EXHIBIT 99.1
[TELEWEST LOGO]
EARNINGS RELEASE
- --------------------------------------------------------------------------------
TELEWEST Q3 RESULTS
November 10, 2005 - London, United Kingdom - Telewest Global, Inc.
("Telewest") (NASDAQ: TLWT) today announces third quarter financial results
for 2005.
HIGHLIGHTS
o Adjusted EBITDA growth of 16% over Q3 04
o Operating income increased 230% over Q3 04
o Consumer sales division revenue growth of 5% over Q3 04
o Triple play penetration increased by 10.6 percentage points over Q3 04
to 35.0%
o Revenue Generating Units grew by 81,000 in the quarter; RGUs per
customer grew from 2.00 at Q3 04 to 2.14 at Q3 05
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(UNAUDITED IN (POUND)M) Q3 2005 Q2 2005 * Q3 2004
Revenue 404 381 328
Operating income 33 48 10
Adjusted EBITDA 142 158 122
Net income/(loss) 5 19 (29)
Free cash flow 50 64 39
- --------------------------------------------------------------------------------
OPERATIONAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Q3 2005 Q2 2005 Q3 2004
Customer net adds 11,000 15,000 17,000
Broadband net adds 67,000 66,000 70,000
RGU net adds 81,000 89,000 92,000
Triple play percentage 35.0% 32.8% 24.4%
- --------------------------------------------------------------------------------
* Includes (pound)16m of Revenue, (pound)20m of Operating income,
(pound)20m of Adjusted EBITDA, (pound)22m of Net income, and (pound)22m of
Free cash flow resulting from a (pound)16m VAT recovery with related
interest of (pound)2m and a (pound)4m rates (local government tax) rebate.
BARRY ELSON, ACTING CHIEF EXECUTIVE OFFICER OF TELEWEST GLOBAL, INC.,
COMMENTED:
"Telewest's third quarter results demonstrate strong financial and
operational performance. Customer growth continued at our consumer division
and ARPU increased to (pound)45.17.
Revenues at our business division have stabilised in an extremely
competitive market and Flextech continues its impressive growth.
Our VOD rollout and broadband speed upgrades are well advanced and we have
today given details of our planned launch of DVR and HDTV services. As a
result, cable will be the first TV platform in the UK to offer the full
range of TV services from free-to-air, basic and premium channels, through
to VOD, DVR and HDTV, giving us a real competitive advantage over other
platforms.
1
As can be seen from these results, we have been operating effectively and
driving growth. We believe that our performance demonstrates continued
strength in both strategy and execution and we are confident that our team
will contribute to the success of the combined company on completion of our
recently announced proposed merger with NTL Inc."
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 gross customer additions of 89,000 in the
quarter, representing an increase of 10,000 both from the previous quarter
and from the same quarter last year, resulting from more effective
marketing, selling and promotions. There was a net increase of 11,000
customer relationships in the quarter.
As expected, churn at 1.4% was higher than the previous quarter as it
continued to be affected by a high level of house movers, including student
churn, as well as non-pay churn. Non-pay churn has continued to be impacted
as a result of higher acquisition levels in recent periods. Churn has
reduced since the end of the quarter and we now expect it to be 1.2% for
the fourth quarter.
Household ARPU was (pound)45.17 in the quarter, up from (pound)44.86 in the
previous quarter, excluding the second quarter revenue impact of a
(pound)16 million VAT recovery. This increase was principally attributable
to selective TV price increases and continued growth in triple play
penetration, partially offset by declines in broadband and telephony ARPU.
ARPU in the fourth quarter will be impacted by price reductions on our top
broadband tier and wireless broadband offerings as a consequence of our
broadband speed upgrades.
RGUs per customer grew to 2.14 and triple play penetration grew to 35.0%.
This reflects our successful focus on profitable growth and on selling
bundled products. Triple play growth over the last few quarters has been
stronger than we had planned and as a result we believe we will now achieve
our 40% triple play penetration target in 2006 - a year earlier than our
previous guidance.
CONSUMER INTERNET
We experienced good growth in the number of broadband subscribers, with
67,000 net additions in the quarter, which was slightly higher than in the
previous quarter.
Growth continued to be strongest in our lowest broadband tier. This
impacted the mix of broadband subscribers and broadband ARPU, which fell
(pound)0.36 to (pound)19.03 as compared to the previous quarter. However,
the rate of ARPU decline slowed in the quarter.
Broadband continued to be successful in attracting new customers to
Telewest - 37% of broadband installations in the quarter were for customers
who were not already existing
2
customers. Multi-service penetration remained high in broadband, with 70%
of all broadband internet customers subscribing to the full triple play and
94% subscribing to at least one other product.
In September, we began implementing further broadband speed increases. As
at November 10, approximately 60% of broadband customers had been upgraded
to the higher speeds. We expect that approximately 80% of broadband
customers will be upgraded by the end of the year, with the remainder
expected to be upgraded in the first quarter of 2006. These speed upgrades
will increase the speed of our lowest tier from 512Kb to 2Mb, the speed of
our existing 1Mb to 4Mb and the speeds of our existing 2Mb and 4Mb tiers to
10Mb. These upgrades are at no extra charge to customers and our 4Mb
customers will receive a (pound)15 per month price reduction when they
migrate to the 10Mb tier.
CONSUMER TELEVISION
The total number of TV subscribers grew by 17,000 in the quarter compared
to 11,000 in the previous quarter. This represents the best performance for
fifteen quarters, demonstrating the success we are having in driving Pay-TV
penetration in a competitive market.
The number of digital TV subscribers rose by 39,000. As a result, 91% of
our TV subscribers now take our digital service and we estimate that we
will be fully digital by the end of 2006. This will free up significant
amounts of bandwidth in our network, which will allow extra capacity for
Video-On-Demand (VOD), High Definition TV (HDTV), broadband speed increases
and other services.
TV ARPU increased to (pound)20.89 compared to (pound)20.78 in the previous
quarter, primarily due to selected prices rises, partially offset by a
reduction in premium revenue.
Our VOD roll-out is continuing and is now available to around 62% of our
digital TV subscribers. We plan to complete the national roll-out by the
end of this year, earlier than initially anticipated. The service is
branded "Teleport" and we have recently expanded the content available,
including an increase in the number of movie titles to well over 300. We
expect to launch a music on demand service later this month.
We are planning to pilot a Digital Video Recorder (DVR) service with a
number of customers in early December 2005. At the same time, we will be
pre-registering customers on our website, ahead of the full national
commercial launch early in the first quarter of 2006. We have branded the
service "TV Drive" and it will be charged at (pound)10 to (pound)15 per
month. TV Drive customers will receive a 160Gb, three tuner, HDTV
compatible Scientific Atlanta DVR. For an extra (pound)5 per month,
customers can use their existing digital set-top box as a second box in the
home (additional outlet), representing a (pound)10 discount on current
pricing.
We plan to launch HDTV at the same time, becoming the first platform in the
UK to offer HDTV to our DVR customers. We have recently secured HDTV
content from the BBC and others and we plan to extend this over the coming
months.
Cable will be the first TV platform in the UK to offer the full range of TV
services from free-to-air, basic and premium channels, through to VOD, DVR
and HDTV, which we believe will give us a real competitive advantage over
other platforms.
CONSUMER TELEPHONY
The number of telephony subscribers decreased by 3,000 in the quarter.
Acquisition was impacted as marketing and promotions during the quarter
focused more on our broadband and television services. Telephony remains an
important element of our bundled offering and is likely to have increased
focus in future marketing campaigns.
3
Telephony ARPU was (pound)22.35 in the quarter, down slightly from
(pound)22.42 in the previous quarter. This reduction was principally due to
the continued impact of declining telephony usage due to mobile
substitution, partially offset by some selected price increases.
We have continued our strategy of migrating subscribers to flat rate
packages to reduce the impact of declining telephony usage. As a result 39%
of all telephony subscribers now subscribe to one of our two main "Talk"
packages - "Talk Unlimited" or "Talk Evenings and Weekends". In July 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 per
month for the "3-2-1" service.
BUSINESS SALES DIVISION
Our business sales division had another solid quarter with revenues of
(pound)64 million in the quarter, up (pound)1 million as compared to the
previous quarter. Revenue in the quarter benefited from a (pound)1 million
settlement received from BT Group plc in respect of rates being applied to
Special Rate Services calls during prior periods.
We are encouraged that our business revenues have been relatively stable
over the past several quarters in extremely challenging market conditions.
As a result of key competitive advantages we believe we are well placed to
compete in this challenging market. In particular, because we own our own
local network infrastructure, we keep more data and telephony traffic on
our network producing higher margins and greater cash flow than would be
possible without ownership of the local network infrastructure. We also
have strong customer relationship management with locally based account
managers and customer support teams.
In line with our continued focus on corporate and mid-market customers, we
have experienced a shift in revenue mix, with data revenues up 18% compared
to the same quarter last year, while voice revenues have remained flat. We
are countering usage declines in the voice market through the introduction
of new services such as SRS Advance Solutions, which help customers manage
their incoming calls and we are also trialling multimedia over the
internet.
CONTENT SEGMENT
Overall revenue in the content segment was (pound)33 million in the
quarter, up 22% on the third quarter of 2004, and up (pound)1 million on
the previous quarter.
Advertising revenue was up 29% on the same quarter last year, and up
(pound)2 million on the previous quarter at (pound)18 million, resulting
primarily from an increase in market share, driven by improved commercial
impacts on Flextech's channels.
Subscription revenue was up 10% on the same quarter last year, and flat on
the previous quarter at (pound)11 million, due to increased multi-channel
penetration and improved pricing.
The content segment's Adjusted EBITDA in the quarter was (pound)9 million
before inter-company eliminations, up (pound)5 million from the same
quarter last year. The content segment's Adjusted EBITDA in the quarter was
(pound)6 million after inter-company eliminations.
We expect that the content segment's Adjusted EBITDA in the fourth quarter
of 2005 will be impacted by extra programming costs. We expect programming
costs in the fourth quarter to increase by more than (pound)10 million as
compared to the third quarter, as we invest in enriched programming in
common with other UK broadcasters to drive advertising revenue growth in
2006. As a result, we expect Adjusted EBITDA to be at a similar level to
the fourth quarter of 2004, when it showed a loss of (pound)1 million.
4
Following this investment in programming and the increased costs of the
Christmas season, we would expect an increase in revenue and Adjusted
EBITDA in the first quarter of 2006 compared to the fourth quarter of 2005,
as we have experienced historically.
SIT-UP SEGMENT
Revenue at sit-up, our recently acquired television home shopping business,
was (pound)58 million in the quarter, up 16% from the same quarter last
year (as reported by sit-up under UK GAAP), due to growth in multi-channel
penetration and the ability of its innovative auction-based shopping
channels to attract new customers. On a pro forma basis, revenue was up
(pound)12 million from the previous quarter. However, year-on-year revenue
growth has slowed and Adjusted EBITDA was only (pound)1 million in the
quarter, down from (pound)4 million (as reported by sit-up under UK GAAP)
in the same quarter last year. Adjusted EBITDA increased by (pound)1
million compared to the previous quarter.
sit-up has been affected by the difficult operating conditions currently
being experienced in the UK retail market. As a result, sit-up has
experienced pressure on product margins, which has impacted Adjusted
EBITDA. Adjusted EBITDA was also impacted during the quarter by extra
supply chain costs incurred in advance of the Christmas season, sit-up's
prime selling period.
If these retail conditions persist in the fourth quarter we would expect
fourth quarter Adjusted EBITDA to be below the (pound)8 million (as
reported by sit-up under UK GAAP) in the fourth quarter of 2004.
FINANCIAL RESULTS
GAAP FINANCIAL MEASURES 3 MONTHS ENDED SEP. 30,
(UNAUDITED IN (POUND) MILLIONS) 2005 2004
- -----------------------------------------------------------------------------
Operating income 33 10
Net income/(loss) 5 (29)
Net cash provided by operating activities 110 72
- -----------------------------------------------------------------------------
Operating income for the third quarter of 2005 was (pound)33 million, up
from (pound)10 million for the third quarter of 2004, due principally to
revenue growth in our cable and content segments, lower cable segment
expenses and cable segment SG&A, and lower depreciation.
The improvement from net loss of (pound)29 million for the third quarter of
2004 to net income of (pound)5 million for the third quarter of 2005 was
due principally to our enhanced operating income and reduced interest costs
following the refinancing of our bank debt in December 2004.
Net cash provided by operating activities increased from (pound)72 million
for the third quarter of 2004 to (pound)110 million for the third quarter
of 2005. This increase arose principally as a result of improvements in net
income, partially offset by increases in working capital.
NON-GAAP FINANCIAL MEASURES 3 MONTHS ENDED SEP. 30,
(UNAUDITED IN (POUND) MILLIONS) 2005 2004
- -----------------------------------------------------------------------------
Adjusted EBITDA 142 122
Free cash flow 50 39
- -----------------------------------------------------------------------------
Adjusted EBITDA (earnings before interest, taxation, depreciation,
amortization and financial restructuring expenses) for the third quarter of
2005 was (pound)142 million, up 16% as compared to the third quarter of
2004. This increase reflects increased revenues in the cable and content
segments, 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 decreased from 37.2% to 35.1%. Whilst Adjusted EBITDA margins
in the third quarter of 2005 in the cable and content segments increased,
(from 39.9% to 43.1% and from 7.4% to 18.2%, respectively) the overall
margin has been impacted by
5
the acquisition of sit-up, which operates on significantly lower margins
than our cable and content segments.
Free cash flow (cash flow from operating activities excluding financial
restructuring expenses less capital expenditure) for the three months ended
September 30, 2005 was (pound)50 million, compared with (pound)39 million
for the three months ended September 30, 2004. The increase was primarily
due to increased Adjusted EBITDA and reduced interest payments, partially
offset by increases in working capital and increased capital expenditure.
Reconciliations of these and other non-GAAP financial measures to the most
directly comparable GAAP financial measures are explained and shown on
pages 19 to 22.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A)
SG&A of (pound)128 million for the quarter was up (pound)11 million from
the third quarter of 2004 primarily due to the consolidation of (pound)13
million of sit-up segment SG&A, partially offset by a decrease in cable
segment SG&A of (pound)2 million.
DEBT AND CAPITAL RESOURCES
Capital expenditure was (pound)60 million for the quarter an increase of
(pound)10 million compared to the third quarter of 2004. Capital
expenditure for the full year is now expected to be approximately
(pound)230 million. This is at the higher end of earlier guidance and
reflects our faster than expected VOD and broadband speed upgrade roll-outs
and increased capital expenditures relating to strong TV growth.
As at September 30, 2005, net debt was (pound)1,665 million. This consisted
of (pound)1,811 million drawn down on our credit facilities (comprising
(pound)1,701 million in respect of TCN Group bank facilities and (pound)110
million in respect of Flextech Group bank facilities) and (pound)114
million of leases and other loans, offset by cash balances of (pound)260
million. The (pound)1,701 million drawn amount includes US$150 million and
Euro100 million. Net cash interest is expected to be approximately
(pound)110 million, which is at the lower end of previous guidance.
PRINCIPAL AFFILIATE
UKTV
(UNAUDITED IN (POUND) MILLIONS) 3 MONTHS ENDED SEP. 30,
------------------------
2005 2004
- -------------------------------------------------------------------------------
Share of net income of UKTV 5 3
Cash inflow from UKTV, being interest received,
repayment of loans made, net, and dividends received 9 6
- -------------------------------------------------------------------------------
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)5 million for the three months
ended September 30, 2005. This compares with (pound)3 million share of net
income for the three months ended September 30, 2004.
UKTV is funded by a loan from Telewest, the balance of which was (pound)173
million at September 30, 2005. Total cash interest and repayments received
in respect of this loan by Telewest were (pound)8 million in the Third
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
6
September 30, 2005, we received (pound)1 million of dividends from UKTV. We
expect to continue to receive dividends from UKTV as it continues to
generate cash.
SUBSEQUENT EVENTS
On October 2, 2005, NTL Incorporated ("NTL"), and Telewest Global, Inc.
entered into a definitive Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which a subsidiary of NTL will merge with and into
Telewest, with Telewest continuing as the surviving corporation and as a
wholly owned subsidiary of NTL (the "Merger"). Under the terms of the
Merger Agreement, Telewest shareholders are to receive $16.25 in cash plus
0.115 shares of NTL stock for each Telewest share held. Further details
relating to the Merger and the Merger Agreement are included in a Form 8-K
filed by the Company with the Securities and Exchange Commission on October
6, 2005.
7
TELEWEST GLOBAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN (POUND)MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SEP. 30,
------------------------------
2005 2004
------------ --------------
- --------------------------------------------------------------------------------------------------------------------
REVENUE
Consumer Sales Division 249 238
Business Sales Division 64 63
- --------------------------------------------------------------------------------------------------------------------
TOTAL CABLE SEGMENT 313 301
Content Segment 33 27
sit-up Segment 58 -
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 404 328
- --------------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Cable segment expenses 71 72
Content segment expenses 19 17
sit-up segment expenses 44 -
Depreciation 99 103
Amortization 10 9
Selling, general and administrative expenses 128 117
- --------------------------------------------------------------------------------------------------------------------
371 318
- --------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 33 10
OTHER INCOME/(EXPENSE)
Interest income 6 6
Interest expense (38) (49)
Foreign exchange losses, net (1) -
Share of net income of affiliates 4 4
- --------------------------------------------------------------------------------------------------------------------
INCOME/(LOSS) BEFORE INCOME TAXES 4 (29)
Income tax benefit/(charge) 1 -
- --------------------------------------------------------------------------------------------------------------------
NET INCOME/(LOSS) 5 (29)
- --------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings/(loss) per share of common stock (pound)0.02 (pound)(0.12)
Weighted average number of shares of common stock - (millions) 245 245
- --------------------------------------------------------------------------------------------------------------------
8
TELEWEST GLOBAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN (POUND)MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
NINE MONTHS NINE MONTHS NINE MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
SEP. 30, SEP. 30, SEP. 30, JUN. 30,
2005 2004 2004 2004
-------------- -------------- --------------- -------------
REORGANIZED COMBINED REORGANIZED PREDECESSOR
COMPANY COMPANIES COMPANY COMPANY
- ----------------------------------------------------------------------------------------------------------------------------
REVENUE
Consumer Sales Division 757 708 238 470
Business Sales Division 188 193 63 130
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL CABLE SEGMENT 945 901 301 600
Content Segment 96 81 27 54
sit-up Segment 82 - - -
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 1,123 982 328 654
- ----------------------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Cable segment expenses 210 225 72 153
Content segment expenses 56 51 17 34
sit-up segment expenses 61 - - -
Depreciation 301 287 103 184
Amortization 28 9 9 -
Selling, general and administrative expenses 362 361 117 244
- ----------------------------------------------------------------------------------------------------------------------------
1,018 933 318 615
- ----------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 105 49 10 39
OTHER INCOME/(EXPENSE)
Interest income 17 21 6 15
Interest expense (including amortization of debt (108) (279) (49) (230)
discount)
Foreign exchange (losses)/gains, net (8) 40 - 40
Share of net income of affiliates 17 12 4 8
Other, net 1 (1) - (1)
- ----------------------------------------------------------------------------------------------------------------------------
INCOME/(LOSS) BEFORE INCOME TAXES 24 (158) (29) (129)
Income tax benefit/(charge) 1 (1) - (1)
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME/(LOSS) 25 (159) (29) (130)
- ----------------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings/(loss) per share of common
stock (pound)0.10 (pound)(0.12)
Weighted average number of shares of common stock -
(millions) 245 245
- ----------------------------------------------------------------------------------------------------------------------------
The Consolidated Statement of Operations for Combined Companies for the
nine months ended September 30, 2004 represents the Consolidated Statement
of Operations for Telewest Global, Inc. ("Reorganized Company") for the
nine months ended September 30, 2004, together with the Consolidated
Statement of Operations for Telewest Communications plc ("Predecessor
Company") for the six months ended June 30, 2004, prior to its financial
restructuring.
The Consolidated Statement of Operations for Combined Companies for the
nine months ended September 30, 2004 is not in accordance with GAAP but our
management considers Combined Companies' financial information an important
indicator of the performance of the business as compared to future and
prior periods. Our management also considers Combined Companies' financial
information important to our investors.
The Consolidated Statement of Operations for the Combined Companies for the
nine months ended September 30, 2004 excludes the Predecessor Company's
Statement of Operations for July 1, 2004, the date of adoption of
Fresh-start reporting.
9
TELEWEST GLOBAL, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN (POUND)MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------
SEP. 30, DEC. 31,
2005 2004
------------- --------------
REORGANIZED REORGANIZED
COMPANY COMPANY
- -----------------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents 260 68
Restricted cash 15 26
Trade receivables 118 108
Other receivables 31 33
Prepaid expenses 38 17
Inventory for re-sale, net 18 -
Other assets 6 -
- -----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 486 252
Investments accounted for under the equity method 284 304
Property and equipment, net 2,856 2,974
Intangible assets, net 286 314
Reorganization value in excess of amounts allocable to identifiable assets 426 425
Goodwill 142 -
Programming inventory 31 24
Deferred financing costs (net of amortization of (pound)5 million;
2004: (pound)0 million) 50 51
- -----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 4,561 4,344
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable 139 93
Other liabilities 446 424
Debt repayable within one year 55 21
Capital lease obligations repayable within one year 62 38
- -----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 702 576
Other liabilities 9 -
Deferred taxes 105 105
Debt repayable after more than one year 1,761 1,686
Capital lease obligations repayable after more than one year 47 69
- -----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,624 2,436
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
MINORITY INTEREST (1) (1)
- -----------------------------------------------------------------------------------------------------------------
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
245,678,524 (2005) and 245,080,629 (2004) 1 1
Additional paid-in capital 1,965 1,954
Accumulated other comprehensive loss (7) -
Accumulated deficit (21) (46)
- -----------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 1,938 1,909
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 4,561 4,344
- -----------------------------------------------------------------------------------------------------------------
10
TELEWEST GLOBAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN (POUND)MILLIONS)
(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEP. 30, NINE MONTHS SIX MONTHS
-------------- -- -------------- ENDED ENDED
2005 2004 SEP. 30, 2004 JUN. 30, 2004 JULY 1, 2004
-------------- -------------- -------------- -------------- --------------
REORGANIZED COMBINED REORGANIZED PREDECESSOR PREDECESSOR
COMPANY COMPANIES COMPANY COMPANY COMPANY
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss) 25 (159) (29) (130) -
Adjustments to reconcile net income/(loss)
to net cash provided by operating activities:
Depreciation 301 287 103 184 -
Amortization 28 9 9 - -
Amortization of deferred financing
costs and debt discount 5 30 - 30 -
Deferred tax charge - 1 - 1 -
Fair value adjustment of interest
rate swaps (10) - - - -
Accretion expense 2 - - - -
Unrealized losses/(gains) on foreign
currency translation 8 (40) - (40) -
Stock-based compensation expense 8 3 3 - -
Share of net income of affiliates (12) (12) (4) (8) -
Profit on disposal of assets (1) - - - -
Amounts written off investments - 1 - 1 -
Changes in operating assets and
liabilities, net of effect of
acquisition of subsidiaries:
Change in receivables (6) 2 (7) 9 -
Change in prepaid expenses (20) (20) 5 (25) -
Change in other assets (14) (5) (2) (3) -
Change in accounts payable 21 37 10 27 -
Change in other liabilities 15 108 (16) 124 -
INCOME TAX PAID FOR UNPROVIDED TAX
CONTINGENCY AT FRESH-START (1) - - - -
- ----------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 349 242 72 170 -
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure (173) (177) (50) (127) -
Proceeds from disposal of fixed assets 2 - - - -
Cash paid for acquisition of
subsidiaries, net of cash acquired (108) - - - -
Repayment/(advance) of loans made to
affiliates, net 13 2 6 (4) -
Disposal of affiliate - 7 - 7 -
Proceeds from sale and leaseback 13 - - - -
- ----------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (253) (168) (44) (124) -
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Release/(placement) of restricted cash 11 (20) 14 2 (36)
Proceeds from new debt 110 - - - -
Repayment of debt (6) (160) - - (160)
Cash paid for financing costs (4) (22) - - (22)
Principal element of capital lease (31) (33) (10) (23) -
repayments
Proceeds from issuance of common stock 4 - - - -
Proceeds from the issue of a
subsidiary's redeemable preferred
stock 12 - - - -
- ----------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY/ (USED IN)
FINANCING ACTIVITIES 96 (235) 4 (21) (218)
- ----------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS 192 (161) 32 25 (218)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 68 427 - 427 452
CASH AND CASH EQUIVALENTS TRANSFERRED
FROM PREDECESSOR COMPANY TO
REORGANIZED COMPANY - - 234 - (234)
- ----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD 260 266 266 452 -
- ----------------------------------------------------------------------------------------------------------------------------
Supplementary cash flow information:
Cash paid for interest, net (75) (100) (39) (61) -
Cash received for income taxes, net 2 2 - 2 -
11
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.
- ---------------------------------------------------------------------------------------------------------------------------------
SEP. 30, JUN. 30, MAR. 31, DEC. 31, SEP. 30,
2005 2005 2005 2004 2004
REORGANIZED COMPANY
----------------------------------------------------------------------
CUSTOMER DATA
- -------------
Homes passed and marketed (1) 4,698,067 4,698,510 4,694,480 4,686,794 4,686,799
Total customer relationships (2) 1,848,096 1,837,191 1,822,530 1,799,556 1,769,263
Customer penetration 39.3% 39.1% 38.8% 38.4% 37.7%
Customer additions 89,469 79,365 78,695 89,452 78,707
Customer disconnections (78,564) (64,704) (55,721) (59,159) (61,997)
Net customer additions 10,905 14,661 22,974 30,293 16,710
Revenue Generating Units ("RGUs") (3) 3,955,205 3,873,792 3,784,835 3,671,402 3,539,185
RGUs per customer 2.14 2.11 2.08 2.04 2.00
Net RGU additions 81,413 88,957 113,433 132,217 91,931
Average monthly revenue per customer (4) (pound)45.17 (pound)44.86 (pound)45.34 (pound)45.13 (pound)45.05
Average monthly churn (5) 1.4% 1.2% 1.0% 1.1% 1.2%
- ---------------------------------------------------------------------------------------------------------------------------------
BUNDLED CUSTOMERS
- -----------------
Customers subscribing to two or more services 1,459,848 1,434,161 1,409,998 1,379,057 1,338,632
Customers subscribing to three services ("triple
play") 647,261 602,430 552,307 492,789 431,290
Percentage of dual or triple play customers 79.0% 78.1% 77.4% 76.6% 75.7%
Percentage of triple play customers 35.0% 32.8% 30.3% 27.4% 24.4%
- ---------------------------------------------------------------------------------------------------------------------------------
CONSUMER TELEVISION
- -------------------
Television ready homes passed and marketed 4,698,067 4,698,510 4,694,480 4,686,794 4,686,799
Total subscribers 1,348,572 1,331,742 1,320,487 1,312,825 1,297,304
Quarterly net additions 16,830 11,255 7,662 15,521 9,032
Television penetration 28.7% 28.3% 28.1% 28.0% 27.7%
Digital ready homes passed and marketed 4,503,909 4,501,169 4,451,420 4,420,388 4,405,162
Digital subscribers 1,228,164 1,189,521 1,149,641 1,122,301 1,078,623
Quarterly net digital additions 38,643 39,880 27,340 43,678 25,768
Penetration of digital subscribers to total
subscribers 91.1% 89.3% 87.1% 85.5% 83.1%
Average monthly churn (5) 1.8% 1.5% 1.4% 1.5% 1.4%
Average monthly revenue per subscriber (4) (pound)20.89 (pound)20.78 (pound)21.12 (pound)20.88 (pound)20.72
- ---------------------------------------------------------------------------------------------------------------------------------
CONSUMER TELEPHONY
- ------------------
Telephony ready homes passed and marketed 4,696,439 4,694,030 4,691,704 4,683,153 4,682,002
"Talk Weekends" (and previously "3-2-1") telephony
subscribers 1,027,271 1,045,139 1,053,226 1,080,893 1,082,125
"Talk Unlimited" and "Talk Evenings and Weekends"
telephony subscribers 659,176 644,073 624,417 579,448 552,534
Total subscribers 1,686,447 1,689,212 1,677,643 1,660,341 1,634,659
Quarterly net (disconnects)/additions (2,765) 11,569 17,302 25,682 13,290
Telephony penetration 35.9% 36.0% 35.8% 35.5% 34.9%
Average monthly churn (5) 1.4% 1.2% 1.0% 1.1% 1.2%
Average monthly revenue per subscriber (4) (pound)22.35 (pound)22.42 (pound)23.00 (pound)23.18 (pound)23.53
- ---------------------------------------------------------------------------------------------------------------------------------
12
TELEWEST GLOBAL, INC.
SELECTED QUARTERLY OPERATING DATA - UNAUDITED (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
SEP. 30, JUN. 30, MAR. 31, DEC. 31, SEP. 30,
2005 2005 2005 2004 2004
REORGANIZED COMPANY
----------------------------------------------------------------------
CONSUMER INTERNET
- -----------------
Broadband ready homes passed and marketed 4,503,909 4,501,169 4,451,420 4,420,388 4,405,162
Total metered dial-up internet subscribers 23,645 25,048 29,376 33,417 39,196
Total unmetered dial-up internet subscribers 49,542 65,516 85,909 107,220 127,745
Total broadband internet subscribers 920,186 852,838 786,705 698,236 607,222
Quarterly net broadband internet additions 67,348 66,133 88,469 91,014 69,609
Broadband internet penetration 20.4% 18.9% 17.7% 15.8% 13.8%
Average monthly broadband internet churn (5) 1.5% 1.3% 1.0% 1.0% 1.3%
Average monthly revenue per broadband internet
subscriber (4) (pound)19.03 (pound)19.39 (pound)19.89 (pound)20.23 (pound)21.50*
- ----- ---------------------------------------------------------------------------------------------------------------------------
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
NCTA CAPITAL EXPENDITURE (6)
- ------------------------ ------------ ------------ ------------ ------------ ------------
Customer premise equipment ("CPE") 30 18 16 25 19
Scaleable infrastructure 9 12 7 14 8
Commercial 10 11 8 8 12
Line extensions - 1 2 1 1
Upgrade/rebuild 5 3 6 10 1
Support capital 12 12 13 7 10
------------ ------------ ------------ ------------ ------------
Total NCTA Capital expenditure 66 57 52 65 51
Non NCTA Capital expenditure:
Content Segment 1 1 - 1 -
sit-up Segment 1 1 - - -
Change in capital accruals and leasing (8) - 2 (2) (1)
- -------------------------------------------------------------------------------------------------------------------------------
Total Capital expenditure 60 59 54 64 50
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
* The product ARPU for broadband internet in this quarter has 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 in the quarter ended
June 30, 2005), 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 (Financial
Reporting by Cable Television Companies) 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>
13
TELEWEST GLOBAL, INC.
SUPPLEMENTAL ANALYSIS
- --------------------------------------------------------------------------------
o FORWARD-LOOKING STATEMENTS
o ADDITIONAL INFORMATION AND WHERE TO FIND IT
o PARTICIPANTS IN THE SOLICITATION
o FRESH-START REPORTING
o PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
o QUARTERLY HISTORICAL INFORMATION
o SEGMENT 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, our
proposed merger with NTL Inc., 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.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This filing may be deemed to be solicitation material in respect of the
proposed merger of NTL and Telewest. In connection with the proposed
merger, NTL and Telewest will file a joint proxy statement/prospectus with
the U.S. Securities and Exchange Commission (the "SEC"). INVESTORS AND
SECURITY HOLDERS OF NTL AND TELEWEST ARE ADVISED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC
WHEN THEY BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED MERGER. The final joint proxy
statement/prospectus will be mailed to stockholders of NTL and Telewest.
Investors and security holders may obtain a free copy of the joint proxy
statement/prospectus, when it becomes available, and other documents filed
by NTL and Telewest with the SEC, at the SEC's web site at
http://www.sec.gov. Free copies of the joint proxy statement /prospectus,
when it becomes available, and each company's other filings with the SEC
may also be obtained from the respective companies. Free copies of
Telewest's filings may be obtained by directing a request to Telewest
Global, Inc., 160 Great Portland Street, London W1W 5QA, United Kingdom,
Attention: Investor Relations.
PARTICIPANTS IN THE SOLICITATION
NTL, Telewest and their respective directors, executive officers and other
members of their management and employees may be deemed to be soliciting
proxies from their respective stockholders in favor of the merger.
Information regarding NTL's directors and executive officers is available
in NTL's proxy statement for its 2005 annual meeting of stockholders, which
was filed with the SEC on April 5, 2005. Information regarding Telewest's
directors and executive officers is available in Telewest's proxy statement
for its 2005 annual meeting of stockholders, which was filed with the SEC
on April 11, 2005. Additional information regarding the
14
TELEWEST GLOBAL, INC.
SUPPLEMENTAL ANALYSIS (CONTINUED)
- --------------------------------------------------------------------------------
interests of such potential participants will be included in the joint
proxy statement/prospectus and the other relevant documents filed with the
SEC when they become available.
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.
15
TELEWEST GLOBAL, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS *
(AMOUNTS IN (POUND)MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
- --------------------------------------------------------------------------------
NINE MONTHS
ENDED SEP 30,
2005
----------------
REORGANIZED
COMPANY *
- --------------------------------------------------------------------------------
REVENUE
Consumer Sales Division 757
Business Sales Division 188
- --------------------------------------------------------------------------------
TOTAL CABLE SEGMENT 945
Content Segment 96
sit-up Segment 156
- --------------------------------------------------------------------------------
TOTAL REVENUE 1,197
- --------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Cable segment expenses 210
Content segment expenses 56
sit-up segment expenses 116
Depreciation 302
Amortization 28
Selling, general and administrative expenses 379
- --------------------------------------------------------------------------------
1,091
- --------------------------------------------------------------------------------
OPERATING INCOME 106
OTHER INCOME/(EXPENSE)
Interest income 17
Interest expense (110)
Foreign exchange losses, net (8)
Share of net income of affiliates 16
Other, net 1
- --------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 22
Income tax benefit 1
- --------------------------------------------------------------------------------
NET INCOME 23
- --------------------------------------------------------------------------------
Basic and diluted earnings per share of common stock (pound)0.09
Weighted average number of shares of common stock - (millions) 245
- --------------------------------------------------------------------------------
* To show pro forma effect as if sit-up Limited had been purchased on
January 1, 2005, for the nine months ended September 30, 2005.
Pro forma adjustments reflect the revenue, segment expenses, depreciation
and SG&A for sit-up for the period January 1, 2005 to May 11, 2005.
Interest income and expense have been adjusted to reflect the interest
income earned by sit-up during the above period and the additional interest
expense that would have been incurred by Telewest to fund the acquisition
at January 1, 2005. Share of net income of affiliates has been adjusted to
reverse the equity accounting of sit-up for the period presented.
Pro forma financial information for the three months ended September 30,
2005 has not been presented, as sit-up is a consolidated subsidiary of the
Reorganized Company during the period, therefore there are no differences
as compared to the Consolidated Statement of Operations.
Comparable pro forma financial information for the three and nine months
ended September 30, 2004 has not been presented since such pro forma
information would not be meaningful as a result of the financial
restructuring of the Predecessor Company during 2004.
16
TELEWEST GLOBAL, INC.
QUARTERLY HISTORICAL INFORMATION
(AMOUNTS IN (POUND)MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
- ------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
---------------------------------------------------------------
SEP. 30, JUN. 30, MAR. 31, DEC. 31, SEP. 30,
2005 2005 2005 2004 2004
---------------------------------------------------------------
REORGANIZED COMPANY
- ------------------------------------------------------------------------------------------------------------------------
REVENUE
Consumer Sales Division 249 262 246 241 238
Business Sales Division 64 63 61 63 63
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CABLE SEGMENT 313 325 307 304 301
Content Segment 33 32 31 32 27
sit-up Segment 58 24 - - -
- ------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 404 381 338 336 328
- ------------------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Cable segment expenses 71 70 69 69 72
Content segment expenses 19 17 20 25 17
sit-up segment expenses 44 17 - - -
Depreciation 99 101 101 101 103
Amortization 10 9 9 9 9
Selling, general and administrative expenses 128 119 115 114 117
- ------------------------------------------------------------------------------------------------------------------------
371 333 314 318 318
- ------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 33 48 24 18 10
OTHER INCOME/(EXPENSE)
Interest income 6 7 4 5 6
Interest expense (38) (41) (29) (47) (49)
Foreign exchange (losses)/gains, net (1) (3) (4) 3 -
Share of net income of affiliates 4 7 6 4 4
Other, net - 1 - - -
- ------------------------------------------------------------------------------------------------------------------------
INCOME/(LOSS) BEFORE INCOME TAXES 4 19 1 (17) (29)
Income tax benefit 1 - - - -
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME/(LOSS) 5 19 1 (17) (29)
- ------------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings/(loss) per share of common
stock (pound)0.02 (pound)0.08 - (pound)(0.07) (pound)(0.12)
Weighted average number of shares of common stock -
(millions) 245 245 245 245 245
- ------------------------------------------------------------------------------------------------------------------------
17
TELEWEST GLOBAL, INC.
SEGMENT INFORMATION
(AMOUNTS IN (POUND)MILLIONS)
- ----------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SEP. 30, NINE MONTHS ENDED SEP. 30, NINE MONTHS SIX MONTHS
--------------------------- -------------------------- ENDED ENDED
2005 2004 2005 2004 SEP. 30, JUN. 30,
2004 2004
---------------------------------------------------------------------------------------------
REORGANIZED REORGANIZED REORGANIZED COMBINED REORGANIZED PREDECESSOR
COMPANY COMPANY COMPANY COMPANIES COMPANY COMPANY
- ----------------------------------------------------------------------------------------------------------------------------------
CABLE SEGMENT
Consumer Sales Division revenue 249 238 757 708 238 470
Business Sales Division revenue 64 63 188 193 63 130
- ----------------------------------------------------------------------------------------------------------------------------------
THIRD PARTY REVENUE 313 301 945 901 301 600
Operating costs and expenses
(before depreciation,
amortization and financial
restructuring charges) (181) (183) (534) (552) (183) (369)
- ----------------------------------------------------------------------------------------------------------------------------------
ADJUSTED EBITDA including
inter-segment costs 132 118 411 349 118 231
Inter-segment costs (1) 3 2 8 7 2 5
- ----------------------------------------------------------------------------------------------------------------------------------
ADJUSTED EBITDA 135 120 419 356 120 236
- ----------------------------------------------------------------------------------------------------------------------------------
CONTENT SEGMENT
Content Segment revenue 36 29 104 88 29 59
Operating costs and expenses
(before depreciation,
amortization and financial
restructuring charges) (27) (25) (82) (71) (25) (46)
- ----------------------------------------------------------------------------------------------------------------------------------
ADJUSTED EBITDA including
inter-segment revenues 9 4 22 17 4 13
Inter-segment revenues (1) (3) (2) (8) (7) (2) (5)
- ----------------------------------------------------------------------------------------------------------------------------------
ADJUSTED EBITDA 6 2 14 10 2 8
- ----------------------------------------------------------------------------------------------------------------------------------
SIT-UP SEGMENT
sit-up Segment revenue 58 - 82 - - -
Operating costs and expenses
(before depreciation,
amortization and financial
restructuring charges) (57) - (81) - - -
- ----------------------------------------------------------------------------------------------------------------------------------
ADJUSTED EBITDA 1 - 1 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
RECONCILIATION TO OPERATING INCOME
Cable Segment Adjusted EBITDA 135 120 419 356 120 236
Content Segment Adjusted EBITDA 6 2 14 10 2 8
sit-up Segment Adjusted EBITDA 1 - 1 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
ADJUSTED EBITDA 142 122 434 366 122 244
Financial restructuring charges - - - (21) - (21)
Depreciation (99) (103) (301) (287) (103) (184)
Amortization (10) (9) (28) (9) (9) -
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 33 10 105 49 10 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.
The Segment Information for the Combined Companies for the nine months
ended September 30, 2004 excludes the Segment Information of the
Predecessor Company for July 1, 2004.
</FN>
18
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.
19
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.
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 period 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.
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 period 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.
20
TELEWEST GLOBAL, INC.
USE OF NON-GAAP FINANCIAL MEASURES (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(AMOUNTS IN (POUND)MILLIONS)
- -----------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SEP. 30, NINE MONTHS ENDED SEP. 30, THREE MONTHS
ENDED JUN.
30,
------------------------------ -------------------------------- ---------------
2005 2004 2005 2004 2005
------------ -------------- -------------- -------------- ---------------
REORGANIZED REORGANIZED REORGANIZED COMBINED REORGANIZED
COMPANY COMPANY COMPANY COMPANIES COMPANY
- -----------------------------------------------------------------------------------------------------------------
RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME/(LOSS)
- -----------------------------------------------------------------------------------------------------------------
Adjusted EBITDA 142 122 434 366 158
Financial restructuring
charges - - - (21) -
Depreciation (99) (103) (301) (287) (101)
Amortization (10) (9) (28) (9) (9)
- -----------------------------------------------------------------------------------------------------------------
Operating income 33 10 105 49 48
Interest income 6 6 17 21 7
Interest expense
(including amortization
of debt discount) (38) (49) (108) (279) (41)
Foreign exchange
(losses)/gains, net (1) - (8) 40 (3)
Share of net income of
affiliates 4 4 17 12 7
Other, net - - 1 (1) 1
Income tax benefit/(charge) 1 - 1 (1) -
- -----------------------------------------------------------------------------------------------------------------
Net income/(loss) 5 (29) 25 (159) 19
- -----------------------------------------------------------------------------------------------------------------
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES
- -----------------------------------------------------------------------------------------------------------------
Free cash flow 50 39 177 101 64
Deduct cash paid for
financial restructuring - (17) (1) (36) -
charges
Add capital expenditure 60 50 173 177 59
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by
operating activities 110 72 349 242 123
- -----------------------------------------------------------------------------------------------------------------
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 34 39 75 100 29
Cash received for income (2) - (2) (2) -
taxes, net
The reconciliation items disclosed above for Combined Companies represent
the items for the Predecessor Company for the six months ended June 30,
2004, prior to its financial restructuring, together with the items for the
Reorganized Company for the nine months ended September 30, 2004.
- --------------------------------------------------------------------------------
SEP. 30, DEC. 31,
2005 2004
-------------------------------
REORGANIZED REORGANIZED
COMPANY COMPANY
- --------------------------------------------------------------------------------
RECONCILIATION OF NET DEBT TO TOTAL LIABILITIES
- --------------------------------------------------------------------------------
Net debt 1,665 1,746
Cash and cash equivalents 260 68
- --------------------------------------------------------------------------------
Total debt 1,925 1,814
Accounts payable 139 93
Other liabilities 455 424
Deferred taxes 105 105
- --------------------------------------------------------------------------------
Total liabilities 2,624 2,436
- --------------------------------------------------------------------------------
21
TELEWEST GLOBAL, INC.
USE OF NON-GAAP FINANCIAL MEASURES (CONTINUED)
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
THREE MONTHS
ENDED JUNE 30,
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
Average number of residential customers in the period 1,830,895
-------------------
Household ARPU (pound)47.72
-------------------
Consumer sales division revenue in the period (pound)262 million
VAT recovery (pound)(16) million
-------------------
Consumer sales division revenue (excluding(pound)16 million VAT (pound)246 million
recovery)
Average number of residential customers in the period 1,830,895
-------------------
Household ARPU (excluding impact of the (pound)16 million VAT recovery) (pound)44.86
-------------------
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
Average number of television subscribers in the period 1,326,317
-------------------
Television ARPU (pound)24.72
-------------------
Consumer television revenue in the period (pound)98 million
VAT recovery (pound)(16) million
-------------------
Consumer television revenue (excluding (pound)16 million VAT recovery) (pound)82 million
Average number of television subscribers in the period 1,326,317
-------------------
Television ARPU (excluding impact of the (pound)16 million VAT recovery) (pound)20.78
-------------------
22