United Pan-Europe Communications N.V.
Q2 2003, Results Announcement
August 14, 2003
UPC
Disclosure Regarding Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of the
U.S. federal securities laws. UPC bases forward-looking statements on its
reasonable beliefs, assumptions, and expectations regarding future events and
conditions, including its future economic performance, taking into account
information currently available to the company. Forward-looking statements
involve risks and uncertainties that could cause actual outcomes and results to
differ materially from the outcomes and results expressed or implied in such
forward-looking statements. Information concerning certain factors that could
cause actual outcomes and results to differ materially is included in the
Company's 10-K, 10-Q and other filings with the U.S. Securities and Exchange
Commission.
UPC
Agenda
o Introduction to UGC Europe: Mike Fries
o UPC: Q2 2003 Executive Summary : John Riordan
o UPC: Q2 2003 Operating and Financial Results: Charlie Bracken
o Q&A
UPC
Pro-forma Organisational Structure Post Restructuring
[Shaded box labeled UnitedGlobalCom] [Shaded box labeled Other]
[Line indicating 66.8%(1) ownership of [Line indicating 33.2% ownership
UGC Europe Inc] UGC Europe Inc]
[Shaded box labeled UGC Europe Inc(2)]
[Line indicating ownership]
[Broken line box labeled UPC NY]
[Line indicating ownership] [Line indicating ownership]
[Lightly shaded box labeled [Lightly shaded box labeled
UPC Boradband(3)] Chello Media]
o Core Cable TV Operations [Line indicating ownership]
o Internet Portal and
Access business
o Programming and
Media Activities
o Priority Telecom
o Investments
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<F1> Final ownership percentabe to be determined based upon resolution of
general unsecured claims
<F2> Previously called New UPC
<F3> Previously called UPC Distribution
UPC
Pro Forma Management Structure of UGC Europe, Inc.
UGC Europe Board of Directors
Gene Schneider - Chairman Jacques Manardo<F1>
Jack Cole John Risner<F1>
John Dick Mark Schneider
Mike Fries Ellen Spangler
John Riordan Tina Wildes
UGC Europe Officers
Gene Schneider - Chairman, Chief Executive Officer
Mike Fries - President, Chief Operating Officer
Charlie Bracken - Chief Financial Officer
John Riordan - CEO, UPC Broadband
Mark Schneider - CEO Chello Media
The Board of UGC Europe is expected to appoint additional officers of UGC Europe
at its first meeting of Directors
o UGC Europe, Inc. ("UGC Europe") will be a U.S. public holding company
headquartered in Denver. UPC N.V. will be a private subsidiary of UGC
Europe
o The current management and supervisory board of UPC N.V. will cease to
exist
o UGC Europe will be managed by the Board of ten Directors of UGC Europe.
o Eight of the ten Directors of UGC Europe will be appointed by UGC. The
remaining two have been nominated by the ad hoc committee of bond holders
o In addition, UGC Europe will be managed by the Officers of the Company
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<F1> Bond holder committee appointee
UPC
UGC Europe, Inc.
UGC europe
It is expected that following the successful completion of the UPC restructuring
UGC Europe will list 50m ordinary shares on the NASDAQ National Market
NASDAQ ticker: UGCE
UGC Europe's ticker symbol will be UGCE
www.ugceurope.com
Once we have emerged from restructuring further information regarding UGC Europe
Inc may be found through our new corporate web site at www.ugceurope.com
We anticipate emergence from restructuring during the third quarter 2003
UPC
Agenda
o Introduction to UGC Europe: Mike Fries
o UPC: Q2 2003 Executive Summary : John Riordan
o UPC: Q2 2003 Operating and Financial Results: Charlie Bracken
o Q&A
UPC
Executive Summary
Operating Performance Q 2003
o Operational improvement and focus on cost control boosted Adjusted EBITDA
to record levels. Annualising second quarter Adjusted EBITDA of EUR 120m
delivers run rate figure of EUR 480
o Continue to see opportunities for cost savings and operational
efficiencies. Will work to achieve financial goals by realising economies
of scale
Commencement of Financial Restructuring in UPC Polska
o Commencement of the financial restructuring of 100% owned subsidiary UPC
Polska in separate process from the restructuring nearing completion at UPC
NV. Successful completion of the Polish restructuring reduces consolidated
debt at UPC Group level by EUR 314m<F1> as at June 30, 2003
o Plan of Restructuring filed in the US Chapter 11 proceeding contemplates
that UPC will continue to hold 100% equity of restructured company. Expect
restructuring to be completed at UPC Polska during fourth quarter 2003
UPC NV Financial Restructuring Update
o Dutch Attorney General delivered advice to Dutch Supreme Court, concluding
that all grounds for appeal by InterComm Holdings L.L.C. ("ICH") are
without merit, therefore appeal should be dismissed.
o Following advice received from Attorney General Supreme Court is expected
to rule on appeal expeditiously.
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<F1> Assumes 1:1.05 USD:EUR exchange rate
UPC
Agenda
o Introduction to UGC Europe: Mike Fries
o UPC: Q2 2003 Executive Summary : John Riordan
o UPC: Q2 2003 Operating and Financial Results: Charlie Bracken
o Q&A
UPC
CONTINUED GROWTH
New Service Subscribers (000s)
[Arrow depicting 13%
[Bar chart depicting 1,297] increase from Q2 2002 [Bar chart depicting 1,466]
to Q2 2003]
Q2 2002 Q2 2003
ARPU per RGU(1) (in Eur per month)
[Arrow depicting 3%
[Bar chart depicting 13.27] increase from Q2 2002 [Bar chart depicting 13.68]
to Q2 2003]
Q2 2002 Q2 2003
ARPU per Basic Cable Subscriber(2) (in EUR per month)
[Arrow depicting 5%
[Bar chart depicting 19.88] increase from Q2 2002 [Bar chart depicting 20.91]
to Q2 2003]
Q2 2002 Q2 2003
Eastern Europe
[Arrow depicting 3%
[Bar chart depicting 8.71] increase from Q2 2002 [Bar chart depicting 8.99]
to Q2 2003]
Q2 2002 Q2 2003
<F1> Total basic cable, internet, digital, DTH revenue divided by total RGUs
(excluding Germany)
<F2> Basic cable, internet, digital, telephony revenue divided by basic cable
subscribers (excluding Germany)
UPC
Operational Update
Subscriber Adds Q2 2003
o First six months of 2003 saw addition of more than 59,000 subscribers to
new services<F1>, below budget and guidance for the year. Shortfall almost
entirely related to implementation of new subscriber management system in
the Netherlands
o Implementation began in Q4 2002 and was substantially complete at the end
of Q2 2003. This process has had and will continue to have a positive
impact on UPC's cashflow, as it has enabled us to improve our cash
collection. In all other countries net sales and net subscriber gains are
largely to budget.
Fall promotions/bundling initiatives
o Continued focus on sale of net present value (NPV) positive products
o Strongly positioned to promote chello internet connection and bundled
telephony with free install and short initial free subscriptions for second
half of 2003
o Launch of chello light and chello plus product on July 1 2003. Offering
lower price for faster speed compared to competitors. Initial sales of new
chello tiered products are encouraging
Digital Update
o Expansion of NPV positive digital basic package in Q3 2003 in the
Netherlands offers more than 60 channels for EUR 15 per month
o Improving content in Netherlands with launch of bouquet of digital channels
to carry UEFA football matches from September 2003
o Premium ethnic and adult channel expansion across all markets
- ---------------
<F1> Internet, telephony, DTH and digital
UPC
Revenue
Growth rate
6 months 6 months YTD June 30,
ended June 30, ended June 30, 2002 to June
Revenues (EUR 000's) Q2 2003 Q2 2002 2003 2002 30, 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Triple Play Distibution(1) 331,248 313,782 663,242 618,290 7%
Other Operations 6,583 23,189 13,054 45,415
UPC Distribution 337,831 336,971 676,296 663,804 2%
Priority Telecom 27,658 30,876 54,262 62,992
UPC Media 21,581 17,860 42,252 36,275
UPC Investment(2) 122 0 245 123
Intercompany eliminations(3) (27,807) (26,790) (54,570) (58,065)
UPC Consolidated 359,385 358,917 718,485 705,229 2%
(1) Includes basic cable, digital, telephony and internet revenues. Excludes
Germany
(2) UPC Investments division formed in 2003 to manage non consolidated
investment assets
(3) Eliminations of intercompany UPC Media revenues and network revenues
UPC
Adjusted EBDITA
Growth rate
6 months 6 months YTD June 30,
ended June 30, ended June 30, 2002 to June
EBITDA (EUR 000's) Q2 2003 Q2 2002 2003 2002 30, 2002
- ----------------------------------------------------------------------------------------------------------------------
Triple Play Distibution(1) 119,763 72,946 234,077 141,019 66%
Other Operations (7,910) (4,451) (20,632) (7,447)
Total UPC Distribution 111,853 68,405 213,445 133,572 60%
Priority Telecom(2) 3,130 (1,473) 5,731 (6,149)
UPC Media 5,559 (112) 8,024 (5,687)
UPC Investment(3) (516) 674 (686) 572
UPC Consolidated 120,026 67,494 226514 122,308 85%
Adjusted EBITDA
- ----------------------------------------------------------------------------------------------------------------------
(1) Includes basic cable, digital, telephony, internet and DTH revenues.
Excludes Germany
(2) Since Priority Telecom's listing, Priority's results are separately
announced in Dutch GAAP, and presented in US GAAP in our financial statements.
Differences may occur as a result of this.
(3) UPC Investments division formed in 2003 to manage non consolidated
investment assets
UPC
Capital Expenditure
(EUR 000's) Q2 2003 Q1 2003
- --------------------------------------------------------------------------------
Customer Premise Equipment 19,248 17,296
Commercial Spending 0 0
Scalable Infrastructure 3,669 6,180
Line Extensions 15,258 6,735
Upgrade and New Build 5,861 2,359
Support Capital 12,048 9,747
Intangibles 100 598
Priority Telecom Capital Expenditure(1) 3,986 N/A
- --------------------------------------------------------------------------------
Total Capital Expenditure 60,170 42,915
- --------------------------------------------------------------------------------
(1) Priority Telecom capital expenditure allocated across all categories in
Q1 2003
UPC
Summary Balance Sheet
June 30, December
ASSETS 2003 31, 2002
- --------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents 178,499 255,062
Other current assets 252,218 297,240
- --------------------------------------------------------------------------------------------------------------------
Total current assets 430,717 552,302
- --------------------------------------------------------------------------------------------------------------------
Marketable securities, Investments in and advances to affiliated companies 76,529 127,440
Net PP&E, goodwill, intangible assets and other 3,945,089 4,251,275
- --------------------------------------------------------------------------------------------------------------------
Total assets 4,452,335 4,931,017
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities not subject to compromise:
Accounts Payable 158,367 166,679
Accrued Liabilities 248,971 281,211
Subscriber pre Payments and Deposits 137,703 121,749
Long-term liabilities not subject to compromise 296,135 661764
Debt 3,367,123 3,280,798
- --------------------------------------------------------------------------------------------------------------------
Total liabilities not subject to compromise 4,208,299 4,512,201
- --------------------------------------------------------------------------------------------------------------------
Total liabilities subject to compromise: 5,038,496 5,431,735
Convertible preference shares subject to compromise: 1,664,689 1,664,689
Minority share 1,504 1,660
Total shareholders' equity (deficit) (6,460,653) (6,679,268)
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity (deficit) 4,452,335 4,931,017
- --------------------------------------------------------------------------------------------------------------------
UPC
Summary Capital Structure
Pro form for
recapitalisation at UPC NV
EUR millions Q2 2003 and UPC Polska
- ---------------------------------------------------------------------------------------------------
UPC Distribution bank facility 2,984 2,984
Other bank group debt(1) 59 59
Sub Total Bank Group 3,043 3,043
Priority Debt 9 9
Polish Debt(2) 371 57
Belmarken notes 819
UPC NV bonds 3,854
Convertible preference shares 1,665
Total debt and preference shares 9,761 3,109
Less cash 178 102
Net Debt(3) 9,582 3,007
- ---------------------------------------------------------------------------------------------------
(1) Other Debt (less Priority debt and PCI Notes)
(2) Includes @Entertainment bonds plus Reece Note and PCI Notes. UPC and holders
of UPC Polska Notes have commenced a restructuring of UPC Polska's balance sheet
(3) Totals may not foot due to rounding
UPC
2003 Adjusted EBITDA Evolution
Sub total Annualised % of 2003
EURm millions impact guidance Update on Progress During first half of 2003
UPC Group Consolidated Q4 02 337 64% Executed
Annualised Adjusted EBITDA
Increase in Priority Adjusted 12 2% Shortfall expected
EBITDA from Q4 level of EUR2m
to full year of EUR20m
Increase in UPC Media Adjusted 20 4% On track
EBITDA from Q4 breakeven to
full year of EUR20m
UPC Distribution pricing effect 49 9% Executed
Impact of RGU growth of which: 52
Q4 2002 100,000 net adds, 11 2% Executed
annualised impact
2003 430,000 net adds 41 8% Shortfall expected
Additional Cost Savings 54 10% Largely executed. Programming contract still
pending.
Projected 2003 Adjusted EBITDA 525
We are unable to provide a reconciliation of forecasted Adjusted EBITDA to the
most directly comparable GAAP measure, net income, because certain items are out
of our control and/or cannot be reasonably predicted. For example, it is
impractical to: (1) estimate future fluctuations in interest rates on our
variable-rate debt facilities; (2) estimate the fluctuations in exchange rates
relative to our U.S. dollar denominated debt; (3) estimate the financial results
of our non-consolidated affiliates; and (4) estimate changes in circumstances
that lead to gains and/or losses such as our restructuring and the restructuring
of UPC Polska and/or sales of investments in affiliates and other assets. Any
and/or all of these items could be significant to our financial results.
UPC
Outlook 2003
Forecast Guidance Full year 2003
o The Company continues to prioritise Adjusted EBITDA and Free Cashflow
generation over revenue growth
o A key variable for UPC's 2003 financial results continues to be the
resolution of the European Movieco Partners court case regarding
minimum programme guarantees which may negatively impact UPC's
consolidated Adjusted EBITDA by up to EUR 25m in 2003 and for each of
the next two years
o In addition, the Company's financial results will be impacted by its
success in reaching its targeted net additions of 430,000 subscribers
during the year. UPC reduces its capital expenditure guidance to EUR
300m for the full year 2003.
o UPC expects to generate Adjusted EBITDA in excess of EUR 500 million. We
are unable to provide a reconciliation of forecasted Adjusted EBITDA to the
most directly comparable GAAP measure, net income, because certain items
are out of our control and/or cannot be reasonably predicted. For example,
it is impractical to: (1) estimate future fluctuations in interest rates on
our variable-rate debt facilities; (2) estimate the fluctuations in
exchange rates relative to our U.S. dollar denominated debt; (3) estimate
the financial results of our non-consolidated affiliates; and (4) estimate
changes in circumstances that lead to gains and/or losses such as our
restructuring and the restructuring of UPC Polska and/or sales of
investments in affiliates and other assets. Any and/or all of these items
could be significant to our financial results.
o Following the successful completion of the restructuring at both UPC Polska
and UPC N.V., UPC forecasts total year-end net debt of less than EUR 3.1
billion reducing UPC's leverage to less than 6.5x using Q2 annualised
Adjusted EBITDA of EUR 480m, and approaching levels achieved by comparable
US cable operators.
UPC
Agenda
o Introduction to UGC Europe: Mike Fries
o UPC: Q2 2003 Executive Summary : John Riordan
o UPC: Q2 2003 Operating and Financial Results: Charlie Bracken
o Q&A