Ntl (NASDAQ:NTLI)
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NTL Incorporated (NASDAQ:NTLI) today announces first
quarter results for the quarter ended March 31, 2006. NTL merged with
Telewest Global, Inc. on March 3, 2006. This earnings release contains
financial information on both an actual reported basis and a pro forma
basis, which assumes that the merger took place on January 1, 2006
(and for comparison purposes to the fourth quarter of 2005 at the
beginning of 2005.)
Quarterly highlights(1)
-- Revenue of GBP 611m, up GBP 127m on Q4-05, mainly due to
merger with Telewest
-- Pro forma consumer revenue of GBP 637m, up GBP 6m on Q4-05
-- Operating income of GBP 4m, up GBP 38m on Q4-05
-- ARPU of GBP 41.50, up GBP 0.23 vs Q4-05
-- RGU net additions of 205,100
-- Customer net additions of 25,800
-- RGU per customer of 2.09, up from 2.06 at Q4-05 and 2.00 at
Q1-05
-- Triple play penetration of 34.9%, up from 32.4% at Q4-05 and
26.8% at Q1-05
-- Accelerated plan to deliver annualized GBP 250m cost synergies
(1) - operational statistics prepared on a pro forma basis
-0-
*T
(GBP millions) (unaudited)
-----------------------------------
Q1 2006 Q4 2005 Q1 2006 Q4 2005
-----------------------------------
Revenue
Consumer 636.7 631.2 461.4 379.4
Business 165.6 168.2 122.8 105.2
-----------------------------------
Total Cable 802.3 799.4 584.2 484.6
Content 86.5 116.7 27.2 -
-----------------------------------
Total Revenue 888.8 916.1 611.4 484.6
OCF 277.0 292.0 198.4 154.7
Operating (loss)/income (0.9) (19.4) 3.9 (34.4)
Pro forma OCF in the first quarter of 2006 has been negatively
impacted by several costs relating to the merger with Telewest,
including; GBP 16.3m of Telewest merger and related fees (such as
investment banking fees and insurance costs), GBP 4.6m of Telewest
long term incentive plan costs, GBP 3.6m of consultancy fees relating
to the merger integration (Q4-05: GBP 1.8m), an estimate of GBP 2.2m
in additional SG&A arising from our internal merger office and GBP
1.9m pro forma revaluation of Telewest stock based compensation
expense (Q4-05: GBP 1.9m). Some of these costs will recur as we
continue our drive to realize merger synergies. For further
discussion, please see Operational Review. OCF is Operating income
before depreciation, amortization and other charges and is a non GAAP
measure. The pro forma presentation set forth above and elsewhere in
this earnings release is non-GAAP financial information. Please see
Appendix F for reconciliation of non- GAAP terms to their nearest GAAP
equivalents.
*T
Steve Burch, Chief Executive Officer of NTL, said:
"The first quarter showed real evidence of operational
improvements in our consumer business, with an increase in ARPU driven
by our successful focus on quality customer growth, improvements to
RGU per customer and increasing triple play penetration.
"The merger of NTL with Telewest completed on March 3, 2006, and
our integration is progressing well. Today, we are announcing our
plans to accelerate our integration program to achieve a run rate of
at least GBP 250 million of annualized cost synergies by the end of
2007. Part of this process will involve outsourcing a significant
number of jobs, where employment would be transferred to an external
organization, as well as actual job reductions. In total, this will
involve around 6,000 employees by the end of 2007. Around 80% of the
reduction will take place within twelve months. The cost savings from
the outsourcing and the job losses combined will be equivalent to
around 3,400 full-time equivalent employees.
"On April 4, 2006, we announced our offer to acquire Virgin Mobile
and a license for the Virgin brand allowing us to transform from the
UK's leading triple-play provider into a national entertainment and
communications quad-play company, harnessing the power of the Virgin
brand and leading our industry in product convergence.
"With the growth opportunities in our markets, together with
substantial merger synergies, we believe we can drive significant free
cash flow generation going forward, providing us with strong financial
flexibility and improved capital deployment options."
OPERATIONAL REVIEW
The commentary below refers to financial results prepared on both
a pro forma and actual reported basis. The actual reported results
consolidate Telewest from March 3, 2006. The pro forma financial
information for the first quarter of 2006 assume that the merger with
Telewest occurred on January 1, 2006. The pro forma results for 2005
quarterly periods assume that the merger occurred on January 1, 2005.
All references to operational statistics including customer and
subscriber figures, ARPU and churn are on a pro forma basis. The pro
forma financial information is non-GAAP financial information that
management believes facilitates a comparative analysis of developments
in the Company's business.
Total revenue in the quarter was GBP 611.4 million, up GBP 126.8
million sequentially and up GBP 113.6 million compared to the first
quarter of 2005 due mainly to the acquisition of Telewest.
Total pro forma revenue in the quarter was GBP 888.8 million, down
GBP 27.3 million sequentially due mainly to a decline in Content
revenue of GBP 30.2 million because the fourth quarter holiday season
is traditionally situp's prime selling period. Total pro forma revenue
was up GBP 55.6 million compared to the first quarter of 2005 due
mainly to Telewest's acquisition of sit-up in May 2005.
Cable Segment
Consumer
Consumer revenue in the first quarter was GBP 461.4 million, up
GBP 82.0 million sequentially and GBP 77.2 million compared to the
first quarter of 2005 due mainly to the acquisition of Telewest.
Pro forma consumer revenue in the first quarter was GBP 636.7
million, up GBP 5.5 million sequentially and up GBP 6.9 million
compared to the first quarter of 2005. Sequential growth was driven
primarily by increased ARPU at GBP 41.50 compared to GBP 41.27 in the
previous quarter.
ARPU growth reflects our successful focus on selling profitable
product bundles and on cross-sell and up-sell to existing customers
and selected price increases. This is reflected in growth in RGU per
customer from 2.06 to 2.09 and in triple play penetration which grew
from 32.4% to 34.9% during the quarter. The success of this focus was
most apparent in old NTL where ARPU reversed from recent declines and
grew by GBP 0.32 to GBP 39.28 in the quarter.
ARPU will be impacted by further television and telephony price
increases this year as discussed further below.
Net RGU additions were 205,100 in the first quarter, compared to
215,800 in the traditionally strong fourth quarter and to 186,100 in
the first quarter of 2005. This has been driven primarily by further
growth in broadband.
Net customer additions were 25,800 in the first quarter, compared
to 40,700 in the previous quarter and to 55,700 in the same quarter
last year as we focused on bundled selling and RGU growth as compared
to overall customer growth. From April 1, 2006, we have more closely
aligned old NTL up-front credit policies with those of old Telewest.
This has the effect of reducing acquisition levels in old NTL. This
focus on quality growth rather than overall customer growth, which is
reflected in improved ARPU, has continued into the second quarter,
where customer net additions are expected to be lower than in the
first quarter.
Churn at 1.3% was down from 1.4% in the previous quarter and flat
as compared to the first quarter of 2005.
Broadband
We continue to experience strong growth in the number of broadband
subscribers, with net additions of 191,400 in the quarter, compared to
191,700 in the previous quarter and 168,400 in the same quarter last
year. Broadband penetration stands at 24.0% of our homes marketable
and the outlook for growth remains strong.
As an end-to-end network owner, we have competitive strengths in
the quality of broadband service that we offer. Customers can receive
consistent speeds no matter where they live and our top speeds of 10Mb
are available throughout our addressable areas.
Television
Digital television net additions were 70,600 in the quarter,
compared to 85,500 in the previous quarter and to 32,800 in the first
quarter of 2005. Total TV net additions, which includes analog
television, were 5,600 in the quarter compared to 23,300 in the fourth
quarter and to net disconnections of 11,900 in the same quarter last
year.
Our roll-out of exciting new television products continues.
Video-on-demand (VOD) is now available to 72% of our digital
subscribers and DVR and HDTV were launched in old Telewest areas in
February, 2006, with initial sales proving encouraging. Consequently,
cable was the first platform in the UK to launch HDTV. We continue to
add to our line-up of VOD and HDTV content, and we expect to broadcast
World Cup football matches in HDTV to our HDTV customers in June.
Television remains a focus for ARPU improvements. In old Telewest,
we increased the price of our top two basic packages for existing
customers and Sky premium channels in March, 2006 and in old NTL we
are increasing some basic package prices in July, 2006, and Sky
premium prices in September, 2006. Our HDTV/DVR service is charged at
GBP 10 per month for customers on the top basic service.
Our wide and comprehensive range of television services allow us
to retain a competitive advantage over competing platforms.
Telephony
Telephony net additions were 8,100 in the quarter, compared to 800
in the previous quarter and to 29,700 in the same quarter last year.
We have continued our strategy of migrating subscribers to flat
rate packages to reduce the impact of declining fixed line telephony
usage.
We will be increasing the price of telephony line rental from GBP
10.50 to GBP 11.00 in June. Our major telephony competitor recently
increased line rental pricing to the same level.
Off-net
Consumer off-net revenue was GBP 18.0 million in the first
quarter, compared to GBP 17.6 million in the previous quarter and GBP
17.5 million in the same quarter last year. These revenues are largely
from Virgin.net, our wholly owned broadband ISP.
As at the quarter end, Virgin.net had 193,200 broadband
subscribers. Net additions in the quarter were 26,700 compared to
23,200 in the previous quarter and to 25,600 in the same quarter last
year.
Business
Business revenue in the first quarter was GBP 122.8 million, up
GBP 17.6 million sequentially and GBP 9.2 million compared to the
first quarter of 2005 due mainly to the acquisition of Telewest.
Pro forma business revenue was GBP 165.6 million, compared to GBP
168.2 million in the previous quarter and GBP 174.3 million in the
same quarter last year. The core part of our voice and data business
remains strong, but revenues were down versus the previous quarter due
to a reduction in the level of Project revenue, which arises from the
provision of LAN and WAN infrastructure to corporate customers.
In line with our continued focus on corporate and mid-market
customers, we have experienced a shift in revenue mix, with pro forma
data revenues growing strongly compared to the same quarter last year.
Business voice and data services remains an extremely challenging
market. We believe we are well positioned for long term growth, with a
lower unit network cost than our competitors and a position that is
enhanced by the scale benefits of the merger. However, the fluctuating
nature of our Project business will make revenue growth in the next
quarter challenging.
Cable Segment OCF
Cable segment OCF in the quarter was GBP 195.4 million, up GBP
24.3 million as compared to the same quarter last year, and up GBP
40.7 million compared to the previous quarter due mainly to the merger
with Telewest.
The cable segment's pro forma OCF in the quarter was GBP 267.6
million, down GBP 29.1 million as compared to the same quarter last
year, and down GBP 15.6 million compared to the previous quarter due
mainly to costs relating to the merger with Telewest, detailed further
below.
Content Segment
The content segment consists of two businesses, Flextech and
sit-up. Content revenue, after inter segment elimination, in the first
quarter was GBP 27.2 million, comprising GBP 11.0 million from
Flextech and GBP 16.2 million from sit-up, compared to GBP nil in both
the prior quarter and the first quarter of 2005 due entirely to the
acquisition of Telewest.
Flextech has historically sold programming to NTL, as well as to
Telewest. For pro forma consolidation purposes therefore, these
amounts have been eliminated.
Total pro forma content revenue, after inter segment elimination,
was GBP 86.5 million in the first quarter, up GBP 57.4 million on the
first quarter of 2005 quarter due to the acquisition of sit-up by
Telewest in May 2005. Pro forma content revenue was down GBP 30.2
million on the previous quarter because the fourth quarter holiday
selling season is traditionally sit-up's prime selling period.
Flextech pro forma revenue, after inter segment elimination, was
GBP 34.6 million in the quarter, up GBP 2.0 million on the previous
quarter and up 19% on the first quarter of 2005. Flextech pro forma
advertising revenue was GBP 22.0 million in the first quarter, up GBP
3 million on the previous quarter and up 28% on the same quarter last
year, resulting primarily from increased share of the advertising
revenue market due to the prior year growth in commercial impacts.
Flextech pro forma subscription revenue before inter segment
elimination was relatively flat compared to the previous quarter at
GBP 14.4 million, but up 8% on the same quarter last year, due to
increased multi-channel penetration.
Sit-up pro forma revenue was GBP 51.8 million in the quarter, flat
on the same quarter last year (as reported by sit-up under UK GAAP
before its acquisition by Telewest.) Pro forma revenue was down GBP
32.2 million from the previous quarter as the fourth quarter holiday
season is traditionally sit-up's prime selling period.
Content segment OCF in the quarter was GBP 3.0 million after inter
segment eliminations, up GBP 3.0 million as compared to both the same
quarter last year and the prior quarter due entirely to the merger
with Telewest. The content segment's pro forma OCF in the quarter was
GBP 9.4 million before inter segment eliminations of GBP 4.8 million,
up GBP 5.4 million as compared to the same quarter last year and up by
GBP 0.6 million from the prior quarter.
Operating income before depreciation, amortization and other
charges (OCF)
Actual reported OCF in the first quarter was GBP 198.4 million, up
GBP 43.7 million sequentially and up GBP 27.3 million compared to the
first quarter of 2005 mainly due to the merger with Telewest.
Pro forma OCF in the first quarter was GBP 277.0 million, down GBP
15.0 million from the previous quarter. The business continued to grow
in the first quarter of 2006, although pro forma OCF was impacted
negatively by costs associated with the merger. Some of these costs
can be expected to recur as we continue our drive to realize synergies
from the Telewest merger. These costs include:
-- GBP 16.3 million of merger and related fees incurred by
Telewest, such as investment banking fees, lawyer fees and
insurance costs arising from the merger.
-- GBP 4.6 million of costs arising from accelerated payments
under the Telewest long-term incentive plan as a result of the
merger.
-- Planning and implementing the merger integration resulted in
third party costs of GBP 3.6 million, primarily relating to
outside consultancy arrangements. These types of costs will
increase and recur in future quarters. In the fourth quarter
of 2005, these costs were GBP 1.8 million.
-- The Company estimates additional selling, general and
administrative expense (SG&A) of approximately GBP 2.2 million
due to the costs of our internal "merger office", a department
staffed by employees working predominantly on the integration
of the two businesses. We expect increased SG&A from the
merger office to recur in future quarters.
-- Pro forma adjustment of GBP 1.9 million of additional stock
based compensation expense (SBCE) from the revaluation of
stock options issued to Telewest personnel, upon the merger.
We anticipate that in our reported results for the second
quarter, SBCE relating to old Telewest personnel will increase
by approximately GBP 3.1 million due primarily to the vesting
of an additional tranche of options.
In addition to the items above, pro forma OCF for the full year
will also be impacted by SBCE of approximately GBP 10 million,
reflecting options and restricted stock awarded to the enhanced
management team and approximately GBP 13 million due to a reduction in
the amount of capitalized overhead attributable to capital projects.
Both of these items are non-cash related. In addition, we believe 2006
pro forma OCF will be negatively impacted by increased energy costs of
around GBP 10 million due to nationwide increases in the price of
electricity and gas as well as an estimated increase of around GBP 10
million in bonus expenses, reflecting the fact that no annual bonus
was paid to NTL employees in 2005.
OCF and pro forma OCF are non-GAAP measures. See Appendix F for
reconciliation of non- GAAP measures to their nearest GAAP
equivalents.
Operating income, loss from continuing operations and net loss
Operating income in the first quarter was GBP 3.9 million,
compared to GBP 13.0 million in the first quarter of 2005. The
increase in OCF arising from the acquisition of Telewest was offset by
additional depreciation and amortization, also arising from the
acquisition of Telewest, together with an increase in other charges.
Other charges of GBP 8.4 million in the first quarter represent
employee termination and property exit costs in connection with the
merger integration restructuring program.
Loss from continuing operations in the first quarter was GBP119.9
million, compared to GBP 65.9 million in the first quarter of 2005.
The increased loss was driven primarily by an increase in interest
expense from the indebtedness incurred to acquire Telewest, a loss of
GBP 32.4 million on extinguishment of debt and a loss on derivative
instruments of GBP 9.2 million.
Net loss was GBP 119.9 million in the first quarter compared to a
profit of GBP 455.8 million in the same quarter last year, which
included a GBP 514.6 million gain on the disposal of our Broadcast
business.
Capital expenditure
Fixed asset additions (accrual basis) in the quarter was GBP 117.8
million, an increase of GBP 23.2 million as compared to the previous
quarter, and an increase of GBP 53.7 million as compared to the first
quarter of 2005, due mainly to the acquisition of Telewest.
Pro forma fixed asset additions (accrual basis) in the quarter was
GBP 158.3 million, flat as compared to the previous quarter, and an
increase of GBP 42.2 million as compared to the first quarter of 2005
due mainly to an increase in scaleable infrastructure a large part of
which related to expansion of broadband capacity and availability in
old NTL's network.
Fixed asset additions (accrual basis) and pro forma fixed asset
additions (accrual basis) are non-GAAP financial measures. See
Appendix F for reconciliation of non-GAAP measures to their nearest
GAAP equivalents.
Net Debt
As of March 31, 2006, net debt was GBP 5,385.1 million. This
consisted of GBP 3,200.0 million outstanding on the company's Senior
Credit Facilities, GBP 1,809.0 million of Senior Bridge financing, GBP
776.4 million of Senior notes, GBP 111.7 million of capital leases and
GBP 6.3 million of other, offset by GBP 518.3 million of cash and cash
equivalents.
Net debt is a non-GAAP financial measure. See Appendix F for
reconciliation of non-GAAP measures to their nearest GAAP equivalents.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995:
Various statements contained in this document constitute
"forward-looking statements" as that term is defined under the Private
Securities Litigation Reform Act of 1995. Words like "believe,"
"anticipate," "should," "intend," "plan," "will," "expects,"
"estimates," "projects," "positioned," "strategy," and similar
expressions identify these forward-looking statements, which involve
known and unknown risks, uncertainties and other factors that may
cause our actual results, performance or achievements or industry
results to be materially different from those contemplated, projected,
forecasted, estimated or budgeted, whether expressed or implied, by
these forward-looking statements. These factors include: (1) the
failure to obtain and retain expected synergies from the merger with
Telewest and the proposed transaction with Virgin Mobile; (2) rates of
success in executing, managing and integrating key acquisitions,
including the merger with Telewest and the proposed transaction with
Virgin Mobile; (3) the ability to achieve business plans for the
combined company; (4) the ability to manage and maintain key customer
relationships; (5) the ability to fund debt service obligations
through operating cash flow; (6) the ability to obtain additional
financing in the future and react to competitive and technological
changes; (7) the ability to comply with restrictive covenants in NTL's
indebtedness agreements; (8) the ability to control customer churn;
(9) the ability to compete with a range of other communications and
content providers; (10) the effect of technological changes on NTL's
businesses; (11) the functionality or market acceptance of new
products that NTL may introduce; (12) possible losses in revenues due
to systems failures; (13) the ability to maintain and upgrade NTL's
networks in a cost-effective and timely manner; (14) the reliance on
single-source suppliers for some equipment and software; (15) the
ability to provide attractive programming at a reasonable cost; and
(16) the extent to which NTL's future earnings will be sufficient to
cover its fixed charges.
These and other factors are discussed in more detail under "Risk
Factors" and elsewhere in NTL's Form 10-K and NTL Holdings Inc.'s Form
10-K that were filed with the SEC on February 28, 2006 and March 1,
2006, respectively. We assume no obligation to update our
forward-looking statements to reflect actual results, changes in
assumptions or changes in factors affecting these statements.
NTL-Telewest Merger
On March 3, 2006, NTL Holdings Inc, (formerly known as NTL
Incorporated) merged with a subsidiary of NTL Incorporated (formerly
known as Telewest Global, Inc.) Because this transaction is accounted
for as a reverse acquisition, the actual reported financial
information included in this release is of the corporation now known
as NTL Holdings Inc. for the period through March 3, 2006 and
thereafter it reflects the reverse acquisition of Telewest Global,
Inc. The pro forma financial information treats the merger as if it
occurred at the beginning of the relevant year.
Non-GAAP Financial Measures
NTL uses non- GAAP measures with a view to providing investors
with a better understanding of the operating results and underlying
trends to measure past and future performance and liquidity.
NTL evaluates operating performance based on several non-GAAP
financial measures, including (i) operating income before
depreciation, amortization and other charges (OCF), (ii) fixed asset
additions (accrual basis) and (iii) net debt, as we believe these are
important measures of the operational strength of our business. Since
these measures are not calculated in accordance with GAAP, they should
not be considered as substitutes for operating income (loss), purchase
of fixed assets and total liabilities, respectively, as indicators of
our operating performance, expenditure for fixed assets and total
liabilities.
The pro forma presentation of our financial results contained
herein is non GAAP financial information. We have included the pro
forma information to provide a useful basis for evaluating
developments in our business over time, but it should not be viewed as
a substitute for our GAAP financial information.
Please see Appendix F for a discussion of NTL's use of non-GAAP
financial measures.
Appendices
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*T
Appendices:
A) Financial Statements
-- Condensed Consolidated Statement of Operations
-- Condensed Consolidated Balance Sheet
-- Condensed Consolidated Statement of Cashflows
-- Quarterly Condensed Consolidated Statement of Operations
B) Residential Operations statistics
C) Segmental Analysis
D) Fixed Asset Additions (accrual basis)
E) Pro Forma Combined Condensed Financial Information
F) Use of non- GAAP Financial Measures and Reconciliations to GAAP
Appendices
----------
A) Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in GBP millions, except per share data) (unaudited)
3 months ended March 31,
2006 2005
--------------------
Revenue 611.4 497.8
Costs and expenses
Operating costs (exclusive of depreciation
shown separately below) (254.9) (206.9)
Selling, general and administrative expenses (158.1) (119.8)
Other charges (8.4) (0.4)
Depreciation (149.3) (130.3)
Amortization (36.8) (27.4)
--------------------
Total costs and expenses (607.5) (484.8)
--------------------
Operating income 3.9 13.0
Other income (expense)
Interest income and other, net 8.6 6.5
Interest expense (83.8) (70.1)
Share of income from equity investments 1.4 -
Foreign currency transaction losses (10.0) (4.0)
Loss on extinguishment of debt (32.4) -
Losses on derivative instruments (9.2) -
--------------------
Loss from continuing operations before income
taxes, minority interest and cumulative effect of
change in accounting principle (121.5) (54.6)
Income tax expense - (11.3)
Minority interest income 0.4 -
Cumulative effect of change in accounting principle 1.2 -
--------------------
Loss from continuing operations (119.9) (65.9)
--------------------
Discontinued operations
Income from discontinued operations before
income taxes - 7.3
Gain on disposal of assets - 514.6
Income tax expense - (0.2)
--------------------
Income from discontinued operations 0.0 521.7
--------------------
Net (loss) income (119.9) 455.8
====================
Basic and diluted (loss) from continuing (GBP 0.49)(GBP 0.30)
operations per share ====================
Basic and diluted income from discontinued GBP 0.00 GBP 2.41
operations per share ====================
Basic and diluted net (loss) income per share (GBP 0.49) GBP 2.11
====================
Average number of shares outstanding 245.5 216.5
====================
CONDENSED CONSOLIDATED BALANCE SHEET
(in GBP millions)
March 31, December
2006 31, 2005
--------------------
(Unaudited)(See Note)
Assets
Current assets
Cash and cash equivalents 518.3 735.2
Restricted cash 7.5 3.4
Marketable securities - 96.9
Accounts receivable - trade, less allowance
for doubtful accounts of GBP 39.7 (2006) and
GBP 41.7 (2005) 344.5 191.8
Inventory for re-sale 9.1 -
Prepaid expenses and other current assets 119.7 112.4
--------------------
Total current assets 999.1 1,139.7
Fixed assets, net 6,227.0 3,294.9
Goodwill 1,350.5 -
Reorganization value in excess of amounts
allocable to identifiable assets 193.0 193.0
Customer lists, net 1,017.2 247.6
Other intangible assets, net 71.2 2.4
Investments in and loans to affiliates, net 370.5 -
Programming inventory 37.4 -
Other assets, net of accumulated amortization of
GBP 10.5 (2006) and GBP 32.2 (2005) 131.1 110.9
--------------------
Total assets 10,397.0 4,988.5
====================
Liabilities and shareholders' equity
Current liabilities
Accounts payable 309.4 176.9
Accrued expenses and other current liabilities 580.6 291.1
Interest payable 56.7 37.8
Deferred revenue 233.0 103.2
Due to affiliates 0.9 -
Current portion of long-term debt 53.5 0.8
--------------------
Total current liabilities 1,234.1 609.8
Long-term debt, net of current portion 5,849.9 2,279.2
Deferred revenue and other long-term liabilities 169.1 134.3
Deferred income taxes 138.8 9.2
Minority Interest 0.6 1.0
--------------------
Total liabilities 7,392.5 3,033.5
--------------------
Commitments and contingent liabilities
Shareholders' equity
Common stock 1.6 1.2
Additional paid-in capital 3,744.2 2,671.0
Treasury stock - (114.0)
Accumulated other comprehensive income 27.3 45.5
Accumulated deficit (768.6) (648.7)
--------------------
Total shareholders' equity 3,004.5 1,955.0
--------------------
Total liabilities and shareholders' equity 10,397.0 4,988.5
====================
Note: The balance sheet at December 31, 2005 has been derived from the
audited financial statements at that date.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in GBP millions) (unaudited)
3 months ended March 31,
2006 2005
--------------------
Net cash provided by operating activities 207.3 157.4
--------------------
Investing activities
Purchase of fixed assets (135.3) (73.8)
Investments in and loans to affiliates 4.9 -
Acquisition of subsidiaries, net of cash
acquired (1,999.2) -
Proceeds from the sale of fixed assets 0.7 -
Decrease (increase) in restricted cash 4.2 (2.0)
Proceeds from sale of broadcast operations, net - 1,221.4
--------------------
Net cash (used in) provided by investing
activities (2,124.7) 1,145.6
--------------------
Financing activities
Proceeds from employee stock option exercises 27.2 0.4
Purchase of stock - (69.2)
New borrowings 5,000.0 -
Principal payments on long-term debt (3,241.3) (500.2)
Financing fees (80.0) -
--------------------
Net cash provided by (used in) financing
activities 1,705.9 (569.0)
--------------------
Cash flow from discontinued operations
Net cash used by operating activities - (6.0)
Net cash used by investing activities - (3.0)
--------------------
Net cash used in discontinued operations - (9.0)
--------------------
Effect of exchange rate changes on cash and cash
equivalents (5.4) (7.4)
(Decrease) increase in cash and cash equivalents (216.9) 717.6
Cash and cash equivalents, beginning of period 735.2 125.2
--------------------
Cash and cash equivalents, end of period GBP 518.3 GBP842.8
====================
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in GBP millions, except per share data) (unaudited)
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2006 2005 2005 2005 2005
---------------------------------------------
Revenue 611.4 484.6 482.7 482.5 497.8
Costs and expenses
Operating costs
(exclusive of
depreciation shown
separately below) (254.9) (205.2) (200.2) (196.0) (206.9)
Selling, general and
administrative expenses (158.1) (124.7) (116.2) (122.3) (119.8)
Other charges (8.4) (22.4) (1.3) (0.7) (0.4)
Depreciation (149.3) (139.5) (142.3) (129.6) (130.3)
Amortization (36.8) (27.2) (27.4) (27.5) (27.4)
---------------------------------------------
Total costs and expenses (607.5) (519.0) (487.4) (476.1) (484.8)
---------------------------------------------
Operating income (loss) 3.9 (34.4) (4.7) 6.4 13.0
Other income (expense)
Interest income and
other, net 8.6 7.8 6.8 8.3 6.5
Interest expense (83.8) (55.6) (51.7) (58.4) (70.1)
Share of income from
equity investments 1.4 0.9 (0.2) 0.2 -
Foreign currency
transaction losses (10.0) 35.2 (13.1) (12.8) (4.0)
Loss on extinguishment
of debt (32.4) - (2.0) - -
Loss on derivative
instruments (9.2) - - - -
---------------------------------------------
Loss from continuing
operations before income
taxes, minority interest
and cumulative effect of
change in accounting
principle (121.5) (46.1) (64.9) (56.3) (54.6)
Income tax expense - (10.1) 12.4 (9.8) (11.3)
Minority interest income 0.4 - (1.0) - -
Cumulative effect of
change in accounting
principle 1.2 - - - -
---------------------------------------------
Loss from continuing
operations (119.9) (56.2) (53.5) (66.1) (65.9)
---------------------------------------------
Discontinued operations
Income from discontinued
operations before
income taxes - 0.2 - (1.8) 7.3
Gain on disposal of
assets - (0.2) 1.4 141.4 514.6
Income tax expenses - - - - (0.2)
---------------------------------------------
Income from discontinued
operations 0.0 0.0 1.4 139.6 521.7
---------------------------------------------
Net (loss) income (119.9) (56.2) (52.1) 73.5 455.8
=============================================
Basic and diluted (loss)
from continuing
operations per share (GBP0.49)(GBP0.26)(GBP0.25)(GBP0.31)(GBP0.30)
=============================================
Basic and diluted income
from discontinued
operations per share GBP 0.00 GBP 0.00 GBP 0.01 GBP 0.65 GBP 2.41
=============================================
Basic and diluted net
(loss) income per share (GBP0.49)(GBP0.26)(GBP0.24)GBP 0.34 GBP 2.11
=============================================
Average number of shares
outstanding 245.5 212.8 212.8 212.8 216.5
=============================================
B) RESIDENTIAL OPERATIONS STATISTICS
(data in 000's except percentages, RGU/Customer and ARPU)
Pro forma new NTL (1)
Q1-06 Q4-05 Q3-05 Q2-05 Q1-05
---------------------------------------------
Customers
Opening Customers 4,958.0 4,945.4 4,893.1 4,830.6 4,774.9
Data Cleanse(2) 0.0 (18.1) 0.0 0.0 0.0
Adjusted Opening
Customers 4,958.0 4,927.3 4,893.1 4,830.6 4,774.9
Gross customer adds 218.1 248.9 271.9 250.8 235.7
Total Customer
disconnections (192.3) (208.2) (219.6) (188.3) (180.0)
Net customer adds 25.8 40.7 52.3 62.5 55.7
Reduction to customer
count(3) 0.0 (10.0) 0.0 0.0 0.0
---------------------------------------------
Closing Customers 4,983.8 4,958.0 4,945.4 4,893.1 4,830.6
Monthly customer churn % 1.3% 1.4% 1.5% 1.4% 1.3%
RGUS
Opening RGUs 10,200.6 10,040.2 9,837.5 9,641.4 9,455.6
Data Cleanse(2) 0.0 (43.1) 0.0 0.0 0.0
Adjusted Opening RGUs 10,200.6 9,997.1 9,837.5 9,641.4 9,455.6
Net RGU adds 205.1 215.8 202.7 196.1 186.1
Reduction to RGU
count(3) 0.0 (12.3) 0.0 0.0 (0.3)
---------------------------------------------
Closing RGUs 10,405.7 10,200.6 10,040.2 9,837.5 9,641.4
Net RGU Adds
Telephone 8.1 0.8 2.6 33.1 29.7
Television 5.6 23.3 (5.0) 13.2 (11.9)
DTV 70.6 85.5 42.9 57.1 32.8
Broadband 191.4 191.7 205.1 149.8 168.4
---------------------------------------------
Total Net RGU Adds 205.1 215.8 202.7 196.1 186.1
Revenue Generating Units (RGUs)
Telephone 4,268.1 4,260.0 4,285.0 4,282.4 4,249.3
Television 3,315.9 3,310.3 3,288.7 3,293.6 3,280.5
DTV 2,786.5 2,715.9 2,637.5 2,594.6 2,537.6
Broadband 2,821.7 2,630.3 2,466.5 2,261.4 2,111.6
---------------------------------------------
Total RGUs 10,405.7 10,200.6 10,040.2 9,837.5 9,641.4
RGU / Customer 2.09 2.06 2.03 2.01 2.00
Internet Customers
Dial-up (metered) 46.6 56.8 64.5 72.4 81.5
Dial-up (unmetered) 87.4 117.2 146.6 192.2 230.7
DTV Access 6.4 7.6 8.0 8.4 6.9
---------------------------------------------
Total Dial-up and DTV
access customers 140.4 181.6 219.0 273.0 319.1
Broadband 2,821.7 2,630.3 2,466.5 2,261.4 2,111.6
---------------------------------------------
Total Internet 2,962.1 2,811.9 2,685.6 2,534.5 2,430.7
---------------------------------------------
Bundled Customers
Dual RGU 1,939.1 2,033.2 2,114.5 2,184.6 2,225.7
Triple RGU 1,741.4 1,604.6 1,490.2 1,379.9 1,292.6
Percentage of dual or
triple RGUs 73.8% 73.4% 72.9% 72.8% 72.8%
Percentage of triple
RGUs 34.9% 32.4% 30.1% 28.2% 26.8%
ARPU
Combined GBP41.50 GBP41.27 GBP41.28 GBP41.63 GBP42.48
NTL GBP39.28 GBP38.96 GBP38.99 GBP39.69 GBP40.75
Telewest GBP45.15 GBP45.13 GBP45.11 GBP44.84 GBP45.34
Homes Marketable On-net
Telephone 12,311.2 12,299.7 12,288.5 12,273.1 12,260.9
ATV 12,656.7 12,652.8 12,633.9 12,621.2 12,607.0
DTV 11,989.2 11,972.3 11,941.7 11,926.1 11,846.1
Broadband 11,745.7 11,613.6 11,583.2 11,567.9 11,447.3
Total homes 12,656.7 12,652.8 12,633.9 12,621.2 12,607.0
Penetration of Homes
Marketable On-net
Telephone 34.7% 34.6% 34.9% 34.9% 34.7%
Television - Total 26.2% 26.2% 26.0% 26.1% 26.0%
Television - DTV 23.2% 22.7% 22.1% 21.8% 21.4%
Broadband 24.0% 22.6% 21.3% 19.5% 18.4%
Total Customer 39.4% 39.2% 39.1% 38.8% 38.3%
Notes:
(1) Subscriber information is on a pro forma combined basis
assuming that the Telewest and NTL merger had occurred on
January 1, 2005 and reflects Telewest and NTL reported on-net
with prior periods restated for policy alignments where
applicable.
(2) Data cleanse activity in Q4-05 resulted in a decrease in ntl
of 18,100 customers and 43,100 RGUs, a decrease of
approximately 17,700 Telco, 26,600 Broadband and an increase
of 1,300 net TV RGUs.
(3) Review of inactive backlog customers in Q4-05 resulted in an
adjustment to remove 10,000 inactive backlog disconnects
representing 12,300 RGUs
(4) A table showing NTL operational statistics for Q1-06 on an
actual reported basis reflecting the merger with Telewest on
March 3, 2006 can be found in our Form 10Q for Q1-06, expected
to be filed with the SEC on May 9, 2006.
RESIDENTIAL OPERATIONS STATISTICS
(data in 000's except percentages, RGU/Customer and ARPU)
Old Telewest (1&4)
Q1-06 Q4-05 Q3-05 Q2-05 Q1-05
----------------------------------------
Customers
Opening Customers 1,868.2 1,848.1 1,837.2 1,822.5 1,799.6
Data Cleanse(2)
Adjusted Opening Customers 1,868.2 1,848.1 1,837.2 1,822.5 1,799.6
Gross customer adds 79.2 86.1 89.5 79.4 78.7
Total Customer
disconnections (60.6) (66.0) (78.6) (64.7) (55.7)
Net customer adds 18.6 20.1 10.9 14.7 23.0
Reduction to customer
count(3)
----------------------------------------
Closing Customers 1,886.8 1,868.2 1,848.1 1,837.2 1,822.5
Monthly customer churn % 1.1% 1.2% 1.4% 1.2% 1.0%
RGUS
Opening RGUs 4,059.6 3,955.2 3,873.8 3,784.8 3,671.4
Data Cleanse(2)
Adjusted Opening RGUs 4,059.6 3,955.2 3,873.8 3,784.8 3,671.4
Net RGU adds 105.3 104.4 81.4 89.0 113.4
Reduction to RGU count(3)
----------------------------------------
Closing RGUs 4,164.9 4,059.6 3,955.2 3,873.8 3,784.8
Net RGU Adds
Telephone 11.5 0.5 (2.8) 11.6 17.3
Television 3.3 19.0 16.8 11.3 7.7
DTV 21.4 42.6 38.6 39.9 27.3
Broadband 90.5 84.9 67.3 66.1 88.5
----------------------------------------
Total Net RGU Adds 105.3 104.4 81.4 89.0 113.4
Revenue Generating Units (RGUs)
Telephone 1,698.4 1,686.9 1,686.4 1,689.2 1,677.6
Television 1,370.9 1,367.6 1,348.6 1,331.7 1,320.5
DTV 1,292.2 1,270.8 1,228.2 1,189.5 1,149.6
Broadband 1,095.6 1,005.1 920.2 852.8 786.7
----------------------------------------
Total RGUs 4,164.9 4,059.6 3,955.2 3,873.8 3,784.8
RGU / Customer 2.21 2.17 2.14 2.11 2.08
Internet Customers
Dial-up (metered) 15.4 19.6 23.6 25.0 29.4
Dial-up (unmetered) 28.9 38.3 49.5 65.5 85.9
DTV Access
----------------------------------------
Total Dial-up and DTV access
customers 44.3 57.9 73.2 90.6 115.3
Broadband 1,095.6 1,005.1 920.2 852.8 786.7
----------------------------------------
Total Internet 1,139.9 1,063.0 993.4 943.4 902.0
----------------------------------------
Bundled Customers
Dual RGU 756.9 794.0 812.6 831.7 857.7
Triple RGU 760.6 698.6 647.3 602.4 552.3
Percentage of dual or
triple RGUs 80.4% 79.9% 79.0% 78.1% 77.4%
Percentage of triple RGUs 40.3% 37.4% 35.0% 32.8% 30.3%
ARPU GBP GBP GBP GBP GBP
45.15 45.13 45.11 44.84 45.34
Homes Marketable On-net
Telephone 4,701.2 4,698.4 4,696.4 4,694.0 4,691.7
ATV 4,702.9 4,700.8 4,698.1 4,698.5 4,694.5
DTV 4,568.5 4,525.2 4,503.9 4,501.2 4,451.4
Broadband 4,568.5 4,525.2 4,503.9 4,501.2 4,451.4
Penetration of Homes Marketable On-net
Telephone 36.1% 35.9% 35.9% 36.0% 35.8%
Television - Total 29.1% 29.1% 28.7% 28.3% 28.1%
Television - DTV 28.3% 28.1% 27.3% 26.4% 25.8%
Broadband 24.0% 22.2% 20.4% 18.9% 17.7%
Total Customer 40.1% 39.7% 39.3% 39.1% 38.8%
Old NTL on-net (1)
Q1-06 Q4 05 Q3-05 Q2-05 Q1-05
----------------------------------------
Customers
Opening Customers 3,089.8 3,097.3 3,055.9 3,008.1 2,975.3
Data Cleanse (2) (18.1)
Adjusted Opening Customers 3,089.8 3,079.2 3,055.9 3,008.1 2,975.3
Gross customer adds 138.9 162.8 182.4 171.4 157.0
Total Customer
disconnections (131.7) (142.2) (141.0) (123.6) (124.2)
Net customer adds 7.2 20.6 41.4 47.8 32.8
Reduction to customer
count(3) (10.0) 0.0 0.0 0.0
----------------------------------------
Closing Customers 3,097.0 3,089.8 3,097.3 3,055.9 3,008.1
Monthly customer churn % 1.5% 1.6% 1.6% 1.5% 1.5%
RGUS
Opening RGUs 6,141.0 6,085.0 5,963.7 5,856.6 5,784.2
Data Cleanse (2) (43.1)
Adjusted Opening RGUs 6,141.0 6,041.9 5,963.7 5,856.6 5,784.2
Net RGU adds 99.8 111.4 121.3 107.1 72.7
Reduction to RGU count (3) (12.3) 0.0 0.0 (0.3)
----------------------------------------
Closing RGUs 6,240.8 6,141.0 6,085.0 5,963.7 5,856.6
Net RGU Adds
Telephone (3.4) 0.3 5.4 21.5 12.4
Television 2.3 4.3 (21.8) 1.9 (19.6)
DTV 49.2 42.9 4.2 17.2 5.4
Broadband 100.9 106.8 137.7 83.7 79.9
----------------------------------------
Total Net RGU Adds 99.8 111.4 121.3 107.1 72.7
Revenue Generating Units (RGUs)
Telephone 2,569.7 2,573.1 2,598.6 2,593.2 2,571.7
Television 1,945.0 1,942.7 1,940.1 1,961.9 1,960.0
DTV 1,494.3 1,445.1 1,409.3 1,405.1 1,387.9
Broadband 1,726.1 1,625.2 1,546.3 1,408.6 1,324.9
----------------------------------------
Total RGUs 6,240.8 6,141.0 6,085.0 5,963.7 5,856.6
RGU / Customer 2.02 1.99 1.96 1.95 1.95
Internet Customers
Dial-up (metered) 31.2 37.2 40.9 47.4 52.1
Dial-up (unmetered) 58.5 78.9 97.0 126.7 144.8
DTV Access 6.4 7.6 8.0 8.4 6.9
----------------------------------------
Total Dial-up and DTV access
customers 96.1 123.7 145.9 182.5 203.8
Broadband 1,726.1 1,625.2 1,546.3 1,408.6 1,324.9
----------------------------------------
Total Internet 1,822.2 1,748.9 1,692.2 1,591.1 1,528.7
----------------------------------------
Bundled Customers
Dual RGU 1,182.2 1,239.2 1,301.9 1,352.9 1,368.0
Triple RGU 980.8 906.0 842.9 777.5 740.3
Percentage of dual or
triple RGUs 69.8% 69.4% 69.2% 69.7% 70.1%
Percentage of triple
RGUs 31.7% 29.3% 27.2% 25.4% 24.6%
ARPU GBP GBP GBP GBP GBP
39.28 38.96 38.99 39.69 40.75
Homes Marketable On-net
Telephone 7,610.0 7,601.3 7,592.0 7,579.1 7,569.2
ATV 7,953.8 7,952.0 7,935.8 7,922.7 7,912.6
DTV 7,420.7 7,447.1 7,437.8 7,424.9 7,394.6
Broadband 7,177.2 7,088.4 7,079.3 7,066.7 6,995.9
Penetration of Homes Marketable On-net
Telephone 33.8% 33.9% 34.2% 34.2% 34.0%
Television - Total 24.5% 24.4% 24.4% 24.8% 24.8%
Television - DTV 20.1% 19.4% 18.9% 18.9% 18.8%
Broadband 24.0% 22.9% 21.8% 19.9% 18.9%
Total Customer 38.9% 38.9% 39.0% 38.6% 38.0%
Notes:
(1) Subscriber information reflects Telewest and NTL reported
on-net with prior periods restated for policy alignments where
(2) Data cleanse activity in Q4-05 resulted in a decrease in ntl
of 18,100 customers and 43,100 RGUs, a decrease of
approximately 17,700 Telco, 26,600 Broadband and an increase
of 1,300 net TV RGUs.
(3) Review of inactive backlog customers in Q4-05 resulted in an
adjustment to remove 10,000 inactive backlog disconnects
representing 12,300 RGUs.
(4) Old Telewest operational statistics given above for Q1-06 are
for the full 3 months ended March 31, 2006, on a pro forma
basis including the period prior to the merger with NTL.
C) SEGMENTAL ANALYSIS
(in GBP millions) (unaudited)
Actual Reported Three months ended
---------------------------------------------
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2006 2005 2005 2005 2005
---------------------------------------------
Revenue
Cable segment
Consumer 461.7 379.4 377.5 378.9 384.2
Business 122.8 105.2 105.2 103.6 113.6
---------------------------------------------
Total 584.5 484.6 482.7 482.5 497.8
Inter segment
revenue (0.3) - - - -
---------------------------------------------
584.2 484.6 482.7 482.5 497.8
---------------------------------------------
Content segment
Flextech 12.8 - - - -
Sit-up 16.2 - - - -
---------------------------------------------
Total 29.0 - - - -
Inter segment
revenue (1.8) - - - -
---------------------------------------------
27.2 - - - -
---------------------------------------------
---------------------------------------------
Total revenue 611.4 484.6 482.7 482.5 497.8
---------------------------------------------
Segment OCF
Cable segment OCF 195.4 154.7 166.3 164.2 171.1
Content segment OCF 3.0 - - - -
---------------------------------------------
OCF (Total) 198.4 154.7 166.3 164.2 171.1
---------------------------------------------
Pro forma Three months ended
---------------------------------------------
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2006 2005 2005 2005 2005
---------------------------------------------
Revenue
Cable segment
Consumer 637.2 631.6 626.7 641.2 630.5
Business 165.6 168.2 169.1 166.2 174.3
---------------------------------------------
Total 802.8 799.8 795.8 807.4 804.8
Inter segment
revenue (0.5) (0.4) (0.7) (0.8) (0.7)
---------------------------------------------
802.3 799.4 795.1 806.6 804.1
---------------------------------------------
Content segment
Flextech 39.9 37.7 36.0 34.4 34.0
Sit-up 51.9 84.1 57.5 24.1 -
---------------------------------------------
Total 91.8 121.8 93.5 58.5 34.0
Inter segment
revenue (5.3) (5.1) (5.4) (5.2) (4.9)
---------------------------------------------
86.5 116.7 88.1 53.3 29.1
---------------------------------------------
---------------------------------------------
Total revenue 888.8 916.1 883.2 859.9 833.2
---------------------------------------------
Segment OCF
Cable segment OCF 267.6 283.2 299.5 312.3 296.7
Content segment OCF 9.4 8.8 7.8 6.1 4.0
---------------------------------------------
OCF (Total) 277.0 292.0 307.3 318.4 300.7
---------------------------------------------
Note: Segment OCF includes inter segment revenue and costs as
applicable. OCF is a non-GAAP financial measure - see Appendix F
D) Fixed Asset Additions (Accrual Basis)
(in GBP millions) (unaudited)
3 months ended
---------------------------------------------
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2006 2005 2005 2005 2005
---------------------------------------------
NCTA Fixed Asset Additions
CPE 40.1 31.6 32.0 29.3 29.7
Scaleable
Infrastructure 52.1 48.7 27.8 22.2 20.2
Commercial 11.4 6.2 8.2 4.9 3.6
Line extensions 0.5 0.0 0.0 0.0 0.0
Upgrade/Rebuild 3.8 2.5 2.3 2.8 2.3
Support Capital 9.5 7.5 6.3 10.6 8.4
---------------------------------------------
Total NCTA Fixed Asset
Additions 117.4 96.5 76.6 69.8 64.2
Non NCTA Fixed Asset
Additions 0.4 (1.9) (0.3) 0.4 (0.1)
---------------------------------------------
Total Fixed Asset
Additions (Accrual Basis) 117.8 94.6 76.3 70.2 64.1
Change in capital accruals 17.5 (22.8) (4.4) 0.4 9.7
---------------------------------------------
Total Purchase of Fixed
Assets 135.3 71.8 71.9 70.6 73.8
=============================================
Note: Ntl is not a member of NCTA and is providing this information
solely for comparative purposes. Fixed asset additions (accrual basis)
are from continuing operations. See Appendix F for a discussion of the
use of fixed asset additions (accrual basis) as a non- GAAP measure
and the reconciliation of fixed asset additions (accrual basis) to
GAAP purchase of fixed assets.
E) Pro Forma Combined Condensed Financial Information
(in GBP millions) (unaudited)
Three months ended
March 31 December September June 30 March 31
2006 31 2005 30 2005 2005 2005
--------- ------------------------------------
Revenue 888.8 916.1 883.2 859.9 833.2
Costs and expenses
Operating costs
(exclusive of
depreciation shown
separately below) (369.0) (399.1) (362.0) (331.4) (327.5)
Selling, general and
administrative
expenses (242.8) (225.0) (213.9) (210.1) (205.0)
Other charges (8.9) (22.4) (1.3) (0.7) (0.4)
Depreciation (210.4) (229.2) (232.0) (219.3) (220.0)
Amortization (58.6) (59.8) (60.0) (60.1) (60.0)
--------- ------------------------------------
(889.7) (935.5) (869.2) (821.6) (812.9)
--------- ------------------------------------
Operating income (loss) (0.9) (19.4) 14.0 38.3 20.3
Other income (expense)
Interest income and
other, net 8.3 7.4 6.0 8.0 4.5
Interest expense (112.0) (126.9) (119.2) (121.4) (111.3)
(Loss) on extinguishment
of debt (32.4) - (2.0) - (57.8)
Other, net (9.2) 4.0 - 1.0 0.3
Share of income from
equity investments 5.0 2.5 3.9 7.5 6.0
Foreign currency
transaction (losses)
gains (8.6) 33.0 (13.9) (15.4) (8.2)
--------- ------------------------------------
(Loss) from continuing
operations before
income taxes (149.8) (99.4) (111.2) (82.0) (146.2)
Income tax (expense)
benefit - (12.6) 12.9 (9.5) (11.3)
Minority interest 0.4 - (1.0) - -
Cumulative effect of a
change in accounting
principle 2.0 - - - -
--------- ------------------------------------
(Loss) from continuing
operations (147.4) (112.0) (99.3) (91.5) (157.5)
--------- ------------------------------------
Reconciliation of Pro Forma OCF to Pro Forma Operating income (loss)
Pro Forma OCF 277.0 292.0 307.3 318.4 300.7
Less:
Other charges (8.9) (22.4) (1.3) (0.7) (0.4)
Depreciation (210.4) (229.2) (232.0) (219.3) (220.0)
Amortization (58.6) (59.8) (60.0) (60.1) (60.0)
--------- ------------------------------------
Pro Forma Operating
income (loss) (0.9) (19.4) 14.0 38.3 20.3
--------- ------------------------------------
The pro forma information presented in these schedules in respect of
the three months ended March 31, 2006 has been prepared on a basis as
if the merger with Telewest had occurred on January 1, 2006 and the
pro forma information in respect of the three months ended on each of
March 31, June 30, September 30 and December 31, 2005 has been
prepared on a basis as if the merger with Telewest had occurred on
January 1, 2005 and includes adjustments to reflect the purchase
accounting impact on our historical results. Readers should refer to
the notes herein for further explanation of the adjustments made. The
presentation does not include all the information and footnotes
required by generally accepted accounting principles in the United
States to be included in pro forma financial statements.
These pro forma operating results are not necessarily indicative of
the results that would have been achieved if the merger had occurred
on January 1, 2006 or January 1, 2005, and undue reliance should not
be placed on this information.
Proforma Combined Condensed Financial Information
Three months ended March 31, 2006 (in GBP millions) (unaudited)
Telewest
NTL Inc. Jan 1 - Total Pro Forma
As reported Mar 3 Adjustments Combined
-------------------------------- ----------
Revenue 611.4 279.9 (2.5) 888.8
Costs and expenses
Operating costs
(exclusive of
depreciation shown
separately below) (254.9) (88.5) (25.6) (369.0)
Selling, general and
administrative expenses (158.1) (110.0) 25.3 (242.8)
Other charges (8.4) (0.5) - (8.9)
Depreciation (149.3) (66.1) 5.0 (210.4)
Amortization (36.8) (8.4) (13.4) (58.6)
-------------------------------- ----------
(607.5) (273.5) (8.7) (889.7)
-------------------------------- ----------
Operating income (loss) 3.9 6.4 (11.2) (0.9)
Other income (expense)
Interest income and
other, net 8.6 4.0 (4.3) 8.3
Interest expense (83.8) (22.2) (6.0) (112.0)
(Loss) on extinguishment
of debt (32.4) - - (32.4)
Other, net (9.2) - - (9.2)
Share of income from
equity investments 1.4 3.6 - 5.0
Foreign currency
transaction (losses)
gains (10.0) 1.4 - (8.6)
-------------------------------- ----------
(Loss) from continuing
operations before income
taxes (121.5) (6.8) (21.5) (149.8)
Income tax (expense)
benefit - - - -
Minority interest 0.4 - - 0.4
Cumulative effect of a
change in accounting
principle 1.2 0.8 - 2.0
-------------------------------- ----------
(Loss) from continuing
operations (119.9) (6.0) (21.5) (147.4)
-------------------------------- ----------
For the three months ended March 31, 2006, the unaudited pro forma
combined condensed financial information contains the actual combined
operating results of NTL Inc. with the results of Telewest for the
period from January 1, 2006 to March 3, 2006 adjusted to include the
pro forma impact of: the elimination of transactions between the
former NTL and the former Telewest; the adjustment of amortization of
acquired intangible assets and depreciation of fixed assets based on
the preliminary purchase price allocation; the adjustment of interest
income based on the reduced cash balance after the merger transaction;
the adjustment of interest expense based on the refinancing in March
2006 using the new senior credit facility and bridge facility
borrowing rates; to reflect the impact of income taxes on the pro
forma adjustments utilizing NTL's statutory tax rate of 35% and
certain accounting policy alignment adjustments. Readers can refer to
the Unaudited Pro Forma Combined Condensed Financial Data expected to
be filed on Form 8-K/A on May 9, 2006, for detailed descriptions of
the adjustments made to this information.
Proforma Combined Condensed Financial Information
Three months ended December 31, 2005 (in GBP millions) (unaudited)
Historical Historical Total Pro Forma
NTL Telewest adjustments Combined
---------------------------------- ---------
Revenue 484.6 434.5 (3.0) 916.1
Costs and expenses
Operating costs
(exclusive of
depreciation shown
separately below) (205.2) (163.9) (30.0) (399.1)
Selling, general and
administrative expenses (124.7) (133.8) 33.5 (225.0)
Other charges (22.4) - - (22.4)
Depreciation (139.5) (97.9) 8.2 (229.2)
Amortization (27.2) (16.0) (16.6) (59.8)
---------------------------------- ---------
(519.0) (411.6) (4.9) (935.5)
---------------------------------- ---------
Operating income (loss) (34.4) 22.9 (7.9) (19.4)
Other income (expense)
Interest income and
other, net 7.8 6.1 (6.5) 7.4
Interest expense (55.6) (43.1) (28.2) (126.9)
(Loss) on extinguishment
of debt - - - -
Other, net 0.9 3.1 - 4.0
Share of income from
equity investments - 2.5 - 2.5
Foreign currency
transaction (losses)
gains 35.2 (2.2) - 33.0
---------------------------------- ---------
(Loss) from continuing
operations before income
taxes (46.1) (10.7) (42.6) (99.4)
Income tax (expense)
benefit (10.1) (2.5) - (12.6)
Minority interest - - - -
---------------------------------- ---------
(Loss) from continuing
operations (56.2) (13.2) (42.6) (112.0)
---------------------------------- ---------
For the three months ended December 31, 2005, the unaudited pro forma
combined condensed financial information contains the actual combined
operating results of NTL and the former Telewest adjusted to include
the pro forma impact of: the elimination of transactions between the
former NTL and the former Telewest; the adjustment of amortization of
acquired intangible assets and depreciation of fixed assets based on
the preliminary purchase price allocation; the adjustment of interest
income based on the reduced cash balance after the transaction; the
adjustment of interest expense based on the refinancing in March 2006
using the new senior credit facility and bridge facility borrowing
rates; to reflect the impact of income taxes on the pro forma
adjustments utilizing NTL's statutory tax rate of 35% and certain
accounting policy alignment adjustments. Readers can refer to the
Unaudited Pro Forma Combined Condensed Financial Data expected to be
filed on Form 8-K/A on May 9, 2006, for detailed descriptions of the
adjustments made to this information.
Proforma Combined Condensed Financial Information
Three months ended September 30, 2005 (in GBP millions) (unaudited)
Historical Historical Total Pro Forma
NTL Telewest adjustments Combined
---------------------------------- ---------
Revenue 482.7 403.7 (3.2) 883.2
Costs and expenses
Operating costs
(exclusive of
depreciation shown
separately below) (200.2) (133.0) (28.8) (362.0)
Selling, general and
administrative expenses (116.2) (128.5) 30.8 (213.9)
Other charges (1.3) - - (1.3)
Depreciation (142.3) (99.4) 9.7 (232.0)
Amortization (27.4) (9.4) (23.2) (60.0)
---------------------------------- ---------
(487.4) (370.3) (11.5) (869.2)
---------------------------------- ---------
Operating income (loss) (4.7) 33.4 (14.7) 14.0
Other income (expense)
Interest income and
other, net 6.8 5.7 (6.5) 6.0
Interest expense (51.7) (38.9) (28.6) (119.2)
(Loss) on extinguishment
of debt (2.0) - - (2.0)
Other, net - - - -
Share of income from
equity investments (0.2) 4.1 - 3.9
Foreign currency
transaction (losses)
gains (13.1) (0.8) - (13.9)
---------------------------------- ---------
(Loss) from continuing
operations before income
taxes (64.9) 3.5 (49.8) (111.2)
Income tax (expense)
benefit 12.4 0.5 - 12.9
Minority interest (1.0) - - (1.0)
---------------------------------- ---------
(Loss) from continuing
operations (53.5) 4.0 (49.8) (99.3)
---------------------------------- ---------
For the three months ended September 30, 2005, the unaudited pro forma
combined condensed financial information contains the actual combined
operating results of NTL and the former Telewest adjusted to include
the pro forma impact of: the elimination of transactions between the
former NTL and the former Telewest; the adjustment of amortization of
acquired intangible assets and depreciation of fixed assets based on
the preliminary purchase price allocation; the adjustment of interest
income based on the reduced cash balance after the transaction; the
adjustment of interest expense based on the refinancing in March 2006
using the new senior credit facility and bridge facility borrowing
rates; to reflect the impact of income taxes on the pro forma
adjustments utilizing NTL's statutory tax rate of 35% and certain
accounting policy alignment adjustments. Readers can refer to the
Unaudited Pro Forma Combined Condensed Financial Data expected to be
filed on Form 8-K/A on May 9, 2006, for detailed descriptions of the
adjustments made to this information.
Proforma Combined Condensed Financial Information
Three months ended June 30, 2005 (in GBP millions) (unaudited)
Historical Historical Total Pro Forma
NTL Telewest adjustments Combined
---------------------------------- ---------
Revenue 482.5 380.7 (3.3) 859.9
Costs and expenses
Operating costs
(exclusive of
depreciation shown
separately below) (196.0) (104.0) (31.4) (331.4)
Selling, general and
administrative expenses (122.3) (118.6) 30.8 (210.1)
Other charges (0.7) - - (0.7)
Depreciation (129.6) (101.0) 11.3 (219.3)
Amortization (27.5) (9.3) (23.3) (60.1)
---------------------------------- ---------
(476.1) (332.9) (12.6) (821.6)
---------------------------------- ---------
Operating income (loss) 6.4 47.8 (15.9) 38.3
Other income (expense)
Interest income and
other, net 8.3 6.2 (6.5) 8.0
Interest expense (58.4) (40.5) (22.5) (121.4)
(Loss) on extinguishment
of debt - - - -
Other, net - 1.0 - 1.0
Share of income from
equity investments 0.2 7.3 - 7.5
Foreign currency
transaction (losses)
gains (12.8) (2.6) - (15.4)
---------------------------------- ---------
(Loss) from continuing
operations before income
taxes (56.3) 19.2 (44.9) (82.0)
Income tax (expense)
benefit (9.8) 0.3 - (9.5)
Minority interest - - - -
---------------------------------- ---------
(Loss) from continuing
operations (66.1) 19.5 (44.9) (91.5)
---------------------------------- ---------
For the three months ended June 30, 2005, the unaudited pro forma
combined condensed financial information contains the actual combined
operating results of NTL and the former Telewest adjusted to include
the pro forma impact of: the elimination of transactions between the
former NTL and the former Telewest; the adjustment of amortization of
acquired intangible assets and depreciation of fixed assets based on
the preliminary purchase price allocation; the adjustment of interest
income based on the reduced cash balance after the transaction; the
adjustment of interest expense based on the refinancing in March 2006
using the new senior credit facility and bridge facility borrowing
rates; to reflect the impact of income taxes on the pro forma
adjustments utilizing NTL's statutory tax rate of 35% and certain
accounting policy alignment adjustments. Readers can refer to the
Unaudited Pro Forma Combined Condensed Financial Data expected to be
filed on Form 8-K/A on May 9, 2006, for detailed descriptions of the
adjustments made to this information.
Proforma Combined Condensed Financial Information
Three months ended March 31, 2005 (in GBP millions) (unaudited)
Historical Historical Total Pro Forma
NTL Telewest adjustments Combined
---------------------------------- ---------
Revenue 497.8 338.6 (3.2) 833.2
Costs and expenses
Operating costs
(exclusive of
depreciation shown
separately below) (206.9) (89.2) (31.4) (327.5)
Selling, general and
administrative expenses (119.8) (115.2) 30.0 (205.0)
Other charges (0.4) - - (0.4)
Depreciation (130.3) (100.9) 11.2 (220.0)
Amortization (27.4) (9.3) (23.3) (60.0)
---------------------------------- ---------
(484.8) (314.6) (13.5) (812.9)
---------------------------------- ---------
Operating income (loss) 13.0 24.0 (16.7) 20.3
Other income (expense)
Interest income and
other, net 6.5 4.5 (6.5) 4.5
Interest expense (70.1) (29.2) (12.0) (111.3)
(Loss) on extinguishment
of debt - - (57.8) (57.8)
Other, net - 0.3 - 0.3
Share of income from
equity investments - 6.0 - 6.0
Foreign currency
transaction (losses)
gains (4.0) (4.2) - (8.2)
---------------------------------- ---------
(Loss) from continuing
operations before income
taxes (54.6) 1.4 (93.0) (146.2)
Income tax (expense)
benefit (11.3) - - (11.3)
Minority interest - - - -
---------------------------------- ---------
(Loss) from continuing
operations (65.9) 1.4 (93.0) (157.5)
---------------------------------- ---------
For the three months ended March 31, 2005, the unaudited pro forma
combined condensed financial information contains the actual combined
operating results of NTL and the former Telewest adjusted to include
the pro forma impact of: the elimination of transactions between the
former NTL and the former Telewest; the adjustment of amortization of
acquired intangible assets and depreciation of fixed assets based on
the preliminary purchase price allocation; the adjustment of interest
income based on the reduced cash balance after the transaction; the
adjustment of interest expense based on the refinancing in March 2006
using the new senior credit facility and bridge facility borrowing
rates; to reflect the impact of income taxes on the pro forma
adjustments utilizing NTL's statutory tax rate of 35% and certain
accounting policy alignment adjustments. Readers can refer to the
Unaudited Pro Forma Combined Condensed Financial Data expected to be
filed on Form 8-K/A on May 9, 2006, for detailed descriptions of the
adjustments made to this information.
F) Non GAAP Measures
*T
Use of non- GAAP Financial Measures and Reconciliation to GAAP
Operating income before depreciation, amortization and other
charges (OCF)
Operating income before depreciation, amortization and other
charges, which we refer to as OCF, is not a financial measure
recognised under GAAP. OCF represents our earnings before interest,
taxes, depreciation and amortisation, other charges, share of income
from equity investments, loss on extinguishment of debt, loss on
derivative instruments and foreign currency transaction gains
(losses). Our management, including our chief executive officer who is
our chief operating decision maker, considers OCF as an important
indicator of our operational strength and performance. OCF excludes
the impact of costs and expenses that do not directly affect our cash
flows. Other charges, including restructuring charges, are also
excluded from OCF as management believes they are not characteristic
of our underlying business operations. OCF is most directly comparable
to the GAAP financial measure operating income (loss). Some of the
significant limitations associated with the use of OCF as compared to
operating income (loss) are that OCF does not consider the amount of
required reinvestment in depreciable fixed assets and ignores the
impact on our results of operations of items that management believes
are not characteristic of our underlying business operations.
We believe OCF is helpful for understanding our performance and
assessing our prospects for the future, and that it provides useful
supplemental information to investors. In particular, this non-GAAP
financial measure reflects an additional way of viewing aspects of our
operations that, when viewed with our GAAP results and the
reconciliation to operating income (loss) shown below, provides a more
complete understanding of factors and trends affecting our business.
Because GAAP financial measures are not standardised, it may not be
possible to compare OCF with other companies' GAAP financial measures
that have the same or similar names.
For a reconciliation of pro forma OCF to pro forma operating
(income) loss, see Appendix E.
-0-
*T
Reconciliation of operating income before depreciation, amortization
and other charges to GAAP operating income (loss)
(in GBP millions) 3 months
ended 3 months ended
---------- -----------------------------------
March 31, Dec 31, Sept 30, June 30, March 31,
2006 2005 2005 2005 2005
---------- -------- -------- -------- --------
Operating income before
depreciation,
amortization and other
charges 198.4 154.7 166.3 164.2 171.1
Reconciling items:
Other charges (8.4) (22.4) (1.3) (0.7) (0.4)
Depreciation and
amortization (186.1) (166.7) (169.7) (157.1) (157.7)
---------- -------- -------- -------- --------
Operating income
(loss) GBP 3.9 (GBP34.4)(GBP 4.7) GBP 6.4 GBP13.0
========== ======== ======== ======== ========
*T
Net debt
Net debt is defined as long-term debt, including current portion,
less cash and cash equivalents and marketable securities. Our
management, including our chief operating decision-maker, consider net
debt an important measure of our financing obligations.
Net debt is not a financial measure recognized under GAAP. This
measure is most directly comparable to the GAAP financial measure,
total liabilities. The significant limitation associated with the use
of net debt as compared to total liabilities is that net debt does not
consider current liabilities due in respect of accounts payable and
other liabilities. It also assumes that all of cash and cash
equivalents and marketable securities are available to service debt.
We believe net debt is helpful for understanding our entire net debt
funding obligations and provides useful supplemental information to
investors. Because non-GAAP financial measures are not standardized,
it may not be possible to compare net debt with other companies'
non-GAAP financial measures that have the same or similar names. The
presentation of this supplemental information is not meant to be
considered in isolation or as a substitute for total liabilities, or
other measures of financial performance reported in accordance with
GAAP.
-0-
*T
Reconciliation of net debt to GAAP to Total liabilities
March 31, December 31,
(in GBP millions) 2006 2005
------------------------------
Net Debt 5,385.1 1,447.9
Cash and cash equivalents 518.3 735.2
Marketable Securities - 96.9
------------------------------
Long-term debt, including current
portion 5,903.4 2,280.0
Accounts payable 309.4 176.9
Accrued expenses and other current
liabilities 580.6 291.1
Interest Payable 56.7 37.8
Due to affiliates 0.9 -
Deferred Revenue and other long-term
liabilities 402.1 237.5
Deferred Income Taxes 138.8 9.2
Minority Interest 0.6 1.0
------------------------------
Total liabilities 7,392.5 3,033.5
------------------------------
*T
Fixed Asset Additions (Accrual Basis)
Our primary measure of expenditures for fixed assets is Fixed
Asset Additions (Accrual Basis). Fixed Asset Additions (Accrual Basis)
is defined as the purchase of fixed assets as measured on an accrual
basis. Our business is underpinned by significant investment in
network infrastructure and information technology. Our management
therefore consider Fixed Asset Additions (Accrual Basis) an important
component in evaluating our liquidity and financial condition since
purchases of fixed assets are a necessary component of ongoing
operations. Fixed Asset Additions (Accrual Basis) is most directly
comparable to the GAAP financial measure purchase of fixed assets as
reported in the Statement of Cash Flows. The significant limitations
associated with the use of Fixed Asset Additions (Accrual Basis) as
compared to purchase of fixed assets is that Fixed Asset Additions
(Accrual Basis) excludes timing differences from payments of
liabilities related to purchases of fixed assets. We exclude this
amount from Fixed Asset Additions (Accrual Basis) because timing
differences from payments of liabilities are more related to the cash
management treasury function than to our management of fixed asset
purchases for long-term operational performance and liquidity. We
compensate for this limitation by separately measuring and forecasting
working capital.
-0-
*T
Reconciliation of Pro Forma and Reported Fixed Asset Additions
(accrual basis) to GAAP Purchase of Fixed Assets
(in GBP millions) 3 months
ended 3 months ended
----------------------------------------------
March 31, Dec 31, Sept 30, June 30, March 31,
2006 2005 2005 2005 2005
----------------------------------------------
Pro forma Fixed Asset
Additions (accrual
basis) GBP158.3 GBP158.6 GBP144.3 GBP129.2 GBP116.1
Pre-acquisition Telewest
Additions (accrual
basis) (40.5) (64.0) (68.0) (59.0) (52.0)
----------------------------------------------
Fixed Asset Additions GBP117.8 GBP 94.6 GBP 76.3 GBP 70.2 GBP 64.1
Changes in liabilities
related to Fixed Asset
Additions (accrual
basis) 17.5 (22.8) (4.4) 0.4 9.7
----------------------------------------------
Purchase of Fixed Assets GBP135.3 GBP 71.8 GBP 71.9 GBP 70.6 GBP 73.8
==============================================
The presentation of this supplemental information is not meant to be
considered in isolation or as a substitute for other measures of
financial performance reported in accordance with GAAP. These non-GAAP
financial measures reflect an additional way of viewing aspects of our
operations that, when viewed with our GAAP results and the
accompanying reconciliations to corresponding GAAP financial measures,
provide a more complete understanding of factors and trends affecting
our business. We encourage investors to review our financial
statements and publicly-filed reports in their entirety and to not
rely on any single financial measure.
*T
Conference Call
There will be a conference call for analysts and investors today
at 0900 EDT/ 1400 UK time. Analysts and investors can dial in to the
presentation by calling +1 617 786 2964 in the United States or + 44
(0) 207 365 8426 for international access, passcode "NTL" for all
participants. The presentation can also be accessed live via webcast
on the Company's website, www.ntl.com/investors. The teleconference
replay will be available for one week beginning approximately two
hours after the end of the call and will be available until Tuesday,
May 16, 2006. The dial-in replay number for the US is: +1 617 801 6888
and the international dial-in replay number is: +44 (0) 207 365 8427,
passcode: 97547688.