Telewest Global (NASDAQ:TLWT)
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From Jul 2019 to Jul 2024
Telewest Global, Inc. ("Telewest") (NASDAQ: TLWT) today
announces third quarter financial results for 2005.
Highlights
-- Adjusted EBITDA growth of 16% over Q3 04
-- Operating income increased 230% over Q3 04
-- Consumer sales division revenue growth of 5% over Q3 04
-- Triple play penetration increased by 10.6 percentage points
over Q3 04 to 35.0%
-- Revenue Generating Units grew by 81,000 in the quarter; RGUs
per customer grew from 2.00 at Q3 04 to 2.14 at Q3 05
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Financial highlights
(unaudited in GBP m) Q3 2005 Q2 2005(a) Q3 2004
Revenue 404 381 328
Operating income 33 48 10
Adjusted EBITDA 142 158 122
Net income/(loss) 5 19 (29)
Free cash flow 50 64 39
Operational highlights
Q3 2005 Q2 2005 Q3 2004
Customer net adds 11,000 15,000 17,000
Broadband net adds 67,000 66,000 70,000
RGU net adds 81,000 89,000 92,000
Triple play percentage 35.0% 32.8% 24.4%
(a) Includes GBP 16m of Revenue, GBP 20m of Operating income, GBP 20m
of Adjusted EBITDA, GBP 22m of Net income, and GBP 22m of Free
cash flow resulting from a GBP 16m VAT recovery with related
interest of GBP 2m and a GBP 4m rates (local government tax)
rebate.
*T
Barry Elson, Acting Chief Executive Officer of Telewest Global,
Inc., commented:
"Telewest's third quarter results demonstrate strong financial and
operational performance. Customer growth continued at our consumer
division and ARPU increased to GBP 45.17.
Revenues at our business division have stabilised in an extremely
competitive market and Flextech continues its impressive growth.
Our VOD rollout and broadband speed upgrades are well advanced and
we have today given details of our planned launch of DVR and HDTV
services. As a result, cable will be the first TV platform in the UK
to offer the full range of TV services from free-to-air, basic and
premium channels, through to VOD, DVR and HDTV, giving us a real
competitive advantage over other platforms.
As can be seen from these results, we have been operating
effectively and driving growth. We believe that our performance
demonstrates continued strength in both strategy and execution and we
are confident that our team will contribute to the success of the
combined company on completion of our recently announced proposed
merger with NTL Inc."
OPERATIONAL REVIEW
Cable segment
Consumer sales division
The consumer sales division had gross customer additions of 89,000
in the quarter, representing an increase of 10,000 both from the
previous quarter and from the same quarter last year, resulting from
more effective marketing, selling and promotions. There was a net
increase of 11,000 customer relationships in the quarter.
As expected, churn at 1.4% was higher than the previous quarter as
it continued to be affected by a high level of house movers, including
student churn, as well as non-pay churn. Non-pay churn has continued
to be impacted as a result of higher acquisition levels in recent
periods. Churn has reduced since the end of the quarter and we now
expect it to be 1.2% for the fourth quarter.
Household ARPU was GBP 45.17 in the quarter, up from GBP 44.86 in
the previous quarter, excluding the second quarter revenue impact of a
GBP 16 million VAT recovery. This increase was principally
attributable to selective TV price increases and continued growth in
triple play penetration, partially offset by declines in broadband and
telephony ARPU.
ARPU in the fourth quarter will be impacted by price reductions on
our top broadband tier and wireless broadband offerings as a
consequence of our broadband speed upgrades.
RGUs per customer grew to 2.14 and triple play penetration grew to
35.0%. This reflects our successful focus on profitable growth and on
selling bundled products. Triple play growth over the last few
quarters has been stronger than we had planned and as a result we
believe we will now achieve our 40% triple play penetration target in
2006 - a year earlier than our previous guidance.
Consumer internet
We experienced good growth in the number of broadband subscribers,
with 67,000 net additions in the quarter, which was slightly higher
than in the previous quarter.
Growth continued to be strongest in our lowest broadband tier.
This impacted the mix of broadband subscribers and broadband ARPU,
which fell GBP 0.36 to GBP 19.03 as compared to the previous quarter.
However, the rate of ARPU decline slowed in the quarter.
Broadband continued to be successful in attracting new customers
to Telewest - 37% of broadband installations in the quarter were for
customers who were not already existing customers. Multi-service
penetration remained high in broadband, with 70% of all broadband
internet customers subscribing to the full triple play and 94%
subscribing to at least one other product.
In September, we began implementing further broadband speed
increases. As at November 10, approximately 60% of broadband customers
had been upgraded to the higher speeds. We expect that approximately
80% of broadband customers will be upgraded by the end of the year,
with the remainder expected to be upgraded in the first quarter of
2006. These speed upgrades will increase the speed of our lowest tier
from 512Kb to 2Mb, the speed of our existing 1Mb to 4Mb and the speeds
of our existing 2Mb and 4Mb tiers to 10Mb. These upgrades are at no
extra charge to customers and our 4Mb customers will receive a GBP 15
per month price reduction when they migrate to the 10Mb tier.
Consumer television
The total number of TV subscribers grew by 17,000 in the quarter
compared to 11,000 in the previous quarter. This represents the best
performance for fifteen quarters, demonstrating the success we are
having in driving Pay-TV penetration in a competitive market.
The number of digital TV subscribers rose by 39,000. As a result,
91% of our TV subscribers now take our digital service and we estimate
that we will be fully digital by the end of 2006. This will free up
significant amounts of bandwidth in our network, which will allow
extra capacity for Video-On-Demand (VOD), High Definition TV (HDTV),
broadband speed increases and other services.
TV ARPU increased to GBP 20.89 compared to GBP 20.78 in the
previous quarter, primarily due to selected prices rises, partially
offset by a reduction in premium revenue.
Our VOD roll-out is continuing and is now available to around 62%
of our digital TV subscribers. We plan to complete the national
roll-out by the end of this year, earlier than initially anticipated.
The service is branded "Teleport" and we have recently expanded the
content available, including an increase in the number of movie titles
to well over 300. We expect to launch a music on demand service later
this month.
We are planning to pilot a Digital Video Recorder (DVR) service
with a number of customers in early December 2005. At the same time,
we will be pre-registering customers on our website, ahead of the full
national commercial launch early in the first quarter of 2006. We have
branded the service "TV Drive" and it will be charged at GBP 10 to GBP
15 per month. TV Drive customers will receive a 160Gb, three tuner,
HDTV compatible Scientific Atlanta DVR. For an extra GBP 5 per month,
customers can use their existing digital set-top box as a second box
in the home (additional outlet), representing a GBP 10 discount on
current pricing.
We plan to launch HDTV at the same time, becoming the first
platform in the UK to offer HDTV to our DVR customers. We have
recently secured HDTV content from the BBC and others and we plan to
extend this over the coming months.
Cable will be the first TV platform in the UK to offer the full
range of TV services from free-to-air, basic and premium channels,
through to VOD, DVR and HDTV, which we believe will give us a real
competitive advantage over other platforms.
Consumer telephony
The number of telephony subscribers decreased by 3,000 in the
quarter. Acquisition was impacted as marketing and promotions during
the quarter focused more on our broadband and television services.
Telephony remains an important element of our bundled offering and is
likely to have increased focus in future marketing campaigns.
Telephony ARPU was GBP 22.35 in the quarter, down slightly from
GBP 22.42 in the previous quarter. This reduction was principally due
to the continued impact of declining telephony usage due to mobile
substitution, partially offset by some selected price increases.
We have continued our strategy of migrating subscribers to flat
rate packages to reduce the impact of declining telephony usage. As a
result 39% of all telephony subscribers now subscribe to one of our
two main "Talk" packages - "Talk Unlimited" or "Talk Evenings and
Weekends". In July 2005 we migrated all of our existing "3-2-1"
subscribers to "Talk Weekends" which gives subscribers free local and
national calls at weekends. This package is charged at GBP 10.50 per
month compared to GBP 10 per month for the "3-2-1" service.
Business sales division
Our business sales division had another solid quarter with
revenues of GBP 64 million in the quarter, up GBP 1 million as
compared to the previous quarter. Revenue in the quarter benefited
from a GBP 1 million settlement received from BT Group plc in respect
of rates being applied to Special Rate Services calls during prior
periods.
We are encouraged that our business revenues have been relatively
stable over the past several quarters in extremely challenging market
conditions. As a result of key competitive advantages we believe we
are well placed to compete in this challenging market. In particular,
because we own our own local network infrastructure, we keep more data
and telephony traffic on our network producing higher margins and
greater cash flow than would be possible without ownership of the
local network infrastructure. We also have strong customer
relationship management with locally based account managers and
customer support teams.
In line with our continued focus on corporate and mid-market
customers, we have experienced a shift in revenue mix, with data
revenues up 18% compared to the same quarter last year, while voice
revenues have remained flat. We are countering usage declines in the
voice market through the introduction of new services such as SRS
Advance Solutions, which help customers manage their incoming calls
and we are also trialling multimedia over the internet.
Content segment
Overall revenue in the content segment was GBP 33 million in the
quarter, up 22% on the third quarter of 2004, and up GBP 1 million on
the previous quarter.
Advertising revenue was up 29% on the same quarter last year, and
up GBP 2 million on the previous quarter at GBP 18 million, resulting
primarily from an increase in market share, driven by improved
commercial impacts on Flextech's channels.
Subscription revenue was up 10% on the same quarter last year, and
flat on the previous quarter at GBP 11 million, due to increased
multi-channel penetration and improved pricing.
The content segment's Adjusted EBITDA in the quarter was GBP 9
million before inter-company eliminations, up GBP 5 million from the
same quarter last year. The content segment's Adjusted EBITDA in the
quarter was GBP 6 million after inter-company eliminations.
We expect that the content segment's Adjusted EBITDA in the fourth
quarter of 2005 will be impacted by extra programming costs. We expect
programming costs in the fourth quarter to increase by more than GBP
10 million as compared to the third quarter, as we invest in enriched
programming in common with other UK broadcasters to drive advertising
revenue growth in 2006. As a result, we expect Adjusted EBITDA to be
at a similar level to the fourth quarter of 2004, when it showed a
loss of GBP 1 million.
Following this investment in programming and the increased costs
of the Christmas season, we would expect an increase in revenue and
Adjusted EBITDA in the first quarter of 2006 compared to the fourth
quarter of 2005, as we have experienced historically.
sit-up segment
Revenue at sit-up, our recently acquired television home shopping
business, was GBP 58 million in the quarter, up 16% from the same
quarter last year (as reported by sit-up under UK GAAP), due to growth
in multi-channel penetration and the ability of its innovative
auction-based shopping channels to attract new customers. On a pro
forma basis, revenue was up GBP 12 million from the previous quarter.
However, year-on-year revenue growth has slowed and Adjusted EBITDA
was only GBP 1 million in the quarter, down from GBP 4 million (as
reported by sit-up under UK GAAP) in the same quarter last year.
Adjusted EBITDA increased by GBP 1 million compared to the previous
quarter.
sit-up has been affected by the difficult operating conditions
currently being experienced in the UK retail market. As a result,
sit-up has experienced pressure on product margins, which has impacted
Adjusted EBITDA. Adjusted EBITDA was also impacted during the quarter
by extra supply chain costs incurred in advance of the Christmas
season, sit-up's prime selling period.
If these retail conditions persist in the fourth quarter we would
expect fourth quarter Adjusted EBITDA to be below the GBP 8 million
(as reported by sit-up under UK GAAP) in the fourth quarter of 2004.
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FINANCIAL RESULTS
GAAP Financial Measures 3 months ended
(unaudited in GBP millions) Sep. 30,
2005 2004
----------------------------------------------------------------------
Operating income 33 10
Net income/(loss) 5 (29)
Net cash provided by operating activities 110 72
----------------------------------------------------------------------
*T
Operating income for the third quarter of 2005 was GBP 33 million,
up from GBP 10 million for the third quarter of 2004, due principally
to revenue growth in our cable and content segments, lower cable
segment expenses and cable segment SG&A, and lower depreciation.
The improvement from net loss of GBP 29 million for the third
quarter of 2004 to net income of GBP 5 million for the third quarter
of 2005 was due principally to our enhanced operating income and
reduced interest costs following the refinancing of our bank debt in
December 2004.
Net cash provided by operating activities increased from GBP 72
million for the third quarter of 2004 to GBP 110 million for the third
quarter of 2005. This increase arose principally as a result of
improvements in net income, partially offset by increases in working
capital.
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*T
Non-GAAP Financial Measures 3 months ended
(unaudited in GBP millions) Sep. 30,
2005 2004
----------------------------------------------------------------------
Adjusted EBITDA 142 122
Free cash flow 50 39
----------------------------------------------------------------------
*T
Adjusted EBITDA (earnings before interest, taxation, depreciation,
amortization and financial restructuring expenses) for the third
quarter of 2005 was GBP 142 million, up 16% as compared to the third
quarter of 2004. This increase reflects increased revenues in the
cable and content segments, and lower operating costs and expenses in
the cable segment, partially offset by higher operating costs and
expenses in the content segment. Adjusted EBITDA margin (Adjusted
EBITDA as a percentage of revenue) has decreased from 37.2% to 35.1%.
Whilst Adjusted EBITDA margins in the third quarter of 2005 in the
cable and content segments increased, (from 39.9% to 43.1% and from
7.4% to 18.2%, respectively) the overall margin has been impacted by
the acquisition of sit-up, which operates on significantly lower
margins than our cable and content segments.
Free cash flow (cash flow from operating activities excluding
financial restructuring expenses less capital expenditure) for the
three months ended September 30, 2005 was GBP 50 million, compared
with GBP 39 million for the three months ended September 30, 2004. The
increase was primarily due to increased Adjusted EBITDA and reduced
interest payments, partially offset by increases in working capital
and increased capital expenditure.
Reconciliations of these and other non-GAAP financial measures to
the most directly comparable GAAP financial measures are explained and
shown on pages 19 to 22.
Selling, general and administrative expenses (SG&A)
SG&A of GBP 128 million for the quarter was up GBP 11 million from
the third quarter of 2004 primarily due to the consolidation of GBP 13
million of sit-up segment SG&A, partially offset by a decrease in
cable segment SG&A of GBP 2 million.
Debt and Capital Resources
Capital expenditure was GBP 60 million for the quarter an increase
of GBP 10 million compared to the third quarter of 2004. Capital
expenditure for the full year is now expected to be approximately GBP
230 million. This is at the higher end of earlier guidance and
reflects our faster than expected VOD and broadband speed upgrade
roll-outs and increased capital expenditures relating to strong TV
growth.
As at September 30, 2005, net debt was GBP 1,665 million. This
consisted of GBP 1,811 million drawn down on our credit facilities
(comprising GBP 1,701 million in respect of TCN Group bank facilities
and GBP 110 million in respect of Flextech Group bank facilities) and
GBP 114 million of leases and other loans, offset by cash balances of
GBP 260 million. The GBP 1,701 million drawn amount includes US$150
million and Euro100 million. Net cash interest is expected to be
approximately GBP 110 million, which is at the lower end of previous
guidance.
Principal affiliate
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UKTV
(unaudited in GBP millions) 3 months ended
Sep. 30,
----------------
2005 2004
----------------------------------------------------------------------
Share of net income of UKTV 5 3
Cash inflow from UKTV, being interest received,
repayment of loans made, net, and dividends received 9 6
----------------------------------------------------------------------
*T
Telewest owns 50% of the companies that comprise UKTV, a group of
joint ventures formed with BBC Worldwide. UKTV offers a portfolio of
multi-channel television channels based on the BBC's program library.
Telewest accounts for its interest in UKTV under the equity method
and recognized its share of net income of GBP 5 million for the three
months ended September 30, 2005. This compares with GBP 3 million
share of net income for the three months ended September 30, 2004.
UKTV is funded by a loan from Telewest, the balance of which was
GBP 173 million at September 30, 2005. Total cash interest and
repayments received in respect of this loan by Telewest were GBP 8
million in the third quarter of 2005. Telewest's cash interest
receipts from UKTV are recorded in free cash flow but not in
Telewest's Adjusted EBITDA. During the three months ended September
30, 2005, we received GBP 1 million of dividends from UKTV. We expect
to continue to receive dividends from UKTV as it continues to generate
cash.
Subsequent events
On October 2, 2005, NTL Incorporated ("NTL"), and Telewest Global,
Inc. entered into a definitive Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which a subsidiary of NTL will merge
with and into Telewest, with Telewest continuing as the surviving
corporation and as a wholly owned subsidiary of NTL (the "Merger").
Under the terms of the Merger Agreement, Telewest shareholders are to
receive $16.25 in cash plus 0.115 shares of NTL stock for each
Telewest share held. Further details relating to the Merger and the
Merger Agreement are included in a Form 8-K filed by the Company with
the Securities and Exchange Commission on October 6, 2005.
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*T
Telewest Global, Inc.
Consolidated Statements of Operations
(amounts in GBP millions, except share and per share data)
(unaudited)
Three months
ended Sep. 30,
-----------------
2005 2004
-------- --------
Revenue
Consumer Sales Division 249 238
Business Sales Division 64 63
----------------------------------------------------------------------
Total Cable Segment 313 301
Content Segment 33 27
sit-up Segment 58 -
----------------------------------------------------------------------
Total revenue 404 328
----------------------------------------------------------------------
Operating costs and expenses
Cable segment expenses 71 72
Content segment expenses 19 17
sit-up segment expenses 44 -
Depreciation 99 103
Amortization 10 9
Selling, general and administrative expenses 128 117
----------------------------------------------------------------------
371 318
----------------------------------------------------------------------
Operating income 33 10
Other income/(expense)
Interest income 6 6
Interest expense (38) (49)
Foreign exchange losses, net (1) -
Share of net income of affiliates 4 4
----------------------------------------------------------------------
Income/(loss) before income taxes 4 (29)
Income tax benefit/(charge) 1 -
----------------------------------------------------------------------
Net income/(loss) 5 (29)
----------------------------------------------------------------------
Basic and diluted earnings/(loss) per share of
common stock GBP 0.02 GBP(0.12)
Weighted average number of shares of common stock -
(millions) 245 245
----------------------------------------------------------------------
Telewest Global, Inc.
Consolidated Statements of Operations
(amounts in GBP millions, except share and per share data)
(unaudited)
Nine months Nine months Nine months Six months
ended ended ended ended
Sep. 30, Sep. 30, Sep. 30, Jun. 30,
2005 2004 2004 2004
----------- --------- ----------- -----------
Reorganized Combined Reorganized Predecessor
Company Companies Company Company
----------------------------------------------------------------------
Revenue
Consumer Sales Division 757 708 238 470
Business Sales Division 188 193 63 130
----------------------------------------------------------------------
Total Cable Segment 945 901 301 600
Content Segment 96 81 27 54
sit-up Segment 82 - - -
----------------------------------------------------------------------
Total revenue 1,123 982 328 654
----------------------------------------------------------------------
Operating costs and expenses
Cable segment expenses 210 225 72 153
Content segment expenses 56 51 17 34
sit-up segment expenses 61 - - -
Depreciation 301 287 103 184
Amortization 28 9 9 -
Selling, general and
administrative expenses 362 361 117 244
----------------------------------------------------------------------
1,018 933 318 615
----------------------------------------------------------------------
Operating income 105 49 10 39
Other income/(expense)
Interest income 17 21 6 15
Interest expense (including
amortization of debt
discount) (108) (279) (49) (230)
Foreign exchange
(losses)/gains, net (8) 40 - 40
Share of net income of
affiliates 17 12 4 8
Other, net 1 (1) - (1)
----------------------------------------------------------------------
Income/(loss) before
income taxes 24 (158) (29) (129)
Income tax
benefit/(charge) 1 (1) - (1)
----------------------------------------------------------------------
Net income/(loss) 25 (159) (29) (130)
----------------------------------------------------------------------
Basic and diluted
earnings/(loss) per
share of common stock GBP 0.10 GBP (0.12)
Weighted average number
of shares of common
stock - (millions) 245 245
----------------------------------------------------------------------
The Consolidated Statement of Operations for Combined Companies for
the nine months ended September 30, 2004 represents the Consolidated
Statement of Operations for Telewest Global, Inc. ("Reorganized
Company") for the nine months ended September 30, 2004, together with
the Consolidated Statement of Operations for Telewest Communications
plc ("Predecessor Company") for the six months ended June 30, 2004,
prior to its financial restructuring.
The Consolidated Statement of Operations for Combined Companies for
the nine months ended September 30, 2004 is not in accordance with
GAAP but our management considers Combined Companies' financial
information an important indicator of the performance of the business
as compared to future and prior periods. Our management also considers
Combined Companies' financial information important to our investors.
The Consolidated Statement of Operations for the Combined Companies
for the nine months ended September 30, 2004 excludes the Predecessor
Company's Statement of Operations for July 1, 2004, the date of
adoption of Fresh-start reporting.
Telewest Global, Inc.
Consolidated Balance Sheets
(amounts in GBP millions, except share and per share data)
(unaudited)
Sep. 30, Dec. 31,
2005 2004
----------- -----------
Reorganized Reorganized
Company Company
----------------------------------------------------------------------
Assets
Cash and cash equivalents 260 68
Restricted cash 15 26
Trade receivables 118 108
Other receivables 31 33
Prepaid expenses 38 17
Inventory for re-sale, net 18 -
Other assets 6 -
----------------------------------------------------------------------
Total current assets 486 252
Investments accounted for under the equity method 284 304
Property and equipment, net 2,856 2,974
Intangible assets, net 286 314
Reorganization value in excess of amounts
allocable to identifiable assets 426 425
Goodwill 142 -
Programming inventory 31 24
Deferred financing costs (net of amortization
of GBP 5 million; 2004: GBP 0 million) 50 51
----------------------------------------------------------------------
Total assets 4,561 4,344
----------------------------------------------------------------------
Liabilities and shareholders' equity
Accounts payable 139 93
Other liabilities 446 424
Debt repayable within one year 55 21
Capital lease obligations repayable within one year 62 38
----------------------------------------------------------------------
Total current liabilities 702 576
Other liabilities 9 -
Deferred taxes 105 105
Debt repayable after more than one year 1,761 1,686
Capital lease obligations repayable after
more than one year 47 69
----------------------------------------------------------------------
Total liabilities 2,624 2,436
----------------------------------------------------------------------
----------------------------------------------------------------------
Minority interest (1) (1)
----------------------------------------------------------------------
Shareholders' equity
Preferred stock - US$0.01 par value;
authorized 5,000,000 shares, issued none
(2005 and 2004) - -
Common stock - US$0.01 par value; authorized
1,000,000,000 shares, issued 245,678,524
(2005) and 245,080,629 (2004) 1 1
Additional paid-in capital 1,965 1,954
Accumulated other comprehensive loss (7) -
Accumulated deficit (21) (46)
----------------------------------------------------------------------
Total shareholders' equity 1,938 1,909
----------------------------------------------------------------------
----------------------------------------------------------------------
Total liabilities and shareholders' equity 4,561 4,344
----------------------------------------------------------------------
Telewest Global, Inc.
Consolidated Statements of Cash Flows
(amounts in GBP millions)
(unaudited)
Nine months ended
Sep. 30,
---------------------
2005 2004
----------- ---------
Reorganized Combined
Company Companies
----------------------------------------------------------------------
Cash flows from operating activities
Net income/(loss) 25 (159)
Adjustments to reconcile net income/(loss) to
net cash provided by operating activities:
Depreciation 301 287
Amortization 28 9
Amortization of deferred financing costs and
debt discount 5 30
Deferred tax charge - 1
Fair value adjustment of interest rate swaps (10) -
Accretion expense 2 -
Unrealized losses/(gains) on foreign currency
translation 8 (40)
Stock-based compensation expense 8 3
Share of net income of affiliates (12) (12)
Profit on disposal of assets (1) -
Amounts written off investments - 1
Changes in operating assets and liabilities,
net of effect of acquisition of subsidiaries:
Change in receivables (6) 2
Change in prepaid expenses (20) (20)
Change in other assets (14) (5)
Change in accounts payable 21 37
Change in other liabilities 15 108
Income tax paid for unprovided tax contingency
at fresh-start (1) -
----------------------------------------------------------------------
Net cash provided by operating activities 349 242
----------------------------------------------------------------------
Cash flows from investing activities
Capital expenditure (173) (177)
Proceeds from disposal of fixed assets 2 -
Cash paid for acquisition of subsidiaries, net
of cash acquired (108) -
Repayment/(advance) of loans made to
affiliates, net 13 2
Disposal of affiliate - 7
Proceeds from sale and leaseback 13 -
----------------------------------------------------------------------
Net cash used in investing activities (253) (168)
----------------------------------------------------------------------
Cash flows from financing activities
Release/(placement) of restricted cash 11 (20)
Proceeds from new debt 110 -
Repayment of debt (6) (160)
Cash paid for financing costs (4) (22)
Principal element of capital lease repayments (31) (33)
Proceeds from issuance of common stock 4 -
Proceeds from the issue of a subsidiary's
redeemable preferred stock 12 -
----------------------------------------------------------------------
Net cash provided by/ (used in) financing activities 96 (235)
----------------------------------------------------------------------
Net increase/(decrease) in cash and cash equivalents 192 (161)
Cash and cash equivalents at beginning of period 68 427
Cash and cash equivalents transferred from
Predecessor Company to Reorganized Company - -
----------------------------------------------------------------------
Cash and cash equivalents at end of period 260 266
----------------------------------------------------------------------
Supplementary cash flow information:
Cash paid for interest, net (75) (100)
Cash received for income taxes, net 2 2
Nine months Six months
ended ended
Sep. 30, Jun. 30, July 1,
2004 2004 2004
----------- ----------- -----------
Reorganized Predecessor Predecessor
Company Company Company
----------------------------------------------------------------------
Cash flows from operating activities
Net income/(loss) (29) (130) -
Adjustments to reconcile net income/
(loss) to net cash provided by
operating activities:
Depreciation 103 184 -
Amortization 9 - -
Amortization of deferred financing
costs and debt discount - 30 -
Deferred tax charge - 1 -
Fair value adjustment of interest
rate swaps - - -
Accretion expense - - -
Unrealized losses/(gains) on
foreign currency translation - (40) -
Stock-based compensation expense 3 - -
Share of net income of affiliates (4) (8) -
Profit on disposal of assets - - -
Amounts written off investments - 1 -
Changes in operating assets and
liabilities, net of effect of
acquisition of subsidiaries:
Change in receivables (7) 9 -
Change in prepaid expenses 5 (25) -
Change in other assets (2) (3) -
Change in accounts payable 10 27 -
Change in other liabilities (16) 124 -
Income tax paid for unprovided tax
contingency at fresh-start - - -
----------------------------------------------------------------------
Net cash provided by operating
activities 72 170 -
----------------------------------------------------------------------
Cash flows from investing activities
Capital expenditure (50) (127) -
Proceeds from disposal of fixed assets - - -
Cash paid for acquisition of
subsidiaries, net of cash acquired - - -
Repayment/(advance) of loans made
to affiliates, net 6 (4) -
Disposal of affiliate - 7 -
Proceeds from sale and leaseback - - -
----------------------------------------------------------------------
Net cash used in investing activities (44) (124) -
----------------------------------------------------------------------
Cash flows from financing activities
Release/(placement) of restricted cash 14 2 (36)
Proceeds from new debt - - -
Repayment of debt - - (160)
Cash paid for financing costs - - (22)
Principal element of capital lease
repayments (10) (23) -
Proceeds from issuance of common stock - - -
Proceeds from the issue of a
subsidiary's redeemable preferred stock - - -
----------------------------------------------------------------------
Net cash provided by/(used in)
financing activities 4 (21) (218)
----------------------------------------------------------------------
Net increase/(decrease) in cash
and cash equivalents 32 25 (218)
Cash and cash equivalents at
beginning of period - 427 452
Cash and cash equivalents
transferred from Predecessor
Company to Reorganized Company 234 - (234)
----------------------------------------------------------------------
Cash and cash equivalents at end
of period 266 452 -
----------------------------------------------------------------------
Supplementary cash flow information:
Cash paid for interest, net (39) (61) -
Cash received for income taxes, net - 2 -
Telewest Global, Inc.
Selected Quarterly Operating Data - unaudited
The following table sets out certain operating data for the
three-month periods shown. The information represents combined
operating statistics for all of our franchises.
----------------------------------------------------------------------
Sep. 30, Jun. 30, Mar. 31,
2005 2005 2005
Reorganized Company
--------------------------------
Customer Data
-------------
Homes passed and marketed(1) 4,698,067 4,698,510 4,694,480
Total customer relationships(2) 1,848,096 1,837,191 1,822,530
Customer penetration 39.3% 39.1% 38.8%
Customer additions 89,469 79,365 78,695
Customer disconnections (78,564) (64,704) (55,721)
Net customer additions 10,905 14,661 22,974
Revenue Generating Units("RGUs")(3) 3,955,205 3,873,792 3,784,835
RGUs per customer 2.14 2.11 2.08
Net RGU additions 81,413 88,957 113,433
Average monthly revenue per
customer(4) GBP 45.17 GBP 44.86 GBP 45.34
Average monthly churn(5) 1.4% 1.2% 1.0%
----------------------------------------------------------------------
Bundled customers
-----------------
Customers subscribing to two or
more services 1,459,848 1,434,161 1,409,998
Customers subscribing to three
services ("triple play") 647,261 602,430 552,307
Percentage of dual or triple play
customers 79.0% 78.1% 77.4%
Percentage of triple play customers 35.0% 32.8% 30.3%
----------------------------------------------------------------------
Consumer Television
-------------------
Television ready homes passed and
marketed 4,698,067 4,698,510 4,694,480
Total subscribers 1,348,572 1,331,742 1,320,487
Quarterly net additions 16,830 11,255 7,662
Television penetration 28.7% 28.3% 28.1%
Digital ready homes passed and
marketed 4,503,909 4,501,169 4,451,420
Digital subscribers 1,228,164 1,189,521 1,149,641
Quarterly net digital additions 38,643 39,880 27,340
Penetration of digital subscribers
to total subscribers 91.1% 89.3% 87.1%
Average monthly churn(5) 1.8% 1.5% 1.4%
Average monthly revenue per
subscriber(4) GBP 20.89 GBP 20.78 GBP 21.12
----------------------------------------------------------------------
Consumer Telephony
------------------
Telephony ready homes passed and
marketed 4,696,439 4,694,030 4,691,704
"Talk Weekends" (and previously
"3-2-1") telephony subscribers 1,027,271 1,045,139 1,053,226
"Talk Unlimited" and "Talk Evenings
and Weekends" telephony subscribers 659,176 644,073 624,417
Total subscribers 1,686,447 1,689,212 1,677,643
Quarterly net (disconnects)/additions (2,765) 11,569 17,302
Telephony penetration 35.9% 36.0% 35.8%
Average monthly churn(5) 1.4% 1.2% 1.0%
Average monthly revenue per
subscriber(4) GBP 22.35 GBP 22.42 GBP 23.00
----------------------------------------------------------------------
Dec. 31, Sep. 30,
2004 2004
Reorganized Company
---------------------
Customer Data
-------------
Homes passed and marketed(1) 4,686,794 4,686,799
Total customer relationships(2) 1,799,556 1,769,263
Customer penetration 38.4% 37.7%
Customer additions 89,452 78,707
Customer disconnections (59,159) (61,997)
Net customer additions 30,293 16,710
Revenue Generating Units ("RGUs")(3) 3,671,402 3,539,185
RGUs per customer 2.04 2.00
Net RGU additions 132,217 91,931
Average monthly revenue per customer(4) GBP 45.13 GBP 45.05
Average monthly churn(5) 1.1% 1.2%
----------------------------------------------------------------------
Bundled customers
-----------------
Customers subscribing to two or more services 1,379,057 1,338,632
Customers subscribing to three services
("triple play") 492,789 431,290
Percentage of dual or triple play customers 76.6% 75.7%
Percentage of triple play customers 27.4% 24.4%
----------------------------------------------------------------------
Consumer Television
-------------------
Television ready homes passed and marketed 4,686,794 4,686,799
Total subscribers 1,312,825 1,297,304
Quarterly net additions 15,521 9,032
Television penetration 28.0% 27.7%
Digital ready homes passed and marketed 4,420,388 4,405,162
Digital subscribers 1,122,301 1,078,623
Quarterly net digital additions 43,678 25,768
Penetration of digital subscribers to total
subscribers 85.5% 83.1%
Average monthly churn(5) 1.5% 1.4%
Average monthly revenue per subscriber(4) GBP 20.88 GBP 20.72
----------------------------------------------------------------------
Consumer Telephony
------------------
Telephony ready homes passed and marketed 4,683,153 4,682,002
"Talk Weekends" (and previously "3-2-1")
telephony subscribers 1,080,893 1,082,125
"Talk Unlimited" and "Talk Evenings and
Weekends" telephony subscribers 579,448 552,534
Total subscribers 1,660,341 1,634,659
Quarterly net (disconnects)/additions 25,682 13,290
Telephony penetration 35.5% 34.9%
Average monthly churn(5) 1.1% 1.2%
Average monthly revenue per subscriber(4) GBP 23.18 GBP 23.53
----------------------------------------------------------------------
Telewest Global, Inc.
Selected Quarterly Operating Data - unaudited (continued)
Sep. 30, Jun. 30, Mar. 31,
2005 2005 2005
Reorganized Company
--------------------------------
Consumer Internet
-----------------
Broadband ready homes passed and
marketed 4,503,909 4,501,169 4,451,420
Total metered dial-up internet
subscribers 23,645 25,048 29,376
Total unmetered dial-up internet
subscribers 49,542 65,516 85,909
Total broadband internet
subscribers 920,186 852,838 786,705
Quarterly net broadband internet
additions 67,348 66,133 88,469
Broadband internet penetration 20.4% 18.9% 17.7%
Average monthly broadband internet
churn(5) 1.5% 1.3% 1.0%
Average monthly revenue per
broadband internet subscriber(4) GBP 19.03 GBP 19.39 GBP 19.89
----------------------------------------------------------------------
NCTA Capital expenditure(6) GBP m GBP m GBP m
----------------------------------------------------------------------
Customer premise equipment ("CPE") 30 18 16
Scaleable infrastructure 9 12 7
Commercial 10 11 8
Line extensions - 1 2
Upgrade/rebuild 5 3 6
Support capital 12 12 13
---------- ---------- ----------
Total NCTA Capital expenditure 66 57 52
Non NCTA Capital expenditure:
Content Segment 1 1 -
sit-up Segment 1 1 -
Change in capital accruals and leasing (8) - 2
----------------------------------------------------------------------
Total Capital expenditure 60 59 54
----------------------------------------------------------------------
Dec. 31, Sep. 30,
2004 2004
Reorganized Company
----------------------
Consumer Internet
-----------------
Broadband ready homes passed and marketed 4,420,388 4,405,162
Total metered dial-up internet subscribers 33,417 39,196
Total unmetered dial-up internet subscribers 107,220 127,745
Total broadband internet subscribers 698,236 607,222
Quarterly net broadband internet additions 91,014 69,609
Broadband internet penetration 15.8% 13.8%
Average monthly broadband internet churn(5) 1.0% 1.3%
Average monthly revenue per broadband internet
subscriber(4) GBP 20.23 GBP 21.50(a)
----------------------------------------------------------------------
NCTA Capital expenditure(6) GBP m GBP m
----------------------------------------------------------------------
Customer premise equipment ("CPE") 25 19
Scaleable infrastructure 14 8
Commercial 8 12
Line extensions 1 1
Upgrade/rebuild 10 1
Support capital 7 10
---------- ----------
Total NCTA Capital expenditure 65 51
Non NCTA Capital expenditure:
Content Segment 1 -
sit-up Segment - -
Change in capital accruals and leasing (2) (1)
----------------------------------------------------------------------
Total Capital expenditure 64 50
----------------------------------------------------------------------
(a) The product ARPU for broadband internet in this quarter has been
adjusted to reflect the full value of promotional discounts
offered.
(1) The number of homes within our service area that can potentially
be served by our network with minimal connection costs.
Information concerning the number of homes "passed and marketed"
is based on physical counts made by us during network construction
or marketing phases.
(2) The number of customers who receive at least one of our
television, telephony or broadband internet services.
(3) Revenue Generating Units ("RGUs"), refer to subscriptions to each
of our analog television, digital television, telephony and
broadband internet services on an individual basis. For example,
when we provide one customer with digital television and broadband
internet services, we record two RGUs. Dial-up internet services,
second telephone lines and additional TV outlets are not recorded
as RGUs although they generate revenue for us.
(4) Average monthly revenue per customer (often referred to as "ARPU"
or "Average Revenue per User") represents the consumer sales
division's total quarterly revenue of residential customers,
including installation revenues (but excluding the recovery of GBP
16 million VAT in the quarter ended June 30, 2005), divided by the
average number of residential customers in the quarter, divided by
three. The same methodology is used for television, telephony and
broadband internet ARPU.
(5) Average monthly churn represents the total number of customers who
disconnected during the quarter divided by the average number of
customers in the quarter, divided by three. Subscribers who move
premises within our addressable areas (known as "Moves and
Transfers") and retain our services are excluded from this churn
calculation.
(6) In order to provide comparable data to the US and UK cable
industry, and in accordance with NCTA (National Cable &
Telecommunications Association) reporting guidelines, Telewest has
allocated capital expenditure to the standard reporting categories
as per below. Telewest is not a member of the NCTA and is
providing this information solely for comparative purposes.
CPE - costs incurred at the customer's house to secure new
customers, revenue units and additional bandwidth revenues.
Includes connections to previously unserved houses in
accordance with SFAS 51 (Financial Reporting by Cable
Television Companies) and customer premise equipment.
Scaleable infrastructure - costs, not CPE or network related,
to secure growth of new customers, revenue units and
additional bandwidth revenues or provide service enhancements.
Commercial - costs to provide high-speed data and telephony
services to businesses and institutions. Includes network and
infrastructure expenditures. Line extensions - network costs
associated with entering new service areas including costs of
fiber, coaxial cable, amplifiers, electronic equipment,
make-ready and design/engineering. Upgrade/rebuild - costs to
modify or replace existing coax and fiber networks. Includes
materials, contract labor, in-house labor, make-ready, design
engineering and other miscellaneous costs associated with all
aspects of the construction of the plant miles along an
existing route. Benefits include added bandwidth and/or
reliability/extended life to the existing plant. Support
capital - costs associated with the replacement or enhancement
of non-network assets due to obsolescence and wear-out,
replacement of network assets unrelated to line extensions,
rebuild/upgrade or customer growth.
*T
Telewest Global, Inc.
Supplemental Analysis
-- Forward-Looking Statements
-- Additional Information and Where to Find It
-- Participants in the Solicitation
-- Fresh-Start Reporting
-- Pro forma Consolidated Statements of Operations
-- Quarterly Historical Information
-- Segment Information
-- Use of Non-GAAP Financial Measures
Forward-Looking Statements
Some of the statements in this earnings release constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements relate to
future events or our future financial performance, including, but not
limited to, strategic plans, our proposed merger with NTL Inc.,
potential growth (including customer net additions and average monthly
revenue per customer), product introductions and innovation, meeting
customer expectations, planned operational changes (including product
improvements and the impact of price increases), expected capital
expenditures, future cash sources and requirements, liquidity,
customer service improvements, cost savings and the benefits of
acquisitions or joint ventures - potential and/or completed - that
involve known and unknown risks, uncertainties and other factors that
may cause our or our businesses' actual results, levels of activity,
performance or achievements to be materially different from those
expressed or implied by any forward-looking statements. In some cases,
you can identify forward-looking statements by terminology such as
"may," "will," "could," "would," "should," "expect," "plan,"
"anticipate," "intend," "believe," "estimate," "predict," "potential,"
or "continue," or the negative of those terms or other comparable
terminology.
There are a number of important factors that could cause our
actual results and future development to differ materially from those
expressed or implied by those forward-looking statements. These
factors include those discussed under the caption "Risk Factors" in
the Annual Report on Form 10-K for the year ended December 31, 2004
(No. 000-50886) filed by Telewest Global, Inc. on March 22, 2005 with
the United States Securities and Exchange Commission, although those
risk factors may not be exhaustive. Other sections of this earnings
release may describe additional factors that could adversely impact
our business and financial performance. We operate in a continually
changing business environment, and new risk factors may emerge from
time to time. Management cannot anticipate all of these new risk
factors, nor can they definitively assess the impact, if any, of new
risk factors on us or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those
projected in any forward-looking statements. Accordingly,
forward-looking statements should not be relied upon as a prediction
of actual results.
Unless otherwise required by applicable securities laws, we assume
no obligation to publicly update or revise any of the forward-looking
statements after the date of this earnings release to reflect actual
results, whether as a result of new information, future events or
otherwise.
Additional Information and Where to Find It
This filing may be deemed to be solicitation material in respect
of the proposed merger of NTL and Telewest. In connection with the
proposed merger, NTL and Telewest will file a joint proxy
statement/prospectus with the U.S. Securities and Exchange Commission
(the "SEC"). INVESTORS AND SECURITY HOLDERS OF NTL AND TELEWEST ARE
ADVISED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE
BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED MERGER. The final joint proxy statement/prospectus will be
mailed to stockholders of NTL and Telewest. Investors and security
holders may obtain a free copy of the joint proxy
statement/prospectus, when it becomes available, and other documents
filed by NTL and Telewest with the SEC, at the SEC's web site at
http://www.sec.gov. Free copies of the joint proxy
statement/prospectus, when it becomes available, and each company's
other filings with the SEC may also be obtained from the respective
companies. Free copies of Telewest's filings may be obtained by
directing a request to Telewest Global, Inc., 160 Great Portland
Street, London W1W 5QA, United Kingdom, Attention: Investor Relations.
Participants in the Solicitation
NTL, Telewest and their respective directors, executive officers
and other members of their management and employees may be deemed to
be soliciting proxies from their respective stockholders in favor of
the merger. Information regarding NTL's directors and executive
officers is available in NTL's proxy statement for its 2005 annual
meeting of stockholders, which was filed with the SEC on April 5,
2005. Information regarding Telewest's directors and executive
officers is available in Telewest's proxy statement for its 2005
annual meeting of stockholders, which was filed with the SEC on April
11, 2005. Additional information regarding the interests of such
potential participants will be included in the joint proxy
statement/prospectus and the other relevant documents filed with the
SEC when they become available.
Fresh-Start Reporting
As a result of the completion of the financial restructuring of
Telewest Communications plc, our predecessor, on July 15, 2004,
Telewest adopted fresh-start reporting in accordance with Statement of
Position 90-7, "Reporting by Entities in Reorganization under the
Bankruptcy Code", ("SOP 90-7"), with effect from July 1, 2004. Under
SOP 90-7, Telewest established a new accounting basis, recording our
predecessor's assets at their fair value and liabilities at the
present value of amounts to be paid.
A reconciliation of our predecessor's balance sheet at June 30,
2004 to the fresh-start balance sheet at July 1, 2004, is included in
Telewest's Annual Report on Form 10-K for the year ended December 31,
2004.
As a result of the adoption of fresh-start reporting, our balance
sheets and results of operations subsequent to July 1, 2004 will not
be comparable in many material respects to the balance sheets or
results of operations reflected in our predecessor's historical
financial statements for periods prior to July 1, 2004.
-0-
*T
Telewest Global, Inc.
Pro forma Consolidated Statements of Operations (a)
(amounts in GBP millions, except share and per share data)
(unaudited)
Nine months
ended Sep 30,
2005
-----------
Reorganized
Company (a)
----------------------------------------------------------------------
Revenue
Consumer Sales Division 757
Business Sales Division 188
----------------------------------------------------------------------
Total Cable Segment 945
Content Segment 96
sit-up Segment 156
----------------------------------------------------------------------
Total revenue 1,197
----------------------------------------------------------------------
Operating costs and expenses
Cable segment expenses 210
Content segment expenses 56
sit-up segment expenses 116
Depreciation 302
Amortization 28
Selling, general and administrative expenses 379
----------------------------------------------------------------------
1,091
----------------------------------------------------------------------
Operating income 106
Other income/(expense)
Interest income 17
Interest expense (110)
Foreign exchange losses, net (8)
Share of net income of affiliates 16
Other, net 1
----------------------------------------------------------------------
Income before income taxes 22
Income tax benefit 1
----------------------------------------------------------------------
Net income 23
----------------------------------------------------------------------
Basic and diluted earnings per share of common stock GBP 0.09
Weighted average number of shares of common stock - (millions) 245
----------------------------------------------------------------------
(a) To show pro forma effect as if sit-up Limited had been purchased
on January 1, 2005, for the nine months ended September 30, 2005.
*T
Pro forma adjustments reflect the revenue, segment expenses,
depreciation and SG&A for sit-up for the period January 1, 2005 to May
11, 2005. Interest income and expense have been adjusted to reflect
the interest income earned by sit-up during the above period and the
additional interest expense that would have been incurred by Telewest
to fund the acquisition at January 1, 2005. Share of net income of
affiliates has been adjusted to reverse the equity accounting of
sit-up for the period presented.
Pro forma financial information for the three months ended
September 30, 2005 has not been presented, as sit-up is a consolidated
subsidiary of the Reorganized Company during the period, therefore
there are no differences as compared to the Consolidated Statement of
Operations.
Comparable pro forma financial information for the three and nine
months ended September 30, 2004 has not been presented since such pro
forma information would not be meaningful as a result of the financial
restructuring of the Predecessor Company during 2004.
-0-
*T
Telewest Global, Inc.
Quarterly Historical Information
(amounts in GBP millions, except share and per share data)
Three months ended
-------------------------
Sep. 30, Jun. 30, Mar. 31,
2005 2005 2005
--------------------------
Reorganized Company
----------------------------------------------------------------------
Revenue
Consumer Sales Division 249 262 246
Business Sales Division 64 63 61
----------------------------------------------------------------------
Total Cable Segment 313 325 307
Content Segment 33 32 31
sit-up Segment 58 24 -
----------------------------------------------------------------------
Total revenue 404 381 338
----------------------------------------------------------------------
Operating costs and expenses
Cable segment expenses 71 70 69
Content segment expenses 19 17 20
sit-up segment expenses 44 17 -
Depreciation 99 101 101
Amortization 10 9 9
Selling, general and administrative expenses 128 119 115
----------------------------------------------------------------------
371 333 314
----------------------------------------------------------------------
Operating income 33 48 24
Other income/(expense)
Interest income 6 7 4
Interest expense (38) (41) (29)
Foreign exchange (losses)/gains, net (1) (3) (4)
Share of net income of affiliates 4 7 6
Other, net - 1 -
----------------------------------------------------------------------
Income/(loss) before income taxes 4 19 1
Income tax benefit 1 - -
----------------------------------------------------------------------
Net income/(loss) 5 19 1
----------------------------------------------------------------------
Basic and diluted earnings/(loss) per share
of common stock GBP 0.02 GBP 0.08 -
Weighted average number of shares of common
stock - (millions) 245 245 245
----------------------------------------------------------------------
Three months ended
------------------
Dec. 31, Sep. 30,
2004 2004
------------------
Reorganized
Company
----------------------------------------------------------------------
Revenue
Consumer Sales Division 241 238
Business Sales Division 63 63
----------------------------------------------------------------------
Total Cable Segment 304 301
Content Segment 32 27
sit-up Segment - -
----------------------------------------------------------------------
Total revenue 336 328
----------------------------------------------------------------------
Operating costs and expenses
Cable segment expenses 69 72
Content segment expenses 25 17
sit-up segment expenses - -
Depreciation 101 103
Amortization 9 9
Selling, general and administrative expenses 114 117
----------------------------------------------------------------------
318 318
----------------------------------------------------------------------
Operating income 18 10
Other income/(expense)
Interest income 5 6
Interest expense (47) (49)
Foreign exchange (losses)/gains, net 3 -
Share of net income of affiliates 4 4
Other, net - -
----------------------------------------------------------------------
Income/(loss) before income taxes (17) (29)
Income tax benefit - -
----------------------------------------------------------------------
Net income/(loss) (17) (29)
----------------------------------------------------------------------
Basic and diluted earnings/(loss) per share of
common stock GBP (0.07)GBP(0.12)
Weighted average number of shares of common stock -
(millions) 245 245
----------------------------------------------------------------------
Telewest Global, Inc.
Segment Information
(amounts in GBP millions)
Three months Nine months
ended Sep. 30, ended Sep. 30,
----------------------- ---------------------
2005 2004 2005 2004
---------------------------------------------
Reorganized Reorganized Reorganized Combined
Company Company Company Companies
----------------------------------------------------------------------
CABLE SEGMENT
Consumer Sales Division
revenue 249 238 757 708
Business Sales Division
revenue 64 63 188 193
----------------------------------------------------------------------
Third party revenue 313 301 945 901
Operating costs and
expenses (before depreciation,
amortization and
financial restructuring
charges) (181) (183) (534) (552)
----------------------------------------------------------------------
Adjusted EBITDA
including inter-segment costs 132 118 411 349
Inter-segment costs(1) 3 2 8 7
----------------------------------------------------------------------
Adjusted EBITDA 135 120 419 356
----------------------------------------------------------------------
CONTENT SEGMENT
Content Segment revenue 36 29 104 88
Operating costs and expenses
(before depreciation,
amortization and
financial restructuring
charges) (27) (25) (82) (71)
----------------------------------------------------------------------
Adjusted EBITDA
including inter-segment
revenues 9 4 22 17
Inter-segment revenues(1) (3) (2) (8) (7)
----------------------------------------------------------------------
Adjusted EBITDA 6 2 14 10
----------------------------------------------------------------------
SIT-UP SEGMENT
sit-up Segment revenue 58 - 82 -
Operating costs and expenses
(before depreciation,
amortization and
financial restructuring
charges) (57) - (81) -
----------------------------------------------------------------------
Adjusted EBITDA 1 - 1 -
----------------------------------------------------------------------
Reconciliation to
operating income
Cable Segment Adjusted EBITDA 135 120 419 356
Content Segment Adjusted EBITDA 6 2 14 10
sit-up Segment Adjusted EBITDA 1 - 1 -
----------------------------------------------------------------------
Adjusted EBITDA 142 122 434 366
Financial restructuring
charges - - - (21)
Depreciation (99) (103) (301) (287)
Amortization (10) (9) (28) (9)
----------------------------------------------------------------------
Operating income 33 10 105 49
----------------------------------------------------------------------
Nine months Six months
ended ended
Sep. 30, Jun. 30,
2004 2004
------------------------
Reorganized Predecessor
Company Company
----------------------------------------------------------------------
CABLE SEGMENT
Consumer Sales Division revenue 238 470
Business Sales Division revenue 63 130
----------------------------------------------------------------------
Third party revenue 301 600
Operating costs and expenses (before
depreciation, amortization and financial
restructuring charges) (183) (369)
----------------------------------------------------------------------
Adjusted EBITDA including inter-segment costs 118 231
Inter-segment costs(1) 2 5
----------------------------------------------------------------------
Adjusted EBITDA 120 236
----------------------------------------------------------------------
CONTENT SEGMENT
Content Segment revenue 29 59
Operating costs and expenses (before
depreciation, amortization and financial
restructuring charges) (25) (46)
----------------------------------------------------------------------
Adjusted EBITDA including inter-segment revenues 4 13
Inter-segment revenues(1) (2) (5)
----------------------------------------------------------------------
Adjusted EBITDA 2 8
----------------------------------------------------------------------
SIT-UP SEGMENT
sit-up Segment revenue - -
Operating costs and expenses (before
depreciation, amortization and financial
restructuring charges) - -
----------------------------------------------------------------------
Adjusted EBITDA - -
----------------------------------------------------------------------
Reconciliation to operating income
Cable Segment Adjusted EBITDA 120 236
Content Segment Adjusted EBITDA 2 8
sit-up Segment Adjusted EBITDA - -
----------------------------------------------------------------------
Adjusted EBITDA 122 244
Financial restructuring charges - (21)
Depreciation (103) (184)
Amortization (9) -
----------------------------------------------------------------------
Operating income 10 39
----------------------------------------------------------------------
(1) Inter-segment revenues are revenues of our Content Segment which
are costs in our Cable Segment and which are eliminated on
consolidation.
The Segment Information for the Combined Companies for the nine months
ended September 30, 2004 excludes the Segment Information of the
Predecessor Company for July 1, 2004.
*T
Telewest Global, Inc.
Use of Non-GAAP Financial Measures
Adjusted EBITDA
Telewest's primary measure of income or loss for each of our
reportable segments is Adjusted EBITDA. Our management, including our
chief operating decision-maker, considers Adjusted EBITDA an important
indicator of the operational strength and performance of our
reportable segments. Adjusted EBITDA for each segment and in total
excludes the impact of costs and expenses that do not directly affect
our cash flows or do not directly relate to the operating performance
of that segment. These costs and expenses include depreciation,
amortization, financial restructuring charges, interest expense,
foreign exchange gains/(losses), share of net income/(loss) from
affiliates and income taxes. It is the belief of management that the
legal and professional costs relating to our financial restructuring
are not characteristic of our underlying business operations.
Furthermore management believes that some of the components of these
charges are not directly related to the performance of a single
reportable segment.
Adjusted EBITDA is not a financial measure recognised under GAAP.
This measure is most directly comparable to the GAAP financial measure
net income/(loss). Some of the significant limitations associated with
the use of Adjusted EBITDA as compared to net income/(loss) are that
Adjusted EBITDA does not reflect the amount of required reinvestment
in depreciable fixed assets, financial restructuring charges, interest
expense, foreign exchange gains or losses, income taxes expense or
benefit and similar items on our results of operations. We believe
Adjusted EBITDA 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
reconciliations to net income/(loss), shown below, provide a more
complete understanding of factors and trends affecting our business.
Because non-GAAP financial measures are not standardized, it may not
be possible to compare Adjusted EBITDA 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 net cash provided by
operating activities, operating income/(loss), net income/(loss), or
other measures of financial performance reported in accordance with
GAAP.
Free cash flow
Telewest's primary measure of cash flow is free cash flow. Free
cash flow is defined as net cash provided by/(used in) operating
activities excluding cash paid for financial restructuring charges,
less capital expenditure. Our management, including our chief
operating decision-maker, considers free cash flow an important
indicator of the operational performance of our business.
Free cash flow is not a financial measure recognized under GAAP.
This measure is most directly comparable to the GAAP financial measure
net cash provided by/(used in) operating activities. The significant
limitation associated with the use of free cash flow as compared to
net cash provided by/(used in) operating activities is that free cash
flow does not consider the amount of cash required to pay financial
restructuring charges. We believe free cash flow is helpful for
understanding our performance and it provides useful supplemental
information to investors. Because non-GAAP financial measures are not
standardized, it may not be possible to compare free cash flow 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 net
cash provided by/(used in) operating activities, or other measures of
financial performance reported in accordance with GAAP.
Net debt
Net debt is defined as the sum of debt repayable, capital lease
obligations and accrued interest payable on notes and debentures less
cash and cash equivalents. The Company's management, including its
chief operating decision-maker, considers net debt an important
measure of the financing obligations undertaken by the Company.
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 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 is available to service debt. Telewest believes net debt
is helpful for understanding its entire net debt funding obligations
and it 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.
Average monthly revenue per customer or "Household ARPU (excluding
impact of the GBP 16 million VAT recovery)"
For a three month period, Household ARPU (excluding impact of the
GBP 16 million VAT recovery) represents the consumer sales division's
total quarterly revenue of residential customers, including
installation revenues, but excluding the recovery of GBP 16 million
VAT, divided by the average number of residential customers in the
quarter, divided by three.
Household ARPU (excluding impact of the GBP 16 million VAT
recovery) is not a financial measure recognized under GAAP. This
measure is most directly comparable to the GAAP financial measure,
Household ARPU. The significant limitation associated with the use of
Household ARPU (excluding impact of the GBP 16 million VAT recovery)
as compared to Household ARPU is that Household ARPU (excluding impact
of the GBP 16 million VAT recovery) does not consider GBP 16 million
of revenues received in respect of recovered VAT. Telewest believes
Household ARPU (excluding impact of the GBP 16 million VAT recovery)
is helpful for understanding the trend in respect of its residential
revenues derived from customers during the period and it provides
useful supplemental information to investors. The VAT recovery is not
expected to recur. Because non-GAAP financial measures are not
standardized, it may not be possible to compare Household ARPU
(excluding impact of the GBP 16 million VAT recovery) 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 Household ARPU,
or other measures of financial performance reported in accordance with
GAAP.
Average monthly revenue per television subscriber or "Television
ARPU (excluding impact of the GBP 16 million VAT recovery)"
For a three month period, Television ARPU (excluding impact of the
GBP 16 million VAT recovery) represents the sum of the consumer sales
division's total quarterly revenue of television subscribers,
including installation revenues, but excluding the recovery of GBP 16
million VAT, divided by the average number of television subscribers
in the quarter, divided by three.
Television ARPU (excluding impact of the GBP 16 million VAT
recovery) is not a financial measure recognized under GAAP. This
measure is most directly comparable to the GAAP financial measure,
Television ARPU. The significant limitation associated with the use of
Television ARPU (excluding impact of the GBP 16 million VAT recovery)
as compared to Television ARPU is that Television ARPU (excluding
impact of the GBP 16 million VAT recovery) does not consider GBP 16
million of revenues received in respect of recovered VAT. Telewest
believes Television ARPU (excluding impact of the GBP 16 million VAT
recovery) is helpful for understanding the trend in respect of its
television revenues derived from subscribers during the period and it
provides useful supplemental information to investors. The VAT
recovery is not expected to recur. Because non-GAAP financial measures
are not standardized, it may not be possible to compare Television
ARPU (excluding impact of the GBP 16 million VAT recovery) 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 Television ARPU,
or other measures of financial performance reported in accordance with
GAAP.
-0-
*T
Reconciliations of Non-GAAP Financial Measures
(amounts in GBP millions)
Three months ended Sep. 30,
---------------------------
2005 2004
---------------------------
Reorganized Reorganized
Company Company
Reconciliation of Adjusted EBITDA to net income/(loss)
----------------------------------------------------------------------
Adjusted EBITDA 142 122
Financial restructuring charges - -
Depreciation (99) (103)
Amortization (10) (9)
----------------------------------------------------------------------
Operating income 33 10
Interest income 6 6
Interest expense (including amortization of debt
discount) (38) (49)
Foreign exchange (losses)/gains, net (1) -
Share of net income of affiliates 4 4
Other, net - -
Income tax benefit/(charge) 1 -
----------------------------------------------------------------------
Net income/(loss) 5 (29)
----------------------------------------------------------------------
Reconciliation of free cash flow to net cash provided by operating
activities
----------------------------------------------------------------------
Free cash flow 50 39
Deduct cash paid for financial restructuring charges - (17)
Add capital expenditure 60 50
----------------------------------------------------------------------
Net cash provided by operating activities 110 72
----------------------------------------------------------------------
Free cash flow is reported after cash paid for interest, net, and
cash received for income taxes.
Supplementary cash flow information:
Cash paid for interest, net 34 39
Cash received for income taxes, net (2) -
Nine months Three months
ended Sep. 30, ended Jun. 30,
----------------------------------------
2005 2004 2005
----------------------------------------
Reorganized Combined Reorganized
Company Companies Company
----------------------------------------
Adjusted EBITDA 434 366 158
Financial restructuring charges - (21) -
Depreciation (301) (287) (101)
Amortization (28) (9) (9)
----------------------------------------------------------------------
Operating income 105 49 48
Interest income 17 21 7
Interest expense (including
amortization of debt discount) (108) (279) (41)
Foreign exchange
(losses)/gains, net (8) 40 (3)
Share of net income of affiliates 17 12 7
Other, net 1 (1) 1
Income tax benefit/(charge) 1 (1) -
----------------------------------------------------------------------
Net income/(loss) 25 (159) 19
----------------------------------------------------------------------
Reconciliation of free cash flow to net cash provided by operating
activities
----------------------------------------------------------------------
Free cash flow 177 101 64
Deduct cash paid for
financial restructuring charges (1) (36) -
Add capital expenditure 173 177 59
----------------------------------------------------------------------
Net cash provided by
operating activities 349 242 123
----------------------------------------------------------------------
Free cash flow is reported after cash paid for interest, net, and
cash received for income taxes.
Supplementary cash flow information:
Cash paid for interest, net 75 100 29
Cash received for income taxes, net (2) (2) -
The reconciliation items disclosed above for Combined Companies
represent the items for the Predecessor Company for the six months
ended June 30, 2004, prior to its financial restructuring, together
with the items for the Reorganized Company for the nine months ended
September 30, 2004.
Sep. 30, Dec. 31,
2005 2004
------------------------
Reorganized Reorganized
Company Company
----------------------------------------------------------------------
Reconciliation of net debt to total liabilities
Net debt 1,665 1,746
Cash and cash equivalents 260 68
----------------------------------------------------------------------
Total debt 1,925 1,814
Accounts payable 139 93
Other liabilities 455 424
Deferred taxes 105 105
----------------------------------------------------------------------
Total liabilities 2,624 2,436
----------------------------------------------------------------------
Three months ended
June 30,
2005
----------------------------------------------------------------------
Reconciliation of Household ARPU to Household ARPU
(excluding impact of the GBP 16 million VAT recovery)
Consumer sales division revenue in the period GBP 262 million
Average number of residential customers in the period 1,830,895
-----------------
Household ARPU GBP 47.72
-----------------
Consumer sales division revenue in the period GBP 262 million
VAT recovery GBP (16)million
-----------------
Consumer sales division revenue (excluding GBP 16 GBP 246 million
million VAT recovery)
Average number of residential customers in the period 1,830,895
-----------------
Household ARPU (excluding impact of the GBP 16 GBP 44.86
million VAT recovery) -----------------
Reconciliation of Television ARPU to Television ARPU (excluding
impact of the GBP 16 million VAT recovery)
Consumer television revenue in the period GBP 98 million
Average number of television subscribers in the period 1,326,317
-----------------
Television ARPU GBP 24.72
-----------------
Consumer television revenue in the period GBP 98 million
VAT recovery GBP (16)million
-----------------
Consumer television revenue (excluding GBP 16 GBP 82 million
million VAT recovery)
Average number of television subscribers in the
period 1,326,317
-----------------
Television ARPU (excluding impact of the GBP 16 GBP 20.78
million VAT recovery) -----------------
*T