AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 7, 2000
================================================================================
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 2000
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-____________.
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<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, 2000.
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, 1999.
ii
<PAGE>
PART I. FINANCIAL INFORMATION
Page
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
Condensed Consolidated Statements of Operations for the
three months ended September 30, 1999 and 2000 and the nine
months ended September 30, 1999 and
2000 ...................................................... 1
Condensed Consolidated Balance Sheets as of December 31,
1999 and September 30,
2000 ...................................................... 2, 3
Condensed Consolidated Statement of Shareholders' Equity for
the nine months ended September 30,
2000 ...................................................... 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1999 and
2000 ...................................................... 5
Notes to Consolidated Financial
Statements ................................................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS .................................... 18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK ............................. 29
PART II. OTHER INFORMATION
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY
HOLDERS ....................................... 31
ITEM 5. OTHER INFORMATION ............................. 31
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, 1999 AND 2000
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
(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,
----- ---------------------------------------------------------------------------------
1999 2000 1999 2000
---------------------------------------------------------------------------------
(GRD) (GRD) ($) (GRD) (GRD) ($)
<S> <C> <C> <C> <C> <C> <C>
Advertising revenue.................. 3,803,199 5,833,026 15,180 22,259,876 27,587,938 71,797
Related party revenue................ 3 375,399 376,245 979 1,334,992 1,065,223 2,772
Publication revenue.................. -- 1,411,900 3,674 -- 5,123,527 13,334
Other revenue........................ 131,968 867,839 2,259 500,728 2,243,530 5,839
--------- --------- ------ ---------- ---------- ------
Total net revenue.................... 10 4,310,566 8,489,010 22,092 24,095,596 36,020,218 93,742
--------- --------- ------ ---------- ---------- ------
Cost of sales........................ 1,690,998 3,731,723 9,712 4,940,875 11,288,032 29,377
Selling, general and administrative
expenses.......................... 818,492 1,538,630 4,004 3,399,247 5,096,786 13,264
Amortization of programming costs.... 3,117,898 3,219,510 8,379 9,361,845 9,937,344 25,862
Depreciation and amortization........ 176,507 333,107 867 509,809 941,219 2,450
--------- --------- ------ ---------- ---------- ------
Operating (loss) income.............. (1,493,329) (333,960) (870) 5,883,820 8,756,837 22,789
Interest expense, net................ (540,080) (1,188,063) (3,092) (1,780,477) (2,111,663) (5,496)
Foreign exchange (losses), net....... 9 (65,317) (1,508,357) (3,925) (593,707) (3,129,054) (8,143)
Equity in net income in unconsolidated
affiliate......................... 4,263 -- -- 19,161 2,677 7
Related party commission income...... 3 122,122 -- -- 353,094 47,875 125
Other income (expense), net.......... 11 554,349 7,811 20 81,536 (407,885) (1,062)
Minority interest in (income) of
consolidated entities, net ....... -- (52,506) (137) -- (47,297) (123)
(Loss) earnings before income taxes.. (1,417,992) (3,075,075) (8,004) 3,963,427 3,111,490 8,097
(Benefit) provision for income taxes. 7 (519,007) (2,095,196) (5,453) 1,567,677 456,960 1,189
(Loss) earnings before extraordinary
gain................................. (898,985) (979,879) (2,551) 2,395,750 2,654,530 6,908
Extraordinary gain on repurchase of
Senior Notes (net of income taxes of
GRD 82,377)....................... 8 -- 105,341 274 -- 105,341 274
--------- --------- ------ ---------- ---------- ------
Net (loss) income ................... (898,985) (874,538) (2,277) 2,395,750 2,759,871 7,182
========= ========= ====== ========== ========== ======
Basic and diluted (loss) earnings per
share before extraordinary gain... (45.29) (49.37) (0.13) 120.7 133.7 0.35
========= ========= ====== ========== ========== ======
Basic and diluted (loss) earnings per
share............................. (45.29) (44.06) (0.11) 120.7 139.0 0.36
========= ========= ====== ========== ========== ======
</TABLE>
Exchange rate used for the convenience translation of the September 30, 2000
balances is GRD 384.25 to $1.00.
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
ANTENNA TV S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND SEPTEMBER 30, 2000
(IN THOUSANDS OF DRACHMAE AND U.S. DOLLARS)
<TABLE>
<CAPTION>
UNAUDITED
DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------
NOTES 1999 1999 2000 2000
------ ---------------------------------------------------------
(GRD) ($) (GRD) ($)
ASSETS
-------------------------------------------------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.......................... 31,772,162 82,686 21,594,083 56,198
Restricted cash.................................... 425,266 1,107 280,191 729
Accounts receivable, less allowance for doubtful
accounts of grd 1,834,794 in 1999 and
GRD 1,431,689 in September 30, 2000............. 21,873,360 56,925 25,981,520 67,616
Inventories........................................ 438,006 1,140 1,179,456 3,070
Due from related parties........................... 3 3,300,360 8,589 3,863,294 10,054
Programming costs, net............................. 4 11,824,168 30,772 13,901,652 36,179
Advances to related parties........................ 3 156,660 408 195,029 508
Advances to third parties.......................... 1,201,061 3,126 1,908,517 4,967
Prepaid expenses and other current assets.......... 89,214 232 440,056 1,145
income and withholding tax advances................ 780,264 2,031 968,785 2,521
---------- ------- ---------- -------
Total current assets................................. 71,860,521 187,016 70,312,583 182,987
---------- ------- ---------- -------
Investment in unconsolidated affiliate.................. 75,806 198 8,000 21
Property and equipment, net............................. 3,475,745 9,046 4,788,694 12,462
Broadcast, transmission and printing equipment under
capital leases, net.................................. 1,649,742 4,293 1,455,499 3,788
Deferred charges, net................................... 1,677,084 4,365 1,306,904 3,401
Programming costs, excluding current portion............ 4 7,652,672 19,916 8,944,637 23,278
Other receivable less allowance for doubtful accounts and
fair value of grd 480,000 in 1999 and grd 652,890 in
September 30, 2000................................... 272,998 710 88,107 229
Due from related party.................................. 3 3,276,667 8,527 4,085,357 10,632
Advances to related parties............................. 3 173,137 451 197,757 515
Intangible assets, net.................................. 5 970,561 2,526 2,305,444 6,000
Deferred tax assets..................................... 7 396,702 1,032 586,995 1,528
Other assets............................................ 6 137,849 359 3,168,709 8,246
---------- ------- ---------- -------
Total assets......................................... 91,619,484 238,439 97,248,686 253,087
========== ======= ========== =======
</TABLE>
Exchange rate used for the convenience translation of the December 31, 1999 and
September 30, 2000 balances is grd 384.25 To $1.00.
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
ANTENNA TV S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND SEPTEMBER 30, 2000
(IN THOUSANDS OF DRACHMAE AND U.S. DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
UNAUDITED
DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------
NOTES 1999 1999 2000 2000
------ ---------------------------------------------------------
(GRD) ($) (GRD) ($)
LIABILITIES AND SHAREHOLDERS' EQUITY
-----------------------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Bank overdrafts and short-term borrowings............ 3,278,111 8,531 12,008,705 31,252
Current portion of obligations under capital leases.. 385,856 1,004 275,048 716
Trade accounts, notes and cheques payable............ 9,793,645 25,488 7,719,001 20,088
Program license payable.............................. 2,538,945 6,608 1,010,940 2,631
Payable to related party............................. 3 68,823 179 -- --
Customer advances.................................... 327,370 852 487,098 1,268
Accrued interest..................................... 1,411,003 3,672 668,632 1,740
Accrued expenses and other current liabilities....... 4,184,880 10,891 3,819,411 9,940
Income taxes payable................................. 237,525 618 121,242 316
Deferred tax liability............................... 7 1,965,298 5,115 2,100,419 5,466
Current portion of other long-term liability......... 1,003,116 2,611 713,099 1,856
---------- ------- ---------- -------
Total current liabilities.......................... 25,194,572 65,569 28,923,595 75,273
---------- ------- ---------- -------
Long-term liabilities:
Long-term debt....................................... 8 36,479,831 94,938 35,857,561 93,318
Long-term obligations under capital leases........... 704,971 1,835 695,460 1,810
Deferred tax liability............................... 7 1,599,096 4,162 1,709,039 4,448
Other long-term liability............................ 532,483 1,386 -- --
Payable to related parties........................... 3 185,000 481 185,000 481
Employee retirement benefits......................... 520,832 1,355 561,636 1,462
Long-term provisions................................. 203,270 529 309,010 803
---------- ------- ---------- -------
Total liabilities.................................. 65,420,055 170,255 68,241,301 177,595
---------- ------- ---------- -------
Minority interests...................................... 650,969 1,694 699,154 1,820
---------- ------- ---------- -------
Shareholders' equity:
share capital........................................ 1,984,944 5,166 1,984,944 5,166
Additional paid-in capital........................... 28,714,904 74,730 28,714,904 74,730
Accumulated (deficit)................................ (5,151,388) (13,406) (2,391,517) (6,224)
Accumulated other comprehensive (loss)............... -- -- (100) (0.3)
---------- ------- ---------- -------
Total shareholders' equity......................... 25,548,460 66,490 28,308,231 73,672
---------- ------- ---------- -------
Commitments and contingencies
Total liabilities and shareholders' equity......... 91,619,484 238,439 97,248,686 253,087
========== ======= ========== =======
</TABLE>
Exchange rate used for the convenience translation of the December 31, 1999 and
September 30, 2000 balances is GRD 384.25 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, 2000
(IN THOUSANDS OF DRACHMAE)
<TABLE>
<CAPTION>
ACCUMULATED (DEFICIT) RETAINED
EARNINGS
---------------------------------------
LEGAL,
TAX ACCUMULATED ACCUMULATED
ADDITIONAL FREE AND (DEFICIT) OTHER
SHARE PAID-IN OTHER RETAINED COMPREHENSIVE
CAPITAL CAPITAL RESERVES EARNINGS TOTAL INCOME (LOSS)
------- ------- -------- -------- ----- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1999............. 1,984,944 28,714,904 2,852,605 (8,003,993) (5,151,388) --
Net income for the nine months (unaudited) -- -- -- 2,759,871 2,759,871 --
Currency translation adjustment (unaudited) -- -- -- -- -- (100)
Total comprehensive income (loss) (unaudited) -- -- -- -- -- --
Transfer to legal, tax free and other reserves -- -- 3,774,449 (3,774,449) -- --
--------- ---------- --------- --------- --------- ----------
BALANCE SEPTEMBER 30, 2000 (UNAUDITED) .... 1,984,944 28,714,904 6,627,054 (9,018,571) (2,391,517) (100)
========= ========== ========= ========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
COMPREHENSIVE
GRAND TOTAL INCOME (LOSS)
----------- -------------
<S> <C> <C>
BALANCE, DECEMBER 31, 1999............. 25,548,460 --
Net income for the nine months (unaudited) 2,759,871 2,759,871
Currency translation adjustment (unaudited) (100) (100)
Total comprehensive income (loss) (unaudited) -- 2,759,871
Transfer to legal, tax free and other reserves -- --
---------- ---------
BALANCE SEPTEMBER 30, 2000 (UNAUDITED) .... 28,308,231 --
========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ANTENNA TV S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
(IN THOUSANDS OF DRACHMAE AND U.S. DOLLARS)
<TABLE>
<CAPTION>
UNAUDITED NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------------
1999 2000
-----------------------------------------------------
GRD) (GRD) ($)
<S> <C> <C> <C>
Cash flows from operating activities
Net income..................................................... 2,395,750 2,759,871 7,182
Adjustments to reconcile net income to net cash
Extraordinary gain on repurchase of Senior Notes............... -- (105,341) (274)
Deferred income taxes.......................................... 1,479,676 57,165 149
Minority in income of consolidated entity...................... 47,297 123
Equity in net income of unconsolidated affiliate............... (19,161) (2,677) (7)
Amortization of debt issuance expenses......................... 170,048 164,237 427
Amortization of premium on forward exchange contract and
loss on option ............................................. 1,224,719 0 0
Depreciation of property and equipment and capital leases
and amortization of programming costs, goodwill and
other intangibles .......................................... 9,871,654 10,878,563 28,311
Provision for other long-term liabilities...................... 17,831 105,740 275
Provision for employee retirement benefits..................... 30,000 37,054 96
Change in current assets and liabilities
Decrease (increase) in accounts and other receivable........... 446,451 (3,655,670) (9,514)
(Increase) in due from/to related parties...................... (1,254,238) (1,665,064) (4,332)
(Increase) in programming costs................................ (8,396,133) (11,584,041) (30,147)
(Increase) in prepaid and licensed programming expenditures.... (393,537) (1,722,543) (4,483)
(Decrease) increase in trade accounts, notes and cheques payable (1,237,074) (2,141,974) (5,575)
(Decrease) in licensed program payable......................... (969,957) (1,528,005) (3,977)
(Increase) in inventories...................................... -- (741,444) (1,930)
(Decrease) increase in customer advances....................... (172,170) 159,728 416
(Decrease) in accrued expenses and liabilities................. (7,507,084) (1,316,809) (3,427)
Increase (decrease) in income taxes payable.................... 4,185 (229,522) (597)
Other, net..................................................... (370,523) (1,930,981) (5,025)
---------- ---------- ------
Total adjustments........................................... (7,075,313) (15,174,287) (39,491)
---------- ---------- ------
Net cash (used) in operating activities........................... (4,679,563) (12,414,416) (32,309)
---------- ---------- ------
Cash flows from investing activities
Deposit for right of acquisition............................... -- (3,000,000) (7,807)
Acquisition of business, net of cash........................... (10,045,383) (1,429,888) (3,721)
Dividends received............................................. 38,759 70,890 184
Purchase of fixed assets....................................... (410,641) (1,931,678) (5,027)
---------- ---------- ------
Net cash (used) in investing activities........................... (10,417,265) (6,290,676) (16,371)
---------- ---------- ------
Cash flows from financing activities
Issuance of common shares...................................... 25,270,404 -- --
Redemption of Senior Notes..................................... (1,185,994) (5,465,169) (14,223)
(Decrease) increase in bank overdrafts and short term borrowings, net (802,787) 8,730,594 22,721
(Increase) decrease in restricted cash......................... (334,800) 145,076 378
Repayments of capital lease obligations........................ (118,349) (120,319) (313)
---------- ---------- ------
Net cash provided by financing activities......................... 22,828,474 3,290,182 8,563
---------- ---------- ------
Effect of exchange rate changes on cash........................... 2,880,543 5,236,831 13,629
---------- ---------- ------
Increase (decrease) in cash....................................... 10,612,189 (10,178,079) (26,488)
Cash at beginning of year......................................... 11,300,087 31,772,162 82,686
---------- ---------- ------
Cash at end of year............................................... 21,912,276 21,594,083 56,198
========== ========== ======
Supplemental disclosure of cash flow information:
Cash paid for interest...................................... 3,153,652 4,031,761 10,493
Cash paid for income taxes.................................. -- 734,414 1,911
</TABLE>
Exchange rate used for the convenience translation of the September 30, 2000
balances is GRD 384.25 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, 2000 and for the six and nine months ended September 30, 1999 and 2000 are
unaudited and prepared in conformity with the accounting principles applied in
the Company's 1999 Annual Report on Form 20-F for the year ended December 31,
1999. 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, 2000 are not necessarily indicative of
the results to be expected for the full year or any other interim period.
ACQUISITIONS OF ENTITIES UNDER COMMON CONTROL
On May 6, 1999, the Company acquired the following interests (the
"Acquisition"): 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 $38.2
million, comprised of cash consideration of $33.0 million and the assumption of
$5.2 million of debt. The total cash purchase price of GRD 10,040 million
exceeded the book value of the acquired companies by GRD 11,969 million,
resulting in a deemed dividend to the shareholders.
6
<PAGE>
ACQUISITIONS OF UNRELATED BUSINESSES
On October 27, 1999, Antenna TV purchased a 51% interest in Daphne
Communications S.A. ("Daphne"), a Greek publishing company, for a total
consideration of GRD 1,210 million. This acquisition was accounted for using the
purchase method and accordingly, the net assets acquired have been recorded at
their fair value and the results of their operations included from the date of
acquisition. Based on estimates of fair value GRD 300 million has been allocated
to net tangible assets, GRD 200 million to magazine rights and GRD 787 million
to goodwill.
On February 7, 2000, Antenna TV acquired the 49% interest in Audiotex
that it did not already own from Legion International S.A., a Lagardere Group
company, for total consideration of GRD 55 million and an increase in the
royalty fee to Legion International S.A. from 7.5% to 12.0% of Audiotex's annual
revenue for 10 years. The term of the amended royalty agreement is from January
1, 2000 to January 1, 2010. This acquisition was accounted for using the
purchase method and, accordingly, the net assets acquired have been recorded at
their fair value and the results of their operations included from the date of
acquisition. Based on estimates of fair value, GRD 76,615 has been allocated to
goodwill. The incremental increase in the royalty payment of 4.5% for the next
five years and the payment of 12% royalty for an additional five years,
represents the additional consideration payable for the acquired interest and
will be recorded as additional element of the cost of the acquired entity (I.E.
goodwill), and amortized over 10 years. Audiotex's revenues for the year ended
December 31, 1999 amounted to GRD 855 million. Assuming revenues remained the
same over the next 10 years, the additional consideration paid would be
approximately GRD 706 million. However the ultimate amount to be paid will only
be determined at the end of each period. The additional elements of cost are
recorded when the contingency is resolved and the consideration is issuable.
On April 13, 2000, the Company announced that it had entered into a
memorandum of understanding with Internet Gold International Ltd, a subsidiary
of Internet Gold, to jointly undertake various Internet-related activities.
Internet Gold agreed to use its best efforts to cause one or more of the
shareholders of CompuLink Networks S.A., a Greek Internet service provider, to
transfer to the Company a 20% stake in CompuLink for consideration of $1
million, $200,000 of which will be paid in cash and $800,000 of which will be
paid in the form of advertising time on television and radio and in magazines.
The Company and Internet Gold will also form two new joint ventures that will
provide content for the Internet and one new joint venture that will be an
Internet service provider in Cyprus. To date, the undertaking of Internet
related activities has not yet materialized nor have the joint ventures been
formed.
On August 4, 2000, Antenna TV acquired interests in three Bulgarian
media companies for total consideration, including related expenses, of GRD
1,368 million. The acquisition includes a 100% interest in Nova Television AD, a
100% interest in Multimex I.D. AD and a 92.2% interest in Radio Express. This
acquisition was accounted for using the purchase method and accordingly, the net
assets acquired have been recorded at their fair value and the results of their
operations included from the dates of acquisition. Based on estimates of fair
value GRD 1,331 million ($3 million) has been allocated to goodwill. On a pro
forma basis, reflecting the acquisition of the three Bulgarian companies as if
it had taken place at the beginning of the year and after giving effect to
adjustments regarding the acquisitions, unaudited net revenues, net earnings and
basic and diluted earnings per share would have been GRD 36,420 million ($95
million), GRD 2,787 million ($7 million) and GRD 140 million ($0.4 million),
respectively. These pro forma results are not indicative of either future
performance or actual results which would have occurred had these acquisitions
taken place at the beginning of the respective period.
7
<PAGE>
In August 2000, Antenna TV became a 40% shareholder in a newly
established company, Antenna Syndromitiki S.A. whereby GRD 8 million ($0.02
million) was contributed as an initial investment. This investment is accounted
for by the equity method as Antenna TV does not own a controlling interest.
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 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, 1999 and 2000
totaled GRD 170 million and GRD 164 million respectively, and is included in
interest expense in the accompanying unaudited consolidated statements of
operations for the nine months ended September 30, 1999 and 2000.
FOREIGN EXCHANGE CONTRACTS
Antenna enters into foreign exchange contracts to manage its exposures
to foreign currency exchange and interest rate risks. Financial instruments are
recorded in the balance sheets at their fair value unless they meet, for
accounting purposes, the following 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 foreign currency
commitment and (ii) the foreign currency commitment is firm. Gains and losses on
foreign exchange contracts meeting these hedge accounting 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.
Antenna was party to an $87 million forward contract with the Royal
Bank of Scotland, to hedge elements of its currency exposure on a portion of the
principal and interest payable of its US 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. There was no amortization for the three and nine
months ended September 30, 2000 as the forward contract expired on May 15, 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
Antenna 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
8
<PAGE>
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 nine months ended September 30, 1999 of GRD 442 million,
respectively, was recorded as part of the foreign exchange loss in the
consolidated statements of operations. There was no mark to market adjustment
for the three and nine months ended September 30, 2000 because the option
matured on May 15, 1999.
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 29, 2000, which was
GRD 384.25 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
1999 SEPTEMBER 30, 2000
---------------------- ----------------------
(IN THOUSANDS)
<S> <C> <C>
Accounts Receivable
Current:
Antenna Satellite TV (USA) Inc. ............................. 1,882,116 2,543,487
Audiotex S.A................................................. 76,208 --
Epikinonia EPE .............................................. 314,172 219,009
Antenna Satellite Radio...................................... 58,655 87,239
Antenna TV Ltd. (Cyprus)..................................... 938,770 1,013,559
Catalogue Auctions Hellas S.A................................ 30,439 --
--------- ---------
3,300,360 3,863,294
========= =========
Long-term:
Antenna Satellite TV (USA) Inc., net ........................ 3,276,667 4,085,357
========= =========
Advances
Current:
Epikinonia EPE............................................... -- 28,000
Catalogue Auctions Hellas S.A. .............................. 156,660 167,029
--------- ---------
156,660 195,029
========= =========
Long-term:
Antenna TV Ltd. (Cyprus)..................................... 120,979 120,979
Epikinonia Ltd............................................... 34,158 34,158
JVFM -- Epikinonia........................................... 18,000 42,620
--------- ---------
173,137 197,757
========= =========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, UNAUDITED
1999 SEPTEMBER 30, 2000
---------------------- ----------------------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable
Current:
Payable to minority shareholders of Daphne...................... 68,823 --
========= =========
Long-term:
Payable to minority shareholders of Daphne...................... 185,000 185,000
========= =========
Unaudited revenue from related parties:
UNAUDITED UNAUDITED
SEPTEMBER 30, 1999 SEPTEMBER 30, 2000
---------------------- ----------------------
(IN THOUSANDS)
Epikinonia Ltd. (Production facilities and
technical and administrative services)........................ 262,397 449,000
Antenna Satellite TV (USA) Inc. (License fees)................... 767,889 242,174
Antenna Satellite Radio (Other).................................. 24,340 26,918
Antenna TV Ltd. (Cyprus) (Royalties)............................. 280,366 347,131
--------- ---------
1,334,992 1,065,223
Audiotex (Related party commission income)....................... 353,094 47,875
--------- ---------
1,688,086 1,113,098
========= =========
</TABLE>
4. PROGRAMMING COSTS
The following table sets forth the components of the programming costs,
net of amortization:
<TABLE>
<CAPTION>
DECEMBER 31, UNAUDITED
1999 SEPTEMBER 30, 2000
----------------------- -----------------------
(IN THOUSANDS)
<S> <C> <C>
Produced programming.............................................. 13,929,446 15,620,010
Purchased sports rights........................................... 1,861,640 1,817,773
Licensed program rights........................................... 2,016,979 2,464,964
Prepaid license program rights.................................... 845,979 1,900,501
Prepaid produced programs and sports.............................. 822,796 1,043,041
---------- ----------
19,476,840 22,846,289
Less: current portion............................................. (11,824,168 (13,901,652)
---------- ----------
7,652,672 8,944,637
========== ==========
</TABLE>
5. INTANGIBLES
<TABLE>
<CAPTION>
DECEMBER 31, UNAUDITED
1999 SEPTEMBER 30, 2000
---------------------- ----------------------
(IN THOUSANDS)
<S> <C> <C>
Goodwill.......................................................... 786,561 2,195,509
Magazine rights .................................................. 200,000 200,000
------- ---------
986,561 2,395,508
Accumulated amortization.......................................... (16,000) (90,065)
------- ---------
970,561 2,305,444
======= =========
</TABLE>
10
<PAGE>
6. OTHER ASSETS
Other assets are analyzed as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNAUDITED
1999 SEPTEMBER 30, 2000
--------------------- -----------------------
(IN THOUSANDS)
<S> <C> <C>
Advance for the right to acquire an interest in
Makedonia TV.................................................. -- 3,000,000
Guarantee deposits............................................ 137,849 168,709
------- ---------
137,849 3,168,709
======= =========
</TABLE>
On February 24, 2000, the Company advanced GRD 3 billion in exchange
for the right to acquire a controlling interest in Makedonia TV, one of the six
Greek commercial TV broadcasters with a nationwide license. This right gives
Antenna the ability to acquire a 51% interest in Makedonia TV from its three
shareholders for a total consideration equal to the advance payment. The Company
may acquire this interest within the next three years, but may only do so if and
when Greek law permits a broadcaster and/or its shareholders to own or control
two licensed free to air television broadcast companies. If the interest is not
acquired, Antenna will be refunded all amounts paid and will be granted a right
of first refusal over any future transfers of the 51% interest.
The Company has signed a cooperation agreement to provide management
consulting, production and technical services to Makedonia TV in return for a
fee of 20% of the total gross annual revenue for the year 2000-2001, 22% for the
year 2002-2003 and 25% for the year 2004. Such revenue amounted to GRD 202
million for the nine months ended September 30, 2000 and is included in other
revenue in the consolidated statements of operations.
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, 1999 and September 30, 2000 are summarized below (the tax rate in effect at
December 31, 1999 and September 30, 2000 was 40%):
<TABLE>
<CAPTION>
UNAUDITED
DECEMBER 31, SEPTEMBER 30,
1999 2000
---------------------- ----------------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities
Intangible and tangible assets........................ 200,000 179,000
Programming costs..................................... 4,250,918 5,515,475
Reserves.............................................. 430,348 430,348
Reserves taxed in a special way....................... 233,826 233,826
Deferred charges...................................... 299,383 252,968
Leased assets......................................... 519,016 315,515
Deferred interest on finance leases................... 5,936 1,055
Customer advances and accounts payable................ 528,673 534,376
Accrued expenses and other liabilities................ 29,359 26,983
--------- ---------
Gross deferred tax liabilities........................... 6,497,459 7,489,546
--------- ---------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED
DECEMBER 31, SEPTEMBER 30,
1999 2000
---------------------- ----------------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets
Property and equipment................................... 32,718 161,165
Startup costs............................................ 1,134,659 1,061,707
Long-term liability...................................... 17,600 17,600
Long-term lease liability................................ 165,265 156,534
Short-term lease liability............................... 130,962 79,358
Long-term receivables.................................... 1,209,309 1,229,309
Deferred revenue ........................................ 5,000 2,900
Accounts receivable...................................... 555,788 625,288
Employee retirement benefits............................. 208,333 224,654
Other assets............................................. 407,126 635,273
Accrued expenses and other provisions.................... 562,945 309,032
Net operating losses..................................... 93,350 93,350
--------- ---------
Gross deferred tax assets....................................... 4,523,055 4,596,170
--------- ---------
Less: valuation allowance....................................... (1,193,288) (329,087)
--------- ---------
Net deferred tax (liability).................................... (3,167,692) (3,222,463)
========= =========
</TABLE>
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:
<TABLE>
<CAPTION>
UNAUDITED
DECEMBER 31, SEPTEMBER 30,
1999 2000
---------------------- ----------------------
(IN THOUSANDS)
<S> <C> <C>
Net current deferred tax liability............................... (1,965,298) (2,100,419)
========= =========
Net non-current deferred tax liability........................... (1,599,096) (1,709,039)
========= =========
Net non-current deferred tax asset............................... 396,702 586,995
========= =========
</TABLE>
The provision for income taxes reflected in the accompanying statements
of operation is analyzed as follows:
<TABLE>
<CAPTION>
UNAUDITED THREE MONTHS UNAUDITED NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1999 2000 1999 2000
---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current............................................ 44,500 222,529 88,001 399,795
Deferred income taxes.............................. (563,507) (2,317,725) 1,479,676 57,165
------- --------- --------- -------
Provision income taxes............................. (519,007) (2,095,196) 1,567,677 456,960
======= ========= ========= =======
</TABLE>
The reconciliation of the provision for income taxes to the amount
determined by the application of the Greek statutory tax rate of 40% in 1999 and
2000 to pre-tax income is summarized as follows:
12
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED THREE MONTHS UNAUDITED NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1999 2000 1999 2000
---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Tax (benefit) provision at statutory rate........... (567,197) (1,230,030) 1,585,371 1,244,596
Goodwill amortization............................... -- 10,618 -- 20,026
Interest income..................................... (5,788) (74,308) (140,668) (187,735)
Disallowed prior period expenses and non-deductible
general expenses............................ 66,822 72,037 228,003 209,490
(Income) loss not subject to income tax............. (12,844) (9,312) 7,971 34,784
Change in valuation allowance....................... -- (864,201) (113,000) (864,201)
------- --------- --------- ---------
Provision income taxes.............................. (519,007) (2,095,196) 1,567,677 456,960
======= ========= ========= =========
</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 (E.G., 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:
<TABLE>
<CAPTION>
UNAUDITED
SEPTEMBER 30,
DECEMBER 31, 1999 2000
----------------- ----
(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. 36,479,831 35,857,561
========== ==========
</TABLE>
Interest expense relating to the Senior Notes for the nine months ended
September 30, 1999 and 2000 totaled GRD 2,314 million and GRD 2,645 million,
respectively, and is included in interest expense in the accompanying
consolidated statements of operations.
13
<PAGE>
On March 19, 1999 and March 25, 1999 the Company repurchased GRD 447
million ($1.5 million), 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.
On July 5, 2000 and August 3, 2000 the Company repurchased GRD 917
million ($2.8 million) and GRD 4,941 million ($15 million), respectively of the
Senior Notes, with accrued interest of GRD 139.5 ($0.39 million) to the date of
repurchase.
The early extinguishment of the Senior Notes resulted in the following:
<TABLE>
<CAPTION>
UNAUDITED NINE MONTHS
ENDED SEPTEMBER 30,
-----------------------------------------
1999 2000
---- ----
(IN THOUSANDS)
<S> <C> <C>
Discount on prepayment of Senior Notes....................... 36,890 393,659
Write-off of related unamortized debt issuance costs......... (55,809) (205,941)
------- -------
(18,919) 187,718
======= =======
</TABLE>
The gain for the nine months ended September 30, 2000 has been recorded
as an extraordinary item, net of tax of GRD 82,377.
The indebtedness evidenced by the Senior Notes constitutes a general
unsecured senior obligation of the Company and ranks PARI PASSU in right of
payment with all other senior indebtedness and senior in right of payment to all
subordinated indebtedness of the Company. The indenture with respect to the
Senior Notes contains certain covenants and restrictions that, among other
things, limit the type and amount of additional indebtedness that may be
incurred by the Company and impose certain limitations on investments, loans and
advances, sales or transfers of assets, dividends and other payments, the
ability of the Company to enter into sale-leaseback transactions, certain
transactions with affiliates and certain mergers.
9. FOREIGN EXCHANGE (LOSSES) GAINS
Foreign exchange (losses) gains included in the consolidated statements
of operations are analyzed as follows:
<TABLE>
<CAPTION>
UNAUDITED THREE MONTHS UNAUDITED NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------------------------------------
1999 2000 1999 2000
---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Realized loss on forward contract..................... -- -- (2,777,096) --
Foreign exchange gain on forward contract
representing difference between balance
sheet rate and forward rate (US$)............. -- -- 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)
on Senior Notes (US$) ...................... 685,302 (2,644,180) (2,880,543) (5,236,831)
Foreign exchange gain on cash, receivables and
payables denominated in foreign currencies
(US$) and realized (losses) gains on
transactions.................................. (750,619) 1,135,823 1,683,651 2,107,777
--------- --------- --------- ---------
(65,317) (1,508,357) (593,707) (3,129,054)
========= ========= ========= =========
</TABLE>
14
<PAGE>
10. SEGMENT INFORMATION
The Company's reportable segments are Television, Radio, Pay
Television, Journalism and Magazines. The accounting policies of the segments
are the same as those described in the summary of significant accounting
policies. Identifiable assets by segments are those assets that are used in the
operation of that business. Sales are attributed to countries based on selling
location.
<TABLE>
<CAPTION>
UNAUDITED NINE MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------------------------------
JOURNALISM
TELEVISION RADIO PAY TELEVISION SCHOOL
---------- ----- -------------- ------
ELIMINATION OF
PACIFIC ANTENNA RELATED PARTY
ANTENNA TV ANTENNA RADIO BROADCAST SPOUDASTIKI REVENUE/EXPENSES TOTAL
(GREECE) (GREECE) (AUSTRALIA) (GREECE) ASSETS CONSOLIDATED
-------- -------- ----------- -------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Advertising revenue.............. 20,889,310 1,370,566 -- -- -- 22,259,876
Related party sales.............. 1,844,217 29,839 -- -- (539,064) 1,334,992
Other revenue.................... 164,353 4,163 208,377 123,835 -- 500,728
---------- --------- ------- ------- ---------- ----------
Total revenues................... 22,897,880 1,404,568 208,377 123,835 (539,064) 24,095,596
Depreciation and amortization.... 443,224 34,765 26,820 5,000 -- 509,809
Amortization of programming costs 9,361,845 -- -- -- -- 9,361,845
---------- --------- ------- ------- ---------- ----------
Operating income (loss).......... 5,954,806 372,074 14,829 (67,681) (390,208) 5,883,820
Equity in net income in
unconsolidated
affiliate................ 19,161 -- -- -- 19,161
Related party commission income.. -- -- 353,094 353,094
Interest expense, net............ (1,681,974) (133,160) (2,457) -- 37,114 (1,780,477)
Foreign exchange gains (losses), net (466,532) (94,875) (32,300) -- -- (593,707)
Other income, (expense), net..... 70,063 11,473 -- -- -- 81,536
---------- --------- ------- ------- ---------- ----------
Income (loss) before tax......... 3,895,524 155,512 (19,928) (67,681) -- 3,963,427
Net income (loss) ............... 2,324,347 142,512 (19,928) (51,181) -- 2,395,750
========== ========= ======= ======= ========== ==========
Total assets at September 30, 1999 79,822,810 2,040,909 482,536 72,271 (12,110,223) 70,308,303
========== ========= ======= ======= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
UNAUDITED NINE MONTHS ENDED SEPTEMBER 30, 2000
----------------------------------------------------------------------------------------------------------
PAY JOURNALISM
TELEVISION RADIO TELEVISION SCHOOL MAGAZINES AUDIOTEX
----------------------------------------------------------------------------------------------------------
ELIMINATION
OF RELATED
DAPHNE PARTY
ANTENNA PACIFIC ANTENNA COMMUNI REVENUE/
ANTENNA TV NOVA RADIO BROADCAST SPOUDASTIKI CATIONS AUDIOTEX EXPENSES/ TOTAL
(GREECE) (BULGARIA) (GREECE) (AUSTRALIA) (GREECE) (GREECE) (GREECE) ASSETS CONSOLIDATED
----------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising revenue... 24,236,834 215,648 1,476,246 -- -- 1,659,210 -- -- 27,587,938
Related party sales... 1,608,527 -- 32,814 -- -- 14,691 -- (590,539) 1,065,223
Publication revenue... -- -- -- -- -- 5,123,527 -- -- 5,123,527
Other revenue......... 427,344 1,904 25,016 169,768 135,072 842,971 641,455 -- 2,243,530
---------- ------- --------- ------- ------- --------- ------- ------- ----------
Total revenues........ 26,272,435 217,552 1,534,076 169,768 135,072 7,640,399 641,455 (590,539) 36,020,218
---------- ------- --------- ------- ------- --------- ------- ------- ----------
Depreciation and
amortization.. 494,593 21,250 35,233 26,962 9,314 338,425 15,422 -- 941,219
Amortization of
programming
costs......... 9,937,344 -- -- -- -- -- -- -- 9,937,344
---------- ------- --------- ------- ------- --------- ------- ------- ----------
Operating income...... 7,764,922 34,787 383,805 101,735 (129,303) 642,549 42,000 (83,685) 8,756,837
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED NINE MONTHS ENDED SEPTEMBER 30, 2000
----------------------------------------------------------------------------------------------------------
PAY JOURNALISM
TELEVISION RADIO TELEVISION SCHOOL MAGAZINES AUDIOTEX
----------------------------------------------------------------------------------------------------------
ELIMINATION
OF RELATED
DAPHNE PARTY
ANTENNA PACIFIC ANTENNA COMMUNI REVENUE/
ANTENNA TV NOVA RADIO BROADCAST SPOUDASTIKI CATIONS AUDIOTEX EXPENSES/ TOTAL
(GREECE) (BULGARIA) (GREECE) (AUSTRALIA) (GREECE) (GREECE) (GREECE) ASSETS CONSOLIDATED
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity in net income in
unconsolidated
affiliate..... 2,677 -- -- -- -- -- -- -- --
Related party commission
income........ 47,875 -- -- -- -- -- -- -- --
Interest expense, net. (1,659,826) -- (64,328) (4,488) (26) (447,049) 1,595 62,459 (2,111,663)
Foreign exchange losses,
net........... -- -- -- -- -- -- -- -- (3,223,648)
Other income, (expense),
net........... (434,451) -- 49,266 -- (13) (22,661) (26) -- (407,885)
Minority interest in profit
of unconsolidated
subsidiary, net -- -- -- -- -- (47,297) -- -- (47,297)
---------- ------- --------- ------- ------- ---------- ------- ----------- ----------
Income (loss) before tax 2,855,691 34,261 288,392 (86,959) (129,343) 126,025 43,570 (20,147) 3,111,490
Net income (loss)..... 2,287,624 34,261 552,593 (86,959) (80,580) 48,680 24,399 (20,147) 2,759,871
========== ======= ========= ======= ======= ========== ======= =========== ==========
Total assets at
September 30
2000 97,934,523 556,562 2,617,074 449,145 222,095 13,519,406 413,634 (18,463,753) 97,248,686
========== ======= ========= ======= ======= ========== ======= =========== ==========
</TABLE>
Information with respect to geographical regions is as follows:
<TABLE>
<CAPTION>
UNAUDITED THREE MONTHS UNAUDITED NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30
----------------------------------------- ---------------------------------
1999 2000 1999 2000
----------------------- ----------------- ---------------- ----------------
(in thousands)
<S> <C> <C> <C> <C>
Revenue:
Domestic.............................................. 3,922,244 7,944,509 22,838,963 35,016,675
International:
Related parties............................... 313,010 174,245 1,048,255 616,223
Third parties................................. 75,311 320,256 208,377 387,320
--------- --------- ---------- ----------
4,310,565 8,489,010 24,095,595 36,020,218
========= ========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-------------------------------------------------------------------------------------------------
JOURNALISM
TELEVISION RADIO PAY TELEVISION SCHOOL MAGAZINES
-------------------------------------------------------------------------------------------------
ANTENNA DAPHNE
ANTENNA TV ANTENNA RADIO PACIFIC BROADCAST SPOUDASTIKI COMMUNICATIONS TOTAL
(GREECE) (GREECE) (AUSTRALIA) (GREECE) (GREECE) CONSOLIDATED
-------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Long-lived assets:
Domestic......................... 9,801,781 114,029 -- 21,751 2,486,544 12,424,105
International.................... -- -- 354,054 -- -- 354,054
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------------------------
PAY JOURNALISM
TELEVISION RADIO TELEVISION SCHOOL MAGAZINE AUDIOTEX
--------------------------------------------------------------------------------------------------------
ANTENNA PACIFIC ANTENNA DAPHNE
ANTENNA TV RADIO BROADCAST SPOUDASTIKI COMMUNICATIONS AUDIOTEX TOTAL
(GREECE) (GREECE) (AUSTRALIA) (GREECE) (GREECE) (GREECE) CONSOLIDATED
--------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Long-lived assets:
Domestic............ 11,869,500 145,062 -- 18,182 2,491,000 46,006 14,569,750
International....... 291,987 -- 327,092 -- -- -- 619,079
</TABLE>
11. OTHER (EXPENSES) INCOME
Other expenses, net is analyzed as follows
<TABLE>
<CAPTION>
UNAUDITED THREE MONTHS UNAUDITED NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------ -----------------------
1999 2000 1999 2000
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Start-up costs related to direct-to-home business -- -- (444,102) (373,350)
Change related to early extinguishment of
Senior Notes.......................... -- -- (18,919) --
Income from marketable securities.............. 590,621 -- 590,621 --
Other, net..................................... (36,272) 7,811 (46,064) (34,535)
------- ----- ------- -------
554,349 7,811 81,536 (407,885)
======= ===== ====== =======
</TABLE>
12. SUBSEQUENT EVENTS
On October 10, 2000 the Company repurchased GRD 1,082 million ($ 3.0
million) of the Senior Notes, with accrued interest of GRD 17.8 million ($0.04
million) to the date of repurchase. The early extinguishment of the Senior Notes
resulted in a gain of GRD 59 million ($ 0.15 million) consisting of the
following:
GRD
----------------
(in thousands)
Discount on repayment of Senior Notes........................ 59,296
Write-off related unamortized debt issuance costs............ (38,903)
--------
Gain 20,393
The gain, net of tax will be recorded as an extraordinary item.
On October 9, 2000, Antenna TV acquired a 100% interest in Part Time
S.A. for a total cash consideration, including expenses, of GRD 872 million.
Subsequent to the acquisition the name was changed to Part Time Symvouleftiki
S.A. and its primary activities will include consulting services.
On October 9, 2000, Antenna TV acquired a plot of land for a total cash
consideration including expenses of GRD 108 million.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
We derive a substantial portion of our revenue from the sale of
advertising time. Advertising revenue made up 92.4% of total net revenue in the
nine months ended September 30, 1999 and 76.6% of total net revenue in the nine
months ended September 30, 2000. On October 27, 1999, we began reporting revenue
from publishing as a result of our acquisition of our interest in Daphne
Communications S.A. (or Daphne).
Our revenue fluctuates throughout the year, with advertising revenue at
its lowest level during the third fiscal quarter (approximately 9.6% of total
net revenue in 1999), and at its highest level during the fourth fiscal quarter
(approximately 32.3% of total net revenue in 1999).
ADVERTISING
Advertising is sold in time increments and is priced primarily on the
basis of the program's popularity, as demonstrated by its ratings, within the
demographic group that an advertiser desires to reach. In addition, advertising
rates are affected by the number of advertisers competing for the available time
and the availability of alternative advertising media.
Substantially all of our advertising revenue is generated from national
advertising arrangements and contracts with the local and international branches
of advertising agencies, representing both multinational and national
advertisers. Examples are:
MULTINATIONAL ADVERTISERS NATIONAL ADVERTISERS
o Procter & Gamble o The Hellenic Telecommunications
Organization (OTE)
o Unilever o Stet Hellas, a Greek mobile
telecommunications company
o Estee Lauder o Panafon, a Greek mobile
telecommunications company
o Colgate-Palmolive o Fage and Delta, Greek dairy companies
We currently use our own sales force to sell advertising time.
Arrangements for advertising are reached during the first quarter of each year,
at which time estimates of annual revenue are determined. Advertising time
generally is reserved on a monthly basis, with a small proportion booked on a
spot basis. Advertising revenue is recorded when the advertisement is aired. As
is common in the industry, we provide certain advertising agencies with an
incentive rebate of up to a maximum of 9.9% of the cost of the airtime
purchased, as permitted by law. At the end of each year, the rebates are
calculated and the advertising agencies which are entitled to a rebate then
invoice us for an airtime credit for the following year that reflects the
rebate. These rebates are estimated and accrued on a quarterly basis as the
related revenues are earned. Revenue is recorded net of the rebates. While most
advertising arrangements tend to be
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reviewed on an annual basis, and typically are renewed, we seek to develop and
maintain long-term relationships with the agencies and advertisers.
Regulatory changes effective January 1, 1996 had the effect of greatly
reducing discounts and free airtime offered to advertisers, requiring
advertisers to pay the full cost, and taxes based on such full cost, contained
in the broadcaster's price list for a particular time slot, as filed with the
Greek tax authorities. A joint directive of the Greek Ministry of Press and Mass
Media and Ministry of Finance, for the purpose of clarifying the term
"advertising" under Greek tax law, broadened the definition beyond spots aired
in return for cash payments to cover all publicity aired. The directive also
clarified a number of procedures relating to collection of taxes relating to
advertising.
While we sell a significant portion of our available advertising time,
we do not sell all of it. In 1999 we sold approximately 96.8% of total available
advertising time during prime time broadcasts and approximately 74.8% of total
available advertising time, including dead time allocated to audiotext,
infomercials and home shopping. We use a variety of means to utilize unsold
advertising time in all time periods (commonly referred to as "dead time") to
improve our operating results and cash flows. These other sources are audiotext
and infomercials. We derive revenue from our majority-owned subsidiary,
Audiotex, which generates audiotext revenue, and from an affiliated entity,
Epikinonia Ltd, which produces infomercials and pays us for production and
technical support.
PROGRAMMING
We also derive revenue from royalties received from syndicating our own
programming. These programming sales are made to a variety of users, including a
television network in Cyprus operated by Antenna TV Ltd. (Cyprus) (or Antenna
Cyprus), a company in which our General Manager 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.
(or Antenna Satellite), and in Australia through our wholly-owned subsidiary,
Pacific Broadcast. Revenue derived from Antenna Satellite, Antenna Cyprus and
Pacific Broadcast represented revenue from sources outside Greece. In addition,
we sell selected news footage to other news broadcasters around the world.
PUBLISHING AND OTHER REVENUE
Since acquiring Daphne in October 1999, we have derived circulation and
advertising revenue from the publication of a wide variety of Greek magazines.
These magazines cover subject matter ranging from style and fashion to
parenting, from politics to astrology and from entertainment to shipping and
defense. We also derive revenue from the printing of books, magazines, pamphlets
and other publication for fees from third parties.
COSTS AND EXPENSES
Cost of sales includes the costs of acquiring foreign programming and
Greek features, together with the cost of gathering, producing and broadcasting
news. Since the acquisition of Daphne, cost of sales also includes publication
costs. Selling, general and administrative expenses (or SG&A) includes payroll
costs and sales, marketing and promotion costs, the broadcast license fee and
other operating and administrative expenses.
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Programming costs generally either are expensed as cost of sales in the
year incurred or capitalized and amortized over a period of three to four years.
Programs that are expensed in the current period include news programs and a
portion of acquired programming, principally Greek features. For such
programming, substantially all of the value is realized upon the initial
broadcast, either because of the topical nature of the programming or, in the
case of acquired programming, contractual limitations on subsequent broadcasts.
Acquired foreign programs, which have contracts limiting our broadcasts to a
specific number during their term (usually two broadcasts during a two- or
maximum three-year period), are expensed in equal portions each time the program
is broadcast. The costs of other programming, such as series, soap operas,
shows, and made-for-television movies, where substantial value can be realized
through multiple broadcasts or syndication, are capitalized as an asset and
amortized, unless we determine during the current period that a program is
unlikely to generate revenue in future periods, in which case the associated
costs are expensed in the current period.
We follow SFAS 53 concerning the amortization of programming production
and acquisition costs. Consequently, all direct and certain indirect production
costs (other than relating to news and similar programming) are capitalized as
investment in programs. These costs are stated at the lower of unamortized cost
or estimated net realizable value. Under SFAS 53, estimated total production
costs for an individual program or series are amortized in the proportion that
the revenue realized relates to management's estimate of the total future
revenue expected to be generated from such program or series based upon past
experience. Estimates of future revenues are reviewed periodically in relation
to historical revenue trends and the amortization of programming costs is
adjusted accordingly. To the extent such estimates differ from the actual
results, such amortization periods will be adjusted. Such adjustments could have
a material adverse effect on our financial condition and results of operations.
The AICPA issued Statement of Position 00-2 "Accounting by Producers or
Distributors of Films" (or SOP 00-2) in June 2000 and it is in effect for fiscal
years beginning after December 15, 2000. SOP 00-2 establishes new accounting
standards for producers and distributors of films, including changes in revenue
recognition and accounting for advertising, development and overhead costs. It
requires advertising costs for television products to be expensed as incurred,
certain indirect overhead costs to be charged directly to expense instead of
being capitalized to film costs, and all film costs to be classified on the
balance sheet as noncurrent assets. Because we have not yet determined the
impact that this statement will have on our financial statements, we cannot
assure you that a one-time charge will not result when we apply it.
An important component of our strategy for maximizing operating
performance and long-term profitability is to continue making investments in
programming to build up our own programming library. This strategy has been
implemented over the past few years by significantly increasing our programming
expenditures. We retain all rights to the programming in our library and believe
that these rights may represent values in excess of net book value. This value
is demonstrated by the advertising revenue generated from rebroadcasting
programming produced in prior years and from programming syndicated to other
networks, including programming for which the production costs have been fully
amortized. In certain cases, advertising revenue has exceeded the advertising
revenue generated from the initial broadcast. We expect to continue to expand
our programming library and to exploit the library through the airing of reruns
and the distribution and syndication of broadcast rights to third parties.
Programming from the library is broadcast to Greeks abroad through third parties
and in the future will also be broadcast directly. Management will continue to
evaluate the total estimated revenues as new markets are entered and revenues
are realized.
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ACQUISITIONS
In March 1999, we raised net proceeds of $86.5 million in an initial
public offering of 7,700,000 American Depository Shares representing 3,850,000
shares. In May 1999, we used a portion of the net proceeds we received of our
initial public offering to acquire:
o a 51% interest in Audiotex for a purchase price of $7.25
million;
o 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;
o a 100% interest in Antenna Spoudastiki Ltd. (or Antenna
Spoudastiki), which operates a training center for journalists
and other media personnel for a purchase price of $6.0
million; and
o a 100% interest in Pacific Broadcast, which rebroadcasts our
programming in Australia through a joint venture, for a
purchase price of $3.5 million.
Each of these companies was previously affiliated with or controlled by
members of the family of Mr. Minos Kyriakou, our Chairman.
These business combinations were among companies under common control
and have been accounted for "as if" a pooling of interest had occurred for
periods after September 1, 1998, the date that the companies came under common
control for accounting purposes (or the Consolidation Date). Consequently, 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 the companies' book
values and historical results of operations. The cash amounts paid for the
companies acquired, in excess of their book values, have been treated as a
dividend to the selling shareholders.
We also undertook the following transactions:
o in October 1999, we acquired a 51% interest in Daphne for
total consideration of approximately GRD 1.2 billion ($3.7
million);
o in February 2000, we acquired the 49% interest in Audiotex
from Legion International that we did not already own for
total consideration of GRD 55 million and an increase of the
royalty fees to Legion International from 7.5% to 12.0% on
Audiotex's annual revenue for 10 years. Based on the 1999 net
revenues of Audiotex, the royalty fee paid to Legion
International computed at 7.5% of net revenues was GRD 64.1
million ($0.2 million). If computed at 12% of net revenues,
the royalty payment would have been GRD 102.6 million ($0.3
million).
o in February 2000, we advanced GRD 3 billion ($8.5 million) in
exchange for the right to acquire a controlling interest in
Makedonia TV, one of the six Greek commercial TV broadcasters
with a nationwide license. This right gives us the ability to
acquire, when and if such acquisition is allowed under
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applicable law, a 51% interest in Makedonia TV from its three
shareholders for a total consideration equal to the advance
payment. We also entered into a corporation agreement to
provide a variety of services to Makedonia TV.
o in April 2000, we entered into a memorandum of understanding
with Internet Gold International Ltd., a subsidiary of
Internet Gold, to jointly undertake various Internet-related
activities. Internet Gold agreed to use its best efforts to
cause one or more of the shareholders of CompuLink Networks
S.A., a Greek Internet service provider, to transfer to us a
20% stake in CompuLink for consideration of $1 million,
$200,000 of which will be paid in cash and $800,000 of which
will be paid in the form of advertising time on television and
radio and in magazines.
o in August 2000, we acquired interests in three Bulgarian media
companies for total consideration, including related expenses,
of $3.7 million. The acquisition includes a 100% interest in
Nova Television, a 100% interest in Multimex and a 92.2%
interest in Radio Express.
Our consolidated financial statements include all of our significant
majority-owned subsidiaries. Affiliated companies in which we do 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, 2000 (UNAUDITED)
COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
REVENUES. Total net revenue increased GRD 4,178 million ($10.9
million), or 96.9%, from GRD 4,311 million ($11.2 million) in the three months
ended September 30, 1999 to GRD 8,489 million ($22.1 million) in the three
months ended September 30, 2000. This increase was attributable primarily to the
addition of GRD 2,429 million ($6.3 million) of revenue from Daphne (primarily
representing publication revenue), and to a lesser extent, an underlying
increase of GRD 977 million ($2.5 million) in advertising revenue and the
addition of GRD 227 million ($0.6 million) of revenue from Audiotex (primarily
representing telephone services revenue), which was accounted for using the
equity method prior to February 7, 2000.
Advertising revenue, which comprised 69% of total net revenues for the
three months ended September 30, 2000, increased GRD 2,030 million ($5.3
million), or 53.4%, from GRD 3,803 million ($9.9 million) in the three months
ended September 30, 1999 to GRD 5,833 million ($15.2 million) in the three
months ended September 30, 2000. This increase principally reflected an
underlying increase in advertising revenue of GRD 977 million ($2.5 million),
primarily as a result of increases in volume. The total increase in advertising
revenue also reflected the addition of GRD 766 million ($2 million) of
advertising revenue from Daphne and GRD 216 million ($0.56 million) advertising
revenue from Nova Television.
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Related party revenue increased GRD 1 million, or 0.2%, from GRD 375
million ($1 million) in the three months ended September 30, 1999 to GRD 376
million ($1 million) in the three months ended September 30, 2000.
We earned publication revenue of GRD 1,412 million ($3.7 million) in
the three months ended September 30, 2000, as a result of the addition of
publication income from Daphne.
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 736 million ($2 million), or 557.6%, from GRD 132
million ($0.3 million) in the three months ended September 30, 1999 to GRD 868
million ($2.3 million) in the three months ended September 30, 2000, principally
as a result of the addition of GRD 252 million ($0.7 million) of other revenue
from Daphne and the addition of GRD 227 million ($0.6 million) from Audiotex,
which was accounted for using the equity method prior to February 7, 2000, and
an underlying increase in other revenue of GRD 219 million ($0.6 million), of
which GRD 209 million ($0.5 million) is stemming from Makedonia TV.
COST OF SALES. Cost of sales increased GRD 2,041 million ($5.3
million), or 121%, from GRD 1,691 million ($4.4 million) in the three months
ended September 30, 1999 to GRD 3,732 million ($9.7 million) in the three months
ended September 30, 2000. This increase was attributable primarily to the
addition of GRD 1,729 million ($4.5 million) of cost of sales from Daphne and,
to a lesser extent, the addition of GRD 151 million ($0.4 million) of cost of
sales from Nova Television and the addition of GRD 82 million ($0.2 million) of
cost of sales from Audiotex, which was accounted for using the equity method
prior to February 7, 2000. The underlying cost of sales increased GRD 80 million
($0.2 million) or 5.5% in the three months ended September 30, 2000.
SG&A. Selling, general and administrative expenses (or SG&A) increased
GRD 721 million ($1.9 million), or 88%, from GRD 818 million ($2.1 million) in
the three months ended September 30, 1999 to GRD 1,539 million ($4 million) in
the three months ended September 30, 2000. The underlying SG&A expense increased
67.2% from GRD 637 million ($1.7 million) to GRD 1,065 million ($2.8 million).
The increase was also attributable to the addition of SG&A of GRD 245 million
($0.6 million) from Daphne.
AMORTIZATION. Amortization of programming costs increased GRD 102
million ($0.3 million), or 3.3%, from GRD 3,118 million ($8.1 million) in the
three months ended September 30, 1999 to GRD 3,220 million ($8.4 million) in the
three months ended September 30, 2000.
DEPRECIATION. Depreciation increased GRD 156 million ($0.4 million), or
88.7%, from GRD 177 million ($0.5 million) in the three months ended September
30, 1999 to GRD 333 million ($0.9 million) in the three months ended September
30, 2000, of which GRD 120 million ($0.3 million) of this increase was
attributable to the addition of depreciation from Daphne.
OPERATING INCOME. Operating income improved GRD 1,159 million ($3
million), or 77.6%, from a loss of GRD 1,493 million ($3.9 million) in the three
months ended September 30, 1999 to a loss of GRD 334 million ($0.9 million) in
the three months ended September 30, 2000, principally reflecting an increase in
total net revenue during the period, partially offset by an increase in cost of
sales. There was an increase in underlying operating income of GRD 578 million
($1.5 million) in the three months ended September 30, 2000.
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INTEREST EXPENSE. Interest expense, net increased GRD 648 million ($1.7
million), or 120%, from GRD 540 million ($1.4 million) in the three months ended
September 30, 1999 to GRD 1,188 million ($3.1 million) in the three months ended
September 30, 2000, reflecting an increase in gross interest expense during the
period, principally attributable to an increase in underlying interest expense
of GRD 404 million ($1.1 million), the addition of GRD 145 million ($0.4
million) of gross interest expense from Daphne and an underlying decrease in
interest income of GRD 132 million ($0.3 million).
FOREIGN EXCHANGE. Foreign exchange losses increased GRD 1,443 million
($3.7 million) from a loss of GRD 65 million ($0.2 million) to a loss of GRD
1,508 million ($3.9 million), primarily reflecting loss resulting from the
translation of the senior notes denominated in U.S. dollars partially offset by
unrealized gains from our U.S. dollar cash holdings and receivables/payables
denominated in foreign currencies.
OTHER INCOME, NET. Other income, net decreased GRD 546 million ($1.38
million), or 98.6%, from GRD 554 million ($1.4 million) in the three months
ended September 30, 1999 to GRD 8 million ($0.02 million) in the three months
ended September 30, 2000. The decrease was attributable principally to the
increase in start up cost associated with our investment in the direct-to-home
television broadcast business.
EXTRAORDINARY ITEMS. Provision for extraordinary items increased from
zero in the three months ended September 30, 1999 to GRD 105 million ($0.3
million) in the three months ended September 30, 2000, reflecting the gain from
the repurchase of certain of our senior notes, net of income tax.
BENEFIT FOR INCOME TAXES. Benefit for income taxes increased GRD 1,576
million ($4.1 million) from GRD 519 million ($1.4 million) in the three months
ended September 30, 1999 to GRD 2,095 million ($5.5 million) in the three months
ended September 30, 2000, principally as a result of increased pre-tax losses
and the result of the partial utilization of the valuation allowance of Antenna
TV and Antenna Radio. Of the increase in benefit for income taxes, GRD 1,266
million ($3.3 million) was attributable to underlying benefit for income taxes
partly offset by the addition of GRD 96 million ($0.22 million) of provision for
income taxes for Daphne.
NET LOSS. Net loss decreased GRD 24 million ($0.06 million) from a loss
of GRD 899 million ($2.34 million) in the three months ended September 30, 1999
to a loss of GRD 875 million ($2.28 million) in the three months ended September
30, 2000, principally reflecting an underlying increase in operating income.
NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
REVENUES. Total net revenue increased GRD 11,925 million ($31 million),
or 49.5%, from GRD 24,095 million ($62.7 million) in the nine months ended
September 30, 1999 to GRD 36,020 million ($93.7 million) in the nine months
ended September 30, 2000. This increase was attributable primarily to the
addition of GRD 7,626 million ($19.8 million) of revenue from Daphne, and to a
lesser extent, an underlying increase in advertising revenue.
Advertising revenue, which comprised 76.6% of total net revenues for
the nine months ended September 30, 2000, increased GRD 5,328 million ($13.9
million), or 23.9%, from GRD 22,260 million ($57.9 million) in the nine months
ended September 30, 1999 to GRD 27,588 million ($71.8 million) in the nine
months ended September 30, 2000. This increase principally reflected an
underlying increase in advertising revenue of GRD 3,348
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million ($8.7 million), primarily as a result of increases in volume. The total
increase in advertising revenue also reflected the addition of GRD 1,659 million
($4.3 million) of advertising revenue from Daphne, and the addition of GRD 216
million ($0.56 million) of advertising revenue from Nova Television.
Related party revenue decreased GRD 270 million ($0.7 million), or
20.2%, from GRD 1,335 million ($3.5 million) in the nine months ended September
30, 1999 to GRD 1,065 million ($2.8 million) in the nine months ended September
30, 2000, principally reflecting the decrease in programming fees paid by
Antenna Satellite.
Antenna earned publication revenue of GRD 5,124 million ($13.3 million)
in the nine months ended September 30, 2000, as a result of the addition of
publication income from Daphne.
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 1,743 million ($4.5 million) from GRD 501 million
($1.3 million) in the nine months ended September 30, 1999 to GRD 2,244 million
($5.8 million) in the nine months ended September 30, 2000, principally as a
result of the addition of GRD 843 million ($2.2 million) of other revenue from
Daphne, GRD 641 million ($1.7 million) of other revenue from Audiotex, which was
accounted for using the equity method prior to February 7, 2000, and an
underlying increase in other revenue of GRD 263 million ($0.7 million), of which
GRD 209 million ($0.5 million) is stemming from Makedonia TV.
COST OF SALES. Cost of sales increased GRD 6,347 million ($16.5
million), or 128%, from GRD 4,941 ($12.9 million) in the nine months ended
September 30, 1999 to GRD 11,288 million ($29.4 million) in the nine months
ended September 30, 2000. This increase was attributable primarily to the
addition of GRD 5,584 million ($14.5 million) of cost of sales from Daphne and,
to a lesser extent, an increase in the underlying cost of sale of GRD 332
million ($0.9 million) and an increase in cost of sales of GRD 194 million ($0.5
million) from Audiotex, which was accounted for using the equity method prior to
February 7, 2000 and the addition of GRD 151 million ($0.4 million) of cost of
sales from Nova Television.
SG&A. Selling, general and administrative expenses increased GRD 1,698
million ($4.4 million), or 49.9%, from GRD 3,399 million ($8.9 million) in the
nine months ended September 30, 1999 to GRD 5,097 million ($13.3 million) in the
nine months ended September 30, 2000. This increase was attributable principally
to the addition of SG&A of GRD 964 million ($2.5 million) from Daphne and to a
lesser extent, the addition to underlying SG&A of GRD 555 million ($1.4
million).
AMORTIZATION. Amortization of programming costs increased GRD 575
million ($1.5 million), or 6.1%, from GRD 9,362 million ($24.4 million) in the
nine months ended September 30, 1999 to GRD 9,937 million ($25.9 million) in the
nine months ended September 30, 2000.
DEPRECIATION. Depreciation increased GRD 431 million ($1.1 million), or
84.6%, from GRD 510 million ($1.3 million) in the nine months ended September
30, 1999 to GRD 941 million ($2.4 million) in the nine months ended September
30, 2000, of which GRD 338 million ($0.9 million) was attributable to the
addition of depreciation from Daphne.
OPERATING INCOME. Operating income increased GRD 2,873 million ($7.5
million), or 48.8%, from GRD 5,884 million ($15.3 million) in the nine months
ended September 30, 1999
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to GRD 8,757 million ($22.8 million) in the nine months ended September 30,
2000, principally reflecting an increase in total net revenue during the period,
partially offset by an increase in cost of sales.
INTEREST EXPENSE. Interest expense, net increased GRD 332 million ($0.9
million), or 18.6%, from GRD 1,780 million ($4.6 million) in the nine months
ended September 30, 1999 to GRD 2,112 million ($5.5 million) in the nine months
ended September 30, 2000, reflecting an increase in gross interest expense
during the period, principally attributable to an increase in underlying
interest expense of GRD 624 million ($1.6 million) and the addition of GRD 464
million ($1.2 million) of gross interest expense from Daphne offset by an
increase of GRD 646 million ($1.7 million) in underlying interest income.
FOREIGN EXCHANGE. Foreign exchange losses increased GRD 2,535 million
($6.6 million) from GRD 594 million ($1.5 million) to GRD 3,129 million ($8.1
million), primarily reflecting loss resulting from the translation of the Senior
Notes denominated in US dollars partially offset by unrealized gains from our
U.S. dollars cash holdings and receivables/payables denominated in foreign
currencies.
OTHER INCOME, NET. Other income, net decreased GRD 489 million ($1.3
million), or 600.3%, from a gain of GRD 81 million ($0.2 million) in the nine
months ended September 30, 1999 to a loss of GRD 408 million ($1.1 million) in
the nine months ended September 30, 2000. The decrease was attributable
principally to the increase in start up cost associated with our investment in
the direct-to-home television broadcast business.
EXTRAORDINARY ITEMS. Provision for extraordinary items increased from
zero in the nine months ended September 30, 1999 to GRD 105 million ($0.3
million) in the nine months ended September 30, 2000, reflecting the gain from
the repurchase of certain of our senior notes, net of income tax.
PROVISION FOR INCOME TAXES. Provision for income taxes decreased GRD
1,111 million ($2.9 million) from GRD 1,568 million ($4.1 million) in the nine
months ended September 30, 1999 to GRD 457 million ($1.2 million) in the nine
months ended September 30, 2000, principally as a result of partial utilization
of valuation allowance of Antenna TV and Antenna Radio.
NET INCOME. Net income increased GRD 364 million ($0.9 million) from
GRD 2,396 million ($6.3 million) in the nine months ended September 30, 1999 to
GRD 2,760 million ($7.2 million) in the nine months ended September 30, 2000,
principally reflecting an underlying increase in operating income and the
benefit of income taxes, partially offset by the increase in foreign exchange
losses and other expenses.
LIQUIDITY AND CAPITAL RESOURCES
We have historically funded our operations, expenditures for
programming, working capital requirements and capital expenditures principally
through a combination of equity contributions, indebtedness and cash flow from
operations. As of September 30, 2000, we had approximately GRD 36,553 million
($95.1 million) of total long-term debt which consists principally of our senior
notes and long-term obligations under capital leases. In 1999, we raised $86.5
million in our initial public offering. Because of our acquisition of Antenna
Radio, we assumed approximately $5.2 million of indebtedness which we intend to
repay over time with operating cash from Antenna Radio, which is reflected on
the balance sheet as of September 1, 1998.
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Our principal use of funds are payment for programming (which includes
cash expenditures for programming aired during the period plus cash expenditures
for programming to be aired in the future), which expenditures totaled GRD 8,790
million ($22.9 million) in the nine months ended September 30, 1999 and GRD
13,306 million ($34.6) in the nine months ended September 30, 2000.
OPERATING ACTIVITIES. Net cash used by operating activities was GRD
4,680 million ($12.2 million) in the nine months ended September 30, 1999
compared to GRD 12,414 million ($32.3 million) in the nine months ended
September 30, 2000.
INVESTING ACTIVITIES. Net cash used in investing activities was GRD
10,417 million ($27.1 million) in the nine months ended September 30, 1999,
reflecting the cost of the acquisition of interests in Antenna FM, Antenna
Spoudastiki, Audiotex and Pacific Broadcast, and GRD 6,291 million ($16.4
million) in the nine months ended September 30, 2000, reflecting the cost of the
right to acquire a controlling interest in Makedonia TV and the acquisition of
three media companies in Bulgaria (Nova TV, Express Radio and Multimex) and
increased purchases of fixed assets such as technical, office equipment and an
office building in Salonica.
FINANCING ACTIVITIES. Net cash provided by financing activities was GRD
22,828 million ($59.4 million) in the nine months ended September 30, 1999
compared to GRD 3,290 million ($8.6 million) in the nine months ended September
30, 2000. The decrease in funds provided by financing activities in 2000
principally reflects the fact that, in 1999, we raised the proceeds of our
initial public offering and partially repurchased certain of our senior notes.
DISTRIBUTABLE RESERVES. We had distributable reserves in our Greek
statutory accounts of approximately GRD 594 million ($1.5 million) as of
September 30, 2000.
OTHER LONG-TERM LIABILITY. We have an outstanding liability to the
Pension Fund for Athens and Thessaloniki Newspaper Employees for advertiser
contributions. The amount is payable in monthly installments until April 30,
2002. An installment of approximately GRD 822 million ($2.1 million) was paid
during the nine month period ended September 30, 2000.
YEAR 2000 AND EURO CONVERSION
Our hardware and operating systems relating to our computer network and
software applications relating to our business systems were Year 2000-compliant.
We spent GRD 92 million ($0.3 million upgrading our computer network. We did not
experience any Year 2000 problems.
Our revenues and expenses are denominated in drachmae and dollars.
Greece is not among the eleven members of the European Union whose currencies
became subject of conversion to the euro starting January 1, 1999. However, the
drachma will become subject to conversion to the euro starting January 1, 2001.
Our upgraded management information system is expected to be 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, we do not believe inflation has had a material
effect on our business for the periods presented.
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Greece experienced average annual rates of inflation of 8.9% during 1995, 8.2%
during 1996, 5.6% during 1997, 48% during 1998 and 2.6% during 1999.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
FOREIGN EXCHANGE RISK MANAGEMENT
Our functional currency is the drachma, but certain of our 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 849
million ($2.2 million) or 2.4% of total net revenue in the nine month period
ended September 30, 2000. Our non-drachma denominated operating costs,
principally foreign-produced programming invoiced in U.S. dollars, accounted for
4.3% of total net revenue in the nine month period ended September 30, 2000.
Non-drachma denominated indebtedness (primarily U.S. dollars) totaled GRD 36,671
million ($95.4 million), or 100% of total indebtedness, at September 2000. 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 our operations are
conducted in Greece, our operating results will depend to a certain extent on
the prevailing economic conditions in Greece. In addition, a significant
proportion of our revenue is in drachmae. We expect to increase modestly the
level of non-drachma denominated revenue as result of our strategy of increasing
our sales of programming to Greek-speaking audiences residing outside Greece and
to other markets.
We hedge elements of our currency exposure through use of derivative
instruments such as forward exchange agreements and currency options, though we
might also consider interest rate swaps. We are 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. We have experienced net foreign exchange losses in the past, and
we could experience them in the future if foreign exchange rates shift in excess
of the risk covered by hedging arrangements. Credit risk will arise if a
counterparty fails to perform its obligations. We intend to minimize credit risk
by entering into contracts only with highly credit rated counterparties and
through internal limits and monitoring procedures.
We record financial instruments to which we are a party 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
(1) the contract is designated, and effective, as a hedge of a foreign currency
commitment; and (2) 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 the losses are not deferred.
We were party to an $87 million forward contract with the Royal Bank of
Scotland, to hedge our currency exposure on a portion of the principal and
interest payable of our U.S. dollar
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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. There was no
amortization for the three months and the nine months ended September 30, 2000
as the forward contract expired on May 15, 1999. In addition, foreign exchange
gains or losses on our non-drachma denominated indebtedness (currently, our
senior notes) was offset by corresponding losses or gains on the forward
contract's notional amount.
We were 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 nine months ended September 30, 1999
of GRD 442 million ($1.3 million) was recorded as part of the foreign exchange
loss in the statement of operations. There was no mark to market adjustment of
the option for the three months and nine months ended September 30, 2000 because
the option matured on May 15, 1999.
The table below presents the principal, cash flows and related weighted
average interest rates by expected maturity date of our indebtedness that may be
sensitive to foreign currency exchange rate fluctuations:
FINANCIAL INSTRUMENT MATURITY (2007) FAIR VALUE
--------------------------------------------- --------------- ----------
(GRD) (GRD)
(IN MILLIONS)
Senior notes ($93.3 million) ................ 35,858 93.3 36,109 94
Average interest rate ....................... 9.4% --
The average interest rate represents the stated interest rate of 9%
plus amortization of deferred issuance costs.
INTEREST RATE RISK MANAGEMENT
We manage interest rate risk by financing non-current assets and a
portion of current assets with equity, long-term liabilities and long-term debt
with fixed interest rates.
The table below presents the principal, cash flows and related weighted
average interest rates by expected maturity date of our indebtedness that may be
sensitive to interest rate fluctuations:
FINANCIAL INSTRUMENT MATURITY (2007) FAIR VALUE
--------------------------------------------- --------------- ----------
(GRD) ($) (GRD) ($)
(IN MILLIONS)
Senior notes ($93.3 million) ................ 35,858 93.3 36,109 94
Average interest rate ....................... 9.4% --
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 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 12, 2000, 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 1999;
2. approval of the financial statements for fiscal year 1999;
3. indemnification of the board of directors and auditors for
fiscal year 2000;
4. ratification of the appointment of the auditors for fiscal
year 2000;
5. ratification of all actions of the Company's board of
directors for fiscal 1999; and
6. waiver of dividends payable for fiscal year 1999.
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.
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, 1999. 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: November 7, 2000
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