1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A-1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-25691
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NTL (DELAWARE), INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-4051921
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
110 East 59th Street, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
(212) 906-8440
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the issuer's common stock as of March 31,
2001 was 11. The Registrant is a wholly-owned subsidiary of NTL Incorporated and
there is no market for the Registrant's common stock. The Registrant meets the
conditions for the reduced disclosure format set forth in General Instruction
H(1) (a) and (b) of Form 10-Q.
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NTL (Delaware), Inc. and Subsidiaries
Index
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
March 31, 2001 and December 31, 2000 ...............................2
Condensed Consolidated Statements of Operations-
Three months ended March 31, 2001 and 2000 .........................4
Condensed Consolidated Statement of Shareholder's Equity-
Three months ended March 31, 2001 ..................................5
Condensed Consolidated Statements of Cash Flows-
Three months ended March 31, 2001 and 2000 .........................7
Notes to Condensed Consolidated Financial Statements ...............8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition ................................16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ..................................28*
SIGNATURES ..................................................................29*
_______
* Previously filed.
The Quarterly Report on Form 10-Q of NTL (Delaware), Inc. for the quarterly
period ended March 31, 2001 is being amended by this Form 10-Q/A-1 to correct
an error. In the Form 10-Q, the amount borrowed as of May 9, 2001 under the
pound sterling 1,300.0 million credit agreement was incorrectly reported as
pound sterling 455.1 million ($645.7 million). The correct amount borrowed was
pound sterling 200.0 million ($283.8 million). Note E--Long-term debt in the
Notes to Condensed Consolidated Financial Statements included in Item 1, and
the Liquidity and Capital Resources section of Item 2 are being amended to
correct the error.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NTL (Delaware), Inc.
Dated: May 21, 2001 By: /s/ Gregg N. Gorelick
---------------------------------
Name: Gregg N. Gorelick
Title: Vice President-Controller
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NTL (Delaware), Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in millions)
MARCH 31, DECEMBER 31,
2001 2000
------------ ------------
(unaudited) (see note)
ASSETS
Current assets:
Cash and cash equivalents $ 355.2 $ 509.9
Accounts receivable - trade, less allowance for doubtful
accounts of $140.5 (2001) and $141.4 (2000) 521.1 729.1
Due from affiliates 83.8 95.8
Other 461.6 431.5
------------ ------------
Total current assets 1,421.7 1,766.3
Fixed assets, net 12,230.7 12,693.0
Intangible assets, net 12,603.9 13,060.8
Other assets, net of accumulated amortization
of $96.6 (2001) and $91.9 (2000) 834.1 807.1
------------ ------------
Total assets $ 27,090.4 $ 28,327.2
============ ============
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NTL (Delaware), Inc. and Subsidiaries
Condensed Consolidated Balance Sheets - continued
(dollars in millions)
MARCH 31, DECEMBER 31,
2001 2000
------------ ------------
(unaudited) (see note)
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 422.7 $ 504.9
Accrued expenses and other 1,218.1 1,258.0
Accrued construction costs 145.7 196.9
Interest payable 191.9 151.3
Deferred revenue 445.6 492.8
Due to affiliates - 25.8
Current portion of long-term debt 4.7 12.6
------------ ------------
Total current liabilities 2,428.7 2,642.3
Long-term debt 15,131.4 15,044.1
Other 54.5 43.1
Commitments and contingent liabilities
Deferred income taxes 170.9 205.4
Shareholder's equity:
Common stock - $.01 par value; authorized 100 shares;
issued and outstanding 11 (2001) and 11 (2000) shares - -
Additional paid-in capital 16,036.0 15,795.7
Accumulated other comprehensive (loss) (740.5) (449.0)
(Deficit) (5,990.6) (4,954.4)
------------ ------------
9,304.9 10,392.3
------------ ------------
Total liabilities and shareholder's equity $ 27,090.4 $ 28,327.2
============ ============
Note: The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date.
See accompanying notes.
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NTL (Delaware), Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(in millions)
THREE MONTHS ENDED
MARCH 31,
---------------------------
2001 2000
--------- ---------
REVENUES
Consumer telecommunications and television $ 623.0 $ 253.5
Business telecommunications 200.2 158.0
Broadcast transmission and other 82.7 79.4
--------- ---------
905.9 490.9
COSTS AND EXPENSES
Operating expenses 447.1 227.2
Selling, general and administrative expenses 333.3 195.0
Other charges 7.4 -
Corporate expenses 7.0 10.2
Depreciation and amortization 763.2 249.6
--------- ---------
1,558.0 682.0
--------- ---------
Operating (loss) (652.1) (191.1)
OTHER INCOME (EXPENSE)
Interest income and other, net (33.3) 22.4
Interest expense (355.1) (206.0)
Foreign currency transaction losses (13.2) (28.3)
--------- ---------
(Loss) before income tax benefit (1,053.7) (403.0)
Income tax benefit 17.5 5.3
--------- ---------
Net (loss) $(1,036.2) $ (397.7)
========= =========
See accompanying notes.
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NTL (Delaware), Inc. and Subsidiaries
Condensed Consolidated Statement of Shareholder's Equity
(Unaudited)
(dollars in millions)
COMMON STOCK
$.01 PAR VALUE
SHARES PAR
------ ------
Balance, December 31, 2000 11 $-
Contribution from NTL Incorporated
Comprehensive loss:
Net loss for the three months ended
March 31, 2001
Currency translation adjustment
Unrealized net losses on investments
Unrealized net losses on derivatives
Total
------ ------
Balance, March 31, 2001 11 $-
====== ======
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NTL (Delaware), Inc. and Subsidiaries
Condensed Consolidated Statement of Shareholder's Equity
(Unaudited) - continued
(dollars in millions)
ACCUMULATED OTHER
COMPREHENSIVE LOSS
---------------------------------------
UNREALIZED UNREALIZED
ADDITIONAL FOREIGN NET NET
PAID-IN COMPREHENSIVE CURRENCY LOSSES ON LOSSES ON
CAPITAL LOSS TRANSLATION INVESTMENTS DERIVATIVES DEFICIT
--------------------------------------------------------------------------------
Balance, December 31, 2000 $15,795.7 $(434.8) $(14.2) $(4,954.4)
Contribution from NTL Incorporated 240.3
Comprehensive loss:
Net loss for three months ended
March 31, 2001 $(1,036.2) (1,036.2)
Currency translation adjustment (283.7) (283.7)
Unrealized net losses on
investments (1.7) (1.7)
Unrealized net losses on
derivatives (6.1) $(6.1)
---------
Total $(1,327.7)
--------------------------------------------------------------------------------
Balance, March 31, 2001 $16,036.0 $(718.5) $(15.9) $(6.1) $(5,990.6)
================================================================================
See accompanying notes.
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NTL (Delaware), Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(dollars in millions)
THREE MONTHS ENDED
MARCH 31,
-------------------------
2001 2000
-------- --------
Net cash (used in) operating activities $ (85.4) $ (71.5)
INVESTING ACTIVITIES
Acquisitions, net of cash acquired - (3,444.5)
Payment of deferred purchase price - (3.2)
Purchase of fixed assets (600.7) (359.2)
Increase in other assets (97.2) (178.4)
Purchase of marketable securities - (47.2)
Proceeds from sales of marketable securities - 165.9
-------- --------
Net cash (used in) investing activities (697.9) (3,866.6)
FINANCING ACTIVITIES
Proceeds from borrowings, net of financing costs 618.1 1,622.4
Proceeds from issuance of redeemable preferred stock - 1,850.0
Principal payments (82.2) (75.3)
Contribution from NTL Incorporated 109.1 -
Cash released from escrow - 83.3
Proceeds from exercise of stock options and warrants - 27.1
-------- --------
Net cash provided by financing activities 645.0 3,507.5
Effect of exchange rate changes on cash (16.4) (5.9)
-------- --------
Decrease in cash and cash equivalents (154.7) (436.5)
Cash and cash equivalents at beginning of period 509.9 2,597.2
-------- --------
Cash and cash equivalents at end of period $ 355.2 $2,160.7
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest exclusive of
amounts capitalized $ 203.6 $ 90.0
Income taxes paid 2.2 -
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Accretion of dividends and discount on preferred stock $ - $ 7.1
Contribution from NTL Incorporated 131.2 -
See accompanying notes.
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NTL (Delaware), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 2001 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2001. For further information, refer to the consolidated
financial statements and footnotes thereto included in a Current Report on Form
8-K/A dated May 4, 2001 of NTL (Delaware), Inc.
Certain prior period amounts have been reclassified to conform to the current
presentation.
NOTE B - CORPORATE RESTRUCTURING
On May 18, 2000, NTL Incorporated completed a corporate restructuring to create
a holding company structure. The formation of the holding company was part of
NTL Incorporated's acquisition of certain assets of Cable & Wireless
Communications plc ("CWC") (the operations acquired from CWC are called
"ConsumerCo"). The holding company restructuring was accomplished through a
merger so that all the stockholders of NTL Incorporated at the effective time of
the merger became stockholders of the new holding company, and NTL Incorporated
became a subsidiary of the new holding company. The new holding company has
taken the name NTL Incorporated and the holding company's subsidiary
simultaneously changed its name to NTL (Delaware), Inc. The "Company" refers to
NTL Incorporated and subsidiaries up to and including May 17, 2000, and to NTL
(Delaware), Inc. and subsidiaries beginning May 18, 2000.
On February 21, 2001, NTL Communications Corp. ("NTL Communications"), a
wholly-owned subsidiary of the Company, completed a transaction whereby it
acquired the entire issued share capital of NTL (CWC Holdings) Limited (the
entity that owns ConsumerCo) from NTL Incorporated. As a result of this
transaction, ConsumerCo became an indirect wholly-owned subsidiary of the
Company. The Company accounted for the transaction in a manner consistent with a
transfer of entities under common control, which is similar to a "pooling of
interests." Accordingly, the net assets and results of operations of ConsumerCo
have been included in the Company's consolidated financial statements from May
30, 2000, the date of NTL Incorporated's acquisition of ConsumerCo.
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NTL (Delaware), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE C - FIXED ASSETS
Fixed assets consist of:
MARCH 31, DECEMBER 31,
2001 2000
------------ ------------
(unaudited)
(in millions)
Operating equipment $ 11,764.7 $ 11,753.2
Other equipment 1,208.0 1,145.2
Construction-in-progress 1,297.2 1,611.1
------------ ------------
14,269.9 14,509.5
Accumulated depreciation (2,039.2) (1,816.5)
------------ ------------
$ 12,230.7 $ 12,693.0
============ ============
Depreciation expense for the three months ended March 30, 2001 and 2000 was
$335.9 million and $151.2 million, respectively.
NOTE D - INTANGIBLE ASSETS
Intangible assets consist of:
MARCH 31, DECEMBER 31,
2001 2000
------------ ------------
(unaudited)
(in millions)
Goodwill, net of accumulated amortization
of $1,421.5 (2001) and $1,103.6 (2000) $ 12,136.3 $ 12,522.8
License acquisition costs, net of accumulated
amortization of $227.3 (2001) and $215.8 (2000) 121.6 139.2
Customer lists, net of accumulated amortization
of $127.5 (2001) and $110.7 (2000) 276.4 318.2
Other intangibles, net of accumulated amortization
of $15.9 (2001) and $13.8 (2000) 69.6 80.6
------------ ------------
$ 12,603.9 $ 13,060.8
============ ============
On March 28, 2000, the Company acquired the cable assets of the Cablecom Group
("Cablecom") in Switzerland. The acquisition was accounted for as a purchase,
and accordingly, the net assets and results of operations of Cablecom have been
included in the consolidated financial statements from the date of acquisition.
On May 30, 2000, NTL Incorporated acquired ConsumerCo. On February 21, 2001, NTL
Incorporated contributed the assets of ConsumerCo to NTL Communications. The
Company accounted for the contribution in a manner consistent with a transfer of
entities under common control, which is similar to a "pooling of interests."
Accordingly, the net assets and results of operations of ConsumerCo have been
included in the Company's consolidated financial statements from May 30, 2000.
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NTL (Delaware), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE D - INTANGIBLE ASSETS (CONTINUED)
A significant component of the pro forma results is associated with the
acquisition of ConsumerCo. The historical results of ConsumerCo reflect certain
intercompany costs and expenses as they were prior to the separation of
ConsumerCo which was completed in the second quarter of 2000. These costs and
expenses do not necessarily reflect the costs and expenses that would have been
incurred had ConsumerCo reported as a separate entity for these periods.
Therefore the historical results of ConsumerCo which are included in the pro
forma results below are not reflective of results on a going forward basis. The
pro forma unaudited consolidated results of operations for the three months
ended March 31, 2000 assuming consummation of these transactions as of January
1, 2000 is as follows (in millions):
Total revenue $ 874.5
Net (loss) (860.6)
Amortization of intangible and other assets charged to expense for the three
months ended March 31, 2001 and 2000 was $427.3 million and $98.4 million,
respectively.
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NTL (Delaware), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE E - LONG-TERM DEBT
Long-term debt consists of:
MARCH 31, DECEMBER 31,
2001 2000
------------ ------------
(unaudited)
(in millions)
NTL Delaware:
5-3/4% Convertible Subordinated Notes $ 1,200.0 $ 1,200.0
ConsumerCo:
Term Loan Facility and other - 21.7
NTL Business:
Credit Agreement - 3,030.3
Cablecom:
Term Loan Facility 1,555.2 1,666.4
Revolving Facility 262.1 320.9
Other 14.6 15.3
NTL Communications:
12-3/4% Senior Deferred Coupon Notes 277.8 277.8
11-1/2% Senior Deferred Coupon Notes 1,050.0 1,040.5
10% Senior Notes 400.0 400.0
9-1/2% Senior Sterling Notes, less unamortized discount 176.9 186.5
10-3/4% Senior Deferred Coupon Sterling Notes 344.4 353.6
9-3/4% Senior Deferred Coupon Notes 1,073.6 1,048.5
9-3/4% Senior Deferred Coupon Sterling Notes 350.5 360.8
11-1/2% Senior Notes 625.0 625.0
12-3/8% Senior Deferred Coupon Notes 333.3 323.6
7% Convertible Subordinated Notes 489.8 599.3
9-1/4% Senior Euro Notes 219.9 234.7
9-7/8% Senior Euro Notes 307.8 328.6
11-1/2% Senior Deferred Coupon Euro Notes 123.2 127.9
11-7/8% Senior Notes, less unamortized discount 489.9 489.6
12-3/8% Senior Euro Notes 263.8 -
NTL Communications Limited:
Credit Agreement 3,547.5 375.3
Other 2.3 -
NTL Triangle:
11.2% Senior Discount Debentures 517.3 517.3
Other 4.5 5.2
Diamond:
13-1/4% Senior Discount Notes 285.1 285.1
11-3/4% Senior Discount Notes 531.0 531.0
10-3/4% Senior Discount Notes 383.8 373.9
10% Senior Sterling Notes 191.6 201.9
9-1/8% Senior Notes 110.0 110.0
Other 5.2 6.0
------------ ------------
15,136.1 15,056.7
Less current portion 4.7 12.6
------------ ------------
$ 15,131.4 $ 15,044.1
============ ============
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NTL (Delaware), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE E - LONG-TERM DEBT (CONTINUED)
In May 2000, NTL Business Limited ("NTL Business") and NTL Communications
Limited ("NTLCL"), wholly-owned indirect subsidiaries of the Company, entered
into a pound sterling 2,500.0 million ($3,547.5 million) credit agreement in
connection with the ConsumerCo acquisition. As of March 31, 2001, there was
pound sterling 2,500.0 million ($3,547.5 million) outstanding under the credit
agreement. The effective rate of interest at March 31, 2001 was 8.03%.
In March 2000, the Company borrowed CHF 2,700.0 million ($1,555.2 million) under
its term loan facility in connection with the acquisition of Cablecom. The
effective interest rate at March 31, 2001 was 5.78%. Cablecom has the option to
draw on a revolving loan facility up to an additional CHF 1,400.0 million
($806.4 million). As of March 31, 2001, Cablecom had borrowed CHF 455.0 million
($262.1 million) under the revolving loan facility with an effective interest
rate of 5.97%.
In January and February 2001, NTL Communications Corp. ("NTL Communications"), a
wholly-owned subsidiary of the Company, issued euro 300.0 million ($263.8
million) aggregate principal amount of 12-3/8% Senior Euro Notes due February 1,
2008. NTL Communications received proceeds of approximately $271.9 million after
underwriters' discount and commissions and other fees. Interest is payable
semiannually in cash at a rate of 12-3/8% per annum beginning on August 1, 2001.
These notes may not be redeemed by NTL Communications except in limited
circumstances.
In February 2001, $109.5 million principal amount of NTL Communications 7%
Convertible Subordinated Notes due December 15, 2008 were converted into 2.8
million shares of NTL Incorporated's common stock at the applicable conversion
price of $39.20 per share. NTL Incorporated issued as a premium on the
conversion an additional 0.5 million shares which were valued at the closing
common stock price on the dates of conversion. The premium, which amounted to
$17.6 million, is included in interest expense. Additionally accrued and unpaid
interest of $1.2 million at the time of the conversion was waived by the holders
of the convertible notes.
On February 21, 2001, as required by the NTL Business and NTLCL credit
agreement, NTL Communications completed a transaction whereby it acquired the
entire issued share capital of NTL (CWC Holdings) Limited (the entity that owns
ConsumerCo) from NTL Incorporated and the entire issued share capital of NTL
Business from NTL Delaware in exchange for shares of its common stock. As a
result of this transaction, ConsumerCo and NTL Business became subsidiaries of
NTL Communications and NTL Business' interest in the pound sterling 2,500.0
million credit agreement was assigned to a subsidiary of NTLCL.
On March 30, 2001, NTL Australia Pty Limited ("NTLA"), a wholly-owned indirect
subsidiary of the Company, entered into a A$350.0 million ($170.8 million)
credit agreement with a group of banks. As of April 3, 2001, A$150.0 million
($73.2 million) was outstanding, and in addition A$50.0 million ($24.4 million)
is expected to be drawn on May 31, 2001. NTLA may use the proceeds under this
credit agreement to repay NTL Delaware (its parent company) for part of its
original investment in NTLA as well as funding the development of NTL in
Australia and general capital expenditures, working capital
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NTL (Delaware), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE E - LONG-TERM DEBT (CONTINUED)
and corporate purposes. Interest is payable at least every six months at the A$
Bank Bill Bid Rate plus a margin of 1.85% per annum, which is subject to
adjustment based on the ratio of senior debt to EBITDA of NTLA. The unused
portion of the commitment is subject to a commitment fee of 0.6%, which is
subject to adjustment based on the ratio of senior debt to EBITDA of NTLA.
Principal is due in five semi-annual installments beginning on June 30, 2004.
The credit agreement contains various financial and other covenants with respect
to NTLA and restrictions on dividends and distributions by NTLA.
On April 27, 2001, the Company received a commitment from a unit of GE Capital
for $388.0 million in financing. Subject to definitive documentation and
customary closing conditions, GE Capital will provide pound sterling 200.0
million ($283.8 million) through an increase to the pound sterling 2,500.0
million credit agreement of NTLCL. This increase is also subject to the consent
of the existing lenders under the credit agreement. The remainder will be in the
form of 5.75% convertible notes, convertible into NTL Incorporated common stock
at a conversion price of $35.00 per share. The Company intends to use
approximately half of the proceeds to repay outstanding amounts under the pound
sterling 2,500.0 million credit agreement and the remainder for construction,
capital expenditure and general corporate purposes.
On May 9, 2001, NTL Incorporated announced that NTL Communications had priced an
issue of $1,000.0 million of 6 3/4% Convertible Senior Notes due May 15, 2008.
Interest will be payable semiannually commencing on November 15, 2001. These
notes will be convertible into shares of NTL Incorporated common stock at the
option of the holder after August 13, 2001 at a conversion price of $32.728 per
share. After May 20, 2004, the notes will be redeemable, in whole or from time
to time in part, at the option of NTL Incorporated or NTL Communications. NTL
Incorporated will be a co-obligor of the notes on a subordinated basis. The
closing of the sale of the notes is expected to occur on May 15, 2001.
NTLCL has a pound sterling 1,300.0 million ($1,844.7 million) credit agreement
with a group of banks which is available to finance working capital
requirements of the U.K. Group, as defined. For purposes of this credit
agreement, Diamond Cable Communications Limited and subsidiaries, NTL
(Triangle) LLC and subsidiaries and certain other entities are excluded from
the U.K. Group. Pursuant to the credit agreement, in connection with the
issuance of NTL Communications notes beginning in October 2000, the commitment
was reduced by pound sterling 255.1 million ($362.0 million). Following the
issuance of the 6 3/4% Convertible Senior Notes, the commitment will be further
reduced by approximately pound sterling 382.1 million ($542.2 million). As of
March 31, 2001, there were no amounts borrowed under this credit agreement. As
of May 9, 2001, pound sterling 200.0 million ($283.8 million) had been borrowed.
NOTE F - DERIVATIVE FINANCIAL INSTRUMENTS
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. Changes in the fair value of
derivatives are recorded each period in the results of operations or in other
comprehensive income (loss), depending on whether a derivative is designated as
a fair value or cash flow hedge. The ineffective portion of all hedges is
recognized in the results of operations.
On January 1, 2001, the Company recorded all of its outstanding derivative
instruments at their fair value. The outstanding derivative instruments were
comprised of cross currency swaps to hedge exposure to movements in the British
pound/U.S. dollar exchange rate, and a number of zero cost collars to hedge
exposure to floating interest rates on certain of its debt. The aggregate fair
value on January 1, 2001 was a liability of $9.0 million, of which $6.8 million
was recorded as an expense and $2.2 million was recorded as other comprehensive
loss. In 2001, the Company entered into cross currency swaps to hedge exposure
to movements in the Euro/British pound exchange rate. In the three months ended
March 31, 2001, the Company recorded income of $5.1 million and other
comprehensive loss of $3.9 million as a result of changes in the fair values.
The aggregate fair value at March 31, 2001 was a net liability of $7.8 million.
NOTE G - OTHER CHARGES
Other charges of $7.4 million in 2001 are principally for costs incurred to
integrate the acquired companies and are primarily related to information
technology integration, and costs incurred for business rationalization.
NOTE H - RESTRUCTURING COSTS
The Company recorded restructuring costs in November 2000 as a result of the
completion of a consolidation review. This charge consisted of employee
severance and related costs of $47.9 million for approximately 2,300 employees
to be terminated and lease exit costs of $18.0 million. As of March 31, 2001,
$20.5 million of the provision had been used, including $17.5 million for
employee severance and related costs and $3.0 million for lease exit costs. As
of March 31, 2001, approximately 1,100 employees had been terminated. The
remaining restructuring reserve of $45.4 million includes $30.4 million for
employee severance and related costs and $15.0 million for lease exit costs.
NOTE I - RELATED PARTY TRANSACTIONS
On April 12, 2001, NTL Incorporated purchased $15.0 million of an unsecured
convertible note of CoreComm Limited, a company that offers telecommunications
and Internet services to residential and business customers in the United
States. In addition, concurrently with the note purchase and without additional
compensation, NTL Incorporated entered into a network and software agreement
with CoreComm. Under the agreement, CoreComm will provide U.S. network access
on CoreComm's network for Internet traffic from NTL Incorporated's U.K.
customers, as well as a royalty free license to use certain billing and
provisioning software and know-how. Certain officers and directors of NTL
Incorporated are also officers and directors of CoreComm. In light of this
relationship, the independent directors of NTL Incorporated examined the
transaction with CoreComm. The board of directors determined that the
transaction was inherently fair and provided NTL Incorporated with benefits
that exceeded those that could be obtained from a third party.
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NTL (Delaware), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE J - COMPREHENSIVE LOSS
The Company's comprehensive loss for the three months ended March 31, 2001 and
2000 was $1,327.7 million and $508.0 million, respectively.
NOTE K - SEGMENT DATA
BROADCAST CONSUMER BUSINESS SHARED TOTAL
--------- --------- --------- --------- ---------
(in millions)
Three months ended March 31, 2001
Revenues $ 82.7 $ 623.0 $ 200.2 $ - $ 905.9
EBITDA (1) 39.6 172.7 70.7 (157.5) 125.5
Three months ended March 31, 2000
Revenues $ 79.4 $ 253.5 $ 158.0 $ - $ 490.9
EBITDA (1) 39.9 67.0 36.2 (74.4) 68.7
Total assets
March 31, 2001 (2) $ 966.5 $22,584.9 $ 1,562.8 $ 1,976.2 $27,090.4
December 31, 2000 (3) 1,051.1 23,582.5 1,753.3 1,940.3 28,327.2
(1) Represents earnings before interest, taxes, depreciation and amortization,
other charges, corporate expenses, and foreign currency transaction losses.
(2) At March 31, 2001, shared assets included $232.9 million of cash and cash
equivalents, $494.2 million of goodwill and $1,249.1 million of other
assets.
(3) At December 31, 2000, shared assets included $357.5 million of cash, cash
equivalents and marketable securities, $422.0 million of goodwill and
$1,160.8 million of other assets.
The reconciliation of segment combined EBITDA to loss before income tax benefit
is as follows:
THREE MONTHS ENDED MARCH 31,
----------------------------
2001 2000
---------- ----------
(in millions)
Segment Combined EBITDA $ 125.5 $ 68.7
(Add) Deduct:
Other charges 7.4 -
Corporate expenses 7.0 10.2
Depreciation and amortization 763.2 249.6
Interest income and other, net 33.3 (22.4)
Interest expense 355.1 206.0
Foreign currency transaction losses 13.2 28.3
---------- ----------
1,179.2 471.7
---------- ----------
(Loss) before income tax benefit $ (1,053.7) $ (403.0)
========== ==========
14
16
NTL (Delaware), Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE L - COMMITMENTS AND CONTINGENT LIABILITIES
At March 31, 2001, the Company was committed to pay approximately $1,270.0
million for equipment and services, which includes approximately $855.0 million
for certain operations and maintenance contracts through 2008.
A wholly-owned indirect subsidiary of the Company, Premium TV Limited, has
entered into media partnerships with various United Kingdom football clubs
whereby Premium TV Limited will receive certain marketing and sponsorship
rights. Premium TV Limited will provide loan facilities to the clubs, repayable
through the issue of shares in the football clubs, as well as provide funding to
joint ventures with the clubs. At March 31, 2001, the aggregate commitment was
pound sterling 20.3 million ($28.8 million). In addition, Premium TV Limited
expects to pay fees of up to pound sterling 59.0 million ($83.7 million) over
five years for the right to enter into a joint venture with the Football League
to set-up an Internet portal for all 72 Football League clubs who wish to
participate.
In August 2000 NTL Incorporated announced that it had signed an agreement in
partnership with Morgan Stanley Dean Witter Private Equity to buy France
Telecom's 49.9% stake in Suez-Lyonnaise Telecom, the operator of the Noos
broadband network in France. Pursuant to the agreement, NTL Incorporated has
agreed to acquire 27% of Noos for approximately $627.0 million. This agreement
was amended in April 2001 with the original purchase price to NTL Incorporated
reduced to $594.0 million to reflect a change in the assets to be contributed to
Noos by France Telecom. The balance of the $627.0 million purchase consideration
is payable to France Telecom on transfer to Noos of specified networks following
receipt of regulatory approvals. The shareholder's agreement relating to Noos
provides for the parties to negotiate for the sale by NTL Incorporated to Noos
of its 1G Networks. If the parties are unable to agree on a price, NTL
Incorporated has the right to sell the 1G Networks to Noos at a price determined
by appraisal and payable by a subordinated note. NTL Incorporated will issue two
series of its preferred stock to France Telecom as consideration for the
acquisition of its 27% interest in Noos. One series of the preferred stock
representing $472.2 million of the initial purchase consideration is mandatorily
redeemable for cash by NTL Incorporated one year after issuance. The second
series of preferred stock representing $121.8 million of the initial purchase
consideration is mandatorily redeemable for cash by NTL Incorporated six years
after issuance. Because the subsidiaries of NTL Incorporated are subject to
restrictions on their ability to pay dividends or make distributions to NTL
Incorporated, it is likely that the initial redemption would have to be financed
by NTL Incorporated. NTL Incorporated will pledge its shares in Noos to secure
payment of the redemption amount under the terms of the preferred stock. The
redemption of the first series of preferred stock is not included in NTL
Incorporated's expected cash requirements for 2001. However, definitive closing
documentation has not yet been executed regarding the transaction and there can
be no assurance that agreement will be reached on such documentation or that the
conditions to closing will be satisfied.
The Company is involved in certain disputes and litigation arising in the
ordinary course of its business. None of these matters are expected to have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
15
17
NTL (Delaware), Inc. and Subsidiaries
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Western Europe Customer Statistics as of March 31, 2001 (in 000s)
(continued on next page)
(UK) (IRELAND) (SWISS) (FRANCE) NTL DIRECT
NTL CABLELINK CABLECOM 1G NETWORKS SUBTOTAL
-------- --------- -------- ----------- ----------
Ownership Interest 100% 100% 100%(1) 100%
Homes in Franchise 11,411.2 420.0 1,893.4 287.0 14,011.6
Homes passed 8,404.1 419.4 1,893.4 265.5 10,982.4
Homes marketed (Telco) 7,472.3 20.0 - - 7,492.3
Homes marketed (CATV) 7,695.8 419.4 1,714.3 212.6 10,042.1
Homes marketed (Ethernet) - - - - -
Customers 2,849.8 370.6 1,562.0 48.1 4,830.5
Single RGU 828.6 367.1 1,526.9 48.0 2,770.6
Dual / Triple RGU 2,021.2 3.5 35.1 0.1 2,059.9
CATV 2,311.5 370.6 1,562.0 48.1 4,292.2
Digital 757.3 - 28.4 0.7 786.4
Telephone (Direct) 2,559.5 3.5 - - 2,563.0
Broadband Internet 26.3 - 35.1 0.1 61.5
RGUs 4,897.3 374.1 1,597.1 48.2 6,916.7
Internet Subscribers 1,953.3 - 194.2 0.1 2,147.6
Wholesale 1,043.3 - - - 1,043.3
ntlworld 602.4 - - - 602.4
Telephone (Indirect) 435.2 - - - 435.2
Residential Customers 4,328.3 370.6 1,562.0 48.1 6,309.0
Residential Services 7,259.5 374.1 1,756.2 48.2 9,438.0
Business Customers 76.6 1.0 3.0 - 80.6
PENETRATION
CATV 30.0% 88.4% 91.1% 22.6% 42.7%
Telephone 34.3% nm na na 34.2%
Customer 37.0% 88.4% 91.1% 22.6% 48.1%
RGU 63.6% 89.2% 93.2% 22.7% 68.9%
Dual / Triple 70.9% 0.9% 2.2% 0.2% 42.6%
(1) Cablecom owns portions of 28 cable systems in Switzerland. The following
statistics reflect the proportional operating data in which Cablecom does not
maintain an equity interest: 188,200 homes passed, 160,600 homes marketed,
152,700 subscribers and 600 broadband Internet subscribers.
16
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NTL (Delaware), Inc. and Subsidiaries
Western Europe Customer Statistics as of March 31, 2001 (in 000s)
(continued from prior page)
(PARIS) (FRANKFURT) (STOCKHOLM) EQUITY GROSS
NOOS EKABEL (2) B2 TOTAL TOTAL
(PENDING)
(2)
--------- ----------- ----------- -------- --------
Ownership Interest 27% 32.5% 25%
Homes in Franchise 3,179.0 2,800.0 305.7 15,668.2 20,296.3
Homes passed 2,563.0 1,828.0 127.3 12,112.1 15,500.7
Homes marketed (Telco) 1.0 - - 7,492.6 7,493.3
Homes marketed (CATV) 2,563.0 1,828.0 - 11,167.6 14,433.1
Homes marketed (Ethernet) - - 86.8 21.7 86.8
Customers 765.0 1,294.0 18.7 5,309.6 6,908.2
Single RGU 718.0 1,294.0 18.7 3,237.6 4,801.3
Dual / Triple RGU 47.0 - - 2,072.0 2,106.9
CATV 747.0 1,294.0 - 4,761.7 6,333.2
Digital 244.0 - - 851.0 1,030.4
Telephone (Direct) 1.0 - - 2,563.3 2,564.0
Broadband Internet 63.0 - 18.7 82.6 143.2
RGUs 811.0 1,294.0 18.7 7,407.6 9,040.4
Internet Subscribers 63.0 - 18.7 2,168.7 2,229.3
Wholesale - - - 1,043.3 1,043.3
ntlworld - - - 602.4 602.4
Telephone (Indirect) - - - 435.2 435.2
Residential Customers 765.0 1,294.0 18.7 6,788.1 8,386.7
Residential Services 811.0 1,294.0 18.7 9,928.9 11,561.7
Business Customers 38.0 - - 90.9 118.6
PENETRATION
CATV 29.1% 70.8% na 42.6% 43.9%
Telephone na na na 34.2% 34.2%
Customer 29.8% 70.8% 21.5% 47.5% 47.9%
RGU 31.6% 70.8% 21.5% 66.3% 62.6%
Dual / Triple 6.1% 0.0% 0.0% 39.0% 30.5%
(2) Data as of December 31, 2000.
17
19
NTL (Delaware), Inc. and Subsidiaries
RESULTS OF OPERATIONS
As a result of the completion of the acquisitions of the cable assets of the
Cablecom Group ("Cablecom") in March 2000 and the consumer cable telephone,
Internet and television operations of Cable & Wireless Communications plc
("ConsumerCo") in May 2000, the Company consolidated the results of operations
of these businesses from the dates of acquisition. The results of operations of
Cablecom from the date of acquisition to March 31, 2000 were not significant.
Three Months Ended March 31, 2001 and 2000
For the three months ended March 31, 2000, certain revenues have been
reclassified from business telecommunications to broadcast transmission and
other, and certain costs have been reclassified from operating expenses to
selling, general and administrative expenses to conform to the 2001
classifications. In 2000 and 2001, the substantial majority of revenues in all
segments were derived from operations in the United Kingdom.
Consumer telecommunications and television revenues increased to $623.0 million
from $253.5 million as a result of acquisitions and from growth in the Company's
customer base. The 2001 revenue includes $351.1 million from acquired companies.
The Company's immediate goal is to drive the majority of revenue growth from
average revenue per unit ("ARPU") increases rather than adding new customers.
Achievement of this goal would allow the Company to achieve its revenue targets,
have a lower capital requirement due to fewer installations, and improve EBITDA
as the Company reduces front-loaded costs such as customer acquisition costs and
higher initial maintenance costs. In the first quarter of 2001, the Company
increased revenues from existing customers as a result of migrating customers to
digital television, price increases and upselling additional products and
services. The Company expects this trend to continue in the second quarter of
2001.
Business telecommunications revenues increased to $200.2 million from $158.0
million as a result of acquisitions, growth in the Company's customer base and
increases in carrier services revenues. The 2001 revenue includes $26.5 million
from ConsumerCo. The Company continues to focus specific sales and marketing
effort on winning business customers in its franchise areas and increasing
revenue from its existing customers. Carrier services revenues increased due to
growth in services provided by the Company's wholesale operation to other
telephone companies, including wireless service operators. Revenue growth in
carrier services is primarily dependent upon the Company's ability to continue
to attract new customers and expand services to existing customers.
18
20
NTL (Delaware), Inc. and Subsidiaries
Broadcast transmission and other revenues increased to $82.7 million from $79.4
million. The increase reflects increases in the number of broadcast television
and FM radio customers and accounts, which exceeded price cap reductions in the
Company's regulated services, and increases in satellite and media services used
by broadcast and media customers. The Company expects growth in broadcast
services to be driven primarily by contracts related to the increased demand for
tower infrastructure by wireless services operators expanding and upgrading
their networks for wireless broadband, the privatization of national broadcast
networks, the digitalization of analog television and radio signals and the
further development of programming for the European markets requiring satellite
and terrestrial distribution services.
Operating expenses (including network expenses) increased to $447.1 million from
$227.2 million as a result of acquisitions and increases in interconnection and
programming costs due to customer growth. The 2001 expense includes $164.6
million from acquired companies.
Selling, general and administrative expenses increased to $333.3 million from
$195.0 million as a result of acquisitions, increases in telecommunications and
cable television sales and marketing costs and increases in additional personnel
and overhead to service the increasing customer base. The 2001 expense includes
$122.3 million from acquired companies.
Other charges of $7.4 million in 2001 are principally for costs incurred to
integrate the acquired companies and are primarily related to information
technology integration, and costs incurred for business rationalization.
Corporate expenses decreased to $7.0 million from $10.2 million due to a
reduction in various overhead costs.
Depreciation and amortization expense increased to $763.2 million from $249.6
million due to an increase in amortization on acquisition related intangibles
and an increase in depreciation of telecommunications and cable television
equipment. The 2001 and 2000 expense includes $522.3 million and $3.0 million,
respectively, from acquired companies, including amortization of acquisition
related intangibles.
Interest income and other, net decreased to expense of $33.3 million from income
of $22.4 million as a result of increases in the net losses of affiliates
accounted for by the equity method and decreases in interest income.
19
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NTL (Delaware), Inc. and Subsidiaries
Interest expense increased to $355.1 million from $206.0 million due to the
issuance of additional debt, and the increase in the accretion of original issue
discount on the deferred coupon notes. The 2001 expense includes $87.9 million
in interest on acquisition related debt. Interest of $225.2 million and $103.6
million was paid in cash in the three months ended March 31, 2001 and 2000,
respectively.
Foreign currency transaction losses decreased to $13.2 million from $28.3
million primarily due to the effect of changes in exchange rates. The Company
and certain of its subsidiaries have cash, cash equivalents and debt denominated
in non-U.S. dollar currencies that are affected by changes in exchange rates. In
addition, foreign subsidiaries of the Company whose functional currency is not
the U.S. dollar hold cash, cash equivalents and debt denominated in U.S. dollars
which are affected by changes in exchange rates.
The Company recorded restructuring costs in November 2000 as a result of the
completion of a consolidation review. This charge consisted of employee
severance and related costs of $47.9 million for approximately 2,300 employees
to be terminated and lease exit costs of $18.0 million. As of March 31, 2001,
$20.5 million of the provision had been used, including $17.5 million for
employee severance and related costs and $3.0 million for lease exit costs. As
of March 31, 2001, approximately 1,100 employees had been terminated. The
remaining restructuring reserve of $45.4 includes $30.4 million for employee
severance and related costs and $15.0 million for lease exit costs.
In September 2000, the Board of Directors approved modifications to certain
stock options granted to employees in November 1999 through May 2000. Options to
purchase an aggregate of approximately 16.5 million shares of NTL Incorporated
common stock with a weighted average exercise price of $64.39 per share were
modified such that the exercise price was reduced to $44.50 per share and the
vesting schedule was delayed and/or lengthened. NTL Incorporated is accounting
for these options as a variable plan beginning in September 2000. The Company
will recognize non-cash compensation expense for the difference between the
quoted market price of the common stock and the exercise price of the vested
options while the options remain outstanding.
LIQUIDITY AND CAPITAL RESOURCES
The Company will continue to require significant amounts of capital to finance
construction of its local and national networks, for connection of telephone,
telecommunications, Internet and cable television customers to the networks,
for other capital expenditures and for debt service. The Company estimates that
these requirements, net of cash from operations, will aggregate up to
approximately $1,700.0 million from April 1, 2001 to December 31, 2001. The
Company's commitments at March 31, 2001 for equipment and services through 2001
of approximately $415.0 million are included in the anticipated requirements.
The Company had approximately $355.2 million in cash on hand at March 31, 2001.
The Company expects to utilize the proceeds from the issuance of convertible
notes in May 2001, proceeds from the proposed GE Capital financing and a
portion of its bank facilities to fund the balance of these requirements.
The Company expects average quarterly capital expenditures to be pound sterling
325.0 million per quarter for the year ending December 31, 2001 and pound
sterling 250.0 million per quarter for the year ending December 31, 2002.
On March 30, 2001, NTL Australia Pty Limited ("NTLA"), a wholly-owned indirect
subsidiary of the Company, entered into a A$350.0 million ($170.8 million)
credit agreement with a group of banks. As of April 3, 2001, A$150.0 million
($73.2 million) was outstanding, and in addition A$50.0 million ($24.4 million)
is expected to be drawn on May 31, 2001. NTLA may use the proceeds under this
credit agreement to repay NTL Delaware (its parent company) for part of its
original investment in NTLA as well as funding the development of NTL in
Australia and general capital expenditures, working capital and corporate
purposes. Interest is payable at least every six months at the A$ Bank Bill Bid
Rate plus a margin of 1.85% per annum, which is subject to adjustment based on
the ratio of senior debt to EBITDA of NTLA. The unused portion of the commitment
is subject to a commitment fee of 0.6%, which is subject to adjustment based on
the ratio of senior debt to EBITDA of NTLA. Principal is due in five semi-annual
installments beginning on June 30, 2004. The credit agreement contains various
financial and other covenants with respect to NTLA and restrictions on dividends
and distributions by NTLA.
On April 27, 2001, the Company received a commitment from a unit of GE Capital
for $388.0 million in financing. Subject to definitive documentation and
customary closing conditions, GE Capital will provide pound sterling 200.0
million ($283.8 million) through an increase to the pound sterling 2,500.0
million credit agreement of NTL Communications Limited ("NTLCL"). This increase
is also subject to the consent of the existing lenders under the credit
agreement. The remainder will be in the form of 5.75% convertible
20
22
NTL (Delaware), Inc. and Subsidiaries
notes, convertible into NTL Incorporated common stock at a conversion price of
$35.00 per share. The Company intends to use approximately half of the proceeds
to repay outstanding amounts under the pound sterling 2,500.0 million credit
agreement and the remainder for construction, capital expenditure and general
corporate purposes.
On May 9, 2001, NTL Incorporated announced that NTL Communications Corp. ("NTL
Communications"), a wholly-owned subsidiary of the Company, had priced an issue
of $1,000.0 million of 6 3/4% Convertible Senior Notes due May 15, 2008.
Interest will be payable semiannually commencing on November 15, 2001. These
notes will be convertible into shares of NTL Incorporated common stock at the
option of the holder after August 13, 2001 at a conversion price of $32.728 per
share. After May 20, 2004, the notes will be redeemable, in whole or from time
to time in part, at the option of NTL Incorporated or NTL Communications. NTL
Incorporated will be a co-obligor of the notes on a subordinated basis. The
closing of the sale of the notes is expected to occur on May 15, 2001.
NTLCL entered into a pound sterling 1,300.0 million ($1,844.7 million) credit
agreement with a group of banks dated May 30, 2000. Pursuant to the credit
agreement, in connection with the issuance in October 2000 of $500.0 million
aggregate principal amount of NTL Communications 11-7/8% notes and the issuance
in January and February 2001 of euro 300.0 million aggregate principal amount of
NTL Communications 12-3/8% notes, the commitment was reduced by pound sterling
255.1 million ($362.0 million). Following the issuance of the 6-3/4% Convertible
Senior Notes, the commitment will be further reduced by approximately pound
sterling 382.1 million ($542.2 million). As of March 31, 2001, there were no
amounts borrowed under this agreement. As of May 9, 2001, pound sterling 200.0
million ($283.8 million) had been borrowed. NTLCL and other members of the U.K.
Group may utilize the proceeds under this credit agreement to finance the
working capital requirements of the U.K. Group, provided that in no event shall
the proceeds be used for a purpose other than to finance the construction,
capital expenditure and working capital needs of a cable television or telephone
or telecommunications business, or a related business, in the United Kingdom or
Ireland. For purposes of this credit agreement, Diamond Cable Communications
Limited and subsidiaries, NTL (Triangle) LLC and subsidiaries and certain other
entities are excluded from the U.K. Group. Interest is payable at least every
six months at LIBOR plus a margin rate of 4.5% per annum. The margin rate shall
increase by 0.5% on the three month anniversary of the initial advance and by an
additional 0.5% on each subsequent three month anniversary, up to a maximum
total interest rate of 16% per annum. The unused portion of the commitment is
subject to a commitment fee of 0.75% payable quarterly. Principal is due in full
on March 31, 2006.
Cablecom has the option to draw on a revolving loan facility of up to CHF
1,400.0 million ($806.4 million). The revolving facility is intended to finance
operating expenses, working capital and other capital expenditures of Cablecom
and subsidiaries and for their general corporate financing requirements. As of
March 31, 2001, Cablecom had borrowed CHF 455.0 million ($262.1 million) under
the revolving loan facility with an effective interest rate of 5.97%. The
revolving facility is available until May 2003. The interest rate, interest
payment requirements and principal payments for the revolving facility are the
same as for the term loan
21
23
NTL (Delaware), Inc. and Subsidiaries
facility (see below). The revolving facility includes a commitment fee of 0.75%
payable quarterly on the unused portion of the revolving facility commitment,
which is reduced to 0.50% when over 50% of the commitment is utilized.
Regarding the Company's estimated cash requirements described above, there can
be no assurance that: (a) actual construction costs will not exceed the amounts
estimated or that additional funding substantially in excess of the amounts
estimated will not be required, (b) conditions precedent to advances under
credit facilities will be satisfied when funds are required, (c) the Company and
its subsidiaries will be able to generate sufficient cash from operations to
meet capital requirements, debt service and other obligations when required, (d)
the Company will be able to access such cash flow or (e) the Company will not
incur losses from its exposure to exchange rate fluctuations or be adversely
affected by interest rate fluctuations.
A wholly-owned indirect subsidiary of the Company, Premium TV Limited, has
entered into media partnerships with U.K. football clubs whereby Premium TV
Limited will receive certain marketing and sponsorship rights. Premium TV
Limited will provide loan facilities to the clubs, repayable through the issue
of shares in the football clubs, as well as provide funding to joint ventures
with the clubs. At March 31, 2001, the aggregate commitment was pound sterling
20.3 million ($28.8 million). In addition, Premium TV Limited expects to pay
fees of up to pound sterling 59.0 million ($83.7 million) over five years for
the right to enter into a joint venture with the Football League to set-up an
Internet portal for all 72 Football League clubs who wish to participate.
In August 2000 NTL Incorporated announced that it had signed an agreement in
partnership with Morgan Stanley Dean Witter Private Equity to buy France
Telecom's 49.9% stake in Suez-Lyonnaise Telecom, the operator of the Noos
broadband network in France. Pursuant to the agreement, NTL Incorporated has
agreed to acquire 27% of Noos for approximately $627.0 million. This agreement
was amended in April 2001 with the original purchase price to NTL Incorporated
reduced to $594.0 million to reflect a change in the assets to be contributed to
Noos by France Telecom. The balance of the $627.0 million purchase consideration
is payable to France Telecom on transfer to Noos of specified networks following
receipt of regulatory approvals. The shareholder's agreement relating to Noos
provides for the parties to negotiate for the sale by NTL Incorporated to Noos
of its 1G Networks. If the parties are unable to agree on a price, NTL
Incorporated has the right to sell the 1G Networks to Noos at a price determined
by appraisal and payable by a subordinated note. NTL Incorporated will issue two
series of its preferred stock to France Telecom as consideration for the
acquisition of its 27% interest in Noos. One series of the preferred stock
representing $472.2 million of the initial purchase consideration is mandatorily
redeemable for cash by NTL Incorporated one year after issuance. The second
series of preferred stock representing $121.8 million of the initial purchase
consideration is mandatorily redeemable for cash by NTL Incorporated six years
after issuance. Because the subsidiaries of NTL Incorporated are subject to
restrictions on their ability to pay dividends or make distributions to NTL
Incorporated, it is likely that the initial redemption would have to be financed
by NTL Incorporated. NTL Incorporated will pledge its shares in Noos to secure
payment of the redemption amount under the terms of the preferred stock. The
redemption of the first series of preferred stock is not included in NTL
Incorporated's expected cash requirements for 2001. However, definitive closing
documentation has not yet been executed regarding the transaction and there can
be no assurance that agreement will be reached on such documentation or that
the conditions to closing will be satisfied.
The accreted value at March 31, 2001 of the Company's consolidated long-term
indebtedness is $15,131.4 million, representing approximately 61.9% of total
capitalization. The following summarizes the terms of the significant notes and
credit facilities issued by the Company and its subsidiaries.
22
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NTL (Delaware), Inc. and Subsidiaries
NTL Delaware:
(1) 5-3/4% Convertible Subordinated Notes due December 15, 2009, principal
amount at maturity of $1,200.0 million, interest payable semiannually from
June 15, 2000, redeemable at the Company's option on or after December 18,
2002, convertible into shares of the Company's stock at a conversion price
of $108.18 per share;
NTLCL:
(2) Credit Agreement of pound sterling 1,300.0 million ($1,844.7 million), no
amounts were outstanding as of March 31, 2001, pound sterling 200.0
million ($283.8 million) outstanding as of May 9, 2001, interest payable
at least every six months at LIBOR plus a margin rate of 4.5% per annum,
which is subject to adjustment, the unused portion of the commitment is
subject to a commitment fee of 0.75% payable quarterly, principal is due
in full on March 31, 2006, pursuant to the credit agreement, following the
issuance of NTL Communications notes beginning in October 2000, the
commitment was reduced by pound sterling 255.1 million ($362.0 million),
following the issuance of the 6-3/4% Convertible Senior Notes, the
commitment will be further reduced by approximately pound sterling 382.1
million ($542.2 million);
(3) Credit Agreement of pound sterling 2,500.0 million ($3,547.5 million), of
which pound sterling 2,500.0 million ($3,547.5 million) was outstanding at
March 31, 2001, interest payable at least every six months at LIBOR plus a
margin rate of 2.25% per annum, which is subject to adjustment, effective
interest rate of 8.03% at March 31, 2001, the unused portion of the
commitment is subject to a commitment fee of 0.75% payable quarterly,
which is reduced to 0.50% when over 50% of the commitment is utilized,
principal is due in six quarterly installments beginning on June 30, 2004;
Cablecom:
(4) Term Loan Facility of CHF 2,700.0 million ($1,555.2 million), interest
payable at least every six months at Swiss LIBOR plus a margin rate of
2.5% per annum, which is subject to adjustment after March 2001, effective
interest rate of 5.78% at March 31, 2001, principal is due over six years
in quarterly installments beginning on March 31, 2004;
23
25
NTL (Delaware), Inc. and Subsidiaries
(5) Revolving Facility of CHF 1,400.0 million ($806.4 million), of which CHF
455.0 million ($262.1 million) was outstanding at March 31, 2001, interest
payable at least every six months at Swiss LIBOR plus a margin rate of
2.5% per annum, which is subject to adjustment, effective interest rate of
5.97% at March 31, 2001, the unused portion of the commitment is subject
to a commitment fee of 0.75% payable quarterly, which is reduced to 0.50%
when over 50% of the commitment is utilized, principal is due over six
years in quarterly installments beginning on March 31, 2004;
NTL Communications:
(6) 12-3/4% Senior Deferred Coupon Notes due April 15, 2005, principal amount
at maturity of $277.8 million, interest payable semiannually from October
15, 2000, redeemable at the Company's option on or after April 15, 2000;
(7) 11-1/2% Senior Deferred Coupon Notes due February 1, 2006, principal
amount at maturity of $1,050.0 million, interest payable semiannually
beginning on August 1, 2001, redeemable at the Company's option on or
after February 1, 2001;
(8) 10% Senior Notes due February 15, 2007, principal amount at maturity of
$400.0 million, interest payable semiannually from August 15, 1997,
redeemable at the Company's option on or after February 15, 2002;
(9) 9-1/2% Senior Sterling Notes due April 1, 2008, principal amount at
maturity of pound sterling 125.0 million ($177.4 million), interest
payable semiannually from October 1, 1998, redeemable at the Company's
option on or after April 1, 2003;
(10) 10-3/4% Senior Deferred Coupon Sterling Notes due April 1, 2008, principal
amount at maturity of pound sterling 300.0 million ($425.7 million),
interest payable semiannually beginning on October 1, 2003, redeemable at
the Company's option on or after April 1, 2003;
(11) 9-3/4% Senior Deferred Coupon Notes due April 1, 2008, principal amount at
maturity of $1,300.0 million, interest payable semiannually beginning on
October 1, 2003, redeemable at the Company's option on or after April 1,
2003;
(12) 9-3/4% Senior Deferred Coupon Sterling Notes due April 15, 2009, principal
amount at maturity of pound sterling 330.0 million ($468.3 million),
interest payable semiannually beginning on October 15, 2004, redeemable at
the Company's option on or after April 15, 2004;
(13) 11-1/2% Senior Notes due October 1, 2008, principal amount at maturity of
$625.0 million, interest payable semiannually from April 1, 1999,
redeemable at the Company's option on or after October 1, 2003;
(14) 12-3/8% Senior Deferred Coupon Notes due October 1, 2008, principal amount
at maturity of $450.0 million, interest payable semiannually beginning on
April 1, 2004, redeemable at the Company's option on or after October 1,
2003;
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NTL (Delaware), Inc. and Subsidiaries
(15) 7% Convertible Subordinated Notes due December 15, 2008, principal amount
at maturity of $489.8 million, interest payable semiannually from June 15,
1999, convertible into shares of the Company's common stock at a
conversion price of $39.20 per share, redeemable at the Company's option
on or after December 15, 2001;
(16) 9-1/4% Senior Euro Notes due November 15, 2006, principal amount at
maturity of euro 250.0 million ($219.9 million), interest payable
semiannually from May 15, 2000;
(17) 9-7/8% Senior Euro Notes due November 15, 2009, principal amount at
maturity of euro 350.0 million ($307.8 million), interest payable
semiannually from May 15, 2000, redeemable at the Company's option on or
after November 15, 2004;
(18) 11-1/2% Senior Deferred Coupon Euro Notes due November 15, 2009, principal
amount at maturity of euro 210.0 million ($184.7 million), interest
payable semiannually beginning on May 15, 2005, redeemable at the
Company's option on or after November 15, 2004;
(19) 11-7/8% Senior Notes due October 1, 2010, principal amount at maturity of
$500.0 million, interest payable semiannually beginning on April 1, 2001,
redeemable at the Company's option on or after October 1, 2005;
(20) 12-3/8% Senior euro Notes due February 1, 2008; principal amount at
maturity of euro 300.0 million ($263.8 million), interest payable
semiannually beginning on August 1, 2001;
NTL Triangle:
(21) 11.2% Senior Discount Debentures due November 15, 2007, principal amount
at maturity of $517.3 million, interest payable semiannually beginning on
May 15, 2001, redeemable at NTL Triangle's option after November 15, 2000;
Diamond:
(22) 13-1/4% Senior Discount Notes due September 30, 2004, principal amount at
maturity of $285.1 million, interest payable semiannually from March 31,
2000, redeemable at Diamond's option after September 30, 1999;
(23) 11-3/4% Senior Discount Notes due December 15, 2005, principal amount at
maturity of $531.0 million, interest payable semiannually beginning on
June 15, 2001, redeemable at Diamond's option on or after December 15,
2000;
(24) 10-3/4% Senior Discount Notes due February 15, 2007, principal amount at
maturity of $420.5 million, interest payable semiannually beginning on
August 15, 2002, redeemable at Diamond's option on or after December 15,
2002;
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27
NTL (Delaware), Inc. and Subsidiaries
(25) 10% Senior Sterling Notes due February 1, 2008, issued by Diamond Holdings
plc, a wholly-owned subsidiary of Diamond, principal amount at maturity of
pound sterling 135.0 million ($191.6 million), interest payable
semiannually from August 1, 1998, redeemable at Diamond's option on or
after February 1, 2003; and
(26) 9-1/8% Senior Notes due February 1, 2008, issued by Diamond Holdings plc,
principal amount at maturity of $110.0 million, interest payable
semiannually from August 1, 1998, redeemable at Diamond's option on or
after February 1, 2003.
Management does not anticipate that the Company and its subsidiaries will
generate sufficient cash flow from operations to repay at maturity the entire
principal amount of the outstanding indebtedness of the Company and its
subsidiaries. Accordingly, the Company may be required to consider a number of
measures, including: (a) refinancing all or a portion of such indebtedness, (b)
seeking modifications to the terms of such indebtedness, (c) seeking additional
debt financing, which may be subject to obtaining necessary lender consents, (d)
seeking additional equity financing, or (e) a combination of the foregoing.
There can be no assurance that financing will be available on acceptable terms
or at all.
The Company's operations are conducted through its direct and indirect
wholly-owned subsidiaries. As a holding company, the Company holds no
significant assets other than cash and its investments in and advances to its
subsidiaries. The Company's ability to make scheduled interest and principal
payments when due to holders of its indebtedness may be dependent upon the
receipt of sufficient funds from its subsidiaries. In addition, NTL
Communications is a holding company that conducts its operations through its
respective subsidiaries. Accordingly, the ability of NTL Communications to make
scheduled interest and principal payments when due to holders of its
indebtedness may be dependent upon the receipt of sufficient funds from its
subsidiaries.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash used in operating activities was $85.4 million and $71.5 million in the
three months ended March 31, 2001 and 2000, respectively. Cash paid for interest
exclusive of amounts capitalized in the three months ended March 31, 2001 and
2000 was $203.6 million and $90.0 million, respectively. The remainder of this
change is primarily due to the increase in the net loss and changes in working
capital as a result of the timing of receipts and disbursements. A significant
component of the working capital change in the three months ended March 31,
2001 was the collection of annual amounts billed by Cablecom in December 2000.
The reduction in Cablecom's accounts receivable of $141.7 million was
principally due to these collections.
Purchases of fixed assets were $600.7 in 2001 and $359.2 in 2000 as a result of
the continuing fixed asset purchases and construction, including purchases and
construction by acquired companies.
The cash used for other assets of $97.2 million in 2001 was primarily for
investments in and loans to unconsolidated entities.
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NTL (Delaware), Inc. and Subsidiaries
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements contained herein constitute "forward-looking statements" as
that term is defined under the Private Securities Litigation Reform Act of 1995.
When used herein, the words, "believe," "anticipate," "should," "intend,"
"plan," "will," "expects," "estimates," "projects," "positioned," "strategy,"
and similar expressions identify such forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from those
contemplated, projected, forecasted, estimated or budgeted, whether expressed or
implied, by such forward-looking statements. Such factors include the following:
general economic and business conditions, the Company's ability to continue to
design networks, install facilities, obtain and maintain any required
governmental licenses or approvals and finance construction and development, all
in a timely manner at reasonable costs and on satisfactory terms and conditions,
as well as assumptions about customer acceptance, churn rates, overall market
penetration and competition from providers of alternative services, the impact
of new business opportunities requiring significant up-front investment, and
availability, terms and deployment of capital. The Company assumes no obligation
to update the forward-looking statements contained herein to reflect actual
results, changes in assumptions or changes in factors affecting such statements.
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