================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
TV FILME, INC.
(Exact name of Registrant as Specified in its Charter)
COMMISSION FILE NUMBER : 0-28670
DELAWARE 98-0160214
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
C/O ITSA-INTERCONTINENTAL TELECOMUNICACOES LTDA.
SCS, QUADRA 07-Bl.A
ED. EXECUTIVE TOWER
SALA 601
70.300-911 BRASILIA-DF
BRAZIL
(Address, Including Zip Code, of Principal Executive Offices)
011-55-61-314-9908
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the 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 such 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. [ x ] Yes [ ] 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
Common Stock, par value $.01 10,189,296 shares
per share. as of August 11, 1997.
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<PAGE>
<TABLE>
<CAPTION>
TV FILME, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
ITEM 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1996
and June 30, 1997 (Unaudited)......................................................................2
Unaudited Consolidated Statements of Operations for the Three and Six Months Ended
June 30, 1996 and the Three and Six Months Ended June 30, 1997.....................................3
Unaudited Consolidated Statement of Changes in Stockholders' Equity
at June 30, 1997...................................................................................4
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1996 and the Six Months Ended June 30, 1997...............................................5
Notes to Unaudited Consolidated Financial Statements...............................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................................................10
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk.........................................14
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.................................................................................14
ITEM 2. Changes in Securities.............................................................................14
ITEM 3. Default Upon Senior Securities....................................................................14
ITEM 4. Submission of Matters to a Vote of Security-Holders...............................................14
ITEM 5. Other Information.................................................................................14
ITEM 6. Exhibits and Reports on Form 8-K..................................................................14
SIGNATURES
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
TV FILME, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30,
1996 1997
---------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................ $ 116,355 $ 98,587
Accounts receivable, net ............................. 3,607 6,817
Supplies ............................................. 2,721 3,537
Prepaid expenses and other current assets ............ 1,175 1,821
Accrued interest receivable .......................... -- 245
Pledged securities-current ........................... 16,159 16,645
--------- ---------
Total current assets ............................. 140,017 127,652
Property, plant and equipment, net ...................... 38,333 51,646
Pledged securities ...................................... 17,353 8,755
Debt issuance costs ..................................... 6,036 6,363
Other assets ............................................ 1,190 1,155
--------- ---------
Total assets ..................................... $ 202,929 $ 195,571
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................ $ 11,106 $ 10,192
Short-term debt ......................................... 2,926 2,926
Payroll and other benefits payable ...................... 1,538 2,158
Accrued interest payable ................................ 572 946
Accrued liabilities and taxes payable ................... 412 535
Payables to affiliates-current .......................... 200 200
--------- ---------
Total current liabilities ........................ 16,754 16,957
Payables to affiliates-long term ........................ 200 0
Deferred installation fees .............................. 8,227 8,021
Senior Notes ............................................ 140,000 140,000
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000
shares authorized, no shares issued ................ -- --
Common stock, $.01 par value, 50,000,000
shares authorized, 10,166,176 and 10,189,296
shares issued and outstanding ...................... 102 102
Additional paid-in capital ......................... 41,825 41,825
Deficit ............................................ (4,179) (11,334)
--------- ---------
Total stockholders' equity ....................... 37,748 30,593
--------- ---------
Total liabilities and stockholders' equity ....... $ 202,929 $ 195,571
========= =========
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
<CAPTION>
TV FILME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- --------------------------
1996 1997 1996 1997
------ ------ ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues ................................................... $ 6,781 $ 12,237 $ 12,633 $ 23,417
Operating costs and expenses:
System operating - Note 2 ............................... 1,833 4,453 3,416 8,150
Selling, general and administrative ..................... 3,884 6,265 7,194 11,741
Depreciation and amortization ........................... 1,326 2,823 2,424 5,127
-------- -------- -------- --------
Total operating costs and expenses ................... 7,043 13,541 13,034 25,018
-------- -------- -------- --------
Operating loss ....................................... (262) (1,304) (401) (1,601)
Other income (expense):
Interest expense - Note 2 ............................... (48) (4,782) (422) (9,690)
Interest income ......................................... 0 2,288 0 5,236
Other expense ........................................... 1 0 11 (1)
Exchange and translation gains (losses) ................. (2) (361) 42 (1,099)
-------- -------- -------- --------
Total other income (expense) ......................... (49) (2,855) (369) (5,554)
-------- -------- -------- --------
Net income (loss) .......................................... $ (311) $ (4,159) $ (770) $ (7,155)
======== ======== ======== ========
Net income (loss) per share ................................ $ (0.04) $ (0.38) $ (0.10) $ (0.65)
======== ======== ======== ========
Weighted average number of shares of
common stock and common stock
equivalents .............................................. 8,086 11,001 8,086 11,001
======== ======== ======== ========
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
TV FILME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
COMMON STOCK ADDITIONAL
----------------------------- PAID-IN ACCUMULATED
SHARES PAR VALUE CAPITAL DEFICIT TOTAL
-------------- ------------- ----------- ----------- ------------
(IN THOUSANDS, EXCEPT SHARES)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 ..................... 10,166,176 $ 102 $ 41,825 $ (4,179) $ 37,748
Issuance of common stock for payment
of 1996 non-cash compensation ................... 23,120 -- -- -- --
Net loss for the period .......................... -- -- -- (7,155) (7,155)
---------- ---------- ---------- ---------- ----------
BALANCE AT JUNE 30, 1997 ......................... 10,189,296 $ 102 $ 41,825 $ (11,334) $ 30,593
========== ========== ========== ========== ==========
See accompanying notes.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
TV FILME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
-----------------------------------------
1996 1997
-------- --------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss...................................................................... $ (770) $ (7,155)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization............................................ 2,424 5,127
Provision for losses on accounts receivable................................... 524 1,223
Amortization of debt issuance costs........................................... - 390
Increase (decrease) in deferred installation fees............................. 2,150 (206)
Changes in assets and liabilities:
Increase in accounts receivable........................................ (1,887) (4,433)
Increase in supplies................................................... (755) (816)
Decrease (increase) in prepaid expenses and other current assets....... 97 (646)
Increase in accrued interest receivable................................ -- (245)
(Increase) decrease in other assets.................................... (182) 1
Decrease in pledged securities......................................... -- 8,112
Increase (decrease) in accounts payable................................ 86 (914)
Increase in payroll and other benefits payable......................... 423 620
Increase in accrued interest payable................................... - 374
Increase in accrued liabilities and taxes payable...................... 988 123
---------- ----------
Net cash provided by operating activities..................................... 3,098 1,555
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions:
Property, plant and equipment............................................ (10,530) (18,406)
---------- ----------
Net cash used in investing activities......................................... (10,530) (18,406)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Debt issuance costs........................................................... - (717)
Issuance of common stock and warrants......................................... 7,151 0
Increase (decrease) in payables to affiliates................................. 295 (200)
---------- ----------
Net cash provided by financing activities..................................... 7,446 (917)
---------- ----------
Net change in cash and cash equivalents....................................... 14 (17,768)
Cash and cash equivalents at beginning of period.............................. 43 116,355
---------- ----------
Cash and cash equivalents at end of period.................................... $ 57 $ 98,587
========== ==========
Cash paid during the period for:
Interest................................................................. $ 422 $ 8,762
========== ==========
</TABLE>
See accompanying notes.
5
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. COMPANY BACKGROUND
In connection with an initial public offering (the "Initial
Public Offering") of its common stock, $.01 par value per share (the "Common
Stock"), TV Filme, Inc. (the "Company") was formed in April 1996 to become the
holding company of and successor to ITSA-Intercontinental Telecomunicacoes S.A.
and its subsidiaries ("ITSA"). The transfer of ITSA to the Company has been
accounted for in a manner similar to a pooling of interests. ITSA was formed in
May 1994 as a holding company for and successor to TV Filme Servicos de
Telecomunicacoes S.A. ("TVFSA"). The transfer of TVFSA to ITSA has been
accounted for in a manner similar to a pooling of interests.
In connection with the Initial Public Offering, the Company
entered into a restructuring (the "Restructuring") pursuant to which all of the
preferred stock of ITSA was converted into common stock of ITSA, based on the
conversion rates at the date of issuance of the preferred stock. Each share of
common stock of ITSA was exchanged for 1,844 shares of Common Stock of the
Company. As all of the preferred stock of ITSA has been converted and there were
no preferred dividends paid or due as a result of the conversion, all preferred
and common stock issuances of the predecessor companies have been reflected as
issuances of Common Stock of the Company. Prior to the consummation of the
Initial Public Offering and the Restructuring, TVFSA operated the Company's
wireless cable system in Brasilia, and held the licenses to operate the
Company's wireless cable systems in Brasilia, Goiania and Belem. ITSA owned
substantially all of TVFSA, TV Filme Goiania Servicos de Telecomunicacoes Ltda.
("TV Filme Goiania") and TV Filme Belem Servicos de Telecomunicacoes Ltda. ("TV
Filme Belem"). Pursuant to the Restructuring, (i) 51% of the voting stock of
TVFSA was transferred to an entity, all of which is owned by certain existing
shareholders of ITSA who are Brazilian nationals, with ITSA retaining 49% of the
voting stock and 83% of the economic interests in TVFSA; (ii) the operating
assets of the wireless cable system of Brasilia were transferred from TVFSA to
TV Filme Brasilia Servicos de Telecomunicacoes Ltda. ("TV Filme Brasilia"),
which is substantially owned by ITSA; and (iii) TVFSA entered into various
agreements with ITSA and its subsidiaries pursuant to which, among other things,
TVFSA has authorized ITSA to operate the existing wireless cable systems under
its current licenses. As a result of the Restructuring and the Initial Public
Offering, the Company owns 100% of ITSA, which holds 49% of the voting stock and
83% of the economic interests of TVFSA and 100% of TV Filme Brasilia, TV Filme
Goiania and TV Filme Belem.
Accordingly, the consolidated financial statements of the
Company include ITSA and its subsidiaries on a historical basis since May 1994
as though they have been part of the Company for all periods presented. All
significant intercompany transactions and balances have been eliminated in
consolidation.
The Company develops, owns and operates subscription
television systems in mid-sized markets in Brazil. The Company has established
wireless cable operating systems in the cities of Brasilia, Goiania and Belem.
Applications have been made for the Company to operate systems in an additional
27 markets in Brazil. Although the economic situation in Brazil has improved
since July 1994, when the government introduced an economic stabilization plan
designed to reduce the rate of inflation, a return to high levels of inflation
and currency fluctuations could adversely affect the Company's operations.
6
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
B. METHOD OF PRESENTATION
The consolidated financial statements of the Company have been
prepared in accordance with generally accepted accounting principles in the
United States in U.S. dollars. Amounts in Brazilian currency have been
remeasured into U.S. dollars in accordance with the methodology set forth in
Statement of Financial Accounting Standards No. 52 ("SFAS 52") as its applies to
entities operating in highly inflationary economies. Supplies, property, plant
and equipment, intangibles and deferred installation fees and the related income
statement accounts are remeasured at exchange rates in effect when the assets
were acquired or the liabilities were incurred. All other assets and liabilities
are remeasured at year end exchange rates, and all other income and expense
items are remeasured at average exchange rates prevailing during the year.
Remeasurement adjustments are included in exchange and translation gains
(losses).
In management's opinion, all adjustments (consisting only of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the first six months are not necessarily
indicative of the results that may be expected for a full year.
C. NET LOSS PER SHARE
Net loss per share is calculated using the weighted average
number of shares of common stock outstanding during the period together with the
number of shares issuable upon the exercise of options and warrants issued
during the twelve months prior to the filing of the Initial Public Offering. The
computation of fully diluted pro forma net loss per share of common stock was
antidilutive; therefore, the amounts reported for primary and fully diluted loss
per share are the same.
D. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company had an allowance for doubtful accounts of
$666,000 at December 31, 1996 and $1,092,000 at June 30, 1997. Charges to the
allowance during the three months ended June 30, 1997 were $449,000.
E. RECLASSIFICATIONS
Certain 1996 amounts have been reclassified to conform to
1997 presentation.
2. RELATED PARTY TRANSACTIONS
Substantially all programming is supplied by a subsidiary of
Tevecap S.A. ("Tevecap"), a stockholder of the Company, pursuant to a
programming contract. Amounts paid to such affiliate during the three and six
months ended June 30, 1996 and 1997 were approximately $1,400,000 and $2,600,000
and $2,700,000 and $5,300,000, respectively. The Company purchases from Tevecap
a program guide which it distributes to its subscribers monthly. Amounts paid to
Tevecap during the three and six months ended June 30, 1996 and 1997 were
$105,000 and $181,000 and $118,000 and $303,000, respectively.
7
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
The Company purchased two licenses to operate wireless cable
systems from Abril S.A. ("Abril") for $400,000 each, payable in four equal
annual installments, which do not bear interest. The $200,000 which remained
outstanding as of June 30, 1997 is due in February 1998. Since there are no
outstanding borrowings to Tevecap, interest expense paid to Tevecap was $0 for
the six months ended June 30, 1997 compared to $400,000 for the six months ended
June 30, 1996.
The Company purchases equipment and supplies from vendors
under irrevocable letters of credit. Abril and a subsidiary of Tevecap guarantee
such obligations from time to time. Total issued and outstanding letters of
credit at June 30, 1997 were $6,400,000. At June 30, 1997, issued and
outstanding letters of credit secured by affiliates were $4,300,000. The
maturity date of such letters of credit range from 270 days to 360 days.
3. STOCK OPTION PLAN
In connection with the Initial Public Offering, the Board of
Directors of the Company adopted and the stockholders of the Company approved
the 1996 Stock Option Plan (such plan, as subsequently amended in June 1997, is
hereinafter referred to as the "Plan"). The Plan provides for the grant of stock
options to officers, key employees, consultants and directors of the Company.
The Plan is administered by the Compensation Committee of the Board and the
total number of shares of Common Stock for which options may be granted pursuant
to the Plan is 936,432, subject to certain adjustments reflecting changes in the
Company's capitalization. The Plan allows the granting of incentive stock
options, which may not have an exercise price below the greater of par value or
the market value on the date of grant, and non-qualified stock options, which
have no restrictions as to exercise price other than the exercise price cannot
be below par value. All options must be exercised no later than 10 years from
the date of grant. Options to purchase 407,000 shares of Common Stock were
granted upon the consummation of the Initial Public Offering, 297,000 of which
are exercisable at $10.00 per share, and 110,000 of which are exercisable at
$11.00 per share, and which generally vest 20% per year for five years beginning
on the first anniversary of consummation of the Initial Public Offering. Options
to purchase 10,000 shares of Common Stock were granted in each of December 1996
and February 1997 at an exercise price of $11.75. Options to purchase 15,000
shares of Common Stock were granted in July 1997 at an exercise price of
$10.125.
4. LONG-TERM DEBT
On December 20, 1996, the Company issued $140 million principal amount
of 12-7/8% Senior Notes due December 15, 2004 (the "Senior Notes"). The proceeds
of the Senior Notes were loaned to ITSA and evidenced by an intercompany note.
Interest is payable semi-annually in arrears on June 15 and December 15 of each
year, commencing on June 15, 1997. Of the $140 million loaned to ITSA,
approximately $33.5 million was used to purchase U.S. government securities,
scheduled interest and principal payments on which is in an amount sufficient to
provide for payment in full when due of the first four scheduled interest
payments on the Senior Notes. Debt issuance costs are capitalized and amortized
over the period of the debt under the effective yield method.
The Senior Notes are redeemable on or after December 15, 2000 at the
option of the Company, in whole or in part from time to time, at specified
redemption prices declining annually to 100% of the
8
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
principal amount on or after December 15, 2003, plus accrued interest. The
Senior Notes contain certain covenants that, among other things, limit the
ability of the Company to incur additional indebtedness and pay dividends or
make certain other distributions. Upon a change of control, the Company is
required to make an offer to purchase the Senior Notes at a purchase price equal
to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest, if any. In accordance with the covenants of the Senior Notes and the
Company's current level of leverage, at June 30, 1997 it is unable to make any
dividend payments.
The Company believes that the recorded value of the Senior Notes
approximates the fair value at June 30, 1997.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM
THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. THE FOLLOWING
DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, INCLUDED ELSEWHERE IN THIS FORM 10-Q.
RESULTS OF OPERATIONS
Although the Company's financial statements are presented pursuant to
United States generally accepted accounting principles in U.S. dollars, the
Company's transactions are consummated in both REAIS and U.S. dollars. Inflation
and devaluation in Brazil have had, and may continue to have, substantial
effects on the Company's results of operations and financial condition.
See"--Inflation and Exchange Rates."
As a result of the development and rapid growth of the Company's
business during the periods presented, the period-to-period comparisons of the
Company's results of operations are not necessarily meaningful and should not be
relied upon as an indication of future performance.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------------------------
% of % of
1996 REVENUE 1997 REVENUE
---------- ---------- ------- ----------
(In thousands, except subscriber, per share and share data)
<S> <C> <C> <C> <C>
Revenues ................................... $ 6,781 100% $ 12,237 100%
Operating costs and expenses:
System operating .................. 1,833 27% 4,453 36%
Selling, general and administrative 3,884 57% 6,265 51%
Depreciation and amortization ..... 1,326 20% 2,823 23%
--------------------- ---------------------
Total operating costs and
expenses ..................... 7,043 104% 13,541 111%
--------------------- ---------------------
Operating loss ............... (262) (4%) (1,304) (11%)
Interest expense .................. (48) (1%) (4,782) (39%)
Interest income ................... 0 0% 2,288 19%
Other expenses .................... 1 0% 0 0%
Exchange and translation gains
(losses) ......................... (2) 0% (361) (3%)
--------------------- ---------------------
Net loss ................................... $ (311) (4%) $ (4,159) (34%)
==============================================
Net loss per share ......................... $ (0.04) $ (0.38)
======== ========
Weighted average number of common
stock and common stock equivalents
outstanding .............................. 8,086 11,001
======== =======
Other Data:
EBITDA(a) ......................... $ 1,064 1,519
======== =======
Number of subscribers at
end of period ..................... 59,036 103,770
======== =======
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------------------
% of % of
1996 REVENUE 1997 REVENUE
-------- ------- -------- -------
(In thousands, except subscriber, per share and share data)
<S> <C> <C> <C> <C>
Revenues ..................................................... $ 12,633 100% $ 23,417 100%
Operating costs and expenses:
System operating .................................... 3,416 27% 8,150 35%
Selling, general and administrative ................. 7,194 57% 11,741 50%
Depreciation and amortization ....................... 2,424 19% 5,127 22%
---------------------------- ----------------------------
Total operating costs and
expenses ........................................ 13,034 103% 25,018 107%
---------------------------- ----------------------------
Operating loss .................................. (401) (3%) (1,601) (7%)
Interest expense .................................... (422) (3%) (9,690) (41%)
Interest income ..................................... 0 0% 5,236 22%
Other expenses ...................................... 11 0% (1) (0%)
Exchange and translation gains
(losses) ......................................... 42 (0%) (1,099) (5%)
---------------------------- -----------------------------
Net loss ..................................................... $ (770) (6%) $ (7,155) (31%)
============================ ============================
Net loss per share ........................................... $ (0.10) $ (0.65)
========== ==========
Weighted average number of common
stock and common stock equivalents
outstanding ................................................ 8,086 11,001
========== ==========
Other Data:
EBITDA(a) ........................................... $ 2,023 $ 3,526
========== ==========
Number of subscribers at
end of period ....................................... 59,036 103,770
========== ==========
</TABLE>
- --------------
(a) EBITDA is defined as operating loss plus depreciation, amortization and
non-cash charges. While EBITDA should not be construed as a substitute for
operating loss or a better measure of liquidity than cash flow from operating
activities, which are determined in accordance with United States GAAP, it is
included herein to provide additional information regarding the ability of the
Company to meet its capital expenditures, working capital requirements and debt
service. EBITDA, however, is not necessarily a measure of the Company's ability
to fund its cash needs.
REVENUES. The Company's revenues primarily consist of monthly fees paid
by subscribers for the programming package, as well as installation fees
recognized for the period, net of sales taxes. For the three months ended June
30, 1997 compared to the same period in 1996, revenues increased by $5.5
million, or 80%, primarily due to an increase of 45,000 in the average number of
subscribers. This increase was offset, in part, by an increase in taxes on
revenues from approximately 2.7% to 7.7% in Brasilia (effective January 1, 1997)
which represented a net revenue reduction of $0.4 million. For the six months
ended June 30, 1997 compared to the same period in 1996, revenues increased by
approximately $10.8 million, or 85%, primarily due to an increase of 44,000 in
the average number of subscribers. The effect of the Brasilia revenue tax
increase for this period was $0.8 million.
SYSTEM OPERATING EXPENSES. System operating expenses consist of
programming costs (including costs associated with developing and producing
proprietary programming content), costs for the programming guide distributed to
subscribers, a portion of costs of compensation and benefits for the Company's
employees, vehicle rental costs, transmitter site rentals, repair and
maintenance expenditures and service call costs. For the three months ended June
30, 1997 compared with the same period in 1996, system operating expenses
increased by approximately
11
<PAGE>
$2.6 million, or 143%, primarily due to additional programming costs directly
associated with the increase in the Company's installed subscriber base ($1.3
million), costs associated with the development of the Company's proprietary
programming initiatives ($0.2 million), programming guide expenses ($0.2
million) and compensation and benefits ($0.8 million). For the six months ended
June 30, 1997 compared to the same period in 1996, system operating expenses
increased by approximately $4.7 million, or 139%, also due to additional
programming costs directly associated with the increase in the Company's
installed subscriber base ($2.5 million), costs associated with the development
of the Company's proprietary programming initiatives ($0.2 million), programming
guide expenses ($0.2 million) and compensation and benefits ($1.6 million).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the three months
ended June 30, 1997 compared to the same period in 1996, selling, general and
administrative ("SG&A") expenses increased by approximately $2.4 million, or
61%, primarily due to growth in the average number of subscribers. This growth
was supported by an increase in advertising and promotion ($0.6 million) and
resulted in increases in compensation and benefits ($0.5 million), provision for
doubtful accounts ($0.3 million), bank fees ($0.2 million) and all other SG&A
expenses ($0.8 million). For the six months ended June 30, 1997 compared to the
same period in 1996, SG&A expenses increased by approximately $4.5 million, or
63%, also due to growth in the average number of subscribers which growth was
supported by an increase in advertising and promotion ($0.9 million) and
resulted in increases in compensation and benefits ($1.1 million), provision for
doubtful accounts ($0.7 million), bank fees ($0.2 million) and all other SG&A
expenses ($1.6 million).
DEPRECIATION AND AMORTIZATION EXPENSES. Depreciation and amortization
expenses consist primarily of depreciation of decoder boxes, headend facilities
and installation costs. These costs are capitalized and depreciated over a five
year period. For the three months ended June 30, 1997 compared to the same
period in 1996, depreciation and amortization expense increased by $1.5 million,
or 113%. For the six months ended June 30, 1997 compared to the same period in
1996, depreciation and amortization expense increased by $2.7 million, or 112%.
In each case, the increase is primarily due to growth in the number of
subscribers in each of the Company's three operating systems.
OPERATING LOSS. For the three and six month periods ended June 30,
1997, the Company generated a loss of approximately $1.3 million and $1.6
million, respectively, primarily due to expenses in connection with the
development of the Company's business, as explained above. The Company may
continue to generate operating losses as it expands its existing systems and
develops additional systems.
INTEREST EXPENSE. Interest expense increased from the three and six
month periods ended June 30, 1996 to the three and six month periods ended June
30, 1997, primarily as a result of accrued interest associated with the Senior
Notes.
INTEREST INCOME. Interest income increased from the three and six month
periods ended June 30, 1996 to the three and six month periods ended June 30,
1997, primarily as a result of investing a portion of the proceeds from the
Initial Public Offering and the Senior Notes.
EXCHANGE AND TRANSLATION GAINS (LOSSES). Exchange and translation gains
(losses) have arisen primarily as a result of converting short-term investments
and borrowings denominated in REAIS to U.S. dollars in accordance with SFAS No.
52. These amounts can fluctuate significantly as a result of changes in the
exchange rate of the REAL relative to the U.S. dollar. Exchange and translation
losses increased from the three and six months ended June 30, 1996 to the three
and six months ended June 30, 1997 as a result of additional short-term
investments in REAIS.
INCOME TAXES. The Company did not have taxable income during the
six-month period ended June 30, 1997 and expects to generate losses for the
foreseeable future. Effective January 1, 1997, Brazilian effective tax rates
increased from 30.5% to approximately 33.0%.
NET LOSS. As explained above, net loss in the periods presented are
primarily attributable to the significant expenses incurred in connection with
the development of the Company's business and net interest expenses associated
with the Senior Notes.
12
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LIQUIDITY AND CAPITAL RESOURCES
The pay television business is a capital intensive business. The
Company made capital expenditures of approximately $18.4 million in the six
months ended June 30, 1997. Such capital expenditures were financed principally
through the proceeds from offerings of equity and debt. From 1993 through the
first part of 1996, the Company raised an aggregate of approximately $16.8
million through a series of private equity placements to Tevecap and Warburg,
Pincus Investors, L.P. In August 1996, TV Filme completed the Initial Public
Offering with net proceeds to the Company of $24.4 million and in December 1996
TV Filme completed the sale of the Senior Notes. In the past, working capital
requirements have been primarily met by (i) vendor financing which generally
requires payment within 360 days of shipment, some of which has been supported
by irrevocable letters of credit guaranteed by Abril and certain of its
affiliates and (ii) borrowings from Abril and certain of its affiliates. As of
September 30, 1996, the Company had repaid working capital borrowings from Abril
and certain of its affiliates in their entirety with a portion of the net
proceeds from the Initial Public Offering. As a result of the Initial Public
Offering and the Senior Notes offering, the Company does not expect to continue
borrowing from Abril or its affiliates. As of June 30, 1997, the Company has a
payable to Abril of $200,000 in connection with the Company's purchase of the
Belem and Goiania licenses from Abril. Such amount is due in February 1998.
As of June 30, 1997, approximately $6.4 million was outstanding under
letters of credit with maturities ranging from 270 days to 360 days, of which
approximately $4.3 million was guaranteed by affiliates of TV Filme. As of June
30, 1997, the Company had importation lines of credit in the aggregate amount of
$7.0 million with two commercial banks, of which approximately $4.1 million was
available on such date. The Company currently believes that lines of credit,
additional vendor financing and other credit facilities are available on
acceptable terms. As a result of the Initial Public Offering and the Senior
Notes offering, the Company had positive working capital at June 30, 1997 in the
amount of $105.4 million. Net cash provided by operating activities for the
three months ended June 30, 1997 was approximately $0.8 million.
For the second half of 1997, the Company anticipates that its aggregate
capital expenditures in its existing operating markets will be approximately
$16.0 million, comprised primarily of subscriber installation equipment. In
addition to expanding its subscriber base in its existing systems, the Company
is seeking to launch additional systems, and applications have been made for the
Company to operate wireless cable systems in 26 additional markets in Brazil;
however, there can be no assurance as to the grant of any such concessions and
licenses and the timing of any such grants generally. Based on current market
and operating conditions, the Company estimates that the average cost of
launching and deploying any additional analog wireless cable operating system
after the granting of a new license in the Company's application markets could
be up to approximately $15.0 million, including construction of a headend
facility, subscriber-related capital costs and funding initial development costs
and marketing costs and operating losses, depending on factors particular to
each such market. The Company also from time to time may selectively pursue the
acquisition of existing pay television systems, although it currently has no
understanding, commitment or agreement with respect to any such acquisitions.
The Company believes that its current cash and internally generated funds will
be sufficient to fund its cash requirements for at least the next twelve months
and has invested its available cash predominantly in U.S. dollar denominated
short-term marketable securities. As of June 30, 1997, of the Company's $124
million in cash, cash equivalents and pledged securities, $107.6 million was
invested in U.S. dollar denominated securities. In the longer term, the
Company's funding needs are subject to a variety of factors, including the
number and size of new system launches or acquisitions, the implementation of
alternative transmission technologies and the offering of additional
communications services. Accordingly, there can be no assurance that the Company
will be able to meet its funding needs in the longer term.
INFLATION AND EXCHANGE RATES
Inflation and exchange rate variations have had, and may continue to
have, substantial effects on the Company's results of operations and financial
condition. In periods of inflation, many of the Company's expenses will tend to
increase. Generally, in periods of inflation, a company is able to raise its
prices to offset the rise in its expenses and may set its prices without
government regulation. However, under Brazilian law designed to reduce
inflation, the rates which the Company may charge to a particular subscriber may
not be increased until the next anniversary of the subscriber's initial
subscription date. Thus, the Company is less able to offset expense increases
13
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with revenue increases. Accordingly, inflation may have a material adverse
effect on the Company's results of operations and financial condition.
Generally, inflation in Brazil has been accompanied by devaluation of
the Brazilian currency relative to the U.S. dollar. Devaluation of the REAL may
also have an adverse effect on the Company. The Company collects substantially
all of its revenues in REAIS, but pays certain of its expenses, including a
significant portion of its equipment costs, substantially all interest expense
and most of its programming costs, in U.S. dollars. To the extent the REAL
depreciates at a rate greater than the rate at which the Company raises prices,
the value of the Company's revenues (as expressed in U.S. dollars) will be
adversely affected. This effect on the Company's revenues may negatively impact
the Company's ability to fund U.S. dollar-based expenditures. Accordingly,
devaluation of the REAL may have a material adverse effect on the Company's
results of operations and financial condition.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
This requirement is not currently applicable to the Company.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
None.
Item 2. CHANGES IN SECURITIES.
None
Item 3. DEFAULT UPON SENIOR SECURITIES.
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None
Item 5. OTHER INFORMATION.
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
3.1(ii) Amended and Restated Bylaws.
27. Financial Data Schedule.
(b) REPORTS ON FORM 8-K
No reports of Form 8-K were filed by the Company during the quarter
ended June 30, 1997.
14
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SIGNATURES
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.
DATED: August 13, 1997
TV FILME, INC.
(Registrant)
/S/ HERMANO STUDART LINS DE ALBUQUERQUE
Hermano Studart Lins de Albuquerque
Chief Executive Officer (Principal Executive
Officer)
/S/ ALVARO J. AQUIRRE
Alvaro J. Aquirre
Chief Financial Officer (Principal Financial and
Accounting Officer)
15
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EXHIBIT INDEX
SEQUENTIALLY
NO. DESCRIPTION NUMBERED PAGES
- --- ----------- --------------
3.1(ii) Amended and Restated Bylaws
27. Financial Data Schedule
16
AMENDED AND RESTATED
BY-LAWS
OF
TV FILME, INC.
***************************
ARTICLE I
OFFICES
The registered office of TV Filme, Inc. (the "Corporation") shall be
in the City of Dover, County of Kent, State of Delaware. The Corporation also
may have offices at such other places, within or without the State of Delaware,
as the Board of Directors (the "Board") determines from time to time or the
business of the Corporation requires.
ARTICLE II
SEAL
The corporation shall have a corporate seal which shall be in
circular form and have inscribed thereon the name of the Corporation, the year
of its incorporation and the words "CORPORATE SEAL 1996 DELAWARE" and may use
the same by causing it or a facsimile thereof to be impressed or affixed or in
any other manner reproduced upon any paper or document.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Except as otherwise provided in these
By-Laws, all meetings of the stockholders shall be held on such dates and at
such times and places, within or without the State of Delaware, as shall be
determined by the Board or the Chairman and as shall be stated in the notice of
the meeting or in waivers of notice thereof. If the place of any meeting is not
so fixed, it shall be held at the registered office of the Corporation in the
State of Delaware.
Section 2. ANNUAL MEETING. The annual meeting of stockholders for
the election of directors and the transaction of such other proper business as
may be brought before the meeting shall be held on such date after the close of
the Corporation's fiscal year, and at such time, as the Board may from time to
time determine. If the day fixed for the annual meeting
<PAGE>
shall be a legal holiday in the State of Delaware or the state or jurisdiction
where the meeting is to be held, such meeting shall be held on the next
succeeding business day. The purpose of the annual meeting of stockholders shall
be to elect directors and to transact such other business as may properly come
before the meeting pursuant to Article III, Section 10 hereof. If the election
of directors shall not be held on the day designated herein for the annual
meeting of the stockholders, or at any adjournment thereof, the Board shall
cause such election to be held at a special meeting of the stockholders as soon
thereafter as conveniently possible.
Section 3. SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose or purposes, may be called by the Board or the Chairman of the
Board.
Section 4. NOTICE OF MEETINGS. Except as otherwise required by law,
whenever the stockholders are required or permitted to take any action at a
meeting, written notice thereof shall be given, stating the place, date and time
of the meeting and, unless it is the annual meeting, by or at whose direction it
is being issued. The notice also shall designate the place where the
stockholders' list is available for examination, unless the list is kept at the
place where the meeting is to be held. Notice of a special meeting also shall
state the purpose or purposes for which the meeting is called. A copy of the
notice of any meeting shall be delivered personally or shall be mailed, not less
than ten nor more than 60 days before the date of the meeting, to each
stockholder of record entitled to vote at the meeting. If mailed, the notice
shall be given when deposited in the United States mail, postage prepaid, and
shall be directed to each stockholder at his or her address as it appears on the
record of stockholders of the Corporation, or to such other address which such
stockholder may have filed by written request with the secretary of the
Corporation. Notice of any meeting of stockholders shall be deemed waived by any
stockholder who attends the meeting, except when the stockholder attends the
meeting for the express purpose of objecting at the beginning thereof to the
transaction of any business because the meeting is not lawfully called or
convened, or by any stockholder who submits, either before or after the meeting,
a signed waiver of notice. Unless the Board, after the adjournment of a meeting,
shall fix a new record date for the adjourned meeting or unless the adjournment
is for more than 30 days, notice of an adjourned meeting need not be given if
the place, date and time to which the meeting shall be adjourned are announced
at the meeting at which the adjournment is taken.
Section 5. QUORUM. Except as otherwise provided by law or, by the
Certificate of Incorporation of the Corporation, at all meetings of
stockholders, the holders of a majority of the outstanding shares of the
Corporation entitled to vote at the meeting shall be present in person or
represented by proxy in order to constitute a quorum for the transaction of
business. If, however, such quorum shall not be present or represented at any
meeting of the stockholders, the stockholders entitled to vote thereat, present
in person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjournment meeting, a notice of the
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adjourned meeting shall be given to each stockholder of record entitled to vote
at the meeting, subject to the provisions of Section 4 hereof.
Section 6. VOTING. Except as otherwise provided by law or by the
Certificate of Incorporation of the Corporation, at any meeting of the
stockholders every stockholder of record having the right to vote thereat shall
be entitled to one vote for every share of stock standing in his or her name as
of the record date and entitling him or her to so vote. A stockholder may vote
in person or by proxy. Directors shall be elected as provided in Section 3 of
Article IV of these By-Laws. Written ballots shall not be required for voting on
any matter unless ordered by the Secretary of the meeting. Stockholders may act
only at an annual or special meeting and stockholders may not act by written
consent.
Section 7. PROXIES. Every proxy shall be executed in writing
by the stockholder or by his or her attorney-in-fact, or otherwise as provided
in the General Corporation Law of the State of Delaware (the "DGCL").
Section 8. LIST OF STOCKHOLDERS. At least ten days before every
meeting of stockholders, a list of the stockholders (including their addresses)
entitled to vote at the meeting and their record holdings as of the record date
shall be open for examination by any stockholder, for any purpose germane to the
meeting, during ordinary business hours, at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list also shall be kept at and throughout the meeting, and may be inspected
by any stockholder who is present.
Section 9. RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board may fix, in advance, but shall not
be required to, a record date in accordance with the DGCL then in effect.
Section 10. CONDUCT OF MEETINGS. At each meeting of the
stockholders, the Chairman of the Board or, in his or her absence, a director
chosen by a majority of the directors then in office shall act as chairman of
the meeting. The Secretary or, in his or her absence, any person appointed by
the chairman of the meeting shall act as secretary of the meeting and shall keep
the minutes thereof. Except as otherwise provided by law, at any annual or
special meeting of stockholders, only such business shall be conducted as shall
have been properly brought before the meeting. Such business must have either
been: (A) brought before the meeting at the direction of the chairman of the
meeting; or (B) specified in a written notice given by or on behalf of a
stockholder of record on the record date for such meeting entitled to vote
thereat or a duly authorized proxy for such stockholder; PROVIDED, that the
following actions, as described below, are taken. A notice must be delivered
personally to, or mailed to and received at, the principal executive office of
the Corporation, addressed to the attention of the Secretary, not less than 60
days nor more than 90 days prior to the meeting; PROVIDED, HOWEVER, that in the
event
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that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the annual or special
meeting was mailed or such public disclosure was made, whichever first occurs.
Such notice shall set forth: (i) a description of each such item of business
proposed to be brought before the meeting and the reasons for conducting such
business at such meeting; (ii) the name and address of the person proposing to
bring such business before the meeting; (iii) the class and number of shares
held of record, held beneficially and represented by proxy by such person as of
the record date for the meeting (if such date has then been made publicly
available) and as of the date of such notice; and (iv) any material interest of
the stockholder in such item of business. No business shall be brought before
any meeting of stockholders of the Corporation otherwise than as provided in
this Section 10. The chairman of the meeting may, if the facts warrant,
determine that a stockholder proposal was not made in accordance with the
foregoing procedure, and if he or she should so determine, he or she shall so
declare to the meeting and the defective proposal shall be disregarded.
Section 11. INSPECTORS. The Board of Directors shall, in advance of
any meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The Board of Directors may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act. If no inspector or alternate is able to act at a meeting of
stockholders, the chairman of the meeting shall appoint one or more inspectors
to act at the meeting. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his ability.
ARTICLE IV
BOARD
Section 1. NUMBER OF BOARD MEMBERS. The business, property and
affairs of the Corporation shall be managed under the direction of the Board,
which initially shall consist of five directors. Directors need not be
stockholders of the Corporation. The number of directors may be reduced or
increased from time to time by action of a majority of the entire Board, but no
decrease may shorten the term of an incumbent director. The Board is divided
into three classes serving staggered three-year terms. When used in these
By-Laws, the phrase "entire Board" means the total number of directors which the
Corporation would have if there were no vacancies.
Section 2. NOMINATION. Only persons who are nominated in accordance
with the procedures set forth in these By-Laws shall be eligible to serve as
directors of the Corporation. Nominations of persons for election to the Board
of the Corporation may be made at a meeting of stockholders (a) by or at the
direction of the Board or (b) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in this
Section 2, who shall be entitled to vote for the election of directors at the
meeting and who
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<PAGE>
complies with the notice procedures set forth in this Section 2. Such
nominations, other than those made by or at the direction of the Board, shall be
made pursuant to timely notice in writing to the secretary of the Corporation.
To be timely, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the Corporation not less than 60
days nor more than 90 days prior to the meeting; PROVIDED, HOWEVER, that in the
event that less than 70 days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of meeting or such public
disclosure was made. Such stockholder's notice shall set forth (x) as to each
person whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (y) as to the stockholder giving the notice (A) the name
and address, as they appear on the Corporation's books, of such stockholder and
(B) the class and number of shares of the Corporation which are beneficially
owned by such stockholder; and (z) as to the beneficial owner, if any, on whose
behalf the nomination is made, (A) the name and address of such person and (B)
the class and number of shares of the Corporation which are beneficially owned
by such person. At the request of the Board, any person nominated by the Board
for election as a director shall furnish to the Secretary of the Corporation
that information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee. The chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by the By-Laws, and if he
or she should so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded. Notwithstanding the foregoing
provisions of this Section 2, a stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section.
Section 3. ELECTION AND TERM. Except as otherwise provided by law,
by the Certificate of Incorporation of the Corporation or by these By-Laws, the
directors shall be elected at the annual meeting of the stockholders and the
persons receiving the greatest number of votes, up to the number of directors to
be elected, shall be the directors. Subject to a director's earlier death,
resignation or removal as provided in Sections 4 and 5 of this Article IV, each
director shall hold office until his or her successor shall have been duly
elected and shall have qualified.
Section 4. REMOVAL. A director may be removed only at any annual or
special meeting of stockholders, with cause, by the holders of a majority of the
outstanding shares of the Corporation entitled to vote at an election of
directors.
Section 5. RESIGNATIONS. Any director may resign at any time by
giving written notice of his or her resignation to the Corporation. A
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein,
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<PAGE>
immediately upon its receipt, and, unless otherwise specified therein, the
acceptance of a resignation shall not be necessary to make it effective.
Section 6. VACANCIES. Except as otherwise provided by the
Certificate of Incorporation of the Corporation, any vacancy in the Board
arising from an increase in the number of directors or otherwise shall be filled
by the vote of a majority of the directors then in office although less than a
quorum, or by the sole remaining director. Subject to his or her earlier death,
removal or resignation as provided in Sections 4 and 5 of this Article IV, each
director so elected shall hold office until his successor shall have been duly
elected and shall have qualified. A director elected to fill a vacancy resulting
from an increase in the number of directors shall hold office for a term that
shall coincide with the remaining term of the class of directors to which he is
elected. A director elected to fill a vacancy not resulting from an increase in
the number of directors shall have the same remaining term as that of his or her
predecessor. Except in the case of newly created directorships where the
directors fail to fill any such vacancy, stockholders may not fill vacancies on
the Board. In such event, the stockholders may do so at the next annual or
special meeting called for that purpose. If there are no directors in office,
then any officer or any stockholder or an executor, administrator, trustee or
guardian of a stockholder or other fiduciary entrusted with like responsibility
for the person or estate of a stockholder, may call a special meeting of
stockholders for the purpose of electing a new Board.
Section 7. PLACE OF MEETINGS. Except as otherwise provided in these
By-Laws, all meetings of the Board shall be held at such places, within or
without the State of Delaware, as the Board determines from time to time.
Section 8. ANNUAL MEETING. The annual meeting of the Board shall be
held either (a) without notice immediately after the annual meeting of
stockholders and in the same place, or (b) as soon as practicable after the
annual meeting of stockholders on such date and at such time and place as the
Board determines.
Section 9. REGULAR MEETINGS. Regular meetings of the Board shall
be held on such dates and at such places and times as the Board determines.
Notice of regular meetings need not be given, except as otherwise required by
law.
Section 10. SPECIAL MEETINGS. Special meetings of the Board may be
called by the Chairman of the Board and shall be called by the Chairman of the
Board or the Secretary upon the written request of not less than a majority of
the directors. The request shall state the date, time, place and purpose or
purposes of the proposed meeting.
Section 11. NOTICE OF MEETINGS. Notice of each special meeting of
the Board (and of each annual meeting held pursuant to subdivision (b) of
Section 8 of this Article IV) shall be given, not later than 3 days before the
meeting is scheduled to commence, by the Chairman of the Board or the Secretary
and shall state the place, date and time of the meeting. Notice of each meeting
may be delivered to a director by hand or given to a director orally
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(whether by telephone or in person) or mailed or telecopied to a director at his
or her residence or usual place of business, provided, however, that if notice
of less than 7 days is given it may not be mailed. If mailed, the notice shall
be deemed to have been given when deposited in the United States mail, postage
prepaid, and if telecopied, the notice shall be deemed to have been given when
oral confirmation of receipt is given. Notice of any meeting need not be given
to any director who shall submit, either before or after the meeting, a signed
waiver of notice or who shall attend the meeting, except if such director shall
attend for the express purpose of objecting at the beginning thereof to the
transaction of any business because the meeting is not lawfully called or
convened. Notice of any adjourned meeting, including the place, date and time of
the new meeting, shall be given to all directors not present at the time of the
adjournment, as well as to the other directors unless the place, date and time
of the new meeting is announced at the adjourned meeting.
Section 12. QUORUM. Except as otherwise provided by law or these
By-Laws, at all meetings of the Board a majority of the entire Board shall
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at a meeting at which a quorum is present shall be the
act of the Board. A majority of the directors present, whether or not a quorum
is present, may adjourn any meeting to another place, date and time.
Section 13. COMPENSATION. The Board shall have the authority to
fix the compensation of directors, and the directors may be paid their expenses,
if any, for attendance at each meeting of the Board.
Section 14. CHAIRMAN OF THE BOARD. The Board may designate a
Chairman of the Board. The Chairman of the Board shall preside at all meetings
of the Board. He or she shall perform such other duties as the Board may from
time to time assign to him or her.
Section 15. CONDUCT OF MEETINGS. At each meeting of the Board, the
Chairman of the Board or, in his or her absence, the President, or, in his or
her absence, the secretary of the Board or, in his or her absence, a director
chosen by a majority of the directors present shall act as chairman of the
meeting. The Secretary or, in his or her absence, any person appointed by the
secretary of the meeting shall act as secretary of the meeting and keep the
minutes thereof. The order of business at all meetings of the Board shall be as
determined by the chairman of the meeting.
Section 16. COMMITTEES OF THE BOARD. The Board, by resolution
adopted by a majority of the entire Board, may designate an audit committee,
compensation committee, executive committee and other committees, each
consisting of one or more directors. Each committee (including the members
thereof) shall serve at the pleasure of the Board and shall keep minutes of its
meetings and report the same to the Board. The Board may designate one or more
directors as alternate members of any committee. Alternate members may replace
any absent or disqualified member or members at any meeting of a committee.
Except as limited by law, each committee, to the extent provided in the
resolution establishing it, shall have and may exercise all the powers and
authority of the Board with respect to all matters.
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Section 17. OPERATION OF COMMITTEES. A majority of all of the
members of a committee shall constitute a quorum for the transaction of
business, and the vote of a majority of all the members of a committee present
at a meeting at which a quorum is present shall be the act of the committee.
Each committee shall adopt whatever other rules of procedure it determines for
the conduct of its activities.
Section 18. WRITTEN CONSENT TO ACTION IN LIEU OF A MEETING. Any
action required or permitted to be taken at any meeting of the Board or of any
committee may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 19. MEETINGS HELD OTHER THAN IN PERSON. Members of the Board
or any committee may participate in a meeting of the Board or committee, as the
case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
and speak with each other, and such participation shall constitute presence in
person at the meeting.
ARTICLE V
OFFICERS
Section 1. EXECUTIVE OFFICERS, ETC. The executive officers of the
Corporation may include a Chief Executive Officer, a President, a Chief
Financial Officer, a Secretary and a Treasurer. The Board also may elect or
appoint one or more Vice Presidents (any of whom may be designated as Executive
Vice Presidents, Senior Vice Presidents or otherwise), and any other officers it
deems necessary or desirable for the conduct of the business of the Corporation,
each of whom shall have such powers and duties as the Board determines.
Section 2. DUTIES.
(a) CHIEF EXECUTIVE OFFICER. The Chief Executive Officer,
subject to the control of the Board, shall have general supervision, direction
and control of the business and affairs of the Corporation. He shall preside at
all meetings of the stockholders, and in the absence of the Chairman of the
Board, shall preside at all meetings of the Board. He shall execute deeds,
bonds, mortgages and other instruments on behalf of the Corporation, except
where required or permitted by law to be signed and executed otherwise and
except where the signing and execution thereof shall be expressly delegated by
the Board to some other officer or agent of the Corporation. He shall be
ex-officio a member of all the standing committees, if any, shall have the
general powers and duties of management usually vested in the office of the
chief executive officer of a corporation, and shall have such other powers and
duties as from time to time may be assigned to him by the Board or prescribed by
these By-Laws.
(b) THE PRESIDENT. The President shall be the chief operating
officer
-8-
<PAGE>
of the Corporation. The President shall be responsible for the general
management of the business and affairs of the Corporation, subject to the
control of the Chief Executive Officer and the Board, and he shall have such
other powers and duties as from time to time may be assigned to him by the Chief
Executive Officer or the Board or prescribed by these By-Laws.
(c) CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
have responsibility for all financial and accounting matters. The Chief
Financial Officer shall have the general powers and duties usually vested in the
office of the chief financial officer of a corporation, and shall have such
other powers and duties as from time to time may be assigned to him by the Chief
Executive Officer, President or the Board or prescribed by these By-Laws.
(d) THE VICE PRESIDENT. The Vice President or, if there shall
be more than one, the Vice Presidents, if any, in the order of their seniority
or in any other order determined by the Board, shall perform, in the absence or
disability of the President, the duties and exercise the powers of the President
and shall have such other powers and duties as from time to time may be assigned
to him by the Chief Executive Officer, President or the Board or prescribed by
these By-Laws.
(e) THE SECRETARY. Except as otherwise provided in these
By-Laws or as directed by the Board, the Secretary shall attend all meetings of
the stockholders and the Board; shall record the minutes of all proceedings in
books to be kept for that purpose; shall give notice of all meetings of the
stockholders and special meetings of the Board; and shall keep in safe custody
the seal of the Corporation and, when authorized by the Board, shall affix the
same to any corporate instrument. The Secretary shall have such other powers and
duties as from time to time may be assigned to him by the Chief Executive
Officer, President or the Board or prescribed by these By-Laws.
(f) THE TREASURER. Subject to the control of the Board, the
Treasurer shall have the care and custody of the corporate funds and the books
relating thereto; shall perform all other duties incident to the office of
treasurer; and shall have such other powers and duties as from time to time may
be assigned to him by the Chief Executive Officer, President or the Board or
prescribed by these By-Laws.
Section 3. ELECTION; REMOVAL. Subject to his or her earlier death,
resignation or removal, as hereinafter provided, each officer shall hold his or
her office until his or her successor shall have been duly elected and shall
have qualified. Any officer may be removed at any time, with or without cause,
by the Board.
Section 4. RESIGNATIONS. Any officer may resign at any time by
giving written notice of his resignation to the Corporation. A resignation shall
take effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt, and,
unless otherwise specified therein, the acceptance of a resignation shall not be
necessary to make it effective.
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<PAGE>
Section 5. VACANCIES. If an office becomes vacant for any reason,
the Board may fill the vacancy, and each officer so elected shall serve for the
remainder of his or her predecessor's term and until his successor shall have
been elected or appointed and shall have qualified.
ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 1. CERTIFICATES. Certificates for the Corporation's capital
stock shall be in such form as required by law and as approved by the Board.
Each certificate shall be signed in the name of the Corporation by the President
or any Vice President and by the Secretary, the Treasurer or any Assistant
Secretary or any Assistant Treasurer and shall bear the seal of the Corporation
or a facsimile thereof. Any or all of the signatures on a certificate may be a
facsimile. In case any officer, transfer agent or registrar who shall have
signed or whose facsimile signature as placed on any certificate shall have
ceased to be such officer, transfer agent or registrar before the certificate
shall be issued, it may nevertheless be issued by the Corporation with the same
effect as if he or she were such officer, transfer agent or registrar at the
date of the issue.
Section 2. LOST CERTIFICATES, ETC. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of the lost, mutilated, stolen or destroyed certificate, or
his or her legal representatives, to make an affidavit of that fact and to give
the Corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the Corporation on account of the alleged loss,
mutilation, theft or destruction of the certificate or the issuance of a new
certificate.
Section 3. TRANSFERS OF SHARES. Transfers of shares shall be
registered on the books of the Corporation maintained for that purpose after due
presentation of the stock certificates therefor appropriately endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer.
ARTICLE VII
INDEMNIFICATION
Section 1. INDEMNIFICATION. The Corporation shall, to the fullest
extent permitted by the General Corporation Law (including, without limitation,
Section 145 thereof, or other provisions of the laws of Delaware relating to
indemnification of directors and officers as the same may be amended and
supplemented from time to time, indemnify any and all such persons whom it shall
have power to indemnify under the General Corporation Law or such other
provisions of law.
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<PAGE>
Section 2. STATUTORY INDEMNIFICATION. Without limiting the
generality of Section l of this Article VII, to the fullest extent permitted,
and subject to the conditions imposed, by law, and pursuant to Section 145 of
the General Corporation Law unless otherwise determined by the Board:
(i) the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, against reasonable expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or her in connection with such action, suit or proceeding if such person
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful; and
(ii) the Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as director or officer of another corporation, partnership,
joint venture, trust or other enterprise against reasonable expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Corporation, except as otherwise provided by law.
Expenses incurred in defending a civil or criminal action, suit or proceeding
shall (in the case of any action, suit or proceeding against a director or
officer of the Corporation) or may (in the case of any action, suit or
proceeding against a trustee, employee or agent) be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors upon receipt of an undertaking by or on
behalf of the indemnified person to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the Corporation
as authorized in this Article VII.
Section 3. INDEMNIFICATION BY RESOLUTION OF STOCKHOLDERS OR
DIRECTORS OR AGREEMENT. To the fullest extent permitted by law, indemnification
may be granted, and expenses may be advanced, to the persons described in
Section 145 of the General Corporation Law or other provisions of the laws of
Delaware relating to indemnification and advancement of expenses, as from time
to time may be in effect, by (i) a resolution of stockholders, (ii) a resolution
of the Board, or (iii) an agreement providing for such indemnification and
advancement of expenses; PROVIDED that no indemnification may be made to or on
behalf of any person if a judgment or other final adjudication adverse to the
person establishes that such person's acts were committed in bad faith or were
the result of active and deliberate dishonesty
-11-
<PAGE>
and were material to the cause of action so adjudicated, or that such person
personally gained in fact a financial profit or other advantage to which such
person was not legally entitled.
Section 4. GENERAL. It is the intent of this Article VII to require
the Corporation to indemnify the persons referred to herein for judgments,
fines, penalties, amounts paid in settlement and expenses (including attorneys'
fees), and to advance expenses to such persons, in each and every circumstance
in which such indemnification and such advancement of expenses could lawfully be
permitted by express provision of by-laws, and the indemnification and expense
advancement provided by this Article VII shall not be limited by the absence of
an express recital of such circumstances. The indemnification and advancement of
expenses provided by, or granted pursuant to, these By-Laws shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled, whether as a matter of law, under any
provision of the Certificate of Incorporation of the Corporation or these
By-Laws, by agreement, by vote of stockholders or disinterested directors of the
Corporation or otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office.
Section 5. INDEMNIFICATION BENEFITS. Indemnification pursuant to
these By-Laws shall inure to the benefit of the heirs, executors, administrators
and personal representatives of those entitled to indemnification.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. DIVIDENDS, ETC. To the extent permitted by law, the Board
shall have full power and discretion, subject to the provisions of the
Certificate of Incorporation of the Corporation and the terms of any other
corporate document or instrument binding upon the Corporation, to determine
what, if any, dividends or distributions shall be declared and paid or made.
Section 2. FISCAL YEAR. The fiscal year of the Corporation shall
be determined by the Board.
Section 3. VOTING SHARES IN OTHER CORPORATIONS. Unless otherwise
directed by the Board, shares in other corporations which are held by the
Corporation shall be represented and voted only by the Chief Executive Officer
or the President or by a proxy or proxies appointed by him or her.
Section 4. EXECUTION OF DEEDS, CONTRACTS AND OTHER DOCUMENTS. Except
as otherwise provided by the Certificate of Incorporation and the Board, all
deeds and mortgages made by the Corporation and all other written contracts and
agreements to which the Corporation shall be a party may be executed on behalf
of the Corporation by the Chief Executive Officer, the President, the Chief
Financial Officer, or one or more Vice Presidents, if any shall have
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<PAGE>
been elected, and may be attested to and the corporate seal affixed thereto by
the Secretary or Assistant Secretary. The Board may authorize the execution of
deeds, mortgages and all other written contracts and agreements to which the
Corporation may be a party by such other officers, assistant officers or agents,
as may be selected by the Chief Executive Officer, President or Chief Financial
Officer from time to time and with such limitations and restrictions as
authorization may prescribe.
ARTICLE IX
AMENDMENT
By-Laws may be made, altered or repealed by the Board, subject to the
right of stockholders to alter or repeal any By-Laws made by the Board.
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED
CONSOLIDATED BALANCE SHEET OF TV FILME, INC. AT JUNE 30, 1997, AND THE UNAUDITED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 98,587
<SECURITIES> 0
<RECEIVABLES> 7,909
<ALLOWANCES> 1,092
<INVENTORY> 3,537
<CURRENT-ASSETS> 127,652
<PP&E> 64,774
<DEPRECIATION> 13,128
<TOTAL-ASSETS> 195,571
<CURRENT-LIABILITIES> 16,957
<BONDS> 140,000
0
0
<COMMON> 102
<OTHER-SE> 30,491
<TOTAL-LIABILITY-AND-EQUITY> 195,571
<SALES> 23,417
<TOTAL-REVENUES> 23,417
<CGS> 8,150
<TOTAL-COSTS> 10,517
<OTHER-EXPENSES> 5,127
<LOSS-PROVISION> 1,223
<INTEREST-EXPENSE> (9,690)
<INCOME-PRETAX> (7,155)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,155)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (7,155)
<EPS-PRIMARY> (0.65)
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