AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 2000
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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 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
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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
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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 June 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>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page
----
<S> <C> <C>
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
Consolidated Statements of Operations for the three months ended June
30, 1999 and 2000 and the six months ended June 30, 1999 and 2000..................... 1
Consolidated Balance Sheets as of December 31, 1999 and June 30,
2000.................................................................................. 2
Consolidated Statement of Shareholders' Equity for the six months
ended June 30, 2000................................................................... 4
Consolidated Statements of Cash Flows for the six months ended
June 30, 1999 and 2000................................................................ 5
Notes to Financial Statements......................................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................................... 19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK............................................................ 28
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.................................... 30
ITEM 5. OTHER INFORMATION............................................................ 30
</TABLE>
iii
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
ANTENNA TV S.A.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended June 30, 1999 and 2000
and for the six months ended June 30, 1999 and 2000
(In thousands of drachmae and U.S. dollars, except earnings per share)
<TABLE>
<CAPTION>
Unaudited Three Months Unaudited Six Months
Notes Ended-June-30, Ended-June-30,
----- -------------- --------------
1999 2000 1999 2000
---- ---- ---- ----
(GRD) (GRD) ($) (GRD) (GRD) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Advertising revenue................. 10,832,730 12,829,991 36,346 18,456,677 21,754,912 61,629
Related party revenue............... 3 541,763 376,652 1,067 959,593 688,978 1,952
Publication revenue................. - 1,765,548 5,002 - 3,711,627 10,514
Other revenue....................... 197,496 1,043,983 2,957 368,760 1,375,691 3,897
---------- ---------- ------ ---------- ----------- ------
Total net revenue................... 11,571,989 16,016,174 45,372 19,785,030 27,531,208 77,992
---------- ---------- ------ ---------- ----------- ------
Cost of sales....................... 1,823,016 4,039,573 11,444 3,249,877 7,556,309 21,406
Selling, general and administrative
expenses......................... 1,221,152 2,034,854 5,764 2,580,755 3,558,156 10,080
Amortization of programming costs... 3,106,278 3,569,083 10,111 6,243,947 6,717,834 19,031
Depreciation and amortization....... 166,007 227,519 645 333,302 608,112 1,723
---------- ---------- ------ ---------- ----------- ------
Operating income.................... 5,255,536 6,145,145 17,408 7,377,149 9,090,797 25,752
Interest income..................... 321,916 569,718 1,614 536,226 1,330,059 3,768
Interest expense.................... (877,244) (1,128,982) (3,198) (1,776,623) (2,253,659) (6,384)
Foreign exchange (losses), net...... 9 (617,986) (212,028) (601) (528,390) (1,620,697) (4,591)
Equity in (loss) net income in
unconsolidated affiliate......... (487) - - 14,898 2,677 8
Related party commission income..... 3 85,656 - - 230,972 47,875 136
Other expense, net.................. 11 (179,918) (408,458) (1,157) (472,813) (415,696) (1,178)
Minority interest in (income) loss
of consolidated entity, net....... - (32,781) (93) - 5,209 15
---------- ---------- ------ ---------- ----------- ------
Earnings before income taxes........ 3,987,473 4,932,614 13,973 5,381,419 6,186,565 17,526
Provision for income taxes.......... 7 1,460,175 2,048,165 5,802 2,086,684 2,552,156 7,230
---------- ---------- ------ ---------- ----------- ------
Net income ......................... 2,527,298 2,884,449 8,171 3,294,735 3,634,409 10,296
========== ========== ====== ========== =========== ======
Basic and diluted earnings
per share........................ 127.3 145.3 0.4 166.0 183.1 0.5
========== ========== ====== ========== =========== ======
</TABLE>
Exchange rate for the convenience translation of the June 30, 2000 balances is
GRD 353.00 to $1.00.
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
ANTENNA TV S.A.
CONSOLIDATED BALANCE SHEETS
As of December 31, 1999 and June 30, 2000
(In thousands of drachmae and U.S. dollars,
except earnings per share)
<TABLE>
<CAPTION>
Unaudited
December 31, June 30,
----------------------- ----------------------
Notes 1999 1999 2000 2000
----- ---- ---- ---- ----
(GRD) ($) (GRD) ($)
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets:
CASH AND CASH EQUIVALENTS.............................. 31,772,162 90,006 26,602,183 75,360
RESTRICTED CASH........................................ 425,266 1,205 241,677 685
ACCOUNTS RECEIVABLE, LESS ALLOWANCE FOR DOUBTFUL
ACCOUNTS OF GRD 1,834,794 IN 1999 AND
GRD 1,994,216 AT JUNE 30, 2000...................... 21,873,360 61,964 29,624,845 83,923
INVENTORIES............................................ 438,006 1,241 818,078 2,317
DUE FROM RELATED PARTIES............................... 3 3,300,360 9,349 3,325,183 9,420
PROGRAMMING COSTS, NET................................. 4 11,824,168 33,496 12,342,550 34,965
ADVANCES TO RELATED PARTIES............................ 3 156,660 444 183,229 519
ADVANCES TO THIRD PARTIES.............................. 1,201,061 3,402 1,343,089 3,805
PREPAID EXPENSES AND OTHER CURRENT ASSETS.............. 89,214 253 115,295 327
INCOME AND WITHHOLDING TAX ADVANCES.................... 780,264 2,210 704,969 1,997
------------ -------- ---------- -------
TOTAL CURRENT ASSETS................................... 71,860,521 203,570 75,301,098 213,318
------------ ------- ---------- -------
INVESTMENT IN UNCONSOLIDATED AFFILIATE......................... 75,806 215 - -
PROPERTY AND EQUIPMENT, NET.................................... 3,475,745 9,846 4,316,060 12,227
BROADCAST, TRANSMISSION AND PRINTING EQUIPMENT
UNDER CAPITAL LEASES, NET................................... 1,649,742 4,674 1,520,246 4,306
DEFERRED CHARGES, NET.......................................... 1,677,084 4,751 1,563,717 4,430
PROGRAMMING COSTS, EXCLUDING CURRENT PORTION................... 4 7,652,672 21,679 7,991,144 22,638
OTHER RECEIVABLE LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS
AND FAIR VALUE OF GRD 480,000 IN 1999 AND
GRD 572,050 AT JUNE 30, 2000................................ 272,998 773 176,448 500
DUE FROM RELATED PARTY......................................... 3 3,276,667 9,282 3,528,595 9,996
ADVANCES TO RELATED PARTIES.................................... 3 173,137 490 188,137 533
INTANGIBLE ASSETS, NET......................................... 5 970,561 2,749 1,001,018 2,836
DEFERRED TAX ASSETS............................................ 7 396,702 1,124 319,089 904
Other assets................................................... 6 137,849 391 3,145,773 8,911
------------ ------- ---------- -------
Total assets............................................... 91,619,484 259,544 99,051,325 280,599
============ ======= ========== =======
</TABLE>
Exchange rate for the convenience translation of the December 31, 1999 and June
30, 2000 balances is GRD 353.00 To $1.00.
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
ANTENNA TV S.A.
CONSOLIDATED BALANCE SHEETS
As of December 31, 1999 and June 30, 2000
(In thousands of drachmae and U.S. dollars, except earnings per share)
<TABLE>
<CAPTION>
Unaudited
December 31, June 30,
----------------------- ----------------------
Notes 1999 1999 2000 2000
----- ---- ---- ---- ----
(GRD) ($) (GRD) ($)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
Current liabilities:
BANK OVERDRAFTS AND SHORT-TERM BORROWINGS........... 3,278,111 9,287 4,926,416 13,956
CURRENT PORTION OF OBLIGATIONS UNDER CAPITAL LEASES. 385,856 1,093 354,112 1,003
TRADE ACCOUNTS, NOTES AND CHEQUES PAYABLE........... 9,793,645 27,744 8,339,180 23,624
PROGRAM LICENSE PAYABLE............................. 2,538,945 7,192 2,381,808 6,747
PAYABLE TO RELATED PARTIES.......................... 3 68,823 195 - -
CUSTOMER ADVANCES................................... 327,370 927 220,520 625
ACCRUED INTEREST.................................... 1,411,003 3,997 1,475,171 4,179
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES...... 4,184,880 11,855 3,923,583 11,115
INCOME TAXES PAYABLE................................ 237,525 673 77,954 221
DEFERRED TAX LIABILITY.............................. 7 1,965,298 5,567 3,603,600 10,208
CURRENT PORTION OF OTHER LONG-TERM LIABILITY........ 1,003,116 2,842 884,166 2,504
------------- ------- ---------- -------
TOTAL CURRENT LIABILITIES....................... 25,194,572 71,372 26,186,510 74,182
------------- ------- ---------- -------
LONG-TERM LIABILITIES:
LONG-TERM DEBT...................................... 8 36,479,831 103,342 39,072,205 110,686
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES.......... 704,971 1,997 621,157 1,760
DEFERRED TAX LIABILITY.............................. 7 1,599,096 4,530 2,258,071 6,398
OTHER LONG-TERM LIABILITY........................... 532,483 1,509 106,483 302
PAYABLE TO RELATED PARTIES.......................... 3 185,000 524 185,000 524
EMPLOYEE RETIREMENT BENEFITS........................ 520,832 1,475 544,678 1,543
LONG-TERM PROVISIONS................................ 203,270 576 248,592 704
------------- ------- ---------- -------
TOTAL LIABILITIES............................... 65,420,055 185,325 69,222,696 196,099
------------- ------- ---------- -------
MINORITY INTERESTS...................................... 650,969 1,844 645,760 1,829
------------- ------- ---------- -------
SHAREHOLDERS' EQUITY:
SHARE CAPITAL....................................... 1,984,944 5,623 1,984,944 5,623
ADDITIONAL PAID-IN CAPITAL.......................... 28,714,904 81,345 28,714,904 81,345
ACCUMULATED (DEFICIT)............................... (5,151,388) (14,593) (1,516,979) (4,297)
------------- ------- ---------- -------
TOTAL SHAREHOLDERS' EQUITY...................... 25,548,460 72,375 29,182,869 82,671
------------- ------- ---------- -------
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... 91,619,484 259,544 99,051,325 280,599
============= ======= ========== =======
</TABLE>
Exchange rate for the convenience translation of the December 31, 1999 and June
30, 2000 balances is GRD 353.00 to $1.00.
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ANTENNA TV S.A.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Six Months Ended June 30, 2000
(In thousands of drachmae)
<TABLE>
<CAPTION>
Accumulated (Deficit) Retained
Earnings
---------------------------------------
Legal,
Tax Accumulated
Additional Free and (Deficit)
Share Paid-in Other Retained
Capital Capital Reserves Earnings Total Grand Total
------- ------- -------- -------- ----- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1999................ 1,984,944 28,714,904 2,852,605 (8,003,993) (5,151,388) 25,548,460
Net income for the six months (unaudited) - - - 3,634,409 3,634,409 3,634,409
--------- ---------- --------- --------- --------- ----------
BALANCE, JUNE 30, 2000 (UNAUDITED)........ 1,984,944 28,714,904 2,852,605 (4,369,584) (1,516,979) 29,182,869
========= ========== ========= ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ANTENNA TV S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1999 and 2000
(In thousands of drachmae and U.S. dollars)
<TABLE>
<CAPTION>
Unaudited Six Months Ended June 30
---------------------------------------------
1999 2000
---- -----------------------
(GRD) (GRD) ($)
<S> <C> <C> <C>
Cash flows from operating activities
Net income...................................................... 3,294,735 3,634,409 10,296
Adjustments to reconcile net income to net cash
Deferred income taxes......................................... 2,043,183 2,377,284 6,735
Minority interest in loss of consolidated entity.............. - (5,209) (15)
Equity in net income of unconsolidated affiliate.............. (14,899) (2,677) (8)
Amortization of debt issuance expenses........................ 169,175 113,367 321
Amortization of premium on forward contract and
loss on option............................................. 1,224,719 - -
Depreciation of property and equipment and capital leases
and amortization of programming costs, goodwill and other
intangibles................................................ 6,577,249 7,325,946 20,753
Provision for other long-term liabilities..................... 15,000 45,332 129
Provision for employee retirement benefits.................... 22,000 20,096 57
Change in current assets and liabilities
(Increase) in accounts and other receivable............... (4,102,041) (7,387,630) (20,928)
(Increase) in due from/to related parties................. (1,155,047) (548,768) (1,555)
(Increase) in programming costs........................... (6,753,431) (7,319,485) (20,735)
(Increase) in prepaid and licensed programming expenditures (19,642) (255,203) (723)
(Decrease) in trade accounts, notes and cheques payable... (1,160,499) (1,518,458) (4,301)
(Decrease) in licensed program payable.................... (389,689) (157,139) (445)
(Increase) in inventories................................. (145,923) (380,072) (1,077)
(Decrease) in accrued expenses and other liabilities...... (5,973,945) (787,843) (2,232)
Increase (decrease) in income taxes payable............... 4,185 (272,593) (772)
Other, net................................................ (315,343) (127,396) (361)
---------- ---------- ------
Total adjustments.................................... (9,974,948) (8,880,448) (25,157)
---------- ---------- ------
Net cash (used) in operating activities............................ (6,680,213) (5,246,039) (14,861)
---------- ---------- ------
Cash flows from investing activities
Acquisition of affiliated companies............................. (10,040,283) - -
Deposit for the right of acquisition............................ - (3,000,000) (8,499)
Acquisition of subsidiary, net of cash.......................... - (55,749) (158)
Dividends received.............................................. - 70,890 201
Purchase of fixed assets........................................ (278,041) (1,247,791) (3,535)
---------- ---------- ------
Net cash (used) in investing activities............................ (10,318,324) (4,232,650) (11,991)
---------- ---------- ------
Cash flows from financing activities
Issuance of common shares....................................... 25,270,404 - -
Redemption of Senior Notes...................................... (1,185,994) - -
(Decrease) increase in bank overdrafts and
short term borrowings, net................................... (174,641) 1,648,305 4,669
(Increase) in restricted cash................................... (195,105) 183,589 520
Repayments of capital lease obligations......................... (82,357) (115,558) (327)
---------- ---------- ------
Net cash provided by financing activities.......................... 23,632,307 1,716,336 4,862
--------- --------- ------
Effect of exchange rate changes on cash............................ 3,565,845 2,592,374 7,344
---------- ---------- ------
Increase (decrease) in cash........................................ 10,199,615 (5,169,979) (14,646)
Cash at beginning of year.......................................... 11,300,087 31,772,162 90,006
---------- ---------- ------
Cash at end of year................................................ 21,499,702 26,602,183 75,360
========== ========== ======
Supplemental disclosure of cash flow information:
Cash paid for interest........................................ 1,402,444 2,064,854 5,849
Cash paid for income taxes.................................... - 159,541 452
</TABLE>
Exchange rate for the convenience translation of the June 30, 2000 balances is
GRD 353.00 to $1.00.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ANTENNA TV S.A.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements and related notes at June 30,
2000 and for the three and six months ended June 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 six months ended June 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: 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.
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.
6
<PAGE>
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 66,416 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 March 2, 2000, the Company entered into an agreement with MEAGA
S.A., a Greek company listed on the Athens Stock Exchange, to acquire
approximately 70% of MEAGA, subject to the completion of due diligence by
Antenna and receipt of regulatory approvals and consents. In connection with
this transaction, MEAGA will sell its existing businesses to third party
purchasers and the proceeds will be applied to repay all of its outstanding
indebtedness. As a result, just prior to the acquisition, MEAGA will have no
asssets or liabilities. In exchange for its interest in MEAGA, the Company will
transfer stakes in four of its subsidiaries, Antenna Radio, Antenna Spoudastiki,
Audiotex and Daphne, to MEAGA. Following the completion of the acquisition, the
assets and liabilities of MEAGA will be comprised of histroical book values of
the businesses contributed by Antenna. The consolidated financial statements of
Antenna will reflect a charge to recognize the cost of the disposition of the
interest transferred to the minority shareholders, and a corresponding
recognition of a minority interest in the consolidated balance sheet. Regulatory
approvals and consents for this transaction have not yet been obtained.
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.
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 six months ended June 30, 1999 and 2000 totalled GRD
113 million and GRD 113 million respectively, and is included in interest
expense in the accompanying unaudited consolidated statements of operations for
the six months ended June 30, 1999 and 2000.
7
<PAGE>
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 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 261 million was recognized for the three months
ended June 30, 1999 and GRD 783 million was recognized for the six months ended
June 30, 1999. There was no amortization for the three month and six months
ended June 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 accounting
period with the resulting gain or loss being reflected in the consolidated
statements of operations. The mark to market adjustment of the option for the
three months and six months ended June 30, 1999 of GRD 109 million and 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 months and six months ended June 30, 2000 because the option
matured on May 15, 1999.
Accounting by Producers or Distributors of Films
The AICPA issued Statement of Position 00-2, "Accounting by Producers
or Distributors of Films," in June 2000, and it is in effect for fiscal years
beginning after December 15, 2000, with earlier application encouraged. 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. The
Company has not yet determined the impact that this statement will have on its
financial statements.
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 June 30, 2000, which was GRD
353.00 to $1.00. The convenience translations should not be construed as
representations that the drachmae 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.
8
<PAGE>
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
favourable 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 June 30, 2000
---------------------- ----------------------
(in thousands)
<S> <C> <C>
Accounts Receivable
Current:
Antenna Satellite TV (USA) Inc. ............. 1,882,116 2,197,216
Audiotex S.A................................. 76,208 -
Epikinonia EPE .............................. 314,172 142,858
Antenna Satellite Radio...................... 58,655 76,995
Antenna TV Ltd. (Cyprus)..................... 938,770 908,114
Catalogue Auctions Hellas S.A................ 30,439 -
---------------------- ---------------------
3,300,360 3,325,183
====================== =====================
Long-term:
Antenna Satellite TV (USA) Inc. ............. 3,276,667 3,528,595
---------------------- ---------------------
Advances
Current:
Epikinonia EPE .............................. - 19,000
Catalogue Auctions Hellas S.A. .............. 156,660 164,229
---------------------- ---------------------
156,660 183,229
---------------------- ---------------------
Long-term:
Antenna TV Ltd. (Cyprus)..................... 120,979 120,979
Epikinonia Ltd............................... 34,158 34,158
JVFM - Epikinonia............................ 18,000 33,000
---------------------- ---------------------
173,137 188,137
====================== =====================
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
December 31, Unaudited
1999 June 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
====================== =====================
</TABLE>
Unaudited revenue from related parties:
Six Months Ended
June 30,
-----------------------
1999 2000
-----------------------
(in thousands)
Epikinonia Ltd. (Production facilities and
technical and administrative services)............ 208,267 274,000
Antenna Satellite TV (Usa) Inc. (License Fees)....... 511,822 147,305
Antenna Satellite Radio (Other)...................... 16,081 18,235
Antenna TV Ltd. (Cyprus) (Royalties)................. 223,423 249,438
--------- -------
959,593 688,978
Audiotex (Related Party Commission Income)........... 230,972 47,875
--------- -------
1,190,565 763,853
========= =======
4. PROGRAMMING COSTS
The following table sets forth the components of the programming costs,
net of amortization:
December 31, Unaudited
1999 June 30, 2000
------------ -------------
(in thousands)
Produced programming....................... 13,929,446 14,774,727
Purchased sports rights.................... 1,861,640 1,618,010
Licensed program rights.................... 2,016,979 2,118,670
Prepaid license program rights............. 845,979 1,047,031
Prepaid produced programs and sports....... 822,796 775,256
---------- ----------
19,476,840 20,333,694
Less: current portion...................... (11,824,168) (12,342,550)
---------- ----------
7,652,672 7,991,144
========== ==========
5. INTANGIBLES
December 31, Unaudited
1999 June 30, 2000
------------ -------------
(in thousands)
Goodwill..................... 786,561 852,977
Magazine rights ............. 200,000 200,000
------- ---------
986,561 1,052,977
Accumulated amortization..... (16,000) (51,959)
------- ---------
970,561 1,001,018
======= =========
10
<PAGE>
6. OTHER ASSETS
Other assets are analyzed as follows:
<TABLE>
<CAPTION>
December 31, Unaudited
1999 June 30, 2000
------------ -------------
(in thousands)
<S> <C> <C>
Advance for the right to acquire an interest in
Maedonia TV........................................ - 3,000,000
Guarantee deposits................................... 137,849 145,775
------- ---------
137,849 3,145,775
======= =========
</TABLE>
On February 24, 2000, the Company advanced GRD 3 billion in exchange
for the right to acquire a controlling interest in Macedonia 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 Macedonia 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.
11
<PAGE>
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 June 30, 2000 are summarized below (the tax rate in effect at
December 31, 1999 and June 30, 2000 was 40%):
Unaudited
December 31, June 30,
1999 2000
---------- ---------
(in thousands)
Deferred tax liabilities
Intangible and tangible assets................ 200,000 186,000
Programming costs............................. 4,250,918 6,640,345
Reserves...................................... 430,348 430,348
Reserves taxed in a special way............... 233,826 233,826
Deferred charges.............................. 299,383 340,547
Leased assets................................. 519,016 474,220
Deferred interest on finance leases........... 5,936 2,450
Customer advances and accounts payable........ 528,673 513,044
Accrued expenses and other liabilities........ 29,359 54,728
---------- ---------
Gross deferred tax liabilities................... 6,497,459 8,875,508
---------- ---------
Deferred tax assets
Property and equipment........................ 32,718 31,305
Start up costs................................ 1,134,659 1,093,351
Long-term liability........................... 17,600 16,600
Long-term lease liability..................... 165,265 131,068
Short-term lease liability.................... 130,962 123,565
Long-term receivables......................... 1,209,309 1,229,309
Deferred revenue ............................. 5,000 3,600
Accounts receivable........................... 555,788 508,734
Employee retirement benefits.................. 208,333 216,371
Other assets.................................. 407,126 524,721
Accrued expenses and other provisions......... 562,945 554,240
Net operating losses.......................... 93,350 93,350
---------- ---------
Gross deferred tax assets........................ 4,523,055 4,526,214
---------- ---------
Less: valuation allowance........................ (1,193,288) (1,193,288)
---------- ---------
Net deferred tax (liability)..................... (3,167,692) (5,542,582)
========== =========
Long-term receivables give rise to a tax asset principally due to
certain long-term agreements that have not satisfied all of the revenue
recognition criteria of SFAS No. 53. Such agreements, however, are taxable by
the local Greek authorities.
The classification of deferred income taxes in the accompanying balance
sheets is as follows:
December 31, Unaudited
1999 June 30, 2000
---------- --------------
(in thousands)
Net current deferred tax liability............. (1,965,298) (3,603,600)
========= =========
Net non-current deferred tax liability......... (1,599,096) (2,258,071)
========= =========
Net non-current deferred tax assets............ 396,702 19,089
========= =========
12
<PAGE>
The provision for income taxes reflected in the accompanying statements
of operation is analyzed as follows:
Unaudited Three Months Unaudited Six Months
Ended June 30, Ended June 30,
----------------------- --------------------
1999 2000 1999 2000
----------------------- --------------------
(in thousands) (in thousands)
Current.................... 5,687 132,285 43,501 177,266
Deferred income taxes...... 1,454,488 1,915,880 2,043,183 2,374,890
--------- --------- --------- ---------
Provision income taxes..... 1,460,175 2,048,165 2,086,684 2,552,156
========= ========= ========= =========
The reconciliation of the provision for income taxes to the amount
determined by the application of the Greek statutory tax rate of 40% in 1998 and
1999 to pre-tax income is summarized as follows:
<TABLE>
<CAPTION>
Unaudited Three Months Unaudited Six Months
Ended June 30, Ended June 30,
-------------------------- -----------------------
1999 2000 1999 2000
----------- --------- --------- ---------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Tax provision at statutory rate 1,594,990 1.973,046 2,152,568 2,474,626
Goodwill amortization.................. - 4,958 - 9,408
Interest income........................ (95,523) (63,795) (134,880) (113,427)
Disallowed prior period expenses and non-
deductible general expenses............ 101,951 108,958 161,181 137,453
(Income) loss not subject to income tax (28,243) 24,998 20,815 44,096
Change in valuation allowance.......... (113,000) - (113,000) -
--------- --------- --------- ---------
1,460,175 2,048,165 2,086,684 2,552,156
========= ========= ========= =========
</TABLE>
Interest income is taxed at a lower rate (15%) than operating income.
Disallowed prior period expenses relate to invoices for goods or services that
were not received prior to the preparation of the tax returns and that relate to
prior year expenses (i.e. invoices received in February that relate to services
rendered in December of prior year). Non-deductible general expenses relate
primarily to certain car, meals and entertainment expenses.
In Greece, amounts reported to the tax authorities are provisional
until such time as the books and records of the entity are inspected by the tax
authorities. Greek tax laws and related regulations are subject to
interpretation by the tax authorities. The Company has been audited by the tax
authorities up to 1992. Management believes that the amounts accrued will be
sufficient to meet its tax obligations.
The ultimate outcome of additional tax assessments may vary from the
amounts accrued, but management believes that any additional tax liability over
and above the amount accrued would not have a material adverse impact on the
Company's results of operations or financial position.
The deferred income taxes relate to the temporary differences between
the book value and tax basis of assets and liabilities. Significant components
of the Company's deferred tax liabilities and assets are analyzed above.
13
<PAGE>
8. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
Unaudited
December 31, June 30,
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 39,072,205
========== ==========
</TABLE>
Interest expense relating to the Senior Notes for the six months ended
June 30, 1999 and 2000 totalled GRD 1,574 million and GRD 1,793 million,
respectively, and is included in interest expense in the accompanying
consolidated statements of operations.
On March 19, 1999 and March 25, 1999, the Company repurchased GRD 447
million ($1.5 million) and GRD 739 million ($2.4 million), respectively, of the
Senior Notes, with accrued interest of GRD 17 million ($0.05 million) to the
date of repurchase. The early extinguishment of the Senior Notes resulted in a
charge of GRD 19 million ($0.06 million) consisting of the following:
Unaudited Six Months
Ended June 30, 1999
--------------------
(in thousands)
Discount on prepayment of Senior Notes....................... 36,890
Write-off of related unamortized debt issuance costs......... (55,809)
-------
(18,919)
=======
The indebtedness evidenced by the Senior Notes constitutes a general
unsecured senior obligation of the Company and ranks pari passu in right of
payment with all other senior indebtedness and senior in right of payment to all
subordinated indebtedness of the Company. The indenture with respect to the
Senior Notes contains certain covenants and restrictions that, among other
things, limit the type and amount of additional indebtedness that may be
incurred by the Company and impose certain limitations on investments, loans and
advances, sales or transfers of assets, dividends and other payments, the
ability of the Company to enter into sale-leaseback transactions, certain
transactions with affiliates and certain mergers.
14
<PAGE>
9. FOREIGN EXCHANGE (LOSSES)
Foreign exchange (losses) included in the consolidated statements of
operations are analyzed as follows:
<TABLE>
<CAPTION>
Unaudited Three Months Unaudited Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
1999 2000 1999 2000
------------------------ ------------------------
(in thousands) (in thousands)
<S> <C> <C>
Realized loss on forward contract..................... (2,777,096) -- (2,777,096) --
Foreign exchange gain on forward contract representing
difference between balance sheet rate and forward rate
(US$)............................................ 2,539,356 -- 4,605,000 --
Amortization of the premium on forward contract....... (261,000) -- (783,000) --
Mark to market adjustment on option................... (109,135) -- (441,719) --
Unrealized Foreign exchange gain (loss) on Senior Note (1,069,382) (161,052) (3,565,845) (2,592,374)
Unrealized Foreign exchange gain on cash, receivables and payables
denominated in foreign currencies (US$) and realized gains
(losses) on transactions......................... 1,059,271 (50,976) 2,434,270 971,677
--------- ------- --------- ---------
(617,986) (212,028) (528,390) (1,620,697)
========= ======= ======== =========
</TABLE>
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 Six Months Ended June 30, 1999
----------------------------------------------------------------------------------------
Television Radio Pay Journalism
Television School
------------ ------- ---------- ----------
Elimination of
Antenna TV Antenna Pacific Antenna related party
(Greece) Radio Broadcast Spoudastiki revenue/ Total
(Greece) (Australia) (Greece) expenses/assets Consolidated
------------ -------- ----------- ----------- --------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Advertising revenue................... 17,396,555 1,060,122 -- -- -- 18,456,677
Related party sales .................. 1,339,020 20,454 -- -- (399,881) 959,593
Other revenue......................... 107,896 4,163 133,066 123,635 -- 368,760
---------- --------- ------- ------- ---------- ----------
Total revenues........................ 18,843,471 1,084,739 133,066 123,635 (399,881) 19,785,030
Depreciating and amortization......... 290,591 22,827 17,884 2,000 -- 333,302
Amortization of programming costs..... 6,243,947 -- -- -- -- 6,243,947
---------- --------- ------- ------- ---------- ----------
Operating income (loss)............... 7,251,583 407,907 (41,052) 15,044 (256,333) 7,377,149
Equity in net income in unconsolidated
affiliate .......................... 14,898 -- -- -- -- 14,898
Related party commission income ...... 230,972 -- -- -- -- 230,972
Interest expense, net................. (1,168,706) (96,514) (538) -- 25,361 (1,240,397)
Foreign exchange (losses), net........ (496,012) (21,929) (10,449) -- -- (528,390)
Other income, (expense), net.......... (480,236) 7,423 -- -- -- (472,813)
---------- --------- ------- ------- ---------- ----------
Income (loss) before tax ............. 5,352,499 296,887 (52,039) 15,044 (230,972) 5,381,419
Net income (loss) .................... 3,053,343 283,887 (52,039) 9,544 -- 3,294,735
---------- --------- ------- ------- ---------- ----------
Total assets as June 30, 1999......... 84,122,282 1,819,098 556,815 137,581 (11,319,642) 75,316,134
========== ========= ======= ======= =========== ==========
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Unaudited Six Months Ended June 30, 2000
---------------------------------------------------------------------------------------
Pay Journalism
Television Radio Television School Magazines
---------------------------------------------------------------------------------------
Antenna Pacific Antenna Daphne
Antenna TV Radio Broadcast Spoudastiki Communications Audiotex
(Greece) (Greece) (Australia) (Greece) (Greece) (Greece)
---------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Advertising revenue................. 19,767,205 1,094,330 -- -- 893,377 --
Related party sales ................ 1,048,525 22,816 -- -- 6,250 --
Publication revenue................. -- -- -- -- 3,711,627 --
Other revenue....................... 151,557 19,888 67,065 130,932 591,443 414,806
---------- --------- ------- ------- ---------- -------
Total revenues...................... 20,967,287 1,137,034 67,065 130,932 5,202,697 414,806
Depreciating and amortization....... 331,294 23,181 17,941 6,040 199,031 7,105
Amortization of programming costs... 6,717,834 -- -- 0 -- --
Operating income (loss)............. 8,432,368 371,475 22,057 (65,453) 317,630 61,218
Equity in net income in unconsolidated
affiliate ......................... 2,677 -- -- -- -- --
Related party commission income..... 47,875 -- -- -- -- --
Interest expense, net............... (611,154) (41,660) (3,062) (26) (311,526) 115
Foreign exchange gains (losses), net (1,463,333) (28,647) (129,235) -- 518 --
Other income (expense), net (1).... (390,216) 140 -- (13) (25,607) --
Minority interest in loss of unconsolidated
subsidiary, net................... -- -- -- -- 5,209 --
------------- --------- ------- ------- ---------- -------
Income (loss) before tax ........... 6,018,217 301,307 (110,240) (65,492) (13,775) 61,333
Net income (loss) .................. 3,579,246 179,278 (110,240) (40,802) (10,631) 34,457
============= ========= ======= ======= ========== =======
Total assets as June 30, 2000....... 100,043,031 2,244,997 419,472 110,598 10,311,800 536,731
============= ========= ======= ======= ========== =======
------------------------
(1) Included in Other income (expense), net are start-up costs related to the
direct-to-home television business amounting to GRD 373 million.
</TABLE>
Elimination of
related party
revenue/ Total
expenses/assets Consolidated
--------------- ------------
Advertising revenue................. -- 21,754,912
Related party sales ................ (388,613) 688,978
Publication revenue................. -- 3,711,627
Other revenue....................... -- 1,375,691
---------- ----------
Total revenues...................... (388,613) 27,531,208
Depreciating and amortization....... 23,520 608,112
Amortization of programming costs... -- 6,717,834
Operating income (loss)............. (48,498) 9,090,797
Equity in net income in unconsolidated
affiliate ......................... -- 2,677
Related party commission income..... -- 47,875
Interest expense, net............... 43,713 (923,600)
Foreign exchange gains (losses), net -- (1,620,697)
Other income (expense), net (1).... -- (415,696)
Minority interest in loss of unconsolidated
subsidiary, net................... -- 5,209
---------- ----------
Income (loss) before tax ........... (4,785) 6,186,565
Net income (loss) .................. 3,101 3,634,409
========== ==========
Total assets as June 30, 2000....... (14,615,304) 99,051,325
========== ==========
------------------------
(1) Included in Other income (expense), net are start-up costs related to the
direct-to-home television business amounting to GRD 373 million.
16
<PAGE>
Information with respect to geographical regions is as follows:
<TABLE>
<CAPTION>
Unaudited Three Months Unaudited Six Months Ended
Ended June 30, June 30,
----------------------------------------------------
1999 2000 1999 2000
----------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Revenue:
Domestic....................................... 11,067,056 15,695,247 18,916,719 27,022,166
International:
Related parties ......................... 415,080 278,652 735,245 441,978
Third parties............................ 89,853 42,275 133,066 67,064
---------- ---------- ---------- ----------
11,571,989 16,016,174 19,785,030 27,531,208
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1999
------------------------------------------------------------------------------------------
Pay Journalism
Television Radio Television School Magazines
------------------------------------------------------------------------------------------
Antenna Pacific Antenna Daphne
Antenna Tv Radio Broadcast Spoudastiki Communications Total
(Greece) (Greece) (Australia) (Greece) (Greece) Consolidated
------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Long-lived assets:
Domestic............................ 9,801,781 114,029 -- 21,751 2,486,544 12,424,105
International....................... -- -- 354,045 -- -- 354,054
</TABLE>
<TABLE>
<CAPTION>
Unaudited
as of June 30, 2000
-----------------------------------------------------------------------------------------------------------
Journalism
Television Radio Pay Television School Magazines
-----------------------------------------------------------------------------------------------------------
Pacific Antenna Daphne
Antenna Tv Antenna 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........... 10,812,964 157,366 -- 20,818 2,465,201 34,988 13,491,337
International...... -- -- 336,113 -- -- -- 336,113
</TABLE>
17
<PAGE>
11. OTHER (EXPENSES)
Other expense, net is analyzed as follows:
<TABLE>
<CAPTION>
Unaudited Three Months Unaudited Six Months
Ended June 30, Ended June 30,
-------------------------------------------------
1999 2000 1999 2000
-------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Start-up costs related to direct-to-home
business...................................... (187,102) (373,350) (444,102) (373,350)
Charge related to early extinguishment of
Senior Notes.................................. -- -- (18,919) --
Other, net .................................... 7,184 (35,108) (9,792) (42,346)
------- ------- ------- -------
(179,918) (408,458) (472,813) (415,696)
======= ======= ======= =======
</TABLE>
12. SUBSEQUENT EVENTS
On July 5, 2000, the Company repurchased GRD 3,454 million ($ 9.8
million) of the Senior Notes, with accrued interest of GRD 138 million ($0.39
million) to the date of repurchase. The early extinguishment of the Senior Notes
resulted in a gain of GRD 113 million ($0.32 million) consisting of the
following :
GRD
--------------
(in thousands)
Discount on prepayment of Senior Notes..................... (217,498)
Write-off of related unamortized debt issuance cost........ 104,552
-------
112,946
=======
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company derives a substantial portion of its revenue from the sale
of television advertising time (79.0% of total net revenue in the six months
ended June 30, 2000 and 93.3% in the six months ended June 30, 1999). While the
Company sells a significant portion of its available advertising time, it does
not sell all of it. The Company uses a variety of means to utilize unsold
advertising time in all time periods (commonly referred to as "dead time") to
improve its operating results and cash flows. Such other sources include
audiotext and infomercials. The Company derives revenue from its wholly-owned
subsidiary, Audiotex S.A. ("Audiotex"), which generates audiotext revenue, and
from an affiliated entity, Epikinonia Ltd., which produces infomercials and pays
Antenna for production and technical support.
The Company also derives revenue from royalties received from
syndicating its own programming. Such programming sales are made to a variety of
users, including a television network in Cyprus (operated by Antenna TV Ltd.
(Cyprus), a company in which the General Manager of the Company is General
Manager), and broadcasters targeting Greek-speaking viewers in the United
States, Canada and Australia. Sales of programming to Greek-speaking viewers are
made in the United States and Canada through an affiliated entity, Antenna
Satellite TV (USA) Inc., and in Australia through the Company's wholly-owned
subsidiary, Pacific Broadcast Distribution Ltd. ("Pacific Broadcast"). In
addition, selected news footage is sold to other news broadcasters around the
world. The Company also expects to derive revenue from various other sources in
the future.
In October 1999, the Company acquired a 51% interest in Daphne
Communications S.A. ("Daphne"), a Greek publishing company, for total
consideration of approximately GRD 1.2 billion ($3.6 million) payable in the
form of advertising airtime on Antenna's television and radio networks. The
Company also derives revenue from the publication of a wide variety of Greek
magazines focusing on subjects ranging from style and fashion to parenting, from
politics to astrology and from entertainment to shipping and defense.
The Company's revenue fluctuates throughout the year, with advertising
revenue at its lowest level during the Company's third fiscal quarter
(approximately 9.6% of total net revenue in Fiscal 1999), and at its highest
level during the fourth fiscal quarter (approximately 32.3% of total net revenue
in Fiscal 1999).
Cost of sales includes the costs of acquiring foreign programming and
Greek features, and the cost of gathering, producing and broadcasting news.
Since the acquisition of Daphne in October 1999, cost of sales also includes
publication costs. Selling, general and administrative expenses ("SG&A")
includes payroll costs and sales, marketing and promotion costs, the broadcast
license fee and other operating and administrative expenses.
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,
19
<PAGE>
which have contracts limiting the Company to a specific number of broadcasts
during their term (usually two broadcasts during a two- or 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 the Company
determines 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.
The Company follows U.S. Financial Accounting Standards Board Statement
No. 53 Financial Reporting by Producers and Distributors of Motion Picture Films
("SFAS 53") regarding the amortization of programming production and acquisition
costs. Consequently, all direct and certain indirect production costs (other
than in respect of 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 the Company's financial condition and results of operations.
The AICPA issued Statement of Position 00-2, "Accounting by Producers
or Distributors of Films," in June 2000, and it is in effect for fiscal years
beginning after December 15, 2000, with earlier application encouraged. 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. The
Company has not yet determined the impact that this statement will have on its
financial statements.
An important component of the Company's strategy for maximizing
operating performance and long-term profitability is to continue making
investments in programming to build up its own programming library. It has
implemented this strategy over the past few years by significantly increasing
its programming expenditures. The Company retains all rights to the programming
in its library and believes that such rights may represent values in excess of
net book value. Such value is demonstrated by the advertising revenue that the
Company generates from rebroadcasting programming produced in prior years and
from programming syndicated to other networks, including, in each case,
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. The Company expects to continue to expand its 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.
In March 1999, the Company raised net proceeds of $86.5 million in an
initial public offering (the "IPO") of 7,700,000 American Depositary Shares
("ADSs"), representing 3,850,000 shares of its capital stock, nominal value GRD
100 per share. On May 6, 1999, the Company utilized a portion of the net
proceeds it received from the IPO to acquire the following interests: a 51%
interest in Audiotex (for a purchase price of $7.25 million); a 99.97% interest
in Antenna R.T. Enterprises ("Antenna Radio"), which owns Antenna FM (97.1 FM),
a combination news/talk and music radio station serving the greater Athens area
(for a purchase price of $16.25 million plus the assumption of approximately
$5.2 million of indebtedness); a 100% interest in Antenna Spoudastiki Ltd.
("Antenna Spoudastiki"), which operates a training center for journalists and
other media personnel (for a purchase price of $6.0 million); and a 100%
interest in Pacific Broadcast, which rebroadcasts the Company's programming in
Australia through a joint venture (for a purchase price of $3.5 million). Each
of the companies whose interests were acquired was
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previously affiliated with or controlled by members of the family of Mr. Minos
Kyriakou, the Company's Chairman and Chief Executive Officer. See Note 1 of
Notes to Financial Statements.
These business combinations were among companies under common control
and have been accounted for "as if" a pooling of interest had occurred for
periods subsequent to September 1, 1998, the date that the companies came under
common control for accounting purposes. Accordingly, the balance sheet as at
December 31, 1998 and the consolidated statements of operations, cash flows and
shareholders' equity for the year ended December 31, 1998 have been restated.
Because the business combinations were among companies under common control they
have been consolidated based upon their book value and historical results of
operations, respectively. The cash amounts paid for the companies acquired, in
excess of their book values, have been treated as a dividend to the selling
shareholders.
On February 7, 2000, the Company 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 are included from the date
of acquisition. Based on estimates of fair value, GRD 66,416 million has been
allocated to goodwill. The incremental increase in the royalty payment of 4.5%
for the next five years and the payment of a 12% royalty fee for an additional
five years represents the additional consideration payable for the acquired
interest and will be recorded as an additional element of the cost of the
acquired entity (i.e., goodwill) and amortized over 10 years. Audiotext's
revenues for the year ended December 31, 1999 were GRD 855 million. Assuming
revenues of the same amount over the next 10 years, the additional consideration
paid would be approximately GRD 706. However, the ultimate amount will only be
determined at the end of each period. The additional elements of cost will be
recorded when the contingency is resolved and the consideration is issuable.
On February 24, 2000, the Company advanced GRD 3 billion in exchange
for the right to acquire a controlling interest in Macedonia TV, one of the six
Greek commercial TV broadcasters with a nationwide license. This right on gives
Antenna the ability to acquire a 51% interest in Macedonia 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 advance is
reflected as a long-term asset on the consolidated balance sheet.
On March 2, 2000, the Company entered into an agreement with MEAGA
S.A., a Greek company listed on the Athens Stock Exchange, to acquire
approximately 70% of MEAGA, subject to the completion of due diligence by
Antenna and receipt of regulatory approvals and consents. In connection with
this transaction, MEAGA will sell its existing businesses to third party
purchasers and the proceeds will be applied to repay all of its outstanding
indebtedness. As a result, just prior to the acquisition, MEAGA will have no
asssets or liabilities. In exchange for its interest in MEAGA, the Company will
transfer stakes in four of its subsidiaries, Antenna Radio, Antenna Spoudastiki,
Audiotex and Daphne, to MEAGA. Following the completion of the acquisition, the
assets and liabilities of MEAGA will be comprised of histroical book values of
the businesses contributed by Antenna. The consolidated financial statements of
Antenna will reflect a charge to recognize the cost of the disposition of the
interest transferred to the minority shareholders, and a corresponding
recognition of a minority interest in the consolidated balance sheet. Regulatory
approvals and consents for this transaction have not yet been obtained.
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.
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The consolidated financial statements of the Company include all of its
significant majority-owned subsidiaries. Affiliated companies in which the
Company does not own a controlling interest or for which the minority
shareholders have significant veto rights over operating decisions
(participating rights requiring unanimous shareholder approval, including:
transactions in excess of GRD 20 million, operating budgets, senior management
positions, borrowing and amendments to contractual obligations) are accounted
for using the equity method.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2000 (unaudited)
Compared to Three Months Ended June 30, 1999 (unaudited)
Total net revenue increased GRD 4,444 million ($12.6 million), or
38.4%, from GRD 11,572 million ($32.8 million) in the three months ended June
30, 1999 to GRD 16,016 million ($45.4 million) in the three months ended June
30, 2000. This increase was attributable primarily to the addition of GRD 2,880
million ($8.2 million) of revenue from Daphne (primarily representing
publication revenue), and to a lesser extent, an underlying increase of GRD
1,385 million ($3.9 million) in advertising revenue and the addition of GRD 304
million ($0.86 million) of revenue from Audiotex (primarily representing
telephone services revenue), which was accounted for using the equity method
prior to February 7, 2000.
Advertising revenue, which comprised 80.1% of total net revenues for
the three months ended June 30, 2000, increased GRD 1,997 million ($ 5.6
million), or 18.4%, from GRD 10,833 million ($30.7 million) in the three months
ended June 30, 1999 to GRD 12,830 million ($36.3 million) in the three months
ended June 30, 2000. This increase principally reflected an underlying increase
in advertising revenue of GRD 1,385 million ($3.9 million), primarily as a
result of increases in volume. The total increase in advertising revenue also
reflected the addition of GRD 582 million ($1.6 million) of advertising revenue
from Daphne.
Related party revenue decreased GRD 165 million ($0.5 million), or
30.5%, from GRD 542 million ($1.5 million) in the three months ended June 30,
1999 to GRD 377 million ($1.0 million) in the three months ended June 30, 2000,
principally reflecting the decrease in programming fees paid by Antenna
Satellite.
Antenna earned publication revenue of GRD 1,766 million ($5.0 million)
in the three months ended June 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 847 million ($2.4 million), or 429%, from GDR 197
million ($0.6 million) in the three months ended June 30, 1999 to GRD 1,044
million ($3.0 million) in the three months ended June 30, 2000, principally as a
result of the addition of GRD 532 million ($1.5 million) of other revenue from
Daphne and the addition of GRD 304 million ($0.9 million) from Audiotex, which
was accounted for using the equity method prior to February 7, 2000.
Cost of sales increased GRD 2,217 million ($6.3 million), or 122%, from
GRD 1,823 million ($5.2 million) in the three months ended June 30, 1999 to GRD
4,040 million ($11.5 million) in the three months ended June 30, 2000. This
increase was attributable primarily to the addition of GRD 2,072 million ($5.9
million) of cost of sales from Daphne and, to a lesser extent, the addition of
GRD 84 million ($0.24 million) of cost of sales from Audiotex, which was
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accounted for using the equity method prior to February 7, 2000. The underlying
cost of sales increased GRD 19 million ($0.05 million) or 1% in the three months
ended June 30, 2000.
Selling, general and administrative expenses ("SG&A") increased GRD 814
million ($2.3 million), or 66.6%, from GRD 1,221 million ($3.5 million) in the
three months ended June 30, 1999 to GRD 2,035 million ($5.8 million) in the
three months ended June 30, 2000. This increase was attributable principally to
the addition of SG&A of GRD 450 million ($1.3 million) from Daphne. The
underlying SG&A expense increased 23.9% from GRD 1,077 million ($3.0 million) to
GRD 1,334 million ($3.8 million).
Amortization of programming costs increased GRD 463 million ($1.3
million), or 14.9%, from GRD 3,106 million ($8.8 million) in the three months
ended June 30, 1999 to GRD 3,569 million ($10.1 million) in the three months
ended June 30, 2000.
Depreciation increased GRD 62 million ($0.18 million), or 37%, from GRD
166 million ($0.47 million) in the three months ended June 30, 1999 to GRD 228
million ($0.65 million) in the three months ended June 30, 2000, of which GRD 35
million ($0.10 million) of this increase was attributable to the addition of
depreciation from Daphne.
Operating income increased GRD 889 million ($2.5 million), or 16.9%,
from GRD 5,256 million ($14.9 million) in the three months ended June 30, 1999
to 6,145 million ($17.4 million) in the three months ended June 30, 2000,
principally reflecting an increase in total net revenue during the period,
partially offset by an increase in cost of sales. The increase in operating
income also reflected the addition of operating income from Audiotex, which was
accounted for using the equity method prior to February 7, 2000 of GRD 184
million ($0.52 million) and from Daphne of GRD 322 million ($0.91 million).
Interest expense, net increased GRD 4 million ($0.01 million), or
0.72%, from GRD 555 million ($1.6 million) in the three months ended June 30,
1999 to GRD 559 million ($1.6 million) in the three months ended June 30, 2000,
reflecting an increase in gross interest expense during the period, principally
attributable to the addition of GRD 169 million ($0.48 million) of gross
interest expense from Daphne and an increase in underlying interest expense of
GRD 100 million ($0.28 million), partially offset by an underlying increase in
interest income resulting mainly from higher cash balances outstanding during
the three months ended June 30, 2000.
Foreign exchange losses decreased GRD 406 million ($1.2 million) from a
loss of GRD 618 million ($1.8 million) to a loss of GRD 212 million ($0.6
million), primarily reflecting strengthening in the translation of the drachma
against the U.S. dollar during the three months ended June 30, 2000.
Other expense, net increased GRD 229 million ($0.7 million), or 127%,
from GRD 180 million ($0.5 million) in the three months ended June 30, 1999 to
GRD 409 million ($1.2 million) in the three months ended June 30, 2000. The
increase was attributable principally to increased start-up costs associated
with the Company's investment in the direct-to-home television broadcast
business.
Equity in net income of unconsolidated affiliates decreased from GRD
0.48 million ($0.001 million) in the three months ended June 30, 1999 to zero in
the three months ended June 30, 2000, as a result of the acquisition of the
remaining interest in Audiotex, which was
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accounted for using the equity method prior to February 7, 2000. Related party
commission income decreased from GRD 86 million ($0.24 million) in the three
months ended June 30, 1999 to zero in the three months ended June 30, 2000, as a
result of the reclassification of revenue earned from Audiotex.
Provision for income taxes increased GRD 588 million ($1.7 million)
from GRD 1,460 million ($4.1 million) in the three months ended June 30, 1999 to
GRD 2,048 million ($5.8 million) in the three months ended June 30, 2000,
principally as a result of increased pre-tax profits. Of the increase in
provision for income taxes, GRD 414 million ($1.2 million) was attributable to
underlying provision for income taxes and GRD 105 million ($0.30 million) was
attributable to the addition of provision for income taxes for Antenna Radio.
Net income increased GRD 357 million ($1.0 million) from GRD 2,527
million ($7.2 million) in the three months ended June 30, 1999 to GRD 2,884
million ($8.2 million) in the three months ended June 30, 2000. The increase was
principally attributable to an increase in net revenues, partially offset by an
increase in cost of sales.
Six Months Ended June 30, 2000 (unaudited)
Compared to Six Months Ended June 30, 1999 (unaudited)
Total net revenue increased GRD 7,746 million ($22 million), or 39.2%,
from GRD 19,785 million ($56 million) in the six months ended June 30, 1999 to
GRD 27,531 million ($78 million) in the six months ended June 30, 2000. This
increase was attributable primarily to the addition of GRD 5,196 million ($14.7
million) of revenue from Daphne, and to a lesser extent, an underlying increase
in advertising revenue.
Advertising revenue, which comprised 79% of total net revenues for the
six months ended June 30, 1999, increased GRD 3,298 million ($9.3 million), or
17.9%, from GRD 18,457 million ($52.3 million) in the six months ended June 30,
1999 to GRD 21,755 million ($61.6 million) in the six months ended June 30,
2000. This increase principally reflected an underlying increase in advertising
revenue of GRD 2,371 ($6.7 million), primarily as a result of increases in
volume. The total increase in advertising revenue also reflected the addition of
GRD 893 million ($2.5 million) of advertising revenue from Daphne.
Related party revenue decreased GRD 271 million ($0.77 million), or
28.2%, from GRD 960 million ($2.72 million) in the six months ended June 30,
1999 to GRD 689 million ($1.95 million) in the six months ended June 30, 2000,
principally reflecting the decrease in programming fees paid by Antenna
Satellite.
Antenna earned publication revenue of GRD 3,712 million ($10.5 million)
in the six months ended June 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 1,007 million ($2.9 million), or 273%, from GRD 369
million ($1.0 million) in the six months ended June 30, 1999 to GRD 1,376
million ($3.9 million) in the six months ended June 30, 2000, principally as a
result of the addition of GRD 591 million ($1.7 million) of other revenue from
Daphne and GRD 415 million ($1.2 million) from Audiotex.
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Cost of sales increased GRD 4,306 million ($12.2 million), or 132.5%,
from GRD 3,250 million ($9.2 million) in the six months ended June 30, 1999 to
GRD 7,556 million ($21.4 million) in the six months ended June 30, 2000. This
increase was attributable primarily to the addition of GRD 3,855 million ($10.9
million) of cost of sales from Daphne and, to a lesser extent, an increase in
cost of sales of GRD 113 million ($0.32 million) from Audiotex, which was
accounted for using the equity method prior to February 7, 2000.
Selling, general and administrative expenses increased GRD 977 million
($2.8 million), or 37.9%, from GRD 2,581 million ($7.3 million) in the six
months ended June 30, 1999 to GRD 3,558 million ($10.1 million) in the six
months ended June 30, 2000. This increase was attributable principally to the
addition of SG&A of GRD 719 million ($2.0 million) from Daphne and to a lesser
extent, underlying SG&A of GRD 127 million ($0.36 million).
Amortization of programming costs increased GRD 474 million ($1.3
million) from GRD 6,244 million ($17.7 million) in the six months ended June 30,
1999 to GRD 6,718 million ($19.0 million) in the six months ended June 30, 2000.
Depreciation increased GRD 275 million ($0.78 million), or 82.5%, from
GRD 333 million ($0.94 million) in the six months ended June 30, 1999 to GRD 608
million ($1.72 million) in the six months ended June 30, 2000, of which GRD 218
million ($0.62 million) was attributable to the addition of depreciation from
Daphne.
Operating income increased GRD 1,714 million ($4.9 million), or 23.2%,
from GRD 7,377 million ($20.9 million) in the six months ended June 30, 1999 to
9,091 million ($25.8 million) in the six months ended June 30, 2000, principally
reflecting an increase in total net revenue during the period, partially offset
by an increase in cost of sales.
Interest expense, net decreased GRD 316 million ($0.9 million), or
25.5%, from GRD 1,240 million ($3.5 million) in the six months ended June 30,
1999 to GRD 924 million ($2.6 million) in the six months ended June 30, 2000,
reflecting an increase in interest income of GRD 794 million ($2.2 million)
principally as a result of higher cash balances outstanding during the six
months ended June 30, 2000, partially offset by the addition of GRD 319 million
($0.90 million) of interest expense from Daphne and the addition of GRD 220
million ($0.62 million) of underlying interest expense.
Foreign exchange losses increased GRD 1,093 million ($3.1 million) from
GRD 528 million ($1.5 million) to GRD 1,621 million ($4.6 million), primarily
reflecting loss resulting from the translation of the Senior Notes denominated
in US dollars partially offset by unrealized gains from the Company's US dollars
cash holdings and receivables/payables denominated in foreign currencies.
Other expense, net decreased GRD 57 million ($ 0.2 million), or 12.1%,
from a loss of GRD 473 million ($1.4 million) in the six months ended June 30,
1999 to a loss of GRD 416 million ($1.2 million) in the six months ended June
30, 2000.
Equity in net income of unconsolidated affiliate decreased from GRD 15
million ($0.04 million) in the six months ended June 30, 1999 to GRD 3 million
($0.001 million) in the six months ended June 30, 2000, as a result of the
acquisition of the remaining interest in Audiotex, which was accounted for using
the equity method prior to February 7, 2000.
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Related party commission income decreased from GRD 231 million ($0.65
million) in the six months ended June 30, 1999 to GRD 48 million ($0.14 million)
in the six months ended June 30, 2000, as a result of the reclassification as
related party commission income of revenue earned from Audiotex.
Provision for income taxes increased GRD 465 million ($1.3 million)
from GRD 2,087 million ($5.9 million) in the six months ended June 30, 1999 to
GRD 2,552 million ($7.2 million) in the six months ended June 30, 2000,
principally as a result of increased pre-tax profits.
Net income increased GRD 340 million ($0.96 million) from a net income
of GRD 3,295 million ($9.34 million) in the six months ended June 30, 1999 to
net income of GRD 3,634 million ($10.3 million) in the six months ended June 30,
2000, principally reflecting an underlying increase in operating income.
LIQUIDITY AND CAPITAL RESOURCES
The Company funds its operations, expenditures for programming, working
capital requirements and capital expenditures principally through a combination
of cash flow from operations and equity contributions. As of June 30, 2000, the
Company had approximately GRD 39,693 million ($112.4 million) of total debt
(long-term indebtedness and long-term obligations under capital leases). In
March 1999, the Company completed the IPO of 7,700,000 ADSs, representing
3,850,000 shares of its capital stock, nominal value GRD 100 per share. Of the
7,700,000 ADSs sold, 6,160,000 were sold by the Company for net proceeds of $
86.5 million and 1,540,000 were sold by a selling shareholder for net proceeds
of $ 14.4 million. On March 19, 1999 and March 25, 1999, the Company used a
portion of the net proceeds received by it from the IPO to repurchase GRD 447
million ($1.5 million) and GRD 739 million ($2.4 million), respectively, of its
outstanding Senior Notes. See Note 8 of Notes to Financial Statements. On May 6,
1999, the Company used a portion of the net proceeds received by it from the IPO
to complete the acquisition of interests in Antenna Radio, Antenna Spoudastiki,
Pacific Broadcast and Audiotex. See Note 1 of Notes to Financial Statements.
The Company's principal use of funds are expenditures for programming,
which expenditures totaled GRD 6,773 million ($19.2 million) in the six months
ended June 30, 1999 and GRD 7,575 million ($21.5 million) in the six months
ended June 30, 2000.
Operating Activities. Net cash used in operating activities was GRD
6,680 million ($18.9 million) in the six months ended June 30, 1999 compared to
GRD 5,246 million ($14.9 million) in the six months ended June 30, 2000.
Investing Activities. Net cash used in investing activities was GRD
10,318 million ($29.2 million) in the six months ended June 30, 1999, reflecting
the cost of the acquisition of interest in Antenna FM, Antenna Spoudastiki Ltd.,
Audiotex SA and Pacific Broadcast, and GRD 4,233 million ($11.9 million) in the
six months ended June 30, 2000, reflecting the cost of the right to acquire a
controlling interest in Macedonia TV and increased purchases of fixed assets
such as technical and office equipment.
Financing Activities. Net cash provided by financing activities was GRD
23,632 million ($66.9 million) in the six months ended June 30, 1999 compared to
GRD 1,716 million
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($4.9 million) in the six months ended June 30, 2000. The decrease in funds
provided by financing activities in 2000 principally reflects the fact that in
1999 the Company raised the proceeds of the IPO.
Distributable Reserves. The Company had distributable reserves in its
Greek statutory accounts of approximately GRD 472 million ($1.3 million). The
declaration of future dividends will be subject to the requirements of Greek
corporate law and the terms of the indenture with respect to the Senior Notes.
Other Long-term Liability. The Company has an outstanding liability to
the Pension Fund for Athens and Thessaloniki Newspaper Employees for advertiser
contributions. The amount is payable in monthly installments until April 30,
2002. An installment of approximately GRD 545 million ($1.5 million) was paid
during the six month period ended June 30, 2000.
YEAR 2000 AND EURO CONVERSION
The Company was aware of the issues associated with programming codes
in existing computer systems relating to the Year 2000 and similar dates. The
Year 2000 problem was pervasive and complex as virtually every computer
operation could be affected in some way by the rollover of the two digit year
value to 00 and similar problems may arise on other dates, such as December 31,
2000. The main issue was whether computer systems would properly recognize date
sensitive information when the date changes. Systems that did not property
recognize such information could generate erroneous data or cause a system to
fail. The Company has upgraded its management information system under the
direction of the Information Technology Department. The principal areas that
could be affected by such a problem was its computer network, customer billing
system and business systems (accounting, finance, advertising, marketing, human
resources, journalist support and transmission systems). The hardware and
operating systems related to its computer network and software applications
related to its business systems were Year 2000- compliant. The Company spent GRD
92 million ($0.3 million) upgrading its computer network. The Company did not
experience any Year 2000 problems.
The Company's revenues and expenses are denominated in drachmae and
dollars. Greece is not among the eleven members of the European Union whose
currencies became subject to conversion to the euro commencing January 1, 1999.
The Company is not party to any material contracts in which payment is expected
to be made in a currency which is scheduled to be converted to the euro. The
Company's upgraded management information system is 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, the Company does not believe inflation has had
a material effect on its results of operations or financial condition for the
periods presented. Greece experienced average annual rates of inflation of
10.9%, 8.9%, 8.2%, 5.6%, 4.8%, and 2.6% in the years 1994 through 1999,
respectively.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN EXCHANGE RISK MANAGEMENT
The Company's functional currency is the drachma but certain of its
revenue, operating costs and expenses are denominated in foreign currencies.
Transactions involving other currencies are converted into drachmae using the
exchange rates in effect at the time of the transactions. Assets and liabilities
denominated in other currencies are stated at the drachma equivalent using
exchange rates in effect at period-end. Non-drachma denominated revenue,
principally from licensing and distribution of programming outside Greece,
accounted for GRD 415 million ($1.2 million), or 1.5 %, of total net revenue in
the six month period ended June 30, 2000. The Company's non-drachma denominated
operating costs, principally foreign-produced programming invoiced in U.S.
dollars, accounted for 3.6% of total net revenue in the three month period ended
June 30, 2000. Non-drachma denominated indebtedness (primarily U.S. dollars)
totaled GRD 39,834 million ($113 million) at June 30, 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 the Company's operations
are conducted in Greece, the Company's operating results will depend to a
certain extent on the prevailing economic conditions in Greece. Furthermore, a
significant proportion of the Company's revenue is in drachmae. The Company
expects to increase modestly the level of non-drachma denominated revenue as
result of its strategy of increasing its sales of programming to Greek-speaking
audiences resident outside Greece and to other markets.
The Company hedges elements of its currency exposure through use of
such derivative instruments as forward exchange agreements and currency options,
though it might also consider interest rate swaps. The Company is currently
evaluating alternatives for future hedging opportunities. Derivatives involve,
to varying degrees, market exposure and credit risk. Market exposure means that
changes in interest rates or currency exchange rates cause the value of
financial instruments to decrease or increase or its obligations to be more or
less costly to settle. When used for risk management purposes, any gains or
losses on the derivatives will offset losses or gains on the asset, liability or
transaction being hedged. The Company has experienced net foreign exchange
losses in the past, and it could experience net foreign exchange losses in the
future to the extent that foreign exchange rates shift in excess of the risk
covered by hedging arrangements. Credit risk would arise in the event of
non-performance by a counterparty. The Company intends to minimize credit risk
by entering into contracts only with highly credit rated counterparties and
through internal limits and monitoring procedures.
The financial instruments to which the Company is a party are recorded
in the balance sheet at fair value unless, for accounting purposes, they meet
the criteria for a hedge of an identifiable foreign currency commitment. A
foreign exchange contract is considered a hedge of an identifiable foreign
currency commitment if: (i) the contract is designated, and effective, as a
hedge of a foreign currency commitment and (ii) the foreign currency commitment
is firm. Gains and losses on foreign exchange contracts meeting these criteria
are deferred and included in the measurement of the related foreign currency
transaction, unless it is estimated that the deferral would lead to recognition
of losses in a later period, in which case such losses are not deferred.
28
<PAGE>
The Company was party to an $87 million forward contract with the Royal
Bank of Scotland, to hedge its currency exposure on a portion of the principal
and interest payable of its U.S. dollar denominated debt. The term of the
contract covered the period from May 15, 1998 to May 15, 1999. The forward rate
was 334 drachmae to the dollar and the spot rate on the contract's effective
date was 310 drachmae to the dollar. The premium (representing the difference
between the spot rate on the contract's effective date and the forward rate),
aggregating GRD 2,088 million, was amortized over the term of the contract. Of
this amount, GRD 261 million was recognized for the three months ended June 30,
1999 and GRD 783 million was recognized for the six months ended June 30, 1999.
There was no amortization for the three months and the six months ended June 30,
2000 as the forward contract expired on May 15, 2000. In addition, foreign
exchange gains or losses on the Company's non-drachma denominated indebtedness
(currently, the Senior Notes) was offset by corresponding losses or gains on the
forward contract's notional amount.
The Company was party to an option agreement with the Royal Bank of
Scotland to sell $104 million at a rate of 280 drachmae to the dollar in May
1999. The option had a maturity date that coincided with the maturity of the
foreign exchange contract described above. The option was recorded on the
balance sheet at its market value and was marked to market each accounting
period with the resulting gain or loss being reflected in the statement of
operations. The mark to market adjustment of the option for the three months and
six months ended June 30, 1999 of GRD 109 million ($0.3 million) and GRD 442
million ($1.3 million), respectively, was recorded as part of the foreign
exchange loss in the statement of operations. There was no mark to market
adjustment of the option for the three months and six months ended June 30, 2000
because the option matured on May 15, 1999.
The following table sets forth the principal, cash flows and related
weighted average interest rates by expected maturity date of indebtedness of the
Company that may be sensitive to foreign currency exchange rate fluctuations:
<TABLE>
<CAPTION>
Financial Instrument Maturity (2007) Fair Value
------------------------------- -------------------- ---------------
(GRD) ($) (GRD) ($)
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Senior Notes ($111 million)..................... 39,072 111.1 32,716 92.7
Average interest rate........................... 9.76% --
</TABLE>
The average interest rate represents the stated interest rate of 9%
plus amortization of deferred issuance costs.
29
<PAGE>
INTEREST RATE RISK MANAGEMENT
The Company manages interest rate risk by financing non-current assets
and a portion of current assets with equity, long-term liabilities and long-term
debt with fixed interest rates.
The following table sets forth the principal, cash flows and related
weighted average interest rates by expected maturity date of indebtedness of the
Company that may be sensitive to interest rate fluctuations:
<TABLE>
<CAPTION>
Financial Instrument Maturity (2007) Fair Value
------------------------------- -------------------- ---------------
(GRD) ($) (GRD) ($)
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Senior Notes ($111 million)..................... 39,072 111.1 32,716 92.7
Average interest rate........................... 9.76% --
</TABLE>
The average interest rate represents the stated interest rate of 9%
plus amortization of deferred issuance costs.
30
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Use of Proceeds From Registered Securities
The Company's Registration Statement on Form F-1 (Registration No.
333-72247) with respect to the IPO became effective on March 3, 1999. The sale
of the ADSs in the IPO commenced on March 3, 1999 and closed on March 9, 1999.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
During the six months ended June 30, 2000, the Company used portions of
the IPO proceeds as follows: (i) the acquisition of the 49% interest in Audiotex
that it did not already own ($0.2 million); (ii) the acquisition of the right to
acquire a controlling interest in Macedonia TV ($8.6 million); and (iii) the
purchase of new office space ($1.7 million)
ITEM 5. OTHER INFORMATION
(a) Forward-Looking Statements
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), the Company is hereby
providing cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made in
this Quarterly Report. Any statements that express, or involve discussions as
to, expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of the words or phrases such
as "will likely result," "are expected to," "will continue," "is anticipated,"
"estimated," "intends," "plans," "projection" and "outlook") are not historical
facts and may be forward-looking and, accordingly, such statements involve
estimates, assumptions and uncertainties which could cause actual results to
differ materially from those expressed in the forward- looking statements.
Accordingly, any such statements are qualified in their entirety by reference
to, and are accompanied by, the factors discussed throughout this Quarterly
Report and in the Company's Annual Report on Form 20-F for the fiscal year ended
December 31, 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.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ANTENNA TV S.A.
(Registrant)
By: /s/ Nikolaos Angelopoulos
-------------------------------
Name: Nikolaos Angelopoulos
Title: Chief Financial Officer
Dated: August 2, 2000
32
