As filed with the Securities and Exchange Commission on November 10, 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 November 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 September
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 1999, 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 filed an amendment to its Annual Report on Form 20-F for the year
ended December 31, 1998 on August 23, 1999 to reflect its restated financial
statements.
ii
<PAGE>
PART I. FINANCIAL INFORMATION
Page
----
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
Condensed Consolidated Statements of Operations for the three months
ended September 30, 1998 and 1999 and the nine months
ended September 30, 1998 and 1999................................ 1
Condensed Consolidated Balance Sheets as of December 31, 1998 and
September 30, 1999............................................... 2
Condensed Consolidated Statement of Shareholders' Equity for the
nine months ended September 30, 1999............................. 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 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 5. OTHER INFORMATION..................................... 25
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 September 30, 1998 and 1999
and for the nine months ended September 30, 1998 and 1999
(In thousands of drachmae and U.S. dollars, except earnings per share)
<TABLE>
<CAPTION>
Unaudited Three Months Unaudited Nine Months
Notes Ended September 30, Ended September 30,
----- --------------------------------------------------------------------------------------
1998 1999 1998 1999
----------- -------------------------- ----------- --------------------------
(GRD) (GRD) ($) (GRD) (GRD) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Advertising revenue................. 3,156,580 3,803,199 12,318 17,997,115 22,259,876 72,097
Related party revenue............... 3 621,137 375,399 1,216 2,067,558 1,334,992 4,324
Other revenue.......................
89,470 131,968 427 167,700 500,728 1,622
----------- ----------- ----------- ----------- ----------- -----------
Total net revenue................... 3,867,187 4,310,566 13,961 20,232,373 24,095,596 78,043
----------- ----------- ----------- ----------- ----------- -----------
Cost of sales....................... 985,680 1,690,998 5,477 4,077,695 4,940,875 16,003
Selling, general and administrative
expenses......................... 889,623 818,492 2,651 3,685,183 3,399,247 11,010
Amortization of programming costs... 3,005,000 3,117,898 10,098 9,241,090 9,361,845 30,322
Depreciation........................ 123,911 176,507 572 366,419 509,809 1,651
----------- ----------- ----------- ----------- ----------- -----------
Operating (loss) income............. (1,137,027) (1,493,329) (4,837) 2,861,986 5,883,820 19,057
Interest expense, net............... (693,400) (540,080) (1,749) (2,134,740) (1,780,477) (5,767)
Foreign exchange (losses), net...... 10 (732,308) (65,317) (212) (3,075,174) (593,707) (1,923)
Equity in net income in
unconsolidated affiliate......... -- 4,263 14 -- 19,161 62
Related party commission income..... 3 -- 122,122 396 -- 353,094 1,144
Other income, net................... 11 890 554,349 1,795 19,476 81,536 264
----------- ----------- ----------- ----------- ----------- -----------
Earnings before income taxes........ (2,561,845) (1,417,992) (4,593) (2,328,452) 3,963,427 12,837
Provision (benefit) for income taxes 7 (587,880) (519,007) (1,681) (169,338) 1,567,677 5,077
----------- ----------- ----------- ----------- ----------- -----------
Net (loss) income ..................
(1,973,965) (898,985) (2,912) (2,159,114) 2,395,750 7,760
----------- ----------- ----------- ----------- ----------- -----------
Basic and diluted earnings
(loss) per share................. (117.71) (45.29) (0.15) (128.75) 120.70 0.39
=========== =========== =========== =========== =========== ===========
</TABLE>
Exchange rate used for the convenience translation of the September 30, 1999
balances is GRD 308.75 to $1.00.
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
ANTENNA TV S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of December 31, 1998 and September 30, 1999
(In thousands of drachmae and U.S. dollars)
<TABLE>
<CAPTION>
Unaudited
December 31, September 30,
----------------------- ---------------------
Notes 1998 1998 1999 1999
----- ---------- ------- ---------- -------
(GRD) ($) (GRD) ($)
<S> <C> <C> <C> <C> <C>
ASSETS
- --------------------------------------------------------
Current assets:
Cash on hand and in banks....................... 11,300,087 36,599 21,912,275 70,971
Restricted cash................................. -- -- 334,800 1,084
Accounts receivable, less allowance for doubtful
accounts of GRD 1,161,396 in 1998 and
GRD 1,208,651 in 1999........................ 17,155,755 55,565 16,751,304 54,255
Due from related parties........................ 3 2,499,479 8,095 3,500,464 11,338
Programming costs, net.......................... 5 11,795,427 38,204 11,480,689 37,184
Advances to related parties..................... 3 141,710 459 152,557 494
Advances to third parties....................... 549,786 1,781 915,793 2,966
Prepaid expenses................................ 42,738 138 128,622 417
Other current assets............................ 87,059 282 -- --
Unamortized premium............................. 1,224,719 3,967 -- --
Income and withholding tax advances............. 578,826 1,875 634,340 2,055
---------- ------- ---------- -------
Total current assets................................ 45,375,586 146,965 55,810,844 180,764
Property and equipment, net............................. 1,675,469 5,427 1,704,910 5,522
Investment in unconsolidated affiliate.................. 84,785 275 70,287 228
Broadcast and transmission equipment
under capital leases, net............................ 1,073,600 3,477 944,991 3,061
Deferred charges, net................................... 1 1,959,622 6,347 1,733,765 5,615
Programming costs, excluding current portion............ 5 7,087,570 22,956 6,830,133 22,122
Other receivable less allowance for doubtful accounts
and fair value of GRD 440,000 in 1998 and
GRD 470,000 in 1999.................................. 329,498 1,067 287,498 931
Due from related party.................................. 3 2,021,798 6,548 2,287,188 7,408
Advances to related parties............................. 3 165,137 535 165,137 535
Deferred tax assets..................................... 7 345,242 1,118 345,573 1,119
Other assets............................................ 121,990 395 127,977 414
---------- ------- ---------- -------
Total assets........................................ 60,240,297 195,110 70,308,303 227,719
========== ======= ========== =======
</TABLE>
Exchange rate used for the convenience translation of the December 31, 1998
and September 30, 1999 balances is GRD 308.75 to $1.00.
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
ANTENNA TV S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of December 31, 1998 and September 30, 1999
(In thousands of drachmae and U.S. dollars, except share data)
<TABLE>
<CAPTION>
Unaudited
December 31, September 30,
------------------------ --------------------------
Notes 1998 1998 1999 1999
----- --------- ----------- ----------- -----------
(GRD) ($) (GRD) ($)
<S> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------
Current liabilities:
Bank overdrafts and short-term borrowings........... 6 1,468,155 4,755 665,368 2,155
Current portion of obligations under capital leases. 107,585 348 109,953 356
Trade accounts, notes and cheques payable........... 4,268,500 13,825 3,031,426 9,818
Program license payable............................. 2,607,320 8,445 1,637,363 5,303
Payable to related party............................ -- -- 22,984 74
Customer advances................................... 271,865 881 99,695 323
Accrued interest.................................... 1,246,685 4,038 515,134 1,668
Accrued expenses and other current liabilities...... 9,418,064 30,504 3,574,242 11,577
Income taxes payable................................ -- -- 4,185 14
Deferred tax liability.............................. 7 1,165,531 3,775 2,645,538 8,569
Dividends payable................................... 1 10,040,283 32,519 -- --
Current portion of other long-term liability........
929,362 3,010 934,200 3,026
----------- ----------- ----------- -----------
Total current liabilities............................... 31,523,350 102,100 13,240,088 42,883
----------- ----------- ----------- -----------
Long-term liabilities:
Long-term debt...................................... 8 32,545,000 105,409 34,239,549 110,897
Long-term obligations under capital leases.......... 417,940 1,354 297,223 963
Other long-term liability........................... 1,546,397 5,009 757,099 2,452
Employee retirement benefits........................ 436,982 1,415 436,374 1,413
Long-term provisions................................ 254,525 824 155,713 504
----------- ----------- ----------- -----------
Total liabilities....................................... 66,724,194 216,111 49,126,046 159,112
----------- ----------- ----------- -----------
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 September 30, 1999,
GRD 100 par value).................................. 9 1,676,944 5,431 1,984,944 6,429
Additional paid-in capital.......................... 9 3,752,500 12,154 28,714,904 93,004
Accumulated (deficit)............................... (11,913,341) (38,586) (9,517,591) (30,826)
----------- ----------- ----------- -----------
Total shareholders' equity.............................. (6,483,897) (21,001) 21,182,257 68,607
----------- ----------- ----------- -----------
Commitments and contingencies
Total liabilities and shareholders' equity...... 60,240,297 195,110 70,308,303 227,719
=========== =========== =========== ===========
</TABLE>
Exchange rate used for the convenience translation of the December 31, 1998
and September 30, 1999 balances is GRD 308.75 to $1.00.
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ANTENNA TV S.A.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the nine months ended September 30, 1999
(In thousands of drachmae)
<TABLE>
<CAPTION>
Accumulated (Deficit) Retained
Earnings
----------------------------------------
Legal,
Tax Accumulated
Additional Free and (Deficit)
Share Paid-in Other Retained
Capital Capital Reserves Earnings Total Grand Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 ................. 1,676,944 3,752,500 2,624,187 (14,537,528) (11,913,341) (6,483,897)
Issuance of 3,080,000 common shares
(unaudited) ......................... 308,000 24,962,404 -- -- -- 25,270,404
Net income for the nine months
(unaudited) ......................... -- -- -- 2,395,750 2,395,750 2,395,750
Transfer of statutory earnings to legal,
tax free and other reserves
(unaudited) ......................... -- -- 124,061 (124,061) -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance September 30, 1999 (unaudited) ..... 1,984,944 28,714,904 2,748,248 (12,265,839) (9,517,591) 21,182,257
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ANTENNA TV S.A.
CONDENSED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1998 and 1999
(In thousands of drachmae and U.S. dollars)
<TABLE>
<CAPTION>
Unaudited Nine Months Ended September 30,
-----------------------------------------
1998 1999
----------- --------------------------
(GRD) (GRD) ($)
<S> <C> <C> <C>
Cash flows from operating activities
Net (loss) income .................................................. (2,159,114) 2,395,750 7,760
Adjustments to reconcile net income to net cash
Deferred income taxes ........................................... (239,123) 1,479,676 4,792
Equity in net income of unconsolidated affiliate ................ -- (19,161) (62)
Amortization of debt issuance expenses .......................... 176,811 225,857 732
Amortization of premium on foreign exchange contract and
loss on option ................................................ -- 1,224,719 3,967
Depreciation of property and equipment and capital leases
and amortization of programming costs ......................... 9,607,509 9,871,654 31,973
Provision for other long-term liabilities ....................... 25,000 17,831 58
Provision for employee retirement benefits ...................... 1,885 30,000 97
Change in current assets and liabilities
(Decrease) in accounts and other receivable ............... 884,636 446,451 1,446
(Increase) in due from related parties .................... (1,401,430) (1,254,238) (4,062)
(Increase) in programming costs ........................... (9,341,015) (8,396,133) (27,194)
(Increase) in prepaid and licensed programming expenditures (1,033,992) (393,537) (1,275)
(Decrease) increase in trade accounts, notes and
cheques payable ......................................... (1,451,767) (1,237,074) (4,007)
(Decrease) in licensed program payable .................... (380,824) (969,957) (3,142)
Increase (Decrease) in customer advances .................. 68,217 (172,170) (558)
Increase (decrease) in accrued expenses and liabilities ... (171,840) (7,507,084) (24,314)
Increase in income taxes payable .......................... 15,177 4,185 14
Other, net ................................................ (1,068,345) (426,333) (1,381)
----------- ----------- -----------
Total adjustments .................................... (4,309,101) (7,075,314) (22,916)
----------- ----------- -----------
Net cash (used) in operating activities ............................ (6,468,215) (4,679,564) (15,156)
----------- ----------- -----------
Cash flows from investing activities
Dividends paid .................................................. (1,000,000) -- --
Investment in unconsolidated affiliate .......................... -- (5,100) (17)
Acquisition of affiliated companies ............................. -- (10,040,283) (32,519)
Dividends received .............................................. -- 38,759 126
Purchase of fixed assets ........................................ (131,028) (410,641) (1,330)
----------- ----------- -----------
Net cash (used) in investing activities ............................ (1,131,028) (10,417,265) (33,740)
----------- ----------- -----------
Cash flows from financing activities
Issuance of common shares ....................................... -- 25,270,404 81,847
Redemption of Senior Notes ...................................... -- (1,185,994) (3,841)
(Decrease) in bank overdrafts and
short term borrowings, net ................................... -- (802,787) (2,600)
(Increase) decrease in restricted cash .......................... -- (334,800) (1,085)
Repayments of capital lease obligations ......................... (68,775) (118,349) (383)
Debt issuance costs of Senior Notes ............................. (82,266) -- --
----------- ----------- -----------
Net cash (used in) provided by financing activities ................ (151,041) 22,828,474 73,938
----------- ----------- -----------
Effect of exchange rate changes on cash ............................ 3,247,385 2,880,543 9,330
----------- ----------- -----------
(Decrease) increase in cash ........................................ (4,502,899) 10,612,188 34,372
Cash at beginning of year .......................................... 11,533,274 11,300,087 36,599
----------- ----------- -----------
Cash at end of year ................................................ 7,030,375 21,912,275 70,971
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest ........................................ 3,027,872 3,153,652 10,214
Cash paid for income taxes .................................... -- -- --
</TABLE>
Exchange rate used for the convenience translation of the September 30, 1999
balances is GRD 308.75 to $1.00.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ANTENNA TV S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of Drachmae, except share data and where otherwise indicated)
1. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements and related notes at September 30,
1999 and for the three and nine months ended September 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 nine months ended September 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 $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 US $38.2
million, comprised of cash consideration of US $33 million and the assumption of
US $5.2 million of debt. The total cash purchase price exceeded the book value
of the acquired companies by GRD 11,969 million (US $38.7 million), resulting in
a deemed dividend to the shareholders.
6
<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 nine months ended September 30, 1998 and 1999
totaled GRD 176,811 and GRD 225,857, respectively, and is included in interest
expense in the accompanying unaudited consolidated statements of operations for
the nine months ended September 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 783 million was recognized for the nine months ended September
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 consolidated
statements of operations. The mark to market adjustment of the option for the
nine months ended
7
<PAGE>
September 30, 1999 of GRD 442 million ($1.4 million) was recorded as part of the
foreign exchange loss in the statement of operations.
2. 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 September 30, 1999, which was
GRD 308.75 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.
3. 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 September 30, 1999
---------- ------------------
(in thousands)
<S> <C> <C>
Accounts Receivable
Current:
Antenna Satellite TV (USA) Inc. ......... 1,633,511 2,335,250
Audiotex ................................ 76,197 117,572
Epikinonia Ltd. ......................... 48,203 144,697
Antenna Satellite Radio ................. 14,228 42,611
Antenna TV Ltd. (Cyprus) ................ 686,901 827,395
Catalogue Auctions Hellas S.A ........... 40,439 32,939
---------- ----------
2,499,479 3,500,464
========== ==========
Long-term:
Antenna Satellite TV (USA) Inc. ......... 2,438,156 2,756,046
Less: allowance for fair value .......... (416,358) (468,858)
---------- ----------
2,021,798 2,287,188
========== ==========
Advances
Current:
Catalogue Auctions Hellas S.A ........... 141,710 152,557
---------- ----------
141,710 152,557
========== ==========
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:
8
<PAGE>
<TABLE>
<CAPTION>
Purchase from related Revenue from related
parties parties
-------------------------------------------
Nine Nine Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
30, 1998 30, 1999 30, 1998 30, 1999
------ --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Epikinonia Ltd. (Production facilities and
technical and administrative services) ...... -- -- 248,573 262,397
Antenna Satellite TV (USA) Inc. (License fees) . -- -- 723,901 767,889
Antenna Satellite Radio ........................ -- -- -- 24,340
Pacific Broadcast Distribution Ltd. ............ -- -- 393,424 --
Antenna TV Ltd. (Cyprus) (Royalties) ........... -- -- 328,806 280,366
Antenna R.T. Enterprises S.A. (Other) .......... 14,450 -- 141,347 --
Audiotex (Related party commission income) ..... --
-- -- 231,507 --
------ --------- --------- ---------
14,450 -- 2,067,558 1,334,992
Audiotex (Related party commission income) ..... -- -- -- 353,094
------ --------- --------- ---------
14,450 -- 2,067,558 1,688,086
====== ========= ========= =========
</TABLE>
The purchases of Drs 14,450 are included in selling, general and
administrative expenses.
4. 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 Total
TV Radio Broadcast Spoudastiki revenue/expenses/ consolidated
(Greece) (Greece) (Australia) (Greece) assets (unaudited)
----------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Sales external .......................... 21,053,663 1,374,728 208,377 123,835 -- 22,760,603
Related party sales ..................... 1,844,217 29,840 -- -- (539,064) 1,334,992
Results ................................. -- -- -- -- -- --
Operating income ........................ 5,954,806 372,074 14,829 (67,681) (390,208) 5,883,820
Depreciation and amortization ........... 443,224 34,765 26,820 5,000 -- 509,809
Amortization of programming costs ....... 9,361,845 -- -- -- -- 9,361,845
Equity in net income in unconsolidated
affiliate ............................... 19,161 -- -- -- -- 19,161
Income (loss) before tax ................ 3,895,524 155,511 (19,928) (67,681) -- 3,963,427
Net income (loss) ....................... 2,324,347 142,511 (19,928) (51,181) -- 2,395,750
Segment assets:
Total assets (September 30, 1999) . 79,822,810 2,040,909 482,536 72,271 (12,110,223) 70,308,303
Total assets (December 31, 1998) .. 58,964,240 1,615,650 472,821 124,114 (936,528) 60,240,297
</TABLE>
5. Programming Costs
The following table sets forth the components of the programming costs,
net of amortization:
9
<PAGE>
December 31, Unaudited
1998 September 30, 1999
----------- ------------------
(in thousands)
Produced programming ............... 11,448,729 11,929,437
Purchased sports rights ............ 3,233,640 1,787,220
Licensed program rights ............ 1,875,691 2,163,229
Prepaid license program rights ..... 1,546,851 1,632,017
Prepaid produced programs and sports 778,086 798,919
----------- -----------
18,882,997 18,310,822
Less: current portion .............. (11,795,427) (11,480,689)
----------- -----------
7,087,570 6,830,133
=========== ===========
6. 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 9.9 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 nine months ended September 30, 1999 was GRD
108,534 million. There was no interest expense for the nine months ended
September 30, 1998.
7. 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
September 30, 1999 are summarized below (the tax rate in effect at December 31,
1998 and September 30, 1999 was 40%):
10
<PAGE>
Unaudited
December 31, September 30,
1998 1999
---------- -------------
(in thousands)
Deferred tax liabilities
Programming costs .................... 1,793,679 2,414,343
Premium unamortized .................. 176,688 --
Reserves ............................. 430,348 430,348
Reserves taxed in a special way ...... 233,826 233,826
Deferred charges ..................... 231,015 276,710
Leased assets ........................ 274,335 233,615
Deferred interest on finance leases .. 5,936 3,845
Customer advances .................... 502,700 542,226
Accrued expenses and other liabilities 53,191 --
---------- ----------
Gross deferred tax liabilities .......... 3,701,718 4,134,913
---------- ----------
Deferred tax assets
Property and equipment ............... 32,942 32,718
Long-term liability .................. 17,600 17,600
Long-term lease liability ............ 22,051 3,409
Short-term lease liability ........... 26,278 23,958
Long-term receivables ................ 1,193,308 1,205,309
Deferred revenue ..................... 6,825 5,700
Accounts receivable .................. 356,388 372,030
Employee retirement benefits ......... 172,793 174,550
Other assets ......................... 409,202 446,296
Other provisions ..................... 195,531 155,532
Accrued expenses ..................... 1,615,315 540,650
Net operating losses ................. 139,484 50,484
---------- ----------
Gross deferred tax assets ............... 4,187,717 3,028,236
---------- ----------
Less: valuation allowance ............... (1,306,288) (1,193,288)
---------- ----------
Net deferred tax (liability) ............ (820,289) (2,299,965)
========== ==========
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, Unaudited
1998 September 30, 1999
------------ ------------------
(in thousands)
Net current deferred tax liability ....... (1,165,531) (2,645,538)
---------- ----------
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:
Unaudited Three Months Unaudited Nine Months
Ended September 30, Ended September 30,
---------------------- ----------------------
1998 1999 1998 1999
--------- --------- --------- ---------
(in thousands)
Current ................ 12,500 44,500 69,785 88,001
Deferred income taxes .. (600,380) (563,507) (239,123) 1,479,676
--------- --------- --------- ---------
Provision income taxes . (587,880) (519,007) (169,338) 1,567,677
========= ========= ========= =========
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:
11
<PAGE>
<TABLE>
<CAPTION>
Unaudited Three Months Unaudited Nine Months
Ended September 30, Ended September 30,
------------------------ ------------------------
(in thousands)
1998 1999 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Tax (benefit) provision at statutory rate . (1,024,737) (567,197) (931,380) 1,585,371
Effect of change in tax rate .............. -- -- (96,507) --
Interest income ........................... (13,266) (5,788) (103,912) (140,668)
Disallowed prior period expenses .......... 35,112 26,822 75,336 79,272
Non-deductible general expenses ........... 40,011 40,000 137,125 148,731
Income (loss) not subject to income tax ... -- (12,844) -- 7,971
Change in valuation allowance ............. 375,000 -- 750,000 (113,000)
---------- ---------- ---------- ----------
Provision for income taxes ................ (587,880) (519,007) (169,338) 1,567,677
========== ========== ========== ==========
</TABLE>
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.
8. Long-term Debt
Long-term debt consists of:
Unaudited
December 31, September 30,
1998 1999
---------- ----------
(in thousands)
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 34,239,549
---------- ----------
32,545,000 34,239,549
Less: Current portion -- --
---------- ----------
32,545,000 34,239,549
========== ==========
12
<PAGE>
Interest expense relating to the Senior Notes for the nine months ended
September 30, 1998 and 1999 totaled GRD 2,144 million and GRD 2,314 million,
respectively, and is included in interest expense in the accompanying
consolidated 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 ($0.05 million) to the
date of repurchase. The early extinguishment of the Senior Notes resulted in a
charge of GRD 19 million ($0.06 million) consisting of the following:
Unaudited Nine
Months
Ended September 30,
1999
--------------
(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.
9. 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 25,270 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.
10. Foreign Exchange (Losses) Gains
Foreign exchange (losses) gains included in the consolidated statements of
operations are analyzed as follows:
<TABLE>
<CAPTION>
Unaudited Three Months Unaudited Nine Months
Ended September 30, Ended September 30,
------------------------ ------------------------
1998 1999 1998 1999
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Realized loss on forward contract ..................... -- -- -- (2,777,096)
Foreign exchange gain on forward contract representing
difference between balance sheet rate and forward
rate (US $) ..................................... (2,500,000) -- (2,500,000) 4,605,000
Amortization of the premium on forward contract ....... -- -- -- (783,000)
Mark to market adjustment on option ................... -- -- -- (441,719)
Unrealized foreign exchange gain (loss) on Senior Notes
(US $) .......................................... 2,176,585 685,302 (747,385) (2,880,543)
Foreign exchange gain on cash, receivables and payables
denominated in foreign currencies (US $) and
realized (losses) gains on transactions ......... (408,893) (750,619) 172,211 1,683,651
---------- ---------- ---------- ----------
(732,308) (65,317) (3,075,174) (593,707)
========== ========== ========== ==========
</TABLE>
13
<PAGE>
11. Other Income, Net
Other income, net for the nine months ended September 30, 1999 includes
start-up costs associated with the Company's evaluating possible options for an
investment in the direct-to-home television business, a charge relating to the
early extinguishment of the Senior Notes and income from marketable securities.
12. Subsequent Event
In October 1999, the Company signed an agreement to acquire a 51% interest
in a Greek publishing company (Daphne Communications, S.A.) for total
consideration of approximately GRD 1.3 billion ($4.2 million) payable in the
form of advertising airtime on Antenna's television and radio networks.
14
<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 (86.7% of total net revenue in the nine months ended
September 30, 1999). 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 $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 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.
15
<PAGE>
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 September 30, 1999 (unaudited)
Compared to Three Months Ended September 30, 1998 (unaudited)
Total net revenue increased GRD 444 million ($1.5 million), or
11.5%, from GRD 3,867 million ($12.5 million) in the three months ended
September 30, 1998 to GRD 4,311 million ($14.0 million) in the three months
ended September 30, 1999. This increase principally reflected the addition of
GRD 395 million ($1.3 million) of total net revenue from Antenna Radio and
Pacific Broadcast and an underlying increase in advertising revenue.
Advertising revenue, which comprised 88.2% of total net revenues for
the three months ended September 30, 1999, increased GRD 646 million ($2.1
million), or 20.5%, from GRD 3,157 million ($10.2 million) in the three months
ended September 30, 1998 to GRD 3,803 million ($12.3 million) in the three
months ended September 30, 1999. This increase principally reflected an
underlying increase in advertising revenue of GRD 336 million ($1.1 million),
primarily as a result of increases in volume, which in turn reflected higher
ratings, and the addition of GRD 320 million ($1.0 million) of advertising
revenue from Antenna Radio.
Related party revenue decreased GRD 246 million ($0.8 million), or
37.2%, from GRD 621 million ($2.0 million) in the three months ended September
30, 1998 to GRD 375 million ($1.2 million) in the three months ended September
30, 1999, principally reflecting the elimination upon consolidation and
reclassification of related party revenue resulting from the acquisition of
interests in Antenna Radio, Antenna Spoudastiki, Pacific Broadcast and Audiotex,
partially offset by the addition of GRD 24 million ($ 0.07 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 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 43 million ($0.1 million), or 48.3%, from GRD 89
million ($0.3 million) in the three months ended September 30, 1998 to GRD 132
million ($0.4 million) in the three months ended September 30, 1999, principally
as a result of the addition of GRD 75 million ($0.2 million) of other revenue,
representing revenue from subscriber fees, from Pacific Broadcast. This increase
was partially offset by an underlying decrease in program sales.
Cost of sales increased GRD 705 million ($2.3 million), or 72%, from
GRD 986 million ($3.2 million) in the three months ended September 30, 1998 to
GRD 1,691 million ($5.5 million) in the three months ended September 30, 1999.
This increase was attributable primarily to increases in the costs associated
with the production of news (including coverage of the war in Kosovo and
earthquakes in Turkey and Greece), the acquisition of foreign programming and
Greek features. This increase was also attributable to an increase in
16
<PAGE>
cost of sales resulting from the addition of GRD 249 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 71
million ($0.3 million), or 8.0%, from GRD 890 million ($2.9 million) in the
three months ended September 30, 1998 to GRD 818 million ($2.6 million) in the
three months ended September 30, 1999. This decrease was attributable
principally to underlying decreases in other provisions mainly for accounts
receivable, partially offset by the addition of GRD 181 million ($0.6 million)
of SG&A from Antenna Radio, Antenna Spoudastiki and Pacific Broadcast. The
decrease was further offset by underlying increases in payroll, travel expenses
and sales promotion expenses.
Amortization of programming costs increased GRD 113 million ($0.4
million), or 3.8%, from GRD 3,005 million ($9.7 million) in the three months
ended September 30, 1998 to GRD 3,118 million ($10.1 million) in the three
months ended September 30, 1999, all of which was attributable to the Company.
Depreciation increased GRD 53 million ($0.2 million), or 42.4%, from
GRD 124 million ($0.4 million) in the three months ended September 30, 1998 to
GRD 177 million ($0.6 million) in the three months ended September 30, 1999. GRD
24 million ($0.07 million) of this increase was attributable to the addition of
depreciation from Antenna Radio, Pacific Broadcast and Antenna Spoudastiki.
Operating income decreased GRD 356 million ($1.1 million), or 31.3%,
from a loss of GRD 1,137 million ($3.7 million) in the three months ended
September 30, 1998 to a loss of 1,493 million ($4.8 million) in the three months
ended September 30, 1999, principally reflecting an underlying increase in cost
of sales and amortization of programming costs, partially offset by the addition
of GRD 320 million ($1.0 million) of revenue of Antenna Radio.
Interest expense, net decreased GRD 153 million ($0.5 million), or
22.0%, from GRD 693 million ($2.2 million) in the three months ended September
30, 1998 to GRD 540 million ($1.7 million) in the three months ended September
30, 1999, reflecting an increase in interest income principally as a result of
higher cash balances outstanding during the three months ended September 30,
1999. 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 30 million ($0.1 million) of gross interest expense from Antenna
Radio and Pacific Broadcast. See "--Liquidity and Capital Resources."
Foreign exchange losses decreased GRD 667 million ($2.2 million) from a
loss of GRD 732 million ($2.4 million) to a loss of GRD 65 million ($0.2
million), primarily reflecting an underlying unrealized gain from the
translation of the Senior Notes denominated in U.S. dollars due to the
strengthening of the drachmae against the US dollar, partially offset by the
addition of GRD 95 million ($0.3 million) of foreign exchange losses from
Antenna Radio and Pacific Broadcast.
The income tax benefit decreased GRD 69 million ($0.2 million) from GRD
588 million ($1.9 million) in the three months ended September 30, 1998 to GRD
519 million ($1.7 million) in the three months ended September 30, 1999,
principally as a result of a decrease in the operating loss. The decrease was
partially offset by the addition of GRD 11 million ($0.04 million) for the
provision for income taxes for Antenna Spoudastiki.
17
<PAGE>
Net income increased GRD 1,075 million ($3.5 million) from a loss of
GRD 1,974 million ($6.4 million) in the three months ended September 30, 1998 to
a loss of GRD 899 million ($2.9 million) in the three months ended September 30,
1999. The increase was principally attributable to decreases in foreign exchange
losses and interest expense, net, and an increase in other income, net of GRD
553 million ($1.8 million) (see Note 11 of Notes to Financial Statements),
partially offset by an increase in cost of sales and a decrease in operating
income.
Nine Months Ended September 30, 1999 (unaudited)
Compared to Nine Months Ended September 30, 1998 (unaudited)
Total net revenue increased GRD 3,864 million ($12.5 million), or
19.1%, from GRD 20,232 million ($65.5 million) in the nine months ended
September 30, 1998 to GRD 24,096 million ($78.0 million) in the nine months
ended September 30, 1999. This increase was attributable primarily to the
addition of GRD 1,405 million ($4.5 million) of total net revenue from Antenna
Radio and an underlying increase in advertising revenue.
Advertising revenue, which comprised 92.1% of total net revenues for
the nine months ended September 30, 1999, increased GRD 4,263 million ($13.8
million), or 23.3%, from GRD 17,997 million ($58.3 million) in the nine months
ended September 30, 1998 to GRD 22,260 million ($72.1 million) in the nine
months ended September 30, 1999. This increase principally reflected an
underlying increase in advertising revenue of GRD 3,493 ($11.3 million),
primarily as a result of increases in volume, which in turn reflected higher
ratings, and the addition of GRD 1,371 million ($4.4 million) of advertising
revenue from Antenna Radio.
Related party revenue decreased GRD 733 million ($2.4 million), or 35%,
from GRD 2,068 million ($6.7 million) in the nine months ended September 30,
1998 to GRD 1,335 million ($4.3 million) in the nine months ended September 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 24 million ($0.07 million) of related
party revenue from Antenna Radio (license fees paid 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 333 million ($1.1 million) from GRD 168 million
($0.5 million) in the nine months ended September 30, 1998 to GRD 501 million
($16 million) in the nine months ended September 30, 1999, principally as a
result of the addition of GRD 332 million ($1.1 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 863 million ($2.8 million), or 21%, from
GRD 4,078 million ($13.2 million) in the nine months ended September 30, 1998 to
GRD 4,941 million ($16.0 million) in the nine months ended September 30, 1999.
This increase was attributable primarily to the addition of GRD 718 million
($2.3 million) of cost of sales from Antenna Radio, Antenna Spoudastiki and
Pacific Broadcast and, to a lesser extent, an increase in underlying costs
associated with the production of news (including coverage of the war in Kosovo
and earthquakes in Turkey and Greece). This increase was partially offset by a
decrease in the underlying costs associated with the acquisition of foreign
programming and Greek features.
18
<PAGE>
Selling, general and administrative expenses decreased GRD 286 million
($0.9 million), or 7.8%, from GRD 3,685 million ($11.9 million) in the nine
months ended September 30, 1998 to GRD 3,399 million ($11.0 million) in the nine
months ended September 30, 1999. This decrease was attributable principally to
underlying decreases in provisions for accounts receivable, frequency fees,
sales promotion expenses and legal expenses, partially offset by the addition of
GRD 490 million ($1.6 million) of SG&A from Antenna Radio, Antenna Spoudastiki
and Pacific Broadcast. The decrease was further offset by underlying increases
in payroll, maintenance, travel expenses and market research.
Amortization of programming costs increased GRD 121 million ($0.4
million), or 1.3%, from GRD 9,241 million ($29.9 million) in the nine months
ended September 30, 1998 to GRD 9,362 million ($30.3 million) in the nine months
ended September 30, 1999, all of which was attributable to the Company.
Depreciation increased GRD 144 million ($0.5 million), or 39.1%, from
GRD 366 million ($1.2 million) in the nine months ended September 30, 1998 to
GRD 510 million ($1.7 million) in the nine months ended September 30, 1999. GRD
67 million ($0.2 million) of this increase was attributable to the addition of
depreciation from Antenna Radio, Pacific Broadcast and Antenna Spoudastiki.
Operating income increased GRD 3,022 million ($9.8 million), or 105.6%,
from GRD 2,862 million ($9.3 million) in the nine months ended September 30,
1998 to 5,884 million ($19.1 million) in the nine months ended September 30,
1999, principally reflecting an increase in total net revenue during the period
(including the addition of GRD 1,737 million ($5.6 million) of revenue from
Antenna Radio, Antenna Spoudastiki and Pacific Broadcast) and a decrease in
SG&A, partially offset by an increase in cost of sales.
Interest expense, net decreased GRD 355 million ($1.1 million), or
16.6%, from GRD 2,135 million ($6.9 million) in the nine months ended September
30, 1998 to GRD 1,780 million ($5.8 million) in the nine months ended September
30, 1999, reflecting an increase in interest income principally as a result of
higher cash balances outstanding during the nine months ended September 30, 1999
and, to a lesser extent, the addition of GRD 10 million ($0.03 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 108 million ($0.3 million) of
gross interest expense from Antenna Radio and Pacific Broadcast. See
"--Liquidity and Capital Resources."
Foreign exchange losses decreased GRD 2,481 million ($8.0 million) from
GRD 3,075 million ($9.9 million) to GRD 594 million ($1.9 million), reflecting
gains from the Company's forward contract, unrealized gains on cash receivables
and payables and realized gains on transactions (see Note 10 of Notes to
Financial Statements), partially offset by the addition of GRD 127 million ($0.4
million) of foreign exchange losses from Antenna Radio and Pacific Broadcast.
Equity in net income of unconsolidated affiliate increased from zero in
the nine months ended September 30, 1998 to GRD 19 million ($0.06 million) in
the nine months ended
19
<PAGE>
September 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 nine months
ended September 30, 1998 to GRD 353 million ($1.1 million) in the nine months
ended September 30, 1999, as a result of the reclassification as related party
commission income of revenue earned from Audiotex.
Other income, net increased GRD 62 million ($0.24 million) from GRD 20
million ($0.06 million) in the nine months ended September 30, 1998 to GRD 82
million ($0.3 million) in the nine months ended September 30, 1999, principally
reflecting income from marketable securities and the addition of other income
from Antenna Radio, partially offset by a charge related to the early
extinguishment of a portion of the Senior Notes and costs associated with
evaluating a possible investment in the direct-to-home television business.
Provision for income taxes increased GRD 1,398 million ($4.5 million)
from GRD 169 million ($0.5 million) in the nine months ended September 30, 1998
to GRD 1,568 million ($5.0 million) in the nine months ended September 30,
principally as a result of increased operating income. Of the increase in
provision for income taxes, GRD 29.5 million ($0.09 million) was attributable to
the addition of provision for income taxes for Antenna Radio and Antenna
Spoudastiki.
Net income increased GRD 4,555 million ($14.7 million) from a net loss
of GRD 2,159 million ($7 million) in the nine months ended September 30, 1998 to
net income of GRD 2,396 million ($7.7 million) in the nine months ended
September 30, 1999, principally reflecting an underlying increase in operating
income and the contribution of operating income from Antenna Radio and Pacific
Broadcast.
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 September 30, 1999,
the Company had approximately GRD $34,538 million ($111.8 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 10,375 million ($33.6 million) in the nine months
ended September 30, 1998 and GRD 8,790 million ($28.5 million) in the nine
months September 30, 1999.
20
<PAGE>
Operating Activities. Net cash used in operating activities was GRD
6,468 million ($21.0 million) in the nine months ended September 30, 1998
compared to GRD 4,680 million ($15.2 million) in the nine months ended September
30, 1999.
Investing Activities. Net cash used in investing activities was GRD
1,131 million ($3.7 million) in the nine months ended September 30, 1998 and GRD
10,417 million ($33.7 million) in the nine months ended September 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 151
million ($0.5 million) in the nine months ended September 30, 1998 compared to
net cash provided by financing activities of GRD 22,828 million ($74.0 million)
in the nine months ended September 30, 1999. The increase in funds from
financing activities in 1999 principally reflects the net proceeds of GRD 25,270
million ($81.8 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 784 million ($2.5
million) was paid during the nine month period ended September 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 finalizing the upgrade of 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 and the
relevant operating systems related to the computer network are Year
2000-compliant. The software applications related to its business systems are
expected to be fully Year 2000-compliant by December 20, 1999. During 1998, the
Company spent GRD 52 million ($0.2 million) upgrading its computer network. The
cost of upgrading the Company's accounting and finance systems to become Year
2000-compliant is GRD 50 million ($0.2 million). The necessary upgrades of the
balance of the Company's information technology system to become Year
2000-compliant will be completed by the end of 1999, at a cost of approximately
21
<PAGE>
GRD 92 million ($0.3 million), the majority of which costs had been expended as
of September 30, 1999.
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 by December 20, 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,
financial institutions, providers of satellite transmission facilities,
production companies, suppliers of foreign programming and other vendors. The
Company has received assurances from many, though not all, of these third
parties that their systems are Year 2000-compliant. The Company is in contact
with those third parties that have yet to respond and is awaiting confirmation
from them of the status of their Year 2000 compliance. 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 if the
final testing of its applications for Year 2000 compliance fails, or the failure
of any relevant third parties to be Year 2000-compliant. These plans would
include, for example, in the case of advertisers, resort to manual statements to
reconcile accounts.
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.
22
<PAGE>
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 1,281 million ($2.5 million), or 5.3%, of total net revenue in
the nine month period ended September 30, 1999. The Company's non-drachma
denominated operating costs, principally foreign-produced programming invoiced
in U.S. dollars, accounted for 5.4% of total net revenue in the nine month
period ended September 30, 1999. Non-drachma denominated indebtedness (primarily
U.S. dollars) totaled GRD 35,311 million ($114.4 million), or 100%, of total
indebtedness, at September 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 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.
23
<PAGE>
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, zero was recognized for the three months ended September 30, 1999
and GRD 783 million was recognized for the nine months ended September 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.
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
nine months ended September 30, 1999 of zero 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 ($111 million)......... 34,240 111.1 29,892 97.0
Average interest rate............... 9.7% --
The average interest rate represents the stated interest rate of 9% plus
amortization of deferred issuance costs.
Interest Rate Risk Management
The Company manages interest rate risk by financing non-current assets and
a portion of current assets with equity, long-term liabilities and long-term
debt with fixed interest rates.
The following table sets forth the principal, cash flows and related
weighted average interest rates by expected maturity date of indebtedness of the
Company that may be sensitive to interest rate fluctuations:
Financial Instrument Maturity (2007) Fair Value
------------------------ ---------------- ---------------
(GRD) ($) (GRD) ($)
(in millions)
Senior Notes ($111 million)......... 34,240 111.1 29,892 97.0
Average interest rate............... 9.7% --
The average interest rate represents the stated interest rate of 9% plus
amortization of deferred issuance costs.
24
<PAGE>
PART II. OTHER INFORMATION
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, in the Company's Annual Report on Form 20-F for the fiscal year ended
December 31, 1998 and in the Company's amendment to its Annual Report on Form
20-F/A 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.
(b) Proposed Acquisition
In October 1999, the Company signed an agreement to acquire a 51%
interest in a Greek publishing company (Daphne Communications, S.A.) for total
consideration of approximately GRD 1.3 billion ($4.2 million) payable in the
form of advertising airtime on Antenna's television and radio networks.
25
<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.
ANTENNA TV S.A.
(Registrant)
By: /s/ Nikolaos Angelopoulos
-----------------------------------------
Name: Nikolaos Angelopoulos
Title: Chief Financial Officer
Dated: November 10, 1999
26
