1.    ORGANIZATION AND BUSINESS

We are the market-leading broadcasters in each of our four operating countries with a combined portfolio of 26 television channels. Each country also develops and produces content for their television channels. We generate advertising revenues in our country operations primarily through entering into agreements with advertisers, advertising agencies and sponsors to place advertising on the television channels that we operate. We generate additional revenues by collecting fees from cable, and direct-to-home (“DTH”) and internet protocol television ("IPTV") operators for carriage of our channels. Unless otherwise indicated, we own 100% of our broadcast operating and license companies in each country.

Bulgaria

We operate one general entertainment channel, BTV, and five other channels, BTV CINEMA, BTV COMEDY, BTV ACTION, BTV LADY and RING. We own 94.0% of CME Bulgaria B.V. ("CME Bulgaria"), the subsidiary that owns our Bulgaria operations.

Czech Republic

We operate one general entertainment channel, TV NOVA, and seven other channels, NOVA 2, NOVA CINEMA, NOVA SPORT 1, NOVA SPORT 2, NOVA ACTION, NOVA GOLD and NOVA INTERNATIONAL, a general entertainment channel broadcasting in the Slovak Republic.

Romania

We operate one general entertainment channel, PRO TV, and seven other channels, PRO 2, PRO X, PRO GOLD, PRO CINEMA, PRO TV INTERNATIONAL, MTV ROMANIA, as well as PRO TV CHISINAU, a general entertainment channel broadcasting in Moldova.

Slovak Republic

2.    BASIS OF PRESENTATION

The terms the “Company”, “we”, “us”, and “our” are used in this Form 10-Q to refer collectively to the parent company, Central European Media Enterprises Ltd. (“CME Ltd.”), and the subsidiaries through which our various businesses are conducted. Unless otherwise noted, all statistical and financial information presented in this report has been converted into U.S. dollars using period-end exchange rates. All references to “US$”, “USD” or “dollars” are to U.S. dollars, all references to “BGN” are to the Bulgarian leva, all references to “CZK” are to the Czech koruna, all references to “RON” are to the New Romanian lei, and all references to “Euro” or “EUR” are to the European Union Euro. Certain amounts may not recalculate due to the use of rounded numbers.

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Quarterly Report on Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the United States of America (“US GAAP”). Amounts as of December 31, 2017 included in the unaudited condensed consolidated financial statements have been derived from audited consolidated financial statements as of that date. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission on February 8, 2018. Our significant accounting policies have not changed since December 31, 2017, except as noted below.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring items and changes in US GAAP, necessary for their fair presentation in conformity with US GAAP for complete financial statements. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year.

Revenue Recognition

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services, net of taxes assessed by a government authority that are both imposed on and concurrent with the specific revenue-producing transaction and collected from the customer. Timing of revenue recognition may differ from the timing of invoicing to customers. We defer the recognition of revenues when cash payments are received or due in advance of our performance, including amounts which are refundable. We record a receivable when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing. Invoicing typically occurs on a monthly basis and customers are obliged to pay within 30 to 60 days of issuance. For certain services and customer types, we require payment before the services are provided.

In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers or to provide customers with financing.

Our principal revenue streams and their respective accounting treatments are discussed below:

Our revenue streams involve significant judgment with respect to the discounts and agency commissions we provide to certain customers based on the amount of advertising purchased. Such discounts are based on estimates of the total amount expected to be earned and reduce revenue based on a systematic and rational allocation of the cost of honoring the discounts earned and claimed to each of the underlying revenue transactions that result in progress by the customer towards earning the discount. Due to timing of the information provided by the rating agencies, significant judgment may be necessary to estimate the total volume of GRPs delivered within the contract period.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.

Discontinued Operations and Assets Held for Sale

We present our results of operations, financial position and cash flows of operations that have either been sold or that meet the criteria for "held-for-sale accounting" as discontinued operations if the disposal represents a strategic shift that will have a major effect on our operations and financial results. At the time an operation qualifies for held-for-sale accounting, the operation is evaluated to determine whether or not the carrying amount exceeds its fair value less cost to sell. Any loss as a result of carrying amounts in excess of fair value less cost to sell is recorded in the period the operation qualifies for held-for-sale accounting. Management judgment is required to (1) assess the criteria required to qualify for held-for-sale accounting, and (2) estimate fair value. Our Croatia and Slovenia operations are classified as discontinued operations and assets held for sale for all periods presented. See Note 3, "Discontinued Operations and Assets Held for Sale".

Basis of Consolidation

The unaudited condensed consolidated financial statements include the accounts of CME Ltd. and our subsidiaries, after the elimination of intercompany accounts and transactions. Entities in which we hold less than a majority voting interest but over which we have the ability to exercise significant influence are accounted for using the equity method. Other investments are accounted for using the cost method.

Seasonality

We experience seasonality, with advertising sales tending to be lowest during the third quarter of each calendar year due to the summer holiday period (typically July and August), and highest during the fourth quarter of each calendar year due to the holiday season.

Recent Accounting Pronouncements

In August 2016, the FASB issued guidance which is intended to reduce the existing diversity in practice related to specific cash flow issues. As applicable to us, the guidance requires that cash flows at the settlement of zero-coupon debt instruments or debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing be bifurcated between cash outflows for operating activities for the portion attributable to accrued interest, and cash outflows for financing activities for the portion attributable to the principal. We adopted this guidance as of January 1, 2018 which did not impact our net cash flows generated from continuing operating activities in 2017 or 2018.

Recent Accounting Pronouncements Issued

In February 2016, the FASB issued guidance to increase transparency and comparability among organizations by recognizing leasing assets and liabilities on the balance sheet and requiring additional disclosures about an entity's leasing arrangements. The guidance requires that a lessee recognize a liability to make lease payments and a right-of-use asset, with an available exception for leases shorter than twelve months. The guidance is effective for our fiscal year beginning January 1, 2019. We are currently inhave completed the processinitial stages of evaluating the impactour assessment of the adoptionbroad implications of thisthe guidance on our condensed consolidated financial statements.operating segments, controls and related IT systems and continue to analyze contractual data to quantify the potential impact.

In June 2016, the FASB issued new guidance to provide financial statement users with more information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments replace the incurred loss impairment methodology in the current guidance with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for our fiscal year beginning January 1, 2020 with early adoption permitted for our fiscal year beginning January 1, 2019. We are in the process of assessing the potential impacts of this guidance.

3.    DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

On July 9, 2017, we entered into a framework agreement with Slovenia Broadband S.à r.l. (the "Purchaser"), a wholly owned subsidiary of United Group B.V., relating to the sale of our Croatia and Slovenia operations for cash consideration of EUR 230.0 million (approximately US$ 283.4 million)268.1 million at June 30, 2018 rates) (the "Divestment Transaction"), subject to customary working capital adjustments. On March 26, 2018, the Croatian Agency for Electronic Media confirmed the transaction is permissible under Croatian media legislation.legislation and on May 7, 2018, the Purchaser received the approval of the Croatian Competition Agency for the Divestment Transaction.

On July 18, 2018, the Competition Protection Agency in Slovenia confirmed the closing of the Croatian Transaction was outside the scope of its review. We expect the transactionCroatian Transaction will be completed on or about July 31, 2018, and the Slovenian Transaction to close subject to obtaining the remaining regulatory approvals from the competition authoritiesCompetition Protection Agency in Croatia and Slovenia as well as the satisfaction of other customary closing conditions.conditions (see Note 22, "Subsequent Events"). If the transactionRestated Framework Agreement is terminated by either party because the transactionclosing has not closedoccurred as of June 30,September 13, 2018 (extended from March 31,June 30, 2018), we would receive a termination fee of EUR 7.0 million (approximately US$ 8.68.2 million), if neither transactions has closed by such date, and approximately EUR 4.4 million (approximately US$ 5.1 million) if the Croatian Transaction has closed but the Slovenian Transaction has not closed by such date, subject to certain exceptions, including if any requisite regulatory approval has not been obtained as a result of the Purchaser being required to make a specified material divestiture as a condition to such regulatory approval, or if a notification has not been declared complete by a relevant regulatory authority.approval.

The carrying amounts of the major classes of assets and liabilities of our discontinued operations that are classified as held for sale in the condensed consolidated balance sheets at March 31,June 30, 2018 and December 31, 2017 were:

4.    GOODWILL AND INTANGIBLE ASSETS

Goodwill:

Other intangible assets:

Broadcast licenses consist of our TV NOVA license in the Czech Republic, which is amortized on a straight-line basis through the expiration date of the license in 2025. Our customer relationships are deemed to have an economic useful life of, and are amortized on a straight-line basis over, five years to fifteen years.

5.    LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS

Financing Transactions

On February 5, 2018, we entered into an amendment to extend the maturity date of the 2019 Euro Loan (formerly the 2018 Euro Term LoanLoan) from November 1, 2018 to May 1, 2019. On February 6, 2018, we paid EUR 50.0 million (approximately US$ 61.6 million at February 6, 2018 rates) of the outstanding principal balance of the 20182019 Euro Term Loan on which we recognized a loss on extinguishment of US$ 0.1 million.Loan.

On April 25, 2018, we entered into a series of amendments (effective on April 26, 2018) which modify certain terms of our 2021 Euro Loan (formerly the 2019 Euro Term Loan), the 2023 Euro Loan (formerly the 2021 Euro Term Loan,Loan), the 2023 Revolving Credit Facility (formerly the 2021 Revolving Credit Facility (asFacility) (each as defined below) and the Reimbursement Agreement (as defined below) (collectively, the "Financing Transactions"). The Financing Transactions reduce the rates payable under the pricing grid under the Reimbursement Agreement and the 20212023 Revolving Credit Facility as well as extend the maturity dates of the 20192021 Euro Term Loan, the 20212023 Euro Term Loan and the 20212023 Revolving Credit Facility. The amount available to us under the 20212023 Revolving Credit Facility will increaseincreased to US$ 75.0 million. The Financing Transactions are effective onmillion from April 26, 2018 (see Note 22, "Subsequent Events").2018.

On April 25,May 3, 2018, Time Warner Inc. ("Time Warner") and TW Investor exercised their outstanding warrants to acquire 100,926,996 shares of Class A Common Stockwe paid EUR 110.0 million (approximately US$ 132.0 million at US$ 1.00 per share. We will use the proceeds from this transaction to repay a substantial portionMay 3, 2018 rates) of the outstanding principal amount outstandingbalance of the 20182019 Euro Term Loan (see Note 22, "Subsequent Events").

We are required to apply the proceeds from the DivestmentCroatian Transaction and Slovenian Transaction (see Note 3, "Discontinued Operations and Assets Held for Sale") to the repayment of the remaining principal amount of the 20182019 Euro Term Loan. Any excess amounts will then be applied to pay fees related to the 20192021 Euro Term Loan, including Guarantee Fees and the Commitment Fee which we have previously paid in kind pursuant to the Reimbursement Agreement.kind. To the extent excess funds are available thereafter, the remaining proceeds are required to be applied to the principal amounts owing in respect of the 20192021 Euro Term Loan (see Note 3, "Discontinued Operations and Assets Held for Sale").Loan.

Overview

Total long-term debt and credit facilities comprised the following at March 31,June 30, 2018:

Long-term Debt

Our long-term debt comprised the following at March 31,June 30, 2018 and December 31, 2017:

The fair values of the Euro Term Loans (as defined below) as at March 31,June 30, 2018 and December 31, 2017 were determined based on comparable instruments that trade in active markets. This measurement of estimated fair value uses Level 2 inputs as described in Note 12, "Financial Instruments and Fair Value Measurements". Certain derivative instruments, including contingent event of default and change of control put options, have been identified as being embedded in each of the Euro Term Loans. The embedded derivatives are considered clearly and closely related to their respective Euro Term Loan, and as such are not required to be accounted for separately.

2019 Euro Term Loan

As at March 31,June 30, 2018, the principal amount of our floating rate senior unsecured term credit facility (the "2019 Euro Term Loan") outstanding was EUR 235.340.8 million (approximately US$ 290.047.6 million). The 2019 Euro Term Loan bears interest at three-month EURIBOR (fixed pursuant to customary hedging arrangements (see Note 12, "Financial Instruments and Fair Value Measurements")) plus a margin of between 1.1% and 1.9% depending on the credit rating of Warner Media, LLC ("Warner Media", formerly Time Warner.Warner, Inc.), a wholly owned subsidiary of AT&T, Inc. ("AT&T") as of June 14, 2018. As at March 31,June 30, 2018, the all-in borrowing rate on amounts outstanding under the 2019 Euro Term Loan was 6.0%3.75%, the components of which are shown in the table below under the heading "Interest Rate Summary".

Interest on the 2019 Euro Term Loan is payable quarterly in arrears on each February 13, May 13, August 13March 12, June 12, September 12 and November 13.December 12. The 2019 Euro Term Loan matureswill mature on NovemberMay 1, 2019 and may currently be prepaid at our option, in whole or in part, without premium or penalty. The 2019 Euro Term Loan is a senior unsecured obligation of CME Ltd., and is unconditionally guaranteed by our 100% owned subsidiary CME BVMedia Enterprises B.V. ("CME BV") and by Time Warner Media and certain of its subsidiaries.

As at March 31,June 30, 2018, the principal amount of our floating rate senior unsecured term credit facility (the "2021 Euro Term Loan") outstanding was EUR 468.8235.3 million (approximately US$ 577.6274.4 million). The 2021 Euro Term Loan bears interest at three-month EURIBOR (fixed pursuant to customary hedging arrangements (see Note 12, "Financial Instruments and Fair Value Measurements")) plus a margin of between 1.1% and 1.9% depending on the credit rating of Time Warner.Warner Media. As at March 31,June 30, 2018, the all-in borrowing rate on amounts outstanding under the 2021 Euro Term Loan was 6.0%3.75%, the components of which are shown in the table below under the heading "Interest Rate Summary".

Interest on the 2021 Euro Loan is payable quarterly in arrears on each February 13, May 13, August 13 and November 13. The 2021 Euro Loan matures on November 1, 2021 and may currently be prepaid at our option, in whole or in part, without premium or penalty from cash generated from our operations. From April 26, 2020, the 2021 Euro Loan may be refinanced at our option. The 2021 Euro Loan is a senior unsecured obligation of CME Ltd. and is unconditionally guaranteed by CME BV and by Warner Media and certain of its subsidiaries.

2023 Euro Loan (formerly the 2021 Euro Term Loan)

Interest on the 2023 Euro Loan is payable quarterly in arrears on each January 7, April 7, July 7 and October 7. The 20212023 Euro Term Loan matures on February 19, 2021April 26, 2023 and may be prepaid at our option, in whole or in part, without premium or penalty uponfrom cash generated from our operations. From April 26, 2020, the earlier of the occurrence of certain events, including if2023 Euro Loan may be refinanced at our net leverage (as defined in the Reimbursement Agreement) decreases to below five times for two consecutive quarters, or at any time from February 19, 2020.option. The 20212023 Euro Term Loan is a senior unsecured obligation of CME BV and is unconditionally guaranteed by CME Ltd. and by Time Warner Media and certain of its subsidiaries.

Reimbursement Agreement and Guarantee Fees

In connection with Time Warner’sWarner Media’s guarantees of the 20182019 Euro Term Loan, the 20192021 Euro Term Loan and 20212023 Euro Term Loan (collectively, the "Euro Term Loans"), we entered into a reimbursement agreement (as amended, the “Reimbursement Agreement") with Time Warner.Warner Media. The Reimbursement Agreement provides for the payment of guarantee fees (collectively, the "Guarantee Fees") to Time Warner Media as consideration for those guarantees, and the reimbursement to Time Warner Media of any amounts paid by them under any guarantee or through any loan purchase right exercised by it. The loan purchase right allows Time Warner Media to purchase any amount outstanding under the Euro Term Loans from the lenders following an event of default under the Euro Term Loans or the Reimbursement Agreement. The Reimbursement Agreement is jointly and severally guaranteed by both our 100% owned subsidiary Central European Media Enterprises N.V. ("CME NV") and CME BV and is secured by a pledge over 100% of the outstanding shares of each of CME NV and CME BV. The covenants and events of default under the Reimbursement Agreement are substantially the same as under the 20212023 Revolving Credit Facility (described below).

We pay Guarantee Fees to Time Warner Media based on the amounts outstanding on the Euro Term Loans calculated on a per annum basis and on our consolidated net leverage (as defined in the Reimbursement Agreement) as shown in the tabletables below:

Our consolidated net leverage as at March 31,June 30, 2018 and December 31, 2017 was 4.8x4.4x and 5.4x, respectively. For the three and six months ended March 31,June 30, 2018 and 2017, we recognized US$ 8.75.3 million and US$ 13.014.0 million; and US$ 11.5 million and US$ 24.5 million, respectively, of Guarantee Fees as interest expense in our condensed consolidated statements of operations and comprehensive income / loss.

The Guarantee Fees relating to the 20182019 Euro Term Loan and the 20192021 Euro Term Loan are payable semi-annually in arrears on each May 1 and November 1. The Guarantee Fees relating to the 20212023 Euro Term Loan are payable semi-annually in arrears on each June 1 and December 1. The first 5.0% of the all-in rate for each facility (including the base rate and the rate paid pursuant to the hedging arrangements) must be paid in cash and the remainder is payable at our election in cash or in kind.

The Guarantee Fees previously paid in kind are presented as a component of other non-current liabilities (see Note 11, "Other Liabilities") and bear interest per annum at their respective Guarantee Fee rate (as set forth in the table below). Guarantee Fees paid in cash are included in cash flows from operating activities in our condensed consolidated statements of cash flows.

We had no balance outstanding under the US$ 50.075.0 million revolving credit facility (the “2021"2023 Revolving Credit Facility”Facility") as at March 31,June 30, 2018.

The 20212023 Revolving Credit Facility bears interest at a rate per annum based on, at our option, an alternate base rate ("ABR Loans" as defined in the 2023 Revolving Credit Facility Agreement) plus 6.0%the spread applicable to ABR Loans based on our consolidated net leverage or an amount equal to the greater of (i) an adjusted LIBO rate and (ii) 1.0%, plus in each case, 7.0%, with the first 5.0% paid in cash and the remainder payable at our election in cash or in kind by adding such accrued interestspread applicable to the applicable principal amount outstanding underEurodollar Loans (as defined in the 2021 Revolving Credit Facility. The interest rate on the 20212023 Revolving Credit Facility is determinedAgreement) based on the basis of our consolidated net leverage ratio (as defined in the Reimbursement Agreement) and ranges from LIBOR (subject to a floor of 1.0%) plus 9.0% if our net leverage is greater than or equal to seven times, to LIBOR (subject to a floor of 1.0%) plus 6.0% per annum if our net leverage ratio is less than five times., with all amounts payable in cash. The maturity date of the 20212023 Revolving Credit Facility is February 19, 2021.April 26, 2023. When drawn, the 20212023 Revolving Credit Facility permits prepayment at our option in whole or in part without penalty.

The 20212023 Revolving Credit Facility is jointly and severally guaranteed by CME NV and CME BV and is secured by a pledge over 100% of the outstanding shares of each of CME NV and CME BV. The 20212023 Revolving Credit Facility agreement contains limitations on CME’s ability to incur indebtedness, incur guarantees, grant liens, pay dividends or make other distributions, enter into certain affiliate transactions, consolidate, merge or effect a corporate reconstruction, make certain investments acquisitions and loans, and conduct certain asset sales. The agreement also contains maintenance covenants in respect of interest cover cash flow cover and total leverage ratios, and has covenants in respect of incurring indebtedness, the provision of guarantees, making investments and disposals, granting security and certain events of defaults.

Other Credit Facilities and Capital Lease Obligations

At March 31,June 30, 2018, the maturity of our long-term debt and credit facilities was as follows:

Capital Lease Commitments

8.    OTHER ASSETS

Capitalized debt costs are being amortized over the term of the 20212023 Revolving Credit Facility using the straight-line method, which approximates the effective interest method.