BERMUDA
|
0-24796
|
98-0438382
|
(State
or other jurisdiction of incorporation
and
organisation)
|
(Commission
File
Number)
|
(IRS
Employer Identification No.)
|
Clarendon
House, Church Street,
Hamilton
|
|
HM
CX Bermuda
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
(a)
|
Financial
Statements of businesses
acquired
|
(b)
|
Pro
forma financial information
|
(i)
|
Final
calculation of the TV Nova Group purchase price including adjustments
for
movements in working capital and indebtedness;
and
|
(ii)
|
Final
fair valuation of tangible and intangible assets including the TV
Nova
license, trademark, customer relationships and program libraries
and the
final valuation of our call option on the 15% interest of PPF in
the TV
Nova Group.
|
|
Audited
Historical CME
|
Audited
Historical TV Nova Group
|
Pro
Forma Adjustments
|
Pro
Forma Total
|
|||||||||
|
|
|
|
||||||||||
Assets
|
|
|
|
||||||||||
Cash
and cash equivalents
|
152,568
|
28,144
|
(15,090
|
)
(c)
|
165,622
|
||||||||
Accounts
receivable (net of allowances)
|
45,170
|
56,634
|
-
|
101,804
|
|||||||||
Other
current assets
|
67,311
|
31,635
|
(18,368
|
)
(d)
|
80,578
|
||||||||
Total
Current Assets
|
265,049
|
116,413
|
(33,458
|
)
|
348,004
|
||||||||
|
|||||||||||||
Goodwill
|
59,092
|
5,768
|
550,710
|
(b)
|
615,570
|
||||||||
Other
intangibles
|
27,331
|
22,564
|
81,761
|
(b)
|
131,656
|
||||||||
Other
assets
|
93,167
|
27,750
|
(10,770
|
)
(e)
|
110,147
|
||||||||
Total
Assets
|
444,639
|
172,495
|
588,243
|
1,205,377
|
|||||||||
|
|||||||||||||
Liabilities
& Shareholders' Equity
|
|||||||||||||
Accounts
payable and accrued liabilities
|
67,042
|
15,220
|
(10,770
|
) (e)
|
71,492
|
||||||||
Credit
facilities and obligations under capital leases
|
10,472
|
37,430
|
491,703
|
(a)
|
539,605
|
||||||||
Other
current liabilities
|
32,231
|
14,803
|
1,650
|
(b)
|
48,684
|
||||||||
Current
liabilities
|
109,745
|
67,453
|
482,583
|
659,781
|
|||||||||
Accounts
payable and accrued liabilities
|
734
|
-
|
-
|
734
|
|||||||||
Credit
facilities and obligations under capital leases
|
8,898
|
57,673
|
-
|
66,571
|
|||||||||
Other
non-current liabilities
|
9,333
|
1,921
|
21,243
|
(b)
|
32,497
|
||||||||
Total
non-current liabilities
|
18,965
|
59,594
|
21,243
|
99,802
|
|||||||||
Minority
interests in consolidated subsidiaries
|
4,861
|
6,697
|
5,813
|
(f)
|
17,371
|
||||||||
|
|||||||||||||
Shareholder's
Equity
|
|||||||||||||
Class
A Common Stock, $0.08 par value
|
1,684
|
18,956
|
(18,676
|
)
(b)
|
1,964
|
||||||||
Class
B Common Stock, $0.08 par value
|
587
|
-
|
-
|
587
|
|||||||||
Additional
paid-in capital
|
387,305
|
-
|
120,603
|
(b)
|
507,908
|
||||||||
Other
reserves
|
-
|
2,465
|
(2,465
|
)
|
-
|
||||||||
Retained
earnings/(accumulated deficit)
|
(87,468
|
)
|
15,084
|
(18,612
|
)
(a)
|
(90,996
|
)
|
||||||
Accumulated
other comprehensive income/(loss)
|
8,960
|
2,246
|
(2,246
|
)
|
8,960
|
||||||||
Total
shareholders' equity
|
311,068
|
38,751
|
78,604
|
428,423
|
|||||||||
Total
liabilities and shareholders' equity
|
444,639
|
172,495
|
588,243
|
1,205,377
|
|
Audited
Historical CME
|
Audited
Historical TV Nova Group
|
Pro
Forma Adjustments
|
Pro
forma Total
|
|||||||||
Net
revenues
|
182,339
|
207,800
|
-
|
390,139
|
|||||||||
Operating
costs
|
33,615
|
33,212
|
-
|
66,827
|
|||||||||
Cost
of programming
|
71,793
|
60,039
|
-
|
131,832
|
|||||||||
Depreciation
of station fixed assets and other intangibles
|
6,663
|
4,374
|
-
|
11,037
|
|||||||||
Total
station operating costs and expenses
|
112,071
|
97,625
|
-
|
209,696
|
|||||||||
Station
selling, general and administrative expenses
|
22,112
|
15,152
|
-
|
37,264
|
|||||||||
Corporate
operating costs (including non-cash stock based
compensation)
|
29,185
|
-
|
-
|
29,185
|
|||||||||
Amortization
of intangibles
|
231
|
2,306
|
5,893
|
(b)
|
8,430
|
||||||||
Operating
income/(loss)
|
18,740
|
92,717
|
(5,893
|
)
|
105,564
|
||||||||
Interest
income
|
4,318
|
662
|
-
|
4,980
|
|||||||||
Interest
expense
|
(1,203
|
)
|
(8,785
|
)
|
(40,021
|
)
(a)
|
(50,009
|
)
|
|||||
Other
income/(expense)
|
(1,272
|
)
|
103
|
-
|
(1,169
|
)
|
|||||||
Income
from continuing operations before provision for income taxes, minority
interest and equity in income of unconsolidated
affiliates
|
20,583
|
84,697
|
(45,914
|
)
|
59,366
|
||||||||
Provision
for income taxes
|
(11,089
|
)
|
(23,815
|
)
|
9,480
|
(b)
|
(25,424
|
)
|
|||||
Income
from continuing operations before minority interests, equity in income
of
unconsolidated affiliates
|
9,494
|
60,882
|
(36,434
|
)
|
33,942
|
||||||||
Minority
interest in income of consolidated subsidiaries
|
(4,106
|
)
|
(5,838
|
)
|
(9,431
|
)
(f)
|
(19,375
|
)
|
|||||
Equity
in income of unconsolidated affiliates
|
10,619
|
-
|
-
|
10,619
|
|||||||||
Net
income/(loss) from continuing operations
|
16,007
|
55,044
|
(45,865
|
)
|
25,186
|
||||||||
|
|||||||||||||
EPS
- Basic
|
0.57
|
0.80
|
|||||||||||
EPS
- Diluted
|
0.55
|
0.77
|
|||||||||||
Weighted
average common shares - Basic
|
27,871
|
3,500
|
(g)
|
31,371
|
|||||||||
Weighted
average common shares - Diluted
|
29,100
|
3,500
|
(g)
|
32,600
|
(a)
|
The
unaudited condensed pro forma consolidated balance sheet reflects
the
incurrence of US$ 491.7 million of indebtedness to PPF used to complete
the TV Nova Acquisition on May 2, 2005. The unaudited condensed pro
forma
consolidated income statement has used the rates of interest that
apply to
the Euro 370 million (US$502.9 million) of fixed and floating rate
notes
issued on May 5, 2005 rather than the interest rate on the indebtedness
to
PPF due to the short-term and non-recurring nature of this indebtedness.
The notes have been used to repay the indebtedness to PPF and to
pay other
costs associated with the TV Nova Acquisition.
|
Interest
Expense
|
Euro'000
|
Euro'000
|
|||||
Euro
senior fixed rate notes
|
245,000
|
||||||
Interest
expense
|
20,212
|
||||||
Euro
senior floating rate notes
|
125,000
|
||||||
Interest
expense
|
|
9,588
|
|||||
Total
interest expense
|
Euro
29,800
|
||||||
Converted
to US$ as below
|
|
$
38,381
|
(b)
|
The
following is a summary of the preliminary purchase price allocation
relating to the TV Nova Acquisition. This is based on the TV Nova
Acquisition occurring on a pro forma basis at December 31,
2004.
|
|
$'000
|
$'000
|
|||||
Promissory
notes to PPF
|
491,703
|
||||||
Class
A Common Stock
|
120,883
|
(i)
|
|||||
Cancellation
of PPF Receivable
|
18,368
|
|
|||||
Total
consideration
|
630,954
|
||||||
|
|||||||
Transaction
costs
|
11,562
|
||||||
Total
purchase price
|
642,516
|
||||||
|
|||||||
Preliminary
net assets acquired (as of December 31, 2004)
|
32,938
|
||||||
Estimated
fair value adjustments to intangible assets
|
|||||||
License
|
67,840
|
(ii)
|
|||||
Trademark
|
11,768
|
(ii)
|
|||||
Customer
relationships
|
2,153
|
(ii)
|
|||||
Deferred
tax liability on fair value adjustments
|
81,761
|
||||||
Estimated
fair value of net assets acquired
|
(22,893
|
)
(iii)
|
|||||
91,806
|
|||||||
|
|||||||
Goodwill
arising on acquisition
|
550,710
|
(i)
|
The
fair value of the shares of our Class A Common Stock issued to
PPF as part
of the consideration for the TV Nova Acquisition is based on the
average
closing price of a share of our Class A Common Stock before and
after the
terms of the TV Nova Acquisition were agreed in the Framework Agreement
dated December 13, 2004. Utilizing the closing price three days
before and
two days after the December 13, 2004 measurement date results in
an
average closing price of US$34.538,
which
has been used to determine the total value of the consideration
paid in
shares of our Class A Common Stock.
|
Share
capital
|
Actual
|
At
par value
|
|
|||||||
Class
A Common Stock to PPF ('000)
|
3,500
|
3,500
|
||||||||
Measurement
value per share ($)
|
34.538
|
0.08
|
||||||||
Share
consideration ($'000)
|
120,883
|
280
|
|
|||||||
Additional
paid in capital ($’000)
|
120,603
|
(ii)
|
We
estimated the fair values of the intangible assets as listed below.
We
also indicate the range of possible values within which the eventual
fair
value to be determined post acquisition may lie:
|
Broadcasting
License amortization
|
$'000
|
$'000
|
|||||
Additional
value to amortize
|
67,840
|
||||||
Amortize
over (yrs)
|
12
|
|
|||||
Annual
amortization charge to income statement
|
5,653
|
||||||
|
|
||||||
Customer
Relationships amortization
|
|||||||
Additional
value to amortize
|
2,153
|
||||||
Amortize
over (yrs)
|
9
|
|
|||||
Annual
amortization charge to income statement
|
239
|
||||||
Amortization
|
5,893
|
(iii)
|
Deferred
tax relating to the fair value adjustments described above has
been
computed as follows:
|
Deferred
tax liability
|
Current
|
Non-Current
|
|||||||||||
CET21
broadcasting license
|
$’000
|
$’000
|
$’000
|
$’000
|
|||||||||
Increase
in value attributable to CME
|
67,840
|
||||||||||||
Czech
Republic statutory tax rate
|
28.0
|
%
|
|||||||||||
18,995
|
1,583
|
17,412
|
|||||||||||
CET
21 TV Nova trademarks
|
|||||||||||||
Increase
in value attributable to CME
|
11,768
|
||||||||||||
Czech
Republic statutory tax rate
|
28.0
|
%
|
|||||||||||
3,295
|
0
|
3,295
|
|||||||||||
Mag
Media 99 customer relationships
|
|||||||||||||
Increase
in value attributable to CME
|
2,153
|
||||||||||||
Czech
Republic statutory tax rate
|
28.0
|
%
|
|||||||||||
603
|
67
|
536
|
|||||||||||
TOTAL
|
22,893
|
1,650
|
21,243
|
Deferred
tax amortization broadcast license
|
$'000
|
$'000
|
|||||
Additional
value to amortize
|
18,993
|
||||||
Amortize
over (yrs)
|
12
|
||||||
|
1,583
|
||||||
Deferred
tax amortization customer relationships
|
|||||||
Additional
value to amortize
|
603
|
||||||
Amortize
over (yrs)
|
9
|
||||||
|
67
|
||||||
|
|
||||||
Annual
amortization tax credit to income statement
|
1,650
|
Provision
for income taxes
|
$'000
|
$'000
|
|||||
Intercompany
indebtedness
|
329,000
|
||||||
Interest
payment @ 8.50%
|
8.50
|
%
|
|||||
Interest
expense
|
27,965
|
||||||
Czech
Republic statutory tax rate
|
28
|
%
|
|
||||
Tax
relief
|
7,830
|
i.
|
The
Czech tax rate is only 28%;
|
ii.
|
The
thin capitalization rules in the Czech Republic would prevent us
from
claiming full relief on 100% of our borrowings.
|
(c)
|
The
acquisition pro forma adjustment to cash and cash equivalents of
US$15.1
million represents the payment of transaction fees (US$11.6 million)
and
bridge financing commitment costs (US$3.5 million).
|
(d)
|
The
US$18.4 million reduction in other current assets represents the
cancellation of an US$18.4 million receivable due from PPF as part
of
purchase consideration (see note (b)).
|
(e)
|
The
US$10.8 million reduction in other assets reflects the inclusion
of
acquisition costs in the goodwill calculation that we incurred
in the year
ended December 31, 2004 and capitalized on our balance sheet at
December
31, 2004. The reduction in current liabilities of US$10.8 million
represents the payment of those acquisition
costs.
|
(f)
|
The
unaudited condensed pro forma consolidated balance sheet minority
interest
adjustment of US$5.8 million represents PPF’s remaining 15% minority
interest in the TV Nova Group following the TV Nova
Acquisition.
|
TV
Nova Group shareholder's equity
|
$'000
|
$'000
|
|||||
Class
A Common Stock at par value
|
18,956
|
||||||
Retained
earnings/(accumulated deficit)
|
15,084
|
||||||
Other
reserves
|
2,465
|
||||||
Accumulated
other comprehensive income/(loss)
|
2,246
|
|
|||||
Total
shareholders' equity/(deficit)
|
38,751
|
||||||
|
|||||||
PPF
remaining minority interest
|
15
|
%
|
5,813
|
(g)
|
Earnings
per share
|
Date:
July 15, 2005
|
/s/
Wallace Macmillan
|
|
Wallace
Macmillan
|
Vice
President - Finance
|
|
(Principal
Financial Officer and Duly Authorized
Officer)
|