SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: February 17, 1999
United International Holdings, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-21974 84-1116217
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification #)
incorporation)
4643 South Ulster Street, Suite 1300, Denver, CO 80237
(Address of Principal Executive Office)
(303) 770-4001
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
- ----------------------------------------------
On February 17, 1999, United Pan-Europe Communications N.V. ("UPC"), a
wholly-owned subsidiary of United International Holdings, Inc. (the
"Registrant"), acquired the remaining 49% of United Telekabel Holding N.V.
("UTH") that it did not own (the "NUON Transaction"). This transaction completed
the purchase of a 100.0% interest in N.V. TeleKabel Beheer from N.V. Nuon
Energie-Onderneming voor Gelderland, Friesland en Flevoland ("NUON") in which a
51.0% interest was initially acquired in connection with the formation of UTH on
August 6, 1998 (the "UTH Transaction"). UPC purchased the 49% interest from NUON
for euro235,085,926 ($272,663,793). In addition, UPC repaid NUON and assumed
from NUON a euro15,101,253 ($17,515,149) subordinated loan, including accrued
interest, owed by UTH to NUON. The purchase of NUON's interest and payment of
the loan were funded with proceeds from UPC's initial public offering. Following
the acquisition UPC indirectly owns 100% of UTH. UTH owns and operates
cable-based communications networks in The Netherlands.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
- ------------------------------------------
(a) FINANCIAL STATEMENTS
The historical financial statements of N.V. TeleKabel Beheer required
to be presented in this Form 8-K/A-1 are incorporated by reference
from UPC's previously filed Registration Statement on Form S-1
(Registration No. 333-67895), a copy of which is attached hereto as
Exhibit 99.1.
(b) PRO FORMA FINANCIAL INFORMATION
The pro forma consolidated condensed balance sheet and statements of
operations and notes thereto set forth below do not purport to
represent what the Registrant'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 the Registrant believes are
reasonable. The unaudited pro forma consolidated condensed financial
information and accompanying notes should be read in conjunction with
the Registrant's audited consolidated financial statements and the
notes thereto, and other financial information pertaining to the
Registrant, previously filed with the Securities and Exchange
Commission, as well as pro forma financial statement information for
UPC incorporated by reference herein from UPC's previously filed
Registration Statement on Form S-1 (Registration Statement No.
333-67895), a copy of which is attached hereto as Exhibit 99.1.
The following unaudited Registrant pro forma consolidated condensed
balance sheet gives effect to the NUON Transaction as if it had
occurred on November 30, 1998. The unaudited pro forma effects on the
balance sheet assume (1) elimination of UPC's equity investment in
UTH, (2) the purchase of the remaining 49% interest in UTH, including
the purchase price allocation related to the acquisition, and (3)
additional debt assuming that the acquisition of the remaining 49%
ownership interest in UTH would have been funded with debt.
2
<PAGE>
<TABLE>
<CAPTION>
As of November 30, 1998
--------------------------------------
NUON Pro
Registrant Consolidated Condensed Balance Sheet: Historical Transaction Forma
---------- ----------- ----------
(United States dollars, in thousands)
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents............................................ $ 67,200 $ 1,348 $ 68,548
Restricted cash...................................................... 10,378 -- 10,378
Short-term liquid investments........................................ 35,370 -- 35,370
Subscriber receivables, net.......................................... 11,784 7,268 19,052
Costs to be reimbursed by affiliated companies, net.................. 19,013 -- 19,013
Other current assets, net............................................ 46,829 36,593 83,422
---------- -------- ----------
Total current assets............................................... 190,574 45,209 235,783
Investments in and advances to affiliated companies, accounted for
under the equity method, net ...................................... 348,629 (33,300)(1) 315,329
Property, plant and equipment, net................................... 457,181 410,331 867,512
Goodwill and other intangible assets, net............................ 409,438 359,905(2) 769,343
Deferred financing costs, net........................................ 41,773 -- 41,773
Non-current restricted cash and other assets, net.................... 31,455 -- 31,455
---------- -------- ----------
Total assets....................................................... $1,479,050 $782,145 $2,261,195
========== ======== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Accounts payable, accrued liabilities and other current liabilities.. $ 144,668 $ 69,921 $ 214,589
Short-term debt...................................................... 23,683 135,526(3) 159,209
Current portion of senior discount notes and other long term debt ... 71,583 304,742 376,325
---------- -------- ----------
Total current liabilities.......................................... 239,934 510,189 750,123
Senior discount notes and other long-term debt....................... 1,862,697 253,469(4) 2,116,166
Deferred taxes and other long-term liabilities....................... 35,230 18,487 53,717
---------- -------- ----------
Total liabilities.................................................. 2,137,861 782,145 2,920,006
---------- -------- ----------
Minority interest in subsidiaries.................................... 30,012 -- 30,012
---------- -------- ----------
Preferred stock...................................................... 56,039 -- 56,039
---------- -------- ----------
Stockholders' deficit................................................ (744,862) -- (744,862)
---------- -------- ----------
Total liabilities and stockholders' deficit.......................... $1,479,050 $782,145 $2,261,195
========== ======== ==========
(1) Represents the net decrease in investments in and advances to
affiliated companies as a result of the NUON Transaction:
De-consolidation of UPC's historical investments in and advances to
UTH.................................................................... $(130,943)
Consolidation of historical UTH investments in and advances to
affiliated companies................................................... 97,643
---------
$ (33,300)
=========
(2) Represents the increase in goodwill as a result of the NUON
Transaction:
Consolidation of historical UTH goodwill............................ $ 212,436
Additional pro forma goodwill related to the NUON Transaction....... 147,469
---------
$ 359,905
=========
(3) Represents the pro forma increase in short-term debt for the
portion of the seller financing from NUON due no later than
November 30, 1999 incurred in connection with the NUON
Transaction.
(4) Represents the pro formaincrease in long-term debt as a result of
the NUON Transaction:
Consolidation of historical UTH long-term debt............ $117,943
Seller financing due December 31, 2000.................... 135,526
--------
$253,469
========
</TABLE>
3
<PAGE>
The following unaudited pro forma consolidated condensed statement of
operations for the nine months ended November 30, 1998 gives effect to
the UTH Transaction and the NUON Transaction as if both had occurred
as of the beginning of the fiscal year ended February 28, 1998. The
column titled "UTH Transaction" gives pro forma effect to (1) the
deconsolidation of the results of operations for the assets
contributed to UTH by UPC which are included in UPC's historical
results of operations, (2) 51% of the results of operations of UTH on
the equity method of accounting, and (3) additional amortization
expense related to the excess basis in the equity investment in UTH.
The column titled "NUON Transaction" gives pro forma effect to (1) the
consolidation of N.V. TeleKabel Beheer for the nine months ended
November 30, 1998, (2) the consolidation of the results of operations
for the assets contributed to UTH by UPC for the nine months ended
November 30, 1998, (3) additional amortization as a result of the
step-up in basis of N.V. TeleKabel Beheer recorded under purchase
accounting, (4) additional interest expense as a result of the debt
incurred by UPC for the acquisition of NUON's interest in UTH, (5)
elimination of UPC's pro forma share of results of UTH for the seven
months ended September 30, 1998 and elimination of the pro forma
amortization of basis difference in UPC's investment in UTH recorded
for the UTH Transaction, and (6) elimination of the historical share
in results of UTH for the two months ended November 30, 1998.
elimination
<TABLE>
<CAPTION>
For the Nine Months Ended November 30, 1998
--------------------------------------------------------
UTH NUON
Historical Transaction Transaction Pro Forma
---------- ----------- ----------- -----------
(United States dollars, in thousands except share and
per share data)
Registrant Consolidated Condensed Statement of Operations:
<S> <C> <C> <C> <C>
Total revenue.......................................... $ 217,011 $(15,388) $ 76,365 $ 277,988
Operating expense...................................... (104,650) 3,025 (24,065) (125,690)
Selling, general and administrative expense............ (126,214) 2,501 (17,242) (140,955)
Depreciation and amortization.......................... (144,964) 6,815 (36,745) (174,894)
---------- -------- -------- ----------
Net operating loss..................................... (158,817) (3,047) (1,687) (163,551)
Interest income........................................ 11,894 (24) 24 11,894
Interest expense....................................... (144,947) 2,821 (27,664) (169,790)
Other expense, net..................................... (5,248) (838) 838 (5,248)
---------- -------- -------- ----------
Net loss before other items............................ (297,118) (1,088) (28,489) (326,695)
Share in results of affiliated companies, net.......... (40,382) 4,076 (1,354) (37,660)
Minority interests in subsidiaries..................... 2,457 -- -- 2,457
---------- -------- -------- ----------
Net loss............................................... $ (335,043) $ 2,988 $(29,843) $ (361,898)
========== ======== ======== ==========
Basic and diluted net loss per common share (1)........ $ (8.44) $ (9.11)
========== ==========
Weighted-average number of common shares outstanding... 39,855,215 39,855,215
========== ==========
</TABLE>
(1) "Basic and diluted loss" per common share is determined by
dividing net loss available to common stockholders by the
weighted-average number of common shares outstanding during each
period. Net loss available to common stockholders includes the
accrual of dividends on convertible preferred stock which are
charged directly to additional paid-in capital.
4
<PAGE>
The following unaudited pro forma consolidated condensed statement of
operations for the year ended February 28, 1998 gives effect to the
UTH Transaction and the NUON Transaction as if both had occurred as of
the beginning of the fiscal year. For all but the last three weeks of
the fiscal year ended February 28, 1998 the Registrant owned 50% of
UPC and thus recorded its share of the results of UPC under the equity
method of accounting.
<TABLE>
<CAPTION>
For the Year Ended February 28, 1998
-----------------------------------------------------------
Pro Forma Adjustments
---------------------------
UTH and NUON
Historical Transaction Pro Forma
---------- ------------ -----------
(United States dollars, in thousands except share and
per share data)
Registrant Condensed Consolidated Statement of Operations:
<S> <C> <C> <C>
Total revenue........................................ $ 98,622 $ -- $ 98,622
Operating expense.................................... (65,631) -- (65,631)
Selling, general and administrative expense.......... (91,356) -- (91,356)
Depreciation and amortization........................ (91,656) -- (91,656)
---------- -------- ----------
Net operating loss................................... (150,021) -- (150,021)
Gain on sale of investment in affiliated
companies.......................................... 90,020 -- 90,020
Interest income...................................... 7,806 -- 7,806
Interest expense..................................... (124,288) -- (124,288)
Provision for loss on investment related costs....... (14,793) -- (14,793)
Other expense, net................................... (5,088) -- (5,088)
---------- -------- ----------
Net loss before other items.......................... (196,364) -- (196,364)
Share in results of affiliated companies, net........ (68,645) (14,356) (83,001)
Minority interest in subsidiaries.................... 1,568 -- 1,568
---------- -------- ----------
Net loss before extraordinary charge................. (263,441) (14,256) (277,797)
Extraordinary charge for early retirement of debt.... (79,091) -- (79,091)
---------- -------- ----------
Net loss............................................. $ (342,532) $(14,356) $ (356,888)
========== ======== ==========
Net loss per common share(1):
Basic and diluted net loss before
extraordinary charge............................. $ (6.75) $ (7.11)
Extraordinary charge............................... (2.02) (2.02)
---------- ----------
Basic and diluted net loss......................... $ (8.77) $ (9.13)
========== ==========
Weighted-average number of common shares
outstanding........................................ 39,211,501 39,211,501
========== ==========
</TABLE>
(1) "Basic and diluted loss" per common share is determined by
dividing net loss available to common stockholders by the
weighted-average number of common shares outstanding during each
period. Net loss available to common stockholders includes the
accrual of dividends on convertible preferred stock which are
charged directly to additional paid-in capital.
5
<PAGE>
(c) EXHIBITS
10.1 Share Purchase Agreement dated as of January 19, 1999, among UPC,
Belmarken Holding B.V., UPC Intermediates B.V., N.V. Nuon
Energie-Onderneming voor Gelderland, Friesland en Flevoland, N.V.
Kraton, and UTH, as amended by letter agreements dated January 19 and
25, 1999.(1)
10.2 Final Amendment to Share Purchase Agreement dated as of February 17,
1999.(1)
23.1 Consent of PricewaterhouseCoopers N.V.
99.1 Financial statements for N.V. Telekabel Beheer and pro forma
information for UPC.
---------------
(1) Previously filed on Form 8-K.
6
<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: March 12, 1999 By: /S/ Valerie L. Cover
---------------------------------
Valerie L. Cover
Vice President and Controller
(a Duly Authorized Officer and
Principal Financial Officer)
7
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
United International Holdings, Inc. on Form S-3 (File No. 33-87326) and on Form
S-8 (File Nos. 33-81876, 333-00226, 333-68641 and 333-71963) of our report dated
September 11, 1998, except with respect to note 14, for which the date is
January 14, 1999, on our audits of the consolidated financial statements of N.V.
TeleKabel Beheer as of December 31, 1996 and 1997 and for the period from August
22, 1995 (date of incorporation) to December 31, 1995 and the years ended
December 31, 1996 and 1997, which report is included in this Form 8-K.
/S/ PricewaterhouseCoopers N.V.
Arnhem, The Netherlands
March 8, 1999.
EXHIBIT 99.1
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
N.V. TELEKABEL BEHEER
Report of Independent Accountants............................................................. 1
Consolidated Balance Sheets as of December 31, 1996 and 1997.................................. 2
Consolidated Statements of Operations from August 22, 1995 (date of incorporation) until
December 31, 1995 and for the Years Ended December 31, 1996 and 1997....................... 3
Consolidated Statements of Cash Flows from August 22, 1995 (date of incorporation) until
December 31, 1995 and for the Years Ended December 31, 1996 and 1997....................... 4
Consolidated Statement of Changes in Shareholder's Equity from August 22, 1995 (date of
incorporation) until December 31, 1995 and for the Years Ended December 31, 1996
and 1997................................................................................... 5
Notes to Consolidated Financial Statements.................................................... 6
Condensed Consolidated Balance Sheet as of September 30, 1998 (Unaudited)..................... 16
Condensed Consolidated Statements of Operations for the Nine Months Ended September
30, 1997 and 1998 (Unaudited).............................................................. 17
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1997 and 1998 (Unaudited).................................................... 18
Notes to Condensed Consolidated Financial Statements.......................................... 19
Pro Forma Selected Consolidated Financial Data...................................................... 21
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of N.V. TeleKabel Beheer
We have audited the accompanying consolidated balance sheets of N.V.
TeleKabel Beheer, ("TeleKabel" or the "Company"), as of December 31, 1996 and
1997 and the related consolidated statements of operations, shareholder's equity
and cash flows for the period from August 22, 1995 (date of incorporation) until
December 31, 1995 and the years ended December 31, 1996 and 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in The Netherlands, which are substantially the same as those generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of N.V. TeleKabel Beheer as of
December 31, 1996 and December 31, 1997 and the results of its operations and
its cash flows for the period from August 22, 1995 (date of incorporation) until
December 31, 1995 and the years ended December 31, 1996 and 1997 in conformity
with accounting principles generally accepted in The Netherlands.
Accounting principles generally accepted in The Netherlands vary in certain
significant respects from generally accepted accounting principles in the United
States of America. The application of the latter would have affected the
determination of consolidated results for each of the two years in the period
ended December 31, 1997 and shareholders' equity as of December 31, 1996 and
1997 to the extent summarized in note 15 to the consolidated financial
statements.
PricewaterhouseCoopers N.V.
Arnhem, The Netherlands,
September 11, 1998, except for Note 14, for which the date is January 14, 1999
1
<PAGE>
N.V. TELEKABEL BEHEER
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1997
(in thousands of Dutch guilders, except per share data)
December 31,
----------------
Note 1996 1997
---- ------- -------
ASSETS
Current assets:
Cash and cash equivalents.............................. -- 17,465
Subscriber receivables, net............................ 4 5,184 9,608
Related party receivables.............................. 30,639 6,949
Other receivables...................................... 5 10,804 13,521
Inventory.............................................. 2,635 3,830
Investments............................................ 6 1,577 16,413
------- -------
Total current assets................................... 50,839 67,786
Tangible fixed assets, net............................. 7 396,997 553,499
Intangible assets, net................................. 8 187,980 194,562
Long term investments.................................. 6 4,200 1,222
------- -------
Total assets......................................... 640,016 817,069
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable....................................... 13,844 28,989
Payable to banks....................................... 42,916 18,884
Deferred income........................................ 9 4,220 6,341
Short-term debt payable to shareholder................. 10 254,646 500,691
Other payables and accrued expenses.................... 77,518 11,901
------- -------
Total current liabilities............................ 393,144 566,806
=== ======= =======
Minority interest in subsidiaries...................... 11 1,820 2,321
Commitments and contingencies.......................... 12 -- --
Shareholder's equity:
Common stock, NLG 10 par value, 100,000 shares
authorized and issued................................. 1,000 1,000
Additional paid-in capital............................. 251,354 251,354
Accumulated deficit.................................... (7,302) (4,412)
--- ------- -------
Total shareholder's equity........................... 245,052 247,942
--- ------- -------
Total liabilities and shareholder's equity......... 640,016 817,069
=== ======= =======
The accompanying notes are an integral part of these consolidated financial
statements
2
<PAGE>
N.V. TELEKABEL BEHEER
CONSOLIDATED STATEMENTS OF OPERATIONS
from August 22, 1995 (date of incorporation) until December 31, 1995 and
the years ended December 31, 1996 and 1997
(in thousands of Dutch guilders)
4 months and
9 days period Years ended
ended December 31,
December 31, ----------------
1995 1996 1997
------------- ------- -------
Service and other revenue...................... 3,656 113,917 137,167
Operating expenses:
Purchases relating to sales.................... (1,041) (14,515) (18,615)
Personnel expenses............................. (442) (14,366) (18,034)
Depreciation and amortization.................. (1,440) (22,195) (31,418)
Other operating expenses....................... (2,361) (39,995) (41,705)
------ ------- -------
Net operating (loss) income.................... (1,628) 22,846 27,395
Equity results in associates................... -- (1,033) 1,022
Interest expense, related party................ (757) (14,134) (26,210)
Other income/(expense), net.................... -- (12,875) --
------ ------- -------
Income/(loss) before and after income taxes.... (2,385) (5,196) 2,207
Minority interests in subsidiaries............. -- 279 683
------ ------- -------
Net income/(loss).............................. (2,385) (4,917) 2,890
====== ======= =======
The accompanying notes are an integral part of these consolidated financial
statements
3
<PAGE>
N.V. TELEKABEL BEHEER
CONSOLIDATED STATEMENTS OF CASH FLOWS
from August 22, 1995 (date of incorporation) until December 31, 1995 and
the years ended December 31, 1996 and 1997
(in thousands of Dutch guilders)
4 months and 9 Years ended
days period ended December 31,
December 31, ------------------
1995 1996 1997
----------------- -------- --------
Cash flows from operating activities:
Net income/(loss)....................... (2,385) (4,917) 2,890
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization........... 1,440 22,195 31,418
Share in results of affiliated
companies.............................. -- 1,033 (1,022)
Provision for doubtfull accounts
receivable............................. -- 458 559
Write off of investment in unlisted
securities............................. -- 8,915 --
Minority interests in subsidiaries...... -- (279) (683)
Changes in operating assets and
liabilities:
(Increase)/decrease in receivables...... (2,376) (43,840) 15,990
Increase in inventories................. -- (2,635) (1,195)
Increase in other current liabilities... (5,749) 10,536 (9,583)
------ -------- --------
Net cash flows from operating
activities............................. (9,070) (8,534) 38,374
------ -------- --------
Cash flows from investing activities:
Purchase of unlisted securities......... (900) (9,592) (49)
Investment in affiliated companies...... -- (5,233) (787)
Capital expenditures.................... (2,802) (215,767) (266,118)
New acquisitions, net of cash acquired.. (2,948) -- --
------ -------- --------
Net cash flows from investing
activities............................. (6,650) (230,592) (266,954)
------ -------- --------
Cash flows from financing activities:
Proceeds from short-term debt to parent
company................................ 16,498 238,148 246,045
Capital contribution.................... 200 -- --
------ -------- --------
Net cash flows from financing
activities............................. 16,698 238,148 246,045
------ -------- --------
Net increase (decrease) in cash and cash
equivalents............................ 978 (978) 17,465
Cash and cash equivalents at beginning
of period.............................. -- 978 --
------ -------- --------
Cash and cash equivalents at end of
period................................. 978 -- 17,465
====== ======== ========
Significant non-cash investment and
financing activities:
Contribution in kind of cable networks
by parent company...................... -- 252,154 --
Deferral of payment for acquisition of
CAI Zoetermeer......................... -- 62,800 --
The accompanying notes are an integral part of these consolidated financial
statements
4
<PAGE>
N.V. TELEKABEL BEHEER
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
for the years ended December 31, 1997, 1996 and 1995
(in thousands of Dutch guilders)
Issued and
fully paid Share Other
capital premium reserves Total
---------- ------- -------- -------
Balance as of December 31, 1995............ 200 -- (2,385) (2,185)
Capital contribution....................... 800 251,354 -- 252,154
Net loss................................... -- -- 4,917) (4,917)
----- ------- ------ -------
Balance as of December 31, 1996............ 1,000 251,354 (7,302) 245,052
Net income................................. -- -- 2,890 2,890
----- ------- ------ -------
Balance as of December 31, 1997............ 1,000 251,354 (4,412) 247,942
===== ======= ====== =======
The accompanying notes are an integral part of these consolidated financial
statements
5
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Dutch guilders)
1. ORGANIZATION AND NATURE OF OPERATIONS
N.V. TeleKabel Beheer and its subsidiaries (TeleKabel or the Company) of
Arnhem was a wholly owned subsidiary of the N.V. NUON Energie-Onderneming voor
Gelderland, Friesland en Flevoland (NUON), a local government owned company.
NUON's main activity is the provision of energy to the provinces of Gelderland,
Friesland en Flevoland.
TeleKabel was incorporated in The Netherlands by NUON on August 22, 1995.
Effective January 1, 1996, NUON contributed all of its cable television networks
to the Company in exchange for its equity interest in the Company. TeleKabel and
its subsidiaries main activities comprise investments in and management of cable
television network and related infrastructures, as well as developing and
rendering information, communication and transaction services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in The Netherlands
("Dutch GAAP"). The consolidated financial statements are prepared under the
historical cost convention. The preparation of financial statements in
conformity with Dutch GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
Subsidiary undertakings, which are those companies in which the Company,
directly or indirectly, has an interest of more than one half of the voting
rights or otherwise has power to exercise control over the operations, have been
consolidated. Subsidiaries are consolidated from the date on which effective
interest is transferred to the Company and are no longer consolidated from the
date of disposal. All intercompany transactions, balances and unrealised
surpluses and deficits on transactions between group companies have been
eliminated. Where necessary, accounting policies for subsidiaries have been
changed to ensure consistency with the policies adopted by the Company. Separate
disclosure is made of minority interests.
6
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
The following subsidiaries are included in the consolidation as of December
31, 1997. The subsidiaries are wholly-owned, unless indicated otherwise.
N.V. TeleKabel (1).......................................... Arnhem
Kabelexploitatie Maatschappij Rijnland B.V. (52.5%)......... Alphen a/d Rijn
TeleKabel Omroep Facilitair Bedrijf B.V..................... Arnhem
Maxinetwerken B.V. ......................................... Ede
TeleKabel Zoetermeer B.V. .................................. Zoetermeer
CAI Over-Betuwe B.V. (1)(2)................................. Utrecht
CAI Heteren B.V. (1)(2)..................................... Heteren
CAI Gendt B.V. (1)(2)....................................... Gendt
CAI Elst B.V. (1)(2)........................................ Elst
CAI Bemmel B.V. (1)(2)...................................... Bemmel
CAI Valburg B.V. (1)(2)..................................... Andelst
CAI Wageningen B.V. (1)(2).................................. Wageningen
Kabelexploitatiemaatschappij CAI Renkum B.V. (1)(2)......... Utrecht
CAI-NKM Nijmegen B.V. (1)(2)................................ Nijmegen
CAI Midden-Betuwe B.V. (1)(2)............................... Veenendaal
- ---------
(1) Statements of joint and several liability pursuant to Article 403, Book 2
of the Dutch Civil Code were issued for these companies.
(2) Cable Networks were acquired through an exchange transaction with Casema as
described in note 3.
CASH AND CASH EQUIVALENTS
For the purposes of the cash flow statement, cash and cash equivalents
comprise cash in hand, deposits held at call with banks, and investments in
money market instruments.
INVESTMENTS IN AFFILIATED COMPANIES
Investments in affiliated companies are accounted for by the equity method
of accounting. These are investments in which the Company has between 20% and
50% of the voting rights, and over which the Company exercises significant
influence, unless such influence is temporary, in which case the investment is
recorded at cost. Provisions are recorded for long-term impairment in value.
Equity accounting involves recognizing in the income statement the
Company's share of the affiliate's profit or loss for the year. The Company's
interest in the affiliate is carried in the balance sheet at an amount that
reflects its share of the fair value of the net assets of the affiliate. The
excess of the consideration over the Company's share of fair value of the
affiliate's net assets is recorded as goodwill and amortized over its expected
useful life.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded 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.
Assets constructed by incorporate interest charges incurred during the period of
construction, and investment subsidies are deducted. Depreciation is calculated
using the annuity or straight line method over the economic life of the asset,
taking into account the residual value. The annuity method is a compounded
interest method whereby the depreciation is calculated based on the assumption
that depreciation plus the normal cost of capital to finance the assets are
7
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
constant over the life of the assets. This results in lower depreciation charges
in the earlier years of the assets life and higher charges in the later years.
Upon disconnection of a subscriber, the remaining book value of the subscriber
equipment, excluding converters which are recovered upon disconnection, and the
capitalized labor are written off and accounted for as an operating cost.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill is the excess of investments in consolidated subsidiaries and
affiliated companies over the fair value of the net tangible fixed asset value
at acquisition and is amortized on a straight line basis over its expected
usefull life.
RECOVERABILITY OF TANGIBLE AND INTANGIBLE ASSETS
The Company evaluates the carrying value of all tangible and intangible
fixed assets whenever events or circumstances indicate the carrying value of
assets may exceed their recoverable amounts. An impairment loss is recognized
when the estimated future cash flows (undiscounted and without interest)
expected to result from the use of an asset are less than the carrying amount of
the asset. Measurement of an impairment loss is based on fair value of the asset
computed using discounted cash flows if the asset is expected to be held and
used. Measurement of an impairment loss for an asset held for sale would be
based on fair market value less estimated costs to sell.
REVENUE RECOGNITION
Revenue is primarily derived from the sale of cable television services to
subscribers and is recognized in the period the related services are provided.
Initial installation fees are recognized as revenue in the period in which the
installation occurs, to the extent installation fees are equal to or less than
direct selling costs, with any excess costs deferred and amortized over the
average subscriber period. To the extent installation fees exceed direct selling
costs, the excess fees would be deferred and amortized over the average contract
period. All installation fees and related costs with respect to reconnections
are recognized in the period in which the reconnection occurs.
INCOME TAXES
The Company accounts for income taxes under the asset and liability method
which requires recognition of deferred tax assets and liabilities for the
expected future income tax consequences of transactions which have been included
in the financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statement and income tax basis of assets, liabilities and loss
carryforwards using enacted tax rates in effect for the year in which the
differences are expected to reverse. Net deferred tax assets are only recorded
if management believes it is more likely than not they will be realized.
3. SIGNIFICANT ACQUISITIONS AND DIVESTITURES
During October of 1995 the Company acquired a 72.5% interest in
Kabelexploitatie Maatschappij Rijnland B.V. ("KMR"). The total cash
consideration, for this acquisition amounted to NLG 4,950. The excess of the
total consideration over the fair value of the net assets acquired was allocated
to goodwill.
Effective January 1, 1996 NUON contributed its cable networks with a book
value of approximately NLG 248,550 to TeleKabel. These cable networks were
recorded in TeleKabel at their book values, in exchange for additional paid in
capital by NUON.
8
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
Effective January 1, 1996 NUON contributed its shares in N.V. TeleKabel
Friesland to TeleKabel in exchange for 80,000 shares of TeleKabel. The
contribution was recorded at its book value recorded in NUON amounting to NLG
3,604.
In April of 1997 the Company entered into an agreement with Casema to
exchange its cable network interest in TeleKabel Oosterhout B.V., TeleKabel De
Bilt-Bilthoven B.V., TeleKabel Zoetermeer B.V. and Kabelexploitatie Maatschappij
Rijnland B.V. for 100% of the shares of CAI-OverBetuwe B.V., CAI- Bemmel B.V.,
CAI-Elst B.V., CAI-Gendt B.V., CAI-Heteren B.V., CAI-Valburg B.V.,
CAI-Midden-Betuwe B.V., Kabelexploitatie Maatschappij CAI-Renkum B.V., CAI-
Buren B.V., CAI-Druten B.V., CAI-Geldermalsen B.V., CAI-Lingewaal B.V., CAI-
NKM-Nijmegen B.V., CAI-Neerijnen-West B.V., CAI-Tiel B.V., CAI-Wageningen B.V.,
CAI-Wychen B.V., CAI-Dodewaard B.V and cable network assets in the cities of
Dronten and Lelystad.
The exchange of cable networks was based on the number of subscriber
connections exchanged, measured as of January 1, 1997. Casema and TeleKabel
agreed that a compensation of NLG 1,200 per subscriber will be paid for any
differences in the number of subscribers exchanged.
Additionally the agreement specified that TeleKabel was to acquire CAI-
Almere B.V. for a consideration of NLG 1,500 per subscriber, based on the number
of subscribers at the date of the share transfer. This acquisition was not
consummated before December 31, 1997.
The transaction with Casema was originally scheduled to be completed as of
December 31, 1997. As of December 31, 1997, TeleKabel transferred its interest
in TeleKabel Oosterhout B.V., TeleKabel De Bilt-Bilthoven B.V. and 47.5% of its
interest in Kabelexploitatie Maatschappij Rijnland B.V. to Casema and received
the interest in the cable networks specified in note 2. Refer to note 14 for the
transfer of the remaining cable networks.
The acquired cable networks were recorded in the books of the Company at
fair value of the cable networks at the date of the exchange.
Effective September 1997 the Company acquired the cable network from the
city of Arnhem and Casema for a total consideration of approximately NLG 84,000,
the difference between the consideration and the fair value of the assets, which
approximated NLG 46,000, was recorded as goodwill.
4. SUBSCRIBER RECEIVABLES
Subscriber receivables are stated net of an allowance for doubtful accounts
of NLG 1,017 and NLG 458 as of December 31, 1997 and 1996, respectively.
5. OTHER RECEIVABLES
Other receivables can be specified as follows:
As of December 31,
------------------
1996 1997
-------- --------
Prepayments and accrued income........................... 7,926 877
Taxes and social security premiums....................... 1,771 --
Other receivables........................................ 1,107 12,644
------ ------
10,804 13,521
====== ======
9
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
Other receivables as of December 31, 1997 include an amount of NLG 10,560,
relating to the Casema transaction.
6. INVESTMENTS IN AFFILIATED COMPANIES AND UNLISTED SECURITIES
Movements in investments in and advances to affiliated companies can be
summarized as follows:
Affiliated Unlisted
companies securities Total
---------- ---------- ------
Book value as of January 1, 1996............. -- 900 900
Additions.................................. 5,233 10,492 15,725
Write off of investment in unlisted
securities................................ -- (8,915) (8,915)
Share in income of affiliated companies.... (1,033) 0 (1,033)
Other...................................... -- (900) (900)
------ ------ ------
Book value as of December 31, 1996........... 4,200 1,577 5,777
Additions.................................. -- 49 49
Share in income affiliated companies....... 1,022 -- 1,022
Other...................................... -- 787 787
Reclassification........................... (4,000) 14,000 10,000
------ ------ ------
Book value as of December 31, 1997........... 1,222 16,413 17,635
====== ====== ======
As of December 31, 1996 investment in affiliated companies relate to a
33.3% interest in Interway Holding B.V. and a 30% interest in Euronet Internet
B.V. During 1997 the investment in Euronet Internet B.V. was reclassified to
unlisted securities, because this investment was considered as temporary. The
reclassification in 1997 includes the net book value of Euronet Internet B.V. of
NLG 4,000 and the unamortized goodwill of NLG 10,000. (see note 8).
The write off of investment in unlisted securities in 1996 mainly relates
to the write off of the company's investment in Sport 7, a television channel
that closed its operation in December of 1996.
10
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
7. PROPERTY, PLANT AND EQUIPMENT
Tangible fixed assets can be summarized as follows:
Other
Land & Cable fixed Assets under
buildings Networks assets construction Total
--------- -------- ------ ------------ -------
Year ended December 31,
1996
Net book value as of
January 1, 1996......... -- 60,011 378 -- 60,389
Additions................ 2,467 332,341 3,291 13,130 351,229
Disposals................ -- (680) -- -- (680)
Depreciation............. (279) (12,969) (693) -- (13,941)
----- ------- ------ ------- -------
Net book value as of
December 31, 1996....... 2,188 378,703 2,976 13,130 396,997
===== ======= ====== ======= =======
Balance as of December
31, 1996
Historical cost.......... 2,467 391,672 3,669 13,130 410,938
Accumulated
depreciation............ (279) (12,969) (693) -- (13,941)
----- ------- ------ ------- -------
Net book value........... 2,188 378,703 2,976 13,130 396,997
===== ======= ====== ======= =======
Year ended December 31,
1997
Net book value as of
January 1, 1997......... 2,188 378,703 2,976 13,130 396,997
Additions................ 4,438 159,601 12,768 36,748 213,555
Disposals................ -- (26,157) -- (13,130) (39,287)
Depreciation............. (389) (15,359) (2,018) -- (17,766)
----- ------- ------ ------- -------
Net book value as of
December 31, 1997....... 6,237 496,788 13,726 36,748 553,499
===== ======= ====== ======= =======
Balance as of December
31, 1997
Historical cost.......... 6,905 525,454 16,437 36,748 585,544
Accumulated
depreciation............ (668) (28,666) (2,711) -- (32,045)
----- ------- ------ ------- -------
Net book value........... 6,237 496,788 13,726 36,748 553,499
===== ======= ====== ======= =======
Estimated useful lives and the depreciation method used for tangible fixed
assets are as follows:
Useful
life Depreciation
(years) Methodology
------- ------------
Land and buildings.................................. 40 Straight line
Cable networks:
Active parts (25%)................................ 7 Annuity method
Passive parts (75%)............................... 20 Annuity method
Other fixed assets.................................. 3-5 Straight line
During 1995, 1996 and 1997, TeleKabel acquired, exchanged and received
cable networks as a capital contribution from NUON (see note 3). The Company
analyzed the value of its complete network in order to record its cable networks
on a consistent basis under fixed assets. All cable network connections were
analysed on a cost per connection basis and compared to the current cost of a
technologically up to date connection. All connections were valued at the cost
of establishing a new and technologically up to date connection, minus the cost
to upgrade the existing connection to the most current technology, referred to
the "current replacement value". The net difference between the book value and
the current replacement value was reclassified to intangible fixed assets, with
similar useful lives.
11
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
8. INTANGIBLE FIXED ASSETS
Intangible fixed assets movements and balances can be summarized as
follows:
Year ended December 31, 1996
Net book value as of January 1, 1996............................... 16,065
Additions.......................................................... 180,169
Amortization....................................................... (8,254)
-------
Book value as of December 31, 1996................................. 187,980
=======
Balance as of December 31, 1996
Historical cost.................................................... 196,234
Accumulated amortization........................................... (8,254)
-------
Net book value..................................................... 187,980
=======
Year ended December 31, 1997
Book value as of January 1, 1997................................... 187,980
Additions.......................................................... 49,057
Reclassification................................................... (10,000)
Disposals.......................................................... (18,823)
Amortization....................................................... (13,652)
-------
Net book value as of December 31, 1997............................. 194,562
=======
Balance as of December 31, 1997
Historical cost.................................................... 216,444
Accumulated amortization........................................... (21,882)
-------
Net book value..................................................... 194,562
=======
As described in Note 2 TeleKabel has recorded any differences between the
"current replacement value" of the tangible fixed assets and the book value of
the cable networks on the date of acquisition, contribution or exchange as
goodwill. Such goodwill is amortized on a straight line basis over the estimated
useful life of the cable network (15 years). Goodwill paid on the acquisition of
other types of businesses is amortized over 5-10 years depending on the nature
of the business. The reclassification of goodwill in 1997 relates to the
reclassification of Euronet Internet B.V. from an equity investment to
investment recorded at cost (see note 6).
12
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
9. DEFERRED INCOME
Deferred income relates to connection fees charged to customers in excess
of the normal cost of creating a connection. Deferred income is released to
income over the expected life of the cable connection.
December 31,
--------------
1996 1997
------ ------
Balance as of January 1.................................... -- 4,220
Addition: connection charges received from clients......... 4,697 2,445
Less: release to income statement.......................... (477) (324)
----- -----
Balance end of period...................................... 4,220 6,341
===== =====
10. SHORT TERM DEBT PAYABLE TO SHAREHOLDER
Relates to loans provided by NUON for financing fixed assets. The interest
rate charged in 1997 was 6.5% (1996: 6.35%).
11. MINORITY INTEREST
The movements in the minority interest can be summarized as follows:
December 31,
--------------
1996 1997
------ ------
Balance as of January 1.................................... 2,099 1,820
Changes of minority interest held by third party........... -- 1,184
Less: share third parties in income........................ (279) (683)
----- -----
Balance end of period...................................... 1,820 2,321
===== =====
12. COMMITMENTS AND CONTINGENT LIABILITIES
LEASES
TeleKabel has commitments for leasing of company cars amounting to NLG 928
yearly as per December 31, 1997. Maximum maturity period of the lease agreements
is four years.
OTHER COMMITMENTS
In 1997 TeleKabel had other commitments on account of acquisitions. These
commitments were not material.
STATEMENT OF LIABILITY
TeleKabel and some subsidiaries can be held liable to a number of group
companies included in the consolidation, as meant by Article 403, Part 9, Book 2
of the Dutch Civil Code. As partner in a partnership firm, one of the group
companies can be held liable for the commitments of this firm. The maximum risk
amounts to NLG 100.
13
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
FISCAL UNITY
Until December 31, 1997, TeleKabel and NUON were included in the same
entity for value added tax and income tax purposes. TeleKabel is severally
liable for the material tax debts of the fiscal entity.
LEGAL
The Company is not a party to any material legal proceedings, nor is it
currently aware of any material legal proceedings. From time to time, the
Company may become involved in litigation relating to claims arising out of its
operations in the normal course of its business.
13. INCOME TAXES
Until October of 1996 the Company did not have an obligation to pay income
taxes, as it was a wholly owned subsidiary of a Dutch local government
institution. As a result of changed shareholders of TeleKabel's parent company,
in Dutch tax laws the Company is subject to Dutch income taxes since October 10,
of 1996. The Company is in discussion with the Dutch tax authorities regarding
the tax basis of its assets and liabilites. Based on current best estimates of
the outcome of these discussions the Company believes that the tax basis of the
Company's assets and liabilities will not differ significantly from their
bookvalues.
14. SUBSEQUENT EVENTS
During 1998 the Company surrendered its interest in TeleKabel Zoetermeer
B.V. and the remaining 52.5% share in Kabelexploitatie Maatschappij Rijnland
B.V.in exchange for shares in CAI-Buren B.V., CAI-Druten B.V., CAI-Geldermalsen
B.V., CAI-Lingewaal B.V., CAI-Neerijnen-West B.V., CAI-Tiel B.V., CAI-Wychen
B.V., CAI-Dodewaard B.V and CAI-Almere B.V., CAI-Dronten B.V., and CAI-Lelystad
B.V. as part of the Casema transaction (see note 3).
Early 1998, NUON and United Pan-Europe Communications N.V. ("UPC") signed
the merger documents to combine their cable network activities in The
Netherlands. The companies completed the merger on August 6, 1998. As a result,
the TeleKabel shares have been transferred to the newly incorporated holding
company named United TeleKabel Holding N.V.
On January 19, 1999, UPC agreed to purchase NUON's 49% ownership interest
in UTH, increasing its ownership in UTH to 100%. The transaction will close
concurrent with the completion of an IPO, or failing such IPO, on or before
November 30, 1999.
15. DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE
NETHERLANDS AND THE UNITED STATES
The Company's consolidated financial statements are prepared in accordance
with Dutch GAAP, which differs in certain respects from accounting principles
generally accepted in the United States ("US GAAP"). The material differences as
they apply to the Company are summarized below:
(a) DEPRECIATION OF FIXED ASSETS
Under Dutch GAAP the Company depreciates its cable network assets using the
annuity method of depreciation. Under US GAAP cable network assets are
depreciated on a straight line basis.
(b) ACCOUNTING FOR INVESTMENTS IN AFFILIATES
Under Dutch GAAP the Company records certain of its investments in
affiliates in which it holds an interest of 20% to 50% at the historical cost of
the investment (see Note 2). Under US GAAP these investments are accounted for
using the equity method of accounting.
14
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(in thousands of Dutch guilders)
(c) ACCRUED SUBSCRIBER FEES
Under Dutch GAAP the Company created an accrual for subscriber fees on the
acquisition balance sheet of the cable network in Leiderdorp. Monthly
subscription fees for subscribers in this area were lower than fees charged to
customers in other areas. The Company created an accrual, to be released over
the useful life of the cable network, which results in the equalization of cable
revenues. Under US GAAP this accrual was not recorded resulting in a decrease of
the amount of goodwill paid for the cable network.
Reconciliation of net (loss)/profit (in thousands of Dutch guilders):
4 months and
9 days period Years ended
ended December 31,
December 31, --------------
1995 1996 1997
------------- ------ ------
Net income/(loss) under Dutch GAAP................ (2,385) (4,917) 2,890
US GAAP adjustment:
Depreciation on a straight line basis............. -- (6,477) (8,631)
Equity accounting for affiliates.................. -- 250 (6,540)
Accrued subscriber fees:
Goodwill amortization............................. -- 86 86
Release of subscriber accrual..................... -- (258) (258)
Income tax effect of US GAAP adjustments.......... -- 2,327 3,081
------ ------ ------
Net income/(loss) under US GAAP................... (2,385) (8,989) (9,372)
====== ====== ======
December 31,
----------------
1996 1997
------- -------
Reconciliation of shareholder's equity:
Total shareholders' equity under Dutch GAAP................ 245,052 247,942
US GAAP adjustment:
Depreciation on a straight line basis...................... (6,477) (15,108)
Equity accounting for affiliates........................... 250 (6,290)
Accrued subscriber fees:
Goodwill................................................... 86 172
Accrued subscriber fees.................................... (258) (516)
Income tax effect of US GAAP adjustments................... 2,327 5,408
------- -------
Total shareholder's equity under US GAAP................... 240,980 231,608
======= =======
15
<PAGE>
N.V. TELEKABEL BEHEER
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(in thousands of Dutch guilders, except for per share data)
September 30,
1998
-------------
ASSETS
Current assets
Cash and cash equivalents...................................... 856
Subscriber receivables, net.................................... 59,549
Inventory...................................................... 3,687
-------
Total current assets......................................... 64,092
Tangible fixed assets, net....................................... 625,116
Intangible assets, net........................................... 242,036
Long term investments............................................ 1,327
-------
Total assets................................................. 932,571
=======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Accounts payable............................................... 22,689
Deferred income................................................ 4,990
Short-term debt payable to shareholder......................... 12,410
Related party payables......................................... 576,406
Other payables and accrued expenses............................ 78,118
-------
Total current liabilities.................................... 694,613
Shareholders' equity
Common stock, NLG 10 par value, 100,000 shares authorized and
issued........................................................ 1,000
Additional paid-in capital..................................... 251,354
Accumulated deficit............................................ (14,396)
-------
Total shareholder's equity................................... 237,958
-------
Total liabilities and shareholder's equity................... 932,571
=======
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
16
<PAGE>
N.V. TELEKABEL BEHEER
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE 9 MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
(in thousands of Dutch guilders)
For the
Nine Months Ended
September 30,
------------------
1997 1998
-------- --------
Service and other revenue................................... 99,313 111,720
Operating expenses:
Purchases relating to sales............................... (13,582) (16,993)
Personnel expenses........................................ (13,422) (14,999)
Depreciation and amortization............................. (23,681) (34,758)
Other operating expenses.................................. (28,639) (27,560)
-------- --------
Net operating (loss) income................................. 19,989 17,410
Equity results in associates.............................. (20) (64)
Interest expense, related party........................... (18,737) (27,331)
Other income/(expense), net............................... (39) 0
-------- --------
Income/(loss) before and after income taxes................. 1,193 (9,985)
Minority interests in subsidiaries........................ 312 0
-------- --------
Net income/(loss)........................................... 1,505 (9,985)
======== ========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
17
<PAGE>
N.V. TELEKABEL BEHEER
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE 9 MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
(in thousands of Dutch guilders)
For the Nine Months Ended
September 30,
--------------------------
1997 1998
-------- ---------
Net cash flows from operating activities.......... 43,855 47,537
-------- -------
Cash flows from investing activities:
Capital expenditures.............................. (244,409) (139,861)
New acquisitions, net of cash acquired............ 0 0
-------- --------
Net cash flows from investing activities.......... (244,409) (139,861)
-------- --------
Cash flows from financing activities:
Proceeds from short-term debt to parent company... 200,554 75,715
-------- --------
Net cash flows from financing activities.......... 200,554 75,715
-------- --------
Net increase (decrease) in cash and cash
equivalents...................................... -- (16,609)
Cash and cash equivalents at beginning of period.. -- 17,465
-------- --------
Cash and cash equivalents at end of period........ -- 856
======== ========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
18
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Dutch guilders)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further information, refer
to the consolidated financial statements and footnotes thereto included herein
for the year ended December 31, 1997.
2. SIGNIFICANT ACQUISITIONS AND DIVESTITURES
During 1998 the Company surrendered its interest in TeleKabel Zoetermeer
B.V. and the remaining 52.5% of the shares in Kabelexploitatie Maatschappij
Rijnland B.V. in exchange for shares in CAI-Buren B.V., CAI-Druten B.V., CAI-
Geldermalsen B.V., CAI-Lingewaal B.V., CAI-Neerijnen-West B.V., CAI-Tiel B.V.,
CAI-Wychen B.V., CAI-Dodewaard B.V, CAI-Almere B.V., CAI-Dronten B.V. and CAI-
Lelystad B.V. as part of the Casema transaction.
Early 1998, NUON and United Pan-Europe Communications N.V. ("UPC") signed
the merger documents to combine their cable network activities in the
Netherlands. The companies completed the merger on August 6, 1998. As a result,
the TeleKabel shares have been transferred to the newly incorporated holding
company named United TeleKabel Holding N.V.
On January 19, 1999, UPC agreed to purchase NUON's 49% ownership interest
in UTH, increasing its ownership in UTH to 100%. The transaction will close
concurrent with the completion of an IPO, or failing such IPO, on or before
November 30, 1999.
3. DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE
NETHERLANDS AND THE UNITED STATES
The Company's consolidated financial statements are prepared in accordance
with Dutch GAAP, which differs in certain respects from accounting principles
generally accepted in the United States ("US GAAP"). The material differences as
they apply to the Company are summarized below:
(a) DEPRECIATION OF FIXED ASSETS
Under Dutch GAAP the Company depreciated its cable network assets using the
annuity method of depreciation. Under US GAAP cable network assets are
depreciated on a straight line basis.
(b) ACCOUNTING FOR INVESTMENTS IN AFFILIATES
Under Dutch GAAP the Company records certain of its investments in
affiliates in which it holds an interest of 20% to 50% at the historical cost of
the investment (see Note 2 of the 1997 figures). Under US GAAP these investments
are accounted for using the equity method of accounting.
19
<PAGE>
N.V. TELEKABEL BEHEER
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --
(Continued)
(in thousands of Dutch guilders)
(c) ACCRUED SUBSCRIBER FEES
Under Dutch GAAP the Company created an accrual for subscriber fees on the
acquisition balance sheet of the cable network in Leiderdorp. Monthly
subscription fees for subscribers in this area were lower than fees charged to
customers in other areas. The Company created an accrual, to be released over
the usefull life of the cable network, which results in the equalization of
cable revenues. Under US GAAP this accrual was not recorded resulting in a
decrease of the amount of goodwill paid for the cable network.
Reconciliation of net (loss)/profit (in thousands of Dutch guilders):
For the
Nine Months
Ended
September 30,
--------------
1997 1998
------ ------
Net income/(loss) under Dutch GAAP.............................. 1,505 (9,985)
US GAAP adjustment:
Depreciation on a straight line basis........................... (6,473) (8,197)
Equity accounting for affiliates................................ (4,905) 6,290
Goodwill amortization........................................... 65 (172)
Release of subscriber accrual................................... (194) 516
Income tax effect of US GAAP adjustments........................ 2,311 2,748
------ ------
Net income/(loss) under US GAAP................................. (7,691) (8,800)
====== ======
Reconciliation of shareholders' equity:
As of
September 30, 1998
------------------
Total shareholders' equity under Dutch GAAP.................. 237,958
US GAAP adjustment:
Depreciation on a straight line basis........................ (23,305)
Equity accounting for affiliates.............................
Income tax effect of US GAAP adjustments..................... 8,156
-------
Total shareholders' equity under US GAAP..................... 222,809
=======
20
<PAGE>
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA
In August 1998, we and a Dutch energy company, NUON, created United
Telekabel Holding by contributing each of our interests in Dutch cable
television systems to the new company. We refer to the creation of UTH as the
"UTH Transaction". We contributed our 100% interest in CNBH and our 50% interest
in A2000. NUON contributed its 100% interest in N.V. TeleKabel Beheer. We held
51% of UTH, with NUON owning the remaining 49%. Effective August 1998, we
deconsolidated our assets contributed to UTH and accounted for our interest in
UTH under the equity method. See note 3 to the audited consolidated financial
statements included in this prospectus for more information on this. In January
1999, we agreed to purchase NUON's 49% ownership interest in UTH, increasing our
ownership of UTH to 100%, for NLG487.6 million, plus interest at 5.5% compounded
annually from January 1, 1998. In addition, we will purchase from NUON a NLG33.0
million subordinated loan dated December 23, 1998, and owed by UTH to NUON, plus
interest on the loan at 5.5% from December 23, 1998 until the closing date. We
refer to the purchase of NUON's 49% interest in UTH as the "NUON Transaction".
The NUON Transaction is expected to close in February 1999. Upon closing of the
NUON Transaction, we will consolidate 100% of the results of UTH. See "Corporate
Ownership Structure -- The Netherlands -- UTH".
The pro forma consolidated condensed balance sheet and statements of
operations and notes thereto do not purport to represent what our 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 we believe are reasonable. The unaudited pro
forma consolidated condensed financial information and accompanying notes should
be read in conjunction with our audited consolidated financial statements and
the notes thereto, and other financial information, including "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
included in this prospectus.
The following unaudited pro forma consolidated condensed balance sheet
gives effect to the NUON Transaction as if it had occurred on September 30,
1998. In accordance with the terms of the purchase agreement for the acquisition
of NUON's 49% interest in UTH and based on offering proceeds of NLG2,556
million, the purchase price, including NLG33 million subordinated note and
related interest, will be funded with approximately NLG506.8 million in cash
proceeds from this offering and the remaining amount totaling approximately
NLG44.2 million would be satisfied six months after closing of the NUON
Transaction by an issuance of our ordinary shares to NUON or, at our option, in
cash. If an offering is not consummated, the purchase agreement requires
settlement of the entire purchase price in cash. The unaudited pro forma effects
on the balance sheet assume this offering is not consummated and include (1)
elimination of our equity investment in UTH, (2) the purchase of the remaining
49% interest in UTH, including the purchase price allocation related to the
acquisition, and (3) additional debt assuming that the acquisition of the
remaining 49% ownership interest in UTH would be funded with debt.
21
<PAGE>
As of September 30, 1998
-----------------------------------
NUON
Historical Transaction Pro Forma
Consolidated Condensed Balance Sheet: ---------- ----------- ---------
(Dutch guilders, in thousands)
ASSETS:
Cash and cash equivalents................. 44,340 2,562 46,902
Restricted cash........................... 9,265 -- 9,265
Subscriber receivables, net............... 12,369 13,810 26,179
Costs to be reimbursed by affiliated
companies, net........................... 25,369 -- 25,369
Other current assets...................... 54,174 69,527 123,701
--------- --------- ---------
Total current assets..................... 145,517 85,899 231,416
Marketable equity securities of parent, at
fair value............................... 58,025 -- 58,025
Investments in and advances to affiliated
companies, accounted for under the equity
method, net ............................. 365,724 (63,270)(1) 302,454
Property, plant and equipment, net........ 527,069 779,629 1,306,698
Goodwill and other intangible assets,
net...................................... 642,629 683,820 (2) 1,326,449
Deferred financing costs, net............. 22,142 -- 22,142
Non-current restricted cash and other
assets................................... 52,750 -- 52,750
--------- --------- ---------
Total assets............................. 1,813,856 1,486,078 3,299,934
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable, accrued liabilities and
other current liabilities ............... 198,513 132,850 331,363
Short-term debt........................... 34,020 257,500(3) 291,520
Notes payable............................. 156,030 -- 156,030
Current portion of long term debt ........ 113,519 579,009 692,528
--------- --------- ---------
Total current liabilities................ 502,082 969,359 1,471,441
Long-term debt............................ 1,001,081 481,592(4) 1,482,673
Deferred taxes and other long-term
liabilities.............................. 52,642 35,127 87,769
--------- --------- ---------
Total liabilities........................ 1,555,805 1,486,078 3,041,883
--------- --------- ---------
Minority interest in subsidiaries......... 34,265 -- 34,265
--------- --------- ---------
Shareholders' equity...................... 223,786 -- 223,786
--------- --------- ---------
Total liabilities and shareholders'
equity................................... 1,813,856 1,486,078 3,299,934
========= ========= =========
- ---------
(1) Represents the net decrease in investments in and advances to affiliated
companies as a result of the NUON Transaction:
De-consolidation of UPC's historical investments in and
advances to UTH........................................... NLG(248,791)
Consolidation of historical UTH investments in and advances
to affiliated companies................................... NLG 185,521
-----------
NLG (63,270)
===========
(2) Represents the increase in goodwill as a result of the NUON Transaction:
Consolidation of historical UTH goodwill..................... NLG403,629
Additional pro forma goodwill related to the NUON
Transaction................................................. NLG280,191
----------
NLG683,820
==========
(3) Represents the increase in short-term debt for the portion of the seller
financing from NUON due no later than November 30, 1999 incurred in
connection with the NUON Transaction.
(4) Represents the increase in long-term debt as a result of the NUON
Transaction:
Consolidation of historical UTH long-term debt................ NLG224,092
Seller financing due December 31, 2000........................ NLG257,500
----------
NLG481,592
==========
22
<PAGE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 1998
--------------------------------------------------------------
UTH NUON
Historical Transaction Transaction(1) Pro Forma
------------ ------------- --------------- --------------
(Dutch guilders, in thousands except per share data)
<S> <C> <C> <C> <C>
Consolidated Condensed Statement of Operations:
Service and other revenue...................... 305,237 (31,146) 154,563 428,654
Operating expense.............................. (97,472) 6,123 (48,708) (140,057)
Selling, general and administrative
expense....................................... (132,466) 5,062 (34,898) (162,302)
Depreciation and amortization.................. (137,231) 13,794 (74,371) (197,808)
---------- ------- ------- ----------
Net operating loss............................. (61,932) (6,167) (3,414) (71,513)
Interest income................................ 4,621 (48) 48 4,621
Interest expense............................... (73,137) 5,709 (55,991) (123,419)
Provision for loss on investment related
costs......................................... -- -- -- --
Foreign exchange gain (loss) and other
expense....................................... 6,609 -- -- 6,609
---------- ------- ------- ----------
Net loss before income taxes and other items... (123,839) (506) (59,357) (183,702)
Share in results of affiliated companies,
net........................................... (42,167) 8,250 (2,741) (36,658)
Minority interests in subsidiaries............. (3,820) -- -- (3,820)
Income tax benefit (expense)................... 413 (1,696) 1,696 413
---------- ------- ------- ==========
Net loss....................................... (169,413) 6,048 (60,402) (223,767)
========== ======= ======= ==========
Basic and diluted net loss per
ordinary share(2)............................. (2.36) (3.12)
========== ==========
Weighted-average number of ordinary shares
outstanding................................... 71,801,865 71,801,865
========== ==========
Supplemental basic and diluted net loss per
ordinary share(2)............................. (1.69)
==========
Supplemental weighted- average number of
ordinary shares outstanding................... 93,963,427
==========
</TABLE>
23
<PAGE>
The following unaudited pro forma consolidated statement of operations for
the year ended December 31, 1997 gives effect to (1) UIH's acquisition of
Philips' 50% interest in us in December 1997, which we refer to as the "UPC
Acquisition", as if it had occurred as of January 1, 1997 and (2) the UTH
Transaction and the NUON Transaction, as if both had occurred as of January 1,
1997.
The unaudited pro forma consolidated statement of operations for the nine
months ended September 30, 1998 gives effect to the UTH Transaction and the NUON
Transaction, as if both had occurred as of January 1, 1997. The column titled
"UTH Transaction" gives pro forma effect to (1) the deconsolidation of the
results of operations for the assets contributed to UTH which are included in
our historical results of operations, (2) our 51% of the results of operations
of UTH on the equity method of accounting, and (3) additional amortization
expense related to our excess basis in our equity investment in UTH.
<TABLE>
<CAPTION>
For the Year Ended December 31, 1997
-------------------------------------------------------------------------
Pro Forma Adjustments
-----------------------------
UPC UTH NUON
Historical Acquisition(3) Transaction Transaction(1) Pro Forma
------------ ------------- ------------ -------------- ---------
(Dutch guilders, in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Condensed Statement of Operations:
Service and other revenue...................... 337,155 -- (18,386) 155,619 474,388
Operating expense.............................. (111,919) -- 4,120 (47,903) (155,702)
Selling, general and administrative
expense....................................... (114,024) -- 3,830 (39,512) (149,706)
Depreciation and amortization.................. (132,888) (26,032)(4) 8,136 (66,391) (217,175)
---------- ------- ------- ------- ----------
Net operating loss............................. (21,676) (26,032) (2,300) 1,813 (48,195)
Interest income................................ 6,512 -- (144) 144 6,512
Interest expense............................... (70,738) (12,483)(5) 3,757 (58,292) (137,756)
Provision for loss on investment
related costs................................. (18,888) -- -- -- (18,888)
Foreign exchange gain (loss) and other
expense....................................... (41,160) 8,441 (6) -- -- (32,719)
---------- ------- ------- ------- ----------
Net loss before income taxes and other items... (145,950) (30,074) 1,313 (56,335) (231,046)
Share in results of affiliated companies,
net........................................... (10,637) (8,169)(7) 9,351 (14,082) (23,537)
Minority interests in subsidiaries............. 152 -- -- 683 835
Income tax benefit (expense)................... 1,649 -- (1,454) 4,535 4,730
---------- ------- ------ ------- ----------
Net loss....................................... (154,786) (38,243) 9,210 (65,199) (249,018)
========== ======= ====== ======= ==========
Basic and diluted net loss per ordinary
share(2)...................................... (1.92) (3.47)
========== ==========
Weighted-average number of ordinary shares
outstanding................................... 80,488,992 71,801,865
========== ==========
Supplemental basic and diluted net loss per
ordinary share(2)............................. (1.77)
==========
Supplemental weighted-average number of
ordinary shares outstanding................... 93,963,427
==========
</TABLE>
- ---------
(1) In accordance with the terms of the purchase agreement for the acquisition
of NUON's 49% interest in UTH and based on gross offering proceeds of
NLG2,556 million, the purchase price of NLG515 million plus the NLG33
million subordinated note and related interest will be funded by
approximately NLG507 million in cash proceeds from this offering and the
remaining amount totaling approximately NLG44 million would be satisfied
six months after closing of the NUON Transaction by an issuance of our
ordinary shares to NUON or, at our option, cash. If an offering is not
consummated, the purchase agreement requires settlement of the entire
purchase price in cash. These pro formas have been prepared assuming an
offering is not completed and we must settle the entire purchase price in
cash. Accordingly, the pro forma consolidated condensed balance sheet
assumes acquisition debt of approximately NLG515 million and the pro forma
consolidated condensed statement of operations reflects interest expense at
an annual rate of 5.5%.
24
<PAGE>
The following pro forma consolidated condensed statements of
operations for the nine months ended September 30, 1998 and the year ended
December 31, 1997 give effect to the components related to the NUON
Transaction:
<TABLE>
<CAPTION>
September 30, 1998
-------------------------------------------------------------------
Telekabel
UPC Assets Beheer UTH Pro Forma NUON
Historical(a) Historical(a) Historical(b) Adjustments Transaction
------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations:
Revenue......................... 31,146 86,919 36,498 -- 154,563
Operating expense............... (6,123) (29,142) (13,443) -- (48,708)
Selling, general and
administrative expense......... (5,062) (22,099) (7,737) -- (34,898)
Depreciation and amortization... (13,794) (32,128) (14,730) (13,719)(c) (74,371)(g)
------- ------- ------- ------- -------
Net operating loss.............. 6,167 3,550 588 (13,719) (3,414)
Interest income................. 48 -- -- -- 48
Interest expense................ (5,709) (21,227) (7,811) (21,244)(d) (55,991)
Provision for loss on investment
related costs.................. -- -- -- -- --
Foreign exchange gain (loss) and
other expense.................. -- -- -- -- --
------- ------- ------- ------- -------
Net loss before income taxes and
other items.................... 506 (17,677) (7,223) (34,963) (59,357)
Share in results of affiliated
companies, net................. (26,630) 6,237 (9,053) 26,705 (e) (2,741)
Minority interests in
subsidiaries................... -- -- -- -- --
Income tax benefit (expense).... 1,696 -- -- -- 1,696
------- ------- ------- ------- -------
Net loss........................ (24,428) (11,440) (16,276) (8,258) (60,402)
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------------------
Telekabel
UPC Assets Beheer Pro Forma NUON
Historical(a) Historical(a) Adjustments Transaction
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Consolidated Statement
of Operations:
Revenue................. 18,386 137,233 -- 155,619
Operating expense....... (4,120) (43,783) -- (47,903)
Selling, general and
administrative
expense................ (3,830) (35,682) -- (39,512)
Depreciation and
amortization........... (8,136) (39,963) (18,292)(c) (66,391)(g)
------- ------- ------- -------
Net operating loss...... 2,300 17,805 (18,292) 1,813
Interest income......... 144 -- -- 144
Interest expense........ (3,757) (26,210) (28,325)(d) (58,292)
Provision for loss on
investment related
costs.................. -- -- -- --
Foreign exchange gain
(loss) and other
expense................ -- -- -- --
------- ------- ------- -------
Net loss before income
taxes and other items.. (1,313) (8,405) (46,617) (56,335)
Share in results of
affiliated companies,
net.................... (28,996) (4,731) 19,645 (f) (14,082)
Minority interests in
subsidiaries........... -- 683 -- 683
Income tax benefit
(expense).............. 1,454 3,081 -- 4,535
------- ------- ------- -------
Net loss................ (28,855) (9,372) (26,972) (65,199)
======= ======= ======= =======
</TABLE>
25
<PAGE>
(a) Represents the historical results of operations for the net assets
contributed by UPC and NUON to UTH for the seven months ended July 31,
1998 and the year ended December 31, 1997.
(b) Represents the historical results of operations of UTH for the two
months ended September 30, 1998.
(c) Represents additional amortization as a result of the step-up in basis
of Telekabel Beheer recorded under purchase accounting in connection
with the NUON Transaction. The excess basis will be amortized over 15
years.
(d) Represents additional interest expense as a result of the debt
incurred by UPC for the acquisition of NUON's interest in UTH for the
nine months ended September 30, 1998 and the year ended December 31,
1997.
(e) Represents the following:
<TABLE>
<CAPTION>
<S> <C>
Elimination of pro forma share of results recorded for the UTH
Transaction representing UPC's 51% interest in UTH for the
seven months ending July 31, 1998................................ 18,293
Elimination of pro forma amortization of basis difference in
UPC's investment in UTH recorded for the UTH Transaction......... 111
Elimination of equity pick-up recorded in UPC historical results
for its share in the results of UTH for the two months ending
September 30, 1998............................................... 8,301
------
26,705
======
</TABLE>
(f) Represents the following:
<TABLE>
<CAPTION>
<S> <C>
Elimination of pro forma share of results recorded for the UTH
Transaction representing UPC's 51% interest in UTH for the
twelve months ending December 31, 1997........................... 19,496
Elimination of pro forma amortization of basis difference in
UPC's investment in UTH recorded for the UTH Transaction......... 149
------
19,645
======
</TABLE>
(g) The expected useful lives of the assets acquired by UPC in the NUON
Transaction are as follows:
Cable distribution networks............................... 7-20 years
Subscriber installation costs and converters.............. 5 years
Office equipment, furniture and fixtures.................. 3-8 years
Buildings and leasehold improvements...................... 20-33 years
Other..................................................... 3-10 years
Goodwill and intangible assets............................ 15-20 years
(2) "Basic and diluted loss per ordinary share" is determined by dividing net
loss available to ordinary shareholders by the weighted-average number of
ordinary shares outstanding during each period. Supplemental basic and
diluted net loss per ordinary share gives pro forma effect to a reduction
of debt related interest expense for that debt that will be paid down from
offering proceeds. In addition, the number of pro forma outstanding shares
has been increased for the proceeds necessary to reduce the debt.
(3) In connection with the UPC Acquisition, our net assets acquired by UIH were
recorded at fair market value based on the purchase price paid by UIH. As a
result of our becoming essentially wholly owned by UIH, certain purchase
accounting adjustments, along with UIH's investment in us including
existing basis differences, were pushed down to our financial statements
and a new basis of accounting was established for our net assets. The pro
forma effects on the statement of operations for the year ended December
31, 1997 include (1) additional depreciation and amortization related to
the step-up in basis in tangible assets and the excess of the purchase
price over Philips' interest in our net assets, (2) the increase in
interest expense from the senior revolving credit and bridge bank facility
incurred to finance UIH's acquisition of Philips' interest in us, as well
as foreign exchange loss on our U.S. dollar-denominated bridge bank
facility, (3) elimination of historical interest expense and the related
foreign exchange loss on the U.S. dollar-denominated pay-in-kind
convertible notes and (4) elimination of historical interest expense on
those existing credit facilities that were refinanced through the proceeds
from the senior revolving credit and bridge bank facilities.
26
<PAGE>
(4) Represents additional depreciation and amortization as a result of the
step-up in basis of property, plant and equipment, license costs and
goodwill as a result of the UPC Acquisition for the period from January 1,
1997 through December 11, 1997. The step-up in basis is being amortized
over 15 years. As a result of the UPC Acquisition and associated push-down
of UIH basis, the net assets of UPC were adjusted to reflect UIH's net
investment in us as of the acquisition date. The new basis will be
depreciated or amortized over the remaining useful lives of the assets.
(5) Represents the net increase in interest expense as a result of the UPC
Acquisition:
Elimination of historical interest expense on the pay-in-kind
convertible notes.............................................. 28,743
Elimination of historical interest on refinanced credit
facilities..................................................... 19,700
Additional interest expense on the senior revolving credit
facility (assuming borrowings of NLG786,000 at an interest rate
of 5.5%)....................................................... (40,828)
Additional interest expense on the bridge bank facility
(assuming borrowings of NLG224,000 at an interest rate of
9.5%).......................................................... (20,098)
-------
(12,483)
=======
(6) Represents the net decrease in foreign exchange loss as a result of the UPC
Acquisition.
Elimination of historical foreign exchange loss of the pay-in-
kind convertible notes......................................... 43,441
Pro Forma foreign exchange loss on the bridge bank facility..... (35,000)
=======
8,441
=======
(7) Represents the net increase on share results of affiliated companies as a
result of the amortization of the step-up in basis of investments in and
advances to affiliated companies accounted for under the equity method as a
result of the UPC Acquisition. The excess basis attributable to investments
in and advances to affiliated companies is being amortized over 15 years.
27
