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 March 31, 2020 ☐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 April 20, 2020 Class A Common Stock, par value $0.08 254,298,255 Index CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. FORM 10-Q For the Quarterly Period Ended March 31, 2020 Page Part I Financial Information Item 1. Financial Statements 1 Condensed Consolidated Balance Sheets as at March 31, 2020 and December 31, 2019 1 Condensed Consolidated Statements of Operations and Comprehensive Income / Loss for the Three Months Ended March 31, 2020 and 2019 2 Condensed Consolidated Statements of Equity for the Three Months Ended March 31, 2020 and 2019 3 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 4 Notes to the Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 24 Item 3. Quantitative and Qualitative Disclosures About Market Risk 40 Item 4. Controls and Procedures 40 Part II Other Information Item 1. Legal Proceedings 41 Item 1A. Risk Factors 41 Item 6. Exhibits 48 Signatures 49 Index PART I. FINANCIAL INFORMATION Item 1. Financial Statements CENTRAL EUROPEAN MEDIA ENTERPRISES LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (US$ 000’s, except share data) (Unaudited) March 31, 2020 December 31, 2019 ASSETS Current assets Cash and cash equivalents $ 140,323 $ 36,621 Accounts receivable, net of allowances for credit losses of $8,781 and $8,548 140,179 188,618 Program rights, net (Note 5) — 75,909 Other current assets (Note 6) 36,916 48,832 Total current assets 317,418 349,980 Non-current assets Property, plant and equipment, net (Note 7) 104,288 113,901 Program rights, net (Note 5) 234,069 166,237 Goodwill (Note 3) 615,599 667,988 Other intangible assets, net (Note 3) 118,670 127,589 Other non-current assets (Note 6) 21,118 22,167 Total non-current assets 1,093,744 1,097,882 Total assets $ 1,411,162 $ 1,447,862 LIABILITIES AND EQUITY Current liabilities Accounts payable and accrued liabilities (Note 8) $ 148,977 $ 135,650 Current portion of long-term debt and other financing arrangements (Note 4) 6,655 6,836 Other current liabilities (Note 9) 33,588 13,515 Total current liabilities 189,220 156,001 Non-current liabilities Long-term debt and other financing arrangements (Note 4) 584,573 600,273 Other non-current liabilities (Note 9) 76,709 80,000 Total non-current liabilities 661,282 680,273 Commitments and contingencies (Note 19) TEMPORARY EQUITY 200,000 shares of Series B Convertible Redeemable Preferred Stock of $0.08 each (December 31, 2019 - 200,000) (Note 12) 269,370 269,370 EQUITY CME Ltd. shareholders’ equity (Note 13): One share of Series A Convertible Preferred Stock of $0.08 each (December 31, 2019 – one) — — 254,298,255 shares of Class A Common Stock of $0.08 each (December 31, 2019 – 253,607,026) 20,343 20,288 Nil shares of Class B Common Stock of $0.08 each (December 31, 2019 – nil) — — Additional paid-in capital 2,008,151 2,007,275 Accumulated deficit (1,449,901) (1,458,942) Accumulated other comprehensive loss (287,919) (226,916) Total CME Ltd. shareholders’ equity 290,674 341,705 Noncontrolling interests 616 513 Total equity 291,290 342,218 Total liabilities and equity $ 1,411,162 $ 1,447,862 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 March 31, 2020 2019 Net revenues $ 143,816 $ 146,559 Operating expenses: Content costs 65,032 70,360 Other operating costs 13,647 13,248 Depreciation of property, plant and equipment 7,927 8,226 Amortization of broadcast licenses and other intangibles 2,167 2,194 Cost of revenues 88,773 94,028 Selling, general and administrative expenses 28,846 24,894 Operating income 26,197 27,637 Interest expense (Note 14) (6,595) (8,242) Other non-operating expense, net (Note 15) (6,136) (3,097) Income before tax 13,466 16,298 Provision for income taxes (4,496) (4,547) Net income 8,970 11,751 Net loss attributable to noncontrolling interests 71 7 Net income attributable to CME Ltd. $ 9,041 $ 11,758 Net income $ 8,970 $ 11,751 Other comprehensive loss Currency translation adjustment (61,049) (15,843) Unrealized gain / (loss) on derivative instruments (Note 13) 220 (3,331) Total other comprehensive loss (60,829) (19,174) Comprehensive loss (51,859) (7,423) Comprehensive income attributable to noncontrolling interests (103) (130) Comprehensive loss attributable to CME Ltd. $ (51,962) $ (7,553) PER SHARE DATA (Note 17): Net income per share: Attributable to CME Ltd. — basic $ 0.02 $ 0.03 Attributable to CME Ltd. — diluted 0.02 0.03 Weighted average common shares used in computing per share amounts (000’s): Basic 265,036 264,199 Diluted 266,791 265,211 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 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, 2019 1 $ — 253,607,026 $ 20,288 — $ — $ 2,007,275 $ (1,458,942) $ (226,916) $ 513 $ 342,218 Stock-based compensation — — — — — — 939 — — — 939 Share issuance, stock-based compensation — — 691,229 55 — — (55) — — — — Withholding tax on net share settlement of stock-based compensation — — — — — — (8) — — — (8) Net income / (loss) — — — — — — — 9,041 — (71) 8,970 Unrealized gain on derivative instruments — — — — — — — — 220 — 220 Currency translation adjustment — — — — — — — — (61,223) 174 (61,049) BALANCE March 31, 2020 1 $ — 254,298,255 $ 20,343 — $ — $ 2,008,151 $ (1,449,901) $ (287,919) $ 616 $ 291,290 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