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 September 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
Commission File No. 0-21974
UnitedGlobalCom, Inc.
(formerly known as 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 November
2, 1999 was:
Class A Common Stock -- 31,773,179 shares
Class B Common Stock -- 9,661,970 shares
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UnitedGlobalCom, Inc.
TABLE OF CONTENTS
Page
Number
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PART I - FINANCIAL INFORMATION
------------------------------
Item 1 - Financial Statements
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<S> <C>
Condensed Consolidated Balance Sheets as of September 30, 1999 (Unaudited) and December 31, 1998............. 3
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 1999 and 1998 (Unaudited).................................................................. 4
Condensed Consolidated Statement of Stockholders' Equity (Deficit) for the Nine Months Ended
September 30, 1999 (Unaudited)........................................................................... 5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1999 and 1998 (Unaudited).................................................................. 7
Notes to Condensed Consolidated Financial Statements (Unaudited)............................................. 10
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 31
- ------
Item 3 - Quantitative and Qualitative Disclosures about Market Risk............................................. 49
- ------
PART II - OTHER INFORMATION
---------------------------
Item 6 - Exhibits and Reports on Form 8-K....................................................................... 53
- ------
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2
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UnitedGlobalCom, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in thousands, except share and per share amounts)
(Unaudited)
As of As of
September 30, December 31,
1999 1998
ASSETS ------------- ------------
<S> <C>
Current assets
Cash and cash equivalents............................................................................... $ 317,018 $ 35,608
Restricted cash......................................................................................... 18,724 17,215
Short-term liquid investments........................................................................... 494,056 41,498
Subscriber receivables, net of allowance for doubtful accounts of $23,212 and $5,482, respectively...... 66,730 13,788
Costs to be reimbursed by affiliated companies.......................................................... 15,326 21,232
Other related party receivables......................................................................... 6,367 2,064
Other receivables....................................................................................... 60,351 15,380
Inventory............................................................................................... 64,860 12,762
Other current assets, net............................................................................... 84,378 16,363
---------- ----------
Total current assets............................................................................... 1,127,810 175,910
Investments in and advances to affiliated companies, accounted for under the equity method, net........... 307,212 429,490
Property, plant and equipment, net of accumulated depreciation of $388,276 and $201,183, respectively..... 2,150,707 464,059
Goodwill and other intangible assets, net of accumulated amortization of $112,031 and $39,683,
respectively............................................................................................ 2,935,937 424,934
Deferred financing costs, net of accumulated amortization of $14,030 and $9,923, respectively............. 115,323 41,270
Other assets, net......................................................................................... 22,304 6,432
---------- ----------
Total assets....................................................................................... $6,659,293 $1,542,095
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable, including related party payables of $3,085 and $247, respectively..................... $ 193,713 $ 76,696
Accrued liabilities..................................................................................... 248,152 66,079
Subscriber prepayments and deposits..................................................................... 57,706 24,210
Short-term debt......................................................................................... 172,820 93,379
Current portion of senior discount notes................................................................ 167 412
Current portion of other long-term debt................................................................. 7,244 62,252
Other current liabilities............................................................................... 14,264 3,524
---------- ----------
Total current liabilities.......................................................................... 694,066 326,552
Senior discount notes..................................................................................... 3,544,891 1,249,643
Other long-term debt...................................................................................... 1,516,303 689,646
Deferred compensation..................................................................................... 1,801 173,251
Deferred taxes............................................................................................ 17,244 4,580
Other long-term liabilities............................................................................... 69,052 7,097
---------- ----------
Total liabilities.................................................................................. 5,843,357 2,450,769
---------- ----------
Minority interests in subsidiaries........................................................................ 574,737 18,705
---------- ----------
Preferred stock, $0.01 par value, 3,000,000 shares authorized, stated at liquidation value:
Series A Convertible Preferred Stock, 0 and 132,144 shares issued and outstanding, respectively......... - 26,086
---------- ----------
Series B Convertible Preferred Stock, 116,185 and 139,031 shares issued and outstanding, respectively... 26,490 30,200
---------- ----------
Stockholders' equity (deficit):
Class A Common Stock, $0.01 par value, 210,000,000 shares authorized, 34,508,188 and 30,674,995
shares issued, respectively........................................................................... 345 307
Class B Common Stock, $0.01 par value, 30,000,000 shares authorized, 9,661,970 and 9,915,880
shares issued and outstanding, respectively.......................................................... 97 99
Series C Convertible Preferred Stock, 425,000 shares authorized, 425,000 and 0 shares issued
and outstanding, respectively......................................................................... 402,687 -
Additional paid-in capital.............................................................................. 746,834 378,597
Deferred compensation................................................................................... (65,318) (679)
Treasury stock, at cost, 2,784,620 shares of Class A Common Stock....................................... (29,061) (29,061)
Accumulated deficit..................................................................................... (645,567) (1,241,986)
Other cumulative comprehensive loss..................................................................... (195,308) (90,942)
---------- ----------
Total stockholders' equity (deficit)............................................................... 214,709 (983,665)
---------- ----------
Total liabilities and stockholders' equity (deficit)............................................... $6,659,293 $1,542,095
========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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3
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UnitedGlobalCom, 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
September 30, September 30,
-------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue.................................................................... $ 206,732 $ 77,955 $ 460,646 $ 215,790
System operating expense................................................... (120,321) (38,181) (251,233) (99,402)
System selling, general and administrative expense......................... (90,851) (32,714) (190,611) (86,187)
Corporate general and administrative expense............................... (23,367) (23,163) (108,423) (42,100)
Depreciation and amortization.............................................. (127,298) (43,814) (260,375) (142,669)
---------- ---------- ---------- ----------
Net operating loss.................................................... (155,105) (59,917) (349,996) (154,568)
Gain on issuance of common equity securities by subsidiaries............... 283,947 - 1,106,014 -
Interest income, including related party income of $142, $306, $420 and
$750, respectively....................................................... 12,993 3,134 22,400 9,494
Interest expense........................................................... (116,255) (48,515) (234,712) (140,764)
Gain on sale of investment in affiliate.................................... - - 7,456 -
Foreign currency exchange (loss) gain...................................... (4,629) 6,344 (24,834) 708
Other income (expense), net................................................ 4,946 (3,386) (1,898) (4,742)
---------- ---------- ---------- ----------
Net income (loss) before other items.................................. 25,897 (102,340) 524,430 (289,872)
Share in results of affiliated companies, net.............................. (16,758) (17,045) (48,366) (47,963)
Minority interests in subsidiaries......................................... 52,854 (1,725) 127,792 (1,746)
---------- ---------- ---------- ----------
Net income (loss) before extraordinary charge......................... 61,993 (121,110) 603,856 (339,581)
Extraordinary charge for early retirement of debt.......................... - - - (79,091)
---------- ---------- ---------- ----------
Net income (loss)..................................................... $ 61,993 $ (121,110) $ 603,856 $ (418,672)
========== ========== ========== ==========
Change in unrealized gain on available-for-sale securities................. $ (339) $ (338) $ 127 $ 121
Change in cumulative translation adjustments............................... (17,924) (15,494) (104,493) (25,924)
---------- ---------- ---------- ----------
Comprehensive income (loss)........................................... $ 43,730 $ (136,942) $ 499,490 $ (444,475)
========== ========== ========== ==========
Basic net income (loss) attributable to common shareholders (Note 12)...... $ 54,071 $ (121,517) $ 594,730 $ (419,729)
========== ========== ========== ==========
Diluted net income (loss) attributable to common shareholders (Note 12).... $ 54,556 $ (121,517) $ 603,856 $ (419,729)
========== ========== ========== ==========
Net income (loss) per common share:
Basic income (loss) before extraordinary charge....................... $ 1.31 $ (3.29) $ 14.78 $ (9.35)
Extraordinary charge.................................................. - - - (2.17)
---------- ---------- ---------- ----------
Basic net income (loss)............................................... $ 1.31 $ (3.29) $ 14.78 $ (11.52)
========== ========== ========== ==========
Diluted income (loss) before extraordinary charge..................... $ 1.22 $ (3.29) $ 13.05 $ (9.35)
Extraordinary charge.................................................. - - - (2.17)
---------- ---------- ---------- ----------
Diluted net income (loss)............................................. $ 1.22 $ (3.29) $ 13.05 $ (11.52)
========== ========== ========== ==========
Weighted-average number of common shares outstanding:
Basic................................................................. 41,272,627 36,983,980 40,251,361 36,423,667
========== ========== ========== ==========
Diluted............................................................... 44,835,484 36,983,980 46,255,351 36,423,667
========== ========== ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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4
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UnitedGlobalCom, Inc.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(Stated in thousands, except share amounts)
(Unaudited)
Class A Class B Series C
Common Stock Common Stock Preferred Stock Additional Treasury Stock
---------------- ---------------- ------------------ Paid-In Deferred -------------------
Shares Amount Shares Amount Shares Amount Capital Compensation Shares Amount
--------- ------ --------- ------ --------- -------- ---------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1998...... 30,674,995 $307 9,915,880 $ 99 - $ - $378,597 $ (679) 2,784,620 $(29,061)
Exchange of Class B Common Stock
for Class A Common Stock....... 253,910 2 (253,910) (2) - - - - - -
Issuance of Class A Common Stock
in connection with exercise
of warrants.................... 1,011,251 10 - - - - 15,158 - - -
Issuance of Class A Common Stock
in connection with Company's
stock option plans............. 820,374 8 - - - - 8,628 - - -
Issuance of Class A Common Stock
in connection with Company's
401(k) plan.................... 751 - - - - - 51 - - -
Exchange of Series A Convertible
Preferred Stock for Class A
Common Stock................... 1,503,202 15 - - - - 26,291 - - -
Exchange of Series B Convertible
Preferred Stock for Class A
Common Stock................... 243,705 3 - - - - 5,176 - - -
Issuance of Series C Convertible
Preferred Stock................ - - - - 425,000 395,250 (13,462) - - -
Accrual of dividends on
Series A and B
Convertible Preferred Stock.... - - - - - - (1,689) - - -
Accrual of dividends on Series C
Convertible Preferred Stock.... - - - - - 7,437 - - - -
Equity transactions of
subsidiaries................... - - - - - - 328,084 (118,856) - -
Amortization of deferred
compensation................... - - - - - - - 54,217 - -
Net income....................... - - - - - - - - - -
Change in cumulative
translation adjustments........ - - - - - - - - - -
Change in unrealized gain on
available-for-sale securities.. - - - - - - - - - -
---------- ---- --------- ---- ------- -------- -------- -------- --------- --------
Balances, September 30, 1999..... 34,508,188 $345 9,661,970 $ 97 425,000 $402,687 $746,834 $(65,318) 2,784,620 $(29,061)
========== ==== ========= ==== ======= ======== ======== ======== ========= ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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5
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UnitedGlobalCom, Inc.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (Continued)
(Stated in thousands, except share amounts)
(Unaudited)
Other
Cumulative
Accumulated Comprehensive
Deficit Loss Total
----------- -------------- ----------
Balances, December 31, 1998...... $(1,241,986) $ (90,942) $(983,665)
Exchange of Class B Common Stock
for Class A Common Stock....... - - -
Issuance of Class A Common Stock
in connection with exercise
of warrants.................... - - 15,168
Issuance of Class A Common Stock
in connection with Company's
stock option plans............. - - 8,636
Issuance of Class A Common Stock
in connection with Company's
401(k) plan.................... - - 51
Exchange of Series A Convertible
Preferred Stock for Class A
Common Stock................... - - 26,306
Exchange of Series B Convertible
Preferred Stock for Class A
Common Stock................... - - 5,179
Issuance of Series C Convertible
Preferred Stock................ - - 381,788
Accrual of dividends on
Series A and B
Convertible Preferred Stock.... - - (1,689)
Accrual of dividends on Series C
Convertible Preferred Stock.... (7,437) - -
Equity transactions of
subsidiaries................... - - 209,228
Amortization of deferred
compensation................... - - 54,217
Net income....................... 603,856 - 603,856
Change in cumulative
translation adjustments........ - (104,493) (104,493)
Change in unrealized gain on
available-for-sale securities.. - 127 127
----------- --------- ---------
Balances, September 30, 1999..... $ (645,567) $(195,308) $ 214,709
=========== ========= =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
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UnitedGlobalCom, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands)
(Unaudited)
For the Nine Months Ended
September 30,
----------------------------
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................................................................... $ 603,856 $(418,672)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Gain on issuance of common equity securities by subsidiaries....................................... (1,106,014) -
Extraordinary charge for early retirement of debt.................................................. - 79,091
Share in results of affiliated companies, net...................................................... 42,369 47,963
Minority interests in subsidiaries................................................................. (127,792) 1,746
Depreciation and amortization...................................................................... 260,375 142,669
Accretion of interest on senior notes and amortization of deferred financing costs................. 152,325 104,907
Stock-based compensation expense................................................................... 71,702 19,199
Gain on sale of investment in affiliate............................................................ (7,456) -
Increase in receivables, net....................................................................... (29,950) (3,195)
Increase in other assets........................................................................... (7,067) (25,700)
Increase in accounts payable, accrued liabilities and other........................................ 103,647 17,541
---------- ---------
Net cash flows from operating activities........................................................ (44,005) (34,451)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term liquid investments............................................................ (557,000) (142,770)
Proceeds from sale of short-term liquid investments.................................................. 89,711 117,684
Restricted cash (deposited) released, net............................................................ (2,816) 3,251
Investments in and advances to affiliated companies.................................................. (144,117) (36,243)
Proceeds from sale of investment in affiliated company............................................... 18,000 -
New acquisitions, net of cash acquired............................................................... (2,103,861) (103,889)
Capital expenditures................................................................................. (444,140) (125,913)
Other................................................................................................ (5,638) (2,983)
---------- ---------
Net cash flows from investing activities........................................................ (3,149,861) (290,863)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock by subsidiaries............................................................. 1,703,471 -
Issuance of Series C Convertible Preferred Stock..................................................... 381,788 -
Issuance of common stock in connection with exercise of warrants..................................... 15,168 -
Issuance of common stock in connection with Company's and subsidiary's stock option plans............ 24,961 9,235
Proceeds from offering of senior discount notes...................................................... 1,727,639 812,200
Retirement of existing senior notes.................................................................. (265) (531,800)
Proceeds from short-term and long-term borrowings.................................................... 915,186 176,390
Deferred financing costs............................................................................. (72,640) (23,888)
Repayments of short-term and long-term borrowings.................................................... (1,137,040) (133,837)
Payment of sellers note.............................................................................. (18,000) -
Other................................................................................................ 2,971 -
---------- ---------
Net cash flows from financing activities........................................................ 3,543,239 308,300
---------- ---------
EFFECT OF EXCHANGE RATES ON CASH..................................................................... (67,963) 1,088
---------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................................................... 281,410 (15,926)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD....................................................... 35,608 74,289
---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD............................................................. $ 317,018 $ 58,363
========== =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
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UnitedGlobalCom, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Stated in thousands)
(Unaudited)
For the Nine Months Ended
September 30,
----------------------------
1999 1998
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SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest............................................................................. $ 54,920 $34,910
========= =======
Cash received for interest......................................................................... $ 17,470 $ 6,710
========= =======
ACQUISITION OF 100% OF @ENTERTAINMENT:
Net current assets................................................................................. $ (51,239) $ -
Property, plant and equipment...................................................................... (196,178) -
Goodwill .......................................................................................... (986,814) -
Long-term liabilities.............................................................................. 448,566 -
Other.............................................................................................. (21,335) -
--------- -------
Total cash paid................................................................................. (807,000) -
Cash acquired...................................................................................... 62,507 -
--------- -------
Net cash paid................................................................................... $(744,493) $ -
========= =======
ACQUISITION OF 100% OF STJARN:
Property, plant and equipment...................................................................... $ (43,171) $ -
Goodwill........................................................................................... (442,094) -
Net current liabilities............................................................................ 55,997 -
Long-term liabilities.............................................................................. 32,268 -
--------- -------
Total purchase price............................................................................ (397,000) -
Seller's Note...................................................................................... 100,000 -
--------- -------
Total cash paid................................................................................. (297,000) -
Cash acquired...................................................................................... 3,792 -
--------- -------
Net cash paid................................................................................... $(293,208) $ -
========= =======
ACQUISITION OF REMAINING 49.0% OF UTH:
Property, plant and equipment...................................................................... $(210,013) $ -
Investments in affiliated companies................................................................ (46,830) -
Goodwill........................................................................................... (256,749) -
Net current liabilities............................................................................ 5,384 -
Long-term liabilities.............................................................................. 242,536 -
--------- -------
Total cash paid................................................................................. (265,672) -
Cash acquired...................................................................................... 13,629 -
--------- -------
Net cash paid................................................................................... $(252,043) $ -
========= =======
ACQUISITION OF REMAINING 50.0% OF A2000:
Receivables assumed................................................................................ $ (13,062) $ -
Property, plant and equipment...................................................................... (96,539) -
Goodwill........................................................................................... (274,361) -
Net current liabilities............................................................................ 25,044 -
Long-term liabilities.............................................................................. 129,918 -
--------- -------
Total cash paid................................................................................. (229,000) -
Cash acquired...................................................................................... 521 -
--------- -------
Net cash paid................................................................................... $(228,479) $ -
========= =======
The accompanying notes are an integral part of these condensed consolidated financial statements.
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UnitedGlobalCom, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Stated in thousands)
(Unaudited)
For the Nine Months Ended
September 30,
----------------------------
1999 1998
---------- ----------
<S> <C> <C>
ACQUISITION OF REMAINING INTEREST IN VTRH:
Working capital.................................................................................... $ (10,671) $ -
Property, plant and equipment...................................................................... (203,200) -
Goodwill and other intangible assets............................................................... (242,131) -
Other long-term assets............................................................................. (14,971) -
Elimination of equity investment in Chilean joint venture.......................................... 68,517 -
Long-term liabilities.............................................................................. 144,277 -
--------- -------
Total cash paid................................................................................ (258,179) -
Cash acquired...................................................................................... 5,498 -
--------- -------
Net cash paid.................................................................................. $(252,681) $ -
========= =======
ACQUISITION OF 100% OF GELREVISION:
Property, plant and equipment...................................................................... $ (49,407) $ -
Goodwill........................................................................................... (67,335) -
Net current liabilities............................................................................ 2,682 -
Long-term liabilities.............................................................................. 4,236 -
--------- -------
Total cash paid................................................................................ (109,824) -
Cash acquired...................................................................................... 136 -
--------- -------
Net cash paid.................................................................................. $(109,688) $ -
========= =======
The accompanying notes are an integral part of these condensed consolidated financial statements.
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UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1999
(Unaudited)
1. ORGANIZATION AND NATURE OF OPERATIONS
UnitedGlobalCom, Inc. (formerly known as United International Holdings, Inc.,
together with its majority-owned subsidiaries, the "Company" or "United") 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 outside the United States.
The following chart presents a summary of the Company's significant investments
in multi-channel television and telephony operations as of September 30, 1999.
10
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<S> <C>
************************************************************************************************************************************
* United *
************************************************************************************************************************************
100.0% * 100.0% *
*************************************** *******************************************************************************************
* United Europe, Inc. ("UEI") * * United International Properties, Inc. ("UIPI") *
*************************************** *******************************************************************************************
* *
* **********************************************
61.5%(1) * 100.0%(7) * * 100.0%
*************************************** ********************************************* *********************************************
* United Pan-Europe Communications * * United Asia/Pacific Communications, Inc. * * United Latin America, Inc. *
* N.V. ("UPC") * * ("UAP")* * * ("ULA") *
*************************************** ********************************************* *********************************************
* 100.0% * *
*************************************** ********************************************* *********************************************
*Austria: * * United Australia/Pacific, Inc. * *Brazil: *
* Telekabel Group 95.0% * * ("United A/P") * * TV Show Brasil, S.A. ("TVSB") 100.0% *
*Belgium: * ********************************************* * TV Cabo e Comunicacoes de *
* UPC Belgium 100.0% * * * Jundiai, S.A. ("Jundiai") 46.3% *
*Czech Republic: * 75.5% * *Chile: *
* Kabel Net Group * ********************************************* * VTR Hipercable S.A. ("VTRH") 100.0% *
* ("KabelNet") 100.0% * * Austar United Communications Limited * *Mexico: *
*France: * * ("Austar United") * * Tele Cable de Morelos, S.A. *
* Mediareseaux Marne S.A. * ********************************************* * de C.V. ("Megapo") 49.0% *
* ("Mediareseaux")(2) 99.6% * * *Peru: *
* Reseaux Cables de France * * * Cable Star S.A. ("Cable Star") 62.2% *
* ("RCF")(3) 95.3% * ********************************************* *Latin American Programming: *
* Time Warner Cable France(3) 99.6% * *Australia: * * MGM Networks Latin America *
* Videopole(3) 99.6% * * CTV Pty Limited and STV Pty * * LLC ("MGM Networks LA") 50.0% *
*Hungary: * * Limited (collectively, * *********************************************
* UPC Magyarorszag(4) 3 79.3% * * ("Austar") 100.0% *
* Monor Telefon Tarsasag, * * United Wireless Pty Limited *
* Rt ("Monor") 47.5% * * ("United Wireless") 100.0% *
*Ireland: * * XYZ Entertainment Pty Limited *
* Tara Television Limited * * ("XYZ Entertainment") 50.0% *
* ("Tara") 80.0% * *New Zealand: *
*Israel: * * Saturn Communications Limited *
* Tevel Israel International * * ("Saturn") 100.0% *
* Communications Ltd. * *********************************************
* ("Tevel") 46.6% *
*Malta: *
* Melita Cable TV PLC * *********************************************
* ("Melita") 50.0% * * *Other UAP *
*The Netherlands: * * *
* UPC Nederland(5) 100.0% * *China: *
* A2000 Holding N.V. * * Hunan International TV *
* ("A2000")(6) 100.0% * * Communications Company *
* GelreVision(6) 100.0% * * Limited ("HITV") 49.0%(8)*
* Priority Telecom N.V. 100.0% * *Philippines: *
* chello Broadband N.V. * * Pilipino Cable Corporation *
* ("chello") 100.0% * * ("PCC") 19.6%(9)*
* UPC Programming B.V. * *Tahiti: *
* ("(UPCtv") 100.0% * * Telefenua S.A. ("Telefenua") 90.0% *
*Norway: * *********************************************
* UPC Norge AS ("UPC Norge") 100.0% *
*Poland: *
* @Entertainment, Inc. *
* ("@Entertainment") 100.0% *
*Romania: *
* Control Cable Ventures SRL *
* ("Control Cable") 100.0% *
* Multicanal Holdings SRL *
* ("Multicanal") 100.0% *
* Eurosat CA-TV SRL *
* ("Eurosat") 51.0% *
* Diplomatic International, *
srl 100.0% *
* Selektronic 100.0% *
*Slovak Republic: *
* Kabeltel SRO ("Kabeltel") 100.0% *
* UPC Slovensko s.r.o. *
* ("UPC Slovensko") 100.0% *
* Trnavatel SRO *
* ("Trnavatel") 95.0% *
*Spain/Portugal: *
* Iberian Programming *
* Services ("IPS") 50.0% *
*Sweden: *
* Stjarn TVnatet AB *
* ("Stjarn") 100.0% *
*United Kingdom: *
* Xtra Music Ltd. 41.0% *
*Other: *
* SBS Broadcasting SA ("SBS") 13.3% *
***************************************
</TABLE> 11
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1) In October 1999, UPC closed an offering of 15.0 million ordinary shares at
euro("euro")59.75 ($64.68) per share, for gross proceeds of approximately
euro896.3 ($970.2) million. This sale diluted United's ownership to 50.5%
on a fully diluted basis.
(2) The minority shareholder holds warrants giving it the right to purchase for
a nominal amount new shares corresponding to 4.6% of Mediareseaux's share
capital. Accordingly, UPC has a 95.0% economic interest in Mediareseaux.
(3) UPC's investment in RCF, Time Warner Cable France and Videopole is held
through Mediareseaux.
(4) Formerly known as Telekabel Hungary
(5) Formerly known as United Telekabel Holding N.V. ("UTH").
(6) UPC's investment in A2000 and GelreVision are held through UPC Nederland.
(7) Effective October 8, 1999, UIPI purchased the remaining 2.0% interest in
UAP that it did not own. The seller has the right to repurchase these
shares at the original sale price, plus interest at 14.0% per annum, at any
time prior to October 8, 2000.
(8) Pursuant to a memorandum of understanding with AmTec, Inc. ("AmTec") UAP
and AmTec agreed to exchange UAP's interest in HITV for AmTec stock.
Closing on the transaction is expected to occur in early 2000, subject to
certain conditions.
(9) UAP currently holds a convertible loan, which upon full conversion would
provide UAP with a 40.0% equity ownership interest in Sun Cable Systems
("Sun Cable"). United will hold an effective 19.6% interest in PCC when the
merger between Sun Cable (49.0%) and Sky Cable (51.0%) is completed in
1999.
12
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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 a controlling financial interest through the ownership of a majority
voting interest. The following illustrates those subsidiaries where the Company
did not consolidate their results of operations for the entire nine months ended
September 30, 1999:
<TABLE>
<CAPTION>
Effective Date
Entity of Consolidation Reason
- ------ ---------------- -------
<S> <C> <C>
UPC Nederland (1) February 1, 1999 Acquisition of remaining 49.0% interest
VTRH May 1, 1999 Acquisition of remaining 66.0% interest
UPC Slovensko June 1, 1999 Acquisition
GelreVision June 1, 1999 Acquisition
RCF June 1, 1999 Acquisition
Saturn (1) August 1, 1999 Acquisition of remaining 35.0% interest
Stjarn August 1, 1999 Acquisition
Videopole August 1, 1999 Acquisition
@Entertainment August 1, 1999 Acquisition
Time Warner Cable France September 1, 1999 Acquisition
A2000 September 1, 1999 Acquisition of remaining 50.0% interest
Telefenua (2)
</TABLE>
- -------------------
(1) Prior to the acquisition date, the equity method of accounting was used
because of certain minority shareholder's rights.
(2) Effective October 1, 1998, the Company discontinued consolidating the
results of operations of Telefenua due to an other-than-temporary loss of
control.
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 September 30, 1999 and the results of its operations for the three
and nine months ended September 30, 1999 and 1998. All significant intercompany
accounts and transactions have been eliminated in consolidation. 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 ten months ended December 31,
1998.
INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
EQUITY METHOD
For those investments in unconsolidated subsidiaries and companies in which the
Company's voting interest is 20.0% to 50.0%, its investments are held through a
combination of voting common stock, preferred stock, debentures or convertible
debt and/or the Company exerts significant influence through board
representation and management authority, the equity method of accounting is
used. Under this method, the investment, originally recorded at cost, is
adjusted to recognize the Company's proportionate share of net earnings or
losses of the affiliate, limited to the extent of the Company's investment in
and advances to the affiliate, including any debt guarantees or other
contractual funding commitments. The Company's proportionate share of net
earnings or losses of affiliates includes the amortization of the excess of its
cost over its proportionate interest in each affiliate's net assets.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Additions, replacements,
installation costs 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 incorporate overhead expense and interest
charges incurred during the period of construction; investment subsidies are
deducted. Upon disconnection of a subscriber, the remaining book value of the
13
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
subscriber equipment, excluding converters which are recovered upon
disconnection, and the capitalized labor are written off and accounted for as an
operating cost. Depreciation is calculated using the straight-line method over
the economic life of the asset.
The economic lives of property, plant and equipment at acquisition are as
follows:
Cable distribution networks.............................. 3-20 years
Subscriber premises equipment and converters............. 3-10 years
MMDS/DTH distribution facilities......................... 5-20 years
Office equipment, furniture and fixtures................. 3-10 years
Buildings and leasehold improvements..................... 3-33 years
Other.................................................... 3-10 years
GOODWILL AND OTHER INTANGIBLE ASSETS
The excess of investments in consolidated subsidiaries over the net tangible
asset value at acquisition is amortized on a straight-line basis over 15 years.
Licenses in newly-acquired companies are recognized at the fair market value of
those licenses at the date of acquisition. Licenses in new franchise areas
include the capitalization of direct costs incurred in obtaining the license.
The license value is amortized on a straight-line basis over the initial license
period, up to a maximum of 20 years.
STAFF ACCOUNTING BULLETIN NO. 51 ("SAB 51") ACCOUNTING POLICY
Gains realized as a result of stock sales by the Company's subsidiaries are
recorded in the statement of operations, except for any transactions which must
be credited directly to equity in accordance with the provisions of SAB 51.
STOCK-BASED COMPENSATION
Stock-based compensation is recognized using the intrinsic value method for the
Company's stock option plans, which results in compensation expense for the
difference between the grant price and the fair market value at each new
measurement date. In addition to the Company's stock option plans, UPC, ULA and
Austar United have also adopted stock-based compensation plans for their
employees. With respect to certain of these plans, the rights conveyed to
employees are the substantive equivalents to stock appreciation rights.
Accordingly, compensation expense is recognized at each financial statement date
based on the difference between the grant price and the estimated fair value of
the respective subsidiary's common stock.
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
"Basic net income (loss) per share" is determined by dividing net income (loss)
available to common stockholders by the weighted-average number of common shares
outstanding during each period. Net income (loss) available to common
stockholders includes the accrual of dividends on convertible preferred stock
which is charged directly to additional paid-in capital. "Diluted net income
(loss) per share" includes the effects of potentially issuable common stock, but
only if dilutive. The Company's stock option plans and convertible securities
are excluded from the Company's diluted net income (loss) per share for the
three and nine months ended September 30, 1998, because their effect would be
anti-dilutive.
FOREIGN OPERATIONS AND FOREIGN EXCHANGE RATE RISK
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 U.S.
dollars. Assets and liabilities of foreign subsidiaries for which the functional
currency is the local currency are translated at 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' equity (deficit) and are included in Other Cumulative
Comprehensive Loss. Transactions denominated in currencies other than the local
currency are recorded based on exchange rates at the time such transactions
arise. Subsequent changes in exchange rates result in transaction gains and
losses which are reflected in income as unrealized (based on period-end
translations) or realized upon settlement of the transactions. Cash flows from
the Company's operations in foreign countries are translated based on their
functional currencies. As a result, amounts related to assets and liabilities
14
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
reported in the consolidated statements of cash flows will not agree to changes
in the corresponding balances in the 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. Certain of the
Company's foreign operating companies have notes payable and notes receivable
that are denominated in a currency other than their own functional currency.
Accordingly, the Company may experience economic loss and a negative impact on
earnings and equity with respect to its holdings solely as a result of foreign
currency exchange rate fluctuations.
NEW ACCOUNTING PRINCIPLES
The Financial Accounting Standards Board ("FASB") recently issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which requires that companies recognize
all derivatives as either assets or liabilities in the balance sheet at fair
value. Under SFAS 133, accounting for changes in fair value of a derivative
depends on its intended use and designation. In June 1999, the FASB issued
Statement of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of SFAS 133"
("SFAS 137"). SFAS 137 amends the effective date of SFAS 133 until fiscal
quarters of all fiscal years beginning after June 15, 2000. The Company is
currently assessing the effect of this new standard.
3. ACQUISITIONS AND OTHER
UPC STOCK OFFERINGS
During February 1999, UPC successfully completed an initial public offering
selling 44.6 million shares on the Amsterdam Stock Exchange and Nasdaq National
Market System, raising gross and net proceeds at Dutch guilder ("NLG")63.91
($32.78) per share of NLG2,852.9 ($1,463.0) million and NLG2,660.1 ($1,364.1)
million, respectively. The proceeds were used to reduce debt facilities and
finance acquisitions. Based on the carrying value of the Company's investment in
UPC as of February 11, 1999, United recognized a gain of $822.1 million from the
resulting step-up in the carrying amount of United's investment in UPC, in
accordance with SAB 51. No deferred taxes were recorded related to this gain due
to the Company's intent on holding its investment in UPC indefinitely. UPC's
offering reduced the Company's ownership interest from 100% to 64.3%. As a
result of the issuance of shares by UPC to partially finance the purchase of
Videopole and employee stock option exercises subsequent to the initial public
offering date, the Company's ownership interest in UPC decreased to 61.5% as of
September 30, 1999. In October 1999, UPC closed an offering of 15.0 million
ordinary shares at euro59.75 ($64.68) per share, for gross proceeds of
approximately euro896.3 ($970.2) million. This sale diluted United's ownership
to 55.1%. If all of the UPC stock options and warrants outstanding on September
30, 1999 were exercised, the Company's ownership interest would be 50.5% on a
fully diluted basis.
UTH
In August 1998, UPC merged its Dutch cable television and telecommunications
assets, consisting of its 50.0% interest in A2000 and its wholly-owned
subsidiary Cable Network Brabant Holding B.V. ("CNBH"), with those of the Dutch
energy company N.V. NUON Energie-Onderneming voor Gelderland, Friesland en
Flevoland ("NUON"), forming a new company, UTH (the "UTH Transaction"). The
transaction was accounted for as a formation of a joint venture with NUON's and
UPC's net assets recorded at their historical carrying values. Although UPC
retained a 51.0% economic and voting interest in UTH, because of joint
governance on most significant operating decisions, UPC accounted for its
investment in UTH using the equity method of accounting. On February 17, 1999,
UPC acquired the remaining 49.0% of UTH from NUON (the "NUON Transaction") for
euro235.1 ($265.7) million. In addition, UPC repaid NUON a euro15.1 ($17.1)
million subordinated loan, including accrued interest, dated December 23, 1998,
owed by UTH to NUON. The purchase of NUON's interest and payment of the loan
were funded with proceeds from UPC's initial public offering. Effective February
1, 1999, UPC began consolidating the results of operations of UTH. Details of
the net assets acquired, based on the preliminary purchase price allocation,
were as follows (in thousands):
Property, plant and equipment............................. $210,013
Investments in affiliated companies....................... 46,830
Goodwill.................................................. 256,749
Long-term liabilities..................................... (242,536)
Net current liabilities................................... (5,384)
--------
Total cash paid...................................... $265,672
========
15
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following pro forma condensed consolidated operating results for the nine
months ended September 30, 1999 and 1998 gives effect to the UTH Transaction and
the NUON Transaction as if they had occurred at the beginning of the periods
presented. This pro forma condensed consolidated financial information does not
purport to represent what the Company's results of operations would actually
have been if such transactions had in fact occurred on such dates. The pro forma
adjustments are based upon currently available information and upon certain
assumptions that management believes are reasonable.
<TABLE>
<CAPTION>
For the Nine Months Ended For the Nine Months Ended
September 30, 1999 September 30, 1998
-------------------------- ---------------------------
Historical Pro Forma Historical Pro Forma
---------- ---------- ---------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Revenue..................................................... $ 460,646 $ 470,763 $ 215,790 $ 276,767
========== ========== ========== ==========
Net income (loss) before extraordinary charge............... $ 603,856 $ 599,161 $ (339,581) $ (366,436)
========== ========== ========== ==========
Net income (loss)........................................... $ 603,856 $ 599,161 $ (418,672) $ 445,527)
========== ========== ========== ==========
Net income (loss) per common share:
Basic income (loss) before extraordinary charge........... $ 14.78 $ 14.66 $ (9.35) $ (10.09)
Extraordinary charge...................................... - - (2.17) (2.17)
---------- ---------- ---------- ----------
Basic net income (loss)................................... $ 14.78 $ 14.66 $ (11.52) $ (12.26)
========== ========== ========== ==========
Diluted income (loss) before extraordinary charge......... $ 13.05 $ 12.95 $ (9.35) $ (10.09)
Extraordinary charge...................................... - - (2.17) (2.17)
---------- ---------- ---------- ----------
Diluted net income (loss)................................. $ 13.05 $ 12.95 $ (11.52) $ (12.26)
========== ========== ========== ==========
Weighted-average number of common shares outstanding:
Basic..................................................... 40,251,361 40,251,361 36,423,667 36,423,667
========== ========== ========== ==========
Diluted................................................... 46,255,351 46,255,351 36,423,667 36,423,667
========== ========== ========== ==========
</TABLE>
VTRH ACQUISITION
On April 29, 1999, an indirect wholly owned subsidiary of ULA acquired a 66.0%
interest in VTRH, a company that provides telephony and multi-channel television
services to the greater Santiago, Chile area (the "VTRH Acquisition"). This
acquisition, combined with the interest in VTRH that is owned by another
indirect wholly owned subsidiary of the Company, gives the Company an indirect
100% interest in VTRH. The purchase price for the 66.0% interest in VTRH was
approximately $258.2 million in cash. In addition, the Company provided capital
for VTRH to prepay approximately $125.8 million of existing bank indebtedness
and a promissory note from the Company to one of the other shareholders of VTRH.
ACQUISITION OF SKT BRATISLAVA
In June 1999, UPC acquired SKT spol s.r.o. (now known as UPC Slovensko), a
company that owns and operates a cable television system in Bratislava, the
capital of the Slovak Republic, for $43.3 million.
ACQUISITION OF GELREVISION
In June 1999, UPC acquired 100% of the GelreVision multi-channel television
systems in The Netherlands for NLG233.9 ($109.8) million.
ACQUISITION OF RESEAUX CABLES DE FRANCE
In June 1999, UPC acquired 95.7% of RCF, which operates cable television systems
throughout France, for French francs ("FFR")172.0 ($27.1) million.
16
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
RESTRUCTURING OF UNITED A/P ASSETS AND AUSTAR UNITED INITIAL PUBLIC OFFERING
In June 1999, the Company's interest in Austar, United Wireless, XYZ
Entertainment and Saturn were contributed to Austar United in exchange for new
shares issued by Austar United. On July 27, 1999, Austar United acquired from
SaskTel its 35.0% interest in Saturn in exchange for approximately 13.7 million
of Austar United's shares, thereby increasing Austar United's ownership interest
in Saturn from 65.0% to 100%. In addition, Austar United successfully completed
an initial public offering selling 103.5 million shares on the Australian Stock
Exchange, raising gross and net proceeds at Australian dollar ("A$")4.70 ($3.03)
per share of A$486.5 ($313.6) million and A$456.5 ($294.3) million,
respectively. Based on the carrying value of the Company's investment in Austar
United as of July 27, 1999, United recognized a gain of $249.0 million from the
resulting step-up in the carrying amount of United's investment in Austar
United, in accordance with SAB 51. No deferred taxes were recorded related to
this gain due to the Company's intent on holding its investment in Austar United
indefinitely. Austar United's offering reduced the Company's ownership interest
from 100% to approximately 75.5%. Including all stock options granted to
employees that were vested as of September 30, 1999, the Company's ownership
interest in Austar United on a fully diluted basis is approximately 73.9%.
ACQUISITION OF INTEREST IN SBS
In July 1999, UPC purchased 4.8% of SBS for $24.3 million in cash. In August
1999, UPC acquired an additional 8.5% of SBS for $75.9 million, increasing its
ownership interest in SBS to 13.3%.
STJARN ACQUISITION
In July 1999, UPC acquired Stjarn for a purchase price of $397.0 million, of
which $100.0 million was paid in the form of a one year note with interest at
8.0% per year and the balance of the purchase price was paid in cash. UPC will
have the option, at maturity of the note, to pay the note in either cash or UPC
stock. Stjarn operates cable television systems serving the greater Stockholm
area.
ACQUISITION OF VIDEOPOLE
In August 1999, UPC acquired 100% of Videopole (France) for a total purchase
price of $135.1 million. The purchase price was paid in cash ($69.9 million) and
955,376 ordinary shares of UPC ($65.2 million). Based on the carrying value of
the Company's investment in UPC as of July 31, 1999, United recognized a gain of
$34.9 million from the resulting step-up in the carrying amount of United's
investment in UPC, in accordance with SAB 51. No deferred taxes were recorded
related to this gain due to the Company's intent on holding its investment in
UPC indefinitely.
17
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
@ENTERTAINMENT ACQUISITION
In August 1999, UPC acquired 100% of @Entertainment for $807.0 million in cash.
Details of the net assets acquired, based on a preliminary purchase price
allocation using information currently available, were as follows (in
thousands):
Net current assets................................... $ 51,239
Property, plant and equipment........................ 196,178
Goodwill............................................. 986,814
Long-term liabilities................................ (448,566)
Other................................................ 21,335
--------
Total cash paid................................. $807,000
========
The following pro forma condensed consolidated operating results for the nine
months ended September 30, 1999 and 1998 give effect to the acquisition of
@Entertainment as if it had occurred at the beginning of each period presented.
This pro forma condensed consolidated financial information does not purport to
represent what the Company's results of operations would actually have been if
such transaction 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.
<TABLE>
<CAPTION>
For the Nine Months Ended For the Nine Months Ended
September 30, 1999 September 30, 1998
-------------------------- ---------------------------
Historical Pro Forma Historical Pro Forma
---------- ---------- ---------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Revenue..................................................... $ 460,646 $ 506,214 $ 215,790 $ 257,423
========== ========== ========== ==========
Net income (loss) before extraordinary charge............... $ 603,856 $ 417,460 $ (339,581) $ (508,876)
========== ========== ========== ==========
Net income (loss)........................................... $ 603,856 $ 417,460 $ (418,672) $ (587,967)
========== ========== ========== ==========
Net income (loss) per common share:
Basic income (loss) before extraordinary charge........... $ 14.78 $ 10.14 $ (9.35) $ (14.00)
Extraordinary charge...................................... - - (2.17) (2.17)
---------- ---------- ---------- ----------
Basic net income (loss)................................... $ 14.78 $ 10.14 $ (11.52) $ (16.17)
========== ========== ========== ==========
Diluted income (loss) before extraordinary charge......... $ 13.05 $ 9.03 $ (9.35) $ (14.00)
Extraordinary charge...................................... - - (2.17) (2.17)
---------- ---------- ---------- ----------
Diluted net income (loss)................................. $ 13.05 $ 9.03 $ (11.52) $ (16.17)
========== ========== ========== ==========
Weighted-average number of common shares outstanding:
Basic..................................................... 40,251,361 40,251,361 36,423,667 36,423,667
========== ========== ========== ==========
Diluted................................................... 46,255,351 46,255,351 36,423,667 36,423,667
========== ========== ========== ==========
</TABLE>
ACQUISITION OF TIME WARNER CABLE FRANCE
In August 1999, UPC acquired through Mediareseaux 100% of Time Warner Cable
France, a company that operates three cable television systems in the suburbs of
Paris and Lyon and in the city of Limoges. The purchase price was $71.1 million
in cash. Simultaneously with the acquisition of Time Warner Cable France, UPC
acquired an additional 47.6% interest in one of its operating systems, Rhone
Vision Cable, in which Time Warner France had a 49.9% interest, for FFR89.3
($14.6) million, increasing UPC's ownership in that system to 97.5%.
ACQUISITION OF 50.0% OF A2000
In September 1999, UPC acquired, through UPC Nederland, the remaining 50.0% of
A2000 that it did not already own for $229.0 million and $13.1 million in cash
and assumed receivables, respectively.
18
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER
THE EQUITY METHOD
<TABLE>
<CAPTION>
As of September 30, 1999
---------------------------------------------------------------------------------------------------
Investments in Cumulative Cumulative
and Advances to Dividends Share in Results of Translation Valuation
Affiliated Companies Received Affiliated Companies Adjustments Allowance Total
-------------------- --------- -------------------- ----------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Europe:
SBS......................... $ 99,467 $ - $ (3,706) $ 2,633 $ - $ 98,394
Tevel....................... 99,184 (6,180) (8,700) 1,367 - 85,671
Melita...................... 14,062 - 1,704 (1,966) - 13,800
Monor....................... 5,454 - (1,613) (7,643) - (3,802)
IPS......................... 14,075 - 1,079 396 - 15,550
Other....................... 33,614 - (2,446) 841 - 32,009
Asia/Pacific:
XYZ Entertainment........... 44,306 - (18,818) 2,913 - 28,401
PCC......................... 14,165 - (2,999) (2,588) - 8,578
HITV........................ 6,073 - (2,276) 16 - 3,813
Telefenua (2)............... 18,599 - (14,215) - (4,384) -
Other....................... 350 - - - - 350
Latin America:
Megapo...................... 32,496 (1,471) (892) (9,716) - 20,417
MGM Networks LA (1)......... 24,072 - (24,072) - - -
Jundiai..................... 6,797 - (1,172) (2,961) - 2,664
Other....................... 1,514 - (25) (122) - 1,367
-------- ------- -------- -------- ------- --------
Total..................... $414,228 $(7,651) $(78,151) $(16,830) $(4,384) $307,212
======== ======= ======== ======== ======= ========
As of December 31, 1998
---------------------------------------------------------------------------------------------------
Investments in Cumulative Cumulative
and Advances to Dividends Share in Results of Translation Valuation
Affiliated Companies Received Affiliated Companies Adjustments Allowance Total
-------------------- --------- -------------------- ----------- --------- ---------
(In thousands)
Europe:
UTH.......................... $135,290 $ - $ (11,447) $ 8,288 $ - $132,131
Tevel........................ 96,340 (6,090) (390) (306) - 89,554
Melita....................... 14,078 - 997 724 - 15,799
Telekabel Hungary
Programming................ 12,263 - (3,881) 28 - 8,410
Monor........................ 11,301 - (2,601) (7,849) - 851
IPS.......................... 14,082 - (7,418) (25) - 6,639
Other........................ 7,595 - (531) 400 - 7,464
Asia/Pacific:
Saturn....................... 49,808 - (23,138) (2,881) - 23,789
XYZ Entertainment............ 44,306 - (18,537) 111 - 25,880
PCC.......................... 11,673 - (2,812) (2,824) - 6,037
HITV......................... 6,073 - (2,435) 16 - 3,654
Telefenua (2)................ 18,599 - (14,215) - (4,384) -
Other........................ 350 - - - - 350
Latin America:
VTRH......................... 112,052 - (17,203) (9,874) - 84,975
Megapo....................... 32,496 (1,471) (1,122) (11,067) - 18,836
MGM Networks LA (1).......... 19,272 - (19,272) - - -
Jundiai...................... 6,797 - (587) (1,089) - 5,121
-------- ------- --------- -------- ------- --------
Total...................... $592,375 $(7,561) $(124,592) $(26,348) $(4,384) $429,490
======== ======= ========= ======== ======= ========
</TABLE>
(1) Includes an accrued funding obligation of $3.2 and $3.0 million at
September 30, 1999 and December 31, 1998, respectively. The Company would
face significant and punitive dilution if it did not make the requested
fundings.
(2) The Company has reserved the remaining balance of the Telefenua investment
of $4.4 million due to the uncertainty of realization.
19
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. PROPERTY, PLANT AND EQUIPMENT
As of As of
September 30, December 31,
1999 1998
------------- ------------
(In thousands)
Cable distribution networks................... $1,766,796 $255,702
Subscriber premises equipment and converters.. 426,819 264,867
MMDS/DTH distribution facilities.............. 124,497 62,872
Office equipment, furniture and fixtures...... 69,006 30,415
Buildings and leasehold improvements.......... 49,875 11,236
Other......................................... 101,990 40,150
---------- ---------
2,538,983 665,242
Accumulated depreciation................... (388,276) (201,183)
---------- ---------
Net property, plant and equipment.......... $2,150,707 $464,059
========== ========
6. GOODWILL AND OTHER INTANGIBLE ASSETS
As of As of
September 30, December 31,
1999 1998
------------- ------------
(In thousands)
Europe:
@Entertainment............................. $ 942,184 $ -
UPC Nederland.............................. 802,882 -
Stjarn..................................... 443,291 -
Telekabel Group............................ 188,107 206,092
Mediareseaux .............................. 109,538 -
UPC Norge.................................. 86,545 87,563
UPC Magyarorszag........................... 52,367 51,550
UPC........................................ 31,111 -
UPC Belgium................................ 21,960 22,322
UPC Slovensko.............................. 21,441 -
Other...................................... 10,419 12,971
Asia/Pacific:
Austar United.............................. 101,910 -
Austar..................................... - 60,071
Latin America:
VTRH....................................... 219,818 -
TVSB....................................... 10,401 16,161
Cable Star................................. 5,994 7,887
---------- ---------
3,047,968 464,617
Accumulated amortization................... (112,031) (39,683)
---------- ---------
Net goodwill and other intangible assets... $2,935,937 $424,934
========== ========
20
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. SHORT-TERM DEBT
As of As of
September 30, December 31,
1999 1998
------------- ------------
(In thousands)
Stjarn Seller's Note (Note 3)................. $100,000 $ -
Stjarn Credit Facility........................ 40,853 -
A2000 Bank Facility........................... 23,122 -
Other UPC..................................... 8,282 33,504
Austar Bank Facility.......................... - 36,738
Other Latin America........................... 563 23,137
-------- -------
Total short-term debt..................... $172,820 $93,379
======== =======
STJARN CREDIT FACILITY
In December 1998, Stjarn's parent company entered into a Swedish Kronor
("SEK")521.0 ($64.0) million loan agreement with a bank to refinance certain
debt. The loan currently consists of an A facility, a medium term loan in the
amount of SEK371.0 ($45.6) million and a revolving credit facility in the amount
of SEK150.0 ($18.4) million. These facilities bear interest at the rate of
Stockholm Interbank Offered Rate ("STIBOR") plus a margin of 0.75% to 1.25%. As
a result of UPC's acquisition of Stjarn, both the A facility and the revolving
facility are now due on March 31, 2000.
8. SENIOR DISCOUNT NOTES
As of As of
September 30, December 31,
1999 1998
------------- ------------
(In thousands)
United 1998 Notes............................. $ 965,955 $ 893,003
United 1999 Notes............................. 218,537 -
United Old Notes.............................. 167 412
UPC Senior Notes due 2009..................... 803,467 -
UPC Euro Senior Notes due 2009................ 319,378 -
UPC Senior Discount Notes due 2009............ 409,220 -
@Entertainment 1999 Senior Discount Notes..... 154,067 -
@Entertainment 1998 Senior Discount Notes..... 137,156 -
@Entertainment 1999 Series C Senior
Discount Notes.............................. 11,348 -
PCI Discount Notes............................ 131,310 -
United A/P Notes.............................. 394,453 356,640
---------- ----------
3,545,058 1,250,055
Less current portion...................... (167) (412)
---------- ----------
Total senior discount notes............... $3,544,891 $1,249,643
========== ==========
21
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
UNITED 1998 NOTES
In February 1998, the Company sold in a private transaction $1,375.0 million
principal amount at maturity of 10.75% senior secured discount notes due 2008
(the "United 1998 Notes"). The United 1998 Notes were issued at a discount from
their principal amount at maturity, resulting in gross proceeds to United of
approximately $812.2 million. On and after February 15, 2003, cash interest will
accrue and will be payable semi-annually until maturity on each February 15 and
August 15, commencing August 15, 2003. The United 1998 Notes will mature on
February 15, 2008 and will be redeemable at the option of the Company on or
after February 15, 2003.
UNITED 1999 NOTES
On April 29, 1999, the Company sold in a private transaction $355.0 million
principal amount at maturity of 10.875% senior discount notes due 2009 (the
"United 1999 Notes"). The United 1999 Notes were issued at a discount from their
principal amount at maturity, resulting in gross proceeds to United of
approximately $208.9 million. The United 1999 Notes will accrete at 10.875% per
annum, compounded semi- annually, to an aggregate principal amount of $355.0
million on May 1, 2004. Commencing November 1, 2004, cash interest on the United
1999 Notes will begin to accrue, payable on May 1 and November 1 of each year
until maturity at a rate of 10.875% per annum. The United 1999 Notes will mature
on May 15, 2009, and are redeemable after May 1, 2004 at premiums declining to
par on May 1, 2007. Additionally, subject to certain limitations, prior to May
1, 2002, United may redeem an aggregate of 35.0% of the United 1999 Notes at the
Company's option with the net proceeds from one or more public offerings or
certain asset sales. The United 1999 Notes are senior, general, unsecured
obligations, ranking equally in right of payment to existing and future senior,
unsecured obligations, senior to all future junior obligations and effectively
junior to existing secured obligations, including the United 1998 Notes.
UPC SENIOR NOTES DUE 2009, UPC EURO SENIOR NOTES DUE 2009 AND UPC SENIOR
DISCOUNT NOTES DUE 2009
On July 27, 1999, UPC completed a private placement bond offering consisting of
$800.0 million of ten-year 10.875% Senior Notes due 2009, euro300.0 ($318.7)
million of ten-year 10.875% Senior Notes due 2009 and $735.0 million aggregate
principal amount of ten-year 12.5% Senior Discount Notes due 2009 (collectively
the "UPC Senior Notes"). The UPC Senior Discount Notes due 2009 were sold at
54.5% of face value amount yielding gross proceeds of approximately $400.0
million. The indentures governing the UPC Senior Notes place certain limitations
on UPC's ability, and the ability of its subsidiaries, to borrow money, issue
capital stock, pay dividends in stock or repurchase stock, make investments,
create certain liens, engage in certain transactions with affiliates, and sell
certain assets or merge with or into other companies.
Concurrent with the closing of the UPC Senior Notes offering, UPC entered into a
cross-currency swap, swapping the UPC Senior Notes due 2009 into fixed and
variable rate Euro notes with a notional amount totaling euro754.7 million. One
half of the Euro notes have a fixed interest rate of 8.54% through August 1,
2004, thereafter switching to a variable interest rate of Euro Interbank Offered
Rate ("EURIBOR") plus 4.15%. The remaining half have a variable interest rate of
EURIBOR plus 4.15% through August 1, 2009. The cross-currency swaps provides the
bank with the right to terminate the swap at fair value commencing August 1,
2004 with the payment of a call premium equal to the call premium which would be
paid by UPC to the UPC Senior Notes due 2009 holders if the notes are called on
or after August 1, 2004. The Company accounted for the cross-currency swap by
bifurcating the instrument into two components; the swap of U.S. dollar fixed
rate debt for Euro variable and fixed rate debt through August 1, 2004 (the
earliest call date) and the residual portion of the cross-currency swap. The
swap of U.S. dollar fixed rate debt for Euro variable and fixed rate debt is
accounted for as a hedge, and accordingly UPC carries the Euro denominated debt
on the balance sheet and recognizes interest expense according to the provisions
of the Euro debt. The residual portion of the cross-currency swap is marked to
fair value at each reporting period through the statement of operations.
@ENTERTAINMENT 1999 SENIOR DISCOUNT NOTES, @ENTERTAINMENT 1998 SENIOR DISCOUNT
NOTES AND @ENTERTAINMENT 1999 SERIES C SENIOR DISCOUNT NOTES (COLLECTIVELY THE
"@ENTERTAINMENT NOTES")
In January 1999, @ Entertainment sold 256,800 units consisting of Senior
Discount Notes due 2009 (the "@Entertainment 1999 Senior Discount Notes") and
warrants to purchase 1,813,665 shares of @Entertainment's common stock. The
@Entertainment Senior Discount Notes were issued at a discount to their
aggregate principal amount at maturity yielding gross proceeds of approximately
$100.0 million. Cash interest on the @Entertainment Senior Discount Notes will
not accrue prior to February 1, 2004. Thereafter, cash interest will accrue at a
22
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
rate of 14.5% per annum, payable semi-annually in arrears on August 1 and
February 1 of each year, commencing August 1, 2004. In connection with the
acquisition of @Entertainment, UPC acquired all of the existing warrants held in
connection with the @Entertainment 1999 Senior Discount Notes.
In July 1998, @Entertainment sold 252,000 units, consisting of 14.5% Senior
Discount Notes due 2008 (the "@Entertainment 1998 Senior Discount Notes") and
warrants entitling the warrant holders to purchase 1,824,514 shares of
@Entertainment common stock. This offering generated approximately $125.1
million in gross proceeds to @Entertainment. The @Entertainment 1998 Senior
Discount Notes are unsubordinated and unsecured obligations of @Entertainment.
Cash interest will not accrue prior to July 15, 2003. After that, cash interest
will accrue at a rate of 14.5% per year and will be payable semi-annually in
arrears on January 15 and July 15 of each year, beginning January 15, 2004. The
@Entertainment 1998 Senior Discount Notes will mature on July 15, 2008. In
connection with the acquisition of @Entertainment, UPC acquired all of the
existing warrants held in connection with the @Entertainment 1998 Senior
Discount Notes.
In January 1999, @Entertainment sold $36.0 million aggregate principal amount at
maturity of Series C Senior Discount Notes generating approximately $9.8 million
of gross proceeds (the "@Entertainment 1999 Series C Senior Discount Notes").
The @Entertainment 1999 Series C Senior Discount Notes are senior unsecured
obligations of @Entertainment. Original issue discount will accrete from January
20, 1999, until maturity on July 15, 2008. Cash interest will accrue beginning
July 15, 2004 at a rate of 7.0% per year on the principal amount at maturity,
and will be payable semi-annually in arrears, on July 15 and January 15 of each
year beginning January 15, 2005.
PCI DISCOUNT NOTES
Poland Communications, Inc. ("PCI"), @Entertainment's major operating
subsidiary, sold $130.0 million of discount notes in October 1996 (the "PCI
Discount Notes"). The PCI Discount Notes bear interest at 9.875%, payable on May
1 and November 1 of each year. The PCI Discount Notes mature on November 1,
2003. Pursuant to the terms of the PCI indenture, @Entertainment repurchased a
portion of the PCI Discount Notes in November 1999 as a result of UPC's
acquisition of @Entertainment (see Note 14).
UNITED A/P NOTES
The 14.0% senior notes were issued by United A/P in May 1996 and September 1997
at a discount from their principal amount of $488.0 million, resulting in gross
proceeds of $255.0 million (the "United A/P Notes"). 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. The United A/P 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%. On October 14, 1998, United A/P
consummated an equity sale resulting in gross proceeds to United A/P of $70.0
million, reducing the interest rate from 14.75% to 14.0% per annum. Due to the
increase in the interest rate effective May 16, 1997 until consummation of the
equity sale, the United A/P Notes will accrete to a principal amount of $492.9
million on May 15, 2001, the date cash interest begins to accrue.
23
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. OTHER LONG-TERM DEBT
As of As of
September 30, December 31,
1999 1998
------------- ------------
(In thousands)
UPC Senior Credit Facility..................... $ 298,695 $ -
New Telekabel Facility......................... 271,773 -
A2000 Facilities............................... 221,256 -
CNBH Facility.................................. 121,846 -
Rhone Vision Cable Credit Facility............. 48,688 -
RCF Facility................................... 39,315 -
UPC DIC Loan................................... 36,243 84,214
Mediareseaux Facility.......................... 41,640 21,346
Videopole Facility............................. 3,940 -
Other UPC...................................... 51,838 3,821
UPC Senior Revolving Credit Facility........... - 512,179
UPC Bridge Bank Facility....................... - 60,063
VTRH Bank Facility............................. 160,000 -
New Austar Bank Facility....................... 173,448 67,352
Saturn Bank Facility........................... 52,288 -
Other Asia/Pacific............................. 2,577 2,923
--------- --------
1,523,547 751,898
Less current portion....................... (7,244) (62,252)
--------- --------
Total other long-term debt................. $1,516,303 $689,646
========== ========
UPC SENIOR CREDIT FACILITY
On July 27, 1999, several UPC subsidiaries and a syndicate of banks executed a
Loan and Note Issuance Agreement for a euro1.0 ($1.1) billion multicurrency
senior secured credit facility (the "UPC Senior Credit Facility"). The UPC
Senior Credit Facility matures on July 27, 2006 and is comprised of two
tranches. The euro750.0 ($801.7) million Tranche A is a senior secured reducing
revolving credit facility. Tranche B is a euro250.0 ($267.2) million term loan
credit facility. The UPC Senior Credit Facility bears interest at EURIBOR (for
borrowings in euro) and at the London Interbank Offered Rate ("LIBOR") (for all
other borrowings) plus a margin of between 0.75% and 2.0% (which shall be at
least 1.5% for the first six months following closing) plus an additional cost
of funding calculation. In addition to repayment of the UPC Senior Revolving
Credit Facility, proceeds from the UPC Senior Credit Facility will be used to
fund acquisitions, repay certain intercompany debts, pay interest on funds
downstreamed from the proceeds of high yield issues, general corporate purposes,
capital expenditures and other permitted distributions. Borrowings under the UPC
Senior Credit Facility are limited by financial ratio tests. The UPC Senior
Credit Facility contains change in control provisions related to UPC's ownership
in certain subsidiaries and United's ownership of UPC. In addition, the UPC
Senior Credit Facility limits acquisitions funded by loan proceeds to euro400.0
($427.6) million over the life of the UPC Senior Credit Facility. The UPC Senior
Credit Facility contains certain financial covenants and restrictions on UPC and
its subsidiaries' ability to make dividends or other payments to UPC, incur
indebtedness, dispose of assets and merge and enter into affiliate transactions.
Net proceeds of certain disposals are required to be used to prepay the
facility.
24
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NEW TELEKABEL FACILITY
In March 1999, UPC Nederland replaced their existing NLG690.0 ($333.3) million
facility with a senior facility (the "New Telekabel Facility"). The New
Telekabel Facility consists of a euro340.0 ($363.4) million revolving facility
to N.V. Telekabel, a subsidiary of UPC Nederland, that will convert to a term
facility on December 31, 2001. Euro5.0 ($5.3) million of the New Telekabel
Facility is in the form of an overdraft facility that will be available until
December 31, 2007. The New Telekabel Facility bears interest at EURIBOR plus a
margin between 0.75% and 2.00% based on leverage multiples tied to certain
measures of net operating cash flow.
A2000 FACILITIES
In January 1996, A2000 and one of its subsidiaries entered into bank facilities
of NLG90.0 ($43.5) million and NLG375.0 ($181.2) million, respectively. In
October 1996, a subsidiary of A2000 entered into a bank facility of NLG45.0
($21.7) million. These facilities have between nine- and ten-year terms and
interest rates of Amsterdam Interbank Offered Rate ("AIBOR") plus 0.75% or AIBOR
plus 0.7% or fixed rates (fixed prior to each advance) increased by 0.7% or
0.75% per annum. The facilities also restrict the borrowers from incurring
additional indebtedness and from paying dividends and distributions, subject to
certain exceptions. A2000 is currently negotiating a credit facility of up to
NLG620.0 ($299.5) million to replace these facilities.
CNBH FACILITY
In February 1998, CNBH entered into a secured NLG250.0 ($120.8) million ten-year
term facility with a syndicate of banks (the "CNBH Facility"). In January 1999,
this facility was increased to NLG274.0 ($132.4) million. The CNBH Facility
bears interest at AIBOR plus a margin between 0.7% and 0.75%. Beginning in 2001,
CNBH will be required to apply 50.0% of its excess cash flow to prepayment of
its facility. In connection with this facility, CNBH also entered into a NLG5.0
($2.4) million ten-year term working capital facility with a bank.
RHONE VISION CABLE CREDIT FACILITY
In July 1996, Rhone Vision Cable, a subsidiary of Time Warner Cable France,
entered into a FFR680.0 ($110.8) million credit facility with a bank to finance
construction and installation of Rhone Vision Cable networks. The facility bears
interest at LIBOR plus 1.0%, payable quarterly. The facility must be repaid by
the earlier of June 30, 2002 or six months after network completion.
RCF FACILITY
In 1990, RCF and six of its subsidiaries entered into a FFR160.0 ($26.1) million
credit facility with a consortium of banks to finance working capital and
operations (the "RCF Facility"). In 1995 this facility was amended and extended
to FFR252.4 ($41.1) million to refinance three further credit facilities entered
into by other subsidiaries of RCF. The loan bears interest at PIBOR (the French
interbank offer rate) plus 1.5%, payable in arrears quarterly. The loan is to be
repaid in yearly installments of FFR34.6 ($5.6) million beginning at the end of
1999 until December 31, 2005.
UPC DIC LOAN
In November 1998, a subsidiary of Discount Investment Corporation ("DIC") loaned
UPC a total of $90.0 million to acquire the additional interests in Tevel and
Melita (the "UPC DIC Loan"). The UPC DIC Loan matures in November 2000 and bears
interest at 8.0% and is payable, together with 106.0% of the principal amount,
on maturity. In connection with the UPC DIC Loan, UPC granted to an affiliate of
DIC an option to acquire a total of $90.0 million, plus accrued interest, of
ordinary shares of UPC at a price equal to 90.0% of the initial public offering
price. UPC allocated the $90.0 million in loan proceeds between the debt
instrument and the equity option element on the basis of relative fair values.
In February 1999, the option agreement was amended, resulting in a grant of two
options of $45.0 million each to acquire ordinary shares of UPC. DIC then
exercised the first option for $45.0 million, paying in cash and acquiring
1,558,654 ordinary shares of UPC. UPC repaid $45.0 million of the UPC DIC Loan
and accrued interest with proceeds received from the option exercise. The
remaining option is exercisable until September 30, 2000.
25
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MEDIARESEAUX FACILITY
In July 1998, Mediareseaux entered into a 9.5 year term facility with a bank for
an amount of FFR680.0 ($110.8) million (the "Mediareseaux Facility"). The
Mediareseaux Facility bears interest at LIBOR plus a margin ranging from 0.75%
to 2.0%. The availability of the facility depends on revenue generated and debt
to equity ratios. The availability period ends at December 31, 2002. The
repayment period starts from January 1, 2003 to final maturity in 2007. During
the repayment period, Mediareseaux must apply 50.0% of its excess cash flow in
prepaying the facility. In July 1998, Mediareseaux secured a 9.5 year FFR20.0
($3.3) million overdraft facility, subject to the same terms and conditions as
the Mediareseaux Facility except that the availability tests are not applicable.
VTRH BANK FACILITY
On April 29, 1999, VTRH entered into a $220.0 million term loan facility in
connection with the VTRH Acquisition (the "VTRH Bank Facility"). The VTRH Bank
Facility consists of two tranches - Tranche A, with an aggregate principal
amount of $140.0 million, and Tranche B, with an aggregate principal amount of
$30.0 million. The banks are in the process of syndicating the final $50.0
million of the VTRH Bank Facility. The VTRH Bank Facility bears interest at
LIBOR plus a margin of 5.0%, increasing by 0.5% every three months beginning
April 29, 2001 until maturity on April 29, 2002.
NEW AUSTAR BANK FACILITY
On April 23, 1999, Austar executed a new A$400.0 million ($260.8 million)
syndicated senior secured debt facility (the "New Austar Bank Facility") to
refinance the existing A$200.0 million Austar Bank Facility and to fund Austar's
subscriber acquisition and working capital needs. The New Austar Bank Facility
consists of two sub-facilities: (i) A$200.0 million amortizing term facility
("Tranche 1") and (ii) A$200.0 million cash advance facility ("Tranche 2").
Tranche 1 was used to refinance the Austar Bank Facility, and Tranche 2 is
available upon the contribution of additional equity on a 2:1 debt-to-equity
basis. The New Austar Bank Facility bears interest at the professional market
rate in Australia plus a margin ranging from 1.75% to 2.25% based upon certain
debt to cash flow ratios. The New Austar Bank Facility is fully repayable
pursuant to an amortization schedule beginning December 31, 2002 and ending
March 31, 2006. As of September 30, 1999, Austar has drawn A$200.0 million under
Tranche 1 and A$66.0 million under Tranche 2, for a total outstanding balance of
A$266.0 ($173.4) million.
SATURN BANK FACILITY
On July 15, 1999, Saturn closed a syndicated senior debt facility in the amount
of New Zealand dollars ("NZ")$125.0 ($64.7) million to fund the completion of
Saturn's network (the "Saturn Bank Facility"). As of September 30, 1999, Saturn
has drawn NZ$101.0 ($52.3) million against the facility and expects to draw down
the remaining balance by the end of fourth quarter 2000. This debt facility has
an interest rate of 3.0% over the current base rate upon draw-down which has
averaged approximately 8.03%. The Saturn Bank Facility is repayable over a five
year period beginning fourth quarter 2001.
10. COMMITMENTS AND CONTINGENCIES
From time to time the Company and/or its subsidiaries may become involved in
litigation relating to claims arising out of its operations in the normal course
of business. Other than as described below, the Company is not a party to any
material legal proceedings, nor is the Company currently aware of any threatened
material proceedings.
Certain minority shareholders of an indirect subsidiary of @Entertainment filed
a lawsuit against @Entertainment, PCI and certain other defendants in United
States District Court, Southern District of Ohio, seeking certain damages for
breach of covenants and fiduciary duties based on a shareholders agreement,
including alleged rights in connection with the sale to UPC. @Entertainment is
unable to predict the outcome of the lawsuit or its ultimate exposure in
connection therewith.
26
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. STOCKHOLDERS' EQUITY (DEFICIT)
SERIES C PREFERRED STOCK
On July 6, 1999, the Company issued 425,000 shares of par value $0.01 per share
Series C Preferred Stock, resulting in gross and net proceeds to the Company of
$425.0 million and $382.5 million, respectively. The purchasers of the Series C
Preferred Stock deposited $29.75 million into an account from which the holders
will be entitled to quarterly payments in an amount equal to $17.50 per
preferred share commencing on September 30, 1999 through June 30, 2000, in cash
or Class A common stock at United's option. On September 30, 1999 the holders
received their quarterly payment in cash. The Series C Preferred Stock had an
initial liquidation value of $1,000 per share, and accrues dividends perpetually
at a rate of 7.0% per annum, payable quarterly on March 31, June 30, September
30 and December 31 of each year, commencing on September 30, 2000, payable in
cash or Class A common stock at the Company's option. Each share of Series C
Preferred Stock is convertible any time at the option of the holder into the
number of shares of the Company's Class A common stock equal to the liquidation
value at the time of conversion divided by $84.30. The conversion price is
subject to adjustment upon the occurrence of certain events. The Company has the
right to require conversion on or after December 31, 2000 if the closing price
of United's common stock has equaled or exceeded 150.0% of the conversion price
for a certain period of time, or on or after June 30, 2002 if the closing price
of United's common stock has equaled or exceeded 130.0% of the conversion price
for a certain period of time. On or after June 30, 2002, the Company has the
option to redeem the Series C Preferred Stock in certain circumstances in cash
or Class A common stock. The Series C Preferred Stock ranks senior to United's
common stock and pari passu with the Company's existing preferred stock. The
Company has registered under the Securities Act of 1933 (i) the resale by
holders of the Series C Preferred Stock, (ii) the shares of common stock
issuable in lieu of cash payment of amounts due on a change of control,
redemption and dividend payment date and (iii) the shares of common stock
issuable upon conversion of the Series C Preferred Stock.
EQUITY TRANSACTIONS OF SUBSIDIARIES
The issuance of warrants, the issuance of convertible debt with an equity
component, variable plan accounting for stock options and the recognition of
deferred compensation expense by the Company's subsidiaries affects the equity
accounts of the Company. The following represents the effect on additional
paid-in capital and deferred compensation as a result of these equity
transactions:
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, 1999
--------------------------------------------------
Austar United
UPC United Corporate Total
--------- -------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Variable plan accounting for stock options......... $241,605 $38,579 $ - $280,184
Deferred compensation expense....................... (80,277) (38,579) - (118,856)
Amortization of deferred compensation............... 34,733 18,894 590 54,217
Issuance of warrants................................ 33,025 - - 33,025
Issuance of convertible debt (UPC DIC Loan)......... 14,875 - - 14,875
-------- ------- ---- --------
Total........................................... $243,961 $18,894 $590 $263,445
======== ======= ==== ========
</TABLE>
OTHER CUMULATIVE COMPREHENSIVE LOSS
As of As of
September 30, December 31,
1999 1998
------------- ------------
(In thousands)
Foreign currency translation adjustments........ $(195,281) $(90,788)
Unrealized loss on available-for-sale
securities.................................... (27) (154)
--------- --------
Total ...................................... $(195,308) $(90,942)
========= ========
27
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. BASIC AND DILUTED NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------ ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C>
Basic:
Net income (loss) .................................................. $61,993 $(121,110) $603,856 $(418,672)
Accretion of Series A Convertible Preferred Stock................... (6) (300) (220) (950)
Accretion of Series B Convertible Preferred Stock................... (479) (107) (1,469) (107)
Accretion of Series C Convertible Preferred Stock................... (7,437) - (7,437) -
------- --------- -------- ---------
Basic net income (loss) attributable to common shareholders...... $54,071 $(121,517) $594,730 $(419,729)
------- --------- -------- ---------
Diluted:
Accretion of Series A Convertible Preferred Stock................... 6 - (a) 220 - (a)
Accretion of Series B Convertible Preferred Stock................... 479 - (a) 1,469 - (a)
Accretion of Series C Convertible Preferred Stock................... - (a) - (a) 7,437 - (a)
------- --------- -------- ---------
Diluted net income (loss) attributable to common shareholders.... $54,556 $(121,517) $603,856 $(419,729)
======= ========= ======== =========
</TABLE>
- --------------------
(a) Excluded from the calculation of diluted net income (loss) attributable to
common shareholders because the effect is anti-dilutive.
13. SEGMENT AND GEOGRAPHIC INFORMATION
The Company's business has historically been derived from its video
entertainment segment. This service has been provided in various countries where
the Company owns and operates its systems. During 1998, the Company introduced
telephony and internet/data services and during 1999 the Company continues to
introduce these services to several systems. To date, revenues and net operating
results from these services have not been significant and therefore segment
information for these services is not required. Accordingly, the Company's
current reportable segments are the various countries in which it operates
multi-channel television, programming and/or telephony operations. These
reportable segments are evaluated separately because each geographic region
presents different marketing strategies and technology issues as well as
distinct economic climates and regulatory constraints. The key operating
performance criteria used in this evaluation include revenue growth, operating
income before depreciation, amortization and stock-based compensation expense
("Adjusted EBITDA"), and capital expenditures. Senior management of the Company
does not view segment results below Adjusted EBITDA, therefore segment
information on these items is not provided.
28
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company's consolidated segment information is as follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
---------------------------------------- --------------------------------------- As of As of
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998 September 30, December 31,
------------------- ------------------ ------------------- ------------------ 1999 1998
Adjusted Adjusted Adjusted Adjusted ------------ ------------
Revenue EBITDA(1) Revenue EBITDA(1) Revenue EBITDA(1) Revenue EBITDA(1) Total Assets
------- --------- ------- --------- ------- --------- ------- --------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Europe:
The Netherlands....... $ 41,587 $(13,452) $ 3,203 $ (2,005) $ 95,134 $(19,331) $ 16,414 $ 6,009 $1,945,719 $ 297,068
Austria............... 26,716 10,044 21,553 9,932 75,774 28,506 64,454 31,035 345,700 341,159
Belgium............... 4,343 721 4,639 1,625 13,344 2,015 13,332 4,767 49,036 57,847
Czech Republic........ 1,313 (75) 1,193 (196) 3,641 (361) 3,276 (912) 8,891 11,497
France................ 10,947 80 1,040 (2,048) 14,498 (3,318) 2,571 (2,952) 515,977 51,092
Hungary............... 8,804 3,291 6,907 2,727 26,112 8,873 6,907 2,727 115,659 86,921
Norway................ 12,561 1,664 11,260 4,233 37,158 7,562 34,148 12,688 239,974 219,068
Poland................ 14,529 (16,314) - - 14,529 (16,314) - - 1,208,389 -
Sweden................ 5,212 1,677 - - 5,212 1,677 - - 492,905 -
Corporate and Other... 5,679 (13,502) 6,111 2,941 10,023 (27,120) 10,188 (3,332) 59,008 22,744
-------- -------- ------- -------- -------- -------- -------- -------- ---------- ----------
Total Europe........ 131,691 (25,866) 55,906 17,209 295,425 (17,811) 151,290 50,030 4,981,258 1,087,396
-------- -------- ------- -------- -------- -------- -------- -------- ---------- ----------
Asia/Pacific:
Australia............. 39,596 703 20,643 (10,435) 104,416 (738) 59,147 (19,541) 512,384 181,169
New Zealand........... 2,149 (832) - - 2,149 (832) - - 128,602 23,789
Corporate and other... (508) (1,582) 1,156 (3,573) 313 (3,172) 3,415 (3,420) 25,814 48,992
-------- -------- ------- -------- -------- -------- -------- -------- ---------- ----------
Total Asia/Pacific.. 41,237 (1,711) 21,799 (14,008) 106,878 (4,742) 62,562 (22,961) 666,800 253,950
-------- -------- ------- -------- -------- -------- -------- -------- ---------- ----------
Latin America:
Chile................. 31,745 7,695 - - 52,759 12,745 - - 473,133 84,975
Corporate and other... 1,810 (2,321) 433 1,690 5,335 (7,503) 1,636 (6,385) 51,956 73,048
-------- -------- ------- -------- -------- -------- -------- -------- ---------- ----------
Total Latin America. 33,555 5,374 433 1,690 58,094 5,242 1,636 (6,385) 525,089 158,023
-------- -------- ------- -------- -------- -------- -------- -------- ---------- ----------
Corporate and Other... 249 (253) (183) (1,993) 249 (608) 302 (13,384) 486,146 42,726
-------- -------- ------- -------- -------- -------- -------- -------- ---------- ----------
Total Company....... $206,732 $(22,456) $77,955 $ 2,898 $460,646 $(17,919) $215,790 $ 7,300 $6,659,293 $1,542,095
======== ======== ======= ======== ======== ======== ======== ======== ========== ==========
</TABLE>
(1) Adjusted EBITDA represents net operating earnings before depreciation,
amortization and stock-based compensation charges. Industry analysts
generally consider Adjusted EBITDA to be a helpful way to measure the
performance of cable television operations and communications companies.
Management believes Adjusted EBITDA helps investors to assess the cash flow
from operations from period to period and thus to value the Company's
business. Adjusted EBITDA should not, however, be considered a replacement
for net income, cash flows or for any other measure of performance or
liquidity under generally accepted accounting principles, or as an
indicator of a company's operating performance. The presentation of
Adjusted EBITDA may not be comparable to statistics with a similar name
reported by other companies. Not all companies and analysts calculate
Adjusted EBITDA in the same manner.
29
<PAGE>
UnitedGlobalCom, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Adjusted EBITDA reconciles to the consolidated statement of operations as
follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------ ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C>
Net operating loss............................................... $(155,105) $(59,917) $(349,996) $(154,568)
Depreciation and amortization.................................... 127,298 43,814 260,375 142,669
Stock-based compensation expense................................. 5,351 19,001 71,702 19,199
--------- -------- --------- ---------
Consolidated Adjusted EBITDA................................. $ (22,456) $ 2,898 $ (17,919) $ 7,300
========= ======== ========= =========
</TABLE>
14. SUBSEQUENT EVENTS
UPC SENIOR NOTES AND SENIOR DISCOUNT NOTES
In October 1999, UPC completed a $1.03 billion bond offering consisting of
$252.0 million and euro101.0 million of ten-year 11.25% Senior Notes due 2009,
$200.0 million and euro100.0 million of eight-year 10.875% Senior Notes due 2007
and $478.0 million and euro191.0 million aggregate principal amount of ten-year
13.375% Senior Discount Notes due 2009. The Senior Discount Notes were sold at
52.3% of the face amount yielding gross proceeds of $250.0 million and euro100.0
million and will accrue but not pay interest until 2004.
KABEL PLUS ACQUISITION
On October 27, 1999, UPC acquired a 94.6% interest in Kabel Plus and took
control of the Kabel Plus cable television systems in the Czech and Slovak
republics. The purchase price of $150.0 million is in escrow pending
registration of the ownership change, which is expected by the end of 1999.
STOCK SPLIT
On November 11, 1999 the Company announced a two-for-one split of its common
stock. Shareholders of record at the close of business on November 22, 1999 will
be entitled to one additional share of common stock for each share they own on
that date. New shares will be mailed or delivered on or about the payable date
of November 30, 1999, by the Company's transfer agent, ChaseMellon Shareholder
Services, LLC. The ex-dividend date, the date on which the change in the stock
price will be reflected on the NASDAQ market, will be on or about December 1,
1999. The stock split will increase the number of shares of Class A common stock
outstanding from approximately 34.6 million shares (including the 2.8 million
shares owned by UPC) to approximately 69.2 million shares and Class B common
stock outstanding from approximately 9.7 million shares to approximately 19.4
million shares. Following the split, a total of approximately 88.6 million
common shares will be outstanding.
NOTES REPURCHASE
@Entertainment purchased $49.1 million aggregate principal amount at maturity of
@Entertainment Notes for an aggregate price of $26.5 million and PCI purchased
$113.2 million aggregate principal amount of PCI Discount Notes for an aggregate
price of $114.4 million.
30
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
The following discussion contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. These
forward-looking statements may include, among other things, statements
concerning our plans, objectives and future economic prospects, expectations,
beliefs, future plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. These
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements,
or industry results, to be materially different from what we say or imply with
such forward-looking statements. These factors include, among other things,
changes in television viewing preferences and habits by our subscribers and
potential subscribers, their acceptance of new technology, programming
alternatives and new video services we may offer. They also include subscribers'
acceptance of our newer telephone and Internet/data services, our ability to
manage and grow our newer telephone and Internet/data services, our ability to
secure adequate capital to fund other system growth and development, risks
inherent in investment and operations in foreign countries, changes in
government regulation and changes in the nature of key strategic relationships
with joint venture partners. These forward-looking statements apply only as of
the time of this report, and we have no obligation or plans to provide updates
or revisions to these forward-looking statements or any other changes in events,
conditions or circumstances on which these statements are based. Our statements
in Management's Discussion and Analysis of Financial Condition and Results of
Operations in this report related to the Year 2000 issues are hereby denominated
as "Year 2000 Statements" within the meaning of the Year 2000 Information and
Readiness Disclosure Act. The following discussion and analysis of financial
condition and results of operations cover the three and nine months ended
September 30, 1999 and 1998, and should be read together with our consolidated
financial statements and related notes included elsewhere herein. These
consolidated financial statements provide additional information regarding our
financial activities and condition.
INTRODUCTION
United was formed in 1989 for the purpose of developing, acquiring and managing
foreign multi-channel television, programming and telephony operations outside
the United States. Today we are a leading broadband communications provider
outside the United States. We provide multi-channel television services in over
20 countries worldwide and telephone and Internet/data services in a growing
number of our international markets. Our operations are grouped into three major
geographic regions: Europe, Asia/Pacific and Latin America. Our European
operations are held through our 55.1% owned, publicly traded subsidiary, UPC,
which is the largest pan-European broadband communications (multi-channel
television, telephone and Internet/data) provider in terms of the number of
subscribers. Our Asia/Pacific operations are primarily held through our
approximately 75.5% owned, publicly traded subsidiary, Austar United, which owns
the largest provider of multi-channel television services in regional Australia,
various Australian programming interests and the only full service provider of
broadband communications in New Zealand. Our primary Latin American operation is
VTRH, Chile's largest multi-channel television provider and a growing provider
of telephone services.
For the nine months ended September 30, 1999 and 1998, we consolidated the
results of operations from our systems in Austria, Belgium, Czech Republic,
France, Hungary (1999 only), Ireland, The Netherlands, Norway, Romania, Slovak
Republic, Australia, New Zealand (from August 1, 1999), Chile (from May 1,
1999), Peru and Brazil (Fortaleza). Unconsolidated systems include our interests
in certain systems in Israel, Malta, Brazil (Jundiai), Mexico, Philippines and
China and programming interests in Spain, Australia and Latin America. We
account for these unconsolidated systems using the equity method of accounting.
SUMMARY OPERATING DATA
The following comparative operating data reflects multi-channel TV subscribers,
telephony lines, programming and data subscribers, as well as selected financial
statistics of the operating systems in which we had an ownership interest as of
September 30, 1999. In addition, the following proportionate data represents
certain operating and financial results for us, multiplied by our applicable
ownership percentage.
31
<PAGE>
<TABLE>
<CAPTION>
GROSS OPERATING SYSTEM DATA
As of and for the Nine Months Ended September 30, 1999
----------------------------------------------------------------------------------------------------
Homes in Two-way Basic Long-
United Service Homes Homes Subscribers/ Basic Adjusted Term
Ownership Area Passed Passed Lines Penetration Revenue EBITDA(1) Debt(2)
----------- --------- --------- ------- ------------ ----------- | --------- --------- ---------
| (In thousands)(3)
<S> <C> <C> <C> <C> <C> <C> | <C> <C> <C>
UPC (EUROPE) |
- ------------ |
Multi-channel TV Subscribers: |
The Netherlands.............. 61.5% 1,710,192 1,652,887 1,311,887 1,515,802 91.7% | $124,695 $ 45,382 $ -
Austria...................... 58.4% 1,081,710 908,030 734,440 461,589 50.8% | $ 63,220 $ 35,228 $ -
Hungary (UPC Magyarorszag)... 48.7% 901,500 624,898 - 498,325 79.7% | $ 25,871 $ 8,838 $ -
Israel....................... 28.7% 610,500 599,443 377,234 415,754 69.4% | $125,756 $ 56,102 $234,232
Norway....................... 61.5% 529,000 466,742 44,492 324,469 69.5% | $ 36,476 $ 15,838 $ -
Belgium...................... 61.5% 133,090 133,090 131,816 123,952 93.1% | $ 11,643 $ 3,682 $ -
Malta........................ 30.8% 175,000 167,744 - 75,000 44.7% | $ 11,886 $ 4,872 $ 26,096
Romania...................... 31.4-61.5% 240,000 143,274 - 94,234 65.8% | $ 1,907 $ 789 $ -
Czech Republic............... 61.5% 239,484 160,558 - 56,638 35.3% | $ 3,623 $ (351) $ -
Hungary (Monor) (4).......... 29.2% 85,000 70,061 - 32,011 45.7% |
France....................... 58.6-61.3% 1,265,827 900,020 238,309 331,029 36.8% | $ 13,165 $ 3,005 $ -
Poland....................... 61.5% 1,950,000 1,705,569 - 1,165,504 57.7% | $ 14,639 $(16,437) $ -
Sweden....................... 61.5% 770,000 421,624 72,679 241,359 57.2% | $ 5,163 $ 2,761 $ -
Slovak Republic.............. 58.4-61.5% 344,343 220,399 - 191,592 86.9% | $ 2,844 $ 756 $ -
---------- --------- --------- --------- | -------- -------- --------
Total.................... 10,035,646 8,174,339 2,910,857 5,527,258 | $440,888 $160,465 $260,328
---------- --------- --------- --------- | -------- -------- --------
Telephony Lines: |
Hungary (Monor).............. 29.2% 85,000 85,000 N/A 72,880 85.7% | $ 15,009 $ 9,713 $ 36,626
The Netherlands.............. 61.5% 1,710,192 723,492 N/A 67,156 9.3% | $ 17,169 $ (6,857) $ -
Austria...................... 58.4% 1,081,710 531,653 N/A 17,551 3.3% | $ 3,286 $ (7,148) $ -
France....................... 58.6-61.3% 1,265,827 95,515 N/A 8,593 9.0% | $ 1,161 $ (3,492) $ -
Norway....................... 61.5% 529,000 23,535 N/A 1,928 8.2% | $ 130 $ (4,752) $ -
---------- --------- --------- --------- | -------- -------- --------
Total.................... 4,671,729 1,459,195 N/A 168,108 | $ 36,755 $(12,536) $ 36,626
---------- --------- --------- --------- | -------- -------- --------
Data Subscribers: |
Internet..................... 48.7-61.5% N/A N/A N/A 79,039 N/A | $ 14,595 $(11,760) $ -
---------- --------- --------- --------- | -------- -------- --------
Programming Subscribers: |
Spain/Portugal (IPS)......... 30.8% N/A N/A N/A 1,085,000 N/A | $ 21,112 $ 9,318 $ 3,163
Ireland (Tara)............... 49.2% N/A N/A N/A 1,168,548 N/A | $ 658 $ (3,444) $ -
---------- --------- --------- --------- | -------- -------- --------
Total.................... N/A N/A N/A 2,253,548 | $ 21,770 $ 5,874 $ 3,163
---------- --------- --------- --------- | -------- -------- --------
AUSTAR UNITED (AUSTRALIA/ |
NEW ZEALAND)(5) |
- ------------------------- |
Multi-channel TV Subscribers: |
Australia (Austar)........... 75.5% 2,085,000 2,083,108 - 360,708 17.3% | $102,956 $ (7,913) $ -
New Zealand.................. 75.5% 141,000 83,582 83,071 13,907 16.6% | $ 1,442 $ (2,706) $ -
---------- --------- --------- --------- | -------- -------- --------
Total.................... 2,226,000 2,166,690 83,071 374,615 | $104,398 $(10,619) $ -
---------- --------- --------- --------- | -------- -------- --------
Telephony Lines: |
New Zealand.................. 75.5% 141,000 83,071 N/A 20,547 24.7% | $ 4,623 $ (2,140) $ -
---------- --------- --------- --------- | -------- -------- --------
Data Subscribers: |
New Zealand.................. 75.5% N/A N/A N/A 4,826 N/A | $ 826 $ (110) $ -
---------- --------- --------- --------- | -------- -------- --------
Programming Subscribers: |
Australia (XYZ |
Entertainment)............. 37.8% N/A N/A N/A 870,972 N/A | $ 22,359 $ 9,960 $ -
---------- --------- --------- --------- | -------- -------- --------
OTHER ASIA/PACIFIC(5) |
- --------------------- |
Multi-channel TV Subscribers: |
Philippines................... 19.6% 600,000 425,239 - 178,153 41.9% | $ 13,074 $ 3,920 $ 45
---------- --------- --------- --------- | -------- -------- --------
LATIN AMERICA |
- ------------- |
Multi-channel TV Subscribers: |
Chile........................ 100.0% 2,350,000 1,609,461 327,212 389,858 24.2% | $ 83,459 $ 13,408 $ -
Mexico....................... 49.0% 341,600 229,451 - 57,441 25.0% | $ 9,311 $ 2,922 $ -
Brazil (Jundiai)............. 46.3% 70,200 66,563 - 17,877 26.9% | $ 4,245 $ 1,532 $ -
Brazil (TVSB)................ 100.0% 437,000 306,000 - 15,107 4.9% | $ 3,006 $ (1,519) $ -
Peru......................... 62.2% 140,000 61,268 - 8,733 14.3% | $ 1,758 $ (542) $ -
---------- --------- --------- --------- | -------- -------- --------
Total.................... 3,338,800 2,272,743 327,212 489,016 | $101,779 $ 15,801 $ -
---------- --------- --------- --------- | -------- -------- --------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
GROSS OPERATING SYSTEM DATA
(Continued) As of and for the Nine Months Ended September 30, 1999
----------------------------------------------------------------------------------------------------
Homes in Two-way Basic Long-
United Service Homes Homes Subscribers/ Basic Adjusted Term
Ownership Area Passed Passed Lines Penetration Revenue EBITDA(1) Debt(2)
----------- --------- --------- ------- ------------ ----------- | --------- --------- ---------
| (In thousands)(3)
<S> <C> <C> <C> <C> <C> <C> | <C> <C> <C>
Telephony Lines: |
Chile........................ 100.0% 2,350,000 345,160 N/A 56,623 15.5% | $ 9,507 $ 4,127 $ -
---------- --------- --------- --------- | -------- -------- --------
Data Subscribers: |
Chile........................ 100.0% N/A N/A N/A 706 N/A | $ 32 $ - $ -
---------- --------- --------- --------- | -------- -------- --------
Programming Subscribers: |
Latin American............... 50.0% N/A N/A N/A 4,775,465 N/A | $ 5,074 $ (9,521) $ -
---------- --------- --------- --------- | -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
As of and for the Nine Months Ended September, 1999
---------------------------------------------------------------------------------
Homes in Two-way Basic Long-
Service Homes Homes Subscribers/ Adjusted Term
Area Passed Passed Lines Revenue EBITDA(1) Debt(2)
------------ ----------- --------- ------------ | ---------- --------- ----------
| (In thousands) (3)
<S> <C> <C> <C> <C> | <C> <C> <C>
TOTAL COMPANY BASED ON GROSS DATA (6): |
- -------------------------------------- |
Multi-channel TV Subscribers.................. 16,200,446 13,039,011 3,321,140 6,569,042 | $660,139 $169,567 $ 260,373
Telephony Lines............................... 7,162,729 1,887,426 N/A 245,278 | $ 50,885 $(10,549) $ 36,626
Data Subscribers.............................. N/A N/A N/A 84,571 | $ 15,453 $(11,870) $ -
Programming Subscribers....................... N/A N/A N/A 7,899,985 | $ 49,203 $ 6,313 $ 3,163
|
TOTAL COMPANY BASED ON CONSOLIDATED SYSTEMS (7): |
- ------------------------------------------------ |
Multi-channel TV Subscribers.................. 14,318,146 11,480,510 2,943,906 5,792,806 | $397,353 $ 82,630 $1,523,547
Telephony Lines............................... 7,077,729 1,802,426 N/A 172,398 | $ 35,891 $(21,746) $ -
Data Subscribers.............................. N/A N/A N/A 84,571 | $ 19,163 $(49,143) $ -
Programming Subscribers....................... N/A N/A N/A 1,168,548 | $ 8,239 $(29,660) $ -
|
TOTAL COMPANY BASED ON PROPORTIONATE DATA (8): |
- ---------------------------------------------- |
Multi-channel TV Subscribers.................. 10,595,393 8,447,497 2,033,039 3,905,627 | $396,102 $ 82,883 $ 75,162
Telephony Lines............................... 5,259,882 1,261,277 N/A 151,448 | $ 30,655 $ (8,103) $ 10,708
Data Subscribers.............................. N/A N/A N/A 52,041 | $ 9,349 $ (7,316) $ -
Programming Subscribers....................... N/A N/A N/A 3,625,088 | $ 17,793 $ 171 $ 973
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
GROSS OPERATING SYSTEM DATA
As of and for the Nine Months Ended September 30, 1998
----------------------------------------------------------------------------------------------------
Homes in Basic Long-
United Service Homes Subscribers/ Basic Adjusted Term
Ownership Area Passed Lines Penetration Revenue EBITDA(1) Debt(2)
----------- --------- --------- ------------ ----------- | --------- --------- ---------
| (In thousands)(3)
<S> <C> <C> <C> <C> <C> | <C> <C> <C>
UPC (EUROPE) |
- ------------ |
Multi-channel TV Subscribers: |
The Netherlands............ 25.5-51.0% 1,510,132 1,476,537 1,372,006 92.9% | $115,490 $ 55,081 $343,015
Austria.................... 95.0% 1,070,640 897,938 442,596 49.3% | $ 63,186 $ 30,437 $ -
Hungary (Kabelkom)......... 79.3% 901,500 490,966 413,119 84.1% | $ 6,025 $ 2,378 $ -
Israel..................... 23.3% 600,000 568,999 395,680 69.5% | $ 79,555 $ 41,838 $250,000
Norway..................... 100% 529,924 461,759 319,769 69.3% | $ 33,706 $ 12,528 $ -
Belgium.................... 100% 133,000 133,000 127,574 95.9% | $ 13,306 $ 4,708 $ -
Malta...................... 25.0% 179,000 161,310 68,149 42.2% | $ 10,977 $ 4,621 $ 20,915
Romania.................... 51.0-100% 180,000 95,674 58,900 61.6% | $ 728 $ 364 $ -
Czech Republic............. 100% 229,531 148,963 52,268 35.1% | $ 3,228 $ (887) $ -
Hungary (Monor)............ 43.3% 85,000 67,361 29,165 43.3% | $ 13,151 $ 8,207 $ 52,782
France..................... 99.6% 86,000 60,712 20,955 34.5% | $ 2,515 $ (1,435) $ -
Slovak Republic............ 75.0-100% 67,959 26,966 14,636 54.3% | $ 497 $ (417) $ -
--------- --------- --------- | -------- -------- --------
Total.................. 5,572,686 4,590,185 3,314,817 | $342,364 $157,423 $666,712
--------- --------- --------- | -------- -------- --------
Telephony Lines: |
Hungary (Monor)............ 43.3% 85,000 84,037 66,895 79.6% | [Financial information is included
The Netherlands............ 25.5% 575,000 359,496 13,849 3.9% | in multi-channel TV information
--------- --------- --------- | above.]
Total.................. 660,000 443,533 80,744 |
--------- --------- --------- |
Programming Subscribers: |
Spain/Portugal (IPS)....... 33.5% N/A N/A 616,000 N/A | $ 11,952 $ 2,041 $ -
Ireland (Tara)............ 75.0% N/A N/A 395,610 N/A | $ 470 $ (3,336) $ -
--------- --------- --------- | -------- -------- --------
Total.................. N/A N/A 1,011,610 | $ 12,422 $ (1,295) $ -
--------- --------- --------- | -------- -------- --------
AUSTAR UNITED (AUSTRALIA/ |
NEW ZEALAND) |
- ------------------------- |
Multi-channel TV Subscribers: |
Australia (Austar)......... 98.0% 2,085,000 2,072,706 251,255 12.1% | $ 61,222 $(16,819) $ -
New Zealand................ 63.7% 141,000 42,712 4,651 10.9% | $ 780 $ (7,407) $ 7,697
--------- --------- --------- | -------- -------- --------
Total.................. 2,226,000 2,115,418 255,906 | $ 62,002 $(24,226) $ 7,697
--------- --------- --------- | -------- -------- --------
Telephony Lines: | [Financial information is included
New Zealand................ 63.7% 141,000 26,974 4,190 15.5% | multi-channel TV information
--------- --------- --------- | above.]
Programming Subscribers: |
Australia (XYZ |
Entertainment)........... 49.0% N/A N/A 647,255 N/A | $ 11,087 $ 3,968 $ -
--------- --------- --------- | -------- -------- --------
OTHER ASIA/PACIFIC |
- ------------------ |
Multi-channel TV Subscribers: |
Philippines................... 19.2% 600,000 360,969 145,303 40.3% | $ 10,668 $ 1,849 $ -
--------- --------- --------- | -------- -------- --------
LATIN AMERICA |
- ------------- |
Multi-channel TV Subscribers: |
Chile...................... 34.0% 2,321,000 1,563,872 387,670 24.8% | $ 73,924 $ 18,926 $104,389
Mexico..................... 49.0% 341,600 222,871 56,106 25.2% | $ 7,693 $ 2,418 $ -
Brazil (Jundiai)........... 46.3% 70,000 67,510 19,766 29.3% | $ 7,050 $ 2,060 $ 39
Brazil (TVSB).............. 45.0% 387,000 306,000 12,443 4.1% | $ 4,284 $ (539) $ -
Peru....................... 100% 140,000 50,504 8,104 16.0% | $ 1,253 $ (293) $ -
--------- --------- --------- | -------- -------- --------
Total.................. 3,259,600 2,210,757 484,089 | $ 94,204 $ 22,572 $104,428
--------- --------- --------- | -------- -------- --------
Telephony Lines: | [Financial information is included
Chile...................... 34.0% 2,321,000 113,300 13,428 11.9% | in multi-channel TV information
--------- --------- --------- | above.]
Programming Subscribers: |
Latin American............. 50.0% N/A N/A 3,151,160 N/A | $ 2,771 $(13,378) $ -
--------- --------- --------- | -------- -------- --------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
As of and for the Nine Months Ended September, 1998
---------------------------------------------------------------------------------
Homes in Basic Long-
Service Homes Subscribers/ Adjusted Term
Area Passed Lines Revenue EBITDA(1) Debt(2)
------------ ----------- ------------ | ---------- --------- ----------
| (In thousands) (3)
<S> <C> <C> <C> | <C> <C> <C>
TOTAL COMPANY BASED ON GROSS DATA (6): |
- -------------------------------------- |
Multi-channel TV Subscribers.................. 11,658,286 9,277,329 4,200,115 | $509,238 $157,618 $778,837
Telephony Lines............................... 3,122,000 583,807 98,362 | $ - $ - $ -
Programming Subscribers....................... N/A N/A 4,810,025 | $ 26,280 $(10,705) $ -
|
TOTAL COMPANY BASED ON CONSOLIDATED SYSTEMS (7): |
- ------------------------------------------------ |
Multi-channel TV Subscribers.................. 5,423,554 4,439,188 1,709,176 | $215,092 $14,860 $751,898
Telephony Lines............................... - - - | $ 215 $(3,710) $ -
Programming Subscribers....................... N/A N/A 395,610 | $ 483 $(3,850) $ -
|
TOTAL COMPANY BASED ON PROPORTIONATE DATA (8): |
- ---------------------------------------------- |
Multi-channel TV Subscribers.................. 7,333,755 5,950,072 2,478,575 | $292,123 $71,394 $241,937
Telephony Lines............................... 1,062,387 183,764 39,732 | $ - $ - $ -
Programming Subscribers....................... N/A N/A 2,395,803 | $ 11,175 $(6,563) $ -
</TABLE>
35
<PAGE>
(1) Adjusted EBITDA represents net operating earnings before depreciation,
amortization and stock-based compensation charges. Industry analysts
generally consider Adjusted EBITDA to be a helpful way to measure the
performance of cable television operations and communications companies. We
believe Adjusted EBITDA helps investors to assess the cash flow from our
operations from period to period and thus to value our business. Adjusted
EBITDA should not, however, be considered a replacement for net income,
cash flows or for any other measure of performance or liquidity under
generally accepted accounting principles, or as an indicator of a company's
operating performance. Our presentation of Adjusted EBITDA may not be
comparable to statistics with a similar name reported by other companies.
Not all companies and analysts calculate Adjusted EBITDA in the same
manner.
(2) The amounts disclosed herein represent unconsolidated debt. Consolidated
debt for the operating systems is included in the footnotes to the
consolidated financial statements.
(3) The financial information presented herein has been taken from unaudited
financial information of the respective operating companies that were
providing service as of September 30, 1999. Certain information presented
herein 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, 1999 exchange
rates for the convenience translation.
(4) Financial information is included in telephony information below.
(5) Effective October 8, 1999, UIPI purchased the remaining 2.0% interest in
UAP that it did not own. The seller has the right to repurchase these
shares at the original sale price, plus interest at 14.0% per annum, at any
time prior to October 8, 2000.
(6) Summation of the gross operating system data on the previous page.
(7) Summation of the gross operating system data on the previous page, for
those systems that we consolidate in our financial statements due to
majority ownership and control.
(8) Summation of the gross operating system data on the previous page,
multiplied by our ownership percentage for each respective system.
36
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES
We have financed our acquisitions and funding of our video, voice and data
systems in the three main regions of the world in which we operate primarily
through public and private debt and equity as well as cash received from the
sale of non-strategic assets by certain subsidiaries. These resources have also
been used to refinance certain debt instruments and facilities as well as to
cover corporate overhead. The following table outlines the sources and uses of
cash, cash equivalents, restricted cash and short-term liquid investments (for
purposes of this table only, "cash") for United (parent only) from inception to
date:
<TABLE>
<CAPTION>
For the Nine
Inception to Months Ended
December 31, 1998 September 30, 1999 Total
----------------- ------------------ --------
(In millions)
<S> <C> <C> <C>
United (Parent Only)
-------------------
Financing Sources:
Gross bond proceeds......................... $1,138.1 $208.9 $1,347.0
Gross equity proceeds (1)................... 408.9 419.6 828.5
Asset sales, dividends and note payments.... 224.4 94.7 319.1
Interest income and other................... 32.7 28.2 60.9
-------- ------ --------
Total sources.......................... 1,804.1 751.4 2,555.5
-------- ------ --------
Application of Funds:
Investment in:
UPC......................................... (454.7) (2.8) (457.5)
UAP (1)..................................... (256.4) (34.9) (291.3)
ULA......................................... (292.3) (292.9) (585.2)
Other....................................... (25.8) - (25.8)
-------- ------ --------
Total.................................. (1,029.2) (330.6) (1,359.8)
Repayment of bonds (2)...................... (531.8) (0.3) (532.1)
Offering costs.............................. (64.5) (19.3) (83.8)
Corporate equipment and development......... (25.7) (5.3) (31.0)
Corporate overhead and other................ (106.5) (10.2) (116.7)
-------- ------ --------
Total uses............................. (1,757.7) (365.7) (2,123.4)
-------- ------ --------
Period change in cash....................... 46.4 385.7 432.1
Cash, beginning of period................... - 46.4 -
-------- ------ --------
Cash, end of period......................... $ 46.4 $432.1 432.1
======== ====== --------
United's Subsidiaries
---------------------
Cash, end of period:
UPC....................................... 101.8
UAP....................................... 288.1
ULA....................................... 5.5
Other..................................... 2.3
--------
Total United's subsidiaries.......... 397.7
--------
Total consolidated cash, cash
equivalents, restricted cash
and short-term liquid investments... $ 829.8
========
</TABLE>
(1) Includes issuance/use of $29.8 million and $29.5 million in convertible
preferred stock in 1995 and 1998, respectively, to acquire interests in
Australia as well as $50.0 million in common stock in 1995 to acquire
the initial interest in UPC.
(2) Includes tender premium of $65.6 million.
37
<PAGE>
UNITED PARENT
We had $432.1 million of cash, cash equivalents, restricted cash and short-term
liquid investments on hand as of September 30, 1999. We do not expect to
contribute additional capital to UPC and Austar United for their on-going
operating or development requirements, as they will finance their operating
systems and development opportunities with their operating cash flow and debt
and equity financings. We believe that our existing capital resources will
enable us to assist in satisfying the operating and development requirements of
our other subsidiaries and cover corporate overhead for the next year. To the
extent we pursue new acquisitions or development opportunities, we will need to
raise additional capital or seek strategic partners. Because we do not currently
generate positive operating cash flow, our ability to repay our long-term
obligations will be dependent on developing one or more additional sources of
cash.
UPC
UPC had $101.8 million of cash, cash equivalents, restricted cash and short-term
liquid investments on hand as of September 30, 1999. During February 1999, UPC
successfully completed an initial public offering selling 44.6 million shares on
the Amsterdam Stock Exchange and Nasdaq National Market System, raising gross
and net proceeds at NLG63.91 ($32.78) per share of NLG2,852.9 ($1,463.0) million
and NLG2,660.1 ($1,364.1) million, respectively. Concurrent with the offering,
DIC exercised one of its two option agreements acquiring approximately 1.6
million shares for $45.0 million. Proceeds from the offering and option exercise
were used to repay certain debt facilities and finance acquisitions.
In July 1999, UPC completed a $1.5 billion bond offering. Proceeds from the bond
offering were primarily used to fund acquisitions. Also in July 1999 UPC entered
into a euro1.0 billion credit facility. Proceeds from the UPC Senior Credit
Facility were used to refinance the existing credit facility, repay certain
intercompany debts, fund general corporate purposes and fund capital
expenditures.
In October 1999, UPC closed an equity offering of 15.0 million ordinary shares
at euro59.75 ($64.68) per share, for gross proceeds of approximately euro896.3
($970.2) million.
Also in October 1999, UPC completed a $1.03 billion bond offering consisting of
$252.0 million and euro101.0 million of ten-year 11.25% Senior Notes due 2009,
$200.0 million and euro100.0 million of eight-year 10.875% Senior Notes due 2007
and $478.0 million and euro191.0 million aggregate principal amount of ten-year
13.375% Senior Discount Notes due 2009. The Senior Discount Notes were sold at
52.3% of the face amount yielding gross proceeds of $250.0 million and euro100.0
million and will accrue but not pay interest until 2004.
The proceeds from the debt and equity offerings, in addition to borrowing
capacity on UPC's facilities at the corporate and project debt level, are
expected to be used primarily for acquisitions, capital expenditures and other
costs associated with UPC's network upgrade and the continued development of
UPC's Telephony and Internet/data services businesses. UPC may need to raise
additional capital in the future to the extent UPC pursues additional
acquisitions or development opportunities or if cash flow from operations is
insufficient to satisfy UPC's liquidity requirements.
UAP
UAP had $288.1 million of cash, cash equivalents and short-term liquid
investments on hand as of September 30, 1999. On July 27, 1999, Austar United
successfully completed an initial public offering selling 103.5 million shares
on the Australian Stock Exchange, raising gross and net proceeds at A$4.70
($3.03) per share of A$486.5 ($313.6) million and A$456.5 ($294.3) million,
respectively. These proceeds, in addition to borrowing capacity on the New
Austar Bank Facility and Saturn Bank Facility, will be used to expand Austar
United's customer base, complete the build-out of its network and introduce new
services such as Telephony and Internet/data.
ULA
ULA had $5.5 million of cash, cash equivalents, restricted cash and short-term
liquid investments on hand as of September 30, 1999. ULA's systems, which are at
various stages of construction and development, will generally depend on funding
from us and project financing to meet their growth needs. ULA's Chilean system,
VTRH, has capacity for borrowing under the VTRH Bank Facility as of September
30, 1999. With this facility and positive operating cash flow, the business is
fully funded through mid-2000 without additional assistance from United. ULA
anticipates continued nominal funding from us for Latin America programming and
projects in Brazil. To the extent ULA pursues new acquisitions or development
opportunities, ULA and/or United will need to raise additional capital or seek
strategic partners.
38
<PAGE>
STATEMENTS OF CASH FLOWS
We had cash and cash equivalents of $317.0 million as of September 30, 1999, an
increase of $281.4 million from $35.6 million as of December 31, 1998. Cash and
cash equivalents of $58.4 million as of September 30, 1998 represented a
decrease of $15.9 million from $74.3 million as of December 31, 1997, the detail
of which is as follows:
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
----------------------------------
1999 1998
--------- ---------
(In thousands)
<S> <C> <C>
Cash flows from operating activities....................... $ (44,005) $(34,451)
Cash flows from investing activities....................... (3,149,861) (290,863)
Cash flows from financing activities....................... 3,543,239 308,300
Effect of exchange rates on cash........................... (67,963) 1,088
---------- --------
Net increase (decrease) in cash and cash equivalents....... 281,410 (15,926)
Cash and cash equivalents at beginning of period........... 35,608 74,289
---------- --------
Cash and cash equivalents at end of period................. $ 317,018 $ 58,363
========== ========
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1999
Principal sources of cash during the nine months ended September 30, 1999
included $1,518.7 million in proceeds from the issuance of the UPC Senior Notes,
$1,409.1 million in proceeds from UPC's initial public offering and DIC's
exercise of its option to acquire shares in UPC, $381.8 million in net proceeds
from the issuance of United's Series C Convertible Preferred Stock, $299.2
million of borrowings on the UPC Senior Credit Facility, $294.3 million in net
proceeds from the Austar United initial public offering, $261.3 million of
borrowings on the New Telekabel Facility, $208.9 million in proceeds from the
issuance of the United 1999 Notes, $198.1 million of borrowings on the New
Austar Bank Facility and the Saturn Bank Facility, $45.0 million of borrowings
on the VTRH Bank Facility, $111.6 million of other borrowings, $40.1 million
from the issuance of our and UPC's equity securities, $18.0 million of proceeds
from the sale of our Hungarian programming assets and $3.0 million from other
investing and financing sources.
Principal uses of cash during the nine months ended September 30, 1999 included
$744.5 million for the acquisition of @Entertainment, $521.7 million for the
repayment of the UPC Senior Revolving Credit Facility, $467.3 million of net
cash invested in short-term investments, $444.1 million of capital expenditures
for system upgrade and new-build activities, $306.1 million for the repayment of
the existing facility at UTH, $293.2 million for the acquisition of Stjarn,
$252.7 million for the acquisition of the additional 66.0% interest in VTRH,
$252.0 million for the acquisition of the additional 49.0% interest in UTH,
$228.5 million for the acquisition of A2000, $109.7 million for the acquisition
of GelreVision, $223.3 million for other acquisitions, $144.1 million of funding
to our affiliates, including UPC's acquisition of an interest in SBS for $100.2
million, $129.1 million for the repayment of the Austar Bank Facility, $56.1
million for the repayment of the UPC Bridge Bank Facility, $45.0 million for the
repayment of a portion of the UPC DIC Loan, $79.3 million for the repayment of
other loans, $72.6 million for deferred financing costs, $68.0 million negative
exchange rate effect on cash, $18.0 million for payment of a note, and $52.4
million for operating activities and other investing and financing uses.
NINE MONTHS ENDED SEPTEMBER 30, 1998
Principal sources of cash during the nine months ended September 30, 1998
included $812.2 million from the issuance of the United 1998 Notes, $176.4
million of borrowings on UPC's bank facilities and Austar's bank facility and
$13.6 million from other investing and financing sources.
Principal uses of cash during the nine months ended September 30, 1998 included
$531.8 million for the redemption of the existing United Old Notes, $108.8
million for the repayment of certain UPC bank facilities, $88.0 million for the
acquisition of Combivisie, The Netherlands, $25.1 million for the net purchase
of short-term investments, $125.9 million of capital expenditures for system
upgrade and new-build activities, $25.0 million for the repayment of a ULA
credit facility, $23.9 million of debt financing costs, $36.2 million of funding
to our affiliates and $53.4 million for operating activities and other investing
and financing uses.
39
<PAGE>
RESULTS OF OPERATIONS
The following table displays selected system operating data for our significant
consolidated systems in the currency reported to United:
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
--------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
UPC Revenue (NLG):
Video........................................ 224,605 102,678 513,783 287,256
Telephony.................................... 21,961 61 44,827 436
Internet/Data................................ 18,204 2,205 37,711 5,274
Programming and Other........................ 11,834 6,001 12,237 13,249
---------- ---------- ---------- ----------
Total UPC Revenue....................... 276,604 110,945 608,558 306,215
========== ========== ========== ==========
UPC Adjusted EBITDA (NLG):
Video........................................ 93,974 42,804 223,839 130,109
Telephony.................................... (20,994) (6,383) (49,037) (7,510)
Internet/Data................................ (49,897) (7,491) (101,313) (12,997)
Programming and Other........................ (77,966) 4,721 (112,460) (8,760)
---------- ---------- ---------- ----------
Total UPC Adjusted EBITDA (1)........... (54,883) 33,651 (38,971) 100,842
========== ========== ========== ==========
Austar (A$):
Revenue...................................... 58,425 34,620 157,893 93,890
========== ========== ========== ==========
Adjusted EBITDA (1).......................... (1,484) (16,355) (12,135) (25,795)
========== ========== ========== ==========
VTRH Revenue (Chilean Pesos "Ch"):
Video........................................ 13,984,702 13,443,399 41,363,983 39,324,357
Telephony.................................... 2,445,511 309,200 4,710,114 704,720
---------- ---------- ---------- ----------
Total VTRH Revenue (2).................. 16,430,213 13,752,599 46,074,097 40,029,077
========== ========== ========== ==========
VTRH Adjusted EBITDA (Ch):
Video........................................ 2,632,354 3,426,068 6,642,811 10,661,342
Telephony.................................... 1,350,336 (425,561) 2,044,666 (498,014)
---------- ---------- ---------- ----------
Total VTRH Adjusted EBITDA (1)(2)...... 3,982,690 3,000,507 8,687,477 10,163,328
========== ========== ========== ==========
</TABLE>
(1) "Adjusted EBITDA" represents net operating earnings before
depreciation, amortization and stock-based compensation charges.
Industry analysts generally consider Adjusted EBITDA to be a helpful
way to measure the performance of cable television operations and
communications companies. We believe Adjusted EBITDA helps investors
to assess the cash flow from our operations from period to period and
thus to value our business. Adjusted EBITDA should not, however, be
considered a replacement for net income, cash flows or for any other
measure of performance or liquidity under generally accepted
accounting principles, or as an indicator of a company's operating
performance. Our presentation of Adjusted EBITDA may not be comparable
to statistics with a similar name reported by other companies. Not all
companies and analysts calculate Adjusted EBITDA in the same manner.
(2) Based on Chilean generally accepted accounting principles from January
1, 1999 through September 30, 1999. We began consolidating the results
of operations of VTRH beginning May 1, 1999.
40
<PAGE>
The following rates were used to translate the selected system operating data
above into U.S. dollars for consolidation purposes per one U.S. dollar:
Dutch Australian Chilean
Guilder Dollar Peso
------- ----------- -------
Average rate three months
ended September 30, 1999.................. 2.1004 1.5399 517.5685
Average rate three months
ended September 30, 1998.................. 1.9945 1.6810 469.1958
REVENUE. Revenue increased $128.7 million, or 165.0%, from $78.0 million for the
three months ended September 30, 1998 to $206.7 million for the three months
ended September 30, 1999. Revenue increased $244.8 million, or 113.4%, from
$215.8 million for the nine months ended September 30, 1998 to $460.6 million
for the nine months ended September 30, 1999.
EUROPE
Revenue for UPC in U.S. dollar terms increased $75.8 million, or 136.6% from
$55.9 million for the three months ended September 30, 1998 to $131.7 million
for the three months ended September 30, 1999, including a negative impact of
$2.8 million due to exchange rate fluctuations. Revenue for UPC in U.S. dollar
terms increased $144.1 million, or 95.2% from $151.3 million for the nine months
ended September 30, 1998 to $295.4 million for the nine months ended September
30, 1999, including a negative impact of $2.3 million due to exchange rate
fluctuations. On a functional currency basis, UPC's revenue increased NLG165.7
million or 149.4% from NLG110.9 million for the three months ended September 30,
1998 to NLG276.6 million for the three months ended September 30, 1999. On a
functional currency basis, UPC's revenue increased NLG302.4 million or 98.8%
from NLG306.2 million for the nine months ended September 30, 1998 to NLG608.6
million for the nine months ended September 30, 1999. The increase in cable
television revenue resulted primarily from acquisitions completed during 1999,
which are included in the results of operations from their respective dates of
acquisition. Revenue consolidated from UTH, or UPC Nederland, made up 73.7% of
this new acquisition revenue for the nine months ended September 30, 1999. The
remaining increase in cable television revenue came from subscriber growth. The
increase in telephony revenue is primarily a result of the consolidation of UTH,
as well as increased telephony revenue from the launch of telephony services in
Austria, France and Norway in the first half of 1999. Internet/data services
revenue is primarily due to increased revenue from Austria and Belgium due to
subscriber growth, and the launch of Internet/data services in France, The
Netherlands and Norway in the first half of 1999. A substantial portion of the
increase in programming revenue is due to the acquisition of @Entertainment,
which had programming revenue of NLG8.4 million for the two months ended
September 30, 1999.
ASIA/PACIFIC
Revenue for Austar increased $17.3 million, or 84.0% from $20.6 million for the
three months ended September 30, 1998 to $37.9 million for the three months
ended September 30, 1999. Austar's revenue increased $43.2 million, or 73.3%,
from $58.9 million for the nine months ended September 30, 1998 to $102.1
million for the nine months ended September 30, 1999. The U.S. dollar increase
was positively impacted by $2.8 million and $3.1 million due to fluctuation in
exchange rates between the three and nine months ended September 30, 1999,
respectively, compared to the same periods in the prior year. On a functional
currency basis, Austar's revenue increased A$23.8 million from A$34.6 million
for the three months ended September 30, 1998 to A$58.4 million for the three
months ended September 30, 1999, a 68.8% increase. Austar's functional currency
revenue increased A$64.0 million, from A$93.9 million for the nine months ended
September 30, 1998 to A$157.9 million for the nine months ended September 30,
1999, a 68.2% increase. These increases were primarily due to subscriber growth
(360,708 at September 30, 1999 compared to 251,255 at September 30, 1998) and
increased average monthly revenue per subscriber as Austar continues to expand
its customer base. The average monthly revenue per subscriber increased A$7.48
($4.88) from an average per subscriber of A$46.36 ($30.23) for the nine months
ended September 30, 1998 to an average of A$53.84 ($35.11) per subscriber for
the nine months ended September 30, 1999, a 16.1% increase.
LATIN AMERICA
We began consolidating the results of operations of VTRH effective May 1, 1999.
Revenue for VTRH in U.S. dollar terms increased $2.4 million, or 8.2% from $29.3
million for the three months ended September 30, 1998 to $31.7 million for the
three months ended September 30, 1999, including a negative impact of $2.7
million due to exchange rate fluctuations. Revenue for VTRH in U.S. dollar terms
increased $5.5 million, or 6.3% from $87.5 million for the nine months ended
September 30, 1998 to $93.0 million for the nine months ended September 30,
1999, including a negative impact of $6.7 million due to exchange rate
fluctuations. On a functional currency basis, VTRH's revenue increased Ch2.7
billion or 19.7% from Ch13.7 billion for the three months ended September 30,
1998 to Ch16.4 billion for the three months ended September 30, 1999. On a
41
<PAGE>
functional currency basis, VTRH's revenue increased Ch6.1 billion or 15.3% from
Ch40.0 billion for the nine months ended September 30, 1998 to Ch46.1 billion
for the nine months ended September 30, 1999. The increase in revenue primarily
resulted from telephony subscriber growth volume (56,623 at September 30, 1999
compared to 13,428 at September 30, 1998), as well as price. The average monthly
revenue per subscriber for telephony service was Ch16,298($31.49) and
Ch13,486($27.22) for the three and nine months ended September 30, 1999,
respectively, compared to Ch9,675($20.62) and Ch9,261($20.25) for the three and
nine months ended September 30, 1998, respectively. VTRH also experienced modest
multi-channel television subscriber growth (389,858 at September 30, 1999
compared to 387,670 at September 30, 1998), and modest rate increases this year
compared to last year. The average monthly revenue per subscriber for
multi-channel television was Ch11,971($23.13) and Ch11,747($23.71) for the three
and nine months ended September 30, 1999, respectively, compared to
Ch11,664($24.86) and Ch11,547($25.25) for the three and nine months ended
September 30, 1998, respectively.
ADJUSTED EBITDA. Adjusted EBITDA decreased $25.4 million for the three months
ended September 30, 1999 compared to the three months ended September 30, 1998.
Adjusted EBITDA decreased $25.2 million for the nine months ended September 30,
1999 compared to the nine months ended September 30, 1998.
EUROPE
Adjusted EBITDA for UPC in U.S. dollar terms decreased $43.0 million, or 254.4%,
from $16.9 million for the three months ended September 30, 1998 to negative
$26.1 million for the three months ended September 30, 1999, including a
negative impact of $1.7 million due to exchange rate fluctuations. Adjusted
EBITDA for UPC in U.S. dollar terms decreased $68.0 million, or 129.3%, from
$52.6 million for the nine months ended September 30, 1998 to negative $15.4
million for the nine months ended September 30, 1999, including a negative
impact of $1.4 million due to exchange rate fluctuations. On a functional
currency basis, UPC's Adjusted EBITDA decreased NLG88.6 million, or 262.9%, from
NLG33.7 million for the three months ended September 30, 1998 to negative
NLG54.9 million for the three months ended September 30, 1999. On a functional
currency basis, UPC's Adjusted EBITDA decreased NLG139.8 million, or 138.7%,
from NLG100.8 million for the nine months ended September 30, 1998 to negative
NLG39.0 million for the nine months ended September 30, 1999. Although revenue
increased compared to the same period in the prior year, increases in operating
expense and selling, general and administrative expense outpaced the revenue
increase, primarily due to the focus on the continued development of UPC's newer
telephony and Internet/data services. We believe the introduction of telephone
services and Internet/data services will have a significant negative impact on
Adjusted EBITDA during 1999.
ASIA/PACIFIC
Austar's Adjusted EBITDA loss decreased $8.7 million, or 89.7%, from negative
$9.7 million for the three months ended September 30, 1998 to negative $1.0
million for the three months ended September 30, 1999. Austar's Adjusted EBITDA
loss decreased $7.7 million, or 49.7%, from negative $15.5 million for the nine
months ended September 30, 1998 to negative $7.8 million for the nine months
ended September 30, 1999. The U.S. dollar Adjusted EBITDA loss decrease was
positively impacted by $0.1 million due to fluctuation in exchange rates between
the three months ended September 30, 1999 and 1998 and the U.S. dollar Adjusted
EBITDA loss decrease was positively impacted by $0.2 million due to fluctuation
in exchange rates between the nine months ended September 30, 1999 and 1998. On
a functional currency basis, Austar's Adjusted EBITDA loss decreased A$14.9
million from negative A$16.4 million for the three months ended September 30,
1998 to negative A$1.5 million for the three months ended September 30, 1999, a
90.9% decrease. Austar's functional currency Adjusted EBITDA loss decreased
A$13.7 million, from negative A$25.8 million for the nine months ended September
30, 1998 to negative A$12.1 million for the nine months ended September 30,
1999, a 53.1% decrease. The decrease in Adjusted EBITDA loss for the comparable
periods from year to year is primarily due to Austar achieving incremental sales
growth while keeping certain costs fixed, such as the national customer service
center, corporate management staff and media-related marketing costs.
LATIN AMERICA
We began consolidating the results of operations of VTRH effective May 1, 1999.
VTRH's Adjusted EBITDA in U.S. dollar terms increased $1.3 million, or 20.3%
from $6.4 million for the three months ended September 30, 1998 to $7.7 million
for the three months ended September 30, 1999, including a negative impact of
$0.6 million due to exchange rate fluctuations. VTRH's Adjusted EBITDA in U.S.
dollar terms decreased $4.7 million, or 21.2% from $22.2 million for the nine
months ended September 30, 1998 to $17.5 million for the nine months ended
September 30, 1999, including a negative impact of $1.7 million due to exchange
rate fluctuations. On a functional currency basis, VTRH's Adjusted EBITDA
42
<PAGE>
increased Ch1.0 billion, or 33.3% from Ch3.0 billion for the three months ended
September 30, 1998 to Ch4.0 billion for the three months ended September 30,
1999. On a functional currency basis, VTRH's Adjusted EBITDA decreased Ch1.5
billion or 14.7% from Ch10.2 billion for the nine months ended September 30,
1998 to Ch8.7 billion for the nine months ended September 30, 1999. Although
revenue increased compared to the same periods in the prior year, increases in
operating expense and selling, general and administrative expense outpaced the
revenue increases, primarily due to the focus on the continued development of
VTRH's newer telephony and Internet/data services and an increase in senior
management personnel hired from the former shareholders of VTRH.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE. Corporate general and
administrative expense increased $0.2 million from $23.2 million for the three
months ended September 30, 1998 to $23.4 million for the three months ended
September 30, 1999. Corporate general and administrative expense increased $66.3
million from $42.1 million for the nine months ended September 30, 1998 to
$108.4 million for the nine months ended September 30, 1999. This increase was
primarily attributable to a stock-based compensation charge of $53.6 million
from UPC's stock option plans for the nine months ended September 30, 1999,
compared to $16.1 million for the same period in 1998. In addition, UAP recorded
$18.9 million of non-cash stock-based compensation expense for the nine months
ended September 30, 1999 compared to nil for the same period in 1998.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased
$83.5 million and $117.7 million during the three and nine months ended
September 30, 1999 compared to the three and nine months ended September 30,
1998, respectively, as follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------ ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C>
Europe........................................................... $ 91,457 $20,816 $164,556 $ 68,102
Asia/Pacific..................................................... 25,086 22,383 75,031 73,018
Latin America.................................................... 10,370 369 19,781 818
Corporate and other.............................................. 385 246 1,007 731
-------- ------- -------- --------
Total depreciation and amortization expense................. $127,298 $43,814 $260,375 $142,669
======== ======= ======== ========
</TABLE>
EUROPE
UPC's depreciation and amortization expense in U.S. dollar terms increased $70.7
million, or 339.9%, from $20.8 million for the three months ended September 30,
1998 to $91.5 million for the three months ended September 30, 1999, offset by a
positive impact of $1.0 million due to exchange rate fluctuations. UPC's
depreciation and amortization expense in U.S. dollar terms increased $96.5
million, or 141.7%, from $68.1 million for the nine months ended September 30,
1998 to $164.6 million for the nine months ended September 30, 1999, including a
positive impact of $0.4 million due to exchange rate fluctuations. On a
functional currency basis, UPC's depreciation and amortization expense increased
NLG149.2 million, or 347.8%, from NLG42.9 million for the three months ended
September 30, 1998 to NLG192.1 million for the three months ended September 30,
1999. On a functional currency basis, UPC's depreciation and amortization
expense increased NLG202.7 million, or 147.1%, from NLG137.8 million for the
nine months ended September 30, 1998 to NLG340.5 million for the nine months
ended September 30, 1999. These increases result primarily from acquisitions
completed during 1999, as well as additional depreciation related to additional
capital expenditures to upgrade the network in our Western European systems and
new-build for developing systems. We expect depreciation and amortization to
increase in the future due to anticipated acquisitions and continued new-build
for developing systems.
ASIA/PACIFIC
Depreciation and amortization expense for Austar increased $1.4 million, or
6.4%, from $21.8 million for the three months ended September 30, 1998 to $23.2
million for the three months ended September 30, 1999. Depreciation and
amortization expense for Austar increased $2.2 million, or 3.1% from $70.0
million for the nine months ended September 30, 1998 to $72.2 million for the
nine months ended September 30, 1999. The U.S. dollar increases were negatively
impacted by $1.7 million due to fluctuation in exchange rates between the three
months ended September 30, 1999 and 1998 and negatively impacted by $2.1 million
due to fluctuation in exchange rates between the nine months ended September 30,
1999 and 1998. On a functional currency basis, Austar's depreciation and
amortization expense decreased A$0.7 million, from A$35.1 million for the three
months ended September 30, 1998 to A$34.4 million for the three months ended
September 30, 1999, a 2.0% decrease. On a functional currency basis, Austar's
43
<PAGE>
depreciation and amortization expense increased A$1.1 million, from A$106.4
million for the nine months ended September 30, 1998 to A$107.5 million for the
nine months ended September 30, 1999, a 1.0% increase.
LATIN AMERICA
The increase in the three and nine month periods ended September 30, 1999 is due
to consolidating the results of operations of VTRH effective May 1, 1999.
GAIN ON ISSUANCE OF SECURITIES BY SUBSIDIARY. In February 1999, UPC successfully
completed an initial public offering selling 44.6 million shares on the
Amsterdam Stock Exchange and Nasdaq National Market System, raising gross and
net proceeds at NLG63.91 ($32.78) per share of NLG2,852.9 ($1,463.0) million and
NLG2,660.1 ($1,364.1) million, respectively. Concurrent with the offering, DIC
exercised its option and acquired 1,558,654 ordinary shares of UPC, resulting in
proceeds to UPC of $45.0 million. Based on the carrying value of our investment
in UPC as of February 11, 1999, we recognized a gain of $822.1 million from the
resulting step-up in the carrying amount of our investment in UPC, in accordance
with SAB 51.
In July 1999, Austar United successfully completed an initial public offering
selling 103.5 million shares on the Australian Stock Exchange, raising gross and
net proceeds at A$4.70 ($3.03) per share of A$486.5 ($313.6) million and A$456.5
($294.3) million, respectively. Based on the carrying value of our investment in
Austar United as of July 27, 1999, we recognized a gain of $249.0 million from
the resulting step-up in the carrying amount of our investment in Austar United,
in accordance with SAB 51.
In August 1999, UPC partially funded the acquisition of Videopole with 955,376
ordinary shares of UPC. Based on the carrying value of our investment in UPC as
of July 31, 1999, we recognized a gain of $34.9 million from the resulting
step-up in the carrying amount of our investment in UPC, in accordance with SAB
51.
No deferred taxes were recorded related to these gains due to our intent on
holding our investment in UPC and Austar United indefinitely.
INTEREST EXPENSE. Interest expense increased $67.8 million, or 139.8%, from
$48.5 million during the three months ended September 30, 1998 to $116.3 million
during the three months ended September 30, 1999. Interest expense increased
$93.9 million, or 66.7%, from $140.8 million during the nine months ended
September 30, 1998 to $234.7 million during the nine months ended September 30,
1999. These increases were primarily due to the continued accretion of interest
on our $1,375.0 million aggregate principal amount United 1998 Notes, continued
accretion on the $492.9 million aggregate principal amount United A/P Notes and
new debt in 1999 such as the UPC Senior Notes, UPC DIC Loan, New Telekabel
Facility, A2000 Facilities, VTRH Bank Facility and Saturn Bank Facility.
FOREIGN CURRENCY EXCHANGE GAIN/LOSS. Foreign currency exchange loss increased
$10.9 million from $6.3 million gain for the three months ended September 30,
1998 to $4.6 million loss for the three months ended September 30, 1999. Foreign
currency exchange loss increased $25.5 million from $0.7 million gain for the
nine months ended September 30, 1998 to $24.8 million loss for the nine months
ended September 30, 1999. These increases were primarily due to a decrease in
the value of the Chilean Peso in relation to the U.S. dollar from period to
period. VTRH has approximately $268.0 million of U.S. dollar denominated notes
payable which are subject to fluctuations in exchange rates.
EXTRAORDINARY CHARGE FOR EARLY RETIREMENT OF DEBT. In connection with the
issuance of the 1998 Notes, we paid $531.8 million to repurchase the existing
Old Notes which had an accreted value of $466.2 million as of February 5, 1998.
This tender premium of $65.6 million, combined with the write off of unamortized
deferred financing costs and other transaction related costs totaling $13.5
million, resulted in an extraordinary charge during the nine months ended
September 30, 1998 of $79.1 million.
SHARE IN RESULTS OF AFFILIATED COMPANIES. Our share in results of affiliated
companies totaled a loss of $16.8 million and $17.0 million for the three months
ended September 30, 1999 and 1998, respectively, and a loss of $48.4 million and
$48.0 million for the nine months ended September 30, 1999 and 1998,
respectively, as follows:
44
<PAGE>
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------ ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C>
Europe:
A2000 (1)........................................................... $ (3,974) $ (1,729) $(16,787) $(13,087)
UTH (2)............................................................. - (4,174) (2,757) (4,174)
Hungary............................................................. - (629) (111) (3,431)
Melita, Princes Holdings and Tevel (3).............................. - 1,280 - 1,710
Tevel (3)........................................................... (3,085) - (4,915) -
Melita (3).......................................................... (793) - (960) -
Monor............................................................... 129 (218) 980 (1,175)
IPS................................................................. 1,050 520 1,240 (271)
SBS................................................................. (3,706) - (3,706) -
Other............................................................... (422) (1,947) (309) (1,851)
-------- -------- -------- --------
(10,801) (6,897) (27,325) (22,279)
-------- -------- -------- --------
Asia/Pacific:
Saturn.............................................................. (2,742) (4,066) (6,324) (8,045)
XYZ Entertainment................................................... (2,138) (680) (6,531) (210)
PCC................................................................. (20) (461) (84) (800)
HITV................................................................ (41) (1,376) 160 (1,698)
-------- -------- -------- --------
(4,941) (6,583) (12,779) (10,753)
-------- -------- -------- --------
Latin America:
VTRH (4)............................................................ - (1,061) (3,962) (5,440)
Megapo.............................................................. 103 238 341 278
TVSB (5)............................................................ - (300) - (253)
MGM Networks LA..................................................... (1,155) (2,556) (4,801) (9,795)
Jundiai............................................................. 36 114 160 279
-------- -------- -------- --------
(1,016) (3,565) (8,262) (14,931)
-------- -------- -------- --------
Total share in results of
affiliated companies................................................ $(16,758) $(17,045) $(48,366) $(47,963)
======== ======== ======== ========
</TABLE>
(1) Effective September 1, 1999 we increased our ownership interest in A2000
from 50.0% to 100% and began consolidating its results of operations.
(2) Effective February 1, 1999 we increased our ownership interest in UTH from
51.0% to 100% and began consolidating its results of operations.
(3) Historically we held our interests in Melita, Princes Holdings and Tevel
through UII, a general partnership. In November 1998 we acquired our
partner's interest in Tevel and Melita and sold our interest in Princes
Holdings.
(4) Effective May 1, 1999 we increased our ownership interest in VTRH to 100%
and began consolidating its results of operations.
(5) Effective October 2, 1998 we increased our ownership interest in TVSB to
100% and began consolidating its results of operations.
45
<PAGE>
YEAR 2000 READINESS DISCLOSURE
Our multi-channel television, programming and telephony operations are heavily
dependent upon computer systems and other technological devices with imbedded
chips. Such computer systems and other technological devices may not be capable
of accurately recognizing dates beginning on January 1, 2000. This problem could
cause miscalculations, resulting in our multi-channel television and telephony
systems or programming services malfunctioning or failing to operate.
YEAR 2000 PROGRAM. In response to possible Year 2000 problems, our Board of
Directors established a Task Force to assess the impact that potential Year 2000
problems may have on company-wide operations and to implement necessary changes
to address such problems. The Task Force reports directly to the United Board.
In creating a program to minimize Year 2000 problems, the Task Force identified
certain critical operations of our business. These critical operations are
service delivery systems, field and headend devices, customer service and
billing systems, and corporate management and administrative operations (e.g.,
cash flow, accounts payable and accounts receivable, payroll and building
operations).
The Task Force has established a three-phase program to address potential Year
2000 problems:
(a) Identification Phase: identify and evaluate computer systems and other
devices (e.g. headend devices, switches and set top boxes) on a system
by system basis for Year 2000 compliance.
(b) Implementation Phase: establish a database and evaluate the
information obtained in the Identification Phase, determine
priorities, implement corrective procedures, define costs and ensure
adequate funding.
(c) Testing Phase: test the corrective procedures to verify that all
material compliance problems will operate on and after January 1,
2000, and develop, as necessary, contingency plans for material
operations.
All of our operating systems, with the exception of acquisitions completed in
the third quarter of 1999 and as described below, have concluded the
Identification Phase and the Task Force is working on the Implementation Phase
for these systems. Excluding recent acquisitions, the Task Force has researched
approximately 98.0% of the items identified during the Identification Phase as
to Year 2000 compliance. Of the items researched, 94.0% are compliant and 4.6%
are not compliant but can be easily remedied without significant cost to us. The
remaining items require further research or additional testing. Because of
several acquisitions early this year, the number of research items has expanded
significantly. Including our recent acquisitions, research on 90.0% of the items
has been completed and remaining research is ongoing.
The Task Force commenced the Testing Phase in first quarter 1999. The Task Force
is supervising the Testing Phase of the computer system for our headend
controllers and our customer service billing systems and routers. Based on
current data to date, testing will continue to the end of 1999. At this time, we
anticipate that all material aspects of the program will be completed before
January 1, 2000, and we do not anticipate any material remediations or
replacements. Testing for customer care and billing systems, as well as our
headends and headend controllers, has been completed in most of our systems.
During the third quarter of 1999, we initiated a priority level review of the
Year 2000 program existing in the systems we acquired subsequent to June 30,
1999. In most of these acquisitions we had received representations and
warranties from the seller regarding Year 2000 compliance. Upon detailed
reviews, however, we found some of the systems unprepared for Year 2000. We are
currently implementing the necessary steps to assure compliance of the mission
critical systems and other date-related equipment, however, there can be no
assurance that we will be successful in this endeavor.
Certain of our operating systems have not completed the Identification Phase,
including Tahiti and certain Australian programming interests. Despite our
attempts to include these systems in our Year 2000 Program, these systems have
not responded. Therefore, we have no information on which to determine if these
systems will be Year 2000 compliant by December 31, 1999. If none of these
systems are Year 2000 compliant, we do not believe that their operation failure,
if any, will have a material adverse effect on our business as a whole. The
basis for determining the above percentages includes these systems.
In August 1999, we completed the acquisition of @Entertainment in Poland.
Currently, the assessment of the Year 2000 program at @Entertainment is behind
schedule and incomplete. Customer care, billing and subscriber management
systems are considered mission critical and have been researched with
unsatisfactory results. UPC is working to upgrade and patch the systems to Year
2000 compliant versions. Both vendors and consultants have committed to
compliance by December 31, 1999. We cannot, however, be certain that the
deadlines will be met. The Year 2000 issues in our Poland operating system have
been given a high priority.
46
<PAGE>
In addition to our program, we are a member of a Year 2000 working group, which
has 12 cable television companies and meets under the auspices of Cable Labs.
The dialogue with the other cable operators has assisted us in developing our
Year 2000 program. Cable Labs developed test procedures and contingency plans
for critical components of operating systems for the benefit of all of its
members. We have received these test procedures and plans, which we have
distributed to our systems.
THIRD PARTY DEPENDENCIES. We believe our largest Year 2000 risk is our
dependency upon third-party products. Two significant areas on which our systems
depend upon third-party products are programming and telephony interconnects. We
do not have the ability to control such parties in their assessment and
remediation procedures for potential Year 2000 problems. Should these parties
not be prepared for Year 2000, their systems may fail, and we would not be able
to provide our services to our customers. Notwithstanding these limitations, the
Task Force monitors the websites for all vendors used by us, to the extent
available, for information on such vendors' Year 2000 programs. To the extent
applicable, the Task Force uses such information to verify Year 2000 compliance
and to implement remediation procedures. For example, this is how the Task Force
learned that previously compliant reports on computer hardware and software from
third party vendors have been re-classified as non-compliant or conditionally
compliant. Such changes are not within the control of the Company.
We also have requested information from various third parties on the status of
their Year 2000 compliance programs in an effort to prevent any possible
interruptions or failures. To date, responses by programming vendors to such
communications have been limited and the responses received state only that the
party is working on Year 2000 issues and does not have a definitive position at
this time. As a result, we are unable to assess the risk posed by our dependence
upon such third parties' systems. Vendors for critical equipment components,
such as the headend controllers mentioned below, have been more responsive, and
we believe substantially all of this equipment will be Year 2000 compliant. We
cannot, however, give any assurances concerning compliance of equipment because
such belief is based on information provided by vendors, which cannot in all
cases be independently verified, and because of the uncertainties inherent in
Year 2000 remediation.
We have considered certain limited contingency plans, including preparing
back-up programming and stand-by power generators. Based on these
considerations, the Task Force has distributed a contingency plan to all of our
operating systems which sets forth preparation procedures and recovery
solutions. Such contingency plans may not, however, resolve the problem in a
satisfactory manner. With respect to other third-party systems, each United
operating system is responsible for inquiring of their vendors and other
entities with which they do business (e.g., utility companies, financial
institutions and facility owners) as to such entities' Year 2000 compliance
programs. In general, we manage the program with our internal Task Force. In
addition, we have retained several independent consultants to assist with the
Year 2000 Program for our operations in Europe, Eastern Europe and New Zealand.
The consultants are also contacting third party vendors regarding their Year
2000 compliance measures.
The Task Force is working closely with the manufacturers of our headend devices
to remedy any Year 2000 problems assessed in the headend equipment. Recent
information from the two primary manufacturers of such equipment indicate that
most of the equipment used in the United operating systems are not date
sensitive. Where such equipment needs to be upgraded for Year 2000 issues, such
vendors are upgrading without charge. These upgrades are expected to be
completed before year-end 1999, but such process is not wholly within the
control of us or our systems. Approximately 99.0% of the headend controllers,
which are considered the most critical component of the headend devices, have
been upgraded and tested as compliant. With respect to billing and customer care
systems, we use standard billing and customer care programs from several
vendors. The Task Force is working with such vendors to achieve Year 2000
compliance for all systems in United.
MINORITY-HELD SYSTEMS. We have several minority investments in international
multi-channel television and telephony operations. With respect to these
minority investments, the Task Force is including their systems in the program.
Of these investments, 95.0% have completed their Identification Phase of the
program and the Task Force is in the process of making recommendations to these
entities as to Year 2000 compliance matters. No assurance can be given, however,
that these entities will implement the recommendations or otherwise be Year 2000
compliant. On an overall basis, the Task Force continues to analyze the Year
2000 program and will revise the program as necessary, including procedures it
undertakes with respect to third parties to ensure their Year 2000 compliance.
COSTS OF COMPLIANCE. The Task Force is not able to determine the full cost of
its Year 2000 program and its related impact on the financial condition of the
Company. In the course of our business, we have made substantial capital
adjustments over the past few years in improving our systems, primarily for
reasons other than Year 2000. Because these upgrades also resulted in Year 2000
47
<PAGE>
compliance, replacement and remediation costs have been low. The Task Force has,
however, revised its estimates of the cost for the Year 2000 program to $7.3
million. This estimate has increased because of recent acquisitions, such as
@Entertainment which is discussed above. The cost includes certain identified
replacement and remediation procedures and external consultants. Such estimate
does not, however, include internal costs because we do not separately track the
internal costs incurred for the Year 2000 program. Although no assurance can be
made, we believe that the known Year 2000 compliance issues can be remedied
without a material financial impact on us. No assurance can be made, however, as
to the total cost (excluding internal costs) for the Year 2000 program until all
of the data has been gathered. In addition, we can not predict the financial
impact on us if Year 2000 problems are caused by third parties upon which our
systems are dependent or experienced by entities in which we hold investments.
The failure of any one of these parties to implement Year 2000 procedures could
have a material adverse impact on our operations and financial condition.
EUROPEAN ECONOMIC AND MONETARY UNION
On January 1, 1999, eleven of the fifteen member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
and the euro. The participating countries adopted the euro as their common legal
currency on that day. The euro trades on currency exchanges and is available for
non-cash transactions during the transition period between January 1, 1999 and
January 1, 2002. During this transition period, the existing currencies are
scheduled to remain legal tender in the participating countries as denominations
of the euro and public and private parties may pay for goods and services using
either the euro or the participating countries' existing currencies.
During the transition period, all UPC operating companies' billing systems will
include amounts in euro as well as the respective country's existing currency.
All of UPC's accounting and management reporting systems currently are
multi-currency.
UPC intends to use the euro as its reporting currency by the end of 2000. We do
not expect the introduction of the euro to affect materially UPC's cable
television and other operations. We have not yet taken steps to confirm that the
financial institutions and other third parties with whom we have financial
relationships are prepared for the use of the euro. Thus far, we have not
experienced any material problem with third parties as a result of the
introduction of the euro. We believe the introduction of the euro will not
require us to amend any of our financial instruments or loan facilities, other
than amendments that will be made automatically by operation of law. These will
include automatic replacement of the currencies of participating countries with
the euro. They will also include automatic replacement of interest rates of
participating countries with European interest rates. We believe the
introduction of the euro will reduce our exposure to risk from foreign currency
and interest rate fluctuations.
48
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INVESTMENT PORTFOLIO
We do not use derivative financial instruments in our non-trading investment
portfolio. We place our cash and cash equivalent investments in highly liquid
instruments that meet high credit quality standards with original maturities at
the date of purchase of less than three months. We also place our short-term
investments in liquid instruments that meet high credit quality standards with
original maturities at the date of purchase of between three and twelve months.
We also limit the amount of credit exposure to any one issue, issuer or type of
instrument. These investments are subject to interest rate risk and will fall in
value if market interest rates increase. We do not expect, however, any material
loss with respect to our investment portfolio.
IMPACT OF FOREIGN CURRENCY RATE CHANGES
The spot rates and average rates for the primary currencies that impact our
financial statements are shown below per one U.S. dollar:
<TABLE>
<CAPTION>
Dutch Australian Chilean
Guilder Dollar Peso
------- ---------- --------
<S> <C> <C> <C>
Spot Rate September 30, 1999.................................. 2.0700 1.5336 530.0500
Average rate for three months ended September 30, 1999........ 2.1004 1.5399 517.5685
Spot Rate December 31, 1998................................... 1.8900 1.6332 N/A
Spot Rate September 30, 1998.................................. 1.8816 1.6855 466.8500
Average rate for three months ended September 30, 1998........ 1.9945 1.6810 469.1958
Spot Rate December 31, 1997................................... 2.0200 1.5378 N/A
</TABLE>
We are exposed to foreign exchange rate fluctuations related to our operating
subsidiaries' monetary assets and liabilities and the financial results of
foreign subsidiaries when their respective financial statements are translated
into U.S. dollars during consolidation. Our exposure to foreign exchange rate
fluctuations also arises from intercompany charges such as the cost of
equipment, management fees and certain other charges that are denominated in
U.S. dollars but recorded in the functional currency of the foreign subsidiary.
In addition, certain of our operating companies have notes payable and notes
receivable which are denominated in a currency other than their own functional
currency, as follows:
Amount Outstanding
U.S. Dollar Denominated Facilities as of September 30, 1999
---------------------------------- ------------------------
(in thousands)
Stjarn Seller's Note (1)........................... $100,000
UPC Senior Discount Notes due 2009 (1)............. $409,220
PCI Discount Notes (1)............................. $131,310
@Entertainment 1999 Senior Discount Notes (1)...... $154,067
@Entertainment 1998 Senior Discount Notes (1)...... $137,156
@Entertainment 1999 Series C Senior Discount
Notes (1)........................................ $ 11,348
UPC DIC Loan (1)................................... $ 45,000
Intercompany Loan to UPC (1)....................... $ 5,881
VTRH Bank Facility (2)............................. $160,000
Intercompany Loan to VTRH (2)...................... $108,000
-----------------
(1) Functional currency is Dutch Guilders.
(2) Functional currency is Chilean Pesos.
Occasionally we will execute hedge transactions to reduce our exposure to
foreign currency exchange rate risk. Concurrent with the closing of the UPC
Senior Notes offering, UPC entered into a cross-currency swap, swapping the UPC
Senior Notes due 2009 into fixed and variable rate Euro notes with a notional
amount totaling euro754.7 million. One half of the Euro notes have a fixed
interest rate of 8.54% through August 1, 2004, thereafter switching to a
variable interest rate of EURIBOR plus 4.15%. The remaining half have a variable
interest rate of EURIBOR plus 4.15% through August 1, 2009. The cross-currency
swaps provides the bank with the right to terminate the swap at fair value
commencing August 1, 2004 with the payment of a call premium equal to the call
premium which would be paid by UPC to the UPC Senior Notes due 2009 holders if
the notes are called on or after August 1, 2004.
49
<PAGE>
Interest Rate Sensitivity
The table below provides information about our primary debt obligations. The
variable rate financial instruments are sensitive to changes in interest rates.
The information is presented in U.S. dollar equivalents, which is our reporting
currency.
<TABLE>
<CAPTION>
As of September 30, 1999 Expected payment as of December 31,
------------------------ --------------------------------------------------------------------
Book Value Fair Value 1999 2000 2001 2002 2003 Thereafter Total
---------- ---------- -------- -------- -------- -------- -------- ---------- ----------
(U.S. dollars, in thousands, except interest rates)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate $ denominated
United 1998 Notes................ $ 965,955 $ 811,250 $ - $ - $ - $ - $ - $ 965,955 $ 965,955
Average interest rate............ 10.75% 13.250%
Fixed rate $ denominated
United 1999 Notes................ $ 218,537 $ 192,917 $ - $ - $ - $ - $ - $ 218,537 $ 218,537
Average interest rate........... 10.875% 13.75%
Variable rate Euro denominated UPC
Senior Notes due 2009............ $ 803,467 $ 786,382 $ - $ - $ - $ - $ - $ 803,467 $ 803,467
Average interest rate........... 7.50%-8.54% 7.50%-8.54%
Fixed rate Euro denominated UPC
Euro Senior Notes due 2009....... $ 319,378 $ 320,975 $ - $ - $ - $ - $ - $ 319,378 $ 319,378
Average interest rate........... 10.875% 10.77%
Fixed rate $ denominated UPC
Senior Discount Notes due 2009... $ 409,220 $ 407,925 $ - $ - $ - $ - $ - $ 409,220 $ 409,220
Average interest rate........... 12.50% 12.58%
Fixed rate $ denominated
@Entertainment 1999 Senior
Discount Notes................... $ 154,067 $ 164,352 $ 9,691 $ - $ - $ - $ - $ 144,376 $ 154,067
Average interest rate........... 14.50% 12.80%
Fixed rate $ denominated
@Entertainment 1998 Senior
Discount Notes................... $ 137,156 $ 153,720 $ 16,764 $ - $ - $ - $ - $ 120,392 $ 137,156
Average interest rate........... 14.50% 13.10%
Fixed rate $ denominated
@Entertainment 1999 Series C
Senior Discount Notes............ $ 11,348 $ 11,348 $ - $ - $ - $ - $ - $ 11,348 $ 11,348
Average interest rate........... 7.00% 7.00%
Fixed rate $ denominated PCI
Discount Notes................... $ 131,310 $ 117,000 $114,400 $ - $ - $ - $16,910 $ - $ 131,310
Average interest rate........... 9.875% 13.00%
Fixed rate $ denominated United
A/P Notes........................ $ 394,453 $ 374,578 $ - $ - $ - $ - $ - $ 394,453 $ 394,453
Average interest rate........... 14.00% 15.04%
Variable rate NLG denominated UPC
Senior Credit Facility........... $ 298,695 $ 298,695 $ - $ - $ - $ - $ - $ 298,695 $ 298,695
Average interest rate........... 6.00% 6.00%
50
<PAGE>
As of September 30, 1999 Expected payment as of December 31,
------------------------ --------------------------------------------------------------------
Book Value Fair Value 1999 2000 2001 2002 2003 Thereafter Total
---------- ---------- -------- -------- -------- -------- -------- ---------- ----------
(U.S. dollars, in thousands, except interest rates)
Variable rate Euro denominated
New Telekabel Facility........... $ 271,773 $ 271,773 $ - $ - $ - $ 13,041 $ 26,083 $ 232,649 $ 271,773
Average interest rate........... 4.90% 4.90%
Variable rate NLG denominated
A2000 Facilities................. $ 221,256 $ 221,256 $221,256 $ - $ - $ - $ - $ - $ 221,256
Average interest rate........... 4.85% 4.85%
Variable rate NLG denominated
CNBH Facility.................... $ 121,846 $ 121,846 $ - $ - $3,391 $ 7,922 $ 14,712 $ 95,821 $ 121,846
Average interest rate........... 3.90% 3.90%
Variable rate FFR denominated
Rhone Vision Cable Credit
Facility......................... $ 48,688 $ 48,688 $ - $ - $4,831 $ 4,831 $ 8,841 $ 30,185 $ 48,688
Average interest rate........... 4.00% 4.00%
Variable rate FFR denominated
RCF Facility..................... $ 39,315 $ 39,315 $ 5,604 $ 5,604 $5,604 $ 5,604 $ 5,604 $ 11,295 $ 39,315
Average interest rate........... 4.70% 4.70%
Fixed rate $ denominated UPC
DIC Loan......................... $ 36,243 $ 36,243 $ - $36,243 $ - $ - $ - $ - $ 36,243
Average interest rate........... 8.00% 8.00%
Variable rate FFR denominated
Mediareseaux Facility............ $ 41,640 $ 41,640 $ - $ - $ - $ - $ 3,357 $ 38,283 $ 41,640
Average interest rate........... 5.10% 5.10%
Fixed rate FFR denominated
Videopole Facility............... $ 3,940 $ 3,940 $ - $ - $ - $ - $ - $ 3,940 $ 3,940
Average interest rate........... 6.60% 6.60%
Variable rate $ denominated
VTRH Bank Facility............... $ 160,000 $ 160,000 $ - $ - $ - $160,000 $ - $ - $ 160,000
Average interest rate........... 9.49% 9.49%
Variable rate A$ denominated
New Austar Bank Facility......... $ 173,448 $ 173,448 $ - $ - $ - $ - $ 51,553 $ 121,895 $ 173,448
Average interest rate........... 7.65% 7.65%
Variable rate NZ$ denominated
Saturn Bank Facility............. $ 52,288 $ 52,288 $ - $ - $ 647 $ 5,177 $ 9,319 $ 37,145 $ 52,288
Average interest rate........... 8.03% 8.03%
Other............................. $ 54,582 $ 54,582 $ - $ - $ - $ - $ - $ 54,582 $ 54,582
---------- ---------- -------- ------- ------- -------- -------- ---------- ----------
$5,068,605 $4,864,161 $367,715 $41,847 $14,473 $196,575 $136,379 $4,311,616 $5,068,605
========== ========== ======== ======= ======= ======== ======== ========== ==========
</TABLE>
51
<PAGE>
We use interest rate swap agreements from time to time, to manage interest rate
risk on our floating rate debt facilities. Interest rate swaps are entered into
depending on our assessment of the market, and generally are used to convert the
floating rate debt to fixed rate debt. Interest differentials paid or received
under these swap agreements are recognized over the life of the contracts as
adjustments to the effective yield of the underlying debt, and related amounts
payable to, or receivable from, the counterparties are included in the
consolidated balance sheet.
Currently, we have four interest rate swaps to manage interest rate exposure on
the New Austar Bank Facility. Two of these swap agreements expire in 2002 and
effectively convert an aggregate principal amount of A$50.0 ($32.6) million of
variable rate, long-term debt into fixed rate borrowings. The other two swap
agreements expire in 2004 and convert on aggregate principal amount of A$100.0
($65.2) million of variable rate, long-term debt into fixed rate borrowings. As
a result of these swap agreements, interest expense was increased by
approximately A$0.3 ($0.2) million during the third quarter of 1999.
In addition, we have an interest rate swap to manage our exposure on the Saturn
Bank Facility which effectively converts an aggregate principal amount of
NZ$60.6 ($31.4) million of variable rate, long-term debt into fixed rate
borrowings. The interest rate swap includes an increasing fixed rate with an
additional margin which is expected to decline as the debt to EBITDA ratio
declines. As a result of this swap agreement, interest expense was increased by
approximately NZ$0.2 ($0.1) million during the third quarter 1999.
Fair values of the interest rate swap agreements are based on the estimated
amounts that we would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates and the current
creditworthiness of the counterparties. As of September 30, 1999, we estimate
that we would have paid approximately A$3.4 million ($2.2 million) to terminate
the agreements on the New Austar Bank Facility.
The table below provides information about our interest rate swaps. The table
presents notional amounts and weighted-average interest rates by expected
(contractual) maturity dates. Notional amounts are used to calculate the
contractual payments to be exchanged under the contract. The information is
presented in U.S. dollar equivalents (in thousands), which is our reporting
currency.
<TABLE>
<CAPTION>
As of December 31,
-------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total
---- ---- ---- ---- ---- ---------- -------
(U.S. dollars, in thousands, except interest rates)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps
New Austar Bank Facility:
Variable to fixed................. $ - $ - $ - $32,603 $ - $65,206 $97,809
Average pay rate %................ 7.95% 7.95% 7.95% 7.95% 7.95% 7.95% 7.95%
Average receive rate %............ 7.65% 7.65% 7.65% 7.65% 7.65% 7.65% 7.65%
Saturn Bank Facility:
Variable to fixed................... $ - $ - $ - $ - $ - $31,373 $31,373
Average pay rate %.................. 9.34% 9.09% 10.19% 10.19% 9.69% 9.94% 9.74%
Average receive rate %.............. 8.03% 8.03% 8.03% 8.03% 8.03% 8.03% 8.03%
</TABLE>
INFLATION AND FOREIGN INVESTMENT RISK
Certain of our operating companies operate in countries where the rate of
inflation is extremely high relative to that in the United States. While our
affiliated companies attempt to increase their subscription rates to offset
increases in operating costs, there is no assurance that they will be able to do
so. Therefore, operating costs may rise faster than associated revenue,
resulting in a material negative impact on reported earnings. We are also
impacted by inflationary increases in salaries, wages, benefits and other
administrative costs, the effects of which to date have not been material.
Our foreign operating companies are all directly affected by their respective
countries' government, economic, fiscal and monetary policies and other
political factors. We believe that our operating companies' financial conditions
and results of operations have not been materially adversely affected by these
factors.
52
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
--------
10.1 Indenture dated as of July 30, 1999, between UPC and Citibank
N.A, as Trustee, with respect to UPC 10.875% Senior Notes(1)
10.2 Indenture dated as of July 30, 1999, between UPC and Citibank
N.A., as Trustee, with respect to UPC 12.5% Senior Discount
Notes(1)
10.3 Indenture dated as of October 29, 1999, between UPC and Citibank
N.A, as Trustee, with respect to UPC 10.875% Senior Notes(2)
10.4 Indenture dated as of October 29, 1999, between UPC and Citibank
N.A, as Trustee, with respect to UPC 11.25% Senior Notes(2)
10.5 Indenture dated as of October 29, 1999, between UPC and Citibank
N.A., as Trustee, with respect to UPC 13.375% Senior Discount
Notes(2)
27.1 Financial Data Schedule
- -------------------
(1) Incorporated by reference from UPC's Report on Form 8-K dated July 30, 1999.
(2) Incorporated by reference from UPC's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999.
(b) Reports on Form 8-K filed during the quarter
<TABLE>
<CAPTION>
Date of Filing Date of Event Item Reported
-------------- ------------- -------------
<S> <C> <C>
July 22, 1999 July 6, 1999 Item 5 - United offering of
Series C Convertible
Preferred Stock
July 23, 1999 July 23, 1999 Item 5 - Change in name to
UnitedGlobalCom, Inc.
August 16, 1999 August 6, 1999 Item 2 - Acquisition of
@Entertainment
July 30, 1999 Item 5 - Acquisition of NBS
Nordic Broadband Services
August 30, 1999 Amendment No. 1 to Form 8-K, dated Item 2 - Acquisition of
July 30, 1999 @Entertainment
September 17, 1999 September 7, 1999 Item 5 - Acquisition of
United shares by Liberty Media
</TABLE>
53
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on this 15th day of
November 1999.
UnitedGlobalCom, Inc.
a Delaware corporation
By: /s/ Valerie L. Cover
---------------------------------------
Valerie L. Cover
Controller and Vice President
(a Duly Authorized Officer and
Principal Financial Officer)
54
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNITEDGLOBALCOM, INC.'S FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 317,018
<SECURITIES> 0
<RECEIVABLES> 87,239
<ALLOWANCES> 20,509
<INVENTORY> 64,860
<CURRENT-ASSETS> 1,127,810
<PP&E> 2,578,691
<DEPRECIATION> 427,984
<TOTAL-ASSETS> 6,659,293
<CURRENT-LIABILITIES> 694,066
<BONDS> 5,061,194
26,490
402,687
<COMMON> 442
<OTHER-SE> (188,420)
<TOTAL-LIABILITY-AND-EQUITY> 6,659,293
<SALES> 206,732
<TOTAL-REVENUES> 206,732
<CGS> 120,321
<TOTAL-COSTS> 361,837
<OTHER-EXPENSES> 4,629
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116,255
<INCOME-PRETAX> 61,993
<INCOME-TAX> 0
<INCOME-CONTINUING> 61,993
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,993
<EPS-BASIC> 1.31
<EPS-DILUTED> 1.22
</TABLE>
