UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended:
JUNE 30, 2001
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 0-24792
NTL (TRIANGLE) LLC
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-4086747
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 East 59th Street
New York, NY 10022
(212) 906-8440
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of Registrant's
principal executive offices)
--------------------------
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 twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
Yes X No
----- -----
--------------------------
As of June 30, 2001, there were 800,000 shares of the Registrant's common
membership interests outstanding. The Registrant is an indirect, wholly owned
subsidiary of NTL Incorporated and there is no market for the Registrant's
Common Stock. The Registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with
the reduced disclosure format.
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION
- ------- ---------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 2001 (Unaudited) and December 31, 2000...............2
Condensed Consolidated Statements of Operations
for the Six and Three Months Ended June 30, 2001 and
2000 (Unaudited)..............................................3
Condensed Consolidated Statement of Shareholder's
Equity for the Six Months Ended June 30, 2001 (Unaudited).....4
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 2001 and 2000 (Unaudited).......5
Notes to Condensed Consolidated Financial Statements
(Unaudited)...............................................6 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............9 - 12
PART II.OTHER INFORMATION
- -------------------------
Item 6. Exhibits and Reports on Form 8-K.............................13
SIGNATURES...........................................................14
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
PART I. FINANCIAL INFORMATION
- ------- ---------------------
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
June 30, December 31,
2001 2000
------------------- -----------------
(Unaudited) (See Note)
(in (UK Pound)000's, except share data)
Assets
Current assets
Cash and cash equivalents............................................ (UK Pound)14,822 (UK Pound)4,706
Accounts receivable, less allowance for doubtful accounts of
(UK Pound)10,134 (2001) and (UK Pound)8,914 (2000)................. 18,314 18,933
Other current assets................................................. 8,799 13,850
------------------- -----------------
Total current assets............................................. 41,935 37,489
Property and equipment, net............................................. 470,233 466,157
Intangible assets, net.................................................. 374,157 395,683
Other assets, net....................................................... 6,822 21,276
------------------- -----------------
(UK Pound)893,147 (UK Pound)920,605
=================== =================
Liabilities and shareholder's equity
Current liabilities
Accounts payable and accrued expenses................................ (UK Pound)47,270 (UK Pound)53,268
Interest payable..................................................... 5,145 4,883
Deferred revenue..................................................... 14,558 14,928
Due to affiliates.................................................... 28,943 24,316
Current portion of long-term debt.................................... 644 662
------------------- -----------------
Total current liabilities.......................................... 96,560 98,057
Loans from affiliate.................................................... 48,201 25,549
Long-term debt, less current portion.................................... 370,018 348,761
Commitments and contingent liabilities
Deferred income taxes................................................... 8,578 8,611
Shareholder's equity:
Common membership interests, (UK Pound).01 par value - authorized
and issued 800,000 shares.......................................... 8 8
Additional capital................................................... 414,543 394,107
Accumulated other comprehensive (loss) income........................ (646) 746
(Accumulated deficit) retained earnings.............................. (44,115) 44,766
------------------- -----------------
Total shareholder's equity......................................... 369,790 439,627
------------------- -----------------
(UK Pound)893,147 (UK Pound)920,605
=================== =================
Note: The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date.
See accompanying notes.
2
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
2001 2000 2001 2000
----------------- ---------------- ----------------- --------------------
(in (UK Pound)000's)
Revenue......................... (UK Pound)87,702 (UK Pound)77,612 (UK Pound)45,659 (UK Pound)38,935
----------------- ---------------- ----------------- --------------------
Costs and expenses
Operating.................... 42,093 30,469 22,484 15,186
Selling, general and
administrative............. 39,547 30,089 16,692 16,963
Depreciation and amortization 51,590 40,092 26,667 23,339
----------------- ---------------- ----------------- --------------------
133,230 100,650 65,843 55,488
----------------- ---------------- ----------------- --------------------
Operating loss.................. (45,528) (23,038) (20,184) (16,553)
Other income (expense)
Interest expense............. (20,090) (16,977) (10,291) (8,840)
Interest expense to affiliate (1,221) - (683) -
Investment income............ 148 798 29 467
Exchange losses.............. (22,156) (22,466) (2,999) (15,810)
----------------- ---------------- ----------------- --------------------
(43,319) (38,645) (13,944) (24,183)
----------------- ---------------- ----------------- --------------------
Loss before income taxes........ (88,847) (61,683) (34,128) (40,736)
Income tax (expense) benefit.... (34) 75 (34) (71)
----------------- ---------------- ----------------- --------------------
Net loss........................ (UK Pound)(88,881) (UK Pound)(61,608) (UK Pound)(34,162) (UK Pound)(40,807)
================= ================ ================= ====================
See accompanying notes.
3
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
--------------------------------------------------------
(Unaudited)
(in 000's)
Retained
Accumulated Earnings
Compre- Other Compre- (Accum-
Common Additional hensive hensive ulated
Shares Par Capital Loss Income (Loss) Deficit) Total
------ --- ------- ---- ------------- -------- -----
Balance at
December 31, 2000....... 800 (UK Pound)8 (UK Pound)394,107 (UK Pound)746 (UK Pound)44,766 (UK Pound)439,627
Contribution from NTL
Group Ltd............ 20,436 20,436
Net loss.............. (UK Pound)(88,881) (88,881) (88,881)
Currency translation
adjustment........... (1,392) (1,392) (1,392)
-----------------
Comprehensive loss..... (UK Pound)(90,273)
--- ----------- ----------------- ----------------- -------------- ----------------- -----------------
Balance at June 30, 2001...800 (UK Pound)8 (UK Pound)414,543 (UK Pound)(646)(UK Pound)(44,115) (UK Pound)369,790
=== =========== ================= ============== ================= =================
See accompanying notes.
4
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
Six Months Ended
June 30,
2001 2000
--------------- -----------------
(in (UK Pound)000's)
Net cash provided by operating activities............................ (UK Pound)1,525 (UK Pound)29,213
--------------- -----------------
Investing activities
Purchases of marketable securities................................ - (2,166)
Proceeds from sales of marketable securities...................... - 2,199
Capital expenditures.............................................. (36,161) (14,063)
--------------- -----------------
Net cash used in investing activities....................... (36,161) (14,030)
--------------- -----------------
Financing activities
Loans from affiliate.............................................. 24,589 -
Contribution from NTL Group Limited............................... 20,436 -
Principal payments................................................ (337) (915)
--------------- -----------------
Net cash provided by (used in) financing activities......... 44,688 (915)
Effect of exchange rate changes on cash..................... 64 (331)
--------------- -----------------
Increase in cash and cash equivalents................................ 10,116 13,937
Cash and cash equivalents, beginning of period....................... 4,706 27,895
--------------- -----------------
Cash and cash equivalents, end of period.............................(UK Pound)14,822 (UK Pound)41,832
=============== =================
Supplemental disclosure of cash flow information
Cash paid during the period for interest..........................(UK Pound)20,795 (UK Pound)177
See accompanying notes.
5
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
NTL (Triangle) LLC (formerly NTL (Bermuda) Limited) (the "Company") have
been prepared in accordance with U.S. generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six and three months ended June 30, 2001 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2001. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
The Company is an indirect, wholly-owned subsidiary of NTL Incorporated
("NTL").
Certain prior period amounts have been reclassified to conform to the
current presentation.
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations" and No.
142, "Goodwill and Other Intangible Assets," effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be
amortized but will be subject to annual impairment tests in accordance with
the Statements. Other intangible assets will continue to be amortized over
their useful lives. The Company will apply the new rules on accounting for
goodwill and other intangible assets beginning in the first quarter of
2002. During 2002, the Company will perform the first of the required
impairment tests of goodwill and indefinite lived intangible assets as of
January 1, 2002. The Company has not yet determined what the effect of
these tests will be on its results of operations and financial position.
2. Comprehensive Loss
The Company's comprehensive loss for the six months ended June 30, 2001 and
2000 was (UK Pound)90.3 million and (UK Pound)61.4 million, respectively.
The Company's comprehensive loss for the three months ended June 30, 2001
and 2000 was $34.8 million and $40.0 million, respectively.
3. Restructuring Costs
The Company recorded restructuring costs in November 2000 as a result of
the completion of a consolidation review. This charge consisted of employee
severance and related costs of (UK Pound)5.6 million for approximately 470
employees to be terminated and lease exit costs of (UK Pound)2.9 million.
As of June 30, 2001, (UK Pound)615,000 of the provision had been used for
employee severance and related costs and approximately 80 employees had
been terminated. The remaining restructuring reserve of (UK Pound)7.9
million includes (UK Pound)5.0 million for employees severance and related
costs and (UK Pound)2.9 million for lease exit costs.
6
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
4. Property and Equipment
Property and equipment consist of (in (UK Pound)000's):
June 30, December 31,
2001 2000
------------------ ------------------
(Unaudited)
Operating equipment.......................................... (UK Pound)525,082 (UK Pound)498,922
Other equipment.............................................. 56,756 57,125
Construction in progress..................................... 58,923 51,652
------------------ ------------------
640,761 607,699
Accumulated depreciation..................................... (170,528) (141,542)
------------------ ------------------
(UK Pound)470,233 (UK Pound)466,157
================== ==================
5. Intangible Assets
Intangible assets consist of (in (UK Pound)000's):
June 30, December 31,
2001 2000
---------------- ----------------
(Unaudited)
Goodwill, net of accumulated amortization of
(UK Pound)46,623 (2001) and (UK Pound)34,955 (2000)........ (UK Pound)303,285 (UK Pound)314,953
License acquisition costs, net of accumulated amortization
of (UK Pound)14,427 (2001) and (UK Pound)10,820 (2000)..... 21,641 25,248
Customer lists, net of accumulated amortization of
(UK Pound)11,787 (2001) and (UK Pound)8,365 (2000)......... 20,535 23,957
Other, net of accumulated amortization of (UK Pound)29,667
(2001) (UK Pound)26,838 (2000)............................. 28,696 31,525
---------------- ----------------
(UK Pound)374,157 (UK Pound)395,683
================ ================
6. Joint Purchasing Alliance Agreement
As of June 30, 2001 and December 31, 2000, other assets include a
receivable for a deposit of (UK Pound)6.8 million and (UK Pound)21.3
million, respectively, which will be utilized under a Joint Purchasing
Alliance Agreement entered into between subsidiaries of the Company and
Diamond Cable Communications Limited, a subsidiary of NTL, for combined
fixed asset purchases. The Company's original deposit was (UK Pound)51.9
million in March 1999.
7
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
7. Related Party Transactions
In October 2000, NTL Communications (Ireland) Limited (formerly Cablelink
Limited), a wholly owned subsidiary of the Company entered into a loan
agreement with a subsidiary of NTL to provide funding of up to IR(UK
Pound)300.0 million ((UK Pound)229.5 million), of which IR(UK Pound)63.0
million ((UK Pound)48.2 million) and IR(UK Pound)32.0 million ((UK
Pound)24.5 million) had been borrowed at June 30, 2001 and December 31,
2000, respectively. The outstanding borrowings are due in October 2007.
Interest is payable quarterly in arrears from March 31, 2001. The annual
interest rate is set on January 1 of each year at the 12-month EURIBOR rate
plus 1%. The effective interest rate at June 30, 2001 was 5.69%. Accrued
interest of IR(UK Pound)860,000 ((UK Pound)658,000) and IR(UK Pound)257,000
((UK Pound)197,000) was included in due to affiliates in the consolidated
balance sheet at June 30, 2001 and December 31, 2000, respectively.
Since the acquisition of the Company by NTL in October 1998, a subsidiary
of NTL has been providing management, financial, legal and technical
services to the Company. Beginning in the fourth quarter of 1999, this
subsidiary began charging the Company for these services using an
allocation formula based on customers. For the six months ended June 30,
2001 and 2000, the Company was charged (UK Pound)27.3 million and (UK
Pound)6.5 million, respectively, which is included in selling, general and
administrative expenses and in due to affiliates in the consolidated
balance sheet. It is not practicable to determine the amounts of these
expenses that would have been incurred had the Company operated as an
unaffiliated entity. In the opinion of management of the Company, the
allocation method is reasonable.
8. Stock Options
In July 2001, (subject to appropriate documentation) the NTL Compensation
Committee approved an offer to all NTL employees, except George Blumenthal,
the Chairman of the Board, Barclay Knapp, the Chief Executive Officer and
the Board of Directors. NTL will offer to re-price some or all options with
an exercise price above $20.01 per share to $13.25 per share. For these
options for which this offer is accepted, a moratorium will be in effect
until January 1, 2003 on further vesting and on all sales of shares that
are obtained after re-pricing from the exercise of re-priced options. The
expiration date for re-priced options will remain the same but in no event
will be earlier than January 30, 2006. In July 2001, there were options to
purchase an aggregate of approximately 29.3 million shares of NTL common
stock with an average exercise price of $40.11 per share that would be
subject to the re-pricing offer. In accordance with APB No. 25 and related
interpretations, NTL will account for options that are subject to this
offer as a variable plan. Options to purchase an aggregate of approximately
16.5 million shares of NTL common stock at an exercise price of $44.50 per
share are already accounted for as a variable plan. The Company will
recognize its share of non-cash compensation expense for the difference
between the quoted market price of the common stock and the exercise price
of the vested options while the options remain outstanding. The NTL
Compensation Committee has taken this action to continue to provide the
appropriate performance incentives to those affected.
9. Contingencies
The Company 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
Company.
8
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Overview
- --------
NTL (Triangle) LLC (the "Company") is a holding company which holds all of the
shares of various companies principally engaged in the development,
construction, management and operation of broadband communications networks for
telephone, cable television and Internet services in the United Kingdom ("UK")
and Ireland. The Company owns the companies that have franchises for Darlington
and Teesside (collectively, "Teesside") and Cambridge Holding Company Limited
("Cambridge") in the UK, and NTL Communications (Ireland) Limited (formerly
Cablelink Limited) ("Cablelink"), which owns the companies that provide services
in Dublin, Galway and Waterford, Ireland.
Liquidity and Capital Resources
- -------------------------------
In November 1995, the Company issued $517.3 million principal amount at maturity
of 11.20% Senior Discount Debentures due 2007 (the "2007 Discount Debentures").
Interest accreted on the 2007 Discount Debentures at 11.20% per annum compounded
semiannually from November 15, 1995 to November 15, 2000, after which date
interest became payable in cash on each May 15 and November 15 through November
15, 2007. The 2007 Discount Debentures contain restrictive covenants which limit
the Company's ability to pay dividends.
The Company currently estimates that it will require approximately (UK
Pound)56.0 million from July 1, 2001 through June 30, 2002 for capital
expenditures and debt service, net of cash from operations. Management expects
that the (UK Pound)56.0 million required will be funded through cash on hand,
debt or equity from NTL or its subsidiaries and from the Joint Purchasing
Alliance Agreement deposit of (UK Pound)6.8 million. Subsidiaries of the Company
and Diamond Cable Communications Limited, a subsidiary of NTL, entered into this
agreement in 1999 for joint fixed asset purchases. The Company's ability to meet
its long-term liquidity and capital requirements is contingent upon Cambridge,
Teesside and Cablelink's ability to generate positive operating cash flow, or,
if necessary, to obtain external financing, although there can be no assurance
that any such financing will be obtained on acceptable terms and conditions.
In October 2000, Cablelink entered into a loan agreement with a subsidiary of
NTL to provide funding of up to IR(UK Pound)300.0 million ((UK Pound)229.5
million), of which (IR Pound)63.0 million ((UK Pound)48.2 million) and (IR
Pound)32.0 million ((UK Pound)24.5 million) had been borrowed at June 30, 2001
and December 31, 2000, respectively. The outstanding borrowings are due in
October 2007. Interest is payable quarterly in arrears from March 31, 2001. The
annual interest rate is set on January 1 of each year at the 12-month EURIBOR
plus 1%. The effective interest rate at June 30, 2001 was 5.69%. Accrued
interest of IR(UK Pound)860,000 ((UK Pound)658,000) and IR(UK Pound)257,000 ((UK
Pound)197,000) was included in due to affiliates in the consolidated balance
sheet at June 30, 2001 and December 31, 2000, respectively.
Condensed Consolidated Statements of Cash Flows
- -----------------------------------------------
Net cash provided by operating activities amounted to (UK Pound)1.5 million and
(UK Pound)29.2 million for the six months ended June 30, 2001 and 2000,
respectively. The decrease in net cash provided by operating activities is
primarily due to the increase in cash paid during the period for interest and
changes in working capital as a result of the timing of receipts and
disbursements.
Net cash used in investing activities amounted to (UK Pound)36.2 million and (UK
Pound)14.0 million for the six months ended June 30, 2001 and 2000,
respectively. During the six months ended June 30, 2001, net cash used in
investing activities was entirely used for capital expenditures.
9
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
Net cash provided by (used in) financing activities amounted to (UK Pound)44.7
million and (UK Pound)(915,000) for the six months ended June 30, 2001 and 2000,
respectively. During the six months ended June 30, 2001, net cash provided by
financing activities includes (UK Pound)24.6 million in cash received by
Cablelink from a subsidiary of NTL and contributions from NTL Group Limited of
(UK Pound)20.4 million. Net cash used in financing activities of (UK
Pound)915,000 in the six months ended June 30, 2000 was for principal payments.
Results of Operations
- ---------------------
Consolidated financial information for the Company for the six and three months
ended June 30, 2001 and 2000 is as follows (in (UK Pound)000's, "NM" denotes
percentage is not meaningful):
Six Months Ended
June 30, Increase/(Decrease)
2001 2000 (UK Pound) %
---------------- ---------------- ---------------- --------
Revenues....................................... (UK Pound)87,702 (UK Pound)77,612 (UK Pound)10,090 13.0%
Operating, selling, general and administrative
expenses..................................... 81,640 60,558 21,082 34.8
Depreciation and amortization.................. 51,590 40,092 11,498 28.7
---------------- ----------------
Operating loss................................. (45,528) (23,038) 22,490 97.6
---------------- ----------------
Interest expense............................... 20,090 16,977 3,113 18.3
Interest expense to affiliate.................. 1,221 - 1,221 NM
Investment income.............................. (148) (798) (650) (81.5)
Exchange losses................................ 22,156 22,466 (310) (1.4)
---------------- ----------------
Loss before income taxes....................... (88,847) (61,683) 27,164 44.0
Income tax (expense) benefit................... (34) 75 (109) (145.3)
---------------- ----------------
Net loss....................................... (UK Pound)(88,881) (UK Pound)(61,608) 27,273 44.3
================ ================
Three Months Ended
June 30, Increase/(Decrease)
2001 2000 (UK Pound) %
---------------- ---------------- ---------------- --------
Revenues....................................... (UK Pound)45,659 (UK Pound)38,935 (UK Pound)6,724 17.3%
Operating, selling, general and administrative
expenses..................................... 39,176 32,149 7,027 21.9
Depreciation and amortization.................. 26,667 23,339 3,328 14.3
---------------- ----------------
Operating loss................................. (20,184) (16,553) 3,631 21.9
---------------- ----------------
Interest expense............................... 10,291 8,840 1,451 16.4
Interest expense to affiliate.................. 683 - 683 NM
Investment income.............................. (29) (467) (438) (93.8)
Exchange losses................................ 2,999 15,810 (12,811) (81.0)
---------------- ----------------
Loss before income taxes....................... (34,128) (40,736) (6,608) (16.2)
Income tax expense............................. (34) (71) (37) (52.1)
---------------- ----------------
Net loss....................................... (UK Pound)(34,162) (UK Pound)(40,807) (6,645) (16.3)
================ ================
Substantially all of the increases in revenues, operating expenses, selling,
general and administrative expenses and depreciation and amortization expense
for the six and three months ended June 30, 2001, as compared to the same
periods in 2000, are attributable to the continued development of the Company's
operations and increased business activity resulting from the growth in the
number of subscribers in Cambridge, Teesside and Cablelink.
For the six and three months ended June 30, 2000, certain costs have been
reclassified from selling, general and administrative expenses to operating
costs to conform to the 2001 classification.
10
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
Selling, general and administrative expense were (UK Pound)39.5 million, (UK
Pound)16.7 million, (UK Pound)30.1 million and (UK Pound)17.0 million for the
six and three months ended June 30, 2001 and 2000, respectively. Beginning in
the fourth quarter of 1999, a subsidiary of NTL began charging the Company for
management, financial, legal and technical services it provides to the Company.
These charges were (UK Pound)27.3 million, (UK Pound)12.6 million, (UK Pound)6.5
million and (UK Pound)3.7 million for the six and three months ended June 30,
2001 and 2000, respectively. After adjusting for the NTL charges, selling,
general and administrative expenses as a percentage of revenues was 13.9%, 8.9%,
30.4% and 34.2% for the six and three months ended June 30, 2001 and 2000,
respectively.
During 2001, the Company intends to drive the majority of revenue growth from
increases in average revenue per customer rather than through the addition of
new customers. This allows the Company to achieve revenue targets, have a lower
capital requirement due to fewer installations, and improve EBITDA as the
Company reduces front-loaded costs such as customer acquisition costs and
initial maintenance costs.
Interest expense was (UK Pound)20.1 million, (UK Pound)10.3 million, (UK
Pound)17.0 million and (UK Pound)8.8 million for the six and three months ended
June 30, 2001 and 2000, respectively, representing increases of (UK Pound)3.1
million and (UK Pound)1.5 million as compared to the same periods in 2000. The
increases are primarily attributable to the compounding of interest on the 2007
Discount Debentures.
In October 2000, Cablelink entered into a loan agreement with a subsidiary of
NTL to provide funding of up to IR(UK Pound)300.0 million ((UK Pound)229.5
million), of which IR(UK Pound)63.0 million ((UK Pound)48.2 million) had been
borrowed at June 30, 2001. Interest expense to affiliate was (UK Pound)1.2
million and (UK Pound)683,000 for the six and three months ended June 30, 2001,
respectively.
Investment income was (UK Pound)148,000, (UK Pound)29,000, (UK Pound)798,000 and
(UK Pound)467,000 for the six and three months ended June 30, 2001 and 2000,
respectively, representing decreases of (UK Pound)650,000 and (UK Pound)438,000
as compared to the same periods in 2000. The decreases are primarily
attributable to decreases in the average cash balances available for investment
in 2001 as compared to the same periods in 2000.
Exchange losses were (UK Pound)22.2 million, (UK Pound)3.0 million, (UK
Pound)22.5 million and (UK Pound)15.8 million for the six and three months ended
June 30, 2001 and 2000, respectively, representing decreases of (UK
Pound)300,000 and (UK Pound)12.8 million as compared to the same periods in
2000. The decreases are primarily attributable to fluctuations in the valuation
of the UK Pound Sterling on the 2007 Discount Debentures, which are denominated
in US dollars. The Company's results of operations will continue to be affected
by exchange rate fluctuations.
The Company recorded restructuring costs in November 2000 as a result of the
completion of a consolidation review. This charge consisted of employee
severance and related costs of (UK Pound)5.6 million for approximately 470
employees to be terminated and lease exit costs of (UK Pound)2.9 million. As of
June 30, 2001, (UK Pound)615,000 of the provision had been used for employee
severance and related costs and approximately 80 employees had been terminated.
The remaining restructuring reserve of (UK Pound)7.9 million includes (UK
Pound)5.0 million for employees severance and related costs and (UK Pound)2.9
million for lease exit costs.
11
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
In July 2001, (subject to appropriate documentation) the NTL Compensation
Committee approved an offer to all NTL employees, except George Blumenthal, the
Chairman of the Board, Barclay Knapp, the Chief Executive Officer and the Board
of Directors. NTL will offer to re-price some or all options with an exercise
price above $20.01 per share to $13.25 per share. For these options for which
this offer is accepted, a moratorium will be in effect until January 1, 2003 on
further vesting and on all sales of shares that are obtained after re-pricing
from the exercise of re-priced options. The expiration date for re-priced
options will remain the same but in no event will be earlier than January 30,
2006. In July 2001, there were options to purchase an aggregate of approximately
29.3 million shares of NTL common stock with an average exercise price of $40.11
per share that would be subject to the re-pricing offer. In accordance with APB
No. 25 and related interpretations, NTL will account for options that are
subject to this offer as a variable plan. Options to purchase an aggregate of
approximately 16.5 million shares of NTL common stock at an exercise price of
$44.50 per share are already accounted for as a variable plan. The Company will
recognize its share of non-cash compensation expense for the difference between
the quoted market price of the common stock and the exercise price of the vested
options while the options remain outstanding. The NTL Compensation Committee has
taken this action to continue to provide the appropriate performance incentives
to those affected.
Recent Accounting Pronouncements
- --------------------------------
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations" and No. 142,
"Goodwill and Other Intangible Assets," effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the Statements. Other intangible
assets will continue to be amortized over their useful lives. The Company will
apply the new rules on accounting for goodwill and other intangible assets
beginning in the first quarter of 2002. During 2002, the Company will perform
the first of the required impairment tests of goodwill and indefinite lived
intangible assets as of January 1, 2002. The Company has not yet determined what
the effect of these tests will be on its results of operations and financial
position.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------
Certain statements contained herein constitute "forward-looking statements" as
that term is defined under the provisions of the Private Securities Litigation
Reform Act of 1995. When used herein, the words "believe," "anticipate,"
"should," "intend," "plan," "will," "expects," "estimates," "projects,"
"positioned," "strategy," and similar expressions identify such forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from those contemplated, projected, forecasted, estimated or budgeted, whether
expressed or implied, by such forward-looking statements. Such factors include,
among others: general economic and business conditions, technological
developments, the Company's ability to continue to design networks, install
facilities, obtain and maintain any required governmental licenses or approvals
and finance construction and development, all in a timely manner at reasonable
costs and on satisfactory terms and conditions, as well as assumptions about
customer acceptance, churn rates, overall market penetration and competition
from providers of alternative services, the impact of restructuring and
integration actions, the impact of new business opportunities requiring
significant up-front investment, interest rate and currency exchange rate
fluctuations and availability, terms and deployment of capital. The Company
assumes no obligation to update the forward-looking statements contained herein
to reflect actual results, changes in assumptions or changes in factors
affecting such statements.
12
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
PART II. OTHER INFORMATION
- -------- -----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits:
None.
(b) Reports on Form 8-K:
During the quarter ended June 30, 2001, the Company filed a
current report on Form 8-K dated May 24, 2001 (filed May 24,
2001) reporting under Item 5, Other Events, that NTL
Incorporated, the public parent company of NTL (Triangle) LLC,
announced it signed a Strategic Outsourcing Deal with IBM
which covers the provision of Information Technology (IT)
services for NTL across the UK and Ireland.
No financial statements were filed with this report.
13
NTL (TRIANGLE) LLC AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NTL (TRIANGLE) LLC
--------------------------------------------
(Registrant)
By: NTL Group Limited
Its Sole Managing Member
Date: August 9, 2001 By: /s/ Stephen A. Carter
--------------------------------------------
Stephen A. Carter
(Director and Chief Operating Officer of
NTL Group Ltd., the sole managing member)
on behalf of registrant
Date: August 9, 2001 By: /s/ Robert MacKenzie
--------------------------------------------
Robert MacKenzie
(Director and Secretary of
NTL Group Ltd., the sole managing member)
on behalf of registrant
14