<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-22616
NTL COMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 52-1822078
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
110 East 59th Street, New York, New York 10022
(Address of principal executive offices) (Zip Code)
</TABLE>
(212) 906-8440
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ______
The number of shares outstanding of the issuer's common stock as of June 30,
2000 was 100. The Registrant is an indirect wholly-owned subsidiary of NTL
Incorporated and there is no market for the Registrant's common stock. The
Registrant meets the conditions for the reduced disclosure format set forth in
General Instruction H(1) (a) and (b) of Form 10-Q.
<PAGE> 2
NTL Communications Corp. and Subsidiaries
Index
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
------------------------------ ----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
June 30, 2000 and December 31, 1999 .................................................. 2
Condensed Consolidated Statements of Operations-
Three and six months ended June 30, 2000 and 1999 .................................... 4
Condensed Consolidated Statement of Shareholder's Equity (Deficiency)-
Six months ended June 30, 2000 ....................................................... 5
Condensed Consolidated Statements of Cash Flows-
Six months ended June 30, 2000 and 1999 .............................................. 7
Notes to Condensed Consolidated Financial Statements ................................. 8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition .................................................... 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk ............................ 21
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ...................................................... 22
SIGNATURES ......................................................................................... 23
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NTL Communications Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in millions)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
--------------------------------------------
(unaudited) (see note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 420.6 $1,070.1
Marketable securities -- 5.0
Accounts receivable - trade, less allowance for doubtful accounts of
$87.3 (2000) and $83.0 (1999) 286.8 249.9
Due from affiliates 25.9 --
Other 119.0 66.6
--------------------------------------------
Total current assets 852.3 1,391.6
Fixed assets, net 5,386.2 5,340.5
Intangible assets, net 2,198.1 2,474.1
Other assets, net of accumulated amortization
of $59.9 (2000) and $49.2 (1999) 201.7 296.1
============================================
Total assets $8,638.3 $9,502.3
============================================
</TABLE>
2
<PAGE> 4
NTL Communications Corp. and Subsidiaries
Condensed Consolidated Balance Sheets - continued
(dollars in millions)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-----------------------------------------------
(unaudited) (see note)
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable $ 251.2 $ 198.6
Accrued expenses and other 397.1 365.2
Due to affiliates 6.2 7.9
Accrued construction costs 97.9 79.3
Interest payable 75.6 69.1
Deferred revenue 176.6 148.0
Current portion of long-term debt 5.4 82.6
-----------------------------------------------
Total current liabilities 1,010.0 950.7
Long-term debt 7,728.8 7,598.0
Commitments and contingent liabilities
Deferred income taxes 38.9 53.1
Shareholder's equity (deficiency):
Common stock - $.01 par value; authorized, issued and
outstanding 100 shares -- --
Additional paid-in capital 2,872.5 2,863.7
Accumulated other comprehensive (loss) income (290.3) 2.4
(Deficit) (2,721.6) (1,965.6)
-----------------------------------------------
(139.4) 900.5
-----------------------------------------------
Total liabilities and shareholder's equity (deficiency) $8,638.3 $9,502.3
===============================================
</TABLE>
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date.
See accompanying notes.
3
<PAGE> 5
NTL Communications Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(dollars in millions)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Residential telecommunications and television $243.6 $196.5 $491.9 $365.3
National and international telecommunications 153.9 112.8 301.1 218.6
Broadcast transmission and other 41.1 40.8 82.2 79.6
--------------------------------------------------------------
438.6 350.1 875.2 663.5
COSTS AND EXPENSES
Operating expenses 225.7 160.9 425.8 322.4
Selling, general and administrative expenses 158.8 154.1 323.5 273.4
Franchise fees -- 7.7 -- 14.6
Other charges 13.7 -- 13.7 --
Corporate expenses 5.3 7.0 11.9 12.2
Depreciation and amortization 226.1 186.7 454.6 328.4
--------------------------------------------------------------
629.6 516.4 1,229.5 951.0
--------------------------------------------------------------
Operating (loss) (191.0) (166.3) (354.3) (287.5)
OTHER INCOME (EXPENSE)
Interest and other income 5.2 9.1 13.8 20.1
Interest expense (181.1) (167.7) (369.6) (298.6)
Foreign currency transaction losses (68.4) (21.6) (56.5) (10.9)
--------------------------------------------------------------
(Loss) before income tax benefit (435.3) (346.5) (766.6) (576.9)
Income tax benefit 5.9 -- 10.6 --
--------------------------------------------------------------
Net (loss) $(429.4) $(346.5) $(756.0) $(576.9)
==============================================================
</TABLE>
See accompanying notes.
4
<PAGE> 6
NTL Communications Corp. and Subsidiaries
Condensed Consolidated Statement of Shareholder's Equity (Deficiency)
(Unaudited)
(dollars in millions)
<TABLE>
<CAPTION>
COMMON STOCK
$.01 PAR VALUE
SHARES PAR
---------------------------------------
<S> <C> <C>
Balance, December 31, 1999 100 $ --
Contributions from NTL (Delaware), Inc.
Comprehensive loss:
Net loss for the six months ended June 30, 2000
Currency translation adjustment
Total
---------------------------------------
Balance, June 30, 2000 100 $ --
=======================================
</TABLE>
See accompanying notes.
5
<PAGE> 7
NTL Communications Corp. and Subsidiaries
Condensed Consolidated Statement of Shareholder's Equity (Deficiency)
(Unaudited) - continued
(dollars in millions)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
PAID-IN COMPREHENSIVE COMPREHENSIVE
CAPITAL LOSS INCOME (LOSS) DEFICIT
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1999 $2,863.7 $ 2.4 $(1,965.6)
Contributions from NTL (Delaware), Inc. 8.8
Comprehensive loss:
Net loss for the six months ended June 30, 2000 $ (756.0) (756.0)
Currency translation adjustment (292.7) (292.7)
---------
Total $(1,048.7)
======================================================================
Balance, June 30, 2000 $2,872.5 $(290.3) $(2,721.6)
======================================================================
</TABLE>
See accompanying notes.
6
<PAGE> 8
NTL Communications Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(dollars in millions)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------------------
2000 1999
---------------------------------------
<S> <C> <C>
Net cash provided by operating activities $ 44.5 $ 54.7
INVESTING ACTIVITIES
Cash of subsidiary at acquisition, net of costs -- 225.7
Purchase of marketable securities (3.4) (264.6)
Proceeds from sales of marketable securities 8.4 391.9
Increase in other assets (16.8) (26.3)
Purchase of fixed assets (666.1) (558.5)
---------------------------------------
Net cash (used in) investing activities (677.9) (231.8)
FINANCING ACTIVITIES
Cash released from escrow 77.5 -
Increase in deferred financing costs (0.7) -
Proceeds from borrowings, net of financing costs -- 320.4
Principal payments (76.5) (3.2)
Distribution to NTL (Delaware) Inc. -- (500.0)
Contributions from NTL (Delaware) Inc. 8.8 --
Proceeds from exercise of stock options and warrants -- 12.2
Proceeds from issuance of preferred stock and warrants -- 500.0
---------------------------------------
Net cash provided by financing activities 9.1 329.4
Effect of exchange rate changes on cash (25.2) (17.3)
---------------------------------------
(Decrease) increase in cash and cash equivalents (649.5) 135.0
Cash and cash equivalents at beginning of period 1,070.1 736.3
---------------------------------------
Cash and cash equivalents at end of period $ 420.6 $ 871.3
=======================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest exclusive of
amounts capitalized $ 117.9 $ 72.3
Income taxes paid -- --
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Accretion of dividends and discount on preferred stock $ -- $ 8.7
Conversion of Convertible Notes, net of unamortized
deferred financing costs -- 268.6
Common stock and stock options issued for an acquisition -- 978.0
</TABLE>
See accompanying notes.
7
<PAGE> 9
NTL Communications Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six months ended June 30,
2000 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in NTL
Communications Corp.'s Annual Report on Form 10-K for the year ended December
31, 1999.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted by the
Company effective January 1, 2001. The Company is evaluating the impact that the
adoption of SFAS No. 133 will have on its results of operations and financial
position.
NOTE B - CORPORATE RESTRUCTURING
On May 18, 2000, NTL Incorporated completed a corporate restructuring to create
a holding company structure. The formation of the holding company is due to NTL
Incorporated's acquisition of certain assets of Cable & Wireless Communications
plc. The holding company restructuring was accomplished through a merger so that
all the stockholders of NTL Incorporated at the effective time of the merger
became stockholders of the new holding company, and NTL Incorporated became a
subsidiary of the new holding company. The new holding company has taken the
name NTL Incorporated and the holding company's subsidiary simultaneously
changed its name to NTL (Delaware), Inc. NTL Communications Corp. (the
"Company") is a wholly-owned subsidiary of NTL (Delaware), Inc.
NOTE C - FIXED ASSETS
Fixed assets consist of:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-------------------------------------------
(unaudited)
(in millions)
<S> <C> <C>
Operating equipment $4,744.2 $4,859.0
Other equipment 697.1 694.7
Construction-in-progress 1,064.2 668.7
-------------------------------------------
6,505.5 6,222.4
Accumulated depreciation (1,119.3) (881.9)
-------------------------------------------
$5,386.2 $5,340.5
===========================================
</TABLE>
Depreciation expense for the six months ended June 30, 2000 and 1999 was $288.6
million and $208.7 million, respectively. Deprecation expense for the three
months ended June 30, 2000 and 1999 was $143.8 million and $109.8 million,
respectively.
8
<PAGE> 10
NTL Communications Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE D - INTANGIBLE ASSETS
Intangible assets consist of:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------------------------------------------
(unaudited)
(in millions)
<S> <C> <C>
Goodwill, net of accumulated amortization
of $262.9 (2000) and $183.6 (1999) $1,885.5 $2,089.8
License acquisition costs, net of accumulated amortization of
$177.5 (2000) and $141.7 (1999) 181.2 225.0
Customer lists, net of accumulated amortization
of $47.1 (2000) and $30.9 (1999) 131.4 159.3
----------------------------------------------
$2,198.1 $2,474.1
==============================================
</TABLE>
In 1999, the Company completed the acquisitions of Diamond Cable Communications
Limited, Cablelink Limited and certain broadband cable franchises of British
Telecommunications plc.
The pro forma unaudited consolidated results of operations for the six months
ended June 30, 1999 assuming consummation of these transactions as of January 1,
1999 is as follows, (in millions):
<TABLE>
<S> <C>
Total revenue $722.4
Net (loss) (650.7)
</TABLE>
Amortization of intangible and other assets charged to expense for the six
months ended June 30, 2000 and 1999 was $166.0 million and $119.7 million,
respectively. Amortization of intangible and other assets charged to expense for
the three months ended June 30, 2000 and 1999 was $82.3 million and $76.9
million, respectively.
9
<PAGE> 11
NTL Communications Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE E - LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
-----------------------------------------
(unaudited)
(in millions)
<S> <C> <C>
NTL Communications:
12-3/4% Senior Deferred Coupon Notes $ 277.8 $ 268.1
11-1/2% Senior Deferred Coupon Notes 983.9 930.4
10% Senior Notes 400.0 400.0
9-1/2% Senior Sterling Notes, less unamortized discount 189.0 201.4
10-3/4% Senior Deferred Coupon Sterling Notes 340.1 343.7
9-3/4% Senior Deferred Coupon Notes 999.5 952.8
9-3/4% Senior Deferred Coupon Sterling Notes 348.8 354.4
11-1/2% Senior Notes 625.0 625.0
12-3/8% Senior Deferred Coupon Notes 304.7 287.0
7% Convertible Subordinated Notes 599.3 599.3
Variable Rate Redeemable Guaranteed Loan Notes -- 76.8
9-1/4% Senior Euro Notes 238.6 252.3
9-7/8% Senior Euro Notes 334.0 353.2
11-1/2% Senior Deferred Coupon Euro Notes 122.9 123.1
NTL Triangle:
11.2% Senior Discount Debentures 496.8 467.3
Other 6.1 8.0
Diamond:
13-1/4% Senior Discount Notes 285.1 285.1
11-3/4% Senior Discount Notes 503.9 476.2
10-3/4% Senior Discount Notes 354.8 336.9
10% Senior Sterling Notes 204.7 218.1
9-1/8% Senior Notes 110.0 110.0
Other 9.2 11.5
-----------------------------------------
7,734.2 7,680.6
Less current portion 5.4 82.6
-----------------------------------------
$7,728.8 $7,598.0
=========================================
</TABLE>
In March 2000, the Company redeemed in full its Variable Rate Redeemable
Guaranteed Loan Notes, principal amount of IR pound sterling 60.0 million ($72.5
million), plus accrued and unpaid interest using cash held in escrow.
10
<PAGE> 12
NTL Communications Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE E - LONG-TERM DEBT (continued)
NTL Communications Limited ("NTLCL"), a wholly-owned indirect subsidiary of
the Company, entered into a pound sterling 1,300.0 million ($1,971.2 million)
credit agreement with a group of banks dated May 30, 2000. As of June 30, 2000,
no amounts have been borrowed under this agreement. NTLCL and other members of
the UK Group may utilize the proceeds under this credit agreement to finance the
working capital requirements of the UK Group, provided that in no event shall
the proceeds be used for a purpose other than to finance the construction,
capital expenditure and working capital needs of a cable television or telephone
or telecommunications business, or a related business, in the United Kingdom or
Ireland. For purposes of this credit agreement, Diamond and subsidiaries, NTL
(Triangle) LLC ("NTL Triangle") and subsidiaries and certain other entities are
excluded from the UK Group. Interest is payable at least every six months at
LIBOR plus a margin rate of 4.5% per annum. The margin rate shall increase by
0.5% on the three month anniversary of the initial advance and by an additional
0.5% on each subsequent three month anniversary, up to a maximum total interest
rate of 16% per annum. The unused portion of the commitment is subject to a
commitment fee of 0.75% payable quarterly. Principal is due in full on March 31,
2006.
NOTE F - COMPREHENSIVE LOSS
The Company's comprehensive loss for the three months ended June 30, 2000 and
1999 was $(661.3) million and $(440.8) million, respectively. The Company's
comprehensive loss for the six months ended June 30, 2000 and 1999 was
$(1,048.7) million and $(785.3) million, respectively.
NOTE G - SEGMENT DATA
<TABLE>
<CAPTION>
RESIDENTIAL
TELECOMS CORPORATE
AND NATIONAL AND
BROADCAST TELEVISION TELECOMS OTHER TOTAL
----------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C> <C>
Six months ended June 30, 2000
Revenues $ 82.2 $ 491.9 $ 301.1 $ -- $ 875.2
EBITDA (1) 47.7 146.5 121.6 (189.9) 125.9
Six months ended June 30, 1999
Revenues $ 79.6 $ 365.3 $ 218.6 $ -- $ 663.5
EBITDA (1) 50.6 100.6 46.7 (130.2) 67.7
Total assets
June 30, 2000 $250.6 $5,443.2 $1,254.5 $1,690.0 $8,638.3
December 31, 1999 281.7 5,978.5 1,078.5 2,163.6 9,502.3
</TABLE>
(1) Represents earnings before interest, taxes, depreciation and amortization,
corporate expenses, franchise fees, other charges and foreign currency
transaction losses.
11
<PAGE> 13
NTL Communications Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
NOTE G - SEGMENT DATA (CONTINUED)
The reconciliation of segment combined EBITDA to loss before income tax benefit
is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------------
2000 1999
-------------------------------------------
<S> <C> <C>
Segment combined EBITDA $ 125.9 $ 67.7
(Add) deduct:
Franchise fees -- 14.6
Other charges 13.7 --
Corporate expenses 11.9 12.2
Depreciation and amortization 454.6 328.4
Interest and other income (13.8) (20.1)
Interest expense 369.6 298.6
Foreign currency transaction losses 56.5 10.9
-------------------------------------------
892.5 644.6
-------------------------------------------
(Loss) before income tax benefit $(766.6) $(576.9)
===========================================
</TABLE>
NOTE H - COMMITMENTS AND CONTINGENT LIABILITIES
At June 30, 2000, the Company was committed to pay approximately $152.0 million
for equipment and services.
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.
12
<PAGE> 14
NTL Communications Corp. and Subsidiaries
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
The following table shows the cable television and telephony customer statistics
for the Company:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
CABLE TELEVISION AND TELEPHONY CUSTOMERS AS OF JUNE 30, 2000
-----------------------------------------------------------------------------------------------
Comcast,
"Original" ComTel and Cablelink and BT
NTL(1) Diamond (2) Cable (3) Total
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Homes in franchise (4) 2,090,000 3,037,600 640,500 5,768,100
-----------------------------------------------------------------------------------------------
Homes passed 1,392,500 2,407,600 605,500 4,405,600
-----------------------------------------------------------------------------------------------
Homes marketed (Tel.) 1,199,500 2,074,300 0 3,273,800
-----------------------------------------------------------------------------------------------
Homes marketed (CATV) 1,199,500 2,143,200 558,300 3,901,000
-----------------------------------------------------------------------------------------------
Total customers 596,200 861,200 424,100 1,881,500
-----------------------------------------------------------------------------------------------
Dual 550,400 471,900 0 1,022,300
-----------------------------------------------------------------------------------------------
Telephone-only 21,300 294,500 0 315,800
-----------------------------------------------------------------------------------------------
Cable-only 24,500 94,800 424,100 543,400
-----------------------------------------------------------------------------------------------
Total RGUs(5) 1,146,600 1,333,100 424,100 2,903,800
-----------------------------------------------------------------------------------------------
Customer penetration 49.7% 40.2% 76.0% 48.2%
-----------------------------------------------------------------------------------------------
RGU penetration 95.6% 62.2% 76.0% 74.4%
-----------------------------------------------------------------------------------------------
Telephone penetration 47.7% 36.9% n/a 40.9%
-----------------------------------------------------------------------------------------------
Cable penetration 47.9% 26.4% 76.0% 40.1%
-----------------------------------------------------------------------------------------------
</TABLE>
(1) Data for franchises which NTL has been developing since 1993
(2) Data for the following franchises: Comcast UK, Diamond Cable and ComTel
(3) Data for Cablelink (Ireland) and BT Cable (Westminster / Milton Keynes)
(4) Franchise home information from The Media Map Datafile 2000.
(5) An RGU is one cable television account or one telephone account; a dual
customer generates two RGUs.
The following table shows the cable television and telephony customer statistics
for "Original NTL":
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
CATV AND TELEPHONY CUSTOMERS FOR "ORIGINAL NTL"
-------------------------------------------------------------------------------------------------------------------
06/30/2000 03/31/2000 12/31/1999 12/31/1998 12/31/1997
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total customers 596,200 572,200 552,900 471,000 321,300
-------------------------------------------------------------------------------------------------------------------
Homes marketed 1,199,500 1,171,300 1,145,600 1,064,600 810,000
-------------------------------------------------------------------------------------------------------------------
Customer penetration 49.7% 48.9% 48.3% 44.2% 39.7%
-------------------------------------------------------------------------------------------------------------------
RGU penetration 95.6% 94.0% 92.9% 85.0% 75.1%
-------------------------------------------------------------------------------------------------------------------
Telephone penetration 47.7% 46.7% 46.2% 42.3% 37.3%
-------------------------------------------------------------------------------------------------------------------
Cable penetration 47.9% 47.3% 46.8% 42.7% 37.8%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 15
NTL Communications Corp. and Subsidiaries
The following table shows the cable television and telephony customer statistics
for Comcast UK ("NTL Triangle"), ComTel and Diamond Cable, acquired in late 1998
to early 1999:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
CATV AND TELEPHONY CUSTOMERS
(COMCAST UK, COMTEL AND DIAMOND)
------------------------------------------------------------------------------------------
06/30/2000 12/31/1999 6/30/1999
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total customers 861,200 799,700 739,700
------------------------------------------------------------------------------------------
Customer penetration 40.2% 37.4% 35.7%
------------------------------------------------------------------------------------------
RGU penetration 62.2% 57.2% 53.6%
------------------------------------------------------------------------------------------
Telephone penetration 36.9% 34.6% 32.6%
------------------------------------------------------------------------------------------
Cable penetration 26.4% 24.5% 22.8%
------------------------------------------------------------------------------------------
</TABLE>
The following table shows the Internet operating statistics for NTL:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
INTERNET CUSTOMERS AS OF JUNE 30, 2000
---------------------------------------------------------------------------------------------------------
Which
NTL Direct VirginNet Online? Total
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total customers 128,300 708,900 60,000 897,200
---------------------------------------------------------------------------------------------------------
</TABLE>
On May 18, 2000, NTL Incorporated completed a corporate restructuring to create
a holding company structure. The holding company restructuring was accomplished
through a merger so that all the stockholders of NTL Incorporated at the
effective time of the merger became stockholders of the new holding company, and
NTL Incorporated became a subsidiary of the new holding company. The new holding
company has taken the name NTL Incorporated and the holding company's subsidiary
simultaneously changed its name to NTL (Delaware), Inc. NTL Communications Corp.
(the "Company") is a wholly-owned subsidiary of NTL (Delaware), Inc.
RESULTS OF OPERATIONS
As a result of the completion of the acquisitions of Diamond Cable
Communications Limited ("Diamond") in March 1999 and Cablelink Limited
("Cablelink") in July 1999, the Company consolidated the results of operations
of these businesses from the dates of acquisition. The results of these
businesses are not included in the 1999 results except for the results of
operations of Diamond from the date of acquisition.
Three Months Ended June 30, 2000 and 1999
Residential telecommunications and television revenues increased to $243.6
million from $196.5 million as a result of acquisitions and from customer growth
that increased the Company's current revenue stream. The 2000 and 1999 revenue
includes $60.1 million and $37.0 million, respectively, from acquired companies.
The Company expects its customer base to continue to increase which will drive
further revenue growth as the Company completes the construction of its
broadband network past the remaining homes in its franchise areas.
14
<PAGE> 16
NTL Communications Corp. and Subsidiaries
National and international telecommunications revenues increased to $153.9
million from $112.8 million as a result of acquisitions and from increases in
business telecommunications revenues, Internet services revenues and carrier
services revenues. The 2000 and 1999 revenue includes $11.9 million and $9.1
million, respectively, from acquired companies. Business telecommunications and
Internet services revenues increased primarily as a result of customer growth.
The Company expects its business telecommunications and Internet services
customer base to continue to increase which will drive further revenue growth.
The Company continues to focus specific sales and marketing effort on business
customers and for Internet services in its completed network. Carrier services
revenues increased due to growth in voice, video and data services provided by
the Company's wholesale operation to broadcasters and telephone companies,
respectively. Revenue growth in carrier services is primarily dependent upon the
Company's ability to continue to attract new customers and expand services to
existing customers.
Broadcast transmission and other revenues increased to $41.1 million from $40.8
million 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.
Operating expenses increased to $225.7 million from $160.9 million as a result
of increases in interconnection costs and programming costs due to customer
growth. The 2000 and 1999 expense includes $24.3 million and $16.1 million,
respectively, from acquired companies.
Selling, general and administrative expenses increased to $158.8 million from
$154.1 million as a result of increases in telecommunications and CATV sales and
marketing costs and increases in additional personnel and overhead to service
the increasing customer base. The 2000 and 1999 expense includes $31.3 million
and $15.1 million, respectively, from acquired companies.
Pursuant to the terms of various United Kingdom licenses, the Company incurred
license fees paid to the Independent Television Commission ("ITC") to operate as
the exclusive service provider in certain of its franchise areas. Upon a request
by the Company in 1999, the ITC converted all of the Company's fee bearing
exclusive licenses to non-exclusive licenses at the end of 1999, and the
Company's liability for license payments ceased upon the conversion. Franchise
fees were $7.7 million in 1999.
One of the Company's major costs has been for the integration of acquired
companies' information technology systems, while simultaneously upgrading them
for digital television, interactive services and video-on-demand. Other charges
of $13.7 million in 2000 were incurred for this integration effort.
Depreciation and amortization expense increased to $226.1 million from $186.7
million due to an increase in depreciation of telecommunications and CATV
equipment. The 2000 and 1999 expense includes $63.0 million and $58.3 million,
respectively, from acquired companies, including amortization of acquisition
related intangibles.
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NTL Communications Corp. and Subsidiaries
Interest expense increased to $181.1 million from $167.7 million due to the
issuance of additional debt, and the increase in the accretion of original issue
discount on the deferred coupon notes. The 2000 and 1999 expense includes $39.9
million and $39.6 million, respectively, related to acquisitions. Interest of
$46.7 million and $32.0 million was paid in the three months ended June 30, 2000
and 1999, respectively.
Foreign currency transaction losses increased to $68.4 million from $21.6
million primarily due to the effect of unfavorable changes in exchange rates.
The Company's results of operations are impacted by changes in foreign currency
exchange rates as follows. The Company has cash, cash equivalents and debt
denominated in foreign currencies that are effected by changes in exchange
rates. In addition, foreign subsidiaries of the Company whose functional
currency is not the U.S. dollar hold cash, cash equivalents and debt denominated
in U.S. dollars which are effected by changes in exchange rates.
Six Months Ended June 30, 2000 and 1999
Residential telecommunications and television revenues increased to $491.9
million from $365.3 million as a result of acquisitions and from customer growth
that increased the Company's current revenue stream. The 2000 and 1999 revenue
includes $120.7 million and $49.3 million, respectively, from acquired
companies. The Company expects its customer base to continue to increase which
will drive further revenue growth as the Company completes the construction of
its broadband network past the remaining homes in its franchise areas.
National and international telecommunications revenues increased to $301.1
million from $218.6 million as a result of acquisitions and from increases in
business telecommunications revenues, Internet services revenues and carrier
services revenues. The 2000 and 1999 revenue includes $24.2 million and $12.6
million, respectively, from acquired companies. Business telecommunications and
Internet services revenues increased primarily as a result of customer growth.
The Company expects its business telecommunications and Internet services
customer base to continue to increase which will drive further revenue growth.
The Company continues to focus specific sales and marketing effort on business
customers and for Internet services in its completed network. Carrier services
revenues increased due to growth in voice, video and data services provided by
the Company's wholesale operation to broadcasters and telephone companies,
respectively. Revenue growth in carrier services is primarily dependent upon the
Company's ability to continue to attract new customers and expand services to
existing customers.
Broadcast transmission and other revenues increased to $82.2 million from $79.6
million 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.
Operating expenses increased to $425.8 million from $322.4 million as a result
of increases in interconnection costs and programming costs due to customer
growth. The 2000 and 1999 expense includes $49.9 million and $21.6 million,
respectively, from acquired companies.
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NTL Communications Corp. and Subsidiaries
Selling, general and administrative expenses increased to $323.5 million from
$273.4 million as a result of increases in telecommunications and CATV sales and
marketing costs and increases in additional personnel and overhead to service
the increasing customer base. The 2000 and 1999 expense includes $57.3 million
and $20.7 million, respectively, from acquired companies.
Pursuant to the terms of various United Kingdom licenses, the Company incurred
license fees paid to the ITC to operate as the exclusive service provider in
certain of its franchise areas. Upon a request by the Company in 1999, the ITC
converted all of the Company's fee bearing exclusive licenses to non-exclusive
licenses at the end of 1999, and the Company's liability for license payments
ceased upon the conversion. Franchise fees were $14.6 million in 1999.
One of the Company's major costs has been for the integration of acquired
companies' information technology systems, while simultaneously upgrading them
for digital television, interactive services and video-on-demand. Other charges
of $13.7 million in 2000 were incurred for this integration effort.
Depreciation and amortization expense increased to $454.6 million from $328.4
million due to an increase in depreciation of telecommunications and CATV
equipment. The 2000 and 1999 expense includes $128.4 million and $76.8 million,
respectively, from acquired companies, including amortization of acquisition
related intangibles.
Interest expense increased to $369.6 million from $298.6 million due to the
issuance of additional debt, and the increase in the accretion of original issue
discount on the deferred coupon notes. The 2000 and 1999 expense includes $81.8
million and $52.3 million, respectively, related to acquisitions. Interest of
$150.1 million and $92.2 million was paid in the six months ended June 30, 2000
and 1999, respectively.
Foreign currency transaction losses increased to $56.5 million from $10.9
million primarily due to the effect of unfavorable changes in the exchange
rates. The Company's results of operations are impacted by changes in foreign
currency exchange rates as follows. The Company has cash, cash equivalents and
debt denominated in foreign currencies that are effected by changes in exchange
rates. In addition, foreign subsidiaries of the Company whose functional
currency is not the U.S. dollar hold cash, cash equivalents and debt denominated
in U.S. dollars which are effected by changes in exchange rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company will continue to require significant amounts of capital to finance
construction of its local and national networks, for connection of telephone,
telecommunications, Internet and CATV customers to the networks, for other
capital expenditures and for debt service. The Company estimates that these
requirements, net of cash from operations, will aggregate up to approximately
$1,400.0 million from July 1, 2000 to June 30, 2001. The Company's commitments
at June 30, 2000 for equipment and services through June 30, 2001 are included
in the anticipated requirements. The Company had $420.6 million in cash on hand
at June 30, 2000. The Company expects to fund the balance of these requirements
through borrowings under the NTL Communications Limited ("NTLCL") pound
sterling 1,300.0 million ($1,971.2 million) credit agreement, or through the
issuance of debt or equity to NTL (Delaware), Inc.
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NTL Communications Corp. and Subsidiaries
NTLCL, a wholly-owned indirect subsidiary of the Company, entered into a pound
sterling 1,300.0 million ($1,971.2 million) credit agreement with a group of
banks dated May 30, 2000. As of June 30, 2000, no amounts have been borrowed
under this agreement. NTLCL and other members of the UK Group may utilize the
proceeds under this credit agreement to finance the working capital requirements
of the UK Group, provided that in no event shall the proceeds be used for a
purpose other than to finance the construction, capital expenditure and working
capital needs of a cable television or telephone or telecommunications business,
or a related business, in the United Kingdom or Ireland. For purposes of this
credit agreement, Diamond and subsidiaries, NTL (Triangle) LLC ("NTL Triangle")
and subsidiaries and certain other entities are excluded from the UK Group.
Interest is payable at least every six months at LIBOR plus a margin rate of
4.5% per annum. The margin rate shall increase by 0.5% on the three month
anniversary of the initial advance and by an additional 0.5% on each subsequent
three month anniversary, up to a maximum total interest rate of 16% per annum.
The unused portion of the commitment is subject to a commitment fee of 0.75%
payable quarterly. Principal is due in full on March 31, 2006.
Regarding the Company's estimated cash requirements described above, there can
be no assurance that: (a) actual construction costs will not exceed the amounts
estimated or that additional funding substantially in excess of the amounts
estimated will not be required, (b) conditions precedent to advances under
credit facilities will be satisfied when funds are required, (c) the Company and
its subsidiaries will be able to generate sufficient cash from operations to
meet capital requirements, debt service and other obligations when required, (d)
the Company will be able to access such cash flow, or (e) the Company will not
incur losses from its exposure to exchange rate fluctuations or be adversely
affected by interest rate fluctuations.
NTL Triangle, an indirect wholly-owned subsidiary of the Company, sold its 50%
ownership interest in Cable London PLC in November 1999 for pound sterling 428.0
million ($649.0 million) in cash. The sale of the Cable London PLC interest is
an "Asset Sale" for purposes of the 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 expects to satisfy
this requirement by investing in fixed assets in the United Kingdom and Ireland
which are "Replacement Assets".
The Company is highly leveraged. The accreted value at June 30, 2000 of the
Company's consolidated long-term indebtedness is $7,728.8 million, representing
approximately 102% 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 $277.8 million, interest payable semiannually 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 $1,050.0 million, interest payable semiannually
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 at maturity of
$400.0 million, interest payable semiannually from August 15, 1997,
redeemable at the Company's option on or after February 15, 2002;
(4) 9-1/2% Senior Sterling Notes due April 1, 2008, principal amount at
maturity of pound sterling 125.0 million ($189.5 million), interest
payable semiannually from October 1, 1998, redeemable at the Company's
option on or after April 1, 2003;
(5) 10-3/4% Senior Deferred Coupon Sterling Notes due April 1, 2008,
principal amount at maturity of pound sterling 300.0 million ($454.9
million), interest payable semiannually beginning on October 1, 2003,
redeemable at the Company's option on or after April 1, 2003;
(6) 9-3/4% Senior Deferred Coupon Notes due April 1, 2008, principal amount
at maturity of $1,300.0 million, interest payable semiannually beginning
on October 1, 2003, redeemable at the Company's option on or after April
1, 2003;
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NTL Communications Corp. and Subsidiaries
(7) 9-3/4% Senior Deferred Coupon Sterling Notes due April 15, 2009,
principal amount at maturity of pound sterling 330.0 million ($500.4
million), interest payable semiannually beginning on October 15, 2004,
redeemable at the Company's option on or after April 15, 2004;
(8) 11-1/2% Senior Notes due October 1, 2008, principal amount at maturity of
$625.0 million, interest payable semiannually from April 1, 1999,
redeemable at the Company's option on or after October 1, 2003;
(9) 12-3/8% Senior Deferred Coupon Notes due October 1, 2008, principal
amount at maturity of $450.0 million, interest payable semiannually
beginning on April 1, 2004, redeemable at the Company's option on or
after October 1, 2003;
(10) 7% Convertible Subordinated Notes due December 15, 2008, principal amount
at maturity of $599.3 million, interest payable semiannually from June
15, 1999, convertible into shares of the Company's common stock at a
conversion price of $39.20 per share, redeemable at the Company's option
on or after December 15, 2001;
(11) 9-1/4% Senior Euro Notes due November 15, 2006, principal amount at
maturity of euro 250.0 million ($238.6 million), interest payable
semiannually from May 15, 2000;
(12) 9-7/8% Senior Euro Notes due November 15, 2009, principal amount at
maturity of euro 350.0 million ($334.0 million), interest payable
semiannually from May 15, 2000, redeemable at the Company's option on or
after November 15, 2004;
(13) 11-1/2% Senior Deferred Coupon Euro Notes due November 15, 2009,
principal amount at maturity of euro 210.0 million ($200.4 million),
interest payable semiannually beginning on May 15, 2005, redeemable at
the Company's option on or after November 15, 2004;
NTL Triangle:
(14) 11.2% Senior Discount Debentures due November 15, 2007, principal amount
at maturity of $517.3 million, interest payable semiannually beginning on
May 15, 2001, redeemable at NTL Triangle's option after November 15,
2000;
Diamond:
(15) 13-1/4% Senior Discount Notes due September 30, 2004, principal amount at
maturity of $285.1 million, interest payable semiannually from June 30,
2000, redeemable at Diamond's option after September 30, 1999;
(16) 11-3/4% Senior Discount Notes due December 15, 2005, principal amount at
maturity of $531.0 million, interest payable semiannually beginning on
June 15, 2001, redeemable at Diamond's option on or after December 15,
2000;
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NTL Communications Corp. and Subsidiaries
(17) 10-3/4% Senior Discount Notes due February 15, 2007, principal amount at
maturity of $420.5 million, interest payable semiannually beginning on
August 15, 2002, redeemable at Diamond's option on or after December 15,
2002;
(18) 10% Senior Sterling Notes due February 1, 2008, issued by Diamond
Holdings plc, a wholly-owned subsidiary of Diamond, principal amount at
maturity of pound sterling 135.0 million ($204.7 million), interest
payable semiannually from August 1, 1998, redeemable at Diamond's option
on or after February 1, 2003; and
(19) 9-1/8% Senior Notes due February 1, 2008, issued by Diamond Holdings plc,
principal amount at maturity of $110.0 million, interest payable
semiannually from August 1, 1998, redeemable at Diamond's option on or
after February 1, 2003.
Management does not anticipate that the Company and its subsidiaries will
generate sufficient cash flow from operations to repay at maturity the entire
principal amount of the outstanding indebtedness of the Company and its
subsidiaries. Accordingly, the Company may be required to consider a number of
measures, including: (a) refinancing all or a portion of such indebtedness, (b)
seeking modifications to the terms of such indebtedness, (c) seeking additional
debt financing, which may be subject to obtaining necessary lender consents, (d)
seeking additional equity financing, or (e) a combination of the foregoing.
The Company's operations are conducted through its direct and indirect
wholly-owned subsidiaries. As a holding company, the Company holds no
significant assets other than cash and its investments in and advances to its
subsidiaries. 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.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Cash provided by operating activities was $44.5 million and $54.7 million in the
six months ended June 30, 2000 and 1999, respectively. This change is primarily
due to the increase in the net loss and changes in working capital as a result
of the timing of receipts and disbursements.
Purchases of fixed assets were $666.1 million in 2000 and $558.5 million in 1999
as a result of the continuing fixed asset purchases and construction, including
purchases and construction by acquired companies.
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NTL Communications Corp. and Subsidiaries
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements contained herein constitute "forward-looking statements" as
that term is defined under the Private Securities Litigation Reform Act of 1995.
When used herein, the words, "believe," "anticipate," "should," "intend,"
"plan," "will," "expects," "estimates," "projects," "positioned," "strategy,"
and similar expressions identify such forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from those
contemplated, projected, forecasted, estimated or budgeted, whether expressed or
implied, by such forward-looking statements. Such factors include the following:
general economic and business conditions, the Company's ability to continue to
design networks, install facilities, obtain and maintain any required
governmental licenses or approvals and finance construction and development, all
in a timely manner at reasonable costs and on satisfactory terms and conditions,
as well as assumptions about customer acceptance, churn rates, overall market
penetration and competition from providers of alternative services, the impact
of new business opportunities requiring significant up-front investment, and
availability, terms and deployment of capital.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There have been no material changes in the reported market risks since the end
of the most recent fiscal year.
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NTL Communications Corp. and Subsidiaries
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NTL COMMUNICATIONS CORP.
Date: August 10, 2000 By: /s/ Barclay Knapp
------------------------
Barclay Knapp
President and Chief Executive Officer
Date: August 10, 2000 By: /s/ Gregg N. Gorelick
--------------------------
Gregg N. Gorelick
Vice President-Controller
(Principal Accounting Officer)
23
