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:
MARCH 31, 1999
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from ________ to ________.
Commission File Number 0-24792
NTL (BERMUDA) 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.)
Cedar House Secretary NTL Incorporated
41 Cedar Avenue 110 East 59th Street
Hamilton, HM 12, Bermuda New York, NY 10022
(441) 295-2244 (212) 906-8440
- --------------------------------------------------------------------------------
(Address, including zip code, and (Name, address, including zip code,
telephone number, and telephone number,
including area code, including area code,
of Registrant's principal of agent for service)
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 March 31, 1999, there were 800,000 shares of the Registrant's common stock
outstanding. The Registrant is an indirect, wholly owned subsidiary of NTL
Incorporated and there is no market for the Registrant's Common Stock.
<PAGE>
NTL (BERMUDA) LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 1999 (Unaudited) and December 31, 1998..........2
Condensed Consolidated Statements of Operations and
Accumulated Deficit for the Three Months Ended
March 31, 1999 and 1998 (Unaudited).......................3
Condensed Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1999 and 1998
(Unaudited)...............................................4
Notes to Condensed Consolidated
Financial Statements (Unaudited)......................5 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........8 - 11
Item 3. Quantitative and Qualitative Disclosures
About Market Risk........................................12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................12
Item 6. Exhibits and Reports on Form 8-K.........................12
SIGNATURE....................................................................13
-----------------------------------
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; Year 2000 readiness; future acquisitions; strategic partnerships and
divestitures; general business and economic conditions in the United Kingdom;
and other risks detailed from time to time in the Company's periodic reports
filed with the Securities and Exchange Commission.
<PAGE>
NTL (BERMUDA) LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------------- ------------------
(in (UK Pound)000's, except share data)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................................ (UK Pound)38,340 (UK Pound)103,451
Accounts receivable, less allowance for doubtful accounts of
(UK Pound)3,311 (1999) and (UK Pound)2,840 (1998)..................... 5,502 5,603
Other current assets..................................................... 13,186 5,404
---------------- ------------------
Total current assets..................................................... 57,028 114,458
---------------- ------------------
INVESTMENT IN CABLE LONDON PLC............................................... 26,625 28,080
---------------- ------------------
PROPERTY AND EQUIPMENT....................................................... 391,586 379,446
Accumulated depreciation ................................................ (64,818) (57,624)
---------------- ------------------
Property and equipment, net.............................................. 326,768 321,822
---------------- ------------------
DEFERRED CHARGES............................................................. 58,322 58,269
Accumulated amortization................................................. (16,911) (15,493)
---------------- ------------------
Deferred charges, net.................................................... 41,411 42,776
---------------- ------------------
OTHER ASSETS................................................................. 56,420 5,188
---------------- ------------------
(UK Pound)508,252 (UK Pound)512,324
================ ==================
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses.................................... (UK Pound)26,031 (UK Pound)25,162
Current portion of long-term debt........................................ 1,557 1,966
Note payable to Comcast U.K. Holdings, Inc............................... 12,577 12,310
---------------- ------------------
Total current liabilities............................................. 40,165 39,438
---------------- ------------------
LONG-TERM DEBT, less current portion......................................... 273,680 259,104
---------------- ------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY
Common stock, (UK Pound).01 par value - authorized and issued 800,000 shares 8 8
Additional capital....................................................... 359,049 359,049
Accumulated deficit...................................................... (164,650) (145,275)
---------------- ------------------
Total shareholder's equity............................................ 194,407 213,782
---------------- ------------------
(UK Pound)508,252 (UK Pound)512,324
================ ==================
</TABLE>
Note: The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date.
See notes to condensed consolidated financial statements.
2
<PAGE>
NTL (BERMUDA) LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
------------------- --------------------
(in (UK Pound)000's)
<S> <C> <C>
REVENUES
Service income................................................. (UK Pound)23,189 (UK Pound)17,302
Consulting fee income.......................................... 274
------------------- --------------------
23,189 17,576
------------------- --------------------
COSTS AND EXPENSES
Operating...................................................... 7,773 5,661
Selling, general and administrative............................ 10,169 8,489
Management fees................................................ 755
Depreciation and amortization.................................. 8,750 7,254
------------------- --------------------
26,692 22,159
------------------- --------------------
OPERATING LOSS.................................................... (3,503) (4,583)
OTHER (INCOME) EXPENSE
Interest expense............................................... 7,646 8,470
Investment income.............................................. (1,704) (2,229)
Equity in net losses of affiliates............................. 2,060 6,415
Amalgamation costs............................................. 145
Exchange losses (gains) and other.............................. 7,725 (1,748)
------------------- --------------------
15,872 10,908
------------------- --------------------
NET LOSS.......................................................... (19,375) (15,491)
ACCUMULATED DEFICIT
Beginning of period ........................................... (145,275) (187,373)
------------------- --------------------
End of period.................................................. ((UK Pound)164,650) ((UK Pound)202,864)
=================== ====================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
NTL (BERMUDA) LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
----------------- -----------------
(in (UK Pound)000's)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.............................................................. ((UK Pound)19,375) ((UK Pound)15,491)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation and amortization....................................... 8,750 7,254
Amortization on foreign exchange contracts.......................... 683 683
Non-cash interest expense........................................... 7,413 6,576
Non-cash investment income.......................................... (542) (694)
Exchange losses (gains)............................................. 7,637 (2,854)
Equity in net losses of affiliates.................................. 2,060 6,415
Changes in operating assets and liabilities:
Accounts receivable and other current assets...................... (7,681) 1,153
Accounts payable and accrued expenses............................. 866 3,151
----------------- -----------------
Net cash (used in) provided by operating activities............. (189) 6,193
----------------- -----------------
FINANCING ACTIVITIES
Repayments of debt.................................................... (754) (598)
Proceeds from borrowing............................................... 75,000
Deferred financing costs.............................................. (1,627)
Net transactions with affiliates...................................... (60) (141)
----------------- -----------------
Net cash (used in) provided by financing activities............. (814) 72,634
----------------- -----------------
INVESTING ACTIVITIES
Capital contributions and loans to affiliates......................... (1,768)
Fixed asset deposit with affiliate.................................... (51,915)
Capital expenditures.................................................. (12,141) (16,172)
Additions to deferred charges......................................... (52) (58)
----------------- -----------------
Net cash (used in) investing activities......................... (64,108) (17,998)
----------------- -----------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS......................... (65,111) 60,829
CASH AND CASH EQUIVALENTS, beginning of period........................... 103,451 37,372
----------------- -----------------
CASH AND CASH EQUIVALENTS, end of period................................. (UK Pound)38,340 (UK Pound)98,201
================= =================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
NTL (BERMUDA) LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The condensed consolidated balance sheet as of December 31, 1998 has been
condensed from the audited consolidated balance sheet as of that date. The
condensed consolidated balance sheet as of March 31, 1999 and the condensed
consolidated statements of operations and accumulated deficit and of cash
flows for the three months ended March 31, 1999 and 1998 have been prepared
by NTL (Bermuda) Limited (formerly 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 March 31, 1999 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, 1998 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the period ended March 31, 1999
are not necessarily indicative of operating results for the full year.
Recent 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.
2. AMALGAMATION WITH NTL
On October 29, 1998, NTL Incorporated ("NTL"), NTL (Bermuda) Limited, a
wholly owned subsidiary of NTL, and Comcast UK Cable Partners Limited
("Partners") consummated a transaction (the "Amalgamation"), whereby NTL
(Bermuda) Limited merged with Partners.
Pursuant to then existing arrangements between Partners and Telewest
Communications plc ("Telewest"), a co-owner of interests in Cable London
PLC ("Cable London") and Birmingham Cable Corporation Limited ("Birmingham
Cable"), Telewest had certain rights to acquire either or both of Partner's
interests in these systems as a result of the Amalgamation. On August 14,
1998, Partners and NTL entered into an agreement (the "Telewest Agreement")
with Telewest relating to Partner's ownership interests in Birmingham
Cable, Partner's and Telewest's respective ownership interests in Cable
London and certain other related matters. Pursuant to the Telewest
Agreement, Partners sold its 27.5% ownership interest in Birmingham Cable
to Telewest for (UK Pound)125 million, plus (UK Pound)5 million for certain
subordinated debt and fees. Partners and Telewest have also agreed within a
certain time period to rationalize their joint ownership of Cable London
pursuant to an agreed procedure (the "Shoot-out"). Between April 29 and
July 29, 1999, the Company can notify Telewest of the price at which it is
willing to sell its 50% ownership interest in Cable London to Telewest.
Following such notification, Telewest at its option will be required at
that price to either purchase the Company's 50% ownership interest in Cable
London or sell its 50% ownership interest in Cable London to the Company.
If the Company fails to give notice to Telewest during the Shoot-out
period, it will be deemed to have given a notice to Telewest offering to
sell its Cable London interest for (UK Pound)100 million.
5
<PAGE>
NTL (BERMUDA) LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
3. INVESTMENTS IN AFFILIATES
Included in investments in affiliates as of March 31, 1999 and December 31,
1998 are loans to Cable London of (UK Pound)28.5 million and accrued
interest of (UK Pound)9.2 million and (UK Pound)8.6 million, respectively.
The loans accrue interest at a rate of 2% above the published base lending
rate of Barclays Bank plc (7.50% effective rate as of March 31, 1999) and
are subordinate to Cable London's credit facility. Of these loans, (UK
Pound)21.0 million as of March 31, 1999 and December 31, 1998 are
convertible into ordinary shares of Cable London at a per share conversion
price of (UK Pound)2.00.
Although the Company is not contractually committed to make any additional
capital contributions or advances to Cable London, 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 Cable London.
Summarized financial information for affiliates accounted for under the
equity method is as follows:
<TABLE>
<CAPTION>
Birmingham Cable
Cable (1) London Combined
(UK Pound)000 (UK Pound)000 (UK Pound)000
<S> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 1999
Results of operations
Service income......................................... (UK Pound)18,992
Operating, selling, general and
administrative expenses.............................. (13,579)
Depreciation and amortization.......................... (5,904)
Operating loss......................................... (491)
Net loss............................................... (4,023)
Company's equity in net loss........................... (2,060)
AT MARCH 31, 1999
Financial position
Current assets......................................... 9,411
Noncurrent assets...................................... 194,185
Current liabilities.................................... 21,636
Noncurrent liabilities................................. 209,556
THREE MONTHS ENDED MARCH 31, 1998
Results of operations
Service income.........................................(UK Pound)18,779 (UK Pound)15,935 (UK Pound)34,714
Operating, selling, general and
administrative expenses.............................. (14,582) (12,663) (27,245)
Depreciation and amortization.......................... (6,486) (5,456) (11,942)
Operating loss......................................... (2,289) (2,184) (4,473)
Net loss............................................... (12,345) (5,870) (18,215)
Company's equity in net loss........................... (3,432) (2,983) (6,415)
<FN>
(1) The Company sold its 27.5% interest in Birmingham Cable in October 1998.
</FN>
</TABLE>
4. JOINT PURCHASING ALLIANCE AGREEMENT
Other assets includes a deposit of (UK Pound)51.9 million which will be
utilized under a Joint Purchasing Alliance Agreement entered into between
subsidiaries of the Company and Diamond Cable Communications plc
("Diamond"), a subsidiary of NTL, for combined fixed asset purchases.
6
<PAGE>
NTL (BERMUDA) LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
5. 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.
6. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of (UK Pound)233,000 and (UK
Pound)1.6 million during the three months ended March 31, 1999 and 1998,
respectively.
The Company's wholly owned subsidiaries incurred capital lease obligations
of (UK Pound)138,000 and (UK Pound)1.3 million during the three months
ended March 31, 1999 and 1998, respectively.
7
<PAGE>
NTL (BERMUDA) LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
NTL (Bermuda) Limited (the "Company") and its subsidiaries are principally
engaged in the development, construction, management and operation of companies
in the UK cable and telecommunications industry. As of March 31, 1999, the
Company had interests in three operations (the "Operating Companies"): Cambridge
Holding Company Limited ("Cambridge Cable"), in which the Company owns a 100%
interest, two companies holding franchises for Darlington and Teesside, England
("Teesside"), in which the Company owns a 100% interest, and Cable London PLC
("Cable London"), in which the Company owns a 50% interest. The Company accounts
for its interests in Cable London under the equity method. Birmingham Cable
Corporation Limited ("Birmingham Cable") in which the Company owned a 27.5%
interest was accounted for using the equity method in 1998 until the interests
were sold to Telewest Communications plc ("Telewest") in October 1998.
When build-out of the Operating Companies' systems is complete, these systems
will have the potential to serve approximately 1.2 million homes and the
businesses within their franchise areas. As of March 31, 1999, the Operating
Companies' systems passed more than 888,000 homes or approximately 75% of the
homes in their franchise areas and served more than 221,000 cable subscribers,
314,000 residential telephony subscribers and 11,000 business telephony
subscribers.
Liquidity and Capital Resources
The Company
Historically, the Company financed its cash requirements through capital
contributions from its former shareholders and the issuance of common stock,
debentures and other debt. In November 1995, the Company issued $517.3 million
principal amount at maturity 11.20% Senior Discount Debentures due 2007 (the
"2007 Discount Debentures"). 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 Company has 9% Subordinated Notes payable to Comcast U.K. Holdings, Inc.
which are due in September 1999. Principal and accrued interest due will be
approximately (UK Pound)13 million.
In August 1998, the Company and NTL Incorporated entered into an agreement with
Telewest relating to the Company's and Telewest's respective 50% ownership
interests in Cable London and certain other related matters (the "Telewest
Agreement"). Pursuant to the Telewest Agreement, the Company and Telewest agreed
to a procedure to rationalize their joint ownership of Cable London as follows
(the "Cable London Shoot-out"). Between April 29 and July 29, 1999, the Company
can notify Telewest of the price at which it is willing to sell its 50%
ownership in Cable London to Telewest. Following such notification, Telewest at
its option will be required at that price to either purchase the Company's 50%
ownership interest in Cable London or sell its 50% ownership interest in Cable
London to the Company. If the Company fails to give notice to Telewest, it will
be deemed to have given a notice to Telewest offering to sell its Cable London
interest for (UK Pound)100 million.
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, or, if necessary, to obtain external financing, although
there can be no assurance that any such financing will be obtained on acceptable
terms and conditions. Except for its working capital and debt service
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 Cable London, (ii) whether the Operating Companies
can obtain debt financing, (iii) whether the Operating Companies will be able to
generate
8
<PAGE>
NTL (BERMUDA) LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
positive operating cash flow, (iv) the timing of the build-out of the Operating
Companies' systems, and (v) whether there may be future acquisitions, including
the Cable London Shoot-out.
The Company estimates that the Operating Companies will require approximately
(UK Pound)83.0 million from April 1, 1999 through December 31, 1999, to continue
the build-out of their systems. Management believes that the entire (UK
Pound)83.0 million required will be funded through the Joint Purchasing Alliance
Agreement deposit of (UK Pound)51.9 million, cash from operations or from cash
on hand, and, for Cable London, through cash from operations, cash on hand or
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 Telewest, its strategic and
financial partner in Cable London, will provide its pro-rata share of any
required fundings, although Telewest is not contractually obligated to do so.
Thus, no assurance of such funding can be given. If Telewest fails to provide
such financing, Cable London 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 Telewest
generally have veto rights over Cable London's debt financing decisions.
Year 2000 Issue
Strategy
The Company's operations are conducted through its Operating Companies, each of
which has different configurations of hardware and software. The Company itself
is a holding company with very limited activities. The Company uses personal
computers and software that are Year 2000 ready. Each of the Operating Companies
is conducting its own program for Year 2000 compliance. Each of the Operating
Companies has appointed a senior manager to be responsible for achieving Year
2000 readiness, and has set up an internal progress and review process. This
includes assessing the progress of significant vendors in achieving Year 2000
readiness. The Cambridge Cable and Teesside Year 2000 programs have been
integrated into the NTL Incorporated program.
Status to Date
The Operating Companies utilize hardware and software from vendors for
substantially all of their activities, including billing, customer service and
the operation of the network. The Operating Companies, therefore, are working
with these third-party vendors to ensure Year 2000 readiness. It is possible
that one or more suppliers will not be able to provide the Operating Companies
with reasonable assurances that they will be ready for the Year 2000, in which
case the Company expects the Operating Companies will seek another vendor. No
assurance, however, can be given that such alternative will be available.
The Operating Companies have already received assurances from vendors of its
main service platforms, including vendors of its telephony switches, cable TV
subsystems, and customer management systems ("CMS"), with the exception of
Cambridge Cable's CMS, that they expect to be Year 2000 ready. The Cambridge
Cable CMS is currently being modified with completion scheduled for July 1999.
The cost of the necessary software upgrades is generally included in the
Operating Companies maintenance contracts with its vendors.
Costs
There are few major costs directly attributable to the Year 2000 issues, as
suppliers will include any remedial software in their normal upgrade process.
For the smaller systems, such as PCs, there has been some acceleration of
routine replacement and upgrades to ensure all systems are Year 2000 ready. The
Company estimates that this acceleration will result in approximately (UK
Pound)300,000 per Operating Company to be incurred in 1999.
9
<PAGE>
NTL (BERMUDA) LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
Risks
The primary risks of a serious business-affecting Year 2000 problem arise from
two separate external sources:
First, a major utility (such as power, water, major telecommunications company
or public sector entity) fails to operate at or after the Year 2000. This risk,
which is beyond the Company's control or ability to monitor, could significantly
adversely affect the Company's financial condition and results of operations.
Second, a supplier of mission critical software fails to timely deliver suitable
Year 2000 software, despite its written assurances. Any such failure could
significantly adversely affect the Company's financial condition and results of
operations. The Operating Companies' Year 2000 project managers' primary task is
to prevent such a failure.
Contingency Plans
Cambridge Cable and Teesside will be included in NTL Incorporated's contingency
planning, which is in process.
Condensed Consolidated Statements of Cash Flows
Net cash (used in) provided by operating activities amounted to ((UK
Pound)189,000) and (UK Pound)6.2 million for the three months ended March 31,
1999 and 1998, respectively. During the three months ended March 31, 1999, net
cash used in operating activities includes exchange losses of (UK Pound)7.6
million compared to gains of (UK Pound)2.9 million in the prior period and
changes in working capital as a result of the timing of receipts and
disbursements.
Net cash (used in) provided by financing activities amounted to ((UK
Pound)814,000) and (UK Pound)72.6 million for the three months ended March 31,
1999 and 1998, respectively. During the three months ended March 31, 1998, net
cash provided by financing activities includes (UK Pound)75.0 million of
borrowings under a credit facility from a consortium of banks that was repaid in
October 1998.
Net cash used in investing activities was (UK Pound)64.1 million and (UK
Pound)18.0 million for the three months ended March 31, 1999 and 1998,
respectively. During the three months ended March 31, 1999, net cash used in
investing activities includes the Joint Purchasing Alliance Agreement deposit of
(UK Pound)51.9 million for combined purchases of fixed assets by NTL affiliates
and capital expenditures of (UK Pound)12.1 million. During the three months
ended March 31, 1998, net cash used in investing activities includes capital
expenditures of (UK Pound)16.2 million and capital contributions and loans to
affiliates of (UK Pound)1.8 million.
10
<PAGE>
NTL (BERMUDA) LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
Results of Operations
The Company
Summarized consolidated financial information for the Company for the three
months ended March 31, 1999 and 1998 is as follows (in thousands, "NM" denotes
percentage is not meaningful):
<TABLE>
<CAPTION>
Three Months Ended
March 31, Increase/(Decrease)
1999 1998 (UK Pound) %
------------------ ----------------- --------------- ------
<S> <C> <C> <C> <C>
Revenues (UK Pound)23,189 (UK Pound)17,576 (UK Pound)5,613 31.9%
Operating, selling, general and
administrative expenses 17,942 14,150 3,792 26.8
Management fees 755 (755) NM
Depreciation and amortization 8,750 7,254 1,496 20.6
------------------ -----------------
Operating loss (3,503) (4,583) (1,080) (23.6)
------------------ -----------------
Interest expense 7,646 8,470 (824) (9.7)
Investment income (1,704) (2,229) (525) (23.6)
Equity in net losses of affiliates 2,060 6,415 (4,355) (67.9)
Amalgamation costs 145 145 NM
Exchange losses (gains) and other 7,725 (1,748) 9,473 NM
------------------ -----------------
Net loss ((UK Pound)19,375) ((UK Pound)15,491) (UK Pound)3,884 25.1%
================== =================
</TABLE>
Substantially all of the increases in revenues, operating expenses, selling,
general and administrative expenses and depreciation and amortization expense
for the three months ended March 31, 1999, as compared to the same period in
1998, 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.
These trends are expected to continue for the foreseeable future.
The Company's former parent and one of its former affiliates provided management
services to the Company. The management agreement was terminated upon the
Amalgamation with NTL Incorporated.
Interest expense for the three months ended March 31, 1999 and 1998 was (UK
Pound)7.7 million and (UK Pound)8.5 million, respectively, representing a
decrease of (UK Pound)800,00 from 1998 as compared to the same period in 1999.
The decrease is primarily attributable to the repayment of the bank credit
facility in October 1998.
Investment income for the three months ended March 31, 1999 and 1998 was (UK
Pound)1.7 million and (UK Pound)2.2 million, respectively, representing a
decrease of (UK Pound)500,000 from 1998 as compared to the same period in 1999.
The decrease is primarily due to decreases in the average cash balances
available for investment in 1999 as compared to the same period in 1998.
Equity in net losses of affiliates for the three months ended March 31, 1999 and
1998 was (UK Pound)2.1 million and (UK Pound)6.4 million, respectively,
representing a decrease of (UK Pound)4.3 million from 1998 as compared to the
same period in 1999. The decrease is attributable to reduced losses of Cable
London in 1999 and the sale of Birmingham Cable in October 1998.
The Company incurred costs of (UK Pound)145,000 in 1999 related to the
Amalgamation with NTL Incorporated.
Exchange losses (gains) and other for the three months ended March 31, 1999 and
1998 were (UK Pound)7.7 million and ((UK Pound)1.7) million, respectively,
representing a change of (UK Pound)9.4 million from 1998 as compared to the same
period in 1999. This change primarily resulted 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. The Company's results of
operations will continue to be affected by exchange rate fluctuations.
11
<PAGE>
NTL (BERMUDA) LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have not been any material changes in the reported market risks since the
end of the most recent fiscal year.
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:
27.0 Financial Data Schedule.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 1999.
12
<PAGE>
NTL (BERMUDA) LIMITED AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1999
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.
NTL (BERMUDA) LIMITED
Date: May 11, 1999 By: /s/ J. Barclay Knapp
--------------------------------------
J. Barclay Knapp
President, Chief Executive Officer and
Chief Financial Officer
Date: May 11, 1999 By: /s/ Gregg Gorelick
--------------------------------------
Gregg Gorelick
Vice President - Controller
(Principal Accounting Officer)
13
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<ARTICLE> 5
<CURRENCY> U.K. POUNDS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1.6116
<CASH> 38,340
<SECURITIES> 0
<RECEIVABLES> 8,813
<ALLOWANCES> (3,311)
<INVENTORY> 0
<CURRENT-ASSETS> 57,028
<PP&E> 391,586
<DEPRECIATION> (64,818)
<TOTAL-ASSETS> 508,252
<CURRENT-LIABILITIES> 40,165
<BONDS> 273,680
0
0
<COMMON> 8
<OTHER-SE> 194,399
<TOTAL-LIABILITY-AND-EQUITY> 508,252
<SALES> 23,189
<TOTAL-REVENUES> 23,189
<CGS> 0
<TOTAL-COSTS> (26,692)
<OTHER-EXPENSES> (9,930)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,646)
<INCOME-PRETAX> (19,375)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,375)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,375)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
