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, 1999
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 13,
1999, the Company had 17,810,249 shares of common stock outstanding.
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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 June 30, 1999 (Unaudited) and December 31, 1998.............. 2
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1999
and 1998 (Unaudited)................................................................................. 3
Condensed Consolidated Statement of Stockholder's Deficit for the Six Months Ended June 30, 1999
(Unaudited).......................................................................................... 4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1999 and
1998 (Unaudited).................................................................................... 5
Notes to Condensed Consolidated Financial Statements (Unaudited)........................................ 6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations............... 15
- ------
Item 3 - Quantitative and Qualitative Disclosures about Market Risk.......................................... 24
- ------
PART II - OTHER INFORMATION
---------------------------
Item 6 - Exhibits and Reports on Form 8-K.................................................................... 27
- ------
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UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in thousands, except share and per share amounts)
(Unaudited)
As of As of
June 30, December 31,
1999 1998
-------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................................ $ 138 $ 181
Short-term liquid investments........................................................................ 769 763
Subscriber receivables, net.......................................................................... 5,909 6,322
Related party receivables............................................................................ 1,893 746
Prepaids and other current assets.................................................................... 4,469 5,351
-------- --------
Total current assets............................................................................. 13,178 13,363
Investments in and advances to affiliated companies, accounted for under the equity method, net....... 53,432 24,597
Property, plant and equipment, net of accumulated depreciation of $208,373 and $147,511,
respectively......................................................................................... 133,540 122,968
Goodwill and other intangible assets, net of accumulated amortizaton of $21,822 and $17,512,
respectively......................................................................................... 40,437 42,559
Deferred financing costs, net of accumulated amortization of $6,463 and $3,237, respectively.......... 17,068 11,675
Other non-current assets, net......................................................................... 2,880 870
-------- --------
Total assets..................................................................................... $260,535 $216,032
======== ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable..................................................................................... $ 5,618 $ 5,426
Accrued liabilities.................................................................................. 23,441 28,522
Construction payables................................................................................ 316 1,076
Current portion of due to parent..................................................................... 6,500 3,665
Short-term debt...................................................................................... - 36,738
Current portion of other long-term debt.............................................................. 1,850 2,189
-------- --------
Total current liabilities........................................................................ 37,725 77,616
Due to parent......................................................................................... 10,379 6,578
Senior discount notes................................................................................. 381,420 356,640
Other long-term debt.................................................................................. 168,632 68,086
Other long-term liabilities........................................................................... 2,057 1,741
-------- --------
Total liabilities................................................................................ 600,213 510,661
-------- --------
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, 17,810,249 shares
issued and outstanding.............................................................................. 178 178
Additional paid-in capital........................................................................... 289,297 215,624
Accumulated deficit.................................................................................. (603,342) (481,240)
Other cumulative comprehensive loss.................................................................. (25,811) (29,191)
-------- --------
Total stockholder's deficit...................................................................... (339,678) (294,629)
-------- --------
Total liabilities and stockholder's deficit...................................................... $260,535 $216,032
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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2
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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,
-------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue........................................................ $ 34,388 $ 20,310 $ 64,820 $ 40,763
System operating expense, including related party expense
of $2,131, $961, $3,524 and $1,934, respectively.............. (24,212) (17,428) (47,445) (29,751)
System selling, general and administrative expense............. (11,688) (11,550) (22,341) (21,922)
Corporate general and administrative expense, including
allocated expense from related party of $18,640, $1,987,
$19,648 and $4,347, respectively.............................. (18,748) (2,064) (19,777) (4,529)
Depreciation and amortization.................................. (25,482) (23,226) (49,943) (50,635)
---------- ---------- ---------- ----------
Net operating loss........................................ (45,742) (33,958) (74,686) (66,074)
Interest income................................................ 34 26 67 126
Interest expense, including related party expense of $0,
$306, $0 and $623, respectively............................... (18,115) (14,179) (33,037) (27,295)
Other expense, net............................................. (5,436) (868) (5,766) (1,164)
---------- ---------- ---------- ----------
Net loss before other items............................... (69,259) (48,979) (113,422) (94,407)
Share in results of affiliated companies, net.................. (5,308) (1,247) (8,680) (3,536)
---------- ---------- ---------- ----------
Net loss.................................................. $ (74,567) $ (50,226) $ (122,102) $ (97,943)
========== ========== ========== ==========
Basic and diluted loss per common share........................ $ (4.19) $ (3.62) $ (6.86) $ (7.06)
========== ========== ========== ==========
Weighted-average number of common shares outstanding........... 17,810,249 13,864,941 17,810,249 13,864,941
========== ========== ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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3
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UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIT
(Stated in thousands, except share amounts)
(Unaudited)
Other
Common Stock Additional Cumulative Total
-------------------- Paid-In Accumulated Comprehensive Comprehensive
Shares Amount Capital Deficit Loss(1) Loss Total
---------- -------- ---------- ----------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1998........... 17,810,249 $178 $215,624 $(481,240) $(29,191) $ - $(294,629)
Cash contributions from parent........ - - 29,403 - - - 29,403
Non-cash contributions from parent.... - - 44,270 - - - 44,270
Net loss.............................. - - - (122,102) - (122,102) (122,102)
Change in cumulative translation
adjustments.......................... - - - - 3,380 3,380 3,380
---------- ---- -------- --------- -------- --------- ---------
Balances, June 30, 1999............... 17,810,249 $178 $289,297 $(603,342) $(25,811) $(118,722) $(339,678)
========== ==== ======== ========= ======== ========= =========
(1) As of June 30, 1999, Other Cumulative Comprehensive Loss represents foreign
currency translation adjustments.
The accompanying notes are an integral part of this condensed consolidated financial statement.
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4
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UIH AUSTRALIA/PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Stated in thousands)
(Unaudited)
For the Six Months Ended
June 30,
----------------------------------
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................................... $(122,102) $(97,943)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization............................................................. 49,943 50,635
Share in results of affiliated companies, net............................................. 2,993 3,536
Allocation of expense accounted for as capital contributions by parent.................... 19,198 3,932
Accretion of interest on senior notes and amortization of deferred financing costs........ 27,734 23,786
Decrease (increase) in subscriber receivables............................................. 950 (1,051)
Increase in related party receivables..................................................... (885) (315)
Decrease (increase) in other assets....................................................... 3,347 (1,759)
Increase in technical assistance agreement payables....................................... 5,447 4,885
(Decrease) increase in accounts payable, accrued liabilities and other.................... (7,716) 359
--------- --------
Net cash flows from operating activities................................................... (21,091) (13,935)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term liquid investments.................................................. (1,066) -
Sale of short-term liquid investments...................................................... 1,060 12,325
Investments in and advances to affiliated companies........................................ (5,177) (7,139)
Deconsolidation of New Zealand subsidiary.................................................. - (9,881)
Purchase of property, plant and equipment.................................................. (46,797) (23,343)
Decrease in construction payables.......................................................... (829) (1,991)
--------- --------
Net cash flows from investing activities................................................... (52,809) (30,029)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash contributions from parent............................................................. 29,403 31,945
Borrowings on the Austar Bank Facility..................................................... 19,372 -
Borrowings on the New Austar Bank Facility................................................. 162,081 -
Payment of the Austar Bank Facility........................................................ (129,149) -
Payments on capital leases and other debt.................................................. (281) (323)
Deferred financing costs................................................................... (7,937) -
--------- --------
Net cash flows from financing activities................................................... 73,489 31,622
--------- --------
EFFECT OF EXCHANGE RATES ON CASH........................................................... 368 749
--------- --------
DECREASE IN CASH AND CASH EQUIVALENTS...................................................... (43) (11,593)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............................................. 181 12,344
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................................... $ 138 $ 751
========= ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash received for interest................................................................. $ 10 $ 139
========= ========
Cash paid for interest..................................................................... $ 7,265 $ 2,509
========= ========
NON-CASH CONTRIBUTION FROM PARENT:
Investment in XYZ Entertainment............................................................ $ 25,072 $ -
========= ========
DECONSOLIDATION OF NEW ZEALAND SUBSIDIARY:
Working capital............................................................................ $ - $ 4,159
Property, plant and equipment.............................................................. - (26,484)
Goodwill and other intangible assets....................................................... - (2,805)
Notes payable and other debt............................................................... - 3,833
Minority interest.......................................................................... - 11,416
--------- --------
Total cash relinquished.................................................................... $ - $ (9,881)
========= ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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5
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UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1999
(Unaudited)
1. ORGANIZATION AND NATURE OF OPERATIONS
UIH Australia/Pacific, Inc. (the "Company"), a wholly-owned subsidiary of UIH
Asia/Pacific Communications, Inc. ("UAP"), which is in turn an indirect
98.0%-owned subsidiary of UnitedGlobalCom, Inc. ("United"), (formerly known as
United International Holdings, Inc.) 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 June 30,
1999.
***********************************************************
* *
* United *
* *
***********************************************************
*
100% *
***********************************************************
* *
* United International Properties, Inc. ("UIPI") *
* *
***********************************************************
*
98% *
***********************************************************
* *
* UAP *
* *
***********************************************************
*
100% *
***********************************************************
* *
* The Company(1) *
* *
***********************************************************
*
100% *
***********************************************************
* Austar United Communications Limited *
* ("Austar United")(2) *
* *
***********************************************************
*
*
***********************************************************
* *
*Australia: *
* CTV Pty Limited and STV Pty Limited *
* (collectively, "Austar") 100.0% *
* United Wireless Pty Limited ("United *
* Wireless") 100.0% *
* XYZ Entertainment Pty Limited ("XYZ *
* Entertainment") 50.0%(3)*
*New Zealand: *
* Saturn Communications Limited ("Saturn") 65.0%(4)*
* *
***********************************************************
(1) The Company also holds an up to 90.0% economic interest in Telefenua S.A.
("Telefenua") in Tahiti.
(2) In June 1999, the Company's interests in Austar, United Wireless, XYZ
Entertainment and Saturn were contributed to Austar United in exchange for
new shares issued by Austar United (see Note 11).
(3) In June 1999, the 25.0% interest in XYZ Entertainment held by UAP was
transferred to the Company at book value in anticipation of Austar United's
initial public offering ("Australian IPO") which closed in July 1999 (see
Note 11) increasing the Company's interest in XYZ Entertainment to 50.0%.
(4) Austar United acquired the remaining 35.0% interest in Saturn in July 1999.
6
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UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") 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 interim condensed consolidated financial statements are
unaudited and include the accounts of the Company and all subsidiaries where the
Company exercises a controlling financial interest through the ownership of a
majority voting interest. The Company previously consolidated the operations of
Saturn from July 1, 1996 through September 30, 1998. Prior to that time, the
Company accounted for its investment in Saturn under the equity method. During
the fourth quarter of 1998, the Company discontinued consolidating the results
of operations of Saturn effective as of January 1, 1998 and returned to the
equity method of accounting. The change was made to comply with the consensus
guidance of the Emerging Issues Task Force regarding Issue 96-16 ("EITF 96-16"),
and related rules of the SEC, because the minority shareholder of Saturn
("SaskTel") had participating approval or veto rights with respect to certain
significant decisions of Saturn in the ordinary course of business. Accordingly,
the condensed consolidated statement of operations and statement of cash flows
for the period ended June 30, 1998 have been adjusted to reflect the
deconsolidation of Saturn effective as of January 1, 1998. Immediately prior to
the Australian IPO, Austar United issued ordinary shares of Austar United to
Sasktel for its 35.0% interest in Saturn. As a result, Saturn will be
consolidated effective July 27, 1999. Effective October 1, 1998, the Company
discontinued consolidating the results of operations of Telefenua due to an
other-than-temporary loss of control and began using the equity method of
accounting. All significant intercompany accounts and transactions have been
eliminated in consolidation.
CASH AND CASH EQUIVALENTS AND SHORT-TERM LIQUID INVESTMENTS
Cash and cash equivalents include cash and investments with original maturities
of less than three months. Short-term liquid investments include certificates of
deposit, commercial paper and government securities which have original
maturities greater than three months but less than twelve months. Short-term
liquid investments are classified as available-for-sale and are reported at fair
market value.
INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
EQUITY METHOD
For those investments in unconsolidated subsidiaries and companies in which the
Company's voting interest is 20.0% to 50.0%, the Company's investments are held
through a combination of voting common stock, preferred stock, debentures or
convertible debt and/or the Company exerts significant influence through board
representation and management authority, the equity method of accounting is
used. 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 funding
commitments. The Company's proportionate share of net earnings or losses of
affiliates includes the amortization of the excess of its cost over its
proportionate interest in each affiliate's net tangible assets.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Additions, replacements,
installation costs and major improvements are capitalized, and costs for normal
repair and maintenance of property, plant and equipment are charged to expense
as incurred. Upon disconnection of a multi-channel multi-point distribution
system ("MMDS") or direct-to-home ("DTH") subscriber, the remaining book value
of the subscriber equipment, excluding converters which are recovered upon
disconnection, and the unamortized portion of capitalized labor are written off
and accounted for as additional depreciation expense. Depreciation is calculated
using the straight-line method over the economic life of the asset.
7
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UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The economic lives of property, plant and equipment at acquisition are as
follows:
Subscriber premises equipment and converters.......... 5-10 years
MMDS/DTH distribution facilities...................... 5-10 years
Cable distribution networks........................... 5-10 years
Office equipment, furniture and fixtures.............. 3-10 years
Buildings and leasehold improvements.................. 3-10 years
Other................................................. 3-10 years
GOODWILL AND OTHER INTANGIBLE ASSETS
The excess of investments in consolidated subsidiaries over the net tangible
asset value at acquisition is amortized using the straight-line method over 15
years. The acquisition of MMDS licenses has been recorded at fair market value,
and amortization expense is computed using the straight-line method over the
term of the license, up to a maximum of 15 years.
REVENUE RECOGNITION
Revenue is primarily derived from the sale of multi-channel cable television
services to subscribers and is recognized in the period the related services are
provided. Initial installation fees are recognized as revenue in the period in
which the installation occurs, to the extent installation fees are equal to or
less than direct selling costs, which are expensed. To the extent installation
fees exceed direct selling costs, the excess fees are deferred and amortized
over the average contract period. All installation fees and related costs with
respect to reconnections and disconnections are recognized in the period in
which the reconnection or disconnection occurs because reconnection fees are
charged at a level equal to or less than related reconnection costs.
STAFF ACCOUNTING BULLETIN NO. 51 ("SAB 51") ACCOUNTING POLICY
Gains realized as a result of stock issuances by the Company's subsidiaries are
recorded in the statement of operations, except for any transactions which must
be credited directly to equity in accordance with the provisions of SAB 51.
BASIC AND DILUTED LOSS PER SHARE
"Basic loss per share" is determined by dividing net loss available to common
stockholders by the weighted-average number of common shares outstanding during
each period. "Diluted loss per share" includes the effects of potentially
issuable common stock, but only if dilutive. The Company's warrants are excluded
from the Company's diluted loss per share amounts for all years presented
because their effect would be anti-dilutive.
FOREIGN OPERATIONS AND FOREIGN EXCHANGE RATE RISK
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 exchange rates in effect at period-end, and the
statements of operations are translated at the average exchange rates during the
period. Exchange rate fluctuations on translating foreign currency financial
statements into U.S. dollars 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 and are included in
Other Cumulative Comprehensive Loss.
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.
Cash flows from the Company's operations in foreign countries are translated
based on their functional currencies. As a result, amounts related to assets and
liabilities reported in the consolidated statements of cash flows will not agree
to changes in the corresponding balances in the consolidated balance sheets. The
effects of exchange rate changes on cash balances held in foreign currencies are
reported as a separate line item below cash flows from financing activities.
8
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UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Certain of the Company's foreign operating companies have notes payable and
notes receivable that are denominated in a currency other than their own
functional currency. In general, the Company and the operating companies do not
execute hedge transactions to reduce the Company's exposure to foreign currency
exchange rate risks. Accordingly, the Company may experience economic loss and a
negative impact on earnings and equity with respect to its holdings solely as a
result of foreign currency exchange rate fluctuations.
NEW ACCOUNTING PRINCIPLES
The Financial Accounting Standards Board ("FASB") recently issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which requires that companies recognize
all derivatives as either assets or liabilities in the balance sheet at fair
value. Under SFAS 133, accounting for changes in fair market value of a
derivative depends on its intended use and designation. SFAS 133 is effective
for fiscal years beginning after June 15, 1999. In June 1999, the FASB approved
Statement No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133," which
amends SFAS 133 to be effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. The Company is currently assessing the effect of
this new standard.
3. INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
EQUITY METHOD
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<CAPTION>
As of June 30, 1999
-------------------------------------------------------------------------------------------
Investments in Cumulative Share Cumulative
and Advances to in Results of Translation Valuation
Affiliated Companies Affiliated Companies Adjustments Allowance Total
-------------------- -------------------- ----------- ---------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
Saturn................ $ 55,990 $(27,788) $(3,549) $ - $24,653
XYZ Entertainment(1).. 44,306 (18,818) 3,291 - 28,779
Telefenua............. 18,599 (14,215) - (4,384)(2) -
-------- -------- ------- ------- -------
Total........... $118,895 $(60,821) $ (258) $(4,384) $53,432
======== ======== ======= ======= =======
December 31, 1998
-------------------------------------------------------------------------------------------
Investments in Cumulative Share Cumulative
and Advances to in Results of Translation Valuation
Affiliated Companies Affiliated Companies Adjustments Allowance Total
-------------------- -------------------- ----------- --------- -------
(In thousands)
Saturn................ $49,808 $(23,138) $(2,881) $ - $23,789
XYZ Entertainment..... 19,363 (18,666) 111 - 808
Telefenua............. 18,599 (14,215) - (4,384)(2) -
------- -------- ------- ------- -------
Total........... $87,770 $(56,019) $(2,770) $(4,384) $24,597
======= ======== ======= ======= =======
</TABLE>
(1) In June 1999, the 25.0% interest in XYZ Entertainment held by UAP was
transferred to the Company at its carrying value of $25.1 million.
(2) The Company has reserved the remaining balance of the Telefenua
investment of $4.4 million due to the uncertainty of realization.
9
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UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. PROPERTY, PLANT AND EQUIPMENT
As of As of
June 30, December 31,
1999 1998
--------- ------------
(In thousands)
Subscriber premises equipment and converters..... $246,735 $187,247
MMDS/DTH distribution facilities................. 62,991 54,725
Cable distribution networks...................... 2,198 2,009
Office equipment, furniture and fixtures......... 11,529 9,810
Buildings and leasehold improvements............. 3,343 2,841
Other............................................ 15,117 13,847
-------- --------
341,913 270,479
Accumulated depreciation....................... (208,373) (147,511)
-------- --------
Net property, plant and equipment.............. $133,540 $122,968
======== ========
5. GOODWILL AND OTHER INTANGIBLE ASSETS
As of As of
June 30, December 31,
1999 1998
--------- ------------
(In thousands)
Austar........................................... $60,757 $55,805
Other............................................ 1,502 4,266
------- -------
62,259 60,071
Accumulated amortization....................... (21,822) (17,512)
------- -------
Net goodwill and other intangible assets....... $40,437 $42,559
======= =======
6. SENIOR DISCOUNT NOTES
As of As of
June 30, December 31,
1999 1998
--------- ------------
(In thousands)
May 1996 Notes (as defined below), net
of unamortized discount......................... $344,604 $321,687
September 1997 Notes (as defined below),
net of unamortized discount..................... 36,816 34,953
-------- --------
Total senior discount notes.................... $381,420 $356,640
======== ========
MAY 1996 NOTES
The 14.0% senior notes, which the Company issued in May 1996 at a discount from
their principal amount of $443.0 million (the "May 1996 Notes"), had an accreted
value of $344.6 million as of June 30, 1999. 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%. On October 14, 1998, the Company
consummated an equity sale resulting in gross proceeds to the Company of $70.0
million which reduced the interest rate from 14.75% to 14.0% per annum. Due to
the increase in the interest rate effective May 16, 1997 until consummation of
the equity sale, the May 1996 Notes will accrete to a principal amount of $447.4
million on May 15, 2001, the date cash interest begins to accrue. The quoted
fair market value of these notes was approximately $313.2 million and $223.7
million as of June 30, 1999 and December 31, 1998, respectively.
SEPTEMBER 1997 NOTES
The 14.0% senior notes, which the Company issued in September 1997 at a discount
from their principal amount of $45.0 million (the "September 1997 Notes"), had
an accreted value of $36.8 million as of June 30, 1999. 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%. On October 14, 1998, the
10
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Company consummated an equity sale, reducing the interest rate from 14.75% to
14.0% per annum. Due to the increase in the interest rate effective September
23, 1997 until consummation of the equity sale, the September 1997 Notes will
accrete to a principal amount of $45.4 million on May 15, 2001, the date cash
interest begins to accrue. The quoted fair market value of these notes was
approximately $31.8 million and $22.7 million as of June 30, 1999 and December
31, 1998, respectively.
On November 17, 1997, pursuant to the terms of the indentures governing the May
1996 Notes and the September 1997 Notes (collectively, the "Notes"), the Company
issued warrants to purchase 488,000 shares of its common stock, which
represented 3.4% of the Company's 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. The warrants were valued at $3.7 million and have been reflected
as an additional discount to the Notes on a pro-rata basis and as an increase in
additional paid-in capital.
7. OTHER LONG-TERM DEBT
As of As of
June 30, December 31,
1999 1998
--------- ------------
(In thousands)
Austar Bank Facility............................ $167,546 $67,352
Capitalized leases and other.................... 2,936 2,923
-------- -------
170,482 70,275
Less current portion....................... (1,850) (2,189)
-------- -------
Total other long-term debt................. $168,632 $68,086
======== =======
AUSTAR BANK FACILITY
In July 1997, Austar secured a senior syndicated term debt facility (the "Austar
Bank Facility") in the amount of A$200.0 million to fund its subscriber
acquisition and working capital needs. Austar had drawn the full amount of the
facility by April 1999 when it secured a new syndicated senior secured debt
facility (the "New Austar Bank Facility") for A$400.0 million to refinance the
A$200.0 million Austar Bank Facility and to fund Austar's subscriber acquisition
and working capital needs. The New Austar Bank Facility consists of two
sub-facilities: (i) A$200.0 million amortizing term facility ("Tranche 1") and
(ii) A$200.0 million cash advance facility ("Tranche 2"). Tranche 1 was used to
refinance the Austar Bank Facility, and Tranche 2 is available upon the
contribution of additional equity on a 2:1 debt-to-equity basis. As of June 30,
1999, Austar had drawn A$251.0 million ($167.5 million) on the New Austar Bank
Facility. All of Austar's assets are pledged as collateral for this facility. In
addition, pursuant to this facility, Austar cannot pay any dividends, interest
or fees under its technical assistance agreements without the consent of the
majority banks. The New Austar Bank Facility bears interest at the professional
market rate in Australia plus a margin ranging from 1.75% to 2.25% based upon
certain debt to cash flow ratios. The New Austar Bank Facility is fully
repayable pursuant to an amortization schedule beginning December 31, 2002 and
ending March 31, 2006.
8. RELATED PARTY
Effective May 1, 1996, the Company and UIH Management, Inc. ("UIH Management"),
an indirect wholly-owned subsidiary of United, executed a 10-year management
services agreement (the "Management Agreement"), pursuant to which UIH
Management performs 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 $0.75 million for
the first year of such agreement (beginning May 1, 1996), and it increases on
each anniversary date of the Management Agreement by 8.0% 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 United for any out-of-pocket expenses
including travel, lodging and entertainment expenses, incurred by UAP or United
on behalf of the Company. In December 1997, United 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. For the
six months ended June 30, 1999 and 1998, the Company recorded $19.6 million and
$4.3 million, respectively, in corporate general and administrative expense
allocated from United and management fees. The June 30, 1999 amount includes
$17.6 million of non-cash stock-based compensation expense related to UAP stock
11
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
appreciation rights, $1.6 million of other corporate general and administrative
expense and $0.4 million in related party management fees due from the Company
to UAP. The June 30, 1998 amount includes $3.9 million of corporate general and
administrative expense and $0.4 million in related party management fees due
from the Company to UAP.
Austar, Saturn, Telefenua and United Wireless are also parties to technical
assistance agreements with UAP whereby such operating companies pay to UAP fees
based on their respective gross revenues. In addition, United has appointed
certain of its employees to serve in senior management positions at the
operating systems. The operating systems reimburse United for certain direct
costs incurred by United, including salaries and benefits relating to these
senior management positions, pursuant to the terms of the technical assistance
agreements. For the six months ended June 30, 1999 and 1998, the Company
recorded $3.0 million and $1.9 million, respectively, in related party
management fees due from the operating systems to UAP. The rights under these
management fee agreements have been assigned to Austar United as part of the
restructuring associated with the Australian IPO.
Included in the amount due to parent is the following:
<TABLE>
<CAPTION>
As of As of
June 30, December 31,
1999 1998
--------- ------------
(In thousands)
<S> <C> <C>
Austar technical assistance agreement obligations, including deferred
management fees of $9,639 and $5,973, respectively (1)................... $14,133 $ 8,347
United Wireless technical assistance agreement obligations................ 740 605
Payable to parent for management fees..................................... 1,505 1,056
Other..................................................................... 501 235
------- -------
16,879 10,243
Less current portion................................................. (6,500) (3,665)
------- -------
Total due to parent.................................................. $10,379 $ 6,578
======= =======
</TABLE>
(1) UAP has the option of converting these management fees into equity.
9. COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Net loss............................................ $(74,567) $(50,226) $(122,102) $(97,943)
Other comprehensive income (loss):
Change in cumulative translation adjustments....... 2,122 (3,019) 3,380 3,877
-------- -------- --------- --------
Total comprehensive loss....................... $(72,445) $(53,245) $(118,722) $(94,066)
======== ======== ========= ========
</TABLE>
10. SEGMENT INFORMATION
The Company's business has historically been derived from its video
entertainment segment. This service has been provided in various countries where
the Company owns and operates its systems. Accordingly, the Company's current
reportable segments are the various countries in which it operates multi-channel
television, programming and/or telephony operations. These reportable segments
are evaluated separately because each country presents different marketing
strategies and technology issues as well as distinct economic climates and
regulatory constraints. The key operating performance criteria used in this
evaluation include revenue growth, operating income before depreciation,
amortization, management fees, non-cash general and administrative expense
allocated from parent ("Adjusted EBITDA"), and capital expenditures. Senior
management of the Company does not view segment results below Adjusted EBITDA,
therefore, interest income, interest expense, provision for losses on investment
related costs, gain on sale of investments, share in results of affiliated
companies, minority interests in subsidiaries and other expenses are not broken
out by segment below.
12
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
For the Three Months Ended For the Three Months Ended For the Six Months Ended For the Six Months Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
-------------------------- -------------------------- ------------------------ ------------------------
Adjusted Adjusted Adjusted Adjusted
Revenue EBITDA(1) Revenue EBITDA(1) Revenue EBITDA(1) Revenue EBITDA(1)
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Australia......... $34,388 $ 619 $19,188 $(7,721) $64,820 $(1,441) $38,504 $(9,106)
New Zealand....... - - - - - - - -
Tahiti............ - - 1,122 13 - - 2,259 129
Corporate......... - (108) - (76) - (130) - (181)
------- ----- ------- ------- ------- ------- ------- -------
Total.......... $34,388 $ 511 $20,310 $(7,784) $64,820 $(1,571) $40,763 $(9,158)
======= ===== ======= ======= ======= ======= ======= =======
</TABLE>
As of As of
June 30, December 31,
1999 1998
--------------------------
Total Assets
--------------------------
Australia......... $225,930 $181,169
New Zealand....... 24,653 23,789
Tahiti............ - -
Corporate......... 9,952 11,074
-------- --------
Total.......... $260,535 $216,032
======== ========
(1) "Adjusted EBITDA" represents net operating earnings, depreciation,
amortization, non-cash general and administrative expense allocation from
parent and management fees. Industry analysts generally consider Adjusted
EBITDA to be a helpful way to measure the performance of cable television
operations and communications companies. Management believes Adjusted
EBITDA helps investors to assess the cash flow from operations from period
to period and thus, to value the Company's business. Adjusted EBITDA should
not, however, be considered a replacement for net income, cash flows or for
any other measure of performance or liquidity under GAAP, or as an
indicator of a company's operating performance. The Company is not entirely
free to use the cash represented by Adjusted EBITDA. Several of the
Company's consolidated operating companies are restricted by the terms of
their debt arrangements. Each company has its own operating expenses and
capital expenditure requirements, which can limit the Company's use of
cash. The Company's presentation of Adjusted EBITDA may not be comparable
to statistics with a similar name reported by other companies. Not all
companies and analysts calculate EBITDA in the same manner.
Adjusted EBITDA reconciles to the consolidated statement of operations as
follows:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C>
Net operating loss......................................... $(45,742) $(33,958) $(74,686) $(66,074)
Depreciation and amortization.............................. 25,482 23,226 49,943 50,635
Non-cash allocation of parent stock-based compensation
expense................................................... 17,630 - 17,630 -
Non-cash general and administrative expense
allocation from parent.................................... 779 1,774 1,568 3,932
Management fees............................................ 2,362 1,174 3,974 2,349
-------- -------- -------- --------
Consolidated Adjusted EBITDA.......................... $ 511 $ (7,784) $ (1,571) $ (9,158)
======== ======== ======== ========
</TABLE>
13
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. SUBSEQUENT EVENT
In June 1999, the Company's interests in Austar, United Wireless, XYZ
Entertainment and Saturn were contributed to Austar United in exchange for new
shares issued by Austar United. On July 27, 1999, Austar United closed an
initial public offering. A total of 103.5 million ordinary shares representing
approximately 21.6% of Austar United were offered for sale at a price of A$4.70
($3.11) for total gross proceeds of A$486.5 million ($321.9 million). In
connection with the offering, Austar United acquired from SaskTel its 35.0%
interest in Saturn in exchange for 13,659,574 ordinary shares, thereby
increasing Austar United's ownership in Saturn from 65.0% to 100%. Accordingly,
the Company will consolidate Saturn effective July 27, 1999. As a result of
these transactions, the Company's fully diluted ownership interest in Austar
United is currently 74.1%.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes thereto included elsewhere herein. Such
condensed consolidated financial statements provide additional information
regarding our financial activities and condition.
We have no employees of our own. UAP, our parent, provides various management,
financial reporting, accounting and other services for us 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 on their respective gross revenues.
Certain statements in this report may constitute "forward-looking statements"
within the meaning of the federal securities laws. These forward-looking
statements may include, among other things, statements concerning our plans,
objectives and future economic prospects, expectations, beliefs, future plans
and strategies, anticipated events or trends and similar expressions concerning
matters that are not historical facts. These forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements or industry results, to be
materially different from what we say or imply with such forward-looking
statements. These factors include, among other things, changes in television
viewing preferences and habits by subscribers and potential subscribers, their
acceptance of new technology, programming alternatives and new services we may
offer, our ability to secure adequate capital to fund other system growth and
development, risks inherent in investment and operations in foreign countries,
changes in government regulation, changes in the nature of key strategic
relationships with partners and joint ventures, and other factors referenced in
this report. These forward-looking statements apply only as of the date of this
report, and we have no obligation or plans to provide updates or revisions to
these forward-looking statements, or any other changes in events, conditions or
circumstances on which these statements are based. Our statements contained in
Management's Discussion and Analysis of Financial Condition and Results of
Operations in this report related to Year 2000 issues are hereby denominated as
"Year 2000 Statements" within the meaning of the Year 2000 Information and
Readiness Disclosure Act.
INTRODUCTION
As of June 30, 1999, we held (i) an effective 100% economic interest in Austar,
(ii) a 65.0% interest in Saturn, (iii) a 50.0% interest in XYZ Entertainment and
(iv) a 100% interest in United Wireless through Austar United and (v) an up to
90.0% economic interest in Telefenua. In connection with the July 1999
Australian IPO, we decreased our interest in Austar United from 100% to 74.1%.
We previously consolidated the operations of Saturn from July 1, 1996 through
September 30, 1998. Prior to that time, we accounted for our investment in
Saturn under the equity method. During the fourth quarter of 1998, we
discontinued consolidating the results of operations of Saturn effective as of
January 1, 1998 and returned to the equity method of accounting. The change was
made to comply with the consensus guidance of the Emerging Issues Task Force
regarding Issue 96-16 ("EITF 96-16"), and related rules of the SEC, because
SaskTel had participating approval or veto rights with respect to certain
significant decisions of Saturn in the ordinary course of business. Accordingly,
the condensed consolidated statement of operations and statement of cash flows
for the period ended June 30, 1998 have been adjusted to reflect the
deconsolidation of Saturn effective as of January 1, 1998. Immediately prior to
the Australian IPO, Austar United issued shares of Austar United to Sasktel for
their 35.0% interest in Saturn. As a result, Saturn will be consolidated
effective July 27, 1999. Effective October 1, 1998, we discontinued
consolidating the results of operations of Telefenua due to an
other-than-temporary loss of control and began using the equity method of
accounting.
15
<PAGE>
SUMMARY OPERATING DATA
The following tables set forth certain unaudited operating data:
<TABLE>
<CAPTION>
As of June 30, 1999
------------------------------------------------------------------------------------
Television Basic Economic
Homes in Homes Subscribers/ Basic Ownership
Service Area Passed Lines Penetration Interest
------------ ---------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Multi-channel television:
Austar..................... 2,085,000 2,083,108 329,002 15.8% 100.0%
Saturn..................... 141,000 72,212 11,163 15.5% 65.0%
Telefenua (1).............. 31,000 20,128 6,125 30.4% 90.0%
--------- --------- -------
Total................... 2,257,000 2,175,448 346,290
========= ========= =======
Telephony:
Saturn (2)................. 141,000 71,710 15,683 21.9% 65.0%
========= ========= =======
Programming:
XYZ Entertainment.......... N/A(3) N/A 807,680(4) N/A 50.0%
========= ========= =======
Data:
Saturn (5)................. 141,000 71,710 2,927 4.1% 65.0%
========= ========= =======
As of June 30, 1998
------------------------------------------------------------------------------------
Television Basic Economic
Homes in Homes Subscribers/ Basic Ownership
Service Area Passed Lines Penetration Interest
------------ ---------- ------------ ----------- ---------
Multi-channel television:
Austar..................... 1,635,000 1,632,691 215,275 13.2% 100.0%
Saturn..................... 141,000 36,613 3,635 9.9% 65.0%
Telefenua.................. 31,000 20,128 6,120 30.4% 90.0%
--------- --------- -------
Total................... 1,807,000 1,689,432 225,030
========= ========= =======
Telephony:
Saturn (2)................. 141,000 7,709 1,023 13.3% 65.0%
========= ========= =======
Programming:
XYZ Entertainment.......... N/A(3) N/A 543,564(4) N/A 25.0%
========= ========= =======
</TABLE>
(1) These numbers are as of September 30, 1998 since we are not receiving
current information from Telefenua (see Note 2).
(2) In April 1998, Saturn launched business and residential telephony services
in the Wellington, New Zealand area.
(3) We expect 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.
(4) This figure represents the total estimated subscribers to the five-channel
XYZ Entertainment package.
(5) Saturn launched data services in late 1998.
16
<PAGE>
SELECTED SYSTEM OPERATING DATA. The following table displays selected system
operating data in Austar's local currency and U.S. dollar:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- ------------------------
1999 1998 1999 1998
-------- -------- -------- --------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Austar (A$):
Revenue................. 53,089 30,479 99,468 59,270
Adjusted EBITDA(1)...... (3,465) (9,956) (10,651) (9,440)
Austar (US$):
Revenue................. 34,711 19,147 64,186 38,346
Adjusted EBITDA(1)...... (2,266) (6,138) (6,836) (5,795)
</TABLE>
(1) "Adjusted EBITDA" represents net operating earnings before
depreciation, amortization, non-cash general and administrative expense
allocated from parent and management fees. Industry analysts generally
consider Adjusted EBITDA to be a helpful way to measure the performance
of cable television operations and communications companies. We believe
Adjusted EBITDA helps investors to assess the cash flow from operations
from period to period and thus, to value our business. Adjusted EBITDA
should not, however, be considered a replacement for net income, cash
flows or for any other measure of performance or liquidity under GAAP,
or as an indicator of a company's operating performance. We are not
entirely free to use the cash represented by Adjusted EBITDA. Several
of our consolidated operating companies are restricted by the terms of
their debt arrangements. Each company has its own operating expenses
and capital expenditure requirements, which can limit our use of cash.
Our presentation of Adjusted EBITDA may not be comparable to statistics
with a similar name reported by other companies. Not all companies and
analysts calculate EBITDA in the same manner.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, we had invested approximately $446.5 million in our
projects. These fundings do not include amounts contributed by shareholders
other than the Company or amounts contributed in either cash or stock to acquire
additional economic interests.
As of
June 30,
SOURCES OF FUNDINGS: 1999
--------------
(In thousands)
Senior discount notes proceeds, net of offering costs..... $244,652
Cash contributions and other equity from parent (1)....... 197,314
Cash received for interest................................ 4,528
--------
Total................................................ $446,494
========
As of
June 30,
USES OF FUNDINGS: 1999
--------------
(In thousands)
Austar (1)................................................ $349,429
Saturn.................................................... 44,612
Telefenua................................................. 16,738
XYZ Entertainment......................................... 16,481
United Wireless........................................... 11,314
Other..................................................... 7,920
--------
Total................................................ $446,494
========
(1) Includes issuance/use of $29.8 million and $6.2 million in United
convertible preferred stock in 1995 and 1998, respectively, to acquire
additional economic interests in Australia.
We are responsible for our proportionate share of capital requirements of the
operating companies. We have funded our proportionate share to date with capital
contributions by United through UAP and proceeds from private debt offerings and
have reduced our proportionate share to date with subsidiary bank debt and
strategic partner contributions. Future funding for customer base expansion and
project build-out will primarily come from the proceeds of the Australian IPO
which closed in July 1999, the New Austar Bank Facility and Saturn's syndicated
senior debt facility (the "Saturn Bank Facility").
17
<PAGE>
AUSTRALIAN IPO
In June 1999, the Company's interests in Austar, United Wireless, XYZ
Entertainment and Saturn were contributed to Austar United in exchange for new
shares issued by Austar United. On July 27, 1999, Austar United closed an
initial public offering. A total of 103.5 million ordinary shares representing
approximately 21.6% of Austar United were offered for sale at a price of A$4.70
($3.11) for total gross proceeds of A$486.5 million ($321.9 million). In
connection with the offering, Austar United acquired from SaskTel its 35.0%
interest in Saturn in exchange for 13,659,574 ordinary shares, thereby
increasing Austar United's ownership in Saturn from 65.0% to 100%. Accordingly,
the Company will consolidate Saturn effective July 27, 1999. As a result of
these transactions, the Company's fully diluted ownership interest in Austar
United is currently 74.1%.
AUSTAR BANK FACILITY
In July 1997, Austar secured the Austar Bank Facility in the amount of A$200.0
million to fund its subscriber acquisition and working capital needs. Austar had
drawn the full amount of the facility by April 1999 when the New Austar Bank
Facility was secured for A$400.0 million to refinance the A$200.0 million Austar
Bank Facility and to fund Austar's subscriber acquisition and working capital
needs. The New Austar Bank Facility consists of two sub-facilities: (i) A$200.0
million amortizing term facility ("Tranche 1") and (ii) A$200.0 million cash
advance facility ("Tranche 2"). Tranche 1 was used to refinance the Austar Bank
Facility, and Tranche 2 is available upon the contribution of additional equity
on a 2:1 debt-to-equity basis. As of June 30, 1999, Austar had drawn A$251.0
million ($167.5 million) on the New Austar Bank Facility. All of Austar's assets
are pledged as collateral for this facility. In addition, pursuant to this
facility, Austar cannot pay any dividends, interest or fees under its technical
assistance agreements without the consent of the majority banks. The New Austar
Bank Facility bears interest at the professional market rate in Australia plus a
margin ranging from 1.75% to 2.25% based upon certain debt to cash flow ratios.
The New Austar Bank Facility is fully repayable pursuant to an amortization
schedule beginning December 31, 2002 and ending March 31, 2006.
SATURN BANK FACILITY
On July 15, 1999, Saturn closed the Saturn Bank Facility in the amount of
NZ$125.0 million ($66.8 million) to fund the completion of Saturn's network. As
of June 30, 1999, Saturn had drawn NZ$78.0 million ($41.7 million) against the
facility.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
We incurred a net loss during the six months ended June 30, 1999 of $122.1
million, which included non-cash items such as depreciation and amortization
expense totaling $49.9 million, accretion of interest on the Notes and
amortization of deferred financing costs totaling $27.7 million and the
allocation of expense from parent of $19.2 million.
Cash and cash equivalents decreased $0.1 million from $0.2 million as of
December 31, 1998 to $0.1 million as of June 30, 1999. Principal sources of cash
during the six months ended June 30, 1999 included borrowings on the New Austar
Bank Facility of $162.1 million, borrowings on the Austar Bank Facility of $19.4
million and cash contributions from parent of $29.4 million.
During the six months ended June 30, 1999, cash was used principally for payment
of the Austar Bank Facility of $129.1 million, purchases of property, plant and
equipment totaling $46.8 million to continue new subscriber connections at
Austar and the build-out of existing projects, the funding of operating
activities of $21.1 million, deferred financing costs of $7.9 million,
investments in and advances to affiliated companies of $5.2 million and other
uses totaling $0.9 million.
FOR THE SIX MONTHS ENDED JUNE 30, 1998
We incurred a net loss during the six months ended June 30, 1998 of $97.9
million, which included non-cash items such as depreciation and amortization
expense totaling $50.6 million and accretion of interest on the Notes and
amortization of deferred financing costs totaling $23.8 million.
Cash and cash equivalents decreased $11.6 million from $12.3 million as of
December 31, 1997 to $0.7 million as of June 30, 1998. Principal sources of cash
during the six months ended June 30, 1998 included cash contributions from
parent of $31.9 million, net proceeds from the sale of short-term investments of
$12.3 million and other investing and financing sources of $0.7 million.
18
<PAGE>
During the six months ended June 30, 1998, cash was used principally for the
purchase of property, plant and equipment of $23.3 million to construct Austar's
and Telefenua's systems, the funding of operating activities of $13.9 million,
investments in and advances to affiliated companies of $7.1 million, the
deconsolidation of Saturn of $9.9 million and other investing and financing uses
totaling $2.3 million.
RESULTS OF OPERATIONS
Effective as of January 1, 1998, we discontinued consolidating the results of
operations of Saturn and returned to the equity method of accounting (see Note
2). Accordingly, the results of operations for the three and six months ended
June 30, 1998 have been restated to reflect the effect of this change.
EXCHANGE RATES. We translate revenue and expense from our foreign subsidiaries
using the weighted-average exchange rates during the period. However, for ease
of presentation, the spot rates for the countries in the Australia/Pacific
region are shown below for the Australian dollar and the New Zealand dollar,
respectively, per one U.S. dollar.
Australian New Zealand
Dollars Dollars
----------- -----------
June 30, 1999............. 1.4981 1.8699
December 31, 1998......... 1.6332 1.8939
June 30, 1998............. 1.6145 1.9290
December 31, 1997......... 1.5378 1.7161
REVENUE. We recognized revenue of $34.4 million and $64.8 million for the three
and six months ended June 30, 1999 compared to $20.3 million and $40.8 million
for the same periods in the prior year. This was an increase of $14.1 million
and $24.0 million for the three and six months ended June 30, 1999,
respectively, compared to the amounts for the corresponding periods in the prior
year.
AUSTAR
Revenue for Austar increased $15.6 million, or 81.7% from $19.1 million for the
three months ended June 30, 1998 to $34.7 million for the three months ended
June 30, 1999. Austar's revenue increased $25.9 million, or 67.6%, from $38.3
million for the six months ended June 30, 1998 to $64.2 million for the six
months ended June 30, 1999. On a functional currency basis, Austar's revenue
increased A$22.6 million from A$30.5 million for the three months ended June 30,
1998 to A$53.1 million for the three months ended June 30, 1999, a 74.1%
increase. Austar's functional revenue increased A$40.2 million, from A$59.3
million for the six months ended June 30, 1998 to A$99.5 million for the six
months ended June 30, 1999, a 67.8% increase. These increases were primarily due
to subscriber growth (329,002 at June 30, 1999 compared to 215,275 at June 30,
1998) as Austar continues to expand its customer base. The U.S. dollar increase
was positively impacted by $1.4 million due to fluctuation in exchange rates
between the three months ended June 30, 1999 and 1998. The U.S. dollar increase
occurred despite the negative impact of $0.1 million due to fluctuation in
exchange rates between the six months ended June 30, 1999 and 1998.
ADJUSTED EBITDA. Adjusted EBITDA was $0.5 million and $(1.6) million for the
three and six months ended June 30, 1999 compared to $(7.8) million and $(9.2)
million for the same periods in the prior year. This was a decrease in the
EBITDA loss of $8.3 million and $7.6 million for the three and six months ended
June 30, 1999, respectively, compared to the amounts for the corresponding
periods in the prior year.
AUSTAR
Austar's adjusted EBITDA loss decreased $3.8 million, or 62.3%, from $(6.1)
million for the three months ended June 30, 1998 to $(2.3) million for the three
months ended June 30, 1999. This decrease in EBITDA loss for the three months is
due to the increase in revenue in 1999 associated with subscriber growth
partially offset by increased programming costs. Austar's adjusted EBITDA loss
increased $1.0 million, or 17.2%, from $(5.8) million for the six months ended
June 30, 1998 to $(6.8) million for the six months ended June 30, 1999. The
increase in EBITDA loss for the six month period from year to year was primarily
due to the large increase in programming and transmission costs. The remainder
of the increase between periods was due to an increase in salaries and benefits
related to the additional personnel necessary to support Austar's establishment
of local and state offices in its markets and an increase in customer subscriber
management expense related to volume increases in telephone, billing and
collection costs. These expense increases were almost entirely offset by
increased revenues between periods due to subscriber growth. On a functional
19
<PAGE>
currency basis, Austar's adjusted EBITDA loss decreased A$6.5 million from
A$(10.0) million for the three months ended June 30, 1998 to A$(3.5) million for
the three months ended June 30, 1999, a 65.0% decrease. Austar's functional
currency adjusted EBITDA loss increased A$1.3 million, from A$(9.4) million for
the six months ended June 30, 1998 to A$(10.7) million for the six months ended
June 30, 1999, a 13.8% increase. The U.S. dollar EBITDA loss decrease was
positively impacted by $0.1 million due to fluctuation in exchange rates between
the three months ended June 30, 1999 and 1998 and the U.S. dollar EBITDA loss
increase was negatively impacted by $0.1 million due to fluctuation in exchange
rates between the six months ended June 30, 1999 and 1998.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization expense
increased $2.3 million and decreased $0.7 million for the three and six months
ended June 30, 1999 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,
------------------------------ ------------------------------
1999 1998 1999 1998
-------- -------- -------- --------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Austar.................................. $24,996 $21,354 $48,954 $48,235
United Wireless......................... 151 154 316 313
Other................................... 335 1,718 673 2,087
------- ------- ------- -------
Total depreciation and amortization
expense............................ $25,482 $23,226 $49,943 $50,635
======= ======= ======= =======
</TABLE>
AUSTAR
Depreciation and amortization expense for Austar increased $3.6 million, or
16.8%, from $21.4 million for the three months ended June 30, 1998 to $25.0
million for the three months ended June 30, 1999. Depreciation and amortization
expense for Austar increased $0.8 million, or 1.7% from $48.2 million for the
six months ended June 30, 1998 to $49.0 million for the six months ended June
30, 1999. On a functional currency basis, Austar's depreciation and amortization
expense increased A$4.5 million, from A$32.4 million for the three months ended
June 30, 1998 to A$36.9 million for the three months ended June 30, 1999, a
13.9% increase. On a functional currency basis, Austar's depreciation and
amortization expense increased A$1.9 million, from A$71.3 million for the six
months ended June 30, 1998 to A$73.2 million for the six months ended June 30,
1999, a 2.7% increase. The U.S. dollar increases were negatively impacted by
$0.9 million due to fluctuation in exchange rates between the three months ended
June 30, 1999 and 1998 and positively impacted by $0.1 million due to
fluctuation in exchange rates between the six months ended June 30, 1999 and
1998.
INTEREST EXPENSE. Interest expense increased $3.9 million and $5.7 million for
the three and six months ended June 30, 1999 compared to the amounts for the
corresponding periods in the prior year. This increase was primarily due to
interest expense related to the Austar Bank Facility and the New Austar Bank
Facility which was $5.3 million and $7.9 million for the three and six months
ended June 30, 1999, respectively, compared to $2.1 million and $3.6 million for
the three and six months ended June 30, 1998, respectively.
OTHER INCOME/EXPENSE. Other expense increased $4.5 million and $4.6 million for
the three and six months ended June 30, 1999 compared to the amounts for the
corresponding periods in the prior year. This increase was primarily due to a
programming license write-off of $3.7 million in May 1999.
20
<PAGE>
SHARE IN RESULTS OF AFFILIATED COMPANIES, NET. We recognized share in losses of
affiliated companies of $5.3 million and $8.7 million for the three and six
months ended June 30, 1999 compared to $1.2 million and $3.5 million for the
same periods in the prior year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Three Months Ended
June 30, 1999 June 30, 1998
----------------------------------- -------------------------------------
Company Company
Ownership Share in Results of Ownership Share in Results of
Interest Affiliated Companies Interest Affiliated Companies
--------- -------------------- --------- ---------------------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Saturn........................................ 65.0% $(1,675) 65.0% $(2,202)
XYZ Entertainment............................. 50.0% (3,633) 25.0% 955
------- -------
Total share in results of affiliated
companies, net............................ $(5,308) $(1,247)
======= =======
For the Six Months Ended For the Six Months Ended
June 30, 1999 June 30, 1998
----------------------------------- -------------------------------------
Company Company
Ownership Share in Results of Ownership Share in Results of
Interest Affiliated Companies Interest Affiliated Companies
--------- -------------------- --------- ---------------------
(In thousands) (In thousands)
Saturn........................................ 65.0% $(3,645) 65.0% $(4,006)
XYZ Entertainment............................. 50.0% (5,035) 25.0% 470
------- -------
Total share in results of affiliated
companies, net............................ $(8,680) $(3,536)
======= =======
</TABLE>
21
<PAGE>
YEAR 2000 READINESS DISCLOSURE
Our multi-channel television, programming and telephony operations are heavily
dependent upon computer systems and other technological devices with embedded
chips. Such computer systems and other technological devices may not be capable
of accurately recognizing dates beginning on January 1, 2000. This problem could
cause miscalculations, resulting in our multi-channel television and telephony
systems or programming services malfunctioning or failing to operate.
YEAR 2000 PROGRAM. In response to possible Year 2000 problems, the Board of
Directors of United established a Task Force to assess the impact that potential
Year 2000 problems may have on company-wide operations, including the Company
and its operating companies, and to implement necessary changes to address such
problems. The Task Force reports directly to the United Board. In creating a
program to minimize Year 2000 problems, the Task Force identified certain
critical operations of our business. These critical operations are service
delivery systems, field and headend devices, customer service and billing
systems and corporate management and administrative operations (e.g., cash flow,
accounts payable and accounts receivable, payroll and building operations).
The Task Force has established a three-phase program to address potential Year
2000 problems:
(a) Identification Phase: identify and evaluate computer systems and other
devices (e.g., headend devices, switches and set top boxes) on a system
by system basis for Year 2000 compliance.
(b) Implementation Phase: establish a database and evaluate the information
obtained in the Identification Phase, determine priorities, implement
corrective procedures, define costs and ensure adequate funding.
(c) Testing Phase: test the corrective procedures to verify that all
material compliance problems will operate on and after January 1, 2000,
and develop, as necessary, contingency plans for material operations.
As of June 30, 1999, 97.0% of our operating systems had completed the
Identification Phase and the Task Force is working on the Implementation Phase
for these systems. The Task Force has researched almost 94.0% of the items
identified during the Identification Phase as to Year 2000 compliance. Of the
items researched, 73.9% are either compliant or can be easily remediated without
significant cost to us. The percentage of items compliant has dropped because
certain suppliers of computer software and hardware have switched their products
from previously compliant to non-compliant or conditional compliant. Such change
requires the Task Force to take additional steps to bring these items into
compliance. As a result, the Task Force expects to continue its research on all
items identified throughout 1999. Based on current data to date, the computer
systems for all corporate operations are expected to be in compliance prior to
Year 2000 and should not require material remediation or replacement.
The Task Force commenced the Testing Phase in first quarter 1999. The Task Force
is supervising the Testing Phase of the computer systems for our headend
controllers and our customer service billing systems and routers. Based on
current data to date, testing will continue through the end of 1999. At this
time, we anticipate that all material aspects of the program will be completed
before January 1, 2000. Certain of our operating systems have not completed the
Identification Phase, including Tahiti and certain Australian programming
interests. Despite the Task Force's attempts to include these systems in the
Year 2000 Programs, these systems have not responded. Therefore, we have no
information on which to determine if these systems will be Year 2000 compliant
by December 31, 1999. If none of these systems are compliant, we do not believe
that their operation failure will have a material adverse effect on our business
as a whole. The basis for determining the above percentage includes these
systems. In general, United is managing the program with its internal Task
Force. In addition, we have retained independent consultants to assist with our
operations in New Zealand, the results of which are not included in the above
percentages. The Task Force will continue to evaluate the need for external
resources to complete the Implementation Phase and implement the Testing Phase.
In the event the Task Force elects to use external resources, such resources may
not, however, be available.
In addition to its program, United is a member of a Year 2000 working group,
which has 12 cable television companies and meets under the auspices of Cable
Labs. The dialogue with the other cable operators has assisted United in
developing its Year 2000 program. Part of the agenda of the working group is to
develop test procedures and contingency plans for critical components of
operating systems for the benefit of all of its members. These test procedures
have been made available to members, including United and the Company.
THIRD PARTY DEPENDENCIES. We believe our largest Year 2000 risk is our
dependency upon third-party products. Two significant areas on which our systems
depend upon third-party products are programming and telephony interconnects. We
do not have the ability to control such parties in their assessment and
remediation procedures for potential Year 2000 problems. Should these parties
22
<PAGE>
not be prepared for Year 2000, their systems may fail and we would not be able
to provide service to our customers. Notwithstanding these limitations, the Task
Force monitors the websites for all vendors used by us, to the extent available,
for information on such vendors' Year 2000 programs. To the extent applicable,
the Task Force uses such information to verify Year 2000 compliance and to
implement remediation procedures. For example, this is how the Task Force
learned that previously compliant reports on computer hardware and software from
third party vendors have been re-classified as non-compliant or conditional
compliant. Such changes are not within the control of the Company.
We also have requested information from various third parties on the status of
their Year 2000 compliance programs in an effort to prevent any possible
interruptions or failures. To date, responses to such communications have been
limited and the responses received state only that the party is working on Year
2000 issues and does not have a definitive position at this time. As a result,
we are unable to assess the risk posed by our dependence upon such third
parties' systems. Vendors for critical equipment components, such as the headend
controllers mentioned below, have been more responsive and we believe
substantially all of our equipment will be Year 2000 compliant. We cannot,
however, give any assurance concerning compliance of equipment because such
belief is based on information provided by vendors, which cannot be
independently verified, and because of the uncertainties inherent in Year 2000
remediation.
The Task Force is considering certain limited contingency plans, including
preparing back-up programming and stand-by power generators. Such contingency
plans may not, however, resolve the problem in a satisfactory manner. With
respect to other third-party systems, each operating system is responsible for
inquiring of their vendors and other entities with which they do business (e.g.,
utility companies, financial institutions and facility owners) as to such
entities' Year 2000 compliance programs. In addition, the Task Force has
distributed a contingency plan to all of our operating systems. Such plan sets
forth preparation procedures and recovery solutions.
The Task Force is working closely with the manufacturers of our headend devices
to remedy any Year 2000 problems assessed in the headend equipment. Recent
information from the two primary manufacturers of such equipment indicate that
most of the equipment used in our operating systems are not date sensitive.
Where such equipment needs to be upgraded for Year 2000 issues, such vendors are
upgrading without charge. These upgrades are expected to be completed before
year-end 1999, but such a process is not wholly within our control or our
systems' control. Approximately 99.0% of the headend controllers, which are the
most critical component of the headend devices have been upgraded and tested as
compliant. With respect to billing and customer care systems, we use standard
billing and customer care programs from several vendors. The Task Force is
working with such vendors to achieve Year 2000 compliance for all systems.
COSTS OF COMPLIANCE. The Task Force is not able to determine the full cost of
its Year 2000 program and its related impact on our financial condition. In the
course of our business, we have made substantial capital adjustments over the
past few years in improving our systems, primarily for reasons other than Year
2000. Because these upgrades also resulted in Year 2000 compliance, replacement
and remediation costs have been low. The Task Force has, however, revised its
estimates of the cost for the Year 2000 program to $1.5 million. The cost
includes certain identified replacement and remediation procedures and external
consultants, and has been increased because of system acquisitions and
additional date sensitive items that require research as to Year 2000
compliance. Such estimate does not, however, include internal costs because we
do not separately track the internal costs incurred for the Year 2000 program.
Although no assurance can be made, we believe that the known Year 2000
compliance issues can be remedied without a material financial impact. No
assurance can be made, however, as to the total cost for the Year 2000 program
until all of the data has been gathered. In addition, we can not predict the
financial impact we will incur if Year 2000 problems are caused by third parties
upon which our systems are dependent or experienced by entities in which we hold
investments. The failure of any one of these parties to implement Year 2000
procedures could have a material adverse impact on our operations and financial
condition.
23
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
- ------------------------------------------------------------------
INVESTMENT PORTFOLIO
We do not use derivative financial instruments in our non-trading investment
portfolio. We place our cash and cash equivalent investments in highly liquid
instruments that meet high credit quality standards with original maturities at
the date of purchase of less than three months. We also place our short-term
investments in liquid instruments that meet high credit quality standards with
original maturities at the date of purchase of between three and twelve months.
We also limit the amount of credit exposure to any one issue, issuer or type of
instrument. These investments are subject to interest rate risk and will fall in
value if market interest rates increase, however, we do not expect any material
loss with respect to our investment portfolio.
IMPACT OF FOREIGN CURRENCY RATE CHANGES
We are exposed to foreign exchange rate fluctuations related to the operating
subsidiaries' monetary assets and liabilities and the financial results of
foreign subsidiaries when their respective financial statements are translated
into U.S. dollars during consolidation. Our exposure to foreign exchange rate
fluctuations also arises from intercompany charges such as the cost of
equipment, management fees and certain other charges. These intercompany
accounts are predominantly denominated in the functional currency of the foreign
subsidiary.
The operating companies' monetary assets and liabilities are subject to foreign
currency exchange risk as certain equipment purchases and payments for certain
operating expenses, such as programming expenses, are denominated in currencies
other than their own functional currency. In addition, certain of the operating
companies have notes payable and notes receivable which are denominated in a
currency other than their own functional currency. Foreign currency rate changes
also affect our share in results of our unconsolidated affiliates such as XYZ
Entertainment and Saturn.
The spot rates for the countries in the Australia/Pacific region are shown below
for the Australian and New Zealand dollars per one U.S. dollar.
Australian New Zealand
Dollars Dollars
---------- -----------
June 30, 1999.............. 1.4981 1.8699
December 31, 1998.......... 1.6332 1.8939
June 30, 1998.............. 1.6145 1.9290
December 31, 1997.......... 1.5378 1.7161
In general, the Company and the operating companies do not execute hedge
transactions to reduce our exposure to foreign currency exchange rate risk.
Accordingly, we may experience economic loss and a negative impact on earnings
and equity with respect to our holdings solely as a result of foreign currency
exchange rate fluctuations.
The countries in which the operating companies now conduct business generally do
not restrict the removal or conversion of local or foreign currency, however,
there is no assurance this situation will continue. We may also acquire
interests in companies that operate in countries where the removal or conversion
of currency is restricted.
24
<PAGE>
INTEREST RATE SENSITIVITY
The table below provides information about our primary debt obligations. The
information is presented in U.S. dollar equivalents, which is our reporting
currency. The instrument's actual cash flows are denominated in both U.S.
dollars (May 1996 and September 1997 Notes) and Australian dollars (New Austar
Bank Facility).
<TABLE>
<CAPTION>
As of June 30, 1999
------------------------------------------
Book Value Fair Value
---------- ----------
(U.S. dollars, in thousands, except interest rates)
<S> <C> <C>
Long-term and short-term debt:
Fixed rate USD Denominated.................. $381,420 $345,006
Average interest rate..................... 14.00% 16.26%
Variable rate A$ Denominated................ $167,546 $167,546
Average interest rate..................... 7.65% 7.65%
</TABLE>
The table below presents principal cash flows and related weighted-average
interest rates by expected maturity dates for our debt obligations. The
information is presented in U.S. dollar equivalents, which is our reporting
currency. The instrument's actual cash flows are denominated in both U.S.
dollars (May 1996 and September 1997 Notes) and Australian dollars (Austar Bank
Facility).
<TABLE>
<CAPTION>
As of June 30, 1999
------------------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total
-------- -------- -------- -------- -------- ---------- ---------
(U.S. dollars, in thousands, except interest rates)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term and short-term debt:
Fixed rate USD Denominated.......... $ - $ - $ - $ - $ - $381,420 $381,420
Average interest rate............. - - - - - 14.00% 14.00%
Variable rate A$ Denominated........ $ - $ - $ - $ - $51,553 $115,993 $167,546
Average interest rate............. - - - - 7.65% 7.65% 7.65%
</TABLE>
Interest rate swap agreements are used by the Company from time to time, to
manage interest rate risk on its floating rate debt facilities. Interest rate
swaps are entered into depending on our assessment of the market, and generally
are used to convert the floating rate debt to fixed rate debt. Interest
differentials paid or received under these swap agreements are recognized over
the life of the contracts as adjustments to the effective yield of the
underlying debt, and related amounts payable to, or receivable from, the
counterparties are included in the consolidated balance sheet. Currently, we
have four interest rate swaps to manage interest rate exposure on the New Austar
Bank Facility. Two of these swap agreements expire in 2002 and effectively
convert an aggregate principal amount of A$50.0 million ($33.4 million as of
June 30, 1999) of variable rate, long-term debt into fixed rate borrowings. The
other two swap agreements expire in 2004 and convert an aggregate principal
amount of A$100.0 million ($66.8 million as of June 30, 1999) of variable rate,
long-term debt into fixed rate borrowings. As of June 30, 1999, the
weighted-average fixed rate under these agreements was 7.95%. As a result of
these swap agreements, interest expense was increased by approximately A$0.3
million ($0.2 million) during the second quarter 1999.
Fair values of the interest rate swap agreements are based on the estimated
amounts that we would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates and the current
creditworthiness of the counterparties. As of June 30, 1999, we estimate that we
would have paid approximately A$3.4 million ($2.3 million) to terminate the
agreements.
The table below provides information about our interest rate swaps. The table
presents notional amounts and weighted-average interest rates by expected
(contractual) maturity dates. Notional amounts are used to calculate the
contractual payments to be exchanged under the contract. The information is
presented in U.S. dollar equivalents (in thousands), which is our reporting
currency. The instrument's actual cash flows are denominated in Australian
dollars.
25
<PAGE>
<TABLE>
<CAPTION>
As of June 30, 1999
------------------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total
-------- -------- -------- -------- -------- ---------- ---------
(U.S. dollars, in thousands, except interest rates)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps:
Variable to fixed.......................... - - - $33,376 - $66,751 $100,127
Average pay rate %......................... 7.95% 7.95% 7.95% 7.95% 7.95% 7.95% 7.95%
Average receive rate %..................... 7.65% 7.65% 7.65% 7.65% 7.65% 7.65% 7.65%
</TABLE>
26
<PAGE>
PART II - OTHER INFORMATION
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.
<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: August 16, 1999
-----------------------------------------------------------
By: /S/ Valerie L. Cover
-----------------------------------------------------------
Valerie L. Cover
Controller
(A Duly Authorized Officer and Principal Financial Officer)
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UIH
AUSTRALIA/PACIFIC, INC.'S FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1999 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-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 138
<SECURITIES> 0
<RECEIVABLES> 5,909
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,178
<PP&E> 341,913
<DEPRECIATION> 208,373
<TOTAL-ASSETS> 260,535
<CURRENT-LIABILITIES> 37,725
<BONDS> 381,420
0
0
<COMMON> 178
<OTHER-SE> (339,856)
<TOTAL-LIABILITY-AND-EQUITY> 260,535
<SALES> 0
<TOTAL-REVENUES> 64,820
<CGS> 0
<TOTAL-COSTS> 47,445
<OTHER-EXPENSES> 49,943
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (33,037)
<INCOME-PRETAX> (122,102)
<INCOME-TAX> 0
<INCOME-CONTINUING> (122,102)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (122,102)
<EPS-BASIC> (6.86)
<EPS-DILUTED> (6.86)
</TABLE>
