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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO RULE 13a - 16 OR 15(d) - 16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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 NUMBER X-XXXXX
KABELMEDIA HOLDING GMBH
(Exact name of registrant as specified in its charter)
FEDERAL REPUBLIC OF GERMANY NOT APPLICABLE
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
OBERER STEINWEG 10, 08523 PLAUEN, GERMANY
(Address of principal executive offices)
Registrant's telephone number, including area code: 011-49-3741-26060
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
________ _______
Included in this filing are pages, sequentially numbered in the bottom
center of each page.
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KABELMEDIA HOLDING GMBH
FORM 10-Q
INDEX
<TABLE>
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PAGE
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed consolidated statements of operations -- Three months ended
September 30, 1996 and 1995; Nine months ended September 30, 1996 and
1995.................................................................... 3
Condensed consolidated balance sheets -- September 30, 1996 and
December 31, 1995....................................................... 4
Condensed consolidated statements of cash flows -- Nine months ended
September 30, 1996 and 1995............................................. 5
Notes to condensed consolidated financial statements...................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 8
Part II. Other Information......................................................... 12
Signatures.......................................................................... 13
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------------
1995 1996 1996 1995 1996 1996
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
DM DM U.S.$ DM DM U.S.$
Revenues........................... 7,607 16,661 10,911 19,315 47,723 31,253
Operating costs and expenses:
Operations....................... 1,144 3,374 2,210 2,884 9,176 6,009
Selling, general and
administrative................ 3,726 4,803 3,145 10,037 13,829 9,056
Depreciation and amortization.... 5,422 12,232 8,010 13,908 34,623 22,674
------- ------- ------- ------- ------- -------
Total.............................. 10,292 20,409 13,365 26,829 57,628 37,739
------- ------- ------- ------- ------- -------
Operating loss..................... (2,685) (3,748) (2,454) (7,514) (9,905) (6,486)
Interest expense:
Bank debt........................ 3,059 2,033 1,331 7,037 11,628 7,615
Senior Discount Notes............ 0 3,609 2,363 0 3,609 2,363
Subordinated Shareholder Loans... 3,217 0 0 8,678 8,968 5,873
Unrealized foreign currency
transaction loss.............. 0 4,063 2,661 0 4,063 2,661
Minority interest in net loss of
subsidiaries..................... 35 14 9 80 23 15
------- ------- ------- ------- ------- -------
Loss before income taxes........... (8,926) (13,439) (8,800) (23,149) (38,150) (24,983)
Income tax benefit (expense)....... 221 (174) (114) 221 (300) (196)
------- ------- ------- ------- ------- -------
Net loss before extraordinary
item............................. (8,705) (13,613) (8,914) (22,928) (38,450) (25,179)
Extraordinary item................. (2,670) (5,322) (3,485) (2,670) (5,322) (3,485)
------- ------- ------- ------- ------- -------
Net loss........................... (11,375) (18,935) (12,399) (25,598) (43,772) (28,664)
======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, ---------------------------
1995 1996 1996
------------ ----------- -----------
DM DM U.S.$
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash.................................................. 7,866 3,693 2,418
Accounts receivable -- net............................ 2,291 2,639 1,728
Inventory............................................. 1,185 1,848 1,210
Property, plant and equipment -- net.................. 235,327 233,939 153,202
Goodwill -- net....................................... 153,155 151,562 99,255
Other assets.......................................... 21,041 28,297 18,531
------- ------- -------
TOTAL ASSETS.......................................... 420,865 421,978 276,344
Accounts payable...................................... 13,930 5,553 3,637
Accrued expenses and other liabilities................ 21,540 18,472 12,096
Deferred revenue...................................... 9,830 9,800 6,418
Bank debt............................................. 228,812 110,493 72,360
Senior Discount Notes................................. 0 156,680 102,606
Subordinated Shareholder Loans........................ 172,638 0 0
------- ------- -------
TOTAL LIABILITIES..................................... 446,750 300,998 197,117
Minority interest in subsidiaries..................... 1,727 459 301
SHAREHOLDERS' EQUITY (DEFICIENCY)
Registered capital.................................... 100 10,000 6,549
Capital contributions................................. 18,187 200,192 131,101
Accumulated deficit................................... (45,899) (89,671) (58,724)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY)............... (27,612) 120,521 78,926
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY)........................................ 420,865 421,978 276,344
======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
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KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------
1995 1996 1996
------- -------- --------
DM DM U.S. $
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities............... 1,489 581 380
INVESTING ACTIVITIES
Purchases of property, plant and equipment.............. (7,953) (14,829) (9,711)
Acquisition of businesses, less cash acquired........... (76,289) (14,768) (9,671)
Acquisition of other assets............................. (304) (105) (69)
------- ------- -------
Net cash used in investing activities................... (84,546) (29,702) (19,451)
FINANCING ACTIVITIES
Proceeds from bank debt................................. 115,569 119,181 78,049
Repayment of 1995 Facilities............................ 0 (237,500) (155,534)
Proceeds from Senior Discount Notes..................... 0 149,008 97,583
Contributions to capital................................ 3,000 100 65
Payments of acquired debt............................... (73,918) (4,625) (3,029)
Payments of capitalized financing costs................. (6,047) (11,415) (7,475)
Proceeds from Subordinated Shareholder Loans............ 65,211 10,199 6,679
------- ------- -------
Net cash provided by financing activities............... 103,815 24,948 16,338
------- ------- -------
Net increase (decrease) in cash and cash equivalents.... 20,758 (4,173) (2,733)
Cash and cash equivalents at beginning of period........ 2,478 7,866 5,151
------- ------- -------
Cash and cash equivalents at end of period.............. 23,236 3,693 2,418
======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
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KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Kabelmedia Holding GmbH (the "Company") have been prepared in accordance with
United States generally accepted accounting principles ("U.S. GAAP") for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by U.S. GAAP for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three- and nine-month periods ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996. For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended December 31, 1995 included
in the Company's Registration Statement on Form S-1 dated July 23, 1996.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with U.S. GAAP including those principles specific
to the cable television industry. The Company maintains its financial records in
accordance with the German Commercial Code, which represents generally accepted
accounting principles in Germany ("German GAAP"). Generally accepted accounting
principles in Germany vary in certain significant respects from U.S. GAAP.
Accordingly, the Company has recorded certain adjustments in order that these
unaudited condensed financial statements be in accordance with U.S. GAAP for
interim financial information.
Solely for the convenience of the reader, the accompanying unaudited
condensed consolidated financial statements as of and for the three and nine
months ended September 30, 1996 have been translated into United States dollars
("U.S. dollars" or "$") at the rate of DM1.527 per $1.00, the Noon Buying Rate
of the Federal Reserve Bank of New York on September 30, 1996. The translations
should not be construed as a representation that the amounts shown could have
been, or could be, converted into U.S. dollars at that or any other rate.
2. DEBT
On July 23, 1996, the Company entered into a new revolving credit facility
totaling DM375,000,000, a working capital facility of DM20,000,000, and an
overdraft facility of DM5,000,000 with a number of banks (collectively the "1996
Facility"). The interest rate under the 1996 Facility is based on London
Interbank Offered Rates plus a margin ranging from 1.25% per annum to 2.00% per
annum, depending on the ratio of indebtedness for borrowed money to the
Company's annualized operating cash flow. The proceeds received under the 1996
Facility were used to repay obligations as of July 29, 1996 under the Company's
existing revolving credit facilities (collectively the "1995 Facilities"). An
extraordinary loss of approximately DM5,322,000, resulting from the full
amortization of unamortized bank financing fees relating to the 1995 Facilities,
was recorded in July, 1996. Financing fees associated with the 1996 Facility of
approximately DM6,000,000 were capitalized and are being amortized over the life
of the 1996 Facility.
On July 29, 1996 the Company issued $100,180,000 of Senior Discount Notes
at 13.625% per annum and maturing August 1, 2006. Cash interest will not accrue
on the Senior Discount Notes prior to August 1, 2001. Thereafter, cash interest
on the Senior Discount Notes will be payable at a rate of 13.625% per annum,
semi-annually in arrears on each February 1 and August 1, commencing February 1,
2002. The Company raised approximately DM143,700,000 in net proceeds after the
payment of underwriting discounts and commissions from the sale of the Senior
Discount Notes. These funds, together with an initial draw down of DM112,000,000
on the 1996 Facility, provided the funds necessary to pay all fees and expenses
related to the issuance of the Senior Discount Notes and the origination of the
1996 Facility, to repay the 1995 Facilities and approximately DM3,500,0000 of
other bank debt and, the Company believes, provided a substantial increase
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in the borrowing capacity of the Company. On August 30, 1996 the Company repaid
DM5,000,000 of the initial drawdown on the 1996 Facility.
3. REGISTERED CAPITAL
During the third quarter, the Company converted DM9,800,000 of capital
contributions to registered capital to permit it to more easily deal with
limitations on the issuance of fractional shares under German Law.
4. SUBSEQUENT EVENT
The Company entered into several foreign currency forward contracts
subsequent to September 30, 1996 to hedge the U.S. dollar denominated Senior
Discount Notes. The contracts allow the Company to purchase U.S. dollars at
prices between DM1.4385 and DM1.4614 per U.S. dollar during the period between
October 4, 2001 and October 31, 2001. In aggregate the Company has entered into
contracts for the purchase of up to $100,000,000.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1996
REVENUES. Revenues increased 119% from DM7,607,000 in the third quarter of
1995 to DM16,661,000 in the third quarter of 1996. The increase was primarily
attributable to a 51% increase (from 238,902 to 360,775) in the average monthly
number of customers and a 45% increase (from DM10.61 to DM15.39) in the average
monthly revenue per customer from the third quarter of 1995 to the third quarter
of 1996. The increase in the Company's average monthly number of customers was
primarily related to the acquisitions of cable television companies subsequent
to June 30, 1995 which, as of the respective dates of the acquisitions,
collectively served approximately 158,408 customers. In addition, the Company
acquired approximately 9,165 additional customers by building out its existing
cable systems during this same time period. Approximately 82% of the increase in
the average monthly revenue per customer is attributable to higher average
monthly revenue per customer in the cable television companies acquired
subsequent to June 30, 1995. The remaining 18% of the increase in average
monthly revenue per customer is attributable to rate increases implemented since
June 30, 1995.
OPERATING EXPENSES. Operating expenses increased 195% from DM1,144,000 in
the third quarter of 1995 to DM3,374,000 in the third quarter of 1996,
principally as a result of the increased number of personnel related to the
cable television companies acquired subsequent to June 30, 1995, increased costs
associated with the maintenance of a larger customer base, increased costs
associated with updating and maintaining a larger customer base in the
subscriber billing system and increased costs under the Company's signal
delivery contracts with Deutsche Telekom AG, under which programming is procured
for a portion of the Company's cable systems. The increase in costs during the
quarter ended September 30, 1996 associated with the signal delivery contracts
with Deutsche Telekom primarily relate to a system in Osnabruck, a Level 4 or
B-1 Model System, in which Deutsche Telekom owns and operates the head-end and
principal transmission lines. The total increase attributable to this system was
approximately DM963,000 compared to the same period in 1995. The Osnabruck
system was acquired in September 1995 and had approximately 25,500 average
monthly customers in the third quarter of 1996. Signal delivery fees for Level 4
or B-1 Model Systems represent a higher percentage of revenues than applies to
the Company's remaining systems, which are predominantly Level 2 or Level 3
Systems, where the Company owns the principal transmission line from its own
head-end or the Deutsche Telekom signal delivery connection point through the
in-house connections, because the signal delivery fees for such Level 4 or B-1
Model Systems include a fee for the rental of Deutsche Telekom's principal
transmission lines to the home.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased by 29% from DM3,726,000 in the third quarter of 1995 to
DM4,803,000 in the third quarter of 1996, principally as a result of increases
in legal and financial consulting costs related to due diligence on
acquisitions, the development of accounting and other in-house functions and the
increased cost of personnel associated with the cable television companies
acquired subsequent to June 30, 1995. Included in selling, general and
administrative expenses for the three months ended September 30, 1996 were
severance expenses of DM48,000 and system audit expenses of approximately
DM200,000. As a percent of revenue, selling, general and administrative expenses
declined from 49% in the third quarter of 1995 to 29% in the third quarter of
1996, reflecting higher revenue per subscriber and improved efficiencies.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
126% from DM5,422,000 in the third quarter of 1995 to DM12,232,000 in the third
quarter of 1996, principally as a result of increased assets associated with
acquisitions of cable television companies.
INTEREST EXPENSE. Interest expense decreased by 10% from DM6,276,000 in the
third quarter of 1995 to DM5,642,000 in the third quarter of 1996 as a result of
reduced indebtedness. Total indebtedness decreased from DM301,087,000 on
September 30, 1995 to DM267,173,000 on September 30, 1996. On June 19, 1996,
subordinated loans to the Company by certain of its shareholders of
DM167,836,000 plus all
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<PAGE> 9
accrued and unpaid interest thereon of DM23,969,000 ("Subordinated Shareholder
Loans") were converted to shareholder capital. Bank indebtedness decreased from
DM228,812,000 on December 31, 1995 to DM110,493,000 on September 30, 1996. The
Company raised DM149,008,000 by issuing Senior Discount Notes. At September 30,
1996 the balance on the Senior Discount Notes was DM156,680,000, reflecting
accretion of interest and the foreign exchange currency loss on the translation
of the U.S. dollar denominated Senior Discount Notes into Deutsche Mark at
September 30, 1996. Of the total interest expense in the third quarter of 1996,
DM3,609,000 related to non-cash interest on the Senior Discount Notes.
FOREIGN CURRENCY LOSS. The Company recorded an unrealized foreign currency
transaction loss related to its U.S. dollar denominated Senior Discount Notes,
reflecting the decrease in value of the Deutsche Mark against the U.S. dollar
between July 29, 1996 and September 30, 1996 from DM1.4874 to DM1.5270 per U.S.
dollar.
EXTRAORDINARY LOSS. On July 29, 1996 the Company repaid and cancelled its
1995 Facilities. All unamortized fees and expenses associated with the 1995
Facilities were fully amortized as of that date.
NET LOSS. Net loss increased DM7,560,000 from DM11,375,000 in the third
quarter of 1995 to DM18,935,000 in the third quarter of 1996 as a result of the
factors discussed above.
EBITDA. In addition to other items, some of which are reflected in its
statement of operations data, the Company measures its financial performance by
EBITDA. The Company defines EBITDA as earnings (loss) before extraordinary
items, minority interests, net interest expense, income taxes and depreciation
and amortization. The Company believes that EBITDA is a meaningful measure of
performance because it is commonly used in the cable television industry to
analyze and compare cable television companies on the basis of operating
performance, leverage and liquidity. EBITDA is not a U.S. GAAP measure of income
(loss) or cash flow from operations and should not be considered as an
alternative to net income as an indication of the Company's financial
performance or as an alternative to cash flow from operating activities as a
measure of liquidity. EBITDA increased significantly from DM2,737,000 for the
three months ended September 30, 1995 to DM8,484,000 for the three months ended
September 30, 1996, primarily as a result of revenues increasing at a faster
rate than operating, selling, general and administrative costs and expenses. The
Company's EBITDA margin, representing EBITDA as a percentage of revenues,
improved from 36% in the third quarter of 1995 to 51% in the third quarter of
1996. Average monthly EBITDA per subscriber increased by 105% from DM3.82 per
subscriber in the third quarter of 1995 to DM7.84 per subscriber in the third
quarter of 1996.
NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1996
REVENUES. Revenues increased 147% from DM19,315,000 in the first nine
months of 1995 to DM47,723,000 in the first nine months of 1996. The increase
was primarily attributable to a 76% increase (from 204,227 to 359,306) in the
average monthly number of customers and a 40% increase (from DM10.51 to DM14.75)
in the average monthly revenue per customer from the first nine months of 1995
to the first nine months of 1996. The increase in the Company's average monthly
number of customers was primarily related to acquisitions of cable television
companies subsequent to December 31, 1994 which, as of the respective dates of
the acquisitions, collectively served approximately 283,500 customers. In
addition, the Company acquired approximately 17,915 additional customers by
building out its existing cable systems. Approximately 88% of the increase in
the average monthly revenue per customer is attributable to higher average
monthly revenue per customer in the cable television companies acquired
subsequent to December 31, 1994. The remaining 12% of the increase in average
monthly revenue per customer is attributable to rate increases implemented since
December 31, 1994.
OPERATING EXPENSES. Operating expenses increased 218% from DM2,884,000 in
the first nine months of 1995 to DM9,176,000 in the first nine months of 1996,
principally as a result of the increased number of personnel related to the
cable television companies acquired subsequent to December 31, 1994, increased
costs associated with the maintenance of a larger customer base, increased costs
associated with updating and maintaining a larger customer base in the
subscriber billing system and increased costs under the Company's signal
delivery contracts with Deutsche Telekom. The increase in costs during the nine
months
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ended September 30, 1996 associated with the signal delivery contracts with
Deutsche Telekom primarily relates to a system in Osnabruck, a Level 4 or B-1
Model System. The total increase in Deutsche Telekom signal delivery fees
attributable to the Osnabruck system was approximately DM2,889,000 compared to
the same period in 1995. The Osnabruck system was acquired in September of 1995
and had average subscribers of approximately 25,200 for the nine months ended
September 30, 1996. Signal delivery fees for Level 4 or B-1 Model Systems
represent a higher percentage of revenues than applies to the Company's
remaining systems, which are predominantly Level 2 or Level 3 systems, because
the signal delivery fees for such Level 4 or B-1 Model Systems include a fee for
the rental of Deutsche Telekom's principal transmission lines to the home.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased by 38% from DM10,037,000 in the first nine months of 1995 to
DM13,829,000 in the first nine months of 1996, principally as a result of
increases in legal and financial consulting costs related to due diligence on
acquisitions, the development of accounting and other in-house functions and the
increased cost of personnel associated with the cable television companies
acquired subsequent to December 31, 1994. As a percent of revenue, selling,
general and administrative expenses declined from 52% in the first nine months
of 1995 to 29% in the first nine months of 1996, reflecting higher revenue per
subscriber and improved efficiencies.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
149% from DM13,908,000 in the first nine months of 1995 to DM34,623,000 in the
first nine months in 1996, principally as a result of increased assets
associated with the cable television companies acquired subsequent to December
31, 1994.
INTEREST EXPENSE. Interest expense increased 54% from DM15,715,000 in the
first nine months of 1995 to 24,205,000 in the first nine months of 1996 as a
result of additional indebtedness. Total average indebtedness increased from
DM192,457,000 to DM333,992,000. Of the total interest expense in the first nine
months of 1996, DM8,968,000 related to non-cash interest included in the
Subordinated Shareholder Loans, which were contributed to the Company's capital
on June 19, 1996, and DM3,609,000 related to non-cash interest on the Senior
Discount Notes.
FOREIGN CURRENCY LOSS. The Company recorded an unrealized foreign currency
transaction loss related to its U.S. dollar denominated Senior Discount Notes,
reflecting the decrease in value of the Deutsche Mark against the U.S. dollar
between July 29, 1996 and September 30, 1996 from DM1.4874 to DM1.5270 per U.S.
dollar.
EXTRAORDINARY LOSS. On July 29, 1996 the Company repaid and cancelled its
1995 Facilities. All fees and expenses associated with the 1995 Facilities were
fully amortized as of that date.
NET LOSS. Net loss increased DM18,174,000 from DM25,598,000 in the first
nine months of 1995 to DM43,772,000 in the first nine months of 1996 as a result
of the factors discussed above.
EBITDA. EBITDA increased significantly from DM6,394,000 for the nine months
ended September 30, 1995 to DM24,718,000 for the nine months ended September 30,
1996 primarily as a result of revenues increasing at a faster rate than
operating, selling, general and administrative costs and expenses. The Company's
EBITDA margin improved from 33% in the first nine months of 1995 to 52% in the
first nine months of 1996. Average monthly EBITDA per subscriber increased by
120% from DM3.47 per subscriber in the first nine months of 1995 to DM7.64 per
subscriber in the first nine months of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied on three sources for necessary funding:
(i) borrowings under its bank facilities and Senior Discount Notes;
(ii) loans and contributions from its equity investors; and
(iii) cash flow from operations.
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At September 30, 1996, the Company's aggregate consolidated indebtedness
was approximately DM267,173,000, comprised of DM107,000,000 of debt outstanding
under its 1996 Facility, DM3,493,000 of other bank debt, and DM156,680,000 of
Senior Discount Notes.
For the nine months ended September 30, 1996, the Company used cash in
investing activities of DM29,702,000. Such cash uses were primarily related to
the acquisition of a cable television company and capital expenditures and to a
lesser extent the purchase of additional shares in a majority-owned subsidiary.
Net cash provided by financing activities amounted to DM24,948,000. Such cash
was primarily provided by the Senior Discount Notes, borrowings under the 1996
Facilities and an advance by an equity investor included in the Subordinated
Shareholder Loans on May 30, 1996. The Subordinated Shareholder Loans were
converted to capital on June 19, 1996. Repayments of DM4,625,000 were made to
retire the debt of cable television companies that were acquired.
Capital expenditures of DM14,829,000 for the nine-month period ended
September 30, 1996 were related to the continued construction, expansion and
upgrading of existing systems. Over the nine-month period ended September 30,
1996, the Company added customers by building out its existing and newly
acquired systems and increasing penetration of such systems. The Company has
only minimal commitments to make capital expenditures under the terms of
concession or franchise agreements or otherwise, but anticipates that it will
continue to increase its capital expenditures in the near future to further
upgrade existing cable systems and to expand and upgrade new cable systems once
they have been acquired. To the extent cash flow from operations is not
sufficient to fund its capital expenditures, the Company expects to borrow the
necessary funds under the 1996 Facility.
Substantial amounts of depreciation and amortization expense and non-cash
interest which accrued on Subordinated Shareholder Loans and the Senior Discount
Notes continued to contribute to the net losses experienced by the Company.
These expenses, however, do not result in an outflow of cash.
The Company believes that EBITDA provides a more meaningful measure of
fixed cost coverage than does a deficiency of earnings to fixed charges. EBITDA
amounts in each period are not solely available to satisfy cash interest expense
amounts payable by the Company and may also be required for other corporate
purposes, including increases in working capital, principal payments on debt and
capital expenditures. EBITDA for the three- and nine-month periods ended
September 30, 1996 was DM8,484,000 and DM24,718,000, respectively. Total
interest expense for the same three- and nine-month periods was DM5,642,000 and
DM24,205,000, respectively. Of the total interest expense in the three- and
nine-month periods, DM3,609,000 and DM12,577,000, respectively, related to
non-cash interest on the Senior Discount Notes and Subordinated Shareholder
Loans.
On July 29, 1996, the Company raised approximately DM143,700,000 in net
proceeds from the sale of Senior Discount Notes. These funds, together with an
initial draw down of DM112,000,000 on the 1996 Facility, provided the funds
necessary to pay all fees and expenses related to the issuance of the Senior
Discount Notes and the origination of the 1996 Facility, to repay the 1995
Facilities and approximately 3,500,000 of other bank debt and, the Company
believes, provided a substantial increase in the borrowing capacity of the
Company. On August 30, 1996, the Company repaid DM5,000,000 of the initial draw
down on the 1996 Facility. At September 30, 1996, the Company had DM107,000,000
outstanding under its 1996 Facility.
TREASURY POLICIES
On July 29, 1996, the Company raised $ 100,180,000 through the sale of
Senior Discount Notes, which are denominated in U.S. dollars, and therefore the
Company will encounter currency exchange rate risk. For the third quarter ended
September 30, 1996, the Company recorded an unrealized foreign currency
transaction loss of DM4,063,000 on the translation of the U.S. dollar
denominated Senior Discount Notes into Deutsche Marks at September 30, 1996.
Subsequent to the quarter ended September 30, 1996, the Company entered into
foreign currency forward contracts for delivery of $100,000,000 at the end of
five years at prices ranging from DM1.4385 to DM1.4614 per U.S. dollar, to hedge
the U.S. dollar denominated Senior Discount Notes.
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PART II. OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KABELMEDIA HOLDING GMBH
Ben Bartel
Chief Executive Officer and
Managing Director
Paul Thomason
Chief Financial Officer and Controller
Dated: November 14, 1996
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