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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO RULE 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number x-xxxxx
KABELMEDIA HOLDING GMBH
(Exact name of registrant as specified in its charter)
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FEDERAL REPUBLIC OF GERMANY NOT APPLICABLE
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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KOLNER 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]
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KABELMEDIA HOLDING GMBH
FORM 10-Q
INDEX
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PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated statements of operations -- Three
and six months ended
June 30, 1998 and 1997................................. 3
Condensed consolidated balance sheets -- June 30, 1998 and
December 31, 1997...................................... 4
Condensed consolidated statements of cash flows -- Six
months ended June 30, 1998 and 1997.................... 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
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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)
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FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ -------------------------------
1997 1998 1998 1997 1998 1998
------- ------- ------ ------- ------- -------
DM DM U.S.$ DM DM U.S.$
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Revenues............................... 18,026 20,921 11,602 35,458 41,481 23,003
Operating costs and expenses:
Operations........................... 3,009 3,952 2,192 6,015 7,806 4,329
Selling, general and
administrative.................... 2,918 2,955 1,639 5,968 5,845 3,241
Corporate overhead................... 2,287 2,646 1,467 4,290 5,216 2,892
Depreciation and amortization........ 12,566 13,200 7,320 24,454 25,669 14,234
------- ------- ------ ------- ------- -------
Total.................................. 20,780 22,753 12,618 40,727 44,536 24,696
------- ------- ------ ------- ------- -------
Operating loss......................... (2,754) (1,832) (1,016) (5,269) (3,055) (1,693)
Interest expense:
Bank debt and other.................. (2,762) (2,972) (1,648) (5,609) (5,935) (3,291)
Senior Discount Notes................ (6,246) (6,764) (3,751) (12,184) (13,586) (7,534)
Unrealized foreign exchange gain....... 792 -- -- 5 -- --
Loss on sale of business............... -- -- -- (444) (246)
------- ------- ------ ------- ------- -------
Loss before income taxes and
extraordinary items.................. (10,970) (11,568) (6,415) (23,057) (23,020) (12,764)
Income tax expense..................... (210) (40) (22) (189) (112) (62)
------- ------- ------ ------- ------- -------
Net loss before extraordinary item..... (11,180) (11,608) (6,437) (23,246) (23,132) (12,826)
Extraordinary item..................... -- -- -- -- (1,956) (1,085)
------- ------- ------ ------- ------- -------
Net loss............................... (11,180) (11,608) (6,437) (23,246) (25,088) (13,911)
======= ======= ====== ======= ======= =======
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See accompanying notes to condensed consolidated financial statements
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KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
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JUNE 30,
DECEMBER 31, ---------------------------
1997 1998 1998
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DM DM U.S.$
(UNAUDITED) (UNAUDITED)
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Cash....................................................... 1,568 1,174 651
Trade accounts receivable -- net........................... 1,566 1,876 1,040
Inventory.................................................. 2,256 2,280 1,264
Property, plant and equipment -- net....................... 225,966 218,980 121,433
Goodwill -- net............................................ 170,598 158,365 87,820
Foreign currency forward contracts......................... 39,632 39,993 22,178
Other assets............................................... 26,036 25,780 14,296
-------- -------- --------
TOTAL ASSETS............................................... 467,622 448,448 248,682
======== ======== ========
Accounts payable........................................... 8,256 4,986 2,765
Accrued expenses and other liabilities..................... 10,017 11,075 6,141
Unamortized discount on foreign currency forward
contracts................................................ 8,581 7,476 4,146
Deferred revenue........................................... 7,672 7,305 4,051
Deferred purchase obligations.............................. 2,729 2,000 1,109
Bank debt.................................................. 170,937 172,307 95,551
Senior Discount Notes...................................... 206,394 215,351 119,421
-------- -------- --------
TOTAL LIABILITIES.......................................... 414,586 420,500 233,184
SHAREHOLDERS' EQUITY
Registered Capital......................................... 10,000 10,000 5,545
Capital contributions...................................... 200,192 200,192 111,014
Accumulated deficit........................................ (157,156) (182,244) (101,061)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY................................. 53,036 27,948 15,498
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'EQUITY.................. 467,622 448,448 248,682
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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)
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FOR THE SIX MONTHS ENDED
JUNE 30,
---------------------------
1997 1998 1998
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DM DM U.S.$
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OPERATING ACTIVITIES
Net cash provided by operating activities................... 3,707 13,492 7,482
INVESTING ACTIVITIES
Purchases of property, plant and equipment.................. (5,030) (6,207) (3,442)
Cash from sale of business.................................. -- 329 182
Acquisition of businesses and cable television systems...... (23,164) (1,450) (804)
------- ------ ------
Net cash used in investing activities....................... (28,194) (7,328) (4,064)
FINANCING ACTIVITIES
Proceeds from bank debt..................................... 22,800 6,500 3,605
Proceeds form deferred purchase obligations................. 2,728 -- --
Repayment of deferred purchase obligations.................. -- (729) (404)
Repayment of bank debt...................................... (2,300) (4,000) (2,218)
Proceeds from bank overdrafts............................... 574 -- --
Repayment of bank overdrafts................................ -- (1,129) (627)
Repurchase of Senior Discount Notes......................... -- (7,200) (3,992)
------- ------ ------
Net cash provided by (used in) financing activities......... 23,802 (6,558) (3,636)
------- ------ ------
Net decrease in cash and cash equivalents................... (685) (394) (218)
Cash and cash equivalents at beginning of period............ 951 1,568 870
------- ------ ------
Cash and cash equivalents at end of period.................. 266 1,174 652
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See accompanying notes to condensed consolidated financial statements
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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
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 six month periods ended June 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 Annual Report 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
consolidated 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 six months ended
June 30, 1998 have been translated into United States dollars ("U.S. $") at the
rate of DM 1.8033 per $1.00 the Noon Buying Rate of the Federal Reserve Bank of
New York on June 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 ACQUISITIONS AND DISPOSITIONS
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 DM 444,000.
In April 1998, Kabelmedia acquired the cable television assets of MKM
Kabelfernsehen GmbH & Co. KG Projekt Magdeburg ("MKM") located in the city of
Magdeburg, Germany for total consideration of DM 1,450,000. The systems which
Kabelmedia acquired from MKM passed approximately 2,700 homes and had 2,600
customers at the acquisition date.
In April 1998, the company and the Beteiligungsgesellschaft AGFB
Aktiengesellschaft fur Beteiligungen an Telekommunikationsunternehmen and Suweda
Elektronische Medien- und Kabelkommunikations AG (Suweda/AGFB Group) executed a
non-binding letter of intent to merge their respective cable television
operations. The Suweda/AGFB Group was founded in 1983 and has approximately
360,000 cable television customers. The Company and the Suweda/AGFB Group expect
to enter into a definite merger agreement and seek shareholder approval sometime
in the third quarter of 1998. There can be no assurance at this time that the
proposed merger will be consummated.
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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 June 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 DM 1.4385 to DM 1.7752 per U.S. $1.00.
See Note 9 to the December 31, 1997 statements included in the Company's
Registration Statement on Form 10-K.
4. SENIOR DISCOUNT NOTES
In February 1998, the Company purchased and canceled a portion of its
Senior Discount Notes with a net book value of DM 5,507,000 for cash
consideration of DM 7,200,000. The purchase of the notes resulted in an
extraordinary loss of DM 1,956,000, 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. SUBSEQUENT EVENT
In July 1998, the Company purchased and canceled a portion of its Senior
Discount Notes with a net book value of DM 4,807,622. The purchase of the notes
resulted in an extraordinary loss of DM 1,578,141, 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 1998, Kabelmedia acquired the shares of HUSAT Kommunikationssysteme
GmbH ("HUSAT") for total consideration of DM 16,003,800 plus closing costs and
expenses of DM465,057 The purchase price consisted of cash payments of
approximately DM 9,364,000, and the assumption of liabilities of DM 6,640,000.
HUSAT passed approximately 30,066 homes and served 23,500 customers at the date
of acquisition. HUSAT will be consolidated into the Berlin region.
In July 1998, KabelMedia purchased two cable television systems of MKM
Kabelfernsehen GmbH & Co. KG, Koblenz ("MKM") for total consideration of DM
4,200,000 plus closing costs and expenses of DM 161,000 The purchase price
consisted of cash payments of approximately DM 2,200,000 and the assumption of
liabilities of DM 2,000,000. The two systems passed 6,423 homes and had 5,194
customers at the date of acquisition.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND 1998
REVENUES. Revenues increased 16.1% from DM 18,026,000 in the second
quarter of 1997 to DM 20,921,000 in the second quarter of 1998. The increase was
primarily attributable to a 8.6% increase (from 388,798 to 422,279) in the
average monthly number of customers and a 6.9% increase (from DM 15.45 to DM
16.51 ) in the average monthly revenue per customer from the second quarter of
1997 to the second 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 March 31, 1997 and as of the respective dates
of the acquisitions, collectively served approximately 35,900 customers. The
entire increase in the average monthly revenue per customer is attributable to
rate increases implemented since March 31, 1997 as the acquisitions had lower
monthly revenue per customer than the Company's average at the time of
acquisition.
OPERATING EXPENSES. Operating expenses increased 31.3% from DM 3,009,000
in the first quarter of 1997 to DM 3,952,000 in the second quarter of 1998,
principally as a result of increased costs associated with the cable television
companies acquired 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 1.3% from DM 2,918,000 in the second quarter of 1997 to DM
2,955,000 in the second quarter of 1998 principally as a result of increased
salaries and wages associated with the cable television companies acquisitions.
Selling, general and administrative expenses as a percent of revenue declined
from 16.2% in the second quarter of 1997 to 14.1% in the second quarter of 1998,
reflecting higher revenue per subscriber and increased efficiencies.
CORPORATE OVERHEAD. Corporate overhead increased by 15.7% from DM
2,287,000 in the second quarter of 1997 to DM 2,646,000 in the second 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. Corporate overhead as a percent of revenue stayed virtually unchanged
from second quarter of 1997 to second quarter of 1998.
DEPRECIATION AND AMORITIZATION. Depreciation and amortization increased by
DM 634,000 from DM 12,566,000 in the second quarter of 1997 to DM 13,200,00 in
the second quarter of 1998, principally as a result of increased assets and
goodwill associated with acquisitions of cable television companies.
INTEREST EXPENSE. Interest expense increased 8.1% from DM 9,008,000 in the
second quarter of 1997 to DM 9,736,000 in the second quarter of 1998,
principally as a result of an increase in the average bank indebtedness related
to the acquisitions consummated and Senior Discount Notes repurchased since
March 31, 1997 and to the interest accreted on the Senior Discount Notes. Of the
total interest accrued in the second quarter of 1998, DM 6,764,000 related to
non-cash interest and the non-cash amortization of financing fees on the Senior
Discount Notes.
NET LOSS. Net loss increased DM 428,000 from DM 11,180,000 in the second
quarter of 1997 to DM 11,608,000 in the second 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) 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
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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 9,812,000 for the three months ended June 30, 1997 to DM 11,368,000 for
the three months ended June 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. EBITDA per average
subscriber increased by 6.7% from DM 8.41 per subscriber in the second quarter
of 1997 to DM 8.97 per subscriber in the second quarter of 1998.
SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1998
REVENUES. Revenues increased 17.0% from DM 35,458,000 in the first half of
1997 to DM 41,481,000 in the second half of 1998. The increase was primarily
attributable to a 10.8% increase (from 380,300 to 421,503) in the average
monthly number of customers and a 5.53% increase (from DM 15.54 to DM 16.40) in
the average monthly revenue per customer from the first six months of 1997 to
the first six month 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 December 31, 1996 and, as of the respective
dates of the acquisitions, collectively served approximately 42,000 customers.
The increase in the average monthly revenue per customer in attributable to rate
increases implemented since December 31 1996 as the acquisitions had lower
monthly revenue per customer than the Company's average at the time of
acquisition.
OPERATING EXPENSES. Operating expenses increased 29.8% from DM 6,015,000
in the first half of 1997 to DM 7,806,000 in the first half of 1998, principally
as a result of increased costs associated with the cable television companies
acquired 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 decreased by 2.1% from DM 5,968,000 in the first six months of 1997 to
DM 5,845,000, principally as a result of the decreased costs associated with the
conclusion of system audits which were performed in 1997. As a percent of
revenue selling general and administrative expenses declined from 16.8% in the
first half of 1997 to 14.1% in the first half of 1998, reflecting higher revenue
per subscriber and increased efficiencies.
CORPORATE OVERHEAD. Corporate overhead increased by 21.6% from DM
4,290,000 in the first half of 1997 to DM 5,216,000 in the first half 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. Corporate overhead
as a percent of revenue increased from 12.1% in the first half of 1997 to 12.6%
in the first half of 1998. A portion of the increase was partially offset by
reductions in legal, accounting and consulting costs.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
DM 1,215,000 from DM 24,454,000 in the first half of 1997 to DM 25,669,000 in
the first half 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 DM 17,793,000 in
the first half of 1997 to DM 19,521,000 in the first half of 1998 as a result of
an increase in average bank indebtedness related to the acquisitions consummated
and Senior Discount Notes repurchased since December 31, 1997 and to the
accreted interest on the Senior Discounts Notes. Of the total interest accrued
in the first half of 1998, DM 13,586,000 related to non-cash interest and
non-cash amortization of financing fees on the Senior Discount Notes.
LOSS ON SALE OF BUSINESS. The Company recorded a loss on the sale of
business in the first half of 1998 of DM 444,000 related to the sale of
approximately 800 subscribers which did not fit into the Company's strategic
plans.
EXTRAORDINARY LOSS. In February 1998, the Company purchased and cancelled
a portion of its Senior Discount Notes with a net book value of DM 5,507,000 for
cash consideration of DM 7,200,000. The
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extraordinary loss of DM 1,956,000 includes the full amortization of the
unamortized costs and expenses related to the issuance of the cancelled Senior
Discount Notes.
NET LOSS. Net loss increases DM 1,842,000 from DM 23,246,000 in the first
half of 1997 to DM 25,088,000 in the first half 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) before extraordinary
items, minority interests, net interest expense. Income taxes and depreciation
and amortization. The Company believes that EBITDA is 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 a
alternative to net income (loss) 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 19,185,000 for the six months
June 30,1997 to DM 22,614,000 for the six months ended June 30,1998 primarily as
a result of revenues increasing at a faster rate than the sum of operating and
selling, general and administrative and corporate costs and expenses. EBITDA per
average subscriber increased by 6.4% from DM 8.41 per subscriber in the first
half of 1997 to DM 8.94 per subscriber in the first half 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 June 30, 1998, the Company's aggregate consolidated indebtedness was
approximately DM 389,658,000, comprised DM 171,000,000 of debt outstanding under
its Amended 1996 Facilities, DM 1,307,000 of other bank debt, DM 2,000,000 of
deferred purchase obligations, and DM 215,351,000 of Senior Discount Notes. The
Senior Discount Notes are denominated in dollars and converted to Deutsche Marks
at the rate of DM 1.8033, the Noon Buying Rate of the Federal Reserve Bank of
New York on June 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 six months ended June 30, 1998 the Company generated net cash from
operating activities of DM 13,492,000.
For the six months ended June 30, 1998, the Company used cash in investing
activities of DM 7,328,000. Such cash uses were primarily related to capital
expenditures and the acquisition of cable television system. Net cash used in
financing activities amounted to 6,558,000. Such net cash was primarily used for
the repurchase of the Senior Discount Notes.
Capital expenditures of DM 6,207,000 for the six month period ended June
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 Facility. The acquisition of cable television system of DM
1,450,000 was related to the purchase of 2.600 customers from MKM in April 1998.
Substantial amounts of depreciation and amortization expense and non-cash
interest which accrued on 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.
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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 six month period ended June 30, 1998 was DM
22,614,000. Total interest expense for the same period was DM 19,521,000. Of the
total interest expense in the six month period, DM 13,586,000 related to
non-cash interest on the Senior Discount Notes.
INTRODUCTION OF EURO AND YEAR 2000
The Company recognizes the need to ensure that its operations will not be
adversely impacted by software failures related to Germany's participation in
the European Monetary Union which results in the introduction of the Euro on
January 1, 1999 and related to the Year 2000. The Company uses purchased
software for its accounting system and subscriber management system. The
financial accounting software is presently Year 2000 compliant, but not fully
Euro compliant. The subscriber management software is neither Year 2000 or Euro
compliant. Upgrades are available and the Company is in the process of obtaining
these upgrades and expects that the software will be installed prior to
Germany's conversion to the Euro and prior to the Year 2000, as the case may be.
The total cost of acquiring these upgrades and achieving Euro and Year 2000
compliance is not expected to have a material effect on the operations and the
consolidated financial position and results of operations of the Company.
However, while the Company expects that its systems will be Euro and Year 2000
compliant, the Company is still in the process of ascertaining whether its main
contracting parties such as Deutsche Telekom, its banks and the main electricity
providers to its cable networks will be Euro and Year 2000 compliant in a timely
manner. At this time, the Company cannot ascertain the magnitude of the impact
of the non-compliance of its main contracting parties on the Company's business
and its financial condition.
FORWARD-LOOKING STATEMENTS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other sections in this Quarterly Report on Form 10-Q contain
forward-looking statements which are subject to various risks and uncertainties.
Actual results could differ materially from those discussed herein. Important
factors that could cause or contribute to such differences include the risks
relating to the Company's acquisition strategy, the competitive environment in
the German cable industry, changes in the regulatory framework as well as
changes in the programming costs, and those discussed elsewhere in this
Quarterly Report on Form 10-Q.
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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.
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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
/s/ Jacques Hackenberg
------------------------------------
Jacques Hackenberg
Chief Executive Officer and Managing
Director
/s/ Paul Thomason
------------------------------------
Paul Thomason
Chief Financial Officer and
Controller
Dated: August 14, 1998
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
DATED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> DEUTSCHE MARK
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1.8033
<CASH> 1,174
<SECURITIES> 0
<RECEIVABLES> 1,876
<ALLOWANCES> 0
<INVENTORY> 2,280
<CURRENT-ASSETS> 0
<PP&E> 218,980
<DEPRECIATION> 0
<TOTAL-ASSETS> 448,448
<CURRENT-LIABILITIES> 32,842
<BONDS> 387,658
0
0
<COMMON> 10,800
<OTHER-SE> 17,948
<TOTAL-LIABILITY-AND-EQUITY> 448,448
<SALES> 41,481
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 18,867
<OTHER-EXPENSES> 25,669
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,521
<INCOME-PRETAX> (23,020)
<INCOME-TAX> (112)
<INCOME-CONTINUING> (23,132)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,956)
<CHANGES> 0
<NET-INCOME> (25,088)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
