Index UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 o 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, Hamilton, Bermuda HM 08 (Address of principal executive offices) (Zip Code) 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 T 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 T 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 T 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. £ Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act) Yes £ No T WorldReginfo - 788e5d78-533f-4177-be8b-72cf51344a1c Index 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 April 26, 2019 Class A Common Stock, par value $0.08 253,279,975 WorldReginfo - 788e5d78-533f-4177-be8b-72cf51344a1c Index CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. FORM 10-Q For the quarterly period ended March 31, 2019 Page Part I Financial Information Item 1. Financial Statements 1 Condensed Consolidated Balance Sheets as at March 31, 2019 and December 31, 2018 1 Condensed Consolidated Statements of Operations and Comprehensive Income / Loss for the Three Months Ended March 31, 2019 and 2018 2 Condensed Consolidated Statement of Equity for the Three Months Ended March 31, 2019 3 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 4 Notes to the Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 25 Item 3. Quantitative and Qualitative Disclosures About Market Risk 40 Item 4. Controls and Procedures 41 Part II Other Information Item 1. Legal Proceedings 41 Item 1A. Risk Factors 42 Item 6. Exhibits 48 Signatures 49 WorldReginfo - 788e5d78-533f-4177-be8b-72cf51344a1c Index PART I. FINANCIAL INFORMATION Item 1. Financial Statements CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (US$ 000’s, except share data) (Unaudited) March 31, 2019 December 31, 2018 ASSETS Current assets Cash and cash equivalents $ 80,032 $ 62,031 Accounts receivable, net (Note 6) 153,822 193,371 Program rights, net (Note 5) 74,648 77,624 Other current assets (Note 7) 34,628 41,067 Total current assets 343,130 374,093 Non-current assets Property, plant and equipment, net (Note 8) 110,347 117,604 Program rights, net (Note 5) 175,993 171,871 Goodwill (Note 3) 660,461 676,333 Other intangible assets, net (Note 3) 131,771 136,052 Other non-current assets (Note 7) 23,967 12,408 Total non-current assets 1,102,539 1,114,268 Total assets $ 1,445,669 $ 1,488,361 LIABILITIES AND EQUITY Current liabilities Accounts payable and accrued liabilities (Note 9) $ 127,222 $ 120,468 Current portion of long-term debt and other financing arrangements (Note 4) 5,802 5,545 Other current liabilities (Note 10) 38,453 13,679 Total current liabilities 171,477 139,692 Non-current liabilities Long-term debt and other financing arrangements (Note 4) 700,694 782,685 Other non-current liabilities (Note 10) 81,526 67,293 Total non-current liabilities 782,220 849,978 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) — — 253,279,975 shares of Class A Common Stock of $0.08 each (December 31, 2018 – 252,853,554) 20,262 20,228 Nil shares of Class B Common Stock of $0.08 each (December 31, 2018 – nil) — — Additional paid-in capital 2,004,188 2,003,518 Accumulated deficit (1,566,318) (1,578,076) Accumulated other comprehensive loss (235,961) (216,650) Total CME Ltd. shareholders’ equity 222,171 229,020 Noncontrolling interests 431 301 Total equity 222,602 229,321 Total liabilities and equity $ 1,445,669 $ 1,488,361 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 WorldReginfo - 788e5d78-533f-4177-be8b-72cf51344a1c 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 March 31, 2019 2018 Net revenues $ 146,559 $ 156,709 Operating expenses: Content costs 70,360 78,460 Other operating costs 13,248 14,467 Depreciation of property, plant and equipment 8,226 8,387 Amortization of broadcast licenses and other intangibles 2,194 2,356 Cost of revenues 94,028 103,670 Selling, general and administrative expenses 24,894 28,458 Operating income 27,637 24,581 Interest expense (Note 15) (8,242) (17,818) Other non-operating (expense) / income, net (Note 16) (3,097) 4,208 Income before tax 16,298 10,971 Provision for income taxes (4,547) (4,215) Income from continuing operations 11,751 6,756 Income from discontinued operations, net of tax — 316 Net income 11,751 7,072 Net loss attributable to noncontrolling interests 7 178 Net income attributable to CME Ltd. $ 11,758 $ 7,250 Net income $ 11,751 $ 7,072 Other comprehensive (loss) / income Currency translation adjustment (15,843) 11,785 Unrealized (loss) / gain on derivative instruments (Note 12) (3,331) 191 Total other comprehensive (loss) / income (19,174) 11,976 Comprehensive (loss) / income (7,423) 19,048 Comprehensive (income) / loss attributable to noncontrolling interests (130) 386 Comprehensive (loss) / income attributable to CME Ltd. $ (7,553) $ 19,434 PER SHARE DATA (Note 18): Net income per share: Continuing operations — basic $ 0.03 $ 0.02 Continuing operations — diluted 0.03 0.01 Discontinued operations — basic — 0.00 Discontinued operations — diluted — 0.00 Attributable to CME Ltd. — basic 0.03 0.02 Attributable to CME Ltd. — diluted $ 0.03 $ 0.01 Weighted average common shares used in computing per share amounts (000’s): Basic 264,199 158,039 Diluted 265,211 241,905 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 WorldReginfo - 788e5d78-533f-4177-be8b-72cf51344a1c 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 of Number Number of Paid-In Accumulated Comprehensive Noncontrolling Total shares Par value of shares Par value shares Par value Capital Deficit Loss Interest Equity BALANCE December 31, 2018 1 $ — 252,853,554 $ 20,228 — $ — $ 2,003,518 $ (1,578,076) $ (216,650) $ 301 $ 229,321 Stock-based compensation — — — — — — 1,003 — — — 1,003 Share issuance, stock-based compensation — — 426,421 34 — — (34) — — — — Withholding tax on net share settlement of stock-based compensation — — — — — — (299) — — — (299) Net income / (loss) — — — — — — — 11,758 — (7) 11,751 Unrealized loss on derivative instruments — — — — — — — — (3,331) — (3,331) Currency translation adjustment — — — — — — — — (15,980) 137 (15,843) BALANCE March 31, 2019 1 $ — 253,279,975 $ 20,262 — $ — $ 2,004,188 $ (1,566,318) $ (235,961) $ 431 $ 222,602 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 WorldReginfo - 788e5d78-533f-4177-be8b-72cf51344a1c Index CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (US$ 000’s) (Unaudited) For the Three Months Ended March 31, 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 11,751 $ 7,072 Adjustments to reconcile net income to net cash generated