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 November 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to_________
Commission File No. 0-21974
United International Holdings, Inc.
(Exact name of Registrant as specified in its charter)
State of Delaware 84-1116217
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4643 South Ulster Street, #1300
Denver, Colorado 80237
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (303) 770-4001
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the Registrant's common stock as of
January 8, 1998 was:
Class A Common Stock -- 26,372,739 shares
Class B Common Stock -- 12,863,323 shares
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UNITED INTERNATIONAL HOLDINGS, INC.
TABLE OF CONTENTS
Page
Number
------
PART I - FINANCIAL INFORMATION
------------------------------
<S> <C> <C>
Item 1 - Financial Statements
- ------
Condensed Consolidated Balance Sheets as of November 30, 1997 and February 28, 1997 (Unaudited).............. 2
Condensed Consolidated Statements of Operations For the Three and Nine Months Ended
November 30, 1997 and 1996 (Unaudited)................................................................... 3
Condensed Consolidated Statement of Stockholders' (Deficit) Equity For the Nine Months Ended
November 30, 1997 (Unaudited)............................................................................ 4
Condensed Consolidated Statements of Cash Flows For the Nine Months Ended November 30, 1997
and 1996 (Unaudited)..................................................................................... 5
Notes to Condensed Consolidated Financial Statements (Unaudited)............................................. 7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 14
- ------
PART II - OTHER INFORMATION
---------------------------
Item 4 - Submission of Matters to a Vote of Security Holders...................................................... 33
- ------
Item 5 - Other Information........................................................................................ 24
- ------
Item 6 - Exhibits and Reports on Form 8-K......................................................................... 34
- ------
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UNITED INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in thousands, except share and per share amounts)
(Unaudited)
November 30, February 28,
1997 1997
------------ -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.................................................................. $210,806 $ 68,784
Restricted cash and short-term investments................................................. 15,171 1,600
Short-term investments..................................................................... 28,236 70,359
Management fee receivables from related parties............................................ 2,385 1,616
Subscriber receivables, net................................................................ 2,670 2,939
Notes receivable........................................................................... 2,034 8,175
Costs to be reimbursed by affiliated companies, net........................................ 10,610 4,884
Other current assets, net, including $1,851 and $1,958 of related party
receivables, respectively............................................................... 14,157 16,857
-------- --------
Total current assets.................................................................. 286,069 175,214
Investments in and advances to affiliated companies, accounted for under
the equity method, net..................................................................... 208,686 253,108
Other investments in affiliated companies, including marketable equity securities............. 2,447 4,293
Property, plant and equipment, net of accumulated depreciation of $70,085 and $29,378,
respectively............................................................................... 209,159 219,342
Goodwill, net of accumulated amortization of $7,134 and $4,602, respectively ................. 54,888 122,249
Acquisition, transaction and development costs, net........................................... 2,341 6,249
Other non-current assets, net, including related party receivables of
$1,215 and $0, respectively................................................................ 35,592 39,481
-------- --------
Total assets.......................................................................... $799,182 $819,936
======== ========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities
Accounts payable........................................................................... $ 15,344 $ 22,885
Construction payables...................................................................... 6,924 38,407
Accrued liabilities, including $790 and $620 of related party payables, respectively....... 9,744 12,571
Purchase money notes payable to sellers, current........................................... -- 5,722
Accrued funding obligations, current....................................................... 2,943 3,309
Note payable............................................................................... 38,000 --
Current portion of long-term debt.......................................................... 4,181 4,965
Other current liabilities.................................................................. 6,907 875
-------- --------
Total current liabilities............................................................. 84,043 88,734
Purchase money notes payable to sellers....................................................... -- 12,966
Senior secured notes and other debt........................................................... 825,876 671,540
-------- --------
Total liabilities..................................................................... 909,919 773,240
-------- --------
Minority interest in subsidiaries............................................................. 13,200 307
-------- --------
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................................................................ 32,242 31,293
-------- --------
Stockholders' (deficit) equity:
Class A Common Stock, $0.01 par value, 60,000,000 shares authorized, 26,369,962 and
26,097,263 shares issued and outstanding, respectively................................... 263 261
Class B Common Stock, $0.01 par value, 30,000,000 shares authorized, 12,863,323 and
12,971,775 shares issued and outstanding, respectively................................... 129 129
Additional paid-in capital................................................................. 347,127 340,753
Deferred compensation...................................................................... (121) (624)
Unrealized loss on investments in marketable equity securities............................. (3,183) (6,069)
Cumulative translation adjustments......................................................... (38,782) (15,801)
Accumulated deficit........................................................................ (461,612) (303,553)
-------- --------
Total stockholders' (deficit) equity.................................................. (156,179) 15,096
--------- --------
Total liabilities and stockholders' (deficit) equity.................................. $799,182 $819,936
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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2
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UNITED INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands, except share and per share amounts)
(Unaudited)
For the Three Months Ended For the Nine Months Ended
November 30, November 30,
-------------------------- --------------------------
1997 1996 1997 1996
-------- --------- --------- --------
<S> <C> <C> <C> <C>
Service and other revenue........................................ $23,360 $ 7,450 $ 67,719 $ 13,877
Management fee income from related parties....................... 114 126 852 756
------- -------- --------- --------
Total revenue............................................ 23,474 7,576 68,571 14,633
System operating expense......................................... (17,324) (6,616) (45,220) (13,925)
System selling, general and administrative expense............... (16,099) (9,810) (45,022) (20,585)
Corporate general and administrative expense..................... (3,529) (2,765) (14,444) (11,507)
Depreciation and amortization.................................... (23,202) (8,142) (61,953) (16,773)
------- -------- --------- --------
Net operating loss....................................... (36,680) (19,757) (98,068) (48,157)
Equity in losses of affiliated companies, net.................... (15,979) (11,483) (53,521) (33,224)
Interest income.................................................. 1,793 4,346 5,244 10,061
Interest expense................................................. (33,048) (23,414) (90,190) (55,308)
Interest (expense) income, related parties, net.................. (71) 131 602 12
Provision for losses on investment related costs................. (1,694) (776) (8,148) (1,600)
Gain on sale of investment in affiliated company................. 91,600 -- 91,600 65,260
Other (expense) income, net...................................... (4,226) 341 (6,174) 745
------- -------- --------- --------
Net income (loss) before minority interest............... 1,695 (50,612) (158,655) (62,211)
Minority interest in subsidiaries................................ 358 1,216 596 2,967
------- -------- --------- --------
Net income (loss)........................................ $ 2,053 $(49,396) $(158,059) $(59,244)
======= ======== ========= ========
Net income (loss) per common share............................... $ 0.05 $ (1.27) $ (4.03) $ (1.52)
======= ======== ========= ========
Weighted-average number of common shares outstanding............. 39,225,184 39,046,462 39,202,740 39,025,768
========== ========== ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
3
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<CAPTION>
UNITED INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
(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.... 143,541 2 -- -- 713 -- -- -- -- 715
Issuance of Class A
Common Stock in
connection with
the Company's
401(k) plan.......... 20,706 -- -- -- 274 -- -- -- -- 274
Exchange of Class B
Common Stock
for Class A
Common Stock......... 108,452 -- (108,452) -- -- -- -- -- -- --
Accretion of dividends
on convertible
preferred stock...... -- -- -- -- (949) -- -- -- -- (949)
Gain on sale of stock
by subsidiary........ -- -- -- -- 5,985 -- -- -- -- 5,985
Compensation
expense related
to the extension
of stock option
exercise period...... -- -- -- -- 263 -- -- -- -- 263
Compensation
expense related
to the acceleration
of the vesting
of options........... -- -- -- -- 88 -- -- -- -- 88
Amortization of
deferred
compensation......... -- -- -- -- -- 503 -- -- -- 503
Change in unrealized
loss on investments.. -- -- -- -- -- -- 2,886 -- -- 2,886
Change in cumulative
translation
adjustments.......... -- -- -- -- -- -- -- (22,981) -- (22,981)
Net loss............... -- -- -- -- -- -- -- -- (158,059) (158,059)
---------- ---- ---------- ---- -------- ----- ------- -------- --------- ---------
Balances,
November 30, 1997....26,369,962 $263 12,863,323 $129 $347,127 $(121) $(3,183) $(38,782) $(461,612) $(156,179)
========== ==== ========== ==== ======== ===== ======= ======== ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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4
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UNITED INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands)
(Unaudited) For the Nine Months Ended
November 30,
----------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.......................................................................................... $(158,059) $(59,244)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Equity in losses of affiliated companies, net.................................................. 54,322 33,523
Gain on sale of investment in affiliated company............................................... (91,600) (65,260)
Minority interest share of losses.............................................................. (596) (2,967)
Depreciation and amortization.................................................................. 61,953 16,773
Amortization of deferred compensation.......................................................... 503 669
Accretion of interest on senior notes and amortization of offering costs....................... 80,562 53,574
Issuance of common stock in connection with Company's 401(k) plan.............................. 274 243
Compensation expense recognized due to the extension of stock option exercise period........... 263 --
Compensation expense recognized due to the acceleration of the vesting of options.............. 88 --
Provision for losses on investment related costs............................................... 8,148 1,600
Foreign exchange loss on foreign currency denominated note receivable.......................... 1,941 21
Increase in management fee receivables......................................................... (890) (564)
Increase in subscriber receivables, net........................................................ (2,268) (1,079)
Decrease (increase) in other assets............................................................ 6,709 (4,500)
(Decrease) increase in accounts payable, accrued liabilities and other......................... (285) 2,828
--------- --------
Net cash flows used in operating activities....................................................... (38,935) (24,383)
--------- --------
Cash flows from investing activities:
Purchase of short-term investments................................................................ (66,926) (274,934)
Proceeds from sale of short-term investments...................................................... 109,049 223,672
Restricted cash (deposited) released.............................................................. (13,571) 2,473
Investments in and advances to affiliated companies and other investments......................... (29,969) (67,832)
Proceeds from sale of investments in affiliated companies......................................... 211,125 43,098
Purchase of initial interests in affiliated companies............................................. (26,570) (26,382)
(Increase) decrease in costs to be reimbursed by affiliated companies, net........................ (5,826) 3,907
Distribution received from affiliated company..................................................... 1,248 --
Increase in notes receivable...................................................................... -- (5,022)
Repayments on notes receivable.................................................................... 12,214 48,264
Reimbursement of advance to related party......................................................... -- 307
Acquisition, transaction and development costs incurred........................................... (3,963) (5,639)
Proceeds from sale of property, plant and equipment............................................... 5,332 --
Purchase of property, plant and equipment......................................................... (74,504) (118,749)
(Decrease) increase in construction payables...................................................... (29,385) 19,795
--------- --------
Net cash flows provided by (used in) investing activities......................................... 88,254 (157,042)
--------- --------
Cash flows from financing activities:
Issuance of common stock in connection with Company's stock option plan .......................... 715 311
Cash contribution from minority interest partner.................................................. 20,336 --
Proceeds from offering of senior notes............................................................ 29,925 225,115
Deferred debt offering costs...................................................................... (11,000) (9,727)
Payment of sellers notes.......................................................................... (46,351) --
Borrowing of other debt........................................................................... 213,971 7,276
Repayment of other debt........................................................................... (113,527) (14,812)
Payment of warrants tendered to the Company....................................................... -- (2,156)
--------- --------
Net cash flows provided by financing activities................................................... 94,069 206,007
--------- --------
Effect of exchange rates on cash.................................................................. (1,366) 906
--------- --------
Increase in cash and cash equivalents............................................................. 142,022 25,488
Cash and cash equivalents, beginning of period.................................................... 68,784 112,218
--------- --------
Cash and cash equivalents, end of period.......................................................... $ 210,806 $137,706
========= ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
5
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UNITED INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Stated in thousands)
(Unaudited) For the Nine Months Ended
November 30,
----------------------------
1997 1996
---------- ----------
<S> <C> <C>
Non-cash investing and financing activities:
Purchase money notes payable to sellers....................................................... $ 52,061 $33,401
======== =======
Note received upon sale of investment in affiliated company................................... $ 6,500 $35,000
======== =======
Non-cash stock issuance for purchase of 50% interest in Saturn................................ $ -- $ 7,800
======== =======
Gain on issuance of shares by Saturn.......................................................... $ 5,985 $ --
======== =======
Conversion of note receivable to equity....................................................... $ 1,909 $ --
======== =======
Assets acquired with capital leases........................................................... $ -- $ 1,707
======== =======
Increase in unrealized loss on investment, recorded in stockholders' (deficit) equity......... $ (730) $(1,404)
======== =======
Supplemental cash flow disclosures:
Cash paid for interest........................................................................ $ 6,658 $ 732
======== =======
Cash received for interest.................................................................... $ 5,737 $10,299
======== =======
Sale of Argentine systems:
Working capital, net of cash relinquished of $2,133 and $0, respectively...................... $ (4,899) $ --
Investments in affiliated companies........................................................... 83,535 --
Property, plant and equipment................................................................. 4,560 --
Goodwill...................................................................................... 60,727 --
Purchase money notes (assumed by the buyers).................................................. (24,398) --
Gain on sale.................................................................................. 91,600 --
-------- -------
Cash proceeds from sale....................................................................... $211,125 $ --
======== =======
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
6
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UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF NOVEMBER 30, 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 November
30, 1997.
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<S> <C>
********************** ************************************************************************************************************
* Philips Media B.V. * * *
* ("Philips") * * UIH *
* * * *
********************** ************************************************************************************************************
* *
* *
* *******************************************************************
50% * 50% * * 100%
******************************* ***************************************************************************************************
* United and Philips * * United International Properties, Inc. *
*Communications B.V.("UPC")(1)* * ("UIPI") *
******************************* ***************************************************************************************************
* *
* *
* **********************************************************************
* * * *
* 98% * * 100% *
* *************************************** ************************* ***********************
**************************** *UIH Asia/Pacific Communications, Inc.* *UIH Latin America, Inc.* * Other *
* Europe * * ("UAP") * *-----------------------* * ----- *
* ------ * *************************************** * ("UIH LA") * *Tara Television *
*Radio Public * * * * * (Ireland) 75.0%*
* (Belgium) 100.0%* * *TV Cable SRL * *Monor *
*Kabel Net * **************************** * (Peru) 100.0%* * Communications *
* (Czech Republic) 100.0 * 100% * * *Cable Star (Peru) 97.7 * * (Hungary) 48.6 *
*KTE (Eindhoven, The * ***************************** *********************** *United Family * *Iberian *
* Netherlands) 100.0 * *UIH Australia/Pacific, Inc.* *HITV (China) 49.0%* * Communications * * Programming *
*Norkabel * *---------------------------* *SCS * * (Latin America * * Services *
* (Norway) 100.0 * * ("UIH A/P") * * Philippines(3) 40.0 * * Programming) 50.0 * * ("IPS")(Spain) 33.5 *
*Intercabo * * * *********************** *Megapo (Mexico) 49.0 * *Teleport *
* (Portugal) 100.0 * *Austar (Australia) 100.0%* *Jundiai TV * * (Russia) 30.0 *
*Marne la Vallee * *United Wireless * * (Brazil) 46.3 * ***********************
* (France) 99.0 * * (Australia) 100.0 * *TV Show Brasil *
*Telekable Group * *Telefenua (Tahiti)(2) 90.0 * * ("TVSB") *
* (Austria) 95.0 * *Saturn (New Zealand) 65.0 * * (Fortaleza, *
*Multi Canal * *XYZ (Australia) 25.0 * * Brazil 40.0 *
* (Romania) 90.0 * ***************************** *VTR Hipercable *
*Tranavatel SRO * * ("VTRH") (Chile) 34.0 *
* (Slovak Republic) 75.0 * *********************** *
*Janco (Norway) 70.2 *
*Control Cable *
* (Romania) 51.0 *
*A2000 (Amsterdam, *
* The Netherlands) 50.0 *
*Kabelkom (Hungary) 50.0 *
*Melita Cable (Malta) 25.0 *
*Citecable (France) 30.0 *
*Santander (Spain) 25.0 *
*Tevel (Israel) 23.3 *
*Princes Holdings *
* ("PHL")(Ireland) 20.0 *
****************************
</TABLE>
(1) 1n December 1997, the Company completed the purchase of Philips' 50%
interest in UPC, less the ratable dilution caused by UPC's incentive option
plan (see Note 6).
(2) 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.
(3) UAP currently holds a convertible loan, which upon full conversion would
provide UAP with a 40% equity ownership interest in the Philippines
operating company.
7
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UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 when
the Company has temporary majority control. For six months of the nine months
ended November 30, 1996, the Company accounted for Saturn Communications Limited
("Saturn") under the equity method. The Company began consolidating the
operations of Saturn effective July 1, 1996. For six months of the nine months
ended November 30, 1996, the Company accounted for its investments in
Cablevision S.A. ("Cablevision") and Red de Television y Servicios por Cable
S.A. ("STX") under the equity method, due to an expected joint venture in Chile
with VTR S.A. ("VTR") wherein UIH LA contributed these interests to VTRH in
September 1996. For the three and nine months ended November 30, 1997, the
Company accounted for its investments in Comodoro, Trelew and Santa Fe,
Argentina under the equity method, due to an expected joint venture in
Argentina. This joint venture was subsequently abandoned due to the sale of
these interests in October 1997. 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 November 30, 1997 and the results of its operations for the
three and nine months ended November 30, 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 November 30, 1997
----------------------------------------------------------------------------------------------
Investments in Cumulative Equity Cumulative
and Advances to in Income (Losses) of Translation Valuation
Affiliated Companies Affiliated Companies(1) Adjustments Allowance Total
-------------------- ----------------------- ----------- --------- -----
<S> <C> <C> <C> <C> <C>
EUROPE
- ------
UPC.............................. $150,442 $ (75,312) $(19,189) $ -- $ 55,941
Monor Communications............. 27,701 (11,323) (5,957) -- 10,421
IPS.............................. 13,371 (7,033) -- -- 6,338
LATIN AMERICA
- -------------
VTRH............................. 91,713 (7,385) (1,509) -- 82,819
Megapo........................... 31,243 (1,945) (1,306) -- 27,992
Jundiai TV....................... 6,229 (1,257) -- -- 4,972
United Family Communications..... 8,100 (4,197) -- -- 3,903
TVSB............................. 7,067 (3,349) -- -- 3,718
Other............................ 200 -- -- -- 200
ASIA/PACIFIC
- ------------
XYZ.............................. 18,202(2) (18,312) 110 -- --
SCS.............................. 8,840 (640) (1,871) -- 6,329
HITV............................. 6,073 (20) -- -- 6,053
OTHER
- -----
Teleport......................... 3,119 (1,051) -- (2,068) --
-------- --------- -------- ------- --------
$372,300 $(131,824) $(29,722) $(2,068) $208,686
======== ========= ======== ======= ========
</TABLE>
8
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UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
As of February 28, 1997
----------------------------------------------------------------------------------------------
Investments in Cumulative Equity Cumulative
and Advances to in Income (Losses) of Translation Valuation
Affiliated Companies Affiliated Companies(1) 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
IPS.............................. 11,187 (4,734) -- -- 6,453
LATIN AMERICA
- -------------
VTRH............................. 82,010 (2,122) (1,502) -- 78,386
Megapo........................... 32,491 (727) (1,420) -- 30,344
Jundiai TV....................... 4,984 (1,214) -- -- 3,770
United Family Communications..... 1,739 (10) -- -- 1,729
TVSB............................. 6,132 (2,860) -- -- 3,272
ASIA/PACIFIC
- ------------
XYZ.............................. 16,202(2) (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) Does not include cumulative equity in net losses of Santa Fe, Comodoro and
Trelew, Argentina of $355 as the Company sold its investments in October
1997.
(2) Includes an accrued funding obligation of $904 and $1,270 for the Company
at November 30, 1997 and February 28, 1997, respectively. The Company does
not have a contractual funding obligation to XYZ; however, the Company
would face significant and punitive dilution if it did not make the
scheduled fundings.
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
three years. Upon disconnection of a multi-point microwave distribution system
("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:
<TABLE>
<CAPTION>
As of As of
November 30, February 28, Average
1997 1997 Life
------------ ------------ -------
<S> <C> <C> <C>
Subscriber premises equipment and converters............. $156,198 $126,007 3
MMDS distribution facilities............................. 58,217 57,074 5-10
Cable distribution networks.............................. 21,943 22,795 5-10
Furniture and fixtures................................... 2,712 3,418 5-10
Leasehold improvements................................... 3,376 3,593 6-10
Other.................................................... 36,798 35,833 3-5
------- -------
279,244 248,720
Accumulated depreciation............................ (70,085) (29,378)
-------- --------
Net property, plant and equipment................... $209,159 $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.
9
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SAB 51 ACCOUNTING POLICY
Under Staff Accounting Bulletin No. 51 ("SAB 51"), the gain of $5,985
recognized by the Company upon the issuance by Saturn of newly issued shares in
July 1997 in exchange for the sale of a 35% interest in Saturn was credited
directly to equity (see Note 3). The Company has adopted a SAB 51 policy to
record all gains as a result of stock sales by its subsidiaries in the statement
of operations, except for any transactions which must be credited directly to
equity in accordance with the provisions of SAB 51.
FOREIGN OPERATIONS
The functional currency for the Company's foreign operations is the
applicable local currency for each affiliate company, except for countries which
have experienced hyper-inflationary economies. For countries which have
hyper-inflationary economies, the financial statements are prepared in United
States dollars. Assets and liabilities of foreign subsidiaries are translated at
the exchange rates in effect at period-end, and the statements of operations are
translated at the average exchange rates during the period. Exchange rate
fluctuations on translating foreign currency financial statements into U.S.
dollars that result in unrealized gains or losses are referred to as translation
adjustments. Cumulative translation adjustments are recorded as a separate
component of stockholders' (deficit) 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.
NEW ACCOUNTING PRINCIPLE
The Financial Accounting Standards Board recently issued Statement of
Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"), which is
required to be adopted by affected companies for fiscal years ending after
December 15, 1997; early adoption is not permitted. SFAS 128 revises the
standards for the computation of earnings per share and the related disclosure
requirements. The Company does not believe that the provisions of SFAS 128 will
have a material effect on the Company's reported earnings per share.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
3. ACQUISITIONS AND DISPOSITIONS
In May 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 Company has received $7,900 in proceeds
from the sale and will receive the remaining amount in equal monthly
installments through February 15, 1999.
In July 1997, SaskTel Holdings (New Zealand), Inc. ("SaskTel") purchased a
35% equity interest in Saturn by investing approximately New Zealand
$("NZ$")30,000 (US$19,600) directly into Saturn for its shares. The Company
believes that SaskTel, a division of Saskatchewan Telecommunications Holdings
Corporation of Saskatchewan, Canada, will contribute telephony expertise to
Saturn in providing cable/telephony service in the Wellington, New Zealand area.
In October 1997, the Company completed the sale of all of its cable
television assets in Argentina, including the regions of Bahia Blanca, Comodoro,
Trelew and Santa Fe. The sale price for Bahia Blanca, Comodoro, Trelew and Santa
Fe collectively was $268,200, $25,300 of which consisted of remaining purchase
money notes payable to sellers which were assumed by the buyers from the
Company's original acquisition of Bahia Blanca in October 1996 and Comodoro,
Trelew and Santa Fe in April 1997. From this net sales price of $242,900,
$29,600 was paid directly by the buyers to other minority interest shareholders,
resulting in net proceeds to the Company of approximately $213,300. The payment
10
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
was received in full in cash, except for a total of $11,250 placed in escrow,
subject to the verification of the total number of subscribers and the
liabilities existing at closing. The Company's net investment in its Argentine
assets as of the closing date was $114,300, resulting in a gain on the
transaction (after transaction costs and estimated post-closing adjustments) of
$91,600. Under the terms of its lending arrangements with a group of banks, the
Company repaid from the proceeds of the sale all of its outstanding indebtedness
under its bridge loan facility totaling $110,000 plus accrued interest.
The following unaudited pro forma condensed consolidated operating results
for the three and nine months ended November 30, 1997 and 1996 give effect to
the sale of Bahia Blanca, Comodoro, Trelew and Santa Fe as if each had occurred
at the beginning of each period presented. This consolidated financial
information does not purport to represent what the Company's results of
operations would actually have been if such transactions had in fact occurred on
such dates. The pro forma adjustments are based upon currently available
information and upon certain assumptions that management believes are reasonable
under current circumstances:
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
November 30, November 30,
-------------------------- -------------------------
1997 1996 1997 1996
-------- ---------- --------- --------
<S> <C> <C> <C> <C>
Total revenue:
Historical ................................................ $ 23,474 $ 7,576 $ 68,571 $ 14,633
Pro Forma ................................................. $ 18,889 $ 7,576 $ 50,944 $ 14,633
Net operating loss:
Historical ................................................ $(36,680) $(19,757) $ (98,068) $(48,157)
Pro Forma ................................................. $(36,526) $(19,757) $ (98,705) $(48,157)
Net income (loss):
Historical................................................. $ 2,053 $(49,396) $(158,059) $(59,244)
Pro Forma ................................................. $(91,133) $(49,396) $(246,115) $(59,244)
Net income (loss) per common share:
Historical................................................. $ 0.05 $ (1.27) $ (4.03) $ (1.52)
Pro Forma ................................................. $ (2.32) $ (1.27) $ (6.28) $ (1.52)
</TABLE>
4. NOTE PAYABLE
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 nine months, extendible up to a maximum of
18 months at an interest rate of LIBOR plus 6% (the "UIH LA Credit Agreement").
In October 1997, UIH LA repaid the outstanding balance of $110,000 under this
credit agreement with the proceeds from the sale of the Company's Argentine
assets (see Note 3).
On November 25, 1997, UIH LA entered into an amended and restated credit
agreement with a bank for a revolving credit facility of up to $40,000 (the "UIH
LA Revolving Credit Facility"). Borrowings under this facility must be repaid
within 12 months and bear interest at a rate of LIBOR plus 3.5%. The facility is
extendable up to 18 months with (i) an increase in the interest rate of 50 basis
points for each three-month period it is extended beyond the initial 12-month
term and (ii) cash fees of 0.75% and 1.50% if it is extended to 15 and 18
months, respectively. The borrowings under the UIH LA Revolving Credit Facility
are secured by all of UIH LA's capital stock and substantially all of its
assets. In addition, UIH LA must maintain a restricted cash balance of $3,500.
As of November 30, 1997, UIH LA had borrowed $38,000 under this facility. Under
the terms of the UIH LA Revolving Credit Facility, UIH LA must use any proceeds
from the sale of Latin American assets to repay this note. Proceeds from the
loan were paid as a dividend by UIH LA to the Company and were primarily used by
the Company to fund the acquisition of Philips' interest in UPC (see Note 6).
11
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. SENIOR SECURED NOTES AND OTHER DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
As of As of
November 30, February 28,
1997 1997
------------ -----------
<S> <C> <C>
November 1994 14% senior secured discount notes, net of unamortized discount.............. $295,676 $264,985
November 1995 14% senior secured discount notes, net of unamortized discount.............. 99,755 90,161
February 1996 14% senior secured discount notes, net of unamortized discount.............. 60,164 55,193
May 1996 14.75% UIH A/P senior discount notes, net of unamortized discount................ 272,094 245,182
September 1997 14.75% UIH A/P senior discount notes, net of unamortized discount......... 29,982 --
Austar Bank Facility (as defined below)................................................... 63,144 --
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....................................................... 2,880 5,447
Capitalized lease obligations............................................................. 3,990 4,959
Mortgage note, interest at 7.885%, 7 year term............................................ 1,158 1,464
Other..................................................................................... 1,214 9,114
-------- --------
830,057 676,505
Less current portion............................................................ (4,181) (4,965)
-------- --------
Total senior secured notes and other debt....................................... $825,876 $671,540
======== ========
</TABLE>
The $295,676 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 $99,755 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 $60,164 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 $272,094 of 14% UIH A/P senior notes were issued in May 1996 at a
discount from their principal amount of $443,000. On and after May 15, 2001,
cash interest will accrue and will be payable semi-annually on each May 15 and
November 15, commencing November 15, 2001. These senior notes are due May 15,
2006. Effective May 16, 1997, the interest rate on these notes increased by an
additional 0.75% per annum to 14.75%, until such time as UIH A/P consummates an
issuance of its capital stock resulting in gross proceeds to UIH A/P of at least
$70,000 (an "Equity Sale"). Due to this increase in the interest rates, these
senior notes will accrete to a principal amount of $455,574 if an Equity Sale is
not consummated prior to maturity.
The $29,982 of 14% UIH A/P senior notes were issued in September 1997 at a
discount from their principal amount of $45,000. On and after May 15, 2001, cash
interest will accrue and will be payable semi-annually on each May 15 and
November 15, commencing November 15, 2001. These senior notes are due May 15,
2006. Effective September 23, 1997, the interest rate on these notes increased
by an additional 0.75% per annum to 14.75%, until such time as UIH A/P
consummates an Equity Sale. Due to this increase in interest rates, these senior
notes will accrete to a principal amount of $46,277 if an Equity Sale is not
consummated prior to maturity.
On November 17, 1997, UIH A/P issued warrants to purchase 488,000 shares of
UIH A/P common stock, which represented 3.4% of UIH A/P's common stock, because
UIH A/P did not consummate an Equity Sale prior to November 16, 1997. The
warrants were issued pursuant to the terms of the indentures governing the UIH
A/P senior notes. The warrants are exercisable at a price of $10.45 per share
which would result in gross proceeds of approximately $5,100 upon exercise. The
warrants are exercisable through May 15, 2006.
12
<PAGE>
UNITED INTERNATIONAL HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In July 1997, Austar secured a financing facility 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, (ii) A$60,000
cash advance facility available upon the contribution of additional equity on a
2:1 debt-to-equity basis and (iii) A$90,000 term loan facility, which will be
available on the basis of Austar having achieved minimum subscriber and
operating cash flow levels. The maximum amount of equity required in (ii) above
would be A$30,000, which had been contributed as of November 30, 1997. The cash
advance and term loan facilities are fully repayable pursuant to an amortization
schedule beginning December 31, 2001 and ending June 30, 2004. As of September
30, 1997, Austar had drawn A$87,000 (US$63,144 converted using the September 30,
1997 exchange rate) on the Austar Bank Facility.
6. SUBSEQUENT EVENTS
On December 11, 1997, the Company acquired from Philips its entire interest
in UPC (which is now known as United Pan-Europe Communications N.V.) (the "UPC
Transaction"). Prior to the UPC Transaction, the Company and Philips each owned
50% of UPC, except for shares held by a foundation benefiting UPC employees and
management pursuant to UPC's equity incentive plans. In addition to purchasing a
portion of Philips' interest in UPC, as part of the UPC Transaction, (i) UPC
purchased 3.17 million shares of Class A Common Stock of the Company held by
Philips, (ii) the Company purchased part of the accreted amount of UPC's 9.96%
Series A and 10.03% Series B Convertible Pay-in-Kind Notes (the "PIK Notes"),
which UIH redeemed for shares of UPC, (iii) UPC repaid to Philips the remaining
accreted amount of the PIK Notes, (iv) UPC repurchased a portion of Philips'
interest in UPC, and (v) the Company invested $7,500 into UPC, with UPC in turn
making a payment of that amount to Philips in lieu of the issuance of a stock
appreciation right by UPC. The final purchase price (excluding
transaction-related costs) was $425,200, comprised of $168,700 for the purchase
by the Company and repayment by UPC of UPC's PIK Notes, $33,200 allocated to the
purchase by UPC of 3.17 million shares of the Company's Class A Common Stock,
and $223,300 allocated to the purchase of Philips' interest in UPC. The UPC
Transaction was funded by a long-term revolving credit facility through UPC with
a syndicate of banks (the "Tranche A Facility") ($151,500), a bridge bank
facility through a subsidiary of UPC (the "Tranche B Facility") ($111,200), and
an equity investment by the Company of $162,500. UPC borrowed an additional
amount on its Tranche A Facility to refinance existing debt and to pay
transaction costs.
Until December 1997, the Company held a 98% interest in UAP. The remaining
portion of UAP was owned by Kiwi Cable Company BVI, Ltd. ("Kiwi"), UAP's former
partner in its New Zealand system, who exchanged its 50% interest in Saturn for
a 2% interest in UAP. In December 1997, the Company purchased from Kiwi the
remaining 2% interest in UAP for a purchase price of $600. In connection with
such acquisition, the Company granted Kiwi a six-month option to repurchase the
2% interest at a purchase price equal to $600 plus interest through the
repurchase date at a rate of 14% per annum.
On January 7, 1998, the Company initiated a tender offer to repurchase all
of its outstanding 14% senior secured notes due November 1999. The total
accreted amount of senior secured notes outstanding is expected to be
approximately $471,000 as of the expiration date of February 4, 1998 compared to
the tender price of approximately $531,000 as of that date, assuming 100%
participation in the tender offer. The tender offer is contingent upon the
successful completion of replacement financing, and is subject to a minimum
participation rate of 90%, which the Company may waive.
13
<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. In addition, effective December 11, 1997,
the Company will begin consolidating UPC, which will dramatically affect the
future results of operations of the Company.
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 indentures governing UIH A/P's senior notes permit 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.
The Company incurred a net loss during the nine months ended November 30,
1997 of $158,059, which includes non-cash items such as depreciation and
amortization expense totaling $61,953 and accretion of interest on the UIH and
UIH A/P senior notes and amortization of debt offering costs totaling $80,562.
Cash and cash equivalents increased $142,022 from $68,784 as of February
28, 1997 to $210,806 as of November 30, 1997. Principal sources of cash during
the nine months ended November 30, 1997 included $211,125 from the sale of the
Company's Argentine cable systems, $110,000 of borrowings under the UIH LA
Credit Agreement, $65,971 of borrowings on the Austar Bank Facility, $38,000
from the UIH LA Revolving Credit Facility, net proceeds from the net change in
short-term investments of $42,123, $29,925 gross proceeds from the issuance of
the UIH A/P senior notes in September 1997, $20,336 from the purchase of a 35%
interest in Saturn by Sasktel and $19,509 of repayments on notes receivable and
other sources.
During the nine months ended November 30, 1997, cash was used principally
for repayment of debt under the UIH LA Credit Agreement of $110,000, purchases
of property, plant and equipment totaling $74,504 to continue the build-out of
existing projects, primarily Austar, payments on the Company's seller notes for
Comodoro, Trelew, Santa Fe and Bahia Blanca, Argentina totaling $46,351,
investments in the Company's affiliated companies totaling $29,969, payment of
construction payables that existed as of February 28, 1997 totaling $29,385,
cash contributed towards the purchase of the Company's interests in Comodoro,
Trelew and Santa Fe, Argentina totaling $26,570, debt financing costs of $39,253
and other uses, and the funding of operating activities of $38,935 during the
period.
The Company incurred a net loss during the nine months ended November 30,
1996 of $59,244, which includes non-cash items such as depreciation and
amortization expense totaling $16,773 and accretion of interest on the UIH and
UIH A/P senior notes and amortization of debt offering costs totaling $53,574.
Cash and cash equivalents increased $25,488 from $112,218 as of February
29, 1996 to $137,706 as of November 30, 1996. Principal sources of cash during
this period included $225,115 gross proceeds from the issuance of the UIH A/P
senior notes in May 1996, $78,098 from the sale of Net Sao Paulo, which was
satisfied with $43,098 in cash at closing and $35,000 in payments on a note
14
<PAGE>
receivable, $19,795 of an increase in construction payables and $28,444 of
repayments on other notes receivable and other sources.
During the nine months ended November 30, 1996, cash was used principally
for the purchase of property, plant and equipment totaling $118,749 to construct
Austar's and Telefenua's systems, the purchase of net short-term investments of
$51,262, the purchases of (i) an additional 35% equity interest in STX for cash
of $23,292 and a note payable of $7,263 and (ii) a 100% interest in Bahia Blanca
for cash of $26,382 and a note payable of $26,138, investments in the Company's
affiliated companies totaling $44,540, $37,356 of repayments on other debt,
offering costs and other uses, and the funding of operating activities of
$24,383 during the period.
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.
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 Fundings
------------------------------------------------------------
Total Portion Remaining
Expected Funded as of as of
Operating System Type of Project Fundings November 30, 1997 November 30, 1997
- ---------------- --------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
UPC Cable systems $171,059 $171,059 $ --
Monor Communications Telephony/cable systems 26,580 26,580 --
IPS Programming 12,864 12,864 --
Tara Television Programming 10,142 6,232 3,910
-------- -------- ------
$220,645 $216,735 $3,910
======== ======== ======
</TABLE>
On December 11, 1997, the Company contributed $162,500 to UPC as part of
the UPC Transaction (see Note 6). The Company currently does not expect to
contribute additional capital to UPC for its on-going operating or development
requirements, 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, including the Tranche A Facility (see Note 6). At
this time, the Company does not know which acquisition or other development
projects UPC will pursue and is unable to estimate the amount of funds that will
be necessary for UPC to develop the projects it chooses to pursue.
In addition, the Company had total expected fundings of $4,780 related to
Teleport. As of November 30, 1997, the Company had remaining projected fundings
of $2,039, representing the Company's guarantee of affiliate debt. The Company
has agreed to terminate its investment in Teleport and is expected to fund the
remaining $2,039 during the fourth quarter of fiscal 1998.
The following table summarizes UIH LA's remaining projected funding
requirements for its projects:
<TABLE>
<CAPTION>
Projected Fundings
------------------------------------------------------------
Total Portion Remaining
Expected Funded as of as of
Operating System Type of Project Fundings November 30, 1997 November 30, 1997
- ---------------- --------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
VTRH Cable systems $ 94,243 $ 91,360 $ 2,883(1)
Megapo Cable systems 30,785 30,785 --
United Family Communications Programming 21,300 7,660 13,640
Cable Star Cable system 12,839 6,906 5,933
TVSB MMDS 8,060 6,060 2,000
Jundiai TV Cable system 5,841 5,841 --
TV Cable SRL Cable system 850 798 52
-------- -------- -------
$173,918 $149,410 $24,508
======== ======== =======
</TABLE>
(1) In 1998, the Company has an option to increase its ownership interest VTRH
to 50% based upon a revaluation of the properties contributed. Thus, the
Company could fund additional amounts to increase its ownership percentage
(subject to maximum and minimum values) of the joint venture.
15
<PAGE>
In October 1997, UIH LA repaid the outstanding balance of $110,000 under
the UIH LA Credit Agreement with the proceeds from the sale of the Argentine
assets. In November 1997, UIH LA entered into an amended and restated credit
agreement with a bank for a revolving credit facility of up to $40,000. As of
November 30, 1997, UIH LA had borrowed $38,000 on this facility. UIH LA will
fund the majority of its remaining project requirements through proceeds from
the sale of certain non-core assets and/or proceeds from further investments by
UIH or other financial or strategic partners.
The following table summarizes UAP's remaining projected funding
requirements for its projects:
<TABLE>
<CAPTION>
Projected Fundings
----------------------------------------------------------
Total Portion Remaining
Expected Funded as of as of
Operating System Type of Project Fundings November 30, 1997 November 30, 1997
- ---------------- --------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
AUSTRALIA/PACIFIC:
Austar MMDS/DTH system $330,778 $214,378 $116,400(1)
Saturn Cable system 80,095 28,376 51,719
Telefenua MMDS 17,400 16,737 663
XYZ Programming 15,000 13,675 1,325
United Wireless Mobile data services 8,226 7,637 589
OTHER UAP PROJECTS:
SCS Cable system 14,038 9,442 4,596
HITV Microwave relay network 6,600 5,980 620
-------- -------- --------
$472,137 $296,225 $175,912
======== ======== ========
</TABLE>
(1) The remaining fundings for Austar include the Company's portion as well as
future amounts expected from the Austar Bank Facility. If Austar does not
secure the expected financing, UAP may raise additional capital through
capital contributions from the Company, further issuances of debt either by
UAP, UIH A/P or its operating companies, by the sale of all or a part of
its equity in certain of its operating subsidiaries or through the exercise
of the 488,000 warrants issued in November 1997, which would result in
proceeds of approximately $5,100 upon exercise.
In September 1997, UIH A/P issued an additional $45,000 aggregate principal
amount of its 14% senior discount notes due 2006. Gross proceeds from the sale
of these notes totaled $29,925. UIH A/P plans to use the proceeds from the sale
to fund capital expenditure and working capital requirements of its subsidiaries
and affiliates as permitted by the terms of the UIH A/P indentures.
To the extent the operating companies in the Asia/Pacific region fund their
construction and other costs through project financing, UAP's portion of
estimated additional funding would be reduced proportionately. In addition to
the Austar Bank Facility and cash on hand, UAP may raise additional capital
through capital contributions from the Company, further issuances of debt either
by UAP, UIH A/P or its operating companies, or by the sale of all or a part of
its equity in certain of its operating subsidiaries. The Company is negotiating
to sell all or a portion of its interest in Telefenua, the proceeds of which
would be used to fund its other businesses. There can be no assurance that the
Company will be successful in completing this sale. Both UIH A/P's indentures
and UIH's indentures place restrictions on UAP and certain of its subsidiaries
with respect to the amount of additional debt each may incur. UIH A/P and all of
its operating companies are currently restricted under the UIH indentures. UIH
A/P, Austar and Telefenua are restricted under UIH A/P's indentures. The
restrictions imposed by the indentures will be eliminated upon the retirement of
UIH's notes at their maturity in November 1999 and upon retirement of UIH A/P's
notes at their maturity in May 2006.
Because the Company and UIH A/P do not currently have positive 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 through 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 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.
16
<PAGE>
Australis Media Limited ("Australis"), Austar's primary supplier of
programming, has engaged in a rapid roll-out of service that has required a
significant amount of capital and has strained its liquidity. In December 1997,
Australis secured a $20,000 note to meet its short-term funding needs. If
Australis is unable to make arrangements to satisfy its long-term capital needs,
Australis may have difficulty meeting contractual obligations with respect to
the four non-XYZ Galaxy channels distributed directly by Australis. The Company
believes that if Austar is no longer able to obtain the four Galaxy channels
provided by Australis on an exclusive basis and the Company is required to seek
replacement programming, it could have access to the same programming directly
from the suppliers of such four Galaxy channels or sufficient alternative
programming on competitive terms.
RESULTS OF OPERATIONS
SERVICE AND OTHER REVENUE. The Company's service and other revenue increased
$15,910 and $53,842 for the three and nine months ended November 30, 1997,
respectively, compared to the amounts for the corresponding periods in the prior
year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
November 30, November 30,
-------------------------- ----------------------------
1997 1996 1997 1996
------- ------ ------- -------
<S> <C> <C> <C> <C>
Asia/Pacific................................................. $18,341 $7,350 $49,052 $13,220
Latin America................................................ 5,000 89 18,648 573
Europe and other............................................. 19 11 19 84
------- ------ ------- -------
Total service and other revenue......................... $23,360 $7,450 $67,719 $13,877
======= ====== ======= =======
</TABLE>
ASIA/PACIFIC
------------
AUSTAR
Service and other revenue for Austar increased $10,568, or 164.7%, from
$6,418 for the three months ended September 30, 1996 to $16,986 for the
three months ended September 30, 1997. This increase was primarily due to
subscriber growth (178,832 at September 30, 1997 compared to 60,276 at
September 30, 1996) as Austar continues to roll-out its services.
Service and other revenue for Austar increased $34,966, or 331.6%, from
$10,544 for the nine months ended September 30, 1996 to $45,510 for the
nine months ended September 30, 1997. This increase is due to the
aforementioned subscriber growth.
SATURN
The Company began consolidating the results of Saturn effective July 1,
1996. Accordingly, the Company reported no service revenue for Saturn for
the six months ended June 30, 1996. For the three and nine months ended
September 30, 1997, Saturn reported service revenue of $133 and $314,
respectively, compared with service revenue of $44 and $148 for the
corresponding periods in 1996. The increase each period was primarily due
to an increase in subscribers (2,829 at September 30, 1997 compared to
1,235 at September 30, 1996).
TELEFENUA
Telefenua's service revenue increased to $1,088 and $2,963 from $893
and $2,632 for the three and nine months ended September 30, 1997 and 1996,
respectively. The increase was primarily attributable to subscriber growth
(6,257 at September 30, 1997 compared to 4,678 at September 30, 1996).
LATIN AMERICA
-------------
The Company consolidated the results of Bahia Blanca effective November
1, 1996 through the eight months ended August 31, 1997. Accordingly, the
Company reported no revenue for Bahia Blanca for the three and nine months
ended September 30, 1996. Bahia Blanca's revenue, consisting primarily of
service fees, was $4,584 and $17,627 for the three and nine months ended
17
<PAGE>
September 30, 1997. The remainder of Latin America's revenue for the three
and nine months ended September 30, 1997, totaling $416 and $1,021, was
attributable to TV Cable SRL and Cable Star.
MANAGEMENT FEE INCOME FROM RELATED PARTIES. Management fee income decreased $12
and increased $96 during the three and nine months ended November 30, 1997,
respectively, compared to the amounts for the corresponding periods in the prior
year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
November 30, November 30,
-------------------------- --------------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Asia/Pacific................................................. $200 $(11) $321 $152
Latin America................................................ (25) 52 456 408
Europe and other............................................. (61) 85 75 196
---- ---- ---- ----
Total management fee income from related parties........ $114 $126 $852 $756
==== ==== ==== ====
</TABLE>
The decrease in management fee revenue for the three months ended November
30, 1997 was due to an adjustment for the elimination of management fee revenue
from related parties.
SYSTEM OPERATING EXPENSE. System operating expense increased $10,708 and $31,295
during the three and nine months ended November 30, 1997, respectively, compared
to the amounts for the corresponding periods in the prior year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
November 30, November 30,
-------------------------- --------------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Asia/Pacific................................................. $12,996 $6,239 $34,060 $12,983
Latin America................................................ 3,396 173 8,778 392
Europe and other............................................. 932 204 2,382 550
------- ------ ------- -------
Total system operating expense.......................... $17,324 $6,616 $45,220 $13,925
======= ====== ======= =======
</TABLE>
ASIA/PACIFIC
------------
AUSTAR
Operating expense for Austar increased $6,545, or 135.5%, from $4,830
for the three months ended September 30, 1996 to $11,375 for the three
months ended September 30, 1997. This increase was due to an increase in
satellite programming fees and copyright costs totaling $4,088 which
corresponds to the increase in subscribers and additional basic programming
services, an increase in salaries and benefits of $206 as a result of
additional personnel to support Austar's launch of local and state offices
in its markets, an increase in customer subscriber management expenses of
$914 related to volume increases in billing and collections, with the
remainder due to increases in system travel, maintenance, vehicle costs and
management fees.
Operating expense for Austar increased $19,730, or 195.1%, from $10,111
for the nine months ended September 30, 1996 to $29,841 for the nine months
ended September 30, 1997. This increase was due to an increase in satellite
programming fees and copyright costs totaling $12,108 which corresponds to
the increase in subscribers and additional basic programming services, an
increase in salaries and benefits of $1,677 as a result of additional
personnel to support Austar's launch of local and state offices in its
markets, an increase in customer subscriber management expenses of $2,259
related to volume increases in billing and collections, with the remainder
due to increases in system travel, maintenance, vehicle costs and
management fees.
Austar is experiencing high operating expense relative to service
revenue due to certain fixed operating expenses. Austar expects operating
expense as a percentage of service revenue to decline as start-up costs
decrease and as certain fixed operating expenses are spread over expected
increases in service revenues.
18
<PAGE>
SATURN
The Company began consolidating the results of Saturn effective July 1,
1996. Accordingly, the Company reported no operating expense for Saturn for
the six months ended June 30, 1996. For the three and nine months ended
September 30, 1997, Saturn reported system operating expense of $802 and
$2,461, respectively, compared with system operating expense of $599 and
$1,319 for the corresponding periods in 1996. System operating personnel
expenses decreased $85 and increased $296 for the three and nine months
ended September 30, 1997, respectively, in order to support Saturn's
build-out of its hybrid fiber coaxial network in the Wellington area.
TELEFENUA
Operating expense at Telefenua decreased to $566 and $1,451 for the
three and nine month periods ended September 30, 1997, respectively, from
$569 and $1,642 for the corresponding periods in 1996. These decreases were
primarily due to decreases in technical-related repairs and maintenance
costs as well as a weakening in the local currency, partially offset by
increased programming costs associated with the increase in subscribers.
LATIN AMERICA
-------------
The Company consolidated the results of Bahia Blanca effective November
1, 1996 through the eight months ended August 31, 1997. Accordingly, the
Company reported no system operating expense for the three and nine months
ended September 30, 1996. Bahia Blanca's system operating expense for the
three and nine months ended September 30, 1997 was $3,184 and $8,077,
respectively, consisting primarily of programming expenses and salaries.
SYSTEM SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. System selling, general and
administrative expense increased $6,289 and $24,437 during the three and nine
months ended November 30, 1997, respectively, compared to the amounts for the
corresponding periods in the prior year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
November 30, November 30,
--------------------------- --------------------------
1997 1996 1997 1996
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Asia/Pacific................................................. $14,220 $9,383 $37,025 $19,625
Latin America................................................ 1,468 146 6,385 403
Europe and other............................................. 411 281 1,612 557
------- ------ ------- -------
Total system selling, general and
administrative expense................................ $16,099 $9,810 $45,022 $20,585
======= ====== ======= =======
</TABLE>
ASIA/PACIFIC
------------
AUSTAR
System selling, general and administrative expense for Austar increased
$4,819, or 64.4%, from $7,482 for the three months ended September 30, 1996
to $12,301 for the three months ended September 30, 1997. This increase was
primarily due to an increase in salaries associated with the National
Customer Operations Center and Austar's corporate headquarters of $1,519 as
a result of additional personnel necessary to support the increase in
subscribers, an increase in marketing costs related to print, radio and
television advertisements of $1,484 associated with subscriber acquisition
and an increase in direct sales commissions of $393 due to subscriber
growth. In addition, $855 of the increase related to one-time charges for
the restructuring and consolidation of various regional offices.
System selling, general and administrative expense for Austar increased
$15,605, or 95.7%, from $16,305 for the nine months ended September 30,
1996 to $31,910 for the nine months ended September 30, 1997. This increase
was primarily due to an increase in salaries associated with the National
Customer Operations Center and Austar's corporate headquarters of $5,526 as
a result of additional personnel necessary to support the increase in
subscribers, an increase in marketing costs related to print, radio and
television advertisements of $4,413 associated with subscriber acquisition
and an increase in direct sales commission of $2,261 due to subscriber
growth. In addition, $855 of the increase related to one-time charges for
the restructuring and consolidation of various regional offices.
19
<PAGE>
Austar expects that system selling, general and administrative expense
as a percentage of service revenue will continue to decline over the
remainder of 1997 as certain fixed expenses are spread over expected
increases in service revenues.
SATURN
The Company began consolidating the results of Saturn effective July 1,
1996. Accordingly, the Company reported no system selling, general and
administrative expense for Saturn for the six months ended June 30, 1996.
Saturn's system selling, general and administrative expense was $934 and
$2,330 for the three and nine months ended September 30, 1997,
respectively, compared to $889 and $1,690 for the comparable periods in
1996. System selling and marketing salaries and expenses increased $111 and
$524 for the three and nine months ended September 30, 1997, respectively,
related to increases in direct sales commissions due to subscriber growth
and marketing/promotion costs for subscriber acquisition.
TELEFENUA
System selling, general and administrative expense consolidated by the
Company from Telefenua decreased to $492 and $1,503 for the three and nine
months ended September 30, 1997, respectively, from $691 and $1,959 for the
same periods in the prior year. These decreases were primarily due to a
reduction in marketing costs during 1997 as well as a weakening of the
local currency.
LATIN AMERICA
-------------
The Company consolidated the results of Bahia Blanca effective November
1, 1996 through the eight months ended August 31, 1997. Accordingly, the
Company reported no system general and administrative expense for Bahia
Blanca for the three and nine months ended September 30, 1996. Bahia
Blanca's system general and administrative expense for the three and nine
months ended September 30, 1997 was $1,231 and $5,626, respectively,
consisting primarily of marketing-related costs and salaries with the
remainder consisting of billing, office and utility costs.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE. Corporate general and
administrative expense increased $764 and $2,937 during the three and nine
months ended November 30, 1997, respectively, compared to the amounts for the
corresponding periods in the prior year. The increase was 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 and the closing of the UPC Transaction and charges related to
employee severance agreements.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization expense
increased $15,060 and $45,180 during the three and nine months ended November
30, 1997, respectively, compared to the amounts for the corresponding periods in
the prior year. The increase was 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 through the eight
months ended August 31, 1997.
EQUITY IN LOSSES OF AFFILIATED COMPANIES, NET. The Company recognized net equity
in losses of affiliated companies of $15,979 and $53,521 for the three and nine
months ended November 30, 1997, respectively, compared to $11,483 and $33,224
for the same periods in the prior year as follows:
20
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended November 30, 1997 Three Months Ended November 30, 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% $ (9,924) 50.0% $ (5,058)
Monor Communications.................... 48.6% (468) 48.6% (237)
IPS..................................... 33.5% (544) 33.5% (1,066)
LATIN AMERICA
United Family Communications............ 50.0% (2,546) -- --
Megapo.................................. 49.0% (909) 49.0% (50)
TVSB.................................... 40.0% (141) 40.0% (306)
VTRH(1)................................. 34.0% (1,373) 34.0% (1,965)
Cablevision(1).......................... -- -- -- (1,073)
STX(1).................................. -- -- -- 520
ASIA/PACIFIC
XYZ..................................... 25.0% (557) 25.0% (1,932)
OTHER...................................... 40.0-49.0% 483 40.0-49.0% (316)
-------- -------
Total equity in losses of affiliated
companies, net....................... $(15,979) $(11,483)
======== ========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended November 30, 1997 Nine Months Ended November 30, 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% $(35,088) 50.0% $(16,226)
Monor Communications.................... 48.6% (2,840) 48.6% (1,424)
IPS..................................... 33.5% (2,228) 33.5% (2,999)
LATIN AMERICA
United Family Communications............ 50.0% (4,186) -- --
Megapo.................................. 49.0% (1,103) 49.0% (258)
TVSB.................................... 40.0% (410) 40.0% (1,083)
VTRH(1)................................. 34.0% (5,140) 34.0% (1,965)
Cablevision(1).......................... -- -- -- (2,687)
STX(1).................................. -- -- -- 1,050
Net Sao Paulo(2)........................ -- -- -- (1,649)
ASIA/PACIFIC
Saturn(3)............................... -- -- 100.0% (928)
XYZ..................................... 25.0% (2,000) 25.0% (3,571)
OTHER...................................... 40.0-49.0% (526) 40.0-49.0% (1,484)
-------- --------
Total equity in losses of affiliated
companies, net........................ $(53,521) $(33,224)
======== ========
</TABLE>
(1) The Company contributed its interests in STX and Cablevision to its 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% interest in UAP.
21
<PAGE>
RESULTS OF OPERATIONS - UPC
---------------------------
REVENUE. During the nine months ended September 30, 1997, as compared to
September 30, 1996, revenue increased $25,628 to $128,898 from $103,270, a
24.8% increase. A substantial portion of this increase was directly
attributable to the increase in ownership of Norkabelgruppen AS
("Norkabel") and the acquisition of Janco Kabel-TV AS ("Janco") in Norway.
Norkabel was acquired effective October 1, 1996 and Janco was acquired
effective January 1, 1997, and were not included in the September 30, 1996
results. The remaining increase in revenue was comprised of increased
revenue in Austria and the Czech Republic from subscriber growth and in the
Netherlands from an increase in the average revenue per subscriber. In
addition, revenue for the period ended September 30, 1997 includes revenue
from several of UPC's development systems including Portugal, France, the
Slovak Republic and Romania which were not included in the September 30,
1996 operating results. The increase in revenue was negatively impacted by
$20,840 due to fluctuations in exchange rates between 1996 and 1997.
OPERATING AND GENERAL AND ADMINISTRATIVE EXPENSE. During the nine months
ended September 30, 1997, as compared to September 30, 1996, operating and
general and administrative expense excluding depreciation increased $24,136
to $91,413 from $67,277, a 35.9% increase. A substantial portion of this
increase was directly attributable to the increase in ownership in Norkabel
and the acquisition of Janco which were not included in the September 30,
1996 results. The remaining increase was comprised primarily of operating
expenses related to development systems in Portugal, France, the Slovak
Republic and Romania. In addition, operating expenses during the nine
months ended September 30, 1997, as compared to September 30, 1996,
included expenses related to the introduction of new services including
tier programming in Austria, Belgium and the Netherlands and data services
in Austria and Belgium. During the nine months ended September 30, 1997,
UPC also established a reserve for its investment in Portugal of $5,155.
The increase in operating expense was positively impacted by $14,779 due to
fluctuations in exchange rates between 1996 and 1997.
NET OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION. During the nine
months ended September 30, 1997, as compared to September 30, 1996, net
operating income increased $1,492 to $37,485 from $35,993, a 4.1% increase.
A substantial portion of this increase was directly attributable to the
increase in ownership in Norkabel and the acquisition of Janco, which was
offset by net operating losses in Portugal, France and the Slovak Republic.
The increase in net operating income was negatively impacted by $6,061 due
to fluctuations in exchange rates between 1996 and 1997.
DEPRECIATION AND AMORTIZATION EXPENSE. During the nine months ended
September 30, 1997, as compared to September 30, 1996, depreciation and
amortization expense increased $15,979 to $56,096 from $40,117, the
majority of which was directly attributable to the increase in ownership in
Norkabel and the acquisition of Janco with the remainder attributable to
new development systems. This increase was positively impacted by $9,069
due to fluctuations in exchange rates between 1996 and 1997.
FOREIGN EXCHANGE LOSS. During the nine months ended September 30, 1997 and
1996, UPC recognized $20,258 and $7,287, respectively, in foreign exchange
losses related to the convertible loan notes due to Philips. These notes
are denominated in U.S. dollars; the increase in the loss was attributable
to the U.S. dollar to Dutch guilder exchange rate movement.
FINANCE EXPENSE. During the nine months ended September 30, 1997 and 1996,
finance expense increased $11,266 to $24,143 from $12,877 due to debt
acquired with the increase in ownership in Norkabel, additional debt to
finance the United Communications International acquisition, additional
interest costs associated with the Philips notes resulting from the change
in the Dutch guilder and the U.S. dollar average exchange rate and
additional debt to fund development projects and the corporate office.
OTHER ITEMS. Equity in losses of affiliated companies and other
miscellaneous expenses totaled $3,988 for the nine months ended September
30, 1997.
EXCHANGE RATE. The exchange rate between the Dutch guilder and the U.S.
dollar increased from 1.71 at September 30, 1996 to 1.98 at September 30,
1997. The average exchange rate between the Dutch guilder and the U.S.
dollar increased from 1.67 for the nine months ended September 30, 1996 to
1.94 for the nine months ended September 30, 1997.
22
<PAGE>
RESULTS OF OPERATIONS - UIH (Continued)
INTEREST INCOME. Interest income decreased $2,553 and $4,817 during the three
and nine months ended November 30, 1997, respectively, compared to the amounts
for the corresponding periods in the prior year. The decrease was 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 $9,634 and $34,882 during the three
and nine months ended November 30, 1997, respectively, compared to the amounts
for the corresponding periods in the prior year. For the nine months ended
November 30, 1997, this increase consisted primarily of interest expense of
$5,900 on the UIH senior notes and $15,060 on the UIH A/P senior notes as well
as amortization of debt offering costs of $5,859.
PROVISION FOR LOSSES ON INVESTMENT RELATED COSTS. Provision for losses on
investment related costs increased $918 and $6,548 during the three and nine
months ended November 30, 1997, respectively, compared to the amounts for the
corresponding periods 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 during the nine months ended November 30, 1997 was due to the
Company's write-off to fair market value of its investments in International
Broadcasting Corporation, Interactive Television Network and other investments
in the Asia/Pacific region due to permanent impairment.
YEAR 2000 CONVERSION
The Company has established a central committee to coordinate the
identification, evaluation and implementation of changes to computer systems and
applications necessary to achieve a year 2000 date conversion with no effect on
customers or disruption to business operations. These actions are necessary to
ensure that the systems and applications will recognize and process information
for the year 2000 and beyond. Major areas of potential business impact have been
identified and are being dimensioned, and initial conversion efforts are
underway. The Company also is communicating with suppliers, dealers, financial
institutions and others with which it does business to coordinate year 2000
conversion. The total cost of compliance and its effect on the Company's future
results of operations is being determined as part of the detailed conversion
planning. In addition, the Company could be materially adversely affected by the
failure of its vendors to achieve year 2000 date conversion.
23
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 5 - OTHER INFORMATION
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 September 30, 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:
Netherlands (Amsterdam)
Cable................ 569,000 562,433 519,848 92.4% 25.0% 142,250 140,608 129,962
Austria
Cable................ 844,200 630,549 434,066 68.8% 47.5% 400,995 299,511 206,181
Norway
Cable................ 529,924 456,441 318,327 69.7% 35.1-50.0% 227,414 194,696 135,183
Hungary (Kabelkom)
Cable................ 300,000 287,347 259,157 90.2% 25.0% 75,000 71,837 64,789
Israel
Cable................ 360,000 346,561 237,343 68.5% 11.6% 41,760 40,201 27,532
Ireland (PHL)
Cable/MMDS........... 355,000 349,609 128,594 36.8% 10.0% 35,500 34,961 12,859
Belgium
Cable................ 133,000 133,000 126,438 95.1% 50.0% 66,500 66,500 63,219
Netherlands (Eindhoven)
Cable................ 98,358 95,407 90,638 95.0% 50.0% 49,179 47,704 45,319
Malta
Cable................ 179,000 151,189 56,999 37.7% 12.5% 22,375 18,899 7,125
Czech Republic
Cable/MMDS/MATV...... 271,100 143,833 49,953 34.7% 50.0% 135,550 71,917 24,977
Romania
Cable................ 150,000 69,620 39,253 56.4% 25.5-45.0% 51,900 21,891 11,479
Slovak Republic
Cable................ 21,839 19,683 14,927 75.8% 37.5% 8,190 7,381 5,598
France (Marne la Vallee)
Cable................ 86,000 23,105 4,613 20.0% 49.5% 42,570 11,437 2,283
Spain (Santander)
Cable................ 74,235 58,763 3,503 6.0% 12.5% 9,279 7,345 438
Portugal
Cable................ 186,449 12,202 2,688 22.0% 50.0% 93,225 6,101 1,344
--------- --------- --------- --------- --------- ---------
Total UPC.......... 4,158,105 3,339,742 2,286,347 1,401,687 1,040,989 738,288
--------- --------- --------- --------- --------- ---------
UIH SYSTEMS:
Hungary (Monor Telefon)
Cable/Telephony(5)... 85,000 139,673 82,314 58.9% 46.3% 39,355 64,669 38,111
Spain (IPS)
Programming.......... N/A N/A 315,000 N/A 33.5% N/A N/A 105,525
Ireland (Tara
Television)
Programming(6)....... N/A N/A 148,403 N/A 100.0% N/A N/A 148,403
--------- --------- --------- --------- --------- ---------
Total Europe....... 4,243,105 3,479,415 2,832,064 1,441,042 1,105,658 1,030,327
--------- --------- --------- --------- --------- ---------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
As of September 30, 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 (UIH LA)
- ----------------------
Chile
Cable................ 2,321,000 1,472,890 359,153 24.4% 34.0% 789,140 500,783 122,112
Mexico
Cable................ 341,600 166,117 53,518 32.2% 49.0% 167,384 81,397 26,224
Brazil (Jundiai)
Cable................ 70,000 52,243 18,947 36.3% 46.3% 32,410 24,189 8,772
Brazil (Fortaleza)
MMDS................. 387,000 387,000 12,018 3.1% 40.0% 154,800 154,800 4,807
Peru
Cable................ 140,000 28,324 6,662 23.5% 97.7-100.0% 137,470 27,778 6,533
Latin America
Programming(8)....... N/A N/A 1,194,000 N/A 50.0% N/A N/A 597,000
--------- --------- --------- --------- --------- ---------
Total UIH LA...... 3,259,600 2,106,574 1,644,298 1,281,204 788,947 765,448
--------- --------- --------- --------- --------- ---------
ASIA/PACIFIC (UAP)
- ------------------
Australia (Austar)
MMDS/DTH............. 1,622,000 1,589,000 178,832 11.3% 98.0% 1,589,560 1,557,220 175,255
Philippines
Cable................ 600,000 174,650 64,790 37.1% 39.2% 235,200 68,463 25,398
Tahiti
MMDS................. 31,000 20,128 6,257 31.1% 88.2% 27,342 17,753 5,519
New Zealand
Cable................ 141,000 20,124 2,829 14.1% 63.7% 89,817 12,819 1,802
Australia (XYZ)
Programming.......... N/A N/A 524,000 N/A 24.5% N/A N/A 128,380
Australia (United
Wireless)
Wireless Data........ N/A N/A N/A N/A 98.0% N/A N/A N/A
China
Microwave Relay(13).. N/A N/A N/A N/A 48.0% N/A N/A N/A
--------- --------- --------- --------- --------- ---------
Total UAP.......... 2,394,000 1,803,902 776,708 1,941,919 1,656,255 336,354
--------- --------- --------- --------- --------- ---------
Total UIH.......... 9,896,705 7,389,891 5,253,070 4,664,165 3,550,860 2,132,129
========= ========= ========= ========= ========= =========
</TABLE>
25
<PAGE>
As of and for the Nine Months Ended
------------------------------------------
September 30, 1997 (In thousands)(1)
------------------------------------------
Net Long-
Income Adjusted Term
Revenue (Loss) EBITDA(2) Debt
-------- ------ --------- -----
EUROPE
- -------
UPC SYSTEMS:
Netherlands (Amsterdam)
Cable................ $ 36,482 $ (10,119) $ 12,337 $184,709
Austria
Cable(3)............. 60,925 19 30,725 --
Norway
Cable(4)............. 36,053 (13,355) 12,878 76,408
Hungary (Kabelkom)
Cable................ 18,817 1,615 6,253 --
Israel
Cable................ 75,457 11,869 37,621 4,210
Ireland (PHL)
Cable/MMDS........... 25,712 (2,497) 8,129 46,674
Belgium
Cable(3)............. 15,101 (648) 5,716 --
Netherlands (Eindhoven)
Cable................ 7,628 (955) 4,622 42,877
Malta
Cable................ 8,514 (1,030) 3,220 17,722
Czech Republic
Cable/MMDS/MATV...... 2,651 (8,302) (2,768) --
Romania
Cable................ 720 203 470 --
Slovak Republic
Cable................ 367 (360) (140) --
France (Marne la Vallee)
Cable................ 803 (2,686) (1,844) --
Spain (Santander)
Cable................ 362 (1,061) (658) --
Portugal
Cable................ 275 (2,615) (1,919) --
-------- --------- -------- --------
Total UPC.......... 289,867 (29,922) 114,642 372,600
-------- --------- -------- --------
UIH SYSTEMS:
Hungary (Monor Telefon)
Cable/Telephony(5)... 10,676 (6,266) 6,155 30,000
Spain (IPS)
Programming.......... 6,223 (6,778) (3,965) 3,500
Ireland (Tara
Television)
Programming(6)....... 20 (4,133) (3,973) --
-------- --------- -------- --------
Total Europe....... 306,786 (47,099) 112,859 406,100
-------- --------- -------- --------
26
<PAGE>
As of and for the Nine Months Ended
------------------------------------------
September 30, 1997 (In thousands)(1)
------------------------------------------
Net Long-
Income Adjusted Term
Revenue (Loss) EBITDA(2) Debt
-------- ------ --------- -----
LATIN AMERICA (UIH LA)
- ----------------------
Chile
Cable................ $ 83,505 $ (12,580) $ 16,365 $115,470
Mexico
Cable................ 7,141 133 1,900 233
Brazil (Jundiai)
Cable................ 5,471 16 1,602 77
Brazil (Fortaleza)
MMDS(7).............. 5,106 (827) 1,120 --
Peru
Cable................ 1,021 (1,056) (477) 99
Latin America
Programming(8)....... 26 (8,281) (8,358) 1,459
-------- --------- -------- --------
Total UIH LA...... 102,270 (22,595) 12,152 117,338
-------- --------- -------- --------
ASIA/PACIFIC (UAP)
- ------------------
Australia (Austar)
MMDS/DTH............. 43,527 (66,493) (13,920) 66,010
Philippines
Cable(9)............. 4,938 (553) 1,431 --
Tahiti
MMDS(10)............. 1,875 (1,441) 677 975
New Zealand
Cable................ 299 (5,173) (3,653) 21
Australia (XYZ)
Programming(12)...... 10,059 (7,190) (4,264) --
Australia (United
Wireless)
Wireless Data(12).... 258 (3,093) (2,182) --
China
Microwave Relay(13).. N/A N/A N/A N/A
-------- --------- -------- --------
Total UAP.......... 60,956 (83,943) (21,911) 67,006
-------- --------- -------- --------
Total UIH.......... $470,012 $(153,637) $103,100 $590,444
======== ========= ======== ========
27
<PAGE>
<TABLE>
<CAPTION>
As of June 30, 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:
Netherlands (Amsterdam)
Cable................ 567,000 558,642 522,594 93.5% 25.0% 141,750 139,661 130,649
Austria
Cable................ 842,100 627,952 432,315 68.8% 47.5% 399,998 298,277 205,350
Norway
Cable................ 529,924 454,442 317,356 69.8% 35.1-50.0% 227,414 193,696 134,711
Hungary (Kabelkom)
Cable................ 270,000 268,000 248,000 92.5% 25.0% 67,500 67,000 62,000
Israel
Cable................ 350,000 342,520 235,438 68.7% 11.7% 40,950 40,075 27,546
Ireland (PHL)
Cable/MMDS........... 355,000 346,853 125,259 36.1% 10.0% 35,500 34,685 12,526
Belgium
Cable................ 133,000 133,000 126,973 95.5% 50.0% 66,500 66,500 63,487
Netherlands (Eindhoven)
Cable................ 92,190 89,425 84,950 95.0% 50.0% 46,095 44,713 42,475
Malta
Cable................ 179,000 147,485 54,018 36.6% 21.3% 38,127 31,414 11,506
Czech Republic
Cable/MMDS/MATV...... 258,600 137,899 40,232 29.2% 50.0% 129,300 68,950 20,116
Romania
Cable................ 150,000 68,907 40,427 58.7% 25.5-45.0% 51,900 21,709 11,768
Slovak Republic
Cable................ 21,839 17,287 13,499 78.1% 37.5% 8,190 6,483 5,062
France (Marne la Vallee)
Cable................ 86,000 21,225 3,749 17.7% 49.8% 42,828 10,570 1,867
Spain (Santander)
Cable................ 74,235 58,763 3,503 6.0% 12.5% 9,279 7,345 438
Portugal
Cable................ 186,449 12,195 2,833 23.2% 50.0% 93,225 6,098 1,417
--------- --------- --------- --------- --------- ---------
Total UPC.......... 4,095,337 3,284,595 2,251,146 1,398,556 1,037,176 730,918
--------- --------- --------- --------- --------- ---------
UIH SYSTEMS:
Hungary (Monor Telefon)
Cable/Telephony(5)... 85,000 129,815 76,006 58.5% 46.3% 39,355 60,104 35,190
Spain (IPS)
Programming.......... N/A N/A 229,000 N/A 33.5% N/A N/A 76,715
Ireland (Tara
Television)
Programming(6)....... N/A N/A 111,279 N/A 100.0% N/A N/A 111,279
--------- --------- --------- --------- --------- ---------
Total Europe....... 4,180,337 3,414,410 2,667,431 1,437,911 1,097,280 954,102
--------- --------- --------- --------- --------- ---------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
As of June 30, 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 (UIH LA)
- ----------------------
Chile
Cable................ 2,321,000 1,467,478 344,590 23.5% 34.0% 789,140 498,943 117,161
Mexico
Cable................ 341,600 166,117 52,536 31.6% 49.0% 167,384 81,397 25,743
Brazil (Jundiai)
Cable................ 70,000 47,754 16,766 35.1% 46.3% 32,410 22,110 7,763
Brazil (Fortaleza)
MMDS................. 387,000 387,000 12,146 3.1% 40.0% 154,800 154,800 4,858
Peru
Cable................ 140,000 23,034 5,319 23.1% 97.7-100.0% 137,470 22,567 5,210
--------- --------- --------- --------- --------- ---------
Total UIH LA...... 3,259,600 2,091,383 431,357 1,281,204 779,817 160,735
--------- --------- --------- --------- --------- ---------
ASIA/PACIFIC (UAP)
- ------------------
Australia (Austar)
MMDS/DTH............. 1,622,000 1,589,000 149,495 9.4% 98.0% 1,589,560 1,557,220 146,505
Philippines
Cable................ 600,000 170,511 62,537 36.7% 39.2% 235,200 66,840 24,515
Tahiti
MMDS................. 31,000 19,728 6,080 30.8% 88.2% 27,342 17,400 5,363
New Zealand
Cable................ 141,000 16,113 2,288 14.2% 98.0% 138,180 15,791 2,242
Australia (XYZ)
Programming.......... N/A N/A 443,073 N/A 24.5% N/A N/A 108,553
Australia (United
Wireless)
Wireless Data........ N/A N/A N/A N/A 98.0% N/A N/A N/A
China
Microwave Relay(13).. N/A N/A N/A N/A 48.0% N/A N/A N/A
--------- --------- --------- --------- --------- ---------
Total UAP.......... 2,394,000 1,795,352 663,473 1,990,282 1,657,251 287,178
--------- --------- --------- --------- --------- ---------
Total UIH.......... 9,833,937 7,301,145 3,762,261 4,709,397 3,534,348 1,402,015
========= ========= ========= ========= ========= =========
</TABLE>
29
<PAGE>
As of and for the Six Months Ended
------------------------------------------
June 30, 1997 (In thousands)(1)
------------------------------------------
Net Long-
Income Adjusted Term
Revenue (Loss) EBITDA(2) Debt
-------- ------ --------- -----
EUROPE
- -------
UPC SYSTEMS:
Netherlands (Amsterdam)
Cable................ $ 24,199 $ (5,627) $ 9,896 $184,709
Austria
Cable(3)............. 40,913 874 20,885 --
Norway
Cable(4)............. 24,916 (5,765) 9,320 76,408
Hungary (Kabelkom)
Cable................ 12,474 1,529 4,791 --
Israel
Cable................ 49,473 8,363 25,290 7,276
Ireland (PHL)
Cable/MMDS........... 17,156 1,533 6,352 46,674
Belgium
Cable(3)............. 9,802 (326) 3,859 --
Netherlands (Eindhoven)
Cable................ 4,972 (711) 3,016 42,625
Malta
Cable................ 5,223 (747) 2,099 16,456
Czech Republic
Cable/MMDS/MATV...... 1,699 (5,664) (1,886) --
Romania
Cable................ 451 135 300 --
Slovak Republic
Cable................ 208 (180) (72) --
France (Marne la Vallee)
Cable................ 450 (1,852) (1,396) --
Spain (Santander)
Cable................ 241 (707) (438) --
Portugal
Cable................ 165 (2,058) (1,547) --
-------- -------- ------- --------
Total UPC.......... 192,342 (11,203) 80,469 374,148
-------- -------- ------- --------
UIH SYSTEMS:
Hungary (Monor Telefon)
Cable/Telephony(5)... 7,137 (4,920) 4,020 30,000
Spain (IPS)
Programming.......... 3,724 (4,973) (3,133) 3,500
Ireland (Tara
Television)
Programming(6)....... -- (2,749) (2,650) --
-------- -------- ------- --------
Total Europe....... 203,203 (23,845) 78,706 407,648
-------- -------- ------- --------
30
<PAGE>
As of and for the Six Months Ended
------------------------------------------
June 30, 1997 (In thousands)(1)
------------------------------------------
Net Long-
Income Adjusted Term
Revenue (Loss) EBITDA(2) Debt
-------- ------ --------- -----
LATIN AMERICA (UIH LA)
- ----------------------
Chile
Cable................ $ 53,313 $ (8,860) $10,620 $ 7,578
Mexico
Cable................ 4,525 1,281 1,304 136
Brazil (Jundiai)
Cable................ 3,656 306 1,324 97
Brazil (Fortaleza)
MMDS(7).............. 3,445 (452) 935 --
Peru
Cable................ 605 (756) (429) 99
-------- -------- ------- --------
Total UIH LA...... 65,544 (8,481) 13,754 7,910
-------- -------- ------- --------
ASIA/PACIFIC (UAP)
- ------------------
Australia (Austar)
MMDS/DTH............. 26,767 (39,046) (8,106) 39,626
Philippines
Cable(9)............. 3,206 137 1,094 --
Tahiti
MMDS(10)............. 1,875 (1,441) 71 1,029
New Zealand
Cable(11)............ 167 (3,694) (2,466) 29
Australia (XYZ)
Programming(12)...... 6,277 (5,007) (3,111) --
Australia (United
Wireless)
Wireless Data(12).... 124 (1,992) (1,319) --
China
Microwave Relay(13).. N/A N/A N/A N/A
-------- -------- ------- --------
Total UAP.......... 38,416 (51,043) (13,837) 40,684
-------- -------- ------- --------
Total UIH.......... $307,163 $(83,369) $78,623 $456,242
======== ======== ======= ========
31
<PAGE>
(Monetary amounts stated in thousands)
(1) The financial information presented above has been taken from unaudited
financial information of the respective operating companies that were
providing service as of September 30, 1997. Certain information presented
above has been derived from financial statements prepared in accordance
with foreign generally accepted accounting principles which differ from
U.S. generally accepted accounting principles. In addition, certain amounts
have been converted to U.S. dollars using the September 30, 1997 exchange
rates for the convenience translation. Operating systems in the following
countries reported to the Company in U.S. dollars: Ireland (Tara only),
Hungary, Spain (IPS only), Brazil, Mexico, Chile, Peru and Tahiti.
Therefore, the financial information presented above for these countries
was not affected by the convenience translation.
(2) 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.
(3) In addition to the debt noted above, Austria and Belgium had intercompany
loans, which eliminated upon consolidation, of BF3,611,250 ($99,055) and
BF3,900,000 ($106,975) as of September 30 and June 30, 1997, respectively.
UPC also had a subordinated convertible loan payable to Philips (including
accrued interest) totaling NLG323,330 ($163,174) and NLG313,800 ($158,365)
as of September 30 and June 30, 1997, respectively.
(4) In addition to the debt noted above, Norkabel had loans payable to UPC
(including accrued interest) of $123,136 and $121,084 as of September 30
and June 30, 1997, respectively.
(5) The Company owns a 48.6% interest in Monor Communications Group, Inc. which
holds a 95.27% interest in the operating company Monor Telefon. The number
of homes passed and basic subscribers includes the sum of cable and
telephony statistics in Monor Telefon's service area.
(6) Tara Television offers a free introductory period for its channel. Tara
Television began collecting revenues in August 1997.
(7) TVSB had a loan payable to the Company of $792 as of September 30 and June
30, 1997.
(8) United Family Communications launched service in June 1997. United Family
Communications offers a free introductory period for its service;
therefore, the number of basic subscribers presented represents the
subscribers under contract at the end of the period.
(9) SCS had convertible loans payable to the Company of P274,920 ($8,003) and
P244,223 ($7,110) as of September 30 and June 30, 1997, respectively.
(10) In addition to the debt noted above, Telefenua had loans payable to the
Company of $12,128 and $11,791 as of September 30 and June 30, 1997,
respectively.
(11) In addition to the debt noted above, Saturn had a loan payable to the
Company totaling NZ$29,300 ($18,756) as of June 30, 1997. This loan was
subsequently converted to equity as part of the July transaction with
SaskTel.
(12) XYZ and United Wireless show capital contributions as shareholder loans
which totaled A$69,378 ($50,354) and A$6,362 ($4,618), respectively, as of
September 30, 1997 and A$64,030 ($46,473) and A$5,490 ($3,985),
respectively, as of June 30, 1997.
(13) The Company has a 49% interest in HITV, a joint venture that owns a
microwave relay system in the Hunan Province that transmits two provincial
channels to approximately 400,000 cable television homes in the region.
HITV launched service in July 1997.
32
<PAGE>
ITEM 4 - SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
On November 19, 1997, the annual meeting of the stockholders of the Company
was held for the purpose of (i) the election of four Directors in Class I to
serve until the 2000 annual stockholders' meeting and one Director in Class II
to serve until the 1998 annual stockholders' meeting, (ii) the ratification of
the Company's 1993 Stock Option Plan and approval of an amendment to increase
the number of shares of Class A Common Stock reserved for issuance under the
Plan by 500,000 to 3,800,000 shares and (iii) the ratification of the
appointment of Arthur Andersen LLP to serve as independent auditors for the
Company for the fiscal year ending February 28, 1998.
<TABLE>
<CAPTION>
The number of votes cast were as follows for the election of Mr. Albert M. Carollo as Class I Director:
<S> <C>
For..................................................................................................... 24,168,428
Withheld................................................................................................ 355,922
The number of votes cast were as follows for the election of Mr. Lawrence J. DeGeorge as Class I Director:
For..................................................................................................... 24,168,228
Withheld................................................................................................ 356,122
The number of votes cast were as follows for the election of Mr. Antony P. Ressler as Class I Director:
For..................................................................................................... 24,174,813
Withheld................................................................................................ 349,537
The number of votes cast were as follows for the election of Mr. Mark L. Schneider as Class I Director:
For..................................................................................................... 24,171,399
Withheld................................................................................................ 352,951
The number of votes cast were as follows for the election of Mr. Lawrence F. DeGeorge as Class II Director:
For..................................................................................................... 24,173,699
Withheld................................................................................................ 350,651
The terms of Messrs. William J. Elsner, Bruce H. Spector, Joseph E. Giovanini, Curtis W. Rochelle and
Gene W. Schneider as Directors of the Company continued after the meeting.
The number of votes cast were as follows for the ratification and amendment of the Company's 1993
Stock Option Plan:
For..................................................................................................... 18,476,649
Against................................................................................................. 5,991,001
Withheld................................................................................................ 56,700
Abstentions............................................................................................. --
Broker non-votes........................................................................................ --
The number of votes cast were as follows for the ratification of the appointment of
Arthur Andersen LLP as the Company's independent auditors:
For..................................................................................................... 24,323,275
Against................................................................................................. 195,375
Withheld................................................................................................ 5,700
Abstentions............................................................................................. --
Broker non-votes........................................................................................ --
</TABLE>
33
<PAGE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Securities Purchase and Conversion Agreement dated as of October
7, 1997, among Philips Media B.V., Philips Media Networks B.V.,
United International Holdings, Inc., Joint Venture, Inc. and
United and Philips Communications B.V.(1)
10.2 Stock Purchase Agreement, dated as of October 17, 1997, by and
among Multicanal S.A., as Buyer, and United International
Holdings Argentina, S.A. and UIH Argentina, Inc., as Sellers,
relating to the sale of the companies operating in Bahia
Blanca.(2)
10.3 Stock Purchase Agreement, dated as of October 20, 1997, by and
among Supercanal Holding S.A., as Buyer, and United International
Holdings Argentina, S.A. and UIH Argentina, Inc., as Sellers,
relating to the sale of the companies operating in Comodoro
Rivadavia and Trelew.(2)
10.4 Stock Purchase Agreement, dated as of October 20, 1997, by and
among Supercanal Holding S.A., as Buyer, and UIH Argentina, Inc.
and CV American Holdings L.L.C., as Sellers, relating to the sale
of the companies operating in Santa Fe and Entre Rios.(2)
10.5 Form of Escrow Agreement executed by and among U.S. Bank National
Association dba Colorado National Bank, as Escrow Agent, and the
applicable Buyer and Sellers in connection with the closing of
the transactions contemplated by each of the foregoing Stock
Purchase Agreements.(2)
10.6 Assignment and Amendment Agreement, dated as of October 29, 1997,
by and among Supercanal Holding S.A., as Assignor, Multicanal
S.A. and Cablevision S.A., as Assignees, and UIH Argentina, Inc.
and CV American Holdings L.L.C., as Sellers. This agreement was
signed, and the transactions contemplated thereby were closed, on
October 29, 1997.(2)
27.1 Financial Data Schedule
---------------------
(1) Incorporated by reference to the Form 8-K of the Company filed
with the Securities and Exchange Commission on October 20, 1997
(File No. 0-21974).
(2) Incorporated by reference to the Form 8-K/A of the Company filed
with the Securities and Exchange Commission on November 14, 1997
(File No. 0-21974).
(b) Reports on Form 8-K filed during the quarter.
<TABLE>
<CAPTION>
Date of Report Item Reported Financial Statements Filed
-------------- ------------- --------------------------
<S> <C> <C>
September 10, 1997 Item 5 - Sale of interests in Argentina None
October 7, 1997 Item 5 - Definitive Agreement to acquire Philips
Electronics NV's interest in UPC None
October 17, 1997 Item 2 - Sale of interests in Argentina Item 7 - Pro forma
. financial information
</TABLE>
Reports on Form 8-K/A filed during the quarter.
<TABLE>
<CAPTION>
Date of Report Item Reported Financial Statements Filed
-------------- ------------- --------------------------
<S> <C> <C>
October 17, 1997 Item 2 - Sale of interests in Argentina Item 7 - Pro forma
financial information
</TABLE>
34
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED INTERNATIONAL HOLDINGS, INC.
Date: January 14, 1998
---------------------
By: /S/ J. Timothy Bryan
---------------------
J. Timothy Bryan
Chief Financial Officer
(A Duly Authorized Officer and Principal Financial Officer)
35
<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 NOVEMBER 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> NOV-30-1997
<CASH> 210,806
<SECURITIES> 2,447
<RECEIVABLES> 2,670
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 286,069
<PP&E> 279,244
<DEPRECIATION> 70,085
<TOTAL-ASSETS> 799,182
<CURRENT-LIABILITIES> 84,043
<BONDS> 825,876
32,242
0
<COMMON> 392
<OTHER-SE> (114,485)
<TOTAL-LIABILITY-AND-EQUITY> 799,182
<SALES> 0
<TOTAL-REVENUES> 68,571
<CGS> 0
<TOTAL-COSTS> 45,220
<OTHER-EXPENSES> 61,953
<LOSS-PROVISION> 8,148
<INTEREST-EXPENSE> 90,190
<INCOME-PRETAX> (158,059)
<INCOME-TAX> 0
<INCOME-CONTINUING> (158,059)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (158,059)
<EPS-PRIMARY> (4.03)
<EPS-DILUTED> 0
</TABLE>
