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PART I – FINANCIAL INFORMATION
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
ý
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTER ENDED MARCH 31, 2003
or
o
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. 000-496-58
UnitedGlobalCom, Inc.
(Exact name of Registrant as specified in its charter)
| State of Delaware (State or other jurisdiction of incorporation or organization) |
84-1602895 (I.R.S. Employer Identification No.) |
4643 South Ulster Street, Suite 1300
Denver, CO 80237
(Address of principle executive offices)
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 proceeding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
The registrant's outstanding common stock as of May 15, 2003 consisted of:
Class A
common stock – 104,985,814 shares
Class B common stock – 8,198,016 shares
Class C common stock – 303,123,542 shares
PART I – FINANCIAL INFORMATION
1
UnitedGlobalCom, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except par value and number of shares)
(Unaudited)
| Assets |
March 31, 2003 |
December 31, 2002 |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| Current assets | |||||||||
| Cash and cash equivalents | $ | 327,373 | $ | 410,185 | |||||
| Restricted cash | 179,392 | 48,219 | |||||||
| Short-term liquid investments | 2,281 | 45,854 | |||||||
| Subscriber receivables, net of allowance for doubtful accounts of $65,218 and $71,485, respectively | 139,664 | 136,796 | |||||||
| Notes receivable, related parties | 8,640 | 8,323 | |||||||
| Other receivables, including related party receivables of $9,060 and $7,079, respectively | 58,273 | 57,838 | |||||||
| Deferred financing costs, net of accumulated amortization of $29,498 and $24,928, respectively | 61,410 | 62,996 | |||||||
| Other current assets, net | 106,156 | 95,340 | |||||||
| Total current assets | 883,189 | 865,551 | |||||||
| Long-term assets | |||||||||
| Property, plant and equipment, net | 3,586,774 | 3,640,211 | |||||||
| Goodwill, net | 1,215,844 | 1,184,132 | |||||||
| Other intangible assets, net | 80,047 | 79,977 | |||||||
| Investments in affiliates, accounted for under the equity method, net | 149,266 | 153,853 | |||||||
| Other assets, net | 12,170 | 7,870 | |||||||
| Total assets | $ | 5,927,290 | $ | 5,931,594 | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
UnitedGlobalCom, Inc.
Condensed Consolidated Balance Sheets (continued)
(In thousands, except par value and number of shares)
(Unaudited)
| Liabilities and Stockholders' Equity (Deficit) |
March 31, 2003 |
December 31, 2002 |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Current liabilities | ||||||||||
| Not subject to compromise: | ||||||||||
| Accounts payable, including related party payables of $1,659 and $1,704, respectively | $ | 185,779 | $ | 192,414 | ||||||
| Accrued liabilities | 316,227 | 328,927 | ||||||||
| Subscriber prepayments and deposits | 185,007 | 127,553 | ||||||||
| Short-term debt | 202,751 | 205,145 | ||||||||
| Notes payable, related party | 102,728 | 102,728 | ||||||||
| Current portion of other long-term debt | 3,423,324 | 3,366,235 | ||||||||
| Derivative liabilities | 1,674 | 12,290 | ||||||||
| Other current liabilities | 7,368 | 4,158 | ||||||||
| Total current liabilities not subject to compromise | 4,424,858 | 4,339,450 | ||||||||
| Subject to compromise: | ||||||||||
| Accounts payable | 40,121 | 38,647 | ||||||||
| Accrued liabilities | 235,512 | 232,603 | ||||||||
| Current portion of senior notes and senior discount notes | 2,828,731 | 2,812,988 | ||||||||
| Total current liabilities subject to compromise | 3,104,364 | 3,084,238 | ||||||||
| Long-term liabilities | ||||||||||
| Not subject to compromise: | ||||||||||
| Senior notes and senior discount notes | 414,993 | 401,423 | ||||||||
| Other long-term debt | 67,486 | 71,248 | ||||||||
| Net negative investment in deconsolidated subsidiaries | 807,253 | 801,958 | ||||||||
| Deferred taxes | 211,740 | 184,858 | ||||||||
| Other long-term liabilities | 88,776 | 88,634 | ||||||||
| Total long-term liabilities not subject to compromise | 1,590,248 | 1,548,121 | ||||||||
| Commitments and contingencies | ||||||||||
Minority interests in subsidiaries |
836,569 |
1,402,146 |
||||||||
Stockholders' equity (deficit) |
||||||||||
| Class A common stock, $0.01 par value, 1,000,000,000 shares authorized, 111,273,445 and 110,392,692 shares issued, respectively | 1,113 | 1,104 | ||||||||
| Class B common stock, $0.01 par value, 1,000,000,000 shares authorized, 8,870,332 shares issued | 89 | 89 | ||||||||
| Class C common stock, $0.01 par value, 400,000,000 shares authorized, 303,123,542 shares issued and outstanding | 3,031 | 3,031 | ||||||||
| Additional paid-in capital | 3,685,675 | 3,683,644 | ||||||||
| Deferred compensation | (22,346 | ) | (28,473 | ) | ||||||
| Class A treasury stock, at cost | (34,162 | ) | (34,162 | ) | ||||||
| Class B treasury stock, at cost | – | – | ||||||||
| Accumulated deficit | (6,317,860 | ) | (6,945,687 | ) | ||||||
| Accumulated other comprehensive income (loss) | (1,344,289 | ) | (1,121,907 | ) | ||||||
| Total stockholders' equity (deficit) | (4,028,749 | ) | (4,442,361 | ) | ||||||
| Total liabilities and stockholders' equity (deficit) | $ | 5,927,290 | $ | 5,931,594 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
UnitedGlobalCom, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(In thousands, except share and per share data)
(Unaudited)
| |
Three Months Ended March 31, |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| |
2003 |
2002 |
||||||||
| Revenue | $ | 436,042 | $ | 349,040 | ||||||
| Operating expense (exclusive of items shown seperately below) | (190,269 | ) | (184,916 | ) | ||||||
| Selling, general and administrative expense | (129,813 | ) | (118,129 | ) | ||||||
| Depreciation and amortization | (194,718 | ) | (165,184 | ) | ||||||
| Impairment and restructuring charges | – | (3,458 | ) | |||||||
| Operating income (loss) | (78,758 | ) | (122,647 | ) | ||||||
Interest income, including related party income of $239 and $2,465, respectively |
5,403 |
9,921 |
||||||||
| Interest expense, including related party expense of $2,026 and $18,773, respectively | (94,989 | ) | (184,134 | ) | ||||||
| Foreign currency exchange gain (loss), net | 150,960 | (46,365 | ) | |||||||
| Other income (expense), net | 71,507 | 1,673,050 | ||||||||
| Income (loss) before income taxes and other items | 54,123 | 1,329,825 | ||||||||
Reorganization expenses, net |
(8,196 |
) |
– |
|||||||
| Income tax expense, net | (26,752 | ) | (122,301 | ) | ||||||
| Minority interests in subsidiaries, net | 463 | (23,987 | ) | |||||||
| Share in results of affiliates, net | (2,699 | ) | (70,962 | ) | ||||||
| Income (loss) before cumulative effect of change in accounting principle | 16,939 | 1,112,575 | ||||||||
Cumulative effect of change in accounting principle |
– |
(1,344,722 |
) |
|||||||
| Net income (loss) | $ | 16,939 | $ | (232,147 | ) | |||||
Net income (loss) per common share (Note 13): |
||||||||||
| Basic income (loss) before cumulative effect of change in accounting principle | $ | 1.52 | $ | 3.50 | ||||||
| Cumulative effect of change in accounting principle | – | (4.24 | ) | |||||||
| Basic net income (loss) | $ | 1.52 | $ | (0.74 | ) | |||||
| Diluted income (loss) before cumulative effect of change in accounting principle | $ | 1.52 | $ | 3.43 | ||||||
| Cumulative effect of change in accounting principle | – | (4.15 | ) | |||||||
| Diluted net income (loss) | $ | 1.52 | $ | (0.72 | ) | |||||
Other comprehensive income (loss), net of tax: |
||||||||||
| Net income (loss) | $ | 16,939 | $ | (232,147 | ) | |||||
| Foreign currency translation adjustments | (228,973 | ) | 42,529 | |||||||
| Change in fair value of derivative assets | 6,558 | 7,555 | ||||||||
| Other | 33 | (20 | ) | |||||||
| Comprehensive income (loss) | $ | (205,443 | ) | $ | (182,083 | ) | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
UnitedGlobalCom, Inc.
Condensed Consolidated Statement of Stockholders' Equity (Deficit)
(In thousands, except number of shares)
(Unaudited)
| |
Class A Common Stock |
Class B Common Stock |
Class C Common Stock |
|
|
Class A Treasury Stock |
Class B Treasury Stock |
|
|
|
|||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
Additional Paid-In Capital |
Deferred Compensation |
Accumulated Deficit |
Other Comprehensive Income (Loss) |
|
||||||||||||||||||||||||||||||||||||
| |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Total |
||||||||||||||||||||||||||||||
| Balances, December 31, 2002 | 110,392,692 | $ | 1,104 | 8,870,332 | $ | 89 | 303,123,542 | $ | 3,031 | $ | 3,683,644 | $ | (28,473 | ) | 7,404,240 | $ | (34,162 | ) | – | $ | – | $ | (6,945,687 | ) | $ | (1,121,907 | ) | $ | (4,442,361 | ) | |||||||||||
| Issuance of Class A common stock for UPC preference shares | 850,504 | 9 | – | – | – | – | 1,939 | – | – | – | – | – | 610,888 | – | 612,836 | ||||||||||||||||||||||||||
| Issuance of Class A common stock in connection with 401(k) plan | 30,249 | – | – | – | – | – | 92 | – | – | – | – | – | – | – | 92 | ||||||||||||||||||||||||||
| Amortization of deferred compensation. | – | – | – | – | – | – | – | 6,127 | – | – | – | – | – | – | 6,127 | ||||||||||||||||||||||||||
| Receipt of Class A and Class B common stock in satisfaction of executive loans | – | – | – | – | – | – | – | – | 188,792 | – | 672,316 | – | – | – | – | ||||||||||||||||||||||||||
| Net income | – | – | – | – | – | – | – | – | – | – | – | – | 16,939 | – | 16,939 | ||||||||||||||||||||||||||
| Foreign currency translation adjustments | – | – | – | – | – | – | – | – | – | – | – | – | – | (228,973 | ) | (228,973 | ) | ||||||||||||||||||||||||
| Change in fair value of derivative assets | – | – | – | – | – | – | – | – | – | – | – | – | – | 6,558 | 6,558 | ||||||||||||||||||||||||||
| Unrealized gain (loss) on available-for-sale securites | – | – | – | – | – | – | – | – | – | – | – | – | – | 33 | 33 | ||||||||||||||||||||||||||
| Balances, March 31, 2003 | 111,273,445 | $ | 1,113 | 8,870,332 | $ | 89 | 303,123,542 | $ | 3,031 | $ | 3,685,675 | $ | (22,346 | ) | 7,593,032 | $ | (34,162 | ) | 672,316 | $ | – | $ | (6,317,860 | ) | $ | (1,344,289 | ) | $ | (4,028,749 | ) | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
UnitedGlobalCom, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| |
Three Months Ended March 31, |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| |
2003 |
2002 |
|||||||
| Cash Flows from Operating Activities | |||||||||
| Net income (loss) | $ | 16,939 | $ | (232,147 | ) | ||||
| Adjustments to reconcile net income (loss) to net cash flows from operating activities: | |||||||||
| Depreciation and amortization | 194,718 | 165,184 | |||||||
| Impairment and restructuring charges | – | 3,458 | |||||||
| Stock-based compensation | 6,111 | 8,709 | |||||||
| Accretion of interest on senior notes and amortization of deferred financing costs | 17,985 | 74,679 | |||||||
| Unrealized foreign exchange (gains) losses, net | (145,402 | ) | 52,519 | ||||||
| Gain on extinquishment of debt | (74,401 | ) | (1,843,292 | ) | |||||
| Loss on derivative securities | 4,701 | 155,918 | |||||||
| Reorganization expenses | 8,196 | – | |||||||
| Deferred tax provision | 26,752 | 120,688 | |||||||
| Minority interests in subsidiaries | (463 | ) | 23,987 | ||||||
| Share in results of affiliates, net | 2,699 | 70,962 | |||||||
| Cumulative effect of change in accounting principle | – | 1,344,722 | |||||||
| Change in receivables, net | (3,646 | ) | (6,526 | ) | |||||
| Change in other assets | (3,853 | ) | 11,074 | ||||||
| Change in accounts payable, accrued liabilities and other | 24,091 | (27,047 | ) | ||||||
| Net cash flows from operating activities | 74,427 | (77,112 | ) | ||||||
Cash Flows from Investing Activities |
|||||||||
| Purchase of short-term liquid investments | (957 | ) | (21,712 | ) | |||||
| Proceeds from sale of short-term liquid investments | 44,555 | 23,980 | |||||||
| Restricted cash (deposited) released, net | (130,169 | ) | 49,480 | ||||||
| New acquisitions, net of cash acquired | – | (252,728 | ) | ||||||
| Capital expenditures | (57,598 | ) | (114,660 | ) | |||||
| Purchase of interest rate swaps | (9,750 | ) | – | ||||||
| Other | 736 | 9,099 | |||||||
| Net cash flows from investing activities | (153,183 | ) | (306,541 | ) | |||||
Cash Flows from Financing Activities |
|||||||||
| Issuance of common stock | – | 200,006 | |||||||
| Proceeds from short-term and long-term borrowings | 1,481 | 576 | |||||||
| Proceeds from note payable to shareholder | – | 102,728 | |||||||
| Deferred financing costs | – | (13,008 | ) | ||||||
| Repayments of short-term and long-term borrowings | (10,354 | ) | (28,426 | ) | |||||
| Net cash flows from financing activities | (8,873 | ) | 261,876 | ||||||
Effect of Exchange Rates on Cash |
4,817 |
(22,540 |
) |
||||||
| Decrease in Cash and Cash Equivalents | (82,812 | ) | (144,317 | ) | |||||
| Cash and Cash Equivalents, Beginning of Period | 410,185 | 920,140 | |||||||
| Cash and Cash Equivalents, End of Period | $ | 327,373 | $ | 775,823 | |||||
Supplemental Cash Flow Disclosures: |
|||||||||
| Cash paid for reorganization expenses | $ | 3,076 | $ | – | |||||
| Cash paid for interest | $ | 71,895 | $ | 13,781 | |||||
| Cash received for interest | $ | 3,814 | $ | 8,252 | |||||
Non-cash Investing and Financing Activities: |
|||||||||
| Assumption of note payable for financial assets | $ | – | $ | 304,598 | |||||
| Issuance of common stock for financial assets | $ | 612,836 | $ | 1,206,441 | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
UnitedGlobalCom, Inc.
Notes to Condensed Consolidated Financial Statements
as of March 31, 2003
(Unaudited)
1. Organization and Nature of Operations
UnitedGlobalCom, Inc. (together with its consolidated subsidiaries, the "Company", "United", "we", "us" and/or "our") provides video, telephone and Internet access services, which the Company refers to as "Triple Play", or "Triple Play Distribution", in numerous countries worldwide. The following chart presents a summary of the Company's ownership structure as of March 31, 2003.
7
2. Risks, Uncertainties and Liquidity
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. On a consolidated basis, the Company has a net working capital deficiency as a result of recurring losses from operations and defaults under certain bank credit facilities, senior notes and senior discount note agreements. With the successful completion of the planned restructuring of UPC and refinancing of VTR's bank credit facility (as discussed below), management believes that on a consolidated basis the Company will have sufficient sources of capital, working capital and operating cash flows to enable it to continue as a going concern. While the Company is optimistic that each of these transactions will be completed successfully, the Company cannot give assurance that these transactions will be completed on terms that are acceptable to it or its operating subsidiaries or at all. Accordingly, there is substantial doubt regarding the Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company not be able to continue as a going concern.
United Corporate
As of March 31, 2003, including the effect of the SBS Transaction and excluding restricted cash, United had $47.8 million in cash on hand and negative working capital of $40.1 million, due primarily to notes payable to Liberty Media Corporation (together with its subsidiaries and affiliates "Liberty") totaling $102.7 million (due in January and February 2004). To meet its cash needs over the next year, United plans to raise capital through public and/or private deb