EXHIBIT
-------
TEVECAP S.A.
FINANCIAL STATEMENTS TOGETHER WITH
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
December 31, 2000 and 1999
Report of Independent Public Accountants
(Translation of the report originally issued in Portuguese.
See Note 26 to the financial statements.)
To the Management and Stockholders of
Tevecap S.A.:
(1) We have audited the individual (Company) and consolidated balance sheets of
TEVECAP S.A. (a Brazilian corporation) and subsidiaries as of December 31, 2000
and 1999, and the related statements of income, changes in stockholders' equity,
and changes in financial position for the years then ended, prepared under the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements. The financial statements as of December
31, 2000 and 1999 of the affiliated company Canbras TVA Cabo Ltda. were audited
by other independent public accountants who issued an unqualified report thereon
dated January 15, 2001. This investment generated an equity loss in the
affiliate in the amount of R$5,554,000 for the year ended December 31, 2000
(R$7,927,000 in 1999). Accordingly, our opinion insofar as it relates to the
amounts of the investment and equity results in this affiliated company is based
upon the report of the other auditors.
(2) Our audits were conducted in accordance with auditing standards in Brazil
and comprised:
(a) planning of the work, taking into consideration the significance of the
balances, volume of transactions, and the accounting and internal control
systems of the Company and its subsidiaries, (b) checking, on a test basis, the
evidence and records that support the amounts and accounting information
disclosed, and (c) evaluating the significant accounting practices and estimates
adopted by management, as well as the presentation of the financial statements
taken as a whole.
(3) In our opinion, based on our audits and on the report of the other
independent public accountants referred to above, the financial statements
referred to in paragraph (1) present fairly, in all material respects, the
individual and consolidated financial positions of Tevecap S.A. and subsidiaries
as of December 31, 2000 and 1999, and the results of their operations, the
changes in stockholders' equity, and the changes in their financial positions
for the years then ended in accordance with accounting practices emanating from
Brazilian corporate law.
Sao Paulo, February 16, 2001
ARTHUR ANDERSEN S/C
Marco Antonio Brandao Simurro
Engagement Partner
TEVECAP S.A.
BALANCE SHEETS--DECEMBER 31, 2000 AND 1999
(In thousands of Brazilian reais)
(Translation of the original in Portuguese)
A S S E T S
Company Consolidated
------- ------------
2000 1999 2000 1999
---- ---- ---- ----
CURRENT ASSETS:
Cash and banks 50 20 3,144 3,481
Accounts receivable -- -- 15,128 13,528
Inventories -- -- 18,918 13,117
Film exhibition rights -- -- -- 2,286
Accounts receivable - affiliated companies 1,315 1,209 353 245
Recoverable taxes 652 670 1,566 2,229
Prepaid expenses 1,524 2,254 2,970 3,802
Escrow deposits -- -- -- 1,488
Accounts receivable - Multithematiques -- -- 7,892 --
Accounts receivable - Galaxy Brasil Ltda 2,511 3,671 4,391 4,851
Notes receivable -- -- 54,252 --
Other receivables 34 198 6,892 4,791
--------- --------- --------- ---------
Total current assets 6,086 8,022 115,506 49,818
--------- --------- --------- ---------
NONCURRENT ASSETS:
Loans to and receivables from subsidiaries
and affiliates 115,001 94,963 60,384 36,786
Advances for future capital increase in
affiliated companies and subsidiaries 659,371 596,013 2 2
Escrow deposits -- -- 15,964 3,726
Prepaid expenses 665 905 665 905
Dividends receivable 113,858 160,000 -- --
Notes receivable -- 45,621 -- 45,621
--------- --------- --------- ---------
Total noncurrent assets 888,895 897,502 77,015 87,040
--------- --------- --------- ---------
PERMANENT ASSETS:
Property and equipment 4 7 287,673 284,898
Investments 330,321 181,756 12 3,866
Goodwill on investments -- -- 23,108 27,846
Deferred charges -- -- 59,433 72,784
--------- --------- --------- ---------
Total permanent assets 330,325 181,763 370,226 389,394
--------- --------- --------- ---------
Total assets 1,225,306 1,087,287 562,747 526,252
========= ========= ========= =========
The accompanying notes are an integral
part of these balance sheets.
TEVECAP S.A.
BALANCE SHEETS--DECEMBER 31, 2000 AND 1999
(In thousands of Brazilian reais)
(Translation of the original in Portuguese)
LIABILITIES AND STOCKHOLDERS' EQUITY
Company Consolidated
------- ------------
2000 1999 2000 1999
---- ---- ---- ----
CURRENT LIABILITIES:
Loans and financing 80,622 29,853 64,668 15,074
Trade accounts payable - films and
licensing -- -- 10,017 15,584
Other trade accounts payable 1,027 1,444 17,601 15,503
Salaries and payroll charges -- -- 4,811 4,258
Taxes payable 2,766 2,830 6,805 10,669
Tax Recovery Program - REFIS 866 -- 3,870 --
Advances -- -- 493 1,678
Other accounts payable 281 235 3,302 3,549
---------- ---------- ---------- ----------
Total current liabilities 85,562 34,362 111,567 66,315
---------- ---------- ---------- ----------
LONG-TERM LIABILITIES:
Loans from subsidiaries and affiliates 296,711 242,407 273,573 243,614
Loans and financing 488,850 447,250 97,165 102,846
Reserve for losses on subsidiaries'
operations 329,304 288,082 14,022 8,468
Taxes 13,166 11,268 35,456 40,744
Tax Recovery Program - REFIS 3,392 -- 22,167 --
Reserve for contingencies -- -- 4,980 4,325
---------- ---------- ---------- ----------
Total long-term liabilities 1,131,423 989,007 447,363 399,997
---------- ---------- ---------- ----------
MINORITY INTEREST -- -- (4,504) (3,978)
---------- ---------- ---------- ----------
STOCKHOLDERS' EQUITY:
Capital 478,741 478,741 478,741 478,741
Revaluation reserve 31,394 35,689 31,394 35,689
Accumulated deficit (501,814) (450,512) (501,814) (450,512)
---------- ---------- ---------- ----------
Total stockholders' equity 8,321 63,918 8,321 63,918
---------- ---------- ---------- ----------
Total liabilities and stockholders'
equity 1,225,306 1,087,287 562,747 526,252
========== ========== ========== ==========
The accompanying notes are an integral
part of these balance sheets.
TEVECAP S.A.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(In thousands of Brazilian reais, except for per share data)
(Translation of the original in Portuguese)
Company Consolidated
------- ------------
2000 1999 2000 1999
---- ---- ---- ----
GROSS REVENUE:
Monthly subscriptions -- -- 188,888 171,886
Hook up fee -- -- 1,745 3,399
Advertising -- -- 5,082 2,900
Additional revenues -- -- 31,514 41,467
Taxes -- -- (24,672) (22,973)
-------- -------- -------- --------
-- -- 202,557 196,679
COST OF SERVICES -- -- (105,478) (94,630)
-------- -------- -------- --------
GROSS PROFIT -- -- 97,079 102,049
OPERATING EXPENSES:
Selling -- -- 11,143 15,100
Administrative 2,160 2,037 51,011 41,645
Depreciation and amortization -- -- 67,019 66,535
Goodwill amortization -- -- 4,737 4,737
EQUITY IN RESULTS OF SUBSIDIARIES AND
AFFILIATES 154,534 308,323 -- (988)
PROVISION FOR LOSSES ON SUBSIDIARIES'
OPERATIONS (47,192) (259,596) (5,554) (138,030)
-------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS BEFORE NET
FINANCIAL EXPENSES 105,182 46,690 (42,385) (164,986)
FINANCIAL EXPENSES, NET (153,309) (251,427) (81,903) (215,266)
-------- -------- -------- --------
LOSS FROM OPERATIONS (48,127) (204,737) (124,288) (380,252)
NONOPERATING INCOME (EXPENSES), NET (3,065) 210,190 73,104 382,826
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAX (51,192) 5,453 (51,184) 2,574
Provision for income tax (4,405) -- (4,939) (195)
-------- -------- -------- --------
INCOME (LOSS) BEFORE MINORITY INTEREST (55,597) 5,453 (56,123) 2,379
Minority interest -- -- 526 3,074
-------- -------- -------- --------
NET INCOME (LOSS) (55,597) 5,453 (55,597) 5,453
======== ======== ======== ========
EARNINGS (LOSS) PER SHARE - R$ (0.2456) 0.0241
======== ========
BOOK VALUE PER SHARE - R$ 0.0368 0.2824
======== ========
The accompanying notes are an integral
part of these statements.
TEVECAP S.A.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(In thousands of Brazilian reais)
(Translation of the original in Portuguese)
Revaluation Total
reserve Accumulated stockholders'
Capital in subsidiary deficit equity
------- ------------- ------- ------
BALANCES DECEMBER 31, 1998 478,741 -- (455,965) 22,776
Net income -- -- 5,453 5,453
Revaluation reserve in subsidiary -- 35,689 -- 35,689
-------- -------- -------- --------
BALANCES DECEMBER 31, 1999 478,741 35,689 (450,512) 63,918
Net loss -- -- (55,597) (55,597)
Realization of revaluation reserve in subsidiary -- (4,295) 4,295 --
-------- -------- -------- --------
BALANCES DECEMBER 31, 2000 478,741 31,394 (501,814) 8,321
======== ======== ======== ========
The accompanying notes are an integral part of these statements.
TEVECAP S.A.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(In thousands of Brazilian reais)
(Translation of the original in Portuguese)
Company Consolidated
------- ------------
2000 1999 2000 1999
---- ---- ---- ----
SOURCES OF FUNDS:
Provided by operations -- 7,730 80,849 418,439
Loans from affiliated companies 73,061 119,852 48,718 109,744
Decrease in noncurrent assets 162,929 50,583 17,502 27,280
Write-off of noncurrent prepaid expenses 240 6,665 240 6,665
Transfer of taxes from current to long-term 5,290 -- 16,891 21,915
Transfer from noncurrent to current assets -- -- 45,621 1,488
-------- -------- -------- --------
Total sources 241,520 184,830 209,821 585,531
-------- -------- -------- --------
USES OF FUNDS:
Used in operations 76,355 -- -- --
Additions-
Property and equipment -- -- 52,673 38,096
Deferred charges -- -- 23 524
Investments 1 10,343 1 4,245
Noncurrent assets 145,282 172,229 49,792 50,024
Payment of loans from parent company 73,018 30,160 73,020 20,146
Payment of loans and financing -- -- -- 242,855
Decrease in long-term reserves -- -- -- 132
Transfer of loans and financing from long-term
to current -- -- 13,876 5,400
-------- -------- -------- --------
Total uses 294,656 212,732 189,385 361,422
-------- -------- -------- --------
INCREASE (DECREASE) IN WORKING CAPITAL (53,136) (27,902) 20,436 224,109
======== ======== ======== ========
Company Consolidated
------- ------------
2000 1999 2000 1999
---- ---- ---- ----
REPRESENTED BY:
Current assets-
At end of year 6,086 8,022 115,506 49,818
At beginning of year 8,022 6,327 49,818 97,186
-------- -------- -------- --------
(1,936) 1,695 65,688 (47,368)
Current liabilities-
At end of year 85,562 34,362 111,567 66,315
At beginning of year 34,362 4,765 66,315 337,792
-------- -------- -------- --------
51,200 29,597 45,252 (271,477)
-------- -------- -------- --------
INCREASE (DECREASE) IN WORKING CAPITAL (53,136) (27,902) 20,436 224,109
======== ======== ======== ========
FUNDS PROVIDED BY (USED IN) OPERATIONS:
Net income (loss) (55,597) 5,453 (55,597) 5,453
Items not affecting working capital-
Depreciation and amortization 3 3 67,019 66,535
Disposal of permanent assets, net -- -- 108 105,120
Goodwill amortization -- -- 4,737 4,737
Equity in results of subsidiaries and
affiliated companies (154,534) (308,323) -- 988
Provision for losses on subsidiaries'
operations 47,192 259,596 5,554 138,030
Net monetary variations applicable to
long-term items 86,581 191,461 58,911 79,513
Increase in long-term reserves -- 10,021 643 12,955
Reversal through write-off of provision
for losses on subsidiaries'
operations/disposal of investments -- (150,481) -- 8,182
Minority interest -- -- (526) (3,074)
-------- -------- -------- --------
Total funds provided by (used in)
operations (76,355) 7,730 80,849 418,439
======== ======== ======== ========
The accompanying notes are an integral
part of these statements.
TEVECAP S.A.
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2000 AND 1999
(Amounts in thousands of Brazilian reais, unless otherwise indicated)
(Translation of the original in Portuguese)
1. OPERATIONS
The Company and its subsidiaries are principally engaged in the production,
purchase, licensing, distribution, import and export of own or third-party
television programing; providing other services related to systems for
transmission, reception and distribution of signals and television programs;
advertising and publicity; and equity in the capital of other companies,
especially those related to the communications area.
2. PRESENTATION OF FINANCIAL STATEMENTS
The financial statements (Company and consolidated) were prepared on the basis
of accounting practices emanating from corporate law in Brazil and supplementary
regulations, as described in Note 3.
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosures of contingent assets and liabilities as of the financial statement
dates, and the reported amounts of revenues and expenses during the reporting
periods. Since management's judgement involves making estimates concerning the
likelihood of future events, actual results could differ from the estimates.
3. SIGNIFICANT ACCOUNTING PRACTICES
3.1. The principal accounting practices applied in the preparation of the
financial statements are as follows:
a. Temporary cash investments are stated at cost, plus income earned to
the balance sheet date.
b. Accounts receivable from customers are represented by billings for
subscriptions, connection fees, advertising and sale of programing.
c. The allowance for doubtful accounts is established on the basis of
receivables past due for more than 90 days and upon cancellation of
subscriptions, and is considered sufficient to cover losses incurred
in the realization of such receivables.
1
d. Inventories are stated at average cost and, when applicable, net of a
reserve to reflect replacement cost or net realizable value.
e. Film exhibition rights are stated at the cost of the respective
contracts. Costs of contracts with film producers and programing
licensing are recorded in income when the films and/or programs are
exhibited.
f. Escrow deposits, as well as taxes payable and reserves for
contingencies mentioned in Notes 14 and 15 are monetarily restated
based on official indices established for this purpose.
g. Property and equipment are stated at cost, monetarily restated through
December 31, 1995, plus a partial revaluation, less depreciation
calculated using the straight-line method at the rates indicated in
Note 11, based on the useful lives of the assets and, when applicable,
net of a reserve for equipment losses.
h. Investments in subsidiaries are carried under the equity method.
i. Goodwill on investments represents the excess amount paid over the
book value of the net assets on the date of their acquisition.
Amortization is computed by the straight-line method, principally
based on the estimated future profitability of the investments, over
periods not exceeding ten years.
j. Deferred costs consist primarily of costs of films, depreciation of
equipment and financial expenses, deferred based on the proportion, in
percentage terms, of the actual number of subscribers to the estimated
number of subscribers for determining the break-even point of the
operation. Once the break-even point was reached, these deferred costs
and expenses are amortized on the straight-line method, based on the
same period used to depreciate transmission equipment, estimated at
ten years, and charged to income.
k. Other balance sheet accounts are monetarily updated when subject to
indexation or exchange rate variation.
l. Earnings (Loss) and book value per share are calculated on the basis
of the number of shares outstanding at yearend.
m. Statements of income:
o Revenues from advertising and costs of commercial production and
programing are recognized in income upon the broadcasting of the
commercials.
o Revenues from cable television subscriptions are accounted for on
the accrual basis. Costs of films and licensing are recognized in
income based on the related revenues.
o Revenues from connection fees are recorded on the date the
equipment is installed at the subscribers' household. Direct
selling expenses are recognized in income when incurred and
installation costs are capitalized and amortized over the average
period the Company estimates the subscribers will remain
connected.
2
3.2. Consolidated Financial Statements
The consolidated financial statements, prepared in conformity with CVM
(Brazilian Securities Commission) Instruction No. 247/96 of March 27, 1996,
include the accounts of the Company and the following subsidiaries:
Ownership
interest (%)
------------
2000 1999
---- ----
TVA Communications Ltd. 100.00 100.00 (d)
TVA Communications Aruba N.V. 100.00 100.00 (c)
Ype Radio e Televisao Ltda. 100.00 100.00 (b)
TVA Inc. 100.00 -- (c)
TVA Sistema de Televisao S.A. 98.00 98.00 (b)
TVA Sistema de Televisao de Porto Alegre S.A. 100.00 100.00 (b)
Rede Ajato Ltda. 100.00 100.00 (d)
Comercial Cabo TV Sao Paulo Ltda. 100.00 100.00 (b)
TVAPar S.A. 100.00 100.00
TVA Overseas Ltd. 100.00 -- (d)
TVA Channels Ltda. 100.00 100.00 (c)
TVA Programadora Ltda. 100.00 100.00 (d)
TVA Distribuidora S.A. 100.00 100.00 (d)
CCS Camboriu Cable System de Telecomunicacoes Ltda. 51.60 51.60 (a)
TVA Sul Parana Ltda. 86.00 86.00 (b)
(a) Indirect interest through TVA Sul Parana Ltda.
(b) Indirect interest through TVA Distribuidora S.A.
(c) Indirect interest through TVA Programadora Ltda.
(d) Direct subsidiary (see Note 8).
Investments in subsidiaries, equity method results, reserve for losses on
subsidiaries' operations, and receivables and payables resulting from
intercompany transactions are eliminated either totally or in proportion to the
Company's interest, when applicable.
Minority interest is calculated based on the minority interest percentage in
stockholders' equity of the respective company and disclosed separately in the
consolidated financial statements.
3
4. ACCOUNTS RECEIVABLE
Consolidated
------------
2000 1999
---- ----
Subscription and connection fees 22,231 25,717
Advertising and programing 3,354 3,646
Barters 4,362 3,391
Other accounts receivable 32 1,115
------- -------
29,979 33,869
Allowance for doubtful accounts (14,851) (20,341)
------- -------
15,128 13,528
======= =======
5. INVENTORIES
Consolidated
------------
2000 1999
---- ----
Consumable material 20,579 13,741
Imports in transit 443 1,103
------- -------
21,022 14,844
Reserve for obsolescence and
reduction to market value (2,104) (1,727
------- -------
18,918 13,117
======= =======
6. ACCOUNTS RECEIVABLE - MULTITHEMATIQUES
On November 24, 2000, the "Eurochannel" channel was sold to Multithematiques for
approximately R$15,800, to be received in installments. The balance as of
December 31, 2000 was R$7,892. The cost of this transaction is represented by
the films owned by the Company.
7. NOTES RECEIVABLE
As part of the payment for the sale of the Company's interest in Galaxy Brasil
Ltda. and TVA Banda C Ltda., the Company received a promissory note from Galaxy
Latin America L.L.C., in the amount of R$49,863, equivalent to US$25,500,000,
maturing on July 28, 2001, subject to interest at LIBID, plus exchange
variation; as of December 31, 2000, these charges amounted to R$4,389. As
mentioned in Note 13.b., the aforementioned promissory note was partially
pledged in guarantee of transactions with certificates issued in the
international market.
4
8. INVESTMENTS
The Company's direct investments in subsidiaries as of December 31, 2000 are
presented as follows:
Number (in
Stockholders' thousands) Provision
Ownership equity Net income of common Equity in for losses on
Capital interest (deficiency in (loss) for shares or income subsidiaries'
Subsidiaries stock (%) net assets) the year quotas (loss) operations
------------ ----- --- ----------- -------- ------ ------ ----------
TVA Distribuidora S.A. 71,768 100 (305,631) (24,978) 71,768 -- (24,978)
TVA Communications Ltd. 36,871 100 266,455 84,698 36,871 84,698 --
TVA Programadora Ltda. 12,117 100 63,867 69,836 12,117 69,836 --
Rede Ajato Ltda. 1,958 100 (17,168) (15,709) 1,958 -- (15,709)
TVA Overseas Ltd. -- 100 (6,505) (6,505) -- -- (6,505)
-------- --------
154,534 (47,192)
======== ========
a. The Company's investments are adjusted according to its interest in
stockholders' equity of its subsidiaries based on their financial
statements prepared in accordance with accounting practices emanating from
Brazilian corporate law, applied on a uniform basis.
b. The "Reserve for losses on subsidiaries' operations", under long-term
liabilities, represents losses on operations of subsidiaries with negative
equity.
c. On November 24, 2000, TVA Programadora Ltda. concluded the sale of the
"Eurochannel" channel. This transaction generated a gain of R$13,316,
recorded as nonoperating income.
d. In July 2000, the subsidiary TVA Inc. sold its subsidiary HBO Brasil
Partners for US$43,000,000 (equivalent to R$76,316), payable in two
installments, the first of US$20,000,000, received upon contract signature,
and the second, of US$23,000,000, through promissory notes issued by the
buyer and maturing in December 2002. The gain on this transaction amounted
to R$72,680, recorded as nonoperating income. In September 2000, the
aforementioned promissory notes were sold to Banco ABN for the net amount
of US$22,144,000.
e. The accumulated balance in the "Reserve for losses on subsidiaries'
operations" related to TVA Distribuidora S.A. includes a balance of
R$14,022 referring to its interest in affiliated company Canbras TVA Cabo
Ltda. as of December 31, 2000 (R$8,468 in 1999); the provision for the year
ended December 31, 2000 amounted to R$5,554 (R$7,927 in 1999).
5
9. GOODWILL ON INVESTMENTS
The Company and its subsidiaries have recorded goodwill on investments, as
follows:
Consolidated
------------
Subsidiaries and affiliates 2000 1999
--------------------------- ---- ----
Comercial Cabo TV Sao Paulo Ltda. 1,070 1,307
TVA Sistema de Televisao S.A. 12,032 14,706
Ype Radio e Televisao Ltda. 3,054 3,732
Canbras TVA Cabo Ltda. 33 41
TVTel Ltda. 1 1
TVA Communications Aruba N.V. 2,302 2,627
TCC TVA Cabo Ltda. 1,514 1,756
CCS Camboriu Cable System
de Telecomunicacoes Ltda. 180 214
TVA Sul Parana Ltda. 2,922 3,462
------ ------
23,108 27,846
====== ======
10. RELATED-PARTY TRANSACTIONS
The following table summarizes the transactions between the Company, its
subsidiaries and affiliates during the year ended December 31, 2000:
Company
-------------------------------------------------
Balance sheet accounts
-------------------------------------------------
Advance
for future Financial
Loans Loans Accounts capital expenses,
Subsidiaries and affiliates receivable payable receivable increase net
--------------------------- ---------- ------- ---------- -------- ---
TVA Sistema de Televisao S.A. -- 8 704 -- --
Editora Abril S.A. -- 272,949 -- -- (53,076)
Canbras TVA Cabo Ltda. 11,459 -- -- -- 1,191
Canbras Participacoes Ltda. 311 -- -- -- --
TV Cabo Santa Branca Comercio Ltda. -- -- -- 2 --
TVA Communications Ltd. 3,325 6 -- -- --
TVA Brasil Radioenlaces Ltda. 26,101 -- -- -- --
Abril S.A. 22,451 -- 75 -- --
TVA Overseas Ltd. 51,354 23,748 -- -- --
TVA Channels Ltda. -- -- 68 -- --
Comercial Cabo TV Sao Paulo Ltda. -- -- 20 -- --
Ype Radio e Televisao Ltda. -- -- 58 -- --
TVA Distribuidora S.A. -- -- 36 619,922 --
TVAPar S.A. -- -- 21 -- --
TVA Programadora Ltda. -- -- 10 18,476 --
Rede Ajato Ltda. -- -- -- 20,971 --
TVA Sistema de Televisao de
Porto Alegre S.A. -- -- 323 -- --
-------- -------- -------- -------- --------
115,001 296,711 1,315 659,371 (51,885)
======== ======== ======== ======== ========
6
Consolidated
---------------------------------------------
Balance sheet accounts
---------------------------------------------
Advance
for future
Loans Loans Accounts capital
Subsidiaries and affiliates receivable payable receivable increase
--------------------------- ---------- ------- ---------- --------
Televisao Abril Ltda. -- 9 45 --
Abril S.A. 22,451 -- 3 --
Televisao Show Time Ltda. -- 93 151 --
Canbras TVA Cabo Ltda. 11,521 13 -- --
Canbras Participacoes Ltda. 311 -- -- --
TV West Entretenimento Ltda. -- -- 12 --
TV Cabo Santa Branca Comercio Ltda. -- -- -- 2
TVA Brasil Radioenlaces Ltda. 26,101 -- 14 --
Editora Abril S.A. -- 273,439 98 --
TVA Network Participacoes S.A. -- 19 30 --
------- ------- ------- -------
60,384 273,573 353 2
======= ======= ======= =======
Consolidated
------------------------------
Financial Sales and
Subsidiaries and affiliates expenses, net costs
--------------------------- ------------- -----
Abril S.A (53,076) 5,403
Canbras TVA Cabo Ltda 1,191 --
------- -------
(51,885) 5,403
======= =======
Except for the loan to TVA Brasil Radioenlaces Ltda., which is not subject to
interest, other loans with subsidiaries and affiliates are subject to market
interest rates.
Related-party transactions for programing sales and costs and printing services
were made at amounts and under terms usual in the market.
The Company and its subsidiaries have guarantees from the parent company Abril
S.A., including letters of credit, in the amount of R$49,863.
7
11. PROPERTY AND EQUIPMENT
Annual
depreciation Consolidated
rates (%) 2000 1999
--------- ------- -------
Buildings 4 4,112 4,112
Machinery and equipment 10 48,872 47,942
Decoders 10 97,369 80,497
Reception equipment 20 114,678 93,175
Cable installations 10 130,829 131,521
Furniture and fixtures 10 2,361 2,261
Vehicles 20 3,559 3,484
Installations 10 2,616 2,427
Telephone sets 10 1,914 1,606
Leasehold improvements 20 - 44 4,871 4,441
EDP equipment 10 13,767 9,327
Rights to use software 20 25,883 12,615
Tools 50 1,115 1,047
-------- --------
451,946 394,455
Accumulated depreciation (158,987) (113,739)
Allowance for equipment losses (10,580) --
Telephone lines 932 1,208
Trademarks and patents 230 241
Construction in progress 1,919 998
Advances to suppliers 1,510 1,032
Other 703 703
-------- --------
287,673 284,898
======== ========
As of December 30, 1999, TVA Sistema de Televisao S.A. revalued its operating
assets, including coaxial cable and optical fiber for transmission, including
connectors, terminals, derivation equipment and projects, totaling 3,124
kilometers of installed cables. As a result, R$36,418 was credited to a
revaluation reserve in stockholders' equity. The subsidiary did not record the
tax effects on this revaluation since it has tax losses not reflected in the
accounting records, which are higher than the tax effects of the revaluation.
12. DEFERRED CHARGES
As of December 31, 2000 and 1999, deferred charges are represented by:
Consolidated
------------
2000 1999
---- ----
Cost of films 22,593 22,593
Financial expenses 94,526 94,526
Depreciation 4,736 4,736
Other 11,402 11,379
Accumulated amortization (73,824) (60,450)
------- -------
59,433 72,784
======= =======
8
13. LOANS AND FINANCING
Consolidated
------------
Current Long term
------- ---------
Financing in foreign currency - senior notes 1,120 93,902
Financing in foreign currency 11,773 3,263
Sinking fund debt 51,775 --
------ ------
64,668 97,165
====== ======
a. On November 26, 1996, the Company obtained funds in the international
market in the amount of US$250 million, equivalent to R$488,850, at the
exchange rate on December 31, 2000. The principal matures on November 26,
2004. Interest thereon is at 12.625% per year, plus exchange rate variation
and is payable May 25 and November 25 of each year, having started on May
25, 1997. On July 28, 1999, the Company and its subsidiary TVA
Communications Ltd (TVAICO), after approval of ANATEL (National
Telecommunications Authority), concluded the sales agreement, dated May 18,
1999, related to the total interest in Galaxy Brasil Ltda., TVA Banda C
Ltda., Galaxy Latin America L.L.C. and Surfin Ltd. These transactions
generated a gain of R$338,948, recorded as nonoperating income in 1999. As
part of the sales agreement involving these investments, on July 28, 1999,
TVAICO made investments in the international market in the amount of
US$131,201,000, equivalent to R$238,379, in senior notes issued by the
Company. This investment was made at a discount of 35% from the face value
of the notes, amounting to US$70,647,000, equivalent to R$118,408, recorded
as nonoperating income in 1999. As a result of this transaction, of the
US$250 million of senior notes originally issued, US$201,848,000 is held in
treasury for future placement in the secondary market.
b. On February 3, 2000, the subsidiary TVA Overseas Ltd. issued securities in
the international market named "sinking fund" in the amount of
US$25,500,000, equivalent to R$49,863, which were acquired by financial
institutions. These securities represented fractions of the promissory note
received by the Company from Galaxy Latin America L.L.C. (see Note 7) and
mature on August 6, 2001. Interest thereon is at 11.5% per year, plus
exchange rate variation, and is payable semiannually, amounting to R$1,912
as of December 31, 2000.
9
Long-term financing matures as follows:
2000
----
2002 3,263
2003 -
2004 93,902
------
97,165
======
14. TAXES PAYABLE
The Company and its subsidiaries have accruals for the following amounts related
to taxes payable:
Consolidated
------------
2000 1999
---- ----
COFINS (tax on revenue) 1,105 19,792
ICMS (State VAT) 37,595 23,420
PIS (tax on revenue) 2,680 7,674
Other 881 527
--------- ---------
42,261 51,413
Current portion (6,805) (10,669)
--------- ---------
Long term 35,456 40,744
========= =========
As a result of the sales agreement for 100% of the interest in Galaxy Brasil
Ltda. and TVA Banda C Ltda., the Company assumed liabilities as of the sale
date, related to taxes, which were accrued and charged against the gain on sale
of the investments in these companies. As of December 31, 2000, the balance
relative to such taxes was R$15,844 (R$13,477 as of December 31, 1999).
The Company has escrow deposits amounting to R$13,058 which will be used to
settle a portion of these liabilities.
10
15. TAX RECOVERY PROGRAM - REFIS
On April 5, 2000, the Company opted for the Government's Tax Recovery Program
(REFIS), implemented by Decree No. 3,342 of January 25, 2000, later converted
into Law No. 9,964 of April 10, 2000, and calculated the tax debts to be paid in
installments as follows:
Restated Balance
principal Amortization 12.31.00
--------- ------------ --------
COFINS/PIS 24,300 (2,521) 21,779
Income tax 4,405 (147) 4,258
------- ------- -------
28,705 (2,668) 26,037
======= ======= =======
Current portion (3,870)
-------
Long-term portion 22,167
=======
The subsidiary TVA Sistemas de Televisao S.A. used its credits for tax losses
and social contribution tax loss carryforwards amounting to R$15,207 for
amortization of interest and fines.
As guarantee of the payment of the debts included in the program, the Company
pledged property items as collateral.
In view of the straight-line characteristic of the financial charges on monthly
installments due, the present value of the debts as of December 31, 2000 is
R$22,430. This calculation was made based on the Company's revenue projections
and considers restatement of the debt based on the Brazilian long-term interest
rate (TJLP) (estimated at 9% per year). As a result, it is expected that the
total debt will be repaid within approximately five years. The current monthly
payment is approximately R$310.
16. RESERVE FOR CONTINGENCIES
Consolidated
------------
2000 1999
---- ----
Labor claims 4,968 4,325
Other 12 --
----- -----
4,980 4,325
===== =====
11
The Company has contingencies referring principally to labor claims which are
not accrued in the financial statements. Amounts for the accrued lawsuits are
considered sufficient by management, based on several factors, including (but
not limited to) legal counsels' opinion, the nature of the lawsuit and
historical experience.
In management's opinion, all lawsuits were properly accrued and in the case of
those for which no accrual was made, management believes that the chances of
loss are remote.
For certain accrued lawsuits, the Company has escrow deposits amounting to
R$2,906.
17. CAPITAL STOCK
The capital stock of the Company as of December 31, 2000 is represented by
226,338,285 registered common shares without par value.
18. FINANCIAL EXPENSES, NET
Consolidated
------------
2000 1999
---- ----
Financial expenses:
Interest (70,978) (83,680)
Exchange variations (19,724) (185,669)
Other (11,357) (4,615)
-------- --------
(102,059) (273,964)
-------- --------
Financial income:
Interest 6,617 5,071
Exchange variations 9,876 51,064
Other 3,663 2,563
-------- --------
20,156 58,698
-------- --------
Financial expenses, net (81,903) (215,266)
======== ========
12
19. INCOME TAX
As of December 31, 2000, the Company had tax loss carryforwards of R$210,964 and
its subsidiaries and affiliates had R$360,029, as follows:
TVA Sistema de Televisao S.A. 290,192
TVA Sul Parana Ltda. 36,313
Rede Ajato Ltda. 19,019
Comercial Cabo TV Sao Paulo Ltda. 466
TVA Distribuidora S.A. 37
TVA Channels Ltda. 12,612
TVA Programadora Ltda. 1,390
-------
360,029
=======
20. NONOPERATING INCOME (EXPENSES)
Company Consolidated
------- ------------
2000 1999 2000 1999
---- ---- ---- ----
Capital gain (loss):
On sale of DTH (765) 220,558 (765) 338,948
On sale of ESPN do Brasil Ltda. -- 5,729 -- 5,729
On sale of HBO Brasil Partners -- -- 72,680 --
On sale of Eurochannel films -- -- 13,316 --
Write-off of investment in TV Filme Inc. -- -- -- (7,236)
Gain on repurchase of senior notes -- -- -- 113,641
Advisory fees related to repurchase of senior notes -- (15,321) -- (14,210)
Provision for equipment loss -- -- (93) 208
Write-off of assets related to cancellations of
subscriptions -- -- (4,886) (19,306)
Write-off of decoders - Digisat operations -- -- -- (33,669)
Write-off of property items -- -- (2,109) --
Provision for decoder loss -- -- (362) --
Advisory fees (2,300) -- (3,334) --
Other -- (776) (1,343) (1,279)
-------- -------- -------- --------
(3,065) 210,190 73,104 382,826
======== ======== ======== ========
21. FINANCIAL INSTRUMENTS
The Company and its subsidiaries have transactions involving financial
instruments as a hedge against fluctuations in international interest rates and
in the valuation of certain financial assets.
13
Temporary cash investments are usually held for periods less than three months,
and the agreed rates reflect normal market conditions as of December 31, 2000.
Note 13 includes detailed information on loans and financing. Securities issued
in the international market are quoted at 90% of face value as of December 31,
2000, representing US$181,663,000, equivalent to R$355,224, for the securities
held by TVAICO. As of December 31, 2000, these securities were recorded by this
subsidiary at US$201,848,000, equivalent to R$394,694.
Except for the loans granted to an affiliate, TVA Brasil Radioenlaces Ltda.,
which are not subject to interest, other loans granted under agreements with
subsidiaries and affiliates are subject to market interest rates.
The market values of other financial instruments for assets and liabilities as
of December 31, 2000 do not differ from the amounts recorded in the financial
statements.
Such operations are performed and controlled based on criteria periodically
reviewed considering financial soundness, reliability and market profile of the
entity with which they are conducted.
22. GUARANTEES
The Company has provided guarantees and letters of credit on behalf of its
subsidiaries and affiliates in the amount of R$6,353.
23. INSURANCE
The policy of the Company and its subsidiaries and affiliates is to maintain
insurance coverage for property and equipment and inventories in amounts
considered sufficient to cover the risks involved. As of December 31, 2000,
insurance coverage amounted to R$82,344 (consolidated).
24. PENSION PLAN
The Company and its subsidiaries are sponsors of the private pension entity,
Abrilprev Sociedade de Previdencia Privada, the primary objective of which is to
provide benefits to employees to supplement those provided by Government social
security. The plan is optional to all employees of the sponsoring entities.
Abrilprev is a defined contribution plan, and the principal actuarial method
used to determine contribution levels is the capitalization method. The plan
costs, borne by both employees and the sponsoring entities, are actuarially
determined on an annual basis as a fixed percentage of payroll of the sponsoring
entities. Retirement benefits granted are based on employees' length of service,
time of contribution to social security, minimum age, and termination of the
employment relationship. In 2000, certain affiliates made contributions to
Abrilprev amounting to R$512. The net asset position of Abrilprev as of December
31, 2000 is sufficient to cover vested and nonvested benefits.
14
25. ABRIL HEALTH CARE PLAN
Abril Health Care Plan has been in operation since February 1996. This plan was
created to provide health care to employees, and their dependents, of Abril
S.A., its subsidiaries and certain affiliated companies. Both, the companies
forming part of the Abril Group and employees thereof contribute monthly to
Associacao Abril de Beneficios, the entity responsible for the administration of
the plan. In 2000, contributions made by certain affiliates amounted to R$1,837.
26. EXPLANATION ADDED FOR TRANSLATION TO ENGLISH
The accompanying financial statements are presented on the basis of accounting
practices emanating from corporate law in Brazil. Certain accounting practices
applied by the Company and its subsidiaries that conform with those accounting
practices in Brazil may not conform with accounting principles generally
accepted in the countries where these financial statements may be used.
* * * * * * * * * * * *
15