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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ___________
Commission file number: 33-83740
DIAMOND CABLE COMMUNICATIONS LIMITED
(Formerly known as Diamond Cable Communications PLC)
(Exact name of registrant as specified in the charter)
England and Wales N/A
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
Diamond Plaza, Daleside Road,
Nottingham NG2 3GG, England N/A
(Address of Principal Executive Offices) (Zip Code)
011-44-115-952-2222
(Registrant's Telephone Number, Including Area Code)
--------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
--------------------------------
Name of Each Exchange
Title of Each Class on Which Registered
None None
--------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
--------------------------------
None
(Title of Class)
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [X]
As of March 17, 2000, there were 59,138,851 shares of the Registrant's Ordinary
Shares of 2.5 pence each outstanding. The Registrant is an indirect wholly-owned
subsidiary of NTL Incorporated, and there is no market for the Registrant's
shares.
The Registrant meets the conditions set forth in General Instructions I(1)(a)
and I(1)(b) of Form 10-K and is filing this form with the reduced disclosure
format pursuant to General Instructions I(2)(b) and I(2)(c).
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DIAMOND CABLE COMMUNICATIONS LIMITED
------------------------------------
1999 FORM 10-K ANNUAL REPORT
----------------------------
TABLE OF CONTENTS
-----------------
PART I
------
Item 1 Business......................................................... 1
Item 2 Properties....................................................... 1
Item 3 Legal Proceedings................................................ 1
Item 4 Submission of Matters to a Vote of Security Holders.............. 1
PART II
-------
Item 5 Market for the Registrant's Common Equity and
Related Shareholder Matters................................ 1
Item 6 Selected Financial Data.......................................... 2
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................... 3
Item 7A Quantitative and Qualitative Disclosures About Market Risk....... 6
Item 8 Financial Statements and Supplementary Data...................... 6
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 6
PART III
--------
Item 10 Directors and Executive Officers of the Registrant................ 7
Item 11 Executive Compensation............................................ 7
Item 12 Security Ownership of Certain Beneficial Owners and Management.... 7
Item 13 Certain Relationships and Related Transactions.................... 7
PART IV
-------
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K........................................ 7
SIGNATURES................................................................ 9
This Annual Report on Form 10-K for the year ended December 31, 1999, at the
time of filing with the Securities and Exchange Commission, modifies and
supersedes all prior documents filed pursuant to Sections 13, 14 and 15(d) of
the Securities Exchange Act of 1934 for purposes of any offers or sales of any
securities after the date of such filing pursuant to any Registration Statement
or Prospectus filed pursuant to the Securities Act of 1933 which incorporates by
reference this Annual Report.
This Annual Report on Form 10-K contains "forward-looking statements" as that
term is defined under the provisions of the Private Securities Litigation Reform
Act of 1995. When used in this Form 10-K, 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 Registrant, 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, among others: general economic and business conditions, the
Registrant'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, Year 2000 readiness, and
availability, terms and deployment of capital.
PART I
------
ITEM 1 BUSINESS
- ------ --------
Diamond Cable Communications Limited (formerly Diamond Cable Communications Plc)
(the "Company") is a limited company incorporated under the laws of England and
Wales. The Company is a holding company which holds all of the shares of various
companies which operate broadband communications networks for telephone, cable
television and Internet services in the United Kingdom. The Company holds these
shares through an intermediate holding company, Diamond Holdings Limited
(formerly Diamond Holdings Plc) ("Diamond Holdings"). In this Annual Report on
Form 10-K, except as the context may otherwise require, references to the
Company refer to the Company and references to the "Group" refer to the Company
and its subsidiaries.
In May 1999, the Company and Diamond Holdings converted from public limited
companies to limited companies and thereby changed their names to Diamond Cable
Communications Limited and Diamond Holdings Limited, respectively.
The Company is an indirect wholly-owned subsidiary of NTL Incorporated ("NTL")
as a result of the completion of the share exchange on March 8, 1999. The
Company's executive office is located at Diamond Plaza, Daleside Road,
Nottingham NG2 3GG, England and its telephone number is 011-44-115-952-2222.
ITEM 2 PROPERTIES
- ------ ----------
The Group owns its head office and head-end/switch site in Nottingham and its
switch site in Shepshed, and leases or rents 28 additional properties for
administrative and sales offices, hub, switch and head-end sites, warehouses and
equipment sites. The Group believes that its facilities are presently adequate
to serve its existing customers.
ITEM 3 LEGAL PROCEEDINGS
- ------ -----------------
The Group is subject to legal proceedings and claims which arise in the ordinary
course of its business. In the opinion of management, the amount of ultimate
liability with respect to these actions will not materially affect the financial
position, results of operations or liquidity of the Group.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
Omitted pursuant to General Instruction I(2)(c) of Form 10-K.
PART II
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ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
- ------ ---------------------------------------------------------------------
The Company is an indirect wholly-owned subsidiary of NTL.
1
ITEM 6 SELECTED FINANCIAL DATA
- ------ -----------------------
The following table sets forth certain financial data for the years ended
December 31, 1999, 1998, 1997, 1996 and 1995. The information should be read in
conjunction with the consolidated financial statements and notes thereto
appearing elsewhere in this Form 10-K.
Year Ended December 31,
--------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(2) (1)(2)
(In thousands)
Statement Of Operations Data:
Revenues................................(UK Pound)119,476 (UK Pound)88,756 (UK Pound)60,305 (UK Pound)37,577 (UK Pound)15,993
Operating loss (30,726) (20,055) (16,344) (22,011) (13,192)
Net loss................................ (137,226) (84,022) (76,604) (35,830) (27,607)
Balance Sheet Data:
Working capital (UK Pound)30,948 (UK Pound)125,328 (UK Pound)52,890 (UK Pound)(10,804) (UK Pound)71,562
Property and equipment, net............. 518,056 465,866 365,636 277,301 163,721
Total assets............................ 757,770 744,621 556,357 416,819 374,172
Long-term debt including current portion 889,868 803,392 545,325 325,041 319,492
Shareholder's equity (deficiency)....... (243,555) (107,696) (22,511) 54,100 25,133
<FN>
Notes to Selected Financial Data
(1) The 1995 financial data includes the financial results of acquired
businesses from October 1, 1995.
(2) The Group raised additional equity financing of (UK Pound)27.0 million and
(UK Pound)64.6 million in the years ended December 31, 1995 and 1996,
respectively.
</FN>
2
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------ RESULTS OF OPERATIONS
---------------------------------------------------------------
Liquidity and Capital Resources
- -------------------------------
The Company issued senior discount notes in September 1994, December 1995 and
February 1997 (collectively, the "Discount Notes"). In February 1998, Diamond
Holdings issued two new series of notes (the "1998 Notes"). The 1998 Notes are
guaranteed by the Company as to payment of principal, interest and any other
amounts due. In connection with the issuance of the 1998 Notes, the Group
terminated its existing bank facility.
The further development and construction of the Group's broadband communications
network will require substantial capital investment. The Group currently
estimates that the additional capital expenditures and debt service requirements
of the Group, net of cash from operations in 2000 will be approximately (UK
Pound)50.0 million. These capital expenditures could vary significantly
depending on, among other things, the number of customers actually connected to
the network, the availability of construction resources, the impact of
competition from other cable or telecommunications operators or television
delivery platforms, and the pace of the Group's construction program. The Group
expects to use the (UK Pound)73.7 million cash and cash equivalents on hand,
which excludes the (UK Pound)50.6 million held on behalf of affiliates pursuant
to the Joint Purchasing Alliance Agreement, to meet its cash requirements.
To the extent that the amounts required for capital expenditures exceed the
estimates, or the Group's cash flow does not meet expectations, the amount of
cash requirements will increase. There can be no assurance that debt or equity
financing, if necessary, will be available to the Group on acceptable commercial
terms or at all.
Diamond Holdings has (UK Pound)135 million in principal amount of its 10% Senior
Notes due February 1, 2008 and $110.0 million in principal amount of its 9 1/8%
Senior Notes due February 1, 2008 outstanding. Interest on these notes is
payable semiannually on February 1 and August 1.
The Company has $285.1 million in principal amount at maturity of its 13 1/4%
Senior Discount Notes due September 30, 2004 (the "1994 Notes") outstanding.
Beginning October 1, 1999, interest accrues on the 1994 Notes and is payable
semiannually, commencing March 31, 2000, at a rate of 13 1/4% per annum.
The Company also has $531 million in principal amount at maturity of its 11 3/4%
Senior Discount Notes due December 15, 2005 (the "1995 Notes") outstanding. Cash
interest is not payable on the 1995 Notes prior to December 15, 2000.
Thereafter, interest will accrue on the 1995 Notes and will be payable
semiannually, commencing June 15, 2001 at a rate of 11 3/4% per annum.
Finally, the Company has $421 million in principal amount at maturity of its 10
3/4% Senior Discount Notes due February 15, 2007 (the "1997 Notes") outstanding.
Cash interest is not payable on the 1997 Notes prior to August 15, 2002.
Thereafter, interest will accrue on the 1997 Notes and will be payable
semiannually, commencing August 15, 2000, at a rate of 10 3/4% per annum.
Year 2000 Issue
- ---------------
The Group had a comprehensive Year 2000 project designed to identify and assess
the risks associated with its information systems, products, operations,
infrastructure, suppliers, and customers, and to develop, implement and test
remediation and contingency plans to mitigate these risks. To date, the Group
has not experienced any significant problems related to the Year 2000.
Because the Group uses a variety of information systems and has additional
systems embedded in its operations and infrastructure, it cannot be sure that
all of its systems will continue to work together in a Year 2000-ready fashion.
Furthermore, the Group cannot be sure that it will not suffer business
interruptions, either because of its own Year 2000 problems or those of
third-parties upon whom the Group is reliant for services. Therefore, a problem
that has not yet been identified may arise and could have adverse consequences
to the Group.
Consolidated Statement of Cash Flows
- ------------------------------------
Net cash provided by operating activities amounted to (UK Pound)63.8 million,
(UK Pound)31.4 million and (UK Pound)20.9 million for the years ended December
31, 1999, 1998 and 1997, respectively. In 1999, net cash provided by operating
activities includes the Joint Purchasing Alliance Agreement deposit of (UK
Pound)50.6 million from various subsidiaries of NTL, foreign
3
exchange losses of (UK Pound)20.8 million compared to gains of (UK Pound)(7.2)
million in 1998 and accretion on the Discount Notes of (UK Pound)69.5 million
compared to (UK Pound)63.8 million in 1998.
Net cash used in investing activities amounted to (UK Pound)101.4 million, (UK
Pound)134.3 million and (UK Pound)110.1 million for the years ended December 31,
1999, 1998 and 1997, respectively. Net cash used in investing activities in 1999
and 1998 includes purchases of fixed assets of (UK Pound)101.5 million and (UK
Pound)134.4 million, respectively as a result of continuing fixed asset
purchases.
Net cash (used in) provided by financing activities amounted to (UK Pound)(2.7)
million, (UK Pound)193.1 million and (UK Pound)146.6 million for the years ended
December 31, 1999, 1998 and 1997, respectively. Net cash used in financing
activities in 1999 includes capital lease payments of (UK Pound)(2.6) million in
1999. Net cash provided by financing activities in 1998 includes the proceeds
from the issuance of debt of (UK Pound)202.4 million offset by financing costs
of (UK Pound)7.0 million.
Results of Operations
- ---------------------
Revenue was (UK Pound)119.5 million, (UK Pound)88.8 million and (UK Pound)60.3
million for the years ended December 31, 1999, 1998 and 1997, respectively,
representing increases of 34.6% from 1998 to 1999 and 47.2% from 1997 to 1998.
This growth is primarily attributable to increases in the number of telephone
lines and cable television customers, together with the provision of new
services. These trends are expected to continue for the foreseeable future.
Operating costs were (UK Pound)42.7 million, (UK Pound)28.4 million and (UK
Pound)21.8 million for the years ended December 31, 1999, 1998 and 1997,
respectively, representing increases of 50.2% from 1998 to 1999 and 30.1% from
1997 to 1998. These increases are predominantly attributable to increases in
interconnection costs and programming costs as a result of growth in telephone
lines and cable television customers.
Selling, general and administrative expenses were (UK Pound)43.6 million, (UK
Pound)37.2 million and (UK Pound)27.2 million for the years ended December 31,
1999, 1998 and 1997, respectively, representing increases of 17.3% from 1998 to
1999 and 36.6% from 1997 to 1998. These increases are attributable to increased
administration and customer acquisition costs associated with the expansion of
the Group's customer base together with additional franchise license costs which
commenced in 1999. Additionally, beginning in the fourth quarter of 1999, a
subsidiary of NTL charged the company (UK Pound)3.1 million for providing
management, financial, legal and technical services to the Company. As a
percentage of total revenues, however, these costs were 36.5% in 1999, 41.9% in
1998 and 45.1% in 1997.
Depreciation and amortization expense was (UK Pound)55.0 million, (UK Pound)43.2
million and (UK Pound)27.6 million for the years ended December 31, 1999, 1998
and 1997, respectively, representing increases of 27.3% from 1998 to 1999 and
56.5% from 1997 to 1998. These increases are attributable to the increasing cost
of the Group's network and the related additional depreciation.
Other expenses of (UK Pound)8.9 million for the year ended December 31, 1999
relate to costs incurred in connection with the Share Exchange Agreement with
NTL, including fees paid to financial advisors to the Group.
Interest expense and amortization of debt discount and expenses was (UK
Pound)98.4 million, (UK Pound)84.6 million and (UK Pound)66.4 million for the
years ended December 31, 1999, 1998 and 1997, respectively, representing
increases of 16.2% from 1998 to 1999 and 27.5% from 1997 to 1998. The 1999
interest expense includes the accretion of the discount on the Discount Notes of
(UK Pound)69.5 million, interest on the 1994 and 1998 Notes of (UK Pound)25.6
million, amortization of deferred financing costs of (UK Pound)2.5 million and
other interest expense of (UK Pound)0.8 million. The 1998 interest expense
includes the accretion of the discount on the Discount Notes of (UK Pound)63.8
million, interest on the 1998 Notes of (UK Pound)17.6 million, amortization of
deferred financing costs of (UK Pound)2.3 million and other interest expense of
(UK Pound)0.9 million. The 1997 interest expense includes the accretion of the
discount on the Discount Notes of (UK Pound)55.0 million, amortization of
deferred financing costs of (UK Pound)2.5 million, commitment fees of (UK
Pound)0.9 million and other interest expense of (UK Pound)1.1 million. In
addition, interest expense in 1997 includes (UK Pound)6.9 million for the
write-off of financing costs related to a senior bank facility which was
terminated in February 1998 as a condition of the issue of the 1998 Notes.
A substantial portion of the Group's existing debt obligations are denominated
in US dollars, while the Group's revenues and expenses are generated and stated
in UK pounds sterling. For the years ended December 31, 1999 and 1998, the Group
recognized a net foreign exchange loss of (UK Pound)18.9 million and a net
foreign exchange gain of (UK Pound)7.2 million, respectively, primarily due to
the unrealized losses and gains on the translation of its Discount Notes and
1998 Notes. For the year ended December 31, 1997, the Group recognized a net
foreign exchange loss of (UK Pound)12.6 million primarily due to the unrealized
loss on the translation of its Discount Notes.
4
The Company entered into a foreign exchange forward contract on June 23, 1997
for settlement on June 25, 1998 to sell (UK Pound)50 million at a rate of
$1.6505 to (UK Pound)1. The Company also entered into a foreign exchange forward
contract on June 27, 1997 for settlement on July 1, 1998 to sell (UK Pound)50
million at a rate of $1.6515 to (UK Pound)1. On June 16, 1998, two offsetting
agreements were entered into at rates of $1.6326 and $1.6322 to (UK Pound)1. The
offsetting contracts were settled on June 17, 1998 with a payment of (UK
Pound)1.1 million to the Company. Because of changes in prevailing rates, the
Company recorded for the year ended December 31, 1997 an unrealized gain of
approximately (UK Pound)0.7 million on the two (UK Pound)50 million sell forward
contracts. For the year ended December 31, 1998, the Company recorded a realized
gain of approximately (UK Pound)0.4 million on the settlement of the offsetting
contracts reflecting the cash payment on settlement of the contracts in excess
of the gain recorded in 1997. The Company entered into a foreign exchange
forward contract on November 1, 1996 for settlement on May 6, 1997 to sell (UK
Pound)200 million at a rate of $1.6289 to (UK Pound)1. On January 31, 1997 an
offsetting agreement was entered into at a rate of $1.6014 to (UK Pound)1. The
offsetting contracts were settled on February 6, 1997 with a payment of
approximately (UK Pound)3.4 million to the Company. During the first quarter of
1997, the Company recorded a realized gain of approximately (UK Pound)11.5
million on the settlement of the two offsetting contracts, reflecting the cash
payment on settlement of the contracts in excess of the unrealized loss of
approximately (UK Pound)8.1 million recognized during 1996. The Company
continues to monitor conditions in the foreign exchange market and may from time
to time enter into foreign currency contracts based on its assessment of foreign
currency market conditions and its effect on the Company's results of operations
and financial condition.
5
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------- ----------------------------------------------------------
Market Risk
- -----------
The Group is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. Since 1998, the Group has not
entered into derivatives or other financial instruments for trading or
speculative purposes. The Group has entered into financial instruments to manage
and reduce the impact of changes in foreign currency exchange rates, primarily
US dollar/UK pound sterling. The counterparties are major financial
institutions. The Group does not enter into derivatives or financial instruments
to manage or reduce the impact of changes in interest rates.
Foreign Exchange Risk
- ---------------------
The principal form of market risk to which the Group is exposed is foreign
exchange rate risk. The Company's Discount Notes and Diamond Holdings' US
dollar-denominated 1998 Notes, which together constitute the substantial portion
of the Group's existing debt obligations, are denominated in US dollars, while
the Group's revenues are generated and stated in UK pounds sterling.
The Group's results have in the past been affected by the foreign exchange
contracts described above, which the Company entered into based on its
assessment of foreign currency market conditions and a desire to manage currency
exchange exposure risks associated with its outstanding US dollar-denominated
debt instruments. In the future, the Group may from time to time enter into
similar foreign currency contracts based on its assessment of foreign currency
market conditions and its effect on the Group's operations and financial
condition. Therefore, changes in currency exchange rates may continue to have a
material effect on the results of operations of the Group and the Group's
ability to satisfy its obligations, including obligations under outstanding debt
instruments, as they become due.
Interest Rate Risk
- ------------------
The Group is exposed to interest rate risk on the fair market value of its
long-term fixed interest rate debt. Generally, the fair market value of fixed
interest rate debt will increase as interest rates fall and decrease as interest
rates rise. In the following table, fair values were determined from quoted
market prices.
Interest Rate Sensitivity
Principal Amount by Expected Maturity
Average Interest Rate
Fair
Value
2000 2001 2002 2003 2004 Thereafter Total 12/31/99
---- ---- ---- ---- ------- --------------- ------------- -------------
(in millions)
Long-term Debt, Including Current Portion...
U.S. dollars
Fixed Rate................................ $285 $1,062 $1,347 $1,254
Average Interest Rate..................... 13.25% 11.08%
Average Forward Exchange Rate............. .6173 .6083
U.K. pound
Fixed Rate................................ (UK Pound)135 (UK Pound)135 (UK Pound)135
Average Interest Rate..................... 10%
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
The consolidated financial statements of the Group are filed under this Item
commencing on page F-1 of this Annual Report on Form 10-K.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ FINANCIAL DISCLOSURE
---------------------------------------------------------------
Not applicable.
6
PART III
--------
ITEMS 10, 11, 12 AND 13
- -----------------------
Omitted, pursuant to General Instruction I(2)(c) of Form 10-K.
PART IV
-------
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- ------- ----------------------------------------------------------------
(a) The following Consolidated Financial Statements of Diamond Cable
Communications Limited are filed as part of this report:
Page
Report of Independent Auditors.......................................F-2
Consolidated Statements of Operations for each of the years
in the three year period ended December 31, 1999..................F-4
Consolidated Balance Sheets at December 31, 1999 and 1998............F-5
Consolidated Statement of Shareholder's Deficiency for each of
the years in the three year period ended December 31, 1999........F-6
Consolidated Statements of Cash Flows for each of the years
in the three year period ended December 31, 1999..................F-7
Notes to the Consolidated Financial Statements.......................F-8
(b) (i) The following financial statement schedule required to be filed by
Items 8 and 14(d) of Form 10-K is filed as part of this report.
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and,
therefore have been omitted.
(c) The Company filed no Current Reports on Form 8-K during the three month
period ended December 31, 1999.
(d) Exhibits:
ITEM NO. DESCRIPTION
- -------- -----------
*3.1 Memorandum and Articles of Association of Diamond Cable
Communications Plc
*3.2 Memorandum and Articles of Association of Diamond Holdings Plc.
(incorporated by reference to the Company's registration statement
on Form S-4 (Exhibit No. 3.2)).
*10.1 Indenture dated as of February 27, 1997 between Diamond Cable
Communications Plc and The Bank of New York, as Trustee.
*10.2 Senior Notes Depositary Agreement, February 27, 1997 between Diamond
Cable Communications Plc and the Bank of New York, as Book-Entry
Depositary.
*10.3 Shareholders Agreements, dated as of September 1, 1994 among ECCP,
AmSouth, as trustee for the McDonald Interests, CGT Family
Corporation, GS Capital Partners, L.P., William W. McDonald and
Diamond Cable Communications Plc. (incorporated by reference to the
Company's registration statement on Form S-1 (File No. 33-83740,
Exhibit No. 10.1)).
*10.4 Management Agreement, dated July 5, 1994, between ECE Management
Company and Diamond Cable (Nottingham) Limited (incorporated by
reference to the Company's registration statement on Form S-1 (File
No. 33-83740, Exhibit No. 10.2)).
7
*10.5 Service Agreement, dated May 17, 1994, between Gary L. Davis and
Diamond Cable (Nottingham) Limited (incorporated by reference
Diamond Cable (Nottingham) Limited (incorporated by reference
Company's registration statement on Form S-1 (File No. 33-83740,
Exhibit No. 10.3)).
*10.6 Service Contract, dated March 1, 1994, between Duncan Craig and
Diamond Cable (Nottingham) Limited (incorporated by reference to the
Company's registration statement on Form S-1 (File No. 33-83740,
Exhibit No. 10.4)).
*10.7 Service Contract, dated as of April 1, 1996, between Diamond Cable
(Nottingham) Ltd. and Stephen Rowles, filed as an exhibit to the
Company's 1996 Annual Report on Form 10-K, File No. 33-83740, and
incorporated by reference herein.
*10.8 Service Agreement, dated July 1, 1995, between Diamond Cable
Communications Plc and Nicholas Millard, filed as an exhibit to the
Company's 1996 Annual Report on Form 10-K, File No. 33-83740, and
incorporated by reference herein.
*10.9 Senior Management Option Scheme, adopted on October 29, 1994, filed
as an exhibit to the Company's 1994 Annual Report on Form 10-K, File
No. 33- 83740, and incorporated by reference herein.
*10.10 Form of Subscription Agreement among Company and Shareholders
relating to equity commitment (incorporated by reference to the
Company's registration statement on Form S-1 (File No. 33-98374,
Exhibit No. 10.7)).
*10.11 Form of Indenture, dated as of December 15, 1995, between Diamond
Cable Communications Plc and The Bank of New York, as Trustee
(incorporated by reference to the Company's registration statement
on Form S-1 (File No. 33-98374, Exhibit No. 4.1)).
*10.12 Form of Senior Notes Depositary Agreement, dated as of December 16,
1995, between Diamond Cable Communications Plc and The Bank of New
York, as Book-Entry Depositary (incorporated by reference to the
Company's registration statement on Form S-1 (File No. 32-98374,
Exhibit No. 4.2)).
*10.13 Indenture, dated as of September 29, 1994, between Diamond Cable
Communications Plc and The Bank of New York, as Trustee
(incorporated by reference to the Company's registration statement
on Form S-1 (File No. 33- 83740, Exhibit No. 4.1)).
*10.14 Senior Notes Depositary Agreement, dated as of September 29, 1994,
between Diamond Cable Communications Plc and The Bank of New York,
as Book-Entry Depositary (incorporated by reference to the Company's
registration statement on Form S-1 (File No. 33-83740; Exhibit No.
4.2)).
*10.15 First Supplemental Indenture, dated as of May 31, 1996 between
Diamond Cable Communications Plc and The Bank of New York, as
Trustee (incorporated by reference to the Company's registration
statement on Form S-1 (File No. 33-83740; Exhibit No. 4.3)).
*10.16 Service Contract, dated September 18, 1996, between Diamond Cable
(Nottingham) Ltd. and Stephen Rowles (incorporated by reference to
the Company's registration statement on Form S-4 (Exhibit No. 10.9).
*10.17 Supplemental Management Agreement, dated February 27, 1997, among
Diamond Cable Communications Plc, Diamond Cable Communications (UK)
Ltd and ECE Management International, LLC.
*10.18 Indenture, dated as of February 6, 1998, among Diamond Holdings Plc,
Diamond Cable Communications Plc and The Bank of New York, as
Trustee (incorporated by reference to the Company's registration
statement on Form S-4 (Exhibit No. 4.1)).
*10.19 Senior Note Depositary Agreement, dated February 6, 1998, among
Diamond Holdings, The Bank of New York, as Global Depositary, and
the Owners of Book-Entry Interests (incorporated by reference to the
Company's registration statement on Form S-4 (Exhibit No. 4.2)).
*21.1 Subsidiaries of Registrant (incorporated by reference to the
Company's registration statement on Form S-1 (File No. 33-98374,
Exhibit No. 21.1)).
27.1 Financial Data Schedule
*99.1 Share Exchange Agreement among NTL Incorporated and the Shareholders
of Diamond Cable Communications Plc, dated as of June 16, 1998
(incorporated by reference to the Company's 1998 Form 10-K, filed on
March 31, 1999)
*99.2 Amendment No. 1, dated as of December 21, 1998, to the Share
Exchange Agreement among NTL Incorporated and the Shareholders of
Diamond Cable Communications Plc, dated as of June 16, 1998
(incorporated by reference to the Company's 1998 Form 10-K, filed on
March 31, 1999)
* Previously filed or incorporated by reference to a concurrent filing.
8
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.
Diamond Cable Communications Limited
-----------------------------------------------
(Registrant)
By /s/ Leigh C. Wood
-----------------------------------------------
Leigh C. Wood
Chairman of the Board
(Principal Executive Officer)
March 27, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Leigh C. Wood
- -----------------------
Leigh C. Wood Chairman of the Board and March 27, 2000
Director (Principal
Executive Officer)
/s/ David Kelham
- -----------------------
David Kelham Director (Principal March 27, 2000
Financial and
Accounting Officer)
/s/ Robert Mackenzie
- -----------------------
Robert Mackenzie Secretary and Director March 27, 2000
9
FORM 10-K - ITEM 14(a)(1) and (2)
---------------------------------
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
The following consolidated financial statements of Diamond Cable Communications
Limited are included in Item 8:
Page
Report of Independent Auditors....................................... F-2
Consolidated Statements of Operations for each of the years
in the three year period ended December 31, 1999.................. F-4
Consolidated Balance Sheets at December 31, 1999 and 1998............ F-5
Consolidated Statement of Shareholder's Deficiency for each of
the years in the three year period ended December 31, 1999........ F-6
Consolidated Statements of Cash Flows for each of the years
in the three year period ended December 31, 1999.................. F-7
Notes to the Consolidated Financial Statements....................... F-8
F-1
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholder
Diamond Cable Communications Limited
We have audited the accompanying consolidated balance sheet of Diamond Cable
Communications Limited as of December 31, 1999 and the related consolidated
statements of operations, shareholder's deficiency and cash flows for the year
then ended. Our audit also included the financial statement schedule for the
year ended December 31, 1999 listed in the index at Item 14 (b)(i). These
financial statements and schedule are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Diamond
Cable Communications Limited as of December 31, 1999 and the consolidated
results of its operations and its consolidated cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule for the
year ended December 31, 1999, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Ernst & Young
Registered Auditors
Nottingham, England
March 27, 2000
F-2
INDEPENDENT AUDITORS' REPORT
To the Shareholders
Diamond Cable Communications Limited (formerly Diamond Cable Communications Plc)
We have audited the accompanying consolidated balance sheet of Diamond
Cable Communications Limited and subsidiaries (the "Company") as of December 31,
1998 and the related consolidated statements of operations, shareholders'
deficit and cash flows for each of the years in the two year period ended
December 31, 1998. Our audits also included the financial statement schedule for
each of the years in the two year period ended December 31, 1998, as listed in
Item 14(b)(i). These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1998 and the results of their operations and their cash flows
for each of the years in the two year period ended December 31, 1998 in
conformity with generally accepted accounting principles in the United States of
America. Also, in our opinion, the related financial statement schedule for each
of the years in the two year period ended December 31, 1998, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
KPMG
Chartered Accountants
Registered Auditors
Nottingham, England
March 30, 1999
F-3
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
(in (UK Pound)000's)
Year ended December 31,
1999 1998 1997
--------------------- ------------------- --------------------
Revenue ..................................................... (UK Pound)119,476 (UK Pound)88,756 (UK Pound)60,305
-------------------- ------------------ -------------------
Costs and expenses
Operating................................................ 42,693 28,416 21,837
Selling, general and administrative...................... 43,569 37,157 27,192
Depreciation and amortization............................ 55,047 43,238 27,620
Other expenses........................................... 8,893 - -
--------------------- ------------------- --------------------
150,202 108,811 76,649
--------------------- ------------------- --------------------
Operating loss............................................... (30,726) (20,055) (16,344)
Other income (expense)
Interest income.......................................... 10,769 13,084 6,440
Interest expense and amortization of
debt discount and expenses........................... (98,358) (84,626) (66,367)
Foreign exchange (losses) gains, net..................... (18,911) 7,163 (12,555)
Unrealized gains on derivative financial instruments..... - - 669
Realized gains on derivative financial instruments....... - 412 11,553
--------------------- ------------------- --------------------
Net loss..................................................... (UK Pound)(137,226) (UK Pound)(84,022) (UK Pound)(76,604)
===================== =================== ====================
See notes to consolidated financial statements
F-4
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
CONSOLIDATED BALANCE SHEETS
(in (UK Pound)000's except share data)
December 31,
1999 1998
---------------------- --------------------
Assets
- ------
Current assets
Cash and cash equivalents.................................................... (UK Pound)124,348 (UK Pound)164,738
Trade receivables - less allowance for doubtful accounts
of (UK Pound)4,100 (1999) and (UK Pound)4,775 (1998).................... 14,050 9,873
Due from affiliates.......................................................... 2,387 -
Other 4,350 2,229
--------------------- -------------------
Total current assets.................................................... 145,135 176,840
Property and equipment - net ...................................................... 518,056 465,866
Deferred financing costs - net of accumulated amortization of
(UK Pound)7,288 (1999) and (UK Pound)4,830 (1998)............................ 17,864 20,322
Goodwill - net of accumulated amortization of (UK Pound)20,613 (1999) and
(UK Pound)15,764 (1998)...................................................... 76,347 81,196
Franchise costs - net of accumulated amortization of (UK Pound)248 (1999) and
(UK Pound)142 (1998)......................................................... 368 397
--------------------- -------------------
Total assets ...................................................................... (UK Pound)757,770 (UK Pound)744,621
===================== ===================
Liabilities and shareholder's deficiency
- ----------------------------------------
Current liabilities
Accounts payable............................................................. (UK Pound)31,158 (UK Pound)28,514
Accounts payable deposit..................................................... 50,558 -
Interest payable............................................................. 14,060 8,140
Current portion of long-term debt............................................ 2,730 2,587
Other 15,681 12,271
--------------------- -------------------
Total current liabilities............................................... 114,187 51,512
Long-term debt
Notes payable................................................................ 882,805 793,917
Capital lease obligations.................................................... 2,129 4,580
Mortgage loan................................................................ 2,204 2,308
--------------------- -------------------
Total long-term debt.................................................... 887,138 800,805
Commitments and contingent liabilities
Shareholder's deficiency:
Ordinary shares: 70,000,000 authorized; issued and outstanding
59,138,851 (1999) and 59,138,791 (1998)................................. 1,478 1,478
Non-voting deferred shares:
6 authorized; issued and outstanding none (1999) and 6 (1998)........... - -
Additional paid-in-capital................................................... 134,466 134,466
Accumulated other comprehensive loss......................................... - (1,367)
Accumulated deficit.......................................................... (379,499) (242,273)
--------------------- -------------------
(243,555) (107,696)
--------------------- -------------------
Total liabilities and shareholder's deficiency..................................... (UK Pound)757,770 (UK Pound)744,621
===================== ===================
See notes to consolidated financial statements
F-5
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDER'S DEFICIENCY
(in (UK Pound)000's except share data)
Additional
Non-voting Paid-
Ordinary Shares Deferred Shares in-capital
--------------------------- ------------------- ------------------
Shares Par Shares Par
------ --- ------ ---
Balance at January 1, 1997........59,138,791 (UK Pound)1,478 6 (UK Pound)- (UK Pound)134,466
Unrealized loss on securities..... - - - - -
Net loss.......................... - - - - -
Comprehensive loss................ - - - - -
---------- ---------------- ----- ----------- -----------------
Balance at December 31, 1997......59,138,791 1,478 6 - 134,466
Unrealized loss on securities..... - - - - -
Net loss.......................... - - - - -
Comprehensive loss................ - - - - -
---------- ---------------- ----- ----------- -----------------
Balance at December 31, 1998......59,138,791 1,478 6 - 134,466
Redesignation of deferred
shares......................... 60 - (6) - -
Unrealized gain on securities..... - - - - -
Net loss.......................... - - - - -
Comprehensive loss................ - - - - -
---------- ---------------- ----- ----------- -----------------
Balance at December 31, 1999......59,138,851 (UK Pound)1,478 - (UK Pound)- (UK Pound)134,466
========== =============== ===== =========== =================
Accumulated
other Total
Compre- Compre- Shareholder's
hensive hensive Accumulated Equity
Loss Loss Deficit (Deficiency)
----------------- --------------- ----------------- -------------------
Balance at January 1, 1997........ (UK Pound)(197) (UK Pound)(81,647) (UK Pound)54,100
Unrealized loss on securities..... (UK Pound)(7) (7) - (7)
Net loss.......................... (76,604) - (76,604) (76,604)
------------------
Comprehensive loss................ (UK Pound)(76,611) - - -
------------------ -------------- ------------------ ------------------
Balance at December 31, 1997...... (204) (158,251) (22,511)
Unrealized loss on securities..... (UK Pound)(1,163) (1,163) - (1,163)
Net loss.......................... (84,022) - (84,022) (84,022)
------------------
Comprehensive loss................ (UK Pound)(85,185) - - -
------------------ -------------- ------------------ ------------------
Balance at December 31, 1998...... (1,367) (242,273) (107,696)
Redesignation of deferred
shares......................... - - - -
Unrealized gain on securities..... (UK Pound)1,367 1,367 - 1,367
Net loss.......................... (137,226) - (137,226) (137,226)
------------------
Comprehensive loss................(UK Pound)(135,859) - - -
------------------ -------------- ------------------ ------------------
Balance at December 31, 1999...... (UK Pound) - (UK Pound)(379,499)(UK Pound)(243,555)
================== ============== ================== ==================
See notes to consolidated financial statements
F-6
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in (UK Pound)000's)
Year Ended December 31,
1999 1998 1997
------------------ ----------------- ------------------
Operating activities
Net loss................................................................(UK Pound)(137,226) (UK Pound)(84,022) (UK Pound)(76,604)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization....................................... 55,047 43,238 27,620
Foreign exchange losses (gains), net................................ 20,779 (7,151) 11,714
Loss on sale of assets.............................................. - - 110
Provision of losses on accounts receivable.......................... 1,974 1,987 1,097
Amortization of deferred financing costs............................ 2,458 2,203 9,301
Accretion of notes payable discount................................. 69,541 63,826 55,038
Change in operating assets and liabilities:
Trade receivables............................................... (6,151) (3,291) (3,277)
Due from affiliates............................................. (2,387) - -
Other current assets............................................ (2,121) 2,241 (566)
Accounts payable................................................ 3,498 4,339 4,255
Accounts payable deposit........................................ 50,558 - -
Interest payable................................................ 5,920 8,140 -
Other current liabilities....................................... 1,892 (102) (7,812)
------------------ ----------------- ------------------
Net cash provided by operating activities............ 63,782 31,408 20,876
------------------ ----------------- ------------------
Investing activities
Purchase of property and equipment.................................. (101,475) (134,383) (110,145)
Proceeds from disposition of property and equipment................. 37 69 62
Cash paid for franchises............................................ - - (3)
------------------ ----------------- ------------------
Net cash used in investing activities................ (101,438) (134,314) (110,086)
------------------ ----------------- ------------------
Financing activities
Proceeds from issuance of debt...................................... - 202,381 153,691
Debt financing costs................................................ - (6,968) (5,375)
Principal payments.................................................. (155) (37) (54)
Capital lease payments.............................................. (2,579) (2,249) (1,676)
------------------ ----------------- ------------------
Net cash (used in) provided by financing activities.. (2,734) 193,127 146,586
------------------ ----------------- ------------------
Effect of exchange rate changes on cash and
cash equivalents.................................................... - (1,163) (7)
------------------ ----------------- ------------------
(Decrease) increase in cash and cash equivalents........................ (40,390) 89,058 57,369
Cash and cash equivalents at beginning of year.......................... 164,738 75,680 18,311
------------------ ----------------- ------------------
Cash and cash equivalents at end of year................................ (UK Pound)124,348 (UK Pound)164,738 (UK Pound)75,680
================== ================= ==================
See notes to consolidated financial statements
F-7
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND NTL INCORPORATED ACQUISITION
Diamond Cable Communications Limited (formerly Diamond Cable Communications
Plc) (the "Company") is a holding company which holds all of the shares of
various companies which operate broadband communications networks for
telephone, cable television and Internet services in the United Kingdom
(the "UK"). The Company holds these shares through an intermediate holding
company, Diamond Holdings Limited (formerly Diamond Holdings Plc) ("Diamond
Holdings"). When used herein, the "Group" refers to the Company and its
subsidiaries.
In May 1999, the Company and Diamond Holdings converted from public limited
companies to limited companies and thereby changed their names to Diamond
Cable Communications Limited and Diamond Holdings Limited, respectively.
On March 8, 1999, the share exchange was completed whereby all of the
holders of the Company's ordinary and deferred shares exchanged their
shares for newly issued common stock of NTL Communications Corp. (formerly
NTL Incorporated). NTL Communications Corp. is a wholly-owned subsidiary of
NTL Incorporated ("NTL"). As a result, the Company became an indirect
wholly-owned subsidiary of NTL. Other expenses of (UK Pound)8.9 million
consist of costs incurred in connection with the Share Exchange Agreement,
including fees paid to Goldman, Sachs & Co. and Columbia Management for
their role as joint financial advisors to the Company in examining
potential business opportunities and other strategic alternatives leading
up to the share exchange.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Foreign Currency Transactions
The primary economic environment in which the Group operates is the UK and
hence its reporting currency is the UK Pound Sterling ((UK Pound)).
Transactions in foreign currencies are recorded using the rate of exchange
in effect on the date of the transaction. Foreign currency transaction
gains and losses are included in the results of operations as incurred.
Monetary assets and liabilities denominated in foreign currencies are
translated using the rate of exchange in effect on the balance sheet date.
Statement of operations amounts have been translated using the average
exchange rate for the period. Foreign exchange forward contracts which do
not hedge firm commitments are recorded at market value with reported gains
and losses recorded in the results of operations.
Cash Equivalents
Cash equivalents include highly liquid investments with original maturity
of three months or less that are readily convertible to cash. Cash
equivalents of (UK Pound)121.5 million and (UK Pound)161.7 million at
December 31, 1999 and 1998, respectively, consist principally of deposits
in a unit fund.
Deferred Financing Costs
Deferred financing costs were incurred in connection with the issuance of
debt and are amortized over the term of the debt as an adjustment of yield.
F-8
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property and Equipment
Property and equipment is stated at cost. Improvements that extend asset
lives are capitalized; other repairs and maintenance charges are expensed
as incurred. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets. Estimated useful lives are as
follows: operating equipment - 6 to 40 years and other equipment - 3 to 50
years.
Goodwill
Goodwill is the excess of the purchase price over the fair value of net
assets acquired in business combinations accounted for as purchases.
Goodwill is amortized on a straight-line basis over the periods benefited
of 20 years.
Franchise Costs
Costs relating to unsuccessful applications were charged to operations as
incurred. Costs relating to successful applications are amortized over the
franchise term, generally 23 years.
Valuation of Long-Lived Assets
Long-lived assets, including property and equipment, goodwill and franchise
costs are reviewed for impairment 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 and the carrying value of the asset.
Interest Rate Swaps
Interest rate swaps, which were not designated to an asset or liability,
were recorded on the balance sheet in other assets or other liabilities at
their market value. Any gains or losses were recognized in the consolidated
statement of operations. Interest rate swaps which were designated to
assets and liabilities were accounted for on an accrual basis.
Revenue Recognition
Revenue is recognized at the time the service is provided to the customer.
Charges for services that are billed in advance are deferred and recognized
when earned.
Cable System Costs, Expenses and Revenues
The Group accounts for costs, expenses and revenues applicable to the
construction and operation of its cable television, telephone and
telecommunications systems in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 51, "Financial Reporting by Cable
Television Companies."
Advertising Expense
The Group charges the cost of advertising to expense as incurred.
Advertising costs were (UK Pound)493,000, (UK Pound)1,000,000 and (UK
Pound)490,000 in 1999, 1998 and 1997, respectively.
Pension Costs
The Group operates a defined contribution pension plan and also contributes
up to specified limits to the third party plan of the employee's choice.
Pension costs of (UK Pound)307,000, (UK Pound)202,000 and (UK Pound)196,000
in 1999, 1998 and 1997 respectively, represent the contributions payable to
the selected plans.
Segment Reporting
The Group has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Group's operations are a single
segment.
Reclassifications
Certain prior year amounts have been reclassified to conform with current
year presentation.
F-9
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
statement, which establishes accounting and reporting standards for
derivatives and hedging activities, is required to be adopted by the Group
effective January 1, 2001. Upon the adoption of SFAS No. 133, all
derivative instruments are required to be recognized in the statement of
financial position as either assets or liabilities and measured at fair
value. The Company is evaluating the impact that the adoption of SFAS No.
133 will have on its financial position and results of operations.
4. JOINT PURCHASING ALLIANCE AGREEMENT
The Company and NTL entered into a Joint Purchasing Alliance Agreement (the
"Alliance Agreement") on March 5, 1999, pursuant to which the Company acts
as purchasing agent on behalf of a number of subsidiaries of NTL. Under the
terms of the Alliance Agreement, on March 8, 1999, the Company received a
deposit of (UK Pound)137 million from various subsidiaries of NTL. Funds
held by the Company under the Alliance Agreement are included in the
balance sheet as Cash and Cash Equivalents and Accounts Payable Deposit.
5. PROPERTY AND EQUIPMENT
Property and equipment consists of (in (UK Pound)000's):
December 31,
1999 1998
---- ----
Operating equipment......................................... (UK Pound)624,013 (UK Pound)532,296
Other equipment............................................. 25,103 22,057
Construction in progress.................................... 11,153 4,200
----------------- -----------------
660,269 558,553
Accumulated depreciation.................................... (142,213) (92,687)
----------------- -----------------
(UK Pound)518,056 (UK Pound)465,866
================= =================
The estimated useful life of set-top boxes and initial subscriber
installations was reduced from seven years to three years with effect from
January 1, 1998. The effect of the change in estimated useful life was to
reduce net income for the year ended December 31, 1998 by (UK Pound)6.6
million.
6. FINANCIAL INSTRUMENTS
Interest Rate Swap
On July 3, 1995, an entity subsequently acquired by the Company entered
into a five year agreement to swap a floating interest rate calculated at
sterling LIBOR for a fixed rate of 8.79%. Following acquisition by the
Company, the interest rate swap was retained and was recorded on the
consolidated balance sheet in other liabilities at its market value at
December 31, 1997 of (UK Pound)1.2 million. The interest rate swap was
terminated in March 1998, with a payment by the Company of (UK Pound)1.2
million.
Foreign Exchange Forward Contracts
The Company entered into a foreign exchange forward contract on June 23,
1997 for settlement on June 25, 1998 to sell (UK Pound)50 million at a rate
of $1.6505 to (UK Pound)1. The Company also entered into a foreign exchange
forward contract on June 27, 1997 for settlement on July 1, 1998 to sell
(UK Pound)50 million at a rate of $1.6515 to (UK Pound)1. On June 16, 1998,
two off-setting agreements were entered into at rates of $1.6326 and
$1.6322 to (UK Pound)1. The offsetting contracts were settled on June 17,
1998 with a payment of (UK Pound)1.1 million to the Company. Because of
changes in prevailing rates, the Company recorded for the year ended
December 31, 1997 an unrealized gain of approximately (UK Pound)0.7 million
on the two (UK Pound)50 million sell forward contracts. For the year ended
December 31,
F-10
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1998, the Company recorded a realized gain of approximately (UK Pound)0.4
million on the settlement of the offsetting contracts reflecting the cash
payment on settlement of the contracts in excess of the gain recorded in
1997.
The Company entered into a foreign exchange forward contract on November 1,
1996 for settlement on May 6, 1997 to sell (UK Pound)200 million at a rate
of $1.6289 to (UK Pound)1. On January 31, 1997 an offsetting agreement was
entered into at a rate of $1.6014 to (UK Pound)1. The offsetting contracts
were settled on February 6, 1997 with a payment of approximately (UK
Pound)3.4 million to the Company. During the first quarter of 1997, the
Company recorded a realized gain of approximately (UK Pound)11.5 million on
the settlement of the two offsetting contracts, reflecting the cash payment
on settlement of the contracts in excess of the unrealized loss of
approximately (UK Pound)8.1 million recognized during 1996.
Gains (losses) on derivative financial instruments consist of (in (UK
Pound)000's):
Year ended December 31,
1999 1998 1997
----------- ----------- -------------
Unrealized loss on interest rate swap...................... (UK Pound)- (UK Pound)- (UK Pound)(57)
Unrealized gain on foreign exchange forward contracts...... - - 726
----------- ----------- -------------
(UK Pound)- (UK Pound)- (UK Pound)669
=========== =========== =============
Year ended December 31,
1999 1998 1997
------------ -------------- ----------------
Realized gain on interest rate swap.........................(UK Pound)- (UK Pound)24 (UK Pound)-
Realized gain on foreign exchange forward contracts......... - 388 11,553
----------- ------------- ----------------
(UK Pound)- (UK Pound)412 (UK Pound)11,553
=========== ============= ================
7. NOTES PAYABLE
Notes payable consist of (in (UK Pound)000's):
December 31,
1999 1998
---- ----
13 1/4% Senior Discount Notes (a)..............(UK Pound)176,533 (UK Pound)155,809
11 3/4% Senior Discount Notes (b).............. 294,724 255,366
10 3/4% Senior Discount Notes (c).............. 208,498 181,588
10% Senior Sterling Notes (d).................. 135,000 135,000
9 1/8% Senior Notes (d)........................ 68,050 66,154
----------------- -----------------
(UK Pound)882,805 (UK Pound)793,917
================= =================
(a) On September 28, 1994 the Company issued $285.1 million of 13 1/4%
Senior Discount Notes due September 30, 2004 (the "1994 Notes") at an
issue price of $526.13 per $1,000 principal. Total proceeds received
by the Company after issuance costs amounted to (UK Pound)91 million.
Interest on the 1994 Notes is payable semiannually, commencing March
31, 2000 at a rate of 13 1/4% per annum. The 1994 Notes may be
redeemed at the option of the Company, in whole or in part, at any
time after September 30, 1999, at specified redemption prices. The
1994 Notes may be redeemed at the option of the Company, in a whole,
but not in part at the accreted value or if such redemption is to
occur on or after September 30, 1999 at 100% of the principal amount
at maturity, plus accrued and unpaid interest, if any, to the date of
redemption in the event of certain tax law changes requiring the
Company to pay additional amounts.
(b) On December 15, 1995, the Company issued $531 million of 11 3/4%
Senior Discount Notes due December 15, 2005 (the "1995 Notes") at an
issue price of $565.02 per $1,000 principal. Total proceeds received
by the Company amounted to (UK Pound)187 million after issuance costs
of (UK Pound)8 million. Interest will not
F-11
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
accrue on the 1995 Notes prior to December 15, 2000. Interest on the
1995 Notes is payable semiannually, commencing June 15, 2001 at a rate
of 11 3/4% per annum. The 1995 Notes may be redeemed at the option of
the Company, in whole or in part, at any time on or after December 15,
2000 at specified redemption prices. The 1995 Notes may be redeemed at
the option of the Company in whole, but not in part, at any time at
the accreted value thereof or if such redemption is to occur on or
after December 15, 2000 at 100% of the principal amount at maturity,
plus accrued interest to the date of redemption, in the event of
certain tax law changes requiring the payment of additional amounts.
(c) On February 21, 1997 the Company issued $421 million of 10 3/4% Senior
Discount Notes due February 15, 2007 (the "1997 Notes") at an issue
price of $594.48 per $1,000 principal. Total proceeds received by the
Company amounted to (UK Pound)149 million after issuance costs of (UK
Pound)5 million. Interest will not accrue on the 1997 Notes prior to
February 15, 2002. Interest on the 1997 Notes is payable semiannually,
commencing August 15, 2002 at a rate of 10 3/4% per annum. The 1997
Notes are redeemable, in whole or in part, at the option of the
Company at any time on or after December 15, 2002 at scheduled
redemption rates.
(d) On February 6, 1998 Diamond Holdings issued (UK Pound)135 million
principal amount of its 10% Senior Notes due February 1, 2008 and $110
million principal amount of 9 1/8% Senior Notes due February 1, 2008
(together, the "1998 Notes") at par. The 1998 Notes have been fully
and unconditionally guaranteed by the Company as to principal,
interest and any other amounts due. Net proceeds received by Diamond
Holdings amounted to (UK Pound)195 million after issuance costs of (UK
Pound)7 million. Interest on the 1998 Notes is payable semiannually in
arrears commencing August 1, 1998. The 1998 Notes are redeemable, in
whole or in part, at the option of Diamond Holdings at any time on or
after February 1, 2003 at scheduled redemption rates.
The 1994 Notes, 1995 Notes and the 1997 Notes (collectively, "the Discount
Notes") are unsecured indebtedness of the Company and rank junior to any
indebtedness of its subsidiaries to the extent of the assets of such
subsidiaries and to any secured indebtedness of the Company to the extent
of the assets securing such indebtedness.
The Discount Notes are stated net of unamortized discount of approximately
(UK Pound)86 million and (UK Pound)151 million at December 31, 1999 and
1998, respectively. The discount is being accreted through the consolidated
statement of operations such that the Company recognizes a fixed rate of
interest. Total accretion was (UK Pound)70 million, (UK Pound)64 million
and (UK Pound)55 million in 1999, 1998 and 1997, respectively.
The Discount Notes and 1998 Notes contain certain covenants generally
restricting the raising of certain types of additional financing, payment
of dividends, creation of liens, sale and leaseback transactions, sale of
certain assets and engaging in certain transactions with affiliates.
In connection with the provisions of the indentures pursuant to which the
Company and Diamond Holdings' debt securities were issued, the Company and
Diamond Holdings were required to make an offer to repurchase such debt
securities at a price of 101% of their accreted value or principal amount
following a "change of control." The Company and Diamond Holdings commenced
offers to repurchase their outstanding debt securities on April 1, 1999
which expired on April 30, 1999. The Company and Diamond Holdings paid (UK
Pound)66,000 to repurchase the tendered debt securities.
Repayments of notes payable are as follows (in (UK Pound)000's):
Year ending December 31:
2000..........................(UK Pound) -
2001.......................... -
2002.......................... -
2003.......................... -
2004.......................... 176,533
Thereafter.................... 791,923
----------------------
(UK Pound)968,456
======================
F-12
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. MORTGAGE LOAN
The Group entered into a mortgage loan agreement of (UK Pound)2.5 million
to fund the construction of the Company's headquarters in Nottingham. The
mortgage is repayable over a period of 20 years commencing July 31, 1995,
the date of drawdown, subject to a capital repayment moratorium which
expired in September 1996. Interest is paid monthly at a rate of LIBOR + 1
1/2%.
A summary of property held under mortgage is as follows (in (UK
Pound)000's):
December 31,
1999 1998
---- ----
Property...........................(UK Pound)5,482 (UK Pound)5,032
Accumulated Depreciation........... (306) (202)
--------------- ----------------
(UK Pound)5,176 (UK Pound)4,830
=============== ================
Future minimum mortgage repayments are as follows (in (UK Pound)000's):
Year ending December 31:
2000............................... (UK Pound)91
2001............................... 109
2002............................... 127
2003............................... 145
2004............................... 163
Thereafter......................... 1,660
----------------
(UK Pound)2,295
================
9. RELATED PARTY TRANSACTIONS
Since the acquisition of the Company by NTL in March 1999, a subsidiary of
NTL has been providing management, financial, legal and technical services
to the Group. Beginning in the fourth quarter of 1999, this subsidiary
began charging the Group for these services using an allocation formula
based on customers. The Group was charged (UK Pound)3.1 million in 1999
which is included in selling, general and administrative expenses and in
the due from affiliates balance. It is not practicable to determine the
amount of these expenses that would have been incurred had the Group
operated as an unaffiliated entity. In the opinion of management of the
Group, the allocation method is reasonable.
The Company had a 10-year Management Agreement effective June 1, 1994 (the
"Management Agreement") with ECE Management Company ("ECE Management"), a
company controlled by former shareholders of the Company. The contract
provided for an annual management fee of $200,000. In addition, the Group
agreed to reimburse ECE Management for the costs incurred in the
performance of its duties. During 1998 and 1997, the Group recorded
expenses of (UK Pound)2.2 million and (UK Pound)2.1 million, respectively,
as amounts paid or payable to ECE Management in connection with management
services provided to the Group and all related expenses incurred. The
Management Agreement was terminated in 1999 when the Company became an
indirect wholly-owned subsidiary of NTL.
Goldman, Sachs & Co., a former shareholder of the Company, and Goldman
Sachs International acted as purchasers in connection with the offering of
the 1998 Notes and received underwriting commissions of approximately $9.6
million. Goldman, Sachs & Co. acted as purchaser in connection with the
1997 Notes offering and received underwriting commissions of approximately
$6.8 million. Goldman, Sachs & Co. acted as underwriter in connection with
the 1995 Notes offering and received underwriting commissions of
approximately $6.8 million. In connection with the offering of the 1994
Notes, Goldman, Sachs & Co. received underwriting commissions of
approximately $4.9 million. Goldman, Sachs & Co. was the counterparty to
foreign exchange contracts entered into by the Company in 1997 and 1998.
F-13
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. INCOME TAXES
No provision for taxation has been made due to operating losses incurred to
date. At December 31, 1999, the Group has tax net operating losses carried
forward of approximately (UK Pound)157.1 million and capital losses carried
forward of approximately (UK Pound)1 million. The operating losses have an
unlimited carry forward period under UK tax law (subject to restrictions on
a loss carried forward where there is a change in Group ownership and a
major change in the nature or conduct of the business) but are limited in
their use to the type of business which generated the loss. Capital losses
carried forward may only be offset against future capital gains.
Differences between the tax benefit recognized in the consolidated
financial statements and the expected tax benefit at the UK statutory rate
of 1999: 30.25%; 1998: 31% and 1997: 31% are summarized as follows (in (UK
Pound)000's):
Year ended December 31,
1999 1998 1997
-------------------- ------------------- --------------------
Tax benefit of net losses........... (UK Pound)(41,806) (UK Pound)(26,047) (UK Pound)(23,747)
Non-deductible expenses............. 16,107 1,985 1,915
Valuation allowance................. 25,699 24,062 21,832
-------------------- ------------------- --------------------
Net tax benefit..................... (UK Pound)- (UK Pound)- (UK Pound)-
==================== =================== ====================
December 31,
1999 1998
---------------- ----------------
(in (UK Pound)000's)
Deferred tax assets relating to:
Net losses.........................................(UK Pound)47,136 UK Pound)125,446
Property and equipment............................. 42,628 -
Other (919) 1,489
---------------- ----------------
Total...................................... 88,845 126,935
Valuation allowance................................ (88,845) (101,050)
---------------- ----------------
- 25,885
---------------- ----------------
Deferred tax liabilities relating to:
Property and equipment............................. - (25,885)
---------------- ----------------
Total...................................... - (25,885)
---------------- ----------------
Deferred tax per consolidated balance sheet........ (UK Pound)- (UK Pound)-
================ ================
Following the 1998 year end, the Group has revised previous tax claims. The
effect is to reduce net operating losses and create a deferred tax asset
applicable to property and equipment.
The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, the
level of historical taxable losses, and tax planning strategies in making
its assessment as to the appropriateness of the reported valuation
allowance.
11. FAIR VALUES OF FINANCIAL INSTRUMENTS
Current assets and current liabilities: The carrying amounts of cash and
cash equivalents, trade receivables, amounts due from affiliates, other
current assets, accounts payable, accounts payable deposit, interest
payable and other current liabilities reported in the balance sheet
approximate fair value due to the short-term maturities of these assets and
liabilities.
F-14
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Notes payable: The estimated fair value of the Company's and Diamond
Holdings' publicly traded debt is based on quoted market prices.
The carrying amount and fair value of the Company's and Diamond Holdings'
notes payable are as follows (in (UK Pound)000's):
December 31,
----------------------------------------------------------------------------------
1999 1998
---------------------------------------- ---------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------------ ------------------ ------------------ ------------------
1994 Notes (UK Pound)176,533 (UK Pound)189,120 (UK Pound)155,809 (UK Pound)166,315
1995 Notes 294,724 308,644 255,366 262,636
1997 Notes 208,498 212,203 181,588 183,027
1998 Notes 203,050 199,055 201,154 191,427
----------------- ----------------- ------------------ -----------------
(UK Pound)882,805 (UK Pound)909,022 (UK Pound)793,917 (UK Pound)803,405
================= ================= ================== =================
Concentration of Credit Risk and Currency Risk
Financial instruments which potentially subject the Group to concentrations
of credit risk consist principally of cash and cash equivalents and trade
receivables. The Group places its cash and cash equivalents with high
credit quality financial institutions. Concentrations of credit risk with
respect to trade receivables are limited due to the large number of
customers comprising the Group's customer base.
The Group's revenues are generated in UK pounds sterling while the interest
and principal obligations with respect to the Discount Notes and the 9 1/8%
Senior Notes are payable in US dollars. To the extent the Group obtains
financing in US dollars and incurs construction and operating costs in UK
pounds, it will encounter currency exchange rate risks.
12. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The Group made cash payments for interest of approximately (UK Pound)20.4
million, (UK Pound)10.7 million and (UK Pound)2.1 million during the years
ended December 31, 1999, 1998 and 1997, respectively.
13. COMMITMENTS AND CONTINGENCIES
As of December 31, 1999, the Group was committed to purchase approximately
(UK Pound)43.2 million for equipment and services.
Certain of the Group's facilities and equipment are held under operating or
capital leases which expire in 2020.
Rental expense was (UK Pound)1.3 million, (UK Pound)1.6 million and (UK
Pound)1.2 million in 1999, 1998 and 1997, respectively.
Depreciation of assets held under capital leases is included in
depreciation and amortization on the consolidated statements of operations.
A summary of assets held under capital leases are as follows (in (UK
Pound)000's)
December 31,
1999 1998
---- ----
Equipment..................................... (UK Pound)14,011 (UK Pound)14,317
Accumulated Depreciation...................... (8,335) (6,978)
----------------- -----------------
(UK Pound)5,676 (UK Pound)7,339
================ ================
F-15
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Future minimum lease payments at December 31, 1999 are as follows (in (UK
Pound)000's):
Capital Operating
leases leases
------ ------
Year ending December 31:
2000...................................................(UK Pound)2,868 (UK Pound)1,176
2001................................................... 1,904 816
2002................................................... 301 509
2003................................................... 6 403
2004................................................... - 264
Thereafter............................................. - 1,874
--------------- ---------------
Total minimum rental commitments....................... 5,079 (UK Pound)5,042
===============
Less: Amount representing interest..................... (311)
---------------
Present value of minimum rental commitments............ 4,768
Less: Current portion of capital lease obligations..... (2,639)
---------------
Long-term portion of capital lease obligations.........(UK Pound)2,129
===============
The Group is involved in legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially
affect the financial position, results of operations or liquidity of the
Group.
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the quarterly results of operations for the
years ended December 31, 1999 and 1998 (in (UK Pound)000's).
1999
Three Months Ended
----------------------------------------------------------------------------
March 31 June 30 September 30 December 31
---------------- ---------------- ---------------- ----------------
Revenues (UK Pound)27,303 (UK Pound)28,566 (UK Pound)30,115 (UK Pound)33,492
Operating loss (14,334) (7,302) (6,706) (2,384)
Net (loss) income (1) (55,414) (43,652) 138 (38,298)
1998
Three Months Ended
----------------------------------------------------------------------------
March 31 June 30 September 30 December 31
---------------- ---------------- ---------------- ----------------
Revenues (UK Pound)19,631 (UK Pound)21,555 (UK Pound)22,736 (UK Pound)24,834
Operating loss (5,181) (5,319) (5,349) (4,206)
Net loss (10,527) (22,930) (12,629) (37,936)
<FN>
(1) Included in net income (loss) are foreign exchange gains (losses) of (UK
Pound)(19,996) in the three months ended March 31, 1999, (UK Pound)(14,868)
in the three months ended June 30, 1999, (UK Pound)28,706 in the three
months ended September 30, 1999, and (UK Pound)(12,753) in the three months
ended December 31, 1999. The net income of (UK Pound)138 in the three
months ended September 30, 1999 is primarily due to this change.
</FN>
F-16
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. CONDENSED FINANCIAL INFORMATION OF REGISTRANT
The following condensed financial statements of the Company are provided in
compliance with the requirements of Rule 5-04 and 12-04 of Regulation S-X.
They represent the financial statements of the Guarantor of the offering of
1998 Notes by Diamond Holdings in February 1998.
Condensed Statements of Operations of the Registrant
(in (UK Pound)000's)
Year ended December 31,
1999 1998 1997
----------------- ----------------- -----------------
Costs and expenses
Selling, general and administrative and other.......... (UK Pound)8,536 (UK Pound)2,897 (UK Pound)2,285
----------------- ----------------- -----------------
Operating loss (8,536) (2,897) (2,285)
Other income (expense)
Interest income........................................ 82,247 71,804 56,417
Interest expense and amortization of
debt discount and expenses......................... (77,146) (65,395) (56,393)
Equity in net loss of affiliates....................... (132,380) (88,568) (87,672)
Foreign exchange gains (losses), net .................. (1,411) (366) 1,016
Unrealized gain on derivative financial instruments.... - - 726
Realized gain on derivative financial instruments...... - 388 11,553
----------------- ----------------- -----------------
Net loss...................................................(UK Pound)(137,226) (UK Pound)(85,034) (UK Pound)(76,638)
================= ================= =================
See notes to condensed financial statements
F-17
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Balance Sheets of the Registrant
(in (UK Pound)000's except share data)
December 31,
1999 1998
----------------- ------------------
Assets
------
Current assets
Cash and cash equivalents......................................... (UK Pound)121,839 (UK Pound)28,366
Due from affiliates............................................... 5,722 -
Other............................................................. 1,897 109
----------------- ------------------
Total current assets.................................................. 129,458 28,475
Investments in and advances to subsidiaries........................... 356,091 443,446
Deferred financing costs less accumulated amortization of
(UK Pound)5,963 (1999) and (UK Pound)4,196 (1998)................. 12,274 14,041
----------------- ------------------
Total assets.......................................................... (UK Pound)497,823 (UK Pound)485,962
================== ==================
Liabilities and shareholder's deficiency
----------------------------------------
Current liabilities
Accounts payable deposit.......................................... (UK Pound)50,558 (UK Pound) -
Other............................................................. 11,064 895
----------------- ------------------
Total current liabilities............................................. 61,622 895
Notes payable......................................................... 679,756 592,763
Shareholder's deficiency:
Ordinary shares: 70,000,000 authorized; issued and outstanding
59,138,851 (1999) and 59,138,791 (1998)....................... 1,478 1,478
Non-voting deferred shares: 6 authorized;
issued and outstanding none (1999) and 6 (1998)............... - -
Additional paid-in-capital........................................ 134,466 134,466
Accumulated other comprehensive loss.............................. - (321)
Accumulated deficit............................................... (379,499) (243,319)
----------------- ------------------
(243,555) (107,696)
----------------- ------------------
Total liabilities and shareholder's deficiency........................ (UK Pound)497,823 (UK Pound)485,962
================== ==================
See notes to condensed financial statements
F-18
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Statements of Cash Flows of the Registrant
(in (UK Pound)000's)
Year ended December 31,
1999 1998 1997
----------------- --------------- ---------------
Net cash provided by (used in) operating activities.................... (UK Pound)47,858 (UK Pound)(79) (UK Pound)2,588
----------------- --------------- ---------------
Investing Activities:
Repayments from (advances to) subsidiaries, net.................... 45,615 (24) (138,652)
----------------- --------------- ---------------
Net cash provided by (used in) investing activities. 45,615 (24) (138,652)
----------------- --------------- ---------------
Financing Activities:
Proceeds from issuance of debt..................................... - - 153,691
Debt financing costs............................................... - (77) (4,989)
----------------- --------------- ---------------
Net cash (used in) provided by financing activities. - (77) 148,702
----------------- --------------- ---------------
Effect of exchange rate changes on cash and
cash equivalents................................................... - (151) 27
----------------- --------------- ---------------
Increase (decrease) in cash and cash equivalents....................... 93,473 (331) 12,665
Cash and cash equivalents at beginning of year......................... 28,366 28,697 16,032
----------------- --------------- ---------------
Cash and cash equivalents at end of year............................... (UK Pound)121,839 (UK Pound)28,366 (UK Pound)28,697
================= =============== ===============
See notes to condensed financial statements
F-19
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A. BASIS OF PRESENTATION
In the Company's condensed financial statements, the Company's
investment in subsidiaries is stated at cost plus equity in the
undistributed earnings of the subsidiaries. The Company's share of net
loss of its subsidiaries is included in net loss using the equity
method of accounting. The condensed financial statements should be
read in conjunction with the Company's consolidated financial
statements.
B. ADVANCES TO SUBSIDIARIES
The advances to subsidiaries consist of a dollar denominated loan and
sterling denominated loans.
The dollar denominated loan bears interest at a rate of 12.25% per
annum. The sterling denominated loans bear interest at a rate of LIBOR
plus 2% per annum.
The interest income on these loans was (UK Pound)73.6 million, (UK
Pound)70.1 million and (UK Pound)54.0 million in 1999, 1998 and 1997,
respectively.
C. OTHER
The Company's subsidiaries made cash payments to the registrant of (UK
Pound)110.2 million in 1999.
F-20
DIAMOND CABLE COMMUNICATIONS LIMITED
- ------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
16. SUMMARIZED FINANCIAL INFORMATION ABOUT DIAMOND HOLDINGS LIMITED
The following table presents summarized consolidated financial information
for Diamond Holdings as of and for the years ended December 31, 1999 and
1998. This summarized financial information is being provided pursuant to
Section G of Topic I of Staff Accounting Bulletin No. 53 "Financial
Statement Requirements in Filings Involving the Guarantee of Securities by
a Parent." The 1998 Notes have been guaranteed by the Company as to
principal, interest and other amounts due.
Diamond Holdings was incorporated on December 15, 1997 and is a
wholly-owned direct subsidiary of the Company. On January 16, 1998, Diamond
Holdings became the intermediate holding company which holds all the shares
of all Group companies. The summarized financial information shows
operating results as if Diamond Holdings became the intermediate holding
company on January 1, 1998.
Year ended December 31,
1999 1998
------------------ -------------------
(in (UK Pound)000's)
Summarized Consolidated Results
of Operations Information
Revenue................................................. (UK Pound)119,476 (UK Pound) 88,756
================== ===================
Operating costs and expenses............................ (UK Pound)141,666 (UK Pound)105,914
================== ===================
Net loss................................................ (UK Pound)(132,380) (UK Pound)(87,556)
================== ===================
December 31,
1999 1998
---------------- -----------------
(in (UK Pound)000's)
Summarized Consolidated Balance Sheet Information
Current assets.......................................... (UK Pound)17,878 (UK Pound)148,415
Fixed and non-current assets............................ 600,361 553,740
---------------- -----------------
Total assets............................................ (UK Pound)618,239 (UK Pound)702,155
================= =================
Current liabilities..................................... (UK Pound)54,768 (UK Pound)48,030
Non-current liabilities................................. 891,476 887,542
Shareholder's deficit................................... (328,005) (233,417)
---------------- -----------------
Total liabilities and shareholder's interest............ (UK Pound)618,239 (UK Pound)702,155
================= =================
F-21
DIAMOND CABLE COMMUNICATIONS LIMITED
------------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
--------------------------------------------
(in (UK Pound)000's)
--------------------
Balance at Additions
Beginning Charged to Deductions Balance at
of the Costs and Describe End of
Year Expenses (a) Year
--------------- --------------- ---------------- ---------------
Allowance for Doubtful Accounts
- -------------------------------
1999.......................... (UK Pound)4,775 (UK Pound)1,974 (UK Pound)(2,649) (UK Pound)4,100
1998.......................... 2,788 2,362 (375) 4,775
1997.......................... 1,691 1,204 (107) 2,788
<FN>
(a) Uncollectible accounts written off
</FN>
F-22