<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10-K
(MARK ONE)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NO. 0-22616
NTL COMMUNICATIONS CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(ON APRIL 1, 1999, THE NAME OF THE REGISTRANT WAS CHANGED FROM NTL
INCORPORATED TO NTL COMMUNICATIONS CORP.)
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)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [X]
As of March 20, 2000, there were 100 shares of the Registrant's common stock
outstanding. The Registrant is a wholly-owned subsidiary of NTL Incorporated,
and there is no market for the Registrant's common stock.
The Registrant meets the conditions set forth in General Instructions I (1) (a)
and I (1) (b) of Form 10-K and is filing this form with the reduced disclosure
format pursuant to General Instruction I (2) (b) and I (2) (c).
*********
DOCUMENTS INCORPORATED BY REFERENCE
NONE
*********
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TABLE OF CONTENTS
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PAGE
PART I
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Item 1. Business ........................................................ 3
Item 2. Properties ...................................................... 3
Item 3. Legal Proceedings ............................................... 4
Item 4. Submission of Matters to a Vote of Security Holders ............. 4
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters ............................................. 4
Item 6. Selected Financial Data ......................................... 4
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................. 5
Item 7a. Quantitative and Qualitative Disclosure about Market Risk ....... 11
Item 8. Financial Statements and Supplementary Data ..................... 13
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ........................................ 13
PART III
Items 10, 11, 12, and 13 .................................................... 13
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K ..................................................... 13
Signatures .................................................................. 19
Index to Consolidated Financial Statements .................................. F-1
</TABLE>
This Annual Report on Form 10-K for the year ended December 31, 1999, at the
time of filing with the Securities and Exchange Commission, modifies and
supersedes all prior documents filed pursuant to Section 13, 14 and 15(d) of the
Securities Exchange Act of 1934 for purposes of any offers or sales of any
securities after the date of such filing pursuant to any Registration Statement
or Prospectus filed pursuant to the Securities Act of 1933 which incorporates by
reference this Annual Report.
"Safe Harbor" Statement under the Private Securities Litigation Reform
Act of 1995:
Certain statements contained herein constitute "forward-looking statements"
as that term is defined under the Private Securities Litigation Reform Act of
1995. When used in this Form 10-K, the words, "believe," "anticipate," "should,"
"intend," "plan," "will," "expects," "estimates," "projects," "positioned,"
"strategy," and similar expressions identify such forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of the Registrant, or industry results, to be materially different from those
contemplated or projected, forecasted, estimated or budgeted, whether expressed
or implied, by such forward-looking statements. Such factors include, among
others: general economic and business conditions, industry trends, the
Registrant's ability to continue to design network routes, install facilities,
obtain and maintain any required government 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.
<PAGE> 3
PART I
ITEM 1. BUSINESS.
NTL Communications Corp. ("NTL Communications" or the "Company") is a
leading broadband communications company in the U.K. and the Republic of
Ireland.
The Company provides residential, business and wholesale customers with the
following services:
- RESIDENTIAL SERVICES, including telephony, cable television, personal
computer and television-based Internet access and interactive services.
- NATIONAL TELECOMS SERVICES, including business telecoms, national and
international carrier telecommunications, Internet services and satellite
communications services. NTL Communications currently serves
approximately 44,900 business and carrier customers, including: AT&T,
Cisco, Colt, MCI Worldcom, Microsoft, Orange, Sun Microsystems and
Vodafone.
- BROADCAST TRANSMISSION AND TOWER SERVICES, including digital and analog
television and radio broadcast transmission services, wireless network
management and tower site rental services.
In this Report on Form 10-K, references to "(pound sterling)" "pounds
sterling," "(pound)," "pence" or "p" are to the lawful currency of the U.K.,
references to "(euro)" or "Euro" are to the lawful currency of the European
Monetary Union, references to "IR(pounds)" or "Irish punts" are to the lawful
currency of the Republic of Ireland and references to "U.S. dollars," "dollars,"
"$" or "(cent)" are to the lawful currency of the United States. Solely for the
convenience of the reader, this Form 10-K contains translations of certain
foreign currency amounts into U.S. dollars and certain U.S. dollar amounts into
foreign currencies. These translations should not be construed as
representations that the foreign currency amounts actually represent such U.S.
dollar amounts or vice versa or could have been or could be or will be converted
into U.S. dollars or foreign currencies, as the case may be, at the rate
indicated or at any other rate. Unless otherwise indicated, the translations of
foreign currencies into U.S. dollars and U.S. dollars into foreign currencies
have been made at $1.6158 per (pound) 1.00, $1.0092 per (euro)1.00 and $1.28 per
IR(pounds)1.00, the noon buying rates in the City of New York for cable
transfers as certified for customs purposes by the Federal Reserve Bank of New
York (the "Noon Buying Rate") on December 31, 1999. On March 13, 2000, the Noon
Buying Rate was $1.5782 per (pound) 1.00, $.9648 per (euro)1.00 and $1.225 per
IR(pounds) 1.00.
NTL Incorporated ("NTL"), a Delaware corporation, was incorporated in
February 1999, to effect a reorganization into a holding company structure under
Section 251(g) of the Delaware General Corporation Law. The holding company
structure, which was implemented to pursue opportunities outside of the U.K. and
Ireland, was accomplished through a merger. The stockholders of NTL
Communications (formerly NTL Incorporated), at the effective time of the merger
became stockholders of the new holding company, and NTL Communications became a
subsidiary of the new holding company. The new holding company then took the
name NTL Incorporated. NTL Group Limited, a wholly-owned indirect subsidiary of
NTL Communications which was acquired in 1996, has a 30-year history in the U.K.
as a provider of reliable communications services. NTL Communications conducts
its operations through direct and indirect wholly-owned subsidiaries. NTL
Communications' principal executive office is located at 110 East 59th Street,
New York, New York 10022, and its telephone number is (212) 906-8440.
ITEM 2. PROPERTIES.
We own, lease or occupy under license 33 business unit and regional
head-offices throughout the U.K. and Ireland, our corporate head-office in Hook,
and 11 retail shops. In addition, we own or lease approximately 140 switching
centers/head-ends and operational hub-sites together with warehouses and other
non-operational properties, as well as various cable television, telephone and
telecommunications equipment used in the U.K. and Ireland.
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We own, lease or occupy under license approximately 770 properties in the
U.K., of which approximately 700 are used as transmitter sites. In addition, we
also are the lessee or licensee of over 600 transmitter sites which are owned by
Castle Transmission and shared between the two organizations pursuant to a site
sharing agreement.
We maintain offices under lease for our corporate staff in New York City.
We believe that our facilities are presently adequate for their current
use. We intend to continue to expand the systems in accordance with the
requirements of the network build schedules and acquire new sites as part of the
ongoing expansion of our transmission networks.
ITEM 3. LEGAL PROCEEDINGS.
We are involved in, or have been involved in, certain disputes and
litigation arising in the ordinary course of business, including claims
involving contractual disputes and claims for damages to property and personal
injury resulting from the construction of our networks and the maintenance and
servicing of our transmission masts, none of which are expected to have a
material adverse effect on our financial position or results of operations or
cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted pursuant to General Instructions I (2) (c) of Form 10-K.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company is a wholly-owned subsidiary of NTL Incorporated.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain financial data for the years ended
December 31, 1999, 1998, 1997, 1996 and 1995. This information should be read in
conjunction with the consolidated financial statements and notes thereto
appearing elsewhere in this Form 10-K.
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(In thousands)
YEAR ENDED DECEMBER 31,
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1999 1998 1997 1996 1995
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(1) (2) (3)
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Income statement data:
Operating revenues $ 1,477,871 $ 747,015 $ 491,755 $ 228,343 $ 33,741
(Loss) before extraordinary item (711,922) (503,927) (328,557) (254,454) (90,785)
Net (loss) (714,956) (534,616) (333,057) (254,454) (90,785)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------- ------------- ------------- ---------
(1) (2) (3)
<S> <C> <C> <C> <C> <C>
Working capital (deficiency) $441,003 $600,549 $(52,344) $242,102 $76,128
Fixed assets, net 5,340,555 3,854,430 1,756,985 1,459,528 639,674
Total assets 9,502,273 6,194,097 2,421,639 2,454,611 1,010,669
Long-term debt 7,598,024 5,043,803 2,015,057 1,732,168 513,026
Senior Redeemable Exchangeable
Preferred Stock -- 124,127 108,534 -- --
Shareholder's equity (deficiency) 900,527 355,154 (61,668) 328,114 339,257
</TABLE>
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(1) In March 1999, the Company purchased Diamond Cable Communications plc
("Diamond") for an aggregate purchase price of $978 million, including
intangibles aggregating $1.3 billion. In July 1999, the Company acquired
Cablelink Limited ("Cablelink") for an aggregate purchase price of $693 million,
including intangibles of $669 million. The net assets and results of operations
of Diamond and Cablelink are included in the consolidated financial statements
from their respective dates of acquisition.
(2) In June and September 1998, the Company purchased ComTel Limited and
Telecential Communications (collectively "Comtel") for an aggregate purchase
price of $969 million, including intangibles aggregating $224 million. In
October 1998, the Company purchased Comcast U.K. Cable Partners Limited
("Comcast U.K.") for an aggregate purchase price of $600 million, including
intangibles of $130 million. In December 1998, the Company purchased Eastern
Group Telecoms ("EGT") for an aggregate purchase price of $151 million,
including intangibles of $45 million. The net assets and results of operations
of ComTel, Comcast U.K. and EGT are included in the consolidated financial
statements from their respective dates of acquisition.
(3) In May 1996, the Company purchased NTL Group Limited for an aggregate
purchase price of $439 million, including goodwill of approximately $263
million. The net assets and results of operations of NTL Group Limited are
included in the consolidated financial statements from the date of the
acquisition.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
As a result of the completion of the acquisitions of ComTel in the second and
third quarters of 1998, Comcast U.K. (now known as NTL (Triangle) LLC ("NTL
Triangle"), formerly NTL (Bermuda) Limited) and EGT in the fourth quarter of
1998, Diamond in March 1999 and Cablelink in July 1999, the Company consolidated
the results of operations of these businesses from the dates of acquisition. The
results of Diamond and Cablelink are not included in the 1998 results. The
Company consolidated the results of operations of ComTel, NTL Triangle and EGT
in 1998 from the dates of acquisition.
Years Ended December 31, 1999 and 1998
Residential telecommunications and television revenues increased to $827,324,000
from $355,589,000 as a result of acquisitions and from customer growth that
increased the Company's current revenue stream. The 1999 and 1998 revenue
includes $467,185,000 and $74,213,000, respectively, from acquired companies.
The Company expects its customer base to continue to increase as the Company
completes the construction of its broadband network past the remaining homes in
its franchise areas.
National and international telecommunications revenues increased to $488,640,000
from $248,895,000 as a result of acquisitions and from increases in business
telecommunications revenues, Internet services revenues and carrier services
revenues. The 1999 and 1998 revenue includes $141,570,000 and $8,461,000,
respectively from acquired companies. Business telecommunications and Internet
services revenues increased primarily as a result of customer growth. The
Company expects its business telecommunications and Internet services customer
base to continue to increase. The Company is expanding its sales and marketing
effort to business customers and for Internet services in its completed 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.
Broadcast transmission and other revenues increased to $161,907,000 from
$140,156,000 due to increases in broadcast television and FM radio customers and
accounts, which exceeded price cap reductions in the Company's regulated
services. The Company expects its digital broadcasting services to increase in
the future.
Other telecommunications revenues decreased to zero from $2,375,000 due to the
sales of the assets of the Company's wholly-owned subsidiary, OCOM Corporation,
to AirTouch Communications, Inc. and to Cellular Communications of Puerto Rico,
Inc. during 1998.
Operating expenses increased to $704,689,000 from $372,134,000 as a result of
increases in interconnection costs and programming costs due to customer growth.
The 1999 and 1998 expense includes $254,007,000 and $35,299,000, respectively,
from acquired companies.
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Selling, general and administrative expenses increased to $561,797,000 from
$299,494,000 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. In addition, approximately $47.4 million of the
increase was due to the new national brand and advertising campaign which began
in the second quarter of 1999 and will continue into 2000. The 1999 and 1998
expense includes $233,914,000 and $40,886,000, respectively, from acquired
companies.
Pursuant to the terms of various United Kingdom licenses, the Company incurred
license fees paid to the Independent Television Commission ("ITC") to operate as
the exclusive service provider in certain of its franchise areas. Upon a request
by the Company in 1999, the ITC converted all of the Company's fee bearing
exclusive licenses to non-exclusive licenses by the end of 1999, and the
Company's liability for license payments ceased upon the conversion. Franchise
fees decreased to $16,538,000 from $25,036,000 due to the reversal of the
accrued liability for franchise fees of $13,592,000. The 1999 amount includes
Diamond franchise fees of $5,037,000.
Corporate expenses increased to $25,260,000 from $17,048,000 due to an increase
in various overhead costs.
Nonrecurring charges of $16,179,000 in 1999 were the fee incurred for the
cancellation of certain contracts. Nonrecurring charges of $20,642,000 in 1997
include deferred costs written-off of $5,013,000 and restructuring costs of
$15,629,000. The deferred costs written-off arose in connection with the
Company's unsuccessful bid for United Kingdom digital terrestrial television
multiplex licenses. Restructuring costs relate to the Company's announcement in
September 1997 of a reorganization of certain of its operations. This charge
consisted of employee severance and related costs of $6,726,000 for
approximately 280 employees to be terminated, lease exit costs of $6,539,000 and
penalties of $2,364,000 associated with the cancellation of contractual
obligations. As of December 31, 1998, $9,172,000 of the provision had been used,
including $5,558,000 for severance and related costs, $1,450,000 for lease exit
costs and $2,164,000 for penalties associated with the cancellation of
contractual obligations. As of December 31, 1998, 177 employees had been
terminated. The $4,194,000 reversed in 1998 includes $1,168,000 for severance
and related costs, $2,826,000 for lease exit costs and $200,000 for penalties
associated with the cancellation of contractual obligations. This reversal was
necessary because employees whose positions were eliminated chose to remain with
the Company in other positions rather than leave the Company and receive
severance pay, and the real estate markets in which the Company sublet space
improved increasing the sublet rentals and shortening the period of time
required to find subtenants. The remaining restructuring reserve of $2,263,000
at December 31, 1998 is for lease costs net of sublease revenue.
Depreciation and amortization expense increased to $762,858,000 from
$266,112,000 due to an increase in depreciation of telecommunications and CATV
equipment. The 1999 and 1998 expense includes $404,235,000 and $45,892,000
respectively, from acquired companies, including amortization of acquisition
related intangibles.
Interest expense increased to $678,036,000 from $328,815,000 due to the issuance
of additional debt, and the increase in the accretion of original issue discount
on the deferred coupon notes. The 1999 expense includes $184,839,000 from
acquired companies. Interest of $221,597,000 and $118,273,000 was paid in the
years ended December 31, 1999 and 1998, respectively.
Other gains of $493,121,000 in 1999 are from the sale of the investment in Cable
London.
Foreign currency transaction gains increased to $22,733,000 from $4,152,000
primarily due to the effect of favorable changes in the exchange rates on the
Company's pound sterling and Euro denominated notes in 1999.
The Company recorded an extraordinary loss from the early extinguishment of debt
of $3,034,000 in 1999 as a result of the repayment of the bridge loan incurred
in connection with the Cablelink acquisition. The Company recorded an
extraordinary loss from the early extinguishment of debt of $30,689,000 in 1998
as a result of the redemption of the 10-7/8% Notes and the repayment of a bank
loan.
Years Ended December 31, 1998 and 1997
Residential telecommunications and television revenues increased to $355,589,000
from $166,951,000 primarily as a result of customer growth that increased the
Company's current revenue stream. The 1998 revenue includes $74,213,000 from
acquired companies.
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National and international telecommunications revenues increased to $248,895,000
from $185,194,000 primarily 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. 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.
Broadcast transmission and other revenues increased to $140,156,000 from
$130,799,000 primarily due to increases in broadcast television and FM radio
customers and accounts, which exceeded price cap reductions in the Company's
regulated services.
Other telecommunications revenues decreased to $2,375,000 from $8,831,000
primarily due to the sales of the assets of the Company's wholly-owned
subsidiary, OCOM Corporation, during 1998.
Operating expenses increased to $372,134,000 from $301,644,000 primarily as a
result of increases in interconnection costs and programming costs due to
customer growth. The 1998 expenses includes $35,299,000 from acquired companies.
Selling, general and administrative expenses increased to $299,494,000 from
$169,133,000 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. The 1998 expense includes $40,886,000 from
acquired companies.
Franchise fees increased to $25,036,000 from $23,587,000 primarily as a result
of the inflation adjustment to the Northern Ireland license payment.
Corporate expenses decreased to $17,048,000 from $18,324,000 primarily due to
the sale of OCOM's assets in 1998. Certain OCOM personnel were included in
corporate expenses in 1997.
Nonrecurring charges of $20,642,000 in 1997 were comprised of restructuring
costs of $15,629,000 and deferred costs written-off of $5,013,000. 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. In 1998, the Company incurred restructuring costs of $9,172,000
and reversed $4,194,000 of the provision.
Depreciation and amortization expense increased to $266,112,000 from
$150,509,000 primarily due to an increase in depreciation of telecommunications
and CATV equipment. The 1998 expense includes $45,892,000 from acquired
companies, including amortization of acquisition related intangibles.
Interest expense increased to $328,815,000 from $202,570,000 due to the issuance
of additional debt in 1998 and the increase in the accretion of original issue
discount on the deferred coupon notes. Interest of $118,273,000 and $78,817,000
was paid in the years ended December 31, 1998 and 1997, respectively.
Other gains of $21,497,000 in 1997 include a gain on sale of fixed assets of
$11,497,000 and a $10,000,000 payment from LeGroupe Videotron Ltee pursuant to
the settlement of a lawsuit.
Foreign currency transaction gains increased to $4,152,000 from $574,000 due to
favorable 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 $30,689,000 in 1998 as a result of the redemption of the 10-7/8% Notes and
the repayment of a bank loan. In connection with the repayment of debt, a
subsidiary recorded an extraordinary loss of $4,500,000 in 1997 from the
write-off of unamortized deferred financing costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company will continue to require significant amounts of capital to finance
construction of its local and national networks, for connection of telephone,
telecommunications, Internet and CATV customers to the networks, for other
capital expenditures and for debt service. The Company estimates that these
requirements, net of cash from operations, will aggregate up to approximately
$1.19 billion in 2000. The Company's commitments at December 31, 1999 for
equipment and services through 2000 are included in the anticipated
requirements. The Company had approximately $1.08 billion in cash and securities
on hand at December 31, 1999. The Company expects to receive cash from NTL for
the remainder of its 2000 requirements.
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Regarding the Company's estimated cash requirements described above, there can
be no assurance that: (a) actual construction costs will not exceed the amounts
estimated or that additional funding substantially in excess of the amounts
estimated will not be required, (b) conditions precedent to advances under
planned credit facilities will be satisfied when funds are required, (c) the
Company and its subsidiaries will be able to generate sufficient cash from
operations to meet capital requirements, debt service and other obligations when
required, (d) the Company will be able to access such cash flow or (e) the
Company will not incur losses from its exposure to exchange rate fluctuations or
be adversely affected by interest rate fluctuations.
Pursuant to an agreement with Telewest Communications plc ("Telewest") relating
to NTL Triangle's and Telewest's respective 50% ownership interests in Cable
London, in November 1999 Telewest purchased all of NTL Triangle's shares of
Cable London for approximately (pound sterling)428 million (approximately $692
million) in cash. The Company recorded a gain of $493 million on the sale. The
sale of the Cable London interest is an "Asset Sale" for purposes of the
Company's Indentures for certain of its notes. The Company will need to use an
amount equal to the proceeds from the sale to repay subsidiary debt, invest in
"Replacement Assets" or make an offer to redeem certain of its notes by November
2000.
The Company is highly leveraged. The accreted value at December 31, 1999 of the
Company's consolidated long-term indebtedness, is approximately $7.6 billion,
representing approximately 89% of total capitalization. The following summarizes
the terms of those notes issued by the Company and its subsidiaries.
NTL Communications:
(1) 12-3/4% Senior Deferred Coupon Notes due April 15, 2005, principal amount
at maturity of $278 million, interest payable semi-annually beginning on
October 15, 2000, redeemable at the Company's option on or after April 15,
2000;
(2) 11-1/2% Senior Deferred Coupon Notes due February 1, 2006, principal amount
at maturity of $1.05 billion, interest payable semi-annually beginning on
August 1, 2001, redeemable at the Company's option on or after February 1,
2001;
(3) 10% Senior Notes due February 15, 2007, principal amount of $400 million,
interest payable semi-annually from August 15, 1997, redeemable at the
Company's option on or after February 15, 2002;
(4) 9-1/2% Senior Sterling Notes due April 1, 2008, principal amount of (pound
sterling)125 million ($202 million), interest payable semi- annually from
October 1, 1998, redeemable at the Company's option on or after April 1,
2003;
(5) 10-3/4% Senior Deferred Coupon Sterling Notes due April 1, 2008, principal
amount at maturity of (pound sterling)300 million ($485 million), interest
payable semi-annually from October 1, 2003, redeemable at the Company's
option on or after April 1, 2003;
(6) 9-3/4% Senior Deferred Coupon Notes due April 1, 2008, principal amount at
maturity of $1.3 billion, interest payable semi-annually beginning on
October 1, 2003, redeemable at the Company's option on or after April 1,
2003;
(7) 9-3/4% Senior Deferred Coupon Sterling Notes due April 15, 2009, principal
amount at maturity of (pound sterling)330 million ($533 million), interest
payable semi-annually from October 15, 2004, redeemable at the Company's
option on or after April 15, 2004;
(8) 11-1/2% Senior Notes due October 1, 2008, principal amount of $625 million,
interest payable semi-annually from April 1, 1999, redeemable at the
Company's option on or after October 1, 2003;
(9) 12-3/8% Senior Deferred Coupon Notes due October 1, 2008, principal amount
at maturity of $450 million, interest payable semi-annually beginning on
April 1, 2004, redeemable at the Company's option on or after October 1,
2003;
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(10) 7% Convertible Subordinated Notes due December 15, 2008, principal amount
of $599 million, interest payable semi-annually from June 15, 1999,
convertible into shares of NTL common stock at a conversion price of $39.20
per share, redeemable at the Company's option on or after December 15,
2001;
(11) Variable Rate Redeemable Guaranteed Loan Notes due January 5, 2002,
principal amount of 60 million Irish punts ($77 million), interest payable
quarterly at EURIBOR (the interest rate at December 31, 1999 was 3.345%),
redeemable at any time at the option of the holder, 20 million Irish punts
($26 million) redeemed in 1999 using cash held in escrow, (euro)86 million
($87 million) remaining in escrow at December 31, 1999;
(12) 9-1/4% Senior Euro Notes due November 15, 2006, principal amount of
(euro)250 million ($252 million), interest payable semiannually beginning
on May 15, 2000;
(13) 9-7/8% Senior Euro Notes due November 15, 2009, principal amount of
(euro)350 million ($353 million), interest payable semiannually beginning
on May 15, 2000, redeemable at the Company's option on or after November
15, 2004;
(14) 11-1/2% Senior Deferred Coupon Euro Notes due November 15, 2009, principal
amount at maturity of (euro)210 million ($212 million), interest payable
semiannually beginning on May 15, 2005, redeemable at the Company's option
on or after November 15, 2004;
NTL Triangle:
(15) 11.2% Senior Discount Debentures due November 15, 2007, principal amount at
maturity of $517.3 million, interest payable semi-annually beginning on May
15, 2001;
Diamond:
(16) 13-1/4% Senior Discount Notes due September 30, 2004, principal amount at
maturity of $285 million, interest payable semi-annually beginning on March
31, 2000, redeemable at Diamond's option after September 30, 1999;
(17) 11-3/4% Senior Discount Notes due December 15, 2005, principal amount at
maturity of $531 million, interest payable semi-annually beginning on June
15, 2001, redeemable at Diamond's option on or after December 15, 2000;
(18) 10-3/4% Senior Discount Notes due February 15, 2007, principal amount at
maturity of $421 million, interest payable semi-annually beginning on
August 15, 2002, redeemable at Diamond's option on or after December 15,
2002;
(19) 10% Senior Notes due February 1, 2008, issued by Diamond Holdings plc, a
wholly-owned subsidiary of Diamond, principal amount of pound sterling135
million ($218 million), interest payable semi-annually from August 1, 1998,
redeemable at Diamond's option on or after February 1, 2003;
(20) 9-1/8% Senior Notes due February 1, 2008, issued by Diamond Holdings plc,
principal amount of $110 million, interest payable semi-annually from
August 1, 1998, redeemable at Diamond's option on or after February 1,
2003; and
(21) mortgage of (pound sterling)2.5 million ($4.0 million) to fund the
construction of an office building, repayable over 20 years as of July 31,
1995, interest at LIBOR plus 1-1/2%.
The Company intends to make an offer to convert its 7% Convertible Notes with a
principal amount of $599 million into NTL Incorporated common stock.
9
<PAGE> 10
Management does not anticipate that the Company and its subsidiaries will
generate sufficient cash flow from operations to repay at maturity the entire
principal amount of the outstanding indebtedness of the Company and its
subsidiaries. Accordingly, the Company may be required to consider a number of
measures, including: (a) refinancing all or a portion of such indebtedness, (b)
seeking modifications to the terms of such indebtedness, (c) seeking additional
debt financing, which may be subject to obtaining necessary lender consents, (d)
seeking additional equity financing, or (e) a combination of the foregoing.
The Company's operations are conducted through its direct and indirect
wholly-owned subsidiaries. As a holding company, the Company holds no
significant assets other than cash, securities and its investments in and
advances to its subsidiaries. Accordingly, the Company's ability to make
scheduled interest and principal payments when due to holders of its
indebtedness may be dependent upon the receipt of sufficient funds from its
subsidiaries.
NTL Communications distributed $500 million to NTL in April 1999. The Company
may use cash from equity proceeds in excess of cumulative EBITDA (as defined in
the Indentures) minus 1.5 times cumulative interest expense plus capital stock
proceeds, for dividend payments to the extent such funds are not used for other
Restricted Payments (as defined in the Indentures). NTL intends to repay certain
amounts to the Company when funds become available.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash provided by operating activities was $71,469,000 and cash used in operating
activities was $18,943,000 in the years ended December 1999 and 1998,
respectively. Although net loss increased to $714,956,000 from $534,616,000 in
the years ended December 31, 1999 and 1998, respectively, results of operations
items not requiring cash outlays increased by a greater amount to $730,492,000
from $523,920,000. In addition, changes in operating assets and liabilities
provided cash of $55,933,000 in 1999 compared to a use of cash of $8,247,000 in
1998. Cash provided by operating activities plus cash paid for interest
exclusive of amounts capitalized was $251,256,000 and $71,570,000 in 1999 and
1998, respectively.
Provision for losses on accounts receivable, which is included in operating
activities, was $45,295,000, $27,282,000 and $6,891,000 in 1999, 1998 and 1997,
respectively. These increases were due principally to the increases in revenues.
Purchases of fixed assets were $1,196,519,000 in 1999 and $772,144,000 in 1998
as a result of the continuing fixed asset purchases and construction in 1999,
including purchases and construction by acquired companies. Proceeds from sales
of assets of $692,490,000 in 1999 was from the sale of Cable London.
Proceeds from borrowings, net of financing costs, of $1,846,003,000 in 1999 was
from the issuance of the 9-3/4% Senior Deferred Coupon Sterling Notes, the
9-1/4% Senior Euro Notes, the 9-7/8% Senior Euro Notes, the 11-1/2% Senior
Deferred Coupon Euro Notes and the Senior Increasing Rate Notes and the Variable
Rate Redeemable Guaranteed Loan Notes issued in connection with the Cablelink
acquisition. Principal payments of $758,212,000 in 1999 were primarily from the
repayment of the Senior Increasing Rate Notes using proceeds from the 9-1/4%
Senior Euro Notes, the 9-7/8% Senior Euro Notes and the 11-1/2% Senior Deferred
Coupon Euro Notes, plus the repayment at maturity of the notes payable to
Comcast U.K. Holdings, Inc. Proceeds from issuance of preferred stock and
warrants of $500,000,000 in 1999 was from the sale of 5.25% Convertible
Preferred Stock and warrants to purchase 1.9 million shares of NTL's common
stock to Microsoft Corp. Cash in escrow for debt repayment of $86,993,000 in
1999 includes (euro)110 million ($113 million) placed into escrow as cash
collateral for the Variable Rate Redeemable Guaranteed Loan Notes, net of
(euro)25 million ($26 million) used to redeem a portion of these notes.
YEAR 2000
We had a comprehensive Year 2000 project designed to identify and assess the
risks associated with our information systems, products, operations,
infrastructure, suppliers and customers, and to develop, implement and test
remediation and contingency plans to mitigate these risks. To date, we have not
experienced any significant problems related to the Year 2000.
Because we use a variety of information systems and have additional systems
embedded in our operations and infrastructure, we cannot be sure that all of our
systems will continue to work together in a Year 2000-ready fashion.
Furthermore, we cannot be sure that we will not suffer business interruptions,
either because of our own Year 2000 problems or those of third-parties upon whom
we are reliant for services. Therefore, a problem that has not yet been
identified may arise and could have adverse consequences to us.
10
<PAGE> 11
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
MARKET RISK
The Company is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. Market risk is the potential loss
arising from adverse changes in market rates and prices, such as foreign
currency exchange and interest rates. The Company does not enter into
derivatives or other financial instruments for trading or speculative purposes.
The Company has entered into financial instruments to manage and reduce the
impact of changes in foreign currency exchange rates, primarily U.S. dollar/U.K.
pound sterling. The counterparties are major financial institutions. The Company
does not enter into derivatives or financial instruments to manage or reduce the
impact of changes in interest rates.
FOREIGN EXCHANGE CONTRACTS
To the extent that the Company obtains financing in United States dollars and
incurs construction and operating costs in various other currencies, it will
encounter currency exchange rate risks. At December 31, 1999, the Company had
approximately $575 million in cash equivalents denominated in foreign currencies
to reduce this risk. In addition, the Company's pounds sterling and Euro
denominated Notes also reduce this risk. Furthermore, the Company's revenues are
generated in foreign currencies 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 (pound sterling) 1 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
a portion of its U.S. dollar denominated debt and anticipated amounts of parent
company expenses. In addition, NTL Triangle has option agreements of (pound
sterling) 250 million notional amount to purchase U.S. dollars at a fixed rate
of (pound sterling) 1 to $1.35 in November 2000. This option provides a hedge
against an adverse change in exchange rates when interest payments commence on
NTL Triangle's U.S. dollar denominated Discount Debentures.
The estimated fair value of foreign currency contracts represents the amount
required to enter into offsetting contracts with similar remaining maturities
based on quoted market prices. At December 31, 1999, the difference between the
fair value of the outstanding contracts and the contract amounts was immaterial.
INTEREST RATES
The fair market value of long-term fixed interest rate debt is subject to
interest rate risk. Generally, the fair market value of fixed interest rate debt
will increase as interest rates fall and decrease as interest rates rise. In the
following table, fair values were determined from quoted market prices.
11
<PAGE> 12
INTEREST RATE SENSITIVITY
PRINCIPAL AMOUNT BY EXPECTED MATURITY
AVERAGE INTEREST RATE
<TABLE>
<CAPTION>
FAIR
VALUE
2000 2001 2002 2003 2004 THEREAFTER TOTAL 12/31/99
---- ---- ---- ---- ---- ---------- ----- --------
(in millions)
Long-term Debt, including
Current Portion
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. dollars
Fixed Rate -- -- -- -- $ 285 $6,281 $6,566 $6,880
Average Interest Rate 13.25% 10.2%
U.K. pound
Fixed Rate -- -- -- -- -- (pound sterling)(pound sterling) (poundsterling)
890 890 654
Average Interest Rate 10.09%
Average Forward
Exchange Rate 1.67
Euro
Fixed Rate -- -- -- -- -- (euro)810 (euro)810 (euro)731
Average Interest Rate 10.1%
Average Forward
Exchange Rate 1.103
Irish punts
Variable Rate RL(pounds)60 -- -- -- -- -- IR(pounds)60 IR(pounds)60
Average Interest Rate Euribor
Average Forward
Exchange Rate 1.297
</TABLE>
12
<PAGE> 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company are filed under this Item
commencing on page F-1 of this Report.
The following is a summary of the quarterly results of operations for the years
ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>
(In thousands)
1999
-----------------------------------------------------------------------
THREE MONTHS ENDED
-----------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- ------------------- ------------------- ----------------
(1)
<S> <C> <C> <C> <C>
Revenues $ 313,381 $ 350,126 $ 389,353 $ 425,011
Operating loss (121,267) (166,269) (142,134) (179,780)
Income (loss) before
extraordinary item (230,419) (346,475) (287,994) 152,966
Net income (loss) (230,419) (346,475) (287,994) 149,932
</TABLE>
<TABLE>
<CAPTION>
1998
----------------------------------------------------------------------
THREE MONTHS ENDED
----------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Revenues $147,792 $ 154,314 $ 182,484 $ 262,425
Operating loss (41,962) (40,665) (55,640) (90,348)
Loss before
extraordinary item (93,672) (104,302) (133,892) (172,061)
Net loss (93,672) (104,302) (138,131) (198,511)
</TABLE>
(1) In November 1999, the Company sold its investment in Cable London for
cash of approximately $692 million and recognized a gain of $493
million.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
ITEM 10, 11, 12 and 13.
Omitted, pursuant to General Instruction I(2) (c) of Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements - See list of Financial
Statements on page F-1.
(2) Financial Statement Schedules - see list of Financial
Statement Schedules on page F-1.
(3) Exhibits - See Exhibit Index on page 12.
(b) During the fourth quarter of 1999, the Company filed the
following Current Reports on Form 8-K: Form 8-K, dated September
20, 1999 (filed October 4, 1999) under item 2. Reporting the
acquisition of Workplace; Form 8-K dated November 23, 1999
(filed November 24, 1999) under item 5. Reporting the completed
sale of Cable London and the consummation of the Euro Notes
Offering.
(c) Exhibits - The response to this portion of Item 14 is
submitted as a separate section of this report.
(d) Financial Statement Schedules - See list of Financial Statement
Schedules on page F-1.
13
<PAGE> 14
EXHIBIT INDEX
EXHIBIT NO.
- -----------
2.1 Agreement and Plan of Merger, dated as of March 26, 1999, among
the Company, NTL Communications and NTL Merger Inc. (Incorporated
by reference to the Company's Registration Statement on Form S-3,
File No. 333-72335)
2.2 Agreement and Plan of Amalgamation, dated as of February 4, 1998,
as amended, among the Company, NTL (Bermuda) Limited, and Comcast
U.K. Cable Partners Limited (Incorporated by reference to the
Company's Registration Statement on Form S-4, File No. 333-64727)
2.3 Amendment No. 1 to Agreement and Plan of Amalgamation, dated as
of May 28, 1998, among the Company, NTL (Bermuda) Limited and
Comcast U.K. Cable Partners Limited (Incorporated by reference to
the Company's Registration Statement on Form S-4, File No.
333-64727)
2.4 Share Exchange Agreement, dated as of June 16, 1998, as amended,
among the Company and the shareholders of Diamond Cable
Communications Plc (Incorporated by reference to the Company's
Proxy Statement, filed on January 29, 1999)
2.5 Amendment No. 1 to Share Exchange Agreement, dated as of December
21, 1998, among the Company and the shareholders of Diamond Cable
Communications plc (Incorporated by reference to the Company's
Form 8-K, filed on December 23, 1998)
3.1 Restated Certificate of Incorporation of the Company
(Incorporated by reference to the Company's Registration
Statement on Form S-3, File No. 333-72335)
3.2 Restated By-Laws (Incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-3, File No. 333-72335)
4.1 Specimen of Common Stock Certificate (Incorporated by reference
to Exhibit 4.1, to the Company's Registration Statement on Form
S-1, File No. 33-63570)
4.4 Indenture, dated as of October 1, 1993, by and between the
Company and Chemical Bank with respect to the 10% Senior Notes
(Incorporated by reference to Exhibit 4.1, to the Company's
Registration Statement on Forms S-1, File No. 33-63572)
4.5 Indenture, dated as of April 20, 1995, by and between the Company
and Chemical Bank as Trustee, with respect to the 12 3/4% Senior
Notes (Incorporated by reference to the Company's Registration
Statement on Form S-4, File No. 33-92794)
4.6 Indenture, dated as of January 30, 1996, by and between the
Company and Chemical Bank as Trustee, with respect to the 11 1/2%
Senior Notes (Incorporated by reference to the Company's
Registration Statement on Form S-4, File No. 333-00118)
4.7 First Supplemental Indenture, dated as of January 22, 1996, by
and among the Company and Chemical Bank, as Trustee, with respect
to the 12 3/4% Senior Notes (Incorporated by reference to the
Company's Registration Statement on Form S-4, File No. 333-00118)
4.8 First Supplemental Indenture, dated as of January 23, 1996, by
and among the Company and Chemical Bank, as Trustee, with respect
to the 10% Notes (Incorporated by reference to the Company's
Registration Statement on Form S-4, File No. 333-00118)
4.9 Indenture, dated as of February 12, 1997, by and between the
Company and The Chase Manhattan Bank, as Trustee, with respect to
the 10% Senior Notes (Incorporated by reference to the Company's
1996 Form 10-K, filed on March 28, 1997)
4.10 Indenture, dated as of March 13, 1998, by and between the Company
and The Chase Manhattan Bank, as Trustee, with respect to the
9 1/2% Senior Notes (Incorporated by reference to the Company's
1997 Form 10-K filed on March 30, 1998)
14
<PAGE> 15
4.11 Indenture, dated as of March 13, 1998, by and between the Company
and The Chase Manhattan Bank, as Trustee, with respect to the
9 3/4% Senior Deferred Coupon Notes (Incorporated by reference to
the Company's 1997 Form 10-K, filed on March 30, 1998)
4.12 Indenture, dated as of March 13, 1998, by and between the Company
and The Chase Manhattan Bank, as Trustee, with respect to the
10 3/4% Senior Deferred Coupon Notes (Incorporated by reference
to the Company's 1997 Form 10-K, filed on March 30, 1998)
4.13 Indenture, dated as of November 2, 1998, by and among the Company
and The Chase Manhattan Bank, as Trustee, with respect to the
11 1/2% Senior Notes due 2008 (Incorporated by reference to the
Company's 1998 Form 10-K filed on March 30, 1999)
4.14 Registration Rights Agreement, dated as of November 2, 1998 by
and among the Company and Morgan Stanley & Co. Incorporated,
Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and Goldman, Sachs & Co., with respect to the 11 1/2%
Senior Notes due 2008 (Incorporated by reference to the Company's
1998 Form 10-K filed on March 30, 1999)
4.15 Indenture, dated as of November 6, 1998, by and among the Company
and The Chase Manhattan Bank, as Trustee, with respect to the
12 3/8% Senior Deferred Coupon Notes due 2008 (Incorporated by
reference to the Company's 1998 Form 10-K filed on March 30,
1999)
4.16 Registration Rights Agreement, dated as of November 6, 1998 by
and among the Company and Morgan Stanley & Co. Incorporated,
Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and Goldman, Sachs & Co., with respect to the 12 3/8%
Senior Deferred Coupon Notes due 2008 (Incorporated by reference
to the Company's 1998 Form 10-K filed on March 30, 1999)
4.17 Indenture, dated as of December 16, 1998, by and among the
Company and The Chase Manhattan Bank, as Trustee, with respect to
the 7% Convertible Subordinated Notes due 2008 (Incorporated by
reference to the Company's 1998 Form 10-K filed on March 30,
1999)
4.18 First Supplemental Indenture, dated as of March 31, 1999, between
NTL Inc., NTL Communications Corp. and The Chase Manhattan Bank
(Trustee), re: 7% Convertible Subordinated Notes due 2008
($600,000,000 principal amount) (Incorporated by reference to the
Company's Registration Statement on Form S-4, File No. 333-72335)
4.19 Indenture, dated as of April 14, 1999, between NTL Communications
Corp. (Issuer) and The Chase Manhattan Bank (Trustee), re: 9 3/4%
Senior Deferred Coupon Notes due 2009 ((pound sterling)
330,000,000 principal amount) (Incorporated by reference to the
Company's Registration Statement on Form S-4, File No. 333-78405)
4.20 Indenture, dated as of February 6, 1998, between Diamond Holdings
plc (Issuer), Diamond Cable Communications plc (Guarantor), and
The Bank of New York (Trustee), re: 10% Senior Notes due February
1, 2008 ((pound sterling) 135,000,000 principal amount) and
9 1/8% Senior Notes due February 1, 2008 ((pound sterling)
110,000,000 principal amount) (Incorporated by reference to
Diamond Cable Communications plc Registration Statement on Form
S-4, File No. 333-48413)
4.21 Indenture, dated as of February 27, 1997, between Diamond Cable
Communications plc (Issuer) and The Bank of New York (Trustee),
re: 10 3/4 % Senior Discount Notes due February 15, 2007
($420,500,000 principal amount) (Incorporated by reference to
Diamond Cable Communications plc Registration Statement on Form
S-4, File No. 333-25193)
4.22 Indenture, dated as of December 15, 1995, between Diamond Cable
Communications plc (Issuer) and The Bank of New York (Trustee),
re: 11-3/4% Senior Discount Notes due December 15, 2005
(Incorporated by reference to Diamond Cable Communications plc
Registration Statement on Form S-1, File No. 33-98374)
15
<PAGE> 16
4.23 Indenture, dated as of November 11, 1995, between Comcast UK
Cable Partners Limited and Bank of Montreal Trust Company re:
11.20% Senior Discount Debentures due 2007(Incorporated by
reference to the Company's Registration Statement on Form S-3,
File No. 333-72335)
4.24 Indenture, dated as of September 28, 1994, between Diamond Cable
Communications plc (Issuer) and The Bank of New York (Trustee),
re: 13-1/4% Senior Discount Notes due September 30, 2004
(Incorporated by reference to Diamond Cable Communications plc
Registration Statement on Form S-1, File No. 33-83740)
4.25 Indenture, dated as of November 24, 1999, between NTL Comm Corp.
(Issuer) and The Chase Manhattan Bank (Trustee), re: 9-1/4%
Senior Notes due 2006 ((euro) 250,000,000 principal amount)
(Incorporated by reference to the Company's Registration
Statement on Form S-4, File No. 333-95267)
4.26 Indenture, dated as of November 24, 1999, between NTL Comm Corp.
(Issuer) and The Chase Manhattan Bank (Trustee), re: 9-7/8%
Senior Notes Due 2009 ((euro)350,000,000 principal amount)
(Incorporated by reference to the Company's Registration
Statement on Form S-4, File No. 333-95267)
4.27 Indenture, dated as of November 24, 1999, between NTL
Communications Corp. (Issuer) and The Chase Manhattan Bank
(Trustee), re: 11-1/2% Senior Deferred Coupon Notes due 2009
((euro) 175,000,000 principal amount) (Incorporated by reference
to the Company's Registration Statement on Form S-4, File No.
333-95267)
4.29 Registration Rights Agreement, dated as of December 16, 1998 by
and among the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Morgan Stanley & Co. Incorporated, Goldman, Sachs &
Co., Chase Securities Inc., Salomon Smith Barney Inc, BT Alex.
Brown Incorporated and Warburg Dillon Read LLC with respect to
the 7% Convertible Subordinated Notes due 2008 (Incorporated by
reference to the Company's 1998 Form 10-K filed on March 30,
1999)
4.30 Registration Rights Agreement, dated February 12, 1997, by and
among the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Chase Securities, Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated with respect to the 10% Senior Notes
(Incorporated by reference to the Company's 1996 Form 10-K filed
on March 30, 1997)
4.31 Registration Rights Agreement, dated February 12, 1997, by and
among the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Chase Securities, Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated with respect to the 13% Senior Notes
(Incorporated by reference to the Company's 1996 Form 10-K filed
on March 30, 1997)
4.32 Registration Rights Agreement, dated as of March 13, 1998, by and
among the Company and Donaldson, Lufkin & Jenrette International,
Morgan Stanley & Co. International Limited, BT Alex. Brown
International, Chase Securities Inc. and Salomon Brothers
International Limited with respect to the 9 1/2% Senior Notes
(Incorporated by reference to the Company's 1997 Form 10-K filed
on March 30, 1998)
4.33 Registration Rights Agreement, dated as of March 13, 1998, by and
among the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Morgan Stanley & Co. Incorporated, BT Alex. Brown
Incorporated, Chase Securities Inc. and Salomon Brothers Inc.
with respect to the 9 3/4% Senior Deferred Coupon Notes
(Incorporated by reference to the Company's 1997 Form 10-K filed
on March 30, 1998)
4.34 Registration Rights Agreement, dated as of March 13, 1998, by and
among the Company and Donaldson, Lufkin & Jenrette International,
Morgan Stanley & Co. International Limited, BT Alex. Brown
International, Chase Securities Inc. and Salomon Brothers
International Limited with respect to the 10 3/4% Senior Deferred
Coupon Notes (Incorporated by reference to the Company's 1997
Form 10-K filed on March 30, 1998)
16
<PAGE> 17
4.36 Registration Rights Agreement, dated as of April 14, 1999 re:
9-3/4% Senior Deferred Coupon Notes due 2009 (Incorporated by
reference to the Company's Registration Statement on Form S-4,
File No. 333-78405)
4.37 Registration Rights Agreement, dated as of March 5, 1999, between
NTL Communications Corp. and The Shareholders of Diamond Cable
Communications plc (Incorporated by reference to the Company's
Registration Statement on Form S-2, File No. 333-81395)
4.38 Registration Rights Agreement, dated as of October 29, 1998,
between NTL Incorporated, NTL (Bermuda) Limited and Comcast
Corporation and Warburg, Pincus Investors, L.P. (Incorporated by
reference to the Company's Registration Statement on Form S-2,
File No. 333-81395)
4.39 Registration Rights Agreement, dated as of January 30, 1996 re:
11-1/2% Series A Senior Deferred Coupon Notes Due 2006
(Incorporated by reference to the Company's Registration
Statement on Form S-4, File No. 333-01010)
4.40 Registration Rights Agreement, dated as of April 13, 1995 re:
12-3/4% Senior Deferred Coupon Notes Due 2005 (Incorporated by
reference to the Company's Registration Statement on Form S-4,
File No. 333-92794)
4.41 Registration Rights Agreement, dated as of November 24, 1999, re:
9-1/4% Senior Notes Due 2006, 9-7/8% Senior Notes Due 2009,
11-1/2% Senior Deferred Coupon Notes Due 2009. (Incorporated by
reference to the Company's Registration Statement on Form S-4,
File No. 333-95267)
4.44 Indenture, dated as of June 12, 1996, by and between the Company
and Chemical Bank, as Trustee, with respect to the 7% Convertible
Notes (Incorporated by reference to the Company's Registration
Statement on Form S-3, File No. 333-07879)
4.45 Registration Rights Agreement, dated June 12, 1996, by and among
the Company and Donaldson, Lufkin & Jenrette Securities
Corporation and Salomon Brothers Inc, with respect to the 7%
Convertible Notes (Incorporated by reference to the Company's
Registration Statement on Form S-3, File No. 33-07879)
4.46 Indenture, dated as of April 20, 1995, by and among the Company
and Chemical Bank, as Trustee, with respect to the 7 1/4%
Convertible Notes (Incorporated by reference to the Company's
Registration Statement on Form S-3, File No. 333-92792)
4.47 Registration Agreement, dated April 12, 1995, by and among the
Company and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman Sachs & Co., with respect to
the 7 1/4% Convertible Notes (Incorporated by reference to the
Company's Registration Statement on Form S-3, File No. 333-
92792)
10.1 Compensation Plan and Agreements, as amended and restated
effective June 3, 1997 (Incorporated by reference to the
Company's 1997 Form 10-K filed on March 30, 1998)
10.2 Rules of the NTL Sharesave Plan, adopted by the Company on
October 28, 1997 (Incorporated by reference to the Company's 1998
Form 10-K filed on March 30, 1999)
10.3 Form of Director and Officer Indemnity Agreement (together with a
schedule of executed Indemnity Agreements) (Incorporated by
reference to the 1999 Form 10-K filed by NTL Incorporated (File
No. 000-25691) on March 17, 2000)
10.4 1998 Non-Qualified Stock Option Plan, as Amended and Restated
October 1998 (Incorporated by reference to the Company's 1998
Form 10-K filed on March 30, 1999)
17
<PAGE> 18
10.5 Bridge Loan Agreement, dated as of March 17, 1999, among the
Company, the Lenders named therein and Goldman Sachs Credit
Partners L.P. (Incorporated by reference to the Company's 1998
Form 10-K on March 30, 1999)
10.6 Agreement, dated August 14, 1998, among TeleWest Communications
PLC, TeleWest Communications Holdings Limited, NTL (Bermuda)
Limited, and the Company (Incorporated by reference to the
Company's Form 8-K, filed on August 18, 1998)
21 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule, for the year ended December 31, 1998
18
<PAGE> 19
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 24, 2000
NTL COMMUNICATIONS CORP.
By: /s/ J. Barclay Knapp
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ J. Barclay Knapp President and Chief March 24, 2000
Executive Officer
(Principal Executive Officer)
/s/ George S. Blumenthal Chairman of the Board March 24, 2000
and Treasurer
/s/ John F. Gregg Chief Financial Officer March 24, 2000
/s/ Gregg N. Gorelick Vice President-Controller March 24, 2000
(Principal Accounting Officer)
/s/ Sidney R. Knafel Director March 24, 2000
/s/ Ted H. McCourtney Director March 24, 2000
/s/ Del Mintz Director March 24, 2000
/s/ Alan J. Patricof Director March 24, 2000
/s/ Warren Potash Director March 24, 2000
/s/ Michael S. Willner Director March 24, 2000
19
<PAGE> 20
Form 10-K--Item 14(a)(1) and (2)
NTL Communications Corp. and Subsidiaries
Index to Consolidated Financial Statements
and Financial Statement Schedules
The following consolidated financial statements of NTL Communications Corp. and
Subsidiaries are included in Item 8:
<TABLE>
<S> <C>
Report of Independent Auditors ........................................................... F-2
Consolidated Balance Sheets - December 31, 1999 and 1998 ................................. F-3
Consolidated Statements of Operations -
Years ended December 31, 1999, 1998 and 1997 .......................................... F-5
Consolidated Statement of Shareholder's Equity -
Years ended December 31, 1999, 1998 and 1997 .......................................... F-6
Consolidated Statements of Cash Flows -
Years ended December 31, 1999, 1998 and 1997 .......................................... F-8
Notes to Consolidated Financial Statements ............................................... F-10
</TABLE>
The following consolidated financial statement schedules of NTL Communications
Corp. and Subsidiaries are included in Item 14(d):
<TABLE>
<S> <C>
Schedule I - Condensed Financial Information of Registrant ............................... F-32
Schedule II - Valuation and Qualifying Accounts .......................................... F-40
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore have been omitted.
F-1
<PAGE> 21
Report of Independent Auditors
The Board of Directors and Shareholder
NTL Communications Corp.
We have audited the consolidated balance sheets of NTL Communications Corp. and
Subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of operations, shareholder's equity and cash flows for each of the
three years in the period ended December 31, 1999. Our audits also included the
financial statement schedules listed in the Index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of NTL
Communications Corp. and Subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
New York, New York
March 7, 2000
F-2
<PAGE> 22
NTL Communications Corp. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
----------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,070,076 $ 736,265
Marketable securities 5,014 260,631
Accounts receivable - trade, less allowance for doubtful accounts
of $82,996 (1999) and $38,475 (1998) 249,905 152,356
Other 66,606 55,248
----------------------------------
Total current assets 1,391,601 1,204,500
Fixed assets, net 5,340,555 3,854,430
Intangible assets, net 2,474,057 725,028
Investment in Cable London PLC, net of accumulated amortization of
$3,093 - 229,093
Other assets, net of accumulated amortization
of $49,170 (1999) and $56,264 (1998) 296,060 181,046
----------------------------------
Total assets $ 9,502,273 $ 6,194,097
==================================
</TABLE>
F-3
<PAGE> 23
NTL Communications Corp. and Subsidiaries
Consolidated Balance Sheets (continued)
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 198,623 $ 167,079
Accrued expenses and other 373,096 221,070
Accrued construction costs 79,302 88,033
Interest payable 69,024 34,258
Deferred revenue 147,952 69,820
Current portion of long-term debt 82,601 23,691
------------------------------------
Total current liabilities 950,598 603,951
Long-term debt 7,598,024 5,043,803
Commitments and contingent liabilities
Deferred income taxes 53,124 67,062
Senior redeemable exchangeable preferred stock - $.01 par value, plus accreted
dividends; less unamortized discount of $3,133 (1998);
issued and outstanding none (1999) and 125,000 (1998) shares - 124,127
Shareholder's equity:
Series preferred stock - $.01 par value;
authorized none (1999) and 10,000,000 (1998) shares: issued and
outstanding none (1999) and 177,000 (1998) shares - 2
Common stock - $.01 par value; authorized 100 (1999) and 400,000,000
(1998) shares; issued and outstanding 100 (1999) and 60,249,000
(1998) shares - 602
Additional paid-in capital 2,863,677 1,501,561
Accumulated other comprehensive income 2,395 104,657
(Deficit) (1,965,545) (1,251,668)
------------------------------------
900,527 355,154
------------------------------------
Total liabilities and shareholder's equity $ 9,502,273 $ 6,194,097
====================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 24
NTL Communications Corp. and Subsidiaries
Consolidated Statements of Operations
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
--------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Residential telecommunications and television $ 827,324 $ 355,589 $ 166,951
National and international telecommunications 488,640 248,895 185,194
Broadcast transmission and other 161,907 140,156 130,799
Other telecommunications - 2,375 8,831
--------------------------------------------------------
1,477,871 747,015 491,775
COSTS AND EXPENSES
Operating expenses 704,689 372,134 301,644
Selling, general and administrative expenses 561,797 299,494 169,133
Franchise fees 16,538 25,036 23,587
Corporate expenses 25,260 17,048 18,324
Nonrecurring charges 16,179 (4,194) 20,642
Depreciation and amortization 762,858 266,112 150,509
--------------------------------------------------------
2,087,321 975,630 683,839
--------------------------------------------------------
Operating (loss) (609,450) (228,615) (192,064)
OTHER INCOME (EXPENSE)
Interest and other income 29,767 46,024 28,415
Interest expense (678,036) (328,815) (202,570)
Other gains 493,121 - 21,497
Foreign currency transaction gains 22,733 4,152 574
--------------------------------------------------------
(Loss) before income taxes and extraordinary item (741,865) (507,254) (344,148)
Income tax benefit 29,943 3,327 15,591
--------------------------------------------------------
(Loss) before extraordinary item (711,922) (503,927) (328,557)
Loss from early extinguishment of debt (3,034) (30,689) (4,500)
--------------------------------------------------------
Net (loss) $ (714,956) $ (534,616) $ (333,057)
========================================================
</TABLE>
See accompanying notes.
F-5
<PAGE> 25
NTL Communications Corp. and Subsidiaries
Consolidated Statement of Shareholder's Equity
(dollars in thousands)
<TABLE>
<CAPTION>
SERIES PREFERRED STOCK COMMON STOCK
$.01 PAR VALUE $.01 PAR VALUE
SHARES PAR SHARES PAR
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 780 $ - 32,066,000 $ 321
Exercise of stock options 119,000 1
Exercise of warrants 25,000 -
Accreted dividends on senior redeemable
exchangeable preferred stock
Accretion of discount on senior redeemable
exchangeable preferred stock
Comprehensive income:
Net loss for the year ended December 31, 1997
Currency translation adjustment
Total
-----------------------------------------------------------------------
Balance, December 31, 1997 780 - 32,210,000 322
Exercise of stock options 298,000 3
Exercise of warrants 70,000 -
Accreted dividends on preferred stock
Accretion of discount on preferred stock
Conversion of 7-1/4% Convertible Subordinated Notes 6,958,000 70
Conversion of Series Preferred Stock (780) - 1,950,000 20
Preferred stock issued for an acquisition 177,000 2
Common stock issued for an acquisition 18,763,000 187
Warrants issued in connection with consent
solicitations
Comprehensive income:
Net loss for the year ended December 31, 1998
Currency translation adjustment
Total
-----------------------------------------------------------------------
Balance, December 31, 1998 177,000 2 60,249,000 602
Exercise of stock options 432,000 4
Exercise of warrants 15,000 1
Preferred stock issued for cash 500,000 5
Warrants issued for cash
Accreted dividends on preferred stock 4,000
Accretion of discount on preferred stock
Conversion of 7% Convertible Subordinated Notes 1,000 -
Common stock issued for an acquisition 12,705,000 127
Stock options issued in connection with an
acquisition
Corporate restructuring (681,000) (7) (73,402,000) (734)
Distribution to NTL Incorporated
Contributions from NTL Incorporated
Distribution of subsidiary to NTL Incorporated
Comprehensive income:
Net loss for the year ended December 31, 1999
Currency translation adjustment
Total
-----------------------------------------------------------------------
Balance, December 31, 1999 - $ - - $ -
=======================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE> 26
NTL Communications Corp. and Subsidiaries
Consolidated Statement of Shareholder's Equity (continued)
(dollars in thousands)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
PAID-IN COMPREHENSIVE COMPREHENSIVE
CAPITAL LOSS INCOME (DEFICIT)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 $ 548,647 $ 163,141 $ (383,995)
Exercise of stock options 1,532
Exercise of warrants 138
Accreted dividends on senior redeemable
exchangeable preferred stock (11,978)
Accretion of discount on senior redeemable
exchangeable preferred stock (285)
Comprehensive income:
Net loss for the year ended December 31, 1997 $ (333,057) (333,057)
Currency translation adjustment (46,133) (46,133)
-----------
Total $ (379,190)
-----------------------------------------------------------------------
Balance, December 31, 1997 538,054 117,008 (717,052)
Exercise of stock options 6,331
Exercise of warrants 508
Accreted dividends on preferred stock (18,761)
Accretion of discount on preferred stock (311)
Conversion of 7-1/4% Convertible Subordinated
Notes 186,942
Conversion of Series Preferred Stock (20)
Preferred stock issued for an acquisition 178,493
Common stock issued for an acquisition 600,245
Warrants issued in connection with consent
solicitations 10,080
Comprehensive income:
Net loss for the year ended December 31, 1998 $ (534,616) (534,616)
Currency translation adjustment (12,351) (12,351)
-----------
Total $ (546,967)
-----------------------------------------------------------------------
Balance, December 31, 1998 1,501,561 104,657 (1,251,668)
Exercise of stock options 12,054
Exercise of warrants 102
Preferred stock issued for cash 483,805
Warrants issued for cash 16,190
Accreted dividends on preferred stock (8,644)
Accretion of discount on preferred stock (78)
Conversion of 7% Convertible Subordinated
Notes 50
Common stock issued for an acquisition 971,310
Stock options issued in connection with an
acquisition 6,599
Corporate restructuring 405,604
Distribution to NTL Incorporated (500,000)
Contributions from NTL Incorporated 5,637
Distribution of subsidiary to NTL Incorporated (30,513) 1,079
Comprehensive income:
Net loss for the year ended December 31, 1999 $ (714,956) (714,956)
Currency translation adjustment (102,262) (102,262)
-----------
Total $ (817,218)
-----------------------------------------------------------------------
Balance, December 31, 1999 $ 2,863,677 $ 2,395 $(1,965,545)
=======================================================================
</TABLE>
See accompanying notes.
F-7
<PAGE> 27
NTL Communications Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
-------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (714,956) $ (534,616) $ (333,057)
Adjustment to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 762,858 266,112 150,509
Loss from early extinguishment of debt 3,034 30,689 4,500
Gain on sale of investment in Cable London PLC (493,121) - -
Amortization of non competition agreements - 1,389 1,852
Provision for losses on accounts receivable 45,295 27,282 6,891
Deferred income taxes (30,943) (3,327) (16,852)
Amortization of original issue discount 451,356 232,691 122,639
Other (7,987) (30,916) (8,148)
Changes in operating assets and liabilities, net of effect from business
acquisitions:
Accounts receivable (129,120) (70,364) (30,430)
Other current assets (46,509) 22,631 (6,563)
Other assets (25,241) 6 2,303
Accounts payable 32,690 (2,564) (4,615)
Accrued expenses and other 155,324 15,272 74,706
Deferred revenue 68,789 26,772 18,994
-------------------------------------------------
Net cash provided by (used in) operating activities 71,469 (18,943) (17,271)
INVESTING ACTIVITIES
Acquisitions, net of cash acquired (473,696) (746,817) -
Purchase of fixed assets (1,196,519) (772,144) (503,656)
Payment of deferred purchase price - - (57,330)
Increase in other assets (30,100) (35,595) (4,322)
Proceeds from sales of assets 692,490 1,312 -
Purchase of marketable securities (354,524) (540,639) (145,939)
Proceeds from sales of marketable securities 618,625 291,276 142,596
-------------------------------------------------
Net cash (used in) investing activities (743,724) (1,802,607) (568,651)
</TABLE>
F-8
<PAGE> 28
NTL Communications Corp. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
--------------------------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Distribution to NTL Incorporated (500,000) - -
Proceeds from borrowings, net of financing costs 1,846,003 3,525,588 490,302
Proceeds from issuance of preferred stock and warrants 500,000 - -
Principal payments (758,212) (845,018) (242,424)
Cash in escrow for debt repayment (86,993) (217,622) -
Consent solicitation payments - (11,333) -
Proceeds from exercise of stock options and warrants 12,161 6,842 1,671
--------------------------------------------------------
Net cash provided by financing activities 1,012,959 2,458,457 249,549
Effect of exchange rate changes on cash (6,893) 456 (10,609)
--------------------------------------------------------
Increase (decrease) in cash and cash equivalents 333,811 637,363 (346,982)
Cash and cash equivalents at beginning of year 736,265 98,902 445,884
--------------------------------------------------------
Cash and cash equivalents at end of year $ 1,070,076 $ 736,265 $ 98,902
========================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest exclusive of amounts
capitalized $ 179,787 $ 90,513 $ 72,047
Income taxes paid - 336 1,107
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Accretion of dividends and discount on preferred stock $ 8,722 $ 19,072 $ 12,263
Conversion of Convertible Notes, net of unamortized
deferred financing costs 269,285 187,012 -
Preferred stock issued for an acquisition - 178,495 -
Common stock and stock options issued for an acquisition 978,036 600,432 -
Warrants issued in connection with consent solicitations - 10,080 -
</TABLE>
See accompanying notes.
F-9
<PAGE> 29
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements
1. CORPORATE RESTRUCTURING AND BUSINESS
Effective April 1, 1999, NTL Incorporated completed a corporate restructuring to
create a holding company structure. The holding company restructuring was
accomplished through a merger so that all the stockholders of NTL Incorporated
at the effective time of the merger became stockholders of the new holding
company, and NTL Incorporated became a subsidiary of the new holding company.
The new holding company has taken the name NTL Incorporated and the holding
company's subsidiary simultaneously changed its name to NTL Communications Corp.
The "Company" refers to NTL Incorporated and subsidiaries up to and including
March 31, 1999, and to NTL Communications Corp. and subsidiaries beginning April
1, 1999. In addition, in April 1999, the Company distributed $500 million to NTL
Incorporated, principally to finance the acquisition of the Australian National
Transmission Network.
The Company, through its subsidiaries and joint ventures, owns and operates
broadband communications networks for telephone, cable television and Internet
services and television and radio broadcasting systems in the United Kingdom and
the Republic of Ireland. Based on revenues and identifiable assets, the
Company's predominant lines of business are residential services, national
telecommunications services and broadcast transmission and tower services in the
United Kingdom. Residential services include telephony, cable television,
Internet access and interactive services. National telecommunications services
include business telephony, national and international carrier
telecommunications, Internet services and satellite communications services.
Broadcast transmission and tower services include digital and analog television
and radio broadcasting and related services.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries and entities where the Company's interest is greater
than 50%. Significant intercompany accounts and transactions have been
eliminated in consolidation.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's foreign subsidiaries have been
translated into U.S. dollars in accordance with SFAS No. 52, "Foreign Currency
Translation." All balance sheet accounts have been translated using the current
exchange rates at the respective balance sheet dates. Statement of operations
amounts have been translated using the average exchange rates for the respective
years. The gains or losses resulting from the change in exchange rates have been
reported as a component of accumulated other comprehensive income. Foreign
currency transaction gains and losses are included in the results of operations
as incurred.
F-10
<PAGE> 30
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
Cash equivalents are short-term highly liquid investments purchased with a
maturity of three months or less. Cash equivalents were $605 million and $651
million at December 31, 1999 and 1998, respectively, which consisted primarily
of bank time deposits and corporate commercial paper. At December 31, 1999 and
1998, $575 million and $121 million, respectively, of the cash equivalents were
denominated in foreign currencies.
MARKETABLE SECURITIES
Marketable securities are classified as available-for-sale, which are carried at
fair value. Unrealized holding gains and losses on securities, net of tax, are
carried as a component of accumulated other comprehensive income. The amortized
cost of debt securities is adjusted for amortization of premiums and accretion
of discounts to maturity. Such amortization is included in interest income.
Realized gains and losses and declines in value judged to be other than
temporary will be included in interest income. The cost of securities sold or
matured is based on the specific identification method. Interest on securities
is included in interest income.
Marketable securities at December 31, 1999 and 1998 consisted of corporate
commercial paper. During the years ended December 31, 1999, 1998 and 1997, there
were no realized gains or losses on sales of securities. All of the marketable
securities as of December 31, 1999 and 1998 had a contractual maturity of less
than one year.
FIXED ASSETS
Fixed assets are stated at cost, which includes amounts capitalized for labor
and overhead expended in connection with the design and installation of
operating equipment. Depreciation is computed by the straight-line method over
the estimated useful lives of the assets. Estimated useful lives are as follows:
operating equipment - 5 to 40 years and other equipment - 3 to 40 years.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, a loss is recognized for the difference between the fair
value and the carrying value of the asset.
INTANGIBLE ASSETS
Intangible assets include goodwill, license acquisition costs and customer
lists. Goodwill is the excess of the purchase price over the fair value of net
assets acquired in business combinations accounted for as purchases. Goodwill is
amortized on a straight-line basis over the periods benefited of 10, 15 or 30
years. License acquisition costs represent the portion of purchase price
allocated to the cable television and telecommunications licenses acquired in
business combinations. License acquisition costs are amortized on a
straight-line basis over the remaining lives of the licenses at acquisition,
which vary from approximately two years to 23 years. Customer lists represent
the portion of the purchase price allocated to the value of the customer base.
Customer lists are amortized on a straight-line basis over 5 years. The Company
continually reviews the recoverability of the carrying value of these assets
using the same methodology that it uses for the evaluation of its other
long-lived assets.
F-11
<PAGE> 31
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENT IN CABLE LONDON PLC
Investment in Cable London PLC was accounted for under the equity method. Equity
method investments are recorded at original cost and adjusted periodically to
recognize the Company's proportionate share of the investees' net income or
losses after the date of investment, additional contributions made and dividends
received. The difference between the Company's recorded investment and its
proportionate interest in the book value of the investees' net assets are being
amortized on a straight-line basis over 10 years.
DEFERRED FINANCING COSTS
Deferred financing costs are incurred in connection with the issuance of debt
and are amortized over the term of the related debt.
CAPITALIZED INTEREST
Interest is capitalized as a component of the cost of fixed assets constructed.
In 1999, 1998 and 1997, interest of $41,810,000, $27,760,000 and $6,770,000,
respectively, was capitalized.
REVENUE RECOGNITION
Revenues are recognized at the time the service is provided to the customer.
Charges for services that are billed in advance are deferred and recognized when
earned.
CABLE TELEVISION SYSTEM COSTS, EXPENSES AND REVENUES
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its broadband communications networks in
accordance with SFAS No. 51, "Financial Reporting by Cable Television
Companies."
ADVERTISING EXPENSE
The Company charges the cost of advertising to expense as incurred. Advertising
costs were $35,817,000, $33,951,000 and $31,003,000 in 1999, 1998 and 1997,
respectively.
STOCK-BASED COMPENSATION
The Company had adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company applied APB Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations in
accounting for the stock option plans in which it participates.
F-12
<PAGE> 32
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted by the
Company effective January 1, 2001. The Company is evaluating the impact that the
adoption of SFAS No. 133 will have on its results of operations and financial
position.
4. CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
NEED FOR ADDITIONAL FINANCING
The Company will require additional financing in the future. There can be no
assurance that the required financing will be obtainable on acceptable terms.
CONCENTRATIONS
The Company's television and radio broadcasting business is substantially
dependent upon contracts with a small group of companies for the right to
broadcast their programming, and upon a site sharing agreement for a large
number of its transmission sites. The loss of any one of these contracts or the
site sharing agreement could have a material adverse effect on the business of
the Company.
CURRENCY RISK
To the extent that the Company obtains financing in U.S. dollars and incurs
construction and operating costs in various other currencies, it will encounter
currency exchange rate risks. In addition, the Company's revenues are generated
in foreign currencies while its interest and principal obligations with respect
to most of the Company's existing indebtedness are payable in U.S. dollars.
5. FIXED ASSETS
Fixed assets consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
----------------------------------
(in thousands)
<S> <C> <C>
Operating equipment $ 4,858,950 $ 3,528,973
Other equipment 694,712 376,518
Construction-in-progress 668,741 369,923
----------------------------------
6,222,403 4,275,414
Accumulated depreciation (881,848) (420,984)
----------------------------------
$ 5,340,555 $ 3,854,430
==================================
</TABLE>
F-13
<PAGE> 33
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. INTANGIBLE ASSETS
Intangible assets consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
--------------------------------
(in thousands)
<S> <C> <C>
Goodwill, net of accumulated amortization of $183,612 (1999) and
$32,358 (1998) $2,089,723 $ 514,529
License acquisition costs, net of accumulated amortization of
$141,682 (1999) and $69,202 (1998) 224,998 153,007
Customer lists, net of accumulated amortization of $30,870 (1999) and
$3,375 (1998) 159,336 57,492
--------------------------------
$2,474,057 $ 725,028
================================
</TABLE>
The Company made the following acquisitions in 1998:
The Company acquired ComTel Limited and Telecential Communications
(collectively, "ComTel") for a total of pound sterling 550 million comprised of
pound sterling 475 million in cash and 125,000 shares of 9.9% Non-voting
Mandatorily Redeemable Preferred Stock, Series A in two stages completed in June
and September 1998. The preferred stock was valued at pound sterling 75 million,
the fair value on the date of issuance. ComTel is a provider of telephone, cable
television and Internet services in England.
In October 1998, a wholly-owned subsidiary of the Company, NTL (Triangle) LLC
("NTL Triangle") (formerly known as NTL (Bermuda) Limited) acquired all of the
outstanding common stock of Comcast UK Cable Partners Limited in exchange for
29.3 million shares of the Company's common stock. The Company's common stock
was valued at $600,432,000, the fair value at the time of the announcement. NTL
Triangle provides telephone, cable television and Internet services in England.
In December 1998, the Company acquired Eastern Group Telecoms ("EGT") for pound
sterling 60 million in cash and 52,000 shares of 9.9% Non-voting Mandatorily
Redeemable Preferred Stock, Series B. The preferred stock was valued at
$52,217,000, the fair value on the date of issuance. EGT's telecoms division has
a fibre-optic network across portions of England, and its radio sites division
serves mobile phone operators in portions of England.
These acquisitions have been accounted for as purchases, 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 aggregate purchase price of $1.7 billion, which includes the related
acquisition costs and the return of cash acquired in the ComTel transaction of
pound sterling 31 million, exceeded the fair value of the net tangible assets
acquired by $591 million, which has been allocated as follows: $185.6 million to
the investment in Cable London PLC, $52.4 million to license acquisition costs,
$60.9 million to customer lists and $292.1 million to goodwill.
F-14
<PAGE> 34
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. INTANGIBLE ASSETS (CONTINUED)
The Company made the following acquisitions in 1999:
In March 1999, the Company acquired Diamond Cable Communications plc
("Diamond"). The Company issued an aggregate of 19.9 million shares of common
stock in exchange for each ordinary share and deferred share of Diamond. The
Company's common stock was valued at $971,437,000, the fair value at the time of
the announcement. In addition, the Company issued options to purchase 191,000
shares of the Company's common stock to holders of Diamond options, which were
valued at $6,599,000. The Company assumed Diamond's debt including five
different notes with an aggregate principal amount at maturity of $1.6 billion.
Diamond is a provider of telephone, cable television and Internet services in
England.
In July 1999, the Company acquired Cablelink Limited ("Cablelink") for IR pound
535.18 million ($693 million), of which IR pound 455.18 million ($589 million)
was paid in cash and IR pound 80 million ($104 million) was paid through the
issuance of Variable Rate Redeemable Guaranteed Loan Notes due 2002. Cablelink
provides multi-channel television and information services in Dublin, Galway and
Waterford, Ireland.
Also in July 1999, the Company acquired certain broadband cable franchises from
British Telecommunications plc for an aggregate of up to pound sterling 19
million ($31 million). The Company paid approximately pound sterling 5 million
($8 million) on closing and will pay up to pound sterling 14 million ($23
million) on completion of the upgrade of certain networks.
These acquisitions were accounted for as purchases, 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
aggregate purchase price of $1.69 billion, including costs incurred of $18
million, plus the fair value of liabilities assumed net of tangible assets
acquired aggregated $1.983 billion, which has been allocated as follows: $143
million to license acquisition costs, $131 million to customer lists and $1.709
billion to goodwill.
The pro forma unaudited consolidated results of operations for the years ended
December 31, 1999 and 1998 assuming consummation of the above mentioned
transactions as of January 1, 1998 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998
---------------------------------
(in thousands)
<S> <C> <C>
Total revenue $1,537,764 $1,170,480
(Loss) before extraordinary item (854,096) (1,058,438)
Net (loss) (857,130) (1,089,127)
</TABLE>
F-15
<PAGE> 35
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. INVESTMENT IN CABLE LONDON PLC
Pursuant to an agreement with Telewest Communications plc ("Telewest") relating
to NTL Triangle's and Telewest's respective 50% ownership interests in Cable
London PLC ("Cable London"), in November 1999 Telewest purchased all of NTL
Triangle's shares of Cable London for approximately pound sterling 428 million
(approximately $692 million) in cash. The Company recorded a gain of $493
million on the sale. The sale of the Cable London interest is an "Asset Sale"
for purposes of the Company's Indentures for certain of its notes. The Company
will need to use an amount equal to the proceeds from the sale to repay
subsidiary debt, invest in "Replacement Assets" or make an offer to redeem
certain of its notes by November 2000.
8. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
---------------------------------------
(in thousands)
<S> <C> <C> <C>
NTL Communications:
12-3/4% Senior Deferred Coupon Notes (a) $ 268,108 $ 236,935
11-1/2% Senior Deferred Coupon Notes (b) 930,404 831,976
10% Senior Notes (c) 400,000 400,000
9-1/2% Senior Sterling Notes, less unamortized
discount of $567 (1999) and $639 (1998) (d) 201,408 206,800
10-3/4% Senior Deferred Coupon Sterling Notes (e) 343,691 317,511
9-3/4% Senior Deferred Coupon Notes (f) 952,825 865,880
9-3/4% Senior Deferred Coupon Sterling Notes (g) 354,394 -
11-1/2% Senior Notes (h) 625,000 625,000
12-3/8% Senior Deferred Coupon Notes (i) 286,967 254,718
7% Convertible Subordinated Notes (j) - 275,000
7% Convertible Subordinated Notes (k) 599,300 600,000
Variable Rate Redeemable Guaranteed Loan Notes (l) 76,794 -
9-1/4% Senior Euro Notes (m) 252,300 -
9-7/8% Senior Euro Notes (n) 353,220 -
11-1/2% Senior Deferred Coupon Euro Notes (o) 123,080 -
NTL Triangle:
11.2% Senior Discount Debentures (p) 467,317 421,835
Other 7,969 31,839
Diamond:
13-1/4% Senior Discount Notes (q) 285,101 -
11-3/4% Senior Discount Notes (r) 476,215 -
10-3/4% Senior Discount Notes (s) 336,891 -
10% Senior Sterling Notes (t) 218,133 -
9-1/8% Senior Notes (u) 110,000 -
Other 11,508 -
---------------------------------------
7,680,625 5,067,494
Less current portion 82,601 23,691
---------------------------------------
$7,598,024 $5,043,803
=======================================
</TABLE>
F-16
<PAGE> 36
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. LONG-TERM DEBT (CONTINUED)
(a) 12-3/4% Notes due April 15, 2005, principal amount at maturity of
$277,804,000, interest payable semiannually beginning on October 15,
2000, redeemable at the Company's option on or after April 15, 2000;
(b) 11-1/2% Notes due February 1, 2006, principal amount at maturity of
$1,050,000,000, interest payable semiannually beginning on August 1,
2001, redeemable at the Company's option on or after February 1, 2001;
(c) 10% Notes due February 15, 2007, principal amount at maturity of
$400,000,000, interest payable semiannually from August 15, 1997,
redeemable at the Company's option on or after February 15, 2002;
(d) 9-1/2% Sterling Notes due April 1, 2008, principal amount at maturity of
pound sterling 125,000,000 ($201,975,000), interest payable semiannually
from October 1, 1998, redeemable at the Company's option on or after
April 1, 2003;
(e) 10-3/4% Sterling Notes due April 1, 2008, principal amount at maturity of
pound sterling 300,000,000 ($484,740,000), interest payable semiannually
beginning on October 1, 2003, redeemable at the Company's option on or
after April 1, 2003;
(f) 9-3/4% Notes due April 1, 2008, principal amount at maturity of
$1,300,000,000, interest payable semiannually beginning on October 1,
2003, redeemable at the Company's option on or after April 1, 2003;
(g) 9-3/4% Sterling Notes due April 15, 2009, principal amount at maturity of
pound sterling 330,000,000 ($533,214,000), interest payable semiannually
beginning on October 15, 2004, redeemable at the Company's option on or
after April 15, 2004;
(h) 11-1/2% Notes due October 1, 2008, principal amount at maturity of
$625,000,000, interest payable semiannually from April 1, 1999,
redeemable at the Company's option on or after October 1, 2003;
(i) 12-3/8% Notes due October 1, 2008, principal amount at maturity of
$450,000,000, interest payable semiannually beginning on April 1, 2004,
redeemable at the Company's option on or after October 1, 2003;
(j) In May 1999, the Company called for redemption all of its $275,000,000
principal amount of 7% Convertible Notes due 2008 at a redemption price
of 104.9% of their principal amount, plus accrued and unpaid interest. In
June 1999, all of the 7% Convertible Notes were converted into
approximately 11,344,000 shares of NTL Incorporated's common stock at the
applicable conversion price of $24.24 per share. The unamortized deferred
financing costs related to the 7% Notes of $6,415,000 were written-off to
equity;
F-17
<PAGE> 37
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. LONG-TERM DEBT (CONTINUED)
(k) 7% Convertible Notes due December 15, 2008, principal amount at maturity
of $599,300,000, interest payable semiannually from June 15, 1999,
convertible into shares of NTL Incorporated common stock at a conversion
price of $39.20 per share, redeemable at the Company's option on or after
December 15, 2001;
(l) Variable Rate Redeemable Guaranteed Notes due January 5, 2002, principal
amount at maturity of IR pound 60,000,000 ($76,794,000), interest payable
quarterly at EURIBOR (3.345% at December 31, 1999), redeemable at any
time at the option of the holder, IR pound 20,000,000 ($25,730,000)
redeemed in 1999 using cash held in escrow, Euro86,475,000 ($87,270,000)
remaining in escrow at December 31, 1999;
(m) 9-1/4% Notes due November 15, 2006, principal amount at maturity of
Euro250,000,000 ($252,300,000), interest payable semiannually beginning
on May 15, 2000;
(n) 9-7/8% Notes due November 15, 2009, principal amount at maturity of
Euro350,000,000 ($353,220,000), interest payable semiannually beginning
on beginning May 15, 2000, redeemable at the Company's option on or after
November 15, 2004;
(o) 11-1/2% Deferred Notes due November 15, 2009, principal amount at
maturity of Euro210,000,000 ($211,932,000), interest payable semiannually
beginning on May 15, 2005, redeemable at the Company's option on or after
November 15, 2004;
(p) 11.2% Debentures due November 15, 2007, principal amount at maturity of
$517,321,000, interest payable semiannually beginning on May 15, 2001;
(q) 13-1/4% Notes due September 30, 2004, principal amount at maturity of
$285,101,000, interest payable semiannually beginning on March 31, 2000,
redeemable at the Company's option on or after September 30, 1999;
(r) 11-3/4% Notes due December 15, 2005, principal amount at maturity of
$530,955,000, interest payable semiannually beginning on June 15, 2001,
redeemable at the Company's option on or after December 15, 2000;
(s) 10-3/4% Notes due February 15, 2007, principal amount at maturity of
$420,500,000, interest payable semiannually beginning on August 15, 2002,
redeemable at the Company's option on or after December 15, 2002;
(t) 10% Sterling Notes due February 1, 2008, principal amount at maturity of
pound sterling 135,000,000 ($218,133,000), interest payable semiannually
from August 1, 1998, redeemable at the Company's option on or after
February 1, 2003; and
(u) 9-1/8% Notes due February 1, 2008, principal amount of $110,000,000,
interest payable semiannually from August 1, 1998, redeemable at the
Company's option on or after February 1, 2003.
F-18
<PAGE> 38
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. LONG-TERM DEBT (CONTINUED)
The indentures governing the notes contain restrictions relating to, among other
things: (i) incurrence of additional indebtedness and issuance of preferred
stock, (ii) dividend and other payment restrictions and (iii) mergers,
consolidations and sales of assets.
During 1999, 1998 and 1997, the Company recognized $451,356,000, $232,691,000
and $122,639,000, respectively, of original issue discount as interest expense.
In September 1999, NTL Triangle repaid at maturity the $21,529,000 due under its
notes payable to Comcast U.K. Holdings, Inc.
In connection with the Cablelink acquisition, the Company issued $704,615,000
principal amount Senior Increasing Rate Notes due 2000. In November 1999, the
Company received net proceeds of $720,743,000 from the issuance of the 9-1/4%
Euro Notes, the 9-7/8% Euro Notes and the 11-1/2% Deferred Euro Notes, of which
$716,505,000 was used to repay the Senior Increasing Rate Notes plus accrued
interest. The Company recorded an extraordinary loss from the early
extinguishment of the notes of $3,034,000 in 1999.
In connection with the ComTel acquisition, the Company borrowed an aggregate of
pound sterling 475,000,000 under its bank credit facility. In November 1998, the
Company received net proceeds of $849,000,000 from the issuance of the 11-1/2%
Notes and the 12-3/8% Notes, a substantial portion of which was used to repay
the $799,000,000 outstanding under the bank loan. The Company recorded an
extraordinary loss from the early extinguishment of the bank loan of $18,579,000
in 1998.
In October 1998, the Company redeemed its 10-7/8% Senior Deferred Coupon Notes
with an accreted value of $211,000,000 for cash of $218,000,000. The Company
recorded an extraordinary loss from the early extinguishment of the 10-7/8%
Notes of $12,110,000 in 1998, which included approximately $4,800,000 of
unamortized deferred financing costs.
In 1998, the Company required consents from the holders of some of its notes to
modify certain indenture provisions in order to proceed with an acquisition. In
October 1998, the Company paid $11,333,000 in consent payments and issued
warrants to purchase 1,197,000 shares of common stock in lieu of additional
consent payments of $10,080,000.
The NTL Triangle and Diamond notes restrict the payment of cash dividends and
loans to the Company. At December 31, 1999, restricted net assets were
approximately $1.4 billion.
Long-term debt repayments are due as follows (in thousands):
<TABLE>
<S> <C>
Year ending December 31:
2000 $ 82,601
2001 1,270
2002 1,062
2003 981
2004 286,001
Thereafter 8,545,710
----------
$8,917,625
==========
</TABLE>
F-19
<PAGE> 39
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. NONRECURRING CHARGES INCLUDING RESTRUCTURING CHARGES
Nonrecurring charges of $16,179,000 in 1999 were the fee incurred for the
cancellation of certain contracts.
Nonrecurring charges of $20,642,000 in 1997 include deferred costs written-off
of $5,013,000 and restructuring costs of $15,629,000. The deferred costs
written-off arose in connection with the Company's unsuccessful bid for United
Kingdom digital terrestrial television multiplex licenses. Restructuring costs
relate to the Company's announcement in September 1997 of a reorganization of
certain of its operations. This charge consisted of employee severance and
related costs of $6,726,000 for approximately 280 employees to be terminated,
lease exit costs of $6,539,000 and penalties of $2,364,000 associated with the
cancellation of contractual obligations. As of December 31, 1998, $9,172,000 of
the provision had been used, including $5,558,000 for severance and related
costs, $1,450,000 for lease exit costs and $2,164,000 for penalties associated
with the cancellation of contractual obligations. As of December 31, 1998, 177
employees had been terminated. The $4,194,000 reversed in 1998 includes
$1,168,000 for severance and related costs, $2,826,000 for lease exit costs and
$200,000 for penalties associated with the cancellation of contractual
obligations. This reversal was necessary because employees whose positions were
eliminated chose to remain with the Company in other positions rather than leave
the Company and receive severance pay, and the real estate markets in which the
Company sublet space improved increasing the sublet rentals and shortening the
period of time required to find subtenants. The remaining restructuring reserve
of $2,263,000 at December 31, 1998 is for lease costs net of sublease revenue.
10. OTHER GAINS
Other gains of $493,121,000 in 1999 are from the sale of the investment in Cable
London. Other gains of $21,497,000 in 1997 include a legal settlement of
$10,000,000 and a gain on the sale of fixed assets of $11,497,000. In October
1997, following the U.S. District Court's decision to dismiss the Company's
complaint against LeGroupe Videotron Ltee and its subsidiary, the Company
entered into a Settlement Agreement dismissing the Company's complaint in
exchange for a payment of $10,000,000. In December 1997, a U.S. subsidiary of
the Company sold its fixed and other assets utilized in its microwave
transmission service business and recognized a gain of $11,497,000.
F-20
<PAGE> 40
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. INCOME TAXES
The benefit for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
-----------------------------------------------
(in thousands)
<S> <C> <C> <C>
Current:
Federal $ 1,000 $ - $ -
State and local - - 1,261
Foreign - - -
-----------------------------------------------
Total current 1,000 - 1,261
-----------------------------------------------
Deferred:
Federal - - -
State and local - - -
Foreign (30,943) (3,327) (16,852)
-----------------------------------------------
Total deferred (30,943) (3,327) (16,852)
-----------------------------------------------
$(29,943) $ (3,327) $(15,591)
===============================================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
-------------------------------
(in thousands)
<S> <C> <C>
Deferred tax liabilities:
Fixed assets $ 66,461 $ 68,766
Intangibles 76,457 -
-------------------------------
Total deferred tax liabilities 142,918 68,766
Deferred tax assets:
Net operating losses 389,722 244,394
Net deferred interest expense 150,120 113,993
Depreciation and amortization 269,322 100,780
Other 12,237 19,975
-------------------------------
Total deferred tax assets 821,401 479,142
Valuation allowance for deferred tax assets (731,607) (477,438)
-------------------------------
Net deferred tax assets 89,794 1,704
-------------------------------
Net deferred tax liabilities $ 53,124 $ 67,062
===============================
</TABLE>
F-21
<PAGE> 41
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. INCOME TAXES (CONTINUED)
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $260 million for U.S. federal income tax purposes that expire in
varying amounts commencing in 2009. The Company also has United Kingdom net
operating loss carryforwards of approximately $947 million which have no
expiration date. Pursuant to United Kingdom law, these losses are only available
to offset income of the separate entity that generated the loss.
The Company is currently undergoing a U.S. federal income tax audit. The
Internal Revenue Service has issued notices of proposed adjustment. The Company
does not expect that the audit adjustments will have a material adverse effect
on its financial position, results of operations or cash flows.
The reconciliation of income taxes computed at U.S. federal statutory rates to
income tax expense is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
---------------------------------------------------
(in thousands)
<S> <C> <C> <C>
(Benefit) at federal statutory rate (35%) $(260,715) $(188,309) $(120,452)
Add:
State and local income tax, net of federal benefit - - 820
Foreign losses with no benefit 102,467 83,500 59,804
Amortization of goodwill and license acquisition costs 4,145 4,366 3,925
U.S. losses with no benefit 124,160 97,116 40,312
---------------------------------------------------
$ (29,943) $ (3,327) $ (15,591)
===================================================
</TABLE>
12. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the consolidated
balance sheets approximate fair value.
Long-term debt: The carrying amount of the Variable Rate Notes approximates
their fair value. The fair values of the Company's other debt are based on
the quoted market prices.
Redeemable Preferred Stock: The fair value is based on the quoted market
price.
F-22
<PAGE> 42
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts and fair values of the Company's financial instruments are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
---------------------------------- ------------------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents $1,070,076 $1,070,076 $ 736,265 $ 736,265
Long-term debt:
12-3/4% Notes 268,108 278,499 236,935 252,801
11-1/2% Notes 930,404 950,250 831,976 882,000
10% Notes 400,000 414,000 400,000 408,000
9-1/2% Sterling Senior Notes 201,408 196,926 206,800 192,917
10-3/4% Sterling Notes 343,691 327,200 317,511 293,732
9-3/4% Notes 952,825 913,250 865,880 835,250
9-3/4% Sterling Notes 354,394 313,263 - -
11-1/2% Notes 625,000 682,813 625,000 681,250
12-3/8% Notes 286,967 319,500 254,718 274,500
7% Convertible Notes - - 275,000 411,125
7% Convertible Notes 599,300 1,582,152 600,000 656,340
Variable Rate Notes 76,794 76,794 - -
9-1/4% Euro Notes 252,300 254,823 - -
9-7/8% Euro Notes 353,220 356,752 - -
11-1/2% Euro Deferred Notes 123,080 125,040 - -
11.2% Debentures 467,317 486,282 421,835 437,119
13-1/4% Notes 285,101 305,414 - -
11-3/4% Notes 476,215 499,140 - -
10-3/4% Notes 336,891 340,605 - -
10% Sterling Notes 218,133 218,133 - -
9-1/8% Notes 110,000 108,900 - -
Redeemable Preferred Stock - - 124,127 124,127
</TABLE>
13. RELATED PARTY TRANSACTIONS
The Company provided management, financial, legal and technical services to
Cellular Communications International, Inc. ("CCII") and Cellular Communications
of Puerto Rico, Inc. ("CCPR"). Certain officers and directors of the Company
were officers and directors of CCII and CCPR.
F-23
<PAGE> 43
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
13. RELATED PARTY TRANSACTIONS (CONTINUED)
In 1997, the Company charged CCPR and CCII $1,492,000 and $871,000,
respectively, for direct costs where identifiable and a fixed percentage of its
corporate overhead. In 1998, the Company charged CCPR, CCII and CoreComm Limited
(which was formed in 1998 and has certain common officers and directors with the
Company) $1,148,000, $982,000 and $313,000, respectively, for direct costs where
identifiable and a fixed percentage of its corporate overhead. In the fourth
quarter of 1999, CoreComm Limited began charging the Company a percentage of
CoreComm Limited's office rent and supplies expense. In 1999, the Company
charged CCPR, CCII and CoreComm Limited $144,000, $439,000 and $1,336,000,
respectively, for direct costs where identifiable and a fixed percentage of its
corporate overhead, net of CoreComm Limited's charges to the Company. Charges to
CCPR and to CCII ceased in 1999 due to each of them being acquired and a
resulting termination of services. These charges reduced corporate expenses. It
is not practicable to determine the amounts of these expenses that would have
been incurred had the Company operated as an unaffiliated entity. In the opinion
of management of the Company, the allocation methods are reasonable.
At December 31, 1999 and 1998, the Company had receivables of $508,000 and
$1,038,000 from CoreComm Limited and none and $588,000 from CCPR, respectively.
In addition, at December 31, 1999, the Company had $8,427,000 due to NTL
Incorporated.
14. SHAREHOLDER'S EQUITY
SALES OF PREFERRED STOCK AND WARRANTS
In January 1999, the Company received $500 million in cash from Microsoft Corp.
("Microsoft") in exchange for 500,000 shares of the Company's 5.25% Convertible
Preferred Stock and warrants to purchase 1,875,000 shares of the Company's
common stock at an exercise price of $53.76 per share (as adjusted for stock
splits in 1999 and 2000).
SERIES PREFERRED STOCK
In September 1998, the Company issued 125,000 shares of 9.9% Non-voting
Mandatorily Redeemable Preferred Stock, Series A (the "Series A Preferred
Stock") in connection with the ComTel acquisition. Each share of Series A
Preferred Stock had a stated value of $1,000. Cumulative dividends accrued at
9.9% of the stated value per share. Dividends were payable when and if declared
by the Board of Directors.
In December 1998, the Company issued 52,000 shares of 9.9% Non-voting
Mandatorily Redeemable Preferred Stock, Series B (the "Series B Preferred
Stock") in connection with the EGT acquisition. Each share of Series B Preferred
Stock had a stated value of $1,000. Cumulative dividends accrued at 9.9% of the
stated value per share. Dividends were payable when and if declared by the Board
of Directors.
In October 1996, 780 shares of Non-voting Convertible Preferred Stock, Series A
were issued in connection with an acquisition. In May 1998, the 780 outstanding
shares were converted into 3,047,000 shares of common stock.
F-24
<PAGE> 44
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
14. SHAREHOLDER'S EQUITY (CONTINUED)
The changes in the number of shares of Series Preferred Stock, excluding the
Redeemable Preferred Stock, were as follows:
<TABLE>
<CAPTION>
Convertible 9.9% 9.9%
Series A Series A Series B 5.25%
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 and 1997 780 - - -
Conversion (780) - - -
Issued for acquisitions - 125,000 52,000 -
-----------------------------------------------------------
Balance, December 31, 1998 - 125,000 52,000 -
Issued for cash - - - 500,000
Issued for dividends - - - 4,000
Corporate restructuring - (125,000) (52,000) (504,000)
-----------------------------------------------------------
Balance, December 31, 1999 - - - -
============================================================
</TABLE>
STOCK OPTIONS
The Company's employees participate in the NTL Incorporated stock option plans.
The following is a description of NTL Incorporated's stock option plans.
There are 3,381,000 shares and 10,396,000 shares of common stock reserved for
issuance under the 1991 Stock Option Plan and the 1993 Stock Option Plan,
respectively. These plans provide that incentive stock options ("ISOs") be
granted at the fair market value of NTL Incorporated's common stock on the date
of grant, and nonqualified stock options ("NQSOs") be granted at not less than
85% of the fair market value of NTL Incorporated's common stock on the date of
grant. Options are exercisable as to 20% of the shares subject thereto on the
date of grant and become exercisable as to an additional 20% of the shares
subject thereto on each January 1 thereafter, while the optionee remains an
employee of the Company. Options will expire ten years after the date of the
grant.
There are 156,000 shares and 500,000 shares of common stock reserved for
issuance under 1991 and 1993 Non-Employee Director Stock Option Plans,
respectively. Under the terms of these plans, options will be granted to members
of the Board of Directors who are not employees of the Company or any of its
affiliates. These plans provide that all options be granted at the fair market
value of NTL Incorporated's common stock on the date of grant, and options will
expire ten years after the date of the grant. Options are exercisable as to 20%
of the shares subject thereto on the date of grant and become exercisable as to
an additional 20% of the shares subject thereto on each subsequent anniversary
of the grant date while the optionee remains a director of the Company. Options
will expire ten years after the date of the grant.
There are 23,438,000 shares of common stock reserved for issuance under the 1998
Non-Qualified Stock Option Plan. The exercise price of a NQSO shall be
determined by the Compensation and Option Committee. Options are exercisable as
to 20% of the shares subject thereto on the date of grant and become exercisable
as to an additional 20% of the shares subject thereto on each January 1
thereafter, while the optionee remains an employee of the Company. Options will
expire ten years after the date of the grant.
There were 6,368,000, 13,850,000 and 2,455,000 options granted under these
plans for the years ended December 31, 1999, 1998 and 1997, respectively.
F-25
<PAGE> 45
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
14. SHAREHOLDER'S EQUITY (CONTINUED)
Pro forma information regarding net loss and net loss per share is required by
SFAS No. 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for 1999, 1998 and 1997: risk-free interest rates of 6.81%, 5.02%
and 5.89%, respectively, dividend yield of 0%, volatility factor of the expected
market price of NTL Incorporated's common stock of .336, .331 and .276,
respectively, and a weighted-average expected life of the option of 10 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
NTL Incorporated's stock options have characteristics significantly different
from those of traded options and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. Pro forma net loss
would have been approximately $801,969,000, $580,747,000, and $343,850,000 for
the years ended December 31, 1999, 1998 and 1997, respectively.
F-26
<PAGE> 46
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
15. EMPLOYEE BENEFIT PLANS
Certain subsidiaries of the Company operate defined benefit pension plans in the
United Kingdom. The assets of the Plans are held separately from those of the
Company and are invested in specialized portfolios under the management of an
investment group. The pension cost is calculated using the attained age method.
The Company's policy is to fund amounts to the defined benefit plans necessary
to comply with the funding requirements as prescribed by the laws and
regulations in the United Kingdom.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998
----------------------------------
(in thousands)
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 213,449 $ 202,645
Service cost 11,599 13,365
Interest cost 11,832 14,684
Actuarial gains (40,800) (14,640)
Benefits paid (5,239) (4,968)
Foreign currency exchange rate changes (5,050) 2,363
----------------------------------
Benefit obligation at end of year $ 185,791 $ 213,449
==================================
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year $ 225,273 $ 193,607
Actual return on plan assets 41,829 24,144
Company contributions 7,211 7,242
Plan participants' contributions 2,788 2,991
Benefits paid (5,239) (4,968)
Foreign currency exchange rate changes (5,329) 2,257
----------------------------------
Fair value of plan assets at end of year $ 266,533 $ 225,273
==================================
Funded status of the plan $ 80,742 $ 11,824
Unrecognized net actuarial gains (88,166) (23,060)
Unrecognized transition obligation 8,177 9,306
----------------------------------
Prepaid/(accrued)benefit cost $ 753 $ (1,930)
==================================
Actuarial assumptions:
Weighted average discount rate 6.25% 5.75%
Weighted average rate of compensation increase 4.50% 5.50%
Expected long-term rate of return on plan assets 8.00% 8.00%
</TABLE>
F-27
<PAGE> 47
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
15. EMPLOYEE BENEFIT PLANS (CONTINUED)
The components of net pension costs are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
---------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Service cost $ 11,599 $ 13,365 $ 10,693
Interest cost 11,832 14,684 12,765
Actual return on plan assets (41,829) (24,144) (30,852)
Net amortization and deferral 25,759 8,282 17,327
---------------------------------------------------------
$ 7,361 $ 12,187 $ 9,933
=========================================================
</TABLE>
16. LEASES
Leases for buildings, office space and equipment extend through 2031. Total
rental expense for the years ended December 31, 1999, 1998 and 1997 under
operating leases was $27,548,000, $29,356,000 and $20,674,000, respectively.
Future minimum lease payments under noncancellable operating leases as of
December 31, 1999 are as follows (in thousands):
<TABLE>
<S> <C>
Year ended December 31:
2000 $ 33,558
2001 31,077
2002 28,354
2003 26,952
2004 25,723
Thereafter 138,557
---------
$284,221
=========
</TABLE>
17. COMMITMENTS AND CONTINGENT LIABILITIES
At December 31, 1999, the Company was committed to pay approximately
$218,000,000 for equipment and services.
The Company had certain exclusive local delivery operator licenses for Northern
Ireland and other franchise areas in the United Kingdom. Pursuant to these
licenses, various subsidiaries of the Company were required to make monthly cash
payments to the Independent Television Commission ("ITC") during the 15-year
license terms. Upon a request by the Company in 1999, the ITC converted all of
the Company's fee bearing exclusive licenses to non-exclusive licenses by the
end of 1999. In 1999, 1998 and 1997, the Company paid $30,130,000, $25,036,000
and $23,587,000, respectively, in connection with these licenses. Since the
Company's liability for the license payments ceased upon the conversion, in 1999
the Company reversed an accrual for franchise fees of $13,592,000.
F-28
<PAGE> 48
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
17. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
The Company intends to make an offer to convert its 7% Convertible Notes with a
principal amount of $599.3 million into NTL Incorporated common stock.
The Company is involved in certain disputes and litigation arising in the
ordinary course of its business. None of these matters are expected to have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
18. INDUSTRY SEGMENTS
The Company has four reportable segments: Residential Telecoms and Television,
National Telecoms, Broadcast and Corporate and Other. The Residential Telecoms
and Television segment delivers residential telephony, cable television,
Internet access and interactive services in regional franchise areas in the
United Kingdom and Ireland. The National Telecoms segment includes the Company's
business telecoms, national and international carrier telecoms, Internet
services and satellite communications services business units in the United
Kingdom. The Broadcast segment provides television and radio broadcasters with
digital and analog broadcast transmission and related services from owned and
shared tower sites throughout the United Kingdom. Corporate and other includes
the Company's shared services departments in the United Kingdom and OCOM, a
subsidiary that operated long distance and microwave transmission businesses in
the United States until June 1998.
The accounting policies of the segments are the same as those described in the
Significant Accounting Policies note. The Company's management evaluates segment
performance based on various financial and non-financial measurements. The
results of operations data utilized in financial measurements are revenues and
EBITDA, which is earnings before interest, taxes, depreciation and amortization,
corporate expenses, franchise fees, nonrecurring charges, other gains, foreign
currency transactions gains and extraordinary items. The Company's primary
measure of profit or loss is EBITDA. Certain selling, general and administrative
expenses are allocated to segments based on revenues. Segment assets include
only those assets that are specific to the segment. Management does not allocate
costs of shared services departments and jointly used assets for purposes of
measuring segment performance. The reportable segments are strategic business
units that offer different services. They are managed separately because each
business requires different technology and marketing strategies.
F-29
<PAGE> 49
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
18. INDUSTRY SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
RESIDENTIAL
TELECOMS CORPORATE
AND NATIONAL AND
BROADCAST TELEVISION TELECOMS OTHER TOTAL
---------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Revenues $ 161,907 $ 827,324 $ 488,640 $ - $ 1,477,871
Depreciation and amortization 44,480 527,093 58,046 133,239 762,858
EBITDA (1) 102,107 245,029 143,545 (279,296) 211,385
Expenditures for long-lived assets 37,330 590,529 387,147 124,516 1,139,522
Total assets 281,687 5,978,509 1,078,474 2,163,603 9,502,273
YEAR ENDED DECEMBER 31, 1998
Revenues $ 140,156 $ 355,589 $ 248,895 $ 2,375 $ 747,015
Depreciation and amortization 29,974 143,479 29,476 63,183 266,112
EBITDA (1) 91,687 67,587 35,848 (119,735) 75,387
Expenditures for long-lived assets 88,476 413,917 297,745 67,141 867,279
Total assets 289,068 3,100,492 761,097 2,043,440 6,194,097
YEAR ENDED DECEMBER 31, 1997
Revenues $ 130,799 $ 166,951 $ 185,194 $ 8,831 $ 491,775
Depreciation and amortization 13,584 78,730 9,666 48,529 150,509
EBITDA (1) 73,636 18,693 13,522 (84,853) 20,998
Expenditures for long-lived assets 36,142 304,656 105,076 20,519 466,393
Total assets 230,920 1,323,808 220,318 646,593 2,421,639
</TABLE>
(1) Represents earnings before interest, taxes, depreciation and amortization,
corporate expenses, franchise fees, nonrecurring charges, other gains,
foreign currency transaction gains and extraordinary items.
F-30
<PAGE> 50
NTL Communications Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
18. INDUSTRY SEGMENTS (CONTINUED)
The reconciliation of segment combined EBITDA to loss before income taxes and
extraordinary item is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
--------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Segment Combined EBITDA $ 211,385 $ 75,387 $ 20,998
(Add) Deduct:
Franchise fees 16,538 25,036 23,587
Corporate expenses 25,260 17,048 18,324
Nonrecurring charges 16,179 (4,194) 20,642
Depreciation and amortization 762,858 266,112 150,509
Interest and other income (29,767) (46,024) (28,415)
Interest expense 678,036 328,815 202,570
Other gains (493,121) - (21,497)
Foreign currency transaction gains (22,733) (4,152) (574)
--------------------------------------------------
953,250 582,641 365,146
--------------------------------------------------
Loss before income taxes and extraordinary
item $(741,865) $(507,254) $(344,148)
===================================================
</TABLE>
19. GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
United States United Kingdom Ireland Total
------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
1999
Revenues $ - $1,446,681 $ 31,190 $1,477,871
Long-lived assets 499,070 7,463,600 148,002 8,110,672
1998
Revenues $ 2,375 $ 744,640 $ - $ 747,015
Long-lived assets 137,223 4,852,374 - 4,989,597
1997
Revenues $ 8,831 $ 482,944 $ - $ 491,775
Long-lived assets 55,173 2,129,312 - 2,184,485
</TABLE>
F-31
<PAGE> 51
NTL Communications Corp.
Schedule I--Condensed Financial Information of Registrant
Condensed Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
-----------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 703,384 $ 514,865
Marketable securities 5,014 260,631
Other 3,162 13,070
-----------------------------------
Total current assets 711,560 788,566
Office improvements and equipment, net of accumulated
depreciation of $1,332 (1999) and $890 (1998) 1,629 1,198
Investments in and loans to subsidiaries 5,774,792 4,211,862
Deferred financing costs, net of accumulated amortization of
$32,182 (1999) and $17,486 (1998) 142,780 136,025
Other assets, net of accumulated amortization
of none (1999) and $13,192 (1998) 87,436 161
-----------------------------------
Total assets $ 6,718,197 $ 5,137,812
===================================
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities $ 126,973 $ 44,711
Long-term debt 5,690,697 4,613,820
Senior redeemable exchangeable preferred stock - 124,127
Shareholder's equity:
Series preferred stock - 2
Common stock - 602
Additional paid-in capital 2,863,677 1,501,561
Accumulated other comprehensive income 2,395 104,657
(Deficit) (1,965,545) (1,251,668)
-----------------------------------
900,527 355,154
-----------------------------------
Total liabilities and shareholder's equity $ 6,718,197 $ 5,137,812
===================================
</TABLE>
See accompanying notes.
F-32
<PAGE> 52
NTL Communications Corp.
Schedule I--Condensed Financial Information of Registrant (continued)
Condensed Statements of Operations
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
---------------------------------------------------
<S> <C> <C> <C>
COSTS AND EXPENSES
Corporate expenses $ 22,734 $ 14,718 $ 12,811
Depreciation and amortization 18,265 10,576 6,655
---------------------------------------------------
Operating (loss) (40,999) (25,294) (19,466)
OTHER INCOME (EXPENSE)
Interest and other income 121,580 128,457 4,490
Interest expense (529,374) (317,677) (191,124)
Other gain - - 10,000
Foreign currency transaction gains (losses) 21,777 3,673 (2,221)
---------------------------------------------------
(Loss) before income taxes, extraordinary item
and equity in net (loss) of subsidiaries (427,016) (210,841) (198,321)
Income tax provision (1,000) - (1,083)
---------------------------------------------------
(Loss) before extraordinary item and equity in net
(loss) of subsidiaries (428,016) (210,841) (199,404)
Loss from early extinguishment of debt (3,034) (12,110) -
---------------------------------------------------
(Loss) before equity in net (loss) of subsidiaries (431,050) (222,951) (199,404)
Equity in net (loss) of subsidiaries (283,906) (311,665) (133,653)
---------------------------------------------------
Net (loss) $(714,956) $(534,616) $(333,057)
===================================================
</TABLE>
See accompanying notes.
F-33
<PAGE> 53
NTL Communications Corp.
Schedule I--Condensed Financial Information of Registrant (continued)
Condensed Statements of Cash Flows
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
---------------------------------------------------
<S> <C> <C> <C>
Net cash (used in) operating activities $ (125,180) $ (291,427) $ (55,467)
INVESTING ACTIVITIES
Purchase of office improvements and equipment (873) (96) (156)
Purchase of marketable securities (354,524) (540,639) (145,939)
Proceeds from sales of marketable securities 618,625 291,276 142,596
Increase in investments in and loans to subsidiaries (990,355) (1,466,334) (482,179)
---------------------------------------------------
Net cash (used in) investing activities (727,127) (1,715,793) (485,678)
FINANCING ACTIVITIES
Distribution to NTL Incorporated (500,000) - -
Proceeds from borrowings, net of financing costs 1,846,003 2,697,777 484,340
Proceeds from issuance of preferred stock and warrants 500,000 - -
Principal payments (730,345) - -
Proceeds from exercise of stock options and warrants 12,161 6,842 1,671
Consent solicitation payments - (11,333) -
Cash in escrow for debt repayment (86,993) (217,622) -
---------------------------------------------------
Net cash provided by financing activities 1,040,826 2,475,664 486,011
---------------------------------------------------
Increase (decrease) in cash and cash equivalents 188,519 468,444 (55,134)
Cash and cash equivalents at beginning of year 514,865 46,421 101,555
---------------------------------------------------
Cash and cash equivalents at end of year $ 703,384 $ 514,865 $ 46,421
===================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 209,069 $ 77,295 $ 53,485
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Accretion of dividends and discount on preferred stock $ 8,722 $ 19,072 $ 12,263
Conversion of Convertible Notes, net of unamortized
deferred financing costs 269,285 187,012 -
Warrants issued in connection with consent solicitations - 10,080 -
Preferred stock issued for an acquisition - 178,495 -
Common stock and stock options issued for an acquisition 978,036 600,432 -
</TABLE>
See accompanying notes.
F-34
<PAGE> 54
NTL Communications Corp.
Schedule I-Condensed Financial Information of Registrant
Notes to Condensed Financial Statements
1. CORPORATE RESTRUCTURING
Effective April 1, 1999, NTL Incorporated completed a corporate restructuring to
create a holding company structure. The holding company restructuring was
accomplished through a merger so that all the stockholders of NTL Incorporated
at the effective time of the merger became stockholders of the new holding
company, and NTL Incorporated became a subsidiary of the new holding company.
The new holding company has taken the name NTL Incorporated and the holding
company's subsidiary simultaneously changed its name to NTL Communications Corp.
(the "Company").
2. BASIS OF PRESENTATION
In the Company's condensed financial statements, the Company's investment in
subsidiaries is stated at cost plus equity in the undistributed earnings of the
subsidiaries. The Company's share of net loss of its subsidiaries is included in
net loss using the equity method of accounting. The condensed financial
statements should be read in conjunction with the Company's consolidated
financial statements.
F-35
<PAGE> 55
NTL Communications Corp.
Schedule I-Condensed Financial Information of Registrant
Notes to Condensed Financial Statements (continued)
3. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
---------------------------------
(in thousands)
<S> <C> <C>
12-3/4% Senior Deferred Coupon Notes (a) $ 268,108 $ 236,935
11-1/2% Senior Deferred Coupon Notes (b) 930,404 831,976
10% Senior Notes (c) 400,000 400,000
9-1/2% Senior Sterling Notes, less unamortized
discount of $567 (1999) and $639 (1998) (d) 201,408 206,800
10-3/4% Senior Deferred Coupon Sterling Notes (e) 343,691 317,511
9-3/4% Senior Deferred Coupon Notes (f) 952,825 865,880
9-3/4% Senior Deferred Coupon Sterling Notes (g) 354,394 -
11-1/2% Senior Notes (h) 625,000 625,000
12-3/8% Senior Deferred Coupon Notes (i) 286,967 254,718
7% Convertible Subordinated Notes (j) - 275,000
7% Convertible Subordinated Notes (k) 599,300 600,000
Variable Rate Redeemable Guaranteed Loan Notes (l) 76,794 -
9-1/4% Senior Euro Notes (m) 252,300 -
9-7/8% Senior Euro Notes (n) 353,220 -
11-1/2% Senior Deferred Coupon Euro Notes (o) 123,080 -
---------------------------------
5,767,491 4,613,820
Less current portion 76,794 -
---------------------------------
$5,690,697 $4,613,820
=================================
</TABLE>
(a) 12-3/4% Notes due April 15, 2005, principal amount at maturity of
$277,804,000, interest payable semiannually beginning on October 15,
2000, redeemable at the Company's option on or after April 15, 2000;
(b) 11-1/2% Notes due February 1, 2006, principal amount at maturity of
$1,050,000,000, interest payable semiannually beginning on August 1,
2001, redeemable at the Company's option on or after February 1, 2001;
(c) 10% Notes due February 15, 2007, principal amount at maturity of
$400,000,000, interest payable semiannually from August 15, 1997,
redeemable at the Company's option on or after February 15, 2002;
(d) 9-1/2% Sterling Notes due April 1, 2008, principal amount at maturity of
pound sterling 125,000,000 ($201,975,000), interest payable semiannually
from October 1, 1998, redeemable at the Company's option on or after
April 1, 2003;
F-36
<PAGE> 56
NTL Communications Corp.
Schedule I-Condensed Financial Information of Registrant
Notes to Condensed Financial Statements (continued)
3. LONG-TERM DEBT (CONTINUED)
(e) 10-3/4% Sterling Notes due April 1, 2008, principal amount at maturity of
pound sterling 300,000,000 ($484,740,000), interest payable semiannually
beginning on October 1, 2003, redeemable at the Company's option on or
after April 1, 2003;
(f) 9-3/4% Notes due April 1, 2008, principal amount at maturity of
$1,300,000,000, interest payable semiannually beginning on October 1,
2003, redeemable at the Company's option on or after April 1, 2003;
(g) 9-3/4% Sterling Notes due April 15, 2009, principal amount at maturity of
pound sterling 330,000,000 ($533,214,000), interest payable semiannually
beginning on October 15, 2004, redeemable at the Company's option on or
after April 15, 2004;
(h) 11-1/2% Notes due October 1, 2008, principal amount at maturity of
$625,000,000, interest payable semiannually from April 1, 1999,
redeemable at the Company's option on or after October 1, 2003;
(i) 12-3/8% Notes due October 1, 2008, principal amount at maturity of
$450,000,000, interest payable semiannually beginning on April 1, 2004,
redeemable at the Company's option on or after October 1, 2003;
(j) In May 1999, the Company called for redemption all of its $275,000,000
principal amount of 7% Convertible Notes due 2008 at a redemption price
of 104.9% of their principal amount, plus accrued and unpaid interest. In
June 1999, all of the 7% Convertible Notes were converted into
approximately 11,344,000 shares of NTL Incorporated common stock at the
applicable conversion price of $24.24 per share. The unamortized deferred
financing costs related to the 7% Notes of $6,415,000 were written-off to
equity;
(k) 7% Convertible Notes due December 15, 2008, principal amount at maturity
of $599,300,000, interest payable semiannually from June 15, 1999,
convertible into shares of NTL Incorporated common stock at a conversion
price of $39.20 per share, redeemable at the Company's option on or after
December 15, 2001;
(l) Variable Rate Redeemable Guaranteed Notes due January 5, 2002, principal
amount at maturity of IR pound 60,000,000 ($76,794,000), interest payable
quarterly at EURIBOR (3.345% at December 31, 1999), redeemable at any
time at the option of the holder, IR pound 20,000,000 ($25,730,000)
redeemed in 1999 using cash held in escrow, Euro86,475,000 ($87,270,000)
remaining in escrow at December 31, 1999;
(m) 9-1/4% Notes due November 15, 2006, principal amount at maturity of
Euro250,000,000 ($252,300,000), interest payable semiannually beginning
on May 15, 2000;
F-37
<PAGE> 57
NTL Communications Corp.
Schedule I-Condensed Financial Information of Registrant
Notes to Condensed Financial Statements (continued)
3. LONG-TERM DEBT (CONTINUED)
(n) 9-7/8% Notes due November 15, 2009, principal amount at maturity of
Euro350,000,000 ($353,220,000), interest payable semiannually beginning
on beginning May 15, 2000, redeemable at the Company's option on or after
November 15, 2004;
(o) 11-1/2% Deferred Notes due November 15, 2009, principal amount at
maturity of Euro210,000,000 ($211,932,000), interest payable semiannually
beginning on May 15, 2005, redeemable at the Company's option on or after
November 15, 2004;
The indentures governing the notes contain restrictions relating to, among other
things: (i) incurrence of additional indebtedness and issuance of preferred
stock, (ii) dividend and other payment restrictions and (iii) mergers,
consolidations and sales of assets.
During 1999, 1998 and 1997, the Company recognized $308,144,000, $232,691,000
and $122,639,000, respectively, of original issue discount as interest expense.
In connection with the Cablelink acquisition, the Company issued $704,615,000
principal amount Senior Increasing Rate Notes due 2000. In November 1999, the
Company received net proceeds of $720,743,000 from the issuance of the 9-1/4%
Euro Notes, the 9-7/8% Euro Notes and the 11-1/2% Deferred Euro Notes, of which
$716,505,000 was used to repay the Senior Increasing Rate Notes plus accrued
interest. The Company recorded an extraordinary loss from the early
extinguishment of the notes of $3,034,000 in 1999.
In connection with the ComTel acquisition, the Company borrowed an aggregate of
pound sterling 475,000,000 under its bank credit facility. In November 1998, the
Company received net proceeds of $849,000,000 from the issuance of the 11-1/2%
Notes and the 12-3/8% Notes, a substantial portion of which was used to repay
the $799,000,000 outstanding under the bank loan. The Company recorded an
extraordinary loss from the early extinguishment of the bank loan of $18,579,000
in 1998.
In October 1998, the Company redeemed its 10-7/8% Senior Deferred Coupon Notes
with an accreted value of $211,000,000 for cash of $218,000,000. The Company
recorded an extraordinary loss from the early extinguishment of the 10-7/8%
Notes of $12,110,000 in 1998, which included approximately $4,800,000 of
unamortized deferred financing costs.
In 1998, the Company required consents from the holders of some of its notes to
modify certain indenture provisions in order to proceed with an acquisition. In
October 1998, the Company paid $11,333,000 in consent payments and issued
warrants to purchase 1,197,000 shares of common stock in lieu of additional
consent payments of $10,080,000.
F-38
<PAGE> 58
NTL Communications Corp.
Schedule I-Condensed Financial Information of Registrant
Notes to Condensed Financial Statements (continued)
3. LONG-TERM DEBT (CONTINUED)
Long-term debt repayments are due as follows (in thousands):
<TABLE>
<S> <C>
Year ending December 31:
2000 $ 76,794
2001 -
2002 -
2003 -
2004 -
Thereafter 6,739,485
----------
$6,816,279
==========
</TABLE>
4. LEASES
Leases for office space end in 2004. Total rental expense for the years ended
December 31, 1999, 1998 and 1997 under operating leases was $1,180,000, $573,000
and $503,000, respectively.
Future minimum lease payments under noncancellable operating leases as of
December 31, 1999 are: $1,041,000 (2000), $1,041,000 (2001), $1,096,000 (2002),
$1,101,000 (2003) and $734,000 (2004).
5. OTHER GAIN
In October 1997, following the U.S. District Court's decision to dismiss the
Company's complaint against LeGroupe Videotron Ltee and its subsidiary, the
Company entered into a Settlement Agreement dismissing the Company's complaint
in exchange for a payment of $10,000,000.
6. OTHER
No cash dividends were paid to the registrant by subsidiaries in any of the last
three years.
F-39
<PAGE> 59
NTL Communications Corp. and Subsidiaries
Schedule II--Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- -----------------------------------------------------------------------------------------------------------------------------
ADDITIONS
(2)
(1) CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE
BEGINNING OF COSTS AND ACCOUNTS-- DEDUCTIONS AT END
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999
Allowance for doubtful accounts $38,475,000 $45,295,000 $ - $(774,000) (a) $82,996,000
====================================================================================
Year ended December 31, 1998
Allowance for doubtful accounts $8,056,000 $27,282,000 $ - $3,137,000 (b) $38,475,000
====================================================================================
Year ended December 31, 1997
Allowance for doubtful accounts $3,870,000 $ 6,891,000 $ - $(2,705,000) (c) $8,056,000
====================================================================================
</TABLE>
(a) Uncollectible accounts written-off, net of recoveries of $15,092,000 and
$1,099,000 foreign exchange currency translation adjustments, offset by
$15,417,000 allowance for doubtful accounts as of acquisition dates of
purchased subsidiaries.
(b) Uncollectible accounts written-off, net of recoveries of $9,158,000,
offset by $12,214,000 allowance for doubtful accounts as of acquisition
dates of purchased subsidiaries and $81,000 foreign currency translation
adjustments.
(c) Uncollectible accounts written-off, net of recoveries of $2,604,000 and
$101,000 foreign currency translation adjustments.
F-40
<PAGE> 1
EXHIBIT 21
NTL COMMUNICATIONS CORP. SUBSIDIARIES AS OF 12/31/99
U.S. SUBSIDIARIES
<TABLE>
<CAPTION>
NAME JURISDICTION OWNERSHIP
- ---- ------------ ---------
<S> <C> <C>
Bearsden Nominees, Inc. Delaware 100%
CableTel Ventures Limited Delaware 100%
CableTel Programming, Inc. Delaware 100%
NTL Digital (US), Inc. Delaware 100%
NTL International Services, Inc. Delaware 100%
NTL (Triangle) LLC Delaware 100%
NTL (UK) Group, Inc. Delaware & UK (dual) 100%
</TABLE>
UK SUBSIDIARIES
<TABLE>
<CAPTION>
NAME OWNERSHIP
- ---- ---------
<S> <C>
Andover Cablevision Limited 100%
Anglia Cable Communications Limited 100%
Berkhamsted Properties & Building Contractors Limited 100%
Bracknell Cable TV Limited 100%
Cable Television Limited 100%
Cable Thames Valley Limited 100%
CableTel Cardiff Limited 100%
CableTel Central Hertfordshire Limited 100%
CableTel Hertfordshire Limited 100%
CableTel Herts and Beds Limited 100%
CableTel Investments Limited 100%
CableTel Limited 100%
CableTel Newport 100%
CableTel North Bedfordshire Limited 100%
CableTel Northern Ireland Limited 100%
CableTel Scotland Limited 100%
CableTel Surrey and Hampshire Limited 100%
CableTel Telecom Supplies Limited 100%
CableTel (UK) Limited 100%
CableTel West Glamorgan Limited 100%
CableTel West Riding Limited 100%
Cambridge Cable Services Limited 100%
Cambridge Holding Company Limited 100%
CCL Corporate Communication Services Limited 100%
</TABLE>
-1-
<PAGE> 2
<TABLE>
<S> <C>
Columbia Management Limited 100%
ComTel Cable Services Limited 100%
ComTel Coventry Limited 100%
Credit-Track Debt Recovery Limited 100%
Diamond Cable Acquisitions Limited 100%
Diamond Cable (Bassetlaw) Limited 100%
Diamond Cable (Burton-upon-Trent) Limited 100%
Diamond Cable (Chesterfield) Limited 100%
Diamond Cable Communications Limited 100%
Diamond Cable Construction Limited 100%
Diamond Cable CPE Limited 100%
Diamond Cable (Grantham) Limited 100%
Diamond Cable (Grimclee) Limited 100%
Diamond Cable (Hinckley) Limited 100%
Diamond Cable (Leicester) Limited 100%
Diamond Cable (Lincoln) Limited 100%
Diamond Cable (Lincolnshire) Limited 100%
Diamond Cable (Mansfield) Limited 100%
Diamond Cable (Melton Mowbray) Limited 100%
Diamond Cable (Newark-on-Trent) Limited 100%
Diamond Cable (Ravenshead) Limited 100%
Diamond Cable (Vale of Belvoir) Limited 100%
Diamond Holdings Limited 100%
Diamond Visual Communications Limited 100%
Digital Television Network Limited 100%
DTELS Limited 100%
East Coast Cable Limited 100%
East Midlands Cable Communications Limited 100%
East Midlands Cable Group Limited 100%
East Midlands Cable Holdings Limited 100%
Enablis Limited 100%
Heartland Cablevision (UK) Limited 100%
Heartland Cablevision II (UK) Limited 100%
Herts Cable Limited 90%
Jewel Holdings Limited 100%
LCL Cable (Holdings) Limited 100%
LCL Telephones Limited 100%
Lichfield Cable Communications Limited 100%
Maza Limited 100%
Metro Hertfordshire Limited 100%
Metro South Wales Limited 100%
National Transcommunications Limited 100%
Northampton Cable Television Limited 80%
NTL Cambridge Limited 100%
</TABLE>
-2-
<PAGE> 3
<TABLE>
<S> <C>
NTL Communications Limited 100%
NTL Darlington Limited 100%
NTL Digital Limited 100%
NTL Digital Radio Limited 100%
NTL Glasgow 100%
NTL Group Limited 100%
NTL Insurance Limited (Guernsey) 100%
NTL Internet Limited 100%
NTL Investment Holdings Limited 100%
NTL Kirklees 100%
NTL Limited 100%
NTL Midlands Limited 100%
NTL Milton Keynes Limited 100%
NTL Networks Limited 100%
NTL Pension Trustees Limited 100%
NTL Radio Services Limited 75%
NTL South Central Limited 100%
NTL South Wales Limited 100%
NTL Systems Limited 100%
NTL Teesside Limited 100%
NTL Telecom Services Limited 100%
NTL Trustees Limited 100%
NTL Westminster Limited 100%
Oxford Cable Limited 100%
Prospectre Limited 100%
Secure Backup Systems Limited 100%
South Yorkshire Cablevision (UK) Limited 100%
Southern East Anglia Cable Limited 100%
Stafford Communications Limited 100%
Swindon Cable Limited 100%
Tamworth Cable Communications Limited 100%
Virgin Net Limited 50%
Vision Networks Services UK Limited 100%
Wessex Cable Limited 100%
XL Debt Recovery Agency Limited 100%
X-Tant Limited 70%
</TABLE>
-3-
<PAGE> 4
REPUBLIC OF IRELAND SUBSIDIARIES
<TABLE>
<CAPTION>
NAME OWNERSHIP
- ---- ---------
<S> <C>
Cablelink Galway Limited 100%
Cablelink Construction Limited 100%
Cablelink Limited 100%
Cablelink Waterford Limited 100%
Dublin Cablesystems Limited 100%
</TABLE>
OTHER FOREIGN SUBSIDIARIES
<TABLE>
<CAPTION>
NAME COUNTRY OWNERSHIP
- ---- ------- ---------
<S> <C> <C>
Canarias Target, SL Spain 100%
</TABLE>
-4-
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-3 No. 333-72335 of NTL Communications Corp. (the "Company") and in
the related Prospectus of our report dated March 7, 2000, with respect to the
consolidated financial statements and schedule of the Company included in the
Annual Report (Form 10-K) for the year ended December 31, 1999.
ERNST & YOUNG LLP
New York, New York
March 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,070,076,000
<SECURITIES> 5,014,000
<RECEIVABLES> 332,901,000
<ALLOWANCES> (82,996,000)
<INVENTORY> 0
<CURRENT-ASSETS> 66,606,000
<PP&E> 6,222,403,000
<DEPRECIATION> (881,848,000)
<TOTAL-ASSETS> 9,502,273,000
<CURRENT-LIABILITIES> 950,598,000
<BONDS> 7,598,024,000
0
0
<COMMON> 0
<OTHER-SE> 900,527,000
<TOTAL-LIABILITY-AND-EQUITY> 9,502,273,000
<SALES> 0
<TOTAL-REVENUES> 1,477,871,000
<CGS> 0
<TOTAL-COSTS> 704,689,000
<OTHER-EXPENSES> 619,774,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 678,036,000
<INCOME-PRETAX> (741,865,000)
<INCOME-TAX> 29,943,000
<INCOME-CONTINUING> (711,922,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (3,034,000)
<CHANGES> 0
<NET-INCOME> (714,956,000)
<EPS-BASIC> (0.0)
<EPS-DILUTED> (0.0)
</TABLE>
