As filed with the Securities and Exchange Commission on August 2, 1999
================================================================================
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of August 1999
Antenna TV S.A.
(Translation of registrant's name into English)
Kifissias Avenue 10-12
Maroussi 151 25
Athens, Greece
(Address of principal executive office)
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 the 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- .
================================================================================
<PAGE>
This report (the "Quarterly Report") sets forth certain information
regarding the financial condition and results of operations of Antenna TV S.A.,
a Greek societe anonyme (the "Company"), for the fiscal quarter ended June 30,
1999.
The unaudited financial statements included in this Quarterly Report,
in the opinion of management, reflect all necessary adjustments (which include
only normal recurring adjustments) necessary for a fair presentation of the
financial position, the results of operations and cash flows for the periods
presented. The unaudited financial information included in this Quarterly Report
has been prepared in accordance with U.S. generally accepted accounting
principles.
For a description of the Company's accounting policies, see Notes to
Financial Statements in the Company's Annual Report on Form 20-F for the year
ended December 31, 1998.
In May 1996, the Company completed the acquisition of interests in
Antenna R.T. Enterprises, Antenna Spoudastiki Ltd., Pacific Broadcast
Distribution Ltd. and Audiotex S.A. See Note 1 of Notes to Financial Statements.
These business combinations were among companies under common control and have
been accounted for "as if" a pooling of interest had occurred for periods
subsequent to September 1, 1998, the date that the companies came under common
control for accounting purposes. Accordingly, the balance sheet as at December
31, 1998 and the consolidated statements of operations, cash flows and
shareholders' equity for the year ended December 31, 1998 have been restated.
The Company intends to reflect such restated financial statements in an
amendment to its Annual Report on Form 20-F for the year ended December 31,
1998.
ii
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
<S> <C> <C>
Condensed Consolidated Statements of Operations for the three months
ended June 30, 1998 and 1999 and the six months ended June
30, 1998 and 1999..................................................................... 1
Condensed Consolidated Balance Sheets as of December 31, 1998 and
June 30, 1999......................................................................... 2
Condensed Consolidated Statement of Shareholders' Equity for the six
months ended June 30, 1999............................................................ 4
Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1999.......................................................... 5
Notes to Financial Statements......................................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................................... 15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK............................................................ 23
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.................................... 25
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY
HOLDERS...................................................................... 25
ITEM 5. OTHER INFORMATION............................................................ 26
</TABLE>
iii
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
ANTENNA TV S.A.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended June 30, 1998 and 1999
and for the six months ended June 30, 1998 and 1999
(In thousands of drachmae and U.S. dollars, except earnings per share)
<TABLE>
<CAPTION>
Unaudited Three Months Unaudited Six Months
Notes Ended June 30, Ended June 30,
----- ---------------------------------------- -------------------------------------
1998 1999 1998 1999
--------------- ----------------------- -------------- ---------------------
(GRD) (GRD) ($) (GRD) (GRD) ($)
<S> <C> <C> <C> <C> <C> <C>
Advertising revenue................. 8,833,932 10,832,730 34,379 14,840,535 18,456,677 58,574
Related party revenue............... 3 767,964 541,763 1,719 1,446,421 959,593 3,045
Other revenue....................... 28,556 197,496 627 78,230 368,760 1,171
--------------- ----------- ---------- -------------- ---------- ---------
Total net revenue................... 9,630,452 11,571,989 36,725 16,365,186 19,785,030 62,790
--------------- ----------- ---------- -------------- ---------- ---------
Cost of sales....................... 1,943,849 1,823,016 5,786 3,092,015 3,249,877 10,314
Selling, general and administrative
expenses......................... 1,513,246 1,221,152 3,875 2,795,560 2,580,755 8,190
Amortization of programming costs... 3,072,183 3,106,278 9,858 6,236,090 6,243,947 19,816
Depreciation........................ 118,498 166,007 527 242,508 333,302 1,058
--------------- ----------- ---------- -------------- ---------- ---------
Operating income.................... 2,982,676 5,255,536 16,679 3,999,013 7,377,149 23,412
Interest expense, net............... (714,528) (555,328) (1,762) (1,441,340) (1,240,397) (3,936)
Foreign exchange gains (losses)..... 10 682,055 (617,986) (1,961) (2,342,866) (528,390) (1,677)
Equity in net income of
unconsolidated entities.......... -- (487) (2) -- 14,898 47
Related party commission income..... 3 -- 85,656 272 -- 230,972 733
Other income (expense).............. 11 9,667 (179,918) (571) 18,586 (472,813) (1,501)
--------------- ----------- ---------- -------------- ---------- ---------
Earnings before income taxes........ 2,959,870 3,987,473 12,655 233,393 5,381,419 17,078
Provision for income taxes.......... 7 164,162 1,460,175 4,634 418,542 2,086,684 6,622
--------------- ----------- ---------- -------------- ---------- ---------
Net income (loss) .................. 2,795,708 2,527,298 8,021 (185,149) 3,294,735 10,456
=============== =========== ========== ============== ========== =========
Basic and diluted earnings
(loss) per share................. 166.7 127.32 0.48 (11.04) 165.99 0.53
=============== =========== ========== ============== ========== =========
</TABLE>
Exchange rate used for the convenience translation of the June 30, 1999
balances is GRD 315.10 to $1.00.
1
<PAGE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
ANTENNA TV S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of December 31, 1998 and June 30, 1999
(In thousands of drachmae and U.S. dollars)
<TABLE>
<CAPTION>
Unaudited
December 31, June 30,
----------------------------------------------------
Notes 1998 1998 1999 1999
----- ------------ ------------ ------------ ------------
(GRD) ($) (GRD) ($)
<S> <C> <C> <C> <C> <C>
ASSETS
- --------------------------------------------------------
Current assets:
Cash on hand and in banks....................... 11,300,087 35,862 21,499,702 68,231
Restricted cash................................. -- -- 195,105 619
Accounts receivable, less allowance for
doubtful accounts of GRD 1,161,396 in 1998
and 1,203,474 in 1999........................... 17,155,755 54,446 21,285,296 67,551
Due from related parties........................ 3 2,499,479 7,932 3,483,839 11,056
Programming costs, net.......................... 5 11,795,427 37,434 12,071,511 38,310
Advances to related parties..................... 3 141,710 450 149,060 473
Advances to third parties....................... 549,786 1,745 780,727 2,478
Prepaid expenses................................ 42,738 136 64,470 205
Other current assets............................ 87,059 276 -- --
Unamortized premium............................. 1,224,719 3,887 -- --
Income and withholding tax advances............. 578,826 1,837 632,785 2,008
------------ ------------ ------------ ------------
Total current assets................................ 45,375,586 144,005 60,162,495 190,931
Property and equipment, net............................. 1,675,469 5,317 1,705,746 5,413
Investment in unconsolidated entity..................... 84,785 269 99,684 316
Broadcast and transmission equipment
under capital leases, net............................ 1,073,600 3,407 988,062 3,136
Deferred charges, net................................... 1 1,959,622 6,219 1,790,447 5,682
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Programming costs, excluding current portion
........................................................ 5 7,087,570 22,493 7,340,612 23,296
Other receivable less allowance for doubtful
accounts
and fair value of GRD 440,000 in 1998 and
GRD 460,000 in 1999.................................. 329,498 1,046 301,998 959
Due from related party.................................. 3 2,021,798 6,416 2,198,620 6,978
Advances to related parties............................. 3 165,137 524 165,137 524
Deferred tax assets..................................... 7 345,242 1,096 345,573 1,097
Other assets............................................ 121,990 387 217,760 691
------------ ------------ ------------ ------------
Total assets........................................ 60,240,297 191,179 75,316,134 239,023
============ ============ ============ ============
</TABLE>
Exchange rate used for the convenience translation of the December 31, 1998 and
June 30, 1999 balances is GRD 315.10 to $1.00.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ANTENNA TV S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of December 31, 1998 and June 30, 1999
(In thousands of drachmae and U.S. dollars, except share data)
<TABLE>
<CAPTION>
Unaudited
December 31, June 30,
----------------------------------------------------
Notes 1998 1998 1999 1999
----- ------------ ------------ ------------ ------------
(GRD) ($) (GRD) ($)
<S> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------
Current liabilities:
Bank overdrafts and short-term borrowings........... 6 1,468,155 4,659 1,293,514 4,105
Current portion of obligations under capital leases. 107,585 341 108,819 345
Trade accounts, notes and cheques payable........... 4,268,500 13,546 3,108,001 9,864
Program license payable............................. 2,607,320 8,275 2,217,631 7,038
Payable to related party............................ -- -- 13,485 43
Customer advances................................... 271,865 863 125,942 400
Accrued interest.................................... 1,246,685 3,957 1,304,852 4,141
Accrued expenses and other current liabilities...... 9,418,064 29,889 4,068,837 12,913
Income taxes payable -- -- 4,185 13
Deferred tax liability.............................. 7 1,165,531 3,699 3,209,045 10,184
Dividends payable................................... 1 10,040,283 31,864 -- --
Current portion of other long-term liability........ 929,362 2,949 934,200 2,965
------------ ------------ ------------ ------------
Total current liabilities............................... 31,523,350 100,042 16,388,511 52,011
------------ ------------ ------------ ------------
Long-term liabilities:
Long-term debt...................................... 8 32,545,000 103,285 34,924,851 110,837
Long-term obligations under capital leases.......... 417,940 1,326 334,349 1,061
Other long-term liability........................... 1,546,397 4,908 990,649 3,144
Employee retirement benefits........................ 436,982 1,387 429,821 1,364
Long-term provisions................................ 254,525 808 166,711 529
------------ ------------ ------------ ------------
Total liabilities....................................... 66,724,194 211,756 53,234,892 168,946
------------ ------------ ------------ ------------
Shareholders' equity:
Share capital (16,769,440 common shares authorized
and issued as of December 31, 1998 and 19,849,440
common shares authorized and issued as of June 30,
1999, GRD 100 par value)............................ 9 1,676,944 5,322 1,984,944 6,300
Additional paid-in capital.......................... 9 3,752,500 11,909 28,714,904 91,129
Accumulated (deficit)............................... (11,913,341) (37,808) (8,618,606) (27,352)
------------ ------------ ------------ ------------
Total shareholders' equity.............................. (6,483,897) (20,577) 22,081,242 70,077
------------ ------------ ------------ ------------
Commitments and contingencies
Total liabilities and shareholders' equity...... 60,240,297 191,179 75,316,134 239,023
============ ============ ============ ============
</TABLE>
Exchange rate used for the convenience translation of the December 31, 1998
and June 30, 1999 balances is GRD 315.10 to $1.00.
5
<PAGE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
ANTENNA TV S.A.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS'
EQUITY
For the six months ended June 30, 1999
(In thousands of drachmae)
<TABLE>
<CAPTION>
Accumulated (Deficit) Retained
Earnings
--------------------------------------
Legal,
Tax Accumulated
Additional Free and (Deficit)
Share Paid-in Other Retained
Capital Capital Reserves Earnings Total Grand Total
----------- ------------ ----------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998................ 1,676,944 3,752,500 2,624,187 (14,537,528) (11,913,341) (6,483,897)
Issuance of 3,080,000 common shares
(unaudited)........................ 308,000 24,962,404 -- -- -- 25,270,404
Net income for the six months
(unaudited)........................ -- -- -- 3,294,735 3,294,735 3,294,735
Transfer of statutory earnings to legal
tax free and other reserves
(unaudited)........................ -- -- 124,061 (124,061) -- --
----------- ------------ ----------- ------------ ----------- ---------------
Balance, June 30, 1999 (unaudited)........ 1,984,944 28,714,904 2,748,248 (11,366,854) (8,618,606) 22,081,242
=========== ============ =========== ============ =========== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
ANTENNA TV S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1998 and 1999
(In thousands of drachmae and U.S. dollars)
<TABLE>
<CAPTION>
Unaudited Six Months Ended June 30,
----------------------------------------------
1998 1999
-------------- -----------------------------
(GRD) (GRD) ($)
<S> <C> <C> <C>
Cash flows from operating activities
Net (loss) income............................................... (185,149) 3,294,735 10,456
Adjustments to reconcile net income to net cash
Deferred income taxes......................................... 361,257 2,043,183 6,484
Equity in net income of unconsolidated entities............... -- (14,899) (47)
Amortization of debt issuance expenses........................ 113,294 169,175 537
Amortization of premium on forward contract and
loss on option............................................. -- 1,224,719 3,887
Depreciation of property and equipment and capital leases
and amortization of programming costs....................... 6,478,597 6,577,249 20,874
Provision for other long-term liabilities..................... 25,000 15,000 48
Provision for employee retirement benefits.................... 1,800 22,000 70
Change in current assets and liabilities
(Increase) in accounts and other receivable............... (2,033,965) (4,102,041) (13,018)
(Increase) in due from related parties.................... (1,141,999) (1,155,047) (3,666)
(Increase) in programming costs........................... (9,010,659) (6,753,431) (21,433)
(Increase) in prepaid and licensed programming expenditures (431,239) (19,642) (62)
(Decrease) in trade accounts, notes and
cheques payable......................................... (328,755) (1,160,499) (3,683)
(Decrease) in licensed program payable.................... (69,832) (389,689) (1,237)
Increase (decrease) in customer advances.................. 255,184 (145,923) (463)
Increase (decrease) in accrued expenses liabilities....... 1,681,552 (5,973,945) (18,959)
Increase in income taxes payable.......................... 15,177 4,185 13
Other, net................................................ (985,983) (315,343) (1,001)
-------------- --------------- -----------
Total adjustments.................................... (5,070,571) (9,974,948) (31,656)
-------------- --------------- -----------
Net cash (used) in operating activities............................ (5,255,720) (6,680,213) (21,200)
-------------- --------------- -----------
Cash flows from investing activities
Acquisition of affiliated companies............................. -- (10,040,283) (31,864)
Purchase of fixed assets........................................ (72,068) (278,041) (882)
-------------- --------------- -----------
Net cash (used) in investing activities............................ (72,068) (10,318,324) (32,746)
-------------- --------------- -----------
Cash flows from financing activities
Issuance of common shares....................................... -- 25,270,404 80,198
Redemption of Senior Notes...................................... -- (1,185,994) (3,764)
(Decrease) in bank overdrafts and
short term borrowings, net................................... -- (174,641) (554)
(Increase) in restricted cash................................... -- (195,105) (619)
Repayments of capital lease obligations......................... (50,901) (82,357) (261)
Debt issuance costs of Senior Notes............................. (74,086) -- --
-------------- --------------- -----------
Net cash (used in) provided by financing activities................ (124,987) 23,632,307 75,000
-------------- --------------- -----------
Effect of exchange rate changes on cash............................ 2,923,970 3,565,845 11,317
-------------- --------------- -----------
(Decrease) increase in cash........................................ (2,528,805) 10,199,615 65,117
Cash at beginning of year.......................................... 11,533,274 11,300,087 35,862
-------------- --------------- -----------
Cash at end of year................................................ 9,004,469 21,499,702 100,979
-------------- --------------- -----------
Supplemental disclosure of cash flow information:
Cash paid for interest........................................ 263,078 354,815 1,126
</TABLE>
Exchange rate used for the convenience translation of the June 30, 1999 balances
is GRD 315.10 to $1.00.
8
<PAGE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
ANTENNA TV S.A.
NOTES TO FINANCIAL STATEMENTS
I. Summary of Significant Accounting Policies
Basis of Presentation
The financial statements and related notes at June 30, 1999 and for the
three and six months ended June 30, 1998 and 1999 are unaudited and prepared in
conformity with the accounting principles applied in the Company's 1998 Annual
Report on Form 20-F for the year ended December 31, 1998. In the opinion of
management, such interim financial statements include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the results for such periods. The results of operations for the three and six
months ended June 30, 1999 are not necessarily indicative of the results to be
expected for the full year or any other interim period.
Acquisitions
On May 6, 1999, the Company acquired the following interests: a 51%
interest in Audiotex S.A. ("Audiotex"), a company that generates revenue from
the sale of audiotext (for a purchase price of $7.25 million); a 99.97% interest
in Antenna R.T. Enterprises ("Antenna Radio"), which owns Antenna FM (97.1 FM),
a combination news/talk and music radio station serving the greater Athens area
(for a purchase price of $16.25 million plus the assumption of approximately
$5.2 million of indebtedness); a 100% interest in Antenna Spoudastiki Ltd.
("Antenna Spoudastiki"), which operates a training center for journalists and
other media personnel (for a purchase price of approximately $6.0 million); and
a 100% interest in Pacific Broadcast Distribution Ltd. ("Pacific Broadcast"),
which rebroadcasts the Company's programming in Australia through a joint
venture (for a purchase price of $3.5 million). Each of the companies whose
interests were acquired was previously affiliated with or controlled by members
of the family of Mr. Minos Kyriakou, the Company's Chairman and Chief Executive
Officer.
These business combinations were among companies under common control and
have been accounted for "as if" a pooling of interest had occurred for periods
subsequent to September 1, 1998, the date that the companies came under common
control for accounting purposes. Accordingly, the balance sheet as at December
31, 1998 and the consolidated statements of operations, cash flows and
shareholders' equity for the year ended December 31, 1998 have been restated.
Because the business combinations are among companies under common control they
have been consolidated based upon their book value and historical results of
operations, respectively. The cash amounts paid for the companies acquired, in
excess of their book values, have been treated as a dividend to the selling
shareholders.
The total purchase price of all the businesses amounted to $38.2 million,
comprised of cash consideration of $33 million and the assumption of $5.2
million of debt. The total cash purchase price exceeded the book value of the
acquired companies by GRD 11,969 million ($37.9 million), resulting in a deemed
dividend to the shareholders.
10
<PAGE>
Principles of Consolidation
The condensed consolidated financial statements of the Company include all
of its significant majority-owned subsidiaries. Affiliated companies in which
the Company does not own a controlling interest or for which the minority
shareholders have significant veto rights over operating decisions
(participating rights requiring unanimous shareholder approval, including:
transactions in excess of GRD 20 million, operating budgets, senior management
positions, borrowing and amendments to contractual obligations) are accounted
for using the equity method.
Deferred Charges
The expenses incurred in connection with the issuance and distribution of
the Company's 9% Senior Notes due 2007 (the "Senior Notes"), issued on August
12, 1997, were capitalized and are being amortized over the term of the Senior
Notes. Amortization for the six months ended June 30, 1998 and 1999 totaled GRD
113 million and GRD 169 million, respectively, and is included in interest
expense in the accompanying unaudited statements of operations for the six
months ended June 30, 1998 and 1999.
Foreign Exchange Contracts
Antenna enters into foreign exchange contracts to manage its exposure to
foreign currency exchange and interest rate risks. Financial instruments are
recorded on the balance sheet at their fair values unless they meet, for
accounting purposes, certain hedging criteria. A foreign exchange contract is
considered a hedge of an identifiable foreign currency commitment if (i) the
contract is designated as, and is effective as, a hedge of currency commitment
and (ii) the foreign currency commitment is firm. Gains and losses on foreign
exchange contracts meeting these hedging criteria are deferred and included in
the measurement of the related foreign currency transaction. Losses are not
deferred if, however, it is estimated that the deferral would lead to
recognition of losses in later periods.
The Company was party to an $87 million forward contract with the Royal
Bank of Scotland, to hedge its currency exposure on a portion of the principal
and interest payable of its U.S. dollar denominated debt. The term of the
contract covered the period from May 15, 1998 to May 15, 1999. The forward rate
was 334 drachmae to the dollar and the spot rate on the contract's effective
date was 310 drachmae to the dollar. The premium (representing the difference
between the spot rate on the contract's effective date and the forward rate),
aggregating GRD 2,088 million, was amortized over the term of the contract. Of
this amount, GRD 261 million was recognized for the three months ended June 30,
1999 and GRD 783 million was recognized for the six months ended June 30, 1999.
In addition, foreign exchange gains or losses on the Company's non-drachma
denominated indebtedness (currently, the Senior Notes) were offset by
corresponding losses or gains on the forward contract's notional amount.
Option
The Company was party to an option agreement with the Royal Bank of
Scotland to sell $104 million at a rate of 280 drachmae to the dollar in May
1999. The option had a maturity date that coincided with the maturity of the
foreign exchange contract described above. The option was recorded on the
balance sheet at its market value and was marked to market each accounting
period with the resulting gain or loss being reflected in the statement of
operations. The mark to market adjustment of the option for the three months and
six months ended June 30
11
<PAGE>
1999 of GRD 109 million ($0.4 million) and GRD 442 million ($1.4 million),
respectively, was recorded as part of the foreign exchange loss in the statement
of operations.
II. Translations of Drachmae into U.S. Dollars
The financial statements are stated in drachmae. The translations of
drachmae into U.S. Dollars are included solely for the convenience of the
reader, using the noon buying rate in New York on June 30, 1999, which was GRD
315.10 to $1.00. The convenience translations should not be construed as
representations that the drachma amounts have been, could have been, or could in
the future be, converted into U.S. Dollars at this or any other rate of
exchange.
III. Due from Related Parties
The Company sells advertising spots, licensing and distribution rights to
certain related parties in the ordinary course of business. Furthermore, the
Company also derives revenue from related parties by charging fees for the use
of the Company's production facilities and technical and administrative services
for the production of infomercials. Such related parties consist of companies
which have common ownership and/or management with the Company. The Company
believes that, in each case, the terms of such transactions are no less
favorable than those that would be attainable by the Company in the ordinary
course from unaffiliated third parties under similar circumstances.
Balances from related companies are as follows:
<TABLE>
<CAPTION>
December 31, Unaudited
1998 June 30, 1999
---------------------- ----------------------
(in thousands)
<S> <C> <C>
Accounts Receivable
Current:
Antenna Satellite TV (USA) Inc............... 1,633,511 2,346,263
Audiotex..................................... 76,197 128,093
Epikinonia Ltd............................... 48,203 119,870
Antenna Satellite Radio...................... 14,228 33,091
Antenna TV Ltd. (Cyprus)..................... 686,901 821,083
Catalogue Auctions Hellas S.A................ 40,439 35,439
---------------------- ----------------------
2,499,479 3,483,839
====================== ======================
Long-term:
Antenna Satellite TV (USA) Inc............... 2,438,156 2,649,978
Less: allowance for fair value............... (416,358) (451,358)
---------------------- ----------------------
2,021,798 2,198,620
====================== ======================
Advances
Current:
Catalogue Auctions Hellas S.A. .............. 141,710 149,060
---------------------- ----------------------
141,710 149,060
====================== ======================
Long-term:
Antenna TV Ltd. (Cyprus)..................... 120,979 120,979
Epikinonia Ltd............................... 44,158 44,158
---------------------- ----------------------
165,137 165,137
====================== ======================
</TABLE>
A summary of transactions with related companies are analyzed as follows:
12
<PAGE>
<TABLE>
<CAPTION>
Revenue
from related parties
-------------------------------------------
Six Months Six Months
Ended Ended
June 30, June 30,
1998 1999
--------------------- ---------------------
<S> <C> <C>
Epikinonia Ltd. (Production facilities and
technical and administrative services).......... 172,194 208,267
Antenna Satellite TV (USA) Inc. (License fees)..... 506,893 511,822
Antenna Satellite Radio (Other).................... -- 16,081
Antenna TV Ltd. (Cyprus) (Royalties)............... 235,012 223,423
Audiotex (Commissions and other)................... 151,077 --
Pacific Broadcast (License fees)................... 290,705 --
Antenna Radio (Other).............................. 90,540 --
--------------------- ---------------------
1,446,421 959,593
Audiotex (Related party commission income)......... -- 230,972
--------------------- ---------------------
1,446,421 1,190,565
===================== =====================
</TABLE>
IV. Segment Information and Geographic Information
The Company's reportable segments are the television and radio businesses.
The following table sets forth certain information regarding the Company's
segments by service, company and geographic region:
<TABLE>
<CAPTION>
Pay Journalism
Television Radio television school
---------- --------- ------------ ------------- Elimination of
Antenna Antenna Pacific Antenna related party
TV Radio Broadcast Spoudastiki revenue/expenses/ Total
(Greece) (Greece) (Australia) (Greece) assets consolidated
---------- --------- ------------ ------------- ----------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Sales external..................... 17,504,451 1,064,285 133,066 123,635 -- 18,825,437
Related party sales................ 1,339,020 20,454 -- -- (399,881) 959,593
Results............................ -- -- -- -- -- --
Operating income................... 7,251,583 407,907 (41,052) 15,044 (256,333) 7,377,149
Depreciation and amortization...... 290,591 22,827 17,884 2,000 -- 333,302
Amortization of programming costs.. 6,243,947 133,704 -- -- -- 6,377,651
Equity in net income of
unconsolidated entities......... 99,684 -- -- -- -- 99,684
Net income (loss) before tax....... 5,121,527 296,887 (52,039) 15,044 -- 5,381,419
Net income (loss).................. 3,053,343 283,887 (52,039) 9,544 -- 3,294,735
Segment assets..................... -- -- -- -- -- --
Total assets (June 30, 1999)....... 84,122,282 1,819,098 556,815 137,581 (11,319,642) 75,316,134
Total assets (December 31, 1998)... 58,964,240 1,615,650 472,821 124,114 (936,528) 60,240,297
</TABLE>
V. Programming Costs
The following table sets forth the components of the programming costs,
net of amortization:
13
<PAGE>
December 31, Unaudited
1998 June 30, 1999
--------------------- ----------------------
(in thousands)
Produced programming.............. 11,448,729 12,931,073
Purchased sports rights........... 3,233,640 2,260,780
Licensed program rights........... 1,875,691 1,947,544
Prepaid license program rights.... 1,546,851 1,456,870
Prepaid produced programs......... 778,086 815,856
--------------------- ----------------------
18,882,997 19,412,123
Less: current portion............. (11,795,427) (12,071,511)
--------------------- ----------------------
7,087,570 7,340,612
--------------------- ----------------------
VI. Bank Overdrafts and Short-term Borrowings
Short-term borrowings consist primarily of indebtedness under various
lines of credit. The aggregate amount of available credit is GRD 8 billion.
Bank overdrafts and short-term borrowings are secured by the assignments
of the advertisers' post-dated checks, notes receivable from advertisers and
letters of guarantee from advertisers.
The interest expense for the six months ended June 30, 1999 was GRD 78
million. There was no interest expense for the six months ended June 30, 1998.
VII. Deferred Income Taxes
The deferred income taxes relate to the temporary differences between the
book values and the tax bases of assets and liabilities. Significant components
of the Company's deferred tax liabilities and assets as at December 31, 1998 and
June 30, 1999 are summarized below (the tax rate in effect at December 31, 1998
and June 30, 1999 was 40%):
14
<PAGE>
December 31, June 30,
1998 1999
------------ ------------
(in thousands)
Deferred tax liabilities
Programming costs........................... 1,793,679 2,485,009
Premium unamortized......................... 176,688 --
Reserves.................................... 430,348 430,348
Reserves taxed in a special way............. 233,826 233,826
Deferred charges............................ 231,015 254,037
Leased assets............................... 274,335 247,342
Deferred interest on finance leases......... 5,936 4,542
Customer advances........................... 502,700 531,588
Accrued expenses and other liabilities...... 53,191 443,018
------------ ------------
Gross deferred tax liabilities................. 3,701,718 4,629,710
------------ ------------
Deferred tax assets
Property and equipment...................... 32,942 33,518
Long-term liability......................... 17,600 17,600
Long-term lease liability................... 22,051 10,072
Short-term lease liability.................. 26,278 43,527
Long-term receivables....................... 1,193,308 1,201,309
Deferred revenue ........................... 6,825 6,400
Accounts receivable......................... 356,388 370,730
Employee retirement benefits................ 172,793 171,929
Other assets................................ 409,202 439,891
Other provisions............................ 195,531 224,732
Accrued expenses............................ 1,615,315 439,818
Net operating losses........................ 139,484 26,484
------------ ------------
Gross deferred tax assets...................... 4,187,717 2,959,526
------------ ------------
Less: valuation allowance...................... (1,306,288) (1,193,288)
------------ ------------
Net deferred tax (liability)................... (820,289) (2,863,472)
============ ============
Long-term receivables give rise to a tax asset principally due to certain
long-term agreements that have not satisfied all of the revenue recognition
criteria of SFAS No. 53. Such agreements, however, are taxable by the local
Greek authorities.
The classification of deferred income taxes in the accompanying balance
sheets is as follows:
December 31, June 30,
1998 1999
------------ ------------
(in thousands)
Net current deferred tax liability............ (1,165,531) (3,209,045)
------------ ------------
Net non-current deferred tax assets........... 345,242 345,573
============ ============
The provision for income taxes reflected in the accompanying statements of
operation is analyzed as follows:
15
<PAGE>
Unaudited Three Months Unaudited Six Months
Ended June 30, Ended June 30,
------------------------ -----------------------
1998 1999 1998 1999
------------ ----------- ------------ ----------
(in thousands)
Current....................... 44,836 16,187 57,285 43,501
Deferred income taxes......... 119,326 1,454,488 361,257 2,043,183
------------ ----------- ------------ ----------
Provision income taxes........ 164,162 1,470,675 418,542 2,086,684
------------ ----------- ------------ ----------
The reconciliation of the provision for income taxes to the amount
determined by the application of the Greek statutory tax rate of 40% in 1998 and
1999 to pre-tax income is summarized as follows:
Unaudited Three Months Unaudited Six Months
Ended June 30, Ended June 30,
------------------------ -----------------------
1998 1999 1998 1999
------------ ----------- ------------ ----------
(in thousands)
Tax provision at statutory rate. 1,183,948 1,562,481 93,357 2,152,568
Effect of change in tax rate.... -- -- (96,507) --
Interest income................. (61,200) (95,523) (90,646) (134,880)
Disallowed prior period expenses 21,300 37,171 40,224 52,450
Non-deductible general expenses. 45,000 58,731 97,114 108,731
loss not subject to income tax.. -- -- -- 20,815
Change in valuation allowance... (1,024,886) -- 375,000 (113,000)
------------ ----------- ------------ ----------
Provision for income taxes...... 164,162 1,562,860 418,542 2,086,684
------------ ----------- ------------ ----------
Interest income is taxed at a lower rate (15%) than operating income.
Disallowed prior period expenses relate to invoices for goods or services that
were not received prior to the preparation of the tax returns and that relate to
prior year expenses (i.e., invoices received in February that relate to services
rendered in December of prior year). Non-deductible general expenses relate
primarily to certain car, meals and entertainment expenses.
In Greece, amounts reported to the tax authorities are provisional until
such time as the books and records of the entity are inspected by the tax
authorities. Greek tax laws and related regulations are subject to
interpretation by the tax authorities. The Company has been audited by the tax
authorities up to 1992. Management believes that the amounts accrued will be
sufficient to meet its tax obligations.
The ultimate outcome of additional tax assessments may vary from the
amounts accrued, but management believes that any additional tax liability over
and above the amount accrued would not have a material adverse impact on the
Company's results of operations or financial position.
The deferred income taxes relate to the temporary differences between the
book value and tax basis of assets and liabilities. Significant components of
the Company's deferred tax liabilities and assets are analyzed above.
VIII. Long-term Debt
Long-term debt consists of:
16
<PAGE>
<TABLE>
<CAPTION>
Unaudited
December 31, June 30,
1998 1999
-------------- ---------------
(in thousands)
<S> <C> <C>
Senior Notes due 2007 issued on August 12, 1997. Interest on
the Notes is paid semi-annually in February and August
commencing February 1, 1998, at a rate of 9% per
annum. The Senior Notes are redeemable, in whole or in
part, at the option of the Company at any time on or
after August 1, 2002. 32,545,000 34,924,851
-------------- ---------------
32,545,000 34,924,851
Less: Current portion -- --
-------------- ---------------
32,545,000 34,924,851
============== ===============
</TABLE>
Interest expense relating to the Senior Notes for the six months ended
June 30, 1998 and 1999 totaled GRD 1,580 million and GRD 1,574 million,
respectively, and is included in interest expense in the accompanying statements
of operations.
On March 19, 1999 and March 25, 1999, the Company repurchased GRD 447
million ($1.5 million) and GRD 739 million ($2.4 million), respectively, of the
Senior Notes, with accrued interest of GRD 17 million ($0.5 million) to the date
of repurchase. The early extinguishment of the Senior Notes resulted in a charge
of GRD 19 million ($0.5 million) consisting of the following:
Unaudited Six Months
Ended June 30, 1998
--------------------
(in thousands)
Discount on prepayment of Senior Notes................ 36,890
Write-off of related unamortized debt issuance costs.. (55,809)
--------------------
(18,919)
====================
The indebtedness evidenced by the Senior Notes constitutes a general
unsecured senior obligation of the Company and ranks pari passu in right of
payment with all other senior indebtedness and senior in right of payment to all
subordinated indebtedness of the Company. The indenture with respect to the
Senior Notes contains certain covenants and restrictions that, among other
things, limit the type and amount of additional indebtedness that may be
incurred by the Company and impose certain limitations on investments, loans and
advances, sales or transfers of assets, dividends and other payments, the
ability of the Company to enter into sale-leaseback transactions, certain
transactions with affiliates and certain mergers.
IX. Share Capital
On March 12, 1999, the Company completed the issuance of 3,080,000 common
shares through an initial public offering, resulting in net proceeds to the
Company of GRD 25,356 million. The Company's share capital increased by GRD 308
million and the excess par value amounted to GRD 24,962 million, which has been
recorded as additional paid-in capital.
17
<PAGE>
X. Foreign Exchange (losses) gains
Foreign exchange (losses) gains included in the statements of operations
are analyzed as follows:
<TABLE>
<CAPTION>
Unaudited Three Months Unaudited Three Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1998 1999 1998 1999
---------- ----------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Realized loss on forward contract..................... -- (2,777,096) -- (2,777,096)
Foreign exchange gain on forward contract representing
difference between balance sheet rate and
forward rate ($) -- 2,539,356 -- 4,605,000
Amortization of the premium on forward contract....... -- (261,000) -- (783,000)
Mark to market adjustment on option................... -- (109,135) -- (441,719)
Foreign exchange gain (loss) on Senior Notes ($)...... 1,365,646 (1,117,452) (2,923,970) (3,565,845)
Foreign exchange gain on cash, receivables and payables
denominated in foreign currencies ($)........... (470,854) 921,869 793,841 2,273,742
Realized gain (loss) on transactions.................. (212,737) 185,472 (212,737) 160,528
---------- ----------- ---------- ----------
682,054 (617,986) (2,342,866) (528,390)
========== =========== ========== ==========
</TABLE>
XI. Other income (expense)
Other income (expense) for the six months ended June 30, 1999 includes
start-up costs of GRD 444 million associated with the Company's evaluating
possible options for an investment in the direct-to-home television business and
a charge of GRD 19 million (see Note 8 above) relating to the early
extinguishment of the Senior Notes.
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The Company derives a substantial portion of its revenue from the sale of
television advertising time (93.3% of total net revenue in the six months ended
June 30, 1999 and 91.7% in the six months ended June 30, 1998). While the
Company sells a significant portion of its available advertising time, it does
not sell all of it. The Company uses a variety of means to utilize unsold
advertising time in all time periods (commonly referred to as "dead time") to
improve its operating results and cash flows. Such other sources include
audiotext and infomercials. The Company derives revenue from its majority-owned
subsidiary, Audiotex S.A. ("Audiotex"), which generates audiotext revenue, and
from an affiliated entity, Epikinonia Ltd., which produces infomercials and pays
Antenna for production and technical support.
The Company also derives revenue from royalties received from syndicating
its own programming. Such programming sales are made to a variety of users,
including a television network in Cyprus (operated by Antenna TV Ltd. (Cyprus),
a company in which the General Manager of the Company is General Manager), and
broadcasters targeting Greek-speaking viewers in the United States, Canada and
Australia. Sales of programming to Greek-speaking viewers are made in the United
States and Canada through an affiliated entity, Antenna Satellite TV (USA) Inc.,
and in Australia through the Company's wholly-owned subsidiary, Pacific
Broadcast Distribution Ltd. ("Pacific Broadcast").
In March 1999, the Company raised net proceeds of $86.5 million in an
initial public offering (the "IPO") of 7,700,000 American Depositary Shares
("ADSs"), representing 3,850,000 shares of its capital stock, nominal value GRD
100 per share. On May 6, 1999, the Company utilized a portion of the net
proceeds it received from the IPO to acquire the following interests: a 51%
interest in Audiotex (for a purchase price of $7.25 million); a 99.97% interest
in Antenna R.T. Enterprises ("Antenna Radio"), which owns Antenna FM (97.1 FM),
a combination news/talk and music radio station serving the greater Athens area
(for a purchase price of $16.25 million plus the assumption of approximately
$5.2 million of indebtedness); a 100% interest in Antenna Spoudastiki Ltd.
("Antenna Spoudastiki"), which operates a training center for journalists and
other media personnel (for a purchase price of approximately $6.0 million); and
a 100% interest in Pacific Broadcast, which rebroadcasts the Company's
programming in Australia through a joint venture (for a purchase price of $3.5
million). Each of the companies whose interests were acquired was previously
affiliated with or controlled by members of the family of Mr. Minos Kyriakou,
the Company's Chairman and Chief Executive Officer. See Note 1 of Notes to
Financial Statements.
These business combinations were among companies under common control and
have been accounted for "as if" a pooling of interest had occurred for periods
subsequent to September 1, 1998, the date that the companies came under common
control for
19
<PAGE>
accounting purposes. Accordingly, the balance sheet as at December 31, 1998 and
the consolidated statements of operations, cash flows and shareholders' equity
for the year ended December 31, 1998 have been restated. Because the business
combinations were among companies under common control they have been
consolidated based upon their book value and historical results of operations,
respectively. The cash amounts paid for the companies acquired, in excess of
their book values, have been treated as a dividend to the selling shareholders.
The condensed consolidated financial statements of the Company include all
of its significant majority-owned subsidiaries. Affiliated companies in which
the Company does not own a controlling interest or for which the minority
shareholders have significant veto rights over operating decisions
(participating rights requiring unanimous shareholder approval, including:
transactions in excess of GRD 20 million, operating budgets, senior management
positions, borrowing and amendments to contractual obligations) are accounted
for using the equity method.
Results of Operations
Three Months Ended June 30, 1999 (unaudited)
Compared to Three Months Ended June 30, 1998 (unaudited)
Total net revenue increased GRD 1,942 million ($6.2 million), or 20.2%,
from GRD 9,630 million ($30.5 million) in the three months ended June 30, 1998
to GRD 11,572 million ($36.7 million) in the three months ended June 30, 1999.
This increase was attributable primarily to an underlying increase in
advertising revenue.
Advertising revenue, which comprised 93.6% of total net revenues for the
three months ended June 30, 1999, increased GRD 1,999 million ($6.4 million), or
22.6%, from GRD 8,834 million ($28.0 million) in the three months ended June 30,
1998 to GRD 10,833 million ($34.4 million) in the three months ended June 30,
1999. This increase principally reflected an underlying increase in advertising
revenue of GRD 1,353 million ($4.3 million), primarily as a result of increases
in volume, which in turn reflected higher ratings. The total increase in
advertising revenue also reflected the addition of GRD 646 million ($2.0
million) of advertising revenue from Antenna Radio. In the prior period, revenue
from Antenna Radio consisted primarily of GRD 47 million ($0.2 million) of
related party revenue from interest on a credit facility with the Company.
Related party revenue decreased GRD 226 million ($0.7 million), or 29.5%,
from GRD 768 million ($2.4 million) in the three months ended June 30, 1998 to
GRD 542 million ($1.7 million) in the three months ended June 30, 1999,
principally reflecting the elimination upon consolidation and reclassification
of related party revenue resulting from the acquisition of interests in Antenna
Radio, Antenna Spoudastiki, Pacific Broadcast and Audiotex, partially offset by
the addition of GRD 14 million of related party revenue from Antenna Radio
(license fees paid by Antenna Satellite Radio). Revenue earned from Audiotex, a
company accounted for using the equity method, is
20
<PAGE>
included under related party commission income (while in prior periods it was
included under related party revenue).
Other revenue, representing revenue from program sales, Visa(R) card fees
and commissions, and revenue from the provision of technical services and
infomercials, increased GRD 169 million ($0.5 million), or 591.6%, from GRD 29
million ($0.1 million) in the three months ended June 30, 1998 to GRD 197
million ($0.6 million) in the three months ended June 30, 1999, principally as a
result of the addition of GRD 150 million ($0.5 million) of other revenue,
representing revenue from subscriber fees and tuition, from Pacific Broadcast
and Antenna Spoudastiki. The balance of the increase was attributable to an
underlying increase in revenues from infomercials and distribution agreements.
Cost of sales decreased GRD 121 million ($0.4 million), or 6.0%, from GRD
1,944 million ($6.2 million) in the three months ended June 30, 1998 to GRD
1,823 million ($5.8 million) in the three months ended June 30, 1999. This
decrease was attributable primarily to decreases in the costs associated with
the acquisition of foreign programming and Greek features, offset by an increase
in costs associated with the production of news (due to the coverage of the war
in Kosovo). This decrease was further offset by an increase in cost of sales
resulting from the addition of GRD 236 million ($0.8 million) of cost of sales
from Antenna Radio, Antenna Spoudastiki and Pacific Broadcast.
Selling, general and administrative expenses ("SG&A") decreased GRD 292
million ($0.9 million), or 19.3%, from GRD 1,513 million ($4.8 million) in the
three months ended June 30, 1998 to GRD 1,221 million ($3.9 million) in the
three months ended June 30, 1999. This decrease was attributable principally to
underlying decreases in frequency fees, sales promotion expenses, legal expenses
and provisions for accounts receivable, partially offset by the addition of GRD
144 million ($0.5 million) of SG&A from Antenna Radio, Antenna Spoudastiki and
Pacific Broadcast. The decrease was further offset by underlying increases in
maintenance, rent and travel expenses.
Amortization of programming costs increased GRD 34 million ($0.1 million),
or 1.1%, from GRD 3,072 million ($9.7 million) in the three months ended June
30, 1998 to GRD 3,106 million ($9.8 million) in the three months ended June 30,
1999, all of which was attributable to the Company.
Depreciation increased GRD 48 million ($0.1 million), or 40.1%, from GRD
118 million ($0.4 million) in the three months ended June 30, 1998 to GRD 166
million ($0.5 million) in the three months ended June 30, 1999, of which GRD 21
million ($0.06 million) of this increase was attributable to the addition of
depreciation from Antenna Radio, Pacific Broadcast and Antenna Spoudastiki.
Operating income increased GRD 2,273 million ($7.2 million), or 76.2%,
from GRD 2,983 million ($9.5 million) in the three months ended June 30, 1998 to
5,256 million ($16.7 million) in the three months ended June 30, 1999,
principally reflecting
21
<PAGE>
an underlying increase in total net revenue during the period (including the
addition of GRD 286 million ($0.9 million) of revenue from Antenna Radio).
Interest expense, net decreased GRD 160 million ($0.5 million), or 22.3%,
from GRD 715 million ($2.2 million) in the three months ended June 30, 1998 to
GRD 555 million ($1.7 million) in the three months ended June 30, 1999,
reflecting an increase in interest income principally as a result of higher cash
balances outstanding during the three months ended June 30, 1999 and, to a
lesser extent, the addition of GRD 5 million ($0.02 million) of interest income
from Antenna Radio. The decrease in interest expense, net was partially offset
by an increase in gross interest expense during the period, principally
attributable to the addition of GRD 25 million ($0.08 million) of gross interest
expense from Antenna Radio and Pacific Broadcast. See "--Liquidity and Capital
Resources."
Foreign exchange losses increased GRD 1,300 million ($4.1 million) from a
gain of GRD 682 million ($2.1 million) to a loss of GRD 618 million ($2.0
million), primarily reflecting unrealized losses resulting from the translation
of the Senior Notes denominated in U.S. dollars, the loss realized on the
forward contract, the amortization of the premium on the forward contract, the
mark to market adjustment on the option (see Note 10 of Notes to Financial
Statements) and the addition of GRD 7 million ($0.02 million) of foreign
exchange losses from Antenna Radio.
Provision for income taxes increased GRD 1,296 million ($4.1 million) from
GRD 164 million ($0.5 million) in the three months ended June 30, 1998 to GRD
1,460 million ($4.6 million) in the three months ended June 30, 1999,
principally as a result of increased operating income and changes in valuation
allowance. Of the increase in provision for income taxes, GRD 8 million ($0.03
million) was attributable to the addition of provision for income taxes for
Antenna Radio and Antenna Spoudastiki.
Net income decreased GRD 269 million ($0.9 million) from GRD 2,796 million
($8.87 million) in the three months ended June 30, 1998 to GRD 2,527 million
($8.0 million) in the three months ended June 30, 1999. The decrease was
principally attributable to an increase in the provision for income taxes,
partially offset by an underlying increase in operating income and the
contribution of operating income from Antenna Radio.
Six Months Ended June 30, 1999 (unaudited)
Compared to Six Months Ended June 30, 1998 (unaudited)
Total net revenue increased GRD 3,420 million ($10.9 million), or 20.9%,
from GRD 16,365 million ($51.9 million) in the six months ended June 30, 1998 to
GRD 19,785 million ($62.8 million) in the six months ended June 30, 1999. This
increase was attributable primarily to an underlying increase in advertising
revenue.
Advertising revenue, which comprised 93.3% of total net revenues for the
six months ended June 30, 1999, increased GRD 3,616 million ($11.5 million), or
24.4%,
22
<PAGE>
from GRD 14,841 million ($47.1 million) in the six months ended June 30, 1998 to
GRD 18,457 million ($58.6 million) in the six months ended June 30, 1999. This
increase principally reflected an underlying increase in advertising revenue of
GRD 2,556 ($8.1 million), primarily as a result of increases in volume, which in
turn reflected higher ratings. The total increase in advertising revenue also
reflected the addition of GRD 1,060 million ($3.4 million) of advertising
revenue from Antenna Radio. In the prior period, revenue from Antenna Radio
consisted primarily of GRD 91 million ($0.3 million) of related party revenue
from interest on a credit facility with the Company.
Related party revenue decreased GRD 486 million ($1.5 million), or 33.7%,
from GRD 1,446 million ($4.6 million) in the six months ended June 30, 1998 to
GRD 960 million ($3.1 million) in the six months ended June 30, 1999,
principally reflecting the elimination upon consolidation and reclassification
of related party revenue resulting from the acquisition of interests in Antenna
Radio, Antenna Spoudastiki, Pacific Broadcast and Audiotex, partially offset by
the addition of GRD 16 million ($0.05 million) of related party revenue from
Antenna Radio (license fees paid to Antenna Radio by Antenna Satellite Radio).
Other revenue, representing revenue from program sales, Visa(R) card fees
and commissions, and revenue from the provision of technical services and
infomercials, increased GRD 291 million ($0.9 million), or 371.0%, from GRD 78
million ($0.3 million) in the six months ended June 30, 1998 to GRD 369 million
($1.2 million) in the six months ended June 30, 1999, principally as a result of
the addition of GRD 261 million ($0.8 million) of other revenue, representing
revenue from subscriber fees and tuition, from Pacific Broadcast and Antenna
Spoudastiki. The balance of the increase was principally attributable to
underlying increases in revenues from Antenna's branded credit card.
Cost of sales increased GRD 158 million ($0.5 million), or 5.0%, from GRD
3,092 million ($9.8 million) in the six months ended June 30, 1998 to GRD 3,250
million ($10.3 million) in the six months ended June 30, 1999. This increase was
attributable primarily to the addition of 469 million ($1.5 million) of cost of
sales from Antenna Radio, Antenna Spoudastiki and Pacific Broadcast and, to a
lesser extent, an increase in costs associated with the production of news (due
to the coverage of the war in Kosovo). This increase was partially offset by
decreases in the costs associated with the acquisition of foreign programming
and Greek features.
Selling, general and administrative expenses ("SG&A") decreased GRD 215
million ($0.7 million), or 7.7%, from GRD 2,796 million ($8.9 million) in the
six months ended June 30, 1998 to GRD 2,581 million ($8.2 million) in the six
months ended June 30, 1999. This decrease was attributable principally to
underlying decreases in sales promotion expenses, frequency fees, provisions for
accounts receivable, legal expenses and advertising expenses, partially offset
by the addition of GRD 309 million ($1.0 million) of SG&A from Antenna Radio,
Antenna Spoudastiki and Pacific Broadcast. The decrease was further offset by
underlying increases in payroll, market research and rent expenses.
23
<PAGE>
Amortization of programming costs increased GRD 8 million ($0.03 million)
from GRD 6,236 million ($19.8 million) in the six months ended June 30, 1998 to
GRD 6,244 million ($19.8 million) in the six months ended June 30, 1999, all of
which was attributable to the Company.
Depreciation increased GRD 91 million ($0.3 million), or 37.6%, from GRD
242 million ($0.8 million) in the six months ended June 30, 1998 to GRD 333
million ($1.1 million) in the six months ended June 30, 1999, of which GRD 43
million ($0.1 million) of this increase was attributable to the addition of
depreciation from Antenna Radio, Pacific Broadcast and Antenna Spoudastiki.
Operating income increased GRD 3,378 million ($10.7 million), or 84.5%,
from GRD 3,999 million ($12.7 million) in the six months ended June 30, 1998 to
7,377 million ($23.4 million) in the six months ended June 30, 1999, principally
reflecting an underlying increase in total net revenue during the period
(including the addition of GRD 317 million ($0.4 million) of revenue from
Antenna Radio) and a decrease in SG&A, partially offset by an increase in cost
of sales.
Interest expense, net decreased GRD 201 million ($0.6 million), or 13.9%,
from GRD 1,441 million ($4.6 million) in the six months ended June 30, 1998 to
GRD 1,240 million ($4.0 million) in the six months ended June 30, 1999,
reflecting an increase in interest income principally as a result of higher cash
balances outstanding during the six months ended June 30, 1999 and, to a lesser
extent, the addition of GRD 7 million ($0.02 million) of interest income from
Antenna Radio. The decrease in interest expense, net was partially offset by an
increase in gross interest expense during the period, principally attributable
to the addition of GRD 72 million ($0.2 million) of gross interest expense from
Antenna Radio and Pacific Broadcast. See "--Liquidity and Capital Resources."
Foreign exchange losses decreased GRD 1,814 million ($5.8 million) from
GRD 2,343 million ($7.5 million) to GRD 528 million ($1.7 million), reflecting
gains from the Company's U.S. dollar cash holdings, receivables/payables and the
forward contract, which offset unrealized losses resulting from the translation
of the Senior Notes denominated in U.S. dollars, the amortization of the premium
on the forward contract, the mark to market adjustment on the option (see Note
10 of Notes to Financial Statements) and the addition of GRD 32 million ($0.1
million) of foreign exchange losses from Antenna Radio and Pacific Broadcast.
Equity in net income of unconsolidated entities increased from zero in the
six months ended June 30, 1998 to GRD 15 million ($0.05 million) in the six
months ended June 30, 1999, as a result of the acquisition of an interest in
Audiotex (which is accounted for using the equity method).
Related party commission income increased from zero in the six months
ended June 30, 1998 to GRD 231 million ($0.7 million) in the six months ended
June 30, 1999,
24
<PAGE>
as a result of the reclassification as related party commission income of
revenue earned from Audiotex.
Other income decreased GRD 492 million ($1.6 million) from income of GRD
19 million ($0.06 million) in the six months ended June 30, 1998 to a loss of
GRD 473 million ($1.5 million) in the six months ended June 30, 1999, as a
result of a charge of GRD 19 million ($0.06 million) related to the early
extinguishment of a portion of the Senior Notes and costs associated with the
Company's evaluating possible options for an investment in the direct-to-home
television business, partially offset by the addition of GRD 7 million ($0.02
million) of other income from Antenna Radio.
Provision for income taxes increased GRD 1,668 million ($5.3 million) from
GRD 419 million ($1.3 million) in the six months ended June 30, 1998 to GRD
2,087 million ($6.6 million) in the six months ended June 30, 1999, principally
as a result of increased operating income. Of the increase in provision for
income taxes, GRD 19 million ($0.06 million) was attributable to the addition of
provision for income taxes for Antenna Radio and Antenna Spoudastiki.
Net income increased GRD 3,480 million ($11.0 million) from a net loss of
GRD 185 million ($0.6 million) in the six months ended June 30, 1998 to net
income of GRD 3,295 million ($10.0 million) in the six months ended June 30,
1999, reflecting an underlying increase in operating income and the contribution
of operating income from Antenna Radio.
Liquidity and Capital Resources
The Company funds its operations, expenditures for programming, working
capital requirements and capital expenditures principally through a combination
of cash flow from operations and equity contributions. As of June 30, 1999, the
Company had approximately GRD 35,259 million ($112.0 million) of total debt
(long-term indebtedness and long-term obligations under capital leases). In
March 1999, the Company completed the IPO of 7,700,000 ADSs, representing
3,850,000 shares of its capital stock, nominal value GRD 100 per share. Of the
7,700,000 ADSs sold, 6,160,000 were sold by the Company for net proceeds of
$86.5 million and 1,540,000 were sold by a selling shareholder for net proceeds
of $14.4 million. On March 19, 1999 and March 25, 1999, the Company used a
portion of the net proceeds received by it from the IPO to repurchase GRD 447
million ($1.5 million) and GRD 739 million ($2.4 million), respectively, of its
outstanding Senior Notes. See Note 8 of Notes to Financial Statements. On May 6,
1999, the Company used a portion of the net proceeds received by it from the IPO
to complete the acquisition of interests in Antenna Radio, Antenna Spoudastiki,
Pacific Broadcast and Audiotex. See Note 1 of Notes to Financial Statements.
The Company's principal use of funds are expenditures for programming,
which expenditures totaled GRD 9,442 million ($30.0 million) in the six months
ended June 30, 1998 and GRD 6,773 million ($21.5 million) in the six months
ended June 30, 1999.
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Operating Activities. Net cash used in operating activities was GRD 5,256
million ($16.7 million) in the six months ended June 30, 1998 compared to GRD
6,680 million ($21.2 million) in the six months ended June 30, 1999.
Investing Activities. Net cash used in investing activities was GRD 72
million ($0.2 million) in the six months ended June 30, 1998 and GRD 10,318
million ($32.7 million) in the six months ended June 30, 1999, reflecting the
cost of the acquisition of interests in Antenna Radio, Antenna Spoudastiki,
Pacific Broadcast and Audiotex and increased purchases of fixed assets such as
technical and office equipment.
Financing Activities. Net cash used in financing activities was GRD 125
million ($0.4 million) in the six months ended June 30, 1998 compared to net
cash provided by financing activities of GRD 23,632 million ($75.0 million) in
the six months ended June 30, 1999. The increase in funds from financing
activities in 1999 principally reflects the net proceeds of GRD 25,270 million
($80.2 million) from the IPO, offset by the early repurchase of a portion of the
Senior Notes.
Distributable Reserves. The Company had distributable reserves in its
Greek statutory accounts of approximately GRD 471 million ($1.5 million). The
Company does not intend to pay dividends for the foreseeable future. The
declaration of future dividends will be subject to the requirements of Greek
corporate law and the terms of the indenture with respect to the Senior Notes.
Other Long-term Liability. The Company has an outstanding liability to the
Pension Fund for Athens and Thessaloniki Newspaper Employees for advertiser
contributions. It is expected that the repayment terms will be structured over
approximately three years. An installment of approximately GRD 447 million ($1.4
million) was paid during the three month period ended June 30, 1999.
Year 2000 and Euro Conversion
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (Year 2000) approaches. The "Year
2000 problem" is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
The Company is in the process of upgrading its management information
system under the direction of the Information Technology Department. The
principal areas affected by the Year 2000 problem are its computer network,
customer billing system and business systems (accounting, finance, advertising,
marketing, human resources, journalist support and transmission systems). The
Company believes that the hardware related to its computer network is now Year
2000-compliant, while the relevant operating systems related to the computer
network are expected to be year 2000-compliant by
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September 1999. During 1998, the Company spent GRD 52 million ($0.2 million)
upgrading its computer network. The software applications related to its
business systems are expected to be Year 2000-compliant by October 1999. The
cost of upgrading the Company's accounting and finance systems is estimated to
be GRD 50 million ($0.2 million). The balance of the necessary upgrades will be
completed by the end of 1999, at a cost of approximately GRD 92 million ($0.3
million).
The Company has evaluated the extent to which non-information technology
systems would be impacted by the Year 2000 and the types of contingency plans
that may be necessary if its management information systems and/or
non-information technology systems were to be non-Year 2000 compliant. The
principal systems are expected to be fully compliant within the fourth quarter
of 1999. The Company is also continuing to evaluate the extent to which failure
of third parties with which the Company interacts to be Year 2000-compliant
could have a material adverse effect on the Company's financial condition or
results of operations. Such third parties could include, among others,
advertisers, providers of satellite transmission facilities, production
companies and suppliers of foreign programming. Any Year 2000 compliance problem
of the Company, any of its vendors and any other company with which it interacts
or otherwise does business could have a material adverse effect on the Company's
financial condition or results of operations. The Company will develop
contingency plans that address its failure to be Year 2000-compliant, or the
failure of third parties with which the Company deals to be Year 2000-compliant,
if the final testing of its applications for Year 2000 compliance fails.
The Company's revenues and expenses are denominated in drachmae and
dollars. Greece is not among the eleven members of the European Union whose
currencies became subject to conversion to the euro commencing January 1, 1999.
The Company is not party to any material contracts in which payment is expected
to be made in a currency which is scheduled to be converted to the euro. The
Company's upgraded management information system is capable of handling
conversion to the euro.
Inflation
Although the Greek economy has long been subject to both high levels of
inflation and the effects of the Greek government's measures to curb inflation
such as high real interest rates, the Company does not believe inflation has had
a material effect on its results of operations or financial condition for the
periods presented. Greece experienced average annual rates of inflation of
10.9%, 8.9%, 8.2%, 5.6% and 4.8% in the years 1994 through 1998, respectively.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Exchange Risk Management
The Company's functional currency is the drachma but certain of its
revenue, operating costs and expenses are denominated in foreign currencies.
Transactions involving other currencies are converted into drachmae using the
exchange rates in effect at the time of the transactions. Assets and liabilities
denominated in other currencies are stated at the drachma equivalent using
exchange rates in effect at period-end. Non- drachma denominated revenue,
principally from licensing and distribution of programming outside Greece,
accounted for GRD 512 million ($1.6 million), or 4.4%, of total net revenue in
the three month period ended June 30, 1999. The Company's non- drachma
denominated operating costs, principally foreign-produced programming invoiced
in U.S. dollars, accounted for 4.4% of total net revenue in the three month
period ended June 30, 1999. Non-drachma denominated indebtedness (primarily U.S.
dollars) totaled GRD 33,368 million ($105.9 million), or 100%, of total
indebtedness, at June 30, 1999. Gains and losses resulting from exchange rate
fluctuations are reflected in the statements of operations.
Historically, advertising in most forms of media has been correlated to
general economic conditions. Since substantially all of the Company's operations
are conducted in Greece, the Company's operating results will depend to a
certain extent on the prevailing economic conditions in Greece. Furthermore, a
significant proportion of the Company's revenue is in drachmae. The Company
expects to increase modestly the level of non-drachma denominated revenue as
result of its strategy of increasing its sales of programming to Greek-speaking
audiences resident outside Greece and to other markets.
The Company hedges elements of its currency exposure through use of such
derivative instruments as forward exchange agreements and currency options,
though it might also consider interest rate swaps. The Company is currently
evaluating alternatives for future hedging opportunities. Derivatives involve,
to varying degrees, market exposure and credit risk. Market exposure means that
changes in interest rates or currency exchange rates cause the value of
financial instruments to decrease or increase or its obligations to be more or
less costly to settle. When used for risk management purposes, any gains or
losses on the derivatives will offset losses or gains on the asset, liability or
transaction being hedged. The Company has experienced net foreign exchange
losses in the past, and it could experience net foreign exchange losses in the
future to the extent that foreign exchange rates shift in excess of the risk
covered by hedging arrangements. Credit risk would arise in the event of
non-performance by a counterparty. The Company intends to minimize credit risk
by entering into contracts only with highly credit rated counterparties and
through internal limits and monitoring procedures.
The financial instruments to which the Company is a party are recorded in
the balance sheet at fair value unless, for accounting purposes, they meet the
criteria for a
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hedge of an identifiable foreign currency commitment. A foreign exchange
contract is considered a hedge of an identifiable foreign currency commitment
if: (i) the contract is designated, and effective, as a hedge of a foreign
currency commitment and (ii) the foreign currency commitment is firm. Gains and
losses on foreign exchange contracts meeting these criteria are deferred and
included in the measurement of the related foreign currency transaction, unless
it is estimated that the deferral would lead to recognition of losses in a later
period, in which case such losses are not deferred.
The Company was party to an $87 million forward contract with the Royal
Bank of Scotland, to hedge its currency exposure on a portion of the principal
and interest payable of its U.S. dollar denominated debt. The term of the
contract covered the period from May 15, 1998 to May 15, 1999. The forward rate
was 334 drachmae to the dollar and the spot rate on the contract's effective
date was 310 drachmae to the dollar. The premium (representing the difference
between the spot rate on the contract's effective date and the forward rate),
aggregating GRD 2,088 million, was amortized over the term of the contract. Of
this amount, GRD 261 million was recognized for the three months ended June 30,
1999 and GRD 783 million was recognized for the six months ended June 30, 1999.
In addition, foreign exchange gains or losses on the Company's non-drachma
denominated indebtedness (currently, the Senior Notes) was offset by
corresponding losses or gains on the forward contract's notional amount.
The Company was party to an option agreement with the Royal Bank of
Scotland to sell $104 million at a rate of 280 drachmae to the dollar in May
1999. The option had a maturity date that coincided with the maturity of the
foreign exchange contract described above. The option was recorded on the
balance sheet at its market value and was marked to market each accounting
period with the resulting gain or loss being reflected in the statement of
operations. The mark to market adjustment of the option for the three months and
six months ended June 30 1999 of GRD 109 million ($0.4 million) and GRD 442
million ($1.4 million), respectively, was recorded as part of the foreign
exchange loss in the statement of operations.
The following table sets forth the principal, cash flows and related
weighted average interest rates by expected maturity date of indebtedness of the
Company that may be sensitive to foreign currency exchange rate fluctuations:
Financial Instrument Maturity (2007) Fair Value
---------------------------------- ------------------- ----------------
(GRD) ($) (GRD) ($)
(in millions)
Senior Notes ($111 million)...........34,925 111.1 30,596 97.0
Average interest rate................. 9.8% --
The average interest rate represents the stated interest rate of 9% plus
amortization of deferred issuance costs.
Interest Rate Risk Management
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The Company manages interest rate risk by financing non-current assets and
a portion of current assets with equity, long-term liabilities and long-term
debt with fixed interest rates.
The following table sets forth the principal, cash flows and related
weighted average interest rates by expected maturity date of indebtedness of the
Company that may be sensitive to interest rate fluctuations:
Financial Instrument Maturity (2007) Fair Value
---------------------------------- ------------------- ----------------
(GRD) ($) (GRD) ($)
(in millions)
Senior Notes ($111 million)...........34,925 111.1 30,596 97.0
Average interest rate................. 9.8% --
The average interest rate represents the stated interest rate of 9% plus
amortization of deferred issuance costs.
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(d) Use of Proceeds from Registered Securities
The Company's Registration Statement on Form F-1 (Registration No.
333-72247) with respect to the IPO became effective on March 3, 1999. The sale
of the ADSs in the IPO commenced on March 3, 1999 and closed on March 9, 1999.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
On May 6, 1999, the Company utilized a portion of the net proceeds
received by it from the IPO to acquire the following interests: a 51% interest
in Audiotex. (for a purchase price of $7.25 million); a 99.97% interest in
Antenna Radio, which owns Antenna FM (97.1 FM), a combination news/talk and
music radio station serving the greater Athens area (for a purchase price of
$16.25 million plus the assumption of approximately $5.2 million of
indebtedness); a 100% interest in Antenna Spoudastiki, which operates a training
center for journalists and other media personnel (for a purchase price of
approximately $6.0 million); and a 100% interest in Pacific Broadcast, which
rebroadcasts the Company's programming in Australia through a joint venture (for
a purchase price of $3.5 million). Each of the companies whose interests were
acquired was previously affiliated with or controlled by members of the family
of Mr. Minos Kyriakou, the Company's Chairman and Chief Executive Officer (see
Note 1 of Notes to Financial Statements).
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 30, 1999, the Company held its Annual Ordinary General Assembly
(the "General Assembly") at which the following matters were submitted to a vote
of the Company's shareholders:
1. approval of reports of the board of directors and auditors for
fiscal year 1998;
2. approval of the financial statements for fiscal year 1998;
3. indemnification of the board of directors and auditors for fiscal
year 1998;
4. ratification of the appointment of the auditors for fiscal year
1999;
5. ratification of the appointment of members of the board of directors
following substitution of resigned members; and ratification of all
other actions of the Company's board of directors for fiscal year
1998; and
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6. waiver of dividends payable for fiscal year 1998.
With respect to the matters described in items 1 through 5 above, there were
15,999,440 votes cast in favor, no votes cast against and 3,850,000
abstentions/broker non-votes. With respect to the matter described in item 6
above, there were 19,849,440 votes cast in favor, no votes cast against and no
abstentions/broker non-votes.
All members of the board of directors who served prior to the General
Assembly continue to serve as directors through the remainder of the current
term (July 2003).
ITEM 5. OTHER INFORMATION
(a) Forward-Looking Statements
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), the Company is hereby
providing cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made in
this Quarterly Report. Any statements that express, or involve discussions as
to, expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of the words or phrases such
as "will likely result," "are expected to," "will continue," "is anticipated,"
"estimated," "intends," "plans," "projection" and "outlook") are not historical
facts and may be forward-looking and, accordingly, such statements involve
estimates, assumptions and uncertainties which could cause actual results to
differ materially from those expressed in the forward-looking statements.
Accordingly, any such statements are qualified in their entirety by reference
to, and are accompanied by, the factors discussed throughout this Quarterly
Report and in the Company's Annual Report on Form 20-F for the fiscal year ended
December 31, 1998. Among the key factors that have a direct bearing on the
Company's results of operations are the ability of the Company to successfully
implement its growth and operating strategies; changes in economic cycles;
competition from other broadcast companies and media; fluctuation of exchange
rates; and changes in the laws and government regulations applicable to the
Company or the interpretation or enforcement thereof. These and other factors
are discussed herein under "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this Quarterly
Report.
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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.
ANTENNA TV S.A.
(Registrant)
By: /s/ Nikolaos Angelopoulos
-------------------------
Name: Nikolaos Angelopoulos
Title: Chief Financial Officer
Dated: August 2, 1999
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