UGC Reports Second Quarter 2004 Results 2004 Operating Cash Flow
Guidance Increased for Recent Acquisition and Performance DENVER,
Aug. 9 /PRNewswire-FirstCall/ -- UnitedGlobalCom, Inc. ("UGC")(1)
(NASDAQ:UCOMA), today announces operating and financial results for
the second quarter ended June 30, 2004. Highlights for the second
quarter compared to the same period in the prior year include: *
Revenue growth of 17% to $545 million * Operating Cash Flow(2)
growth of 30% to $195 million * Operating Cash Flow margin of 37%
year-to-date, compared to 30% * 102,400 Net RGU(3) additions
compared to 41,200 * Net loss of $(95) million compared to net
income of $622 million * Free Cash Flow(4) growth of 248% to $87
million Mike Fries, President and Chief Executive Officer of UGC
said, "Our second quarter results were strong across the board. We
added 102,400 net new RGUs in the quarter, including 47,700
broadband Internet RGUs. As a result, broadband Internet RGUs now
exceed 1.0 million in total -- an important milestone for the
Company. We added 194,700 net new RGUs during the first six months
of the year which, given the seasonality of our business and
potential upside from new digital and voice products, puts us on
track to meet or exceed our full year guidance of 500,000 net new
RGUs in 2004." "Revenue growth on an organic basis was
approximately 11% in the quarter compared to the same period in the
prior year, slightly above our full year guidance of 10%. Operating
cash flow on an organic (or local currency basis) grew 23% -- ahead
of our 20% guidance, but was down modestly in absolute terms from
our first quarter 2004 result due primarily to unfavorable foreign
currency movements, as well as higher marketing expenditures in
Europe to drive customer growth during the seasonally slower summer
months. For the six months ended June 30, 2004, our organic
operating cash flow increased 33% compared to the same period in
the prior year. We expect to see a meaningful improvement in our
third quarter operating cash flow and we believe there is upside to
our $800 million guidance for the full year 2004 excluding the
acquisition of Noos. Including the consolidation of Noos beginning
July 1, 2004, we expect to report full year Operating Cash Flow of
at least $850 million.(5)" "We are also making solid progress on
key strategic initiatives across all of our product lines. We are
on track for commercial launch of VoIP services in the Netherlands
and Hungary during the third quarter, and expect to be 100% VoIP
ready across our entire Dutch footprint of 2.6 million homes passed
by the end of the year. In digital video, we are pleased with the
continued success of our new digital product in France and are
looking at expanding our digital footprint across Central and
Eastern Europe using a similar Headend-In-The-Sky (HITS) strategy.
We have now agreed to rate increases in all but a handful of our
Dutch markets which will be phased in throughout the remainder of
the year, resulting in a harmonization of our analog cable
television rates across The Netherlands by the end of the year. And
despite a relatively competitive market for broadband Internet
services across Europe, our sales are up over 40% from a year ago
and we continue to generate one of the highest ARPU's in the
industry. As a result of these efforts, we believe we are well
positioned to meet or exceed all of our 2004 financial guidance
targets and we look forward to producing strong second half
results." Recent Events UGC Stock Repurchase Program Announced:
UGC's Board of Directors has authorized a $100 million share
repurchase program. UGC expects such purchases to occur from time
to time in the open market or in private transactions, subject to
market conditions. European Bank Facility Refinancing: On June 29,
2004, we announced the refinancing of over Euro 1.0 billion of our
Euro 3.5 billion European bank credit facility, substantially
improving the interest rate, general covenant and funding
flexibility of the facility. In addition, the refinancing
facilitated the debt funding required for our acquisition of Noos
in France. As a result of the refinancing, we expect annual
interest savings of approximately Euro 50 million and UGC's
consolidated weighted average cost of outstanding debt is currently
below 5.0%. In addition, because a significant portion of our
outstanding debt is floating rate, we have purchased interest rate
caps through 2006 to limit our exposure to rising interest rates.
Noos Acquisition Completed: On July 7, 2004, we announced the
completion by our French holding company (UPC Broadband France) of
the acquisition of Noos, the largest cable television operator in
France, from SUEZ. SUEZ is currently a 19.9% shareholder in UPC
Broadband France which includes UGC's existing French cable
television operation. The transaction valued Noos at approximately
Euro 615 million, or 7.25 times 2004 estimated Operating Cash Flow.
The final purchase price is subject to a 90-day audit of Noos'
financial information. Consideration to SUEZ consisted of
approximately Euro 530 million of cash funded in equal proportions
out of cash on hand and UGC's European bank facility, as well as
the 19.9% equity interest in the combined French operation. As a
result of the transaction, UPC Broadband France now serves
approximately 2.3 million RGUs. The combined French businesses
generate annual revenue of approximately Euro 400 million based on
the 2003 results of Noos and UPC France. Second Quarter 2004
Results Our significant and consolidated operating subsidiaries in
Europe include UPC Broadband -- our cable television and broadband
division with operations in 11 countries, and chellomedia -- our
media and programming division, which also includes our Competitive
Local Exchange Carrier (CLEC), Priority Telecom. In Latin America,
our primary operation is VTR GlobalCom (VTR), our cable television
and broadband provider in Chile. Please refer to the Financial
Highlights and Consolidated Financial Statements section at the end
of this press release for additional segment information. Revenue
Revenue for the three months ended June 30, 2004 was $545 million,
an increase of 17% or $80 million compared to the same period in
the prior year. Excluding the impact of foreign exchange rates,
organic year-over-year revenue growth was approximately 11% for the
second quarter of 2004 driven by higher average monthly revenue per
subscriber (ARPU) and RGU growth. For the six months ended June 30,
2004, organic revenue growth was approximately 10%, consistent with
our 10% guidance target for the full year. Based on our expectation
for continued revenue growth in the second half, including the
positive contribution from our recent analog video rate increases
in The Netherlands, we are confirming our full year 10% growth
target. Operating Cash Flow Operating Cash Flow for the three
months ended June 30, 2004 was $195 million, an increase of 30%
compared to the same period in the prior year. Excluding the impact
of foreign exchange rate fluctuations, our organic Operating Cash
Flow growth was approximately 23% for the period. Our second
quarter 2004 cash flow result was down modestly from first quarter
2004 due primarily to unfavorable foreign currency movements, as
well as higher marketing expenditures to drive customer growth in
Europe during the seasonally slower summer months. We continue to
benefit from organizational, operating, and network efficiencies,
as our consolidated Operating Cash Flow margin improved to 37% for
the first six months of 2004 compared to 30% for the same period
last year -- a year over year improvement of approximately 640
basis points. Based on our Operating Cash Flow result for the first
six months of 2004, we confirm our full year guidance target of
$800 million(6), which excludes the acquisition of Noos. Because
organic OCF growth for the six months ended June 30, 2004 was
approximately 33%, we believe there is upside to our guidance of
20% organic growth. Including the consolidation of Noos beginning
July 1, 2004, we expect to report full year Operating Cash Flow of
at least $850 million. Net Income (Loss) Net loss was $(95) million
for the three months ended June 30, 2004, which compares with a net
income of $622 million for the same period in 2003. The positive
second quarter 2003 result was primarily due to a one-time gain of
$569 million from the completion of the reorganization of our
Australian holding company, United Australia Pacific, Inc. Free
Cash Flow and Capital Expenditures Free Cash Flow for the three
months ended June 30, 2004 was $87 million, a 248% improvement
compared to the same period last year. The increase was driven by
an 82% improvement in cash flow from operating activities, offset
by a 27% increase in capital expenditures. For the six months ended
June 30, 2004, Free Cash Flow was $122 million, a 193% increase
compared to the same period last year. Capital expenditures
increased to $96 million for the three months ended June 30, 2004,
compared to $75 million for the same period last year. The primary
reason for the increase was higher spending on customer premise
equipment (CPE) due to the significant increase in RGU growth in
the second quarter 2004 compared to the same period last year. For
the six months ended June 30, 2004, capital expenditures were $176
million or 16% of sales over the period and below our guidance
target of 20% of sales. Based on our expectation for an increase in
capital expenditures during second half 2004, we confirm our
guidance target for full year 2004 capital expenditures at
approximately 20% of sales. Balance Sheet, Leverage Position and
Liquidity As of June 30, 2004, total debt was $4.1 billion and we
had cash and cash equivalents (including short-term liquid
investments) of $1.6 billion. On a pro forma basis of the Noos
acquisition as of June 30, 2004, total debt was $4.2 billion and
cash and cash equivalents were $1.1 billion. Using these pro forma
figures, net debt to annualized Operating Cash Flow(7) was 3.6x
compared to 3.2x for the second quarter on an as reported basis. In
addition to our cash balances, we had approximately $680 million of
availability under Facility A of our European Credit Facility
(pro-forma for the Noos acquisition). Together with the market
value of our interests in publicly traded securities of SBS
Broadcasting and Austar United, we had total liquidity of
approximately $2.2 billion as of June 30, 2004. Operating
Statistics As of June 30, 2004, total RGUs were 9,340,100, an
increase of 5%, or 421,000 compared to the prior year. For the
three months ended June 30, 2004, we added 102,400 net new RGUs
compared to 41,200 during the same period last year. Since December
31, 2003, we have added 194,700 net new RGUs. Due to the
seasonality of our business, we believe that our year-to-date net
gain in RGUs puts us on track to meet or exceed our guidance of
500,000 net new RGUs in 2004, particularly with digital additions
running ahead of forecast and with commercial VoIP launches planned
in The Netherlands and Hungary in late summer. About
UnitedGlobalCom UGC is the leading international broadband
communications provider of video, voice, and broadband Internet
services with operations in 14 countries. Based on UGC's operating
statistics at June 30, 2004, the Company's networks reached
approximately 12.3 million homes passed and served over 9.3 million
RGUs, including approximately 7.6 million video subscribers,
756,900 telephone subscribers and 1,032,000 broadband Internet
subscribers. Forward Looking Statements: Except for historical
information contained herein, this press release contains
forward-looking statements, including guidance given for 2004. The
Company's plans with respect to refinancing the senior bank
facility and the intended effects of such refinancing, if any, such
as a reduction of interest rates, elimination or loosening of
covenants and potential acquisitions are forward looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward looking statements involve certain risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by these statements. These risks
and uncertainties include, our ability to successfully integrate
the French systems, continued use by subscribers and potential
subscribers of the Company's services, changes in the technology
and competition, our ability to achieve expected operational
efficiencies and economies of scale, our ability to generate
expected revenue and achieve assumed margins, as well as other
factors detailed from time to time in the Company's filings with
the Securities and Exchange Commission. These forward- looking
statements speak only as of the date of this release. The Company
expressly disclaims any obligation or undertaking to disseminate
any updates or revisions to any guidance and other forward-looking
statement contained herein to reflect any change in the Company's
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
Please visit http://www.unitedglobal.com/ for further information.
New Basis of Accounting Effective January 1, 2004 On January 5,
2004, Liberty Media Corporation (together with its subsidiaries
"LMC") acquired approximately 8.2 million shares of Class B common
stock from our founding stockholders in exchange for securities of
LMC and cash (the "Founders Transaction"). Upon completion of this
transaction, the restriction on LMC's right to exercise its voting
power over us was terminated. LMC then had the ability to elect our
entire board of directors and otherwise to control us. LMC acquired
its cumulative interest in us over a period of several years in
separate acquisitions. LMC's largest acquisition of us occurred in
January 2002 whereby its economic and voting interest increased
from approximately 11% and 37%, respectively, to approximately 73%
and 94%, respectively. Because of certain voting and standstill
agreements entered into between LMC and our founding stockholders
in connection with this January 2002 transaction, LMC was unable to
control us and therefore accounted for its investment in us under
the equity method of accounting. Upon consummation of the Founders
Transaction, our financial statements changed to reflect the push
down of LMC's basis and, as a result, we have a new basis of
accounting effective January 1, 2004. Accordingly, for periods
prior to January 1, 2004 the assets and liabilities of
UnitedGlobalCom, Inc. and the related consolidated financial
statements are sometimes referred to herein as "UGC Pre-Founders
Transaction", and for periods subsequent to January 1, 2004 the
assets and liabilities of UnitedGlobalCom, Inc. and the related
consolidated financial statements are sometimes referred to herein
as "UGC Post-Founders Transaction." (1) Also referred to us the
"Company", "we, "us", "our", and similar terms. (2) Please see
Financial Highlights included herein this press release for an
explanation of Operating Cash Flow, detail on Operating Cash Flow
by segment, and a reconciliation of Operating Cash Flow to Net
Income (Loss). Operating Cash Flow is also referred to as "OCF."
(3) RGUs or Revenue Generating Units. Please see definition
included herein. (4) Please see Financial Highlights included
herein this press release for an explanation of Free Cash Flow and
a reconciliation of Free Cash Flow to Net Cash Flows from operating
activities. (5) Based on the same foreign exchange rate of 1.20 US
dollars per Euro used to calculate our $800 million guidance
figure. (6) Based on previously disclosed foreign exchange rate
assumptions. Specifically, we have assumed for the full year a 1.20
average U.S. dollar/Euro exchange rate and 650 Chilean Pesos to the
U.S. dollar. (7) Represents net debt/Operating Cash Flow annualized
for the three months ended June 30, 2004. UnitedGlobalCom, Inc.
Condensed Consolidated Balance Sheets (In thousands, except par
value and number of shares) (Unaudited) UGC UGC Post-Founders
Pre-Founders Transaction Transaction June 30, December 31, Assets
2004 2003 Current assets Cash and cash equivalents $1,368,677
$310,361 Restricted cash 20,237 25,052 Short-term liquid
investments 207,194 2,134 Trade and other receivables, net 204,825
205,232 Other current assets, net 90,899 79,542 Total current
assets 1,891,832 622,321 Long-term assets Property, plant and
equipment, net 2,998,782 3,342,743 Goodwill 1,912,703 2,519,831
Intangible assets, net 397,083 252,236 Other assets, net 441,479
362,540 Total assets $7,641,879 $7,099,671 Liabilities and
Stockholders' Equity Current liabilities Not subject to compromise:
Accounts payable $225,338 $225,540 Accrued liabilities 363,846
405,546 Subscriber prepayments and deposits 226,443 141,108 Notes
payable, related party -- 102,728 Current portion of long-term debt
44,605 310,804 Other current liabilities 14,111 82,149 Total
current liabilities not subject to compromise 874,343 1,267,875
Subject to compromise: Current portion of long-term debt 24,627
317,372 Other liabilities 4,690 19,544 Total current liabilities
subject to compromise 29,317 336,916 Long-term liabilities
Long-term debt 4,036,308 3,615,902 Deferred taxes 135,194 124,232
Other long-term liabilities 313,978 259,493 Total long-term
liabilities 4,485,480 3,999,627 Minority interests in subsidiaries
22,082 22,761 Stockholders' equity Preferred stock, $0.01 par
value, 10,000,000 shares authorized, nil shares issued and
outstanding -- -- Class A common stock, $0.01 par value,
1,000,000,000 shares authorized, 400,388,513 and 287,350,970 shares
issued, respectively 4,004 2,873 Class B common stock, $0.01 par
value, 1,000,000,000 shares authorized, 11,165,777 and 8,870,332
shares issued, respectively 112 89 Class C common stock, $0.01 par
value, 400,000,000 shares authorized, 385,828,203 and 303,123,542
shares issued and outstanding, respectively 3,858 3,031 Additional
paid-in capital 2,608,756 5,852,896 Treasury stock, at cost
(70,495) (70,495) Accumulated deficit (244,536) (3,372,737)
Accumulated other comprehensive income (loss) (71,042) (943,165)
Total stockholders' equity 2,230,657 1,472,492 Total liabilities
and stockholders' equity $7,641,879 $7,099,671 UnitedGlobalCom,
Inc. Condensed Consolidated Statements of Operations and
Comprehensive Income (Loss) (In thousands, except per share data)
(Unaudited) UGC UGC Post-Founders Transaction Pre-Founders
Transaction Three Months Six Months Three Months Six Months Ended
Ended Ended Ended June 30, June 30, June 30, June 30, 2004 2004
2003 2003 Statements of Operations Revenue $545,072 $1,092,414
$465,109 $901,151 Operating expense (210,608) (419,781) (197,719)
(387,988) Selling, general and administrative expense (139,936)
(273,821) (117,959) (241,661) Depreciation and amortization
(214,418) (432,112) (211,487) (406,205) Impairment of long-lived
assets (16,111) (16,623) -- -- Restructuring charges and other
(5,023) (8,925) (6,904) (6,904) Stock-based compensation 10,136
(51,716) (8,275) (14,386) Operating income (loss) (30,888)
(110,564) (77,235) (155,993) Interest income 8,195 11,523 2,502
7,905 Interest expense (73,980) (145,713) (94,879) (189,868)
Foreign currency exchange (loss) gain, net (6,980) (28,832) 263,451
414,411 Gain on sale of investments in affiliates, net -- --
281,483 281,604 Gain on extinguishments of debt 3,871 35,787 --
74,401 Other income (expense), net 6,758 2,454 (11,025) (14,040)
Income (loss) before income taxes and other items (93,024)
(235,345) 364,297 418,420 Reorganization expense, net 467 (6,427)
(5,524) (13,720) Income tax expense, net (5,827) (4,534) (30,767)
(57,519) Minority interests in subsidiaries, net 30 500 274 737
Share in results of affiliates, net 3,483 1,270 293,734 291,035 Net
income (loss) $(94,871) $(244,536) $622,014 $638,953 Earnings per
share: Basic and diluted net income (loss) per share $(0.12)
$(0.33) $3.13 $4.51 Statements of Comprehensive Income Net income
(loss) $(94,871) $(244,536) $622,014 $638,953 Other comprehensive
income, net of tax: Foreign currency translation adjustments
(12,392) (60,483) (135,421) (358,391) Change in fair value of
derivative assets -- -- 4,058 10,616 Change in unrealized (loss)
gain on available-for-sale securities (29,997) (10,559) 6,024 6,057
Comprehensive income (loss) $(137,260) $(315,578) $496,675 $297,235
UnitedGlobalCom, Inc. Condensed Consolidated Statements of
Operations and Comprehensive Income (Loss) (In thousands, except
per share data) (Unaudited) UGC UGC Post-Founders Pre-Founders
Transaction Transaction Six Months Six Months Ended Ended Cash
Flows from Operating Activities June 30, 2004 June 30, 2003 Net
income (loss) $(244,536) $638,953 Adjustments to reconcile net
income (loss) to net cash flows from operating activities:
Stock-based compensation 51,716 14,386 Depreciation and
amortization 432,112 406,205 Impairment of long-lived assets,
restructuring charges and other 25,548 6,904 Accretion of interest
on senior notes and amortization of deferred financing costs 10,386
43,423 Unrealized foreign exchange (gains) losses, net 15,118
(398,245) Gain on sale of investments in affiliates, net --
(281,604) (Gain) loss on derivative securities (2,346) 11,348 Gain
on extinguishment of debt (35,787) (74,401) Deferred income tax
provision (4,602) 55,780 Minority interests in subsidiaries, net
(500) (737) Share in results of affiliates, net (1,270) (291,035)
Change in assets and liabilities: Change in receivables and other
assets (48,367) 56,551 Change in accounts payable, accrued
liabilities and other 100,811 (12,788) Net cash flows from
operating activities 298,283 174,740 Cash Flows from Investing
Activities Capital expenditures (175,861) (132,943) Purchase of
short-term liquid investments (213,154) (971) Proceeds from sale of
short-term liquid investments 7,984 45,560 Restricted cash
(deposited) released, net 3,869 (11,449) Proceeds from sale of
investments in affiliated companies 737 43,150 Purchase of interest
rate caps (21,442) (9,750) Settlement of interest rate swaps --
(58,038) Dividends received and other 4,676 (305) Net cash flows
from investing activities (393,191) (124,746) Cash Flows from
Financing Activities Issuance of common stock 1,076,279 -- Proceeds
from issuance of convertible senior notes 604,595 -- Proceeds from
short-term and long-term borrowings 19,114 -- Repayments of
short-term and long-term borrowings (487,340) (162,330) Financing
costs (49,792) (2,233) Net cash flows from financing activities
1,162,856 (164,563) Effect of Exchange Rates on Cash (9,632) 10,844
Increase (Decrease) in Cash and Cash Equivalents 1,058,316
(103,725) Cash and Cash Equivalents, Beginning of Period 310,361
410,185 Cash and Cash Equivalents, End of Period $1,368,677
$306,460 Supplemental Cash Flow Disclosures: Cash paid for
reorganization expenses $6,427 $13,720 Cash paid for interest
$132,944 $123,596 Cash paid for income taxes $3,476 $2,403 Non-cash
Investing and Financing Activities: Issuance of common stock for
financial assets, settlement of liabilities and other $36,574
$1,429,206 Financial Highlights: Revenue The table below highlights
Revenue by segment: Year/ Year/ 3 months 3 months Year 6 months 6
months Year (thousands) Q2 2004 Q2 2003 Change Jun-04 Jun-03 Change
UPC Broadband ? W Europe $333,591 $286,917 16% $667,725 $557,777
20% UPC Broadband ? C & E Europe 109,979 90,230 22% 217,292
175,472 24% Total UPC Broadband 443,570 377,147 18% 885,017 733,249
21% Chellomedia 57,154 56,200 2% 116,861 107,040 9% VTR 69,758
53,972 29% 141,441 103,059 37% Other(1) (25,410) (22,210) 14%
(50,905) (42,197) 21% UGC Consolidated $545,072 $465,109 17%
$1,092,414 $901,151 21% 1. Primarily inter-company eliminations and
other Latin America broadband. The following is provided for
informational purposes to highlight revenues in the functional
currency of VTR (Chilean Pesos) and the primary functional currency
of UGC Europe (Euros), as follows: 3 months 3 months Year/Year
(thousands, except for VTR) Q2 2004 Q2 2003 Change UPC Broadband -
W Europe Euro 276,895 Euro 251,999 10% UPC Broadband - C & E
Europe 91,288 79,249 15% Total UPC Broadband 368,183 331,248 11%
Chellomedia 47,440 49,361 -4% Other(1) (22,657) (21,224) 7% UGC
Europe ? Total Euro 392,966 Euro 359,385 9% VTR (millions) CP43,884
CP38,331 14% 6 months 6 months Year/Year (thousands, except for
VTR) Jun-04 Jun-03 Change UPC Broadband - W Europe Euro 543,882
Euro 504,521 8% UPC Broadband - C & E Europe 177,035 158,721
12% Total UPC Broadband 720,917 663,242 9% Chellomedia 95,148
96,759 -2% Other(1) (44,655) (41,516) 8% UGC Europe ? Total Euro
771,410 Euro 718,485 7% VTR (millions) CP85,988 CP74,500 15% 1.
Primarily inter-company eliminations. Operating Cash Flow The table
below highlights Operating Cash Flow by segment: Year/ Year/ 3
months 3 months Year 6 months 6 months Year (thousands) Q2 2004 Q2
2003 Change Jun-04 Jun-03 Change UPC Broadband ? W Europe 138,740
$101,759 36% $280,236 $193,006 45% UPC Broadband - C & E Europe
44,809 34,886 28% 89,421 66,259 35% Total UPC Broadband 183,549
136,645 34% 369,657 259,265 43% Chellomedia 9,964 9,223 8% 21,496
14,475 49% VTR Broadband 23,987 16,496 45% 49,017 28,955 69%
Other(1) (22,972) (12,933) 78% (41,358) (31,193) 33% UGC
Consolidated 194,528 $149,431 30% $398,812 $271,502 47% OCF Margin
(% of revenues) 35.7% 32.1% 360 bps 36.5% 30.1% 640 bps 1.
Primarily intercompany eliminations and other Latin America
broadband. The following is provided for informational purposes to
highlight Operating Cash Flow in the functional currency of VTR
(Chilean Pesos) and the primary functional currency of UGC Europe
(Euros), as follows: 3 months 3 months Year/Year (thousands, except
for VTR) Q2 2004 Q2 2003 Change UPC Broadband - W Europe Euro
115,103 Euro 89,189 29% UPC Broadband - C & E Europe 37,158
30,574 22% Total UPC Broadband 152,261 119,763 27% Chellomedia
8,289 8,173 1% Other(1) (16,631) (7,910) 110% UGC Europe ? Total
Euro 143,919 Euro 120,026 20% OCF Margin (% of revenues) 36.6%
33.4% 320 bps VTR (in millions) CP15,085 CP11,694 29% OCF Margin (%
of revenues) 34.4% 30.5% 390 bps 6 months 6 months Year/Year
(thousands, except for VTR) Jun-04 Jun-03 Change UPC Broadband - W
Europe Euro 228,148 Euro 174,255 31% UPC Broadband - C & E
Europe 72,800 59,822 22% Total UPC Broadband 300,948 234,077 29%
Chellomedia 17,501 13,069 34% Other(1) (28,330) (20,632) 37% UGC
Europe ? Total Euro 290,119 Euro 226,514 28% OCF Margin (% of
revenues) 37.6% 31.5% 610 bps VTR (in millions) CP29,768 CP20,876
43% OCF Margin (% of revenues) 34.6% 28.0% 660 bps 1. Primarily
inter-company eliminations. Operating Cash Flow Definition and
Reconciliation Operating Cash Flow is the primary measure used by
our chief operating decision makers to evaluate segment-operating
performance and to decide how to allocate resources to segments. As
we use the term, Operating Cash Flow is defined as revenue less
operating, selling, general and administrative expenses (excluding
depreciation and amortization, impairment of long-lived assets,
restructuring charges and other and stock-based compensation). We
believe Operating Cash Flow is meaningful because it provides
investors a means to evaluate the operating performance of our
segments and our company on an ongoing basis using criteria that is
used by our internal decision makers. Our internal decision makers
believe Operating Cash Flow is a meaningful measure and is superior
to other available GAAP measures because it represents a
transparent view of our recurring operating performance and allows
management to readily view operating trends, perform analytical
comparisons and benchmarking between segments in the different
countries in which we operate and identify strategies to improve
operating performance. For example, our internal decision makers
believe that the inclusion of impairment and restructuring charges
within Operating Cash Flow distorts their ability to efficiently
assess and view the core operating trends in our segments. In
addition, our internal decision makers believe our measure of
Operating Cash Flow is important because analysts and investors use
it to compare our performance to other companies in our industry.
We reconcile the total of the reportable segments' Operating Cash
Flow to our consolidated net income as presented in the
accompanying condensed consolidated statements of operations,
because we believe consolidated net income is the most directly
comparable financial measure to total segment operating
performance. Investors should view Operating Cash Flow as a
supplement to, and not a substitute for, operating income, net
income, cash flow from operating activities and other GAAP measures
of income as a measure of operating performance. We are unable to
provide a reconciliation of forecasted Operating Cash Flow to the
most directly comparable GAAP measure, net income, because certain
items are out of our control and/or cannot be reasonably predicted.
For example, it is impractical to: (1) estimate future fluctuations
in interest rates on our variable-rate debt facilities; (2)
estimate the fluctuations in exchange rates relative to the U.S.
dollar and its impact on our results of operations; (3) estimate
the financial results of our non-consolidated affiliates; and (4)
estimate changes in circumstances that lead to gains and/or losses
such as sales of investments in affiliates and other assets. Any
and/or all of these items could be significant to our financial
results. The table below highlights the reconciliation of Operating
Cash Flow to Net income (loss): 3 months 3 months 6 months 6 months
(thousands) Q2 2004 Q2 2003 Jun-04 Jun-03 Total segment Operating
Cash Flow $194,528 $149,431 $398,812 $271,502 Depreciation and
amortization (214,418) (211,487) (432,112) (406,205) Impairment of
long-lived assets (16,111) -- (16,623) -- Restructuring charges and
other (5,023) (6,904) (8,925) (6,904) Stock-based compensation
10,136 (8,275) (51,716) (14,386) Operating income (loss) (30,888)
(77,235) (110,564) (155,993) Interest expense, net (65,785)
(92,377) (134,190) (181,963) Foreign currency exchange gain (loss),
net (6,980) 263,451 (28,832) 414,411 Gain on sale of investments in
affiliates, net -- 281,483 -- 281,604 Gain on extinguishment of
debt 3,871 -- 35,787 74,401 Other expense, net 6,758 (11,025) 2,454
(14,040) Income (loss) before income taxes and other items (93,024)
364,297 (235,345) 418,420 Other, net (1,847) 257,717 (9,191)
220,533 Net income (loss) ($94,871) $622,014 ($244,536) $638,953
Free Cash Flow Definition and Reconciliation Free Cash Flow is not
a GAAP measure of liquidity. We define Free Cash Flow as net cash
flows from operating activities less capital expenditures. We
believe our presentation of free cash flow provides useful
information to our investors because it can be used to gauge our
ability to service debt and fund new investment opportunities.
Investors should view free cash flow as a supplement to, and not a
substitute for, GAAP cash flows from operating, investing and
financing activities as a measure of liquidity. The table below
highlights the reconciliation of net cash flows from operating
activities and Free Cash Flow: Year/ Year/ 3 months 3 months Year 6
months 6 months Year (thousands) Q2 2004 Q2 2003 Change Jun-04
Jun-03 Change Net cash flows from operating activities $182,512
$100,313 82% $298,283 $174,740 71% Capital expenditures (95,651)
(75,345) 27% (175,861) (132,943) 32% Free cash flow $86,861 $24,968
248% $122,422 $41,797 193% Consolidated Operating Statistics The
table below shows operating statistics for UGC on a consolidated
basis:(1) As of As of As of As of Jun-04 Mar-04 Dec-03 Jun-03 Video
Homes Passed 12,323,500 12,288,800 12,260,100 12,124,200 Basic
Analog Subscribers 7,135,200 7,138,800 7,145,700 7,092,800 Basis
Penetration 58% 58% 58% 59% Quarterly Net Basic Subscriber Change
(3,600) (6,900) 39,500 (4,300) Digital Subscribers 201,800 168,100
145,700 136,500 Digital Penetration 2% 1% 1% 1% Quarterly Net
Digital Subscriber Change 33,700 22,400 6,000 (500) DTH Subscribers
214,200 204,500 197,300 160,500 Broadband Internet Broadband
Internet Homes Serviceable 7,326,900 7,127,100 7,045,000 6,580,400
Broadband Internet Subscribers 1,032,000 984,300 923,700 825,100
Penetration 14% 14% 13% 13% Quarterly Net Subscriber Change 47,700
60,600 56,200 34,400 Telephone Telephone Homes Serviceable
4,488,500 4,467,700 4,467,800 4,408,300 Telephone Subscribers
756,900 742,000 733,000 704,200 Penetration 17% 17% 16% 16%
Quarterly Net Subscriber Change 14,900 9,000 15,100 8,600 Total
RGUs 9,340,100 9,237,700 9,145,400 8,919,100 ARPU per RGU(2) $18.49
$18.68 $17.71 $16.22 Constant ARPU per RGU(3) $18.49 $17.91 $17.89
$17.30 Customer Relationships 7,633,200 7,625,000 7,624,300 n.a.
ARPU per Customer Relationship(4) $22.51 $22.52 n.a. n.a. Constant
ARPU per Customer Relationship(5) $22.51 $21.59 n.a. n.a. RGUs by
region: Europe (UGC Europe) 8,363,700 8,291,500 8,220,200 8,065,000
Chile (VTR) 944,700 914,600 894,000 822,600 Other 31,700 31,600
31,200 31,500 Total RGUs 9,340,100 9,237,700 9,145,400 8,919,100
Growth Growth Growth vs. 1Q04 vs. 4Q03 vs. 2Q03 Video Homes Passed
34,700 63,400 199,300 Basic Analog Subscribers (3,600) (10,500)
42,400 Basis Penetration n.m. n.m. n.m. Quarterly Net Basic
Subscriber Change n.m. n.m. n.m. Digital Subscribers 33,700 56,100
65,300 Digital Penetration n.m. n.m. n.m. Quarterly Net Digital
Subscriber Change n.m. n.m. n.m. DTH Subscribers 9,700 16,900
53,700 Broadband Internet Broadband Internet Homes Serviceable
199,800 281,900 746,500 Broadband Internet Subscribers 47,700
108,300 206,900 Penetration n.m. n.m. n.m. Quarterly Net Subscriber
Change n.m. n.m. n.m. Telephone Telephone Homes Serviceable 20,800
20,700 80,200 Telephone Subscribers 14,900 23,900 52,700
Penetration n.m. n.m. n.m. Quarterly Net Subscriber Change n.m.
n.m. n.m. Total RGUs 102,400 194,700 421,000 ARPU per RGU(2)
($0.19) $0.78 $2.27 Constant ARPU per RGU(3) $0.58 $0.60 $1.18
Customer Relationships 8,200 8,900 n.a. ARPU per Customer
Relationship(4) ($0.01) n.a. n.a. Constant ARPU per Customer
Relationship(5) $0.92 n.a. n.a. RGUs by region: Europe (UGC Europe)
72,200 143,500 298,700 Chile (VTR) 30,100 50,700 122,100 Other 100
500 200 Total RGUs 102,400 194,700 421,000 1. Please refer to page
12 for definitions regarding the Consolidated Operating Statistics.
2. ARPU per RGU is calculated as follows: average monthly broadband
revenue for the period as indicated, divided by the average of the
opening and closing RGUs for the period. 3. Constant ARPU per RGU
is calculated as follows: average monthly broadband revenue
converted at the same average exchange rates for the three months
ended June 30, 2004 for each period as indicated, divided by the
average of the opening and closing RGUs for the period 4. ARPU per
Customer Relationship is calculated as follows: average monthly
broadband revenue for the period as indicated, divided by the
average of the opening and closing Customer Relationships for the
period. 5. Constant ARPU per Customer Relationship is calculated as
follows: average monthly broadband revenue converted at the same
average exchange rates for the three months ended June 30, 2004 for
each period as indicated, divided by the average of the opening and
closing Customer Relationships for the period. Capital Expenditures
Update The table below highlights our capital expenditures per NCTA
cable industry guidelines: Year/ Year/ (thousands) 3 months 3
months Year 6 months 6 months Year Q2 2004 Q2 2003 Change Jun-04
Jun-03 Change Customer Premises Equipment $38,298 $23,643 62%
$66,480 $45,617 46% Commercial -- -- -- -- -- -- Scaleable
Infrastructure 16,686 4,357 283% 28,675 11,354 153% Line Extensions
(2,524) 22,199 -111% 9,273 31,844 -71% Upgrade/Rebuild 11,852 6,588
80% 17,238 8,726 98% Support Capital 23,145 13,976 66% 40,366
26,778 51% Intangibles & Other 8,194 4,582 79% 13,829 8,624 60%
Total Capital Expenditures $95,651 $75,345 27% $175,861 $132,943
32% June 30, 2004 Two-way Homes in Homes Homes Customer Total
Service Area Passed Passed Relationships RGUs (1) (2)(14) (3)(14)
(4)(13)(15) (5)(15) Europe: The Netherlands 2,642,700 2,614,200
2,413,700 2,297,800 2,882,200 Austria 1,081,400 927,400 924,100
561,900 894,900 France 2,656,600 1,395,100 705,200 504,200 608,700
Norway 529,000 484,900 236,500 339,500 440,300 Sweden 770,000
421,600 273,600 284,800 385,200 Belgium 530,000 155,000 155,000
144,800 160,300 Total Western Europe 8,209,700 5,998,200 4,708,100
4,133,000 5,371,600 Poland 1,877,200 1,877,200 472,200 986,400
1,018,700 Hungary 1,170,400 996,200 643,500 868,900 947,400 Czech
Republic 913,000 725,400 295,200 377,400 395,600 Romania 659,600
458,400 2,600 336,600 336,600 Slovak Republic 517,800 402,300
126,600 291,000 293,800 Total Central and Eastern Europe 5,138,000
4,459,500 1,540,100 2,860,300 2,992,100 Total Europe 13,347,700
10,457,700 6,248,200 6,993,300 8,363,700 Latin America: Chile
2,350,000 1,782,700 1,045,300 610,200 944,700 Brazil 746,300 16,300
16,300 15,900 16,300 Peru 203,300 66,800 30,300 13,800 15,400 Total
Latin America 3,299,600 1,865,800 1,091,900 639,900 976,400 Grand
Total 16,647,300 12,323,500 7,340,100 7,633,200 9,340,100 Video
Analog Digital Analog Cable DTH Cable Cable Subscribers Subscribers
Subscribers Penetration (6)(15) (7) (8) Europe: The Netherlands
2,294,100 -- 55,900 87.8% Austria 492,700 -- 26,900 53.1% France
470,600 -- 47,700 33.7% Norway 339,500 -- 35,300 70.0% Sweden
284,800 -- 29,700 67.6% Belgium 132,200 -- -- 85.3% Total Western
Europe 4,013,900 -- 195,500 66.9% Poland 984,200 -- -- 52.4%
Hungary 708,700 121,800 -- 71.1% Czech Republic 292,900 75,200 --
40.4% Romania 336,600 -- -- 73.4% Slovak Republic 277,800 12,200 --
69.1% Total Central and Eastern Europe 2,600,200 209,200 -- 58.3%
Total Europe 6,614,100 209,200 195,500 63.2% Latin America: Chile
499,600 5,000 -- 28.0% Brazil 9,100 -- 6,300 55.8% Peru 12,400 --
-- 18.6% Total Latin America 521,100 5,000 6,300 27.9% Grand Total
7,135,200 214,200 201,800 57.9% Broadband Internet Homes
Serviceable Subscribers Penetration (9)(14) (10) Europe: The
Netherlands 2,413,700 365,800 15.2% Austria 924,100 222,300 24.1%
France 705,200 29,300 4.2% Norway 236,500 42,300 17.9% Sweden
273,600 70,700 25.8% Belgium 155,000 28,100 18.1% Total Western
Europe 4,708,100 758,500 16.1% Poland 472,200 34,500 7.3% Hungary
638,800 52,700 8.2% Czech Republic 295,200 27,500 9.3% Romania --
-- 0.0% Slovak Republic 120,700 3,800 3.1% Total Central and
Eastern Europe 1,526,900 118,500 7.8% Total Europe 6,235,000
877,000 14.1% Latin America: Chile 1,045,300 151,100 14.5% Brazil
16,300 900 5.5% Peru 30,300 3,000 9.9% Total Latin America
1,091,900 155,000 14.2% Grand Total 7,326,900 1,032,000 14.1%
Telephone Homes Serviceable Subscribers Penetration (11) (12)
Europe: The Netherlands 1,613,500 166,400 10.3% Austria 903,600
153,000 16.9% France 705,200 61,100 8.7% Norway 145,800 23,200
15.9% Sweden -- -- -- Belgium -- -- -- Total Western Europe
3,368,100 403,700 12.0% Poland -- -- 0.0% Hungary 87,200 64,200
73.6% Czech Republic -- -- -- Romania -- -- -- Slovak Republic --
-- -- Total Central and Eastern Europe 87,200 64,200 73.6% Total
Europe 3,455,300 467,900 13.5% Latin America: Chile 1,033,200
289,000 28.0% Brazil -- -- -- Peru -- -- -- Total Latin America
1,033,200 289,000 28.0% Grand Total 4,488,500 756,900 16.9% (1)
"Homes in Service Area" are homes that can potentially be served in
the areas we operate, based on census data and other market
information. (2) "Homes Passed" are homes that can be connected to
our broadband network without further extending the distribution
plant. (3) "Two-way Homes Passed" are homes passed by our network
where customers can request and receive the installation of a
two-way addressable set-top computer, cable modem, transceiver
and/or voice port which, in most cases, allows for the provision of
video, telephone and broadband Internet services. (4) "Customer
Relationships" are the number of customers who receive at least one
level of service (video/telephone/broadband Internet) without
regard to which service(s) they subscribe. (5) "Revenue Generating
Unit" is separately an Analog Cable Subscriber, DTH Subscriber,
Digital Cable Subscriber, Broadband Internet Subscriber or
Telephone Subscriber. A home may contain one or more RGUs. For
example, if a residential customer in our Austrian system
subscribed to our analog cable service, digital cable service,
telephone service and high-speed broadband Internet access service,
the customer would constitute four RGUs. "Total RGUs" is the sum of
Analog, DTH, Digital Cable, Broadband Internet and Telephone
Subscribers. (6) "Analog Cable Subscriber" is comprised of basic
analog customers and lifeline customers that are counted on a per
connection basis. The lifeline tier is the least expensive
regulated tier of our video services, containing only a few
channels. Commercial contracts such as hotels and hospitals are
counted on an equivalent bulk unit ("EBU") basis. EBU is calculated
by dividing the bulk price charged to accounts in an area by the
most prevalent price charged to non- bulk residential customers in
that market for the comparable tier of service. Non-paying
subscribers are counted as subscribers during their free
promotional or service period. Some of these customers may choose
to disconnect after their free service period. (7) "DTH Subscriber"
is a home or commercial unit that receives our video programming
broadcast directly to the home via geosynchronous satellites. (8)
"Digital Cable Subscriber" is a home or commercial unit connected
to our distribution network with one or more digital converter
boxes that receives our digital video service. A Digital Cable
Subscriber is also counted as an Analog Cable Subscriber. (9)
"Broadband Internet Homes Serviceable" are homes that can be
connected to our broadband network where customers can request and
receive broadband Internet access services. (10) "Broadband
Internet Subscriber" is a home or commercial unit with one or more
cable modems connected to our broadband network, where a customer
has requested and is receiving high-speed broadband Internet access
services. (11) "Telephone Homes Serviceable" are homes that can be
connected to our broadband network (or twisted pair network in
Hungary), where customers can request and receive voice services.
(12) "Telephone Subscriber" is a home or commercial unit connected
to our broadband network (or twisted pair network in Hungary),
where a customer has requested and is receiving voice services.
(13) As of December 31, 2003, certain analog cable customers in The
Netherlands that also received our broadband Internet services were
counted as two separate customer relationships, due to the nature
of our billing arrangement (cable through the local utility company
and broadband Internet directly by UGC Europe). As of June 30,
2004, we count customers in this situation as one customer
relationship. Had this methodology been applied to the December 31,
2003 data, the previously reported 2,403,000 customer relationships
in the Netherlands would have been 2,316,900. (14) Included in
analog cable subscribers are multi-channel multi-point distribution
system ("MMDS") subscribers that receive our video service through
microwave transmissions and are not part of our wireline network.
Total MMDS subscribers represent less than 1% of our total analog
video subscriber base. Previously we counted nil homes passed for
MMDS subscribers in Chile and one home passed for every
line-of-sight home in Brazil. As of June 30, 2004, we count one
home passed for every MMDS customer. The impact of this change was
a net reduction of 461,700 homes passed from the figures previously
reported. (15) Prior to June 30, 2004, we inadvertently counted
certain commercial contracts in the Netherlands on a per connection
basis rather than an EBU basis. The reduction in the number of
customer relationships and analog cable subscribers as a result of
this correction was 8,900 and 9,400, respectively. DATASOURCE:
UnitedGlobalCom, Inc. CONTACT: Richard Abbott, Investor Relations -
Denver, +1-303-220-6682, , or Bert Holtkamp, Corporate
Communications - Europe, + 31 (0) 20 778 9447, , both of
UnitedGlobalCom, Inc.
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