-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RWoDiT8k74yorC4m7ZR6Bf/97wFJor62WRJXHOyVqBN5Z4oTbVvI8R95w5GFwS+M dPNMOxAgTZNzDf2bwSrwCw== /in/edgar/work/20000814/0001014909-00-500016/0001014909-00-500016.txt : 20000921 0001014909-00-500016.hdr.sgml : 20000921 ACCESSION NUMBER: 0001014909-00-500016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITEDGLOBALCOM INC CENTRAL INDEX KEY: 0000887949 STANDARD INDUSTRIAL CLASSIFICATION: [4841 ] IRS NUMBER: 841116217 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21974 FILM NUMBER: 699752 BUSINESS ADDRESS: STREET 1: 4643 S ULSTER ST STREET 2: STE 1300 CITY: DENVER STATE: CO ZIP: 80237 BUSINESS PHONE: 3037704001 MAIL ADDRESS: STREET 1: 4643 S ULSTER ST STREET 2: STE 1300 CITY: DENVER STATE: CO ZIP: 80237 FORMER COMPANY: FORMER CONFORMED NAME: UNITED INTERNATIONAL HOLDINGS INC DATE OF NAME CHANGE: 19921119 10-Q 1 0001.txt 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 June 30, 2000 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. (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 August 4, 2000 was: Class A Common Stock -- 77,113,103 shares Class B Common Stock -- 19,221,940 shares
UnitedGlobalCom, Inc. TABLE OF CONTENTS Page Number ------ PART I - FINANCIAL INFORMATION ------------------------------ Item 1 - Financial Statements - ------ Condensed Consolidated Balance Sheets as of June 30, 2000 (Unaudited) and December 31, 1999.................. 3 Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited)..................................................................................... 4 Condensed Consolidated Statement of Stockholders' Equity for the Six Months Ended June 30, 2000 (Unaudited).............................................................................................. 5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999 (Unaudited).............................................................................................. 7 Notes to Condensed Consolidated Financial Statements (Unaudited)............................................. 9 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 24 - ------ Item 3 - Quantitative and Qualitative Disclosures about Market Risk............................................. 39 - ------ PART II - OTHER INFORMATION --------------------------- Item 4 - Submission of Matters to a Vote of Security Holders.................................................... 43 - ------ Item 6 - Exhibits and Reports on Form 8-K....................................................................... 43 - ------
UnitedGlobalCom, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (Stated in thousands, except share and per share amounts) (Unaudited) As of As of June 30, December 31, 2000 1999 ASSETS ------------- ------------ Current assets Cash and cash equivalents.......................................................................... $ 969,367 $1,925,915 Restricted cash.................................................................................... 17,322 18,217 Short-term liquid investments...................................................................... 1,092,114 629,689 Subscriber receivables, net of allowance for doubtful accounts of $42,611 and $27,808, respectively..................................................................................... 108,601 83,388 Costs to be reimbursed by affiliated companies, net................................................ 10,730 13,430 Other receivables, including related party receivables of $1,810 and $1,680, respectively.......... 137,028 131,622 Inventory.......................................................................................... 128,707 82,995 Deferred taxes..................................................................................... 3,021 2,119 Other current assets, net.......................................................................... 140,261 98,891 ----------- ---------- Total current assets.......................................................................... 2,607,151 2,986,266 Investments in affiliates, accounted for under the equity method, net................................ 863,938 309,509 Marketable equity securities and other investments................................................... 97,131 235,917 Property, plant and equipment, net of accumulated depreciation of $683,332 and $482,524, respectively....................................................................................... 2,883,063 2,379,837 Goodwill and other intangible assets, net of accumulated amortization of $292,694 and $170,133, respectively....................................................................................... 3,872,903 2,944,802 Deferred financing costs, net of accumulated amortization of $27,998 and $17,062, respectively....... 168,198 130,704 Deferred taxes....................................................................................... 9,519 3,698 Other assets, net.................................................................................... 29,237 12,120 ----------- ---------- Total assets.................................................................................. $10,531,140 $9,002,853 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable, including related party payables of $736 and $390, respectively.................. $ 339,537 $ 306,760 Accrued liabilities................................................................................ 456,943 324,431 Subscriber prepayments and deposits................................................................ 78,564 41,466 Short-term debt.................................................................................... 713,953 173,296 Current portion of other long-term debt............................................................ 12,574 52,180 Other current liabilities.......................................................................... 6,137 10,567 ----------- ---------- Total current liabilities..................................................................... 1,607,708 908,700 Senior discount notes and senior notes............................................................... 6,038,668 4,385,004 Other long-term debt................................................................................. 1,525,616 1,604,451 Deferred compensation................................................................................ 74,258 54,825 Deferred taxes....................................................................................... 18,046 17,074 Other long-term liabilities.......................................................................... 29,124 23,603 ----------- ---------- Total liabilities............................................................................. 9,293,420 6,993,657 ----------- ---------- Minority interests in subsidiaries................................................................... 574,961 867,970 ----------- ---------- Series B Convertible Preferred Stock, 3,000,000 shares authorized, stated at liquidation value, 114,123 and 116,185 shares issued and outstanding, respectively.................. 27,309 26,920 ----------- ---------- Stockholders' equity: Class A Common Stock, $0.01 par value, 210,000,000 shares authorized, 82,644,618 and 81,574,815 shares issued and outstanding, respectively........................................... 827 816 Class B Common Stock, $0.01 par value, 30,000,000 shares authorized, 19,221,940 and 19,323,940 shares issued and outstanding, respectively........................................... 192 193 Series C Convertible Preferred Stock, 425,000 shares authorized, issued and outstanding............ 425,000 410,125 Series D Convertible Preferred Stock, 287,500 shares authorized, issued and outstanding............ 278,835 268,773 Additional paid-in capital......................................................................... 1,563,191 1,416,635 Deferred compensation.............................................................................. (178,413) (119,996) Treasury stock, at cost, 5,569,240 shares of Class A Common Stock.................................. (29,061) (29,061) Accumulated deficit................................................................................ (1,177,782) (621,941) Other cumulative comprehensive loss................................................................ (247,339) (211,238) ----------- ---------- Total stockholders' equity.................................................................... 635,450 1,114,306 ----------- ---------- Total liabilities and stockholders' equity.................................................... $10,531,140 $9,002,853 =========== ========== The accompanying notes are an integral part of these condensed consolidated financial statements.
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UnitedGlobalCom, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Stated in thousands, except share and per share amounts) (Unaudited) For the For the Three Months Ended Six Months Ended June 30, June 30, --------------------------- ------------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Revenue................................................................. $ 303,201 $ 145,996 $ 584,407 $ 253,914 System operating expense................................................ (189,174) (75,747) (378,702) (130,912) System selling, general and administrative expense...................... (186,284) (58,170) (329,865) (99,760) Corporate general and administrative income (expense)................... 63,556 (58,974) (9,027) (85,056) Depreciation and amortization........................................... (186,679) (75,679) (358,777) (133,077) ---------- ---------- ---------- ---------- Operating loss..................................................... (195,380) (122,574) (491,964) (194,891) (Loss) gain on issuance of common equity securities by subsidiaries..... (3,463) (3,129) 73,646 822,067 Interest income, including related party income of $140, $140, $280 and $278, respectively.................................................... 14,220 5,497 69,722 9,407 Interest expense........................................................ (201,910) (61,834) (417,491) (118,457) Gain on sale of investments in affiliates............................... - - - 7,456 Foreign currency exchange loss, net..................................... (61,224) (14,715) (124,110) (20,205) Other income (expense), net............................................. 2,888 (1,362) (5,124) (7,149) ---------- ---------- ---------- ---------- (Loss) income before other items................................... (444,869) (198,117) (895,321) 498,228 Income tax benefit, net................................................. 2,117 493 2,781 305 Minority interests in subsidiaries...................................... 174,468 62,182 401,577 74,938 Share in results of affiliates, net..................................... (17,682) (11,046) (39,941) (31,608) ---------- ---------- ---------- ---------- Net (loss) income.................................................. $ (285,966) $ (146,488) $ (530,904) $ 541,863 ========== ========== ========== ========== Foreign currency translation adjustments................................ $ (42,599) $ (23,672) $ (65,748) $ (86,569) Unrealized holding gains arising during period.......................... 29,631 563 29,647 466 ---------- ---------- ---------- ---------- Comprehensive (loss) income........................................ $ (298,934) $ (169,597) $ (567,005) $ 455,760 ========== ========== ========== ========== Basic net (loss) income attributable to common shareholders............. $ (298,871) $ (147,039) $ (556,716) $ 540,659 ========== ========== ========== ========== Diluted net (loss) income attributable to common shareholders........... $ (298,871) $ (147,039) $ (556,716) $ 541,863 ========== ========== ========== ========== Net (loss) income per common share: Basic net (loss) income............................................ $ (3.12) $ (1.82) $ (5.82) $ 6.80 ========== ========== ========== ========== Diluted net (loss) income.......................................... $ (3.12) $ (1.82) $ (5.82) $ 6.11 ========== ========== ========== ========== Weighted-average number of common shares outstanding: Basic.............................................................. 95,939,285 80,976,454 95,734,422 79,464,553 =========== ========== ========== ========== Diluted............................................................ 95,939,285 80,976,454 95,734,422 88,672,220 =========== ========== ========== ========== The accompanying notes are an integral part of these condensed consolidated financial statements.
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UnitedGlobalCom, Inc. CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Stated in thousands, except share amounts) (Unaudited) Class A Class B Series C Series D Common Stock Common Stock Preferred Stock Preferred Stock Additional ---------------- ---------------- ------------------ ------------------ Paid-In Deferred Shares Amount Shares Amount Shares Amount Shares Amount Capital Compensation --------- ------ --------- ------ --------- -------- --------- -------- ---------- ------------ Balances, December 31, 1999...... 81,574,815 $816 19,323,940 $193 425,000 $410,125 287,500 $268,773 $1,416,635 $(119,996) Exchange of Class B Common Stock for Class A Common Stock........ 102,000 1 (102,000) (1) - - - - - - Issuance of Class A Common Stock in connection with Company's stock option plans.............. 922,036 9 - - - - - - 5,497 - Exchange of Series B Convertible Preferred Stock for Class A Common Stock........ 45,767 1 - - - - - - 486 - Accrual of dividends on Series B, C and D Convertible Preferred Stock..... - - - - - 14,875 - 10,062 (875) - Equity transactions of subsidiaries.................... - - - - - - - - 141,448 (54,023) Amortization of deferred compensation.................... - - - - - - - - - (4,394) Net loss......................... - - - - - - - - - - Change in cumulative translation adjustments......... - - - - - - - - - - Change in unrealized gain on available-for-sale securites....................... - - - - - - - - - - ---------- ---- ---------- ---- ------- -------- ------- -------- ---------- --------- Balances, June 30, 2000.......... 82,644,618 $827 19,221,940 $192 425,000 $425,000 287,500 $278,835 $1,563,191 $(178,413) ========== ==== ========== ==== ======= ======== ======= ======== ========== ========= The accompanying notes are an integral part of these condensed consolidated financial statements.
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UnitedGlobalCom, Inc. CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Continued) (Stated in thousands, except share amounts) (Unaudited) Treasury Stock Cumulative ------------------- Accumulated Comprehensive Shares Amount Deficit Loss Total --------- --------- ----------- ------------- ---------- Balances, December 31, 1999...... 5,569,240 $(29,061) $ (621,941) $(211,238) $1,114,306 Exchange of Class B Common Stock for Class A Common Stock........ - - - - - Issuance of Class A Common Stock in connection with Company's stock option plans.............. - - - - 5,506 Exchange of Series B Convertible Preferred Stock for Class A Common Stock........ - - - - 487 Accrual of dividends on Series B, C and D Convertible Preferred Stock..... - - (24,937) - (875) Equity transactions of subsidiaries.................... - - - - 87,425 Amortization of deferred compensation.................... - - - - (4,394) Net loss......................... - - (530,904) - (530,904) Change in cumulative translation adjustments......... - - - (65,748) (65,748) Change in unrealized gain on available-for-sale securites....................... - - - 29,647 29,647 --------- -------- ----------- --------- ---------- Balances, June 30, 2000.......... 5,569,240 $(29,061) $(1,177,782) $(247,339) $ 635,450 ========= ======== =========== ========= ========== 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 (Stated in thousands) (Unaudited) For the Six Months Ended June 30, --------------------------- 2000 1999 ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income............................................................................... $ (530,904) $ 541,863 Adjustments to reconcile net (loss) income to net cash flows from operating activities: Gain on issuance of common equity securities by subsidiaries.................................. (73,646) (822,067) Share in results of affiliates, net........................................................... 36,059 25,987 Minority interests in subsidiaries............................................................ (401,577) (74,938) Exchange rate differences in loans............................................................ 113,891 18,365 Depreciation and amortization................................................................. 358,777 133,077 Accretion of interest on senior notes and amortization of deferred financing costs............ 213,284 86,754 Stock-based compensation expense.............................................................. (686) 66,351 Gain on sale of investments in affiliates..................................................... - (7,456) Increase in receivables, net.................................................................. (87,934) (25,315) Increase in other assets...................................................................... (74,999) (17,458) Increase in accounts payable, accrued liabilities and other................................... 221,730 21,641 ----------- ---------- Net cash flows from operating activities................................................. (226,005) (53,196) ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of short-term liquid investments....................................................... (1,978,560) (67,288) Proceeds from sale of short-term liquid investments............................................. 1,447,864 67,756 Restricted cash (deposited) released, net....................................................... (7) 3,429 Investments in affiliates and other investments................................................. (321,266) (37,815) Proceeds from sale of investments in affiliated companies....................................... - 18,000 New acquisitions, net of cash acquired.......................................................... (1,358,219) (682,081) Capital expenditures............................................................................ (633,566) (220,280) Other........................................................................................... 35,915 (22,761) ----------- ---------- Net cash flows from investing activities................................................. (2,807,839) (941,040) ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock by subsidiaries........................................................ 102,403 1,409,133 Issuance of common stock in connection with Company's and subsidiary's stock option plans....... 10,613 22,472 Issuance of common stock in connection with exercise of warrants................................ - 14,411 Proceeds from offering of senior notes and senior discount notes................................ 1,612,200 208,939 Retirement of existing senior notes............................................................. - (265) Proceeds from short-term and long-term borrowings............................................... 940,120 555,945 Deferred financing costs........................................................................ (56,276) (20,236) Repayments of short-term and long-term borrowings............................................... (416,114) (911,728) Payment of sellers note......................................................................... - (18,000) ----------- ---------- Net cash flows from financing activities................................................. 2,192,946 1,260,671 ----------- ---------- EFFECT OF EXCHANGE RATES ON CASH................................................................ (115,650) (49,936) ----------- ---------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS................................................ (956,548) 216,499 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................................................. 1,925,915 35,608 ----------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD........................................................ $ 969,367 $ 252,107 =========== ========== 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 Six Months Ended June 30, --------------------------- 2000 1999 ----------- ---------- SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid for interest........................................................................ $ 126,097 $ 44,939 =========== ========== Cash received for interest.................................................................... $ 70,866 $ 8,822 =========== ========== Acquisition of K&T Group: Property, plant and equipment.................................................................. $ (227,845) $ - Investments in affiliated companies............................................................ (8,430) - Goodwill....................................................................................... (786,436) - Long-term liabilities.......................................................................... 225,439 - Net current liabilities........................................................................ 8,129 - Receivables acquired........................................................................... (216,904) - ----------- ---------- Net cash paid............................................................................. $(1,006,047) $ - =========== ========== Acquisition of remaining 49.0% of Dutch joint venture: Property, plant and equipment.................................................................. $ - $ (179,131) Investments in affiliated companies............................................................ - (46,830) Goodwill....................................................................................... - (287,631) Long-term liabilities.......................................................................... - 242,536 Net current liabilities........................................................................ - 5,384 ----------- ---------- Total cash paid........................................................................... - (265,672) Cash acquired.................................................................................. - 13,629 ----------- ---------- Net cash paid............................................................................. $ - $ (252,043) =========== ========== Acquisition of remaining interest in Chilean joint venture: 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) =========== ========== Other acquisitions: Property, plant and equipment.................................................................. $ - $ (72,967) Goodwill....................................................................................... - (26,178) Net current assets............................................................................. - (8,808) Long-term liabilities.......................................................................... - 39,100 ----------- ---------- Total cash paid........................................................................... - (68,853) Cash acquired.................................................................................. - 1,184 ----------- ---------- Net cash paid............................................................................. $ - $ (67,669) =========== ========== The accompanying notes are an integral part of these condensed consolidated financial statements.
8 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2000 (Unaudited) 1. ORGANIZATION AND NATURE OF OPERATIONS UnitedGlobalCom, 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 telephone operations outside the United States. The following chart presents a summary of the Company's significant investments in telecommunications as of June 30, 2000.
************************************************************************************************************************************ * United * ************************************************************************************************************************************ 100.0% * 100.0% * *************************************** ******************************************************************************************* * United Europe, Inc. ("UEI") * * United International Properties, Inc. ("UIPI") * *************************************** ******************************************************************************************* * * * ********************************************** 53.0% * 100.0% * * 100.0% *************************************** ********************************************* ********************************************* * United Pan-Europe Communications * * United Asia/Pacific Communications, Inc. * * United Latin America, Inc. * * N.V. ("UPC") * * ("UAP")* * * ("ULA") * *************************************** ********************************************* ********************************************* * 72.3% * * *************************************** ********************************************* ********************************************* *Austria: * * Austar United Communications Limited * *Brazil: * * Telekabel Group 95.0% * * ("Austar United") * * TV Show Brasil 100.0% * *Belgium: * ********************************************* * Jundiai 46.3% * * UPC Belgium 100.0% * * *Chile: * *Czech Republic: * * * VTR 100.0% * * Kabel Net 100.0% * ********************************************* *Mexico: * * Kabel Plus 99.9% * * Australia: * * Megapo 90.3% * *France: * * Austar 100.0% * *Peru: * * UPC France(1) 92.0% * * Austar United Broadband 100.0% * * Cable Star 100.0% * *Germany: * * XYZ Entertainmnet 50.0% * *Latin American Programming: * * PrimaCom 25.1% * * New Zealand: * * MGM Networks LA 50.0% * *Hungary: * * Telstra Saturn 50.0% * ********************************************* * UPC Magyarorszag 100.0% * ********************************************* * Monor 98.7% * *Ireland: * ********************************************* * Tara 80.0% * * *Other UAP * *Israel: * * * * Tevel 46.6% * * China: * *Malta: * * Hunan International TV 49.0% * * Melita 50.0% * * Philippines: * *The Netherlands: * * Pilipino Cable Corporation 19.6% * * UPC Netherland(2) 100.0% * ********************************************* *Norway: * * UPC Norge 100.0% * * El Tele Ostfold 100.0% * *Poland: * * UPC Polska 100.0% * *Romania: * * UPC Romania 51.0%- 70.0% * *Slovak Republic: * * UPC Solvak 95.0%-100.0% * *Spain/Portugal: * * Iberian Programming 50.0% * * Munditelecom 51.0% * *Sweden: * * UPC Sweden 100.0% * *United Kingdom: * * Xtra Music 41.0% * *Other Business Lines: * * SBS 23.5% * * Priority Telecom 100.0% * * chello broadband 100.0% * * UPCtv 100.0% * ***************************************
(1) The investments in Mediareseaux, Videopole, Time Warner Cable France, RCF and Intercomm are held through UPC France. (2) The investments in GelreVision, A2000, K&T Group, Tebecai and Haarlem are held through UPC Nederland. 9 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 for which the Company did not consolidate the results of operations for the entire six months ended June 30, 2000 and/or June 30, 1999:
Effective Date Entity of Consolidation Reason - ------ ---------------- ------ UPC Nederland(1) February 1, 1999 Acquisition of remaining 49.0% interest in United Telekabel Holding N.V. ("UTH"') VTR May 1, 1999 Acquisition of remaining 66.0% interest UPC Slovensko (Slovak Republic) June 1, 1999 Acquisition GelreVision (The Netherlands) June 1, 1999 Acquisition Reseaux Cables de France ("RCF"') June 1, 1999 Acquisition Saturn (2) August 1, 1999 Acquisition of remaining 35.0% interest Stjarn (Sweden) August 1, 1999 Acquisition Videopole (France) August 1, 1999 Acquisition @Entertainment (UPC Polska) August 1, 1999 Acquisition Time Warner Cable France September 1, 1999 Acquisition A2000 (The Netherlands) September 1, 1999 Acquisition of remaining 50.0% interest Kabel Plus October 1, 1999 Acquisition Monor December 1, 1999 Acquisition Intercomm France Holding S.A. March 1, 2000 Acquisition of 92.0% interest Tebecai February 1, 2000 Acquisition El Tele Ostfold and Vestfold March 1, 2000 Acquisition K&T Group March 31, 2000 Acquisition
- -------------------- (1) Prior to the acquisition date, the equity method of accounting was used because of certain minority shareholder's rights. (2) Saturn was deconsolidated effective April 1, 2000 in connection with the formation of the 50/50 joint venture Telstra Saturn. 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 June 30, 2000 and the results of its operations for the three and six months ended June 30, 2000 and 1999. 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 year ended December 31, 1999. INVESTMENTS IN AFFILIATES, 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. 10 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) MARKETABLE EQUITY SECURITIES AND OTHER INVESTMENTS The cost method of accounting is used for the Company's other investments in affiliates in which the Company's ownership interest is less than 20.0% and where the Company does not exert significant influence, except for those investments in marketable equity securities. The Company classifies its investments in marketable equity securities in which its interest is less than 20.0% and where the Company does not exert significant influence as available-for-sale and reports such investments at fair market value. Unrealized gains and losses are charged or credited to equity, and realized gains and losses and other-than-temporary declines in market value are included in operations. 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 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. DEFERRED FINANCING COSTS Costs to obtain debt financings are capitalized and amortized over the life of the debt facility using the effective interest method. SUBSCRIBER PREPAYMENTS AND DEPOSITS Payments received in advance for multi-channel television service are deferred and recognized as revenue when the associated services are provided. Deposits are recorded as a liability upon receipt and refunded to the subscriber upon disconnection. REVENUE RECOGNITION Revenue is primarily derived from the sale of multi-channel television, telephone and Internet/data services to subscribers and is recognized in the period the related services are provided. Initial installation fees are recognized as revenue in the period in which the installation occurs, to the extent installation fees are equal to or less than direct selling costs, which are expensed. To the extent installation fees exceed direct selling costs, the excess fees are deferred and amortized over the average contract period. All installation fees and related costs with respect to reconnections and disconnections are recognized in the period in which the reconnection or disconnection occurs because reconnection fees are charged at a level equal to or less than related reconnection costs. 11 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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, chello broadband, ULA, VTR and Austar United have also adopted stock-based compensation plans for their employees. With respect to 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. Subsequent decreases in the estimated fair value result in a credit to the statement of operations. BASIC AND DILUTED NET (LOSS) INCOME PER SHARE "Basic net (loss) income per share" is determined by dividing net (loss) income available to common stockholders by the weighted-average number of common shares outstanding during each period. Net (loss) income available to common stockholders includes the accrual of dividends on convertible preferred stock which is charged directly to additional paid-in capital. "Diluted net (loss) income per share" includes the effects of potentially issuable common stock, but only if dilutive. On November 11, 1999, The Board of Directors authorized a two-for-one stock split effected in the form of a stock dividend distributed on November 30, 1999 to stockholders of record on November 22, 1999. All historical weighted average share and per share amounts have been restated to reflect the stock split. 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 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 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 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 market value of a derivative depends on its intended use and designation. In June 1999, the FASB approved Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133 ("SFAS 137"). SFAS 137 amends the effective date of SFAS 133, which will now be effective for the Company's first quarter 2001. The Company is currently assessing the effect of this new standard. 12 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101, "Revenue Recognition" ("SAB 101") which provides interpretive guidance on the recognition, presentation and disclosure of revenue in financial statements. The Company is required to determine the impact of SAB 101 no later than the end of the fourth quarter of fiscal 2000. Depending on the results of the evaluation, the implementation of SAB 101 may require the Company to restate its current year results to reflect any cumulative effect of a change in accounting principle as if SAB 101 had been implemented on January 1, 2000. The Company is currently reviewing SAB 101 to determine what impact, if any, the adoption of SAB 101 will have on its financial position or results of operations. 3. ACQUISITIONS AND OTHER AGREEMENT WITH LIBERTY MEDIA CORPORATION In June 2000, the Company and Liberty Media Corporation ("Liberty") announced an agreement in which United will acquire certain of Liberty's international broadband distribution and programming assets in exchange for $200.0 million in cash and 75.3 million shares of United's Class B common stock. These shares represent a 38.0% economic and a 72.0% voting interest in United. The Liberty assets to be acquired by United include a 25.0% indirect economic interest in Telewest Communications, the second largest broadband communications provider in the United Kingdom. United will also acquire Liberty's Latin American broadband interests, including a 28.0% interest in Cablevision S.A. of Argentina; 49.0% of Liberty Cablevision of Puerto Rico; 41.0% of Grupo Portatel, a wireless broadband service provider in Mexico; and 43.0% of Digital Latin America. The transaction is subject to certain regulatory, shareholder and third party approvals and is expected to close in the fourth quarter of 2000. Upon closing Liberty will be bound by certain voting and standstill agreements with the Company and certain of its controlling shareholders. SATURN TELSTRA JOINT VENTURE On April 6, 2000, Saturn merged with Telstra New Zealand Limited, a wholly-owned subsidiary of Telstra Corporation Limited, to form Telstra Saturn. Telstra Saturn offers video, voice and data services to New Zealand's business and residential markets. 13 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. INVESTMENTS IN AFFILIATES, ACCOUNTED FOR UNDER THE EQUITY METHOD
As of June 30, 2000 -------------------------------------------------------------------------------- Cumulative Cumulative Investments in Dividends Share in Results Translation Affiliates Received of Affiliates Adjustments Total --------------- ----------- ---------------- ------------ --------- (In thousands) Europe: SBS............................... $ 264,675 $ - $(11,980) $ (2,459) $250,236 Tevel............................. 99,385 (6,180) (7,843) (3,561) 81,801 Melita............................ 14,062 - 1,349 (2,897) 12,514 Iberian Programming............... 11,947 (2,560) 2,216 2,790 14,393 Xtra Music........................ 12,186 - (1,729) (3,503) 6,954 PrimaCom.......................... 341,017 - (10,965) (11,828) 318,224 Other............................. 41,780 - (3,753) 992 39,019 Asia/Pacific: XYZ Entertainment................. 44,306 (3,197) (15,320) (72) 25,717 Telstra Saturn.................... 66,318 - (7,787) (1,283) 57,248 Pilipino Cable Corporation........ 16,010 - (3,015) (2,588) 10,407 Hunan International TV............ 6,061 - (1,990) 16 4,087 Other............................. 2,797 - (166) (148) 2,483 Latin America: Megapo............................ 71,819 (20,862) (2,333) (11,083) 37,541 MGM Networks LA (1)............... 13,386 - (13,386) - - Jundiai........................... 6,032 (1,572) 188 (1,334) 3,314 ---------- -------- -------- -------- -------- Total........................... $1,011,781 $(34,371) $(76,514) $(36,958) $863,938 ========== ======== ======== ======== ======== As of December 31, 1999 -------------------------------------------------------------------------------- Cumulative Cumulative Investments in Dividends Share in Results Translation Affiliates Received of Affiliates Adjustments Total --------------- ----------- ---------------- ------------ --------- (In thousands) Europe: SBS............................... $ 99,621 $ - $ (5,421) $ 2,858 $ 97,058 Tevel............................. 100,679 (6,180) (12,108) 3,761 86,152 Melita............................ 14,062 - 2,066 (2,417) 13,711 Iberian Programming............... 11,947 - (460) 2,828 14,315 Xtra Music........................ 9,913 - (2,476) (640) 6,797 Other............................. 27,447 - (65) (1,048) 26,334 Asia/Pacific: XYZ Entertainment................. 44,306 - (18,564) 2,804 28,546 Pilipino Cable Corporation........ 14,950 - (3,004) (2,588) 9,358 Hunan International TV............ 6,061 - (2,477) 16 3,600 Other............................. 350 - - - 350 Latin America: Megapo............................ 32,496 (1,408) (1,618) (9,382) 20,088 MGM Networks LA (1)............... 11,988 - (11,988) - - Jundiai........................... 6,032 (1,572) 72 (1,334) 3,198 Other............................. 2 - - - 2 ---------- -------- -------- -------- -------- Total........................... $ 379,854 $ (9,160) $(56,043) $ (5,142) $309,509 ========== ======== ======== ======== ========
(1) Includes an accrued funding obligation of $3.4 and $3.0 million at June 30, 2000 and December 31, 1999, respectively. The Company would face significant and punitive dilution if it did not make the requested fundings. 14 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. PROPERTY, PLANT AND EQUIPMENT As of As of June 30, December 31, 2000 1999 -------------- ------------ (In thousands) Cable distribution networks...................................................... $2,450,762 $1,826,781 Subscriber premises equipment and converters..................................... 537,436 451,505 MMDS/DTH distribution facilities................................................. 178,391 144,593 Office equipment, furniture and fixtures......................................... 155,879 103,869 Buildings and leasehold improvements............................................. 122,745 162,522 Other............................................................................ 121,182 173,091 ---------- ---------- 3,566,395 2,862,361 Accumulated depreciation.................................................... (683,332) (482,524) ---------- ---------- Net property, plant and equipment........................................... $2,883,063 $2,379,837 ========== ========== 6. GOODWILL AND OTHER INTANGIBLE ASSETS As of As of June 30, December 31, 2000 1999 -------------- ------------ Europe: (In thousands) UPC Polska..................................................................... $ 912,322 $ 935,867 UPC Nederland.................................................................. 1,589,867 763,714 UPC Sweden..................................................................... 416,533 430,606 Telekabel Group................................................................ 168,499 177,800 UPC France..................................................................... 208,599 117,787 UPC Norge...................................................................... 78,707 85,405 Kabel Plus..................................................................... 86,088 85,330 UPC Magyarorszag............................................................... 109,126 55,068 UPC N.V........................................................................ 150,569 29,406 Monor.......................................................................... 21,866 24,420 UPC Slovak..................................................................... 21,662 23,026 UPC Belgium.................................................................... 20,805 20,994 El Tele Ostfold................................................................ 24,846 - Other.......................................................................... 39,290 12,932 Asia/Pacific: Austar United.................................................................. 78,230 114,882 Latin America: VTR............................................................................ 223,108 223,484 TV Show Brasil................................................................. 8,300 8,298 Cable Star..................................................................... 7,180 5,916 ---------- ---------- 4,165,597 3,114,935 Accumulated amortization.................................................... (292,694) (170,133) ---------- ---------- Net goodwill and other intangible assets.................................... $3,872,903 $2,944,802 ========== ========== 7. SHORT-TERM DEBT As of As of June 30, December 31, 2000 1999 -------------- ------------ (In thousands) UPC facilities................................................................... $ 700,930 $ 164,263 Other ULA and UAP................................................................ 13,023 9,033 ---------- ---------- Total short-term debt....................................................... $ 713,953 $ 173,296 ========== ==========
15 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. SENIOR DISCOUNT NOTES AND SENIOR NOTES As of As of June 30, December 31, 2000 1999 -------------- ------------ (In thousands) United 1998 Notes................................................................ $1,044,857 $ 991,568 United 1999 Notes................................................................ 236,630 224,426 UPC 10.875% USD Senior Notes due 2009............................................ 719,738 759,442 UPC 10.875% Euro Senior Notes due 2009........................................... 286,096 301,878 UPC 12.5% USD Senior Discount Notes due 2009..................................... 448,104 421,747 UPC 10.875% USD Senior Notes due 2007............................................ 181,821 191,852 UPC 10.875% Euro Senior Notes due 2007........................................... 95,365 100,625 UPC 11.25% USD Senior Notes due 2009............................................. 227,359 239,905 UPC 11.25% Euro Senior Notes due 2009............................................ 95,655 100,894 UPC 13.375% USD Senior Discount Notes due 2009................................... 272,891 255,786 UPC 13.375% Euro Senior Discount Notes due 2009.................................. 103,989 102,847 UPC 11.25% USD Senior Notes due 2010............................................. 595,883 - UPC 11.25% Euro Senior Notes due 2010............................................ 189,367 - UPC 11.5% USD Senior Notes due 2010.............................................. 281,139 - UPC 13.75% Senior Discount Notes due 2010........................................ 543,860 - @Entertainment Senior Discount Notes............................................. 279,578 286,089 United A/P Notes................................................................. 436,336 407,945 ---------- ---------- 6,038,668 4,385,004 Less current portion........................................................ - - ---------- ---------- Total senior discount notes and senior notes................................ $6,038,668 $4,385,004 ========== ========== 9. OTHER LONG-TERM DEBT As of As of June 30, December 31, 2000 1999 -------------- ------------ (In thousands) UPC Senior Credit Facility....................................................... $ 531,007 $ 359,720 UPC Nederland Facilities......................................................... 346,560 588,310 UPC France Facilities............................................................ 201,391 146,157 Other UPC........................................................................ 60,956 123,199 VTR Bank Facility................................................................ 176,000 176,000 New Austar Bank Facility......................................................... 219,039 202,703 Saturn Bank Facility............................................................. - 57,685 Other Asia/Pacific............................................................... 2,694 2,263 Other Latin America.............................................................. 543 594 ---------- ---------- 1,538,190 1,656,631 Less current portion......................................................... (12,574) (52,180) ---------- ---------- Total other long-term debt................................................... $1,525,616 $1,604,451 ========== ==========
COMMITMENT In May 2000, UPC closed a euro4.0 ($3.8) billion 8.0 and 8.75 year Operating and Term Loan Commitment. The facilities will refinance existing operating company bank debt currently totaling euro1.7 ($1.6) billion as of June 30, 2000. The new loan facilities will add euro2.3 ($2.2) billion of liquidity and will be used to finance the further rollout of digital video, voice and data services. The loan is expected to be closed and drawn in the third quarter 2000. 16 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. STOCKHOLDERS' EQUITY COMMON STOCK In April 1993, the Company adopted a Restated Certificate of Incorporation pursuant to which the Company authorized the issuance of two classes of common stock, Class A Common Stock and Class B Common Stock. Each share of Class A Common Stock is entitled to one vote per share while each share of Class B Common Stock is entitled to ten votes per share. Each share of Class B Common Stock is convertible at any time at the option of the holder into one share of Class A Common Stock. The two classes of common stock are identical in all other respects. COMMON STOCK SPLIT On November 11, 1999, the Board of Directors authorized a two-for-one stock split effected in the form of a stock dividend distributed on November 30, 1999 to shareholders of record on November 22, 1999. The effect of the stock split has been recognized retroactively in all share and per share amounts in the accompanying consolidated financial statements and notes. SERIES C CONVERTIBLE PREFERRED STOCK In July 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 $381.6 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, December 31, 1999, March 31, 2000 and June 30, 2000 the holders received their quarterly payment in cash. The Series C Preferred Stock has 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 $42.15. SERIES D CONVERTIBLE PREFERRED STOCK In December 1999, the Company issued 287,500 shares of par value $0.01 per share Series D Preferred Stock, resulting in gross and net proceeds to the Company of $287.5 million and $259.9 million, respectively. The purchasers of the Series D Preferred Stock deposited $20.1 million into an account from which the holders will be entitled to payments in an amount equal to $17.50 per preferred share per quarter commencing on December 31, 1999 through September 30, 2000 in cash or Class A Common Stock at United's option. On December 31, 1999, March 31, 2000 and June 30, 2000 the holders received their payment in cash. The Series D Preferred Stock has 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 December 31, 2000, payable in cash or Class A Common Stock at the Company's option. Each share of Series D 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 $63.79. UPC STOCK SPLIT In March 2000, at an extraordinary general meeting of shareholders, shareholders of UPC approved an amendment to UPC's Articles of Association to effect a three-for-one stock split. All share and per share amounts in the accompanying notes to the consolidated financial statements have been adjusted to reflect this stock split. 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: 17 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Six Months Ended June 30, 2000 ---------------------------------------------- Austar UPC United Total ------------- ------------- ------------- (In thousands) Variable plan accounting for stock options..................... $54,023 $ - $54,023 Deferred compensation expense.................................. (54,023) - (54,023) Amortization of deferred compensation.......................... (7,934) 3,540 (4,394) Issuance of warrants by UPC.................................... 59,912 - 59,912 Issuance of shares by subsidiary of UPC........................ 27,513 - 27,513 ------- ------ ------- Total..................................................... $79,491 $3,540 $83,031 ======= ====== =======
OTHER CUMULATIVE COMPREHENSIVE LOSS
As of As of June 30, December 31, 2000 1999 -------------- ------------ (In thousands) Foreign currency translation adjustments....................... $(283,690) $(217,942) Unrealized gain on available-for-sale securities............... 36,351 6,704 --------- --------- Total .................................................... $(247,339) $(211,238) ========= =========
11. BASIC AND DILUTED NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
For the For the Three Months Ended Six Months Ended June 30, June 30, --------------------------- ------------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (In thousands) (In thousands) Basic: Net (loss) income................................................ $(285,966) $(146,488) $(530,904) $541,863 Accretion of Series A Convertible Preferred Stock................ - (53) - (214) Accretion of Series B Convertible Preferred Stock................ (437) (498) (875) (990) Accretion of Series C Convertible Preferred Stock................ (7,437) - (14,875) - Accretion of Series D Convertible Preferred Stock................ (5,031) - (10,062) - --------- --------- --------- -------- Basic net (loss) income attributable to common shareholders... (298,871) (147,039) (556,716) 540,659 --------- --------- --------- -------- Diluted: Accretion of Series A Convertible Preferred Stock................ - - (1) - 214 Accretion of Series B Convertible Preferred Stock................ - (1) - (1) - (1) 990 Accretion of Series C Convertible Preferred Stock................ - (1) - - (1) - Accretion of Series D Convertible Preferred Stock................ - (1) - - (1) - --------- --------- --------- -------- Diluted net (loss) income attributable to common shareholders.. $(298,871) $(147,039) $(556,716) $541,863 ========= ========= ========= ========
(1) Excluded from the calculation of diluted net (loss) income attributable to common shareholders because the effect is anti-dilutive. 18 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12. SEGMENT INFORMATION
As of June 30, For the Three Months Ended June 30, 2000 2000 ---------------------------------------------------------------------------- ----------- Internet/ Total Video Telephone Data Programming Other Total Assets ---------- ---------- ---------- ----------- ---------- --------- ----------- Revenue: (In thousands) (In thousands) Europe: The Netherlands......... $ 53,248 $ 26,348 $ 8,393 $ 640 $ 339 $ 88,968 $ 2,864,769 Austria................. 19,161 7,306 6,015 - - 32,482 397,221 Belgium................. 3,765 326 1,018 - - 5,109 47,863 Czech Republic.......... 5,632 224 - - 686 6,542 156,434 France.................. 14,046 2,169 601 - - 16,816 757,647 Hungary................. 10,736 4,971 65 - 7 15,779 287,530 Norway.................. 11,297 747 536 - - 12,580 251,694 Poland.................. 17,177 - - 12,905 - 30,082 1,179,791 Sweden.................. 7,731 218 1,481 - - 9,430 427,001 Corporate and Other..... 3,772 - - - 621 4,393 1,689,059 -------- -------- --------- -------- -------- -------- ----------- Total Europe......... 146,565 42,309 18,109 13,545 1,653 222,181 8,059,009 -------- -------- --------- -------- -------- -------- ----------- Asia/Pacific: Australia............... 41,688 - 421 - 438 42,547 577,360 Corporate and Other..... - - - - - - 54,266 -------- -------- --------- -------- -------- -------- ----------- Total Asia/Pacific... 41,688 - 421 - 438 42,547 631,626 -------- -------- --------- -------- -------- -------- ----------- Latin America: Chile................... 29,236 7,248 135 - - 36,619 507,723 Brazil.................. 1,340 - - - - 1,340 17,710 Corporate and Other..... 489 - - - - 489 61,590 -------- -------- --------- -------- -------- -------- ----------- Total Latin America.. 31,065 7,248 135 - - 38,448 587,023 -------- -------- --------- -------- -------- -------- ----------- Corporate & Other......... - - - - 25 25 1,253,482 -------- -------- --------- -------- -------- -------- ----------- Total Company........ $219,318 $ 49,557 $ 18,665 $ 13,545 $ 2,116 $ 303,201 $10,531,140 ======== ======== ========= ======== ======= ========= =========== Adjusted EBITDA: (1) Europe: The Netherlands......... $ 26,232 $(21,223) $ (37,434) $(11,770) $ (5,523) $(49,718) Austria................. 10,251 (1,743) 316 - - 8,824 Belgium................. 1,400 (115) (1,293) - - (8) Czech Republic.......... 1,264 11 - (50) 193 1,418 France.................. 4,900 (6,407) (2,914) - (298) (4,719) Hungary................. 3,878 2,688 (981) (77) 7 5,515 Norway.................. 4,063 (3,157) (887) - (122) (103) Poland.................. 381 - - (12,716) (827) (13,162) Sweden.................. 2,544 (1,008) (2,249) - - (713) Corporate and Other..... 1,314 1,726 (3,004) (185) (19,155) (19,304) -------- -------- --------- -------- -------- -------- Total Europe......... 56,227 (29,228) (48,446) (24,798) (25,725) (71,970) -------- -------- --------- -------- -------- -------- Asia/Pacific: Australia............... 2,030 (89) (5,143) - (3,280) (6,482) New Zealand............. - - - - - - Corporate and Other..... - - - - 706 706 -------- -------- --------- -------- -------- -------- Total Asia/Pacific... 2,030 (89) (5,143) - (2,574) (5,776) -------- -------- --------- -------- -------- -------- Latin America: Chile................... 10,722 (4,002) (804) - (2,302) 3,614 Brazil.................. (196) - - - - (196) Corporate and Other..... (219) - - - 464 245 -------- -------- --------- -------- -------- -------- Total Latin America.. 10,307 (4,002) (804) - (1,838) 3,663 -------- -------- --------- -------- -------- -------- Corporate & Other......... - - - - (3,764) (3,764) -------- -------- --------- -------- -------- -------- Total Company........ $ 68,564 $(33,319) $ (54,393) $(24,798) $(33,901) $(77,847) ======== ======== ========= ======== ======== ========
19 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Six Months Ended June 30, 2000 ---------------------------------------------------------------------------- Internet/ Video Telephone Data Programming Other Total ---------- ---------- ---------- ----------- ---------- --------- Revenue: (In thousands) Europe: The Netherlands......... $ 96,029 $ 42,352 $ 13,634 $ 1,145 $ 339 $ 153,499 Austria................. 39,615 14,343 11,546 - - 65,504 Belgium................. 7,366 601 1,820 - - 9,787 Czech Republic.......... 11,836 479 - - 1,709 14,024 France.................. 27,960 4,022 1,005 - - 32,987 Hungary................. 22,364 10,208 122 - 7 32,701 Norway.................. 23,416 1,197 935 - - 25,548 Poland.................. 34,232 - - 22,850 - 57,082 Sweden.................. 15,854 218 2,316 - - 18,388 Corporate and Other..... 7,663 1,391 - - 865 9,919 -------- -------- -------- -------- -------- --------- Total Europe......... 286,335 74,811 31,378 23,995 2,920 419,439 -------- -------- -------- -------- -------- --------- Asia/Pacific: Australia............... 82,537 - 429 - 1,037 84,003 New Zealand............. 844 3,166 878 - - 4,888 Corporate and Other..... - - - - - - -------- -------- -------- -------- -------- --------- Total Asia/Pacific... 83,381 3,166 1,307 - 1,037 88,891 -------- -------- -------- -------- -------- --------- Latin America: Chile................... 58,188 13,813 242 - - 72,243 Brazil.................. 2,729 - - - - 2,729 Corporate and Other..... 1,049 - - - 4 1,053 -------- -------- -------- -------- -------- --------- Total Latin America.. 61,966 13,813 242 - 4 76,025 -------- -------- -------- -------- -------- --------- Corporate & Other......... - - - - 52 52 -------- -------- -------- -------- -------- --------- Total Company........ $431,682 $ 91,790 $ 32,927 $ 23,995 $ 4,013 $ 584,407 ======== ======== ======== ======== ======== ========= Adjusted EBITDA: (1) Europe: The Netherlands......... $ 47,451 $(33,061) $(69,481) $(19,327) $ (5,523) $ (79,941) Austria................. 21,363 (3,294) 482 - - 18,551 Belgium................. 2,844 (254) (2,414) - - 176 Czech Republic.......... 2,181 34 - (50) 604 2,769 France.................. 6,399 (9,121) (3,888) - (298) (6,908) Hungary................. 7,479 5,593 (2,037) (77) 7 10,965 Norway.................. 8,910 (5,948) (1,726) - (122) 1,114 Poland.................. 1,440 - - (31,445) (1,147) (31,152) Sweden.................. 6,236 (1,705) (4,310) - - 221 Corporate and Other..... 2,961 357 (4,683) (248) (41,928) (43,541) -------- -------- -------- -------- -------- --------- Total Europe......... 107,264 (47,399) (88,057) (51,147) (48,407) (127,746) -------- -------- -------- -------- -------- --------- Asia/Pacific: Australia............... 3,222 (126) (6,864) - (5,057) (8,825) New Zealand............. (253) (357) 248 - (1,344) (1,706) Corporate and Other..... - - - - 948 948 -------- -------- -------- -------- -------- --------- Total Asia/Pacific... 2,969 (483) (6,616) - (5,453) (9,583) -------- -------- -------- -------- -------- --------- Latin America: Chile................... 19,887 (5,692) (929) - (4,528) 8,738 Brazil.................. (150) - - - - (150) Corporate and Other..... (407) - - - 1,966 1,559 -------- -------- -------- -------- -------- --------- Total Latin America.. 19,330 (5,692) (929) - (2,562) 10,147 -------- -------- -------- -------- -------- --------- Corporate & Other......... - - - - (6,691) (6,691) -------- -------- -------- -------- -------- --------- Total Company........ $129,563 $(53,574) $(95,602) $(51,147) $(63,113) $(133,873) ======== ======== ======== ======== ======== =========
20 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, For the Three Months Ended June 30, 1999 1999 ---------------------------------------------------------------------------- ----------- Internet/ Total Video Telephone Data Programming Other Total Assets ---------- ---------- ---------- ----------- ---------- --------- ----------- Revenue: (In thousands) (In thousands) Europe: The Netherlands......... $ 25,923 $ 6,110 $ 888 $ 12 $ - $ 32,933 $3,157,285 Austria................. 20,564 988 2,770 - - 24,322 356,337 Belgium................. 3,964 - 555 - - 4,519 47,826 Czech Republic.......... 1,186 - - - - 1,186 159,806 France.................. 1,473 339 127 - - 1,939 498,776 Hungary................. 8,404 - 18 - - 8,422 215,448 Norway.................. 12,092 30 100 - - 12,222 244,975 Poland.................. - - - - - - 1,218,956 Sweden.................. - - - - - - 474,899 Corporate and Other..... 1,363 - - 954 - 2,317 77,219 -------- ------- -------- ------- ------- -------- ---------- Total Europe......... 74,969 7,467 4,458 966 - 87,860 6,451,527 -------- ------- -------- ------- ------- -------- ---------- Asia/Pacific: Australia............... 34,388 - - - - 34,388 563,627 New Zealand............. - - - - - - 76,139 Corporate and Other..... - - - - 997 997 52,441 -------- ------- -------- ------- ------- -------- ---------- Total Asia/Pacific... 34,388 - - - 997 35,385 692,207 -------- ------- -------- ------- ------- -------- ---------- Latin America: Chile................... 18,906 2,108 - - - 21,014 489,638 Brazil.................. 1,103 - - - - 1,103 17,172 Corporate and Other..... 634 - - - - 634 71,379 -------- ------- -------- ------- ------- -------- ---------- Total Latin America.. 20,643 2,108 - - - 22,751 578,189 -------- ------- -------- ------- ------- -------- ---------- Corporate & Other......... - - - - - - 1,280,930 -------- ------- -------- ------- ------- -------- ---------- Total Company........ $130,000 $ 9,575 $ 4,458 $ 966 $ 997 $145,996 $9,002,853 ======== ======= ======== ======= ======= ======== ========== Adjusted EBITDA: (1) Europe: The Netherlands......... $ 12,506 $(2,360) $(14,003) $(2,753) $ - $ (6,610) Austria................. 11,150 (2,918) 15 - - 8,247 Belgium................. 1,411 - (474) - - 937 Czech Republic.......... (41) - - - - (41) France.................. (158) (1,242) (401) - - (1,801) Hungary................. 2,565 - (10) - - 2,555 Norway.................. 5,664 (1,120) (928) - - 3,616 Corporate and Other..... 457 - (84) (6,349) 61 (5,915) -------- ------- -------- ------- ------- -------- Total Europe......... 33,554 (7,640) (15,885) (9,102) 61 988 -------- ------- -------- ------- ------- -------- Asia/Pacific: Australia............... 619 - - - (2,131) (1,512) New Zealand............. - - - - - - Corporate and Other..... - - - - (13) (13) -------- ------- -------- ------- ------- -------- Total Asia/Pacific... 619 - - - (2,144) (1,525) -------- ------- -------- ------- ------- -------- Latin America: Chile................... 4,399 651 - - (1,024) 4,026 Brazil.................. (935) - - - - (935) Corporate and Other..... (226) - - - (1,414) (1,640) -------- ------- -------- ------- ------- -------- Total Latin America.. 3,238 651 - - (2,438) 1,451 -------- ------- -------- ------- ------- -------- Corporate & Other......... - - - - (98) (98) -------- ------- -------- ------- ------- -------- Total Company........ $ 37,411 $(6,989) $(15,885) $(9,102) $(4,619) $ 816 ======== ======= ======== ======= ======= ========
21 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Six Months Ended June 30, 1999 ---------------------------------------------------------------------------- Internet/ Video Telephone Data Programming Other Total ---------- ---------- ---------- ----------- ---------- --------- Revenue: (In thousands) Europe: The Netherlands......... $ 42,613 $ 9,696 $ 1,226 $ 12 $ - $ 53,547 Austria................. 42,806 1,113 5,139 - - 49,058 Belgium................. 7,989 - 1,012 - - 9,001 Czech Republic.......... 2,328 - - - - 2,328 France.................. 3,067 348 136 - - 3,551 Hungary................. 17,258 - 50 - - 17,308 Norway.................. 24,369 33 195 - - 24,597 Poland.................. - - - - - - Sweden.................. - - - - - - Corporate and Other..... 2,304 - - 1,153 887 4,344 -------- -------- -------- -------- -------- -------- Total Europe......... 142,734 11,190 7,758 1,165 887 163,734 -------- -------- -------- -------- -------- -------- Asia/Pacific: Australia............... 64,820 - - - - 64,820 New Zealand............. - - - - - - Corporate and Other..... - - - - 821 821 -------- -------- -------- -------- -------- -------- Total Asia/Pacific... 64,820 - - - 821 65,641 -------- -------- -------- -------- -------- -------- Latin America: Chile................... 18,906 2,108 - - - 21,014 Brazil.................. 2,108 - - - - 2,108 Corporate and Other..... 1,417 - - - - 1,417 -------- -------- -------- -------- -------- -------- Total Latin America.. 22,431 2,108 - - - 24,539 -------- -------- -------- -------- -------- -------- Corporate & Other......... - - - - - - -------- -------- -------- -------- -------- -------- Total Company........ $229,985 $ 13,298 $ 7,758 $ 1,165 $ 1,708 $253,914 ======== ======== ======== ======== ======== ======== Adjusted EBITDA: (1) Europe: The Netherlands......... $ 21,134 $ (3,562) $(20,442) $ (3,358) $ - $ (6,228) Austria................. 23,812 (5,187) (163) - - 18,462 Belgium................. 2,520 - (1,165) - - 1,355 Czech Republic.......... (286) - - - - (286) France.................. (164) (2,320) (914) - - (3,398) Hungary................. 5,595 - (13) - - 5,582 Norway.................. 10,827 (2,748) (2,180) - - 5,899 Corporate and Other..... 669 - (84) (8,437) (5,259) (13,111) -------- -------- -------- -------- -------- -------- Total Europe......... 64,107 (13,817) (24,961) (11,795) (5,259) 8,275 -------- -------- -------- -------- -------- -------- Asia/Pacific: Australia............... (1,441) - - - (3,525) (4,966) New Zealand............. - - - - - - Corporate and Other..... - - - - 1,778 1,778 -------- -------- -------- -------- -------- -------- Total Asia/Pacific... (1,441) - - - (1,747) (3,188) -------- -------- -------- -------- -------- -------- Latin America: Chile................... 4,399 651 - - (1,024) 4,026 Brazil.................. (1,401) - - - - (1,401) Corporate and Other..... (226) - - - (2,773) (2,999) -------- -------- -------- -------- -------- -------- Total Latin America.. 2,772 651 - - (3,797) (374) -------- -------- -------- -------- -------- -------- Corporate & Other......... - - - - (176) (176) -------- -------- -------- -------- -------- -------- Total Company........ $ 65,438 $(13,166) $(24,961) $(11,795) $(10,979) $ 4,537 ======== ======== ======== ======== ======== ========
22 UnitedGlobalCom, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (1) "Adjusted EBITDA" represents net operating earnings before depreciation, amortization and stock-based compensation charges. Stock-based compensation charges result from variable plan accounting for our subsidiaries' phantom stock option plans and are generally non-cash charges. Industry analysts generally consider Adjusted EBITDA to be a helpful way to measure the performance of cable television operations and communications companies. 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. The Company's consolidated segment Adjusted EBITDA reconciles to the consolidated statement of operations as follows:
For the For the Three Months Ended Six Months Ended June 30, June 30, --------------------------- ------------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (In thousands) (In thousands) Operating loss.................................................... $(195,380) $(122,574) $(491,964) $(194,891) Depreciation and amortization..................................... 186,679 75,679 358,777 133,077 Stock-based compensation expense.................................. (69,146) 47,711 (686) 66,351 --------- --------- --------- --------- Consolidated Adjusted EBITDA................................. $ (77,847) $ 816 $(133,873) $ 4,537 ========= ========= ========= =========
23 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 and our planned acquisitions, our ability to successfully close proposed transactions, risks inherent in investment and operations in foreign countries, changes in government regulation, changes in the nature of key strategic relationships with joint ventures. We and our subsidiaries have announced many potential acquisitions, many of which are subject to various conditions, some of which may not occur. 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. The following discussion and analysis of financial condition and results of operations cover the three and six months ended June 30, 2000 and 1999, 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. SUMMARY OPERATING DATA The following comparative operating data reflects video subscribers, telephone lines, programming and data subscribers, as well as selected financial statistics of the operating systems in which we had an ownership interest as of June 30, 2000. In addition, the following proportionate data represents certain operating and financial results for us, multiplied by our applicable ownership percentage. 24
GROSS OPERATING SYSTEM DATA As of and for the Six Months Ended June 30, 2000 ------------------------------------------------------------------------------------------------------- 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) | UPC (EUROPE) | - ------------ | Video Subscribers: | The Netherlands......... 53.0% 2,541,686 2,431,861 1,953,910 2,253,204 92.7% | $ 95,803 $ 47,355 $ - Poland.................. 53.0% 1,950,000 1,793,375 - 1,416,473 79.0% | $ 56,821 $(31,089) $ - Germany................. 13.3% 1,422,826 1,422,826 30,456 919,641 64.6% | $ 52,671 $ 20,001 $203,650 Hungary (UPC | Magyarorszag).......... 53.0% 915,500 704,988 131,451 535,907 76.0% | $ 20,609 $ 6,656 $ - Austria................. 50.4% 1,080,900 910,550 867,300 478,520 52.6% | $ 39,362 $ 21,320 $ - Israel.................. 24.7% 660,000 623,274 388,735 437,318 70.2% | $ 69,679 $ 20,870 $223,129 France.................. 48.8% 2,460,357 1,111,477 230,531 381,519 34.3% | $ 27,812 $ 6,386 $ - Czech Republic.......... 53.0% 868,823 777,419 17,740 356,601 45.9% | $ 11,756 $ 2,177 $ - Norway.................. 53.0% 529,000 469,248 84,531 330,292 70.4% | $ 23,266 $ 8,892 $ - Slovak Republic......... 50.3-53.0% 417,813 295,914 - 244,343 82.6% | $ 5,680 $ 1,813 $ - Sweden.................. 53.0% 770,000 421,624 228,153 248,706 59.0% | $ 15,757 $ 6,224 $ - Belgium................. 53.0% 530,000 152,052 152,052 123,484 81.2% | $ 7,330 $ 2,839 $ - Romania................. 27.0-37.1% 509,320 395,910 - 260,307 65.7% | $ 2,244 $ 944 $ - Malta................... 26.5% 177,000 175,986 - 79,393 45.1% | $ 7,634 $ 2,557 $ 27,475 Hungary (Monor)......... 52.3% 85,561 70,587 84,906 33,158 47.0% | $ 729 $ 366 $ - ---------- ---------- --------- --------- | -------- -------- -------- Total.............. 14,918,786 11,757,091 4,169,765 8,098,866 | $437,153 $117,311 $454,254 ---------- ---------- --------- --------- | -------- -------- -------- | Telephone Lines: | The Netherlands......... 53.0% 2,541,686 N/A N/A 169,769 N/A | $ 43,758 $(32,994) $ - Hungary (Monor)......... 52.3% 85,561 N/A N/A 73,825 N/A | $ 4,603 $ 2,533 $ - Austria................. 50.4% 1,080,900 N/A N/A 71,812 N/A | $ 14,273 $ (3,288) $ - France.................. 48.8% 2,460,357 N/A N/A 25,403 N/A | $ 4,009 $ (9,102) $ - Norway.................. 53.0% 529,000 N/A N/A 11,634 N/A | $ 1,198 $ (5,936) $ - Czech Republic.......... 53.0% 868,823 N/A N/A 3,613 N/A | $ 476 $ 34 $ - ---------- ---------- --------- --------- | -------- -------- -------- Total.............. 7,566,327 N/A N/A 356,056 | $ 68,317 $(48,753) $ - ---------- ---------- --------- --------- | -------- -------- -------- Data Subscribers: | Internet................ 13.3-53.0% 10,250,269 N/A N/A 214,155 N/A | $ 36,723 $(83,206) $ - ---------- ---------- --------- --------- | -------- -------- -------- Programming Subscribers: | Ireland................. 42.4% N/A N/A N/A 3,228,922 N/A | N/A N/A $ - Spain/Portugal.......... 26.5% N/A N/A N/A 1,404,000 N/A | N/A N/A $ - ---------- ---------- --------- --------- | -------- -------- -------- Total.............. N/A N/A N/A 4,632,922 | N/A N/A $ - ---------- ---------- --------- --------- | -------- -------- -------- AUSTAR UNITED (AUSTRALIA/NEW ZEALAND) | - ------------------------------------- | Video Subscribers: | Australia............... 72.3% 2,085,000 2,083,108 - 406,326 19.5% | $ 80,697 $ 2,975 $ - New Zealand............. 36.2% 141,000 93,015 93,015 19,006 20.4% | $ 1,607 $ (805) $ 25,989 ---------- ---------- --------- --------- | -------- -------- -------- Total.............. 2,226,000 2,176,123 93,015 425,332 | $ 82,304 $ 2,170 $ 25,989 ---------- ---------- --------- --------- | -------- -------- -------- Telephone Lines: | New Zealand............. 36.2% 141,000 93,015 N/A 31,521 33.9% | $ 17,672 $ (7,470) $ 40,062 ---------- ---------- --------- --------- | -------- -------- -------- Data Subscribers: | New Zealand............. 36.2% 141,000 N/A N/A 36,335 N/A | $ 2,170 $ (180) $ 13,698 Australia............... 72.3% N/A N/A N/A 8,490 N/A | $ 43 $ (5,303) $ - ---------- ---------- --------- --------- | -------- -------- -------- Total.............. 141,000 N/A N/A 44,825 | $ 2,213 $ (5,483) $ 13,698 ---------- ---------- --------- --------- | -------- -------- -------- Programming Subscribers: | Australia............... 36.2% N/A N/A N/A 1,017,000 N/A | $ 17,595 $ 9,733 $ - ---------- ---------- --------- --------- | -------- -------- -------- OTHER ASIA/PACIFIC | - ------------------ | Video Subscribers : | Philippines............. 19.6% 600,000 457,500 - 186,217 40.7% | $ 11,601 $ 4,723 $ 20,659 ---------- ---------- --------- --------- | -------- -------- --------
25
GROSS OPERATING SYSTEM DATA (Continued) As of and for the Six Months Ended June 30, 2000 ------------------------------------------------------------------------------------------------------- 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) | LATIN AMERICA | - ------------- | Video Subscribers: | Chile................... 100.0% 2,350,000 1,622,783 492,720 394,119 24.3% | $ 58,188 $ 19,887 $ - Mexico.................. 90.3% 341,600 233,277 - 63,273 27.1% | $ 6,906 $ 1,903 $ - Brazil (Jundiai)........ 46.3% 70,200 67,466 - 17,540 26.0% | $ 3,075 $ 441 $ - Brazil (TV Show Brasil). 100.0% 437,000 306,000 - 19,350 6.3% | $ 2,700 $ (148) $ - Peru.................... 100.0% 140,000 63,932 - 7,824 12.2% | $ 1,047 $ (405) $ - ---------- ---------- --------- --------- | -------- -------- -------- Total.............. 3,338,800 2,293,458 492,720 502,106 | $ 71,916 $ 21,678 $ - ---------- ---------- --------- --------- | -------- -------- -------- Telephone Lines: | Chile................... 100.0% 2,350,000 492,720 N/A 94,191 19.1% | $ 13,813 $ (5,692) $ - ---------- ---------- --------- --------- | -------- -------- -------- Data Subscribers: | Chile................... 100.0% 2,350,000 492,720 N/A 2,821 0.6% | $ 242 $ (929) $ - ---------- ---------- --------- --------- | -------- -------- -------- Programming Subscribers: | Latin America........... 50.0% N/A N/A N/A 5,778,276 N/A | $ 5,508 $ (2,666) $ - ---------- ---------- --------- --------- | -------- -------- --------
As of and for the Six Months Ended June 30, 2000 ------------------------------------------------------------------------------------------- Homes in Two-way Basic Long- Service Homes Homes Subscribers/ Adjusted Term Area Passed Passed Lines Revenue EBITDA(1) Debt (2) --------- ---------- ----------- ------------ |----------- ---------- ------------ | (In thousands) (3) | TOTAL COMPANY BASED ON GROSS DATA (4): | - -------------------------------------- | Video Subscribers.................. 21,083,586 16,684,172 4,755,500 9,212,521 | $602,974 $145,882 $ 500,902 Telephone Lines.................... 10,057,327 N/A N/A 481,768 | $ 99,802 $(61,915) $ 40,062 Data Subscribers................... 12,741,269 N/A N/A 261,801 | $ 39,178 $(89,618) $ 13,698 Programming Subscribers............ N/A N/A N/A 11,428,198 | $ 23,103 $ 7,067 $ - | TOTAL COMPANY BASED ON CONSOLIDATED SYSTEMS (5): | - ------------------------------------------------ | Video Subscribers.................. 17,670,960 13,610,828 4,243,294 7,490,133 | $431,682 $129,563 $1,538,190 Telephone Lines.................... 9,916,327 N/A N/A 450,247 | $ 91,790 $(53,574) $ - Data Subscribers................... 11,177,443 N/A N/A 225,316 | $ 32,927 $(95,602) $ - Programming Subscribers............ N/A N/A N/A 3,225,922 | $ 23,995(7) $(51,147)(7) $ - | TOTAL COMPANY BASED ON PROPORTIONATE DATA (6): | - ---------------------------------------------- | Video Subscribers.................. 11,830,494 9,168,809 2,580,868 4,533,033 | $320,275 $ 71,707 $ 102,925 Telephone Lines.................... 6,277,573 N/A N/A 286,876 | $ 55,829 $(33,776) $ 14,482 Data Subscribers................... 7,135,833 N/A N/A 133,502 | $ 20,174 $(48,776) $ 4,952 Programming Subscribers............ N/A N/A N/A 4,997,907 | $ 9,115 $ 2,186 $ -
26
GROSS OPERATING SYSTEM DATA As of and for the Six Months Ended June 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) | UPC (EUROPE) | - ------------ | Video Subscribers: | The Netherlands......... 31.1-62.2% 1,712,920 1,645,140 1,184,336 1,538,756 93.5% | $ 88,311 $ 25,640 $209,991 Hungary (UPC | Magyarorszag)......... 49.3% 901,500 550,423 - 449,337 81.6% | $ 15,156 $ 4,879 $ - Austria................. 59.1% 1,078,980 905,430 685,520 461,018 50.9% | $ 42,983 $ 16,130 $ - Israel.................. 29.0% 602,000 592,326 373,312 410,380 69.3% | $ 74,040 $ 38,279 $213,663 Czech Republic.......... 62.2% 229,531 157,586 - 54,691 34.7% | $ 2,042 $ (245) $ - France.................. 59.5%-62.0% 412,500 287,087 85,201 108,140 37.7% | $ 9,948 $ (2,013) $ - Norway.................. 62.2% 529,900 465,951 30,022 323,265 69.4% | $ 21,553 $ 5,205 $ - Slovak Republic......... 46.7-62.2% 344,343 211,295 - 185,633 87.9% | $ 948 $ 188 $ - Belgium................. 62.2% 133,060 133,060 116,804 125,786 94.5% | $ 7,889 $ 1,202 $ - Romania................. 31.7-62.2% 180,000 99,274 - 61,944 62.4% | $ 1,082 $ 452 $ - Malta................... 31.1% 179,000 166,415 - 73,051 43.9% | $ 7,017 $ 2,974 $ 21,157 Hungary (Monor)......... 29.6% 85,000 70,061 - 31,686 45.2% | $ 8,864 $ 5,742 $ 31,137 ---------- ---------- --------- --------- | -------- -------- -------- Total.............. 6,388,734 5,284,048 2,475,195 3,823,687 | $279,833 $ 98,433 $475,948 ---------- ---------- --------- --------- | -------- -------- -------- Telephone Lines: | The Netherlands......... 31.1-62.2% 1,712,920 N/A N/A 54,007 N/A | [Financial information is Hungary (Monor)......... 29.6% 85,000 N/A N/A 71,721 N/A | included in multi-channel Austria................. 59.1% 1,078,980 N/A N/A 7,879 N/A | TV information above.] France.................. 59.5-62.0% 412,500 N/A N/A 5,160 N/A | Norway.................. 62.2% 529,900 N/A N/A 451 N/A | ---------- ---------- --------- --------- | Total.............. 3,819,300 N/A N/A 139,218 | ---------- ---------- --------- --------- | Data Subscribers: | [Financial information is Internet................ 31.1-62.2% N/A N/A N/A 52,677 N/A | included in multi-channel ---------- ---------- --------- --------- | TV information above.] Programming Subscribers: | Ireland................. 49.8% N/A N/A N/A 749,244 N/A | $ 373 $ (2,148) $ - Spain/Portugal.......... 31.1% N/A N/A N/A 1,031,000 N/A | $ 12,265 $ 5,355 $ 2,907 ---------- ---------- --------- --------- | -------- -------- -------- Total..................... N/A N/A N/A 1,780,244 | $ 12,638 $ 3,207 $ 2,907 ---------- ---------- --------- --------- | -------- -------- -------- AUSTAR UNITED (AUSTRALIA/NEW ZEALAND) | - ------------------------------------- | Video Subscribers: | Australia............... 98.0% 2,085,000 2,083,000 - 329,002 15.8% | $ 59,366 $ (6,357) $ - New Zealand............. 63.7% 141,000 72,212 71,710 11,163 15.5% | $ 3,288 $ (3,185) $ 36,616 ---------- ---------- --------- --------- | -------- -------- -------- Total.............. 2,226,000 2,155,212 71,710 340,165 | $ 62,654 $ (9,542) $ 36,616 ---------- ---------- --------- --------- | -------- -------- -------- Telephone Lines: | New Zealand............. 63.7% 141,000 71,710 N/A 15,683 21.9% | ---------- ---------- --------- --------- | Data Subscribers: | [Financial information is New Zealand............. 63.7% N/A N/A N/A 2,927 N/A | included in multi-channel ---------- ---------- --------- --------- | TV information above.] Programming Subscribers: | Australia............... 49.0% N/A N/A N/A 807,680 N/A | $ 13,858 $ 6,361 $ - ---------- ---------- --------- --------- | -------- -------- -------- OTHER ASIA/PACIFIC | - ------------------ | Video Subscribers: | Philippines............. 19.2% 600,000 425,239 - 174,075 40.9% | $ 8,242 $ 2,471 $ 43 ---------- ---------- --------- --------- | -------- -------- --------
27
GROSS OPERATING SYSTEM DATA (Continued) As of and for the Six Months Ended June 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) | LATIN AMERICA | - ------------- | Video Subscribers: | Chile................... 100.0% 2,321,000 1,593,681 300,353 391,021 24.5% | $ 53,472 $ 12,061 $ - Mexico.................. 49.0% 341,600 229,451 - 57,031 24.9% | $ 5,736 $ 1,934 $ - Brazil (Jundiai)........ 46.3% 70,200 66,341 - 18,250 27.5% | $ 2,998 $ 1,129 $ 76 Brazil (TV Show Brasil). 100.0% 437,000 306,000 - 13,335 4.4% | $ 2,007 $ (867) $ - Peru.................... 60.0% 140,000 61,072 - 9,375 15.4% | $ 1,237 $ (176) $ - ---------- ---------- --------- --------- | -------- -------- -------- Total.............. 3,309,800 2,256,545 300,353 489,012 | $ 65,450 $ 14,081 $ 76 ---------- ---------- --------- --------- | -------- -------- -------- Telephone Lines: | [Financial information is Chile................... 100.0% 2,321,000 300,353 N/A 43,379 14.4% | included in multi-channel ---------- ---------- --------- --------- | TV information above.] Programming Subscribers: | Latin America........... 50.0% N/A N/A N/A 4,354,718 N/A | $ 3,070 $ (7,192) $ - ---------- ---------- --------- ---------- | -------- -------- --------
As of and for the Six Months Ended June 30, 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) | TOTAL COMPANY BASED ON GROSS DATA (4): | - -------------------------------------- | Video Subscribers.................. 12,524,534 10,121,044 2,847,258 4,826,939 | $416,179 $105,443 $ 512,683 Telephone Lines.................... 6,281,300 N/A N/A 198,280 | $ - $ - $ - Data Subscribers................... N/A N/A N/A 55,604 | $ - $ - $ - Programming Subscribers............ N/A N/A N/A 6,942,642 | $ 29,566 $ 2,376 $ 2,907 | TOTAL COMPANY BASED ON CONSOLIDATED SYSTEMS (5): | - ------------------------------------------------ | Video Subscribers.................. 9,925,536 7,918,801 2,016,127 3,519,006 | $229,985 $ 65,438 $1,026,263 Telephone Lines.................... 5,475,102 N/A N/A 80,986 | $ 13,298 $(13,166) $ - Data Subscribers................... N/A N/A N/A 38,255 | $ 7,758 $(24,961) $ - Programming Subscribers............ N/A N/A N/A 749,244 | $ 1,165 $(11,795) $ - | TOTAL COMPANY BASED ON PROPORTIONATE DATA (6): | - ---------------------------------------------- | Video Subscribers.................. 8,631,721 6,966,962 1,618,969 2,769,745 | $252,876 $ 47,225 $ 166,393 Telephone Lines.................... 4,533,551 954,362 N/A 106,880 | $ - $ - $ - Data Subscribers................... N/A N/A N/A 29,464 | $ - $ - $ - Programming Subscribers............ N/A N/A N/A 3,266,587 | $ 12,325 $ 118 $ 904
28 (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. 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. Debt for consolidated 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 June 30, 2000. 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 June 30, 2000 exchange rates for the convenience translation. (4) Summation of the gross operating system data on the previous page. (5) 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. (6) Summation of the gross operating system data on the previous page, multiplied by our ownership percentage for each respective system. (7) The consolidated financial information for @Entertainment (Poland) is included in Programming. The financial information for @Entertainment (Poland) within Gross Data is included in video. 29 RESULTS OF OPERATIONS The following table sets forth information from our major consolidated operating systems:
For the Three Months Ended For the Six Months Ended June 30, June 30, --------------------------- ------------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (In thousands) (In thousands) UPC Revenue (USD): Video............................................................ $146,565 $74,969 $ 286,335 $142,734 Telephone........................................................ 42,309 7,467 74,811 11,190 Internet/data.................................................... 18,109 4,458 31,378 7,758 Programming and DTH.............................................. 13,545 966 23,995 1,165 Other............................................................ 1,653 - 2,920 887 -------- ------- --------- -------- Total UPC Revenue........................................... $222,181 $87,860 $ 419,439 $163,734 ======== ======= ========= ======== UPC Adjusted EBITDA (USD): Video............................................................ $ 56,227 $33,554 $ 107,264 $ 64,107 Telephone........................................................ (29,228) (7,640) (47,399) (13,817) Internet/data.................................................... (48,446) (15,885) (88,057) (24,961) Programming and DTH.............................................. (24,798) (9,102) (51,147) (11,795) Other............................................................ (26,582) - (50,218) (5,479) -------- ------- --------- -------- Total UPC Adjusted EBITDA (1)............................... $(72,827) $ 927 $(129,557) $ 8,055 ======== ======= ========= ======== Austar United Revenue (USD): Video............................................................ $ 41,688 $34,388 $ 83,381 $ 64,820 Telephone........................................................ - - 3,166 - Internet/data and other.......................................... 859 - 2,344 - -------- ------- --------- -------- Total Austar United Revenue................................. $ 42,547 $34,388 $ 88,891 $ 64,820 ======== ======= ========= ======== Austar United Adjusted EBITDA (USD): Video............................................................ $ 2,030 $ 619 $ 2,969 $ (1,441) Telephone........................................................ (89) - (483) - Internet/data and other.......................................... (8,423) (2,131) (13,017) (3,525) -------- ------- --------- -------- Total Austar United Adjusted EBITDA (1) $ (6,482) $(1,512) $ (10,531) $ (4,966) ======== ======= ========= ======== VTR Revenue (USD) Video............................................................ $ 29,236 $28,180 $ 58,188 $ 55,963 Telephone........................................................ 7,248 3,425 13,813 5,061 Internet/data.................................................... 135 - 242 - -------- ------- --------- -------- Total VTR Revenue........................................... $ 36,619 $31,605 $ 72,243 $ 61,024 ======== ======= ========= ======== VTR Adjusted EBITDA (USD) Video............................................................ $ 10,722 $ 5,191 $ 19,887 $ 12,436 Telephone........................................................ (4,002) 977 (5,692) (438) Internet/data.................................................... (804) - (929) - Other............................................................ (2,302) (1,024) (4,528) (1,024) -------- ------- --------- -------- Total VTR Adjusted EBITDA (1)............................... $ 3,614 $ 5,144 $ 8,738 $ 10,974 ======== ======= ========= ========
(1) "Adjusted EBITDA" represents net operating earnings before depreciation, amortization and stock-based compensation charges. Stock-based compensation charges result from variable plan accounting for our subsidiaries' phantom stock option plans and are generally non-cash charges. Industry analysts generally consider Adjusted EBITDA to be a helpful way to measure the performance of cable television operations and communications companies. 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. 30 The following rates for the primary currencies that impact our financial statements are shown below per one U.S. dollar:
Australian Chilean Euro Dollar Peso ------------- -------------- -------------- Average rate three months ended June 30, 2000........ 1.0713 1.6933 520.6675 Average rate three months ended June 30, 1999........ 0.9459 1.5302 489.6650 Average rate six months ended June 30, 2000.......... 1.0372 1.6442 516.5963 Average rate six months ended June 30, 1999.......... 0.9190 1.5489 487.5346
REVENUE. Revenue increased $157.2 million, or 107.7%, from $146.0 million for the three months ended June 30, 1999 to $303.2 million for the three months ended June 30, 2000. Revenue increased $330.5 million, or 130.2%, from $253.9 million for the six months ended June 30, 1999 to $584.4 million for the six months ended June 30, 2000. EUROPE. Revenue for UPC in U.S. dollar terms increased $134.3 million, or 152.8% from $87.9 million for the three months ended June 30, 1999 to $222.2 million for the three months ended June 30, 2000, despite a 13.3% devaluation of the Euro to the U.S. dollar from period to period. Revenue for UPC in U.S. dollar terms increased $255.7 million, or 156.2% from $163.7 million for the six months ended June 30, 1999 to $419.4 million for the six months ended June 30, 2000, despite a 12.9% devaluation of the Euro to the U.S. dollar from period to period. For both the three month period and the six month period, the increase in video revenue resulted primarily from UPC's acquisitions. The increase in video revenue for the three months ended June 30, 2000 attributable to acquisitions totaled 91.6% of the total increase. Of this increase, acquisitions in The Netherlands represent 43.9%, acquisitions in France represent 23.2%, the acquisition in Poland represents 11.1% and the acquisition in Sweden represents 11.8%. The increase in video revenue for the six months ended June 30, 2000 attributable to acquisitions totaled 92.9% of the total increase. Of this increase, acquisitions in The Netherlands represent 35.0%, acquisitions in France represent 22.8%, the acquisition in Poland represents 23.0% and the acquisition in Sweden represents 10.6%. The remaining increase in video revenue came from subscriber growth, increased revenue per subscriber in Austria, Norway, UPC's existing system in France, and UPC's systems in Eastern Europe. The increase in UPC's telephone revenue is primarily due to the launch of local telephone services, under the brand name Priority Telecom, in UPC's Austrian, Dutch, French and Norwegian systems. In addition, UPC began consolidating telephone revenue from its acquisitions of A2000 (September 1999) and Monor (December 1999). The increase in UPC's Internet/data revenue is primarily due to the launch of residential and business cable-modem high-speed Internet access services, branded chello broadband in April 1999. During the second quarter of 1999, UPC launched chello broadband on the upgraded portion of its networks in Austria, Belgium, France, the Netherlands (with the exception of A2000) and Norway. UPC launched chello broadband at A2000 (Netherlands) as well as in Sweden in the fourth quarter of 1999. The increase in UPC's Programming and DTH revenue from period to period is primarily due to the acquisition of @Entertainment in August 1999. ASIA/PACIFIC. Revenue for Austar United increased $8.1 million, or 23.5% from $34.4 million for the three months ended June 30, 1999 to $42.5 million for the three months ended June 30, 2000, despite a 10.7% devaluation of the Australian dollar to the U.S. dollar from period to period. Austar United's revenue increased $24.1 million, or 37.2%, from $64.8 million for the six months ended June 30, 1999 to $88.9 million for the six months ended June 30, 2000, despite a 6.2% devaluation of the Australian dollar to the U.S. dollar from period to period. The increase in video revenue from period to period was primarily due to Austar United's subscriber growth (406,326 at June 30, 2000 compared to 329,002 at June 30, 1999) as well as growth in premium tiers, resulting in an average revenue per subscriber of $33.49 and $33.67 for the three and six months ended June 30, 2000, respectively, compared to $33.91 and $32.48 for the same periods in the prior year. LATIN AMERICA. We began consolidating the results of operations of VTR effective May 1, 1999. Revenue for VTR in U.S. dollar terms increased $5.0 million, or 15.8%, from $31.6 million for the three months ended June 30, 1999 to $36.6 million for the three months ended June 30, 2000, despite a 6.3% devaluation of the Chilean peso to the U.S. dollar from period to period. Revenue for VTR in U.S. dollar terms increased $11.2 million, or 18.4% from $61.0 million for the six months ended June 30, 1999 to $72.2 million for the six months ended June 30, 2000, despite a 6.0% devaluation of the Chilean peso to the U.S. dollar from period to period. The increase in telephone revenue of $8.8 million for the six months ended June 30, 2000 compared to the prior year resulted from telephone subscriber growth (94,191 at June 30, 2000 compared to 43,379 at June 30, 1999) as well as an increase in average monthly revenue per subscriber for telephone service from $26.21 for the six months ended June 30, 1999 to $28.61 for the same period in the current year. Video revenue increased a modest $2.2 million 31 for the six months ended June 30, 2000 because of increased churn and lower sales volume than expected for its video service due to an economic recession in Chile and increased competition. The number of subscribers increased slightly from 391,021 as of June 30, 1999 to 394,119 as of June 30, 2000. The average monthly revenue per subscriber for video was $24.87 and $24.83 for the three and six months ended June 30, 2000, respectively, compared to $24.03 and $23.77 for the same periods in the prior year. ADJUSTED EBITDA. Adjusted EBITDA decreased $78.7 million during the three months ended June 30, 2000 compared to the three months ended June 30, 1999. Adjusted EBITDA decreased $138.4 million during the six months ended June 30, 2000 compared to the six months ended June 30, 1999. EUROPE. Adjusted EBITDA for UPC in U.S. dollar terms decreased $73.7 million, from $0.9 million for the three months ended June 30, 1999 to negative $72.8 million for the three months ended June 30, 2000. Adjusted EBITDA for UPC in U.S. dollar terms decreased $137.7 million, from $8.1 million for the six months ended June 30, 1999 to negative $129.6 million for the six months ended June 30, 2000. Video EBITDA increased 67.6% and 67.3% for the three and six months ended June 30, 2000 compared to the same periods in the prior year, while video revenue increased 95.5% and 100.6%, respectively. As a percentage of revenue, video operating and SG&A expense increased 6.2% from 55.3% for the three months ended June 30, 1999 to 61.5% for the three months ended June 30, 2000, and increased 7.5% from 55.0% for the six months ended June 30, 1999 to 62.5% for the six months ended June 30, 2000. These increases were primarily due to higher operating costs as a percentage of revenue for systems UPC acquired during 1999. UPC expects to reduce this percentage in future years as the new acquisitions are integrated and through other operating efficiencies. UPC's negative Adjusted EBITDA from its local telephone services was due to the recent launch of Priority Telecom in its Austrian, Dutch, French and Norwegian systems. In order to achieve high growth from early market entry, UPC prices its telephone service at a discount compared to services offered by incumbent telecommunications operators. UPC may also waive or discount installation fees. UPC's significant negative Adjusted EBITDA from its Internet/data service was due to the launch of chello broadband on the upgraded portion of its networks in Austria, Belgium, France, The Netherlands (with the exception of A2000) and Norway in the second quarter of 1999. UPC launched chello broadband in A2000 and Sweden in the fourth quarter of 1999. Subsequent to UPC's acquisition of @Entertainment in August 1999, UPC began to restructure the Polish DTH and programming businesses by separating them into two business lines. UPC has incurred significant start-up and restructuring costs related to this endeavor. UPC expects to incur additional operating losses related to its programming and DTH businesses for the next two years, while UPC develops and expands its subscriber base. ASIA/PACIFIC. Austar United's Adjusted EBITDA loss increased by $5.0 million, or 333.3%, from negative $1.5 million for the three months ended June 30, 1999 to negative $6.5 million for the three months ended June 30, 2000. Austar United's Adjusted EBITDA loss increased by $5.5 million, or 110.0%, from negative $5.0 million for the six months ended June 30, 1999 to negative $10.5 million for the six months ended June 30, 2000. This increase in Adjusted EBITDA loss was primarily due to the increased expenses associated with the launch of Austar United Broadband's Internet business. The Adjusted EBITDA loss for video improved by $1.4 million and $4.4 million for the three and six months ended June 30, 2000, respectively, compared to the same periods in the prior year. Austar's incremental sales growth was partially offset by increased programming costs as subscribers increased and the Australian dollar weakened against the U.S. dollar, as well as by increased marketing costs due to a push for improved brand name awareness in the marketplace during the second quarter. The Adjusted EBITDA loss for the Internet business increased to $5.1 million and $6.6 million for the three and six months ended June 30, 2000, respectively, compared to nil in the prior year as Austar United Broadband rolls out its broadband Internet services. LATIN AMERICA. We began consolidating the results of operations of VTR effective May 1, 1999. VTR's Adjusted EBITDA in U.S. dollar terms decreased $1.5 million, or 29.4%, from $5.1 million for the three months ended June 30, 1999 to $3.6 million for the three months ended June 30, 2000. VTR's Adjusted EBITDA in U.S. dollar terms decreased $2.3 million, or 20.9% from $11.0 million for the six months ended June 30, 1999 to $8.7 million for the six months ended June 30, 2000. The overall decrease in both periods was due primarily to an increase in management fees of $1.3 and $3.5 million for the three and six months ended June 30, 2000, respectively, compared to the prior periods, as we began consolidating VTR. VTR's Adjusted EBITDA from its video business increased for the three and six months ended June 30, 2000 compared to the prior periods as modest price increases exceeded expenses. Although revenues from telephone services increased significantly from the comparable period in 1999, development expenses of this new business continue to exist. VTR expects these operating and selling, general 32 and administrative expenses as a percentage of telephone revenue to decline in future periods because development costs in general will taper off and certain costs have already been incurred and are fixed in relation to subscriber volumes. CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE. Corporate general and administrative expense decreased $122.6 million, from $59.0 million for the three months ended June 30, 1999 to a credit of $63.6 million for the three months ended June 30, 2000. Corporate general and administrative expense decreased $76.1 million from $85.1 million for the six months ended June 30, 1999 to $9.0 million for the six months ended June 30, 2000. These decreases were primarily attributable to a stock-based compensation credit of $69.1 million and $0.7 million for the three and six months ended June 30, 2000, respectively, compared to a charge of $47.8 million and $66.4 million for the same periods in 1999. These plans include the UPC phantom stock option plan, the chello phantom stock option plan, the Austar United stock option plan, the ULA phantom stock option plan and the VTR phantom stock option plan, which continue to require variable plan accounting. Under this method of accounting, increases in the fair market value of these shares result in non-cash compensation charges to the statement of operations for vested options, while decreases in the fair market value of these shares will cause a reversal of previous charges taken. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased $111.0 million and $225.7 million during the three and six months ended June 30, 2000 compared to the three and six months ended June 30, 1999, respectively, as follows:
For the Three Months Ended For the Six Months Ended June 30, June 30, --------------------------- ------------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (In thousands) (In thousands) Europe.............................................................. $148,569 $40,878 $277,735 $ 73,099 Asia/Pacific........................................................ 24,770 25,477 54,798 49,945 Latin America....................................................... 12,969 8,951 25,492 9,411 Corporate and other................................................. 371 373 752 622 -------- ------- -------- -------- Total depreciation and amortization expense.................... $186,679 $75,679 $358,777 $133,077 ======== ======= ======== ========
EUROPE. UPC's depreciation and amortization expense in U.S. dollar terms increased $107.7 million, from $40.9 million for the three months ended June 30, 1999 to $148.6 million for the three months ended June 30, 2000. UPC's depreciation and amortization expense in U.S. dollar terms increased $204.6 million, from $73.1 million for the six months ended June 30, 1999 to $277.7 million for the six months ended June 30, 2000. The increase resulted primarily from acquisitions completed during 1999 in The Netherlands and Poland, as well as additional depreciation related to additional capital expenditures to upgrade the network in UPC's Western European systems and new-build for developing systems. ASIA/PACIFIC. Depreciation and amortization expense for Austar United decreased $1.0 million, or 3.9%, from $25.5 million for the three months ended June 30, 1999 to $24.5 million for the three months ended June 30, 2000. On a functional currency basis, Austar United's depreciation and amortization expense increased A$1.8 million, from A$39.0 million for the three months ended June 30, 1999 to A$40.8 million for the three months ended June 30, 2000, a 4.6% increase. Depreciation and amortization expense for Austar United increased $4.3 million, or 8.6%, from $49.9 million for the six months ended June 30, 1999 to $54.2 million for the six months ended June 30, 2000. On a functional currency basis, Austar United's depreciation and amortization expense increased A$11.5 million, from A$77.5 million for the six months ended June 30, 1999 to A$89.0 million for the six months ended June 30, 2000, a 14.8% increase. This increase is primarily due to Saturn being consolidated for the first quarter 2000 and reported under the equity method during the first six months in 1999. LATIN AMERICA. The increase in the three and six months ended June 30, 2000 is due to consolidating the results of operations of VTR effective May 1, 1999. GAIN ON ISSUANCE OF COMMON EQUITY SECURITIES BY SUBSIDIARIES. During February 1999, UPC successfully completed an initial public offering selling 133.8 million shares on the Amsterdam Stock Exchange and Nasdaq, raising gross and net proceeds at $10.93 per share of $1,463.0 million and $1,364.1 million, respectively. Concurrent with the offering, a third party exercised an option and acquired approximately 4.7 million 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 March 2000, Austar United successfully priced a second public 33 offering selling 20.0 million shares on the Australian Stock Exchange, raising gross and net proceeds at $5.20 per share of $104.0 million and $102.4 million, respectively. Based on the carrying value of our investment in Austar United as of March 29, 2000, we recognized a gain of $66.8 million from the resulting step-up in the carrying amount of our investment in Austar United, in accordance with SAB 51. We recorded an additional gain in accordance with SAB 51 of $6.8 million related to the UPC France transaction in February 2000. No deferred taxes were recorded related to these gains due to our intent on holding our investment in UPC and Austar United indefinitely. INTEREST INCOME. Interest income increased during the three and six months ended June 30, 2000 compared to the corresponding periods in the prior year due to higher cash balances related to the issuance of new debt and equity in late 1999. INTEREST EXPENSE. Interest expense increased $140.1 million, from $61.8 million during the three months ended June 30, 1999 to $201.9 million during the three months ended June 30, 2000. Interest expense increased $299.0 million, from $118.5 million during the six months ended June 30, 1999 to $417.5 million during the six months ended June 30, 2000. These increases were primarily due to the $4.1 billion of senior notes and senior discount notes issued by UPC from July 1999 through January 2000, as well as continued accretion of interest on our $1,375.0 million aggregate principal amount 1998 senior notes and our 1999 senior notes. FOREIGN CURRENCY EXCHANGE LOSS. Foreign currency exchange loss increased $46.5 million from $14.7 million for the three months ended June 30, 1999 to $61.2 million for the three months ended June 30, 2000. Foreign currency exchange loss increased $103.9 million from $20.2 million for the six months ended June 30, 1999 to $124.1 million for the six months ended June 30, 2000. These increases were primarily due to UPC, which has bond and notes payable that are denominated in U.S. dollars. MINORITY INTERESTS IN SUBSIDIARIES. The minority interests' share of losses increased $112.3 million from $62.2 million for the three months ended June 30, 1999 to $174.5 million for the three months ended June 30, 2000. Minority interests' share of losses increased $326.7 million from $74.9 million for the six months ended June 30, 1999 to $401.6 million for the six months ended June 30, 2000. The initial public offerings of UPC (February 1999) and Austar United (July 1999) and other share issuances have reduced our ownership from 100% and 98.0% as of December 31, 1998 to 53.0% and 72.3% as of June 30, 2000 for UPC and Austar United, respectively. For accounting purposes we continue to consolidate 100% of the results of operations of UPC and Austar United, then deduct the minority interests' share of income (loss) before arriving at net income (loss). Of the total increase for the three and six months ended June 30, 2000, $101.1 million and $305.6 million related to UPC, respectively, and $11.6 million and $21.2 million related to Austar United, respectively. SHARE IN RESULTS OF AFFILIATED COMPANIES. Our share in results of affiliates totaled $17.7 million and $11.0 million for the three months ended June 30, 2000 and 1999, respectively, and $39.9 million and $31.6 million for the six months ended June 30, 2000 and 1999, respectively, as follows: 34
For the Three Months Ended For the Six Months Ended June 30, June 30, --------------------------- ------------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (In thousands) (In thousands) Europe: A2000 (1)........................................................ $ - $ (7,724) $ - $(12,813) UTH (2).......................................................... - - - (2,757) Hungary.......................................................... - - - (111) Tevel............................................................ 3,003 268 (3,378) (1,830) Melita .......................................................... (210) (172) (474) (167) Monor............................................................ - 1,004 - 851 Iberian Programming.............................................. 1,357 - 1,979 - SBS.............................................................. (4,395) - (11,397) - PrimaCom......................................................... (5,241) - (10,993) - Other............................................................ (3,702) 436 (5,890) 304 -------- -------- -------- -------- (9,188) (6,188) (30,153) (16,523) -------- -------- -------- -------- Asia/Pacific: Saturn (3)....................................................... (7,787) (1,634) (7,787) (3,582) XYZ Entertainment................................................ 201. (1,207) (414) (4,393) Pilipino Cable Corporation....................................... 44 117 56 (64) Hunan International TV........................................... 393 330 487 201 Other............................................................ (199) - (165) - -------- -------- -------- -------- (7,348) (2,394) (7,823) (7,838) -------- -------- -------- -------- Latin America: VTR (4).......................................................... - (990) - (3,963) Megapo........................................................... (623) 81 (683) 238 MGM Networks LA.................................................. (549) (1,608) (1,398) (3,646) Jundiai.......................................................... 26 53 116 124 -------- -------- -------- -------- (1,146) (2,464) (1,965) (7,247) -------- -------- -------- -------- Total share in results of affiliates............................... $(17,682) $(11,046) $(39,941) $(31,608) ======== ======== ======== ========
(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) Effective January 1, 1998, we discontinued consolidating the results of operations of Saturn and returned to the equity method of accounting due to certain minority shareholder's rights. Effective August 1, 1999, we increased our ownership interest in Saturn to 100% and began consolidating its results of operations. Effective April 1, 2000 we discontinued consolidating the results of operations of Saturn and returned to the equity method of accounting due to the joint venture with Telstra. (4) Effective May 1, 1999, we increased our ownership interest in VTR to 100% and began consolidating its results of operations. 35 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:
For the Six Inception to Months Ended United (Parent Only) December 31, 1999 June 30, 2000 Total - -------------------- ----------------- ------------- ------------ (In millions) Financing Sources: Gross bond proceeds.......................................... $1,347.0 $ - $1,347.0 Gross equity proceeds........................................ 1,686.7(1) 5.4 1,692.1 Asset sales, dividends and note payments..................... 319.1 50.8 369.9 Interest income and other.................................... 95.0 41.6 136.6 -------- -------- -------- Total sources........................................... 3,447.8 97.8 3,545.6 -------- -------- -------- Application of Funds: Investment in: UPC........................................................ (459.1) 0.6 (458.5) UAP........................................................ (315.6)(1) - (315.6) ULA........................................................ (623.6) (101.8) (725.4) Other...................................................... (25.8) (12.0) (37.8) -------- -------- -------- Total................................................... (1,424.1) (113.2) (1,537.3) Repayment of bonds........................................... (532.1)(2) - (532.1) Offering costs............................................... (102.2) - (102.2) Corporate equipment and development.......................... (31.0) - (31.0) Corporate overhead and other................................. (122.6) (14.3) (136.9) -------- -------- -------- Total uses.............................................. (2,212.0) (127.5) (2,339.5) -------- -------- -------- Period change in cash........................................ 1,235.8 (29.7) 1,206.1 Cash, beginning of period.................................... - 1,235.8 - -------- -------- -------- Cash, end of period.......................................... $1,235.8 $1,206.1 1,206.1 ======== ======== -------- United's Subsidiaries - --------------------- Cash, end of period: UPC.......................................................... 552.5 UAP.......................................................... 307.6 ULA.......................................................... 6.8 Other..................................... .................. 5.8 -------- Total United's subsidiaries............................. 872.7 -------- Total consolidated cash, cash equivalents, restricted cash and short-term liquid investments................ $2,078.8 ========
(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. 36 UNITED PARENT. We had $1,206.1 million of cash, cash equivalents, restricted cash and short-term liquid investments on hand as of June 30, 2000. Additional sources of cash through 2000 may include the raising of additional private or public debt and/or equity and/or the receipt of sales proceeds from the disposition of non-strategic assets by certain subsidiaries. Uses of cash in the next year will include continued funding to the Latin America region to meet existing growth plans of our systems, as well as potential acquisitions in that region, and corporate overhead. We estimate approximately $65.0 million of United Parent funding will be required by systems in the Latin America region during the remainder of 2000. 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 remainder of the year. To the extent we pursue new acquisitions or development opportunities, we may 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 $552.5 million of cash, cash equivalents, restricted cash and short-term liquid investments on hand as of June 30, 2000. In May 2000, UPC closed a euro4.0 ($3.8) billion 8.0 and 8.75 year Operating and Term Loan Commitment. The facilities will refinance existing operating company bank debt currently totaling euro1.7 ($1.6) billion as of June 30, 2000. The new loan facilities will add euro2.3 ($2.2) billion of liquidity and will be used to finance the further rollout of digital and triple play services. The loan is expected to be closed and drawn in the third quarter 2000. UPC may need to raise additional capital in the future to the extent UPC pursues additional acquisitions or development opportunities. UAP. UAP had $307.6 million of cash, cash equivalents and short-term liquid investments on hand as of June 30, 2000. This cash will be used to expand Austar United's customer base, complete the build-out of its network and introduce new services such as telephone and Internet/data. ULA. ULA had $6.8 million of cash, cash equivalents, restricted cash and short-term liquid investments on hand as of June 30, 2000. 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. To the extent ULA pursues additional acquisitions or development opportunities, ULA may need to raise additional capital or seek strategic partners. STATEMENTS OF CASH FLOWS We had cash and cash equivalents of $969.4 million as of June 30, 2000, a decrease of $956.5 million from $1,925.9 million as of December 31, 1999. Cash and cash equivalents of $252.1 million as of June 30, 1999 represented an increase of $216.5 million from $35.6 million as of December 31, 1998.
For the Six Months Ended June 30, ------------------------- 2000 1999 ----------- --------- (In thousands) Cash flows from operating activities............................................. $ (226,005) $ (53,196) Cash flows from investing activities............................................. (2,807,839) (941,040) Cash flows from financing activities............................................. 2,192,946 1,260,671 Effect of exchange rates on cash................................................. (115,650) (49,936) ---------- --------- Net increase in cash and cash equivalents........................................ (956,548) 216,499 Cash and cash equivalents at beginning of period................................. 1,925,915 35,608 ---------- --------- Cash and cash equivalents at end of period....................................... $ 969,367 $ 252,107 ========== =========
SIX MONTHS ENDED JUNE 30, 2000 Principal sources of cash during the six months ended June 30, 2000 included $1,612.2 million in proceeds from the issuance of senior notes and senior discount notes by UPC and $940.1 million of borrowings on various subsidiary facilities, including $289.2 million under the new UPC Nederland Facility, $192.8 million under the UPC Senior Credit Facility, $142.7 million from the new UPC France Facility and $223.1 million under UPC's new A2000 Facility, proceeds of which were used to pay off existing A2000 Facilities. Additional sources of cash included net proceeds of $102.4 million from Austar United's second public offering of common equity securities, $10.6 million from the exercise of stock options and $35.9 million from affiliate dividends and other investing and financing sources. 37 Principal uses of cash during the six months ended June 30, 2000 included $1,006.0 million for the acquisition of the K&T Group in The Netherlands, $352.2 million for other acquisitions, $633.6 million of capital expenditures for system upgrade and new-build activities, $530.7 million of net cash invested in short-term liquid investments, $416.1 million for repayments of debt, $160.6 million for an additional investment in SBS, $122.1 million for shares in Primacom AG, $38.6 million of other investments in affiliates, $115.7 million negative exchange rate effect on cash, $56.3 million for deferred financing costs and $225.8 million for operating activities and other investing and financing uses. SIX MONTHS ENDED JUNE 30, 1999 Principal sources of cash during the six months ended June 30, 1999 included $1,409.1 million in proceeds from UPC's initial public offering and DIC's exercise of its option to acquire shares in UPC, $266.6 million of borrowings on the New Telekabel Facility, $208.9 million in proceeds from the issuance of the 1999 Notes, $162.1 million of borrowings on the New Austar Bank Facility, $54.4 million of borrowings on the UPC Senior Revolving Credit Facility, $30.0 million of borrowings on the VTR Bank Facility, $42.8 million of borrowings by our other operating companies, $36.9 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 $3.9 million from other investing and financing sources. Principal uses of cash during the six months ended June 30, 1999 included $252.7 million for the acquisition of the additional 66.0% interest in VTR, $252.0 million for the acquisition of the additional 49.0% interest in UTH, $109.7 million for the acquisition of GelreVision, $67.7 million for other acquisitions, $306.1 million for the repayment of the existing facility at UTH, $306.1 million for the repayment of a portion of the UPC Senior Revolving Credit Facility, $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 DIC Loan, $69.3 million for the repayment of other loans, $220.3 million of capital expenditures for system upgrade and new-build activities, $49.9 million negative exchange rate effect on cash, $37.8 million of funding to our affiliates, $20.2 million for deferred financing costs, $18.0 million for payment of a note, and $76.2 million for operating activities and other investing and financing uses. 38 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 EXCHANGE RATES 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 as of June 30, 2000 ------------------- (In thousands) U.S. Dollar Denominated Facilities: Stjarn Seller's Note due 2000 (1).............................. $ 100,000 UPC 12.5% Senior Discount Notes due 2009 (1)................... 448,104 UPC 13.375% Senior Discount Notes due 2009 (1)................. 272,891 UPC 13.75% Senior Discount Notes due 2010 (1).................. 543,860 UPC 11.25% Senior Notes due 2010 (1)........................... 595,883 @Entertainment Senior Discount Notes (1)...................... 279,578 UPC DIC Loan (1)............................................... 44,672 VTR Bank Facility (2).......................................... 176,000 Intercompany Loan to VTR (2)................................... 148,600 ---------- $2,609,588 ========== ----------------- (1) Functional currency is Euros (2) Functional currency is Chilean Pesos.
Occasionally we will execute hedge transactions to reduce our exposure to foreign currency exchange rate risk. In connection with UPC's offering of senior notes in July 1999, October 1999 and January 2000, UPC entered into cross-currency swap agreements, exchanging dollar-denominated notes into Euro denominated notes. 39 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.
As of June 30, 2000 Expected payment as of December 31, ----------------------- ---------------------------------------------------------------------------- Book Value Fair Value 2000 2001 2002 2003 2004 Thereafter Total ---------- ---------- --------- --------- -------- -------- --------- ---------- ------------ (U.S. dollars, in thousands, except interest rates) Fixed rate United USD 1998 Notes.............. $1,044,857 $ 948,750 $ - $ - $ - $ - $ - $1,044,857 $1,044,857 Average interest rate... 10.75% 12.32% Fixed rate United USD 1999 Notes.............. $ 236,630 $ 220,477 $ - $ - $ - $ - $ - $ 236,630 $ 236,630 Average interest rate... 10.875% 12.82% Fixed rate UPC USD Senior Notes due 2009 ...... $ 719,738 $ 694,576 $ - $ - $ - $ - $ - $ 719,738 $ 719,738 Average interest rate... 10.875% 13.18% Fixed rate UPC Euro Senior Notes due 2009....... $ 286,096 $ 246,042 $ - $ - $ - $ - $ - $ 286,096 $ 286,096 Average interest rate... 10.875% 13.39% Fixed rate UPC USD Senior Discount Notes due 2009..... $ 448,104 $ 363,825 $ - $ - $ - $ - $ - $ 448,104 $ 448,104 Average interest rate... 12.50% 15.48% Fixed rate UPC USD Senior Notes due 2007.............. $ 181,821 $ 178,000 $ - $ - $ - $ - $ - $ 181,821 $ 181,821 Average interest rate... 10.875% 13.26% Fixed rate UPC Euro Senior Notes due 2007.............. $ 95,365 $ 84,875 $ - $ - $ - $ - $ - $ 95,365 $ 95,365 Average interest rate... 10.875% 13.26% Fixed rate UPC USD Senior Notes due 2009.............. $ 227,359 $ 225,715 $ - $ - $ - $ - $ - $ 227,359 $ 227,359 Average interest rate... 11.25% 13.34% Fixed rate UPC Euro Senior Notes due 2009.............. $ 95,655 $ 84,761 $ - $ - $ - $ - $ - $ 95,655 $ 95,655 Average interest rate... 11.25% 13.44% Fixed rate UPC USD Senior Discount Notes due 2009..... $ 272,891 $ 234,220 $ - $ - $ - $ - $ - $ 272,891 $ 272,891 Average interest rate... 13.375% 15.42% Fixed rate UPC Euro Senior Discount Notes due 2009..... $ 103,989 $ 89,252 $ - $ - $ - $ - $ - $ 103,989 $ 103,989 Average interest rate... 13.375% 15.42% Fixed rate UPC USD Senior Notes due 2010.............. $ 595,883 $ 534,000 $ - $ - $ - $ - $ - $ 595,883 $ 595,883 Average interest rate... 11.25% 13.36% Fixed rate UPC Euro Senior Notes due 2010.............. $ 189,367 $ 167,843 $ - $ - $ - $ - $ - $ 189,367 $ 189,367 Average interest rate... 11.25% 13.31% Fixed rate UPC USD Senior Notes due 2010.............. $ 281,139 $ 267,000 $ - $ - $ - $ - $ - $ 281,139 $ 281,139 Average interest rate... 11.50% 13.58% Fixed rate UPC USD Senior Discount Notes due 2010..... $ 543,860 $ 475,000 $ - $ - $ - $ - $ - $ 543,860 $ 543,860 Average interest rate... 13.75% 15.38%
40
As of June 30, 2000 Expected payment as of December 31, ----------------------- ---------------------------------------------------------------------------- Book Value Fair Value 2000 2001 2002 2003 2004 Thereafter Total ---------- ---------- --------- --------- -------- -------- --------- ---------- ------------ (U.S. dollars, in thousands, except interest rates) Fixed rate United USD A/P Notes............... $ 436,336 $ 448,509 $ - $ - $ - $ - $ - $ 436,336 $ 436,336 Average interest rate... 14.00% 13.32% Variable rate UPC NLG Senior Credit Facility(1)... $ 531,007 $ 531,007 $ 531,007 $ - $ - $ - $ - $ - $ 531,007 Average interest rate... 7.2% 7.2% Variable rate Telekabel Euro Facility(1)............ $ 214,715 $ 214,715 $ 214,715 $ - $ - $ - $ - $ - $ 214,715 Average interest rate... 5.9% 5.9% Variable rate CNBH NLG Facility(1)................. $ 115,618 $ 115,618 $ 115,618 $ - $ - $ - $ - $ - $ 115,618 Average interest rate... 5.3% 5.3% Variable rate New A2000 Facilities(1)............... $ 220,702 $ 220,702 $ 220,702 $ - $ - $ - $ - $ - $ 220,702 Average interest rate... 4.7% 4.7% Variable rate Rhone Vision Cable FFR Credit Facility(1)................. $ 58,135 $ 58,135 $ 58,135 $ - $ - $ - $ - $ - $ 58,135 Average interest rate... 4.9% 4.9% Fixed rate UPC USD DIC Loan.................... $ 44,672 $ 44,672 $ 44,672 $ - $ - $ - $ - $ - $ 44,672 Average interest rate... 8.0% 8.0% Stjarn Seller's Note......... $ 100,000 $ 100,000 $ 100,000 $ - $ - $ - $ - $ - $ 100,000 Average interest rate... 8.0% 8.0% Variable rate UPC NL Bridge Loan(1).............. $ 286,096 $ 286,096 $ 286,096 $ - $ - $ - $ - $ - $ 286,096 Average interest rate... 6.4% 6.4% Variable rate France Facility(1)................. $ 141,095 $ 141,095 $ 141,095 $ - $ - $ - $ - $ - $ 141,095 Average interest rate... 6.5% 6.5% Variable rate VTR USD Bank Facility............... $ 176,000 $ 176,000 $ - $ - $176,000 $ - $ - $ - $ 176,000 Average interest rate... 11.41% 11.41% Variable rate Austar A$ New Austar Bank Facility.... $ 219,039 $ 219,039 $ - $ - $ 7,666 $ 42,165 $ 67,355 $ 101,853 $ 219,039 Average interest rate... 7.4% 7.4% Fixed rate @Entertainment Senior Discount Notes....... $ 279,578 $ 278,976 $ - $ - $ - $ 14,483 $ - $ 265,095 $ 279,578 Average interest rate... 7.0%-14.50% 7.0%-14.62% ---------- ---------- ---------- -------- -------- -------- -------- ---------- ---------- $8,145,747 $7,648,900 $1,712,040 $ - $183,666 $ 56,648 $ 67,355 $6,126,038 $8,145,747 ========== ========== ========== ======== ======== ======== ======== ========== ========== (1) Expected to be refinanced by the Euro4.0 billion Facility.
41 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. 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. 42 PART II - OTHER INFORMATION - --------------------------- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ The annual meeting of stockholders of UnitedGlobalCom, Inc. was held on June 27, 2000. At the annual meeting, two matters were considered and acted upon: (1) the election of three directors to serve until the 2003 annual meeting of stockholders, three directors to serve until the 2001 annual meeting of stockholders and one director to serve until the 2002 annual meeting of stockholders, until their successors are elected and qualified; (2) the ratification of the appointment of Arthur Andersen LLP as independent auditors of UnitedGlobalCom, Inc. for the fiscal year ended December 31, 2000. Indicated below are the total votes in favor of each director nominee and the total votes abstained: For Withheld --- -------- Albert M. Carollo 256,039,443 312,682 Lawrence J. DeGeorge 256,007,968 344,157 Michael T. Fries 256,024,268 327,857 John C. Malone 256,054,743 297,382 Mark L. Schneider 256,014,468 337,657 Henry P. Vigil 256,051,993 300,132 Tina M. Wildes 256,014,468 337,657 In connection with the vote on the ratification of the appointment of the independent auditors, 255,680,100 votes were cast in favor of the appointment and 667,350 votes were cast in opposition thereto. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- (a) Exhibits 27.1 Financial Data Schedule (b) Reports on Form 8-K filed during the quarter
DATE OF FILING DATE OF EVENT ITEM REPORTED July 12, 2000 June 26, 2000 Item 5 - UnitedGlobalCom, Inc. and Liberty Media Corporation announced an agreement in which United will acquire certain of Liberty's international broadband distribution and programming assets in exchange for $200.0 million in cash and 75.3 million shares of United's Class B common stock.
43 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 14th day of August 2000. 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) 44 EX-27 2 0002.txt
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITEDGLOBALCOM, INC.'S FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-2000 JUN-30-2000 986,689 1,092,114 151,212 42,611 128,707 2,607,151 3,566,395 683,332 10,531,140 1,607,708 7,564,284 27,309 703,835 1,564,210 (1,632,595) 10,531,140 303,201 303,201 189,174 311,252 0 0 201,910 (444,869) 2,117 (285,966) 0 0 0 (285,966) (3.12) (3.12)
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