INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Owners
of Playboy TV International, LLC.:
We have audited the accompanying consolidated balance sheets of Playboy TV
International, LLC and subsidiaries (collectively, "Playboy TV International")
as of December 31, 1999 and 2000 and the related consolidated statements of
operations and comprehensive loss, owners' equity and cash flows for the period
from August 31, 1999 (date of commencement) through December 31, 1999 and the
year ended December 31, 2000. These financial statements are the responsibility
of Playboy TV International's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Playboy TV International at
December 31, 1999 and 2000 and the results of its operations and its cash flows
for the period from August 31, 1999 (date of commencement) through December 31,
1999 and the year ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
February 20, 2001
PLAYBOY TV INTERNATIONAL, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 1999 and 2000
(In thousands of U.S. dollars)
December 31, December 31,
1999 2000
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................... $ 2,436 $ 5,549
Accounts receivable, net ............................ 5,331 4,860
Due from related parties ............................ 2,358 3,791
Programming rights, net ............................. 11,232 13,334
Other current assets ................................ 252 1,179
------- -------
Total current assets ............................. 21,609 28,713
PROPERTY AND EQUIPMENT, NET ............................ 1,258 1,399
PROGRAMMING RIGHTS, NET ................................ 41,471 37,724
INVESTMENT IN UNCONSOLIDATED AFFILIATE ................. 3,306 3,306
TRADEMARKS, net ........................................ 11,595 10,396
GOODWILL, net .......................................... 9,673 8,939
OTHER .................................................. 158 138
------- -------
TOTAL .................................................. $89,070 $90,615
======= =======
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................... $ 1,400 $ 1,258
Accrued expenses and other current liabilities ...... 3,080 2,940
Accrued compensation ................................ 16 334
Due to related parties .............................. 2,852 2,789
Current portion of rights acquisition fee payable ... 7,500 5,000
Unearned revenues ................................... 138 588
------- -------
Total current liabilities ........................ 14,986 12,909
RIGHTS ACQUISITION FEE PAYABLE, net of current portion . 45,717 45,039
COMMITMENTS AND CONTINGENCIES (Note 7)
OWNERS' EQUITY ......................................... 28,367 32,667
------- -------
TOTAL .................................................. $89,070 $90,615
======= =======
See notes to consolidated financial statements.
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PLAYBOY TV INTERNATIONAL, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Period from August 31, 1999 (Date of Commencement) through December 31, 1999
and Year Ended December 31, 2000
(In thousands of U.S. dollars)
Period
from August 31, 1999
(Date of Commencement) Year
Through Ended
December 31, 1999 December 31, 2000
---------------------- -----------------
REVENUES:
Subscriber-based fees .......................... $ 6,741 $ 24,584
Advertising .................................... 113 459
Programming rights ............................. 2,328 2,516
Other .......................................... 186 741
-------- --------
Total revenues ................................ 9,368 28,300
-------- --------
OPERATING EXPENSES:
Product, content and technology ................ 4,950 18,534
Marketing and sales ............................ 805 3,323
Corporate and administration ................... 4,746 9,813
Depreciation and amortization .................. 646 2,148
-------- --------
Total operating expenses ...................... 11,147 33,818
-------- --------
OPERATING LOSS ................................... (1,779) (5,518)
-------- --------
OTHER INCOME (EXPENSE):
Interest expense ............................... (1,285) (4,322)
Interest income ................................ 35 213
Other .......................................... -- (308)
-------- --------
Other income (expense), net ................... (1,250) (4,417)
-------- --------
NET LOSS ......................................... (3,029) (9,935)
OTHER COMPREHENSIVE INCOME - Foreign currency
translation .................................... 189 32
-------- --------
COMPREHENSIVE LOSS ............................... $ (2,840) $ (9,903)
======== ========
See notes to consolidated financial statements.
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PLAYBOY TV INTERNATIONAL, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OWNERS' EQUITY
Period from August 31, 1999 (Date of Commencement) through December 31, 1999
and Year Ended December 31, 2000
(In thousands of U.S. dollars)
Accumulated
Cisneros Playboy Other
Group Entertainment Comprehensive
Affiliate Group, Inc. Income Total
--------- ------------- ------------- -----
INITIAL CASH CAPITAL CONTRIBUTIONS ......... $ 33,996 $ 8,446 $ -- $ 42,442
Adjustment for historical carryover basis
(see Note 1) .......................... -- (11,235) -- (11,235)
Foreign currency translation ............ -- -- 189 189
Net loss ................................ (2,426) (603) -- (3,029)
-------- -------- -------- --------
BALANCE, DECEMBER 31, 1999 ................. 31,570 (3,392) 189 28,367
Capital contributions ................... 11,377 2,826 -- 14,203
Foreign currency translation ............ -- -- 32 32
Net loss ................................ (7,958) (1,977) -- (9,935)
-------- -------- -------- --------
BALANCE, DECEMBER 31 2000 .................. $ 34,989 $ (2,543) $ 221 $ 32,667
======== ======== ======== ========
See notes to consolidated financial statements.
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PLAYBOY TV INTERNATIONAL, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period from August 31, 1999 (Date of Commencement) through December 31, 1999
and Year Ended December 31, 2000
(In thousands of U.S. dollars)
Period from
August 31, 1999
(Date of Commencement) Year
through Ended
December 31, 1999 December 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ...................................................... $ (3,029) $ (9,935)
Adjustments to reconcile net loss to net cash used in operating
activities:
Amortization of programming rights ......................... 3,909 14,293
Depreciation and amortization .............................. 646 2,148
Accretion of interest expense .............................. 1,285 4,322
Changes in operating assets and liabilities:
Accounts receivable, net ................................... (2,085) 471
Due from related parties ................................... (2,358) (1,433)
Acquisition of programming rights .......................... (9,097) (12,648)
Other assets ............................................... (342) (907)
Accounts payable ........................................... 410 (142)
Accrued expenses and other current liabilities ............. 1,184 (140)
Accrued compensation ....................................... 16 318
Due to related parties ..................................... (1,018) (63)
Unearned revenue ........................................... 138 450
-------- --------
Net cash used in operating activities ......................... (10,341) (3,266)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment ...................... (1,164) (634)
Net cash acquired in acquisition ........................... 1,310 --
-------- --------
Net cash provided by (used in) investing activities ........... 146 (634)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions ...................................... 42,442 14,203
Payment of rights acquisition fee payable .................. (30,000) (7,500)
-------- --------
Net cash provided by financing activities ..................... 12,442 6,703
-------- --------
EFFECT OF FOREIGN CURRENCY TRANSLATION ........................ 189 310
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS ..................... 2,436 3,113
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ................ -- 2,436
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ...................... $ 2,436 $ 5,549
======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Acquisition of certain net assets as described in Note 1
See notes to consolidated financial statements.
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PLAYBOY TV INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from August 31, 1999 (Date of Commencement) through December 31, 1999
and Year Ended December 31, 2000
(In thousands of U.S. dollars)
1. GENERAL AND ORGANIZATION
General -- Playboy TV International, LLC and subsidiaries (collectively,
"Playboy TV International"), a Delaware limited liability company, were
created to own and operate on an exclusive basis adult-oriented television
services worldwide outside of North America and Latin America under the
Playboy TV and Spice brand names. Playboy TV International presently owns
and operates an adult-oriented television service in the United Kingdom.
Playboy TV International also owns a minority interest (19.9%) in an
adult-oriented television service in Japan. Playboy TV International
generates a significant portion of its revenues from subscriber-based fees
charged to cable system and direct-to-home operators that distribute
Playboy TV International's branded television channels. Playboy TV
International also derives revenues from the licensing of programming
rights.
Playboy TV International's business plan provides for operating losses in
the initial years, requires further capital contributions, and is
ultimately expected to result in positive cash flow. The funding of the
capital requirements of Playboy TV International is established annually
in connection with the approval of the business plan and annual budget.
There can be no assurance, however, that Playboy TV International's
business plan and cash flow projections will be met.
Organization -- Playboy TV International was formed in June 1999 by a
member of the Cisneros Group and Playboy Entertainment Group, Inc.
("PEGI") with initial cash capital contributions of $33,996 and $8,446,
respectively. The "Cisneros Group" is a name used to describe a group of
investments, joint ventures, strategic alliances and companies that are
engaged in diversified consumer businesses, including broadcast and pay
television, direct-to-home satellite television, content production and
other entertainment, media and communication enterprises, and that are
associated with Ricardo J. and Gustavo A. Cisneros and trusts established
by them for the benefit of themselves and members of their families. A
member of the Cisneros Group acquired an 80.1% interest in Playboy TV
International and PEGI acquired a 19.9% interest. The net income or loss
of Playboy TV International is allocated to the owners in accordance with
their respective ownership interests. PEGI has substantive participating
rights, including the approval of the annual budget, and has the option to
increase its equity interest in Playboy TV International up to 50% by
purchasing a portion of the member of the Cisneros Group's interest in
Playboy TV International at a price governed by the terms of the operating
agreement. This option may be exercised on the earlier of the last day of
the tenth year following the formation of Playboy TV International and 30
days after the date on which Playboy TV International has had positive
cash EBITDA for two consecutive fiscal quarters. Until August 2003, the
exercise price for this "buy-up" right increases over time and is based on
the price of the initial investment in Playboy TV International plus
interest. From August 2003 through August 2009, the exercise price is
based on the fair market value of Playboy TV International at the time of
exercise. The exercise price may be paid in cash or shares of PEGI's
parent company.
On August 31, 1999 (date of commencement), Playboy TV International
entered into several agreements in which, among other things, Playboy TV
International acquired certain assets, subject to certain liabilities,
from PEGI and PEGI's parent company, including the right to use certain
trademarks for a specified number of years and a 100% ownership interest
in a subsidiary in the United Kingdom ("U.K. Subsidiary"). The following
is a summary of the assets acquired, liabilities assumed and consideration
paid:
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PLAYBOY TV INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from August 31, 1999 (Date of Commencement) through December 31, 1999
and Year Ended December 31, 2000
(In thousands of U.S. dollars)
Current assets, other than programming rights ........... $ 4,556
Programming rights ...................................... 47,515
Investment in unconsolidated affiliate .................. 3,306
Intangible and other assets ............................. 12,237
--------
Total assets acquired ........................ 67,614
--------
Current liabilities, other than current portion of rights
acquisition fee payable .............................. 6,756
Rights acquisition fee payable .......................... 81,932
--------
Total consideration .......................... 88,688
--------
Excess of consideration ................................. 21,074
Adjustment for historical carryover basis ............... (11,235)
--------
Excess cost over net assets
acquired (goodwill)
$ 9,839
The above transaction was recorded in the accompanying consolidated
financial statements by carrying over PEGI's historical basis in the net
assets sold to the extent that PEGI continues to have an interest in those
assets (i.e., 19.9%). The net assets attributable to the Cisneros Group
were recorded at their estimated fair value.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements of
Playboy TV International include the accounts of Playboy TV International,
LLC and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Use of Estimates -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fair Value of Financial Instruments -- The fair value of financial
instruments held by Playboy TV International is based on a number of
factors and assumptions and may not necessarily be representative of the
actual gains or losses that may be realized upon settlement. The carrying
amount of cash equivalents, accounts receivable and payable, accrued
expenses, due to related parties and other current liabilities
approximates their fair value due to their short-term nature. The carrying
amount of the rights acquisition fee payable approximates fair value as
determined based on rates estimated by Playboy TV International to be
currently available from other lenders.
Foreign Currency Translation-- The accounts of the U.K. Subsidiary are
translated into U.S. dollars in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 52, Foreign
Currency Translation. Management has determined that the pound is the
functional currency of the U.K. Subsidiary. Certain assets and liabilities
of the U.K. Subsidiary are denominated in currencies other than the
functional currency. Transaction gains and losses on these assets and
liabilities are included in the results of operations for the relevant
period.
- 7 -
PLAYBOY TV INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from August 31, 1999 (Date of Commencement) through December 31, 1999
and Year Ended December 31, 2000
(In thousands of U.S. dollars)
Risk Management -- Playboy TV International has international operations.
As a result, Playboy TV International's revenues may be adversely affected
by changes in international market conditions. Playboy TV International
does not have significant foreign currency risk because the majority of
its assets are non-monetary in nature and the majority of its liabilities
are denominated in U.S. dollars. In addition, Playboy TV International
does not have interest rate risk exposure. Accordingly, Playboy TV
International does not enter into derivative transactions to hedge against
these potential risks. As a result, the January 1, 2001 implementation of
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 138, is not expected to have a material
impact on Playboy TV International's consolidated financial position,
results of operations or cash flows.
Cash and Cash Equivalents -- Cash and cash equivalents include cash and
interest-bearing deposits held in banks with an original maturity date of
three months or less when acquired.
Allowance for Doubtful Accounts Receivable -- Playboy TV International
carries accounts receivable at the amount it deems to be collectible.
Accordingly, Playboy TV International provides allowances for accounts
receivable deemed to be uncollectible based on management's best
estimates. Recoveries are recognized in the period they are received. The
ultimate amount of accounts receivable that become uncollectible could
differ from the estimated amount. The activity for the allowance for
doubtful accounts receivable is as follows:
Period from
August 31, 1999
(Date of Commencement) Year Ended
through December 31,
December 31, 1999 2000
--------------------- ------------
Beginning balance ........... $ -- $ 144
Provision ................... 144 205
Write-offs, net of recoveries -- (163)
----------- -----------
Ending balance .............. $ 144 $ 186
=========== ===========
Programming Rights -- Programming rights consist of the right to broadcast
and distribute acquired or licensed television content and related rights.
Programming rights and the related obligations are recorded at gross
contract prices. The costs are amortized on varying bases related to the
license periods, anticipated usage of the programs and the expected
revenues to be derived from the licensing of rights to third parties. In
the event that an acquired program is replaced and no longer used or
otherwise deemed to be impaired, Playboy TV International reduces the
carrying value of the related programming rights accordingly. Programming
rights are segregated on the balance sheet between current and non-current
based on management's estimate of usage. Playboy TV International believes
that these policies conform to Statement of Position No. 00-2, Accounting
by Producers or Distributors of Films.
Property and Equipment -- Property and equipment is stated at cost less
accumulated depreciation and amortization. Property and equipment, other
than leasehold improvements, is depreciated using the straight-line method
over the estimated useful lives of the respective assets, which range from
3 to 5 years. Leasehold improvements are amortized over the lesser of the
term of the lease or the useful life of the respective improvement (from 4
to 5 years).
Investment in Unconsolidated Affiliate -- Investment in unconsolidated
affiliate consists of a 19.9% minority interest in an adult-oriented
television service in Japan. Playboy TV International accounts for this
investment under the cost method of accounting.
- 8 -
PLAYBOY TV INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from August 31, 1999 (Date of Commencement) through December 31, 1999
and Year Ended December 31, 2000
(In thousands of U.S. dollars)
Trademarks and Goodwill-- Trademarks are amortized on a straight-line
basis over their contractual life of 10 years. As of December 31, 1999 and
2000, accumulated amortization of trademarks amounted to $400 and $1,599,
respectively. Goodwill is amortized on a straight-line basis over an
estimated life of 20 years. As of December 31, 1999 and 2000, accumulated
amortization of goodwill amounted to $166 and $622, respectively. The
carrying value of intangible assets is periodically reviewed by management
and impairments, if any, are recognized when the expected future
undiscounted cash flows related to such intangible assets are less than
their carrying value. Measurement of any impairment loss is based on
discounted operating cash flows, which represents management's estimate of
fair value.
Revenue Recognition -- Playboy TV International enters into network
license agreements with cable and direct-to-home distributors pursuant to
which it receives subscriber-based fees. Revenues from subscriber-based
fees are recorded as Playboy TV International provides the television
signal to the distributor or when the license period begins and a
contractual obligation exists. Advertising revenue is recognized at the
time the advertisement is aired. Revenues from programming rights are
recognized when the license period begins and a contractual obligation
exists. Playboy TV International believes that its revenue recognition
policies conform with Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements.
Revenues attributable to any one customer that exceeded 10% amounted to
$4,955 or 53% (representing three customers with 22%, 15% and 16%) and
$6,580 or 23% (representing one customer) for the period from August 31,
1999 (date of commencement) through December 31, 1999 and for the year
ended December 31, 2000, respectively.
Advertising Expenses -- Playboy TV International records advertising
expenses as incurred. Advertising expenses amounted to $792 and $3,156 for
the period from August 31, 1999 (date of commencement) through December
31, 1999 and for the year ended December 31, 2000, respectively.
Income Taxes -- Playboy TV International's subsidiaries that are subject
to income taxes account for income taxes in accordance with the provisions
of SFAS No. 109, Accounting for Income Taxes. SFAS No. 109 requires an
asset and liability approach for differences in financial accounting and
income tax purposes. Under this method, a deferred tax asset or liability
is recognized with respect to all temporary differences between the
carrying amounts and the tax bases of assets and liabilities, and the
benefit from utilizing tax loss carryforwards and asset tax credits is
recognized in the year in which the loss or credit arises (subject to a
valuation allowance with respect to any tax benefits not expected to be
realized). As of December 31, 1999 and 2000, Playboy TV International did
not have any significant deferred tax assets or liabilities.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
December 31, December 31,
1999 2000
------------ ------------
Furniture and equipment ...................... $ 536 $ 1,188
Leasehold improvements ....................... 802 784
------- -------
Total ...................................... 1,338 1,972
Less accumulated depreciation and amortization (80) (573)
------- -------
Property and equipment, net .................. $ 1,258 $ 1,399
======= =======
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PLAYBOY TV INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from August 31, 1999 (Date of Commencement) through December 31, 1999
and Year Ended December 31, 2000
(In thousands of U.S. dollars)
4. RIGHTS ACQUISITION FEE PAYABLE
The rights acquisition fee payable arose in connection with the net assets
acquired as described in Note 1. The rights acquisition fee is
non-interest bearing and has been recorded at its present value using an
imputed interest rate of 8.25%. For the period from August 31, 1999 (date
of commencement) through December 31, 1999 and for the year ended December
31, 2000, imputed interest expense amounted to $1,285 and $4,322,
respectively. The rights acquisition fee matures as follows:
2001............................................. $ 5,000
2002............................................. 7,500
2003............................................. 25,000
2004............................................. 25,000
------------
Total gross payments............................. 62,500
Less amounts representing interest............... (12,461)
-------------
Present value of rights acquisition fee payments. 50,039
Less current portion of rights acquisition fee... (5,000)
------------
Rights acquisition fee, net of current portion... $ 45,039
============
5. RELATED PARTY TRANSACTIONS
Program Supply Agreement -- On August 31, 1999 (date of commencement),
Playboy TV International and PEGI entered into a program supply agreement
pursuant to which Playboy TV International was granted a license to all
new programs produced by PEGI as well as other programs for which PEGI
acquires international rights. In exchange for these rights, Playboy TV
International agreed to pay to PEGI a license fee that is generally
determined as a percentage of PEGI's annual programming costs. For the
period from August 31, 1999 (date of commencement) through December 31,
1999 and for the year ended December 31, 2000, Playboy TV International
acquired $8,644 and $10,154, respectively, of programming pursuant to this
agreement.
Trademark License Agreement -- Playboy TV International entered into a
trademark license agreement with PEGI's parent company ("Licensor") under
which Playboy TV International received the exclusive right to use the
Playboy marks outside the United States, Canada and Latin America in
connection with the operation, distribution and promotion of the Playboy
TV channels and for the licensing of Playboy programming to third parties.
The license fee for the trademark license granted for years one through
ten was included in the purchase price as discussed in Note 1. Beginning
on the eleventh anniversary of the agreement and for each fiscal year
through the end of the 50-year term of the agreement, Playboy TV
International agreed to pay Licensor a license fee based on a percentage
of Playboy TV International's total revenues for that year.
Management Services -- A subsidiary of Ibero-American Media Partners II,
Ltd. ("Ibero-American Media Partners") performs certain "back office"
management services for Playboy TV International. The fees for these
services are determined based on the estimated value of the services
provided and are agreed upon by the owners annually in connection with the
approval of the business plan and annual budget. Management of Playboy TV
International believes that the fees charged for these services are
reasonable. Included in corporate and administration expense for the
period from August 31, 1999 (date of commencement) through December 31,
1999 and for the year ended December 31, 2000 is $30 and $295,
respectively, for management services provided by Ibero-American Media
Partners.
Revenues -- For the period from August 31, 1999 (date of commencement)
through December 31, 1999 and for the year ended December 31, 2000,
Playboy TV International recognized subscriber-based fees totaling $2,623
and $8,187, respectively, from two affiliates. Included in due from
related parties as of December 31, 1999 and as of December 31, 2000 is
$2,358 and $3,791 due from these affiliates.
- 10 -
PLAYBOY TV INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from August 31, 1999 (Date of Commencement) through December 31, 1999
and Year Ended December 31, 2000
(In thousands of U.S. dollars)
6. SUPPLEMENTAL REVENUE INFORMATION
The following presents, on a supplemental basis, Playboy TV
International's revenues based on revenue sources by country/region:
For the period from August 31, 1999 (date of commencement) through
December 31, 1999:
Subscriber- Programming Advertising
Based Fees Rights and Other Total
---------- ----------- ----------- -----
United Kingdom ...... $2,222 $ 95 $ 213 $2,530
Germany ............. -- 1,455 -- 1,455
Latin America ....... 1,573 -- -- 1,573
Iberia .............. 530 -- -- 530
Turkey .............. 425 -- -- 425
Japan ............... 520 -- -- 520
Israel .............. 250 90 -- 340
Scandinavia ......... 267 100 -- 367
Poland .............. -- 210 -- 210
Other ............... 954 378 86 1,418
------ ------ ------ ------
Total ........... $6,741 $2,328 $ 299 $9,368
====== ====== ====== ======
Year ended December 31, 2000:
Subscriber- Programming Advertising
Based Fees Rights and Other Total
---------- ----------- ----------- -----
United Kingdom ...... $11,292 $ 1,069 $ 459 $12,820
Latin America ....... 4,628 -- -- 4,628
Iberia .............. 2,960 -- -- 2,960
Japan ............... 1,607 -- -- 1,607
Turkey .............. 1,163 -- -- 1,163
Scandinavia ......... 1,516 100 -- 1,616
Taiwan ....... ...... 750 -- -- 750
Poland .............. -- 426 -- 426
Israel .............. 410 -- -- 410
Netherlands ......... 93 355 -- 448
Other ............... 165 566 741 1,472
------- ------- ------- -------
Total ........... $24,584 $ 2,516 $ 1,200 $28,300
======= ======= ======= =======
7. COMMITMENTS AND CONTINGENCIES
Leases -- Playboy TV International's headquarter offices are leased
through a subsidiary of Ibero-American Media Partners. In addition,
Playboy TV International leases transponders and office space in the
United Kingdom. Future minimum lease payments under these noncancellable
operating lease agreements are as follows:
- 11 -
PLAYBOY TV INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from August 31, 1999 (Date of Commencement) through December 31, 1999
and Year Ended December 31, 2000
(In thousands of U.S. dollars)
Year Ended December 31,
2001.......................... $ 538
2002.......................... 538
2003.......................... 522
2004.......................... 346
----------
Total...................... $ 1,944
==========
Contingent Acquisition Payment -- As part of the acquisition of the U.K.
Subsidiary, Playboy TV International assumed a contingent liability in the
amount of approximately $10,000 payable to the previous shareholders
(prior to PEGI) of the U.K. Subsidiary. This amount is payable from future
profits of the U.K. Subsidiary and is therefore contingent upon the
ability of the U.K. Subsidiary to make profits as defined in the
applicable agreement. As of December 31, 2000, this contingency had not
been resolved and, accordingly, a liability had not been recorded.
8. PROPOSED TRANSACTION
Claxson Interactive Group Inc. ("Claxson") was incorporated as an
international business company under British Virgin Islands Law on October
16, 2000. In connection with a combination agreement executed by a
shareholder of Playboy TV International, certain subsidiaries of the
shareholder, including the subsidiaries that hold the interest in Playboy
TV International, will be transferred to Claxson in exchange for Class A
common shares of Claxson. As part of this transaction, it is contemplated
that the operations of three affiliates, Playboy TV Latin America, LLC,
Playboy TV B.V. and PTVLA U.S., LLC, will be integrated with the
operations of Playboy TV International.
* * * * * *
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