press-release-details

Central European Media Enterprises Ltd. Reports Results for the Third Quarter and Nine Months Ended September 30, 2016

October 25, 2016

THIRD QUARTER
- Net revenues increased 8% at constant rates to US$ 126.7 million -
- Operating income decreased 71% at constant rates to US$ 8.4 million -
- OIBDA more than doubled to US$ 18.0 million -

NINE MONTHS
- Net revenues increased 5% at constant rates to US$ 430.9 million -
- Operating income increased 22% at constant rates to US$ 60.0 million -
- OIBDA increased 31% at constant rates to US$ 88.8 million -

HAMILTON, Bermuda, Oct. 25, 2016 (GLOBE NEWSWIRE) -- Central European Media Enterprises Ltd. (“CME” or the “Company”) (NASDAQ:CETV) ( Prague Stock Exchange:CETV) today announced financial results for the three and nine months ended September 30, 2016.

Operational and financial highlights:

  • TV advertising revenues increased nearly 5% at constant rates in the first nine months of 2016, which included growth in the three largest markets, the Czech Republic, Romania and the Slovak Republic.
  • Carriage fees and subscription revenues increased 8% at constant rates in the first nine months of 2016 due primarily to growth in the number of subscribers, better channel offerings, and new channel launches.
  • Overall costs charged in arriving at OIBDA were flat at constant rates in the three and nine months ended September 30, 2016 as an increase in content costs was more than offset by savings in other costs.
  • OIBDA margin increased to 14% and 21% in the three and nine months ended September 30, 2016 from 7% and 16% in the same periods in 2015.
  • Operating income for the nine months ended September 30, 2016 increased 22% at constant rates. Excluding the reversal of non-cash charges in 2015 related to tax audits in Romania, operating results for the three and nine months ended September 30, 2015 were a loss of US$ 1.3 million and income of US$ 36.1 million, respectively.
  • Unlevered free cash flow for the nine months ended September 30, 2016 increased 44%, reflecting the improvement in OIBDA and lower capital expenditures, but cash flows from operations declined because we paid more interest in cash and elected to repay US$ 27.5 million of guarantee fees previously paid in kind.
  • Cash generated by the business and the year-on-year improvement in OIBDA reduced the net leverage ratio below seven times, so the cost of borrowing on approximately half of our debt will now decrease an additional 100 basis points to 9%.

Michael Del Nin, Co-Chief Executive Officer, commented: "These results are, on a relative basis, arguably the best we have seen all year. Due to the combination of robust revenue growth and effective cost control, we've more than doubled OIBDA in the quarter compared to the same period in 2015. We believe these results keep us well on track to deliver another full year of excellent financial performance."

Christoph Mainusch, Co-Chief Executive Officer, added: "Our results today reflect not just an improvement in profitability, but also better engagement with our audiences as the gap between us and our closest commercial competitor widened in five out of six markets during the third quarter. We believe we continue to provide the most efficient medium for advertisers to reach consumers in all countries in which we operate."

In this release we refer to several non-GAAP financial measures, including OIBDA, OIBDA margin, free cash flow and unlevered free cash flow. Please see “Non-GAAP Financial Measures” below for additional information, including definitions and reconciliations to  US GAAP financial measures.

Consolidated Results for the Three Months Ended September 30, 2016

Headline consolidated results for the three months ended September 30, 2016 and September 30, 2015 were:

(US$ 000's, except per share data) For the Three Months Ended September 30,
(unaudited) 2016   2015   % Actual   % Lfl (1)
Net revenues $ 126,706     $ 117,322       8.0 %     8.2 %
Operating income 8,384     28,853       (70.9 )%     (70.5 )%
Operating margin 6.6 %   24.6 %     (18.0 )p.p.     (17.7 )p.p.
OIBDA 18,014     8,353       115.7 %     120.7 %
OIBDA margin 14.2 %   7.1 %     7.1 p.p.     7.2 p.p.
Loss from continuing operations (19,823 )   (21,510 )     7.8 %     9.3 %
Fully diluted loss from continuing operations per share $ (0.14 )   $ (0.17 )     17.6 %     22.2 %
                               

Consolidated Results for the Nine Months Ended September 30, 2016

Headline consolidated results for the nine months ended September 30, 2016 and September 30, 2015 were:

(US$ 000's, except per share data) For the Nine Months Ended September 30,
(unaudited) 2016   2015   % Actual   % Lfl (1)
Net revenues $ 430,912     $ 410,289     5.0 %   4.8 %
Operating income 60,038     48,055     24.9 %   22.4 %
Operating margin 13.9 %   11.7 %   2.2 p.p.   2.0 p.p.
OIBDA 88,754     66,612     33.2 %   30.7 %
OIBDA margin 20.6 %   16.2 %   4.4 p.p.   4.1 p.p.
Loss on extinguishment of debt (150,158 )       NM (2)   NM (2)
Loss from continuing operations (201,766 )   (103,422 )   NM (2)   NM (2)
Fully diluted loss from continuing operations per share $ (1.42 )   $ (0.79 )   NM (2)   NM (2)
                       

(1) % Lfl (like-for-like) variance reflects the impact of applying the current period average exchange rates to the prior period revenues and costs.
(2) Number is not meaningful.

Teleconference and Audio Webcast Details

CME will host a teleconference and audio webcast to discuss its third quarter results on Tuesday, October 25, 2016 at 9 a.m. New York time ( 2 p.m. London and 3 p.m. Prague time). The audio webcast and teleconference will refer to presentation slides which will be available on CME's website at www.cme.net prior to the call.

To access the teleconference, U.S. and international callers may dial +1-646-254-3369 ten minutes prior to the start time and reference passcode 7983768. The conference call will also be audio webcasted via www.cme.net. It can be heard on iPads, iPhones and a range of devices supporting Android and Windows operating systems.

A digital audio replay of the webcast will be available for two weeks following the call at www.cme.net.

Forward-Looking and Cautionary Statements

This press release contains forward-looking statements. For all forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy or are otherwise beyond our control and some of which might not even be anticipated.  Forward-looking statements reflect our current views with respect to future events and because our business is subject to such risks and uncertainties, actual results, our strategic plan, our financial position, results of operations and cash flows could differ materially from those described in or contemplated by the forward-looking statements.

Important factors that contribute to such risks include, but are not limited to, those factors set forth under “Risk Factors” in our Quarterly Report on Form 10-Q for the period ended September 30, 2016 as well as the following: levels of television advertising spending and the rate of development of the advertising markets in the countries in which we operate; the impact of global economic conditions on our markets; the extent to which our liquidity constraints and debt service obligations restrict our business; our success in continuing our initiatives to diversify and enhance our revenue streams; our ability to make cost-effective investments in our television businesses, including investments in programming; our ability to develop and acquire necessary programming and attract audiences; our ability to refinance our existing indebtedness; changes in the political and regulatory environments where we operate and in the application of relevant laws and regulations; our exposure to additional tax liabilities; and the timely renewal of broadcasting licenses and our ability to obtain additional frequencies and licenses.

The foregoing review of important factors should not be construed as exhaustive. For a more detailed description of these uncertainties and other factors, please see the “Risk Factors” and “Forward-looking Statements” sections in CME's Quarterly Report on Form 10-Q for the period ended September 30, 2016. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise.

This press release should be read in conjunction with our Quarterly Report on Form 10-Q for the period ended September 30, 2016, which was filed with the Securities and Exchange Commission on October 25, 2016.

We make available free of charge on our website at www.cme.net our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. Please note that we may announce material information using SEC filings, press releases, public conference calls, webcasts and posts to the Investors section of our website, www.cme.net. In the future, we will continue to use these channels to communicate important information about CME and our operations. Information that we post on our website could be deemed material. Therefore, we encourage investors, the media, our customers and others interested in CME to review the information we post at www.cme.net.

CME is a media and entertainment company operating leading businesses in six Central and Eastern European markets with an aggregate population of approximately 50 million people. CME broadcasts 36 television channels in Bulgaria (bTV, bTV Cinema, bTV Comedy, bTV Action, bTV Lady and Ring.bg), Croatia (Nova TV, Doma, Nova World and MiniTV), the Czech Republic (TV Nova, Nova Cinema, Nova Sport 1, Nova Sport 2, Nova International, Fanda, Smichov and Telka), Romania (PRO TV, PRO TV International, Acasa, Acasa Gold, PRO Cinema, Sport.ro, MTV Romania, PRO TV Chisinau and Acasa in Moldova), the Slovak Republic (TV Markíza, Markíza International, Doma and Dajto), and Slovenia (POP TV, Kanal A, Brio, Oto and Kino). CME is traded on the NASDAQ Global Select Market and the Prague Stock Exchange under the ticker symbol “CETV”.

 
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(US$ 000's, except per share data)
(unaudited)
   
  For the Three Months Ended
September 30,
  2016   2015
Net revenues $ 126,706     $ 117,322  
Operating expenses:      
Content costs 64,487     58,983  
Other operating costs 17,024     17,180  
Depreciation of property, plant and equipment 7,557     6,974  
Amortization of broadcast licenses and other intangibles 2,073     2,695  
Cost of revenues 91,141     85,832  
Selling, general and administrative expenses 27,181     2,403  
Restructuring costs     234  
Operating income 8,384     28,853  
Interest expense (27,636 )   (43,998 )
Non-operating income / (expense), net 387     (6,477 )
Loss before tax (18,865 )   (21,622 )
(Provision) / credit for income taxes (958 )   112  
Loss from continuing operations (19,823 )   (21,510 )
Loss from discontinued operations, net of tax     (265 )
Net loss (19,823 )   (21,775 )
Net loss attributable to noncontrolling interests 196     253  
Net loss attributable to CME Ltd. $ (19,627 )   $ (21,522 )
       
PER SHARE DATA:      
Net loss per share attributable to CME Ltd.:      
Continuing operations - Basic and diluted $ (0.14 )   $ (0.17 )
Discontinued operations - Basic and diluted 0.00     (0.01 )
Net loss per share - Basic and diluted (0.14 )   (0.18 )
       
Weighted average common shares used in computing per share amounts (000's):      
Basic and diluted 153,494     147,054  
           

 

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(US$ 000's, except per share data)
(unaudited)
   
  For the Nine Months Ended 
September 30,
  2016   2015
Net revenues $ 430,912     $ 410,289  
Operating expenses:      
Content costs 213,747     203,710  
Other operating costs 51,417     51,640  
Depreciation of property, plant and equipment 22,469     20,911  
Amortization of broadcast licenses and other intangibles 6,247     9,628  
Cost of revenues 293,880     285,889  
Selling, general and administrative expenses 76,994     75,016  
Restructuring costs     1,329  
Operating income 60,038     48,055  
Interest expense (106,335 )   (125,862 )
Loss on extinguishment of debt (150,158 )    
Non-operating income / (expense), net 1,636     (22,122 )
Loss before tax (194,819 )   (99,929 )
Provision for income taxes (6,947 )   (3,493 )
Loss from continuing operations (201,766 )   (103,422 )
Loss from discontinued operations, net of tax     (869 )
Net loss (201,766 )   (104,291 )
Net loss attributable to noncontrolling interests 387     817  
Net loss attributable to CME Ltd. $ (201,379 )   $ (103,474 )
       
PER SHARE DATA:      
Net loss per share attributable to CME Ltd.:      
Continuing operations - Basic and diluted $ (1.42 )   $ (0.79 )
Discontinued operations - Basic and diluted 0.00     (0.00 )
Net loss per share - Basic and diluted (1.42 )   (0.79 )
       
Weighted average common shares used in computing per share amounts (000's):      
Basic and diluted 149,898     146,803  
           

 

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(US$ 000's)
(unaudited)
       
  September 30, 2016   December 31, 2015
ASSETS      
Cash and cash equivalents $ 64,229     $ 61,679  
Other current assets 268,498     296,605  
Total current assets 332,727     358,284  
Property, plant and equipment, net 109,424     108,522  
Goodwill and other intangible assets, net 788,062     773,405  
Other non-current assets 214,023     200,206  
Total assets $ 1,444,236     $ 1,440,417  
       
LIABILITIES AND EQUITY      
Accounts payable and accrued liabilities $ 172,110     $ 134,705  
Current portion of long-term debt and other financing arrangements 1,258     1,155  
Other current liabilities 23,210     10,448  
Total current liabilities 196,578     146,308  
Long-term debt and other financing arrangements 1,059,670     908,521  
Other non-current liabilities 51,820     65,749  
Total liabilities $ 1,308,068     $ 1,120,578  
       
Series B Convertible Redeemable Preferred Stock $ 252,512     $ 241,198  
       
EQUITY      
Common Stock $ 11,392     $ 10,864  
Additional paid-in capital 1,910,620     1,914,050  
Accumulated deficit (1,806,624 )   (1,605,245 )
Accumulated other comprehensive loss (232,545 )   (242,409 )
Total CME Ltd. shareholders' (deficit) / equity (117,157 )   77,260  
Noncontrolling interests 813     1,381  
Total (deficit) / equity (116,344 )   78,641  
Total liabilities and equity $ 1,444,236     $ 1,440,417  
               

 

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(US$ 000's)
(unaudited)
   
  For the Nine Months Ended September 30,
  2016   2015
Net cash generated from continuing operating activities $ 42,564     $ 79,085  
Net cash used in continuing investing activities (19,734 )   (26,219 )
Net cash used in continuing financing activities (23,395 )   (27,664 )
Net cash provided by discontinued operations 705     4,011  
Impact of exchange rate fluctuations on cash and cash equivalents 2,410     (1,730 )
Net increase in cash and cash equivalents $ 2,550     $ 27,483  
       
Supplemental disclosure of cash flow information:      
Cash paid for interest (includes mandatory cash-pay guarantee fees) $ 40,877     $ 10,712  
Cash paid for guarantee fees previously paid in kind 27,502      
Interest and related guarantee fees paid in kind $ 22,257     $ 43,681  
       
Supplemental disclosure of non-cash financing activities:      
Accretion on Series B Convertible Redeemable Preferred Stock
$ 11,314     $ 12,796  
               

Segment Data

We manage our business on a geographical basis, with six reporting segments: Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic and Slovenia. These segments reflect how CME Ltd.’s operating performance is evaluated by our chief operating decision makers, who we have identified as our co-Chief Executive Officers, how operations are managed by segment managers, and the structure of our internal financial reporting.

We evaluate our consolidated results and the performance of our segments based on net revenues and OIBDA. Stock-based compensation and certain other items are not allocated to our segments for purposes of evaluating their performance and therefore are not included in their respective OIBDA. Intersegment revenues and profits have been eliminated in consolidation.

Below are tables showing our net revenues and OIBDA by segment for the three and nine months ended September 30, 2016 and September 30, 2015:

(US$ 000's) For the Three Months Ended September 30,
(unaudited) 2016   2015   % Actual   % Lfl (1)
Net revenues              
Bulgaria $ 13,789     $ 14,673     (6.0 )%   (6.0 )%
Croatia 9,833     9,949     (1.2 )%   (2.2 )%
Czech Republic 39,031     35,575     9.7 %   9.7 %
Romania 36,970     32,005     15.5 %   16.6 %
Slovak Republic 17,864     17,223     3.7 %   3.9 %
Slovenia 9,555     8,606     11.0 %   11.2 %
Intersegment revenues (336 )   (709 )   NM (2)   NM (2)
Total net revenues $ 126,706     $ 117,322     8.0 %   8.2 %
                           

 

(US$ 000's) For the Nine Months Ended September 30,
(unaudited) 2016   2015   % Actual   % Lfl (1)
Net revenues              
Bulgaria $ 50,103     $ 50,877     (1.5 )%   (1.4 )%
Croatia 38,037     38,184     (0.4 )%   (1.8 )%
Czech Republic 128,558     122,671     4.8 %   3.4 %
Romania 118,269     109,561     7.9 %   9.1 %
Slovak Republic 59,466     54,997     8.1 %   8.2 %
Slovenia 37,324     35,149     6.2 %   6.2 %
Intersegment revenues (845 )   (1,150 )   NM (2)   NM (2)
Total net revenues $ 430,912     $ 410,289     5.0 %   4.8 %
                           

(1) % Lfl (like-for-like) variance reflects the impact of applying the current period average exchange rates to the prior period revenues and costs.
(2) Number is not meaningful.

(US$ 000's) For the Three Months Ended September 30,
(unaudited) 2016   2015   % Act   % Lfl (1)
OIBDA              
Bulgaria $ 1,943     $ 2,223     (12.6 )%   (12.4 )%
Croatia (516 )   (909 )   43.2 %   43.9 %
Czech Republic 13,180     9,483     39.0 %   39.2 %
Romania 12,606     6,953     81.3 %   83.3 %
Slovak Republic (383 )   358     NM (2)   NM (2)
Slovenia (746 )   (1,556 )   52.1 %   52.2 %
Elimination 11     (225 )   NM (2)   NM (2)
Total Operating Segments 26,095     16,327     59.8 %   61.7 %
Central (8,081 )   (7,974 )   (1.3 )%   (1.4 )%
Total OIBDA $ 18,014     $ 8,353     115.7 %   120.7 %
                           

 

(US$ 000's) For the Nine Months Ended September 30,
(unaudited) 2016   2015   % Act   % Lfl (1)
OIBDA              
Bulgaria $ 8,966     $ 8,466     5.9%   5.6%
Croatia 5,386     5,925     (9.1)%   (12.4)%
Czech Republic 46,353     43,812     5.8%   3.6%
Romania 45,030     25,733     75.0%   75.1%
Slovak Republic 5,168     3,840     34.6%   27.0%
Slovenia 170     (233)   NM (2)   NM (2)
Elimination (57)   (260)
  NM (2)   NM (2)
Total Operating Segments 111,016     87,283     27.2%   25.3%
Central (22,262)   (20,671)   (7.7)%   (7.5)%
Total OIBDA $ 88,754     $ 66,612     33.2%   30.7%
                           

(1) % Lfl (like-for-like) variance reflects the impact of applying the current period average exchange rates to the prior period revenues and costs.
(2) Number is not meaningful.

Non-GAAP Financial Measures

In this release we refer to several non-GAAP financial measures, including OIBDA, OIBDA margin, free cash flow and unlevered free cash flow. We believe that each of these metrics is useful to investors for the reasons outlined below. Non-GAAP financial measures may not be comparable to similar measures reported by other companies. Non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, US GAAP financial measures.

We evaluate our consolidated results and the performance of our segments based on net revenues and OIBDA. We believe OIBDA is useful to investors because it provides a meaningful representation of our performance, as it excludes certain items that do not impact either our cash flows or the operating results of our operations. OIBDA and unlevered free cash flow are also used as components in determining management bonuses.

OIBDA includes amortization and impairment of program rights and is calculated as operating income / loss before depreciation, amortization of intangible assets and impairments of assets and certain unusual or infrequent items that are not considered by our co-CEOs when evaluating our performance. Stock-based compensation and certain other items are not allocated to our segments for purposes of evaluating their performance and therefore are not included in their respective OIBDA. Our key performance measure of the efficiency of our consolidated operations and our segments is OIBDA margin. We define OIBDA margin as the ratio of OIBDA to net revenues. Intersegment revenues and profits have been eliminated on consolidation.

We have previously used free cash flow as a measure of the ability of our operations to generate cash. We define free cash flow as cash flows from continuing operating activities less purchases of property, plant and equipment, net of disposals of property, plant and equipment and excluding the cash impact of certain unusual or infrequent items that are not included in costs charged in arriving at OIBDA because they are not considered by our co-CEOs when evaluating performance. Following the refinancing transaction completed in April 2016, the amount of interest and related guarantee fees on our outstanding indebtedness that is paid in cash has increased. Since we expect to use cash generated by the business to pay more interest and related guarantee fees in cash, and these cash payments are reflected in free cash flow, we think unlevered free cash flow, defined as free cash flow before cash payments for interest and guarantee fees, better illustrates the cash generated by our operations when comparing periods.

For additional information regarding our business segments, see Part 1, Item 1, Note 18, "Segment Data" in our Form 10-Q.

The analysis in this release contains references to like-for-like or constant currency percentage movements (“% Lfl”). These references reflect the impact of applying the current period average exchange rates to the prior period revenues and costs. Given the significant movement of the currencies in the markets in which we operate against the dollar, we believe that it is useful to provide percentage movements based on like-for-like percentage movements as well as actual (“% Act”) percentage movements (which includes the effect of foreign exchange). Unless otherwise stated, all percentage increases or decreases in the release refer to year-on-year percentage changes between the three and nine months ended September 30, 2016 and 2015.

(US$ 000's) For the Three Months
Ended September 30,
  For the Nine Months
Ended September 30,
(unaudited) 2016   2015   2016   2015
Operating income $ 8,384     $ 28,853     60,038     48,055  
Depreciation of property, plant and equipment 7,557     6,974     22,469     20,911  
Amortization of intangible assets 2,073     2,695     6,247     9,628  
Other items (3)     (30,169 )       (11,982 )
Total OIBDA $ 18,014     $ 8,353     $ 88,754     $ 66,612  
                               

(3) Other items for the three and nine months ended September 30, 2016 reflects the reversal of charges related to tax audits in Romania. Since the charges recorded in the fourth quarter of  2014 and the first quarter of 2015 were not included in OIBDA, our subsequent reversal of these charges in the third quarter of 2015 were similarly excluded from OIBDA.

  For the Nine Months Ended September 30,
  2016   2015
Net cash generated from continuing operating activities $ 42,564     $ 79,085  
Capital expenditures, net of proceeds from disposals (19,734 )   (26,219 )
Free cash flow 22,830     52,866  
Cash paid for interest (including mandatory cash-pay guarantee fees) 40,877     10,712  
Cash paid for guarantee fees previously paid in kind 27,502      
Unlevered free cash flow $ 91,209     $ 63,578  
               

 

For additional information, please visit www.cme.net or contact:

Mark Kobal
Head of Investor Relations
Central European Media Enterprises
+420 242 465 576
mark.kobal@cme.net

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Source: Central European Media Enterprises Ltd.

MEDIA AND INVESTOR
INQUIRIES

MARK KOBAL
Head of Investor Relations
+420 242465605
investorrelations@cme.net
CENTRAL EUROPEAN MEDIA ENTERPRISES
Krizeneckeho nam. 1078/5 152 00 Praha 5
Czech Republic