UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-22616
------------------------------------------------------------
NTL INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1822078
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
110 East 59th Street, New York, New York 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 906-8440
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the issuer's common stock as of September
30, 1998 was 41,391,644.
<PAGE>
NTL Incorporated and Subsidiaries
Index
PART I. FINANCIAL INFORMATION Page
- ------ --------------------- ----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
September 30, 1998 and December 31, 1997 ........................ 2
Condensed Consolidated Statements of Operations-
Three and nine months ended September 30, 1998 and 1997 ......... 4
Condensed Consolidated Statement of Shareholders'
(Deficiency) - Nine months ended September 30, 1998 ............. 5
Condensed Consolidated Statements of Cash Flows-
Nine months ended September 30, 1998 and 1997 ................... 7
Notes to Condensed Consolidated Financial Statements ............ 8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition .............................. 18
PART II. OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K ................................ 32
SIGNATURES................................................................ 33
- ----------
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NTL Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
--------------------------------------
(unaudited) (see note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 459,443,000 $ 98,902,000
Marketable securities 138,326,000 4,998,000
Accounts receivable - trade, less allowance for doubtful
accounts of $22,193,000 (1998) and $8,056,000 (1997) 130,958,000 66,022,000
Cash held in escrow 156,403,000 -
Other 34,651,000 67,232,000
---------------------------------------
Total current assets 919,781,000 237,154,000
Fixed assets, net 3,134,655,000 1,756,985,000
Intangible assets, net 456,304,000 364,479,000
Other assets, net of accumulated amortization
of $32,957,000 (1998) and $25,889,000 (1997) 111,498,000 63,021,000
---------------------------------------
Total assets $ 4,622,238,000 $ 2,421,639,000
=======================================
</TABLE>
2
<PAGE>
NTL Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets - continued
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
--------------------------------------
(unaudited) (see note)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY)
Current liabilities:
Accounts payable $ 125,293,000 $ 45,475,000
Accrued expenses and other 169,127,000 163,158,000
Interest payable 10,615,000 18,875,000
Accrued construction costs 62,008,000 26,930,000
Deferred revenue 53,079,000 35,060,000
Current portion of long-term debt 148,781,000 -
--------------------------------------
Total current liabilities 568,903,000 289,498,000
Long-term debt 3,885,489,000 2,015,057,000
Commitments and contingent liabilities
Deferred income taxes 72,061,000 70,218,000
Senior redeemable exchangeable preferred stock - $.01 par
value, plus accreted dividends; liquidation preference
$121,000,000; less unamortized discount of $3,211,000
(1998) and $3,444,000 (1997); issued and outstanding
121,000 (1998) and 110,000 (1997) shares
120,044,000 108,534,000
Shareholders' (deficiency):
Series preferred stock - $.01 par value; authorized
10,000,000 shares:
Series A - liquidation preference $125,590,000; issued
and outstanding 125,000 (1998) and none (1997) shares 1,000 -
Series A - issued and outstanding none (1998) and 780
(1997) - -
Common stock - $.01 par value; authorized 400,000,000
shares; issued and outstanding 41,392,000 (1998) and
32,210,000 (1997) shares 414,000 322,000
Additional paid-in capital 844,368,000 538,054,000
Accumulated other comprehensive income 184,115,000 117,008,000
(Deficit) (1,053,157,000) (717,052,000)
--------------------------------------
(24,259,000) (61,668,000)
--------------------------------------
Total liabilities and shareholders' (deficiency) $ 4,622,238,000 $ 2,421,639,000
======================================
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date.
See accompanying notes.
3
<PAGE>
NTL Incorporated and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------------- ----------------------------------
1998 1997 1998 1997
--------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
REVENUES
Local telecommunications and television $ 84,366,000 $ 45,606,000 $ 214,545,000 $ 114,593,000
National and international telecommunications 64,185,000 46,435,000 166,845,000 130,217,000
Broadcast transmission and other 33,933,000 32,531,000 100,825,000 96,818,000
Other telecommunications - 2,162,000 2,375,000 6,745,000
---------------------------------- ----------------------------------
182,484,000 126,734,000 484,590,000 348,373,000
COSTS AND EXPENSES
Operating expenses 88,122,000 75,836,000 243,476,000 217,087,000
Selling, general and administrative expenses 78,543,000 40,724,000 192,070,000 122,934,000
Franchise fees 6,223,000 5,848,000 18,729,000 17,608,000
Corporate expenses 4,018,000 4,352,000 11,797,000 13,394,000
Nonrecurring charges - 15,982,000 - 20,537,000
Depreciation and amortization 61,218,000 38,430,000 156,785,000 108,254,000
--------------------------------- ----------------------------------
238,124,000 181,172,000 622,857,000 499,814,000
--------------------------------- ----------------------------------
Operating (loss) (55,640,000) (54,438,000) (138,267,000) (151,441,000)
OTHER INCOME (EXPENSE)
Interest and other income 16,318,000 6,134,000 39,796,000 24,347,000
Interest expense (84,800,000) (52,978,000) (226,422,000) (152,095,000)
Foreign currency transaction gains (losses) (9,770,000) 1,109,000 (6,973,000) 912,000
--------------------------------- ----------------------------------
(Loss) before income taxes and extraordinary item (133,892,000) (100,173,000) (331,866,000) (278,277,000)
Income tax benefit - 16,816,000 - 21,485,000
--------------------------------- ----------------------------------
(Loss) before extraordinary item (133,892,000) (83,357,000) (331,866,000) (256,792,000)
(Loss) from early extinguishment of debt (4,239,000) - (4,239,000) -
--------------------------------- ----------------------------------
Net (loss) $ (138,131,000) $ (83,357,000) $ (336,105,000) $ (256,792,000)
================================= ==================================
Basic and diluted net (loss) per common share:
(Loss) before extraordinary item $ (3.34) $ (2.70) $ (9.17) $ (8.26)
Extraordinary item (.10) - (.12) -
--------------------------------- ----------------------------------
Net (loss) $ (3.44) $ (2.70) $ (9.29) $ (8.26)
================================= ==================================
</TABLE>
See accompanying notes.
4
<PAGE>
NTL Incorporated and Subsidiaries
Condensed Consolidated Statement of Shareholders' (Deficiency)
(Unaudited)
<TABLE>
<CAPTION>
SERIES SERIES
PREFERRED PREFERRED COMMON STOCK -
STOCK STOCK $.01 PAR VALUE
SHARES PAR SHARES PAR SHARES PAR
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 780 $ - 32,210,000 $ 322,000
Exercise of stock options 221,000 2,000
Exercise of warrants 53,000
Accreted dividends on preferred stock
Accretion of discount on preferred stock
Conversion of 7-1/4% Convertible
Subordinated Notes 6,958,000 70,000
Conversion of Series Preferred Stock (780) 1,950,000 20,000
Preferred stock issued for acquisition 125,000 $ 1,000
Comprehensive income
Net loss for the nine months
ended September 30, 1998
Currency translation adjustment
Total
------------------------------------------------------------------------------
Balance, September 30, 1998 - $ - 125,000 $ 1,000 41,392,000 $ 414,000
==============================================================================
</TABLE>
See accompanying notes.
5
<PAGE>
NTL Incorporated and Subsidiaries
Condensed Consolidated Statement of Shareholders' (Deficiency)
(Unaudited) - continued
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
PAID-IN COMPREHENSIVE COMPREHENSIVE
CAPITAL INCOME INCOME (DEFICIT)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1997 $ 538,054,000 $ 117,008,000 $ (717,052,000)
Exercise of stock options 4,526,000
Exercise of warrants 410,000
Accreted dividends on preferred stock (11,587,000)
Accretion of discount on preferred stock (233,000)
Conversion of 7-1/4% Convertible
Subordinated Notes 186,942,000
Conversion of Series Preferred Stock (20,000)
Preferred stock issued for acquisition 126,276,000
Comprehensive income
Net loss for the nine months
ended September 30, 1998 $ (336,105,000) (336,105,000)
Currency translation adjustment 67,107,000 67,107,000
--------------
Total $ (268,998,000)
---------------------------------------------------------------------------------
Balance, September 30, 1998 $ 844,368,000 $ 184,115,000 $ (1,053,157,000)
=================================================================================
</TABLE>
See accompanying notes.
6
<PAGE>
NTL Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
--------------------------------------
1998 1997
--------------------------------------
<S> <C> <C>
Net cash (used in) operating activities $ (27,656,000) $ (62,899,000)
INVESTING ACTIVITIES
Acquisition of subsidiary, net of cash acquired (829,698,000) -
Purchase of fixed assets (464,944,000) (354,919,000)
Payment of deferred purchase price - (57,064,000)
Increase in other assets (10,397,000) (2,073,000)
Proceeds from sale of assets 1,312,000 -
Purchase of marketable securities (297,918,000) (459,504,000)
Proceeds from sales of marketable securities 168,650,000 423,410,000
--------------------------------------
Net cash (used in) investing activities (1,432,995,000) (450,150,000)
FINANCING ACTIVITIES
Proceeds from borrowings and sale of preferred stock, 2,093,602,000 490,556,000
net of financing costs
Principal payments (66,040,000) (13,043,000)
Cash placed in escrow (221,427,000) -
Proceeds from exercise of stock options and warrants 4,938,000 1,264,000
--------------------------------------
Net cash provided by financing activities 1,811,073,000 478,777,000
Effect of exchange rate changes on cash 10,119,000 (21,212,000)
--------------------------------------
Increase (decrease) in cash and cash equivalents 360,541,000 (55,484,000)
Cash and cash equivalents at beginning of period 98,902,000 445,884,000
--------------------------------------
Cash and cash equivalents at end of period $ 459,443,000 $ 390,400,000
======================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest exclusive of
amounts capitalized $ 79,112,000 $ 47,808,000
Income taxes paid 335,000 31,000
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Accretion of dividends and discount on preferred stock $ 11,820,000 $ 8,660,000
Conversion of Convertible Notes, net of unamortized
deferred financing costs of $4,738,000 187,012,000 -
Preferred stock issued for acquisition 126,277,000 -
</TABLE>
See accompanying notes.
7
<PAGE>
NTL Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended September
30, 1998 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
In March 1998, the Company issued debt denominated in British pounds sterling.
Interest expense has been translated using the average exchange rate for the
period and the debt balance has been translated using the current exchange rate
at the balance sheet date. Foreign currency gains and losses arising from
exchange rate fluctuations are included in the results of operations.
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income." Comprehensive loss for the three months
ended September 30, 1998 and 1997 was $(81,135,000) and $(131,354,000),
respectively. Comprehensive loss for the nine months ended September 30, 1998
and 1997 was $(268,998,000) and $(341,547,000), respectively.
In June 1997, the Financial Accounting Standards Board (the "FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
SFAS No. 131 establishes standards for the way that public enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997. The Company is assessing whether changes in
reporting will be required in adopting this new standard. The Company will adopt
SFAS No. 131 for fiscal year ending December 31, 1998.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted in years
beginning after June 15, 1999. Management does not anticipate that the adoption
of SFAS No. 133 will have a significant effect on earnings or the financial
position of the Company.
Certain prior year amounts have been reclassified to conform to the 1998
presentation.
8
<PAGE>
NTL Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
NOTE B - COMTEL ACQUISITION
Pursuant to an acquisition agreement (the "ComTel Agreement") with Vision
Networks III B.V., a wholly-owned subsidiary of Royal PTT Nederland NV (KPN),
the Company acquired the operations of ComTel Limited and Telecential
Communications (collectively, "ComTel") for a total of 550 million pounds
sterling completed in two stages. In the first stage, in June 1998, the Company
acquired certain of the ComTel properties for 275 million pounds sterling in
cash. In the second stage, in September 1998, the Company acquired the remaining
ComTel properties for 200 million pounds sterling in cash and 75 million pounds
sterling in preferred stock. The Company financed the cash portion of the
transaction through a bank loan, completed through an amendment to the Company's
existing bank facility with The Chase Manhattan Bank.
The ComTel acquisition has been accounted for as a purchase, and, accordingly,
the net assets and results of operations of the acquired businesses have been
included in the consolidated financial statements from the dates of acquisition.
The purchase price of 550 million pounds sterling plus the return of cash
acquired of 31 million pounds sterling and costs incurred of 3 million pounds
sterling (an aggregate of 584 million pounds sterling ($993 million)) exceeded
the estimated fair value of the net tangible assets acquired by 64 million
pounds sterling ($109 million), which is classified as license acquisition
costs. The assets acquired and liabilities assumed have been recorded at their
estimated fair values, which are subject to further adjustment based upon
appraisals and other analyses.
The pro forma unaudited consolidated results of operations for the nine months
ended September 30, 1998 and 1997 assuming consummation of the ComTel
acquisition as of January 1, 1997 are as follows:
NINE MONTHS ENDED
SEPTEMBER 30
------------------------------
1998 1997
------------------------------
Total revenue $ 581,454,000 $ 433,924,000
(Loss) before extraordinary item (379,296,000) (316,572,000)
Net (loss) (383,535,000) (316,572,000)
Basic and diluted net (loss) per common share:
(Loss) before extraordinary item (10.44) (10.13)
Net (loss) (10.55) (10.13)
NOTE C - AMALGAMATION WITH COMCAST UK CABLE PARTNERS LIMITED
Effective October 29, 1998, the Company, NTL (Bermuda) Limited, a wholly owned
subsidiary of the Company, and Comcast UK Cable Partners Limited ("Partners")
consummated a transaction pursuant to the Agreement of Plan of Amalgamation,
dated February 4, 1998, as amended, whereby NTL (Bermuda) Limited (the
"Amalgamated Company") acquired all of the outstanding common stock of Partners.
Shareholders of Partners received 0.3745 shares of common stock of the Company
in consideration for each of their shares of common stock of Partners (an
aggregate of approximately 18,700,000 shares of the Company's common stock).
9
<PAGE>
NTL Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
NOTE C - AMALGAMATION WITH COMCAST UK CABLE PARTNERS LIMITED (CONTINUED)
The Amalgamated Company has executed a First Supplemental Indenture relating to
Partners' 11.20% Senior Discount Debentures due 2007, which provides for the
assumption by the Amalgamated Company of the Debentures. As of September 30,
1998, Partners had 241 million pounds sterling ($409 million) of Debentures
outstanding.
Pursuant to existing arrangements between Partners and Telewest Communications
plc ("Telewest"), a co-owner of interests in Cable London PLC ("Cable London")
and Birmingham Cable Corporation Limited ("Birmingham Cable"), Telewest had
certain rights to acquire either or both of Partners' interests in these systems
as a result of the Amalgamation. On August 14, 1998, Partners and the Company
entered into an agreement with Telewest, pursuant to which, Partners sold its
27.5% ownership interest in Birmingham Cable to Telewest for 125 million pounds
sterling, plus 5 million pounds sterling for certain subordinated debt and fees.
In addition, Partners and Telewest agreed within a certain time period to
rationalize their joint ownership of Cable London pursuant to an agreed
procedure (the "Shoot-out"). Between April 29 and July 29, 1999, the Amalgamated
Company can notify Telewest of the price at which it is willing to sell its 50%
ownership interest in Cable London to Telewest. Following such notification,
Telewest at its option will be required at that price to either purchase the
Amalgamated Company's 50% ownership interest in Cable London or sell its 50%
ownership interest in Cable London to the Amalgamated Company. If the
Amalgamated Company fails to give notice to Telewest by July 29, 1999, it will
be deemed to have delivered an offer notice for 100 million pounds sterling. The
sale or purchase by the Company as per the Cable London Shoot-out is expected to
be completed by November 1999.
The Company required consents from holders of some of its Notes to modify
certain indenture provisions in order to proceed with the Amalgamation. In
October 1998, the Company paid $11,333,000 in consent payments and issued
warrants to purchase 766,000 shares of common stock at an exercise price of
$43.39 per share in lieu of additional consent payments of $10,080,000. The
warrants expire in 2008.
NOTE D - PROPOSED DIAMOND ACQUISITION
In June 1998, the Company entered into an acquisition agreement (the "Diamond
Agreement") with Diamond Cable Communications, plc ("Diamond"). Pursuant to the
Diamond Agreement, Diamond shareholders will receive 0.25 shares of the
Company's common stock for each Diamond ordinary share. Diamond has
approximately 60.7 million fully diluted shares outstanding, and the total
consideration for the transaction will be approximately 15.2 million shares,
subject to adjustment. Based on the closing price of the Company's common stock
on the date of the Diamond Agreement, the purchase price implies a total Diamond
equity value of approximately $630 million. The closing of the Diamond Agreement
is subject to shareholder approval, bond consents and customary closing
conditions.
10
<PAGE>
NTL Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
NOTE E - FIXED ASSETS
Fixed assets consist of:
SEPTEMBER 30, DECEMBER 31,
1998 1997
-----------------------------------
(unaudited)
Operating equipment $ 2,667,113,000 $ 1,612,440,000
Other equipment 282,678,000 225,514,000
Construction-in-progress 530,850,000 134,795,000
-----------------------------------
3,480,641,000 1,972,749,000
Accumulated depreciation (345,986,000) (215,764,000)
-----------------------------------
$ 3,134,655,000 $ 1,756,985,000
===================================
NOTE F - INTANGIBLE ASSETS
Intangible assets consist of:
SEPTEMBER 30, DECEMBER 31,
1998 1997
-----------------------------------
(unaudited)
License acquisition costs, net of
accumulated amortization of
$60,048,000 (1998) and
$46,620,000 (1997) $ 219,112,000 $ 123,116,000
Goodwill, net of accumulated
amortization of $27,324,000 (1998)
and $13,449,000 (1997) 237,192,000 241,363,000
-----------------------------------
$ 456,304,000 $ 364,479,000
===================================
11
<PAGE>
NTL Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
NOTE G - LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------------------------------
(unaudited)
<S> <C> <C>
10-7/8% Senior Deferred Coupon Notes $ 148,781,000 $ 194,959,000
12-3/4% Series A Senior Deferred Coupon Notes 229,652,000 209,387,000
11-1/2% Series B Senior Deferred Coupon Notes 809,150,000 743,961,000
10% Series B Senior Notes 400,000,000 400,000,000
9-1/2% Senior Sterling Notes, less unamortized
discount of $669,000 211,693,000 -
10-3/4% Senior Deferred Coupon Sterling Notes 316,445,000 -
9-3/4% Senior Deferred Coupon Notes 845,172,000 -
7-1/4% Convertible Subordinated Notes - 191,750,000
7% Convertible Subordinated Notes 275,000,000 275,000,000
Subsidiary bank loan 798,377,000 -
------------------------------------
4,034,270,000 2,015,057,000
Less current portion 148,781,000 -
------------------------------------
$ 3,885,489,000 $ 2,015,057,000
====================================
</TABLE>
10-7/8% NOTES REDEMPTION: In June 1998, the Company provided to the Trustee of
its 10-7/8% Senior Deferred Coupon Notes due 2003 a notice that it would redeem
the 10-7/8% Notes on October 15, 1998. Pending such redemption, the Company
deposited in trust with the Trustee $218.6 million to pay the redemption price
(including principal) on the 10-7/8% Notes. In July 1998, the Company purchased
a portion of the 10-7/8% Notes with an accreted value of $62.3 million for cash
of $65 million. The Company recorded an extraordinary loss from the early
extinguishment of this portion of the 10-7/8% Notes of $4,239,000. In October
1998, the Company redeemed the remainder of the 10-7/8% Notes with an accreted
value of $148,781,000 at September 30, 1998 using cash held in escrow of $152.6
million. The Company recorded an extraordinary loss from the early
extinguishment of the 10-7/8% Notes of approximately $7.9 million in the fourth
quarter of 1998.
CONVERSION OF 7-1/4% CONVERTIBLE NOTES: In March 1998, the Company called for
redemption all of its $191,750,000 principal amount 7-1/4% Convertible
Subordinated Notes due 2005. The redemption date was April 20, 1998, at a
redemption price of 105.08% of the principal amount plus accrued and unpaid
interest through the date of redemption. The 7-1/4% Notes were convertible into
Common Stock at a conversion price of $27.56 per share. In April 1998, all of
the 7-1/4% Notes were converted into approximately 6,958,000 shares of the
Company's Common Stock.
ISSUANCE OF NEW NOTES: In March 1998, the Company issued 125 million pounds
sterling aggregate principal amount of 9-1/2% Senior Notes due 2008 (the
"Sterling Senior Notes"), 300 million pounds sterling aggregate principal amount
of 10-3/4% Senior Deferred Coupon Notes due 2008 (the "Sterling Deferred Coupon
Notes") and $1.3 billion aggregate principal amount of 9-3/4% Senior Deferred
Coupon
12
<PAGE>
NTL Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
NOTE G - LONG-TERM DEBT (CONTINUED)
Notes due 2008 (the "Dollar Deferred Coupon Notes") (together the "New Notes").
The Sterling Senior Notes, Sterling Deferred Coupon Notes and the Dollar
Deferred Coupon Notes were issued at 99.67% or 124.6 million pounds sterling,
58.62% or 175.9 million pounds sterling and 61.724% or $802.4 million,
respectively. The Company received net proceeds of 121.2 million pounds
sterling, 170.6 million pounds sterling and $778.3 million, after discounts and
commissions, from the issuance of the Sterling Senior Notes, the Sterling
Deferred Coupon Notes and the Dollar Deferred Coupon Notes, respectively. The
aggregate of the discounts, commissions and other fees incurred of $39.5 million
is included in deferred financing costs.
The original issue discount of the Sterling Deferred Coupon Notes accretes at a
rate of 10-3/4%, compounded semiannually, to an aggregate principal amount of
300 million pounds sterling by April 1, 2003. The original issue discount of the
Dollar Deferred Coupon Notes accretes at a rate of 9-3/4%, compounded
semiannually, to an aggregate principal amount of $1.3 billion by April 1, 2003.
Interest on each of the Sterling Deferred Coupon Notes and the Dollar Deferred
Coupon Notes will thereafter accrue at 10-3/4% per annum and 9-3/4% per annum,
respectively, payable semiannually, beginning on October 1, 2003. The Sterling
Senior Notes accrue interest at 9-1/2% per annum, payable on October 1, 1998 and
semiannually thereafter.
The New Notes are effectively subordinated to all existing and future
indebtedness and other liabilities and commitments of the Company's
subsidiaries, rank pari passu in right of payment with each other and with all
senior unsecured indebtedness of the Company and rank senior in right of payment
to all subordinated indebtedness of the Company.
The New Notes may be redeemed at the Company's option, in whole or in part, at
any time on or after April 1, 2003, at a redemption price of 104-3/4% to
105-3/8% that declines annually to 100% in 2006, in each case together with
accrued and unpaid interest to the date of redemption.
The indentures governing the New Notes contain restrictions relating to, among
other things: (i) incurrence of additional indebtedness and the issuance of
preferred stock, (ii) dividend and other payment restrictions and (iii) mergers,
consolidations and sales of assets.
BANK LOAN PAYABLE AND REFINANCING: In connection with the ComTel acquisition,
the Company borrowed an aggregate of 475 million pounds sterling ($798 million)
under its credit facility from The Chase Manhattan Bank. The effective interest
rate on the amounts borrowed at September 30, 1998 was 9.776%. The bank loan was
due on January 31, 1999, subject to extension to June 30, 1999.
In November 1998, the Company issued $625,000,000 aggregate principal amount of
11-1/2% Senior Notes due 2008 (the "11-1/2% Notes") and $450,000,000 aggregate
principal amount at maturity of 12-3/8% Senior Deferred Coupon Notes due 2008
(the "12-3/8% Notes"). The 11-1/2% Notes and the 12-3/8% Notes were issued at
100% or $625,000,000 and 55.505% or $249,773,000, respectively. The Company
received net proceeds of $607,031,000 and $241,967,000 after discounts and
13
<PAGE>
NTL Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
NOTE G - LONG-TERM DEBT (CONTINUED)
commissions, from the issuance of the 11-1/2% Notes and the 12-3/8% Notes,
respectively. The proceeds from these notes were used to repay the bank loan and
the remaining $50,000,000 was added to short term investments. The Company
recorded an extraordinary loss from the early extinguishment of debt of
approximately $19.5 million in the fourth quarter of 1998 as a result of the
repayment.
The 11-1/2% Notes accrue interest at 11-1/2% per annum, payable semiannually
beginning on April 1, 1999. The 11-1/2% Notes may be redeemed, at the Company's
option, in whole or in part, at any time on or after October 1, 2003 at a
redemption price of 105.75% that declines annually to 100% in 2006, in each case
together with accrued and unpaid interest to the date of redemption.
The original issue discount on the 12-3/8% Notes accretes at a rate of 12-3/8%,
compounded semiannually, to an aggregate principal amount of $450,000,000 by
October 1, 2003. Interest will thereafter accrue at 12-3/8% per annum, payable
semiannually beginning on April 1, 2004. The 12-3/8% Notes may be redeemed, at
the Company's option, in whole or in part, at any time on or after October 1,
2003 at a redemption price of 106.188% that declines annually to 100% in 2006,
in each case together with accrued and unpaid interest to the date of
redemption.
NOTE H - SERIES PREFERRED STOCK
In May 1998, the 780 outstanding shares of 5% Non-Voting Convertible Preferred
Stock, Series A were converted into 1,950,000 shares of Common Stock.
On September 21, 1998, the Company issued 125,280 shares of 9.9% Non-voting
Mandatorily Redeemable Preferred Stock, Series A (the "PIK Preferred Stock") in
connection with the ComTel acquisition. The PIK Preferred Stock was valued at
75,000,000 pounds sterling ($126,277,000), the fair market value on the date of
issuance. Each share of PIK Preferred Stock has a stated value of $1,000.
Cumulative dividends accrue at 9.9% of the stated value per share. Dividends are
payable when and if declared by the Board of Directors and may be paid, in the
sole discretion of the Board, in cash, in shares of common stock, in shares of
Convertible Preferred Stock or through any combination of the foregoing. As of
September 30, 1998, accrued and unpaid dividends were $310,000. On December 22,
1999, all outstanding shares of the PIK Preferred Stock shall be redeemed for
$1,000 per share together with accrued and unpaid dividends, at the Company's
option, in cash, in shares of common stock, in shares of Convertible Preferred
Stock or through any combination of the foregoing.
14
<PAGE>
NTL Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
NOTE I - GRANT OF STOCK OPTIONS
In March 1998, options to purchase approximately 7,800,000 shares of Common
Stock were granted to officers, non-employee directors and employees at an
exercise price of $36.50 per share. Officers and senior management employees
were granted options to purchase 3,260,000 shares and 2,765,000 shares,
respectively. These employees will not be granted any further options in 1998 to
2001 inclusive. These options will vest beginning January 1, 1999 through
January 1, 2004. The non-employee directors were granted options to purchase an
aggregate of 450,000 shares which vest on the same schedule. Supervisory
employees were granted options to purchase an aggregate of approximately
1,000,000 shares which are exercisable as to 20% of the shares subject thereto
on the date of grant and an additional 20% each January 1 thereafter, while the
optionee remains an employee of the Company. Finally, each employee who is not
included in the groups described above and who had at least one year of service
as of March 1, 1998 was granted an option to purchase 100 shares which are
exercisable on a 20% per year schedule.
Beginning in March 1998 and in each year thereafter, each employee who is not
otherwise granted options and has completed at least one year of employment will
be granted an option to purchase 100 shares of the Company's Common Stock each
year. The exercise price for these options will be at the fair market value of
the Company's Common Stock on the date of issuance, and these options will vest
on a 20% per year schedule. It is anticipated that approximately 1,850,000
options will be granted each year in 1999, 2000 and 2001 to supervisory and
other employees.
NOTE J - RESTRUCTURING CHARGES
In September 1997, the Company announced a reorganization of certain of its
operations. Restructuring costs of $15,811,000 were recorded in September 1997
consisting of employee severance and related costs of $6,688,000 for
approximately 280 employees to be terminated, lease exit costs of $6,509,000 and
penalties of $2,614,000 associated with the cancellation of contractual
obligations. As of September 30, 1998, $8,029,000 of the provision has been
used, including $4,493,000 for severance and related costs, $1,400,000 for lease
exit costs and $2,136,000 for penalties associated with the cancellation of
contractual obligations. As of September 30, 1998, 137 employees had been
terminated. There was no other adjustment to the liability through September 30,
1998.
15
<PAGE>
NTL Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
NOTE K - NET LOSS PER COMMON SHARE
The following table sets forth the computation of basic and diluted net loss per
common share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30
--------------------------------- ----------------------------------
1998 1997 1998 1997
--------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Numerator:
Loss before extraordinary item $ (133,892,000) $ (83,357,000) $ (331,866,000) $ (256,792,000)
Preferred stock dividend (4,190,000) (3,414,000) (11,587,000) (8,453,000)
--------------------------------- ----------------------------------
(138,082,000) (86,771,000) (343,453,000) (265,245,000)
Extraordinary item (4,239,000) - (4,239,000) -
--------------------------------- ----------------------------------
Loss available to common shareholders $ (142,321,000) $ (86,771,000) $ (347,692,000) $ (265,245,000)
--------------------------------- ----------------------------------
Denominator for basic net loss
per common share 41,348,000 32,122,000 37,436,000 32,101,000
Effect of dilutive securities - - - -
--------------------------------- ----------------------------------
Denominator for diluted net loss
per common share 41,348,000 32,122,000 37,436,000 32,101,000
--------------------------------- ----------------------------------
Basic and diluted net loss per
common share:
Loss before extraordinary item $ (3.34) $ (2.70) $ (9.17) $ (8.26)
Extraordinary item (.10) - (.12) -
--------------------------------- ----------------------------------
Net loss $ (3.44) $ (2.70) $ (9.29) $ (8.26)
================================= ==================================
</TABLE>
The shares issuable upon the exercise of stock options and warrants and upon the
conversion of convertible securities are excluded from the calculation of net
loss per common share as their effect would be antidilutive.
NOTE L - COMMITMENTS AND CONTINGENT LIABILITIES
As of September 30, 1998, the Company was committed to pay approximately
$176,300,000 for equipment and services.
The Company has licenses issued by the United Kingdom Department of Trade and
Industry ("DTI") and the United Kingdom Independent Television Commission
("ITC") for its cable television ("CATV"), telephone and telecommunications
business. The initial terms of the Company's licenses was 15 or 23 years for the
DTI licenses and 15 years for the ITC licenses. The Company's licenses expire in
2005 to 2016 for the DTI licenses and 1999 to 2005 for the ITC licenses. The DTI
requires a fixed annual renewal fee of 2,500 pounds sterling ($4,200) per
license. The ITC requires an annual license fee ranging from 1,300 pounds
sterling ($2,200) to 7,900 pounds sterling ($13,400) per license based on the
number of homes in the licensed area, which is subject to adjustment annually.
The provision of the Company's transmission and distribution services is
governed by the Telecommunications Act and the Wireless Telegraphy Act 1949. The
Company holds five licenses under the Telecommunications Act. The initial terms
of these licenses were 10 or 25 years. These licenses expire in 2002 to 2021.
The Company holds a number of Wireless Telegraphy Act
16
<PAGE>
NTL Incorporated and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
NOTE L - COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
licenses which continue in force primarily from year to year unless revoked or
unless any of the license fees are not paid. The Company's license fees paid in
the nine months ended September 30, 1998 were $1,628,000.
In addition, the Company was awarded certain newly issued licenses by the ITC in
1995. Pursuant to the terms of the local delivery license ("LDL") for Northern
Ireland granted to a wholly-owned subsidiary of the Company, the Company is
required to make annual cash payments to the ITC for fifteen years commencing in
January 1997 in the amount of approximately 14,400,000 pounds sterling
($24,500,000) (subject to adjustments for inflation). The fee for 1998 is
14,951,661 pounds sterling. Such payments are in addition to the percentages of
qualifying revenue already set by the ITC of 0% for the first ten years and 2%
for the last five years of the fifteen year license. The Company paid
approximately $18,600,000 in license fees in the nine months ended September 30,
1998.
Pursuant to the terms of the LDL for Glamorgan and Gwent, Wales granted to a
wholly-owned subsidiary of the Company, the Company is required to make annual
cash payments to the ITC for fifteen years, commencing in January 1998, in the
amount of 104,188 pounds sterling ($177,000). Such payments are in addition to
the percentages of qualifying revenue already set by the ITC of 0% for the first
five years, 2% for the second five years and 4% for the last five years of the
fifteen year license. The Company paid $129,000 in the nine months ended
September 30, 1998.
The Company is involved in, or has been involved in, certain disputes and
litigation arising in the ordinary course of its business, including claims
involving contractual disputes and claims for damages to property and personal
injury resulting from construction of the Company's networks and the maintenance
and servicing of the Company's transmission masts. None of these matters are
expected to have a material adverse effect on the Company's financial position,
results of operations or cash flows.
17
<PAGE>
NTL Incorporated and Subsidiaries
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
The following table illustrates the number of homes passed, the number of homes
marketed and the total number of customers for the Company's newly constructed
dual network for NTL on a stand-alone basis, as well as pro forma for the
Company's recently closed Comcast UK Cable Partners Limited and ComTel
acquisitions and the pending Diamond Cable acquisition.
<TABLE>
<CAPTION>
=========================================================================================================
| | | PRO FORMA NTL |
| | NTL ONLY | COMBINED (4) |
|---------------------------|-------------------------------------------------------|-------------------|
| | 9/30/97 | 12/31/97 | 9/30/98 | 9/30/98 |
|---------------------------|-----------------|------------------|------------------|-------------------|
<S> <C> <C> <C> <C>
| Franchise homes | 2,090,000 | 2,090,000 | 2,090,000 | 5,182,000 |
|---------------------------|-----------------|------------------|------------------|-------------------|
| Homes passed (1) | 957,000 | 1,007,000 | 1,197,000 | 3,378,500 |
|---------------------------|-----------------|------------------|------------------|-------------------|
| Homes marketed (Tel.) | 746,700 | 810,000 | 1,020,000 | 2,776,000 |
|---------------------------|-----------------|------------------|------------------|-------------------|
| Homes marketed (CATV) | 746,700 | 810,000 | 1,020,000 | 2,907,800 |
|---------------------------|-----------------|------------------|------------------|-------------------|
| Total customers | 286,600 | 321,300 | 429,600 | 1,111,300 |
|---------------------------|-----------------|------------------|------------------|-------------------|
| Dual | 253,100 | 287,200 | 393,800 | 680,700 |
|---------------------------|-----------------|------------------|------------------|-------------------|
| Telephone-only | 14,900 | 15,300 | 15,300 | 298,500 |
|---------------------------|-----------------|------------------|------------------|-------------------|
| Cable-only | 18,600 | 18,800 | 20,500 | 132,100 |
|---------------------------|-----------------|------------------|------------------|-------------------|
| Total RGUs (2) | 539,700 | 608,500 | 823,400 | 1,792,000 |
|---------------------------|-----------------|------------------|------------------|-------------------|
| Customer penetration | 38.4% | 39.7% | 42.1% | 38.2% |
|---------------------------|-----------------|------------------|------------------|-------------------|
| RGU penetration (3) | 72.3% | 75.1% | 80.7% | 61.6% |
|---------------------------|-----------------|------------------|------------------|-------------------|
| Telephone penetration | 35.9% | 37.3% | 40.1% | 35.3% |
|---------------------------|-----------------|------------------|------------------|-------------------|
| Cable penetration | 36.4% | 37.8% | 40.6% | 28.0% |
=========================================================================================================
</TABLE>
(1) "Homes passed" is the expression in common usage in the cable industry as
the measurement of the size of a cabled area, meaning the total number of
residential premises which have the potential to be connected to the
Company's network. This number does not include CATV-only homes which are
only included in the Company's homes passed for the purpose of its
regulatory milestones.
(2) An RGU (revenue generating unit) is one CATV account or one telephone
account; a dual customer generates two RGUs.
(3) RGU penetration is the number of RGUs per 100 homes marketed. As defined,
maximum RGU penetration is 200%.
(4) Includes Comcast UK, ComTel and Diamond Cable. Excludes 50% ownership of
Cable London.
18
<PAGE>
NTL Incorporated and Subsidiaries
RESULTS OF OPERATIONS
As a result of the completion of the first and second stages of the acquisition
of ComTel in June 1998 and September 1998, respectively, the Company
consolidated the results of operations of certain acquired businesses from the
date of acquisition. The results of operations of the acquired businesses
subsequent to the date of acquisition did not significantly impact the
consolidated results. The results of the acquired businesses are not included in
the 1997 results.
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
- ----------------------------------------------
NTL increased revenues from third quarter 1997 to third quarter 1998 by
approximately 44% to $182.5 million. This $55.8 million increase in revenues was
accompanied by only a $12.3 million increase in operating expenses, representing
a 78% incremental margin.
Local telecommunications and television revenues increased to $84,366,000 from
$45,606,000 as a result of customer growth that increased the Company's current
revenue stream. The Company expects customer growth to continue to increase
which will drive further revenue growth as the Company completes the
construction of its dual service network past the remaining homes in its
franchise areas.
National and international telecommunications revenues increased to $64,185,000
from $46,435,000 as a result of increases in business telecommunications
revenues, Internet services revenues and carrier services revenues. Business
telecommunications and Internet services revenues increased primarily as a
result of customer growth. The Company expects business telecommunications and
Internet services customer growth to continue to increase which will drive
further revenue growth. The Company is expanding its selling and marketing
effort to business customers and for Internet services in its completed network
and the Company has not yet completed the construction of its dual service
network. Carrier services revenues increased due to growth in satellite services
and telephone services provided by the Company's wholesale operation to
broadcasters and telephone companies, respectively. Revenue growth in carrier
services is primarily dependent upon the Company's ability to continue to
attract new customers and expand services to existing customers. Recent new
contracts should contribute to revenue growth in the near term.
Broadcast transmission and other revenues increased to $33,933,000 from
$32,531,000 primarily due to increases in broadcast television and FM radio
customers and accounts, which exceeded price cap reductions in the Company's
regulated services. Broadcast television revenues are expected to increase in
the future as digital television broadcasting commences.
Other telecommunications revenues decreased primarily due to the sale of the
assets of the Company's wholly-owned subsidiary, OCOM Corporation, to AirTouch
Communications, Inc. and to CoreComm Incorporated during 1998.
Operating expenses increased to $88,122,000 from $75,836,000 primarily as a
result of increases in interconnection costs and programming costs due to
customer growth.
19
<PAGE>
NTL Incorporated and Subsidiaries
Selling, general and administrative expenses increased to $78,543,000 from
$40,724,000 as a result of increases in telecommunications and CATV sales and
marketing costs and increases in additional personnel and overhead to service
the increasing customer base.
Franchise fees increased to $6,223,000 from $5,848,000 primarily as a result of
the inflation adjustment to the Northern Ireland license payment.
Corporate expenses decreased to $4,018,000 from $4,352,000 primarily due to the
sale of OCOM's assets in 1998. Certain OCOM personnel were included in corporate
expenses in 1997. The 1998 and 1997 amounts include $463,000 of non-cash expense
related to non-compete agreements.
Nonrecurring charges of $15,982,000 in 1997 are comprised of restructuring costs
of $15,811,000 and deferred costs written-off of $171,000. The deferred costs
written-off arose in connection with the Company's unsuccessful bid for Digital
Terrestrial Television multiplex licenses. Restructuring costs relate to the
Company's announcement in September 1997 of a reorganization of certain of its
operations. The Company is consolidating the Customers Operations departments
that serve its three franchise areas in England (excluding the ComTel and
Partners franchises) into one department and is consolidating certain operations
and management groups within the Broadcast Services division, as well as certain
other consolidations or cessation of activities. This charge consisted of
employee severance and related benefit costs of $6,688,000 for approximately 280
employees to be terminated, lease exit costs of $6,509,000 and penalties of
$2,614,000 associated with the cancellation of contractual obligations. The
entire $15,811,000 restructuring charge will require a cash outlay which will be
funded using cash on hand. The consolidations have been completed, the lease
exit costs are for leases that extend over a number of years and the contract
cancellations are expected to be completed by the end of 1998. As of September
30, 1998, $8,029,000 of the provision has been used, including $4,493,000 for
severance and related costs, $1,400,000 for lease exit costs and $2,136,000 for
penalties associated with the cancellation of contractual obligations. As of
September 30, 1998, 137 employees had been terminated. There was no other
adjustment to the liability through September 30, 1998.
Depreciation and amortization expense increased to $61,218,000 from $38,430,000
primarily due to an increase in depreciation of telecommunications and CATV
equipment.
Interest expense increased to $84,800,000 from $52,978,000 due to the issuance
of the New Notes in March 1998, the bank loan in connection with the ComTel
acquisition, and the increase in the accretion of original issue discount on the
deferred coupon notes. Interest of $55,076,000 and $25,987,000 was paid in the
three months ended September 30, 1998 and 1997, respectively.
Foreign currency transaction gains (losses) decreased to losses of $9,770,000
from gains $1,109,000 due to unfavorable changes in the exchange rate subsequent
to the issuance in March 1998 of new debt denominated in British pounds
sterling.
The Company recorded an extraordinary loss from the early extinguishment of debt
of $4,239,000 in 1998 as a result of the redemption of a portion of the 10-7/8%
Notes in July 1998.
20
<PAGE>
NTL Incorporated and Subsidiaries
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
- ---------------------------------------------
Local telecommunications and television revenues increased to $214,545,000 from
$114,593,000 as a result of customer growth that increased the Company's current
revenue stream. The Company expects customer growth to continue to increase
which will drive further revenue growth as the Company completes the
construction of its dual service network past the remaining homes in its
franchise areas.
National and international telecommunications revenues increased to $166,845,000
from $130,217,000 as a result of increases in business telecommunications
revenues, Internet services revenues and carrier services revenues. Business
telecommunications and Internet services revenues increased primarily as a
result of customer growth. The Company expects business telecommunications and
Internet services customer growth to continue to increase which will drive
further revenue growth. The Company is expanding its selling and marketing
effort to business customers and for Internet services in its completed network
and the Company has not yet completed the construction of its dual service
network. Carrier services revenues increased due to growth in satellite services
and telephone services provided by the Company's wholesale operation to
broadcasters and telephone companies, respectively. Revenue growth in carrier
services is primarily dependent upon the Company's ability to continue to
attract new customers and expand services to existing customers. Recent new
contracts should contribute to revenue growth in the near term.
Broadcast transmission and other revenues increased to $100,825,000 from
$96,818,000 primarily due to increases in broadcast television and FM radio
customers and accounts, which exceeded price cap reductions in the Company's
regulated services. Broadcast television revenues are expected to increase in
the future as digital television broadcasting commences.
Other telecommunications revenues decreased to $2,375,000 from $6,745,000
primarily due to the sale of the assets of the Company's wholly-owned
subsidiary, OCOM Corporation, to AirTouch Communications, Inc. and to CoreComm
Incorporated during 1998.
Operating expenses increased to $243,476,000 from $217,087,000 primarily as a
result of increases in interconnection costs and programming costs due to
customer growth.
Selling, general and administrative expenses increased to $192,070,000 from
$122,934,000 as a result of increases in telecommunications and CATV sales and
marketing costs and increases in additional personnel and overhead to service
the increasing customer base.
Franchise fees increased to $18,729,000 from $17,608,000 primarily as a result
of the inflation adjustment to the Northern Ireland license payment.
Corporate expenses decreased to $11,797,000 from $13,394,000 primarily due to
the sale of OCOM's assets in 1998. Certain OCOM personnel were included in
corporate expenses in 1997. The 1998 and 1997 amounts include $1,389,000 of
non-cash expense related to non-compete agreements.
21
<PAGE>
NTL Incorporated and Subsidiaries
Nonrecurring charges of $20,537,000 in 1997 are comprised of restructuring costs
of $15,811,000 and deferred costs written-off of $4,726,000. As described above,
restructuring costs include costs of employee severance and related costs, lease
exit costs and penalties associated with the cancellation of contractual
obligations. Write-off of deferred costs of $4,726,000 relate to the Company's
unsuccessful bid for Digital Terrestrial Television multiplex licenses.
Depreciation and amortization expense increased to $156,785,000 from
$108,254,000 primarily due to an increase in depreciation of telecommunications
and CATV equipment.
Interest expense increased to $226,422,000 from $152,095,000 due to the issuance
of the New Notes in March 1998, the bank loan in connection with the ComTel
acquisition and the increase in the accretion of original issue discount on the
deferred coupon notes. Interest of $94,734,000 and $52,941,000 was paid in the
nine months ended September 30, 1998 and 1997, respectively.
Foreign currency transaction gains (losses) decreased to losses of $6,973,000
from gains of $912,000 due to unfavorable changes in the exchange rate
subsequent to the issuance in March 1998 of new debt denominated in British
pounds sterling.
The Company recorded an extraordinary loss from the early extinguishment of debt
of $4,239,000 in 1998 as a result of the redemption of a portion of the 10-7/8%
Notes in July 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company will continue to require significant amounts of capital to finance
construction of its local and national networks, for connection of telephone,
telecommunications and CATV customers to the networks, for other capital
expenditures, as well as for cash interest payments. Based on the information
currently available, the Company estimates that, from October 1, 1998 through
September 30, 1999, these requirements will aggregate approximately 520 million
pounds sterling (approximately $880 million), including ComTel and the
Amalgamated Company. The Company intends to fund its requirements from cash,
cash equivalents and marketable securities on hand of $795 million as of
September 30, 1998 (including the Amalgamated Company), further equity and/or
debt financings and funds internally generated by the operations of the
Company's subsidiaries. The Company's commitments for equipment and services at
September 30, 1998, of approximately $176.3 million are included in the
anticipated requirements.
In November 1998, the Company issued $625 million aggregate principal amount of
11-1/2% Senior Notes due 2008 (the 11-1/2% Notes) and $450 million 12-3/8%
Senior Deferred Coupon Notes due 2008 (the 12-3/8% Notes). The 11-1/2% Notes and
the 12-3/8% Notes were issued at 100% or $625 million and 55.505% or $249.8
million, respectively. The Company received net proceeds of $607 million and
$242 million, after discounts and commissions, from the issuance of the 11-1/2%
Notes and the 12 3/8% Notes, respectively.
In March 1998, the Company issued 125 million pounds sterling aggregate
principal amount of 9-1/2% Senior Notes due 2008 (the "Sterling Senior Notes"),
300 million pounds sterling aggregate principal amount of 10-3/4% Senior
Deferred Coupon Notes due 2008 (the "Sterling Deferred Coupon Notes") and $1.3
billion aggregate principal amount of 9-3/4% Senior Deferred Coupon Notes due
2008 (the "Dollar Deferred Coupon Notes"). The Sterling Senior Notes, Sterling
Deferred Coupon Notes
22
<PAGE>
NTL Incorporated and Subsidiaries
and the Dollar Deferred Coupon Notes were issued at 99.67% or 124.6 million
pounds sterling, 58.62% or 175.9 million pounds sterling and 61.724% or $802.4
million, respectively. The Company received net proceeds of 121.2 million pounds
sterling, 170.6 million pounds sterling and $778.3 million, after discounts and
commissions, from the issuance of the Sterling Senior Notes, the Sterling
Deferred Coupon Notes and the Dollar Deferred Coupon Notes, respectively.
In March 1998, the Company called for redemption all of its $191,750,000
principal amount of 7-1/4% Convertible Subordinated Notes due 2005. The
redemption date was April 20, 1998, at a redemption price of 105.08% of the
principal amount plus accrued and unpaid interest through the date of
redemption. The 7-1/4% Notes were convertible into Common Stock at a conversion
price of $27.56 per share. In April 1998, all of the 7-1/4% Notes were converted
into approximately 6,958,000 shares of the Company's Common Stock.
In June 1998, the Company provided to the Trustee of its 10-7/8% Senior Deferred
Coupon Notes due 2003 a notice that it would redeem the 10-7/8% Notes on October
15, 1998. Pending such redemption, the Company deposited in trust with the
Trustee $218.6 million to pay the redemption price (including principal) on the
10-7/8% Notes. In July and October 1998, the Company redeemed the 10-7/8% Notes
for cash of $218 million. The Company recorded an extraordinary loss from the
early extinguishment of the 10-7/8% Notes of approximately $4.2 million in the
third quarter of 1998 and approximately $7.9 million in the fourth quarter of
1998.
Pursuant to an acquisition agreement (the "ComTel Agreement") with Vision
Networks III B.V., a wholly-owned subsidiary of Royal PTT Nederland NV (KPN),
the Company acquired the operations of ComTel Limited and Telecential
Communications (collectively, "ComTel") for a total of 550 million pounds
sterling completed in two stages. In the first stage, in June 1998, the Company
acquired certain of the ComTel properties for 275 million pounds sterling in
cash. In the second stage, in September 1998, the Company acquired the remaining
ComTel properties for 200 million pounds sterling in cash and 75 million pounds
sterling in preferred stock. The Company financed the cash portion of the
transaction through a bank loan, completed through an amendment to the Company's
existing bank facility with The Chase Manhattan Bank. The Company issued 125,280
shares of 9.9% Non-voting Mandatorily Redeemable Preferred Stock, Series A (the
"PIK Preferred Stock") in connection with the ComTel acquisition. The PIK
Preferred Stock was valued at 75,000,000 pounds sterling ($126,277,000), the
fair market value on the date of issuance. Each share of PIK Preferred Stock has
a stated value of $1,000. Cumulative dividends accrue at 9.9% of the stated
value per share. Dividends are payable when and if declared by the Board of
Directors and may be paid, in the sole discretion of the Board, in cash, in
shares of common stock, in shares of Convertible Preferred Stock or through any
combination of the foregoing. As of September 30, 1998, accrued and unpaid
dividends were $310,000. On December 22, 1999, all outstanding shares of the PIK
Preferred Stock shall be redeemed for $1,000 per share together with accrued and
unpaid dividends, at the Company's option, in cash, in shares of common stock,
in shares of Convertible Preferred Stock or through any combination of the
foregoing.
In 1997, NTL (UK) Group, Inc., a wholly-owned subsidiary of the Company, which
is the holding company for its United Kingdom operations and the parent company
of NTLIH, and NTLIH entered into an agreement with The Chase Manhattan Bank
pursuant to which Chase has agreed to fully underwrite a term loan facility. In
June 1998, in connection with the ComTel acquisition, the Company entered into
an amendment to this term loan facility. In June and
23
<PAGE>
NTL Incorporated and Subsidiaries
September 1998, the Company borrowed an aggregate of 475 million pounds sterling
($798 million). The effective interest rate on the amounts borrowed at September
30, 1998 was 9.776%. The bank loan was due on January 31, 1999, subject to
extension to June 30, 1999. The term loan was repaid in full in November 1998
from proceeds of the 11-1/2% Notes and the 12-3/8% Notes. Chase has committed to
make available to the Company a 480 million pounds sterling senior secured
credit facility subject to the renegotiation of the term loan facility structure
and pricing.
Effective October 29, 1998, the Company, NTL (Bermuda) Limited, a wholly owned
subsidiary of the Company, and Comcast UK Cable Partners Limited ("Partners")
consummated a transaction whereby NTL (Bermuda) Limited (the "Amalgamated
Company") acquired all of the outstanding common stock of Partners. Shareholders
of Partners received 0.3745 shares of common stock of the Company in
consideration for each of their shares of common stock of Partners (an aggregate
of approximately 18,700,000 shares of the Company's common stock). The
Amalgamated Company has executed a First Supplemental Indenture relating to
Partners' 11.20% Senior Discount Debentures due 2007 which provides for the
assumption by the Amalgamated Company of the Debentures. As of September 30,
1998, Partners had 241 million pounds sterling ($409 million) of Debentures
outstanding. Interest accretes on the Debentures at 11.20% per annum, compounded
semiannually from November 15, 1995 to November 15, 2000, after which date
interest will be paid in cash semiannually through November 15, 2007. The
Amalgamated Company also has notes payable to Comcast U.K. Holdings, Inc. of 12
million pounds sterling ($20 million) as of September 30, 1998. The notes accrue
interest at 9% per annum, compounded semiannually. The notes and accrued
interest are due and payable in September 1999.
In August 1998, Partners and the Company entered into an agreement with Telewest
Communications plc relating to Partners' and Telewest's respective 50% ownership
interests in Cable London PLC and certain other related matters. Pursuant to
this agreement, between April 29 and July 29, 1999, the Amalgamated Company can
notify Telewest of the price at which it is willing to sell its 50% ownership in
Cable London to Telewest. Following such notification, Telewest at its option
will be required at that price to either purchase the Amalgamated Company's 50%
ownership interest in Cable London or sell its 50% ownership interest in Cable
London to the Amalgamated Company. If the Amalgamated Company fails to give
notice to Telewest by July 29, 1999, it will be deemed to have delivered an
offer notice for 100 million pounds sterling. The sale or purchase by the
Company as per the Cable London Shoot-out is expected to be completed by
November 1999.
In June 1998, the Company entered into an acquisition agreement with Diamond
Cable Communications, plc. Pursuant to this agreement, Diamond shareholders will
receive 0.25 shares of the Company's common stock for each Diamond ordinary
share. Diamond has approximately 60.7 million fully diluted shares outstanding,
and the total consideration for the transaction will be approximately 15.2
million shares. Based on the closing price of the Company's common stock on the
date of the agreement, the purchase price implies a total Diamond equity value
of approximately $630 million. The closing of the Diamond acquisition is subject
to shareholder approval, bond consents and customary closing conditions.
24
<PAGE>
NTL Incorporated and Subsidiaries
The Company is highly leveraged. The accreted value at September 30, 1998 of the
Company's total long-term indebtedness (including the Redeemable Preferred
Stock) and as adjusted for (i) the Amalgamation (including the sale by Partners
of its interest in Birmingham Cable Corporation Limited and the application of
the proceeds therefrom), (ii) the redemption of the 10-7/8% Notes on October 15,
1998, and (iii) the issuance of the 11-1/2% Notes and the 12-3/8% Notes in
November 1998, is approximately $4.5 billion, representing approximately 89% of
total capitalization. The following table summarizes the terms of those notes
and Redeemable Preferred Stock issued by the Company.
25
<PAGE>
NTL Incorporated and Subsidiaries
<TABLE>
<CAPTION>
11-1/2% 12-3/4% 10-3/4% 9-3/4% 12-3/8%
Series B Senior Series A Senior Senior Sterling Senior Senior
Deferred Coupon Deferred Coupon Deferred Coupon Deferred Coupon Deferred Coupon
Notes Notes Notes Notes Notes
<S> <C> <C> <C> <C> <C>
Denomination $ $ Pounds Sterling $ $
Net Proceeds (in 000's)..... 582,000 145,125 170,584 778,340 241,967
Issue Date.................. January 30, 1996 April 20, 1995 March 13, 1998 March 13, 1998 November 6, 1998
Issue Price (1)............. 57.155% 53.995% 58.62% 61.724% 55.505%
Aggregate Principal Amount
at Maturity (in 000's).... 1,050,000 277,803 300,000 1,300,000 450,000
Maturity Date............... February 1, 2006 April 15, 2005 April 1, 2008 April 1, 2008 October 1, 2008
Yield or Interest Rate (2).. 11-1/2% 12-3/4% 10-3/4% 9-3/4% 12-3/8%
February 1 and April 15 and April 1 and April 1 and April 1 and
Interest or Dividend August 1 October 15 October 1 October 1 October 1
Payment Dates............. from 8-1-01 from 10-15-00 from 10-1-2003 from 10-1-2003 from 4-1-2004
Earliest Optional
Redemption Date (4)....... February 1, 2001 April 15, 2000 April 1, 2003 April 1, 2003 October 1, 2003
105.75 (2001) to 103.64 (2000) to 105.375 (2003) to 104.875 (2003) to 106.188 (2003) to
Redemption Price (%) (5).... 100 (2003) 100 (2002) 100 (2006) 100 (2006) 100 (2006)
Conversion Price (6)........ N/A N/A N/A N/A N/A
Senior/Subordinated......... Senior Senior Senior Senior Senior
</TABLE>
(Table continues on the following page)
26
<PAGE>
NTL Incorporated and Subsidiaries
<TABLE>
<CAPTION>
7%
11-1/2% Convertible 9-1/2% 10% Redeemable
Senior Subordinated Senior Sterling Series B Preferred
Notes Notes Notes Senior Notes Stock
<S> <C> <C> <C> <C> <C>
Denomination $ $ Pounds Sterling $ $
Net Proceeds (in 000's)..... 607,031 267,437 121,161 389,000 96,625
Issue Date.................. November 2, 1998 June 12, 1996 March 13, 1998 February 14, 1997 February 14, 1997
Issue Price (1)............. 100% 100% 99.670% 100% 100%
Aggregate Principal Amount
at Maturity (in 000's).... 625,000 275,000 125,000 400,000 100,000
Maturity Date............... October 1, 2008 June 15, 2008 April 1, 2008 February 15, 2007 February 15, 2009
Yield or Interest Rate (2).. 11-1/2% 7% 9-1/2% 10% 13%
May 15, August 15,
April l and June 15 and April 1 and February 15 and November 15 and
Interest or Dividend October 1 from December 15 October 1 August 15 February 15
Payment Dates............. 4-1-99 from 12-15-96 from 10-1-98 from 8-15-97 from 5-15-97 (3)
Earliest Optional
Redemption Date (4)....... October 1, 2003 June 15, 1999 April 1, 2003 February 15, 2002 February 15, 2002
105.75 (2003) to 104.9 (1999) to 104.75 (2003) to 105 (2002) to 106.5 (2002) to
Redemption Price (%) (5).... 100 (2006) 100 (2006) 100 (2006) 100 (2005) 100 (2005)
Conversion Price (6)........ N/A 37.875 N/A N/A N/A
Senior/Subordinated......... Senior Subordinated Senior Senior N/A
</TABLE>
(1) Percent of aggregate principal amount at maturity (or aggregate liquidation
preference in the case of the Redeemable Preferred Stock).
(2) Percent per annum.
(3) Dividend payments on the Redeemable Preferred Stock are payable in cash or
additional shares of Redeemable Preferred Stock, at the Company's option.
From May 15, 2004, dividend payments are payable in cash.
(4) This is the first date when redeemable at the Company's option. The
Redeemable Preferred Stock is mandatorily redeemable for cash on February
15, 2009.
(5) Expressed as a percentage of principal amount or liquidation preference, as
applicable, plus, in each case, accrued and unpaid interest or dividends
thereon to the applicable redemption date.
(6) This is the conversion price per share of the Company's common stock,
adjusted for the four-for-three stock split in August 1995 and subject to
further adjustments in certain events.
27
<PAGE>
NTL Incorporated and Subsidiaries
Pursuant to the terms of the Northern Ireland LDL, CableTel Northern Ireland
Limited (a wholly-owned subsidiary of the Company) is required to make annual
cash payments to the ITC for fifteen years in the amount of approximately 14.4
million pounds sterling (subject to adjustments for inflation). The fee for 1998
is 14.95 million pounds sterling. CableTel Northern Ireland Limited began making
monthly payments in January 1997. Such payments are in addition to the
percentages of qualifying revenue already set by the ITC of 0% for the first ten
years and 2% for the last five years of the fifteen year license. Pursuant to
the terms of the Glamorgan and Gwent LDL, CableTel South Wales Limited (a
wholly-owned subsidiary of the Company) is required to make annual cash payments
to the ITC for fifteen years, commencing in January 1998, in the amount of
104,188 pounds sterling (subject to adjustment for inflation). Such payments are
in addition to the percentages of qualifying revenue already set by the ITC of
0% for the first five years, 2% for the second five years and 4% for the last
five years of the fifteen year license.
The development, construction and operations of the combined telecommunications
networks of the Company, ComTel, Partners and Diamond will require substantial
capital. In addition, the Company will require significant amounts of capital to
finance the other capital expenditures and other obligations of its current and
future subsidiaries. The Company intends to fund a portion of these requirements
from cash and securities on hand and cash from operations. However, the
Company's management estimates that additional funding will be necessary to meet
these requirements. There can be no assurance that: (i) actual construction
costs will not exceed the amounts estimated or that additional funding
substantially in excess of the amounts estimated will not be required, (ii)
additional financing will be obtained or will be available on acceptable terms,
(iii) conditions precedent to advances under future credit facilities will be
satisfied when funds are required, (iv) the Company and its subsidiaries will be
able to generate sufficient cash from operations to meet capital requirements,
debt service and other obligations when required, (v) the Company will be able
to access such cash flow or (vi) the Company will not incur losses from its
exposure to exchange rate fluctuations or be adversely affected by interest rate
fluctuations.
Management does not anticipate that the Company and its subsidiaries will
generate sufficient cash flow from operations to repay at maturity the entire
principal amount of the outstanding indebtedness of the Company and its
subsidiaries. Accordingly, the Company will be required to consider a number of
measures, including: (i) refinancing all or a portion of such indebtedness, (ii)
seeking modifications to the terms of such indebtedness, (iii) seeking
additional debt financing, which may be subject to obtaining necessary lender
consents, (iv) seeking additional equity financing, or (v) a combination of the
foregoing.
The Company's operations are conducted through its direct and indirect
wholly-owned subsidiaries. As a holding company, the Company holds no
significant assets other than its investments in and advances to its
subsidiaries. The Company is therefore dependent upon the receipt of sufficient
funds from its subsidiaries to meet its own obligations. Accordingly, the
Company's ability to make scheduled interest and principal payments when due to
holders of indebtedness of the Company and the Company's ability to pay cash
dividends to its stockholders is dependent upon the receipt of sufficient funds
from its subsidiaries.
28
<PAGE>
NTL Incorporated and Subsidiaries
To the extent that the Company obtains financing in United States dollars and
incurs costs in the construction and operation of its networks in the United
Kingdom in British pounds sterling, it will encounter currency exchange rate
risks. At September 30, 1998, the Company had approximately $360 million in
pounds sterling cash and cash equivalents to reduce this risk. In addition, the
Company's pounds sterling denominated New Notes issued in March 1998 will also
reduce this risk. Furthermore, the Company's revenues are generated primarily in
British pounds sterling while its interest and principal obligations with
respect to most of the Company's existing indebtedness are payable in U.S.
dollars. The Company has entered into an option agreement to hedge some of the
risk of exchange rate fluctuations related to interest and principal payments on
U.S. dollar denominated debt and for parent company expenses up to an annual
limit of approximately $13 million. The Company may purchase U.S. dollars at a
fixed rate of 1 pound sterling to $1.40 on specified dates through June 2001 for
specified amounts of U.S. dollars. The dates and U.S. dollar amounts correspond
to the Company's interest and principal payment dates and amounts for its U.S.
dollar denominated debt and anticipated amounts of parent company expenses.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash used in operating activities was $27,656,000 and $62,899,000 in the nine
months ended September 30, 1998 and 1997, respectively. The change is primarily
due to a reduction in the operating loss and changes in operating assets and
liabilities.
Purchases of fixed assets were $464,944,000 in 1998 and $354,919,000 in 1997 as
a result of the continuing fixed asset purchases and construction in 1998.
Proceeds from borrowings, net of financing costs, of $2,093,602,000 in 1998 is
comprised of the proceeds from the 9-1/2% Senior Sterling Notes, the 10-3/4%
Senior Deferred Coupon Sterling Notes and the 9-3/4% Senior Deferred Coupon
Notes of $1,305,902,000 net of financing costs incurred of $39,481,000 and
proceeds from borrowings under the bank loan of $841,908,000 less $14,727,000
paid for financing costs. Principal payments of $66,040,000 represent the
repayment of borrowings under the bank loan.
YEAR 2000
The Company has a comprehensive Year 2000 project designed to identify and
assess the risks associated with its information systems, products, operations
and infrastructure, suppliers, and customers that are not Year 2000 compliant,
and to develop, implement and test remediation and contingency plans to mitigate
these risks. The project comprises four phases: (1) identification of risks, (2)
assessment of risks, (3) development of remediation and contingency plans and
(4) implementation and testing.
The Company has essentially completed its compilation of equipment and systems
that might be affected by Year 2000 noncompliance. An impact and risk assessment
is underway on all items to determine whether items are business critical, high
priority or low priority. This assessment will include all information systems
("IS") and non-IS equipment with embedded technology such as air conditioning,
generators and power supplies. All business critical and high priority items
have been identified. The Company's billing, provisioning and customer service
systems
29
<PAGE>
NTL Incorporated and Subsidiaries
are being reviewed and modified for Year 2000 readiness which is expected to be
completed by the end of 1998. Integration testing of the complete system will
begin in early 1999 and is expected to require three months. Testing of other
business critical and high priority items is in various stages with some areas
up to 50% complete. The target for the completion of this testing is the end of
March 1999. Where appropriate, remedial work has been minimized by bringing
forward planned system revisions and retiring old equipment. The Company is also
communicating with its suppliers with respect to the high priority and business
critical items. A central database has been established to insure all issues are
resolved. This communication is approximately 50% complete. A Millennium
Operations Plan is being created that details the key resources needed for
problems that may arise over the Year 2000 weekend. All Business Continuity
Plans are being reviewed and will be revised to account for special
circumstances related to the Year 2000.
The Company expects to incur $13 million in 1998 and 1999 primarily in labor
costs to compile inventories, assess risks, prioritize remediation projects,
communicate with suppliers, maintain the supplier communications database, test
remediations and implement remediations. The expected cost includes enhancements
and upgrades that are part of the normal upgrades and system revisions.
As the Year 2000 project continues, the Company may discover additional
problems, may not be able to develop, implement or test remediation or
contingency plans, or may find that the costs of these activities exceed current
expectations. In many cases, the Company is relying on assurances from suppliers
that new and upgraded information systems and other products will be Year 2000
ready. The Company plans to test such third-party products, but cannot be sure
that its tests will be adequate or that, if problems are identified, they will
be addressed by the supplier in a timely and satisfactory way.
Because the Company uses a variety of information systems and has additional
systems embedded in its operations and infrastructure, the Company cannot be
sure that all of its systems will work together in a Year 2000-ready fashion.
Furthermore, the Company cannot be sure that it will not suffer business
interruptions, either because of its own Year 2000 problems or those of
third-parties upon whom the Company is reliant for services. The Company is
continuing to evaluate its Year 2000-related risks and corrective actions.
However, the risks associated with the Year 2000 problem are pervasive and
complex; they can be difficult to identify and address, and can result in
material adverse consequences to the Company. Even if the Company, in a timely
manner, completes all of its assessments, identifies and test remediation plans
believed to be adequate, and develops contingency plans believed to be adequate,
some problems may not be identified or corrected in time to prevent material
adverse consequences to the Company.
FORWARD LOOKING STATEMENTS
The information in the preceding paragraphs includes projections; in reviewing
such information it should be kept in mind that actual results may differ
materially from those in such projections. These projections were based on
various factors and were derived utilizing numerous assumptions. Important
assumptions and factors that could cause actual results to differ
30
<PAGE>
NTL Incorporated and Subsidiaries
materially from those in these projections include general economic and business
conditions in the United Kingdom, the Company's ability to continue to design
networks, install facilities, obtain and maintain any required governmental
licenses or approvals and finance construction and development, all in a timely
manner at reasonable costs and on satisfactory terms and conditions, as well as
assumptions about customer acceptance, churn rates, overall market penetration
and competition from providers of alternative services, the impact of new
business opportunities requiring significant up-front investment, Year 2000
readiness, and availability, terms and deployment of capital. The failure of
such assumptions to be realized as well as other factors may also cause actual
results to differ materially from those projected. The Company assumes no
obligations to update these projections to reflect actual results, changes in
assumptions or changes in other factors affecting such projections.
31
<PAGE>
NTL Incorporated and Subsidiaries
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K.
During the quarter ended September 30, 1998, the Company filed a
report on Form 8-K dated August 14, 1998, reporting under Item 5,
Other Events, the announcement that Comcast UK Cable Partners Limited
("Comcast UK") and NTL entered into an agreement with Telewest
Communications plc relating to Comcast UK's ownership interests in
Birmingham Cable Corporation Limited and Comcast UK's and Telewest's
respective ownership interests in Cable London plc.
No financial statements were filed with this report.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NTL INCORPORATED
Date: November 12, 1998 By: /s/ J. Barclay Knapp
--------------------------------------
J. Barclay Knapp
President, Chief Executive Officer and
Chief Financial Officer
Date: November 12, 1998 By: /s/ Gregg Gorelick
--------------------------------------
Gregg Gorelick
Vice President-Controller
(Principal Accounting Officer)
33
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 459,443,000
<SECURITIES> 138,326,000
<RECEIVABLES> 153,151,000
<ALLOWANCES> (22,193,000)
<INVENTORY> 0
<CURRENT-ASSETS> 191,054,000
<PP&E> 3,480,641,000
<DEPRECIATION> (345,986,000)
<TOTAL-ASSETS> 4,622,238,000
<CURRENT-LIABILITIES> 1,367,280,000
<BONDS> 3,087,112,000
120,044,000
1,000
<COMMON> 414,000
<OTHER-SE> (24,674,000)
<TOTAL-LIABILITY-AND-EQUITY> 4,622,238,000
<SALES> 0
<TOTAL-REVENUES> 484,590,000
<CGS> 0
<TOTAL-COSTS> 243,476,000
<OTHER-EXPENSES> 222,596,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 226,422,000
<INCOME-PRETAX> (331,866,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (331,866,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (4,239,000)
<CHANGES> 0
<NET-INCOME> (336,105,000)
<EPS-PRIMARY> (9.29)
<EPS-DILUTED> (9.29)
</TABLE>
