Accounts (proof 6

Transcription

Accounts (proof 6

Jetix Europe N.V.
Annual Review and
Financial Statements 2004
contents
1
2
4
6
8
Introduction
Group at a Glance
Our Highlights
Our Library
Our History
10
12
16
20
24
28
30
31
Chief Executive Officer’s Review
Operating and Financial Review
Channels and Online
Programme Distribution
Consumer Products
Board of Directors
Supervisory Board
Corporate Governance
fox kids Europe n.v. is
now jEtix Europe n.v.
is a new global programming alliance between
>> Jetix
Jetix Europe N.V. (Jetix Europe) and The Walt Disney
Company (Disney)
will allow us to increase the amount of content
>> Jetix
that we co-produce with Disney, thereby optimising our
cash investment in programming whilst improving the
quality of our shows even further
our new programming partner, is the world’s
>> Disney,
leading provider of family entertainment
are now part of a global brand that reaches
>> We
over 140 million TV households in 79 countries
1
group at a
glance
Our Business Lines
Channels & Online
>>
>>
>>
Own and operate fully localised children’s channels
Broadcast in 58 countries, reaching more than 38 million
homes in 17 languages
Localised websites in 16 languages
>>
>>
Distribute programmes to terrestrial broadcasters and
third party cable and satellite channels
Over 120 clients in 50 markets
Consumer Products
>>
>>
2
License merchandising and home entertainment
rights to Jetix library and third party properties
throughout Europe
Local offices in 7 markets, represented in 30 countries
We are a fully integrated panEuropean children’s entertainment
company with a local approach
Ownership Structure
as at September 30, 2004
ABC Family
Worldwide
Public
Shareholders
(A subsidiary
of Disney)
25%
75%
Share Price Performance
14
12
10
8
6
4
Oct 1,
2003
Sep 30,
JETIX
2004
AEX Index
SXMP (Dow Jones Media index)
3
our
highlights
GROWTH on EVERY measure
of performance
17.1(3)
13.6(11)
16.2(1)
3.8
0.3
5.8(10)
(28.9)(2)
(29.8)(4)
2000
2001
2002(8)
2003
2004
Net Income
[$ million]
(1)
Results for the year ended May 31, 2001.
Results for the year ended June 30, 2002.
Results for the 13-months ended June 30, 2001.
(4)
Results for the 15-months ended September 30, 2002.
(5)
Consistent with prior years, EBITDA is stated before programme amortisation,
impairment and depreciation. EBITDA less depreciation, amortisation and impairment
is equivalent to operating income.
(6)
Including our share of revenues of non-consolidated joint ventures.
(7)
Including other small non-advertising channel revenues.
(8)
Before cumulative effect of change in accounting principle.
(9)
Including online advertising revenues.
(10)
Results for the year ended September 30, 2004.
(2)
(3)
4
30.9
58.9(4)
53.9(3)
56.0
58.0(11)
20.2(4)
50.6(1)
10.4
53.3(2)
51.0(10)
34.9
8.9(2)
(4.4)(3)
(9.9)(1)
(15.6)
2000
2001
2002
2003
2004
2000
2001
Operating Cash Flow
EBITDA
[$ million]
[$ million]
38.3
(4)
32.3
24.9(3)
19.9
2000
2002
2003
2004
(5)
160.2(4)
34.8
170.7
152.0
136.1(3)
31.4(2)
100.4
126.7(1)
133.0(2)
24.7(1)
2001
2002
2003
2004
2000
2001
Households reached by channels
Revenues(6)
[million]
[$ million]
2002
2003
89.9
42.8
(4)
78.6
26.7(4)
2004
79.1
30.3
48.6(3)
16.7(3)
9.8
2000
60.9(2)
30.0
22.3(2)
43.7(1)
(1)
15.4
2001
2002
2003
(6),(9)
2004
2000
2001
2002
2003
Advertising revenues
Subscription revenues
[$ million]
[$ million]
(11)
2004
(6),(7)
To enhance comparability, the Company has also provided operating results on a pro forma basis, which exclude the impact of non-recurring
relocation charges recognised during the year. These charges relate to the relocation of the Company’s UK and French based operations to
Disney’s premises within these markets. The Company believes that pro forma results provide additional information useful in analysing the
underlying business results.
5
our
library
At the heart of every strong
media company is great
quality content
6
Driving new
content
Higher
return to
shareholders
Higher free
cash flow
High exposure:
free and pay-TV
in Europe
Subscription revenues
Advertising revenues
Consumer products revenues
Distribution revenues
Library Highlights
>>
Over 6,600 episodes
>>
25% is European quota
compliant
>>
Majority of rights held:
• pan-European
• long term
• across most media
7
our
history
Nov 1999
Initial Public Offering
>>>>>
2000
>>>>>
Channel launch in Italy
Fox Kids Europe reaches profitability. Channel launch
in Turkey
Channels now reach 20 million households in
38 countries
Channel launch in Germany. Fox Kids is now the
only children’s entertainment company with a local
channel in every major European market
2001
>>>>>
Channel launch in Israel. Hungarian channel
extended to Czech Republic and Slovakia
Launch of branded block in Russia with a potential
audience of 105 million viewers
Fox Kids is the most widely distributed children’s
channel in Europe and the Middle East, reaching
24.9 million households and broadcasting in 54
countries via 11 channel feeds in 16 languages
Launch of branded block in Italy
Channel launches in Hungary and the Middle East
Disney acquires 100% of Fox Family Worldwide,
Fox Kids Hits album reaches No.1 spot in Dutch
national compilation charts achieving platinum status
thereby becoming Fox Kids Europe’s majority
shareholder
Channel launch in Greece
8
One of the KEY factors behind our
success has been our SPEED of execution
2002
>>>>>
2003
>>>>>
2004
>>>>>
Buena Vista International Television appointed to
service Fox Kids’ programme distribution business
Fox Kids Europe launches 2 hour branded block on
TV2 in Hungary, replacing Cartoon Network block
Fox Kids Europe creates Jetix, a global programming
alliance with Disney
Fox Kids Europe reaches 32.3 million households
10 years of Power Rangers success! Power Rangers
ranked as best selling action figure brand of all
time in the US
Fox Kids Europe N.V. changes its name to Jetix
Europe N.V.
Now broadcasting in 56 countries in 17 languages
via 12 channel feeds
Online division is integrated into Channels – Fox
Kids Europe is now the leading pan-European
online community for children reaching 1.2 million
registered users through 17 local websites
Disney Consumer products appointed to represent
Power Rangers; Video distribution agreement
concluded with Buena Vista Home Entertainment
Italian channel launches morning branded block
Fox Kids Europe now reaches 34.8 million
households in 57 countries in 17 languages via
12 channel feeds
Increased synergies with Disney – Jetix relocates its
UK and French offices to Disney’s local premises
First two Jetix co-productions with Disney
underway: W.I.T.C.H. and Super Robot Monkey
Team Hyperforce Go!
Channels now reach 38.3 million households in
58 countries in 17 languages via 14 channel feeds
9
chief executive
officer’s review
“As well as increasing the quality of our shows even further,
the Jetix alliance will help us optimise the level of cash invested
in programming each year, one of our primary objectives.”
There is an old adage within the property business that says the
three most important factors behind any successful investment
are location, location, location. I think that one could very much
apply this to media companies, except the answer would be
content, content, content! Of course there are many other
factors which contribute to the success of any media company,
the skill and commitment of its staff definitely being one of
them, but my point is that great quality content is without doubt
critical. High value properties like Power Rangers prove that
content is King!
That is why the creation of Jetix, a global brand and
programming alliance with Disney, our majority shareholder, has
been so important to us. By producing or purchasing top quality
shows, we strengthen our channel offering, which in turn
generates higher subscriber growth and revenues, as well as
driving ratings, which should lead to higher advertising revenues.
But it doesn’t stop there. Improving the quality of our content
also increases the demand for our product from free television
broadcasters, thus increasing our licence fees, thereby increasing
programme distribution profitability. We also receive further
benefits in the form of higher sales of DVD and video products.
As well as increasing the quality of our shows even further,
the Jetix alliance will help us optimise the level of cash invested
in programming each year, one of our primary objectives. For
example, when we co-produce shows with Disney as part of the
Jetix alliance, we usually only take the European and Middle
Eastern rights, typically investing less than 40% of the overall
production cost of the show. Compared to last year, we have
managed to reduce our cash spend on programming by a third.
Our first two Jetix co-productions are well underway: W.I.T.C.H.
and Super Robot Monkey Team Hyperforce Go!. Although not due
for release until next year, W.I.T.C.H. has attracted vast interest
from broadcasters and has already been pre-sold in four of the
five major European territories! We are also very optimistic
about Super Robot Monkey Team Hyperforce Go! and are
expecting to green-light further episodes on the back of the
positive broadcaster feedback that we have received to date.
paul taylor
Chief Executive Officer
December 2004
10
And the Jetix success story does not stop there. The branded
blocks running on our channels, that were introduced to ensure
a smooth transition during the renaming of our channels to Jetix,
have experienced great results, securing leadership positions in
most markets. And we are now looking to further promote the
Jetix brand by introducing Jetix branded blocks on free TV. The
first of these deals was concluded with Kabel 1 in Germany,
launching just after the end of our fiscal year in October 2004.
Our core channel & online business had another great year,
and we now reach over 38 million households, reinforcing our
position as the most widely distributed kids channel in Europe
and the Middle East. Together with Disney’s branded blocks in
the US and their channels in Latin America, the Jetix brand now
extends to over 140 million households worldwide.
And we are not only extending the reach of Jetix through the
continued subscriber growth of our channel network, we are
also extending the number of ways we connect with our
audience by launching new complementary services such as
interactive television and channel multiplexes. Our interactive
service is now available on Sky and Telewest in the UK.
Our programme distribution business saw the decline we
predicted last year due largely to a reduction in the number of
episodes for which we acquired rights outside of Europe and the
Middle East. However, the rate of decline was less than expected,
helped by an increase in the number of episodes added to our
library and a strong slate of acquired programming that included
Tutenstein, Shaman King and Sonic X. Tutenstein won an Emmy
award for Outstanding Special Class Animated Programme.
Our consumer products business also performed strongly. Last
year we announced the appointment of Disney Consumer Products
(DCP) as the agent for our hit property Power Rangers. The results
have so far been very promising: not only is Power Rangers
merchandise now being sold in all Disney Stores across Europe,
but DCP have already outperformed the minimum guarantee
for the first year of this three-year deal,
with Power Rangers revenues up 40%
on last year.
(1)
As always, our strong operating performance is mirrored in our
financial performance. We have managed to increase earnings
per share by 50% even after relocation costs(1). Excluding the nonrecurring relocation costs, there was a five-fold increase in our
earnings per share. Our operating cash flow virtually tripled to
$30.9 million and our balance sheet remains as strong as ever,
with no debt and $86 million in cash balances.
Corporate governance is also something that the Company takes
very seriously and on page 31 you can find details of how we
plan to comply with the Tabaksblat code, which takes effect for
us in the year ending September 30, 2005. As you will see, we
plan a very high level of compliance with the code.
And finally, the success we achieved this year would not have been
possible without our entrepreneurial culture, strong local approach
and talented and hard working staff. I would like to take this
opportunity to thank every member of staff for their contribution
to the success of the business, in particular I would like to mention
Martin Weigold, who has decided to leave the company when his
contract expires in March 2005. Martin has been Chief Financial
Officer (CFO) since the Company’s initial public offering in 1999
and has made a substantial contribution to our success. I am
delighted to welcome Dene Stratton, Senior Vice President of
Planning and Control at ABC Inc. who will take over as CFO in
January 2005. Dene has extensive experience in the international
broadcasting business, this and his proven financial and leadership
skills will ensure a seamless transition in the coming months.
We can look forward to growing success in the
coming years as Jetix Europe continues to go
from strength to strength as part of the
global brand phenomena that is JETIX!
Charges recognised during the year in respect of the relocation of our UK and French based operations to Disney’s premises
within these markets. The charge recognised includes a provision in respect of the anticipated costs of disposing of our existing
lease commitments, I.T. reconfiguration, move costs, additional depreciation charges incurred as a result of the relocation as well
as redundancy costs resulting from the contracting out of certain functions to Disney.
11
operating and
financial review
“Our focus remains on increasing shareholder value and
cash generation within the business and, in this respect,
we are pleased that we have managed to almost triple
our operating cash flow from last year.”
martin weigold
Chief Financial Officer
December 2004
12
Basis of Presentation
To enhance comparability, the Company has also provided operating results on a pro forma basis, which
exclude the impact of non-recurring relocation charges recognised during the year. These charges relate to
the relocation of the Company’s UK and French based operations to Disney’s premises within these markets.
The Company believes that pro forma results provide additional information useful in analysing the
underlying business results.
Audited
$ millions
Costs and expenses
Depreciation and impairment
Operating income
Income before tax and minority interest
Tax
Net income
Basic earnings per share
Diluted earnings per share
114.4
2.8
5.2
7.6
(2.0)
5.8
Non-recurring
relocation charges
$ millions
Pro forma
$ millions
7.1
0.9
8.0
8.0
0.2
(7.8)
107.3
1.9
13.2
15.6
(2.2)
13.6
Audited
$ cents per share
Pro forma
$ cents per share
7.1
6.9
16.4
16.1
Revenues
Revenues increased by 13% to $165.3 million. Revenues adjusted to include our share of non-consolidated
joint ventures (1) increased by 12% to $170.7 million. Channels & online revenues increased by 22% to
$127.3 million. Channels & online revenues, adjusted to include our share of non-consolidated joint
ventures, increased by 21% to $132.7 million as subscription revenues rose 16% to $86.9 million and
advertising revenues increased 42% to $42.8 million. Other channel & online revenues generated from
premium rate calls, research and interactive services amounted to $3.0 million. The primary drivers of
the growth in our channel & online revenues were strong ratings performances by our channels in the
Netherlands, UK and France as well as increased distribution of our channels.
Revenues from programme distribution were $24.7 million, down by 21% on last year but better than
the guidance given in our half-year results. The primary reason for this decline was the reduction in the
number of episodes for which we acquired rights outside of Europe compared to the previous year.
Our consumer products revenues grew by 18% to $13.3 million primarily driven by strong performances
from Power Rangers, the Jetix and Fox Kids brands, PUCCA, Sonic X and Shaman King.
Overall, our revenues also benefited significantly from the weakening of the US dollar, our reporting
currency, versus the euro and sterling.
Year to 30
September 2004
Year to 30
September 2003
Revenue
Our share of non-consolidated joint ventures
165,345
5,396
146,825
5,192
Revenue (adjusted to include our share of non-consolidated joint ventures)
170,741
152,017
(1)
13
operating and
financial review
Revenue(1) by line of business
Consumer
Products
8%
Programme
Distribution
Channels
& Online
14%
78%
[continued]
of the relocation of our UK and French based operations to
Disney’s premises within these markets. The charge recognised
includes a provision in respect of the anticipated costs of
disposing of our existing lease commitments, I.T. reconfiguration,
move costs, additional depreciation charges incurred as a result
of the relocation as well as redundancy costs resulting from the
contracting out of certain functions to Disney.
The costs that were recognised in respect of the relocation were
$8.0 million. On a pro forma basis, costs and expenses increased
by 18% to $107.3 million. The primary reason behind the increase
was the weakening of the US dollar against sterling and the euro.
EBITDA(2)
EBITDA fell by 9% to $51.0 million as a result of the relocation
costs referred to above. On a pro forma basis, EBITDA increased
by 4% to $58.0 million. On a pro forma basis, channel & online
operations achieved a 16% increase in EBITDA to $47.7 million.
On a pro forma basis, EBITDA from programme distribution fell by
23% to $15.7 million due to lower revenues as discussed previously.
Revenue(1) by territory
Middle
East
5%
Nordic Poland
Region
4%
2%
Other
1%
UK
8%
On a pro forma basis, our consumer products operation saw a
38% improvement in EBITDA to $5.5 million primarily as a result
of the revenue increases referred to previously, and the costs of
restructuring our German operations that were incurred last year
of $0.25 million.
Spain and
Portugal
Amortisation, Impairment and Depreciation
Germany
29%
8%
CEE
8%
France
12%
Italy
11%
Benelux
12%
Costs and Expenses
Costs and expenses increased by 26% to $114.4 million. The main
reasons for this increase were the weakening of the US dollar,
our reporting currency, versus sterling and the euro, the two
currencies in which the majority of our costs and expenses are
incurred, as well as non-recurring charges recognised in respect
14
Programme amortisation and impairment fell by 13% to $43.0
million due to lower programme distribution revenues as well
as an increase in the estimated future income from our channels.
Programme amortisation includes an impairment charge of
$5.0 million, of which $2.6 million results from a decision to
no longer run certain titles within our library on our channels
that are not considered to be core to the Jetix brand.
Depreciation increased by 14% to $2.8 million, as certain
leasehold improvements and fixtures and fittings were written
down to fair value following the relocation of our UK and
French based operations. On a pro forma basis, depreciation fell
by 23% to $1.9 million.
Financial Income
Cash Flow
Financial income fell from $1.7 million to $1.0 million due to the
prior year benefiting from a $1.3 million gain on settlement of
the long term notes receivable and payable.
Operating cash flow increased by 196% to $30.9 million.
The primary reasons for this increase were the improvements
in the trading performance of the Company compared with the
previous year, a reduction in the cash invested in programming
and a favourable working capital movement.
Income Before Tax and Minority Interest
Income before tax and minority interest increased by 35% to
$7.6 million. The primary drivers of this increase were strong
performances by our channel and consumer products businesses
and a foreign exchange gain, partially offset by the costs of
relocating our UK and French based operations.
Cash flow increased by $44.3 million to $34.6 million. This
increase was due to the increase in operating cash flow outlined
above, $4.3 million of cash raised through the new issue of
shares and the prior period acquisition of certain Israeli assets
for cash consideration of $20.5(3) million in December 2002.
On a pro forma basis, income before tax and minority interest
increased by 178% to $15.6 million. The primary drivers of this
increase were a $7.9 million improvement in operating profits
within the channel & online operations, a $2.9 million
improvement in operating profit from our consumer products
business and a favourable foreign exchange movement, partially
offset by a reduction in financial income and income from
equity in affiliates.
As at September 30, 2004, the company had cash balances of
$86.0 million and was debt free(4).
Minority Interest
The reduction in participation of the minority interest is due to
our channel in Poland becoming loss making following expiration
of a minimum guarantee in April 2003 and to the acquisition of
our partner’s share in Fox Kids Israel in December 2002.
Taxation
The effective tax rate was 26% compared to 22% in the prior
fiscal year. On a pro forma basis the effective tax rate was 14%.
The income tax charge for the year comprised income,
withholding and capital taxes payable amounting to $3.3 million,
partially offset by a deferred tax credit of $1.3 million.
Earnings per Share
Basic earnings per share increased by 54% from 4.6 cents per
share to 7.1 cents per share due to the increases in income
referred to above. On a pro forma basis, basic earnings per
share increased by 257% to 16.4 cents per share after adjusting
for the costs of relocating our UK and French based operations.
Reporting Currency
As a pan-European media business, the Company and its
subsidiaries generate revenues and incur costs in many different
currencies. The three currencies in which most of our
transactions are originated are the euro, US dollar and sterling.
To date, we have managed successfully to minimise the impact
of foreign exchange movements on our net income through the
use of natural hedges i.e. matching revenues and costs incurred
in different currencies. For example, in the current fiscal year,
the dollar weakened by 13% and 12% against the euro and
sterling respectively versus the prior fiscal year. However, the
impact of foreign exchange at the net income level was less than
one percent of revenue.
Due to the growing significance of our channel & online
business which incurs most of its revenues and expenses in
euros, and the introduction of the euro which has led to an
increase in usage in currencies other than the dollar, we
expect the euro to become the currency in which most of
our revenues and costs will be originated. Furthermore, the
euro is expected to increase in significance for Jetix Europe
in the future.
Therefore as well as continuing our strategy of natural hedging,
we are currently investigating changing our reporting currency
to the euro instead of the US dollar.
Diluted earnings per share increased by 50% to 6.9 cents per
share. On a pro forma basis, diluted earnings per share increased
by 250% to 16.1 cents per share.
(1)
(2)
Consistent with prior years, EBITDA is stated before programme amortisation, impairment and depreciation. EBITDA less programme amortisation, impairment and depreciation
is equal to operating income. Pro forma EBITDA is stated after excluding non-recurring relocation charges of $7.1 million.
(3)
In addition to the $20.5 million cash consideration, $0.3 million of professional fees directly associated with the acquisition were incurred.
(4)
Excluding small amounts due under leases.
15
channels
and online
16
>> We are the number one kids channel
in Europe and the Middle East. We reach
more households in these regions than any
other kids channel
17
channels
and online
[continued]
highlights
132.7
106.2(4)
65.4(2)
>>> Subscribers grew by 3.5 million
households to 38.3 million as at
September 30, 2004
39.8
109.4
83.6(3)
59.2(1)
>>> Channels broadcasting in 58
countries via 14 channel feeds
in 17 languages
>>> Transition to Jetix name for
2000
2001
Revenue
2002
2003
2004
(7)
[$ million]
channels on schedule
47.7(5)
>>> Strong ratings performance,
41.2
particularly in the Netherlands,
UK and France
35.6(4)
42.1(6)
>>> Specialist unit established to
28.4(3)
increase pan-European and cross
media advertising campaigns
7.0(2)
>>> Jetix interactive service successfully
launched in the UK via Playjam on
Sky Active
5.6(1)
(0.3)
2000
18
2001
(1)
(2)
EBITDA(8)
Results for the 13-months ended June 30, 2001.
(3)
[$ million]
(4)
Results for the 15-months ended September 30, 2002.
(5)
Pro forma stated after excluding non-recurring relocation charges
of $5.6 million.
(6)
(7)
(8)
Consistent with prior years, EBITDA is stated before programme
amortisation, impairment and depreciation. EBITDA less
depreciation, amortisation and impairment is equivalent
to operating income.
2002
2003
2004
“We have continued the introduction of the Jetix name that we began in the
first half of the year through the launch of Jetix branded blocks. These blocks
have been very successful, securing leadership positions in most markets.”
Subscriber numbers grew by 3.5 million to 38.3 million households
reinforcing our position as the most widely distributed kids’
channel in Europe and the Middle East. As at September 30,
2004, our channels broadcast in 58 countries via 14 channel
feeds in 17 languages.
channels in the UK and Spain thereby increasing the number of
advertising spots that we are able to sell to advertisers. We now
have four channels that are on air for 24 hours per day: France,
Spain, Italy and the UK. We aim to increase the number of
channels broadcasting 24 hours per day in the future.
We have continued the introduction of the Jetix name that
we began in the first half of the year with the launch of Jetix
branded blocks. These blocks have been very successful, securing
leadership positions in most markets. Strong block performances
have also boosted overall channel averages in key markets such
as the Netherlands, where our channel remains the market
leader averaging over 35%(9) market share, more than 10 share
points over our nearest competitor. Our UK channel, operating
in one of the most competitive kids markets in the world,
showed an 11%(10) increase in ratings year-on-year while all other
leading kids channels in the UK saw year-on-year declines.
In France, our channel showed increases in all kids demographics,
especially in our core target group of kids aged 4-10, where our
market share grew by 57%(11) over the previous measurement period.
Other initiatives to increase advertising revenues implemented
during the year include the creation of a dedicated sales unit to
build campaigns across media including broadcast, online, press
and interactive, producing a unique market offering as well as
serving pan-European clients. As the only advertising supported
kid’s channel that broadcasts in all five of the major European
markets, we are also very well placed to benefit from advertisers’
increasing interest in pan-European campaigns. These and other
initiatives are now bearing fruit with a 30% increase in the
number of new brands being advertised on our channels over
the previous fiscal year.
Full renaming has already taken place successfully in France and,
subsequent to our fiscal year end, in Scandinavia. We expect that
all our channels will be renamed by June 2005.
The newly renamed Jetix Kids Cup (the award-winning
international football championship for kids) was also very
successful. Over one million kids played in the qualifying
tournaments with a final event taking place at the Manchester
United Soccer School at Disneyland Resort Paris.
Advertising continues to increase in significance as a proportion
of our channel revenues. As well as improving our ratings
performance, we have extended the broadcast hours of our
On the back of the success of Totally Spies!, we have entered
into an exclusive first look agreement with French producer
Marathon, which covers their entire kids’ output for the next
three years. As part of this agreement, we will be co-producing
three new series of 52 episodes over the next four years.
The first of these co-productions is entitled Galaxy High and
is due for delivery in fiscal year 2006.
We have also made significant progress in our interactive
business. In April we launched our interactive games service
on Sky Active, reaching seven million households in the UK.
Combined with distribution on Telewest, this brings the reach
of this service to over eight million homes. We expect to launch
this service on NTL within the next six months thereby making
it available to all pay TV households within the UK.
(9)
SKO, Cab Homes, Mon-Sun 0600-1800, Kids 6-12 years, TVR Oct 03-Sep 04 Vs Oct 02-Sep 03.
(10)
BARB, Cab/Sat Homes, Mon-Sun, All broadcast day, Kids 4-15, TVR, includes time shifted data Oct 03-Sep 04 Vs Oct 02-Sep 03.
(11)
Mediacabsat, Cab/Sat Homes, Mon-Sun, All broadcast day, Kids 4-10, Share, June 04 – August 04 Vs. Dec 03 to Jun 04.
19
programme
distribution
20
>> We are one of the largest suppliers of
kids programming to free TV broadcasters
in Europe and the Middle East
21
programme
distribution
highlights
[continued]
61.4(2)
54.1
59.0(1)
43.2(4)
40.1(3)
31.4
24.7
>>> Library expanded with addition
of 271 new episodes
>>> Two new Jetix co-productions
underway with Disney
>>> Co-production underway with
SIP Animation for A.T.O.M. –
Alpha Teens on Machines
2000
2002
2003
2004
Revenue
[$ million]
>>> Co-production underway with
Sav! The World, Super RTL and
France 3 for Oban Star Racers
2001
51.2(2)
40.8
49.2(1)
>>> Output deal concluded in Russia
28.8(3),(4)
with CTC
20.4
>>> First Jetix branded block in
15.7(5)
Germany on free TV
22
(1)
(2)
Results for the 13-month period ended June 30, 2001.
(3)
(4)
Results for the 15 months ended September 30, 2002.
(5)
Pro forma stated after excluding non-recurring relocation charges of $0.2 million.
(6)
(7)
Consistent with prior years, EBITDA is stated before programme amortisation,
impairment and depreciation. EBITDA less depreciation, amortisation and
impairment is equivalent to operating income.
15.5(6)
2000
2001
EBITDA
(7)
[$ million]
2002
2003
2004
“Among the flagship titles acquired this year, both Sonic X and Emmy
award-winning Tutenstein have already been sold in all five major
European territories.”
We have taken delivery of 271 new episodes during the year,
up from 205 last year, primarily as a result of increased acquisition
activity. Titles delivered include new series such as Sonic X,
Shaman King, Tutenstein and Daigunder the Battle Robot, as well
as additional seasons of Power Rangers Dino Thunder, What’s
with Andy and RoboRoach. Although the number of episodes
added to our library increased over the prior year, the number
of episodes for which we acquired rights outside of Europe and
the Middle East fell, and this led to a fall in revenues from
programme distribution.
Our shows continue to perform strongly on free television.
Power Rangers ranks number one in its timeslot in four out
of the five major European territories. Joining Power Rangers
success is newly acquired Sonic X which ranked number one in
its timeslot among all kids in France. On the back of the strong
ratings performances in France and other markets, we have
acquired another 26 episodes bringing the number of episodes
of this very successful series in our library to 78.
Among the flagship titles acquired this year, both Sonic X and
Emmy award-winning Tutenstein, have already been sold in all
five major European territories.
As part of our new global programming alliance with Disney,
we entered into a co-production agreement for a new series,
Super Robot Monkey Team Hyperforce Go! The first few episodes
of this 26 half-hour episode series were delivered in September
and, based on positive feedback from broadcasters, we expect
to commission a further season of this series. This joins our
other Jetix co-production, W.I.T.C.H., that is being produced with
SIP Animation and which has already generated extensive
interest from broadcasters, having been pre-sold in four of the
five major European territories already. We expect to announce
further co-productions with Disney in the coming year.
We also entered into an agreement with SIP Animation for the
co-production of A.T.O.M. – Alpha Teens on Machines, which
features a rebellious teen team of unlikely action heroes who
have the task of tracking down and catching 100 of the worst
villains and the mastermind who set them free from prison.
We are very excited about the prospects for this series which
is scheduled to debut on Jetix channels in the Autumn of 2005.
We also commenced the production of Oban Star Racers, a
26 episode co-production with Sav! The World, Super RTL and
France 3. The series chronicles the adventures of Molly, a feisty
teenager, and the epic story of the Great Race of Oban, an
intergalactic competition which takes place every 10,000 years
to determine the balance of powers within the Galaxy. This series
is expected to begin delivery in the first quarter of our 2006
fiscal year.
An important part of our strategy with respect to free television
is the establishment of branded blocks with leading free
television broadcasters around Europe. As part of this strategy,
we concluded a three-year output deal in Russia with CTC, which
reaches approximately 40 million homes. This complements our
existing branded block in Russia with Ren-TV. In Germany, we
concluded a three-year agreement with Kabel 1, the first of our
free TV blocks to be branded as Jetix. The block began airing on
October 30, 2004 and airs for one and a half hours every week
on Saturday mornings.
As at September 30, 2004, there were 142 episodes in progress
including Oban Star Racers, W.I.T.C.H., Super Robot Monkey Team
Hyperforce Go!, A.T.O.M. – Alpha Teens on Machines and a new
season of Sonic X.
23
consumer
products
24
>> We are one of the few
independent agencies that
offers a full pan-European
licensing service
25
consumer
products
[continued]
highlights
13.3
10.7(4)
11.3
9.3(2)
9.3(3)
6.5
8.5(1)
>>> Power Rangers performing
strongly following introduction
to all Disney Stores within Europe
>>> Licensing and merchandising
rights secured to Sonic X
>>> Appointed Hasbro as master toy
licensee for A.T.O.M. – Alpha
Teens on Machines
2000
2001
2003
2004
Revenue
[$ million]
5.2(2)
>>> Agency rights to Oban Star
Racers, PUCCA and Marathon’s
next three series secured
>>> Agency rights to Totally Spies!
2002
(1)
5.5(5)
(4)
4.9
4.6
4.4(3)
2001
2002
4.0
5.2(6)
2003
2004
2.2
extended until 2007
2000
26
(1)
(2)
EBITDA
Results for the 13-month period ended June 30, 2001.
(3)
[$ million]
(4)
Results for the 15-month period ended September 30, 2002.
(5)
Pro forma stated after excluding non-recurring relocation charges
of $0.3 million.
(6)
(7)
Consistent with prior years, EBITDA is stated before programme
amortisation, impairment and depreciation. EBITDA less depreciation,
amortisation and impairment is equivalent to operating income.
(7)
“Along with a strong performance from master toy licensee Bandai, DCP has
outperformed the minimum guarantee for Power Rangers for the first year
of the three-year term ensuring that we are well placed to capitalise on this
property in the coming fiscal year.”
Our flagship property, Power Rangers, continues to perform
strongly and, following the appointment of Disney Consumer
Products (DCP) as agent at the beginning of the fiscal year,
merchandise based on this property is on sale in every Disney
Store throughout Europe. Along with a strong performance
from master toy licensee Bandai, this has ensured that DCP
has outperformed the minimum guarantee in respect of this
property for the first year of the three-year term and ensures
that we are well placed to capitalise on this property in the
coming fiscal year.
Other properties which performed particularly well for us this
fiscal year included the Jetix and Fox Kids brands, PUCCA, Sonic X
and Shaman King.
Securing rights to strong new properties is important to our
future growth. Pursuant to this objective we have continued
to expand our consumer products portfolio by adding the
worldwide (excluding North America and Asia) licensing and
merchandising rights to the television and video rights that we
had already acquired for Sonic X, the latest incarnation of the
iconic property, Sonic the Hedgehog.
Additionally, we secured the licensing rights for Oban Star Racers
and, as part of a co-production agreement with Marathon, we
will act as licensing agent for the next three series that we will
co-produce with them. We also renewed our licensing and
merchandising rights to Marathon’s top-rated animated series
Totally Spies! in all territories in Western Europe (excluding
Germany, Greece and Austria) until 2007.
There continues to be strong interest in our properties for
licensing purposes. For example, we have already appointed
FEVA as the master toy licensee for Sonic X and Hasbro, one
of the largest toy manufacturers in the world, as the master toy
licensee for A.T.O.M – Alpha Teens on Machines.
Home entertainment remains an important part of our consumer
products business, and the strongest properties in this respect
were Spiderman and Power Rangers, distributed by Buena Vista
Home Entertainment, and Shaman King and Sonic X which are
represented by Jetix Consumer Products.
Our publishing activities, which cover magazines based on our
channels as well as specific properties within our library, also
had a good year and saw the launch of the first ever Jetix
branded magazine in the UK.
Our promotions activities also performed well. Our first panEuropean promotion with McDonalds featuring Gadget and the
Gadgetinis, Medabots, Power Rangers and Totally Spies! was a
major success with millions of toy premiums being sold. On the
back of this success we have secured another pan-European
promotion for 2005.
Ch!pz, the band formed last year in conjunction with Glam Slam
and EMI Music Publishing continues to go from strength to
strength in the Netherlands with its first album achieving gold
status. Subsequent to the year end, they released their fourth
single, 1001 Arabian Nights, which has already achieved platinum
status. We expect to conclude an agreement shortly which will
see Ch!pz debut in both the UK and Germany in 2005.
27
board of
directors
28
from left to right
PAUL TAYLOR
Olivier Spiner
Martin Weigold
OLIVER FRYER
Chief Executive Officer
Director of International Affairs
Chief Financial Officer
General Counsel
Paul Taylor was appointed Chief
Executive Officer in November 2004
having served as Interim CEO since
July 2004. In this role, he is responsible
for leading the continued growth of
all Jetix Europe’s businesses. Mr. Taylor
spent 5 years at BSkyB and was
General Manager of Movies & PayPer-View when he left to join Jetix
Europe. Prior to that he served as
Director of Advertising Sales at UK
Gold and UK Living. Mr. Taylor also
worked at Channel Four from 1992
to 1996, and held posts at various
advertising agencies including JWT,
McCanns, Lowe Howard-Spink and
Geers Gross.
Olivier Spiner was appointed as a
member of the board of management,
Director of International Affairs in
November 1999 and is responsible
for Jetix Europe’s co-production and
corporate activities. Prior to joining
Jetix Europe he served as Deputy
General Manager of Saban
International Paris from 1996 and
before this, from 1982, he held the
positions of Deputy General Manager
and Chief Financial Officer at
Créativité and Développement.
Martin Weigold was appointed as
Chief Financial Officer in December
1999. He is also a member of the
board of management. He was
previously Vice President of Finance
at Walt Disney Television International
where he was actively involved in the
launching of Disney Channels in
France, Spain, Italy and Germany
and also served as a Director of
Super RTL, the German free-to-air
broadcaster. From 1990 to 1996,
he worked in the City of London as
a venture capitalist and from 1987
to 1990 he worked as a management
consultant with Arthur Andersen.
Oliver Fryer was appointed a member
of the board of management in
September 2003. In his role, he is
responsible for all of Jetix Europe’s
contractual, legal and business affairs
issues. He previously served as
Director of Legal and Business Affairs
for Jetix Europe since June 2001.
Before this, Mr. Fryer worked for
The Simkins Partnership and for
Zenith Entertainment plc, where
for several years he was Director
of Legal and Business Affairs.
29
supervisory
board
Thomas Staggs
Philippe Laco
Chairman of the Supervisory Board
Supervisory Board Member
Tom Staggs was appointed as Chairman of the Supervisory Board in
November 2001. He is currently Senior Executive Vice President and
Chief Financial Officer of The Walt Disney Company and a member
of Disney’s executive management committee, with responsibility for
the company’s worldwide finance organisation, controller functions,
acquisitions, investor relations, treasury activities, information systems,
real estate and taxes. Mr. Staggs joined Disney in 1990 as Manager of
Strategic Planning. In 1995 he became Vice President of Planning and
Development and in 1998 Mr. Staggs became Executive Vice President
and Chief Financial Officer.
Philippe Laco was appointed as a member of the Supervisory Board in
November 2001. He currently serves as a Country Manager for Disney’s
businesses in Southern Europe (France, Benelux, Iberia, Italy) and Africa.
He is also President of The Walt Disney Company (France) S.A.S. and has
served since 1999 as Country Manager for Disney businesses in France
and the Benelux countries. Mr. Laco joined Disney in 1996, as Vice
President and Managing Director, and was responsible for launching The
Disney Channel in France. Between 1991 and 1996, Mr. Laco held various
management positions with Warner Music France. Prior to this, from
1982 to 1991, Mr. Laco held management positions with Polygram.
Claus Holst-Gydesen
Peter Murphy
Claus Holst-Gydesen was appointed as a member of the Supervisory
Board in November 2001. He is currently Managing Director of The Walt
Disney Company (Germany) GmbH and serves as Country Manager for
Disney’s businesses in Northern Central and Eastern Europe (Russia,
Poland, Nordic and GSA). Mr. Holst-Gydesen joined Disney in 1995 as
General Manager of Buena Vista Home Entertainment in Germany,
Switzerland and Austria, with responsibility for distribution of Disney’s
motion pictures in home entertainment formats. Prior to that, Mr HolstGydesen held various sales, marketing and management positions with
both MD Foods and the Lego Company.
Peter Murphy was appointed as a member of the Supervisory Board in
November 2001. He has served since January 2000 as Senior Executive
Vice President and Chief Strategic Officer of The Walt Disney Company
and a member of Disney’s executive management committee, with
responsibility for strategy, business development, technology and longterm planning. Mr. Murphy joined Disney’s Strategic Planning department
in 1988 as a senior planning analyst, becoming Senior Vice President and
Chief Financial Officer of ABC, Inc., Disney’s broadcasting and cable
programming unit in 1997.
Antoine Jeancourt-Galignani
Antoine Jeancourt-Galignani was appointed as a member of the
Supervisory Board in November 2001. He currently serves as Chairman
of Gecina, a Paris based property company. Mr. Jeancourt-Galignani is
also the Chairman of the Supervisory Board of Euro Disney SCA and a
director of Société Générale, Total, AGF and Kaufman & Broad SA. Prior
to this he served as the Chairman and CEO of AGF, the second largest
French insurance company, and as President and subsequently Chairman
of Banque Indosuez. He is also a member of the International Business
Leaders Advisory Council to the Mayor of Shanghai, which he chaired
from 1998 to 2000.
30
corporate
governance
The Tabaksblat Code (“the Code”) was published in December
2003 and took effect on January 1, 2004. It applies with respect
to Dutch companies from the financial year commencing at that
date or thereafter. Therefore the Company became subject to
the Code from 1 October 2004 and was not subject to the Code
during this financial year. However, as is generally recommended
in the Code, the Management and Supervisory Boards of the
Company set out below their report on the Company’s intentions
regarding compliance from October 1, 2004 and thereafter.
I.1 Compliance and Enforcement
The Company is already compliant with the majority of the
Code’s principles and best practice recommendations. It is the
intention of the Company’s Boards that this level of compliance
increases and that the Company be generally compliant with the
provisions of the Code. A Compliance Policy is being drawn up
and will be presented to the Company’s AGM of its shareholders
in March 2005 (at which this report and the accounts will be
submitted for approval and adoption). This Compliance Policy
will incorporate reference to areas of existing and improved
future compliance as well as specifically identifying and
explaining any areas where the Boards of the Company have
elected to deviate from the Code or to delay compliance. It will
also set out any necessary changes to the Articles of Association
of the Company and its other rules and regulations.
II.2 Management Board Remuneration
In the majority of areas the Company is or will shortly be fully
compliant with the Code. We have set out below where we are
or intend to be fully compliant within the fiscal year ended
September 30, 2005 and explain those areas where the
procedures of the Company may not be fully compliant with
those of the Code.
Full compliance
I.2 Submission of Changes
Full compliance
II.1 Management Board Role and Procedure
Full compliance
Full compliance apart from the following:
II.2.1 and II.2.2 Stock Options
The current option scheme does not include any formal
conditional criteria following a grant of options. Additionally,
options can be vested and exercised over a period of four years
starting one year from the date of grant. It is not proposed to
amend this scheme as it broadly reflects that of the Company’s
majority shareholder Disney
II.3 Management Board Conflicts of Interest
Full compliance
III.1 Supervisory Board Role and Procedure
Full compliance
31
corporate
governance
[continued]
III.2 Supervisory Board Independence
III.7 Supervisory Board Remuneration
Full compliance. Please note the following however:
Full compliance
At present four of the five supervisory board members are
employees of Disney. It is intended that during the course of
the fiscal year ending September 30, 2005 the composition
of the supervisory board will change with the appointment of
an additional non-Disney connected member to replace one
of the Disney connected members
III.8 One-tier Management Structure
III.3 Supervisory Board Experience and Composition
Full compliance
III.4 Supervisory Board Chairman and Company Secretary
Full compliance
III.5 Supervisory Board Committees
Full compliance
III.6 Supervisory Board Conflicts of Interest
Full compliance
Not relevant
IV.1 Powers of Shareholders and General Meeting
Full compliance where relevant
IV.2 Depository Receipts
Not relevant
IV.3 Information to Shareholders
Full compliance
IV.4 Institutional Investors
Not relevant
V.1 Financial Reporting
Full compliance
V.2 External Auditor
Full compliance
V.3 Internal Auditor
Full compliance
V.4 Relationship between Auditor and Company
Full compliance
32
accounts
our accounts contents
34
35
36
37
38
39
Report of the Independent Auditors
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders’ Equity
Notes to Consolidated Financial Statements
Report of Independent Auditors
To the Shareholders of Jetix Europe N.V.
We have audited the accompanying consolidated balance sheets of Jetix Europe N.V. and subsidiaries (“the
Company”), as of September 30, 2004 and as of September 30, 2003 and the related consolidated statements of
operations, cash flows and shareholders’ equity for the years then ended which have been prepared on the basis
of accounting principles generally accepted in the United States of America. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America.
These standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Jetix Europe N.V. and its subsidiaries at September 30, 2004 and September 30, 2003 and the
results of their operations and their cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
This report, including the opinion, has been prepared for and only for the Company’s members as a body in order
to meet the provisions of the listing agreement with the Euronext Stock Exchange in Amsterdam and for no other
purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior
consent in writing.
PRICEWATERHOUSECOOPERS LLP
Chartered Accountants and Registered Auditors
London, United Kingdom
January 18, 2005
34
Consolidated Balance Sheets
as of September 30, 2004 and September 30, 2003
ASSETS
2004
$’000
2003
$’000
Cash and cash equivalents
Accounts receivable, net of allowance of $2,568,000 and $3,040,000 respectively
Prepaids and other assets
Programme rights, net
Deferred income taxes
Investments in equity affiliates
Property and equipment, net
Goodwill, net
Amounts due from related parties
86,022
49,051
5,798
116,207
12,101
2,134
3,054
28,016
20,412
51,450
35,967
7,801
125,225
10,770
1,210
4,030
28,016
10,917
Total assets
322,795
275,386
2004
$’000
2003
$’000
10,253
49,035
14,033
10,477
16,200
1,184
14,181
39,192
4,131
12,539
–
1,340
101,182
71,383
21,629
449,751
(204,114)
(52,128)
6,475
21,426
445,659
(204,114)
(57,956)
(1,012)
Total shareholders’ equity
221,613
204,003
Total liabilities, minority interests and shareholders’ equity
322,795
275,386
Notes
6
9
12
7
8
16
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS’ EQUITY
10
16
11
Accounts payable
Accrued liabilities
Deferred income
Amounts due to related parties
Other liabilities
Minority interests
Total liabilities and minority interests
19
83,196,912 (2003 – 82,519,307) ordinary shares of m0.25 each and
100 (2003 – 100) priority shares of m0.25 each
Additional paid-in capital
Other reserves
Accumulated deficit
Accumulated other comprehensive income/(loss)
The accompanying notes are an integral part of these consolidated financial statements.
35
Consolidated Statements of Operations
Year ended September 30, 2004 and September 30, 2003
Notes
18
Revenues
18
Costs and expenses
Depreciation, amortisation and impairment
Operating income
14
15
Other income/(expense):
Interest income
Interest expense
Gain/(loss) on foreign exchange
Equity in income of affiliates
Total other income, net
12
Income before tax and minority interest
Tax
Minority interest
Net income
20
2003
$’000
165,345
146,825
(114,394)
(45,804)
(90,843)
(51,824)
5,147
4,158
2,814
(1,809)
648
810
10,550
(8,879)
(1,861)
1,655
2,463
1,465
7,610
(1,972)
190
5,623
(1,239)
(556)
5,828
3,828
2004
2003
7.1
6.9
4.6
4.6
82,618
84,156
82,519
82,614
EARNINGS PER SHARE (CENTS)
Basic Earnings per share
Diluted Earnings per share
Weighted average number of ordinary shares outstanding (’000)
– Basic
– Diluted
36
2004
$’000
Consolidated Statements of Cash Flows
Year ended September 30, 2004 and September 30, 2003
2004
$’000
2003
$’000
5,828
3,828
43,008
1,884
912
(472)
(810)
(190)
(1,331)
49,373
2,451
–
(537)
(1,655)
556
(615)
(5,474)
(4,082)
(33,990)
865
(2,445)
12,291
(1,331)
16,200
(4,283)
(89)
(44,068)
(389)
4,830
985
23
–
Net cash generated by operating activities
30,863
10,410
INVESTING ACTIVITIES
Repayments from equity affiliates
Acquisition of minority shares
Purchases of property and equipment
–
–
(1,169)
2,297
(20,800)
(1,242)
Net cash used in investing activities
(1,169)
(19,745)
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash generated by operating activities:
Amortisation and impairment of programme rights
Depreciation of property and equipment
Impairment of property and equipment
Provision for doubtful debts
Equity in income of affiliates
Minority interest
Deferred tax
Changes in operating assets and liabilities(1):
Accounts receivable
Amounts due from related parties
Programme rights
Prepaids and other assets
Accounts payable
Accrued liabilities and deferred income
Amounts due to related parties
Other liabilities
FINANCING ACTIVITIES
Exercise of Stock Options
4,295
–
Net cash generated by financing activities
4,295
–
NET CHANGE IN CASH AND CASH EQUIVALENTS FROM
OPERATING, INVESTING AND FINANCING ACTIVITIES
NET INCREASE/(DECREASE) IN CASH DUE TO FOREIGN CURRENCY FLUCTUATIONS
33,989
583
(9,335)
(415)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
34,572
51,450
(9,750)
61,200
CASH AND CASH EQUIVALENTS, END OF YEAR
86,022
51,450
1,316
1,809
2,573
14,136
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR TAXES
CASH PAID FOR INTEREST
(1)
Changes in operating assets and liabilities include the impact of foreign currency translation movements.
SIGNIFICANT NON-CASH TRANSACTIONS
On July 18, 2003, the long-term note receivable from a subsidiary of ABC Family Worldwide, Inc. (ABCW) of
$104.1 million, was transferred to another subsidiary of ABCW against the assumption of the long-term note
payable to an affiliate of ABCW of $104.1 million (see note 16).
The Company has recorded revenues and costs of $2.7 million and $2.8 million in relation to non-cash barter
transactions during the years ended September 30, 2004 and September 30, 2003 respectively.
Prior to September 3, 2003, a subsidiary of ABCW, also a shareholder of the Company, had provided cumulative
funding of $2.8 million to Fox Kids Poland Limited (FKP). On September 3, 2003, the subsidiary made a capital
contribution of its loan receivable to the Company (see note 16).
37
Consolidated Statements of
Shareholders’ Equity
BALANCE AT
SEPTEMBER 30, 2002
Net income
Foreign currency
translation adjustments
Interest receivable on note
contributed for equity
Interest received on note
contributed for equity
Redemption of loan
Other capital contribution
Comprehensive income
BALANCE AT
SEPTEMBER 30, 2003
Additional
paid-in
capital
$’000
21,426
442,351
–
–
–
–
3,828
–
–
–
–
–
–
–
–
(8,687)
–
–
–
–
–
–
14,355
104,114(2)
–
–
–
–
–
–
–
–
–
–
–
–
2,184
–
–
–
Other(1)
reserves
$’000
(204,114) (109,782)
–
–
3,308(3)
–
–
21,426
445,659
Note
receivable
contributed
for equity
(Note 16)
$’000
Accumulated(4)
other
comprehensive
income
(loss)
$’000
Ordinary
and
priority
shares
(Note 19)
$’000
–
(204,114)
Accumulated
deficit
$’000
(61,784)
–
–
(57,956)
Comprehensive
income
(loss)
$’000
632
–
(1,644)
3,828
(1,644)
(1,012)
Net income
Foreign currency
translation adjustments
Share options Exercised
–
–
–
–
5,828
–
5,828
–
203
–
4,092
–
–
–
–
–
–
7,487
–
7,487
–
Comprehensive income
–
–
–
–
–
–
13,315
21,629
449,751
BALANCE AT
SEPTEMBER 30, 2004
(204,114)
–
(52,128)
6,475
38
(1)
Deemed distribution of cash and note payable at IPO.
(2)
A long-term note receivable from a subsidiary of ABCW of $104.1 million was included within shareholders’
equity as required by EITF 85-01, “Classifying Notes Received for Capital Stock”. The note was transferred to a
subsidiary of ABCW in exchange for that subsidiary assuming the long-term note payable to an affiliate of
ABCW of $104.1 million (see note 16).
(3)
Includes $2.8 million additional paid-in capital contributed by one of the shareholders (see note 16).
(4)
This consists solely of cumulative translation adjustments.
1.
DESCRIPTION OF BUSINESS, ORGANISATION AND BASIS OF PRESENTATION
Description of business
Jetix Europe N.V. (together with its subsidiaries, “the Company”) is a pan-European integrated children’s
entertainment company with localised television channels, online & interactive, programme distribution and
consumer products (licensing, merchandising and home entertainment) businesses.
Channel and online operations began in October 1996 with the launch of the first channel (branded Fox
Kids) in the United Kingdom. In the last 8 years, the Company has established operations in most European
countries and together with its affiliates is currently broadcasting 14 children’s television channel feeds in
17 different languages in 58 countries via cable and DTH satellite transmission. Main channel markets
currently include France, Germany, Italy, the Netherlands, Poland, Scandinavia, Spain, the United Kingdom and
various countries in the Middle East and Central and Eastern Europe. The Company also operates 16 fully
localised websites.
The Company’s programme distribution business is based on rights to children’s programming from the Jetix
Library. The Jetix Library comprises the following rights;
•
The rights contributed by, acquired from or co-produced with ABC Family Worldwide, Inc. (ABCW) or
its affiliates.
•
Other rights acquired from or co-produced with third parties.
The Jetix Library is one of the largest and most recognised Libraries of children’s programming in the world.
The Company’s consumer products business covers many European countries and includes operations in
France, Germany, Italy, Spain, the Netherlands, the United Kingdom and Israel.
Organisation
Jetix Europe N.V. (Jetix Europe) was incorporated in the Netherlands in November 1999. At the initial public
offering of the ordinary shares of Jetix Europe (IPO) in November 1999, in consideration for 62.5 million
shares in Jetix Europe, Fox Family Worldwide, Inc. (FFWW) contributed to Jetix Europe, at book value, its
interests in the subsidiaries and businesses specifically noted overleaf.
On October 24, 2001, The Walt Disney Company (Disney) concluded the acquisition of the Company’s
majority shareholder, FFWW, and thereby assumed 75.7% ownership of Jetix Europe. As of that date, FFWW
changed its name to ABCW. ABCW indirectly holds 75.1% of the shares in Jetix Europe at September 30, 2004
(75.7% at September 30, 2003).
Change of Name
During the current financial year Fox Kids Europe N.V. changed its name to Jetix Europe N.V.
39
1.
DESCRIPTION OF BUSINESS, ORGANISATION AND BASIS OF PRESENTATION (continued)
Basis of presentation
These consolidated financial statements do not constitute statutory accounts under Dutch Law. Dutch statutory
accounts are being produced and will be filed at the Chamber of Commerce, PO Box 378, 1200 AJ, Hilversum,
The Netherlands. A copy of the Dutch statutory accounts will be available from Jetix Europe’s registered
office, Bergweg 50, 1217 SC, Hilversum, The Netherlands.
The consolidated financial statements of Jetix Europe reflect the financial statements of:
Company Name
Country of
Incorporation
Jetix Entertainment Limited (formerly Fox Kids Entertainment Limited)
Jetix Entertainment Spain SL (formerly Fox Kids Entertainment Spain SL)
Jetix Europe Channels B.V. (formerly Fox Kids Europe Channels B.V.)
Jetix Europe Limited (formerly Fox Kids Europe Limited)(1)
Jetix Europe Properties (Luxembourg) Sarl (formerly Fox Kids Europe
Properties Sarl)
Jetix Hungary Financial Management Limited (formerly Fox Kids Financial
Management (Hungary) Limited)(5)
Fox Kids Germany GmbH
Fox Kids Israel Limited
Fox Kids Italy Srl
Fox Kids Poland Limited(1)
Jetix Services B.V. (formerly Fox Kids Services B.V.)
Jetix Consumer Products UK Limited (formerly Active Licensing UK Ltd)(1)
Jetix Consumer Products Italy Srl (formerly Ideal Licensing Italy Srl)(1)
Active Licensing France SAS(1)(3)
Jetix Poland NV (formerly Fox Kids Poland NV)(1)
Jetix Consumer Products Israel Limited (formerly Active Licensing
Israel Limited)
Kids Entertainment Services EPE
United Kingdom
Spain
The Netherlands
United Kingdom
Luxembourg
Fox Kids Play B.V. (merged into Jetix Europe Channels B.V.
effective October 1, 2003)(4)
Fox Kids Israel Enterprises B.V. (merged into Jetix Europe Channels B.V.
Active Licensing Germany GmbH (merged into Fox Kids Germany GmbH
The Netherlands
Equity Interest
(100% unless
otherwise stated)
Hungary
Germany
Israel
Italy
Isle of Man
The Netherlands
United Kingdom
Italy
France
The Netherlands
Israel
80%
Greece
The Netherlands
Germany
Fox Kids Scandinavia AS was liquidated during the year ended September 30, 2003.
Fox Kids AB (in the process of being liquidated)
Sweden
The Company also has the following affiliates accounted for under the equity method:
Company Name
Country of
Incorporation
Fox Kids España SL(1)
TV10 Holdings LLC(1)
50%
Spain
The United States
50%
of America
The Netherlands 50%
TV10 B.V.(1)
(1)
(2)
(3)
(4)
(5)
40
Equity Interest
These entities were contributed to Jetix Europe by ABCW at the IPO.
During the year ended September 30, 2003, the equity interest in Fox Kids Israel Enterprises B.V.
increased from 50.5% to 100%. For details of the acquisition refer to note 4.
Effective October 1, 2002, Fox Kids France SAS was merged into Active Licensing France SAS.
The Company sold 50% of its shares in Fox Kids Play B.V. to Visiware S.A. in December 2002. Accordingly,
Fox Kids Play B.V. was equity accounted for in the year ended September 30, 2003. During the current
year, the Company reacquired 50% of the shares in Fox Kids Play B.V. and merged it into Jetix Europe
Channels B.V. effective from October 1, 2003.
In July 2003 the Company acquired the remaining 2.4% minority interest in Jetix Hungary Financial
Management Limited for a nominal price.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements comprise the accounts of Jetix Europe N.V. consolidated with the
financial statements of those entities under its control, including those entities and businesses contributed
by ABCW at the IPO.
The Company uses the equity method of accounting for investments in affiliates where it does not have the
majority of equity or the risks and rewards but where it does exercise significant influence.
All material intercompany accounts and transactions have been eliminated.
General Presentation
In circumstances where the classification of certain balances has changed from the previous year, the prior
year comparatives have been reclassified accordingly.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of
three months or less.
Revenue recognition – Channels & Online
Subscriber fees receivable from cable operators and DTH broadcasters are recognised as revenue over the
period for which the channels are provided and to which the fees relate. Subscriber revenue is recognised
as contracted, based upon the level of subscribers. Television advertising revenue is recognised as the
commercials are aired. In certain countries, the Company commits to provide advertisers with certain rating
levels in connection with their advertising. Revenue is recorded net of estimated shortfalls, which are
usually settled by providing the advertiser additional advertising time. In accordance with EITF 99-17,
“Accounting for Advertising Barter Transactions”, barter revenues, representing the receipt of goods and
services in exchange for advertising time on a television station, are recognised upon the airing of an
advertisement during such advertising time, where the fair value of the advertising surrendered is
determinable based on the Company’s own historical practice of receiving cash or other consideration that
is readily convertible to a known cash amount for similar advertising from buyers unrelated to the
counterparty in the barter transaction.
Revenue recognition – Programme Distribution
Programme distribution revenue is recognised when the relevant agreement has been entered into, the
product is available for delivery, collectability of the cash is reasonably assured and all the Company’s
contractual obligations have been satisfied. This is in accordance with SOP 00-2.
Revenue recognition – Consumer Products
Revenues from home entertainment, licensing and merchandising agreements which provide for the receipt
by the Company of non-refundable guaranteed amounts, are recognised when the licence or distribution
period begins, the payments are due under the terms of the contract, collectability is reasonably assured
and all performance obligations of the Company have been fulfilled. Amounts in excess of minimum
guarantees under these agreements are recognised when earned. Amounts received in advance of
recognition of revenue are recorded as deferred revenue.
Revenue is recorded net of Value Added Tax (VAT).
41
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Advertising expenses
Advertising costs are expensed as incurred. For the year ended September 30, 2004 and year ended
September 30, 2003 the Company incurred advertising expenses totalling $0.7 million and $0.9 million
respectively.
Programme rights
The Company adopted SOP 00-2 and SFAS No. 139 “Rescission of FASB Statement No. 53 and amendments
to SFAS Nos. 63, 89 and 121” as of July 1, 2001. Programme rights that are produced are stated at the lower
of cost less accumulated amortisation or fair value. Amortisation charge is based on the ratio of the current
period’s gross revenues to estimated remaining total gross revenues from such programmes. Each year
management revises estimates, based on historical and anticipated trends, of future revenue for each
programme property.
If estimated undiscounted cashflows from a programme are insufficient to recover the unamortised costs,
the unamortised programming costs are written down to fair value.
Where television programme rights are licensed from third parties for a defined period for broadcasting on
the Company’s channels, usually for periods of between 2 and 5 years, these are amortised in accordance
with their expected usage over that defined period. Acquired television programme rights and related
liabilities are recorded when the licence period begins and the programme is available for use.
Minority interest
Minority interests in loss-making subsidiaries are recognised only to the extent of the minority’s share of
net assets or when the minority shareholder has an obligation and an ability to fund such losses.
Property and equipment
Property and equipment, consisting mainly of computer equipment and office furniture and fittings, is
stated at cost less accumulated depreciation. Depreciation is provided using the straight-line method over
an estimated useful life of 3 to 10 years.
Leasehold improvements are amortised over the shorter of the term of the lease or the estimated life of
the improvements. Repair and maintenance costs are expensed as incurred.
The Company periodically reviews the carrying amount of property and equipment to determine whether
current events or circumstances warrant impairment to the carrying value and/or the estimates of useful
lives. When these events or circumstances arise that indicate that assets may be impaired, the assets are
written down to their recoverable amount, in accordance with SFAS No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets”, which was adopted by the Company on July 1, 2001.
Trade receivables
Accounts receivable are reported at their net realisable or expected cash value.
42
2.
Goodwill
The Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”, as of July 1, 2001. In
accordance with SFAS No. 142, goodwill recognised on an acquisition is calculated as the excess of the fair
value of the consideration over the fair value of the assets and liabilities acquired.
Goodwill is not amortised but tested for impairment on an annual basis and whenever indicators of impairment
arise. The Company has determined that each business segment comprises its own reporting unit. There was
no impairment charge for the year ended September 30, 2004 (year ended September 30, 2003 – $nil).
Investments in equity affiliates
Investments in, and advances to equity affiliates, are accounted for under the equity method. Under this
method of accounting, the carrying value of the investment is increased or decreased by the Company’s
share of income or losses and decreased by any dividends.
Foreign currency translation
The functional currency of each of Jetix Europe’s subsidiaries is the currency of the primary economic
environment in which each subsidiary operates. Accordingly, assets and liabilities recorded in foreign
currencies in the balance sheets of Jetix Europe’s subsidiaries are translated at the exchange rate between
such functional currency and the US dollar at the balance sheet date except for the share capital and
reserves of those subsidiaries, which are translated at historic rates. Revenues and expenses are translated
at the average rate of exchange prevailing during the period. Translation adjustments resulting from this
process are charged or credited to accumulated other comprehensive income.
Gains and losses arising from transactions denominated in currencies other than the functional currency are
included in determining net income for the period.
Fair value of financial instruments
SFAS No. 107, “Disclosures About Fair Value of Financial Instruments”, requires disclosure of fair value
information about financial instruments whether or not recognised in the consolidated balance sheet.
The amounts reported in the consolidated balance sheet for cash and cash equivalents, accounts receivable
and accounts payable approximate fair value due to the short-term maturity of these instruments.
Income taxes
In accordance with SFAS 109, “Accounting for Income Taxes”, deferred income taxes are recognised using
the asset and liability method. Deferred tax balances are established for the difference between the financial
reporting and income tax bases of assets and liabilities as well as operating loss and tax credit carry-forwards.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be realised. Deferred tax assets
and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
43
2.
Earnings per share
Basic earnings per ordinary share is calculated using income available to ordinary shareholders divided by
the weighted average number of shares outstanding. The difference between basic and diluted earnings per
share arises after giving effect to the dilutive effect of all dilutive potential ordinary shares equivalents that
were outstanding during the period.
Use of estimates
The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America (US GAAP) requires management of the Company to make
estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
Stock option plan
The Company accounts for stock-based compensation using the intrinsic value method prescribed in APB
No. 25, “Accounting for Stock Issued to Employees”, and related interpretations. There are no performance
criteria attached to the exercise of the options. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of Jetix Europe’s stock at the date of grant over
the amount an employee must pay to acquire the stock. The Company has also disclosed below the impact
on earnings that would result if stock options had been valued at their fair value at the grant date, in
accordance with SFAS No. 123, “Accounting for Stock-Based Compensation”.
The Company has adopted the disclosure provision of SFAS No.123 and pursuant to its provision elected to
continue using the intrinsic value method of accounting for stock-based awards granted to employees in
accordance with APB 25. Accordingly, the Company has not recognised compensation expense for its stockbased awards to employees. The following table reflects pro forma net income and earnings per share had
the Company elected to adopt the fair value approach of SFAS No.123:
Net income
As reported
Adjusted for notional expense under FAS 123
Pro forma net income
Basic earnings per share (cents)
As reported
Pro forma
Diluted earnings per share (cents)
As reported
Pro forma
2004
$’000
2003
$’000
5,828
(1,853)
3,828
(1,180)
3,975
2,648
7.1
4.8
4.6
3.2
6.9
4.7
4.6
3.2
These pro forma amounts may not be representative of future disclosures since the estimated fair value of
stock options is amortised to expense over the vesting period and additional options may be granted in
future years.
44
2.
No options were granted during the current year. The weighted average fair value of options at their date of
grant during the prior year was $2.88.
The estimated fair value of each option granted is calculated using the Black-Scholes option pricing model.
The weighted average assumptions used in the model were as follows:
2003
Risk free interest rate
Expected years from grant until exercise
Expected stock volatility
Dividend yield
4.0%
4
60%
0%
Accounting Changes
In December 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation 46R which
became effective for the Company during the year ended September 30, 2004. Variable interest entities
(VIEs) are primarily entities that lack sufficient equity to finance their activities without additional financial
support from other parties or whose equity holders lack adequate decision making ability. All VIEs with
which the Company is involved must be evaluated to determine the primary beneficiary of the risks and
rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting
purposes. The Company concluded that their equity investments do not require consolidation as either they
are not VIEs or in the event that they are VIEs, the Company is not the primary beneficiary.
3.
REORGANISATION
Effective October 1, 2003, Fox Kids Play B.V. and Fox Kids Israel Enterprises B.V. were merged with Jetix
Europe Channels B.V. (formerly Fox Kids Europe Channels B.V.).
Effective October 1, 2003, Active Licensing GmbH was merged with Fox Kids Germany GmbH.
Effective October 1, 2002, Fox Kids France SAS was merged with Active Licensing France SAS (formerly
Saban Consumer Products France SAS).
4.
ACQUISITION
Fox Kids Israel B.V.
On December 19, 2002, as a direct consequence of the change of control of our majority shareholder
triggering an option held by Middle East Communication Holdings B.V. (MECH BV), the Company purchased
the 49.5% of shares in Fox Kids Israel Enterprises B.V. not owned by the Company from MECH BV as well as
the Israeli rights to the Saban programme library and certain other Israeli rights outside the formal process
set out in the option agreement. The total consideration for the above transaction was $20.8 million,
comprised of $20.5 million of cash and $0.3 million professional fees directly associated with the acquisition.
45
4.
ACQUISITION (continued)
The following table summarises the final purchase price allocation of the programme library and Fox Kids
Israel Enterprises B.V.’s assets acquired and liabilities assumed at the date of acquisition.
$’000
4,873
(4,125)
Assets (primarily receivables)
Liabilities (primarily accrued expenses)
748
370
2,112
Share of 49.5% acquired
Programme Library
Fair value of net assets and programme library acquired
Goodwill
2,482
18,318
Purchase consideration
20,800
Goodwill was assigned to the Channels & Online reporting unit.
5.
RELOCATION EXPENSES
The Company relocated its operations in the UK and France to Disney’s premises in these markets during
the year. The Company incurred a charge of $8.0 million resulting from this relocation, which is included
in Costs and Expenses. The charge recognised includes a provision in respect of the anticipated costs of
fulfilling the Company’s existing lease commitments of $4.4 million (comprised of $3.2 million of lease exit
costs and $1.2 million of refitting costs), I.T. reconfiguration of $1.2 million, move costs of $0.6 million,
impairment of certain fixed assets of $0.9 million and redundancy costs resulting from the contracting out
of certain functions (see note 16) to Disney of $0.9 million.
In order to induce the Company to relocate its operations in the UK and France, Disney provided the
Company with a $3.1 million operating lease incentive which, in accordance with US GAAP, is deferred and
recognised through the income statement over the term of the operating lease to which it relates.
6.
ACCOUNTS RECEIVABLE
Billed receivables
Accrued income
46
2004
$’000
2003
$’000
27,689
21,362
16,332
19,635
49,051
35,967
7.
PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Property and equipment
Leasehold improvements
Less accumulated depreciation and amortisation
8.
2004
$’000
2003
$’000
12,567
1,115
12,454
1,317
13,682
(10,628)
13,771
(9,741)
3,054
4,030
GOODWILL
At September 30, 2004 and September 30, 2003, goodwill was comprised of the goodwill of $18.3 million
arising on the acquisition of the minority interest in Fox Kids Israel during the year ended September 30,
2003 (see note 4) and the goodwill of $9.7 million arising from the acquisition of the Fox Kids Netherlands
Channel on December 1, 2000. The goodwill arising represents primarily the difference between the
carrying value of the investment in TV10 BV and the net book value of the Fox Kids Netherlands Channel
assets in TV10 BV. These assets were transferred from the Company’s equity affiliate, TV10 BV, to the
Company. This transaction has been accounted for as a reorganisation between companies under common
control and therefore the assets were transferred to Jetix at their carrying value.
Goodwill has been fully allocated to the Channels & Online business segment (see note 18). The goodwill is
not tax deductible.
The Company adopted SFAS No. 142 as of July 1, 2001. Accordingly there has been no amortisation charge
since that date. As a result of the annual impairment review carried out on September 30, there was no
impairment charge for the year ended September 30, 2004 (September 30, 2003 – $nil).
47
9.
PROGRAMME RIGHTS
Programme rights consist of the following:
2004
$’000
Programme rights cost
Less accumulated amortisation and impairment
2003
$’000
470,374
(354,167)
436,355
(311,130)
116,207
125,225
In accordance with SOP 00-2, the Company periodically performs a review of the fair value of the Jetix
library to determine whether any of the titles are impaired. This review compares the estimated remaining
ultimate revenues to be earned to the net book value by title for all properties in the Jetix library. Where
the estimated remaining ultimate revenues were lower than the net book value of a title, an impairment
was identified and the title was written down to fair value. During the year the Company recorded an
impairment charge of $5.0 million (year ended September 30, 2003 – $4.7 million) of which $2.6 million
results from a decision to no longer run certain titles within the library on our channels that are not
considered to be core to the Jetix brand.
The amortisation charge relating to programme rights for the year ended September 30, 2004 and September
30, 2003, was $38.0 million and $44.7 million respectively.
Of the net book value of programme rights at September 30, 2004, $89.8 million (year ended September
30, 2003 – $105.0 million) represents the rights of the Jetix library in the Company’s territories, with the
remainder being programming licensed from third parties for broadcasting by the channels operated by the
Company. At September 30, 2004 the net book value of programme rights included programmes in
production of $2.2 million (2003 – $4.8 million).
The Company expects to amortise the net book value of its programme rights on the following timescale:
Within one year
Within three years
Within five years
10.
30-40%
55-65%
80%
ACCRUED LIABILITIES
Accrued liabilities consist of the following:
Participation and royalty costs
Accrued programme costs
Payroll liabilities
Taxation
Relocation costs
Other accruals
48
2004
$’000
2003
$’000
10,715
15,141
6,578
3,503
821
12,277
9,404
7,972
4,318
2,289
–
15,209
49,035
39,192
11.
OTHER LIABILITIES
Other liabilities consist of the following:
Provision for lease exit costs
Operating lease incentive
2004
$’000
2003
$’000
3,200
13,000
–
–
16,200
–
The operating lease incentive and provision for lease exit costs are discussed in notes 5 and 16.
12.
TAX
The (provision)/benefit for income tax consists of the following:
2004
$’000
Income taxes
Other taxes
Deferred income taxes
2003
$’000
(2,049)
(1,254)
1,331
(1,050)
(804)
615
(1,972)
(1,239)
and are as follows:
2004
$’000
The Netherlands
Others
– Current
– Current
– Deferred
2003
$’000
(702)
(2,601)
1,331
(123)
(1,731)
615
(1,972)
(1,239)
The components of the (provision)/benefit for income taxes for the year ended September 30, 2004 and
the year ended September 30, 2003 were based upon the following sources of pre-tax income/(loss).
2004
$’000
The Netherlands
Others
2003
$’000
368
7,242
(7,573)
13,196
7,610
5,623
49
12.
TAX (continued)
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory
income tax rate of the Netherlands of 34.5% (2003 – 34.5%) to income before provision for income taxes
and minority interest is as follows:
2004
$’000
2003
$’000
Income before tax and minority interests
7,610
5,623
Income before tax and minority interests multiplied by statutory rate of corporation tax
2,626
1,940
(1,499)
(279)
3,321
(3,206)
(245)
1,254
(4,914)
(571)
4,773
(1,000)
207
804
1,972
1,239
Effects of:
Permanent differences
Equity of income in affiliates
Timing differences subject to valuation allowance
Statutory income tax difference
Adjustments to tax charge in respect of previous periods
Other taxes
Current tax charge for the year
Where the Company has provided for income taxes, the provisions have been calculated at the statutory
rates in the relevant jurisdictions.
Deferred taxes
Principal components of the deferred tax assets and liabilities are as follows:
2004
$’000
2003
$’000
Deferred tax assets
Net operating losses
Fixed assets
Other
73,370
1,896
1,980
63,907
1,360
5,585
Total
77,246
70,852
(65,145)
(60,082)
12,101
10,770
Valuation Allowance
Deferred tax
The estimated portion of the Deferred Income Tax Asset to be utilised during the year ended September 30,
2005 is $62,000.
Management has determined that as of September 30, 2004 approximately $65.1 million (year ended
September 30, 2003 – $60.1 million) of deferred income tax assets do not satisfy the recognition criteria
set forth in SFAS No 109. Accordingly a valuation allowance has been recorded for that amount.
The above amount relating to net operating losses results from approximately $480.5 million of tax net
operating loss carryforwards as at September 30, 2004, of which approximately $120.4 million have no
expiry date and approximately $360.1 million expire between 2005 and 2012. Realisation of these net
operating losses is dependent on generating sufficient taxable income prior to the expiration of the loss
carryforwards, subject to any limitations on their use.
50
13.
PENSION PLANS
Jetix Europe Limited operates a defined contribution group personal pension plan (the “Plan”) for United
Kingdom employees. The Plan is effectively a collection of individual personal pension plans. Jetix Europe
Limited contributes a percentage of eligible employees’ annual compensation, provided that the employee
contributes a minimum percentage. The contributions to the Plan are expensed as incurred and for the year
ended September 30, 2004 were $484,000 (year ended September 30, 2003 – $398,000).
14.
INTEREST INCOME
Interest receivable on bank deposits
Interest receivable from related party on long-term note
2004
$’000
2003
$’000
2,814
–
593
9,957
2,814
10,550
Included in interest receivable from related party on the long-term note for the year ended September 30,
2003 is $1.3 million received on the exchange of the loan notes receivable and payable (see note 16).
15.
INTEREST EXPENSE
Interest expense
Interest payable to related party on long-term note
16.
2004
$’000
2003
$’000
1,809
–
430
8,449
1,809
8,879
RELATED PARTY TRANSACTIONS
Sales to Parent Company
In previous years the Company secured non-European distribution rights to certain properties (in addition
to the European rights). The Company in turn sold these rights to the US and other non-European markets
to subsidiaries of its parent company ABCW. The Company has reduced the volume of rights acquired for
shows outside its core territories of Europe and the Middle East and as such made no revenue on sales to
ABCW or its subsidiaries during the year (year ended September 30, 2003 – $9,440,000). The amount
receivable at September 30, 2004 was $2.1 million (September 30, 2003 – $3.3 million).
51
16.
RELATED PARTY TRANSACTIONS (continued)
Inter-company Debt Arrangements
Prior to September 3, 2003, a subsidiary of ABCW, also a shareholder of the Company, had provided
cumulative funding of $2.8 million to Fox Kids Poland Limited (FKP). On September 3, 2003, the subsidiary
made a capital contribution of its loan receivable to the Company.
The long-term note payable of $104.1 million to a subsidiary of ABCW was assumed in partial consideration for
the transfer of certain rights to the Saban library to the Company at the IPO. The note bore interest quarterly,
commencing December 31, 1999, at an annual rate of 10.18%. The term of the note was 19 years and six months
and annual repayments of principal in the amount of $5.2 million began to fall due on June 30, 2000. Under the
terms of the note if repayments exceeded cash receipts under the note receivable (see below) then payments
could be deferred until such time as cash receipts exceeded payments but all deferrals would have fallen due
for payment on October 31, 2005.
The long-term note receivable of $104.1 million from a subsidiary of ABCW, was assigned to the Company
in exchange for ordinary shares. This note was included within shareholders’ equity in the prior year as
required by EITF 85-01, “Classifying Notes Received for Capital Stock”. The note bore interest quarterly,
commencing December 31, 1999, at an annual rate of 10.43%. The term of the note was 19 years and six
months and annual repayments of principal in the amount of $5.2 million would have begun to fall due on
June 30, 2006 with a voluntary annual prepayment schedule of such amounts from June 30, 2000.
On July 18, 2003, the long-term note receivable of $104.1 million from a subsidiary of ABCW was
transferred to another subsidiary of ABCW against the assumption of the long-term note payable to a
subsidiary of ABCW of $104.1 million. Additionally, an amount of $1.3 million was collected from ABCW
during the year to September 30, 2003, being the excess of the fair market value of the loan note
receivable over the fair market value of the loan note payable as of the date of the agreement (see note 12).
Logistical Services
Buena Vista International Television (BVITV), a Disney subsidiary, provides logistical services to the Company
in connection with its third party programme distribution. The Company pays BVITV on the basis of cost
plus a margin of 5% – 10% dependent on the service performed. Services were previously provided by an
ABCW affiliate under an agreement with substantially similar terms, which was terminated on May 1, 2002,
at which time the agreement with BVITV commenced. The amount charged in the income statement,
included in Costs and Expenses, relating to services provided by BVITV for the year ended September 30,
2004 was $3,718,000 (September 30, 2003 – $3,949,000). In addition BVITV incurs distribution expenses on
behalf of the Company whilst performing its services. These expenses are recharged back to the Company.
The amount charged to the income statement relating to distribution expenses incurred by BVITV on behalf
of the Company was $2,212,000 (2003 – $2,068,000). The amount owed to BVITV as at September 30, 2004
was $5,481,000 (2003 – $6,300,000).
Arrangements with Middle East Communication Holdings B.V. (MECH BV)
At October 1, 2002, MECH BV owned the shares in Fox Kids Israel Enterprises B.V. (FKI) not owned by the
Company and the Saban library rights in Israel. On December 19, 2002, the Company purchased MECH BV’s
shares in FKI as well as the Israeli rights to the Saban programme library and certain other Israeli rights (see
note 4). For the year ended September 30, 2004, the Company incurred charges of $nil (year ended
September 30, 2003 – $564,000) relating to the provision of programming and other services by Israel
Audiovisual Corporation (IAC) a related party of MECH BV. At the end of the year, the Company owed $nil
(2003 – $nil) to IAC.
52
16.
Arrangements with Sogecable S.A. (Sogecable)
The Fox Kids channel in Spain is operated by Fox Kids España SL, a company jointly owned by a subsidiary
of Sogecable and the Company. Sogecable and its subsidiaries provide office and sales administration,
programming and production facilities and services to Fox Kids Spain. The amount payable to Sogecable
for the year ended September 30, 2004 was $1,412,000 (year ended September 30, 2003 – $1,182,000).
The amount outstanding for the year ended September 30, 2004 was $599,000 (year ended September 30,
2003 – $1,655,000).
The Company leases rights to the Jetix Library to Fox Kids España SL. The lease fee for the year ended
September 30, 2004 was $4.1 million (September 30, 2003 – $2.2 million). The amount outstanding at
September 30, 2004 was $nil (September 30, 2003 – $0.5 million).
Arrangements with United Pan-Europe Communications N.V. (UPC)
The minority shareholder in Fox Kids Poland Limited, a subsidiary of UPC, provided certain transmission,
programming and marketing services to the Fox Kids channels in Poland and Central and Eastern Europe
during the year. The amount charged in the income statement, included in Costs and Expenses, in relation
to these services for the year ended September 30, 2004 was $985,000 (year ended September 30, 2003 –
$1,255,000). There were no amounts payable to UPC for these services at September 30, 2004 (September
30, 2003 – $nil).
Trademark arrangements
Disney has granted the Company a trademark licence without a fixed term to use the “Jetix” name and
related logos without material charge.
Buena Vista Home Entertainment (BVHE)
On May 5, 2003, the Company entered into an agreement with BVHE, a subsidiary of Disney, to grant BVHE
the sole and exclusive right to exploit on VHS and DVD formats all home entertainment distribution and
exhibition rights for certain major programmes including Power Rangers and some of our programmes
based upon Marvel comics characters. The Company will receive from BVHE a minimum guarantee against
certain royalties during the term of the agreement, which ends on May 4, 2006, of which $0.7 million was
earned in the year ended September 30, 2004 (2003 – $1.0 million). The receivable amount outstanding for
the year ended September 30, 2004 was $0.4 million (year ended September 30, 2003 $nil).
Disney Consumer Products (DCP)
On October 1, 2003 the Company appointed Disney Consumer Products (DCP), a subsidiary of Disney,
to act as its licensing agent within Europe and the Middle East in respect of the property, Power Rangers.
The Company will receive from DCP a minimum guarantee against certain royalties during the term of the
agreement, which ends on September 30, 2006. DCP will receive a commission of 30% of earned revenues in
return for its services. During the first year of the agreement, DCP will pay a marketing contribution of 20%
of the minimum guarantee to the Company. This marketing contribution will be reduced by the amount that
the gross revenues earned by Jetix exceed the minimum guarantee.
The Company earned $7.0 million in the year ended September 30, 2004 and $2.5 million was due from DCP
at September 30, 2004 (September 30, 2003 – $nil). The commission payable to DCP at September 30, 2004
was $1.3 million (September 30, 2003 – $nil).
53
16.
Super RTL
On September 30, 2003, the Company entered into a co-production agreement with Super RTL, a Disney
affiliate. Under the terms of the deal the Company will co-produce two series, namely W.I.T.C.H. and Oban Star
Racers, with Super RTL and a third party. No episodes relating to these series were delivered or revenues
recognised during the year ended September 30, 2004.
Arrangements with Visiware S.A. (Visiware)
In December 2002, the Company sold 50% of its shares in Fox Kids Play B.V. to Visiware. Fox Kids Play was
an existing entity owned by the Company that has been used as a vehicle for the joint venture with
Visiware to develop the interactive games business.
Effective October 1, 2003, the Company reacquired Visiware’s 50% shareholding in Fox Kids Play for a
nominal price and merged it into Jetix Europe Channels B.V.
Premises and facilities
During the year, the Company entered into arrangements with The Walt Disney Company Limited and The
Walt Disney Company (France) SAS with respect to the lease of office and broadcast operations facilities
and the provision of certain accounting functions in the UK and France. Under these arrangements, the
amount payable for services received during the year ended September 30, 2004 was $1.3 million.
The relocation costs incurred and the amount recharged to Disney are disclosed in note 5.
As part of these arrangements, the Company will also receive an incentive of $9.9 million from Disney over
the next four years. This together with the amount recharged to Disney of $3.1 million as disclosed in note 5
has been accounted for as an operating lease incentive, which, in accordance with US GAAP, is deferred and
recognised in the income statement over the period of the leases.
Of the total receivable of $13.0 million, $8.7 million will be received after one year.
Receivables
ABCW collects certain receivables on behalf of the Company. The amount owed to the Company at
September 30, 2004 was $2.0 million (September 30, 2003 – $7.2 million).
TV10 B.V.
Through a shareholder agreement with Fox TV10 Holdings, Inc. (Fox), up to December 1, 2000, the
revenues and direct costs of the daytime programming were attributed to the Company, with those of the
evening programming attributed to Fox. Subject to certain limits, indirect costs were allocated between the
Company and Fox in proportion to revenue. Since December 1, 2000 any material costs as well as revenues
of TV10 B.V. in which the Company has an interest, are recharged to the Company. The amount recharged
from TV10 B.V. for the year to September 30, 2004 was $1.1 million (2003 – $1.3 million). The amount
payable to TV10 B.V. at September 30, 2004 was $0.8 million (September 30, 2003 – $nil).
Programme Rights
The Company acquires certain programme rights relating to its territories from ABCW. The amount payable
to ABCW at September 30, 2004 was $1.8 million (September 30, 2003 – $5.8 million).
54
17.
COMMITMENTS AND CONTINGENCIES
Operating leases
The Company leases transponders, office facilities, and certain programme related equipment. These leases,
which qualify as operating leases, expire at various dates through 2010.
Non-cancellable future minimum payments for the remainder of the initial, non-cancellable lease periods
are as follows:
Year Ending September 30,
2005
2006
2007
2008
2009
Thereafter
$’000
18,764
17,424
16,280
12,444
12,333
4,871
82,116
Total operating lease expenses were approximately $11.0 million and $5.7 million for the years ended
September 30, 2004 and September 30, 2003, respectively.
Litigation
In the ordinary course of its business, the Company from time to time may become exposed to certain
litigation. As at September 30, 2004, there are potential implications for the company pursuant to one
ongoing and one possible action brought or threatened against various Disney entities by owners of certain
rights claiming larger participation payments. The Company believes that its existing accrual for participation
costs is adequate and accordingly it has not provided any further amounts in relation to these claims.
18.
SEGMENT INFORMATION
During the periods presented, the Company operated in three business segments based on its products and
services: Channels & Online (which principally consists of the operation and broadcast of television channels
and websites), Programme Distribution (which principally consists of the sale of programming to third
parties) and Consumer Products (licensing and merchandising operations and home entertainment).
The accounting policies of the segments are the same as those described in Note 2 except that for segment
reporting, the Company includes its share of revenues of equity affiliates in total revenues. In addition, for
segment reporting, the Company measures profitability based on Earnings Before Interest, Tax, Depreciation
and Amortisation (EBITDA). EBITDA is stated before interest, taxation, depreciation, programme amortisation
and impairment. EBITDA less depreciation, amortisation and impairment is equal to operating income.
55
18.
SEGMENT INFORMATION (continued)
Business Segments
Revenues
2004
$’000
2003
$’000
Channels & Online(1)
Consumer Products
132,728
24,681
13,332
109,383
31,362
11,272
Total Revenues (including unconsolidated revenues of equity affiliates)
Less: unconsolidated revenues of equity affiliates
170,741
(5,396)
152,017
(5,192)
Revenues
165,345
146,825
(1)
The Company’s share of revenues of equity affiliates is included within Channels & Online.
EBITDA
2004
$’000
2003
$’000
Channels & Online(2)
Consumer Products
Shared costs not allocated to segments
42,118
15,551
5,170
(11,888)
41,239
20,449
4,021
(9,727)
EBITDA
Less: depreciation, amortisation and impairment
50,951
(45,804)
55,982
(51,824)
5,147
4,158
2004
$’000
2003
$’000
Operating income
(2)
EBITDA excludes costs related to the Company’s unconsolidated joint ventures.
Depreciation, amortisation and impairment
Channels & Online
Consumer Products
(28,553)
(13,295)
(3,662)
(294)
(29,313)
(17,401)
(4,952)
(158)
(45,804)
(51,824)
Included in the above amounts are impairment charges on programme rights of $3,375,000 (year ended
September 30, 2003 – $3,712,000) and $1,625,000 (year ended September 30, 2003 – $958,000) in Channels
& Online and Programme Distribution, respectively.
Identifiable assets
Channels & Online
Consumer Products
Shared assets not allocated to segments
56
The investment in equity affiliates is included within Channels & Online.
2004
$’000
2003
$’000
129,758
185,661
6,244
1,132
134,044
129,352
11,569
421
322,795
275,386
18.
Geographic Segments
Revenues
2004
$’000
2003
$’000
49,567
20,510
20,217
18,018
14,427
13,813
13,690
8,106
6,944
3,738
1,711
–
40,075
17,113
15,286
14,408
12,649
9,846
11,679
8,309
6,514
6,276
264
9,598
Total Revenues
Less: unconsolidated revenues of equity affiliates
170,741
(5,396)
152,017
(5,192)
Revenues
165,345
146,825
EBITDA(2)
2004
$’000
2003
$’000
United Kingdom and Ireland
France
Benelux
Italy
Spain and Portugal(1)
Germany
Central and Eastern Europe
Middle East
Nordic Region
Poland
Other
Americas
France
Benelux
Italy
Spain and Portugal
Germany
Central and Eastern Europe
Middle East
Nordic Region
Poland
Other
Americas
EBITDA
Less: depreciation, amortisation and impairment
Operating income
(1)
(2)
25,915
4,812
7,985
7,765
4,944
3,981
2,976
2,871
732
(231)
1,089
–
(11,888)
22,320
4,920
5,945
6,351
4,591
1,916
4,620
3,444
2,208
2,244
192
6,958
(9,727)
50,951
55,982
(45,804)
(51,824)
5,147
4,158
Includes the Company’s share of revenues of equity affiliates and sales of programming to its equity
affiliates.
EBITDA excludes costs related to the Company’s unconsolidated joint ventures.
57
18.
Geographic Segments
Identifiable assets
France
Benelux
Other
2004
$’000
2003
$’000
21,128
9,127
238,425
54,115
12,504
7,929
239,597
15,356
322,795
275,386
Revenues are attributed to geographic segments based on the destination of the sale. Assets are attributed
to geographic segments based on the location of individual assets. The programme rights and goodwill are
located in the Benelux segment.
The significant customer which has had revenues greater than 10% of the revenues for at least one of the
periods presented is as follows:
Customer A
19.
Revenue
2004
$’000
%
2004
Revenue
2003
$’000
%
2003
33,049
20.0
25,180
17.1
SHARE CAPITAL
The authorised share capital of Jetix Europe consists of 349,999,900 ordinary shares with a nominal value of
m0.25 per share, and 100 priority shares, each with a nominal value of m0.25 per share. The issued shares
are as follows:
Issued at September 30, 2003
Shares issued during the year
Issued at September 30, 2004
(1)
(2)
58
Priority
shares
Number
Ordinary
shares
Number
Total
number
100
–
100
82,519,307
677,605
83,196,912
82,519,407
677,605
83,197,012
Priority(1)
shares
Nominal
value
$’000
0
–
0
Ordinary(2)
shares
Nominal
value
$’000
Total
Nominal
value
$’000
21,426
203
21,629
21,426
203
21,629
The nominal value of priority shares at September 30, 2004 is $26 (September 30, 2003 – $26).
The shares issued during the year are translated using the rate at the date of issuance.
19.
SHARE CAPITAL (continued)
The priority shares are held by Buena Vista Entertainment Inc., (BVEI, formerly Saban Entertainment Inc.)
a subsidiary of ABCW. The priority shares can only be transferred with the approval of the Board of
Management and the Supervisory Board. The holder or holders of the priority shares have the right, inter
alia, to: nominate members for the appointment of the Board of Management and the Supervisory Board;
receive a non-cumulative preferential dividend of 5% of the nominal value of each share per annum;
propose amendments to the Articles of Association; propose the dissolution, legal merger or split-up of
Fox Kids Europe; and receive a preferential liquidation distribution.
The members of the board of directors of BVEI are Griffith Foxley, Marsha Reed and Joseph Santaniello.
BVEI is a wholly owned subsidiary of ABCW. The members of the board of directors of ABCW are Marsha
Reed and David Thompson. The directors of BVEI and ABCW are responsible for the management of their
respective companies. None of the priority shares are held by a member of the Board of Management of
Jetix Europe.
20.
EARNINGS PER SHARE
The earnings per share is computed using the net income for each period divided by the weighted average
number of shares in issue in each period.
The following table sets forth the computation of basic and diluted earnings per share.
2004
2003
5,828
3,828
82,618
1,538
82,519
95
84,156
82,614
Basic earnings per share (cents)
7.1
4.6
Diluted earnings per share (cents)
6.9
4.6
Numerator ($’000)
Net income
Denominator (’000)
Basic – weighted average ordinary shares outstanding
Dilutive effect of employee stock options
For the year ended September 30, 2004, options to acquire shares totalling 739,236 (September 30, 2003 –
2,545,104) were excluded from diluted earnings per share, as their impact was anti-dilutive.
59
21.
STOCK OPTION PLAN
Under the Jetix Discretionary Stock Option Scheme, Jetix Europe may grant options to acquire shares to
employees at exercise prices equal to or exceeding the market price at the date of grant. Options vest
equally over a four-year period from the date of grant and expire ten years after the date of grant. Shares
available for future option grants at September 30, 2004 totalled 4,856,281 (2003 – 4,324,624).
The following table summarises information about stock option transactions:
2004
Weighted
average
exercise
price
(Euro)
2004
Number
of
options
2003
Weighted
average
exercise
price
(Euro)
2003
Number
of
options
Awards forfeited
Awards exercised
6.92
–
6.88
5.28
3,927,307
–
(531,657)
(677,605)
13.48
5.06
13.52
–
2,840,024
3,055,078
(1,967,795)
–
Outstanding at September 30
7.33
2,718,045
6.92
3,927,307
13.61
715,036
13.62
599,454
Outstanding at beginning of year
Awards granted
Exercisable at September 30
The following table summarises information about stock options outstanding at September 30, 2004:
Exercise
prices – Euro
3.4 – 5.4
9.1 – 13.5
16.5 – 20.2
60
Number
of options
Outstanding
weighted
average
remaining
years of
contractual
life
Exercisable
Weighted
average
exercise
price
(Euro)
Number
of options
Weighted
average
exercise
price
(Euro)
1,978,809
708,904
30,332
8.82
5.39
5.56
5.01
13.36
18.18
–
684,704
30,332
–
13.41
18.18
Annual Report Copyright Notices
JETIX name and logo © and ™ Disney Enterprises, Inc. THE INCREDIBLE HULK ™ & © 2005 Marvel. THE INCREDIBLE HULK is the exclusive
property of Marvel Characters, Inc. All Rights Reserved. TUTENSTEIN © and TM 2005 PorchLight Entertainment, Inc. All Rights Reserved.
ACTION MAN TM & © 2005 Hasbro. ACTION MAN is a trademark of Hasbro. All Rights Reserved. EEK THE CAT ™ & © 2005 ABC
Children’s Network, Inc. All Rights Reserved. SHAMAN KING © 2005 Hiroyuki Takei FANTASTIC FOUR ™ & © 2005Marvel. FANTASTIC
FOUR is the exclusive property of Marvel Characters, Inc. All Rights Reserved. GADGET AND THE GADGETINIS © 2005 DIC Entertainment,
L.P., Fox Kids Europe Properties, Fox Kids International Programming A.V.V., SIP Animation and M6. Gadget and The Gadgetinis and all
related logos, names and distinctive likenesses are the exclusive property of DIC Entertainment L.P. All Rights Reserved. PUCCA © VOOZ.
All Rights Reserved. TOTALLY SPIES © 2005 Marathon. Copyright in Totally Spies and all related characters is owned by Marathon.
TOTALLY SPIES is a trademark of Marathon. All Rights Reserved. JACKIE CHAN ADVENTURES © 2005 Sony Pictures Television International.
All Rights Reserved. BLACK HOLE HIGH © 2005 BREWSTER (BHH) PRODUCTIONS INC. A Brewster (BHH) Productions Inc production
produced in association with Fireworks Entertainment and Discovery Kids. ROBOT WARS ™ & © 2005 Robot Wars LLC PIG CITY © 2005
Canada inc. /Anima kids Productions S.A. All rights reserved MAD JACK THE PIRATE ™ & © 2005 BVS Entertainment, Inc., and BVS
International N.V. All Rights Reserved. Super Robot Monkey Team Hyper Force Go! (c) 2005 Disney Enterprises, Inc. W.I.T.C.H (c) SIP
Animation 2005 POWER RANGERS NINJA STORM ™ & © 2005 BVS Entertainment Inc. and BVS International N.V. All Rights Reserved.
SPIDER-MAN © 2005 New World Animation. Underlying property TM & © Marvel Characters, Inc. All Rights Reserved. TEENAGE MUTANT
NINJA TURTLES © 2005 Mirage Entertainment, Inc and 4Kids Entertainment, Inc SONIC X © SONIC Project. All Rights Reserved. A.T.O.M –
Alpha Teens on Machines © &TM 2005 Fox Kids Europe Properties MEDABOTS © 2005 Nelvana Limited. MEDABOTS is a ™ of Kodansha
and used under license. Based on the computer game software produced by Imagineer Co., Ltd. And Natsume Co., Ltd. © 1997
Imagineer, Natsume, © 1999 NAS/Kodansha, TV Tokyo. All other characters, names and distinctive likenesses are the exclusive property of
their respective rights holders. All rights reserved. THE X-MEN & © 2005 Marvel Characters, Inc. All Rights Reserved. OBAN STAR RACERS©
Sav! The World Productions/Jetix Europe 2005. All rights reserved.
Designed and produced by MAGEE
Printed by the colourhouse
Jetix Europe N.V.
For more information write to:
Bergweg 50, 1217 SC
Hilversum
The Netherlands
or contact:
Investor Relations
Jetix Europe Limited
3 Queen Caroline Street
Hammersmith
London W6 9PE
Tel: +44 20 8222 3600
Fax: +44 20 8222 5906
www.jetixeurope.com

Accounts (proof 6

Transcription

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