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 March 31, 1998
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 May 15,
1998, the Company had 13,864,941 shares of common stock outstanding.
<PAGE>
<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
TABLE OF CONTENTS
Page
Number
------
PART I - FINANCIAL INFORMATION
------------------------------
Item 1 - Financial Statements
- ------
<S> <C>
Condensed Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997 (Unaudited)............. 2
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 1998
and 1997 (Unaudited)................................................................................. 3
Condensed Consolidated Statement of Stockholder's Deficit for the Three Months Ended
March 31, 1998 (Unaudited).......................................................................... 4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998
and 1997 (Unaudited)................................................................................ 5
Notes to Condensed Consolidated Financial Statements (Unaudited)........................................ 6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations............... 13
- ------
PART II - OTHER INFORMATION
---------------------------
Item 5 - Other Information................................................................................... 19
- ------
Item 6 - Exhibits and Reports on Form 8-K.................................................................... 20
- ------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in thousands, except share and per share amounts)
(Unaudited)
March 31, December 31,
1998 1997
--------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents........................................................ $ 1,920 $ 12,344
Restricted cash.................................................................. 420 420
Short-term investments........................................................... -- 12,325
Subscriber receivables........................................................... 2,682 2,548
Related party receivables........................................................ 1,872 1,942
Other current assets............................................................. 3,052 3,405
-------- --------
Total current assets......................................................... 9,946 32,984
Property, plant and equipment, net of accumulated depreciation of $102,235 and
$78,179, respectively............................................................ 176,323 183,101
License fees, net of accumulated amortization of $4,278 and $3,773, respectively.... 5,254 5,691
Goodwill, net of accumulated amortization of $9,027 and $8,044, respectively........ 43,475 43,017
Deferred financing costs, net of accumulated amortization of $1,824 and $1,306,
respectively..................................................................... 12,959 13,393
Other non-current assets, net....................................................... 1,731 846
-------- --------
Total assets................................................................. $249,688 $279,032
======== ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
Accounts payable and accrued liabilities, including related party payables of
$2,806 and $1,596, respectively................................................ $ 23,612 $ 24,617
Construction payables............................................................ 4,635 6,008
Accrued funding obligation....................................................... 841 406
Related party note payable....................................................... 4,999 4,999
Current portion of long-term debt................................................ 2,055 1,825
-------- --------
Total current liabilities.................................................... 36,142 37,855
Due to parent....................................................................... 6,285 5,394
Senior discount notes and other debt................................................ 399,562 387,094
Other long-term liabilities......................................................... 1,692 1,426
-------- --------
Total liabilities............................................................ 443,681 431,769
-------- --------
Minority interest in subsidiary..................................................... 9,940 11,416
-------- --------
Stockholder's deficit:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and
outstanding.................................................................... -- --
Common stock, $0.01 par value, 30,000,000 shares authorized, 13,864,941 and
13,864,941 shares issued and outstanding, respectively......................... 139 139
Additional paid-in capital....................................................... 145,447 139,621
Cumulative translation adjustments............................................... (26,853) (28,964)
Accumulated deficit.............................................................. (322,666) (274,949)
-------- --------
Total stockholder's deficit.................................................. (203,933) (164,153)
-------- --------
Total liabilities and stockholder's deficit.................................. $249,688 $279,032
======== ========
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
March 31,
-----------------------------
1998 1997
-------- ---------
<S> <C> <C>
Service and other revenue.................................................. $ 20,608 $ 14,492
System operating expense, including related party expense of $1,047 and
$402, respectively...................................................... (13,586) (10,062)
System selling, general and administrative expense......................... (11,200) (11,034)
Corporate general and administrative expense, including management fees
to a related party of $2,360 and $188, respectively..................... (2,464) (283)
Depreciation and amortization.............................................. (27,961) (17,305)
-------- --------
Net operating loss.................................................. (34,603) (24,192)
Equity in losses of affiliated companies................................... (485) (366)
Interest income............................................................ 185 216
Interest expense, including related party expense of $317 and $30,
respectively............................................................ (13,145) (8,621)
Other expense, net......................................................... (594) (218)
-------- --------
Net loss before minority interest................................... (48,642) (33,181)
Minority interest in subsidiary............................................ 925 --
-------- --------
Net loss............................................................ $(47,717) $(33,181)
======== ========
Basic and diluted loss per common share.................................... $ (3.44) $ (2.39)
======== ========
Weighted-average number of common shares outstanding....................... 13,864,941 13,864,941
========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIT
(Stated in thousands, except share amounts)
(Unaudited)
Common Stock Additional Cumulative
------------------- Paid-In Translation Accumulated
Shares Amount Capital Adjustments Deficit Total
---------- ------ ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1997......... 13,864,941 $139 $139,621 $(28,964) $(274,949) $(164,153)
Capital contributions from parent... -- -- 5,826 -- -- 5,826
Change in cumulative translation
adjustments...................... -- -- -- 2,111 -- 2,111
Net loss............................ -- -- -- -- (47,717) (47,717)
---------- ---- -------- -------- --------- ---------
Balances, March 31, 1998............ 13,864,941 $139 $145,447 $(26,853) $(322,666) $(203,933)
========== ==== ======== ======== ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands)
(Unaudited)
For the Three Months Ended
March 31,
--------------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................................................ $(47,717) $(33,181)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization........................................................ 27,961 17,305
Equity in losses of affiliated companies............................................. 485 366
Minority interest share of losses.................................................... (925) --
Accretion of interest on senior notes and amortization of deferred financing costs... 11,695 8,524
Increase in subscriber receivables................................................... (95) (691)
Decrease (increase) in related party receivables..................................... 118 (379)
Increase in other assets............................................................. (601) (1,379)
Increase in technical assistance agreement payables.................................. 991 397
Increase in accounts payable, accrued liabilities and other.......................... 662 8,859
-------- --------
Net cash flows used in operating activities............................................. (7,426) (179)
-------- --------
Cash flows from investing activities:
Purchase of short-term investments...................................................... -- (3,256)
Sale of short-term investments.......................................................... 12,325 21,896
Investments in and advances to affiliated companies and other investments............... (51) --
Purchase of property, plant and equipment............................................... (18,354) (12,886)
Decrease in construction payables....................................................... (1,389) (20,888)
-------- --------
Net cash flows used in investing activities............................................. (7,469) (15,134)
-------- --------
Cash flows from financing activities:
Capital contributions from parent....................................................... 3,668 --
Borrowing on related party payables to parent........................................... -- 1,312
Deferred financing costs................................................................ -- 472
Borrowing on other debt................................................................. 624 --
Payment on capital leases and other debt................................................ (187) (348)
-------- --------
Net cash flows provided by financing activities......................................... 4,105 1,436
-------- --------
Effect of exchange rates on cash........................................................ 366 (1,029)
-------- --------
Decrease in cash and cash equivalents................................................... (10,424) (14,906)
Cash and cash equivalents, beginning of period.......................................... 12,344 19,220
-------- --------
Cash and cash equivalents, end of period................................................ $ 1,920 $ 4,314
======== ========
Non-cash investing and financing activities:
Non-cash capital contribution from parent............................................ $ 2,158 $ --
======== ========
Decrease in unrealized loss on investment............................................ $ -- $ 266
======== ========
Assets acquired with capital leases.................................................. $ 77 $ 310
======== ========
Supplemental cash flow disclosures:
Cash received for interest........................................................... $ 224 $ 281
======== ========
Cash paid for interest............................................................... $ 1,132 $ --
======== ========
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 MARCH 31, 1998
(Monetary amounts stated in thousands)
(Unaudited)
1. ORGANIZATION AND BACKGROUND
UIH Australia/Pacific, Inc. (the "Company"), a wholly-owned subsidiary of
UIH Asia/Pacific Communications, Inc. ("UAP"), which is in turn an indirect
98%-owned subsidiary of United International Holdings, Inc. ("UIH"), was formed
on October 14, 1994, 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 March 31, 1998.
********************************************************
* UIH *
********************************************************
*
100% *
*
********************************************************
* United International Properties, Inc. ("UIPI") *
********************************************************
*
98% *
*
********************************************************
* UAP *
********************************************************
*
100% *
*
********************************************************
* The Company *
********************************************************
*
*
*
********************************************************
* *
* CTV Pty Limited ("CTV") and STV Pty Limited *
* ("STV")(collectively, "Austar")(Australia)(1) 100% *
* Austar Satellite Pty Limited *
* ("Austar Satellite")(Australia) 100% *
* United Wireless Pty Limited *
* ("United Wireless")(Australia) 100% *
* Telefenua S.A. ("Telefenua")(Tahiti)(2) 90% *
* Saturn Communications Limited *
* ("Saturn")(New Zealand) 65% *
* XYZ Entertainment Pty Limited *
* ("XYZ Entertainment")(Australia) 25% *
* *
********************************************************
(1) The Company holds an effective 100% economic interest in Austar
through a combination of ordinary and convertible debentures.
(2) The Company owns an effective 90% economic interest in Telefenua. The
Company's economic interest will decrease to 75% and 64% once it has
received a 20% and 40% internal rate of return on its investment in
Tahiti, respectively.
LIQUIDITY AND CAPITAL RESOURCES
A substantial portion of the Company's investments to date relate to its
investment in Austar, which is comprised primarily of multi-channel multi-point
distribution systems ("MMDS") and direct-to-home ("DTH") satellite operations.
The Company has essentially completed the construction and deployment of
Austar's entire MMDS network infrastructure and has incurred certain other
significant expenditures, such as Austar's National Customer Service Center,
which contemplates provision of MMDS and DTH services to a substantially larger
customer base than currently exists. If additional capital financings are not
available to continue to connect new customers at Austar, the Company's revenues
will decline and the current net operating loss will increase over time due to
customer disconnections, which are normally experienced in connection with
multi-channel television operations. In order to complete the anticipated
build-out of Austar and the Company's other projects, the Company will need a
significant amount of additional capital, which is not currently available.
6
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of March 31, 1998, the Company had a net working capital deficit of
$23,390, excluding related party payables of $2,806, which are primarily due to
UIH. Due to the nature of the operation, the Company is able to slow the rate of
subscriber connections at Austar and network construction at the Company's other
projects to adjust to the level of funding sources that are available. The
Company believes it can, if necessary, substantially reduce the capital required
at Austar as the majority of future capital expenditures will be for subscriber
installation and premises equipment, which are controllable by the Company based
upon the rate of new subscriber connections. However, the Company needs to
continue the present rate of new subscriber connections to offset current churn
rates at Austar. The Company is currently in the process of seeking additional
sources of funds, which could include private equity, bank and/or public debt
and the sale of certain non-strategic assets. The Company may or may not be
successful in completing all or any of such financings. The Company believes,
however, that committed financial support from UIH combined with, if necessary,
reductions in the Company's planned capital expenditures, are sufficient to
sustain its operations through at least early 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and all subsidiaries where it exercises majority control and owns a
majority economic interest. Austar, Saturn, Telefenua and United Wireless were
consolidated for all periods presented. In November 1997, the Company formed
Austar Satellite and began consolidating its operations. All significant
intercompany accounts and transactions have been eliminated in consolidation.
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 March 31, 1998 and the results of its operations for the three
months ended March 31, 1998 and 1997. 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, 1997.
INVESTMENTS IN AND ADVANCES TO AN AFFILIATED COMPANY, ACCOUNTED FOR UNDER THE
EQUITY METHOD
The Company accounts for its investment in 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.
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 are
depreciated over three 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 and accounted for
as additional depreciation expense. Depreciation expense is computed using the
straight-line method over the estimated useful lives shown below:
Average
Life
-------
Subscriber premises equipment and converters.............. 3
MMDS distribution facilities.............................. 5-10
Cable distribution networks............................... 5-10
Office equipment, furniture and fixtures.................. 3-10
Buildings and leasehold improvements...................... 6-10
Other..................................................... 3-5
7
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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.
COMPREHENSIVE INCOME
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which requires that an enterprise (i) classify items of other
comprehensive income by their nature in a financial statement and (ii) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. The Company adopted SFAS 130 effective January 1, 1998. For
the three months ended March 31, 1998 and 1997, the Company's only components of
other comprehensive income were the changes in cumulative translation
adjustments and the change in unrealized loss on investment (see Note 6).
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 that result in
unrealized gains or losses are referred to as translation adjustments.
Cumulative translation adjustments are recorded as a separate component of
stockholder's deficit.
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.
NEW ACCOUNTING PRINCIPLE
The American Institute of Certified Public Accountants recently issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"
("SOP 98-5"), which is required to be adopted by affected companies for fiscal
years beginning after December 15, 1998. SOP 98-5 defines start-up and
organization costs, which must be expensed as incurred. The Company is in the
process of determining whether the adoption of this standard will have an impact
on its reported results of operations.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year presentation.
3. INVESTMENTS IN AND ADVANCES TO AN AFFILIATED COMPANY, ACCOUNTED FOR UNDER THE
EQUITY METHOD
Investments in and advances to XYZ Entertainment are as follows:
<TABLE>
<CAPTION>
Investments in Cumulative Equity Cumulative
and Advances to in Losses of Translation
Affiliated Company Affiliated Company Adjustments Total
------------------ ------------------ ----------- -----
<S> <C> <C> <C> <C>
As of:
March 31, 1998................... $19,095(1) $(19,205) $110 $ --
======= ======== ==== ====
December 31, 1997................ $18,610(1) $(18,720) $110 $ --
======= ======== ==== ====
</TABLE>
(1) Includes an accrued funding obligation of $841 and $406 at March 31,
1998 and December 31, 1997, 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 requested fundings.
8
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. PROPERTY, PLANT AND EQUIPMENT
Detail of property, plant and equipment is as follows:
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
Subscriber premises equipment and converters............................... $165,513 $160,413
MMDS distribution facilities............................................... 56,585 55,093
Cable distribution networks................................................ 25,691 16,770
Office equipment, furniture and fixtures................................... 11,921 10,813
Buildings and leasehold improvements....................................... 6,520 5,647
Other...................................................................... 12,328 12,544
-------- --------
278,558 261,280
Accumulated depreciation............................................. (102,235) (78,179)
-------- --------
Net property, plant and equipment.................................... $176,323 $183,101
======== ========
</TABLE>
5. SENIOR DISCOUNT NOTES AND OTHER DEBT
Senior discount notes and other debt consists of the following:
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
May 1996 Notes (as defined below), net of unamortized discount............. $288,969 $278,662
September 1997 Notes (as defined below), net of unamortized discount....... 31,339 30,461
Austar Bank Facility (as defined below).................................... 72,809 71,531
Vendor financed equipment at Saturn........................................ 4,122 3,730
Capitalized lease obligations.............................................. 3,361 3,441
Mortgage note, interest at 7.548%, 7-year term............................. 1,017 1,094
-------- --------
401,617 388,919
Less current portion................................................. (2,055) (1,825)
-------- --------
$399,562 $387,094
======== ========
</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 "May 1996 Notes"). On and after May 15, 2001,
cash interest will accrue and will be payable semi-annually on each May 15 and
November 15, commencing November 15, 2001. The May 1996 Notes are due May 15,
2006. Effective May 16, 1997, the interest rate on these notes increased by an
additional 0.75% per annum to 14.75%, until such time as the Company consummates
an issuance of its capital stock resulting in gross proceeds to the Company of
at least $70,000 (an "Equity Sale"). Due to this increase in the interest rates,
the May 1996 Notes will accrete to a principal amount of $455,574 if an Equity
Sale is not consummated prior to May 15, 2001, the date cash interest begins to
accrue.
On September 23, 1997, the Company received total gross proceeds of $29,925
from the private placement of $45,000 aggregate principal amount of 14% senior
discount notes (the "September 1997 Notes"). On and after May 15, 2001, cash
interest will accrue and will be payable semi-annually on each May 15 and
November 15, commencing November 15, 2001. The September 1997 Notes are due May
15, 2006. Effective September 23, 1997, the interest rate on these notes
increased by an additional 0.75% per annum to 14.75%, until such time as the
Company consummates an Equity Sale. Due to this increase in interest rates, the
September 1997 Notes will accrete to a principal amount of $46,277 if an Equity
Sale is not consummated prior to May 15, 2001, the date cash interest begins to
accrue.
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
($155,000) (the "Austar Bank Facility"). The proceeds of the Austar Bank
Facility have been and will be used to fund Austar's 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
9
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
cash advance facility and (iii) A$90,000 term loan facility. This term loan
facility will be available to the extent that any drawdown, if added to the
existing aggregate outstanding balance under sub-facilities (i) and (ii), would
not exceed five times annualized cash flows (as defined), and upon Austar having
achieved and maintained total subscribers of at least 200,000. All of Austar's
assets are pledged as collateral for the Austar Bank Facility. In addition,
pursuant to the Austar Bank Facility, Austar cannot pay any dividends, interest
or fees under its technical assistance agreements prior to December 31, 2000.
Subsequent to December 31, 2000, Austar will be permitted to make these types of
payments, subject to certain debt to cash flow ratios. The working capital
facility is fully repayable on June 30, 2000. The cash advance facility is fully
repayable pursuant to an amortization schedule beginning December 31, 2000 and
ending June 30, 2004. As of March 31, 1998, Austar had drawn the entire amount
of the working capital facility and the cash advance facility totaling A$110,000
($72,809 converted using the March 31, 1998 exchange rate). Although management
does not expect to meet the requirements for drawing down the term loan facility
during 1998, they have engaged the lender under the Austar Bank Facility in a
discussion regarding an amendment to the Austar Bank Facility. If approved, such
an amendment would allow Austar to draw all or a portion of the A$90,000 term
loan facility in advance of the time period currently envisioned. There can be
no assurance, however, that such an amendment will ultimately be approved.
6. COMPREHENSIVE INCOME
The components of total comprehensive loss are as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1998 1997
-------- --------
<S> <C> <C>
Net loss................................................................... $(47,717) $(33,181)
Other comprehensive income (loss):
Increase (decrease) in cumulative translation adjustments................ 2,111 (1,011)
Decrease in unrealized loss on investment................................ -- 266
-------- --------
Total comprehensive loss............................................. $(45,606) $(33,926)
======== ========
</TABLE>
7. RELATED PARTY
Effective May 1, 1996, the Company and UIH Management, Inc. ("UIH
Management"), an indirect wholly-owned subsidiary of UIH, executed a 10-year
management services agreement (the "Management Agreement"), pursuant to which
UIH Management performed certain administrative, accounting, financial reporting
and other services for the Company, which has no separate employees of its own.
Pursuant to the Management Agreement, the management fee was $750 for the first
year of such agreement (beginning May 1, 1996), and it increases on each
anniversary date of the Management Agreement by 8% per year. Effective March 31,
1997, UIH Management assigned its rights and obligations under the Management
Agreement to UAP, the Company's immediate parent, and extended the agreement for
20 years from that date (the "UAP Management Agreement"). In addition, the
Company reimburses UAP or UIH for any out-of-pocket expenses including travel,
lodging and entertainment expenses, incurred by UAP or UIH on behalf of the
Company. In December 1997, UIH began allocating corporate general and
administrative expense to the Company in the form of capital contributions,
based on increased activity at the operating system level. Management believes
that this method of allocating costs is reasonable.
Austar, Saturn, Telefenua and United Wireless are also parties to technical
service agreements with UAP whereby such operating companies pay to UAP fees
based on their respective gross revenues. In addition, UIH has appointed certain
of its employees to serve in senior management positions at the operating
systems. The operating systems reimburse UIH for certain direct costs incurred
by UIH, including salaries and benefits relating to these senior management
positions.
As of March 31, 1998, UIPI, the immediate parent of UAP, had 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.
10
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Included in the amount due to parent is the following:
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
Payable to parent for management fees, interest and invoices paid by UIH
on the Company's behalf............................................... $1,264 $ 723
Austar technical assistance agreement obligations....................... 3,957 2,629
Saturn technical assistance agreement obligations....................... 552 406
Telefenua technical assistance agreement obligations.................... 2,598 2,659
United Wireless technical assistance agreement obligations.............. 496 487
Other................................................................... 224 86
------ ------
9,091 6,990
Less current portion................................................ (2,806) (1,596)
------ ------
$6,285 $5,394
====== =======
</TABLE>
8. SEGMENT INFORMATION
The Company's reportable segments are the various countries in which it
operates multi-channel television, programming and/or telephony operations.
These reportable segments are managed separately because each country presents
different marketing strategies and technology issues as well as distinct
economic climates and regulatory constraints. The Company has selected the
following reportable segments: (i) Australia, including the Company's
investments in Austar, Austar Satellite and United Wireless, (ii) New Zealand,
including the Company's investment in Saturn, (iii) Tahiti, including the
Company's investment in Telefenua and (iv) Corporate, including various holding
companies and eliminations.
The Company's segment information is as follows:
<TABLE>
<CAPTION>
As of and for the Three Months Ended
March 31, 1998
----------------------------------------------------------------------
Australia New Zealand Tahiti Corporate Total
--------- ----------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Service and other revenue................... $ 19,316 $ 155 $ 1,137 $ -- $ 20,608
Net loss.................................... $(30,996) $(1,805) $ (607) $(14,309) $(47,717)
Total assets................................ $193,969 $38,922 $10,739 $ 6,058 $249,688
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 1997
----------------------------------------------------------------------
Australia New Zealand Tahiti Corporate Total
--------- ----------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Service and other revenue................... $ 13,493 $ 83 $ 916 $ -- $ 14,492
Net loss.................................... $(21,719) $(1,696) $(537) $(9,229) $(33,181)
</TABLE>
9. SUBSEQUENT EVENT
In May 1998, Australis Media Limited ("Australis"), a major supplier of
programming to Austar, was placed into receivership in Australia. As a result of
the receivership, Optus Communications Pty Limited ("Optus") has purportedly
terminated its lease on two transponders currently used by Australis to
distribute its programming to both Australis and Austar subscribers. In
addition, franchise agreements pursuant to which Austar purchases programming
from Australis may be terminated by Austar or Australis. Finally, Austar's
management believes that programming arrangements between Australis and certain
of its programming providers may be terminated by as early as May 15, 1998.
As of May 15, 1998, Austar continued to receive signal from Australis with
little disruption in service, although this is not expected to continue. Austar
has anticipated the foregoing events and has arranged for suitable contingency
plans relating to both the distribution of signal and the purchase of the same
or substantially similar programming. Austar has entered into agreements with
both Optus and Foxtel Management Pty Limited ("Foxtel") which address the issues
of continued signal propagation and continued access to current as well as new
programming for Austar. As of May 15, 1998, however, these arrangements had not
been implemented since Australis was still providing programming to Austar and
certain of these arrangements are conditional upon termination of the franchise
agreements.
11
<PAGE>
Under the terms of the Austar Bank Facility, the termination of Austar's
franchise agreements is an event of default if (i) the termination is initiated
by Austar, (ii) the termination is not rectified within seven days and (iii) the
termination would likely have a material adverse effect on Austar. Austar has
received the advance consent of the lenders under the Austar Bank Facility to
terminate its franchise agreement with Australis, and such banks have not given
notice that a termination would constitute a material adverse effect. Austar
believes that, subject to its contingency arrangements taking effect, there will
be no material adverse effect to Austar.
12
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 not yet achieved the expected subscriber penetration levels anticipated
with mature operating systems, the Company believes that its historical results
of operations discussed herein are not indicative of the results of its future
operations.
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 UAP Management Agreement. 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.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had invested a total of approximately
$422.9 million in its projects as outlined below:
As of
March 31,
1998
--------------
(In thousands)
Austar............................................ $355,612(1)(2)
Saturn............................................ 28,376(1)(3)
Telefenua......................................... 16,738
XYZ Entertainment................................. 14,140
United Wireless................................... 8,020
--------
Total........................................ $422,886
========
(1) Does not include 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.
(2) Includes A$110,000 ($83,895 converted using the exchange rate on
each funding date) of amounts borrowed under the Austar Bank
Facility and $28,773 paid by the Company to increase its economic
interest in Austar to approximately 100%. Does not include the
$29,840 of non-cash issuance of preferred stock by the Company to
increase its economic interest in Austar to approximately 100%.
(3) Does not include the $7,800 of common stock exchanged for shares
of the Company to increase the Company's interest in Saturn to
100% effective July 1996 or the $19,566 invested by another
shareholder for its 35% interest in Saturn in July 1997.
AUSTAR
The Company anticipates the need for additional funding for
Austar in the future. The amount of capital needed is dependent
primarily upon three factors: (i) the number of new subscribers added;
13
<PAGE>
(ii) the level of churn, that is, the level of existing subscribers
who disconnect from Austar's service; and (iii) the mix of DTH versus
MMDS installations. Substantially all fixed costs required to operate
Austar's service have already been incurred. The average cost to
install a subscriber includes variables such as equipment, marketing
and sales costs, and installation fees. The average cost of a
subscriber who disconnects is reduced by the recovery of certain
equipment (principally converters), and is further reduced if a new
subscriber is installed in a previously disconnected home. Austar
plans to continue to expand and add subscribers; however, the timing
of such expansion and the funds required for such expansion are
largely variable. Based upon current plans and budgeted churn, Austar
will require approximately $50-$75 million to continue on its current
expansion path for the period from April 1, 1998 to December 31, 1998
and approximately $50-$75 million for similar expansion plans for
1999. The sources of funds for such expansion may include the raising
of private or public equity, continued investment by UIH, the drawdown
of the remaining amount ($59.6 million converted using the March 31,
1998 exchange rate) under the Austar Bank Facility (assuming that
certain financial ratios are met, which ratios are not currently being
met) or the sale of non-strategic assets. The Company may or may not
be successful in completing all or any of such financings. The Company
believes, however, that committed financial support from UIH combined
with, if necessary, reductions in the Company's planned capital
expenditures, are sufficient to sustain its operations through at
least early 1999.
SATURN
The Company anticipates the need for additional funding for
Saturn in the future. Saturn's capital needs include capital for the
completion of the network required by Saturn to offer cable television
and telephony services and the capital required to install customers.
Management currently estimates that the Company's portion of the total
funding required for Saturn is approximately $50-$55 million for the
period from April 1, 1998 until Saturn has sufficient cash flows from
operations to cover such needs, although there can be no assurances
that further additional capital will not be required. Of this amount,
approximately $35 million is required as a fixed cost to complete the
construction of the network, and the remainder is required as a result
of the installation of customers. The sources of funds for such
expansion may include the raising of private or public equity,
continued investment by UIH, the raising of equipment and/or bank
financing (where the Company has already commenced discussions with
several potential lenders) or the sale of non-strategic assets. The
Company may or may not be successful in completing all or any of such
financings. The Company believes, however, that committed financial
support from UIH combined with, if necessary, reductions in the
Company's planned capital expenditures, are sufficient to sustain its
operations through at least early 1999.
OTHER
The Company anticipates that the aggregate future funding
requirements for Telefenua, XYZ Entertainment and United Wireless are
less than $5 million.
The indentures associated with UIH's senior secured discount notes due
February 2008 and the Company's May 1996 Notes and September 1997 Notes
(collectively, the "Notes") place restrictions on the Company and its restricted
subsidiaries with respect to incurring additional debt. 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 indentures. The
restrictions imposed by the UIH indentures will be eliminated upon the
retirement of UIH's notes at their maturity in February 2008, and the
restrictions imposed by the Company's indentures will be eliminated upon the
retirement of the Company's Notes at their maturity in May 2006. In addition,
pursuant to the Austar Bank Facility, Austar cannot pay any dividends, interest
on debentures and subordinated debt or fees under its technical assistance
agreements prior to December 31, 2000. Subsequent to December 31, 2000, Austar
will be permitted to make these types of payments, subject to certain debt to
cash flow ratios.
On November 17, 1997, pursuant to the terms of the indentures governing the
Notes, the Company issued warrants to purchase a total of 488,000 shares of its
common stock, which represented 3.4% of its common stock. The warrants are
exercisable at a price of $10.45 per share which would result in gross proceeds
of approximately $5.1 million upon exercise. The warrants are exercisable
through May 15, 2006.
14
<PAGE>
In May 1998, Australis, a major supplier of programming to Austar, was
placed into receivership in Australia. As a result of the receivership, Optus
has purportedly terminated its lease on two transponders currently used by
Australis to distribute its programming to both Australis and Austar
subscribers. In addition, franchise agreements pursuant to which Austar
purchases programming from Australis may be terminated by Austar or Australis.
Finally, Austar's management believes that programming arrangements between
Australis and certain of its programming providers may be terminated by as early
as May 15, 1998.
As of May 15, 1998, Austar continued to receive signal from Australis with
little disruption in service, although this is not expected to continue. Austar
has anticipated the foregoing events and has arranged for suitable contingency
plans relating to both the distribution of signal and the purchase of the same
or substantially similar programming. Austar has entered into agreements with
both Optus and Foxtel which address the issues of continued signal propagation
and continued access to current as well as new programming for Austar. As of May
15, 1998, however, these arrangements had not been implemented since Australis
was still providing programming to Austar and certain of these arrangements are
conditional upon termination of the franchise agreements.
Under the terms of the Austar Bank Facility, the termination of Austar's
franchise agreements is an event of default if (i) the termination is initiated
by Austar, (ii) the termination is not rectified within seven days and (iii) the
termination would likely have a material adverse effect on Austar. Austar has
received the advance consent of the lenders under the Austar Bank Facility to
terminate its franchise agreement with Australis, and such banks have not given
notice that a termination would constitute a material adverse effect. Austar
believes that, subject to its contingency arrangements taking effect, there will
be no material adverse effect to Austar.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
The Company incurred a net loss during the three months ended March 31,
1998 of $47.7 million, which includes non-cash items such as depreciation and
amortization expense totaling $28.0 million and accretion of interest on the
Notes and amortization of deferred financing costs totaling $11.7 million.
Cash and cash equivalents decreased $10.4 million from $12.3 million as of
December 31, 1997 to $1.9 million as of March 31, 1998. Principal sources of
cash during the three months ended March 31, 1998 included net proceeds from the
sale of short-term investments of $12.3 million, cash contributions from parent
of $3.7 million and borrowing on other debt as well as other sources totaling
$1.0 million.
During the three months ended March 31, 1998, cash was used principally for
purchases of property, plant and equipment of $18.4 million to continue the
build-out of existing projects, primarily at Austar, the funding of operating
activities of $7.4 million, a decrease in construction payables of $1.4 million
and the payment on capital leases and other debt of $0.2 million during the
period.
FOR THE THREE MONTHS ENDED MARCH 31, 1997
The Company incurred a net loss during the three months ended March 31,
1997 of $33.2 million, which includes non-cash items such as depreciation and
amortization expense totaling $17.3 million and accretion of interest on the
Notes and amortization of deferred financing costs totaling $8.5 million.
Cash and cash equivalents decreased $14.9 million from $19.2 million as of
December 31, 1996 to $4.3 million as of March 31, 1997. Principal sources of
cash during the three months ended March 31, 1997 included net proceeds from the
net decrease in short-term investments of $18.6 million, borrowings from parent
of $1.3 million and deferred financing costs of $0.5 million.
During the three months ended March 31, 1997, cash was used principally for
a decrease in construction payables of $20.9 million, the purchase of property,
plant and equipment of $12.9 million to construct Austar's and Telefenua's
systems, the payment of capital leases and other debt as well as other uses
totaling $1.3 million and the funding of operating activities of $0.2 million
during the period.
RESULTS OF OPERATIONS
SERVICE AND OTHER REVENUE. The Company's service and other revenue increased
$6.1 million for the three months ended March 31, 1998 compared to the amount
for the corresponding period in the prior year as follows:
15
<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1998 1997
-------- --------
(In thousands)
<S> <C> <C>
Austar ................................................ $19,199 $13,469
Saturn ................................................ 155 83
Telefenua.............................................. 1,137 916
United Wireless........................................ 117 24
------- -------
Total service and other revenue................. $20,608 $14,492
======= =======
</TABLE>
AUSTAR
Service and other revenue for Austar increased $5.7 million, or
42.2%, from $13.5 million for the three months ended March 31, 1997 to
$19.2 million for the three months ended March 31, 1998. This increase
was primarily due to subscriber growth (199,955 at March 31, 1998
compared to 129,156 at March 31, 1997) as Austar continues to roll-out
its services.
SYSTEM OPERATING EXPENSE. System operating expense increased $3.5 million for
the three months ended March 31, 1998 compared to the amount for the
corresponding period in the prior year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1998 1997
-------- --------
(In thousands)
<S> <C> <C>
Austar .............................................. $10,191 $ 8,467
Saturn .............................................. 1,263 727
Telefenua............................................ 561 426
United Wireless...................................... 363 442
Other .............................................. 1,208 --
------- -------
Total system operating expense................ $13,586 $10,062
======= =======
</TABLE>
AUSTAR
Operating expense for Austar increased $1.7 million, or 20.0%,
from $8.5 million for the three months ended March 31, 1997 to $10.2
million for the three months ended March 31, 1998. This increase was
primarily due to an increase in satellite programming fees and
copyright costs, which corresponds to the increase in subscribers and
additional basic programming services; an increase in salaries and
benefits related to the additional personnel necessary to support
Austar's launch of local and state offices in its markets; and an
increase in customer subscriber management expenses related to volume
increases in telephone, billing and collections costs. The remainder
of the increase related to increases in system travel, maintenance,
vehicle costs and management fees.
Austar has experienced high operating expense relative to service
revenue due to certain fixed operating expenses. Austar expects
operating expense as a percentage of service revenue to decline in
future periods because a significant portion of Austar's distribution
facilities and network costs, such as local and state office staffing
levels, operating costs and wireless license costs, have already been
incurred and are fixed in relation to changes in subscriber volumes.
Other system operating expense, such as those related to programming
and subscriber management expense, will vary in direct proportion to
the number of subscribers.
SATURN
For the three months ended March 31, 1998, the Company reported
system operating expense from Saturn of $1.3 million, an increase of
$0.6 million, or 85.7%, compared with system operating expense of $0.7
million for the corresponding period in 1997. This increase was
primarily due to an increase in personnel expenses in order to support
Saturn's build-out of its hybrid fiber coaxial network in the
Wellington area.
16
<PAGE>
OTHER
In September 1997, the Company commenced transponder fee payments
for a satellite service fee of approximately $0.4 million per month as
part of its five-year agreement with Optus Networks Pty Limited. The
Company expects to launch programming services on the satellite during
1998.
SYSTEM SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. System selling, general and
administrative expense increased $0.2 million for the three months ended March
31, 1998 compared to the amount for the corresponding period in the prior year
as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1998 1997
-------- --------
(In thousands)
<S> <C> <C>
Austar .............................................. $ 9,573 $ 9,526
Saturn .............................................. 828 650
Telefenua............................................ 517 473
United Wireless...................................... 282 385
------- -------
Total system selling, general
and administrative expense................... $11,200 $11,034
======= =======
</TABLE>
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE. Corporate general and
administrative expense increased $2.2 million for the three months ended March
31, 1998 compared to the amount for the corresponding period in the prior year.
This increase was primarily due to an increase in the allocation of UIH
corporate general and administrative expense to the Company in the form of
capital contributions, based on increased activity at the operating system
level. Management believes that this method of allocating costs is reasonable.
Depreciation and Amortization Expense. Depreciation and amortization expense
increased $10.7 million for the three months ended March 31, 1998 compared to
the amount for the corresponding period in the prior year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1998 1997
-------- --------
(In thousands)
<S> <C> <C>
Austar .............................................. $26,881 $16,503
Saturn .............................................. 552 395
Telefenua............................................ 369 240
United Wireless...................................... 159 167
------- -------
Total depreciation and amortization expense... $27,961 $17,305
======= =======
</TABLE>
AUSTAR
Deprecation and amortization expense from Austar increased $10.4
million, or 63.0%, from $16.5 million for the three months ended March
31, 1997 to $26.9 million for the three months ended March 31, 1998.
This increase was primarily due to the larger fixed asset base due to
the significant deployment of operating assets to meet subscriber
growth as well as an increase in depreciation expense related to
subscriber disconnects.
EQUITY IN LOSSES OF AFFILIATED COMPANIES. The Company experienced an increase in
equity in losses from XYZ Entertainment of $0.1 million from $0.4 million for
the three months ended March 31, 1997 to $0.5 million for the three months ended
March 31, 1998.
INTEREST EXPENSE. Interest expense increased $4.5 million for the three months
ended March 31, 1998 compared to the amount for the corresponding period in the
prior year. This increase was primarily due to greater accretion of interest on
the Notes, which was caused by the additional accretion of interest on the
September 1997 Notes and the increase of the interest rate to 14.75% compounded
semi-annually compared to 14% in the prior year interim period. In addition,
interest expense related to the Austar Bank Facility, which was secured in July
1997, was $1.5 million for the three months ended March 31, 1998.
17
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements in this report may constitute "forward-looking
statements" within the meaning of the federal securities laws. Such
forward-looking statements may include, among other things, statements
concerning the Company's plans, objectives and future economic prospects, such
as matters relative to the effect on Austar of Australis being placed into
receivership in Australia and other statements of expectations, beliefs, future
plans and strategies, anticipated events or trends and similar expressions
concerning matters that are not historical facts. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among other things, the availability of
programming to replace that supplied by Australis and of suitable means to
distribute signal to subscribers and other factors referenced in this report.
18
<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
March 31, 1998
----------------------------------------------------------------------------
Television
Homes in Economic
Service Homes Basic Basic Ownership
Operating System Area Serviceable Subscribers Penetration Interest
---------------- ---------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Austar............................. 1,635,000 1,589,000 199,955 12.6% 100%(3)
Saturn............................. 141,000 23,780 3,245 13.6% 65%
Telefenua.......................... 31,000 20,128 6,104 30.3% 90%(4)
XYZ Entertainment.................. N/A(1) N/A 577,476(2) N/A 25%
--------- --------- -------
Total........................ 1,807,000 1,632,908 786,780
========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
As of
March 31, 1997
----------------------------------------------------------------------------
Television
Homes in Economic
Service Homes Basic Basic Ownership
Operating System Area Serviceable Subscribers Penetration Interest
---------------- ---------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Austar............................. 1,622,000 1,571,000 129,156 8.2% 100%(3)
Saturn............................. 141,000 16,281 2,052 12.6% 100%
Telefenua.......................... 31,000 19,584 5,537 28.3% 90%(4)
XYZ Entertainment.................. N/A(1) N/A 390,000(2) N/A 25%
--------- --------- -------
Total........................ 1,794,000 1,606,865 526,745
========= ========= =======
</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, Foxtel and East Coast Television Pty Limited.
(2) This figure represents the total estimated subscribers to the eight-channel
Galaxy package to which XYZ Entertainment supplies four channels. In
addition, XYZ Entertainment launched a fifth channel, the Lifestyle
Channel, on September 1, 1997.
(3) The Company holds an effective 100% interest in Austar through a
combination of ordinary and convertible debentures.
(4) The Company holds an effective 90% economic interest in Telefenua. The
Company's economic interest will decrease to 75% and 64% once it has
received a 20% and 40% internal rate of return on its investment in Tahiti,
respectively.
19
<PAGE>
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.
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UIH AUSTRALIA/PACIFIC, INC.
Date: May 15, 1998
-------------------------------------
By: /S/ J. Timothy Bryan
-------------------------------------
J. Timothy Bryan
Chief Financial Officer and Treasurer
(A Duly Authorized Officer and Principal Financial Officer)
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UIH
AUSTRALIA/PACIFIC, INC.'S FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,920
<SECURITIES> 0
<RECEIVABLES> 2,682
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,946
<PP&E> 278,558
<DEPRECIATION> 102,235
<TOTAL-ASSETS> 249,688
<CURRENT-LIABILITIES> 36,142
<BONDS> 399,562
0
0
<COMMON> 139
<OTHER-SE> (177,219)
<TOTAL-LIABILITY-AND-EQUITY> 249,688
<SALES> 0
<TOTAL-REVENUES> 20,608
<CGS> 0
<TOTAL-COSTS> 13,586
<OTHER-EXPENSES> 27,961
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,145
<INCOME-PRETAX> (47,717)
<INCOME-TAX> 0
<INCOME-CONTINUING> (47,717)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (47,717)
<EPS-PRIMARY> (3.44)
<EPS-DILUTED> 0
</TABLE>
