PRESS RELEASE
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TELEWEST GLOBAL, INC. ANNOUNCES
TELEWEST COMMUNICATIONS PLC'S SECOND QUARTER FINANCIAL RESULTS
FOR 2004
London, United Kingdom - July 29, 2004 (NASDAQ: TLWT). Telewest Global,
Inc. ("Telewest") today announced the US GAAP results for the three and six
months ended June 30, 2004, for its predecessor company, Telewest
Communications plc ("plc"). Substantially all of the assets of plc were
transferred to Telewest UK, a wholly owned subsidiary of Telewest on July
14, 2004 in connection with plc's financial restructuring. During the three
and six months ended June 30, 2004, Telewest had no significant assets and
no operations. Telewest's quarterly results, including a discussion of how
the presentation of its future results will differ from the presentation of
the historical results of plc, are included in its quarterly report on Form
10-Q, filed with the U.S. Securities and Exchange Commission today.
SECOND QUARTER HIGHLIGHTS
OPERATING INCOME INCREASED YEAR-ON-YEAR FROM (POUND)3M TO (POUND)20M
QUARTERLY NET CASH PROVIDED BY OPERATING ACTIVITIES OF (POUND)88M
72,000 BROADBAND NET ADDITIONS - A RECORD QUARTER
CUSTOMERS TAKING TWO OR MORE SERVICES INCREASED YEAR-ON-YEAR BY 4% PTS TO 75%
QUARTERLY REVENUE GENERATING UNIT ("RGU") GROWTH OF 84,000 TO 3.45M
London, United Kingdom - Cob Stenham, Chairman of Telewest Global, Inc.
commented:
"This is the last set of results for Telewest Communications plc, the
predecessor company of Telewest Global, Inc. prior to the completion of its
financial restructuring on July 15, 2004. They show continued good
operating performance with growth in customers and revenue generating
units. Coupled with strong cost control and reduced SG&A expenses, the
result is that operating income, and free cash flow are sharply up. In
particular, we achieved record growth in broadband services and increased
the proportion of our "triple play" customers to 22%.
As a result of the financial restructuring, Telewest now has a strong balance
sheet and a sound platform for delivering profitable growth as a leading
broadband communications and media group in the United Kingdom."
ENQUIRIES: INVESTORS
Richard Williams Head of investor relations +44 (0) 20 7299
5479
Vani Gupta Investor relations manager +44 (0) 20 7299
5353
MEDIA
Jane Hardman Director of corporate +44 (0) 20 7299
communications 5888
COMPANY SUMMARY
We are a leader in the UK broadband communications and media sector. Our
operations are divided into two reporting segments: cable and content. The
cable segment is further subdivided into a consumer sales division and a
business sales division. The consumer sales division provides cable
television, consumer telephony and internet access services to residential
customers. The business sales division focuses on a wide range of voice,
data and managed solutions services for businesses. We use our local
distribution networks, our "national network" and our internet protocol
services platform to handle the communication, entertainment and
information needs of our residential and business customers. Our content
segment supplies basic (non-premium) television channels and related
services to the UK pay-television broadcasting market.
The content segment, which has four pay-television channels and one
free-to-air channel, owns 50% of the companies that comprise UKTV, a joint
venture formed with BBC Worldwide. UKTV offers a portfolio of multi-channel
television channels based on the BBC's program library. The content
segment, together with UKTV, is the largest provider of basic (non-premium)
thematic channels to the UK multi-channel pay-television broadcasting
market.
FINANCIAL SUMMARY
US GAAP FINANCIAL THREE MONTHS SIX MONTHS
MEASURES (IN ENDED JUNE 30, ENDED JUNE 30,
(POUND) MILLIONS) 2004 2003 2004 2003
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Total revenue 326 323 654 642
Operating income 20 3 39 5
Net (loss)/income (126) 5 (130) (158)
Net cash provided by
operating activities 88 62 170 136
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Operating income for the three months ended June 30, 2004 was (pound)20
million, up (pound)17 million from (pound)3 million for the three months
ended June 30, 2003, and for the six months ended June 30, 2004 was
(pound)39 million, up (pound)34 million from (pound)5 million for the six
months ended June 30, 2003. The improvements resulted from increased
revenues and lower operating costs.
Net (loss)/income decreased from (pound)5 million net income for the three
months ended June 30, 2003 to (pound)126 million net loss for the three
months ended June 30, 2004. The movement resulted principally from foreign
exchange losses of (pound)37 million on our dollar-denominated debt in the
second quarter of 2004 compared to exchange gains of (pound)117 million in
the second quarter of 2003, as a result of the increasing value of the US
dollar versus the pound sterling during the second quarter of 2004. As all
of the dollar-denominated debt was cancelled under the financial
restructuring, foreign exchange movements on this cancelled debt will not
occur in the future. Net (loss)/income was also negatively impacted by
(pound)83 million and (pound)161 million in the three and six months ended
June 30, 2004, respectively, of interest on notes and debentures. These
notes and debentures were cancelled under the financial restructuring and
the accompanying interest will not be paid.
Net (loss)/income decreased from (pound)158 million for the six months
ended June 30, 2003 to (pound)130 million for the six months ended June 30,
2004. The movement resulted principally from improved operating income
partially offset by reduced foreign exchange gains.
Net cash provided by operating activities increased from (pound)62 million
for the second quarter of 2003 to (pound)88 million for the second quarter
of 2004 and from (pound)136 million for the six months ended June 30, 2003
to (pound)170 million for the six months ended June 30, 2004. These
increases were principally as a result of improvements in operating income
and reduced working capital.
NON-US GAAP FINANCIAL THREE MONTHS SIX MONTHS
MEASURES (IN(POUND) ENDED JUNE 30, ENDED JUNE 30,
MILLIONS) 2004 2003 2004 2003
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Adjusted EBITDA 122 109 244 210
Free cash flow 37 21 62 32
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A reconciliation of the above non-US GAAP financial measures, Adjusted
EBITDA and Free cash flow, to the most directly comparable US GAAP
financial measures are explained and shown on pages 15 to 18.
Adjusted EBITDA for the three months ended June 30, 2004 was (pound)122
million, up 12% as compared to the three months ended June 30, 2003,
reflecting increased revenues, improved gross margin and lower selling,
general and administrative expenses ("SG&A"). Adjusted EBITDA for the three
months ended June 30, 2004, represents Cable Adjusted EBITDA of (pound)119
million and Content Adjusted EBITDA of (pound)3 million compared with
(pound)107 million and (pound)2 million, respectively, for the three months
ended June 30, 2003.
Adjusted EBITDA for the six months ended June 30, 2004 was (pound)244
million, up 16% as compared to the six months ended June 30, 2003,
reflecting increased revenues, improved gross margin and lower SG&A.
Adjusted EBITDA for the six months ended June 30, 2004, represents Cable
Adjusted EBITDA of (pound)236 million and Content Adjusted EBITDA of
(pound)8 million compared with (pound)205 million and (pound)5 million,
respectively, for the six months ended June 30, 2003.
Free cash flow for the three and six months ended June 30, 2004 was
(pound)37 million and (pound)62 million, respectively, up 76% and 94%
compared to the three and six months ended June 30, 2003, as improvements
in net cash provided by operating activities were partially offset by
increases in cash paid for property and equipment.
OPERATING RESULTS
COMPARISON OF THE THREE-MONTH PERIODS ENDED JUNE 30, 2004 AND 2003
Except where otherwise stated in this section, all comparisons compare the
three-month period ended June 30, 2004 to the three-month period ended June
30, 2003. All quarterly financial information is unaudited.
Total revenue Three months Three months
(in (pound)millions) ended June 30, ended June 30, Percentage
2004 2003 inc/(dec)
- -------------------------------------------------------------------------
Cable Segment
Consumer sales 235 228 3%
Business sales 63 69 (9%)
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Total Cable Segment 298 297 -
Content Segment 28 26 8%
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Total revenue 326 323 1%
=========================================================================
CABLE SEGMENT
CONSUMER SALES DIVISION
Consumer sales division revenue increased (pound)7 million from (pound)228
million to (pound)235 million, due primarily to growth in internet revenue.
Overall, the consumer sales division's Average Revenue Per User ("ARPU")
for the quarter was up 3% to (pound)44.98 reflecting increasing broadband
internet and "triple play" penetration. During the quarter the number of
household customers increased by 10,000.
Our successful focus on selling bundled products has resulted in the
percentage of customers subscribing to two or more services increasing from
71% to 75% and the percentage of "triple play" customers increasing from
13% to 22%. This success is also reflected in the growth of Revenue
Generating Units (RGUs) which grew by 84,000 in the quarter.
Subscriber growth was also helped by a reduction in average monthly churn
from 1.3% to 1.1%.
CABLE TELEVISION
The number of TV subscribers rose by 2,000 in the second quarter of 2004
compared to losses of 23,000 in the second quarter of 2003. Average monthly
TV churn fell from 1.7% to 1.3%.
We are improving the range of content included in our lower and mid-tier
digital TV packs. The entry level Starter pack will expand to incorporate
the five most popular digital television channels and the mid-tier
Essential pack will now include the top fifteen. Alongside these changes,
we have increased the price of our Essential pack by (pound)1 per month
with effect from July 1, 2004.
At June 30, 2004, 82% of our TV subscribers took our digital service
compared with 73% at June 30, 2003. 94% of our network has been upgraded
for broadband and digital. We continue to upgrade the last remaining
sections of our network that are currently unable to receive digital
television or broadband.
We are currently working on plans to begin rolling out Video On Demand
(VOD) and Personal Video Recorder (PVR) services in the future.
CONSUMER TELEPHONY
The number of telephony subscribers increased by 9,000 in the second
quarter compared to the loss of 13,000 in the corresponding period in 2003
as we continued to add customers in an increasingly competitive market.
Average monthly telephony churn fell from 1.2% to 1.1%.
The number of subscribers to our "Talk" flat rate telephony packages
increased by 34,000 in the second quarter, compared to 16,000 in the second
quarter of 2003. 32% of all telephony customers are now on a "Talk" flat
rate package compared to 25% at June 30, 2003.
Revenues from telephony products have declined slightly, due to lower
telephony usage and due to the sale of our Indirect Access ("IDA")
telephony business in July 2003. This IDA business had generated (pound)2
million of revenue in the second quarter of 2003. Telephony usage revenue
has also been impacted by reductions in our mobile telephony prices
following cuts in interconnect charges from mobile operators imposed by
Ofcom, (the UK regulatory body for communications).
INTERNET
The second quarter was our best ever quarter for broadband with 72,000 net
additions compared to 51,000 net additions in the first quarter of 2004.
This growth was driven principally by the successful launch of our lower
tier 256Kb service in March 2004. At June 30, 2004, we had 538,000
broadband internet subscribers.
During the second quarter of 2004, we also increased the connection speeds
of our top three broadband tiers at no additional cost to our customers.
Our standard broadband service increased in speed from 512Kb to 750Kb. The
1Mb and 2Mb services increased to speeds of 1.5Mb and 3Mb respectively.
We believe we are the broadband internet market leader in our addressable
areas (those areas of the country where consumers are able to receive our
broadband internet services) with around 70% market share. Broadband
continues to be successful in attracting new customers to Telewest. In the
second quarter of 2004, 31% of broadband installations were for customers
who were not existing customers. We have also achieved strong multi-service
penetration amongst our broadband customers, with 71% subscribing to the
full "triple play" and 94% to at least one other product as of June 30,
2004.
BUSINESS SALES DIVISION
The business sales division's revenue decreased (pound)6 million to
(pound)63 million primarily due to competitive pressures in the business
voice market and a reduction of (pound)3 million in carrier services
revenues.
The business services market remains extremely competitive and despite
continued growth in revenues from data services, this has not been enough
to offset weakness in voice and carrier revenues.
Within the fast growing data services market, our IPVPN (Internet Protocol
Virtual Private Network) service has become a flagship product and we have
seen total data revenues grow by 16%.
Recently, the business sales division has successfully launched two new
voice reseller products, Carrier Pre-Select and Wholesale Line Rental
services. Within the public sector arena, the business sales division has
also won the first contract to be awarded as part of a UK government
initiative to boost broadband adoption in the public sector.
We are reorganizing the business division to provide a differentiated
service to customers, based more closely on the services and products they
have or may require in the future, with separate service models for
standard and complex customers. These changes have resulted in significant
cost savings and the reorganization process is due to complete in the third
quarter of 2004.
CONTENT SEGMENT
Content segment revenue increased by (pound)2 million as increases in
advertising and subscription revenues were partially offset by a decline in
other, non-core, revenues. Advertising revenue was up 27% compared to a 6%
growth in the overall market as multi-channel penetration increased.
Subscription revenue grew 10% due to growth in the number of UK
pay-television subscribers.
Telewest's 50% share of its joint venture UKTV's net income was (pound)5
million in the second quarter and is included within "share of net
income/(loss) of affiliates."
COMBINED OPERATING COSTS AND EXPENSES
OPERATING COSTS AND
EXPENSES THREE MONTHS ENDED THREE MONTHS ENDED
(IN (POUND) MILLIONS) JUNE 30, 2004 JUNE 30, 2003
--------------------------------- --------------------------------
BEFORE BEFORE
FINANCIAL FINANCIAL FINANCIAL FINANCIAL
RESTRUCT. RESTRUCT. RESTRUCT. RESTRUCT. PERCENTAGE
CHARGES CHARGES TOTAL CHARGES CHARGES TOTAL INC/(DEC)
Cable segment
expenses 74 - 74 79 - 79 (6%)
Content segment
expenses 18 - 18 18 - 18 -
Depreciation 90 - 90 102 - 102 (12%)
SG&A expenses 112 12 124 117 4 121 2%
- ---------------------------------------------------------------------------------------------------
Total operating costs
and expenses 294 12 306 316 4 320 (4%)
===================================================================================================
Total operating costs and expenses were (pound)306 million, down 4% from
(pound)320 million. Total operating costs and expenses excluding financial
restructuring charges decreased by (pound)22 million or 7% from (pound)316
million to (pound)294 million. Financial restructuring charges represent
those costs incurred in respect of the financial restructuring of plc.
Total gross margin (total revenue less cable and content segment expenses
as a percentage of total revenue) increased from 70% to 72% due primarily
to the growing number of high margin broadband subscribers, the continued
migration of customers onto unmetered "Talk" telephony packages and
reductions in interconnect costs.
Depreciation of tangible fixed assets was (pound)90 million, down from
(pound)102 million. This reduction was principally due to accelerated
depreciation in the second quarter of 2003 which was not repeated in the
second quarter of 2004.
Reflecting our continued focus on reducing costs, SG&A (excluding financial
restructuring charges) decreased 4% to (pound)112 million due mainly to
headcount reductions and lower severance costs. SG&A including financial
restructuring charges increased by (pound)3 million to (pound)124 million.
COMPARISON OF SIX-MONTH PERIODS ENDED JUNE 30, 2004 AND 2003
Except where otherwise stated in this section, all comparisons compare the
six-month period ended June 30, 2004 to the six-month period ended June 30,
2003. All financial information is unaudited.
Total revenue Six months Six months Percentage
(in (pound)millions) ended June ended June inc/(dec)
30, 2004 30, 2003
- ----------------------------------------------------------------------
Cable Segment
Consumer sales 470 450 4%
Business sales 130 139 (6%)
- ----------------------------------------------------------------------
Total Cable Segment 600 589 2%
Content Segment 54 53 2%
- ----------------------------------------------------------------------
Total revenue 654 642 2%
======================================================================
CABLE SEGMENT
CONSUMER SALES DIVISION
Consumer sales division revenue increased (pound)20 million from (pound)450
million to (pound)470 million, primarily due to growth in the number of
broadband internet subscribers.
BUSINESS SALES DIVISION
The business sales division's revenue decreased (pound)9 million to
(pound)130 million due to the competitive pressures in the business voice
market and a (pound)4 million reduction in carrier services revenues,
partially offset by 18% growth in data revenues.
CONTENT SEGMENT
Content segment revenue increased by (pound)1 million as increases in
advertising and subscription revenues were partially offset by a decline in
other, non-core, revenues.
Telewest's 50% share of its joint venture UKTV's net income was (pound)9
million in the six months and is included within "share of net
income/(loss) of affiliates."
COMBINED OPERATING COSTS AND EXPENSES
OPERATING COSTS AND SIX MONTHS ENDED SIX MONTHS ENDED
EXPENSES JUNE 30, 2004 JUNE 30, 2003
(IN (POUND) MILLIONS)
------------------------------------------- --------------------------------
BEFORE BEFORE
FINANCIAL FINANCIAL FINANCIAL FINANCIAL
RESTRUCT. RESTRUCT. RESTRUCT. RESTRUCT. PERCENTAGE
CHARGES CHARGES TOTAL CHARGES CHARGES TOTAL INC/(DEC)
Cable segment
expenses 153 - 153 162 - 162 (6%)
Content segment
expenses 34 - 34 35 - 35 (3%)
Depreciation 184 - 184 198 - 198 (7%)
SG&A expenses 223 21 244 235 7 242 1%
- -------------------------------------------------------------------------------------------------------------
Total operating costs and
expenses 594 21 615 630 7 637 (3%)
=============================================================================================================
Total operating costs and expenses were (pound)615 million, down 3% from
(pound)637 million. Total operating costs and expenses excluding financial
restructuring charges decreased by (pound)36 million or 6% from (pound)630
million to (pound)594 million.
Total gross margin (total revenue less cable and content segment expenses
as a percentage of total revenue) increased from 69% to 71% due primarily
to the growing number of high margin broadband subscribers, the continued
migration of customers onto unmetered "Talk" telephony packages and
reductions in interconnect costs.
Depreciation of tangible fixed assets was (pound)184 million, down from
(pound)198 million. This reduction was principally due to accelerated
depreciation in the second quarter of 2003 which was not repeated in the
second quarter of 2004.
Reflecting our continued focus on reducing costs, SG&A (excluding financial
restructuring charges) decreased 5% to (pound)223 million due mainly to
headcount reductions, lower severance costs and bad debt savings achieved
through improved credit policies. SG&A including financial restructuring
charges increased by (pound)2 million to (pound)244 million.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased from (pound)62 million
for the second quarter of 2003 to (pound)88 million for the second quarter
of 2004 and from (pound)136 million for the six months ended June 30, 2003
to (pound)170 million for the six months ended June 30, 2004. These
increases were principally as a result of improvements in operating income
and reduced working capital.
Net cash provided by operating activities in the third quarter of 2004 has
been negatively impacted by cash payments made in respect of the financial
restructuring, including the remaining (pound)22 million in respect of fees
owed under our amended senior secured facility.
Net cash used in investing activities increased from (pound)31 million for
the second quarter of 2003 to (pound)61 million for the second quarter of
2004 and from (pound)92 million for the six months ended June 30, 2003 to
(pound)124 million for the six months ended June 30, 2004. These increases
were principally as a result of increased cash paid for property and
equipment and loans made to affiliates. Capital expenditure, on an accrual
basis, for the second quarter of 2004 was (pound)54 million.
Net cash used in financing activities decreased from (pound)16 million for
the second quarter of 2003 to (pound)9 million for the second quarter of
2004 and from (pound)29 million for the six months ended June 30, 2003 to
(pound)21 million for the six months ended June 30, 2004. These decreases
were principally as a result of decreased repayments in respect of our
capital leases.
Cash and cash equivalents at June 30, 2004 were (pound)452 million.
SUBSEQUENT EVENTS
On July 15, 2004, plc completed its financial restructuring, part of which
consisted of the transfer, on July 14, 2004, of substantially all of its
assets and post-restructuring liabilities to Telewest. As a result of the
financial restructuring, (pound)3,282 million of notes and debentures and
(pound)479 million of unpaid accrued interest were extinguished resulting
in the transfer of post-restructuring liabilities of approximately
(pound)2.8 billion to Telewest. In addition, as part of the financial
restructuring, the senior secured credit facility entered into by Telewest
Communications Networks Limited, now a wholly owned subsidiary of Telewest,
was amended. As part of the amendment process, approximately (pound)160
million outstanding under the prior facility was repaid.
As at June 30, 2004, on a pro forma basis adjusting for the impact of the
financial restructuring, total indebtedness was (pound)1,965 million and
net debt was (pound)1,719 million. The pro forma net debt consisted of
(pound)118 million of total capital lease obligations, (pound)7 million in
other debt and (pound)1,840 million drawn down on our (pound)2,030 million
amended senior secured credit facility less (pound)246 million of cash and
cash equivalents. An explanation and a reconciliation of net debt to the
most directly comparable US GAAP financial measure is shown on pages 15 to
18. For a further discussion of the pro forma impact of the financial
restructuring, see the Registration Statement on Form S-1 (No. 333-115508)
filed by Telewest Global, Inc. with, and declared effective by, the US
Securities and Exchange Commission on July 16, 2004.
As a result of the completion of plc's financial restructuring on July 15,
2004, Telewest adopted "fresh start" accounting in accordance with
Statement of Position 90-7 "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code", or "SOP 90-7", issued by the
American Institute of Certified Public Accountants, with effect from July
1, 2004. Under SOP 90-7, Telewest established a new accounting basis, and
recorded its existing assets and liabilities at their respective fair
values. As a result of the application of "fresh start" accounting,
Telewest's balance sheet and results of operations for the three months
ending September 30, 2004 and for each reporting period thereafter will not
be comparable in many material respects to the balance sheet or results of
operations reflected in plc's historical financial statements for periods
prior to July 1, 2004.
BASIS OF PREPARATION
As a consequence of the completion of plc's financial restructuring on July
15, 2004, the transfer of substantially all of the assets of plc to
Telewest and the planned liquidation of plc, plc is no longer a going
concern. The financial statements, however, have continued to be prepared
on a going concern basis to preserve continuity of reporting and to provide
more meaningful information to stakeholders. The principal impact to the
financial statements if they had not been prepared on a going concern basis
would be to impair the remaining goodwill and the potential write down of
property and equipment to net realizable value.
Some of the statements in this press release constitute "forward-looking
statements" which we believe to be "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements relate to future events or our future financial performance,
including, but not limited to, strategic plans, planned operational changes
(including product improvements), product introductions and innovations and
customer service improvements that involve known and unknown risks,
uncertainties and other factors that may cause our or our businesses'
actual results, levels of activity, performance or achievements to be
materially different from those expressed or implied by any forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as "may", "will," "could," "would," "should," "expect,"
"plan," "anticipate," "intend," "believe," "estimate," "predict,"
"potential," or "continue" or the negative of those terms or other
comparable terminology.
There are a number of important factors that could cause our actual results
and future development to differ materially from those expressed or implied
by those forward-looking statements, including, but not limited to:
o our ability to refinance our amended senior credit facility at
its final term;
o our ability to fund our operations through operating cash flow,
in particular given our obligations to service our substantial
indebtedness;
o our ability to comply with financial and performance covenants in
our amended senior secured facility, as non-compliance may lead
to additional restrictions on us or accelerated repayment
obligations;
o changes that may be made to our business, operations and current
long-range plan by our new board of directors;
o the extent to which we are able to compete with other providers
of broadband internet services, including British
Telecommunications plc;
o the extent to which consumers regard cable telephony as an
attractive alternative to telephony services provided by, for
example British Telecommunications plc, or the emergence of
voice-over-internet protocol as a viable alternative to cable
telephony;
o the extent to which we are able to successfully compete with
mobile network operators;
o the extent to which we are able to retain our current customers
and attract new customers;
o the extent to which we are able to migrate customers to
additional products or services or to high-margin products or
services;
o the extent to which regulatory and competitive pressures in the
UK telephony market continue to reduce prices;
o the extent to which UK and EU merger control laws restrict our
ability to expand through mergers or acquisitions;
o our ability to develop and introduce attractive interactive and
high-speed data services in a rapidly changing and highly
competitive technological and business environment;
o our ability to penetrate markets and respond to changes or
increases in competition;
o our ability to compete against digital television service
providers, including British Sky Broadcasting Group plc and
Freeview, by increasing our digital customer base;
o our ability to compete with other internet services providers;
o our ability to achieve, or realize benefits from, any further
consolidation in the UK cable industry
o our ability to have an impact on, or respond to, new or changed
government regulations;
o our ability to improve operating efficiencies, including through
cost reductions;
o our ability to maintain and upgrade our network in a
cost-efficient and timely manner;
o adverse changes in the price or availability of telephony
interconnection or cable television programming;
o our ability to compete effectively in the advertising-sales,
program distribution and programming supply markets; and
o disruption in our supply of programming, services and equipment.
Unless otherwise required by applicable securities laws, we disclaim any
intention or obligation to publicly update or revise any of the
forward-looking statements after the date of this press release to conform
them to actual results, whether as a result of new information, future
events or otherwise. All of the forward-looking statements are qualified in
their entirety by reference to the factors discussed under the caption
"Risk Factors" in the Registration Statement on Form S-1 (No. 333-115508)
filed by Telewest Global, Inc. with, and declared effective by, the US
Securities and Exchange Commission on July 16, 2004, which describe risks
and factors that could cause results to differ materially from those
projected in those forward-looking statements.
These risk factors may not be exhaustive. Other sections of this press
release may describe additional factors that could adversely impact our
business and financial performance. We operate in a continually changing
business environment, and new risk factors may emerge from time to time.
Management cannot anticipate all of these new risk factors, nor can they
definitively assess the impact, if any, of new risk factors on us or the
extent to which any factor, or combination of factors, may cause actual
results to differ materially from those projected in any forward-looking
statements. Accordingly, forward-looking statements should not be relied
upon as a prediction of actual results.
TELEWEST COMMUNICATIONS PLC
US GAAP
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30
- ------------------------------------------------- ------------ ------------ ---------- ------------
3 MONTHS 3 MONTHS 6 MONTHS 6 MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2004 2003 2004 2003
(restated) (restated)
(POUND)M (POUND)M (POUND)M (POUND)M
- ------------------------------------------------- ------------ ------------ ---------- ------------
REVENUE
Consumer Sales Division 235 228 470 450
Business Sales Division 63 69 130 139
- ------------------------------------------------- ------------ ------------ ---------- ------------
TOTAL CABLE SEGMENT 298 297 600 589
Content Segment 28 26 54 53
- ------------------------------------------------- ------------ ------------ ---------- ------------
TOTAL REVENUE 326 323 654 642
- ------------------------------------------------- ------------ ------------ ---------- ------------
OPERATING COSTS AND EXPENSES
Cable segment expenses (74) (79) (153) (162)
Content segment expenses (18) (18) (34) (35)
Depreciation (90) (102) (184) (198)
- ------------------------------------------------- ------------ ------------ ---------- ------------
Cost of revenue (182) (199) (371) (395)
- ------------------------------------------------- ------------ ------------ ---------- ------------
SG&A (excluding financial restructuring charges) (112) (117) (223) (235)
Financial restructuring charges (12) (4) (21) (7)
- ------------------------------------------------- ------------ ------------ ---------- ------------
Total SG&A (124) (121) (244) (242)
- ------------------------------------------------- ------------ ------------ ---------- ------------
(306) (320) (615) (637)
- ------------------------------------------------- ------------ ------------ ---------- ------------
OPERATING INCOME 20 3 39 5
OTHER INCOME/(EXPENSE)
Interest income 8 6 15 12
Interest expense (including amortization of debt
discount) (121) (122) (230) (247)
Foreign exchange (losses)/gains, net (37) 117 40 69
Share of net income/(loss) of affiliates 5 - 8 2
Other, net - - (1) (1)
- ------------------------------------------------- ------------ ------------ ---------- ------------
(LOSS)/INCOME BEFORE INCOME TAXES (125) 4 (129) (160)
Income taxes (charge)/benefit (1) 1 (1) 2
- ------------------------------------------------- ------------ ------------ ---------- ------------
NET (LOSS)/INCOME (126) 5 (130) (158)
- ------------------------------------------------- ------------ ------------ ---------- ------------
The consolidated financial information as set out on pages 9 to 11 has been
prepared on the basis of the accounting policies set out in Telewest
Communications plc's Annual Report on Form 20-F for the year ended December
31, 2003, other than where changes are necessary to implement new
accounting pronouncements. The December 31, 2003 balance sheet is derived
from the financial statements disclosed in the Annual Report on Form 20-F
mentioned earlier.
TELEWEST COMMUNICATIONS PLC
US GAAP
UNAUDITED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------- ---------- ----------
JUNE 30, DEC 31,
2004 2003
(POUND)M (POUND)M
- --------------------------------------------------------------------------------- ---------- ----------
ASSETS
Cash and cash equivalents 452 427
Secured cash deposits restricted for more than one year 11 13
Trade receivables 111 114
Other receivables 34 39
Prepaid expenses 41 16
- --------------------------------------------------------------------------------- ---------- ----------
Total current assets 649 609
Investment in affiliates, accounted for under the equity method, and related
receivables 367 362
Property and equipment 2,342 2,421
Goodwill 447 447
Inventory 33 27
Other assets 19 23
- --------------------------------------------------------------------------------- ---------- ----------
TOTAL ASSETS 3,857 3,889
- --------------------------------------------------------------------------------- ---------- ----------
LIABILITIES AND SHAREHOLDERS' FUNDS
Accounts payable 112 98
Other liabilities 917 809
Debt repayable within one year 5,283 5,287
Capital lease obligations repayable within one year 76 89
- --------------------------------------------------------------------------------- ---------- ----------
Total current liabilities 6,388 6,283
Deferred taxes 110 108
Debt repayable after more than one year 6 6
Capital lease obligations repayable after more than one year 42 51
- --------------------------------------------------------------------------------- ---------- ----------
TOTAL LIABILITIES 6,546 6,448
MINORITY INTERESTS (1) (1)
SHAREHOLDERS' DEFICIT (2,688) (2,558)
- --------------------------------------------------------------------------------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT 3,857 3,889
- --------------------------------------------------------------------------------- ---------- ----------
TELEWEST COMMUNICATIONS PLC
US GAAP
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30
- -------------------------------------------------- ------------ ------------ ---------- -------------
3 MONTHS 3 MONTHS 6 MONTHS 6 MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2004 2003 2004 2003
(restated) (restated)
(POUND)M (POUND)M (POUND)M (POUND)M
- -------------------------------------------------- ------------ ------------ ---------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)/income (126) 5 (130) (158)
Adjustments to reconcile net (loss)/income to
net cash provided by operating activities:
Depreciation 90 102 184 198
Amortization of deferred financing costs and 10 32 30 58
issue discount on Senior Discount debentures
Deferred taxes charge/(credit) 1 (1) 1 (2)
Unrealized losses/(gains) on foreign currency
translation 37 (117) (40) (69)
Share of net (income)/loss of affiliates (5) - (8) (2)
Loss on disposal of assets 1 - - 1
Amounts written off investments - - 1 -
Changes in operating assets and liabilities, net
of effect of acquisition of subsidiaries:
Change in receivables 11 23 9 32
Change in prepaid expenses (20) 5 (25) (14)
Change in other assets (1) (4) (3) (12)
Change in accounts payable 12 (23) 27 16
Change in other liabilities 78 40 124 88
- -------------------------------------------------- ------------ ------------ ---------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 88 62 170 136
- -------------------------------------------------- ------------ ------------ ---------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property and equipment (61) (43) (127) (110)
Repayment of loans made to affiliates, net (7) 6 (4) 12
Disposal of affiliate 7 6 7 6
- -------------------------------------------------- ------------ ------------ ---------- -------------
NET CASH USED IN INVESTING ACTIVITIES (61) (31) (124) (92)
- -------------------------------------------------- ------------ ------------ ---------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Release of restricted deposits 2 - 2 -
Capital element of capital lease repayments (11) (16) (23) (29)
- -------------------------------------------------- ------------ ------------ ---------- -------------
NET CASH USED IN FINANCING ACTIVITIES (9) (16) (21) (29)
- -------------------------------------------------- ------------ ------------ ---------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 18 15 25 15
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 434 390 427 390
- -------------------------------------------------- ------------ ------------ ---------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 452 405 452 405
- -------------------------------------------------- ------------ ------------ ---------- -------------
Supplementary cash flow information:
Cash paid for interest, net 29 51 61 88
Cash received for income taxes - - (2) -
TELEWEST COMMUNICATIONS PLC
US GAAP
QUARTERLY HISTORICAL INFORMATION
FOR THE THREE MONTH PERIODS ENDED
- -------------------------------------------------- ------------ ------------ ------------ ---------- -------------
JUN. 30, MAR. 31, DEC. 31, SEP. 30, JUN. 30,
2004 2004 2003 2003 2003
(restated) (restated)
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
- -------------------------------------------------- ------------ ------------ ------------ ---------- -------------
REVENUE
Consumer Sales Division 235 235 230 227 228
Business Sales Division 63 67 68 71 69
- -------------------------------------------------- ------------ ------------ ------------ ---------- -------------
TOTAL CABLE SEGMENT 298 302 298 298 297
Content Segment 28 26 33 27 26
- -------------------------------------------------- ------------ ------------ ------------ ---------- -------------
TOTAL REVENUE 326 328 331 325 323
- -------------------------------------------------- ------------ ------------ ------------ ---------- -------------
OPERATING COSTS AND EXPENSES
Cable segment expenses (74) (79) (78) (78) (79)
Content segment expenses (18) (16) (27) (19) (18)
Depreciation (90) (94) (95) (96) (102)
- -------------------------------------------------- ------------ ------------ ------------ ---------- -------------
Cost of revenue (182) (189) (200) (193) (199)
- -------------------------------------------------- ------------ ------------ ------------ ---------- -------------
SG&A (excluding financial restructuring charges) (112) (111) (112) (118) (117)
Financial restructuring charges (12) (9) (9) (9) (4)
- -------------------------------------------------- ------------ ------------ ------------ ---------- -------------
Total SG&A (124) (120) (121) (127) (121)
- -------------------------------------------------- ------------ ------------ ------------ ---------- -------------
(306) (309) (321) (320) (320)
- -------------------------------------------------- ------------ ------------ ------------ ---------- -------------
OPERATING INCOME 20 19 10 5 3
OTHER INCOME/(EXPENSE)
Interest income 8 7 7 5 6
Interest expense (including amortization of debt
discount) (121) (109) (122) (119) (122)
Foreign exchange (losses)/gains, net (37) 77 184 15 117
Share of net income/(loss) of affiliates 5 3 (3) 2 -
Other, net - (1) 8 1 -
- -------------------------------------------------- ------------ ------------ ------------ ---------- -------------
(LOSS)/INCOME BEFORE INCOME TAXES (125) (4) 84 (91) 4
Income taxes (charge)/benefit (1) - (20) 2 1
- -------------------------------------------------- ------------ ------------ ------------ ---------- -------------
NET (LOSS)/INCOME (126) (4) 64 (89) 5
- -------------------------------------------------- ------------ ------------ ------------ ---------- -------------
Subsequent to the issue of the Company's consolidated financial statements
for the year ended Dec. 31, 2002, the Group determined the need to adjust
the classification of debt previously reflected as non-current in the
consolidated balance sheet at Dec. 31, 2002 and write off deferred issue
costs as at that date relating to the restated debt. Accordingly, the
unaudited consolidated financial statements for the three and six months
ended Jun. 30, 2003, and the quarterly historical information for the three
months ended Jun. 30 and Sep. 30, 2003 also need to be restated.
Previously reported interest expense for the three and six months ended
Jun. 30, 2003 included a charge of (pound)2 million and (pound)5 million,
respectively, and the three months ended Sep. 30 2003 included a charge of
(pound)2 million in respect of amortization of deferred issue costs. These
charges have been written back now that all deferred issue costs on the
restated debt have been written off with effect from Dec. 31, 2002.
Additionally, charges of (pound)5 million and (pound)8 million,
respectively, have been made in the three and six months ended Jun. 30,
2003, and a charge of (pound)6 million made for the three months ended Sep.
30, 2003 for further interest on bonds in default. Consequently, the net
effect of these adjustments to "Interest expense" for the three and six
months ended Jun. 30, 2003 is (pound)3 million and (pound)3 million,
respectively, and (pound)4 million for the three months ended Sep. 30,
2003.
- -------------------------------------------------- -------------------------------------------------------------
RESTATEMENT IMPACT ON JUN. 30, 2003
3 MONTHS ENDED JUN. 30, 6 MONTHS ENDED JUN. 30,
2003 2003
AS REPORTED AS RESTATED AS REPORTED AS RESTATED
(POUND)M (POUND)M (POUND)M (POUND)M
- -------------------------------------------------- ------------- ------------ ------- ------------- ------------
Interest expense (including amortization of debt
discount) (119) (122) (244) (247)
Net income/(loss) 8 5 (155) (158)
- -------------------------------------------------- ------------- ------------ ------- ------------- ------------
TELEWEST COMMUNICATIONS PLC
QUARTERLY OPERATING DATA - UNAUDITED
FOR THE THREE MONTHS ENDED
The following table sets out certain operating data for the three-month
periods shown. The information represents combined operating statistics for
all of our franchises.
- ---------------------------------------------------------- ------------ ------------ ------------ ------------ -------------
JUN. 30, MAR. 31, DEC. 31, SEP. 30, JUN. 30,
2004 2004 2003 2003 2003
- ---------------------------------------------------------- ------------ ------------ ------------ ------------ -------------
CUSTOMER DATA
Homes passed and marketed (1) 4,682,777 4,678,182 4,674,764 4,679,688 4,686,974
Total customer relationships (2) 1,752,553 1,742,144 1,730,438 1,721,550 1,719,868
Customer penetration 37.4% 37.2% 37.0% 36.8% 36.7%
Customer additions 67,118 61,997 64,278 62,553 43,684
Customer disconnections (56,709) (50,291) (55,390) (60,871) (67,538)
Net customer additions/(disconnections) 10,409 11,706 8,888 1,682 (23,854)
Revenue Generating Units ("RGUs") (3) 3,447,254 3,363,240 3,286,706 3,217,600 3,168,205
RGUs per customer 1.97 1.93 1.90 1.87 1.84
Net RGU additions/(losses) 84,014 76,534 69,106 49,395 (6,167)
Average monthly revenue per customer (pound)44.98 (pound)45.05 (pound)44.42 (pound)43.93 (pound)43.61
Average monthly churn (4) 1.1% 1.0% 1.1% 1.2% 1.3%
- ---------------------------------------------------------- ------------ ------------ ------------ ------------ -------------
BUNDLED CUSTOMERS
Customers subscribing to two or more services 1,312,842 1,291,141 1,264,756 1,239,659 1,220,545
Customers subscribing to three services ("triple
play") 381,859 329,955 291,512 256,391 227,792
Percentage of dual or triple-service customers 74.9% 74.1% 73.1% 72.0% 71.0%
Percentage of triple-service customers 21.8% 18.9% 16.8% 14.9% 13.2%
- ---------------------------------------------------------- ------------ ------------ ------------ ------------ -------------
CABLE TELEVISION
Television ready homes passed and marketed 4,682,777 4,678,182 4,674,764 4,679,688 4,686,974
Total subscribers 1,288,272 1,285,797 1,272,064 1,258,549 1,250,511
Quarterly net additions/(disconnections) 2,475 13,733 13,515 8,038 (23,034)
Television penetration 27.5% 27.5% 27.2% 26.9% 26.7%
Digital ready homes passed and marketed 4,401,860 4,386,050 4,306,251 4,292,032 4,294,480
Digital subscribers 1,052,855 1,029,759 987,873 945,595 911,191
Quarterly net digital additions 23,096 41,886 42,278 34,404 23,885
Penetration of digital subscribers to total
subscribers 81.7% 80.1% 77.7% 75.1% 72.9%
Average monthly churn 1.3% 1.2% 1.3% 1.4% 1.7%
- ---------------------------------------------------------- ------------ ------------ ------------ ------------ -------------
TELEPHONY
Telephony ready homes passed and marketed 4,677,861 4,674,932 4,670,494 4,678,970 4,680,349
3-2-1 telephony subscribers (metered) 1,105,056 1,130,171 1,144,474 1,164,549 1,190,873
Talk subscribers (unmetered) 516,313 481,976 455,559 427,092 397,485
Total subscribers 1,621,369 1,612,147 1,600,033 1,591,641 1,588,358
Quarterly net additions/(disconnections) 9,222 12,114 8,392 3,283 (13,248)
Telephony penetration 34.7% 34.5% 34.3% 34.0% 33.9%
Average monthly churn 1.1% 1.0% 1.1% 1.2% 1.2%
- ---------------------------------------------------- -------------- -------------- ------------- -------------- ------------
JUN. 30, MAR. 31, DEC. 31, SEP. 30, JUN. 30,
2004 2004 2003 2003 2003
- ---------------------------------------------------- -------------- -------------- ------------- -------------- ------------
INTERNET
Broadband ready homes passed and marketed 4,401,860 4,386,050 4,306,251 4,292,032 4,294,480
Total metered dial-up internet subscribers 47,884 50,953 49,368 52,353 64,958
Total unmetered dial-up internet subscribers 151,457 177,250 184,009 190,571 193,406
Total broadband internet subscribers 537,613 465,296 414,609 367,410 329,336
Quarterly net broadband additions 72,317 50,687 47,199 38,074 30,115
Broadband internet penetration 12.2% 10.6% 9.6% 8.6% 7.7%
Average monthly churn 1.2% 1.0% 1.1% 1.2% 1.1%
- ---------------------------------------------------- -------------- -------------- ------------- -------------- ------------
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
NCTA CAPITAL EXPENDITURE (ACCRUAL BASIS) (5)
-------------- -------------- ------------- -------------- ------------
Customer premise equipment ("CPE") 23 23 25 23 20
Scaleable infrastructure 7 7 11 12 5
Commercial 9 11 15 9 7
Line extensions 1 1 - 1 1
Upgrade/rebuild 4 2 - - -
Support capital 9 8 12 10 5
-------------- -------------- ------------- -------------- ------------
Total NCTA Capital expenditure 53 52 63 55 38
Non NCTA Capital expenditure:
Content Segment 1 - 1 - 1
- ---------------------------------------------------- -------------- -------------- ------------- -------------- ------------
Total Capital expenditure (accrual basis) 54 52 64 55 39
==================================================== ============== ============== ============= ============== ============
(1) The number of homes within our service area that can potentially be
served by our network with minimal connection costs.
(2) The number of customers who receive at least one level of service,
encompassing television, telephony and broadband services, without regard
to which service(s) customers purchase.
(3) Revenue Generating Units or RGUs represent the sum total of all primary
analogue television, digital television, broadband and telephony
subscribers. Dial-up internet subscribers, second telephone lines and
additional TV outlets are not included although they are revenue generating
for Telewest.
(4) Average monthly churn represents the total number of customers who
disconnected during the quarter divided by the average number of customers
in the quarter, divided by three. Subscribers who move premises within
Telewest's addressable areas (known as Moves and Transfers) and retain
Telewest's services are excluded from this churn calculation.
(5) In order to provide comparable data to the US and UK cable industry,
and in accordance with NCTA (National Cable & Telecommunications
Association) reporting guidelines, Telewest has allocated capital
expenditure (which represents fixed asset additions on an accrual basis) to
the standard reporting categories as per below. Telewest is not a member of
the NCTA and is providing this information solely for comparative purposes.
CPE - costs incurred at the customer's house to secure new customers,
revenue units and additional bandwidth revenues. Includes connections to
previously unserved houses in accordance with SFAS 51 and customer premise
equipment. Scaleable infrastructure - costs, not CPE or network related, to
secure growth of new customers, revenue units and additional bandwidth
revenues or provide service enhancements. Commercial - costs to provide
high speed data and telephony services to businesses and institutions.
Includes network and infrastructure expenditures. Line extensions - network
costs associated with entering new service areas including costs of fiber,
coaxial cable, amplifiers, electronic equipment, make-ready and
design/engineering. Upgrade/rebuild - costs to modify or replace existing
coax and fiber networks. Includes materials, contract labor, in-house
labor, make-ready, design engineering and other miscellaneous costs
associated with all aspects of the construction of the plant miles along an
existing route. Benefits include added bandwidth and/or
reliability/extended life to the existing plant. Support capital - costs
associated with the replacement or enhancement of non-network assets due to
obsolescence and wear-out, replacement of network assets unrelated to line
extensions, rebuild/upgrade or customer growth.
TELEWEST COMMUNICATIONS PLC
USE OF NON-US GAAP FINANCIAL MEASURES
- -------------------------------------------------------------------------------
ADJUSTED EBITDA
Telewest's primary measure of income or loss for each of our reportable
segments is Adjusted EBITDA. Our management, including our chief operating
decision maker, considers Adjusted EBITDA an important indicator of the
operational strength and performance of our reportable segments. Adjusted
EBITDA for each segment and in total excludes the impact of costs and
expenses that do not directly affect our cash flows or do not directly
relate to the operating performance of that segment. These costs and
expenses include depreciation, amortization, financial restructuring
charges, interest expense, foreign exchange gains/(losses), share of net
income/(loss) from affiliates and income taxes. It is the belief of
management that the legal and professional costs relating to our financial
restructuring are not characteristic of our underlying business operations.
Furthermore management believes that some of the components of these
charges are not directly related to the performance of a single reportable
segment.
Adjusted EBITDA is not a financial measure recognised under US GAAP. This
measure is most directly comparable to the US GAAP financial measure net
income/(loss). Some of the significant limitations associated with the use
of Adjusted EBITDA as compared to net income/(loss) are that Adjusted
EBITDA does not reflect the amount of required reinvestment in depreciable
fixed assets, financial restructuring charges, interest expense, foreign
exchange gains or losses, income taxes expense or benefit and similar items
on our results of operations. We believe Adjusted EBITDA is helpful for
understanding our performance and assessing our prospects for the future,
and that it provides useful supplemental information to investors. In
particular, this non-US GAAP financial measure reflects an additional way
of viewing aspects of our operations that, when viewed with our US GAAP
results and the reconciliations to net income/(loss), shown on page 17,
provide a more complete understanding of factors and trends affecting our
business. Because non-US GAAP financial measures are not standardized, it
may not be possible to compare Adjusted EBITDA with other companies' non-US
GAAP financial measures that have the same or similar names. The
presentation of this supplemental information is not meant to be considered
in isolation or as a substitute for net cash provided by operating
activities, operating income/(loss), net income/(loss), or other measures
of financial performance reported in accordance with US GAAP.
FREE CASH FLOW
Telewest's primary measure of cash flow is free cash flow. Free cash flow
is defined as net cash provided by/(used in) operating activities excluding
cash paid for financial restructuring charges, less cash paid for property
and equipment. Our management, including our chief operating decision
maker, considers free cash flow an important indicator of the operational
performance of our business.
Free cash flow is not a financial measure recognized under US GAAP. This
measure is most directly comparable to the US GAAP financial measure net
cash provided by/(used in) operating activities. The significant limitation
associated with the use of free cash flow as compared to net cash provided
by/(used in) operating activities is that free cash flow does not consider
the amount of cash required to pay financial restructuring charges. We
believe free cash flow is helpful for understanding our performance and it
provides useful supplemental information to investors. Because non-US GAAP
financial measures are not standardized, it may not be possible to compare
free cash flow with other companies' non-US GAAP financial measures that
have the same or similar names. The presentation of this supplemental
information is not meant to be considered in isolation or as a substitute
for net cash provided by/(used in) operating activities, or other measures
of financial performance reported in accordance with US GAAP.
CAPITAL EXPENDITURE (ACCRUAL BASIS)
Telewest's primary measure of expenditure for fixed assets is Capital
expenditure (accrual basis). Capital expenditure (accrual basis) is defined
as the purchase of fixed assets as measured on an accrual basis. Telewest's
business is underpinned by its significant investment in network
infrastructure and information technology. Management therefore considers
Capital expenditure (accrual basis) an important component in evaluating
Telewest's liquidity and financial condition since capital expenditure is a
necessary component of ongoing operations. Capital expenditure (accrual
basis) is most directly comparable to the US GAAP financial measure cash
paid for property and equipment as reported in the Consolidated Statement
of Cash Flows. The significant limitation associated with the use of
Capital expenditure (accrual basis) as compared to cash paid for property
and equipment is Capital expenditure (accrual basis) excludes timing
differences from payments of liabilities related to capital expenditure.
Management excludes this amount from Capital expenditure (accrual basis)
because it is more closely related to the cash management treasury function
than to Telewest's management of capital expenditure for long-term
operational performance and liquidity. Management compensates for this
limitation by separately measuring and forecasting working capital and
interest payments.
The presentation of this supplemental information is not meant to be
considered in isolation or as a substitute for other measures of financial
performance reported in accordance with US GAAP accepted in the United
States. These non-US GAAP financial measures reflect an additional way of
viewing aspects of Telewest's operations that, when viewed with Telewest's
US GAAP results and the accompanying reconciliation to cash paid for
property and equipment, shown on page 17, provide a more complete
understanding of factors and trends affecting Telewest's business.
Management encourages investors to review Telewest's financial statements
and publicly-filed reports in their entirety and to not rely on any single
financial measure.
TELEWEST COMMUNICATIONS PLC
USE OF NON-US GAAP FINANCIAL MEASURES (CONTINUED)
- -------------------------------------------------------------------------------
NET DEBT
Net debt is defined as the sum of debt repayable within one year, capital
lease obligations repayable within one year, debt repayable after more than
one year, capital lease obligations repayable after more than one year less
cash and cash equivalents. Telewest's management, including its chief
operating decision maker, considers net debt an important measure of the
total net debt financing obligations undertaken by Telewest.
Net debt is not a financial measure recognized under US GAAP. This measure
is most directly comparable to the US GAAP financial measure, total current
liabilities. The significant limitation associated with the use of net debt
as compared total current liabilities is that net debt does not consider
current liabilities due in respect of accounts payable and other
liabilities, whilst it includes debt and capital lease obligations due
after more than one year and cash and cash equivalents. Telewest believes
net debt is helpful for understanding its entire net debt funding
obligations and it provides useful supplemental information to investors.
Because non-US GAAP financial measures are not standardized, it may not be
possible to compare net debt with other companies' non-US GAAP financial
measures that have the same or similar names. The presentation of this
supplemental information is not meant to be considered in isolation or as a
substitute for total current liabilities, or other measures of financial
performance reported in accordance with US GAAP.
TELEWEST COMMUNICATIONS PLC
- -------------------------------------------------------------------------------
RECONCILIATIONS OF NON-US GAAP FINANCIAL MEASURES
- -------------------------------------------------------------------------------
RECONCILIATION OF ADJUSTED EBITDA TO NET LOSS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2004 2003 2004 2003
(POUND)M (POUND)M (POUND)M (POUND)M
- ------------------------------------------------------------------------------------------------------------------
Adjusted EBITDA 122 109 244 210
Financial restructuring charges (12) (4) (21) (7)
Depreciation (90) (102) (184) (198)
- ------------------------------------------------------------------------------------------------------------------
Operating income 20 3 39 5
Interest income 8 6 15 12
Interest expense (including amortization of debt discount) (121) (122) (230) (247)
Foreign exchange (losses)/gains, net (37) 117 40 69
Share of net income/(loss) of affiliates 5 - 8 2
Other, net - - (1) (1)
Income taxes (charge)/benefit (1) 1 (1) 2
- ------------------------------------------------------------------------------------------------------------------
Net (loss)/income (126) 5 (130) (158)
==================================================================================================================
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2004 2003 2004 2003
(POUND)M (POUND)M (POUND)M (POUND)M
- ------------------------------------------------------------------------------------------------------------------
Free cash flow 37 21 62 32
Deduct cash paid for financial restructuring charges (10) (2) (19) (6)
Add cash paid for property and equipment 61 43 127 110
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 88 62 170 136
==================================================================================================================
Supplementary cash flow information:
Cash paid for interest, net 29 51 61 88
Cash received for income taxes - - (2) -
Free cash flow is reported after cash paid for interest, net and cash
received for income taxes.
RECONCILIATION OF CAPITAL EXPENDITURE (ACCRUAL BASIS) TO CASH PAID FOR
PROPERTY AND EQUIPMENT
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2004 2003 2004 2003
(POUND)M (POUND)M (POUND)M (POUND)M
- ------------------------------------------------------------------------------------------------------------------
Capital expenditure (accrual basis) 54 39 106 104
Changes in capital accruals 7 4 21 6
- ------------------------------------------------------------------------------------------------------------------
Cash paid for property and equipment 61 43 127 110
==================================================================================================================
TELEWEST COMMUNICATIONS PLC
- -------------------------------------------------------------------------------
RECONCILIATIONS OF NON-US GAAP FINANCIAL MEASURES (CONTINUED)
JUNE 30, 2004 DECEMBER 31, 2003
(POUND)M (POUND)M
- ------------------------------------------------------------------------------------------------------------------
Net debt 5,434 5,358
Cash and cash equivalents 452 427
- ------------------------------------------------------------------------------------------------------------------
Total debt 5,886 5,785
Accrued interest payable on notes and debentures (479) (352)
Debt repayable after more than one year (6) (6)
Capital lease obligations repayable after more than one year (42) (51)
Accounts payable 112 98
Other liabilities 917 809
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities 6,388 6,283
==================================================================================================================