Exhibit 99.1
[Telewest-Logo]
EARNINGS RELEASE
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TELEWEST Q2 RESULTS SHOW STRONG FINANCIAL PERFORMANCE
August 11, 2005 - London, United Kingdom - Telewest Global, Inc.
("Telewest" or the "Reorganized Company") (NASDAQ: TLWT) today announces
second quarter financial results for 2005.
HIGHLIGHTS
o Adjusted EBITDA growth of 30% over Q2 04 *
o Operating income increased 140% over Q2 04 *
o Consumer sales division revenue growth of 5% (before VAT
recovery) over Q2 04
o Triple play penetration increased by 11 percentage points over Q2
04 to 32.8%
o Revenue Generating Units grew by 89,000 in the quarter; RGUs per
customer grew from 1.97 at Q2 04 to 2.11 at Q2 05
FINANCIAL HIGHLIGHTS
TELEWEST GLOBAL, INC. * TELEWEST GLOBAL, INC. PREDECESSOR
----------------------- ----------------------- -----------------------
(UNAUDITED IN (POUND)M) Q2 2005 Q1 2005 Q2 2004
Revenue 381 338 326
Operating income 48 24 20
Adjusted EBITDA 158 134 122
Net income/(loss) 19 1 (126)
Free cash flow 64 63 37
OPERATIONAL HIGHLIGHTS
Q2 2005 Q1 2005 Q2 2004
Customer net adds 15,000 23,000 10,000
Broadband net adds 66,000 88,000 72,000
RGU net adds 89,000 113,000 84,000
Triple play percentage 32.8% 30.3% 21.8%
<FN>
* Includes (pound)40m of Revenue, (pound)20m of Operating income,
(pound)20m of Adjusted EBITDA, (pound)22m of Net income, and (pound)20m of
Free cash flow resulting from (a) the consolidation of sit-up Limited from
May 12, 2005, (b) a (pound)16m VAT recovery and (c) a (pound)4m rates
(local government tax) rebate.
</FN>
BARRY ELSON, ACTING CHIEF EXECUTIVE OFFICER OF TELEWEST GLOBAL, INC.,
COMMENTED:
"Telewest has delivered strong financial results and good subscriber growth
in television, telephony and broadband internet. Our focus on marketing the
bundle has led to increased triple play penetration, now at 33%.
Our business sales division has returned to top-line revenue growth and our
Content assets, Flextech and UKTV along with sit-up are performing well and
continue to increase their market share.
We continue to focus upon free cash flow in all of our divisions and remain
confident of profitable growth."
ENQUIRIES
Richard Williams Head of investor relations +44 (0) 20 7299 5479
Vani Gupta Investor relations manager +44 (0) 20 7299 5353
Kirstine Cox Head of media +44 (0) 20 7299 5115
BRUNSWICK
Nick Claydon UK +44 (0) 20 7404 5959
Frank De Maria US +1 212 333 3810
OPERATIONAL REVIEW
CABLE SEGMENT
CONSUMER SALES DIVISION
The consumer sales division had a good quarter with a net increase of
15,000 customer relationships, up 41% on the same quarter in 2004. This was
lower than in the previous quarter primarily due to seasonally higher
churn.
As expected, churn at 1.2%, was higher than the previous quarter. It was
affected by a higher level of movers due to a seasonal increase in people
moving house and students finishing college and an increase in non-pay
churn. Non-pay churn is up as a result of higher acquisition levels in
recent periods together with the impact of a tightened credit policy under
which we have reduced the time period before we disconnect newly acquired
customers who do not adhere to our payment terms. This change is in line
with our focus on maintaining profitable growth and managing credit risk.
It is likely that these factors will continue to have an impact in the
third quarter.
Household ARPU (excluding the revenue impact of the (pound)16 million VAT
recovery, described below) was (pound)44.86 in the quarter, down from
(pound)45.34 in the previous quarter. This reduction was principally
attributable to lower telephony usage due to the start of the summer and
the continued impact of fixed-to-mobile substitution. A reduction in
premium and pay-per-view revenue after the end of the football season also
negatively impacted ARPU.
Partially offsetting these impacts was the continued growth in RGUs per
customer, which grew to 2.11, and triple play penetration, which grew to
32.8%. This reflects our successful focus on profitable growth and on
selling bundled products. We remain on target to achieve 40% triple play
penetration during 2007.
CONSUMER INTERNET
We experienced good growth in the number of broadband subscribers, with
66,000 net additions in the quarter. Growth was slower than in the previous
quarter, partly due to the factors indicated above. We believe that we have
continued to maintain market share at around 67% in our addressable areas.
Growth continued to be strongest in our lowest broadband tier. This
impacted the mix of broadband subscribers and broadband ARPU, which fell
(pound)0.50 to (pound)19.39 as compared to the previous quarter.
Broadband continued to be successful in attracting new customers to
Telewest - 49% of broadband installations in the quarter were for customers
who were not existing customers. Multi-service penetration remained high in
broadband, with 71% of all broadband internet subscribers subscribing to
the full "triple play" and 93% subscribing to at least one other product.
In September 2005 we will commence the increase of our broadband internet
speeds, which we expect to complete by early 2006. This will be at no
additional charge to our customers. The 512Kb tier speed will be increased
to 2Mb. The 1Mb tier speed will be increased to 4Mb. The currently existing
2Mb and 4Mb tier speeds will be increased to 10Mb.
CONSUMER TELEVISION
The number of TV subscribers grew by 11,000 in the quarter compared to
8,000 in the previous quarter. This represents the best second quarter
performance for four years.
TV ARPU (excluding the revenue impact of the (pound)16 million VAT
recovery, described below) of (pound)20.78 fell (pound)0.34 compared to the
previous quarter, primarily due to reduced premium and pay-per-view revenue
at the end of the football season. On July 1, 2005, we increased the price
of our two lowest digital TV tiers by (pound)1 each. We expect this to have
a positive impact on TV ARPU in the third quarter.
The number of digital TV subscribers rose by 40,000 compared to 27,000 in
the previous quarter. 89% of our TV subscribers now take our digital
service. We estimate that we will be fully digital by the end of 2006. Once
complete, this will free up significant amounts of bandwidth in our
network, which will allow extra capacity for Video-On-Demand (VOD), High
Definition TV, broadband speed increases and other services.
Our VOD roll-out is continuing and is now available to approximately
120,000 subscribers in the South West. We branded this service "Teleport"
and have expanded the content available. In addition to the "Teleport
Movies" service, we launched "Teleport Replay" which gives access to some
of the best television from the BBC and others from the preceding seven
days. Subscribers to our top tier "Supreme" pack will also receive free
access to "Teleport TV", which makes available a range of library content
from the BBC, Flextech, Discovery and others. This service costs (pound)5
per month for non-Supreme customers, therefore encouraging upward migration
to higher digital tiers. We plan to continue our region-by-region roll-out
during the second half of this year and to complete the national roll-out
by early 2006. We expect to launch DVR (Digital Video Recorder) services
towards the end of this year.
CONSUMER TELEPHONY
The number of telephony subscribers increased by 12,000 in the quarter.
This represents the best second quarter performance for four years.
Telephony ARPU was (pound)22.42 in the quarter, down from (pound)23.00 in
the previous quarter. This reduction was principally attributable to lower
telephony usage due to the start of the summer and the continued impact of
fixed-to-mobile substitution.
We have continued our strategy of migrating subscribers to flat rate
packages to reduce the impact of declining telephony usage. As a result,
38% of all telephony subscribers now subscribe to one of our two main
"Talk" packages - "Talk Unlimited" or "Talk Evenings and Weekends". On July
1, 2005 we migrated all of our existing "3-2-1" subscribers to "Talk
Weekends" which gives subscribers free local and national calls at
weekends. This package is charged at (pound)10.50 per month compared to
(pound)10 for the "3-2-1" service.
BUSINESS SALES DIVISION
Our business sales division had an improved quarter with revenues up
(pound)2 million on the previous quarter to (pound)63 million, driven by
growth in new business acquired. The division is operating in challenging
market conditions and we are encouraged that this is the first growth in
quarterly revenues for seven quarters. In particular, data revenues are up
12% compared to the same quarter last year.
CONTENT SEGMENT
Overall revenue in Flextech was (pound)32 million in the quarter, up 14% on
the second quarter of 2004, and up (pound)1 million on the previous
quarter.
Advertising revenue was up 14% on the same quarter last year at (pound)16
million, resulting primarily from an increase in market share, driven by
improved viewing share of Flextech's channels. Advertising revenue was down
(pound)1 million from the previous quarter after an exceptionally strong
first quarter in the UK television advertising market.
Subscription revenue remained flat at (pound)11 million compared to both
the previous quarter and the same quarter last year. During the quarter we
signed a new carriage agreement with NTL for Flextech and UKTV channels to
be carried on its platform for three years.
Other revenue increased by (pound)2 million compared to both the previous
quarter and the same quarter last year principally due to sales of
international programming rights and increased commercial revenue.
SIT-UP SEGMENT
On May 12, 2005, Telewest acquired a controlling interest in sit-up Limited
("sit-up") for an aggregate purchase price of approximately (pound)103
million including fees. Telewest completed the acquisition of 100% of the
ordinary shares of sit-up on July 7, 2005. sit-up markets and retails a
wide variety of consumer products primarily by means of televised shopping
programs using an auction-based format.
sit-up's financial results were consolidated into the Group's results from
May 12, 2005. As a result, Group revenues of (pound)24 million and Adjusted
EBITDA of (pound)0 have been recognized in respect of sit-up in the second
quarter.
On a pro forma basis, assuming that sit-up was acquired on January 1, 2005,
revenues would have been (pound)46 million in the second quarter. Revenues
in the same quarter last year were (pound)36 million on a pro forma basis,
assuming that sit-up was acquired on January 1, 2004, thus implying pro
forma revenue growth of 28%. On the same pro forma basis, Adjusted EBITDA
in the quarter would have been (pound)0, flat compared to the same quarter
last year.
sit-up's revenues increased due to growth in multi-channel penetration and
the continued success of its innovative auction-based home shopping
channels.
sit-up recently launched a third live-auction channel, speed auction tv, on
Sky, NTL and Telewest.
FINANCIAL RESULTS
GAAP FINANCIAL MEASURES 3 MONTHS ENDED JUNE 30,
(UNAUDITED IN (POUND) MILLIONS) ---------------------------
2005 2004
REORGANIZED PREDECESSOR
COMPANY COMPANY
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Operating income 48 20
Net income/(loss) 19 (126)
Net cash provided by operating activities 123 88
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Total revenue and consumer sales division revenue include a credit of
(pound)16 million resulting from the recovery of Value Added Tax (VAT) from
HM Customs and Excise, which had been the subject of a court case and
subsequent appeals since 2002. A (pound)16 million charge was taken against
revenue in 2002 when the case commenced. This recovery has not been
included in any ARPU calculations.
Operating income for the second quarter of 2005 was (pound)48 million, up
from (pound)20 million for the second quarter of 2004, due principally to
the recovery of VAT, revenue growth in our consumer sales division and
content segment, and lower SG&A, partially offset by increased depreciation
and amortization. SG&A in the second quarter of 2004 was impacted by
(pound)12 million of financial restructuring charges compared to (pound)0
in the second quarter of 2005. The second quarter of 2005 was impacted by
(pound)7 million of expense relating to sit-up and (pound)3 million of
stock-based compensation expense, neither of which arose in the second
quarter of 2004. Additionally (pound)4 million of rates (local government
tax) rebate was received in the second quarter of 2005 compared with
(pound)0 in the second quarter of 2004.
The improvement from net loss of (pound)126 million for the second quarter
of 2004 to net income of (pound)19 million for the second quarter of 2005
was due principally to significantly reduced interest costs and decreased
foreign exchange losses following our predecessor's financial
restructuring, and enhanced operating income.
Net cash provided by operating activities increased from (pound)88 million
for the second quarter of 2004 to (pound)123 million for the second quarter
of 2005. This increase arose principally as a result of improvements in
operating income.
NON-GAAP FINANCIAL MEASURES 3 MONTHS ENDED JUNE 30,
(UNAUDITED IN (POUND) MILLIONS) ----------------------------
2005 2004
REORGANIZED PREDECESSOR
COMPANY COMPANY
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Adjusted EBITDA 158 122
Free cash flow 64 37
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Adjusted EBITDA (earnings before interest, taxation, depreciation,
amortization and financial restructuring expenses) for the second quarter
of 2005 was (pound)158 million, up 30% as compared to the second quarter of
2004. This increase reflects the recovery of VAT, the rates rebate and
increased revenues in the consumer sales division and content segment, and
lower operating costs and expenses in the cable segment, partially offset
by higher operating costs and expenses in the content segment. Adjusted
EBITDA margin (Adjusted EBITDA as a percentage of revenue) has increased
from 37.4% to 41.5%. Excluding the VAT recovery and rates rebate, Adjusted
EBITDA margin would have been 37.8% for the second quarter of 2005.
Stock-based compensation expense ("SBCE") of (pound)3 million was incurred
in the second quarter of 2005. SBCE arises as a result of options and
restricted stock granted to our employees. SBCE will similarly affect
future periods. This is a non-cash item and no such expense was incurred in
the second quarter of 2004. Adjusted EBITDA before the deduction of SBCE
was (pound)161 million in the second quarter of 2005, an increase of
(pound)39 million, or 32%, over the second quarter of 2004 on the same
basis.
Free cash flow (cash flow from operating activities excluding financial
restructuring expenses less capital expenditure) for the three months ended
June 30, 2005 was (pound)64 million, compared with (pound)37 million for
the three months ended June 30, 2004. The increase was primarily due to
increased Adjusted EBITDA.
Reconciliations of these and other non-GAAP financial measures to the most
directly comparable GAAP financial measures are explained and shown on
pages 16 to 19.
COSTS
Total gross margin (excluding the credit of (pound)16 million VAT
recovery), was flat for the quarter as compared to 72% for the same quarter
last year due primarily to the growing number of high margin broadband
subscribers, television price increases and reduced cable segment expenses
partially offset by the consolidation of sit-up, which is comparatively a
much lower gross margin business. Total gross margin was 73%, including the
credit of (pound)16 million VAT recovery. Gross margin was down from 74% in
the previous quarter due to the consolidation of the comparatively lower
margin sit-up segment.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A)
SG&A of (pound)119 million was up (pound)4 million from the previous
quarter primarily due to the consolidation of (pound)7 million of sit-up
SG&A, partially offset by a rates rebate received of (pound)4 million. This
relates to rates charged on our core network. The rebate was for the period
April 1, 2001 to March 31, 2005 and is not expected to recur in future
quarters.
DEBT AND CAPITAL RESOURCES
Capital expenditure was (pound)59 million for the quarter. Capital
expenditure has been lower than expected in the first half of the year due
to further savings on consumer contract installation costs and the phasing
of capital project spend. As a result, capital expenditure for the full
year is now expected to be in the range of (pound)220 million to (pound)230
million.
During the quarter, certain of Telewest's Flextech subsidiaries entered
into a new bank facility related to the acquisition of sit-up. (pound)110
million of the facility has been fully drawn with a (pound)20 million
revolver facility, currently undrawn. Interest rates on the facility start
at 1.75 percentage points above LIBOR with leverage ratchets down to 1%
above LIBOR. The facility matures in June 2009 repayable semi-annually over
the life of the facility from December 2005. The facility is secured on the
assets of certain Flextech subsidiaries and sit-up along with Telewest's
50% share of the issued equity of UKTV.
As at June 30, 2005, net debt was (pound)1,712 million. This consisted of
(pound)1,809 million drawn down on our credit facilities and (pound)116
million of leases and other loans, offset by cash balances of (pound)213
million. The (pound)1,809 million drawn amount includes US$150 million and
Euro100 million.
PRINCIPAL AFFILIATE
UKTV
(UNAUDITED IN (POUND) MILLIONS) 3 MONTHS ENDED JUNE 30,
------------------------
2005 2004
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Share of net income of UKTV 7 5
Cash inflow from UKTV, being interest
received, repayment of loans made, net,
and dividends received 10 6
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Telewest owns 50% of the companies that comprise UKTV, a group of joint
ventures formed with BBC Worldwide. UKTV offers a portfolio of
multi-channel television channels based on the BBC's program library.
Telewest accounts for its interest in UKTV under the equity method and
recognized its share of net income of (pound)7 million for the three months
ended June 30, 2005. This compares with (pound)5 million share of net
income for the three months ended June 30, 2004.
UKTV is funded by a loan from Telewest, the balance of which was (pound)178
million at June 30, 2005. Total cash interest and repayments received in
respect of this loan by Telewest were (pound)8 million in the second
quarter of 2005. Telewest's cash interest receipts from UKTV are recorded
in free cash flow but not in Telewest's Adjusted EBITDA. During the three
months ended June 30, 2005, we received (pound)2 million of dividends from
UKTV. We expect to continue to receive dividends from UKTV as it continues
to generate cash.
TELEWEST GLOBAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN (POUND)MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
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THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- -------------------------------
2005 2004 2005 2004
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REORGANIZED PREDECESSOR REORGANIZED PREDECESSOR
COMPANY COMPANY COMPANY COMPANY
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REVENUE
Consumer Sales Division 262 235 508 470
Business Sales Division 63 63 124 130
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TOTAL CABLE SEGMENT 325 298 632 600
Content Segment 32 28 63 54
sit-up Segment 24 - 24 -
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TOTAL REVENUE 381 326 719 654
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OPERATING COSTS AND EXPENSES
Cable segment expenses 70 74 139 153
Content segment expenses 17 18 37 34
sit-up segment expenses 17 - 17 -
Depreciation 101 90 202 184
Amortization 9 - 18 -
Selling, general and administrative expenses 119 124 234 244
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333 306 647 615
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OPERATING INCOME 48 20 72 39
OTHER INCOME/(EXPENSE)
Interest income 7 8 11 15
Interest expense (including amortization of
debt discount) (41) (121) (70) (230)
Foreign exchange (losses)/gains, net (3) (37) (7) 40
Share of net income of affiliates 7 5 13 8
Other, net 1 - 1 (1)
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INCOME/(LOSS) BEFORE INCOME TAXES 19 (125) 20 (129)
Income tax charge - (1) - (1)
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NET INCOME/(LOSS) 19 (126) 20 (130)
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Basic and diluted earnings per share of common
stock (pound)0.08 (pound)0.08
Weighted average number of shares of common
stock - (millions) 245 245
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TELEWEST GLOBAL, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN (POUND)MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
2005 2004
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REORGANIZED REORGANIZED
COMPANY COMPANY
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ASSETS
Cash and cash equivalents 213 68
Restricted cash 16 26
Trade receivables 118 108
Other receivables 32 33
Prepaid expenses 38 17
Inventory for re-sale, net 15 -
Other assets 4 -
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TOTAL CURRENT ASSETS 436 252
Investments accounted for under the equity method 286 304
Property and equipment, net 2,888 2,974
Intangible assets, net 296 314
Reorganization value in excess of amounts allocable to identifiable assets 425 425
Goodwill 142 -
Programming inventory 30 24
Deferred financing costs (net of amortization of (pound)3 million; 2004: (pound)0 million) 52 51
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TOTAL ASSETS 4,555 4,344
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable 153 93
Other liabilities 446 424
Debt repayable within one year 55 21
Capital lease obligations repayable within one year 45 38
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TOTAL CURRENT LIABILITIES 699 576
Other liabilities 6 -
Deferred taxes 105 105
Debt repayable after more than one year 1,760 1,686
Capital lease obligations repayable after more than one year 65 69
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TOTAL LIABILITIES 2,635 2,436
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MINORITY INTEREST (1) (1)
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SHAREHOLDERS' EQUITY
Preferred stock - US$0.01 par value; authorized 5,000,000 shares, issued none
(2005 and 2004) - -
Common stock - US$0.01 par value; authorized 1,000,000,000 shares, issued
245,171,054 (2005) and 245,080,629 (2004) 1 1
Additional paid-in capital 1,960 1,954
Accumulated other comprehensive loss (14) -
Accumulated deficit (26) (46)
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TOTAL SHAREHOLDERS' EQUITY 1,921 1,909
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 4,555 4,344
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TELEWEST GLOBAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN (POUND)MILLIONS)
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30,
-------------------------------
2005 2004
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REORGANIZED PREDECESSOR
COMPANY COMPANY
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss) 20 (130)
Adjustments to reconcile net income/(loss) to net cash provided by
operating activities:
Depreciation 202 184
Amortization 18 -
Amortization of deferred financing costs and debt discount 3 30
Deferred tax charge - 1
Fair value adjustment of interest rate swaps (10) -
Accretion expense 1 -
Unrealized losses/(gains) on foreign currency translation 7 (40)
Stock-based compensation expense 6 -
Share of net income of affiliates (9) (8)
Profit on disposal of assets (1) -
Amounts written off investments - 1
Changes in operating assets and liabilities, net of effect of
acquisition of subsidiaries:
Change in receivables (9) 9
Change in prepaid expenses (19) (25)
Change in other assets (11) (3)
Change in accounts payable 35 27
Change in other liabilities 6 124
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NET CASH PROVIDED BY OPERATING ACTIVITIES 239 170
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure (113) (127)
Proceeds from disposal of fixed assets 2 -
Cash paid for acquisition of subsidiaries, net of cash acquired (107) -
Repayment/(advance) of loans made to affiliates, net 9 (4)
Disposal of affiliate - 7
Proceeds from sale and leaseback 12 -
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NET CASH USED IN INVESTING ACTIVITIES (197) (124)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Release of restricted cash 10 2
Proceeds from new debt 110 -
Repayment of debt (6) -
Cash paid for financing costs (4) -
Principal element of capital lease repayments (19) (23)
Proceeds from the issue of redeemable preferred stock 12 -
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NET CASH PROVIDED BY/ (USED IN) FINANCING ACTIVITIES 103 (21)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 145 25
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 68 427
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CASH AND CASH EQUIVALENTS AT END OF PERIOD 213 452
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Supplementary cash flow information:
Cash paid for interest, net 41 61
Cash received for income taxes - (2)
TELEWEST GLOBAL, INC.
SELECTED QUARTERLY OPERATING DATA - UNAUDITED
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.
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JUN. 30, MAR. 31, DEC. 31, SEP. 30, JUN. 30,
2005 2005 2004 2004 2004
PREDECESSOR
REORGANIZED COMPANY COMPANY
---------------------------------------------------- ---------------
CUSTOMER DATA
Homes passed and marketed (1) 4,698,510 4,694,480 4,686,794 4,686,799 4,682,777
Total customer relationships (2) 1,837,191 1,822,530 1,799,556 1,769,263 1,752,553
Customer penetration 39.1% 38.8% 38.4% 37.7% 37.4%
Customer additions 79,365 78,695 89,452 78,707 67,118
Customer disconnections (64,704) (55,721) (59,159) (61,997) (56,709)
Net customer additions 14,661 22,974 30,293 16,710 10,409
Revenue Generating Units ("RGUs") (3) 3,873,792 3,784,835 3,671,402 3,539,185 3,447,254
RGUs per customer 2.11 2.08 2.04 2.00 1.97
Net RGU additions 88,957 113,433 132,217 91,931 84,014
Average monthly revenue per customer (4) (pound)44.86 (pound)45.34 (pound)45.13 (pound)45.05 (pound)44.98
Average monthly churn (5) 1.2% 1.0% 1.1% 1.2% 1.1%
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BUNDLED CUSTOMERS
Customers subscribing to two or more services 1,434,161 1,409,998 1,379,057 1,338,632 1,312,842
Customers subscribing to three services ("triple
play") 602,430 552,307 492,789 431,290 381,859
Percentage of dual or triple play customers 78.1% 77.4% 76.6% 75.7% 74.9%
Percentage of triple play customers 32.8% 30.3% 27.4% 24.4% 21.8%
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CONSUMER TELEVISION
Television ready homes passed and marketed 4,698,510 4,694,480 4,686,794 4,686,799 4,682,777
Total subscribers 1,331,742 1,320,487 1,312,825 1,297,304 1,288,272
Quarterly net additions 11,255 7,662 15,521 9,032 2,475
Television penetration 28.3% 28.1% 28.0% 27.7% 27.5%
Digital ready homes passed and marketed 4,501,169 4,451,420 4,420,388 4,405,162 4,401,860
Digital subscribers 1,189,521 1,149,641 1,122,301 1,078,623 1,052,855
Quarterly net digital additions 39,880 27,340 43,678 25,768 23,096
Penetration of digital subscribers to total 89.3% 87.1% 85.5% 83.1% 81.7%
subscribers
Average monthly churn (5) 1.5% 1.4% 1.5% 1.4% 1.3%
Average monthly revenue per subscriber (4) (pound)20.78 (pound)21.12 (pound)20.88 (pound)20.72 (pound)20.53
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CONSUMER TELEPHONY
Telephony ready homes passed and marketed 4,694,030 4,691,704 4,683,153 4,682,002 4,677,861
"3-2-1" and "Talk Weekends" telephony subscribers 1,045,139 1,053,226 1,080,893 1,082,125 1,105,056
"Talk Unlimited" and "Talk Evenings and Weekends"
subscribers 644,073 624,417 579,448 552,534 516,313
Total subscribers 1,689,212 1,677,643 1,660,341 1,634,659 1,621,369
Quarterly net additions 11,569 17,302 25,682 13,290 9,222
Telephony penetration 36.0% 35.8% 35.5% 34.9% 34.7%
Average monthly churn (5) 1.2% 1.0% 1.1% 1.2% 1.1%
Average monthly revenue per subscriber (4) (pound)22.42 (pound)23.00 (pound)23.18 (pound)23.53 (pound)23.70
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TELEWEST GLOBAL, INC.
SELECTED QUARTERLY OPERATING DATA - UNAUDITED (CONTINUED)
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JUN. 30, MAR. 31, DEC. 31, SEP. 30, JUN. 30,
2005 2005 2004 2004 2004
PREDECESSOR
REORGANIZED COMPANY COMPANY
----------------------------------------------------- ----------------
CONSUMER INTERNET
Broadband ready homes passed and marketed 4,501,169 4,451,420 4,420,388 4,405,162 4,401,860
Total metered dial-up internet subscribers 25,048 29,376 33,417 39,196 47,884
Total unmetered dial-up internet subscribers 65,516 85,909 107,220 127,745 151,457
Total broadband internet subscribers 852,838 786,705 698,236 607,222 537,613
Quarterly net broadband internet additions 66,133 88,469 91,014 69,609 72,317
Broadband internet penetration 18.9% 17.7% 15.8% 13.8% 12.2%
Average monthly broadband internet churn (5) 1.3% 1.0% 1.0% 1.3% 1.2%
Average monthly revenue per broadband internet
subscriber (4) (pound)19.39 (pound)19.89 (pound)20.23(pound)21.50* (pound)22.45*
- -------------------------------------------------------------------------------------------------------------- --------------
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
NCTA CAPITAL EXPENDITURE (6)
--------------------------------------------------- ------------
Customer premise equipment ("CPE") 18 16 25 19 23
Scaleable infrastructure 12 7 14 8 7
Commercial 11 8 8 12 9
Line extensions 1 2 1 1 1
Upgrade/rebuild 3 6 10 1 4
Support capital 12 13 7 10 9
--------------------------------------------------- ------------
Total NCTA Capital expenditure 57 52 65 51 53
Non NCTA Capital expenditure:
Content Segment 1 - 1 - 1
sit-up Segment 1 - - - -
Change in capital accruals - 2 (2) (1) 7
- -------------------------------------------------------------------------------------------------------------- --------------
Total Capital expenditure 59 54 64 50 61
- -------------------------------------------------------------------------------------------------------------- --------------
<FN>
* The product ARPUs for broadband internet in these quarters have been
adjusted to reflect the full value of promotional discounts offered.
(1) The number of homes within our service area that can potentially be
served by our network with minimal connection costs. Information concerning
the number of homes "passed and marketed" is based on physical counts made
by us during network construction or marketing phases.
(2) The number of customers who receive at least one of our television,
telephony or broadband internet services.
(3) Revenue Generating Units ("RGUs"), refer to subscriptions to each of
our analog television, digital television, telephony and broadband internet
services on an individual basis. For example, when we provide one customer
with digital television and broadband internet services, we record two
RGUs. Dial-up internet services, second telephone lines and additional TV
outlets are not recorded as RGUs although they generate revenue for us.
(4) Average monthly revenue per customer (often referred to as "ARPU" or
"Average Revenue per User") represents the consumer sales division's total
quarterly revenue of residential customers, including installation
revenues, but excluding the recovery of (pound)16 million VAT, divided by
the average number of residential customers in the quarter, divided by
three. The same methodology is used for television, telephony and broadband
internet ARPU.
(5) 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 our
addressable areas (known as "Moves and Transfers") and retain our services
are excluded from this churn calculation.
(6) 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 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.
</FN>
TELEWEST GLOBAL, INC.
SUPPLEMENTAL ANALYSIS
- --------------------------------------------------------------------------
o FORWARD-LOOKING STATEMENTS
o FRESH-START REPORTING
o PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
o QUARTERLY HISTORICAL INFORMATION
o SEGMENTAL INFORMATION
o USE OF NON-GAAP FINANCIAL MEASURES
FORWARD-LOOKING STATEMENTS
Some of the statements in this earnings release constitute "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,
potential growth (including customer net additions and average monthly
revenue per customer), product introductions and innovation, meeting
customer expectations, planned operational changes (including product
improvements and the impact of price increases), expected capital
expenditures, future cash sources and requirements, liquidity, customer
service improvements, cost savings and the benefits of acquisitions or
joint ventures - potential and/or completed - 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. These factors include those discussed
under the caption "Risk Factors" in the Annual Report on Form 10-K for the
year ended December 31, 2004 (No. 000-50886) filed by Telewest Global, Inc.
on March 22, 2005 with the United States Securities and Exchange
Commission, although those risk factors may not be exhaustive. Other
sections of this earnings 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.
Unless otherwise required by applicable securities laws, we assume no
obligation to publicly update or revise any of the forward-looking
statements after the date of this earnings release to reflect actual
results, whether as a result of new information, future events or
otherwise.
FRESH-START REPORTING
As a result of the completion of the financial restructuring of Telewest
Communications plc, our predecessor, on July 15, 2004, Telewest adopted
fresh-start reporting in accordance with Statement of Position 90-7,
"Reporting by Entities in Reorganization under the Bankruptcy Code", ("SOP
90-7"), with effect from July 1, 2004. Under SOP 90-7, Telewest established
a new accounting basis, recording our predecessor's assets at their fair
value and liabilities at the present value of amounts to be paid.
A reconciliation of our predecessor's balance sheet at June 30, 2004 to the
fresh-start balance sheet at July 1, 2004, is included in Telewest's Annual
Report on Form 10-K for the year ended December 31, 2004.
As a result of the adoption of fresh-start reporting, our balance sheets
and results of operations subsequent to July 1, 2004 will not be comparable
in many material respects to the balance sheets or results of operations
reflected in our predecessor's historical financial statements for periods
prior to July 1, 2004.
TELEWEST GLOBAL, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS *
(AMOUNTS IN (POUND)MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- -------------------------------
2005 2004 2005 2004
------------ ------------- -------------- -------------
REORGANIZED PREDECESSOR REORGANIZED PREDECESSOR
COMPANY * COMPANY * COMPANY * COMPANY *
- -----------------------------------------------------------------------------------------------------------------
REVENUE
Consumer Sales Division 262 235 508 470
Business Sales Division 63 63 124 130
- -----------------------------------------------------------------------------------------------------------------
TOTAL CABLE SEGMENT 325 298 632 600
Content Segment 32 28 63 54
sit-up Segment 46 36 98 76
- -----------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 403 362 793 730
- -----------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Cable segment expenses 70 74 139 153
Content segment expenses 17 18 37 34
sit-up segment expenses 34 27 72 57
Depreciation 101 91 203 185
Amortization 9 - 18 -
Selling, general and administrative expenses 124 133 251 262
- -----------------------------------------------------------------------------------------------------------------
355 343 720 691
- -----------------------------------------------------------------------------------------------------------------
OPERATING INCOME 48 19 73 39
OTHER INCOME/(EXPENSE)
Interest income 7 7 11 14
Interest expense (including amortization of
debt discount) (41) (122) (72) (233)
Foreign exchange (losses)/gains, net (3) (37) (7) 40
Share of net income of affiliates 7 4 12 7
Other, net 1 - 1 (1)
- -----------------------------------------------------------------------------------------------------------------
INCOME/(LOSS) BEFORE INCOME TAXES 19 (129) 18 (134)
Income tax charge - (1) - (1)
- -----------------------------------------------------------------------------------------------------------------
NET INCOME/(LOSS) 19 (130) 18 (135)
- -----------------------------------------------------------------------------------------------------------------
Basic and diluted earnings per share of common
stock (pound)0.08 (pound)0.07
Weighted average number of shares of common
stock - (millions) 245 245
- -----------------------------------------------------------------------------------------------------------------
<FN>
* To show pro forma effect as if sit-up Limited had been purchased on
January 1, 2005 and 2004, for the periods ended June 30, 2005 and 2004,
respectively.
</FN>
Pro forma adjustments reflect the revenue, segment expenses, depreciation
and SG&A for sit-up for the periods January 1, 2005 to May 11, 2005 and
January 1, 2004 to June 30, 2004. Interest income and expense have been
adjusted to reflect the interest income earned by sit-up during the above
periods and the additional interest expense that would have been incurred
by Telewest to fund the acquisition at January 1, 2005 and 2004,
respectively. Share of net income of affiliates has been adjusted to
reverse the equity accounting of sit-up for the periods presented.
TELEWEST GLOBAL, INC.
QUARTERLY HISTORICAL INFORMATION
(AMOUNTS IN (POUND)MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
- -------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
----------------------------------------------------------------------
JUN. 30, MAR. 31, DEC. 31, SEP. 30, JUN. 30,
2005 2005 2004 2004 2004
PREDECESSOR
REORGANIZED COMPANY COMPANY
- ------------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------------- --------------
REVENUE
Consumer Sales Division 262 246 241 238 235
Business Sales Division 63 61 63 63 63
- ------------------------------------------------------------------------------------------------------------- --------------
TOTAL CABLE SEGMENT 325 307 304 301 298
Content Segment 32 31 32 27 28
sit-up Segment 24 - - - -
- ------------------------------------------------------------------------------------------------------------- --------------
TOTAL REVENUE 381 338 336 328 326
- ------------------------------------------------------------------------------------------------------------- --------------
OPERATING COSTS AND EXPENSES
Cable segment expenses 70 69 69 72 74
Content segment expenses 17 20 25 17 18
sit-up segment expenses 17 - - - -
Depreciation 101 101 101 103 90
Amortization 9 9 9 9 -
- ------------------------------------------------------------------------------------------------------------- --------------
Cost of revenue 214 199 204 201 182
Selling, general and administrative expenses 119 115 114 117 124
- ------------------------------------------------------------------------------------------------------------- --------------
333 314 318 318 306
- ------------------------------------------------------------------------------------------------------------- --------------
OPERATING INCOME 48 24 18 10 20
OTHER INCOME/(EXPENSE)
Interest income 7 4 5 6 8
Interest expense (including amortization of debt (41) (29) (47) (49) (121)
discount)
Foreign exchange (losses)/gains, net (3) (4) 3 - (37)
Share of net income of affiliates 7 6 4 4 5
Other, net 1 - - - -
- ------------------------------------------------------------------------------------------------------------- --------------
INCOME/(LOSS) BEFORE INCOME TAXES 19 1 (17) (29) (125)
Income tax charge - - - - (1)
- ------------------------------------------------------------------------------------------------------------- --------------
NET INCOME/(LOSS) 19 1 (17) (29) (126)
- ------------------------------------------------------------------------------------------------------------- --------------
Basic and diluted earnings/(loss) per share of common
stock (pound)0.08 - (pound)(0.07) (pound)(0.12)
Weighted average number of shares of common stock -
(millions) 245 245 245 245
- ------------------------------------------------------------------------------------------------------------- --------------
TELEWEST GLOBAL, INC.
SEGMENT INFORMATION
(AMOUNTS IN (POUND)MILLIONS)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- -------------------------------
2005 2004 2005 2004
------------ ------------- -------------- -------------
REORGANIZED PREDECESSOR REORGANIZED PREDECESSOR
COMPANY COMPANY COMPANY COMPANY
- -----------------------------------------------------------------------------------------------------------------
CABLE SEGMENT
Consumer Sales Division revenue 262 235 508 470
Business Sales Division revenue 63 63 124 130
- -----------------------------------------------------------------------------------------------------------------
THIRD PARTY REVENUE 325 298 632 600
Operating costs and expenses (before financial
restructuring charges) (174) (181) (353) (369)
- -----------------------------------------------------------------------------------------------------------------
ADJUSTED EBITDA including inter-segment costs 151 117 279 231
Inter-segment costs (1) 2 2 5 5
- -----------------------------------------------------------------------------------------------------------------
ADJUSTED EBITDA 153 119 284 236
- -----------------------------------------------------------------------------------------------------------------
CONTENT SEGMENT
Content Segment revenue 34 30 68 59
Operating costs and expenses (before financial
restructuring charges) (27) (25) (55) (46)
- -----------------------------------------------------------------------------------------------------------------
ADJUSTED EBITDA including inter-segment
revenues 7 5 13 13
Inter-segment revenues (1) (2) (2) (5) (5)
- -----------------------------------------------------------------------------------------------------------------
ADJUSTED EBITDA 5 3 8 8
- -----------------------------------------------------------------------------------------------------------------
SIT-UP SEGMENT
sit-up Segment revenue 24 - 24 -
Operating costs and expenses (before financial
restructuring charges) (24) - (24) -
- -----------------------------------------------------------------------------------------------------------------
ADJUSTED EBITDA - - - -
- -----------------------------------------------------------------------------------------------------------------
RECONCILIATION TO OPERATING INCOME
Cable Segment Adjusted EBITDA 153 119 284 236
Content Segment Adjusted EBITDA 5 3 8 8
sit-up Segment Adjusted EBITDA - - - -
- -----------------------------------------------------------------------------------------------------------------
ADJUSTED EBITDA 158 122 292 244
Financial restructuring charges - (12) - (21)
Depreciation (101) (90) (202) (184)
Amortization (9) - (18) -
- -----------------------------------------------------------------------------------------------------------------
OPERATING INCOME 48 20 72 39
- -----------------------------------------------------------------------------------------------------------------
<FN>
(1) Inter-segment revenues are revenues of our Content Segment which are
costs in our Cable Segment and which are eliminated on consolidation.
</FN>
TELEWEST GLOBAL, INC.
USE OF NON-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 GAAP. This
measure is most directly comparable to the 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-GAAP financial measure reflects an additional way of
viewing aspects of our operations that, when viewed with our GAAP results
and the reconciliations to net income/(loss), shown below, provide a more
complete understanding of factors and trends affecting our business.
Because non-GAAP financial measures are not standardized, it may not be
possible to compare Adjusted EBITDA with other companies' non-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 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 capital expenditure.
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 GAAP. This
measure is most directly comparable to the 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-GAAP
financial measures are not standardized, it may not be possible to compare
free cash flow with other companies' non-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 GAAP.
NET DEBT
Net debt is defined as the sum of debt repayable, capital lease obligations
and accrued interest payable on notes and debentures less cash and cash
equivalents. The Company's management, including its chief operating
decision-maker, considers net debt an important measure of the financing
obligations undertaken by the Company.
Net debt is not a financial measure recognized under GAAP. This measure is
most directly comparable to the GAAP financial measure, total liabilities.
The significant limitation associated with the use of net debt as compared
total liabilities is that net debt does not consider current liabilities
due in respect of accounts payable and other liabilities. It also assumes
that all of cash and cash equivalents is available to service debt.
Telewest believes net debt is helpful for understanding its entire net debt
funding obligations and it provides useful supplemental information to
investors. Because non-GAAP financial measures are not standardized, it may
not be possible to compare net debt with other companies' non-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 liabilities, or other measures of financial
performance reported in accordance with GAAP.
TELEWEST GLOBAL, INC.
USE OF NON-GAAP FINANCIAL MEASURES (CONTINUED)
- ---------------------------------------------------------------------------
AVERAGE MONTHLY REVENUE PER CUSTOMER OR "HOUSEHOLD ARPU (EXCLUDING IMPACT
OF THE (POUND)16 MILLION VAT RECOVERY)"
For a three month period, Household ARPU (excluding impact of the (pound)16
million VAT recovery) represents the consumer sales division's total
quarterly revenue of residential customers, including installation
revenues, but excluding the recovery of (pound)16 million VAT, divided by
the average number of residential customers in the quarter, divided by
three.
For a six month period, Household ARPU (excluding impact of the (pound)16
million VAT recovery) represents the consumer sales division's total half
yearly revenue of residential customers, including installation revenues,
but excluding the recovery of (pound)16 million VAT, divided by the average
number of residential customers in the half year, divided by six.
Household ARPU (excluding impact of the (pound)16 million VAT recovery) is
not a financial measure recognized under GAAP. This measure is most
directly comparable to the GAAP financial measure, Household ARPU. The
significant limitation associated with the use of Household ARPU (excluding
impact of the (pound)16 million VAT recovery) as compared to Household ARPU
is that Household ARPU (excluding impact of the (pound)16 million VAT
recovery) does not consider (pound)16 million of revenues received in
respect of recovered VAT. Telewest believes Household ARPU (excluding
impact of the (pound)16 million VAT recovery) is helpful for understanding
the trend in respect of its residential revenues derived from customers
during the periods and it provides useful supplemental information to
investors. The VAT recovery is not expected to recur. Because non-GAAP
financial measures are not standardized, it may not be possible to compare
Household ARPU (excluding impact of the (pound)16 million VAT recovery)
with other companies' non-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 Household ARPU,
or other measures of financial performance reported in accordance with
GAAP.
AVERAGE MONTHLY REVENUE PER TELEVISION SUBSCRIBER OR "TELEVISION ARPU
(EXCLUDING IMPACT OF THE (POUND)16 MILLION VAT RECOVERY)"
For a three month period, Television ARPU (excluding impact of the
(pound)16 million VAT recovery) represents the sum of the consumer sales
division's total quarterly revenue of television subscribers, including
installation revenues, but excluding the recovery of (pound)16 million VAT,
divided by the average number of television subscribers in the quarter,
divided by three.
For a six month period, Television ARPU (excluding impact of the (pound)16
million VAT recovery) represents the sum of the consumer sales division's
total half yearly revenue of television subscribers, including installation
revenues, but excluding the recovery of (pound)16 million VAT, divided by
the average number of television subscribers in the half year, divided by
six.
Television ARPU (excluding impact of the (pound)16 million VAT recovery) is
not a financial measure recognized under GAAP. This measure is most
directly comparable to the GAAP financial measure, Television ARPU. The
significant limitation associated with the use of Television ARPU
(excluding impact of the (pound)16 million VAT recovery) as compared to
Television ARPU is that Television ARPU (excluding impact of the (pound)16
million VAT recovery) does not consider (pound)16 million of revenues
received in respect of recovered VAT. Telewest believes Television ARPU
(excluding impact of the (pound)16 million VAT recovery) is helpful for
understanding the trend in respect of its television revenues derived from
subscribers during the periods and it provides useful supplemental
information to investors. The VAT recovery is not expected to recur.
Because non-GAAP financial measures are not standardized, it may not be
possible to compare Television ARPU (excluding impact of the (pound)16
million VAT recovery) with other companies' non-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 Television ARPU, or other measures of financial performance reported in
accordance with GAAP.
TELEWEST GLOBAL, INC.
USE OF NON-GAAP FINANCIAL MEASURES (CONTINUED)
- ---------------------------------------------------------------------------
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(AMOUNTS IN (POUND)MILLIONS)
- ---------------------------- ------------------------------ - -------------------------------- -- ---------------
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, THREE MONTHS
ENDED MARCH 31,
------------------------------ -------------------------------- ---------------
2005 2004 2005 2004 2005
------------ -------------- -------------- -------------- ---------------
REORGANIZED PREDECESSOR REORGANIZED PREDECESSOR REORGANIZED
COMPANY COMPANY COMPANY COMPANY COMPANY
- ---------------------------- ------------ -- -------------- - -------------- -- -------------- -- ---------------
RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME/(LOSS)
- ------------------------------------------------------------------------------------------------------------------
Adjusted EBITDA 158 122 292 244 134
Financial restructuring
charges - (12) - (21) -
Depreciation (101) (90) (202) (184) (101)
Amortization (9) - (18) - (9)
- ------------------------------------------------------------------------------------------------------------------
Operating income 48 20 72 39 24
Interest income 7 8 11 15 4
Interest expense
(including amortization
of debt discount) (41) (121) (70) (230) (29)
Foreign exchange
(losses)/gains, net (3) (37) (7) 40 (4)
Share of net income of
affiliates 7 5 13 8 6
Other, net 1 - 1 (1) -
Income tax charge - (1) - (1) -
- ------------------------------------------------------------------------------------------------------------------
Net income/(loss) 19 (126) 20 (130) 1
- ------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES
- ------------------------------------------------------------------------------------------------------------------
Free cash flow 64 37 127 62 63
Deduct cash paid for
financial restructuring - (10) (1) (19) (1)
charges
Add capital expenditure 59 61 113 127 54
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by
operating activities 123 88 239 170 116
- ------------------------------------------------------------------------------------------------------------------
Free cash flow is reported after cash paid for interest, net, and cash
received for income taxes.
Supplementary cash flow information:
Cash paid for interest, net 29 29 41 61 12
Cash received for income - - - (2) -
taxes
- -----------------------------------------------------------------------------------------------------------------
JUN. 30, DEC. 31,
2005 2004
----------------------------------
REORGANIZED REORGANIZED
COMPANY COMPANY
- -----------------------------------------------------------------------------------------------------------------
RECONCILIATION OF NET DEBT TO TOTAL LIABILITIES
- -----------------------------------------------------------------------------------------------------------------
Net debt 1,712 1,746
Cash and cash equivalents 213 68
- ------------------------------------------------------------------------------------------------------------------
Total debt 1,925 1,814
Accounts payable 153 93
Other liabilities 452 424
Deferred taxes 105 105
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 2,635 2,436
- ------------------------------------------------------------------------------------------------------------------
TELEWEST GLOBAL, INC.
USE OF NON-GAAP FINANCIAL MEASURES (CONTINUED)
- -------------------------------------------------------------------------------------------------------------------
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2005 2005
- -------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF HOUSEHOLD ARPU TO HOUSEHOLD ARPU (EXCLUDING IMPACT OF
THE (POUND)16 MILLION VAT RECOVERY)
- ---------------------------------------------------------------------------------------------------------------------
Consumer sales division revenue in the period (pound) 262 million (pound) 508 million
Average number of residential customers in the period 1,830,895 1,820,654
-----------------------------------------
Household ARPU (pound) 47.72 (pound) 46.54
-----------------------------------------
Consumer sales division revenue in the period (pound) 262 million (pound) 508 million
VAT recovery (pound)(16) million (pound)(16) million
-----------------------------------------
Consumer sales division revenue (excluding (pound)16 million VAT (pound) 246 million (pound) 492 million
recovery)
Average number of residential customers in the period 1,830,895 1,820,654
-----------------------------------------
Household ARPU (excluding impact of the (pound)16 million VAT recovery) (pound) 44.86 (pound) 45.11
-----------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF TELEVISION ARPU TO TELEVISION ARPU (EXCLUDING IMPACT OF
THE (POUND)16 MILLION VAT RECOVERY)
- ---------------------------------------------------------------------------------------------------------------------
Consumer television revenue in the period (pound) 98 million (pound) 182 million
Average number of television subscribers in the period 1,326,317 1,321,291
-----------------------------------------
Television ARPU (pound) 24.72 (pound) 22.93
-----------------------------------------
Consumer television revenue in the period (pound) 98 million (pound) 182 million
VAT recovery (pound)(16) million (pound)(16) million
-----------------------------------------
Consumer television revenue (excluding (pound)16 million VAT recovery) (pound) 82 million (pound) 166 million
Average number of television subscribers in the period 1,326,317 1,321,291
-----------------------------------------
Television ARPU (excluding impact of the (pound)16 million VAT recovery) (pound) 20.78 (pound) 20.95
-----------------------------------------
- ---------------------------------------------------------------------------------------------------------------------