1
NTL COMMUNICATIONS CORP.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN MILLIONS)
NTL
COMMUNICATIONS CORP. CONSUMERCO
(HISTORICAL) (HISTORICAL) ADJUSTMENTS PRO FORMA
-------------------- ------------ ----------- ---------
REVENUES....................... $ 2,484.2 $ 469.2 $ 2,953.4
COSTS AND EXPENSES
Operating expenses............. 1,223.2 195.1 1,418.3
Selling, general and
administrative expenses...... 969.1 199.2 1,168.3
Other charges.................. 92.7 -- 92.7
Corporate expenses............. 23.7 -- 23.7
Depreciation and
amortization................. 1,700.7 191.8 $ 366.9 A 2,259.4
--------- ------- ------- ---------
4,009.4 586.1 366.9 4,962.4
--------- ------- ------- ---------
Operating loss................. (1,525.2) (116.9) (366.9) (2,009.0)
OTHER INCOME (EXPENSE)
Interest income and other,
net.......................... (56.5) 1.7 4.5 B (50.3)
Interest expense............... (886.3) (132.3) (29.6) C (1,048.2)
--------- ------- ------- ---------
Loss before income taxes....... (2,468.0) (247.5) (392.0) (3,107.5)
Income tax benefit
(provision).................. 79.9 54.1 134.0
--------- ------- ------- ---------
Net (loss)..................... $(2,388.1) $(193.4) $(392.0) $(2,973.5)
========= ======= ======= =========
A. Depreciation and Amortization: ConsumerCo
----------
For the year ended December 31, 2000
Intangibles (10 years).................................... $ 366.9
==========
B. Interest Income (using 4.867%):
For the year ended December 31, 2000
Reduction of interest income on cash on hand used......... $ (2.1)
Interest income on excess cash from Bank financing........ 6.6
----------
$ 4.5
==========
C. Interest Expense:
For the year ended December 31, 2000
Reduction of interest expense for debt not assumed........ $ 91.4
Interest on Bank Financing at 8.28%....................... (121.0)
----------
$ (29.6)
==========
2
2
EXHIBIT 99.7
NTL (CWC HOLDINGS)
FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000 AND FOR THE
SEVEN MONTHS ENDED DECEMBER 31, 2000
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheet as of December 31, 2000.......... F-3
Consolidated Statement of Operations for the seven months
ended December 31, 2000................................... F-4
Consolidated Statement of Shareholders' Equity for the seven
months ended December 31, 2000............................ F-5
Consolidated Statement of Cash Flows for the seven months
ended December 31, 2000................................... F-6
Notes to Consolidated Financial Statements.................. F-7
F-1
3
To: The Board of Directors
ntl (CWC Holdings)
We have audited the accompanying consolidated balance sheet of ntl (CWC
Holdings) as of December 31, 2000, and the related consolidated statements of
operations, shareholders' equity and cash flows for the seven months then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of ntl (CWC
Holdings) at December 31, 2000, and the consolidated results of its operations
and its consolidated cash flows for the seven months then ended in conformity
with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG
London, England
May 3, 2001
F-2
4
NTL (CWC HOLDINGS)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUND STERLING, EXCEPT SHARE DATA)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... L 24
Accounts receivable, net of allowance for doubtful accounts
of L32.................................................... 87
Affiliate receivable........................................ 59
Prepaid expenses............................................ 36
------
Total current assets........................................ 206
Investment in affiliates.................................... 2
Fixed assets, net of accumulated depreciation of L182....... 3,297
Intangible assets, net of accumulated amortization of
L350...................................................... 5,568
Other assets................................................ 28
------
Total assets................................................ L8,895
======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................ L 64
Accrued expenses and other current liabilities.............. 368
Taxes, other than income taxes.............................. 6
Deferred revenue............................................ 29
Amounts owed to affiliates.................................. 147
Current portion of long-term debt........................... 5
------
Total current liabilities................................... 619
3.5% Unsecured Convertible Loan Notes due 2001.............. --
Amount owed to affiliate.................................... 2,488
Long-term debt.............................................. 10
------
Total liabilities........................................... 3,117
Commitments and contingencies
Minority interests.......................................... 9
Shareholders' equity:
Share capital
Ordinary shares -- L1.32 nominal value. Authorized 1,625
million shares; issued and outstanding 1,497 million
shares.................................................... 1,976
Additional paid-in capital.................................. 4,336
Retained earnings (deficit)................................. (543)
------
Total shareholders' equity.................................. 5,769
------
Total liabilities and shareholders' equity.................. L8,895
======
The accompanying notes are an integral part of these financial statements.
F-3
5
NTL (CWC HOLDINGS)
CONSOLIDATED STATEMENT OF OPERATIONS
SEVEN MONTHS ENDED DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUNDS STERLING)
REVENUES:
Consumer telecommunications and television.................. L 362
Business telecommunications................................. 42
-----
404
COSTS AND EXPENSES:
Operating expenses.......................................... (191)
Selling, general and administrative expenses................ (142)
Restructuring costs......................................... (7)
Depreciation and amortization............................... (532)
-----
Operating loss.............................................. (468)
Interest payable to affiliates.............................. (89)
Interest payable to third parties........................... (1)
-----
Loss before minority interests and income taxes............. (558)
Income tax benefit.......................................... 13
-----
Loss after income taxes and before minority interests....... (545)
Minority interests.......................................... 2
-----
Net loss.................................................... L(543)
-----
The accompanying notes are an integral part of these financial statements.
F-4
6
NTL (CWC HOLDINGS)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SEVEN MONTHS ENDED DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUNDS STERLING EXCEPT NUMBER OF SHARES)
ORDINARY
SHARES L1.32
NOMINAL VALUE
NUMBER OF ORDINARY ADDITIONAL RETAINED
SHARES SHARES L1.32 PAID IN EARNINGS
(MILLIONS) NOMINAL VALUE CAPITAL (DEFICIT) TOTAL
------------- ------------- ---------- --------- ------
Balance at beginning of period.............. 1,496 L1,976 L4,334 L -- L6,310
Net loss for the period..................... -- -- -- (543) (543)
Conversion of 5% Unsecured Convertible Loan
Notes..................................... 1 -- 2 -- 2
----- ------ ------ ----- ------
Balance at end of period.................... 1,497 L1,976 L4,336 L(543) L5,769
===== ====== ====== ===== ======
The accompanying notes are an integral part of these financial statements.
F-5
7
NTL (CWC HOLDINGS)
CONSOLIDATED STATEMENT OF CASH FLOWS
SEVEN MONTHS ENDED DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUNDS STERLING)
OPERATING ACTIVITIES
Net loss.................................................... L(543)
Adjustment to reconcile net loss to net cash provided by
operating activities:
Minority interests.......................................... (2)
Depreciation and amortization............................... 532
Deferred income taxes....................................... (13)
Provision for losses on accounts receivable................. (1)
Changes in operating assets and liabilities:
Accounts receivable......................................... (10)
Prepaid expenses............................................ (3)
Other assets................................................ 16
Accounts payable............................................ (5)
Accrued expenses and other current liabilities.............. 119
Deferred revenue............................................ 9
-----
Net cash provided by operating activities................... 99
-----
INVESTING ACTIVITIES
Purchase of fixed assets.................................... (304)
-----
Net cash used in investing activities....................... (304)
-----
FINANCING ACTIVITIES
Increase in loans from affiliate............................ 200
Repayment of debt........................................... (8)
-----
Net cash used by financing activities....................... 192
-----
Decrease in cash and cash equivalents....................... (13)
Cash and cash equivalents at beginning of period............ 37
-----
Cash and cash equivalents at end of period.................. L 24
=====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during the period, net of amounts
capitalized............................................... L 6
=====
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
Conversion of 5% Unsecured Convertible Loan Notes........... L 2
=====
The accompanying notes are an integral part of these financial statements.
F-6
8
NTL (CWC HOLDINGS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEVEN MONTHS ENDED DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUNDS STERLING)
1 ORGANIZATION AND NATURE OF BUSINESS
ntl (CWC Holdings), formerly Cable & Wireless Communications (Holdings) plc
(the "Company"), was incorporated on February 4, 2000. On May 12, 2000, the
Company acquired the entire issued share capital of ntl (CWC) Limited, formerly
Cable & Wireless Communications plc.
The Company, an unlimited company registered in England and Wales, is a
wholly owned subsidiary of NTL Incorporated ("NTL"). NTL acquired the Company on
May 30, 2000. On February 21, 2001, as part of a corporate restructuring, the
Company's immediate parent became NTL Group Limited.
The Company, through its subsidiaries, owns and operates broadband
communication networks for telephone, cable television and internet services in
the United Kingdom. The Company offers telephony, cable television, internet
access and interactive services to its consumer customers and telephony services
to its business customers. These broadband cable and local telecommunications
network currently passes in excess of four million residences and business
establishments within its 47 franchise areas.
2 SIGNIFICANT ACCOUNTING POLICIES
a) Basis of accounting
The financial statements have been prepared in accordance with generally
accepted accounting principles in the United States ("US GAAP") and are
expressed in Pounds Sterling. These financial statements have been prepared for
the period post NTL's acquisition from May 31, 2000 to December 31, 2000. The
purchase price accounting of the Company by NTL has been pushed down into these
financial statements in accordance with SEC requirements.
Use of estimates
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
Principles of consolidation
The consolidated financial statements include the accounts of ntl (CWC
Holdings) and subsidiaries. The results of subsidiaries acquired or disposed of
during the period are included from the date of their acquisition or up to the
date of their disposal. Significant intercompany accounts and transactions have
been eliminated in consolidation.
b) Revenue recognition
Revenue, which excludes United Kingdom value added tax, represents the
amount receivable in respect of services provided to customers in each period
and is recognized as follows:
Telephony
Revenue is recognized in respect of services provided to customers as the
service is used. At the end of each quarter, adjustments are recorded to defer
revenue with respect to services invoiced in advance and to accrue for unbilled
services.
F-7
9
NTL (CWC HOLDINGS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEVEN MONTHS ENDED DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUNDS STERLING)
Cable television
Revenue is recognized in respect of services provided to customers as the
service is used. At the end of each quarter, adjustments are recorded to defer
revenue with respect to services invoiced in advance and to accrue for unbilled
services.
Rentals
Revenue is recognized in respect of line rentals and rental equipment
provided to customers on a straight-line basis over the term of the rental
agreement. At the end of each quarter, adjustments are recorded to defer revenue
with respect to rentals invoiced in advance and to accrue for unbilled rental
income.
Installations
Installation fees are recognized as revenue whenever the cost of
installation exceeds the installation fee. Where the installation fee exceeds
the cost of installation, the excess is deferred and recognized as revenue over
the expected life of the contract.
c) Interconnection with other operators
When traffic is carried by operators of other national and international
telecommunications networks, the charges incurred are matched with the
associated revenues. All charges payable to, or by, other telecommunications
companies are negotiated separately and are subject to continuous review.
d) Intangible assets
Intangible assets include goodwill, customer lists and other intangibles.
Goodwill is calculated as the excess of the purchase price over the fair value
of net tangible and identifiable intangible assets acquired in business
combinations accounted for as purchases. Goodwill is amortized on a
straight-line basis over periods benefited up to 10 years. Customer lists
represent the portion of the purchase price allocated to the value of the
customer base. Customer lists are amortized on a straight-line basis over
periods benefited up to 5 years. Other intangibles include the portion of the
purchase price allocated to the value of the workforce in place. Workforce in
place is amortized over the period benefited of up to four years.
The Company periodically reviews events and changes in circumstances to
determine whether the recoverability of the carrying value of goodwill should be
reassessed. An impairment assessment is performed whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the fair
value (determined using expected future discounted cash flows) and the carrying
value of the asset.
e) Fixed assets
Fixed assets are recorded at cost, which includes amounts capitalized for
labor and overhead expended in connection with the design and installation of
operating equipment.
Capitalization of interest
Interest is capitalized as a component of the cost of fixed assets
constructed.
F-8
10
NTL (CWC HOLDINGS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEVEN MONTHS ENDED DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUNDS STERLING)
Depreciation
Depreciation is computed by the straight-line method over the estimated
useful lives of the assets. Estimated useful lives are as follows:
Land and buildings: Lives
freehold buildings 40 years
leasehold land and buildings up to 40 years or term of lease if
less
leasehold improvements remaining term of lease or expected
useful life of the improvements if
less
Communications network plant and equipment:
ducting and network construction 10 to 40 years
electronic equipment and cabling 10 to 20 years
other network plant and
equipment 6 to 25 years
Non-network plant and equipment 3 to 10 years
Freehold land, where the cost is distinguishable from the cost of the
building thereon, is not depreciated.
The Company periodically reviews the recoverability of the carrying value
of these assets using the same methodology that it uses for the evaluation of
its intangible assets.
f) Leased assets
All leases are operating leases and the annual rentals are charged to the
statement of operations on a straight-line basis over the lease term.
g) Cash equivalents
Cash equivalents are short-term highly liquid investments purchased with a
maturity of three months or less. Cash equivalents were L1 at December 31, 2000,
which consisted of bank time deposits.
h) Deferred taxation
Deferred taxes are determined based on the difference between the tax basis
of an asset or liability and its reported amount in the financial statements. A
deferred tax liability or asset is recorded using the enacted tax rates expected
to apply to taxable income in the period in which the deferred tax liability or
asset is expected to be settled or realized. Future tax benefits attributable to
these differences, if any, are recognizable to the extent that realization of
such benefits is more likely than not.
i) Pensions
Defined contribution schemes
Where ntl (CWC Holdings) companies participate in defined contribution
pension schemes for their employees, the pension costs charged to the statement
of operations represent contributions payable during the period.
Defined benefit schemes
The Company also participates in a defined benefit pension scheme operated
by Cable and Wireless plc for certain employees. This scheme has been accounted
for as a multi-employer plan under the provisions of
F-9
11
NTL (CWC HOLDINGS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEVEN MONTHS ENDED DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUNDS STERLING)
SFAS No 87, "Employers' Accounting for Pensions". The pension costs charged to
the statement of operations therefore represent contributions payable during the
period.
j) Loss contingencies
An estimated loss from a loss contingency is recognized through a charge to
income if information available prior to the issuance of the financial
statements indicates that it is probable that an asset had been impaired or a
liability had been incurred at the date of the financial statements and the
amount of loss can be reasonably estimated.
k) Stock based compensation
As permitted by SFAS No 123, "Accounting for Stock-Based Compensation", the
Company applies APB Opinion No 25, "Accounting for Stock Issued to Employees"
and related interpretations in accounting for its stock option plans.
l) Advertising expenditure
The Company charges the cost of advertising to expense as incurred.
Advertising costs were L29 in the seven months ended December 31, 2000.
3 RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. SAB 101 was required to be
adopted retrospectively to January 1, 2000. The adoption of SAB 101 by the
Company on May 31, 2000 had no effect on revenues or results of operations.
Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS Nos. 137
and 138. The new accounting standard requires that all derivative instruments be
recorded on the balance sheet at fair value. As the Company had no derivative
instruments at that date, the adoption of SFAS 133 had no effect on the
financial statements.
4 FIXED ASSETS
Fixed assets consist of:
2000
------
Cost
Network assets.............................................. L3,090
Non-network assets.......................................... 153
Property.................................................... 76
Construction-in-progress.................................... 160
------
3,479
Accumulated depreciation.................................... (182)
------
Net property and equipment.................................. L3,297
======
Depreciation expense was L182 in the seven months ended December 31, 2000.
F-10
12
NTL (CWC HOLDINGS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEVEN MONTHS ENDED DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUNDS STERLING)
Interest totaling L9 for the seven months ended December 31, 2000 that is
directly applicable to the design, construction and installation of cable
television and telecommunications network has been capitalized.
5 INTANGIBLE ASSETS
Intangible assets include:
2000
------
Customer lists.............................................. L 35
Workforce in place.......................................... 25
Goodwill.................................................... 5,858
------
5,918
Accumulated amortization.................................... (350)
------
Net book value.............................................. L5,568
======
Amortization expense was L350 in the seven months ended December 31, 2000.
6 AMOUNTS OWED TO AFFILIATES
The long-term amount owed to affiliate of L2,488 is due to ntl Business
Limited ("ntl Business") and is derived from a L2,500 credit agreement entered
into in May 2000. Interest is payable by the Company on the same basis as that
between ntl Business and the lending bank. Interest is payable at least every
six months at LIBOR plus a margin of 2.25% per annum, which is subject to
adjustment based on a ratio of EBITDA to finance charges of the UK Group. The
effective rate of interest at December 31, 2000 was 8.283%. The unused portion
of the facility is subject to a commitment fee of 0.75% payable quarterly, which
is reduced to 0.50% when over 50% of the commitment fee is utilized.
The long-term amount owed to affiliate is due as follows:
Year ending December 31:
2004........................................................ L 90
2005........................................................ 2,398
------
L2,488
======
Short-term amounts owed to affiliates comprise accrued interest on the
above facility of L86 and L61 owed to other affiliates, which is non-interest
bearing and payable on demand.
F-11
13
NTL (CWC HOLDINGS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEVEN MONTHS ENDED DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUNDS STERLING)
7 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consists of:
2000
----
Interconnect................................................ L88
IT Systems.................................................. 81
Purchase ledger accruals.................................... 48
Other accruals.............................................. 40
Networks and maintenance.................................... 34
Telecommunications expenses................................. 34
Content accruals............................................ 25
Property.................................................... 11
Marketing................................................... 7
----
L368
====
8 LONG-TERM DEBT
Long-term debt consists of:
2000
----
Bank loans.................................................. L15
Less: current portion....................................... 5
---
L10
===
On April 18, 1995, NTL (South Hertfordshire) Limited, a majority owned
subsidiary ("NTL South Herts"), entered into an agreement with two major banks
to provide a L25 revolving credit and term loan credit facility agreement
maturing on December 31, 2003 (the "South Herts Credit Agreement"). On October
18, 1996, L5 was cancelled and the facility reduced to L20.
The credit facility was structured as a revolving facility through December
31, 1997, at which time the facility was converted into a term loan. The
facility is divided into two tranches, denoted Facility A and Facility B, and
the aggregate amount drawn down under both tranches may not exceed L20. Amounts
drawn down under Facility A bear interest at sterling LIBOR plus a margin of
2.5%. The availability of Facility B of L20 is subject to certain conditions
which have been satisfied and amounts drawn down under Facility B bear interest
at sterling LIBOR plus a margin ranging from 0.75% to 2.0% depending on the bank
debt ratio (the ratio of bank debt to annualized operating cash flow) of NTL
South Herts. At December 31, 2000, sterling LIBOR was 6%.
The South Herts Credit Agreement contains certain events of default
including non-payment of amounts due under the South Herts Credit Agreement,
breaches of representations and covenants (including financial ratios) contained
in the South Herts Credit Agreement, cross-default to certain other indebtedness
of NTL South Herts, certain bankruptcy and insolvency events and certain changes
of ownership.
The obligations of NTL South Herts under the South Herts Credit Agreement
are secured by first fixed and floating charges over all of the assets of NTL
South Herts. In addition, there is a pledge of all of the share capital of NTL
South Herts given by NTL (CWC Holdings) as additional security for the facility.
F-12
14
NTL (CWC HOLDINGS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEVEN MONTHS ENDED DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUNDS STERLING)
Repayment of the credit facility at December 31, 2000 fell due in twelve
equal quarterly installments. The facility was repaid in full with funding from
NTL Incorporated on February 21, 2001.
9 SHAREHOLDERS' EQUITY
At December 31, 2000, capital instruments of a subsidiary undertaking which
were convertible into ordinary shares of ntl (CWC Holdings) were as follows:
PROJECTED
PRINCIPAL NUMBER PERIOD OF
AMOUNT OF SHARES CONVERSION
--------- --------- ----------
3.5% Unsecured Convertible Loan Notes due
2001....................................... L-- 23,176 1999-2001
== ====== =========
The 3.5% Unsecured Convertible Loan Notes are convertible at the option of
the holders.
During the seven months ended December 31, 2000, 5% Unsecured Convertible
Loan Notes due 1995 (as extended) with a convertible value of L2 were converted
into 618,484 ordinary shares.
Share options
Options over shares in NTL Incorporated
Certain employees of the Company participate in the NTL Incorporated stock
option plans. No expense has been recognized in the financial statements because
the exercise price of the option awards were equal to the underlying stock fair
market value on the date of grant.
10 INCOME TAXES
The benefit for income taxes consists of the following:
2000
----
United Kingdom taxation:
Current corporation tax at 30%.............................. L --
Deferred tax................................................ (13)
Adjustment in respect of prior years........................ --
----
Total income tax benefit.......................... L(13)
====
The effective tax rate for the period ended December 31, 2000 is 12%. The
current period rate is lower than the statutory tax rate of 30% because the
companies within ntl (CWC Holdings) were loss making in the period and deferred
tax assets for such losses were not recognized in full.
F-13
15
NTL (CWC HOLDINGS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEVEN MONTHS ENDED DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUNDS STERLING)
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the deferred tax liabilities and assets are as follows:
2000
----
Deferred tax liabilities:
Depreciation................................................ L333
Intangibles................................................. 16
Capitalized interest........................................ 3
----
Total deferred tax liabilities.............................. 352
----
Deferred tax assets:
Net operating loss carryforwards............................ 570
Purchase accounting liabilities............................. 104
Other....................................................... 17
----
Total deferred tax assets................................... 691
Valuation allowance for deferred tax assets................. (339)
----
Net deferred tax assets..................................... 352
----
Net deferred tax liabilities................................ L--
====
At December 31, 2000, the Company had a valuation allowance against its
deferred tax assets to the extent it was more likely than not that such assets
would be realized in the future. At December 31, 2000, the valuation allowance
includes approximately L283, which, if realized, would be accounted for as a
reduction to goodwill.
At December 31, 2000 the group had United Kingdom net operating loss
carryforwards of approximately L1,800 that have no expiry date. Pursuant to
United Kingdom law, these net operating losses are only available to offset
income of the separate entity that generated the loss. A portion of the United
Kingdom net operating loss carryforwards belong to dual resident companies, of
which US net operating loss carryforwards amount to approximately $1,000. For US
tax purposes these operating loss carryforwards will expire in varying amounts
between 2010 and 2020.
The reconciliation of income tax computed at United Kingdom statutory rates
to income tax benefit is as follows:
2000
-----
Benefit at statutory rate................................... L(167)
Losses with no benefit...................................... 154
-----
Income tax benefit.......................................... L(13)
=====
11 RESTRUCTURING COSTS
Restructuring costs relate to NTL's announcement in November 2000 of its
completion of a strategic review. Based on a comprehensive review of the
enlarged group following the acquisition of ntl (CWC Holdings) and the
integration of several other acquired businesses, NTL identified significant
efficiency improvements and cost savings. The restructuring provision,
representing the Company's share of the group provision, includes employee
severance and related costs of L6 for approximately 437 employees to be made
F-14
16
NTL (CWC HOLDINGS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEVEN MONTHS ENDED DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUNDS STERLING)
redundant and lease termination costs of L1. None of the provision had been
utilized through December 31, 2000.
12 EMPLOYEE BENEFIT PLANS
During the seven months ended December 31, 2000, ntl (CWC Holdings)
participated in a pension plan operated by Cable and Wireless plc, the Company's
former parent. The plan is a defined benefit scheme whereby retirement benefits
are based on the employees' final remuneration and length of service, and is
funded through a separate trustee administered scheme. Contributions to the plan
are based on pension costs for all members of the plan across the Cable and
Wireless plc group and are made in accordance with the recommendations of
independent actuaries who value the plan at regular intervals, usually
triennially. The last valuation currently available relates to the position of
the scheme as at March 31, 2000. The total contributions payable to the Cable
and Wireless plc pension plan was L2.
The Company also operates several defined contribution pension plans. The
total contributions payable to these plans in the seven months ended December
31, 2000 amounted to L2. All permanent employees are eligible to join and
contributions are determined as a percentage of salary.
On January 1, 2001 the Company established a new approved pension plan and
employees of ntl (CWC Holdings) who were active members of the Cable and
Wireless plc plan were invited to join the new ntl (CWC Holdings) plan and to
transfer their accrued rights to it. Employees of the Company who were active
members of ntl (CWC Holdings) pension plans were also invited to join.
13 LEASES
Future minimum lease payments under non-cancellable operating leases as of
December 31, 2000 are as follows:
Land and buildings
2001........................................................ L8
2002........................................................ 8
2003........................................................ 8
2004........................................................ 8
2005........................................................ 8
Thereafter.................................................. 41
---
Total....................................................... L81
===
Other assets
2001........................................................ L3
2002........................................................ 3
2003........................................................ 3
2004........................................................ 2
---
Total....................................................... L11
===
F-15
17
NTL (CWC HOLDINGS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEVEN MONTHS ENDED DECEMBER 31, 2000
(EXPRESSED IN MILLIONS OF POUNDS STERLING)
The rental expense recorded in the statement of operations was L9 in the
seven months ended December 31, 2000.
14 COMMITMENTS AND CONTINGENCIES
The Company is contracted to IBM under an IT outsource agreement. At
December 31, 2000, the total outstanding commitment was L575. The IT outsource
agreement is for a period expiring in September 2008. Other capital commitments
at December 31, 2000 amounted to L62.
F-16