UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended:
JUNE 30, 1998
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 Number 0-24792
COMCAST UK CABLE PARTNERS LIMITED
(Exact name of registrant as specified in its charter)
Bermuda Not Applicable
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Clarendon House Comcast Corporation
2 Church Street West 1500 Market Street, 35th Floor
Hamilton, HM 11, Bermuda Philadelphia, PA 19102-2148
(441) 295-5950 (215) 665-1700
- --------------------------------------------------------------------------------
(Address, including zip code, and (Name, address, including zip code,
telephone number, and telephone number, including area code,
including area code, of agent for service)
of Registrant's principal
executive offices)
--------------------------
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 twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
Yes __X__ No ____
_________________________________
As of June 30, 1998, there were 37,231,997 Class A Common Shares and 12,872,605
Class B Common Shares outstanding.
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
as of June 30, 1998 and December 31,
1997 (Unaudited)...........................................2
Condensed Consolidated Statement of
Operations and Accumulated Deficit for
the Six and Three Months Ended June 30,
1998 and 1997 (Unaudited)..................................3
Condensed Consolidated Statement of Cash
Flows for the Six Months Ended June 30,
1998 and 1997 (Unaudited)..................................4
Notes to Condensed Consolidated
Financial Statements (Unaudited)......................5 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................11 - 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.........................................19
Item 6. Exhibits and Reports on Form 8-K..........................19
SIGNATURE...........................................................20
________________________________
This Quarterly Report on Form 10-Q contains forward looking statements made
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Readers are cautioned that such forward looking statements
involve risks and uncertainties which could significantly affect expected
results in the future from those expressed in any such forward looking
statements made by, or on behalf of, the Company. Certain factors that could
cause actual results to differ materially include, without limitation, the
effects of legislative and regulatory changes; the potential for increased
competition; technological changes; the need to generate substantial growth in
the subscriber base by successfully launching, marketing and providing services
in identified markets; pricing pressures which could affect demand for the
Company's services; the Company's ability to expand its distribution; changes in
labor, programming, equipment and capital costs; the Company's continued ability
to create or acquire programming and products that customers will find
attractive; future acquisitions; the NTL Transaction (see Note 3 to Condensed
Consolidated Financial Statements); strategic partnerships and divestitures;
general business and economic conditions; and other risks detailed from time to
time in the Company's periodic reports filed with the Securities and Exchange
Commission.
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
(in (UK Pound)000's, except share data)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................................... (UK Pound)92,315 (UK Pound)37,372
Accounts receivable, less allowance for doubtful accounts of
(UK Pound)3,065 and (UK Pound)2,598......................................... 3,805 4,255
Other current assets.......................................................... 6,798 5,419
----------------- -----------------
Total current assets...................................................... 102,918 47,046
----------------- -----------------
INVESTMENTS IN AFFILIATES........................................................ 53,981 61,363
----------------- -----------------
PROPERTY AND EQUIPMENT........................................................... 348,960 315,702
Accumulated depreciation ..................................................... (44,506) (33,000)
----------------- -----------------
Property and equipment, net................................................... 304,454 282,702
----------------- -----------------
DEFERRED CHARGES................................................................. 58,666 60,770
Accumulated amortization...................................................... (13,082) (13,985)
----------------- -----------------
Deferred charges, net......................................................... 45,584 46,785
----------------- -----------------
FOREIGN EXCHANGE PUT OPTIONS, net................................................ 6,584 7,958
----------------- -----------------
(UK Pound)513,521 (UK Pound)445,854
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses.........................................(UK Pound)25,210 (UK Pound)23,605
Accrued interest.............................................................. 323
Current portion of long-term debt............................................. 1,943 1,683
Due to affiliates............................................................. 1,161 920
----------------- -----------------
Total current liabilities................................................. 28,637 26,208
----------------- -----------------
LONG-TERM DEBT, less current portion............................................. 330,695 234,010
----------------- -----------------
FOREIGN EXCHANGE CALL OPTION..................................................... 2,515 2,688
----------------- -----------------
LONG-TERM DEBT, due to shareholder............................................... 11,775 11,272
----------------- -----------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred shares, (UK Pound).01 par value - authorized, 10,000,000
shares; issued, none........................................................
Class A common shares, (UK Pound).01 par value - authorized, 50,000,000
shares; issued, 37,231,997.................................................. 372 372
Class B common shares, (UK Pound).01 par value - authorized, 50,000,000
shares; issued, 12,872,605.................................................. 129 129
Additional capital............................................................ 358,548 358,548
Accumulated deficit........................................................... (219,150) (187,373)
----------------- -----------------
Total shareholders' equity................................................ 139,899 171,676
----------------- -----------------
(UK Pound)513,521 (UK Pound)445,854
================= =================
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1998 1997 1998 1997
(in (UK Pound)000's, except per share data)
<S> <C> <C> <C> <C>
REVENUES
Service income................................ (UK Pound)36,027 (UK Pound)25,205 (UK Pound)18,725 (UK Pound)13,087
Consulting fee income......................... 561 496 287 263
------------------ ------------------ ------------------ ------------------
36,588 25,701 19,012 13,350
------------------ ------------------ ------------------ ------------------
COSTS AND EXPENSES
Operating..................................... 11,762 9,894 6,101 5,165
Selling, general and administrative........... 17,196 14,818 8,707 7,419
Management fees............................... 1,470 1,707 715 864
Depreciation and amortization................. 14,684 12,189 7,430 6,266
------------------ ------------------ ------------------ ------------------
45,112 38,608 22,953 19,714
------------------ ------------------ ------------------ ------------------
OPERATING LOSS................................... (8,524) (12,907) (3,941) (6,364)
OTHER (INCOME) EXPENSE
Interest expense.............................. 17,407 12,285 8,937 6,234
Investment income............................. (4,489) (4,026) (2,260) (1,925)
Equity in net losses of affiliates............ 11,185 10,314 4,770 5,162
Exchange (gains) losses and other............. (850) 2,168 898 (2,727)
------------------ ------------------ ------------------ ------------------
23,253 20,741 12,345 6,744
------------------ ------------------ ------------------ ------------------
NET LOSS......................................... (31,777) (33,648) (16,286) (13,108)
ACCUMULATED DEFICIT
Beginning of period ......................... (187,373) (120,017) (202,864) (140,557)
------------------ ------------------ ------------------ ------------------
End of period................................ ((UK Pound)219,150) ((UK Pound)153,665) ((UK Pound)219,150) ((UK Pound)153,665)
================== ================== ================== ==================
NET LOSS PER SHARE............................... ((UK Pound).63) ((UK Pound).67) ((UK Pound).32) ((UK Pound).26)
================== ================== ================== ==================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING DURING THE PERIOD......... 50,105 50,105 50,105 50,105
================== ================== ================== ==================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
(UK Pound)000 (UK Pound)000
<S> <C> <C>
OPERATING ACTIVITIES
Net loss......................................................((UK Pound)31,777) ((UK Pound)33,648)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization.............................. 14,684 12,189
Amortization on foreign exchange contracts................. 1,374 1,374
Non-cash interest expense.................................. 13,301 12,015
Non-cash investment income................................. (1,427) (1,149)
Exchange (gains) losses.................................... (2,590) 1,780
Equity in net losses of affiliates......................... 11,185 10,314
---------------- ----------------
4,750 2,875
Increase in accounts receivable and other current assets... (929) (813)
Increase in accounts payable and accrued expenses and
accrued interest........................................ 1,928 1,178
---------------- ----------------
Net cash provided by operating activities........... 5,749 3,240
---------------- ----------------
FINANCING ACTIVITIES
Repayments of debt............................................ (1,124) (800)
Proceeds from borrowings...................................... 86,000
Deferred financing costs...................................... (1,634)
Net transactions with affiliates.............................. (365) (272)
---------------- ----------------
Net cash provided by (used in) financing activities. 82,877 (1,072)
---------------- ----------------
INVESTING ACTIVITIES
Proceeds from sales of short-term investments, net............ 38,161
Capital contributions and loans to affiliates................. (1,768) (8,661)
Capital expenditures.......................................... (31,701) (38,194)
Deferred charges.............................................. (214) (461)
---------------- ----------------
Net cash used in investing activities............... (33,683) (9,155)
---------------- ----------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................. 54,943 (6,987)
CASH AND CASH EQUIVALENTS, beginning of period.................... 37,372 63,314
---------------- ----------------
CASH AND CASH EQUIVALENTS, end of period.......................... (UK Pound)92,315 (UK Pound)56,327
================ ================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The condensed consolidated balance sheet as of December 31, 1997 has been
condensed from the audited consolidated balance sheet as of that date. The
condensed consolidated balance sheet as of June 30, 1998, the condensed
consolidated statement of operations and accumulated deficit for the six
and three months ended June 30, 1998 and 1997 and the condensed
consolidated statement of cash flows for the six months ended June 30, 1998
and 1997 have been prepared by Comcast UK Cable Partners Limited (the
"Company") and have not been audited by the Company's independent auditors.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows as of June 30, 1998 and for all
periods presented have been made.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's December
31, 1997 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the periods ended June 30, 1998
are not necessarily indicative of operating results for the full year.
Reclassifications
Certain reclassifications have been made to the prior year condensed
consolidated financial statements to conform to those classifications used
in 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement, which establishes
accounting and reporting standards for derivatives and hedging activities,
is effective for fiscal years beginning after June 15, 1999. Upon the
adoption of SFAS No. 133, all derivatives are required to be recognized in
the statement of financial position as either assets or liabilities and
measured at fair value. The Company is currently evaluating the impact the
adoption of SFAS No. 133 will have on its financial position and results of
operations.
3. AMALGAMATION WITH NTL
On February 4, 1998, the Company entered into a definitive agreement to
amalgamate (the "NTL Transaction") with a wholly owned Bermuda subsidiary
of NTL Incorporated ("NTL"). NTL is an alternative telecommunications
company in the United Kingdom ("UK") and is listed on Nasdaq. The NTL
Transaction is expected to close in 1998, subject to, among other things,
the receipt of required Bermuda and UK regulatory approvals, the approval
of the Company's and NTL's shareholders, the consent of the Company's and
NTL's bondholders, the consent of certain NTL bank lenders and other
customary closing matters. Comcast Corporation ("Comcast"), through its
indirect wholly owned subsidiary, Comcast U.K. Holdings, Inc. ("Holdings"),
is the sole holder of the multiple-voting Class B Common Shares of the
Company and has agreed to vote for the transaction, assuring its approval
by the Company's shareholders. Upon consummation of the NTL Transaction,
the Company would become a wholly owned subsidiary of NTL.
Except in the circumstances described below, the Company's shareholders
will receive 0.3745 shares of NTL common stock for each of the Company's
Class A Common Shares or Class B Common Shares. If the average closing
price of the NTL common stock for a specified period of time prior to the
Company's shareholders meeting to approve the NTL Transaction (the "Average
Price") is less than $26.70, the Company will have the
5
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
option to terminate the NTL Transaction, subject to the right of NTL to
adjust the exchange ratio such that one share of the Company's Class A
Common Shares or Class B Common Shares will be exchanged for a number of
shares of NTL common stock equal to $10.00 (based on the Average Price).
Pursuant to existing arrangements between the Company and Telewest
Communications plc ("Telewest"), a co-owner of interests in Cable London
PLC ("Cable London") and Birmingham Cable Corporation Limited ("Birmingham
Cable"), Telewest has certain rights (the "Telewest Rights") to acquire
either or both of the Company's interests in these systems (see Note 4) as
a result of the NTL Transaction. However, as described in the following
paragraphs, the consummation of the NTL Transaction is not dependent on the
resolution of the Telewest Rights.
If the Telewest Rights have been exercised prior to the closing of the NTL
Transaction, the Company's shareholders may receive (at the option of NTL),
in lieu of a portion of the consideration allocable to the interest subject
to the exercised Telewest Rights, the per share proceeds from the sale of
the interest to Telewest (as adjusted including for taxes), payable in cash
or shares of NTL common stock valued at the greater of $30.00 per share or
the Average Price at closing (the "Exercise Consideration").
Similarly, if at closing either of the Telewest Rights have not been
exercised and have not been waived or otherwise expired, the Company's
shareholders may receive (at the option of NTL), shares of a new class of
NTL preferred stock equal to a portion of the consideration allocable to
the interest subject to the unexercised Telewest Rights. Any shares of NTL
preferred stock would have the same voting and dividend rights as shares of
NTL common stock, would be subject to redemption as described below, and
would be expected to be listed for trading on Nasdaq. If following closing
the Telewest Rights are exercised, the NTL preferred stock will be redeemed
for the Exercise Consideration (based on the Average Price at the time of
exercise). If the Telewest Rights are resolved without being exercised, the
NTL preferred stock will be redeemed for NTL common stock on a one-for-one
basis.
Of the consideration to be received by the Company's shareholders in the
NTL Transaction, the parties have allocated 31% to the Company's interest
in Cable London and 17% to the Company's interest in Birmingham Cable.
However, if either or both of the Telewest Rights are exercised, the actual
consideration to be received by the Company's shareholders may be
materially different from the portion of the consideration (the "allocable
portion") which has been allocated by the parties to the Company's
respective interests in Cable London and Birmingham Cable, depending on,
among other things, the value of these interests, as finally determined,
whether NTL exercises its option to deliver the Exercise Consideration in
lieu of the allocable portion, and the amount of any taxes payable by the
Company on the sale of these interests.
4. INVESTMENTS IN AFFILIATES
The Company has invested in two affiliates: Birmingham Cable and Cable
London (together, the "Equity Investees"). The Equity Investees operate
integrated cable communications, residential telephony and business
telecommunications systems in their respective major metropolitan areas
under exclusive cable television licenses and non-exclusive
telecommunications licenses. As of June 30, 1998, the Company's ownership
interest in the Equity Investees is as follows:
Birmingham Cable................................27.5%
Cable London....................................50.0%
Included in investments in affiliates as of June 30, 1998 and December 31,
1997, are loans to Cable London of (UK Pound)28.5 million and accrued
interest of (UK Pound)7.3 million and (UK Pound)6.0 million, respectively.
The loans accrue interest at a rate of 2% above the published base lending
rate of Barclays Bank plc (9.5% effective rate as of June 30,
6
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
1998) and are subordinate to Cable London's credit facility. Of these
loans, (UK Pound)21.0 million as of June 30, 1998 and December 31, 1997,
are convertible into ordinary shares of Cable London at a per share
conversion price of (UK Pound)2.00. Also included in investments in
affiliates as of June 30, 1998 and December 31, 1997, are loans to
Birmingham Cable of (UK Pound)3.7 million and (UK Pound)1.9 million and
accrued interest of (UK Pound)248,000 and (UK Pound)133,000, respectively.
The Birmingham Cable loans accrue interest at a fixed rate of 7.8% and are
subordinate to Birmingham Cable's credit facility.
Although the Company is not contractually committed to make any additional
capital contributions or advances to the Equity Investees, it currently
intends to fund its share of the amounts necessary for capital expenditures
and to finance operating deficits. Failure to do so could dilute the
Company's ownership interests in the Equity Investees.
7
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Summarized financial information for affiliates accounted for under the
equity method is as follows:
<TABLE>
<CAPTION>
Birmingham Cable
Cable London Combined
(UK Pound)000 (UK Pound)000 (UK Pound)000
<S> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 1998
Results of operations
Service income.........................................(UK Pound)37,975 (UK Pound)32,178 (UK Pound)70,153
Operating, selling, general and
administrative expenses.............................. (29,276) (25,207) (54,483)
Depreciation and amortization.......................... (13,742) (10,976) (24,718)
Operating loss......................................... (5,043) (4,005) (9,048)
Net loss............................................... (19,078) (11,530) (30,608)
Company's equity in net loss........................... (5,324) (5,861) (11,185)
THREE MONTHS ENDED JUNE 30, 1998
Results of operations
Service income......................................... 19,196 16,243 35,439
Operating, selling, general and
administrative expenses.............................. (14,694) (12,544) (27,238)
Depreciation and amortization.......................... (7,256) (5,520) (12,776)
Operating loss......................................... (2,754) (1,821) (4,575)
Net loss............................................... (6,733) (5,660) (12,393)
Company's equity in net loss........................... (1,892) (2,878) (4,770)
AT JUNE 30, 1998
Financial position
Current assets......................................... 11,295 11,298 22,593
Noncurrent assets...................................... 246,011 188,914 434,925
Current liabilities.................................... 21,749 22,032 43,781
Noncurrent liabilities................................. 182,306 189,958 372,264
SIX MONTHS ENDED JUNE 30, 1997
Results of operations
Service income.........................................(UK Pound)31,800 (UK Pound)24,693 (UK Pound)56,493
Operating, selling, general and
administrative expenses.............................. (27,645) (22,294) (49,939)
Depreciation and amortization.......................... (13,035) (8,890) (21,925)
Operating loss......................................... (8,880) (6,491) (15,371)
Net loss............................................... (15,364) (11,879) (27,243)
Company's equity in net loss........................... (4,295) (6,019) (10,314)
THREE MONTHS ENDED JUNE 30, 1997
Results of operations
Service income......................................... 16,406 13,022 29,428
Operating, selling, general and
administrative expenses.............................. (14,191) (11,258) (25,449)
Depreciation and amortization.......................... (6,742) (4,632) (11,374)
Operating loss......................................... (4,527) (2,868) (7,395)
Net loss............................................... (8,009) (5,770) (13,779)
Company's equity in net loss........................... (2,237) (2,925) (5,162)
</TABLE>
8
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
5. LONG-TERM DEBT
UK Holdings Credit Facility
In December 1997, Comcast UK Holdings Limited ("UK Holdings"), a wholly
owned subsidiary of the Company, entered into a loan agreement (the "UK
Holdings Agreement") with a consortium of banks to provide financing under
a credit facility (the "UK Holdings Credit Facility") up to a maximum of
(UK Pound)200.0 million. Under the terms of the UK Holdings Agreement,
borrowings under the UK Holdings Credit Facility are guaranteed by
Cambridge Holding Company Limited ("Cambridge Cable") and two companies
holding the franchises for Darlington and Teesside, England ("Teesside").
Cambridge Cable and Teesside are wholly owned subsidiaries of the Company.
In January 1998, UK Holdings borrowed (UK Pound)75.0 million under the UK
Holdings Credit Facility. Of this initial borrowing, (UK Pound)50.4 million
was paid to the Company as a dividend and (UK Pound)17.8 million was used
to fund capital expenditures and working capital requirements at Cambridge
Cable and Teesside. Final maturity of the UK Holdings Credit Facility is
January 31, 2001. The UK Holdings Credit Facility bears interest at a rate
per annum equal to the London Interbank Offered Rate ("LIBOR") plus 1/2% to
2 1/4%. As of June 30, 1998 the Company's effective weighted average
interest rate on the UK Holdings Credit Facility was 9.48%.
The consummation of the NTL Transaction will result in a change in control,
as defined in the UK Holdings Credit Facility. Upon a change in control,
all amounts outstanding under the UK Holdings Credit Facility will become
immediately due and payable.
6. RELATED PARTY TRANSACTIONS
Comcast U.K. Consulting, Inc., a wholly owned subsidiary of the Company,
earns consulting fee income under consulting agreements with the Equity
Investees. The consulting fee income is generally based on a percentage of
gross revenues or a fixed amount per dwelling unit in the Equity Investees'
franchise areas.
The Company's right to receive consulting fee payments from the Equity
Investees has been subordinated to the banks under their credit facilities.
Accordingly, these fees have been classified as long-term receivables and
are included in investments in affiliates in the Company's condensed
consolidated balance sheet. In addition, the Company's shares in Cable
London have been pledged to secure amounts outstanding under Cable London's
revolving credit facility.
Management fee expense is incurred under agreements between the Company on
the one hand, and Comcast, the Company's controlling shareholder, and
Comcast UK Cable Partners Consulting, Inc. ("Comcast Consulting"), an
indirect wholly owned subsidiary of Comcast, on the other, whereby Comcast
and Comcast Consulting provide consulting services to the Equity Investees
on behalf of the Company and management services to the Company. Such
management fees are based on Comcast's and Comcast Consulting's cost of
providing such services. As of June 30, 1998 and December 31, 1997, due to
affiliates consists primarily of this management fee and operating expenses
paid by Comcast and its affiliates on behalf of the Company.
For the six and three months ended June 30, 1998 and 1997, investment
income includes (UK Pound)1.4 million, (UK Pound)1.1 million, (UK
Pound)733,000 and (UK Pound)620,000 of interest income, respectively,
relating to the loans to the Equity Investees.
Long-term debt due to shareholder consists of 9% Subordinated Notes payable
to Holdings which are due in September 1999. For the six and three months
ended June 30, 1998 and 1997, the Company recorded (UK Pound)503,000, (UK
Pound)461,000, (UK Pound)258,000 and (UK Pound)237,000, respectively, of
interest expense relating to such notes.
9
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
In management's opinion, the foregoing transactions were entered into on
terms no more or less favorable than those with non-affiliated parties.
7. CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially
affect the financial position, results of operations or liquidity of the
Company.
8. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of (UK Pound)3.8 million, (UK
Pound)270,000, (UK Pound)2.2 million and (UK Pound)135,000 during the six
and three months ended June 30, 1998 and 1997, respectively.
The Company's wholly owned subsidiaries incurred capital lease obligations
of (UK Pound)1.7 million, (UK Pound)607,000, (UK Pound)426,000 and (UK
Pound)607,000 during the six and three months ended June 30, 1998 and 1997,
respectively.
10
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Comcast UK Cable Partners Limited and its subsidiaries (the "Company"), an
indirect controlled subsidiary of Comcast Corporation ("Comcast"), are
principally engaged in the development, construction, management and operation
of the interests of Comcast in the United Kingdom ("UK") cable and
telecommunications industry. As of June 30, 1998, the Company has interests in
four operations (the "Operating Companies"): Birmingham Cable Corporation
Limited ("Birmingham Cable"), in which the Company owns a 27.5% interest, Cable
London PLC ("Cable London"), in which the Company owns a 50.0% interest,
Cambridge Holding Company Limited ("Cambridge Cable"), in which the Company owns
a 100% interest and two companies holding the franchises for Darlington and
Teesside, England ("Teesside"), in which the Company owns a 100% interest. The
Company accounts for its interests in Birmingham Cable and Cable London
(together, the "Equity Investees") under the equity method.
When build-out of the Operating Companies' systems is complete, these systems
will have the potential to serve approximately 1.6 million homes and the
businesses within their franchise areas. As of June 30, 1998, the Operating
Companies' systems passed more than 1,248,000 homes or approximately 78% of the
homes in their franchise areas and served more than 313,000 cable subscribers,
395,000 residential telephony subscribers and 13,000 business telephony
subscribers.
General Developments of Business
Amalgamation with NTL
See Note 3 to the Company's Condensed Consolidated Financial Statements included
in Item 1.
Liquidity and Capital Resources
The Company
Historically, the Company has financed its cash requirements, including its
investments in the Equity Investees, through capital contributions from its
shareholders, as well as proceeds from the Company's initial public offering of
15.0 million of its Class A Common Shares (net proceeds of $209.4 million or (UK
Pound)132.6 million) in September 1994 and from the Company's offering of its
$517.3 million principal amount at maturity 11.20% Senior Discount Debentures
due 2007 (the "2007 Discount Debentures") (net proceeds of $291.1 million or (UK
Pound)186.9 million) in November 1995. Interest accretes on the 2007 Discount
Debentures at 11.20% per annum compounded semi-annually from November 15, 1995
to November 15, 2000, after which date interest will be paid in cash on each May
15 and November 15 through November 15, 2007. The 2007 Discount Debentures
contain restrictive covenants which limit the Company's ability to pay
dividends. The Operating Companies are not expected to pay any dividends or
advances in the foreseeable future.
In December 1997, Comcast UK Holdings Limited ("UK Holdings"), a wholly owned
subsidiary of the Company, entered into a loan agreement (the "UK Holdings
Agreement") with a consortium of banks to provide financing under a credit
facility (the "UK Holdings Credit Facility") up to a maximum of (UK Pound)200.0
million. Under the terms of the UK Holdings Agreement, borrowings under the UK
Holdings Credit Facility are guaranteed by Teesside and Cambridge Cable.
11
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
In January 1998, UK Holdings borrowed (UK Pound)75.0 million under the UK
Holdings Credit Facility. Of this initial borrowing, (UK Pound)50.4 million was
paid to the Company as a dividend and (UK Pound)17.8 million was used to fund
capital expenditures and working capital requirements at Cambridge Cable and
Teesside.
Final maturity of the UK Holdings Credit Facility is January 31, 2001. The UK
Holdings Credit Facility bears interest at a rate per annum equal to the London
Interbank Offered Rate ("LIBOR") plus 1/2% to 2 1/4%. As of June 30, 1998, the
Company's effective weighted average interest rate on the UK Holdings Credit
Facility was 9.48%.
The UK Holdings Credit Facility contains restrictive covenants which limit UK
Holdings' ability to enter into arrangements for the acquisition and sale of
property and equipment, investments, mergers and the incurrence of additional
debt. Certain of these covenants require that certain financial ratios and cash
flow levels be maintained and contain certain restrictions on dividend payments.
The Company's right to receive consulting fee payments from Cambridge Cable and
Teesside has been subordinated to the banks under the UK Holdings Credit
Facility. In addition, the Company's shares in UK Holdings have been pledged to
secure the UK Holdings Credit Facility.
The consummation of the NTL Transaction will result in a change in control, as
defined in the UK Holdings Credit Facility. Upon a change in control, all
amounts outstanding under the UK Holdings Credit Facility will become
immediately due and payable.
Except for its working capital requirements, the Company's cash needs will
depend on management's investment decisions. Investment considerations include
(i) whether further capital contributions will be made to the Equity Investees,
(ii) whether the Operating Companies can obtain debt financing, (iii) whether
the Operating Companies will be able to generate positive operating cash flow,
(iv) the timing of the build-out of the Operating Companies' systems, and (v)
whether there may be future acquisitions and trades funded in cash or the
Company's shares. There are no agreements or negotiations for specific material
acquisitions currently pending.
Historically, the Company has made investments in the Equity Investees in
conjunction with proportionate investments by its strategic and financial
partners. The Company made capital contributions and loans to the Operating
Companies in the aggregate of (UK Pound)1.8 million and (UK Pound)49.7 million
during the six months ended June 30, 1998 and 1997 respectively, and (UK
Pound)18.4 million during the three months ended June 30, 1997. Of these
amounts, (UK Pound)1.8 million and (UK Pound)8.7 million relate to capital
contributions and loans to the Equity Investees during the six months ended June
30, 1998 and 1997, respectively and (UK Pound)736,000 relates to capital
contributions and loans to the Equity Investees during the three months ended
June 30, 1997. Although the Company is not contractually committed to make any
additional capital contributions or loans to the Equity Investees, it currently
intends to fund its share of the amounts necessary for capital expenditures and
to finance operating deficits. Failure to do so could dilute the Company's
ownership interests in the Equity Investees.
The Company estimates that the Operating Companies will require approximately
(UK Pound)90.0 million from July 1, 1998 through December 31, 1998, to continue
the build-out of their systems. Management believes that the entire (UK
Pound)90.0 million required will be funded through drawdowns under currently
existing credit facilities (subject to compliance with certain financial and
operating covenants). If such credit facilities are not available for drawdown,
the Company expects that its strategic and financial partners in the Equity
Investees will provide their pro-rata share of any required fundings, although
they are not contractually obligated to do so. Thus, no assurance of such
funding can be given. If the Company's strategic and financial partners fail to
provide such financing, the Equity Investees will be required to seek additional
funds elsewhere. Such additional funds may come from the Company, from new
strategic and financial partners, from borrowings under new credit facilities or
from other sources, although there can be no assurance that any such financing
would be available on acceptable terms and conditions. The Company and its
strategic and financial partners generally have veto rights over the Equity
Investees' debt financing decisions.
12
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
Failure of any Operating Company to obtain financing necessary to complete the
build-out of its system could result in loss of its cable franchises and
licenses.
The Company's ability to meet its long-term liquidity and capital requirements
is contingent upon the Operating Companies' ability to generate positive
operating cash flow and obtain external financing, although there can be no
assurance that any such financing will be obtained on acceptable terms and
conditions. The Company believes that its existing cash and cash equivalents
will be sufficient to fund the Company's required capital contributions and
advances to the Equity Investees and borrowings under the UK Holdings Credit
Facility will be sufficient to fund development and construction costs for
Cambridge Cable and Teesside throughout 1998.
The Operating Companies
The following is a discussion of the liquidity and capital resources of each of
the Operating Companies. Such financial information has not been adjusted for
the Company's proportionate ownership percentages in the Operating Companies.
Birmingham Cable. Historically, Birmingham Cable's primary sources of funding
have been capital contributions and loans from the Company and the Company's
strategic and financial partners, cash from the issuance of Birmingham Cable's
preference shares and borrowings under Birmingham Cable's credit facility. The
Company estimates that approximately (UK Pound)13.0 million will be required
from July 1, 1998 through December 31, 1998 to continue development and
construction of Birmingham Cable's cable/telephony network. The Company expects
that such funds will be provided by borrowings under the Birmingham Cable credit
facility.
Cable London. Historically, Cable London's primary sources of funding have been
capital contributions and loans from the Company and the Company's strategic and
financial partner and borrowings under Cable London's previous and current
credit facilities. The Company estimates that approximately (UK Pound)24.0
million will be required from July 1, 1998 through December 31, 1998 to continue
development and construction of Cable London's cable/telephony network. The
Company expects that such funds will be provided by borrowings under the Cable
London credit facility.
Cambridge Cable. Historically, Cambridge Cable's primary sources of funding have
been capital contributions and loans from the Company and the Company's former
strategic and financial partner. The Company estimates that approximately (UK
Pound)30.0 million will be required from July 1, 1998 through December 31, 1998
to continue development and construction of Cambridge Cable's cable/telephony
network. The Company expects that such funds will be provided by borrowings
under the UK Holdings Credit Facility.
Teesside. Historically, Teesside's primary source of funding has been capital
contributions from the Company. The Company estimates that approximately (UK
Pound)23.0 million will be required from July 1, 1998 through December 31, 1998
to continue development and construction of Teesside's cable/telephony network.
The Company expects that such funds will be provided by borrowings under the UK
Holdings Credit Facility.
Statement of Cash Flows
Cash and cash equivalents increased (UK Pound)54.9 million as of June 30, 1998
from December 31, 1997 and decreased (UK Pound)7.0 million as of June 30, 1997
from December 31, 1996. The changes in cash and cash equivalents resulted from
cash flows from operating, financing and investing activities which are
explained below.
Net cash provided by operating activities amounted to (UK Pound)5.7 million and
(UK Pound)3.2 million for the six months ended June 30, 1998 and 1997,
respectively. The increase in net cash provided by operating activities as
compared to the
13
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
prior period is principally due to the increase in the Company's operating
income before depreciation and amortization and changes in working capital as a
result of the timing of receipts and disbursements.
Net cash provided by (used in) financing activities amounted to (UK Pound)82.9
million and ((UK Pound)1.1) million for the six months ended June 30, 1998 and
1997, respectively. During the six months ended June 30, 1998, net cash provided
by financing activities includes (UK Pound)86.0 million of borrowings under the
UK Holdings Credit Facility, offset by financing costs of (UK Pound)1.6 million.
Net cash used in investing activities was (UK Pound)33.7 million and (UK
Pound)9.2 million for the six months ended June 30, 1998 and 1997, respectively.
During the six months ended June 30, 1998, net cash used in investing activities
includes capital expenditures of (UK Pound)31.7 million and capital
contributions and loans to affiliates of (UK Pound)1.8 million. During the six
months ended June 30, 1997, net cash used in investing activities includes
capital expenditures of (UK Pound)38.2 million and capital contributions and
loans to affiliates of (UK Pound)8.7 million, offset by proceeds from the sales
of short-term investments of (UK Pound)38.2 million.
14
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
Results of Operations
The Company
Summarized consolidated financial information for the Company for the six and
three months ended June 30, 1998 and 1997 is as follows (in thousands, "NM"
denotes percentage is not meaningful):
<TABLE>
<CAPTION>
Six Months Ended
June 30, Increase/(Decrease)
1998 1997 (UK Pound) %
<S> <C> <C> <C> <C>
Revenues (UK Pound)36,588 (UK Pound)25,701 (UK Pound)10,887 42.4%
Operating, selling, general and administrative expenses 28,958 24,712 4,246 17.2
Management fees 1,470 1,707 (237) (13.9)
----------------- -----------------
Operating income (loss) before depreciation and
amortization (1) 6,160 (718) 6,878 NM
Depreciation and amortization 14,684 12,189 2,495 20.5
----------------- -----------------
Operating loss (8,524) (12,907) (4,383) (34.0)
----------------- -----------------
Interest expense 17,407 12,285 5,122 41.7
Investment income (4,489) (4,026) 463 11.5
Equity in net losses of affiliates 11,185 10,314 871 8.4
Exchange (gains) losses and other (850) 2,168 (3,018) NM
----------------- -----------------
Net loss ((UK Pound)31,777) ((UK Pound)33,648) ((UK Pound)1,871) (5.6%)
================= =================
Three Months Ended
June 30, Increase/(Decrease)
1998 1997 (UK Pound) %
Revenues (UK Pound)19,012 (UK Pound)13,350 (UK Pound)5,662 42.4%
Operating, selling, general and administrative expenses 14,808 12,584 2,224 17.7
Management fees 715 864 (149) (17.2)
----------------- -----------------
Operating income (loss) before depreciation and
amortization (1) 3,489 (98) 3,587 NM
Depreciation and amortization 7,430 6,266 1,164 18.6
----------------- -----------------
Operating loss (3,941) (6,364) (2,423) (38.1)
Interest expense 8,937 6,234 2,703 43.4
Investment income (2,260) (1,925) 335 17.4
Equity in net losses of affiliates 4,770 5,162 (392) (7.6)
Exchange losses (gains) and other 898 (2,727) 3,625 NM
----------------- -----------------
Net loss ((UK Pound)16,286) ((UK Pound)13,108) 3,178 24.2%
================= =================
<FN>
- ------------
(1) Operating income (loss) before depreciation and amortization is commonly
referred to in the Company's businesses as "operating cash flow (deficit)."
Operating cash flow (deficit) is a measure of a company's ability to
generate cash to service its obligations, including debt service
obligations, and to finance capital and other expenditures. In part due to
the capital intensive nature of the Company's businesses and the resulting
significant level of non-cash depreciation expense and amortization
expense, operating cash flow (deficit) is frequently used as one of the
bases for comparing businesses in the Company's industries, although the
Company's measure of operating cash flow (deficit) may not be comparable to
similarly titled measures of other companies. Operating cash flow (deficit)
does not purport to represent net income or net cash provided by operating
activities, as those terms are defined under generally accepted accounting
principles, and should not be considered as an alternative
15
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
to such measurements as an indicator of the Company's performance. See
"Statement of Cash Flows" above for a discussion of net cash provided by
operating activities.
</FN>
</TABLE>
Substantially all of the increases in service income, operating expenses,
selling, general and administrative expenses and depreciation and amortization
expense for the six and three months ended June 30, 1998, as compared to the
same periods in 1997, are attributable to the effects of the continued
development of Teesside's and Cambridge Cable's operations and increased
business activity resulting from the growth in the number of subscribers in
their respective franchise areas.
Comcast U.K. Consulting, Inc., a wholly owned subsidiary of the Company, earns
consulting fee income under consulting agreements with the Equity Investees. The
consulting fee income is generally based on a percentage of gross revenues or a
fixed amount per dwelling unit in the Equity Investees' franchise areas.
Consulting fee income for the six and three months ended June 30, 1998 and 1997
was (UK Pound)561,000, (UK Pound)496,000, (UK Pound)287,000 and (UK
Pound)263,000, respectively.
Management fee expense is incurred under agreements between the Company on the
one hand, and Comcast and Comcast UK Cable Partners Consulting, Inc. ("Comcast
Consulting"), an indirect wholly owned subsidiary of Comcast, on the other,
whereby Comcast and Comcast Consulting provide consulting services to the Equity
Investees on behalf of the Company and management services to the Company. Such
management fees are based on Comcast's and Comcast Consulting's cost of
providing such services.
Interest expense for the six and three months ended June 30, 1998 and 1997 was
(UK Pound)17.4 million, (UK Pound)12.3 million, (UK Pound)8.9 million and (UK
Pound)6.2 million, respectively, representing increases of (UK Pound)5.1 million
and (UK Pound)2.7 million from 1997 as compared to the same periods in 1998. The
increases are primarily attributable to interest on borrowings under the UK
Holdings Credit Facility and the compounding of interest on the 2007 Discount
Debentures.
Investment income for the six and three months ended June 30, 1998 and 1997 was
(UK Pound)4.5 million, (UK Pound)4.0 million, (UK Pound)2.3 million and (UK
Pound)1.9 million, respectively, representing increases of (UK Pound)463,000 and
(UK Pound)335,000 from 1997 as compared to the same periods in 1998. The
increases are primarily due to increases in the average loan balances to the
Equity Investees in 1998 as compared to the same periods in 1997.
Equity in net losses of affiliates for the six and three months ended June 30,
1998 and 1997 was (UK Pound)11.2 million, (UK Pound)10.3 million, (UK Pound)4.8
million and (UK Pound)5.2 million, respectively, representing an increase of (UK
Pound)871,000 and a decrease of (UK Pound)392,000 from 1997 as compared to the
same periods in 1998. The increase from the six months ended June 30, 1997 is
attributable to an increase in the net loss for Birmingham Cable. The decrease
from the three months ended June 30, 1997 is attributable to a decrease in the
net loss of Birmingham Cable.
Exchange (gains) losses and other for the six and three months ended June 30,
1998 and 1997 were ((UK Pound)850,000), (UK Pound)2.2 million, (UK Pound)898,000
and ((UK Pound)2.7) million, respectively, representing changes of ((UK
Pound)3.0) million and (UK Pound)3.6 million from 1997 as compared to the same
periods in 1998. These changes primarily results from the impact of fluctuations
in the valuation of the UK Pound Sterling on the 2007 Discount Debentures, which
are denominated in United States ("US") dollars, on the Company's foreign
exchange call option contracts and on cash held in US dollars. The Company's
results of operations will continue to be affected by exchange rate
fluctuations.
16
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
The Operating Companies
Summarized proportionate combined financial information for the Operating
Companies for the six and three months ended June 30, 1998 and 1997 is as
follows (in thousands, "NM" denotes percentage is not meaningful):
<TABLE>
<CAPTION>
Six Months Ended
June 30, Increase/(Decrease)
1998 1997 (UK Pound) %
<S> <C> <C> <C> <C>
Service income (UK Pound)62,548 (UK Pound)46,287 (UK Pound)16,261 35.1%
Operating, selling, general and administrative expenses 49,917 43,630 6,287 14.4
----------------- -----------------
Operating income before depreciation and
amortization (a) 12,631 2,657 9,974 NM
Depreciation and amortization 23,416 19,645 3,771 19.2
----------------- -----------------
Operating loss (10,785) (16,988) (6,203) (36.5)
Interest expense 14,127 10,155 3,972 39.1
Investment income (671) (979) (308) (31.5)
----------------- -----------------
Net loss ((UK Pound)24,241) ((UK Pound)26,164) ((UK Pound)1,923) (7.3%)
================= =================
Three Months Ended
June 30, Increase/(Decrease)
1998 1997 (UK Pound) %
Service income (UK Pound)32,120 (UK Pound)24,105 (UK Pound)8,015 33.3%
Operating, selling, general and administrative expenses 25,292 22,214 3,078 13.9
----------------- -----------------
Operating income before depreciation and
amortization (a) 6,828 1,891 4,937 NM
Depreciation and amortization 11,918 10,149 1,769 17.4
----------------- -----------------
Operating loss (5,090) (8,258) (3,168) (38.4)
Interest expense 6,433 5,234 1,199 22.9
Investment income (338) (443) (105) (23.7)
----------------- -----------------
Net loss ((UK Pound)11,185) ((UK Pound)13,049) ((UK Pound)1,864) (14.3%)
================= =================
<FN>
- ------------
(a) See Note (1) on page 15.
</FN>
</TABLE>
Due to the similar nature of their operations, the following discussion with
respect to the Operating Companies' results of operations for the six and three
months ended June 30, 1998 and 1997 is based on their proportionate combined
results of operations. Such proportionate combined results of operations have
been derived from the financial statements of the Company and the Equity
Investees, after giving effect to the Company's ownership interests in each of
the Operating Companies as of June 30, 1998. The Company believes that
presentation of proportionate combined financial data, although not in
accordance with generally accepted accounting principles, facilitates the
understanding and assessment of its operating performance since the Company
accounts for its interests in Birmingham Cable and Cable London under the equity
method. The results of operations of Teesside and Cambridge Cable are
consolidated with those of the Company.
Proportionate combined service income was (UK Pound)62.5 million, (UK Pound)46.3
million, (UK Pound)32.1 million and (UK Pound)24.1 million for the six and three
months ended June 30, 1998 and 1997, respectively, representing increases of (UK
Pound)16.2 million and (UK Pound)8.0 million from 1997 as compared to the same
periods in 1998. Substantially all of the growth in service income was due to
increases in the number of cable communications and telephony subscribers,
primarily as a result of additional homes passed. Approximately one-half of the
Operating Companies' service income for the six and three months
17
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
ended June 30, 1998 and 1997 is derived from monthly subscription charges and
approximately one-half of their service income for these periods is derived
primarily from usage charges.
Proportionate combined operating, selling, general and administrative expenses
were (UK Pound)49.9 million, (UK Pound)43.6 million, (UK Pound)25.3 million and
(UK Pound)22.2 million for the six and three months ended June 30, 1998 and
1997, respectively, representing increases of (UK Pound)6.3 million and (UK
Pound)3.1 million from 1997 as compared to the same periods in 1998.
Substantially all of the increases were attributable to the continued
development of Teesside's and Cambridge Cable's operations and increased
business activity resulting from the growth in the number of subscribers and
development of the Operating Companies' franchise areas.
The Operating Companies account for costs and expenses applicable to the
construction and operation of their cable telecommunications systems under the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 51,
"Financial Reporting by Cable Television Companies." Under SFAS No. 51, during
the period while a system is partially under construction and partially in
service (the "Prematurity Period"), costs of telecommunications plant, including
materials, direct labor and construction overhead are capitalized.
Subscriber-related costs and general and administrative costs are expensed as
incurred. Costs incurred in anticipation of servicing a fully operating system
that will not vary regardless of the number of subscribers are partially
expensed and partially capitalized based upon the percentage of average actual
or estimated subscribers, whichever is greater, to the total number of
subscribers expected at the end of the Prematurity Period (the "Fraction").
During the Prematurity Period, depreciation and amortization of system assets is
determined by multiplying the depreciation and amortization of the total
capitalized system assets expected at the end of the Prematurity Period by the
Fraction. At the end of the Prematurity Period, depreciation and amortization of
system assets is based on the remaining undepreciated cost at that date.
Proportionate combined depreciation and amortization expense was (UK Pound)23.4
million, (UK Pound)19.6 million, (UK Pound)11.9 million and (UK Pound)10.1
million for the six and three months ended June 30, 1998 and 1997, respectively,
representing increases of (UK Pound)3.8 million and (UK Pound)1.8 million from
1997 as compared to the same periods in 1998. The increases were due to certain
of the Operating Companies' discrete build areas ending their Prematurity
Periods as set out under SFAS No. 51, as well as an increase in the percentage
used to calculate depreciation expense as a result of an increased number of
subscribers in those discrete franchise areas remaining in their Prematurity
Period.
Proportionate combined interest expense was (UK Pound)14.1 million, (UK
Pound)10.2 million, (UK Pound)6.4 million and (UK Pound)5.2 million for the six
and three months ended June 30, 1998 and 1997, respectively, representing
increases of (UK Pound)3.9 million and (UK Pound)1.2 million from 1997 as
compared to the same periods in 1998. The increases were primarily attributable
to additional borrowings under credit facilities and loans from shareholders.
Proportionate combined investment income was (UK Pound)671,000, (UK
Pound)979,000, (UK Pound)338,000 and (UK Pound)443,000 for the six and three
months ended June 30, 1998 and 1997, respectively, representing decreases of (UK
Pound)308,000 and (UK Pound)105,000 from 1997 as compared to the same periods in
1998. The decreases were attributable to decreases in the average balance of
cash, cash equivalents and restricted cash held by the Operating Companies
during the six and three months ended June 30, 1998, as compared to the same
periods in 1997.
18
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and the Operating Companies are not party to litigation which, in
the opinion of the Company's management, will have a material adverse effect on
the Company's financial position, results of operations or liquidity.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
2.1 Amendment No. 1 dated May 28, 1998 to Agreement and Plan of
Amalgamation dated as of February 4, 1998 among NTL
Incorporated, NTL (Bermuda) Limited and Comcast UK Cable
Partners Limited (incorporated by reference to Exhibit 2.1
to the Company's Current Report on Form 8-K filed on June 4,
1998.)
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
(i) Comcast UK Cable Partners Limited filed a Current Report on
Form 8-K under Item 5 on June 4, 1998 relating to Amendment
No. 1 to the Agreement and Plan of Amalgamation with NTL
Incorporated and NTL (Bermuda) Limited dated May 28, 1998,
pursuant to which the termination date was extended from
August 4, 1998 to October 5, 1998.
19
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMCAST UK CABLE PARTNERS LIMITED
--------------------------------------------------
/s/ John R. Alchin
--------------------------------------------------
John R. Alchin
Senior Vice President and
Treasurer
(Principal Financial Officer)
Date: August 14, 1998
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of operations and consolidated balance sheet and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000919957
<NAME> COMCAST UK CABLE PARTNERS LTD
<MULTIPLIER> 1,000
<CURRENCY> U. K. POUNDS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1.6677
<CASH> 92,315
<SECURITIES> 0
<RECEIVABLES> 6,870
<ALLOWANCES> (3,065)
<INVENTORY> 0
<CURRENT-ASSETS> 102,918
<PP&E> 348,960
<DEPRECIATION> (44,506)
<TOTAL-ASSETS> 513,521
<CURRENT-LIABILITIES> 28,637
<BONDS> 330,695
0
0
<COMMON> 501
<OTHER-SE> 139,398
<TOTAL-LIABILITY-AND-EQUITY> 513,521
<SALES> 36,027
<TOTAL-REVENUES> 36,588
<CGS> 0
<TOTAL-COSTS> (45,112)
<OTHER-EXPENSES> (10,335)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (17,407)
<INCOME-PRETAX> (31,777)
<INCOME-TAX> 0
<INCOME-CONTINUING> (31,777)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,777)
<EPS-PRIMARY> (.63)
<EPS-DILUTED> (.63)
</TABLE>
