UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001 Commission file number 1-11484
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HUNGARIAN TELEPHONE AND CABLE CORP.
(Exact name of registrant as specified in its charter)
Delaware 13-3652685
--------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
32 Center Street, Darien, CT 06820
(Address of principal executive offices)
(203) 656-3882
(Registrant's telephone number, including area code)
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 preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
Yes X No
---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock as of the latest possible date:
Common Stock, $.001 par value 12,103,180 Shares
(Class) (Outstanding at August 8, 2001)
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Table of Contents
Part I. Financial Information: Page No.
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Consolidated Condensed Balance Sheets 2
Consolidated Condensed Statements of Operations and
Comprehensive Income (Loss) 3
Consolidated Condensed Statements of Stockholders' Deficiency 4
Consolidated Condensed Statements of Cash Flows 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Part II. Other Information 22
Signatures 24
- 1 -
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
(In thousands, except share data)
Assets June 30, 2001 December 31, 2000
------ ------------- -----------------
(unaudited)
Current assets:
Cash and cash equivalents $ 12,587 $ 15,596
Restricted cash 103 107
Accounts receivable, net 5,745 5,511
Other current assets 2,154 2,917
-------- --------
Total current assets 20,589 24,131
Property, plant and equipment, net 97,841 101,670
Goodwill, less accumulated amortization 6,039 6,331
Other intangibles, less accumulated amortization 3,668 3,806
Deferred costs 7,336 8,212
Other assets 5,627 3,168
-------- --------
Total assets $ 141,100 $ 147,318
======== ========
Liabilities and Stockholders' Deficiency
Current liabilities:
Current installments of long-term debt $ 9,708 $ 8,063
Short-term loans 3,390 3,722
Accounts payable 767 2,577
Accruals 3,534 5,307
Other current liabilities 2,131 1,725
Due to related parties 1,346 1,226
-------- --------
Total current liabilities 20,876 22,620
Long-term debt, excluding current installments 113,112 124,814
Due to related parties 100 676
Deferred credits and other liabilities 9,152 10,086
-------- --------
Total liabilities 143,240 158,196
-------- --------
Commitments and Contingencies
Stockholders' deficiency:
Cumulative Convertible Preferred stock, $.01 par value;
$70.00 liquidation value. Authorized 200,000 shares;
issued and outstanding 30,000 shares in 2001 and 2000 -- --
Common stock, $.001 par value. Authorized
25,000,000 shares; issued and outstanding
12,103,180 shares in 2001 and 12,087,179 in 2000 12 12
Additional paid-in capital 144,706 144,601
Accumulated deficit (161,840) (170,143)
Accumulated other comprehensive income 14,982 14,652
-------- --------
Total stockholders' deficiency (2,140) (10,878)
-------- --------
Total liabilities and stockholders' deficiency $ 141,100 $ 147,318
======== ========
See accompanying notes to consolidated condensed financial statements.
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Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations and Comprehensive Income (Loss)
For the Three and Six Month Periods Ended June 30, 2001 and 2000
(In thousands, except share and per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Telephone service revenues, net $ 10,999 $ 10,887 $ 22,231 $ 22,024
Operating expenses:
Operating and maintenance expenses 4,042 4,033 8,318 8,657
Depreciation and amortization 2,278 2,388 4,605 4,889
------------ ------------ ------------ ------------
Total operating expenses 6,320 6,421 12,923 13,546
------------ ------------ ------------ ------------
Income from operations 4,679 4,466 9,308 8,478
Other income (expenses):
Foreign exchange gains (losses), net 7,476 (525) 5,340 (2,503)
Interest expense (3,430) (4,489) (7,095) (10,416)
Interest income 364 323 778 783
Other, net (3) 43 25 47
------------ ------------ ------------ ------------
Net income (loss) $ 9,086 $ (182) $ 8,356 $ (3,611)
Cumulative convertible preferred stock
dividends (in arrears) (27) (27) (53) (53)
------------ ------------ ------------ ------------
Net income (loss) ascribable to common stockholders 9,059 (209) 8,303 (3,664)
Comprehensive income adjustments (545) 104 330 1,076
------------ ------------ ------------ ------------
Total comprehensive income (loss) $ 8,514 $ (105) $ 8,633 $ (2,588)
============ ============ ============ ============
Net income (loss) per common share:
Basic $ 0.75 $ (0.02) $ 0.69 $ (0.30)
============ ============ ============ ============
Diluted $ 0.72 $ (0.02) $ 0.66 $ (0.30)
============ ============ ============ ============
Weighted average number of common shares
outstanding:
Basic 12,103,180 12,014,052 12,096,760 12,001,740
============ ============ ============ ============
Diluted 12,567,788 12,014,052 12,600,935 12,001,740
============ ============ ============ ============
See accompanying notes to consolidated condensed financial statements.
- 3 -
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Consolidated Condensed Statements of Stockholders' Deficiency
(In thousands, except share data)
(unaudited)
Accumulated
Additional Other Total
Preferred Paid-in Accumulated Comprehensive Stockholders'
Shares Common Stock Stock Capital deficit Income Deficiency
-----------------------------------------------------------------------------------------------------------------------------------
Balances at December 31,
2000 12,087,179 $ 12 - 144,601 (170,143) 14,652 $ (10,878)
Exercise of options and
pre-emptive rights 16,001 -- - 114 -- -- 114
Modification of option terms -- -- - (9) -- -- (9)
Cumulative convertible -- -- - -- (53) -- (53)
preferred stock dividends
(in arrears)
Net income -- -- - -- 8,356 -- 8,356
Foreign currency translation
adjustment -- -- - -- -- 330 330
-----------------------------------------------------------------------------------------------------------------------------------
Balances at June 30, 2001 12,103,180 $ 12 - 144,706 (161,840) 14,982 $ (2,140)
-----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated condensed financial statements.
- 4 -
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
For the Six Month Periods Ended June 30, 2001 and 2000
(In thousands)
(unaudited)
2001 2000
---- ----
Net cash provided by (used in) operating activities $ 5,089 (2,301)
---------- ----------
Cash flows from investing activities:
Construction of telecommunication networks (2,263) (2,517)
Increase in construction deposits (2,683) (257)
Proceeds from sale of assets 20 177
---------- ----------
Net cash used in investing activities (4,926) (2,597)
---------- ----------
Cash flows from financing activities:
Borrowings under long-term debt agreements - 117,170
Repayments and settlement of long-term debt (3,291) (117,534)
Borrowings under short-term debt agreements - 3,754
Proceeds from exercise of stock options and pre-emptive rights 114 263
---------- ----------
Net cash (used in) provided by financing activities (3,177) 3,653
---------- ----------
Effect of foreign exchange rate changes on cash 5 (799)
---------- ----------
Net decrease in cash and cash equivalents (3,009) (2,044)
Cash and cash equivalents at beginning of period 15,596 17,197
---------- ----------
Cash and cash equivalents at end of period $ 12,587 15,153
========== ==========
See accompanying notes to consolidated condensed financial statements.
- 5 -
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
(1) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying consolidated condensed financial statements of
Hungarian Telephone and Cable Corp. ("HTCC" or the "Registrant" and,
together with its consolidated subsidiaries, the "Company") have been
prepared without audit and, in the opinion of management, include all
adjustments, consisting mainly of normal recurring accruals, necessary
for a fair presentation. Results for interim periods are not
necessarily indicative of the results for a full year.
The accompanying consolidated condensed financial statements include
the financial statements of the Company and its majority owned
subsidiaries; Kelet-Nograd Com Rt., ("KNC"), Raba-Com Rt.,
("Raba-Com"), Hungarotel Tavkozlesi Rt. ("Hungarotel"), Papa es Tersege
Telefon Koncesszios Rt. ("Papatel") (KNC, Raba-Com, Hungarotel and
Papatel are each an Operating Company and together, the "Operating
Companies"), HTCC Consulting Rt. ("HTCC Consulting") and Pilistav Rt.
("Pilistav"). All material intercompany balances and transactions have
been eliminated.
The accompanying consolidated condensed financial statements are
prepared in accordance with U.S. generally accepted accounting
principles (U.S. GAAP). In preparing financial statements in conformity
with U.S. GAAP, management is required to make estimates and
assumptions. These estimates and assumptions affect reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
The consolidated condensed financial statements should be read in
conjunction with the audited consolidated financial statements of
Hungarian Telephone and Cable Corp. and its subsidiaries for the year
ended December 31, 2000, including the notes thereto, set forth in the
Company's annual report on Form 10-K filed with the United States
Securities and Exchange Commission ("SEC").
- 6 -
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
(b) Net Income (Loss) Per Share
Net income (loss) per share ("EPS") is computed by dividing income or
loss ascribable to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted EPS is computed
similar to basic earnings per share except that the weighted average
shares outstanding are increased to include additional shares from the
assumed exercise of stock options, where dilutive. The number of
additional shares is calculated by assuming that outstanding stock
options were exercised, or preferred securities were converted, and
that the proceeds from such exercises or conversions were used to
acquire shares of common stock at the average market price during the
reporting period.
The following is a reconciliation from basic earnings per share to
diluted earnings per share for the three and six month periods ended
June 30, 2001 and 2000:
3 months ended 6 months ended
-------------- --------------
2001 2000 2001 2000
---- ---- ---- ----
($ in thousands,
except share data)
Net income (loss) ascribable to
common stockholders (A) $ 9,059 $ (209) $ 8,303 $ (3,664)
plus: preferred stock dividends 27 27 53 53
------------ ------------ ------------ ------------
Net income (loss) (B) $ 9,086 $ (182) $ 8,356 $ (3,611)
============ ============ ============ ============
Determination of shares:
Weighted average common
shares outstanding -
basic (C) 12,103,180 12,014,052 12,096,760 12,001,740
Assumed conversion of
dilutive stock options and
cumulative convertible
preferred stock 464,608 -- 504,175 --
------------ ------------ ------------ ------------
Weighted average common
shares outstanding -
diluted (D) 12,567,788 12,014,052 12,600,935 12,001,740
Net income (loss) per
common share:
Basic (A/C) $ 0.75 $ (0.02) $ 0.69 $ (0.30)
Diluted (B/D) $ 0.72 $ (0.02) $ 0.66 $ (0.30)
- 7 -
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
For the three and six month periods ended June 30, 2001, 2,934,400 and
2,889,400 stock options and warrants were excluded from the computation
of diluted earnings per share due to their antidilutive effect. For the
three and six month periods ended June 30, 2000, potentially dilutive
common stock equivalents were excluded from the computation of diluted
net loss per common share because they were antidilutive.
(c) Foreign Exchange Financial Instruments
Foreign exchange financial instrument contracts are utilized by the
Company to manage certain foreign exchange rate risks. Company policy
prohibits holding or issuing derivative financial instruments for
trading purposes.
(2) Cash and Cash Equivalents
At June 30, 2001, cash of $4,927,000 comprised the following: $500,000
on deposit in the United States, and $4,427,000 consisting of $139,000
denominated in U.S. dollars and the equivalent of $4,288,000
denominated in Hungarian Forints on deposit with banks in Hungary.
Cash equivalents amounted to approximately $7,660,000 at June 30, 2001
and consisted of Hungarian government securities, denominated in
Hungarian Forints, purchased under agreements to resell which mature
within three months.
(3) Related Parties
Current and long-term amounts due to related parties totalling
$1,446,000 at June 30, 2001 is comprised of the following: $228,000 due
to a subsidiary of Citizens Communications Company, representing
cumulative preferred stock dividends in arrears, and $1,218,000
representing payments due to three former officers under separate
termination, consulting and non-competition agreements. The Company
paid approximately $604,000 during each of the six month periods ended
June 30, 2001 and 2000 to the former officers under these agreements.
- 8 -
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
(4) Segment Disclosures
The Company operates in a single industry segment, telecommunications
services. The Company has constructed a modern telecommunications
infrastructure in order to provide a full range of the Company's
products and services in its five concession areas in Hungary. While
the Company's chief operating decision maker monitors the revenue
streams of the various products and services, operations are managed
and financial performance is evaluated based on the delivery of
multiple services to customers over an integrated network.
Substantially all of the Company's assets are located in Hungary and
all of its operating revenues are generated in Hungary.
Products and Services
The Company groups its products and services into the following
categories:
Telephone Services - local dial tone and switched products and services
that provide incoming and outgoing calls over the public switched
network. This category includes reciprocal compensation revenues and
expenses (i.e. interconnect).
Network Services - point-to-point dedicated services that provide a
private transmission channel for the Company's customers' exclusive use
between two or more locations, both in local and long distance
applications.
Other Service and Product Revenues - PBX hardware sales and service
revenues, as well as miscellaneous other telephone service revenues.
The revenues generated by these products and services for the periods
ended June 30 were as follows:
3 months ended 6 months ended
---------------- ---------------
2001 2000 2001 2000
---- ---- ---- ----
($ in thousands)
Telephone services $10,144 $10,101 $20,539 $20,493
Network services 622 618 1,240 1,169
Other service and product
revenues 233 168 452 362
------- ------- ------- -------
$10,999 $10,887 $22,231 $22,024
======= ======= ======= =======
- 9 -
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
Major Customers
For the periods ended June 30, 2001 and 2000, none of the Company's
customers accounted for more than 10% of the Company's total revenues.
(5) Derivative Instruments and Hedging Activities
On January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities", as subsequently amended by
Statement of Financial Accounting Standards No. 138 ("SFAS 138").
Accordingly, the Company carries its foreign currency forward contracts
at fair value in its consolidated balance sheet. The fair value is
based on forward rates provided by the counterparty bank with which the
Company has entered into the forward contract. The foreign currency
forward contracts the Company has entered into do not qualify for hedge
accounting, as defined under SFAS 133 and 138, and accordingly changes
in the fair value of the forward contracts are reported in the
consolidated statement of operations and comprehensive income, as a
part of net foreign exchange gains/(losses).
Prior to the adoption of SFAS 133 and 138, the Company accounted for
its foreign currency forward contracts under Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS
52"). The transition adjustment on adoption of SFAS 133 and 138 was not
material and has not been separately presented as the effect of a
change in accounting principle. The fair value of the Company's foreign
currency forward contracts at June 30, 2001 and December 31, 2000 are
approximately $389,000 and $13,000, respectively.
- 10 -
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Introduction
Hungarian Telephone and Cable Corp. ("HTCC" or the "Registrant" and,
together with its consolidated subsidiaries, the "Company") is engaged primarily
in the provision of telecommunications services through its majority-owned
operating subsidiaries, Kelet-Nograd Com Rt. ("KNC"), Raba Com Rt. ("Raba-Com"),
Papa es Tersege Telefon Koncesszios Rt. ("Papatel") and Hungarotel Tavkozlesi
Rt. ("Hungarotel"). The Company earns substantially all of its
telecommunications revenue from measured service fees, monthly line rental fees,
connection fees, public pay telephone services and ancillary services (including
charges for additional services purchased at the customer's discretion).
During 1996 and 1997, the Company embarked on a significant network
development program which met its substantial demand backlog, increased the
number of basic telephone access lines in service and modernized existing
facilities. The development and installation of the network in each of the
Company's operating areas required significant capital expenditures.
The Company achieved EBITDA1 of $7.0 million during the quarter ended
June 30, 2001, up from EBITDA of $6.9 million for the quarter ended June 30,
2000. Now that the Company's networks are substantially built-out, the ability
of the Company to generate sufficient revenues to satisfy cash requirements and
remain profitable will depend upon a number of factors, including the Company's
ability to attract additional customers and increased revenues per customer.
These factors are expected to be primarily influenced by the success of the
Company's operating and marketing strategies, as well as market acceptance of
telecommunications services in the Company's operating areas. In addition, the
Company's profitability may be affected by changes in the Company's regulatory
environment and other factors that are beyond the Company's control.
Since commencing the provision of telecommunications services in the
first quarter of 1995, the Company's network construction and expansion program
has added approximately 145,000 access lines through June 30, 2001 to the
approximately 60,000 access lines acquired directly from Magyar Tavkozlesi Rt.
("Matav"), the former State-controlled monopoly telephone company.
--------
1 EBITDA is defined by the Company as net revenue less operating and maintenance
expenses. The Company has included information concerning EBITDA because it
believes that it is used by certain investors as one measure of the Company's
financial performance. EBITDA is not a measure of financial performance under
U.S. generally accepted accounting principles and is not necessarily comparable
to similarly titled measures used by other companies. EBITDA should not be
construed as an alternative to operating income or to cash flows from operating
activities (as determined in accordance with U.S. generally accepted accounting
principles) as a measure of liquidity.
-11-
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Comparison of Three Months Ended June 30, 2001 and Three Months Ended June 30,
2000
The Company's Hungarian subsidiaries functional currency is the
Hungarian forint. The average Hungarian forint/U.S. dollar exchange rate for the
three months ended June 30, 2001 was 294.57, as compared to an average Hungarian
forint/U.S. dollar exchange rate for the three months ended June 30, 2000 of
275.89. This 7% devaluation of the Hungarian forint against the U.S. dollar
reflects the strengthening of the U.S. dollar against the Hungarian forint
between the periods. When comparing the three months ended June 30, 2001 to the
three months ended June 30, 2000, it should be noted that all U.S. dollar
reported amounts have been affected by this 7% devaluation of the Hungarian
forint.
Net Revenues-unaudited
Quarter ended
June 30,
(dollars in millions) 2001 2000 % change
Measured service revenues 7.1 7.7 (8)
Subscription revenues 4.0 3.4 18
Net interconnect charges (1.6) (1.6) -
----- -----
Net measured service and subscription revenues 9.5 9.5 -
Connection fees 0.5 0.4 25
Other operating revenues, net 1.0 1.0 -
----- -----
Telephone Service Revenues, Net 11.0 10.9 1
===== =====
The Company recorded a 1% increase in telephone service revenues to
$11.0 million for the three months ended June 30, 2001 from $10.9 million for
the three months ended June 30, 2000.
Net measured service and subscription revenues remained consistent at
$9.5 million for the three months ended June 30, 2001 and June 30, 2000.
Measured service revenues decreased 8% to $7.1 million during the three months
ended June 30, 2001 from $7.7 million during the three months ended June 30,
2000. Subscription revenues increased 18% to $4.0 million during the three
months ended June 30, 2001 from $3.4 million during the three months ended June
30, 2000. Measured service revenues decreased in functional currency terms by
approximately 1% due to an increase in average access lines in service from
approximately 201,300 for the three months ended June 30, 2000 to approximately
205,600 for the three months ended June 30, 2001, being offset by an average
2.6% decrease in call tariffs between 2000 and 2001 as a result of continued
tariff re-balancing which was introduced during 2000. Under tariff re-balancing,
a more cost-driven payment structure is envisaged, with monthly subscription
fees increasing to cover network infrastructure expenses over time. In Hungary,
as in many other countries over the past several years, cheaper local call
charges have been subsidized by expensive international and domestic
long-distance calls. The overall effect on a gross revenue basis for the Company
and for the telecom industry as a whole is expected to be neutral. Subscription
revenues increased in functional currency terms by approximately 26% as a result
of continued tariff re-balancing. However, the increase in subscription revenues
in functional currency terms has been offset to an extent by the approximate 7%
devaluation of the functional currency between the periods and, therefore,
subscription revenues show only an 18% increase in U.S. dollar terms.
-12-
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
These revenues have been reduced by net interconnect charges which
totalled $1.6 million during each of the three month periods ended June 30, 2001
and 2000. As a percentage of measured service and subscription revenues, net
interconnect charges have remained consistent at approximately 14% for each of
the three month periods ended June 30, 2001 and 2000.
Connection fees, which represent fees paid by customers to connect to
the Company's networks, increased to $0.5 million for the three months ended
June 30, 2001 from $0.4 million for the three months ended June 30, 2000. During
the fourth quarter of 2000, the Company implemented the SEC's Staff Accounting
Bulletin No. 101 ("SAB 101"), with effect from January 1, 2000, which requires
connection fees and corresponding direct incremental costs to be deferred and
amortized over future periods. As a result of the implementation of SAB 101,
certain connection fees and related operating and maintenance costs recognized
in prior periods were deferred and are being amortized over the estimated
average subscriber life of 7 years. The adoption of SAB 101 has not had a
material impact on the Company's results of operations. The amortization of
deferred connection fee revenue and associated direct incremental costs is
included in net telephone service revenues and operating and maintenance
expenses, respectively. The adoption of SAB 101 in the fourth quarter of 2000
caused connection fee revenues for the three months ended June 30, 2000 to be
restated from what was previously reported of $0.2 million to $0.4 million.
Operating and Maintenance Expenses
Operating and maintenance expenses remained consistent at $4.0 million
for each of the three month periods ended June 30, 2001 and 2000. The adoption
of SAB 101 in the fourth quarter of 2000 caused operating and maintenance
expenses for the three months ended June 30, 2000 to be restated from what was
previously reported of $3.8 million to $4.0 million. In functional currency
terms, operating and maintenance expenses increased approximately 15% for the
three months ended June 30, 2001, as compared to the three months ended June 30,
2000, due to inflationary increases in costs at the Company's Hungarian
subsidiaries. In U.S. dollar terms, however, the increase in such costs in
functional currency terms has been offset by the 7% devaluation of the Hungarian
forint between the periods and a reduction in the Company's U.S. dollar
denominated operating expenses between the periods. On a per line basis,
operating and maintenance expenses remained consistent at $20 per average access
line for each of the three month periods ended June 30, 2001 and 2000.
Depreciation and Amortization
Depreciation and amortization charges decreased $0.1 million to $2.3
million for the three months ended June 30, 2001 from $2.4 million for the three
months ended June 30, 2000, due primarily to the devaluation of the Hungarian
forint between the periods. Depreciation and amortization charges increased in
functional currency terms by approximately 2% due to additional capital
expenditures.
-13-
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Income from Operations
Income from operations increased to $4.7 million for the three months
ended June 30, 2001 from $4.5 million for the three months ended June 30, 2000.
Contributing to such improvement were slightly higher net telephone service
revenues and lower depreciation and amortization charges.
Foreign Exchange Gains (Losses)
Foreign exchange gains amounted to $7.5 million for the three months
ended June 30, 2001, compared to foreign exchange losses of $0.5 million for the
three months ended June 30, 2000. Such foreign exchange gains resulted primarily
from the appreciation of the Hungarian forint against the Company's U.S. dollar
25 million and euro 88 million denominated debt during the three month period
ended June 30, 2001. At June 30, 2001, the Hungarian forint appreciated in value
by approximately 9% against the euro and approximately 5% against the U.S.
dollar as compared to March 31, 2001. When non-Hungarian forint debt is
re-measured into Hungarian forints, the Company reports foreign exchange
gains/losses when the Hungarian forint appreciates/devalues against such
non-forint currencies during the reporting period. See the "Inflation and
Foreign Currency" and "Market Risk Exposure" sections below.
Interest Expense
Interest expense decreased to $3.4 million for the three months ended
June 30, 2001 from $4.5 million for the three months ended June 30, 2000. This
$1.1 million decrease is attributable to lower interest rates paid on borrowings
in currencies other than the Hungarian forint. As a result of the Company's
medium-term credit facility entered into in April 2000, the Company's borrowings
went from being mostly Hungarian forint denominated to mostly euro denominated.
Thus the decrease reflects the lower interest rates paid on borrowings in euros
compared to Hungarian forints. As a result of the Company's medium-term credit
facility entered into in April 2000, the Company's weighted average interest
rate on its debt obligations went from 9.48% for the three months ended June 30,
2000, to 8.92% for the three months ended June 30, 2001, a 6% decrease. Included
in interest expense for the three months ended June 30, 2000 is approximately
$0.6 million of amortization of forward points on forward foreign currency
contracts accounted for under SFAS 52. The Company adopted the provisions of
SFAS 133 and SFAS 138 on January 1, 2001 and the foreign currency forward
contracts the Company has entered into during 2001 do not qualify for hedge
accounting as defined under SFAS 133 and SFAS 138. See "Liquidity and Capital
Resources" section below.
Net Income (Loss)
As a result of the factors discussed above, the Company recorded income
ascribable to common stockholders of $9.1 million, or $0.75 per share, or $0.72
per share on a diluted basis, during the three months ended June 30, 2001 as
compared to a net loss ascribable to common stockholders of $0.2 million, or
$0.02 per share on a basic and diluted basis, during the three months ended June
30, 2000.
-14-
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Comparison of Six Months Ended June 30, 2001 to Six Months Ended June 30, 2000
As previously mentioned, the Company's Hungarian subsidiaries
functional currency is the Hungarian forint. The average Hungarian forint/U.S.
dollar exchange rate for the six months ended June 30, 2001 was 291.12, as
compared to an average Hungarian forint/U.S. dollar exchange rate for the six
months ended June 30, 2000 of 268.50. This 8% devaluation of the Hungarian
forint against the U.S. dollar reflects the strengthening of the U.S. dollar
against the Hungarian forint between the periods. When comparing the six months
ended June 30, 2001 to the six months ended June 30, 2000, it should be noted
that all U.S. dollar reported amounts have been affected by this 8% devaluation
in the Hungarian forint.
Net Revenues-unaudited
Year-to-date
(dollars in millions) 2001 2000 % change
Measured service revenues 14.5 15.7 (8)
Subscription revenues 7.9 6.6 20
Net interconnect charges (3.2) (3.2) -
----- -----
Net measured service and subscription revenues 19.2 19.1 1
Connection fees 1.1 0.8 38
Other operating revenues 1.9 2.1 (10)
----- -----
Telephone Service Revenues, Net 22.2 22.0 1
===== =====
The Company recorded a 1% increase in net telephone service revenues of
$22.2 million for the six months ended June 30, 2001 as compared to revenues of
$22.0 million for the six months ended June 30, 2000.
Net measured service and subscription revenues increased 1% to $19.2
million for the six months ended June 30, 2001 from $19.1 million for the six
months ended June 30, 2000. Measured service revenues decreased 8% to $14.5
million, while subscription revenues increased 20% to $7.9 million for the six
months ended June 30, 2001. Measured service revenues remained consistent in
functional currency terms as a result of an increase in average access lines in
service from approximately 201,100 for the six months ended June 30, 2000 to
approximately 206,100 during the six months ended June 30, 2001, being offset by
an average 2.6% decrease in call tariffs between 2000 and 2001 as a result of
continued tariff re-balancing which was introduced during 2000. Under tariff
re-balancing, a more cost-driven payment structure is envisaged, with the actual
monthly subscription fees increasing to cover network infrastructure expenses
over time. In Hungary, as in many other countries over the past several years,
cheaper local call charges have been subsidized by expensive international and
domestic long-distance calls. The overall effect on a gross revenue basis for
the Company and the telecom industry as a whole is expected to be neutral.
Subscription revenues increased in functional currency terms by approximately
29% as a result of continued tariff re-balancing. However, the increase in
subscription revenues in functional currency terms has been offset to an extent
by the approximate 8% devaluation of the functional currency between the periods
and therefore, subscription revenues show only a 20% increase in U.S. dollar
terms.
-15-
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
These revenues have been reduced by net interconnect charges which
totalled $3.2 million for each of the six month periods ended June 30, 2001 and
2000. As a percentage of measured service and subscription revenues, net
interconnect charges have remained consistent at approximately 14% for each of
the six month periods ended June 30, 2001 and 2000.
Connection fees, which represent fees paid by customers to connect to
the Company's networks, increased to $1.1 million for the six months ended June
30, 2001 from $0.8 million for the six months ended June 30, 2000. During the
fourth quarter of 2000, the Company implemented the SEC's Staff Accounting
Bulletin No. 101 ("SAB 101"), with effect from January 1, 2000, which requires
connection fees and corresponding direct incremental costs to be deferred and
amortized over future periods. As a result of the implementation of SAB 101,
certain connection fees and related operating and maintenance costs recognized
in prior periods were deferred and are being amortized over the estimated
average subscriber life of 7 years. The adoption of SAB 101 has not had a
material impact on the Company's results of operations and the amortization of
deferred connection fee revenue and associated direct incremental costs is
included in net telephone service revenues and operating and maintenance
expenses, respectively. The adoption of SAB 101 in the fourth quarter of 2000
caused connection fee revenues for the six months ended June 30, 2000 to be
restated from what was previously reported of $0.3 million to $0.8 million.
Operating and Maintenance Expenses
Operating and maintenance expenses decreased 4% to $8.3 million for the
six months ended June 30, 2001, as compared to $8.7 million for the six months
ended June 30, 2000. The adoption of SAB 101 in the fourth quarter of 2000
caused operating and maintenance expenses for the six months ended June 30, 2000
to be restated from what was previously reported of $8.1 million to $8.7
million. In functional currency terms, operating and maintenance expenses
increased 9% for the six months ended June 30, 2001, as compared to the six
months ended June 30, 2000, due to inflationary increases in costs. In U.S.
dollar terms, however, the increase in such costs in functional currency terms
has been offset by the 8% devaluation of the Hungarian forint between the
periods and a reduction in the Company's U.S. dollar denominated operating
expenses between the periods. On a per line basis, operating and maintenance
expenses decreased to approximately $40 per average access line for the six
months ended June 30, 2001 from $43 for the six months ended June 30, 2000.
Depreciation and Amortization
Depreciation and amortization charges decreased $0.3 million, or 6%, to
$4.6 million for the six months ended June 30, 2001 from $4.9 million for the
six months ended June 30, 2000, due primarily to the devaluation of the
Hungarian forint between the periods. Depreciation and amortization charges
increased in functional currency terms by approximately 2% due to additional
capital expenditures.
-16-
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Income from Operations
Income from operations increased to $9.3 million for the six months
ended June 30, 2001 compared to $8.5 million for the six months ended June 30,
2000. Contributing to such improvement were higher net telephone service
revenues, lower operating and maintenance expenses and lower depreciation and
amortization charges.
Foreign Exchange Gains (Losses)
Foreign exchange gains amounted to $5.3 million for the six months
ended June 30, 2001, compared to foreign exchange losses of $2.5 million for the
six months ended June 30, 2000. The foreign exchange gains resulted primarily
from the appreciation of the Hungarian forint against the Company's euro 88
million denominated debt during the period. At June 30, 2001, the Hungarian
forint appreciated in value by approximately 8% against the euro as compared to
January 1, 2001. When non-Hungarian forint debt is re-measured into Hungarian
forints, the Company reports foreign exchange gains/losses on its consolidated
financial statements when the Hungarian forint appreciates/devalues against such
non-forint currencies during the reporting period. See the "Inflation and
Foreign Currency" and "Market Risk Exposure" sections below.
Interest Expense
Interest expense decreased to $7.1 million for the six months ended
June 30, 2001 from $10.4 million for the six months ended June 30, 2000. This
$3.3 million decrease is attributable to lower interest rates paid on borrowings
in currencies other than the Hungarian forint. As a result of the Company's
medium-term credit facility entered into in April 2000, the Company's borrowings
went from being mostly Hungarian forint denominated to mostly euro denominated.
Thus the decrease reflects the lower interest rates paid on borrowings in euros
compared to Hungarian forints. As a result of the Company's medium-term credit
facility entered into in April 2000, the Company's weighted average interest
rate on its debt obligations went from 11.89% for the six months ended June 30,
2000, to 8.99% for the six months ended June 30, 2001, a 24% decrease. Included
in interest expense for the six months ended June 30, 2000 is approximately $0.6
million of amortization of forward points on forward foreign currency contracts
accounted for under SFAS 52. The Company adopted the provisions of SFAS 133 and
SFAS 138 on January 1, 2001 and the foreign currency forward contracts the
Company has entered into during 2001 do not qualify for hedge accounting as
defined under SFAS 133 and SFAS 138. See "Liquidity and Capital Resources"
section below.
Net Income (Loss)
As a result of the factors discussed above, the Company recorded income
ascribable to common stockholders of $8.3 million, or $0.69 per share, or $0.66
per share on a diluted basis, for the six months ended June 30, 2001 as compared
to a net loss ascribable to common stockholders of $3.7 million, or $0.30 per
share on a basic and diluted basis, for the six months ended June 30, 2000.
-17-
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Liquidity and Capital Resources
The Company has historically funded its capital requirements primarily
through a combination of debt, equity and vendor financing. The development and
installation of the network in each of the Company's operating areas required
significant capital expenditures ($192.3 million at historical exchange rates
through June 30, 2001). Since the end of 1998, the Company's networks have had
the capacity, with only normal capital expenditure requirements, to provide
basic telephone services to virtually all of the potential subscribers within
its operating areas.
Net cash provided by operating activities totalled $5.1 million during
the six months ended June 30, 2001 compared to net cash used in operating
activities of $2.3 million during the six months ended June 30, 2000. For the
six months ended June 30, 2001 and 2000, the Company used $4.9 million and $2.6
million, respectively, in investing activities, which was primarily used to fund
additions to the Company's telecommunications networks. Financing activities
used net cash of $3.2 million for the six months ended June 30, 2001, compared
with net cash provided by financing activities of $3.7 million for the six
months ended June 30, 2000.
On April 11, 2000, the Company entered into an EUR 130 million Senior
Secured Debt Facility Agreement (the "Debt Agreement") with a European banking
syndicate. The Company drew down EUR 129 million of the Facility on April 20,
2000 ($121 million at April 20, 2000 exchange rates), which funds were used,
along with $7.3 million of other Company funds (at April 20, 2000 exchange
rates), to pay off the entire outstanding EUR 134 million (approximately $126
million at April 20, 2000 exchange rates) principal and interest due on a bridge
loan primarily denominated in Hungarian forints, which was due to mature on May
12, 2000, and to pay fees associated with the Debt Agreement. The Company
believes that its current cash flow will allow it to meet its working capital
needs and continue its network development plans, as well as meet its
obligations under the Debt Agreement.
Inflation and Foreign Currency
In May 2001, the National Bank of Hungary widened the trading band the
Hungarian forint is allowed to trade within from +/- 2.25% of the mid-point of
the band to +/- 15%. This widening caused the Hungarian forint to initially
appreciate in value against the euro by approximately 4%. Subsequent to the band
widening, and without any warning in June 2001, the National Bank of Hungary
lifted all remaining foreign exchange restrictions concerning the Hungarian
forint, thus making the Hungarian forint fully and freely convertible. The
lifting of the restrictions has caused a large amount of investment money to
flow into the Hungarian markets and caused the Hungarian forint to appreciate in
value against the euro by approximately 9% between March 31, 2001 and June 30,
2001. Based upon current exchange rates, the Hungarian forint has appreciated
approximately 7-8% between May and August 2001 against the euro. This
appreciation in the Hungarian forint's value has caused the Company to have
large foreign exchange gains during the second quarter primarily related to the
re-measurement of the Company's euro denominated debt. It should be kept in
mind, however, that with the widening of the trading band, the potential
volatility of the Hungarian forint has increased and no
-18-
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
assurance of such foreign exchange gains, as those experienced by the Company
during the period, can be given for the future. See the "Market Risk Exposure"
section below.
The Company's Hungarian operations generate revenues in Hungarian
forints and incur operating and other expenses, including capital expenditures,
predominately in Hungarian forints but also in U.S. dollars and euros. In
addition, certain of the Company's balance sheet accounts are denominated in
currencies other than the Hungarian forint, the Company's Hungarian
subsidiaries' functional currency. Accordingly, when such accounts are
translated into Hungarian forints, the Company is subject to foreign exchange
gains and losses which are reflected as a component of net income or loss. When
the Company and its subsidiaries' forint-denominated accounts are translated
into U.S. dollars for financial reporting purposes, the Company is subject to
translation adjustments, the effect of which is reflected as a component of
stockholders' deficiency.
While the Company has the ability to increase the prices it charges for
its services commensurate with increases in the Hungarian Consumer Price Index
("CPI") pursuant to its licenses from the Hungarian government, it may choose
not to implement the full amount of the increase permitted due to competitive
and other concerns. In addition, the rate of increase in the Hungarian CPI may
not be sufficient to offset potential negative exchange rate movements and as a
result, the Company may be unable to generate cash flows to the degree necessary
to meet its obligation in currencies other than the Hungarian forint.
Market Risk Exposure
The Company is exposed to various types of risk in the normal course of
its business, including the impact of foreign currency exchange rate
fluctuations and interest rate changes. Company operations, including all
revenues and approximately 88% of operating expenses are Hungarian forint based
and are therefore subject to exchange rate variability between the Hungarian
forint and the U.S. dollar. In the past, the "crawling peg" policy of the
Hungarian National Bank, combined with the +/- 2.25% trading band, allowed the
Hungarian forint to be somewhat predictable versus the euro (e.g. the Hungarian
forint/euro exchange rate went from 264.58 as of January 1, 2001 to 266.70 as of
March 31, 2001). However, due to the lifting of all foreign exchange
restrictions concerning the Hungarian forint and the volatility in euro/U.S.
dollar exchange rates, Hungarian forint/euro and Hungarian forint/U.S. dollar
exchange rate variability has increased. This increase in variability is evident
by the fact that the Hungarian forint/euro exchange rate went from 266.70 as of
March 31, 2001 to 243.59 as of June 30, 2001, an approximate 9% appreciation in
value. Similarly, the Hungarian forint/U.S. dollar exchange rate went from
302.79 as of March 31, 2001 to 287.39 as of June 30, 2001, an approximate 5%
appreciation in value.
The debt obligations of the Company are Hungarian forint, euro and U.S.
dollar denominated. The interest rate on the Hungarian forint debt obligations
is based on the Budapest Bank Offer Rate (BUBOR). The interest rates on the euro
and U.S. dollar denominated obligations are based on EURIBOR and USD LIBOR,
respectively. Over the medium to long term, the BUBOR rate is expected to follow
inflation and devaluation trends and the Company does not currently believe it
has any material interest rate risk on any of its Hungarian forint
-19-
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
denominated debt obligations. If a 1% change in the BUBOR interest rate were to
occur, the Company's interest expense would increase or decrease by
approximately $0.4 million annually based upon the Company's June 30, 2001 debt
level. If a 1% change in EURIBOR interest rates were to occur, the Company's
interest expense would increase or decrease by approximately $0.7 million
annually based upon the Company's June 30, 2001 debt level. If a 1% change in
USD LIBOR interest rates were to occur, the Company's interest expense would
increase or decrease by approximately $0.3 million annually based upon the
Company's June 30, 2001 debt level.
The Company is also exposed to exchange rate risk insofar as the
Company has debt obligations in other than the functional currency of its
majority owned Hungarian subsidiaries. Given the Company's debt obligations,
which include euro and U.S. dollar denominated debt, if a 1% change in Hungarian
forint/euro exchange rates were to occur, the Company's exchange rate exposure
would increase or decrease by approximately $0.7 million annually based upon the
Company's June 30, 2001 debt level. If a 1% change in Hungarian forint/U.S.
dollar exchange rates were to occur, the Company's exchange rate exposure would
increase or decrease by approximately $0.3 million annually.
The Company utilizes foreign currency forward contracts to reduce its
exposure to exchange rate risks associated with cash payments in euro maturing
within six months under the Company's long-term debt obligations. The forward
contracts establish the exchange rates at which the Company will sell the
contracted amount of Hungarian forints for euros at a future date. The Company
utilizes forward contracts which are six months in duration and at maturity will
either receive or pay the difference between the contracted forward rate and the
exchange rate at the settlement date. The contracted amount of foreign currency
forwards at June 30, 2001 is EUR 6,030,000 (approximately $5,111,000). The
counterparties to the Company's foreign currency forward contracts are
substantial and creditworthy multinational commercial banks which are recognized
market makers. The risk of counterparty nonperformance associated with these
contracts is not considered by the Company to be material.
Prospective Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, Business Combinations
("SFAS 141") and No. 142, Goodwill and Other Intangible Assets ("SFAS 142").
SFAS 141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. Under SFAS 142, goodwill and intangible
assets with indefinite lives are no longer amortized but are reviewed annually
(or more frequently if impairment indicators arise) for impairment. Separable
intangible assets that are not deemed to have indefinite lives will continue to
be amortized over their useful lives. The amortization provisions of SFAS 142
apply to goodwill and intangible assets acquired after June 30, 2001. With
respect to goodwill and intangible assets acquired prior to July 1, 2001, the
Company is required to adopt SFAS 142 effective January 1, 2002. The Company is
currently evaluating the effect, if any, the adoption of the provisions of SFAS
142, that are effective January 1, 2002, will have on its results of operations
and financial position.
-20-
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The information required by this Item is contained under the heading
"Market Risk Exposure" under Item 2. "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
-21-
Part II. Other Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Item 1. Legal Proceedings
As reported in Item 3. "Legal Proceedings" in the Company's Report on
Form 10-K for the year ended December 31, 2000, Raba-Com, a subsidiary
of the Company, was a defendant in a lawsuit filed in Hungary by an
individual residential customer. The plaintiff sought a refund of a
minimal amount alleging that his home was connected to Raba-Com's
telephone network in an untimely fashion. The lower court ruled against
Raba-Com. In a judgment dated May 3, 2001, the Hungarian Supreme Court
upheld the lower court's ruling. The Company does not believe that the
outcome of this case will have a material effect on the Company's
consolidated financial position, results of operations or liquidity
because the precedential effect of this case is limited by (i) the
statute of limitations which has limited the number of claims and (ii)
the maximum exposure per claim which is not material.
As reported in Item 3. "Legal Proceedings" in the Company's Report on
Form 10-K for the year ended December 31, 2000 and Item 1., Part II of
the Company's report on Form 10-Q for the quarterly period ended March
31, 2001, the Company is involved in legal proceedings in Hungary with
a Hungarian contractor. In July 2001, the contractor filed an
additional lawsuit challenging certain transactions regarding the
litigated matters between Postabank (the contractor's creditor) and the
Company. The first hearing regarding this additional action will be
held in 2002. The Company believes that this additional lawsuit is
without merit and that the Company will prevail when the lawsuit is
resolved.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Default Upon Senior Securities
(a) None.
(b) On May 12, 1999, the Company issued 30,000 shares of Preferred
Stock Series A with a liquidation value of $70 per share to a
subsidiary of Citizens Communications Company. Any holder of
such Preferred Shares is entitled to receive cumulative cash
dividends payable in arrears at the annual rate of 5%,
compounded annually, on the liquidation value. As of June 30,
2001, the total arrearage on the Preferred Shares was
$228,000.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of the Registrant was held
on May 21, 2001.
(b) Not Applicable.
(c) First Matter Voted on at the Annual Meeting of Stockholders of
the Registrant: Election of Directors
-22-
Part II. Other Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Votes Cast For Votes Withheld
Ole Bertram 11,472,894 10,925
Soren Eriksen 11,473,019 10,800
Daryl A. Ferguson 11,473,019 10,800
Torben V. Holm 11,473,019 10,800
John B. Ryan 11,472,519 11,300
William E. Starkey 11,472,519 11,300
Leonard Tow 11,472,519 11,300
Second Matter Voted on at the Annual Meeting of Stockholders
of the Registrant: Approval of the proposal to amend the
Registrant's Incentive Stock Option Plan to extend the
termination date of the plan from April 30, 2002 to April 30,
2003.
For Against Abstain Not Voted
--- ------- ------- ----------
9,427,518 71,158 3,490 1,981,653
Third Matter Voted on at the Annual Meeting of Stockholders of
the Registrant: Ratification of the appointment of KPMG
Hungaria Kft. as auditors of the Registrant for the fiscal
year ending December 31, 2001.
For Against Abstain
--- ------- -------
11,475,694 7,700 425
(d) Not Applicable.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
Number Description
------ -----------
2 Plan of acquisition, reorganization, arrangement,
liquidation or succession (None)
3(i) Certificate of Incorporation of the Registrant, as
amended, filed as Exhibit 4.1 to the Registrant's
Registration Statement on Form S-8 filed on January
31, 2001 (File #333-54688) and incorporated herein by
reference
3(ii) By-laws of the Registrant, as amended, filed as
Exhibit 4.2 to the Registrant's Registration
Statement on Form S-8 filed on January 31, 2001 (File
#333-54688) and incorporated herein by reference
-23-
Part II. Other Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
4.1 Specimen Common Stock Certificate, filed as Exhibit
4(a) to the Registrant's Registration Statement on
From SB-2 filed on October 27, 1994 and incorporated
herein by reference (File #33-80676)
4.2 Certificate of Designation of Series A - Preferred
Stock of Hungarian Telephone and Cable Corp., filed
as Exhibit 4.1 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1999 and
incorporated herein by reference
11 Statement re computation of per share earnings (not
required)
15 Letter re unaudited interim financial information
(not required)
18 Letter re change in accounting principles (none)
19 Report furnished to security holders (none)
22 Published report regarding matters submitted to vote
of security holders (not required)
24 Power of Attorney (not required)
(b) Reports on Form 8-K
None.
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Hungarian Telephone and Cable Corp.
August 8, 2001 By: /s/Ole Bertram
--------------
Ole Bertram
Chief Executive Officer and President
August 8, 2001 By: /s/William McGann
-----------------
William McGann
Chief Accounting Officer,
Controller and Treasurer
-24-