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:
SEPTEMBER 30, 1999
OR
(X) 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 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)
44-115-952-2222
- --------------------------------------------------------------------------------
(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 of the Registrant's Ordinary Shares of 2.5 pence each
outstanding as of September 30, 1999 was 59,138,791. The Registrant is an
indirect, wholly owned subsidiary of NTL Incorporated and there is no market for
the Registrant's shares.
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations for the Nine and Three months ended
September 30, 1999 and 1998 (Unaudited).......................................2
Condensed Consolidated Balance Sheets as of
September 30, 1999 (Unaudited) and December 31, 1998..........................3
Condensed Consolidated Statement of
Shareholder's Deficiency for the Nine months
ended September 30, 1999 (Unaudited)..........................................4
Condensed Consolidated Statements of Cash Flows for the
Nine months ended September 30, 1999 and 1998 (Unaudited).....................5
Notes to the Condensed Consolidated
Financial Statements (Unaudited)..........................................6 - 8
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition............................9 - 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk...................13
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................................13
SIGNATURES.............................................................................14
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1999 1998 1999 1998
----------------- ----------------- ------------- -----------------
(in (UK Pound)000's)
<S> <C> <C> <C> <C>
Revenue (UK Pound)85,984 (UK Pound)63,922 (UK Pound)30,115 (UK Pound)22,736
----------------- ----------------- ------------- -----------------
Costs and expenses
Operating .................................... (30,219) (21,840) (10,713) (7,728)
Selling, general and administrative ......... (31,399) (27,430) (10,061) (9,506)
Depreciation and amortization ................ (43,815) (30,501) (16,047) (10,851)
Other expenses (Note 3) ...................... (8,893) -- -- --
----------------- ----------------- ------------- -----------------
(114,326) (79,771) (36,821) (28,085)
----------------- ----------------- ------------- -----------------
Operating (loss) .................................. (28,342) (15,849) (6,706) (5,349)
Interest income ................................... 8,608 10,264 3,220 3,383
Interest expense and amortization of debt
discount and expenses ........................ (73,036) (61,984) (25,082) (21,569)
Foreign exchange gain (loss), net ................. (6,158) 21,071 28,706 10,906
Realized gain on derivative financial instruments . -- 412 -- --
----------------- ----------------- ------------- -----------------
Net income (loss) ................................. ((UK Pound)98,928) ((UK Pound)46,086) (UK Pound)138 ((UK Pound)12,629)
================= ================= ============= =================
</TABLE>
See accompanying notes.
2
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------- -----------------
(Unaudited) (See Note)
(in (UK Pound)000's, except share data)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents ................................... (UK Pound)180,326 (UK Pound)164,738
Trade receivables - less allowance for doubtful accounts of
(UK Pound)4,141 (1999) and (UK Pound)4,775 (1998) .... 12,250 9,873
Other assets ................................................ 3,061 2,229
----------------- -----------------
Total current assets ............................................. 195,637 176,840
Deferred financing costs - less accumulated amortization of
(UK Pound)6,651(1999) and (UK Pound)4,830 (1998) ............ 18,501 20,322
Property and equipment, net ...................................... 501,887 465,866
Goodwill - less accumulated amortization of (UK Pound)19,401
(1999) and (UK Pound)15,764 (1998) .......................... 77,559 81,196
Franchise costs - less accumulated amortization of
(UK Pound)241 (1999) and (UK Pound)219 (1998) ............... 375 397
----------------- -----------------
Total assets ..................................................... (UK Pound)793,959 (UK Pound)744,621
================= =================
Liabilities and shareholders' (deficiency)
Current liabilities
Accounts payable .......................................... (UK Pound)25,110 (UK Pound)28,514
Accounts payable deposit .................................. 92,321 --
Current portion of long-term debt ......................... 2,480 2,135
Other liabilities ......................................... 18,523 20,411
----------------- -----------------
Total current liabilities ........................................ 138,434 51,060
Senior discount notes ............................................ 653,725 592,763
Senior notes ..................................................... 201,780 201,154
Capital lease obligations ........................................ 3,052 5,002
Mortgage loan .................................................... 2,225 2,338
Shareholders' (deficiency):
Ordinary shares (70,000,000 authorized; 59,138,791 issued) 1,478 1,478
Non-voting deferred shares (6 shares authorized and issued) -- --
Additional paid-in capital ................................ 134,466 134,466
Accumulated other comprehensive (loss) .................... -- (1,367)
Accumulated deficit ....................................... (341,201) (242,273)
----------------- -----------------
(205,257) (107,696)
----------------- -----------------
Total liabilities and shareholders' (deficiency) ................. (UK Pound)793,959 (UK Pound)744,621
================= =================
<FN>
Note: The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date.
</FN>
</TABLE>
See accompanying notes.
3
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S (DEFICIENCY)
(Unaudited)
<TABLE>
<CAPTION>
Non-voting Additional Paid-
Ordinary Shares deferred shares in-capital
-------------------------------- ----------------- --------------------
(in (UK Pound)000's except share data)
Number Number
--------- -------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 .... 59,138,791 (UK Pound)1,478 6 -- (UK Pound)134,466
Unrealized gain on securities ... -- -- -- -- --
Net loss ........................ -- -- -- -- --
----------- --------------- ----- ----- -----------------
Balance at September 30, 1999.... 59,138,791 (UK Pound)1,478 6 -- (UK Pound)134,466
=========== =============== ===== ===== =================
</TABLE>
<TABLE>
<CAPTION>
Accumulated other
comprehensive Accumulated Total Shareholder's
(loss) Deficit Deficiency
------------------- ------------------ -------------------
(in (UK Pound)000's except share data)
<S> <C> <C> <C>
Balance at December 31, 1998 .... ((UK Pound)1,367) ((UK Pound)242,273) ((UK Pound)107,696)
Unrealized gain on securities ... 1,367 -- 1,367
Net loss ........................ -- (98,928) (98,928)
---------------- ------------------ ------------------
Balance at September 30, 1999 ... (UK Pound) -- ((UK Pound)341,201) ((UK Pound)205,257)
================ ================== ==================
</TABLE>
See accompanying notes.
4
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 1998
---------------- ----------------
(in (UK Pound)000's)
<S> <C> <C>
Net cash provided by operating activities .......... (UK Pound)99,847 (UK Pound)17,374
---------------- ----------------
Investing Activities
Purchase of property and equipment ............ (82,256) (100,958)
Proceeds from disposition of assets ........... 37 95
---------------- ----------------
Net cash (used in) investing activities ............ (82,219) (100,863)
---------------- ----------------
Financing Activities
Proceeds from issuance of debt ................ -- 202,381
Debt financing costs .......................... -- (6,814)
Principal payments ............................ (132) (27)
Capital lease payments ........................ (1,908) (1,541)
---------------- ----------------
Net cash (used in) provided by financing activities (2,040) 193,999
---------------- ----------------
Net increase in cash and cash equivalents .......... 15,588 110,510
Cash and cash equivalents at beginning of period ... 164,738 75,680
---------------- ----------------
Cash and cash equivalents at end of period .........(UK Pound)180,326 (UK Pound)186,190
================= =================
</TABLE>
See accompanying notes.
5
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Diamond Cable Communications Plc (the "Company") owns and operates cable
television and telecommunications systems through its subsidiaries. The
accompanying unaudited condensed consolidated financial statements of the
Company and its subsidiaries (the "Group") have been prepared in accordance
with U.S. generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine and three
months ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted by the
Company effective January 1, 2001. Management does not anticipate that the
adoption of this standard will have a significant effect on the results of
operations and financial position of the Group.
2. Comprehensive loss
Comprehensive (loss) income for the nine and three-month periods ended
September 30, 1999 and 1998 was ((UK Pound)97,561), (UK Pound)138, ((UK
Pound)48,909) and ((UK Pound)13,751), respectively.
3. NTL Incorporated Acquisition
On March 8, 1999, the share exchange was completed whereby all of the
holders of the Company's ordinary and deferred shares exchanged their
shares for newly issued common stock of NTL Incorporated ("NTL"). As a
result, the Company became a wholly-owned subsidiary of NTL. Other expenses
of (UK Pound)8.9 million consist of costs incurred in connection with the
Share Exchange Agreement, including fees paid to Goldman, Sachs & Co. and
Columbia Management for their role as joint financial advisors to the
Company in examining potential business opportunities and other strategic
alternatives leading up to the share exchange.
In connection with the provisions of the indentures pursuant to which the
Company's debt securities were issued, the Company was required to make an
offer to repurchase such debt securities at a price of 101% of their
accreted value or principal amount following a "change of control." The
Company commenced offers to repurchase its outstanding debt securities on
April 1, 1999. The offers expired on April 30, 1999. The Company paid (UK
Pound)66,000 to repurchase the tendered debt securities.
6
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. Property and Equipment
Property and equipment consists of:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------- -----------------
(unaudited)
(in (UK Pound)000's)
<S> <C> <C>
Land and Buildings.......................................... (UK Pound)8,043 (UK Pound)7,483
Cable Network............................................... 611,144 538,472
Office Equipment............................................ 14,129 11,637
Motor Vehicles.............................................. 1,150 961
----------------- -----------------
634,466 558,553
Accumulated depreciation.................................... (132,579) (92,687)
----------------- -----------------
(UK Pound)501,887 (UK Pound)465,866
================= =================
</TABLE>
5. Joint Purchasing Alliance Agreement
The Company and NTL entered into a Joint Purchasing Alliance Agreement (the
"Alliance Agreement") on March 5, 1999, pursuant to which the Company acts
as purchasing agent on behalf of a number of subsidiaries of NTL. Under the
terms of the Alliance Agreement, on March 8, 1999, the Company received a
deposit of (UK Pound)137 million from various subsidiaries of NTL. Funds
held by the Company under the Alliance Agreement are recorded on the
balance sheet as Cash and Cash Equivalents and Accounts Payable Deposit.
6. Summarized Financial Information
On February 6, 1998, Diamond Holdings plc ("Diamond Holdings"), a
subsidiary of the Company, issued (UK Pound)135,000,000 principal amount of
its 10% Senior Notes due February 1, 2008 and $110,000,000 principal amount
of its 9 1/8% Senior Notes due February 1, 2008 (together, the "1998
Notes".) The 1998 Notes have been fully and unconditionally guaranteed by
the Company as to principal, interest and other amounts due. Net proceeds
received by Diamond Holdings amounted to approximately (UK Pound)195.0
million after issuance costs of approximately (UK Pound)7.0 million.
The following table presents summarized consolidated financial information
for Diamond Holdings as of and for the nine months ended September 30,
1999. This summarized financial information is being provided pursuant to
Section G of Topic 1 of Staff Accounting Bulletin No. 53, "Financial
Statement Requirements in Filings Involving the Guarantee of Securities by
a Parent." The Company will continue to provide such summarized financial
information for Diamond Holdings for as long as the 1998 Notes remain
outstanding and guaranteed by the Company.
7
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
(Unaudited)
<TABLE>
<CAPTION>
Diamond Holdings plc (note a)
---------------------------------------------
Nine months
ended Year ended
September 30, December 31,
1999 1998
----------------- -----------------
(in (UK Pound)000's)
<S> <C> <C>
Summarized Consolidated Income Statement
Information
Revenue ......................................... (UK Pound)85,984 (UK Pound)88,756
================= =================
Operating costs and expenses .................... (UK Pound)105,851 (UK Pound)105,914
================= =================
Net loss for the period ......................... ((UK Pound)96,124) ((UK Pound)87,556)
================= =================
September 30, December 31,
1999 1998
----------------- -----------------
(in (UK Pound)000's)
Summarized Consolidated Balance Sheet
Information
Fixed and noncurrent assets ..................... (UK Pound)585,584 (UK Pound)553,740
Current assets .................................. 18,213 148,415
----------------- -----------------
Total assets .................................... (UK Pound)603,797 (UK Pound)702,155
================= =================
Current liabilities ............................. (UK Pound)44,317 (UK Pound)48,030
Noncurrent liabilities .......................... 849,861 849,750
Shareholders deficit ............................ (290,381) (195,625)
----------------- -----------------
Total liabilities and shareholders interest ..... (UK Pound)603,797 (UK Pound)702,155
================= =================
<FN>
(a) Diamond Holdings was incorporated on December 15, 1997 and is a
wholly-owned, direct subsidiary of the Company. On January 16, 1998,
Diamond Holdings became the intermediate holding company which holds all of
the shares of all Group companies. The Summarized Financial Information
shows operating results as if Diamond Holdings became the intermediate
holding company on January 1, 1998.
</FN>
</TABLE>
8
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Liquidity and Capital Resources
The Group's cash and funding requirements historically have been met principally
through the issuance of the Company's senior discount notes in September 1994,
December 1995 and February 1997 (collectively, 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,
issued the 1998 Notes, raising net proceeds of approximately (UK 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
Company currently estimates that the additional capital expenditures and other
cash requirements of the Group, net of cash from operations, from October 1,
1999 through December 31, 2000 will be approximately (UK Pound)101.4 million.
These expenditures could vary significantly depending on, among other things,
the number of customers actually connected to the network, the availability of
construction resources, the impact of competition from other cable or
telecommunications operators or television delivery platforms, and the pace of
the Group's construction program. The Company expects to use the (UK Pound)88.0
million cash and cash equivalents on hand, which excludes the (UK Pound)92.3
million held on behalf of affiliates pursuant to the Joint Purchasing Alliance
Agreement, plus debt and/or equity financing from NTL or its other subsidiaries
to meet its cash requirements.
To the extent that the amounts required for capital expenditures exceed the
estimates, or the Group's cash flow does not meet expectations, 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.
Results of Operations for the Nine and Three Months Ended September 30, 1999 and
1998
Revenue was (UK Pound)86.0 million and (UK Pound)30.1 million for the nine and
three months ended September 30, 1999, respectively compared to (UK Pound)63.9
million and (UK Pound)22.7 million, respectively, for the comparable periods in
1998, representing increases of 34.5% and 32.5% respectively. This growth is
primarily attributable to increases in the number of telephone lines and cable
television customers. These trends are expected to continue for the foreseeable
future.
Operating costs were (UK Pound)30.2 million and (UK Pound)10.7 million for the
nine and three months ended September 30, 1999, respectively, compared to (UK
Pound)21.8 million and (UK Pound)7.7 million, respectively, for the comparable
periods in 1998, representing increases of 38.4% and 38.6%, respectively. These
increases are the result of increases in interconnection costs and programming
costs as a result of growth in telephone lines and cable television customers.
Selling, general and administrative expenses were (UK Pound)31.4 million and (UK
Pound)10.1 million for the nine and three months ended September 30, 1999,
respectively and (UK Pound)27.4 million and (UK Pound)9.5 million, respectively,
for the comparable periods in 1998. The increase was due to higher
administration and sales force costs associated with the expansion of the
Company's business together with additional franchise license costs which
commenced in 1999. As a percentage of total revenues however, these costs
decreased to 37% and 33% for the nine and three months ended September 30, 1999,
respectively, from 43% and 42%, respectively, in the comparable periods in 1998.
Depreciation and amortization expense increased by 44% and 48% for the nine and
three months ended September 30, 1999, respectively from the comparable periods
in 1998. This increase was attributable to the increasing cost of the Company's
network and the related additional depreciation.
9
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
Other expenses of (UK Pound)8.9 million in the nine months ended September 30,
1999 relate to costs incurred in connection with the Share Exchange Agreement,
including fees paid to Goldman, Sachs & Co. and Columbia Management for their
role as joint financial advisors to the Company in examining potential business
opportunities and other strategic alternatives leading up to the share exchange.
Interest expense including amortization of debt discount and expenses was (UK
Pound)73.0 million and (UK Pound)25.1 million for the nine and three months
ended September 30, 1999, respectively compared to (UK Pound)62.0 million and
(UK Pound)21.6 million in the comparable periods in 1998. The increase is due
primarily to the accretion on the Discount Notes of (UK Pound)55.9 million and
(UK Pound)19.4 million in the nine and three month ended September 30, 1999,
respectively compared to (UK Pound)47.0 million and (UK Pound)15.9 million in
the comparable periods in 1998 and interest on the 1998 Notes of (UK Pound)14.8
million and (UK Pound)4.9 million in the nine and three month ended September
30, 1999, respectively compared to (UK Pound)12.8 million and (UK Pound)4.9
million in the comparable periods in 1998. In addition, amortization of debt
financing costs was (UK Pound)1.8 million and (UK Pound)619,000 in the nine and
three months ended September 30, 1999, respectively, compared to (UK Pound)1.6
million and (UK Pound)600,000, in the comparable periods in 1998.
A substantial portion of the Group's existing debt obligations are denominated
in U.S. dollars, while the Group's revenues and expenses are generated and
stated in pounds sterling. During the nine and three months ended September 30,
1999, the Group recorded a net foreign exchange loss of (UK Pound)6.2 million
and a net foreign exchange gain of (UK Pound)28.7 million, respectively,
primarily due to the unrealized losses and gains on translation of its Discount
Notes and 1998 Notes. During the nine and three months ended September 30, 1998,
the Group recognized a net foreign exchange gain of (UK Pound)21.1 million and a
net foreign exchange gain of (UK Pound)10.9 million, respectively, primarily due
to the unrealized gain on translation of its Discount Notes and 1998 Notes.
Changes in foreign currency exchange rates may affect the Company's ability to
satisfy its obligations, including obligations under outstanding debt
instruments, as they become due.
The Company entered into a foreign exchange forward contract on June 23, 1997
for settlement on June 25, 1998 to sell (UK Pound)50 million at a rate of
$1.6505 to (UK Pound)1. The Company also entered into a foreign exchange forward
contract on June 27, 1997 for settlement on July 1, 1998 to sell (UK Pound)50
million at a rate of $1.6515 to (UK Pound)1. On June 16, 1998 two offsetting
agreements were entered into at rates of $1.6326 and $1.6322 to (UK Pound)1. The
offsetting contracts were settled on June 17, 1998 with a payment of (UK
Pound)1.1 million to the Company. Realized gains on derivative financial
instruments of (UK Pound)400,000 for the nine months ended September 30, 1998
consist primarily of the settlement of these two contracts. 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 its effect on the Company's results of operations
and financial condition.
Condensed Consolidated Statements of Cash Flows
Net cash provided by operating activities amounted to (UK Pound)99.8 million and
(UK Pound)17.4 million for the nine months ended September 30, 1999 and 1998,
respectively. During the nine months ended September 30, 1999, net cash provided
by operating activities includes the Joint Purchasing Alliance Agreement deposit
of (UK Pound)137 million from various subsidiaries of NTL, exchange losses of
(UK Pound)6.2 million compared to gains of ((UK Pound)21.1) million in the prior
period and accretion on the Discount Notes of (UK Pound)55.9 million compared to
(UK Pound)47.0 million in the prior period.
Net cash used in investing activities amounted to (UK Pound)82.2 million and (UK
Pound)100.9 million for the nine months ended September 30, 1999 and 1998,
respectively. During the nine months ended September 30, 1999 and 1998 net cash
used in investing activities includes purchases of fixed assets of (UK
Pound)82.3 million and (UK Pound)101.0 million, respectively as a result of
continuing fixed asset purchases in 1998 and 1999.
Net cash (used in) provided by financing activities was ((UK Pound)2.0) million
and (UK Pound)194.0 million for the nine months ended September 30, 1999 and
1998, respectively. During the nine months ended September 30, 1998, net cash
provided by financing activities includes (UK Pound)202.4 million relating to
the proceeds from issuance of debt offset by financing costs of (UK Pound)6.8
million.
10
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
Information Systems - Year 2000
The future operations of the Group depend on its network infrastructure and
certain other systems performing correctly over the change of millennium and on
subsequent dates. The correct handling of date information is therefore
essential and detailed test programs have been completed for all crucial
telecommunications and cable television network and systems infrastructure.
The Group has had an overall program in place since 1997 which encompass
information technology ("IT") systems and non- IT systems containing embedded
technology. The Group has installed and tested Year 2000 compliant software for
the telecommunications switches, cable television infrastructure and network
control systems. Other systems critical to business operations, such as the
subscriber management systems and the financial and accounting systems, are
maintained by the vendors. The vendors have supplied versions of these critical
systems which are designed to be Year 2000 compliant and were subject to a
thorough testing program. There are no known problems with vendor supplied or
maintained systems. The personal computer and Local Area Network (LAN)
infrastructures have been surveyed and tested. Non-compliant elements have been
replaced, together with a wider functionality upgrade to increase LAN bandwidth.
Costs incurred in connection with Year 2000 compliance have not been material.
Costs incurred to date are approximately (UK Pound)150,000, and it is estimated
that a further (UK Pound)50,000 will be required.
The Company currently believes that the most reasonably likely worst case
scenario with respect to the Year 2000 is the failure of public electricity
supplies during the millennium period. A number of critical sites have permanent
automatic standby generators and uninterruptible power supplies. Where critical
sites do not have permanent standby power, the Company intends to deploy its
mobile generators. In addition, other telephone operators have suggested that
the telephone network may overload due to excessive traffic. The Company is
reviewing its "cold start" scenarios and alternative interconnection routes in
the event of interruptions in the service of other telephone companies. Either
or both of the above mentioned scenarios could have a material adverse effect on
operations, although it is not possible at this time to quantify the amount of
revenues and gross profit that might be lost, or the costs that could be
incurred.
During the remainder of 1999, the Company may discover additional problems and
may not be able to develop, implement or test remediation or contingency plans,
or may find that the costs of these activities exceed current expectations. In
many cases, the Company is relying on assurances from suppliers that new and
upgraded information systems and other products will be Year 2000 ready. The
Company has tested these third-party products, but because the Company uses a
variety of information systems and has additional systems embedded in its
operations and infrastructure, the Company cannot be sure that all of its
systems will work together in a Year 2000-ready fashion. Furthermore, the
Company cannot be sure that it will not suffer business interruptions, either
because of its own Year 2000 problems or those of third-parties upon whom the
Company is reliant for services. The Company is continuing to evaluate its Year
2000-related risks and corrective actions. However, the risks associated with
the Year 2000 problem are pervasive and complex; they can be difficult to
identify and address, and can result in material adverse consequences to the
Company. Even if the Company, in a timely manner, completes all of the upgrades
that is believed to be adequate, and develops contingency plans believed to be
adequate, some problems may not be identified or corrected in time to prevent
material adverse consequences to the Company.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Certain statements contained herein constitute "forward-looking statements" as
that term is defined under the Private Securities Litigation Reform Act of 1995.
When used herein, the words, "believe," "anticipate," "should," "intend,"
"plan," "will," "expects," "estimates," "projects," "positioned," "strategy,"
and similar expressions identify such forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Group, or industry results, to be materially different from those
contemplated, projected, forecasted, estimated or budgeted, whether expressed or
implied, by such forward-looking statements. Such factors include the following:
general economic and business conditions in the United Kingdom, the Group's
ability to continue to design networks, install facilities, obtain and maintain
any required
11
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
governmental licenses or approvals and finance construction and development, all
in a timely manner at reasonable costs and on satisfactory terms and conditions,
as well as assumptions about customer acceptance, churn rates, overall market
penetration and competition from providers of alternative services, the impact
of new business opportunities requiring significant up-front investment, Year
2000 readiness, and availability, terms and deployment of capital.
12
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There have been no material changes in the reported market risks since
the end of the most recent fiscal year.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
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 September 30, 1999.
13
<PAGE>
DIAMOND CABLE COMMUNICATIONS PLC
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
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: November 10, 1999 By: /s/ Leigh C. Wood
------------------------
Leigh C. Wood
(Chief Operating Officer)
Date: November 10, 1999 By: /s/ David Kelham
-------------------------
David Kelham
(Acting Financial Director)
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC
FORM 10-Q DATED SEPTEMBER 30, 1999 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1.6464
<CASH> 180,326
<SECURITIES> 0
<RECEIVABLES> 16,391
<ALLOWANCES> 4,141
<INVENTORY> 0
<CURRENT-ASSETS> 195,637
<PP&E> 634,466
<DEPRECIATION> 132,579
<TOTAL-ASSETS> 793,959
<CURRENT-LIABILITIES> 138,434
<BONDS> 855,505
0
0
<COMMON> 1,478
<OTHER-SE> 206,735
<TOTAL-LIABILITY-AND-EQUITY> 793,959
<SALES> 0
<TOTAL-REVENUES> 85,984
<CGS> 0
<TOTAL-COSTS> 114,326
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (28)
<INTEREST-EXPENSE> 73,036
<INCOME-PRETAX> 98,928
<INCOME-TAX> 0
<INCOME-CONTINUING> 98,928
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 98,928
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
