<PAGE>
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 November 30, 1996
----------------------------------------------------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from________________________to_______________________
Commission File Number: 0-21974
United International Holdings, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1116217
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4643 South Ulster St. #1300 Denver, CO 80237
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303)770-4001
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
The number of shares outstanding of the registrant's common stock as of
January 8, 1997 was:
Class A Common Stock -- 26,057,610 shares
Class B Common Stock -- 13,006,553 shares
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
PART I - FINANCIAL INFORMATION
------------------------------
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Item 1 - Financial Statements
- ------
Condensed Consolidated Balance Sheets as of
November 30, 1996 and February 29, 1996 (Unaudited)........... 2
Condensed Consolidated Statements of Operations For the
Three and Nine Months Ended November 30, 1996 and
1995 (Unaudited).............................................. 3
Condensed Consolidated Statement of Stockholders' Equity
For the Nine Months Ended November 30, 1996 (Unaudited)....... 4
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended November 30, 1996 and 1995
(Unaudited)................................................... 5
Notes to Condensed Consolidated Financial Statements
(Unaudited)................................................... 6
Item 2 - Management's Discussion and Analysis of Financial Condition
- ------
and Results of Operations..................................... 11
PART II - OTHER INFORMATION
---------------------------
Item 1 - Legal Proceedings............................................. 25
- ------
Item 5 - Other Information............................................. 19
- ------
Item 6 - Exhibits and Reports on Form 8-K.............................. 25
- ------
</TABLE>
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
November 30, February 29,
1996 1996
-------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents............... $ 137,706 $ 112,218
Restricted cash and short-term
investments............................ 11,600 14,073
Short-term investments.................. 86,954 35,692
Management fee receivables.............. 1,277 498
Costs to be reimbursed by affiliated
companies, net......................... 3,959 7,972
Notes receivable........................ 8,174 7,581
Property, plant and equipment, net of
accumulated depreciation of $14,734
and $2,097, respectively............... 146,964 31,102
Acquisition, transaction and
development costs, net................. 7,385 4,541
Investments in and advances to
affiliated companies, accounted for
under the equity method, net........... 322,236 272,205
Other investments in affiliated
companies, including marketable
equity securities...................... 2,653 3,273
Goodwill, net........................... 56,060 45,629
Other assets, net....................... 58,312 45,422
--------- ---------
Total assets............................ $ 843,280 $ 580,206
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued
liabilities............................ $ 33,484 $ 11,068
Accrued funding obligations............. 34,604 2,163
Senior secured notes and other debt..... 643,470 371,251
--------- ---------
Total liabilities....................... 711,558 384,482
--------- ---------
Minority interest in subsidiaries....... 1,907 2,509
--------- ---------
Warrants to purchase Class A Common
Stock.................................. -- 11,167
--------- ---------
Preferred stock, $.01 par value,
3,000,000 shares authorized, 170,513
shares of Convertible Preferred Stock,
Series A issued and outstanding, stated
at liquidation value................... 30,983 30,072
--------- ---------
Commitments (Note 4)
Stockholders' Equity:
Class A Common Stock, $.01 par value,
60,000,000 shares authorized,
25,928,554 and 25,732,154 issued
and outstanding, respectively.......... 258 257
Class B Common Stock, $.01 par value,
30,000,000 shares authorized,
13,130,168 and 13,274,685 issued
and outstanding, respectively.......... 132 133
Additional paid-in capital.............. 340,959 325,716
Deferred compensation................... (864) (842)
Unrealized loss on investments.......... (2,593) (1,189)
Cumulative translation adjustments...... (15,088) (7,371)
Accumulated deficit..................... (223,972) (164,728)
--------- ---------
Total stockholders' equity.............. 98,832 151,976
--------- ---------
Total liabilities and stockholders'
equity................................. $ 843,280 $ 580,206
========= =========
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated balance sheets.
2
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
November 30, November 30,
---------------------------- --------------------------
1996 1995 1996 1995
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Management fee income from related
parties................................ $ 126 $ 37 $ 756 $ 100
Service revenue......................... 7,450 599 13,877 1,631
System operating expense................ (6,693) (455) (19,563) (2,592)
System, selling, general and
administrative expense................. (9,733) (452) (14,947) (2,678)
Corporate general and administrative
expense................................ (2,765) (4,612) (11,507) (14,813)
Depreciation and amortization........... (8,142) (423) (16,773) (1,891)
----------- ----------- ----------- -----------
Net operating loss.................... (19,757) (5,306) (48,157) (20,243)
Equity in losses of affiliated
companies, net......................... (11,483) (12,433) (33,224) (25,743)
Interest income......................... 4,346 1,030 10,061 5,927
Interest income related parties, net.... 131 40 12 298
Other interest expense.................. (23,414) (8,732) (55,308) (24,327)
Provision for losses on investment
related costs.......................... (776) (325) (1,600) (1,141)
Gain on sale of investment in
affiliated company..................... -- -- 65,260 --
Other................................... 341 (133) 745 199
----------- ----------- ----------- -----------
Net loss before minority interest..... (50,612) (25,859) (62,211) (65,030)
Minority interest in subsidiaries....... 1,216 -- 2,967 713
----------- ----------- ----------- -----------
Net loss.............................. $ (49,396) $ (25,859) $ (59,244) $ (64,317)
=========== =========== =========== ===========
Net loss per common share............... $ (1.27) $ (0.76) $ (1.52) $ (1.99)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding..................... 39,046,462 34,249,055 39,025,768 32,374,229
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated statements.
3
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock Additional
---------------------- ------------------------ Paid-In
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Balances, February 29, 1996..................... 25,732,154 $257 13,274,685 $133 $325,716
Issuance of Class A Common Stock in
connection with Company's 401 (k) Plan...... 17,008 -- -- -- 243
Issuance of Class A Common Stock in connection
with Company's Stock Option Plan............ 34,875 -- -- -- 311
Amortization of deferred compensation........... -- -- -- -- --
Exchange of Class B Common Stock for
Class A Common Stock........................ 144,517 1 (144,517) (1) --
Accretion of dividends on convertible
preferred stock............................. -- -- -- -- (911)
Gain on sale of stock by subsidiary............. -- -- -- -- 5,898
Expiration of warrants not tendered to the
Company..................................... -- -- -- -- 9,011
Repricing of stock options...................... -- -- -- -- 691
Unrealized loss on investments.................. -- -- -- -- --
Cumulative translation adjustments.............. -- -- -- -- --
Net loss........................................ -- -- -- -- --
---------- --- ------------ --- -------
Balances, November 30, 1996..................... 25,928,554 $258 13,130,168 $132 $340,959
========== === ============ === =======
<CAPTION>
Unrealized Cumulative
Deferred Loss Translation Accumulated
Compensation on Investments Adjustments Deficit Total
------------ -------------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balances, February 29, 1996..................... $( 842) $(1,189) $ (7,371) $(164,728) $151,976
Issuance of Class A Common Stock in
connection with Company's 401 (k) Plan...... -- -- -- -- 243
Issuance of Class A Common Stock in connection
with Company's Stock Option Plan............. -- -- -- -- 311
Amortization of deferred compensation........... 669 -- -- -- 669
Exchange of Class B Common Stock for
Class A Common Stock........................ -- -- -- -- --
Accretion of dividends on convertible
preferred stock............................. -- -- -- -- (911)
Gain on sale of stock by subsidiary............. -- -- -- -- 5,898
Expiration of warrants not tendered to the
Company..................................... -- -- -- -- 9,011
Repricing of stock options...................... (691) -- -- -- --
Unrealized loss on investments.................. -- (1,404) -- -- (1,404)
Cumulative translation adjustments.............. -- -- (7,717) -- (7,717)
Net loss........................................ -- -- -- (59,244) (59,244)
---- ------ ------- -------- -------
Balances, November 30, 1996..................... $(864) $(2,593) $(15,088) $(223,972) $ 98,832
==== ====== ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated statements.
4
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
November 30,
--------------------------------
1996 1995
------------------ -------------
<S> <C> <C>
Cash flows from operating activities
Net loss................................................................................. $(59,244) $(64,317)
Adjustments to reconcile net loss to net cash flows from operating activities:
Equity in losses of affiliated companies, net............................................ 33,523 25,887
Gain on sale of investment in affiliated company......................................... (65,260) --
Minority interest share of losses........................................................ (2,967) (713)
Depreciation and amortization............................................................ 16,773 1,891
Amortization of deferred compensation.................................................... 669 528
Accretion of interest on senior secured notes............................................ 53,574 23,603
Issuance of common stock in connection with Company's 401(k) Plan........................ 243 186
Acceleration of vesting of stock options................................................. -- 1,575
Provision for losses on investment related costs......................................... 1,600 1,141
Increase in management fee receivables................................................... (564) (111)
Increase in other assets................................................................. (5,579) (2,604)
Increase (decrease) in accounts payable, accrued liabilities and other................... 2,849 (2,470)
-------- --------
Net cash flows from operating activities................................................. (24,383) (15,404)
-------- --------
Cash flows from investing activities
Purchase of short-term investments....................................................... (274,934) (90,541)
Proceeds from sale of short-term investments............................................. 223,672 157,681
Restricted cash and short-term investments............................................... (11,600) 71,780
Restricted cash and short-term investments released...................................... 14,073 --
Investments in and advances to affiliated companies and other investments................ (94,214) (155,856)
Increase in notes receivable............................................................. (40,022) (8,568)
Reimbursement of note receivable......................................................... 42,264 --
Reimbursement of advance to related party................................................ 307 100
Proceeds from sale of affiliated company................................................. 84,098 1,190
Decrease (increase) in costs to be reimbursed by affiliated companies, net............... 3,907 (208)
Acquisition, transaction and development costs incurred.................................. (5,639) (4,150)
Increase in accounts payable for capital expenditures.................................... 19,795 --
Purchase of property, plant and equipment................................................ (118,749) (7,127)
-------- --------
Net cash flows from investing activities................................................. (157,042) (35,699)
-------- --------
Cash flows from financing activities
Issuance of common stock in connection with public offering, net of offering expenses.... -- 62,107
Issuance of common stock in connection with Company's Stock Option Plan ................. 311 205
Proceeds from offering of senior notes................................................... 225,115 75,860
Deferred debt offering costs............................................................. (9,727) (11,688)
Payment of warrants tendered to the Company.............................................. (2,156) --
Borrowing of other debt.................................................................. 7,276 9,820
Repayment of other debt.................................................................. (14,812) (1,000)
-------- --------
Net cash flows from financing activities................................................. 206,007 135,304
-------- --------
Effect of exchange rates on cash............................................................ 906 743
-------- --------
Increase in cash and cash equivalents....................................................... 25,488 84,944
Cash and cash equivalents, beginning of period.............................................. 112,218 30,717
-------- --------
Cash and cash equivalents, end of period.................................................... $137,706 $115,661
======== ========
Supplemental cash flow disclosures:
Cash paid for interest...................................................................... $ 732 $ 759
======== ========
Cash received for interest.................................................................. $ 10,299 $ 7,131
======== ========
Non cash stock issuance utilized in purchase of 50% interest in Saturn, net of $1,902
allocated to minority interest........................................................... $ 5,898 $ --
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
5
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF NOVEMBER 30, 1996
(Monetary amounts stated in thousands)
(Unaudited)
1. Organization and Basis of Presentation
United International Holdings, Inc. (the "Company" or "UIHI") was formed as
a Delaware corporation in 1989, for the purpose of developing, acquiring and
managing multi-channel television operations and related businesses. The
following chart presents a summary of the Company's significant investments
in multi-channel television, programming distribution and telephony
operations as of November 30, 1996.
<TABLE>
<CAPTION>
---------------------- ----------------------
Philips Media B.V. United International
Holdings, Inc.
---------------------- ----------------------
50% 50% 100%
------------------------------ -------------------------
United and Philips United International
Communications B.V. ("UPC")(1) Properties, Inc.
------------------------------ -------------------------
- ---------------------------------------- --------------------------------------
Europe UIH Latin America, Inc.
- ------ -----------------------
<S> <C> <C> <C>
Radio Public (Belgium) 100.0% VTR Hipercable S.A (Chile)(6) 34.0%
Kabel Net (Czech Rep.) 100.0 Cable Star (Peru) 94.0
KTE (Eindhoven, the Netherlands) 100.0 TV Cable SRL (Peru) 100.0
Marne la Vallee (France) 100.0 Megapo (Mexico) 49.0
Telekable Group (Austria) 95.0 Jundiai TV (Brazil) 46.3
Transvatel SRO (Slovak Republic) 75.0 TV Show Brasil
A2000 (Amsterdam, the Netherlands) 50.0 (Fortaleza, Brazil) 40.0
Citecable (France) 30.0 Bahia Blanca (Argentina)(7) 100.0
RKS Hamburg (Germany) 29.0 United Family Communications
Santander (Spain) 25.0 (Latin America Progrmming) 50.0
Portugal 100.0 --------------------------------------
Romania 51.0-90.0
Melita Cable (Malta) 42.5 --------------------------------------
Tevel (Israel) 23.3 Other
PHL (Ireland) 20.0 -----
Kabelkom (Hungary) 47.0 ITN 76.9%
Norkabel (Norway) 100.0 Monor Communications (Hungary) 48.6
- --------------------------------------- Iberian Programming Services 33.8
Teleport (St. Petersburg) 30.0
--------------------------------------
--------------------------------------
UIH Asia/Pacific, Inc.
----------------------
HITV (China) 49.0%
SCS (Philippines)(5) 40.0
97.4%
UIH Australia/Pacific, Inc. ("UIH AP")
--------------------------------------
Austar (Australia)(2) 100.0%
Saturn (New Zealand)(3) 100.0
United Wireless (Australia) 100.0
Telefenua(Tahiti)(4) 90.0
XYZ (Australia) 25.0
--------------------------------------
</TABLE>
(1) In September 1996 UPC acquired 100% of UCI, a partnership which held
interests in Norkabel, Kabelkom and Swedish Cable. UPC sold Swedish Cable in
October 1996.
(2) During the third quarter, UIH AP acquired the remaining 6% interest in
Austar.
(3) In July 1996, UIH AP increased its ownership interest in Saturn to 100%. In
exchange for acquiring the additional 50% interest, the Company gave
Saturn's other shareholder a 2.6% interest in UIH AP.
(4) UIH AP owns an effective 90% economic interest in the Tahiti project. UIH
AP's economic interest will decrease to 75% and 64% once UIH AP has received
a 20% and 40% internal rate of return on its investment in Tahiti,
respectively.
(5) The Company currently holds a convertible loan, which upon full conversion
would provide the Company with a 40% equity ownership interest in the
Philippines operating company.
(6) In September 1996, the Company completed an agreement with VTR S.A. ("VTR"),
a leading Chilean conglomerate with interests in telecommunications and
natural resources, under which the parties formed a joint venture. The
Company and VTR contributed their respective Chilean multi-channel
television assets to the joint venture of which the Company owns 34%. In
early 1998, the Company will have the option to increase its interest to 50%
after a revaluation of the properties subject to minimum and maximum values.
Prior to formation of the joint venture, the Company held 100% interests in
Cablevision and STX, both of which are Chilean multi-channel television
operators.
(7) The Company owns 100% of two subsidiaries and 80% of a third subsidiary that
serve the Bahia Blanca and Punta Alta areas and, has agreed, subject to
certain conditions, to acquire the remaining 20% of the subsidiary in 1998.
6
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In October 1996, the Company acquired a 100% interest in TV Cable S.R.L.,
which currently owns and operates a cable television system in Tacna, Peru.
The total purchase price was $550.
In November 1996, the Company acquired a 100% ownership interest in two
cable television companies and 80% of a third cable company serving the
Bahia Blanca and Punta Alta, Argentina areas. The Company has a call option
and the shareholders have a put option, in each case first exercisable in 18
months, on the remaining 20% of the third cable company. The total purchase
price is $52,800 (which is subject to adjustment based upon completion of
post closing adjustments by the Company), of which $26,000 was paid at
closing and the balance will be paid over an 18-month period. The purchase
price for the put/call option is estimated to be approximately $4,400.
In November 1996, the Company and International Family Entertainment entered
into an agreement to form United Family Communications LLC, which will
launch a 3-channel package of family-themed entertainment programming for
the Spanish and Portuguese markets worldwide.
The accompanying interim condensed consolidated financial statements are
unaudited and include the accounts of the Company and all majority-owned
subsidiaries except Cablevision S.A. and Red de Television y Servicios por
Cable S.A. ("STX") due to a joint venture in Chile which, in September 1996,
reduced the Company's interest in Cablevision S.A. and STX below 50%. All
affiliated companies are accounted for on a calendar year basis, versus the
Company which has a fiscal yearend of February 28 (February 29 in leap
years). The Company records its share of equity in income (losses) of
affiliated companies or consolidates the affiliated companies based on the
affiliated companies' calendar yearend results. Exchange rates used are as
of November 30, 1996, unless otherwise noted. All significant intercompany
accounts and transactions have been eliminated in consolidation.
In the opinion of management, all adjustments (of a normal recurring nature)
have been made which are necessary to present fairly the financial position
of the Company as of November 30, 1996, and the results of its operations
for the three and nine months ended November 30, 1996 and 1995. For a more
complete understanding of the Company's financial position and results of
operations, reference is made to the consolidated financial statements of
the Company included in the Company's annual report on Form 10-K for the
year ended February 29, 1996.
Certain prior year amounts have been reclassified for comparability with the
current year presentation.
2. Summary of Significant Accounting Policies
Costs to be Reimbursed by Affiliated Companies
The Company incurs costs on behalf of affiliated companies, such as
expatriate salaries and benefits, travel and professional services. These
costs are reimbursed by the affiliated companies.
Investments in and Advances to Affiliated Companies, Accounted for Under the
Equity Method
All affiliated companies are accounted for on a calendar year basis, versus
the Company which has a fiscal yearend of February 28 (February 29 in leap
years). The Company records its share of equity in income (losses) of
affiliated companies based on the affiliated companies' calendar yearend
results. Investments in and advances to affiliated companies are as follows:
7
<PAGE>
<TABLE>
<CAPTION>
As of
November 30, 1996
----------------------------------------------------------------------------------
Investments in Cumulative Equity Cumulative
and Advances to in Losses of Translation Valuation
Affiliated Companies Affiliated Companies(1) Adjustments Allowance Total
-------------------- ------------------------ ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Europe
- ------
UPC................... $150,446 $(31,786) $ (9,509) $ -- $109,151
Monor Communications.. 27,182 (7,022) (3,663) -- 16,497
Latin America
- -------------
VTR Hipercable S.A.... 83,225 (1,965) (2,386) -- 78,874
Bahia Blanca(2)....... 57,277 (318) -- -- 56,959
TV Show Brasil........ 6,160 (2,665) -- -- 3,495
Megapo................ 32,497 (333) (1,139) -- 31,025
Asia/Pacific
- ------------
XYZ................... 15,288 (15,398) 110 -- --
SCS................... 8,616 (366) 165 -- 8,415
Other
- -----
Teleport.............. 3,078 (1,051) -- (2,027) --
Other................. 22,355 (4,535) -- -- 17,820
------- ------- ------- ------ -------
$406,124 $(65,439) $(16,422) $(2,027) $322,236
======= ======= ======= ====== =======
</TABLE>
(1) Does not include cumulative equity in losses of $9,979 of Net Sao Paulo as
the Company sold its investment in August 1996 realizing a gain of $65,260.
Does not include cumulative equity in losses of $1,641 of ITN as ITN is now
consolidated. Does not include cumulative equity in losses of $2,469 of
Cablevision and STX as these properties were contributed to VTR Hipercable
S.A. Also, does not include cumulative equity in losses of $2,733 of
Saturn as the Company now owns 100%.
(2) The Company acquired Bahia Blanca in November 1996 and will begin
consolidating it during the fourth quarter.
<TABLE>
<CAPTION>
As of
February 29, 1996
--------------------------------------------------------------------------------
Investments in Cumulative Equity Cumulative
and Advances to in Income (Losses) of Translation Valuation
Affiliated Companies Affiliated Companies Adjustments Allowance Total
-------------------- ---------------------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Europe
- ------
UPC................... $150,442 $(15,559) $(3,758) $ -- $131,125
Monor Communications.. 24,632 (5,573) (2,654) -- 16,405
Latin America
- -------------
STX................... 29,423 205 (671) -- 28,957
Cablevision S.A....... 30,939 (1,037) (125) -- 29,777
Net Sao Paulo......... 16,054 (8,290) -- -- 7,764
TV Show Brasil........ 6,118 (1,582) -- -- 4,536
Megapo................ 32,491 (48) (1,257) -- 31,186
Asia/Pacific
- ------------
Saturn................ 6,014 (1,802) 112 -- 4,324
XYZ................... 11,718 (11,737) 111 -- 92
SCS................... 6,346 (148) 183 -- 6,381
Other
- -----
Teleport.............. 2,961 (1,051) -- (1,910) --
ITN................... 3,862 (1,032) -- -- 2,830
Other................. 10,008 (1,180) -- -- 8,828
------- ------- ------ ------ -------
$331,008 $(48,834) $(8,059) $(1,910) $272,205
======= ======= ====== ====== =======
</TABLE>
SAB 51 Accounting Policy
Under Staff Accounting Bulletin Number 51 ("SAB 51"), the "gain" ($5,898)
recognized by the Company upon the issuance by UIH AP of a 2.6% interest in UIH
AP for a 50% interest in Saturn was credited directly to equity. The Company
has adopted a SAB 51 policy to record all gains as a result of stock sales by
its subsidiaries in the statement of operations except for any transactions
which must be credited directly to equity in accordance with the provisions of
SAB 51.
Foreign Operations
The functional currency for the Company's foreign operations is the applicable
local currency for each affiliate company, except for countries which have
experienced hyper-inflationary economies. For countries which have hyper-
inflationary economies, the financial statements are presented in United States
dollars. 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 U.S.
dollars result in unrealized gains or losses referred to as translation
adjustments. Cumulative translation adjustments are recorded as a separate
component of stockholders' 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.
8
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows", cash flows from the Company's operations in
foreign countries are translated based on average exchange rates for the
period while balance sheet amounts are translated at period end exchange
rates. 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 effect of exchange rate changes on cash balances held in foreign
currencies is reported as a separate line below cash flows from financing
activities.
3. Senior Secured Notes and Other Debt
Senior secured notes and other debt consists of the following as of
November 30, 1996 and February 29, 1996:
<TABLE>
<CAPTION>
As of As of
November 30, February 29,
1996 1996
------------ ------------
<S> <C> <C>
November 1994 14% senior secured notes, net of unamortized discount............................... $255,330 $228,828
November 1995 14% senior secured notes, net of unamortized discount............................... 87,130 78,745
February 1996 14% senior secured notes, net of unamortized discount............................... 53,609 49,140
May 1996 14% UIH AP senior notes, net of unamortized discount (1)................................. 237,024 --
Note payable to a company, interest at 1.5% above the rate published by a certain Chilean bank,
principal and interest due quarterly until June 1998, secured by shares of STX................ 6,355 --
Note payable to a bank, interest at 7.5%.......................................................... -- 9,820
Note payable to a bank, interest at LIBOR plus 1.75%.............................................. -- 3,828
Note payable to a bank............................................................................ 7 --
Capitalized lease obligation...................................................................... 4,015 890
-------- --------
Total senior secured notes and other debt......................................................... $643,470 $371,251
======== ========
</TABLE>
(1) Balance is as of September 30, 1996.
The $255,330 of 14% senior secured notes were issued in November 1994 at a
discount from their principal amount of $394,000 and accrete interest at a
rate of 15.24% compounded semi-annually. No cash interest payments will be
made prior to maturity on November 15, 1999.
The $87,130 of 14% senior secured notes were issued in November 1995 at a
discount from their principal amount of $130,000 and accrete interest at a
rate of 14% compounded semi-annually. No cash interest payments will be
made prior to maturity on November 15, 1999.
The $53,609 of 14% senior secured notes were issued in February 1996 at a
discount from their principal amount of $75,350 and accrete interest at a
rate of 11.875% compounded semi-annually. No cash interest payments will
be made prior to maturity on November 15, 1999.
The $237,024 of 14% UIH AP senior notes were issued in May 1996 at a
discount from their principal amount of $443,000 and accrete interest at a
rate of 14% compounded semi-annually. Cash interest will not be paid prior
to May 15, 2001. Thereafter, cash interest will be payable semi-annually
on each May 15 and November 15, commencing November 15, 2001. The senior
notes mature May 15, 2006.
4. Commitments
A summary of the Company's guarantees as of November 30, 1996 is as
follows:
Guarantees
----------
Teleport St. Petersburg............................. $ 2,109(1)
Monor Communications................................ 10,000(2)
Australis Media Limited............................. 10,000(3)
------
$22,109
======
9
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(1) Amount represents Company guarantee of affiliate debt.
(2) The Company has entered into an arrangement with the lender to the Monor
project that calls for a commitment of up to $10,000. The commitment can
be used to pay project indebtedness of up to $5,000 for a specified period
of time and up to $5,000 to be invested directly into the business.
(3) In May 1996, a wholly-owned subsidiary of UIH AP guaranteed $10,000 of
obligations of Australis Media Limited ("Australis"), a principal supplier
of Austar's programming. In connection with the guarantee, the wholly-
owned subsidiary received warrants to purchase approximately 4.2 million
ordinary shares of Australis. This guarantee is secured by a cash deposit
of $10,000 by the wholly-owned subsidiary. Of this guarantee,
approximately $4,000 was converted to equity of Australis in UIH AP's
fourth quarter and the remainder was returned to UIH AP.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations-Liquidity and Capital Resources" for projected fundings.
10
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Monetary Amounts Stated in Thousands)
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the Company's condensed
consolidated financial statements and related notes thereto included elsewhere
herein. Such condensed consolidated financial statements provide additional
information regarding the Company's financial activities and condition.
Liquidity and Capital Resources
The Company's expenditures to date have been made in developing multi-channel
television, programming distribution and telephony operations in foreign
countries. Except for the Company's working capital requirements, the Company's
future cash needs will depend on management's acquisition and development
decisions. The Company does not expect any operating company to pay dividends
in the foreseeable future and accordingly does not expect any distributions to
be made by any affiliates. The indenture governing UIH AP's senior notes
prohibits UIH AP from paying dividends during the period such notes are
outstanding.
During the nine months ended November 30, 1996, the Company incurred net losses
of $59,244 of which $33,523 was from non-cash equity in losses of affiliated
companies. The Company also recorded accretion of non-cash interest expense on
the senior secured notes totaling $53,574. The Company recognized a gain on sale
of an affiliated company of $65,260 and received proceeds from the sale of
$79,098. For the nine months ended November 30, 1996 the Company purchased
$118,749 of property, plant and equipment, the majority of which was purchased
by the Company's majority owned subsidiaries in Australia and Tahiti as those
entities continued to construct their systems. This increase is offset by a
related increase of $19,795 in accounts payable for capital expenditures. The
Company incurred $5,639 of acquisition, transaction and development costs,
primarily with respect to its Latin America and Asia/Pacific regions. The
Company's notes receivable decreased by $2,242, which includes an increase of
$35,000 from the sale of Sao Paulo offset by the pay-off of the note receivable
of $35,000 received for the sale of Sao Paulo. The Company invested $94,214 of
cash in its affiliated companies and other investments due to expected
additional investments to the existing systems. The Company purchased short-term
investments of $274,934 and sold short-term investments of $223,672 as part of
its cash management activities. The Company also paid $2,156 for warrants
tendered to the Company. UIH AP received proceeds from the sale of its senior
notes of $225,115 and incurred offering costs of $9,727. The Company borrowed
additional debt of $7,276 and repaid two loans totaling $14,812.
During the nine months ended November 30, 1995, the Company incurred net losses
of $64,317 of which $25,743 was from non-cash equity in losses of affiliated
companies. The Company also recorded accretion of non-cash interest expense on
the senior secured notes totaling $23,603. During the nine months ended November
30, 1995, the Company purchased $7,127 of property, plant and equipment, the
majority of which was purchased by the Company's majority owned subsidiaries in
Tahiti and the Czech Republic as those entities continued to construct their
MMDS systems. The Company incurred $4,150 of acquisition, transaction and
development costs, primarily with respect to its Latin America and Asia/Pacific
regions. The Company's notes receivable increased by $8,568 due to advances
under a bridge loan to the other owners of SCS to meet their funding commitments
to the project, for which the Company was repaid a portion in August 1996 and
will be repaid the remaining portion in August 1997 pursuant to the terms of the
bridge loans. The Company's restricted cash decreased $71,780 due to the release
of funds in connection with the Company's formation of UPC. The Company invested
$155,856 of cash in its affiliated companies and other investments due to
expected additional investments to the existing systems. The Company purchased
short-term investments of $90,541 and sold short-term investments of $157,681 as
part of its cash management activities. The Company received net proceeds from
an equity offering of $62,107 and net proceeds from an issuance of senior notes
of $64,172. The Company borrowed $9,820 to fund a portion of its acquisition in
STX.
The amount currently estimated by the Company for future fundings and capital
commitments, as described in the following paragraphs, is intended to be funded
using the Company's existing cash. In addition, UIH AP intends to raise
additional funds through the sale of equity securities and/or further issuances
of debt either by UIH AP, its immediate parent corporation or its operating
companies. While the Company currently anticipates funding the projects
summarized below, there can be no assurance that the Company's actual
expenditures will equal the currently anticipated amounts. If the Company's
actual expenditures are less than the amounts indicated, the Company intends to
use such remaining cash to pursue additional development and acquisition
opportunities.
11
<PAGE>
The following table summarizes the Company's remaining projected funding
requirements for its projects other than UIH AP:
<TABLE>
<CAPTION>
Projected Fundings
--------------------------------------------------------
Total Portion Remaining
Expected Funded as of as of
Location Type of Project Fundings November 30, 1996 November 30, 1996
- -------- --------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
Europe:
UPC Cable systems $171,059 $171,059 $ --
Monor Communications Telephony/cable systems 26,580 26,580 --
Spain Programming Programming 11,613 9,430 2,183
Irish Programming Programming 9,743 1,943 7,800
-------- -------- -------
218,995 209,012 9,983
-------- -------- -------
UIH Latin America, Inc.:
Chile Cable system 84,862 77,754 7,108
Argentina Cable system 57,200 26,382 30,818
Mexico Cable system 32,033 32,033 --
Fortaleza, Brazil MMDS system 8,402 6,087 2,315
Jundiai, Brazil Cable system 4,733 4,398 335
Arequipa, Peru Cable system 3,811 3,169 642
Tacna, Peru Cable system 2,750 550 2,200
Venezuela Cable system 9,955 5,325 4,630
United Family Communications Programming 5,245 1,300 3,945
-------- -------- -------
208,991 156,998 51,993
-------- -------- -------
UIH Asia/Pacific Communications,
Inc.:
UIH AP (1) -- 102,035 102,035 --
Hunan Province, China Microwave transmission network 6,600 5,980 620
Philippines Cable system 17,400 12,438 4,962
-------- -------- -------
126,035 120,453 5,582
-------- -------- -------
Other:
Teleport St. Petersburg Telephony 4,491 2,491 2,000
ITN, Inc. -- 6,000 5,542 458
-------- -------- -------
10,491 8,033 2,458
-------- -------- -------
Grand Total $564,512 $494,496 $70,016
======== ======== =======
</TABLE>
(1) Amount represents what the Company funded to UIH AP. See the table below
for UIH AP's projected fundings.
The Company may also invest additional amounts in its existing operating systems
and early stage projects or acquire interests from its partners in these
systems. For example, the Company completed an agreement with VTR S.A. in Chile
to form a joint venture to which each party contributed its respective multi-
channel television assets in Chile and of which the Company owns 34%. The
Company has an option in early 1998 to increase its ownership interest in the
new joint venture to 50% based upon a revaluation of the properties contributed.
Thus, the Company could fund additional amounts to increase its ownership
percentage (subject to maximum and minimum values) of the joint venture.
The portion funded as of November 30, 1996, as described below, has been funded
using the proceeds of $225,100 from the sale of the 1996 UIH AP senior notes, of
which $48,240 is remaining as of November 30, 1996, and UIHI's fundings prior to
the offering. In addition, UIH AP intends to raise additional funds through the
sale of equity securities and/or further issuances of debt either by UIH AP, its
immediate parent corporation, or its operating companies.
The following table summarizes UIH AP's remaining projected funding requirements
for its projects (based on UIH AP's November 30, 1996 ownership interest):
<TABLE>
<CAPTION>
Projected Fundings
--------------------------------------------------------
Total Portion Remaining
Expected Funded as of as of
Location Type of Project Fundings November 30, 1996 November 30, 1996
- -------- --------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
UIH AP:
New Zealand Cable system $ 92,822 $ 19,997 $ 72,825
Australia (Austar)(1) MMDS/DTH systems 355,315 156,639 198,676
Australia (XYZ) Programming 14,328 10,819 3,509
Tahiti MMDS system 17,399 16,738 661
United Wireless Mobile data services 8,200 4,286 3,914
-------- -------- --------
$488,064 $208,479 $279,585
======== ======== ========
</TABLE>
(1) Does not include the $58,600 paid by the Company to other shareholders of
Austar to increase its ownership interest.
12
<PAGE>
The Company currently does not expect to contribute additional capital to UPC,
as UPC will finance its operating systems and development opportunities with its
operating cash flow and cash on hand, as well as possible equity and debt
financings. At this time, the Company does not know which acquisition or other
development projects UPC will pursue and is unable to estimate the amount of
funds that will be necessary for UPC to develop the projects it chooses to
pursue.
In connection with the UPC transaction, UPC issued to Philips $133,600 of UPC
PIK Notes in two tranches, both of which become due and payable on January 1,
2005. The first tranche ($53,400) becomes convertible into equity of UPC in
July 1999 and the second tranche ($80,200) becomes convertible into equity of
UPC in July 2001. The Company has the option to purchase one-half of the UPC
PIK Notes at any time they become convertible. While the Company and Philips
currently intend that the UPC PIK Notes will be redeemed by UPC prior to
conversion through an equity or debt financing at the UPC level, if the UPC PIK
Notes are not redeemed prior to conversion, the Company must either purchase
one-half of the UPC PIK Notes or face dilution of its interest in UPC.
Because the Company and UIH AP do not currently have any cash flow, their
ability to repay their obligations on the senior notes at maturity will be
dependent on developing one or more sources of cash prior to the maturities of
their respective senior notes. The Company may (i) seek to refinance all or a
portion of the senior notes at maturity though sales of additional debt or
equity securities of the Company, (ii) seek to sell all or a portion of its
interests in one or more of its affiliated companies, (iii) negotiate with its
current financial and strategic partners to permit the cash produced by its
affiliated companies, such as UPC, to be distributed to equity holders rather
than reinvested in the businesses of such affiliated companies, and/or (iv) seek
to invest in companies that will make substantial cash distributions on or
before the maturity of the senior notes.
The Company continues to be actively engaged in the development and acquisition
of additional investment opportunities in multi-channel television services and
related businesses in Asia/Pacific and Latin America and incurs expenses in
identifying and pursuing these opportunities before any investment decision is
made. The Company anticipates making investments supplemented by capital raised
from local financial and strategic partners as well as local debt financing to
the extent available and appropriate for each project, subject to the provisions
of the Company's and UIH AP's senior secured notes indentures.
See Note 4 of the Company's Condensed Consolidated Financial Statements for
additional information regarding the Company's commitments subject to the
provisions of the Company's and UIH AP's senior secured notes indentures.
Results of Operations
The Company's Management Fee Income from Related Parties. Management fee income,
as compared to the corresponding prior year amounts, increased approximately $89
(240.5%) and $656 (656.0%) during the three and nine months ended November 30,
1996 and 1995, respectively. The detail of management fee income is as follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended November 30, Ended November 30,
-------------------- -------------------
1996 1995 1996 1995
--------- --------- ---------- -------
<S> <C> <C> <C> <C>
UIH Asia/Pacific Communications,
Inc.(1)............................ $ (11) $ 37 $ 152 $ 37
UIH Latin America, Inc............... 52 -- 408 --
Other................................ 85 -- 196 63
----- ----- ------ -----
Total management fee income $ 126 $ 37 $ 756 $ 100
from related parties........... ===== ===== ====== =====
</TABLE>
(1) The decrease during the three months ended November 30, 1996 is due to
intercompany eliminations and the two month lag with consolidated foreign
subsidiaries.
13
<PAGE>
Service Revenue. Service revenue, as compared to the corresponding prior year
amounts, increased approximately $6,851 (1,143.7%) and $12,246 (750.8%) during
the three and nine months ended November 30, 1996 and 1995, respectively, as
follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended November 30, Ended November 30,
--------------------- -------------------
1996 1995 1996 1995
----------- -------- --------- --------
<S> <C> <C> <C> <C>
UIH Asia/Pacific
Communications, Inc. (1)... $7,350 $ 599 $13,220 $1,151
UIH Latin America, Inc. (2).. 89 -- 573 --
Other (3).................... 11 -- 84 480
----- ---- ------ -----
Total service revenue..... $7,450 $ 599 $13,877 $1,631
===== ==== ====== =====
</TABLE>
(1) Austar
Service revenues at Austar were $10,500 in the nine months ended September
30, 1996 (the "1996 Nine Months"). Revenues consisted primarily of service
and installation fees from basic subscribers of $6,700 and $3,800,
respectively. The Company began consolidating the results of Austar on
March 1, 1996. As a result, the Company reported no service revenues from
Austar in the nine months ended September 30, 1995 (the "1995 Nine
Months"). Austar's actual service revenues for the 1995 Nine Months were
$100. The increase in service revenues in the 1996 Nine Months was
primarily attributable to an increase in subscribers (60,276 at September
30, 1996 versus 1,019 at September 30, 1995). Such increase was the result
of the rapid roll-out of Austar's services initially launched August 1995.
Telefenua
Telefenua's service revenues increased to $2,600 for the 1996 Nine Months
from $1,200 in the 1995 Nine Months, primarily attributable to an increase
in subscribers (4,678 at September 30, 1996 compared to 2,684 at September
30, 1995).
Saturn
The Company began consolidating Saturn on September 1, 1996. Accordingly,
reported service revenues for the 1996 and 1995 results were not
meaningful. In addition, because Saturn has only recently launched basic
services in the Wellington area in September 1996, Saturn's actual results
for the 1996 Nine Months and the 1995 Nine Months were not significant or
meaningful.
(2) The Company acquired 94% of Cablestar in February 1996.
(3) Other amounts have varied for the following reasons:
- The Company's previously owned 66.7% subsidiary, Kabel Net, initiated
MMDS operations during the fall of 1994. Beginning June 1, 1995, the
activity of Kabel Net and certain of the programming assets are recorded
through the Company's 50% equity pick-up from UPC.
- The Company began consolidating ITN effective June 1, 1996.
System Operating Expense. During the three and nine months ended November 30,
1996 and 1995, respectively, the Company experienced an increase in operating
expense, as compared to the corresponding prior year amounts, of approximately
$6,238 (1,371.0%) and $16,971 (654.7%), as follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended November 30, Ended November 30,
-------------------- -------------------
1996 1995 1996 1995
---------- -------- --------- --------
<S> <C> <C> <C> <C>
UIH Asia/Pacific
Communications, Inc. (1)... $6,316 $ 455 $18,621 $1,870
UIH Latin America, Inc. (2).. 173 -- 392 --
Other (3).................... 204 -- 550 722
----- ---- ------ -----
Total operating expense... $6,693 $ 455 $19,563 $2,592
===== ==== ====== =====
</TABLE>
Footnotes (2) and (3): see discussion under "The Company's Service Revenue"
above.
14
<PAGE>
(1) Austar
Operating expenses consolidated by the Company from Austar were $15,600 in
the 1996 Nine Months. Operating expenses consisted primarily of payroll
($6,700), satellite programming fees ($2,600) and annual MMDS spectrum
license fees ($1,300), with the remainder consisting primarily of warehouse
rent, system travel/recruitment and national customer operations center
("NCOC") start-up costs. The Company began consolidating the results of
Austar on March 1, 1996. As a result, the Company reported no operating
expenses from Austar in the Company's consolidated statement of operations
for the 1995 Nine Months. Austar's actual operating expenses for the 1995
Nine Months were $700. The increase in operating expenses in the 1996 Nine
Months was primarily attributable to the rapid roll-out of Austar's
services initially launched in August 1995 and the corresponding increase
in subscribers. Austar is experiencing high operating expenses relative to
service revenues due to certain fixed operating expenses (such as
management overhead, license fees and certain marketing costs) as well as
non-recurring start up costs (such as initial market research, NCOC
establishment costs and additional one-time expenses due to the name change
to "Austar") associated with the launch of its service. Austar expects
operating expenses as a percent of service revenues to decline as start-up
costs are reduced and as certain fixed operating expenses are spread over
expected increases in service revenues.
Telefenua
Operating expenses consolidated by the Company from Telefenua decreased to
$1,500 in the 1996 Nine Months from $1,900 in the 1995 Nine Months,
primarily due to a decrease in technical related repairs and maintenance
and tape production costs, partially offset by an increase in the
subscribers in the 1996 Nine Months. Telefenua's operating expenses for the
1996 Nine Months consisted primarily of satellite programming fees ($500)
and tape production costs ($400), with the remainder consisting of payroll
related costs and technical related costs.
Saturn
The Company began consolidating Saturn on September 1, 1996. Accordingly,
while the Company reported operating expenses of $600 for Saturn in its
consolidated statement of operations for the 1996 Nine Months, Saturn's
actual operating expenses were $1,200 for the 1996 Nine Months, consisting
primarily of payroll and office expenses related to the start-up
activities, including system design and engineering work, for launching
Saturn's Wellington system in September 1996. Saturn's operating expenses
for the 1995 Nine Months were not significant or meaningful.
System Selling, General and Administrative Expense. During the three and nine
months ended November 30, 1996 and 1995, respectively, the Company experienced
an increase in system selling, general and administrative expense over the
corresponding prior year amounts of approximately $9,281 (2,053.3%) and $12,269
(458.1%), as follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended November 30, Ended November 30,
-------------------- -------------------
1996 1995 1996 1995
---------- -------- --------- --------
<S> <C> <C> <C> <C>
UIH Asia/Pacific
Communications, Inc. (1).... $9,306 $ 452 $13,987 $1,636
UIH Latin America, Inc. (2).. 146 -- 403 --
Other (3).................... 281 -- 557 1,042
----- ---- ------ -----
Total operating expense... $9,733 $ 452 $14,947 $2,678
===== ==== ====== =====
</TABLE>
Footnotes (2) and (3): see discussion under "The Company's Service Revenue"
above.
(1) Austar
System selling, general and administrative expenses consolidated by the
Company from Austar were $10,700 in the 1996 Nine Months and consisted
primarily of $3,100 in marketing costs related to print, radio and
television advertisements utilized in the launch of Austar services
throughout its service areas during 1996, direct sales commissions ($2,100)
and for general and administrative expenses at Austar's Sydney corporate
headquarters ($5,500). The company began consolidating the results of
Austar on March 1, 1996. As a result, the Company reported no system
selling, general and administrative expenses from Austar in its
consolidated statement of operations for the 1995 Nine Months. Austar's
system selling, general and administrative expenses were primarily
attributable to marketing expenses related to the increased roll-out of
MMDS operating systems and the initiation of DTH service in 1996.
15
<PAGE>
Telefenua
System selling, general and administrative expenses consolidated by the
Company from Telefenua increased to $2,000 in the 1996 Nine Months compared
to $1,600 in the 1995 Nine Months. This increase was primarily attributable
to an increase in marketing expenses during the 1996 Nine Months.
Saturn
The Company began consolidating Saturn on September 1, 1996. Accordingly,
reported system selling, general and administrative expenses for the 1996
and 1995 results were not meaningful. In addition, because Saturn has only
recently launched basic services in the Wellington area and had not
conducted a significant marketing effort in either period, Saturn's system
selling, general and administrative expenses for the 1996 Nine Months and
the 1995 Nine Months were not significant or meaningful.
Corporate General and Administrative Expense. During the three and nine months
ended November 30, 1996 and 1995, respectively, the Company experienced a
decrease in general and administrative expense over the corresponding prior year
amounts of approximately $1,847 (40.0%) and $3,306 (22.3%), as follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended November 30, Ended November 30,
-------------------- -------------------
1996 1995 1996 1995
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Other (3) (4)........................ $2,765 $3,687 $11,507 $11,574
Non-recurring charges (5)............ -- 925 -- 3,239
----- ----- ------ ------
Total general and administrative $2,765 $4,612 $11,507 $14,813
expense.......................... ===== ===== ====== ======
</TABLE>
Footnotes (3): see discussion under "The Company's Service Revenue" above.
(4) The decrease during the three months ended November 30, 1996 as compared to
1995 is due to certain costs previously expensed being billed to
affiliates.
(5) Included in non-recurring charges are costs which are currently incurred by
UPC.
Depreciation and Amortization. Depreciation and amortization increased $7,719
(1,824.8%) and $14,882 (787.0%) during the three and nine months ended November
30, 1996 relative to the same period in the prior year, respectively. The
increase is due to the launch of the system in Tahiti in March of 1995 and
Australia in September 1995. The Company began consolidating Austar effective
March 1, 1996, and began consolidating Saturn effective September 1, 1996. As
noted above under "The Company's Service Revenue," the activity of Kabel Net and
certain programming assets are currently recorded as an equity pick-up and in
fiscal 1996 such investments were consolidated for the first quarter.
The Company's Equity in Losses of Affiliated Companies, Net. The Company
recognized equity in losses of affiliated companies of $11,483 and $12,433 for
the three months ended November 30, 1996 and 1995, respectively, and $33,224 and
$25,743 for the nine months ended November 30, 1996 and 1995, as follows:
<TABLE>
<CAPTION>
Three Months Ended November 30, 1996 Three Months Ended November 30, 1995
-------------------------------------- -------------------------------------
Company/UPC Equity in Company/UPC Equity in
Ownership Income (Losses) of Ownership Income (Losses) of
Interest (1) Affiliated Companies Interest (1) Affiliated Companies
-------------- ---------------------- ------------ ----------------------
<S> <C> <C> <C> <C>
Europe
UPC.......................... 50.0% $ (5,058) 50.0% $ (4,003)
Monor........................ 48.6% (237) 48.2% (1,549)
UIH Latin America, Inc.
VTR Hipercable S.A. (12)..... 34.0% (1,965) -- --
STX(12)...................... 100.0% 520 65.0% 234
Megapo....................... 49.0% (50) 49.0% (11)
Net Sao Paulo(2)............. -- -- 34.0% (293)
Cablevision S.A.(12)......... 100.0% (1,073) 70.9% (516)
TV Show Brasil............... 40.0% (306) 40.0% (433)
UIH Asia/Pacific
Communications, Inc.
Austar (3)................... -- -- 50.0% (1,049)
XYZ.......................... 25.0% (1,932) 25.0% (3,554)
Saturn (4)................... -- -- 50.0% (276)
Other.......................... 33.8-46.3% (1,382) 25.0-46.3% (983)
------ -------
Total equity in losses of
affiliated companies, net... $(11,483) $(12,433)
====== =======
</TABLE>
See footnotes on page 17.
16
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended November 30, 1996 Nine Months Ended November 30, 1995
----------------------------------------- ----------------------------------------
Company/UPC Equity in Company/UPC Equity in
Ownership Income (Losses) of Ownership Income (Losses) of
Interest (1) Affiliated Companies Interest (1) Affiliated Companies
---------------- ---------------------- --------------- ----------------------
<S> <C> <C> <C> <C>
Europe
UPC.................... 50.0% $(16,226) 50.0% $ (4,003)
UCI (5)(6): --
Norkabel............. -- -- 8.3% 651
SCD.................. -- -- 2.2% (61)
Kabelkom............. -- -- 3.9% 64
UCI.................. -- -- 8.3% (6)
-------
648
Suspended loss (7)... -- -- (648)
-------
Loss recognized...... -- -- --
-------
UII(6):
Tevel................ -- -- 23.3% 1,054
PHL.................. -- -- 20.0%(8) (925)
Melita(5)............ -- -- 41.6%(8) (598)
UII.................. -- -- 50.0% 267
-------
(202)
-------
UII Management(6)...... -- -- 50.0% 468
Monor.................. 48.6% (1,424) 47.6% (3,310)
Santander(6)........... -- -- 25.0% (213)
Kabel Net(6)(9)........ -- -- 66.7% (1,217)
Programming(6)(9)...... -- -- 100.0% (247)
UIH Latin America, Inc.
VTR Hipercable S.A. 34.0% (1,965) -- --
(12)..................
STX(12)................ 100.0% 1,050 65.0% 234
Megapo................. 49.0% (258) 49.0% (19)
Net Sao Paulo(2)....... 34.0% (1,649) 34.0% (3,811)
Cablevision S.A.(12)... 100.0% (2,687) 70.9% (507)
TV Show Brasil......... 40.0% (1,083) 40.0% (900)
UIH Asia/Pacific
Communications, Inc.
Austar (3)............. -- -- 50.0% (1,413)
XYZ.................... 25.0%(10) (3,571) 50.0% (7,943)
Saturn(4).............. 100.0% (928) 50.0% (811)
Other.................... 33.8-76.9%(11) (4,483) 25.0-46.3% (1,849)
------- -------
Total equity in losses
of affiliated
companies, net........ $(33,224) $(25,743)
======= =======
</TABLE>
(1) On July 13, 1995, the UPC transaction was closed and the Company's
interests in UCI, UII, UII Management, Santander, Kabel Net and certain
programming entities were transferred to UPC.
(2) In August 1996, the Company sold its interest in Net Sao Paulo for $78,098
and recognized a gain of $65,260 on the sale.
(3) In December 1995, the Company increased its effective interest in Austar to
majority control and began consolidating Austar's results of operations
March 1, 1996.
(4) In July 1996, UIH AP increased its ownership interest in Saturn to 100%. In
exchange for acquiring the additional 50% interest, the Company issued to
Saturn's other shareholder a 2.6% interest in UIH AP.
(5) The Company's ownership interest with respect to equity in losses from UCI
and Melita was calculated based on the Company's average ownership interest
throughout the period.
(6) These properties were contributed to UPC.
(7) Represents cumulative losses in affiliate in excess of capital invested
(including contractual funding commitments) or a reduction of suspended
losses for equity in income.
(8) The Company's ownership interest with respect to equity in losses from PHL
and Melita is calculated net of minority interest.
(9) Due to the determination that Kabel Net and certain programming entities
would be contributed to UPC, the consolidated activity for the three months
ended June 30, 1995 was calculated as an equity pick up and not
consolidated.
(10) In July 1995, the Company reduced its ownership percentage in XYZ to 25%.
(11) The Company increased its ownership in ITN to 76.9% in April 1996.
(12) The Company contributed its interests in STX and Cablevision to its new
joint venture VTR Hipercable S.A. effective September 1, 1996.
The Company's Interest Income. Interest income, as compared to the
corresponding prior period amounts, increased by approximately $3,316 (321.9%)
and $4,134 (69.7%) during the three and nine months ended November 30, 1996.
Such increase is primarily due to a higher amount of cash invested in the
current year as compared to the prior year and due to reduced fundings to
projects in the current period.
17
<PAGE>
The Company's Interest Expense. Interest expense, as compared to the
corresponding prior period amounts, increased by approximately $14,682 (168.1%)
and $30,981 (127.4%) during the three and nine months ended November 30, 1996.
The increase is due to the sale of the senior secured notes in connection with
the Company's debt offerings in November 1995 and February 1996 and UIH AP's
debt offering in May 1996.
The Company's Provision for Losses on Investment Related Costs. Provision for
losses on investment related costs totaled $776 and $325 for the three months
ended November 30, 1996 and 1995, respectively and $1,600 and $1,141 for the
nine months ended November 30, 1996 and 1995, respectively. The Company
capitalizes direct and incremental costs incurred relative to pursuing potential
investments. If an investment is made, these costs are either reimbursed to the
Company by the operating entity or capitalized as part of the cost basis of the
investment. If the potential investment is abandoned, these costs are expensed.
Gain on Sale of Affiliated Company. In August 1996, the Company sold its
interest in Net Sao Paulo for $78,098 and recognized a gain of $65,260. The
purchase price was satisfied with a cash payment of $43,098 and a note
receivable of $35,000 which was paid in full in November 1996.
18
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 5 - Other Information
Summary Operating Data
The operating data set forth below reflect the aggregate statistics of the
operating systems in which the Company has an ownership interest.
<TABLE>
<CAPTION>
As of September 30, 1996
-----------------------------------------------------------------------------------------------------
UIHI UIHI UIHI
Homes in Equity in Equity in Equity in
Service Homes Basic Basic UIHI Homes in Homes Basic
Area Passed Subscribers Penetration Ownership Service Area Passed Subscribers
---- ------ ----------- ----------- --------- ------------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Europe
- ------
UPC Systems:
Austria
Cable................. 884,000 613,900 426,251 69.4% 47.5% 419,900 291,603 202,469
Netherlands (Amsterdam)
Cable................ 562,000 553,400 521,000 94.1% 25.0% 140,500 138,350 130,250
Belgium
Cable................ 134,000 133,000 126,784 95.3% 50.0% 67,000 66,500 63,392
Netherlands (Eindhoven)
Cable................ 90,000 88,609 84,179 95.0% 50.0% 45,000 44,305 42,090
Israel
Cable................ 333,300 330,944 227,378 68.7% 11.7% 38,996 38,720 26,603
Ireland
Cable................ 99,457 78,223 50,834 65.0% 10.0% 9,946 7,822 5,083
MMDS................. 352,620 259,403 62,724 24.2% 35,262 25,940 6,272
Czech Republic
Cable/MMDS........... 330,000 108,249 28,323 26.2% 50.0% 165,000 54,125 14,162
MATV................. -- 9,550 9,550 100.0% -- 4,775 4,775
Slovakia
Cable................ 100,000 9,405 6,370 67.7% 37.5% 37,500 3,527 2,389
Malta
Cable................ 179,000 142,638 47,053 33.0% 21.3% 38,127 30,382 10,022
Hungary (Kabelkom)
Cable................ 265,000 264,808 232,556 87.8% 23.5% 62,275 62,230 54,651
Norway
Cable................ 233,900 220,439 154,847 70.2% 50.0% 116,950 110,220 77,424
Germany
Cable................ 300,000 66,000 53,491 81.0% 14.5% 43,500 9,570 7,756
Spain
Cable................ 57,800 41,483 2,288 5.5% 12.5% 7,225 5,185 286
Portugal
Cable................ 772,000 2,135 -- -- 50.0% 386,000 1,068 --
Romania
Cable................ 105,000 48,435 29,086 60.1% 25.5-45.0% 32,625 16,489 8,859
France
Citecable............ 250,000 12.7% 15.0% 10,461 1,330
69,740 8,868 37,500
Mediareseau.......... -- 469 -- -- 47.5% -- 223 --
--------- --------- --------- --------- ------- -------
Total........ 5,048,077 3,040,830 2,071,582 1,683,306 921,495 657,813
--------- --------- --------- --------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
As of June 30, 1996
--------------------------------------------------------------------------
UIHI UIHI
Equity in Equity in
Homes Basic Basic UIHI Homes Basic
Passed Subscribers Penetration Ownership Passed Subscribers
------ ----------- ----------- --------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Europe
- ------
UPC Systems:
Austria
Cable................. 612,400 423,300 69.1% 47.5% 290,890 201,068
Netherlands (Amsterdam)
Cable................ 516,125 487,221 94.4% 25.0% 129,031 121,805
Belgium
Cable................ 133,000 127,109 95.6% 50.0% 66,500 63,555
Netherlands (Eindhoven)
Cable................ 88,440 84,018 95.0% 50.0% 44,220 42,009
Israel
Cable................ 327,575 224,675 68.6% 11.7% 38,326 26,287
Ireland
Cable................ 77,706 49,571 63.8% 10.0% 7,771 4,957
MMDS................. 257,000 60,752 23.6% 25,700 6,075
Czech Republic
Cable/MMDS........... 99,579 30,197 30.3% 50.0% 49,790 15,099
MATV................. 9,610 9,610 100.0% 4,805 4,805
Slovakia
Cable................ 7,865 6,166 78.4% 37.5% 2,949 2,312
Malta
Cable................ 139,070 42,556 30.6% 21.3% 29,622 9,064
Hungary (Kabelkom)
Cable................ 235,646 216,209 91.8% 2.0% 4,713 4,324
Norway
Cable................ 219,091 154,093 70.3% 4.2% 9,202 6,472
Germany
Cable................ 150,000 53,491 35.7% 14.5% 21,750 7,756
Spain
Cable................ 17,186 1,790 10.4% 12.5% 2,148 224
Portugal
Cable................ -- -- -- 50.0% -- --
Romania
Cable................ 47,562 28,240 59.4% 25.5-45.0% 16,224 8,602
France
Citecable............ 69,740 6,868 9.8% 15.0% 10,461 1,030
Mediareseau.......... -- -- -- -- --
--------- --------- ------- -------
Total........ 3,007,595 2,005,866 754,102 525,444
--------- --------- ------- -------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
As of September 30, 1996
--------------------------------------------------------------------------------------------------------
UIHI UIHI UIHI
Homes in Equity in Equity in Equity in
Service Homes Basic Basic UIHI Homes in Homes Basic
Area Passed Subscribers Penetration Ownership Service Area Passed Subscribers
---- ------ ----------- ----------- --------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UIHI Systems:
Hungary (Monor)(2)
Telephony............ 75,000 75,000 49,723 66.3% 43.3% 32,475 32,475 21,530
Cable................ -- 34,324 10,368 30.2% -- 14,862 4,489
UIH Latin America, Inc.
- -----------------------
Chile(3)
Cable................ 1,630,000 1,444,145 309,943 21.5% 34.0% 554,200 491,009 105,381
Mexico
Cable................ 331,149 166,745 53,447 32.1% 49.0% 162,263 81,705 26,189
Fortaleza, Brazil
MMDS................. 430,000 387,000 11,230 2.9% 40.0% 172,000 154,800 4,492
Jundiai, Brazil
Cable................ 50,000 35,905 8,843 24.6% 46.3% 23,150 16,624 4,094
Peru (Cablestar)
Cable................ 115,000 10,000 2,619 26.2% 94.0% 108,100 9,400 2,462
Peru (Tacna)
Cable............... 30,000 875 300 34.3% 100.0% 30,000 875 300
Argentina (Bahia Blanca)(4)
Cable.............. 125,000 116,000 61,000 52.6% 100.0% 125,000 116,000 61,000
--------- --------- ------- --------- ------- -------
Total........... 2,711,149 2,160,670 447,382 1,174,713 870,413 203,918
--------- --------- ------- --------- ------- -------
UIH Asia/Pacific,
Communications, Inc.
- -------------------------
Australia (Austar)
MMDS/DTH............. 1,537,000 1,371,115 60,276 4.4% 97.4% 1,497,038 1,335,466 58,709
Australia (XYZ)
Programming.......... N/A N/A 258,210 N/A 24.4% N/A N/A 63,003
New Zealand
Cable................ 141,000 10,468 1,235 11.8% 97.4% 137,334 10,196 1,203
Philippines(5)
Cable................ 433,000 88,467 32,542 36.8% 40.0% 173,200 35,387 13,017
Tahiti
MMDS................. 31,000 18,633 4,678 25.1% 87.7% 27,187 16,341 4,103
China (HITV)(6)
Microwave Relay Nwt.. N/A N/A N/A N/A 49.0% N/A N/A N/A
--------- --------- --------- --------- --------- ---------
Total........... 2,142,000 1,488,683 356,941 1,834,759 1,397,390 140,035
--------- --------- --------- --------- --------- ---------
Grand Total..... 9,976,226 6,799,507 2,935,996 4,725,253 3,236,635 1,027,785
========= ========= ========= ========= ========= =========
<CAPTION>
As of June 30, 1996
-------------------------------------------------------------------------
UIHI UIHI
Equity in Equity in
Homes Basic Basic UIHI Homes Basic
Passed Subscribers Penetration Ownership Passed Subscribers
------ ----------- ----------- --------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
UIHI Systems:
Hungary (Monor)(2)
Telephony............ 75,000 49,723 66.3% 43.3% 32,475 21,530
Cable................ 34,324 10,368 30.2% 14,862 4,489
UIH Latin America, Inc.
Chile(3)
Cable................ 330,515 101,473 30.7% 100.0% 330,515 101,473
Mexico
Cable................ 165,113 53,334 32.3% 49.0% 80,905 26,134
Fortaleza, Brazil
MMDS................. 387,000 10,040 2.6% 40.0% 154,800 4,016
Jundiai, Brazil
Cable................ 33,199 7,124 21.5% 46.3% 15,371 3,298
Peru (Cablestar)
Cable................ 10,000 2,619 26.2% 94.0% 9,400 2,462
Peru (Tacna)
Cable............... -- -- -- -- -- --
Argentina (Bahia Blanca)(4)
Cable.............. -- -- -- -- -- --
------- ------- ------- -------
Total........... 925,827 174,590 590,991 137,383
------- ------- ------- -------
UIH Asia/Pacific, Inc.
- ----------------------
Australia (Austar)
MMDS/DTH............. 1,171,000 34,808 3.0% 94.0% 1,100,740 32,720
Australia (XYZ)
Programming.......... N/A 207,666 N/A 25.0% N/A 51,917
New Zealand
Cable................ 6,000 1,125 18.8% 100.0% 6,000 1,125
Philippines(5)
Cable................ 81,259 29,642 36.5% 40.0% 32,504 11,857
Tahiti
MMDS................. 17,458 4,361 25.0% 90.0% 15,712 3,925
China (HITV)(6)
Microwave Relay Nwt.. N/A N/A N/A 49.0% N/A N/A
--------- --------- --------- -------
Total........... 1,275,717 277,602 1,154,956 101,544
--------- --------- --------- -------
Grand Total..... 5,318,463 2,518,149 2,547,386 790,390
========= ========= ========= =======
</TABLE>
(1) During October 1996, UPC sold its interest in the Sweden operating
company.
(2) The Company owns a 48.4% interest in Monor Communications Group, Inc.
which holds a 89.47% interest in the operating company, Monor Telefon.
(3) The Company holds a 34% interest in VTR Hipercable S.A. Prior to
September 1996, the Company held a 100% interest in Cablevision
(Cablevision holds a 100% interest in Cablevision Norte S.A. and a
100% interest in Pacifico TV) and a 100% interest in STX which were
contributed to VTR Hipercable S.A..
(4) The Company holds an 80% interest in one operating system and 100%
interest in two other operating systems in the Bahia Blanca, Argentina
area. The Company is obligated, under certain conditions to acquire
the remaining 20% interest in 1998.
(5) The Company currently has a convertible loan with SCS, which upon
conversion will allow for a 40% ownership interest.
(6) The Company has a 49% interest in HITV, a joint venture that owns a
microwave relay system in the Hunan Province that transmits one
provincial channel to approximately 400,000 cable television homes in
the region.
20
<PAGE>
The financial information presented below has been taken from unaudited
financial information of the respective operating companies that were providing
service as of September 30, 1995 and 1996. Some of the information presented
below has been derived from financial statements prepared in accordance with
foreign generally accepted accounting principles which differ from United States
generally accepted accounting principles. In addition, certain amounts for the
nine months ended September 30, 1995 and 1996 have been converted to dollars
using September 30, 1996 exchange rates for the convenience translation.
<TABLE>
<CAPTION>
Revenues
-------------------------------------
Convenience Translation
-------------------------------------
Nine Months Ended Nine Months Ended
September 30,1995 September 30, 1996
----------------- ------------------
<S> <C> <C>
Europe (in thousands)
Belgium(1)........................... $ -- $ 13,462
Eindhoven(1)......................... -- 7,912
Austria(1)........................... -- 68,716
Amsterdam............................ 32,982 36,723
Israel............................... 55,661 68,723
Ireland.............................. 20,224 22,349
Malta................................ 4,634 6,694
Norway............................... 25,845 25,175
Hungary (Kabelkom, cable)............ 14,234 16,234
Hungary (Monor, telephony/cable)..... 3,530 8,529
Czech Republic(1).................... -- 2,239
Spain................................ 33 --
France............................... -- --
Romania.............................. -- 565
Slovakia............................. -- 157
-------- --------
Total 157,143 277,478
-------- --------
UIH Latin America, Inc.
Chile(3)............................ 3,522 --
Jundiai, Brazil...................... 507 2,208
Fortaleza, Brazil.................... 1,493 3,938
Mexico............................... -- 6,314
Peru (Cablestar)..................... -- 573
-------- --------
Total 5,522 13,033
-------- --------
UIH Asia/Pacific Communications, Inc.
Australia (United Wireless)(4)....... -- 42
Australia (Austar)................... 110 10,605
New Zealand.......................... 141 151
Tahiti............................... 1,097 2,632
Philippines.......................... -- 2,744
Australia (XYZ)...................... 447 6,260
-------- --------
Total............................. 1,795 22,434
-------- --------
Grand Total....................... $164,460 $312,945
======== ========
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Net Income (Loss)
----------------------------------------
Convenience Translation
----------------------------------------
Nine Months Ended Nine Months Ended
September 30, 1995 September 30, 1996
------------------ ------------------
<S> <C> <C>
Europe (in thousands)
Belgium(1)......................... $ -- $ (281)
Eindhoven(1)....................... -- (846)
Austria(1)......................... -- (1,341)
Amsterdam(10)...................... -- (10,092)
Israel............................. 6,510 10,209
Ireland............................ (8,578) (4,270)
Malta.............................. (2,355) (2,275)
Norway............................. (1,788) (10,922)
Hungary (Kabelkom, cable).......... 1,452 2,692
Hungary (Monor, telephony/cable)... (8,180) (3,032)
Czech Republic(1).................. -- (6,973)
Spain.............................. (1,639) --
France............................. -- (1,419)
Romania............................ -- 187
Slovakia........................... -- (174)
-------- --------
Total (14,578) (28,537)
-------- --------
UIH Latin America, Inc.
Chile(3).......................... 87 --
Jundiai, Brazil.................... (880) (672)
Fortaleza, Brazil.................. (2,476) (1,764)
Mexico............................. -- 2,026
Peru (Cablestar)................... -- (453)
-------- -------
Total (3,269) (863)
-------- -------
UIH Asia/Pacific Communications, Inc.
Australia (United Wireless)(4)..... -- (1,921)
Australia (Austar)................. (3,151) (28,807)
New Zealand........................ (2,289) (3,667)
Tahiti............................. (2,959) (2,749)
Philippines........................ -- (516)
Australia (XYZ).................... -- (14,141)
-------- --------
Total........................... (8,399) (51,801)
-------- --------
Grand Total..................... $(26,246) $(81,201)
======== ========
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Adjusted EBITDA (9)
----------------------------------------
Convenience Translation
----------------------------------------
Nine Months Ended Nine Months Ended
September 30, 1995 September 30, 1996
------------------ ------------------
<S> <C> <C>
Europe (in thousands)
Belgium(1)......................... $ -- $ 6,709
Eindhoven(1)....................... -- 4,953
Austria(1)......................... -- 35,950
Amsterdam.......................... 15,848 17,234
Israel............................. 28,136 38,256
Ireland............................ 5,290 8,351
Malta.............................. 1,069 1,780
Norway............................. 11,398 10,361
Hungary (Kabelkom, cable).......... 6,274 6,959
Hungary (Monor, telephony/cable)... (940) 4,236
Czech Republic(1).................. -- (3,817)
Spain.............................. (1,511) --
France............................. -- (1,323)
Romania............................ -- 390
Slovakia........................... -- (145)
-------- -------
Total 65,564 129,894
-------- -------
UIH Latin America, Inc.
Chile(3).......................... 942 --
Jundiai, Brazil.................... (777) 60
Fortaleza, Brazil.................. (1,844) (682)
Mexico............................. -- 2,166
Peru (Cablestar)................... -- (221)
-------- -------
Total (1,679) 1,323
-------- -------
UIH Asia/Pacific Communications, Inc.
Australia (United Wireless)(4)..... -- (1,375)
Australia (Austar)................. (3,988) (16,025)
New Zealand........................ (1,782) (2,923)
Tahiti............................. (2,199) (654)
Philippines........................ -- 729
Australia (XYZ).................... (23,116) (10,434)
-------- -------
Total........................... (31,085) (30,682)
-------- -------
Grand Total..................... $ 32,800 $100,535
======== =======
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Long-term Debt
------------------------
Convenience Translation
-----------------------
As of
September 30, 1996
-----------------------
Europe (in thousands)
<S> <C>
Belgium(1)........................... $114,953
Eindhoven(1)......................... 12,930
Austria(1)........................... 123,891
Amsterdam............................ 198,854
Israel............................... 12,550
Ireland.............................. --
Malta................................ 12,152
Norway(2)............................ 148,541
Hungary (Kabelkom, cable)............ --
Hungary (Monor, telephony/cable)..... --
Czech Republic(1).................... --
Spain................................ --
France............................... --
Romania.............................. --
Slovakia............................. --
--------
Total 623,871
--------
UIH Latin America, Inc.
Chile(3)............................ --
Jundiai, Brazil...................... 131
Fortaleza, Brazil.................... 747
Mexico............................... 457
Peru (Cablestar)..................... --
--------
Total 1,335
--------
UIH Asia/Pacific Communications, Inc.
Australia (United Wireless)(4)....... --
Australia (Austar)................... 1,508
New Zealand (5)...................... --
Tahiti (6)........................... --
Philippines (7)...................... --
Australia (XYZ) (8).................. --
--------
Total............................. 1,508
--------
Grand Total....................... $626,714
========
</TABLE>
(1) These systems were contributed to UPC in July 1995 at which time a new
basis of accounting was adopted. Thus, there is no comparable prior year
information. In addition to the debt noted above, Austria and Belgium have
intercompany loans, which eliminate upon consolidation, of S1.3 billion
($123.9 million) and BF 3.6 billion ($115.0 million) and UPC has a
subordinated convertible loan payable to Philips totaling NLG 213.8 million
($133.0 million).
(2) Included in the long-term debt noted above, Norkabel has Nkr 447.3
million ($68.8 million), of loans payable to UCI (including accrued
interest).
(3) The Company contributed its Chilean assets (Cablevision and STX) to the VTR
Hipercable joint venture in September, 1996. Therefore, comparable
information to the prior year is not available.
(4) The Company acquired its ownership in United Wireless in September 1995
and, as such, the amounts shown are using the new basis of accounting with
no comparable history. United Wireless has A$ 4.2 million ($3.3 million) of
loans payable to related parties at September 30, 1996.
(5) Saturn has loans payable to the owners totaling N$22.1 million ($15.5
million) at September 30,1996.
(6) Telefenua has loans payable to the Company of $11.8 million at September
30, 1996.
(7) The Philippine system has a convertible loan payable to the Company of P
219.3 million ($8.4 million) as of September 30, 1996.
(8) XYZ shows all capital contributions by shareholders as loans which totaled
$41.0 million as of September 30, 1996.
(9) Adjusted EBITDA represents net income (loss) as determined using generally
accepted accounting principles which differ from those used in the United
States for Israel, Ireland, Sweden, Chile, New Zealand, Spain, Mexico,
Philippines, Belgium, France, Germany, Austria, the Netherlands, Slovakia
and Romania plus net interest expense, income tax expense, depreciation,
amortization, minority interest, management fee expense, currency exchange
gains (losses) and other non-operating income (expense) items. Industry
analysts generally consider Adjusted EBITDA to be an appropriate measure of
the performance of multi-channel television operations. Adjusted EBITDA
should not be considered as an alternative to net income or to cash flows
or to any other generally accepted accounting principles measure of
performance or liquidity as an indicator of an entitys operating
performance.
(10) Information not available.
24
<PAGE>
ITEM 1 - LEGAL PROCEEDINGS
On November 6, 1996, Austar filed a complaint in the Supreme Court of New
South Wales, Commercial Division, seeking injunctive relief to prevent (i)
Australis from transferring its satellite delivery systems and associated
infrastructure to its joint venture with Optus Vision and (ii) Optus Vision
from using such infrastructure to deliver DTH services in Austar's
franchise area. Austar believes that the use of the infrastructure by any
entity other than Austar for the provision of DTH services within Austar's
franchise areas violates the terms of Austar's franchise agreement with
Australis which granted Austar an exclusive license and franchise to use
the infrastructure within its franchise areas. Austar is seeking injuctive
relief or, in the alternative, damages associated with this violation of
its franchise agreements. On December 6, 1996, Australis filed
counterclaims against Austar and the Company alleging generally that Austar
and the Company breached implied terms of the Australis Arrangement by
seeking such injunctive relief. In addition, Optus Vision claims that the
exclusive nature of Austar's franchise agreements violates Australia's
Trade Practices Act. The Company intends vigorously to defend its position.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter.
<TABLE>
<CAPTION>
Date of Report Item Reported Financial Statements Filed
-------------- ------------- --------------------------
<S> <C> <C>
September 6, 1996 Item 5 - Formation of Chilean joint venture - VTR Hipercable S.A. None
September 24, 1996 Item 5 - Cautionary statement pursuant to safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 None
November 1, 1996 Item 5 - Acquisition of Bahia Blanca system in Argentina None
</TABLE>
25
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED INTERNATIONAL HOLDINGS, INC.
Date: January 13, 1996
------------------------------
By: /s/ J. Timothy Bryan
--------------------------------
J. Timothy Bryan
Chief Financial Officer
(A Duly Authorized Officer and Principal Financial Officer)
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITED
INTERNATIONAL HOLDINGS, INC.'S FORM 10-Q FOR THE QUARTER ENDED NOVEMBER 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 137,706
<SECURITIES> 2,652
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 161,698
<DEPRECIATION> 14,734
<TOTAL-ASSETS> 843,280<F2>
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 643,470
30,983
0
<COMMON> 390
<OTHER-SE> 116,987
<TOTAL-LIABILITY-AND-EQUITY> 843,280
<SALES> 0
<TOTAL-REVENUES> 14,633
<CGS> 0
<TOTAL-COSTS> 19,563
<OTHER-EXPENSES> 16,773
<LOSS-PROVISION> 1,600
<INTEREST-EXPENSE> 55,308
<INCOME-PRETAX> (59,244)
<INCOME-TAX> 0
<INCOME-CONTINUING> (59,244)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (59,244)
<EPS-PRIMARY> (1.52)
<EPS-DILUTED> 0
<FN>
<F1>The Company does not have a classified balance sheet. See the condensed
consolidated balance sheet for more information.
<F2>See the condensed consolidated balance sheet for the detail of total assets.
</FN>
</TABLE>
