvested at December 31, 2016	2,542,625		$	2.61
Granted	1,158,887		3.62
Vested	(912,246	)	2.65
Forfeited	(75,582	)	1.53
Unvested at September 30, 2017	2,713,684		$	3.06


⁽¹⁾	Reflects revenues earned from the sale of content to ~~our~~ other ~~segments.~~country segments in CME Ltd. All other revenues are third party revenues.



OIBDA and reconciliation of OIBDA to condensed consolidated statements of operations and comprehensive income / loss:	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Bulgaria	$	2,537		$	1,943		$	6,973		$	8,966
Czech Republic	12,618			13,180			49,130			46,353
Romania	15,496			12,606			52,450			45,030
Slovak Republic	2,944			(383		)	11,339			5,168
Elimination	10			6			27			9
Total operating segments	33,605			27,352			119,919			105,526
Corporate	(8,460		)	(8,028		)	(22,026		)	(22,074		)
Total OIBDA	25,145			19,324			97,893			83,452
Depreciation of property, plant and equipment	(6,936		)	(5,801		)	(19,345		)	(17,134		)
Amortization of broadcast licenses and other intangibles	(2,187		)	(2,073		)	(6,349		)	(6,247		)
Operating income	16,022			11,450			72,199			60,071
Interest expense (Note 15)	(18,352		)	(22,424		)	(54,773		)	(90,640		)
Loss on extinguishment of debt (Note 5)	(101		)	—			(101		)	(150,158		)
Non-operating income, net (Note 16)	3,643			350			12,783			1,638
Income / (loss) before tax	$	1,212		$	(10,624	)	$	30,108		$	(179,089	)



OIBDA:	For the Three Months Ended June 30,						For the Six Months Ended June 30,
OIBDA:	2020			2019			2020			2019
Bulgaria	$	4,462		$	7,888		$	9,280		$	14,009
Czech Republic	20,870			32,293			36,820			47,240
Romania	18,769			25,243			33,833			42,776
Slovak Republic	8,836			8,555			12,781			10,284
Slovenia	7,149			6,213			12,011			11,144
Elimination	9			(24		)	6			24
Total operating segments	60,095			80,168			104,731			125,477
Corporate	(5,586		)	(6,826		)	(13,051		)	(14,078		)
Total OIBDA	54,509			73,342			91,680			111,399
Depreciation of property, plant and equipment	(7,972		)	(8,154		)	(15,899		)	(16,380		)
Amortization of broadcast licenses and other intangibles	(2,110		)	(2,113		)	(4,277		)	(4,307		)
Other items ⁽¹⁾	(253		)	(2,613		)	(1,133		)	(2,613		)
Operating income	44,174			60,462			70,371			88,099
Interest expense (Note 14)	(5,754		)	(7,735		)	(12,349		)	(15,977		)
Other non-operating income / (expense), net (Note 15)	328			2,237			(5,808		)	(860		)
Income before tax	$	38,748		$	54,964		$	52,214		$	71,262



Total assets ⁽¹⁾:	September 30, 2017		December 31, 2016
Bulgaria	$	146,813	$	130,873
Czech Republic	801,791		700,190
Romania	294,202		266,132
Slovak Republic	156,006		131,220
Total operating segments	1,398,812		1,228,415
Corporate	38,707		40,786
Assets held for sale	135,171		121,516
Total assets	$	1,572,690	$	1,390,717


⁽¹⁾	Other items during the three and six months ended June 30, 2020 reflects costs relating to the Merger, primarily legal and professional fees.



Total assets: ⁽¹⁾	June 30, 2020		December 31, 2019
Bulgaria	$	139,415	$	135,593
Czech Republic	713,393		758,479
Romania	263,696		289,968
Slovak Republic	141,352		150,806
Slovenia	81,702		92,144
Total operating segments	1,339,558		1,426,990
Corporate	122,984		20,872
Total assets	$	1,462,542	$	1,447,862