2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
As described in Note 1, as of December 31, 2015, the Company accounts for the remaining equity interest in the Russian
and Kazakh businesses of the CTC group under equity method. See also Notes 3 and 6.
The
principal entities included in the accompanying financial statements and CTC Media, Inc.'s beneficial ownership interests in these entities as of December 31, 2013,
2014 and 2015 are presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2014
|
|
2015**
|
|
Russian Channels
|
|
|
|
|
|
|
|
|
|
|
CTC Network
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
25
|
%
|
Domashny Network
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
25
|
%
|
Che Network*
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
25
|
%
|
CTC-Region
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
25
|
%
|
CTC-St. Petersburg
|
|
|
80.0
|
%
|
|
80.0
|
%
|
|
20
|
%
|
DomashnySt. Petersburg
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
25
|
%
|
CheSt. Petersburg*
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
25
|
%
|
Kazakhstan Channel
|
|
|
|
|
|
|
|
|
|
|
Channel 31 Group
|
|
|
60.0
|
%
|
|
60.0
|
%
|
|
15
|
%
|
-
*
-
Che
TV channel is using the frequency band previously used by Peretz. In November, 2015 Peretz channel was relaunched in a new format as Che.
F-9
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
-
**
-
Since
2015, all Russian channels and Channel 31 are controlled by an intermediate Russian holding company, CTC Investments, 75% of which was sold by the
Company to UTH in December 2015. See Note 1.
Use of Estimates
The preparation of financial statements in conformity with the accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of profits and losses during the reporting period. Significant
estimates in the accompanying financial statements relate to the estimates related to determination of the financial result from the sale of a 75% interest in the Russian and Kazakh businesses of the
CTC group to UTH on December 23, 2015 (see Note 1), which included the determination of carrying value of net assets as of the date of sale and determination of the fair value of the
remaining 25% participation interest in these net assets which are accounted for under equity method at the date of sale and at December 31, 2015. See also Notes 3 and 6. In addition,
significant estimates include the determination of the carrying value of the net assets of the Russian and Kazakh businesses in 2015, and in preparation of the financial statements for 2013 and 2014,
and the related estimated fair value of the Company's reporting units and their long-lived assets in determining impairment losses; the amortization method for programming rights and valuation of
programming reserves; the useful lives of tangible and intangible assets; impairment of goodwill; valuation of intangible assets and long-lived assets; and estimates of contingencies. Also, the
Company used significant estimates and assumptions in determining stock-based compensation, estimates of income taxes in relation to the Company's interpretation of current tax laws, in particular, in
estimation of US taxes and related foreign tax credits, and possible outcomes of current and future audits conducted by tax authorities.
The
Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making changes in estimates from time to time, and evaluates the estimates on an ongoing basis. Actual results may differ from those estimates under different assumptions or conditions.
Foreign Currency Translation
In 2013, 2014 and 2015, the functional currency of the Company's businesses domiciled in Russia was the Russian ruble, and the
functional currency of the Channel 31 Group was the Kazakh tenge. The Company's reporting currency is the US dollar. Translation of financial statements into US dollars has been performed using the
current rate method. As such, assets and liabilities related to Russian and Kazakh businesses were translated at the rates of exchange prevailing at the balance sheet dates; and results of operations
were translated at monthly average rates of exchange. Stockholders' equity was translated at the applicable historical rates.
Cash and Cash Equivalents; Short-Term Investments and Other Non-current assets
The Company classifies cash on hand and deposits in banks and any other investments with an original maturity of 90 days or less
as cash and cash equivalents. Deposits in banks with an original maturity ranging from 91 to 365 days are classified as short-term investments.
F-10
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
On
March 14, 2014, the Office of Foreign Assets Control of the U.S. Department of Treasury ("OFAC") designated Bank Rossiya as a Specially Designated National and Blocked Person
("SDN") for the purposes of U.S. economic sanctions. As of that date, Bank Rossiya directly or indirectly owned more than 50% of Telcrest Investments Limited ("Telcrest") and Telcrest was accordingly
also considered an SDN for the purposes of U.S. sanctions at such time. As a result, the shares of the Company's common stock, among other property, held by Telcrest that were in the possession or
control of the Company or Computershare, the Company's transfer agent, were reported to OFAC as blocked property pursuant to applicable sanctions requirements. On September 25, 2015, Telcrest
notified the Company that, as a result of two transactions with third parties relating to its share capital, it was no longer 50% or more owned, directly or indirectly, in the aggregate by one or more
SDNs, including Bank Rossiya. Nonetheless, all property of Telcrest in the Company's possession or control (including the Company's shares and dividends payable to Telcrest) remains blocked property
until such time as OFAC authorizes its unblocking or Bank Rossiya is removed from the SDN list.
On
March 5, 2014, April 29, 2014, July 25, 2014, October 27, 2014 and March 4, 2015, the Company's Board declared a dividend to stockholders. The
Company paid the declared dividends on March 28, 2014, June 26, 2014, September 25, 2014, December 23, 2014 and March 26, 2015. However, dividends totalling $34,605
otherwise payable to Telcrest were blocked pursuant to the U.S. sanctions described above and paid into a separate interest-bearing bank account for the benefit of Telcrest, but to which Telcrest will
not have access until such time as OFAC authorizes their unblocking. These funds are classified by the Company as other non-current assets at December 31, 2014 and 2015.
Tax Provisions
Deferred income taxes result from temporary differences between the tax bases of assets and liabilities and the bases as reported in
the financial statements, as well as the tax benefits of net operating loss carry forwards which are expected to be realized. The Company records valuation allowances related to the tax effects of
deductible temporary differences and loss carry forwards when, in the opinion of management, it is more likely than not that the respective tax assets will not be realized. Changes in the Company's
assessment of the probability of realization of deferred tax assets may affect the Company's effective income tax rate.
The
Company records temporary differences related to investments in its Russian and Kazakh businesses. As of December 31, 2015 these temporary differences consist primarily of
undistributed earnings that the Company does not plan to permanently reinvest in operations outside the U.S. The level of sophistication and expertise with respect to complex tax laws is continually
evolving both on the part of tax professionals and the taxing authorities. The Company is a US legal entity. As a result, the Company's tax filing positions in the US are substantially impacted by the
Company's interpretation of tax law and how the Company applies it in determining US taxes payable and deferred tax liabilities. While the Company believes it has made, and continues to make,
reasonable judgments in determining its tax filing positions in each jurisdiction in which the Company is subject to tax, views may differ as to the determination of its tax obligations. These
judgments may ultimately be subjected to examination by the tax authorities and further revisions may be required in the Company's estimates. See also Note 7, Income Taxes.
F-11
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant policies applied to the Russian and Kazakh businesses (See Note 3)
Programming Rights
Programming rights are stated at the lower of their unamortized cost or net realizable value. The Company reported an asset and
liability for the rights acquired and obligations incurred at the commencement of the licensing period when the cost of the programming
was known or reasonably determinable, the program material has been accepted and the programming was available for airing.
The
Company amortized programming based on expected revenue generation patterns, based on the proportion that current estimated revenues bear to the estimated remaining total lifetime
revenues. If the initial airing of content allowed by a license is expected to provide more value than subsequent airings, the Company applied an accelerated method of amortization. These accelerated
methods of amortization depend on the estimated number of runs the content is expected to receive, and are determined based on a study of historical results for similar programming. For content that
was expected to be aired only once, the entire cost was recognized as an expense on the first run. To the extent that the revenues the Company expected to earn from broadcasting a program are lower
than the book value, the program rights were written down to their net realizable value by way of recording an additional amortization charge. Such write-downs established a new cost basis for
programming rights.
Revenue Recognition
Revenue is recognized when there is persuasive evidence of an arrangement, services have been rendered, the price is fixed or
determinable and collectability is reasonably assured. An allowance for doubtful accounts is maintained for estimated losses resulting from the customers' inability to make payments. The Company
recognizes advertising revenues at the moment when the advertising is broadcast and net of Value Added Taxes ("VAT").
The
CTC Group's own sales house serves as the exclusive advertising sales agent for substantially all national and regional advertising sales, with the exception of advertising sales to
local clients of a number of the Company's owned-and-operated regional stations. The CTC Group recognizes its Russian advertising revenues, excluding regional advertising revenues from local clients,
based on the gross amounts billed to the advertisers and their agencies under direct sales arrangements.
The
CTC Group's cooperation model with Vi provides for the licensing of specialized advertising software by Vi to its sales house, together with the provision by Vi of related software
maintenance and analytical support and consulting services. Compensation expenses payable to Vi for the use of advertising software, related maintenance and analytical support and consulting services
are included in selling, general and administrative expenses in the statements of income. In 2013, 2014 and 2015, the amounts of such compensation expense included in selling, general and
administrative expenses of discontinued operations were $78,321, $69,451 and $33,623 respectively. See also Note 3.
In
addition, a number of the CTC Group's owned-and-operated regional stations and Channel 31 have signed agency agreements with local subsidiaries of Vi with respect to advertising sales
to local clients, which is recognized net of agency commissions. Agency commissions under these agreements amounted to $7,146, $6,015 and $3,682 in 2013, 2014 and 2015, respectively.
Amortizable Long-Lived Assets
Amortizable assets are stated at cost less accumulated amortization. Definite-lived intangible assets primarily
represented broadcast licenses and cable network connections
F-12
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
that
are amortized on a straight-line basis over their estimated period of future economic benefit ranging from 2018 to 2022.
The
estimated useful lives of broadcasting licenses is subject to the availability of further information about the transition to digital broadcasting which could require the CTC Group
to revise amortization expense on a prospective basis. Amortizable assets, including property and equipment and finite-lived intangibles, are reviewed periodically to determine whether an event or
change in circumstances indicates that the carrying amount of the asset may not be recoverable. For long-lived assets to be held and used, the CTC Group based its evaluation on such impairment
indicators as the nature of the assets, the future economic benefit of the assets and any historical or future profitability measurements, as well as other external market conditions or factors that
may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, the CTC Group determined whether impairment
has occurred through the use of an undiscounted cash flows analysis of assets at the lowest level for which identifiable cash flows exist. If the carrying value of the asset or group of assets
exceeded the undiscounted cash flows, impairment is deemed to have occurred, and the CTC Group recognized an impairment loss for the difference between the carrying amount and the estimated fair value
of the asset. The fair value of the asset was estimated using a discounted cash flow analysis or other valuation techniques. See also"
Goodwill Impairment
Test"
below.
Goodwill Impairment Test
The Company evaluated goodwill for impairment annually, in the fourth quarter, or more frequently if events or changes in
circumstances indicate that such carrying value may not be recoverable. Other than the annual review, there are a number of factors that could trigger an impairment review including under-performance
of operating segments or changes in projected results; changes in the manner of utilization of an asset; severe and sustained declines in the traded price of the Company's common stock that are not
attributable to factors other than the underlying value of its assets; negative market conditions or economic trends; and specific events, such as new legislation, new market entrants, changes in
technology or adverse legal judgments that the Company believed could have a negative impact on its business.
The
Company first assessed qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value
of a reporting
unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. If the Company after assessing the totality of events or
circumstances, determined it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is not required.
However, if the Company concluded otherwise, then it is required to perform the first step of the two-step impairment test. The Company determined whether an impairment of goodwill has occurred by
assigning goodwill to the reporting units and comparing the carrying amount of the entire reporting unit to the estimated fair value based on discounted cash flows of the reporting unit (Step 1). If
the carrying value of the reporting unit is more than the estimated fair value of the reporting unit, the Company compared the implied fair value of goodwill based on a hypothetical purchase price
allocation to the carrying value of the goodwill (Step 2). If the carrying value of goodwill exceeded the implied fair value of goodwill based on Step 2, goodwill impairment is deemed to have
occurred, and the Company recognized a loss
F-13
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
for
the difference between the carrying amount and the implied fair value of goodwill. See also
Fair Value Measurements below
and
Note 3, Discontinued operations.
Stock-Based Compensation
The Company estimates the fair value of equity awards at the date of grant using the Black-Scholes option pricing model.
The
Black-Scholes pricing model was originally developed for use in estimating the fair value of traded options, which have different characteristics than the Company's employee equity awards. The model
is also sensitive to changes in subjective assumptions, which can materially affect the fair value estimate. These subjective assumptions include expected volatility, the expected life of the awards,
future employee turnover rates, and future employee award exercise behavior. The Company determines the fair value of its common stock by using closing prices as quoted on the Nasdaq Global Select
Market. Performance-based nonvested share awards require management to make assumptions regarding the likelihood of achieving the set goals.
Once
the Company has estimated the fair value of the equity instruments, it recognizes this estimated cost as stock-based compensation expense over the service period. Equity-based
incentive awards that meet liability accounting criteria are remeasured at each reporting date at their fair value until settlement. The fair value of such unsettled equity-based incentive awards is
recognized in liabilities.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy contains three levels as
follows:
Level 1Unadjusted
quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.
Level 2Other
observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:
(1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar assets in non-active markets; (3) inputs other than quoted prices
that are observable for the asset or liability; and (4) inputs that are derived principally from or corroborated by other observable market data.
Level 3Unobservable
inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally
determined using pricing models for which the assumptions utilize management's estimates of market participant assumptions. In accordance with ASC 820, fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distress sale) between market participants at the measurement date under current market
conditions. In determination of fair value of the Company's reporting units, the Company applied multiple valuation techniques by weighting indications of fair value resulting from the application of
the going-concern-based present value technique and the market approach.
F-14
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Assets Measured at Fair Value on a Nonrecurring Basis
On December 23, 2015, at the date of sale of a 75% interest in CTC Investments, the
Company recorded its remaining 25% interest in CTC Investments under the equity method at its estimated fair value of $89,457 (See Note 6). In determination of the fair value of equity
investment, the Company used Level 3 inputs. The Company's valuation of the equity investment incorporated its estimate of the fair value of the potential issuance
of an additional interest in CTC Investments to UTV-Management or its affiliate which would result in UTV-Management (together with its affiliate) holding 80% of CTC Investments (see Note 1).
In
addition, as a result of impairment reviews performed in 2013, 2014 and 2015 with respect to the assets of the Russian and Kazakh businesses, the Company recorded impairment of
goodwill and broadcasting license, which was included in earnings of discontinued operations:
-
-
For the year ended December 31, 2015, goodwill related to Che reporting unit with a carrying amount of $3,289 was fully written
down, and an umbrella analog license related to the Che reporting unit with a carrying amount of $6,440 was partially written down, resulting in an impairment loss of $2,965 (in November 2015, Peretz
channel was relaunched in a new format as Che), reflecting the decrease in cash flow projections in response to a more conservative forecast for the advertising market for 2016 and thereafter, and
increased uncertainty in the medium-term due to macroeconomic and political headwinds; also Cable network connections related to the CTC and Domashny reporting units with a carrying amount of $2,167
and $570, respectively, were fully written down due to must carry law which came to the effect in 2015, resulting in an impairment loss of $2,737;
-
-
For the year ended December 31, 2014, goodwill related to Che reporting unit with a carrying amount of $33,514 was written down
to its implied fair value of $4,158, resulting in an impairment loss of $29,356, reflecting a decrease in cash flow projections in response to a more conservative forecast for the advertising market;
and
-
-
In December 2013, goodwill related to the in-house production unit with a carrying amount of $29,869 was fully written down, resulting
in an impairment loss of $29,869, reflecting downward revisions of long-term cash flow projections as a result of the restructuring of in-house production.
The
table below represents fair value measurements on a nonrecurring basis at the dates when impairments were taken:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using
|
|
|
|
December 23,
2015
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
Total Gains
(Losses)
|
|
Umbrella analog license
|
|
$
|
3,475
|
|
$
|
|
|
$
|
|
|
$
|
3,475
|
|
$
|
(2,965
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Che goodwill
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
(3,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable network connections
|
|
$
|
4,080
|
|
$
|
|
|
$
|
|
|
$
|
4,080
|
|
$
|
(2,737
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,555
|
|
$
|
|
|
$
|
|
|
$
|
7,555
|
|
$
|
(8,991
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-15
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using
|
|
|
|
December 31,
2014
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
Total Gains
(Losses)
|
|
Goodwill
|
|
$
|
4,158
|
|
|
|
|
|
|
|
$
|
4,158
|
|
$
|
(29,356
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,158
|
|
|
|
|
|
|
|
$
|
4,158
|
|
$
|
(29,356
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using
|
|
|
|
December 31,
2013
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
Total Gains
(Losses)
|
|
Goodwill
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
(29,869
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
(29,869
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2014 and December 31, 2013, goodwill and broadcasting licenses are included in assets of discontinued operations in the Company's balance sheet. See also
Note 3, Discontinued operations.
Assessing
goodwill for impairment and the determination of the fair value of an equity investment is a process that requires significant judgment and involves detailed quantitative and
qualitative business-specific analysis and many individual assumptions which fluctuate with the passage of time. The Company's estimate of the cash flows its operations will generate in future periods
forms the basis for most of the significant assumptions inherent in the impairment reviews. The Company's expectations of these cash flows are developed during the long- and short-range business
planning processes of CTC Investments, which are designed to address the uncertainties in the forecasting process by capturing a range of possible views about key trends which govern future cash flow
growth.
The
Company has over many years observed a strong positive correlation between the macroeconomic performance of its Russian and Kazakh markets and the size of the television advertising
market and ultimately the cash flows the CTC Group generates. With this in mind, the Company has placed a high importance on developing its expectations for the future development of the macroeconomic
environment in general and, in particular, the advertising market, and the CTC Group's share of it, as well as, more recently, developments in the transition to digital broadcasting. While this has
involved an appreciation of historical trends, the Company has placed a higher emphasis on forecasting these market trends, which has involved a detailed review of macroeconomic data and a range of
both proprietary and publicly-available estimates for future market development.
The
most significant of the assumptions used in the valuation of goodwill, broadcasting licenses and equity investment in Russian and Kazakh businesses are discussed
below:
-
-
Cost of capital: The cost of capital reflects the return a hypothetical market participant would require for a long-term investment in
an asset and can be viewed as a proxy for the risk of that asset. The Company calculates the cost of capital according to the Capital Asset Pricing Model using a number of assumptions, the most
significant of which is a Country Risk Premium
F-16
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
("CRP").
The CRP reflects the excess risk to an investor of investing in markets other than the United States and generally fluctuates with expectations of changes in a country's macroeconomic
environment. If the Russian macroeconomic environment becomes less stable and the risk to investors investing in Russian markets increases, the cost of capital may increase, which in turn will
decrease the fair value of the respective assets or reporting units. Additionally, changes in the financial markets, such as an increase in interest rates or an increase in the expected required
return on equity by market participants within the industry, could increase the discount rate, thus decreasing the fair value of the assets. The cost of capital used by the Company in its analysis was
13% in 2013, ranged from 15.7% to 18.6% in 2014 and ranged from 17.6% to 18.2% in 2015.
-
-
Growth rate into perpetuity: Growth rate into perpetuity reflects the level of economic growth in each of the Company's markets from
the last forecasted period into perpetuity and is the sum of an estimated real growth rate, which reflects the long-term expectations for inflation. These assumptions are inherently uncertain. The
growth rate into perpetuity used by the Company in its 2013, 2014 and 2015 analysis was 3%, 4% and 4%. In its calculations, the perpetuity period starts after nine years. The Company's estimates of
these rates are based on observable market data.
-
-
Total television advertising market in Russia and Kazakhstan: The size of the television advertising market effectively places an
upper limit on the advertising revenue the CTC Group can expect to earn. The Company's estimate of the total Russian and Kazakh television advertising markets is developed from a number of external
non-public sources, in combination with a process of on-going consultation with operational management. In general, expenditures by advertisers tend to reflect overall economic conditions and buying
patterns. In 2015 and early 2016, Russia has experienced an economic downturn, which affected the CTC Group's expectations for the Russian advertising market for 2016 and increased uncertainty in the
medium-term. Further downturns in the macroeconomic environment, particularly the overall economic recession, may adversely affect the total advertising market, and in turn, the fair value of the
equity investment.
-
-
Market shares: This assumption is a function of the audience share that Russian and Kazakh businesses generate from their television
channels, and the relative price at which the channels can sell advertising. The Company's estimates of the market shares are developed based on historical patterns, from a number of external sources,
in combination with a process of on-going consultation with operational management. If audience shares or ratings of the CTC Group's channels, or shares or ratings of market participants, were to fall
as a result, for example, of competitive pressures, the underperformance of key programs or a change in the method of measuring television audiences, this would likely result in a decrease in the fair
value of the equity investment.
F-17
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
-
-
Forecasted operating costs and capital expenditures: The level of cash flow generated by a television channel is ultimately governed
by the extent to which the channel manages the relationship between revenues and costs. The Company forecasts the level of operating costs and capital expenditures by reference to (a) the
historical absolute and relative levels of costs the channels have incurred in generating revenue, (b) the operating strategy of each business, (c) specific forecasted operating costs
and capital expenditures to be incurred and (d) expectations as to what these costs would be for an average market participant. The Company's estimates of forecasted operating costs are
developed from a number of external sources, in combination with a process of on-going consultation with operational management of the Russian and Kazakh businesses.
-
-
Digitalization of broadcasting: There is currently great uncertainty regarding the effect of the implementation of digital
broadcasting on business models of the group's Russian and Kazakh operations, as it is difficult to predict accurately how the digitalization of broadcasting may affect the market. During 2015, the
plans around TV broadcasting in Russia, in particular digital broadcasting, continued to evolve. While the Company expects some of these developments to be beneficial to its businesses in Russia and
Kazakhstan, other changes may increase the uncertainties and risks with respect to current business models. As a result, the Company is required to consider a number of factors in determining the
estimated fair values of its assets which could change rapidly or unpredictably. The planned transition to digital broadcasting could impact the Company's assumptions used in its economic models and
its assessment of the fair value of its equity investment. The Company's estimates of the effect on digital broadcasting implementation are developed from a number of external sources, including
governmental plans, and CTC Investments' arrangements with RTRS, in combination with a process of on-going consultation with operational management. Depending on further information about the terms of
the transition to digital broadcasting, terms of interaction with cable and satellite providers, and other future developments, CTC Investments may need to further revise its projected cash flows,
which could adversely impact the fair value of the Company's equity investment.
New and Recently Adopted Accounting Pronouncements
In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.
ASU 2014-08 raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the
definition of a discontinued operation. For public business entities and not-for-profit entities that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an
exchange or an over-the-counter market, the ASU is effective for annual periods beginning on or after 15 December 2014 and interim periods within those years. For other entities, the ASU is
effective for annual periods beginning on or after 15 December 2014 and interim periods within annual periods beginning on or after 15 December 2015. Effective January 1, 2015,
the Company adopted ASU 2014-08.
Effective
January 1, 2015, the Company adopted Accounting Standards Update 2014-05, Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain
Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity ("ASU 2014-05"),
F-18
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting
Standards Update 2014-07, Liquidation Basis of Accounting ("ASU 2014- 07") and Accounting Standards Update 2014-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss
Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ("ASU 2014-11").
In
April 2015, the FASB issued Accounting Standards Update 2015-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2015-08"). ASU 2015-08
changes the criteria for determining which disposals can be presented as discontinued operations and modified related disclosure requirements. Under the new guidance, a discontinued operation is
defined as: (i) a disposal of a component or group of components that is disposed of or is classified as held for sale that represents a strategic shift that has or will have a major effect on
an entity's operations and financial results or (ii) an acquired business or nonprofit activity that is classified as held for sale on the date of acquisition. The standard states that a
strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business, (iii) a major equity method investment, or
(iv) other major parts of an entity. The guidance is effective prospectively for reporting periods beginning on or after December 15, 2015 and interim periods within that year.
In
June 2015, the FASB issued Accounting Standards Update 2015-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved
after the Requisite Service Period ("ASU 2015-12"). ASU 2015-12 applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a
performance target that affects vesting could be achieved after the requisite service period. That is the case when an employee is eligible to retire or otherwise terminate employment before the end
of the period in which a performance target could be achieved and still be eligible to vest in the award if and when the performance target is achieved. The amendments require that a performance
target that affects vesting and that could be achieved after the requisite service period to be treated as a performance condition. A reporting entity should apply existing guidance ASC 718 as it
relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant date fair value of the
award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the
compensation cost attributable to the periods for which the requisite service has already been rendered. The adoption of this guidance, which is effective for annual periods and interim periods within
those annual periods beginning after December 15, 2015, is not expected to have a material effect on the Company's balance sheet or results of operations.
In
August 2015, the FASB issued Accounting Standards Update 2015-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2015-15").
ASU 2015-15 requires management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing
standards. Specifically, the amendments (1) provide a definition of the term "substantial doubt", (2) require an evaluation every reporting period including interim periods,
(3) provide principles for considering the mitigating effect of management's plans, (4) require certain disclosures when substantial doubt is alleviated as a result of the consideration
of management's plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of
F-19
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
one
year after the date that the financial statements are issued (or available to be issued). The adoption of this guidance, which is effective for the annual period ending after December 15,
2016, and for annual periods and interim periods thereafter, is not expected to have a material effect on the Company's balance sheet or results of operations.
In
January 2015, the FASB issued Accounting Standards Update 2015-01, Income StatementExtraordinary and Unusual Items ("ASU 2015-01"). ASU 2015-01 eliminates from GAAP the
concept of extraordinary items. Eliminating the concept of extraordinary items will save time and reduce costs for preparers because they will not have to assess whether a particular event or
transaction event is extraordinary (even if they ultimately would conclude it is not). The adoption of this guidance, which is effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2015, is not expected to have a material effect on the Company's balance sheet or results of operations.
3. DISCONTINUED OPERATIONS
As discussed in Note 1, on December 23, 2015, the Company closed the sale of 75% of the outstanding participation interests in its subsidiary CTC Investments to UTH, a
private television broadcaster in Russia. The Company received $150.5 million in cash at closing. An additional $50 million was held back and was subject to adjustment based on the
performance of the business during the second half of 2015 and agreed indemnity obligations. On February 12, 2016, the Company received $42.5 million of this additional consideration in
cash, based on the final price determination. The total consideration
received in connection with the sale amounted to $193.1 million. The amount of cash disposed of at the date of a sale comprised $51,632.
CTC
Investments is a Russian holding company which controls Russian and Kazakh businesses operating CTC, Domashny, Che and CTC Love television channels in Russia and Channel 31 in
Kazakhstan. The results of these businesses have been presented as discontinued operations in the accompanying Statements of Income for the years ended December 31, 2013, 2014 and 2015. The
accompanying Balance Sheets have been adjusted to present assets and liabilities of discontinued operations separately from those of continuing operations. The following table presents major line
F-20
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
3. DISCONTINUED OPERATIONS (Continued)
items
of income/loss from discontinued operations for the years ended December 31, 2013, 2014 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
2014
|
|
2015
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
$
|
805,546
|
|
$
|
698,111
|
|
$
|
341,898
|
|
Sublicensing and other revenues
|
|
|
25,516
|
|
|
12,315
|
|
|
8,662
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
831,062
|
|
|
710,426
|
|
|
350,560
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses (exclusive of programming expenses, shown below; exclusive of depreciation and amortization of $29,024, $22,583 and $12,298 in
2013, 2014 and 2015, respectively)
|
|
|
(46,351
|
)
|
|
(45,281
|
)
|
|
(32,569
|
)
|
Selling, general and administrative (exclusive of depreciation and amortization $4,092, $3,499 and $2,004 in 2013, 2014 and 2015, respectively)
|
|
|
(167,539
|
)
|
|
(152,249
|
)
|
|
(86,631
|
)
|
Stock-based compensation benefit (expense)
|
|
|
(1,834
|
)
|
|
171
|
|
|
(4,185
|
)
|
Programming expenses
|
|
|
(338,215
|
)
|
|
(299,750
|
)
|
|
(199,288
|
)
|
Depreciation and amortization
|
|
|
(33,116
|
)
|
|
(26,082
|
)
|
|
(14,302
|
)
|
Impairment loss
|
|
|
(29,869
|
)
|
|
(29,356
|
)
|
|
(8,991
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
(616,924
|
)
|
|
(552,547
|
)
|
|
(345,966
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
|
214,138
|
|
|
157,879
|
|
|
4,594
|
|
OTHER NON-OPERATING INCOME (LOSS), net
|
|
|
14,187
|
|
|
11,698
|
|
|
2,110
|
|
Income from discontinued operations before income tax
|
|
|
228,325
|
|
|
169,577
|
|
|
6,704
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX BENEFIT/(EXPENSE)
|
|
|
(63,725
|
)
|
|
(55,283
|
)
|
|
36,610
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME BEFORE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST
|
|
$
|
164,600
|
|
$
|
114,294
|
|
$
|
43,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LESS: INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST
|
|
$
|
(7,821
|
)
|
$
|
(5,284
|
)
|
$
|
(1,386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS ON DISPOSAL, including tax benefit of $7,476:
|
|
|
|
|
|
|
|
|
(529,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Including loss on reclassification of accumulated other comprehensive losses to earnings
|
|
|
|
|
|
|
|
|
(523,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME FROM DISCONTINUED OPERATIONS
|
|
$
|
156,779
|
|
$
|
109,010
|
|
$
|
(487,201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
financial information of discontinued operations presented above include allocations of expenses from the Company's corporate headquarters to CTC Investments in the amounts of $4.1,
$3.2 and $6.1 million in 2013, 2014 and 2015, respectively. These costs primarily include salaries and stock-based compensation of operational management. Costs and expenses relating to CTC
Media, Inc. are included in the results of continuing operations. Costs related to sale of 75% in CTC Group in the
F-21
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
3. DISCONTINUED OPERATIONS (Continued)
amount
of $6.9 million are classified in discontinued operations. In addition, the Company allocated income tax benefit/(expense) to continuing operations based on pre-tax income/ (losses) of
continuing operations and a US income tax rate of 35%. The remaining portion of income tax benefit/(expense) was allocated to discontinued operations. As of September 30, 2015, the income tax
position was significantly affected by the one-off recognition of $40.2 million of deferred tax benefit resulting from the remeasurement of the Company's deferred tax liability in respect of
unremitted earnings of its Russian and Kazakh businesses. This remeasurement was triggered by a change in the Company's expectations for the US tax position due to sale transaction. Based on the terms
of the Framework Agreement, CTC Investments distributed substantially all of outstanding cash of its subsidiaries to CTC Media, Inc; this distribution was estimated to be tax free in the US due to
significant amount of foreign tax credits available to offset US income tax. Further, it was estimated that the potential sale of a 75% interest in the group's Russian and Kazakh business and
subsequent merger transaction would not result in US income tax to the Company, based on the sale price outlined in the Framework Agreement and available foreign tax credits. Accordingly, the Company
has adjusted its income tax expense in the third quarter of 2015 for the respective amount of deferred taxes.
The
following table summarizes the impairment losses which are included in income from discontinued operations (shown above) for the years ended December 31, 2013, 2014 and 2015
as a result of impairment reviews:
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2014
|
|
2015
|
|
Umbrella analog licenses
|
|
$
|
|
|
$
|
|
|
$
|
2,965
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable network connections
|
|
|
|
|
|
|
|
|
2,737
|
|
|
|
|
|
|
|
|
|
|
|
|
Che goodwill*
|
|
|
|
|
|
29,356
|
|
|
3,289
|
|
|
|
|
|
|
|
|
|
|
|
|
Production unit goodwill
|
|
|
29,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impairment losses
|
|
$
|
29,869
|
|
$
|
29,356
|
|
$
|
8,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax effect
|
|
|
|
|
|
|
|
|
(1,140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total effect on net income
|
|
$
|
29,869
|
|
$
|
29,356
|
|
$
|
7,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
*
-
In
November, 2015 Peretz channel was relaunched in a new format as Che.
At
December 23, 2015, the Company recognized loss from disposal of the 75% interest in the Russian and Kazakh businesses in the amount of $5.3 million (including
transaction costs of $6.9 million). The Company measured this loss as the difference between consideration received of $193,057, the fair value of the remaining 25% interest in CTC Investments
of $89,457 and the net assets, net of impairments, when applicable, of the respective net assets sold. At December 23, 2015, the carrying value of Russian and Kazakh businesses (after
impairment losses recorded with respect of goodwill and broadcasting licenses at that date) was $287,118. The excess of fair value of 25% interest in CTC Investments over the amount of underlying
equity in respective net assets comprised $17,678. In addition, loss on disposal includes accumulated other comprehensive loss related to the Russian and Kazakh businesses reclassified to earnings at
the date of sale, in the amount of $523,755.
F-22
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
3. DISCONTINUED OPERATIONS (Continued)
See
also
Summary of significant accounting policies
Fair Value
Measurements.
In
the years ended December 31, 2013, 2014 and 2015, total operating and investing cash flows related to discontinued operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2014
|
|
2015
|
|
Net cash provided by operating activities of discontinued operations
|
|
$
|
190,872
|
|
$
|
106,214
|
|
$
|
28,075
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities of discontinued operations
|
|
$
|
(60,791
|
)
|
$
|
56,568
|
|
$
|
61,819
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2014, assets and liabilities related to the Russian and Kazakh businesses have been presented in assets of discontinued operations and liabilities associated
with discontinued
F-23
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
3. DISCONTINUED OPERATIONS (Continued)
operations,
respectively. At December 31, 2014, the carrying amounts of the major classes of these assets and liabilities were as follows:
|
|
|
|
|
|
|
December 31,
2014
|
|
CURRENT ASSETS OF DISCONTINUED OPERATIONS:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
31,700
|
|
Short-term investments
|
|
|
77,800
|
|
Trade accounts receivable
|
|
|
25,504
|
|
Taxes reclaimable
|
|
|
9,693
|
|
Prepayments
|
|
|
42,503
|
|
Programming rights
|
|
|
112,708
|
|
Deferred tax assets
|
|
|
20,307
|
|
Other current assets
|
|
|
63
|
|
|
|
|
|
|
TOTAL CURRENT ASSETS
|
|
|
320,278
|
|
|
|
|
|
|
NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS:
|
|
|
|
|
Property and equipment
|
|
|
18,503
|
|
Intangible assets:
|
|
|
45,969
|
|
Goodwill
|
|
|
53,627
|
|
Programming rights
|
|
|
72,446
|
|
Investments in and advances to investees
|
|
|
3,167
|
|
Prepayments
|
|
|
13,719
|
|
Deferred tax assets
|
|
|
8,264
|
|
Other non-current assets
|
|
|
6,929
|
|
|
|
|
|
|
TOTAL ASSETS ASSOCIATED WITH ASSETS OF DISCONTINUED OPERATIONS
|
|
|
542,902
|
|
|
|
|
|
|
CURRENT LIABILITIES ASSOCIATED WITH ASSETS OF DISCONTINUED OPERATIONS:
|
|
|
|
|
Bank loans
|
|
|
2,192
|
|
Accounts payable
|
|
|
54,371
|
|
Accrued liabilities
|
|
|
15,027
|
|
Taxes payable
|
|
|
15,440
|
|
Deferred revenue
|
|
|
6,650
|
|
Deferred tax liabilities
|
|
|
58,827
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES ASSOCIATED WITH ASSETS OF DISCONTINUED OPERATIONS
|
|
|
152,507
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES ASSOCIATED WITH ASSETS OF DISCONTINUED OPERATIONS:
|
|
|
|
|
Deferred tax liabilities
|
|
|
6,910
|
|
F-24
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
4. NET INCOME PER SHARE
Basic net income from continuing operation per share for the years ended December 31, 2013, 2014 and 2015 is computed on the basis of the weighted average number of common shares
outstanding during the period. Diluted net income from continuing operations per share is computed using the weighted average number of common shares and, if dilutive, potential common shares
outstanding during the period. Potential common shares are calculated using the "treasury stock" method and consist of shares underlying outstanding equity awards. The number of shares excluded from
the diluted net income per common share computation because their effect was antidilutive for the years ended December 31, 2013, 2014 and 2015, was 2,306,665, 1,435,139 and 347,362,
respectively.
The
components of basic and diluted net income from continuing operations per share were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2013
|
|
2014
|
|
2015
|
|
Net loss from continuing operations
|
|
$
|
(4,439
|
)
|
$
|
(918
|
)
|
$
|
(3,076
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) from discontinued operations, net of income tax
|
|
|
156,779
|
|
|
109,010
|
|
|
(487,201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income /(loss)
|
|
$
|
152,340
|
|
$
|
108,092
|
|
$
|
(490,277
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstandingbasic Common stock
|
|
|
156,889,533
|
|
|
155,747,225
|
|
|
156,023,836
|
|
Dilutive effect of:
|
|
|
|
|
|
|
|
|
|
|
Stock-based awards
|
|
|
42,919
|
|
|
261,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstandingdiluted
|
|
|
156,932,452
|
|
|
156,008,428
|
|
|
156,023,836
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/ (loss) from continuing operations per share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.03
|
)
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
Diluted
|
|
$
|
(0.03
|
)
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
Net Income/(loss) from discontinued operations per share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.00
|
|
$
|
0.70
|
|
$
|
(3.12
|
)
|
Diluted
|
|
$
|
1.00
|
|
$
|
0.70
|
|
$
|
(3.12
|
)
|
Net income/(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.97
|
|
$
|
0.69
|
|
$
|
(3.14
|
)
|
Diluted
|
|
$
|
0.97
|
|
$
|
0.69
|
|
$
|
(3.14
|
)
|
5. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS; RECEIVABLE FROM UTH AND OTHER NON-CURRENT ASSETS
The Company's cash and cash equivalents and short-term investments comprise bank accounts and term deposits. Deposits with an original maturity ranging from 91 to 365 days are
classified as
F-25
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
5. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS; RECEIVABLE FROM UTH AND OTHER NON-CURRENT ASSETS (Continued)
short-term
investments. Below are breakdowns of cash and cash equivalents and short-term investments:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2014
|
|
2015
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
Russian ruble bank accounts
|
|
$
|
1,065
|
|
$
|
97
|
|
US dollar bank accounts
|
|
|
5,061
|
|
|
209,690
|
|
Other
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
$
|
6,136
|
|
$
|
209,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
Ruble-denominated deposits
|
|
$
|
|
|
$
|
|
|
U.S. dollar-denominated deposits
|
|
$
|
26,000
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
|
$
|
26,000
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivable from UTH
As discussed in Note 1, on December 23, 2015, the Company closed the sale of 75% of the outstanding participation
interests in its subsidiary CTC Investments to UTH. CTC Media, Inc. received $150.5 million in cash at closing. An additional $50 million was held back and was subject to
adjustment based on the performance of the business during the second half of 2015 and agreed indemnity obligations. Based on the final price determination, additional cash consideration of
$42.5 million was received on February 12, 2016. This amount was classified as a receivable from sale of CTC Investments as of December 31, 2015.
Other non-current assets
On March 14, 2014, the Office of Foreign Assets Control of the U.S. Department of Treasury ("OFAC") designated Bank
Rossiya as a Specially Designated National and Blocked Person ("SDN") for the purposes of U.S. economic sanctions. As of that date, Bank Rossiya directly or indirectly owned more than 50% of Telcrest
Investments Limited ("Telcrest") and Telcrest was accordingly also considered an SDN for the purposes of U.S. sanctions at such time. As a result, the shares of the Company's common stock, among other
property, held by Telcrest that were in the possession or control of the Company or Computershare, the Company's transfer agent, were reported to OFAC as blocked property pursuant to applicable
sanctions requirements. The Company declared dividends to Telcrest in 2015 and prior years, which cumulatively equalled $27.7 million and $34.6 million at December 31, 2014 and 2015,
respectively, which were blocked pursuant to the U.S. sanctions described above and paid into a separate interest-bearing bank account for the benefit of Telcrest, but to which Telcrest will not have
access until such time as OFAC authorizes their unblocking. These funds are classified by the Company as other non-current assets at December 31, 2014 and 2015.
6. INVESTMENTS IN EQUITY INVESTEES
As of December 31, 2015, following the sale transaction described above, the Company accounts for its remaining 25% interest in CTC Investments under the equity method. See
Note 1. At the date
F-26
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
6. INVESTMENTS IN EQUITY INVESTEES (Continued)
of
closing the sale, the Company recorded its share in the net assets of CTC Investments at the estimated fair value of $89,457.
The
Company's estimate of the fair value of its equity investments is highly dependent on the changing macroeconomic environment and political headwinds. There is considerable
uncertainty concerning economic stability globally in the medium-term, including uncertainty over the impact of changes in the global economy on the Russian television advertising market. Also, the
fair value estimates are also highly sensitive to the cost of capital used by the Company in the discounting of expected cash flows attributable to its equity investment in CTC Investments. The
potential negative trends in the macroeconomic environment could increase the risk to investors investing in Russian markets, which could increase the cost of capital, which in turn will decrease the
fair value equity investment. Additionally, changes in the financial markets, such as an increase in interest rates or an increase in the expected required return on equity by market participants
within the industry, could increase the discount rate, thus decreasing the fair value of assets. See also Note 2Summary of significant accounting policiesFair value
measurements.
Summarized
balance sheet data of CTC Investments as of December 31, 2015 is as follows:
|
|
|
|
|
|
|
December 31,
2015
|
|
Current assets:
|
|
|
186,989
|
|
Non-current assets:
|
|
|
166,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS:
|
|
|
353,250
|
|
|
|
|
|
|
Current liabilities:
|
|
|
69,752
|
|
Non-current liabilities:
|
|
|
2,850
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
72,602
|
|
|
|
|
|
|
Non-controlling interest
|
|
|
6,184
|
|
|
|
|
|
|
7. INCOME TAXES
Income taxes provided for financial reporting purposes are determined on a basis consistent with the tax filing positions the Company takes in its tax returns. The Company is a US legal
entity and as a result, the Company's tax filing positions in the US are substantially impacted by its interpretations of tax law and how are they applied in determining US taxes payable. The
judgments and estimates it uses may at times significantly impact its determination of taxes payable in the US. The Company is subject to income tax at a basic rate of 35%. Effective January 1,
2007, the Company elected to claim foreign tax credits ("FTCs"). FTCs allow the Company to decrease its US income tax by the amount of appropriate foreign income and withholding taxes. In addition,
The Company is subject to the Double Tax Treaty of 1992 between the United States and Russia ("Treaty"). After the sale of 75% interest in CTC Investments (see Note 3), the Company's continuing
operations before income taxes primarily represents financial results from domestic operations of CTC Media, Inc. US taxable income or losses recorded are reported on CTC Media, Inc.'s
US income tax return. Dividends distributed to CTC Media, Inc. are subject to a Russian withholding tax of 5% under the Treaty.
F-27
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
7. INCOME TAXES (Continued)
As
of December 31, 2015, the Company's deferred tax liability represents estimated taxes from undistributed earnings from its equity investee. In addition, the Company estimates
that the amount of unrecognized income tax benefits could be up to $5.2 million, which relate to available foreign tax credits that could be used in US income tax with respect of its equity
investment.
The
tax years ended December 31, 2013, 2014 and 2015 remain subject to examination by the US tax authorities.
8. STOCKHOLDERS' EQUITY
As of December 31, 2014 and 2015, the Company's issued and outstanding share capital was as follows:
|
|
|
|
|
|
|
|
Type
|
|
December 31,
2014
|
|
December 31,
2015
|
|
Common stock issued
|
|
|
158,210,719
|
|
|
158,210,719
|
|
Less: Common stock held in treasury
|
|
|
(2,448,553
|
)
|
|
(2,106,865
|
)
|
|
|
|
|
|
|
|
|
Common stock outstanding
|
|
|
155,762,166
|
|
|
156,103,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Repurchase Program
On March 4, 2014, the Board of Directors approved an open market stock repurchase program, pursuant to which the Company was
authorized to repurchase up to 2.5 million shares of common stock in the market for use under the Company's 2014 Equity Incentive Plan. During the period ended December 31, 2014, the
Company repurchased 2,500,000 shares of its common stock at an average price of $11.89 per share for a total of $29,727. Treasury stock is accounted for under the cost method. In 2014 and 2015, the
Company issued 51,447 and 341,688 shares of common stock from treasury upon the exercise of RSUs under the 2013 and 2014 sub-tranche of the 2013 Equity Incentive Plan. In 2015, in connection with the
Company's Management Incentive Plan, which provided for the payment of cash bonuses of up to $6 million to specified senior executives in connection with a change in control, certain awards
under the Equity Incentive Plan were terminated. The adoption of Management Incentive Plan was accounted for as a modification of Equity Incentive Plan.
The
Company's certificate of incorporation authorizes the Company to issue 175,772,173 shares of common stock. As of December 31, 2014 and 2015, 155,762,166 and 156,103,854
shares, respectively, were outstanding. Each holder of common stock is entitled to one vote for each share of common stock held of record on all matters on which stockholders generally are entitled to
vote.
During
2013, the Company's former and current employees exercised options to purchase an aggregate of 50,000 shares of common stock, respectively, for aggregate consideration of $454.
F-28
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
8. STOCKHOLDERS' EQUITY (Continued)
Dividends
In 2015, the following dividends were declared and paid:
|
|
|
|
|
|
|
|
|
|
|
Declaration date
|
|
Per Share Dividend
|
|
Aggregate Dividend
|
|
Record Date
|
|
Payment Date
|
March 4, 2015
|
|
$
|
0.175
|
|
$
|
27,271
|
|
March 16, 2015
|
|
March 26, 2015
|
Dividends
payable to Telcrest of $6,921 for 2015 were blocked pursuant to applicable US sanctions described above in Note 5.
9. RELATED-PARTY TRANSACTIONS
Transactions of continuing operations:
Telcrest
Telcrest Investments Limited, a Cypriot company ("Telcrest"), became one of the Company's principal stockholders in June 2011. Dividends
declared to Telcrest amounted to $24,916, $27,684 and $6,921 in 2013, 2014 and 2015, respectively. In 2014 and 2015, dividends declared to Telcrest of $27,684 and $6,921, respectively, were blocked
pursuant to the US sanctions described in Note 5.
Modern Times Group MTG AB ("MTG")
Dividends declared and paid to MTG Russia AB amounted to $37,806, $42,006 and $10,502 in 2013, 2014 and 2015,
respectively.
Xenon Capital Partners
On July 28, 2015, the special committee of the Company's board of directors engaged Xenon, a financial advisory firm,
as
its financial advisor to assist the special committee in reviewing, analyzing and executing the sale and merger transactions described above. Natasha Tsukanova, the Co-Chairman of the Company's board
of directors, who was originally appointed to serve on the Company's board of directors by MTG pursuant to the stockholders agreement that was then in place between our two largest stockholders and
the Company, is a founder and managing director of Xenon. The amount of financial advisory services provided by Xenon in 2015 totaled $1.5 million.
Transactions of discontinued operations:
Transactions with Entities Related to Telcrest
Certain beneficial owners of Telcrest have investments in Russian media businesses, including
indirect
ownership interests in Channel One,
REN-TV, TRK 5 and Art Pictures (which are not targets of international economic sanctions). In 2013, 2014 and 2015, the Company's Russian businesses acquired program content from these entities, of
approximately $11.5 million, $18 million and $15 million, respectively.
In
September 2015, Telcrest informed the Company that, as a result of two transactions with third parties relating to its share capital, it was no longer 50% or more owned, directly or
indirectly, in the aggregate by one or more Specially Designated National and Blocked Persons, including Bank Rossiya (see Note 2).
Transaction with WeiT Media
The Company has entered into several production agreements with WeiT Media, a television production house that is 49%
owned by Timur Weinstein, a member of the
F-29
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
9. RELATED-PARTY TRANSACTIONS (Continued)
Company's
Board of Directors. The total amount paid to WeiT Media was approximately $5.5 million in 2014 and $3.4 million in 2015.
Transactions with Entities Related to Modern Times Group MTG AB
The Company enters into certain transactions with the MTG group for the sale
of
program rights. For the year ending December 31, 2015, these transactions amounted to approximately $0.6 million.
10. COMMITMENTS AND CONTINGENCIES
In December 2015, the Company's stockholders approved a previously-announced merger transaction to return value in cash to the Company's stockholders (other than Telcrest, for so long as
the shares of Company common stock it holds remain blocked property pursuant to applicable sanctions). Upon consummation of the merger, CTCM Merger Sub, Inc., the Company's wholly owned
subsidiary, would merge with and into the Company, with the Company surviving, and each holder of the Company's outstanding common stock as of the effective time of the merger, other than Telcrest,
will be entitled to receive cash consideration per share based on the aggregate amount of the Company's available cash as of the time of the merger, net of the cash reserves that will be appropriate
in light of potential liabilities. The shares of common stock held by Telcrest would remain outstanding following the merger, and Telcrest would be the Company's sole stockholder. Following the
merger, the Company would cease to be a publicly traded company. The Company has received a license from the Office of Foreign Assets Control of the U.S. Treasury Department authorizing the merger
transaction. The Company expects the merger to complete in the second quarter of 2016.
Operating environment in Russia and Kazakhstan
Economic environment
Significant uncertainty exists surrounding the current geopolitical situation in Ukraine. The United States, the European Union
and other countries have imposed economic sanctions on certain Russian government officials, other individuals and certain Russian companies in connection with recent developments in Ukraine and
Crimea. Neither the Company, nor any of its Russian operations or assets, are a target of current sanctions and the Company and its equity investee, CTC Investments and its subsidiaries do not appear
on the United States and European Union lists of sanctioned parties. However, there is significant uncertainty regarding the
extent or timing of any potential further economic or trade sanctions, or the ultimate outcome of the Ukrainian crisis. The current situation in Ukraine had a broad impact on the macroeconomic
environment of the region. These factors, in conjunction with global macroeconomic weakness, may adversely affect the business of the Company's equity investee in Russia.
In
2015 and early 2016, Russia has experienced significant economic instability, characterized by substantial depreciation of its currency, sharp fluctuations of interest rates, a
decline in gross domestic product in 2015 and a steep decline in the value of shares traded on its stock exchanges. Any continuing economic and political instability, potentially including continued
or additional international economic sanctions, could have a negative impact on television advertising spending in future periods. If overall spending by the largest multinational advertisers in the
Russian television advertising market falls substantially further, the results of operations of the Company's equity investment in Russia will be materially adversely impacted.
F-30
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
10. COMMITMENTS AND CONTINGENCIES (Continued)
Exchange Rate
Although the Company's reporting currency is the US dollar, the functional currency of its equity investment is primarily the Russian
ruble. As a result, the reported results of the Company's equity investment are impacted by fluctuations in the exchange rate between the US dollar and the Russian ruble. Additionally, given that the
majority of the Company's equity investment's revenues are generated in Russian rubles, the Company faces exchange rate risk relating to payments that the Russian businesses must make in US dollars.
In 2015, the Russian ruble depreciated against the US dollar by 23%, and was on average 37% lower than the average value of the Russian ruble compared to the US dollar during 2014. In 2014, the
Russian ruble depreciated against the US dollar by 42%, and was on average 17% lower than the average value of the Russian ruble compared to the US dollar during 2013.
The
prevailing exchange rate as of December 31, 2015 was RUR 72.88 to $1.00. During the period from December 31, 2015 to March 29, 2016, the Russian ruble slightly
appreciated against the US dollar to RUR 68.78 to $1.00. If the exchange rate between the ruble and the US dollar were to depreciate further, the results of operations of the Company's equity
investment in Russia and Kazakhstan will be materially adversely impacted.
In the ordinary course of business, the Company and CTC Investments may be party to various legal and tax proceedings, including tax
audits, and subject to claims, certain of which may relate to the developing markets and evolving fiscal and regulatory environments in which the CTC Investments operates. In the opinion of
management, the Company's liability, if any, in all pending litigation, other legal proceedings or other matters, will not have a material effect upon the financial condition, results of operations or
liquidity of the Company.
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
March 31,
2014
|
|
June 30,
2014
|
|
September 30,
2014
|
|
December 31,
2014
|
|
Operating loss
|
|
|
(1,701
|
)
|
|
(1,563
|
)
|
|
(1,740
|
)
|
|
(1,814
|
)
|
Net income / (loss) from continuing operations
|
|
|
726
|
|
|
(2,447
|
)
|
|
472
|
|
|
327
|
|
Net income from discontinued operations
|
|
|
30,490
|
|
|
29,108
|
|
|
31,123
|
|
|
18,293
|
|
Net income
|
|
|
31,216
|
|
|
26,661
|
|
|
31,595
|
|
|
18,620
|
|
Net income per sharebasic
|
|
$
|
0.20
|
|
$
|
0.17
|
|
$
|
0.20
|
|
$
|
0.13
|
|
Net income per sharediluted
|
|
$
|
0.20
|
|
$
|
0.17
|
|
$
|
0.20
|
|
$
|
0.13
|
|
Net loss per share from continuing operationsbasic
|
|
$
|
0.00
|
|
$
|
(0.01
|
)
|
$
|
0.00
|
|
$
|
0.00
|
|
Net loss per share from continuing operationsdiluted
|
|
$
|
0.00
|
|
$
|
(0.01
|
)
|
$
|
0.00
|
|
$
|
0.00
|
|
Net income per share from discontinued operationsbasic
|
|
$
|
0.20
|
|
$
|
0.18
|
|
$
|
0.20
|
|
$
|
0.13
|
|
Net income per share from discontinued operationsdiluted
|
|
$
|
0.20
|
|
$
|
0.18
|
|
$
|
0.20
|
|
$
|
0.13
|
|
F-31
Table of Contents
CTC MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands of US dollars, except share and per share data)
11. QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
March 31,
2015
|
|
June 30,
2015
|
|
September 30,
2015
|
|
December 31,
2015
|
|
Operating loss
|
|
|
(1,408
|
)
|
|
(1,223
|
)
|
|
(1,250
|
)
|
|
(1,386
|
)
|
Net loss from continuing operations
|
|
|
(625
|
)
|
|
(830
|
)
|
|
(850
|
)
|
|
(771
|
)
|
Net income/ (loss) from discontinued operations
|
|
|
9,042
|
|
|
5,526
|
|
|
45,010
|
|
|
(546,779
|
)
|
Net income/ (loss)
|
|
|
8,417
|
|
|
4,696
|
|
|
44,160
|
|
|
(547,550
|
)
|
Net income/ (loss) per sharebasic
|
|
$
|
0.05
|
|
$
|
0.03
|
|
$
|
0.28
|
|
$
|
(3.51
|
)
|
Net income/ (loss) per sharediluted
|
|
$
|
0.05
|
|
$
|
0.03
|
|
$
|
0.28
|
|
$
|
(3.51
|
)
|
Net loss per share from continuing operationsbasic
|
|
$
|
0.00
|
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
0.00
|
|
Net loss per share from continuing operationsdiluted
|
|
$
|
0.00
|
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
0.00
|
|
Net income/(loss) per share from discontinued operationsbasic
|
|
$
|
0.05
|
|
$
|
0.04
|
|
$
|
0.29
|
|
$
|
(3.50
|
)
|
Net income/(loss) per share from discontinued operationsdiluted
|
|
$
|
0.05
|
|
$
|
0.04
|
|
$
|
0.29
|
|
$
|
(3.50
|
)
|
The
sum of the earnings per share for the four quarters will generally not equal earnings per share for the total year due to the changes in the average number of common shares
outstanding.
12. SUBSEQUENT EVENTS
On February 12, 2016, the Company received the final tranche of the purchase price in connection with its sale of 75% of the outstanding participation interests in its subsidiary
CTC Investments LLC to UTV-Management LLC (the "Purchaser") pursuant to the Framework Agreement, dated as of September 24, 2015, as amended, by and between the Company and the
Purchaser (the "Agreement"). The sale had previously closed on December 23, 2015 and the Company received $150.5 million in cash at closing (see Note 1). An additional
$50 million was held back at closing pursuant to the Agreement, and was subject to adjustment based on the performance of the Company during the second half of 2015 and certain indemnity
obligations. As the final tranche of the purchase price, the Company received $42.5 million of the holdback amount in cash from the Purchaser. The total consideration received in connection
with the sale was therefore $193.1 million.
On
February 29, 2016, the Office of Foreign Assets Control of the U.S. Department of Treasury issued a license authorizing CTC Media to proceed with the previously announced
cash-out merger transaction (see Note 1).
F-32
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
|
|
|
|
|
|
|
CTC MEDIA, INC.
|
|
|
By:
|
|
/s/ JEAN-PIERRE MOREL
Jean-Pierre Morel
Chief Executive Officer, Chief Financial Officer and Director
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the
date indicated.
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ JEAN-PIERRE MOREL
Jean-Pierre Morel
|
|
Chief Executive and Financial Officer
(Principal Executive, Financial and Accounting Officer)
Director
|
|
March 31, 2016
|
/s/ ANGELO CODIGNONI
Angelo Codignoni
|
|
Co-Chairman of the Board of Directors
|
|
March 31, 2016
|
/s/ NATASHA TSUKANOVA
Natasha Tsukanova
|
|
Co-Chairman of the Board of Directors
|
|
March 31, 2016
|
/s/ TAMJID BASUNIA
Tamjid Basunia
|
|
Director
|
|
March 31, 2016
|
/s/ KAJ GRADEVIK
Kaj Gradevik
|
|
Director
|
|
March 31, 2016
|
/s/ IRINA GOFMAN
Irina Gofman
|
|
Director
|
|
March 31, 2016
|
/s/ WERNER KLATTEN
Werner Klatten
|
|
Director
|
|
March 31, 2016
|
S-1
Table of Contents
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ ALEXANDER PENTYA
Alexander Pentya
|
|
Director
|
|
March 31, 2016
|
/s/ TIMUR WEINSTEIN
Timur Weinstein
|
|
Director
|
|
March 31, 2016
|
S-2
Table of Contents
EXHIBIT INDEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
Form on
which
Originally
Filed
|
|
Original
Exhibit
Number
|
|
Original Filing
Date with SEC
|
|
SEC File
Number
|
|
|
3.4
|
|
Restated Certificate of Incorporation of CTC Media
|
|
S-1
|
|
|
3.4
|
|
|
April 11, 2006
|
|
|
333-132228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.7
|
|
Amended and Restated Bylaws of CTC Media
|
|
10-K
|
|
|
3.7
|
|
|
March 2, 2009
|
|
|
000-52003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1
|
|
Specimen Certificate evidencing shares of common stock
|
|
S-1
|
|
|
4.1
|
|
|
May 12, 2006
|
|
|
333-132228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
Framework Agreement, dated as of September 24, 2015, by and between CTC Media, Inc. and UTV-Management LLC, as amended
|
|
10-K
|
|
|
10.1
|
|
|
September 25, 2015
|
|
|
000-52003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.2
|
|
Agreement and Plan of Merger, dated as of November 16, 2015, by and between CTC Media, Inc. and CTCM Merger Sub, Inc.
|
|
Definitive Proxy Statement on Schedule 14A
|
|
|
Exhibit B
|
|
|
November 17, 2015
|
|
|
000-52003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.41
|
++
|
Form of indemnification agreement between CTC Media and each of its directors and executive officers
|
|
S-1
|
|
|
10.41
|
|
|
March 6, 2006
|
|
|
333-132228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14.1
|
|
Code of Business Conduct and Ethics
|
|
10-K
|
|
|
14.1
|
|
|
March 1, 2007
|
|
|
000-52003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.1
|
|
Consent of Independent Registered Public Accounting Firm
|
|
Filed herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
|
|
Filed herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
|
|
Filed herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1
|
|
Section 1350 Certification
|
|
Filed herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS
|
*
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH
|
*
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL
|
*
|
XBRL Taxonomy Calculation Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB
|
*
|
XBRL Taxonomy Label Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE
|
*
|
XBRL Taxonomy Presentation Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF
|
*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.REF
|
*
|
XBRL Taxonomy Reference Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
-
++
-
indicates
a management contract or any compensatory plan, contract or arrangement.
-
*
-
submitted
electronically herewith.
Attached
as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of
December 31, 2014 and 2015, (ii) Consolidated Statements of Income for the years ended December 31, 2013, 2014 and 2015, (iii) Consolidated Statements of Cash Flows for the
years ended December 31, 2013, 2014 and 2015, (iv) Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2013, 2014 and 2015, and
(v) Notes to Consolidated Financial Statements.
In
accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K is deemed not filed or part of
a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act, is deemed not filed for purposes of section 18 of the Exchange Act, and otherwise is not
subject to liability under these sections.
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