FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a or 15d - 16 of
the Securities Exchange Act of 1934
For the month of April 1998
Tevecap S.A.
(Exact Name as Specified in its Charter)
Tevecap Inc.
(Translation of Name into English)
SEC FILE NUMBER: 0-22267
Rua do Rocio, 313
Sao Paulo, SP Brazil
04552-904
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under Securities Exchange Act of 1934.
Yes No X
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with rule 12g3-2(b):82 N/A
<PAGE>
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.
TEVECAP S.A.
By: /s/ Jose Augusto P. Moreira
---------------------------
Jose Augusto P. Moreira
Officer
By: /s/ Claudio Cesar D'Emilio
--------------------------
Claudio Cesar D'Emilio
Officer
Date: April 30, 1998
<PAGE>
EXHIBIT LIST
1. One copy of the audited financial statements of Tevecap S.A. prepared in
accordance with Brazilian GAAP for the years ended December 31, 1997 and
1996, published on April 28, 1998, in Brazil, pursuant to certain
requirements of Brazilian law.
<PAGE>
[GRAPHIC OMITTED]
TEVECAP S.A.
REPORT ON
FINANCIAL STATEMENTS
December 31, 1997 and 1996
(Free translation from the
Portuguese language original)
<PAGE>
TEVECAP S.A.
REPORT ON FINANCIAL STATEMENTS
December 31, 1997 and 1996
(Free translation from the Portuguese language original)
-------
CONTENTS
Report of Independent Accountants
Balance Sheets
Statements of Operations
Statements of Changes in Shareholders' Equity
Statements of Changes in Financial Position
Notes to Financial Statements
[GRAPHIC OMITTED]
<PAGE>
Coopers
& Lybrand
Coopers & Lybrand Rua Geraldo Flausino Gomes, 33 telefone (011)5504-8200
Biedermann, Bordasch 04575-900-Sao Paulo-SP-Brazil telefax (011)5505-3355
accountants
REPORT OF INDEPENDENT ACCOUNTANTS
(Free translation from the Portuguese language original)
To the
Shareholders and Directors of
Tevecap S.A.
1 We have examined the balance sheets of TEVECAP S.A. (parent company)
and subsidiaries (consolidated) as of December 31, 1997 and 1996,
presented as per Corporation Law, and the consolidated balance sheets
as of December 31, 1997 and 1996, presented in constant purchasing
power, and the related statements of operations, changes in
shareholders' equity, and changes in financial position for the years
then ended. These financial statements are the responsibility of the
Company's Management. Our responsibility is to express an opinion on
these financial statements based on our audits.
2 We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we: a) plan our work,
considering the materiality of balances, volume of transactions, and
the Company's system of internal accounting control; b) examine, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements; and c) assess the accounting principles used and
significant estimates made by Management, as well as evaluate the
overall financial statement presentation.
3 In our opinion, the financial statements referred to in paragraph 1,
presented as per Corporation Law, present fairly, in all material
respects, the financial position of Tevecap S.A. (parent company) and
subsidiaries (consolidated) as of December 31, 1997 and 1996, and the
results of their operations, changes in their shareholders' equity, and
changes in their financial position for the years then ended, in
accordance with the accounting methodology required by the Brazilian
Corporation Law (Law No. 6.404/76).
1
<PAGE>
4 In our opinion, the financial statements referred to in paragraph 1,
presented in constant purchasing power, present fairly, in all material
respects, the financial position of Tevecap S.A. (parent company) and
subsidiaries (consolidated) as of December 31, 1997 and 1996, and the
results of their operations, changes in their shareholders' equity, and
changes in their financial position for the years then ended, in
accordance with accounting principles generally accepted in Brazil.
Sao Paulo, Brazil
March 20, 1998
(Portuguese language original signed by Marco Antonio Brandao Simurro,
Accountant registered with the Rio de Janeiro Chapter of the Brazilian Regional
Accounting Council - CRC/RJ - under No. 52000 "S" SP 2061 and partner of Coopers
& Lybrand, Biedermann, Bordasch Auditores Independentes, an audit firm
registered with the Sao Paulo Chapter of the CRC under No. SP 8599.)
[GRAPHIC OMITTED]
2
<PAGE>
TEVECAP S.A.
BALANCE SHEETS
December 31, 1997 and 1996
(in thousands of reais)
(Free translation from the Portuguese language original)
-------
ASSETS
<TABLE>
Constant purchasing
Corporation Law power
--------------- -------------------
Parent company Consolidated Consolidated
-------------- ------------ ------------
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Current assets
Cash and cash equivalents 22 107,310 1,868 108,886 1,868 117,321
Accounts receivable (Note 5) - - 48,764 34,119 48,764 36,762
Inventories (Note 6) - - 25,172 12,858 26,331 14,690
Film exhibition rights (Nota 7) - - 3,967 1,905 3,967 2,053
Accounts receivable from affiliated companies
(Note 11) 402 - 8,620 579 8,620 624
Offsettable taxes 1,589 - 2,579 246 2,579 265
Advances to employees and other - - 405 3,704 405 3,991
Prepaid expenses 1,474 1,200 2,226 2,213 2,226 2,384
Other accounts receivable 1,088 1,069 3,508 611 3,508 659
---------- ---------- ---------- ---------- ---------- ----------
Total current assets 4,575 109,579 97,109 165,121 98,268 178,749
---------- ---------- ---------- ---------- ---------- ----------
Long-term assets
Loans and other receivables from
affiliated companies (Note 11) 487,551 65,685 47,109 39,814 47,109 42,898
Advances for future capital increase in
affiliated companies and subsidiaries
(Note 11) 362 278,851 314 3,468 314 3,737
Legal and compulsory deposits (Note 8) - - 2,278 1,133 2,278 1,221
Prepaid expenses 8,722 8,301 8,722 8,301 8,722 8,944
Other accounts receivable - - - 21 - 23
---------- ---------- ---------- ---------- ---------- ----------
Total long-term assets 496,635 352,837 58,423 52,737 58,423 56,823
---------- ---------- ---------- ---------- ---------- ----------
Permanent assets
Property, plant and equipment (Note 12) 13 - 402,940 219,711 439,339 252,678
Investments (Note 9) 97,509 75,466 43,252 24,188 48,095 27,893
Goodwill on investments (Note 10) 30,234 30,580 37,294 39,892 40,246 42,234
Deferred charges (Note 13) - - 103,150 115,721 118,673 128,186
---------- ---------- ---------- ---------- ---------- ----------
Total permanent assets 127,756 106,046 586,636 399,512 646,353 450,991
---------- ---------- ---------- ---------- ---------- ----------
Total assets 628,966 568,462 742,168 617,370 803,044 686,563
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an
integral part of the financial
statements.
3
<PAGE>
TEVECAP S.A.
BALANCE SHEETS
December 31, 1997 and 1996
(in thousands of reais)
(Free translation from the Portuguese language original)
------
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
Constant purchasing
Corporation Law power
--------------- -------------------
Parent company Consolidated Consolidated
-------------- ------------ ------------
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Current liabilities
Bank loans (Note 14) 3,037 3,189 51,820 18,420 51,820 19,847
Film suppliers and licensing - - 30,787 8,030 30,787 8,652
Other suppliers - - 74,755 55,211 74,755 59,488
Accrued payroll and related liabilities - - 7,523 6,429 7,523 6,927
Taxes payable other than income taxes 6 - 14,663 8,477 14,663 9,134
Advance payments received from subscribers - - 6,339 11,177 6,339 12,043
Other accounts payable 285 349 4,072 5,753 4,072 6,199
---------- ---------- ---------- ---------- ---------- ----------
Total current liabilities 3,328 3,538 189,959 113,497 189,959 122,290
---------- ---------- ---------- ---------- ---------- ----------
Long-term liabilities
Loans from affiliated
companies (Note 11) 57,823 6 103,854 190 103,854 205
Bank loans (Note 14) 279,100 259,850 308,412 259,850 308,412 279,980
Loans from shareholders - - - 1,670 - 1,799
Provision for losses on subsidiaries'
operations (Note 9.2) 157,344 69,726 - - - -
Provision for tax and labor
contingencies (Note 8) - - 6,594 5,113 6,594 5,510
Other accounts payable - - - 1,115 - 1,201
---------- ---------- ---------- ---------- ---------- ----------
Total long-term liabilities 494,267 329,582 418,860 267,938 418,860 288,695
---------- ---------- ---------- ---------- ---------- ----------
Minority interest - - 1,978 593 2,582 659
---------- ---------- ---------- ---------- ---------- ----------
Shareholders' equity
Paid-in capital (Note 15) 366,000 366,000 366,000 366,000 430,615 430,615
Accumulated deficit (234,629) (130,658) (234,629) (130,658) (238,972) (155,696)
---------- ---------- ---------- ---------- ---------- ----------
Total shareholders' equity 131,371 235,342 131,371 235,342 191,643 274,919
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities and shareholders' equity 628,966 568,462 742,168 617,370 803,044 686,563
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an
integral part of the financial
statements.
4
<PAGE>
TEVECAP S.A.
STATEMENTS OF OPERATIONS
for the years ended December 31, 1997 and 1996
(in thousands of reais, except for per share data)
(Free translation from the Portuguese language original)
-------
<TABLE>
Constant purchasing
Corporation Law power
--------------- -------------------
Parent company Consolidated Consolidated
-------------- ------------ ------------
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Revenues from services sold - - 398,759 226,929 406,228 250,101
Less - taxes thereon - - (27,683) (14,230) (28,446) (15,770)
---------- ---------- ---------- ---------- ---------- ----------
- - 371,076 212,699 377,782 234,331
Cost of services sold - - (269,110) (137,901) (272,163) (153,748)
---------- ---------- ---------- ---------- ---------- ----------
Gross profit - - 101,966 74,798 105,619 80,583
Operating expenses (income)
Selling - - 73,954 42,783 74,571 46,166
Administrative 3,104 625 62,651 55,768 66,650 62,032
Goodwill amortization 3,598 3,598 4,458 4,250 3,465 4,453
Interest expenses 55,760 16,330 86,046 27,830 57,733 26,793
Interest income 78,917 4,246 16,690 7,820 10,703 7,293
Equity in income of affiliates (Note 9) (36,179) (23,766) (667) (2,950) (329) (3,203)
Provision for losses on subsidiaries'
operations (Note 9) (84,375) (23,948) - - - -
---------- ---------- ---------- ---------- ---------- ----------
Operating loss (104,099) (64,021) (109,120) (50,963) (86,426) (54,771)
Nonperating income (expenses),
net (Note 17) 128 9,797 2,151 (5,698) 635 (4,516)
---------- ---------- ---------- ---------- ---------- ----------
Loss before income taxes (103,971) (54,224) (106,969) (56,661) (85,791) (59,287)
Provision for income taxes - - - (186) - (200)
---------- ---------- ---------- ---------- ---------- ----------
Loss before minority interest (103,971) (54,224) (106,969) (56,847) (85,791) (59,487)
Minority interest - - 2,998 2,623 2,515 2,815
---------- ---------- ---------- ---------- ---------- ----------
Net loss (103,971) (54,224) (103,971) (54,224) (83,276) (56,672)
========== ========== ========== ========== ========== ==========
Loss per share in R$ (Note 3.1.L) (0.5285) (0.2756)
========== ==========
Book value per share in R$ (Note 3.1.L) 0.6678 1.1964
========== ==========
</TABLE>
The accompanying notes are an
integral part of the financial
statements.
5
<PAGE>
TEVECAP S.A.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended December 31, 1997 and 1996
(in thousands of reais)
(Free translation from the Portuguese language original)
-------
Corporation Law
Total
Paid-in Capital Accumulated shareholders'
capital reserves deficit equity
Balances at
December 31, 1995 314,707 51,293 (76,434) 289,566
Capital increase at
April 30, 1996 51,293 (51,293) - -
Net loss - - (54,224) (54,224)
---------- ---------- ---------- ----------
Balances at
December 31, 1996 366,000 - (130,658) 235,342
Net loss - - (103,971) (103,971)
---------- ---------- ---------- ----------
Balances at
December 31, 1997 366,000 - (234,629) 131,371
========== ========== ========== ==========
The accompanying notes are an
integral part of the financial
statements.
6
<PAGE>
TEVECAP S.A.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended December 31, 1997 and 1996
(in thousands of reais)
(Free translation from the Portuguese language original)
-------
Constant purchasing power
Total
Paid-in Accumulated shareholders'
capital deficit equity
Balances at
December 31, 1995 (pro forma) 430,615 (99,023) 331,592
Net loss - (56,673) (56,673)
---------- ------------ -----------
Balances at December 31, 1996 430,615 (155,696) 274,919
Net loss - (83,276) (83,276)
---------- ------------ -----------
Balances at December 31, 1997 430,615 (238,972) 191,643
========== ============ ===========
The accompanying notes are an
integral part of the financial
statements.
7
<PAGE>
TEVECAP S.A.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
for the years ended December 31, 1997 and 1996
(in thousands of reais)
(Free translation from the Portuguese language original)
<TABLE>
Constant purchasing
Corporation Law power
--------------- -------------------
Parent company Consolidated Consolidated
-------------- ------------ ------------
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Sources of funds
Total funds from operations - - 7,241 - 5,359 -
Bank loans, long-term - 259,850 28,553 259,850 29,323 279,980
Loans from affiliated companies 56,920 167,136 98,867 151,046 101,101 167,580
Loans from shareholders - - - 1,670 - 1,799
Decrease in long-term assets of related companies 130,900 142,316 19,049 7,357 19,667 10,690
Adjustment to beginning balance as per CVM
Regulatory Instruction No. 247/96 - - - 10,958 - -
Other - - 3,595 5,142 3,564 11,044
---------- ---------- ---------- ---------- ---------- ----------
Total sources of funds 187,820 569,302 157,305 436,023 159,014 471,093
---------- ---------- ---------- ---------- ---------- ----------
Uses of funds
Total funds used in operations 30,832 3,526 - 5,195 - 2,051
Additions
Property, plant and equipment 13 - 247,251 129,437 250,806 146,584
Deferred charges - - 1,938 5,609 2,002 6,080
Investments 54,851 94,798 19,583 11,858 20,391 12,922
Goodwill 3,251 - 5,672 9,964 5,838 11,056
Long-term assets 203,246 200,496 22,540 18,273 23,281 19,689
Repayment of loans from
affiliated companies - 178,790 4,374 162,414 4,410 177,017
Prepaid expenses 421 8,301 421 8,301 436 8,945
---------- ---------- ---------- ---------- ---------- ----------
Total uses of funds 292,614 485,911 301,779 351,051 307,164 384,344
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net working capital (104,794) 83,391 (144,474) 84,972 (148,150) 86,749
========== ========== ========== ========== ========== ==========
Increase (decrease) in net working
capital represented by:
Current assets:
At end of year 4,575 109,579 97,109 165,121 98,628 178,749
At beginning of year 109,579 22,815 165,121 56,354 178,749 63,290
---------- ---------- ---------- ---------- ---------- ----------
(105,004) 86,764 (68,012) 108,767 (80,481) 115,459
Current liabilities:
At end of year 3,328 3,538 189,959 113,497 189,959 122,290
At beginning of year 3,538 165 113,497 89,702 122,290 93,580
---------- ---------- ---------- ---------- ---------- ----------
(210) 3,373 76,462 23,795 67,669 28,710
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net working capital (104,794) 83,391 (144,474) 84,972 (148,150) 86,749
========== ========== ========== ========== ========== ==========
Statements of funds from (used in)
operating activities
Net loss (103,971) (54,224) (103,971) (54,224) (83,276) (56,672)
Items not requiring outlay of net working capital
Depreciation and amortization - - 54,507 32,318 49,239 37,002
Write-offs of permanent assets, net - - 27,843 - 30,799 -
Goodwill amortization 3,597 3,598 4,458 4,250 3,464 4,453
Equity in income of subsidiaries 36,179 23,766 667 2,950 329 3,203
Provision for losses on subsidiaries'
operations 84,375 23,948 - - - -
Capital gains in subsidiaries and affiliates (128) (9,797) (155) 1,397 (156) 1,456
Monetary variations/net (gains) losses
applicable to long-term (50,884) 9,183 26,890 10,551 7,475 11,122
Increase in long-term provisions - - - 186 - 200
Minority interest - - (2,998) (2,623) (2,515) (2,815)
---------- ---------- ---------- ---------- ---------- ----------
Total (used in) from operations (30,832) (3,526) 7,241 (5,195) 5,359 (2,051)
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an
integral part of the financial
statements.
8
<PAGE>
TEVECAP S.A.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
(in thousands of reais)
(Free translation from the Portuguese language original)
-------
1 Business segment
Tevecap S.A. and subsidiaries provide services related to wireless,
cable and parabolic antenna television systems, including marketing and
advertising, production, licensing, distribution, import and export of domestic
and foreign television programs, and hold interests in other companies,
particularly those engaged in the communications sector.
2 Presentation of the financial statements
2.1 Financial statements as per Corporation Law
The financial statements ( parent company and consolidated) were
prepared in accordance with the accounting methodology required by the
Brazilian Corporation Law and supplementary provisions. Law No.
9.249/95, of December 26, 1995, abolished the balance sheet monetary
restatement as from 1996 for tax and corporate purposes.
2.2 Financial statements in constant purchasing power ("constant currency")
The consolidated financial statements in constant purchasing power were
prepared in accordance with the Corporation Law, adjusted for inflation
following the criteria for preparation of financial statements in
constant purchasing power, as required by CVM (Brazilian Securities and
Exchange Commission) provisions, and monetarily restated through
December 31, 1996, based on the monthly variation in the General Market
Price Index (IGP-M) published by Getulio Vargas Foundation (FGV). The
supplemental
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS, Continued
-------
financial statements are presented for purposes of comparability with
prior-year information, adjusted for inflation. Reconciliation between
net loss and shareholders' equity as per Corporation Law and constant
purchasing power are presented in Note 17.
3 Significant accounting policies
3.1 Financial statements as per Corporation Law
a) Cash and cash equivalents are stated at cost, plus income earned
through the balancesheet dates.
b) Accounts receivable include revenues from subscriptions, hook-up
fee, advertising, and sale of programming.
c) An allowance for doubtful accounts is established on the basis
of receivables overdue for more than 90 days, and is considered
sufficient to cover any losses incurred in realization of such
receivables.
d) Inventories are stated at average acquisition cost, which is
lower than market value.
e) Film exhibition rights are stated at acquisition cost of the
respective contracts, net of the provision for loss. Films
exhibition rights and programming licensing are recognized as
the films and/or programs are shown.
f) Legal and compulsory deposits, as well as provisions for taxes
and contributions, are monetarily restated based on the official
indices established for this purpose.
g) Property, plant and equipment are stated at cost, monetarily
restated through December 31, 1995, less depreciation calculated
using the straight-line method at the rates stated in Note 11,
over the remaining useful lives of the assets.
10
<PAGE>
h) Investments in subsidiaries and significant investments in
affiliates greater than 10% are accounted for by the equity
method. Other investments are presented at cost, monetarily
restated through December 31, 1995, net of a provision for
unrealizable investments, if applicable.
i) Goodwill on investments represents the excess amount paid over
the fair market price of the underlying net assets acquired.
Amortization is computed by the straight-line method over
periods not exceeding ten years.
j) Deferred charges consist primarily of film costs, equipment
depreciation and interest expenses which were deferred based on
the proportion, in percentage terms, of actual number of
subscribers to estimated number of subscribers for determining
the break-even point of the operation. Once the break-even point
was reached, costs and expenses have been amortized based on the
same period (ten years) used to depreciate
transmission/reception equipment. Costs and expenses incurred
after the break- even point is reached are charged to expense as
incurred.
k) Pursuant to CVM Resolution 206 of November 29, 1996, the Company
analyzed the realization of assets as of December 31, 1997 and
concluded that book values are lower than realizable values.
l) Loss and book value per share are calculated on the basis of the
number of outstanding shares at the balance sheet dates.
m) Statement of income
m.1) Advertising revenues and production costs of
advertisement and programming are recognized in income
when ads are aired.
m.2) Subscription revenues are recorded on an accrual basis.
Film and licensing costs are recorded in income
according to the respective revenues.
11
<PAGE>
m.3) Hook-up fees are recorded on the date the equipment is
installed at the subscriber's household. Direct selling
expenses are charged to expense as incurred and
installation costs are capitalized and amortized over
the average period that the Company estimates
subscribers will remain connected.
3.2 Financial statements in constant purchasing power
a) Inflation accounting
The financial statements for the year ended December 31, 1997 and
1996 were prepared in constant purchasing power, based on the
General Market Price Index (IGP-M) published by Getulio Vargas
Foundation (FGV). Fixed interest rate receivables and payables
with future maturities were discounted to present value based on
the variation in daily rates, which approximate the rate set by
the Brazilian Investment Bank Association ( ANBID). The effects
of these adjustments are included in the respective income
statement accounts.
b) Inventories are stated at their monetarily restated average
acquisition cost, which is lower than replacement cost or net
realizable value.
c) Property, plant and equipment are stated at monetarily restated
cost, less depreciation which is calculated under the
straight-line method at the rates stated in Note 11, over the
remaining useful lives of the assets.
d) Investments in subsidiaries and significant investments in
affiliates greater than 10% are accountfor by the equity method.
Other investments are presented at monetarily restated cost, net
of a provision for unrealizable investments, if applicable.
e) Advances from customers are stated at their original amounts,
monetarily restated by reference to the IGP-M variation.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS, Continued
-------
f) Other balance sheet accounts are recorded at their original
amounts since they are expressed in constant currency of
December 31, 1997.
g) Statement of operations
The statement of operations accounts are monetarily restated, as
indicated in item 3.2.a:
g.1) Cost of services sold is restated through the balance
sheet date.
g.2) Deferred expenses and advances from customers are
monetarily restated, the effects of which are included
in the respective statement of operations accounts.
g.3) Equity in income/(losses) of subsidiaries and affiliated
companies is restated through the balance sheet dates.
g.4) Fixed interest rate receivables and payables are
recorded at present value in the income or expense
accounts, based on the variation in the daily rates
which approximate the ANBID rate prevailing on the
transaction date.Accretion of the related amounts are
recorded as income or expenses in subsequent months, and
offset against inflation gains or losses generated by
beginning balances of receivables and payables in the
same period, calculated by reference to the IGP-M
variation.
3.3 Consolidated financial statements
The consolidated financial statements comprise Tevecap S.A. and the
following subsidiaries:
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS, Continued
-------
Tevecap S.A.
interest %
----------
1997 1996
TVA Communications Ltd. 100.00 100.00
TVA Communications Aruba N.V. 100.00 100.00
Ype Radio e Televisao Ltda. 100.00 48.90
Galaxy Brasil S.A. 100.00 100.00
TVA Sistema de Televisao S.A. 98.00 98.00
TVA TCG Sistema de Televisao de Porto Alegre S.A. 100.00 100.00
ESPN do Brasil Ltda. 50.00 50.00 (b)
TVA Sul Participacoes S.A. 86.00 87.00
TV Alfa Cabo Ltda. - 87.00 (c)
TCC TV a Cabo Ltda. - 87.00 (c)
CCS Camboriu Cable System de Telecomunicacoes Ltda. 60.00 52.00 (a)
TVA Sul Parana Ltda. 100.00 87.00 (a)
TVA Sul Santa Catarina Ltda. 100.00 87.00 (a)
TVA Sul Foz do Iguacu Ltda. 100.00 87.00 (a)
(a) Indirect investment through subsidiary TVA Sul Participacoes
S.A.
(b) Company proportionally consolidated.
(c) Companies merged into TVA Sul Parana Ltda.
(d) Investments in subsidiaries, equity in income/(losses) of
subsidiaries and affiliated companies, provision for losses on
subsidiaries' operations, receivables and payables related to
intercompany transactions are eliminated, either totally or
proportionally to the parent company interest, whenever
applicable.
(e) Minority interest is calculated based on the proportion of
minority interest percentage in the net equity of the respective
company.
14
<PAGE>
4 Accounting reclassifications
As from the year ended December 31, 1997, Tevecap S.A. and subsidiaries
changed the method for recording service charges. As a consequence, bank
service charges in the amount of R$3.855 consolidated, as per
Corporation Law, in constant purchasing power, are recorded as selling
and administrative expenses. Previously, such charges were recorded as
interest expenses.
In order to provide users with a better understanding of the financial
statements (parent company and consolidated) for 1997 and 1996, the
aforementioned reclassifications are reflected in the Company's
statement of operations for the year ended December 31, 1996, on the
same basis of the statement of operations prepared for 1997. Such
reclassifications do not have any effect on net loss for the year ended
December 31, 1997.
5 Accounts receivable
Consolidated
---------------------------------------
Constant
Corporation Law purchasing power
--------------- ----------------
1997 1996 1997 1996
Subscriptions 32,450 9,143 32,450 9,851
Hook-up fees 18,549 20,443 18,549 22,027
Advertising and programming 5,456 4,210 5,456 4,536
Barters 7,012 5,827 7,012 6,278
Other accounts receivable 2,556 479 2,556 516
---------- ---------- ---------- ----------
66,023 40,102 66,023 43,208
Allowance for doubtful accounts (17,259) (5,983) (17,259) (6,446)
---------- ---------- ---------- ----------
48,764 34,119 48,764 36,762
========== ========== ========== ==========
6 Inventories
15
<PAGE>
Consolidated
---------------------------------------
Constant
Corporation Law purchasing power
--------------- ----------------
1997 1996 1997 1996
Installation materials 24,943 13,173 27,373 16,066
Supplies 722 17 746 18
Imports in transit 1,695 1,044 1,695 1,125
---------- ---------- ---------- ----------
29,360 14,234 29,814 17,209
Allowance for obsolescence (2,188) (1,376) (3,483) (2,519)
---------- ---------- ---------- ----------
25,172 12,858 26,331 14,690
---------- ---------- ---------- ----------
7 Film exhibition rights
Consolidated
---------------------------------------
Constant
Corporation Law purchasing power
--------------- ----------------
1997 1996 1997 1996
Film exhibition rights 3,967 2,042 3,967 2,200
Allowance for exhibition
expiration - (137) - (147)
------- -------- ------- --------
3,967 1,905 3,967 2,053
======= ======== ======= ========
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS, Continued
-------
8 Legal and compulsory deposits and taxes and contributions payable
Tevecap S.A. and subsidiaries have deposits referring to lawsuits filed
against tax authorities challenging imposition of certain taxes. The
deposits, made compulsorily in view of law or negotiation, can be shown
as follows:
Consolidated
-----------------------------------------------------
Corporation Law Constant purchasing power
--------------- -------------------------
1997 1996 1997 1996
Cofins 1,002 897 1,002 966
Labor claims 202 86 202 93
PIS 305 114 305 123
INSS 335 - 335 -
Other 434 36 434 39
------- ------- ------- -------
2,278 1,133 2,278 1,221
======= ======= ======= =======
Based on its legal counsel's opinion, the Company and its subsidiaries
have accrued the following amounts relating to the above-mentioned
lawsuits, and others:
Consolidated
-----------------------------------------------------
Corporation Law Constant purchasing power
--------------- -------------------------
1997 1996 1997 1996
Cofins 851 821 851 885
Finsocial 27 27 27 29
Labor claims 3,047 1,921 3,047 2,070
IPI - 94 - 101
Ecad 2,256 800 2,256 862
ICMS 401 1,450 401 1,563
Other 12 - 12 -
------- ------- ------- -------
6,594 5,113 6,594 5,510
======= ======= ======= =======
17
<PAGE>
9 Investments
The following table shows the direct investment held by Tevecap S.A.,
parent company, in its subsidiaries and affiliated companies as of
December 31, 1997:
<TABLE>
Number Provision
Income/ (in thousands) for losses on
Interest Net (loss) for common stock Equity in subsidiaries'
Subsidiaries and affiliates Capital % equity the year or quotas income (loss) operations
<S> <C> <C> <C> <C> <C> <C> <C>
TVA Sistema de Televisao S.A. 23,868 98.00 (159,155) (88,007) 6,840,764 - (86,247)
TV Filme Inc. 44,622 14.33 50,498 - -
Canbras TVA Cabo Ltda. 11,845 36.00 5,180 (3,558) 1,456,760 (1,281) -
Comercial Cabo TV
Sao Paulo Ltda. 4,996 100.00 4,615 (60) 1,139,685 (60) -
TV Cabo Santa Branca
Comercio Ltda. 8 36.00 8 - 377 - -
Galaxy Brasil S.A. 52,160 100.00 26,341 (25,493) 5,215,950 (25,493) -
ESPN do Brasil Ltda. 33,286 50.00 5,885 (12,327) 17,767,590 (6,163) -
Ype Radio e Televisao Ltda. 112 100.00 53 - 132 - -
TVA Communications Ltd. 36,871 100.00 32,394 3,871 - 3,871 -
TVA Sul Participacoes S.A. 49,428 86.00 25,633 (8,202) 42,507,763 (7,053) -
TVA TCG Sistema de Porto
Alegre S.A. 12 100.00 12 - 9,999 - -
TVA Communications
Aruba N.V. 6 100.00 (1,372) 1,847 6,000 - 1,872
----------- -----------
(36,179) (84,375)
=========== ===========
</TABLE>
9.1 The investments of Tevecap S.A., parent company, are adjusted according
to the interest in the net equity of its subsidiaries and affiliated
companies based on the financial statements in accordance with the
accounting methodology required by the Brazilian Corporation Law.
9.2 The provision for losses on subsidiaries' operations, in long-term
liabilities, represents cumulative losses on operations of subsidiaries
and affiliated companies in excess of contributed capital.
9.3 Since 1997, investments in Itsa Intercontinental Telecomunicacoes S.A.
is no longer recorded by the equity method, being accounted for by the
cost method.
18
<PAGE>
9.4 Summarized financial data of the jointly controlled company ESPN do
Brasil Ltda., as mentioned in Note 3.3.b, are as follows:
Assets
------
Current assets 11,240
Long-term assets 406
Permanent assets 829
---------
Total assets 12,495
=========
Liabilities
-----------
Current liabilities 6,610
Quotaholders' equity 5,885
---------
Total liabilities 12,495
=========
Statement of operations
-----------------------
Revenues from services sold 19,821
Net operating income 18,611
Gross loss (9,877)
Operating income (expenses) (2,452)
Nonoperating income (expenses) 2
---------
Net loss (12,327)
=========
10 Goodwill on investments
Tevecap S.A. and subsidiaries have recorded goodwill on investments as
follows:
19
<PAGE>
<TABLE>
Parent company Consolidated
-------------- ------------
Corporation Law Corporation Law Constant purchasing power
--------------- --------------- -------------------------
Subsidiaries and affiliated companies 1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
ESPN do Brasil Ltda. 1 1 1 1 1 1
Coml. Cabo TV SP Ltda. 1,782 2,020 1,782 2,020 2,094 2,377
TVA Sistema de Televisao S.A. 20,055 22,728 20,055 22,728 21,255 22,644
Ype Radio e Televisao Ltda. 5,090 5,768 5,090 5,768 5,988 6,787
Canbras TVA Cabo 56 63 56 63 65 74
TVA Communications Aruba N.V. 3,250 - 3,250 - 3,250 -
TV Alfa Cabo Ltda. - - - 1,678 - 1,913
TCC TVA Cabo Ltda. - - 2,240 2,240 2,334 2,555
CCS Camboriu Cable System
de Telecomunicacoes Ltda. - - 280 314 306 341
TVA Sul Foz do Iguacu Ltda. - - 4,527 5,065 4,938 5,525
TVA Sul Santa Catarina Ltda. - - 13 15 16 17
--------- --------- --------- --------- --------- ---------
30,234 30,580 37,294 39,892 40,246 42,234
========= ========= ========= ========= ========= =========
</TABLE>
11 Related-party transactions
The following table summarizes the transactions between Tevecap S.A. and
related companies during the year ended December 31, 1997:
<TABLE>
Parent company
Corporation Law
Balance sheet accounts
Advances Interest
Loans Loans for future income
Subsidiaries and affiliated companies granted obtained capital increase (expense), net
<S> <C> <C> <C> <C>
TVA Sistema de Televisao S.A. 402,434 - - 58,523
Abril S.A. - 57,823 - (897)
Canbras TVA Cabo Ltda. 6,192 - 312 590
Canbras Participacoes Ltda. 311 - - -
Galaxy Brasil S.A. 2,292 - 48 5,554
TV Cabo Santa Branca Comercio Ltda. - - 2 -
TVA Comunicacoes S.A. 17,325 - - -
TVA Brasil Radioenlaces Ltda. 26,629 - - -
TVA Sul Participacoes S.A. 18,453 - - 5,720
Comercial Cabo TV Sao Paulo Ltda. 285 - - 66
Ype Radio e Televisao Ltda. 25 - - -
SMC Marketing Promocional Ltda. 13,737 - - 947
TVA Network Ltda. 45 - - -
TVA Network Participacoes S.A 11 - - -
TVA TCG Sistema de Televisao de
Porto Alegre S.A. 214 - - -
---------- ---------- ---------- ----------
487,953 57,823 362 70,503
========== ========== ========== ==========
</TABLE>
20
<PAGE>
<TABLE>
Consolidated
Corporation Law
Balance sheet accounts
Advances Interest
for future income
Subsidiaries and affiliated companies Loans Loans capital (expense), Sales and
granted obtained increase net costs, net
<S> <C> <C> <C> <C> <C>
Televisao Abril Ltda. 38 - - - 88
Abril S.A. 13 103,494 - (7,456) (4,731)
ITSA Intercontinental
Telecomunicacoes S.A. 21 - - - 9,302
Televisao Show Time Ltda. 178 - - - -
Canbras TVA Cabo Ltda. 6,263 - 312 590 2,021
Canbras Participacoes Ltda. 311 - - - -
HBO Partners 1,743 - - - -
Surfin Ltda. 4,413 - - - -
California Brodcast Center 7,583 - - 607 -
Galaxy Latin America 6,076 - - - -
TV Cabo Santa Branca Comercio Ltda. - - 2 - -
TVA Brasil Radioenlaces Ltda. 26,629 360 - - -
SMC Marketing Promocional Ltda. - - - 947 -
ESPN do Brasil Ltda. 17 - - - (1,883)
TVA Network Ltda. 45 - - - -
TVA Network Participacoes S.A. 2,399 - - - -
---------- ---------- ---------- ---------- ----------
55,729 103,854 314 (5,312) 4,797
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
Consolidated
Constant purchasing power
Balance sheet accounts
Advances Interest
for future income
Loans Loans capital (expense), Sales and
granted obtained increase net costs, net
<S> <C> <C> <C> <C> <C>
Televisao Abril Ltda. - - - 90
Abril S.A. 13 103,494 - (5,436) (4,892)
ITSA Intercontinental
Tecomunicacoes S.A. 21 - - - 9,562
Televisao Show Time Ltda. 178 - - - -
Canbras TVA Cabo Ltda. 6,263 - 312 393 2,077
Canbras Participacoes Ltda. 311 - - (24) -
HBO Partners 1,743 - - - -
Surfin Ltda. 4,413 - - - -
California Brodcast Center 7,583 - - 607 -
Galaxy Latin America 6,076 - - - -
TV Cabo Santa Branca Comercio Ltda. - - 2 - -
TVA Brasil Radioenlaces Ltda. 26,629 360 - (2,046) -
SMC Marketing Promocional Ltda. - - - (35) -
ESPN do Brasil Ltda. 17 - - - (1,936)
TVA Network Ltda. 45 - - - -
TVA Network Participacoes S.A 2,399 - - - -
---------- ---------- ---------- ---------- ----------
57,729 103,854 314 (6,541) 4,901
========== ========== ========== ========== ==========
</TABLE>
21
<PAGE>
11.1 Loans granted to or obtained from related companies, under loan
agreements, are subject to market interest rates, except for the loan
with TVA Brasil Radioenlaces Ltda., which was monetarily restated
through December 31, 1995 based on the Ufir (Fiscal Reference Unit)
variation.
11.2 Related-party transactions relating to programming sales and costs and
printing services costs were carried out at usual market rates and
terms.
11.3 Tevecap S.A. and subsidiaries were given debt guarantees by Abril S.A.,
their parent company, by way of collateral and letters of credit in the
amount of R$60,943.
12 Property, plant and equipment
<TABLE>
Annual
depreciation Consolidated
rates Corporation Law Constant purchasing power
----- --------------- -------------------------
% 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C>
Buildings 4 13,821 11,899 15,604 13,609
Machinery and equipment 10 60,718 47,085 68,989 55,160
Converters 10 198,655 106,362 215,321 120,247
Reception equipment 20 77,583 27,234 81,758 31,839
Furniture and fixtures 10 2,442 2,180 2,788 2,530
Vehicles 20 3,838 1,397 4,088 1,628
Premises 10 3,301 2,542 3,715 2,955
Telephone sets 10 1,904 1,683 2,179 1,971
Leasehold improvements 20 4,081 2,157 4,498 2,533
Cable plant 10 53,860 24,552 58,163 28,066
EDP equipment 20 11,947 8,729 13,323 10,077
Software use rights 20 5,451 3,150 5,994 3,684
Tools 50 1,038 890 1,189 1,040
---------- ---------- ---------- ----------
438,639 239,860 477,609 275,339
Accumulated depreciation (72,618) (32,690) (76,076) (38,404)
Telephone line use rights 1,232 1,162 1,431 1,362
Trademarks and patents 227 217 265 255
Fixed assets in transit 19,915 10,293 20,118 13,096
Advances to suppliers 14,842 166 15,225 202
Other 703 703 767 828
---------- ---------- ---------- ----------
402,940 219,711 439,339 252,678
========== ========== ========== ==========
</TABLE>
22
<PAGE>
13 Deferred charges
On December 31, 1997 and 1996, deferred charges comprised:
<TABLE>
Consolidated
------------
Constant
Corporation Law purchasing power
--------------- ----------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Film cost 22,593 22,593 26,581 26,581
Capitalized interest 94,526 94,526 102,273 102,273
Capitalized depreciation 4,736 4,736 5,572 5,572
Other 17,020 15,081 19,098 17,099
Accumulated amortization (35,725) (21,215) (34,851) (23,339)
---------- ---------- ---------- ----------
103,150 115,721 118,673 128,186
========== ========== ========== ==========
</TABLE>
14 Bank loans
Consolidated
Constant
Corporation Law purchasing power
1997 1997
--------------------- ---------------------
Short-term Long-term Short-term Long-term
Working capital, foreign currency - - - -
denominated: 3,037 279,100 3,037 279,100
Local currency financing 48,783 29,312 48,783 29,312
-------- ---------- -------- ----------
51,820 308,412 51,820 308,412
23
<PAGE>
14.1 On November 26, 1996, Tevecap S.A. raised funds in foreign markets
amounting to R$259,850, equivalent to US$250,000, at the exchange rate
of December 31, 1996. These loans mature on November 26, 2004 and are
guaranteed by Tevecap S.A. subsidiaries. Interest thereon is at 12.625%
p.a. above exchange rate change and is payable May 25 and November 25,
commencing on May 25, 1997.
14.2 Short-term financings in local currency are secured by promissory notes
and chattel mortgages, and bear interest at rates varying from 8% to 9%
per year.
15 Capital stock
On December 31, 1997 and 1996, the parent company's capital is
represented by 196,712,855 registered common shares without par value
16 Income tax
As of December 31, 1997, Tevecap S.A. had accumulated tax losses in the
amount of R$10,119 and its subsidiaries and affiliated companies in the
amount of R$264,613, as follows:
TVA Sistema de Televisao S.A. 157,866
TVA Sul Participacoes S.A. 22,165
ESPN do Brasil Ltda. 26,738
Comercial Cabo TV Sao Paulo Ltda. 371
Galaxy Brasil S.A. 9,933
ITSA Intercontinental Telecomunicacoes S.A. 47,540
----------
264,613
==========
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS, Continued
-------
17 Nonoperating income (loss)
<TABLE>
Consolidated
------------
Parent company Constant
Corporation Law Corporation Law purchasing power
--------------- --------------- ----------------
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Capital gain on sale of interest in TVA Curitiba
Servicos de Telecomunic. Ltda. - 8,916 - - - -
Capital gain on sale of interest in
TV Film Inc. - 2,383 - 2,383 - 2,634
Capital loss on acquisition of
TVA Sul Participacoes S.A. - (1,502) - (1,502) - (1,629)
Capital losses on acquisition of companies from the
South region, purchased through
TVA Sul Participacoes S.A. - - - (2,278) - (2,460)
Capital gain on sale of TVA Sul
Participacoes S.A. companies - - 921 - 921 -
Capital gain on TVA Communications Aruba N.V.
from capital increase in its affiliated company
HBO Brasil Partners - - 1,258 - 1,258 -
Capital gain on TVA Communications Lt.
through sale of TVA Communications Aruba - - - - - -
N.V. to Tevecap S.A. - - 3,250 - 3,307 -
Write-off of provision for Disney II films - - 1,298 - 1,339 -
Gain on assets written off - - 1,710 - 1,722 -
Provision for loss on converters - - (1,380) - (1,425)
Provision for inventory obsolescence - - (819) (1,376) (2,147) (1,542)
Provision for loss on equipment - - (3,819) - (3,845) -
Provision for loss on reception equipment - - (1,575) - (1,586) -
Commissions - - - (1,268) - (277)
Other 128 - (73) (277) (334) 183
------ ------ ------ ------ ------ ------
128 9,797 2,151 (5,698) 635 (4,516)
====== ====== ====== ====== ====== ======
</TABLE>
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS, Continued
-------
18 Constant purchasing power and Corporation Law
Reconciliations between net loss and shareholders' equity as per
Corporation Law and constant purchasing power are as follows:
<TABLE>
Parent company Consolidated
-------------- ------------
Shareholders' Shareholders'
Net loss equity Net loss equity
<S> <C> <C> <C> <C>
Balances as per Corporation Law (103,971) 131,371 (103,971) 131,371
Gains on monetary items 5,682 5,682 23,042 23,042
Gains on shareholders' equity - 46,921 - 46,921
Restatement of inventories - - 1,159 1,159
Goowill adjustment in subsidiaries (3,614) (3,614) (3,614) (3,614)
Equity in income/(losses) of subsidiaries 7,310 7,310 - -
Provision for losses on subsidiaries' operations 3,973 3,973 - -
Allocation of gains/(losses) on deferred
expenses - - (6,630) (6,630)
Reversal of prior-year adjustments 7,344 - 7,344 -
Minority interest - - (606) (606)
---------- ---------- ---------- -----------
Balances in constant purchasing power (83,276) 191,643 (83,276) 191,643
========== ========== ========== ===========
</TABLE>
19 Financial instruments
The Company and its subsidiaries carry out operations involving
financial instruments as a hedge against fluctuations in international
interest rates and in appraisal of certain financial assets.
Short-term investments are usually for periods shorter than three
months, and the agreed rates reflect normal market conditions as of
December 31, 1997.
For detailed information about loans and financings, see Note 14.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS, Continued
-------
Loans granted to or obtained from related companies, under loan
agreements, are subject to market interest rates.
The market values of other financial instruments receivable and payable
as of December 31, 1997 do not differ from those recorded in the
financial statements.
Such operations are performed and controlled based on criteria
periodically reviewed considering financial soundness, reliability and
market profile of the entity with which they are carried out.
20 Guarantees
The Company has given guarantees and letters of credit on behalf of its
related companies in the amount of R$50, 595.
21 Insurance
The policy of the parent company and its subsidiaries and affiliated
companies is to maintain insurance coverage for property, plant and
equipment and inventories in an amount considered sufficient to cover
the risks involved. On December 31, 1997, insurance coverage amounted to
R$98,443 (consolidated).
22 Pension plan
Tevecap S.A. and subsidiaries and certain affiliated companies are
co-sponsors of a private pension entity, Abrilprev Sociedade de
Previdencia Privada, the primary objective of which is to provide
employee benefits other than those provided by Social Security. The plan
is available to all employees of the sponsoring entities. Abrilprev
operates as a Defined Contribution Plan, and the main actuarial method
used to
27
<PAGE>
determine the contribution level is the capitalization method. The plan
costs, borne by both employees and sponsoring entities, are actuarially
determined annually expressed in a fixed percentage of payroll of the
sponsoring entities. Retirement supplements granted are based on
employees' years of service, contribution to Social Security, minimum
age, and termination of employment relationship. As of December 31,
1997, contributions made by Tevecap S.A. and subsidiaries and certain
affiliated companies amounted to R$739.
23 Abril Health Care Plan
In February 1996, the Abril Health Care Plan was created to provide
health care to Abril companies' employees and their dependents. Both
companies and employees contribute monthly to Associacao Abril de
Beneficios, the company responsible for the plan management. In 1996,
contributions made by Tevecap S.A. subsidiaries and certain affiliated
companies amounted to R$3,258.
24 Commitments
24.1 As of December 31, 1997, contractual commitments with Embratel, assumed
by Tevecap S.A. and subsidiaries for satellite use from 1998 through
2004, amounted to R$103,906.
24.2 Galaxy Brasil S.A., subsidiary of Tevecap S.A., has a lease contract
with Citibank N.A. in the amount of US$43,463, equivalent to R$48,522 at
the exchange rate of December 31, 1997. Such contract has a five-year
term with interest at 12.5% p.a. above exchange rate change. The
contract is guaranteed by Tevecap and TVA Sistema de Televisao S.A.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS, Concluded
-------
25 Subsequent events
On February 17, 1998, the Company's capital stock was increased by
R$112,740 through payment of capital from shareholders. As from that
date, the subscribed paid-in capital amounts to R$478,740, represented
by 226,338,285 registered common shares without par value.
29
