<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to_________
Commission File No. 000-25365
United Pan-Europe Communications N.V.
(Exact name of Registrant as specified in its charter)
The Netherlands 84-1116217
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Fred. Roeskestraat 123, P.O. Box 74763
1070 BT Amsterdam, The Netherlands 1070 BT
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (31) 20-778-9840
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No ___
The number of shares outstanding of the Registrant's common stock as of May 13,
1999 was:
129,246,123 ordinary shares, including
shares represented by American Depository Receipts
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
TABLE OF CONTENTS
Page
Number
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1999 and December
31, 1998 (Unaudited) ................................................... 2
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 1999 and 1998 (Unaudited) .............................. 3
Condensed Consolidated Statement of Shareholders' Equity (Deficit)
for the Three Months Ended March 31, 1999 (Unaudited) .................. 4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1999 and 1998 (Unaudited) ....................... 5
Notes to Condensed Consolidated Financial Statements (Unaudited) ......... 7
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations .......................................... 19
Item 3 - Quantitative and Qualitative Disclosure About Market Risk .......... 35
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings................................................... 38
Item 2 - Changes in Securities and Use of Proceeds........................... 38
Item 5 - Other Information................................................... 39
Item 6 - Exhibits and Reports on Form 8-K.................................... 46
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in thousands of Dutch guilders, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1999 1998
---------- ----------
<S> <C> <C>
ASSETS:
Current assets
Cash and cash equivalents ..................................................................... 1,062,002 29,571
Restricted cash ............................................................................... 84,050 30,263
Subscriber receivables, net of allowance for doubtful accounts of 8,362 and 9,260, respectively 42,140 12,886
Costs to be reimbursed by affiliated companies, net of allowance for doubtful accounts of 139
and 0, respectively ....................................................................... 28,703 27,277
Other receivables ............................................................................. 49,045 25,845
Inventory ..................................................................................... 40,388 24,121
Prepaid expenses and other current assets ..................................................... 35,886 15,654
---------- ----------
Total current assets ............................................................ 1,342,214 165,617
Marketable equity securities of parent, at fair value ............................................. 248,319 101,097
Investments in and advances to affiliated companies, accounted for under the equity method, net ... 390,767 493,051
Property, plant and equipment, net of accumulated depreciation of 139,881 and 87,708, respectively 1,528,580 602,997
Goodwill and other intangible assets, net of accumulated amortization of 58,416 and 39,109,
respectively .................................................................................. 1,454,742 680,032
Deferred financing costs, net of accumulated amortization of 2,376 and 9,288, respectively ........ 35,681 21,663
Other assets ...................................................................................... 3,269 3,322
---------- ----------
Total assets ................................................................... 5,003,572 2,067,779
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT):
Current liabilities
Accounts payable, including related party payables of 20,883 and 15,671, respectively ......... 139,998 141,917
Accrued liabilities ........................................................................... 131,655 56,840
Subscriber prepayments and deposits ........................................................... 149,432 45,757
Short-term debt ............................................................................... 48,921 63,322
Note payable to shareholder ................................................................... 15,881 175,012
Current portion of long-term debt ............................................................. -- 113,519
---------- ----------
Total current liabilities ................................................... 485,887 596,367
Long-term debt .................................................................................... 1,279,240 1,174,749
Deferred taxes .................................................................................... 42,361 8,657
Deferred compensation ............................................................................. 2,811 327,445
Other long-term liabilities ....................................................................... 9,542 8,801
---------- ----------
Total liabilities ......................................................... 1,819,841 2,116,019
---------- ----------
Minority interests in subsidiaries ................................................................ 27,239 25,934
Shareholders' equity (deficit) (As adjusted for the 3:2 stock split, see Note 10)
Priority stock, 0.661113 par value, 100 shares authorized, 100 and 0 shares
issued, respectively ...................................................................... -- --
Ordinary stock, 0.661113 par value, 200,000,000 shares authorized, 129,246,123
and 92,285,604 shares issued, respectively ................................................ 85,446 61,497
Additional paid-in capital .................................................................... 3,836,929 672,016
Deferred compensation ......................................................................... (85,445) --
Treasury stock, at cost, 0 and 9,198,135 shares of ordinary stock, respectively ............... -- (110,385)
Accumulated deficit ........................................................................... (867,589) (727,050)
Other cumulative comprehensive income ......................................................... 187,151 29,748
---------- ----------
Total shareholders' equity (deficit) ...................................... 3,156,492 (74,174)
---------- ----------
Total liabilities and shareholders' equity (deficit) ...................... 5,003,572 2,067,779
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- 2 -
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands of Dutch guilders, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
----------------------------
1999 1998
------------ -----------
<S> <C> <C>
Service and other revenue ................................. 148,820 95,005
Operating expense ......................................... (67,067) (30,899)
Selling, general and administrative expense ............... (104,333) (27,551)
Depreciation and amortization ............................. (63,198) (48,457)
------------ -----------
Net operationg (loss) income ........................ (85,778) (11,902)
Interest income ........................................... 4,911 814
Interest expense .......................................... (38,245) (22,734)
Gain on sale of assets .................................... 14,625 --
Foreign exchange (loss) gain and other expense ............ (15,335) (4,894)
------------ -----------
Net loss before income taxes and other items ........ (119,822) (38,716)
Share in results of affiliated companies, net ............. (20,272) (14,139)
Minority interests in subsidiaries ........................ (77) 241
Income tax benefit (expense) .............................. (368) 719
------------ -----------
Net loss ............................................ (140,539) (51,895)
============ ===========
Basic and diluted net loss per ordinary share(1) .......... (1.31) (0.56)
============ ===========
Weighted-average number of ordinary shares
outstanding(1) .......................................... 107,395,811 92,062,589
============ ===========
</TABLE>
(1) As adjusted for the 3:2 stock split (Note 10).
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-3-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (2)
(Stated in thousands of Dutch guilders except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Priority Stock Ordinary Stock Additional
---------------------- --------------------- Paid-In Deferred
Shares Amount Shares (2) Amount Capital Compensation
-------- ---------- ---------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1998 ...... -- -- 92,285,604 61,497 672,016 --
Change in par value of
ordinary shares ............... -- -- -- (486) 486 --
Issuance of priority shares ...... 100 -- -- -- -- --
Issuance of ordinary shares in
public offering, net of offering
costs ......................... -- -- 35,401,865 23,405 2,535,761 --
Issuance of convertible debt ..... -- -- -- -- 29,006 --
Issuance of ordinary shares upon
exercise of DIC option ....... -- -- 1,558,654 1,030 88,619 --
Issuance of warrants ............. -- -- -- -- 64,400 --
Change in stock option plan
due to public offering ....... -- -- -- -- 310,099 (31,772)
Deferred compensation expense
related to stock options ...... -- -- -- -- 136,542 (84,166)
Amortization of deferred
compensation .................. -- -- -- -- -- 30,493
Unrealized gain on investment .... -- -- -- -- -- --
Change in cumulative translation
adjustments .................. -- -- -- -- -- --
Net loss ......................... -- -- -- -- -- --
-------- ---------- ----------- ------- --------- -------
Balances, March 31, 1999 ......... 100 -- 129,246,123 85,446 3,836,929 (85,445)
======== ========== =========== ======= ========= =======
<CAPTION>
Other
Cumulative
Treasury Comprehensive
---------------------- Accumulated Income
Shares (2) Amount Deficit (Loss) (1) Total
----------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1998 ...... (9,198,135) (110,385) (727,050) 29,748 (74,174)
Change in par value of
ordinary shares ............... -- -- -- -- --
Issuance of priority shares ...... -- -- -- -- --
Issuance of ordinary shares in
public offering, net of offering
costs ......................... 9,198,135 110,385 -- -- 2,669,551
Issuance of convertible debt ..... -- -- -- -- 29,006
Issuance of ordinary shares upon
exercise of DIC option ....... -- -- -- -- 89,649
Issuance of warrants ............. -- -- -- -- 64,400
Change in stock option plan
due to public offering ....... -- -- -- -- 278,327
Deferred compensation expense
related to stock options ...... -- -- -- -- 52,376
Amortization of deferred
compensation .................. -- -- -- -- 30,493
Unrealized gain on investment .... -- -- -- 147,222 147,222
Change in cumulative translation
adjustments .................. -- -- -- 10,181 10,181
Net loss ........................ -- -- (140,539) -- (140,539)
---------- -------- -------- ------- ----------
Balances, March 31, 1999 ......... -- -- (867,589) 187,151 3,156,492
========== ======== ======== ======= ==========
</TABLE>
(1) As of December 31, 1998, Other Cumulative Comprehensive Income (Loss)
represents foreign currency translation adjusments of (12,649) and unrealized
gain on investment of 42,397. As of March 31, 1999, Other Cumulative
Comprehensive Income (Loss) represents foreign currency translation adjustments
of (2,468) and unrealized gain on investment of 189,619.
(2) As adjusted for the 3:2 stock split (Note 10).
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-4-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of Dutch guilders)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................... (140,539) (51,895)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Depreciation and amortization ........................ 63,198 48,457
Amortization of deferred financing costs ............. 717 1,030
Accretion of equity value of DIC Loan ................ 4,323 --
Share in results of affiliated companies, net ........ 20,272 14,139
Compensation expense related to stock options ........ 36,560 406
Minority interests in subsidiaries ................... 77 (241)
Exchange rate differences in
loans .............................................. 8,655 1,115
Gain on sale of investment ........................... (14,625) --
Loss on repayment of loan ............................ 5,012 --
Other ................................................ (31) 3,341
Changes in assets and liabilities:
(Increase) decrease in receivables ................ (30,443) 5,541
Increase in inventories............................ (12,703) (1,095)
(Increase) decrease in other non-current assets... 42 (401)
Increase in other current liabilities ............. 91,336 41,299
Increase (decrease) in deferred taxes and other
long-term liabilities ........................... 12,319 (1,914)
---------- ----------
Net cash flows from operating activities ............... 44,170 59,782
---------- ----------
Cash flows from investing activities:
Restricted cash (deposited) released, net .............. (53,787) 5,836
Investments in and advances to affiliated companies, net (7,161) --
Capital expenditures ................................... (124,187) (33,970)
New acquisitions, net of cash acquired ................. (491,485) (180,762)
Sale of affiliated companies ........................... 36,687 --
---------- ----------
Net cash flows from investing activities ............... (639,933) (208,896)
---------- ----------
Cash flows from financing activities:
Proceeds from initial public offering, net ............. 2,669,551 --
Proceeds from exercise of option ....................... 89,649 --
Proceeds from short-term borrowings .................... 16,011 --
Proceeds from long-term borrowings ..................... 754,899 190,461
Deferred financing costs ............................... (10,317) --
Repayments of long and short-term borrowings ........... (1,698,123) (205,619)
(Repayments) borrowings on note payable to shareholder . (157,437) 129,925
Repayments on short-term note .......................... (36,358) --
---------- ----------
Net cash flows from financing activities ............... 1,627,875 114,767
---------- ----------
Effect of exchange rates on cash ....................... 319 (20)
---------- ----------
Net increase (decrease) in cash and cash equivalents ... 1,032,431 (34,367)
Cash and cash equivalents at beginning of period ....... 29,571 100,144
---------- ----------
Cash and cash equivalents at end of period ............. 1,062,002 65,777
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-5-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of Dutch guilders)
(Unaudited)
For the Three Months
Ended March 31,
-----------------------
1999 1998
-------- --------
Non-cash investing and financing activities:
Unrealized gain on investment .................. 147,222 43,604
======== ========
Issuance of warrants ........................... 64,400 --
======== ========
Supplemental cash flow disclosures:
Cash paid for interest ......................... (57,626) (21,897)
======== ========
Cash received for interest ..................... 4,138 814
======== ========
Acquisition of 49% of UTH:
Property, plant and equipment .................. (349,306) --
Investments in affiliated companies ........... (91,319) --
Goodwill ....................................... (560,880) --
Long-term liabilities .......................... 472,945 --
Net current liabilities ........................ 10,499 --
-------- --------
Total cash paid .............................. (518,061) --
Cash acquired ................................ 26,576 --
-------- --------
(491,485) --
======== ========
Acquisition of Dutch Cable assets:
Property, plant and equipment and other assets . -- (106,000)
Goodwill ....................................... -- (74,762)
-------- --------
Total cash paid .............................. (180,762)
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-6-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Monetary amounts stated in thousands of Dutch guilders,
except share and per share amounts)
(Unaudited)
1. Organization and Nature of Operations
United Pan-Europe Communications, N.V. ("UPC" or the "Company") was
established as a joint venture for the purpose of acquiring and developing
multi-channel television and telecommunications systems in Europe. On July 13,
1995, United International Holdings, Inc. ("UIH"), a United States of America
corporation, and Philips Electronics, N.V. ("Philips"), contributed their
respective ownership interests in European and Israeli multi-channel television
systems to UPC. As a result of this transaction, UIH and Philips each owned a
50% interest in UPC. On December 11, 1997, UIH acquired Philips' 50% interest in
UPC (the "UPC Acquisition"), thereby making it an effectively wholly-owned
subsidiary of UIH (subject to certain employee equity incentive compensation
arrangements). In February 1999, UPC concluded an initial public offering.
Through our broadband cable-based communications networks, UPC offers cable
television services in 10 countries in Europe and in Israel and Internet/data
and voice services in 6 and 4 Western European countries, respectively.
The following chart presents a summary of the Company's significant
investments in multi-channel television, programming and telephony operations as
of March 31, 1999:
Austria:
Telekabel Group ("Telekabel Group") ........................... 95.0%
Belgium:
Radio Public N.V./S.A. ("TVD") ................................ 100.0%
Czech Republic:
KabelNet ...................................................... 100.0%
France:
Mediareseaux Marne S.A. ("Mediareseaux") (1) .................. 99.6%
Hungary:
Telekabel Hungary ("Telekabel Hungary") ....................... 79.25%
Monor Communications Group, Inc. ("Monor") .................... 44.75%
Ireland:
Tara Televison Limited ("Tara") ............................... 80.0%
Israel:
Tevel Israel International Communications Ltd. ("Tevel") ...... 46.6%
Malta:
Melita Cable TV P.L.C. ("Melita") ............................. 50.0%
The Netherlands:
United Telekabel Holding N.V. ("UTH") ......................... 100.0%
Norway:
Janco Multicom ("Janco Multicom") ............................. 100.0%
Romania:
Multicanal Holdings ........................................... 100.0%
Control Cable Ventures ........................................ 100.0%
Eurosat ....................................................... 51.0%
Slovak Republic:
Trnavatel ..................................................... 75.0%
Kabeltel ...................................................... 100.0%
Spain:
Ibercom, Inc. ("IPS") ......................................... 33.5%
(1) The minority shareholder holds warrants giving it the right to purchase
for a nominal amount new shares corresponding to 4.6% of Mediareseaux's
share capital. Accordingly, we have a 95% economic interest in
Mediareseaux.
-7-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements of the
Company have been prepared in accordance with United States generally accepted
accounting principles. The preparation of financial statements in conformity
with United States generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
In January 1999, UPC acquired programming assets from UIH through the
issuance of new shares (see Note 3). As this acquisition was between entities
under common control, the transaction was accounted for at historical cost,
similar to pooling-of-interests accounting. It is generally accepted that,
consistent with a pooling-of-interests accounting, prior period financial
statements of the transferee are restated for all periods in which the
transferred operations were part of the parent's consolidated financial
statements. Accordingly, we have restated all periods presented as if UPC had
acquired the programming assets from UIH as of the date of UIH's initial
investment.
In management's opinion, all adjustments of a normal, recurring nature
have been made which are necessary to present fairly the financial position of
the Company as of March 31, 1999 and the results of its operations for the three
months ended March 31, 1999 and 1998. For a more complete understanding of the
Company's financial position and results of operations see the consolidated
financial statements of the Company included in the Company's annual report on
Form 10-K for the year ended December 31, 1998.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the
accounts of UPC and all subsidiaries where it exercises a controlling financial
interest through the ownership of a majority voting interest, except for UTH
from inception through February 1, 1999, where because of certain minority
shareholder's rights the Company accounted for its investment in UTH using the
equity method of accounting. On February 17, 1999, UPC acquired the minority
shareholder's interest in UTH and began consolidating UTH effective February 1,
1999. All significant intercompany accounts and transactions have been
eliminated in consolidation.
New Accounting Principles
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1 "Accounting For the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"), which
provides guidance on accounting for the costs of computer software developed or
obtained for internal use. SOP 98-1 identifies the characteristics of internal-
use software and provides examples to assist in determining when computer
software is for internal use. The Company adopted SOP 98-1 effective January 1,
1999 with no material effect on our financial statements.
The AICPA recently issued Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 defines start-up and
organization costs, which must be expensed as incurred. In addition, all
deferred start-up and organization costs existing as of January 1, 1999 must be
written-off and accounted for as a cumulative effect of an accounting change.
The Company adopted SOP 98-5 effective January 1, 1999 with no material effect
on our financial statements.
-8-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Acquisitions and Dispositions
UTH
On August 6, 1998, UPC merged its Dutch cable television systems with
those of NUON, forming a new company, UTH (the "UTH Transaction"), which was
accounted for as the formation of a joint venture with NUON's and UPC's net
assets recorded at their historical carrying values. Following the merger, UPC
held 51% of UTH. The agreement provided UPC with a call option to acquire an
additional interest in UTH and NUON a put option to require UPC to purchase part
of NUON's interest in UTH. The UTH shareholder agreement provided for
essentially joint governance by NUON and UPC on almost all significant
participating and protective type rights, accordingly, because of joint
governance on most significant operating decisions, UPC accounted for its
investment in UTH using the equity method of accounting.
On February 17, 1999, the Company acquired the remaining 49% of UTH from
NUON (the "NUON Transaction") for NLG518.1 million. In addition, UPC repaid NUON
and assumed from NUON a NLG33.3 million subordinated loan, including accrued
interest, dated December 31, 1998, owed by UTH to NUON. The purchase of NUON's
interest and payment of the loan were funded with proceeds from UPC's initial
public offering. Effective February 1, 1999, UPC began consolidating its
investment in UTH. Details of the net assets acquired, based on preliminary
purchase price allocations using information currently available, were as
follows:
Property, plant and equipment ............................. 349,306
Investments in affiliated companies ....................... 91,319
Goodwill .................................................. 560,880
Long-term liabilities ..................................... (472,945)
Net current liabilities ................................... (10,499)
--------
Total cash paid ........................... 518,061
========
The following pro forma condensed consolidated operating results for the
three months ended March 31, 1999 and 1998 give effect to the UTH Transaction
and the NUON Transaction as if they both had occurred at the beginning of the
periods presented. This pro forma condensed consolidated financial information
does not purport to represent what the Company's results of operations would
actually have been if such transactions had in fact occurred on such date. The
pro forma adjustments are based upon currently available information and upon
certain assumptions that management believes are reasonable.
<TABLE>
<CAPTION>
For the Three Months Ended For the Three Months Ended
March 31, 1999 March 31, 1998
--------------------------------------- -------------------------------------
Historical Pro Forma Historical Pro Forma
-------------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Service and other revenue ........ 148,820 168,664 95,005 133,162
=================== ================ ================= =================
Net loss ......................... (140,539) (145,711) (51,895) (59,894)
=================== ================ ================= =================
Weighted-average number of
ordinary shares outstanding .. 107,395,811 107,395,811 92,062,589 92,062,589
=================== ================ ================= =================
Basic and diluted net loss
per ordinary share .......... (1.31) (1.36) (0.56) (0.65)
=================== ================ ================= =================
</TABLE>
Purchase of Programming Assets from UIH
In January 1999, in exchange for 4,955,264 newly-issued ordinary shares,
UIH sold to us their approximately 33.5% interest in IPS, a group of programming
entities focusing on the Spanish and Portuguese-speaking markets. Because this
was an exchange between entities under common control, we have restated our
financial statements for all periods in which the operations of IPS were part of
UIH's consolidated financial statements (see Note 2).
-9-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Acquisition of Bratislava Cable TV System
In March 1999, UPC reached final agreement with Siemens Austria
("Siemens") to purchase Siemens' 95.63% interest in SKT s.r.o., the company that
owns and operates the cable TV system in Bratislava, Slovak Republic. The
acquisition will increase UPC's subscribers in Eastern Europe by approximately
157,000. The completion of the purchase is subject to obtaining the approval of
regulatory authorities. The purchase price for the 95.63% interest is
approximately USD41.0 million. As of March 31, 1999, 84,050 has been placed in
escrow for the acquisition.
Agreement for the Purchase of Time Warner Cable France
In March 1999, UPC and Time Warner Entertainment reached a definitive
agreement for the purchase by UPC of 100% of Time Warner Cable France, a company
which controls and operates three cable TV systems in the suburbs of Paris and
Lyon and the city of Limoges. Completion of the purchase, which is subject to
regulatory approval, is expected to take place in the third quarter of 1999. The
acquisition will increase UPC's subscriber base in France by approximately
64,000. The purchase price for Time Warner Cable France is approximately USD71.0
million.
4. Investments in and Advances to Affiliated Companies, Accounted for Under the
Equity Method
<TABLE>
<CAPTION>
As of March 31, 1999
-----------------------------------------------------------------------------------------------------------
Investments in Cumulative Cumulative
and Advances to Dividends Share in Results of Translation
Affiliated Companies Received Affiliated Companies Adjustments Total
--------------------------- -------------- -------------------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
A2000 .............. 171,469 -- (9,981) -- 161,488
Tevel .............. 191,716 (12,121) (4,892) 9,953 184,656
Melita ............. 28,018 -- 1,994 598 30,610
Monor .............. 9,890 -- (5,216) (14,911) (10,237)
Xtra Music ......... 11,601 -- (1,502) 53 10,152
IPS ................ 10,419 -- (9) 3,197 13,607
Other, net ......... 288 -- 205 (2) 491
---------- -------- ------- ------- --------
Total .............. 423,401 (12,121) (19,401) (1,112) 390,767
========== ======== ======= ======= ========
</TABLE>
-10-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
As of December 31, 1998
-----------------------------------------------------------------------------------------------------------
Investments in Cumulative Cumulative
and Advances to Dividends Share in Results of Translation
Affiliated Companies Received Affiliated Companies Adjustments Total
--------------------------- -------------- -------------------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
UTH (1) ................ 272,508 -- (22,780) -- 249,728
Tevel .................. 191,716 (12,121) (777) (9,562) 169,256
Melita ................. 28,018 -- 1,985 (141) 29,862
Telekabel Hungary
Programming (2) .... 24,404 -- (7,723) (787) 15,894
Monor .................. 21,358 -- (4,916) (14,835) 1,607
Xtra Music ............. 10,598 -- (1,067) -- 9,531
IPS .................... 10,419 -- (337) 2,514 12,596
Other, net ............. 4,568 -- 9 -- 4,577
------- ------- ------- ------- -------
Total .................. 563,589 (12,121) (35,606) (22,811) 493,051
======= ======= ======= ======= =======
</TABLE>
(1) In February 1999, the Company acquired the remaining 49% of UTH and began
consolidating UTH as of February 1, 1999 (See Note 3).
(2) Represents the Company's remaining investment in Telekabel Hungary
Programming after the transaction with TWE. In March 1999, UPC sold the
remaining investment in Telekabel Hungary Programming.
Summary financial information for UTH is as follows:
For the
One Month
Ended
January 31,
1999
-----------
Revenue ...................................................... 19,844
Costs ........................................................ (12,629)
Depreciation and amortization ................................ (8,246)
-------
Net operating loss ...................................... (1,031)
Share in results of affiliated companies ..................... (5,022)
Financial charges and other .................................. (4,768)
Income tax (provision) benefit ............................... 242
-------
Net loss ................................................ (10,579)
=======
5. Marketable Equity Securities of Parent
As of March 31, 1999, a subsidiary of UPC owned 2,784,620 shares of UIH
Class A Common shares, valued at fair market value of 248,319. The fair market
value of the shares at December 31, 1998 was 101,097, resulting in an unrealized
gain of 147,222 for the three months ended March 31, 1999.
-11-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Property, Plant and Equipment
As of As of
March 31, December 31,
1999 1998
---------- ------------
Cable distribution networks ...................... 1,391,610 466,087
Subscriber premises equipment and converters ..... 154,825 134,527
MMDS distribution facilities ..................... 12,637 13,873
Office equipment, furniture and fixtures ......... 29,152 35,294
Buildings and leasehold improvements ............. 21,678 12,754
Other ............................................ 58,559 28,170
---------- --------
1,668,461 690,705
Accumulated depreciation ................ (139,881) (87,708)
---------- --------
Net property, plant and equipment ....... 1,528,580 602,997
========== ========
7. Goodwill and Other Intangible Assets
As of As of
March 31, December 31,
1999 1998
---------- ------------
UTH .............................................. 729,387 --
Telekabel Group .................................. 389,412 389,513
Janco Multicom ................................... 169,865 165,494
Telekabel Hungary ................................ 95,549 97,429
TVD .............................................. 42,362 42,189
UPC .............................................. 64,400 --
Other ............................................ 22,183 24,516
---------- --------
1,513,158 719,141
Accumulated amortization ................ (58,416) (39,109)
---------- --------
Net goodwill and other intangible assets 1,454,742 680,032
========== ========
8. Short-Term Debt
Time Warner Note
Short-term debt as of December 31, 1998 includes the USD18.0 million
(34,020) non-interest bearing Time Warner Note. In March 1999, the Time Warner
Note was repaid as TWE exercised its option to acquire our 50% interest in HBO
Hungary and 100% interest in TV Max.
Telekabel Hungary Facility
In October 1998, Telekabel Hungary entered into a DM65.6 million (74.0
million) six-month secured bridge facility. Availability under this facility
depends on certain financial covenants. The DM49.2 million (55.5 million)
international tranche of the facility and half of the DM16.4 million (18.5
million) local tranche bear interest at LIBOR plus 2.5% per annum plus an
additional cost of funding calculation. The remaining half of the local tranche
must be drawn in Hungarian forints and bears interest at Budapest interbank
offered rates for Hungarian forints, plus 2.5% per annum plus an additional cost
of funding calculation. Telekabel Hungary is using the facility, among other
things, to finance capital expenditures and to acquire minority shares in our
Kabelkom systems. We have pledged our indirect 79.25% interest in Telekabel
Hungary to secure the facility.
-12-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The facility also is secured by a pledge over certain assets of the Telekabel
Hungary group and a negative pledge. As of March 31, 1999 and December 31, 1998,
the amount outstanding under this facility totaled DM36.6 million (41.2 million)
and DM26.0 million (29.3 million), respectively. In April 1999, a subsidiary of
UPC paid the balance of the Telekabel Hungary Facility.
9. Long-Term Debt
As of As of
March 31, December 31,
1999 1998
-------------- --------------
Senior Revolving Credit Facility............. 361,854 968,018
UTH Facility................................. 539,909 -
CNBH Facility................................ 239,495 -
Bridge Bank Facility......................... - 113,519
Mediareseaux Facility........................ 59,821 40,344
Bank and other loans......................... 78,161 166,387
-------------- --------------
1,279,240 1,288,268
Less current portion................ - (113,519)
-------------- --------------
Total............................... 1,279,240 1,174,749
============== ==============
Senior Revolving Credit Facility
In October 1997, UPC and Norkabel as borrowers entered into a 1,100,000
multi-currency revolving credit facility ("Senior Revolving Credit Facility")
with a syndicate of banks. In December 1997, Telekabel Wien and the other
members of the Telekabel Group also became borrowers under the Senior Revolving
Credit Facility. Although not a borrower, TVD is a guarantor under the Senior
Revolving Credit Facility. Norkabel was succeeded as a borrower by Janco
Multicom after the merger of Janco and Norkabel. In February 1999, the facility
amount was reduced from 1,100,000 to 1,000,000. As of March 31, 1999, the amount
outstanding under the Senior Revolving Credit Facility for UPC, Telekabel Wien
and Janco Multicom was 0, 197,421 and 164,433, respectively. Amounts advanced
under the Senior Revolving Credit Facility bear interest at the London interbank
offered rate ("LIBOR") plus a margin ranging from 0.5% to 2.0% per annum. The
aggregate amount available for borrowing under the facility is reduced
automatically by 5.0% per quarter beginning December 31, 2001. The borrowings of
the Company and its subsidiaries in Austria, Belgium and Norway are limited by
financial covenants under the Senior Revolving Credit Facility. The principal
amount of all borrowings by the Company and such subsidiaries may not exceed
certain multiples of total annualized net operating cash flow for the Company
and such subsidiaries. In addition, the principal amount of all borrowings of
the Company and such subsidiaries may not exceed certain multiples of their
cable television net operating cash flow. The Senior Revolving Credit Facility
generally prohibits dividends and other distributions to shareholders of the
Company unless, among other things, the Company achieves for at least two
consecutive quarters certain financial ratios. The Senior Revolving Credit
Facility also includes financial covenants relating to interest and debt service
coverage and application of proceeds from asset sales and securities offerings.
Bridge Bank Facility
In connection with the UPC Acquisition, the Company entered into the
consolidated USD125.0 million term bridge bank facility ("Bridge Bank Facility")
with a syndicate of banks. In February 1999, UPC repaid the Bridge Bank Facility
with proceeds from the initial public offering.
UTH Facility
In March 1999, UTH replaced their existing 690.0 million facility with
a senior facility and additional shareholder loans. The senior facility consists
of a Euro 340 million (750 million) revolving facility to N.V. Telekabel that
will convert to a term facility on December 31, 2001. Euro 5 million of this
facility will be in the form of an overdraft facility that will be available
until December 31, 2007. This facility
-13-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
was used to repay a portion of the UTH facility and for capital expenditures.
The new facility will bear interest at the Euro Interbank Offered Rate plus a
margin between 0.75% and 2.00% based on leverage multiples tied to N.V.
Telekabel's operating cash flow. The new facility is secured, among other
things, by a pledge over shares held by the borrower and will restrict N.V.
Telekabel's ability to incur additional debt.
CNBH Facility
In February 1998, CNBH entered into a secured 250.0 million ten-year term
facility with a syndicate of banks led by Rabobank. In August 1998, this
facility was increased to 266.0 million. Most of the proceeds were used to repay
in full a Combivisie bridge facility entered into in connection with the
acquisition of Combivisie (122.0 million) and a KTE bank facility (65.0
million). The remaining amount under this facility is available to finance
certain capital expenditures. Beginning in 2001, CNBH will be required to apply
50% of its excess cash flow to prepayment of its facility. The facility
restricts the payment of dividends and distributions and limits the amount of
payments to us under our general services agreement. In January 1999, this
facility was increased to 274.0 million. In connection with this facility, we
entered into a project support agreement providing, among other things, for us
to retain majority ownership of CNBH. In connection with this facility, CNBH
also entered into a 5.0 million ten-year term working capital facility with
Rabobank.
Mediareseaux Facility
In July 1998, Mediareseaux entered into an 9.5 year term facility with a
bank for an amount of French francs ("FRF")680 million ("Mediareseaux
Facility"). The purpose of the facility is to finance on-going capital
expenditures, working capital and acquisitions with a limit of FRF120 million.
The Mediareseaux Facility bears interest at LIBOR plus a margin ranging from
0.75% to 2.0%. The availability of the facility depends on revenue generated and
debt to equity ratios. The availability period ends at December 31, 2002. The
repayment period starts from January 1, 2003 to final maturity in 2007. During
the repayment period, Mediareseaux must apply 50% of its excess cash flow in
prepaying the facility. The Mediareseaux Facility generally restricts the
payment of dividends and distributions. This facility also restricts
Mediareseaux from incurring additional indebtedness, subject to certain
exceptions. In July 1998, Mediareseaux secured a 9.5 year FRF20.0 million
overdraft facility, subject to the same terms and conditions as the Mediareseaux
Facility except that the availability tests are not applicable. As of March 31,
1999 and December 31, 1998 an amount of FRF178,065 million (59,821) and
FRF120,000 (40,344), respectively, was outstanding under the Mediareseaux
Facility.
DIC Loan
In November 1998, a subsidiary of Discount Investment Corporation ("DIC")
loaned the Company a total of USD90.0 million ("DIC Loan") to acquire the
additional interests in Tevel and Melita. The DIC Loan matures in November 2000
and is secured by the Company's pledge of its ownership interest in Tevel. The
DIC Loan bears interest at 8% and is payable, together with 106% of the
principal amount, on maturity. The DIC Loan may be repaid on quarterly
prepayment dates with three months' prior notice by the Company. In connection
with the DIC Loan, UPC granted to an affiliate of DIC an option to acquire a
total of USD90.0 million, plus accrued interest, of ordinary shares of UPC at a
price equal to 90% of the initial public offering price. UPC allocated the USD90
million in loan proceeds between the debt instrument and the equity option
element on the basis of relative fair values. Accordingly, the effective
interest rate on the debt instrument exceeds the stated rate as set forth above.
In February 1999, the option agreement was amended, resulting in a grant of two
options of USD45.0 million each. In February 1999, DIC exercised the first
option for USD45.0 million, and received 1,558,654 ordinary shares. UPC repaid
USD45.0 million of the DIC Loan and accrued interest with the proceeds received
from the option exercise. The remaining option to acquire USD45.0 million, plus
accrued interest, of ordinary shares is at a price equal to the 30 day average
closing price of our shares on the Amsterdam Stock Exchange, or the initial
public offering price, whichever is higher. The remaining option is exercisable
until September 30, 2000.
10. Shareholders' Equity
In February 1999, the Company's shareholders approved an amendment and
restatement of the Company's Articles of Association to effect a 3 for 2 stock
split and an increase in the number of authorized ordinary shares to
200,000,000, which was legally effected before the Company's initial public
offering. Therefore, all
-14-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
share and per share amounts in the accompanying condensed consolidated financial
statements and notes thereto have been retroactively restated to reflect this
event. The Company's shareholders also approved the issuance of 100 priority
shares, which have special approval and other rights, to UIH. In addition, the
Company's Articles of Association were amended and restated to provide for the
issuance of 49,999,900 Class A preference shares and 200,000,000 Class B
preference shares. All shares have a par value of Euro 0.30 (0.661113) per
share.
Initial Public Offering
During February 1999, the Company successfully completed an initial public
offering selling 44.6 million shares on the Amsterdam Stock Exchange and Nasdaq
National Market System and raising gross and net proceeds from the offering of
approximately 2,852,902 and 2,669,552, respectively. Also concurrent with the
offering, proceeds were used to reduce the Senior Revolving Credit Facility
(635,791, including accrued interest of 15,791), repay in its entirety the
Bridge Bank Facility (110,021, net of the interest reserve account), acquire
NUON's 49% interest in UTH (518,061), and the purchase from NUON of a 33,000
subordinated loan from UTH, including accrued interest( 33,279). Subsequent to
the offering, we also repaid USD80.0 million (157,437) of the note payable to
UIH.
Relationship with Microsoft
On January 25, 1999, UPC and Microsoft Corporation ("Microsoft") signed a
letter of intent providing for the establishment of a technical services
relationship. In connection with this letter of intent, UPC agreed to grant
Microsoft warrants to purchase up to 3,800,000 shares or ADSs at Microsoft's
option, at an exercise price of USD28.00. Half of these warrants are expected to
be formally issued in the second quarter of 1999. These warrants will be
exercisable after one year from issuance for a period of three years. The other
half of the warrants will be issued upon the signing of the first definitive
agreement. This half of the warrants will vest and become exercisable based on
performance criteria to be established in the definitive agreements, although
they also will not be exercisable until at least one year after the date of the
closing of UPC's initial public offering. The first half of the warrants are for
the right to negotiate to license technology from Microsoft under definitive
agreements to be negotiated in the future. Concurrent with the IPO, UPC recorded
as contract acquisition rights approximately NLG64.4 million associated with the
first half of the warrants. Such costs will be amortized on a straight-line
basis over the expected contract life, which is yet to be determined. The
accounting for the cost associated with the second half of the warrants will
depend on the ultimate nature of the performance criteria giving rise to the
earn-out of these warrants. These warrants will be recorded as such at fair
value when it is probable the performance criteria will be met in accordance
with EITF Issue No. 96-18.
11. Segment and Geographic Information
The Company's business has historically been derived from our video
entertainment segment. This service has been provided in various European
countries where the Company owns and operates its systems. During 1997, the
Company introduced Internet/data and during 1999 the Company introduced
telephony in several of its systems.
-15-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company evaluates performance and allocates resources at the
geographic country level. The key operating performance criteria used in this
evaluation includes revenue growth and operating income before depreciation,
amortization and stock-based compensation expense ("Adjusted EBITDA").
Management generally considers Adjusted EBITDA to be a helpful way to measure
the performance of cable television operations and communications companies. We
believe Adjusted EBITDA helps investors to assess the cash flow from our
operations from period to period and thus to value our business. Adjusted EBITDA
should not, however, be considered a replacement for net income, cash flows or
for any other measure of performance or liquidity under generally accepted
accounting principles, or as an indicator of a company's operating performance.
We are not entirely free to use the cash represented by our Adjusted EBITDA as
we please. Several of our consolidated operating companies are restricted by the
terms of their debt arrangements. Each company has its own operating expenses
and capital expenditure requirements, which can limit our use of cash. Our
presentation of Adjusted EBITDA may not be comparable to statistics with a
similar name reported by other companies. Not all companies and analysts
calculate EBITDA in the same manner.
A summary of the segment information by geographic area is as follows:
<TABLE>
<CAPTION>
Revenue for the Three Months Ended March 31, 1999
--------------------------------------------------------------------------
Cable Internet/ Programming
Television Telephony Data & Other Total
-------------- -------------- ------------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
The Netherlands:
Corporate, UPCtv..... -- -- -- 1,740 1,740
chello............... -- -- -- -- --
Priority Telecom..... -- -- -- -- --
Operating companies.. 32,735 7,034 663 -- 40,432
Austria................ 43,625 245 4,647 -- 48,517
Belgium................ 7,895 -- 896 -- 8,791
Czech Republic......... 2,240 -- -- -- 2,240
Norway................. 24,080 6 187 -- 24,273
Hungary................ 17,367 -- 62 -- 17,429
France................. 3,126 18 18 -- 3,162
Other.................. 1,845 -- -- 391 2,236
-------------- -------------- ------------- ------------------ -----------
Total................ 132,913 7,303 6,473 2,131 148,820
============== ============== ============= ================== ===========
</TABLE>
<TABLE>
<CAPTION>
Revenue for the Three Months Ended March 31, 1998
--------------------------------------------------------------------------
Cable Internet/ Programming
Television Telephony Data & Other Total
-------------- -------------- ------------- ------------------ -----------
<S>.................... <C> <C> <C> <C> <C>
The Netherlands:
Corporate, UPCtv..... -- -- -- 2,577 2,577
chello............... -- -- -- -- --
Priority Telecom..... -- -- -- -- --
Operating companies.. 13,160 120 -- -- 13,280
Austria................ 42,327 -- 786 -- 43,113
Belgium................ 8,931 -- 177 -- 9,108
Czech Republic......... 1,998 -- -- -- 1,998
Norway................. 22,879 -- 40 -- 22,919
Hungary................ -- -- -- -- --
France................. 1,311 -- -- -- 1,311
Other.................. 649 -- -- 50 699
-------------- -------------- ------------- ------------------ -----------
Total................ 91,255 120 1,003 2,627 95,005
============== ============== ============= ================== ===========
</TABLE>
-16-
<PAGE>
UNITED PAN-EUROPE COMMUNICATIONS N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
Adjusted EBITDA for the Three Months Ended March 31, 1999
--------------------------------------------------------------------------
Cable Internet/ Programming
Television Telephony Data & Other Total
-------------- -------------- ------------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
The Netherlands:
Corporate, UPCtv...... -- -- -- (11,429) (11,429)
chello................ -- -- (12,054) -- (12,054)
Priority Telecom...... -- (328) -- -- (328)
Operating companies... 16,923 (2,030) (1,078) -- 13,815
Austria................. 24,836 (4,451) (349) -- 20,036
Belgium................. 2,176 -- (1,356) -- 820
Czech Republic.......... (481) -- -- -- (481)
Norway.................. 10,125 (3,194) (2,455) -- 4,476
Hungary................. 5,942 -- (5) -- 5,937
France.................. (12) (2,114) (1,006) -- (3,132)
Other................... 415 -- -- (4,095) (3,680)
-------------- -------------- ------------- ------------------ -----------
Total................. 59,924 (12,117) (18,303) (15,524) 13,980
============== ============== ============= ================== ===========
</TABLE>
<TABLE>
<CAPTION>
Adjusted EBITDA for the Three Months Ended March 31, 1998
--------------------------------------------------------------------------
Cable Internet/ Programming
Television Telephony Data & Other Total
-------------- -------------- ------------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
The Netherlands:
Corporate, UPC TV..... -- -- -- (4,139) (4,139)
chello................ -- -- (226) -- (226)
Priority Telecom...... -- -- -- -- --
Operating companies... 8,710 38 -- -- 8,748
Austria................. 24,245 (235) (1,263) -- 22,747
Belgium................. 3,721 -- (965) -- 2,756
Czech Republic.......... (918) -- -- -- (918)
Norway.................. 9,414 (65) (186) -- 9,163
Hungary................. -- -- -- -- --
France.................. (821) -- -- -- (821)
Other................... 462 -- -- (811) (349)
-------------- -------------- ------------- ------------------ -----------
Total................. 44,813 (262) (2,640) (4,950) 36,961
============== ============== ============= ================== ===========
</TABLE>
Following is a reconciliation of Adjusted EBITDA to UPC's net loss before income
taxes:
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
------------------------
1999 1998
---- ----
<S> <C> <C>
Adjusted EBITDA........................................... 13,980 36,961
Depreciation and amortization............................. (63,198) (48,457)
Stock-based compensation ................................. (36,560) (406)
--------- ---------
Net operationg (loss) income........................ (85,778) (11,902)
Interest income........................................... 4,911 814
Interest expense.......................................... (38,245) (22,734)
Gain on sale of assets.................................... 14,625 -
Foreign exchange (loss) gain and other expense............ (15,335) (4,894)
--------- ---------
Net loss before income taxes and other items........ (119,822) (38,716)
Share in results of affiliated companies, net............. (20,272) (14,139)
Minority interests in subsidiaries........................ (77) 241
--------- ---------
Net loss before income benefit (expense)............ (140,171) (52,614)
========= =========
</TABLE>
-17-
<PAGE>
Total Assets
--------------------------------------
As of As of
March 31, December 31,
1999 1998
------------------ ------------------
The Netherlands:
Corporate, UPC TV.... 1,568,187 567,264
chello............... 13,841 6,617
Priority Telecom..... 264 174
Operating companies.. 1,861,417 -
Austria................ 657,506 644,791
Belgium................ 112,430 109,331
Czech Republic......... 19,741 21,730
Norway................. 455,049 414,038
Hungary................ 171,974 164,280
France................. 119,045 96,563
Other.................. 24,118 42,991
------------------ ------------------
Total................ 5,003,572 2,067,779
================== ==================
12. Comprehensive Income
The components of total comprehensive income are as follows:
For the Three Months Ended
March 31,
------------------------------
1999 1998
-------------- --------------
Net loss.......................................... (140,539) (51,895)
Other comprehensive loss:
Change in cumulative translation adjustments.. 10,181 (6,218)
Change in unrealized gain on investments...... 147,222 43,604
-------------- --------------
Total comprehensive loss................ 16,864 (14,509)
============== ==============
13. Subsequent Events
Agreement to Acquire GelreVision
In April 1999, UTH and Gamog reached in principal an agreement for
the acquisition of Gamog's cable company, GelreVision, for approximately 243.0
million. The acquisition will increase UTH's existing subscriber base by
131,000. The acquisition is expected to close in the third quarter of 1999.
Acquisition of Additional Interest in IPS
In April 1999, a subsidiary of UPC and Disney/ABC International
Television, Inc. ("Disney") entered into an agreement with the 33.0% shareholder
of IPS whereby UPC and Disney each agreed to acquire 16.5% of the other
shareholder's 33.0% interest. After the acquisition, UPC and Disney each hold a
50% interest in IPS. UPC's portion of the purchase price is USD7.6 million.
-18-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. These
forward-looking statements may include statements concerning our plans,
objectives and future economic prospects, expectations, beliefs, anticipated
events or trends and similar expressions about matters that are not historical
facts. These forward-looking statements involve both known and unanticipated
risks, uncertainties and other factors that may cause our actual results,
performance or achievements, or industry results, to be materially different
from what we say or imply with the forward-looking statements. These factors
include changes in television viewing preferences and habits by our subscribers
and potential subscribers, their acceptance of new technology, programming
alternatives and new video services we may offer. They also include our ability
to manage and grow our newer telephone and Internet/data services. These
forward-looking statements apply only as of the time of this report and we have
no obligation or plans to provide updates or revisions to these forward-looking
statements or any other changes in events or circumstances on which these
forward-looking statements are based. Our statements in this Management's
Discussion and Analysis of Financial Condition and Results of Operations section
that relate to the Year 2000 issues are hereby denominated as "Year 2000
Statements" within the meaning of the Year 2000 Information and Readiness
Disclosure Act. The following discussion and analysis of financial condition and
results of operations covers the three months ended March 31, 1999 and 1998, as
restated to include Monor Communications Group, Inc., Tara Television Limited,
and Ibercom, Inc. for all periods in which their operations were part of UIH's
consolidated results, and should be read together with our condensed
consolidated financial statements and related notes included elsewhere herein.
These condensed consolidated financial statements provide additional information
regarding our financial activities and condition.
Introduction
We commenced our present business in July 1995. Our systems together have
the largest number of subscribers of any group of broadband communications
networks operated across Europe. We provide cable television services. We are
further developing and upgrading our network to provide digital video, voice and
Internet/data services in our Western European markets. We and Microsoft
recently signed a letter of intent to establish a relationship to work jointly
on Internet, telephone and video projects.
As of March 31, 1999, we consolidate the results from our systems in
Austria, Belgium, Norway, The Netherlands (other than A2000), France, Hungary,
(other than Monor) the Czech Republic, Romania, the Slovak Republic and our
programming interests in Ireland. Unconsolidated systems include our interests
in the Dutch (A2000), Israeli, Maltese and Hungarian (Monor) systems, and
programming interests in Spain. We account for these unconsolidated systems
using the equity method of accounting. During the year ended December 31, 1998,
we consolidated some of our Dutch systems for a seven-month period ended July
31, 1998. Thereafter, all of the Dutch systems were accounted for using the
equity method. On February 17, 1999, we acquired the remaining 49% interest in
UTH, our Dutch holding company, and began consolidating the results of UTH's
systems other than A2000 effective February 1, 1999. We began consolidating our
system in Hungary in July 1998.
History of UPC
Since formation, we have developed largely through acquisitions. The most
recent acquisitions have resulted in significant growth in consolidated revenues
and expenditures.
January 1998 Effective January 1, 1998, we acquired the
CNBH Formation and Combivisie cable television systems in the region
Combivisie Acquisition surrounding our KTE system in The Netherlands for a
purchase price of NLG180.8 million. Effective January
1, 1998, we combined the Combivisie and KTE systems
to form CNBH and consolidated the results of CNBH
through July 31, 1998 (see UTH Formation).
June 1998 On June 29, 1998, we acquired from Time Warner
Eastern Europe Entertainment Company L.P.("TWE") 50%
of Kabelkom, the Transactions Hungarian cable
television system holding company, increasing our
ownership to 100%. The purchase price was
approximately USD27.5 million, USD9.5 million of
which was payable in cash and USD18.0 million by
delivery of a non-interest
-19-
<PAGE>
bearing note. We gave TWE the option, exercisable until March
26, 1999, to purchase 50% of the Hungarian programming
businesses formerly held by Kabelkom, including HBO Hungary,
and 100% of TV Max, a Czech and Slovak Republic programming
business, for approximately USD18.25 million. Effective June
30, 1998, we combined our interest in Kabelkom with Kabeltel, a
group of Hungarian cable television systems located in Budapest
and other large Hungarian cities, forming Telekabel Hungary. We
own 79.25% of Telekabel Hungary, Hungary's largest cable
television operator, and started consolidating its results as
of such date. In March 1999, TWE exercised its option to
purchase our Hungarian programming business and TV Max.
August 1998 In August 1998, UPC and NUON combined all of our Dutch
UTH Formation broadband cable television and telecommunications businesses to
form UTH. We contributed 100% of CNBH and 50% of A2000 for our
51% interest in UTH. NUON contributed 100% of Telekabel Beheer.
UPC and NUON agreed on the relative values of the respective
assets and NUON made a small balancing payment of approximately
NLG2.0 million for its 49% interest. As a result of the
creation of UTH, effective August 1, 1998, we did not
consolidate the results of CNBH and accounted for UTH using the
equity method of accounting. As described below, however, we
purchased the other 49% of UTH in February 1999 and began
consolidating UTH effective February 1, 1999.
November 1998 We held our interest in the Israeli, Maltese and Irish
Increase in operating systems through a partnership with a subsidiary of
Israeli and Tele-Communications International, Inc. In November 1998, we
Maltese Systems acquired Tele-Communications International's indirect 23.3% and
Ownership 25.0% interests in the Israeli and Maltese systems for
approximately USD88.5 million, net of closing adjustments,
doubling our respective interests in these systems to 46.6% and
50%, respectively. We financed this acquisition through a loan
from our primary partners in the Israeli operating system.
November 1998 As part of the Israeli and Maltese transaction described
Sale of Irish above, in November 1998, we purchased from Riordan
System Communications Ltd., an indirect 5% interest in an Irish multi-
channel television system and 5% of Tara Television Limited, a
company providing Irish programming to the U.K. markets. The
purchase price was 384,531 shares of UIH we indirectly held. In
November 1998, we sold the newly-acquired 5% interest in the
Irish multi-channel television system, together with our
previously-held 20% interest in this system, to Tele-
Communications International, Inc. The purchase price for this
transaction was USD20.5 million, offsetting part of the
purchase price payable for the Israeli and Maltese systems.
December 1998 In December 1998, UIH sold to us in exchange for 6,330,340
Purchase of of our ordinary shares UIH's:
Monor and Tara
from UIH - 44.75% economic interest in Monor Communications Group
Inc., ("Monor") a company that operates a traditional
telephone system in the Monor region of Hungary.
- 75% interest in Tara Television Limited ("Tara"), a
company with revenues of approximately NLG1.3 million for
the year ended December 31, 1998.
Because this was an exchange between companies under common
control, we have restated our financial statements for all
periods in which the operations of these companies were part of
UIH's consolidated financial statements.
February 1999 In February 1999, UIH sold to us, in exchange for 4,955,264
Purchase of of our ordinary shares, UIH's approximately 33.5% interest in
IPS from UIH Ibercom, Inc. ("IPS"), a group of programming entities focusing
on the Spanish- and Portuguese-speaking markets. IPS had
revenues of approximately NLG34.0 million for the year ended
December 31, 1998.
Because this was an exchange between companies under common
control, we have restated our financial statements for all
periods in which the operations of IPS were part of UIH's
consolidated financial statements.
February 1999 On February 17, 1999, UPC acquired NUON's 49% ownership
Purchase of interest in UTH for NLG518.1 million. In addition, UPC
UTH Minority purchased from NUON a NLG33.3 million subordinated loan,
Interest including interest, dated December 23, 1998 owed by UTH to
NUON. We paid for the entire purchase price and loan totaling
NLG551.4 million in cash on
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<PAGE>
closing. Effective February 17, 1999, we own 100% of UTH and
began consolidating UTH as of February 1, 1999.
March 1999 In March 1999, UPC reached final agreement with Siemens
Acquisition of Austria ("Siemens") to purchase Siemens' 95.63% interest in
Bratislava SKT s.r.o., the company that owns and operates the cable TV
Cable TV System system in Bratislava, Slovak Republic. The completion of the
purchase is subject to obtaining the approval of regulatory
authorities. The acquisition will increase UPC's subscriber
base in Eastern Europe by approximately 157,000. The
purchase price for the 95.63% interest is approximately
USD41.0 million.
March 1999 On March 29, 1999, UPC reached a definitive agreement
Agreement to with Time Warner Entertainment for the purchase by us of
purchase 100% of Time Warner Cable France, a company which controls
Time Warner Cable and operates three cable TV systems with subscribers of
France approximately 64,000 in the suburbs of Paris and Lyon and
the city of Limoges. Completion of the purchase, which is
subject to regulatory approval, is expected to take place in
the third quarter of 1999. The purchase price is
approximately USD71.0 million.
April 1999 In April 1999, UTH and Gamog reached in principal an
Agreement to agreement for the acquisition by UTH of Gamog's cable
purchase company, GelreVision. The acquisition, which will increase
GelreVision UTH's existing subscriber base by 131,000, is expected to
close in the third quarter of 1999. The purchase price is
approximately 243.0 million.
April 1999 In April 1999, a subsidiary of UPC and Disney/ABC
Agreement to International Television, Inc. ("Disney") entered into an
purchase agreement with the 33.0% shareholder of IPS whereby UPC
additional and Disney each agreed to acquire 16.5% of the other
interest in IPS shareholder's 33.0% interest. After the acquisition, UPC
and Disney each hold a 50% interest in IPS. UPC's portion
of the purchase price is USD7.6 million.
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<PAGE>
Results of Operations
The following table sets forth information from, or derived from, our
condensed consolidated statements of operations for the three months ended March
31, 1999 and 1998.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------------
1999 1998
-------- -------
(Dutch guilders, in thousands)
<S> <C> <C>
Service and other revenue ........................... 148,820 95,005
Operating expense ................................... (67,067) (30,899)
Selling, general and administrative expense ......... (104,333) (27,551)
Depreciation and amortization ....................... (63,198) (48,457)
-------- -------
Net operating income (loss) ................... (85,778) (11,902)
Interest income ..................................... 4,911 814
Interest expense .................................... (38,245) (22,734)
Gain on sale of assets .............................. 14,625 --
Foreign exchange gain (loss) and other expense ...... (15,335) (4,894)
-------- -------
Net loss before income taxes and other items .. (119,822) (38,716)
Share in results of affiliated companies, net ....... (20,272) (14,139)
Minority interests in subsidiaries .................. (77) 241
Income tax benefit (expense) ........................ (368) 719
-------- -------
Net loss ............................................ (140,539) (51,895)
======== =======
Other information:
Adjusted EBITDA
Net operating income (loss) ................... (85,778) (11,902)
Depreciation and amortization ....................... 63,198 48,457
Stock based compensation ............................ 36,560 406
-------- -------
Consolidated Adjusted EBITDA (1)..................... 13,980 36,961
======== =======
As a Percentage of Revenue:
Operating expense ................................... 45.1% 32.5%
Selling, general and administrative expense ......... 70.1% 29.0%
Adjusted EBITDA (1).................................. 9.4% 38.9%
Depreciation and amortization ....................... 42.5% 51.0%
</TABLE>
(1) Adjusted EBITDA represents earnings before net interest expense, income
tax expense, depreciation, amortization, stock-based compensation charges,
minority interest, share in results of affiliated companies (net), currency
exchange gains (losses) and other non-operating income (expense) items.
Management generally considers Adjusted EBITDA to be a helpful way to measure
the performance of cable television operations and communications companies. We
believe Adjusted EBITDA helps investors to assess the cash flow from our
operations from period to period and thus to value our business. Adjusted EBITDA
should not, however, be considered a replacement for net income, cash flows or
for any other measure of performance or liquidity under generally accepted
accounting principles, or as an indicator of a company's operating performance.
We are not entirely free to use the cash represented by our Adjusted EBITDA as
we please. Several of our consolidated operating companies are restricted by the
terms of their debt arrangements. Each company has its own operating expenses
and capital expenditure requirements, which can limit our use of cash. Our
presentation of Adjusted EBITDA may not be comparable to statistics with a
similar name reported by other companies. Not all companies and analysts
calculate EBITDA in the same manner.
Revenue
During the three months ended March 31, 1999, our revenue increased NLG53.8
million to NLG148.8 million from NLG95.0 million for the three months ended
March 31, 1998, a 56.6% increase. Of this increase, approximately NLG41.7
million resulted from increased cable television revenue, NLG7.2 million
resulted from increased telephony revenue and NLG5.5 million resulted from
increased Internet/data revenue. These increases were partially offset by a
decrease of NLG0.5 million in revenue from other services. The increase in cable
television revenue primarily resulted from the consolidation of UTH effective
February 1, 1999 and the consolidation of Telekabel Hungary effective July 1,
1998. For the period from February 1, 1999 through March 31,1999, cable
television revenue from UTH was NLG32.7 million, as compared to cable television
revenue from CNBH, UPC's only consolidated Dutch system for the three months
ended March 31, 1998, of NLG13.2 million. Total cable television revenue of
Telekabel Hungary was NLG17.4 million for the three months ended March 31, 1999
as compared with NLG0 for the three months ended March 31, 1998. The balance of
the increase in cable television revenue came from subscriber growth. The
increase in telephony revenue is primarily a result of the consolidation of UTH.
Internet/data revenue increased primarily due to increased Internet subscribers
in Austria, Belgium and the Netherlands.
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<PAGE>
Operating Expense
During the three months ended March 31, 1999, our operating expense
increased NLG36.2 million to NLG67.1 million from NLG30.9 million for the three
months ended March 31,1998, an increase of 117.2%. Of this increase,
approximately NLG15.3 million resulted from increased cable television operating
costs, NLG8.3 million resulted from increased telephony operating costs, NLG9.2
million resulted from increased Internet/data operating costs and NLG3.4
resulted from increased operating costs for other services. The increase in
cable television operating costs primarily resulted from the consolidation of
UTH effective February 1, 1999 and the consolidation of Telekabel Hungary
effective July 1, 1998. For the period from February 1, 1999 through March
31,1999, cable television operating costs from UTH were NLG7.7 million, as
compared to cable television operating costs from CNBH, UPC's only consolidated
Dutch system for the three months ended March 31, 1998, of NLG2.7 million. Total
cable television operating costs of Telekabel Hungary were NLG6.0 million for
the three months ended March 31, 1999 as compared with NLG0 for the three months
ended March 31, 1998. The balance of the increase in cable television operating
costs came from subscriber growth. The increase in telephony operating costs is
primarily a result of the consolidation of UTH, as well as continued development
of our telephony business. The increase in Internet/data operating costs is
attributable to development of chello and increased Internet/data operating
company costs. UPC launched chello in March 1999 and will begin recognizing
revenue in the second quarter of 1999. Included in the increase in other
operating expenses is an increase in Tara's operating expenses of NLG1.4 million
over the comparable period in 1998. We expect operating expense as a percentage
of revenue to increase as new video, telephone and Internet/data services are
introduced.
Selling, General and Administrative Expense
During the three months ended March 31, 1999, our SG&A expense increased
NLG76.8 million to NLG104.3 million from NLG27.6 million for the three months
ended March 31, 1998, an increase of 278.3%. A substantial portion of this
increase, and the increase as a percentage of revenue, results from a
stock-based compensation charge of NLG36.6 million attributable to our stock
option plans for the three months ended March 31, 1999, compared to NLG0.4
million for the same period in 1998. Of the remaining increase in SG&A expense,
NLG11.2 million is an increase in cable television SG&A expense, NLG10.8 million
is an increase in telephony SG&A expense, NLG11.9 million is an increase in
Internet SG&A expense (excluding NLG0.7 of chello stock-based compensation for
the three months ended March 31, 1999) and NLG6.3 million is an increase in
corporate and other SG&A costs. The increase in cable television SG&A costs is
primarily attributable to the consolidation of UTH effective February 1, 1999
and the consolidation of Telekabel Hungary as of July 1, 1998. For the period
from February 1, 1999 through March 31,1999, cable television SG&A costs from
UTH were NLG8.1 million, as compared to cable television SG&A costs from CNBH,
UPC's only consolidated Dutch system for the three months ended March 31, 1998,
of NLG1.8 million. Total cable television SG&A costs of Telekabel Hungary were
NLG5.4 million for the three months ended March 31, 1999 as compared with NLG0
for the three months ended March 31, 1998. The increase in telephony SG&A
expenses is a combination of the consolidation of UTH, as well as increased
development and the launch of telephony services in Austria, Norway and France
in the first quarter of 1999. The increase in Internet SG&A expenses is also
attributable to further development and launch preparation costs. Included in
the increase in other operating expenses is an increase in SG&A expense related
to programming of NLG3.6 million compared to the same period in 1998. We expect
selling, general and administrative costs as a percentage of revenue to decrease
in the future as the new video, telephone and Internet/data services mature.
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<PAGE>
Depreciation and Amortization
During the three months ended March 31, 1999, our depreciation and
amortization expense increased NLG14.7 million to NLG63.2 million from NLG48.5
million for the three months ended March 31, 1998, a 30.3% increase. The
increase is primarily due to additional depreciation and amortization from the
consolidation of UTH effective February 1, 1999 and the consolidation of
Telekabel Hungary effective July 1, 1998. The remaining increase comprised
additional depreciation related to additional capital expenditures to upgrade
the network in our Western European systems and new-build for developing
systems.
On January 25, 1999 UPC and Microsoft Corporation ("Microsoft") entered
into a letter of intent providing for the establishment of a technical services
relationship. In connection with this letter of intent, we have agreed to grant
Microsoft warrants to purchase up to 3,800,000 ADSs or ordinary shares, at
Microsoft's option, at an exercise price of USD28.00 per ordinary share or ADS.
Half of these warrants are expected to be formally issued in the second quarter
of 1999. These warrants will be exercisable after one year from issuance for a
period of three years. The other half of the warrants will be issued upon the
signing of the first definitive agreement. This half of the warrants will vest
and become exercisable based on performance criteria to be established in the
definitive agreements, although they also will not be exercisable until at least
one year after the date of the closing of UPC's initial public offering. The
first half of the warrants are for the right to negotiate to license technology
from Microsoft under definitive agreements to be negotiated in the future.
Concurrent with our initial public offering, we recorded as contract acquisition
rights approximately NLG64.4 million associated with the first half of the
warrants. Such costs will be amortized on a straight-line basis over the
expected contract life, which is yet to be determined. The accounting for the
cost associated with the second half of the warrants will depend upon the
ultimate nature of the performance criteria giving rise to the earn-out of these
warrants. These warrants will be recorded as such at fair value when it is
probable the performance criteria will be met, in accordance with EITF Issue No.
96-18.
Operating Income (Loss)
During the three months ended March 31, 1999, operating loss increased
NLG73.9 million to NLG85.8 million from NLG11.9 million, a 621.0% increase.
Approximately 49.0% of this increase resulted from the stock-based compensation
charge of NLG36.6 million related to our stock option plans. A substantial
portion of the remaining increase in net operating loss is due to the focus on
the continued development of our telephony and Internet/data services.
We believe the introduction of telephone services and Internet/data
services will have a significant negative impact on operating income (loss)
during 1999. Thereafter, this negative impact is expected to decline. The
financial effect of the development of our video programming businesses and the
construction of our digital distribution platform will depend upon our ability
to find joint venture partners for these new investments. If we are unable to
find joint venture partners for these new investments, we will be required to
consolidate all of the losses of these new investments. During the three months
ended March 31, 1999, such losses were consolidated.
Interest Expense
During the three months ended March 31, 1999, interest expense increased
NLG15.5 million to NLG38.2 million from NLG22.7 million during the same period
in 1998, a 68.3% increase. This increase was due primarily to increases in
interest cost related to the DIC Loan, consolidation of the NUON Facility and
the acquisition of Telekabel Hungary in June 1998.
Foreign Exchange Gain (Loss) and Other Expense
Foreign exchange gain (loss) and other expense reflected a loss of NLG15.3
million for the three months ended March 31, 1999 as compared to a loss of
NLG4.9 million for the same period in 1998. The foreign exchange loss during the
three months ended March 31, 1999 was due primarily to a decrease in the value
of the Dutch guilder in relation to the U.S. dollar as compared to December 31,
1998. Subsequent to December 31, 1998, we repaid a significant portion of our
remaining U.S. dollar-denominated indebtedness with proceeds from our initial
public offering.
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<PAGE>
Share in Results of Affiliated Companies, Net
The table below sets forth our share in results of affiliated companies
for the applicable periods.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-----------------------------------
1999 1998
----------------- ---------------
(Dutch Guilders, in thousands)
<S> <C> <C>
A2000 ...................................................... (9,981) (11,387)
UTH ........................................................ (5,407) --
Hungary (Kabelkom, programming and cable television) ....... (219) (856)
UII Partnership (Israel, Ireland, Malta) (2) ............... -- (441)
Tevel (2) .................................................. (4,116) --
Melita (2) ................................................. 10 --
Monor ...................................................... (300) (612)
Xtra Music ................................................. (435) --
Other (1) .................................................. 176 (843)
-------- --------
Total ...................................................... (20,272) (14,139)
======== ========
</TABLE>
(1) "Other" shows in 1998, our share in results from Spain, France and
Germany, in 1999 our share in results from Spain and a Czech and Slovak
Republic programming business.
(2) Historically, we held our interests in Israel, Ireland and Malta in UII, a
general partnership. In November 1998, we acquired our partner's interest
in Tevel and Melita and sold our interest in PHL.
For the three months ended March 31, 1999, our share in net losses of
affiliated companies increased to NLG20.3 million from NLG14.1 million for the
three months ended March 31, 1998, a 44.0% increase. A substantial portion of
the increase in share in net losses was attributable to our 51% investment in
UTH, accounted for as an equity investment until February 1, 1999 when we
acquired the remaining 49% and began consolidating the investment. Additional
increased losses are also attributable to additional amortization of goodwill
related to our acquisition of an additional 23.3% and 25% interest in Melita and
Tevel, respectively, in November 1998. The increase in losses from Tevel also
result from losses incurred by Tevel resulting from goodwill amortization and
financing expense related to Tevel's acquisition of Guanim Cable Television Ltd
in the second half of 1998.
Statements of Cash Flows
We had cash and cash equivalents of NLG1,062.0 million as of March 31,
1999, an increase of NLG1,032.4 million from NLG29.6 million as of December 31,
1998.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------------
1999 1998
-------- -------
(Dutch guilders, in thousands)
<S> <C> <C>
Cash flows from operating activities ................ 44,170 59,782
Cash flows from investing activities ................ (639,933) (208,896)
Cash flows from financing activities ................ 1,627,875 114,767
Effect of exchange rates on cash .................... 319 (20)
--------- --------
Net increase (decrease) in cash and cash equivalents 1,032,431 (34,367)
Cash and cash equivalents at beginning of period .... 29,571 100,144
--------- --------
Cash and cash equivalents at end of period .......... 1,062,002 65,777
========= ========
</TABLE>
Cash Flows from Operating Activities
During the three months ended March 31, 1999, net cash flow from operating
activities decreased NLG15.6 million to NLG44.2 million from NLG59.8 million
for the comparable period in 1998, a 26.1% decrease. This decrease was
primarily related to increased cash needs for working capital and the
consolidation of UTH as of February 1, 1999.
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<PAGE>
Cash Flows from Investing Activities
We used approximately NLG639.9 million of cash in investing activities
during the three months ended March 31, 1999, compared to NLG208.9 million for
the three months ended March 31, 1998. During the three months ended March 31,
1999, cash was used principally for the acquisition of UTH, which represented
NLG491.5 million, net of cash acquired, and for capital expenditures for
property, plant and equipment, including other tangible assets such as system
upgrade and new-build activities, which represented NLG124.2 million. Also
during the three months ended March 31, 1999, we had a net increase in
restricted cash from the deposit of NLG84.1 million for the acquisition of
Bratislava and the release of NLG30.3 million of restricted cash upon pay-off of
the bridge bank facility. During this period we made a net investment in
affiliates of NLG7.2 million and received proceeds from the sale of our
Hungarian programming assets of NLG36.7 million.
For the three months ended March 31, 1998, our primary use of cash for
investing activities was the acquisition of Combivisie for NLG180.8 million. We
also used cash for capital expenditures of NLG34.0 million, which was partially
offset by a decrease in restricted cash of NLG5.8 million.
Cash Flows from Financing Activities
We had NLG1,627.9 million of cash flows from financing activities during
the three months ended March 31, 1999, as compared to NLG114.8 million for the
three months ended March 31, 1998. Principal sources of cash include net
proceeds from our initial public offering of NLG2,669.6 million. Additional
sources of cash were from short-term borrowings of NLG16.1 million and long-term
borrowings of NLG754.9 million, which includes borrowings on the UTH facility of
NLG 539.9 million, borrowings under the senior credit facility of NLG195.5
million and borrowings under the Mediareseaux facility of NLG19.5 million.
Concurrent with the public offering DIC exercised its option to acquire shares
for proceeds of NLG89.6 million, which we used to pay USD45.0 million (NLG87.8)
of the DIC Loan. We used proceeds from the public offering to pay NLG620.0
million of the senior revolving credit facility, NLG110.0 million of the bridge
bank facility and the note payable to UIH of NLG157.4 million. An additional
NLG191.0 million of the senior revolving credit facility was paid by Telekabel
Wein. As part of the acquisition of UTH, we also paid a loan to NUON of NLG33.0
million. In March, UTH paid off its existing credit facility of NLG625.2 million
with a new facility, plus funding from UPC. We paid down other loans of NLG31.1
million. We used proceeds from the sale of our programming assets in Hungary to
pay the Time Warner note totaling NLG36.4 million.
During the three months ended March 31, 1998 our primary source of cash
was borrowings from UIH of NLG129.9 million and from our senior revolving credit
facility and CNBH's major facility of NLG190.5. We repaid long and short-term
borrowings from our bridge bank facility and KTE facility of NLG205.6 million.
Consolidated Capital Expenditures
The table below sets forth our consolidated capital expenditures for the
three months ended March 31, 1999 and 1998. The historical information below
does not reflect capital expenditures by A2000, UTH (through February 1, 1999),
Tevel or other unconsolidated systems. CNBH has been deconsolidated as of
August 1, 1998; its capital expenditures are included for the three months
ending March 31,1998. UTH was consolidated as of February 1, 1999 and its
capital expenditures for the two months ended March 31, 1999 are included in the
capital expenditures for the three months ended March 31, 1999.
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<PAGE>
For the Three Months
Ended March 31,
------------------------------
1999 1998
-------------- -------------
(Dutch guilders, in thousands)
Cable Network:
Upgrade .................................... 29,338 14,775
New build .................................. 14,950 8,362
-------- -------
Total Cable Network ........................ 44,288 23,137
Master Telecom Center:
Video services ............................. 1,998 1,116
Cable telephone (Priority Telecom) ......... 14,857 112
Internet/data services ..................... 5,871 170
-------- -------
Total Master Telecom Center .......... 22,726 1,398
Customer Premise Equipment (CPE):
Video services ............................. 6,953 2,935
Cable telephone (Priority Telecom) ......... 215 --
Internet/data services ..................... 6,181 651
-------- -------
Total CPE ............................ 13,349 3,586
Support Systems and Equipment (SSE) .............. 7,108 1,810
Land, buildings, leasehold and other.............. 31,328 2,479
-------- -------
Total SSE and Other .................. 38,436 4,289
New Businesses:
chello broadband ........................... 4,937 --
Digital distribution platform .............. -- --
-------- -------
Total New Businesses ................. 4,937 --
Other ............................ 451 1,560
-------- -------
Total Capital Expenditures ................. 124,187 33,970
======== =======
Cable Network
Since our formation as a joint venture, we have been aggressively
upgrading our existing cable television system infrastructure and constructing
our new-build infrastructure with two-way high capacity technology to support
digital video, telephone and Internet/data services. Capital expenditures for
the upgrade and new-build construction can be reduced at our discretion,
although such reductions require lead-time in order to complete work-in-progress
and can result in higher total costs of construction.
We expect that the upgrade of the cable network and related equipment will
cause us to write-off some of our existing cable network and equipment. We do
not expect the write-off to be significant, except in certain limited
circumstances where it will be necessary to rebuild the network. While there are
some exceptions, most of the existing cable plant and related equipment has been
in service for over ten years and the remaining book value is very low. While we
believe the upgrade will extend the life of our existing plant, we do not
anticipate extending the useful life of our existing coaxial cable and equipment
for financial reporting purposes.
During the three months ended March 31, 1999, we spent approximately
NLG44.3 million in cable network capital expenditures. For fiscal 1999, we have
budgeted cable network capital expenditures of approximately NLG407.8 million.
Master Telecom Center
The master telecom center includes the headend and all central network
equipment needed for services provided through the operating system. For cable
television, this includes satellite antennas, encryption devices and original
transmission facilities. For telephone service, this includes the central office
switch and
-27-
<PAGE>
synchronous digital hierarchy and other telephone-related equipment. For
Internet/data service, this includes servers and equipment for connection to the
Internet.
During the three months ended March 31, 1999, we spent approximately
NLG22.7 million for master telecom center equipment. For 1999, we have budgeted
capital expenditures for master telecom center equipment of approximately
NLG82.7 million.
Customer Premise Equipment
Customer premise equipment includes television set-top converters for
video services, cable phone equipment for telephone and cable modems and network
interface cards for Internet/data services. Customer premise equipment is a
variable capital expenditure, except for inventory on hand, and generally will
not be incurred unless we need the equipment for a subscriber.
During the three months ended March 31, 1999, we spent approximately
NLG13.3 million on customer premise equipment. For 1999, we have budgeted
capital expenditures for customer premise equipment of approximately NLG152.0
million. We recently entered into agreements with Philips and General
Instruments for the development and purchase of an integrated digital set-top
box for video and Internet/data services, as well as for Internet-based
telephone.
Support Systems and Equipment
Support systems and equipment includes ancillary systems such as
operational and business support systems, including network management, customer
care, inventory and billing. During the three months ended March 31, 1999, we
spent NLG38.4 million in total support systems and equipment. For 1999, we have
budgeted NLG52.8 million for support systems and equipment.
New Businesses
In addition to the network infrastructure and related equipment and
capital resources described above, development of our newer businesses, chello
broadband and our digital distribution platform, require capital expenditures
for construction and development of our pan-European distribution and
programming facilities, including our origination facility, network operating
center, near video on demand server complex and related support systems and
equipment. For the three months ended March 31, 1999, we incurred capital
expenditures of approximately NLG4.9 million for chello broadband. We have
budgeted for 1999 approximately NLG42.5 million and NLG35.5 million,
respectively, for capital expenditures for chello broadband and our digital
distribution platform.
New Businesses - Revenue, Operating Expenses and SG&A Expenses
During late 1997 we introduced Internet/data service as a product offering
in our consolidated systems. During 1998 we began the development of several
other new businesses including chello broadband, Priority Telecom and UPC tv.
During 1998 the Internet/data service business and telephony business were
developed at both local country operating companies and at the corporate
Pan-European level. The information provided below provides an overview of the
revenues, operating expenses and SG&A expenses for the three months ended March
31, 1999 and 1998 related to these new services in relation to our cable
television business. Historically, we did not fully allocate overhead and
general and administrative expenses to these new businesses. Full allocation
began in 1999.
-28-
<PAGE>
For the Three Months Ended March 31, 1999
------------------------------------------
Operating SG&A
Revenue Expenses(2) Expenses
--------- -------- ----------
Cable Television 132,913 (44,016) (28,973)
Telephony:
Operating companies 7,303 (8,274) (10,818)
Priority Telecom -- -- (328)
Internet/data:
Operating companies 6,473 (6,358) (6,364)
chello(1) -- (4,210) (8,504)
Corporate overhead, UPCtv,
programming and other(1) 2,131 (4,209) (49,346)
------- ------- --------
Total 148,820 (67,067) (104,333)
======= ======= ========
For the Three Months Ended March 31, 1998
------------------------------------------
Operating SG&A
Revenue Expenses(2) Expenses
--------- -------- ----------
Cable Television 91,255 (28,692) (17,750)
Telephony:
Operating companies 120 (23) (359)
Priority Telecom -- -- --
Internet/data:
Operating companies 1,003 (1,378) (2,039)
chello(1) -- -- (226)
Corporate overhead, UPCtv,
programming and other(1) 2,627 (806) (7,177)
------- ------- --------
Total 95,005 (30,899) (27,551)
======= ======= ========
(1) Corporate overhead SG&A expense includes a stock-based compensation charge
of 35,900 for the three months ended March 31, 1999, compared to a charge of
406 for the three months ended March 31, 1998. chello SG&A expense includes
a stock-based compensation charge of 660 for the three months ended March
31, 1999, compared to a charge of 0 for the three months ended March 31,
1998.
(2) Operating expenses do not include depreciation and amortization, which for
the three months ended March 31, 1999 and 1998 totaled 63,198 and 48,457,
repectively.
Liquidity and Capital Resources
Historically, we have financed our operations and acquisitions primarily
from:
. cash contributed by UIH upon our formation,
. debt financed at the UPC corporate level and project debt financed
at the operating company level, and
. operating cash flow.
We have both well-established and developing systems. In general, we have
used the cash contributed by UIH upon formation and debt financed at the UPC
corporate level to fund acquisitions, developing systems and corporate overhead.
We have financed our well-established systems and, when possible, our developing
systems, with project debt and operating cash flow. Also, well-established
systems generally have stable positive cash flows that, to the extent permitted
by applicable credit facilities, may be used to fund other operations.
Developing systems are at various stages of construction and development and
generally depend on us for some of the funding for their operating needs until
project financing can be secured.
In February 1999, we completed our initial public offering. Funds from the
offering will be used primarily for capital expenditures and to fund other costs
associated with our network upgrade, the build and launch of our telephone and
Internet/data services businesses, as well as our video distribution and
programming businesses. Further, UPC is actively seeking potential strategic
acquisition targets to both fill in existing clusters and expand our
Pan-European footprint. We believe that the European marketplace will engage in
a period of consolidation during the near term and it is our intention to
participate in this consolidation.
-29-
<PAGE>
Sources of Capital
We had approximately NLG1,062.0 million of unrestricted cash and cash
equivalents on hand as of March 31, 1999. In addition, we had additional
borrowing capacity at the corporate and project debt level including CNBH,
Mediareseaux and Telekabel Hungary facilities.
During February 1999, we successfully completed an initial public offering
selling 44.6 million shares on the Amsterdam Stock Exchange and Nasdaq National
Market System and raising gross and net proceeds from the offering of
approximately NLG2,852.9 million and NLG2,669.6 million, respectively.
Concurrent with the offering DIC exercised one of its two option agreements
acquiring approximately 1.6 million shares for NLG89.6 million. Proceeds from
the sale of the shares to DIC were used to repay USD45.0 million of the DIC Loan
and related interest. Proceeds from the offering were used to reduce the senior
revolving credit facility (NLG635.8 million, including accrued interest of
NLG15.8 million), repay in its entirety the bridge bank facility (NLG110.0
million, net of the interest reserve account), acquire NUON's 49% interest in
UTH (NLG518.1 million), and assume from NUON a NLG33.0 million subordinated
loan, including accrued interest NLG33.3 million. Subsequent to the offering, we
also repaid USD80.0 million NLG157.4 million of the note payable to UIH and an
additional NLG191.0 of the senior revolving credit facility.
The remaining proceeds from the initial public offering, in addition to
our ability to re-borrow under our senior revolving credit facility, are
expected to be used primarily for capital expenditures and to fund other costs
associated with our network upgrade, the build and launch of our telephone and
Internet/data services businesses as well as our video distribution and
programming businesses.
While the remaining proceeds from our initial public offering are adequate
to meet our existing business requirements, we may need to raise additional
capital in the future to the extent we pursue new acquisition or development
opportunities or if cash flow from operations is insufficient to satisfy our
liquidity requirements.
Certain Dutch Property Tax Issues
One of our Dutch systems was recently assessed for a transfer tax on
immovable property in the amount of NLG1.8 million for the purchase of a cable
network. We have always regarded our cable networks as movable property and not
subject to such transfer tax. We are appealing this tax assessment. Should we be
unsuccessful, our Dutch systems may be assessed for taxes on similar
transactions. We cannot predict the extent to which the taxes could be assessed
retroactively or the amount of tax that our systems may be assessed for,
although it may be substantial. Because we own 100% of UTH, any tax liabilities
assessed against our Dutch systems, other than the A2000 systems, will be
consolidated with our results. We believe that, if our appeal is unsuccessful,
most cable television companies and other utilities in The Netherlands would
become subject to similar tax liabilities. If this happens, we expect these
entities would lobby with us the Dutch tax authorities against such tax
assessments.
Inflation and Foreign Currency Exchange Rate Losses
To date, we have not been impacted materially by inflation.
The value of our monetary assets and liabilities is affected by
fluctuations in foreign currency exchange rates as accounts payable for certain
equipment purchases and certain operating expenses, such as programming
expenses, are denominated in currencies other than the functional currency of
the entity making such payments. We and some of our operating companies have
notes payable and notes receivable that are denominated in, and loans payable
that are linked to, a currency other than their own functional currency,
exposing us to foreign currency exchange risks on these monetary assets and
liabilities. In general, we and our operating companies do not execute hedge
transactions to reduce our exposure to foreign currency exchange rate risks.
Accordingly, we may experience economic loss and a negative impact on earnings
and equity with respect to our holdings solely as a result of foreign currency
exchange rate fluctuations.
The functional currency for our operations generally is the applicable
local currency for each operating company. Assets and liabilities of foreign
subsidiaries are translated at the exchange rates in effect at period-end, and
the statements of operations are translated at the average exchange rates during
the period. Exchange rate fluctuations on translating foreign currency financial
statements into Dutch guilders result in unrealized gains or losses referred to
as translation adjustments. Cumulative translation adjustments are
-30-
<PAGE>
recorded as a separate component of shareholders' equity. Transactions
denominated in currencies other than the local currency are recorded based on
exchange rates at the time such transactions arise. Subsequent changes in
exchange rates result in transaction gains and losses which are reflected in
income as unrealized, based on period-end translations, or realized upon
settlement of the transactions.
Cash flows from our operations in foreign countries are translated based
on their reporting currencies. As a result, amounts related to assets and
liabilities reported on the condensed consolidated statements of cash flows will
not agree to changes in the corresponding balances on the condensed consolidated
balance sheets. The effects of exchange rate changes on cash balances held in
foreign currencies are reported as a separate line below cash flows from
financing activities.
New Accounting Principles
The American Institute of Certified Public Accountants ("AICPA") recently
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities". This statement defines start-up and organization costs, which must
be expensed as incurred. In addition, all deferred start-up and organization
costs existing as of January 1, 1999 must be written-off and accounted for as a
cumulative effect of an accounting change. We have adopted this statement
effective January 1, 1999.
In March 1998, the AICPA issued Statement of Position 98-1 "Accounting For
the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP
98-1"), which provides guidance on accounting for the costs of computer software
developed or obtained for internal use. SOP 98-1 identifies the characteristics
of internal-use software and provides examples to assist in determining when
computer software is for internal use. We have adopted this statement effective
January 1, 1999.
Year 2000 Conversion
Our cable television, programming, telephone and Internet/data operations
are heavily dependent upon computer systems and other technological devices with
imbedded chips. Such computer systems and other technological devices may not be
capable of accurately recognizing dates beginning on January 1, 2000. This
problem could cause miscalculations, resulting in our cable television,
telephone and Internet/data systems or programming services malfunctioning or
failing to operate.
Year 2000 Compliance Program
In response to possible Year 2000 problems, the Board of Directors of UIH
established a task force to assess the impact that potential Year 2000 problems
may have on company-wide operations, including us and our operating companies,
and to implement necessary changes to address such problems. The task force
includes our staff, external consultants and staff from UIH, and subcommittees
at the operating company levels and reports directly to the UIH Board. In
creating a program to minimize Year 2000 problems, the task force identified
certain critical operations of our business. These critical operations are
service delivery systems, field and headend devices, customer service and
billing systems, and corporate management and administrative operations such as
cash flow, accounts payable and accounts receivable, payroll and building
operations.
The task force has established a three phase program to address potential
Year 2000 problems:
. Identification Phase: identify and evaluate computer systems and
other devices (e.g. headend devices, switches and set top boxes) on
a system by system basis for Year 2000 compliance.
. Implementation Phase: establish a database and evaluate the
information obtained in the Identification Phase, determine
priorities, implement corrective procedures, define costs and ensure
adequate funding.
-31-
<PAGE>
. Testing Phase: test the corrective procedures to verify that all
material compliance problems will operate on and after January 1,
2000, and develop, as necessary, contingency plans for material
operations.
About 91% of our operating systems have completed the Identification
Phase and the task force is working on the Implementation Phase for these
systems. The task force has researched approximately 83.0% of the items
identified during the Identification Phase as to Year 2000 compliance. Of the
items researched, 69.0% are compliant and 9.0% are not compliant but can be
easily remediated without significant cost to us. The remaining items require
further research or additional testing. Because of several acquisitions, such as
UTH, the research of items has expanded significantly. As a result, the research
on 75.0% of the items has been completed and research on the remaining items is
ongoing.
Subsequent to March 31, 1999, we acquired or will acquire additional
systems, which will be included in our Year 2000 program. At this time, we have
not determined whether any of these systems have their own programs in place for
Year 2000 compliance. We are undertaking such review during the second quarter
of 1999 and will determine at what level their systems are within our Year 2000
program.
The task force commenced the Testing Phase in the first quarter of 1999.
The task force is supervising the Testing Phase of the computer systems for our
headend controllers and our customer service billing systems and routers. Based
on current data to date, we expect to complete the testing by mid-1999. At this
time we anticipate that all material aspects of the program will be completed
before January 1, 2000, and we do not anticipate any material remediations or
replacements.
In general, UIH manages the program with its own internal task force. In
addition, UIH has retained independent consultants to assist with the Year 2000
program. The task force will continue to evaluate the need for external
resources to complete the Implementation Phase and implement the Testing Phase.
In the event the task force elects to use such additional resources, such
resources may not, however, be available.
In addition to its program, UIH is a member of a Year 2000 working group,
which has 12 cable television companies and meets under the auspices of Cable
Labs. The dialogue with the other cable operators has assisted UIH in developing
its Year 2000 program. Part of the agenda of the working group is to develop
test procedures and contingency plans for critical components of operating
systems for the benefit of all its members. The test procedures are expected to
be available to members, including UIH, during the second quarter of 1999.
Third-Party Dependence
We believe that our largest Year 2000 risk is our dependence upon third-
party products. Two significant areas in which our systems depend upon third-
party products are programming and telephony interconnects. We do not have the
ability to control such parties in their assessment and remediation procedures
for potential Year 2000 problems. Should these parties not be prepared for Year
2000, their systems may fail and we would not be able to provide our services to
our customers. Not withstanding these limitations, the task force monitors the
websites for all vendors used by us, to the extent applicable, for information
on such vendors' Year 2000 programs. To the extent applicable, the task force
uses such information to verify Year 2000 compliance and to implement
remediation procedures. We also have requested information from various third
parties on the state of their Year 2000 compliance programs in an effort to
prevent any possible interruptions or failures. To date, responses by
programming vendors to such communications have been limited. The responses
received state only that the party is working on Year 2000 issues and does not
have a definitive position at this time. As a result, we are unable to assess
the risk posed by our dependence upon such third parties' systems. Vendors for
critical equipment components, such as the headend controllers mentioned below,
have been more responsive, and we believe substantially all of our equipment
will be Year 2000 compliant. We cannot, however, give any assurances concerning
compliance of equipment because such belief is based on information provided by
vendors, which cannot be independently verified, and because of the
uncertainties inherent in Year 2000 remediation.
The task force is working closely with the manufacturers of its headend
devices to remedy any Year 2000 problems assessed in the headend equipment.
Recent information from the two primary manufacturers of such equipment indicate
that most of the equipment used in our operating systems are not date-sensitive.
Where such equipment needs to be upgraded for Year 2000 issues, such vendors are
upgrading without charge. These upgrades are expected to be completed before
year-end 1999, but this process is not entirely within our control.
Approximately 91.0% of the headend controllers, which are considered the most
critical component of the headend devices, have been upgraded. With respect to
billing and customer care systems, we use standard billing and customer care
programs from several vendors. The task force is working with such vendors to
achieve Year 2000 compliance for all of our systems.
We have considered certain limited contingency plans, including preparing
back-up programming and stand-by power generators. Based on these
considerations, the task force has distributed a contingency plan to all of our
operating systems, which sets forth preparation procedures and recovery
solutions. With respect to other third-party systems, each of our operating
systems is responsible for inquiring of its vendors and other entities with
which it does business (e.g., utility companies, financial institutions and
facility owners) as to such entities' Year 2000 compliance programs. Each of our
operating companies has begun this process and to assist our operating companies
in this process, we have hired two Year 2000 consultants, one for Eastern Europe
and one for Western
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<PAGE>
Europe, who will visit each operating company and work with them to identify and
report to us any potential Year 2000 compliance problems. These consultants will
also contact third party vendors regarding their Year 2000 compliance measures.
To date, these consultants have not identified any new third-party Year 2000
compliance problems.
Minority-Held Systems
We also have non-controlling interests in cable television and telephone
operations, including A2000. MediaOne International, our partner in A2000, is
undertaking and implementing a program to ensure that the operations of A2000
will be Year 2000 compliant. The task force is including other minority
investments in its program. Of these investments, 95.0% have completed their
Identification Phase of the program and the task force is in the process of
making recommendations to these entities as to Year 2000 compliance matters. No
assurance can be given, however, that these entities will implement the
recommendations or otherwise be Year 2000 compliant. Overall, the task force
will continue to analyze the Year 2000 program and will revise the program as
necessary throughout the remainder of 1999, including procedures to ensure third
parties' Year 2000 compliance.
Cost of Compliance
The task force is not able to determine the full cost of its Year 2000
program and its related impact on our financial condition. In the course of our
business, we have made substantial capital investments over the past few years
in improving our systems, primarily for reasons other than Year 2000. Because
the systems' upgrades also result in Year 2000 compliance, replacement and
remediation costs have been low. Based on the task force review to date, we
currently estimate that these costs will not exceed NLG4.0 million, excluding
any costs associated with our interest in A2000. The cost includes certain
identified replacement and remediation procedures and external consultants. Such
estimate does not, however, include internal costs because we do not separately
track the internal costs incurred for the Year 2000 program. Although no
assurance can be made, we believe that the known Year 2000 compliance issues can
be remedied without a material financial impact on us. No assurance can be made,
however, as to the total cost (excluding the internal cost) for the Year 2000
program until all of the data has been gathered. In addition, we cannot predict
the financial impact we will experience if Year 2000 problems are caused by
third parties upon which our systems are dependent or experienced by entities in
which we hold investments. The failure of any one of these parties to implement
Year 2000 procedures could have a material adverse impact on our operations and
financial condition.
European Economic and Monetary Union
On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing sovereign
currencies and the euro. The participating countries adopted the euro as their
common legal currency on that day. The euro trades on currency exchanges and is
available for non-cash transactions during the transition period between January
1, 1999 and January 1, 2002. During this transition period, the existing
currencies are scheduled to remain legal tender in the participating countries
as denominations of the euro and public and private parties may pay for goods
and services using either the euro or the participating countries' existing
currencies.
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<PAGE>
During the transition period, all operating companies' billing systems
will include amounts in euro as well as the respective country's existing
currency. All of our accounting and management reporting systems currently are
multi-currency.
We intend to use the euro as our reporting currency by the end of 2000. We
do not expect the introduction of the euro to affect materially our cable
television and other operations. We have not yet taken steps to confirm that the
financial institutions and other third parties with whom we have financial
relationships are prepared for the use of the euro. Thus far, we have not
experienced any material problem with third parties as a result of the
introduction of the euro. We believe the introduction of the euro will not
require us to amend any of our financial instruments or loan facilities, other
than amendments that will be made automatically by operation of law. These will
include automatic replacement of the currencies of participating countries with
the euro. They will also include automatic replacement of interest rates of
participating countries with European interest rates. We believe the
introduction of the euro will reduce our exposure to risk from foreign currency
and interest rate fluctuations.
-34-
<PAGE>
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Investment Portfolio
As of March 31, 1999, UPC has cash and cash equivalents of approximately
1.1 billion. UPC has invested this cash in highly liquid instruments which meet
high credit quality standards with original maturities at the date of purchase
of less than three months. These investments will be subject to interest rate
risk and foreign exchange fluctations (with respect to amounts invested in
currencies outside the European Monetary Union), however, the Company does not
expect any material losses with respect to its investment portfolio.
Impact of Foreign Currency Rate Changes
The table below provides information about UPC's and its consolidated
subsidiaries' foreign currency exchange risk for cash and debt which is
denominated in foreign currencies outside of the European Monetary Union as of
March 31, 1999, including cash flows based on the expected repayment date and
related weighted-average interest rates for debt. The information is presented
in NLG equivalents, which is the Company's reporting currency. The instruments'
actual cash flows are denominated in US Dollars.
Amount Outstanding
as of March 31, 1999
--------------------------
Book Value Fair Value
---------- ----------
Dollar Denominated Investments
- -----------------------------
Cash Account 74,437 74,437
<TABLE>
<CAPTION>
Amount Outstanding Expected Repayment
as of March 31, 1999 as of December 31,
-------------------------- ---------------------
Book Value Fair Value 1999 2000
---------- ---------- ---- ----
<S> <C> <C> <C>
Dollar Denominated Facilities
- -----------------------------
DIC Loan 92,250 92,250 -- 92,250
8.0% per annum + 6.0% of
principal at maturity, due 2000
UIH Loan 12,056 12,056 12,056 --
10.75% per annum, due 2001
</TABLE>
In general, the Company and its operating companies do not execute hedge
transactions to reduce the Company's exposure to foreign currency exchange rate
risk. Accordingly, the Company may experience economic loss and a negative
impact on earnings and equity with respect to its holdings solely as a result of
foreign currency exchange rate fluctuations.
Interest Rate Sensitivity
The table below provides information about the Company's financial
instruments that are sensitive to changes in interest rates as of March 31,
1999, including cash flows based on the expected repayment dates and the related
weighted-average interest rates. The information is presented in NLG
equivalents, which is the Company's reporting currency.
-35-
<PAGE>
<TABLE>
<CAPTION>
Amount Outstanding
as of March 31, 1999 Expected Repayment as of December 31,
------------------------ ----------------------------------------------------------
Book Value Fair Value 1999 2000 2001 2002 2003
---------- ---------- --------- ---------- ---------- --------- --------
Variable Rate Facilities
<S> <C> <C> <C> <C> <C> <C> <C>
Senior Revolving Credit 361,854 361,854 -- -- 50,000 200,000 111,854
Facility
LIBOR + 0.55% to 2.0%,
average rate in 1999 of 5.09%
UTH Facility 539,909 539,909 -- -- -- 26,995 53,991
EIOR + 0.75% to 2.0%,
average rate in 1999 of 5.09%
CNBH Facility 234,262 234,262 -- -- 7,028 16,398 30,454
AIBOR + 0.7% to 0.75%, or
fixed rate advance + 0.7% to 0.75%
average rate in 1999 of 4.69%
Mediareseaux 59,821 59,821 -- -- -- -- 5,982
FRF LIBOR +0.75% to 2.0%,
average rate in 1999 of 5.09%
Telekabel Hungary Facility 41,777 41,777 41,777 -- -- -- --
BUBOR + 2.5%,
average rate in 1999 of 5.59%
Fixed Rate Facilities
DIC Loan 92,250 92,250 -- 92,250 -- -- --
8.0% per annum + 6.0% of
principal at maturity, due 2000
UIH Loan 12,056 12,056 12,056 -- -- -- --
10.75% per annum, due 2001
</TABLE>
Equity Prices
As of March 31, 1999, the Company is exposed to equity price fluctuations
related to its investment in UIH stock, which is classified as an investment
available for sale. Changes in the price of the stock are reflected as
unrealized gains (losses) in the Company's statement of shareholders' equity
(deficit), until such time as the stock is sold and any unrealized gain (loss)
will be reflected in the statement of operations.
Fair Value as of
Number of Shares March 31, 1999
------------------- ----------------
(Stated in thousands of Dutch Guilders,
except share amounts)
Investment in UIH Stock 2,784,620 248,319
As of March 31, 1999, the Company is also exposed to equity price
fluctuations related to its debt which is convertible into ordinary shares of
the Company. The table below provides information about UPC's convertible debt,
including expected cash flows and related weighted-average interest rates.
-36-
<PAGE>
<TABLE>
<CAPTION>
Amount Outstanding Expected Repayment
as of March 31, 1999 as of December 31,
-------------------------- ---------------------
Book Value Fair Value 1999 2000
---------- ---------- --------- -------
<S> <C> <C> <C>
DIC Loan 92,250 92,250 -- 92,250
8.0% per annum + 6.0% of
principal at maturity, due 2000
UIH Loan 12,056 12,056 12,056 --
10.75% per annum, due 2001
</TABLE>
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<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
From time to time, we and our operating companies may become involved in
litigation relating to claims arising out of its operations in the normal course
of business.
On April 20, 1999, a class action suit was filed in the District Court of
Tel Aviv against several cable operators in Israel, including Tevel. The
complaint alleges that the cable operators have taken advantage of their
monopoly position in the market by charging excessive prices for the services
provided. The plaintiffs are seeking damages in the amount of NIS1,000 per
subscriber. Tevel's cable television service subscription rates are subject to
governmental regulation through franchise agreements and through the arrangement
approved by the Restrictive Trade Practices Tribunal. Tevel intends to
vigorously defend itself against these allegations.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
On February 17, 1999, we issued 1,558,654 ordinary shares to affiliates
of Discount Investment Corporation, our partner in our Israel system, for
NLG89.6 million upon exercise of an option. The option was granted in connection
with a $90.0 million loan made to us to fund our acquisition of additional
interests in Israeli and Maltese operating companies. We repaid $45.0 million of
the loan and accrued interest with the proceeds from the option exercise. The
issuance was exempt from registration under the Securities Act of 1933 pursuant
to Section 4(2) of that Act.
In February 1999, we concluded an initial public offering of 44.6 million
ordinary shares, raising gross proceeds and net proceeds of approximately
NLG2,852.9 million and NLG2,669.6 million, respectively. The U.S. portion of the
offering was made under a Registration Statement on Form S-1 (File No.
333-67895) that was declared effective on February 11, 1999. All of the shares
registered were sold. The managing underwriters were Goldman Sachs International
and Morgan Stanley Dean Witter. The total expenses (including underwriting
discounts and commissions) of the initial public offering were NLG183.3 million.
Through March 31, 1999, we have used the proceeds as follows:
. NLG635.8 million to pay down senior revolving credit facility and accrued
interest,
. NLG110.0 million to repay bridge bank facility,
. NLG551.4 million to acquire NUON's 49% interest in UTH, and repay loan,
. NLG157.4 million to repay note payable to UIH and accrued interest,
. NLG84.1 million to acquire 95.63% interest in SKT s.r.o.,
. NLG113.2 million shareholder loan to UTH
. NLG9.2 million to pay accounts payable to UIH
. approximately NLG 9.6 million for general working capital,
. approximately NLG 20.0 million to fund equipment, cable, installation and
other costs associated with our network upgrade, and
Except for repayment of the note payable to UIH, payment of the accounts payable
to UIH and working capital to pay usual employee compensation, we have not used
these proceeds for direct or indirect payments to directors, officers, 10%
shareholders or other of our affiliates.
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<PAGE>
Item 5. Other Information
-----------------
Summary Operating Data 1999
The operating data set forth below reflects the aggregate statistics of the
operating systems in which the Company has an ownership interest.
<TABLE>
<CAPTION>
As at March 31, 1999
---------------------------------------------------------------------------------------------
UPC
Homes in Two way UPC Equity in
Service Homes Homes Basic Basic Paid-in Homes in
Area Passed Passed Subscribers Penetration Ownership Service Area
---------- ---------- ---------- ----------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Multi-channel TV:
The Netherlands (A2000) ........... 578,500 575,000 386,109 533,722 92.8% 50.0% 289,250
The Netherlands (UTH) ............ 950,714 916,220 600,000 870,409 95.0% 100.0% 950,714
Austria ........................... 1,076,190 903,200 623,490 457,165 50.6% 95.0% 1,022,381
Hungary (Telekabel Hungary) ....... 901,500 528,719 -- 442,390 83.7% 79.3% 714,439
Israel ............................ 595,000 583,408 364,000 406,970 69.8% 46.6% 277,270
Norway ............................ 529,900 464,941 18,685 322,735 69.4% 100.0% 529,900
Belgium ........................... 133,030 133,030 104,039 126,818 95.3% 100.0% 133,030
Malta ............................. 179,000 164,553 -- 71,040 43.2% 50.0% 89,500
Romania ........................... 180,000 98,174 -- 62,524 63.7% 51.0-100.0% 165,300
Czech Republic .................... 229,531 153,949 -- 54,691 35.5% 100.0% 229,531
Hungary (Monor) .................. 85,000 68,339 -- 31,108 45.5% 44.8% 38,080
France ............................ 190,000 82,320 82,320 32,662 39.7% 99.6% 189,240
Slovak Republic ................... 64,493 40,494 -- 25,697 63.5% 75.0-100% 59,143
--------- --------- --------- --------- ---------
Total ........................ 5,692,858 4,712,347 2,178,643 3,437,931 4,687,778
========= ========= ========= ========= =========
<CAPTION>
As at March 31, 1999
--------------------------
UPC UPC
Equity in Equity in
Homes Basic
Passed Subscribers
---------- -----------
<S> <C> <C>
Multi-channel TV:
The Netherlands (A2000)........... 287,500 266,861
The Netherlands (UTH) ............ 916,220 870,409
Austria ........................... 858,040 434,307
Hungary (Telekabel Hungary) ....... 419,010 350,594
Israel ............................ 271,868 189,648
Norway ............................ 464,941 322,735
Belgium ........................... 133,030 126,818
Malta ............................. 82,277 35,520
Romania ........................... 84,209 51,514
Czech Republic .................... 153,949 54,691
Hungary (Monor) .................. 30,616 13,936
France ............................ 81,991 32,531
Slovak Republic ................... 36,205 22,895
--------- ---------
Total ........................ 3,819,856 2,772,459
========= =========
</TABLE>
-39-
<PAGE>
Summary Operating Data 1999 (continued)
<TABLE>
<CAPTION>
As at March 31, 1999
-----------------------------------------------------------------------------------------------
UPC
Subscribers Lines served UPC Equity in
--------------------------- ---------------------------------- Paid-in Residential
Residential Businesses Residential Businesses Ownership Subscribers
----------- ---------- ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Telephony
The Netherlands (A2000)(1)......... 22,338 3 24,512 830 50.0% 11,169
The Netherlands (UTH)(2)........... 16,608 4,152 16,608 4,152 100.0% 16,608
Austria ........................... 767 41 767 112 95.0% 729
Norway ............................ 211 -- 239 -- 100.0% 211
France ............................ 523 -- 551 -- 99.6% 521
Hungary (Monor)(3)................. -- -- 63,828 6,382 44.8% --
------ ----- ------- ----------- ------
Total ........................ 40,447 4,196 106,505 11,476 29,238
====== ===== ======= =========== ======
Dataservices
The Netherlands (A2000) ........... 11,058 493 n/a n/a 50.0% 5,529
The Netherlands (UTH) ............. 5,042 -- n/a n/a 100.0% 5,042
Austria ........................... 13,918 941 n/a n/a 95.0% 13,222
Norway ............................ 884 5 n/a n/a 100.0% 884
Belgium ........................... 2,551 365 n/a n/a 100.0% 2,551
Hungary (Telekabel Hungary) ....... 64 46 n/a n/a 79.3% 51
France ............................ 82 -- n/a n/a 99.6% 82
------ ----- ------- ----------- ------
Total ........................ 33,599 1,850 n/a n/a 27,361
====== ===== ======= =========== ======
<CAPTION>
As at March 31, 1999
------------------------------------------
UPC UPC UPC
Equity in Equity in Equity in
Business Residential Business Lines
Subscribers Lines Served Served
----------- ------------ ---------------
<S> <C> <C> <C>
Telephony 2 12,256 415
The Netherlands (A2000)(1)......... 4,152 16,608 4,152
The Netherlands (UTH)(2)........... 39 729 106
Austria ........................... -- 239 --
Norway ............................ -- 549 --
France ............................ -- 28,563 2,856
Hungary (Monor)(3)................. ----- -------- -------
4,193 58,944 7,529
Total ........................ ===== ======== =======
Dataservices 247 n/a n/a
The Netherlands (A2000) ........... -- n/a n/a
The Netherlands (UTH) ............. 894 n/a n/a
Austria ........................... 5 n/a n/a
Norway ............................ 365 n/a n/a
Belgium ........................... 36 n/a n/a
Hungary (Telekabel Hungary) ....... -- n/a n/a
France ............................ ----- -------- -------
1,547 n/a n/a
Total ........................ ===== ======== =======
</TABLE>
-40-
<PAGE>
Summary Financial Data 1999 (4)
<TABLE>
<CAPTION>
For the three months period ending March 31, 1999
------------------------------------------------------------------------------------------------
Cash flows from
Net ------------------------------
Income/ Adjusted Capital Operating Investing
Revenue (loss) EBITDA (5) Expenditures (6) Activities Activities
----------- ---------- ----------- ----------------- ----------- ----------
(Dutch guilders, in thousands)
<S> <C> <C> <C> <C> <C> <C>
The Netherlands (A2000) ........... 35,979 (14,087) 10,986 18,506 (4,695) 23,015
The Netherlands (UTH) ............. 60,277 (28,573) 22,410 22,639 (31,920) (33,855)
Austria ........................... 48,517 354 20,036 19,942 76,580 (22,598)
Hungary (Telekabel Hungary) ....... 17,429 669 5,937 9,355 (385) (5,530)
Israel ............................ 72,238 6,628 28,567 15,938 24,156 (15,767)
Norway ............................ 24,273 (16,183) 4,476 19,273 4,422 (43,077)
Belgium ........................... 8,792 (3,662) 820 2,757 41,932 (1,652)
Malta ............................. 7,985 678 3,564 3,329 2,681 (5,051)
Romania ........................... 1,241 186 508 124 751 (406)
Czech Republic .................... 2,240 (1,473) (481) 418 (3,135) (983)
Hungary (Monor) ................... 10,010 (12) 1,928 1,285 3,503 (1,285)
France ............................ 3,162 (6,173) (3,132) 15,640 (23,126) (15,041)
Slovak Republic ................... 604 (934) (112) 525 (1,419) (3,276)
<CAPTION>
At March 31,
1999
----------------------------
------------ Long-
Financing Term
Activities Debt (7)
---------- ----------
<S> <C> <C>
The Netherlands (A2000) ........... 27,593 499,094
The Netherlands (UTH) ............. 78,093 793,017
Austria ........................... (48,032) 197,421
Hungary (Telekabel Hungary) ....... 8,936 41,177
Israel ............................ (9,832) 502,572
Norway ............................ 39,449 164,433
Belgium ........................... (39,487) --
Malta ............................. -- 46,757
Romania ........................... (1,296) --
Czech Republic .................... 2,688 --
Hungary (Monor) ................... 5,534 84,281
France ............................ 46,966 59,821
Slovak Republic ................... 2,474 --
</TABLE>
-41-
<PAGE>
Summary Operating Data 1998
The operating data set forth below reflects the aggregate statistics of the
operating systems in which the Company has an ownership interest.
<TABLE>
<CAPTION>
As at March 31, 1998
----------------------------------------------------------------------------------------------
UPC
Homes in Two way UPC Equity in
Service Homes Homes Basic Basic Paid-in Homes in
Area Passed Passed Subscribers Penetration Ownership Service Area
---------- --------- ---------- ----------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Multi-channel TV:
The Netherlands (A2000) .... 566,782 566,782 165,272 519,548 91.7% 50.0% 283,391
The Netherlands (CNBH) ..... 246,853 239,448 149,640 229,740 95.9% 100.0% 246,853
Austria .................... 1,065,327 893,301 373,869 439,100 49.2% 95.0% 1,012,061
Hungary (Kabelkom) ......... 300,000 300,000 -- 266,311 88.8% 50.0% 150,000
Israel ..................... 360,000 354,308 354,308 244,697 69.1% 23.3% 83,880
Norway ..................... 529,924 460,242 -- 317,947 69.1% 87.3% 462,624
Ireland (Princes Holdings) . 380,000 371,529 -- 138,626 37.3% 20.0% 76,000
Belgium .................... 133,000 133,000 45,081 127,366 95.8% 100.0% 133,000
Malta ...................... 179,000 155,493 -- 61,153 39.3% 25.0% 44,750
Romania .................... 150,000 69,654 -- 40,006 57.4% 90.0-100.0% 143,000
Czech Republic ............. 271,100 146,448 -- 52,140 35.6% 100.0% 271,100
Hungary (Monor) ............ 85,000 67,159 -- 31,108 46.3% 44.8% 38,080
France ..................... 86,000 35,212 35,212 14,829 42.1% 99.6% 85,656
Slovak Republic ............ 67,959 22,603 -- 16,309 72.2% 75.0-100% 62,499
--------- --------- --------- --------- ---------
Total ................. 4,420,945 3,815,179 1,123,382 2,498,880 3,092,894
========= ========= ========= ========= =========
<CAPTION>
------------------------
UPC UPC
Equity in Equity in
Homes Basic
Passed Subscribers
---------- -----------
<S> <C> <C>
Multi-channel TV:
The Netherlands (A2000) .... 283,391 259,774
The Netherlands (CNBH) ..... 239,448 229,740
Austria .................... 848,636 417,145
Hungary (Kabelkom) ......... 150,000 133,156
Israel ..................... 82,554 57,014
Norway ..................... 401,791 277,568
Ireland (Princes Holdings) . 74,306 27,725
Belgium .................... 133,000 127,366
Malta ...................... 38,873 15,288
Romania .................... 67,534 39,253
Czech Republic ............. 146,448 52,140
Hungary (Monor) ............ 30,087 13,936
France ..................... 35,071 14,770
Slovak Republic ............ 18,438 12,929
--------- ---------
Total ................. 2,549,577 1,677,804
========= =========
</TABLE>
-42-
<PAGE>
Summary Operating Data 1998 (continued)
<TABLE>
<CAPTION>
As at March 31, 1998
----------------------------------------------------------------------------------
UPC
Subscribers Lines served UPC Equity in
------------------------ ----------------------- Paid-in Residential
Residential Businesses Residential Businesses Ownership Subscribers
------------ ---------- ----------------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Telephony
The Netherlands (A2000) (1) ..... 5,518 1 6,092 770 50.0% 2,759
Hungary (Monor)(3) .............. -- -- 58,359 5,555 46.3% --
----- --- ------- ------- -----
Total ........................ 5,518 1 64,451 6,325 2,759
===== === ======= ======= =====
Data Services
The Netherlands (A2000) ......... 1,661 -- n/a n/a 50.0% 831
Austria ......................... 2,008 95 n/a n/a 95.0% 1,908
Norway .......................... 214 -- n/a n/a 87.3% 187
Belgium ......................... 482 69 n/a n/a 100.0% 482
----- --- ------- ------- -----
Total ........................ 4,365 164 n/a n/a 3,408
===== === ======= ======= =====
<CAPTION>
As at March 31, 1998
--------------------------------------------
UPC UPC UPC
Equity in Equity in Equity in
Business Residential Business Lines
Subscribers Lines Served Served
------------ ------------ --------------
<S> <C> <C> <C>
Telephony
The Netherlands (A2000) (1) ..... 1 3,046 385
Hungary (Monor)(3) .............. -- 27,020 2,572
--- ------- -------
Total ........................ 1 30,066 2,957
=== ======= =======
Data Services
The Netherlands (A2000) ......... -- n/a n/a
Austria ......................... 90 n/a n/a
Norway .......................... -- n/a n/a
Belgium ......................... 69 n/a n/a
--- ------- -------
Total ........................ 159 n/a n/a
=== ======= =======
</TABLE>
-43-
<PAGE>
Summary Financial Data 1998 (4)
<TABLE>
<CAPTION>
For the three months period ending March 31, 1998
--------------------------------------------------------------------------------------------
Cash flows from
Net ---------------------------------------
Income/ Adjusted Capital Operating Investing Financing
Revenue (loss) EBITDA Expenditures Activities Activities Activities
------------------------ -------------------------------------------------------------------
(Dutch guilders, in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
The Netherlands (A2000) ........... 29,427 (4,003) 7,683 19,961 (2,332) (20,083) 14,874
The Netherlands (CNBH) ............ 13,280 658 8,748 6,961 9,830 198,080 193,422
Austria ........................... 43,113 3,254 22,747 9,864 69,720 (10,525) (70,013)
Hungary (Kabelkom) ................ 15,331 498 4,713 853 844 853 --
Israel ............................ 51,649 8,549 28,872 6,748 16,630 (45,890) 29,216
Norway ............................ 22,919 (14,919) 9,163 4,984 6,108 (5,025) 218
Ireland (Princes Holdings) ........ 19,496 813 8,079 4,647 2,213 4,649 155
Belgium ........................... 9,108 (3,840) 2,756 4,316 2,004 (413,345) 4
Malta ............................. 6,893 656 3,085 83 2,314 (1,955) 2,539
Romania ........................... 700 141 392 280 816 278 (386)
Czech Republic .................... 1,998 (1,135) (918) 269 (6,117) 268 6,502
France ............................ 1,311 (2,003) (821) 5,432 2,454 (6,072) 3,967
Slovak Republic ................... 399 (307) (241) 2,573 746 496 324
Hungary (Monor) ................... 8,796 (967) 5,370 2,069 9,774 (1,952) 2,420
<CAPTION>
At March 31,
1998
--------------
Long-
Term
Debt (7)
--------------
<S> <C>
The Netherlands (A2000) ........... 438,000
The Netherlands (CNBH) ............ 211,754
Austria ........................... 175,000
Hungary (Kabelkom) ................ --
Israel ............................ 4,192
Norway ............................ 148,515
Ireland (Princes Holdings) ........ --
Belgium ........................... --
Malta ............................. 41,000
Romania ........................... --
Czech Republic .................... --
France ............................ --
Slovak Republic ................... --
Hungary (Monor) ................... 101,523
</TABLE>
-44-
<PAGE>
(1) A2000 offers cable telephony service.
(2) UTH's 80% subsidiary Uniport offers a carrier select telephony service.
(3) Our Monor service offers traditional telephone service.
(4) Financial information has been prepared in accordance with Dutch GAAP.
(5) "Adjusted EBITDA" represents earnings before net interest expense, income
tax expense, depreciation, amortisation, stock based compensation charges,
minority interest, share in results of affiliated companies (net),
currency exchange gains (losses) and other non-operating income (expense)
items. Management generally considers Adjusted EBITDA to be a helpful way
to measure the performance of cable television operations and
communications companies such as us. We believe Adjusted EBITDA helps
investors to assess the cash flow from our operations from period to
period and thus to value our business. Adjusted EBITDA should not,
however, be considered a replacement for net income, cash flows or for any
other measure of performance or liquidity under generally accepted
accounting principles, or as an indicator of a company's operating
performance. We are not entirely free to use the cash represented by our
Adjusted EBITDA as we please. Several of our consolidated operating
companies are restricted by the terms of their debt arrangements. Each
company has its own operating expenses and capital expenditure
requirements, which can limit our use of cash. Our presentation of
Adjusted EBITDA may not be comparable to statistics with a similar name
reported by other companies. Not all companies and analysts calculate
EBITDA in the same manner.
(6) Tangible CAPEX only.
(7) Excludes intercompany debt.
-45-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
10.1 Loan Agreement for Facilities up to Euro 340,000,000 dated as of
March 10, 1999, among N.V. Telekabel as borrower, and the
guarantors and banks named therein. (1)
27.1 Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter.
Date of Report Item Reported Financial Statements Filed
-------------- ------------- --------------------------
February 17, 1999 UTH Acquisition none
- ----------
(1) Incorporated by reference from the Annual Report on Form 10-K of United
International Holdings, Inc. for the period ended December 31, 1998 (File
No. 0-21974).
-46-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED PAN-EUROPE COMMUNICATIONS N.V.
Date: May 14, 1999
---------------------
By: /S/ Ray D. Samuelson
---------------------
Ray D. Samuelson
Managing Director, Finance and Accounting
(A Duly Authorized Officer and Principal Financial Officer)
-47-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITED
PAN-EUROPE COMMUNICATIONS N.V.'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> NETHERLANDS GUILDERS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 2.05
<CASH> 1,146,052
<SECURITIES> 0
<RECEIVABLES> 91,185
<ALLOWANCES> (8,362)
<INVENTORY> 40,388
<CURRENT-ASSETS> 1,342,214
<PP&E> 1,528,580
<DEPRECIATION> (139,881)
<TOTAL-ASSETS> 5,003,572
<CURRENT-LIABILITIES> 485,887
<BONDS> 0
0
0
<COMMON> 85,446
<OTHER-SE> 3,071,046
<TOTAL-LIABILITY-AND-EQUITY> 5,003,572
<SALES> 0
<TOTAL-REVENUES> 148,820
<CGS> 0
<TOTAL-COSTS> (234,598)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (38,245)
<INCOME-PRETAX> (140,471)
<INCOME-TAX> (368)
<INCOME-CONTINUING> (140,539)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (140,539)
<EPS-PRIMARY> (1.31)
<EPS-DILUTED> (1.31)
</TABLE>
