As filed with the Securities and Exchange Commission on October 2, 2006
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 2, 2006
METROMEDIA INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-5706 58-0971455
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
8000 Tower Point Drive, Charlotte, NC 28227
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (704) 321-7380
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(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
On October 2, 2006, Metromedia International Group, Inc. (the "Company"
or "MIG"), the owner of interests in communications businesses in the country of
Georgia, announced the release of preliminary unaudited financial results, for
the fiscal year ended December 31, 2005, for its principal Georgian business,
Magticom Limited ("Magticom"). The press release announcing this matter is
attached as Exhibit 99.1 and is incorporated herein by reference.
Management of the Company has determined that the following additional
preliminary unaudited financial results of Magticom should be disclosed.
Furthermore, since the information included within this periodic report contains
preliminary unaudited financial results for Magticom, this financial information
is subject to adjustment until such time that the Company files its respective
periodic reports with the United States Securities and Exchange Commission
("SEC").
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Three Months Nine Months Percent Change
(In thousands, except performance data) September 30, September 30, Nine Months
----------- ----------- ----------- -----------
2005 2004 2005 2004 2005 to 2004
----------- ----------- ----------- ----------- ---------------
Revenues
Subscriber $ 30,905 $ 22,196 $ 78,984 $ 58,301 35.5%
Inbound 8,895 4,267 24,354 10,491 132.1%
Roaming & other 1,137 1,096 3,055 2,586 18.1%
----------- ----------- ----------- -----------
Total revenues 40,937 27,559 106,393 71,378 49.1%
Cost of Services (exclusive of depreciation and
amortization) 9,005 3,481 24,170 9,141 164.4%
% of revenues 22.0% 12.6% 22.7% 12.8% --
Selling, general & administrative 3,970 2,824 10,478 7,709 35.9%
Depreciation and amortization 5,044 3,499 12,887 10,386 24.1%
Other (income) expense, including income tax 4,673 3,969 12,412 9,543 30.1%
Net Income 18,245 13,786 46,446 34,599 34.2%
EBITDA (1) 27,848 21,238 71,253 54,710 30.2%
Capital expenditures 8,216 3,940 22,197 9,865 125.0%
Performance Data:
-----------------
Average revenue per subscriber (a) $ 17.54 $ 16.00 $ 14.52 $ 14.70 (1.2)%
Average minutes of use per subscriber (b) 112.89 107.90 93.92 102.57 (8.4)%
Average Subscribers (c) 587,215 462,524 604,468 440,656 37.2%
Personnel Headcount -- -- 607 468 29.7%
(a) - Average revenue per subscriber is determined by dividing subscriber
revenue for the period by average subscribers for the period (the sum of the
beginning subscribers and ending subscribers, divided by two), and dividing that
result by the number of months in the period. Subscriber revenue excludes
inbound and roaming revenues.
(b) - Average minutes of use per subscriber is determined by dividing total
outgoing minutes for the period by average subscribers for the period (the sum
of the beginning subscribers and ending subscribers, divided by two), and
dividing that result by the number of months in the period.
(c) - Substantially all of Magticom's customers pre-pay for services via
scratch-cards or deposits; that is, less than 3% of Magticom's subscribers pay
for services on a post service utilization basis. Magticom currently considers a
pre-paid subscriber active if that subscriber undertook any revenue generating
activity within the prior 30 days.
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Magticom's preliminary unaudited financial results for the first nine months of
2005 were favorably affected by the strengthening of the Georgian Lari, against
the U.S. Dollar. In relation to the U.S. dollar, the Georgian Lari average
exchange rate increased by 6.4% for the first nine months of 2005, as compared
with the same period in 2004.
Revenues grew by approximately 49% in the first nine months of 2005 as compared
to the same period in 2004, due principally to continuing strong customer
demand. Year-over year growth in inbound interconnection revenue reflected, in
part, a significant change in a contractual arrangement with another mobile
telephone provider in Tbilisi, Georgia.
Magticom is the market leader in Georgia, based on both revenues and number of
subscribers, and anticipates further increases in its subscriber base as it
continues to penetrate a market that currently has low telephone density rates.
Magticom's total and average subscribers have increased approximately 43% and
37%, respectively, since September 30, 2004. Average revenue per subscriber
("ARPU") was favorably affected by the strengthening of the Georgian Lari
against the U.S. dollar. Lari-calculated ARPU increased 14.5% for the three
months ended September 30, 2005 when compared to the three months ended June 30,
2005. Magticom anticipates that its Lari-calculated ARPU will likely remain flat
in the near future; however, in the long-term, Magticom anticipates that its
Lari-calculated ARPU will decline due to both competitive pressures on pricing
of services and as a result of Magticom's further penetration of the addressable
market because new customers are anticipated to have lower usage rates than
Magticom's existing customer base.
Inbound revenues reflect revenues that Magticom earns as a result of its
termination of other telephone service providers' traffic on Magticom's
telecommunications network. The significant growth in inbound revenues in the
first nine months of 2005 as compared to the same period in 2004 principally
reflects a change in the previously discussed contractual interconnect
arrangement with another mobile telephone service provider in Tbilisi, Georgia.
Prior to October 1, 2004, Magticom's arrangement with the other mobile telephone
service provider, as set forth in the interconnect agreement between the
parties, provided for the termination of traffic on each other's network at no
cost, unless certain net traffic volume thresholds were exceeded between the
parties, an eventuality that never occurred. Effective October 1, 2004, the
contractual arrangement was amended and Magticom began processing monthly
invoices to the mobile telephone service provider based on its termination of
traffic on Magticom's telecommunication network and thus Magticom began
recognizing inbound revenues for this relationship between the parties. For the
first nine months of 2004, Magticom did not recognize inbound revenues from this
mobile telephone service provider; however had the existing interconnect
agreement been effective January 1, 2004, Magticom's pro-forma inbound revenues
for the first nine months of 2004 would have increased by $14.2 million to $24.6
million and thus period-over-period inbound revenues would have decreased by
approximately 1%.
Roaming revenues are based on Magticom subscribers originating calls using their
Magticom-equipped mobile telephone in a territory not directly serviced by
Magticom. Magticom bills its subscribers an international roaming premium on a
per-minute basis for calls made while abroad. Given the nature of this revenue
stream, which is dependent upon Magticom users traveling abroad and utilizing
their respective Magticom-equipped mobile telephone, predicting future revenue
levels is difficult.
Cost of services as a percentage of revenues increased by approximately 77% for
the first nine months of 2005 as compared to the same period in 2004, due
principally to the previously discussed change in a contractual arrangement
related to an interconnect arrangement with another mobile telephone service
provider in the Tbilisi, Georgia. Effective October 1, 2004, Magticom began
receiving monthly invoices from the mobile telephone service provider based on
Magticom's termination of its traffic on the telecommunications network of the
other mobile telephone service provider and as a result Magticom began
recognizing interconnect costs for this relationship between the parties. For
the first nine months of 2004, Magticom did not recognize inbound interconnect
costs from this mobile telephone service provider; however had the existing
interconnect agreement been effective January 1, 2004, Magticom's pro-forma
interconnect costs for the first nine months of 2004 would have increased by
$17.4 million to $26.5 million. Accordingly, pro-forma cost of services as a
percentage of revenue would have declined by approximately 27% in the first nine
months of 2005 as compared to the same period in 2004. Magticom's position as a
market leader has allowed it to maintain its subscriber margins; however,
Magticom anticipates that its costs of sales as a percentage of revenues will
increase as competition intensifies in the region.
Magticom's selling, general and administrative expenses increased by
approximately 36% in the first nine months of 2005, as compared to the same
period in 2004, principally due to the increase in personnel related costs. The
increase in Magticom's personnel related costs are due to the significant
increase in personnel employed, approximately a 30% increase since September 30,
2004, wage increases provided to existing employees, effective January 2005, and
the implementation of a performance bonus program in 2005 for all Magticom
employees.
The significant growth in capital expenditures for the first nine months of 2005
as compared to the same period in 2004 is principally due to the continued
upgrade and expansion of the telecom infrastructure and Magticom's acquisition
of new mobile telephony frequency spectrum licenses operating in the 800 MHz and
2.1 GHz frequency ranges. The new mobile telephony spectrum licenses acquired
during the first nine months of 2005 are for 18% of the 800 MHz radio frequency
spectrum available in Georgia for offering CDMA, data, voice and video services
and voice services and 25% of the 2.1 GHz frequency spectrum available in
Georgia for offering 3G GSM mobile voice, data, and video services. These new
license agreements require Magticom to offer commercial service using the
spectrum covered by the licenses within one year and offer such service
throughout Georgia within three years.
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Three Months Six Months Percent Change
(In thousands, except performance data) June 30, June 30, Six Months
----------- ----------- ----------- -----------
2005 2004 2005 2004 2005 to 2004
----------- ----------- ----------- ----------- ---------------
Revenues
Subscriber $ 25,446 $ 18,946 $ 48,079 $ 36,105 33.2%
Inbound 8,119 3,257 15,459 6,224 148.4%
Roaming & other 1,057 867 1,918 1,490 28.7%
----------- ----------- ----------- -----------
Total revenues 34,622 23,070 65,456 43,819 49.4%
Cost of Services (exclusive of depreciation and
amortization) 7,902 2,865 15,165 5,660 167.9%
% of revenues 22.8% 12.4% 23.2% 12.9% --
Selling, general & administrative 3,274 2,495 6,508 4,885 33.2%
Depreciation and amortization 4,026 3,322 7,843 6,887 13.9%
Other (income) expense, including income tax 4,241 2,645 7,739 5,574 38.8%
Net Income 15,179 11,743 28,201 20,813 35.5%
EBITDA (1) 23,251 18,669 43,405 33,472 29.7%
Capital expenditures 8,037 3,407 13,981 5,925 136.0%
Performance Data:
-----------------
Average revenue per subscriber (a) $ 15.17 $ 14.26 $ 14.06 $ 14.04 0.1%
Average minutes of use per subscriber (b) 98.82 99.93 91.26 99.93 (8.7)%
Average Subscribers (c) 559,078 442,900 569,963 428,708 32.9%
Personnel Headcount -- -- 603 428 40.9%
(a) - Average revenue per subscriber is determined by dividing subscriber
revenue for the period by average subscribers for the period (the sum of the
beginning subscribers and ending subscribers, divided by two), and dividing that
result by the number of months in the period. Subscriber revenue excludes
inbound and roaming revenues.
(b) - Average minutes of use per subscriber is determined by dividing total
outgoing minutes for the period by average subscribers for the period (the sum
of the beginning subscribers and ending subscribers, divided by two), and
dividing that result by the number of months in the period.
(c) - Substantially all of Magticom's customers pre-pay for services via
scratch-cards or deposits; that is, less than 3% of Magticom's subscribers pay
for services on a post service utilization basis. Magticom currently considers a
pre-paid subscriber active if that subscriber undertook any revenue generating
activity within the prior 30 days.
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Magticom's preliminary unaudited financial results for the first six months of
2005 were favorably affected by the strengthening of the Georgian Lari against
the U.S. Dollar. In relation to the U.S. dollar, the Georgian Lari average
exchange rate increased by 8.7% for the first six months of 2005, as compared
with the same period in 2004.
Revenues grew by approximately 49% in the first six months of 2005 as compared
to the same period in 2004, due principally to strong customer demand and a
significant change in a contractual arrangement with another mobile telephone
provider in Tbilisi, Georgia. Magticom's total and average subscribers have
increased approximately 35% and 33%, respectively, since June 30, 2004. ARPU was
favorably affected by the strengthening of the Georgian Lari against the U.S.
dollar. Lari-calculated ARPU increased by 9.9% for the three months ended June
30, 2005 when compared to the three months ended March 31, 2005.
The significant growth in inbound revenues in the first six months of 2005 as
compared to the same period in 2004 principally reflects a change in the
previously discussed contractual interconnect arrangement with another mobile
telephone service provider in Tbilisi, Georgia. For the first six months of
2004, Magticom did not recognize inbound revenues from this mobile telephone
service provider; however had the existing interconnect agreement been effective
January 1, 2004, Magticom's pro-forma inbound revenues for the first six months
of 2004 would have increased by $8.4 million to $14.6 million and thus
period-over-period inbound revenues would have increased by only approximately
6%.
Cost of services as a percentage of revenues increased by approximately 80% for
the first six months of 2005 as compared to the same period in 2004, due
principally to the previously discussed change in a contractual arrangement
related to an interconnect arrangement with another mobile telephone service
provider in the Tbilisi, Georgia. For the first six months of 2004, Magticom did
not recognize inbound interconnect costs from this mobile telephone service
provider; however had the existing interconnect agreement been effective January
1, 2004, Magticom's pro-forma interconnect costs for the first six months of
2004 would have increased by $10.6 million to $16.2 million. Accordingly,
pro-forma cost of services as a percentage of revenue would have declined by
approximately 25% in the first six months of 2005 as compared to the same period
in 2004.
Magticom's selling, general and administrative expenses increased by
approximately 33% in the first six months of 2005, as compared to the same
period in 2004, principally due to the increase in personnel related costs. The
increase in Magticom's personnel related costs are due to the significant
increase in personnel employed, approximately a 41% increase since June 30,
2004, wage increases provided to existing employees, effective January 2005, and
the implementation of a performance bonus program in 2005 for all Magticom
employees.
The significant growth in capital expenditures for the first six months of 2005
as compared to the same period in 2004 is principally due to the continued
upgrade and expansion of the telecom infrastructure and Magticom's acquisition
of new mobile telephony frequency spectrum license operating in the 800 MHz
frequency range.
---------------------------------------------------------------------------------------------------------------------------------
Three Months Percent Change
(In thousands, except performance data) March 31, Three Months
--------------------------- --------------------
2005 2004 2005 to 2004
-------------- ----------- --------------------
Revenues
Subscriber $ 22,633 $ 17,159 31.9%
Inbound 7,340 2,967 147.4%
Roaming & other 861 623 38.2%
----------- -----------
Total revenues 30,834 20,749 48.6%
Cost of Services (exclusive of depreciation and
amortization) 7,263 2,795 159.9%
% of revenues 23.6% 13.5% --
Selling, general & administrative 3,234 2,390 35.3%
Depreciation and amortization 3,817 3,565 7.1%
Other (income) expense, including income tax 3,498 2,929 19.4%
Net Income 13,022 9,070 43.6%
EBITDA (1) 20,154 14,803 36.1%
Capital expenditures 5,944 2,518 136.1%
Performance Data:
-----------------
Average revenue per subscriber (a) $ 13.76 $ 13.58 1.3%
Average minutes of use per subscriber (b) 88.98 98.39 (9.6)%
Average Subscribers (c) 548,193 421,032 30.2%
Personnel Headcount 583 411 41.8%
(a) - Average revenue per subscriber is determined by dividing subscriber
revenue for the period by average subscribers for the period (the sum of the
beginning subscribers and ending subscribers, divided by two), and dividing that
result by the number of months in the period. Subscriber revenue excludes
inbound and roaming revenues.
(b) - Average minutes of use per subscriber is determined by dividing total
outgoing minutes for the period by average subscribers for the period (the sum
of the beginning subscribers and ending subscribers, divided by two), and
dividing that result by the number of months in the period.
(c) - Substantially all of Magticom's customers pre-pay for services via
scratch-cards or deposits; that is, less than 3% of Magticom's subscribers pay
for services on a post service utilization basis. Magticom currently considers a
pre-paid subscriber active if that subscriber undertook any revenue generating
activity within the prior 30 days.
---------------------------------------------------------------------------------------------------------------------------------
Magticom's preliminary unaudited financial results for the first quarter 2005
were favorably affected by the strengthening of the Georgian Lari against the
U.S. dollar. In relation to the U.S. dollar, the Georgian Lari average exchange
rate increased by 11.1% for the first three months of 2005, as compared with the
same period in 2004.
Revenues grew by approximately 49% in the first three months of 2005 as compared
to the same period in 2004, due principally to strong customer demand and a
significant change in a contractual arrangement with another mobile telephone
provider in Tbilisi, Georgia. Magticom's total and average subscribers have
increased approximately 30% since March 31, 2004. ARPU was favorably affected by
the strengthening of the Georgian Lari against the U.S. dollar. Lari-calculated
ARPU decreased by 7.2% for the three months ended March 31, 2005 when compared
to the three months ended December 31, 2004.
The significant growth in inbound revenues for the first three months of 2005 as
compared with the same period in 2004 principally reflects a change in the
previously discussed contractual interconnect arrangement with another mobile
telephone service provider in Tbilisi, Georgia. For the first three months of
2004, Magticom did not recognize inbound revenues from this mobile telephone
service provider; however had the existing interconnect agreement been effective
January 1, 2004, Magticom's pro-forma inbound revenues for the first three
months of 2004 would have increased by approximately $3.9 million to $ 6.8
million and thus period-over-period inbound revenues would have increased by
only approximately 7%.
Cost of services as a percentage of revenues increased by approximately 75% for
the first three months of 2005 as compared to the same period in 2004, due
principally to the previously discussed change in a contractual arrangement
related to an interconnect arrangement with another mobile telephone service
provider in the Tbilisi, Georgia. For the first three months of 2004, Magticom
did not recognize inbound interconnect costs from this mobile telephone service
provider; however had the existing interconnect agreement been effective January
1, 2004, Magticom's pro-forma interconnect costs for the first three months of
2004 would have increased by $5.0 million to $7.8 million. Accordingly,
pro-forma cost of services as a percentage of revenue would have declined by
approximately 26% in the first three months of 2005 as compared to the same
period in 2004.
Magticom's selling, general and administrative expenses increased by
approximately 35% in the first three months of 2005, as compared to the same
period in 2004, principally due to the increase in personnel related costs. The
increase in Magticom's personnel related costs are due to the significant
increase in personnel employed, approximately a 42% increase since March 31,
2004, wage increases provided to existing employees, effective January 2005, and
the implementation of a performance bonus program in 2005 for all Magticom
employees.
The significant growth in capital expenditures for the first three months of
2005 as compared to the same period in 2004 is principally due to the continued
upgrade and expansion of the telecom infrastructure.
Preliminary Unaudited Restated 2003 Financial Results
The following table highlights the Company's current preliminary unaudited
restated financial results of Magticom for the year ended December 31, 2003, as
compared to the originally reported financial results of Magticom which were
included in MIG's 2003 Annual Report on Form 10-K.
Year ended December 31, 2003
--------------------------------------------
Originally
(in thousands, except percentages) Reported Adjustments Restated
---------- ------------- ---------------
Total revenues 72,073 (69) 72,004
Cost of services (exclusive of depreciation and
amortization) 10,347 210 10,557
% of revenues 14.4% 14.7%
Selling, general and administrative 9,107 (485) 8,622
Depreciation and amortization 12,919 (411) 12,508
Other expense, including income tax 8,541 282 8,823
---------- ------------- ----------
Net income $ 31,159 $ 335 $ 31,494
EBITDA (1) $ 51,670 $ 206 $ 51,876
Capital expenditures $ 19,440 $ 560 $ 20,000
2003 Summary of Adjustments:
----------------------------
The following is a summary of the adjustments necessary to address several
accounting errors that were identified and determined to be material for
correction:
o The Company determined that the accounting for its deferral of activation
fees was applied erroneously. Accordingly, Magticom has recognized a
decrease in "revenues" of $56,000 for the year ended December 31, 2003;
o Magticom determined the expiration of certain deferred revenues for prepaid
calling cards was not recognized in the appropriate accounting periods. The
correction of such adjustment resulted in an increase in "revenues" of
$106,000 for the year ended December 31, 2003;
o The Company identified certain revenue items that should have been
recognized in an accounting period that were identified subsequent to the
inclusion of the respective financial statements in filings with the SEC.
Such amounts resulted in Magticom recognizing an increase in "revenues" of
$102,000 for the year ended December 31, 2003;
o Magticom determined that certain promotions granted to its customers for
marketing purposes did not meet the criteria for revenue recognition.
Accordingly, Magticom reduced its "revenues" and "selling, general and
administrative" expenses by $221,000 for the year ended December 31, 2003;
o The Company identified certain cost of service items that should have been
recognized in an accounting period that were identified subsequent to the
inclusion of the respective financial statements in filings with the SEC.
Such amounts resulted in Magticom recognizing an increase in "cost of
services" expenses of $95,000 for the year ended December 31, 2003;
o The Company identified that certain inventory items included in the cost of
services should have been recognized in a subsequent accounting period that
were identified subsequent to the inclusion of the respective financial
statements in filings with the SEC. Such amounts resulted in Magticom
recognizing a decrease in "cost of services" expenses of $124,000 for the
year ended December 31, 2003;
o The Company reclassified certain items to be consistent with current period
presentation and recognized foreign currency translation adjustments of the
above items. Such reclassifications resulted in an increase to "cost of
services" and a corresponding decrease in "selling, general, and
administrative" expenses of $239,000 for the year ended December 31, 2003;
o The Company identified certain selling, general and administrative items
that should have been recognized in an accounting period that were
identified subsequent to the inclusion of the respective financial
statements in filings with the SEC. Such amounts resulted in Magticom
recognizing a reduction in "selling, general and administrative" expenses
of $25,000 for the year ended December 31, 2003;
o Magticom determined that it had recognized excess depreciation expense for
prior periods as it had relied on a detailed fixed asset ledger for
statutory purposes rather than maintaining one for U.S. GAAP reporting
purposes. Accordingly, Magticom has reduced its "depreciation" expense by
$411,000 for the year ended December 31, 2003;
o Magticom failed to accrue interest income earned on its invested funds.
Accordingly, Magticom recognized a decrease in "other expense, including
income tax" of $155,000 for the year ended December 31, 2003; and
o Magticom determined that it had made an error in its 2003 tax provision
process. Accordingly, Magticom increased its income tax expense by $507,000
for the year ended December 31, 2003. In addition, Magticom had decreased
its income tax expense for the year ended December 31, 2003 by $70,000,
which represents the income tax affect of the items identified above. These
adjustments resulted in a net increase in "other expense, including income
tax" of $437,000.
Preliminary Unaudited Restated 2004 Quarterly Financial Results
The following table highlights the Company's current preliminary unaudited
restated financial results of Magticom for each of the 2004 quarterly periods,
as compared to the originally reported financial results of Magticom which were
included in MIG's 2004 Quarterly Reports on Form 10-Q's or as included in the
Company's preliminary financial results originally released in April 2005.
Three months ended December 31, 2004
---------------------------------------------
Originally
(in thousands, except percentages) Disclosed Adjustments Restated
---------- ------------- ---------------
Total revenues 30,299 337 30,636
Cost of services (exclusive of depreciation
and amortization) 7,046 96 7,142
% of Revenues 23.3% 23.3%
Selling, general and administrative 5,184 (195) 4,989
Depreciation and amortization 3,664 65 3,729
Other income, including income tax (1,651) 718 (933)
---------- ------------- ----------
Net income $ 16,056 $ (347) $ 15,709
EBITDA (1) $ 18,147 $ 417 $ 18,564
Capital expenditures $ 2,587 $ (434) $ 2,153
Three months ended September 30, 2004
---------------------------------------------
Originally
(in thousands, except percentages) Reported Adjustments Restated
---------- ------------- ---------------
Total revenues 27,559 - 27,559
Cost of services (exclusive of depreciation
and amortization) 3,481 - 3,481
% of Revenues 12.6% 12.6%
Selling, general and administrative 2,824 - 2,824
Depreciation and amortization 3,374 125 3,499
Other expense, including income tax 3,969 - 3,969
---------- ------------- ----------
Net income $ 13,911 $ (125) $ 13,786
EBITDA (1) $ 21,238 $ - $ 21,238
Capital expenditures $ 3,940 $ - $ 3,940
Three months ended June 30, 2004
---------------------------------------------
Originally
(in thousands, except percentages) Reported Adjustments Restated
---------- ------------- ---------------
Total revenues 23,070 - 23,070
Cost of services (exclusive of depreciation
and amortization) 2,865 - 2,865
% of Revenues 12.4% 12.4%
Selling, general and administrative 2,495 - 2,495
Depreciation and amortization 3,222 100 3,322
Other expense, including income tax 2,645 - 2,645
---------- ------------- ----------
Net income $ 11,843 $ (100) $ 11,743
EBITDA (1) $ 18,669 $ - $ 18,669
Capital expenditures $ 3,407 $ - $ 3,407
Three months ended March 31, 2004
---------------------------------------------
Originally
(in thousands, except percentages) Reported Adjustments Restated
---------- ------------- ---------------
Total revenues 20,851 (102) 20,749
Cost of services (exclusive of depreciation
and amortization) 2,766 29 2,795
% of Revenues 13.3% 13.5%
Selling, general and administrative 2,544 (154) 2,390
Depreciation and amortization 3,855 (290) 3,565
Other expense, including income tax 3,175 (246) 2,929
---------- ------------- ----------
Net income $ 8,511 $ 559 $ 9,070
EBITDA (1) $ 14,886 $ (83) $ 14,803
Capital expenditures $ 2,518 $ - $ 2,518
2004 Summary of Adjustments:
----------------------------
The following is a summary of the adjustments necessary to address several
accounting errors that were identified and determined to be material for
correction:
o Magticom determined that the accounting for its deferral of activation fees
was not applied correctly in prior periods, the result of which is that
Magticom will recognize an increase in "revenues" of $348,000 for the three
months ended December 31, 2004;
o Upon settlement of legal proceedings with one of its interconnection
partners, Magticom recognized decreases to its "revenues" of $44,000 and
"selling, general & administrative" expenses of $1,680,000 for the three
months ended December 31, 2004;
o Magticom determined that it had not properly accounted for certain revenue,
cost of service, selling, general and administrative expenses and foreign
exchange transactions, the result of which is that Magticom will recognize
an increase to "revenue" of $33,000, "cost of services" expenses of
$96,000, and "selling, general & administrative" expenses of $116,000 and a
decrease to "other income, including income tax" of $20,000 for the three
months ended December 31, 2004; and decreases to "revenue" of $102,000,
"cost of services" expenses of $95,000 and "selling, general &
administrative" expenses of $154,000 for the three months ended March 31,
2004;
o Magticom determined that it had not properly accounted for certain
inventory costs, the result of which is that Magticom will recognize an
increase to "cost of services" expenses of $124,000 for the three months
ended March 31, 2004;
o Magticom determined that it had not properly accounted for certain amounts
due to the Georgian tax authorities for taxes other than income, the result
of which is that Magticom will recognize an increase of $485,000 in
"selling, general & administrative" expenses for the three months ended
December 31, 2004;
o Magticom determined that it should recognize an obsolescence charge
associated with uninstalled telecommunications equipment (spare parts) and
fixed assets no longer in use, the result of which is that Magticom will
recognize an increase in "selling, general & administrative" expenses of
$884,000 for the three months ended December 31, 2004;
o The Company maintained a detailed fixed asset ledger for statutory
reporting purposes in the Country of Georgia. However, until the fourth
quarter of 2004, the Company did not maintain a detailed fixed asset ledger
for U.S. GAAP reporting purposes, instead relying upon the statutory fixed
asset ledger and applying average or period end exchange rates for
translation of such amounts into the reporting currency. Upon completion of
the detailed fixed assets ledger for U.S. GAAP reporting purposes, Magticom
determined that it had miscalculated its depreciation expense. As a result
Magticom has increased its "depreciation" expense by $65,000, $125,000, and
$100,000 and reduced it by $290,000 for the three months ended December 31,
2004, September 30, 2004, June 30, 2004 and March 31, 2004, respectively;
o Magticom determined that it had not properly accounted for revenues in 2003
associated with its prepaid calling cards and had also reflected the amount
in the 2004 quarterly financial results as "other income" versus
"subscriber revenues". As such, Magticom has determined that it needs to
reduce its "other non-operating income" amount, the result of which is that
Magticom will recognize an increase of $106,000 to "other expense,
including income tax" for the three months ended March 31, 2004;
o Magticom determined that it had not properly accounted for interest income
and that its interest income amount needed to be reduced, the result of
which is that Magticom will recognize an increase to "other expense,
including income tax" of $155,000 for the three months ended March 31,
2004; and
o Magticom has determined that it made an error in its 2004 tax provision and
needed to increase its income tax expense, accordingly, Magticom decreased
its "other income, including income tax" by $698,000 for the three months
ended December 31, 2004. In addition, Magticom determined that it had made
an error in its 2003 income tax provision, and as such has corrected its
2003 financial results for that error. Due to this correction in the prior
period, Magticom has corrected its 2004 financial results by reducing its
2004 "income tax expense", the result of which is that Magticom will reduce
"other expense, including income tax" by $507,000 for the three months
ended March 31, 2004.
Magticom Limited
Reconciliation of Net Income to EBITDA (1)
(in thousands of US Dollars)
(unaudited)
------------------------------------------------------------------------------------------------------------
Three Months Nine Months
September 30, September 30,
-------------------------- ------------------------
2005 2004 2005 2004
----------- ---------- ----------- -----------
Net Income $ 18,245 $ 13,786 $ 46,446 $ 34,599
Interest income, net (65) (405) (145) (553)
Income tax expense 4,624 4,358 12,065 10,278
Depreciation and amortization 5,044 3,499 12,887 10,386
----------- ---------- ----------- -----------
EBITDA (1) $ 27,848 $ 21,238 $ 71,253 $ 54,710
=========== ========== =========== ===========
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Three Months Six Months
June 30, June 30,
-------------------------- ------------------------
2005 2004 2005 2004
----------- ---------- ----------- -----------
Net Income $ 15,179 $ 11,743 $ 28,201 $ 20,813
Interest income, net (50) (143) (80) (148)
Income tax expense 4,096 3,747 7,441 5,920
Depreciation and amortization 4,026 3,322 7,843 6,887
----------- ---------- ----------- -----------
EBITDA (1) $ 23,251 $ 18,669 $ 43,405 $ 33,472
=========== ========== =========== ===========
------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Three Months
March 31,
------------------------
2005 2004
----------- -----------
Net Income $ 13,022 $ 9,070
Interest income, net (30) (5)
Income tax expense 3,345 2,173
Depreciation and amortization 3,817 3,565
----------- -----------
EBITDA (1) $ 20,154 $ 14,803
=========== ===========
--------------------------------------------------------------------------------
Footnotes to Above Results:
---------------------------
(1) EBITDA is a non-GAAP financial measure generally defined as earnings before
interest, taxes, depreciation and amortization. This measure is not defined by
US generally accepted accounting principles ("US GAAP") and is a measure of
operating performance commonly used in the telecommunications and media
industries, but should not be construed as an alternative to operating income
determined in accordance with US GAAP as an indicator of operating performance
or as an alternative to cash from operating activities determined in accordance
with US GAAP as a measure of liquidity.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
99.1 Press Release of Metromedia International Group, Inc. dated
October 2, 2006.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
METROMEDIA INTERNATIONAL GROUP, INC.
By: /S/ HAROLD F. PYLE, III
----------------------------------------------
Name: Harold F. Pyle, III
Title: Executive Vice President Finance,
Chief Financial Officer and Treasurer
Date: October 2, 2006
Charlotte, NC