PrimaCom 6K Current report | PCAGY 16 Aug 05

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

For the six months ended June 30, 2005

PrimaCom AG

(Exact name of registrant as specified in its charter)

An der Ochsenwiese 3, 55124 Mainz, Germany
(Address of principal executive offices)

(Indicate by check mark whether the registrant filed or will file annual reports under cover of Form 20-F or Form 40-F)

Form 20-Fþ Form 40-F.o

Indicate by check mark whether the registrant by furnishing the information contained in this form is also there furnishing the commission pursuant to Rule 12g3-2 (b) under the securities Exchange Act of 1934.

Yeso Noþ

If “yes” is marked indicate below the file number assigned to the registrant in connection with Rule 12g3-2 (b): 82-___.

PrimaCom AG’s financial statements for the three months ending June 30, 2005 are attached to this Form 6-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


PRIMACOM AG

By:	/s/ HANS-WERNER KLOSE

Name:		Hans-Werner Klose
Titles:		Member of the Management Board

By:	/s/ WOLFGANG PREUSS

Name:		Wolfgang Preuss
Titles:		Chief Executive Officer and
		Member of the Management Board

Date: August 16, 2005

PRIMACOM AG

FORM 6-K

INDEX


		Page
Item 1	Financial Information

	Condensed consolidated statements of operations

	Three months ended June 30, 2005 and 2004		4

	six months ended June 30, 2005 and 2004		5

	Condensed consolidated balance sheets June 30, 2005 and December 31, 2004		6

	Condensed consolidated statements of cash flows six months ended June 30, 2005 and 2004		7

	Notes to condensed consolidated financial statements		8

Item 2	Management’s discussion and analysis of financial condition and results of operations		17

ITEM 1: FINANCIAL INFORMATION

PRIMACOM AG AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)


	For Three Months ended June 30,
	2004			2005			2005
	Euro			Euro			U.S.$
Revenues		52,167			55,953			67,692
Operating costs and expenses:
Operations		13,758			16,257			19,668
Selling, general and administrative		7,265			7,759			9,387
Corporate overhead		4,182			9,017			10,909
Depreciation and amortization		20,798			21,093			25,518

Total		46,003			54,126			65,482

Operating profit		6,164			1,827			2,210
Interest expense:
Convertible Second Secured Loan non-cash interest		11,851			14,444			17,474
Other bank interest and other interest		18,605			19,394			23,463

Total		30,456			33,838			40,937
Other (income)/expense		—			(1,055	)		(1,276	)
Loss from operations before income taxes and minority interest		(24,292	)		(30,956	)		(37,451	)
Income tax benefit/(expense)		(1,825	)		(219	)		(265	)

Loss before minority interest		(26,117	)		(31,175	)		(37,716	)
Minority interest in net income of subsidiaries		(22	)		54			65

Net loss		(26,139	)		(31,121	)		(37,651	)

Loss per share:
Basic and diluted:		(1.32	)		(1.57	)		(1.90	)

See accompanying notes to condensed consolidated financial statements.

PRIMACOM AG AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)


	For six Months ended June 30,
	2004			2005			2005
	Euro			Euro			U.S.$
Revenues		103,260			110,238			133,366
Operating costs and expenses:
Operations		27,052			31,740			38,399
Selling, general and administrative		14,797			15,891			19,225
Corporate overhead		8,251			14,533			17,582
Depreciation and amortization		41,531			42,329			51,210

Total		91,631			104,493			126,416

Operating profit		11,629			5,745			6,950
Interest expense:
Convertible Second Secured Loan non-cash interest		23,132			28,048			33,932
Other bank interest and other interest		37,255			38,392			46,447

Total		60,387			66,440			80,379
Other (income)/expense		(311	)		(988	)		(1,195	)
Loss from operations before income taxes and minority interest		(48,447	)		(59,707	)		(72,234	)
Income tax benefit/(expense)		(3,591	)		(429	)		(519	)

Loss before minority interest		(52,038	)		(60,136	)		(72,753	)
Minority interest in net income of subsidiaries		(44	)		30			36

Net loss		(52,082	)		(60,106	)		(72,717	)

Loss per share:
Basic and diluted:		(2.63	)		(3.04	)		(3.67	)

See accompanying notes to condensed consolidated financial statements.

PRIMACOM AG AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)


				June 30,
	December 31,			(unaudited)
	2004			2005			2005
	Euro			Euro			U.S.$
Cash		1,235			396			479
Trade accounts receivable — net		4,080			3,900			4,718
Other current assets		6,280			9,930			12,013

Total current assets		11,595			14,226			17,210

Property and equipment — net		427,166			403,600			488,275
Goodwill — net		359,710			359,710			435,177
Customer lists — net		39,397			36,744			44,453
Deferred tax assets		57,695			57,695			69,800
Other assets		31,375			28,002			33,877

TOTAL ASSETS		926,938			899,977			1,088,792


Accounts payable		11,457			11,109			13,440
Accrued expenses		56,465			78,658			95,160
Deferred revenue		2,076			3,721			4,501
Deferred purchase obligations		195			516			624
Sale-leaseback obligations — current		966			957			1,158
Bank and other debt — current		988,200			997,987			1,207,365

Total current liabilities		1,059,359			1,092,948			1,322,248

Sale-leaseback obligations		611			150			181
Deferred income taxes		64,958			64,958			78,586
TOTAL LIABILITIES		1,124,928			1,158,056			1,401,015

Minority interest		434			404			489

SHAREHOLDERS’ DEFICIENCY
Registered capital		50,614			50,614			61,233
Additional paid-in capital		361,262			361,309			437,112
Accumulated deficit		(610,300	)		(670,406	)		(811,057	)

TOTAL SHAREHOLDERS’ DEFICIENCY		(198,424	)		(258,483	)		(312,712	)


TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIENCY		926,938			899,977			1,088,792

See accompanying notes to condensed consolidated financial statements.

PRIMACOM AG AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)


	For the six months ended June 30,
	2004			2005			2005
	Euro			Euro			U.S.$
Operating Activities
Net cash provided by operating activities		16,707			33,724			40,800
Investing Activities
Purchases of property and equipment		(14,735	)		(15,639	)		(18,920	)
Proceeds from sale of property and equipment		46			106			128

Net cash used in investing activities		(14,689	)		(15,533	)		(18,792	)
Financing Activities
Repayments from credit facilities		—			(28,889	)		(34,950	)
Net proceeds from bank overdrafts		—			10,628			12,858
Repayments of sale-leaseback obligations		(879	)		(470	)		(569	)
Payment of deferred purchase obligations		(473	)		(299	)		(362	)

Net cash provided by (used in) financing activities		(1,352	)		(19,030	)		(23,023	)

Net increase in cash and cash equivalents		666			(839	)		(1,015	)
Cash and cash equivalents at beginning of period		5,252			1,235			1,494

Cash and cash equivalents at end of period		5,918			396			479

See accompanying notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

PrimaCom AG, (“PrimaCom”) and subsidiaries (“the Company”), a German stock corporation, was formed on December 30, 1998, by the merger (“the Merger”) of Süweda Elektronische Medien- und Kabelkommunikations-AG (“Süweda”) into KabelMedia Holding AG (“KabelMedia”), two similarly sized German cable television network operators. At the date of the Merger, KabelMedia was renamed PrimaCom AG. KabelMedia and Süweda had been in existence since 1992 and 1983, respectively. Under U.S. GAAP, the Merger was accounted for under the purchase method of accounting as a reverse acquisition by Süweda of KabelMedia even though KabelMedia issued shares to Süweda’s shareholders as consideration in the Merger and is the surviving legal entity.

Since KabelMedia’s inception in 1992, the Company has primarily owned and operated and acquired cable television networks in Germany. On September 18, 2000, with the acquisition of N.V. Multikabel (“Multikabel”), the Company expanded its operations from Germany to The Netherlands.

The accompanying unaudited condensed consolidated financial statements of PrimaCom AG have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 6-K. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six-month periods ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2004 included in the Company’s Annual Report on Form 20-F.

All amounts in the accompanying notes to the unaudited condensed consolidated financial statements refer to continuing operations unless otherwise noted.

All amounts herein are shown in Euro and for the three and six-month periods ended June 30, 2005 are also presented in U.S. dollars (“U.S.$”), presented solely for the convenience of the reader at the rate of€0.8266 = $1.00, the Noon Buying Rate of the Federal Reserve Bank of New York on June 30, 2005. The translations should not be construed as a representation that the amounts shown could have been, or could be, converted into U.S. dollars at that or any other rate.

The financial statements have been prepared by management in accordance with U.S. generally accepted accounting principles on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. Accordingly, the financial statements do not include any adjustments to recorded asset values that might be necessary should the Company be unable to continue as a going concern.

In addition to the current working capital deficiency and a shareholders’ deficit, the Company incurred losses of€118.1 million and€113.5 million for the years ended December 31, 2003 and 2004. In the three and six-month periods ending June 30, 2005, the Company incurred losses of€31.0 million and€60.0 million, respectively. As a result of the interest expense obligations under the Company’s bank debt, management expects significant losses to continue into the foreseeable future.

On December 9, 2004 the Company issued an Ad Hoc notice disclosing that PrimaCom AG and PrimaCom Management GmbH, a wholly owned subsidiary of the Company, had filed a law suit at the District Court Mainz against the holders of the Second Secured Loan under the Second Secured Credit Facility. The principal amount of the second secured loan is€375,000,000 (plus an amount of accrued capitalized interest). The law suit asked the court to determine whether PrimaCom AG and PrimaCom Management GmbH are obligated to pay the interest of the Second Secured Loan or whether the Second Secured Lenders are not able to enforce possible existing interest claims.

The Ad Hoc notice explained that the law suit is based on expert opinions obtained from the renowned accounting partnership (Wirtschaftsprüfersozietät) LKC Kemper Czarske v. Gronau Berz – functioning as independent investigator — as well as from Prof. Dr. Armbrüster on usurious credit and additionally an expert opinion from a renowned insolvency office – that the Second Secured Loan has an equity character, as defined in German law.

Should the law suit be successful in all points then no interest would have to be paid over the entire term of the second secured loan and interest already paid would be refundable to the Company.

On December 21, 2004 PrimaCom Management GmbH filed a further affirmative action claim at the District Court Frankfurt am Main against the Second Secured Lenders. In the affirmative action claim the court was asked to declare on whether the pledges of shares in certain of the Company’s subsidiaries as collateral for the Second Secured Loan are invalid and/or currently not enforceable.

Both court cases are currently pending.

As a consequence of the above developments and in particular due to the claimed equity character of the Second Secured Loan, it is not permissible under German insolvency law to continue to make interest payments as long as, and until a solution to the Company’s financial crisis is found. Therefore, the Company did not make the scheduled interest payment on the Second Secured Loan which was due on December 31, 2004 and was served with a notice of default on January 6, 2005. This non-payment of interest also triggered a cross default of the Senior Credit Facility (under which PrimaCom Management GmbH is the borrower). On December 31, 2004, PrimaCom Management GmbH received a waiver from the Senior Lenders for a period of sixty days for the cross default under the Senior Credit Facility and on March 3 2005 the Senior Lenders agreed to extend this waiver until March 7, 2005. Since March 7, 2005, the Company has also not made the schedule interest payments on the Second Secured Loans which were due on March 31, 2005 and June 30, 2005 for the reasons previously stated. In order for PrimaCom Management GmbH to be able to make use of the Senior Credit Facility on a monthly revolving basis, it is a condition that no Event of Default (as defined in the Senior Credit Facility Agreement) is outstanding on the date of a rollover of the Senior Loans. The Senior Lenders have provided waivers of the cross-defaults under the Senior Credit Facility Agreement as a result of the non-payment by the Company of interest on the Second Secured Lenders and other outstanding Events of Default in order to allow PrimaCom Management GmbH to continue to be able to make use of the Senior Credit Facility. In addition a claim was filed by the Second Secured Lenders in London for a declaration that the provisions of the Second Secured Facility Agreement, which oblige PrimaCom to pay interest to the Second Secured Lenders are valid and enforceable. However this case has been stayed pending the outcome of the German proceedings referred to above.

On March 8, 2005 following expiration of the standstill period governed by the inter-creditor agreement ,the Second Secured Lenders served PrimaCom AG with a notice of default and demand in which they have declared all of the Second Secured Loan immediately due and payable together with accrued interest and all other sums due under the Second Secured Credit Facility Agreement. In a separate letter PrimaCom Management GmbH, which is the guarantor of the Second Secured Loan, was notified of the above event of default. Subsequently the Second Secured Lenders have served Primacom AG with notices of default for failure to pay expenses, failure to execute pledges over the shares of one of our subsidiaries, a cross default in respect of failure to comply with the proforma debt service covenant of the Senior Credit Facility and failure to provide documents. On expiry of 180 days after notice of the Event of Default dated January 2005 8, (as referred to above) as governed by the inter-creditor agreement the Second Secured Lenders served notices of default and demand on Primacom Management GmbH and also commenced legal proceedings in which they demanded, under the guarantee and indemnity clauses of the Second Secured Facility, full repayment of the Second Secured Loan plus accrued interest due under the Second Secured Facility Agreement.

Since March 8, 2005 for PrimaCom AG and from July 7, 2005 for PrimaCom Management GmbH the Second Secured Lenders are entitled to petition or apply or vote in favour of any resolution for the winding up, dissolution, administration of or voluntary arrangement or insolvency proceedings in relation to PrimaCom AG and PrimaCom Management GmbH, respectively. Management believes that such enforcement action will be difficult given the pending court cases in Germany mentioned above and in any case that an assessment of the risks must be considered in light of any remedies or actions available to the Senior Lenders (whose claims to recoveries rank before those of the Second Secured Lenders).

In addition to the interest obligations under the Second Secured Credit Facility, the Company and PrimaCom Management GmbH must also comply with specific financial covenants included in the Senior Credit Facility Agreement and the Second Secured Credit Facility Agreement. Although the Company and PrimaCom Management GmbH have been able to comply with these covenants through June 30, 2005 (except that the Company was unable to comply with a pro forma debt service ratio covenant under the Senior Credit Facility Agreement for the testing periods ending December 31, 2004 March 31, 2005 and June 30, 2005), management anticipates that the Company will not be able to comply with certain of these covenants in the remainder of 2005. This non-compliance could result in the obligations of PrimaCom Management GmbH under the Senior Credit Facility becoming immediately payable to the Senior Lenders (the Second Secured Loans having already been declared immediately payable by PrimaCom AG and could therefore not be accelerated again as a result of any such non-compliance). In the case of a violation of a debt covenant, a waiver would need to be obtained from the lenders. The Company anticipates that it will not be able to obtain waivers if a violation of these covenants occurs and will not have the funds available to repay the debt if required by the lenders. Consequently the amounts outstanding under both, the Senior and Second Secured Facilities, have been classified as Current Liabilities.

In addition under the amortization schedule of Senior Credit Facility Agreement, PrimaCom Management GmbH will be required to make repayments of principal of approximately€57 million in the next 12 months. The Company does not anticipate that operating cash flows of the Company and PrimaCom Management GmbH will be sufficient to meet this schedule and therefore may run into liquidity problems in the fourth quarter of 2005 or the first quarter of 2006. These conditions raise substantial doubt about the Company’s and PrimaCom Management GmbH’s ability to continue as a going concern.

As a result of these conditions the Company has embarked on a restructuring plan under which it intends to sell its 100% subsidiary Multikabel, use the proceeds to repay the current Senior Facility, enter into a new senior loan agreement for the German business and use the proceeds to buy out the Second Secured Loan. While Management has made substantial progress and continues with negotiations and believes this to be viable option for the Company, Management can give no assurances on whether the Company will be able to obtain the necessary consents from the Second Secured Lenders to sell Multikabel, or whether the Company will be successful in obtaining a refinancing, nor on the extent to which the Company will be successful in negotiating a discharge of the Second Secured Facility.

2. RECLASSIFICATIONS

Certain amounts in the prior year have been reclassified to conform to the 2005 condensed consolidated financial statement presentation.

3. ACCOUNTING CHANGES

Significant Accounting Policies:The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions (see Note 2 of the notes to the consolidated financial statements). We believe the following significant accounting policies involve the most significant judgment and estimates used in the preparation of our consolidated financial statements.

Recently Issued Accounting Standards:On December 16, 2004, the FASB issued Statement No. 123 (revised 2004), “Share-Based Payment” (Statement 123(R)), which replaces Statement No. 123, “Accounting for Stock-Based Compensation” and supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” Statement 123(R) requires all companies to measure compensation cost for all share-based payments (including employee stock options) at fair value and recognize the cost in the financial statements beginning with the first interim or annual reporting period that begins after June 15, 2005. On April 14, 2005, the Securities and Exchange Commission announced that it would provide for a phased-in implementation process for FASB 123(R), Share-Based Payment. The SEC now requires that registrants adopt Statement 123(R)’s fair value of accounting for share-based payments to employees no later than the beginning of the first fiscal year beginning after June 15, 2005. The Company is required to adopt Statement 123(R) beginning January 1, 2006. Although the Company has not completed its analysis of the impact of the implementation of FAS 123(R), since the Company has been applying FASB Statement 123 versus APB Opinion No. 25,” the Company does not anticipate that the application of FASB 123(R) will have a material impact on the Company’s financial statements.

4. GOODWILL

On a yearly basis, the Company performs its required impairment testing of goodwill. As a result of the annual impairment tests for the years ending December 31, 2003 and 2004 goodwill was determined not to be impaired. The Company did not perform any interim testing of goodwill impairment for the three and six-month periods ending June 30, 2005.

The Company determines fair value using the discounted cash flows technique, which is subjective and requires management to use estimates of future cash flows and discount rates. Because these estimates of future cash flows are dependent on risks, uncertainties and other factors, the Company will continue to evaluate its estimates, which could result in the need to test goodwill for impairment prior to the annual test.

5. IMPAIRMENT OF PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

In order to assess impairment of property and equipment and intangible assets under US GAAP, we apply Statement Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. If management has concluded that impairment indicators exist, we test for impairment by comparing the sum of the future undiscounted cash flows derived from an asset or a group of assets to their carrying value. If the carrying value of the asset or the group of assets exceeds the sum of the future undiscounted cash flows, impairment is considered to exist and an impairment charge will be measured and recorded. An impairment charge is measured using an estimation of the assets’ fair value, typically using a discounted cash flow method. In 2003, the Company recorded a charge of approximately€3.0 million primarily attributable to impairment in both, Germany and the Netherlands on certain long-term assets associated with the digital cable business and€12.9 million in 2002 in the German segment only. In the Netherlands, our subsidiary Multikabel N.V. has a 15.7% investment in Mediakabel B.V. A decision has been taken by the shareholders of Mediakabel to liquidate the company at the end of 2005. The proceeds of the liquidation of Mediakabel are expected to fall below the current book value of the investment and consequently an impairment charge of€1,869,000 was recorded in 2004. No impairment charges were recorded by the Company in the quarter ended June 30, 2005.

The identification of impairment indicators, the estimation of future cash flows and the determination of fair values for assets or groups of assets requires management to make significant judgments concerning the identification and validation of impairment indicators, expected cash flows and applicable discount rates. If actual results differ from these estimates, or if we adjust these estimates in future periods, operating results could be significantly affected. In calculating fair value based on discounted cash flows, the Company makes significant estimates regarding the number of years of future cash flows, discount rates, and revenues, costs, and expenses in future periods. The number of years of future cash flows was based on the remaining useful life of the underlying assets, discount rates were determined based on relevant market data and revenues, costs and expenses were based on the Company’s business plan.

6. BANK AND OTHER DEBT

The Company has two existing credit agreements of initially€625.0 million revolving credit facility (“Facility”) (including a€15.0 million overdraft facility (“Overdraft Facility”)) and a€375.0 million working capital facility (“Second Secured Loan”). The Facility and the Overdraft Facility have a final maturity of December 31, 2009 and the Second Secured Loan has a final maturity date of March 31, 2010. However, the Second Secured Loan is convertible to common shares of PrimaCom Management GmbH at the option of the lenders based on predetermined financial ratios at any time on and after December 31, 2004.

The Second Secured Loan bears an interest rate from 18.0% to 20.0% over the term of the loan. For the six months period ended June 30, 2005, the interest rate was 20.0%, which includes both a cash interest portion of 12.0% and a non-cash interest portion of 8.0%. The non-cash interest obligation is capitalized to the outstanding loan amount and will be due upon repayment of the Second Secured Loan.

Amounts outstanding under the Facility bear interest at the rate of EURIBOR in the case of amounts owing in Euro and LIBOR in the case of amounts owing in a currency other than Euro plus a margin of between 0.75% and 2.25%, depending on the ratio of total indebtedness of the Company’s subsidiaries to annualized earnings before interest, tax, depreciation and amortization (“EBITDA”). The margin was 2.25% as of June 30, 2005.

As a result of the original debt issuance and subsequent refinancings of all three facilities, the Company incurred certain financing costs that are currently capitalized and included in other assets. The Company had approximately€24.515,000 of capitalized bank financing fees as of June 30, 2005. These costs are being amortized over the term of the related financing agreements as additional interest expense.

7. LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per share:


	Three months						Six months
	ended June 30,						ended June 30,
	2004			2005			2004			2005
Numerator:
Net loss (in€ thousands)		(26,139	)		(31,121	)		(52,082	)		(60,106	)
Denominator:
Weighted average shares		19,798,552			19,798,552			19,798,552			19,798,552
Basic and diluted loss per share (€)		(1.32	)		(1.57	)		(2.63	)		(3.04	)

Outstanding stock options are excluded from the loss per share calculation because the effect would be antidilutive.

8. LITIGATION RELATING TO PRIMACOM

The Company is currently in negotiations with third parties for the payment of current and past royalty fees. No formal settlement agreement has been reached as to final payment. The Company has accrued approximately€6,338,000 and€6,218,000 as of June 30, 2005 and December 31, 2004, respectively.

In December 2004, the Company filed a law suit at the District court of Mainz against the holders of the Second Secured Loan. The law suit should determine whether the Company and its subsidiary, PrimaCom Management GmbH, is obligated to pay the interest of the second secured loan. This implies that no interest would have to be paid over the entire term and that interest already paid should be refunded to the Company. Furthermore due to the conversion feature and therefore, the equity character of the Second Secured Loan, as furnished by an expert opinion, it is not possible under German law to continue to make interest payments as long as and until a solution to the financial crisis is found.

In December 2004, the Company filed an affirmative action claim against the Second Secured Lenders at the District Court of Frankfurt am Main. The court has been asked to declare on whether the pledges of shares of the subsidiaries of the Company, as collateral for the Second Secured Loan, are invalid, as at that time the requirements of the German Civil Code have not been met and therefore the security pledges of GmbH shares are, currently, not enforceable.

On 13 May 2005, J P Morgan Europe Limited, as Agent for the Senior Lenders, commenced proceedings in London, seeking a range of declaratory relief, including a declaration that the Senior Facility Agreement is valid, binding and enforceable in accordance with all of its terms. The proceedings are continuing.

On 7 July 2005, J P Morgan Europe Limited, as Agent for the Second Secured Lenders, commenced proceedings in London, seeking judgment against PrimaCom Management GmbH in respect of its alleged obligation to indemnify the Second Secured Lenders against all loss and damage arising under the Second Secured Facility Agreement. The proceedings are continuing.

In February 2001,Eisenhüttenstädter Wohnungsbaugenossenschaft e. G.sought confirmation at the regional court (Landgericht) in Frankfurt (Oder) that its concession agreement with a term of 25 years could be terminated earlier because the agreement contains an invalid standard non-negotiated term regarding the duration of the contract. The court has held that the concession agreement is terminable after 12 years on July 30, 2003. The Company is party to the proceedings has appealed this decision to the superior court (Oberlandesgericht) in Brandenburg. The appeal was dismissed on April 16, 2002. The pertinent Group Company has appealed the judgement of the superior court to the federal court of justice (Bundesgerichtshof– BGH). On December 6, 2002 the BGH reversed the judgment of the superior court and removed the action for a new hearing and decision since the superior court has not sufficiently analyzed the concession agreement and an overall consideration of

services, rights and duties is missing. The last hearing at the superior court in Brandenburg was on December 18, 2003. An order to take evidence has been pronounced on January 20, 2004. The next hearing at the superior court in Brandenburg will be on August 16, 2005.

In January 2002,Vereinigte Wohnungsgenossenschaft Arnstadt von 1954 e.G.through which the pertinent Group Company serves 3,018 subscribers sought judicial confirmation that its concession agreement with a term of 25 years could be terminated earlier. The last hearing at the chamber of commerce (Kammer für Handelssachen)in Erfurt was on June 26, 2003. Our intention to reach a settlement failed. On September 4, 2003 the court ordered that the parties have to answer certain questions raised by the court. The Company complied with the order. The hearing scheduled for August 5, 2005 has been cancelled by the court. A new hearing has not been yet scheduled.

In December 2002, the Company sought judicial confirmation that the 25-year-term concession agreement withWohnungsbaugenossenschaft “Hellersdorfer Kiez” eGthrough which the Company has served 2,058 subscribers could not be terminated earlier. The last hearing at the chamber of commerce (Kammer für Handelssachen) in Berlin was on September 3, 2003. The court pronounced a hearing of evidence and the appointment of an expert on November 12, 2003. The appointed expert was given instructions at a hearing which took place on January 18, 2005. The report of the expert has been submitted on March 15, 2005. The Company sent its last comments to court on June 23, 2005. A new hearing has until now not been pronounced.

In December 2003 the Company bought cable assets from the company Schellhammer GmbH in Singen. Subsequently the pertinent Primacom Group Company withdrew from the contract. Schellhammer GmbH filed an action against the pertinent Group Company in November 2004. In August 2005, the court declared the contract withdrawal to be invalid and found in favour of the claimant and decided that the pertinent Primacom Group Company must pay invoices from August 2004 until September 2004 in the amount of€24,259.39. Primacom intends to appeal this decision and the management of the Company expects to prevail in this matter.

The Company bought shares ofTKG Eisenhüttenstadt.The European Commission claims an incorrect bid. This could cause an action before the European Court of Justice.

A shareholders’ lawsuit has been filed against PrimaCom AG. The court has been asked to declare that PrimaCom AG should not be bound to uphold the commitments of the second secured facility agreement which, according to the claimants, is an interference in PrimaCom AG’s company structure and also an interference in shareholders’ rights. With the claim PrimaCom AG should be obliged to terminate the contract with the second secured lenders. A hearing has not been scheduled.

A former Multikabel management board member has again summoned the Company for the civil court for severance payments equal to five years of salaries. In the previous court case the claimer was awarded approximately 25% of the requested payments, but based on a recent Dutch Supreme Court jurisdiction the plaintiff sees reasons for a new case. The process is pending, and a decision is expected in the course of 2005.

QuickNet, a 100% Multikabel subsidiary, has an agreement with bbned for the delivery of DSL access services. bbned has failed to fulfil the obligations arising from that agreement. In February 2005 QuickNet has started civil proceedings in which bbned is hold responsible for the suffered damages caused by negligence (approx.€ 135.000). The process is pending; it is unclear when a decision can be expected.

The Company is part to routine litigation incidental to the normal conduct of business. In the opinion of management, the outcome of and liabilities in excess of what has been provided for related to these proceedings, in the aggregate, are not likely to be material to the financial condition or results of operations.

9. SEGMENT DISCLOSURE

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources to an individual segment and in assessing performance of the segment.

The Company has two reportable segments based on geographic location: Germany and The Netherlands. Both segments provide analog and digital cable programming, high-speed internet access and other network services.

Revenues from these four product categories are regularly reviewed by the chief operating decision maker or decision making group. However, for internal reporting purposes, the Company does not allocate operating costs and expenses to these product categories to evaluate their performance.

The Company evaluates performance and allocates resources based on profit or loss from operations before interest, taxes, depreciation and amortization. All elimination amounts in the segments relate primarily to intercompany transactions. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.


	Three months ended					Six months ended
	June 30,					June 30,
(in€ thousands)	2004		2005			2004		2005
Germany
Analog cable		28,280		27,215			56,685		54,690
Digital cable		166		183			337		346
High-speed internet		583		770			1,125		1,493
Other revenue		1,173		1,737			2,182		2,429

		30,202		29,905			60,329		58,958

The Netherlands
Analog cable		10,517		11,860			21,105		23,797
Digital cable		236		188			459		411
High-speed internet		7,915		9,739			15,274		19,025
Telephony		698		2,126			1,128		4,136
Other revenue		2,599		2,135			4,965		3,911

		21,965		26,048			42,931		51,280

Total revenues		52,167		55,953			103,260		110,238


Germany		1,830		(3,394	)		3,539		(4,079	)
The Netherlands		4,334		5,221			8,090		9,824

Total operating profit (loss)		6,164		1,827			11,629		5,745


Germany		15,642		17,729			30,631		33,891
The Netherlands		14,814		16,109			29,756		32,549

Total interest expense — net		30,456		33,838			60,387		66,440


Germany		12,482		12,008			24,848		23,973
The Netherlands		8,316		9,085			16,683		18,356

Total depreciation and amortization		20,798		21,093			41,531		42,329


Germany		206,341		206,200			206,341		206,200
The Netherlands		195,420		190,254			195,420		190,254

Total goodwill and customer lists		401,761		396,454			401,761		396,454


Germany		516,041		475,935			516,041		475,935
The Netherlands		368,330		352,121			368,330		352,121

Total long-lived assets		884,371		828,056			884,371		828,056


Germany		565,147		512,475			565,147		512,475
The Netherlands		408,501		387,502			408,501		387,502

Total assets		973,648		899,977			973,648		899,977


Germany		3,842		3,803			6,018		6,431
The Netherlands		4,164		3,770			8,717		9,208

Total capital expenditures		8,006		7,573			14,735		15,639

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Three months ended June 30, 2004 and June 30, 2005

Revenues.Revenues primarily include monthly subscription fees received for providing analog television, digital television and high speed Internet access, telephony, and data communication services, to our subscriber base. In addition to monthly subscription fees, we also receive revenue from our subscribers for installation, connection and administrative services. We receive recurring revenue for the lease of fiber optic capacity to businesses within our franchise areas. We also receive carriage fees from program producers, advertising revenue and other revenue related to the on-going operations and services provided to third parties and our subscriber base.

Total revenues increased by 7.3% from€52,167,000 in the second quarter of 2004 to€55,953,000 in the second quarter of 2005.


	June 30		June 30
	2004		2005
Homes passed by coax (450 MHz networks)		1,362,006		1,334,949
Homes passed by fiber (862 MHz networks)		591,638		631,581

Total homes passed		1,953,644		1,966,530

Total ready-for-service homes (862 MHz networks)		461,443		502,702

Analog CATV subscribers (450 MHz networks)		873,803		819,883
Analog CATV subscribers (862 MHz networks)		412,686		444,803

Total analog-TV-subscribers		1,286,489		1,264,686

Digital TV subscribers		11,875		15,775
Internet subscribers		110,657		141,366
Telephony subscribers		10,360		26,365
Data communication subscribers		958		617

Total revenue generating units		1,420,339		1,448,809

The number of revenue generating units increased by 28,470 from 1,420,339 at June 30, 2004 to 1,448,809 at June 30, 2005. The primary factor responsible for this growth was the increase in high-speed Internet access and telephony customers in The Netherlands.

Revenue from the analog cable television subscriber base increased by€278,000 from€38,797,000 in the second quarter of 2004 to€39,075,000 in the second quarter of 2005. In The Netherlands, analog cable television revenue increased from€10,517,000 in the second quarter of 2004 to€11,860,000 in the second quarter of 2005. The 12.8% increase in Multikabel’s analog cable television revenues results largely from the inclusion of basic digital services in a new bundled product following a change in product strategy. In Germany, the revenue generated from the analog cable television business decreased to€27,215,000 in the second quarter 2005 down from€28,280,000 for the same period in 2004, as a result of reductions in subscribers mainly as a consequence of demographic effects in the eastern part of Germany. The average monthly revenue per analog television subscriber was€10.30 for the three-month period ended June 30, 2005 and€10.04 for the three-month period ended June 30, 2004. Multikabel reported average monthly revenue per analog cable television

subscriber of€12.46 and our German operations reported average monthly revenue of€9.58 in the second quarter ended June 30, 2005, compared with€11.09 and€9.70, respectively, in the same period of 2004.

For the second quarter ended June 30, 2005, we passed 631.581 homes with fiber optic cable and upgraded 502.702 homes to 862 MHz with two-way capability (ready-for-service-homes). Multikabel services 328.476 of the ready-for-service homes at June 30, 2005. The remaining 174.226 ready-for-service homes were upgraded homes in Germany. Including the Multikabel subscribers, approximately 39.7% of our subscriber base is now fully upgraded to 862 MHz and is two-way capable. In addition to analog cable service, these upgraded networks are capable of delivering digital cable television, high-speed Internet access, telephony and data communication-services.

For the second quarter of 2005, high-speed Internet access contributed€10,509,000 to revenue compared with€8,498,000 in the second quarter of 2004. Strong growth in our subscriber base for this product was the primary factor for this increase. Total high-speed Internet subscribers increased by 27.8% from 110,657 at June 30, 2004 to 141,366 at June 30, 2005. Penetration of high-speed Internet access customers to ready-for-service homes increased from 24.0% in the second quarter of 2004 to 28.1% in the second quarter of 2005. The average monthly revenue per subscriber decreased from€27.42 in the second quarter of 2004 to€25.26 in the second quarter of 2005, primarily due to the introduction of new lower rate packages in our Netherlands subsidiary to provide more attractive pricing to our customers.

For the second quarter of 2005, Multikabel contributed€9,739,000 of high-speed Internet access revenue compared with€7,915,000 in the second quarter of 2004. The increase was due to strong growth in the subscriber base for this product. Total high-speed Internet subscribers in The Netherlands increased by 26.0% from 101.499 at June 30, 2004 to 127,880 at June 30, 2005. Penetration of high-speed Internet access customers to ready-for-service homes increased from 31.3% in the second quarter of 2004 to 38.9% in the second quarter of 2005. The average monthly revenue per subscriber decreased from€27.87 in the second quarter of 2004 to€25.81 in the second quarter of 2005 as we increased volume through competitive pricing and introduced new lower rate packages to extend our product portfolio and attract additional subscribers in low penetration rate market segments.

In Germany, high-speed Internet access revenue increased by 32.1% from€583,000 in the second quarter of 2004 to€770,000 in the second quarter of 2005. The average monthly revenue per subscriber in Germany decreased from€22.49 in the second quarter 2004 to€19.90 in the second quarter 2005 as we increased volume through the introduction of flexible rates. At June 30, 2004, we served 9,158 customers compared with 13,486 at June 30, 2005. Penetration of high-speed Internet access customers to ready-for-service homes was 7.7% at June 30, 2005 compared with 6.7% at June 30, 2004.

We expect high-speed Internet access subscribers, and therefore penetration to ready-for-service homes, to continue to increase at strong growth rates over the next few years in both The Netherlands and Germany. However, average revenue per subscriber is expected to be subject to stronger competition than in the past.

Digital television revenue decreased from€402,000 in the second quarter of 2004 to€371,000 in the second quarter of 2005. The number of subscribers increased from 11,875 at June 30, 2004 to 15,775 at June 30, 2005. At June 30, 2005 the penetration rate for digital subscribers for our ready-for-service homes was 3.1%.

In Germany, revenue from digital television increased from€166,000 in the second quarter of 2004 to€183,000 in the second quarter of 2005. . Total subscribers decreased from 5,596 at June 30, 2004 to 4,689 at June 30, 2005. Digital ARPU’s improved due to the higher uptake of pay per view products in the period. At June 30, 2005 the penetration rate for digital subscribers for our ready-for-service homes in Germany was 2.7%.

At June 30, 2005, Multikabel served 11,086 digital television subscribers, compared with 6,279 at June 30, 2004. Multikabel contributed digital television revenue of€188,000 for second quarter of 2005 compared to€236,000 for the second quarter of 2004. As mentioned above, basic digital services are now included in a new bundled product reported under analog revenues. In the quarter ended June 30, 2005, digital revenues reflect only revenues from new services. At June 30, 2005 the penetration rate for digital subscribers for our ready-for-service homes at Multikabel was 3.4% compared with 1.9% at June 30, 2004.

The development of digital television subscribers and revenue growth continues to be below our expectations. We are continually reviewing the product in order to make it more attractive to consumers or to reduce the cost associated with delivering the product.

Other revenue includes revenue we receive in The Netherlands for data communication services that we provide to small-and medium-sized businesses and schools. Multikabel served approximately 617 small-and medium-sized businesses and schools as of June 30, 2005, which contributed€1,157,000 of revenue for the second quarter of 2005. As of June 30, 2004, Multikabel served 915 small- and medium-sized businesses and schools, which contributed€1,166,000 to revenue in the second quarter of 2004.

In the addition, other revenue in Germany and The Netherlands increased from€2,606,000 in the second quarter of 2004 to€2,715,000 in the second quarter of 2005.

The following table reconciles average revenue per subscriber (ARPU) to our U.S. GAAP consolidated financial statements:


	Germany				The Netherlands				Total
	June 30				June 30				June 30
	2004		2005		2004		2005		2004		2005
Revenues (€ in thousands)
Analog		28,280		27,215		10,517		11,860		38,797		39,075
Digital		166		183		236		188		402		371
Internet		583		770		7,915		9,739		8,498		10,509
Telephony		—		—		698		2,126		698		2,126
Other		1,173		1,737		2,599		2,135		3,772		3,872

		30,202		29,905		21,965		26,048		52,167		55,953


Average subscribers
Analog		972,150		947,076		316,200		317,353		1,288,350		1,264,429
Digital		5,735		4,783		6,249		10,597		11,984		15,380
Internet		8,641		12,897		94,683		125,766		103,324		138,663
Telephony		—		—		8,120		24,762		8,120		24,762
Data communication		—		—		937		619		937		619

ARPU (in€)
Analog		9.70		9.58		11.09		12.46		10.04		10.30
Digital		9.65		12.75		12.59		5.91		11.18		8.04
Internet		22.49		19.90		27.87		25.81		27.42		25.26

Operations. Operations costs include signal delivery fees paid to Kabel Deutschland GmbH and private successor network operators in Germany, city connection costs, Internet feed costs, copyright royalties, and the labor and materials associated with the repair and maintenance of our networks.

Operations costs increased by 18.2% from€13,758,000 in the second quarter of 2004 to€16,257,000 in the second quarter of 2005. The increase in costs is largely attributable to set up costs on new telephone customers plus interconnection fees which increase directly with revenues. In addition, operation costs in the second quarter of 2005 included higher access fees for the increase in ADSL-customers.

Selling, General and Administrative. Selling, general and administrative expenses primarily include salaries and wages of personnel directly involved in the sales, general and administrative functions of our operating companies, expenses of maintaining our operating offices, marketing expenses, sales commissions, costs of consultants used to support our operating activities, automobile expenses, certain cash management expenses, billing expenses, office supplies and other expenses associated with the operation of our networks and services.

Selling, general and administrative expenses increased by 6.8% to€7,759,000 in the second quarter of 2005 from€7,265,000 in the second quarter of 2004. The increase results primarily, in the Netherlands, from investment in personnel and marketing to support the growth in Internet sales and also costs arising from the introduction of a new billing/CRM system to support the increased customer base.

Corporate Overhead.Corporate overhead includes the salaries and wages of all senior management, the company’s information technology group, certain product development and certain accounting personnel, the cost of the corporate offices, the cost of license fees associated with our billing and financial accounting systems, bank fees and other expenses related to the corporate offices.

Corporate overhead increased by 115.6% from€4,182,000 in the second quarter of 2004 to€9,017,000 in the second quarter of 2005, with ongoing cost savings being offset by extra costs and professional fees incurred in relation to our financial restructuring. In the quarter ended June 30, 2005, the Company recorded charges of approximately€6.1 million in respect of professional fees related to the ongoing efforts to achieve financial restructuring of the Company. Of the€6.1 million,€5.9 million relates to the indemnification by PrimaCom, under the Senior and Second Secured Facility agreements, of costs incurred by the respective bank groups for their legal and accounting advice, together with the corresponding costs of PrimaCom’s own lawyers.

Depreciation and Amortization.Depreciation and amortization increased by 1.4% from€20,798,000 in the second quarter of 2004 to€21,093,000 in the second quarter of 2005.

Operating Profit. Operating profit decreased by€4,337,000 from€6,164,000 in the second quarter of 2004 to a profit of€1,827,000 in the second quarter of 2005.

Interest Expense.Interest expense includes interest on our revolving credit and convertible second secured borrowings, capital lease obligations and other borrowings, changes in the fair market value of our interest rate derivatives, payment of unused facility fees and the amortization of front-end finance fees paid to obtain bank borrowings.

Interest expense increased by€3,382,000 from€30,456,000 in the second quarter of 2004 to€33,838,000 in the second quarter of 2005.

For the second quarter of 2005, interest on the convertible second secured credit facility amounted to a total of€26,953,000 (€14,444,000 non-cash interest expense plus€12,509,000 cash interest expense), as compared with€23,226,000 (€11,851,000 non-cash interest expense plus€11,375,000 cash interest expense) during the second quarter of 2004.

The average amount outstanding under our revolving credit facility decreased from€494.7 million in the second quarter of 2004 to€480.5 million in the second quarter of 2005. In the second quarter of 2005, the average cash interest rate on the revolving credit bank borrowings remained at 4.4% unchanged from second quarter 2004.

On March 26, 2002, we drew down the entire amount from the€375.0 million convertible second secured credit facility. In the second quarter of 2005, the average outstanding under the facility had, through the accumulation of non-cash interest, increased to€517.9 million. The average interest rate on the convertible second secured borrowings was 20.0% during the second quarter of 2005 compared with 20.0% in the second quarter of 2004. Of the 20.0%, interest rate 12.0% (12.0% in 2004) is calculated on the initial borrowings of€375.0 million and is payable on a quarterly basis. The remaining 8.0% (8.0% in 2004) non-cash interest is added every quarter to the principle amount of the initial drawdown of€375.0 million. Ongoing non-cash interest is calculated on the accumulated amount. Under our convertible secured credit facility agreement, non-

cash interest can be added to the accumulated principle balance until maturity in March 31, 2010, at which time the non-cash interest is payable in full.

In total average indebtedness increased from€957.1 million in the second quarter of 2004 to 996.9 million in the second quarter of 2005. The increase in average indebtedness is due primarily to the accumulation of non-cash interest. Interest expense in the second quarter of 2004 and 2005 also includes€1,673,000 relating to the amortization of capitalized finance fees.

Loss from Operations Before Income Taxes and Minority Interest.Loss from continuing operations before income taxes and other items increased by€6,664,000 for the reasons discussed in the above sections from€24,292,000 in the second quarter of 2004 to€30,956,000 in the second quarter of 2005.

Income Tax Expense.Income tax expense of€219,000 was recorded in the second quarter of 2005, compared with an income tax expense of€1,825,000 in the second quarter of 2004. The higher tax expense in the second quarter of 2004 was primarily due to the limited deductability of interest in one of our group companies.

Minority Interest in Net Income of Subsidiaries.Due to the deterioration of profitability in certain of our subsidiary companies, the total amount we are required to record as a liability for minority interest has decreased in the three month period ending June 30, 2005, resulting in an income for the quarter of€54,000.

Net Loss. Net loss increased from€26,139,000 in the second quarter of 2004 to€31,121,000 in the second quarter of 2005.

EBITDA.In addition to other measurements, some of which are reflected in our statement of operations data, we measure financial performance by EBITDA. We define EBITDA as earnings before extraordinary items, cumulative effect of change in accounting principles, discontinued operations, minority interests, net interest expense, income taxes and depreciation and amortization. We believe that EBITDA is a meaningful measure of performance because it is a commonly used measure in the cable television industry to analyze and compare cable television companies on the basis of operating performance, leverage and liquidity. EBITDA is not a U.S. GAAP measure of income (loss) or cash flow from operations and should not be considered as an alternative to net income as an indication of our financial performance or as an alternative to cash flow from operating activities as a measure of liquidity. EBITDA decreased by 15.0% from€26,962,000 for the three months ended June 30, 2004 to€22,920,000 for the three months ended June 30, 2005, mainly as a result of higher restructuring expenses.

The following schedule reconciles EBITDA to our U.S. GAAP financial statements:


	For three months ended
	June 30,
	(in€ thousands)
	2004		2005
Operating profit		6,164		1,827
Depreciation and amortization		20,798		21,093

EBITDA		26,962		22,920

Six months ended June 30, 2004 and June 30, 2005

Revenues.Total revenues increased by 6.8% from€103,260,000 in the first half of 2004 to€110,238,000 in the first half of 2005.

Revenue from the analog cable television subscriber base increased by€697,000 from€77,790,000 in the first half of 2004 to€78,487,000 in the first half of 2005. In The Netherlands, analog cable television revenue increased from€21,105,000 in the first half of 2004 to€23,797,000 in the first half of 2005. The 12.8% increase in Multikabel’s analog cable television revenues results largely from the inclusion of basic digital services in a new bundled product following a change in product strategy. In Germany, the revenue generated from the analog cable television business decreased to€54,690,000 in the first half 2005 down from€56,685,000 for the same period in 2004, as a result of reductions in subscribers mainly as a consequence of demographic effects in the eastern part of Germany. The average monthly revenue per analog television subscriber was€10.33 for the six-month period ended June 30, 2005 and€10.03 for the six-month period ended June 30, 2004. Multikabel reported average monthly revenue per analog cable television subscriber of€12.54 and our German operations reported average monthly revenue of€9.59 in the first half ended June 30, 2005, compared with€11.14 and€9.67., respectively, in the same period of 2004.

For the first half of 2005, high-speed Internet access contributed€20,518,000 to revenue compared with€16,399,000 in the first half of 2004. Strong growth in our subscriber base for this product was the primary factor for this increase. The average monthly revenue per subscriber decreased from€27.99 in the first half of 2004 to€25.51 in the first half of 2005, primarily due to the introduction of new lower rate packages in our Netherlands subsidiary to provide more attractive pricing to our customers.

For the first half of 2005, Multikabel contributed€19,025,000 of high-speed Internet access revenue compared with€15,274,000 in the first half of 2004. The increase was due to strong growth in the subscriber base for this product. The average monthly revenue per subscriber decreased from€28.41 in the first half of 2004 to€25.99 in the first half of 2005 as we increased volume through competitive pricing and introduced new lower rate packages to extend our product portfolio and attract additional subscribers in low penetration rate market segments.

In Germany, high-speed Internet access revenue increased by 32.7% from€1,125,000 in the first half of 2004 to€1,493,000 in the first half of 2005. The average monthly revenue per subscriber in Germany decreased from€23.32 in the first half 2004 to€20.65 in the first half 2005 as we increased volume through the introduction of flexible rates.

Digital television revenue decreased from€796,000 in the first half of 2004 to€757,000 in the first half of 2005.

In Germany, revenue from digital television increased from€337,000 in the first half of 2004 to€346,000 in the first half of 2005. Multikabel contributed digital television revenue of€411,000 for first half of 2005 compared with€459,000 for the first half of 2004. As mentioned above, basic digital services are now included in a new bundled product reported under analog revenues. In the first half ended June 30, 2005, digital revenues reflect only revenues from new services.

Other revenue includes revenue we receive in The Netherlands for data communication services that we provide to small-and medium-sized businesses and schools, which contributed€2,267,000 of revenue for the

first half of 2005. As of June 30, 2004, small- and medium-sized businesses and schools contributed€2,545,000 to revenue in the first half of 2004.

In the addition, other revenue in Germany and The Netherlands decreased from€4,602,000 in the first half of 2004 to€4,073,000 in the first half of 2005.

The following table reconciles average revenue per subscriber (ARPU) to our U.S. GAAP consolidated financial statements:


	Germany				The Netherlands				Total
	June 30				June 30				June 30
	2004		2005		2004		2005		2004		2005
Revenues (€ in thousands)
Analog		56,685		54,690		21,105		23,797		77,790		78,487
Digital		337		346		459		411		796		757
Internet		1,125		1,493		15,274		19,025		16,399		20,518
Telephony		—		—		1,128		4,136		1,128		4,136
Other		2,182		2,429		4,965		3,911		7,147		6,340

		60,329		58,958		42,931		51,280		103,260		110,238


Average subscribers
Analog		977,307		950,354		315,693		316,367		1,293,000		1,266,721
Digital		5,897		4,934		6,154		9,174		12,051		14,108
Internet		8,042		12,048		89,619		122,002		97,661		134,050
Telephony		—		—		6,782		22,795		6,782		22,795
Data communication		—		—		935		698		935		698

ARPU (in€)
Analog		9.67		9.59		11.14		12.54		10.03		10.33
Digital		9.52		11.69		12.43		7.47		11.01		8.94
Internet		23.32		20.65		28.41		25.99		27.99		25.51

Operations costs increased by 17.3% from€27,052,000 in the first half of 2004 to€31,740,000 in the first half of 2005. The increase in costs is largely attributable to set up costs on new telephone customers plus interconnection fees which increase directly with revenues. In addition, operation costs in the first half of 2005 included higher access fees for the increase in ADSL-customers.

Selling, general and administrative expenses increased by 7.4% to€15,891,000 in the first half of 2005 from€14,797,000 in the first half of 2004. The increase results primarily, in the Netherlands, from investment in personnel and marketing to support the growth in Internet sales and also costs arising from the introduction of a new billing/CRM system to support the increased customer base.

Corporate overhead increased by 76.1% from€8,251,000 in the first half of 2004 to€14,533,000 in the first half of 2005, with ongoing cost savings being offset by extra costs and professional fees incurred in relation to our financial restructuring. In the six months ended June 30, 2005, the Company recorded charges of approximately€9.1 million in respect of professional fees related to the ongoing efforts to achieve financial restructuring of the Company. Of the€9.1 million,€8.8 million relates to the indemnification by PrimaCom, under the Senior and Second Secured Facility agreements, of costs incurred by the respective bank groups for their legal and accounting advice, together with the corresponding costs of PrimaCom’s own lawyers.

Depreciation and Amortization.Depreciation and amortization increased by 1.9% from€41,531,000 in the first half of 2004 to€42,329,000 in the first half of 2005.

Operating Profit. Operating profit decreased by€5,884,000 from€11,629,000 in the first half of 2004 to a profit of€5,745,000 in the first half of 2005.

Interest expense increased by€6,053,000 from€60,387,000 in the first half of 2004 to€66,440,000 in the first half of 2005.

For the first half of 2005, interest on the convertible second secured credit facility amounted to a total of€52,450,000 (€28,048,000 non-cash interest expense plus€24,402,000 cash interest expense), as compared with€45,882,000 (€23,132,000 non-cash interest expense plus€22,750,000 cash interest expense) during the first half of 2004.

The average amount outstanding under our revolving credit facility decreased from€494.6million in the first half of 2004 to€484.1 million in the first half of 2005. In the first half of 2005, the average cash interest rate on the revolving credit bank borrowings remained at 4.4% unchanged from first half 2004.

On March 26, 2002, we drew down the entire amount from the€375.0 million convertible second secured credit facility. In the first half of 2005, the average outstanding under the facility had, through the accumulation of non-cash interest, increased to€511.0 million. The average interest rate on the convertible second secured borrowings was 20.0% during the first half of 2005 compared with 20.0% in the first half of 2004. Of the 20.0%, interest rate 12.0% (12.0% in 2004) is calculated on the initial borrowings of€375.0 million and is payable on a quarterly basis. The remaining 8.0% (8.0% in 2004) non-cash interest is added every quarter to the principle amount of the initial drawdown of€375.0 million. Ongoing non-cash interest is calculated on the accumulated amount. Under our convertible secured credit facility agreement, non-cash interest can be added to the accumulated principle balance until maturity in March 31, 2010, at which time the non-cash interest is payable in full.

In total average indebtedness increased from€957.1 million in the first half of 2004 to€996.9 million in the first half of 2005. The increase in average indebtedness is due primarily to the accumulation of non-cash interest. Interest expense in the first half of 2004 and 2005 also includes€3,347,000 relating to the amortization of capitalized finance fees.

Loss from Operations Before Income Taxes and Minority Interest.Loss from continuing operations before income taxes and other items increased by€11,260,000 for the reasons discussed in the above sections from€48,447,000 in the first half of 2004 to€59,707,000 in the first half of 2005.

Income Tax Expense.Income tax expense of€429,000 was recorded in the first half of 2005, compared with an income tax expense of€3,591,000 in the first half of 2004. The higher tax expense in the first half of 2004 was primarily due to the limited deductability of interest in one of our group companies.

Minority Interest in Net Income of Subsidiaries.Due to the deterioration of profitability in certain of our subsidiary companies, the total amount we are required to record as a liability for minority interest has decreased in the six month period ending June 30, 2005, resulting in an income for the quarter of€30,000.

Net Loss. Net loss increased from€52,082,000 in the first half of 2004 to€60,106,000 in the first half of 2005.

EBITDA.In addition to other measurements, some of which are reflected in our statement of operations data, we measure financial performance by EBITDA. We define EBITDA as earnings before extraordinary items, cumulative effect of change in accounting principles, discontinued operations, minority interests, net interest expense, income taxes and depreciation and amortization. We believe that EBITDA is a meaningful measure of performance because it is a commonly used measure in the cable television industry to analyze and compare cable television companies on the basis of operating performance, leverage and liquidity. EBITDA is not a U.S. GAAP measure of income (loss) or cash flow from operations and should not be considered as an alternative to net income as an indication of our financial performance or as an alternative to cash flow from operating activities as a measure of liquidity. EBITDA decreased by 9.6% from€53,160,000 for the six months ended June 30, 2004 to€48,074,000 in the first half of 2005, mainly as a result of higher restructuring expenses.

The following schedule reconciles EBITDA to our U.S. GAAP financial statements:


	For six months ended June
	30,
	(in€ thousands)
	2004		2005
Operating profit		11,629		5,745
Depreciation and amortization		41,531		42,329

EBITDA		53,160		48,074

LIQUIDITY AND CAPITAL RESOURCES

We have historically relied on three sources for necessary funding:

	•		cash flow from operations,

	•		sale-lease back transactions, and

	•		borrowings under our bank facilities.

For the six months ended June 30, 2005 net cash of€33,724,000 was provided by operating activities.

For the six months ended June 30, 2005 we used cash in investing activities of€15,533,000. Net cash used in financing activities amounted to€19,030,000.

The€15,533,000 we invested in capital expenditures for the six months ended June 30, 2005 was invested in Germany and The Netherlands to replace electronic components and improve the technical standards of our network in Germany. We have only minimal commitments to make capital expenditures under the terms of our concession or franchise agreements or otherwise, but anticipate that we will also make capital expenditures in the near future to selectively upgrade existing cable systems.

At June 30, 2005, our aggregate consolidated indebtedness was approximately€999.6 million, comprised of approximately€998.0 million of bank debt outstanding,€1.1 million of capital leases obligations, and€0.5 million of deferred purchase obligations.

On September 18, 2000, our wholly-owned subsidiary PrimaCom Management GmbH entered into a€1,000,000,000 reducing senior secured revolving credit facility with a number of lenders. The senior secured facility was put in place to refinance all outstanding debt at that time, to fund the acquisition of Multikabel, future capital expenditures and acquisitions and for other general corporate purposes. Under the terms of the senior secured revolving credit facility, our subsidiaries may borrow, repay and reborrow, up to the commitment amounts, until December 31, 2009, when all amounts will become due and payable. As required by a condition to the senior secured facility, PrimaCom AG also entered into a€375,000,000 working capital facility concurrently with entering into the senior secured facility. The working capital facility was intended as a means by which PrimaCom AG could access longer-term unsecured debt financing, which would benefit the lenders under the senior secured facility, in the event the high yield note issuance contemplated by PrimaCom AG at the time was not completed. The working capital facility was committed until May 15, 2001. At that time, we or the senior secured facility lenders could request that the working capital facility be drawn, with the proceeds being used to repay borrowings under the senior secured facility. If the working capital facility had been drawn, it would have converted to a loan or debt security with a ten-year maturity. The interest rate on the working capital facility would have been no less than 13% per annum and no greater than a cap based on current trading yields of high yield securities issued by comparable companies. In the event that the working capital facility remained outstanding beyond September 30, 2001, PrimaCom also agreed to issue contingent value rights which would provide the facility holders with an economic benefit payable in cash equivalent to that which they would have received had they exercised warrants to acquire up to 5% of our equity capital at prices based on relevant market values. Therefore, we entered into a Contingent Value Right (“CVR”) Agreement, which was a condition precedent to the obligations of the lenders under the Senior Working Capital Facility. Pursuant to the CVR Agreement, we were required, if requested on or before September 18, 2010, to make a payment in either cash or common shares to the holders of each CVR Certificate equal to the difference between the market price of a share of our common stock on the date of exercise of such CVR and 110% of the market price of a share of such common stock on the relevant release date, being September 30, 2001, December 31, 2001, March 31, 2002 and June 30, 2002, subject to the provisions of the CVR Agreement, in particular various provisions protecting the holders of CVR Certificates against dilution. The total number of CVRs to be issued under the CVR Agreement equaled five percent of the outstanding number of our shares. The total amount of CVR’s to be issued under this assignment was 989,300.

On March 8, 2004 PrimaCom AG signed a contingent value rights termination agreement with a number of entities which are past or present holders of contingent value rights under the CVR Agreement and the agent under the CVR Agreement and Escrow Agent in relation to such contingent value rights. All parties to the contingent value rights termination agreement agreed that all contingent value rights issued and not already cancelled would be cancelled and terminated on an effective date, such effective date to be conditional upon certain matters being satisfied. The Contingent Value Rights Termination Agreement was effective on March 16, 2004.

In connection with the release of CVR’s on September 30, 2001 and December 31, 2001, the Company recorded€1,063,000 to other assets and additional paid in capital for the fair value of the CVR’s on those dates. The amount capitalized in other assets was amortized as bank debt interest straight-line over the remaining life of the Senior Working Capital Facility. Amortization expense relating to CVR’s included in other assets was approximately€19,000,€147,000 and€133,000 in 2001, 2002 and 2003, respectively. The remaining balance of€ 764,000 in other assets related to CVR’s was written off at the time of cancellation.

Under the terms of the Revolving Credit Facility, our subsidiaries may borrow, repay and reborrow, up to the commitment amounts until December 31, 2009, when all amounts will become due and payable.

We announced our proposed merger with UPC Germany on March 29, 2001 and requested an extension of the commitment under the working capital facility until the merger could be consummated. On May 15, 2001 the lenders under our senior secured and working capital facilities agreed to an extension of the commitment under the working capital facility until November 15, 2001. In addition, we agreed with the lenders under the working capital facility to a cap on cash interest of 16% and on total interest of 18%. It was also agreed that on November 15, 2001 either we or the lenders under the senior secured revolving credit facility could request that the working capital facility be drawn. If drawn, the working capital facility would then have converted to a ten-year security or loan.

On August 26, 2001, UPC notified us it would not vote in favor of our merger with UPC Germany, and the merger was removed from the agenda of our shareholders’ meeting held on August 28, 2001. Between September 18, 2000, on which our credit facilities were entered into and August 2001, when the proposed merger failed to proceed, the market for high-yield debt had deteriorated significantly for broadband communications companies, as a result of which we concluded that it was not realistic for us to seek to access that market in the near to medium term. As a result, we immediately initiated negotiations with the lenders under our senior secured revolving credit facility and working capital facilities, with a view to amending certain terms of the working capital facility which might in the future otherwise have resulted in non-compliance with financial covenants included in those facilities if the working capital facility were drawn in full. The lending commitment and date of any mandatory drawing under the working capital facility were extended on three further occasions while these negotiations progressed, upon payment by us of commitment and other fees totaling approximately€25,000,000.

On March 26, 2002, we completed the refinancing of our senior secured revolving credit and working capital facilities. The amended working capital facility was conditionally replaced by a€375,000,000 convertible second secured term loan facility, which was drawn down in full on March 26, 2002. Those borrowings were used to repay an equivalent amount of outstanding borrowings under the senior secured facility. In addition, the lending commitment under the senior secured facility was reduced by the amount of the borrowings under the convertible second secured term loan facility, to€625,000,000. Approval of the modifications to our debt facilities by our shareholders was obtained on June 5, 2002.

The available commitment under the senior secured facility reduces in quarterly amounts beginning March 31, 2003. Additionally as part of our restructuring negotiations, we agreed to further reductions in the unused facility effective in July 2004. The table below reflects the remaining amounts of the facility as of December 31 of the years indicated:


	Available
	commitment and
	overdraft
	(€)
December 31, 2004		506,111,000
December 31, 2005		448,333,000
December 31, 2006		390,556,000
December 31, 2007		318,333,000
December 31, 2008		214,333,000
December 31, 2009		—

The senior secured facility contains financial covenants common for financings of this type. Our ability to borrow under the senior secured facility depends on our continued compliance with these covenants. Breach of these covenants may result in an event of default. In addition to the requirement to meet certain financial covenants, there are restrictions on, among other things:

	•		Incurring debt,

	•		encumbering revenues or assets,

	•		lending funds to third parties or assuming liabilities,

	•		disposing of assets, and

	•		paying dividends or making distributions.

The senior secured facility contains several events of default in addition to the following:

	•		amendment, suspension or termination of certain contracts which results in a material adverse change, and

	•		a regulatory change in the environment in which we operate, which results in a material adverse effect.

The occurrence of an event of default could result in all amounts outstanding under the senior secured facility becoming immediately due and payable and the limitation of further drawings under the senior secured facility. It could also result in the acceleration of amounts outstanding under our other debt instruments, including the convertible second secured term loan facility.

The senior secured facility is secured until the satisfaction of the obligation by, among other things, pledges or assignments of receivables from subscribers, intercompany loans, partnership interests and shares of our subsidiaries.

Amounts outstanding under the revolving credit facility bear interest at the rate of EURIBOR in the case of amounts owing in Euro and LIBOR in the case of amounts owing in a currency other than Euro plus a margin of between 0.75% and 2.25%, depending on our ratio of total indebtedness to annualized Adjusted EBITDA. At June 30, 2005 the applicable margin was 2.25%.

The convertible second secured term loan funded on March 26, 2002 and is due and payable on September 30, 2010. The interest on this facility is divided into cash and non-cash components. The non-cash interest is added to the principal outstanding under the facility and will then incur further non-cash interest as a principal amount. Cash interest begins to accrue at 8% and increases to 12% over time and accrues only on the initial principal amount of the facility,€375.0 million. All-in interest is initially 18% and increases to 20% over time. The cash, non-cash and all-in interest rates are set out on the following schedule:


	Cash Rate			Noncash Rate			All-in rate
March 26, 2002 - September 30, 2002		8.0	%		10.0	%		18.0	%
October 1, 2002 - December 31, 2002		8.5	%		10.5	%		19.0	%
January 1, 2003 - March 31, 2003		9.5	%		9.5	%		19.0	%
April 1, 2003 - June 30, 2003		10.5	%		8.5	%		19.0	%
July 1, 2003 - September 30, 2003		11.5	%		8.5	%		20.0	%
October 1, 2003 - final maturity		12.0	%		8.0	%		20.0	%

The convertible second secured term loan facility may be prepaid in whole or in part at any time at our option and all accrued but unpaid non-cash interest in excess of 18% for any period will be forgiven on the indebtedness thereunder if the facility is repaid in full by December 31, 2004. Lenders who were not party to the convertible second secured term loan when initially funded on March 26, 2002 would receive a prepayment fee on any amount we prepay to that lender of 3% of that amount during the first year of the loan, 2% during the third year of the loan and 1% during the third year of the loan.

At any time on or after December 31, 2004, the lenders under the convertible second secured loan term facility may opt to convert their outstanding loans into shares of PrimaCom Management GmbH having a nominal value determined by computing the ratio of the amount of debt being converted to the quotient of twelve times EBITDA (defined as earnings before interest, tax, depreciation and amortization) for the twelve month period through the end of the most recent calendar quarter less the amount of then outstanding consolidated debt of PrimaCom AG at the end of the most recent calendar quarter plus the amount of debt then being converted, and the total nominal value of all PrimaCom Management GmbH shares then outstanding. However, in no case will the lenders under the convertible second secured term loan facility be entitled to convert their loans under that facility into shares of PrimaCom Management comprising more than 65% of the total nominal capital of PrimaCom Management GmbH.

The convertible second secured term loan facility is guaranteed by PrimaCom Management GmbH, a wholly owned subsidiary of PrimaCom AG, and is secured by second-ranking pledges (after the pledges securing the senior facility) on the shares of the operating companies owned by PrimaCom Management GmbH until the satisfaction of the obligation.

We also refer to the notes to the condensed consolidated financial statements – 1. Basis of Presentation.

Employees

On June 30, 2005 PrimaCom and subsidiaries had a total of 831 employees comprised of 629 full time and 202 part time employees. On June 30, 2004 there were a total of 823 employees of which were 627 full time and 196 part time.

Directors’ Dealings


	June 30,				December 31,				June 30,
	2004				2004				2005
	shares		options		shares		options		shares		options

Management Board (Vorstand)
Dr. Jens Kircher^(*1)		—		100,000				100,000				100,000
Hans-Werner Klose^(*2)		4,630		100,000		4,630		100,000		4,630		100,000
Wolfgang Preuss^(*3)		2,695,413		100,000		2,695,413		100,000		2,695,413		100,000
Prof. Dr. Stefan Schwenkedel^(*4)		—		100,000				100,000				100,000
Supervisory Board (Aufsichtsrat)
Boris Augustin		3,464		—		3,464		—		3,464		—
Heinz Eble		39,358		—		39,358		—		39,358		—
Erwin Kleber^(*5)		3,750		—		3,750		—		3,750		—
Brigitte Preuß		166,997		—		166,997		—		166,997		—

Total		2,913,612		400,000		2,913,612		400,000		2,913,612		400,000


^*1		Mr. Jens Kircher left the Management Board on June 14, 2004. At this time he had 100,000 options but no shares,

^*2		Mr. Hans-Werner Klose joined the Management Board on June 14, 2004.

^*3		Mr. Wolfgang Preuss was appointed to the Supervisory Board on June 8, 2004. On June 30, 2004 Mr. Preuss joined the Management Board as CEO. Mr. Preuss resigned from Supervisory Board on September 15, 2004.

^*4		Prof. Dr. Stefan Schwenkedel left the Management Board on June 14, 2004. At this time he had 100,000 options but no shares.

^*5		Mr. Erwin Kleber was appointed to the Supervisory Board on June 29, 2004.

FORWARD LOOKING STATEMENTS

This Form 6-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Because these statements apply to future events, they are subject to risks and uncertainties that could cause actual results to differ materially, including PrimaCom’s absence of an operating history for its merged operations, its possible future need for additional financing, competitive factors and restrictions imposed by existing and possible future debt instruments.

PrimaCom (PCAGY) Inactive 6-KCurrent report (foreign)

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents