DRAFT
10-Q First Quarter 1997
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 March 31, 1997
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 N/A
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Clarendon House, Church Street, Hamilton HM CX Bermuda
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 441-296-1431
Indicate by check mark whether registrant: (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for each shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
-- --
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 May 13, 1997
----- ------------------------------
Class A Common Stock, par value $.01 16,732,178
Class B Common Stock, par value $.01 7,149,475
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Consolidated Balance Sheets as at
March 31, 1997 and December 31, 1996
($000s)
ASSETS March 31, December 31,
------ 1997 1996
-------------------------------
(Unaudited)
CURRENT ASSETS:
Cash and Cash Equivalents 59,553 78,507
Investments in Marketable Securities 2,858 2,896
Restricted Cash 1,798 2,749
Accounts Receivable (net of allowances of $3,276, $3,200) 30,387 37,342
Program Rights Costs 14,886 12,675
Value-added Tax Recoverable 225 182
Amount due from Unconsolidated Affiliates 1,927 1,066
Advances to Affiliates 5,227 4,119
Other Short-term Assets 2,536 850
Prepaid Expenses 8,007 5,773
-------------------------------
Total current assets 127,404 146,159
Investments in Unconsolidated Affiliates 52,974 56,599
Investments 3,600 3,600
Loans to Affiliates 14,660 17,766
Property, Plant & Equipment (net of depreciation of $24,276, $22,317) 55,248 58,982
Program Rights Costs 11,927 14,266
Broadcast Licence Costs and Other Intangibles
(net of amortization of $1,628, $1,007) 2,506 3,097
Licence Aquisition Costs (net of amortization of $1,054, $854) 3,723 3,923
Goodwill 41,158 35,338
Organization Costs (net of amortization of $1,022, $950) 812 934
Development Costs (net of allowance of $1,116, $996) 2,167 19,105
Deferred Taxes 958 868
Other Assets 2,233 4,493
-------------------------------
Total assets 319,370 365,130
===============================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts Payable 17,023 18,775
Accrued Liabilities 13,278 17,010
Duties and Other Taxes Payable 5,942 3,312
Income Taxes Payable 9,381 9,948
Current Portion of Obligations under Capital Lease 1,757 1,794
Current Portion of Credit Facilities 9,195 7,106
Investments Payable 7,104 1,955
Advances from Affiliates 2,603 606
-------------------------------
Total current liabilities 66,283 60,506
Deferred Income Taxes 1,696 2,142
Obligations under Finance Leases 6,108 7,120
Long-Term Portion of Credit Facilities 17,273 22,488
Investments Payable 13,748 14,633
Other Liabilities 195 305
Minority Interest in Consolidated Subsidiaries 4,826 8,616
SHAREHOLDERS' EQUITY:
Preferred Stock, $0.01 par value: authorized: 5,000,000 shares;
issued and outstanding: none - -
Class A Common Stock, $0.01 par value: authorized:
30,000,000 shares; issued and outstanding: 16,716,478
at March 31, 1997 and 16,664,143 shares at December 31, 1996 167 167
Class B Common Stock, $0.01 par value: authorized:
15,000,000 shares; issued and outstanding:
7,149,475 and 7,191,475 at March 31, 1997 and December 31, 1996 72 72
Additional Paid-in Capital 330,472 330,315
Accumulated Deficit (112,992) (78,004)
Cumulative Currency Tanslation Adjustment (8,478) (3,230)
-------------------------------
Total shareholders' equity 209,241 249,320
-------------------------------
Total liabilities and shareholders' equity 319,370 365,130
===============================
1
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Consolidated Statements of Operations
($000s, except per share data)
(Unaudited)
For the three months
ended March 31,
1997 1996
---- ----
GROSS REVENUES: 37,480 28,890
Discounts and Agency Commissions (8,315) (5,635)
---------- ----------
Net Revenues 29,165 23,255
STATION EXPENSES:
Other Operating Costs and Expenses 13,546 12,492
Amortization of Programming Rights 5,286 4,306
Depreciation of Station Fixed Assets and Other Intangibles 3,650 2,934
---------- ----------
Total Station Operating Costs and Expenses 22,482 19,732
Selling, General and Administrative Expenses 4,329 2,938
CORPORATE EXPENSES:
Corporate Operating Costs and Development Expenses 4,575 3,091
Amortization of Goodwill and Allowance for Development Costs 1,997 100
---------- ----------
6,572 3,191
Operating Loss (4,218) (2,606)
Equity in Loss of Unconsolidated Affiliates (Note 3) (6,769) (2,769)
Loss on Impairment of Investments in Unconsolidated
Affiliates (Note 3) (20,707) -
Interest and Other Income 2,100 637
Interest Expense (2,174) (1,007)
Foreign Currency Exchange Loss (2,071) (395)
---------- ----------
Net Loss Before Provision for Income Taxes (33,839) (6,140)
Provision for Income Taxes (1,911) (2,004)
---------- ----------
Net loss before minority interest (35,750) (8,144)
Minority Interest in loss of Unconsolidated Subsidiaries 762 394
---------- ----------
Net Loss (34,988) (7,750)
========== ==========
PER SHARE DATA
Net loss per share (Note 2) (1.47) (0.42)
========== ==========
Weighted average number of common shares outstanding (000's) 23,857 18,374
---------- ----------
2
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Consolidated Statements of Shareholders' Equity (Deficit)
For the three months ended March 31, 1997
($000s)
(Unaudited)
Cumulative
Class A Class B Additional Currency
Common Common Paid-in Accumulated Translation
Stock Stock Capital Deficit(1) Adjustment Total
------------- ------------- ------------- ------------- -------------- -------------
BALANCE, December 31, 1996 167 72 330,315 (78,004) (3,230) 249,320
Capital Contributed by
Shareholders - - 157 - - 157
Foreign Currency Translation
Adjustment - - - - (5,248) (5,248)
Net Loss - - - (34,988) - (34,988)
------------- ------------- ------------- ------------- -------------- -------------
BALANCE, March 31, 1997 167 72 330,472 (112,992) (8,478) 209,241
============= ============= ============= ============= ============== =============
(1) Of the accumulated deficit of $112,992 at March 31, 1997, $77,724
represents accumulated losses in unconsolidated affiliates.
3
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Consolidated Statements of Cash Flows
($000s)
(Unaudited)
For the three months
ended March 31,
1997 1996
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss (34,988) (7,750)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Equity in Loss of Unconsolidated Affiliates 6,769 2,769
Loss on Impairment of Investments in Unconsolidated Affiliates 20,707 -
Depreciation & Amortization (excluding amortization of barter programs) 10,789 7,240
Minority Interest in Loss of Consolidated Subsidiaries (762) (394)
Valuation Allowance for Development Costs 120 100
Changes in assets & liabilities:
Accounts Receivable 4,711 3,138
Program Rights Paid (5,313) (6,277)
Value-added Tax Recoverable (43) 651
Advances to Affiliates 183 (360)
Prepaid Expenses (964) (385)
Other Assets (17) 101
Accounts Payable (2,921) 1,016
Accrued Liabilities (3,142) 440
Other Short-term Liabilities (91) 1,585
Income & Other Taxes Payable 2,302 (53)
----------------------
Net cash provided by (used in) operating activities (2,660) 1,821
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Unconsolidated Affiliates (8,215) (5,829)
Investments in Marketable Securities 38 3,154
Restricted Cash 951 1,679
Acquisition of Fixed Assets (2,667) (5,962)
Acquisition of Minority Shareholder's Interest (74) -
Payments for Broadcast License Costs, Other Assets and Intangibles - (92)
Development Costs (634) (6,154)
----------------------
Net cash used in investing activities (10,601) (13,204)
----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Credit Facilities (2,689) (2,356)
Payments under Capital Leases (477) (473)
Loans and Advances to Affiliates (2,114) (1,733)
Repayment of Advances from Affiliates - (1,243)
Capital Contributed by Shareholders 157 70
----------------------
Net cash used in financing activities (5,123) (5,735)
IMPACT OF EXCHANGE RATE FLUCTUATIONS ON CASH (570) 200
Net decrease in cash and cash equivalents (18,954) (16,918)
CASH AND CASH EQUIVALENTS, beginning of period 78,507 53,210
----------------------
CASH AND CASH EQUIVALENTS, end of period 59,553 36,293
======================
4
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
Notes to Consolidated Financial Statements
March 31, 1997
1. Organization and Business
Central European Media Enterprises Ltd., a Bermuda corporation ("CME"),
was formed in June 1994. Through its predecessor companies, CME has been in
operation since 1991. CME, together with its subsidiaries (CME and its
subsidiaries are collectively referred to as the "Company"), invests in,
develops and operates national and regional commercial television stations and
station groups in Central and Eastern Europe and regional commercial television
stations in Germany.
In the Czech Republic, the Company owns a 93.2% economic interest in
Ceska Nezavisla Televizni Spolecnost s.r.o. ("Nova TV"), the leading private
national television station in the Czech Republic. On August 1, 1996, the
Company increased its economic interest in Nova TV to 88% from 66% through the
acquisition of a 22% economic interest in Nova TV from Ceska Sporitelna Bank
("CS") (the "Additional Nova TV Purchase"). Also, during 1996, the Company
entered into an agreement to lend the General Director of Nova TV funds to
finance his purchase of shares in CET 21 s.r.o ("CET 21") in order to increase
his ownership in CET 21. In March 1997, the Company acquired an additional 5.2%
interest in Nova TV through the retirement of the loan (the "1997 Nova TV
Purchase"). The Company is in the process of registering the 1997 Nova TV
Purchase pursuant to Czech law. On an ongoing basis, after giving effect to the
1997 Nova TV Purchase, the Company is entitled to 93.2% of the total profits of
Nova TV and has 91.2% of the voting power in Nova TV. CET 21 and certain of its
partners will own the remaining 6.8% of Nova TV, subject to the registration
procedures.
In 1995, in the Czech Republic, the Company entered into loan ("Radio
Alfa Loan") and consulting agreements with Radio Alfa a.s. ("Radio Alfa"), one
of two private Czech Republic national radio broadcasters. During December 1996,
the Company purchased a 62% ownership interest from Radio Alfa's other
shareholders for a purchase price of Kc 37,500,000 ($1,372,000). Certain of the
Company's outstanding loans to, and interest in, Radio Alfa are convertible into
an additional equity interest which, when combined with its 62% interest, would
give the Company an 83.7% interest in Radio Alfa.
In Romania, the Company and two local partners, Adrian Sarbu and Ion
Tiriac, operate PRO TV, a commercial television network launched in December
1995, through Media Pro International S.A. ("Media Pro International"). The
Company owns a 77.5% equity interest in Media Pro International, although the
Company's partners hold options exercisable through October 1997 which, if
exercised, would reduce the Company's interest to not less than 66%. The Company
recently exercised an option to purchase 49% of the equity of PRO TV, SRL, an
affiliate station of Media Pro International. Messrs. Sarbu and Tiriac own
substantially all of the remainder of PRO TV, SRL. PRO TV, SRL holds many of the
licenses for the stations comprising the PRO TV network. In September 1996, the
Company acquired a 95% equity interest in Unimedia SRL ("Unimedia"), which owns
a 10% equity interest in a consortium, MobilRom, which obtained one of two GSM
licenses in Romania in December 1996. Mr. Sarbu owns the remaining 5.0% of
Unimedia.
In Slovenia, the Company launched POP TV in December 1995 together with
MMTV d.o.o. Ljubljana ("MMTV") (formerly known as Boutique MMTV) and Tele 59
d.o.o. Maribor ("Tele 59"), through the formation of Produkcija Plus d.o.o.
("Pro Plus"). POP TV provides programming to, and sells advertising for, MMTV,
Tele 59 and an additional affiliate, Robin TV. In March 1997, the Company
purchased a substantial portion of MMTV's interest in Pro Plus for an aggregate
price of approximately $5,000,000. After giving effect to this purchase, the
Company owns 78% of the equity of Pro Plus, but has an effective economic
interest of 85.3%
5
as a result of a 33% economic interest in MMTV and a 33% economic interest in
Tele 59. Tele 59 owns a 21% equity interest in Pro Plus, and MMTV owns a 1%
interest in Pro Plus.
In the Slovak Republic, the Company owns an 80% non-controlling
interest and a 49% voting interest in Slovenska Televizna Spolocnost s.r.o.
("STS"), which launched Markiza TV as a national television station on August
31, 1996.
In Poland, the Company, together with the Polish media group ITI,
formed TVN Sp.z.o.o. ("TVN"). ITI holds 67% of the equity in TVN and the Company
holds the remaining 33%. In February 1997, TVN was awarded television broadcast
licenses for northern Poland and the cities of Warsaw and Lodz. TVN also owns a
49% interest in Telewizja Wisla Sp.z.o.o. ("TV Wisla"), which operates a
regional television station in southern Poland. TVN has an option to purchase an
additional 27.2% interest in TV Wisla.
In Ukraine, the Company owns a 50% interest in a group of companies
(collectively, the "Studio 1+1 Group"), which has the right through 2006 to
broadcast programming and sell advertising on one of Ukraine's public television
stations, UT-2.
In Hungary, as of March 31, 1997, the Company owned a 97.4% interest in
Videovox Studio Limited Liability Company ("Videovox"), a Hungarian dubbing and
production company acquired in May 1996. The Company recently formed a
consortium which submitted an application for a national television license with
a ten year term and a broadcast reach of approximately 87% of Hungary. The
tender procedures require awards to be announced within 60 days of the bid
submission date of April 10, 1997. If the Company's consortium is awarded one of
these licenses, it would be required to commence broadcasting 90 days after the
award is granted.
As of March 31, 1997, the Company owned a 58.7% non-controlling interest
in PULS ("PULS"), a regional television station based in Berlin, Germany. The
Company owns a 50% interest (non-voting profit participation) in Franken Funk &
Fernsehen GmbH ("FFF"), which owns 74.8% of a regional television station in
Nuremberg, Germany, NMF Neue Medien Franken GmbH and Co., K.G. ("NMF"). The
Company has a 49% equity interest, and a 50% economic interest in Sachsen Funk
und Fernsehen GmbH ("SFF") which owns a 33.33% equity interest in Sachsen
Fernsehen Betriebs KG, which operates regional television stations in Leipzig
and Dresden, Germany. On May 13, 1997, the Company announced its decision to
discontinue funding of PULS. This decision was made after the Company concluded
that its shareholders would be better served by using the Company's financial
and management resources on other opportunities in Central and Eastern Europe.
As a result, the Company has written down its investments in Germany by
$20,707,000. This write-down, together with losses incurred by the German
operations during the three months ended March 31, 1997, has resulted in a total
charge of $24,281,000 in the Company's Consolidated Statements of Operations
(Notes 3 and 4).
2. Summary of Significant Accounting Policies
The accompanying financial statements have been prepared in accordance
with United States generally accepted accounting principles. In the opinion of
management, these consolidated financial statements include all adjustments
necessary to fairly state the Company's financial position and results of
operations. The results for the three months ended March 31, 1997 are not
necessarily indicative of the results expected for the year.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company's wholly owned subsidiaries and the accounts of Nova TV, PRO TV,
POP TV, Videovox and Radio Alfa (the "Consolidated Affiliates") as consolidated
entities and reflect the interests of the minority owners of Nova TV, PRO TV
and POP TV for the three months ended March 31,
6
1997. Videovox was acquired on May 1, 1996 and a controlling interest in Radio
Alfa was acquired on December 26, 1996. As a result, Nova TV, PRO TV and POP TV
were the only consolidated entities for the three months ended March 31, 1996.
The results of the Company's operating stations, Markiza TV, PULS, FFF, SFF,
Studio 1+1 and TVN (the "Unconsolidated Affiliates") in which the Company has
minority or non-controlling ownership interests, are included in the
accompanying consolidated financial statements as investments in unconsolidated
affiliates using the equity method. The Company's investment in MobilRom is
recorded at the lower of cost and market value.
Net Loss Per Share
Net loss per share was computed by dividing the Company's net loss by
the weighted average number of Common Shares (both Class A and Class B) and
common share equivalents outstanding during the period ended March 31, 1997. The
impact of outstanding options and warrants has not been included in the
computation of net loss per share, as the effect of their inclusion would be
anti-dilutive.
Recently Issued Accounting Standards
In March 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings Per Share". This statement establishes standards for
computing and presenting earnings per share ("EPS"), replacing the presentation
of currently required primary EPS with a presentation of Basic EPS. For entities
with complex capital structures, the statement requires the dual presentation of
both Basic EPS and Diluted EPS on the face of the statement of operations. Under
this new standard, Basic EPS is computed based on weighted average shares
outstanding and excludes any potential dilution. Diluted EPS reflects potential
dilution from the exercise or conversion of securities into common stock or from
other contracts to issue common stock and is similar to the currently required
fully diluted EPS. SFAS 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods, and earlier
application is not permitted. When adopted, the Company will be required to
restate its EPS data for all prior periods presented. The Company does not
expect the impact of the adoption of this statement to be material to previously
reported EPS amounts.
Reclassifications
Certain reclassifications were made to prior period amounts to conform
to current period classifications.
7
3. Summary Financial Information For PULS TV, FFF, Markiza TV, TVN and
Studio 1+1.
($ 000s) As of
- -------- ------------------------------------------------------------------------------------------
March 31, 1997 December 31, 1996
PULS FFF Markiza TV TVN Studio 1+1 PULS FFF Markiza TV
---- --- ---------- --- ---------- ---- --- ----------
Current assets 2,482 3,583 9,725 1,089 4,103 3,235 2,694 10,896
Non-current assets 10,615 1,755 28,638 5,262 18,529 12,260 2,105 28,783
Current Liabilities (3,912) (1,238) (7,480) (4,245) (2,045) (3,996) (1,270) (6,635)
Non-current Liabilities (5,281) (12,751) (9,613) (6,325) (3,521) (6,305) (11,923) (9,222)
------- -------- ------- ------- ------- ------- -------- -------
Net Assets 3,904 (8,651) 21,270 (4,219) 17,066 5,194 (8,394) 23,822
For the three months ended,
-----------------------------------------------------------------------------
March 31, 1997 March 31, 1996
($ 000s) PULS FFF Markiza TV TVN Studio 1+1 PULS FFF
- -------- ---- --- ---------- --- ---------- ---- ---
Net Revenues 611 1,161 5,628 279 3,086 849 1,178
Operating Loss (3,596) (808) (1,152) (1,555) (1,481) (4,292) (984)
Net Loss (3,611) (915) (1,721) (1,847) (1,481) (4,338) (1,093)
The Company's share of losses in Unconsolidated Affiliates for the
three months ended March 31, 1997 was $6,769,000, including $2,843,000 in PULS,
$477,000 in FFF, $254,000 in SFF, $1,513,000 in Markiza TV, $676,000 in TVN and
$1,006,000 in Studio 1+1 Group.
On May 13, 1997, the Company announced its decision to discontinue
funding of PULS. This decision was made after the Company concluded that its
shareholders would be better served by using the Company's financial and
management resources on other opportunities in Central and Eastern Europe. As a
result, the Company has written down its investments in Germany by $20,707,000
and eliminated the carrying value of these investments. This write-down,
together with losses incurred by the German operations during the three months
ended March 31, 1997, has resulted in a total charge of $24,281,000 in the
Company's Consolidated Statements of Operations (Notes 2 and 4).
4. Subsequent Events
On April 30, 1997, Perekhid Media Enterprises Ltd. ("Perekhid") filed a
complaint in the Supreme Court of New York County, State of New York, against
the Company and Ronald S. Lauder, the Chairman of the Company's Board of
Directors. Perekhid's complaint seeks compensatory damages of $250 million,
punitive damages of $500 million, and an injunction against the Company and Mr.
Lauder to prevent the continuation of the alleged conduct. Management believes
that it has substantial defences in this matter and intends to defend the matter
vigorously. See "Other Information - Legal Proceedings".
On May 13, 1997, the Company announced its decision to discontinue
funding of PULS, resulting in a one-time write-down against the Company's German
operations. This decision was made after the Company concluded that its
shareholders would be better served by using the Company's financial and
management resources on other opportunities in Central and Eastern Europe.
(Notes 2 and 3).
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
The Company invests in, develops and operates national and regional
commercial television stations and station groups in Central and Eastern Europe,
including the leading national television station in the Czech Republic and
stations in Romania, Slovenia and the Slovak Republic which command the leading
audience share within their respective areas of broadcast reach. The Company
recently commenced operations in Ukraine and southern Poland and has operations
under development in other areas of Poland and in Hungary. The Company operates
television stations which reach an aggregate of 86.6 million people in six
countries in the region and an additional 9.0 million people in Germany.
Operations under development in Poland and Hungary could reach an additional 32
million people. The Company's strategy is to continue capitalizing on the
substantial market opportunities created by the emergence of private commercial
television and the corresponding significant growth of television advertising
expenditures in these markets.
The Company's revenues are derived principally from the sale of
television advertising to local, national and international advertisers. To a
limited extent, the Company also engages in certain barter transactions in which
its broadcast operations exchange unsold commercial advertising time for goods
and services. The Company experiences seasonality, with advertising sales
tending to be lowest during the third quarter of each calendar year, which
includes the summer holiday schedule (typically July and August), and highest
during the fourth quarter of each calendar year. The primary expenses incurred
in operating broadcast stations are programming costs, employee salaries,
broadcast transmission expenses and selling, general and administrative
expenses. Certain of the Company's operations do not require the direct
incurrence of broadcast transmission expenses. However, the Company incurs
significant development expenses, including funding and negotiating with local
partners, researching and preparing license applications, preparing business
plans and conducting pre-operating activities as well as restructuring existing
affiliate entities which hold the broadcast licenses.
The primary sources of cash available for corporate operating costs and
development expenses are dividends and other distributions from subsidiaries.
The Company's ability to obtain dividends or other distributions is subject to,
among other things, restrictions on dividends under applicable local laws and
foreign currency exchange regulations of the jurisdictions in which its
subsidiaries operate. The subsidiaries' ability to make distributions is also
subject to the legal availability of sufficient operating funds not needed for
operations, obligations or other business plans and, in some cases, the approval
of the other partners, stockholders or creditors of these entities. The laws
under which the Company's operating subsidiaries are organized provide generally
that dividends may be declared by the partners or shareholders out of yearly
profits subject to the maintenance of registered capital and required reserves
and after the recovery of accumulated losses.
Selected Combined Financial Information - Broadcast Cash Flow
The following tables are neither required by United States generally
accepted accounting principles ("GAAP") nor intended to replace the Consolidated
Financial Statements prepared in accordance with GAAP. The tables set forth
certain combined operating data for the three months ended March 31, 1997 and
1996 for national television broadcast stations or networks. The financial
information included below departs materially from GAAP because it aggregates
the revenues and operating income of certain Unconsolidated Affiliates with
Consolidated Affiliates. This supplemental information is presented solely for
additional analysis and not as a presentation of results of operations of each
component, nor as combined or consolidated financial data presented in
accordance
9
with GAAP. Poland and Ukraine are not included in this analysis, as these
stations are in the early stages of operations.
The Company accounts for its 80% non-controlling interest in Markiza TV
using the equity method of accounting. Under this method of accounting, the
Company's interest in net earnings or losses of Markiza TV is included in the
consolidated earnings and an adjustment is made to the carrying value at which
the investment is recorded on the consolidated balance sheet. The following
supplementary unaudited combined information includes certain financial
information of Markiza TV on a line-by-line basis, similar to that of the
Company's Consolidated Affiliates.
Management service charges are not included in the combined operating
data below as these are eliminated in the Consolidated Financial Statements. The
Company believes that this unaudited combined and combining operating data
provides useful disclosure.
Three Months Ended March 31,
----------------------------
1997 1996(1)
---- --------
Combined Operating Data ($ 000s):
- ---------------------------------
Net revenues 33,911 23,255
Station operating expense (27,471) (19,732)
Selling, general and (4,922) (2,938)
administrative expenses
Station operating income (loss) 1,518 585
Depreciation of assets 4,539 2,946
Amortization of programming rights 6,847 4,294
Cash program rights costs (7,841) (6,277)
Broadcast cash flow 5,063 1,548
Broadcast cash flow margin 14.93% 6.66%
Broadcast cash flow attributable 4,969 492
to the Company
Three Months Ended March 31,
Nova TV PRO TV POP TV Markiza TV (1)
--------------------- --------------------- --------------------- --------------
1997 1996 1997 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
Operating Data ($ 000s):
- ------------------------
Net revenues 20,665 20,620 4,947 1,551 2,671 1,084 5,628
Station operating expense (12,811) (13,215) (5,120) (3,845) (3,640) (2,672) (5,900)
Selling, general and (1,556) (1,477) (1,764) (804) (722) (657) (880)
administrative expenses
Station operating income (loss) 6,298 5,928 (1,937) (3,098) (1,691) (2,245) (1,152)
Depreciation of assets 1,966 1,956 904 555 645 435 1,024
Amortization of programming 3,462 3,340 1,012 542 812 412 1,561
rights
Cash program rights costs (4,545) (4,233) (298) (1,704) (470) (340) (2,528)
Broadcast cash flow 7,181 6,991 (319) (3,705) (704) (1,738) (1,095)
Broadcast cash flow margin 34.75% 33.90% - - - - -
Broadcast cash flow 6,693 4,614 (247) (2,871) (601) (1,250) (876)
attributable to the Company
Effective economic interest 93.2% 66.0% 77.5% 77.5% 85.3% 72.0% 80.0%
attributable to the Company
- -----------------------------------------------------------
(1) Markiza TV commenced operations on August 31, 1996.
"Broadcast cash flow", a broadcasting industry measure of performance,
is defined as net broadcast revenues, less broadcast operating expenses
excluding depreciation and
10
amortization, broadcast selling, general and administrative expenses, and cash
program rights costs. "Broadcast cash flow margin" is broadcast cash flow
divided by net broadcast revenues. "Broadcast cash flow attributable to the
Company" is broadcast cash flow which is attributable to the Company based on
the Company's effective economic interest in Nova TV, PRO TV, POP TV and Markiza
TV as of March 31, 1997 which was 93.2% (with 5.2% in the process of being
registered pursuant to Czech law), 77.5%, 85.3% and 80.0%, respectively. Cash
program rights costs represent cash payments for current programs payable and
such payments do not necessarily correspond to program use. The Company has
included broadcast cash flow because it is commonly used in the broadcast
industry as a measure of performance. Broadcast cash flow should not be
considered as a substitute measure of operating performance or liquidity
prepared in accordance with GAAP.
Application of Accounting Principles
Although the Company conducts operations largely in foreign currencies,
the Company prepares its financial statements in United States dollars and in
accordance with GAAP. The Company's consolidated operating statements include
the results of wholly owned subsidiaries and the results of Nova TV, PRO TV,
POP TV, Videovox and Radio Alfa and separately set forth the minority interest
attributable to other owners of Nova TV, PRO TV, POP TV and Videovox. Videovox
was acquired by the Company in May 1996, and Radio Alfa was acquired in December
1996. The results of other broadcast operations, Markiza TV, PULS, FFF, SFF, TVN
and Studio 1+1 are accounted for using the equity method which reflects the
Company's share of the net income or losses in those operations. The Company's
investment in MobilRom is recorded at the lower of cost and market value.
Foreign Currency
The Company and its subsidiaries generate revenues primarily in Czech
korunas ("Kc"), Romanian lei ("ROL"), Slovenian tolar ("SIT"), Slovak korunas
("Sk"), Hungarian forints ("HUF"), Ukrainian hryvna ("Hrn"), Polish zloty ("ZI")
and German marks ("DM"), and incur substantial operating expenses in those
currencies. The Romanian lei, Slovenian tolar, Ukranian hryvna and Slovak koruna
are managed currencies with limited convertibility. The Company also incurs
operating expenses of programming in United States dollars and other foreign
currencies. For entities operating in economies considered non-highly
inflationary, including Nova TV, POP TV, Markiza TV, Videovox, Radio Alfa, TVN
and certain Studio 1+1 Group entities, balance sheet accounts are translated
from foreign currencies into United States dollars at the relevant period end
exchange rate; statement of operations accounts are translated from foreign
currencies into United States dollars at the weighted average exchange rates for
the respective periods. The resulting translation adjustments are reflected in a
component of shareholders' equity with no effect on the consolidated statements
of operations. PRO TV and certain Studio 1+1 Group entities operate in economies
qualifying as highly inflationary. Accordingly, non-monetary assets are
translated at historical exchange rates and monetary assets are translated at
current exchange rates. Translation adjustments are included in the
determination of income. Currency translation adjustments relating to
11
transactions of the Company in currencies other than the functional currency of
the entity involved are reflected in the operating results of the Company. The
exchange rates at the end of, and during, the periods indicated were as follows:
Balance Sheet Income Statement
-------------------------------------- ----------------------------------
Average for the three months
At At ending March 31,
March 31, December 31, ----------------------------------
1997 1996 % change 1997 1996 % change
---- ---- -------- ---- ---- --------
Czech koruna equivalent of $1.00 29.20 27.33 -6.8% 28.51 27.14 -5.1%
German mark equivalent of $1.00 1.68 1.55 -8.4% 1.66 1.48 -12.2%
Hungarian forint equivalent of $1.00 176.00 162.00 -8.6% 169.00 n/a n/a
Polish zloty equivalent of $1.00 3.08 2.88 -6.9% 2.98 n/a n/a
Romanian lei equivalent of $1.00 7,025 4,035 -74.1% 6,196 3,532 -75.4%
Slovak koruna equivalent of $1.00 33.09 31.90 -3.7% 32.78 n/a n/a
Slovenian tolar equivalent of $1.00 153.13 141.48 -8.2% 152.12 132.00 -15.2%
Ukrainan hyrvna equivalent of $1.00 1.85 1.89 2.1% 1.86 n/a n/a
The Company's results of operations and financial position during the
first quarter of 1997 were impacted by changes in foreign currency exchange
rates since December 31, 1996. In the highly inflationary economy in Romania,
PRO TV indexes sales contracts to the United States dollar in order to minimize
the effects of Romanian lei devaluation. As shown above, virtually all operating
currencies have weakened against the United States dollar during the first
quarter 1997.
The underlying Czech koruna and Slovenian tolar assets and liabilities
of Nova TV and POP TV decreased by 6.8% and 8.2%, respectively, in dollar terms
during the three month period ended March 31, 1997, due to foreign exchange
movements. PRO TV's local currency monetary assets and liabilities decreased by
up to 74.1% during the three month period ended March 31, 1997, depending on the
time they remained outstanding during the period. Nova TV's operating income,
together with interest costs and minority interest in income, are approximately
5.1% lower than would be the case had the weighted average exchange rate during
the three month period ended March 31, 1997 remained the same as during the
three month period ended March 31, 1996.
Results of Operations
The three months ended March 31, 1997 compared to the three months ended March
31, 1996
The Company's net revenues increased by $5,910,000, or 25.4%, to
$29,165,000, in the three months ended March 31, 1997 from $23,255,000 in the
three months ended March 31, 1996. Of this increase, $4,983,000, or 84.3%, was
attributable to PRO TV and POP TV. PRO TV and POP TV achieved net revenues of
$4,947,000 and $2,671,000, respectively, for the three months ended March 31,
1997, reflecting increases of 219.0% and 146.4%, respectively, over the same
period in 1996. This significant revenue growth is primarily the result of the
growth in audience market share and the fact that PRO TV and POP TV have now
been able to convert their dominant audience shares into larger shares of their
respective advertising markets.
The change in Nova TV's net revenues reflects an increase in net
revenues from advertising sales of $1,963,000 or 10.8% (16.4% measured in local
currency) to $20,212,000, offset by a decline in other revenues (principally
game show revenues), by $1,918,000. The higher advertising sales revenues are
principally attributable to the growth in the advertising market
12
and Nova TV's ability to consistently maintain a leading market share in a
growing market. The decline in game show revenues is attributable to a current
lack of suitably attractive game show partners. As a result, Nova TV's net
revenues increased by $45,000, to $20,665,000 in the three months ended March
31, 1997 from $20,620,000 in the three months ended March 31, 1996. The
depreciation of the Czech koruna during the three months ended March 31, 1997
compared with the same period in 1996, reduced Nova TV's revenues in US dollars
by approximately 5%.
To a lesser extent, Videovox and Radio Alfa, with net revenues of
$600,000 and $282,000, respectively, for the three months ended March 31, 1997,
also contributed to the increase in the Company's net revenues. Videovox and
Radio Alfa were not included in the Company's operations during the three months
ended March 31, 1996.
Total station operating costs and expenses increased $2,750,000 or
13.9%, to $22,482,000 in the three months ended March 31, 1997 from $19,732,000
in the three months ended March 31, 1996. The increase in total station
operating costs and expenses is primarily attributable to PRO TV's and POP TV's
achievement of full scale operations together with the inclusion of operating
expenses of Videovox and Radio Alfa of $461,000 and $448,000, respectively. This
increase was partially offset by a decrease in Nova TV's operating costs and
expenses in the three months ended March 31, 1997, compared to the three months
ended March 31, 1996.
Station selling, general and administrative expenses increased
$1,391,000, or 47.3%, to $4,329,000 in the three months ended March 31, 1997
from $2,938,000 in the three months ended March 31, 1996. This increase was
primarily attributable to the increase in PRO TV's station selling, general and
administrative expenses due to higher marketing expenses in order to maintain a
leading market share. To a lesser extent, the increase was attributable to the
fact that Videovox and Radio Alfa were not included in the Company's operations
during the three months ended March 31, 1996.
Corporate operating costs and development expenses for the three months
ended March 31, 1997 and the three months ended March 31, 1996 were $4,575,000
and $3,091,000, respectively, an increase of $1,484,000, or 43.0%. As a
percentage of net revenues, corporate operating costs and development expenses
increased by only 2.4%, from 13.3% in the three months ended March 31, 1996 to
15.7% in the three months ended March 31, 1997. The increase was primarily
attributable to the Company's increased scope of operations, the continued
development of the Company's infrastructure, the Company's new operations in
Poland and Ukraine and development activities in other countries.
Amortization of goodwill and allowance for development costs was
$1,997,000 and $100,000 in the three months ended March 31, 1997 and 1996,
respectively. This increase is primarily attributable to amortization related to
the Additional Nova TV Purchase and the 1997 Nova TV Purchase and, to a lesser
extent, the amortization of goodwill and license acquisition costs related to
investments in POP TV and Radio Alfa.
As a result of the above factors, operating loss increased by
$1,612,000, or 61.9%, to $4,218,000 in the three months ended March 31, 1997
from $2,606,000 in the three months ended March 31, 1996. This increase in
operating loss was primarily attributable to increased corporate operating costs
and development expenses and amortization of goodwill and allowance for
development costs, offset by the increase in operating income of Nova TV and a
decrease in operating losses of PRO TV and POP TV over the same period in 1996.
Equity in loss of unconsolidated affiliates increased by $4,000,000 to
$6,769,000 in the three months ended March 31, 1997 from $2,769,000 in the three
months ended March 31, 1996. The increase reflects the addition of Markiza TV,
TVN and Studio 1+1 Group to the Company's operations, in addition to the losses
attributable to the Company's German operations in the three months ended March
31, 1997.
Loss on impairment of investments in unconsolidated affiliates of
$20,707,000 was a result of the write-down of the Company's investments in
Germany. This one-time charge,
13
together with losses incurred by the German operations during the three months
ended March 31, 1997, has resulted in a total charge of $24,281,000 in the
Company's Consolidated Statements of Operations.
Interest and other income increased $1,463,000, or 229.7%, to
$2,100,000 for the three months ended March 31, 1997 from $637,000 for the three
months ended March 31, 1996. The increase in interest income was primarily
attributable to the investment of net cash proceeds from the Company's 1996
public offering of shares of Class A Common Stock completed in November 1996
(the "1996 Offering").
Interest expense increased $1,167,000, or 115.9%, to $2,174,000 in the
three months ended March 31, 1997 from $1,007,000 in the three months ended
March 31, 1996. This is primarily attributable to interest expense incurred on
the Czech koruna debt funding for the Additional Nova TV Purchase, partially
offset by lower debt levels at Nova TV.
The net foreign currency exchange loss of $2,071,000 in the three
months ended March 31, 1997 is primarily attributable to the US dollar
denominated liabilities of Nova TV, PRO TV and POP TV and the devaluation during
this period of the Czech koruna, Romanian lei and Slovenian tolar against the
dollar. Movements in these currencies during the three months ended March 31,
1996 were significantly less than in the corresponding period for 1997. These
losses were partially offset by a gain the Company realized on the Czech koruna
debt funding for the Additional Nova TV Purchase.
Provision for income taxes was $1,911,000 for the three months ended
March 31, 1997 and $2,004,000 for the three months ended March 31, 1996.
Minority interest in loss of consolidated subsidiaries was $762,000 in
the three months ended March 31, 1997 and $394,000 in the three months ended
March 31, 1996. This increase was primarily the result of the Additional Nova TV
Purchase and the 1997 Nova TV Purchase, together with losses from PRO TV and POP
TV.
As a result of these factors, the net loss of the Company was
$34,988,000 and $7,750,000 for the three months ended March 31, 1997 and the
three months ended March 31, 1996, respectively.
Liquidity and Capital Resources
Net cash used in operating activities was $2,660,000 in the three
months ended March 31, 1997, compared to cash provided by operating activities
of $1,821,000 in the three months ended March 31, 1996. The increase in net cash
used for operating activities for the three months ended March 31, 1997 was
primarily the result of a higher operating loss and increased payments of
accounts payable, partially offset by an increase in income and other taxes
payable.
Net cash used in investing activities was $10,601,000 in the three
months ended March 31, 1997 and $13,204,000 in the three months ended March 31,
1996. The decrease is primarily attributable to a reduction in capital
expenditures from levels during the start-up of PRO TV and POP TV in 1996. In
addition, the Company's investment in marketable securities during the three
months ended March 31, 1997 decreased compared to the same period in 1996.
Furthermore, investment in unconsolidated affiliates and development cost
decreased by $3,134,000 in the three months ended March 31, 1997 compared to the
same period in 1996. This was a result of lower funding requirements for the
German operations and the reduction of development costs related to Markiza TV.
Net cash used in financing activities for the three months ended March
31, 1997 was $5,123,000 compared to $5,735,000 for the same period in 1996. The
decrease was primarily
14
due to a repayment of advances from affiliates during the three months ended
March 31, 1996. No advances were repaid in the three months ended March 31,
1997.
The Company's operations to date have been financed primarily through
public offerings of shares of Class A Common Stock completed in October 1994
(the "IPO"), November 1995 and the 1996 Offering, which raised net proceeds of
approximately $68,800,000, $86,600,000 and $143,600,000, respectively. Prior to
the IPO, the Company relied on certain affiliates for capital in the form of
both debt and equity financing.
Primarily as a result of the 1996 Offering, the Company had cash of
$59,553,000 at March 31, 1997 ($78,507,000 at December 31, 1996) and marketable
securities of $2,858,000 at March 31, 1997 ($2,896,000 at December 31, 1996)
available to finance its future activities.
The Company has made and will continue to make investments to develop
broadcast operations in Central and Eastern Europe. The Company is currently
developing broadcast operations in Ukraine and Poland and recently formed a
consortium to bid for a national broadcast license in Hungary. The Company's
cash needs for those investment activities may exceed cash generated from
operations, resulting in external financing requirements.
On August 1, 1996, the Company entered into the Additional Nova TV
Purchase for the purchase of CS's 22% economic interest and virtually all of
CS's voting rights in Nova TV for a purchase price of Kc 1 billion
($36,590,000). The Company also entered into a loan agreement with CS to finance
85% of the purchase price. The remainder of the purchase price Kc 150,000,000
($5,488,000) was paid by the Company on November 15, 1996 out of the Company's
cash balances. The loan from CS was drawn in August 1996 and in April 1997 in
the amounts of Kc 450,000,000 ($16,464,000) and Kc 400,000,000 ($13,699,000),
respectively, to fund purchase payments due at those times, and the loan bears
an interest rate of 12.9% annually. Quarterly repayments on the loan are
required in the amount of Kc 22,500,000 ($771,000) during the period from
November 1997 through November 1998, Kc 42,500,000 ($1,455,000) during the
period from February 1999 through August 2002, and Kc 20,000,000 ($685,000)
during the period from November 2002 through November 2003.
The Company expects that Nova TV's future cash requirements will
continue to be satisfied through operating cash flows and available borrowing
facilities. As of March 31, 1997, Nova TV had two loan facilities with CS. The
first facility consisted of a long term loan due on December 30, 1999 in the
principal amount of Kc 120,000,000 ($4,110,000) as of March 31, 1997, and bore
interest at a rate of 2.5% over the bank's prime rate. Principal payments of Kc
60,000,000 ($2,055,000) were due each year on this facility. In February 1997,
Nova TV paid the Kc 60,000,000 ($2,055,000) due on this facility and the
remainder of the loan was repaid in April 1997. The second facility is a line of
credit, obtained in October 1996, for an amount up to Kc 250,000,000
($8,562,000) bearing interest at a rate 0.5% over Prague Interbank Offer Rate
("PRIBOR"). The second facility, which is secured by Nova TV's equipment,
vehicles and receivables, was unutilized at March 31, 1997.
PRO TV has two borrowing facilities with Tiriac Bank in Romania which
were obtained in July 1996. The first facility consists of a $2,000,000 line of
credit substantially payable by July 31, 1997. The line of credit bears interest
at a rate of 5% over LIBOR (5.72% at March 31, 1997). At March 31, 1997,
$1,999,000 was borrowed under this facility. The second facility is a long term
loan for $4,000,000 due July 31, 2001. The long term loan bears interest at 5%
over LIBOR (5.72% at March 31, 1997) and is to be repaid in installments
starting July 31, 1997. At March 31, 1997, $3,854,000 was borrowed under this
facility. These facilities are secured by PRO TV's equipment and vehicles.
Notwithstanding these borrowing facilities, the Company believes that it will be
required to provide additional funding to PRO TV in 1997.
The laws under which the Company's currently operating subsidiaries and
affiliates are organized provide generally that dividends may be declared by the
partners or shareholders out of yearly profits subject to the maintenance of
registered capital, required reserves and after the recovery of accumulated
losses. In the case of the Company's Dutch
15
and Netherlands Antilles subsidiaries, the Company's voting power is sufficient
to compel the making of distributions. The Company's voting power is sufficient
to compel Nova TV to make distributions. In the case of PRO TV, distributions
may be paid from the profits of PRO TV subject to a reserve of 5% of annual
profits until the aggregate reserves equal 20% of PRO TV's registered capital. A
majority vote can compel PRO TV to make distributions. There are no legal
reserve requirements in Slovenia. In the case of Markiza TV, distributions may
be paid from net profits subject to an initial reserve requirement of 10% of net
profits until the reserve fund equals 5% of registered capital. Subsequently,
the reserve requirement is equal to 5% of net profits until the reserve fund
equals 10% of registered capital. The Company's voting power in Markiza TV is
not sufficient to compel the distribution of dividends. The laws of countries
where the Company is developing operations contain restrictions on the payment
of dividends.
Except for the Company's working capital requirements and completing
the funding of existing television broadcast operations and the mobile
telecommunications venture in Romania (MobilRom), the Company's future cash
needs will depend on management's acquisition and development decisions. The
Company is actively engaged in the development of additional broadcast
operations and investing in existing broadcasting companies throughout Central
and Eastern Europe. The Company incurs limited expenses in identifying and
pursuing broadcast opportunities before any investment decision is made. The
Company anticipates making additional investments in other broadcast operations,
supplemented by capital raised from local financial strategic partners as well
as local debt and lease financing, to the extent that it is available and
appropriate for each project. The Company's aggregate funding commitment with
respect to MobilRom is up to $12.0 million, of which $3.6 million has been
funded to date.
The Company believes that its current cash balances, cash from Nova TV
and local financing of broadcast operations and broadcast operations under
development should be adequate to satisfy the Company's operating and capital
requirements for its current operations through 1997. The Company is actively
exploring additional financing at both the CME level and the subsidiary level to
fund the development and build out of new broadcast opportunities in Central and
Eastern Europe, including the potential success of the Company's bid in Hungary
and funding in connection with the new licenses in Poland. If the Company is
unsuccessful in raising such additional funds, the Company may not be able to
acquire additional broadcast rights or complete the development of additional
broadcast opportunities.
Statements made in this section, "Liquidity and Capital Resources,"
regarding future investments in existing television broadcast operations and the
development of new television broadcast operations (including the amount and
nature thereof), business strategies and the future need for additional funds
from outside sources, are forward-looking statements. Forward-looking statements
are inherently subject to risks and uncertainties, many of which cannot be
predicted with accuracy and some of which might not even be anticipated. Future
events and actual results, financial and otherwise, could differ materially from
those set forth in or contemplated by the forward-looking statements herein.
Important factors that contribute to such risks include the Company's ability to
raise additional financing from external sources and the terms of any such
financing, the success in obtaining additional broadcast licenses, the cost of
developing these opportunities into television broadcast operations, the ability
to acquire programming, the ability to attract audiences, the rate of
development of advertising markets in these countries and general market and
economic conditions.
16
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
On April 30, 1997, Perekhid Media Enterprises Ltd. ("Perekhid") filed a
complaint in the Supreme Court of New York County, State of New York, against
the Company and Ronald S. Lauder, the Chairman of the Company's Board of
Directors. Perekhid alleges that the issuance of a license to the Studio 1+1
Group pursuant to which Studio 1+1 has been broadcasting programming on
Ukrainian National Channel 2 ("UT-2"), constitutes a tortious interference by
CME and Mr. Lauder with a Perekhid contract with the Ukrainian authorities for
Perekhid to provide programming for and sell advertising time on UT-2.
Perekhid's complaint seeks compensatory damages of $250 million, punitive
damages of $500 million, and an injunction against the Company and Mr. Lauder to
prevent the continuation of the alleged conduct. Management believes that it has
substantial defenses in this matter and intends to defend the matter vigorously.
One of the owners of CET 21 has filed a claim in the Regional
Commercial Court in Prague challenging the transfer by four other owners of CET
21 of a portion of their interests in CET 21 to Vladimir Zelezny. This owner of
CET 21 interests alleges that the proper procedures were not followed prior to
the interests being transferred to Dr. Zelezny. A preliminary injunction was
sought with respect to the transfer of these ownership interests and was denied
by the Czech Republic Court of Appeals. The underlying claim is still before the
Court.
The Company is, from time to time, a party to litigation that arises in
the normal course of its business operations. The Company is not presently a
party to any such litigation which could reasonably be expected to have a
material adverse effect on its business or operations.
Item 4. Submission of Matters to a Vote of Security-holders
None.
Item 5. Other Information
On May 13, 1997, the Company announced its decision to discontinue
funding of PULS, resulting in a one-time write-down against the Company's German
operations. This decision was made after the Company concluded that its
shareholders would be better served by using the Company's financial and
management resources on other opportunities in Central and Eastern Europe. A
press release announcing the Company's decision is filed as Exhibit 99.1 to this
Form 10-Q for the Quarterly Period Ended March 31, 1997.
17
Item 6. Exhibits and Reports on Form 8-K.
a) The following exhibits are attached:
Exhibit
3.1 Bye-Laws of Central European Media Enterprises Ltd, as amended, dated
as of May 2, 1997.
10.1 Amendment Agreement to Marketing, Advertising and Sales Agreement
between Innova Film GmbH and International Media Services Limited,
dated May 7, 1997.
10.2 Termination Agreement between International Media Services Ltd and
Limited Liability Company "Prioritet", dated May 7, 1997
10.3 IMS Advertising Services Agreement between International Media Services
Ltd and Limited Liability Company "Prioritet", dated May 7, 1997.
10.4 Advertising Consultancy Agreement between Intermedia and Prioritet,
dated May 7, 1997.
27.01 Financial Data Schedule
99.1 Press release, dated May 13, 1997, regarding the German operations.
b) No reports on Form 8-K were filed during the quarter ended March 31, 1997.
18
SIGNATURE
Pursuant to the requirements 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.
Date: May 15, 1997 /s/ Leonard M. Fertig
-----------------------------
Leonard M. Fertig
Chief Executive Officer
(Duly Authorized Officer)
Date: May 15, 1997 /s/ John A. Schwallie
-----------------------------
John A. Schwallie
Chief Financial Officer
(Principal Financial Officer)
19
EXHIBIT INDEX
Exhibit
3.1 Bye-Laws of Central European Media Enterprises Ltd, as amended, dated
as of May 2, 1997.
10.1 Amendment Agreement to Marketing, Advertising and Sales Agreement
between Innova Film GmbH and International Media Services Limited,
dated May 7, 1997.
10.2 Termination Agreement between International Media Services Ltd and
Limited Liability Company "Prioritet", dated May 7, 1997
10.3 IMS Advertising Services Agreement between International Media Services
Ltd and Limited Liability Company "Prioritet", dated May 7, 1997.
10.4 Advertising Consultancy Agreement between Intermedia and Prioritet,
dated May 7, 1997.
27.01 Financial Data Schedule
99.1 Press release, dated May 13, 1997, regarding the German operations.
20