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CTCM > SEC Filings for CTCM > Form 8-K on 23-Dec-2013All Recent SEC Filings

Show all filings for CTC MEDIA, INC.

Form 8-K for CTC MEDIA, INC.


Material Impairments, Other Events

Item 2.06: Material Impairments

On December 17, 2013, the Board of Directors of CTC Media, Inc. (the "Company") concluded that the carrying value of the goodwill associated with the Company's in-house production unit exceeded its fair value. Accordingly, the Company will record a charge in the fourth quarter of 2013 as a result of impairment of substantially all of its in-house production unit goodwill.

The Company acquired its in-house production capabilities in 2008 with the acquisitions of two production companies. Goodwill related to the in-house production unit had been attributed to its workforce. Since 2008, the in-house production unit has contributed to the production of a portion of the sitcoms, series, sketchcoms and entertainment TV shows for the Company's channels.

As disclosed in its Annual Report on Form 10-K for the year ended December 31, 2012, the Company's goodwill allocated to its in-house production unit is highly sensitive to the volume of programming that is expected to be produced and sold to the Company's channels for broadcast, and in 2011 and 2012, the volume of in-house produced programming hours contracted by the Company's channels was significantly below that originally anticipated.

On July 30, 2013, the Company announced that the Board of Directors had appointed Yuliana Slashcheva to serve as the Company's Chief Executive Officer, effective August 1, 2013.

The Company further disclosed in its Quarterly Report on Form 10-K for the three and nine months ended September 30, 2013, that management had initiated a review of the current economic model for its in-house production unit, as a result of which the Company could be required to record an impairment of production unit goodwill by the end of 2013.

Under its new leadership, the Company undertook this review and is currently engaged in restructuring its in-house production operations to better align its structure with the current and future needs of its channels. While not complete, this restructuring is expected to result in closer alignment of creative talent to each of the Company's channels. It is further anticipated that the delivery of in-house content to its channels will be accomplished through closer partnerships and strategic alliances with third-party production companies. The Company believes these steps will better enable it to operate in the competitive broadcast TV market in Russia and to continue to broadcast content that is attractive to its target audiences.

Based on this restructuring initiative, changes in the economic model for in-house production have been approved by the Board. The Board has also concluded that the carrying value of the production unit exceeds its fair value as a result of downward revisions of the long-term cash flow projections in respect of this unit. These downward revisions primarily reflect a reduction in the expected volume of in-house production, an expected increase in production costs as the Company faces increased competition from other market participants for a scarce supply of quality talent, and projections of a decreased rate of growth in the Russian TV advertising market.

The Company has not yet determined the exact amount of the impairment charge to be recorded in the fourth quarter of 2013, but management currently anticipates that substantially all of the carry value of the production unit goodwill will be impaired. The

carry value of the production unit goodwill as of September 30, 2013 was approximately $30 million.

Item 8.01: Other Events

On December 23, 2013, the Company issued a press release announcing the development of its in-house creative production center. This press release is submitted as Exhibit 99.1.

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