financial statements, management and corporate

Transcription

FINANCIAL STATEMENTS,
MANAGEMENT AND CORPORATE
GOVERNANCE REPORT
ANNUAL CORPORATE GOVERNANCE
REPORT BALANCE SHEETS
TÍTULO CAPÍTULO
2
INDEX
1. MEDIASET ESPAÑA COMUNICACIÓN, S.A. 4
2. MEDIASET ESPAÑA COMUNICACIÓN, S.A. AND SUBSIDIARIES
106
3. ANNUAL CORPORATE GOVERNANCE REPORT200
TÍTULO CAPÍTULO
MEDIASET ESPAÑA
COMUNICACIÓN, S.A.
Financial Statements and Management Report
for the year ended December 31, 2012
4
AUDIT REPORT
MEDIASET ESPAÑA COMUNICACIÓN, S.A.
Financial Statements and Management Report
for the year ended
December 31, 2012
AUDIT REPORT ON THE FINANCIAL STATEMENTS
(Free translation of the original issued in Spanish. In case of conflict, the Spanish version prevails)
To the shareholders of MEDIASET ESPAÑA COMUNICACIÓN, S.A.:
We have audited the financial statements of MEDIASET ESPAÑA COMUNICACIÓN, S.A., which consist
of the balance sheet at December 31, 2012, the income statement, the statement of changes in equity,
the cash flow statement, and the notes thereto for the year then ended. The Company’s directors are
responsible for the preparation of the financial statements in accordance with the regulatory framework
for financial information applicable to the entity (identified in Note 2 to the accompanying financial
statements), and specifically in accordance with the accounting principles and criteria contained
therein. Our responsibility is to express an opinion on the aforementioned financial statements taken
as a whole, based upon work performed in accordance with the regulatory audit standards prevailing
in Spain, which require the examination, through the performance of selective tests, of the evidence
supporting the financial statements, and the evaluation of whether their presentation, the accounting
principles and criteria applied, and the estimates made are in agreement with the applicable regulatory
framework for financial information.
In our opinion, the accompanying 2012 financial statements give a true and fair view, in all material
aspects, of the equity and financial position of MEDIASET ESPAÑA COMUNICACIÓN, S.A. at
December 31, 2012, as well as the results of its operations and cash flows for the year then ended, in
conformity with the applicable accounting regulations regarding financial information and, especially,
the accounting principles and criteria established therein.
While not affecting our audit opinion, we wish to draw attention to the content of Note 19 to the
accompanying financial statements, which states that the Company carries out a significant part of its
transactions with other Group companies. The related-party transactions carried out in 2012 and the
corresponding balances at year end are described in that note.
The accompanying management report for 2012 contains such explanations as the directors consider
appropriate concerning the situation of MEDIASET ESPAÑA COMUNICACIÓN, S.A., the evolution of
its business and other matters; however, it is not an integral part of the financial statements. We have
checked that the accounting information included in the aforementioned management report agrees
with the 2012 financial statements. Our work as auditors is limited to verifying the management report in
accordance with the scope mentioned in this paragraph, and does not include the review of information
other than that obtained from the Company’s accounting records.
TABLE OF CONTENTS
Balance sheets at December 31, 2012 and 20118
Income statements for the years ended December 31, 2012 and 2011 10
Statements of changes in equity for the years ended
December 31, 2012 and 2011 12
Cash flow statements for the years ended
December 31, 2012 and 2011 14
Notes to the financial statements for the year ended
December 31, 2012 16
Management Report for 2012 92
BALANCE SHEETS AT DECEMBER 31, 2012 AND 2011
Thousands of euros
ASSETS
Notes
2012
2011
NON-CURRENT ASSETS
1,533,504
1,535,579
Intangible assets
6
732,961
747,970
Patents, licenses, and trademarks
229,372
237,405
Goodwill
287,979
287,979
Software
3,079
3,486
212,531
219,100
52,500
53,632
Land and buildings
30,978
27,319
Plant and other PP&E items
20,619
18,097
903
8,216
604,043
596,985
Equity instruments
590,079
589,840
Loans to companies
10,620
3,735
Audiovisual property rights
Property, plant and equipment
5
Property, plant and equipment under construction, and prepayments
Investment in group companies and associates
7
Loans to associates
Financial investments
8
Loans to third parties
Derivatives
Other financial assets
3,410
5,902
942
824
-
5,000
78
78
Deferred tax assets
15
142,980
131,090
CURRENT ASSETS
349,366
530,086
Inventories
9
5,939
7,710
5,628
7,394
311
316
166,940
200,860
5,659
12,965
Finished products
Prepayments to suppliers
Trade and other receivables
8,10
Trade receivables
Trade receivables from group companies and associates
144,509
175,689
Other receivables
5
5
Receivables from employees
47
56
15
16,720
12,145
8
118,395
191,605
Loans to companies
79,240
102,667
39,155
88,938
752
53,468
122
-
Current income tax assets
Investments in group companies and associates
19
8
Loans to companies
Derivatives
-
2,112
630
51,356
Other current assets
11
10,747
65,400
Cash and cash equivalents
12
46,593
11,043
46,593
11,043
1,882,870
2,065,665
Cash surpluses
TOTAL ASSETS
Read with the accompanying explanatory notes.
Madrid, February 27, 2013.
8
3,344
1,020
FINANCIAL STATEMENTS, MANAGEMENT AND CORPORATE GOVERNANCE REPORT. 2012
Thousands of euros
EQUITY AND LIABILITIES
Notes
2012
2011
13
1,531,101
1,520,647
1,531,101
1,520,647
203,431
203,431
203,431
203,431
1,064,247
1,064,247
283,676
200,450
Legal and statutory reserves
40,686
40,686
Other reserves
242,990
159,764
(84,745)
(84,745)
64,492
137,264
EQUITY
CAPITAL AND RESERVES
Share capital
Issued capital
Share premium
Reserves
Treasury shares
Profit for the year
NON-CURRENT LIABILITIES
30,139
33,631
Provisions
14
23,314
28,302
23,314
28,302
171
101
171
101
Provisions for contingencies and liabilities
Borrowings
8
Other financial liabilities
Deferred tax liabilities
15
6,654
5,228
CURRENT LIABILITIES
321,630
511,387
Provisions
14
-
8
Borrowings
8
71,147
159,857
Bank borrowings
131
61,759
Liabilities arising from derivative financial instruments
417
-
70,599
98,098
8,19
111,018
129,082
8
139,452
222,319
107,542
177,083
12,078
24,185
75
529
5,319
6,882
14,374
13,640
64
-
13
121
1,882,870
2,065,665
Borrowings from group companies and associates
Trade and other payables
Suppliers
Suppliers, group companies, and associates
19
Other payables
Employee benefits payable
Other payables to public administrations
15
Customer advances
Accruals
TOTAL EQUITY AND LIABILITIES
9
INCOME STATEMENT FOR THE YEARS ENDED DECEMBER 31,
2012 AND 2011
Thousands of euros
Notes
2012
2011
CONTINUING OPERATIONS
Revenue
18
696,524
830,928
689,429
822,756
7,095
8,172
(1,766)
8
15,109
14,296
(266,461)
(225,489)
(266,461)
(225,489)
19,284
28,703
19,284
28,703
(86,732)
(95,322)
Wages, salaries et al.
(72,706)
(81,194)
Social security costs
(14,026)
(14,128)
(193,179)
(228,362)
(168,467)
(197,998)
Taxes
(23,623)
(28,117)
Losses on, impairment of and change in trade provisions
(1,089)
(2,247)
(207,489)
(230,818)
Overprovisions
2,298
3,316
Impairment losses and gains (losses) on disposal of non-current assets
5,426
(7,821)
Sale
Rendering of services
Changes in inventory of finished goods and work in progress
18
Work performed by the entity and capitalized
Cost of sales
Consumption of goods for resale
18
Other operating income
Ancillary income
Employee benefits expense
18
Other operating expenses
External services
Depreciation and amortization
18
5,6
Impairment losses and losses
6
5,444
(7,240)
Gains (losses) on disposal and other gains and losses
5
(18)
(581)
(Continue)
10
(Continued)
Thousands of euros
Notes
2012
2011
(16,986)
89,439
74,044
70,420
68,272
63,541
68,272
63,541
5,772
6,879
5,073
5,486
699
1,393
(3,991)
(4,839)
(1,644)
(1,654)
(2,347)
(3,185)
(5,000)
-
(5,000)
-
Exchange gains (losses)
(144)
936
Impairment and gains (losses) on disposal of financial instruments
4,622
(7,674)
4,622
(8,517)
7
-
843
FINANCIAL RESULT
69,531
58,843
PROFIT BEFORE TAX
52,545
148,282
Income tax
15
11,947
(11,018)
PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS
64,492
137,264
DISCONTINUED OPERATIONS
-
-
64,492
137,264
OPERATING PROFIT
Finance Income
From equity investments
In group companies and associates
19
From marketable securities and other financial instruments
Of group companies and associates
19
Of third parties
Finance Cost
Borrowing from group companies and associates
19
Third-party borrowings
Change in fair value of financial instruments
8
Trading portfolio and other securities
Impairment losses and losses
Gains (losses) on disposal and other gains and losses
Profit/(loss) after tax for the year from discontinued operations
PROFIT FOR THE YEAR
11
STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED
DECEMBER 31, 2012 AND 2011
A) Statement of recognized income and expenses for the years ended December 31, 2012 and 2011
Thousands of euros
Notes
2012
2011
64,492
137,264
-
-
Available-for-sale financial assets
-
-
Other income/expense
-
-
From cash flows hedges
-
-
Currency translation differences
-
-
Grants, donations and bequests received
-
-
From actuarial gains and losses, and other adjustments
-
-
Tax effect
-
-
-
-
-
-
-
-
Other income/expense
-
-
From cash flows hedges
-
-
Grants, donations, and bequests received
-
-
Tax effect
-
-
PROFIT FOR THE PERIOD
INCOME AND EXPENSES RECOGNIZED DIRECTLY IN EQUITY
From measurement of financial instruments
TOTAL INCOME AND EXPENSE RECOGNIZED DIRECTLY IN EQUITY
AMOUNTS TRANSFERRED TO INCOME STATEMENT
From measurement of financial instruments
TOTAL AMOUNTS TRANSFERRED TO INCOME STATEMENT
-
-
TOTAL RECOGNIZED INCOME AND EXPENSE
64,492
137,264
12
B) Statement of changes in equity for the years ended December 31, 2012 and 2011
Thousands of euros
Other reserves
Share
Premium
Legal
Reserve
Reserves
for share
option
plans
ADJUSTED BALANCE AT
203,431 1,065,351
JANUARY 1, 2011
24,664
12,777
Total recognized income
and expense
Issued
Capital
Goodwill
reserve
-
Reserves
Total
other
reserves
Treasury
shares
Profit for
the year
TOTAL
188,041
200,818
(84,745)
113,934
1,523,453
-
-
-
-
-
-
-
-
137,264
137,264
Profit distribution
-
-
16,022
-
-
-
-
-
(113,934)
(97,912)
Capital increase
-
(1,104)
-
-
-
-
-
-
-
(1,104)
Transactions with shares
or own equity instruments
(net)
-
-
-
-
-
-
-
-
-
-
Incentive plans though
share-based payments
-
-
-
1,358
-
-
1,358
-
-
1,358
Merger
-
-
-
-
-
(164)
(164)
-
-
(164)
Extraordinary dividend
-
-
-
-
-
(42,248)
(42,248)
-
-
(42,248)
Other changes in equity
-
-
-
-
-
-
-
-
-
-
ADJUSTED BALANCE AT
203,431 1,064,247
December 31, 2011
40,686
14,135
-
145,629
159,764
(84,745)
137,264
1,520,647
ADJUSTED BALANCE AT
203,431 1,064,247
JANUARY 1, 2012
40,686
14,135
-
145,629
159,764
(84,745)
137,264
1,520,647
Transactions with
shareholders and owners
Total recognized income
and expense
-
-
-
-
-
-
-
-
64,492
64,492
Profit distribution
-
-
-
-
14,399
67,605
82,004
-
(137,264)
(55,260)
Capital increase
-
-
-
-
-
-
-
-
-
-
Transactions with shares
or own equity instruments
(net)
-
-
-
-
-
-
-
-
-
-
Incentive plans though
share-based payments
-
-
-
1,222
-
-
1,222
-
-
1,222
Merger
-
-
-
-
-
-
-
-
-
-
Extraordinary dividend
-
-
-
-
-
-
-
-
-
-
Other changes in equity
-
-
-
-
-
-
-
-
-
-
40,686
15,357
242,990
(84,745)
64,492
1,531,101
Transactions with
shareholders and owners
ADJUSTED BALANCE AT
203,431 1,064,247
December 31, 2012
14,399
213,234
13
CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31,
2012 AND 2011
Thousands of euros
Notes
2012
2011
Profit before tax
52,545
148,282
Adjustments to profit
127,373
196,939
CASH FLOW FROM OPERATING ACTIVITIES
Depreciation and amortization
5,6
207,489
230,818
Impairment losses
6,7
(10,067)
22,388
(4,996)
9,314
5,000
-
(74,044)
(70,420)
Finance costs
3,991
4,839
Change in working capital
11,944
(19,679)
1,771
3,983
38,495
131,563
54,653
(55,537)
(82,867)
(99,712)
Other current liabilities
(108)
24
Other cash flows from operating activities
57,500
52,639
Interest paid
(3,991)
(4,839)
68,272
63,541
5,772
6,879
Income tax receipts (payments)
(12,553)
(12,942)
CASH FLOWS FROM OPERATING ACTIVITIES
249,362
378,181
Payments on investments
(234,760)
(361,950)
Group companies and associates
(16,842)
(164,474)
Intangible assets
(208,808)
(157,790)
(6,557)
(12,678)
(2,553)
(27,008)
Changes in provisions
Gains/(losses) from derecognition and disposal of financial instruments
8
Finance income
Inventories
9
Dividends received
Interest received
19
CASH FLOWS FROM INVESTING ACTIVITIES
(Continue)
14
(Continued)
Thousands of euros
Notes
2012
2011
Proceeds from disposal
137,765
77,286
Group companies and associates
82,671
-
Intangible assets
6
1,941
1,645
5
20
287
52,716
75,354
417
-
(96,995)
(284,664)
Proceeds from and payments on equity instruments
-
(1,104)
Issue of shares
-
-
Cancellation of equity instruments
-
(1,104)
Acquisitions of treasury shares
-
-
(61,557)
1,289
70
1,574
Bank borrowings
-
1,574
Other borrowings
70
-
(61,627)
(285)
Bank borrowings
(61,627)
-
Other borrowings
-
(285)
Dividends paid and payments on other equity instruments
(55,260)
(140,160)
Dividends
(55,260)
(140,160)
CASH FLOWS FROM FINANCING ACTIVITIES
(116,817)
(139,975)
-
-
35,550
(46,458)
11,043
27,534
-
29,967
46,593
11,043
Other assets
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from and payments of financial liabilities
Issues
Repayment and redemption of
8
8
NET FOREING EXCHANGE DIFFERENCE
NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at January 1
12
Cash and cash equivalents arising from merger
Cash and cash equivalents at December 31,
12
15
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR
ENDED 31 DECEMBER 2012
(THOUSANDS OF EUROS)
1.ACTIVITY
MEDIASET ESPAÑA COMUNICACIÓN, S.A. (called Gestevisión Telecinco, S.A. until April 12, 2011), (hereinafter
“the Company”) was incorporated in Madrid on March 10, 1989. Its registered address is Carretera de Fuencarral a
Alcobendas 4, 28049 Madrid.
The Company engages in the indirect management of a public television service. The Company operated seven TV
channels (Telecinco, Siete, Factoría de Ficción, Boing, Cuatro, Divinity, and Energy), having commenced test broadcasting
in 2012 of a new channel: “9.” The licenses to operate these channels were granted as follows:
• Under the terms of the State concession granted by the General Secretariat of Communications’ Resolution of
August 28, 1989 and the concession agreement contained in the public deed of October 3, 1989, as well as all natural
operations related to and as a consequence of that management.
• This agreement was renewed for ten years from April 3, 2000 under a Council of Ministers’ agreement dated March
10, 2000.
• A Council of Ministers’ resolution of November 25, 2005 extended this concession agreement as well as those of
other national concessionaires to include three DTT (digital terrestrial television) channels.
• A Council of Ministers’ agreement of March 25, 2010 renewed this concession for an additional ten years. The
Company made all the investments required to start digital transmissions pursuant to Royal Decree 2169/1998,
of October 9, which approved the Spanish National Technical Plan for Digital Terrestrial TV. Without prejudice to
the above and in conformity with Transitional Provision Two of the Audiovisual Law, on May 3, 2010 the Company
requested that the concession be changed to a license to offer an audiovisual communication service. Under the
Council of Ministers’ resolution of June 11, 2010 the concession became a 15-year license to offer an audiovisual
communication service.This license is automatically renewable for the same period provided the Company meets the
requirements of Article 28 of the Audiovisual Law 7/2010, of March 31.
• Since the analogical blackout on April 3, 2010 (when analogical broadcasts ended), and by virtue of Additional
Provision Three of Royal Decree 944/2005 on May 4, 2010, the Company has access to a multiple digital license with
national coverage, which increases the channels it manages to four.
• Following the acquisition of Sogecuatro, S.A. in 2010, the Company obtained Cuatro’s multiplex licenses (Cuatro and
three more channels).
Per Article 4 of its bylaws, the Company was incorporated for an indefinite period.
The Company became exchange-listed on June 24, 2004, when it was listed on the stock exchanges of Madrid,
Barcelona, Bilbao, and Valencia and became an IBEX-35 company on January 3, 2005.
16
Corporate transactions
On July 27, 2011, the merger of Agencia de Televisión Latino-Americana de Servicios y Noticias España, S.A.U., Sociedad
General TV Cuatro, S.A.U., and Compañía Independiente de Noticias de Televisión, S.L. by Mediaset España Comunicación,
S.A. was registered with the Madrid Mercantile Registry. Mediaset España Comunicación, S.A. was the sole shareholder
of these companies. The merger was authorized by the Board of Directors on July 22, 2011.
Mediaset España Comunicación, S.A. acquired all the absorbed companies’ assets based on the merger balance sheets at
December 31, 2010 by universal succession, and assumed all their rights and obligations without reservation, exception
or limitations as established by law.
The merger took effect for accounting purposes on January 1, 2011.
In respect of the aforementioned takeover and merger, the Company elected to apply the option set forth in Chapter
VIII,Title VII of the revised Spanish Corporation Law, approved by Royal Legislative Decree 4/2004 of March 5, regarding
mergers, spin-offs, contributions of assets, and exchanges of securities.
2. BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS
The financial statements have been prepared in accordance with Spanish GAAP enacted by Royal Decree 1514/2007
of November 16, which was amended by Royal Decree 1159/2010, of September 17, and all prevailing mercantile law.
The figures shown in these financial statements are presented in Thousands of euros unless otherwise indicated.
True and fair view
The accompanying annual financial statements have been prepared from the Company’s accounting records in
accordance with prevailing accounting legislation in order to give a true and fair view of the equity, financial position, and
results of the Company, as well as the cash flows reported in the cash flow statement.
These financial statements have been prepared by the directors of the Company and will be submitted for approval by
the shareholders in general meeting. It is expected that they will be approved without modification.
Comparative information
Thus, in accordance with mercantile law, for comparative purposes the Company has included the 2011 figures in
addition to those of 2012 for each item of the balance sheet, of the income statement, of the statement of changes in
equity, of the cash flow statement, and of Notes thereto. The notes to the financial statements also include quantitative
information from the previous year, except when an accounting standard specifically establishes this as unnecessary.
Preparation of the consolidated financial statements
The Company, as the parent of a corporate group in accordance with mercantile law and given that it is a listed company,
is obliged to present consolidated financial statements in accordance with the International Accounting Standards as
approved by the European Union. Accordingly, the corresponding consolidated financial statements were prepared
together with these individual financial statements. Consolidated equity and net profit for the year ended December
31, 2012 totaled 1,408,401 thousand euros and 50,143 thousand euros, respectively.
17
Critical issues concerning the assessment of uncertainty
The preparation of the Company’s annual financial statements require the Directors to make judgments, estimates,
and assumptions which affect the application of accounting principles and the balances of assets, liabilities, income and
expenses, and the disclosure of contingent assets and liabilities at the reporting date. These estimates and assumptions
are based on historical experience and various other factors believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying amount of the assets and liabilities that are not
readily apparent from other sources. Those estimates and assumptions are reviewed on an ongoing basis. The effects of
the reviews of the accounting estimates are recognized in the period during which they are carried out, if they relate
solely to that period, or in the period reviewed and future periods if the review affects both current and future periods.
Nevertheless, the uncertainty inherent in the estimates and assumptions may lead to results that necessitate adjusting
the carrying values of the assets and liabilities affected in the future.
Aside from the general process of making systematic and periodically revising estimates, the directors made certain value
judgments on issues that have a special effect on the financial statements.
The main judgments as well as the estimates and assumptions regarding future events, and other uncertain sources of
estimates at the date of preparation of the financial statements that may cause corrections to assets and liabilities are
as follows:
Impairment of non-current assets
When measuring non-current assets other than financial assets, especially goodwill and intangible assets with an indefinite useful life, estimates must be made to determine their fair value to assess if they are impaired. To determine fair
value, the directors estimate the expected cash flows from assets or the cash-generating units to which they belong
and apply an appropriate discount rate to calculate the present value of these cash flows.
Deferred tax assets
Deferred tax assets are recognized when the Income tax Group is likely to have future taxable profit against which
these assets may be utilized.
To determine the amount of deferred tax assets that can be recognized, the directors estimate the amounts and dates
on which future taxable profits will be obtained, and the reversion period of taxable temporary differences.
Useful life of property, plant and equipment, and intangible assets
The Company periodically reviews the useful lives of its property, plant and equipment, and its intangible assets, prospectively adjusting the provisions for depreciation when the estimates change.
Provisions
The Company recognizes provisions for risks in accordance with the accounting policy set forth in Note 4.The Company
has made judgments and estimates regarding the probability of the occurrence of said risks, as well as the amount
thereof, and has recognized a provision when the risk has been considered likely, estimating the cost that such an
occurrence would represent for it.
Calculation of fair values, values in use and present values
Estimating fair values, values in use, and present values entails calculating future cash flows and making assumptions on
the future values of flows as well as the applicable discount rates. The estimates and related assumptions are based on
historical experience and various other factors understood to be reasonable under the circumstances.
18
The Company values incentive plans through shares at fair value on the date of the concession. Making such an estimate at that date requires making estimates and judgments on the valuation option models and taking into account
the price of the option in the year, the life of the option, the price of the underlying shares, the expected volatility of
the share price, an estimate of dividend payments, and the risk-free interest rate for the life of the option.
Channel increase through access to a multiple digital license
As explained in Note 14, the Supreme Court ruled against the authorization of the fourth channel granted to the
Company on April 3, 2010 (as well as an additional channel acquired by Sociedad General de Televisión Cuatro, S.A.U.
in 2010). The directors and their legal advisors have evaluated this situation, which is discussed in Note 14.
3. APPROPRIATION OF PROFIT
The Directors have proposed the following appropriation of profit, expressed in Thousands of euros, pending approval
by the General Shareholders’ Meeting:
Amount
Proposed appropriation
Profit for the year
64,492
Total
64,492
Appropriation to
Dividends
-
Goodwill reserve
14,399
Voluntary reserves
50,093
Total
64,492
Limitations on the distribution of dividends
The Company is obliged to transfer 10% of the profit for the year to a legal reserve until this reserve reaches an
amount at least equal to 20% of share capital. Unless the balance of the reserve exceeds this amount, it cannot be
distributed to shareholders.
Once the legal or the company bylaw requirements have been met, dividends may only be distributed against profit
for the year or against freely distributable reserves if the value of equity is not lower than share capital or would not
be caused to be less than share capital by the distribution of dividends. Accordingly, profit recognized directly in equity
may not be distributed either directly or indirectly. Where losses exist from previous years that reduce the Company’s
equity to below the amount of share capital, profit must be allocated to offset these losses.
Companies are required to set aside a restricted reserve equal to the amount of goodwill shown in assets. An amount
of profit representing at least 5% of goodwill must be earmarked for this purpose. If no profit or insufficient profit is
earned, unrestricted reserves must be used for this purpose.
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4. RECOGNITION AND MEASUREMENT ACCOUNTING POLICIES
The main recognition and measurement accounting policies applied in the preparation of these financial statements are
as follows:
Intangible assets
Intangible assets are measured at cost of acquisition or production, less accumulated depreciation and any impairment
losses. Intangible assets with indefinite useful lives are not amortized but are subject to an impairment test at least
annually and whenever there are indications. An intangible asset is recognized as such only if it is likely to generate future
income for the Company and its cost can be reliably measured.
The financial expenses of specific or generic funding of assets with installation periods exceeding one year accrued
before the assets are put to use are included in the acquisition or production cost.
In each case, the Company assesses the intangible asset’s useful life to be either finite or indefinite.
Those that have finite useful lives are amortized over their estimated useful lives, and their recoverability is analyzed
when events or changes arise that indicate that the net carrying amount might not be recoverable. Amortization
methods and periods are reviewed at year end and adjusted prospectively where applicable.
Goodwill
Upon acquisition, goodwill is initially measured at cost, being the excess of the cost of the business combination over the
Company’s share in the net fair value of the acquiree’s identifiable assets, less the liabilities assumed.
Goodwill is not amortized. Instead, cash-generating units or groups of cash generating units to which goodwill has
been assigned at the acquisition date are tested for impairment at least annually, and any impairment loss is recognized
accordingly.
Goodwill impairment losses cannot be reversed in future periods.
Computer software
This includes the amounts paid for title to or the right to use computer programs; those developed in-house are
included only when they are expected to be used over several years.
Computer software maintenance costs are expensed directly in the year in which they are incurred.
Computer software is amortized over three years from the date on which it starts to be used.
Concessions, patents and trademarks
These relate mainly to trademarks and concessions for television channels.
The “Cuatro” trademark and the “Cuatro” multiplex operators’ license were identified in the Sogecuatro Group purchase
price allocation price. The “Cuatro” trademark has an estimated useful life of 20 years.
The license is considered to be an intangible asset with an indefinite useful life. Intangible assets with indefinite useful
lives are not amortized, but are assessed for impairment at least annually or when there are indications of impairment.
20
The following intangible assets are recognized under this heading:
Property rights on external audiovisual production
These rights are initially recognized at their acquisition price. If they are acquired in closed packages and the breakdown
of the individual value of each product is not provided, individual values are calculated based on a weighting factor
equivalent to the acquisition cost of products of a similar type and category, as if the acquisition were made on an
individual basis. If the contract stipulates the individual value of each product/title, this is taken directly as the asset value.
The right is recognized at the time the material becomes available for broadcasting pursuant to the contract, and
is recognized under Customer Advances until it becomes available for broadcasting. In the case of several rights
associated with a single contract that become available during the same year but on different dates, the Company
recognizes the inclusion of the rights under the contract on the date on which the first right is available for
broadcasting.
These rights are amortized based on the number of screenings, as follows:
1. Films and TV movies (non-series)
• Contractual rights for two screenings:
First screening: 50% of acquisition cost
Second screening: 50% of acquisition cost
• Contractual rights for three or more screenings:
Third screening: 20% of acquisition cost
2. Other products (series)
• Contractual rights for two or more screenings:
When a screening is sold to a third party, the value of the screening, calculated on the basis of the above percentages,
is amortized on the basis of the buyer’s territorial capacity to distribute the television signal. A cost of goods sold is
recognized based on the revenues generated in the territory where the screening has been sold and adjustments are
made to the unsold value of the screening.
When audience figures for first screenings or channel programming indicate that the net carrying amount is not in line
with the estimated real value, specific impairment provisions are recognized for each product or right.
In-house series production rights
These include productions that the Company, as the owner, may both broadcast and subsequently sell.
Their value includes both the costs incurred directly by the Company and recorded in the line “Work performed by the
entity and capitalized” of the Income Statement, and the amounts billed by third parties.
The residual value, estimated at 2% of total cost, is amortized on a straight-line basis over three years from the time the
productions are available, unless these rights are sold to third parties during the amortization period, in which case the
remaining value is expensed to the revenues generated by the sale.
21
Amortization is based on the screenings, as follows:
• Series of less than 60 minutes and/or broadcast daily.
First screening: 100% of the amortizable double value
• Series of less than 60 minutes and/or broadcast weekly
First screening: 90% of the amortizable value
Second screening: 10% of the amortizable value
In addition, the residual values of broadcasting rights over three years old, from the date of recording of the assets, are
written off.
When audience figures for first screenings or channel programming indicate that the net carrying amount is not in line
with the real estimated value, each specific product or right is amortized.
Distribution rights
These include the rights acquired by the Company for use in all windows in Spanish territory.
The cost of the right is that stated in the contract. Amortization of distribution rights is recognized on the basis of the
revenue generated in each window in which the right is used and an estimate of future revenue from each window.
When the free-to-air broadcasting or right commences, it is reclassified under “Audiovisual Property Rights.”
In the free-to-air window, the amortization of the rights is recognized in the same way as in the case of audiovisual
property rights, as detailed in the corresponding note.
Coproduction rights
These include the coproduction rights acquired by the Company for use in all windows.
The cost of the right is that stated in the contract. Amortization of distribution rights is recognized on the basis of the
revenue generated in each window in which the right is used and estimated revenue from each window.
When the free-to-air broadcasting or right commences, it is reclassified under “Audiovisual Property Rights.”
In the free-to-air window, the amortization of the rights is recognized in the same way as in the case of audiovisual
property rights, as detailed in the corresponding note.
Rights: options, scripts, development
Necessary expenses to analyze and develop new projects are recognized under this heading. Scripts acquired are
measured at cost.
When a right to a production to which it is associated commences, the right is reclassified to the related rights account
and amortized accordingly.
Master copies and dubbing
Master copies refer to the media supporting the audiovisual rights and dubbing to the cost of dubbing original versions.
These are measured at cost and amortized in the same proportion as the audiovisual rights with which they are
associated.
22
Retransmission rights
The costs for the rights to broadcast sport are recognized under “Procurements” on the separate income statement
at the cost stipulated in the agreement. The costs are recognized when each event is broadcast. Advance payments are
recognized in the balance sheet under “Current assets – Other current assets.”
Property, plant and equipment are initially measured at either acquisition or production cost.
Following initial measurement, they are stated at cost less accumulated depreciation and any impairment losses.
The financial expenses of specific or generic funding of assets with installation periods exceeding one year accrued
before the assets are put to use are included in the acquisition or production cost.
When, based on an analysis of the nature and conditions of a lease agreement, all risks and rewards incidental to
ownership of the leased item are considered to be substantially transferred to the Company, the agreement is classified
as a financial lease. Therefore, the ownership acquired through these financial leases is measured, based on its nature in
the PPE, at an amount equivalent to the lower of its fair value and the present value of the minimum payments set forth
at the beginning of the lease agreement, minus the accumulated depreciation and any impairment loss. There were no
finance lease agreements at year end 2012 and 2011.
Expenses for repairs which do not prolong the useful life of the assets, as well as maintenance expenses, are recognized
in the income statement in the year incurred. Expenses incurred for expansion or improvements which increase the
productivity or prolong the useful life of the asset are capitalized as an increase in the value of the item.
Depreciation expenses are recognized in the income statement. The elements of this item are depreciated from the
time in which they are available to be brought into service. Property, plant and equipment are depreciated by the
straight-line method during the following years of estimated useful life:
Ratio
Buildings
TV equipment
4%
20 %
Plant
10-35 %
Tools
20 %
Automobile-related material
14 %
Furniture
10 %
Data-processing equipment
25 %
Sundry inventoriable materials
20 %
The Company reviews the assets’ residual value, useful lives and the depreciation methods of property, plant and
equipment at year end and adjusts them prospectively where applicable.
Impairment of non-current non-financial assets
The Company assesses at least at each year end whether there is an indication that a non-current asset or, where
applicable, a cash-generating unit may be impaired. If any such indication exists, and in all events when goodwill or
intangible assets have indefinite useful lives, the Company estimates the asset’s recoverable amount.
23
The recoverable amount is the higher of the cash-generating unit’s (CGU) fair value less cost to sell and value in use.
When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired. To
assess value in use, expected future cash flows are discounted to their present value using risk-free market rates, adjusted
by the risks specific to the asset. For those assets that do not generate cash inflows largely independent of those from
other assets or groups of assets, the recoverable amount is determined for the CGU to which the asset belongs.
Impairment loss and its reversion are recognized in the income statement. Impairment loss is reversed only if the
circumstances giving rise to it have ceased to exist, except those related to goodwill. The reversal is limited to the
carrying amount that would have been determined had no impairment loss been recognized for the asset.
Goodwill and intangibles with indefinite lives are tested for impairment by determining the recoverable amount of the
cash-generating unit (or groups of cash-generating units) to which the goodwill relates. If the recoverable amount of
the cash-generating unit is less than the carrying amount, an impairment loss is recognized. At December 31, 2012, the
recoverable amount of the cash-generating units exceeded carrying amount.
Financial instruments
Financial assets
A) Recognition and measurement
Financial instruments are classified into one of the following categories for measurement purposes:
1. Loans and receivables
2. Held-to-maturity investments
3. Financial assets held for trading
4. Other financial assets at fair value through profit or loss
5. Investments in group companies, joint ventures and associates
6. Available-for-sale financial assets
Financial assets are initially recognized at fair value. Unless there is evidence to the contrary, fair value is the transaction
price. The transaction price is equivalent to the fair value of the consideration paid plus directly attributable transaction
costs, except, for financial assets held for trading and other financial assets at fair value through profit or loss, directly
attributable transaction costs are recognized directly in the income statement of the year in which the financial asset is
acquired. In addition, for financial assets held for trading and available-for-sale financial assets, preferential subscription
and any similar rights acquired will be part of the initial measurement.
a.1) Loans and receivables
Loans and receivables comprise financial assets arising from the sale of goods or the rendering of services in the ordinary
course of the Company’s business.The category also includes trade receivables, which are defined as financial assets that,
in addition to not being equity instruments or derivatives, have no commercial substance, have fixed or determinable
payments and are not traded on an active market.This category does not include financial assets for which the Company
might not substantially recover all of its initial investment due to circumstances other than credit impairment.
Following initial recognition, financial assets included in this category are measured at amortized cost. Interest is
recognized in the income statement using the effective interest rate method.
24
Nevertheless, trade receivables that mature within less than one year with no contractual interest rate, as well as
advances and loans to personnel, dividends receivable and called-up payments on equity instruments, the amount of
which is expected in the short term, are carried at nominal value both at initial and subsequent remeasurement, when
the effect of not discounting cash flows is not significant.
Loans and receivables maturing in less than twelve months as of the balance sheet date are classified as current, and
those maturing at over 12 months as non-current.
a.2) Held-to-maturity investments
Held-to-maturity investments include debt instruments with fixed maturities and fixed or determinable payments traded
on active markets, and which the Company has the positive intention and the financial capacity to hold to maturity.
a.3) Financial assets held for trading
A financial asset is considered to be held for trading when:
a) It is originated or acquired to be sold in the short term,
b) It is part of a portfolio of identified financial instruments that are managed together and for which there is
evidence of a recent pattern of short-term profit taking, or
c) It is a derivative financial instrument, providing that is not a financial guarantee contract and has not been designated
as a hedging instrument.
After initial recognition, these assets are stated at fair value including any transaction costs relating to their sale. Changes
to fair value are recognized in the income statement for the year. The Company maintained no investments of this type
at year end 2012 and 2011.
a.4) Other financial assets at fair value through profit or loss
This category includes hybrid financial instruments, when it is not possible to separately measure the value of the
embedded derivative or to reliably determine its fair value, either at the time of acquisition or at a subsequent date, or,
when so elected, at the time of initial recognition, because the instrument has been measured at fair value.
This category also includes all financial assets that the Company has designated, at the time of initial recognition, for
inclusion. This designation is only made when it results in more relevant information, because:
a) It eliminates or significantly reduces inconsistencies in recognition or valuation that otherwise would exist due
to the measurement of assets or liabilities or due to the recognition of losses or gains thereon through the
application of different criteria.
b) A group of financial assets or financial assets and liabilities is managed, and the return thereon is evaluated on the
basis of the assets’ fair value, according to a documented investment or risk-management strategy, and, in addition,
information regarding the Group is provided on a fair-value basis to the key management personnel.
to fair value are recognized in the income statement for the year.
25
a.5) Investments in Group companies, joint ventures, and associates
This category includes equity investments in group companies, joint ventures, and associates.
Upon initial recognition in the balance sheet, the investments are recognized at fair value, which, unless there is evidence
to the contrary, is the transaction price, which is equivalent to the fair value of the consideration paid.
Investments in Group companies are recognized, where applicable, based on accounting principles for transactions with
group companies and those used for determining the cost of business combinations in accordance with the accounting
policy governing business combinations.
When an investment is newly classified as a group company, joint venture or associate, the carrying amount of that
investment immediately prior to its new classification is taken as the cost of that investment. If applicable, any unrealized
value adjustments to the investment which have been previously recognized directly in equity are left in equity until the
investment is either sold or impaired.
Following initial measurement, these financial assets are measured at cost, less any accumulated impairment loss.
When a value must be assigned to these assets because they are derecognized or for another reason, the homogenousgroups weighted average cost method is applied, with homogenous groups understood to be those that have the same
rights. Where preferential subscription or similar rights are sold or separated for the purpose of being exercised, the cost
of these rights decreases the carrying amount of the respective assets.
a.6) Available-for-sale financial assets
This category includes debt securities and equity instruments of other companies not classified in any of the preceding
categories.
in fair value are recognized directly in equity until the investment is derecognized or determined to be impaired, at
which time the cumulative gain or loss is recognized in the income statement. However, impairment losses and foreign
exchange gains, and losses on monetary assets denominated in foreign currency are recognized in the income statement.
Interest, calculated according to the effective interest rate method and dividend income are also recognized in the
income statement.
Investments in equity instruments whose fair value cannot be reliably determined are measured at cost, less any
cumulative impairment. When a value must be assigned to these assets because they are derecognized or for another
other reason, the homogenous-groups weighted average cost method is applied, with homogenous groups understood
to be those that have the same rights. Where preferential subscription or similar rights are sold or separated for the
purpose of exercising being exercised, the cost of these rights decreases the carrying amount of the respective assets.
This amount is the fair value or the cost of the rights consistent with the measurement of the associated financial assets.
B) Interest and dividends received from financial assets
Interest and dividends from financial assets accrued subsequent to acquisition are recognized as income. Interest must
be recognized using the effective interest rate method; dividends are recognized when the right to receive them is
established.
For these purposes, financial assets are recognized separately on initial measurement, based on maturity, accrued explicit
interest receivable at that date, and the proposed dividends at the time the assets are acquired. For these purposes,
explicit interest refers to the contract interest rate applied to the financial instrument.
26
In addition, when distributed dividends are derived unmistakably from profit generated prior to the date of acquisition
given that the amounts of distributed dividends exceeded the profit generated by the associate since acquisition, the
dividends are not recognized as income and decrease the cost of the investment.
C) Impairment of financial assets
At year end, the Company evaluates if its financial assets or group of financial assets are impaired.
Financial assets recognized at amortized cost (receivables and investments held to maturity)
Valuation adjustments are made, provided that there is objective evidence that the value of a financial asset, or group
of financial assets, recognized at amortized cost has suffered an impairment loss as a result of one or more events that
have occurred after their initial recognition causing a reduction or delay in estimated future cash flows.
The impairment loss on these financial assets is the difference between their carrying value and the present value of
the future cash flows expected to be generated, minus the effective interest rate calculated at the time of their initial
recognition. For financial assets with floating interest rates, the effective interest rate corresponding to the balance sheet
date is used, in accordance with the contractual conditions. To calculate the impairment losses of a group of financial
assets, models based on statistical methods or formulas are used. For investments held to maturity as a substitute for
the present value of future cash flows, the market value of the instrument may be used, provided that it is sufficiently
reliable to be considered representative of the value that the Company might recover.
Impairment losses, as well as the reversion thereof when the amount of the loss diminishes for reasons related to a
subsequent event, are recognized as revenue or expenses, respectively, in the income statement. The reversal of an
impairment is limited to the carrying value of the credit that would have been recognized on the reversal dates had no
impairment loss been recognized.
Investments in Group companies, joint ventures, and associates
When there is objective evidence that the carrying amount of an investment will not be recoverable, the required
valuation adjustments must be made.
The valuation adjustment is the difference between the carrying amount of the investment and the recoverable amount,
which is the greater of the investment’s fair value, less costs to sell, and the present value of future cash flows derived
from the investment. Unless better evidence of the recoverable amount of the investments is available, impairment of
this type of asset has been estimated taking into account the equity of the subsidiary, adjusted by any unrealized capital
gain existing on the measurement date.
Unless financial support has been promised to the investee, no provisions are set aside in excess of the value of the
investment.
Impairment loss and its reversion are recognized as expenses or as revenue, respectively, in the income statement.
The reversal of an impairment is limited to the carrying value of the estimate that would have been recognized on the
reversal dates had no impairment loss been recognized.
When there is objective evidence of a decline in the fair value of this category of financial assets due to impairment, the
underlying capital losses recognized as “Unrealized gains (losses) reserve” in equity are taken to the income statement.
The reversal of an impairment loss is recognized in the income statement. Such reversal is limited to the carrying amount
of the financial asset that would have been recognized on the reversal date had no impairment loss been recognized.
27
D) Derecognition of financial assets
The Company derecognizes all or part of a financial asset when the contractual rights to related cash flows expire or are
transferred. In such cases, substantially all of the risks and rewards of ownership must be assigned, under circumstances
that are evaluated by comparing the Company’s exposure before and after the transfer with the variability in the
amounts, and the timing of the net cash flows of the transferred asset.
If the Company has not transferred or retained substantially all of the risks and rewards, the financial asset is derecognized
if control over the asset has not been retained. The situation is determined in accordance with the transferee’s capacity
to transfer the asset. If control over the asset is retained, the Company continues to recognize it to the extent to which it
is exposed to the changes in the value of the transferred asset, i.e., due to its continuing involvement, and the associated
liability is also derecognized.
When the financial asset is derecognized, the difference between the consideration received, net of attributable
transaction costs, including any new financial asset obtained less any liability assumed, and any cumulative gain or loss
directly recognized in equity, determines the gain or loss generated upon derecognition and is included in the income
statement in the year to which it relates.
The Company does not derecognize financial assets and it recognizes a financial liability for an amount equal to the
compensation received in the transfers of financial assets in which it has retained substantially the risks and rewards
incidental to ownership, such as discounted bills, recourse factoring, disposals of financial assets under repurchase
agreements at fixed prices or sale price plus interest, and securitizations of financial assets in which the company, as
transferor, retains subordinated debt or other types of guarantees that substantially absorb estimated losses.
Financial liabilities
A) Recognition and measurement
The Company classifies its financial liabilities into the following categories:
1. Trade and other payables
2. Financial liabilities held for trading
3. Other financial liabilities at fair value through profit or loss
Financial liabilities are initially measured at fair value, which, unless there is evidence to the contrary, is equivalent to the
fair value of the consideration received. For financial liabilities included in trade and other payables, directly attributable
transaction costs are part of the initial recognition; for other financial liabilities, these costs are recognized in the income
statement. Liabilities maturing in less than twelve months as of the balance sheet date are classified as current, and those
maturing at over twelve months as non-current.
a.1)
Trade and other payables comprises financial liabilities arising from the purchase of goods and services in the ordinary
course of the Company’s business.The category also includes non-trade payables, which are defined as financial liabilities
that, in addition to not being derivative instruments, have not commercial substance.
Upon initial recognition in the balance sheet, they are recognized at fair value, which, unless there is evidence to the
contrary, is the transaction price, which is equivalent to the fair value of the consideration received, adjusted by directly
attributable transaction costs.
28
Nevertheless, trade payables maturing within less than one year with no contractual interest rate, as well as called-up
payments on shares the amount of which is expected in the short term are carried at nominal value, both in the initial
recognition and in the subsequent recognition, when the effect of not discounting cash flows is not significant.
a.2)
Financial liabilities held for trading:
A financial liability is considered to be held for trading when:
a)
It is issued primarily for the purpose of being repurchased in the short term,
b)
It forms part of a portfolio of identified financial instruments that are managed together and for which there is
evidence of a recent pattern of short-term profit taking, or
c)
It is a derivative financial instrument, providing that is not a financial guarantee contract and has not been
designated as a hedging instrument.
Financial liabilities are initially measured at fair value, which, unless there is evidence to the contrary, is equivalent to the
fair value of the consideration received. Directly attributable transaction costs are directly recognized in the income
statement.
After initial recognition, these assets are measured at fair value including any transaction costs relating to their sale.
Changes to fair value are recognized in the income statement for the year. The Company maintained no investments of
this type at year end 2012 and 2011.
a.3)
Other financial liabilities at fair value through profit or loss
This category includes hybrid financial instruments, when it is not possible to separately measure the value of the
embedded derivative or to reliably determine its fair value, either at the time of acquisition or at a subsequent date,
or, when so elected, at the time of initial recognition, because the financial instrument has been measured at fair value.
This category also includes all financial liabilities that the Company has designated, at the time of initial recognition, for
inclusion. This designation is only made when it results in more relevant information, because:
a) It eliminates or significantly reduces inconsistencies in recognition or valuation that otherwise would exist due to
the measurement of assets or liabilities or due to the recognition of losses or gains thereon by applying different
criteria.
b) A group of financial liabilities or financial assets and liabilities is managed, and the return thereon is evaluated on
the basis of its fair value, according to a documented investment or risk-management strategy, and, in addition,
information regarding the Group is provided on a fair-value basis to the key management personnel.
to fair value are recognized in the income statement for the year. The Company maintained no investments of this type
at year end 2012 and 2011.
B) Derecognition of financial liabilities
The Company derecognizes a financial liability when the obligation under the liability is extinguished. And it also proceeds
to derecognize its own financial liabilities that it acquires, even with a view to reselling them in the future.
29
When debt instruments are exchanged, provided that their contractual terms are substantially different, the original
financial liability is derecognized and the new financial liability is recognized. Financial liabilities whose contractual terms
are substantially modified are treated in the same way.
The difference between the carrying amount of the derecognized financial asset (or part of it) and the compensation
paid, including any attributable transaction costs, which also includes any new asset transferred other than cash or liability
assumed, is recognized in the income statement in the year to which it relates.
When debt instruments are exchanged whose contractual terms are not substantially different, the original financial
liability is not derecognized, and the commissions paid are recognized as an adjustment to the carrying amount. The
amortized cost of a financial liability is determined by applying the effective interest rate, which is the rate the makes
the carrying amount of the financial liability on the modification date equal to the cash flows to be paid as per the new
terms.
Financial derivatives and hedges
Cash flow hedges are hedges to exposure to variability in cash flows attributable to a specific risk associated with
a recognized asset or liability or to a highly probable forecast transaction that may affect the income statement. The
effective portion of the gain or loss on the hedge instrument is recognized directly in equity, whereas the ineffective
portion is recognized in the income statement.
The amounts recognized in equity are transferred to the income statement when the hedged transaction affects profit
or loss, as well as when financial expense or revenue is recognized, or when a forecast sale or purchase takes place.
When the hedged item is the cost of a financial liability or asset, the amounts recognized in equity are transferred to the
initial carrying amount of the non-financial liability or asset.
If the forecast transaction is no longer expected to take place, the amounts previously recognized in equity are transferred
to the income statement. If a hedge instrument expires, is sold, terminates or is exercised without being replaced or
renegotiated, or its designation as a hedge is revoked, the amounts previously recognized in equity continue to be
recognized under that heading until the transaction occurs. If the related transaction is not expected to take place, the
amount is recognized in the income statement.
The Company’s financial derivatives at December 31, 2012 and 2011 were classified as held for trading, with gains or
losses recognized in profit or loss.
Treasury shares
Treasury shares are recognized in equity as a decrease in “Capital and reserves” when acquired. No loss or gain is shown
in the income statement on sale or cancelation. Expenses incurred in connection with transactions with treasury shares
are recognized directly in equity as a decrease in reserves.
Inventories
In-house production programs are recognized as inventories. These programs are recognized at production cost, which
is determined by considering all costs attributable to the product which are incurred by the Company.
Advances paid for programs are also included.
They are expensed when the related programs are broadcast.
When the net realizable value of inventories is less than acquisition or production cost, the corresponding provision is
recognized in the income statement.
30
This heading includes cash, current accounts, short-term deposits, and purchases of assets under resale agreements that
meet the following criteria:
• They are readily convertible to cash.
• They mature within less than three months from the acquisition date.
• The risk of change in value is insignificant.
• They are part of the Company’s standard cash management strategy.
In terms of the cash flow statement, occasional bank overdrafts used as part of the Company’s cash management
strategy are recognized as a decrease in cash and cash equivalents.
Provisions and contingencies
Provisions are recognized in the balance sheet when the Company has a present obligation (derived from a contract
or a legal provision or from an explicit or implicit obligation) as a result of past events, and a quantifiable outflow of
resources is likely to be required to settle the obligation.
Provisions are measured at the present value of the best estimate of the amount that an entity would have to pay to
settle the obligation at the balance sheet date or to transfer it to a third party at that time, with provision discount
adjustments recognized as a finance cost as they accrue. No discounts are made on provisions falling due within twelve
months that do not have a significant financial effect. Provisions are reviewed at each balance sheet date and adjusted
to reflect the current best estimate.
Compensation receivable from a third party when provisions are settled is recognized as an asset, albeit not deducted
from the amount of the provision, and provided that there is no doubt that this compensation will actually be received,
and that it does not exceed the amount of the liability recognized. When a contractual or legal relationship exists by
virtue of which the Company is required to externalize the risk, and thus it is not liable for the related obligation, the
amount of the reimbursement is deducted from the amount of the provision.
In addition, contingent liabilities are considered to be possible obligations that arise from past events whose materialization
depends on the occurrence of future events not wholly within the Company’s control, as well as present obligations
arising from past events regarding which it is not probable that an outflow of resources will be required to settle them or
which cannot be reliably measured. Contingent liabilities are not recognized in the financial statements but are disclosed
in the accompanying notes, unless the likelihood of an outflow of resources is considered remote.
Equity-settled transactions
The Company maintains share option plans related to the compensation system for executive directors and board
members that are settled by delivering Company shares. The employee benefits expense is determined based on the
fair value of the share options to be awarded on the date the option is granted. This expense is recognized over the
stipulated three-year period during which the services are rendered. The fair value of share options established at the
date the award was granted is not modified.
The options’ fair value is measured based on an internal valuation using valuation option models —specifically, the
binomial method— and taking into account the price of the option in the year, the life of the option, the price of the
underlying shares, the expected volatility of the share price, estimated dividend payments, and the risk-free interest rate
for the life of the option.
31
The granting of Company shares to the other executive directors and directors of group companies is recognized in the
financial statements by increasing the value of the investment of said subsidiaries.
Transactions in foreign currency
The financial statements are presented in Thousands of euros, which is the Company’s functional currency.
Monetary items
Transactions in foreign currency are initially recognized at the exchange rate prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currency are translated at the exchange rate prevailing at the
balance sheet date. All exchange gains or losses arising from translation as well as those arising when balance sheet items
are settled are recognized in the income statement.
Non-monetary items
Non-monetary items measured at historical cost are translated at the exchange rate prevailing on the date of the
transaction.
Non-monetary items measured at fair value are translated at the exchange rate prevailing when the fair value is
determined. When a gain or loss on a non-monetary item is recognized directly in equity, any exchange component of
that gain or loss is recognized directly in equity. Conversely, when a gain or loss on a non-monetary item is recognized
in profit or loss, any exchange component of that gain or loss is recognized in the income statement.
Income tax
Since 1999, the Company has filed its income tax return on a consolidated basis with two of its subsidiaries: Grupo
Editorial Tele 5, S.A.U. and Estudios Picasso Fábrica de Ficción, S.A.U. In 2000, Agencia de Televisión Latinoamericana de
Servicios y Noticias España, S.A.U., Agencia de Televisión Latinoamericana de Servicios y Noticias Andalucía S.A., and
Agencia de Televisión Latinoamericana de Servicios y Noticias Levante S.A. were included in the consolidated tax group.
In 2001, Digitel 5 Media, S.A.U. was included.
In 2002, Agencia de Televisión Latinoamericana de Servicios y Noticias Galicia, S.A. and Agencia de Televisión
Latinoamericana de Servicios y Noticias Cataluña, S.A.U. were included.
In 2004, Micartera Media, S.A.U. was included.
In 2004, due to the merger by absorption of Agencia de Televisión Latinoamericana de Servicios y Noticias Andalucía S.A.,
Agencia de Televisión Latinoamericana de Servicios y Noticias Levante S.A., and Agencia de Televisión Latinoamericana
de Servicios y Noticias Galicia, S.A. into Agencia de Televisión Latinoamericana de Servicios y Noticias Cataluña, S.A.U.,
which subsequently changed its business name to Atlas Media, S.A.U., the acquirees ceased to exist.
In 2005, Publiespaña, S.A.U., Publimedia Gestión, S.A.U., and Advanced Media, S.A.U. were included.
In 2006, Digitel 5 Media, S.A.U. was excluded, since a resolution had been passed in July 2006 to dissolve and liquidate it.
In 2007, Mediacinco Cartera, S.L. was included and Estudios Picasso Fábrica de Ficción, S.A.U. changed its company name
to Telecinco Cinema, S.A.U.
In 2008, Conecta 5 Telecinco, S.A.U. was included.
32
In 2009, Canal Factoria de Ficción, S.A.U. was included.
In 2010, Advanced Media, S.A.U. was excluded as on March 25, 2010 it was agreed to dissolve and liquidate the company.
In 2011, Sogecable Media, S.L.U and Sogecable Editorial, S.L.U. were included. As a result of the merger of Agencia de
Televisión Latinoamericana de Servicios and Noticias España, S.A.U., they no longer form part of the tax group.
Premiere Megaplex, S.A.U. was included in 2012; due to their dissolution and liquidation, Atlas Media, S.A.U., Mi Cartera
Media, S.A.U., and Canal Factoría de Ficción, S.A.U. were excluded.
Income tax expense for the year is calculated as the sum of current tax resulting from applying the corresponding tax
rate to taxable profit for the year, less any applicable rebates and tax credits, taking into account changes during the year
in recognized deferred tax assets and liabilities. The corresponding tax expense is recognized in the income statement,
except when it relates to transactions recognized directly in equity, in which case the corresponding tax expense is
recognized in equity, and in business combinations in which is recorded as other assets and liabilities of the acquired
business.
Deferred income tax is recognized on all temporary differences at the balance sheet date between the tax bases of
assets and liabilities and their carrying amounts. The tax base of an asset or liability is the amount attributed to it for tax
purposes.
The tax effect of temporary differences is included in “Deferred tax assets” or “Deferred tax liabilities” on the balance
sheet, as applicable.
Deferred tax liabilities are recognized for all temporary differences, except where disallowed by prevailing tax legislation.
The Company recognizes deferred tax assets for all deductible temporary differences, carryforward of unused tax
credits and unused tax losses, to the extent that it is probable that future taxable profit will be available against which
these assets may be utilized, except where disallowed by prevailing tax legislation.
For business combinations in which deferred tax assets have not been accounted for separately at initial recognition
because they do not meet the criteria, the deferred tax assets which are recognized during the measurement period
and which arise from new information regarding matters and circumstances existing at the acquisition date will require
an adjustment of the related goodwill. After the abovementioned measurement period, or as a result of new information
regarding matters and circumstances existing at the acquisition date, they are written off or recognized directly in equity,
depending on the applicable accounting policy.
At each financial year end, the Company assesses the deferred tax assets recognized and those that have not yet been
recognized. Based on this analysis, the Company derecognizes the asset recognized previously if it is no longer probable
that it will be recovered, or it recognizes any deferred tax asset that had not been recognized previously, provided that
it is probable that future taxable profit will be available against which these assets may be utilized.
Deferred tax assets and liabilities are measured at the tax rate expected to apply to the period in which they reverse,
as required by enacted tax laws and in the manner in which it reasonably expects to recover the asset’s carrying value
or settle the liability.
Deferred tax assets and liabilities are not discounted and are classified as non-current assets or non-current liabilities,
respectively.
33
Income and expenses
Revenue and expenses are recognized when the actual flow of the related goods and services occurs, regardless of
when the resulting monetary or financial flow arises.
Income from sales and services
Revenue is recognized according to the economic substance of the transaction.
Income is recognized when it is probable that the profit or economic benefits from the transaction will flow to the
Company and the amount of income and costs incurred or to be incurred can be reliably measured.
Revenue from the sale of goods or the rendering of services is measured at the fair value of the consideration received
or receivable stemming from those goods or services, less any discounts, rebates and similar items given by the company,
as well as indirect taxes on transactions reimbursed by third parties. Interest included in trade receivables maturing
in not more than one year that have no contractual rate of interest is included as an increase in value of the revenue,
because the effect of not discounting cash flows is not significant.
Leases
Leases in which the lessor maintains a significant portion of the risks and benefits of ownership of the leased asset
are treated as operating leases. Payments or collections carried out under contracts of this type are recognized in the
income statement throughout the period of the lease on an accrual basis.
Business combinations
Business combinations, understood as operations in which the Company acquires control of one or more businesses,
are recognized using the purchase method. Under the purchase method, assets acquired and liabilities assumed are
recognized, at the acquisition date, at fair value, provided that this value can reliably measured. In addition, the difference
between the cost of the business combination and the value of these assets and liabilities is recognized, in the income
statement, as goodwill, when the difference is positive, or as income, when the difference is negative. The criteria
contained in the section on intangible assets of these Notes apply to goodwill.
Provisional values are used to measure business combinations when the necessary valuation process has not been
completed prior to the financial year end. These values should be adjusted within a year from the date of acquisition.
Adjustments recognized to complete initial measurement are made retroactively, thus the resultant values are those
which would have been stated initially had the information been available, and therefore the comparative figures are
restated.
The cost of a business combination is determined by the sum of:
a) The fair values on the acquisition date of the assets received, the liabilities incurred or assumed, and the equity
instruments issued by the acquirer. Nonetheless, when the fair value of the business acquired is more reliable,
this value is used to estimate the fair value of the compensation paid.
b) The fair value of any contingent compensation which depends on future events or the fulfillment of certain
conditions. Such compensation must be recognized as an asset, a liability or equity depending on its nature.
Under no circumstances is the cost of the business combination to include expenses related to the issuing of equity
instruments or financial liabilities exchanged for assets acquired; these must be recognized according to the standard on
financial instruments.
34
Other fees paid to legal advisors or other professionals involved in the transaction are recorded as an expense in the
income statement. Under no circumstances are internal expenses generated as a result of any of these concepts to be
included in the cost of the business combination. Likewise, those incurred by the acquiring entity related to the business
combination are not to be included.
Generally, unless there is a more reliable valuation, the fair value of equity instruments or financial liabilities which are
provided as compensation for a business combination is the quoted price if these instruments are quoted on an active
market. If this is not the case, in the specific case of a merger and spin-off, the fair value is the value given to the shares
or participation in the acquiring company when determining the corresponding exchange ratio.
When the carrying amount of the assets provided by the acquirer as compensation is not the same as their fair value, if
applicable, the related difference is recognized in the income statement.
Related-party transactions
Related-party transactions are measured according to the valuation methods described above.
The prices of related-party transactions are adequately documented; hence the Company’s directors consider there to
be no risk of significant liabilities arising from these.
In mergers, the acquiree’s assets and liabilities are measured at the related amount in the Group’s consolidated financial
statements.
If no consolidated financial statements exist, or if the consolidated financial statements were prepared according to
IFRS, rather than Spanish GAAP, acquired assets are carried at the amount at which they are stated in the transferring
company’s separate financial statements.
Classification of current and non-current assets and liabilities
Assets and liabilities are classified in the balance sheet as current and non-current. Accordingly, assets and liabilities are
classified as current when they are associated with the Company’s operating cycle and it is expected that they will be
sold, consumed, realized or settled within the normal course of that cycle; if they differ from the aforementioned assets,
and are expected to mature, to be sold or settled within one year; if they are held for trading or are cash and cash
equivalents whose use is not restricted to one year.
Audiovisual rights, classified as intangible assets, are included in full as non-current assets. Note 6 details those which the
Company expects to use within a period of less than 12 months.
Environmental issues
In view of the business activities carried out by the Company, it does not have any environmental liability, expenses, assets,
provisions or contingencies that might be material with respect to its equity, financial position or results. Therefore, no
specific environmental disclosures have been included in these notes to the financial statements.
Termination benefits
In accordance with prevailing labor legislation, the Company is required to pay indemnities to employees who are
dismissed under certain circumstances. Reasonably quantifiable indemnity payments are recognized as an expense in
the year in which the Company creates a valid expectation on the part of the affected third parties that the dismissals
will occur.
35
5. PROPERTY, PLANT, AND EQUIPMENT
The breakdown and movements in property, plant, and equipment in 2012 and 2011 were as follows:
2012
01/01/12
Additions
Disposals
Transfers
12/31/12
Land
14,970
-
-
-
14,970
Buildings
32,443
157
-
4,951
37,551
TV equipment, plant and tools
90,582
1,930
(2,747)
5,472
95,237
Furniture and fixtures
4,027
239
(42)
-
4,224
14,801
932
(624)
157
15,266
587
32
(19)
-
600
8,216
3,267
-
(10,580)
903
165,626
6,557
(3,432)
-
168,751
Buildings
(20,094)
(1,449)
-
-
(21,543)
TV equipment, plant, and tools
(78,023)
(4,201)
2,740
-
(79,484)
(2,698)
(254)
34
-
(2,918)
(10,665)
(1,734)
620
-
(11,779)
(514)
(31)
18
-
(527)
(111,994)
(7,669)
3,412
-
(116,251)
Cost
Other PP&E
Property, plant and equipment under
construction
Total
Accumulated depreciation
Other PP&E
Total
Net carrying amount
53,632
52,500
01/01/11
Additions from
merger (Note 20)
Additions
Disposals
Transfers
12/31/11
Land
14,970
-
-
-
-
14,970
Buildings
32,387
-
-
-
56
32,443
81,852
8,122
1,328
(4,618)
3,898
90,582
3,713
159
409
(254)
-
4,027
11,550
1,370
564
(1,619)
2,936
14,801
598
29
14
(54)
-
587
3,521
1,222
10,363
-
(6,890)
8,216
148,591
10,902
12,678
(6,545)
-
165,626
2011
Cost
Other PP&E
under construction
Total
36
01/01/11
Additions from
merger (Note 20)
Additions
Disposals
Transfers
12/31/11
Buildings
(18,788)
-
(1,306)
-
-
(20,094)
(72,584)
(6,283)
(3,514)
4,358
-
(78,023)
(2,619)
(40)
(273)
234
-
(2,698)
(9,323)
(1,110)
(1,844)
1,612
-
(10,665)
(516)
(25)
(27)
54
-
(514)
(103,830)
(7,458)
(6,964)
6,258
-
(111,994)
2011
Other PP&E
Total
Net carrying amount
44,761
53,632
Additions in 2012 and 2011 are due primarily to the acquisition of plant for the Company to continue its business and
to enlargements of the buildings where it performs its operations. Decreases in 2012 and 2011 relate primarily to idle
and fully depreciated assets that the Company has eliminated from its balance sheet.
At December 31, 2012 and 2011, the amounts of fully depreciated assets still in use are as follows:
2012
2011
8,971
6,968
67,161
66,498
4
4
2,040
1,898
78,176
75,368
Other PP&E
Operating leases
Amounts recognized under “Operating leases” are as follows:
Thousands of euros
Operating lease payments recognized as loss/profit for the
year (Note 18.d).
2012
2011
635
1,159
635
1,159
The Company’s future lease payments fall due within a year and are for similar amounts to those assumed during the
year.
37
6.
INTANGIBLE ASSETS
The breakdown and movements in intangible assets in 2012 and 2011 are as follows:
2012
01/01/12
Additions
Disposals
Transfers
12/31/12
Cuatro signal transmission license
85,000
-
-
-
85,000
Merger goodwill
287,979
-
-
-
287,979
Trademarks and trade names
173,993
-
-
-
173,997
453,453
124,924
(126,861)
3,183
454,699
Master copies and Customs
7
-
-
-
7
Dubbing and other work
9,081
2,116
(266)
-
10,931
Coproduction rights
6,712
-
-
-
6,712
Fiction series rights
1,173,188
51,416
-
827
1,225,431
Distribution rights
10,397
-
-
-
10,397
Other auxiliary services (distribution)
539
-
-
-
539
Rights: options, scripts, development
836
54
(342)
-
548
4,939
793
-
(3,183)
2,549
230
787
-
(827)
190
1,600
-
(1,600)
-
-
539
425
-
(322)
642
17,939
793
(285)
322
18,769
2,226,436
181,308
(129,354)
-
2,278,390
(21,592)
(8,033)
-
-
(29,625)
(254,645)
(137,187)
126,861
-
(264,971)
(7)
-
-
-
(7)
(7,830)
(1,863)
267
-
(9,426)
Coproduction rights
(6,713)
1
-
-
(6,712)
(1,144,076)
(51,113)
-
-
(1,195,189)
Distribution rights
(10,397)
-
-
-
(10,397)
(539)
-
-
-
(539)
(14,992)
(1,625)
285
-
(16,332)
Total amortization
(1,460,791)
(199,820)
127,413
-
(1,533,198)
Impairment losses
(17,675)
(1,851)
7,295
-
(12,231)
Cost
Prepayments, audiovisual property rights
Prepayments, fiction series rights
Prepayments, fiction rights
Computer software in progress
Software
Total
Other auxiliary services (distribution)
Software
Total
Net carrying amount
38
(1,478,466)
(1,545,429)
(747,970)
732,961
Allocation
of goodwill
(Note 20)
Additions
Disposals
Transfers
12/31/11
2011
01/01/11
Merger
(Note 20)
Cuatro signal transmission license
-
-
85,000
-
-
-
85,000
Merger goodwill
-
538,039
(250,060)
-
-
-
287,979
13,372
625
160,000
-
-
-
173,993
304,245
111,127
-
127,783
(99,577)
9,875
453,453
9
-
-
-
(2)
-
7
8,117
-
-
1,053
(89)
-
9,081
Coproduction rights
6,712
-
-
-
-
-
6,712
993,361
106,523
-
76,949
(8,755)
5,110
1,173,188
Distribution rights
10,397
-
-
-
-
-
10,397
Other auxiliary services
(distribution)
539
-
-
-
-
-
539
Rights: options, scripts,
development
625
-
-
933
(501)
(221)
836
Prepayments, audiovisual property
rights
5,127
7,357
-
3,111
(781)
(9,875)
4,939
Prepayments, fiction series rights
972
-
-
4,147
-
(4,889)
230
-
-
-
1,600
-
-
1,600
449
946
-
1,226
-
(2,082)
539
14,638
1,828
-
535
(1,144)
2,082
17,939
1,358,563
766,445
(5,060)
217,337
(110,849)
-
2,226,436
(13,157)
(498)
-
(7,937)
-
-
(21,592)
(181,983)
(54,355)
9,135
(127,019)
99,577
-
(254,645)
(8)
-
-
-
1
-
(7)
(7,204)
-
-
(715)
89
-
(7,830)
Coproduction rights
(6,713)
-
-
-
-
-
(6,713)
(969,202)
(96,938)
-
(86,691)
8,755
-
(1,144,076)
Distribution rights
(10,397)
-
-
-
-
-
(10,397)
(539)
-
-
-
-
-
(539)
(12,986)
(1,296)
-
(1,492)
782
-
(14,992)
Total amortization
(1,202,189)
(153,087)
9,135
(223,854)
109,204
-
(1,460,791)
Impairment losses
(1,778)
-
(8,656)
(8,341)
1,100
-
(17,675)
Cost
Start-up expenses
Prepayments, fiction rights
Computer software in progress
Software
Total
Accumulated amortization
(distribution)
Software
Total
Net carrying amount
(1,203,967)
(1,478,466)
154,596
747,970
39
The additions relate to the acquisition of audiovisual rights for future broadcasts. The retirements mainly relate to
transmission rights which have expired and which have been fully amortized; hence the Company derecognizes these
from its balance sheet.
Outstanding provisions at year end 2012 and 2011 correspond to the net carrying amount of rights which, while
expiring later than December 31, 2012 and 2011, did not feature in the channel’s future broadcasting plans at the time
of these financial statements were prepared. Should one of the Company’s networks exercise these broadcasting rights,
the provision would be reversed and the right would be amortized for the amount of the reversal. This would not have
an impact on the income statement.
Of the total amount recognized under “Non-current assets - Audiovisual rights” in the balance sheet at December
31, 2012, the Company estimates an 80% percentage consumption for the 12 months subsequent to year end. This
estimate was based on the best information available at that date using the programming budget for the next year and
comparable to 2011 for the next 12 months.
At year end 2012, there were firm commitments to acquire audiovisual property rights available starting January 1, 2013
for a total amount of $83,939 thousand and 189,333 thousand euros. At December 31, 2012, prepayments of 2,549
thousand euros had been made in connection with said firm commitments to acquire audiovisual property rights.
At year end 2011, there were firm commitments to acquire audiovisual property rights available starting January 1, 2012
for a total amount of $139,836 thousand and 155,284 thousand euros. At December 31, 2011, prepayments of 4,758
thousand euros and $262 thousand had been made in connection with said firm commitments to acquire audiovisual
property rights.
At December 31, 2012, advances paid for fiction series totaled 190 thousand euros. At December 31, 2011, these
advances totaled 230 thousand euros.
At December 31, 2012 and 2011, the amounts of fully depreciated assets still in use are as follows:
2012
2011
39
-
Software
13,506
13,150
Co-production rights
6,712
6,712
Distribution rights
10,397
10,397
539
539
31,193
30,798
Trademarks
Impairment testing of goodwill
In accordance with accounting standards, at December 31, 2012, the Company tested its goodwill and intangibles with
indefinite lives for impairment.
The impairment test was carried out by comparing the recoverable value of the cash-generating unit to which the
goodwill and intangibles with indefinite lives are assigned with the carrying value of the cash-generating unit.
The cash-generating unit is the free-to-air TV business.
To test its goodwill for impairment, the Company took the free-to-air TV business’ strategic plan and discounted the
estimated future cash flows. The assumptions used in the cash flow estimates include the best estimate of future
trends of advertising markets, audiences and costs.
40
The Company’s estimates on the future trend of the advertising market are based on market forecasts and historic
performance, as well as its correlation to economic conditions, using reasonable projections in accordance with external information sources.
Projected income estimated for future years is calculated based on the abovementioned advertising market trend
calculation, while taking into account reasonable hypotheses regarding audience numbers.
Programming cost assumptions took into account forecasted internal and external audiovisual production costs, as
well as the amount of investment necessary to maintain audience levels.
These estimates cover a period of five years and for cash flows not considered, income to perpetuity is estimated
using a growth rate of around 2% (the percentage applied during the prior year). Estimated cash flows are discounted
at a rate that represents the current market assessment of the risk-free rate and the specific situation of the industry.
The discount rate used was slightly below 10% (2011: 9.3%).
Based on the assumptions used and the estimated cash flows calculated, no impairment was identified for either
goodwill or intangibles with indefinite lives.
Sensitivity to changes in assumptions
Management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount.
7. INVESTMENT IN GROUP COMPANIES AND ASSOCIATES
The breakdown and movements in non-current investments in Group companies and associates in 2012 and 2011
are as follows:
2012
01/01/12
Additions
Disposals
Transfers
12/31/12
Equity instruments
918,101
1,483
-
-
919,584
Impairment losses
(328,261)
(1,980)
736
-
(329,505)
Total equity instruments
589,840
(497)
736
-
590,079
Receivables from group companies (Note 8)
40,772
952
-
-
41,724
(33,627)
(1,018)
6,885
-
(27,760)
7,145
(66)
6,885
-
13,964
596,985
(563)
7,621
-
604,043
Cost
Impairment losses
Total group companies
41
01/01/11
Merger (Note
20)
Additions
Disposal from
mergers
Disposals
Transfers
12/31/11
Equity instruments
1,380,287
6,241
602
(592,723)
(18,806)
142,500
918,101
Impairment losses
(215,865)
(6,108)
1,680
-
-
Total equity instruments
1,164,422
133
2,282
(592,723)
(18,806)
34,532
589,840
Receivables from group
companies (Note 8)
246,663
-
7,600
-
-
(213,491)
40,772
(130,866)
(1,985)
(8,744)
-
-
107,968
(33,627)
115,797
(1,985)
(1,144)
-
-
(105,523)
7,145
1,280,219
(1,852)
1,138
(592,723)
(18,806)
(70,991)
596,985
2011
Cost
Impairment losses
Total group companies
(107,968) (328,261)
7.1 Description of investments in group companies and associates
The information relating to investments in group companies and associates is as follows:
12/31/12
Direct equity
interest (%)
12/31/11
Direct equity
interest (%)
Activity
Publiespaña, S.A.U.
Ctra. de Fuencarral a Alcobendas, 4, 28049
Madrid
100
100
Exclusive advertising concessionaire,
Telecinco
Premiere Megaplex, S.A.
C/ Enrique Jardiel Poncela, 4, 28016 Madrid
100
100
Gaming and betting activities
Grupo Editorial Tele 5, S.A.U.
Madrid
100
100
Exploitation of rights; production, and
distribution of publications
Telecinco Cinema, S.A.U.
Madrid
100
100
Television broadcasting services and
intermediation in the markets for
audiovisual rights
Conecta 5 Telecinco, S.A.U.
Ctra. De Fuencarral a Alcobendas, 4 28049
Madrid
100
100
Exploitation of audiovisual content on
the Internet
Editora Digital de Medios, S.L.
C/ Condesa de Venadito, 1, 3º 28027 Madrid
50
-
Digital editing, writing, and distribution of
social media information on the website
60dB Entertainment, S.L.U.
Avda. Diagonal, 558,1º 08021 Barcelona
30
-
Production of audiovisual programs
Mediacinco Cartera, S.L.
Madrid
75
75
Financial management and intermediation
services
30
Production, distribution, and exploitation
of audiovisual rights; exploitation of
industrial and intellectual property rights.
Management and financial intermediation
of audiovisual companies
Company
Group companies and associates:
Bigbang Media, S.L.
C/ Almagro, 3 28010 Madrid
30
(Continue)
42
(Continued)
Company
12/31/12
Direct equity
interest (%)
12/31/11
Direct equity
interest (%)
Activity
Pegaso Televisión, Inc.
Brickell Avenue, 1401 - Suite 33131 - Miami,
Florida
43.71
43.71
Television stations and production of
television content
Distribuidora Televisión Digital, S.A.
Avda. de los Artesanos,6 28760 Tres Cantos
Madrid
22
22
Indirect management of the public pay
TV service
Producciones Mandarina, S.L.
C/ María Tubau, 3 4º, 28050 Madrid
30
30
La Fabrica de la Tele, S.L.
C/Ángel Ganivet, 18, 28007 Madrid
30
30
Sogecable Media, S.L.U.
Madrid
100
100
Management and sale of advertising
Sogecable Editorial, S.L.U.
Madrid
100
100
Management of intellectual property
rights
Information on the year ended 12/31/12
Net
carrying
value at
12/31/12
Percentage
ownership
Share
capital
Reserves
74,343
100
601
7,285
39,880
47,766
53,558
39,837
783
100
131
(85)
736
782
992
-
120
100
120
(2,577)
6,142
3,685
8,754
5,467
-
100
160
(27,627)
3,759
(23,708)
(1,625)
-
Canal Factoria de Ficción, S.A.U.
(***)
-
-
-
-
-
-
-
-
-
100
62
(3,436)
2,985
(389)
1,417
-
40,571
75
50
56,445
(2,401)
54,094
(173)
-
60
30
200
1,897
342
2,439
476
242
Pegaso Televisión, Inc. (****)
3,540
-
-
-
-
-
-
-
DTS Distribuidora TV Digital
(**)
469,649
22
126,286
748,336
52,407
927,029
83,647
19,933
Sogecable Media, S.L.U. (*)
-
100
3
(1,467)
82
(1,382)
201
-
Sogecable Editorial, S.L.U. (*)
3
100
3
287
148
438
210
867
60Db Entertainment, S.L.U. (*)
447
30
10
495
(175)
330
(235)
-
(*)
433
50
1,000
-
(134)
866
(134)
-
Company
BigBang Media, S.L.
Profit
Total
Operating
(loss)
capital and
profit
for the
reserves
(loss)
year
Dividends
distributed
during the
year
(Continue)
43
(Continued)
Net
carrying
value at
12/31/12
Percentage
ownership
Share
capital
Reserves
La Fábrica de la Tele, S.L.
40
30
13
6,413
5,441
11,867
7,727
997
90
30
5
3,153
1,515
4,673
2,163
929
Company
Profit
Total
Operating
(loss)
capital and
profit
for the
reserves
(loss)
year
Dividends
distributed
during the
year
590,079
(*) Unaudited data
(**) Company audited by Deloitte, S.L.
(***) Dissolved and liquidated
(****) Information not available
Company
Net
carrying Percentage Share
value at ownership capital
12/31/11
Profit
(loss)
Reserves
for the
year
Total
Dividends
capital
Operating distributed
and
profit (loss) during the
reserves
year
73,920
100
601
(5,187)
51,937
47,351
71,111
50,715
-
-
-
-
-
-
-
-
Premiere Megaplex, S.A. (*)
46
100
131
(82)
(2)
47
(2)
-
Grupo Editorial Tele 5, S.A.U. (*)
120
100
120
(3,177)
6,067
3,010
8,653
6,579
-
100
160
(24,448)
(3,239)
(27,527)
(4,640)
-
Canal Factoria de Ficción, S.A.U. (****)
-
-
-
-
-
-
-
-
-
100
62
1,313
(4,749)
(3,374)
280
4,311
42,372
75
50
47,925
8,520
56,495
(2,941)
-
60
30
200
1,090
1,615
2,905
2,456
-
3,540
44
64,549
(63,499)
(1,080)
(30)
498
-
Sociedad General TV Cuatro (***)
-
-
-
-
-
-
-
-
DTS Distribuidora TV Digital (**)
469,649
22
126,286
780,283
45,117
951,686
72,020
-
-
100
3
(589)
(878)
(1,464)
(700)
-
Sogecable Editorial, S.L.U.
3
100
3
287
867
1,157
1,238
-
40
30
13
4,988
6,221
11,222
8,873
1,175
90
30
5
1,827
4,423
6,255
6,537
762
Agencia de Televisión Latinoamericana
de Servicios y Noticias de España, S.A.U.
(***)
BigBang Media, S.L.
Pegaso Televisión, Inc. (*****)
(*) Unaudited data
(**) Company audited by Deloitte, S.L.
(***) Merged into Mediaset España Comunicación, S.A.
(****) Dissolved and liquidated
(*****) Information not available
Pegaso Television, Inc. data have been calculated with an interest rate 1=USD 1.29 at December 31, 2011.
44
The profit (loss) of the group companies and associates shown in the above table corresponds entirely to continuing
operations. None of the group companies or associates is listed on the stock exchange.
A breakdown of the loans extended to the group companies at December 31, 2012 and December 31, 2011 are as
follows:
Thousands of euros
2012
2011
Conecta 5 Telecinco, S.A.
5,611
2,626
Telecinco Cinema. S.A.U.
4,791
973
218
136
10,620
3,735
Interest rates on these loans are IBOR plus a market spread.
The breakdown of “Loans to associates” at December 31, 2012 and 2011 is as follows:
Thousands of euros
2012
2011
Pegaso Televisión Inc
3,344
3,410
3,344
3,410
Interest rates on these loans are IBOR plus a market spread.
7.2 Significant movements
7.2.1. Equity instruments
a)Main changes in the year ending December 31, 2012
Acquisition of 60dB Entertainment, S.L.
On June 2, 2012, the Company assumed and fully paid in the capital increase (3 thousand euros) as well as the
corresponding share premium (497 thousand euros). The partner expressly forfeited its right to exercise the preemptive subscription rights to 3,000 new shares, which were fully assumed and paid in by the Company, which thereby
acquired 30% of 60dB Entertainment, S.L.
Acquisition of Editora Digital de Medios, S.L.
On September 26, 2012, the Company subscribed all of the newly-issued shares issued by Editorial Ecoprensa, S.A.
in accordance with the terms of the capital increase, and paid in 500 thousand euros for them. Following the capital
increase, the Company currently owns 500,000 shares with a par value of 1 euro each, representing 50% of Editora
Digital de Medios, S.L.
45
b) Main changes in the year ending December 31, 2011
Mediacinco Cartera, S.L. capital increase
In 2011, in order to a restore its equity, the Company undertook the following transactions:
• A share capital reduction of 236,996 thousand euros to offset losses.
• A share capital increase for a nominal 47 thousand euros with a share premium of 189,953 thousand euros in
compensation of participating loans.
Mediaset España Comunicación, S.A., owner of 75% of Mediacinco Cartera, S.L., assumed its share of the previous
transactions, as did the other shareholder, Mediacinco Cartera, S.L.
The participating loans held by Mediaset España Comunicación, S.A. and converted into equity amounted to 142,500
thousand euros before conversion.
Acquisition of the remaining 50% of Premiere Megaplex, S.A.
On November 28, 2011, the Company acquired the 50% of Premiere Megaplex, S.A. it did not already own for 24
thousand euros. This gave it 100% ownership of Premiere Megaplex, S.A.
Sogecable Media, S.L.U., Sogecable Editorial, S.L.U., Aprok Imagen, S.L., La Fabrica de la Tele, S.L., and Producciones
Mandarina, SL:
As a result of the merger between Agencia de Televisión Latinoamericana de Servicios España, S.A.U. and Sociedad
General de Televisión Cuatro, S.A.U., the following companies were included in Mediaset España Comunicación, S.A.’s
balance sheet (under “Non-current assets - Investments in Group companies and associates”):
• Sogecable Media, S.L.U., with a net carrying amount of 0 euros following the write-off of the value of the investment.
• Sogecable Editorial, S.L.U., with a net carrying amount of 3 thousand euros.
• Aprok Imagen, S.L., with a net carrying of amount of 0 euros following the write-off of the value of the investment.
• La Fabrica de la Tele, S.L. with a net carrying amount of 40 thousand euros.
• Producciones Mandarina, S.L., with a net carrying amount of 90 thousand euros.
Liquidation of Canal Factoría de Ficción, S.A.
On November 10, 2011, the Company decided on the simultaneous dissolution and liquidation of Canal Factoría de
Ficción, S.A.U.
7.2.2. Receivables from Group companies
Participating loan granted to Telecinco Cinema
The participating loans amounted to 28,500 thousand euros at December 31, 2012 and 2011. Give the situation of
Telecinco Cinema, S.A.U.’s equity, provisions were recognized for those loans amounting to 27,527 thousand euros in
2011 and 23,709 thousand euros in 2012.
46
Participating loan to Sogecable Media, S.L.U.
During 2012, the Company had a participating loan agreement with Sogecable Media, S.L.U. amounting to 1,600 thousand
euros (during 2011, it agreed to a partial conversion of this line of credit to a participating loan). 82 thousand euros of
the provision was reversed (a provision of 1,463 thousand euros was recognized in 2011, decreasing the amount of the
participating loan).
Participating loan to Conecta 5 Telecinco, S.A.U.
In 2012, the Company had a participating loan agreement with Conecta 5 Telecinco, S.A.U. amounting to 6,000 thousand
euros (in 2011, it agreed to a partial conversion of this line of credit to a participating loan). 2,985 thousand euros of
the provision was reversed (a provision of 3,374 thousand euros was recognized in 2011, decreasing the amount of the
participating loan).
7.2.3. Loans to associated companies
Long-term loan to Pegaso Televisión, Inc.
In 2012, 3,344 thousand euros of the long-term loan to Pegaso Television were transferred from short-term to longterm.
In 2011, 3,410 thousand euros were transferred from short-term to long-term.
7.3. Impairment testing
DTS Distribuidora de TV Digital, S.A.
At December 31, 2012, the performance of Digital+’s business during the year did not give any indications that the
investment was impaired. Therefore, it was not tested for impairment this year.
This subsidiary is engaged in cinematographic co-productions in compliance with the legal precepts that apply to
television concessionaires. Therefore, it is not possible to obtain reliably evaluate the amount recoverable either by
calculating the present value of the future cash flows from the investment or by estimating dividends to be received,
which depend on the number of productions made in the future, on the type of production, and on their commercial
success. For this reason, the Company has adjusted the valuation in accordance with the equity of the subsidiary as at
year-and 2012 and 2011. Given that the value of the capital and reserves of Telecinco Cinema, S.A.U. was negative at
December 31, 2011, a provision for the same amount as its negative equity was recognized for the participating loan
granted to the company. In 2012, a portion of this provision was reversed, due to the Company’s business performance
during the year (Note 7.2.2.).
As indicated above, Mediacinco Cartera, S.L. owns a 33% equity interest in the share capital of Edam Acquisition Holding
I Cooperative U.A., the parent company of Grupo Endemol, and has no other operating activities.
Once the impairment of Mediacinco Cartera, S.L. stemming from its interest in Grupo Endemol was recognized in its
financial statements, the Company’s interest in Mediacinco Cartera, S.L. was adjusted in accordance with its underlying
carrying amount.
47
Regarding Mediacinco’s capital increase, subscribed to by the Company through compensation of the participating loans
to restore its equity, a provision was recognized in 2011 for the equity interest in Mediacinco Cartera for the amount of
the share in the investee’s equit, which was established as 0 euros; there were no significant modifications during 2012.
Pegaso Televisión Inc.
At year end 2012 and 2011, this investment’s recoverable amount was determined from the market value of the merger
with a local operator.
Given that Sogecable Media, S.L.U. had negative equity at December 31, 2011, a provision for the same amount as its
negative equity was recognized for the participating loan granted to Sogecable Media, S.L.U. In 2012, a portion of this
provision was reversed, due to the Company’s business performance during the year (Note 7.2.2.).
Given that Conecta 5 Telecinco, S.A.U. had negative equity at December 31, 2011, a provision for the same amount as its
negative equity was recognized for the participating loan granted to it. In 2012, a portion of this provision was reversed,
due to the Company’s business performance during the year (Note 7.2.2.).
8.
FINANCIAL INSTRUMENTS
8.1 Financial Assets
The breakdown of financial assets in 2012 and 2011 was as follows:
Thousands of euros
Equity
instruments
2012
Debt
securities
Loans, derivatives, and
other financial assets
Total
2011
2012
2011
2012
2011
2012
2011
Non-current financial assets
Assets at fair value through profit or loss
Held for trading
-
-
-
-
-
-
-
-
Other
-
-
-
-
-
-
-
-
Held-to-maturity investments
-
-
-
-
-
-
-
-
Loans and receivables
-
-
-
-
14,984
13,047
14,984
13,047
Measured at fair value
-
-
-
-
-
-
-
-
Measured at cost
-
-
-
-
-
-
-
-
Hedging derivatives
-
-
-
-
-
-
-
-
-
-
-
14,984
14,984
13,047
Total
13,047
(Continue)
48
(Continued)
Thousands of euros
Equity
instruments
2012
Debt
securities
Loans, derivatives, and
Total
2011
2012
2011
2012
2011
2012
2011
Current financial assets
Held for trading
-
-
-
-
-
-
-
-
Other
-
-
-
-
-
-
-
-
Held-to-maturity investments
-
-
-
-
-
-
-
-
-
-
-
-
269,367
431,676
269,367
431,676
-
-
-
-
-
-
-
-
Measured at cost
-
-
-
-
-
-
-
-
Hedging derivatives
-
-
-
-
-
2,112
-
2,112
-
-
-
- 269,367
433,788
269,367
433,788
Total
These amounts are disclosed in the balance sheet as follows:
Thousands of euros
Total
2012
2011
Loans to companies (Note 19)
13,964
7,145
Non-current financial investments
1,020
5,902
14,984
13,047
Trade and other receivables (*) (Note 10)
150,220
188,715
Loans to group companies
118,395
191,605
752
53,468
Total
269,367
433,788
284,351
446,835
Investments in group companies and associates
Total
(*) Excludes “Current income tax assets” and “Other receivables from public Administrations”
49
a) Loans and receivables
Thousands of euros
2012
2011
13,964
7,145
942
824
-
5,000
78
78
14,984
13,047
Trade and other receivables (Note 10)
150,220
188,715
Loans to group companies (Note 19)
118,395
191,605
Loans to companies
122
-
Short-term deposits
-
50,608
630
748
269,367
431,676
Loans to Group companies
Loans to third parties (Notes 7 and 19)
Derivatives
Deposits given and prepayments
Current receivables from Group companies
Interest rates on these loans are IBOR plus a market spread. Loans to Group companies consist of swap facilities.
Also included under this heading are income tax credits with Group companies stemming from the tax consolidation.
The 142,500 thousand euro balance of participating loans in 2010 was offset in full in 2011 with the proceeds from the
capital increase and the share premium agreed by shareholders of Mediacinco Cartera, S.L. in an extraordinary meeting
as they considered the company had no reserves.
At December 31, 2010, the balance of this loan was 75,662 thousand euros, which was transferred to current loans as
it matured on June 30, 2012. In 2012, 23,712 thousand euros of this loan were partially amortized, and its maturity date
was extended to June 30, 2013, with interest at the 3-month Euribor plus a spread of 1%. The Company incorporated
the interest earned until year end to the loan, which totals 4,330 thousand euros.
Short-term deposits
During 2012, short-term deposits matured and were not renewed.
At December 31, 2011 this amount mainly related to short-term deposits with credit institutions as shown below:
Date arranged
Maturity date
Annual interest rate
Principal
(Thousands of euros)
23/12/2011
03/01/2012
3.060%
50,000
29/12/2011
05/01/2012
1.704%
570
The uncollected accrued interest on these investments was 38 thousand euros.
50
Other financial instruments
Mediaset España Comunicación, S.A. together with Sogecable (now Prisa TV) and Prisa had signed in 2010 an agreement
whereby Gestevisión Telecinco has the option to obtain recognition of certain rights in its favor related to the management of the subgroup Digital+ (DTS Distribuidora Televisión Digital, S.A. and subsidiaries).
The price of granting the option was 5,000 thousand euros, paid by Telecinco to Prisa TV.
Mediaset España Comunicación may exercise these rights within three months from the first anniversary of the
completion of the purchase of Digital+. Execution of the rights of the Option Contract and payment of the exercise
price were contingent upon the suspensive condition that the required authorization had been obtained from the antitrust authorities.
Execution of the option bore an additional premium of 5,000 thousand euros.
On August 3, 2012, the Company chose not to exercise the option, and therefore the suspensive condition was voided,
and the transaction went through; it derecognized the corresponding financial asset. The option strike price paid was
recognized as an expense on the income statement.
b) Derivatives
The Company uses derivatives to hedge its risks against foreign-currency fluctuations on the purchase of audiovisual
property rights made in the year. It also hedges against foreign currency risk on commercial transactions with customers,
and these transactions were recognized in the Company’s balance sheet of financial position. As required by the
corresponding measurement and recognition policy, these derivatives are classified as “held for trading.”
At year-end 2012, derivative financial instruments were recognized under “Financial liabilities” (Note 8.2 b.3).
The breakdown of the notional values of the derivatives outstanding in the Company at December 31, 2011 was
as follows:
USD Amount
ASSETS Notional value/
Maturity Within 1
year
Dollars Year-end rate ( /$)
rate ( /$)
Fair value
32,649
44,877
1.2939
2,112
-
-
-
-
32,649
44,877
1.2939
2,112
Unmatured foreign-currency purchases:
Purchases of dollars against euros
Sales of dollars against euros
Net balance
Foreign currency hedges on rights contracts are measured as the difference between the present value of the foreign
currency hedge at the forward rate for the contract and the value of the foreign exchange hedge at the year-end
exchange rate.
51
8.2 Financial liabilities
The breakdown of financial liabilities in 2012 and 2011 was as follows:
Thousands of euros
Bank borrowings
Bonds & other
marketable
debt securities
Derivatives and
other financial
liabilities
Total
2012
2011
2012
2011
2012
2011
2012
2011
-
-
-
-
171
101
171
101
Liabilities at fair value through profit or loss
-
-
-
-
-
-
-
-
Held for trading
-
-
-
-
-
-
-
-
Other
-
-
-
-
-
-
-
-
Hedging derivatives
-
-
-
-
-
-
-
-
-
-
-
-
171
101
171
101
131
61,759
-
-
306,695
435,859
306,826
497,618
Liabilities at fair value through profit or loss
-
-
-
-
-
-
-
-
Held for trading
-
-
-
-
-
-
-
-
Other
-
-
-
-
-
-
-
-
Hedging derivatives
-
-
-
-
417
-
417
-
131
61,759
-
-
307,112
435,859
307,243
497,618
131
61,759
-
-
307,283
435,960
307,414
497,719
Non-current financial liabilities
Current financial liabilities
These figures are classified in the balance sheet as follows:
Thousands of euros
2012
2011
Borrowings
171
101
171
101
Borrowings
71,147
159,857
Borrowings from group companies and associates (Note 19)
111,018
129,082
Trade and other payables (*)
125,078
208,679
307,243
497,618
307,414
497,719
(*) Excludes “Current income tax liabilities “ and “Other payables to public administrations”
52
a) Bank borrowings
In 2012, existing credit facilities were renewed and extended up to a total of 345,000 thousand euros. These bear
interest at IBOR plus a market spread in line with Company solvency.
Of the total 345,000 thousand euros in credit facilities, 280,000 thousand euros fall due during 2013, while the remaining
65,000 thousand euros are payable during 2014.
At December 31, 2012, the Company had undrawn credit amounting to 344,869 thousand euros. This amounts to a
considerable increase in its available working capital at December 31, 2012.
At year end 2011, the Company had credit facilities amounting to 303,000 thousand euros; 241,241 thousand euros
had not been drawn down.
b) Derivatives and other financial liabilities
b.1) Borrowings form Group companies
The interest rate on these borrowings is IBOR plus a market spread. Loans to Group companies consist of swap facilities.
Also included under this heading are current payables for income tax payable with Group companies stemming from
the tax consolidation. Note 19 provides the breakdown of these balances.
b.2) Others
The breakdown at December 31, 2012 and 2011 is as follows:
Balance 12/31/12
Balance 12/31/11
125,078
208,679
70,599
98,098
195.677
306,777
Other financial liabilities consist of current borrowings from suppliers of audiovisual rights.
b.3) Derivatives
The Company carries out derivative transactions to hedge currency risk on the purchases of audiovisual property rights
in the year and when necessary to hedge currency risk on trade transactions in other currencies with customers, which
are recognized in the Company’s balance sheet. As required by the corresponding measurement and recognition policy,
these derivatives are classified as “held for trading.”
The breakdown, by maturity, of the notional amounts of Company’s derivatives at December 31, 2012 is as follows:
Liabilities
Amount in thousand $
Notional amount/
Maturity up to one year
$
(€/$) exchange rate
26,201
34,050
1.3194
417
-
-
-
-
26.201
34,050
1.3194
417
Fair value
Purchase of unmatured currency:
Purchase of dollars in euros
Sale of dollars in euros
Net
53
At year end 2011, derivative financial instruments were recognized under “Financial assets” (Note 8.1 b).
The foreign currency derivatives associated with the property rights are measured at the difference between the
present value of the quoted foreign currency hedge at the forward exchange rate in the contract and the value of the
quoted foreign currency hedge at year end.
8.3 Risk management policy
The Company’s operations are exposed to different basic categories of financial risk:
1. Credit risk
Credit risk exists when a potential loss may arise from the Company’s counterparty not meeting its contractual obligations,
i.e., the possibility that financial assets will not be recovered at their carrying amount within the established timeframe.
The Company’s maximum exposure to credit risk at December 31, 2012 and 2011 was as follows:
Thousands of euros
2012
2011
Non-current receivables from Group companies and associates
13,964
7,145
1,020
5,902
150,220
188,715
Current receivables from Group companies and associates
118,395
191,605
752
53,468
46,593
11,043
330,944
457,878
Current investments
For the purposes of credit risk management the Company differentiates between financial assets arising from operations
and those arising from investments.
Operating activities
Most of the balance of trade payables consists of operations with Group companies that, therefore, do not present a risk.
The breakdown of trade receivables at December 31, 2012 and 2011 was as follows:
2012
54
2011
Number of
customers
Thousands of
euros
Number of
customers
Thousands
of euros
With a balance of more than 1,000 thousand euros
7
144,870
6
178,355
With a balance between 1,000 and 500 thousand euros
-
-
7
3,735
With a balance between 500 and 200 thousand euros
7
1,682
12
2,824
With a balance between 200 and 100 thousand euros
8
1,146
12
1,694
With a balance of less than 100 thousand euros
146
2,470
231
2,046
Total
168
150,168
268
188,654
The Company constantly monitors the age of its debt, and there were no risk situations at year end.
Investing activities
A Financial Risk Management Procedures Manual sets forth the general criteria governing investments of the Company’s
Treasury surpluses, which, in broad terms, are as follows:
• The investments are made with institutions (whether domestic or foreign) of recognized financial solvency;
• The investments are placed in conservative products (bank deposits, debt repos, etc.) on which, in general, the
repayment of the invested capital is guaranteed.
• Authorizations for the corresponding investments are limited by the powers granted to the company’s senior
executives and, in any event, are highly restricted (according to the amount, the Board Members, General Management
and Operations Director, and the Financial Director).
• Under ordinary circumstances, the longest term is three months and the investments usually offer automatically
available funds.
2.
Market risk
Market risk exists when a potential loss may arise from fluctuations in the fair value or future cash flows of a financial
instrument due to changes in market prices.
Given the nearly complete absence of financial debt, there are no financial risks associated with interest-rate movements.
Nevertheless, and for illustrative purposes, the Company has conducted a test to determine the sensitivity of the
Company’s cash surpluses to certain modifications in interest rates.
The following assumption was used: beginning with our year-end cash surpluses, and taking the 1-month ibor at December 31, as the benchmark, we applied a variation of -10 +100 basis points for 2012 (in 2011, we applied a variation
of -10 + 100).
The sensitivity test shows that the impact of variations on the interest rates applied to the cash surpluses, at December
31, would, in any event, not be significant and would exclusively affect the amount of financial income.
Reference Rate (€)
Cash
Surpluses
Annual
Interest
100bp
Annual
Interest
-10bp
Annual
Interest
12/31/12
0.109
77,082
84
1.109
855
0.009
7
12/31/11
1.024
75,617
774
2.024
1,530
0.724
547
The financial instruments exposed to /USD exchange-rate risk, mainly consisting of future currency-purchase agreements,
have undergone a sensitivity test at the balance sheet date.
The exposed balance sheet value of these financial instruments was corrected by applying a symmetrical percentage
change, equal to the 1-year implicit volatility of the currency in question published by Reuters (2011: 15.40% and 2012:
9.17%), to the year-end exchange rate.
The sensitivity test shows that the variations on the year-end exchange rate would have had an impact on the income
statement, which, in any event, is not significant.
55
12/31/2012
12/31/2011
USD
Exc. Rate
Differences
USD
Exc. Rate
Differences
34,050
1.3194
(417)
44,877
1.2939
2,112
Sensitivity Test
34,050
1.1984
2,153
44,877
1.0947
8,407
34,050
1.4404
(2,544)
44,877
1.4931
(2,502)
3. Liquidity risk
The Company’s financial structure is at a low liquidity risk, given the low level of financial leveraging and, the recurrence
of operational cash flow generated every year.
Liquidity risk would result from the Company having insufficient funds or access to sufficient funds at an acceptable cost
to meet its payment obligations at all times. The Company’s objective is to maintain sufficient available funds.
The Company’s policies establish the minimum liquidity levels required at all times:
• Excess liquidity may only be invested in certain types of assets (see previous section on credit risk/investment
activities) the liquidity of which is guaranteed.
• The amount of the Company’s revolving credit lines ensures that the Company is able to meet its operating needs
as well as finance new short-term investment projects. At year end 2012, the credit lines available totaled 345,000
thousand euros (131 thousand euros had been drawn down). At year end 2011, the credit lines available totaled
303,000 thousand euros (61,759 thousand euros had been drawn down). Given the difficult market situation, these
credit lines have been contracted under very competitive financial conditions, which strengthens the financial sector’s
perception that the Company is creditworthy and sound.
The table below presents information for 2012 and 2011 with respect to Law 15/2010 of July 5, amending Law 3/2004
of December 29, establishing measures against late payment in commercial transactions,
2012
Total payments within the
maximum legal payment period
Total payments in
2012
Deferred payments exceeding
the legal payment deadline at the
reporting date (*)
Average payment period >
75 days
492,318
510,303
15,064
4
(*) Deferrals exceeding the legal payment period at the end of the year relate to administrative incidents in the processing of invoices.
2011
Total payments within the
maximum legal payment
period
Total payments
in 2011
Deferred payments exceeding the legal
payment deadline at the reporting date
(*)
Average payment period >
85 days
709,010
744,676
17,986
5
(*) Deferrals exceeding the legal payment period at the end of the year relate to administrative incidents in the processing of invoices.
56
The undiscounted contractual maturity dates of financial liabilities at December 31, 2012 are as follows:
Thousands of euros
Non-current borrowings
Current borrowings
Current borrowings from Group companies
and associates
Up to 6
months
6 months 1 year
1-5 years
More than
5 years
Total
-
-
163
8
171
70,598
548
-
-
71,146
480
110,538
-
-
111,018
102,994
22,084
-
-
125,078
174,072
133,170
163
8
307,413
The undiscounted contractual maturity dates of financial liabilities at December 31, 2011 were as follows:
Thousands of euros
Up to 6
months
6 months 1 year
1-5 years
More than
5 years
Total
-
-
93
8
101
98,098
61,759
-
-
159,857
524
128,558
-
-
129,082
181,648
27,031
-
-
208,679
280,270
217,348
93
8
497,719
Non-current borrowings
Current borrowings
Current borrowings from Group companies
and associates
The undiscounted contractual maturities of the financial assets at December 31, 2012 are as follows:
Thousands of euros
6 months
or less
6 months 1 year
1-5 years
More than
5 years
Total
-
-
10,620
-
10,620
3,344
-
3,344
Loans to associates
Equity instruments
-
-
-
-
-
-
-
942
-
942
Derivatives
-
-
-
-
-
-
-
-
78
78
(Continue)
57
(Continued)
Thousands of euros
6 months
or less
6 months 1 year
1-5 years
More than
5 years
Total
144,556
5,664
-
-
150,220
-
118,395
-
-
118,395
-
-
122
-
122
Short-term deposits
-
-
-
-
-
Derivatives
-
-
-
-
-
-
630
-
-
630
144,556
124,689
15,028
78
284,351
The undiscounted contractual maturities of the financial assets at December 31, 2011 were as follows:
Thousands of euros
6 months
or less
6 months 1 year
1-5 years
More than
5 years
Total
-
-
3,735
-
3,735
3,410
-
3,410
Loans to associates
Equity instruments
-
-
-
-
-
-
-
824
-
824
5,000
-
-
-
5,000
-
-
-
78
78
56
188,659
-
-
188,715
-
191,605
-
-
191,605
-
-
-
-
-
Short-term deposits
50,608
-
-
-
50,608
Derivatives
2,112
-
-
-
2,112
-
748
-
-
748
57,776
381,012
7,969
78
446,835
Derivatives
58
9. INVENTORIES
The balances under this heading at year end were as follows:
2012
2011
311
316
In-house production programs
5,628
7,394
Total
5,939
7,710
Prepayments to program suppliers
10. TRADE AND OTHER RECEIVABLES
The breakdown of trade and receivables in 2012 and 2011 was as follows:
12/31/12
12/31/11
5,659
12,965
144,509
175,689
Other receivables
5
5
Receivables from employees
47
56
16,720
12,145
166,940
200,860
Trade receivables
Receivables from Group companies and associates (Note 19)
Receivables from Public Bodies (Note 15)
Impairment losses:
The balance of trade receivables is shown net of impairment loss allowances. The variations in 2012 and 2011 in these
impairment losses were as follows:
Thousands of euros
Cumulative impairment losses at January 1, 2011
5,841
Charge to the income statement
3,597
Contribution from the merger
(2,995)
Cumulative impairment losses at December 31, 2011
6,443
Cumulative impairment losses at January 1, 2012
6,443
Charge to the income statement
1,880
Cumulative impairment losses at December 31, 2012
8,323
The breakdown of trade receivables denominated in foreign currency, for 2012 and 2011, is as follows:
ASSETS
Trade receivables
2012
2011
Dollars
Balance in euros at 12/31/12
Dollars
Balance in euros at 12/31/11
89
68
104
80
59
11. OTHER CURRENT ASSETS
The breakdown of this heading at December 31 is as follows:
Thousands of euros
Prepaid expenses
2012
2011
10,747
65,400
10,747
65,400
The amounts shown in this heading arise from the prepayments of transmission rights.
12. CASH AND CASH EQUIVALENTS
The breakdown of “Cash and cash equivalents” at December 31, is as follows:
Thousands of euros
2012
2011
26
54
46,567
10,989
46,593
11,043
Cash
Current accounts
Current accounts earn market interest rates. Cash and cash equivalents are unrestricted.
13. CAPITAL AND RESERVES
a)Issued capital
At December 31, 2012 the share capital consisted of 406,861,426 shares with a value (2011: 406,861,426 euros) of
0.50 euros each, represented by a book-entry system. Share capital is fully subscribed and paid-up and the breakdown
of ownership is as follows:
Shareholder
12/31/12
12/31/11
-
41.22
Mediaset S.P.A.
41.55
-
Prisa T.V.
17.34
17.34
Free float
39.53
39.86
Treasury shares
1.58
1.58
Total
100
100
Mediaset Investimenti, S.p.A.
60
At December 31, 2012, the Company was notified of the merger between Mediaset Investimenti, S.p.A. and Mediaset
S.p.A.; the latter assumed all of the former’s assets and liabilities, which resulted in a new share capital breakdown (see
above table).
All the shares making up the company’s issued capital enjoy the same rights.
Share transfers are governed by the General Audiovisual Communication Law.
Listing on the Stock Exchange
The Company was admitted for listing on the Stock Exchange on June 24, 2004. On January 3, 2005, its shares were
included on the IBEX 35. Its shares are traded on the Madrid, Barcelona, Bilbao, and Valencia Stock Exchanges.
Dividends
On March 28, 2012, approval was given at the Company’s General Shareholders’ Meeting to pay out 55,260 thousand
euros in dividends charged to 2011 earnings. This dividend was paid in April 2012 and was equivalent to 0.1379 euros
per outstanding share.
On April 13, 2011, approval was given at the Company’s General Shareholders’ Meeting to pay out 97,912 thousand
euros in dividends charged to 2010 earnings. This dividend was paid in 2011 and was equivalent to 0.2445 euros per
outstanding share.
On April 13, 2011, approval was given at the Company’s General Shareholders’ Meeting to pay 42,248 thousand euros
of extraordinary dividends charged to unrestricted reserves. This dividend was paid in May 2011 and was equivalent to
0.1055 euros per outstanding share.
b) Legal reserve
The companies are required to transfer 10% of each year’s profit to a legal reserve until this reserve reaches an amount
at least equal to 20% of share capital.This reserve cannot be distributed to shareholders, and may only be used to cover
income statement balances payable, if no other reserves are available.
c) Goodwill reserve
This reserve is restricted as long as the related goodwill is recognized in the Company’s balance sheet.
d) Treasury shares and equity investments:
In general, treasury shares have been acquired to meet the Company’s commitments related to the compensation
system, based on shares of executive directors and directors, as described in Note 17.
Changes under this heading in 2012 were as follows:
Thousands of euros
Treasury shares
Balance 12/31/11
Additions
Disposals
84,745
-
-
Balance 12/31/12
84,745
61
The change in the number of shares during the year is detailed below:
Number of shares
Treasury shares
12/31/11
Additions
Disposals
12/31/12
6,419,259
-
-
6,419,259
Changes under this heading in 2011 were as follows:
Thousands of euros
Balance 12/31/10
Additions
Disposals
84,745
-
-
Treasury shares
Balance 12/31/11
84,745
The change in the number of shares in 2011 is detailed below:
Number of shares
Treasury shares
12/31/10
Additions
Disposals
12/31/11
6,419,259
-
-
6,419,259
14. PROVISIONS AND OTHER CONTINGENT LIABILITIES
Current and non-current provisions
The breakdown and movements in provisions in 2012 and 2011 are as follows:
Thousands of euros
2012
Balance at
January 1,
Allowances
Reversals /
applications
Transfers
Balance at
December 31,
Provision for long-term personnel benefits
28,302
5,805
(10,793)
-
23,314
28,302
5,805
(10,793)
-
23,314
Provision for outstanding litigation
8
-
(8)
-
-
8
-
(8)
-
-
28,310
5,805
(10,801)
-
23,314
28,310
5,805
(10,801)
-
23,314
Non-current provisions
Provisions short-term
Total
62
Thousands of euros
2011
Balance at
January 1
Increases
from merger
Allowances
Reversals /
applications
Transfers
Balance at
December 31
Provision for outstanding
litigation
12,371
18,137
6,824
(8,733)
(297)
28,302
12,371
18,137
6,824
(8,733)
(297)
28,302
litigation
19
-
-
(11)
-
8
19
-
-
(11)
-
8
litigation
12,390
18,137
6,824
(8,744)
(297)
28,310
12,390
18,137
6,824
(8,744)
(297)
28,310
Provisions short-term
Total
At December 31, 2012 and 2011, the non-current provisions for liabilities and charges relate to pending lawsuits and
appeals between the Company and third parties. Provisions recognized in the year relate to new lawsuits brought
against the Company, while reversals relate to litigation that has been resolved.
The Company’s directors and legal advisors have evaluated possible related risks, and where such risks are considered
probable, and their economic effects quantifiable, they have made the appropriate provisions.
Contingencies
Channel increase through access to a multiple digital license
A sentence handed down on November 27, 2012 by the Third Chamber of the Supreme Court (Appeal 442/2010)
canceled the Council of Ministers’ resolution dated July 16, 2010 which assigned each of the Digital Terrestrial TV (TDT)
channel licensing companies (the operators), including MEDIASET ESPAÑA (previously GESTEVISION TELECINCO)
and SOCIEDAD GENERAL DE TELEVISION CUATRO, S.A., a multiple digital license with national coverage comprised
of four channels.
This assignment (annulled by the sentence) was enacted by virtue of the application of regulations approved by the
National Technical Plan for Digital Terrestrial TV, which starting in 1998 regulated the transition from analogical to TDT
transmission, finalizing in 2010. The government verified that the companies to be granted the multiple channels had
complied with all the necessary requirements and obligations inherent in proceeding with the appealed assignation in
order to make the transition to TDT.
The sentence was based on the fact that when the the multiple channels were assigned, the General Law on Audiovisual
Communication (LGCA, published one month prior to the appealed Agreement) was applicable; it states that additional
channels assigned under each license must be granted through a public bidding process. This dilemma might have been
circumvented with the mere introduction of a provision by the LGCA granting continuity to the agreement prior to
its enactment.
63
The Supreme Court views the main obstacle as a mere formality, as the TDT’s original premise was never questioned,
and therefore, the eventual assignment of multiple channels to each operator was not a complex issue; this was
manifested during meetings held with the pertinent ministries; thus, it is expected that these issues will be resolved in
upcoming weeks.
Procedures relative to the late presentation of the Action Plan
On August 2, 2011, the Comisión Nacional de la Competencia (CNC - anti-trust authorities) handed down a resolution
on dossier SNC/0012/11 (Concentración Telecinco-Cuatro) in which it declared Mediaset España Comunicación
responsible for a very serious violation of Anti-Trust Law, as it did not present an Action Plan (including commitments
with the CNC) within the established deadline, setting a fine of 3,600,000 euros.
This resolution was appealed before the National Court of Justice as part of ordinary civil lawsuit 474/2011. A sentence
handed down on January 8, 2013 overruled it, upholding the imposition of the fine.
Another appeal was filed before the Supreme Court; the Company has solid expectations that it will receive a favorable
ruling: either an annulment, or a significant reduction in the amount of the fine.
The main arguments against the Supreme Court ruling as well as the CNC’s resolution are as follows:
• The alleged Action Plan infraction did not take place: it was presented within the CNC’s established deadline.
• In the event that it was indeed presented late, the period did not exceed a month and thus, the Company complied
with CNC commitments (that the Action Plan could simply consist of a development outline); thus, no general or
underlying interests were harmed.
• Therefore, rather than a material lack of compliance, the Company was guilty of a simple procedural error, and
therefore did not breach anti-trust laws; consequently, Law 30/1992 of the Legal Regime of Public Administrations
and Common Administrative Procedure laws are applicable.
• It is thus not considered necessary to apply the terms of the Anti-Trust Law: a procedural error cannot be considered
a very serious violation, and is thus unworthy of a 3,660,000 fine, as this sum is totally disproportionate to the
infringement in question
• Finally, the fine is a frontal violation and breach of the principles which prohibit reformatio in peius (Articles 89.2
and 113.3 of Law 30/1992), since the CNC only chose to initiate disciplinary proceedings against Mediaset España
Comunicación, S.A. once it had decided to appeal the CNC-approved Action Plan, and not when the alleged violation
took place.
Thus, the accompanying balance sheet does not include a provision for this contingency, as the Company’s directors and
legal advisors do not consider it likely that this risk will materialize.
Proceedings related to Mediaset España Comunicación, S.A.’s failure to company with the
Telecinco-Cuatro merger
On February 6, 2013, the el Comisión Nacional de la Competencia (CNC - Anti-trust authorities) handed down a
ruling on Dossier SNC/0024/12 Mediaset (the “resolution”), in which Mediaset España Comunicación, S.A. (“Mediaset
España”) failed to comply with certain commitments and obligations established in the C-0230/09 Telecinco/Cuatro
merger dossier; a fine of 15,600,000 was set.
The resolution states that Mediaset España failed to comply with four of the twelve commitments upon which the
Telecinco/Cuatro merger was authorized (commitments (ii), (iii), (vi) and (xii)), as well as different requirements for
providing information to the CNC regarding these obligations.
64
The commitments set Mediaset España restrictions in order to neutralize or compensate for potential anti-trust issues
arising from the transaction. These include:
• Regarding the sale of TV ad space: Mediaset España agreed that it would not jointly place advertisements with Cuatro
and Telecinco or groups of channels whose overall audience topped 22%. Specifically, commitment (ii) prohibited
formal or de-facto joint sales of advertising space with Telecinco and Cuatro. Among other stipulations, commitment
(iii) established a functional split between Publimedia and Publiespaña, in order to handle free-to-air and pay
TV separately.
• Limits were imposed for the acquisition of audiovisual contents from third parties. Commtment (vi) limited exclusive
contracts to three year durations (in general terms), also excluding automatic renewal and other similar terms, while
commitment (xii) prevented exclusive rights or first options on the entirety of national contents production/products.
The commitments were later developed unilaterally as part of the CVC-imposed Action Plan, which also set certain
obligations regarding informing the authorities, to guarantee their compliance.
The Action Plan’s interpretation of the commitments was strict to the point that it substantially modified its content,
thereby significantly making Mediaset España’s commitments more difficult to assume; this affected advertising as
well as content acquisition. For example, the duration of contracts for acquiring content was to be calculated at their
signing date, rather than when the rights commenced; thus, this was legally disputed, and a sentence is still pending.
Mediaset España did not fail to comply with any of its commitments with the CNC.
• Mediaset España did not violate commitment (ii) after the merger finalized: in 2011, it lowered its share of the
advertising market as well as the average per-ad price, while managing to keep its audience numbers constant.
Reports prepared by external advisors conclude that Publiespaña has not failed to meet its commitments, and that
it has not violated anti-trust laws.
• As regards commitment (iii), Mediaset España was careful to ensure that positions in Publimedia and Publiiespaña were
not duplicated. Likewise, there has been no indication whatsoever of a failure to meet the obligation to guarantee the
functional or commercial independence of both companies.
• With respect to commitment (vi), Mediaset España was charged with delay in granting suppliers the right to reduced
contracts, renouncing extension or preferential acquisition rights which never really existed, considering the deadlines
established to that effect as well as legal suspension periods, as a result of Mediaset’s legitimately filed appeals. No
effect would have been felt on the market, as no suppliers exercised any of the granted rights.
• With respect to commitment (xii), Mediaset España renounced all the pertinent option rights included in contracts with
producers, while fulfilling its other related obligations; thus, it did not fail to comply with any of the stated conditions.
Mediaset España provided information in conformance with the Action Plan, responded to CNC requirements, and took
all the necessary steps expected of it. None of the supposed delays or problems in delivering information represent a
material failure to comply with the established commitments.
Therefore, Mediaset España plans to file an appeal and prepare a resolution before the National Court of Justice,
to request the suspension of the fine, in accordance with articles 46 and 129 and Law 29/1998, dated July 13, which
regulates the Federal Court of Appeals on Commercial Matters.
As in the previous dossier, the accompanying balance sheet does not include a provision for this contingency, as the
Company’s directors and legal advisors do not consider it likely that this risk will materialize.
As explained in Note 15, the Company is open to inspection of certain tax returns, but its directors and tax advisors
consider that no significant tax contingencies will materialize, and if they do, they will not have a significant effect on the
accompanying balance sheet.
65
15. TAXES
Under prevailing tax regulations, tax returns may not be considered final until they have either been inspected by tax
authorities or until the four-year inspection period has expired. The Company is open to inspection of all taxes to which
it is liable for the last four years. Once the Spanish Tax Authorities’Tax and Customs Control Department of the Central
Office of Major Tax Payers had performed its verifications and investigations in 2009 (as explained in the above note),
the Company has the following items and years open to inspection:
Item(s)
Periods
Income tax
2008 to 2012
Value added tax
2009 to 2012
Wit holding, non-resident income tax
2009 to 2012
Gaming tax:
06/2008 to 2012
Taxes on games of luck, betting, and chance: raffles and tombola
06/2008 to 2012
Annual transaction statement
2008 to 2012
Consolidated statement of intra-regional delivery and acquisition of assets
2009 to 2012
The Spanish Tax Authorities’Tax and Customs Control Department of the Central Office of Major Taxpayers is currently
performing its verifications and investigations on the following items: “Taxes on games of luck, bets, or chance: raffles and
tombolas” as well as “Gaming tax: bets and promotional draws” for June, 2008 to December 2011; the final result is still
pending at the date of these financial statements.
If, once the inspection has finalized, a regulation is proposed which surpasses the related provisioned risks and
contingencies, it will in any case refer to Company transactions carried out in close observance of the criteria established
by the tax authorities (more specifically the inspectors) arising from previous inspections and related to the same items
and transactions identical in nature. Thus, should such a situation arise, there are solid arguments in the Company’s
defense for applying the above criteria in both lawsuits and appeals, and consequently obtaining favorable outcomes.
Based on the best interpretation of current legislation, the Company’s directors and tax advisors consider that in the
event of a tax inspection, no significant tax contingencies would arise as a result of varying interpretations of the tax
legislation applicable to the Company’s transactions. Therefore, the accompanying balance sheet does not include a
provision for this contingency.
Value Added Tax
In 2010, the Company has filed consolidated tax as regulated by Chapter IX, Title IX of Law 37/1992. As a result, it has
presented consolidated VAT for tax group 049/99, which comprises:
• Mediaset España Comunicación, S.A., as the parent
• Telecinco Cinema, S.A.U.
• Publiespaña, S.A.U.
• Mediacinco cartera, S.L.
66
Presenting consolidated VAT generates a short-term payable to Group companies for the tax effect (Note 19).
The breakdown of balances relating to income tax assets and liabilities at December 31 is as follows:
Thousands of euros
2012
2011
(6,654)
(5,228)
(6,654)
(5,228)
VAT
(7,634)
(4,869)
Personal income tax withholdings
(2,831)
(2,927)
Social security
(1,238)
(1,224)
Levy to finance RTVE
(2,654)
(4,152)
(17)
(468)
Other payables to public administrations
(14,374)
(13,640)
Deferred tax assets
105,827
109,770
Unused tax deductions and relief
37,153
21,320
142,980
131,090
16,720
12,145
16,720
12,145
Gaming tax
Other receivables from public administrations
Income tax
15.1 Income tax
The reconciliation of net income and expenses for the year with tax results is as follows:
Thousands of euros
Income and expenses directly
recognized in equity
Income statement
2012
Increase
Decrease
Total
Increase
Decrease
Total
64,492
-
64,492
-
-
-
-
-
-
-
-
-
64,492
-
64,492
-
-
-
Continuing operations
-
(11,947)
(11,947)
-
-
-
Discontinued operations (Note 10)
-
-
-
-
-
-
-
(11,947)
(11,947)
-
-
-
Income and expenses for the year
Discontinued operations
Income tax
before tax
52,545
-
67
Thousands of euros
Income statement
2012
Increase
Decrease
Total
Increase
Decrease
Total
916
-
916
-
-
-
-
(47,616)
(47,616)
-
-
-
2,689
-
2,689
-
-
-
Temporary differences
-
(17,979)
(17,979)
-
-
-
Utilization of previously
unrecognized tax losses
-
-
-
-
-
-
Permanent differences
Non-deductible expenses &
penalties
Internal elimination of dividends
Other
Tax result
(9,445)
-
Thousands of euros
Income statement
2011
Increase
Decrease
Total
Increase
Decrease
Total
137,264
-
137,264
-
-
-
-
-
-
-
-
-
137,264
-
137,264
-
-
-
11,018
-
11,018
-
-
-
-
-
-
-
-
-
11,018
-
11,018
-
-
-
Discontinued operations
Income tax
Discontinued operations (Note 10)
Income and expenses for the year before tax
148,282
-
Non-deductible expenses & penalties
873
-
873
-
-
-
-
(62,812)
(62,812)
-
-
-
Other
2,251
-
2,251
-
-
-
Temporary differences
13,993
-
13,993
-
-
-
-
(43,788)
(43,788)
-
-
-
Internal elimination of dividends
Utilization of previously unrecognized tax
losses
Tax result
68
58,799
-
Temporary differences are due to different taxation and accounting criteria relative to impairment provisions regarding
audiovisual rights, contingencies and expenses and provisions for subsidiaries.
The reconciliation between income tax expense/(income) and the result of multiplying total recognized income and
expenses by applicable tax rates —with the balance of the income statement being differentiated— is as follows:
Thousands of euros
Income statement
Income and expense recognized
directly in equity
52,545
Tax charge (tax rate: 30%)
15,764
2012
Non-deductible revenue/expenses
(13,203)
Tax credits and others
(21,310)
Positive adjustments to income tax charge
-
Negative adjustments to income tax charge
910
Tax adjustments (dividends minus deductions from subsidiaries)
5,828
Tax on foreign profits
65
Tax expense (income)
(11,947)
Thousands of euros
Income statement
Income and expense recognized
directly in equity
148,282
Tax charge (tax rate: 30%)
44,485
2011
Non-deductible revenue/expenses
(17,907)
Tax credits and others
(16,014)
Positive adjustments to income tax charge
-
Negative adjustments to income tax charge
32
Tax adjustments (dividends minus deductions from subsidiaries)
362
Tax on foreign profits
60
Tax expense (income)
11,018
69
The breakdown of income tax expense/ (income) is as follows:
Thousands of euros
2012
Income statement
Directly recognized in equity
Current income tax
(1,483)
Other temporary differences
(10,464)
(11,947)
Thousands of euros
2011
Income statement
Current income tax
Directly recognized in equity
24,395
Other temporary differences
(13,377)
11,018
Income tax payable was calculated as follows:
Thousands of euros
Taxable income:
2012
(9,445)
Tax payable: (30%)
-
Negative tax payable contributed by subsidiaries in tax consolidation
Deductions and rebates
13,891
-
Deductions and rebates, companies filing consolidated taxes
(10,539)
Withholdings
(12,789)
Other
-
Total income tax refund
(9,437)
Thousands of euros
Taxable income:
58,799
Tax payable: (30%)
17,640
Negative tax payable contributed by subsidiaries in tax consolidation
22,483
Deductions and rebates
(6,965)
Deductions and rebates, companies filing consolidated taxes
(7,889)
Withholdings
(37,414)
Other
Total income tax refund
70
2011
(12,145)
Refundable Income tax is as follows:
Thousands of euros
2012
2011
Corporate income tax refundable I, 2011
7,283
12,145
Corporate income tax refundable I, 2012
9,437
-
Total
16,720
12,145
15.2 Deferred tax assets
The breakdown is as follows:
Thousands of euros
2012 2011
Deferred tax assets
105,827
109,770
Unused tax credits and rebates
37,153
21,320
142,980
131,090
The changes in the items composing “Deferred tax assets” are as follows:
Thousands of euros
Balance at
January 1,
Additions
from merger
Income
statement
Equity
Reclassifications
Balance at
December 31,
2,502
(1,633)
-
-
869
909
(428)
-
-
481
103,033
(1,507)
-
-
101,526
3,326
(375)
-
-
2,951
109,770
(3,943)
-
-
105,827
2012
Deferred tax assets
Impairment audiovisual rights
Rights management
institutions
Provisions, subsidiaries
Other provisions
2011
Deferred tax assets
Impairment audiovisual rights
Rights management
institutions
Provisions, subsidiaries
Other provisions
-
-
2,534
-
(32)
2,502
174
124
611
-
-
909
98,865
1,940
2,228
-
-
103,033
-
285
1,790
-
1,251
3,326
7,163
-
1,219
109,770
99,039
The Company has no unused loss carryforwards. In 2012, tax losses amounting to 2,150 thousand euros were offset at
71
At December 31, 2012 unused tax credits for audiovisual productions amount to a total of 37,153 thousand euros
(2011: 21,320 thousand euros) which can be recovered over the next 10 years.
The breakdown of the deductions is as follows:
Thousands of euros
2012
2011
Deductions pending 2010
2,026
5,694
15,626
15,626
19,501
-
37,153
21,320
The Company has availed itself of the deduction provided for in article 42 of Royal Legislative Decree 4/2004, of March
5, which enacted the revised text of the Corporation Tax Law, in respect of income of 1,637 thousand euros. This
amount was generated by the sale of 60% of the Company’s ownership in Cinematext Media, S.A., which was sold on
September 30, 2009.
The Company estimated the taxable profits which it expects to obtain over the next five fiscal years (period for which
it considers the estimates to be reliable) based on budgeted projections. It has likewise analyzed the reversal period of
taxable temporary differences. Based on this analysis, the Company has recognized deferred tax assets for tax credits
and deductible temporary differences which it considers probable will be recoverable in the future.
15.3 Deferred tax liabilities
The breakdown and movements in the various items composing “Deferred tax liabilities” are as follows:
Thousands of euros
Opening
balance at
January 1,
Income
statement
Equity
Reclassifications
Closing
balance at
December 31,
Other
2,343
75
-
-
2,418
Tax amortization of goodwill
1,823
841
-
-
2,664
Tax amortization of signal transmission license
1,062
510
-
-
1,572
5,228
1,426
-
-
6,654
1,194
(70)
-
1,219
2,343
Tax amortization of goodwill
-
1,823
-
-
1,823
Tax amortization of signal transmission license
-
1,062
-
-
1,062
1,194
2,815
-
1,219
5,228
2012
2011
Other
72
The deferred tax liability mainly relates to taxable temporary differences arising from consolidation adjustments of the
tax group and tax amortization of intangible assets with an indefinite useful life (goodwill and signal transmission license).
16. GUARANTEE COMMITMENTS TO THIRD PARTIES
The breakdown of guarantees provided as of December 31, 2012 and 2011 is as follows:
Type
Collateral for contracts, concessions and tenders
Legal guarantees
Guarantees deposited at the tax authorities
2012
2011
24,868
60,520
100
100
2,363
2,280
27,331
62,900
At December 31, 2011, the Company had 77 thousand euros of guarantees maturing in April, 2012, which were deposited
with the Directorate-General for the Development of the Information Society (Science and Technology Ministry, currently
the Ministry of Industry, Tourism, and Trade) to guarantee the refundable advance granted by the Directorate-General to
the company, as aid for research and development in the following projects: “Research and development of new tools for
the technological evolution of production processes in digital television,” “Research and development on an information
system to manage contracts with electronic signatures and a security and contingency plan.”
The Company deposited at December 31, 2012, 24,868 thousand euros in guarantees required for its commercial
activity (2011: 60,443 thousand euros).
The breakdown of the guarantees deposited with the tax authorities is as follows:
• A guarantee of 2,091 thousand euros was deposited with the Tax and Customs Control Department due to the
appeal against the tax settlement agreement which the Department notified to the Company on June 26, 2009 and
which confirmed the proposal given in the assessment from the tax inspection dated September 1, 2008. This tax
inspection included the verification of the gaming tax in respect of bets and promotional draws, as well as raffles and
tombolas from September 2004 up to and including May 2008.
• To guarantee the late-payment interest, the amount of the guarantee was increased by 83 thousand euros (2011: 85
thousand euros and 2010: 104 thousand euros).
73
17. SHARE-BASED PAYMENT SCHEMES
As of the date of preparation of these financial statements, the share option plans for which the conditions for their
being granted have been fulfilled are as follows:
2012
No. Of
options
01/01/12
Additions
Disposals
No. Of
options
12/31/12
Granted to
employees of
the company
Granted to
employees of
the Group
Strike
price
Assignment
date
Strike term
From
To
2008 share-based
payments plan
572,325
-
27,000
545,325
319,375
225,950
7.13 €
30/07/08
30/07/11
29/07/13
2009 share-based
payments plan
319,163
-
9,000
310,163
180,688
129,475
5.21 €
29/07/09
29/07/12
28/07/14
2010 share-based
payments plan
1,297,650
-
57,000
1,240,650
722,750
517,900
7.00 €
28/07/10
28/07/13
27/07/15
2011 share-based
payments plan
673,225
-
28,500
644,725
385,775
258,950
5.83 €
27/07/11
27/07/14
26/07/16
2011
No. Of
options
01/01/11
Additions
Disposals
No. Of
options
12/31/11
Granted to
employees of
the company
Granted to
employees of
the Group
Strike
price
Assignment
date
Strike term
From
To
2007 share-based
payments plan
1,042,650
-
-
1,042,650
545.750
496.900
19.74 €
25/07/07
25/07/10
24/07/12
2008 share-based
payments plan
572,325
-
-
572,325
292.375
279.950
7.13 €
30/07/08
30/07/11
29/07/13
2009 share-based
payments plan
319,163
-
-
319,163
162.688
156.475
5.21 €
29/07/09
29/07/12
28/07/14
2010 share-based
payments plan
1,297,650
-
-
1,297,650
671,750
625,900
7.00 €
28/07/10
28/07/13
27/07/15
2011 share-based
payments plan
-
673,225
-
673,225
396,275
276,950
5.83 €
27/07/11
27/07/14
26/07/16
The beneficiaries of these plans are directors and executive directors of Group companies.
As a result of these plans, 738 thousand euros were recognized in the 2012 income statement (2011: 780 thousand
euros).
74
The increase in the value of investments in the Company due to the recognition of stock options granted to employees of the investees is as follows:
Thousands of euros
2012
2011
423
518
60
59
483
577
At December 31, 2012, as described below, the Company has four share option plans granted to certain employees.
The last share option plan was approved in 2011.
All the approved plans that remain in effect have a three-year accrual period and the given strike price, and, if applicable,
are exercised through the delivery of the shares.
Pursuant to a resolution by the parent’s Board of Directors on February 2, 2011, all the strike prices of each of the share
option plans were reestimated to ensure that the two capital increases carried out in 2010 had a neutral impact on the
statistics of the exercise of each. This adjustment only affected the strike prices of each Plan, not the number of options
originally granted.
The most relevant assumptions used in the measurement are as follows:
Strike
Yield on the share (dividend yield)
Volatility
2007 Plan
2008 Plan
2009 Plan
2010 Plan
2011 Plan
19.74
7.13
5.21
7.00
5.83
6%
10%
5%
5.5%
5.5%
22.5%
27.5%
30%
50%
37%
A share option plan for certain employees was approved in 2011. The weighted average fair value of these options at
the measurement date was 1.21 per share, calculated using a binomial valuation model with the following variables.
Variable
Value
Weighted average share price
6.22
Strike price
5.83
Expected volatility
37%
Life of option
27/7/2014-26/7/2016
Expected dividends
5,5%
Risk-free interest rate
1.93% (yield on German bond)
75
18. INCOME AND EXPENSES
a) Breakdown of revenue
The distribution of revenue from continuing operations corresponding to the Company’s ordinary activities, broken
down by category, is as follows:
Thousands of euros
2012
2011
689,429
822,756
7,095
8,172
696,524
830,928
Business segment
Advertising revenue
Rendering of services
Total
The Company’s most important client continues to be Publiespaña, S.A.U. Revenue from advertising sales to this client,
685,406 thousand euros, accounts for approximately 98% of the Company’s total revenue (2011: 815,705 thousand
euros, or 98% of the total).
b) Consumption of goods for resale
The breakdown of consumption of goods for resale and consumption of raw materials and other consumables for the
years ended December 31, 2012 and 2011 is as follows:
Thousands of euros
2012
2011
(1,766)
8
(1,766)
8
Purchases in Spain
252,015
208,948
EU acquisitions
14,446
16,541
266,461
225,489
Consumption of goods for resale
Changes in inventories
Goods for resale
Cost of sales
c) Wages and salaries
Thousands of euros
76
2012
2011
Wages and salaries
72,706
81,194
Social Security costs, et al.
14,026
14,128
Total
86,732
95,322
During 2011, “Wages and salaries” included dismissal indemnities totaling 12,570 thousand euros, mainly due to the
collective redundancy authorized by the Madrid Directorate General of Labor in the Cuatro Group integration.
The breakdown of Social Security costs et al. for the years ended December 31, 2012 and 2011 is as follows:
Thousands of euros
2012
2011
Social security
12,743
12,521
Other employee welfare expenses
1,283
1,607
Total employee welfare expenses
14,026
14,128
d) External services
The breakdown of “External services” for the years ended December 31, 2012 and 2011 is as follows:
Thousands of euros
2011
2011
Leased assets (Note 5)
635
1,159
Other leases
164
188
Program production costs
39,376
53,831
Management fees for rights, concessions, and licenses
28,833
41,425
Repairs and maintenance
3,720
3,634
Other professional services
10,191
11,283
Transportation and messenger services
1,419
1,331
216
255
Public relations
2,789
2,024
Supplies
3,436
3,590
Signal transmission and technical assistance
50,614
46,882
News agencies and post-production
12,201
16,244
Cash and non-cash prizes
3,843
7,031
Other expenses for legal and judicial risks
3,812
5,180
Other expenses and services
7,218
3,941
168,467
197,998
General insurance
77
19. RELATED-PARTY TRANSACTIONS
Related companies
Company transactions in 2012 and 2011 with related parties, as well as the nature of the relationship, were as follow:
Company
78
Nature of the relationship
30% owned
Aprok Imagen, S.L.
3% owned
Bigbang Media, S.L.
30% owned
Pegaso Inc
43.7% owned
Conecta 5 Telecinco, S.A.
100% owned
DTS, Distribuidora TV Digital, S.A.
22% owned
50% owned
100% owned
Endemol Group
25% owned
Mediaset Group
Shareholder
PRISA Group
Shareholder
La Fábrica de la Tele , S.L.
30% owned
Mediacinco Cartera S.L.
75% owned
100% owned
30% owned
100% owned
Publimedia Gestión, S.A.U.
100% owned
Sogecable Editorial, S.L.
100% owned
Sogecable Media, S.L.
100% owned
100% owned
The balances with the related parties listed in the preceding table at December 31, 2012 and 2011 are as follows:
Trade receivables from
group companies and
associates (Note 10)
Suppliers, group
companies, and
associates
141,568
168,864
1,504
1,705
-
-
-
-
100
85
112
146
-
-
-
-
1,629
1,353
15
-
429
-
4,791
973
245
804
-
-
-
-
-
-
-
-
69
-
-
-
-
-
1,156
2,197
-
-
-
-
5,611
2,626
-
-
2,898
3,119
-
1,485
-
-
BigBang Media, S.L.
-
-
891
2,450
-
-
-
-
-
-
3,127
7,282
-
-
-
-
59
118
138
51
-
-
-
-
60
-
-
-
-
-
-
-
26
-
-
-
-
-
-
-
(820)
(351)
-
-
-
-
218
136
-
-
35
51
-
-
-
-
DTS, Distribuidora TV Digital,
S.A.
2
2,268
274
591
590
847
-
-
Caribevisión TV Network LLC
-
-
-
-
-
-
3,344
3,410
PRISA Group
247
337
2,221
4,884
-
1,612
-
-
Mediaset Group
237
6
378
416
-
-
-
-
Endemol Group
-
8
416
3,490
832
644
-
-
144,509
175,689
12,078
24,185
1,851
4,588
13,964
7,145
Publimedia, S.A.U.
Current tax payable, group companies
(Note 8.2)
Suppliers, rights of
group companies
and associates
Long-term loans to
Group companies
(Note 8)
Current liabilities with creditor group
companies (Note 8.2)
12/31/12
12/31/11
12/31/12
12/31/11
-
-
80,199
72,313
-
-
3,541
4,705
14,574
2,678
-
-
1,628
-
3,411
-
29
313
-
-
-
-
378
316
1,029
794
-
38,976
17,260
3,785
87,529
116.310
79
Current tax receivable, group
companies (Note 8)
Current assets with creditor
group companies (Note 8)
12/31/12
12/31/11
12/31/12
12/31/11
16,599
21,100
-
-
2,632
2,600
-
-
874
625
-
-
-
-
37,150
42,599
Premiere Megaplex,S.A.
214
-
1,359
-
-
134
-
45,129
Premiere Megaplex,S.A.
-
-
-
200
Mediacinco Cartera,S.L.
-
-
56,334
77,470
Sogecable Media,S.L.
-
-
593
1,010
63
372
-
-
Atlas País Vasco, S.A.U. (in liquidation)
-
-
6
6
Atlas Media, S.A.U (in liquidation)
-
-
-
10
Canal Factoria de Ficción, S.A.U. (in liquidation)
-
-
1
1
Caribevisión TV Network LLC
-
-
313
115
Producciones Telecinco, S.A.U (in liquidation)
-
-
15
15
Mi Cartera Media, S.A.U. (in liquidation)
-
-
-
6
20,382
24,831
95,771
166,561
Publimedia, S.A.U.
Current payables to group companies due
to tax effect (VAT) (Nota 8.2)
Current loans to group companies
due to tax effect (VAT) (Note 8)
12/31/12
12/31/11
12/31/12
12/31/11
4,372
4,368
-
-
-
-
2,242
213
6
32
-
-
4,378
4,400
2,242
213
In 2012 and 2011, the following transactions were conducted with the related parties listed above:
Purchases
Accrued interest expense
Purchase of rights
12/31/12
12/31/11
12/31/12
12/31/11
12/31/12
12/31/11
290
448
20
13
-
-
2,006
11,479
-
-
363
59
31
273
1,486
1,589
-
-
14
4
-
-
806
2,206
-
1
-
-
-
-
Aprok Imagen, S.L.
(Continue)
80
(Continued)
-
-
138
51
-
-
14,984
23,024
-
-
-
6,468
29,337
34,564
-
-
-
-
BigBang Media, S.L.
5,787
9,164
-
-
-
6,755
148
-
-
-
-
-
-
60
-
-
-
-
112
164
1
1
-
-
Prisa Group
11,003
14,788
-
-
979
8,238
Endemol Group
26,473
31,316
-
-
964
600
Mediaset Group
1,482
1,442
-
-
18
-
91,667
126,727
1,645
1,654
3,130
24,326
Advertising revenue &
sales of rights
Other revenue
Accrued interest
revenue
Dividends
12/31/12
12/31/11
12/31/12
12/31/11
12/31/12
12/31/11
12/31/12
12/31/11
-
-
159
196
-
-
5,467
6,579
-
-
-
-
85
553
-
-
-
-
-
-
-
-
867
685,406
815,705
4,027
3,824
-
-
39,837
50,715
Publimedia Gestión, S.A.U.
-
944
763
740
-
-
-
-
4
94
(137)
5,196
-
-
19,933
-
Mi Cartera Media, S.A.U.
-
-
-
-
-
1,191
-
-
10
-
435
409
1,386
-
-
-
132
132
817
891
865
1,838
-
4,310
-
-
22
-
-
-
-
Mediacinco cartera, S.L.
-
-
342
395
2,522
1,808
-
-
-
-
-
203
-
-
997
1,175
-
-
34
-
19
-
-
Alba Adriatica, S.L.
-
-
-
-
-
-
-
-
Producciones Mandarina,S.L.
-
-
1
14
-
-
929
762
Caribevisión Network LLC
77
728
-
-
196
96
-
-
-
-
-
1
-
-
242
-
Prisa Group
55
675
375
209
-
-
-
-
Endemol Group
25
20
-
10
-
-
-
-
Mediaset Group
355
5
33
58
-
-
-
-
686,064
818,303
6,871
12,146
5,073
5,486
68,272
63,541
Big Bang Media, S.L.
The related-party transactions consist of normal Company trading activity and are conducted on an arm’s length basis.
81
Directors and senior executives
During the year, the members of the Board of Directors and other senior executives of the Company, and the individuals
and entities that they represent, did not carry out transactions with the Company or with other Group companies
unrelated to normal trading activity or not on an arm’s length basis.
a) Compensation and other benefits
1. Remuneration of the members of the Board of Directors in 2012 and 2011:
The breakdown of the remuneration earned by members of the Company’s Board of Directors is as follows:
Thousands of euros
Compensation
Attendance fees
2012
2011
2,986
2,939
592
662
3,578
3,601
In addition to the information given in this section, the compensation received by each director in 2012 is indicated
below, in euros:
Mr. Alejandro Echevarría Busquet – Chairman of the Board of Directors
Fixed Board compensation:
62,500.00
Attendance fees:
72,000.00
Fixed compensation:
634,649.52
Variable compensation:
173,825.00
Total
942,974.52
Option rights granted:
0
Option rights exercised:
0
Mr. Paolo Vasile – Joint CEO
62,500.00
Attendance fees:
36,000.00
Fixed compensation:
882,581.98
Variable compensation:
347,650.00
Remuneration in-kind:
10,226.75 (*)
Total
1,338,958.73
0
0
(*) Excluding the base of the in-kind compensation, 41,320.21
82
Mr. Giuseppe Tringali – Joint CEO
62,500.00
Attendance fees:
36,000.00
Total
98,500.00
0
0
Mr. Massimo Musolino – Executive Director
62,500.00
Attendance fees:
24,000.00
Total
86,500.00
0
0
Mr. Alfredo Messina – Board Member
62,500.00
Attendance fees:
20,000.00
Total
82,500.00
Mr. Fedele Confalonieri – Board Member
62,500.00
Attendance fees:
60,000.00
Total
122,500.00
Mr. Marco Giordani – Board Member
62,500.00
Attendance fees:
44,000.00
Total
106,500.00
Mr. Pier Silvio Berlusconi – Board Member
Attendance fees:
Total
62,500.00
0.00
62,500.00
83
Mr. Giuliano Adreani – Board Member
62,500.00
Attendance fees:
60,000.00
Total
122,500.00
Mr. Ángel Durández Adeva –Independent Director
62,500.00
Attendance fees:
48,000.00
Total
110,500.00
Mr. Borja de Prado Eulate – Independent Director/ Chair of Appointments
and Remuneration Committee
62,500.00
Attendance fees:
32,000.00
Total
94,500.00
Mr. José Ramón Álvarez-Rendueles – Independent Director/ Chair Audit
and Compliance Committee
62,500.00
Attendance fees:
64,000.00
Total
126,500.00
Mrs. Helena Revoredo Delvecchio – Independent Director.
62,500.00
Attendance fees:
24,000.00
Total
86,500.00
Mr. Manuel Polanco Moreno – Independent Director
62,500.00
Attendance fees:
36,000.00
Total
98,500.00
Mr. Juan Luis Cebrián Echarri – Independent Director
84
62,500.00
Attendance fees:
36,000.00
Total
98,500.00
None of the Board Members has received any compensation for belonging to other Boards of Directors of the Group’s
companies.
As was the case last year, at year end of 2012, the Company has not granted any advance payments or loans to any of
its Board Members.
Regarding the benefits arrangements, the Company has taken out, for only one of the Joint CEOs, life insurance
covering disability or death and medical insurance, at an annual cost of 16,925 euros. These items are included in in-kind
compensation.
As was the case last year, no contribution has been made to pension plans or funds on behalf of any member of the
Board of Directors.
There were no new share option plans during 2012.
In 2011, the Board members were given a total of 198,625 share options, of which 67,250 were granted to each Joint
CEO and 33,625 to the Chairman of the Board of Directors.
In 2011, no share options were exercised.
b. Compensation to key management personnel
Compensation paid to General Directors of the Company and individuals who discharge similar functions, excluding
those who are also members of the Board of Directors, is summarized as follows:
Number of persons
Total compensation (Thousands of euros)
2012
2011
2012
2011
13
13
5,782
4,728
As far as the number of share options granted to Senior Management is concerned, excluding those managers which
are simultaneously members of the Board of Directors, the breakdown at December 31, 2012 and 2011 is as follows:
2012
2011
Option rights granted
-
234,900
Total
-
234,900
A list of the key management personnel is included in the accompanying Corporate Governance Report.
c) Other disclosures on the Board of Directors:
Breakdown of the involvement with companies engaging in similar activities and the directors’ involvement in similar
activities either on their own or on behalf of others.
In respect of MEDIASET ESPAÑA COMUNICACIÓN, S.A. and in compliance with article 229.2 of the Capital
Companies Law, it is hereby confirmed that neither Mr. Giuseppe Tringali, Mr. Paolo Vasile, Mr. Giuliano Adreani, Mr. José
Ramón Álvarez Rendueles, Mr. Pier Silvio Berlusconi, Mr. Fedele Confalonieri, Mr. Ángel Durández Adeva, Mr. Marco
Giordani, Mr. Alfredo Messina, Mr. Borja de Prado Eulate, Mr. Massimo Musolino, Mrs. Helena Revoredo Delvecchio, Mr.
Manuel Polanco Moreno and Mr. Juan Luis Cebrián Echarri, members of the Board of Directors of MEDIASET ESPAÑA
COMUNICACIÓN, S.A. at December 31, 2012, nor any persons considered as related parties to the above pursuant to
article 231 of the Capital Companies Law, have held or hold investments in companies with activities that are the same,
similar or complementary to the business activities of MEDIASET ESPAÑA COMUNICACIÓN, S.A.
85
Mr. Alejandro Echevarría Busquet:
Subsidiary
Vocento, S.A.
Diario ABC, S.L.
Activity
Ownership interest
Duties
Communication
0.00878 %
-
Newspaper publishing
0.0002 %
-
Mr. Manuel Polanco Moreno:
Subsidiary
Prisa, S.A.
Rucandio, S.A.
Activity
Ownership interest
Duties
Media holding
company
0.017% of voting power
(direct and indirect)
0.015% of warrants
(direct or indirect investment)
Vice-Chairman
13.55% full ownership;
11.45% nominal ownership
Board Member
It is hereby confirmed that Mr. Alejandro Echevarría Busquet, Mr. Giuseppe Tringali, Mr. Paolo Vasile, Mr. Giuliano Adreani,
Mr. José Ramón Álvarez Rendueles, Mr. Pier Silvio Berlusconi, Mr. Fedele Confalonieri, Mr. Ángel Durández Adeva,
Mr. Marco Giordani, Mr. Alfredo Messina, Mr. Borja de Prado Eulate, Mr. Massimo Musolino, Mrs Helena Revoredo Delvecchio and Mr. Manuel Polanco Moreno, members of the Board of Directors of MEDIASET ESPAÑA COMUNICACIÓN,
S.A. at December 31, 2012 and related parties to the above, do not hold posts in companies with activities that are
the same, similar or complementary to the Company’s business pursuant to article 231 of the Capital Companies Law.
Mr. Juan Luis Cebrián Echarri:
Person related to the director
Daughter
Son
Sister
Company
Duties
Corporación RTVE Radio
Televisión Española
Director of the Film division and
Televisión Española
Plural Entertainment España, S.L.
Director of Fiction
Prisa Televisión, S.A.U.
Studio Manager
It is hereby confirmed that Mr. Alejandro Echevarría Busquet, Mr. Giuseppe Tringali, Mr. Paolo Vasile, Mr. Giuliano Adreani,
Mr. José Ramón Álvarez Rendueles, Mr. Pier Silvio Berlusconi, Mr. Fedele Confalonieri, Mr. Ángel Durández Adeva,
Mr. Marco Giordani, Mr. Alfredo Messina, Mr. Borja de Prado Eulate, Mr. Massimo Musolino, Mrs. Helena Revoredo
Delvecchio, Mr. Juan Luis Cebrián, and Mr. Manuel Polanco Moreno, members of the Board of Directors of MEDIASET
ESPAÑA COMUNICACIÓN, S.A. have no conflicts of interest with the Company at December 31, 2012.
In compliance with the aforementioned text, the activities performed either on their own behalf or on behalf of others
by members of the Board of Directors at December 31, 2012 at companies having the same, similar or complementary
activities to that of MEDIASET ESPAÑA COMUNICACIÓN, S.A. are listed below:
86
Activity
Arrangement under
which the activity is
performed
Company through
carried out
Position held or
function discharged
Diario El Correo, S.A.
Self-employed
-
Board Member
Editorial Cantabria, S.A.
Self-employed
-
Board Member
Sociedad Vascongada de
Publicaciones, S.A.
Self-employed
-
Board Member
Advertising agency
Self-employed
-
Chairman
Name
Publiespaña, S.A.U. (*)
(*) Mr. Alejandro Echevarria was the President of Publiespaña, S.A.U. until November 21, 2012.
Mr. Paolo Vasile:
Name
Activity
Arrangement under
performed
Company through
which the activity
is carried out
Position held or
function discharged
Advertising agency
Company employee
Mediaset España
Comunicación, S.A.
Board Member
Exploitation of
audiovisual content on
the Internet
Company employee
Mediaset España
Comunicación, S.A.
Chairman
Exploitation of
rights; production
and distribution of
publications
Company employee
Mediaset España
Comunicación, S.A.
Chairman
Television broadcasting
services and
intermediation in the
markets for audiovisual
rights
Company employee
Mediaset España
Comunicación, S.A.
Chairman
(*) Mr .Paolo Vasile was on the Publiespaña, S.A.U. Board of Directors until November 21, 2012.
Mr. Giuliano Adreani:
Name
Activity
Arrangement under
performed
Company through
carried out
Position held or
function discharged
R.T.I. – Reti Televisive Italiane
S.p.A.
Television operator
Self-employed
-
Board Member
Activity
Arrangement under
performed
Company through
carried out
Position held or
function discharged
Television operator
Self-employed
-
Chairman/Managing
Director
Mr. Pier Silvio Berlusconi:
Name
S.p.A.
87
D. Giuseppe Tringali:
Name
Activity
Arrangement under
performed
Company through
carried out
Position held or
function discharged
Publitalia 80 S.p.A.
Selling of advertising
space
Self-employed
-
Board Member
Publiope Limited
space
Self-employed
-
Board Member
Sogecable Media, S.A.U.
Advertising agency
Company employee
Joint and several
director
Advertising agency
Company employee
Chairman/Managing
Director
Company through
carried out
Position held or
function discharged
-
Managing Director
Mr. Marco Giordani:
Name
Activity
Arrangement
under which
the activity is
performed
R.T.I. – Reti Televisive Italiane S.p.A.
Television operator
Self-employed
Mr. Massimo Musolino:
Activity
Arrangement under
performed
Company through
carried out
Position held or
function discharged
Advertising agency
Company employee
Mediaset España
Comunicación, S.A.
Board Member
DTS Distribuidora de
Televisión digital, S.A.
Management of the
free-to-air public TV
service
Company employee
Mediaset España
Comunicación, S.A.
Vice-Chairman
Exploitation of
the Internet
Company employee
Mediaset España
Comunicación, S.A.
Board Member
Exploitation of
rights; production
and distribution of
publications
Company employee
Mediaset España
Comunicación, S.A.
Managing Director
services and
rights
Company employee
Mediaset España
Comunicación, S.A.
Managing Director
Company employee
Mediaset España
Comunicación, S.A.
Chairman/Managing
Director
Film distribution
Company employee
Mediaset España
Comunicación, S.A.
Chairman/Managing
Director
Name
(*) Mr. Massimo Musolino was the CEO of Publiespaña, S.A.U. until November 21, 2012.
88
Mr. Manuel Polanco Moreno:
Activity
Arrangement under
performed
Company through
which the activity
is carried out
Position held
or function
discharged
Prisa Television, S.A.U.
Television holding
company
-
-
Chairman
Grupo Media Capital, SGPS,S.A.
Television holding
company
-
-
Board Member
Canal Club de Distribución de
Ocio y Cultura, S.A.
Telemarketing TV
channel
-
-
Board Member
DTS,Distribuidora de Televisión
Digital, S.A.:
Pay TV
-
-
Chairman
Television holding
company
-
-
Chairman
Plural Entertainment Portugal,
S.A.
Television producer
-
-
Chairman
TVI Televisao Independente, S.A.
Free-to-air television
-
-
Chairman
Media Capital Produçoesinvestimentos, SGPS, S.A.
Production holding
company
-
-
Chairman
MCP Media Capital Produçoes,
S.A.
Production holding
company
-
-
Chairman
Internet content
-
-
Board Member
Prisa División Internacional, S.L.
International holding
company
-
-
Board Member
Prisa INC
US holding company
-
-
Board Member
Productora Canaria de
Programas, S.A.
Production
-
-
Board Member
Sociedad Canaria de Televisión
Regional, S.A.
Production
-
-
Joint Chief
Executive Officer
Film production
-
-
Vice-Chairman
and Joint Chief
Executive Officer
Tesela Producciones
Audiovisuales, S.L.U.
Production
-
-
Joint and several
director
Plural Entertainment España,
S.L.U.
Production
-
-
Joint and several
director
Plural Entertainment Canarias,
S.L.U.
Production
-
-
Joint and several
director
Timón, S.A.
-
-
-
Vice-Chairman
V-Me Media Inc.
-
-
-
Board Member
Name
Vertix, SGPS, S.A.
Prisa Digital, S.L.
Plural Jempsa, S.L.
89
Mr. Juan Luis Cebrián Echarri:
Activity
Arrangement under
performed
Company through
which the activity
is carried out
Position held
or function
discharged
Holding television
-
-
Vice-Chairman
Grupo Media Capital, SGPS, S.A.
(*)
Holding television
-
-
Board Member
DTS Distribuidora de Televisión
Digital, S.A.
Television
-
-
Board Member
Name
(*) At December 31, 2012, Mr. Juan Luis Cebrián no longer held any positions, although he was a Director during a portion of 2012.
In addition and in compliance with the aforementioned text, it is hereby confirmed that Mr. Fedele Confalonieri, Mr. José
Ramón Álvarez Rendueles, Mr. Angel Durández Adeva, Mr. Alfredo Messina, Mr. Borja de Prado Eulate, and Mrs. Helena
Revoredo Delvecchio, have not carried out nor carry out, on their own behalf or on behalf of other parties, any activities
which are the same, similar or complementary to the activities of MEDIASET ESPAÑA COMUNICACIÓN, S.A.
20. OTHER DISCLOSURES
a) Employees
2012
At year end
90
Average for the Year
Male
Female
Total
Senior executives
11
2
13
13
Executives
43
23
66
63
Department managers
33
33
66
67
Technical staff
372
242
614
624
Administrative personnel
30
108
138
137
Operators
19
-
19
19
Journalists
66
96
162
165
574
504
1,078
1,088
2011
At year end
Average for the Year
Male
Female
Total
Senior executives
11
2
13
13
Executives
41
20
61
60
Department managers
32
37
69
75
Technical staff
378
243
621
625
Administrative personnel
31
110
141
140
Operators
19
-
19
19
Journalists
74
102
176
179
586
514
1,100
1,111
b) Audit fees
Audit fees of the 2012 financial statements totaled 137 thousand euros (2011: 174 thousand euros).
In addition, the fees paid in the year for other services performed by the Company’s statutory auditors in 2012 totaled 72 thousand euros (2011: 99 thousand euros).
c) Foreign currency
Foreign-currency transactions related to the acquisition of audiovisual property rights and distribution rights totaled $73
million (2011: $116 million).
“Trade receivables” includes 68 thousand euros, US currency. (2011: 80 thousand euros, US currency).
In addition, “Plant, property and equipment” payables includes 29,208 thousand euros, US currency (2011: 49,138
thousand euros, US currency).
21. SIGNIFICANT EVENTS AFTER THE REPORTING DATE
At December 31, test broadcasting had begun by the new channel, “9,” which is part of the Cuatro multiplex. After the
end of 2012, this channel was broadcasting normally.
91
MANAGEMENT REPORT FOR THE YEAR ENDED
AT 31 DECEMBER 2012
EXPRESADO EN MILES DE EUROS
THE SPANISH ECONOMY IN 2012
Data on the Spanish economy available at the date of authorization for issue of these financial statements indicates
that, without a doubt, last year was one of worst since the global economic crisis began five years ago. The prolonged
recession has hit our production model hard since 2008, which is indicative of the daunting economic environment in
which we competed economically during 2012.
Viewed from a global perspective, from the start of 2012 it became clear that the hoped-for economic recovery was
still not imminent; in fact, it soon became evident that the Chinese economy was showing signs of slowing down as
compared to its previous high growth rates. Other developed economies were still far from getting back on the road to
long-lasting growth for two main reasons: the US did not meet growth rates projected during the final quarter of 2011,
while the dire situation of the European economy was pulled further down by peripheral countries which entered into
a recession the first part of 2012.
Since then, all these economies (excepting China, whose growth seems to have received a push in recent months) have
worsened, to the extent that the German and US GDPs, traditionally the motor of the global economy, entered into
the red towards the end of the year. This panorama excludes Latin America: although in 2012 certain countries did not
grow as much as projected (no doubt due to the fact their economies are warming up), the forecasted overall GDP is
under 3%, which, while not exactly spectacular, can be considered sound.
Data for Spain available at the at the date of authorization for issue of these financial statements indicate that the
GDP fell 1.8% overall during the year: it is quite significant that the fourth quarter was the year’s worst (-0.7%), which
seems to corroborate that the end is not in sight, and that some time will have to pass until the recession ends and
the economy begins to reflect growth, however slight. Evidently, the contraction of the GDP during the year has led to
an intense destruction of jobs, causing unemployment to reach 26.1% of the current active population at the date of
preparation of these financial statements; thus, approximately 5 million people are unemployed.
Austerity measures (which were nearly inevitable) instrumented by the government were a leading cause of the
contraction of the Spanish economy during 2012; they have had a significant impact on internal demand as well as
private consumption. These measures include: a rise in Personal Income Tax at the beginning of the year, increase VAT
as of September 1, as well as other austerity initiatives having an impact on the expenditures and investments made by
public administrations.
Economic forecasts for 2013 indicate that the economy will remain stagnant, as certain key public and private sector
employment adjustments will still be pending, which will have the inevitable effect on internal demand that has been
greatly affected by shrinking public budgets. However, as of the third quarter of the year, a weak growth might be noted
once all the current economic adjustments underway have begun to take effect.
The huge efforts and sacrifices made regarding economic policies as well as the restructuring of important sectors,
especially the financial, have led to improved productivity as well as a reversal of Spain’s trade deficit; thus, at the end
of 2012, it reached a balance and headed towards a surplus. Net capital flow during the first part of 2012 was fluid,
to then reverse during the second half, demonstrating the increasing confidence of foreign investors in the Spanish
economy.This has pushed risk premiums for Spanish public debt downwards, with a public and private degearing process
which is crucial, and without which it would not be possible to get back on the road to recovery. Against this backdrop,
encouraging news has begun to emerge regarding financial markets as well as Spain’s competitive edge, but has yet
92
to influence the economy’s flow of credit in reasonable quantities and conditions making it possible to guarantee that
economic agents will able to obtain necessary financing when conditions make it possible to do so.
THE TELEVISION INDUSTRY IN 2012: LEADING DURING TROUBLED TIMES
Last year, TV advertising was greatly influenced by the second phase of the recession, which began at the beginning of
2011, effectively dashing any hopes of economic recovery which had been in the air due to the brief upturn during 2010.
As mentioned previously, the economic policies implemented during the year have had a direct effect on the disposable
income of families: the severe destruction of employment and its psychological impact on consumers, including those
with job security, has forced private consumption below the GDP, as well as causing very harsh cuts in budgets devoted
to television advertising, leading to a very pronounced drop in income from TV ads which has affected the entire sector.
Data available at the date of preparation of these financial statements (pending confirmation by Kantar Media) estimates
that the TV advertising market plummeted 18.5% in 2012, confirming it as the second worst year of the crisis after 2009.
The overall TV sector has lost over 50% of its invoicing since its record during 2007, mainly as a result of the steep drop
in sales prices over recent years.
In 2012, Mediaset España Comunicación, S.A. has employed a strategy aimed at bolstering its position as sector leader
(45.3% at year end), ensuring balanced operation of channels according to market conditions, and optimizing income
from sporting events (most notably the UEFA European Football Championship, won by Spain, as well as the Moto GP
Championship, which the Company recently acquired the rights to); this has enabled it to increase market share during
the year.
Turning to audience figures, after the integration of Cuatro in 2011 and the launch of the new “Divinity” channel the
same year, the Company moved forward with its diversification and complementation strategies by launching “Energy”
in 2012, which mainly addresses the male population via the sporting events to which the Company bought the rights,
as well as content specifically acquired for the channel. Thus, along with its more consolidated channels, such as Factoría
de Ficción, La Siete, and Boing, and its driving force, Telecinco, the Company has managed to consolidate the overall
audience of its family of channels as well as each of them individually. It has avoided cannibalization within an environment
in which TV consumption has reached its maximum limits, despite a pervading economic crisis, and achieved a greater
diversification and audience loyalty through segmentation.
To illustrate, data show Mediaset España was the overall leader in 2012, with a 28.1% share, 9.2 points ahead of RTVE
and 2.3 ahead of Antena 3 (once the merger with La Sexta was completed). The Telecinco channel reached a 13.9%
share in the year, 1.7 points ahead of RTVE’s La Primera, while Cuatro’s 6% share situated it 1.1 points ahead of La Sexta.
Finally, as regards the newer-generation digital channels, those comprising the Mediaset España Group registered an 8.3%
audience share, which is 9 points higher than its main competitor’s group of channels, which attests to its unequivocal
position at the head of the pack.
A comparison of the Company’s results in 2012 with those of 2011 indicate that:
• Total operating income decreased from 859,631 thousand euros in 2011 to 715,808 thousand euros in 2012, mainly
as a result of decreased ad income.
• Operating expenses decreased from 784,488 thousand euros to 747,903 thousand euros, which is slight when viewed
in overall terms, mainly the result of a reduction in general expenses, the most noteworthy of which are directly linked
to the Company’s legal commitments. These expenses include those related to sporting events (namely the 2012
UEFA European Football Championship), which were compensated by savings from other television programs, as well
as the magnificent audience share obtained during the year, as mentioned previously.
• Finally, net profit in 2012 amounted to 64,492 thousand euros, compared to 137,264 thousand euros in 2011.
93
DIVIDENDS
In 2012, the Company paid a total of 55,260 thousand euros of dividends.
INVESTMENT IN RIGHTS AND FILM PRODUCTION
The Mediaset España Group maintained its policy of investing in audiovisual broadcasting rights, carefully selecting the
type of rights and content in order to maintain audience figures in the future and provide the most fertile ground for
the advertising business. The Group placed special emphasis once again on investment in Spanish Series.
Worth highlighting were the activities undertaken by Telecinco Cinema, S.A., a wholly owned subsidiary of the Company
charged with film production under the legal requirement of TV concessionaires to earmark 3% of operating revenue
for Spanish and European film production.
As investment in film production arises from a legal obligation and not a decision made freely by the network, the
Company has opted for quality and ambitious projects based on global strategic criteria guiding its activity in this field.
Where possible, it opts for productions of a certain size and scope that are apt for international showing bearing in mind
market conditions and the Company’s financing capacity as this obligation outweighs the revenues generated, regardless
of the trend and without any consideration to costs incurred or margins commanded.
In short, the aim is to combine financial wherewithal, talent, profitability and opportunities efficiently for our brightest
and most promising professionals in order to maximize the return on investment -in light of global conditions, maximum
importance is attached to this- considering that the activity is not voluntary, and to produce films that bring together
quality and commercial appeal under the network’s logo.
Without a doubt, 2012 was an extraordinary year for our film co-production activity: “The Impossible” broke the 40
million euro mark in Spain, and now ranks as the top-grossing Spanish film in history, and second in absolute terms right
behind “Avatar,” surpassing movies such as “Titanic,” “The Lord of the Rings, or “Pirates of the Caribbean.”
In international terms, the film has been sold all over the world and results until now have been very encouraging. The
film has been present in international festivals, including the Toronto International Film Festival and the San Sebastian Film
Festival, acclaimed by critics and public alike: it was nominated for 14 Goya awards, winning in five of these categories
(including Best Director and Best Production Supervision), as well as Oscar and Golden Globe awards in the category
of Best Performance by an Actress in a Leading Role.
In 2012, “Tadeo Jones” was co-produced with an all-Spanish team; it is the most-watched Spanish animated film of all
time as well as the biggest box office smash in this category, raking in 18 million euros in Spain, which is over Hollywood
productions such as “Ice Age 4,” “Brave,” or “Madagascar 3.” It was nominated for four Goyas, and won three, including
Best Animated Film, Best Adapted Screenplay, and Best New Director. It is the Group’s first animated movie, and is
paving the way for new business opportunities in this regard.
Thanks to the above, the Group leads the national film production market by far, with a 56% share, which is even more
significant when taking into consideration the challenging situation the sector faces due to the economic recession, as
well as the impact of the VAT increase effected last September.
INTERNET
The Group considers Internet a strategically important current and future activity.
In 2012, the Group broke even in this segment.
According to OJD data, Telecinco was the television website with the highest traffic during the year. The Mediaset.es
website also led communication groups operating in Spain.
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The Group’s MiTele website encompasses all its audiovisual content. It bolstered its contents while becoming more
available through its specific areas devoted to film (movies in their original version, ie, not dubbed) for children’s
programming.
TREASURY SHARES
At December 31, 2012, the Company held 6,419,259 treasury shares, representing 1.58% of share capital.
MEDIASET ESPAÑA SHARE PRICE PERFORMANCE
Throughout 2012 the IBEX 35 Spanish blue chip index was in a slump, losing 4.7% overall during the year; however,
until May 30 accumulated losses reached 30%, to strongly bounce back the remainder of the year thanks to the positive
impact exerted on investor trust by the European Central Bank’s defense of the European Monetary Union.
Spain’s blue chip index performance during the year clearly reflected investors’ negative perception of the Spanish
economy, especially when compared to other areas, as all the key international markets (Dow Jones, DAX, CAC40,
FTSE10, etc.) rose during the year.
Mediaset España’s share price behaved positively in 2012, growing 15.4% overall, making it the index’s eighth best
performer during the year. Its quoted price rose to 5.09 euros.
Mediaset España’s market capitalization was 2,071 million euros, situating it in first place, well ahead of its nearest
competitors: it more than doubles the all the other Spanish companies in the sector as a group.
The volume of shares traded during the year rose to 477.4 million, equivalent to 2004.1 million euros, which is substantially
lower than during 2011. This drop can basically be blamed on the prohibition of short-selling shares on the Spanish
market imposed by the CNMV at the end of July until the end of the year.
Most notably, Mediaset España’s share price reached a yearly high of 5.69 euros on December 19, with its minimum
registered on May 9 (3.30 euros).
CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY
Good practice in corporate governance means establishing rules, principles and incentives at companies that help
safeguard the interests of the company and its shareholders, and guarantee greater transparency in management.
The main measures adopted by Mediaset España Comunicación, S.A. in the field of corporate governance since 2006
are as follows:
Amendments of the rules governing the organization and operation of the main management bodies. Specifically,
amendments have been made to 9 articles of the Company’s bylaws, 4 articles in its General Shareholders’ Meeting
regulations and 18 articles in the Regulations of the Board of Directors. In addition, the Company drafted an Internal
Code of Conduct for Mediaset España Comunicación, S.A. and its Group of Companies governing their activities on the
stock markets.
Revision of the composition of the Board of Directors and the board committees to increase the percentage of independent directors. Meanwhile, the Audit and Compliance Committee and the Appointments and Remuneration Committee are chaired by independent directors.
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Increase in the number of women directors, reflecting the network’s commitment to gender equality.
Continued detailed information on remuneration paid to directors in the Company’s annual financial statements, as
well as in the Annual Corporate Governance Report and the Report on the Directors’ Remuneration Policy.
Verification of the Corporate Governance Report and the Corporate Responsibility Report by an independent auditor (PricewaterhouseCoopers).
Mediaset España Comunicación’s efforts in 2009 were acknowledged by Observatorio de Responsabilidad Social
Corporativa, a Spanish corporate social responsibility organization, which rated it top among IBEX-35 companies in a
study of corporate governance compliance. The network was rated highly for its efforts in transparency and the degree
of compliance with the Unified Code Recommendations.
Mediaset España Comunicación, S.A. is aware of the social impact of its actions.This awareness is all the more important
at Mediaset España as a mass media, prompting the network to spearhead a variety of initiatives, such as the “12 meses,
12 causas” (12 months, 12 causes) project to make the network’s viewers more aware of a series of issues. Under the
auspices of the above initiative, Mediaset España Comunicación, S.A. created its “You are perfect for someone else”
campaign in collaboration with the a National Transplant Organization, aimed at encouraging organ donation in Spain.
Thanks to the Company’s widespread presence in Spanish homes, as well as the communication potential of its star
presenters, over 170,000 donor cards were requested as a result of the campaign. This very well accepted and effective
solidarity campaign led to Mediaset España Comunicación, S.A. winning seven awards, several of which are considered
Spain’s most prestigious.
Internally, Mediaset España Comunicación, S.A. also remains firmly committed to the training and career development
of its employees.
HEDGING
The Company uses financial instruments to hedge the impact of foreign exchange differences in connection with
transactions (primarily the acquisition of external production rights) denominated in foreign currency. These hedges are
designed to offset the impact on the income statement of exchange-rate fluctuations in outstanding amounts payable
on these transactions. Specifically, the Company buys foreign currency forward for the amounts payable so as to match
the forecast payment dates.
RISK CONTROL
As part of its general oversight function, the Board of Directors is in charge of identifying the Mediaset España’s main
risks, as well as implementing and monitoring the internal information and control, and internal reporting systems.
In addition, among the basic responsibilities of the Audit and Compliance Committee are to know and verify the
appropriateness of the financial reporting process and internal control systems.
To support and back this Committee, a Corporate Risk Management System is applied consistently at all Group
companies. This system is reviewed and updated periodically.
Corporate risk management at Mediaset España is based on the COSO II (Committee of Sponsoring Organizations of
the Treadway Comission) integrated framework for enterprise risk management.
Mediaset España Comunicación, S.A. monitors its risks permanently, assessing the relevance and potential impact on
Group companies, the probability that this risk will occur and the degree of control over the risk.
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RESEARCH AND DEVELOPMENT
The Company’s biggest investments go to the current and future content broadcast by the Group. It does not have a
specific R&D department, although innovation is still a crucial area of future development.
EVENTS AFTER THE REPORTING PERIOD
The main events occurring between the end of the reporting period and the date of authorization for issue of the
financial statements are those discussed in the related Note to the financial statements.
CAPITAL STRUCTURE
The Company’s share capital before the capital increases carried out to acquire Cuatro and 22% of Digital+ amounted
to 123,320,928.00 euros, made up of 246,641,856 shares of the same class represented by book entries and with a par
value of 0.50 euros each. As a result of the capital increases, the number of shares increased to 406,861,426 of 0.50
euros par value each, taking the total to 203,430,713 euros. All the shares are of the same class and represented by
book entries.
The Company’s shares are listed on the Madrid, Madrid, Barcelona, Bilbao and Valencia stock exchanges. The ISIN code
is ES0152503035.
Mediaset España Comunicación, SA is a member of the IBEX 35 since January 3, 2005.
BUSINESS OUTLOOK
The Company’s business is dependent on national private consumption, and as such, in 2013 will not be able to separate
itself from the overall macroeconomic environment and related indicators. As discussed in this Management Report,
despite the fact the there are reasonable expectations that towards the end of the year Spain will begin to experiment
the first signs of economic recovery after nearly five years of an unprecedented deep recession, this is not to say that
in 2013 (particularly during the first six months) basic economic indicators such as unemployment and consumption
will not continue to be big concerns.
As regards free-to-air television, a sector in which the Company was pioneer and is still consolidating its presence, it
should continue forging a strong presence based on rationalized use and transparency, making it more easily adaptable
to the demands of the economy as well as the situations presenting themselves when expected recovery arrives.
Available data on TV consumption and its share of the total advertising income pie indicate that the sector has undergone
a crisis brought on by the economic recession; however, structural factors remain solid.
Within this context of the concentration and consolidation of operators, the Company’s business strategy will be
focused on how to maintain its strong lead, in both terms of audience as well as advertising market, while being fullyadapted to the environment which affects cash generation as well as its cost structure, in order to protect its financial
margins as well as foster growth once the economy makes it possible to do so.
As far as its programming lineup is concerned, the Company will continue to support genres which have traditionally
been popular, thereby making it the indisputable leader of the market; it will also continue with its strategy of diversification, focusing on the different audience to which the family of channels is tailored. Also, it will endeavor to better position
each channel in advertising terms, while remaining cognizant of sporting events which, in an increasingly-fragmented
market, are very popular and attract large audiences. All this will take place with close supervision of acquisition costs
and attention to advertising opportunities, which are key to obtaining economic benefits, as well as a relevant goal within
our programming strategy and commercial operations.
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A final first-line goal is to maintain a solid financial and equity position (while remaining virtually debt-free), thereby
making it possible to objectively and independently consider operational and business opportunities as they arise within
the context of the current ever-changing environment, while bolstering the Company’s competitive edge in the face of
the high financial leverage which affects the majority of the companies competing in its sector.
RESTRICTIONS ON VOTING RIGHTS
There are no legal or bylaw stipulated restrictions on exercising voting rights. Each share carries one vote.
SHAREHOLDER AGREEMENTS
Shareholder agreements in force are those included in the “Significant Event” notice filed by the Company with the
National Securities Exchange Commission (CNMV) on February 8, 2011, reproduced below:
Through this communication we inform of the clauses restricting the transfer of shares or relating to the exercise of
the right to vote at the General Meetings that are included in the Integration Agreement and the Option Agreement
entered into between Mediaset España Comunicación, S.A., Prisa Televisión, S.A.U. (“Prisa Televisión”), and Promotora
de Informaciones, S.A. (“Prisa”), as listed and described in Mediaset España Comunicación, S.A. Prospectus approved and
registered by the National Securities Market dated November 18, 2010 and January 25, 2011 (the “Prospectus):
1 Integration Contract
Subject to Clause 3.4 of the Integration Agreement and as described in the Prospectus dated November 18, 2010,
Prisa TV (formerly Sogecable) is entitled to appoint two members of the Board of Directors of Mediaset España
Comunicación, S.A. (at the same time as Mediaset España Comunicación, S.A. will have 8) and will be entitled to appoint
one director for as long as it holds a minimum of 5% of the Mediaset España Comunicación’s share capital. In addition,
whilst Prisa TV holds 10% of Mediaset España Comunicación’s share capital, it will be entitled to appoint, among the
directors it has appointed, a non-executive Vice-president, a member of the Executive Committee, a member of the
Audit and Control Committee, and a member of the Remuneration and Nomination Committee. Mediaset S.p.A. has
expressed its agreement with the contents of the indicated clause.
The following is the transcription of the clause 3.4 of the Integration Agreement:
(3.4) Mediaset España Comunicación, S.A. Government
Following the integration, when it becomes effective, Prisa Televisión, S.A. will have a proportional representation on the board of Mediaset España Comunicación, S.A. and in particular, the following rights in relation to
corporate governance of Mediaset España Comunicación, S.A.:
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(i)
Prisa Televisión, S.A. has the right to appoint two of the 15 members that make up the Board of Directors
of Mediaset España Comunicación, S.A. (and without prejudice to the said right of Prisa Televisión, S.A.,
the directors appointed by Mediaset España Comunicación, S.A. will be reduced to eight);
(ii)
the rules of proportional representation will be taken into account for purposes of giving rights to
appoint directors to of Prisa Televisión, S.A. (a) if a change in the total number of board members
specified in paragraph (i) above, or (b) if occurs a change in the participation of Prisa Televisión, S.A. in
Mediaset España Comunicación, S.A.; all without prejudice to the right granted to Prisa Televisión, S.A.
under the following paragraph;
(iii)
the extent to which Prisa Televisión, S.A. maintains a share of at least 5% of the share capital of Mediaset
España Comunicación, S.A., Prisa Televisión, S.A. has the right to retain one board member, and
(iv)
while Prisa Televisión, S.A. has an ownership interest in more than 10% of the share capital of Mediaset
España Comunicación, S.A., Prisa Televisión, S.A. has the right to appoint, among its representatives in
the board of Mediaset España Comunicación, S.A.,
• a non-executive vice president;
• a member of the executive committee;
• a member of the audit and control, and
• a member of the remuneration and nomination committee.”
2. Option Agreement
Pursuant to clause 4.4 of the Option Agreement and as described in the Prospectus, Prisa TV has committed to the
Company not to transfer the New Mediaset España Comunicación’s Shares subscribed in exchange of the contribution
of Sociedad General de Televisión Cuatro, SAU (representing 17.336% of the Mediaset España Comunicación’s share
capital after the adjustment contractually agreed in the deal), shares that, for this purpose, have been pledged in favor of
Mediaset España Comunicación, S.A.
This commitment will remain in effect until March 28, 2012 or, if the option is exercised as per the Option Agreement,
as set out in paragraph 5.2.3. (F.6) of the Registration Document of the Pre-Prospectus approved and registered as of
November 18, 2010 (the “Preprospectus”), until it gets: (i) the unconditional authorization or subject to no substantial
conditions of the antitrust authorities; and if necessary ruled by an independent expert or experts designated for that
purpose by the parties, or (ii) an agreement between the parties on the conditions imposed by competition authorities.
Therefore, until Mediaset España Comunicación, S.A. will not make effective the additional corporate rights granted by
the sale agreement and shareholders agreement in Digital+ as described in paragraph 5.2.3 of the Pre-prospectus (the
“Additional Corporate Rights”). If not, or if it is impossible to apply the Additional Corporate Rights, there would be,
among other things, the cancellation of the New Shares owned by Prisa TV, as indicated in the mentioned paragraph
5.2.3. (F.6) of the Pre-prospectus.
The following is the transcript of the, limited to pledges of non-availability of shares to Prisa TV, clause 4.4 of the Option
Agreement:
4.4.
Prohibition of disposal of New Shares and Participation Mediaset España Comunicación, S.A.
Prisa Televisión, S.A. agrees not to offer, sell, convey any title, neither directly nor indirectly to place any liens and
encumbrances on, the New Mediaset España Comunicación’s Shares, until the effect of this Clause 4 will be
extinguished, all without prejudice to the events arising from the Pledge and NAT Pledge and other security
referred to in paragraph (i) of Clause 4.6 below. Accordingly, clause 13.2 of the Integration Agreement shall be void.
RULES GOVERNING THE APPOINTMENT AND REPLACEMENT OF
DIRECTORS AND THE AMENDMENT OF THE COMPANY´S BYLAWS
A. Appointment and removal of directors.
Article 41 of the Company bylaws:
1.
Directors shall be appointed pursuant to a resolution of the shareholders at the General Meeting, adopted in
accordance with the requirements of article 102 of the Spanish Corporation Law.
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2.
Notwithstanding the foregoing, the designation of directors through the proportional system referred to in
article 137 of the Spanish Corporation Law is duly safeguarded.
3.
In the event of a vacancy during the term for which the directors were appointed, the Board may co-opt a
shareholder to occupy the position until the earliest General Meeting.
1.
Directors shall be appointed for a period of five years and may be re-elected for one or more subsequent
terms of equal length.The appointment shall lapse at the end of the term once the subsequent General Meeting
has been held or at the end of the legal term established for calling the Annual General Meeting.
2.
The appointment of directors designated by cooptation shall be deemed to have been made and the directors
shall exercise their functions up to and including the date of the next General Meeting, without prejudice to the
shareholders’ powers of ratification at the General Meeting.
3.
Independent directors may exercise their functions for a maximum period of twelve (12) years and may not
be re-elected after such period except subject to a favorable report by the Appointments and Remuneration
Committee.
Article 55 - Removal of directors
1.
Directors shall cease to hold office when so determined at the General Meeting, when they notify the Company
of their resignation or decision to stand down or when the term for which they were appointed elapses. In the
latter case, the resignation shall be effective from the date of the earliest General Meeting.
2.
Directors shall tender their resignation to the Board of Directors and the Board shall accept their resignation
if deemed appropriate in the following situations: (a) when they reach the age of 70; (b) when they retire from
the executive positions to which their appointment as directors was associated; (c) when they are involved in
any applicable situations of incompatibility or prohibition; (d) when they have been seriously reprimanded by
the Appointments and Remuneration Committee for having infringed their duties as directors; and (e) when
their continuity as directors jeopardizes the Company’s interests or adversely affects its prestige and reputation
or when the reasons for which they were appointed cease to exist (e.g. when proprietary directors dispose of
their ownership interest in the company).
3.
Directors who stand down from the Board prior to the end of their mandate must submit a letter to all the
members of the Board explaining the reasons for vacating office. The Company shall also notify the Spanish
National Securities Market Commission (CNMV) of the resignation in a significant event filing and explain the
reasons in the annual Corporate Governance Report.
B. Amendments to the Company’s bylaws.
Article 34. - Adoption of resolutions
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1.
Resolutions shall be adopted at Annual General Meetings or at Extraordinary General Meetings with the
majorities required under the Spanish Corporation Law. Every voting share present or duly represented at the
General Meeting shall carry one vote.
2.
The majority required to approve resolutions shall be one half plus one of the voting shares present or duly
represented at the General Meeting, except for the instances stipulating larger majorities, provided for in Law
or these bylaws.
POWERS OF DIRECTORS AND, SPECIFICALLY, POWERS TO ISSUE OR BUY
BACK SHARES
These powers are regulated firstly in the Company’s bylaws and secondly in the internal code of conduct.
A.
Article 37 of the bylaws regulates management and supervisory powers as follows:
1. Except for matters reserved solely to General Meeting, the Board of Directors is the Company’s highest
decision-making body.
2. The Board of Directors has all the powers required to manage the Company. However, the management of the
Company’s ordinary business shall generally be entrusted to the steering committees and to the management
team and the Board of Directors shall focus on establishing the Company’s general strategy and exercising
general supervisory functions. In any case, decisions on the following matters are the exclusive reserve of the
Board of Directors and may not be delegated:
a)
Authorization for issue of the financial statements, management report and proposed distribution of
profit and the consolidated financial statements and Group management report.
b)
Appointment of directors by co-optation and proposals to the General Meeting for the appointment,
ratification, re-election or removal of directors.
c)
Designation and re-election of internal positions on the Board of Directors and members of committees.
d)
Establishment of the remuneration of the members of the Board of Directors, to be proposed by the
Appointments and Remuneration Committee.
e)
Payment of interim dividends.
f)
Announcements relating to any takeover bids launched for the securities issued by the Company.
g)
Approval and amendment of the Board of Directors’ Regulations governing internal organization and
functions.
h)
Authorization for issuance of the annual Corporate Governance Report.
i)
Exercise of the powers delegated by the shareholders in general meeting when powers of substitution
have not been established and the performance of any duties entrusted by the shareholders in general
meeting.
j)
Conclusion of any agreement or establishment of any legal relationship between the Company and any
shareholders (or companies belonging to the same group as the shareholder) with ownership interests
of over five per cent and of an amount in excess of 13,000,000 euros.
k)
third party valued at over 80,000,000 euros.
l)
Approval of annual budgets and, if applicable, strategic plans.
m)
Oversight of investing and financing policy.
n)
Oversight of the shareholder structure of the Mediaset España Group.
o)
Approval of corporate governance policy
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p)
Oversight of corporate social responsibility policy.
q)
Approval of the remuneration policy for executive directors for their executive functions and the main
terms that their contracts must fulfill.
r)
Performance evaluation of the Company’s executive directors.
s)
Monitoring, following a prior report of the Audit and Compliance Committee, of the risk control and
management policy and the internal information and control systems.
t)
Approval of Company policy on treasury shares.
u)
Staying abreast of the removal and appointment of senior executives and their contract terms.
v)
Approval at the proposal of the Audit and Compliance Committee, of the financial information that the
Company must publish periodically.
w)
Approval of the creation or acquisition of ownership interests in special-purpose entities or companies
domiciled in countries or territories considered to be tax havens and any transactions or operations of
a similar nature which, due to the complexity thereof, may adversely affect the Group’s transparency.
x)
Authorization, following a favorable report of the Audit and Compliance Committee, of the relatedparty transactions that Mediaset España Comunicación, S.A. may perform with directors or persons
related to the directors or to significant shareholders, except for those which fulfill the following
conditions: (i) they are applied en masse to a group of customers and in accordance with standard
terms and conditions, (ii) they are performed at prices established in general terms by the supplier of
the service or on an arm’s length basis, (iii) the related amount does not exceed 1% of Mediaset España
Comunicación’s annual revenue. The directors affected by related-party transactions which, due to the
nature thereof, are subject to vote by the Board of Directors shall not attend the meeting and may not
vote or delegate their vote.
y)
Any other matters that the Board of Directors Regulations reserve for handling by the Board in full.
The powers reserved for the Board of Directors, except those that legally or statutorily cannot be delegated, are vested
in the Executive Committee and the two chief executive officers, Paolo Vasile and Giuseppe Tringali.
B. Section 9 of the in-house Code of Conduct of Mediaset España Comunicación,
S.A. and its Group governing its dealings in the securities markets sets out the rules
applicable to transactions in treasury shares, specifically providing the following:
9.1. Definition of treasury share transactions falling under the remit of the securities market code of
conduct
Transactions with treasury shares shall be deemed to be those engaged in with shares issued by Telecinco
Group companies and derivative instruments whose underlying is the aforementioned shares.
These transactions may be undertaken:
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a)
Directly by the Company or by other Telecinco Group companies.
b)
Indirectly, through third parties with an explicit or implicit mandate.
c)
By third parties without a mandate but acting to the same end.
9.2. Policy on treasury shares
Within the scope of the authorization given at the General Meeting, the Company’s Board of Directors shall
be responsible for drawing up specific plans for the acquisition or disposal of treasury shares.
9.3. General principles guiding trading in treasury shares
Trading in treasury shares shall conform to the following principles:
9.3.1. Compliance with regulations
All Affected Persons are obliged to know and comply with the applicable internal regulations and
procedures.
9.3.2. Purpose
The overriding objective of trading in treasury shares is to provide investors with the adequate market liquidity and depth for its securities and to minimize any possible temporary imbalances arising
between market demand and supply. Under no circumstances shall trading be engaged in with a view
to intervening in the free formation of prices.
9.3.3. Transparency
Transparency in dealings with the stock exchange supervisory and regulatory bodies in connection
with treasury share transactions shall be monitored.
9.3.4. Insider information
Under no circumstances may persons who have had access to insider information on the related
securities and instruments trade in treasury shares.
9.3.5. Neutrality in price formation
Intervention shall be neutral and under no circumstances may a dominant position be held in the
market.
9.3.6. Brokerage
The Telecinco Group companies shall channel all trading in Company shares through a limited number of market members. Prior to any trading the Company shall inform the CNMV in a confidential
manner of the designated member and also of any replacement thereof. In the event that a framework agreement is executed with any market member governing treasury share dealing, a confidential
copy thereof shall be furnished to the CNMV and to the stock exchange governing bodies.
9.3.7. Counterparty
The Telecinco Group companies shall refrain from buying or selling Company shares where the counterparty is any of the following persons or entities: (i) Telecinco Group companies, (ii) the directors
thereof, (iii) their significant shareholders, or (iv) interposed persons of any of the above. Similarly,
the Telecinco Group companies may not simultaneously hold purchase and sale orders for Company
shares.
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9.3.8. Restrictions
Trading in Company shares shall not be engaged in during processes related to public offerings, takeover bids, mergers or other similar corporate operations unless expressly provided for in the prospectus for the transaction in question. The Company shall also refrain from trading in treasury shares
during the closed periods established in article 4.3.4 of the Code of Conduct.
9.3.9. Amendment
In the event of the urgent need to protect the interests of the Telecinco Group and its shareholders,
the chief executive officer or the director of regulatory compliance may agree to temporarily amend
or suspend the application of the foregoing regulations, of which the Board of Directors and the
CNMV shall be informed.
9.4. Stock option plans
Notwithstanding the foregoing, the rules established in articles 9.1 to 9.3 of the Code shall not apply with
respect to the acquisition of treasury shares to be subsequently granted to the beneficiaries of the Company’s
stock option plans approved by the Board of Directors or to the other trading in treasury shares entered into
by the Company within the framework of a share buyback program. The aforementioned transactions shall
be executed taking into account the particular characteristics thereof, the manner and the specific features
established by the Board of Directors when approving the plans, which shall comply with the conditions
established in the regulations implementing article 81.4 of the Securities Market Law.
9.5. Designation and functions of the department responsible for the management of treasury shares
The Management Control Department shall be responsible for managing treasury shares.
9.5.1. Special duty of confidentiality
The persons that form part of the Management Control Department assume special confidentiality commitments
with respect to treasury share strategy and trading.
9.5.2. Duties
The Department shall be responsible for:
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a)
Managing the treasury shares in accordance with the general principles established in the Code of
Conduct and those determined by the Telecinco Group’s managing bodies.
b)
Overseeing the performance of the Telecinco’s shares and informing the director of regulatory
compliance of any significant changes in the share price which cannot reasonably be attributed to
market movements.
c)
Keeping a record of all treasury share trades ordered and executed for consultation by the director of
regulatory compliance, the Board of Directors or any other persons designated by the Board.
d)
Establishing relationships with any supervisory bodies as necessary to correctly comply with the
provisions of this Code.
e)
Preparing a report on the Department’s activities quarterly or whenever so required.
f)
Notifying the director of regulatory compliance of any significant incident arising from the management
of the treasury shares.
SIGNIFICANT AGREEMENTS THAT WOULD COME INTO FORCE, BE
AMENDED OR EXPIRE IN THE EVENT OF A CHANGE OF CONTROL AT
THE COMPANY
There are no significant agreements subject to a change in control at the Company.
AGREEMENTS BETWEEN THE COMPANY AND ITS DIRECTORS AND
MANAGERS THAT PROVIDE FOR SPECIAL INDEMNITIES
The following table itemizes the only instances of special indemnification schemes outstanding between the Company
and its directors and managers.
Position
Guarantee or golden parachute clause
General Manager
Termination of contract by the Company (except for just cause):
(in replacement of legally prescribed severance, unless the latter is higher)
Termination between 04/24/02 and 12/31/07: 24 months’ salary
Termination between 2008 and 2011: 18 months’ salary
Termination thereafter: 12 months’ salary
General Manager
Severance scheme:
a) Voluntary redundancy: accrual per annum: fixed annual salary + annual bonus/13.5, so that total
compensation is equivalent to the total years worked.
b) Justified or unjustified dismissal: legally prescribed severance + severance set out in a) above
Division Manager
Termination of contract by the Company (except in case of just cause):
An indemnity of one year of gross fixed salary plus legally prescribed severance.
Manager
Termination of contract for reason attributable to the Company (except in case of just cause):
18 months of fixed salary (including legally prescribed severance).
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TÍTULO CAPÍTULO
MEDIASET ESPAÑA
COMUNICACIÓN, S.A.
AND SUBSIDIARIES
Consolidated Financial Statements for the year
ended December 31, 2012, prepared in accordance
with International Financial Reporting Standards (IFRS) as
adopted by the European Union, and Directors’ Report.
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Audit report
MEDIASET ESPAÑA COMUNICACIÓN, S.A. AND SUBSIDIARIES
Consolidated Financial Statements and Consolidated Management
Report for the year ended
31 December 2012
AUDIT REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
(Free translation from the original in Spanish. In case of conflict the Spanish version prevails)
To the Shareholders of MEDIASET ESPAÑA COMUNICACIÓN, S.A.:
We have audited the consolidated financial statements of MEDIASET ESPAÑA COMUNICACIÓN,
S.A. (Parent company) and subsidiaries (the Group), which consist of the consolidated statement of
financial position at 31 December 2012, the consolidated separate income statement, the consolidated
statement of comprehensive income, the consolidated statement of changes in equity, the consolidated
cash flow statement, and the notes thereto for the year then ended. As explained in Note 2.1, the
directors of the Parent company are responsible for the preparation of the Group’s consolidated
financial statements in accordance with the International Financial Reporting Standards adopted by
the European Union and other regulations regarding financial information applicable to the Group. Our
responsibility is to express an opinion on the aforementioned consolidated financial statements taken
as a whole, based upon work performed in accordance with the prevailing audit regulations in Spain,
which require the examination, through the performance of selective tests, of the evidence supporting
the consolidated financial statements, and evaluation of whether the consolidated financial statements,
the principles and criteria applied, and the estimates made, are in accordance with the applicable
regulatory requirements regarding financial information.
In our opinion, the accompanying 2012 consolidated financial statements give a true and fair view,
in all material respects, of the consolidated equity and financial position of MEDIASET ESPAÑA
COMUNICACIÓN, S.A. and subsidiaries at 31 December 2012 and the consolidated results of its
operations, changes in consolidated equity and consolidated cash flows for the year then ended, in
conformity with the International Financial Reporting Standards adopted by the European Union and
other applicable regulations regarding financial information.
The accompanying 2012 consolidated management report contains such explanations as the directors
of MEDIASET ESPAÑA COMUNICACIÓN, S.A. consider appropriate concerning the situation of the
Group, the evolution of its businesses and other matters; however, it is not an integral part of the
consolidated financial statements. We have checked that the accounting information included in the
aforementioned consolidated management report agrees with the consolidated financial statements
for the year ended 31 December 2012. Our work as auditors is limited to verifying the consolidated
management report in accordance with the scope mentioned in this paragraph, and does not include
the review of information other than that obtained from the accounting records of MEDIASET ESPAÑA
COMUNICACIÓN, S.A. and its subsidiaries.
TABLE OF CONTENTS
Consolidated statement of financial position at
31 december 2012 and 2011
110
Consolidated separate income statement at 31 december
2012 and 2011 112
Consolidated statement of comprehensive income at
31 december 2012 and 2011 113
Consolidated statement of comprehensive income at
31 december 2012 and 2011 114
Consolidated statement of cash flow at 31 december 2012 and 2011
116
Notes of the Consolidated Financial Statement
118
Management Report for the year ended at 31 December 2012
184
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31
DECEMBER 2012 AND 2011
ASSETS
12/31/12
12/31/11
Property, plant, and equipment (Note 6)
53,193
54,459
Intangible assets (Note 7)
234,650
242,720
Audiovisual property rights (Note 8)
230,853
260,960
Goodwill (Note 9)
287,357
287,357
Equity method investments (Note 10)
467,943
483,087
Non-current financial assets (Note 11)
4,479
55,462
176,434
158,125
1,454,909
1,542,170
5,977
7,720
202,570
229,613
184,598
213,765
809
2,867
Sundry receivables
7
7
Employee receivables
71
91
365
738
Income tax current assets (Note 19.3)
16,720
12,145
Other current assets (Note 12)
10,956
65,555
Other current financial assets (Note 13)
2,065
55,790
Cash and cash equivalents (Note 14)
90,692
58,574
Total current assets
312,260
417,252
1,767,169
1,959,422
NON-CURRENT ASSETS
Deferred tax assets (Note 19.3)
Total non-current assets
CURRENT ASSETS
Inventories
Accounts receivable
Trade receivables for sales and services
Trade receivables from related parties (Note 25.1)
Other receivable from public authorities (Note 19.3)
TOTAL ASSETS
The accompanying Notes 1 to 26 are an integral part of this consolidated financial statement at December 31, 2012.
110
FINANCIAL STATEMENTS AND MANAGEMENT. ANNUAL CORPORATE GOVERNANCE REPORT. BALANCE SHEETS 2012
EQUITY AND LIABILITIES
12/31/12
12/31/11
203,431
203,431
1,064,247
1,064,247
Share based payment reserves
15,361
14,139
Other reserves
194,471
124,572
Treasury shares
(84,746)
(84,746)
Reserves in associates
(34,506)
(19,424)
50,143
110,519
Total equity of the parent
1,408,401
1,412,738
Non-controlling interests
12,498
13,098
1,420,899
1,425,836
Long term provisions (Note 16)
24,317
29,306
Non-current liabilities (Note 17)
240
283
Deferred tax liabilities (Note 19.5)
6,607
5,305
Total non-current liabilities
31,164
34,894
Payable to related parties (Note 25.1)
44,427
62,013
Accounts payable for purchases and services (Note 22)
121,330
191,341
Accounts payable for audiovisual rights (Note 22)
68,866
93,777
Other non-trade payables
29,742
93,637
Bank borrowings (Note 22)
226
61,774
Government grants and other loans
55
225
Payables to public authorities (Note 19.3)
16,871
15,229
Payables for non-current asset acquisitions
2,602
4,583
Remuneration payable
9,915
11,227
73
529
50,423
57,665
318
259
Total current liabilities
315,106
498,692
1,767,169
1,959,422
EQUITY (Note 15)
Share capital
Share premium
Profit for the year attributable to the parent
Total equity
NON-CURRENT LIABILITIES
Current Liabilities
Other borrowings
Short-term provision (Note 18)
TOTAL EQUITY AND CURRENT LIABILITIES
111
CONSOLIDATED SEPARATE INCOME STATEMENT AT 31 DECEMBER
2012 AND 2011
12/31/12
12/31/11
Revenue (Note 23.1)
872,836
984,902
Sales
869,785
1,022,198
Discount and volume rebates
(50,611)
(58,850)
Revenue from the rendering of services
53,662
21,554
Other operating incomes
13,891
24,428
Total operating income
886,727
1,009,330
1,766
(8)
Procurements
305,693
256,895
Staff costs (Note 23.2)
109,256
116,603
Amortization of audiovisual property rights
210,469
227,680
Depreciation and amortization charge
15,929
14,861
213
801
Other expenses (Note 23.4)
194,598
227,969
Total operating expenses
837,924
844,801
Profit from operations
48,803
164,529
Net finance income/expense (Note 23.6)
(3,907)
3,431
Exchange differences (Note 23.7)
(61)
1,556
Result of companies accounted for using the equity method (Note 10)
8,452
(22,955)
(1,109)
(11,091)
64
15,661
Profit before tax
52,332
151,131
Income tax (Note 19.4)
2,789
38,482
Profit for the year
49,543
112,649
Shareholders of the parent
50,143
110,519
(600)
2,130
Earnings per share (Note 24.1)
0.13
0.28
Diluted earnings per share (Note 24.2)
0.13
0.28
INCOME
EXPENSES
Decrease in inventories of finished goods and work in progress
Change in operating provisions (Note 23.3)
Sale/Impairment losses of other financial assets
Gains (losses) on disposals of non-current assets available for sale (Note 11)
Attributable to:
112
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AT
31 DECEMBER 2012 AND 2011
12/31/2012
12/31/2011
49,543
112,649
-
30,414
49,543
143,063
Shareholders of the parent
50,143
140,933
(600)
2,130
PROFIT FOR THE YEAR
Reclassification from “Equity method investments” to “Non-current assets available for sale financial assets (Note 10)
TOTAL PROFIT FOR THE YEAR
Attributable to:
113
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AT 31
DECEMBER 2012 AND 2011
Share capital
Share
premium
Share bases
payment reserve
Legal
reserve
203,431
1,064,247
14,139
40,686
Components of other comprehensive income
-
-
-
-
Profit (Loss) for the year
-
-
-
-
Total comprehensive income for the year
-
-
-
-
Balance at 12/31/11
Distribution of profit for the year
-
-
-
-
Capital increase expenses
-
-
-
-
Share based payment
-
-
1,222
-
Other changes
-
-
-
-
-
-
-
-
203,431
1,064,247
15,361
40,686
Share capital
Share
premium
Share bases
payment reserve
Legal
reserve
203,431
1,065,351
12,781
24,664
Components of other comprehensive income
-
-
-
-
Profit (Loss) for the year
-
-
-
-
Total comprehensive income for the year
-
-
-
-
Balance at 12/31/12
Balance at 12/31/10
Distribution of profit for the year
-
-
-
16,022
Treasury shares
-
-
-
-
Capital increase
-
(1,104)
-
-
Share based payment
-
-
1,358
-
Other changes
-
-
-
-
-
-
-
-
203,431
1,064,247
14,139
40,686
Balance at 12/31/11
114
Other
reserves
Treasury
shares
Reserves in
associates
Profit for
the year
Total equity
of the parent
Non-controlling
interest
Total
83,885
(84,746)
(19,424)
110,519
1,412,738
13,098
1,425,836
-
-
-
-
-
-
-
-
-
-
50,143
50,143
(600)
49,543
-
-
-
50,143
50,143
(600)
49,543
69,900
-
(14,640)
(110,519)
(55,260)
-
(55,260)
-
-
-
-
-
-
-
-
-
-
-
1,222
-
1,222
-
-
(442)
-
(442)
-
(442)
-
-
-
-
-
-
-
153,785
(84,746)
(34,506)
50,143
1,408,401
12,498
1,420,899
Other
reserves
Treasury
shares
Reserves in
associates
Profit for the
year
Total equity
of the parent
Non-controlling
interest
Total
356,015
(84,746)
(235,405)
70,545
1,412,637
(36,532)
1,376,105
30,414
-
-
-
30,414
-
30,414
-
-
-
110,519
110,519
2,130
112,649
30,414
-
110,519
140,933
2,130
143,063
50,081
-
(135,718)
(70,545)
(140,160)
-
(140,160)
-
-
-
-
-
-
-
-
-
-
-
(1,104)
-
(1,104)
-
-
-
-
1,358
-
1,358
(352,625)
-
351,699
-
(926)
47,500
46,574
-
-
-
-
-
-
83,885
(84,746)
(19,424)
110,519
1,412,738
13,098
1,425,836
115
CONSOLIDATED STATEMENT OF CASH FLOW AT 31 DECEMBER
2012 AND 2011
12/31/12
12/31/11
52,332
151,131
Amortization of audiovisual property rights (Note 8)
210,469
227,680
Depreciation and amortization charge (Note 6 and 7)
15,929
14,861
Result of companies accounted for using the equity method
(8,452)
22,955
Change in provisions for contingencies and charges
(4,989)
(2,672)
3,907
(3,431)
61
(1,556)
Proceeds from disposal of non-current assets
(64)
(15,661)
Disposals of other assets
7,308
2,421
Impairment of other financial assets
1,019
11,091
277,520
406,819
Inventories
1,743
3,990
Accounts receivable
28,960
53,433
50,631
(63,240)
Accounts payable
(87,597)
(46,301)
(2,121)
(30,545)
Change in provisions
(7,242)
239
Cash flows from operating activities
261,894
324,395
Taxes paid at sources
(12,552)
(33,483)
Net cash flows from operating activities (A)
249,342
290,912
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit before tax
Adjustment for:
Net finance income (Note 23.6)
Net exchange differences (Note 23.7)
Profits from operations before changes in working capital
Change in operating assets and liabilities net of the impact of acquisition of new
investments
(Continue)
116
(Continued)
12/31/12
12/31/11
Investment in property, plant, and equipment (Note 6)
(6,603)
(12,739)
Investment in intangible assets (Note 7)
(2,296)
(2,828)
(207,990)
(166,270)
Disposals of audiovisual rights
2,715
2,816
Disposals of non-current financial assets
45,983
(5,049)
Investments in subsidiaries
(9,044)
-
Investment in other non-current financial assets
53,725
(27,301)
Dividend received (Note 10)
22,101
35,093
Interest received
2,669
7,268
(98,740)
(169,010)
1,258
(23,107)
Interest paid
(2,825)
(2,887)
Dividends paid (Note 15.2)
(55,260)
(140,160)
Short term financing
(61,718)
16,482
Acquisition of treasury shares (Note 15.4)
-
-
Net increase in equity
-
-
(118,545)
(149,672)
32,057
(27,770)
61
(1,556)
Net change in cash and cash equivalents
32,118
(29,326)
Cash and cash equivalents at beginning of the year (Note 14)
58,574
87,900
Cash and cash equivalents at end of the year (Note 14)
90,692
58,574
Investments in audiovisual property rights
Net cash flows from investing activities (B)
CASH FLOW USED IN FINANCING ACTIVITIES
Long term financing
Net cash flows used in financing activities (C)
NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS [D=A+B+C]
Net foreign exchange difference
117
NOTES OF THE CONSOLIDATED FINANCIAL STATEMENT
EXPRESADO EN MILES DE EUROS
1. OBJECTS OF THE MEDIASET ESPAÑA COMUNICACIÓN, S.A.
GROUP COMPANIES
MEDIASET ESPAÑA COMUNICACIÓN, S.A. - PARENT
Mediaset España Comunicación, S.A. (“Mediaset España,” the “Company” or the “parent”) domiciled at the Carretera de
Fuencarral to Alcobendas, nº 4, 28049 Madrid, was incorporated in Madrid on March 10, 1989.
The Company is devoted to the indirect management of Servicio Público de Televisión, and at December 31, 2012,
operates seven different TV channels: Telecinco, Siete, Factoria de Ficción, Boing, Cuatro, Divinity, and Energy, having
commenced test broadcasting a new channel: Nueve. The licenses to operate these channels were granted as follows:
• Based on the terms of the concession granted by the government as per the General Communications Secretary’s
resolution of August 28, 1989, and a concession contract ratified by public deed on October 3, 1989, as well as the
transactions resulting from these arrangements.
• This agreement was renewed for ten years from April 3, 2000 by virtue of a Council of Ministers’ resolution dated
March 10, 2000.
• A Council of Ministers’ resolution of November 25, 2005 extended this concession agreement as well as those of
other national concessionaires to include three DTT (digital terrestrial television) channels.
• A Council of Ministers’ resolution of March 26, 2010 renewed this concession for an additional ten years. The Company has made all the investments required to start digital transmissions pursuant to Royal Decree 2169/1998, of
October 9, which approved the Spanish National Technical Plan for Digital Terrestrial TV. Without prejudice to the
above and in conformity with Transitional Provision Two of Audiovisual Law, on May 3, 2010, the Company requested
that the concession be changed to a license to offer an audiovisual communication service. Under the Council of
Ministers’ resolution of June 11, 2010, the concession became a 15-year license to offer an audiovisual communication
service. This license is automatically renewable for the same period provided the Company meets the requirements
of Article 28 of the Audiovisual Law 7/2010, of March 31.
• Since the analogical blackout on April 3, 2010 (when analogical broadcasts ended), and by virtue of Additional
Provision Three of Royal Decree 944/2005 on May 4, 2010, the Company has access to a multiple digital license with
national coverage, which increases the channels it manages to four.
• Following the acquisition of Sogecuatro, S.A. in 2010, the Company obtained Cuatro’s multiplex licenses (Cuatro and
three more channels).
• Per Article 4 of its bylaws, the Company was incorporated for an indefinite period.
• The Company was admitted for listing on the Stock Exchange on June 24, 2004, and its shares are traded on the
Madrid, Barcelona, Bilbao, and Valencia Stock Exchanges. The shares were included in the IBEX-35 index on January
3, 2005.
118
• The Company is head of a Group of subsidiaries making up the Mediaset España Comunicación Group (“the Group”).
Consequently, Mediaset España Comunicación, S.A. is required to prepare, in addition to its individual financial
statements, consolidated financial statements for the Group. The consolidated Group companies are as follows:
Fully consolidated companies
Country
2012
2011
Spain
100%
100%
Spain
100%
100%
Spain
100%
100%
Spain
100%
100%
Spain
75%
75%
Publimedia Gestión, S.A.U. (1)
Spain
100%
100%
Spain
100%
100%
Sogecable Editorial, S.A.U.
Spain
100%
100%
Premiere Megaplex, S.A.U.
Spain
100%
100%
Country
2012
2011
Pegaso Televisión, Inc
USA
44%
44%
Bigbang Media, S.L.
Spain
30%
30%
Spain
30%
30%
Spain
30%
30%
DTS, Distribuidora de Televisión Digital, S.A.
Spain
22%
22%
Furia de Titanes II, A.I.E.
Spain
34%
-
Spain
50%
-
60 DB Entertainment, S.L.
Spain
30%
-
Companies accounted for using the equity method
(1) The ownership interest in these companies is held through Publiespaña, S.A.U.
Changes in the consolidation scope during the year ended December 31, 2012
• In 2012, Telecinco Cinema, S.A.U. acquired 34% of Agrupación de Interés Económico Furia de Titanes II, A.I.E.
• On July 26, 2012, Editora Digital de Medios, S.L.U. was formed; Mediaset España Comunicación, S.A. owns 50%.
• Mediaset España Comunicación, S.A. also acquired 30% of 60 DB Entertainment, S.L.U.
Changes in the consolidation scope during the year ended December 31, 2011
• In 2011, Mediaset España Comunicación, S.A. took over and merged subsidiaries Agencia de Televisión LatinoAmericana de Servicios y Noticias España, S.A.U., Sociedad General TV Cuatro, S.A.U., and Compañía Independiente
de Noticias de Televisión, S.L. This did not have any impact on the Group’s consolidated financial statements.
119
• Also during the year, the following companies were liquidated: Canal Factoría de Ficción, S.A.U. on November 10,
Atlas Media, S.A.U. on November 10, Agencia de Televisión Latino-Americana de Servicios y Noticias País Vasco,
S.A.U. on December 21, and Mi Cartera Media, S.A.U. on December 23. This did not have any impact on the Group’s
consolidated financial statements.
• In addition, on November 28, the Company acquired the 50% stake it did not already own in Premiere Megaplex,
S.A. Accordingly, it was consolidated using the full consolidation method. This did not have a significant impact on the
consolidated financial statements.
• In 2011, the investment in Edam Acquisition Holding was reclassified to “Non-current financial assets.”
SUBSIDIARIES
Subsidiaries are defined as companies over which the parent has the capacity to exercise effective control, which is
presumed to exist when the parent directly or indirectly owns half or more of the voting power of the investee.
1. Fully consolidated companies (wholly-owned by Mediaset España
Comunicación S.A.)
Grupo Editorial Tele 5, S.A.U. was incorporated in Madrid on July 10, 1991, and its registered office is at Carretera de
Fuencarral a Alcobendas, nº 4, Madrid.
Its company objective is to carry on, inter alia, the following activities which are complementary to operating a television
channel: the acquisition and exploitation of phonogram and audiovisual ecording rights, artistic representation, the
promotion of events and the publishing, production, distribution, and marketing of publications and graphic materials.
Telecinco Cinema S.A.U.
Digitel 5, S.A.U. was incorporated in Madrid on September 23, 1996. Its registered office is in Madrid, at Carretera de
Fuencarral a Alcobendas, nº 4.
In November 1999, the change of its corporate name from Dígitel 5, S.A.U. to Estudios Picasso Fábrica de Ficción, S.A.U.
was registered at the Mercantile Registry.
In May 2007, the change of its corporate name to Producciones Cinematográficas Telecinco, S.A.U. was registered at the
Mercantile Registry.
In November 2007, the change of its corporate name to Telecinco Cinema, S.A.U. was registered at the Mercantile
Registry.
The company object includes mainly, although not exclusively, the provision of television broadcasting services through
digital technology, research, development and commercialization of new technologies related to telecommunications;
any activity that might be required for television broadcasting, intermediation in the markets for audiovisual rights;
organization, production, and broadcasting of shows or events of any kind.
120
Publiespaña, S.A.U. was incorporated on November 3, 1988. Its registered office is at Carretera de Fuencarral a
Alcobendas, nº 4, Madrid.
The company’s objects are as follows:
a) The performance and execution of advertising projects, and all manner of work relating to the commissioning,
intermediation, and dissemination of advertising messages in all possible forms, by means of any manner of
broadcasting or communications media.
b) The performance of activities relating directly or indirectly to marketing, merchandising, telesales, and any other
commercial activity.
c) The organization and production of cultural, sports, musical or any other event, and the acquisition and exploitation,
by any means, of all manner of rights relating thereto.
d) The provision of advisory analysis and management services, using any procedure relating to the aforementioned
activities.
e) These activities may be performed fully or partially indirectly by the company, through equity investments in other
companies with a similar object.
Europortal, S.A. was incorporated on September 6, 1999. On October 14, 1999, the company changed its name to
Europortal Jumpy, S.A. Its registered office is at Carretera de Fuencarral a Alcobendas, nº 4, Madrid.
On November 5, 2007, its name was changed to Conecta 5 Telecinco, S.A.U.
Its company objective is the exploitation of audiovisual content on the Internet.
Mediacinco Cartera, S.L. (75% owned)
Mediacinco Cartera, S.L.U. was incorporated on April 13, 2007. Its registered office is in Madrid, at Carretera de
Fuencarral a Alcobendas, nº 4.
Its company objectives are:
a) The investment through acquisition, subscription, assumption, disbursement, ownership, transfer, disposal,
contribution, and charging of Marketable Securities, including shares and other equity investments in companies and
joint property entities, company subscription rights, exchangeable and non-exchangeable debentures, commercial
bonds, “rights” bonds, fixed-income, and equity securities, irrespective of whether or not they are on the official
stock exchanges and government debt securities, including treasury bills and promissory notes, bills of exchange,
and certificates of deposit, all in accordance with the applicable legislation.
b) The provision of accounting, financial, tax, civil law, corporate law, labour law, and administrative law administration,
management and advisory services to other companies in which it has direct or indirect ownership interests.
121
Sogecable Editorial, S.A.U.
Sogecable Editorial, S.A.U.’s registered office is at Carretera de Fuencarral a Alcobendas, nº 4.
The company’s objective includes the following activities, which are complementary to operating a television channel:
a) the acquisition and exploitation of sound and audiovisual recording rights,
b) the representation of artists,
c) the promotion of shows and the edition, production, distribution, and marketing of publications and graphic material
Premiere Megaplex, S.A.’s registered office is at Carretera de Fuencarral a Alcobendas, nº 4.
The Company is engaged in:
•
Activities related to gambling and betting, e.g. the organization, sale and operation of games, bets, raffles, contests,
et al in which amounts of money or other financial consideration is at stake and whose outcome is uncertain,
irrespective of players’ skills, as well as activities that are exclusive to or sponsored by such activities. These activities
are governed by Law 13/2011, of May 27, on the regulation of gambling.
ASSOCIATES OF MEDIASET ESPAÑA COMUNICACIÓN, S.A.
Associates are companies over which the Company is in a position to exercise significant influence, which is presumed
to exist when an investment of at least 20% is held, but not control or joint control.
1. Direct ownership through Mediaset España Comunicación, S.A.
Company
Pegaso Televisión Inc.
1401 Brickell Avenue – Ste 500
Miami, Florida
2012
2011
Line of business
Channelling of the investment in Caribevisión
Network, a TV broadcaster on the east coast of
the US and in Puerto Rico
43,7%
43,7%
Bigbang Media, S.L.
C/ Almagro,3
28010 Madrid
30%
30%
Production and distribution of all classes of
audiovisual programs and products in any
support format
DTS, Distribuidora de Televisión Digital, S.A.
Avda de los Artesanos, 6
28760 Tres Cantos, Madrid
22%
22%
Indirect management of pay TV service
C/ María Tubau, 3
28050 Madrid
30%
30%
Creation, development, production, and
commercial exploitation of audiovisual content
30%
30%
La Fabrica de la Tele, S.L.
C/ Angel Gavinet, 18
28007 Madrid
Creation, development, production, and
commercial exploitation of audiovisual content
(Continue)
122
(Continued)
Company
2012
C/ Condesa de Venadito, 1
28027 Madrid
2011
50%
60 DB Entertainment. S.L.
Avenida Diagonal, 558
08021 Barcelona
Creation, development, and operation of a
digital diary specialized in communication media,
particularly audiovisual.
-
30%
Line of business
Creation and development of audiovisual
content in all formats, including: entertainment,
fiction, advertising, or similar, as well as the
production and commercial exploitation of
events in all forms and media formats.
-
2. Indirect ownership through Mediacinco Cartera, S.L.
Company
2012
Edam Acquisition Holding I
Coöperatief U.A.
Flevolaan 41 a
1411 KC Naarden, Ámsterdam(*)
2011
33%
33%
Line of business
Holding company for the investment in the
Endemol Group, which produces and operates
content for television and other audiovisual
platforms.
(*) Transferred to “Non-current financial assets” in 2011.
3. Indirect ownership through Telecinco Cinema, S.A.U.
Company
Agrupación de Interés Económico
Furia de Titanes II, A.I.E.
C/ Teobaldo Power, 2-3ºD
Santa Cruz de Tenerife
2012
34%
2011
-
Line of business
Proprietary and third-party presentation of
telecommunication services in all forms and formats,
known or unknown, in accordance with legal
regulations, and all types of participation in the creation,
production, distribution, and all other operation of
audiovisual productions, be they fiction, animated,
documentary in nature.
These companies are accounted for using the equity method, since the Group is not a majority shareholder and does
not exercise control.
None of these companies is publicly listed.
In accordance with what is established in the Spanish Corporation Law, the parent has duly notified the investees of
its acquisition of their share capital. It has no commitments which could lead to contingent liabilities with respect to
these companies.
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2. BASIS OF PRESENTATION AND COMPARABILITY OF THE
CONSOLIDATED FINANCIAL STATEMENTS
2.1. F air presentation and conformity with International Financial
Reporting Standards
The Group’s consolidated financial statements for 2012 were formally prepared:
• By the directors, at the Board of Directors Meeting held on February 27, 2013.
• In accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, in
conformity with Regulation (EC) No 1606/2002 of the European Parliament and of the Council.
• Taking into account all the mandatory accounting policies and rules and measurement bases with a material effect on
the consolidated financial statements, as well as the alternative treatments permitted by the relevant standards in this
connection, which are specified in these notes to the consolidated financial statements.
• On a historical cost basis, except for derivative financial instruments and available for sale financial assets that were
measured at fair value.
• So that they present fairly the Group’s consolidated equity and financial position at December 31, 2012 and the
results of its operations, the changes in consolidated equity, and the consolidated cash flows in the year then ended.
• On the basis of the accounting records kept by the Company and by the other Group companies.
The company is the parent company of a Group and in accordance with International Financial Reporting Standards
adopted by the European Union it is required to prepare a set of consolidated financial statements under IFRS-EU as
it is a listed group.
Since the accounting policies and measurement bases used in preparing the Group’s consolidated financial statements
for 2012 and 2011 (IFRSs) are not exactly the same as those used by the Group companies (local standards), the
required adjustments and reclassifications were made on consolidation to unify the policies and methods used and to
make them compliant with the International Financial Reporting Standards adopted by the European Union.
The 2012 consolidated financial statements of the Group and the 2012 financial statements of the Group companies
have not yet been approved by their shareholders at the respective annual general meetings; they are expected to be
approved without modification.
The statement of comprehensive income is presented in two statements; one which presents the components of
income (Separate Income Statement) and a second statement which presents the components of comprehensive
income (Statement of Comprehensive Income).
The consolidated separate income statement is presented on the basis of the nature of expenses.
The consolidated cash flow statement is presented using the indirect method.
At the date of authorization for issue of these consolidated financial statements, the Group had applied all the mandatory
IFRSs and interpretations adopted by the European Union (IFRS-EU) and in force for annual periods beginning on or
after January 1, 2012.
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2.2. Changes in accounting policies
a) Standards and interpretations approved by the European Union applicable in 2012
The accounting principles applied in the preparation of the consolidated financial statements for the year ended
December 31, 2012 are the same as those applied to the 2011 consolidated financial statements, except for the
following standards and interpretations, applicable for annual periods beginning on or after January 1, 2012:
• Amendment to IFRS 7 “Disclosures – Transfers of financial assets:” Effective from years beginning July 1, 2011. As the
Group does not have any financial assets, there was no impact on these consolidated financial statements.
b) Standards and interpretations issued by the IASB and approved by the European Union
but not mandatory in 2012
At the date of publication of these consolidated financial statements, the following IFRSs and amendments had been
issued by the IASB and approved by the European Union, but were not mandatory:
• Amendment to IAS 1 “Presentation of Items of Other Comprehensive Income”: Effective from years beginning July
1, 2012.
• IAS 19 (revised) – “Employee Benefits”: Effective from years beginning January 1, 2013.
• IFRS 10 “Consolidated Financial Statements”: Effective from years beginning January 1, 2014.
• IFRS 11 “Joint Agreements”: Effective from years beginning January 1, 2014.
• IFRS 12 “Disclosure of Interests in Other Entities”: Effective from years beginning January 1, 2014.
• IFRS 13 “Fair Value Measurement”: Effective from years beginning January 1, 2013.
• Amendment to IAS 28: “Investments in Associates and Joint Ventures”: Effective from years beginning January 1, 2014.
• IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine”: Effective from years beginning January 1, 2013.
• Amendment to IAS 32 “Offsetting Financial Assets and Financial Liabilities”: Effective from years beginning January 1,
2014.
• Amendment to IFRS 7: “Disclosures - Transfers of Financial Assets”: Effective from years beginning January 1, 2013.
• Amendment to IAS 12: “Deferred taxes – Recovery of underlying assets”: Effective from years beginning January 1,
2013.
The Group intends to adopt the applicable interpretations and amendments when they come into effect. Although it is
not possible to determine whether their initial application will or will not have a significant impact on these consolidated
financial statements, the Group is currently analyzing their potential impact.
c) Standards and interpretations issued by the IASB but not approved by the European Union
At the date of publication of these consolidated financial statements, the following IFRSs and amendments had been
issued by the IASB but were not mandatory and had not been approved by the European Union:
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• IFRS 9 Financial Instruments: effective for annual periods beginning on or after January 1, 2015 for the IASB.
• IFRS improvements: Effective from years beginning January 1, 2013 for the IASB.
• Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date and Transition Disclosures: effective for annual periods
beginning on or after January 1, 2015 for the IASB.
• Amendment to IFRS 10 and 11, and IAS 27 “Transition guide:” Effective from years beginning January 1, 2013 for the
IASB.
• Amendment to IFRS 10 and 11, and IAS 27 “Credit institutions”: Effective from years beginning January 01, 2014 for
the IASB.
Although it is not possible to determine whether their initial application will or will not have a significant impact on these
consolidated financial statements, the Group is currently analyzing their potential impact.
2.3. Responsibility for the information and use of estimates.
The information in these financial statements is the responsibility of the Company’s directors.
In preparing the Group’s consolidated financial statements for 2012, certain estimates and assumptions were made on
the basis of the best information available at December 31, 2012 on the events analyzed. However, events that take place
in the future might make it necessary to change these estimates (upwards or downwards) in coming years. Changes
in accounting estimates would be applied prospectively, in accordance with the requirements of IAS 8, recognizing the
effects of the change in estimates in the related consolidated income statements.
Estimates and assumptions are reviewed on an ongoing basis.The impact of changes in accounting estimates is recognized
in the period in which the estimates are changed if they affect only that period or in the period of the changes and future
periods if they affect both current and future periods.The main hypothesis and assumptions regarding future events and
other uncertain sources of estimates at the date of preparation of the financial statements that may cause corrections
to assets and liabilities are as follows.
• Impairment of non-current assets
The Group assesses whether there are any indications of impairment for all non-financial assets at each reporting
date. Goodwill and other indefinite life intangible assets are tested for impairment annually and at any time when such
indications exists. Other non-financial assets are tested for impairment when there are indications that the carrying
amounts may not be recoverable.
If there is objective evidence that an impairment loss occur, the amount of the impairment loss is measured as the
difference between the carrying amount of the assets and the estimated future cash-flow discounting using a proper
discount rate.
• Impairment of financial assets
The Group assesses at each statement of financial position date whether a financial asset or group of financial assets
is impaired (Notes 9 and 10).
If there is objective evidence that an impairment loss on assets carried at amortized cost has been incurred, the
amount of the loss is measured as the difference between the assets’ carrying amount and the present value of
estimated future cash flows discounted at the financial asset’s original effective interest rate (i.e. the effective interest
rate computed at initial recognition).The carrying amount of the asset is reduced through use of an allowance account.
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If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal
payment and amortization) and its current fair value, less any impairment loss previously recognized in the separate
income statement.
• Useful life of property, plant, and equipment, and intangible assets
The Group periodically reviews the useful lives of its property, plant, and equipment, and its intangible assets,
prospectively adjusting the provisions for depreciation when the estimates change.
• Recoverability of deferred tax assets
If the Group or any of the Group companies present tax credits relating to deferred tax assets, the corresponding
estimates of tax loss carryforwards expected in future years are reviewed at year end to assess their recoverability
depending on their maturity and, if applicable, recognize the related impairment loss where recoverability is
not assured.
• Provisions
The Company recognizes provisions for risks in accordance with the accounting policy set forth in Note 4.19. The
Group has made judgments and estimates regarding the probability of the occurrence of said risks, as well as the
amount thereof, and has recognized a provision when the risk has been considered likely, estimating the cost that such
an occurrence would represent for it.
• Share based payments
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. Estimating fair value for share-based payments requires
determining the most appropriate valuation model for a grant of equity instruments, which is dependent on the
terms and conditions of the grant. This also requires determining the most appropriate inputs to the valuation model
including the expected life of the option, volatility and dividend yield and making assumptions about them.
• Channel increase through access to a multiple digital license
As explained in Note 16, the Supreme Court ruled against the authorization of the fourth channel granted to the
Company on April 3, 2010 (as well as an additional channel acquired by Sogecuatro, S.L. in 2010). The Directors and
their advisors have evaluated this situation, which is discussed in Note 16.
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3. PROPOSED DISTRIBUTION OF THE PROFIT OF THE PARENT
The distribution of the parent’s net profit for 2012 that its Board of Directors will propose for approval by the
shareholders at the annual general meeting and the distribution of the parent’s net profit in 2011 approved by the
annual general meeting are as follows:
Base for distribution
2012
2011
63,254
137,264
-
-
Other reserves
50,093
67,605
Goodwill reserve
14,399
14,399
-
55,260
64,492
137,264
Profit for the year
Distribution
Legal reserve
Dividends
Total
At its meeting of February 22, 2012, the parent’s Board of Directors resolved to submit for approval by shareholders in
ordinary general meeting a proposal to pay out 55,260 thousand euros of dividends with a charge to 2011 profit. The
total dividend was 0.14 euros per share. This distribution was ratified at the General Shareholders’ Meeting on March
28, 2012.
4. ACCOUNTING POLICIES
The principal accounting policies used in preparing the Group’s consolidated financial statements were as follows:
4.1. Basis of consolidation
The Group’s consolidated financial statements include the financial statements of all the companies over which the Group
has control. Control is the power to govern a company’s financial and operating policies in order to obtain benefits from
its activities. All intra-Group balances and transactions were eliminated on consolidation. Associates, companies over
which the Group exercises significant influence but not control, were accounted for using the equity method.
However, given that the accounting principles and measurement bases applied when preparing the Group’s consolidated
financial statements for 2012 and 2011 (EU-IFRS) vary from those used by the companies composing the Group (local
standards), the necessary adjustments and reclassifications have been made on consolidation to standardise the most
significant measurement and recognition principles between the companies and to adapt these to EU-adopted IFRS.
All items of property, plant, and equipment, and intangible assets are linked to production and the generation of revenue
from business activities.
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4.2. Translation of financial statements of foreign subsidiaries
The consolidated annual financial statements are presented in euros, which is the Group’s functional and presentation
currency. Each entity in the Group determines its own functional currency and items included in the financial statements
of each entity are measured using that functional currency. The statement of financial position and separate income
statement headings of consolidated foreign companies are translated to euros at the year-end exchange rate,
which means:
• All assets, rights and liabilities are translated to euros at the exchange rate ruling at the close of the foreign subsidiaries’
accounts.
• Separate Income statement headings are translated at the average exchange rate.
The difference between the equity of foreign companies, including the balance of the separate income statement,
translated at year–end exchange rates and the equity obtained translating the assets, rights and liabilities by applying
the criteria set forth above are shown under ”Translation differences,” under equity in the consolidated statement of
financial position.
4.3. Related parties
The corresponding heading in the consolidated statement of financial position includes the balances with significant
shareholders and associates. The other balances arising from related-party transactions with directors and key
management personnel are classified under the appropriate consolidated statement of financial position headings.
4.4. Current/Non-current classification
In the accompanying consolidated statement of financial position, assets and liabilities maturing within no more
than 12 months are classified as current items and those maturing within more than 12 months are classified as
non-current items.
Audiovisual rights are classified in full as non-current assets. Note 8 details the rights that the Group expects to amortize
within a period of less than 12 months.
4.5. Property, plant, and equipment
Property, plant, and equipment are recognized using the cost model, which includes the cost of acquisition of the assets
and the additional expenses incurred until they have become operational. Property, plant, and equipment are measured
at the lower of cost and recoverable amount.
Repairs that do not lead to a lengthening of the useful life of the assets and maintenance expenses are charged directly
to the separate income statement.
The depreciation of property, plant, and equipment is calculated systematically, using the straight-line method, on the
basis of the useful life of the assets, based on the actual decline in value caused by their use and by wear and tear.
The depreciation rates used to calculate the decline in value of the various items of property, plant, and equipment are
as follows:
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Rate
Buildings
TV equipment
Fixtures
4%
20 %
10-35 %
Tools
20 %
Furniture
10 %
Computer hardware
25 %
Transportation equipment
14 %
Other items of property, plant, and equipment
20%
4.6 Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible
assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Intangible assets
are recognized as such only when the Group can demonstrate how the asset will generate future economic benefits and
the ability to measure reliably the expenditure during development.
• Development expenditure
Expenditure on development activities is recognized as an expense as incurred, except in the case of computer software
projects that have reached the development stage. These expenses are measured at cost and are allocated to specific
projects until the projects have been completed, provided there is a reasonable assurance that they can be financed
through completion and there are sound reasons to foresee their technical success.
• Trademarks and trade names
These relate mainly to licenses to use industrial property rights and television channel concessions.
The “Cuatro” trademark and the “Cuatro” multiplex operators’ license were identified in the Sogecuatro Group purchase
price allocation. The “Cuatro” trademark has an estimated useful life of 20 years.
The license is considered to be an intangible asset with an indefinite useful life. Intangible assets with indefinite useful
lives are not amortized, but are assessed for impairment at least annually or when there are indications of impairment.
• Computer software
This includes the amounts paid for title to or the right to use computer programs. Computer software maintenance
costs are recognized with a charge to the income statement for the year in which they are incurred.
Computer software is amortized over three years from the date on which it starts to be used.
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4.7 Audiovisual property rights
4.7.1. Outside production rights
These consist primarily of rights acquired for a period that exceeds one business year. These rights are measured at
cost and relate to the individual value of each right. If they are acquired in closed packages, with no breakdown of the
individual value of each product, individual values are calculated based on a weighting factor equivalent to the acquisition
cost of products of a similar type and category that would have been incurred had the acquisition been made on an
individual basis.
The cost of audiovisual rights acquired in a business combination is fair value at the date of acquisition.
The right is recognized at the earlier of the time the material becomes available for broadcasting pursuant to the
contract or, if earlier, the date on which the right commences. In the case of several rights associated with a single
contract that are accepted during the same year but on different dates, the Group recognizes the inclusion of the rights
under the contract on the earlier of the date on which the first right is accepted for broadcasting and the date the rights
commence.
These rights are recognized in the separate income statement under “Amortization of audiovisual property rights”,
based on the number of screenings, as follows:
1. Films and TV movies (non-series)
1.1. Contractual rights for two screenings:
First screening: 50% of acquisition cost.
Second screening: 50% of acquisition cost.
1.2. Contractual rights for three or more screenings:
Third screening: 20% of acquisition cost.
2. Other products (series)
Contractual rights for two or more screenings:
When a screening is sold to a third party, the value of the screening, calculated on the basis of the aforementioned
percentages, is amortized on the basis of the territorial television signal distribution capacity of the television station
buying the screenings, and a cost of sales is recognized based on the revenue generated in the region where the
screening has been sold, with adjustments made to the unsold value of the screening in question.
These rights are subject to valuation adjustments, where necessary, as detailed in Note 4.11.
4.7.2. Series in-house production rights
This includes productions owed by the Group in which it may proceed with broadcasting or subsequent sale.
Their value includes both the costs incurred directly by the Group and the amounts billed by third parties.
The cost of audiovisual rights acquired in a business combination is fair value at the date of acquisition.
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The residual value, estimated at 2% of the total cost, is amortized on a straight-line basis over three years from the time
the productions become available; unless these rights are sold to third parties during the amortization period, in which
case the residual value is allocated to the revenue generated by the sale.
These rights are recognized in the separate income statement under “Rights consumption” based on the number of
shows broadcast in accordance with the following:
•Series of less than 60 minutes and/or broadcast daily.
First screening: 100% of the amortizable value.
•Series of more than 60 minutes and/or broadcasted weekly.
First screening: 90% of the amortizable value.
Second screening: 10% of the amortizable value.
These rights are subject to valuation adjustments, where necessary, as detailed in Note 4.11.
4.7.3. Distribution rights
These include the rights acquired by the Group for their exploitation in all windows in Spain.
The cost of the right is that stipulated in the contract. Amortization of distribution rights is recognized on the basis of
the revenue generated in each window in which the right is exploited and of an estimate of future revenue from each
window.
When the free-to-air broadcasting or right commences, it is reclassified to “Audiovisual property rights.”
In the free-to-air window, the amortization of the rights is recognized in the separate income statement under
“Amortization of audiovisual property rights” in the same way as in the case of audiovisual property rights, as detailed
in the related note to these consolidated financial statements.
4.7.4. Co-production rights
These include the co-production rights acquired by the Group for exploitation in all windows.
The cost of the right is that stipulated in the contract. Amortization of co-production rights is recognized on the basis
of the revenue generated in each window in which the right is exploited and of an estimate of future revenue from
each window.
When the free-to-air broadcasting or right commences, it is reclassified to “Audiovisual property rights.”
In the free-to-air window, the amortization of the rights is recognized in the separate income statement under
“Amortization of audiovisual property rights” in the same way as in the case of audiovisual property rights, as detailed
in the related note to these consolidated financial statements.
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4.7.5. Master copies and dubbing
These items relate to the material supporting the audiovisual property rights and the cost of dubbing original versions,
respectively.
They are measured at cost and the related amortization is recognized at the same rate as the amortization of the
audiovisual property rights with which they are associated.
4.7.6. Retransmission rights
The costs for the rights to broadcast sport are recognized under “Procurements” in the separate income statement at
the cost stipulated in the agreement. The costs are recognized when each event is broadcast. Advance payments are
recognized in the statement of financial position under other current assets.
4.8. Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of the business combination is
determined by measuring the identifiable assets acquired and liabilities assumed at their acquisition-date fair values. For
each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at
the proportionate share of the acquiree’s identifiable net assets. The acquirer shall account for acquisition-related costs
as expenses in the income statement, as incurred.
When the Group acquires a business, it assesses the identifiable assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, its operating or accounting
policies, and other pertinent conditions at the acquisition date.
If the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree
at its acquisition-date fair value and recognizes the resulting gain or loss, if any, in profit or loss.
Any contingent consideration the Group transfers is recognized at fair value at the acquisition date. Subsequent changes
in the fair value of contingent consideration classified as an asset or liability will be recognized in accordance with IAS 39,
with any resulting gain or loss recognized either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured and its subsequent settlement is accounted for within equity.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount
recognized for non-controlling interests over the fair value of the identifiable assets and liabilities measured as such in
the acquiree. If this consideration is lower, the difference is recognized in the separate income statement.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for
impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount may
be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated
to each of the Group’s cash-generating units or groups of cash-generating units expected to benefit from the combination’s synergies, irrespective of whether other Group assets or liabilities are assigned to those units or groups of units.
Impairment is determined by assessing the recoverable amount of the cash-generating unit or groups of cash-generating
units to which the goodwill relates. If the recoverable amount of the cash-generating unit or group of cash-generating
units is less than the carrying amount, the Group recognizes an impairment loss.
Goodwill impairment losses cannot be reversed in future periods.
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When an entity sells or otherwise disposes of an operation within a cash-generating unit to which goodwill has been
allocated, the goodwill associated with the operation should be included in the carrying amount of the operation when
determining the gain or loss on disposal and measured on the basis of the relative values of the operation disposed of
or sold and the portion of the cash-generating unit retained.
4.9. Non-current investments in companies accounted for using the
equity method
The companies over which the Group exercises significant influence, directly or indirectly, through an ownership interest
of 20% or more in the voting power of the investee are accounted for using the equity method.
Investments in an investee are initially recognized at cost, which will be increased or reduced on the basis of the Group’s
share of the investee’s equity, subsequent to the date of acquisition.
The value of these investments in the consolidated statement of financial position includes, where applicable, the
goodwill arising on the acquisition thereof.
The results of the investee are recognized in profit or loss in proportion to the Group’s percentage of ownership. Where
there has been a change recognized directly in the equity of the associate, the Group recognizes its share of any change
and discloses this, when applicable, in the statements of changes in equity.
The dividends received from investees reduce the carrying amount of the investment.
Following the application of the equity method and recognition of the value of the associate, if there is any indication
that the investment might have become impaired, pursuant to IAS 39 the relevant analysis and impairment tests are
carried out in order to recognize the impact of the impairment loss on the investment in the year in which it is detected.
If the Group’s share of losses of the associate equals or exceeds its investment, it discontinues recognizing its share of
further losses. The interest in an associate is the carrying amount of the investment in the associate under the equity
method together with any non-current interest that, in substance, form part of the investor’s net investment in the
associate. Losses recognized under the equity method in excess of the Group’s investment in ordinary shares are applied
to the other components of the interest in the associate in the reverse order of their seniority (i.e. priority in liquidation).
Upon loss of significant influence in the associate, the Group measures and recognizes any retaining investment at its fair
value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value
of the retained investment is recognized in the separate income statement.
In addition, amounts recognized in “Recyclable reserves in associates” are reclassified to the separate income statement,
with the investment in that company recognized under “Non-current financial assets” in the consolidated statement of
financial position.
4.10. Financial assets
Financial assets are initially recognized at fair value, including, in case investments are not recognized at fair value with
changes in results, general transactions costs.
The Group determines the classification of its financial assets on initial recognition and re-evaluates this designation at
each financial year end.
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The financial assets held by the Group companies are classified as:
• Held-to-maturity investments: financial assets with fixed or determinable payments and fixed maturity that the Group
has the positive intention and ability to hold from the date of purchase to the date of maturity. They do not include
loans and accounts receivable originated by the company. After initial measurement held-to-maturity investments are
measured at amortized cost using the effective interest method.
• Originated loans and receivables: financial assets originated by the companies in exchange for supplying cash, goods
or services directly to a debtor. Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. Such financial assets are carried at amortized cost using the
effective interest rate method. Gains and losses are recognized in the consolidated income statement when the loans
and receivables are derecognized or impaired, as well as through the amortization process. Loans and receivables in
the consolidated statement of financial position maturing in 12 months or less from the consolidated statement of
financial position date are classified as current and those maturing in over 12 months as non-current.
• Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are
not classified in any of the three preceding categories. After initial measurement, available-for-sale financial assets are
measured at fair value with unrealized gains or losses recognized directly in equity until the investment is derecognized,
at which time the cumulative gain or loss recorded in equity is recognized in the separate income statement, or
determined to be impaired, at which time the cumulative loss recorded in equity is recognized in the separate income
statement.
• Financial assets at fair value through profit and loss: Financial assets classified as held for trading are included in the
category financial assets at fair value through profit and loss. Financial assets are classified as held for trading when
they are acquired for the purpose of selling in the near future. Derivatives are also classified as held for trading unless
they are effective hedging instruments and identified as such. Gains or losses on financial assets held for trading are
recognized in profit or loss. The Group has no held-for-trading financial assets.
The fair value of a financial instrument on a given date is taken to be the amount for which it could be bought or sold
on that date by two knowledgeable, willing parties in an arm’s length transaction acting prudently. The most objective
and common reference for the fair value of a financial instrument is the price that would be paid for it on an organized,
transparent and deep market (“quoted price” or “market price”). If this market price cannot be determined objectively
and reliably for a given financial instrument, its fair value is estimated on the basis of the price established in recent
transactions involving similar instruments or of the discounted present value of all the future cash flows (collections or
payments), applying a market interest rate for similar financial instruments (same term, currency, interest rate, and same
equivalent risk rating).
4.11. Impairment of non-current assets
4.11.1. Non-financial assets
The Group assesses periodically and at least at each reporting date whether there is any indication that an asset may be
impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates
the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair
value less costs to sell and its value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used.
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For assets that do not generate cash inflows that are largely independent of those from other assets or groups of assets,
the recoverable amount is determined for the cash-generating units to which the asset belongs.
Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. Impairment losses are recognized in the separate income statement.
At each reporting date the group assesses if there are indications that a previously recognized impairment loss is
reversed or reduced. If this is the case, the Group estimates the asset’s recoverable amount. Except for goodwill, an
impairment loss previously recognized can be reverted if there has been a change in the circumstances that caused it.
Such reversal is recognized in the consolidated separate income statement. The increased amount cannot exceed the
carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for
the asset.
Goodwill and intangible assets
Goodwill and intangibles with indefinite lives are tested for impairment by determining the recoverable amount of the
cash-generating unit (or groups of cash-generating units) to which the goodwill relates. If the recoverable amount of
the cash-generating unit is less than the carrying amount, an impairment loss is recognized. At December 31, 2012, the
recoverable amount of the cash-generating units exceeded the carrying amount.
4.11.2. Financial assets
The Group assesses at each statement of financial position date whether a financial asset or group of financial assets is
impaired.
• Assets carried at amortized cost
If there is objective evidence that an impairment loss on assets carried at amortized cost has been incurred, the amount
of the loss is measured as the difference between the assets’ carrying amount and the present value of estimated future
cash flows discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at
initial recognition).The carrying amount of the asset is reduced through use of an allowance account.The amount of the
loss shall be recognized in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to
an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed, to the
extent that the carrying value of the asset does not exceed its amortized cost at the reversal date. Any subsequent
reversal of an impairment loss is recognized in profit or loss.
In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the
probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of
the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use
of an allowance account. Impaired debts are derecognized when they are assessed as uncollectible.
• Available-for-sale financial investments
If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal
payment and amortization) and its current fair value, less any impairment loss previously recognized in profit or loss, is
transferred from equity to profit or loss. Reversals of impairment losses on debt instruments are reversed through profit
or loss; if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment
loss was recognized in the separate income statement.
136
4.12. Inventories
The cost of producing in-house productions is determined taking into account all the costs allocable to the product
incurred by the Group. Advances paid for programmes are also included.
The production costs are expensed when the related programmes are broadcast.
4.13. Cash equivalents
The cash equivalents comprise mainly short-term deposits, short-term marketable bills and notes, short-term government
bonds and other money market assets maturing at three months or less.
4.14. Grants
The amounts received are recognized where there is reasonable assurance that the grant will be received and all
attached conditions will be complied with.
The difference between the nominal value and the fair value of the loan is deducted from the carrying amount of the
related asset and is allocated to the separate income statement according to financial criteria.
4.15. Treasury shares
Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted from equity. No
gain or loss is recognized in the separate income statement on the purchase, sale, issue or cancellation of the parent’s
own equity instruments. Voting rights related to treasury shares are nullified for the Group and no dividends are
allocated to them.
4.16. Financial liabilities
Financial liabilities are initially measured at fair value less attributable transaction costs. Following initial recognition,
financial liabilities are measured at amortized cost, with any differences between cost and redemption value recognized
in the consolidated separate income statement over the period of the borrowings, using the effective interest rate
method.
Liabilities maturing in less than 12 months from the consolidated statement of financial position date are classified as
current, while those with longer maturity periods are classified as non-current.
4.17. Derivative financial instruments
The Group uses financial derivatives to manage some its interest rate risk exposure.
Cash flow hedges are a hedge of the exposure to variability in cash flows attributable to a particular risk associated
with a recognized asset or liability or a highly probable forecast transaction, and could affect profit or loss. The effective
portion of the gain or loss on the hedging instrument is recognized directly in equity, while the ineffective portion is
recognized in the separate income statement.
Amounts taken to equity are transferred to the separate income statement when the hedged transaction affects profit
or loss such as when hedged financial income or expense is recognized or when a forecast sale or purchase occurs.
137
Where the hedged item is the cost of a non-financial asset or liability, the amounts taken to equity are transferred to
the initial carrying amount of the non-financial asset or liability.
If the forecast transaction is no longer expected to occur, the amounts previously recognized in equity are transferred to
the separate income statement. If a hedging instrument expires or is sold, terminated or exercized without replacement
or rollover, or if its designation as a hedge is revoked, amounts previously recognized in equity remain in equity until the
forecast transaction occurs. If the related transaction is not expected to occur, the amount is taken to income.
The Group’s financial derivatives at December 31, 2012 and 2011 were classified as held for trading, with gains or losses
recognized in the consolidated separate income statement.
4.18. Derecognition of financial assets and liabilities
4.18.1. Financial assets
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is
derecognized when:
• The rights to receive cash flows from the assets have expired.
• The Group retains the right to receive the cash flows from the asset but has assumed the obligation to pay the
received cash flows in full without material delay to a third party under a pass-through arrangement.
• The Group has transferred its rights to receive cash flows from the asset and either (a) the Group has transferred
substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred
control of the asset, a new asset is recognized to the extent of the Group’s continuing involvement in the asset. Continuing
involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration that the Group could be required to repay.
4.18.2. Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged, canceled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition
of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is
recognized in the separate income statement.
4.19. Provisions and contingencies
Provisions are recognized in the consolidated statement of financial position where the Group has a present obligation
(either legal or tacit) as a result of a past event and it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation. Amounts recognized as provisions are the best estimate of the amounts
required to offset the current value of those obligations at the consolidated statement of financial position date.
Provisions are reviewed at each year end and adjusted to reflect the current best estimate of the liability.
138
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects,
where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the
passage of time is recognized as an interest expense.
4.20. Income tax
The parent, Mediaset España Comunicación, S.A., files consolidated income tax returns with the following subsidiaries:
• Grupo Editorial Tele 5, S.A.U.
• Telecinco Cinema, S.A.U.
• Publiespaña, S.A.U.
• Publimedia, S.A.U.
• Mediacinco Cartera, S.L.
• Conecta 5 Telecinco, S.A.U.
• Sogecable Editorial, S.A.U.
• Sogecable Media, S.A.U.
• Premiere Megaplex, S.A.U.
The income tax expense for the year is recognized in the separate income statement, except in cases in which it relates
to items that are recognized directly in the statement of other comprehensive income or equity, in which case the
related tax is also recognized in equity.
Deferred tax assets and liabilities are recognized on the basis of the temporary differences between the carrying
amounts of the assets or liabilities and their tax bases and are measured on the basis of the tax rates that are expected
to apply in the period when the asset is realized or the liability is settled. Deferred tax assets and liabilities arising from
changes in equity are charged or credited directly to equity. Deferred tax assets and tax loss and tax credit carryforwards
are only recognized when the probability of their future realization is reasonably assured and are adjusted subsequently
if it is not considered probable that taxable profits will be obtained in the future.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the tax
authorities taking the tax rates prevailing at the consolidated statement of financial position date and including any tax
adjustments from previous years.
The Group recognizes deferred tax liabilities for all taxable temporary differences, except:
• When the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction
that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss.
• In respect of taxable temporary differences associated with investments in subsidiaries and associates, where the
timing of the reversal of the temporary differences can be controlled by the parent and it is probable that the
temporary difference will not reverse in the foreseeable future.
The Group recognizes deferred income tax assets for all deductible temporary differences, carryforward of unused
tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the
deductible temporary difference, and the carryforward of unused tax credits or losses can be utilized, except:
139
• Where the deferred income tax relating to the deductible temporary difference arises from the initial recognition of
an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss.
• In respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred
tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the
foreseeable future and taxable profit will be available against which the temporary difference can be utilized.
The carrying amount of deferred income tax assets is reviewed at each statement of financial position date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of
the deferred income tax asset to be utilized. The Group also reviews unrecognized deferred income tax assets at each
statement of financial position date and recognizes them to the extent that it has become probable that future taxable
profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off
current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity
and the same taxation authority.
4.21. Revenue and expense recognition
Revenue and expenses are recognized net of the related taxes, except in the case of non-deductible expenses.
In accordance with the accrual principle, income and expenses are recognized when the goods or services represented
by them take place, regardless of when actual payment or collection occurs.
Revenue associated with the rendering of services is recognized by reference to the stage of completion of the services,
provided that the revenue can be measured reliably.
The Group’s main source of revenue is from advertising. This revenue is recognized in the period in which it is earned;
i.e. when the related advertisement is broadcast.
Expenses, including discounts and volume rebates, are recognized in the separate income statement in the period in
which they are incurred.
4.22. Equity-settled transactions
The Company maintains share option plans related to the compensation system for executive directors and board
members that are settled by delivering Company shares. The employee benefits expense is determined based on the
fair value of the share options to be awarded on the date the option is granted. This expense is recognized over the
stipulated three-year period during which the services are rendered. The fair value of share options established at the
date the award was granted is not modified.
The options’ fair value is measured based on an internal valuation using valuation option models – specifically, the
binomial method – and taking into account the price of the option in the year, the life of the option, the price of the
underlying shares, the expected volatility of the share price, estimated dividend payments and the risk-free interest rate
for the life of the option. The option valuation models and the assumptions used are described in Note 21.
140
4.23. Transactions in foreign currency
Transactions in foreign currency are initially recognized at the exchange rate prevailing at the date of the transaction.
All exchange gains or losses arising from translation as well as those arising when statement of financial position items
settled are recognized in the separate income statement.
4.24. Earnings per share
The Group calculates basic earnings per share on the basis of the weighted average number of shares outstanding at
year end. The calculation of diluted earnings per share also includes the dilutive effect, if any, of stock options granted
during the year.
4.25. Environmental issues
In view of the business activities carried out by the Group, it does not have any environmental liability, expenses, assets,
provisions or contingencies that might be material with respect to its equity, financial position or results. Therefore, no
specific environmental disclosures have been included in these notes to the financial statements.
5. SEGMENT INFORMATION
In accordance with IFRS 8, free-to-air TV business is the Group’s only identified operating segment.
6. PROPERTY, PLANT, AND EQUIPMENT
The breakdown of the balances of “Property, plant, and equipment” and of the changes therein in the years ended
December 31, 2012 and 2011 is as follows:
Balance at
Additions Disposals
12/31/10
Balance at
12/31/11
Additions
Disposals
Transfers
Balance at
12/31/12
14,970
-
-
-
14,970
55
32,443
157
-
4,951
37,551
Transfer
COST
Land and natural resources
14,970
Buildings and other structures
32,383
Machinery, plants, and tools
91,014
1,337
(4,629)
4,193
91,916
1,931
(2,782)
5,472
96,537
Furniture and fixture
4,694
441
(272)
2
4,865
242
(43)
-
5,064
Computer hardware
13,284
584
(1,697)
2,945
15,116
974
(625)
157
15,622
668
14
(92)
590
32
(19)
-
603
4,743
10,363
(6,890)
8,216
3,267
-
(10,580)
903
161,761
12,739
305
168,116
6,603
(3,469)
-
171,250
Other Items of property,
plant, and equipment
Property, plant, and equipment
in the course of construction
Total cost
(6,690)
141
Balance at
Additions Disposals
12/31/10
Transfer
Balance at
12/31/11
Additions
Disposals
Transfers
Balance at
12/31/12
(20,095)
(1,448)
-
-
(21,543)
ACCUMULATED DEPRECIATION
Buildings and other structures
(18,789)
(1,306)
Machinery, plants, and tools
(79,355)
(3,610)
4,368
(295)
(78,892)
(4,298)
2,771
-
(80,419)
(3,158)
(319)
250
(2)
(3,229)
(300)
35
-
(3,494)
Computer hardware
(10,699)
(1,905)
1,690
(8)
(10,922)
(1,768)
620
-
(12,070)
(583)
(27)
92
(518)
(31)
18
-
(531)
(112,584)
(7,167)
6,400
(305)
(113,655)
(7,845)
3,444
-
(118,057)
49,177
5,572
(290)
-
54,459
(1,242)
(25)
-
53,193
Other items of property, plant,
and equipment
Total accumulated
depreciation
CARRYING AMOUNT
Additions in 2012 and 2011 relate to the acquisition of items of property, plant, and equipment required to continue
with and increase the Group’s activities. Additionally in 2011, the Group began the enlargements of the buildings where
it conducts its operations, which was finished in 2012.
Disposals in 2012 and 2011 relate mainly to the retirement and/or sale of fully depreciated items or that are no longer
in use.
The breakdown of the fully depreciated property, plant, and equipment in use at December 31, 2012 and 2011 is as
follows:
2012
2011
Computer hardware
9,213
7,182
Technical machinery, fixtures, and tools
67,573
66,822
Furniture
2,001
1,832
432
495
79,219
76,331
Other items of property, plant, and equipment
The Group has taken out insurance policies to cover the possible risks to which its property, plant, and equipment are
subject and the claims that might be filed against it for carrying on its business activities. These policies are considered to
adequately cover the related risks.
The Group had no items under finance leases at December 31, 2012 or at December 31, 2011.
The impact of the accelerated amortization of audiovisual rights was 2,243 thousand euros in 2012 (2011: 2,421 euros).
142
7. INTANGIBLE ASSETS
The breakdown of the balances of “Intangible assets” and of the changes therein in the years ended December 31, 2012
and 2011 is as follows:
Balance at
12/31/10
Additions
Development
Expenditure
549
428
Concessions,
patents, and
trademarks
277,800
4
Computer
software
23,091
683
Computer
software in
progress
1,394
1,544
Total cost
302,834
2,659
Transfers
Change in
consolidation
scope
(274)
-
703
(120)
465
169
(1,564)
3,888
Disposals
and other
Balance at
Additions
12/31/11
Disposals
and other
Transfers
Balance at
12/31/12
831
-
(632)
902
278,318
38
(19,141)
-
259,215
-
26,098
1,002
(1,521)
1,134
26,713
(2,220)
-
718
425
-
(502)
641
(1,684)
1,859
169
305,837
2,296
(20,662)
-
287,471
COST
ACCUMULATED AMORTIZATION
Concessions,
patents, and
trademarks
(32,448)
(7,943)
120
(465)
-
(40,736)
(8,066)
19,144
-
(29,658)
Computer
software
(20,014)
(2,510)
1,202
(1,059)
-
(22,381)
(2,274)
1,491
-
(23,164)
Total
accumulated
amortization
(52,462)
(10,453)
1,322
(1,524)
-
(63,117)
(10,340)
20,635
-
(52,822)
CARRYING
AMOUNT
250,372
(7,794)
(362)
335
169
242,720
(8,044)
(27)
-
234,650
The breakdown of the fully amortized intangible assets in use at December 31, 2012 and 2011 is as follows:
Computer software
Concessions, patents, and trademarks
Total
2012
2011
19,367
19,413
136
18,832
19,503
38,245
143
8. AUDIOVISUAL PROPERTY RIGHTS
The breakdown of the balances of “Audiovisual property rights” and of the changes therein in the years ended December
31, 2012 and 2011 is as follows:
Balance at
12/31/10
Additions
Disposals
Transfers
and others
Balance at
12/31/11
Additions
Disposals
Transfers
and others
Balance at
12/31/12
Audiovisual
property rights
359,450
126,617
(99,576)
64,686
451,177
124,131
(126,861)
3,722
452,169
Master copies
9
-
(2)
-
7
-
-
-
7
8,117
1,053
(89)
-
9,081
2,116
(267)
-
10,930
Co-production
rights
131,836
888
(1,230)
5,168
136,662
824
(1,552)
32,689
168,623
In-house rights
1,000,348
79,547
(8,755)
102,048
1,172,188
51,416
-
827
1,225,431
11,497
6
-
119
11,622
582
-
65
12,269
754
-
-
-
754
19
(22)
-
751
1,246
1,379
(577)
(385)
1,663
445
(342)
(363)
1,403
158
-
-
-
158
-
-
-
158
Advances
42,356
16,623
(1,009)
(20,822)
37,148
3,546
(800)
(36,940)
2,954
Total cost
1,555,771
226,113
(111,238)
150,814
1,821,460
183,079
(129,844)
-
1,874,695
COST Dubbing
Distribution rights
Other ancillary
work
Rights, options,
script development
Start-up costs
ACCUMULATED AMORTIZATION Audiovisual
property rights
(180,180)
(126,534)
99,576
(45,833)
(252,971)
(136,877)
126,861
-
(262,987)
Master copies
(8)
(0)
1
-
(7)
-
-
-
(7)
(7,204)
(714)
89
-
(7,829)
(1,863)
267
-
(9,425)
Co-production
rights
(119,659)
(6,021)
-
-
(125,680)
(25,943)
-
-
(151,623)
In-house rights
(969,202)
(86,691)
8,755
(96,938)
(1,144,076)
(51,113)
-
-
(1,195,189)
Distribution rights
(11,496)
-
-
-
(11,496)
(125)
-
-
(11,621)
Other ancillary
work
(748)
-
-
-
(748)
-
-
-
(748)
Start-up costs
(154)
-
1
-
(153)
-
-
-
(153)
(1,288,651)
(219,960)
108,422
(142,771)
(1,542,960)
(215,921)
127,128
-
(1,631,753)
Provisions
(1,778)
(8,341)
1,100
(8,522)
(17,541)
(1,833)
7,285
-
(12,089)
Total
audiovisual rights
265,343
(2,188)
(1,716)
(479)
260,960
(34,675)
4,569
-
230,853
Dubbing
Total accumulated
depreciation
Of the total amount recognized under “Non-current assets - Audiovisual rights” in the consolidated statement of
financial position at December 31, 2012, the Group estimates that their consumption over the upcoming year will be
approximately 75%, which is a bit higher than the previous year.
144
Provisions at the end of 2012 relate to the net carrying amount of rights which, although they expire after December
31, 2012, are not included in the Group’s future broadcasting plans at the date of authorization for issue of these
consolidated financial statements. Should one of the Group’s networks exercise these broadcasting rights, the provision
would be reversed and the right would be amortized for the amount of the reversal. This would not have an impact on
the consolidated separate income statement.
Therefore, the balance of this provision relates basically to the adjustment required to determine the carrying amount
of the library.The provision recognized in the consolidated separate income statement at December 31, 2012 and 2011
amounted to 1,851 thousand euros and 8,341 thousand euros, respectively.
At December 31, 2012, there were firm commitments to acquire audiovisual property rights commencing on or after
January 1, 2013 for a total amount of $83,939 thousand and 186,814 thousand euros. The commitments at year end
2011 amounted to $139,836 thousand and 153,587 thousand euros.
At December 31, 2012, advances of 2,254 thousand euros had been paid in connection with these firm commitments
to purchase audiovisual property rights. The advances paid in 2011 amounted to 4,587 thousand euros.
At the statement of financial position date there were commitments to purchase co-production rights, available from
January 1, 2013, for a total amount of 9,811 thousand euros (2011: 34,347 thousand euros).
At December 31, 2012, advances of 380 thousand euros had been paid in connection with these firm commitments to
purchase co-production rights (2011: 31,532 thousand euros).
The Group had firm commitments to purchase distribution rights commencing on or after January 1, 2013 for a total
amount of 1,303 thousand euros. At December 31, 2011, firm commitments to purchase distribution rights amounted
to 2,800 thousand euros.
Advances of 130 thousand euros had been paid in connection with firm distribution right purchase commitments at
December 31, 2012 (2011: 1,600 thousand euros).
Advances for fiction series are included under Advances.
9. GOODWILL AND BUSINESS COMBINATIONS
Goodwill amounting to 287,357 thousand euros arose from the purchase of the Cuatro Group, which became effective
on December 31, 2010, as well as an asset with an indefinite useful life amounting to 85,000 euros.
Impairment testing of goodwill
The impairment test was carried out by comparing the recoverable value of the cash-generating unit to which the
goodwill and intangibles with indefinite lives are assigned with the carrying value of the cash-generating unit.
The cash-generating unit is the free-to-air TV business.
To test its goodwill for impairment, the Company took the free-to-air TV business’ strategic plan and discounted the
estimated future cash flows. The assumptions used in the cash flow estimates include the best estimate of future trends
of advertising markets, audiences and costs.
145
The Group’s estimates on the future trend of the advertising market are based on market forecasts and historic
performance, as well as its correlation with economic conditions, using reasonable projections in accordance with
external information sources.
Projected income estimated for upcoming years is calculated based on the abovementioned advertising market trend,
while taking into account reasonable hypotheses regarding audience numbers.
Programming cost assumptions took into account forecasted internal and external audiovisual production costs, as well
as the amount of investment necessary to maintain audience levels.
The estimates cover a period of five years and for cash flows not considered, income to perpetuity is estimated using
a growth rate of around 2% (2011: 2%). Estimated cash flows are discounted at a rate that represents the current
market assessment of the risk-free rate and the specific situation of the industry.The discount rate used is around 9.75%
(2011: 9.3%).
Based on the assumptions used and the estimated cash flows calculated, no impairment was identified for either
goodwill or intangibles with indefinite lives.
Sensitivity to changes in assumptions
Management believes that, based on information currently available, no reasonably possible change in any of the above
key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount.
10. EQUITY METHOD INVESTMENTS
The amounts and changes in 2012 and 2011 in the items composing “Equity method investments” are as follows:
Equity method investment
Balance at December 31, 2010
496,725
Increases/decreases
Equity method investments
Dividends receipts
7,460
(20,275)
Other non-comprehensive income
Other movements
(823)
483,087
Increases/decreases
Equity method investments
Dividends receipts
8,452
(22,101)
Other non-comprehensive income
146
Other movements
(1,495)
467,943
In 2010, Mediaset España Comunicación, S.A., based on the outcome of the impairment test carried out, wrote down
the value of the stake in Edam Acquisition Holding, Coop. to zero.
In 2011, the Edam Group entered into negotiations with its bank creditors for a potential debt restructuring as it was
unable to meet the financial covenants of the syndicated loan granted in 2007 for the acquisition of Endemol. A qualified
majority of credits agreed to grant waivers, extending the terms so the June 2011 covenants would not be missed and
to help the negotiation of the debt restructuring, led by senior debt creditors.
Judging by recent developments in this process near year end 2011 (e.g. the creditors’ agreement signed which entails
the allocation of the Group to senior bondholders or its sale to third parties) and its outlook based on the agreements
made once the need for restructuring was decided, the Company’s directors reversed the debit balance of the “Recyclable reserves in associates” arising from movements recognized directly in Endemol’s consolidated reserves. This resulted
in a loss in the income statement, but did not have any overall effect on the Group’s equity.
Therefore, the investment in Edam Acquisition Holding, Coop. was transferred in 2011 from “Equity method investments”
to “Other financial assets.”
The breakdown by company of investments accounted for by the equity method is as follows:
Company
Investments accounted for
using the equity method
Results of companies accounted
for using the equity method
2012
2011
2012
2011
Pegaso Television, Inc.
3,540
3,540
-
-
1,402
1,876
454
1,327
3,560
3,367
1,632
1,866
732
871
103
484
457,829
473,433
4,331
3,783
60 DB Entertainment
447
-
(53)
-
Editora Digital de Medios
433
-
(67)
-
-
-
2,052
-
467,943
483,087
8,452
7,460
BigBang, S.L.
DTS Distribuidora de Tv Digital, S.A. (*)
Furia de Titanes A.I.E.
Total
Impact of Edam’s removal from the
consolidation scope
(30,415)
8,452
(22,955)
(*) Audited by Deloitte
147
a)Key financial highlights of companies accounted for using the equity method
in 2012 and 2011:
2012
Assets
Equity
Liabilities
Income
Outcome
Data not
available
Data not
available
Data not available
Data not
available
Data not
available
BigBang (1)
3,020
2,439
581
5,821
342
7,086
4,673
2,413
15,101
1,515
La Fábrica de la Tele, S.L. (1)
19,456
11,867
7,589
29,412
5,441
1,471,666
927,029
544,637
1,067,884
52,408
60 DB Entertainment (1)
418
330
88
493
(175)
Editora Digital de Medios (1)
987
866
121
20
(134)
56,319
(5,729)
62,048
3,879
(6,323)
Pegaso Televisión, Inc. (1)
DTS Distribuidora de TV Digital,
S.A. (**)
Furia de Titanes A.I.E. (2)
(**) Audited by Deloitte, S.L.
(1) Unaudited
(2) Audited by Deloitte, S.L. at June 30, 2012
2011
Assets
Equity
Liabilities
Income
Outcome
Pegaso Televisión, Inc. (1)
13,305
(30)
13,335
25
(1,970)
BigBang(1)
4,991
2,904
2,087
15,911
1,615
11,482
6,255
5,227
33,364
4,423
La Fábrica de la Tele, S.L. (1)
22,482
11,223
11,259
34,806
6,221
1,423,340
956,226
458,114
984,603
49,806
DTS Distribuidora de TV Digital, S.A. (**)
(**) Audited by Deloitte, S.L.
(1) Unaudited
Changes in the investments accounted for using the equity method are described in Note 1 under “Changes in the
consolidation scope.”
b)Acquisition of 60 DB Entertainment, S.L.U.
On June 2, 2012, Mediaset España Comunicación, S.A. assumed and fully paid in the capital increase (3 thousand euros) as
well as its corresponding share premium (497 thousand euros). The shareholder expressly forfeited its right to exercise
the pre-emptive subscription rights to 3,000 new shares, which were fully assumed and paid in by the Mediaset España
Comunicación, S.L., thereby acquiring 30% of 60dB Entertainment, S.L.
148
Acquisition of Editora Digital de Medios, S.L.U.
On September 26, 2012, Mediaset España Comunicación, S.A., subscribed the entirety of the new shares which Editorial
Ecoprensa, S.A. agreed to issue as a capital increase, paying in 500 thousand euros. Following the capital increase,
Mediaset España Comunicación, S.A. currently owns 500,000 shares with a par value of 1 euro each, representing 50%
of Editora Digital de Medios, S.L.
c)Impairment testing of equity method investments
• DTS Distribuidora de TV Digital, S.A.
At December 31, 2012, the performance of Digital+’s business during the year did not give any indications that the
investment was impaired. Therefore, it was not tested for impairment this year.
11. OTHER NON-CURRENT FINANCIAL ASSETS
The following are included under “Other non-current financial assets”:
12/31/12
12/31/11
192
143
3,344
49,495
Other
943
5,824
Total
4,479
55,462
Long term loans
Loans to related companies
Loans to related companies
The breakdown of “Loans to related companies” at December 31, 2012 and 2011 is as follows:
12/31/2012
12/31/2011
-
46,085
Loans granted to Pegaso
3,344
3,410
Total
3,344
49,495
Endemol Group’s debt
Endemol Group debt relates to acquisitions made in prior years from third parties under market conditions of Endemol
Group debt, as explained in the notes to the 2011 consolidated financial statements.This debt is measured at amortized
cost. At March 30, 2012, the Group sold a third of this debt, earning 1 million euros; therefore, at December 31, the
Group is no longer an Endemol Group creditor.
149
Other current financial assets
This heading primarily reflected the option that Prisa TV granted to Mediaset España whereby, once a year has elapsed
from the date of acquisition of its share in DTS, Distribuidora de Televisión Digital, S.A., it might recognize certain rights
over the management of Digital+.
The price of granting the option was 5,000 thousand euros, which Mediaset paid to Prisa TV at the same time it acquired
its shares.
Mediaset España Comunicación may exercise this option within three months after the first anniversary of the closing of
the transaction. In 2012, the Group chose not to exercise the option, and therefore the above amount was recognized
in the separate income statement.
The stake in Edam Acquisition Holding, Coop. is recognized under “Other financial assets” (Note 10). The carrying
amount of this investment was zero in 2012 and 2011.
12. OTHER CURRENT ASSETS
The breakdown of “Other current assets” at December 31, 2012 and December 31, 2011 is as follows:
Prepaid expenses
Advance commissions
Total
12/31/2012
12/31/2011
10,940
65,525
16
30
10,956
65,555
Prepaid expenses relate mainly to retransmission rights for programs which have yet to be broadcast.
13. OTHER CURRENT FINANCIAL ASSETS
The breakdown of “Other current financial assets” at December 31, 2012 and December 31, 2011 is as follows:
12/31/2012
12/31/2011
-
53,931
313
117
1,752
1,742
Total
2,065
55,790
Short-term investments securities
Loans to associates
150
“Short-term investment securities” included time deposits maturing in the short term at market interest rates, which
were canceled during the year.
“Other financial assets” mainly includes legal deposits for pending litigation.
14. CASH AND CASH EQUIVALENTS
The breakdown of “Cash and cash equivalents” at December 31, 2012 and December 31, 2011 is as follows:
12/31/2012
12/31/2011
Cash on hand and at bank
90,692
58,574
Total
90,692
58,574
No restrictions to the availability of balances exist.
15. EQUITY
15.1 Share capital
At December 31, 2012 and 2011, the parent Company’s share capital comprised 406,861,426 shares with a nominal
value of 0.5 euros each, all represented by book entries. All share capital has been fully subscribed and paid up and is
held as follows:
Owner
Mediaset, S.p.A.
2012
2011
% Interest
% Interest
41.6
-
-
41.2
Prisa Group
17.3
17.3
Market
39.5
39.9
Treasury shares
1.6
1.6
100.0
100.0
Mediaset Investimenti, S.p.A.
Total
At December 31, 2012, the Group was notified of the merger between Mediaset Investimenti, S.p.A. and Mediaset
S.p.A.; the latter assumed all of the former’s assets and liabilities, which resulted in a new share capital breakdown
(see above table).
151
All the shares making up the company’s issued capital enjoy the same rights.
Share transfers are governed by the General Audiovisual Communication Law 7/2010, of March 31.
15.2. Dividends
On February 22, 2012, the parent’s Board of Directors resolved to submit for approval by shareholders in ordinary
general meeting a proposal to pay out a dividend amounting to 55,260 thousand euros with a charge to 2011 profit.This
dividend was equivalent to 0.14 euros per outstanding share. This distribution was ratified by the General Shareholders’
Meeting on March 28, 2012.
15.3. Legal reserve and Goodwill reserve
Under the Spanish Companies Law, 10% of net profit for each year must be transferred to the legal reserve until the
balance of this reserve reaches at least 20% of the share capital.
The legal reserve can be used to increase capital provided that the remaining reserve balance does not fall below 10%
of the increased share capital amount. Otherwise, until the legal reserve exceeds 20% of share capital, it can only be
used to offset losses, provided that sufficient other reserves are not available for this purpose.
The parent has set aside the full legal reserve required, i.e., 40,686 thousand euros.This amount is included under “Other
reserves” on the accompanying consolidated statement of financial position.
The parent has set aside a non-distributable reserve of 14,399 thousand euros equal to the amount of goodwill.
15.4. Treasury shares
Treasury shares were acquired mainly to cover the company’s commitments in relation to share option plans. These
plans are described in Note 21.
The changes in “Treasury shares” in 2012 and 2011 were as follows:
2012
2011
Number of shares
Amount (*)
Number of shares
Amount (*)
6,419,259
84,746
6,419,259
84,746
Increase
-
-
-
-
Decrease
-
-
-
-
6,419,259
84,746
6,419,259
84,746
At beginning of year
At year end
(*) Amounts in thousands of euros
At December 31, 2012, the Company shares held by it and by its subsidiaries represented 1.58% of the share capital
(2011: 1.58%).
No treasury shares were purchased or sold in 2012 or 2011.
Thus, the Company held the same amount of treasury shares in 2012 as 2011.
152
15.5. Non-controlling interests
The breakdown, by company, of the balance of “Non-controlling interests” in the consolidated statement of financial
position at December 31, 2012 and 2011 is as follows:
2012
2011
Noncontrolling
interest
Separated
profit(loss)
attributable to
non-controlling
interests
Consolidated
profit(loss)
attributable to
non-controlling
interests
Noncontrolling
interest
Separated
profit(loss)
attributable to
non-controlling
interests
Consolidated
profit(loss)
attributable to
non-controlling
interests
12,498
(600)
(600)
13,098
2,130
2,130
Total
12,498
(600)
(600)
13,098
2,130
2,130
Mediaset Investiment S.A.R.L. has a non-controlling interest in Mediaset Investment S.A.R.L., which has granted a
participating loan to Mediacinco Cartera. This loan was converted into equity of the company in 2011.
16. NON-CURRENT PROVISIONS AND OTHER
CONTINGENT LIABILITIES
These include provisions made in 2012 and prior years to cover, among other items, contingent risks arising from
litigation in progress and unresolved tax assessments.
The changes in non-current provisions in the years ended December 31, 2012 and 2011 were as follows:
2012
Provision for contingencies and charges
2011
Provision for contingencies and charges
Balance at
12/31/11
Charge for
the year
Amount
used
Amounts
reversed
Transfer
Balance at
12/31/12
29,306
3,926
(6,973)
(1,942)
-
24,317
Balance at
12/31/10
Charge for
the year
Amount
used
Amounts
reversed
Transfer
Balance at
12/31/11
31,978
7,809
(5,416)
(3,316)
(1,749)
29,306
At December 31, 2012 and 2011, provisions for liabilities and charges relate to pending lawsuits and appeals between
the Group and third parties. Provisions recognized in the year relate to new lawsuits facing the Group, while reversals
relate to litigation that has been resolved.
Its directors and legal advisors have evaluated possible related risks, and where such risks are considered probable, and
their economic effects quantifiable, they have made the appropriate provisions.
153
Contingencies
CHANNEL INCREASE THROUGH ACCESS TO A MUTLIPLE DIGITAL LICENSE
A sentence handed down on November 27, 2012 by the Third Chamber of the Supreme Court (Appeal 442/2010)
canceled the the Council of Ministers’ resolution dated July 16, 2010 which assigned each of the Digital Terrestrial
TV (TDT) channel licensing companies (the operators), including MEDIASET ESPAÑA (previously GESTEVISION
TELECINCO) and SOCIEDAD GENERAL DE TELEVISION CUATRO, S.A., a multiple digital license with national
coverage, increasing the channels it manages to four.
This assignment (annulled by the sentence) was enacted by virtue of the application of regulations approved by the
National Technical Plan for Digital Terrestrial TV, which starting in 1,998 regulated the transition from analogical to TDT
transmission, finalizing in 2010. The government verified that the companies to be granted the multiple channels had
complied with all the necessary requirements and obligations inherent in proceeding with the appealed assignation in
order to make the transition to TDT.
The sentence was based on the fact that when the the multiple channels were assigned, the General Law on Audiovisual
Communication (LGCA, published one month prior to the appealed Agreement) was applicable; it states that additional
channels assigned under each license must be granted through a public bidding process. This dilemma might have been
circumvented with the mere introduction of a provision by the LGCA granting continuity to the agreement prior
to its enactment.
The Supreme Court views the main obstacle to be a mere formality, and the TDT’s original basis was never questioned,
and therefore, the eventual assignment of multiple channels to each operator was not a complex issue; this was
manifested during meetings held with the pertinent ministries; thus, it is expected that these issues will be resolved in
upcoming weeks.
PROCEDURES RELATIVE TO THE LATE PRESENTATION OF THE ACTION PLAN
On August 2, 2011, the Comisión Nacional de la Competencia (CNC - anti-trust authorities) handed down a resolution
on dossier SNC/0012/11 (Concentración Telecinco-Cuatro) in which it declared Mediaset España responsible for a very
serious violation of Anti-Trust Law, as it did not present an Action Plan (including commitments with the CNC) within
the established deadline, setting a fine of 3,600,000 euros.
This resolution was appealed before the National Court of Justice as part of ordinary civil lawsuit 474/2011. A sentence
handed down on January 8, 2013 overruled it, upholding the imposition of the fine.
Another appeal was filed before the Supreme Court; the Company has solid expectations that it will receive a favorable
ruling: either an annulment, or a significant reduction in the amount of the fine.
The main arguments against the Supreme Court ruling as well as the CNC’s resolution are as follows:
• The alleged Action Plan infraction did not take place: it was presented within the CNC’s established deadline.
• In the event that it was indeed presented late, the period did not exceed a month and thus, the Group complied
with the commitment with the CNC (that the Action Plan was a mere development outline); thus, no general or
underlying interests were harmed.
• Therefore, rather than a material lack of compliance, the Group was guilty of a simple procedural error, and therefore
did not breach anti-trust laws; consequently, Law 30/1992 of the Legal Regime of Public Administrations and Common
Administrative Procedure laws are applicable.
154
• It is thus not considered necessary to apply the terms of the Anti-Trust Law: a procedural error cannot be considered
a very serious violation, and is thus unworthy of a 3,660,000 fine, as this sum is totally disproportionate to the
infringement in question.
• Finally, the fine is a frontal violation and breach of the principles which prohibit reformatio in peius (Articles 89.2 and
113.3 of Law 30/1992), since the CNC only chose to initiate disciplinary proceedings against MEDIASET ESPAÑA
once it had decided to appeal the CNC-approved Action Plan, and not when the alleged violation took place.
Thus, the accompanying consolidated balance sheet does not include a provision for this contingency, as the directors
and legal advisors do not consider it likely that this risk will materialize.
PROCEEDINGS RELATED TO MEDIASET ESPAÑA COMUNICACIÓN, S.A.’S FAILURE TO
COMPANY WITH THE TELECINCO-CUATRO MERGER
On February 6, 2013, the el Comisión Nacional de Defensa de la Competencia (CNDC - Anti-trust authorities) handed
down a ruling on Dossier SNC/0024/12 Mediaset (the “resolution”), in which Mediaset España Comunicación, S.A.
(“Mediaset España”) failed to comply with certain commitments and obligations established in the C-0230/09 Telecinco/
Cuatro merger dossier; a fine of 15,600,000 was set.
The resolution states that Mediaset España failed to comply with four of the twelve commitments upon which the
Telecinco/Cuatro merger was authorized (commitments (ii), (iii), (vi) and (xii)), as well as different requirements for
providing information to the CNS regarding these obligations.
The commitments set Mediaset España restrictions in order to neutralize or compensate for potential anti-trust issues
arising from the transaction. These include:
• Regarding the sale of TV ad space: Mediaset España agreed that it would not jointly place advertisements with Cuatro
and Telecinco or groups of channels whose overall audience topped 22%. Specifically, commitment (ii) prohibited
formal or de-facto joint sales of advertising space with Telecinco and Cuatro. Among other stipulations, commitment
(iii) established a functional split between Publimedia and Publiespaña, in order to handle free-to-air and pay TV
separately.
• Limits were imposed for the acquisition of audiovisual contents from third parties. Commitment (vi) limited exclusive
contracts to three year durations (in general terms), also excluding automatic renewal and other similar terms, while
commitment (xii) prevented exclusive rights or first options on the entirety of national contents production/products.
The commitments were later developed unilaterally as part of the CVC-imposed Action Plan, which also set certain
obligations regarding informing the authorities, to guarantee their compliance.
The Action Plan’s interpretation of the commitments was strict to the point that it substantially modified its content,
thereby significantly making Mediaset España’s commitments more difficult to assume; this affected advertising as well
as content acquisition. For example, the duration of contracts for acquiring content was to be calculated at their signing
date, rather than when the rights commenced; thus, this was legally disputed, and a sentence is still pending.
Mediaset España did not fail to comply with any of its commitments with the CNC.
• Mediaset España did not violate commitment (ii) after the merger finalized: in 2011, it lowered its share of the
advertising market as well as the average per-ad price, while managing to keep its audience numbers constant.
Reports prepared by external advisors conclude that Publiespaña has not failed to meet its commitments, and that
it has not violated anti-trust laws.
155
• As regards commitment (iii), Mediaset España was careful to ensure that positions in Publimedia and Publiiespaña
were not duplicated. Likewise, there has been no indication whatsoever of a failure to meet the obligation to
guarantee the functional or commercial independence of both companies.
• With respect to commitment (vi), Mediaset España has been charged with delay in granting suppliers the right to
reduced contracts, and renouncing extension or preferential acquisition rights which never really existed, considering
the deadlines established to that effect as well as legal suspension periods, as a result of Mediaset’s legitimately filed
appeals. No effect would have been felt on the market, as no suppliers exercised any of the granted rights.
• With respect to commitment (xii), Mediaset España renounced all the pertinent option rights included in contracts
with producers, while fulfilling its other related obligations; thus, it did not fail to comply with any of the stated
conditions.
Mediaset España provided information in conformance with the Action Plan, responded to CNC requirements, and took
all the necessary steps expected of it. None of the supposed delays or problems in delivering information represents a
material failure to comply with the established commitments.
Therefore, Mediaset España plans to file an appeal and prepare a resolution before the National Court of Justice,
to request the suspension of the fine, in accordance with articles 46 and 129 and Law 29/1998, dated July 13, which
regulates the Federal Court of Appeals on Commercial Matters.
As in the previous dossier, the accompanying consolidated balance sheet does not include a provision for this contingency,
as the directors and legal advisors do not consider it likely that this risk will arise.
As explained in Note 19.2, the Group is open to inspection of certain tax returns; however, the parent’s directors and
tax advisors consider that no significant tax contingencies will materialize, and if they do, they will not have a significant
effect on the accompanying consolidated statement of financial position.
17. OTHER NON-CURRENT LIABILITIES
The breakdown of “Other non-current liabilities” is as follows:
Balance at 12/31/12
Balance at 12/31/11
-
94
Other payables
240
189
Total
240
283
Advances received on loans
156
18. SHORT-TERM PROVISIONS
The breakdown of “Short-term provisions” is as follows:
Provisions for sales volume rebates
Balance at
12/31/11
Additions
Applications
Reversions
Transfers
Balance at
12/31/12
57,657
45,424
(56,113)
-
3,455
50,423
-
(8)
Provisions for contingencies
8
Provisions for sales volume rebates
Provisions for contingences
-
57,665
45,424
(56,113)
(8)
3,455
50.423
Balance at
12/31/10
Additions
Applications
Reversions
Transfers
Balance at
12/31/11
57,407
56,866
(56,567)
-
(49)
57,657
(11)
-
19
57,426
56,866
(56,578)
8
(49)
57,665
19. TAX MATTERS
19.1. Consolidated tax group
Pursuant to current legislation, the Consolidated Tax Group includes Mediaset España Comunicación, S.A., as the parent,
and the Spanish subsidiaries that meet the requirements provided for in Spanish legislation regulating the taxation of the
consolidated profits of corporate groups.
The Group’s other subsidiaries file individual tax returns in accordance with the tax legislation in force in each country.
19.2. Years open to tax inspection
Under prevailing tax regulations, tax returns may not be considered final until they have either been inspected by the tax
authorities or until the four-year inspection period has prescribed. Once the Spanish Tax Authorities’ Tax and Customs
Control Department of the Central Office of Major Tax Payers had performed its verifications and investigations in
2009, the Group has the following items and years open to inspection:
Item (s)
Years
Income Tax
2008 to 2012
Value added tax
2009 to 2012
Withholdings, non-resident income tax
2009 to 2012
Gaming tax: bets and promotional draws
06/2008 to 2012
Taxes on games of luck, betting, and chance: raffles and tombola
06/2008 to 2012
Annual transaction statement
2008 to 2012
Consolidated statement of intra-regional delivery and acquisition of assets
2009 to 2012
157
The Spanish Tax Authorities’Tax and Customs Control Department of the Central Office of Major Taxpayers is currently
performing its verifications and investigations on the following items: “Taxes on games of luck, bets, or chance: raffles and
tombolas” as well as “Gaming tax: bets and promotional draws” for June, 2008 to December 2011; the final result is still
pending at the date of these financial statements.
If, once the inspection has finalized, a regulation is proposed which surpasses the related provisioned risks and
contingencies, it will in any case refer to Company transactions carried out in close observance of the criteria established
by the tax authorities (more specifically the inspectors) arising from previous inspections and related to the same items
and transactions identical in nature. Thus, should such a situation arise, there are solid arguments in the Company’s
defense for applying the above criteria in both lawsuits and appeals, and consequently obtaining favorable outcomes.
Based on the best interpretation of current legislation, the parent’s directors and tax advisors consider that in the event
of a tax inspection, no significant tax contingencies would arise as a result of varying interpretations of the tax legislation
applicable to the Group’s transactions. Therefore, the accompanying statement of financial position does not include a
provision for this contingency.
19.3 Balances relating to Public Authorities
The breakdown of balances relating to Public Authorities is as follows:
Balance at 12/31/12
Balance at 12/31/11
6,607
5,305
Value added tax liability
8,558
5,605
Personal income tax withholdings
3,454
3,384
Payable to Social Security
1,541
1,519
Other public entities
3,318
4,791
Payable to tax authorities
16,871
15,299
Balance at 12/31/12
Balance at 12/31/11
Deferred tax assets
176,434
158,125
Income tax receivable
16,720
12,145
VAT receivable
23
384
Other tax receivables
342
354
Receivable from tax authorities
365
738
As a result of Law 8/2009 on the Financing of Radio Televisión Española and the definitive procedure for calculating,
declaring, and paying the amount developed in Royal Decree 1004/2010 of August 5, which implemented Law 8/2009
and ITC order/2373/2010 of September 9, approving the statements and prepayments set out in Law 8/2009, the
amount corresponding to 3% of the Company’s gross operating income billed is recognized under “Other public
entities.” At December 31, 2012, the outstanding balance is 2,654 thousand euros (2011: 4,152 thousand euros).
158
19.4. Income tax
The reconciliation of net income and expenses for the year with tax results is as follows:
2012
2011
25,660
61,228
(22,871)
(22,746)
2,789
38,482
2012
2011
CONSOLIDATED PROFIT BEFORE TAX
52,332
151,131
Tax rate
15,700
45,339
1,477
9,195
Tax credits and rebates
(14,388)
(16,052)
2,789
38.482
CONSOLIDATED INCOME STATEMENT
Current income tax
Current income tax expense
Relating to increases and decreases in temporary differences
In 2012 and 2011, the Group has not allocated to consolidated equity any amount that would have a tax effect.
19.5. Deferred taxes
The tax effect was calculated by applying the applicable tax rate in the year each item was generated to the
corresponding amount, adjusted for the effect of the change in tax legislation in the current year.
2012
Balance at
12/31/11
Increases
Decreases
Balance at
12/31/12
Transfer
Deferred taxes:
Provisions for fixed assets impairment
Provision for litigation
Other concepts
Unused tax deductions
Loss carryforwards
Total deferred tax assets
-
-
-
-
-
910
-
(429)
-
481
135,005
2,401
(622)
-
136,784
22,209
16,959
-
-
39,168
-
-
-
-
-
158,125
19,360
(1,051)
-
176,434
159
Balance at
12/31/10
Increases
Decreases
Transfer
Balance at
12/31/11
-
-
-
-
-
175
735
-
-
910
Other concepts
122,294
15,386
(332)
(2,343)
135,005
Unused tax deductions
12,290
17,968
(8,049)
-
22,209
Loss carryforwards
25,291
-
(25,292)
-
-
Total deferred tax assets
160,050
34,089
(33,673)
(2,343)
158,125
2011
Deferred taxes:
Provisions for fixed assets impairment
Provision for litigation
2012
Balance at 12/31/11
Increases
Decreases
Transfers
Balance at 12/31/12
Other items
2,343
77
-
-
2,420
Intangible assets
2,962
1,274
(49)
-
4,187
Total deferred tax liability
5,305
1,351
(49)
-
6,607
Balance at 12/31/10
Increases
Decreases
Transfers
Balance at 12/31/11
Other items
-
-
-
2,343
2,343
Intangible assets
-
2,962
-
-
2,962
Total deferred tax liability
-
2,962
-
2,343
5,305
2011
Deferred tax liabilities on intangible assets arise from the deductibility of goodwill and the license acquired.
The unused tax credits mainly relate to tax credits for investments in film productions. These tax credits may be used
over the next 10 years.
2012
2011
2,916
6,583
15,626
15,626
20,626
-
39,168
22,209
Other relates mainly to the temporary difference generated by the impairment of the investee Edam Acquisition
Holding I Cooperative U.A.
The Group estimated the taxable profits which it expects to obtain over the next five fiscal years (period for which it
considers the estimates to be reliable) based on budgeted projections. It has likewise analyzed the reversal period of
taxable temporary differences. Based on this analysis, the Group has recognized deferred tax assets for tax credits and
deductible temporary differences which it considers probable will be recoverable in the future.
160
20. GUARANTEE COMMITMENTS TO THIRD PARTIES
The breakdown, by nature, of the guarantees provided and received at December 31, 2012 and December 31, 2011,
are as follows:
Nature of guarantee
12/31/12
12/31/11
Surety bonds for contracts, concessions, and tenders
27,923
67,373
Payments into court
3,600
27
31,523
67,400
32,817
37,779
Guarantees provided
Guarantees received
20.1. Guarantees provided
The Group has provided guarantees totaling 2,363 thousand euros to the Tax and Customs Control Department due
to the appeal against the tax settlement agreement of which the Department notified the Group on June 26, 2009
and which confirmed the proposal given in the assessment from the tax inspection dated September 1, 2008. The tax
inspection included the verification of the gaming tax in respect of bets and promotional draws, as well as raffles and
tombolas from September 2004 up to and including May 2008 (Note 16).
To guarantee the late-payment interest, the amount of the guarantee was increased by 84 thousand euros.
The Group has deposited 25.5 million euros in guarantees required for its commercial activity in 2012 (2011: 65 million).
20.2. Guarantees received
Under the Group’s advertising contracting procedures, deferred sales must be accompanied by performance bonds.
The amount of the guarantees received in this connection at December 31, 2012 and December 31, 2011 is shown in
the preceding table.
21. SHARE-BASED PAYMENT PLAN
At December 31, 2012, as described below, the Group has five valid share option plans which it has granted to certain
employees. The last share option plan was approved in 2011.
All the approved plans that remain in effect have a three-year accrual period and the given strike price, and, if applicable,
are exercsed through the delivery of the shares.
Pursuant to a resolution by the parent’s Board of Directors on February 2, 2011, all the strike prices of each of the share
option plans were reestimated to ensure that the two capital increases carried out in 2010 had a neutral impact on the
statistics of the exercise of each. This adjustment only affected the strike prices of each Plan, not the number of options
originally granted.
161
The most relevant assumptions used in the measurement are as follows:
2007 Plan
2008 Plan
2009 Plan
2010 Plan
2011 Plan
19.74
7.13
5.21
7.00
5.83
6%
10%
5%
5.5%
5.5%
22.5%
27.5%
30%
50%
37%
Strike
Yield on the share (dividend yield)
Volatility
A share option plan for certain employees was approved in 2011.The weighted average fair value of these options at the
measurement date was 1.21 euros per share, calculated using a binomial valuation model with the following variables:
Variable
Value
Weighted average share price
6.22
Excercise price
5,83 euros
Expected volatility
,
37%
Option life
7/27/2014-7/26/2016
Expected dividends
5.5%
Risk-free interest rate
1.93% (Rentability German Bond)
There were no new share option plans in 2012.
The two capital increases give rise to an incremental fair value for the options. In accordance with IFRS 2, as the
modification took place during the vesting period of the share options, the incremental fair value granted is included in
the measurement of the amount recognized for services received over the period from the modification date until the
date when the modified equity instruments vest, in addition to the amount based on the grant date fair value of the
original equity instruments, which is recognized over the remainder of the original vesting period. The impact of this is
not significant.
The services received from employees in exchange for the share options granted are charged to the separate income
statement at fair value calculated on the date granted. An expense of 1,222 thousand euros was recognized for share
options in 2012 (2011: 1,358 thousand euros) (Note 23.2).
These share-based payment schemes in 2012 are shown in the following table (in any case, the granting conditions
approved by the Board of Directors have been met):
162
Number of
options
Strike
price
Assignment
date
From
To
Options granted
572,325
7.13
2008
07/30/2011
07/29/2013
Options canceled
(27,000)
7.13
2008
Plans outstanding at December 31, 2008
545,325
Options granted
319,163
5.21
2009
07//29/2012
07/28//2014
Options canceled
(9,000)
5.21
2009
855,488
07/28//2013
07/27/2015
07/27/2014
07/26/2016
Options granted
1,297,650
7.00
2010
Options canceled
(57,000)
7.00
2010
2,096,138
Options granted
673,225
5.83
2011
Options canceled
(28,500)
5.83
2011
2,740,863
Number of
options
Strike
Price
Assignment
date
From
To
Options granted
1,153,650
19.74
2007
07/25/2010
97/24//2012
Options canceled
(111,000)
19.74
2007
1,042,650
07/30//2011
07/29/2013
The schemes for 2011 are as follows:
Options granted
590,325
7.13
2008
Options canceled
(18,000)
19.74
2007
1,614,975
5.21
2009
07/29/2012
07/28//2014
7.00
2010
07/28//2013
07/27//2015
5.83
2011
07/27//2014
07/26//2016
Options granted
319,163
1,934,138
Options granted
1,297,650
3,231,788
Options granted
673,225
3,905,013
The Goup hat its own share options to comply with this commitments.
163
22. FINANCIAL INSTRUMENTS
22.1. Derivatives
The Group uses financial instruments to hedge the foreign currency risks relating to purchases of audiovisual property
rights in the year and, when necessary, to hedge those related to commercial transactions with customers, which are
recognized in the consolidated statement of financial position. As required by the corresponding measurement and
recognition policy, these derivatives are classified as “held for trading.”
The breakdown, by maturity, of the notional amounts of derivatives outstanding at the Group at December 31, 2012 is
as follows:
2012
Amount in $
Notional amount/ Maturity
up to one year
Dollars
Year - end (€/$)
exc. rate
Fair value
26,201
34,050
1.3194
(417)
-
-
-
-
26,201
34,050
Purchase of unmatured currency
Sales of dollars in euros
Net
(417)
The breakdown, by maturity, of the notional amounts of derivatives outstanding at the Group at December 31, 2011 is
as follows:
2011
Amount in $
Notional amount/
Maturity up to one
year
Dollars
Year - end (€/$) exc.
rate
Fair value
32,649
44,877
1.2939
2,112
-
-
-
-
32,649
44,877
Purchase of unmatured currency
Sales of dollars in euros
Net
2,112
The foreign currency derivatives associated with the property rights are measured at the difference between the
present value of the quoted foreign currency hedge at the forward exchange rate in the contract and the value of the
quoted foreign currency hedge at year end.
164
22.2. The classification of financial assets and liabilities per the categories
established in IAS would be as follows:
Loans, derivatives and
Equity instruments
Debt securities
Total
2012
2011
2012
2011
2012
2011
2012
2011
-
-
-
-
-
-
-
-
Other
-
-
-
-
-
-
-
-
Held-to-maturity
investments
-
-
-
-
-
-
-
-
-
-
-
-
4,479
55,462
4,479
55,462
-
-
-
-
-
-
-
-
Measured at cost
-
-
-
-
-
-
-
-
Hedging derivatives
-
-
-
-
-
-
-
-
TOTAL
-
-
-
-
4,479
55,462
4,479
55,462
Held for trading
Available-for-sale financial
assets
Held for trading
-
-
-
-
-
-
-
-
Other
-
-
-
-
-
-
-
-
Held-to-maturity
investments
-
-
-
-
-
-
-
-
-
-
-
-
187,549
272,519
-
-
-
-
-
-
-
-
Measured at cost
-
-
-
-
-
-
-
-
Hedging derivatives
-
-
-
-
-
-
-
-
TOTAL
-
-
-
187,549
272,519
187,549 272,519
TOTAL
-
-
-
192,028
327,981
192,028 327,981
187,549 272,519
Available-for-sale financial
assets
-
165
These financial assets are classified in the statement of financial position as follows:
Accounts receivable
Other current financial assets
2012
2011
4,479
55,462
185,484
216,729
2,065
55,790
192,028
327,981
“Accounts receivable” includes trade receivables less provisions for uncollectible receivables, which amounted to a gross
201,843 thousand euros in 2012 (2011: 230,797 thousand euros).
The maturity of the principal financial assets is as shown in the following table (in thousands of euros):
2012
Balance
Trade receivables
Under 3 months or past due
6 months
12 months
> 12 months
201,843
197,197
4,266
380
-
7
7
-
-
-
2,065
1,953
-
112
-
203,915
199,157
4,266
492
-
Other debtors
Other financial current assets
2011
Balance
Trade receivables
Maturity
Less than 3 months or due dated
6 months
12 months
> 12 months
230,797
211,389
3,781
2,972
12,655
7
7
-
-
-
55,790
55,790
-
-
-
286,594
267,186
3,781
2,972
12,655
Other debtors
Other financial current assets
Maturity
Bank
borrowings
Bonds and other
marketable debt
securities
Payables, derivatives
and other financial
assets
Total
2012
2011
2012
2011
2012
2011
2012
2011
-
-
-
-
240
283
240
283
-
-
-
-
-
-
-
-
Derivatives
-
-
-
-
-
-
-
-
-
-
-
-
240
283
240
283
Liabilities at fair value through profit
or loss
Held for trading
(Continue)
166
(Continued)
Bonds and other
marketable debt
securities
Bank
borrowings
Payables, derivatives
and other financial
assets
Total
2012
2011
2012
2011
2012
2011
2012
2011
226
61,774
-
-
246,851
363,695
247,077
425,470
Held for trading
-
-
-
-
-
-
-
-
Derivatives
-
-
-
-
417
-
417
-
226
61,774
-
-
247,268
363,695
247,494
425,470
226
61,774
-
-
247,508
363,979
247,734
425,753
Liabilities at fair value through profit
or loss
At December 31, 2012, the Group’s undrawn credit amounted to 344,998 thousand euros (2011: 271,481 thousand
euros). The interest accrued on these loans in 2012 amounted to 828 thousand euros (2011: 2,092 thousand euros).
These financial liabilities are classified in the statement of financial position as follows:
2012
2011
Other non-current liabilities (Note 17)
240
283
Payable to related parties (Note 25.1)
44,427
62,013
Accounts payable for purchases and services
121,330
191,341
Accounts payable for audiovisual rights
68,866
93,777
Other non-trade payables
12,871
78,338
247,734
425,753
There are no significant differences between the fair value and the net carrying amounts of financial assets and liabilities
at December 31, 2012 and 2011.
The maturity of the principal financial instruments is as shown in the following table (in thousands of euros):
2012
Balance
Maturities
3 months
6 months
12 months
30 months
Payable for purchases or rendering of goods or
services
121,330
117,389
3,941
-
-
Payables for purchases of audiovisual rights
68,866
68,246
531
89
-
226
226
-
-
-
2,602
2,191
411
-
-
193,024
188,052
4,883
89
-
Bank borrowings
Payables for acquisition of assets
Total
167
2011
Balance
Maturities
3 months
6 months
12 months
30 months
Payable for purchases or rendering of goods or
services
191,341
190,978
341
22
-
Payables for purchases of audiovisual rights
93,777
93,084
612
81
-
Bank borrowings
61,774
61,774
-
-
-
Payables for acquisition of assets
4,583
4,556
27
-
-
351,475
350,392
980
103
-
Total
The maturities of the borrowings from related parties are shown in detail in Note 25.1.
In accordance with prevailing mercantile legislation, in 2012 the Group must disclose the outstanding balances owed
to suppliers at the reporting date that are older than the deadline provided for in Law 15/2010 of July 7, establishing
measures against late payment in commercial transactions. According to this law, payment in general must be made
within 60 days. There is a transitional period of 85 days from the entry into force of this law until December 31, 2011,
of 75 days in 2012 and 60 from January 1, 2013. At December 31, 2012 the outstanding amounts payable to suppliers
over 75 days was 25,551 thousand euros.
Total payments made within
the maximum legal period
Total payments
for the year
Deferrals exceeding the maximum legal
payment period at year end (*)
Average debt payment
period over 75 days
541,439
569,132
25,551
4
At December 31, 2011, the outstanding amounts payable to suppliers over 85 days was 27,692 thousand euros.
Total payments made within
the maximum legal period
Total payments
for the year
Deferrals exceeding the maximum legal
payment period at year end (*)
Average debt payment
period over 85 days
550,838
604,869
27,692
8
(*) Deferrals exceeding the legal payment period at the end of the year relate mainly to administrative incidents in the
processing of invoices, which are currently being resolved.
22.3. Capital management policy
The Group’s capital management policy is focused on securing a return on investment for shareholders that maximizes
the profitability of their contribution to the company with the least amount of risk possible, contributing with an
attractive risk investment in line with the current economic and business environment. The capital structure of the
company places it in an excellent position as a result of its significant capacity to generate positive cash flows, even in
the current markets condition.
168
22.4. Risk management policy
To efficiently manage the risks to which the Mediaset España Group is exposed, certain control and prevention
mechanisms have been designed and implemented, led by the senior executives of the Group in the Audit Committees.
These mechanisms have been put into place in the corporate governance rules and have been applied throughout
the Group.
The measures adopted by the Group to manage risks can be classified into three main categories and were designed
to cover exposure to credit risk, liquidity risk, and market risk.
22.4.1. Credit risk
Credit risk exists when a potential loss may arise from the Company’s counterparty not meeting its contractual obligations,
i.e., the possibility that financial assets will not be recovered at their carrying amount within the established timeframe.
The Group maximum exposure to credit risk at December 31, 2012 and December 31, 2011 was as follows:
2012
2011
4,479
55,462
-
-
201,762
226,746
809
2,867
Current investments
2,065
55,790
90,692
58,574
299,806
399,439
Non-current receivables
Current receivables from Group companies and associates
For the purposes of credit risk Group management differentiates between financial assets arising from operations and
those arising from investments.
22.4.2. Operating activities
Most of the operating activities of the Group consist of advertising revenues.
Group management has developed a policy whereby credit limit by customer type and authorization levels in order to
approve transactions are established.
The financial assets considered as part of the operating activities are mainly trade receivables for sales and services.
From a business standpoint, the Group considers the advertisers to be the end customer; none of these represents
significant business revenue in terms of the Group’s total turnover. It is standard sector practice to use media agencies
as intermediaries between advertisers and the television channel offering the advertising space.
The Group constantly monitors the age of its debt, and there were no risk situations at year end.
169
22.4.3. Investing activities
The financial assets considered as investment activity are non-current loans (Note 11), non-current financial investments
(Note 11) and current financial investments (Note 13). Those notes provide information on the concentration of this
risk and the related maturities.
A Financial Risk Management Procedures Manual sets forth the general criteria governing investments of the Group’s
treasury surpluses, which, in broad terms, are as follows:
• The investments are made with institutions (whether domestic or foreign) of recognized financial solvency measured
based on their current ratings.
• The investments are placed in conservative products (bank deposits, debt repos, etc,) on which, in general, the
repayment of the invested capital is guaranteed.
• Authorizations for the corresponding investments are limited by the powers granted to the group’s senior executives
and, in any event, are highly restricted (according to the amount, the Board Members, General Management and
Operations Director, and Financial Director).
• Under ordinary circumstances, the longest term is three months and the investments usually offer automatically
available funds.
22.4.4. Liquidity risk
The Company’s financial structure is at a low liquidity risk, given the low level of financial leveraging and the high levels
of operating cash flows generated each year.
Liquidity risk would result from the Group having insufficient funds or access to sufficient funds at an acceptable cost
to meet its payment obligations at all times. The Group’s objective is to maintain sufficient available funds to conduct
its business.
The Group’s policies establish the minimum liquidity levels required at all times:
• Excess liquidity may only be invested in certain types of assets (see previous section on credit risk/investment
activities) the liquidity of which is guaranteed.
• The amount of the Group’s revolving credit lines ensures that the Group is able to meet its operating needs as well
as finance new short-term investment projects. At year end 2012, the opening credit lines total 345 million euros
(2011:total 333 million euros). Given the difficult market situation, these credit lines have been contracted under very
competitive financial conditions, which strengthen the financial sector’s perception that the Group is creditworthy
and sound.
22.4.5. Market risk
Given the nearly complete absence of financial debt, there are no financial risks associated with interest-rate movements.
Nevertheless, and for illustrative purposes, the Group has conducted a test to determine the sensitivity of the Group’s
cash surpluses to certain modifications in interest rates.
The following assumption was used: beginning with our year-end cash surpluses, and taking the 1-month Euribor at
December 31, as the benchmark, we applied a variation of +100 basis points -10 basis points.
170
The sensitivity test shows that the impact of variations on the interest rates applied to the cash surpluses at December
31 would, in any event, not be significant and would exclusively affect the amount of financial income.
Reference
rate (%)
Cash
surpluses
Annual
interest
100 bp
Annual
interest
-10 bp
Annual
interest
31-12-12
0.109%
73,716
80
1.109
818
0.009
7
31-12-11
1.024%
26,449
271
2.024
535
0.924
191
22.4.6. Sensitivity analysis and estimates of the impact of changes in exchange rates on the
separate income statement.
The financial instruments exposed to euros/$ exchange-rate risk, mainly consisting of future currency-purchase
agreements, have undergone a sensitivity test at the statement of financial position date.
The exposed statement of financial position value of these financial instruments was corrected by applying a symmetrical
percentage change, equal to the 1-year implicit volatility of the currency in question published by Reuters (2012: 9.1675%
and 2011: 15.40%), to the year-end exchange rate.
The sensitivity test shows that the variations on the year-end exchange rate would have had an impact on the Separate
income statement account that, in any event, is not significant.
Analysis of accounts payables to suppliers in foreign currency:
12/31/12
12/31/11
$
Exc. Rate
Differences
$
Exc. Rate
Differences
34,050
1.3194
-417
44,877
1.2939
2,112
Sensitivity test
34,050
1.1984
2,153
44,877
1.0947
8,407
34,050
1.4404
-2,544
44,877
1.4931
-2,502
Analysis of derivatives on purchases from suppliers in foreign currencies:
12/31/12
12/31/11
$
E,R,
Differences
$
E,R,
Differences
38,536
1.3194
455
61,664
1.2939
-2,947
Sensitivity analysis
38,536
1.1984
-2,493
61,664
1,0947
-11,619
38,536
1.4404
2,909
61,664
1,4931
3,411
171
23. INCOME AND EXPENSES
23.1. The breakdown of the Group’s ordinary revenue is as follows:
Activity
2012
2011
806,714
947,482
519
1,182
Revenue from the rendering of services
53,662
21,554
Other
11,941
14,684
Total
872,836
984,902
Publiespaña Group advertising revenue
Other advertising revenue
23.2. The breakdown of “Staff costs” in 2012 and 2011 is as follows:
2012
2011
Wages and salaries
89,650
96,970
Accrued share-based payment costs (Note 21)
1,222
1,358
Social security costs
15,875
15,481
Employee benefit costs
2,509
2,795
109,256
116,603
Total
The average number of employees at the Group, by professional category, was as follows:
2012
172
2011
Men
Women
Men
Women
Managers
81
38
79
37
Supervisors
39
45
43
50
Other line personnel
70
99
78
108
Clerical staff
463
472
476
477
Other
21
2
21
2
Employees under contracts for project work or services
14
16
7
12
Total employees
688
672
704
686
The breakdown of personnel by gender and by professional category at December 31, is as follows:
2012
2011
Men
Women
Men
Women
Managers
81
38
80
38
Supervisors
38
45
40
47
Other line personnel
68
98
78
105
Clerical staff
454
469
465
475
Other
21
2
21
2
Employees under contracts for project work or services
10
11
11
16
Total employees
672
663
695
683
23.3 The breakdown of “Change in operating provisions” at the statement of
financial position date, which relates to the allowance for doubtful debts,
is as follows:
Charge for the year
Amounts used
Total
2012
2011
3,491
4,671
(3,278)
(3,870)
213
801
23.4 The breakdown of “Other expenses” in 2012 and 2011 is as follows:
2012
2011
Other expenses
197,903
231,853
Overprovisions
(3,305)
(3,884)
Total
194,598
227,969
Overprovisions mainly include the reversal of the provisions explained in Notes 16 and 18.
23.5 Services provided by the auditors
“Other operating expenses” in the accompany consolidated income statement includes the fees for the audit of the
Group’s financial statements in 2012, conducted by Ernst & Young, S.L., amounting to 239 thousand euros (2011: 254
thousand euros).
173
The fees for other professional services provided exclusively to the parent by the principal auditor amounted to 72
thousand euros at December 31, 2012 corresponding to audit-related services (2011: 99 thousand euros).
23. 6 The breakdown of the Group’s net finance income in 2012 and 2011
is as follows:
2012
2011
4,813
7,653
Less interest expenses
(8,720)
(4,222)
Total
(3,907)
3,431
Interest income
Finance income arises mainly from the interest on loans to related parties and interest earned from banks.
Finance expenses arise from the interest on associates’ loans and the interest on credit facilities.
23.7 Exchange differences
The breakdown of the exchange differences in 2012 and 2011 is as follows:
2012
2011
Exchange gains
(1,459)
4,061
Exchange losses
1,398
(2,505)
Total
(61)
1,556
The foreign currency transactions, which related to the acquisition of audiovisual property rights and distribution rights,
amounted to $73 million in 2012 (2011: $116 million).
In addition, the balance of the trade payables for purchases of audiovisual property rights includes 29,208 thousand
euros denominated in US currency in 2012 (2011: 49,137 thousand euros).
Trade receivables for sales and services includes 68 thousand euros denominated in US currency in 2012 (2011: 80
thousand euros).
174
23.8 Operating leases
The breakdown of “Operating leases” in 2012 and 2011 is as follows:
Minimum lease payments under operating
leases recognized in profit or loss
2012
2011
977
1,492
977
1,492
The future operating lease obligations assumed by the Group fall due at one year and are for amounts similar to those
for 2012.
24. EARNINGS PER SHARE
The calculation of the weighted average number of shares outstanding and diluted at December 31, 2012 and 2011 is
as follows:
12/31/12
12/31/11
Total shares issued
406,861,426
406,861,426
Less: treasury shares
(6,419,259)
(6,419,259)
Total shares outstanding
400,442,167
400,442,167
11,171
1,171,096
400,453,344
401,613,263
Dilutive effect of share options and free delivery of shares
Total number of shares for calculating diluted earnings per share
24.1 Basic earnings per share
Basic earnings per share are calculated by dividing the net profit or loss attributable to the Group by the weighted
average number of shares outstanding during the year, excluding the average number of treasury shares held in the year.
Accordingly:
Net profit for the year (thousands of euros)
Number of shares outstanding
Basic earnings per share (euros)
2012
2011
Change
50,143
110,519
(60,376)
400,442,167
400,442,167
-
0.13
0.28
(0.15)
175
24.2. Diluted earnings per share
Diluted earnings per share are calculated by dividing the net profit or loss for the year attributable to ordinary shareholders
adjusted for the effect attributable to the dilutive potential ordinary shares by the weighted average number of ordinary
shares outstanding in the year, adjusted by the weighted average number of ordinary shares that would be issued on
the conversion of all the dilutive potential ordinary shares into ordinary shares of the Company. For these purposes, the
conversion is deemed to take place at the beginning of the year or on the date of issue of the potential ordinary shares
if such shares had been issued during the reporting period.
Accordingly:
2012
2011
Change
50,143
110,519
(60,376)
400,453,344
401,613,263
(1,159,919)
0.13
0.28
(0.15)
Net profit for the year (thousands of euros)
Number of shares for calculating diluted earnings per share
Diluted earnings per share (euros)
25. RELATED PARTY TRANSACTIONS
25.1. Transactions with associates and shareholders
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note. Transactions between the Group and its associates are disclosed below. Transactions
between the Company and its subsidiaries and associates are disclosed in the Company’s individual financial statements.
The Group’s accounts payable to and receivable from related parties are as follows:
12/31/2012
Receivable
12/31/2011
Payables
Receivable
Payables
Aprok Imagen S.L.
-
-
-
-
Big Bang
-
1,774
-
2,461
-
4,888
-
4,605
-
5,940
-
7,308
Digital +
157
7,191
2,268
7,768
27
23
-
69
Mediaset Group
303
20,755
125
28,546
Endemol Group
-
1,541
136
4,464
60 Db Entertainment
(Continue)
176
(Continued)
12/31/2012
Receivable
Pegaso Televisión Group
12/31/2011
Payables
Receivable
Payables
-
-
-
-
Prisa Group
322
2,246
338
6,861
Total
809
44,427
2,867
62,013
The breakdown, by maturity, of the balances payable to all the related parties is as follows:
2012
Balance
Maturities
3 months
6 months
12 months
Investee
184
184
-
-
Mediaset Group
303
238
65
-
Other companies
322
322
-
-
Total
809
744
65
-
2011
Balance
Maturities
3 months
6 months
12 months
2,269
2,269
-
-
Mediaset Group
125
125
-
-
Other companies
473
473
-
-
2,867
2,867
-
-
Investee
Total
Current payables to related parties by maturity are as follows:
2012
Balance
Maturities
3 months
6 months
12 months
Investee
19,886
19,018
868
-
Mediaset Group
20,754
1,914
18,840
-
Other companies
3,787
2,964
823
-
Total
44,427
23,896
20,531
-
2011
Balance
Maturities
3 months
6 months
12 months
Investee
22,143
22,143
-
-
Mediaset Group
28,546
2,679
25,867
-
Other companies
11,324
11,324
-
-
Total
62,013
36,146
25,867
-
177
During the year, the Group companies performed the following transactions with related parties:
Sales of goods
Purchase of goods
Other sales
Purchase of rights
2012
2011
2012
2011
2012
2011
2012
2011
-
-
164
-
-
-
-
-
22
-
19
-
-
-
-
-
Big Bang
-
1
5,819
9,183
-
-
-
6,755
Digital +
605
5,250
17,359
22,487
-
-
363
59
-
203
29,456
34,741
-
-
-
-
Producc, Mandarina, S.L.
1
14
15,057
23,024
-
-
-
6,468
Mediaset Group
87
436
380
1,317
3,178
3,044
18
-
Prisa Group
398
908
11,628
15,902
-
-
979
8,238
Endemol Group
(6)
98
26,600
31,602
-
-
964
600
Pegaso Group
77
-
-
-
(95)
727
-
-
1,184
6,910
106,482
138,256
3,083
3,771
2,324
22,120
60 Db Entertainment
Total
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No
material provisions have been made for doubtful debts in relation to the amounts owed by related parties.
The breakdown of the financing terms between the Group and associates and shareholders as regards the established
limits, balances drawn down, and maturities is as follows:
Credit facilities
Current limit
Drawn down
(Dr) Cr
Non- current
limit
Drawn down
(Dr) Cr
Maturity
Exercise 2012
Associates or shareholders
75,000
18,760
-
-
2013
75,000
25,823
-
-
2012
Exercise 2011
Associates or shareholders
The interest rates applicable to these credit facilities, excluding those arranged as participating loans, were EURIBOR plus
a market spread for 2012 and 2011.
Financing provided to associates consists primarily of credit facilities or commercial loans.
25.2 Remuneration of directors
The Company’s Board members earned total remuneration of 4,843 thousand euros and 4,731 thousand euros in 2012
and 2011, respectively, in the form of salaries and other compensation in kind.
178
The Company has not granted the directors any advances or loans and it does not have any pension or other obligations
to them.
In addition, in 2011 the Company’s Board of Directors granted directors a total of 198,625 share options valued at 41
thousand euros.
At December 31, 2012, the most significant information on the share options granted by the Company to its directors
is summarized as follows:
Number of share
options
Exercise price
(euros)
Beginning of
exercise period
End of exercise
period
Total Board of Directors
Options granted in 2008
216,625
7.13
07/30/11
07/29/13
108,312
5.21
07/29/12
07/28/14
397,250
7.00
07/28/13
07/27/15
198,625
5.83
07/27/14
07/26/16
Other disclosures on the Board of Directors
Information on equity investments held by directors in companies with similar activities and functions performed by
these on their own behalf or on behalf of third parties.
In compliance with Article 229,2 of the Spanish Corporation Law, and regarding the parent company, we hereby
state that Giuseppe Tringali, Paolo Vaisle, Giuliano Adreani, José Ramón Alvarez Rendueles, Pier Silvio Berlusconi, Fedele
Confalonieri, Ángel Durández Adeva, Marco Giordani, Manuel Polanco Moreno, Alfredo Messina, Borja de Prado Eulate,
Massimo Musolini, Helena Revoredo Delvecchio, and Juan Luis Cebrián Echarri, members of the Board of Directors
of Mediaset España Comunicación, S.A. as of December 31, 2012, nor any related party to the above board members
according to article 231 of the Capital Companies Law, have not owned and do not own shareholdings in the share
capital of companies that have a corporate purpose identical, similar or complementary to the activity that constitutes
Mediaset España Comunicación, S.A.’s corporate purpose.
Subsidiary
Vocento, S.A.
Diario ABC, S.L.
Activity
Ownership
Duties
Communication
0.00878 %
-
0.0002 %
-
It is hereby noted for Alejandro Echevarría Busquet, Giuseppe Tringali, Paolo Vasile, Giuliano Adreani, José Ramón Álvarez
Rendueles, Pier Silvio Berlusconi, Fedele Confalonieri, Ángel Durández Adeva, Marco Giordani, Alfredo Messina, Borja
de Prado Eulate, Massimo Musolino, Helena Revoredo Delvecchio, and Manuel Polanco Moreno, as members of the
Board of Directors of Mediaset España Comunicación, S.A. at December 31, 2012, that their related parties do not hold
positions in companies whose activities are identical, similar or complementary to those of the Company’s in accordance
with article 231 of the Capital Companies Law:
179
Juan Luis Cebrián Echarri
Person related to director
Daughter
Company
Duties
Corporación RTVE, Radio Televisión Española
Head of Cinema
Plural Entertainment España, S.L.
Head of Fiction Series
Head of Research
Son
Sister
In accordance with the aforementioned text, the following is a schedule of the activities carried out by the Company’s
Board of Directors at December 31, 2012, either on their own or on others’ behalf, in company’s engaging in business
activities that are identical, similar, or complementary to the activity that constitutes the corporate purpose of
Mediaset España Comunicación, S.A.:
Activity
Arrangement under
performed
Company through
carried out
Position held or
function discharged
Diario El Correo, S.A.
Self-employed
-
Board member
Editorial Cantabria, S.A.
Self-employed
-
Board member
Sociedad Vascongada de
Publicaciones, S.A.
Self-employed
-
Board member
Advertising agency
Self-employed
-
Chairman
Name
(*) Mr. Alejandro Echevarria was the President of Publiespaña, S.A.U. until November 21, 2012.
Mr. Paolo Vasile
Activity
Arrangement under
performed
Company through
carried out
Position held or
function discharged
Advertising agency
Company employee
Mediaset España
Comunicación S.A.
Board member
Conecta 5 Telecinco ,
S.A.U.
Exploitation of audiovisual
content on the Internet
Company employee
Mediaset España
Comunicación S.A.
Chairman
Grupo Editorial Tele 5,
S.A.U.
Exploitation of rights;
production, and distribution
of publications
Company employee
Mediaset España
Comunicación S.A.
Chairman
Telecinco Cinema,
S.A.U.
services and intermediation
in the markets for
audiovisual rights
Company employee
Mediaset España
Comunicación S.A.
Chairman
Name
(*) Mr. Paolo Vasile was the CEO of Publiespaña, S.A.U. until November 21, 2012.
180
Mr. Giuliano Adreani
Activity
Arrangement under
performed
Company through
carried out
Position held or
function discharged
S.p.A.
Television operator
Self-employed
-
Board member
Advertising agency
Self-employed
-
Board member
Name
(*) Mr. Giuliano Adreani was the CEO of Publiespaña, S.A.U. until November 21, 2012.
Mr. Pier Silvio Berlusconi
Name
Activity
Arrangement under
performed
Company through
which the activity
is carried out
Position held or
function discharged
S.p.A.
Television operator
Self-employed
-
Chairman/Managing
Director
Advertising agency
Self-employed
-
Board member
(*) Mr. Pier Silvio Berlusconi was the CEO of Publiespaña, S.A.U. until November 21, 2012.
Mr. Fedele Confalonieri
Name
Activity
Arrangement under
performed
Company through
carried out
Position held or
function discharged
Advertising agency
Self-employed
-
Board member
(*) Mr. Fedele Confalonieri was the CEO of Publiespaña, S.A.U. until November 21, 2012.
Mr. Giuseppe Tringali
Activity
Arrangement under
performed
Company through
which the activity
is carried out
Position held or
function discharged
Publitalia 80 S.p.A.
space
Self-employed
-
Board member
Publieurope Limited
space
Self-employed
-
Board member
Advertising sales
Company employee
Joint and several
director
Advertising agency
Company employee
Chairman/Managing
Director
Name
181
Mr. Marco Giordani
Activity
Arrangement under
performed
Company through
which the activity
is carried out
Position held or
function discharged
Television operator
Self-employed
-
Managing Director
Activity
Arrangement under
performed
Company through
carried out
Position held or
function discharged
Television holding
company
-
-
Vice Chairman
Grupo Media Capital,
SGPS,S.A.
Television holding
company
-
-
Board member
Activity
Arrangement under
performed
Company through
which the activity
is carried out
Position held or
function discharged
Advertising agency
Company employee
Mediaset España
Comunicación, S.A.
Board member
DTS Distribuidora de
Televisión Digital, S.A.
Indirect management
of public pay TV
service
Company employee
Mediaset España
Comunicación, S.A.
Vice Chairman
Conecta 5 Telecinco , S.A.U.
Exploitation of
the Internet
Company employee
Mediaset España
Comunicación, S.A.
Board member
Exploitation of
rights; production,
and distribution of
publications
Company employee
Mediaset España
Comunicación, S.A.
Managing Director
services and
rights
Company employee
Mediaset España
Comunicación, S.A.
Managing Director
Company employee
Mediaset España
Comunicación, S.A.
Chairman/Managing
Director
Gaming and betting
activities
Company employee
Mediaset España
Comunicación, S.A.
Chairman/Managing
Director
Name
S.p.A.
Mr. Manuel Polanco Moreno
Name
Mr. Massimo Musolino
Name
(*) Mr. Massimo Musolino was the CEO of Publiespaña, S.A.U. until November 21, 2012.
182
Mr. Juan Luis Cebrián Echarri
Activity
Arrangement under
performed
Company through
carried out
Position held or
function discharged
(formerly Sogecable,
S.A.U.)
Television holding
company
-
-
Vice Chairman
Grupo Media Capital,
SGPS,S.A. (*)
Television holding
company
-
-
Board member
-
Managing Director
and Chairman
of Executive
Committee
Name
Promotora de
Informaciones, S.A.
Information holding
company
-
(*) At December 31, 2012, Mr. Juan Luis Cebrián no longer held any positions, although he was a Director during a portion of 2012.
In accordance with the above, we hereby state that José Ramón Álvarez Rendueles, Angel Durández Adeva, Alfredo
Messina, Borja de Prado Eulate and Helena Revoredo Delvecchio have not and do not carry out activities, either on
their own or on others’ behalf, in companies engaging in business activities that are identical, similar, or complementary
to the activity that constitutes Mediaset España Comunicación, S.A.’s corporate purpose.
25.3. Compensation to key management personnel
Compensation paid to General Directors of the Company and individuals who discharge similar functions, excluding
those who are also members of the Board of Directors, is summarized as follows:
No of persons
Total compensation (Thousands of euros)
2012
2011
2012
2011
22
23
7,970
6,820
A list of the key management personnel is included in the accompanying management report.
The remuneration consists of a fixed amount and a variable amount.The variable remuneration is determined by applying
a percentage to the fixed remuneration in each case, based on the extent to which certain annual targets are met.
In addition, there is an item of remuneration that is earned over more than one year, the targets of which are not certain
to be met; however, at December 31, 2012 and 2011, the Company recognized a provision that represents its best
estimate at that date based on a conservative forecast.
In 2012, management was not assigned share options. A total of 474,600 options were granted to senior executives in
2011 for 141 thousand euros recognized under “Employee benefits expense.”
26. SIGNIFICANT EVENTS AFTER THE REPORTING DATE
At December 31, 2012, test broadcasting had begun by the new channel, “9,” which is part of the Cuatro multiplex. After
the year end, this channel was broadcasting normally.
183
MANAGEMENT REPORT FOR THE YEAR ENDED
AT 31 DECEMBER 2012
THOUSANDS OF EUROS
THE SPANISH ECONOMY IN 2012
Data on the Spanish economy available at the date of authorization for issue of these financial statements indicates
that, without a doubt, last year was one of worst since the global economic crisis began five years ago. The prolonged
recession has hit our production model hard since 2008, which is indicative of the daunting economic environment in
which we competed economically during 2012.
Viewed from a global perspective, from the start of 2012 it became clear that the hoped-for economic recovery was
still not imminent; in fact, it soon became clear that the Chinese economy was showing signs of slowing down when
compared to its previous high growth rates. Other developed economies were still far from getting back on the road to
long-lasting growth for two main reasons: the US did not meet growth rates projected during the final quarter of 2011,
while the dire situation of the European economy was pulled further down by peripheral countries which entered into
a recession the first part of 2012.
Since then, all these economies (excepting China, whose growth seems to have received a push in recent months) have
worsened, to the extent that the German and US GDPs, traditionally the motor of the global economy, entered into
the red towards the end of the year. This panorama excludes Latin America: although in 2012 certain countries did not
grow as much as projected (no doubt due to the fact their economies are warming up), the forecasted overall GDP is
under 3%, which, while not exactly spectacular, can be considered sound.
Data for Spain available at the at the date of authorization for issue of these financial statements indicate that the
GDP fell 1.8% overall during the year: it is quite significant that the fourth quarter was the year’s worst (-0.7%), which
seems to corroborate that the end is not in sight, and that some time will have to pass until the recession ends and
the economy begins to reflect growth, however slight. Evidently, the contraction of the GDP during the year has led to
an intense destruction of jobs, causing unemployment to reach 26.1% of the current active population at the date of
preparation of these financial statements; thus, approximately 5 million people are unemployed.
Austerity measures (which were nearly inevitable) instrumented by the government were a leading cause of the
contraction of the Spanish economy during 2012; they have had a significant impact on internal demand as well as
private consumption. These measures include: a rise in Personal Income Tax at the beginning of the year, increase VAT
as of September 1, as well as other austerity initiatives having an impact on the expenditures and investments made by
public administrations.
Economic forecasts for 2013 indicate that the economy will remain stagnant, as certain key public and private sector
employment adjustments will still be pending, which will have the inevitable effect on internal demand that has been
greatly affected by shrinking public budgets. However, as of the third quarter of the year, a weak growth might be noted
once all the current economic adjustments underway have begun to take effect.
184
The huge efforts and sacrifices made regarding economic policies as well as the restructuring of important sectors,
especially the financial, have led to improved productivity as well as a reversal of Spain’s trade deficit; thus, at the end
of 2012, it reached a balance and headed towards a surplus. Net capital flow during the first part of 2012 was fluid,
to then reverse during the second half, demonstrating the increasing confidence of foreign investors in the Spanish
economy.This has pushed risk premiums for Spanish public debt downwards, with a public and private degearing process
which is crucial, and without which it would not be possible to get back on the road to recovery. Against this backdrop,
encouraging news has begun to emerge regarding financial markets as well as Spain’s competitive edge, but has yet
to influence the economy’s flow of credit in reasonable quantities and conditions making it possible to guarantee that
economic agents will able to obtain necessary financing when conditions make it possible to do so.
THE TELEVISION INDUSTRY IN 2012: LEADING
DURING TROUBLED TIMES
As explained in the Management Report corresponding to the interim consolidated financial statements for for the
first half of 2012, last year, TV advertising was greatly influenced by the second phase of the recession, which began at
the beginning of 2011, effectively dashing any hopes of economic recovery which had been in the air due to the brief
upturn during 2010.
As mentioned previously, the economic policies implemented during the year have had a direct effect on the disposable
income of families: the severe destruction of employment and its psychological impact on consumers, including those
with job security, has forced private consumption below the GDP, as well as causing very harsh cuts in budgets devoted
to television advertising, leading to a very pronounced drop in income from TV ads which has affected the entire sector.
Data available at the date of preparation of these financial statements (pending confirmation by Kantar Media) estimates
that the TV advertising market plummeted 18.5% in 2012, confirming it as the second worst year of the crisis after 2009.
The overall TV sector has lost over 50% of its invoicing since its record during 2007, mainly as a result of the steep drop
in sales prices over recent years.
In 2012, Mediaset España has employed a strategy aimed at bolstering its position as sector leader (45.3% at year end),
ensuring balanced operation of channels according to market conditions, and optimizing income from sporting events
(most notably the UEFA European Football Championship, won by Spain, as well as the Moto GP Championship, which
the Group recently acquired the rights to); this has enabled it to increase market share during the year.
Turning to audience figures, after the integration of Cuatro in 2011 and the launch of the new “Divinity” channel the
same year, the Group moved forward with its diversification and complementation strategies by launching “Energy” in
2012, which mainly addresses the male population via the sporting events to which the Group bought the rights, as
well as content specifically acquired for the channel. Thus, along with its more consolidated channels, such as Factoría
de Ficción, La Siete, and Boing, and its driving force, Telecinco, the Company has managed to consolidate the overall
audience of its family of channels as well as each of them individually. It has avoided cannibalization within an environment
in which TV consumption has reached its maximum limits, despite a pervading economic crisis, and achieved a greater
diversification and audience loyalty through segmentation.
To illustrate, data show Mediaset España was the overall leader in 2012, with a 28.1% share, 9.2 points ahead of RTVE
and 2.3 ahead of Antena 3 (once the merger with La Sexta was completed). The Telecinco channel reached a 13.9%
share in the year, 1.7 points ahead of RTVE’s La Primera, while Cuatro’s 6% share situated it 1.1 points ahead of La Sexta.
Finally, as regards the newer-generation digital channels, those comprising the Mediaset España Group registered an 8.3%
audience share, which is 9 points higher than its main competitor’s group of channels, which attests to its unequivocal
position at the head of the pack.
185
A comparison of the Company’s results in 2012 with those of 2011 indicate that:
• Total operating income decreased from 1,009,330 thousand euros in 2011 to 886,727 thousand euros in 2012,
mainly as a result of decreased ad income.
• Operating expenses decreased from 844,801 thousand euros to 837,924 thousand euros, which is slight when
viewed in overall terms, mainly the result of a reduction in general expenses, the most noteworthy of which are
directly linked to the Company’s legal commitments.These expenses include those related to sporting events (namely
the 2012 Euro Cup Football Championship), which were compensated by savings from other television programs, as
well as the magnificent audience share obtained during the year, as mentioned previously.
• Profit from operations amounted to 48,803 thousand euros, down from 164,529 thousand euros in 2011, leaving an
operating margin (profit from operations/operating income) of 5.5% in 2012 compared to 16.3% in 2011. Given the
high operational gearing inherent in the TV business, the decrease relates mainly to the downturn in the advertising
market in the year.
• Lastly, profit for 2012 attributable to the parent amounted to 50,143 thousand euros, compared to 110,519 thousand
euros in 2011.
DIVIDENDS
In 2012, the Group paid a total of 55,260 thousand euros of dividends.
INVESTMENT IN RIGHTS AND FILM PRODUCTION
The Mediaset España Group maintained its policy of investing in audiovisual broadcasting rights, carefully selecting the
type of rights and content in order to maintain audience figures in the future and provide the most fertile ground for
the advertising business. The Group placed special emphasis once again on investment in Spanish Series.
Worth highlighting were the activities undertaken by Telecinco Cinema, S.A., a wholly owned subsidiary of Mediaset
España Comunicación, S.A. charged with film production under the legal requirement of TV concessionaires to earmark
3% of operating revenue for Spanish and European film production.
As investment in film production arises from a legal obligation and not a decision made freely by the network, the Group
has opted for quality and ambitious projects based on global strategic criteria guiding its activity in this field. Where
possible, it opts for productions of a certain size and scope that are apt for international showing bearing in mind market
conditions and the Group’s financing capacity, as this obligation outweighs the revenues generated, regardless of the
trend and without any consideration to costs incurred or margins commanded.
In short, the aim is to combine financial wherewithal, talent, profitability, and opportunities efficiently for our brightest
and most promising professionals in order to maximize the return on investment -in light of global conditions, maximum
importance is attached to this- considering that the activity is not voluntary, and to produce films that bring together
quality and commercial appeal under the network’s logo.
Without a doubt, 2012 was an extraordinary year for our film co-production activity: “The Impossible” broke the 40
million euro mark in Spain, and now ranks as the top-grossing Spanish film in history, and second in absolute terms right
behind “Avatar,” surpassing movies such as “Titanic,” “The Lord of the Rings, or “Pirates of the Caribbean.”
In international terms, the film has been sold all over the world and results until now have been very encouraging. The
film as been present in international festivals, including the Toronto International Film Festival and the San Sebastian Film
186
Festival, acclaimed by critics and public alike; it was nominated for 14 Goya awards, winning in five of these categories
(including Best Director and Best Production Supervision), as well as for Oscar and Golden Globe awards in the
category of Best Performance by an Actress in a Leading Role.
In 2012, “Tadeo Jones” was co-produced with an all-Spanish team; it is the most-watched Spanish animated film of all
time as well as the biggest box office smash in this category, raking in 18 million euros in Spain, which is over Hollywood
productions such as “Ice Age 4,” “Brave,” or “Madagascar 3.” It was nominated for four Goyas, and won three, including
Best Animated Film, Best Adapted Screenplay, and Best New Director. It is the Group’s first animated movie, and is
paving the way for new business opportunities in this regard.
Thanks to the above, the Group leads the national film production market by far, with a 56% share, which is even more
significant when taking into consideration the challenging situation the sector faces due to the economic recession, as
well as the impact of the VAT increase effected last September.
INTERNET
The Group considers Internet a strategically important current and future activity.
In 2012, the Group broke even in this segment.
According to OJD data, Telecinco was the television website with the highest traffic during the year. The Mediaset.es
website also led communication groups operating in Spain.
The Group’s MiTele website encompasses all its audiovisual content. It bolstered its contents while becoming more
available through its specific areas devoted to film (movies in their original version, i.e., not dubbed) for children’s
programming.
TREASURY SHARES
At December 31, 2012, the Group held 6,419,259 of its own shares, representing 1.58% of share capital post capital
increases.
MEDIASET ESPAÑA SHARE PRICE PERFORMANCE
Throughout 2012 the IBEX 35 Spanish blue chip index was in a slump, losing 4.7% overall during the year; however,
until May 30 accumulated losses reached 30%, to strongly bounce back the remainder of the year thanks to the positive
impact exerted on investor trust by the European Central Bank’s defense of the European Monetary Union.
Spain’s blue chip index performance during the year clearly reflected investors’ negative perception of the Spanish
economy, especially when compared to other areas, as all the key international markets (Dow Jones, DAX, CAC40,
FTSE10, etc.) rose during the year.
Mediaset España’s share price behaved positively in 2012, growing 15.4% overall, making it the index’s eighth best
performer during the year. At December 31, 2012, its quoted price rose to 5.09 euros.
Mediaset España’s market capitalization was 2,071 million euros, situating it in first place, well ahead of its nearest
competitors: it more than doubles the all the other Spanish companies in the sector as a group.
187
The volume of shares traded during the year rose to 477.4 million, equivalent to 2004.1 million euros, which is substantially
lower than during 2011. This drop can basically be blamed on the prohibition of short-selling shares on the Spanish
market imposed by the CNMV at the end of July until the end of the year.
Most notably, Mediaset España’s share price reached a yearly high of 5.69 euros on December 19, with its minimum
registered on May 9 (3.30 euros).
CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY
Good practice in corporate governance means establishing rules, principles, and incentives at companies that help
safeguard the interests of the company and its shareholders, and guarantee greater transparency in management.
The main measures adopted by the Mediaset España Group in the field of corporate governance since 2006 are as
follows:
Amendments of the rules governing the organization and operation of the main management bodies. Specifically,
amendments have been made to 9 articles of the Company’s bylaws, 4 articles in its The Company’s Board members
and 18 articles in the Regulations of the Board of Directors. In addition, the Company drafted an Internal Code of
Conduct for Mediaset España Comunicación, S.A. and its Group of Companies governing their activities on the stock
markets.
Revision of the composition of the Board of Directors and the board committees to increase the percentage of
independent directors, meanwhile, the Audit and Compliance Committee and the Appointments and Remuneration
Committee are chaired by independent directors.
Increase in the number of women directors, reflecting the network’s commitment to gender equality.
Continued detailed information on remuneration paid to directors in the Company’s annual financial statements, as well
as in the Annual Corporate Governance Report and the Report on the Directors’ Remuneration Policy.
Verification of the Corporate Governance Report and the Corporate Responsibility Report by an independent auditor
(PricewaterhouseCoopers).
The Mediaset España Group’s efforts in 2009 were acknowledged by Observatorio de Responsabilidad Social
Corporativa, a Spanish corporate social responsibility organization, which rated it top among IBEX-35 companies in a
study of corporate governance compliance. The network was rated highly for its efforts in transparency and the degree
of compliance with the Unified Code Recommendations.
The Mediaset Group is aware of the social impact of its actions. This awareness is all the more important at Mediaset
as a mass media, prompting the network to spearhead a variety of initiatives, such as the “12 meses, 12 causas” (12
months, 12 causes) project to make the network’s viewers more aware of a series of issues. Under the auspices of the
above initiative, Mediaset created its “You are perfect for someone else” campaign in collaboration with the a National
Transplant Organization, aimed at encouraging organ donation in Spain. Thanks to the Company’s widespread presence
in Spanish homes, as well as the communication potential of its star presenters, over 170,000 donor cards were
requested as a result of the campaign. This very well accepted and effective solidarity campaign led to Mediaset España
Comunicación, S.A. winning seven awards, several of which are considered Spain’s most prestigious.
Internally, Mediaset also remains firmly committed to the training and career development of its employees.
188
HEDGING
The Group uses financial instruments to hedge the impact of foreign exchange differences in connection with transactions
(primarily the acquisition of external production rights) denominated in foreign currency. These hedges are designed
to offset the impact on the income statement of exchange-rate fluctuations in outstanding amounts payable on these
transactions. Specifically, the Group buys foreign currency forward for the amounts payable so as to match the forecast
payment dates.
RISK CONTROL
As part of its general oversight function, the Board of Directors is in charge of identifying the Mediaset Group’s main
risks, as well as implementing and monitoring the internal information and control, and internal reporting systems.
In addition, among the basic responsibilities of the Audit and Compliance Committee are to know and verify the
appropriateness of the financial reporting process and internal control systems.
To support and back this Committee, a Corporate Risk Management System is applied consistently at all Group
companies. This system is reviewed and updated periodically.
Corporate risk management at Mediaset is based on the COSO II (Committee of Sponsoring Organizations of the
Treadway Comission) integrated framework for enterprise risk management.
Mediaset España Comunicación monitors its risks permanently, assessing the relevance and potential impact on Group
companies, the probability that this risk will occur and the degree of control over the risk.
RESEARCH AND DEVELOPMENT
Mediaset’s biggest investments go to the current and future content broadcast by the Group. It does not have a specific
R&D department, although innovation is still a crucial area of future development.
EVENTS AFTER THE REPORTING PERIOD
The main events occurring between the end of the reporting period and the date of authorization for issue of the
financial statements are those discussed in the related note to the financial statements.
CAPITAL STRUCTURE
The Company’s share capital before the capital increases carried out to acquire Cuatro and 22% of Digital+ amounted
to 123,320,928.00 euros, made up of 246,641,856 shares of the same class represented by book entries and with a par
value of 0.50 euros each. As a result of the capital increases, the number of shares increased to 406,861,426 of 0.50
euros par value each, taking the total to 203,430,713 euros. All the shares are of the same class and represented by
book entries.
The Company’s shares are listed on the Madrid, Barcelona, Bilbao, and Valencia stock exchanges. The ISIN code is
ES0152503035.
Mediaset España Comunicación, SA has been a member of the IBEX 35 since January 3, 2005.
189
BUSINESS OUTLOOK
The Group’s business is dependent on national private consumption, and as such, in 2013 will not be able to separate
itself from the overall macroeconomic environment and related indicators. As discussed in this Management Report,
despite the fact the there a reasonable expectations that towards the end of the year Spain will begin to experiment the
first signs of economic recovery after nearly five years of a deep recession without precedent in recent decades, this is
not to say that in 2013 (particularly during the first six months) basic economic indicators such as unemployment and
consumption will not continue to be big concerns.
As regards free-to-air television, a sector in which the Group was pioneer and is still consolidating its presence, it should
continue forging a strong presence based on a more rational use and transparency, making it more easily adaptable to
the demands of the economy as well as the situations presenting themselves when expected recovery arrives.
Available data on TV consumption and its share of the total advertising income pie indicate that the sector has undergone
a crisis brought on by the economic recession; however, structural factors remain solid.
Within this context of the concentration and consolidation of operators, the Company’s business strategy will be
focused on how to maintain its strong lead, in both terms of audience as well as advertising market, while being fullyadapted to the environment which affects cash generation as well as its cost structure, in order to protect its financial
margins as well as foster growth once the economy makes it possible to do so.
As far as its programming lineup is concerned, the Company will continue to support genres which have traditionally been
popular, thereby making it the indisputable leader of the market; it will also continue with its strategy of diversification,
focusing on the different audience to which the family of channels is tailored. Also, it will endeavor to better position
each channel in advertising terms, while remaining cognizant of sporting events which, in an increasingly-fragmented
market, are very popular and attract large audiences. All this will take place with close supervision of acquisition costs
and attention to advertising opportunities, which are key to obtaining economic benefits, as well as a relevant goal within
our programming strategy and commercial operations.
A final first-line goal is to maintain a solid financial and equity position (while remaining virtually debt-free), thereby
making it possible to objectively and independently consider operational and business opportunities as they arise within
the context of the current ever-changing environment, while bolstering the Company’s competitive edge in the face of
the high financial leverage which affects the majority of the companies competing in its sector.
RESTRICTIONS ON VOTING RIGHTS
There are no legal or bylaw stipulated restrictions on exercising voting rights. Each share carries one vote.
SHAREHOLDER AGREEMENTS
Shareholder agreements in force are those included in the “Significant event” notice filed by the Company with the
National Securities Exchange Commission (CNMV) on February 8, 2011, reproduced below:
Through this communication we inform of the clauses restricting the transfer of shares or relating to the exercise of
the right to vote at the General Meetings that are included in the Integration Agreement and the Option Agreement
entered into between Mediaset España Comunicación, S.A., Prisa Televisión, S.A.U. (“Prisa Televisión”) and Promotora
de Informaciones, S.A. (“Prisa”), as listed and described in Mediaset España Comunicación, S.A. Prospectus approved
and registered by the National Securities Market dated November 18, 2010 and January 25, 2011 (the “Prospectus”):
190
1. Integration Contract
Subject to Clause 3.4 of the Integration Agreement and as described in the Prospectus dated November 18, 2010, Prisa
TV (formerly Sogecable) is entitled to appoint two of the eight members of the Board of Directors of Mediaset España
Comunicación, S.A. and will be entitled to appoint one director for as long as it holds a minimum of 5% of Mediaset
España Comunicación’s share capital. In addition, whilst Prisa TV holds 10% of Mediaset España Comunicación’s share
capital, it will be entitled to appoint, among the directors it has appointed, a non-executive Vice-president, a member of
the Executive Committee, a member of the Audit and Control Committee, and a member of the Remuneration and
Nomination Committee. Mediaset S.p.A. has expressed its agreement with the contents of the indicated clause.
The following is the transcription of the clause 3.4 of the Integration Agreement:
(3.4) Mediaset España Comunicación, S.A. Government
Following the integration, when it becomes effective, Prisa Televisión, S.A. will have a proportional representation
on the board of Mediaset España Comunicación, S.A. and in particular, the following rights in relation to corporate
governance of Mediaset España Comunicación, S.A.:
(i)
Prisa Televisión, S.A. has the right to appoint two of the 15 members that make up the Board of Directors
of Mediaset España Comunicación, S.A. (and without prejudice to said right of Prisa Televisión, S.A., the
directors appointed by Mediaset España Comunicación, S.A. will be reduced to eight);
(ii)
the rules of proportional representation will be taken into account for purposes of giving rights to appoint
directors of Prisa Televisión, S.A. if a change occurs in (a) the total number of board members specified in
paragraph (i) above, or (b) the participation of Prisa Televisión, S.A. in Mediaset España Comunicación, S.A.;
all without prejudice to the right granted to Prisa Televisión, S.A. under the following paragraph;
(iii)
the extent to which Prisa Televisión, S.A. maintains a share of at least 5% of the share capital of Mediaset
España Comunicación, S.A., Prisa Televisión, S.A. has the right to retain one board member, and
(iv)
while Prisa Televisión, S.A. has an ownership interest in more than 10% of the share capital of Mediaset
España Comunicación, S.A., Prisa Televisión, S.A. has the right to appoint, among its representatives on the
board of Mediaset España Comunicación, S.A.,
• a non-executive vice president;
• a member of the executive committee;
• a member of the audit and control, and
• a member of the remuneration and nomination committee.”
2. Option Agreement
Pursuant to clause 4.4 of the Option Agreement and as described in the Prospectus, Prisa TV has committed to the
Company not to transfer the New Mediaset España Comunicación’s shares subscribed in exchange of the contribution
of Sociedad General de Televisión Cuatro, SAU (representing 17.336% of the Mediaset España Comunicación’s share
capital after the adjustment contractually agreed in the deal), shares that, for this purpose, have been pledged in favour
of Mediaset España Comunicación, S.A.
This commitment will remain in effect until March 28, 2012 or, if the option is exercised as per the Option Agreement,
as set out in paragraph 5.2.3. (F.6) of the Registration Document of the Pre-Prospectus approved and registered as of
November 18, 2010 (the “Preprospectus”), until it gets: (i) the unconditional authorization or subject to no substantial
191
conditions of the antitrust authorities; and if necessary ruled by an independent expert or experts designated for that
purpose by the parties, or (ii) an agreement between the parties on the conditions imposed by competition authorities.
Therefore, until Mediaset España Comunicación, S.A. will not make effective the additional corporate rights granted by
the sale agreement and shareholders agreement in Digital+ as described in paragraph 5.2.3 of the Pre-prospectus (the
“Additional Corporate Rights”). If not, or if it is impossible to apply the Additional Corporate Rights, there would be,
among other things, the cancellation of the New Shares owned by Prisa TV, as indicated in the mentioned paragraph
5.2.3. (F.6) of the Pre-prospectus.
The following is the transcript of the, limited to pledges of non-availability of shares to Prisa TV, clause 4.4 of the Option
Agreement:
4.4. Prohibition of disposal of New Shares and Participation Mediaset España
Comunicación, S.A.
Prisa Televisión, S.A. agrees not to offer, sell, convey any title, neither directly nor indirectly to place any liens and
encumbrances on, the New Mediaset España Comunicación’s Shares, until the effect of this Clause 4 will be
extinguished, all without prejudice to the events arising from the Pledge and NAT Pledge and other security
referred to in paragraph (i) of Clause 4.6 below. Accordingly, clause 13.2 of the Integration Agreement shall be
void. Accordingly, clause 13.2 of the Integration Agreement shall be void.
RULES GOVERNING THE APPOINTMENT AND REPLACEMENT OF
DIRECTORS AND THE AMENDMENT OF THE COMPANY´S BYLAWS
A. Appointment and removal of directors.
1. Directors shall be appointed pursuant to a resolution of the shareholders at the General Meeting, adopted in
accordance with the requirements of article 102 of the Spanish Corporation Law.
2. Notwithstanding the foregoing, the designation of directors through the proportional system referred to in article
137 of the Spanish Corporation Law is duly safeguarded.
3. In the event of a vacancy during the term for which the directors were appointed, the Board may co-opt a shareholder
to occupy the position until the earliest General Meeting.
1. Directors shall be appointed for a period of five years and may be re-elected for one or more subsequent terms
of equal length. The appointment shall lapse at the end of the term once the subsequent General Meeting has been
held or at the end of the legal term established for calling the Annual General Meeting.
2. The appointment of directors designated by cooptation shall be deemed to have been made and the directors
shall exercise their functions up to and including the date of the next General Meeting, without prejudice to the
shareholders’ powers of ratification at the General Meeting.
3. Independent directors may exercise their functions for a maximum period of twelve (12) years and may not
be re-elected after such period except subject to a favourable report by the Appointments and Remuneration
Committee.
192
Article 55 - Removal of directors
1. Directors shall cease to hold office when so determined at the General Meeting, when they notify the Company of
their resignation or decision to stand down or when the term for which they were appointed elapses. In the latter
case, the resignation shall be effective from the date of the earliest General Meeting.
2. Directors shall tender their resignation to the Board of Directors and the Board shall accept their resignation
if deemed appropriate in the following situations: (a) when they reach the age of 70; (b) when they retire from
the executive positions to which their appointment as directors was associated; (c) when they are involved in
any applicable situations of incompatibility or prohibition; (d) when they have been seriously reprimanded by the
Appointments and Remuneration Committee for having infringed their duties as directors; and (e) when their
continuity as directors jeopardises the Company’s interests or adversely affects its prestige and reputation or when
the reasons for which they were appointed cease to exist (e.g. when proprietary directors dispose of their ownership
interest in the company).
3. Directors who stand down from the Board prior to the end of their mandate must submit a letter to all the
members of the Board explaining the reasons for vacating office. The Company shall also notify the Spanish
National Securities Market Commission (CNMV) of the resignation in a significant event filing and explain the
reasons in the annual Corporate Governance Report.
B. Amendments to the Company’s bylaws.
Article 34. - Adoption of resolutions
1. Resolutions shall be adopted at Annual General Meetings or at Extraordinary General Meetings with the majorities
required under the Spanish Corporation Law. Every voting share present or duly represented at the General Meeting
shall carry one vote.
2. The majority required to approve resolutions shall be one half plus one of the voting shares present or duly
represented at the General Meeting, except for the instances stipulating larger majorities, provided for in Law or
these bylaws.
POWERS OF DIRECTORS AND, SPECIFICALLY, POWERS TO ISSUE OR
BUY BACK SHARES
These powers are regulated firstly in the Company’s bylaws and secondly in the internal code of conduct.
A. Article 37 of the bylaws regulates management and supervisory powers as follows:
1. Except for matters reserved solely to General Meeting, the Board of Directors is the Company’s highest decisionmaking body.
2. The Board of Directors has all the powers required to manage the Company. However, the management of the
Company’s ordinary business shall generally be entrusted to the steering committees and to the management
team and the Board of Directors shall focus on establishing the Company’s general strategy and exercising general
supervisory functions. In any case, decisions on the following matters are the exclusive reserve of the Board of
Directors and may not be delegated:
a) Authorization for issue of the financial statements, management report, and proposed distribution of profit,
and the consolidated financial statements and Group management report.
193
b) Appointment of directors by co-optation and proposals to the General Meeting for the appointment,
ratification, re-election, or removal of directors.
c) Designation and re-election of internal positions on the Board of Directors and members of committees.
d) Establishment of the remuneration of the members of the Board of Directors, to be proposed by the
Appointments and Remuneration Committee.
e) Payment of interim dividends.
f)
Announcements relating to any takeover bids launched for the securities issued by the Company.
g) Approval and amendment of the Board of Directors’ Regulations governing internal organization and
functions.
h) Authorization for issuance of the annual Corporate Governance Report.
i)
Exercise of the powers delegated by the shareholders in general meeting when powers of substitution have
not been established and the performance of any duties entrusted by the shareholders in general meeting.
j)
shareholders (or companies belonging to the same group as the shareholder) with ownership interests of
over five per cent and of an amount in excess of 13,000,000 euros.
k) Conclusion of any agreement or establishment of any legal relationship between the Company and any
third party valued at over 80,000,000 euros.
l)
Approval of annual budgets and, if applicable, strategic plans.
m) Oversight of investing and financing policy.
n) Oversight of the shareholder structure of the Mediaset España Group.
o) Approval of corporate governance policy
p) Oversight of corporate social responsibility policy.
q) Approval of the remuneration policy for executive directors for their executive functions and the main
terms that their contracts must fulfil.
r) Performance evaluation of the Company’s executive directors.
s) Monitoring, following a prior report of the Audit and Compliance Committee, of the risk control and
management policy, and the internal information and control systems.
t)
Approval of Company policy on treasury shares.
u) Staying abreast of the removal and appointment of senior executives, and their contract terms.
v) Approval at the proposal of the Audit and Compliance Committee, of the financial information that the
Company must publish periodically.
w) Approval of the creation or acquisition of ownership interests in special-purpose entities or companies
domiciled in countries or territories considered to be tax havens and any transactions or operations of a
similar nature which, due to the complexity thereof, may adversely affect the Group’s transparency.
194
x) Authorization, following a favourable report of the Audit and Compliance Committee, of the related-party
transactions that Mediaset España Comunicación, S.A. may perform with directors or persons related to
the directors or to significant shareholders, except for those which fulfil the following conditions: (i) they
are applied en masse to a group of customers and in accordance with standard terms and conditions, (ii)
they are performed at prices established in general terms by the supplier of the service or on an arm’s
length basis, (iii) the related amount does not exceed 1% of Mediaset España Comunicación’s annual
revenue. The directors affected by related-party transactions which, due to the nature thereof, are subject
to vote by the Board of Directors, shall not attend the meeting and may not vote or delegate their vote.
y) Any other matters that the Board of Directors Regulations reserve for handling by the Board in full.
The powers reserved for the Board of Directors, except those that legally or statutorily cannot be delegated, are vested
in the Executive Committee and the two chief executive officers, Paolo Vasile and Giuseppe Tringali.
B. Section 9 of the in-house Code of Conduct of Mediaset España Comunicación, S.A. and
its Group governing its dealings in the securities markets sets out the rules applicable to
transactions in treasury shares, specifically providing the following:
9.1. Definition of treasury share transactions falling under the remit of the securities market code of conduct
Transactions with treasury shares shall be deemed to be those engaged in with shares issued by Telecinco
Group companies and derivative instruments whose underlying is the aforementioned shares.
These transactions may be undertaken:
a) Directly by the Company or by other Telecinco Group companies.
b) Indirectly, through third parties with an explicit or implicit mandate.
c) By third parties without a mandate but acting to the same end.
9.2. Policy on treasury shares
Within the scope of the authorization given at the General Meeting, the Company’s Board of Directors shall be
responsible for drawing up specific plans for the acquisition or disposal of treasury shares.
9.3. General principles guiding trading in treasury shares
Trading in treasury shares shall conform to the following principles:
9.3.1. Compliance with regulations
All Affected Persons are obliged to know and comply with the applicable internal regulations and
procedures.
9.3.2. Purpose
The overriding objective of trading in treasury shares is to provide investors with the adequate
market liquidity and depth for its securities, and to minimise any possible temporary imbalances arising
between market demand and supply. Under no circumstances shall trading be engaged in with a view to
intervening in the free formation of prices.
195
9.3.3. Transparency
Transparency in dealings with the stock exchange supervisory and regulatory bodies in connection with
treasury share transactions shall be monitored.
9.3.4. Insider information
Under no circumstances may persons who have had access to insider information on the related
securities and instruments trade in treasury shares.
9.3.5. Neutrality in price formation
Intervention shall be neutral and under no circumstances may a dominant position be held in the market.
9.3.6. Brokerage
The Telecinco Group companies shall channel all trading in Company shares through a limited number of
market members. Prior to any trading the Company shall inform the CNMV in a confidential manner of
the designated member and also of any replacement thereof. In the event that a framework agreement is
executed with any market member governing treasury share dealing, a confidential copy thereof shall be
furnished to the CNMV and to the stock exchange governing bodies.
9.3.7. Counterparty
The Telecinco Group companies shall refrain from buying or selling Company shares where the counterparty
is any of the following persons or entities: (i) Telecinco Group companies, (ii) the directors thereof, (iii)
their significant shareholders, or (iv) interposed persons of any of the above. Similarly, the Telecinco Group
companies may not simultaneously hold purchase and sale orders for Company shares.
9.3.8. Restrictions
Trading in Company shares shall not be engaged in during processes related to public offerings, takeover
bids, mergers or other similar corporate operations unless expressly provided for in the prospectus for
the transaction in question. The Company shall also refrain from trading in treasury shares during the
closed periods established in article 4.3.4 of the Code of Conduct.
9.3.9. Amendment
In the event of the urgent need to protect the interests of the Telecinco Group and its shareholders,
the chief executive officer or the director of regulatory compliance may agree to temporarily amend or
suspend the application of the foregoing regulations, of which the Board of Directors and the CNMV
shall be informed.
9.4. Stock option plans
Notwithstanding the foregoing, the rules established in articles 9.1 to 9.3 of the Code shall not apply with respect
to the acquisition of treasury shares to be subsequently granted to the beneficiaries of the Company’s stock
option plans approved by the Board of Directors, or to the other trading in treasury shares entered into by the
Company within the framework of a share buyback program.The aforementioned transactions shall be executed
taking into account the particular characteristics thereof, the manner and the specific features established by
the Board of Directors when approving the plans, which shall comply with the conditions established in the
regulations implementing article 81.4 of the Securities Market Law.
196
9.5. Designation and functions of the department responsible for the management of treasury shares
The Management Control Department shall be responsible for managing treasury shares.
9.5.1. Special duty of confidentiality
The persons that form part of the Management Control Department assume special confidentiality
commitments with respect to treasury share strategy and trading.
9.5.6. Duties
The Department shall be responsible for:
a) Managing the treasury shares in accordance with the general principles established in the Code of Conduct
and those determined by the Telecinco Group’s managing bodies.
b) Overseeing the performance of the Telecinco’s shares and informing the director of regulatory compliance
of any significant changes in the share price which cannot reasonably be attributed to market movements.
c) Keeping a record of all treasury share trades ordered and executed for consultation by the director of
regulatory compliance, the Board of Directors or any other persons designated by the Board.
d) Establishing relationships with any supervisory bodies as necessary to correctly comply with the provisions
of this Code.
e) Preparing a report on the Department’s activities quarterly or whenever so required.
f) Notifying the director of regulatory compliance of any significant incident arising from the management of
the treasury shares.
SIGNIFICANT AGREEMENTS THAT WOULD COME INTO FORCE, BE
AMENDED OR EXPIRE IN THE EVENT OF A CHANGE OF CONTROL
AT THE COMPANY
There are no significant agreements subject to a change in control at the Company.
197
AGREEMENTS BETWEEN THE COMPANY AND ITS DIRECTORS AND
MANAGERS THAT PROVIDE FOR SPECIAL INDEMNITIES
The following table itemises the only instances of special indemnification schemes outstanding between the Company
and its directors and managers.
Position
198
Guarantee or golden parachute clause
General
Manager
Termination of contract by the Company (except for just cause):
(in replacement of legally prescribed severance, unless the latter is higher)
Termination between 04/24/02 and 12/31/07: 24 months’ salary
Termination between 2008 and 2011: 18 months’ salary
Termination thereafter: 12 months’ salary
General
Manager
Severance scheme:
a) Voluntary redundancy: accrual per annum: fixed annual salary + annual bonus/13,5, so that total
compensation is equivalent to the total years worked,
b) Justified or unjustified dismissal: legally prescribed severance + severance set out in a) above
Division
Manager
Termination of contract by the Company (except in case of just cause):
An indemnity of one year of gross fixed salary plus legally prescribed severance.
Manager
Termination of contract for reason attributable to the Company (except in case of just cause):
18 months of fixed salary (including legally prescribed severance).
ANNUAL CORPORATE
GOVERNANCE REPORT
200
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