-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jl7FBqgAEjn5waipWSlMFmUBUeVv1dAjdL2Cphc6zVD85vOXv/EIpUHrwJzwtL/b kGFBfbocVf8awNJ4lQRIGg== 0000927356-96-000916.txt : 19961016 0000927356-96-000916.hdr.sgml : 19961016 ACCESSION NUMBER: 0000927356-96-000916 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED INTERNATIONAL HOLDINGS INC CENTRAL INDEX KEY: 0000887949 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 841116217 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21974 FILM NUMBER: 96643372 BUSINESS ADDRESS: STREET 1: 4643 S ULSTER ST STREET 2: STE 1300 CITY: DENVER STATE: CO ZIP: 80237 BUSINESS PHONE: 3037704001 MAIL ADDRESS: STREET 1: 4643 S ULSTER ST STREET 2: STE 1300 CITY: DENVER STATE: CO ZIP: 80237 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended August 31, 1996 ----------------------------------------------------------- [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________________ to ______________________ Commission File Number: 0-21974 United International Holdings, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 84-1116217 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4643 South Ulster St. #1300 Denver, CO 80237 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (303) 770-4001 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [_] No The number of shares outstanding of the registrant's common stock as of October 11, 1996 was: Class A Common Stock -- 25,774,253 shares Class B Common Stock -- 13,256,469 shares UNITED INTERNATIONAL HOLDINGS, INC. PART I - FINANCIAL INFORMATION ------------------------------
Page Number ------ Item 1 - Financial Statements - ------ Condensed Consolidated Balance Sheets as of August 31, 1996 and February 29, 1996 (Unaudited)..................................................... 2 Condensed Consolidated Statements of Operations For the Three and Six Months Ended August 31, 1996 and 1995 (Unaudited).................................................................. 3 Condensed Consolidated Statement of Stockholders' Equity For the Six Months Ended August 31, 1996 (Unaudited).................................................. 4 Condensed Consolidated Statements of Cash Flows For the Six Months Ended August 31, 1996 and 1995 (Unaudited)......................................... 5 Notes to Condensed Consolidated Financial Statements (Unaudited)....................................... 6 Item 2 - Management's Discussion and Analysis of Financial Condition - ------ and Results of Operations............................................................................. 11 PART II - OTHER INFORMATION --------------------------- Item 5 - Other Information...................................................................................... 18 - ------ Item 6 - Exhibits and Reports on Form 8-K....................................................................... 24 - ------
UNITED INTERNATIONAL HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share and per share data) (Unaudited)
August 31, February 29, 1996 1996 ------------ ------------ ASSETS Cash and cash equivalents................................................................... $ 150,606 $ 112,218 Restricted cash and short-term investments.................................................. 10,000 14,073 Short-term investments...................................................................... 137,791 35,692 Management fee receivables.................................................................. 774 498 Costs to be reimbursed by affiliated companies, net......................................... 5,832 7,972 Notes receivable............................................................................ 40,081 7,581 Property, plant and equipment, net of accumulated depreciation of $8,205 and $2,097, respectively.............................................................................. 81,292 31,102 Acquisition, transaction and development costs, net......................................... 6,808 4,541 Investments in and advances to affiliated companies, accounted for under the equity method, net.............................................................. 279,941 272,205 Other investments in affiliated companies, including marketable equity securities........... 2,663 3,273 Goodwill, net............................................................................... 48,082 45,629 Other assets, net........................................................................... 55,654 45,422 --------- --------- Total assets................................................................................ $ 819,524 $ 580,206 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities.................................................... $ 18,310 $ 11,068 Accrued funding obligations................................................................. 2,242 2,163 Senior secured notes and other debt......................................................... 621,817 371,251 --------- --------- Total liabilities........................................................................... 642,369 384,482 --------- --------- Minority interest in subsidiaries........................................................... 1,132 2,509 --------- --------- Warrants to purchase Class A Common Stock................................................... -- 11,167 --------- --------- Preferred stock, $.01 par value, 3,000,000 shares authorized, 170,513 shares of Convertible Preferred Stock, Series A issued and outstanding, stated at liquidation value............. 30,676 30,072 --------- --------- Commitments (Note 4) Stockholders' Equity: Class A Common Stock, $.01 par value, 60,000,000 shares authorized, 25,768,398 and 25,732,154 issued and outstanding, respectively............................ 258 257 Class B Common Stock, $.01 par value, 30,000,000 shares authorized, 13,256,469 and 13,274,685 issued and outstanding, respectively............................ 132 133 Additional paid-in capital.................................................................. 335,042 325,716 Deferred compensation....................................................................... (1,107) (842) Unrealized loss on investment............................................................... (1,799) (1,189) Cumulative translation adjustments.......................................................... (12,603) (7,371) Accumulated deficit......................................................................... (174,576) (164,728) --------- --------- Total stockholders' equity.................................................................. 145,347 151,976 --------- --------- Total liabilities and stockholders' equity.................................................. $ 819,524 $ 580,206 ========= =========
The accompanying notes are an integral part of these condensed consolidated balance sheets. 2 UNITED INTERNATIONAL HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share and per share data) (Unaudited)
For the Three For the Six Months Ended Months Ended August 31, August 31, ------------------------ ----------------------- 1996 1995 1996 1995 -------- -------- -------- -------- Management fee income from related parties.......................... $ 313 $ 29 $ 630 $ 63 Service revenue..................................................... 4,255 456 6,427 1,032 Operating expense................................................... (7,761) (1,224) (12,870) (2,494) General and administrative expense.................................. (7,612) (6,634) (13,956) (12,070) Depreciation and amortization....................................... (5,734) (375) (8,631) (1,468) -------- -------- -------- -------- Net operating loss................................................ (16,539) (7,748) (28,400) (14,937) Equity in losses of affiliated companies, net....................... (9,539) (9,098) (21,741) (13,310) Interest income..................................................... 3,594 1,664 5,715 4,897 Interest (expense) income related parties, net...................... (407) 179 (119) 258 Other interest expense.............................................. (18,177) (8,027) (31,894) (15,595) Provision for losses on investment related costs.................... (472) (439) (824) (816) Gain on sale of investment in affiliated company.................... 65,260 -- 65,260 -- Other............................................................... 725 291 404 332 -------- -------- -------- -------- Net income (loss) before minority interest........................ 24,445 (23,178) (11,599) (39,171) Minority interest in subsidiaries................................... 1,025 -- 1,751 713 -------- -------- -------- -------- Net income (loss)................................................. $ 25,470 $(23,178) $ (9,848) $(38,458) ======== ======== ======== ======== Net income (loss) per common share.................................. $ 0.65 $ (0.72) $ (0.25) $ (1.22) ======== ======== ======== ======== Weighted average number of common shares outstanding................ 39,022,756 32,297,792 39,015,668 31,446,716 ========== ========== ========== ==========
The accompanying notes are an integral part of these condensed consolidated statements. 3 UNITED INTERNATIONAL HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Dollars in thousands, except share data) (Unaudited)
Class A Class B Common Stock Common Stock Additional ---------------------- -------------------- Paid-In Shares Amount Shares Amount Capital ------ ------ ------ ------ ------- Balances, February 29, 1996............................ 25,732,154 $257 13,274,685 $133 $325,716 Issuance of Class A Common Stock in connection with Company's 401 (k) Plan............... 11,153 -- -- -- 163 Issuance of Class A Common Stock in connection with Company's Stock Option Plan..................... 6,875 -- -- -- 65 Amortization of deferred compensation.................. -- -- -- -- -- Exchange of Class B Common Stock for Class A Common Stock................................. 18,216 1 (18,216) (1) -- Accretion of dividends on convertible preferred stock...................................... -- -- -- -- (604) Expiration of warrants not tendered to the Company.............................................. -- -- -- -- 9,011 Repricing of stock options............................. -- -- -- -- 691 Unrealized loss on investment.......................... -- -- -- -- -- Cumulative translation adjustments..................... -- -- -- -- -- Net loss............................................... -- -- -- -- -- ---------- --- ---------- --- -------- Balances, August 31, 1996.............................. 25,768,398 $258 13,256,469 $132 $335,042 ========== === ========== === ======== Unrealized Cumulative Deferred Loss Translation Accumulated Compensation on Investment Adjustments Deficit Total ------------ ------------- ----------- ----------- --------- Balances, February 29, 1996............................ $ ( 842) $(1,189) $ (7,371) $(164,728) $151,976 Issuance of Class A Common Stock in connection with Company's 401 (k) Plan............... -- -- -- -- 163 Issuance of Class A Common Stock in connection with Company's Stock Option Plan..................... -- -- -- -- 65 Amortization of deferred compensation.................. 426 -- -- -- 426 Exchange of Class B Common Stock for Class A Common Stock................................. -- -- -- -- -- Accretion of dividends on convertible preferred stock...................................... -- -- -- -- (604) Expiration of warrants not tendered to the Company.............................................. -- -- -- -- 9,011 Repricing of stock options............................. (691) -- -- -- -- Unrealized loss on investment.......................... -- (610) -- -- (610) Cumulative translation adjustments..................... -- -- (5,232) -- (5,232) Net loss............................................... -- -- -- (9,848) (9,848) ------- ------- -------- --------- -------- Balances, August 31, 1996.............................. $(1,107) $(1,799) $(12,603) $(174,576) $145,347 ======= ======= ======== ========= ========
The accompanying notes are an integral part of these condensed consolidated statements. 4 UNITED INTERNATIONAL HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
For the Six Months Ended August 31, ---------------------------------- 1996 1995 ---------------- ---------------- Cash flows from operating activities Net loss................................................................................ $ (9,848) $ (38,458) Adjustments to reconcile net loss to net cash flows from operating activities: Equity in losses of affiliated companies, net.......................................... 21,723 13,447 Gain on sale of investment in affiliated company....................................... (65,260) -- Minority interest share of losses...................................................... (1,751) (713) Depreciation and amortization.......................................................... 8,631 1,468 Amortization of deferred compensation.................................................. 426 378 Accretion of interest on senior secured notes.......................................... 31,356 15,348 Issuance of common stock in connection with Company's 401(k) Plan...................... 163 122 Acceleration of vesting of stock options............................................... -- 650 Provision for losses on investment related costs....................................... 824 816 Increase in management fee receivables................................................. (301) (98) Increase in other assets............................................................... (8,839) (825) Increase (decrease) in accounts payable, accrued liabilities and other................. 5,572 (3,243) --------- --------- Net cash flows from operating activities............................................... (17,304) (11,108) --------- --------- Cash flows from investing activities Purchase of short-term investments...................................................... (179,639) (63,261) Proceeds from sale of short-term investments............................................ 77,540 134,271 Restricted cash and short-term investments released..................................... 4,073 71,780 Investments in and advances to affiliated companies and other investments............... (53,663) (138,459) Increase in notes receivable............................................................ (36,764) (6,568) Reimbursement of note receivable........................................................ 4,264 -- Reimbursement of advance to related party............................................... 307 100 Proceeds from sale of affiliated company................................................ 84,098 1,190 Decrease (increase) in costs to be reimbursed by affiliated companies, net.............. 3,005 (8,975) Acquisition, transaction and development costs incurred................................. (2,822) (3,265) Purchase of property, plant and equipment............................................... (54,289) (5,816) --------- --------- Net cash flows from investing activities................................................ (153,890) (19,003) --------- --------- Cash flows from financing activities Issuance of common stock in connection with Company's Stock Option Plan................. 65 134 Proceeds from offering of senior notes.................................................. 225,115 -- Deferred debt offering costs............................................................ (9,515) (1) Payment of warrants tendered to the Company............................................. (2,156) -- Borrowing of other debt................................................................. 8,902 9,820 Repayment of other debt................................................................. (13,684) (1,000) --------- --------- Net cash flows from financing activities................................................ 208,727 8,953 --------- --------- Effect of exchange rates on cash......................................................... 855 734 --------- --------- Increase (decrease) in cash and cash equivalents......................................... 38,388 (20,424) Cash and cash equivalents, beginning of period........................................... 112,218 30,717 --------- --------- Cash and cash equivalents, end of period................................................. $ 150,606 $ 10,293 ========= ========= Supplemental cash flow disclosures: Cash paid for interest................................................................... $ 553 $ 492 ========= ========= Cash received for interest............................................................... $ 5,357 $ 6,421 ========= =========
The accompanying notes are an integral part of these condensed consolidated statements. 5 UNITED INTERNATIONAL HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AUGUST 31, 1996 (Monetary amounts stated in thousands) (Unaudited) 1. Organization and Basis of Presentation United International Holdings, Inc. (the "Company" or "UIHI") was formed as a Delaware corporation in 1989, for the purpose of developing, acquiring and managing multi-channel television operations and related businesses. The following chart presents a summary of the Company's significant investments in multi-channel television, programming distribution and telephony operations as of August 31, 1996.
---------------------- ---------------------- Philips Media B.V. United International Holdings, Inc. ---------------------- ---------------------- 50% 50% 100% ---------------------------- ------------------------- United and Philips United International Communications B.V. ("UPC") Properties, Inc. ---------------------------- ------------------------- - ---------------------------------------- -------------------------------------- Europe UIH Latin America, Inc. - ------ ----------------------- Interests Held Directly Radio Public (Belgium) 100.0% Cablevision S.A. (Chile)(6) 100.0% Kabel Net (Czech Rep.) 100.0 STX (Chile)(6) 100.0 KTE (Eindhoven, the Netherlands) 100.0 Cable Star (Peru) 94.0 Marne la Vallee (France) 100.0 Megapo (Mexico) 49.0 Telekable Group (Austria) 95.0 Jundiai TV (Brazil) 46.3 Transvatel SRO (Slovak Republic) 75.0 TV Show Brasil A2000 (Amsterdam, the Netherlands) 50.0 (Fortaleza, Brazil) 40.0 Citecable (France) 30.0 -------------------------------------- RKS Hamburg (Germany) 29.0 Santander (Spain) 25.0 -------------------------------------- Portugal 100.0 Other Romania 51.0-90.0 ----- Interests Held Through UII ITN 76.9% Melita Cable (Malta) 42.5 Monor Communications (Hungary) 48.4 Tevel (Israel) 23.3 Iberian Programming Services 33.8 PHL (Ireland) 20.0 Teleport (St. Petersburg) 30.0 -------------------------------------- Interests Held Through UCI (1) Norkabel (Norway) 8.3 -------------------------------------- Kabelkom (Hungary) 3.9 UIH Asia/Pacific, Inc. Swedish Cable (Sweden) 2.2 ---------------------- - --------------------------------------- HITV (China) 49.0% SCS (Philippines)(5) 40.0 97.4% UIH Australia/Pacific, Inc. ("UIH AP") -------------------------------------- Saturn (New Zealand)(2) 100.0% United Wireless (Australia) 100.0 Austar (Australia)(3) 94.0 Telefenua(Tahiti)(4) 90.0 XYZ (Australia) 25.0 --------------------------------------
(1) UPC recently acquired 100% of UCI and now owns 100 of Norkabel, 47% of Kabelkom and 26% of Swedish Cable. (2) In July 1996, UIH AP increased its ownership interest in Saturn to 100%. In exchange for acquiring the additional 50% interest, the Company gave Saturn's other shareholder a 2.6% interest in UIH AP. (3) UIH AP holds an effective 94% economic interest in CTV and STV, the two companies that form Austar, formerly known as CEtv. UIH AP held an effective 50% economic interest in Austar until December 1995 when it increased its effective economic ownership interest to 90% and May 31, 1996 when it increased its effective economic ownership interest to 94%. UIH AP has agreed to acquire the remaining 6% interest in Austar subject to certain conditions. (4) UIH AP owns an effective 90% economic interest in the Tahiti project. UIH AP's economic interest will decrease to 75% and 64% once UIH AP has received a 20% and 40% internal rate of return on its investment in Tahiti, respectively. (5) The Company currently holds a convertible loan, which upon full conversion would provide the Company with a 40% ownership interest in the Philippines operating company. (6) In September 1996, the Company formed a joint venture with VTK S.A., a Chilean conglomerate, to which each party contributed their respective Chilean multi-channel assets. The Company owns 34% of the joint venture. See Note 5. 6 UNITED INTERNATIONAL HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) In August 1996, the Company sold its interest in Net Sao Paulo for $78,098 and recognized a gain of $65,260. The purchase price was satisfied with a cash payment of $43,098 and a note receivable of $35,000. The note receivable bears interest at a rate of 12% per annum, is due in August 1997, and is guaranteed by the Company's former partner in Net Sao Paulo. The accompanying interim condensed consolidated financial statements are unaudited and include the accounts of the Company and all majority-owned subsidiaries except Cablevision S.A. and Red de Television y Servicios por Cable S.A. ("STX") due to a joint venture in Chile which, in September 1996, reduced the Company's interest in Cablevision S.A. and STX below 50% (see Note 5). All affiliated companies are accounted for on a calendar year basis, versus the Company which has a fiscal yearend of February 28 (February 29 in leap years). The Company records its share of equity in income (losses) of affiliated companies or consolidates the affiliated companies based on the affiliated companies' calendar yearend results. Exchange rates used are as of August 31, 1996, unless otherwise noted. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (of a normal recurring nature) have been made which are necessary to present fairly the financial position of the Company as of August 31, 1996, and the results of its operations for the three and six months ended August 31, 1996 and 1995. For a more complete understanding of the Company's financial position and results of operations, reference is made to the consolidated financial statements of the Company included in the Company's annual report on Form 10-K for the year ended February 29, 1996. 2. Summary of Significant Accounting Policies Costs to be Reimbursed by Affiliated Companies The Company incurs costs on behalf of affiliated companies, such as expatriate salaries and benefits, travel and professional services. These costs are reimbursed by the affiliated companies. Investments in and Advances to Affiliated Companies, Accounted for Under the Equity Method All affiliated companies are accounted for on a calendar year basis, versus the Company which has a fiscal yearend of February 28 (February 29 in leap years). The Company records its share of equity in income (losses) of affiliated companies based on the affiliated companies' calendar yearend results. Investments in and advances to affiliated companies are as follows:
As of August 31, 1996 ---------------------------------------------------------------------------------- Investments in Cumulative Equity Cumulative and Advances to in Income (Losses) of Translation Valuation Affiliated Companies Affiliated Companies(1) Adjustments Allowance Total -------------------- ----------------------- ------------ ---------- -------- Europe - ------ UPC........................... $150,446 $(26,727) $ (9,573) $ -- $114,146 Monor Communications.......... 27,182 (6,785) (3,319) -- 17,078 Latin America - ------------- STX........................... 52,716 735 (855) -- 52,596 Cablevision S.A. ............. 33,583 (2,651) (671) -- 30,261 TV Show Brasil................ 6,070 (2,359) -- -- 3,711 Megapo........................ 32,497 (283) (1,180) -- 31,034 Asia/Pacific - ------------ Saturn........................ 11,629 (2,733) 237 -- 9,133 XYZ........................... 13,356 (13,466) 110 -- -- SCS........................... 8,637 (234) 177 -- 8,580 Other - ----- Teleport...................... 3,039 (1,051) -- (1,988) -- Other......................... 16,830 (3,428) -- -- 13,402 ------- ------- ------- ------ ------- $355,985 $(58,982) $(15,074) $(1,988) $279,941 ======= ======= ======= ====== =======
(1) Does not include cumulative equity in losses of $9,979 of Net Sao Paulo as the Company sold its investment in August 1996 realizing a gain of $65,260. Also, does not include cumulative equity in losses of $1,641 of ITN as ITN is now consolidated. 7 UNITED INTERNATIONAL HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
As of February 29, 1996 -------------------------------------------------------------------------------- Investments in Cumulative Equity Cumulative and Advances to in Income (Losses) of Translation Valuation Affiliated Companies Affiliated Companies Adjustments Allowance Total -------------------- -------------------- ----------- --------- ----- Europe - ------ UPC.......................... $150,442 $(15,559) $(3,758) $ -- $131,125 Monor Communications......... 24,632 (5,573) (2,654) -- 16,405 Latin America - ------------- STX.......................... 29,423 205 (671) -- 28,957 Cablevision S.A.............. 30,939 (1,037) (125) -- 29,777 Net Sao Paulo................ 16,054 (8,290) -- -- 7,764 TV Show Brasil............... 6,118 (1,582) -- -- 4,536 Megapo....................... 32,491 (48) (1,257) -- 31,186 Asia/Pacific - ------------ Saturn....................... 6,014 (1,802) 112 -- 4,324 XYZ.......................... 11,718 (11,737) 111 -- 92 SCS.......................... 6,346 (148) 183 -- 6,381 Other - ----- Teleport..................... 2,961 (1,051) -- (1,910) -- ITN.......................... 3,862 (1,032) -- -- 2,830 Other........................ 10,008 (1,180) -- -- 8,828 ------- ------- ------ ------- ------- $331,008 $(48,834) $(8,059) $(1,910) $272,205 ======= ======= ====== ======= =======
Foreign Operations The functional currency for the Company's foreign operations is the applicable local currency for each affiliate company, except for countries which have experienced hyper-inflationary economies. For countries which have hyper-inflationary economies, the financial statements are presented in United States dollars. Assets and liabilities of foreign subsidiaries are translated at the exchange rates in effect at period end and the statements of operations are translated at the average exchange rates during the period. Exchange rate fluctuations on translating foreign currency financial statements into U.S. dollars result in unrealized gains or losses referred to as translation adjustments. Cumulative translation adjustments are recorded as a separate component of stockholders' equity. Transactions denominated in currencies other than the local currency are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in transaction gains and losses which are reflected in income as unrealized (based on period end translations) or realized upon settlement of the transactions. In accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows", cash flows from the Company's operations in foreign countries are translated based on average exchange rates for the period while balance sheet amounts are translated at period end exchange rates. As a result, amounts related to assets and liabilities reported on the Condensed Consolidated Statements of Cash Flows will not agree to changes in the corresponding balances on the Condensed Consolidated Balance Sheets. The effect of exchange rate changes on cash balances held in foreign currencies is reported as a separate line below cash flows from financing activities. 8 UNITED INTERNATIONAL HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 3. Debt Debt consists of the following as of August 31, 1996 and February 29, 1996:
As of As of August 31, February 29, 1996 1996 ---------- ------------ November 1994 14% senior secured notes, net of unamortized discount ........................... $246,244 $228,828 November 1995 14% senior secured notes, net of unamortized discount ........................... 84,263 78,745 February 1996 14% senior secured notes, net of unamortized discount ........................... 52,099 49,140 May 1996 14% UIH AP senior notes, net of unamortized discount (1) ............................. 229,142 -- Note payable to a company, interest at 1.5% above the rate published by a certain Chilean bank, principal and interest due quarterly until June 1998, secured by shares of STX .............. 7,263 -- Note payable to a bank, interest at 7.5% ...................................................... -- 9,820 Note payable to a bank, interest at LIBOR plus 1.75% .......................................... -- 3,828 Note payable to a bank ........................................................................ 208 -- Capitalized lease obligation .................................................................. 2,598 890 -------- -------- Total senior secured notes and other debt ..................................................... $621,817 $371,251 ======== ========
(1) Balance is as of June 30, 1996. The $246,244 of 14% senior secured notes were issued in November 1994 at a discount from their principal amount of $394,000 and accrete interest at a rate of 15.24% compounded semi-annually. No cash interest payments will be made prior to maturity on November 15, 1999. The $84,263 of 14% senior secured notes were issued in November 1995 at a discount from their principal amount of $130,000 and accrete interest at a rate of 14% compounded semi-annually. No cash interest payments will be made prior to maturity on November 15, 1999. The $52,099 of 14% senior secured notes were issued in February 1996 at a discount from their principal amount of $75,350 and accrete interest at a rate of 11.875% compounded semi-annually. No cash interest payments will be made prior to maturity on November 15, 1999. The $229,142 of 14% UIH AP senior notes were issued in May 1996 at a discount from their principal amount of $443,000 and accrete interest at a rate of 14% compounded semi-annually. Cash interest will not be paid prior to May 15, 2001. Thereafter, cash interest will be payable semi-annually on each May 15 and November 15, commencing November 15, 2001. The senior notes mature May 15, 2006. 4. Commitments A summary of the Company's guarantees as of August 31, 1996 is as follows: Guarantees ---------- Teleport St. Petersburg .......................... $ 2,109(1) Monor Communications ............................. 10,000(2) Australis Media Limited .......................... 10,000(3) ------ $22,109 ====== (1) Amount represents Company guarantee of affiliate debt. (2) The Company has entered into an arrangement with the lender to the Monor project that calls for a commitment of up to $10,000. The commitment can be used to pay project indebtedness of up to $5,000 for a specified period of time and up to $5,000 to be invested directly into the business. 9 UNITED INTERNATIONAL HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (3) In May 1996, a wholly-owned subsidiary of UIH AP guaranteed $10,000 of obligations of Australis Media Limited ("Australis"), a principal supplier of Austar's programming. In connection with the guarantee, the wholly-owned subsidiary received warrants to purchase approximately 4.2 million ordinary shares of Australis. This guarantee is secured by a cash deposit of $10,000 by the wholly-owned subsidiary. UIH AP expects this guarantee to be converted to equity and/or repaid during the fourth quarter. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources" for projected fundings. 5. Subsequent Event In September 1996, the Company completed an agreement with VTR S.A. ("VTR"), a leading Chilean conglomerate with interests in telecommunications and natural resources, under which the parties formed a joint venture. The Company and VTR contributed their respective Chilean multi-channel television assets to the joint venture of which the Company owns 34%. In early 1998, the Company will have the option to increase its interest to 50% after a revaluation of the properties subject to minimum and maximum values. 10 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Monetary Amounts Stated in Thousands) The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the Company's condensed consolidated financial statements and related notes thereto included elsewhere herein. Such condensed consolidated financial statements provide additional information regarding the Company's financial activities and condition. Liquidity and Capital Resources The Company's expenditures to date have been made in developing multi-channel television, programming distribution and telephony operations in foreign countries. Except for the Company's working capital requirements, the Company's future cash needs will depend on management's acquisition and development decisions. The Company does not expect any operating company to pay dividends in the foreseeable future and accordingly does not expect any distributions to be made by any affiliates. During the six months ended August 31, 1996, the Company incurred net losses of $9,848 of which $21,723 was from non-cash equity in losses of affiliated companies. The Company also recorded accretion of non-cash interest expense on the senior secured notes totaling $31,356. The Company recognized a gain on sale of an affiliated company of $65,260 and received proceeds from the sale of $79,098. For the six months ended August 31, 1996 the Company purchased $54,289 of property, plant and equipment, the majority of which was purchased by the Company's majority owned subsidiaries in Australia and Tahiti as those entities continue to construct their systems. The Company incurred $2,822 of acquisition, transaction and development costs, primarily with respect to its Latin America and Asia/Pacific regions. The Company's notes receivable increased by $32,500 primarily due to the note receivable of $35,000 received for the sale of Sao Paulo. The Company invested $53,663 of cash in its affiliated companies and other investments due to expected additional investments to the existing systems. The Company purchased short-term investments of $179,639 and sold short-term investments of $77,540 as part of its cash management activities. The Company also paid $2,156 for warrants tendered to the Company. UIH AP received proceeds from the sale of its senior notes of $225,115 and incurred offering costs of $9,515. The Company borrowed additional debt of $8,902 and repaid two loans totaling $13,684. During the six months ended August 31, 1995, the Company incurred net losses of $38,458 of which $13,447 was from non-cash equity in losses of affiliated companies. The Company also recorded accretion of non-cash interest expense on the senior secured notes totaling $15,348. During the six months ended August 31, 1995, the Company purchased $5,816 of property, plant and equipment, the majority of which was purchased by the Company's majority owned subsidiaries in Tahiti and the Czech Republic as those entities continued to construct their MMDS systems. The Company incurred $3,265 of acquisition, transaction and development costs, primarily with respect to its Latin America and Asia/Pacific regions. The Company's notes receivable increased by $6,568 due to advances under a bridge loan to the other owners of SCS to meet their funding commitments to the project, for which the Company was repaid a portion in August 1996 and will be repaid the remaining portion in August 1997 pursuant to the terms of the bridge loans. The Company's restricted cash decreased $71,780 due to the release of funds in connection with the Company's formation of UPC. The Company invested $138,459 of cash in its affiliated companies and other investments due to expected additional investments to the existing systems. The Company purchased short-term investments of $63,261 and sold short-term investments of $134,271 as part of its cash management activities. The Company's cost to be reimbursed increased by $8,975. The Company borrowed $9,820 to fund a portion of its acquisition in STX. The amount currently estimated by the Company for future fundings and capital commitments, as described in the following paragraphs, is intended to be funded using the Company's existing cash. While the Company currently anticipates funding the projects summarized below, there can be no assurance that the Company's actual expenditures will equal the currently anticipated amounts. If the Company's actual expenditures are less than the amounts indicated, the Company intends to use such remaining cash to pursue additional development and acquisition opportunities. 11 The following table summarizes the Company's remaining projected funding requirements for its projects other than UIH AP:
Projected Fundings --------------------------------- Portion Funded Remaining Total as of as of Expected August August 31, Location Type of Project Fundings 31, 1996 1996 - -------- --------------- -------- -------- ---------- Europe: UPC Cable systems $171,059 $171,059 $ -- Monor Communications Telephony/cable systems 26,580 26,580 -- Spain Programming Programming 11,613 6,527 5,086 Irish Programming Programming 10,159 1,600 8,559 ------- ------- ------ 219,411 205,766 13,645 ------- ------- ------ UIH Latin America, Inc.: Chile (STX) Cable system 53,407 45,305 8,102 Chile (Cablevision) Cable system 32,100 32,100 -- Mexico Cable system 32,033 32,033 -- Fortaleza, Brazil MMDS system 8,402 6,060 2,342 Jundiai, Brazil Cable system 4,733 4,001 732 Peru Cable system 6,561 2,059 4,502 Venezuela Cable system 7,812 3,182 4,630 United Family Programming 5,245 -- 5,245 Communications ------- ------- ------ 150,293 124,740 25,553 ------- ------- ------ UIH Asia/Pacific, Inc.: UIH AP (1) -- 102,035 102,035 -- Hunan Province, China Microwave transmission network 6,265 5,980 285 Philippines Cable system 14,723 11,323 3,400 ------- ------- ------ 123,023 119,338 3,685 ------- ------- ------ Other: Teleport St. Petersburg Telephony 4,206 2,080 2,126 ITN, Inc. -- 5,087 5,002 85 ------- ------- ------ 9,293 7,082 2,211 ------- ------- ------ Grand Total $502,020 $456,926 $45,094 ======= ======= ======
(1) Amount represents what the Company funded to UIH AP. See the table below for UIH AP's projected fundings. The Company may also invest additional amounts in its existing operating systems and early stage projects or acquire interests from its partners in these systems. For example, the Company completed an agreement with VTR S.A. in Chile to form a joint venture to which each party contributed its respective multi- channel television assets in Chile and of which the Company owns 34%. The Company has an option in early 1998 to increase its ownership interest in the new joint venture to 50% based upon a revaluation of the properties contributed. Thus, the Company could fund additional amounts to increase its ownership percentage (subject to maximum and minimum values) of the joint venture. The amount currently estimated by UIH AP for future fundings and capital commitments, as described below, has been funded using the proceeds of $225,100 from the sale of the 1996 UIH AP senior notes, of which $109,352 is remaining as of August 31, 1996, and UIHI's fundings prior to the offering. In addition, UIH AP intends to raise additional funds through the sale of equity securities and/or further issuances of debt either by UIH AP, its immediate parent corporation, or its operating companies. The following table summarizes UIH AP's remaining projected funding requirements for its projects (based on UIH AP's August 31, 1996 ownership interest):
Projected Fundings ----------------------------------------- Total Portion Remaining Expected Funded as of as of Location Type of Project Fundings August 31, 1996 August 31, 1996 - -------- --------------- --------- --------------- --------------- UIH AP: New Zealand Cable system $ 92,822 $ 14,757 $ 78,065 Australia (Austar)(1) MMDS/DTH systems 355,315 108,436 246,879 Australia (XYZ) Programming 14,328 10,002 4,326 Tahiti MMDS system 17,399 15,119 2,280 United Wireless Mobile data 8,200 3,036 5,164 services ------- ------- ------- $488,064 $151,350 $336,714 ======= ======= =======
(1) Does not include the $50,700 paid by the Company to other shareholders of Austar to increase its ownership interest. UIH AP has also agreed to acquire the remaining 6% of Austar. The above projected funding assumes 100% ownership. 12 The Company currently does not expect to contribute additional capital to UPC, as UPC will finance its operating systems and development opportunities with its operating cash flow and cash on hand, as well as possible equity and debt financings. At this time, the Company does not know which acquisition or other development projects UPC will pursue and is unable to estimate the amount of funds that will be necessary for UPC to develop the projects it chooses to pursue. In connection with the UPC transaction, UPC issued to Philips $133,600 of UPC PIK Notes in two tranches, both of which become due and payable on January 1, 2005. The first tranche ($53,400) becomes convertible into equity of UPC in July 1999 and the second tranche ($80,200) becomes convertible into equity of UPC in July 2001. The Company has the option to purchase one-half of the UPC PIK Notes at any time they become convertible. While the Company and Philips currently intend that the UPC PIK Notes will be redeemed by UPC prior to conversion through an equity or debt financing at the UPC level, if the UPC PIK Notes are not redeemed prior to conversion, the Company must either purchase one-half of the UPC PIK Notes or face dilution of its interest in UPC. In December 1995, the Company acquired an additional effective 40% economic interest in both CTV and STV, increasing its total effective economic interest in both companies to approximately 90%. In May 1996, the Company increased its interest to 94% and UIH AP (the 97.4% owned subsidiary to which the interests in Austar, formerly known as CEtv, were contributed) has agreed subject to certain conditions, to acquire the remaining 6% in Austar. As a result of this acquisition, the Company now consolidates the majority financial results of STV and CTV, the two companies that comprise Austar. Prior to this acquisition, the Company accounted for these companies on the equity method, reporting its proportionate interest in STV's and CTV's losses. As STV and CTV are in the early stages of operations and construction of their multi-channel television systems, the Company anticipates these companies will continue to incur losses for the next several years. In July 1996, UIH AP increased its ownership interest in Saturn to 100%. In exchange for acquiring the additional 50% interest, the Company gave Saturn's other shareholder a 2.6% interest in UIH AP. The Company's share of Saturn's losses have been recognized to date through an equity pick up. Saturn's results will be consolidated beginning in the third quarter. Because the Company and UIH AP do not currently have any cash flow, their ability to repay their obligations on the senior notes at maturity will be dependent on developing one or more sources of cash prior to the maturity of the senior notes. The Company may (i) seek to refinance all or a portion of the senior notes at maturity though sales of additional debt or equity securities of the Company, (ii) seek to sell all or a portion of its interests in one or more of its affiliated companies, (iii) negotiate with its current financial and strategic partners to permit the cash produced by its affiliated companies, such as UPC, to be distributed to equity holders rather than reinvested in the businesses of such affiliated companies, and/or (iv) seek to invest in companies that will make substantial cash distributions on or before the maturity of the senior notes. The Company continues to be actively engaged in the development and acquisition of additional investment opportunities in multi-channel television services and related businesses in Asia/Pacific and Latin America and incurs expenses in identifying and pursuing these opportunities before any investment decision is made. The Company anticipates making investments supplemented by capital raised from local financial and strategic partners as well as local debt financing to the extent available and appropriate for each project, subject to the provisions of the Company's and UIH AP's senior secured notes indentures. See Note 4 of the Company's Condensed Consolidated Financial Statements for additional information regarding the Company's commitments subject to the provisions of the Company's and UIH A/P's senior secured notes indentures. Results of Operations The Company's Management Fee Income from Related Parties. Management fee income, as compared to the corresponding prior year amounts, increased approximately $284 (979.3%) and $567 (900.0%) during the three and six months ended August 31, 1996 and 1995, respectively. The detail of management fee income is as follows:
For the Three Months For the Six Months Ended August 31, Ended August 31, -------------------- ------------------ 1996 1995 1996 1995 --------- --------- -------- -------- UIH Asia/Pacific, Inc. ................ $ 29 $ -- $ 163 $ -- UIH Latin America, Inc. ............... 217 -- 356 -- Other ................................. 67 29 111 63 ---- ---- ---- ---- Total management fee income from related parties ................. $ 313 $ 29 $ 630 $ 63 ==== ==== ==== ====
13 The Company's Service Revenue. Service revenue, as compared to the corresponding prior year amounts, increased approximately $3,799 (833.1%) and $5,395 (522.8%) during the three and six months ended August 31, 1996 and 1995, respectively, as follows:
For the Three Months For the Six Months Ended August 31, Ended August 31, -------------------- ------------------ 1996 1995 1996 1995 ---------- -------- -------- -------- UIH Asia/Pacific, Inc. (1) .... $3,936 $ 456 $5,870 $ 552 UIH Latin America, Inc. (2) ... 246 -- 484 -- Other (3) ..................... 73 -- 73 480 ----- ---- ----- ----- Total service revenue ...... $4,255 $ 456 $6,427 $1,032 ===== ==== ===== =====
(1) Amounts for UIH Asia/Pacific, Inc. have varied for the following reasons: - Austar, formerly known as CEtv, launched service in September 1995 and was consolidated effective March 1, 1996. - The Tahiti system launched service in March 1995. - The Company acquired a 100% interest in United Wireless in September 1995. (2) The Company acquired 94% of Cablestar in February 1996. (3) Other amounts have varied for the following reasons: - The Company's previously owned 66.7% subsidiary, Kabel Net, initiated MMDS operations during the fall of 1994. Beginning June 1, 1995, the activity of Kabel Net and certain of the programming assets are recorded through the Company's 50% equity pick-up from UPC. - The Company began consolidating ITN effective June 1, 1996. The Company's Operating Expense. During the three and six months ended August 31, 1996 and 1995, respectively, the Company experienced an increase in operating expense, as compared to the corresponding prior year amounts, of approximately $6,537 (534.1%) and $10,376 (416.0%), as follows:
For the Three Months For the Six Months Ended August 31, Ended August 31, -------------------- ------------------ 1996 1995 1996 1995 --------- --------- --------- ------- UIH Asia/Pacific, Inc. (1) ... $7,310 $1,224 $12,305 $1,415 UIH Latin America, Inc. (2) .. 104 -- 218 -- Other (3) .................... 347 -- 347 1,079 ----- ----- ------ ----- Total operating expense ... $7,761 $1,224 $12,870 $2,494 ===== ===== ====== =====
Footnotes (1), (2), (3): see discussion under "The Company's Service Revenue" above. The Company's General and Administrative Expense. During the three and six months ended August 31, 1996 and 1995, respectively, the Company experienced an increase in general and administrative expense over the corresponding prior year amounts of approximately $978 (14.7%) and $1,886 (15.6%), as follows:
For the Three Months For the Six Months Ended August 31, Ended August 31, -------------------- ------------------ 1996 1995 1996 1995 --------- --------- -------- -------- UIH Asia/Pacific, Inc. (1) ............. $2,638 $1,024 $ 4,682 $ 1,184 UIH Latin America, Inc. (2) ............ 123 -- 257 -- Other (3) (4) .......................... 4,851 3,769 9,017 8,572 Non-recurring charges (5) .............. -- 1,841 -- 2,314 ----- ----- ------ ------ Total general and administrative expense............................. $7,612 $6,634 $13,956 $12,070 ===== ===== ====== ======
Footnotes (1), (2), (3): see discussion under "The Company's Service Revenue" above. (4) The increase, in part, relates to the increases in activity which have resulted in the hiring of additional staff dedicated to the Company's management and development efforts. (5) Included in non-recurring charges are costs which are currently incurred by UPC. The Company's Depreciation and Amortization. Depreciation and amortization increased $5,359 (1,429.1%) and $7,163 (487.9%) during the three and six months ended August 31, 1996 and 1995, respectively. The increase is due to the launch of the system in Tahiti in March of 1995 and Australia in September 1995, which is consolidated effective March 1, 1996. As noted above under "The Company's Service Revenue," the activity of Kabel Net and certain programming assets are currently recorded as an equity pick-up and in fiscal 1996 such investments were consolidated for the first quarter. 14 The Company's Equity in Losses of Affiliated Companies, Net. The Company recognized equity in losses of affiliated companies of $9,539 and $9,098 for the three months ended August 31, 1996 and 1995, respectively, and $21,741 and $13,310 for the six months ended August 31, 1996 and 1995, as follows:
Three Months Ended August 31, 1996 Three Months Ended August 31, 1995 ---------------------------------------- ----------------------------------------- Company/UPC Equity in Company/UPC Equity in Ownership Income (Losses) of Ownership Income (Losses) of Interest (1) Affiliated Companies Interest (1) Affiliated Companies ----------------- --------------------- --------------- --------------------- Europe UPC ................... 50.0% $(4,686) -- $ -- UCI (2)(3): Norkabel ......... -- -- 8.3% 104 SCD .............. -- -- 2.2% (27) Kabelkom ......... -- -- 3.9% 37 UCI .............. -- -- 8.3% (6) ------- ------- -- 108 Suspended loss (4) -- (108) ------- ------- Loss recognized .. -- -- ------- ------- UII(3): Tevel ............ -- -- 23.3% 512 PHL .............. -- -- 20.0%(5) (552) Melita(2) ........ -- -- 41.6%(5) (357) UII .............. -- -- 50.0% 121 ------- ----- -- (276) ------- ----- UII Management(3) ..... -- -- 50.0% 232 Monor ................. 48.4% (591) 47.6% (857) Santander(3) .......... -- -- 25.0% (119) Kabel Net(3)(6) ....... -- -- 66.7% (1,217) Programming(3)(6) ..... -- -- 100.0% (247) UIH Latin America, Inc. .... STX ................... 100.0% 255 -- -- Megapo ................ 49.0% 50 -- -- Net Sao Paulo(7) ...... 34.0% -- 34.0% (1,992) Cablevision S.A. ...... 100.0% (1,298) 50.0% (2) TV Show Brasil ........ 40.0% (324) 40.0% (269) UIH Asia/Pacific, Inc. ..... Austar(8) -- -- 50.0% (175) XYZ ................... 25.0%(9) (1,007) 50.0% (3,446) Saturn (10) ........... 100.0% (529) 50.0% (274) Other ...................... 33.8-46.3%(11) (1,409) 25.0-46.3% (456) ------- ------ Total equity in losses of affiliated companies, net................... $ (9,539) $(9,098) ======= ======
15
Six Months Ended August 31, 1996 Six Months Ended August 31, 1995 --------------------------------------- ----------------------------------------- Company/UPC Equity in Company/UPC Equity in Ownership Income (Losses) of Ownership Income (Losses) of Interest (1) Affiliated Companies Interest (1) Affiliated Companies ---------------- --------------------- --------------- --------------------- Europe UPC ...................... 50.0% $(11,168) -- $ -- UCI (2)(3): Norkabel ............ -- -- 8.3% 651 SCD ................. -- -- 2.2% (61) Kabelkom ............ -- -- 3.9% 64 UCI ................. -- -- 8.3% (6) -------- ------- -- 648 Suspended loss (4) .. -- -- (648) -------- ------- Loss recognized ..... -- -- -- -------- ------- UII(3): Tevel ............... -- -- 23.3% 1,054 PHL ................. -- -- 20.0%(5) (925) Melita(2) ........... -- -- 41.6%(5) (598) UII ................. -- -- 50.0% 267 -------- ------- -- (202) -------- -------- UII Management(3) ........ -- -- 50.0% 468 Monor .................... 48.4% (1,187) 47.6% (1,761) Santander(3) ............. -- -- 25.0% (213) Kabel Net(3)(6) .......... -- -- 66.7% (1,217) Programming(3)(6) ........ -- -- 100.0% (247) UIH Latin America, Inc. STX ...................... 100.0% 530 -- -- Megapo ................... 49.0% (208) -- -- Net Sao Paulo(7) ......... 34.0% (1,649) 34.0% (3,518) Cablevision S.A. ......... 100.0% (1,614) 50.0% 9 TV Show Brasil ........... 40.0% (777) 40.0% (467) UIH Asia/Pacific, Inc. Austar(8) ................ -- -- 50.0% (364) XYZ ...................... 25.0%(9) (1,639) 50.0% (4,389) Saturn(10) ............... 100.0% (928) 50.0% (535) Other ......................... 33.8-76.9%(11) (3,101) 25.0-46.3% (874) -------- ------- Total equity in losses of affiliated companies, net...................... $ (21,741) $(13,310) ======== =======
(1) On July 13, 1995, the UPC transaction was closed and the Company's interests in UCI, UII, UII Management, Santander, Kabel Net and certain programming entities were transferred to UPC. (2) The Company's ownership interest with respect to equity in losses from UCI and Melita was calculated based on the Company's average ownership interest throughout the period. (3) These properties were contributed to UPC. (4) Represents cumulative losses in affiliate in excess of capital invested (including contractual funding commitments) or a reduction of suspended losses for equity in income. (5) The Company's ownership interest with respect to equity in losses from PHL and Melita is calculated net of minority interest. (6) Due to the determination that Kabel Net and certain programming entities would be contributed to UPC, the consolidated activity for the three months ended June 30, 1995 was calculated as an equity pick up and not consolidated. (7) In August 1996, the Company sold its interest in Net Sao Paulo for $78,098 and recognized a gain of $65,260 on the sale. (8) In December 1995, the Company increased its effective interest in Austar to majority control and began consolidating Austar's results of operations March 1, 1996. (9) In July 1995, the Company reduced its ownership percentage in XYZ to 25%. (10) In July 1996, UIH AP increased its ownership interest in Saturn to 100%. In exchange for acquiring the additional 50% interest, the Company issued to Saturn's other shareholder a 2.6% interest in UIH AP. (11) The Company increased its ownership in ITN to 76.9% in April 1996. The Company's Interest Income. Interest income, as compared to the corresponding prior period amounts, increased by approximately $1,930 (116.0%) and $818 (16.7%) during the three and six months ended August 31, 1996. Such increase is primarily due to a higher amount of cash invested in the current year as compared to the prior year and due to reduced fundings to projects in the current period. The Company's Interest Expense. Interest expense, as compared to the corresponding prior period amounts, increased by approximately $10,150 (126.4%) and $16,299 (104.5%) during the three and six months ended August 31, 1996. The increase is due to the sale of the senior secured notes in connection with the Company's debt offerings in November 1995 and February 1996. 16 The Company's Provision for Losses on Investment Related Costs. Provision for losses on investment related costs totaled $472 and $439 for the three months ended August 31, 1996 and 1995, respectively and $824 and $816 for the six months ended August 31, 1996 and 1995, respectively. The Company capitalizes direct and incremental costs incurred relative to pursuing potential investments. If an investment is made, these costs are either reimbursed to the Company by the operating entity or capitalized as part of the cost basis of the investment. If the potential investment is abandoned, these costs are expensed. Gain on Sale of Affiliated Company. In August 1996, the Company sold its interest in Net Sao Paulo for $78,098 and recognized a gain of $65,260. The purchase price was satisfied with a cash payment of $43,098 and a note receivable of $35,000. The note receivable bears interest at a rate of 12% per annum, is due in August 1997, and is guaranteed by the Company's former partner in Net Sao Paulo. 17 PART II - OTHER INFORMATION --------------------------- Item 5 - Other Information Summary Operating Data The operating data set forth below reflect the aggregate statistics of the operating systems in which the Company has an ownership interest.
As of June 30, 1996 -------------------------------------------------------------- Homes in Homes Basic Basic UIHI Service Area Passed Subscribers Penetration Ownership ------------ ------ ----------- ------------ ---------- Europe - ------ UPC Systems: Austria Cable ............ 884,000 612,400 423,300 69.1% 47.5% Netherlands (Amsterdam) Cable ............ 525,000 516,125 487,221 94.4% 25.0% Belgium Cable ............ 134,000 133,000 127,109 95.6% 50.0% Netherlands (Eindhoven) Cable ............ 90,000 88,440 84,018 95.0% 50.0% Israel Cable ............ 330,000 327,575 224,675 68.6% 11.7% Ireland Cable ............ 78,100 77,706 49,571 63.8% 10.0% MMDS ............. 277,200 257,000 60,752 23.6% Czech Republic Cable/MMDS ....... 330,000 99,579 30,197 30.3% 50.0% MATV ............. -- 9,610 9,610 100.0% Slovakia Cable ............ 100,000 7,865 6,166 78.4% 37.5% Malta Cable ............ 179,000 139,070 42,556 30.6% 21.3% Hungary (Kabelkom) Cable ............ 252,100 235,646 216,209 91.8% 2.0% Norway Cable ............ 233,900 219,091 154,093 70.3% 4.2% Germany Cable ............ 300,000 150,000 53,491 35.7% 14.5% Sweden Cable ............ 541,600 316,567 148,432 46.9% 1.1% SMATV ............ -- 143,971 59,912 41.6% Santander, Spain Cable ............ 57,800 17,186 1,790 10.4% 12.5% Portugal Cable ............ 772,000 -- -- -- 50.0% Romania Cable ............ 105,000 47,562 28,240 59.4% 25.5-45.0% France (Citecable) Cable ............ 250,000 69,740 6,868 9.8% 15.0% --------- --------- --------- Total ...... 5,439,700 3,468,133 2,214,210 --------- --------- --------- As of June 30, 1996 As of March 31,1996 --------------------------------------- ------------------------------------- UIHI UIHI UIHI Equity in Equity in Equity in Homes in Homes Basic Homes Basic Basic Service Area Passed Subscribers Passed Subscribers Penetration ------------ ------ ----------- ------ ----------- ----------- Europe - ------ UPC Systems: Austria Cable ............ 419,900 290,890 201,068 610,200 419,900 68.8% Netherlands (Amsterdam) Cable ............ 131,250 129,031 121,805 515,059 485,616 94.3% Belgium Cable ............ 67,000 66,500 63,555 133,000 127,902 96.2% Netherlands (Eindhoven) Cable ............ 45,000 44,220 42,009 88,200 83,808 95.0% Israel Cable ............ 38,610 38,326 26,287 324,166 222,325 68.6% Ireland Cable ............ 7,810 7,771 4,957 77,247 49,413 64.0% MMDS ............. 27,720 25,700 6,075 211,244 60,327 28.6% Czech Republic Cable/MMDS ....... 165,000 49,790 15,099 76,514 17,131 22.4% MATV ............. -- 4,805 4,805 9,880 9,880 100.0% Slovakia Cable ............ 37,500 2,949 2,312 6,738 5,607 83.2% Malta Cable ............ 38,127 29,622 9,064 136,158 39,243 28.8% Hungary (Kabelkom) Cable ............ 5,042 4,713 4,324 235,402 217,471 92.4% Norway Cable ............ 9,824 9,202 6,472 217,982 153,690 70.5% Germany Cable ............ 43,500 21,750 7,756 66,000 53,491 81.0% Sweden Cable ............ 5,958 3,482 1,633 315,953 151,179 47.8% SMATV ............ -- 1,584 659 143,244 61,621 43.0% Santander, Spain Cable ............ 7,225 2,148 224 18,761 1,098 5.9% Portugal Cable ............ 386,000 -- -- -- -- -- Romania Cable ............ 32,625 16,224 8,602 -- -- -- France (Citecable) Cable ............ 37,500 10,461 1,030 50,040 7,041 14.1% --------- --------- --------- --------- --------- Total ...... 1,505,591 759,168 527,736 3,235,788 2,166,743 --------- --------- --------- --------- --------- As of March 31, 1996 ----------------------------------------------- UIHI UIHI Equity in Equity in UIHI Homes Basic Ownership Passed Subscribers --------- ------ ----------- Europe - ------ UPC Systems: Austria Cable ............ 47.5% 289,845 199,453 Netherlands (Amsterdam) Cable ............ 25.0% 128,765 121,404 Belgium Cable ............ 50.0% 66,500 63,951 Netherlands (Eindhoven) Cable ............ 50.0% 44,100 41,904 Israel Cable ............ 11.7% 37,927 26,012 Ireland Cable ............ 10.0% 7,725 4,941 MMDS ............. 21,124 6,033 Czech Republic Cable/MMDS ....... 50.0% 38,257 8,566 MATV ............. 4,940 4,940 Slovakia Cable ............ 37.5% 2,527 2,103 Malta Cable ............ 21.3% 29,002 8,359 Hungary (Kabelkom) Cable ............ 2.0% 4,708 4,349 Norway Cable ............ 4.2% 9,155 6,455 Germany Cable ............ 14.5% 9,570 7,756 Sweden Cable ............ 1.1% 3,475 1,663 SMATV ............ 1,576 678 Santander, Spain Cable ............ 12.5% 2,345 137 Portugal Cable ............ -- -- -- Romania Cable ............ -- -- -- France (Citecable) Cable ............ 15.0% 7,506 1,056 ------- ------- Total ...... 709,047 509,760 ------- -------
18
As of June 30, 1996 ------------------------------------------------------------------------------------------------- UIHI Equity in UIHI UIHI Homes in Equity Equity in Homes in Homes Basic Basic UIHI Service in Homes Basic Service Area Passed Subscribers Penetration Ownership Area Passed Subscribers ------------ ------ ----------- ----------- --------- --------- --------- ----------- UIHI Systems: Hungary (Monor)(1) Telephony............. 75,000 75,000 49,723 66.3% 43.3% 32,475 32,475 21,530 Cable................. -- 34,324 10,368 30.2% -- 14,862 4,489 UIH Latin America, Inc. ----------------------- Chile (Cablevision)(2) Cable................. 234,000 156,124 45,454 29.1% 100.0% 234,000 156,124 45,454 Chile (Pacifico)(2) Cable................. 44,000 26,843 7,257 27.0% 100.0% 44,000 26,843 7,257 Chile (STX) Cable................. 221,000 147,548 48,762 33.0% 100.0% 221,000 147,548 48,762 Mexico Cable................. 350,000 165,113 53,334 32.3% 49.0% 171,500 80,905 26,134 Fortaleza, Brazil MMDS.................. 430,000 387,000 10,040 2.6% 40.0% 172,000 154,800 4,016 Jundiai, Brazil Cable................. 50,000 33,199 7,124 21.5% 46.3% 23,150 15,371 3,298 Peru Cable................. 115,000 10,000 2,619 26.2% 94.0% 108,100 9,400 2,462 --------- --------- --------- --------- ---------- ------- Total............ 1,444,000 925,827 174,590 973,750 590,991 137,383 --------- --------- --------- --------- ---------- ------- UIH Asia/Pacific, Inc. --------------------------- Australia (Austar) MMDS/DTH.............. 1,500,000 1,171,000 34,808 3.0% 94.0% 1,410,000 1,100,740 32,720 Australia (XYZ) Programming........... N/A N/A 207,666 N/A 25.0% N/A N/A 51,917 New Zealand Cable................. 141,000 6,000 1,125 18.8% 100.0% 141,000 6,000 1,125 Philippines(3) Cable................. 433,000 81,259 29,642 36.5% 40.0% 173,200 32,504 11,857 Tahiti MMDS.................. 31,000 17,458 4,361 25.0% 90.0% 27,900 15,712 3,925 China (HITV)(4) Microwave Relay Nwt... N/A N/A N/A N/A 49.0% N/A N/A N/A --------- --------- --------- --------- --------- ------- Total............ 2,105,000 1,275,717 277,602 1,752,100 1,154,956 101,544 --------- --------- --------- --------- --------- ------- Grand Total...... 9,063,700 5,779,001 2,726,493 4,263,916 2,552,452 792,682 ========= ========= ========= ========= ========== ======= As of March 31, 1996 ------------------------------------------------------------------------ UIHI UIHI Equity in Equity in Homes Basic Basic UIHI Homes Basic Passed Subscribers Penetration Ownership Passed Subscribers --------- ----------- ----------- --------- --------- ----------- UIHI Systems: Hungary (Monor)(1) Telephony............. 75,000 43,690 58.3% 43.3% 32,475 18,918 Cable................. 29,676 8,606 29.0% 12,850 3,726 UIH Latin America, Inc. - --------------------------- Chile (Cablevision)(2) Cable................. 148,128 42,583 28.7% 100.0% 148,128 42,583 Chile (Pacifico)(2) Cable................. 24,325 6,562 27.0% 100.0% 24,325 6,562 Chile (STX) Cable................. 141,343 47,124 33.3% 65.0% 91,873 30,631 Mexico Cable................. 156,610 52,462 33.5% 49.0% 76,739 25,706 Fortaleza, Brazil MMDS.................. 387,000 8,699 2.2% 40.0% 154,800 3,480 Jundiai, Brazil Cable................. 26,722 5,448 20.4% 46.3% 12,372 2,541 Peru Cable................. 15,000 2,550 17.0% 94.0% 14,100 2,397 ------- ------- ------- ------- Total............ 899,128 165,428 522,337 113,900 ------- ------- ------- ------- UIH Asia/Pacific, Inc. - --------------------------- Australia (Austar) MMDS/DTH.............. 347,038 14,047 4.0% 90.0% 312,334 12,633 Australia (XYZ) Programming........... N/A 185,000 N/A 25.0% N/A 46,250 New Zealand Cable................. 6,000 1,100 18.3% 50.0% 3,000 2,250 Philippines(3) Cable................. 66,553 24,444 36.7% 40.0% 26,621 9,778 Tahiti MMDS.................. 15,450 4,500 29.1% 90.0% 13,905 4,050 China (HITV)(4) Microwave Relay Nwt... N/A N/A N/A 49.0% N/A N/A --------- --------- --------- ------ Total............ 435,041 229,091 355,860 74,961 --------- --------- --------- ------ Grand Total...... 4,674,633 2,613,558 1,632,569 721,265 ========= ========= ========= =======
(1) The Company owns a 48.4% interest in Monor Communications Group, Inc. which holds a 89.47% interest in the operating company, Monor Telefon. (2) The Company holds a 100% interest in Cablevision. Cablevision holds a 100% interest in Cablevision Norte S.A. and a 100% interest in Pacifico TV. (3) The Company currently has a convertible loan with SCS, which upon conversion will allow for a 40% ownership interest. (4) The Company has a 49% interest in HITV, a joint venture that owns a microwave relay system in the Hunan Province that transmits one provincial channel to approximately 400,000 cable television homes in the region. 19 The financial information presented below has been taken from unaudited financial information of the respective operating companies that were providing service as of June 30, 1995 and 1996. Some of the information presented below has been derived from financial statements prepared in accordance with foreign generally accepted accounting principles which differ from United States generally accepted accounting principles. In addition, certain amounts for the six months ended June 30, 1995 and 1996 have been converted to dollars using June 30, 1996 exchange rates for the convenience translation.
Revenues ---------------------------------- Convenience Translation ---------------------------------- Six Months Ended Six Months Ended June 30,1995 June 30, 1996 ---------------- ---------------- Europe (in thousands) Belgium(1)........................ $ -- $ 10,477 Eindhoven(1)...................... -- 5,356 Austria(1)........................ -- 45,983 Amsterdam......................... -- 23,687 Israel............................ 36,537 45,281 Ireland........................... 13,627 14,887 Malta............................. 2,968 4,308 Norway............................ 17,349 16,895 Sweden............................ 21,463 21,270 Hungary (Kabelkom, cable)......... 9,607 10,882 Hungary (Monor, telephony/cable).. 2,046 5,361 Czech Republic(1)................. 645 1,670 Spain............................. 16 313 France............................ -- 25 Romania........................... -- 360 Slovakia.......................... -- 101 -------- -------- Total 104,258 206,856 -------- -------- UIH Latin America, Inc. Chile (Cablevision)(3)............ 2,121 3,650 Chile (Pacifico)(3)............... 431 738 Chile (STX)....................... -- 7,191 Jundiai, Brazil................... 286 1,055 Fortaleza, Brazil................. 892 2,429 Mexico............................ -- 4,081 Peru (Cablestar).................. -- 484 -------- -------- Total 3,730 19,628 -------- -------- UIH Asia/Pacific, Inc. Australia (United Wireless)(4).... -- 5 Australia (Austar)................ -- 4,147 New Zealand....................... 53 105 Tahiti............................ 541 1,739 Philippines....................... -- 1,720 Australia (XYZ)................... -- 2,667 -------- -------- Total.......................... 594 10,383 -------- -------- Grand Total.................... $108,582 $236,867 ======== ========
20
Net Income (Loss) ------------------------------------ Convenience Translation ------------------------------------ Six Months Ended Six Months Ended June 30, 1995 June 30, 1996 ----------------- ----------------- Europe (in thousands) Belgium(1)........................ $ -- $ (637) Eindhoven(1)...................... -- (332) Austria(1)........................ -- 299 Amsterdam......................... -- (2,525) Israel............................ 4,170 10,706 Ireland........................... (5,906) (2,731) Malta............................. (1,232) (1,521) Norway............................ 3,492 (11,602) Sweden............................ (12,597) (7,281) Hungary (Kabelkom, cable)......... 1,098 2,415 Hungary (Monor, telephony/cable).. 26,238 (2,605) Czech Republic(1)................. (3,687) (4,526) Spain............................. (1,005) (919) France............................ -- (741) Romania........................... -- 188 Slovakia.......................... -- (31) -------- --------- Total 10,571 ( 21,843) -------- --------- UIH Latin America, Inc. Chile (Cablevision)(3)............ 238 (913) Chile (Pacifico)(3)............... (29) 33 Chile (STX)....................... -- 2,216 Jundiai, Brazil................... (525) (622) Fortaleza, Brazil................. (1,537) (1,229) Mexico............................ -- (654) Peru (Cablestar).................. -- (62) -------- --------- Total (1,853) (1,231) -------- --------- UIH Asia/Pacific, Inc. Australia (United Wireless)(4).... -- (1,184) Australia (Austar)................ -- (16,369) New Zealand....................... (1,022) (1,739) Tahiti............................ (2,333) (1,745) Philippines....................... -- (190) Australia (XYZ)................... -- (6,423) -------- --------- Total.......................... (3,355) (27,650) -------- --------- Grand Total.................... $ 5,363 $ (50,724) ======== =========
21
Adjusted EBITDA (9) ------------------------------------ Convenience Translation ------------------------------------ Six Months Ended Six Months Ended June 30, 1996 June 30, 1996 ----------------- ----------------- Europe (in thousands) Belgium(1)........................ $ -- $ 3,542 Eindhoven(1)...................... -- 3,502 Austria(1)........................ -- 23,971 Amsterdam......................... -- 11,043 Israel............................ 18,852 24,868 Ireland........................... 3,519 5,548 Malta............................. 759 1,100 Norway............................ 7,862 5,682 Sweden............................ 4,998 6,698 Hungary (Kabelkom, cable)......... 4,221 4,710 Hungary (Monor, telephony/cable).. (457) 2,153 Czech Republic(1)................. (2,466) (2,599) Spain............................. (950) (570) France............................ -- (662) Romania........................... -- 246 Slovakia.......................... -- (118) ------- -------- Total 36,338 89,114 ------- -------- UIH Latin America, Inc. Chile (Cablevision)(3)............ 665 1,063 Chile (Pacifico)(3)............... 52 187 Chile (STX)....................... -- 3,178 Jundiai, Brazil................... (448) (116) Fortaleza, Brazil................. (1,296) (541) Mexico............................ -- 1,322 Peru (Cablestar).................. -- 9 ------- -------- Total (1,027) 5,102 ------- -------- UIH Asia/Pacific, Inc. Australia (United Wireless)(4).... -- (823) Australia (Austar)................ -- (9,919) New Zealand....................... (800) (1,434) Tahiti............................ -- (440) Philippines....................... -- 525 Australia (XYZ)................... -- (5,289) ------- -------- Total.......................... (800) (17,380) ------- -------- Grand Total.................... $34,511 $ 76,836 ======= ========
22
Long-term Debt ------------------------ Convenience Translation ------------------------ As of June 30, 1996 ------------------------ Europe (in thousands) Belgium(1) $ -- Eindhoven(1)...................... 12,934 Austria(1)........................ -- Amsterdam......................... 198,923 Israel............................ 18,304 Ireland........................... 54,813 Malta............................. 12,746 Norway(2)......................... 149,799 Sweden............................ 112,976 Hungary (Kabelkom, cable)......... -- Hungary (Monor, telephony/cable).. 30,198 Czech Republic(1)................. -- Spain............................. -- France............................ -- Romania........................... -- Slovakia.......................... 1,967 -------- Total 592,660 -------- UIH Latin America, Inc. Chile (Cablevision)(3)............ -- Chile (Pacifico)(3)............... -- Chile (STX)....................... -- Jundiai, Brazil................... 129 Fortaleza, Brazil................. 889 Mexico............................ 351 Peru (Cablestar).................. 208 -------- Total 1,577 -------- UIH Asia/Pacific, Inc. Australia (United Wireless)(4).... -- Australia (Austar)................ 2,203 New Zealand (5)................... -- Tahiti (6)........................ -- Philippines (7)................... -- Australia (XYZ) (8)............... -- -------- Total.......................... 2,203 -------- Grand Total.................... $596,440 ========
(1) These systems were contributed to UPC in July 1995 at which time a new basis of accounting was adopted. Thus, there is no comparable prior year information. In addition to the debt noted above, Austria and Belgium have intercompany loans, which eliminate upon consolidation, of S1.3 billion ($124.0 million) and BF 3.6 billion ($115.4 million) and UPC has a subordinated convertible loan payable to Philips totaling NLG 213.8 million ($133.0 million). (2) In addition to the long-term debt noted above, Norkabel has Nkr 712.0 million ($111.1 million), of loans payable to UCI (including accrued interest). (3) The Company acquired its ownership interest in the Chile (Cablevision) systems in January 1994. Cablevision owns 100% of Cablevision Norte and 100% of Pacifico. (4) The Company acquired its ownership in United Wireless in September 1995 and, as such, the amounts shown are using the new basis of accounting with no comparable history. United Wireless has A$ 2.7 million ($2.1 million) of loans payable to related parties at June 30, 1996. (5) Saturn has loans payable to the owners totaling N$14.3 million ($9.8 million) at June 30,1996. (6) Telefenua has loans payable to the Company of $10.3 million at June 30, 1996. (7) The Philippine system has a convertible loan payable to the Company of P168.7 million ($6.4 million) as of June 30, 1996. (8) XYZ shows all capital contributions by shareholders as loans which totaled $34.7 million as of June 30, 1996. (9) Adjusted EBITDA represents net income (loss) as determined using generally accepted accounting principles which differ from those used in the United States for Israel, Ireland, Sweden, Chile, New Zealand, Spain, Mexico, Philippines, Belgium, France, Germany, Austria, the Netherlands, Slovakia and Romania plus net interest expense, income tax expense, depreciation, amortization, minority interest, management fee expense, currency exchange gains (losses) and other non-operating income (expense) items. Industry analysts generally consider Adjusted EBITDA to be an appropriate measure of the performance of multi-channel television operations. Adjusted EBITDA should not be considered as an alternative to net income or to cash flows or to any other generally accepted accounting principles measure of performance or liquidity as an indicator of an entity's operating performance. 23 Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial Data Schedule (b) Reports on Form 8-K filed during the quarter. Date of Report Item Reported Financial Statements Filed -------------- ------------- -------------------------- August 5, 1996 Sale of interest in Net Sao Paulo None 24 SIGNATURES ---------- 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 thereunto duly authorized. UNITED INTERNATIONAL HOLDINGS, INC. Date: October 14, 1996 --------------------------------------------- By: /S/ Bernard G. Dvorak ------------------------------------------ Bernard G. Dvorak Chief Financial Officer (A Duly Authorized Officer and Principal Financial Officer) 25 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from United International Holdings, Inc. Form 10-Q for the Quarter Ended August 31, 1996 and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS FEB-28-1997 MAR-01-1996 AUG-31-1996 150,606 2,662 0 0 0 0 89,497 8,205 819,524 0 621,817 30,676 0 390 160,466 819,524 0 7,057 0 12,870 8,631 824 31,894 (9,848) 0 (9,848) 0 0 0 (9,848) (0.65) 0 FN(1) The Company does not have a classified balance sheet. See the Condensed Consolidated Balance Sheet for more information. FN(2) See the Condensed Consolidated Balance Sheet for the detail of total assets.
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