<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No.
0-25691
NTL (DELAWARE), INC.
(Exact name of registrant as specified in its charter)
(On May 18, 2000, the name of the Registrant was changed from NTL Incorporated
to NTL (Delaware), Inc.)
Delaware 13-4051921
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
110 East 59th Street, New York, New York 10022
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 906-8440
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of the issuer's common stock as of September
30, 2000 was 100.
The Registrant is a wholly-owned subsidiary of NTL Incorporated and there is no
market for the Registrant's common stock. The Registrant meets the conditions
for the reduced disclosure format set forth in General Instruction H(1) (a) and
(b) of Form 10-Q.
<PAGE> 2
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Index
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
------------------------------ ----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
September 30, 2000 and December 31, 1999 ............................................. 2
Condensed Consolidated Statements of Operations-
Three and nine months ended September 30, 2000 and 1999 .............................. 4
Condensed Consolidated Statement of Shareholder's Equity-
Nine months ended September 30, 2000 ................................................. 5
Condensed Consolidated Statements of Cash Flows-
Nine months ended September 30, 2000 and 1999 ........................................ 7
Notes to Condensed Consolidated Financial Statements ................................. 8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition .................................................... 15
PART II. OTHER INFORMATION
------------------------------
Item 6. Exhibits and Reports on Form 8-K ...................................................... 27
SIGNATURES ......................................................................................... 28
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in millions)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(unaudited) (see note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 243.9 $ 2,597.2
Marketable securities -- 344.5
Accounts receivable - trade, less allowance for doubtful
accounts of $94.1 (2000) and $85.6 (1999) 342.3 294.2
Due from affiliates 3,692.0 --
Other 327.0 82.7
--------- ---------
Total current assets 4,605.2 3,318.6
Fixed assets, net 7,016.3 5,597.7
Intangible assets, net 4,886.2 2,927.8
Other assets, net of accumulated amortization
of $77.4 (2000) and $49.4 (1999) 792.4 367.5
--------- ---------
Total assets $17,300.1 $12,211.6
========= =========
</TABLE>
2
<PAGE> 4
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Condensed Consolidated Balance Sheets - continued
(dollars in millions)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(unaudited) (see note)
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 388.9 $ 224.7
Accrued expenses and other 494.3 438.2
Accrued construction costs 143.9 79.8
Interest payable 110.7 71.1
Deferred revenue 238.8 160.8
Due to affiliate 1,811.2 --
Current portion of long-term debt 4.5 82.6
--------- ---------
Total current liabilities 3,192.3 1,057.2
Long-term debt 13,737.2 8,798.0
Commitments and contingent liabilities
Deferred income taxes 193.0 77.7
Minority interests 15.9 --
Redeemable preferred stock - $.01 par value, plus accreted dividends;
less unamortized discount of $2.8 (1999); issued and outstanding
none (2000) and 142,000 (1999) shares -- 141.8
Shareholder's equity:
Series preferred stock - $.01 par value;
authorized none (2000) and 10,000,000 (1999) shares; issued and
outstanding none (2000) and 1,332,000 (1999) shares -- --
Common stock - $.01 par value; authorized 100 (2000) and 400,000,000
(1999) shares; issued and outstanding 100 (2000) and 132,416,000
(1999) shares -- 1.3
Additional paid-in capital 4,157.3 4,125.1
Accumulated other comprehensive (loss) (603.0) (2.1)
(Deficit) (3,392.6) (1,987.4)
--------- ---------
161.7 2,136.9
--------- ---------
Total liabilities and shareholder's equity $17,300.1 $12,211.6
========= =========
</TABLE>
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date.
See accompanying notes.
3
<PAGE> 5
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(dollars in millions)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Residential telecommunications and television $ 339.7 $ 220.3 $ 935.9 $ 585.6
National and international telecommunications 183.3 141.6 549.2 360.2
Broadcast transmission and other 54.3 55.2 164.9 144.9
-------- -------- -------- --------
577.3 417.1 1,650.0 1,090.7
COSTS AND EXPENSES
Operating expenses 266.2 206.8 808.3 536.2
Selling, general and administrative expenses 263.1 144.9 646.5 419.2
Franchise fees -- 7.7 -- 22.3
Other charges 6.0 -- 19.7 --
Corporate expenses 5.6 7.4 25.7 21.1
Depreciation and amortization 319.6 201.9 884.9 533.6
-------- -------- -------- --------
860.5 568.7 2,385.1 1,532.4
-------- -------- -------- --------
Operating (loss) (283.2) (151.6) (735.1) (441.7)
OTHER INCOME (EXPENSE)
Interest income and other, net (7.4) 13.4 38.4 34.1
Interest income from affiliate 88.5 -- 88.5 --
Interest expense (290.3) (186.6) (739.2) (485.2)
Foreign currency transaction gains (losses) 24.1 46.7 (90.9) 35.8
-------- -------- -------- --------
(Loss) before income tax benefit (468.3) (278.1) (1,438.3) (857.0)
Income tax benefit 14.5 -- 33.1 --
-------- -------- -------- --------
Net (loss) $ (453.8) $ (278.1) $(1,405.2) $ (857.0)
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 6
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Condensed Consolidated Statement of Shareholder's Equity
(Unaudited)
(dollars in millions)
<TABLE>
<CAPTION>
SERIES PREFERRED STOCK COMMON STOCK
$.01 PAR VALUE $.01 PAR VALUE
SHARES PAR SHARES PAR
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1999 1,332,000 $ -- 132,416,000 $ 1.3
Exercise of stock options 1,775,000 --
Exercise of warrants 192,000 --
Conversion of series preferred stock (528,000) -- 8,229,000 .1
Preferred stock issued for dividends 9,000
Accreted dividends on preferred stock 13,000
Accretion of discount on preferred stock
Contribution from NTL Incorporated
Corporate restructuring (826,000) -- (142,612,000) (1.4)
Comprehensive loss:
Net loss for the nine months ended
September 30, 2000
Currency translation adjustment
Total
------------ ------------ ------------ ------------
Balance, September 30, 2000 -- $ -- -- $ --
============ ============ ============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 7
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Condensed Consolidated Statement of Shareholder's Equity
(Unaudited) - continued
(dollars in millions)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
PAID-IN COMPREHENSIVE COMPREHENSIVE
CAPITAL LOSS LOSS DEFICIT
---------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
Balance, December 31, 1999 $ 4,125.1 $ (2.1) $(1,987.4)
Exercise of stock options 32.2
Exercise of warrants 5.1
Conversion of series preferred stock (.1)
Preferred stock issued for dividends 9.4
Accreted dividends on preferred stock (20.0)
Accretion of discount on preferred stock (.1)
Contribution from NTL Incorporated 5.7
Corporate restructuring
Comprehensive loss:
Net loss for the nine months ended
September 30, 2000 $(1,405.2) (1,405.2)
Currency translation adjustment (600.9) (600.9)
---------
Total $(2,006.1)
--------- --------- --------- ---------
Balance, September 30, 2000 $ 4,157.3 $ (603.0) $(3,392.6)
========= ========= ========= =========
</TABLE>
See accompanying notes.
6
<PAGE> 8
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(dollars in millions)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
2000 1999
-------- --------
<S> <C> <C>
Net cash (used in) provided by operating activities $ (80.9) $ 41.8
INVESTING ACTIVITIES
Acquisitions, net of cash acquired (3,440.2) (1,103.1)
Payment of deferred purchase price (3.0) --
Purchase of marketable securities (61.6) (573.8)
Proceeds from sales of marketable securities 250.1 539.8
Purchase of fixed assets (1,299.1) (858.1)
Due from affiliate (3,836.3) --
Cash deposited into escrow for an acquisition -- (120.7)
Increase in other assets (505.3) (28.8)
-------- --------
Net cash (used in) investing activities (8,895.4) (2,144.7)
FINANCING ACTIVITIES
Cash released from escrow 77.5 --
Proceeds from borrowings, net of financing costs 5,784.6 1,125.5
Principal payments (1,103.5) (25.9)
Proceeds from issuance of preferred stock and warrants -- 1,250.0
Proceeds from issuance of redeemable preferred stock 1,850.0 --
Proceeds from issuance of common stock -- 250.0
Proceeds from exercise of stock options and warrants 37.3 29.9
Contribution from NTL Incorporated 5.7 --
-------- --------
Net cash provided by financing activities 6,651.6 2,629.5
Effect of exchange rate changes on cash (28.6) 2.7
-------- --------
(Decrease) increase in cash and cash equivalents (2,353.3) 529.3
Cash and cash equivalents at beginning of period 2,597.2 736.3
-------- --------
Cash and cash equivalents at end of period $ 243.9 $1,265.6
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest exclusive of amounts
capitalized $ 339.2 $ 140.3
Income taxes paid 1.4 --
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Accretion of dividends and discount on preferred stock $ 20.1 $ 26.5
Conversion of Convertible Notes, net of unamortized deferred
financing costs -- 269.3
Common stock and stock options issued for an acquisition -- 978.0
</TABLE>
See accompanying notes.
7
<PAGE> 9
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended September
30, 2000 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in the NTL
(Delaware), Inc. (formerly NTL Incorporated) Annual Report on Form 10-K for the
year ended December 31, 1999.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted by the
Company effective January 1, 2001. The Company is evaluating the impact that the
adoption of SFAS No. 133 will have on its results of operations and financial
position.
NOTE B - CORPORATE RESTRUCTURING
On May 18, 2000, NTL Incorporated completed a corporate restructuring to create
a holding company structure. The formation of the holding company was part of
NTL Incorporated's acquisition of certain assets of Cable & Wireless
Communications plc ("CWC"). The holding company restructuring was accomplished
through a merger so that all the stockholders of NTL Incorporated at the
effective time of the merger became stockholders of the new holding company, and
NTL Incorporated became a subsidiary of the new holding company. The new holding
company has taken the name NTL Incorporated and the holding company's subsidiary
simultaneously changed its name to NTL (Delaware), Inc. The "Company" refers to
NTL Incorporated and subsidiaries up to and including May 17, 2000, and to NTL
(Delaware), Inc. and subsidiaries beginning May 18, 2000.
NOTE C - FIXED ASSETS
Fixed assets consist of:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(unaudited)
(in millions)
<S> <C> <C>
Operating equipment $5,992.1 $5,111.3
Other equipment 917.4 715.2
Construction-in-progress 1,421.7 669.4
-------- --------
8,331.2 6,495.9
Accumulated depreciation (1,314.9) (898.2)
-------- --------
$7,016.3 $5,597.7
======== ========
</TABLE>
Depreciation expense for the nine months ended September 30, 2000 and 1999 was
$504.2 million and $337.6 million, respectively. Depreciation expense for the
three months ended September 30, 2000 and 1999 was $178.1 million and $125.6
million, respectively.
8
<PAGE> 10
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE D - INTANGIBLE ASSETS
Intangible assets consist of:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(unaudited)
(in millions)
<S> <C> <C>
Goodwill, net of accumulated amortization of $434.2 (2000) and
$197.0 (1999) $4,606.0 $2,543.5
License acquisition costs, net of accumulated amortization of
$194.7 (2000) and $141.7 (1999) 160.8 225.0
Customer lists, net of accumulated amortization of $54.7 (2000)
and $30.9 (1999) 119.4 159.3
-------- --------
$4,886.2 $2,927.8
======== ========
</TABLE>
On March 28, 2000, the Company acquired the cable assets of the Cablecom Group
("Cablecom") in Switzerland for cash of CHF 5,800.0 million ($3,510.2 million),
a substantial portion of which was funded by a new bank facility of CHF 2,700.0
million ($1,630.5 million) and the Company's issuance of $1,850.0 million of
preferred stock to France Telecom and a group of commercial banks. This
acquisition was accounted for as a purchase, and accordingly, the net assets and
results of operations of Cablecom have been included in the consolidated
financial statements from the date of acquisition. The aggregate purchase price
of $3,528.4 million, including costs incurred of $18.2 million, exceeded the
estimated fair value of net tangible assets acquired by $2,635.4 million, which
is included in goodwill. Under the purchase method of accounting, the purchase
price is allocated to the assets acquired and liabilities assumed based on the
estimated fair values at acquisition. Changes to the allocation of the purchase
price are expected as valuations or appraisals of assets and liabilities are
completed.
In 1999, the Company completed the acquisitions of Diamond Cable Communications
Limited, the Australian National Transmission Network, Cablelink Limited,
certain broadband cable franchises of British Telecommunications plc, the "1G
Networks" of France Telecom and Workplace Technologies plc.
The pro forma unaudited consolidated results of operations for the nine months
ended September 30, 2000 and 1999 assuming consummation of these transactions as
of January 1, 1999 is as follows.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
-------- --------
(in millions)
<S> <C> <C>
Total revenue $1,743.3 $1,568.0
Net (loss) (1,485.4) (1,260.4)
</TABLE>
Amortization of intangible and other assets charged to expense for the nine
months ended September 30, 2000 and 1999 was $380.7 million and $196.0 million,
respectively. Amortization of intangible and other assets charged to expense for
the three months ended September 30, 2000 and 1999 was $141.5 million and $76.3
million, respectively.
NOTE E - REDEEMABLE PREFERRED STOCK
In March 2000, the Company received $1,850.0 million in cash from France Telecom
and a group of commercial banks in exchange for 1.9 million shares of new 5%
Cumulative Preferred Stock, Series A.
9
<PAGE> 11
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE F - LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
--------- ---------
(unaudited)
(in millions)
<S> <C> <C>
NTL Delaware:
5-3/4% Convertible Subordinated Notes $ 1,200.0 $ 1,200.0
NTL Business:
Credit Agreement 2,813.0 --
Cablecom:
Term Loan Facility 1,563.8 --
Revolving Facility 214.3 --
Other 15.0 --
NTL Communications:
12-3/4% Senior Deferred Coupon Notes 277.8 268.1
11-1/2% Senior Deferred Coupon Notes 1,011.9 930.4
10% Senior Notes 400.0 400.0
9-1/2% Senior Sterling Notes, less unamortized discount 184.4 201.4
10-3/4% Senior Deferred Coupon Sterling Notes 340.4 343.7
9-3/4% Senior Deferred Coupon Notes 1,023.4 952.8
9-3/4% Senior Deferred Coupon Sterling Notes 348.3 354.4
11-1/2% Senior Notes 625.0 625.0
12-3/8% Senior Deferred Coupon Notes 313.9 287.0
7% Convertible Subordinated Notes 599.3 599.3
Variable Rate Redeemable Guaranteed Loan Notes -- 76.8
9-1/4% Senior Euro Notes 220.9 252.3
9-7/8% Senior Euro Notes 309.3 353.2
11-1/2% Senior Deferred Coupon Euro Notes 117.0 123.1
NTL Communications Limited:
Credit Agreement 163.0 --
NTL Triangle:
11.2% Senior Discount Debentures 510.5 467.3
Other 5.5 8.0
Diamond:
13-1/4% Senior Discount Notes 285.1 285.1
11-3/4% Senior Discount Notes 518.7 476.2
10-3/4% Senior Discount Notes 364.2 336.9
10% Senior Sterling Notes 199.6 218.1
9-1/8% Senior Notes 110.0 110.0
Other 7.4 11.5
--------- ---------
13,741.7 8,880.6
Less current portion 4.5 82.6
--------- ---------
$13,737.2 $ 8,798.0
========= =========
</TABLE>
10
<PAGE> 12
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE F - LONG-TERM DEBT (CONTINUED)
In May 2000, NTL Business Limited ("NTL Business"), a wholly-owned subsidiary of
the Company, and NTL Communications Limited ("NTLCL"), a wholly-owned indirect
subsidiary of the Company, entered into a (pound sterling) 2,500.0 million
($3,696.8 million) credit agreement in connection with the acquisition by NTL
Incorporated of the consumer cable telephone, Internet and television operations
of CWC in the United Kingdom ("ConsumerCo"). NTL Incorporated paid cash of
(pound sterling) 2,846.3 million and issued an aggregate of 84.9 million shares
of its common stock in exchange for each ordinary share of CWC. In addition, NTL
Incorporated paid (pound sterling) 2,214.0 million to repay a portion of
ConsumerCo's debt. Included in due from affiliates at September 30, 2000 is
(pound sterling) 2,492.7 million ($3,686.0 million) due from ConsumerCo to NTL
Business. As of September 30, 2000, NTL Business had (pound sterling) 1,902.3
million ($2,813.0 million) and NTLCL had (pound sterling) 110.2 million ($163.0
million) outstanding under the credit agreement. Interest is payable at least
every six months at LIBOR plus a margin rate of 2.25% per annum, which is
subject to adjustment based on the ratio of EBITDA to finance charges of the UK
Group. The effective interest rate at September 30, 2000 was 8.32%. The
unused portion of the commitment is available for refinancing ConsumerCo
indebtedness and forworking capital requirements of the UK Group. For
purposes of this credit agreement, Diamond Cable Communications Limited and
subsidiaries, NTL (Triangle)LLC and subsidiaries and certain other entities
are excluded from the UK Group. The unused portion of the commitment is
subject to a commitment fee of 0.75% payable quarterly, which is reduced to
0.50% when over 50% of the commitment is utilized. Principal is due in six
quarterly installments beginning on June 30, 2004. The credit agreement
contains various financial and other covenants with respect to the UK Group,
and restrictions on dividends and distributions by the UK Group.
In March 2000, the Company borrowed CHF 2,700.0 million ($1,563.8 million) under
its term loan facility in connection with the acquisition of Cablecom. Interest
is payable at least every six months at Swiss LIBOR plus a margin rate of 2.5%
per annum, which is subject to adjustment after March 2001 based on Cablecom's
ratio of senior debt to EBITDA. The effective interest rate at September 30,
2000 was 5.98%. Principal is due over six years in quarterly installments
beginning on March 31, 2004. Cablecom has the option to draw on a revolving
loan facility up to an additional CHF 1,400.0 million ($810.9 million). The
revolving facility is intended to finance operating expenses, working capital
and other capital expenditures of Cablecom and subsidiaries and for their
general corporate financing requirements. As of September 30, 2000, Cablecom
had borrowed CHF 370.0 million ($214.3 million) under the revolving loan
facility with an effective interest rate of 5.89%. The revolving facility is
available until May 2003. The interest rate, interest payment requirements
and principal payments for the revolving facility are the same as for the
term loan facility. The revolving facility includes a commitment fee of 0.75%
payable quarterly on the unused portion of the revolving facility commitment,
which is reduced to 0.50% when over 50% of the commitment is utilized. The
term loan facility and the revolving facility contain various financial and
other covenants with respect to Cablecom and subsidiaries, and restrictions
on dividends and distributions by Cablecom subsidiaries.
11
<PAGE> 13
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE F - LONG-TERM DEBT (CONTINUED)
NTLCL entered into a (pound sterling) 1,300.0 million ($1,922.3 million) credit
agreement with a group of banks dated May 30, 2000. Pursuant to the credit
agreement, in connection with the issuance in October 2000 of $500.0 million
aggregate principal amount NTL Communications Corp. 11-7/8% notes, the
commitment has been reduced by (pound sterling) 161.8 million ($239.3 million).
As of September 30, 2000, there were no amounts borrowed under this agreement.
NTLCL and other members of the UK Group (as defined above) may utilize the
proceeds under this credit agreement to finance the working capital requirements
of the UK Group, provided that in no event shall the proceeds be used for a
purpose other than to finance the construction, capital expenditure and working
capital needs of a cable television or telephone or telecommunications business,
or a related business, in the United Kingdom or Ireland. Interest is payable at
least every six months at LIBOR plus a margin rate of 4.5% per annum. The margin
rate shall increase by 0.5% on the three month anniversary of the initial
advance and by an additional 0.5% on each subsequent three month anniversary, up
to a maximum total interest rate of 16% per annum. The unused portion of the
commitment is subject to a commitment fee of 0.75% payable quarterly. Principal
is due in full on March 31, 2006. The credit agreement contains various
financial and other covenants with respect to the UK Group, and restrictions on
dividends and distributions by the UK Group.
In March 2000, the Company redeemed in full its Variable Rate Redeemable
Guaranteed Loan Notes, principal amount of IR (pound sterling) 60.0 million
($67.3 million), plus accrued and unpaid interest using cash held in escrow.
NOTE G - COMPREHENSIVE LOSS
The Company's comprehensive loss for the three months ended September 30, 2000
and 1999 was $(750.2) million and $(36.5) million, respectively. The Company's
comprehensive loss for the nine months ended September 30, 2000 and 1999 was
$(2,006.1) million and $(822.3) million, respectively.
NOTE H - SEGMENT DATA
<TABLE>
<CAPTION>
RESIDENTIAL
TELECOMS CORPORATE
AND NATIONAL AND
BROADCAST TELEVISION TELECOMS OTHER TOTAL
------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C> <C>
Nine months ended September 30, 2000
Revenues $ 164.9 $ 935.9 $ 549.2 $ -- $ 1,650.0
EBITDA (1) 87.3 232.3 174.9 (299.3) 195.2
Nine months ended September 30, 1999
Revenues $ 144.9 $ 585.6 $ 360.2 $ -- $ 1,090.7
EBITDA (1) 81.6 163.2 90.5 (200.0) 135.3
Total assets
September 30, 2000 $ 616.9 $ 9,379.3 $ 1,495.8 $ 5,808.1 $17,300.1
December 31, 1999 748.7 6,106.5 1,180.8 4,175.6 12,211.6
</TABLE>
(1) Represents earnings before interest, taxes, depreciation and amortization,
corporate expenses, franchise fees, other charges and foreign currency
transaction gains (losses).
12
<PAGE> 14
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE H - SEGMENT DATA (CONTINUED)
The reconciliation of segment combined EBITDA to loss before income tax benefit
is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
-------- --------
(in millions)
<S> <C> <C>
Segment Combined EBITDA $ 195.2 $ 135.3
(Add) Deduct:
Franchise fees -- 22.3
Other charges 19.7 --
Corporate expenses 25.7 21.1
Depreciation and amortization 884.9 533.6
Interest income and other, net (126.9) (34.1)
Interest expense 739.2 485.2
Foreign currency transaction (gains) losses 90.9 (35.8)
-------- --------
1,633.5 992.3
-------- --------
(Loss) before income tax benefit $(1,438.3) $ (857.0)
========= ========
</TABLE>
NOTE I - COMMITMENTS AND CONTINGENT LIABILITIES
At September 30, 2000, the Company was committed to pay approximately $279.0
million for equipment and services, which includes certain operations and
maintenance contracts through 2005.
A wholly-owned subsidiary of the Company, Premium TV Limited, has entered into
media partnerships with various United Kingdom football clubs whereby Premium TV
Limited will receive certain marketing and sponsorship rights. Premium TV
Limited will provide loan facilities to the clubs, repayable through the issue
of shares in the football clubs, as well as provide funding to joint ventures
with the clubs. At September 30, 2000, the aggregate commitment was (pound
sterling) 58.5 million ($86.5 million). In addition, Premium TV Limited expects
to pay fees of up to (pound sterling) 65.0 million ($96.1 million) over five
years for the right to enter into a joint venture with the Football League to
set-up an Internet portal for all 72 Football League clubs who wish to
participate.
In August 2000, NTL Incorporated announced that it had signed an agreement in
partnership with Morgan Stanley Dean Witter Private Equity to buy France
Telecom's 49.9% stake in Noos, the leading broadband company in France offering
cable television, telephony and Internet services. NTL Incorporated will acquire
27% of Noos for approximately $627.0 million. NTL Incorporated will issue
12-month redeemable preferred stock to France Telecom for 80% of the $627.0
million consideration and 6-year redeemable preferred stock for the remaining
20%.
The Company is involved in certain disputes and litigation arising in the
ordinary course of its business. None of these matters are expected to have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
13
<PAGE> 15
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE J - SUBSEQUENT EVENT
In October 2000, NTL Communications Corp., a wholly-owned subsidiary of the
Company, issued $500.0 million principal amount of 11-7/8% Senior Notes due
2010. The Notes were issued at a price of 97.872% of the aggregate principal
amount at maturity or $489.4 million. The underwriters' discount and commissions
were $11.3 million. Interest is payable semiannually in cash at the rate of
11-7/8% per annum beginning on April 1, 2001. The Notes may be redeemed at the
Company's option, in whole or in part, at any time on or after October 1, 2005.
Also in October 2000, (pound sterling) 110.6 million ($163.5 million) of the
principal amount outstanding under the NTL Business and NTLCL credit agreement
was repaid.
14
<PAGE> 16
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
The following table shows the cable television and telephony customer statistics
for NTL in the United Kingdom and Ireland:
<TABLE>
<CAPTION>
CABLE TELEVISION AND TELEPHONY CUSTOMERS
AS OF SEPTEMBER 30, 2000
----------------------------------------------------------------
"Original" 1998 Cablelink and UK and Ireland
NTL(1) Acquisitions(2) BT Cable (3) Consolidated
---------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Homes in franchise (4) 2,090,000 3,037,600 640,500 5,768,100
Homes passed 1,423,500 2,427,500 605,500 4,456,500
Homes marketed (Tel.) 1,230,500 2,101,600 1,000 3,333,100
Homes marketed (CATV) 1,230,500 2,161,900 560,600 3,953,000
Total customers (5) 615,000 893,500 432,000 1,940,500
Dual 566,800 518,600 200 1,085,600
Telephone-only (5) 24,300 288,500 0 312,800
Cable-only 23,900 86,400 431,800 542,100
Total RGUs(6) 1,181,800 1,412,100 432,200 3,026,100
Net adds (customers) (7) 18,800 32,300 7,900 59,000
Net adds (RGUs) (7) 35,200 79,000 8,100 122,300
Customer penetration 50.0% 41.3% 77.1% 49.1%
RGU penetration 96.0% 65.3% 77.1% 76.6%
Telephone penetration 48.0% 38.4% 20.0% 42.0%
Cable penetration 48.0% 28.0% 77.1% 41.2%
</TABLE>
(1) Data for franchises which NTL has been developing since 1993.
(2) Data for the following franchises: Triangle, ComTel and Diamond Cable.
(3) Data for Cablelink (Ireland) and BT Cable (Westminster / Milton
Keynes).
(4) Franchise home information from The Media Map Datafile 2000.
(5) Excludes approximately 44,000 off-net telephony customers and over 1.25
million Internet customers.
(6) An RGU is one cable television account or one telephone account; a dual
customer generates two RGUs.
(7) Total additional customers and RGUs, respectively, as compared to June
30, 2000.
15
<PAGE> 17
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
The following table illustrates NTL's broadband position in Western Europe
outside of the United Kingdom and Ireland:
<TABLE>
<CAPTION>
CABLE TELEVISION AND INTERNET CUSTOMERS AS OF
SEPTEMBER 30, 2000 (IN 000S)
---------------------------------------------------------------------------------------------
(Switzerland) (France) (France) (Germany) (Sweden) NTL Europe
Cablecom(1) 1G(2) Noos(3) eKabel(4) B2(5) Gross (6)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ownership interest 100%(1) 100% 27% 32.5% 25% n/a
Homes in franchise (7) 1,875 287 3,179 2,800 247 8,388
Homes passed 1,875 265 2,563 1,828 45 6,576
Homes marketed (CATV) 1,706 212 2,563 1,828 0 6,309
Customers (CATV) 1,555 48 730 1,294 0 3,627
Penetration (CATV) 91% 23% 28% 71% n/a 57%
Internet - Dial-Up 154 0 0 0 0 154
Internet - Cable/Ethernet 19 0 49 0 8 76
</TABLE>
(1) Cablecom (Switzerland) is 100% owned by NTL, however, Cablecom
retains various ownership interests in several smaller Swiss cable systems.
Historically, Cablecom has reported customer data reflecting the equity
interest applicable to each system and as of September 30, 2000 was as
follows: 1,690,500 franchise homes, 1,690,500 homes passed, 1,547,900 CATV
homes marketed and 1,404,300 CATV customers (includes an ongoing audit
adjustment at Cablecom of an additional 95,900 equity homes passed and
92,100 equity homes marketed). During the third quarter Cablecom acquired
15,100 equity cable subscribers and 6,700 equity Internet customers via the
acquisition of several cable systems. Data in the above table consolidates
all of the systems in which Cablecom has an ownership interest.
(2) The "1G Networks" (France) were acquired by NTL in 1999.
(3) Proforma for the closing of Noos (France). NTL recently agreed to acquire a
27% interest in Noos.
(4) NTL acquired a 32.5% interest in eKabel (Germany) in September 2000.
(5) NTL purchased a 25% equity interest in Bredbandsbolaget (B2)(Sweden) in
March 2000.
(6) Gross subscriber information assumes NTL owns 100% of B2, Noos, eKabel and
each of the cable systems in which Cablecom retains an ownership interest.
(7) Franchise home information is from Company records.
16
<PAGE> 18
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
The following table shows the Internet statistics for operations wholly-owned by
NTL:
<TABLE>
<CAPTION>
INTERNET CUSTOMERS AS OF SEPTEMBER 30, 2000
--------------------------------------------------------------------
NTLWORLD &
NTL DIRECT UK WHOLESALE SWITZERLAND TOTAL NTL
---------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Internet customers 399,400 853,500 172,500 1,425,400
</TABLE>
On May 18, 2000, NTL Incorporated completed a corporate restructuring to create
a holding company structure. The holding company restructuring was accomplished
through a merger so that all the stockholders of NTL Incorporated at the
effective time of the merger became stockholders of the new holding company, and
NTL Incorporated became a subsidiary of the new holding company. The new holding
company has taken the name NTL Incorporated and the holding company's subsidiary
simultaneously changed its name to NTL (Delaware), Inc. The "Company" refers to
NTL Incorporated and subsidiaries up to and including May 17, 2000, and to NTL
(Delaware), Inc. and subsidiaries beginning May 18, 2000.
RESULTS OF OPERATIONS
As a result of the completion of the acquisitions of Diamond Cable
Communications Limited ("Diamond") in March 1999, the Australian National
Transmission Network ("NTL Australia") in April 1999, Cablelink Limited
("Cablelink") in July 1999, the "1G Networks" of France Telecom in August and
December 1999, NTL Business Limited (formerly Workplace Technologies plc) ("NTL
Business") in September 1999, and the cable assets of the Cablecom Group
("Cablecom") in March 2000, the Company consolidated the results of operations
of these businesses from the dates of acquisition.
On November 2, 2000, the Company announced the completion of a consolidation
review. Based on a comprehensive review of the combined company following the
acquisition of ConsumerCo and the integration of several other acquired
businesses over the last 18 months, the Company identified significant
efficiency improvements and cost savings. These include the elimination of
duplicate technologies and processes, consolidation of support functions and
reductions in levels of management. Approximately 1,300 roles will become
redundant over the next 15 months as part of the cost savings. The Company
expects to realize the cost savings beginning in the latter half of 2001. The
Company expects to incur a restructuring charge in fiscal 2000 as a result of
this review, although to date the Company is still in the process of finalizing
this charge.
Three Months Ended September 30, 2000 and 1999
----------------------------------------------
Residential telecommunications and television revenues increased to $339.7
million from $220.3 million as a result of acquisitions and from customer growth
that increased the Company's current revenue stream. The 2000 and 1999 revenue
includes $155.8 million and $53.9 million, respectively, from acquired
companies. The Company expects its customer base to continue to increase, which
will drive further revenue growth as the Company continues to connect customers
to its broadband network. The Company also expects revenue growth from the
continuing rollout of its cable modem and digital cable television services.
17
<PAGE> 19
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
National and international telecommunications revenues increased to $183.3
million from $141.6 million as a result of acquisitions and from increases in
business telecommunications revenues, Internet services revenues and carrier
services revenues. The 2000 and 1999 revenue includes $38.3 million and $21.0
million, respectively, from acquired companies. Business telecommunications and
Internet services revenues increased primarily as a result of customer growth.
The Company expects its business telecommunications and Internet services
customer base to continue to increase, which will drive further revenue growth.
The Company continues to focus specific sales and marketing effort on business
customers and for Internet services in its completed network. Carrier services
revenues increased due to growth in voice, video and data services provided by
the Company's wholesale operation to broadcasters and telephone companies,
respectively. Revenue growth in carrier services is primarily dependent upon the
Company's ability to continue to attract new customers and expand services to
existing customers.
Broadcast transmission and other revenues decreased to $54.3 million from $55.2
million. Included in these amounts are revenues of $13.6 million and $14.9
million from NTL Australia in 2000 and 1999, respectively. These decreases are
entirely due to exchange rate fluctuations since these revenues increased (pound
sterling) 2.4 million and A$0.8 million in the United Kingdom and NTL Australia,
respectively. The United Kingdom increase reflects increases in broadcast
television and FM radio customers and accounts, which exceeded price cap
reductions in the Company's regulated services. The Company expects its digital
broadcasting services to increase in the future.
Operating expenses increased to $266.2 million from $206.8 million primarily as
a result of costs from acquired businesses. The 2000 and 1999 expense includes
$105.5 million and $47.5 million, respectively, from acquired companies.
Selling, general and administrative expenses increased to $263.1 million from
$144.9 million as a result of sales and marketing costs and increases in
additional personnel and overhead to service the increasing customer base. The
2000 and 1999 expense includes $70.1 million and $19.0 million, respectively,
from acquired companies.
Pursuant to the terms of various United Kingdom licenses, the Company incurred
license fees paid to the Independent Television Commission ("ITC") to operate as
the exclusive service provider in certain of its franchise areas. Upon a request
by the Company in 1999, the ITC converted all of the Company's fee bearing
exclusive licenses to non-exclusive licenses at the end of 1999, and the
Company's liability for license payments ceased upon the conversion. Franchise
fees were $7.7 million in 1999.
One of the Company's major costs has been for the integration of acquired
companies' information technology systems, while simultaneously upgrading them
for digital television, interactive services and video-on-demand. Other charges
of $6.0 million in 2000 were incurred for this integration effort.
Corporate expenses decreased to $5.6 million from $7.4 million due to a
decrease in various overhead costs.
18
<PAGE> 20
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Depreciation and amortization expense increased to $319.6 million from $201.9
million due to an increase in depreciation of telecommunications and CATV
equipment. The 2000 and 1999 expense includes $158.5 million and $71.3 million,
respectively, from acquired companies, including amortization of acquisition
related intangibles.
Interest income and other, net, decreased to expense of $7.4 million from
income of $13.4 million as a result of increases in the net losses of
affiliates accounted for by the equity method and decreases in interest income.
Interest income from affiliate of $88.5 million in 2000 is interest charged to
ConsumerCo.
Interest expense increased to $290.3 million from $186.6 million due to the
issuance of additional debt, and the increase in the accretion of original issue
discount on the deferred coupon notes. The 2000 and 1999 expense includes $136.3
million and $40.9 million, respectively, related to acquisitions. Interest of
$171.7 million and $79.9 million was paid in the three months ended September
30, 2000 and 1999, respectively.
Foreign currency transaction gains decreased to $24.1 million from $46.7 million
primarily due to the effect of unfavorable changes in exchange rates. The
Company's results of operations are impacted by changes in foreign currency
exchange rates as follows. The Company and certain of its subsidiaries have
cash, cash equivalents and debt denominated in foreign currencies that are
effected by changes in exchange rates. In addition, foreign subsidiaries of the
Company whose functional currency is not the U.S. dollar hold cash, cash
equivalents and debt denominated in U.S. dollars which are effected by changes
in exchange rates.
Nine Months Ended September 30, 2000 and 1999
---------------------------------------------
Residential telecommunications and television revenues increased to $935.9
million from $585.6 million as a result of acquisitions and from customer growth
that increased the Company's current revenue stream. The 2000 and 1999 revenue
includes $376.7 million and $103.2 million, respectively, from acquired
companies. The Company expects its customer base to continue to increase, which
will drive further revenue growth as the Company continues to connect customers
to its broadband network. The Company also expects revenue growth from the
continuing rollout of its cable modem and digital cable television services.
National and international telecommunications revenues increased to $549.2
million from $360.2 million as a result of acquisitions and from increases in
business telecommunications revenues, Internet services revenues and carrier
services revenues. The 2000 and 1999 revenue includes $127.4 million and $33.6
million, respectively, from acquired companies. Business telecommunications and
Internet services revenues increased primarily as a result of customer growth.
The Company expects its business telecommunications and Internet services
customer base to continue to increase, which will drive further revenue growth.
The Company continues to focus specific sales and marketing effort on business
customers and for Internet services in its completed network. Carrier services
revenues increased due to growth in voice, video and data services provided by
the Company's wholesale operation to broadcasters and telephone companies,
respectively. Revenue growth in carrier services is primarily dependent upon the
Company's ability to continue to attract new customers and expand services to
existing customers.
19
<PAGE> 21
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Broadcast transmission and other revenues increased to $164.9 million from
$144.9 million due to revenues of $42.0 million and $25.0 million from NTL
Australia in 2000 and in 1999, respectively, and from increases in broadcast
television and FM radio customers and accounts, which exceeded price cap
reductions in the Company's regulated services. The Company expects its digital
broadcasting services to increase in the future.
Operating expenses increased to $808.3 million from $536.2 million as a result
of increases in interconnection costs and programming costs due to customer
growth. The 2000 and 1999 expense includes $264.8 million and $76.1 million,
respectively, from acquired companies.
Selling, general and administrative expenses increased to $646.5 million from
$419.2 million as a result of increases in telecommunications and CATV sales and
marketing costs and increases in additional personnel and overhead to service
the increasing customer base. The 2000 and 1999 expense includes $178.0 million
and $40.7 million, respectively, from acquired companies.
Pursuant to the terms of various United Kingdom licenses, the Company incurred
license fees paid to the ITC to operate as the exclusive service provider in
certain of its franchise areas. Upon a request by the Company in 1999, the ITC
converted all of the Company's fee bearing exclusive licenses to non-exclusive
licenses at the end of 1999, and the Company's liability for license payments
ceased upon the conversion. Franchise fees were $22.3 million in 1999.
One of the Company's major costs has been for the integration of acquired
companies' information technology systems, while simultaneously upgrading them
for digital television, interactive services and video-on-demand. Other charges
of $19.7 million in 2000 were incurred for this integration effort.
Corporate expenses increased to $25.7 million from $21.1 million due to an
increase in various overhead costs.
Depreciation and amortization expense increased to $884.9 million from $533.6
million due to an increase in depreciation of telecommunications and CATV
equipment. The 2000 and 1999 expense includes $394.7 million and $151.4 million,
respectively, from acquired companies, including amortization of acquisition
related intangibles.
Interest income from affiliate of $88.5 million in 2000 is interest charged to
ConsumerCo.
Interest expense increased to $739.2 million from $485.2 million due to the
issuance of additional debt, and the increase in the accretion of original issue
discount on the deferred coupon notes. The 2000 and 1999 expense includes $263.0
million and $93.2 million, respectively, related to acquisitions. Interest of
$395.7 million and $172.1 million was paid in the nine months ended September
30, 2000 and 1999, respectively.
Foreign currency transaction gains (losses) decreased to a loss of $90.9 million
from a gain of $35.8 million primarily due to the effect of unfavorable changes
in exchange rates. The Company's results of operations are impacted by changes
in foreign currency exchange rates as follows. The Company and certain of its
subsidiaries have cash, cash equivalents and debt denominated in foreign
currencies that are effected by changes in exchange rates. In addition, foreign
subsidiaries of the Company whose functional currency is not the U.S. dollar
hold cash, cash equivalents and debt denominated in U.S. dollars which are
effected by changes in exchange rates.
20
<PAGE> 22
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
LIQUIDITY AND CAPITAL RESOURCES
The Company will continue to require significant amounts of capital to finance
construction of its local and national networks, for connection of telephone,
telecommunications, Internet and CATV customers to the networks, for other
capital expenditures and for debt service. The Company estimates that these
requirements, net of cash from operations, will aggregate up to approximately
$1,600.0 million from October 1, 2000 to September 30, 2001. The Company's
commitments at September 30, 2000 for equipment and services through September
30, 2001 are included in the anticipated requirements. The Company had $243.9
million in cash on hand at September 30, 2000. The Company expects to utilize
the proceeds from the issuance of notes in October 2000 and a portion of its
bank facilities to fund the balance of these requirements.
In October 2000, NTL Communications Corp. ("NTL Communications") issued $500.0
million principal amount of 11-7/8% Senior Notes due 2010. The Notes were issued
at a price of 97.872% of the aggregate principal amount at maturity or $489.4
million. The underwriters' discount and commissions were $11.3 million. Interest
is payable semiannually in cash at the rate of 11-7/8% per annum beginning on
April 1, 2001. The Notes may be redeemed at the Company's option, in whole or in
part, at any time on or after October 1, 2005. Also in October 2000, (pound
sterling) 110.6 million ($163.5 million) of the principal amount outstanding
under the NTL Business Limited ("NTL Business") and NTL Communications Limited
("NTLCL") credit agreement was repaid.
NTL Business, a wholly-owned subsidiary of the Company and NTLCL, a wholly-owned
indirect subsidiary of the Company, have the option to draw on the unused
portion of the (pound sterling) 2,500.0 million ($3,696.8 million) commitment
amounting to (pound sterling) 586.7 million ($867.6 million) at October 31,
2000. The unused portion of the commitment is available for refinancing
ConsumerCo indebtedness and for working capital requirements of the UK Group, as
defined. For purposes of this credit agreement, Diamond Cable Communications
Limited and subsidiaries, NTL (Triangle) LLC ("NTL Triangle") and subsidiaries
and certain other entities are excluded from the UK Group.
NTLCL entered into a (pound sterling) 1,300.0 million ($1,922.3 million) credit
agreement with a group of banks dated May 30, 2000. Pursuant to the credit
agreement, in connection with NTL Communications' issuance in October 2000 of
$500.0 million aggregate principal amount of 11-7/8% notes, the commitment has
been reduced by (pound sterling) 161.8 million ($239.3 million). As of September
30, 2000, there were no amounts borrowed under this agreement. NTLCL and other
members of the UK Group (as defined above) may utilize the proceeds under this
credit agreement to finance the working capital requirements of the UK Group,
provided that in no event shall the proceeds be used for a purpose other than to
finance the construction, capital expenditure and working capital needs of a
cable television or telephone or telecommunications business, or a related
business, in the United Kingdom or Ireland. Interest is payable at least every
six months at LIBOR plus a margin rate of 4.5% per annum. The margin rate shall
increase by 0.5% on the three month anniversary of the initial advance and by an
additional 0.5% on each subsequent three month anniversary, up to a maximum
total interest rate of 16% per annum. The unused portion of the commitment is
subject to a commitment fee of 0.75% payable quarterly. Principal is due in full
on March 31, 2006.
21
<PAGE> 23
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Cablecom has the option to draw on a revolving loan facility of up to CHF
1,400.0 million ($810.9 million). The revolving facility is intended to finance
operating expenses, working capital and other capital expenditures of Cablecom
and subsidiaries and for their general corporate financing requirements. As of
September 30, 2000, Cablecom had borrowed CHF 370.0 million ($214.3 million)
under the revolving loan facility with an effective interest rate of 5.89%. The
revolving facility is available until May 2003. The interest rate, interest
payment requirements and principal payments for the revolving facility are the
same as for the term loan facility. The revolving facility includes a commitment
fee of 0.75% payable quarterly on the unused portion of the revolving facility
commitment, which is reduced to 0.50% when over 50% of the commitment is
utilized.
Regarding the Company's estimated cash requirements described above, there can
be no assurance that: (a) actual construction costs will not exceed the amounts
estimated or that additional funding substantially in excess of the amounts
estimated will not be required, (b) conditions precedent to advances under
credit facilities will be satisfied when funds are required, (c) the Company and
its subsidiaries will be able to generate sufficient cash from operations to
meet capital requirements, debt service and other obligations when required, (d)
the Company will be able to access such cash flow or (e) the Company will not
incur losses from its exposure to exchange rate fluctuations or be adversely
affected by interest rate fluctuations.
A wholly-owned subsidiary of the Company, Premium TV Limited, has entered into
media partnerships with United Kingdom football clubs whereby Premium TV Limited
will receive certain marketing and sponsorship rights. Premium TV Limited will
provide loan facilities to the clubs, repayable through the issue of shares in
the football clubs, as well as provide funding to joint ventures with the clubs.
At September 30, 2000, the aggregate commitment was (pound sterling) 58.5
million ($86.5 million). In addition, Premium TV Limited expects to pay fees of
up to (pound sterling) 65.0 million ($96.1 million) over five years for the
right to enter into a joint venture with the Football League to set-up an
Internet portal for all 72 Football League clubs who wish to participate.
In August 2000, NTL Incorporated announced that it had signed an agreement in
partnership with Morgan Stanley Dean Witter Private Equity to buy France
Telecom's 49.9% stake in Noos, the leading broadband company in France offering
cable television, telephony and Internet services. NTL Incorporated will acquire
27% of Noos for approximately $627.0 million. NTL Incorporated will issue a
12-month redeemable preferred stock to France Telecom for 80% of the $627.0
million consideration and 6-year redeemable preferred stock for the remaining
20%.
The Company is highly leveraged. The accreted value at September 30, 2000 of the
Company's consolidated long-term indebtedness is $13,737.2 million, representing
approximately 98.8% of total capitalization. The following summarizes the terms
of those notes issued by the Company and its subsidiaries.
NTL (Delaware), Inc.:
(1) 5-3/4% Convertible Subordinated Notes due December 15, 2009, principal
amount at maturity of $1,200.0 million, interest payable semiannually from
June 15, 2000, redeemable at the Company's option on or after December 18,
2002, convertible after March 21, 2000 into shares of the Company's common
stock at a conversion price of $108.18 per share;
22
<PAGE> 24
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
NTL Business and NTLCL:
(2) Credit Agreement of (pound sterling) 2,500.0 million ($3,696.8 million), of
which (pound sterling) 2,012.5 million ($2,976.0 million) was outstanding
at September 30, 2000, interest payable at least every six months at LIBOR
plus a margin rate of 2.25% per annum, which is subject to adjustment,
effective interest rate at September 30, 2000 was 8.32%, the unused portion
of the commitment is subject to a commitment fee of 0.75% payable
quarterly, which is reduced to 0.50% when over 50% of the commitment is
utilized, principal is due in six quarterly installments beginning on June
30, 2004;
Cablecom:
(3) Term Loan Facility of CHF 2,700.0 million ($1,563.8 million), interest
payable at least every six months at Swiss LIBOR plus a margin rate of 2.5%
per annum, which is subject to adjustment after March 2001, effective
interest rate of 5.98% at September 30, 2000, principal is due over six
years in quarterly installments beginning on March 31, 2004;
NTL Communications:
(4) 12-3/4% Senior Deferred Coupon Notes due April 15, 2005, principal amount
at maturity of $277.8 million, interest payable semiannually beginning on
October 15, 2000, redeemable at the Company's option on or after April 15,
2000;
(5) 11-1/2% Senior Deferred Coupon Notes due February 1, 2006, principal amount
at maturity of $1,050.0 million, interest payable semiannually beginning on
August 1, 2001, redeemable at the Company's option on or after February 1,
2001;
(6) 10% Senior Notes due February 15, 2007, principal amount at maturity of
$400.0 million, interest payable semiannually from August 15, 1997,
redeemable at the Company's option on or after February 15, 2002;
(7) 9-1/2% Senior Sterling Notes due April 1, 2008, principal amount at
maturity of (pound sterling) 125.0 million ($184.8 million), interest
payable semiannually from October 1, 1998, redeemable at the Company's
option on or after April 1, 2003;
(8) 10-3/4% Senior Deferred Coupon Sterling Notes due April 1, 2008, principal
amount at maturity of (pound sterling) 300.0 million ($443.6 million),
interest payable semiannually beginning on October 1, 2003, redeemable at
the Company's option on or after April 1, 2003;
(9) 9-3/4% Senior Deferred Coupon Notes due April 1, 2008, principal amount at
maturity of $1,300.0 million, interest payable semiannually beginning on
October 1, 2003, redeemable at the Company's option on or after April 1,
2003;
(10) 9-3/4% Senior Deferred Coupon Sterling Notes due April 15, 2009, principal
amount at maturity of (pound sterling) 330.0 million ($488.0 million),
interest payable semiannually beginning on October 15, 2004, redeemable at
the Company's option on or after April 15, 2004;
(11) 11-1/2% Senior Notes due October 1, 2008, principal amount at maturity of
$625.0 million, interest payable semiannually from April 1, 1999,
redeemable at the Company's option on or after October 1, 2003;
23
<PAGE> 25
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
(12) 12-3/8% Senior Deferred Coupon Notes due October 1, 2008, principal amount
at maturity of $450.0 million, interest payable semiannually beginning on
April 1, 2004, redeemable at the Company's option on or after October 1,
2003;
(13) 7% Convertible Subordinated Notes due December 15, 2008, principal amount
at maturity of $599.3 million, interest payable semiannually from June 15,
1999, convertible into shares of the Company's common stock at a conversion
price of $39.20 per share, redeemable at the Company's option on or after
December 15, 2001;
(14) 9-1/4% Senior Euro Notes due November 15, 2006, principal amount at
maturity of (euro) 250.0 million ($220.9 million), interest payable
semiannually from May 15, 2000;
(15) 9-7/8% Senior Euro Notes due November 15, 2009, principal amount at
maturity of (euro) 350.0 million ($309.3 million), interest payable
semiannually from May 15, 2000, redeemable at the Company's option on or
after November 15, 2004;
(16) 11-1/2% Senior Deferred Coupon Euro Notes due November 15, 2009, principal
amount at maturity of (euro) 210.0 million ($185.6 million), interest
payable semiannually beginning on May 15, 2005, redeemable at the Company's
option on or after November 15, 2004;
NTL Triangle:
(17) 11.2% Senior Discount Debentures due November 15, 2007, principal amount at
maturity of $517.3 million, interest payable semiannually beginning on May
15, 2001, redeemable at NTL Triangle's option after November 15, 2000;
Diamond:
(18) 13-1/4% Senior Discount Notes due September 30, 2004, principal amount at
maturity of $285.1 million, interest payable semiannually from June 30,
2000, redeemable at Diamond's option after September 30, 1999;
(19) 11-3/4% Senior Discount Notes due December 15, 2005, principal amount at
maturity of $531.0 million, interest payable semiannually beginning on June
15, 2001, redeemable at Diamond's option on or after December 15, 2000;
(20) 10-3/4% Senior Discount Notes due February 15, 2007, principal amount at
maturity of $420.5 million, interest payable semiannually beginning on
August 15, 2002, redeemable at Diamond's option on or after December 15,
2002;
(21) 10% Senior Sterling Notes due February 1, 2008, issued by Diamond Holdings
plc, a wholly-owned subsidiary of Diamond, principal amount at maturity of
(pound sterling) 135.0 million ($199.6 million), interest payable
semiannually from August 1, 1998, redeemable at Diamond's option on or
after February 1, 2003 and;
(22) 9-1/8% Senior Notes due February 1, 2008, issued by Diamond Holdings plc,
principal amount at maturity of $110.0 million, interest payable
semiannually from August 1, 1998, redeemable at Diamond's option on or
after February 1, 2003.
24
<PAGE> 26
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Management does not anticipate that the Company and its subsidiaries will
generate sufficient cash flow from operations to repay at maturity the entire
principal amount of the outstanding indebtedness of the Company and its
subsidiaries. Accordingly, the Company may be required to consider a number of
measures, including: (a) refinancing all or a portion of such indebtedness, (b)
seeking modifications to the terms of such indebtedness, (c) seeking additional
debt financing, which may be subject to obtaining necessary lender consents, (d)
seeking additional equity financing, or (e) a combination of the foregoing.
The Company's operations are conducted through its direct and indirect
wholly-owned subsidiaries. As a holding company, the Company holds no
significant assets other than cash and its investments in and advances to its
subsidiaries. The Company's ability to pay cash dividends to its stockholders
may be dependent upon the receipt of sufficient funds from its subsidiaries. The
Company's wholly-owned subsidiary, NTL Communications, is also a holding company
that conducts its operations through its subsidiaries. Accordingly, NTL
Communications' ability to make scheduled interest and principal payments when
due to holders of its indebtedness may be dependent upon the receipt of
sufficient funds from its subsidiaries.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Cash (used in) provided by operating activities was $(80.9) million and $41.8
million in the nine months ended September 30, 2000 and 1999, respectively. This
change is primarily due to the increase in the net loss and changes in working
capital as a result of the timing of receipts and disbursements.
Purchases of fixed assets were $1,299.1 million in 2000 and $858.1 million in
1999 as a result of the continuing fixed asset purchases and construction,
including purchases and construction by acquired companies.
Acquisitions, net of cash acquired of $3,440.2 million, proceeds from
borrowings, net of financing costs of $5,784.6 million and proceeds from
issuance of redeemable preferred stock of $1,850.0 million in 2000 were
primarily for the acquisitions of Cablecom and ConsumerCo including the term
loan facility and the credit agreement entered into with groups of banks and the
preferred stock issued to France Telecom and certain commercial banks. The due
from affiliate of $3,836.3 million is due from ConsumerCo to NTL Business as a
result of borrowings by NTL Business for the ConsumerCo acquisition. Included in
proceeds from borrowings, net of financing costs, is $506.1 million of
borrowings under credit facilities that was not related to acquisitions.
Included in principal payments is $1,015.7 million of repayments of amounts
borrowed under the NTL Business and NTLCL credit agreement.
The cash used for other assets of $505.3 million in 2000 was primarily for
investments in and loans to unconsolidated entities. Included in this amount is
a $37.9 million deposit that will be returned to the Company.
25
<PAGE> 27
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements contained herein constitute "forward-looking statements" as
that term is defined under the Private Securities Litigation Reform Act of 1995.
When used herein, the words, "believe," "anticipate," "should," "intend,"
"plan," "will," "expects," "estimates," "projects," "positioned," "strategy,"
and similar expressions identify such forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from those
contemplated, projected, forecasted, estimated or budgeted, whether expressed or
implied, by such forward-looking statements. Such factors include the following:
general economic and business conditions, the Company's ability to continue to
design networks, install facilities, obtain and maintain any required
governmental licenses or approvals and finance construction and development, all
in a timely manner at reasonable costs and on satisfactory terms and conditions,
as well as assumptions about customer acceptance, churn rates, overall market
penetration and competition from providers of alternative services, the impact
of new business opportunities requiring significant up-front investment, and
availability, terms and deployment of capital.
26
<PAGE> 28
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K.
During the quarter ended September 30, 2000, the Company filed
the following reports on Form 8-K:
(i) Report dated August 3, 2000 (filed August 7, 2000)
reporting under Item 5, Other Events, that NTL
Incorporated announced its preliminary operating
statistics for its residential services for the
quarter ended June 30, 2000.
(ii) Report dated August 7, 2000 (filed August 10, 2000)
reporting under Item 5, Other Events, that NTL
Incorporated announced that it will build a
carrier-grade telecommunications network on the east
coast of Australia in partnership with WIN Television
and Southern Cross Broadcasting.
No financial statements were filed with these reports.
27
<PAGE> 29
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 (DELAWARE), INC.
Date: November 13, 2000 By: /s/ Barclay Knapp
--------------------------
Barclay Knapp
President and Chief Executive Officer
Date: November 13, 2000 By: /s/ Gregg N. Gorelick
--------------------------
Gregg N. Gorelick
Vice President-Controller
(Principal Accounting Officer)
28
