<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-4
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) May 17, 2000
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NTL INCORPORATED
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-30673 13-4105887
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
110 East 59th Street, New York, New York 10022
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code: (212) 906-8440
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
The registrant hereby amends its Current Report on Form 8-K, dated May
30, 2000, as amended by Form 8-K/A, dated July 13, 2000, Form 8-K/A-2, dated
August 25, 2000 and Form 8-K/A-3, dated August 30, 2000, by filing financial
statements of the acquired business, CWC ConsumerCo a division of NTL (CWC)
Limited (formerly Cable & Wireless Communications Limited).
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements
CWC ConsumerCo a division of NTL (CWC) Limited (formerly Cable &
Wireless Communications Limited) Report and financial statements as of
March 31, 1999 and 2000 and for the three years ended March 31, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NTL INCORPORATED
(Registrant)
By: /s/ Gregg N. Gorelick
--------------------------
Name: Gregg N. Gorelick
Title: Vice President-Controller
Dated: October 6 , 2000
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CWC ConsumerCo a division of
NTL (CWC) Limited
(formerly Cable & Wireless Communications Limited)
Report and financial statements as of March 31, 1999
and 2000 and for the three years ended March 31, 2000
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FINANCIAL STATEMENTS OF CWC CONSUMERCO
REPORT OF INDEPENDENT AUDITORS
TO THE DIRECTORS OF NTL INCORPORATED
We have audited the accompanying financial statements of CWC ConsumerCo as of
March 31, 1999 and 2000 and for the three years ended March 31, 2000 which
have been prepared on the bases and in accordance with the accounting
policies set out therein under the historical cost convention.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Directors of ntl (CWC) Limited are responsible for the preparation of the
financial statements in accordance with the applicable United Kingdom law and
accounting standards. Our responsibilities, as independent auditors, are
established by the United Kingdom Auditing Practices Board and by our
profession's ethical guidance.
BASIS OF OPINION
We conducted our audit in accordance with generally accepted auditing standards
in the United States. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements
made by the Directors in the preparation of the financial statements and of
whether the accounting policies are appropriate to the circumstances of CWC
ConsumerCo, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
other irregularity or error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information in the financial
statements.
OPINION
In our opinion, the financial statements referred to above present fairly, in
all material respects, the state of affairs of CWC ConsumerCo as at March 31,
1999 and 2000 and of CWC ConsumerCo's results and cash flows for each of the
three years ended March 31, 2000 in accordance with the bases of preparation
detailed in the accompanying financial statements, applied using accounting
principles generally accepted in the United Kingdom.
RECONCILIATION TO US GAAP
Accounting practices used by CWC ConsumerCo in preparing the accompanying
financial statements conform with generally accepted accounting principles in
the United Kingdom, but do not conform with generally accepted accounting
principles in the United States. A description of these differences and a
reconciliation of net loss and shareholders' equity to generally accepted
accounting principles in the United States is set out in Note 35.
Arthur Andersen
Chartered Accountants
London
United Kingdom
6th October 2000
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COMBINED PROFIT & LOSS ACCOUNT
For the year ended March 31
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Note 2000 1999 1998
Pound Sterling m Pound Sterling m Pound Sterling m
<S> <C> <C> <C> <C>
TURNOVER
Continuing operations 694 688 104
Acquisitions - - 446
4 694 688 550
OPERATING COSTS
Outpayments and other cost of sales 5 (269) (251) (188)
GROSS PROFIT 425 437 362
Millennium and NCNC costs 5, 6 (12) (16) (2)
Other operating expenses (net) 5 (270) (241) (197)
Depreciation and amortisation 5, 7 (156) (135) (103)
OPERATING (LOSS) / PROFIT
Continuing operations (13) 45 49
Acquisitions - - 11
TOTAL OPERATING (LOSS) / PROFIT (13) 45 60
Costs of fundamental reorganisation 10 - - (96)
Release of surplus fundamental reorganisation provision 2 - -
Profit on disposal of tangible fixed assets 1 - -
Net interest payable 11 (190) (179) (121)
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION 7 (200) (134) (157)
Taxation 12 34 - -
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (166) (134) (157)
Minority interests 1 (1) -
NET LOSS - TRANSFER TO RESERVES (165) (135) (157)
=============================================================================================================================
</TABLE>
As more fully explained in Note 2, CWC ConsumerCo did not operate as a separate
legal or reporting entity throughout the period. Accordingly the above profit
and loss account may not be representative of its future results.
All operations are continuing.
There are no recognised gains or losses other than those reflected in the
combined profit and loss account and accordingly, no statement of total
recognised gains and losses is presented.
The accompanying notes are an integral part of this combined profit and loss
account.
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COMBINED BALANCE SHEET
As at March 31
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Note 2000 1999
Pound Sterling m Pound Sterling m
<S> <C> <C> <C>
FIXED ASSETS
Intangible assets 13 8 8
Tangible assets 14 3,167 2,860
3,175 2,868
CURRENT ASSETS
Debtors:
Due within one year 15 131 67
Due after one year 15 68 69
Debtors within receivables securitisation 16
Gross debtors 56 85
Non-returnable proceeds (29) (62)
27 23
Cash at bank and in hand 87 127
313 286
CREDITORS: amounts falling due within one year 17 (826) (487)
NET CURRENT LIABILITIES (513) (201)
TOTAL ASSETS LESS CURRENT LIABILITIES 2,662 2,667
CREDITORS: amounts falling due after more than one year 18 (3,075) (2,916)
PROVISIONS FOR LIABILITIES AND CHARGES 19 (6) (14)
NET LIABILITIES (419) (263)
CAPITAL AND RESERVES
Called up share capital 21 748 746
Share premium 22 17 9
Other reserves 22 (1,199) (1,034)
Equity shareholders' funds (434) (279)
Equity minority interest 15 16
(419) (263)
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
APPROVED AND SIGNED ON BEHALF OF THE BOARD
6th October 2000
By: /s/ David W. Kelham
-----------------------------
Name: David W. Kelham
Title: Group Commercial Director
ntl Group Ltd.
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COMBINED CASH FLOW STATEMENT
For the year ended March 31
<TABLE>
<CAPTION>
Note 2000 1999 1998
Pound Pound Pound
Sterling m Sterling m Sterling m
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<S> <C> <C> <C> <C>
Net cash (outflow)/ inflow before fundamental reorganisation costs and IT (89) 220 386
outsource
Outflow related to fundamental reorganisation costs and IT outsource (6) (41) (30)
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NET CASH (OUTFLOW) / INFLOW FROM OPERATING ACTIVITIES 27 (95) 179 356
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RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 5 15 10
Interest paid (224) (227) (144)
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NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (219) (212) (134)
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TAXATION
UK Corporation tax paid - - (16)
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TAX PAID - - (16)
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CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (452) (375) (529)
Interest bearing deposit (net of VAT) - (109) -
Sale of tangible fixed assets 19 57 -
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NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (433) (427) (529)
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ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings, net of cash acquired 28 - - 88
Disposal of business 28 - 4 -
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NET CASH INFLOW FROM ACQUISITIONS AND DISPOSALS - 4 88
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EQUITY DIVIDENDS PAID
Ordinary dividends paid - - (9)
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CASH OUTFLOW BEFORE FINANCING (747) (456) (244)
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FINANCING
Increase in bank and other loans 932 669 3,257
Increase in share capital 1 - -
Net proceeds from issue of loan notes - 433 1,585
Repayment of debt (222) (736) (4,448)
Capital element of finance lease rental payments (4) (12) (6)
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(DECREASE) / INCREASE IN CASH 29 (40) (102) 144
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of this combined cash flow
statement.
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RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
For the year ended March 31
<TABLE>
<CAPTION>
Note 2000 1999 1998
Pound Pound Pound
Sterling m Sterling m Sterling m
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loss for the financial year (165) (135) (157)
Share issues 21, 22 10 10 1,957
Goodwill acquired and written off during the year - - (2,006)
Other movements on reserves - (31) (7)
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Net decrease in equity shareholders' funds (155) (156) (213)
Equity shareholders' funds at beginning of year (279) (123) 90
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EQUITY SHAREHOLDERS' FUNDS AT END OF YEAR (434) (279) (123)
=======================================================================================================================
</TABLE>
The accompanying notes are an integral part of this reconciliation of movements
in equity shareholders' funds.
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<PAGE> 9
1 BACKGROUND
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On July 26, 1999, Cable and Wireless plc ("Cable and Wireless"), NTL
Incorporated ("NTL") and Cable & Wireless Communications (now ntl
(CWC) Limited and hereafter "ntl (CWC)") announced that they had agreed
to propose a restructuring of ntl (CWC) to its shareholders. The
restructuring was agreed by the shareholders, and completed on May
30, 2000.
As part of the restructuring, ntl (CWC), which was a 52.8% owned
subsidiary of Cable and Wireless was separated into its
residential cable, business cable, indirect residential telephony,
residential internet and digital television development and services
businesses, referred to as CWC ConsumerCo, and its corporate,
business, internet protocol and wholesale operations, referred to as
CWC Data Co. NTL indirectly acquired all of CWC ConsumerCo and Cable
and Wireless indirectly acquired the interest in CWC DataCo. which
was not already attributable to it, thereby achieving 100%
ownership of CWC DataCo. These two acquisitions, collectively, are
referred to as the "Transaction".
2 BASIS OF PREPARATION
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a) STRUCTURE OF FINANCIAL STATEMENTS
The financial statements, have been prepared on the basis set out
within the "Basis of preparation" below. In the financial statements,
ntl (CWC) and its subsidiary undertakings, as appropriate, are referred
to as "ntl (CWC) group".
The activities of CWC ConsumerCo were carried out as an integral part
of the ntl (CWC) group and as such the operations comprising CWC
ConsumerCo were carved out from the financial statements of the ntl
(CWC) group. Consequently, certain revenues, costs, assets and
liabilities previously reported within legal entities, comprising the
ntl (CWC) group, have been allocated to CWC ConsumerCo to reflect the
assets and liabilities attributable to CWC ConsumerCo and the results
of such operations for the periods shown.
As a result of the carve out, the combined balance sheet presents an
"Other reserves" balance for CWC ConsumerCo, consistent with the fact
that CWC ConsumerCo did not operate as a standalone group. Accordingly,
the net liabilities position is presented with an equal and opposite
equity shareholders' funds figure after including this "Other reserves"
balance which represents the investment in CWC ConsumerCo held by the
ntl (CWC) group.
The financial statements have been prepared specifically in connection
with the acquisition of CWC ConsumerCo by NTL and consequently do not
contain certain reports, disclosures or other matters that would be
required under the UK Companies Act 1985.
Further, the financial statements do not necessarily reflect the terms
of the Transaction agreement referred to in Note 1 above.
b) BASIS OF PREPARATION
REVENUE
All CWC ConsumerCo's revenues are specifically identifiable from the
total revenues of the ntl (CWC) group.
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SPECIFICALLY ATTRIBUTABLE COSTS, ASSETS AND LIABILITIES
Most of the costs, assets and liabilities reflected in the financial
statements are specifically identifiable to CWC ConsumerCo. Such
specific costs, assets and liabilities have been allocated directly to
CWC ConsumerCo.
- Outpayments
Outpayments and other cost of sales figures represent third
party costs incurred by CWC ConsumerCo.
ALLOCATION OF INDIRECTLY ATTRIBUTABLE COSTS, ASSETS AND LIABILITIES
Where costs, assets and liabilities were incurred for the benefit of
CWC ConsumerCo, but could not be specifically identified, an allocation
has been made.
Indirectly attributable costs, assets and liabilities have been
allocated using bases which the Directors believe provide an
appropriate mechanism to carve out CWC ConsumerCo's financial results
for the three years ended March 31, 2000 and financial position as at
March 31, 1999 and 2000, from the ntl (CWC) group financial statements.
COSTS
Particular indirectly attributable costs have been allocated
consistently on the following bases unless otherwise stated:
- Net operating expenses - three years ended March 31, 2000
Net operating expenses consist primarily of network operations
and central ntl (CWC) group support costs, principally those
of the Finance and IT departments. A significant element of
these costs are staff related.
- Network operations costs have been allocated based
upon the relative usage of the ntl (CWC) group
telecommunications network by those products and
services provided by CWC ConsumerCo.
- Staff and related costs have been allocated based
upon management's estimation of the relative
proportion of individuals' time providing services to
CWC ConsumerCo. The Directors believe that this
provides a fair allocation of costs to CWC
ConsumerCo.
- IT department costs relating to general IT support
and services have been allocated in the proportion of
CWC ConsumerCo headcount, including allocated
headcount, to total ntl (CWC) group headcount.
Specific IT projects and systems have been allocated
on the basis of estimated usage by CWC ConsumerCo.
- Finance department costs have been allocated in the
proportion of CWC ConsumerCo headcount (including
allocated headcount) to total ntl (CWC) group
headcount. In the year ended March 31, 1998 these
costs were allocated on the basis of revenue due to
the lack of retrospective information regarding
Finance department headcount. The Directors believe
that despite the different bases applied the overall
allocation is appropriate.
- Facilities and other related costs have been
allocated based on relative usage by CWC ConsumerCo.
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- Depreciation
Depreciation for the three years ended 31 March 2000 has been
allocated consistent with the allocation of fixed assets to
CWC ConsumerCo.
ASSETS AND LIABILITIES
Particular indirectly attributable assets and liabilities have been
consistently allocated on the following bases as at March 31, 1999 and
2000 unless otherwise stated:
- Fixed assets
CWC ConsumerCo has allocated fixed asset additions and
disposals on the basis of management's estimate of relative
usage of those assets. The Directors believe this fairly
presents the historic asset base attributable to CWC
ConsumerCo.
- Trade creditors
Trade creditor amounts relate to operating and capital
expenditure. Where not specifically attributable, such amounts
have been allocated based on the allocation to CWC ConsumerCo
of net operating expenses and capital expenditure.
- Debt
Substantially all ntl (CWC)'s debt has been allocated to CWC
ConsumerCo on the basis that it is primarily used to fund CWC
ConsumerCo activities. See Note 18.
- Other assets and liabilities
Prepayments and accrued income and accruals and deferred
income amounts are attributable to specific CWC ConsumerCo
cost centres and where not specifically attributable, have
been allocated based on the allocation of the net operating
expenses to each respective cost centre.
LIMITATIONS ON USE OF FINANCIAL STATEMENTS
Because of the allocations referred to above and the proposed changes
in the structure and financing of CWC ConsumerCo going forward, these
financial statements should not be relied upon as being representative
of the future financial position or performance of CWC ConsumerCo. In
particular:
- Outpayments for all periods presented are not representative
of those amounts that will be incurred by CWC ConsumerCo in
the future as it will need to enter into arms' length
arrangements for the carriage and delivery of
telecommunications traffic and services either with CWC DataCo
and with other third parties.
- The operating costs attributed to CWC ConsumerCo for the year
ended March 31, 2000 are not representative of the costs it
will incur after the proposed transaction as they represent
the carve out of costs incurred by the ntl (CWC) group, which
was managed as an integrated business. The activities of CWC
ConsumerCo on a stand alone basis may be restructured
following the transaction which may result in certain costs
being duplicated, other costs being avoided altogether and yet
other costs being incurred. For this reason the reported
result for the year ended March 31, 2000 is not representative
of the amounts to be incurred by CWC ConsumerCo after the
Transaction.
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- In view of the refinancing and corporate restructuring of
the businesses, the debt, interest and taxation figures
included in these financial statements are not representative
of the amounts of those items for CWC ConsumerCo following
the Transaction.
3 STATEMENT OF ACCOUNTING POLICIES
--------------------------------------------------------------------------------
The financial statements have been prepared applying CWC ConsumerCo's
accounting policies and no adjustments have been made with respect to any
differences between these and NTL's accounting policies.
The principal accounting policies of CWC ConsumerCo, which have been applied
consistently throughout the three years ended March 31, 2000, unless
expressly stated otherwise, are as follows:
a) BASIS OF ACCOUNTING
The financial statements have been prepared applying accounting principles
generally accepted in the United Kingdom and on the historical cost basis.
The results of subsidiary undertakings acquired or disposed of during the
year are included from the date of their acquisition or up to the date of
their disposal, except for the acquisition of Mercury Communications
Limited which has been merger accounted for under the group reorganisation
provisions of FRS 6 "Acquisitions and mergers".
Intercompany sales and profits are eliminated fully.
b) TURNOVER AND REVENUE RECOGNITION
Turnover, which excludes value added tax, represents the amount receivable
in respect of services provided to customers in each year and is accounted
for on the accruals basis. At the end of each year adjustments are
recorded to defer revenue with respect to services invoiced in advance and
to accrue for unbilled services.
c) INTERCONNECTION WITH OTHER OPERATORS
When operators of other national and international telecommunications
networks carry traffic, the charges incurred are matched with the
associated revenues. All charges payable to, or by, overseas
telecommunications administrations are negotiated separately and are
subject to continuous review.
Charges payable by CWC ConsumerCo to British Telecommunications plc,
referred to as BT, for the conveyance of traffic and connections to the BT
network are subject to government regulation in the form of a
determination by OFTEL, the Office of Telecommunications. During 1998, the
basis for calculation of these charges changed from one based on the fully
allocated historic cost of providing the delivery mechanism on their
network, to one based upon the long-run incremental cost of providing that
service.
Up until September 30, 1997, OFTEL undertook a review, in the form of a
determination, after the end of each financial year, and for the half year
to September 30, 1997, to assess the bases used for the calculation of the
charges made in that year. Amendments were backdated to take effect from
April 1, in the year under review, but were accounted for in subsequent
financial periods.
Since October 1, 1997, the charging mechanism has been designed to reflect
the commercial considerations surrounding a competitive market. OFTEL has
set a framework of controls within which BT will have the price
flexibility to set its own charges. The degree of control depends on the
competitiveness of the services concerned.
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d) GOODWILL
With effect from April 1, 1998, goodwill arising on the acquisition of
subsidiary undertakings and businesses, being the difference between the
fair value of the purchase consideration and the fair value attributed to
the identifiable assets and liabilities acquired, is capitalised and
amortised in equal annual instalments through the profit and loss account
over the ntl (CWC)' Directors' estimate of its useful economic life.
CWC ConsumerCo periodically reviews events and changes in circumstances
to determine whether the recoverability of the carrying value of goodwill
should be reassessed. An impairment assessment is performed whenever
events or changes in circumstances indicate that the carrying amount may
not be recoverable.
As permitted under the transitional provisions in FRS 10, "Goodwill and
Intangible Assets", goodwill on acquisitions prior to April 1, 1998 is
dealt with as a movement on reserves. Where subsidiary undertakings are
wholly or partially disposed of during the year, goodwill that was written
off to reserves or has not been amortised through the profit and loss
account is charged to the profit and loss account.
e) TANGIBLE FIXED ASSETS AND DEPRECIATION
Tangible fixed assets are recorded at cost, which includes materials,
direct labour and other incremental costs applicable to the design,
construction and connection of the telecommunications and cable television
networks and equipment. Other incremental costs capitalised include all
costs of those departments responsible solely for design, construction and
connection. Where departments spend only part of their time on functions
directly connected with design, construction and connection, the relevant
proportion of total costs is capitalised. Costs which are initially
capitalised in projects under construction where the projects do not
become operational are written off to the profit and loss account, once it
is determined that the project will not become operational.
Costs of departments relating to revenue related operations such as direct
selling, marketing and other customer related departments, are not
capitalised.
CAPITALISATION OF INTEREST
Interest is capitalised as part of the cost of separately identifiable
major capital projects, up to the time that such projects are
substantially complete. The amount of interest capitalised is calculated
as the capitalisation rate multiplied by the weighted average carrying
amount of major capital projects under construction during the period.
DEPRECIATION
Depreciation is provided on the difference between the cost of tangible
fixed assets and the estimated residual value in equal annual instalments
over the estimated useful lives of the assets. These lives are as follows:
LAND AND BUILDINGS: LIVES
freehold buildings 40 years
leasehold land and buildings up to 40 years or term of lease if less
leasehold improvements remaining term of lease or expected
useful life of the improvements if less
COMMUNICATIONS NETWORK PLANT AND EQUIPMENT:
ducting and network construction 10 to 40 years
electronic equipment and cabling 10 to 20 years
other network plant and equipment 6 to 25 years
NON-NETWORK PLANT AND EQUIPMENT 3 to 10 years
Freehold land, where the cost is distinguishable from the cost of the
building thereon, is not depreciated.
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After a portion of the network is fully constructed and released to
operations, depreciation of the network commences either when target rates
of penetration are achieved or no later than one year after the release
date.
f) LEASED ASSETS
Where assets are financed by leasing agreements that give rights
approximating to ownership, the assets are treated as if they had been
purchased outright. The amount capitalised is the present value of the
minimum lease payments payable during the lease term. The corresponding
leasing commitments are shown as obligations to the lessor. Lease payments
are split between capital and interest elements using the annuity method.
Depreciation on the relevant assets and interest are charged to the profit
and loss account.
All other leases are operating leases and the annual rentals are charged
to operating profit on a straight line basis over the lease term.
g) FIXED ASSET INVESTMENTS
Fixed asset investments are stated at cost less provisions for impairment.
Any impairment is charged to the profit and loss account in the year in
which it is identified.
h) DEFERRED TAXATION
The charge for taxation is based on the results for the year and takes
into account taxation deferred because of timing differences between the
treatment of certain items for taxation and accounting purposes. CWC
ConsumerCo provides for deferred tax unless there is a reasonable
probability that the liability will not arise in the foreseeable future.
Where deferred tax is provided, the liability method is used. No deferred
tax assets are recognised in respect of accumulated tax losses.
i) PENSIONS
DEFINED CONTRIBUTION SCHEMES
Where CWC ConsumerCo companies through the ntl (CWC) group participate in
defined contribution pension schemes for their employees, the pension
costs charged to the profit and loss account represent contributions
payable during the year.
DEFINED BENEFIT SCHEMES
CWC ConsumerCo through the ntl (CWC) group also participates in a defined
benefit pension scheme operated by Cable and Wireless for certain
employees. The regular cost of providing benefits is charged to operating
profit over the service lives of the members of the scheme so as to
achieve a constant percentage of pensionable pay.
j) FOREIGN CURRENCIES
Transactions are translated into sterling at the rate of exchange ruling
on the date of the transaction. All outstanding monetary assets and
liabilities denominated in foreign currency are retranslated at the rates
ruling at the balance sheet date. Any exchange differences arising are
dealt with through the profit and loss account.
The results of overseas operations are translated at the average rate of
exchange during the period and their balance sheets at the rate ruling at
the balance sheet date. Exchange differences arising on translation of the
opening net assets and results of overseas operations are dealt with
through reserves. All other exchange differences are included in the
profit and loss account.
k) FORWARD EXCHANGE CONTRACTS AND INTEREST RATE SWAPS
CWC ConsumerCo through the ntl (CWC) group uses financial instruments,
including forward exchange contracts and interest rate swaps, in its
management of exchange rate and interest rate exposures. While these
instruments are subject to the risk of loss from changes in exchange rates
and interest rates, these losses would generally be offset by gains in the
related exposures.
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<PAGE> 15
Financial instruments are only used to hedge underlying economic
exposures. CWC ConsumerCo does not speculate in derivative financial
instruments.
Realised and unrealised gains and losses on forward contracts which hedge
firm third party commitments are recognised in the profit and loss account
in the same period as the gain or loss on the underlying transaction. Net
interest paid or received on interest rate swaps is included in interest
expense on an accruals basis.
l) CAPITAL INSTRUMENTS AND FINANCING COSTS
Capital instruments are accounted for and classified as equity or
non-equity share capital, equity or non-equity minority interests or debt
according to their form. The costs of issue of non-equity and debt capital
instruments are charged to the profit and loss account on an annual basis
over the life of the instruments at a constant rate on the carrying
amount. Where permitted by law, a corresponding amount is subsequently
transferred from the share premium account to retained earnings. The cost
of issue of equity instruments is written off against the share premium
account.
m) PROVISIONS
CWC ConsumerCo accounts for provisions in accordance with FRS12
"Provisions and Contingencies". Consequently, provisions are only
recognised when CWC ConsumerCo has a legal or constructive obligation to
transfer economic benefits as a result of past events. To the extent that
the provisions are surplus to requirements they are released in the profit
and loss account.
n) IT OUTSOURCE
CWC ConsumerCo through the ntl (CWC) group has entered into a 10 year
contract for the provision of commercial IT services. Certain costs are
paid in advance of the benefit received. These costs are deferred and
amortised over the period during which benefit is derived. The charge for
the provision of the consolidated billing system is amortised over the
expected levels of billing activity.
o) MILLENNIUM AND NATIONAL CODE NUMBER CHANGE COSTS
Costs incurred in modifying existing software to achieve Year 2000
compliance are normally written off to the profit and loss account in the
period in which they are incurred. However, to the extent that any
expenditure not only achieves compliance, but also represents an
enhancement of an asset's service potential, it is capitalised and
depreciated over the estimated remaining useful life of the asset, in
accordance with Urgent Issues Task Force Abstract 20, "Year 2000:
Accounting and Disclosures".
Costs incurred in modifying equipment in preparation for National Code
Number Changes are normally written off to the profit and loss account in
the period in which they are incurred. However, to the extent that any
expenditure not only achieves the necessary modification but also
represents an enhancement of an asset's service potential, it is
capitalised and depreciated over the estimated remaining useful life of
the asset.
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4 TURNOVER
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Turnover derives from:
- local, national and international telecommunications and cable
television services; and
- the sale and rental of telecommunications equipment.
Turnover comprised the following:
<TABLE>
<CAPTION>
2000 1999 1998
Pound Sterling m Pound Sterling m Pound Sterling m
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer Markets
Direct telephony 279 292 219
Indirect telephony 93 102 104
Television 253 222 172
Business Markets 69 72 55
-----------------------------------------------------------------------------------------------------------------------
Total Turnover 694 688 550
=======================================================================================================================
</TABLE>
The Directors consider this to be a single class of business and accordingly no
segmental analysis of operating profit or loss or net assets is shown. In the
year ended March 31, 2000 all of the turnover was generated by operations in the
United Kingdom (1999: 100% and 1998: 100%).
5 COST OF SALES AND OPERATING EXPENSES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999 1998
Total Total Continuing Acquisition Total
Pound Pound Pound Pound Pound
Sterling m Sterling m Sterling m Sterling m Sterling m
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Outpayments and other cost of sales 269 251 36 152 188
Other operating expenses (net) 270 241 19 178 197
Millennium and NCNC costs 12 16 - 2 2
Depreciation and amortisation 156 135 2 101 103
===========================================================================================================================
</TABLE>
All activities in the years ended March 31, 1999 and 2000 were continuing.
6 MILLENNIUM AND NATIONAL CODE NUMBER CHANGE COSTS
--------------------------------------------------------------------------------
MILLENNIUM COSTS
Millennium costs comprise the costs allocated to CWC ConsumerCo through the ntl
(CWC) group Year 2000 Programme. This includes CWC ConsumerCo's share of the
costs of making software and systems compliant, upgrading rented customer
premises equipment, purchasing new software and employing external
consultants and advisors, as well as the costs of CWC ConsumerCo employees
working on the Year 2000 Programme. A cumulative total of Pound Sterling 30
million has been incurred to date, of which Pound Sterling 1 million has
been capitalised and Pound Sterling 29 million has been written off to the
profit and loss account.
NATIONAL CODE NUMBER CHANGE COSTS
National Code Number Change costs are being incurred by CWC ConsumerCo through
the ntl (CWC) group, in relation to the change in national code numbers which
has been initiated by OFTEL. National dialling codes are being reorganised to
provide additional UK numbering capacity required for long term growth in new
numbers for fixed and mobile telephones, fax, pager, and internet use.
15
<PAGE> 17
Costs of Pound Sterling 2 million had been incurred during the year in relation
to National Code Number Change, which were capitalised (1999: Pound Sterling 1
million expensed in the profit and loss account). The National Code Number
Change programme is expected to take a further year to complete. Total costs are
expected to be Pound Sterling 5 million of which Pound Sterling 3 million is
expected to relate to capital expenditure, the balance being written off to the
profit and loss account as incurred.
7 LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION
--------------------------------------------------------------------------------
Loss on ordinary activities before taxation is stated after charging:
<TABLE>
<CAPTION>
2000 1999 1998
Pound Sterling m Pound Sterling m Pound Sterling m
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation of owned tangible fixed assets 144 122 91
Depreciation of fixed assets held under finance leases 12 12 12
Amortisation of goodwill - 1 -
Operating lease payments - hire of plant and machinery - 2 2
Operating lease payments - other 5 8 9
Management service fees payable (see Note 33) - 1 3
=========================================================================================================================
</TABLE>
8 EMPLOYEES
--------------------------------------------------------------------------------
In 2000 the average monthly number of persons working within CWC ConsumerCo was
5,262 (1999: 5,130 and 1998: 5,407).
The aggregate remuneration and associated costs of CWC ConsumerCo employees
were:
<TABLE>
<CAPTION>
2000 1999 1998
Pound Sterling m Pound Sterling m Pound Sterling m
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries and wages 142 126 106
Social security costs 11 11 10
Pension costs of defined benefit scheme 3 3 3
Pension costs of defined contribution schemes 3 3 2
------------------------------------------------------------------------------------------------------------------------------
Total staff costs 159 143 121
Less: Staff costs capitalised within network fixed assets (79) (47) (34)
------------------------------------------------------------------------------------------------------------------------------
80 96 87
==============================================================================================================================
</TABLE>
Details of the pension schemes are given in Note 9.
9 PENSIONS
--------------------------------------------------------------------------------
CWC ConsumerCo, through ntl (CWC), participates in a pension scheme operated by
Cable and Wireless. The scheme is a defined benefit scheme whereby retirement
benefits are based on the employees' final remuneration and length of service,
and is funded through a separate trustee administered scheme. Contributions to
the scheme are based on pension costs for all members of the scheme across the
Cable and Wireless group and are made in accordance with the recommendations of
independent actuaries who value the scheme at regular intervals, usually
triennially. The last valuation currently available relates to the position of
the scheme as at March 31, 1999. Full details relating to the pension scheme are
disclosed in the financial statements of Cable and Wireless.
CWC ConsumerCo also operates several defined contribution pension plans.
16
<PAGE> 18
CWC ConsumerCo will establish a new exempt approved pension scheme and employees
allocated to CWC ConsumerCo who are active members of the Cable and Wireless
superannuation fund will be invited to join the new CWC ConsumerCo scheme and
to transfer their accrued rights to it. Employees allocated to CWC ConsumerCo
who are active members of ntl (CWC) pension schemes will, for the time being,
remain in those schemes.
10 COSTS OF FUNDAMENTAL REORGANISATION
--------------------------------------------------------------------------------
Following the formation of the ntl (CWC) group on April 28, 1997, the nature and
focus of operations of the constituent companies were fundamentally reorganised.
Costs of Pound Sterling 96 million have been allocated to CWC ConsumerCo and
include branding, employee related costs such as redundancies and property
rationalisations.
The inclusion of the costs of fundamental reorganisation had no material impact
on the tax charge for 2000 or 1999 or 1998.
11 NET INTEREST PAYABLE
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999 1998
Pound Sterling m Pound Sterling m Pound Sterling m
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest receivable and similar income:
Deposits and short term loan interest 4 8 8
Funds placed with parent undertaking - 6 1
-------------------------------------------------------------------------------------------------------------------------------
4 14 9
===============================================================================================================================
Interest payable:
Finance charges on leases (6) (9) (7)
Bank loans and overdrafts (70) (89) (90)
Loan notes (146) (132) (58)
Funds borrowed from parent undertaking (2) - (1)
-------------------------------------------------------------------------------------------------------------------------------
(224) (230) (156)
Less: interest capitalised within network fixed assets (Note 14) 30 37 26
-------------------------------------------------------------------------------------------------------------------------------
(194) (193) (130)
-------------------------------------------------------------------------------------------------------------------------------
Net interest payable (190) (179) (121)
===============================================================================================================================
</TABLE>
12 TAXATION
--------------------------------------------------------------------------------
The tax credit comprises:
<TABLE>
<CAPTION>
2000 1999 1998
Pound Sterling m Pound Sterling m Pound Sterling m
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United Kingdom taxation:
Current corporation tax at 30% (1999:31%, 1998:31%) 34 - -
Deferred tax - - -
Adjustment in respect of prior years - - -
------------------------------------------------------------------------------------------------------------------------
Tax credit on profit on ordinary activities 34 - -
========================================================================================================================
</TABLE>
If deferred tax had been provided in 2000 on a full provision basis, there would
have been no change in the tax charge for the year (1999: no change, 1998: no
change). The effective tax rate for the year ended March 31, 2000 is 0% (1999:
0%, 1998: 0% after costs of fundamental reorganisation). This rate differs from
the statutory tax rate of 30% because the companies within CWC ConsumerCo were
loss making in the period and deferred tax assets for such losses were not
recognised in full. The tax credit in the year ended March 31, 2000 reflects a
payment of Pounds Sterling 34 million from CWC DataCo for losses surrendered by
way of group relief.
17
<PAGE> 19
13 INTANGIBLE FIXED ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOODWILL
POUND STERLING M
<S> <C>
COST
At April 1, 1999 9
Additions -
--------------------------------------------------------------------------------------------------------------------
At March 31, 2000 9
--------------------------------------------------------------------------------------------------------------------
AMORTISATION
At April 1, 1999 1
Charge for the year -
--------------------------------------------------------------------------------------------------------------------
At March 31, 2000 1
--------------------------------------------------------------------------------------------------------------------
Net book value at March 31, 2000 8
--------------------------------------------------------------------------------------------------------------------
Net book value at March 31, 1999 8
====================================================================================================================
</TABLE>
Goodwill arising on the acquisition of Two Way TV Limited is amortised over 20
years, which is the ntl (CWC)' Directors' estimate of its economic useful life.
14 TANGIBLE FIXED ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NETWORK CABLE, NON-NETWORK PLANT
LAND AND BUILDINGS PLANT AND EQUIPMENT AND EQUIPMENT TOTAL
POUND STERLING M POUND STERLING M POUND STERLING M POUND STERLING M
<S> <C> <C> <C> <C>
COST
At April 1, 1999 53 3,020 14 3,087
Additions 1 423 73 497
Disposals - (8) (18) (26)
---------------------------------------------------------------------------------------------------------------------------
At March 31, 2000 54 3,435 69 3,558
---------------------------------------------------------------------------------------------------------------------------
DEPRECIATION
At April 1, 1999 4 218 5 227
Charge for the year 5 130 21 156
Transfers - 16 - 16
Disposals - (3) (5) (8)
---------------------------------------------------------------------------------------------------------------------------
At 31 March 2000 9 361 21 391
---------------------------------------------------------------------------------------------------------------------------
NET BOOK VALUE AT
March 31, 2000 45 3,074 48 3,167
---------------------------------------------------------------------------------------------------------------------------
March 31, 1999 49 2,802 9 2,860
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
2000 1999
Pound Sterling m Pound Sterling m
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The net book value of land and buildings comprised:
Freehold 19 19
Long leasehold 2 2
Short leasehold 24 28
---------------------------------------------------------------------------------------------------------------------------
45 49
===========================================================================================================================
</TABLE>
Interest totalling Pound Sterling 30 million (1999: Pound Sterling 37 million)
for the year ended March 31, 2000 that is directly applicable to the design,
construction and installation of CWC ConsumerCo's cable television and
telecommunications network has been capitalised within additions to network
assets. Accumulated
18
<PAGE> 20
interest capitalised included in the total cost of tangible fixed assets at
March 31, 2000 amounted to Pound Sterling 93 million (1999: Pound Sterling 63
million).
Included in the net book value of Network cable, plant and equipment is Pound
Sterling 83 million in respect of assets held under finance leases and similar
hire purchase contracts (1999: Pound Sterling 95 million). Accumulated
depreciation on these assets is Pound Sterling 42 million (1999: Pound Sterling
30 million) and the charge for the year is Pound Sterling 12 million (1999:
Pound Sterling 12 million). Network cable, plant and equipment includes Pound
Sterling 127 million (1999: Pound Sterling 118 million) in respect of assets not
yet in service and consequently upon which depreciation has not been charged.
15 DEBTORS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
Pound Sterling m Pound Sterling m
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DUE WITHIN ONE YEAR
Trade debtors outside receivables securitisations 12 7
Amounts due from CWC DataCo (see below) 63 -
Other debtors 18 11
Prepayments and accrued income 38 49
---------------------------------------------------------------------------------------------------------------------------
131 67
---------------------------------------------------------------------------------------------------------------------------
DUE AFTER MORE THAN ONE YEAR
Prepayments and accrued income 68 69
---------------------------------------------------------------------------------------------------------------------------
199 136
===========================================================================================================================
</TABLE>
Where, as part of attributing assets and liabilities to CWC ConsumerCo and CWC
DataCo these assets and liabilities are to be transferred between legal entities
within the ntl (CWC) group, intragroup balances have been set up.
Included within prepayments and accrued income, is an amount of Pound Sterling
100 million (1999: Pound Sterling 112 million) in respect of the IT outsource
representing:
<TABLE>
<CAPTION>
2000 1999
Due after
Due within more than
one year one year Total Total
Pound Sterling m Pound Sterling m Pound Sterling m Pound Sterling m
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Security deposit 21 32 53 85
Consolidated billing system charge 9 27 36 14
Transition costs 2 9 11 13
---------------------------------------------------------------------------------------------------------------------------------
32 68 100 112
=================================================================================================================================
</TABLE>
The consolidated billing system charge is amortised over the life of the
outsource contract based on expected billing levels. The transition costs billed
by IBM in relation to the transition of the IT function to the outsource
provider include external legal, consultancy, property and other technical fees
which are amortised over differing periods depending on the period over which
CWC ConsumerCo, through the ntl (CWC) group derives benefit.
16 DEBTORS WITHIN RECEIVABLES SECURITISATION
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
Pound Sterling m Pound Sterling m
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gross debtors 56 85
Non-returnable proceeds (29) (62)
----------------------------------------------------------------------------------------------------------------------------
27 23
============================================================================================================================
</TABLE>
19
<PAGE> 21
Within the overall working capital facilities, certain trade debtors have been
assigned as security against the advance of cash. This security is represented
by the assignment of a pool of trade debts to a trust for the benefit of the
providers of this securitisation facility. The financing provided against this
pool takes into account, inter alia, the risks that may be attached to
individual debtors and the expected collection period.
CWC ConsumerCo, through the ntl (CWC) group, is not obliged (and does not
intend) to support any losses arising from the assigned debts against which cash
has been advanced. The providers of the finance have confirmed in writing that,
in the event of default in payment by a debtor, they will seek repayment of the
cash advanced only from the remainder of the pool of debts in which they hold an
interest, and that repayment will not be required from CWC ConsumerCo in any
other way.
17 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
Pound Sterling m Pound Sterling m
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Unsecured convertible loan notes - 9
Current instalments due on loans 543 33
Obligations under finance leases 7 5
Trade creditors 34 35
Amounts owed to CWC DataCo (see below) - 199
Amounts owed to parent undertaking 13 -
Other taxation and social security 11 5
Other creditors 7 30
Accruals and deferred income 211 171
----------------------------------------------------------------------------------------------------------------------
826 487
======================================================================================================================
</TABLE>
Where, as part of attributing assets and liabilities to CWC ConsumerCo and CWC
DataCo these assets and liabilities are to be transferred between legal entities
within the ntl (CWC) group, intragroup balances have been set up.
18 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
Pound Sterling m Pound Sterling m
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Notes due 2003 ($750m at a coupon rate of 6.375%) 453 453
Notes due 2005 ($650m at a coupon rate of 6.625%) 393 393
Notes due 2008 ($1.1bn at a coupon rate of 6.750%) 665 665
Bonds due 2005 (Pound Sterling 300m at a coupon rate of 7.125%) 298 298
Bonds due 2017 (Pound Sterling 200m at a coupon rate of 7.375%) 199 199
Loans 965 795
Obligations under finance lease 100 108
Accruals and deferred income 2 5
----------------------------------------------------------------------------------------------------------------------
3,075 2,916
======================================================================================================================
</TABLE>
With the exception of certain specific finance lease obligations, all debt of
ntl (CWC) group has been allocated to CWC ConsumerCo as such debt has primarily
been necessary to fund CWC ConsumerCo's activities.
Substantially all third party borrowings were repaid as part of the Transaction
Agreement and were replaced with approximately Pounds Sterling 2.2 billion of
borrowings from another NTL group company.
20
<PAGE> 22
19 PROVISIONS FOR LIABILITIES AND CHARGES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Onerous Property Total
obligations costs
Pound Sterling m Pound Sterling m Pound Sterling m
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
At March 31, 1999 5 9 14
Amounts used during the year (3) (5) (8)
Established during the year - - -
-------------------------------------------------------------------------------------------------------------------------------
AT MARCH 31, 2000 2 4 6
===============================================================================================================================
</TABLE>
At March 31, 2000 the onerous obligations provision relates to onerous contract
commitments not recorded in the books of Two Way TV Limited. This is expected to
be utilised over the next five years.
The remaining provision for property costs relates to the fair value property
provision for overmarket rents set up as a result of the acquisition of Bell
Cablemedia and NYNEX CableComms in April 1997, and is expected to be utilised
over the next 18 years.
20 DEFERRED TAX
--------------------------------------------------------------------------------
The amount provided, and the full potential liability, in respect of UK deferred
taxation is as follows:
<TABLE>
<CAPTION>
2000 1999
Pound Sterling m Pound Sterling m
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Amount provided and potential liability: - -
============================================================================================================================
Tax effect of timing differences due to:
Excess capital allowances over depreciation (206) (140)
Other timing differences - -
----------------------------------------------------------------------------------------------------------------------------
(206) (140)
============================================================================================================================
</TABLE>
As at March 31, 2000, CWC ConsumerCo had substantial UK tax losses available to
carry forward which exceeded the timing differences due to the excess of capital
allowances over depreciation. No deferred tax asset has been recognised in the
accounts in respect of any unutilised tax losses.
21 CALLED UP SHARE CAPITAL
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF SHARES
2000 1999 2000 1999
M M POUND STERLING M POUND STERLING M
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Authorised:
Ordinary shares of 50p each 2,250 2,250 1,125 1,125
----------------------------------------------------------------------------------------------------------------------------------
Allotted, issued and fully paid:
Ordinary shares of 50p each 1,496 1,493 748 746
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ntl (CWC) was listed on the London and New York Stock exchanges on April 28,
1997, when 1,489,253,555 shares were issued to acquire Bell Cablemedia and NYNEX
CableComms with a further 102,707 being issued on offer acceptances received
post-listing.
21
<PAGE> 23
Allotments of ordinary shares of 50p each during the year to March 31, 2000 were
as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES GROSS CONSIDERATION
ALLOTTED RECEIVED
POUND STERLING
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bell Cablemedia plc Savings-Related Share Option Plan 1994 20,135 59,781
Bell Cablemedia plc No 1 Executive Share Option Plan 1994 13,944 41,521
Bell Cablemedia plc No 2 Executive Share Option Plan 1994 26,902 78,089
3.5% Bell Cablemedia plc unsecured convertible loan notes due 2001 46,242 -
5% Bell Cablemedia unsecured convertible loan notes due 1995 (extended) 2,815,385 -
NYNEX CableComms Employees Share Option Plan 252,250 940,388
NYNEX CableComms Savings-Related Share Option Plan 1995 7,309 22,080
NYNEX CableComms Savings-Related Share Option Plan 1996 36,916 85,867
------------------------------------------------------------------------------------------------------------------------
3,219,083 1,227,726
========================================================================================================================
</TABLE>
Allotments of ordinary shares of 50p each during the year to March 31, 1999 were
as follows:
<TABLE>
<CAPTION>
GROSS
NUMBER OF CONSIDERATION
SHARES RECEIVED
ALLOTTED POUND STERLING
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bell Cablemedia plc Savings-Related Share Option Plan 1994 36,041 107,006
Bell Cablemedia plc No. 1 Executive Share Option Plan 1994 137,199 394,646
Bell Cablemedia plc No. 2 Executive Share Option Plan 1994 254,974 731,162
3.5% Bell Cablemedia plc unsecured convertible loan notes due 2001 9,366 -
NYNEX CableComms Employees Share Option Plan 2,373,139 8,847,066
NYNEX CableComms Savings-Related Share Option Plan 1995 29,098 87,905
NYNEX CableComms Savings-Related Share Option Plan 1996 46,218 107,504
------------------------------------------------------------------------------------------------------------------------
2,886,035 10,275,289
========================================================================================================================
</TABLE>
At March 31, 2000, capital instruments which were convertible into ordinary
shares of ntl (CWC) were as follows:
<TABLE>
<CAPTION>
PRINCIPAL PROJECTED PERIOD OF
AMOUNT NUMBER OF CONVERSION
POUND STERLING SHARES
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5% unsecured convertible loan notes due 1995 (extended) 1,925,000 826,303 1999-2001
3.5% unsecured convertible loan notes due 2001 57,564 23,086 1999-2001
=================================================================================================================================
</TABLE>
Both loan notes are convertible at the option of the holders.
22 RESERVES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARE OTHER
PREMIUM RESERVES
POUND STERLING M POUND STERLING M
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
At April 1, 1999 9 (1,034)
Gross premiums on shares allotted 8 -
Amortisation of issue costs relating to capital instruments - -
Loss for the financial year - (165)
Other movements - -
--------------------------------------------------------------------------------------------------------------------------
At March 31, 2000 17 (1,199)
==========================================================================================================================
</TABLE>
23 FINANCIAL INSTRUMENTS
--------------------------------------------------------------------------------
CWC ConsumerCo, through the ntl (CWC) group, holds or issues financial
instruments to finance its operations and to manage the interest rate and
currency risks arising from its sources of finance. In addition, various
financial assets and liabilities, for example, trade debtors, trade creditors,
accruals and
22
<PAGE> 24
prepayments, arise directly from operations. CWC ConsumerCo has taken advantage
of the exemption available to exclude short term debtors and creditors from
disclosures of financial assets and liabilities. Disclosure focuses on those
financial instruments which play a significant medium to long term role in the
financial risk profile.
CWC ConsumerCo, through the ntl (CWC) group finances its operations by a mixture
of bank borrowings and other long term debt. The ntl (CWC) group borrows in the
major debt markets in Sterling and US dollars at both fixed and floating rates
of interest, using derivatives where appropriate to generate the desired
effective currency profile and interest rate basis. The derivatives used for
this purpose are principally interest rate swaps and cross currency swaps.
The main risks arising from financial instruments are interest rate risk and
currency risk.
FINANCE AND INTEREST RATE RISK
CWC ConsumerCo, through the ntl (CWC) group's exposure to interest rate
fluctuations on its borrowings and deposits is managed by using interest rate
swaps and forward rate agreements (FRAs). The minimum proportion fixed is higher
in the near term than in the longer term, with the aim of reducing the
volatility of short term interest costs whilst maintaining the opportunity to
benefit from the movements in longer term rates. The interest rate profile of
the financial liabilities, after taking account of interest rate swaps, FRAs and
cross currency swaps, of CWC ConsumerCo as at March 31, 2000 and 1999 was:
<TABLE>
<CAPTION>
2000 1999
Sterling Sterling
Pound Sterling m Pound Sterling m
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Floating rate financial liabilities 1,492 117
Fixed rate financial liabilities 2,131 2,828
---------------------------------------------------------------------------------------------------------------------------
Total 3,623 2,945
===========================================================================================================================
Fixed rate financial liabilities
Weighted average interest rate (%) 6.9% 7.1%
Weighted average period for which rate is fixed (years) 5 6
===========================================================================================================================
</TABLE>
In addition to swaps, further protection from interest rate movements will be
provided by interest rate collars on Pound Sterling 700 million for 3 years from
July 15, 1999. These start when the last FRAs mature and at this stage the
weighted average interest rate is expected to fall further.
CWC ConsumerCo held the following financial assets as part of its financing
arrangements at March 31, 2000:
<TABLE>
<CAPTION>
CURRENCY POUND STERLING M
---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Sterling 87
===========================================================================================================================
</TABLE>
LIQUIDITY RISK
CWC ConsumerCo, through ntl (CWC) group treasury operations, manages borrowings
with respect to both interest and financing risk. Accordingly there are a range
of maturities of debt from one year to 17 years. Financial flexibility is
provided via the Pound Sterling 1,500 million revolving facility, of which Pound
Sterling 1,000 million is for five years and Pound Sterling 500 million for 364
days. At the 2000 year end Pound Sterling 700 million was drawn under the five
year facility and Pound Sterling 350 million was drawn under the 364 day
facility.
23
<PAGE> 25
The maturity profile of financial liabilities, other than short term creditors
such as trade creditors and accruals, at March 31, 2000 and 1999 was:
<TABLE>
<CAPTION>
2000 1999
Pound Sterling m Pound Sterling m
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance lease obligations are repayable as follows:
Within one year 7 6
Between one and two years 8 6
Between two and five years 31 28
In five or more years 61 74
-----------------------------------------------------------------------------------------------------------------------------
107 114
=============================================================================================================================
</TABLE>
All finance lease obligations were settled upon acquisition by NTL on May 30,
2000 and replaced with group financing.
<TABLE>
<CAPTION>
2000 1999
Pound Sterling m Pound Sterling m
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loans and Notes are repayable as follows:
Within one year 543 29
Between one and two years 6 4
Between two and five years 1,854 1,541
In five or more years 1,113 1,257
----------------------------------------------------------------------------------------------------------------------------
3,516 2,831
=============================================================================================================================
</TABLE>
All loans and notes were settled prior to, or upon, acquisition by NTL on May
30, 2000 and replaced with group financing.
The maturity profile of the CWC ConsumerCo's undrawn committed borrowing
facilities at March 31, 2000 was:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------------------------------------------------------------------
Pound Sterling m Pound Sterling m
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Within one year 150 500
Greater than two years 40 225
-------------------------------------------------------------------------------------------------------------------------------
190 725
===============================================================================================================================
</TABLE>
FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
The estimated fair value of CWC ConsumerCo's financial instruments are
summarised below:
<TABLE>
<CAPTION>
2000
Carrying amount Estimated
fair value
Pound Sterling m Pound Sterling m
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY FINANCIAL INSTRUMENTS HELD OR ISSUED TO FINANCE OPERATIONS:
LONG TERM DEBT (3,075) (3,127)
--------------
Cash and short term deposits 87 87
Derivative financial instruments held to manage the interest rate and currency
profile
Interest rate swaps - assets - 9
Interest rate swaps - (liabilities) - -
INTEREST RATE COLLARS - ASSETS - 5
-------------------------------
INTEREST RATE COLLARS - (LIABILITIES) - -
-------------------------------------
CROSS CURRENCY SWAPS - ASSETS - -
-----------------------------
Cross currency swaps - (liabilities) - (48)
-----------------------------------------------------------------------------------------------------------------------
<CAPTION>
1999
Carrying Estimated
amount fair value
Pound Sterling m Pound Sterling m
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY FINANCIAL INSTRUMENTS HELD OR ISSUED TO FINANCE OPERATIONS:
LONG TERM DEBT (2,911) (2,962)
--------------
Cash and short term deposits 127 127
Derivative financial instruments held to manage the interest rate and currency
profile
Interest rate swaps - assets - -
Interest rate swaps - (liabilities) - (76)
INTEREST RATE COLLARS - ASSETS - -
-------------------------------
INTEREST RATE COLLARS - (LIABILITIES) - (8)
-------------------------------------
CROSS CURRENCY SWAPS - ASSETS - 38
-----------------------------
Cross currency swaps - (liabilities) - (17)
=======================================================================================================================
</TABLE>
24
<PAGE> 26
CASH AT BANK AND IN HAND, ACCOUNT RECEIVABLE, ACCOUNT PAYABLE, SHORT TERM
BORROWINGS AND CURRENT INVESTMENT LIABILITIES.
The carrying value approximates fair value either because of the short maturity
of the instruments or because the interest rate on investments is reset after
periods not greater than six months.
LONG TERM BORROWINGS
The fair value is based on quoted market prices or, where these are not
available, on the quoted market prices of comparable debt issued by other
companies.
INTEREST RATE SWAPS, COLLARS AND CURRENCY SWAPS
The fair value of interest rate and currency swaps is the estimated amount which
CWC ConsumerCo, through the ntl (CWC) group, expects to pay or receive on the
termination of the agreement, taking into consideration current interest rates
and the current credit worthiness of the counterparties. The nominal value of
the interest rate and currency swaps at March 31, 2000 was Pound Sterling 2,898
million (1999: Pound Sterling 2,935 million). The nominal value of the interest
rate collars at March 31, 2000 was Pound Sterling 700 million (1999: Pound
Sterling 700 million).
CURRENCY RISK
CWC ConsumerCo, through the ntl (CWC) group has significant sources of finance
denominated in US dollars which have been hedged back into sterling using cross
currency swaps.
Gains and losses on instruments used for hedging are not recognised until the
exposure that is being hedged is itself recognised. Unrecognised gains and
losses on the instruments used for hedging, and the movements thereon are as
follows as at March 31, 2000:
<TABLE>
<CAPTION>
GAINS LOSSES TOTAL
POUND STERLING M POUND STERLING M POUND STERLING M
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrecognised gains and losses on hedges
As at April 1, 1999 38 (101) (63)
------------------------------------------------------------------------------------------------------------------------------------
Gains and losses arising before April 1, 1999 that were not recognised in the year 38 (101) (63)
Gains and losses arising in the year that were not recognised in the year (24) 53 29
------------------------------------------------------------------------------------------------------------------------------------
Unrecognised gains and losses on hedges at March 31, 2000 14 (48) (34)
------------------------------------------------------------------------------------------------------------------------------------
Gains and losses expected to be realised in 2000 14 (48) (34)
Gains and losses expected to be realised in 2001 or later - - -
------------------------------------------------------------------------------------------------------------------------------------
14 (48) (34)
====================================================================================================================================
</TABLE>
24 COMMITMENTS
--------------------------------------------------------------------------------
The amount of capital expenditure, excluding that relating to the IT outsource,
authorised by CWC ConsumerCo, for which no provision has been made in the
consolidated financial information is as follows:
<TABLE>
<CAPTION>
2000 1999
Pound Sterling m Pound Sterling m
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Contracted 86 180
========================================================================================================================
</TABLE>
CWC ConsumerCo, through the ntl (CWC) group, is also contracted to IBM under the
IT outsource agreement. At March 31, 2000, the total outstanding commitment was
Pound Sterling 1.3 billion which was shared equally between CWC ConsumerCo and
CWC DataCo in accordance with the Transaction Agreement for a 10 year period
against which the security deposit is offset throughout the term of the contract
(1999: Pound Sterling 1.5 billion, 1998: Pound Sterling nil).
25
<PAGE> 27
25 CONTINGENT LIABILITIES
--------------------------------------------------------------------------------
There are no contingent liabilities at March 31, 2000.
26 LEASES
--------------------------------------------------------------------------------
Operating lease commitments payable in the following year, analysed according to
the period in which each lease expires are as follows:
<TABLE>
<CAPTION>
2000 1999
POUND STERLING M POUND STERLING M
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LAND AND BUILDINGS
Expiring within one year - -
Expiring in years two to five 1 -
Expiring thereafter 5 7
-----------------------------------------------------------------------------------------------------------------------------------
6 7
-----------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Expiring within one year 1 1
Expiring in years two to five 3 -
Expiring thereafter - -
-----------------------------------------------------------------------------------------------------------------------------------
4 1
===================================================================================================================================
</TABLE>
27 RECONCILIATION OF OPERATING (LOSS) PROFIT TO NET CASH (OUTFLOW)
INFLOW FROM OPERATING ACTIVITIES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999 1998
Pound Sterling m Pound Sterling m Pound Sterling m
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating (loss)/ profit (13) 45 60
Depreciation and amortisation 156 135 103
Decrease in non refundable receipts from receivables securitisation (33) 1 61
Increase in debtors 32 (21) (29)
Decrease in creditors (231) 60 191
------------------------------------------------------------------------------------------------------------------------------------
Net cash (outflow) / inflow from operating activities before fundamental
reorganisation and IT outsource costs (89) 220 386
Outflow relating to fundamental reorganisation (6) (28) (30)
Outflow relating to IT outsource transition costs - (13) -
------------------------------------------------------------------------------------------------------------------------------------
Net cash (outflow) / inflow from operating activities (95) 179 356
====================================================================================================================================
</TABLE>
28 CASH INFLOW FROM ACQUISITIONS AND DISPOSALS
--------------------------------------------------------------------------------
The analysis of net inflow of cash in respect of the acquisition and disposal of
subsidiaries is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
Pound Sterling m Pound Sterling m Pound Sterling m
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Acquisition of subsidiaries - (4) -
Share issue costs - - (49)
Cash acquired with subsidiaries - 4 137
------------------------------------------------------------------------------------------------------------------------------
Net cash inflow from acquisition - - 88
Disposal of business - 4 -
==============================================================================================================================
Net cash inflow from acquisitions and disposals - 4 88
==============================================================================================================================
</TABLE>
26
<PAGE> 28
29 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999 1998
Pound Sterling m Pound Sterling m Pound Sterling m
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Decrease) increase in cash in the period (40) (102) 144
Cash outflow resulting from debt and lease financing (706) (331) (378)
-------------------------------------------------------------------------------------------------------------------------
Changes in net debt resulting from cash flows (746) (433) (234)
Other movements 12 7 -
Acquisition of subsidiaries - - (2,197)
Inception of finance lease contracts - - (30)
-------------------------------------------------------------------------------------------------------------------------
Movement in net debt in the period (734) (426) (2,461)
Net (debt) funds at April 1 (2,802) (2,376) 85
-------------------------------------------------------------------------------------------------------------------------
Net debt at March 31 (3,536) (2,802) (2,376)
=========================================================================================================================
</TABLE>
30 ANALYSIS OF CHANGES IN NET DEBT
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
At At At
April 1, Cash Other April 1, Cash Other March 31,
1998 flow movements 1999 flow movements 2000
Pound Pound Pound Pound Pound Pound Pound
Sterling m Sterling m Sterling m Sterling m Sterling m Sterling m Sterling m
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash at bank and in hand 229 (102) - 127 (40) - 87
----------------------------------------------------------------------------------------------------------------------------------
Debt due within one year (28) 10 - (18) (541) 9 (550)
Debt due after more than one year (2,577) (341) 7 (2,911) (165) 3 (3,073)
----------------------------------------------------------------------------------------------------------------------------------
Total debt (2,605) (331) 7 (2,929) (706) 12 (3,623)
----------------------------------------------------------------------------------------------------------------------------------
Total net (debt) cash (2,376) (433) 7 (2,802) (746) 12 (3,536)
==================================================================================================================================
</TABLE>
31 ACQUISITIONS AND DISPOSALS
--------------------------------------------------------------------------------
ACQUISITIONS
On July 28, 1998, CWC ConsumerCo, through ntl (CWC) subscribed for shares
representing 50.1% of the enlarged ordinary share capital of Two Way TV Limited
for Pound Sterling 13 million.
For Two Way TV Limited the fair value of assets and liabilities acquired,
together with the fair value of consideration paid (including acquisition costs)
is set out below:
<TABLE>
<CAPTION>
1999
CWC
Book Fair value ConsumerCo
Value adjustments Fair value
Pound Sterling m Pound Sterling m Pound Sterling m
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets acquired:
Tangible fixed assets 1 - 1
Stocks - - -
Debtors 9 - 9
Cash 4 - 4
Creditors: amounts falling due within one year (2) - (2)
Creditors: amounts falling due after one year (1) - (1)
Provisions - (3) (3)
Minority interest (4) - (4)
-----------------------------------------------------------------------------------------------------------
7 (3) 4
Goodwill 9
-----------------------------------------------------------------------------------------------------------
Fair value of consideration 16 (3) 13
-----------------------------------------------------------------------------------------------------------
Satisfied by:
Cash 4
Deferred cash consideration 9
===========================================================================================================
</TABLE>
27
<PAGE> 29
On April 28, 1997 CWC ConsumerCo, through ntl (CWC) acquired 100% of Bell
Cablemedia, as enlarged by its acquisition of Videotron, and 100% of NYNEX
CableComms. This transaction has been accounted for under the acquisition
method. The consideration comprised Pound Sterling 2 billion in shares.
For the acquisition of Bell Cablemedia and NYNEX CableComms the fair value of
assets and liabilities acquired, together with the fair value of consideration
paid (including acquisition costs) is set out below:
<TABLE>
<CAPTION>
1998
Accounting
Fair value policy
Book value adjustments alignment Fair value
Pound Sterling m Pound Sterling m Pound Sterling m Pound Sterling m
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets acquired:
Intangible fixed assets 517 - (517) -
Tangible fixed assets 2,371 (194) - 2,177
Debtors 144 (36) - 108
Cash and cash equivalents 137 - - 137
Borrowings (2,000) (197) - (2,197)
Creditors: amounts falling due within one year (139) (26) - (165)
Provisions - (48) - (48)
Minority interests (13) - - (13)
---------------------------------------------------------------------------------------------------------------------------
1,017 (501) (517) (1)
Goodwill 2,006
---------------------------------------------------------------------------------------------------------------------------
Fair value of consideration
Satisfied by:
Shares allotted 2,005
Cash -
---------------------------------------------------------------------------------------------------------------------------
2,005
===========================================================================================================================
</TABLE>
Bell Cablemedia held Pound Sterling 517 million of goodwill in its balance sheet
arising principally on its acquisition of Videotron. This amount has been
written off directly to reserves in accordance with CWC ConsumerCo policy in
1998.
The principal fair value adjustments were:
- An adjustment for Pound Sterling 129 million to write-down analogue
set-top boxes and head-end equipment, Pound Sterling 31 million for
property and IT systems and Pound Sterling 34 million of other fixed
assets;
- An adjustment to write off deferred financing costs and arrangement fees
of Pound Sterling 58 million, Pound Sterling 25 million of which were
classified in debtors and Pound Sterling 33 million in borrowings;
- An adjustment of Pound Sterling 164 million to borrowings to restate the
high yield debt obligations of Bell Cablemedia at their fair value;
- An adjustment to provide for onerous contracts of Pound Sterling 48
million, including programming costs, future commitments to purchase
analogue set-top boxes, property and other items;
- Other adjustments of Pound Sterling 37 million relating to other assets
and liabilities.
28
<PAGE> 30
The fair value of assets and liabilities acquired on each of the significant
acquisitions is set out below:
<TABLE>
<CAPTION>
FAIR VALUE
BOOK VALUE ADJUSTMENTS FAIR VALUE
NYNEX CABLECOMMS: POUND STERLING M POUND STERLING M POUND STERLING M
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tangible fixed assets 1,158 (60) 1,098
Debtors 66 (27) 39
Cash 5 - 5
Borrowings (615) - (615)
Creditors: amounts falling due within one year (28) (5) (33)
Provisions - (23) (23)
----------------------------------------------------------------------------------------------------------------------------
586 (115) 471
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FAIR VALUE ACCOUNTING
BOOK VALUE ADJUSTMENTS POLICY ALIGNMENT FAIR VALUE
BELL CABLEMEDIA: POUND STERLING M POUND STERLING M POUND STERLING M POUND STERLING M
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Intangible fixed assets 517 - (517) -
Tangible fixed assets 1,214 (133) - 1,081
Debtors 78 (9) - 69
Cash 132 - - 132
Borrowings (1,385) (197) - (1,582)
Creditors: amounts falling due within one year (111) (21) - (132)
Provisions - (26) - (26)
Minority interests (13) - - (13)
--------------------------------------------------------------------------------------------------------------------------------
432 (386) (517) (471)
================================================================================================================================
</TABLE>
The summarised results of CWC ConsumerCo's material acquisitions through ntl
(CWC) from the end of the previous financial year to the date of acquisition by
ntl (CWC) were as follows:
<TABLE>
<CAPTION>
NYNEX
BELL CABLEMEDIA CABLECOMMS
JAN 1, 1997 TO APRIL 28, 1997 JAN 1, 1997 TO APRIL 28, 1997
POUND STERLING M POUND STERLING M
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Turnover 35 63
Operating loss (27) (24)
Loss before tax (56) (33)
Taxation - 7
Loss after tax (56) (26)
Minority interests - -
Loss attributable to shareholders (56) (26)
======================================================================================================================
</TABLE>
There were no recognised gains and losses in these periods other than the losses
attributable to shareholders. The table below gives summarised financial
information for the CWC ConsumerCo's material acquisitions for their full
financial year prior to acquisition.
<TABLE>
<CAPTION>
NYNEX
BELL CABLEMEDIA CABLECOMMS
YEAR ENDED DEC 31, 1996 YEAR ENDED DEC 31, 1996
POUND STERLING M POUND STERLING M
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loss after tax (96) (74)
Minority interests - 11
============================================================================================================================
</TABLE>
29
<PAGE> 31
32 SUBSEQUENT EVENTS
--------------------------------------------------------------------------------
Certain key transaction steps have taken place subsequent to the balance sheet
date, as detailed below.
Following the announcement of the clearance by the Secretary of State of France
Telecom's investment in NTL on May 10, 2000, all necessary conditions to the
ntl (CWC) Scheme of Arrangement which forms part of the Transaction were
satisfied.
With effect from close of trading on May 11, 2000, the listing of ntl (CWC)
shares on the London Stock Exchange was cancelled. On May 12, 2000, the ntl
(CWC) Scheme became effective. As part of the Scheme, all of the existing ntl
(CWC) shares were cancelled and the resulting credit in the books of ntl (CWC)
was applied in issuing paid up in full, new ntl (CWC) shares to Cable & Wireless
Communications (Holdings) plc. Consequently, Cable & Wireless Communications
(Holdings) plc has become the immediate parent undertaking of ntl (CWC). ntl
(CWC) shareholders who were on the register of ntl (CWC) at the Dealings Record
Time were issued with shares in Cable & Wireless Communications (Holdings) plc
in proportion to their cancelled holdings of ntl (CWC) shares. In addition, ntl
(CWC) has been re-registered as a private company.
On May 12, 2000, the ntl (CWC) issued a 30 day redemption notice to the Yankee
Bondholders and deposited redemption monies with the Trustee of the Yankee
Bonds. On May 13, 2000, CWC DataCo was transferred to Cable & Wireless
Communications (Holdings) plc.
On May 24, 2000, ntl exercised the option granted to it by Cable and Wireless
plc, required for completion of the Transaction, which took place on May 30,
2000. Following completion, ntl became the ultimate parent undertaking of the
ntl (CWC).
On June 13, 2000 the Cable & Wireless Communications changed its name to ntl
(CWC) Limited.
33 RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------
TRANSACTIONS WITH AFFILIATES
Cable and Wireless and Bell Atlantic Corporation are considered related parties
on the basis of their equity shareholdings in ntl (CWC) which at April 30, 2000
amounted to 52.73% (1999: 52.84%) and 18.55% (1999: 18.59%) respectively.
During the period CWC ConsumerCo had the following transactions with Cable and
Wireless:
<TABLE>
<CAPTION>
2000 1999 1998
Note Pound Sterling m Pound Sterling m Pound Sterling m
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest payable - - (1)
Contribution towards group development programme (i) (1) (1) (1)
Management service charge payable (ii) - (1) (3)
Net lease payments on property (iii) (1) (1) -
================================================================================================================================
</TABLE>
All transactions with CWC DataCo undertakings are on commercial terms.
Notes:
(i) Cable and Wireless undertakes a number of development programmes which are
of benefit to its subsidiary undertakings. CWC ConsumerCo makes
contributions for its share of the cost of these development programmes.
(ii) Management service charges cover the provision of technical training,
marketing, taxation, internal audit and treasury services and other
professional advice.
30
<PAGE> 32
(iii) This relates to office space in properties rented from Cable and Wireless.
OTHER CWC CONSUMERCO TRANSACTIONS AS PART OF THE NTL (CWC) GROUP
In the year ended March 31, 1998 CWC ConsumerCo, through the ntl (CWC) group had
transactions with Bell Canada International Telecommunications Holdings relating
to the transfer of consortium relief. The balance due to Bell Canada
International Telecommunication Holdings at March 31, 1998 was Pound Sterling 3
million.
CWC ConsumerCo, through ntl (CWC) had an interconnect agreement with Mercury
Personal Communications, trading as One2One, a partnership in which Cable and
Wireless until October 1999 had a 50% interest. The agreement covers the
carrying of traffic on each party's respective networks. During the year ended
March 31, 1998, revenues from One2One were Pound Sterling 30 million and
purchases were Pound Sterling 41 million.
CWC ConsumerCo, through ntl (CWC) reinsures its health care claims fund through
Pender Insurance Ltd, a wholly owned subsidiary company of Cable and Wireless.
The cost of this arrangement is Pound Sterling 3.5 million.
NTL (CWC) SHAREHOLDERS' AGREEMENT
On March 21, 1997, Cable and Wireless, Bell Canada International
Telecommunication Holdings, Bell Atlantic, together the Shareholder Companies,
and ntl (CWC) entered into an agreement setting out the terms of the
relationship among them in respect of ntl (CWC). Under this agreement, the
Shareholder Companies have agreed that their group members will enter into
contracts with ntl (CWC) only on a normal commercial basis and on arms' length
terms.
MANAGEMENT AND TECHNICAL SERVICES AGREEMENT
The Shareholder Companies and ntl (CWC) entered into a management and technical
services agreement under which each of the Shareholder Companies provide various
services to ntl (CWC) at ntl (CWC)' request, including tax, legal, internal
audit, treasury and corporate finance and human resource services. The services
which may be provided by ntl (CWC) to each of the Shareholder Companies include
payroll and accounting, car fleet management and VAT services. The terms and
conditions of any services requested will be negotiated and agreed on an arm's
length basis.
SECONDMENT AGREEMENT
The Shareholder Companies and ntl (CWC) have also entered into the Secondment
Agreement pursuant to which each of the Shareholder Companies, on the one hand,
and ntl (CWC), on the other hand, will, subject to certain conditions, be able
to second their employees or employees of their subsidiary undertakings to each
other, respectively, or to companies within their respective groups. The fee for
any such secondment will broadly be based on the employee's salary, remuneration
and other benefits paid or provided to the employee by the providing company.
TAX AGREEMENTS
Under the Tax Sharing Agreement entered into on March 21, 1997 between the
Shareholder Companies and ntl (CWC) i) the tax affairs of ntl (CWC) will be
managed on a 'stand alone' basis; ii) dividends paid by ntl (CWC) will be paid
outside of any election under Section 247 of the Income and Corporation Tax Act
1988; iii) Cable and Wireless will be entitled to surrender, but did not in the
year ended March 31, 1999, to ntl (CWC) ACT to the fullest extent permitted by
law (such surrender to be for payment); iv) the shareholders will consider
proposals to structure such surrenders in such a way as to reduce the tax
disadvantage for Bell Atlantic; v) ntl (CWC) will make, at the request of Bell
Atlantic, certain elections with regard to its subsidiaries for the purposes of
reducing US tax disadvantages to Bell Atlantic, unless such elections would have
a detrimental effect on the affairs of ntl (CWC), its subsidiaries, or the other
shareholders; vi) ntl (CWC) will consult generally with the shareholders
regarding its tax affairs.
31
<PAGE> 33
CABLE AND WIRELESS LICENCE
Cable and Wireless has granted ntl (CWC) the right to use the 'Cable &
Wireless', 'C&W' and Globe Device trade marks (together with other trade marks
relating to Cable and Wireless products previously offered by Mercury) in the
United Kingdom on a royalty free basis.
34 PRINCIPAL OPERATING SUBSIDIARY UNDERTAKINGS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country of
Subsidiary incorporation Holding Principal activities
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ntl (Aylesbury and Chiltern) Limited UK 100% Cable TV and telecommunications provider
ntl (Broadland) Limited UK 100% Cable TV and telecommunications provider
ntl (County Durham) Limited UK 100% Cable TV and telecommunications provider
ntl (Ealing) Limited UK 100% Cable TV and telecommunications provider
ntl (Fenland) Limited UK 100% Cable TV and telecommunications provider
ntl (Greenwich and Lewisham) Limited UK 100% Cable TV and telecommunications provider
ntl (Hampshire) Limited UK 100% Cable TV and telecommunications provider
ntl (Harrogate) Limited UK 100% Cable TV and telecommunications provider
ntl (Harrow) Limited UK 100% Cable TV and telecommunications provider
ntl (Kent) Limited UK 100% Cable TV and telecommunications provider
ntl (Lambeth and Southwark) Limited UK 100% Cable TV and telecommunications provider
ntl (Leeds) Limited UK 100% Cable TV and telecommunications provider
ntl Wirral Telephone and Cable TV Company UK 100% Cable TV and telecommunications provider
ntl (Norwich) Limited UK 100% Cable TV and telecommunications provider
ntl (Peterborough) Limited UK 100% Cable TV and telecommunications provider
ntl (Southampton and Eastleigh) Limited UK 100% Cable TV and telecommunications provider
ntl (South East) Limited UK 100% Cable TV and telecommunications provider
ntl (South Hertfordshire) Limited UK 33.3% Cable TV and telecommunications provider
ntl (South London) Limited UK 100% Cable TV and telecommunications provider
ntl (Thamesmead) Limited UK 100% Cable TV and telecommunications provider
ntl (Wandsworth) Limited UK 100% Cable TV and telecommunications provider
ntl (Wearside) Limited UK 100% Cable TV and telecommunications provider
ntl (West London) Limited UK 100% Cable TV and telecommunications provider
ntl (York) Limited UK 100% Cable TV and telecommunications provider
ntl CableComms Bolton UK 100% Cable TV and telecommunications provider
ntl CableComms Bromley UK 100% Cable TV and telecommunications provider
ntl CableComms Bury and Rochdale UK 100% Cable TV and telecommunications provider
ntl CableComms Cheshire UK 100% Cable TV and telecommunications provider
ntl CableComms Derby UK 100% Cable TV and telecommunications provider
ntl CableComms East Lancashire UK 100% Cable TV and telecommunications provider
ntl CableComms UK 100% Cable TV and telecommunications
</TABLE>
32
<PAGE> 34
<TABLE>
<CAPTION>
Country of
Subsidiary incorporation Holding Principal activities
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Greater Manchester provider
ntl CableComms Macclesfield UK 100% Cable TV and telecommunications provider
ntl CableComms Oldham and Tameside UK 100% Cable TV and telecommunications provider
ntl CableComms Solent UK 100% Cable TV and telecommunications provider
ntl CableComms Staffordshire UK 100% Cable TV and telecommunications provider
ntl CableComms Stockport UK 100% Cable TV and telecommunications provider
ntl CableComms Surrey UK 100% Cable TV and telecommunications provider
ntl CableComms Sussex UK 100% Cable TV and telecommunications provider
ntl CableComms Wessex UK 100% Cable TV and telecommunications provider
ntl CableComms Wirral UK 100% Cable TV and telecommunications provider
ntl (CWC) Programming Limited UK 100% Cable programming company
ntl Communications Services Limited UK 100% Management company
Two Way TV Limited UK 50.1% Development company
</TABLE>
35 SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
--------------------------------------------------------------------------------
BASIS OF PREPARATION
CWC ConsumerCo has prepared its combined financial statements in accordance with
generally accepted accounting principles in the United Kingdom which differ in
certain material respects from US generally accepted accounting principles. The
significant differences relate principally to the following items and the
adjustments necessary to restate net loss and shareholders' equity in accordance
with US generally accepted accounting principles are shown below.
a) GOODWILL
Under UK generally accepted accounting principles, goodwill arising on
acquisitions before April 1, 1998 is eliminated directly against reserves.
Goodwill arising on acquisitions after April 1, 1998 is capitalised and
amortised through the profit and loss account over the Directors' estimate of
its useful economic life, which may be up to 20 years. Under US generally
accepted accounting principles goodwill is capitalised and amortised by charges
against income up to 20 years.
b) DEFERRED TAX
Under UK generally accepted accounting principles, provision is made for
deferred taxation only when there is a reasonable probability that the liability
will arise in the foreseeable future. US generally accepted accounting
principles requires full provision for deferred income taxes under the liability
method on all temporary differences and, if required, a valuation allowance is
established to reduce gross deferred tax assets to the amount which is likely to
be realised.
c) PREMATURITY
Under US generally accepted accounting principles, depreciation of costs in the
period between the completion of a portion of the network and the time that
expected subscriber numbers are achieved (the prematurity period) are determined
in accordance with SFAS 51, "Financial Reporting by Cable Television Companies".
This requires that depreciation and capitalisation during the prematurity period
be determined by reference to the ratio of the greater of i) the average number
of customers expected that month as estimated at the beginning of the
prematurity period; ii) the average number of customers that would be attained
using at least equal, that is, straight line, monthly progress in adding new
customers towards the estimate of customers at the end of the prematurity
period; and iii) the average number of actual customers - to the estimated
number of customers at the end of the prematurity period. CWC
33
<PAGE> 35
ConsumerCo follows policies which, because the size of the portion of the
network tracked is significantly smaller than a "portion" under SFAS 51, result
in no material difference to applying SFAS 51.
Under UK generally accepted accounting principles interest on borrowings used
to finance construction of the network is capitalized until that portion of the
network is completed, hence no interest on borrowings that continue to finance
completed portions of the network in the prematurity period is capitalised.
However, US generally accepted accounting principles allow such interest to
continue to be capitalised in the prematurity period.
d) CASH FLOWS
The Cash Flow Statement is prepared in accordance with the UK Financial
Reporting Standard No.1 Revised, Cash Flow Statements, referred to as FRS1
Revised, for UK generally accepted accounting principles reporting. Its
objective and principles are similar to those set out in Statement of Financial
Accounting Standard (SFAS) 95, "Statement of Cash Flows". The principal
difference between the standards is in respect of classification. Under FRS 1
Revised, CWC ConsumerCo presents its combined cash flows for: operating
activities; returns on investments and servicing of finance; taxation; capital
expenditure and financial investment; acquisitions and disposals; equity
dividends paid; and financing. SFAS 95 requires only three categories of cash
flow activity; operating; investing and financing.
Cash flows arising from taxation and returns on investments and servicing of
finance under FRS 1 Revised would, with the exception of dividends paid, be
included as operating activities under SFAS 95; dividend payments would be
included as a financing activity under SFAS 95. Under FRS 1 Revised, cash is
defined as cash in hand and deposits repayable on demand, short term deposits
which are readily convertible into known amounts of cash at or close to their
carrying value are classified as liquid resources. SFAS 95 defines cash and cash
equivalents as cash in hand and short term highly liquid investments with
original maturities of three months or less. Cash flows in respect of short term
deposits with original maturities exceeding three months are included in
investing activities under SFAS 95 and are included in capital expenditure and
financial investments under FRS 1 Revised.
e) DEBT
On May 12, 2000, CWC ConsumerCo issued a 30 day redemption notice to Yankee
Bondholders and deposited redemption monies with the Trustee of the Yankee
Bonds. This debt was treated as long term under UK GAAP. However, in accordance
with US GAAP, CWC ConsumerCo had committed to pay the monies prior to release of
these financial statements, therefore this debt is classified as current.
The effects of these different accounting principles are as follows:
An exchange rate of US$1.63 has been used to translate sterling to US dollars.
Such translations are for convenience only and should not be construed as
representations that the sterling amounts have been converted into US dollars at
that or any other rate.
RECONCILIATION OF UK/US GAAP
--------------------------------------------------------------------------------
RECONCILIATION OF UK/US GAAP - NET LOSS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 2000 1999
$m Pound Sterling m Pound Sterling m
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET LOSS AS REPORTED UNDER UK GAAP (269) (165) (135)
US GAAP adjustments:
Amortisation of goodwill (165) (101) (101)
Capitalisation of Prematurity Interest 7 4 -
Deferred Tax (18) (11) -
-----------------------------------------------------------------------------------------------------------------------------------
NET LOSS UNDER US GAAP (445) (273) (236)
===================================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
RECONCILIATION OF UK/US GAAP - SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 2000 1999
$m Pound Sterling m Pound Sterling m
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY AS REPORTED UNDER UK GAAP (707) (434) (279)
Goodwill 2,799 1,717 1,818
Capitalisation of Prematurity Interest 7 4 -
Deferred Tax (18) (11) -
-----------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY UNDER US GAAP 2,081 1,276 1,539
===================================================================================================================================
</TABLE>
34
<PAGE> 36
--------------------------------------------------------------------------------
COMBINED STATEMENT OF CASH FLOWS UNDER US GAAP
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 2000 1999
$m Pound Sterling m Pound Sterling m
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net cash (used) provided by operating activities (31) (19) (223)
Net cash used in investing activities (1,133) (695) (234)
Net cash provided by financing activities 1,099 674 355
-----------------------------------------------------------------------------------------------------------------------------------
NET CHANGE IN CASH UNDER US GAAP (65) (40) (102)
===================================================================================================================================
</TABLE>
35
