-----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, WFWjEtSu1CnFr8SK7rMAhJ6K3a3OHnUABO0VOJjzHITv0H0+hZa5IQlnWEcXjAhI yln0F+cDntQTTzxYHblFzA== 0001014909-97-000075.txt : 19971016 0001014909-97-000075.hdr.sgml : 19971016 ACCESSION NUMBER: 0001014909-97-000075 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971015 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: SEC FILE NUMBER: 000-21974 FILM NUMBER: 97696054 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 UNITED STATES 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, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to_________ Commission File No. 0-21974 United International Holdings, Inc. (Exact name of Registrant as specified in its charter) State of Delaware 84-1116217 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4643 South Ulster Street, #1300 Denver, Colorado 80237 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (303) 770-4001 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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of the Registrant's common stock as of October 10, 1997 was: Class A Common Stock -- 26,355,377 shares Class B Common Stock -- 12,863,323 shares
UNITED INTERNATIONAL HOLDINGS, INC. TABLE OF CONTENTS Page Number ------ PART I - FINANCIAL INFORMATION ------------------------------ Item 1 - Financial Statements - ------ Condensed Consolidated Balance Sheets as of August 31, 1997 and February 28, 1997 (Unaudited)........ 2 Condensed Consolidated Statements of Operations For the Three and Six Months Ended August 31, 1997 and 1996 (Unaudited)........................................................................ 3 Condensed Consolidated Statement of Stockholders' (Deficit) Equity For the Six Months Ended August 31, 1997 (Unaudited)...................................................................... 4 Condensed Consolidated Statements of Cash Flows For the Six Months Ended August 31, 1997 and 1996 (Unaudited) ............................................................................ 5 Notes to Condensed Consolidated Financial Statements (Unaudited)..................................... 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations............ 12 - ------ PART II - OTHER INFORMATION --------------------------- Item 1 - Legal Proceedings................................................................................ 30 - ------ Item 5 - Other Information................................................................................ 21 - ------ Item 6 - Exhibits and Reports on Form 8-K................................................................. 30 - ------
UNITED INTERNATIONAL HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Stated in thousands, except share and per share amounts) (Unaudited) August 31, February 28, 1997 1997 ---------- ----------- ASSETS Current assets Cash and cash equivalents............................................................ $ 63,975 $ 68,784 Restricted cash and short-term investments........................................... 10,520 1,600 Short-term investments............................................................... 38,044 70,359 Management fee receivables from related parties...................................... 1,977 1,616 Subscriber receivables, net.......................................................... 5,014 2,939 Notes receivable..................................................................... 8,275 8,175 Costs to be reimbursed by affiliated companies, net.................................. 10,786 4,884 Other current assets, net, including $3,604 and $2,931 of related party receivables, respectively.......................................................... 19,232 17,830 -------- -------- Total current assets............................................................. 157,823 176,187 Investments in and advances to affiliated companies, accounted for under the equity method, net................................................................ 301,858 253,108 Other investments in affiliated companies, including marketable equity securities....... 3,248 4,293 Property, plant and equipment, net of accumulated depreciation of $56,062 and $29,378, respectively.......................................................................... 214,345 219,342 Goodwill, net of accumulated amortization of $10,707 and $4,602, respectively .......... 118,650 122,249 Acquisition, transaction and development costs, net..................................... 2,257 6,249 Other non-current assets, net........................................................... 35,252 38,508 -------- -------- Total assets..................................................................... $833,433 $819,936 ======== ======== LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current liabilities Accounts payable..................................................................... $ 23,787 $ 23,173 Construction payables................................................................ 8,978 38,331 Accrued liabilities, including $1,833 and $620 of related party payables, respectively............................................................. 10,858 12,571 Purchase money notes payable to sellers, current..................................... 24,021 5,722 Accrued funding obligations, current................................................. 3,613 3,309 Note payable......................................................................... 110,000 -- Current portion of long-term debt.................................................... 4,705 4,965 Other current liabilities............................................................ 3,408 875 -------- -------- Total current liabilities........................................................ 189,370 88,946 Purchase money notes payable to sellers................................................. 11,806 12,966 Senior secured notes and other debt..................................................... 753,637 671,328 -------- -------- Total liabilities................................................................ 954,813 773,240 -------- -------- Minority interest in subsidiaries....................................................... 69 307 -------- -------- Preferred stock, $0.01 par value, 3,000,000 shares authorized, 170,513 and 170,513 shares of Convertible Preferred Stock, Series A issued and outstanding, respectively, stated at liquidation value............................................ 31,922 31,293 -------- -------- Stockholders' (Deficit) Equity: Class A Common Stock, $0.01 par value, 60,000,000 shares authorized, 26,349,067 and 26,097,263 shares issued and outstanding, respectively............................. 263 261 Class B Common Stock, $0.01 par value, 30,000,000 shares authorized, 12,863,323 and 12,971,775 shares issued and outstanding, respectively............................. 129 129 Additional paid-in capital........................................................... 341,224 340,753 Deferred compensation................................................................ (215) (624) Unrealized loss on investments in marketable equity securities....................... (4,122) (6,069) Cumulative translation adjustments................................................... (26,985) (15,801) Accumulated deficit.................................................................. (463,665) (303,553) -------- -------- Total stockholders' (deficit) equity............................................. (153,371) 15,096 -------- -------- Total liabilities and stockholders' (deficit) equity............................. $833,433 $819,936 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements.
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UNITED INTERNATIONAL HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Stated in thousands, except share and per share amounts) (Unaudited) For the Three For the Six Months Ended Months Ended August 31, August 31, -------------------- --------------------- 1997 1996 1997 1996 -------- ------- --------- -------- Service and other revenue .......................................... $ 23,277 $ 4,255 $ 44,359 $ 6,427 Management fee income from related parties ......................... 457 313 738 630 -------- -------- --------- -------- Total revenue ............................................... 23,734 4,568 45,097 7,057 System operating expense ........................................... (15,107) (3,765) (27,896) (7,309) System selling, general and administrative expense ................. (15,408) (7,032) (28,726) (10,775) Corporate general and administrative expense ....................... (5,384) (4,576) (11,112) (8,742) Depreciation and amortization ...................................... (19,293) (5,734) (38,751) (8,631) -------- -------- --------- -------- Net operating loss ............................................ (31,458) (16,539) (61,388) (28,400) Equity in losses of affiliated companies, net ...................... (18,225) (9,539) (37,542) (21,741) Interest income .................................................... 1,693 3,594 3,451 5,715 Interest expense ................................................... (31,287) (18,177) (57,142) (31,894) Interest income (expense), related parties, net .................... 533 (407) 673 (119) Provision for losses on investment related costs ................... (2,018) (472) (6,454) (824) Gain on sale of investment in affiliated company ................... -- 65,260 -- 65,260 Other (expense) income, net ........................................ (328) 725 (1,948) 404 -------- -------- --------- -------- Net (loss) income before minority interest .................... (81,090) 24,445 (160,350) (11,599) Minority interest in subsidiaries .................................. 7 1,025 238 1,751 -------- -------- --------- -------- Net (loss) income ............................................. $(81,083) $ 25,470 $(160,112) $ (9,848) ======== ======== ========= ======== Net (loss) income per common share ................................. $ (2.07) $ 0.65 $ (4.09) $ (0.25) ======== ======== ========= ======== Weighted-average number of common shares outstanding ............... 39,208,962 39,022,756 39,191,640 39,015,668 ========== ========== ========== ========== The accompanying notes are an integral part of these condensed consolidated financial statements.
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UNITED INTERNATIONAL HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY (Stated in thousands, except share amounts) (Unaudited) Class A Class B Common Stock Common Stock Additional Unrealized Cumulative --------------- ---------------- Paid-In Deferred Loss on Translation Accumulated Shares Amount Shares Amount Capital Compensation Investments Adjustments Deficit Total ------ ------ ------ ------- ---------- ------------ ----------- ----------- ----------- --------- Balances, February 28, 1997.....26,097,263 $261 12,971,775 $129 $340,753 $(624) $(6,069) $(15,801) $(303,553) $ 15,096 Issuance of Class A Common Stock in connection with the Company's Stock Option Plan.... 128,956 2 -- -- 641 -- -- -- -- 643 Issuance of Class A Common Stock in connection with the Company's 401(k) Plan.......... 14,396 -- -- -- 196 -- -- -- -- 196 Exchange of Class B Common Stock for Class A Common Stock......... 108,452 -- (108,452) -- -- -- -- -- -- -- Accretion of dividends on convertible preferred stock...... -- -- -- -- (629) -- -- -- -- (629) Change in cumulative translation adjustments.......... -- -- -- -- -- -- -- (11,184) -- (11,184) Compensation expense related to the extension of stock option exercise period...... -- -- -- -- 263 -- -- -- -- 263 Amortization of deferred compensation......... -- -- -- -- -- 409 -- -- -- 409 Change in unrealized loss on investments.. -- -- -- -- -- -- 1,947 -- -- 1,947 Net loss............... -- -- -- -- -- -- -- -- (160,112) (160,112) ---------- ---- ---------- ---- ------- ----- ------- -------- --------- --------- Balances, August 31, 1997.......26,349,067 $263 12,863,323 $129 $341,224 $(215) $(4,122) $(26,985) $(463,665) $(153,371) ========== ==== ========== ==== ======== ===== ======= ======== ========= ========= The accompanying notes are an integral part of these condensed consolidated financial statements.
4
UNITED INTERNATIONAL HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Stated in thousands) (Unaudited) For the Six Months Ended August 31, ------------------------- 1997 1996 ------ ------ Cash flows from operating activities: Net loss.......................................................................................... $(160,112) $ (9,848) Adjustments to reconcile net loss to net cash flows from operating activities: Equity in losses of affiliated companies, net.................................................. 37,620 21,723 Gain on sale of investment in affiliated company............................................... -- (65,260) Minority interest share of losses.............................................................. (238) (1,751) Depreciation and amortization.................................................................. 38,751 8,631 Amortization of deferred compensation.......................................................... 409 426 Accretion of interest on senior notes and amortization of offering costs....................... 51,099 31,356 Issuance of common stock in connection with the Company's 401(k) Plan.......................... 196 163 Compensation expense recognized due to extension of stock option exercise period............... 263 -- Provision for losses on investment related costs............................................... 6,454 824 Increase in management fee receivables, net.................................................... (201) (301) Decrease (increase) in other assets............................................................ 620 (8,839) Increase (decrease) in accounts payable, accrued liabilities and other......................... 5,909 (949) --------- --------- Net cash flows used in operating activities....................................................... (19,230) (23,825) --------- --------- Cash flows from investing activities: Purchase of short-term investments................................................................ (47,433) (179,639) Proceeds from sale of short-term investments...................................................... 79,748 77,540 Restricted cash (deposited) released.............................................................. (8,920) 4,073 Advances to affiliated companies and other investments............................................ (13,303) (30,371) Proceeds from sale of investments in affiliated companies......................................... -- 43,098 Purchase of interests in affiliated companies..................................................... (26,570) (23,292) (Increase) decrease in costs to be reimbursed by affiliated companies, net........................ (5,048) 3,005 Increase in notes receivable...................................................................... (761) (1,764) Repayments on notes receivable.................................................................... 4,593 10,264 Reimbursement of advance to related party......................................................... -- 307 Acquisition, transaction and development costs incurred........................................... (3,002) (2,822) Proceeds from sale of property, plant and equipment............................................... 5,332 -- Purchase of property, plant and equipment......................................................... (47,098) (54,289) (Decrease) increase in construction payables...................................................... (28,163) 6,521 --------- --------- Net cash flows used in investing activities....................................................... (90,625) (147,369) --------- --------- Cash flows from financing activities: Issuance of common stock in connection with the Company's Stock Option Plan....................... 641 65 Proceeds from offering of senior notes............................................................ -- 225,115 Deferred debt offering costs...................................................................... (7,045) (9,515) Payment of sellers notes.......................................................................... (34,922) -- Borrowing of other debt .......................................................................... 149,286 8,902 Repayment of other debt........................................................................... (2,963) (13,684) Payment of warrants tendered to the Company....................................................... -- (2,156) --------- --------- Net cash flows provided by financing activities................................................... 104,997 208,727 --------- --------- Effect of exchange rates on cash.................................................................. 49 855 --------- --------- (Decrease) increase in cash and cash equivalents.................................................. (4,809) 38,388 Cash and cash equivalents, beginning of period.................................................... 68,784 112,218 --------- --------- Cash and cash equivalents, end of period.......................................................... $ 63,975 $ 150,606 ========= ========= Non-cash investing and financing activities: Purchase money notes payable to sellers........................................................ $ 52,061 $ -- ========= ========= Note issued upon sale of investment in affiliated company...................................... $ 6,500 $ 35,000 ========= ========= Conversion of note receivable to equity........................................................ $ 1,909 $ -- ========= ========= Cash paid for interest......................................................................... $ 2,170 $ 553 ========= ========= Cash received for interest..................................................................... $ 4,070 $ 5,357 ========= ========= Assets acquired with capital leases............................................................ $ -- $ 1,707 ========= ========= The accompanying notes are an integral part of these condensed consolidated financial statements.
5 UNITED INTERNATIONAL HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AUGUST 31, 1997 (Monetary amounts stated in thousands) (Unaudited) 1. ORGANIZATION AND BACKGROUND United International Holdings, Inc. (together with its majority-owned subsidiaries, the "Company" or "UIH") was formed as a Delaware corporation in May 1989 for the purpose of developing, acquiring and managing foreign multi-channel television, programming and telephony operations. The following chart presents a summary of the Company's significant investments in multi-channel television, programming and telephony operations as of August 31, 1997.
********************** ************************************************************************************************************ * Philips Media B.V. * * * * ("Philips") * * UIH * * * * * ********************** ************************************************************************************************************ * * * * * ******************************************************************* * 50% * 50% * 100% ******************************* *************************************************************************************************** * United and Philips * * United International Properties, Inc. * *Communications B.V.("UPC")(1)* * ("UIPI") * ******************************* *************************************************************************************************** * * * * * ********************************************************************** * * * * * 98% * * 100% * * *************************************** ************************* *********************** **************************** *UIH Asia/Pacific Communications, Inc.* *UIH Latin America, Inc.* * Other * * Europe * * ("UAP") * *-----------------------* * ----- * * ------ * *************************************** * ("UIH LA") * *Tara Television * *Radio Public * * * * * (Ireland) 100.0%* * (Belgium) 100.0%* * *Comodoro/Trelew * *Monor * *Kabel Net * **************************** * (Argentina)(5) 100.0%* * Communications * * (Czech Republic) 100.0 * * 100% * *TV Cable SRL * * (Hungary) 48.6 * *KTE (Eindhoven, The * ***************************** *********************** * (Peru) 100.0 * *Iberian * * Netherlands) 100.0 * *UIH Australia/Pacific, Inc.* *HITV (China) 49.0%* *Bahia Blanca 80.0-* * Programming * *Norkabel * *---------------------------* *SCS * * (Argentina)(5) 100.0 * * Services * * (Norway) 100.0 * * ("UIH A/P") * * Philippines(4) 40.0 * *Cable Star (Peru) 94.0 * * ("IPS")(Spain) 33.8 * *Intercabo * * * *********************** *Santa Fe * *Teleport * * (Portugal) 100.0 * *Austar (Australia) 100.0%* * (Argentina) * * (Russia) 30.0 * *Marne la Vallee * *United Wireless * * (5)(6) 69.0 * *********************** * (France) 99.5 * * (Australia) 100.0 * *United Family * *Telekable Group * *Telefenua (Tahiti)(2) 90.0 * * Communications * * (Austria) 95.0 * *Saturn (New * * (Latin America * *Multi Canal * * Zealand)(3) 65.0 * * Programming) 50.0 * * (Romania) 90.0 * *XYZ (Australia) 25.0 * *Megapo (Mexico) 49.0 * *Tranavatel SRO * ***************************** *Jundiai TV * * (Slovak Republic) 75.0 * * (Brazil) 46.3 * *Janco (Norway) 70.2 * *TV Show Brasil * *Control Cable * * ("TVSB") * * (Romania) 51.0 * * (Fortaleza, * *A2000 (Amsterdam, * * Brazil) 40.0 * * The Netherlands) 50.0 * *VTR Hipercable * *Kabelkom (Hungary) 50.0 * * ("VTRH) (Chile) 34.0 * *Melita Cable (Malta) 50.0 * ************************* *Citecable (France) 30.0 * *Santander (Spain) 25.0 * *Tevel (Israel) 23.3 * *Princes Holdings * * ("PHL")(Ireland) 20.0 * ****************************
(1) In October 1997, the Company and Philips signed a definitive agreement pursuant to which the Company and/or UPC will acquire Philips' 50% interest in UPC, less the ratable dilution caused by UPC's incentive option plan. (2) UIH A/P owns an effective 90% economic interest in the Tahiti project. UIH A/P's economic interest will decrease to 75% and 64% once UIH A/P has received a 20% and 40% internal rate of return on its investment in Tahiti, respectively. 6 UNITED INTERNATIONAL HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (3) In July 1997, SaskTel Holdings (New Zealand), Inc. ("SaskTel") purchased a 35% equity interest in Saturn by investing approximately New Zealand $("NZ$")30,000 (US$20,000) directly into Saturn for newly issued shares. (4) UAP currently holds a convertible loan, which upon full conversion would provide UAP with a 40% equity ownership interest in the Philippines operating company. (5) In September 1997, the Company signed a definitive agreement with Supercanal Holding S.A. ("Supercanal") to sell all of the Company's assets in Argentina, including its options to acquire additional properties, for approximately $225,000 (subject to change with post-closing adjustments), resulting in a gain of approximately $90,000. This transaction is expected to close during the third quarter of fiscal 1998. (6) On July 15, 1997, the Company increased its interest in Santa Fe from 31% to 69%. In July 1995, the Company and Philips Electronics B.V. contributed their respective ownership interests in European and Israeli multi-channel television systems to UPC. The Company and Philips each own a 50% economic and voting interest in UPC and will continue to have equal board representation so long as their share ownership is equal. In October 1997, the Company and Philips entered into a definitive agreement whereby the Company and/or UPC agreed to acquire from Philips their 50% equity interest in UPC along with 3.17 million shares of the Company's Class A Common Stock currently held by Philips (the "Philips Transaction"). The purchase price for the acquisition of these two assets is $275,000. In addition, UPC, as part of the Philips Transaction, agreed to redeem certain debt securities owed to Philips in the approximate amount of $155,000, and issue to Philips a UPC stock appreciation right. Closing of the Philips Transaction is expected to occur by late 1997. In October 1997, UPC entered into a Dutch guilder ("NLG") 1,100,000 (approximately US$550,000) reducing revolving credit facility with a group of commercial banks. Proceeds from the facility will provide a substantial portion of the funds needed to consummate the Philips Transaction. In addition, UPC has signed an underwritten commitment letter for a NLG258,000 (approximately US$129,000) bridge loan, the proceeds of which will also be used to fund the Philips Transaction. The balance of funding for the Philips Transaction will be derived either from an investment by UIH of approximately $155,000 or from the issuance by UPC of $162,000 of PIK Preferred Stock. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying interim condensed consolidated financial statements are unaudited and include the accounts of the Company and all subsidiaries where it exercises majority control and owns a majority economic interest, except when the Company has temporary majority control. For the three and six months ended August 31, 1996, the Company accounted for its investments in Cablevision S.A. ("Cablevision") and Red de Television y Servicios por Cable S.A. ("STX") under the equity method, due to an expected joint venture in Chile with VTR S.A. ("VTR") wherein UIH LA subsequently contributed these interests to VTRH in September 1996. For the three and six months ended August 31, 1997, the Company accounted for its investments in Comodoro and Trelew, Argentina under the equity method, due to an expected joint venture in Argentina. This joint venture was subsequently abandoned due to the pending sale of these interests which agreement was entered into in September 1997. All significant intercompany accounts and transactions have been eliminated in consolidation. All affiliated companies have calendar year-ends compared to the Company which has a fiscal year-end 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 year-end results. In management's opinion, 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, 1997, and the results of its operations for the three and six months ended August 31, 1997 and 1996. For a more complete understanding of the Company's financial position and results of operations, see the consolidated financial statements of the Company included in the Company's annual report on Form 10-K for the year ended February 28, 1997. 7 UNITED INTERNATIONAL HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE EQUITY METHOD Investments in and advances to affiliated companies are as follows:
As of August 31, 1997 -------------------------------------------------------------------------------------- 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 $ (65,388) $(18,403) $ -- $ 66,651 Monor Communications........... 27,690 (10,633) (5,629) -- 11,428 IPS............................ 12,824 (6,418) -- -- 6,406 LATIN AMERICA - ------------- VTRH........................... 86,596 (5,930) (880) -- 79,786 Santa Fe....................... 51,366 (956) -- -- 50,410 Megapo......................... 32,491 (951) (1,459) -- 30,081 Comodoro/Trelew................ 28,323 (55) -- -- 28,268 TVSB........................... 7,038 (3,147) -- -- 3,891 Jundiai TV..................... 5,847 (1,105) -- -- 4,742 United Family Communications... 5,211 (1,651) -- -- 3,560 Other.......................... 200 -- -- -- 200 ASIA/PACIFIC - ------------ XYZ............................ 17,645(1) (17,755) 110 -- -- SCS............................ 10,670 (418) 129 -- 10,381 HITV........................... 6,073 (19) -- -- 6,054 Other - ----- Teleport....................... 3,119 (1,051) -- (2,068) -- -------- --------- -------- ------- -------- $445,535 $(115,477) $(26,132) $(2,068) $301,858 ======== ========= ======== ======= ======== As of February 28, 1997 -------------------------------------------------------------------------------------- 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 $(40,224) $(11,044) $ -- $ 99,174 Monor Communications........... 27,182 (8,221) (4,575) -- 14,386 IPS............................ 11,187 (4,734) -- -- 6,453 LATIN AMERICA - ------------- VTRH........................... 82,010 (2,122) (1,502) -- 78,386 Megapo......................... 32,491 (727) (1,420) -- 30,344 TVSB........................... 6,132 (2,860) -- -- 3,272 Jundiai TV..................... 4,984 (1,214) -- -- 3,770 United Family Communications... 1,739 (10) -- -- 1,729 ASIA/PACIFIC - ------------ XYZ............................ 16,202(1) (16,312) 110 -- -- SCS............................ 9,748 (366) 155 -- 9,537 HITV........................... 6,073 (16) -- -- 6,057 OTHER - ----- Teleport....................... 3,119 (1,051) -- (2,068) -- -------- -------- -------- ------- -------- $351,309 $(77,857) $(18,276) $(2,068) $253,108 ======== ======== ======== ======= ========
(1) Includes an accrued funding obligation of $1,574 and $1,270 at August 31, 1997 and February 28, 1997, respectively. The Company does not have a contractual funding obligation to XYZ; however, the Company would face significant and punitive dilution if it did not make the scheduled fundings. 8 UNITED INTERNATIONAL HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at cost. Additions, replacements and major improvements are capitalized, and costs for normal repair and maintenance of property, plant and equipment are charged to expense as incurred. All subscriber equipment and capitalized installation labor is depreciated over three years. Upon disconnection of a multi-point microwave distribution system ("MMDS") subscriber, the remaining book value of the subscriber equipment, excluding converters which are recovered upon disconnection, and the capitalized labor is written off. Depreciation expense is computed using the straight-line method over the estimated useful lives shown below. Detail of property, plant and equipment is as follows:
As of As of August 31, February 28, Average 1997 1997 Life ---------- ------------ ------- Subscriber premises equipment and converters....... $143,663 $126,007 3 MMDS distribution facilities....................... 58,423 57,074 5-10 Cable distribution networks........................ 24,763 22,795 5-10 Furniture and fixtures............................. 3,337 3,418 5-10 Leasehold improvements............................. 4,765 3,593 6-10 Other.............................................. 35,456 35,833 3-5 --------- -------- 270,407 248,720 Accumulated depreciation....................... (56,062) (29,378) -------- -------- Net property, plant and equipment.............. $214,345 $219,342 ======== ========
Assets acquired under capital leases are included in property, plant and equipment. The initial amount of the leased asset and corresponding lease liability are recorded at the present value of future minimum lease payments. Leased assets are amortized over the life of the relevant lease. 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 prepared 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' (deficit) 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 with changes in the corresponding balances on the Condensed Consolidated Balance Sheets. The effects of exchange rate changes on cash balances held in foreign currencies are reported as a separate line below cash flows from financing activities. NEW ACCOUNTING PRINCIPLE The Financial Accounting Standards Board recently issued Statement of Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"), which is required to be adopted by affected companies for fiscal years ending after December 15, 1997; early adoption is not permitted. SFAS 128 revises the standards for the computation of earnings per share and the related disclosure requirements. The Company does not believe that the provisions of SFAS 128 will have a material effect on the Company's reported earnings per share. 9 UNITED INTERNATIONAL HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform with the current year's presentation. 3. ACQUISITIONS AND DISPOSITIONS In May 1997, the Company entered into an agreement with SuperCable CA, the largest cable operator in Venezuela, to sell the Company's cable television assets in Venezuela for $10,500. The transaction is expected to close in the third quarter of fiscal 1998. The Company has received $4,000 in proceeds from the sale and will receive the remaining amount either in 18 monthly installments or as a lump sum, at the option of the buyer. In July 1997, SaskTel purchased a 35% equity interest in Saturn by investing approximately NZ$30,000 (US$20,000) directly into Saturn for newly issued shares. The Company believes that SaskTel, a division of Saskatchewan Telecommunications Holdings Corporation of Saskatchewan, Canada, will contribute telephony expertise to Saturn in providing cable/telephony service in the Wellington, New Zealand area. The proceeds from the sale are expected to provide a portion of the capital necessary for completion of the scheduled build-out of the project, and SaskTel's 35% equity interest will reduce the Company's proportionate share of future fundings. 4. NOTE PAYABLE On April 24, 1997, UIH LA entered into a credit agreement with a bank for a loan of up to $125,000 for a term of nine months, extendible up to a maximum of 18 months at an interest rate of LIBOR plus 6%. As of August 31, 1997, UIH LA had borrowed $110,000 under this credit agreement of which 8% of the outstanding loan balance must remain as restricted cash. Proceeds from the loan have been used to fund acquisitions and provide for capital expenditures for existing properties. The loan is extendible up to 18 months with (i) an increase in the interest rate of 50 basis points for each three months it is extended beyond the initial nine month term, (ii) cash fees of 1% to 3% each three months if it is extended beyond nine months and (iii) warrants to purchase common stock equal to 0.5% of UIH LA's outstanding common stock if it is extended beyond nine months, another 2% of UIH LA's outstanding common stock and 2.75% of UIH's outstanding common stock if it is extended beyond 12 months and another 3% of UIH's outstanding common stock if it is extended beyond 15 months. In lieu of the extension fees and warrants, UIH may, at its option, inject an additional $50,000 of equity into UIH LA to be used to repay the outstanding loan. The warrants to purchase UIH common stock have an exercise price equal to the lower of the fair market value at the closing date or at the grant date. The note payable is secured by all of UIH LA's capital stock and substantially all of its assets. The Company expects to use the proceeds from the sale of the Argentine properties (see Note 6) to repay this note payable. 5. SENIOR SECURED NOTES AND OTHER DEBT Debt consists of the following:
As of As of August 31, February 28, 1997 1997 ----------- ------------ November 1994 14% senior secured discount notes, net of unamortized discount.... $285,154 $264,985 November 1995 14% senior secured discount notes, net of unamortized discount.... 96,473 90,161 February 1996 14% senior secured discount notes, net of unamortized discount.... 58,470 55,193 May 1996 14.75% UIH A/P senior discount notes, net of unamortized discount...... 262,587 245,182 Austar interim financing facility, including accrued interest of $521 and $0, respectively.................................................................. 38,212 -- 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...................................................... 3,772 5,447 Capitalized lease obligations................................................... 3,978 4,959 Mortgage note, interest at 7.885%, 7 year term.................................. 1,025 1,252 Other........................................................................... 8,671 9,114 -------- -------- 758,342 676,293 Less current portion....................................................... (4,705) (4,965) -------- -------- Total senior secured notes and other debt.................................. $753,637 $671,328 ======== ========
10 UNITED INTERNATIONAL HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The $285,154 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 $96,473 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 $58,470 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 $262,587 of 14% UIH A/P senior notes were issued in May 1996 at a discount from their principal amount of $443,000. Effective May 16, 1997, the interest rate increased from 14% to 14.75% compounded semi-annually. Due to this increase in the interest rate, the UIH A/P senior notes will accrete to a principal amount of $455,574 if an equity sale as discussed below is not completed by November 16, 1997. The additional 0.75% interest will accrete until such time as UIH A/P effects an equity sale resulting in $70,000 of additional equity; if this is not consummated, the then holders of the 14% UIH A/P senior notes will be entitled to receive warrants to purchase 3.4% of the common stock of UIH A/P, assuming the aggregate fair market value of UIH A/P's equity is $150,000, or, in certain circumstances, of UIH A/P's immediate parent. 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 on May 15, 2006. In July 1997, Austar secured a financing facility from a bank for a senior syndicated term debt facility in the amount of Australian $("A$")200,000 (US$155,000) (the "Austar Bank Facility"). The proceeds of the Austar Bank Facility will be used to fund Austar's construction and subscriber acquisition and working capital needs. The Austar Bank Facility consists of three sub-facilities: (i) A$50,000 revolving working capital facility; (ii) A$60,000 cash advance facility available upon the contribution of additional equity on a 2:1 debt-to-equity basis; and (iii) A$90,000 term loan facility, which will be available on the basis of Austar having achieved minimum subscriber and operating cash flow levels. The maximum amount of equity required in (ii) above would be A$30,000, approximately A$15,500 of which has already been contributed through August 31, 1997 and the remainder of which is expected to be contributed by a third party equity provider, UAP or the Company. The cash advance and term loan facilities are fully repayable pursuant to an amortization schedule beginning December 31, 2001 and ending June 30, 2004. As of June 30, 1997, Austar had drawn A$50,000 (US$38,212) on an interim financing facility, which was subsequently repaid from the proceeds of the Austar Bank Facility. 6. SUBSEQUENT EVENTS In September 1997, the Company signed a definitive stock purchase and sale agreement with Supercanal to sell all of the Company's assets in Argentina, including its options to acquire additional properties, for approximately $225,000, resulting in a gain of approximately $90,000. This transaction is expected to close during the third quarter of fiscal 1998. The Company received $5,000 upon signing the agreement and will receive the remaining sale price at closing except for $12,500, of which $7,500 will be received 60 days after closing and the final $5,000 will be received 18 months after closing. The sale price may be adjusted upon verification of the total number of subscribers and the liabilities existing at closing. In September 1997, UIH A/P issued an additional $45,000 aggregate principal amount of its 14% senior discount notes due 2006. Gross proceeds from the sale of these notes totaled approximately $29,900. 11 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MONETARY AMOUNTS STATED IN THOUSANDS) THE FOLLOWING DISCUSSION CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW AND IN THE COMPANY'S REPORT ON FORM 8-K DATED SEPTEMBER 24, 1996. 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. The Company conducts no operations other than through its operating companies in which it holds varying interests. Because the operating companies have, since inception, been engaged primarily in organizational, start-up and construction activities, the Company believes that its historical results of operations discussed herein are not indicative of the results of operations which will follow the completion of construction and initial marketing of service by the operating companies. LIQUIDITY AND CAPITAL RESOURCES The Company's expenditures to date have been made in developing multi-channel television, programming 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, many of which are restricted due to existing loan agreements. The indenture governing UIH A/P's senior notes permits dividends to be paid from UIH A/P to the Company only if certain financial conditions are met; however, these conditions are not presently being met. During the six months ended August 31, 1997, the Company incurred a net loss of $160,112 of which $37,620 was from non-cash equity in losses of affiliated companies. The Company also recorded accretion of non-cash interest expense on its senior notes and amortization of debt offering costs totaling $51,099. Provision for losses on investment related costs totaled $6,454 due primarily to a reduction of the Company's cost investment in International Broadcasting Corporation to fair market value as well as write-offs of various acquisition, transaction and development costs primarily in the Asia/Pacific region. The Company purchased short-term investments of $47,433 and sold short-term investments of $79,748 as part of its cash management activities. The Company invested $13,303 of cash in its affiliated companies and other investments as a result of its projected fundings. Purchases of interests in affiliated companies totaled $26,570, representing interests acquired in Comodoro, Trelew and Santa Fe, Argentina. The Company received $4,593 from VenInfotel L.L.C. as payment on its note, as well as $5,332 in cash proceeds from the sale of property, plant and equipment and its Venezuelan assets. Purchases of property, plant and equipment totaled $47,098 with construction payables decreasing by $28,163, both primarily as a result of Austar construction activity. Debt offering costs related to Asia/Pacific debt and equity financings and the UIH LA credit agreement totaled $7,045 during the period, with borrowings of $110,000 under the UIH LA credit agreement and $39,286 on the Austar interim financing facility. The Company also paid down $34,922 on its purchase money notes for Comodoro, Santa Fe and Bahia Blanca during the period. During the six months ended August 31, 1996, the Company incurred a net loss 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 notes and amortization of debt offering costs totaling $31,356. The Company recognized a gain on sale of an affiliated company of $65,260 for the sale of Net Sao Paulo and received proceeds from the sale of $78,098, which was satisfied with $43,098 in cash and a $35,000 note receivable. 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 continued to construct their systems. The Company also experienced a related increase in construction payables of $6,521 during the period. The Company incurred $2,822 of acquisition, transaction and development costs, primarily with respect to its Latin America and Asia/Pacific regions. The Company invested $30,371 of cash in its affiliated companies and other investments as a result of its projected 12 fundings. The Company also purchased an additional 35% equity interest in STX for cash of $23,292 and a note payable of $7,263. 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 A/P 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 $1,639 and repaid two loans totaling $13,684. As of August 31, 1997, the Company had executed guarantees of certain facilities totaling approximately $12,000. The Company has estimated future fundings and capital commitments by region, as described in the following paragraphs. Each such description contains the Company's current plans with respect to financing such commitments. 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. The following table summarizes the Company's remaining projected funding requirements for its European projects. The Company plans on funding its remaining commitments in Europe through existing cash.
Projected Fundings --------------------------------------------------- Total Portion Remaining Expected Funded as of as of Operating System Type of Project Fundings August 31, 1997 August 31, 1997 - ---------------- --------------- ---------- --------------- --------------- UPC Cable systems $171,059 $171,059 $ -- Monor Communications Telephony/cable systems 26,580 26,580 -- IPS Programming 12,558 12,361 197 Tara Television Programming 10,142 5,586 4,556 -------- -------- ------ $220,339 $215,586 $4,753 ======== ======== ======
The Company currently does not expect to contribute additional capital to UPC for its on-going operating or development requirements, 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. The Company may, however, invest up to $155,000 in UPC as part of the Philips Transaction (see Note 1). The Company will use the proceeds form the sale of its Argentine properties (see Note 6) plus existing cash on hand to fund such an investment. In addition, the Company had total expected fundings of $4,741 related to Teleport. As of August 31, 1997, the Company had remaining projected fundings of $2,000, representing the Company's guarantee of affiliate debt. The following table summarizes UIH LA's remaining projected funding requirements for its projects:
Projected Fundings --------------------------------------------------- Total Portion Remaining Expected Funded as of as of Operating System Type of Project Fundings August 31, 1997 August 31, 1997 - ---------------- --------------- ---------- --------------- --------------- VTRH Cable systems $ 94,243 $ 86,243 $ 8,000 Bahia Blanca(1) Cable systems 56,991 50,735 6,256 Santa Fe(1) Cable systems 50,738 33,808 16,930 Megapo Cable systems 32,033 32,033 -- Comodoro/Trelew(1) Cable systems 27,911 15,270 12,641 United Family Communications Programming 21,300 4,770 16,530 Cable Star Cable system 12,839 5,252 7,587 TVSB MMDS 8,060 6,060 2,000 Jundiai TV Cable system 5,456 5,456 -- TV Cable SRL Cable system 850 731 119 -------- -------- ------- $310,421 $240,358 $70,063 ======== ======== =======
(1) In September 1997, the Company signed a definitive stock purchase and sale agreement with Supercanal to sell all of the Company's assets in Argentina, including its options to acquire additional properties, for approximately $225,000 (subject to post-closing adjustments). This transaction is expected to close during the third quarter of fiscal 1998. The Company will use the proceeds from the sale of these properties to retire or reduce loans made to UIH LA. Net proceeds after repayment of debt will be used by UIH to invest in UPC as part of the Philips Transaction or for other UIH corporate purposes. 13 In April 1997, UIH LA entered into a credit agreement with a bank which provides for borrowings of up to $125,000, of which $110,000 had been borrowed as of August 31, 1997. Under the terms of the existing credit agreement, this loan must be paid from the proceeds of the Argentine sale. UIH LA will fund the majority of its remaining commitments (which would be $34,236 as of August 31, 1997, assuming the sale of the Argentine properties) through any or all of the following sources: a new, smaller debt facility for UIH LA; proceeds from the sale of certain non-core assets, including the sale of Venezuela; or proceeds from further investments by UIH or other financial or strategic partners. The Company received $4,000 in proceeds from the sale of Argentine and will receive the remaining amount either in 18 monthly installments or as a lump sum, at the option of the buyer. The following table summarizes UAP's remaining projected funding requirements for its projects:
Projected Fundings -------------------------------------------------- Total Portion Remaining Expected Funded as of as of Operating System Type of Project Fundings August 31, 1997 August 31, 1997 - ---------------- --------------- -------- --------------- --------------- AUSTRALIA/PACIFIC: Austar MMDS/DTH system $225,346 $204,605 $20,741 Saturn Cable system 66,489 28,376 38,113 Telefenua MMDS 17,400 16,737 663 XYZ Programming 13,974 12,564 1,410 United Wireless Mobile data services 8,226 6,787 1,439 OTHER UAP PROJECTS: SCS Cable system 14,038 9,076 4,962 HITV Microwave relay network 6,600 5,980 620 -------- -------- ------- $352,073 $284,125 $67,948 ======== ======== =======
In July 1997, SaskTel purchased a 35% equity interest in Saturn by investing approximately NZ$30,000 (US$20,000) directly into Saturn for newly issued shares. The Company believes that SaskTel, a division of Saskatchewan Telecommunications Holdings Corporation of Saskatchewan, Canada, will contribute telephony expertise to Saturn in providing cable/telephony service in the Wellington, New Zealand area. The proceeds from the sale are providing a portion of the capital necessary for completion of the project. In September 1997, UIH A/P issued an additional $45,000 aggregate principal amount of its 14% senior discount notes due 2006. Gross proceeds from the sale of these notes totaled approximately $29,900. UIH A/P plans to use the proceeds from the sale to fund the capital expenditure and working capital requirements of its subsidiaries and affiliates as permitted by the terms of the UIH A/P indentures. To the extent the operating companies in the Asia/Pacific region fund their construction and other costs through project financing, UAP's portion of estimated additional funding would be reduced proportionately. In addition to the Austar Bank Facility and cash on hand, UAP may to raise additional capital through capital contributions from the Company, further issuances of debt either by UAP, UIH A/P or its operating companies, or by the sale of all or a part of its equity in certain of its operating subsidiaries. UIH A/P's indentures and UIH's indentures place restrictions on UAP and certain of its subsidiaries with respect to the amount of additional debt each may incur. UIH A/P and all of its operating companies are currently restricted under the UIH indentures. UIH A/P, Austar and Telefenua are restricted under UIH A/P's indentures. The restrictions imposed by the indentures will be eliminated upon the retirement of UIH's notes at their maturity in November 1999 and upon retirement of UIH A/P's notes at their maturity in May 2006. If UIH A/P does not consummate an issuance of capital stock resulting in gross proceeds to UIH A/P of at least $70,000 (an "Equity Sale") prior to November 16, 1997, the then holders of the UIH A/P Notes will be entitled to receive warrants to purchase 3.4% of the common stock of UIH A/P, assuming the aggregate fair market value of UIH A/P's equity is $150,000, or, in certain circumstances, of UIH A/P's immediate parent. UIH A/P may pursue additional sources of funding that may constitute an Equity Sale. At this time, the Company believes that it is unlikely that UIH A/P will be successful in concluding an Equity Sale prior to November 16, 1997. 14 Because the Company and UIH A/P do not currently have positive 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 maturities of their respective senior notes. The Company may (i) seek to refinance all or a portion of the senior notes at maturity through 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. RESULTS OF OPERATIONS SERVICE AND OTHER REVENUE. Service and other revenue increased $19,022 and $37,932 during the three and six months ended August 31, 1997, respectively, compared to the amounts for the corresponding periods in the prior year as follows:
For the Three For the Six Months Ended Months Ended August 31, August 31, ---------------------- -------------------- 1997 1996 1997 1996 ------- ------ ------- ------ Asia/Pacific........................................... $16,219 $3,936 $30,711 $5,870 Latin America.......................................... 7,058 246 13,648 484 Europe and other....................................... -- 73 -- 73 ------- ------ ------- ------ Total service and other revenue.................... $23,277 $4,255 $44,359 $6,427 ======= ====== ======= ======
ASIA/PACIFIC ------------ AUSTAR Service revenue at Austar was $15,055 and $28,524 for the three and six months ended June 30, 1997, respectively, compared to $3,059 and $4,127 for the corresponding periods in 1996. For the six months ended June 30, 1997, revenues consisted primarily of service and installation fees from basic subscribers of $23,930 and $3,836, respectively, with other revenue totaling $758. For the six months ended June 30, 1996, revenues consisted primarily of service and installation fees from basic subscribers of $2,627 and $1,494, respectively, with other revenue totaling $6. The increase in service revenue was primarily due to subscriber growth (149,495 at June 30, 1997 compared to 29,282 at June 30, 1996) as Austar continues to roll-out its services, which were initially launched in August 1995. TELEFENUA Telefenua's service revenue increased to $959 and $1,875 from $876 and $1,738 for the three and six months ended June 30, 1997 and 1996, respectively. The increase was primarily attributable to subscriber growth (6,080 at June 30, 1997 compared to 4,361 at June 30, 1996). SATURN The Company began consolidating the results of Saturn effective July 1, 1996. Accordingly, the Company reported no service revenue for Saturn for the six months ended June 30, 1996. For the three and six months ended June 30, 1997, the Company reported service revenue of $98 and $181, respectively, compared with service revenue for Saturn of $52 and $104 for the corresponding periods in 1996. The increase was primarily due to an increase in subscribers (2,288 at June 30, 1997 compared to 1,125 at June 30, 1996). LATIN AMERICA ------------- The Company began consolidating the results of Bahia Blanca effective November 1, 1996. Accordingly, the Company reported no revenue for Bahia Blanca for the three and six months ended June 30, 1996. Bahia Blanca's revenue, consisting primarily of service fees, was $13,043 for the six months ended June 30, 1997. The remainder of Latin America's revenue for the six months ended June 30, 1997, totaling $605, was attributable to TV Cable SRL and Cable Star. 15 MANAGEMENT FEE INCOME FROM RELATED PARTIES. Management fee income increased $144 and $108 during the three and six months ended August 31, 1997, respectively, compared to the amounts for the corresponding periods in the prior year as follows:
For the Three For the Six Months Ended Months Ended August 31, August 31, ----------------- --------------- 1997 1996 1997 1996 ---- ---- ---- ---- Asia/Pacific........................................... $ 14 $ 29 $121 $163 Latin America.......................................... 356 217 481 356 Europe and other....................................... 87 67 136 111 ---- ---- ---- ---- Total management fee income from related parties.... $457 $313 $738 $630 ==== ==== ==== ====
SYSTEM OPERATING EXPENSE. System operating expense increased $11,342 and $20,587 during the three and six months ended August 31, 1997, respectively, compared to the amounts for the corresponding periods in the prior year as follows:
For the Three For the Six Months Ended Months Ended August 31, August 31, ----------------- ----------------- 1997 1996 1997 1996 ------- ------ ------ ------ Asia/Pacific........................................... $11,087 $3,314 $21,064 $6,744 Latin America.......................................... 2,842 104 5,382 218 Europe and other....................................... 1,178 347 1,450 347 ------- ------ ------- ------ Total system operating expense...................... $15,107 $3,765 $27,896 $7,309 ======= ====== ======= ======
ASIA/PACIFIC ------------ AUSTAR The Company reported operating expense from Austar of $9,999 and $18,466 for the three and six months ended June 30, 1997, respectively, compared to $2,623 and $5,281 for the comparable periods in the prior year. For the six months ended June 30, 1997, Austar's operating expense consisted primarily of satellite programming fees ($9,024), salaries and benefits ($3,073) and MMDS spectrum license fees ($1,279), with the remainder consisting of system travel, maintenance, vehicle and customer billing expenses. For the six months ended June 30, 1996, Austar's operating expense consisted primarily of salaries and benefits ($1,964), satellite programming fees ($995) and MMDS spectrum license fees ($688), with the remainder consisting of system travel, maintenance, vehicle and customer billing expenses. The increase in operating expense in 1997 was primarily due to the on-going roll-out of Austar's services and the corresponding increase in subscribers. Austar is currently experiencing high operating expenses relative to service revenues due to certain fixed operating expenses (such as management overhead, license fees and certain office-related costs). Austar expects operating expense as a percentage of service revenue to decline as start-up costs decrease and as certain fixed operating expenses are spread over expected increases in service revenues. TELEFENUA Operating expense at Telefenua decreased to $459 and $885 for the three and six month period ended June 30, 1997, respectively, from $501 and $1,073 for the corresponding periods in 1996. These decreases are primarily due to decreases in technical-related repairs and maintenance costs as well as a weakening in the local currency, partially offset by increased programming costs associated with the increase in subscribers. Telefenua's operating expense for the six months ended June 30, 1997 consisted primarily of programming-related expenses ($557) with the remainder consisting of payroll-related costs and technical-related costs. Telefenua's operating expense for the six months ended June 30, 1996 consisted primarily of programming-related expenses ($602) with the remainder consisting of payroll-related costs and technical-related costs. 16 SATURN The Company began consolidating the results of Saturn effective July 1, 1996. Accordingly, the Company reported no operating expense for Saturn for the six months ended June 30, 1996. For the three and six months ended June 30, 1997, the Company reported system operating expense of $932 and $1,659, respectively, for Saturn compared with system operating expense of $378 and $720 for the corresponding periods in 1996. For the six months ended June 30, 1997, system operating expense consisted primarily of payroll ($721) and office expenses related to the system design and engineering work for the expansion of Saturn's Wellington system and to the provision of service to existing customers. For the six months ended June 30, 1996, system operating expense consisted primarily of payroll ($341) and office expenses. LATIN AMERICA ------------- The Company began consolidating the results of Bahia Blanca effective November 1, 1996. Accordingly, the Company reported no system operating expense for the three and six months ended June 30, 1996. Bahia Blanca's system operating expense for the three and six months ended June 30, 1997 was $2,587 and $4,893, respectively, consisting primarily of programming expenses and salaries. SYSTEM SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. System selling, general and administrative expense increased $8,376 and $17,951 during the three and six months ended August 31, 1997, respectively, compared to the amounts for the corresponding periods in the prior year as follows:
For the Three For the Six Months Ended Months Ended August 31, August 31, ----------------- ------------------- 1997 1996 1997 1996 ------- ------ ------- ------- Asia/Pacific........................................... $11,574 $6,633 $22,608 $10,242 Latin America.......................................... 2,853 123 4,917 257 Europe and other....................................... 981 276 1,201 276 ------- ------ ------- ------- Total system selling, general and administrative expense............................. $15,408 $7,032 $28,726 $10,775 ======= ====== ======= =======
ASIA/PACIFIC ------------ AUSTAR Austar's system selling, general and administrative expense increased to $10,083 and $19,609 from $5,964 and $8,823 for the three and six months ended June 30, 1997 and 1996, respectively. During the six months ended June 30, 1997, system selling, general and administrative expense at Austar consisted primarily of salaries associated with the National Customer Operations Center and Austar's Sydney corporate headquarters ($6,009), marketing costs related to print, radio and television advertisements ($4,833), office-related expenses including rent and utilities ($3,361) and direct sales commissions ($2,897). During the six months ended June 30, 1996, system selling, general and administrative expense at Austar consisted primarily of salaries associated with the National Customer Operations Center and Austar's Sydney corporate headquarters ($3,464), marketing costs related to print, radio and television advertisements ($1,906), office-related expenses including rent and utilities ($1,605) and direct sales commissions ($1,030). The increase in 1997 was primarily due to the on-going roll-out of Austar's services. Austar expects that system selling, general and administrative expense as a percent of service revenue will continue to decline over the remainder of 1997 as certain fixed expenses are spread over expected increases in service revenues. TELEFENUA System selling, general and administrative expense consolidated by the Company from Telefenua decreased to $538 and $1,011 for the three and six months ended June 30, 1997, respectively, from $661 and $1,268 for the same periods in the prior year. This decline was primarily due to a reduction in marketing costs during 1997 as well as a weakening of the local currency. 17 SATURN The Company began consolidating the results of Saturn effective July 1, 1996. Accordingly, the Company reported no system selling, general and administrative expense for Saturn for the six months ended June 30, 1996. Saturn's system selling, general and administrative expense was $746 and $1,396 for the three and six months ended June 30, 1997, respectively, compared to $442 and $801 for the comparable periods in 1996. For the six months ended June 30, 1997, system selling, general and administrative expense consisted primarily of marketing and support salaries and benefits ($721) associated with increased marketing efforts to expand the subscriber base as Saturn's system expands. For the six months ended June 30, 1996, system selling, general and administrative expense consisted primarily of marketing and support salaries and benefits ($341). LATIN AMERICA ------------- The Company began consolidating the results of Bahia Blanca effective November 1, 1996. Accordingly, the Company reported no system general and administrative expenses for Bahia Blanca for the three and six months ended June 30, 1996. Bahia Blanca's system general and administrative expenses for the three and six months ended June 30, 1997 were $2,575 and $4,395, respectively, consisting primarily of marketing-related costs and salaries with the remainder consisting of billing, office and utility costs. CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE. Corporate general and administrative expense increased $808 and $2,370 during the three and six months ended August 31, 1997, respectively, compared to the amounts for the corresponding periods in the prior year. The increase was primarily attributable to professional services incurred in connection with the lawsuit against the Wharf group of companies, professional services incurred in connection with the letter of intent and the definitive agreement with Philips whereby the Company and/or UPC would acquire from Philips their 50% interest in UPC and charges related to employee severance agreements. DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization expense increased $13,559 and $30,120 during the three and six months ended August 31, 1997, respectively, compared to the amounts for the corresponding periods in the prior year. The increase was due to depreciation on a larger fixed asset base as the operating companies, particularly Austar, expand their networks and due to depreciation and purchased goodwill amortization associated with the consolidation of Bahia Blanca effective November 1, 1996. EQUITY IN LOSSES OF AFFILIATED COMPANIES, NET. The Company recognized net equity in losses of affiliated companies of $18,225 and $37,542 for the three and six months ended August 31, 1997, respectively, compared to $9,539 and $21,741 for the same periods in the prior year as follows:
Three Months Ended August 31, 1997 Three Months Ended August 31, 1996 ---------------------------------- ---------------------------------- Company Equity in Company Equity in Ownership Income (Losses) of Ownership Income (Losses) of Interest Affiliated Companies Interest Affiliated Companies --------- -------------------- --------- -------------------- EUROPE UPC........................................... 50.0% $(11,344) 50.0% $(4,686) Monor Communications.......................... 48.6% (1,063) 48.4% (591) IPS........................................... 33.8% (791) 33.8% (1,148) LATIN AMERICA United Family Communications.................. 50.0% (1,206) -- -- Megapo........................................ 49.0% (340) 49.0% 50 TVSB.......................................... 40.0% (138) 40.0% (324) VTRH(1)....................................... 34.0% (1,209) -- -- Santa Fe(2)................................... 31.0% (956) -- -- Cablevision(1)................................ -- -- 100.0% (1,298) STX(1)........................................ -- -- 100.0% 255 Net Sao Paulo(3).............................. -- -- 34.0% -- ASIA/PACIFIC Saturn(4)..................................... -- -- 50.0% (529) XYZ........................................... 25.0% (1,077) 25.0% (1,007) OTHER............................................ 40.0-100.0% (101) 40.0-46.3% (261) -------- ------- Total equity in losses of affiliated companies, net.............................. $(18,225) $(9,539) ======== =======
18
Six Months Ended August 31, 1997 Six Months Ended August 31, 1996 ---------------------------------- ---------------------------------- Company Equity in Company Equity in Ownership Income (Losses) of Ownership Income (Losses) of Interest Affiliated Companies Interest Affiliated Companies --------- -------------------- --------- -------------------- EUROPE UPC........................................... 50.0% $(25,164) 50.0% $(11,168) Monor Communications.......................... 48.6% (2,372) 48.4% (1,187) IPS........................................... 33.8% (1,684) 33.8% (1,933) LATIN AMERICA United Family Communications.................. 50.0% (1,640) -- -- Megapo........................................ 49.0% (194) 49.0% (208) TVSB.......................................... 40.0% (269) 40.0% (777) VTRH(1)....................................... 34.0% (3,767) -- -- Santa Fe(2)................................... 31.0% (956) -- -- Cablevision(1)................................ -- -- 100.0% (1,614) STX(1)........................................ -- -- 100.0% 530 Net Sao Paulo(3).............................. -- -- 34.0% (1,649) ASIA/PACIFIC Saturn(4)..................................... -- -- 50.0% (928) XYZ........................................... 25.0% (1,443) 25.0% (1,639) OTHER............................................ 40.0-100.0% (53) 40.0-76.9% (1,168) -------- -------- Total equity in losses of affiliated companies, net.............................. $(37,542) $(21,741) ======== ========
(1) The Company contributed its interests in STX and Cablevision to its joint venture VTRH effective September 1, 1996. (2) In July 1997, the Company increased its ownership in Santa Fe to 69%. (3) 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. (4) In July 1996, UIH A/P 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 A/P. On May 15, 1997, this shareholder in UIH A/P exchanged its 2.6% interest in UIH A/P for a 2% interest in UAP. RESULTS OF OPERATIONS - UPC --------------------------- REVENUE. During the six months ended June 30, 1997, as compared to June 30, 1996, revenue increased $22,308 to $88,613 from $66,305, a 33.6% increase. A substantial portion of this increase was directly attributable to the acquisition of Norkabelgruppen AS ("Norkabel") and Janco Kabel TV AS ("Janco") in Norway. Norkabel was acquired effective October 1, 1996 and Janco was acquired effective January 1, 1997, and were not included in the June 30, 1996 results. The remaining increase in revenue was comprised of increased revenue in Austria and the Czech Republic from subscriber growth and in the Netherlands from an increase in the average revenue per subscriber. In addition, the revenue for period ended June 30, 1997 includes revenue from several of UPC's development systems including Portugal, France, the Slovak Republic and Romania which were not included in June 30, 1996 operating results. The increase in revenue was negatively impacted by $7,717 due to fluctuations in exchange rates between 1996 and 1997. OPERATING EXPENSE. During the six months ended June 30, 1997, as compared to June 30, 1996, operating and general and administrative expense excluding depreciation increased $19,779 to $60,294 from $40,515, a 48.8% increase. A substantial portion of this increase was directly attributable to the acquisition of Norkabel and Janco which were not included in the June 30, 1996 results. The remaining increase was comprised primarily of operating expenses related to development systems in Portugal, France, the Slovak Republic and Romania. In addition, operating expenses during the six months ended June 30, 1997, as compared to June 30, 1996, included expenses related to the introduction of new services including tier programming in Austria, Belgium and the Netherlands and data services in Austria and Belgium. The increase in operating expense was positively impacted by $4,716 due to fluctuations in exchange rates between 1996 and 1997. 19 NET OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION. During the six months ended June 30, 1997, as compared to June 30, 1996, net operating income increased $2,529 to $28,319 from $25,790, a 9.8% increase. A substantial portion of this increase was directly attributable to the acquisition of Norkabel and Janco which was offset by net operating losses in Portugal, France and the Slovak Republic. The increase in net operating income was negatively impacted by $3,002 due to fluctuations in exchange rates between 1996 and 1997. DEPRECIATION AND AMORTIZATION EXPENSE. During the six months ended June 30, 1997, as compared to June 30, 1996, depreciation and amortization expense increased by $9,469 to $36,423 from $26,954, the majority of which was directly attributable to Norkabel and Janco with the remainder attributable to new development systems. This increase was positively impacted by $3,137 due to fluctuations in exchange rates between 1996 and 1997. FOREIGN EXCHANGE LOSS. During the six month periods ended June 30, 1997 and 1996, UPC recognized $16,594 and $9,021, respectively, in foreign exchange losses related to the convertible loan notes due to Philips. These notes are denominated in U.S. dollars; the increase in the loss is attributable to the U.S. dollar to Dutch guilder exchange rate movement. FINANCE EXPENSE. During the six month periods ended June 30, 1997 and 1996, finance expense increased $10,153 to $17,252 from $7,099 due to debt acquired in the Norkabel acquisition, additional debt to finance the United Communications International acquisition (including Norkabel), additional interest costs associated with the Philips notes resulting from the change in the Dutch guilder and the U.S. dollar average exchange rate, and additional debt to fund development projects and the corporate office. OTHER ITEMS. During the six month period ended June 30, 1997, UPC established a reserve for its investment in Portugal of $5,291. EXCHANGE RATE. The exchange rate between the Dutch guilder and the U.S. dollar has increased from 1.71 at June 30, 1996 to 1.96 at June 30, 1997. The average exchange rate between the Dutch guilder and the U.S. dollar has increased from 1.67 for the six months ended June 30, 1996 to 1.89 for the six months ended June 30, 1997. INTEREST INCOME. Interest income decreased $1,901 and $2,264 during the three and six months ended August 31, 1997, respectively, compared to the amounts for the corresponding periods in the prior year. The decrease was due to reduced cash and short-term investment balances related to the funding of the company's investments in affiliated operating systems. INTEREST EXPENSE. Interest expense increased $13,110 and $25,248 during the three and six months ended August 31, 1997, respectively, compared to the amounts for the corresponding periods in the prior year. The increase was primarily due to the issuance of senior notes by UIH A/P in May 1996. PROVISION FOR LOSSES ON INVESTMENT RELATED COSTS. Provision for losses on investment related costs increased $1,546 and $5,630 during the three and six months ended August 31, 1997, respectively, compared to the amounts for the corresponding periods in the prior year. 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. The majority of the increase was due to the Company's write-off to fair market value of its investment in International Broadcasting Corporation due to permanent impairment. 20 PART II - OTHER INFORMATION --------------------------- ITEM 5 - OTHER INFORMATION The operating data set forth below reflects the aggregate statistics of the operating systems in which the Company has an ownership interest.
As of June 30, 1997 ------------------------------------------------------------------------------------------ UIH Equity in UIH UIH Homes in UIH Homes in Equity Equity in Service Homes Basic Basic Paid-in Service in Homes Basic Area Passed Subscribers Penetration Ownership Area Passed Subscribers -------- ------ ----------- ----------- --------- --------- --------- ----------- EUROPE - ------- UPC SYSTEMS: Netherlands (Amsterdam) Cable................ 567,000 558,642 522,594 93.5% 25.0% 141,750 139,661 130,649 Austria Cable................ 842,100 627,952 432,315 68.8% 47.5% 399,998 298,277 205,350 Norway Cable................ 529,924 454,442 317,356 69.8% 35.1-50.0% 227,414 193,696 134,711 Hungary (Kabelkom) Cable................ 270,000 268,000 248,000 92.5% 25.0% 67,500 67,000 62,000 Israel Cable................ 350,000 342,520 235,438 68.7% 11.7% 40,950 40,075 27,546 Belgium Cable................ 133,000 133,000 126,973 95.5% 50.0% 66,500 66,500 63,487 Ireland (PHL) Cable/MMDS........... 355,000 346,853 125,259 36.1% 10.0% 35,500 34,685 12,526 Netherlands (Eindhoven) Cable................ 92,190 89,425 84,950 95.0% 50.0% 46,095 44,713 42,475 Malta Cable................ 179,000 147,485 54,018 36.6% 21.3% 38,127 31,414 11,506 Romania Cable................ 150,000 68,907 40,427 58.7% 25.5-45.0% 51,900 21,709 11,768 Czech Republic Cable/MMDS/MATV...... 258,600 137,899 40,232 29.2% 50.0% 129,300 68,950 20,116 Slovak Republic Cable................ 21,839 17,287 13,499 78.1% 37.5% 8,190 6,483 5,062 France (Marne la Vallee) Cable................ 86,000 21,225 3,749 17.7% 49.8% 42,828 10,570 1,867 Spain (Santander) Cable................ 74,235 58,763 3,503 6.0% 12.5% 9,279 7,345 438 Portugal Cable................ 186,449 12,195 2,833 23.2% 50.0% 93,225 6,098 1,417 ---------- --------- --------- --------- --------- --------- Total UPC.......... 4,095,337 3,284,595 2,251,146 1,398,556 1,037,176 730,918 ---------- --------- --------- --------- --------- --------- UIH SYSTEMS: Hungary (Monor Telefon) Cable/Telephony(5)... 85,000 129,815 76,006 58.5% 46.3% 39,355 60,104 35,190 Spain (IPS) Programming.......... N/A N/A 229,000 N/A 33.8% N/A N/A 77,402 Ireland (Tara Television)(6) Programming.......... N/A N/A 111,279 N/A 100.0% N/A N/A 111,279 ---------- --------- --------- --------- --------- --------- Total Europe....... 4,180,337 3,414,410 2,667,431 1,437,911 1,097,280 954,789 ---------- --------- --------- --------- --------- ---------
21
As of June 30, 1997 ------------------------------------------------------------------------------------------ UIH Equity in UIH UIH Homes in UIH Homes in Equity Equity in Service Homes Basic Basic Paid-in Service in Homes Basic Area Passed Subscribers Penetration Ownership Area Passed Subscribers -------- ------ ----------- ----------- --------- ---------- --------- ----------- LATIN AMERICA (UIH LA) - ---------------------- Chile Cable................ 2,321,000 1,467,478 344,590 23.5% 34.0% 789,140 498,943 117,161 Argentina Cable................ 372,600 294,260 182,374 62.0% 31.0-100.0% 240,810 197,660 119,876 Mexico Cable................ 341,600 166,117 52,536 31.6% 49.0% 167,384 81,397 25,743 Brazil (Jundiai) Cable................ 70,000 47,754 16,766 35.1% 46.3% 32,410 22,110 7,763 Brazil (Fortaleza) MMDS................. 387,000 387,000 12,146 3.1% 40.0% 154,800 154,800 4,858 Peru Cable................ 140,000 23,034 5,319 23.1% 94.0-100.0% 133,400 21,815 5,036 ---------- --------- --------- --------- --------- --------- Total UIH LA...... 3,632,200 2,385,643 613,731 1,517,944 976,725 280,437 ---------- --------- --------- --------- --------- --------- ASIA/PACIFIC (UAP) - ------------------ Australia (Austar) MMDS/DTH............. 1,622,000 1,589,000 149,495 9.4% 98.0% 1,589,560 1,557,220 146,505 Philippines Cable................ 600,000 170,511 62,537 36.7% 39.2% 235,200 66,840 24,515 Tahiti MMDS................. 31,000 19,728 6,080 30.8% 88.2% 27,342 17,400 5,363 New Zealand Cable................ 141,000 16,113 2,288 14.2% 98.0% 138,180 15,791 2,242 Australia (XYZ) Programming.......... N/A N/A 443,073 N/A 24.5% N/A N/A 108,553 China Microwave Relay(12).. N/A N/A N/A N/A 48.0% N/A N/A N/A Australia (United Wireless) Wireless Data........ N/A N/A N/A N/A 98.0% N/A N/A N/A ---------- --------- --------- --------- --------- --------- Total UAP.......... 2,394,000 1,795,352 663,473 1,990,282 1,657,251 287,178 ---------- --------- --------- --------- --------- --------- Total UIH..........10,206,537 7,595,405 3,944,635 4,946,137 3,731,256 1,522,404 ========== ========= ========= ========= ========= =========
22 As of and for the Six Months Ended June 30, 1997 ------------------------------------------ (In thousands)(1) ------------------------------------------ Net Long- Service Income Adjusted Term Revenue (Loss) EBITDA(2) Debt -------- ------ --------- ----- EUROPE - ------- UPC SYSTEMS: Netherlands (Amsterdam) Cable................ $ 24,413 $ (5,676) $ 9,983 $186,345 Austria Cable(3)............. 41,410 885 21,138 -- Norway Cable(4)............. 24,023 (5,558) 8,986 73,672 Hungary (Kabelkom) Cable................ 12,474 1,529 4,791 -- Israel Cable................ 48,084 8,128 24,581 7,071 Belgium Cable(3)............. 9,929 (330) 3,909 -- Ireland (PHL) Cable/MMDS........... 17,829 1,593 6,601 48,507 Netherlands (Eindhoven) Cable................ 5,016 (717) 3,043 43,003 Malta Cable................ 5,358 (766) 2,153 16,883 Romania Cable................ 486 146 324 -- Czech Republic Cable/MMDS/MATV...... 1,727 (5,756) (1,917) -- Slovak Republic Cable................ 210 (182) (73) -- France (Marne la Vallee) Cable................ 452 (1,861) (1,403) -- Spain (Santander) Cable................ 243 (713) (442) -- Portugal Cable................ 169 (2,096) (1,575) -- -------- -------- ------- -------- Total UPC.......... 191,823 (11,374) 80,099 375,481 -------- -------- ------- -------- UIH SYSTEMS: Hungary (Monor Telefon) Cable/Telephony(5)... 7,137 (4,920) 4,020 30,000 Spain (IPS) Programming.......... 3,724 (4,973) (3,133) 3,500 Ireland (Tara Television)(6) Programming.......... -- (2,749) (2,650) -- -------- -------- ------- -------- Total Europe....... 202,684 (24,016) 78,336 408,981 -------- -------- ------- -------- 23 As of and for the Six Months Ended June 30, 1997 ------------------------------------------ (In thousands)(1) ------------------------------------------ Net Long- Service Income Adjusted Term Revenue (Loss) EBITDA(2) Debt -------- ------ --------- ----- LATIN AMERICA (UIH LA) - ---------------------- Chile Cable................ $ 53,313 $ (8,860) $10,620 $ 7,578 Argentina Cable................ 23,035 1,053 4,513 -- Mexico Cable................ 4,525 1,281 1,304 136 Brazil (Jundiai) Cable................ 3,656 306 1,324 97 Brazil (Fortaleza) MMDS(6).............. 3,445 (452) 935 -- Peru Cable................ 605 (756) (429) 99 -------- -------- ------- -------- Total UIH LA...... 88,579 (7,428) 18,267 7,910 -------- -------- ------- -------- ASIA/PACIFIC (UAP) - ------------------ Australia (Austar) MMDS/DTH............. 27,800 (40,553) (8,419) 38,212 Philippines Cable(8)............. 4,175 178 1,425 -- Tahiti MMDS(9).............. 1,875 (1,441) 71 1,025 New Zealand Cable(10)............ 177 (3,916) (2,615) 31 Australia (XYZ) Programming(11)...... 6,520 (5,201) (3,231) -- China Microwave Relay(12).. N/A N/A N/A N/A Australia (United Wireless) Wireless Data(11).... 129 (2,068) (1,370) -- -------- -------- ------- -------- Total UAP.......... 40,676 (53,001) (14,139) 39,268 -------- -------- ------- -------- Total UIH......... $331,939 $(84,445) $82,464 $456,159 ======== ======== ======= ======== 24
As of March 31, 1997 ------------------------------------------------------------------------------------------ UIH Equity in UIH UIH Homes in UIH Homes in Equity Equity in Service Homes Basic Basic Paid-in Service in Homes Basic Area Passed Subscribers Penetration Ownership Area Passed Subscribers -------- ------ ----------- ----------- --------- --------- --------- ----------- EUROPE - ------- UPC SYSTEMS: Netherlands (Amsterdam) Cable................ 564,000 556,975 524,188 94.1% 25.0% 141,000 139,244 131,047 Austria Cable................ 840,000 624,091 429,861 68.9% 47.5% 399,000 296,443 204,184 Norway Cable................ 529,693 448,060 316,601 70.7% 35.1-50.0% 227,299 190,505 134,414 Hungary (Kabelkom) Cable................ 268,000 267,929 246,768 92.1% 23.5% 62,980 62,963 57,990 Israel Cable................ 350,000 338,612 234,695 69.3% 11.7% 40,950 39,618 27,459 Belgium Cable................ 133,000 133,000 127,383 95.8% 50.0% 66,500 66,500 63,692 Ireland (PHL) Cable/MMDS........... 350,000 344,370 124,604 36.2% 10.0% 35,000 34,437 12,460 Netherlands (Eindhoven) Cable................ 92,042 89,281 84,817 95.0% 50.0% 46,021 44,641 42,409 Malta Cable................ 146,384 146,384 52,799 36.1% 21.3% 31,180 31,180 11,246 Romania Cable................ 148,000 68,707 40,852 59.5% 25.5-45.0% 51,390 21,658 11,911 Czech Republic Cable/MMDS/MATV...... 258,600 128,835 38,018 29.5% 50.0% 129,300 64,418 19,009 Slovak Republic Cable................ 21,839 15,577 11,768 75.5% 37.5% 8,190 5,841 4,413 France (Marne la Vallee) Cable................ 68,000 12,660 2,344 18.5% 50.0% 34,000 6,330 1,172 Spain (Santander) Cable................ 74,235 58,763 3,503 6.0% 12.5% 9,279 7,345 438 Portugal Cable................ 186,449 9,327 2,192 23.5% 50.0% 93,225 4,664 1,096 --------- --------- --------- --------- --------- --------- Total UPC.......... 4,030,242 3,242,571 2,240,393 1,375,314 1,015,787 722,940 --------- --------- --------- --------- --------- --------- UIH SYSTEMS: Hungary (Monor Telefon) Cable/Telephony(5)... 85,000 126,024 72,651 57.6% 46.3% 39,355 58,349 33,637 Spain (IPS) Programming.......... N/A N/A 206,000 N/A 33.8% N/A N/A 69,628 Ireland (Tara Television)(6) Programming.......... N/A N/A 73,103 N/A 100.0% N/A N/A 73,103 --------- --------- --------- --------- --------- --------- Total Europe....... 4,115,242 3,368,595 2,592,147 1,414,669 1,074,136 899,308 --------- --------- --------- --------- --------- ---------
25
As of March 31, 1997 ------------------------------------------------------------------------------------------ UIH Equity in UIH UIH Homes in UIH Homes in Equity Equity in Service Homes Basic Basic Paid-in Service in Homes Basic Area Passed Subscribers Penetration Ownership Area Passed Subscribers -------- ------ ----------- ----------- --------- ---------- --------- ----------- LATIN AMERICA (UIH LA) - ---------------------- Chile Cable................ 2,321,000 1,464,092 326,849 22.3% 34.0% 789,140 497,791 111,129 Argentina (Bahia Blanca) Cable................ 113,000 98,990 59,722 60.3% 80.0-100.0% 113,000 98,990 59,722 Mexico Cable................ 341,600 166,117 53,440 32.2% 49.0% 167,384 81,397 26,186 Brazil (Jundiai) Cable................ 70,000 45,301 14,301 31.6% 46.3% 32,410 20,974 6,621 Brazil (Fortaleza) MMDS................. 387,000 387,000 12,391 3.2% 40.0% 154,800 154,800 4,956 Peru Cable................ 140,000 19,104 3,910 20.5% 94.0-100.0% 133,400 18,043 3,694 --------- --------- --------- --------- --------- --------- Total UIH LA...... 3,372,600 2,180,604 470,613 1,390,134 871,995 212,308 --------- --------- --------- --------- --------- --------- ASIA/PACIFIC (UAP) - ------------------ Australia (Austar) MMDS/DTH............. 1,622,000 1,571,000 129,156 8.2% 97.4% 1,579,828 1,530,154 125,798 Philippines Cable................ 600,000 167,483 55,309 33.0% 40.0% 240,000 66,993 22,124 Tahiti MMDS................. 31,000 19,584 5,537 28.3% 87.7% 27,187 17,175 4,856 New Zealand Cable................ 141,000 16,281 2,052 12.6% 97.4% 137,334 15,858 1,999 Australia (XYZ) Programming.......... N/A N/A 390,000 N/A 24.4% N/A N/A 95,160 China Microwave Relay(12).. N/A N/A N/A N/A 49.0% N/A N/A N/A Australia (United Wireless) Wireless Data........ N/A N/A N/A N/A 97.4% N/A N/A N/A --------- --------- --------- --------- --------- --------- Total UAP.......... 2,394,000 1,774,348 582,054 1,984,349 1,630,180 249,937 --------- --------- --------- --------- --------- --------- Total UIH.......... 9,881,842 7,323,547 3,644,814 4,789,152 3,576,311 1,361,553 ========= ========= ========= ========= ========= =========
26 As of and for the Three Months Ended March 31, 1997 ------------------------------------------ (In thousands)(1) ------------------------------------------ Net Long- Service Income Adjusted Term Revenue (Loss) EBITDA(2) Debt -------- ------ --------- ----- EUROPE - ------- UPC SYSTEMS: Netherlands (Amsterdam) Cable................ $ 12,169 $ (2,473) $ 5,500 $186,345 Austria Cable(3)............. 21,077 939 11,193 -- Norway Cable(4)............. 11,763 (2,822) 4,467 73,672 Hungary (Kabelkom) Cable................ 6,191 939 2,502 -- Israel Cable................ 23,320 4,217 11,493 5,736 Belgium Cable(3)............. 5,088 (238) 1,706 -- Ireland (PHL) Cable/MMDS........... 8,748 (734) 3,226 52,296 Netherlands (Eindhoven) Cable................ 2,488 (376) 1,598 42,983 Malta Cable................ 2,584 (442) 1,075 15,584 Romania Cable................ 204 51 120 -- Czech Republic Cable/MMDS/MATV...... 832 (2,727) (909) -- Slovak Republic Cable................ 84 (17) 58 -- France (Marne la Vallee) Cable................ 168 (859) (692) -- Spain (Santander) Cable................ 215 (394) (135) 7 Portugal Cable................ 63 (1,035) (834) -- -------- -------- ------- -------- Total UPC.......... 94,994 (5,971) 40,368 376,623 -------- -------- ------- -------- UIH SYSTEMS: Hungary (Monor Telefon) Cable/Telephony(5)... 3,530 (2,769) 2,037 30,000 Spain (IPS) Programming.......... 1,639 (2,647) (1,766) 3,500 Ireland (Tara Television)(6) Programming.......... -- (1,454) (1,407) -- -------- -------- ------- -------- Total Europe....... 100,163 (12,841) 39,232 410,123 -------- -------- ------- -------- 27 As of and for the Three Months Ended March 31, 1997 ------------------------------------------ (In thousands)(1) ------------------------------------------ Net Long- Service Income Adjusted Term Revenue (Loss) EBITDA(2) Debt -------- ------ --------- ----- LATIN AMERICA (UIH LA) - ---------------------- Chile Cable................ $ 23,222 $ (6,016) $ 1,521 $ 8,947 Argentina Cable................ 6,312 (147) 1,589 -- Mexico Cable................ 2,273 1,120 1,516 371 Brazil (Jundiai) Cable................ 1,827 267 727 97 Brazil (Fortaleza) MMDS(6).............. 1,721 (240) 393 -- Peru Cable................ 278 (393) (220) -- -------- -------- ------- -------- Total UIH LA...... 35,633 (5,409) 5,526 9,415 -------- -------- ------- -------- ASIA/PACIFIC (UAP) - ------------------ Australia (Austar) MMDS/DTH............. 13,033 (19,021) (3,961) -- Philippines Cable(8)............. 1,572 (128) 502 -- Tahiti MMDS(9).............. 915 (527) 59 1,118 New Zealand Cable(10)............ 81 (1,517) (1,180) -- Australia (XYZ) Programming(11)...... 3,140 (1,188) (1,191) -- China Microwave Relay(12).. N/A N/A N/A N/A Australia (United Wireless) Wireless Data(11).... 23 (963) (720) -- -------- -------- ------- -------- Total UAP.......... 18,764 (23,344) (6,491) 1,118 -------- -------- ------- -------- Total UIH......... $154,560 $(41,594) $38,267 $420,656 ======== ======== ======= ======== 28 (Monetary amounts stated in thousands) (1) The financial information presented above has been taken from unaudited financial information of the respective operating companies that were providing service as of June 30, 1997. Certain information presented above has been derived from financial statements prepared in accordance with foreign generally accepted accounting principles which differ from U.S. generally accepted accounting principles. In addition, certain amounts have been converted to U.S. dollars using the June 30, 1997 exchange rates for the convenience translation. Operating systems in the following countries reported to the Company in U.S. dollars: Ireland (Tara only), Hungary, Spain (IPS only), Brazil, Mexico, Chile, Peru, Argentina and Tahiti. Therefore, the financial information presented above for these countries was not affected by the convenience translation. (2) Adjusted EBITDA represents net income (loss), as determined using generally accepted accounting principles which may differ from those used in the United States, 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. (3) In addition to the debt noted above, Austria and Belgium had intercompany loans, which eliminated upon consolidation, of BF3,900,000 ($108,363) as of June 30 and March 31, 1997. UPC also had a subordinated convertible loan payable to Philips (including accrued interest) totaling NLG313,800 ($159,768) and NLG300,028 ($152,756) as of June 30 and March 31, 1997, respectively. (4) In addition to the debt noted above, Norkabel had loans payable to UPC (including accrued interest) of $121,084 and $119,054 as of June 30 and March 31, 1997, respectively. (5) The Company owns a 48.6% interest in Monor Communications Group, Inc. which holds a 95.27% interest in the operating company Monor Telefon. The number of homes passed and basic subscribers includes the sum of cable and telephony statistics in Monor Telefon's service area. (6) Tara Television offers a free introductory period for its channel and will begin collecting revenues in late 1997. (7) TVSB had a loan payable to the Company of $792 at June 30 and March 31, 1997. (8) SCS had convertible loans payable to the Company of P244,223 ($9,259) and P248,849 ($9,437) as of June 30 and March 31, 1997, respectively. (9) Telefenua had loan payable to the Company of $11,791 and $11,575 as of June 30 and March 31, 1997, respectively. (10) In addition to the debt noted above, Saturn had loans payable to the Company totaling NZ$29,300 ($19,936) and NZ$30,039 ($20,870) as of June 30 and March 31, 1997, respectively. (11) XYZ and United Wireless show capital contributions as shareholder loans which totaled A$64,030 ($48,266) and A$5,490 ($4,138), respectively, as of June 30, 1997 and A$58,452 ($45,942) and A$4,378 ($3,441), respectively, as of March 31, 1997. (12) The Company has a 49% interest in HITV, a joint venture that owns a microwave relay system in the Hunan Province that transmits two provincial channels to approximately 400,000 cable television homes in the region. HITV launched service in July 1997. 29 ITEM 1 - LEGAL PROCEEDINGS Carl M. Johnson, an individual who claimed to have worked with UIH in connection with the acquisition by Austar of certain of its licenses, filed a complaint in 1996 claiming that UIH owed him an equity interest in unspecified subsidiaries of UIH. This matter was settled in September 1997. 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. None. 30 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 15, 1997 ------------------------- By: /S/ J. Timothy Bryan ------------------------- J. Timothy Bryan Chief Financial Officer (A Duly Authorized Officer and Principal Financial Officer) 31 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITED INTERNATIONAL HOLDINGS, INC.'S FORM 10-Q FOR THE QUARTER ENDED AUGUST 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS FEB-28-1998 AUG-31-1997 63,975 3,248 5,014 0 0 157,823 270,407 56,062 833,433 189,370 753,637 31,922 0 392 (122,441) 833,433 0 45,097 0 27,896 38,751 6,454 57,142 (160,112) 0 (160,112) 0 0 0 (160,112) (4.09) 0
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