SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MARCH 16, 2000
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NTL INCORPORATED
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-25691 13-4051921
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
110 East 59th Street, New York, New York 10022
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code (212) 906-8440
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
- ------- -------------------------------------
The registrant hereby amends its Current Report on Form 8-K, dated March
16, 2000 by filing financial statements of the acquired business, Cablecom
Holdings AG, and certain pro forma financial information for the registrant.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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Page
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(a) Financial Statements of Businesses Acquired
Cablecom Holdings AG and Subsidiaries
Consolidated Financial Statements, Year Ended 31 December 1999......4
(b) Pro Forma Financial Information
NTL Incorporated and Subsidiaries
Unaudited Pro Forma Financial Data.................................32
-2-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NTL INCORPORATED
(Registrant)
By: /s/ Gregg N. Gorelick
---------------------------------
Name: Gregg N. Gorelick
Title: Vice President-Controller
Dated: May 10, 2000
-3-
CONTENTS
GROUP FINANCIAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS OF THE CABLECOM GROUP FOR 1999
Page
5 Report to the Board of Directors
6 Consolidated income statement
7 Consolidated balance sheet
8 Consolidated cash flow statement
9 Consolidated statement of shareholders' equity
10 - 31 Notes to the consolidated financial statements
-4-
<PAGE>
To the Board of Directors of
Cablecom Holding AG
Frauenfeld
We have audited the accompanying consolidated balance sheet of Cablecom Holding
AG and its subsidiaries ("Cablecom") as of December 31, 1999 and 1998 and the
related income statements, cash flows and shareholders' equity for each of the
two years in the period ended December 31, 1999, all expressed in Swiss Francs.
These consolidated financial statements are the responsibility of the Board of
Directors. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We confirm that we meet the legal
requirements concerning professional qualification and independence.
Our audits were conducted in accordance with the auditing standards promulgated
by the profession in Switzerland, which are similar in all material respects to
auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from
material misstatement. We have examined on test basis evidence supporting the
amounts and disclosures in the consolidated financial statements. We have also
assessed the accounting principles used, significant estimates made and the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements give a true and fair view
of the consolidated financial position of Cablecom as of December 31, 1999 and
1998 and Cablecom's results of operations and cash flows for each of the two
years in the period ended December 31, 1999 in accordance with the Swiss
Accounting and Reporting Recommendations and the legal provisions of the Swiss
Code of Obligations.
The Swiss Accounting and Reporting Recommendations vary in certain respects from
accounting principles generally accepted in the United States of America. The
application of the latter would have affected the determination of the
consolidated net income for each of the two years in the period ended December
31, 1999 and the determination of consolidated shareholders' equity and
consolidated financial position at December 31, 1999 and 1998 to the extent
summarized in Note 21 to the consolidated financial statements.
PricewaterhouseCoopers AG
Hansjorg Sagesser Julie Fitzgerald
Berne, Switzerland,
March 14, 2000, except for Note 21, as to which the date is April 28, 2000
-5-
<PAGE>
Cablecom Holding AG, Frauenfeld
Consolidated income statement
(CHF in thousands)
<TABLE>
<CAPTION>
Notes 1999 1998
<S> <C> <C> <C>
Revenue 3 579,272 564,913
Changes in inventory and capitalized cost 107,974 97,135
-------------- --------------
Total 687,246 662,048
-------------- --------------
Goods and services purchased 256,293 265,466
Personnel expenses 118,823 111,521
Other operating expenses 85,519 77,855
Depreciation and amortization 161,032 139,958
-------------- --------------
Total operating expenses 621,667 594,800
-------------- --------------
Operating income 65,579 67,248
Gain on sale of investments 4 5,124 57,745
Financial income 5 20,472 2,481
Financial expense 6 (34,152) (35,705)
-------------- --------------
Income before income taxes and minority interest 57,023 91,769
Income tax expense 7 (19,848) (18,344)
-------------- --------------
Income before minority interest 37,175 73,425
Minority interest (455) (310)
-------------- --------------
Net income 36,720 73,115
============== ==============
</TABLE>
-6-
<PAGE>
Cablecom Holding AG, Frauenfeld
Consolidated balance sheet
(CHF in thousands)
<TABLE>
<CAPTION>
Notes Dec 31, 1999 Dec 31, 1998
<S> <C> <C> <C>
Current assets
Cash and cash equivalents 14,205 32,926
Securities available for sale 80 2,192
Accounts receivable 209,218 219,489
Inventories 8 58,295 35,366
Other current assets 9 34,709 23,985
--------------- -----------------
Total current assets 316,507 313,958
--------------- -----------------
Non-current assets
Property, plant and equipment 10 1,906,222 1,585,882
Investments 11 8,948 39,649
Intangible assets 4,790 5,531
Other non-current assets 12 15,682 18,489
--------------- -----------------
Total non-current assets 1,935,642 1,649,551
--------------- -----------------
Total assets 2,252,149 1,963,509
=============== =================
Short-term liabilities
Short-term debt 13 1,313,988 523,916
Trade accounts payable 49,870 40,095
Other current liabilities 76,476 63,906
Accruals and deferred revenue 14 233,402 266,118
-------------- -----------------
Total short-term liabilities 1,673,736 894,035
-------------- -----------------
Long-term liabilities
Long-term debt 13 33,345 531,284
Deferred tax provision 236,425 226,694
Other long-term liabilities 15 78,045 102,344
-------------- -----------------
Total long-term liabilities 347,815 860,322
-------------- -----------------
Total liabilities and provisions 2,021,551 1,754,357
-------------- -----------------
Minority interest 23,800 8,817
-------------- -----------------
Shareholders' equity
Share capital 100,000 100,000
Treasury shares 4,000 4,000
Retained earnings 102,798 96,335
-------------- -----------------
Total shareholders' equity 206,798 200,335
-------------- -----------------
Total liabilities and shareholders' equity 2,252,149 1,963,509
============== =================
-7-
</TABLE>
<PAGE>
Cablecom Holding AG, Frauenfeld
Consolidated cash flow statement
(in CHF thousands)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Income before income taxes and minority interest 57,023 91,769
Adjustments for:
Depreciation and amortization 161,032 139,958
Gain on sale of investments (5,124) (57,745)
Financial expense 34,152 35,705
Financial income (20,472) (2,481)
Loss on sale of fixed assets 65 4,441
Increase/(decrease) in provisions (31,424) 13,669
------------- -------------
195,252 225,316
(Increase)/decrease in trade accounts receivable 12,299 (21,581)
Increase in inventories (22,442) (3,690)
(Increase)/decrease in other current assets (8,856) 1,592
Increase in trade accounts payable 7,704 9,208
Increase/(decrease) in accruals and deferred revenue (42,465) 36,833
Increase in other current liabilities 10,729 9,739
------------- -------------
Cash generated from operations 152,221 257,417
Dividends received 1,174 527
Interest received 272 1,406
Interest paid (31,952) (33,785)
Income taxes paid (17,605) (15,497)
------------- -------------
Net cash provided by operating activities 104,110 210,068
------------- -------------
Purchase of property, plant and equipment (200,436) (167,946)
Acquisition of businesses, net of cash acquired (98,930) (28,360)
(Purchase)/sale of securities 2,112 (2,143)
Investments in other intangible assets (4,800) (3,603)
Proceeds from sale of property, plant and equipment 467 256
Proceeds from sale of investments 9,755 77,600
(Increase)/decrease in other non-current assets (8,927) (1,180)
------------- -------------
Net cash used in investing activities (300,759) (125,376)
------------- -------------
(Repayment)/issuance of short-term debt 278,424 (36,685)
Repayment of long-term debt (90,896) (17,858)
Dividend paid (9,600) (9,687)
------------- -------------
Net cash from financing activities 177,928 (64,230)
------------- -------------
Net (decrease) / increase in cash and cash equivalents (18,721) 20,462
Cash and cash equivalents at start of year 32,926 12,464
------------- -------------
Cash and cash equivalents at end of year 14,205 32,926
============= =============
-8-
</TABLE>
<PAGE>
Cablecom Holding AG, Frauenfeld
Consolidated statement of shareholders' equity
(in CHF thousands)
<TABLE>
<CAPTION>
Reserve for Retained Total
Share capital own shares earnings equity
<S> <C> <C> <C> <C>
- ----------------------------------------- --------------- --- -------------- -- ------------- --- -------------
As at 1 January 1998 100,000 4,000 43,791 147,791
Goodwill (12,183) (12,183)
Negative goodwill 1,313 1,313
Net income for the year - - 73,115 73,115
Dividends - - (9,687) (9,687)
Translation adjustments - - (14) (14)
- ----------------------------------------- --------------- --- -------------- -- ------------- --- -------------
As at 31 December 1998 100,000 4,000 96,335 200,335
Effect of eliminating intercompany
profit for the first time (6,873) (6,873)
Goodwill (13,798) (13,798)
Net income for the year - - 36,720 36,720
Dividends - - (9,600) (9,600)
Translation adjustments - - 14 14
- ----------------------------------------- --------------- --- -------------- -- ------------- --- -------------
As at 31 December 1999 100,000 4,000 102,798 206,798
========================================= =============== === ============== == ============= === =============
As at 31 December 1999 share capital comprises 100,000 registered shares with a
par value of CHF 1,000.
Cablecom acquired 63.2% of Swiss Online AG in July 1998 for CHF 23,400k. The
goodwill arising on the acquisition of CHF 12,183k was recorded directly to
equity in 1998. In 1999, Cablecom acquired a further 26.8% of Swiss Online AG.
The goodwill arising on this acquisition of CHF 10,791k was recorded directly to
equity (see Note 16). In addition there were other acquisitions during 1999 that
resulted in goodwill of CHF 3,007k (see Note 17).
According to the Swiss Accounting and Reporting Recommendations (ARR) no 2
paragraph 22, intercompany profits do not have to be eliminated if the internal
transfer prices are at market values and the elimination of such profits
requires unreasonable effort or expense. In 1998, Cablecom did not eliminate
intercompany profits, as the systems in order to determine such profits were not
in place. As described in Note 20, the shareholders of Cablecom entered into an
agreement to sell all of the assets and liabilities of Cablecom Group to NTL
Incorporated. The financial statements of Cablecom Holding AG were filed by NTL
Incorporated with the US Securities and Exchange Commission. These statements
included a reconciliation from Swiss ARR to US GAAP. Under US GAAP all
intercompany profits must be eliminated. In order to produce this information,
Management had to implement appropriate systems and procedures. In 1999
Cablecom, therefore, eliminated its intercompany profits and recorded the
cumulative effect of CHF 6,873k, net of deferred taxes of CHF 1,938k, against
opening retained earnings.
</TABLE>
-9-
<PAGE>
Notes to the consolidated financial statements
1 DESCRIPTION OF BUSINESS
Cablecom Holding AG and its subsidiaries (referred to as "Cablecom") is the
principal provider of Cable TV services in Switzerland, offering a comprehensive
range of services primarily to residential customers. Cablecom's major lines of
business are cable and digital television, internet services, provision of
network systems and consumer electronics. Cablecom Holding AG is a stock
corporation incorporated in Switzerland, domiciled in Frauenfeld.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements of Cablecom have been prepared under the
historical cost convention and in accordance with the Swiss Accounting and
Reporting Recommendations (Swiss ARR) and in conformity with the legal
provisions of the Swiss Code of Obligations. All figures in the consolidated
financial statements are quoted in thousand Swiss francs.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Although these
estimates are based on management's best knowledge of current events and actions
Cablecom may undertake in the future, actual results ultimately may differ from
those estimates.
Principles of consolidation
The consolidated financial statements of Cablecom include the operations of
Cablecom Holding AG and all its direct and indirect subsidiaries which Cablecom
Holding AG controls by more than 50 percent of votes.
Material investments and joint ventures where Cablecom exercises significant
influence but does not have control are accounted for using the equity method.
Under the equity method, investments in affiliated companies are presented at
their cost at date of acquisition adjusted for Cablecom's subsequent share in
earnings and losses. Investments in which Management intends to dispose are
accounted for using the cost method.
-10-
<PAGE>
Investments in which Cablecom's interest is less than 20 percent are recorded at
cost less appropriate allowances in the case of an impairment in value.
A schedule with all significant subsidiaries and investments in affiliated
companies is presented in Note 18.
Subsidiaries and investments acquired or disposed of during the year are
included in the consolidated financial statements in the year of acquisition and
excluded after the date of sale respectively.
All intercompany balances and transactions are eliminated on consolidation. It
was Cablecom's policy not to eliminate intercompany profits on consolidation
prior to 1999. In 1999 Cablecom eliminated intercompany profits and recorded the
cumulative effect of this change in accounting policy against opening retained
earnings (see consolidated statement of shareholders' equity).
Significant balances and transactions with investments and joint ventures
accounted for using the equity method are separately disclosed as items with
affiliated companies.
Foreign currency translation
Transactions denominated in foreign currencies are recorded at the rate of
exchange prevailing at the dates of transaction, or at a rate that approximates
that rate. At the end of the accounting period the unsettled balances in foreign
currency receivables and liabilities are valued at the rate of exchange
prevailing at balance sheet date, with resulting exchange rate differences
charged to income.
Assets and liabilities of subsidiaries and affiliated companies accounted for
using the equity method reporting in currencies other than Swiss francs are
translated at the rates of exchange prevailing at balance sheet date. Income,
expenses and cash flows are translated at the average exchange rates for the
period. Translation gains and losses are recorded directly to retained earnings.
Cash and cash equivalents
Cash includes petty cash, cash at banks and cash on deposit. Cash equivalents
include term deposits with the Swiss Post and other financial institutions, as
well as short-term money market investments with original maturity dates of
three months or less.
-11-
<PAGE>
Trade accounts receivable
Trade accounts receivable are recorded at nominal value less an allowance for
receivables whose collection is considered uncertain.
Inventories
Inventories consist primarily of consumer equipment for resale and supplies used
in constructing and maintaining the network. Inventories are valued at the lower
of cost and net realisable value using the weighted average method. Allowances
are made for obsolete and slow-moving items.
Treasury stock
Treasury stock is recorded under investments at the acquisition cost. A reserve
for own shares is recorded within shareholders' equity at nominal value.
Property, plant and equipment
Property, plant and equipment are recorded at historic cost less accumulated
depreciation. Depreciation expense is recognized on a straight-line basis over
the estimated useful life of the assets as follows:
Communication equipment
Communication network 16 years
Backbone 6 - 20 years
Other communication equipment 3 - 6 years
Other tangible assets
Real estate, primarily office buildings 33 - 50 years
Other tangible assets 3 - 6 years
Goodwill and negative goodwill
The excess of the purchase price of acquisitions and the fair value of net
tangible and intangible assets acquired is classified as goodwill and is offset
against shareholders' equity at the time of acquisition.
When the purchase price of the acquisition is less than the fair value of net
assets acquired, the difference is recorded as negative goodwill and as an
increase of shareholders' equity.
-12-
<PAGE>
Intangible assets
Intangible assets, which comprise primarily software acquired from third
parties, are capitalized and amortized over their estimated useful life, between
3 and 5 years.
Deferred taxes
Deferred income tax is provided, using the liability method, for all temporary
differences arising between the tax bases of assets and liabilities and their
carrying values for financial reporting purposes. Currently enacted tax rates
are used to determine the deferred tax liability or asset.
In applying purchase accounting for business combinations, at the date of
acquisition Cablecom records a deferred tax liability or asset on the difference
between the fair value and the tax basis of assets acquired.
Deferred tax assets relating to the carry forward of unused tax losses are
recognized to the extent that it is probable that future taxable profit will be
available against which the unused tax losses can be utilised.
Revenue recognition and deferred revenue
Revenue includes all sales of goods and services, net of any value-added taxes,
rebates and discounts. Revenue is recognized when goods are delivered or
services are rendered. Subscription revenue, which is generally invoiced in
advance on an annual basis, is recognized rateably over the year. Annual
subscriptions received in advance are recorded as deferred revenue.
Changes in inventory and capitalized costs
Cablecom's consolidated income statement is prepared on the total cost basis
commonly used in Switzerland. Costs to be capitalized and expensed in future
periods, such as costs capitalized on construction projects, are classified in
the consolidated income statement as revenues with a corresponding amount
included in expenses such that the net effect is zero.
Employee benefit plans
Cablecom maintains several retirement plans covering all of its employees,
including its executive officers. In addition to retirement benefits, Cablecom
provides benefits on the death or long term disability of its employees.
Cablecom retirement plans are structured according to the principles of the
Swiss Occupational Benefits Law (BVG) and are substantially identical to the BVG
program except that Cablecom plans also cover salaries above the salary limit of
the BVG. Cablecom and its employees pay retirement contributions, which are
defined as a percentage of the employees covered salaries, into the pension
plans. The plans are considered to be defined benefit plans and the
contributions which Cablecom is called upon to pay in respect of a particular
period are recorded as an expense in that period. The Swiss Institute of
Certified Accountants and Tax Consultants has issued Accounting and Reporting
Recommendation No. 16 "Employee Benefit Obligations". Under this standard,
pension expense will be actuarially determined. This standard will be required
to be adopted for periods beginning on January 1, 2000. Management has not
determined the effect of the new standard.
-13-
<PAGE>
Financial derivatives
Derivative transactions have been undertaken for purposes of hedging variable
interest rate loans. Cablecom has entered into interest rate swaps and caps,
where the variable interest rates payable on the loans can be exchanged for
fixed interest rates. The premium paid for the interest rate caps is expensed
over the life of the cap.
Cash flow statement
The cash flow statement presented within the financial statements conforms with
International Accounting Standards No 7.
3 REVENUE
(in CHF thousands) 1999 1998
------------------ -----------------
Cable and digital television 351,977 346,238
Internet 32,232 32,404
Systems 76,395 67,548
Consumer electronics 118,668 118,723
------------------ -----------------
Total revenue 579,272 564,913
================== =================
Revenue from consumer electronics comprises the sale of electronic goods from
Cablecom's retail outlets throughout Switzerland. Goods purchased for the sale
of consumer electronics is CHF 57,964k in 1999 (1998: CHF 56,766k)
Revenue from systems comprises primarily services provided for network design
and build.
4 GAIN ON SALE ON INVESTMENTS
During 1999, Cablecom sold its investment in IRPSA for CHF 9,755k, realizing a
gain on sale of CHF 5,124k. In 1998, Cablecom sold its 33.3% investment in
Gvanim Cable Ltd for CHF 71,817k, realizing a gain on sale of CHF 55,885. In
addition, Cablecom sold its 100% investment in Valvision SA, France for CHF
5,783k, realizing a gain on sale of CHF 1,860k. Cablecom historically recorded
these investments at cost rather than equity, as it was Management's intention
from the date of acquisition to dispose of these investments.
5 FINANCIAL INCOME
Included within financial income is interest income from non-consolidated
companies of CHF 145k in 1999 (1998: CHF 132k) and dividends from
non-consolidated companies of CHF 673k in 1999 (1998: CHF 527k) (see Note 12).
Included within financial income in 1999 is the repayment of a loan to Valvision
SA, which was sold in 1998, of CHF 14,092k which was previously written off.
Also included within financial income in 1999 is the release of a provision of
CHF 3,800k on Cablecom's investment in Balcab AG. During 1999, Cablecom acquired
all the remaining shares of Balcab AG (see Note 17).
6 FINANCIAL EXPENSE
Included within financial expense is interest payable to shareholders of CHF
9,730k in 1999 (1998: CHF 9,132k).
-14-
<PAGE>
7 INCOME TAX EXPENSE
(in CHF thousands) 1999 1998
--------------- --------------
Current tax expense 25,923 25,513
Deferred tax credit (6,075) (7,169)
--------------- --------------
Total income tax expense 19,848 18,344
=============== ==============
Taxable income in Switzerland is allocated among the 26 cantons, each canton has
a different tax rate. Cablecom's weighted average statutory tax rate for Federal
and Cantonal taxes, which is based on the relationship between the income earned
in the canton and the corresponding tax rate for that canton, is 22%. The
primary difference between the statutory rate and the effective rate is
attributable to various expenses that are not deductible for tax purposes and
net operating losses of subsidiaries which cannot be recognised.
The deferred tax liability is primarily attributable to differences between the
financial statement basis and tax basis of property, plant and equipment.
At December 31, 1999, certain subsidiaries of Cablecom had net operating loss
carryforwards of CHF 52,031k, representing a contingent deferred tax asset of
CHF 11,453k. The majority of the operating loss carryforwards expire in 2006.
Management does not believe that it is probable that it will be able to utilize
these loss carryforwards and no asset has been recorded.
8 INVENTORIES
(in CHF thousands) 31.12.1999 31.12.1998
---------------- ---------------
Raw material and supplies 34,657 24,320
Work in progress 23,638 11,046
---------------- ---------------
Total inventories 58,295 35,366
================ ===============
-15-
<PAGE>
9 OTHER CURRENT ASSETS
(in CHF thousands) 31.12.1999 31.12.1998
----------------- -----------------
Receivables from affiliated companies 0 754
Other receivables 17,562 15,375
Prepaid expenses 17,147 7,856
----------------- -----------------
Total other current assets 34,709 23,985
================= =================
10 PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
(in CHF thousands) Communication Other Total
equipment tangible tangible
Real estate assets assets
------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Historical cost at December 31, 1998 52,829 1,842,401 117,800 2,013,030
Accumulated depreciation (4,113) (351,129) (71,906) (427,148)
------------- -------------- ------------ -------------
Net book value at December 31, 1998 48,716 1,491,272 45,894 1,585,882
============= ============== ============ =============
Historical cost at December 31, 1999 65,431 2,269,818 151,811 2,487,060
Accumulated depreciation (5,858) (476,744) (98,236) (580,838)
------------- -------------- ------------ -------------
Net book value at December 31, 1999 59,573 1,793,074 53,575 1,906,222
============= ============== ============ =============
The fire insurance value of the tangible assets was CHF 272,355k as at December
31, 1999 (1998: CHF 257,634k). Only the technical equipment located in the head
stations is insured; the cable and ducts are not covered by insurance.
</TABLE>
-16-
<PAGE>
11 INVESTMENTS
The investments of CHF 8,948k comprise several insignificant investments at
December 31, 1999. At December 31, 1998, investments of CHF 39,649k comprised
Balcab AG (41.1%), IRPSA (48%) and several insignificant investments.
During 1999 Cablecom acquired all the remaining shares of Balcab AG (see Note
17). In addition, Cablecom sold its shares in IRPSA in 1999 (see Note 4).
12 OTHER NON-CURRENT ASSETS
(in CHF thousands) 31.12.1999 31.12.1998
----------------- --------------
Treasury shares 13,098 13,098
Loans to non-consolidated companies (see Note 5) 760 4,060
Other non-current assets 1,824 1,331
----------------- --------------
Total other non-current assets 15,682 18,489
================= ==============
13 DEBT
(in CHF thousands) 31.12.1999 31.12.1998
--------------- --------------
Short-term
Bank overdrafts 16,930 94,916
Bank debt 800,015 429,000
Shareholders loans 497,043 0
---------------- ----------------
Total short-term debt 1,313,988 523,916
================ ================
The interest rate on bank overdrafts outstanding was between 1.7 and 2.6% in
1999 (1998: between 1.7 and 2%).
Bank debts of CHF 575,000k outstanding as at December 31, 1999 are due for
repayment on the closing date of the sale of Cablecom to NTL Inc., which is
planned for the first half of 2000.
-17-
<PAGE>
The remaining bank debts of CHF 225,000k outstanding at December 31, 1999 are
due for repayment during the first quarter of 2000. The interest rate on these
loans is based on LIBOR and was between 2 and 2.8% during 1999 (1998:
approximately 2%).
Cablecom has loan agreements with its current shareholders totaling CHF
497,043k. In most cases there are no repayment terms specified in the
agreements. These loans will become due on the closing of the sale of Cablecom
to NTL Inc., which is planned for the first half of 2000 (see Note 20). The
interest on such loans is based on LIBOR and was between 2.1 and 2.3% in 1999
(1998: approximately 1.7%).
31.12.1999 31.12.1998
---------------- ----------------
Long-term
Bank loans 33,345 87,284
Shareholders' loans 0 444,000
---------------- ----------------
33,345 531,284
================ ================
Maturity of long-term debt
Within 1 - 2 years 600 87,284
Within 2 - 3 years 30,000 0
Over 3 years 2,745 0
Shareholders' loans (no contractual due date) 0 444,000
---------------- ----------------
Total long-term debt 33,345 531,284
================ ================
The interest on the long-term bank loans was approximately 2.3% in 1999 (1998:
2.4%).
In 1997, OTC Interest Swaps with a four year term worth a total of CHF 400,000k
were acquired. In 1998, these contracts were extended by one year and a new
contract was taken out for an amount of CHF 100,000k with a five year duration.
Under the terms of these contracts, variable interest rates are exchanged for
fixed rates. The fixed interest rate is 2.9%. The difference between the
variable and the fixed rates is recognized in income as incurred.
-18-
<PAGE>
Interest caps (OTC options) worth a total of CHF 75,000k and CHF 25,000k were
purchased in 1995 and 1996 respectively. The average strike rate of these caps
is 5 1/8% and they expire in the year 2000. The premium paid of CHF 1,900k is
being expensed over the life of the cap.
As at 31 December 1999, property, plant and equipment worth CHF 19,572k (1998:
CHF 23,071k), accounts receivable worth CHF 400k (1998: CHF 400k), and
securities worth CHF 0k (1998: CHF 2,123k) had been pledged as security for bank
loans.
14 ACCRUALS AND DEFERRED REVENUE
(in CHF thousands) 31.12.1999 31.12.1998
---------------- ---------------
Deferred revenue 186,189 222,407
Accruals 47,213 43,711
---------------- ---------------
Total accruals and deferred revenue 233,402 266,118
================ ===============
Deferred revenue at December 31, 1999 and 1998 comprises subscription revenue,
which is generally invoiced annually in December in advance and is released into
income rateably over the year.
15 OTHER LONG-TERM LIABILITIES
(in CHF thousands) 31.12.1999 31.12.1998
---------------- ---------------
Provision on non-consolidated companies 0 10,007
Provision for income taxes 45,317 44,183
Other long-term liabilities 32,728 48,154
---------------- ---------------
Total long-term liabilities 78,045 102,344
================ ===============
16 ACQUISITION OF A FURTHER 26.8% OF SWISS ONLINE AG
In July 1998, Cablecom acquired 63.2% of the shares of Swiss Online AG, one of
the largest Internet Service Providers in Switzerland, for approximately CHF
23,400k in cash. Swiss Online was consolidated from January 1, 1998 in
accordance with the purchase method. The goodwill arising on this acquisition of
CHF 12,183k was charged directly to equity.
-19-
<PAGE>
In 1999, Cablecom acquired a further 26.8% of the shares of Swiss Online AG for
CHF 10,791k in cash. This acquisition was accounted for using the purchase
method. The entire purchase price was allocated to goodwill (see statement of
shareholders' equity).
The remaining 10% of the shares of Swiss Online AG were acquired for CHF 3,924k
in January 2000.
17 ACQUISITION OF MAJOR SUBSIDIARIES
In July 1999, Cablecom acquired 100% of the share capital of Kilchenmann Holding
AG, a cable TV operator in the Canton of Berne, for CHF 9,500k in cash.
Kilchenmann was consolidated from end of July 1999 in accordance with the
purchase method.
In October 1999, Cablecom acquired the remaining 59% of the share capital of
Balcab AG, a cable TV operator in Basle, for CHF 39,500k in cash. The
acquisition was financed by loans provided by Cablecom's shareholders. Balcab
was consolidated from October 1, 1999 in accordance with the purchase method.
In October 1999, Cablecom acquired 66.7% of the share capital of Sitel SA for
CHF 29.2 million in cash. Sitel SA offers cable TV and certain telecommunication
services in the Canton of Vaud. Sitel was consolidated from October 1, 1999 in
accordance with the purchase method.
18 GOODWILL
It is Cablecom's policy to offset goodwill and negative goodwill arising on
acquisitions directly against shareholders' equity. If the goodwill and negative
goodwill had been capitalized and amortized over its useful life of 5 years, net
income for 1999 would have decreased by CHF 864k and total assets would have
increased by CHF 13,298k at December 31, 1999.
-20-
<PAGE>
19 Significant subsidiaries
Business Share Capital Conso-
capital owned lidation
Company in 1,000 method
- ---------------------------------- --------- ----------- -------- ----------
Balcab 2) T CHF 22,080 100 % F
Cablecom AG T CHF 12,000 100 % F
Cablecom (Bern) AG T CHF 1,000 100 % F
Cablecom Engineering AG S CHF 2,000 100 % F
Cablecom Kabelkommunikation
GmbH T ATS 500 100 % F
Cablecom Media AG T CHF 1,000 100 % F
Cablecom (Mittelland) AG T CHF 9,100 100 % F
Cablecom (Ostschweiz) AG T CHF 6,300 100 % F
Cablecom (Suisse Romande) SA T CHF 6,000 100 % F
Cablecom (Ticino) SA T CHF 10,000 100 % F
Cablecom (Zentralschweiz) AG T CHF 4,510 100 % F
Cable Signal Olten AG 2) T CHF 500 100 % F
Coditel SA T CHF 4,500 100 % F
Kilchenmann Holding AG 1) FH CHF 800 100 % F
Rediffusion AG E CHF 5,000 100 % F
Rera AG Immobiliengesellschaft R CHF 3,000 100 % F
Sitel SA 1) T CHF 20,580 67 % F
Swiss Online AG 2) I CHF 6,667 90 % F
Tinet SA 1) I CHF 800 80 % F
Video 2000 SA T CHF 1,000 60 % F
Abbreviations
T = Cable Television
I = Internet
S = Systems
E = Consumer Electronics
FH = Finance Company/ Holding
R = Real estate company
F = Full consolidation by purchase method
ATS = Austrian schillings
1) These shareholding interests were acquired in 1999
2) These shareholdings interests were increased as follows in the year under
review:
Balcab (see Note 17) from 41% to 100%
Cable Signal Olten AG from 67% to 100%
Swiss Online AG from 63% to 90%
-21-
<PAGE>
20 SALE OF CABLECOM TO NTL INCORPORATED
In December 1999, the shareholders' of Cablecom entered into an agreement to
sell all of the assets and liabilities of the Cablecom group to NTL
Incorporated, a public company in the United States, for approximately CHF 5,400
million. The net purchase price is subject to adjustment and the transaction is
expected to close in the first half of 2000.
21 DIFFERENCES BETWEEN SWISS AND UNITED STATES ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in accordance with
Swiss Accounting and Reporting Recommendations (Swiss ARR), which differ in
certain respects from generally accepted accounting principles in the United
States (U.S. GAAP). Application of U.S. GAAP would have affected the balance
sheet as of December 31, 1999 and 1998 and net income for each of the years in
the two-year period ended December 31, 1999 to the extent described below. This
information has been presented in accordance with Item 17 of Form 20-F.
Information about differences in the cash flow statement are not presented as
Cablecom's cash flow statement has been prepared in accordance with
International Accounting Standards No. 7.
-22-
<PAGE>
RECONCILIATION FROM SWISS ARR TO U.S. GAAP
The following schedule illustrates the significant adjustments to reconcile net
income in accordance with Swiss ARR to the amounts determined in accordance with
U.S. GAAP for each of the two years ended December 31, 1999.
<TABLE>
<CAPTION>
(CHF in thousands) 1999 1998
------------------ ------------------
<S> <C> <C>
Net income according to Swiss ARR 36,720 73,115
------------------ ------------------
U.S. GAAP adjustments
a) Deferred installation revenues (9,779) (11,252)
b) Elimination of unrealized intercompany profits - (6,525)
c) Capitalization of interest 1,397 1,136
d) Restructuring and other provisions (27,196) 7,007
e) Employee pensions 2,916 3,916
f) SECE purchase accounting - goodwill amortization (15,688) (15,688)
f) SECE purchase accounting - depreciation expense 21,362 21,362
g) Swiss Online purchase accounting 1,508 (4,095)
h) Investments and Balcab purchase accounting (1,385) (2,082)
i) Negative goodwill 922 922
k) Goodwill (188) -
l) Deferred income taxes 2,222 (3,645)
------------------ ------------------
Total U.S. GAAP adjustments (23,909) (8,944)
------------------ ------------------
Net income under U.S. GAAP 12,811 64,171
================== ==================
-23-
</TABLE>
<PAGE>
The following schedule illustrates the significant adjustments necessary to
reconcile shareholders' equity in accordance with Swiss ARR to the amounts in
accordance with U.S. GAAP as at December 31, 1999 and 1998.
<TABLE>
<CAPTION>
(in CHF thousands) 31.12.99 31.12.98
------------------ ------------------
<S> <C> <C>
Shareholders' equity according to Swiss ARR 206,798 200,335
------------------ ------------------
U.S. GAAP adjustments
a) Deferred installation revenues (41,121) (31,342)
b) Elimination of unrealized intercompany profits - (8,811)
c) Capitalization of interest 3,322 1,925
d) Restructuring and other provisions 5,974 33,170
e) Employee pensions 16,123 13,207
f) SECE purchase accounting - goodwill 200,016 215,704
f) SECE purchase accounting - property plant and equipment (272,364) (293,726)
f) SECE purchase accounting - investments - (5,452)
g) Swiss Online purchase accounting 20,387 8,088
h) Investments and Balcab purchase accounting (10,989) (4,152)
i) Negative goodwill (12,084) (13,006)
j) Treasury shares - other non-current assets (13,098) (13,098)
k) Goodwill 2,819 -
l) Deferred income taxes 62,723 62,439
------------------ ------------------
Total U.S. GAAP adjustments (38,292) (35,054)
------------------ ------------------
Shareholders' equity according to U.S. GAAP 168,506 165,281
================== ==================
</TABLE>
A) DEFERRED INSTALLATION REVENUES
Cablecom receives a fee for connecting customers to the network. Under Swiss
ARR, fees received from installation are recognized as revenue in the period
received. Under U.S. GAAP, Cablecom follows the guidance prescribed by SFAS 51 -
"Financial Reporting by Cable Television Companies." Under this standard,
revenue from installation is recognized to the extent of direct selling costs
incurred. The remainder is deferred and amortized over the estimated average
period that the subscribers are expected to remain connected.
-24-
<PAGE>
The amount of revenue that was deferred as well as the amount that was reversed
is presented below:
Originating that Reversing amounts
is deferred previously deferred Net deferral
Beginning of 1998 20,090
1998 13,473 2,221 11,252
1999 12,800 3,021 9,779
------------
41,121
============
B) ELIMINATION OF UNREALIZED INTERCOMPANY PROFITS
In 1998, under Swiss ARR, Cablecom capitalized unrealized profits from
intercompany charges relating to the construction of property, plant and
equipment. Under U.S. GAAP, intercompany profits are eliminated in
consolidation. For U.S. GAAP purposes, unrealized gains totaling CHF 7,127k for
the year ended December 31, 1998 were eliminated from changes in inventory and
capitalized cost. Property, plant and equipment would have been reduced by CHF
8,811k (net of accumulated depreciation of CHF 828k) as of December 31, 1998 and
depreciation expense would have been reduced by CHF 602k for the year ended
December 31, 1998. In 1999, as indicated in the statement of shareholders'
equity, Cablecom changed its policy under Swiss ARR and eliminated intercompany
profits and recorded the cumulative effect of CHF 6,873k, net of deferred taxes
of CHF 1,938k, against opening retained earnings.
C) CAPITALIZATION OF INTEREST
As allowed by Swiss ARR, Cablecom does not capitalize interest. U.S. GAAP
requires the interest cost incurred during the construction of qualifying assets
to be capitalized and amortized over the life of the asset. For U.S. GAAP
purposes, Cablecom would have reduced financial expense for capitalized interest
by CHF 1,631k and CHF 1,267k for the years ended December 31, 1999 and 1998,
respectively. Property, plant and equipment would have increased by CHF 3,322k
and CHF 1,925k (net of accumulated depreciation of CHF 418k and CHF 184k) as of
December 31, 1999 and 1998, respectively and depreciation expense would have
increased CHF 234k and CHF 131k for the periods the years ended December 31,
1999 and 1998, respectively.
-25-
<PAGE>
D) RESTRUCTURING AND OTHER PROVISIONS
The guidance for determining the period that a provision for restructuring or
other items should be recorded under Swiss ARR is not as specific as under U.S.
GAAP. Swiss ARR utilize the prudence concept of recognizing losses. These
concepts will generally result in the recognition of a loss before it would be
recognized under U.S. GAAP. In addition, the criteria to determine the period of
recognition is more flexible under Swiss ARR compared to U.S. GAAP. Cablecom
recognized restructuring charges and other provisions under Swiss ARR before
such charges would meet the criteria for recognition as a liability under U.S.
GAAP. In determining the U.S. GAAP information, Cablecom recorded the liability
and the expense using the guidance in EITF 94-3 and other appropriate standards.
Included within financial income in 1999 under Swiss ARR is the repayment of a
loan to Valvision of CHF 14,092k, which was previously written off. This loan
had not been written off under U.S. GAAP, and, accordingly, financial income
would have decreased. Also included within financial income in 1999 under Swiss
ARR is the release of a provision of CHF 3,800k on Cablecom's investment in
Balcab AG. No such provision was recorded under U.S. GAAP (see Note 5). In 1999
Cablecom recorded a gain of CHF 5,124k on the sale of its investment in IRPSA
under Swiss ARR (see Note 4). CHF 3,067k of the gain recorded related to the
release of provisions. No such provision had been recorded under U.S. GAAP.
E) EMPLOYEE PENSIONS
As described in Note 2, Cablecom recognizes expense as contributions are made to
the plan. These plans would be considered a defined benefit plan under U.S.
GAAP, and would be accounted for in accordance with the provisions of Statements
of Financial Accounting Standards (SFAS) 87 "Employers Accounting for Pensions".
It was not feasible for Cablecom to adopt SFAS 87 at the effective date
indicated in the standard. Accordingly, for purposes of preparing information in
accordance with U.S. GAAP, Cablecom applied a method of adoption that is
acceptable to the U.S. Securities and Exchange Commission. The standard was
adopted effective January 1, 1997 - the first period that U.S. GAAP information
is provided. At this date, Cablecom determined the difference between plan
assets and the projected benefit obligation in accordance with SFAS 87. It
recorded a portion of the transition asset directly to equity based on the ratio
of: (a) the years elapsed between the effective date in the standard and the
adoption date, to (b) the remaining service period of employees expected to
receive benefits as estimated at the adoption date.
-26-
<PAGE>
The primary assumptions used for the SFAS 87 calculations are as follows:
<TABLE>
<CAPTION>
(CHF in thousands) 1999 1998
------------------ ------------------
<S> <C> <C>
Weighted average discount rate 4.00% 3.75%
Rate of increase in future compensation levels 2.00% 2.00%
Expected long-term rate of return of plan assets 5.50% 5.00%
The projected benefit obligation and plan assets are shown below:
(CHF in thousands) 1999 1998
------------------ ------------------
Projected benefit obligation 199,094 197,733
Fair value of plan assets 227,002 216,523
</TABLE>
F) SECE PURCHASE ACCOUNTING
In 1996, Cablecom acquired SECE Group for CHF 691,000k. Under Swiss ARR,
Cablecom did not allocate any of the purchase price to goodwill. Rather, once
the fair value of the purchase price was allocated to other identifiable
tangible and intangible assets, all of the remaining amount was allocated to
property plant and equipment - network. Cablecom further increased the amount
allocated to the network by the amount of the deferred tax liability for the
difference between the values assigned for financial statement purposes under
Swiss ARR and the amount of the tax basis. Under U.S. GAAP, the amount of the
purchase price allocated to the network was based on its fair value. The amount
of the purchase price that exceeded fair value was allocated to goodwill. In
addition, goodwill was increased by the amount the deferred tax liability that
was recorded at the date of the acquisition for the difference in the tax basis
and the basis recorded under U.S. GAAP. Also, the amount allocated to its
investment in Balcab was CHF 5,452k lower under U.S. GAAP. As described in Note
17 Cablecom acquired all of the outstanding shares of Balcab AG during 1999.
This difference in the amount assigned to the investment was taken into
consideration in determining the purchase price allocation (see Note 21 h)).
-27-
<PAGE>
As a result of the differences in the methodology of purchase price allocation,
the amount assigned to property plant and equipment would have decreased by CHF
341,790k and the amount of goodwill would have increased by CHF 251,001k under
U.S. GAAP. The difference between these amounts would be a reduction in the
deferred tax liability. (The tax effect of all differences between Swiss ARR and
U.S. GAAP is included in entry l) below.) Goodwill is amortized over 16 years
under U.S. GAAP. At December 31, 1999, the amount of the adjustment to
accumulated depreciation would have been CHF 69,426k, and the amount of the
adjustment to accumulated amortization of goodwill would have been CHF 50,985k.
G) SWISS ONLINE PURCHASE ACCOUNTING
Cablecom acquired a 63.2% interest in Swiss Online (SOL) in July 1998 and a
further 26.8% during 1999. Under Swiss ARR, Cablecom consolidated 100% of SOL
since January 1, 1998. Cablecom recorded the amount allocated to goodwill of CHF
12,183k in 1998 and CHF 10,791k in 1999 as a reduction of retained earnings.
Under U.S. GAAP, these amounts would have been recorded as an asset and
amortized over a useful life of 5 years. The amount allocated to goodwill in
1998 would have been increased by CHF 5,638k for intangible assets, primarily
software development costs, that would not be capitalized under US GAAP. This
increase in goodwill would have been reduced by CHF 2,570k relating to the
inclusion of operating results prior to the date of acquisition. Under U.S.
GAAP, goodwill would have been CHF 20,387k and CHF 13,726k (net of accumulated
amortization of CHF 5,655k and CHF 1,525k)at December 31, 1999 and 1998,
respectively. Amortization expense would have been CHF 4,130k and CHF 1,525k in
1999 and 1998, respectively. In addition, amortization expense under Swiss ARR
includes a write off of intangible assets of CHF 5,638k in 1999 that would not
be recognized under U.S. GAAP as the asset was never recorded. Accordingly, U.S.
GAAP income is increased by this amount.
-28-
<PAGE>
H) INVESTMENTS
In 1998 and through to the acquisition of the remainder of the outstanding
shares of Balcab AG in October 1999, Cablecom accounted for this investment
under the cost method. Under the cost method, dividends are recorded as income
when declared. Under the equity method, Cablecom would recognize in income its
pro rata share of income from Balcab after adjusting interest income on loans to
Balcab. Because the difference between these two amounts was not material, no
adjustments were made under Swiss ARR from autumn 1996, when Cablecom acquired a
minority interest in Balcab, to October 1999, when Cablecom acquired the
remainder of the outstanding shares. However, until October 1999, property plant
and equipment at Balcab was depreciated over a 30-year concession period under
Swiss ARR. As from October 1999, these assets are being depreciated over 16
years, which represents the useful life of the underlying assets. Under U.S.
GAAP, these assets would have always been depreciated over their shorter useful
life. Balcab was consolidated from October 1, 1999 in accordance with the
purchase method. Under U.S. GAAP, property plant and equipment was reduced by
the amount of the difference between the book value of the assets using a useful
life of 30 years compared to 16 years. As noted in Note 21 f) the amount
allocated to Cablecom's investment in Balcab was CHF 5,452k lower under U.S.
GAAP. This amount was adjusted against property, plant and equipment in the
purchase price allocation.
Under U.S. GAAP, IRPSA and Gvanim would be accounted for under the equity method
and Valvision would be accounted for under the consolidation method. The
difference in net income for 1998 compared to the cost method used under Swiss
ARR is not material. The effect on the major balance sheet items at December 31,
1998 of not consolidating Valvision would also be immaterial. All these
investments had been disposed off by December 31, 1999.
I) NEGATIVE GOODWILL
Under Swiss ARR, when the purchase price of an acquisition is less than the fair
value of the net assets acquired, the difference is recorded as an increase in
shareholders' equity. Under U.S. GAAP, Cablecom would have reduced the amount of
the property plant and equipment, and depreciation expense would have been
reduced over the life of the asset. The total amount of the reduction in
property plant and equipment would have been CHF 14,768k at December 31, 1999
and 1998. Accumulated amortization would have been CHF 2,684k and CHF 1,762k as
at December 31, 1999 and 1998, respectively.
J) TREASURY SHARES
Cablecom records the shares held in treasury as an asset at the amount paid
under Swiss ARR. Under U.S. GAAP, Cablecom would record the amount paid to
acquire its own shares as a reduction of equity.
-29-
<PAGE>
K) GOODWILL
Under Swiss ARR, goodwill can be offset against shareholders' equity at the time
of acquisition. During 1999, goodwill arising on acquisitions, excluding Swiss
Online which has been included in Note 21 g), amounting to CHF 3,007k was
recorded directly to equity (see statement of shareholders' equity). Under U.S.
GAAP, Cablecom would have recorded the excess of the purchase price over the
fair value of net assets acquired as an asset and amortized this asset over its
estimated life. Amortization expense for 1999 would have been CHF 188k.
L) DEFERRED INCOME TAXES
There are no significant differences between Swiss ARR and U.S. GAAP in the
methodology in accounting for income taxes. Under U.S. GAAP, a valuation
allowance would have been recorded for the deferred tax asset associated with
the loss carryforwards as is was more than likely that it would not be realized.
The adjustment to deferred income taxes is attributable to the other U.S. GAAP
adjustments.
M) LOANS TO SHAREHOLDERS
At December 31, 1998, under Swiss ARR, loans to shareholders in an amount of CHF
444,000k were classified as long-term. These loans did not have stated terms.
Under U.S. GAAP, such loans were reclassified to short-term debt. As part of the
agreement to sell all of the assets and liabilities of the Cablecom group to NTL
Incorporated, it was agreed that these loans would become due on the closing of
the sale, which was in the first quarter of 2000. These loans were therefore
recorded as short-term debt at December 31, 1999 under Swiss ARR.
-30-
<PAGE>
STATEMENT OF COMPREHENSIVE INCOME UNDER U.S. GAAP
SFAS 130 "Reporting Comprehensive Income" established standards for the
reporting and display of comprehensive income and its components. Comprehensive
income includes net income and all changes in equity during the period that
arise from non-owner sources, such as foreign currency items and unrealized
gains and losses on securities available for sale. The additional disclosures
required under U.S. GAAP are as follows:
<TABLE>
<CAPTION>
(CHF in thousands) 1999 1998
------------------ ------------------
<S> <C> <C>
Net income under U.S. GAAP 12,811 64,171
Other comprehensive income, Translation adjustments 14 (14)
------------------ ------------------
Comprehensive income under U.S. GAAP 12,825 64,157
================== ==================
</TABLE>
As the amount of securities held for sale is insignificant, the application of
SFAS 115, which would require Cablecom to record changes in the fair value in
comprehensive income, would not be material.
Cablecom does not maintain information to determine the cumulative amount of the
translation adjustment.
-31-
UNAUDITED PRO FORMA FINANCIAL DATA
The unaudited pro forma financial data presented gives effect to the
completed acquisitions of Diamond Cable Communications in March 1999 and
Cablecom Group in March 2000. The pro forma financial data is based on NTL's
historical financial statements and the historical financial statements of
Diamond and Cablecom. Certain amounts in these historical financial statements
have been reclassified to conform to NTL's presentation. The pro forma financial
data also gives effect to the issue of new NTL preferred stock in March 2000 to
France Telecom and certain commercial banks for an aggregate subscription price
of $1.85 billion used to fund, in part, NTL's acquisition of Cablecom.
The Diamond acquisition has been accounted for using the purchase method of
accounting, in which the assets acquired and liabilities assumed have been
recorded at their fair values. The Cablecom acquisition has been accounted for
in the pro forma financial data using the purchase method of accounting.
Accordingly, the assets acquired and liabilities assumed have been recorded at
their estimated fair values. NTL is unaware of events other than those disclosed
in the unaudited pro forma notes that would require a material change to the
preliminary purchase price allocation. However, a final determination of
necessary purchase accounting adjustments will be made upon the completion of a
study to be undertaken to determine the fair value of certain assets and
liabilities, including intangible assets. The actual financial position and
results of operations will differ, perhaps significantly, from the unaudited pro
forma amounts reflected because of a variety of factors, including access to
additional information, changes in value not currently identified and changes in
operating results between the dates of the unaudited pro forma financial data
and the dates on which the acquisitions take place.
The pro forma financial data does not give effect to the elimination of
transactions between NTL and Cablecom which are not material.
-32-
<PAGE>
The unaudited pro forma condensed combined statement of operations for the
year ended December 31, 1999 gives effect to the acquisitions of Diamond and
Cablecom and issuance of new preferred stock as if they had been consummated on
January 1, 1999. The unaudited pro forma balance sheet at December 31, 1999
gives effect to the acquisition of Cablecom and issuance of new preferred stock
as if they occurred on December 31, 1999.
The pro forma adjustments are based upon available information and
assumptions that NTL believes were reasonable at the time made. The unaudited
pro forma financial data does not purport to present NTL's financial position or
results of operations had the acquisitions occurred on the dates specified, nor
are they necessarily indicative of the financial position or results of
operations that may be achieved in the future. The unaudited pro forma condensed
combined statements of operations do not reflect any adjustments for cost
savings that NTL expects to realize. NTL may incur integration related expenses
not reflected in the pro forma financial information as a result of the
elimination of duplicate facilities, operational realignment and related
workforce reductions. Such costs would generally be recognized as a liability
assumed as of the respective acquisition dates resulting in additional goodwill
if they relate to facilities or workforce previously aligned with Cablecom, and
would be expensed if they relate to facilities or workforce previously aligned
with NTL. The assessment of integration related expenses is ongoing. The pro
forma adjustments reflecting the acquisition of Cablecom are based upon the
assumptions set forth in the notes to the pro forma financial data. No
assurances can be made as to the amount of cost savings or revenue enhancements,
if any, that may be realized.
-33-
<PAGE>
NTL INCORPORATED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(Unaudited)
For the Year Ended December 31, 1999
NTL Diamond Cablecom
(Historical)(Historical)(Historical) Adjustments Pro Forma
---------- ----------- ----------- ----------- ---------
(in millions, except per share data)
REVENUES............. 1,584 $ 29 $ 380 $ -- $ 1,993
Costs and Expenses
Operating
expenses........... 800 10 134 -- 944
Selling, general and
administrative
expenses........... 574 12 104 -- 690
Franchise fees....... 17 -- -- -- 17
Corporate
expenses........... 29 -- -- -- 29
Non-recurring
charges............ 16 14 -- (14) 16
Depreciation and
amortization....... 791 15 103 301(B) 1,210
----- ---- ---- ---- -----
2,227 51 341 287 2,906
----- ---- ---- ---- -----
Operating income
(loss)............. (643) (22) 39 (287) (913)
Other income
(expense)
Interest and other
income............. 556 (39) 3 (5)(D) 515
Interest expense..... (681) (26) (22) (65)(C) (794)
----- ---- ---- ---- -----
Income (loss) before
income taxes....... (768) (87) 20 (357) (1,192)
Income tax benefit
(provision)........ 35 -- (12) -- 23
----- ---- ---- ---- -----
Loss before extra-
ordinary item...... (733) (87) 8 (357) (1,169)
Loss from early
extinguishment of
debt............... (3) -- -- -- (3)
----- ---- ---- ---- -----
Net income (loss)... (736) (87) 8 (357) (1,172)
Preferred stock
dividends.......... (74) -- -- (102)(E) (176)
----- ---- ---- ---- -----
Net income (loss)
available to common
stock.............. $(810) $ (87) $ 8 $ (459) $(1,348)
===== ==== ==== ===== ======
Net (loss) per common
stock -- basic and
fully diluted...... $(6.78) $(10.03)
===== ======
Weighted average
shares
outstanding........ 119 15 134
===== ==== =====
-34-
<PAGE>
NTL INCORPORATED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(Unaudited)
December 31, 1999
NTL Cablecom
(Historical) (Historical) Adjustments Pro Forma
----------- ----------- ----------- ---------
(in millions)
ASSETS:
Current Assets:
Cash, cash equivalents and
securities............. $ 2,942 $ 9 $ (106)(A) $ 2,845
Other current assets...... 377 190 -- 567
------- ------- ------- -------
Total current assets........ 3,319 199 (106) 3,412
Fixed assets, net........... 5,598 1,013 365(A) 6,976
Intangible assets, net...... 2,928 143 2,414(A) 5,485
Other assets, net........... 367 18 -- 385
------- ------- ------- -------
Total assets................ $12,212 $ 1,373 $ 2,673 $16,258
======= ======= ======= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current liabilities:
Other current
liabilities............ $ 974 $ 251 $ -- $1,225
Current portion of
long-term debt and
capital leases......... 83 825 (825)(A) 83
Due to affiliates......... -- -- -- --
------- ------- ------- -------
Total current liabilities... 1,057 1,076 (825) 1,308
Long-term debt.............. 8,798 21 1,674(A) 10,493
Other....................... -- 61 -- 61
Deferred income taxes....... 78 109 80(A) 267
Redeemable preferred stock.. 142 -- 1,850(A) 1,992
Shareholders' equity:
Preferred stock, Common
stock and additional
paid-in capital........ 4,126 -- -- 4,126
Acquired company equity... -- 106 (106) --
Other comprehensive
(loss)................. (2) -- -- (2)
Deficit................... (1,987) -- -- (1,987)
------- ------- ------- -------
2,137 106 (106) 2,137
======= ======= ======= =======
Total liabilities and
shareholders' equity...... $12,212 $ 1,373 $ 2,673 $16,258
======= ======= ======= =======
-35-
<PAGE>
NTL INCORPORATED
NOTES TO THE PRO FORMA FINANCIAL DATA
(in millions, except per share data)
A. Purchase Price and Allocation of Purchase Price:
Cablecom
Proceeds from the issuance of redeemable preferred stock. $ 1,850
Bridge financing (CHF2.7 billion)................. 1,695
Cash on hand...................................... 97
------
Purchase price (CHF5.8 billion)................... 3,642
Net assets at December 31, 1999................... 106
Less: cash on hand................................ (9)
Less: intangible assets........................... (143)
Plus: current and long-term debt.................. 846
------
800
------
Excess of purchase price over net tangible assets acquired $ 2,842
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Preliminary allocation to:
Fixed assets...................................... $ 365
Deferred tax liability............................ (80)
Intangible assets................................. 2,557
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$ 2,842
========
The intangible assets arising from the acquisition of Cablecom may includ
customer lists, license acquisition costs and goodwill. The amount of eac
individual intangible is not currently determinable. The amounts of eac
intangible will be determined based on appraisal and other analyses. Th
amortization period for each may vary, although it is assumed in Pro Form
Adjustment B below, that 10 years is a representative blended amortizatio
period.
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<PAGE>
Cablecom
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B. Depreciation and Amortization
For the year ended December 31, 1999:
Depreciation of fixed asset allocation (over 15
years)......................................... $ 24
Amortization of intangibles (over 2-15 years).... 256
Historical amortization of intangibles........... (4)
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$ 276
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C. Interest Expense
For the year ended December 31, 1999:
Reduction of interest on Cablecom
debt not assumed............................... $(22)
Interest expense on the bridge financing......... 87
-----
Net statement of operations impact............... $ 65
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D. Interest Income
For the year ended December 31, 1999:
Reduction of interest income on cash on hand used
for acquisition.................................... $ (5)
=====
E. Preferred Stock Dividend
Dividends at 5% on the redeemable preferred stock
For the year ended December 31, 1999........... $(102)
=====
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