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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 1998.
KABELMEDIA HOLDING AG
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(Exact Name of Registrant)
KOLNER STRASSE 6, 65760 ESCHBORN
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(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual,
reports under cover of Form 20-F or Form 40-F.)
Form 20-F [X] Form 40-F. [ ]
Indicate by check mark whether the registrant by furnishing the information
contained in this form is also there furnishing the commission pursuant to Rule
12g3-2(b) under the securities Exchange Act of 1934.)
Yes [ ] No [X]
(If "yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b); 82- .)
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On September 16, 1998, KabelMedia Holding GmbH effected a conversion of its
corporate status, pursuant to which it changed from a limited liability company
(Gesellschaft mit beschrankter Haftung -- GmbH) to a joint stock corporation
(Aktiengesellschaft -- AG) by registering conversion documents with the German
Commercial Register.
KabelMedia AG's financial statements for the three and nine months ending
September 30, 1998 are attached to this Form 6-K.
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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 AG
By: /s/ PAUL THOMASON
-------------------------------------
Name: Paul Thomason
Title: Chief Financial Officer
Date: November 17, 1998
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KABELMEDIA HOLDING AG
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated statements of operations -- Three and
nine months ended September 30, 1998 and 1997.......... 5
Condensed consolidated balance sheets -- September 30, 1998
and December 31, 1997.................................. 6
Condensed consolidated statements of cash flows -- Nine
months ended September 30, 1998 and 1997............... 7
Notes to condensed consolidated financial statements........ 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................. 11
</TABLE>
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FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KABELMEDIA HOLDING AG AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
--------------------------- ---------------------------
1997 1998 1998 1997 1998 1998
------- ------- ------- ------- ------- -------
DM DM U.S.$ DM DM U.S.$
<S> <C> <C> <C> <C> <C> <C>
Revenues........................... 17,957 21,514 12,881 53,415 62,995 37,717
Operating costs and expenses:
Operations....................... 3,086 3,703 2,217 9,101 11,500 6,885
Selling, general and
administrative................ 2,904 2,695 1,614 8,872 8,540 5,113
Corporate overhead............... 2,211 2,810 1,682 6,501 8,026 4,805
Depreciation and amortization.... 12,598 13,234 7,924 37,052 38,903 23,292
------- ------- ------- ------- ------- -------
Total.............................. 20,799 22,442 13,437 61,526 66,969 40,095
------- ------- ------- ------- ------- -------
Operating loss..................... (2,842) (928) (556) (8,111) (3,974) (2,378)
Interest expense
Bank debt and other.............. (2,648) (3,618) (2,166) (8,257) (9,562) (5,726)
Senior Discount Notes............ (6,912) (6,858) (4,106) (19,096) (20,444) (12,240)
Unrealized foreign exchange gain
(loss)........................... (303) 0 0 (298) (444) (266)
Gain (loss) on sale of business.... 1,593 0 0 1,593 0 0
------- ------- ------- ------- ------- -------
Loss before income taxes and
extraordinary items.............. (11,112) (11,404) (6,828) (34,169) (34,424) (20,610)
Income tax benefit (expense)....... (19) (26) (16) (208) (138) (83)
------- ------- ------- ------- ------- -------
Net loss before extraordinary
item............................. (11,131) (11,430) (6,844) (34,377) (34,562) (20,693)
Extraordinary item................. (1,013) (1,218) (729) (1,013) (2,893) (1,732)
------- ------- ------- ------- ------- -------
Net loss........................... (12,144) (12,648) (7,573) (35,390) (37,455) (22,425)
======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
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KABELMEDIA HOLDING AG AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30
DECEMBER 31, --------------------------
1997 1998 1998
------------ ----------- -----------
DM DM U.S.$
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash.................................................. 1,568 1,536 920
Trade accounts receivable -- net...................... 1,566 1,677 1,004
Inventory............................................. 2,256 2,150 1,287
Property, plant and equipment -- net.................. 225,966 223,564 133,855
Goodwill -- net....................................... 170,598 161,907 96,939
Foreign currency forward contracts.................... 39,632 23,949 14,339
Other assets.......................................... 26,036 29,134 17,443
-------- -------- --------
TOTAL ASSETS.......................................... 467,622 443,917 265,787
======== ======== ========
Accounts payable...................................... 8,256 10,922 6,539
Accrued expenses and other liabilities................ 10,017 9,969 5,969
Unamortized discount on foreign currency forward
contracts........................................... 8,581 6,924 4,146
Deferred revenue...................................... 7,672 7,907 4,734
Deferred purchase obligations......................... 2,729 2,468 1,478
Capital lease obligations............................. 0 6,483 3,883
Bank debt............................................. 170,937 182,719 109,399
Senior Discount Notes................................. 206,394 200,944 120,311
-------- -------- --------
TOTAL LIABILITIES..................................... 414,586 428,336 256,459
SHAREHOLDER'S EQUITY
Registered Capital.................................... 10,000 10,000 5,987
Capital contributions................................. 200,192 200,192 119,861
Accumulated deficit................................... (157,156) (194,611) (116,520)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY............................ 53,036 15,581 9,328
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............ 467,622 443,917 265,787
======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
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KABELMEDIA HOLDING AG AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------
1997 1998 1998
--------- --------- ---------
DM DM U.S.$
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities............... 13,020 23,273 13,935
INVESTING ACTIVITIES
Purchases of property, plant equipment.................. (7,823) (11,857) (7,099)
Cash from sale of business.............................. 1,636 329 197
Acquisition of businesses and cable television
systems............................................... (19,275) (9,226) (4,925)
------- ------- -------
Net cash used in investing activities................... (25,462) (20,754) (12,426)
FINANCING ACTIVITIES
Proceeds from bank debt................................. 27,800 19,000 11,376
Repayment of deferred purchase obligations.............. (7,875) (729) (436)
Payments of capital lease obligations................... 0 (228) (137)
Repayment of bank debt.................................. (7,300) (4,000) (2,395)
Proceeds from (payments of) bank overdrafts............. (1,030) 0 0
Repayment of bank overdrafts............................ -- (3,218) (1,927)
Repurchase of Senior Discount Notes..................... -- (13,376) (8,009)
------- ------- -------
Net cash provided by (used in) financing activities..... 11,595 (2,551) (1,528)
------- ------- -------
Net increase (decrease) in cash and cash equivalents.... (847) (32) (19)
Cash and cash equivalents at beginning of period........ 951 1,568 939
------- ------- -------
Cash and cash equivalents at end of period.............. 104 1,536 920
======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
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KABELMEDIA HOLDING AG AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Kabelmedia Holding AG ("KabelMedia" or the "Company") 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, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further information, refer
to the consolidated financial statements and footnotes thereto for the year
ended December 31, 1997 included in the Company's Registration Statement on 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.
Effective for companies with fiscal years beginning after December 15,
1997, comprehensive income and its components are required to be reported in the
financial statements in accordance with Statement of Financial Accounting
Standard No. 130, Reporting Comprehensive Income. For the periods presented, the
Company has no comprehensive income.
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, 1998 have been translated into United States dollars ("U.S.$") at
the rate of DM1.6702 per $1.00 the Noon Buying Rate of the Federal Reserve Bank
of New York on September 30, 1998. 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 ACQUISITION AND DISPOSITION
On January 1, 1998 Kabelmedia sold approximately 800 subscribers for total
consideration of DM329,000. The disposition resulted in a loss on the sale of
business of DM444,000.
In April 1998, Kabelmedia acquired the cable television assets of MKM
Kabelfernsehen GmbH & Co. KG Projetkt Magdeburg ("MKM-Magdeburg") located in the
city of Magdeburg, Germany for total consideration of DM1,450,000. The systems
which Kabelmedia acquired from MKM-Magdeburg passed approximately 2,700 homes
and had 2,600 customers at the acquisition date.
In July, Kabelmedia acquired the shares of HUSAT Kommunikationssysteme GmbH
("HUSAT") for total consideration of DM16,894,000 plus closing costs and
expenses of DM465,000. The purchase price consisted of cash payments of
approximately DM8,896,000, the assumption of liabilities of DM7,530,000, and a
deferred purchase obligation of DM468,000. HUSAT passed approximately 30,066
homes and served approximately 23,500 customers at the date of acquisition.
In July, KabelMedia purchased one cable television system of MKM
Kabelfernsehen GmbH & Co. KG, Koblenz ("MKM-Koblenz") for total consideration of
DM1,991,000 plus closing costs and expenses of DM161,000. The purchase price
consisted of cash payments of approximately DM1,000 and the assumption of
liabilities of DM1,990,000. The system passed 3,661 homes and had 2,370
customers at the date of
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KABELMEDIA HOLDING AG AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
2. BUSINESS ACQUISITION AND DISPOSITION -- (CONTINUED)
acquisition. KabelMedia has contracted to purchase a second cable television
system from MKM-Koblenz for total consideration of approximately DM2,050,000.
The system passes approximately 2,840 homes and serves approximately 2,800
customers.
3. FOREIGN EXCHANGE
The Company has entered into foreign currency forward contracts to hedge
against the effect of exchange rate fluctuations of the U.S. dollar denominated
Senior Discount Notes. At September 30, 1998 the Company had entered into
foreign currency forward contracts for delivery of $130,000,000 between October
4, 2001 and June 28, 2002, at prices ranging from DM1.4385 to DM1.7752 per
U.S.$1.00. See Note 9 to the December 31, 1997 statements included in the
Company's Annual Report on Form 10-K.
4. SENIOR DISCOUNT NOTES
In February, the Company purchased and cancelled a portion of its Senior
Discount Notes with a net book value of DM5,807,000 for cash consideration of
DM7,200,000. The purchase of the notes resulted in an extraordinary loss of
DM1,675,000, representing the difference between the purchase price and the
accreted value of the Senior Discount Notes at the time of repurchase and the
full amortization of the unamortized costs and expenses related to the issuance
of the cancelled notes.
In July, the Company purchased and cancelled a portion of its Senior
Discount Notes with a net book value of DM5,203,000 for cash consideration of
DM6,176,000. The purchase of the notes resulted in an extraordinary loss of
DM1,218,000, representing the difference between the purchase price and the
accreted value of the Senior Discount Notes at the time of repurchase and the
full amortization of the unamortized costs and expenses related to the issuance
of the cancelled notes.
5. RECLASSIFICATION
Certain amounts in the prior year have been reclassified to conform with
the 1998 consolidated condensed financial statement presentation.
6. SUWEDA MERGER
In April 1998, the Company, Beteiligungsgesellschaft AGFB
Aktiengesellschaft fur Beteiligungen an Telekommunikationsunternehmen ("AGFB")
and Suweda Elektronische Medien- und Kabelkommunikations AG ("Suweda") executed
a non-binding letter of intent to merge their respective cable television
operations. Suweda was founded in 1983 in Mainz Germany to build and operate
broadband distribution networks which connect private households to radio and
television programming. Starting in 1987, Suweda entered into several agreements
with AGFB, an investment company organized under German law for the purpose of
investing in telecommunications companies. Under these agreements AGFB invested
in operating cable television companies owned and operated by Suweda and,
ultimately, in Suweda.
As a condition precedent to the merger of Suweda into Kabelmedia, Suweda
has to divest its non-cable assets and complete a reorganization in which AGFB
contributes all of its cable assets to Suweda in exchange for additional shares
in Suweda. (the "Suweda Reorganization").
AGFB has approximately 2,000 shareholders and its shares are traded on the
Frankfurt Stock Exchange. On September 25, 1998, at AGFB's annual shareholder
meeting, the shareholders of AGFB approved the Suweda Reorganization and gave
AGFB's management a mandate to approve the merger of Suweda into Kabelmedia.
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KABELMEDIA HOLDING AG AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
6. SUWEDA MERGER -- (CONTINUED)
The Company excepts its merger with Suweda to be consummated and registered
in the German Commercial Register by year end, at which time Kabelmedia Holding
AG will be renamed PrimaCom AG, but there can be no assurance that the merger
will be consummated by that time or in the future.
7. FOREIGN PRIVATE ISSUER
On January 1, 1998 the composition of the Company's management team changed
such that a majority of senior management were not U.S. residents and the
Company then qualified for foreign private issuer filing status under
application rules of the United States Securities and Exchange Commission (the
"SEC"). Upon the conversion of the Company from a limited liability company to a
joint stock corporation, the Company elected to commence filing with the SEC as
a foreign private issuer.
8. SHAREHOLDERS' EQUITY
On September 16, 1998 the Company was transformed from a German limited
liability company ("GmbH") into an Aktiengesellschaft ("AG"), a German stock
corporation. The Company is authorized to issue 2,000,000 ordinary shares of DM5
nominal amount each. Each ordinary share is entitled to one vote. The
transformation from a GmbH to an AG has been reflected for all periods
presented.
9. SUBSEQUENT EVENT
In November, certain shareholders of KabelMedia; Jacque Hackenberg, the CEO
of Kabelmedia, and Paul Thomason, the CFO of Kabelmedia, entered into a share
sale agreement. Under the share sale agreement the existing shareholders of
KabelMedia sold shares of Kabelmedia to Paul Thomason to increase his ownership
from 1.25% to 2.5% of the existing KabelMedia shares and to Jacque Hackenberg to
provide him ownership of 2.5% of the existing Kabelmedia shares.
Subsequent to the execution of the share sale agreement and in order to
satisfy a condition precedent of the Suweda merger, the Company filed a
resolution with the German Commercial Register to issue 5,417,928 additional
shares and increase its Registered Capital from DM10,000,000 to DM37,089,640.
This increase will result in a corresponding decrease in Capital Contributions
from DM200,192,000 to DM173,105,360.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
REVENUES. Revenues increased 19.8% from DM17,957,000 in the third quarter
of 1997 to DM21,514,000 in the third quarter of 1998. The increase was primarily
attributable to a 13.0% increase (from 389,275 to 439,792) in the average
monthly number of customers and a 6.0% increase (from DM15.38 to DM16.31) in the
average monthly revenue per customer from the third quarter of 1997 to the third
quarter of 1998. 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, 1997 which, as of the respective dates of the
acquisitions, collectively served approximately 62,570 customers. The entire
increase in the average monthly revenue per customer is attributable to rate
increases implemented since June 30, 1997. The full impact of these rate
increases on Kabelmedia's revenue per subscriber was partially offset by the
addition of acquired subscribers, which at the date of acquisition had lower
average monthly revenue per subscriber than Kabelmedia's existing subscribers.
OPERATING EXPENSES. Operating expenses increased 20.0% from DM3,086,000 in
the third quarter of 1997 to DM3,703,000 in the third quarter of 1998,
principally as a result of increased costs associated with the cable television
companies acquired, increased costs under the Company's signal delivery
contracts with Deutsche Telekom AG and write downs of obsolete inventory.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses decreased by 7.2% from DM2,904,000 in the third quarter of 1997 to
DM2,695,000 in the third quarter of 1998, principally as a result of a decrease
in costs associated with sales commissions and system audits.
CORPORATE OVERHEAD. Corporate overhead increased by 27.1% from DM2,211,000
in the third quarter of 1997 to DM2,810,000 in the third quarter of 1998. The
increase was primarily attributable to increased costs associated with the
addition of accounting, administrative and MIS personnel required to manage a
larger customer base, increased costs associated with customizing the Company's
billing subscriber system and increased costs associated with customer mailings.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
DM636,000 from DM12,598,000 in the third quarter of 1997 to DM13,234,000 in the
third quarter of 1998, principally as a result of increased assets and goodwill
associated with acquisitions of cable television systems.
INTEREST EXPENSE. Interest expense increased 9.6% from DM9,560,000 in the
third quarter of 1997 to DM10,476,000 in the third quarter of 1998, principally
as a result of an increase in the average bank indebtedness related to the
acquisition of cable television systems and Senior Discount Notes repurchased
since December 1997 and to the interest accreted on the Senior Discount Notes.
Of the total interest accrued in the third quarter of 1998, DM6,912,000 related
to non-cash interest and the non-cash amortization of financing fees on the
Senior Discount Notes.
INCOME TAX EXPENSE. The Company had insignificant income taxes in the third
quarter of 1997 and 1998 because of the losses it incurred.
EXTRAORDINARY LOSS. In July 1998, the Company purchased and cancelled a
portion of its Senior Discount Notes with a net book value of DM5,203,000 for
cash consideration of DM6,176,000. The purchase of the notes resulted in an
extraordinary loss of DM1,218,000, representing the difference between the
purchase price and the accreted value of the Senior Discount Notes at the time
of repurchase and the full amortization of the unamortized costs and expenses
related to the issuance of the cancelled notes.
NET LOSS. Net loss increased DM504,000 from DM12,144,000 in the third
quarter of 1997 to DM12,648,000 in the third quarter of 1998 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)
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before extraordinary items, 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 26.1% from DM9,756,000 for the three
months ended September 30, 1997 to DM12,306,000 for the three months ended
September 30, 1998, primarily as a result of revenues increasing at a faster
rate than the sum of operating, selling, general and administrative and
corporate overhead costs and expenses. Average monthly EBITDA per subscriber
increased by 11.7% from DM8.35 per subscriber in the third quarter of 1997 to
DM9.33 per subscriber in the third quarter of 1998.
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1998
REVENUES. Revenues increased 17.9% from DM53,415,000 in the first nine
months of 1997 to DM62,995,000 in the first nine months of 1998. The increase
was primarily attributable to a 12.7% increase (from 384,942 to 433,897) in the
average monthly number of customers and a 4.6% increase (from DM15.42 to
DM16.13) in the average monthly revenue per customer from the first nine months
of 1997 to the first nine months of 1998. The increase in the Company's average
monthly number of customers was primarily related to the acquisitions of cable
television systems subsequent to December 31, 1996 and, as of the respective
dates of the acquisitions, collectively served approximately 87,970 customers.
The increase in the average monthly revenue per customer is attributable to rate
increases implemented since December 31, 1996. The full impact of these rate
increases on Kabelmedia revenue per subscribers was partially offset by the
addition of acquired subscribers, which at the date of acquisition had lower
average monthly revenue per subscriber, than Kabelmedia existing subscribers.
OPERATING EXPENSES. Operating expenses increased 26.4% from DM9,101,000 in
the first nine months of 1997 to DM11,500,000 in the first nine months of 1998,
principally as a result of increased costs associated with the cable television
systems acquired, increased costs under the Company's signal delivery contracts
with Deutsche Telecom AG and write downs of obsolete inventory.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses decreased by 3.7% from DM8,872,000 in the first nine months of 1997 to
DM8,540,000 in the first nine months of 1998, principally as a result of the
decreased costs associated with sales commissions and system audits.
CORPORATE OVERHEAD. Corporate overhead increased by 23.5% from DM6,501,000
in the first nine months of 1997 to DM8,026,000 in the first nine months of
1998. The increase is attributable to the addition of the management,
accounting, administrative and MIS personnel required to manage a larger
customer base, increased costs associated with customizing the Company's billing
subscriber system and increased costs associated with customer mailings.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
DM1,851,000 from DM37,052,000 in the first nine months of 1997 to DM38,903,000
in the first nine months of 1998, principally as a result of increased assets
and goodwill associated with acquisitions of cable television companies.
INTEREST EXPENSE. Interest expense increased 9.7% from DM27,353,000 in the
first nine months of 1997 to DM30,006,000 in the first nine months of 1998 as a
result of an increase in average bank indebtedness related to the acquisitions
of cable television systems, Senior Discount Notes repurchased since December,
1997 and to the accreted interest on the Senior Discounts Notes. Of the total
interest accrued in the first nine months of 1998, DM20,444,000 related to
non-cash interest and non-cash amortization of financing fees on the Senior
Discount Notes.
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LOSS ON SALE OF BUSINESS. The Company recorded a loss on the sale of
business in the first nine months of 1998 of DM444,000 related to the sale of
approximately 800 subscribers which did not fit into the Company's strategic
plans.
INCOME TAX EXPENSE. The Company had insignificant income taxes in the first
nine months of 1997 and 1998 because of the losses it incurred.
EXTRAORDINARY LOSS. In February and July 1998, the Company purchased and
cancelled a portion of its Senior Discount Notes with an aggregate net book
value of DM11,010,000 for an aggregate cash consideration of DM13,376,000. The
purchase of the notes resulted in an extraordinary loss of DM2,893,000,
representing the difference between the purchase price and the accreted value of
the Senior Discount Notes at the respective times of repurchase and the full
amortization of the unamortized costs and expenses related to the issuance of
the cancelled notes.
NET LOSS. Net loss increased DM2,066,000 from DM35,390,000 in the first
nine months of 1997 to DM37,456,000 in the first nine months of 1998 as a result
of the factors discussed above.
EBITDA increased from DM28,941,000 for the nine months September 30, 1997
to DM34,929,000 for the nine months ended September 30, 1998, primarily as a
result of revenues increasing at a faster rate than the sum of operating,
selling, general and administrative and corporate costs and expenses. Average
monthly EBITDA per subscriber increased by 7.1% from DM8.35 per subscriber in
the first nine months of 1997 to DM8.94 per subscriber in the first nine months
of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied on three sources for necessary funding:
(i) cash flow from operations,
(ii) borrowings under its bank facilities, and
(iii) issuance of the Senior Discount Notes.
At September 30, 1998, the Company's aggregate consolidated indebtedness
was approximately DM392,614,000, comprised DM182,719,000 of debt outstanding
under bank facilities entered into in 1996 and later amended (the "Amended 1996
Facilities"), DM6,483,000 of capital leases, DM2,468,000 of deferred purchase
obligations, and DM200,944,000 of Senior Discount Notes. The Senior Discount
Notes are denominated in dollars and converted to Deutsche Marks at the rate of
DM1.6702, the Noon Buying Rate of the Federal Reserve Bank of New York on
September 30, 1998. The Company has entered into foreign currency forward
contracts to hedge against the effect of rate fluctuations on the U.S. dollar
denominated Senior Discount Notes.
For the nine months ended September 30, 1998 the Company generated net cash
from operating activities of DM23,273,000.
For the nine months ended September 30, 1998, the Company used cash in
investing activities of DM20,754,000. Such cash uses were primarily related to
capital expenditures and the acquisition of cable television systems. Net cash
used by financing activities amounted to DM2,551,000. Included in the cash
provided by investing activities is the proceeds from the assumption of
DM6,711,000 in capital leases of acquired cable television systems. The Company
intends to prepay the obligations in the event it is able to agree acceptable
economic terms with the relevant lessors. There can be no assurance that such an
agreement will be reached.
Capital expenditures of DM11,857,000 for the nine month period ended
September 30, 1998 were related to the continued construction, expansion and
upgrading of 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 continue to increase its capital
expenditures in the near future to further upgraded existing cable systems once
they have been acquired. To the extent cash flow is not sufficient to fund its
capital expenditures, the Company expects to borrow the necessary funds under
the Amended 1996 Bank
13
<PAGE> 14
Facilities. The acquisition of cable television systems for DM19,206,000 relates
to the purchase of cable assets from MKM-Magdeburg in April 1998 and
from MKM-Koblenz in July 1998 respectively and the purchase of the shares of
HUSAT in July 1998.
Substantial amounts of depreciation and amortization expense and non-cash
interest which accrued on the Senior Discount Notes continued 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, 1998
was DM34,929,000. Total interest expense for the same period was DM30,006,000.
Of the total interest expense in the nine month period, DM20,444,000 related to
non-cash interest on the Senior Discount Notes.
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SEC FORM 6-K DATED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> DEUTSCHE MARK
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1.6702
<CASH> 1,536
<SECURITIES> 0
<RECEIVABLES> 1,677
<ALLOWANCES> 0
<INVENTORY> 2,150
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<PP&E> 223,564
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<CURRENT-LIABILITIES> 44,673
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0
0
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