<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 June 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
incorporation or organization) Identification No.)
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 June 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>
<S> <C>
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
June 30, 2000 and December 31, 1999 ...................... 2
Condensed Consolidated Statements of Operations-
Three and six months ended June 30, 2000 and 1999 ........ 4
Condensed Consolidated Statement of Shareholder's Equity-
Six months ended June 30, 2000 ........................... 5
Condensed Consolidated Statements of Cash Flows-
Six months ended June 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 ....................... 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk 24
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ...... 25
Item 6. Exhibits and Reports on Form 8-K ......................... 25
SIGNATURES ........................................................ 26
</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>
JUNE 30, DECEMBER 31,
2000 1999
--------- ---------
(unaudited) (see note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 562.2 $ 2,597.2
Marketable securities - 344.5
Accounts receivable - trade, less allowance for doubtful
accounts of $93.1 (2000) and $85.6 (1999) 360.3 294.2
Due from affiliates 3,549.6 -
Other 309.1 82.7
--------- ---------
Total current assets 4,781.2 3,318.6
Fixed assets, net 6,814.6 5,597.7
Intangible assets, net 5,202.5 2,927.8
Other assets, net of accumulated amortization
of $64.9 (2000) and $49.4 (1999) 631.9 367.5
--------- ---------
Total assets $17,430.2 $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>
JUNE 30, DECEMBER 31,
2000 1999
--------- ---------
(unaudited) (see note)
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 306.9 $ 224.7
Accrued expenses and other 514.0 438.2
Accrued construction costs 100.8 79.8
Interest payable 85.4 71.1
Deferred revenue 288.1 160.8
Due to affiliate 1,586.5 -
Current portion of long-term debt 5.4 82.6
--------- ---------
Total current liabilities 2,887.1 1,057.2
Long-term debt 13,404.7 8,798.0
Commitments and contingent liabilities
Deferred income taxes 216.9 77.7
Minority interests 14.8 -
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 4,152.1 4,125.1
Accumulated other comprehensive (loss) (306.6) (2.1)
(Deficit) (2,938.8) (1,987.4)
--------- ---------
906.7 2,136.9
--------- ---------
Total liabilities and shareholder's equity $17,430.2 $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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Residential telecommunications and television $ 342.7 $ 196.5 $ 596.2 $ 365.3
National and international telecommunications 184.4 112.8 365.9 218.6
Broadcast transmission and other 54.7 50.9 110.6 89.7
-------- -------- -------- --------
581.8 360.2 1,072.7 673.6
COSTS AND EXPENSES
Operating expenses 301.2 167.8 542.1 329.4
Selling, general and administrative expenses 202.1 155.1 383.4 274.3
Franchise fees - 7.7 - 14.6
Other charges 13.7 - 13.7 -
Corporate expenses 9.9 8.5 20.1 13.7
Depreciation and amortization 315.7 190.0 565.3 331.7
-------- -------- -------- --------
842.6 529.1 1,524.6 963.7
-------- -------- -------- --------
Operating (loss) (260.8) (168.9) (451.9) (290.1)
OTHER INCOME (EXPENSE)
Interest and other income 23.4 9.7 45.8 20.7
Interest expense (242.9) (167.7) (448.9) (298.6)
Foreign currency transaction losses (86.7) (21.6) (115.0) (10.9)
-------- -------- -------- --------
(Loss) before income tax benefit (567.0) (348.5) (970.0) (578.9)
Income tax benefit 13.3 - 18.6 -
-------- -------- -------- --------
Net (loss) $ (553.7) $ (348.5) $ (951.4) $ (578.9)
======== ======== ======== ========
</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 six months ended June 30, 2000
Currency translation adjustment
Total
------------ ------- ------------ -------
Balance, June 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
Corporate restructuring
Comprehensive loss:
Net loss for the six months ended June 30, 2000 $ (951.4) (951.4)
Currency translation adjustment (304.5) (304.5)
--------
Total $(1,255.9)
-------- -------- -------- --------
Balance, June 30, 2000 $4,152.1 $ (306.6) $(2,938.8)
======== ======== ======== ========
</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>
SIX MONTHS ENDED
JUNE 30,
---------------------------
2000 1999
-------- --------
<S> <C> <C>
Net cash (used in) provided by operating activities $ (251.5) $ 46.1
INVESTING ACTIVITIES
Acquisitions, net of cash acquired (3,469.8) (199.4)
Payment of deferred purchase price (3.1) -
Purchase of marketable securities (61.6) (279.6)
Proceeds from sales of marketable securities 250.1 391.9
Purchase of fixed assets (734.0) (559.4)
Due from affiliate (3,663.0) -
Increase in other assets (317.5) (28.5)
-------- --------
Net cash (used in) investing activities (7,998.9) (675.0)
FINANCING ACTIVITIES
Cash released from escrow 77.5 -
Proceeds from borrowings, net of financing costs 5,298.3 320.4
Principal payments (1,018.6) (3.2)
Proceeds from issuance of preferred stock and warrants - 500.0
Proceeds from issuance of redeemable preferred stock 1,850.0 -
Proceeds from exercise of stock options and warrants 37.3 24.3
Contribution from NTL Incorporated .5 -
-------- --------
Net cash provided by financing activities 6,245.0 841.5
Effect of exchange rate changes on cash (29.6) (17.3)
-------- --------
(Decrease) increase in cash and cash equivalents (2,035.0) 195.3
Cash and cash equivalents at beginning of period 2,597.2 736.3
-------- --------
Cash and cash equivalents at end of period $ 562.2 $ 931.6
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest exclusive of amounts
capitalized $ 188.9 $ 72.3
Income taxes paid - -
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Accretion of dividends and discount on preferred stock $ 20.1 $ 17.5
Conversion of Convertible Notes, net of unamortized deferred
financing costs - 268.6
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 six months ended June 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>
JUNE 30, DECEMBER 31,
2000 1999
-------- --------
(unaudited)
(in millions)
<S> <C> <C>
Operating equipment $6,166.0 $5,111.3
Other equipment 737.0 715.2
Construction-in-progress 1,081.0 669.4
-------- --------
7,984.0 6,495.9
Accumulated depreciation (1,169.4) (898.2)
-------- --------
$6,814.6 $5,597.7
======== ========
</TABLE>
Depreciation expense for the six months ended June 30, 2000 and 1999 was $326.1
million and $212.0 million, respectively. Depreciation expense for the three
months ended June 30, 2000 and 1999 was $174.9 million and $113.1 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>
JUNE 30, DECEMBER 31,
2000 1999
-------- --------
(unaudited)
(in millions)
<S> <C> <C>
Goodwill, net of accumulated amortization of $345.2
(2000) and $197.0 (1999) $4,889.9 $2,543.5
License acquisition costs, net of accumulated
amortization of $177.5 (2000) and $141.7 (1999) 181.2 225.0
Customer lists, net of accumulated amortization of
$47.1 (2000) and $30.9 (1999) 131.4 159.3
-------- --------
$5,202.5 $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 $3,528.2 million, including costs incurred of $17.9 million, exceeded the
estimated fair value of net tangible assets acquired by $2,583.9 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 six months
ended June 30, 2000 and 1999 assuming consummation of these transactions as of
January 1, 1999 is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
2000 1999
-------- --------
(in millions)
<S> <C> <C>
Total revenue $1,166.0 $ 921.6
Net (loss) (1,049.2) (872.8)
</TABLE>
Amortization of intangible and other assets charged to expense for the six
months ended June 30, 2000 and 1999 was $239.2 million and $119.7 million,
respectively. Amortization of intangible and other assets charged to expense for
the three months ended June 30, 2000 and 1999 was $140.8 million and $76.9
million, respectively.
9
<PAGE> 11
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries Notes
to Condensed Consolidated Financial Statements (unaudited) (continued)
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 .
NOTE F - LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 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 2,693.0 -
Cablecom:
Term Loan Facility 1,653.5 -
Revolving Facility 104.1 -
Other 25.3 -
NTL Communications:
12-3/4% Senior Deferred Coupon Notes 277.8 268.1
11-1/2% Senior Deferred Coupon Notes 983.9 930.4
10% Senior Notes 400.0 400.0
9-1/2% Senior Sterling Notes, less unamortized discount 189.0 201.4
10-3/4% Senior Deferred Coupon Sterling Notes 340.1 343.7
9-3/4% Senior Deferred Coupon Notes 999.5 952.8
9-3/4% Senior Deferred Coupon Sterling Notes 348.8 354.4
11-1/2% Senior Notes 625.0 625.0
12-3/8% Senior Deferred Coupon Notes 304.7 287.0
7% Convertible Subordinated Notes 599.3 599.3
Variable Rate Redeemable Guaranteed Loan Notes - 76.8
9-1/4% Senior Euro Notes 238.6 252.3
9-7/8% Senior Euro Notes 334.0 353.2
11-1/2% Senior Deferred Coupon Euro Notes 122.9 123.1
NTL Triangle:
11.2% Senior Discount Debentures 496.8 467.3
Other 6.1 8.0
Diamond:
13-1/4% Senior Discount Notes 285.1 285.1
11-3/4% Senior Discount Notes 503.9 476.2
10-3/4% Senior Discount Notes 354.8 336.9
10% Senior Sterling Notes 204.7 218.1
9-1/8% Senior Notes 110.0 110.0
Other 9.2 11.5
--------- ---------
13,410.1 8,880.6
Less current portion 5.4 82.6
--------- ---------
$13,404.7 $ 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, borrowed pound sterling 2,376.0 million ($3,602.7 million) under
its pound sterling 2,500.0 million ($3,790.8 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 2,847.3 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 June 30, 2000 is pound sterling 2,333.0 million ($3,537.5 million)
due from ConsumerCo to NTL Business. In June 2000, NTL Business repaid pound
sterling 600.0 million ($909.7 million). 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 rate at June 30, 2000 was 8.21%. The unused portion of the commitment
is available for refinancing ConsumerCo indebtedness and for working 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 ($1,653.5 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 rate at June 30, 2000 was 5.638%.
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 ($857.4 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 June 30, 2000, Cablecom had borrowed CHF 170.0
million ($104.1 million) under the revolving loan facility with an effective
rate of 5.86%. 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.
NTL Communications Limited ("NTLCL"), a wholly-owned indirect subsidiary of the
Company, entered into a pound sterling 1,300.0 million ($1,971.2 million) credit
agreement with a group of banks dated May 30, 2000. As of June 30, 2000, no
amounts have been 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 IRpound sterling 60.0 million ($72.5
million), plus accrued and unpaid interest using cash held in escrow.
11
<PAGE> 13
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries Notes
to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE G - COMPREHENSIVE LOSS
The Company's comprehensive loss for the three months ended June 30, 2000 and
1999 was $(747.9) million and $(441.3) million, respectively. The Company's
comprehensive loss for the six months ended June 30, 2000 and 1999 was
$(1,255.9) million and $(785.8) 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>
Six months ended June 30, 2000
Revenues $ 110.6 $ 596.2 $ 365.9 $ - $ 1,072.7
EBITDA (1) 58.3 164.2 114.7 (190.0) 147.2
Six months ended June 30, 1999
Revenues $ 89.7 $ 365.3 $ 218.6 $ - $ 673.6
EBITDA (1) 52.8 100.6 46.7 (130.2) 69.9
Total assets
June 30, 2000 $ 673.4 $ 9,710.4 $ 1,349.4 $ 5,697.0 $17,430.2
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 losses.
The reconciliation of segment combined EBITDA to loss before income tax benefit
is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
2000 1999
-------- --------
<S> <C> <C>
Segment Combined EBITDA $ 147.2 $ 69.9
(Add) Deduct:
Franchise fees - 14.6
Other charges 13.7 -
Corporate expenses 20.1 13.7
Depreciation and amortization 565.3 331.7
Interest and other income (45.8) (20.7)
Interest expense 448.9 298.6
Foreign currency transaction losses 115.0 10.9
-------- --------
1,117.2 648.8
-------- --------
(Loss) before income tax benefit $ (970.0) $ (578.9)
======== ========
</TABLE>
12
<PAGE> 14
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)
NOTE I - COMMITMENTS AND CONTINGENT LIABILITIES
At June 30, 2000, the Company was committed to pay approximately $280.0 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 June 30, 2000, the aggregate commitment was pound
sterling 65.0 million ($98.6 million). In addition, Premium TV Limited expects
(a) to pay approximately pound sterling 109.0 million ($165.3 million) per annum
for a three-year license from the British Football Association's Premier League
to televise and offer 40 Premier League matches live, on a pay-per-view basis in
the course of a season beginning at the start of the 2001/2 season, and (b) to
pay fees of up to pound sterling 65.0 million ($98.6 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, which is payable in shares of NTL
Incorporated redeemable preferred stock.
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
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:
<TABLE>
<CAPTION>
===========================================================================================================
CABLE TELEVISION AND TELEPHONY CUSTOMERS AS OF JUNE 30, 2000
-----------------------------------------------------------------------------------------------------------
"Original" UK and Continental
NTL(1) Ireland (2) Europe(3) Total
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Homes in Franchise (4) 2,090,000 5,768,100 1,861,000 7,629,100
-----------------------------------------------------------------------------------------------------------
Homes Passed 1,392,500 4,405,600 1,859,600 6,265,200
-----------------------------------------------------------------------------------------------------------
Homes marketed (Tel.) 1,199,500 3,273,800 0 3,723,800
-----------------------------------------------------------------------------------------------------------
Homes marketed (CATV) 1,199,500 3,901,000 1,668,100 5,569,100
-----------------------------------------------------------------------------------------------------------
Total customers 596,200 1,881,500 1,428,800 3,310,300
-----------------------------------------------------------------------------------------------------------
Dual 550,400 1,022,300 0 1,022,300
-----------------------------------------------------------------------------------------------------------
Telephone-only 21,300 315,800 0 315,800
-----------------------------------------------------------------------------------------------------------
Cable-only 24,500 543,400 1,428,800 1,972,200
-----------------------------------------------------------------------------------------------------------
Total RGUs(5) 1,146,600 2,903,800 1,428,800 4,332,600
-----------------------------------------------------------------------------------------------------------
Customer penetration 49.7% 48.2% 85.7% 59.4%
-----------------------------------------------------------------------------------------------------------
RGU penetration 95.6% 74.4% 85.7% 77.8%
-----------------------------------------------------------------------------------------------------------
Telephone penetration 47.7% 40.9% n/a 35.9%
-----------------------------------------------------------------------------------------------------------
Cable penetration 47.9% 40.1% 85.7% 53.8%
===========================================================================================================
</TABLE>
(1) Data for franchises which NTL has been developing since 1993
(2) Data for the following franchises: "Original NTL", Comcast UK, Diamond
Cable, ComTel, Cablelink and BT Cable
(3) Includes Cablecom (Switzerland) and the "1G Networks" (France). Cablecom
homes passed and homes marketed have been revised upward from the prior
quarter, however remain as a best estimate.
(4) UK and Ireland franchise home information from The Media Map Datafile
2000. Data for Switzerland and France is from internal estimates.
(5) An RGU is one cable television account or one telephone account; a dual
customer generates two RGUs.
The following table shows the cable television and telephony customer statistics
for "Original NTL":
<TABLE>
<CAPTION>
==================================================================================================================
CATV AND TELEPHONY CUSTOMERS FOR "ORIGINAL NTL"
------------------------------------------------------------------------------------------------------------------
06/30/2000 03/31/2000 12/31/1999 12/31/1998 12/31/1997
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total customers 596,200 572,200 552,900 471,000 321,300
------------------------------------------------------------------------------------------------------------------
Homes Marketed 1,199,500 1,171,300 1,145,600 1,064,600 810,000
------------------------------------------------------------------------------------------------------------------
Customer penetration 49.7% 48.9% 48.3% 44.2% 39.7%
------------------------------------------------------------------------------------------------------------------
RGU penetration 95.6% 94.0% 92.9% 85.0% 75.1%
------------------------------------------------------------------------------------------------------------------
Telephone penetration 47.7% 46.7% 46.2% 42.3% 37.3%
------------------------------------------------------------------------------------------------------------------
Cable penetration 47.9% 47.3% 46.8% 42.7% 37.8%
------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 16
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
The following table shows the cable television and telephony customer statistics
for Comcast UK ("NTL Triangle"), ComTel and Diamond Cable, acquired in late 1998
to early 1999:
<TABLE>
<CAPTION>
==========================================================================================
CATV AND TELEPHONY CUSTOMERS
(COMCAST UK, COMTEL AND DIAMOND)
------------------------------------------------------------------------------------------
06/30/2000 12/31/1999 6/30/1999
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total customers 861,200 799,700 739,700
------------------------------------------------------------------------------------------
Customer penetration 40.2% 37.4% 35.7%
------------------------------------------------------------------------------------------
RGU penetration 62.2% 57.2% 53.6%
------------------------------------------------------------------------------------------
Telephone penetration 36.9% 34.6% 32.6%
------------------------------------------------------------------------------------------
Cable penetration 26.4% 24.5% 22.8%
------------------------------------------------------------------------------------------
</TABLE>
The following table shows the Internet operating statistics for NTL:
<TABLE>
<CAPTION>
==============================================================================================================
INTERNET CUSTOMERS AS OF JUNE 30, 2000
--------------------------------------------------------------------------------------------------------------
WHICH?
NTL DIRECT VIRGINNET ONLINE SWITZERLAND TOTAL
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total customers 128,300 708,900 60,000 160,900 1,058,100
-----------------------------------------------------------------------------------------=====================
</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. The results of these
businesses are not included in the 1999 results except for the results of
operations of Diamond and NTL Australia from the dates of acquisition.
Three Months Ended June 30, 2000 and 1999
Residential telecommunications and television revenues increased to $342.7
million from $196.5 million as a result of acquisitions and from customer growth
that increased the Company's current revenue stream. The 2000 and 1999 revenue
includes $156.8 million and $37.0 million, respectively, from acquired
companies. The Company expects its customer base to continue to increase which
will drive further revenue growth as the Company completes the construction of
its broadband network past the remaining homes in its franchise areas.
15
<PAGE> 17
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
National and international telecommunications revenues increased to $184.4
million from $112.8 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 $42.6 million and $9.1
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 increased to $54.7 million from $50.9
million due to revenues of $13.6 million, and $10.1 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 $301.2 million from $167.8 million as a result
of increases in interconnection costs and programming costs due to customer
growth. The 2000 and 1999 expense includes $96.7 million and $23.1 million,
respectively, from acquired companies.
Selling, general and administrative expenses increased to $202.1 million from
$155.1 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 $67.1 million
and $16.1 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 $13.7 million in 2000 were incurred for this integration effort.
Corporate expenses increased to $9.9 million from $8.5 million due to an
increase in various overhead costs.
Depreciation and amortization expense increased to $315.7 million from $190.0
million due to an increase in depreciation of telecommunications and CATV
equipment. The 2000 and 1999 expense includes $153.8 million and $61.6 million,
respectively, from acquired companies, including amortization of acquisition
related intangibles.
16
<PAGE> 18
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Interest expense increased to $242.9 million from $167.7 million due to the
issuance of additional debt in 1999, and the increase in the accretion of
original issue discount on the deferred coupon notes. The 2000 and 1999 expense
includes $84.8 million and $39.6 million, respectively, from acquired companies.
Interest of $120.4 million and $32.0 million was paid in the three months ended
June 30, 2000 and 1999, respectively.
Foreign currency transaction losses increased to $86.7 million from $21.6
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.
Six Months Ended June 30, 2000 and 1999
Residential telecommunications and television revenues increased to $596.2
million from $365.3 million as a result of acquisitions and from customer growth
that increased the Company's current revenue stream. The 2000 and 1999 revenue
includes $220.9 million and $49.3 million, respectively, from acquired
companies. The Company expects its customer base to continue to increase which
will drive further revenue growth as the Company completes the construction of
its broadband network past the remaining homes in its franchise areas.
National and international telecommunications revenues increased to $365.9
million from $218.6 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 $89.1 million and $12.6
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.
Broadcast transmission and other revenues increased to $110.6 million from $89.7
million due to revenues of $28.4 million and $10.1 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 $542.1 million from $329.4 million as a result
of increases in interconnection costs and programming costs due to customer
growth. The 2000 and 1999 expense includes $159.3 million and $28.6 million,
respectively, from acquired companies.
17
<PAGE> 19
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
Selling, general and administrative expenses increased to $383.4 million from
$274.3 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 $107.9 million
and $21.7 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 $14.6 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 $13.7 million in 2000 were incurred for this integration effort.
Corporate expenses increased to $20.1 million from $13.7 million due to an
increase in various overhead costs.
Depreciation and amortization expense increased to $565.3 million from $331.7
million due to an increase in depreciation of telecommunications and CATV
equipment. The 2000 and 1999 expense includes $236.2 million and $80.1 million,
respectively, from acquired companies, including amortization of acquisition
related intangibles.
Interest expense increased to $448.9 million from $298.6 million due to the
issuance of additional debt in 1999, and the increase in the accretion of
original issue discount on the deferred coupon notes. The 2000 and 1999 expense
includes $126.7 million and $52.3 million, respectively, from acquired
companies. Interest of $224.0 million and $92.2 million was paid in the six
months ended June 30, 2000 and 1999, respectively.
Foreign currency transaction losses increased to $115.0 million from $10.9
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.
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
$1,700.0 million from July 1, 2000 to June 30, 2001. The Company's commitments
at June 30, 2000 for equipment and services through June 30, 2001 are included
in the anticipated requirements. The Company had $562.2 million in cash on hand
at June 30, 2000. The Company expects to utilize a portion of its bank
facilities to fund the balance of these requirements.
18
<PAGE> 20
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
NTL Business Limited ("NTL Business"), a wholly-owned subsidiary of the Company,
has the option to draw on the unused portion of its pound sterling 2,500.0
million ($3,790.8 million) commitment amounting to pound sterling 724.0 million
($1,097.8 million) at June 30, 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 and subsidiaries, NTL (Triangle) LLC ("NTL Triangle") and subsidiaries
and certain other entities are excluded from the UK Group.
NTL Communications Limited ("NTLCL"), a wholly-owned indirect subsidiary of the
Company, entered into a pound sterling 1,300.0 million ($1,971.2 million) credit
agreement with a group of banks dated May 30, 2000. As of June 30, 2000, no
amounts have been 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.
Cablecom has the option to draw on a revolving loan facility of up to CHF
1,400.0 million ($857.4 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
June 30, 2000, Cablecom had borrowed CHF 170.0 million ($104.1 million) under
the revolving loan facility. 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.
NTL Triangle, an indirect wholly-owned subsidiary of the Company, sold its 50%
ownership interest in Cable London PLC in November 1999 for pound sterling 428.0
million ($649.0 million) in cash. The sale of the Cable London PLC interest is
an "Asset Sale" for purposes of the NTL, Communications Corp. ("NTL
Communications") Indentures for certain of its notes. NTL Communications will
need to use an amount equal to the proceeds from the sale to repay subsidiary
debt, invest in "Replacement Assets" or make an offer to redeem certain of its
notes by November 2000. NTL Communications expects to satisfy this requirement
by investing in fixed assets in the United Kingdom and Ireland which are
"Replacement Assets".
19
<PAGE> 21
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
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 June 30, 2000, the aggregate commitment was pound sterling 65.0 million
($98.6 million). In addition, Premium TV Limited expects (a) to pay
approximately pound sterling 109.0 million ($165.3 million) per annum for a
three-year license from the British Football Association's Premier League to
televise and offer 40 Premier League matches live, on a pay-per-view basis in
the course of a season beginning at the start of the 2001/2 season, and (b) to
pay fees of up to pound sterling 65.0 million ($98.6 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, which is payable in shares of NTL
Incorporated redeemable preferred stock.
The Company is highly leveraged. The accreted value at June 30, 2000 of the
Company's consolidated long-term indebtedness is $13,404.7 million, representing
approximately 94% 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;
NTL Business:
(2) Credit Agreement of pound sterling 2,500.0 million ($3,790.8 million), of
which pound sterling 1,776.0 million ($2,693.0 million) was outstanding at
June 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 June 30, 2000 was 8.21%, 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 ($1,653.5 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 rate of 5.638%
at June 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;
20
<PAGE> 22
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
(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 ($189.5 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 ($454.9 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 ($500.4 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;
(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 ($238.6 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 ($334.0 million), interest payable
semiannually from May 15, 2000, redeemable at the Company's option on or
after November 15, 2004;
21
<PAGE> 23
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
(16) 11-1/2% Senior Deferred Coupon Euro Notes due November 15, 2009, principal
amount at maturity of euro 210.0 million ($200.4 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 ($204.7 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.
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.
22
<PAGE> 24
NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
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 $(251.5) million and $46.1
million in the six months ended June 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 $734.0 million in 2000 and $559.4 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 $3,469.8 million, proceeds from
borrowings, net of financing costs of $5,298.3 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 $3,663.0 million is due from ConsumerCo to NTL Business as a
result of borrowings by NTL Business for the ConsumerCo acquisition.
The cash used for other assets of $317.5 million in 2000 was primarily for
investments in and loans to unconsolidated entities. Included in this amount is
a $59.3 million deposit for financing costs which was returned to the Company in
July 2000.
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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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There have been no material changes in the reported market risks since the end
of the most recent fiscal year.
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NTL (Delaware), Inc. (formerly NTL Incorporated) and Subsidiaries
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 11, 2000, NTL (Delaware), Inc. held the second part of a special
meeting of stockholders. The first part of this meeting was held on March 21,
2000. The following management proposals were adopted: (1) the share issuance of
NTL common stock to the shareholders of Cable & Wireless Communications plc in
exchange for ConsumerCo and (2) the amendment of the Restated Certificate of
Incorporation of NTL to grant a Board seat right to Cable and Wireless plc. The
stockholders approved the first proposal by a vote of 121,489,330 shares in
favor, 25,270 shares against and 377,640 shares abstaining from voting. The
stockholders approved the second proposal by a vote of 121,413,225 shares in
favor, 61,173 shares against and 417,842 shares abstaining from voting.
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 June 30, 2000, the Company filed the
following reports on Form 8-K:
(i) Report dated April 27, 2000 (filed April 27, 2000) reporting
under Item 5, Other Events, that the Company and France
Telecom confirmed that NTL Mobile, their joint venture, has
withdrawn from the UMTS auction.
(ii) Report dated May 4, 2000 (filed May 4, 2000) reporting under
Item 5, Other Events, that the Company has prepared unaudited
pro forma financial data in connection with its acquisitions
of Cablecom and ConsumerCo and under Item 7, Financial
Statements, Pro Forma Financial Information and Exhibits,
unaudited pro forma financial data.
(iii) Report dated March 16, 2000 (filed May 10, 2000) reporting
under Item 2, Acquisition or Disposition of Assets, that the
Company amended its Current Report on Form 8-K, dated March
16, 2000, by filing financial statements of Cablecom Holdings
AG and certain pro forma financial information for the
registrant and under Item 7, Financial Statements, Pro Forma
Financial Information and Exhibits, the consolidated financial
statements of Cablecom Holdings AG and subsidiaries for the
year ended December 31, 1999 and the unaudited pro forma
financial data of the Company and its subsidiaries.
(iv) Report dated May 10, 2000 (filed May 16, 2000) reporting under
Item 5, Other Events, that the Secretary of State for Trade
and Industry had approved France Telecom's investment in the
Company, that the Company made a $6.0 million equity
investment in Diva Systems Corporation and that the Company
announced its first quarter results.
(v) Report dated May 18, 2000 (filed May 19, 2000), reporting
under Item 5, Other Events, that the Company completed a
corporate restructuring to create a holding company structure.
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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: August 10, 2000 By: /s/ Barclay Knapp
-------------------------
Barclay Knapp
President and Chief Executive Officer
Date: August 10, 2000 By: /s/ Gregg N. Gorelick
--------------------------
Gregg N. Gorelick
Vice President-Controller
(Principal Accounting Officer)
26
