<PAGE> 1
================================================================================
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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number x-xxxxx
KABELMEDIA HOLDING GMBH
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
FEDERAL REPUBLIC OF GERMANY NOT APPLICABLE
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
KOELNER STRASSE 6, 65760 ESCHBORN, GERMANY
(Address of principal executive offices)
Registrant's telephone number, including area code: 011-49-6196-926360
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 14 pages, sequentially numbered in the bottom
center of each page.
================================================================================
<PAGE> 2
KABELMEDIA HOLDING GMBH
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated statements of operations -- Three months ended September 30,
1997 and 1996; Nine months ended September 30, 1997 and 1996...................... 3
Condensed consolidated balance sheets -- September 30, 1997 and December 31, 1996.... 4
Condensed consolidated statements of cash flows -- Nine months ended
September 30, 1997 and 1996....................................................... 5
Notes to condensed consolidated financial statements................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................... 9
PART II. OTHER INFORMATION............................................................ 13
Signatures............................................................................. 14
</TABLE>
2
<PAGE> 3
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, 1997 SEPTEMBER 30, 1997
--------------------------- ---------------------------
1996 1997 1997 1996 1997 1997
------- ------- ------- ------- ------- -------
DM DM U.S.$ DM DM U.S.$
<S> <C> <C> <C> <C> <C> <C>
Revenues................................. 16,661 17,957 10,162 47,723 53,415 30,227
Operating costs and expenses:
Operations............................. 3,052 3,086 1,746 8,515 9,101 5,150
Selling, general and administrative.... 2,770 2,910 1,647 8,378 9,169 5,189
Corporate overhead..................... 2,355 2,211 1,251 6,112 6,226 3,523
Depreciation and amortization.......... 12,232 12,598 7,129 34,623 37,052 20,968
------- ------- ------- ------- ------- -------
Total.................................... 20,409 20,805 11,773 57,628 61,548 34,830
======= ======= ======= ======= ======= =======
Operating loss........................... (3,748) (2,848) (1,611) (9,905) (8,133) (4,603)
Interest expense:
Bank debt and other.................... (2,033) (2,648) (1,499) (11,628) (8,257) (4,672)
Senior Discount Notes.................. (3,609) (6,912) (3,911) (3,609) (19,096) (10,806)
Subordinated Shareholder Loans......... -- -- -- (8,968) -- --
Unrealized foreign currency loss......... (4,063) (303) (171) (4,063) (298) (168)
Net gain on the sale of Neuruppin........ 0 1,593 901 -- 1,593 901
Other.................................... 14 6 3 23 22 12
------- ------- ------- ------- ------- -------
Loss before income taxes................. (13,439) (11,112) (6,288) (38,150) (34,169) (19,336)
Income tax expense....................... (174) (19) (11) (300) (208) (118)
------- ------- ------- ------- ------- -------
Net loss before extraordinary item....... (13,613) (11,131) (6,299) (38,450) (34,377) (19,454)
Extraordinary loss....................... (5,322) (1,013) (573) (5,322) (1,013) (573)
------- ------- ------- ------- ------- -------
Net loss................................. (18,935) (12,144) (6,872) (43,772) (35,390) (20,027)
======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1996 SEPTEMBER 30, 1997
------------ --------------------------
DM DM U.S.$
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash....................................................... 951 104 59
Accounts receivable -- net................................. 2,815 3,472 1,965
Inventory.................................................. 1,811 2,789 1,578
Property, plant and equipment -- net....................... 230,341 224,380 126,976
Goodwill -- net............................................ 147,747 150,386 85,103
Foreign currency forward contracts......................... 9,062 34,927 19,765
Other assets............................................... 29,305 27,852 15,762
-------- -------- -------
TOTAL ASSETS............................................... 422,032 443,910 251,208
======== ======== =======
Accounts payable........................................... 6,290 4,197 2,375
Accrued expenses and other liabilities..................... 10,140 10,098 5,715
Deferred gain on foreign currency forward contracts........ 7,606 9,133 5,169
Deferred revenue........................................... 8,703 8,526 4,825
Deferred purchase obligations.............................. 7,875 2,729 1,544
Bank debt.................................................. 111,175 130,644 73,931
Senior Discount Notes...................................... 163,131 206,861 117,062
-------- -------- -------
TOTAL LIABILITIES.......................................... 314,920 372,188 210,621
SHAREHOLDER'S EQUITY
Registered capital......................................... 10,000 10,000 5,659
Capital contributions...................................... 200,192 200,192 113,288
Accumulated deficit........................................ (103,080) (138,470) (78,360)
-------- -------- -------
TOTAL SHAREHOLDERS' EQUITY................................. 107,112 71,722 40,587
-------- -------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................. 422,032 443,910 251,208
======== ======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1996 1997 1997
-------- ------- -------
DM DM U.S.$
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities.................. 3,164 13,020 7,368
INVESTING ACTIVITIES
Purchases of property, plant equipment..................... (14,829) (7,823) (4,427)
Acquisition of businesses, less cash acquired.............. (14,768) (22,003) (12,451)
Acquisition of other assets................................ (105) -- --
Proceeds from sale of Neuruppin............................ -- 1,636 926
-------- ------- -------
Net cash used in investing activities...................... (29,702) (28,190) (15,952)
FINANCING ACTIVITIES
Proceeds from bank debt.................................... 119,181 27,800 15,731
Proceeds from Senior Discount Notes........................ 149,008
Proceeds from deferred purchase obligations................ -- 2,728 1,544
Payments of acquired debt.................................. (4,625) -- --
Payments of capitalized bank refinancing costs............. (11,415) -- --
Payments of bank debt...................................... (237,500) (7,300) (4,131)
Payments of deferred purchase obligations.................. (2,583) (7,875) (4,456)
Proceeds from (payments of) bank overdrafts................ -- (1,030) (583)
Proceeds from Subordinated Shareholder Loans............... 10,199 -- --
Contribution to capital.................................... 100 -- --
-------- ------- -------
Net cash provided by financing activities.................. 22,365 14,323 8,105
Net decrease in cash and cash equivalents.................. (4,173) (847) (479)
Cash and cash equivalents at beginning of period........... 7,866 951 538
-------- ------- -------
Cash and cash equivalents at end of period................. 3,693 104 59
======== ======= =======
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE> 6
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" or "Kabelmedia") have been prepared in
accordance with U.S. generally accepted accounting principles 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. generally accepted accounting principles 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, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. For further information, refer
to the consolidated financial statements and footnotes thereto for the year
ended December 31, 1996 included in the Company's Form 10-K.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with United States generally accepted accounting
principles ("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
consolidated financial statements as of and for the three and nine months ended
September 30, 1997 have been translated into United States dollars ("U.S. $") at
the rate of DM 1.7671 per U.S. $1.00, the Noon Buying Rate of the Federal
Reserve Bank of New York on September 30, 1997. 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. BUSINESS ACQUISITIONS AND DISPOSITION
On January 31, 1997, Kabelmedia acquired the shares of Antennen-Lindemann
("Lindemann") for a total consideration of DM 20,000,000 plus closing costs and
expenses of DM 550,000. The purchase price consisted of cash payments of DM
16,730,000, the assumption of liabilities of DM 770,000 and a deferred purchase
obligation of DM 2,500,000. DM 500,000 of the deferred purchase obligation and
the initial purchase price adjustment of DM 208,000 was paid on May 28, 1997.
The remainder of the deferred purchase obligation plus accrued interest of 4%
per annum is due on the third anniversary date, January 31, 2000. The
acquisition resulted in goodwill of DM 18,346,000.
On May 30, 1997, Kabelmedia acquired the assets of Telekommunikation Doebis
Antennenservice ("Doebis") for total consideration of DM 3,643,000, plus closing
costs and expenses of DM 85,000. The purchase price consisted of cash payments
of DM 2,914,000 and a deferred purchase obligation of DM 728,000. The deferred
purchase obligation plus accrued interest of 4% is due and payable on May 30,
1998.
On September 30, 1997, Kabelmedia settled and paid its deferred purchase
obligation arising out of its acquisition of the BFR Group in September 1995 of
DM 7,875,000, representing the discounted present value of the obligation.
6
<PAGE> 7
On July 4, 1997, KabelMedia sold its 50% interest in BKG
Breitbandkabelgesellschaft mbH, Neuruppin ("Neuruppin") for total cash
consideration on DM 1,850,000. The resulting sale resulted in a gain of DM
1,593,000, net of costs and expenses of DM 214,000.
3. FOREIGN EXCHANGE
Through September 30, 1997, the Company had entered into foreign currency
forward contracts to hedge against the effect of exchange rate fluctuations on
the Senior Discount Notes. The U.S. dollar denominated Senior Discount Notes are
recorded in Deutsche Marks at the Noon Buying Rate of the Federal Reserve Bank
of New York on September 30, 1997. The foreign currency forward contracts
require the Company to exchange Deutsche Marks for U.S. dollars and generally
mature in four to five years. The premium on the foreign currency forward
contracts, representing the difference between the contracted forward rate and
the spot rate at the date of the contracts, in an initial amount of DM
11,043,000, is being amortized over the life of the contracts. The asset is
adjusted to the period-end exchange rate which offsets the related unrealized
gain or loss on the Senior Discount Notes. For the three months and nine months
ended September 30, 1997, the Company recorded an unrealized foreign exchange
loss of DM 303,000 and DM 298,000, respectively, as a result of entering into
foreign currency forward contracts. At September 30, 1997, the Company had
foreign currency forward contracts to acquire $ 130,000,000 at exchange rates of
between DM 1.4385 to DM 1.7552 with settlement dates ranging from October of
2001 to June of 2002.
4. RESERVE FOR CORPORATE RESTRUCTURING
During the three and nine months ended September 30, 1997, the Company
applied approximately DM 207,000 and DM 811,000 of costs and expenses against
the DM 1,611,000 restructuring accrual which was established in 1996 to allow
for the move of the Company's corporate office from Plauen to Frankfurt. The
expenses incurred primarily relate to the rehabilitation of leasehold
improvements in Plauen and severance payments.
5. RECLASSIFICATION
The Company has made the decision to report its corporate overhead as a
separate line item in its Condensed Consolidated Statements of Operations.
Corporate overhead is primarily comprised of the salaries of senior management
and the administrative, accounting and MIS staff, the lease of office space for
corporate activities and fees and expenses paid to the Company's legal,
accounting and SMS consultants.
The three and nine month periods ended September 30, 1996 have been
restated to reflect this change in accounting presentation by allocating DM
2,355,000 and DM 6,112,000 from operating and selling, general and
administrative expenses to corporate overhead.
6. EXTRAORDINARY LOSS
In July 1997, the Company fully amortized the financing fees related to the
early cancellation of DM 75,000,000 of its DM 400,000,000 1996 Bank Facility.
7. SUBSEQUENT EVENTS
On November 7, 1997, the Company signed a purchase and sale contract to
acquire 100% of the shares of Innocom Schwerin GmbH ("Innocom") for total cash
consideration of DM 26,400,000. Innocom owns and operates a cable television
system in Schwerin, Germany. It serves approximately 34,100 customers.
On December 1, 1997, the Company expects to execute an amendment to its
1996 Bank Facility. The amendment would change the borrower under the Facility
to Kabelmedia Management GmbH, a wholly owned subsidiary of Kabelmedia Holding
GmbH, and the existing borrowers, eleven subsidiaries of Kabelmedia Management
GmbH, to guarantors. This change is designed solely to reduce administrative
burden related to drawdowns and repayments. The amendment could also reduce the
revolver and term loan portion of the Facility to DM 255,000,000 from DM
300,000,000, extend the period for which the borrower
7
<PAGE> 8
may borrow, repay and reborrow by one year through December 31, 1998, and extend
the final maturity date of the revolver and term loan by one year. The amendment
would also increase the DM 20,000,000 revolving facility to DM 65,000,000 and
extend the final maturity of both the revolving facility and the DM 5,000,000
overdraft facility by one year. The amendment would also expand the permitted
use of proceeds to allow the Company to borrow in order to make open market
repurchases of its Senior Discount Notes under certain conditions.
The amended Facility would continue to be secured by a first ranking
security interest on substantially all assets and revenues of the borrower and
the guarantors and a pledge of shares of the borrower's subsidiaries. The
amended Facility would continue to contain certain covenants which, among other
things, require specified ratios relating to cash flow and total debt to
contributed equity.
8
<PAGE> 9
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1996 AND 1997
REVENUES. Revenues increased 7.8% from DM 16,661,000 in the third quarter
of 1996 to DM 17,957,000 in the third quarter of 1997. The increase was
primarily attributable to a 7.9% increase (from 360,775 to 389,275) in the
average monthly number of customers. The average monthly revenue per customer
for the third quarter of 1996 and for the third quarter of 1997 was DM 15.39 and
15.38, respectively. The increase in the Company's average monthly number of
customers was primarily related to the acquisitions of cable television
companies in 1997, which as of the respective dates of the acquisitions,
collectively served approximately 25,400 customers (approximately 19,300
acquired on January 31, 1997 and approximately 6,100 acquired on May 31, 1997).
In addition, the Company acquired approximately 3,500 additional customers by
building out and marketing its existing cable systems during the relevant
period. The average monthly revenue per customer decreased slightly from DM
15.39 to DM 15.38 as a result of the 25,400 customers acquired in 1997, which
had average monthly revenue per customer of approximately DM 12.13, offset by
rate increases implemented since June 30, 1996.
OPERATING EXPENSES. Operating expenses increased 1.1% from DM 3,052,000 in
the third quarter of 1996 to DM 3,086,000 in the third quarter of 1997. A
decrease in the costs associated with the repair and maintenance of the
Company's customer base partially offset increased costs associated with the
cable companies acquired in 1997 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.
SELLING, GENERAL And ADMINISTRATIVE. Selling, general and administrative
expenses increased by 5.1% from DM 2,770,000 in the third quarter of 1996 to DM
2,910,000 in the third quarter of 1997, principally as a result of the increased
costs associated with the cable television companies acquired in 1997, system
subscriber audits, and more aggressive marketing.
CORPORATE OVERHEAD. Corporate overhead decreased by 6.1% from DM 2,355,000
in the third quarter of 1996 to DM 2,211,000 in the third quarter of 1997. The
decrease was primarily attributable to a reduction in legal, accounting and
consulting expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
DM 366,000 from DM 12,232,000 in the third quarter of 1996 to DM 12,598,000 in
the third quarter of 1997, principally as a result of increased assets and
goodwill associated with acquisitions of cable television companies in 1997.
INTEREST EXPENSE. Interest expense increased from DM 5,642,000 in the
third quarter of 1996 to DM 9,560,000 in the third quarter of 1997 as the result
of an increase in the average indebtedness from approximately DM 267,200,000 in
the third quarter of 1996, during which Senior Discount Notes were issued, to DM
333,600,000. Of the total interest accrued in the third quarter of 1997, DM
6,912,000, or 72.3%, related to non-cash interest on the Senior Discount Notes.
UNREALIZED FOREIGN CURRENCY LOSS. The Company recorded an unrealized
foreign currency loss of DM 303,000 in the third quarter of 1997, as a result of
entering into foreign currency forward contracts. At September 30, 1997, the
Company had entered into foreign exchange forward contracts of $130,000,000 at
exchange rates between DM 1.4385 and DM 1.7552 with settlement dates ranging
from October of 2001 to June of 2002.
NET GAIN ON SALE OF NEURUPPIN. The Company recorded a net gain of DM
1,593,000 (after closing costs and expenses of approximately DM 214,000) in the
third quarter of 1997, as the result of the sale of its 50.0 % interest in
Neuruppin.
9
<PAGE> 10
EXTRAORDINARY LOSS. The Company recorded an extraordinary loss of DM
1,013,000 resulting from the full amortization of bank financing fees relating
to the early cancellation of DM 75,000,000 of its DM 400,000,000 1996 Bank
Facility in July 1997. In the third quarter of 1996, the Company recorded an
extraordinary loss of DM 5,322,000 resulting from the full amortization of bank
fees associated with its 1995 Bank Facilities.
NET LOSS. Net loss decreased by DM 6,791,000, from DM 18,935,000 in the
third quarter of 1996 to DM 12,144,000 in the third quarter of 1997, 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, 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 from DM 8,484,000 for the three months
ended September 30, 1996 to DM 9,750,000 for the three months ended September
30, 1997, primarily as a result of revenues increasing at a faster rate than
operating and selling, general and administrative costs and expenses. The
Company's EBITDA margin improved from 50.9% in the third quarter of 1996 to
54.3% in the third quarter of 1997. Average monthly EBITDA per subscriber
increased by 6.5% from DM 7.84 per subscriber in the third quarter of 1996 to DM
8.35 per subscriber in the third quarter of 1997.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996 AND 1997
REVENUES. Revenues increased 11.9% from DM 47,723,000 in the first nine
months of 1996 to DM 53,415,000 in the first nine months of 1997. The increase
was primarily attributable to a 7.1% increase (from 359,306 to 384,942) in the
average monthly number of customers and a 4.5% increase (from DM 14.76 to DM
15.42) in the average monthly revenue per customer from the first nine months of
1996 to the first nine months of 1997. The increase in the Company's average
monthly number of customers was primarily related to the acquisitions of cable
television companies subsequent to December 31, 1995 which as of the respective
dates of the acquisitions, collectively served approximately 40,100 customers
(14,700 acquired on January 27, 1996; 19,300 acquired on January 31, 1997 and
6,100 acquired on May 31, 1997). In addition the Company acquired approximately
4,800 additional customers by building out and marketing its existing cable
systems during the relevant period. The increase in the average monthly revenue
per customer is attributable to rate increases implemented since January 1,
1997, as the 40,100 customers acquired had average monthly revenue per customer
of approximately DM 12.51.
OPERATING EXPENSES. Operating expenses increased 6.9% from DM 8,515,000 in
the first nine months of 1996 to DM 9,101,000 in the first nine months of 1997,
principally as a result of increased costs associated with the companies
acquired in January 1, 1997 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.
SELLING, GENERAL And ADMINISTRATIVE. Selling, general and administrative
expenses increased by 9.4% from DM 8,378,000 in the first nine months of 1996 to
DM 9,169,000 in the first nine months of 1997, principally as a result of the
increased costs associated with the cable television companies acquired in
January 1, 1997 and increased costs associated with system audits and a more
aggressive marketing plan.
CORPORATE OVERHEAD. Corporate overhead increased by 1.9% from DM 6,112,000
in the first nine months of 1996 to DM 6,226,000 in the first nine months of
1997. The increase is attributable to the addition of senior management,
accounting, administrative and MIS personnel required to manage a larger
customer base. A portion of the increase was partially offset by reductions in
external legal, accounting and consulting costs.
10
<PAGE> 11
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
DM 2,429,000 from DM 34,623,000 in the first nine months of 1996 to DM
37,052,000 in the first nine months of 1997, principally as a result of
increased assets and goodwill associated with acquisitions of cable television
companies in 1997.
INTEREST EXPENSE. Interest expense increased from DM 24,205,000 in the
first nine months of 1996 to DM 27,353,000 in the first nine months of 1997,
primarily as a result of an increase in the weighted average interest rate.
Average indebtedness declined from DM 333,992,000 in the first nine months of
1996 to DM 325,944,000 in the first nine months of 1997. The decline in average
indebtedness primarily resulted from the conversion of the Subordinated
Shareholder Loans to Shareholder Capital on June 19, 1996, offset by the
issuance of the Senior Discount Notes on July 23, 1996. Of the total interest
accrued in the first nine months of 1997, DM 19,096,000 related to non-cash
interest on the Senior Discount Notes.
UNREALIZED FOREIGN CURRENCY LOSS. The Company recorded an unrealized
foreign currency loss of DM 298,000 in the first nine months of 1997 as a result
of the Company entering into foreign exchange currency forward contracts. At
September 30, 1997, the Company had entered into foreign exchange forward
contracts of $130,000,000 at exchange rates between DM 1.4385 and DM 1.7552 with
settlement dates ranging from October of 2001 to June of 2002.
NET GAIN ON THE SALE OF NEURUPPIN. The Company recorded a net gain of DM
1,593,000 (after closing costs and expenses of approximately DM 214,000) in the
first nine months of 1997 as a result of the sale of its 50.0% interest in
Neuruppin.
EXTRAORDINARY LOSS. The Company recorded an extraordinary loss of DM
1,013,000 resulting from the full amortization of bank fees relating to the
early cancellation of DM 75,000,000 of its DM 400,000,000 1996 Bank Facility.
The Company recorded a DM 5,322,000 extraordinary loss associated with the full
amortization of financing fees related with its 1995 Bank Facilities.
NET LOSS. Net loss decreased by DM 8,382,000 from DM 43,772,000 in the
first nine months of 1996 to DM 35,390,000 in the first nine months of 1997, 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, 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 from DM 24,718,000 for the nine months
September 30, 1996 to DM 28,919,000 for the nine months ended September 30,
1997, primarily as a result of revenues increasing at a faster rate than
operating and selling, general and administrative costs and expenses. The
Company's EBITDA margin improved from 51.8% in the first nine months of 1996 to
54.1% in the first nine months in 1997. Average monthly EBITDA per subscriber
increased by 9.3% from DM 7.64 per subscriber in the first nine months of 1996
to DM 8.35 per subscriber in the first nine months of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied on four sources for necessary funding:
(i) cash flow from operations
(ii) borrowings under its bank facilities
(iii) issuance of the Senior Discount Notes
(iv) capital contributions from its equity investors
11
<PAGE> 12
At September 30, 1997, the Company's aggregate consolidated indebtedness
was approximately DM 340,234,000 comprised of DM 127,500,000 of debt outstanding
under its 1996 Bank Facility, DM 3,144,000 of other bank debt, DM 2,729,000 of
deferred purchase obligations and DM 206,861,000 of Senior Discount Notes. The
Senior Discount Notes are denominated in dollars and for these purposes have
been converted to Deutsche Marks at the rate of DM 1.7671, the Noon Buying Rate
of the Federal Reserve Bank of New York on September 30, 1997.
For the nine months ended September 30, 1997 the Company generated net cash
from operating activities of DM 13,020,000.
For the nine months ended September 30, 1997, the Company used DM
28,190,000 of cash in investing activities. Such cash uses were primarily
related to the acquisition of the shares of Lindemann and assets of Doebis. The
Company made capital expenditures of DM 7,823,000 in the nine month period ended
September 30, 1997. The sale of the Company's 50% investment in Neuruppin
generated net cash proceeds of DM 1,636,000.
Capital expenditures of DM 7,823,000 for the nine month period ended
September 30, 1997 were related to the continued construction, expansion and
upgrading of existing cable systems. Over the nine month period ended September
30, 1997 the Company added 4,800 customers by building out and marketing its
existing 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 maintain its current level of capital expenditures
in the near term to further upgrade existing cable systems. To the extent cash
flow is not sufficient to fund its capital expenditures, the Company expects to
borrow the necessary funds under its 1996 Bank Facility.
Net cash provided by financing activities amounted to DM 14,323,000 during
the nine months ended September 30, 1997. Such net cash was primarily provided
by DM 20,500,000 of net borrowings under the 1996 Bank Facility less net
repayments of DM 5,147,000 of deferred purchase obligations and DM 1,030,000
under the Company's overdraft facility. The Company expects that its amended
bank facility will provide sufficient funding to allow it to continue to make
acquisitions of cable television systems in Germany through at least 1998. In
addition, under certain conditions the Company would be permitted to use bank
borrowings to acquire its Senior Discount Notes through open market purchases.
Substantial amounts of depreciation and amortization expense and the
accrual of non-cash interest on Senior Discount Notes continue to contribute to
the net losses experienced by the Company. These expenses, however, do not
result in a current 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 nine month period ended September 30, 1997
was DM 28,919,000. Total interest expense for the same period was DM 27,353,000.
Of the total interest expense in that nine month period, DM 19,096,000 related
to non-cash interest on the Senior Discount Notes.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 -- Financial Data Schedule.
(b) Reports on Form 8-K
None.
13
<PAGE> 14
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, 1997
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
SEC_FORM 10-2 DATED SEPTEMBER 30,1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH (B) FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> DEUTSCHE MARK
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1,7671
<CASH> 104
<SECURITIES> 0
<RECEIVABLES> 3,472
<ALLOWANCES> 0
<INVENTORY> 2,789
<CURRENT-ASSETS> 0
<PP&E> 224,380
<DEPRECIATION> 0
<TOTAL-ASSETS> 443,910
<CURRENT-LIABILITIES> 34,683
<BONDS> 337,505
<COMMON> 10,000
0
0
<OTHER-SE> 61,722
<TOTAL-LIABILITY-AND-EQUITY> 443,910
<SALES> 53,415
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 24,496
<OTHER-EXPENSES> 37,052
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,353
<INCOME-PRETAX> (34,169)
<INCOME-TAX> 208
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 1,013
<CHANGES> 0
<NET-INCOME> (35,390)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
