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PART I – FINANCIAL INFORMATION

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

ý Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

FOR THE QUARTER ENDED JUNE 30, 2003

or

o Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the transition period from                  to                 

Commission File No. 000-496-58

UnitedGlobalCom, Inc.
(Exact name of Registrant as specified in its charter)

4643 South Ulster Street, Suite 1300
Denver, CO 80237
(Address of principle executive offices)

Registrant's telephone number, including area code: (303) 770-4001

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the proceeding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes o No ý

The registrant's outstanding common stock as of August 1, 2003 consisted of:

Class A common stock – 105,251,673 shares
Class B common stock –    8,198,016 shares
Class C common stock – 303,123,542 shares

PART I – FINANCIAL INFORMATION

1

UnitedGlobalCom, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except par value and number of shares)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

UnitedGlobalCom, Inc.
Condensed Consolidated Balance Sheets (continued)
(In thousands, except par value and number of shares)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

UnitedGlobalCom, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income
(In thousands, except share and per share data)
(Unaudited)

(1)

Exclusive of items shown separately below, including depreciation and amortization and impairment and restructuring.

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

UnitedGlobalCom, Inc.
Condensed Consolidated Statement of Stockholders' Equity (Deficit)
(In thousands, except number of shares)
(Unaudited)

Accumulated Other Comprehensive Income (Loss)

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

UnitedGlobalCom, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

UnitedGlobalCom, Inc.
Notes to Condensed Consolidated Financial Statements

1.     Organization and Nature of Operations

UnitedGlobalCom, Inc. (the "Company", "United", "we", "us", "our" or similar terms) was formed in February 2001 as part of a series of planned transactions with UGC Holdings, Inc. ("UGC Holdings") and Liberty Media Corporation (together with its subsidiaries and affiliates "Liberty"), which restructured and recapitalized our business. Today, we, together with our operating subsidiaries, are one of the largest broadband communications providers outside the United States in terms of homes passed and number of subscribers. We provide video distribution services and/or telephone and Internet access services in 15 countries worldwide. Our operations are grouped into two major geographic regions – Europe and Latin America. Our European operations are held through our 53.1% owned, publicly traded subsidiary, United Pan-Europe Communications N.V. ("UPC"). UPC is the largest pan-European broadband communications company in terms of homes passed and number of subscribers. UPC provides video, telephone and/or Internet access services in 11 countries in Europe. UPC's shares are publicly traded on the official segment of the stock market of Euronext Amsterdam, N.V. under the symbol "UPC" and on the Over the Counter Bulletin Board in the United States under the symbol "UPCOY.OB". Our primary Latin American operation is our wholly owned Chilean operation, VTR GlobalCom S.A. ("VTR"). VTR is Chile's largest multi-channel television and high-speed Internet access provider in terms of homes passed and number of subscribers, and the second largest provider of residential telephone services. Our primary goal in these markets is to capitalize on the opportunity to increase revenues and cash flows through the continued sale of new and expanded video services and telephone and high-speed Internet access services over our broadband communications networks. We refer to these broadband services as "Triple-Play", or "Triple-Play Distribution".

2.     Risks, Uncertainties and Liquidity

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern. On a consolidated basis, we have a net working capital deficiency as a result of recurring losses from operations and defaults under certain bank credit facilities and senior and senior discount note agreements. With the successful completion of the planned restructuring of UPC, we believe on a consolidated basis that we will have sufficient sources of capital, working capital and operating cash flows to enable us to continue as a going concern. While we are optimistic that the UPC restructuring will be completed successfully, we cannot give assurance that it will be completed on terms that are acceptable to us or UPC or at all. Accordingly, there is substantial doubt regarding our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we not be able to continue as a going concern.

United Corporate

As of June 30, 2003, excluding restricted cash of $21.6 million, we had $74.2 million in cash on hand, of which United, UGC Holdings, United Latin America, Inc. ("ULA") and other wholly owned subsidiaries had $17.1 million, $7.0 million, $44.1 million and $6.0 million, respectively. As of June 30, 2003, we had negative working capital of $10.2 million, due primarily to notes payable to Liberty totaling $102.7 million (due in January and February 2004). To meet our cash needs over the next year, we plan to raise capital through public and/or private debt and/or equity transactions, sell certain non-strategic assets and/or reduce spending. Uses of cash over the next year in addition to repayment of the Liberty notes may include approximately $25.0 million for interest on the Liberty notes and general corporate purposes. Although we expect these plans to be successful, there can be no assurance they will occur on terms that are satisfactory to us or at all.

UPC

UPC has a net working capital deficiency as a result of recurring losses from operations and defaults under its senior notes, senior discount notes, the $1.225 billion 6% guaranteed discount notes due 2007 (the "UPC Exchangeable Loan") and the senior secured credit facility among UPC Distribution Holdings, B.V. ("UPC Distribution") as borrower and TD Bank Europe Limited and Toronto Dominion (Texas), Inc., as facility agents, and a group of banks and financial institutions (the "UPC Distribution Bank Facility"). UPC's ability to continue as a going concern is dependent on (i) the successful completion of its restructuring and (ii) its ability to generate enough cash flow to enable it to recover the carrying value of its assets and satisfy its liabilities in the normal course of business.

On March 4, 2002, UPC received the first of a series of waivers from the lenders of the UPC Distribution Bank Facility and the UPC Exchangeable Loan for the potential cross events of default under such facilities that existed or may exist as a result of UPC's failure to make interest payments due within the applicable cure periods, or any resulting cross defaults. These waivers were periodically extended through September 30, 2003.

7

On September 30, 2002, we, UPC and members of an ad-hoc committee representing UPC's bondholders agreed on a plan to restructure and recapitalize UPC (the "Restructuring Agreement"). If completed under its current terms, the Restructuring Agreement will substantially reduce UPC's debt through the judicially supervised conversion of the UPC Exchangeable Loan and UPC's senior notes and senior discount notes into new common stock issued by a newly formed Delaware corporation ("New UPC"). Key terms of the Restructuring Agreement are as follows:

•

We will receive approximately 65.5% of New UPC's pro forma equity (subject to dilution in certain circumstances) in exchange for approximately $1.5 billion accreted amount of UPC senior notes and senior discount notes (collectively the "United UPC Bonds") and the UPC Exchangeable Loan;

•

Third-party noteholders will receive approximately 32.5% of New UPC's pro forma equity (subject to dilution in certain circumstances) in exchange for approximately $2.8 billion accreted amount of UPC senior notes and senior discount notes owned by them; and

•

UPC's existing ordinary and preferred shareholders, including us and UGC Holdings, will receive approximately 2.0% of New UPC's pro forma equity (subject to dilution in certain circumstances). UGC Holdings currently owns 53.1% of UPC's ordinary shares and we and UGC Holdings own 79.4% and 20.2%, respectively, of UPC's preference shares.

In order to effect the restructuring, on December 3, 2002, UPC filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (the "U.S. Chapter 11 Case") with the United States Bankruptcy Court for the Southern District of New York (the "U.S. Bankruptcy Court"), including a pre-negotiated plan of reorganization dated December 3, 2002 (the "Reorganization Plan"). In order to fully achieve the restructuring, including the distributions contemplated by the Reorganization Plan, it was necessary to effect the restructuring under the laws of The Netherlands. Accordingly, in conjunction with the commencement of the U.S. Chapter 11 Case on December 3, 2002, UPC commenced a moratorium of payments in The Netherlands under Dutch bankruptcy law (the "Dutch Bankruptcy Case"). On December 3, 2002, UPC filed a proposed plan of compulsory composition (the "Akkoord") with the Dutch Bankruptcy Court under the Dutch Faillissementswet (the "Dutch Bankruptcy Code"). UPC submitted a revision to the Reorganization Plan in the U.S. Bankruptcy Court and to the Akkoord in the Dutch Bankruptcy Court on December 23, 2002, and a subsequent revision on January 7, 2003. The U.S. Bankruptcy Court confirmed the Reorganization Plan on February 20, 2003. The Dutch Bankruptcy Court ratified the Akkoord on March 13, 2003. On March 21, 2003, InterComm Holdings L.L.C. ("ICH"), a creditor in the Dutch moratorium proceeding with a €1.00 claim and one vote, appealed the Dutch Bankruptcy Court's ratification of the Akkoord. On April 15, 2003, the Dutch Court of Appeals confirmed the Dutch Bankruptcy Court's ratification of the Akkoord. On April 23, 2003, ICH appealed the ratification of the Akkoord to the Dutch Supreme Court. Briefs have been submitted to the Dutch Supreme Court. On July 11, 2003, the Dutch Attorney General delivered advice to the Dutch Supreme Court, which concluded that the grounds for appeal are without merit and, therefore, the appeal should be dismissed. The Dutch Supreme Court is independent of the Dutch Attorney General, however, and there can be no assurance that the Dutch Supreme Court will act consistently with the advice of the Dutch Attorney General. The Dutch Supreme Court is expected to rule on the appeal by the end of August, 2003. UPC believes the appeal is without merit. In addition to the Dutch Attorney General advice, the U.S. Bankruptcy Court has already overruled an objection brought by ICH in the parallel U.S. Chapter 11 Case. UPC does not expect that ICH's Dutch appeal will affect the successful completion of UPC's restructuring, which in all other respects has been finalized.

Unless the parties agree to an extension, any party to the Restructuring Agreement may terminate its obligations under the agreement after September 3, 2003, the date nine months after the filing of the U.S. Chapter 11 Case; however, no creditor may change or withdraw its acceptance or rejection of the Reorganization Plan absent an order of the U.S. Bankruptcy Court for cause shown.

UPC believes subscriber growth has been impacted in some countries by UPC's financial restructuring, however UPC believes the restructuring has not had a material adverse effect on its subsidiaries or UPC's relationship with suppliers and employees. Upon completion of the restructuring, UPC expects that its existing cash balances, working capital, cash flow from operations and draw downs available under the UPC Distribution Bank Facility will be sufficient to fund operations for the foreseeable future. However, if UPC wishes to expand its cable television services or broadband communications network to take full advantage of business opportunities, it will require additional capital. UPC does not know when additional financing may be available to it (if at all) or available on favorable terms.

8

3.     Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these statements do not include all of the information required by GAAP for complete financial statements. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. These statements should be read together with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2002.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements include our accounts and all subsidiaries where we exercise a controlling financial interest through the ownership of a direct or indirect majority voting interest, including the accounts of UPC. Although the U.S. and Dutch bankruptcy laws do convey significant rights to the bankruptcy courts, we believe during UPC's bankruptcy proceedings that we substantively control UPC for the following primary reasons:

•

As both the majority debt and equity holder, we had majority voting control before UPC commenced voluntary bankruptcy proceedings and will have majority voting control of UPC on its emergence from bankruptcy;

•

As a result of our priority debt position and due to the fact we are UPC's single largest creditor, we were able to negotiate the prearranged form of the voluntary bankruptcy filing by obtaining the agreement of the other key stakeholders (UPC third-party bondholders and bank lenders) that we would continue to be UPC's controlling equity holder upon UPC's emergence from bankruptcy;

•

Based on an evaluation of pre-arranged debtor-in-possession bankruptcies filed in the U.S. and in The Netherlands, it was virtually certain from the filing of UPC's bankruptcy petitions that the courts would confirm the bankruptcy plan;

•

We believe the rights exercised by the U.S. and Dutch bankruptcy courts are protective in nature and, therefore, do not affect our continued substantive control over UPC and the presumption that we should continue to consolidate UPC during the bankruptcy process; and

•

We believe that consolidating UPC provides the best and most transparent financial reporting to our financial statement users.

Accordingly, the accounts of UPC have been consolidated for all periods presented in the accompanying unaudited condensed financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation.

In connection with the bankruptcy proceedings, UPC is required to prepare its unaudited condensed consolidated financial statements as of June 30, 2003, in accordance with Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code ("SOP 90-7"), issued by the American Institute of Certified Public Accountants. In accordance with SOP 90-7, all of UPC's pre-petition liabilities that are subject to compromise under its Reorganization Plan are segregated in UPC's unaudited condensed consolidated balance sheet as liabilities and convertible preferred stock subject to compromise. These liabilities are recorded at the amounts expected to be allowed as claims in the bankruptcy proceedings rather than at the estimated amounts for which those allowed claims may be settled as a result of the approval of the Reorganization Plan. The estimates for allowable amounts are based on accounting records, discussions with creditors and amounts as documented in the Reorganization Plan, although these estimates for allowable amounts could change. Since we consolidate UPC, financial information with respect to UPC included in our accompanying unaudited condensed consolidated financial statements as of June 30, 2003, has been prepared in accordance with SOP 90-7. The following presents condensed financial information for UPC in accordance with SOP 90-7:

9

(1)

Eliminated in consolidation.

(2)

99.6% is eliminated in consolidation.

In accordance with SOP 90-7, interest expense on liabilities subject to compromise is reported in the accompanying unaudited condensed consolidated statement of operations only to the extent that it will be paid during the bankruptcy proceedings or to the extent it is considered an allowed claim. For the three and six months ended June 30, 2003, actual interest expense on liabilities subject to compromise totaled nil and contractual interest expense on liabilities subject to compromise totaled $134.1 million and $265.7 million, respectively. The reorganization expenses reported in the accompanying unaudited condensed consolidated statements of operations include professional fees of $5.5 million and $13.7 million for the three and six months ended June 30, 2003, respectively.

Stock-Based Compensation

We account for our stock-based compensation plans and the stock-based compensation plans of our subsidiaries using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"). We have provided pro forma disclosures of net loss under the fair value method of accounting for these plans, as prescribed by Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, as amended by

10

SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure and Amendment of SFAS No. 123, as follows:

Stock-based compensation is recorded as a result of applying fixed-plan accounting to the UPC stock option plan and applying variable-plan accounting to certain of our other subsidiaries' stock-based compensation plans. Under fixed-plan accounting, deferred compensation is recorded for the difference between fair value of options granted and the option price of such options at the date of grant. This deferred compensation is then recognized in the statement of operations ratably over the vesting period of the option, which is generally 48 months. Under variable-plan accounting, compensation expense (credit) is recognized at each financial statement date for vested options based on the difference between the grant price and the estimated fair value of the underlying common stock, until the options are exercised or expire, or until the fair value is less than the original grant price. Currently, almost all of our subsidiaries' variable stock option plans contain outstanding options with exercise prices greater than the current fair value of the underlying common stock.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. We adopted SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 required us to reclassify gains and losses associated with the extinguishment of debt (including the related tax effects) from extraordinary classification to other income in the accompanying condensed consolidated statements of operations.

New Accounting Principles

In April 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS No. 149 amends SFAS No. 133 to provide clarification on the financial accounting and reporting of derivative instruments and hedging activities and requires that contracts with similar characteristics be accounted for on a comparable basis. The provisions of SFAS No. 149 are effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. We are currently evaluating SFAS No. 149 to determine its impact on our financial position, results of operations, and cash flows, if any.

In May 2003, the FASB issued SFAS No. 150, Accounting For Certain Financial Instruments With Characteristics Of Both Liabilities and Equity. SFAS No. 150 establishes standards on the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The provisions of SFAS No. 150 are effective for financial instruments entered into or modified after May 31, 2003 and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003. We are currently evaluating SFAS No. 150 to determine its impact on our financial position, results of operations, and cash flows, if any.

11

UnitedGlobalCom, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)

4.     Acquisitions, Dispositions and Other

Acquisition of UPC Preference Shares

On April 4, 2003, we issued 879,041 shares of our Class A common stock in a private transaction pursuant to a transaction agreement dated March 31, 2003, among us, a subsidiary of ours, Motorola Inc. and Motorola UPC Holdings, Inc. In consideration for the 879,041 shares of our Class A common stock, we acquired 3,500 preference shares A of UPC, nominal value €1.00 per share and warrants to purchase 1,669,457 ordinary shares A of UPC, nominal value €1.00 per share, at an exercise price of €42.546 per ordinary share. On April 14, 2003, we issued 426,360 shares of our Class A common stock in a private transaction pursuant to a securities purchase agreement dated April 8, 2003, among us and Liberty. In consideration for the 426,360 shares of our Class A common stock, we acquired 2,122 preference shares A of UPC, nominal value €1.00 per share and warrants to purchase 971,118 ordinary shares A of UPC, nominal value €1.00 per share, at an exercise price of €42.546 per ordinary share. A gain of $812.2 million was recognized during the second quarter of 2003 from the purchase of these preference shares for the difference between fair value of the consideration given and book value (including accrued dividends) of the preference shares at the transaction date. This gain is reflected in the accompanying condensed consolidated statement of stockholders' equity (deficit).

Sale of Megapo Interest

In June 2003, we sold our indirect approximate 90.3% interest in Megapo Comunicaciones de Mexico, S.A de C.V. ("Megapo") for $45.2 million in cash (including settlement of certain liabilities owed to us and our affiliates prior to closing) and a $5.0 million promissory note, deposited into escrow. A loss of $3.3 million was recognized during the second quarter of 2003 from the sale of this interest for the difference between the net carrying value of our investment in Megapo and the consideration received, less costs to sell. Subsequent to the sale, the purchaser asserted a claim of approximately $3.4 million against the escrowed amount. That amount will remain in escrow pending resolution of the purchaser's claim. The remaining amount of $1.6 million (in the form of a replacement note) has been released from escrow and delivered to ULA. This note matures on September 10, 2003.

5.     Goodwill and Other Intangible Assets

Goodwill

The change in the carrying amount of goodwill (net of accumulated amortization) by operating segment for the six months ended June 30, 2003 is as follows:

12

Other Intangible Assets

The following tables present certain information for other intangible assets, which consist primarily of licenses and capitalized software. Actual amounts of amortization expense may differ from estimated amounts due to additional acquisitions, changes in foreign currency exchange rates, impairment of intangible assets, accelerated amortization of intangible assets, and other events.