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 June 30, 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. 333-05017
UIH AUSTRALIA/PACIFIC, INC.
(Exact name of Registrant as specified in its charter)
State of Colorado 84-1341958
(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 Company has no publicly-traded shares of capital stock. As of August
14, 1997, the Company had 500 shares of common stock outstanding.
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<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
TABLE OF CONTENTS
Page
Number
------
PART I - FINANCIAL INFORMATION
------------------------------
<S> <C>
Item 1 - Financial Statements
- ------
Condensed Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 (Unaudited).............. 2
Condensed Consolidated Statements of Operations For the Three and Six Months Ended
June 30, 1997 and 1996 (Unaudited)................................................................... 3
Condensed Consolidated Statement of Stockholder's Equity (Deficit) For the Six Months Ended
June 30, 1997 (Unaudited)............................................................................ 4
Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 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................ 10
- ------
PART II - OTHER INFORMATION
---------------------------
Item 5 - Other Information.................................................................................... 16
- ------
Item 6 - Exhibits and Reports on Form 8-K..................................................................... 16
- ------
</TABLE>
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<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in thousands, except share and per share amounts)
(Unaudited)
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ................................................................... $ 6,859 $ 19,220
Short-term investments ...................................................................... -- 18,640
Subscriber receivables ...................................................................... 1,885 1,625
Related party receivables ................................................................... 2,273 1,958
Other current assets ........................................................................ 3,564 2,393
-------- --------
Total current assets .................................................................... 14,581 43,836
Other investments in affiliated companies, including marketable equity securities .............. 1,077 1,372
Property, plant and equipment, net of accumulated depreciation of $52,768 and
$27,038, respectively ....................................................................... 192,969 193,170
License fees, net of accumulated amortization of $3,126 and $2,520, respectively ............... 8,963 10,387
Goodwill, net of accumulated amortization of $7,881 and $3,835, respectively ................... 56,289 58,134
Other non-current assets, net, including related party receivables of $1,600 and
$1,600, respectively ........................................................................ 13,406 12,424
-------- --------
Total assets ............................................................................ $287,285 $319,323
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities
Accrued liabilities and accounts payable, including related party payables of
$3,353 and $1,905, respectively ........................................................... $ 25,819 $ 20,336
Construction payables ....................................................................... 8,978 38,407
Accrued funding obligation .................................................................. 1,574 1,270
Other current liabilities, including related party notes of $9,998 and $0,
respectively .............................................................................. 11,088 1,108
-------- --------
Total current liabilities................................................................ 47,459 61,121
Due to parent .................................................................................. 4,434 2,758
Senior discount notes and other liabilities .................................................... 305,701 251,397
-------- --------
Total liabilities........................................................................ 357,594 315,276
-------- --------
Stockholder's Equity (Deficit):
Common stock, $0.01 par value, 1,000 shares authorized, 500 and 500 shares
issued and outstanding, respectively ...................................................... -- --
Additional paid-in capital .................................................................. 112,485 112,485
Unrealized loss on investment ............................................................... (3,707) (3,412)
Cumulative translation adjustments .......................................................... (1,526) 1,867
Accumulated deficit ......................................................................... (177,561) (106,893)
-------- --------
Total stockholder's equity (deficit) .................................................... (70,309) 4,047
-------- --------
Total liabilities and stockholder's equity (deficit) .................................... $287,285 $319,323
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands, except share and per share amounts)
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1997 1996 1997 1996
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Service and other revenue ...................................... $ 16,219 $ 3,936 $ 30,711 $ 5,870
System operating expense, including related party
expense of $919, $80, $1,321 and $165,
respectively ................................................ (11,807) (3,496) (21,869) (7,014)
System selling, general and administrative expense ............. (11,771) (6,633) (22,805) (10,242)
Corporate general and administrative expense,
including management fees to a
related party of $197, $187, $385 and $375,
respectively ................................................ (293) (240) (576) (532)
Depreciation and amortization .................................. (18,431) (5,501) (35,736) (8,249)
-------- -------- --------- --------
Net operating loss .......................................... (26,083) (11,934) (50,275) (20,167)
Equity in losses of affiliated companies ....................... (1,077) (1,535) (1,443) (2,568)
Interest income ................................................ 63 1,260 279 1,317
Interest expense ............................................... (9,793) (3,840) (18,384) (4,064)
Interest expense, related party, net ........................... (48) (475) (78) (144)
Other (expense) income, net .................................... (549) 906 (767) 618
-------- -------- --------- --------
Net loss before minority interest ........................... (37,487) (15,618) (70,668) (25,008)
Minority interest in subsidiaries .............................. -- 879 -- 1,605
-------- -------- --------- --------
Net loss .................................................... $(37,487) $(14,739) $ (70,668) $(23,403)
======== ======== ========= ========
Net loss per common share ...................................... $(74,974) $(30,265) $(141,336) $(48,055)
======== ======== ========= ========
Weighted-average number of common shares
outstanding ................................................. 500 487 500 487
=== === === ===
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
3
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<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
(Stated in thousands, except share amounts)
(Unaudited)
Common Stock Additional Unrealized Cumulative
------------------ Paid-In Loss on Translation Accumulated
Shares Amount Capital Investment Adjustments Deficit Total
------ ------ ---------- ---------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1996 ........... 500 $ -- $112,485 $(3,412) $ 1,867 $(106,893) $ 4,047
Unrealized loss on investment ......... -- -- -- (295) -- -- (295)
Change in cumulative translation
adjustments ......................... -- -- -- -- (3,393) -- (3,393)
Net loss .............................. -- -- -- -- -- (70,668) (70,668)
---- ----- -------- ------- ------- --------- --------
Balances, June 30, 1997 ............... 500 $ -- $112,485 $(3,707) $(1,526) $(177,561) $(70,309)
==== ===== ======== ======= ======= ========= ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands)
(Unaudited)
For the Six Months Ended
June 30,
----------------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss ..................................................................................... $(70,668) $(23,403)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization ............................................................. 35,736 8,249
Equity in losses of affiliated companies .................................................. 1,443 2,568
Minority interest share of losses ......................................................... -- (1,605)
Increase (decrease) in technical assistance agreement payables ............................ 2,966 (844)
Accretion of interest on senior discount notes ............................................ 17,498 4,064
Increase in subscriber receivables ........................................................ (326) (1,388)
Increase in other assets .................................................................. (2,078) (5,946)
Increase in accounts payable, accrued liabilities and other ............................... 6,903 3,863
-------- --------
Net cash flows from operating activities ..................................................... (8,526) (14,442)
-------- --------
Cash flows from investing activities:
Purchase of short-term investments ........................................................... (3,663) (70,627)
Proceeds from sale of short-term investments ................................................. 22,303 --
Restricted cash deposited .................................................................... -- (10,000)
Investments in and advances to affiliated companies and other investments .................... (1,138) (10,450)
Increase in goodwill ......................................................................... -- (218)
Purchase of property, plant and equipment .................................................... (41,776) (43,610)
Increase (decrease) in construction payables ................................................. (28,163) 6,521
-------- --------
Net cash flows from investing activities ..................................................... (52,437) (128,384)
-------- --------
Cash flows from financing activities:
Capital contributions from parent ............................................................ -- 10,707
Proceeds from offering of senior discount notes .............................................. -- 225,115
Deferred debt offering costs ................................................................. (1,502) (9,411)
Borrowing on related party payables to parent ................................................ 11,633 15,073
Payment on bridge loan payable to parent ..................................................... -- (25,000)
Borrowing on other debt ...................................................................... 39,286 --
Payment on other debt ........................................................................ (777) --
-------- --------
Net cash flows from financing activities ..................................................... 48,640 216,484
-------- --------
Effect of exchange rates on cash ............................................................. (38) 855
-------- --------
Increase (decrease) in cash and cash equivalents ............................................. (12,361) 74,513
Cash and cash equivalents, beginning of period ............................................... 19,220 8,730
-------- --------
Cash and cash equivalents, end of period ..................................................... $ 6,859 $ 83,243
======== ========
Non-cash investing and financing activities:
Cash received for interest ................................................................ $ 305 $ 131
======== ========
Assets acquired with capital leases ....................................................... $ -- $ 1,707
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
5
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1997
(Monetary amounts stated in thousands)
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
UIH Australia/Pacific, Inc. (the "Company"), and all subsidiaries where it
exercises majority control and owns a majority economic interest. Austar
Entertainment Pty Limited ("Austar"), Telefenua S.A. ("Telefenua") and United
Wireless Pty Limited ("United Wireless") were consolidated for all periods
presented. The Company has consolidated the operations of Saturn Communications
Limited ("Saturn") since July 1, 1996. Prior to that time, the Company accounted
for its investment in Saturn under the equity method. All significant
intercompany accounts and transactions have been eliminated in consolidation.
On May 15, 1997, the Company's minority holder exchanged its 2.6% interest
for a 2% interest in UIH Asia/Pacific Communications, Inc. ("UAP"), the
Company's immediate parent.
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 June 30, 1997 and the results of its operations for the three
and six months ended June 30, 1997 and 1996. For a more complete understanding
of the Company's financial position and results of its operations, see the
consolidated financial statements of the Company included in the Company's
annual report on Form 10-K for the year ended December 31, 1996.
INVESTMENTS IN AND ADVANCES TO AN AFFILIATED COMPANY, ACCOUNTED FOR UNDER THE
EQUITY METHOD
The Company accounts for its investment in XYZ Entertainment Pty Limited
("XYZ Entertainment") under the equity method of accounting. Under this method,
the investment, originally recorded at cost, is adjusted to recognize the
Company's proportionate share of net earnings or losses of the affiliate,
limited to the extent of the Company's investment in and advances to the
affiliate, including any debt guarantees or other contractual funding
commitments. The Company's proportionate share of net earnings or losses of XYZ
Entertainment includes the amortization of basis differences related to the
excess of cost over net tangible assets acquired. Investments in and advances to
XYZ Entertainment are as follows:
<TABLE>
<CAPTION>
As of
June 30, 1997
------------------------------------------------------------------------
Investments in Cumulative Equity Cumulative
and Advances to in Losses of Translation
Affiliated Company Affiliated Company Adjustments Total
------------------ ------------------ ------------ -----
<S> <C> <C> <C> <C>
XYZ Entertainment....................... $17,645(1) $(17,755) $110 $ --
======= ======== ==== ======
</TABLE>
<TABLE>
<CAPTION>
As of
December 31, 1996
--------------------------------------------------------------------------
Investments in Cumulative Equity Cumulative
and Advances to in Losses of Translation
Affiliated Company Affiliated Company Adjustments Total
------------------ ------------------ ----------- -----
<S> <C> <C> <C> <C>
XYZ Entertainment....................... $16,202(1) $(16,312) $110 $ --
======= ======== ==== ======
</TABLE>
(1) Includes an accrued funding obligation of $1,574 and $1,270 at June 30,
1997 and December 31, 1996, respectively. The Company does not have a
contractual funding obligation to XYZ Entertainment; however, the Company
would face significant and punitive dilution if it did not make the
scheduled fundings.
The Company recognized $1,443 and $4,484 of equity losses from XYZ
Entertainment for the six months ended June 30, 1997 and the year ended December
31, 1996, respectively. In addition, the Company recognized $1,638 and $930 of
equity losses from XYZ Entertainment and Saturn, respectively, for the six
months ended June 30, 1996.
6
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are 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 premises equipment and capitalized installation labor is
depreciated over 3 years. Upon disconnection of a subscriber, the remaining book
value of the subscriber equipment, excluding converters which are recovered upon
disconnection, and the capitalized labor are 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:
<TABLE>
<CAPTION>
As of As of
June 30, December 31, Average
1997 1996 Life
-------- ------------ -------
<S> <C> <C> <C>
MMDS distribution facilities............................. $ 58,423 $ 57,073 5-10
Cable distribution networks.............................. 15,922 11,672 5-10
Subscriber premises equipment and converters............. 142,983 125,238 3
Furniture and fixtures................................... 2,090 2,031 5-10
Leasehold improvements................................... 3,362 3,465 6-10
Other.................................................... 22,957 20,729 3-5
-------- --------
245,737 220,208
Accumulated depreciation......................... (52,768) (27,038)
-------- --------
Net property, plant and equipment................ $192,969 $193,170
======== ========
</TABLE>
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. Assets and liabilities of
foreign subsidiaries are translated at the exchange rate 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 stockholder's 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 calculated at average rates based on their reporting currencies.
As a result, amounts related to assets and liabilities reported on the Condensed
Consolidated Statements of Cash Flows will not agree to changes in the
corresponding balances on the Condensed Consolidated Balance Sheets. The effects
of exchange rate changes on cash balances held in foreign currencies are
reported as a separate line below cash flows from financing activities.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year presentation.
7
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SENIOR DISCOUNT NOTES AND OTHER LIABILITIES
Senior discount notes and other liabilities consists of the following:
<TABLE>
<CAPTION>
As of As of
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
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 --
Capitalized lease obligations.............................................. 3,846 4,522
Mortgage note, interest at 7.885%, 7 year term............................. 1,025 1,252
Other...................................................................... 930 1,337
-------- --------
306,600 252,293
Less current portion................................................... (899) (896)
-------- --------
$305,701 $251,397
======== ========
</TABLE>
On May 14, 1996, the Company raised total gross proceeds of approximately
$225,115 from the private placement of $443,000 aggregate principal amount of
14% senior discount notes (the "Notes"). No cash interest payments are required
until May 15, 2001, at which time cash interest payments will be payable
semi-annually on each May 15 and November 15. The Notes are due May 15, 2006. In
September 1996, the Notes were exchanged for 14% Senior Discount Notes due 2006,
Series B. Effective May 16, 1997, the interest rate on the Notes increased by an
additional 0.75% per annum to 14.75%.
If the Company does not consummate an issuance of capital stock resulting
in gross proceeds to the Company of at least $70,000 (an "Equity Sale") prior to
November 16, 1997, the then holders of the Notes will be entitled to receive
warrants to purchase 3% of the common stock of the Company, assuming the
aggregate fair market value of the Company's equity is $150,000, or, in certain
circumstances, of the Company's immediate parent. The Company plans to pursue
additional sources of funding that may constitute an Equity Sale although there
can be no assurance that the Company will be successful in concluding an Equity
Sale prior to November 16, 1997.
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 "Bank Facility"). The proceeds of the Bank Facility will be
used to fund Austar's subscriber acquisition and working capital needs. The 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$7,500
of which has already been contributed during 1997 and the remainder of which is
expected to be contributed by a third party equity provider, UAP or United
International Holdings, Inc. ("UIH"). 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$38,840 converted using the exchange rate on each funding date) on an interim
financing facility, which was subsequently repaid from the proceeds of the Bank
Facility.
8
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UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. RELATED PARTY
The Company and UIH Management, Inc. ("UIH Management"), a wholly-owned
subsidiary of UIH, executed a 10-year management services agreement (the
"Management Agreement"), pursuant to which UIH Management will perform certain
administrative, accounting, financial reporting and other services for the
Company, which has no separate employees of its own. Effective March 31, 1997,
UIH Management assigned its rights and obligations under the Management
Agreement to UAP. Effective May 1, 1996, pursuant to the Management Agreement,
the management fee was $750 for the first year of such agreement, and fees shall
increase on each anniversary date of the Management Agreement by 8% per year. In
addition, the Company shall reimburse UAP for any out-of-pocket expenses
incurred by UAP in performance of its duties under the Management Agreement,
including travel, lodging and entertainment expenses.
As of June 30, 1997, United International Properties, Inc. ("UIPI"), the
immediate parent of UAP, had loaned Saturn $4,999 for the expansion of its
system. This loan accrues interest at 15% and is due on September 12, 1997
unless extended at UIPI's option. As of June 30, 1997, UIPI had also loaned
$4,999 to UIH Australia/Pacific Finance, Inc., a wholly-owned subsidiary of the
Company. This loan accrues interest at 15% and is due on demand.
Included in the amount due to parent is the following:
<TABLE>
<CAPTION>
As of As of
June 30, December 31,
1997 1996
-------- -----------
<S> <C> <C>
Austar technical assistance agreement obligations.............................. $2,086 $1,135
Telefenua technical assistance agreement obligations........................... 2,304 1,879
Saturn technical assistance agreement obligations.............................. 1,514 1,002
Other.......................................................................... 1,883 647
------ ------
7,787 4,663
Less current portion...................................................... (3,353) (1,905)
------ ------
$4,434 $2,758
====== ======
</TABLE>
4. SUBSEQUENT EVENT
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) for its 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 project, and SaskTel's 35% equity interest will reduce the
Company's proportionate share of future fundings.
9
<PAGE>
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 MAY 15, 1997.
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.
The Company has no employees of its own. UAP, the Company's parent,
provides various management, financial reporting, accounting and other services
for the Company pursuant to the terms of the Management Agreement between UAP
and the Company. Austar, Saturn, Telefenua and United Wireless are also parties
to technical service agreements with UAP for which such operating companies pay
to UAP fees based, in part, on their respective gross revenues (see Note 3).
LIQUIDITY AND CAPITAL RESOURCES
The Company is responsible for its proportionate share of the capital
requirements of the operating companies and has funded its share to date with
capital contributed by UIH and from the proceeds of the Notes. In July 1997,
Austar secured the Bank Facility of A$200,000 (US$155,000) to fund its
subscriber acquisition and working capital needs (see Note 2).
If the Company does not consummate an issuance of capital stock resulting
in an Equity Sale prior to November 16, 1997, the then holders of the Notes
would be entitled to receive warrants to purchase 3% of the common stock of the
Company, assuming the aggregate fair market value of the Company's equity is
$150,000, or, in certain circumstances, of the Company's immediate parent. The
Company plans to pursue additional sources of funding that may constitute an
Equity Sale although there can be no assurance that the Company will be
successful in concluding an Equity Sale prior to November 16, 1997.
The following table sets forth, as of June 30, 1997, (i) the total
estimated funding required for the construction and initial marketing of the
operating companies' systems in their existing license areas, including any
capital invested to date and the application of any operating cash flow sources
for such operating companies, (ii) the total amount of capital invested in each
of the operating companies and the portion funded by the Company and (iii) the
total estimated additional funding required based on the assumptions stated in
(i) above and the Company's estimated portion of such funding. Such amounts are
expected to be funded over the next 24 to 36 months. The estimated required
additional funding numbers below have not been reduced to give effect to any
surplus cash flow of any one operating company which might be available to fund
the requirements of another operating company. To the extent the operating
companies fund their construction and other costs through project financing, the
Company's portion of estimated additional funding would be reduced
proportionately. The Company's portion of estimated additional funding would be
increased proportionately to the extent cash flow from the operating companies
and other sources of financing are not sufficient to meet project funding
requirements. To the extent that the other shareholders of XYZ Entertainment
fail to fund their pro rata share of the additional shareholder capital, the
Company may elect to fund all or a portion of such shortfall.
10
<PAGE>
<TABLE>
<CAPTION>
Estimated Total Project Capital Invested Estimated Required
Funding Requirements As of June 30, 1997(1) Additional Funding
Operating ------------------------ ---------------------------------- ------------------------
Company The Company Total The Company(2) Total(2) The Company Total
------- ----------- ----- -------------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Austar $369,800 $369,800 $250,461(3) $250,461(3) $119,339(4) $119,339
Saturn 109,700 109,700 30,213(5) 30,213(5) 79,487(6) 79,487
Telefenua 17,400 17,400 16,737 16,737 663 663
XYZ Entertainment 14,000 56,000 11,673 46,692 2,327 9,308
United Wireless 8,200 8,200 6,111 6,111 2,089 2,089
-------- -------- -------- -------- -------- --------
Total $519,100 $561,100 $315,195 $350,214 $203,905 $210,886
======== ======== ======== ======== ======== ========
</TABLE>
(1) Certain amounts contributed by the Company's partners were contributed in
currencies other than U.S. dollars. Such amounts have been translated to
U.S. dollars using a convenience translation.
(2) Includes amounts contributed to Austar (approximately $11,000) and Saturn
(approximately $2,920) by shareholders other than the Company, which
amounts were contributed by such shareholders prior to the acquisition of
their respective interests by the Company.
(3) Does not include the $58,600 paid by the Company to increase its economic
interest in Austar to approximately 100%.
(4) The Austar Bank Facility of A$200,000 (US$155,000) reduces the Company's
portion of the remaining funding requirements. As of June 30, 1997, Austar
had drawn A$50,000 (US$38,840 converted using the exchange rate on each
funding date) on an interim financing facility (see Note 2).
(5) Does not include the value of shares of common stock exchanged for shares
of the Company to increase the Company's interest in Saturn to 100%.
(6) The SaskTel investment will reduce the Company's future funding requirement
for Saturn to approximately $38,700 ($79,500 estimated for project
completion less the $20,000 share subscription and SaskTel's estimated
proportionate future funding of $20,800).
In July 1997, SaskTel purchased a 35% equity interest in Saturn by
investing approximately NZ$30,000 (US$20,000) for its 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 project.
The Company believes that it will be required to fund a total of
approximately $163,000, after the effect of the SaskTel investment, in order to
build-out its existing projects over the next four years. To the extent the
operating companies fund their construction and other costs through project
financing, the Company's portion of estimated additional funding would be
reduced proportionately. In addition to the recently completed Bank Facility
(see Note 2) and cash on hand, the Company intends to raise additional capital
through capital contributions from its parent corporation, further issuances of
debt either by the Company or the operating companies, or by the sale of all or
a part of its equity in certain of its operating subsidiaries. The Company's
indenture and UIH's indentures place restrictions on the Company and certain of
its subsidiaries with respect to the amount of additional debt each may incur.
The Company and all of the operating companies are currently restricted under
the UIH indentures. The Company, Austar and Telefenua are restricted under the
Company's indenture. The restrictions imposed by the indentures will be
eliminated upon the retirement of UIH's notes at their maturity in November 1999
and upon the retirement of the Company's Notes at their maturity in May 2006.
The Company is negotiating to sell all or a portion of its interest in
Telefenua, the proceeds of which would be used to fund its other businesses.
There can be no assurance that the Company will be successful in completing this
sale.
During the six months ended June 30, 1997, the Company recognized losses of
$70,668 of which $35,736 was from non-cash depreciation and amortization and
$1,443 was from non-cash equity in losses of affiliated companies. In addition,
the Company recorded non-cash accretion of interest on the Notes of $17,498.
During the six month period, the Company incurred related party payables
totaling $11,633, including loans to Saturn and UIH Australia/Pacific Finance,
Inc. The Company purchased $41,776 of property, plant and equipment and
experienced a decrease of $28,163 in construction payables during the six months
ended June 30, 1997. The majority of this construction activity relates to
Austar. Austar also borrowed $39,286 on an interim financing facility to provide
adequate funds for its operations until the Bank Facility closed. The Company
purchased $3,663 and sold $22,303 of short-term investments, respectively, as
part of its cash management activities for the six month period. The remainder
of cash was primarily used in operations.
11
<PAGE>
During the six months ended June 30, 1996, UIH contributed capital of
$10,707 to the Company and made bridge loans of $15,073 to Austar and Telefenua.
In addition, the Company raised $225,115 of gross proceeds from the Notes. At
that time, the Company acquired $25,000 of the Austar bridge loans from UIH with
proceeds from the Notes and converted those loans (plus accrued interest of
$600) to equity of Austar. Subsequently, the Company funded an additional
$25,000 to Austar, thereby increasing the Company's interest in Austar to 96%.
Prior to the closing of the Notes, approximately $5,000 of the Societe Francaise
des Communications et du Cable S.A. ("SFCC") bridge loans was converted into
convertible debentures of SFCC, which are convertible into preferred stock of
SFCC. The remaining SFCC bridge loans totaling $2,600 (including accrued
interest) will be either (i) repaid by SFCC, after which time the Company would
invest the proceeds of such repayment as permitted under the Company's
indenture, or (ii) converted by the Company into equity of SFCC. The bridge
loans were used to fund the construction and initial marketing of Austar's and
Telefenua's systems. The Company also made $10,450 in capital contributions to
Saturn and XYZ Entertainment during the six months ended June 30, 1996 using
capital contributed to it by UIH. Approximately $43,610 was used for the
purchase of property, plant and equipment by Austar and Telefenua as these
systems are in the process of building their multi-point microwave distribution
systems ("MMDS") and direct-to-home ("DTH") satellite systems. The Company also
experienced a related increase in construction payables of $6,521 during the
period. The Company purchased $70,627 of short-term investments in connection
with its cash management activities. The remainder was used in operations.
RESULTS OF OPERATIONS
SERVICE AND OTHER REVENUE. The Company's service and other revenue increased
$12,283 and $24,841 for the three and six months ended June 30, 1997,
respectively, compared to the amounts for the corresponding periods in the prior
year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
---------------------------- ------------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
AUSTRALIA
Austar............................. $15,055 $3,059 $28,524 $4,127
United Wireless.................... 107 1 131 5
TAHITI
Telefenua.......................... 959 876 1,875 1,738
NEW ZEALAND
Saturn............................. 98 -- 181 --
------- ------ ------- ------
Total service and other revenue.. $16,219 $3,936 $30,711 $5,870
======= ====== ======= ======
</TABLE>
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.
12
<PAGE>
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 is
primarily due to an increase in subscribers (2,288 at June 30, 1997
compared to 1,125 at June 30, 1996).
SYSTEM OPERATING EXPENSE. System operating expense increased $8,311 and $14,855
for the three and six months ended June 30, 1997, respectively, compared to the
amounts for the corresponding periods in the prior year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- -------------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Austar.................................. $ 9,999 $2,623 $18,466 $5,281
Telefenua............................... 459 501 885 1,073
Saturn.................................. 932 -- 1,659 --
United Wireless......................... 417 372 859 660
------- ------ ------- ------
Total system operating expense..... $11,807 $3,496 $21,869 $7,014
======= ====== ======= ======
</TABLE>
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.
13
<PAGE>
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.
SYSTEM SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. System selling, general and
administrative expense increased $5,138 and $12,563 for the three and six months
ended June 30, 1997, respectively, compared to the amounts for the corresponding
periods in the prior year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- -------------------------
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
Austar.................................. $10,083 $5,964 $19,609 $ 8,823
Telefenua............................... 538 661 1,011 1,268
Saturn.................................. 746 -- 1,396 --
United Wireless......................... 404 8 789 151
------- ------ ------- -------
Total system selling, general and
administrative expense............ $11,771 $6,633 $22,805 $10,242
======= ====== ======= =======
</TABLE>
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.
14
<PAGE>
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).
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE. Corporate general and
administrative expense increased $53 and $44 for the three and six months ended
June 30, 1997, respectively, compared to the amounts for the corresponding
periods in the prior year.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization expense
increased $12,930 and $27,487 for the three and six months ended June 30, 1997,
respectively, compared to the amounts for the corresponding periods in the prior
year. This increase was primarily attributable to the significant deployment of
operating assets and subscriber growth at Austar during the latter part of 1996
and, to a lesser extent, in 1997.
EQUITY IN LOSSES OF AFFILIATED COMPANIES. The Company experienced decreases in
equity in losses of affiliated companies of $458 and $1,125 for the three and
six month ended June 30, 1997, respectively, compared to the corresponding
amounts in the prior year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- -------------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Saturn (1)................................ $ -- $ 528 $ -- $ 929
XYZ Entertainment......................... 1,077 1,007 1,443 1,639
------ ------ ------ ------
Total equity in losses of affiliated
companies............................ $1,077 $1,535 $1,443 $2,568
====== ====== ====== ======
</TABLE>
(1) The Company acquired a 50% interest in Saturn in July 1994. The
Company increased its ownership in Saturn to 100% and began
consolidating its results effective July 1, 1996.
INTEREST INCOME. Interest income decreased $1,197 and $1,038 for the three and
six months ended June 30, 1997, respectively, compared to the amounts for the
corresponding periods of the prior year. This decrease was due to reduced cash
and short-term investment balances as a result of the fundings to the Company's
affiliated operating systems.
INTEREST EXPENSE. Interest expense increased $5,953 and $14,320 for the three
and six months ended June 30, 1997, respectively, compared to the amounts for
the corresponding periods in the prior year. This increase was primarily due to
the issuance of the Notes. The Notes currently accrete interest at a rate of
14.75% compounded semi-annually.
15
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 5 - OTHER INFORMATION
SUMMARY OPERATING DATA
The following tables set forth certain unaudited operating data:
<TABLE>
<CAPTION>
As of
June 30, 1997
-----------------------------------------------------------
Television
Homes in Economic
Service Homes Basic Ownership
Operating System Area Serviceable Subscribers Interest
- ---------------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Austar..................................... 1,622,000 1,589,000 149,495 100%
Saturn..................................... 141,000 16,113 2,288 100%(3)
Telefenua.................................. 31,000 19,728 6,080 90%
XYZ Entertainment.......................... N/A(1) N/A 443,073(2) 25%
--------- --------- -------
Total................................ 1,794,000 1,624,841 600,936
========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
As of
June 30, 1996
-----------------------------------------------------------
Television
Homes in Economic
Service Homes Basic Ownership
Operating System Area Serviceable Subscribers Interest
- ---------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Austar..................................... 1,500,000 1,171,000 29,282 94%
Saturn..................................... 141,000 6,000 1,125 50%
Telefenua.................................. 31,000 17,458 4,361 90%
XYZ Entertainment.......................... N/A(1) N/A 207,666(2) 25%
--------- --------- -------
Total................................ 1,672,000 1,194,458 242,434
========= ========= =======
</TABLE>
(1) The Company expects that XYZ Entertainment's programming package will be
marketed to virtually all of Australia's 6.5 million television households
by Australian multi-channel television providers, including Austar,
Australis Media Limited, Foxtel Management Pty Limited and East Coast
Television Pty Limited.
(2) Total estimated subscribers to the eight channel Galaxy package to which
XYZ Entertainment supplies four channels.
(3) In July 1997, the Company sold a 35% equity interest in Saturn.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.0 Supplemental Indenture dated as of June 30, 1997 between the Company
and Firststar Bank of Minnesota N.A., as trustee.
27.1 Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter.
<TABLE>
<CAPTION>
Date of Report Item Reported Financial Statements Filed
-------------- ------------- --------------------------
<S> <C> <C>
May 15, 1997 Item 5 - Cautionary statement pursuant to safe harbor None
provisions of the Private Securities Litigation Reform
Act of 1995.
</TABLE>
16
<PAGE>
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.
UIH AUSTRALIA/PACIFIC, INC.
Date: August 14, 1997
---------------
By: /S/ J. Timothy Bryan
----------------------------------------------------------
J. Timothy Bryan
Chief Financial Officer and Treasurer
(A Duly Authorized Officer and Principal Financial Officer)
17
EXHIBIT 4.0
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE, dated as of June 30, 1997, between UIH
Australia/Pacific, Inc, a Colorado corporation (the "Company") and FirstStar
Bank of Minnesota, N.A., as trustee (the "Trustee").
WHEREAS, the Company and the Trustee are parties to an Indenture, dated as
of May 16, 1996 (the "Indenture");
WHEREAS, in accordance with Section 9.02 of the Indenture, the Company has
received the written consent of Holders of majority in principal amount of the
Securities outstanding as of the date hereof to certain amendments to the
Indenture, and in accordance therewith, the parties desire to amend the
Indenture as herein provided;
WHEREAS, capitalized terms used in this Supplemental Indenture without
being defined herein shall have the meanings given thereto in the Indenture;
NOW THEREFORE, it is agreed:
1. Subsection (v) of Section 4.11 of the Indenture is hereby amended to
read in its entirety as follows:
(v) any such encumbrance or restriction imposed in any agreement
governing Senior Bank Financing; PROVIDED no such encumbrance or
restriction shall, prevent the payment of amounts to the Company
required for it to meet its operating expenses (including, without
limitation, payments under the Notes and the Indenture), so long as no
default under such agreement shall exist or would result from any such
payment.
2. This Supplemental Indenture is limited as specified and shall not
constitute a modification or waiver of any other provisions of the Indenture.
Except as specifically amended hereby, all provisions of the Indenture shall
remain in full force and effect.
3. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS SUPPLEMENTAL INDENTURE.
4. The parties may sign any number of copies of this Supplemental
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
IN WITNESS WHEREOF, the Company and the Trustee have caused this
Supplemental Indenture to be duly executed and delivered as of the date first
above written.
UIH AUSTRALIA/PACIFIC, INC.
By /S/ Michael T. Fries
------------------------------------------------
Michael T. Fries
Chief Executive Officer
FIRSTSTAR BANK OF MINNESOTA, N.A.,
as Trustee
By /S/ Frank P. Leslie III
------------------------------------------------
Name: Frank P. Leslie III
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UIH
AUSTRALIA/PACIFIC, INC.'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,859
<SECURITIES> 1,077
<RECEIVABLES> 1,885
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,581
<PP&E> 245,737
<DEPRECIATION> 52,768
<TOTAL-ASSETS> 287,285
<CURRENT-LIABILITIES> 47,459
<BONDS> 305,701
0
0
<COMMON> 0
<OTHER-SE> (65,076)
<TOTAL-LIABILITY-AND-EQUITY> 287,285
<SALES> 0
<TOTAL-REVENUES> 30,711
<CGS> 0
<TOTAL-COSTS> 21,869
<OTHER-EXPENSES> 35,736
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,384
<INCOME-PRETAX> (70,668)
<INCOME-TAX> 0
<INCOME-CONTINUING> (70,668)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (70,668)
<EPS-PRIMARY> (141,336)
<EPS-DILUTED> 0
</TABLE>
