Index UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number: 0-24796 CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. (Exact name of registrant as specified in its charter) Bermuda 98-0438382 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) O'Hara House, 3 Bermudiana Road, HM 08 Hamilton, Bermuda (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (441) 296-1431 Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: Title of each class Trading Symbol(s) Name of each exchange on which registered Class A Common Stock, par value $0.08 CETV NASDAQ Global Select Market Indicate by check mark whether registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for each shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” or “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated Filer Accelerated Filer Non-accelerated Filer Smaller reporting company Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Index Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act) Yes No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of October 15, 2019 Class A Common Stock, par value $0.08 253,607,026 Index CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. FORM 10-Q For the Quarterly Period Ended September 30, 2019 Page Part I Financial Information Item 1. Financial Statements 1 Condensed Consolidated Balance Sheets as at September 30, 2019 and December 31, 2018 1 Condensed Consolidated Statements of Operations and Comprehensive Income / Loss for the Three and Nine Months Ended September 30, 2019 and 2018 2 Condensed Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2019 and 2018 3 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 5 Notes to the Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Item 3. Quantitative and Qualitative Disclosures About Market Risk 44 Item 4. Controls and Procedures 45 Part II Other Information Item 1. Legal Proceedings 45 Item 1A. Risk Factors 45 Item 6. Exhibits 51 Signatures 52 Index PART I. FINANCIAL INFORMATION Item 1. Financial Statements CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (US$ 000’s, except share data) (Unaudited) September 30, 2019 December 31, 2018 ASSETS Current assets Cash and cash equivalents $ 34,154 $ 62,031 Accounts receivable, net (Note 6) 130,784 193,371 Program rights, net (Note 5) 73,369 77,624 Other current assets (Note 7) 41,335 41,067 Total current assets 279,642 374,093 Non-current assets Property, plant and equipment, net (Note 8) 104,553 117,604 Program rights, net (Note 5) 168,740 171,871 Goodwill (Note 3) 640,427 676,333 Other intangible assets, net (Note 3) 124,381 136,052 Other non-current assets (Note 7) 21,438 12,408 Total non-current assets 1,059,539 1,114,268 Total assets $ 1,339,181 $ 1,488,361 LIABILITIES AND EQUITY Current liabilities Accounts payable and accrued liabilities (Note 9) $ 114,943 $ 120,468 Current portion of long-term debt and other financing arrangements (Note 4) 6,063 5,545 Other current liabilities (Note 10) 24,285 13,679 Total current liabilities 145,291 139,692 Non-current liabilities Long-term debt and other financing arrangements (Note 4) 581,101 782,685 Other non-current liabilities (Note 10) 78,207 67,293 Total non-current liabilities 659,308 849,978 Commitments and contingencies (Note 20) TEMPORARY EQUITY 200,000 shares of Series B Convertible Redeemable Preferred Stock of $0.08 each (December 31, 2018 - 200,000) (Note 13) 269,370 269,370 EQUITY CME Ltd. shareholders’ equity (Note 14): One share of Series A Convertible Preferred Stock of $0.08 each (December 31, 2018 – one) — — 253,607,026 shares of Class A Common Stock of $0.08 each (December 31, 2018 – 252,853,554) 20,288 20,228 Nil shares of Class B Common Stock of $0.08 each (December 31, 2018 – nil) — — Additional paid-in capital 2,006,150 2,003,518 Accumulated deficit (1,508,614) (1,578,076) Accumulated other comprehensive loss (253,159) (216,650) Total CME Ltd. shareholders’ equity 264,665 229,020 Noncontrolling interests 547 301 Total equity 265,212 229,321 Total liabilities and equity $ 1,339,181 $ 1,488,361 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 Index CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / LOSS (US$ 000’s, except per share data) (Unaudited) For the Three Months Ended For the Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Net revenues $ 138,851 $ 137,038 $ 469,009 $ 475,655 Operating expenses: Content costs 58,962 60,910 199,678 219,337 Other operating costs 13,274 13,260 40,328 41,929 Depreciation of property, plant and equipment 8,245 8,202 24,625 25,150 Amortization of broadcast licenses and other intangibles 2,029 2,216 6,336 6,839 Cost of revenues 82,510 84,588 270,967 293,255 Selling, general and administrative expenses 25,558 30,253 79,160 85,605 Operating income 30,783 22,197 118,882 96,795 Interest expense (Note 15) (8,037) (9,977) (24,014) (40,206) Other non-operating (expense) / income, net (Note 16) (3,963) 1,574 (4,823) (1,144) Income before tax 18,783 13,794 90,045 55,445 Provision for income taxes (5,261) (3,185) (20,694) (14,405) Income from continuing operations 13,522 10,609 69,351 41,040 Income from discontinued operations, net of tax — 57,882 — 60,548 Net income 13,522 68,491 69,351 101,588 Net loss attributable to noncontrolling interests 223 80 111 274 Net income attributable to CME Ltd. $ 13,745 $ 68,571 $ 69,462 $ 101,862 Net income $ 13,522 $ 68,491 $ 69,351 $ 101,588 Other comprehensive (loss) / income Currency translation adjustment (32,525) 12,137 (31,366) (10,707) Unrealized (loss) / gain on derivative instruments (Note 14) (235) 1,033 (4,786) (1,895) Total other comprehensive (loss) / income (32,760) 13,170 (36,152) (12,602) Comprehensive (loss) / income (19,238) 81,661 33,199 88,986 Comprehensive (income) / loss attributable to noncontrolling interests (88) 26 (246) (4) Comprehensive (loss) / income attributable to CME Ltd. $ (19,326) $ 81,687 $ 32,953 $ 88,982 PER SHARE DATA (Note 18): Net income per share: Continuing operations — basic $ 0.04 $ 0.03 $ 0.18 $ 0.11 Continuing operations — diluted 0.04 0.03 0.18 0.10 Discontinued operations — basic — 0.15 — 0.18 Discontinued operations — diluted — 0.15 — 0.17 Attributable to CME Ltd. — basic 0.04 0.18 0.18 0.29 Attributable to CME Ltd. — diluted 0.04 0.18 0.18 0.27 Weighted average common shares used in computing per share amounts (000’s): Basic 264,833 263,829 264,536 219,267 Diluted 266,529 264,940 265,940 255,265 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 Index CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. CONDENSED CONSOLIDATED STATEMENT OF EQUITY (US$ 000’s, except share data) (Unaudited) CME Ltd. Series A Convertible Class A Class B Preferred Stock Common Stock Common Stock Accumulated Additional Other Number Par Number Par Number Par Paid-In Accumulated Comprehensive Noncontrolling Total of shares value of shares value of shares value Capital Deficit Loss Interest Equity BALANCE June 30, 2019 1 $ — 253,559,298 $ 20,285 — $ — $ 2,005,215 $ (1,522,359) $ (220,088) $ 459 $ 283,512 Stock-based compensation — — — — — — 932 — — — 932 Share issuance, stock- based compensation — — 47,728 3 — — (3) — — — — Withholding tax on net share settlement of stock-based compensation — — — — — — 6 — — — 6 Net income — — — — — — — 13,745 — (223) 13,522 Unrealized loss on derivative instruments — — — — — — — — (235) — (235) Currency translation adjustment — — — — — — — — (32,836) 311 (32,525) BALANCE September 30, 2019 1 $ — 253,607,026 $ 20,288 — $ — $ 2,006,150 $ (1,508,614) $ (253,159) $ 547 $ 265,212 CME Ltd. Series A Convertible Class A Class B Preferred Stock Common Stock Common Stock Accumulated Additional Other Number Par Number Par Number Par Paid-In Accumulated Comprehensive