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 May 31, 1997
[ ] 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
July 11, 1997 was:
Class A Common Stock -- 26,277,405 shares
Class B Common Stock -- 12,934,985 shares
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
TABLE OF CONTENTS
Page
Number
------
PART I - FINANCIAL INFORMATION
------------------------------
Item 1 - Financial Statements
- - ------
Condensed Consolidated Balance Sheets as of May 31, 1997
and February 28, 1997 (Unaudited)............................. 2
Condensed Consolidated Statements of Operations For the
Three Months Ended May 31, 1997 and 1996 (Unaudited).......... 3
Condensed Consolidated Statement of Stockholders' Equity
(Deficit) For the Three Months Ended
May 31, 1997 (Unaudited)....................................... 4
Condensed Consolidated Statements of Cash Flows For the
Three Months Ended May 31, 1997 and 1996 (Unaudited)........... 5
Notes to Condensed Consolidated Financial Statements
(Unaudited).................................................... 6
Item 2 - Management's Discussion and Analysis of Financial Condition
- - ------ and Results of Operations...................................... 13
PART II - OTHER INFORMATION
Item 5 - Other Information.................................................. 21
- - ------
Item 6 - Exhibits and Reports on Form 8-K................................... 29
- - ------
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in thousands, except share and per share amounts)
(Unaudited)
May 31, February 28,
1997 1997
-------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................................................ $ 43,841 $ 68,784
Restricted cash and short-term investments........................................... 6,623 1,600
Short-term investments............................................................... 58,183 70,359
Subscriber receivables, net.......................................................... 4,065 2,939
Management fee receivables from related parties...................................... 1,514 1,616
Notes receivable..................................................................... 3,581 8,175
Costs to be reimbursed by affiliated companies, net.................................. 7,917 4,884
Other current assets, net, including $3,409 and $2,931 of related party
receivables, respectively.......................................................... 18,476 17,830
-------- --------
Total current assets.......................................................... 144,200 176,187
Investments in and advances to affiliated companies, accounted for under the
equity method, net.................................................................... 311,392 253,108
Other investments in affiliated companies, including marketable equity securities....... 3,813 4,293
Property, plant and equipment, net of accumulated depreciation of $43,016 and $29,378,
respectively.......................................................................... 214,945 219,342
Goodwill, net of accumulated amortization of $9,391 and $6,641, respectively ........... 117,880 122,249
Acquisition, transaction and development costs, net..................................... 5,876 6,249
Other non-current assets, net........................................................... 36,157 38,508
-------- --------
Total assets.................................................................. $834,263 $819,936
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable..................................................................... $ 27,636 $ 23,173
Construction payables................................................................ 16,786 38,331
Accrued liabilities, including $1,047 and $620 of related party
payables, respectively.......................................................... 10,015 12,571
Purchase money notes payable to sellers, current..................................... 46,041 5,722
Accrued funding obligations, current................................................. 3,018 3,309
Other current liabilities............................................................ 7,636 2,208
-------- --------
Total current liabilities..................................................... 111,132 85,314
Purchase money notes payable to sellers................................................. 16,775 12,966
Senior secured notes and other debt..................................................... 742,645 674,960
-------- --------
Total liabilities............................................................. 870,552 773,240
-------- --------
Minority interest in subsidiaries....................................................... 247 307
-------- --------
Preferred stock, $0.01 par value, 3,000,000 shares authorized, 170,513 and
170,513 shares of Convertible Preferred Stock, Series A issued and
outstanding, respectively, stated at liquidation value............................. 31,606 31,293
-------- --------
Stockholders' Equity (Deficit):
Class A Common Stock, $0.01 par value, 60,000,000 shares authorized, 26,266,529 and
26,097,263 shares issued and outstanding, respectively.......................... 263 261
Class B Common Stock, $0.01 par value, 30,000,000 shares authorized, 12,934,985 and
12,971,775 shares issued and outstanding, respectively.......................... 129 129
Additional paid-in capital........................................................... 341,439 340,753
Deferred compensation................................................................ (434) (624)
Unrealized loss on investments in marketable equity securities....................... (3,146) (6,069)
Cumulative translation adjustments................................................... (23,811) (15,801)
Accumulated deficit.................................................................. (382,582) (303,553)
-------- --------
Total stockholders' equity (deficit).......................................... (68,142) 15,096
-------- --------
Total liabilities and stockholders' equity (deficit).......................... $834,263 $819,936
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands, except share and per share amounts)
(Unaudited)
For the Three Months Ended
May 31,
--------------------------
1997 1996
-------- --------
<S> <C> <C>
Service and other revenue............................................................ $ 21,082 $ 2,172
Management fee income from related parties........................................... 281 317
-------- --------
Total revenue................................................................... 21,363 2,489
System operating expense............................................................. (12,789) (5,109)
System selling, general and administrative expense................................... (13,318) (2,178)
Corporate general and administrative expense......................................... (5,728) (4,166)
Depreciation and amortization........................................................ (19,458) (2,897)
-------- --------
Net operating loss.............................................................. (29,930) (11,861)
Equity in losses of affiliated companies, net........................................ (19,317) (12,202)
Interest income...................................................................... 1,758 2,121
Interest expense..................................................................... (25,855) (13,717)
Interest income, related parties, net................................................ 140 288
Provision for losses on investment related costs..................................... (4,436) (352)
Other expense, net................................................................... (1,620) (321)
-------- --------
Net loss before minority interest............................................... (79,260) (36,044)
Minority interest in subsidiaries.................................................... 231 726
-------- --------
Net loss........................................................................ $(79,029) $(35,318)
======== ========
Net loss per common share............................................................ $ (2.02) $ (0.91)
======== ========
Weighted-average number of common shares outstanding................................. 39,174,318 39,008,310
========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(Stated in thousands, except share amounts)
(Unaudited)
Class A Class B
Common Stock Common Stock Additional Unrealized Cumulative
---------------- ---------------- Paid-in Deferred Loss on Translation Accumulated
Shares Amount Shares Amount Capital Compensation Investments Adjustments Deficit Total
------ ------ ------ ------ ---------- ------------ ----------- ----------- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances,
February 28, 1997.... 26,097,263 $261 12,971,775 $129 $340,753 $(624) $(6,069) $(15,801) $(303,553) $ 15,096
Issuance of Class A
Common Stock in
connection with the
Company's Stock
Option Plan.......... 128,956 2 -- -- 641 -- -- -- -- 643
Issuance of Class A
Common Stock in
connection with the
Company's 401(k)
Plan................. 3,520 -- -- -- 98 -- -- -- -- 98
Exchange of Class B
Common Stock for
Class A Common
Stock................. 36,790 -- (36,790) -- -- -- -- -- -- --
Accretion of
dividends on
convertible
preferred stock...... -- -- -- -- (313) -- -- -- -- (313)
Change in cumulative
translation
adjustments.......... -- -- -- -- -- -- -- (8,010) -- (8,010)
Compensation expense
related to the
extension of stock
option exercise
period............... -- -- -- -- 260 -- -- -- -- 260
Amortization of
deferred
compensation......... -- -- -- -- -- 190 -- -- -- 190
Change in unrealized
loss on investments.. -- -- -- -- -- -- 2,923 -- -- 2,923
Net loss............... -- -- -- -- -- -- -- -- (79,029) (79,029)
---------- ---- ---------- ---- -------- ----- ------- -------- --------- --------
Balances, May 31,
1997................. 26,266,529 $263 12,934,985 $129 $341,439 $(434) $(3,146) $(23,811) $(382,582) $(68,142)
========== ==== ========== ==== ======== ===== ======= ======== ========= ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands)
(Unaudited)
For the Three Months Ended
May 31,
--------------------------
1997 1996
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................................................... $(79,029) $(35,318)
Adjustments to reconcile net loss to net cash flows from operating activities:
Equity in losses of affiliated companies, net........................................... 19,445 12,185
Minority interest share of losses....................................................... (231) (726)
Depreciation and amortization........................................................... 19,458 2,897
Gain on sale of property, plant and equipment........................................... (691) --
Amortization of deferred compensation................................................... 190 388
Accretion of interest on senior notes................................................... 24,122 13,229
Issuance of common stock in connection with the Company's 401(k) Plan................... 98 74
Compensation expense recognized due to extension of stock option exercise period........ 260 --
Provision for losses on investment related costs........................................ 4,436 352
Increase in management fee receivables, net............................................. (507) (460)
Increase in other assets................................................................ (2,861) (2,982)
Increase (decrease) in accounts payable and accrued liabilities......................... 11,334 (4,366)
-------- --------
Net cash flows from operating activities.................................................... (3,976) (14,727)
-------- --------
Cash flows from investing activities:
Purchase of short-term investments.......................................................... (37,820) (50,890)
Proceeds from sale of short-term investments................................................ 49,996 44,424
Restricted cash deposited................................................................... (5,023) --
Investments in and advances to affiliated companies and other investments................... (6,676) (12,980)
Proceeds from sale of investments in affiliated companies................................... -- 3,000
Purchase of interests in affiliated companies............................................... (26,070) --
Increase in costs to be reimbursed by affiliated companies, net............................. (2,643) (1,219)
Increase in notes receivable................................................................ -- (264)
Repayments on notes receivable.............................................................. 4,594 1,264
Acquisition, transaction and development costs incurred..................................... (849) (1,190)
Proceeds from sale of property, plant and equipment......................................... 2,332 --
Purchase of property, plant and equipment................................................... (16,502) (18,202)
Increase (decrease)in construction payables................................................. (20,888) 5,799
-------- --------
Net cash flows from investing activities.................................................... (59,549) (30,258)
-------- --------
Cash flows from financing activities:
Issuance of common stock in connection with the Company's Stock Option Plan................. 643 65
Deferred debt offering costs................................................................ (1,909) (69)
Payment of sellers notes.................................................................... (8,016) --
Borrowing of other debt..................................................................... 50,000 725
Repayment of other debt..................................................................... (1,108) --
Payment of warrants tendered to the Company................................................. -- (2,156)
-------- --------
Net cash flows from financing activities.................................................... 39,610 (1,435)
-------- --------
Effect of exchange rates on cash............................................................ (1,028) 148
-------- --------
Decrease in cash and cash equivalents....................................................... (24,943) (46,272)
Cash and cash equivalents, beginning of period.............................................. 68,784 112,218
-------- --------
Cash and cash equivalents, end of period.................................................... $ 43,841 $ 65,946
======== ========
Non-cash investing and financing activities:
Purchase money notes payable to sellers.................................................. $ 52,144 $ --
======== ========
Cash paid for interest................................................................... $ 514 $ 256
======== ========
Cash received for interest............................................................... $ 2,136 $ 1,911
======== ========
Assets acquired with capital leases...................................................... $ -- $ 795
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
5
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MAY 31, 1997
(Monetary amounts stated in thousands)
(Unaudited)
1. ORGANIZATION AND BACKGROUND
United International Holdings, Inc. (together with its majority-owned
subsidiaries, the "Company" or "UIH") was formed as a Delaware corporation in
May 1989 for the purpose of developing, acquiring and managing foreign
multi-channel television, programming and telephony operations. The following
chart presents a summary of the Company's significant investments in
multi-channel television, programming and telephony operations as of May 31,
1997.
<TABLE>
<CAPTION>
<S> <C>
********************** *********************
* Philips Media B.V. * * *
* ("Philips") * * UIH **************************
* * * * *
********************** ********************* *
50% * * 50% * 100%
* * *
********************************* ****************************
* United and Philips * * United International *
* Communications B.V. ("UPC")(1)* * Properties, Inc. ("UIPI")*
********************************* ****************************
* *
* *
* **********************************************************************
* * * *
* 98%(2) * * 100% *
* *************************************** ************************* ***********************
**************************** *UIH Asia/Pacific Communications, Inc.* *UIH Latin/America, * *Other *
*Europe * * ("UAP") * * Inc. ("UIH LA") * *----- *
*------ * *************************************** *------------------ * *Tara Channel 75.0%*
*Radio Public * * *Comodoro/Trelew * *Monor *
* (Belgium) 100.0%* * * (Argentina)(5) 100.0%* * Communications *
*Kabel Net * **************************** *TV Cable SRL * * (Hungary) 48.6 *
* (Czech Republic) 100.0 * * 100%(2) * * (Peru) 100.0 * *Iberian *
*KTE (Eindhoven, the * ***************************** *********************** *Bahia Blanca 80.0-* * Programming *
* Netherlands) 100.0 * *UIH Australia/Pacific, Inc.* *HTV (China) 49.0%* * (Argentina)(6) 100.0 * * Services *
*Norkabel * *---------------------------* *SCS * *Cable Star (Peru) 94.0 * * ("IPS") 33.8 *
* (Norway) 100.0 * *("UIH A/P") * * Philippines(4) 40.0 * *United Family * *Teleport (St. *
*Intercabo * *Austar (Australia) 100.0%* *********************** * Communications * * Petersburg) 30.0 *
* (Portugal) 100.0 * *Saturn (New Zealand) 100.0 * * (Latin America * ***********************
*Marne la Vallee * *United Wireless * * Programming) 50.0 *
* (France) 99.5 * * (Australia) 100.0 * *Megapo (Mexico) 49.0 *
*Telekable Group * *Telefenua (Tahiti)(3) 90.0 * *Jundiai TV *
* (Austria) 95.0 * *XYZ (Australia) 25.0 * * (Brazil) 46.3 *
*Multi Canal * ***************************** *TV Show Brazil *
* (Romania) 90.0 * * ("TVSB") *
*Tranavatel SRO * * (Fortaleza, *
* (Slovak Republic) 75.0 * * Brazil) 40.0 *
*Janco (Norway) 70.2 * *VTR Hipercable *
*Control Cable * * ("VTRH") (Chile) 34.0 *
* (Romania) 51.0 * *Santa Fe *
*A2000 (Amsterdam, * * (Argentina) 31.0 *
* the Netherlands) 50.0 * *************************
*Kabelkom (Hungary) 47.0 *
*Melita Cable (Malta) 42.5 *
*Citecable (France) 30.0 *
*Santander (Spain) 25.0 *
*Tevel (Israel) 23.3 *
*Princes Holdings *
* (Ireland) 20.0 *
****************************
</TABLE>
6
<PAGE>
(1) In February 1997, the Company and Philips signed a letter of intent which
agreed for the Company and/or UPC to acquire Philips' 50% interest in UPC,
less the ratable dilution caused by UPC's incentive option plan.
(2) On May 15, 1997, the minority holder in UIH A/P exchanged its 2.6% interest
in UIH A/P for a 2% interest in UAP.
(3) UIH A/P owns an effective 90% economic interest in the Tahiti project. UIH
A/P's economic interest will decrease to 75% and 64% once UIH A/P has
received a 20% and 40% internal rate of return on its investment in Tahiti,
respectively.
(4) UAP currently holds a convertible loan, which upon full conversion would
provide UAP with a 40% equity ownership interest in the Philippines
operating company.
(5) In April 1997, UIH LA acquired 100% of multi-channel television systems in
Comodoro and Trelew, Argentina. The Company will begin consolidating these
investments in the second quarter of fiscal 1998 (see Note 3).
(6) UIH LA owns 100% of two subsidiaries and 80% of a third subsidiary that
serve the Bahia Blanca and Punta Alta areas of Argentina and, has agreed,
subject to certain conditions, to acquire the remaining 20% of the third
subsidiary in fiscal 1998.
(7) In April 1997, UIH LA agreed to acquire up to an 80% equity interest in the
multi-channel television systems located in Santa Fe, Parana and Galvez,
Argentina. In April 1997, UIH LA acquired an initial 31% equity interest
and paid a deposit to acquire the additional 38% equity interest by July
15, 1997 and the additional 11% equity interest by the end of July 1997.
The Company will begin consolidating this investment in the third quarter
of fiscal 1998 (see Note 3).
In July 1995, the Company and Philips Electronics B.V. contributed their
respective ownership interests in European and Israeli multi-channel television
systems to UPC. The Company and Philips each own a 50% economic and voting
interest in UPC and will continue to have equal board representation so long as
their share ownership is equal. In February 1997, the Company and Philips
entered into a letter of intent whereby the Company and/or UPC would acquire
from Philips their approximate 50% equity interest in UPC along with 3.17
million shares of the Company's Class A Common Stock currently held by Philips.
The purchase price for the acquisition of these two assets is $275,000. In
addition, UPC, as part of the transaction, would agree to redeem certain debt
securities owed to Philips in the approximate amount of $155,000, and issue to
Philips a stock appreciation right. The parties are currently working on
definitive documentation for the transaction; however, if the transaction fails,
the ownership of UPC will remain as currently structured. Closing for the
transaction, assuming the successful execution of definitive documentation, is
expected to occur by late fall 1997.
7
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying interim condensed consolidated financial statements are
unaudited and include the accounts of the Company and all subsidiaries where it
exercises majority control and owns a majority economic interest, except
Cablevision S.A. ("Cablevision") and Red de Television y Servicios por Cable
S.A. ("STX") for the three months ended May 31, 1996, due to an expected joint
venture in Chile with VTR S.A. ("VTR") wherein UIH LA subsequently contributed
these interests to VTRH in September 1996. Accordingly, due to temporary
majority control, such investments have been accounted for under the equity
method. All significant intercompany accounts and transactions have been
eliminated in consolidation. All affiliated companies have calendar year-ends
compared to the Company which has a fiscal year-end 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 year-end results.
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 May 31, 1997, and the results of its operations for the three
months ended May 31, 1997 and 1996. 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 February 28, 1997.
INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
EQUITY METHOD
Investments in and advances to affiliated companies are as follows:
<TABLE>
<CAPTION>
As of May 31, 1997
-------------------------------------------------------------------------------------
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 $(54,044) $(16,477) $ -- $ 79,921
Monor Communications............ 27,142 (9,530) (5,187) -- 12,425
Iberian Programming
Services...................... 11,187 (5,627) -- -- 5,560
LATIN AMERICA
- - -------------
VTRH............................ 85,218 (4,680) (2,503) -- 78,035
Comodoro/Trelew(1).............. 28,126 -- -- -- 28,126
Santa Fe(2) .................... 50,756 -- -- -- 50,756
Megapo.......................... 32,463 (581) (1,420) -- 30,462
TVSB............................ 6,114 (2,991) -- -- 3,123
Jundiai TV...................... 5,573 (1,108) -- -- 4,465
United Family Communications.... 3,471 (445) -- -- 3,026
ASIA/PACIFIC
- - ------------
XYZ............................. 16,568(3) (16,678) 110 -- --
SCS............................. 9,725 (422) 134 -- 9,437
HITV............................ 6,073 (17) -- -- 6,056
OTHER
- - -----
Teleport........................ 3,119 (1,051) -- (2,068) --
-------- -------- -------- ------- --------
$435,977 $(97,174) $(25,343) $(2,068) $311,392
======== ======== ======== ======= ========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
As of February 28, 1997
---------------------------------------------------------------------------------------
Investments in Cumulative Equity Cumulative
and Advances to in Income (Losses) of Translation Valuation
Affiliated Companies Affiliated Companies(4) Adjustments Allowance Total
-------------------- ----------------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
EUROPE
- - ------
UPC............................. $150,442 $(40,224) $(11,044) $ -- $ 99,174
Monor Communications............ 27,182 (8,221) (4,575) -- 14,386
Iberian Programming Services... 11,187 (4,734) -- -- 6,453
LATIN AMERICA
- - -------------
VTRH(5)......................... 82,010 (2,122) (1,502) -- 78,386
Megapo.......................... 32,491 (727) (1,420) -- 30,344
TVSB............................ 6,132 (2,860) -- -- 3,272
Jundiai TV...................... 4,984 (1,214) -- -- 3,770
United Family Communications.... 1,739 (10) -- -- 1,729
ASIA/PACIFIC
- - ------------
XYZ............................. 16,202(3) (16,312) 110 -- --
SCS............................. 9,748 (366) 155 -- 9,537
HITV............................ 6,073 (16) -- -- 6,057
OTHER
- - -----
Teleport........................ 3,119 (1,051) -- (2,068) --
-------- -------- -------- ------- --------
$351,309 $(77,857) $(18,276) $(2,068) $253,108
======== ======== ======== ======= ========
</TABLE>
(1) In April 1997, UIH LA acquired 100% of multi-channel television systems in
Comodoro and Trelew, Argentina. The Company will begin consolidating these
investments in the second quarter of fiscal 1998.
(2) In April 1997, UIH LA acquired an initial 31% equity interest in the
multi-channel television systems located in Santa Fe, Parana and Galvez,
Argentina, and paid a deposit to acquire the additional 38% equity interest
by July 15, 1997 and the additional 11% equity interest by the end of July
1997. The Company will begin consolidating this investment in the third
quarter of fiscal 1998.
(3) Includes an accrued funding obligation of $979 and $1,270 at March 31, 1997
and December 31, 1996, respectively.
(4) Does not include cumulative equity in losses of Net Sao Paulo of $9,979 as
the Company sold its investment in August 1996. Also, does not include
cumulative equity in income of STX of $613 and cumulative equity in losses
of Cablevision of $5,198 as these assets were exchanged for a 34% interest
in VTRH on August 31, 1996.
(5) On August 31, 1996, the Company's investments in STX and Cablevision were
carried at $52,474 and $27,873, respectively. The Company exchanged its
investments in STX and Cablevision for a 34% interest in VTRH. Accordingly,
such amounts are reflected as investment in VTRH as of February 28, 1997.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Additions, replacements
and major improvements are capitalized, and costs for normal repair and
maintenance of property, plant and equipment are charged to expense as incurred.
All subscriber equipment and capitalized installation labor is depreciated over
3 years. Upon disconnection of an MMDS subscriber, the remaining book value of
the subscriber equipment, excluding converters which are recovered upon
disconnection, and the capitalized labor is written off. Depreciation expense is
computed using the straight-line method over the estimated useful lives shown
below. Detail of property, plant and equipment is as follows:
9
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
As of As of
May 31, February 28, Average
1997 1997 Life
-------- ----------- -------
<S> <C> <C> <C>
MMDS distribution facilities............................. $ 56,931 $ 57,074 5-10
Cable distribution networks.............................. 29,244 22,795 5-10
Subscriber premises equipment and converters............. 131,313 126,007 3
Furniture and fixtures................................... 3,365 3,418 5-10
Leasehold improvements................................... 3,552 3,593 6-10
Other.................................................... 33,556 35,833 3-5
-------- --------
257,961 248,720
Accumulated depreciation............................. (43,016) (29,378)
-------- --------
Net property, plant and equipment.................... $214,945 $219,342
======== ========
</TABLE>
Assets acquired under capital leases are included in property, plant and
equipment. The initial amount of the leased asset and corresponding lease
liability are recorded at the present value of future minimum lease payments.
Leased assets are amortized over the life of the relevant lease.
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 prepared in United
States dollars. Assets and liabilities of foreign subsidiaries are translated at
the exchange rates in effect at year-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.
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 with 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.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
10
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
3. ACQUISITIONS
In April 1997, UIH LA closed the 100% acquisition of multi-channel
television systems in Comodoro and Trelew, Argentina for a total purchase price
of $27,900, of which $13,900 was paid at closing and the remaining $14,000 is
due in 18 monthly installments beginning May 1997.
In April 1997, UIH LA agreed to acquire up to an 80% equity interest in the
multi-channel television systems located in Santa Fe, Parana and Galvez,
Argentina for a total purchase price of $59,000. In April 1997, UIH LA closed
the acquisition of the first 31% equity interest for a total purchase price of
$23,000 and paid a $2,000 deposit to acquire the additional 38% equity interest
by July 15, 1997 and the additional 11% equity interest by the end of July 1997.
The total purchase price was paid 50% at closing and the balance paid in monthly
installments through June 2000.
4. SENIOR SECURED NOTES AND OTHER DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
As of As of
May 31, February 28,
1997 1997
-------- -----------
<S> <C> <C>
November 1994 14% senior secured discount notes, net of unamortized discount... $274,764 $264,985
November 1995 14% senior secured discount notes, net of unamortized discount... 93,229 90,161
February 1996 14% senior secured discount notes, net of unamortized discount... 56,792 55,193
May 1996 14.75% UIH A/P senior discount notes, net of unamortized discount..... 253,616 245,182
UIH LA note payable to a bank.................................................. 50,000 --
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........................................ 4,688 5,447
Capitalized lease obligations.................................................. 4,661 4,959
Mortgage note, interest at 7.885%, 7 year term................................. 1,118 1,252
Other.......................................................................... 8,709 9,114
-------- --------
747,577 676,293
Less current portion....................................................... (4,932) (1,333)
-------- --------
Total senior secured notes and other debt.................................. $742,645 $674,960
======== ========
</TABLE>
The $274,764 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 $93,229 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 $56,792 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 $253,616 of 14% UIH A/P senior notes were issued in May 1996 at a
discount from their principal amount of $443,000 and, effective May 16, 1997,
the interest rate increased from 14% to 14.75% compounded semi-annually. The
additional 0.75% interest will accrete until such time as UIH A/P effects an
equity sale resulting in $70,000 of additional equity. 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 on May 15, 2006.
11
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
On April 24, 1997, UIH LA entered into a credit agreement with a bank for a
loan of up to $125,000 for a term of 9 months, extendible up to a maximum of 18
months at an interest rate of LIBOR plus 6%. As of May 31, 1997, UIH LA had
borrowed $50,000 under this credit agreement. Proceeds from the loan will be
used to fund acquisitions and provide for capital expenditures for existing
properties. The loan is extendible up to 18 months with (i) an increase in the
interest rate of 50 basis points for each three months it is extended beyond a 9
month term, (ii) cash fees of 1% to 3% each three months if it is extended
beyond 9 months and (iii) warrants to purchase common stock equal to 0.5% of UIH
LA's outstanding common stock if it is extended beyond 9 months, another 2% of
UIH LA's outstanding common stock and 2.75% of UIH's outstanding common stock if
it is extended beyond 12 months and another 3% of UIH's outstanding common stock
if it is extended beyond 15 months. In lieu of the extension fees and warrants,
UIH may, at its option, inject an additional $50,000 of equity into UIH LA to be
used to repay the outstanding loan. The warrants to purchase UIH common stock
have an exercise price equal to the lower of the fair market value at the
closing date or at the grant date.
In April 1997, Austar received an underwriting commitment from a bank for a
Senior Syndicated Term Debt Facility in the amount of Australian $("A$")200,000
(US$155,000) (the "Austar Bank Facility"). The proceeds of the Austar Bank
Facility will be used to fund Austar's construction and subscriber acquisition
and working capital needs. The Austar Bank Facility consists of three
sub-facilities: (i) A$50,000 revolving working capital facility available at
closing (end of July 1997); (ii) A$90,000 term loan facility, which will be
available on the basis of Austar having achieved minimum subscriber and
operating cash flow levels; and (iii) A$60,000 cash advance facility available
upon the contribution of additional equity on a 2:1 debt-to-equity basis. The
maximum amount of equity required would be A$30,000, approximately A$7,500 of
which has already been contributed during 1997 and the remainder of which is
expected to be contributed by a third party equity provider or the Company. The
cash advance and term loan facilities will be fully repayable pursuant to an
amortization schedule beginning December 31, 2001 and ending June 30, 2004. The
bank has also provided Austar with an interim financing facility of A$50,000
which is expected to be refinanced from the proceeds of the Austar Bank
Facility. As of May 31, 1997, Austar had drawn A$43,000 (US$33,352) on the
interim financing facility.
5. SUBSEQUENT EVENTS
On June 26, 1997, the Company entered into an agreement with SuperCable CA,
the largest cable operator in Venezuela, to sell the Company's cable television
assets in Venezuela for $10,500. The purchase price approximates the Company's
costs incurred in Venezuela. The transaction is expected to close in August
1997.
On July 3, 1997, the Company was notified that the Nasdaq Stock Market
("Nasdaq") had completed a review of the Company regarding the Company's
non-compliance with the net tangible asset requirements of Nasdaq and that
Nasdaq had determined that the Company will remain listed on the Nasdaq National
Market.
12
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(MONETARY AMOUNTS STATED IN THOUSANDS)
THE FOLLOWING DISCUSSION CONTAINS, IN ADDITION TO HISTORICAL INFORMATION,
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW AND IN THE
COMPANY'S REPORT ON FORM 8-K DATED SEPTEMBER 24, 1996.
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.
The Company conducts no operations other than through its operating
companies in which it holds varying interests. Because the operating companies
have, since inception, been engaged primarily in organizational, start-up and
construction activities, the Company believes that its historical results of
operations discussed herein are not indicative of the results of operations
which will follow the completion of construction and initial marketing of
service by the operating companies.
LIQUIDITY AND CAPITAL RESOURCES
The Company's expenditures to date have been made in developing
multi-channel television, programming 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, many of which are restricted due to existing loan
agreements. The Indenture governing UIH A/P's senior notes permits dividends to
be paid from UIH A/P to the Company only if certain financial conditions are
met; however, these conditions are not presently being met.
During the three months ended May 31, 1997, the Company incurred a net loss
of $79,029 of which $19,445 was from non-cash equity in losses of affiliated
companies. The Company also recorded accretion of non-cash interest expense on
the senior notes totaling $24,122. The Company purchased $16,502 of property,
plant and equipment, the majority of which was purchased by the Company's
majority-owned subsidiaries in Australia, Tahiti, Peru and Argentina as those
systems continue to construct their systems. Construction payables decreased
$20,888 due primarily to reduced construction activity in Australia. The Company
incurred $849 of acquisition, transaction and development cost, primarily with
respect to to its Latin America and Asia/Pacific regions. The Company's notes
receivable decreased by $4,594 due to advances which were repaid. The Company
invested $6,676 of cash in its affiliated companies and other investments due to
expected additional capital expenditures to the existing systems. The Company
acquired systems in Argentina for $26,070. The Company borrowed $50,000 from a
bank primarily to fund acquisitions in Argentina. The Company purchased
short-term investments of $37,820 and sold short-term investments of $49,996 as
part of its cash management activities.
During the three months ended May 31, 1996, the Company incurred a net loss
of $35,318 of which $12,185 was from non-cash equity in losses of affiliated
companies. The Company also recorded accretion of non-cash interest expense on
the senior notes totaling $13,229. The Company purchased $18,202 of property,
plant and equipment, the majority of which was purchased by the Company's
majority-owned subsidiaries in Australia and Tahiti as those systems continued
to construct their systems. Construction payables increased $5,799 due primarily
to construction activity in Australia. The Company incurred $1,190 of
acquisition, transaction and development costs, primarily with respect to its
Latin America and Asia/Pacific regions. The Company's notes receivable decreased
by $1,264 due to advances which were repaid. The Company invested $12,980 of
cash in its affiliated companies and other investments due to expected
additional capital expenditures to the existing systems. The Company purchased
short-term investments of $50,890 and sold short-term investments of $44,424 as
part of its cash management activities. The Company also paid $2,156 for
warrants tendered to the Company.
As of May 31, 1997, the Company had executed guarantees of certain
facilities totaling approximately $12,000. The Company has estimated future
fundings and capital commitments by region, as described in the following
paragraphs. Each such description contains the Company's current plans with
respect to financing such commitments. 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.
13
<PAGE>
The following table summarizes the Company's remaining projected funding
requirements for its European projects. The Company plans on funding its
remaining commitments in Europe through existing cash.
<TABLE>
<CAPTION>
Projected Funding
----------------------------------------------
Total Portion Remaining
Expected Funded as of as of
Operating System Type of Project Fundings May 31, 1997 May 31, 1997
- - ---------------- --------------- -------- ------------ ------------
<S> <C> <C> <C> <C>
UPC Cable systems $171,059 $171,059 $ --
Monor Communications Telephony/cable systems 26,580 26,580 --
IPS Programming 12,530 10,993 1,537
Tara Channel Programming 9,973 4,523 5,450
-------- -------- ------
$220,142 $213,155 $6,987
======== ======== ======
</TABLE>
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.
The following table summarizes UIH LA's remaining projected funding
requirements for its projects:
<TABLE>
<CAPTION>
Projected Funding
--------------------------------------------
Total Portion Remaining
Expected Funded as of as of
Operating System Type of Project Fundings May 31, 1997 May 31, 1997
- - ---------------- --------------- -------- ------------ ------------
<S> <C> <C> <C> <C>
VTRH Cable systems $ 85,754 $ 77,754 $ 8,000
Bahia Blanca Cable systems 59,636 45,197 14,439
Comodoro/Trelew Cable systems 29,954 14,342 15,612
Santa Fe Cable systems 58,758 13,747 45,011
Megapo Cable systems 32,033 32,033 --
TVSB MMDS 8,087 6,087 2,000
Jundiai TV Cable system 5,193 5,193 --
Cable Star Cable system 12,379 3,901 8,478
TV Cable SRL Cable system 850 550 300
United Family Communications Programming 21,300 3,030 18,270
-------- -------- --------
$313,944 $201,834 $112,110
======== ======== ========
</TABLE>
In April 1997, UIH LA entered into a credit agreement with a major
financial institution which provides for borrowings of up to $125,000, of which
the entire amount has currently been raised and $50,000 has been borrowed as of
May 31, 1997. UIH LA will fund the majority of its remaining commitments with
proceeds from this facility as well as from positive operating cash flow,
particularly as it relates to the Argentine properties. In addition, UIH LA is
considering the sale of certain non-core assets as a source of funding,
including the sale of Venezuela for $10,500. Based upon these assumptions, the
Company currently anticipates that no further fundings to UIH LA will be
required in the foreseeable future.
14
<PAGE>
The following table summarizes UAP's remaining projected funding
requirements for its projects:
<TABLE>
<CAPTION>
Projected Funding
-----------------------------------------------
Total Portion Remaining
Expected Funded as of as of
Operating System Type of Project Fundings May 31, 1997(1) May 31, 1997
- - ---------------- --------------- -------- -------------- ------------
<S> <C> <C> <C> <C>
AUSTRALIA/PACIFIC:
Austar MMDS/DTH system $369,800 $245,153(2) $124,647(3)
Saturn Cable system 109,700 29,066(4) 80,634
Telefenua MMDS 17,400 16,737 663
XYZ Programming 14,000 11,507 2,493
United Wireless Mobile data services 8,200 5,761 2,439
OTHER:
HITV Microwave relay network 6,600 5,980 620
SCS Cable system 17,400 12,438 4,962
-------- -------- --------
$543,100 $326,642 $216,458
======== ======== ========
</TABLE>
(1) Certain amounts contributed by the Company's partners were contributed in
currencies other than U.S. dollars. Such amounts have been translated to
U.S. dollars using a convenience translation. Includes amounts contributed
to Austar (approximately $11,100) and Saturn (approximately $2,900) by such
shareholders prior to the acquisition of their respective interests by the
Company.
(2) Does not include the $58,600 paid by the Company to increase its economic
interest in Austar to approximately 100%.
(3) The Austar Bank Facility of A$200,000 (US$155,000) reduces the Company's
portion of the remaining funding requirements. As of May 31, 1997, Austar
had drawn A$43,000 (US$33,532) on the interim financing facility (see Note
4).
(4) Does not include the value of shares of common stock exchanged for shares
of the Company to increase the Company's interest in Saturn to 100%.
The majority of UAP's future funding commitments reside in two projects,
Australia and New Zealand. Funding for Australia is projected to come from two
sources: the Austar Bank Facility in the amount of A$200,000 (US$155,000) and
remaining equity from the Company of approximately A$22,500 (US$18,000). Funding
for New Zealand is projected to come from either a strategic partner equity
contribution or equity from UAP and/or the Company, in amounts to be determined.
In addition, UAP is in the early stages of negotiating the sale of all or a
portion of its system in Tahiti, the proceeds of which would be used to fund its
capital requirements with respect to Saturn and its other businesses. There can
be no assurances that the Company will be able to identify a strategic partner
for the New Zealand project or successfully complete a sale of all or a portion
of the Tahiti project. Based upon the successful completion of the arrangements
described above, the Company may invest up to an additional $25,000 in UAP.
If UIH A/P does not consummate an issuance of capital stock resulting in
gross proceeds to UIH A/P of at least $70,000 (an "Equity Sale") prior to
November 16, 1997, the then holders of the UIH A/P Notes will be entitled to
receive warrants to purchase 3% of the common stock of UIH A/P, assuming the
aggregate fair market value of UIH A/P's equity is $150,000, or, in certain
circumstances, of UAP. UIH A/P may pursue additional sources of funding that may
constitute an Equity Sale. There can be no assurance that UIH A/P will be
successful in concluding an Equity Sale prior to November 16, 1997.
In addition, the Company had total expected fundings of $4,641 related to
Teleport. As of May 31, 1997, the Company had remaining projected fundings of
$2,000, representing the Company's guarantee of affiliate debt.
Because the Company and UIH A/P 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.
15
<PAGE>
RESULTS OF OPERATIONS
Many of the operating companies in which the Company holds interests are in
the early stages of constructing and marketing their multi-channel television
systems. With respect to those operating companies that currently are not
generating net income on a continuing basis, the Company does not currently
anticipate that such operating companies will generate net income in the
foreseeable future. Similarly, the Company currently does not anticipate it will
generate net income in the foreseeable future.
SERVICE AND OTHER REVENUE. Service and other revenue increased $18,910 during
the three months ended May 31, 1997, compared to the corresponding amount in the
prior year, as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
May 31,
--------------------------
1997 1996
------- ------
<S> <C> <C>
Europe ............................................................ $ -- $ --
Latin America...................................................... 6,590 238
Asia/Pacific....................................................... 14,492 1,934
------- ------
Total service and other revenue................................ $21,082 $2,172
======= ======
</TABLE>
Latin America
-------------
The Company began consolidating the results of Bahia Blanca
effective November 1, 1996. Accordingly, the Company reported no revenue
for Bahia Blanca for the three months ended March 31, 1996. Bahia
Blanca's revenues, which consist primarily of service fees, for the three
months ended March 31, 1997 were $6,312. The remainder of Latin America's
revenues, totaling $278, are attributable to TV Cable SRL and Cable Star.
Asia/Pacific
------------
AUSTAR
Service revenues at Austar were $13,469 for the three months ended
March 31, 1997, which consisted primarily of service and installation
fees from basic subscribers of $11,044 and $2,066, respectively, with
other revenue totaling $359. For the three months ended March 31,
1996, service and installation fees from basic subscribers consisted
of $740 and $328, respectively. The increase in service revenues for the
three months ended March 31, 1997 relative to the comparable prior year
period was primarily attributable to subscriber growth (129,156 at
March 31, 1997 compared to 14,037 at March 31, 1996). The increase in
subscribers was the result of the on-going roll-out of Austar's services
which were initially launched in August 1995.
TELEFENUA
Telefenua's service revenues increased to $916 from $862 during the
three month periods ended March 31, 1997 and 1996, respectively. The
increase is primarily attributable to subscriber growth (5,537 at March
31, 1997 compared to 4,500 at March 31, 1996).
SATURN
The Company began consolidating the results of Saturn effective
July 1, 1996. Accordingly, the Company reported no service revenue for
Saturn for the three months ended March 31, 1996. Saturn's actual service
revenues for the three months ended March 31, 1997 and 1996 were $83 and
$52, respectively. The increase is attributable to an increase in
subscribers from 1,100 at March 31, 1996 to 2,052 at March 31, 1997.
16
<PAGE>
MANAGEMENT FEE INCOME FROM RELATED PARTIES. Management fee income decreased $36
during the three months ended May 31, 1997, compared to the corresponding amount
in the prior year, as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
May 31,
---------------------------
1997 1996
----- -----
<S> <C> <C>
Europe ............................................................. $ 49 $ 44
Latin America....................................................... 125 139
Asia/Pacific........................................................ 107 134
---- ----
Total management fee income from related parties............... $281 $317
==== ====
</TABLE>
SYSTEM OPERATING EXPENSE. System operating expense increased $7,680 during the
three months ended May 31, 1997, compared to the corresponding amount in the
prior year, as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
May 31,
---------------------------
1997 1996
------- ------
<S> <C> <C>
Europe ............................................................ $ 272 $ --
Latin America...................................................... 2,540 114
Asia/Pacific....................................................... 9,977 4,995
------- ------
Total system operating expense.................................. $12,789 $5,109
======= ======
</TABLE>
Latin America
-------------
The Company began consolidating the results of Bahia Blanca
effective November 1, 1996. Accordingly, the Company reported no system
operating expenses for Bahia Blanca for the three months ended March
31, 1996. Bahia Blanca's system operating expenses for the three
months ended March 31, 1997 were $2,306 and consisted primarily of
programming expenses (approximately $1,400) and salaries (approximately
$500).
Asia/Pacific
------------
AUSTAR
The Company reported operating expenses from Austar of $8,467 for
the three months ended March 31, 1997, consisting primarily of salary and
benefits ($854), satellite programming fees ($4,149) and annual MMDS
spectrum license fees ($643), with the remainder consisting primarily of
office-related expenses and system travel and recruitment expenses.
Austar's operating expenses for the comparable period in 1996 were
$4,223. The increase in operating expense in 1997 is primarily
attributable to the continued roll-out of Austar's services, which were
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 office-related costs. 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 $426 for the quarter ended March 31, 1997 from $572 during
the comparable period of 1996, primarily due to decreases in
technical-related repairs and maintenance and tape production costs,
partially offset by increased programming costs associated with the
aforementioned increase in subscribers between March 31, 1996 and 1997.
Telefenua's operating expenses in the first quarter of 1997 consisted
primarily of programming-related expenses ($284) with the remainder
consisting of payroll-related costs and technical-related costs.
17
<PAGE>
SATURN
The Company began consolidating Saturn effective July 1, 1996.
Accordingly, the Company reported no operating expenses for Saturn in its
consolidated statement of operations for the quarter ended March 31,
1996. Saturn's operating expenses were approximately $727 for the quarter
ended March 31, 1997, consisting primarily of payroll ($359) and office
expenses related to the provision of service to existing customers and
on-going system design and engineering work for expansion of Saturn's
Wellington system. Saturn's system operating expenses for the comparable
quarter in 1996 were $342.
SYSTEM SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. During the three months
ended May 31, 1997, the Company experienced an increase in system selling,
general and administrative expense of $11,140 over the corresponding prior year
amount as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
May 31,
--------------------------
1997 1996
------- -------
<S> <C> <C>
Europe ........................................................ $ 220 $ --
Latin America.................................................. 2,064 135
Asia/Pacific................................................... 11,034 2,043
------ -----
Total system selling, general and administrative expense.... $13,318 $2,178
======= ======
</TABLE>
Latin America
-------------
The Company began consolidating the results of Bahia Blanca
effective November 1, 1996. Accordingly, the Company reported no system
general and administrative expenses for Bahia Blanca for the three months
ende March 31, 1996. Bahia Blanca's system general and administrative
expenses for the three months ended March 31, 1997 were $1,820 and
included marketing related costs (approximately $160) and salaries
(approximately $500) with the remainder consisting of billing, office and
utility costs.
Asia/Pacific
------------
AUSTAR
System selling, general and administrative expenses consolidated by
the Company from Austar were $9,526 for the quarter ended March 31, 1997
and consisted primarily of marketing costs related to print, radio and
television advertisements utilized in the continued marketing of Austar's
services throughout its service areas during 1997 ($1,512), direct sales
commissions ($1,576), general and administrative salaries associated with
Austar's Sydney corporate headquarters ($1,512) and National Customer
Operations Center ($3,073) and office related expenses, including rent
and utilities ($1,725). Austar's system selling, general and
administrative expenses were $1,294 for the comparable quarter in 1996.
The increase relates to marketing efforts associated with Austar's
continued expansion of service to all of its service areas, including the
initiation of DTH service in 1996, and increased customer support costs
as Austar's subscriber base grows. Austar expects that system general and
administrative expenses as a percent of service revenues will decline
over the remainder of 1997 as certain fixed expenses are spread over
expected increases in service revenues.
TELEFENUA
System selling, general and administrative expenses consolidated by
the Company from Telefenua decreased to $473 during the first quarter of
1997 compared to $607 during the comparable period in 1996, primarily due
to an unfavorable change in the exchange rate as well as decreased travel
and marketing costs.
18
<PAGE>
SATURN
The Company began consolidating the results of Saturn effective
July 1, 1996. Accordingly, the Company reported no system selling,
general and administrative expense from Saturn for the quarter ended
March 31, 1996. Saturn's actual selling, general and administrative costs
increased to $650 in the first quarter of 1997 from $343 for the first
quarter of 1996. System selling, general and administrative expense
at Saturn for the quarter ended March 31, 1997 consisted primarily
of marketing and support salaries of $359 associated with increased
marketing efforts to expand the subscriber base as Saturn's system
expands.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE. During the three months ended May
31, 1997, the Company experienced an increase in corporate general and
administrative expense of $1,562 over the corresponding prior year amount. The
increase is primarily attributable to professional services incurred in
connection with the lawsuit against the Wharf group of companies, professional
services incurred in connection with the letter of intent with Philips whereby
the Company and/or UPC would acquire from Philips their 50% interest in UPC and
charges related to employee severance agreements.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization expense
increased $16,561 during the three months ended May 31, 1997 compared to the
same period in the prior year. The increase is due to depreciation on a larger
fixed asset base as the operating companies, particularly Austar, expand their
networks and due to depreciation and purchased goodwill amortization associated
with the consolidation of Bahia Blanca effective November 1, 1996.
EQUITY IN LOSSES OF AFFILIATED COMPANIES, NET. The Company recognized equity in
losses of affiliated companies of $19,317 for the three months ended May 31,
1997, compared to $12,202 for the same period in the prior year, as follows:
<TABLE>
<CAPTION>
Three Months Ended May 31, 1997 Three Months Ended May 31, 1996
----------------------------------- ----------------------------------
Company Equity in Company Equity in
Ownership Income (Losses) of Ownership Income (Losses) of
Interest Affiliated Companies Interest Affiliated Companies
-------- -------------------- --------- --------------------
<S> <C> <C> <C> <C>
EUROPE
UPC.................................. 50.0% $(13,820) 50.0% $ (6,482)
Monor Communications................. 48.6% (1,309) 48.4% (596)
LATIN AMERICA
VTRH(1).............................. 34.0% (2,558) -- --
Cablevision(1)....................... -- -- 100.0% (316)
STX(1)............................... -- -- 65.0% 275
Net Sao Paulo(2)..................... -- -- 34.0% (1,649)
Megapo............................... 49.0% 146 49.0% (258)
TVSB................................. 40.0% (131) 40.0% (453)
ASIA/PACIFIC
XYZ.................................. 25.0% (366) 25.0% (632)
Saturn(3)............................ -- -- 50.0% (399)
OTHER(4).................................. 33.8-50.0% (1,279) 33.8-76.9% (1,692)
-------- --------
Total equity in losses of affiliated
companies, net.................... $(19,317) $(12,202)
======== ========
</TABLE>
(1) The Company contributed its interests in STX and Cablevision to its new
joint venture VTRH effective September 1, 1996.
(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 July 1996, UIH A/P 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 A/P. On May 15, 1997,
the minority holder in UIH A/P exchanged its 2.6% interest in UIH A/P for a
2% interest in UAP.
(4) The Company increased its ownership in ITN to 76.9% in April 1996 and began
consolidating ITN in the second quarter of fiscal 1997.
19
<PAGE>
RESULTS OF OPERATIONS - UPC
The exchange rate between the Dutch guilder and the U.S. dollar
has increased from approximately 1.65 at March 31, 1996 to 1.89 at March
31, 1997. The exchange rate of all European currencies included in the
UPC consolidated group showed the same trend. As a result, revenues,
operating expenses and system general and administrative expenses in U.S.
dollars, all of which are reflected in the Company's equity in losses of
UPC, are negatively impacted by the approximate 14% fluctuation in
exchange rates.
Revenue increased in Austria due primarily to an increase in
subscribers from 419,900 at March 31, 1996 to 429,861 at March 31, 1997.
Overall, revenues decreased in the Czech Republic due primarily to the
deconsolidation of one of the operating systems, TV-Max, as offset by
increased subscribers from 27,011 at March 31, 1996 to 38,018 at March
31, 1997 at the other Czech Republic systems.
In October 1996, UPC increased its ownership interest in its
Norwegian operating system, Norkabel, from 8.3% to 100% and in January
1997 acquired a 70.2% interest in Janco, another operating system in
Norway. Both Norkabel and Janco are included in the first quarter 1997
results of operations for the full quarter. Janco's results were not
included with those of UPC during the first quarter of 1996.
Effective June 30, 1996, UPC consolidated its investments in
development systems in Portugal, France, the Slovak Republic and Romania.
UPC recognized substantial operating losses in the last half of 1996 and
the first quarter of 1997 due to start-up costs at these systems,
especially at the systems in Portugal and France.
During 1997, UPC plans to introduce new services including
pay-per-view, additional tier programming and data services. Further, UPC
is planning to introduce telephony services beginning in 1998.
Consequently, UPC expects a slight decrease in the percentage of EBITDA
to total revenue during 1997 as the introduction of these new services
commences.
INTEREST INCOME. Interest income decreased by $363 during the three months ended
May 31, 1997, compared to the corresponding period in the prior year. The
decrease is due to reduced cash and short-term investment balances related to
the funding of the company's investments in affiliated operating systems.
INTEREST EXPENSE. Interest expense increased $12,138 during the three months
ended May 31, 1997, compared to the corresponding period in the prior year. The
increase is primarily due to the issuance of senior notes by UIH A/P in May
1996.
PROVISION FOR LOSSES ON INVESTMENT RELATED COSTS. Provision for losses on
investment related costs increased $4,084 during the three months ended May 31,
1997, compared to the corresponding period in the prior year. 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.
The majority of the increase is due to the Company's recognition of the
unrealized loss on its investment in International Broadcasting Corporation, an
investment in Thailand in which the Company's initial investment was made during
1992.
20
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 5 - OTHER INFORMATION
SUMMARY OPERATING DATA
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 of March 31, 1997
------------------------------------------------------------------------------------------
UIH
Equity in UIH UIH
Homes in UIH Homes in Equity Equity in
Service Homes Basic Basic Paid-in Service in Homes Basic
Area Passed Subscribers Penetration Ownership Area Passed Subscribers
-------- ------ ----------- ----------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EUROPE
- - -------
UPC SYSTEMS:
Austria
Cable................ 840,000 624,091 429,861 68.9% 47.5% 399,000 296,443 204,184
Netherlands (Amsterdam)
Cable................ 564,000 556,975 524,188 94.1% 25.0% 141,000 139,244 131,047
Belgium
Cable................ 133,000 133,000 127,383 95.8% 50.0% 66,500 66,500 63,692
Netherlands (Eindhoven)
Cable................ 92,042 89,281 84,817 95.0% 50.0% 46,021 44,641 42,409
Israel
Cable................ 350,000 338,612 234,695 69.3% 11.7% 40,950 39,618 27,459
Ireland
Cable/MMDS........... 350,000 344,370 124,604 36.2% 10.0% 35,000 34,437 12,460
Czech Republic
Cable/MMDS/MATV...... 258,600 128,835 38,018 29.5% 50.0% 129,300 64,418 19,009
Slovak Republic
Cable................ 21,839 15,577 11,768 75.5% 37.5% 8,190 5,841 4,413
Malta
Cable................ 146,384 146,384 52,799 36.1% 21.3% 31,180 31,180 11,246
Hungary
Cable................ 268,000 267,929 246,768 92.1% 23.5% 62,980 62,963 57,990
Norway(1)
Cable................ 529,693 448,060 316,601 70.1-71.2% 35.1-50.0% 227,299 190,505 134,414
Spain
Cable................ 74,235 58,763 3,503 6.0% 12.5% 9,279 7,345 438
Portugal
Cable................ 186,449 9,327 2,192 23.5% 50.0% 93,225 4,664 1,096
Romania
Cable................ 148,000 68,707 40,852 36.1-69.9% 25.5-45.0% 51,390 21,658 11,911
France
Cable................ 68,000 12,660 2,344 18.5% 50.0% 34,000 6,330 1,172
--------- --------- --------- --------- --------- ---------
Total.............. 4,030,242 3,242,571 2,240,393 1,375,314 1,015,787 722,940
--------- --------- --------- --------- --------- ---------
UIH SYSTEMS:
Monor(3)
Cable/Telephony...... 85,000 126,024 72,651 37.1-67.9% 46.3% 39,355 58,349 33,637
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
As of December 31, 1996
----------------------------------------------------------------------
UIH UIH
UIH Equity Equity in
Homes Basic Basic Paid-in in Homes Basic
Passed Subscribers Penetration Ownership Passed Subscribers
------ ----------- ----------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
EUROPE
- - ------
UPC SYSTEMS:
Austria
Cable................. 623,100 428,453 68.8% 47.5% 295,973 203,515
Netherlands (Amsterdam)
Cable................ 555,459 523,940 94.3% 25.0% 138,865 130,985
Belgium
Cable................ 133,000 127,815 96.1% 50.0% 66,500 63,908
Netherlands (Eindhoven)
Cable................ 89,116 84,660 95.0% 50.0% 44,558 42,330
Israel
Cable................ 334,426 231,712 69.3% 11.7% 39,128 27,113
Ireland
Cable/MMDS........... 340,993 121,475 35.6% 10.0% 34,099 12,148
Czech Republic
Cable/MMDS/MATV...... 121,782 35,288 29.0% 50.0% 60,891 17,644
Slovak Republic
Cable................ 13,435 9,003 67.0% 37.5% 5,038 3,376
Malta
Cable................ 145,371 51,500 35.4% 21.3% 30,964 10,970
Hungary
Cable................ 265,058 245,488 92.6% 23.5% 62,289 57,690
Norway(1)
Cable................ 221,441 156,915 70.9% 50.0% 110,721 78,458
Spain
Cable................ 51,418 3,048 5.9% 12.5% 6,427 381
Portugal
Cable................. 5,430 1,191 21.9% 50.0% 2,715 596
Romania
Cable................ 50,072 30,210 34.8-80.5% 25.5-45.0% 17,070 9,200
France(2)
Cable................ 6,780 1,488 21.9% 47.5% 3,221 707
--------- --------- --------- ---------
Total.............. 2,956,881 2,052,186 918,459 659,021
--------- --------- --------- ---------
UIH SYSTEMS:
Monor(3)
Cable/Telephony...... 125,000 70,638 36.0-66.5% 43.3% 54,125 30,586
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
As of March 31, 1997
------------------------------------------------------------------------------------------
UIH
Equity in UIH UIH
Homes in UIH Homes in Equity Equity in
Service Homes Basic Basic Paid-in Service in Homes Basic
Area Passed Subscribers Penetration Ownership Area Passed Subscribers
-------- ------ ----------- ----------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LATIN AMERICA
- - -------------
Chile
Cable................ 2,321,000 1,464,092 326,849 22.3% 34.0% 789,140 497,791 111,129
Mexico
Cable................ 341,600 166,117 53,440 32.2% 49.0% 167,384 81,397 26,186
Brazil, Fortaleza
MMDS................. 387,000 387,000 12,391 3.2% 40.0% 154,800 154,800 4,956
Brazil, Jundiai
Cable................ 70,000 45,301 14,301 31.6% 46.3% 32,410 20,974 6,621
Argentina (Bahia Blanca)
Cable................ 113,000 98,990 59,722 60.3% 80.0-100.0% 113,000 98,990 59,722
Peru (Arequipa & Tacna)
Cable................ 140,000 19,104 3,910 20.4%-21.2% 94.0-100.0% 133,400 18,043 3,694
--------- --------- --------- --------- --------- ---------
Total............. 3,372,600 2,180,604 470,613 1,390,134 871,995 212,308
--------- --------- --------- --------- --------- ---------
ASIA/PACIFIC
- - ------------
Austraila (Austar)
MMDS/DTH............. 1,622,000 1,571,000 129,156 8.2% 97.4% 1,579,828 1,530,154 125,798
Australia (XYZ)
Programming.......... N/A N/A 390,000 N/A 24.4% N/A N/A 95,160
New Zealand
Cable................ 141,000 16,281 2,052 12.6% 97.4% 137,334 15,858 1,999
Philippines(4)
Cable................ 600,000 167,483 55,309 33.0% 40.0% 240,000 66,993 22,124
Tahiti
MMDS................. 31,000 19,584 5,537 28.3% 87.7% 27,187 17,175 4,856
China (HITV)(5)
Microwave Relay...... N/A N/A N/A N/A 49.0% N/A N/A N/A
--------- --------- --------- --------- --------- ---------
Total.............. 2,394,000 1,774,348 582,054 1,984,349 1,630,180 249,937
--------- --------- --------- --------- --------- ---------
Grand Total........ 9,881,842 7,323,547 3,365,711 4,789,152 3,576,311 1,218,822
========= ========= ========= ========= ========= =========
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
As of December 31, 1996
----------------------------------------------------------------------
UIH UIH
UIH Equity Equity in
Homes Basic Basic Paid-in in Homes Basic
Passed Subscribers Penetration Ownership Passed Subscribers
------ ----------- ----------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
LATIN AMERICA
- - -------------
Chile
Cable................ 1,482,000 321,730 21.7% 34.0% 503,880 109,388
Mexico
Cable................ 166,117 54,446 32.8% 49.0% 81,397 26,679
Brazil, Fortaleza
MMDS................. 387,000 12,011 3.1% 40.0% 154,800 4,804
Brazil, Jundiai
Cable................ 41,889 11,126 26.6% 46.3% 19,395 5,151
Argentina (Bahia Blanca)
Cable................ 98,990 60,166 60.8% 80.0-100.0% 98,990 60,166
Peru (Arequipa & Tacna)
Cable................ 13,720 3,325 24.2% 94.0-100.0% 12,949 3,144
--------- --------- --------- ---------
Total.............. 2,189,716 462,804 871,411 209,332
--------- --------- --------- ---------
ASIA/PACIFIC
- - ------------
Australia (Austar)
MMDS/DTH............. 1,529,000 103,447 6.8% 97.4% 1,489,246 100,757
Australia (XYZ)
Programming.......... N/A 340,000 N/A 24.4% N/A 82,960
New Zealand
Cable................ 14,280 1,697 11.9% 97.4% 13,909 1,653
Philippines(4)
Cable................ 113,402 40,129 35.4% 40.0% 45,361 16,052
Tahiti
MMDS................. 19,584 5,187 26.5% 87.7% 17,175 4,549
China (HITV)(5)
Microwave Relay...... N/A N/A N/A 49.0% N/A N/A
--------- --------- --------- ---------
Total.............. 1,676,266 490,460 1,565,691 205,971
--------- --------- --------- ---------
Grand Total........ 6,947,863 3,076,088 3,409,686 1,104,910
========= ========= ========= =========
</TABLE>
(1) In January 1997, UPC acquired a 70.2% interest in Janco, which serves the
city of Oslo.
(2) Does not include 49,068 homes passed and 7,486 basic subscribers for
Citecable as of December 31, 1996.
(3) The Company owns a 48.6% interest in Monor Communications Group, Inc. which
holds a 95.27% interest in the operating company Monor Telefon.
(4) The Company currently has a convertible loan with SCS, which upon
conversion will allow for a 40% ownership interest.
(5) 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.
24
<PAGE>
THE FINANCIAL INFORMATION PRESENTED BELOW HAS BEEN TAKEN FROM UNAUDITED
FINANCIAL INFORMATION OF THE RESPECTIVE OPERATING COMPANIES THAT WERE PROVIDING
SERVICE AS OF MARCH 31, 1997. CERTAIN 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 THREE
MONTHS ENDED MARCH 31, 1997 AND 1996 HAVE BEEN CONVERTED TO DOLLARS USING MARCH
31, 1997 EXCHANGE RATES FOR THE CONVENIENCE TRANSLATION.
<TABLE>
<CAPTION>
Revenue
----------------------------------------
Convenience Translation
----------------------------------------
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
EUROPE
Belgium................................................. $ 5,286 $ 4,685
Eindhoven, the Netherlands.............................. 2,588 2,394
Amsterdam, the Netherlands.............................. 12,660 10,631
Austria................................................. 21,898 20,795
France.................................................. 175 --
Israel.................................................. 24,945 20,543
Ireland (Princes Holdings).............................. 9,098 7,287
Ireland (Tara) ......................................... -- --
Malta .................................................. 2,625 1,960
Norway.................................................. 12,980 8,332
Hungary (Kabelkom)...................................... 6,191 5,610
Hungary (Monor) ........................................ 3,530 2,607
Czech Republic.......................................... 926 1,218
Spain (Santander)....................................... 222 123
Spain (IPS) ............................................ 1,531 --
Romania ................................................ 187 --
Slovak Republic......................................... 87 --
Portugal ............................................... 66 --
-------- -------
Total ............................................... 104,995 86,185
-------- -------
LATIN AMERICA
Jundiai, Brazil ........................................ 1,827 485
Fortaleza, Brazil....................................... 1,721 1,065
Mexico(8)............................................... 2,273 1,912
Chile (VTRH)(2)......................................... 23,222 --
Peru (Cable Star)....................................... 248 211
Argentina (Bahia Blanca)................................ 6,312 --
-------- -------
Total................................................ 35,603 3,673
-------- -------
ASIA/PACIFIC
Australia (Austar) ..................................... 13,544 1,101
New Zealand............................................. 83 53
Tahiti.................................................. 915 862
Philippines............................................. 1,573 801
Australia (XYZ)......................................... 3,263 1,854
Australia (United Wireless)............................. 24 4
-------- -------
Total................................................ 19,402 4,675
-------- -------
Grand Total.......................................... $160,000 $94,533
======== =======
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Net Income (Loss)
----------------------------------------
Convenience Translation
----------------------------------------
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
EUROPE
Belgium................................................. $ (247) $ (326)
Eindhoven, the Netherlands.............................. (391) (93)
Amsterdam, the Netherlands.............................. (2,573) (2,007)
Austria................................................. 976 1,015
France.................................................. (894) --
Israel.................................................. 4,511 2,467
Ireland (Princes Holdings).............................. (763) (1,302)
Ireland (Tara) ......................................... (1,454) --
Malta .................................................. (449) (654)
Norway.................................................. (3,114) (3,711)
Hungary (Kabelkom)...................................... 939 1,044
Hungary (Monor) ........................................ (2,769) (1,196)
Czech Republic.......................................... (3,035) (2,273)
Spain (Santander)....................................... (407) (356)
Spain (IPS) ............................................ (2,647) --
Romania ................................................ 47 --
Slovak Republic......................................... (17) --
Portugal................................................ (1,081) --
-------- --------
Total............................................... (13,368) (7,392)
-------- --------
LATIN AMERICA
Jundiai, Brazil......................................... 267 (315)
Fortaleza, Brazil....................................... (240) (503)
Mexico(8)............................................... 1,120 (615)
Chile (VTRH)(2)......................................... (6,016) --
Peru (Cable Star)....................................... (340) (40)
Argentina (Bahia Blanca)................................ (147) --
-------- --------
Total............................................... (5,356) (1,473)
-------- --------
ASIA/PACIFIC
Australia (Austar) ..................................... (19,767) (6,561)
New Zealand............................................. (1,549) (709)
Tahiti.................................................. (527) (917)
Philippines............................................. (128) (58)
Australia (XYZ)......................................... (1,235) (2,859)
Australia (United Wireless)............................. (1,000) (624)
-------- --------
Total................................................ (24,206) (11,728)
-------- --------
Grand Total.......................................... $(42,930) $(20,593)
======== ========
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Adjusted EBITDA (3)
-------------------------------------------
Convenience Translation
-------------------------------------------
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
EUROPE
Belgium.................................................. $ 1,773 $ 1,621
Eindhoven, the Netherlands............................... 1,663 1,585
Amsterdam, the Netherlands............................... 5,721 5,104
Austria.................................................. 11,629 11,108
France................................................... (720) --
Israel................................................... 12,294 10,004
Ireland (Princes Holdings)............................... 3,355 2,664
Ireland (Tara) .......................................... (1,407) --
Malta ................................................... 1,092 475
Norway................................................... 4,930 3,438
Hungary (Kabelkom)....................................... 2,502 2,585
Hungary (Monor) ......................................... 2,037 1,042
Czech Republic........................................... (1,011) (1,359)
Spain (Santander)........................................ (139) (225)
Spain (IPS) ............................................. (1,766) --
Romania ................................................. 110 --
Slovak Republic ......................................... 60 --
Portugal ................................................ (872) --
------- -------
Total................................................. 41,251 38,042
------- -------
LATIN AMERICA
Jundiai, Brazil ......................................... 727 (146)
Fortaleza, Brazil........................................ 393 (320)
Mexico(8)................................................ 1,516 832
Chile (VTRH)(2).......................................... 1,521 --
Peru (Cable Star)........................................ (182) 110
Argentina (Bahia Blanca)................................. 1,589 --
------- -------
Total................................................. 5,564 476
------- -------
ASIA/PACIFIC
Australia (Austar) ...................................... (4,116) (4,541)
New Zealand.............................................. (1,205) (654)
Tahiti................................................... 59 (232)
Philippines.............................................. 502 245
Australia (XYZ).......................................... (1,238) (1,821)
Australia (United Wireless).............................. (748) (443)
------- -------
Total................................................. (6,746) (7,446)
------- -------
Grand Total........................................... $40,069 $31,072
======= =======
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Long-term Debt
-----------------------
Convenience Translation
------------------------
As of
March 31, 1997
------------------------
<S> <C>
EUROPE
Belgium(1)............................................ $ 709
Eindhoven, the Netherlands............................ 46,125
Amsterdam, the Netherlands............................ 193,856
Austria(1)............................................ 1,100
France................................................ --
Israel................................................ 6,135
Ireland (Princes Holdings)............................ 54,391
Ireland (Tara) ....................................... --
Malta ................................................ 15,831
Norway(4)............................................. 81,293
Hungary (Kabelkom).................................... --
Hungary (Monor) ...................................... 30,000
Czech Republic........................................ --
Spain (Santander)..................................... 7
Spain (IPS) .......................................... 3,500
Romania .............................................. --
Slovak Republic....................................... --
Portugal.............................................. --
--------
Total.............................................. 432,947
--------
LATIN AMERICA
Jundiai, Brazil ...................................... 97
Fortaleza, Brazil..................................... 792
Mexico(8)............................................. 371
Chile (VTRH).......................................... 8,947
Peru (Cable Star)..................................... --
Argentina (Bahia Blanca).............................. --
--------
Total.............................................. 10,207
--------
ASIA/PACIFIC
Australia (Austar) ................................... --
New Zealand(5)........................................ --
Tahiti(6)............................................. 1,118
Philippines(7)........................................ --
Australia (XYZ)(9).................................... --
Australia (United Wireless)(9)........................ --
--------
Total.............................................. 1,118
--------
Grand Total........................................ $444,272
========
</TABLE>
(1) In addition to the debt noted above, Austria and Belgium have intercompany
loans, which eliminate upon consolidation, of BF3.9 billion ($111.2
million) subordinated convertible loan payable to Philips totaling NLG293.9
million ($155.7 million).
(2) The Company contributed its Chilean assets (Cablevision and STX) to its new
joint venture VTRH effective September 1, 1996. Therefore, comparable
information to the prior year is not available.
(3) Adjusted EBITDA represents net income (loss), as determined using generally
accepted accounting principles which may differ from those used in the
United States, 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 entity's operating
performance.
(4) In addition to the debt noted above, Norkabel has $117.1 million of loans
payable to UPC (including accrued interest).
(5) Saturn has loans payable to the Company totaling N$30 million ($20.9
million) at March 31, 1997.
(6) In addition to the debt noted above, Telefenua has loans payable to the
Company of $11.6 million at March 31, 1997.
(7) The Philippine system has a convertible loan payable to the Company of
P248.8 million ($9.4 million) at March 31, 1997.
28
<PAGE>
(8) In 1997, Mexico became a hyper-inflationery economy, and the operating
system began reporting its financial results in U.S. dollars. The financial
results for 1996 were reported in Mexican pecos and converted using the
March 31, 1997 rate for the convenience translation.
(9) XYZ and United Wireless show capital contributions as shareholder loans
which totaled A$58.5 million ($45.8 million) and A$4.3 million ($3.4
million) at March 31, 1997, respectively.
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.
None.
29
<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: July 15, 1997
/S/ J. Timothy Bryan
By: --------------------------------------------------------------
J. Timothy Bryan
Chief Financial Officer
(A Duly Authorized Officer and Principal Financial Officer)
30
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITED
INTERNATIONAL HOLDINGS, INC.'S FORM 10-Q FOR THE QUARTER ENDED MAY 31, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> MAY-31-1997
<CASH> 43,841
<SECURITIES> 2,483
<RECEIVABLES> 4,065
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 144,200
<PP&E> 257,961
<DEPRECIATION> 43,016
<TOTAL-ASSETS> 834,263
<CURRENT-LIABILITIES> 111,132
<BONDS> 742,645
31,606
0
<COMMON> 392
<OTHER-SE> (41,143)
<TOTAL-LIABILITY-AND-EQUITY> 834,263
<SALES> 0
<TOTAL-REVENUES> 21,363
<CGS> 0
<TOTAL-COSTS> 12,789
<OTHER-EXPENSES> 19,458
<LOSS-PROVISION> 4,436
<INTEREST-EXPENSE> 25,855
<INCOME-PRETAX> (79,029)
<INCOME-TAX> 0
<INCOME-CONTINUING> (79,029)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (79,029)
<EPS-PRIMARY> (2.02)
<EPS-DILUTED> 0
</TABLE>
