PROSPECTUS SUPPLEMENT NO. 1 TO PROSPECTUS DATED MARCH 27, 1998
DIAMOND CABLE COMMUNICATIONS PLC
13 1/4% SENIOR DISCOUNT NOTES DUE SEPTEMBER 30, 2004
11 3/4% SENIOR DISCOUNT NOTES DUE DECEMBER 15, 2005
10 3/4% SENIOR DISCOUNT NOTES DUE FEBRUARY 15, 2007
------------------------
Interest will not accrue on the 13 1/4% Senior Discount Notes due September
30, 2004 (the "1994 Notes") prior to September 30, 1999. Interest on the 1994
Notes will be payable on March 31 and September 30 of each year, commencing
March 31, 2000, at a rate of 13 1/4% per annum. See "Description of 1994 Notes".
The 1994 Notes are redeemable, in whole or in part, at the option of the Company
at any time on or after September 30, 1999, at the redemption prices set forth
herein plus accrued interest to the date of redemption. The 1994 Notes are also
redeemable in whole, but not in part, at the option of the Company at any time
at 100% of the principal amount plus accrued interest to the date of redemption
(or, prior to September 30, 1999, at 100% of Accreted Value) in the event of
certain tax law changes requiring the payment of additional amounts as described
herein. The Company is required to offer to repurchase all outstanding 1994
Notes at 101% of principal amount plus accrued interest to the date of
repurchase (or, prior to September 30, 1999, at 101% of Accreted Value on the
date of repurchase) after the occurrence of a Change of Control. In addition,
upon the occurrence of an Asset Disposition, the Company may be obligated to
make an Offer to Purchase all or a portion of the outstanding 1994 Notes at 100%
of the principal amount plus accrued interest to the date of repurchase (or,
prior to December 15, 2000, at 100% of Accreted Value on the date of
repurchase). See "Description of the 1994 Notes -- Redemption". There can be no
assurance that the Company will have the financial resources necessary or
otherwise be able to repurchase the 1994 Notes under such circumstances.
Interest will not accrue on the 11 3/4% Senior Discount Notes due December
15, 2005 (the "1995 Notes") prior to December 15, 2000. Interest on the 1995
Notes will be payable on June 15 and December 15 of each year, commencing June
15, 2001 at a rate of 11 3/4% per annum. See "Description of the 1995 Notes".
The 1995 Notes are redeemable, in whole or in part, at the option of the Company
at any time on or after December 15, 2000, at the redemption prices set forth
herein plus accrued interest to the date of redemption. The 1995 Notes are also
redeemable in whole, but not in part, at the option of the Company at any time
at 100% of the principal amount plus accrued interest to the date of redemption
(or, prior to December 15, 2000, at 100% of Accreted Value) in the event of
certain tax law changes requiring the payment of additional amounts as described
herein. Upon the occurrence of a Change of Control the Company is required to
offer to repurchase all outstanding 1995 Notes at 101% of principal amount plus
accrued interest to the date of repurchase (or, prior to December 15, 2000, at
101% of Accreted Value on the date of repurchase) after the occurrence of a
Change of Control. In addition, upon the occurrence of an Asset Disposition, the
Company may be obligated to make an Offer to Purchase all or a portion of the
outstanding 1995 Notes at 100% of the principal amount plus accrued interest to
the date of repurchase (or, prior to December 15, 2000, at 100% of Accreted
Value on the date of repurchase). See "Description of the 1995 Notes --
Redemption". There can be no assurance that the Company will have the financial
resources necessary or otherwise be able to repurchase the 1995 Notes under such
circumstances.
Interest will not accrue on the 10 3/4% Senior Discount Notes due February
15, 2007 (the "1997 Notes", and together with the 1994 Notes and the 1995 Notes,
the "Discount Notes") prior to February 15, 2002. Interest on the 1997 Notes
will be payable on February 15 and August 15 of each year, commencing August 15,
2002 at a rate of 10 3/4% per annum. See "Description of the 1997 Notes". The
1997 Notes will be redeemable, in whole or in part, at the option of the Company
at any time on or after February 15, 2002, at the redemption prices set forth
herein plus accrued and unpaid interest, if any, to the date of redemption. The
1997 Notes will also be redeemable in whole, but not in part, at the option of
the Company at any time at 100% of the principal amount at maturity (or, prior
to February 15, 2002 at 100% of Accreted Value) plus accrued and unpaid
interest, if any, to the date of redemption in the event of certain tax law
changes requiring the payment of additional amounts as described herein. See
"Description of the 1997 Notes -- Redemption". Upon the occurrence of a Change
of Control, the Company is required to offer to repurchase all outstanding 1997
Notes at 101% of principal amount at maturity (or, prior to February 15, 2002,
at 101% of Accreted Value on the date of repurchase), plus accrued and unpaid
interest, if any, to the date of repurchase. See "Description of the 1997
Notes--Certain Comments--Change of Control". There can be no assurance that the
Company would have the financial resources necessary or otherwise be able to
repurchase the 1997 Notes under such circumstances.
The Discount Notes constitute unsecured senior indebtedness of the Company.
At March 31, 1998, the Company had approximately(pound)740 million of
indebtedness outstanding, including approximately (pound)140 million, (pound)233
million and (pound)166 million in accreted value of 1994 Notes, the 1995 Notes
and the 1997 Notes, respectively. On February 6, 1998, a wholly-owned subsidiary
of the Company, Diamond Holdings plc, issued (pound)135,000,000 in principal
amount of its 10% Senior Notes due February 1, 2008 and $110,000,000 in
principal amount of its 9 1/8% Senior Notes due February 1, 2008 (the "1998
Notes") each unconditionally guaranteed as to principal, interest and any other
amounts due by the Company. The Company has not issued, and does not have any
current plans to issue, any significant indebtedness that will be subordinated
to the Discount Notes. The Company is a holding company which conducts
substantially all of its business through subsidiaries, all of which are
wholly-owned. The Discount Notes effectively rank junior to any indebtedness of
the Company's subsidiaries to the extent of the assets of such subsidiaries and
to any secured indebtedness of the Company to the extent of the assets securing
such indebtedness. The 1998 Notes effectively rank senior to the Discount Notes
in that funds will be available from the Company's subsidiaries, including
Diamond Holdings Plc, to the Company only through payment of dividends, if any,
or payment of principal of and interest on currently outstanding intercompany
indebtedness which will be subordinated to the 1998 Notes. The Guarantee by the
Company in respect of payments in respect of the Discount Notes (the
"Guarantee") will rank pari passu with the Company's unsecured obligations,
including its obligations under the Discount Notes.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Prospectus Supplement, together with the Prospectus dated March 27,
1998 is to be used by Goldman, Sachs & Co. in connection with offers and sales
of the Discount Notes related to market-making transactions at negotiated prices
related to prevailing market prices at the time of sale. The Company will not
receive any of the proceeds of such transactions. Goldman, Sachs & Co. may act
as a principal or agent in such transactions. See "Plan of Distribution" in the
Prospectus.
GOLDMAN, SACHS & CO.
------------------------
The date of this Prospectus Supplement is May 18, 1998.
<PAGE>
GENERAL
This Prospectus Supplement should be read in conjunction with the
Prospectus dated March 27, 1998 (the "Prospectus"). The Prospectus has been used
by Goldman, Sachs & Co. in connection with offers and sales related to
market-making transactions in the Senior Notes. This Prospectus Supplement,
together with the Prospectus, is to be used by Goldman, Sachs & Co. in
connection with such transactions and unsolicited purchases and sales.
Capitalized terms used in this Prospectus Supplement and not otherwise
defined have the same meanings as in the Prospectus.
RECENT DEVELOPMENTS
Operating Results. Attached hereto is the Company's Quarterly Report on
Form 10-Q filed on May 15, 1998, which includes, among other things, the
Company's unaudited interim financial statements as of, and for the three month
period ended March 31, 1998, and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the three month period ended
March 31, 1998.
-2-
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-83740
Diamond Cable Communications Plc
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
England and Wales N/A
- ------------------------------------------ -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Diamond Plaza, Daleside Road
Nottingham NG2 3GG, England N/A
- ------------------------------------------ -------------------------
(Address of principal executive offices) (Zip code)
44-115-912-2217
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of the Registrant's Ordinary Shares of
2.5 pence each outstanding as of March 31, 1998 was 59,138,791.
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
INDEX
Page
INTRODUCTION ............................................................ 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited condensed consolidated statements of
operations--Three months ended
March 31, 1998 and 1997...................................... 5
Condensed consolidated balance sheets--
March 31, 1998 and December 31, 1997......................... 6
Unaudited condensed consolidated statement of
shareholders' equity -- Three months
ended March 31, 1998......................................... 7
Unaudited condensed consolidated statements of cash
flows -- Three months ended March 31, 1998
and 1997..................................................... 8
Notes to the unaudited condensed consolidated
financial statements......................................... 9
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition........................ 12
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................... 23
SIGNATURES............................................................... 24
2
<PAGE>
INTRODUCTION
Diamond Cable Communications Plc (the "Company") is a public limited
company (with registered number 2965241) incorporated under the laws of England
and Wales. The Company is a holding company which holds all of the shares of (i)
Diamond Cable Communications (UK) Limited (formerly Diamond Cable (Nottingham)
Limited) ("DCL") and its subsidiaries and (ii) a group of companies comprising
East Midlands Cable Group Limited ("EMCG"), East Midlands Cable Communications
Limited and East Midlands Cable Holdings Limited (collectively "LCL"), in both
cases through intermediate holding companies, Diamond Holdings plc and Jewel
Holdings Limited ("Jewel"). References herein to the "Group" refer to the
Company and its subsidiaries, including, since September 27, 1995, LCL.
The Group operates a telecommunications and cable television business
focused on the East Midlands area of England. The Group is currently
constructing a broadband fiber-optic network to serve the approximately 1.2
million homes and an estimated 60,600 businesses within its contiguous franchise
areas. As of March 31, 1998, the Group's cable television and telecommunications
network had passed by civils construction approximately 574,600 homes and an
estimated 27,800 businesses, of which portions of the network passing
approximately 550,900 homes and an estimated 26,300 businesses had been
activated. As of that date, the Group also had approximately 177,600 residential
telephone lines, 90,500 cable television subscribers and 29,600 business
telephone lines. Through that date, (pound)462 million had been invested (at
original cost) in the construction of the network and related systems.
--------------------
THIS DOCUMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS, IDENTIFIED
AS SUCH, WITH RESPECT TO WHICH THE COMPANY IS SEEKING TO UTILIZE THE SAFE HARBOR
PROVIDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE
STATEMENTS ARE ACCOMPANIED BY, AND SHOULD BE READ IN CONJUNCTION WITH, AN
EXPLANATION OF IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS.
3
<PAGE>
The Company operates only in the United Kingdom and, accordingly,
publishes its financial statements in pounds sterling. In this Report,
references to "pounds sterling," "(pound)" "pence" or "P" are to the lawful
currency of the United Kingdom and references to "U.S. dollars," "$" or "(cent)"
are to the lawful currency of the United States. Merely for convenience, this
Report contains translations of certain pound sterling amounts into U.S. dollars
at specified rates. These translations should not be construed as
representations that the pound sterling amounts actually represent such U.S.
dollar amounts or could have been or could be converted into U.S. dollars at the
rate indicated or at any other rate. Unless otherwise indicated, the
translations of pounds sterling into U.S. dollars have been made at $1.6766 per
(pound)1.00, the noon buying rate in The City of New York fOR cable transfers in
pounds sterling as certified for customs purposes by the Federal Reserve Bank of
New York (the "Noon Buying Rate") on March 31, 1998. On May 13, 1998, the Noon
Buying Rate was $1.6308 per (pound)1.00.
4
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DIAMOND CABLE COMMUNICATIONS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------------------------
1997 1998 1998
---------------- ------------------- --------------
(note 1)
(in thousands)
<S> <C> <C> <C>
REVENUE
Business telecommunications.......................... (pound) 3,173 (pound) 4,332 $ 7,263
Residential telephone................................ 6,171 9,840 16,498
Cable television..................................... 3,818 5,459 9,152
-------------- -------------- --------
13,162 19,631 32,913
-------------- -------------- --------
OPERATING COSTS AND EXPENSES
Telephone............................................ (2,596) (3,738) (6,267)
Programming.......................................... (2,292) (3,025) (5,072)
Selling, general, and administrative................. (6,201) (8,729) (14,635)
Depreciation and amortization........................ (6,380) (9,320) (15,626)
-------------- -------------- --------
(17,469) (24,812) (41,600)
-------------- -------------- --------
OPERATING LOSS....................................... (4,307) (5,181) (8,687)
Interest income...................................... 943 3,006 5,040
Interest expense and amortization of debt
discount and expenses.............................. (12,181) (18,959) (31,786)
Foreign exchange (losses)/gains, net................. (11,994) 12,497 20,952
Unrealized gain/(loss) on derivative financial
instruments........................................ 76 (1,914) (3,209)
Realized gain on derivative financial
instruments........................................ 11,553 24 40
-------------- -------------- --------
Loss before income taxes............................. (15,910) (10,527) (17,650)
Income taxes......................................... -- -- --
-------------- -------------- --------
NET LOSS............................................. (pound)(15,910) (pound)(10,527) $(17,650)
============== ============== ========
See the accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
</TABLE>
5
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
------------------ -----------------------------------------
1997 1998 1998
------------------ -------------------- -------------------
(NOTE 1)
(IN THOUSANDS)
ASSETS
<S> <C> <C> <C>
pound pound
Cash and cash equivalents ............................... sterling 75,680 sterling 246,818 $413,815
Trade receivables (net of allowance for doubtful
accounts of (pound)2,788 at December 31, 1997 and
(pound)3,232 at March 31, 1998)........................ 8,569 8,816 14,781
Other assets............................................. 4,470 4,006 6,717
Deferred financing costs (less accumulated amortization
of (pound)2,627 at December 31, 1997 and
(pound)3,111 at March 31, 1998)........................ 15,533 21,714 36,406
Property and equipment, net (note 4)..................... 365,636 391,458 656,318
Goodwill (less accumulated amortization of
(pound)10,914 at December 31, 1997 and(pound)12,127 at
March 31, 1998).......................................... 86,046 84,833 142,231
Franchise costs (less accumulated
amortization of (pound)116 at December 31, 1997 and
(pound)123 at March 31, 1998).......................... 423 416 697
--------- --------- ----------
TOTAL ASSETS pound pound
sterling 556,357 sterling 758,061 $1,270,965
========= ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
pound pound
Accounts payable......................................... sterling 22,319 sterling 27,572 $46,227
Other liabilities........................................ 11,224 15,648 26,236
Senior discount notes.................................... 534,861 539,324 904,230
Senior notes............................................. - 200,613 336,348
Capital lease obligations................................ 8,041 7,570 12,692
Mortgage loan............................................ 2,423 2,413 4,045
Shareholders' equity
Ordinary shares (70,000,000 authorized;
59,138,791 issued at December 31, 1997 and
at March 31, 1998)................................... 1,478 1,478 2,478
Non-voting deferred shares (6 shares authorized
and issued at December 31, 1997 and March 31,
1998).................................................. - - -
Additional paid-in-capital............................. 134,466 134,466 225,446
Accumulated other comprehensive loss................... (204) (2,245) (3,764)
Accumulated deficit.................................... (158,251) (168,778) (282,973)
--------- --------- ----------
pound pound
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............... sterling 556,357 sterling 758,061 $1,270,965
========= ========= ==========
See the accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
</TABLE>
6
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENT
OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
NON-VOTING PAID-
ORDINARY SHARES DEFERRED SHARES IN-CAPITAL
------------------------- --------------- ----------
<S> <C> <C> <C>
(IN THOUSANDS EXCEPT SHARE DATA)
Number Number
------ ------
BALANCE AT JANUARY 1, 1998........ 59,138,791 (pound)1,478 6 -- (pound)134,466
Unrealized loss on securities..... -- -- -- -- --
Net loss.......................... -- -- -- -- --
---------- ------------ ------ ----- --------------
BALANCE AT MARCH 31, 1998......... 59,138,791 (pound)1,478 6 -- (pound)134,466
========== ============ ====== ===== ==============
ACCUMULATED
OTHER TOTAL
COMPREHENSIVE ACCUMULATED SHAREHOLDERS'
LOSS DEFICIT DEFICIT
--------------- ---------------- -------------
<S> <C> <C> <C>
(IN THOUSANDS EXCEPT SHARE DATA)
BALANCE AT JANUARY 1, 1998........ (pound) 204 (pound)(158,251) (pound)(22,511)
Unrealized loss on securities..... (2,041) -- (2,041)
Net loss.......................... -- (10,527) (10,527)
--------------- ------------- -------------
BALANCE AT MARCH 31, 1998......... (pound)(2,245) (pound)168,778 (pound)35,079
=============== ============= =============
<FN>
- ---------------
See the accompanying notes to the Unaudited Condensed
Consolidated Financial Statements.
</FN>
</TABLE>
7
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------------------
1997 1998 1998
--------------- -------------- -------------
(NOTE 1)
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................................... (pound)(15,910) (pound)(10,527) $ (17,650)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization................................... 6,380 9,320 15,626
Unrealized foreign exchange losses/(gains)...................... 11,193 (12,552) (21,045)
Loss on disposition of assets................................... 11 - -
Accretion of Senior Note discount............................... 11,184 15,247 25,563
Provision for losses on accounts receivable..................... 207 444 744
Amortization of deferred financing costs........................ 543 484 811
Change in operating assets and liabilities:
Change in trade receivables................................... (580) (691) (1,158)
Change in other assets........................................ (1,407) 464 778
Change in accounts payable.................................... 6,311 1,469 2,463
Change in other liabilities................................... (7,459) 4,040 6,774
--------------- -------------- -------------
Net cash provided by operating activities......................... 10,473 7,698 12,906
--------------- -------------- -------------
Cash flows from investing activities:
Cash invested in property and equipment......................... (26,105) (30,091) (50,450)
Proceeds from disposition of assets............................. 8 14 23
--------------- -------------- -------------
Net cash used in investing activities............................. (26,097) (30,077) (50,427)
--------------- -------------- -------------
Cash flows from financing activities:
Proceeds of issue of debt....................................... 153,692 202,381 339,312
Debt financing costs............................................ (4,767) (6,225) (10,437)
Repayment of mortgage loan...................................... (17) (10) (17)
Capital element of capital lease repayments..................... (351) (588) (985)
--------------- -------------- -------------
Net cash provided by financing activities......................... 148,557 195,558 327,873
--------------- -------------- -------------
Net increase in cash and cash equivalents......................... 132,933 173,179 290,352
Cash and cash equivalents at beginning of period.................. 18,311 75,680 126,885
Effect of exchange rate changes on cash and cash equivalents...... (142) (2,041) (3,422)
--------------- -------------- -------------
Cash and cash equivalents at end of period........................ (pound)151,102 (pound)246,818 $ 413,815
See the accompanying notes to the Unaudited Condensed
Consolidated Financial Statements.
</TABLE>
8
<PAGE>
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
Diamond Cable Communications Plc (the "Company") owns and operates
cable television and telecommunications systems through its subsidiaries. The
unaudited consolidated financial statements of the Company and its subsidiaries
(the "Group") have been prepared in accordance with U.S. generally accepted
accounting principles and the rules and regulations of the Securities and
Exchange Commission (the "SEC"). Accordingly, certain information and footnote
disclosures normally included in consolidated financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. The consolidated financial statements are stated in pounds sterling
((pound)). Merely for convenience the consolidated financial statements contain
translations of certain pound sterling amounts into U.S. dollars at $1.6766 per
(pound)1.00, the noon buying rate in the City of New York for cable transfers in
pounds sterling as certified for customs purposes by the Federal Reserve Bank of
New York on March 31, 1998.
2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS
The financial statements as of and for the periods ended March 31, 1998
and 1997 are unaudited. However, in the opinion of the management, such
statements include all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of the results for the periods
presented. The results of operations for any interim period are not necessarily
indicative of the results for the full year. The interim financial statements
should be read in conjunction with the financial information included in the
Company's 1997 Annual Report on Form 10-K filed with the SEC.
3. COMPREHENSIVE LOSS
SFAS No. 130, "Reporting Comprehensive Income" was issued in June 1997,
and is effective for accounting periods beginning after December 15, 1997. SFAS
No. 130 establishes standards for reporting and display of comprehensive income
and its components. Comprehensive loss for the three month periods to March 31,
1997 and 1998 is shown below:
9
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------------------
1997 1998 1998
--------------- -------------- -------------
(NOTE 1)
(IN THOUSANDS)
<S> <C> <C> <C>
Net loss..................................................... (pound)(15,910) (pound)(10,527) $(17,650)
Other comprehensive loss net of tax:
Unrealized loss on securities.............................. (142) (2,041) (3,422)
--------------- -------------- --------------
Comprehensive loss............................................... (pound)(16,052) (pound)(12,568) $(21,072)
--------------- -------------- --------------
</TABLE>
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
LAND AND CABLE OFFICE MOTOR
BUILDINGS NETWORK EQUIPMENT VEHICLES TOTAL
------------- ----------- ------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ACQUISITION COSTS
Balance at January 1, 1998....... (pound)5,111 (pound)405,652 (pound)9,017 (pound)606 (pound)420,386
Additions........................ 102 33,448 274 112 33,936
Dispositions..................... - (63) - (24) (87)
--------- --------- -------- -------- ---------
Balance at March 31, 1998........ 5,213 439,037 9,291 694 454,235
--------- --------- -------- -------- ---------
ACCUMULATED DEPRECIATION
Balance at January 1, 1998....... 478 49,695 4,369 208 54,750
Charge for period................ 43 7,510 508 39 8,100
Dispositions..................... - (55) - (18) (73)
--------- --------- -------- -------- ---------
Balance at March 31, 1998........ 521 57,150 4,877 229 62,777
--------- --------- -------- -------- ---------
MARCH 31, 1998 NET BOOK VALUE.... 4,692 381,887 4,414 465 391,458
========= ========= ======== ======== =========
DECEMBER 31, 1997 NET BOOK
VALUE.......................... (pound)4,633 (pound)355,957 (pound)4,648 (pound)398 (pound)365,636
========= ========== ======== ======== =========
</TABLE>
The estimated useful life of set-top boxes and initial subscriber installations
was reduced from seven years to three years with effect from January 1, 1998.
The effect of the change in estimated useful life on net income for the period
was (pound)1.4 million ($2.3 million).
5. COMMITMENTS AND CONTINGENCIES
The Company is obligated under the terms of its existing licenses, and
under the milestone requirements of its local delivery licenses ("LDLs"), to
construct cable systems passing a predetermined number of premises. Should the
Company fail to achieve these
10
<PAGE>
milestones, without license modifications, the Director General could commence
proceedings to require compliance. Similarly, the Independent Television
Commission ("ITC") may commence proceedings to require compliance with the build
milestones in the LDLs. If the Company is unable to comply, its licenses in
respect of which milestones have not been met could be revoked, which could have
a material adverse effect on the Company.
6. ISSUE OF 1998 NOTES
On February 6, 1998, Diamond Holdings plc, a subsidiary of the Company,
issued (pound)135,000,000 in principal amount of its 10% Senior Notes due
February 1, 2008 and $110,000,000 in principal amount of its 91/8% Senior Notes
due February 1, 2008. These Senior Notes have been guaranteed by the Company as
to principal, interest and other amounts due. Net proceeds received by Diamond
Holdings plc amounted to approximately (pound)195 million after issuance costs
of approximately (pound)7 million.
11
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company expended net cash to fund investing activities of
approximately (pound)110.1 million and (pound)30.1 million in the year ended
December 31, 1997 and the first three months of 1998, respectively. Net cash
provided by financing activities in the year ended December 31, 1997 was
approximately (pound)146.6 million and (pound)195.6 million in the first three
months of 1998. The Company's investing activities consisted almost exclusively
of the ongoing construction of the network ((pound)110.1 million in the year
ended December 31, 1997 and (pound)30.1 million in the first three months of
1998). The Company's net cash provided by operating activities was (pound)20.9
million in the year ended December 31, 1997 and (pound)7.7 million in the three
months to March 31, 1998. The Group's cash and funding requirements historically
have been met principally through the issuance of senior discount notes in
September 1994, December 1995 and February 1997 (together, the "Discount
Notes"), as well as from equity capital, advances from its shareholders, and
from bank and lease financing. In February 1998, a subsidiary of the Company,
Diamond Holdings plc, issued two new series of notes (together, the "1998
Notes"), raising net proceeds of approximately (pound)195 million. The 1998
Notes are guaranteed by the Company as to payment of principal, interest and any
other amounts due. In connection with the issuance of the 1998 Notes, the Group
terminated its existing bank facility.
The further development and construction of the Group's cable
television and telecommunications network will require substantial capital
investment. The Group is obligated by the milestones in its telecommunications
licenses and LDLs to construct and activate a network passing an aggregate of
1,021,894 premises within prescribed time periods. Failure by the Group to meet
its milestones could potentially subject the Group to enforcement orders from
OFTEL or the ITC, which could lead to revocation of the relevant licenses or a
shortening of an LDL period or fines. The Group met the required quarterly
milestone obligations under each of its telecommunications licenses as at March
31, 1998. Principally because of delays by the Department of Trade and Industry
in granting the Group a national telecommunications license, and consequent
delays in the commencement of construction, the Group did not meet its annual
LDL milestones in six of its seven LDL franchises at the end of 1997,
12
<PAGE>
although construction had commenced in five of the seven LDL franchises.
Following an application by the Group to the ITC, the ITC has now modified the
annual build milestone obligations in all of the Group's LDL franchise areas
except Vale of Belvoir. The Group has met the modified milestones in all of its
LDL franchises as at December 31, 1997.
The Company expects that the Group's residential cable network will
extend approximately 14,300 kilometers (plus 920 kilometers to interconnect the
residential build) and pass approximately 1.2 million homes once completed. The
network will be substantially completed by the end of 2001. The Company
currently estimates that the additional capital expenditures from April 1, 1998
required for the company to substantially complete construction sufficient to
satisfy its aggregate milestone obligations of approximately 1.02 million
premises (including estimated subscriber connection expenses) will be
approximately (pound)400 million, although further capital expenditures would be
required to substantially complete the network. These amounts could vary
significantly depending on such factors as the number of customers actually
connected to the network, the availability of construction resources and the
impact of competition from other cable operators or delivery mechanisms.
At March 31, 1998, the Group had constructed and activated a network
comprising approximately 56% of its aggregate milestones. The Group estimates
that existing cash resources and estimated future cash flows from operations
will be sufficient to complete the construction and activation of its network to
almost 84% of its aggregate final milestones, which level the Group estimates it
will achieve by the end of 1999. Thereafter, the Group will be required to
obtain further debt and/or equity financing to complete construction sufficient
to satisfy its aggregate milestones. To the extent that (i) the amounts required
to construct the Group's network to meet its milestones exceed its estimates,
(ii) the Group's cash flow does not meet expectations or (iii) the Group
continues its construction of the network beyond its milestone obligations, the
amount of further debt and/or equity financing required will increase. There can
be no assurance that any such debt or equity financing will be available to the
Group on acceptable commercial terms or at all.
The foregoing information with regard to expected completion times,
future capital expenditures and the sufficiency of funding is forward-looking in
nature. Due to a number of factors, including those identified in the preceding
paragraph and below, actual results may differ materially from expected results.
In
13
<PAGE>
particular, the anticipated further funding requirements will depend upon the
Group's cash flow which, in turn, will depend upon a number of variables,
including revenue generated from business telecommunications, residential
telephone and cable television services, churn, expenses such as programming
costs and interconnect charges, network construction and development
expenditures and financing costs. Adverse developments in any of these or other
areas could adversely affect the Group's cash flow. Moreover, there can be no
assurance that (i) conditions precedent to the availability of funds under any
future debt instruments will be satisfied when funds are required; (ii) the
Group will be able to generate sufficient cash from operations to meet any
unfunded portion of its capital requirements when required; (iii) the cost of
constructing and activating the network will not increase significantly; (iv)
the Group will not acquire additional franchise areas, which would require
additional capital expenditures; or (v) the Group will not incur losses from
foreign currency transactions or its exposure to foreign currency exchange rate
fluctuations, each of which factors would increase the Group's funding needs.
14
<PAGE>
SELECTED OPERATING DATA
The following table sets forth certain data concerning the Group's
franchises at and for the years ended December 31, 1996 and 1997 and at and for
the three-month period ended March 31, 1998.
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------- ------------
1996 1997 1998
------------ ----------- ------------
<S> <C> <C> <C>
Homes passed by civils construction(1).......... 453,496 536,110 574,557
Homes activated(2).............................. 347,246 508,801 550,862
Homes marketed(3)............................... 252,601 405,787 456,438
Student services rooms marketed(4).............. - 1,805 4,583
BUSINESS TELECOMMUNICATIONS
Business customers accounts..................... 3,935 5,723 6,165
Business lines connected........................ 18,932 27,124 29,571
Private circuits(5)............................. 226 258 269
Average lines per business(6)................... 4.8 4.7 4.8
Average monthly revenue per line(7)(8).......... (pound)50.17 (pound)46.26 (pound)45.88
Pro-forma average monthly revenue per line(8)... (pound)51.25 (pound)46.26 (pound)45.88
RESIDENTIAL TELEPHONE(4)
Residential lines connected..................... 104,460 157,171 177,612
Penetration rate of homes marketed(9)........... 41.4% 38.6% 38.5%
Average monthly revenue per line(8)(10)......... (pound)18.40 (pound)18.75 (pound)18.77
Pro-forma average monthly revenue per line(8)... (pound)18.64 (pound)18.75 (pound)18.77
Churn(11)(12)................................... 20.6% 16.3% 12.6%
CABLE TELEVISION
Basic service subscribers....................... 59,242 83,793 90,498
Penetration rate of homes marketed(13).......... 23.5% 20.6% 19.8%
Average monthly revenue per subscriber(14)...... (pound)18.03 (pound)19.84 (pound)19.95
Churn(11)(12)................................... 40.9% 32.7% 29.2%
<FN>
- --------------------
(1) Homes passed by civils is the number of homes (excluding student services
rooms) that have had ducting buried outside.
(2) Homes activated is the number of homes (excluding student services
rooms) that are capable of receiving cable service without further
extension of transmission lines, apart from the final connection to the
home.
(3) Homes marketed is the number of homes activated (excluding student
services rooms) for which the initial marketing phase (including door
to door direct marketing) has been completed.
(4) During 1997 the Group began to provide telephone services and internet
access to students at a number of large educational establishments in its
franchise area. Academic terms make this business seasonal in nature. In
order to fairly present the results, the Company has adopted the following
policy: (i) rental revenue is recognized evenly over a full twelve month
period (or the balance of the period to the start of the next academic
year if shorter), (ii) call revenue is recognised in the month in which it
is earned and is incorporated in residential telephone average monthly
revenue per line, (iii) a student services line is recognised as the
equivalent of 3/4 of a residential line, (iv) each student room at which
service is available is treated as a home marketed and incorporated in the
calculation of residential telephone penetration and, (v) any net decrease
in the number of students taking the service between one academic year and
another is ignored for the purposes of calculating residential telephone
churn.
(5) Private circuits are point-to-point customer specific connections for
which a fixed annual rental charge is made.
(6) Average lines per business account is calculated by dividing the number
of business lines connected on the given date by the number of business
customer accounts on such date.
</FN>
</TABLE>
15
<PAGE>
(7) The average monthly business telecommunications revenue per line is
calculated by dividing (i) business telecommunications line and equipment
rental, outgoing call charges and incoming call charges (including revenue
from private circuits) for the period by (ii) the average number of
business telecommunications lines and private circuits (calculated as a
simple average of the number of subscribed lines and private circuits at
the end of each month during the period) and dividing that amount by 12
(for the years ended December 31, 1996 and 1997) or by three (for the
three months ended March 31, 1998).
(8) The calculation of the average monthly revenue per line (for both
residential telephone and business telecommunication revenues) for the
year to December 31, 1996 reflects the reduction in revenues stemming from
rebates to BT on incoming termination revenues relating in part to 1995
but recorded in full against revenues in 1996. The rebates were calculated
in accordance with revised interconnect agreements with BT that were made
effective retroactively from April 1995. The pro-forma average monthly
revenue per line (for both residential telephone and business
telecommunications revenues) gives effect to the revised interconnect
agreements as if they had been in effect from April 1995 and allocates to
each period the portion of the rebates that relates to such period.
(9) Penetration rate of homes marketed is calculated by dividing the number
of residential lines, including student services lines recognized at
the equivalent of 3/4 of a residential line connected on the given date
by the total number of homes marketed and student services rooms
marketed as of such date, expressed as a percentage.
(10) The average monthly revenue per residential telephone line is calculated
by dividing (i) line and equipment rental, outgoing call charges and
incoming call charges for the period by (ii) the average number of
residential telephone lines (calculated as a simple average of the number
of subscribed lines at the end of each month during the period) and
dividing that amount by 12 (for the years ended December 31, 1996 and
1997) or by three (for the three months ended March 31, 1998). Call
revenue from student services lines is recognized in the month in which
it is earned and is incorporated in residential telephone average monthly
revenue per line, with each student services line recognized as the
equivalent of3/4of a residential line.
(11) Churn is calculated by dividing net disconnections (total disconnections
less the number of disconnected accounts for which service is later
restored) in a period by the average number of subscribers in the period
(calculated as a simple average of the number of subscribers at the end of
each month during the period). Churn for the three months ended March 31,
1998 is annualized by multiplying the amount as calculated above by four.
(12) Since the beginning of 1997, the Group's reported churn has excluded from
net disconnected accounts subscribers who disconnect from the service when
moving residence and reconnect to the service in their new residence.
Previously, those subscribers were not identified under the Group's
information system and were therefore included in the churn calculation as
disconnected accounts. If churn for 1997 and the quarter to March 31,
1998 were calculated on the basis used in periods prior to 1997,
annualized churn would have been 36.9% and 33.9% for cable television and
21.3% and 17.8% for residential telephone, respectively. The difference
between churn on the new and prior bases is not necessarily indicative of
the adjustment that would arise if churn for prior periods were
restated.
(13) Penetration rate of homes marketed is calculated by dividing the number
of homes receiving basic cable television on the given date by the
total number of homes marketed as of such date, expressed as a
percentage.
(14) The average monthly revenue per cable television subscriber is
calculated by dividing total cable television subscriber revenues
(excluding installation revenues) for the period by the average number
of cable television subscribers (calculated as a simple average of the
number of basic service subscribers at the end of each month during the
period) and dividing that amount by 12 (for the years ended December
31, 1996 and 1997) or by three (for the three months ended March 31,
1998).
16
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998
The Group continued to experience increases in its subscribers,
revenues and expenses during the three month period ended March 31, 1998. In
general, these increases were attributable to the Group's continued network
construction, activation and marketing of new homes and businesses. Homes passed
by civils construction increased by 38,447 homes (7.2%) and homes activated
increased by 42,061 (8.3%) from December 31, 1997 to March 31, 1998. The Group
met the required quarterly milestone obligations under each of its
telecommunications licenses as at March 31, 1998.
In order to improve the management and quality of the residential sales
force, commencing in February 1997, the Company began to develop its own
internal sales force through direct hiring of residential sales people. The
Group now employs residential sales people. At March 31, 1998, the Company
employed approximately 135 residential sales people, including former contracted
sales people who were hired by the Company in accordance with its employment
criteria following interviews and pays them on the basis of a salary plus sales
commission. All of these sales staff have now undergone a training process which
the Group believes has increased their long-term effectiveness but which delayed
their productivity in the short-term. Penetration was also negatively impacted
during 1997 and the first quarter of 1998 by increased competitive activity, in
particular from BT, Ionica, CWC and BSkyB. At March 31, 1998, residential
telephone line penetration had fallen to 38.5% and cable television
penetration had fallen to 19.8% from 38.6% and 20.6% respectively at December
31, 1997. Penetration rates for residential telephone and cable television were
39.8% and 21.4% respectively at March 31, 1997.
REVENUE
For the three months ended March 31, 1998, total revenues were
(pound)19.6 million, a 49% increase over total revenues of (pound)13.2 million
for the comparable period in 1997. This growth is attributable to increases in
revenues in all three of the Group's primary lines of business.
Business Telecommunications. Business telecommunications revenue was
(pound)4.3 million for the three month period ended March 31, 1998 compared to
(pound)3.2 million for the comparable period in 1997, representing an increase
of 37%. The growth in reported revenues is due primarily to an increase in the
number of business lines installed from 20,874 at March 31, 1997 to 29,571 at
March 31, 1998, an increase
17
<PAGE>
of 42%. The monthly revenue per line decreased from (pound)47.14 in the three
months to March 31, 1997 to (pound)45.88 in the comparable period in 1998. The
decrease was due to a combination of, (i) an increase in centrex lines which
have a lower average revenue per line than other business customer lines
(centrex services represented 40.8% and 46.2% of the total number of business
lines at March 31, 1997 and March 31, 1998 respectively) and (ii) reductions in
certain tariffs in response to price reductions by competitors, offset in part
by increased call usage per line and higher line rental charges which were
increased in September 1997. The Company may lower prices in the future if
necessary for competitive reasons.
Residential Telephone. Residential telephone revenues were (pound)9.8
million in the three month period to March 31, 1998 compared to (pound)6.2
million for the comparable period in 1997, an increase of 59%. The growth in
residential telephone revenue is due primarily to an increase in the number of
residential telephone lines from 111,881 at March 31, 1997 to 177,612 at March
31, 1998, representing an increase of 59%. Monthly revenue per line was
(pound)18.62 in the three month period to March 31, 1997 and (pound)18.77 in the
comparable period in 1998. This increase was largely due to increased call usage
which more than offset reductions in call and incoming termination tariffs
during 1997 and the first three months of 1998. The churn rate (annualized) was
12.6% for the first three months of 1998 as compared to 18.1% in the comparable
period in 1997. The relatively high churn in the first quarter of 1997 was
attributable in part to the application of a stricter disconnect policy relating
to non-payment.
Cable Television. Cable television revenues increased from (pound)3.8
million in the three months to March 31, 1997 to (pound)5.5 million in the
comparable period in 1998, an increase of 43%. This growth in cable television
revenue was primarily due to an increase in the number of the Company's cable
television subscribers which rose from 60,008 at March 31, 1997 to 90,498 at
March 31, 1998, an increase of 51%, partially offset by a decrease in the
Company's average monthly revenue per subscriber from (pound)20.35 for the first
three months of 1997 to (pound)19.95 for the comparable period in 1998. The
decrease in average revenue per subscriber is primarily due to the introduction
of new lower priced program packages during 1997 partially offset by increases
in certain cable television pricing.
The Group's churn rate was 29.2% for the three months to March 31, 1998
as compared to a churn rate of 46.8% in the comparable period in 1997. The Group
believes that this reduction in churn in the three months to March 31, 1998 is
largely the result of new policies introduced by the Group to reduce churn,
including that it now requires subscribers to pay an installation fee in
connection with new residential services. In addition, the Group introduced
other policies which contributed to the reducing trend in churn during 1997
18
<PAGE>
including improvements in the management and quality of the sales force, the
introduction of more program packaging choice for customers and increased focus
on the retention of customers.
OPERATING COSTS AND EXPENSES
Telephone expenses, consisting principally of interconnect charges
payable to BT, Mercury, Energis and Global One were (pound)2.6 million in the
three months to March 31, 1997 and (pound)3.7 million in the three months to
March 31, 1998. As a percentage of combined business telecommunications and
residential telephone revenues, these direct costs decreased from 28% in the
three months to March 31, 1997 to 26% in the comparable period in 1998 due
primarily to reduced interconnect tariffs paid to these operators.
Direct costs for cable television programming, which generally depend
on the number of subscribers and per-subscriber rates charged by programming
suppliers, increased from (pound)2.3 million in the three months to March 31,
1997 to (pound)3.0 million in the comparable period in 1998. As a percentage of
cable television revenues, these direct costs decreased from 60% in the three
month period ended March 31, 1997 to 55% in the comparable period in 1998. The
decrease was in large part due to an increased proportion of subscribers on
higher margin basic and premium program packages in the three month period to
March 31, 1998 compared to the comparable period in 1997.
Selling, general and administrative expenses as a percentage of total
revenues in the three months to March 31, 1997 and 1998 were 47% and 44%
respectively and increased by 41% from the three months to March 31, 1997 to the
comparable period in 1998. The increase was due to higher administration and
sales force costs associated with the expansion of the Company's business,
together with LDL cash bid payments which commenced in 1998 .
Depreciation and amortization expenses increased by 46% from the three
month period to March 31, 1997 to the comparable period in 1998. This increase
was attributable to a combination of the increasing size of the Company's
network and the additional depreciation resulting from a change in the estimated
useful lives of set-top boxes and initial subscriber installations. In
anticipation of changes in technology, the estimated useful lives of set-top
boxes and initial subscriber installations was reduced from seven years to three
years with effect from January 1, 1998. The effect of the change in estimated
useful lives on the depreciation charge for the three months to March 31, 1998
was an increase of (pound)1.4 million.
The Group continues to review the potential consequences of changes in
technology, its network infrastructure and the industry
19
<PAGE>
structure within the UK in general for its plans, operations and the assessment
of the useful lives of its assets.
INTEREST INCOME/EXPENSE
Interest expense was (pound)19.0 million in the three months ended
March 31, 1998 compared to (pound)12.2 million in the comparable period in 1997.
The increase is due primarily to the accretion on the Discount Notes of
(pound)15.2 million in the first quarter of 1998 (compared to (pound)11.2
million in the first quarter of 1997) and (pound)3.0 million accrued interest on
the 1998 Notes. In addition, amortization of debt financing costs was (pound)0.5
million and other interest expense was (pound)0.3 million in the three months to
March 31, 1998, compared to (pound)0.5 million and (pound)0.5 million
respectively in the three months to March 31, 1997. Interest received was
(pound)3.0 million in the three months to March 31, 1998 compared to (pound)0.9
million in the three months to March 31, 1997 and the increase was primarily due
to temporary investment of the proceeds of the 1998 Notes.
FOREIGN EXCHANGE
A substantial portion of the Group's existing debt obligations are
denominated in U.S. dollars, while the Group's revenues and accounts are
generated and stated in pounds sterling. Foreign currency translation gains and
losses, except for unrealized gains and losses on available-for-sale securities,
are reported as part of the profit or loss of the Group. In the three months
ended March 31, 1997, the Group recognized a net foreign exchange loss of
(pound)12.0 million primarily due to the unrealized loss on translation of its
liability on the Discount Notes. Because of changes in prevailing rates, during
the three months ended March 31, 1998, the Group recorded a net foreign exchange
gain of (pound)12.5 million primarily due to the unrealized gain on translation
of its liability on the Discount Notes and the 1998 Notes.
DERIVATIVE FINANCIAL INSTRUMENTS
Realized gains on derivative financial instrument of (pound)24,000 in
the three months to March 31, 1998 consists of the mark-to-market closing
valuation of an interest rate swap commitment which was closed in March 1998.
The Company entered into a foreign exchange forward contract on
November 1, 1996 for settlement on May 6, 1997 to sell (pound)200 million at a
rate of $1.6289 to (pound)1. On January 31, 1997 an offsetting agreement was
entered into at a rate of $1.6014 to (pound)1. The offsetting contracts were
settled on February 6, 1997 with a payment of approximately (pound)3.4 million
to the Company. Because of changes in prevailing rates, the Company recorded for
the year ended December 31,
20
<PAGE>
1996, an unrealized loss of approximately (pound)8.1 million on the pounds
sterling sell forward contract which partially offset the gain that was recorded
on the translation of the U.S. dollar denominated obligations on the Discount
Notes issued in 1994 and 1995 during the same period. During the first quarter
of 1997, the Company recorded a gain of approximately (pound)11.5 million on the
two offsetting forward contracts, reflecting the reversal of an (pound)8.1
million loss referred to above and the approximately (pound)3.4 million cash
payment on settlement of the contracts. The realized gain on the foreign
exchange forward contract in the first quarter of 1997 largely offset the
unrealized loss that was recorded in the same period on the translation of the
U.S. dollar denominated obligations on the Discount Notes. The Company entered
into a foreign exchange forward contract on June 23, 1997 for settlement on June
25, 1998 to sell (pound)50 million at a rate of $1.6505 to (pound)1. The Company
also entered into a foreign exchange forward contract on June 27, 1997 for
settlement on July 1, 1998 to sell (pound)50 million at a rate of $1.6515 to
(pound)1. An unrealized loss of (pound)1.9 million has been recorded in the
three months to March 31, 1998 on these two contracts. The Company may enter
into separate agreements to roll forward these contracts in order to cover
specific dollar liabilities when they arise or terminate the contracts to
crystallize a profit or minimize a loss at any stage thought appropriate.
Therefore the accounting treatment of these contracts, which are not designated
to an asset or liability, are recorded on the balance sheet in other assets or
other liabilities at their market value. Any gains or losses are recognized in
the statement of operations. The Company continues to monitor conditions in the
foreign exchange market and may from time to time enter into foreign currency
contracts based on its assessment of foreign currency market conditions and
their effect on the Company's operations and financial condition. Therefore,
changes in currency exchange rates may continue to have a material effect on the
results of operations of the Group and may materially affect the Company's
ability to satisfy its obligations, including obligations under outstanding debt
instruments, as they become due.
NET LOSS
As a result of the foregoing factors, Diamond had net losses of
(pound)10.5 million in the three-month period ended March 31, 1998, compared to
net losses of (pound)15.9 million in the comparable period of 1997.
INFORMATION SYSTEMS - YEAR 2000
The Group is actively reviewing its information systems in light of
year 2000 information processing requirements. The Group believes that its main
hardware and operating systems are currently compliant and expects that its key
subscriber management and financial systems will be compliant by the end of
1998. The costs of
21
<PAGE>
investigating and correcting year 2000 information processing problems has not
been and is not expected by the Group to be material. Although the Group intends
to ensure that all of its systems will be year 2000 compliant, it is generally
reliant on third party suppliers for delivery of appropriate system solutions.
In addition, the Group may be affected by year 2000 problems encountered by its
primary suppliers or customers. Significant year 2000 information processing
problems encountered by the Group or certain of its customers or suppliers could
have a material adverse effect on the Group.
RECENT DEVELOPMENTS
On April 23, 1998 the Department of Trade and Industry announced the
U.K. government's intention to progressively end the policy of granting only one
cable television license for a franchise area. If the announcement were enacted
into law as initially proposed, any licensed operator would with immediate
effect be able to compete in the provision of broadcast entertainment in those
areas outside current cable franchises.
22
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
None.
(b) Reports on Form 8-K -
The Company filed on January 13, 1998 a report on Form 8-K announcing
its 1997 Preliminary Operating Results.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DIAMOND CABLE COMMUNICATIONS PLC
Date: May 14, 1998 By: /s/ Robert Goad
-------------------------------------
Robert Goad
(Chief Executive Officer)
Date: May 14, 1998 By: /s/ Nicholas Millard
-------------------------------------
Nicholas Millard
(Chief Financial Officer)
Date: May 14, 1998 By: /s/ Duncan Craig
-------------------------------------
Duncan Craig
(Chief Accounting Officer)
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SEC FORM 10-Q DATED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000929649
<NAME> DIAMOND CABLE COMMUNICATIONS Plc
<MULTIPLIER> 1,000
<CURRENCY> POUNDS STERLING
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1.6766
<CASH> 246,818
<SECURITIES> 0
<RECEIVABLES> 12,048
<ALLOWANCES> 3,232
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 454,235
<DEPRECIATION> 62,777
<TOTAL-ASSETS> 758,061
<CURRENT-LIABILITIES> 0
<BONDS> 739,937
0
0
<COMMON> 1,478
<OTHER-SE> (36,557)
<TOTAL-LIABILITY-AND-EQUITY> 758,061
<SALES> 0
<TOTAL-REVENUES> 19,631
<CGS> 0
<TOTAL-COSTS> 24,812
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 444
<INTEREST-EXPENSE> 18,959
<INCOME-PRETAX> (10,527)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,527)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,527)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
