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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ___________ to
___________
COMMISSION FILE NUMBER: 0-26840
TELEWEST PLC
(Exact Name of Registrant as Specified in its Charter)
ENGLAND AND WALES N.A.
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
GENESIS BUSINESS PARK
ALBERT DRIVE, WOKING
SURREY, GU21 5RW
UNITED KINGDOM
TELEPHONE NUMBER 011 44 1483 750 900
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 [_]
At March 31, 1996, 919,963,400 ordinary shares of 10p each were outstanding.
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<PAGE>
PART 1 ------ FINANCIAL INFORMATION
ITEM 1 ------ FINANCIAL STATEMENTS.
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TELEWEST PLC
US GAAP
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS)
- - ----------------------------------------------------------------------------------------------------------------------------------
3 months 3 months 3 months
ended ended ended
March 31, March 31, March 31,
1996 1996 1995
<S> <C> <C> <C>
REVENUE
Cable television $ 42,845 (pound) 28,073 (pound) 12,504
Telephony - residential 42,695 27,975 9,610
Telephony - business 10,955 7,178 3,483
Other ((pound)407 and(pound)288 in 1996 and 1995 from related parties) 2,952 1,934 834
---------- ----------- -----------
99,447 65,160 26,431
---------- ----------- -----------
OPERATING COSTS AND EXPENSES
Programming (23,342) (15,294) (5,817)
Telephony (18,670) (12,233) (5,267)
Selling, general, and administrative (including(pound)710 and(pound)509 in 1996 (63,156) (41,381) (20,255)
and 1995 from related parties)
Depreciation (39,779) (26,064) (11,956)
Amortization of goodwill (9,836) (6,445) (525)
---------- ----------- -----------
(154,783) (101,417) (43,820)
---------- ----------- -----------
OPERATING LOSS (55,336) (36,257) (17,389)
OTHER INCOME/(EXPENSE)
Interest income((pound)432 and(pound)12 in 1996 and 1995 from related parties) 10,403 6,816 3,003
Interest expense and similar charges ((pound)nil and(pound)471 in 1996 and
1995 from related parties) (36,607) (23,986) (979)
Unrealized loss on interest rate swaps - - (2,561)
Foreign exchange losses, net (25,436) (16,666) -
Share of net losses of affiliates (5,429) (3,557) (2,421)
Gain on disposal of assets 60 39 -
Minority interests in (profits)/losses of consolidated subsidiaries, net (26) (17) 36
Other, net - - 5
---------- ----------- -----------
LOSS BEFORE INCOME TAXES (112,371) (73,628) (20,306)
Income tax expense (29) (19) (7)
---------- ----------- -----------
NET LOSS $ (112,400) (pound) (73,647) (pound)(20,313)
========== =========== ===========
LOSS PER ORDINARY SHARE (DOLLARS/POUND) (NOTE 5) $ (0.12) (pound) (0.08) (pound) (0.02)
========== =========== ============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
1
<PAGE>
<TABLE>
<CAPTION>
TELEWEST PLC
US GAAP
UNAUDITED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
- - -------------------------------------------------------------------------------------------------------------------------------
March 31, March 31, December 31,
1996 1996 1995
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 579,193 (pound) 379,500 (pound) 464,818
Trade receivables (net of allowance for doubtful accounts
of(pound)5,324 and(pound)4,695) 37,003 24,245 23,123
Other receivables 44,629 29,242 25,657
Prepaid expenses 9,722 6,370 6,133
Investments in affiliates, accounted for under the equity
method, and related receivables 119,408 78,239 80,703
Other investments, at cost 31,540 20,666 20,666
Property and equipment (less accumulated depreciation
of(pound)207,788 and(pound)182,142) 1,729,687 1,133,329 1,063,808
Goodwill (less accumulated amortization of
(pound)18,203 and(pound)11,758) 761,934 499,236 495,881
Other assets (less accumulated amortization
of(pound)1,491 and(pound)742) 154,297 101,099 108,931
------------- ------------- --------------
TOTAL ASSETS $ 3,467,413 (pound) 2,271,926 (pound) 2,289,720
============= ============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 63,322 (pound) 41,490 (pound) 40,402
Other liabilities 192,086 125,859 103,824
Debt 1,255,144 822,398 792,265
Capital lease obligations 49,676 32,549 30,314
------------- ------------- --------------
TOTAL LIABILITIES 1,560,228 1,022,296 966,805
------------- ------------- --------------
Minority interests 281 184 167
------------- ------------- --------------
Shareholders' equity
Convertible preference shares, 10 pence par value;
661,000,000 shares authorized in 1996 and 1995; 75,710 49,607 49,607
496,066,708 shares issued and outstanding
in 1996 and 1995
Ordinary shares, 10 pence par value;
2,010,000,000 shares authorized in 1996 and 1995;
919,963,400 shares issued and outstanding
in 1996 and 1995 140,404 91,996 91,996
Additional paid-in capital 2,019,118 1,322,971 1,322,971
Accumulated deficit (325,636) (213,364) (139,717)
------------- -------------- -------------
1,909,596 1,251,210 1,324,857
Ordinary shares held in trust for the TeleWest
Restricted Share Scheme (2,692) (1,764) (2,109)
------------- -------------- --------------
TOTAL SHAREHOLDERS' EQUITY 1,906,904 1,249,446 1,322,748
------------- -------------- --------------
Commitments and contingencies (note 6)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,467,413 (pound) 2,271,926 (pound) 2,289,720
============= ============== ==============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
TELEWEST PLC
US GAAP
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
- - ----------------------------------------------------------------------------------------------------------------------------------
3 months 3 months 3 months
ended ended ended
March 31, March 31, March 31,
1996 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (112,400) (pound) (73,647) (pound) (20,313)
Adjustments to reconcile net loss to
net cash provided by/(used in) operating activities:
Depreciation 39,779 26,064 11,956
Amortization of goodwill 9,836 6,445 525
Amortization of deferred financing costs and issue
discount on senior discount debentures 25,791 16,899 -
Accrued interest on senior debentures 8,319 5,451 -
Unrealized loss on foreign currency translation 25,436 16,666 -
Unrealized loss on interest rate swap - - 2,561
Share of losses of affiliates 5,429 3,557 2,421
Gain on disposals of assets (60) (39) -
Minority interests in profit/(loss) 26 17 (36)
Changes in operating assets and liabilities, net of effect of
acquisition of subsidiaries:
Change in receivables (8,871) (5,812) (869)
Change in prepaid expenses (362) (237) (205)
Change in accounts payable (9,777) (6,406) (11,600)
Change in other liabilities 21,775 14,267 4,502
Other (net) - - (5)
---------- --------- ----------
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES 4,921 3,225 (11,063)
---------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property and equipment (114,029) (74,714) (65,449)
Cash paid for acquisition of subsidiaries (21,516) (14,098) -
Proceeds from disposals of assets 853 559 19
---------- --------- ----------
NET CASH USED IN INVESTING ACTIVITIES (134,692) (88,253) (65,430)
---------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash paid for debenture issue costs (838) (549) -
Cash paid for share issue costs - - (5,643)
Increase in overdraft - - 448
Capital element of finance lease repayments (943) (618) 2,107
---------- --------- ----------
NET CASH USED IN FINANCING ACTIVITIES (1,781) (1,167) (3,088)
---------- --------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (131,552) (86,195) (79,581)
Effect of exchange rate changes on cash and
cash equivalents 1,339 877 -
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 709,406 464,818 248,002
---------- --------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 579,193 (pound) 379,500 (pound) 168,421
========== ========= ==========
.
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
TELEWEST PLC
US GAAP
UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
- - -----------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE ADDITIONAL
PREFERENCE ORDINARY SHARES HELD PAID-IN ACCUMULATED
SHARES SHARES IN TRUST CAPITAL DEFICIT TOTAL
(pound) (pound) (pound) (pound) (pound) (POUND)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 49,607 91,996 (2,109) 1,322,971 (139,717) 1,322,748
Accrued employee compensation relating to
the TeleWest Restricted Share Scheme - - 345 - - 345
Net loss for the period to March 31, 1996 - - - - (73,647) (73,647)
---------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1996 49,607 91,996 (1,764) 1,322,971 (213,364) 1,249,446
=======================================================================================
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
4
<PAGE>
TELEWEST PLC
US GAAP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
TeleWest plc (the "Company") was incorporated on October 20, 1994 under
the laws of England and Wales. On October 2, 1995, the entire issued
share capital of TeleWest Communications plc ("Old TeleWest") was
transferred to the Company in exchange for fully paid up shares of the
Company pursuant to a court-approved scheme of arrangement (the "Scheme
of Arrangement") made between Old TeleWest, the Company and the
shareholders of Old TeleWest. Details regarding the organization and
history of Old TeleWest and the Scheme of Arrangement can be found in
the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission (the "1995 Annual Report").
On October 3, 1995, immediately following the completion of the Scheme
of the Arrangement, the Company acquired the entire issued share capital
of SBC CableComms (UK) ("SBCC"), a company that holds cable television
and telephony interests in the United Kingdom ( "UK"), from its former
shareholders in exchange for fully paid up shares of the Company.
Details regarding the acquisition can be found in the 1995 Annual
Report.
The unaudited consolidated financial statements of the Company and its
majority owned subsidiaries (and, where appropriate, their predecessor
companies, collectively, the "TeleWest Group") have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to those rules and regulations.
As the currency in which the Company operates is UK pounds sterling and
the economic environment in which the Company operates is the United
Kingdom, the financial statements are stated in pounds sterling
((pound)). Merely for convenience, the financial statements contain
translations of certain pounds sterling amounts into US dollars at
$1.5262 per (pound)1.00, the Noon Buying Rate of the Federal Reserve
Bank of New York on March 29, 1996.
2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements as of and for the
periods ended March 31, 1995 and 1996 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 of operations for the interim periods
presented. The results of operations for any interim period are not
necessarily indicative of the results for the full year. The unaudited
condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the 1995 Annual Report .
3. ACCOUNTING POLICIES - FINANCIAL INSTRUMENTS
The Company uses foreign currency option contracts which permit, but do
not require, the Company to exchange foreign currencies at a future date
with another party at a contracted exchange rate. The Company also
enters into combined foreign currency and interest rate swap contracts
("Foreign Currency Swaps"). Such contracts are used to hedge against
adverse changes in foreign currency exchange rates associated with
certain obligations denominated in foreign currency.
The foreign currency option and the Foreign Currency Swaps are recorded
on the balance sheet
5
<PAGE>
TELEWEST PLC
US GAAP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACCOUNTING POLICIES - FINANCIAL INSTRUMENTS (CONTINUED)
in other assets or other liabilities at their fair value at the end of
each reporting period with changes in their fair value during the
reporting period being reported as part of the foreign exchange gain or
loss in the statement of operations. Such gains and losses are offset
against foreign exchange gains and losses on the obligations denominated
in foreign currencies which have been hedged.
4. DEPRECIATION
The estimated useful lives of certain assets within system electronics
and cable and ducting were re-assessed during the period and changed
from 10 years and 30 years to 8 years and 25 years, respectively. These
assets will be written off over their revised estimated remaining lives.
The change in asset lives does not have a material effect on the current
period financial statements.
5. LOSS PER SHARE
Loss per share is based on the number of ordinary shares outstanding for
the period of 919,963,400 shares.
6. COMMITMENTS AND CONTINGENCIES
The Company is party to various legal proceedings in the ordinary course
of business which it does not believe will result, in aggregate, in a
material adverse effect on its balance sheet position and its results.
6
<PAGE>
ITEM 2----MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The financial information contained in this Report on Form 10-Q is prepared in
accordance with US GAAP. In accordance with UK securities regulations, the
Company also prepares financial statements in accordance with UK GAAP. The UK
GAAP financial statements for the period covered by this Report are contained in
Exhibit 99 to this Report.
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the management discussion and
analysis found in the 1995 Annual Report.
LIQUIDITY AND CAPITAL RESOURCES
On October 3, 1995, the Company raised (pound)734 million through the issue of
$300 million principal amount of 9 5/8% Senior Debentures due 2006 (the "Senior
Debentures") and $1,536 million principal amount at maturity of 11% Senior
Discount Debentures due 2007 (the "Senior Discount Debentures"). Interest on the
Senior Debentures is payable semi-annually (with the first such payment having
been made on April 1, 1996); interest on the Senior Discount Debentures will be
payable semi-annually commencing on April 1, 2001. On October 2, 1995, the
Company entered into certain currency hedge arrangements to reduce its exposure
to exchange rate fluctuations on the debentures between Pounds Sterling and US
Dollars through October 1, 2000. The aggregate cost of such arrangements was
(pound)88 million. The proceeds of the issue have been and will be used by the
Company to fund general working capital, capital expenditures, additional
investments, if any, in affiliated companies or other companies engaged in the
cable/telecommunications business. The proceeds of the issue were also used to
purchase the currency hedge arrangements described above and to repay a credit
facility entered into by SBCC.
The Company's principal hedge instrument, a foreign currency option, provides
protection against exchange rate fluctuations up to the early redemption date of
October 1, 2000, down to a rate of $1.452: (pound)1, and allows the Company to
benefit from a strengthening of Pounds Sterling. The instrument is marked to its
market value and exchange gains and losses on the debentures are recorded as
they arise. As a result, the Company's results may be materially influenced by
future exchange rate movements.
Cash and deposit balances at March 31, 1996 were (pound)379.5 million. The
Company had undrawn bank and lease facilities of more than (pound)400 million as
at March 31, 1996.
In June 1994, the Company (through an indirectly wholly owned subsidiary)
entered into a (pound)195 million revolving credit facility (the "Scotland
Credit Facility"). In October 1993, the Company (through indirectly wholly owned
partnerships) entered into a (pound)190 million revolving credit facility (the
"London South/Avon Credit Facility"). These facilities are used to finance
network construction in, and to assist in meeting the working capital
requirements of, the respective regional franchise areas; and in the case of the
London South/Avon Credit Facility, the facility was used to refinance a
(pound)20 million credit facility. Both facilities are secured by the assets,
partnership interests and shares of the respective franchises and borrowings
thereunder bear interest at a floating rate based upon LIBOR. The Company's
ability to borrow under each facility is subject to, among other things, its
compliance with the financial and other covenants contained therein, and the
failure to comply with such covenants could result in all amounts outstanding
under such facility becoming due and payable.
The Company incurred a net cash outflow from operating activities of (pound)11.1
million in the first quarter 1995. Net cash inflow from operating activities was
(pound)3.2 million in the first quarter 1996 reflecting the improvement in the
Company's operating results, excluding non cash items, from the first quarter
1995.
The Company incurred net cash outflow from investing activities of (pound)65.4
million and (pound)88.3 million in the first quarter 1995 and 1996,
respectively. The Company's principal investing activities continue to be the
construction of the network and, in the first quarter 1996, the acquisition of a
franchise covering the Worcester area from Bell Cablemedia plc for
(pound)9.8 million to continue the expansion of the network. The Company expects
to continue to have significant capital requirements to fund the cost of
constructing the network for the foreseeable future.
7
<PAGE>
Cash used in financing activities was (pound)3.1 million and (pound)1.2 million
in the first quarter 1995 and 1996, respectively. Cash used in financing
activities consisted principally of professional fees relating to share issue
costs outstanding from 1994 paid in the first quarter 1995 and to debenture
issue costs outstanding from 1995 paid in the first quarter 1996.
At March 31, 1996, the Company's broadband network had passed approximately 55%
of the homes in its owned and operated franchise areas as compared to 42% of
homes in its owned and operated franchises at 31 March 1995. Total capital
expenditure in the first quarter 1996 was (pound)96.1 million as compared with
(pound)62.7 million in the first quarter 1995 and continues to remain in line
with the Company's expectations.
The Company is obligated under the terms of its telecommunications licences to
construct its network to pass a specified number of premises by prescribed
dates. The Company expects to exceed milestone obligations under its
telecommunications licences. If such milestones are not met, the Company may be
subject to enforcement action from regulatory authorities which, if not complied
with, could result in revocation of the Company's telecommunications licences.
Although the Company from time to time has not met certain milestones, it has
sought and received appropriate milestone modifications from the Director
General.
The Company expects to make capital expenditures of an aggregate of
approximately (pound)520 million during 1996.
The Company currently expects that the anticipated funding requirements (after
taking into account current cash and deposit balances, together with anticipated
revenues) to substantially complete the construction of the owned and operated
network (including the recently acquired franchises of Worcester and Southport),
to fund the Company's operations, to upgrade older portions of the network, to
develop and introduce certain new products, to pay interest on the Company's
debt and to refinance the existing London South/Avon and Scotland Credit
Facilities (aggregating (pound)385 million), will be approximately (pound)1
billion. The Company currently intends to obtain such funding from syndicated
bank financing and has secured bank commitment letters aggregating (pound)1.2
billion, although there can be no assurance that such funding or any other
funding will be available to the Company, that the Company will not elect to use
alternative funding sources or that the Company's current anticipated funding
requirements will be in line with the Company's expectations.
SUMMARY OF OPERATIONS (THREE MONTHS ENDED MARCH 31, 1995 AND 1996)
The Company's consolidated revenue increased by 147% from (pound)26.4 million in
the first quarter 1995 to (pound)65.2 million in the first quarter 1996. The
results of the Company for the first quarter 1996 include the results of the
former SBCC franchises which were acquired in October 1995; the inclusion of
these results accounted for an 88% increase. The remainder of the increase was
principally attributable to the larger subscriber base created by the Company's
continuing network construction in the Old TeleWest franchises.
REVENUE
Cable television revenue increased by 125% from (pound)12.5 million in the first
quarter 1995 to (pound)28.1 million in the first quarter 1996. This increase was
primarily attributable to a 121% increase (from 183,323 to 404,403) in the
average number of customers during each period, resulting from an increase in
the number of homes passed and marketed in the Old TeleWest franchises (from
881,923 to 1,194,176) and from the inclusion of the former SBCC franchises,
which contributed 154,138 customers at March 31, 1996. Penetration remained
stable at 21.8% as at March 31, 1995 (21.6% as at March 31, 1996) and churn
decreased from 48.7% in the first quarter 1995 to 42.2% in the first quarter
1996. Churn decreased from 47.7% for the twelve-month period ended March 31,
1995 to 40.7% for the twelve-month period ended March 31, 1996.
Average monthly revenue per cable television customer increased from
(pound)22.61 in the first quarter 1995 to (pound)23.12 in the first quarter
1996, reflecting an increase in the average premium channels purchased per
customer, an increase in the basic channel charge implemented in the fourth
quarter 1995, and the additional revenues generated from the UK's first national
pay-per view programming aired in March 1996.
8
<PAGE>
Telephony revenue increased by 168% from (pound)13.1 million in the first
quarter 1995 to (pound)35.2 million in the first quarter 1996. Residential
telephony revenue increased by 191% (from (pound)9.6 million to (pound)28.0
million) and business telephony revenue increased by 106% (from (pound)3.5
million to (pound)7.2 million) from the first quarter 1995 to the first quarter
1996.
The increase in residential telephony revenue was primarily due to a 222%
increase (from 139,356 to 448,285) in the average number of residential
telephony lines during each period, which was partially offset by a 9% decrease
(from (pound)22.96 to (pound)20.78) in the average monthly revenue per
residential line. The increase in the average number of residential telephony
lines was attributable to a 56% increase in the number of homes passed and
marketed in the Old TeleWest franchises (from 661,080 to 1,034,329) and the
inclusion of the former SBCC franchises which represented 210,899 lines at March
31, 1996. The decrease in the average monthly revenue per line was mainly
attributable to the inclusion of the former SBCC franchises, which have a lower
average monthly revenue per line, and price reductions in per minute call
charges in response to price cutting by British Telecommunications plc, the
Company's main competitor in residential telephony. The Company intends to
continue reducing per minute call tariffs and plans to mitigate the revenue
impact of these reductions through increased call volumes and higher line
rentals. Residential telephony penetration increased from 22.9% at March 31,
1995 to 26.7% at March 31, 1996 and churn increased from 19.1% in the first
quarter 1995 to 24.1% in the first quarter 1996. Churn increased from 18.7% for
the twelve-month period ended March 31, 1995 to 22.5% for the twelve-month
period ended March 31, 1996.
The increase in business telephony revenue was primarily attributable to a 155%
increase (from 16,691 to 42,575) in the average number of business telephony
lines during the period, which was partially offset by a 19% decrease (from
(pound)69.51 to (pound)56.16) in the average monthly revenue per business line.
The decrease in the average monthly revenue per line was attributable to the
inclusion of the former SBCC franchises, which have historically marketed their
services to smaller businesses, and price reductions in per minute call charges
in response to competition.
Other revenue increased 132% from (pound)0.8 million in the first quarter 1995
to (pound)1.9 million in the first quarter 1996, and is derived primarily from
management services provided to Affiliated Companies, cable publications and
network management services provided to other operators and advertising sales.
OPERATING COSTS AND EXPENSES
The Company's consolidated operating costs and expenses increased by 131% from
(pound)43.8 million in the first quarter 1995 to (pound)101.4 million in the
first quarter 1996.
Programming fees are the largest component of the Company's operating costs in
providing cable television services. The Company obtains most of its programming
under contracts which provide for payments based upon the number of customers.
As a percentage of cable television revenues, programming costs increased from
47% in the first quarter 1995 to 54% in the first quarter 1996 as a result of
more channels being provided to customers and a higher premium to basic channel
ratio. Programming fees as a percentage of revenue are generally higher for
premium channels than for basic channels.
Interconnection charges are the largest component of the Company's operating
costs in providing telephony services. As a percentage of telephony revenue,
interconnection charges declined from 40% in the first quarter 1995 to 35% in
the first quarter 1996 as interconnect costs have reduced and line rental
income, which gives rise to no third party cost, represented a larger proportion
of total average revenue per line in the first quarter of 1996 than in the first
quarter 1995. The Company expects the trend of increasing line rental income and
decreasing call charge rates to continue.
Selling, general and administrative expenses, which include, among other items,
salary and marketing costs, decreased as a percentage of revenue from 77% in the
first quarter 1995 to 64% in the first quarter 1996. The Company expects that
its selling, general and administrative expenses will remain significant as a
percentage of revenue while the network continues to be built out. The Company
increased its workforce by 82% from 2,296 as at March 31, 1995 to 4,188 as at
March 31, 1996 (including 1,321 employees in the former SBCC franchises). A
portion of labour and overhead costs are capitalised as they relate to the
construction of the network. Total labour and overhead costs capitalised in the
first quarter 1996 amounted to (pound)9.1 million, compared to (pound)9.0
million in the first
9
<PAGE>
quarter 1995.
Depreciation expense increased 118% from (pound)12.0 million in the first
quarter 1995 to (pound)26.1 million in the first quarter 1996. This increase was
principally attributable to capital expenditure associated with the Company's
continuing construction activities, depreciation recorded by the former SBCC
franchises, and a reduction in the estimated useful lives of certain network
assets. Amortization expense increased from (pound)0.5 million in the first
quarter 1995 to (pound)6.4 million in the first quarter 1996 primarily due to
the amortization of goodwill arising on the acquisition of SBCC.
OTHER INCOME (EXPENSE)
The Company's share of the net losses its Affiliated Companies accounted for
under the equity method, principally Birmingham Cable Corporation Limited and
Cable London plc, was (pound)2.4 million and (pound)3.6 million for the first
quarter 1995 and 1996, respectively. The performance of the Affiliated Companies
was broadly in line with expectations.
Financial expenses consist primarily of interest expense of (pound)24.0 million
for the first quarter 1996 ((pound)1.0 million for the first quarter 1995), and
foreign exchange losses of (pound)16.7 million for the first quarter 1996
((pound)nil for the first quarter 1995) offset by interest income earned on
short-term investments and loans to Affiliated Companies of (pound)6.8 million
for the first quarter 1996 ((pound)3.0 million in the first quarter 1995).
Interest expense increased by (pound)23.0 million in the first quarter 1996
primarily as a result of the accrued interest expense on the Senior Debentures
and the Senior Discount Debentures issued by the Company in October 1995. The
foreign exchange losses in the first quarter 1996 arose principally from the
retranslation of the US Dollar denominated debentures to Pounds Sterling using
the March 31, 1996 exchange rate and marking the associated hedging instruments
to their market value at March 31, 1996.
10
<PAGE>
PART II ---- OTHER INFORMATION
ITEM 1 ----LEGAL PROCEEDINGS
None
ITEM 2 ---- CHANGES IN SECURITIES
None
ITEM 3 ---- DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 ---- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 ---- OTHER MATTERS
None
ITEM 6 ---- EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27 ---- TeleWest plc financial data schedule
99 ---- TeleWest plc Press Release issued on May 15, 1996 with respect
to results of operations for the quarterly period ended March
31, 1996 (including unaudited consolidated financial statements
prepared in accordance with UK GAAP)
b. Reports on Form 8-K
None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
TELEWEST PLC
By: /s/ STEPHEN J. DAVIDSON
--------------------------
Name: Stephen J. Davidson
Title: Finance Director (principal financial
officer and duly authorized signatory)
May 15, 1996
12
<PAGE>
EXHIBITS
EXHIBIT
27 ---- TeleWest plc Financial Data Schedule
99 ---- TeleWest plc Press Release issued on May 15, 1996 with respect
to results of operations for the quarterly period ended March
31, 1996 (including unaudited consolidated financial statements
prepared in accordance with UK GAAP)
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the financial
statements contained in the body of the
accompanying Form 10-Q and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<CURRENCY> POUNDS STERLING
<EXCHANGE-RATE> 1.5262
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 379,500
<SECURITIES> 0
<RECEIVABLES> 53,487
<ALLOWANCES> 5,324
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,341,117
<DEPRECIATION> 207,788
<TOTAL-ASSETS> 2,271,926
<CURRENT-LIABILITIES> 0
<BONDS> 822,398
0
49,607
<COMMON> 91,996
<OTHER-SE> 1,107,843
<TOTAL-LIABILITY-AND-EQUITY> 2,271,926
<SALES> 0
<TOTAL-REVENUES> 65,160
<CGS> 0
<TOTAL-COSTS> 27,527
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,986
<INCOME-PRETAX> (73,628)
<INCOME-TAX> 19
<INCOME-CONTINUING> (73,647)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (73,647)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
</TABLE>
PRESS RELEASE
TO ALL CITY EDITORS
FOR IMMEDIATE RELEASE
15 MAY 1996
TELEWEST PLC
FIRST QUARTER FINANCIAL RESULTS
TeleWest plc ("TeleWest"), today announced its financial results for the three
months ended 31 March 1996.
Pro forma information is included to demonstrate the comparative effect of
including the results of SBC CableComms UK ("SBCC"), acquired by TeleWest on 3
October 1995, for the equivalent period last year.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
<S> <C> <C>
- - - Total revenue up 147% to(pound)65.2m (up 61% on a pro forma basis)
- - - Cable television revenue up 125% to(pound)28.1m (up 51% on a pro forma basis)
- - - Residential telephony revenue up 191% to(pound)28.0m (up 69% on a pro forma basis)
- - - Business telephony revenue up 106% to(pound)7.2m (up 65% on a pro forma basis)
- - - Gross contribution (total revenue up 145% to(pound)37.6m (up 62% on a pro forma basis)
less direct programming and
telephony costs)
- - - EBITDA (loss) improved 24% to(pound)3.7m (improved 44% on a pro forma
(loss before interest, tax, basis)
depreciation, and amortisation)
- - - Net loss up in line with TeleWest's expectations to(pound)53.4m from(pound)17.7m in q1 1995
- - - Capital expenditure up to (pound)96.1m
</TABLE>
OPERATING HIGHLIGHTS
- - - Network now 55% built, over 2.1 million homes passed;
- - - Telewest has customer relationships with 1 in 3 homes passed;
- - - Nearly 57,000 Telewest customers subscribed to the UK's first pay-per-view
event, the Bruno v Tyson fight on 17 March 1996, representing a take up of
13.9% of the total cable TV customer base;
- - - Two new franchise areas, Southport (a new LDO awarded by the ITC on 18
January) and Worcester (purchased from Bell Cablemedia) were acquired in
the quarter, adding 80,000 and 75,000 licensed homes, respectively.
Telewest is now licensed to serve 4.3 million equity homes in the UK;
- - - (Pound)2.8 million contract from Dudley Metropolitan Borough Council for a
Centrex Communications System;
1
<PAGE>
<TABLE>
<S> <C> <C>
- - - Cable television customers
- Owned and operated up 114% to 411,838 (up 34% on a pro forma basis)
- Equity basis up 97% to 470,085 (up 33% on a pro forma basis)
- - - Cable tv penetration stable at 21.6% (21.8% q1 1995 and 21.7% q1 1995 on a pro forma basis)
- - - Rolling 12 month churn down to 40.7% (47.7% q1 1995 and 53.7% q1 1995 on a pro forma basis)
- - - Residential telephony lines
- Owned and operated up 207% to 467,036 (up 67% on a pro forma basis)
- equity basis up 173% to 518,783 (up 63% on a pro forma basis)
- - - Residential telephony penetration increased significantly to 26.7% (22.9% q1 1995 and 25.0% q1
1995 on a pro forma basis)
- - - Rolling 12 month churn increased to 22.5% (18.7% q1 1995 and 20.6% q1 1995 on a pro forma basis)
- - - Business lines
- Owned and operated up 152% to 45,573 (up 94% on a pro forma basis)
- Equity basis up 124% to 53,630 (up 83% on a pro forma basis)
</TABLE>
Commenting on the results, Alan Michels, Chief Executive of TeleWest, said:
"These are encouraging results. The continued, rapid growth in customers and
revenues reflects our rate of build, our progession into a marketing-led company
and the progressive introduction of new services.
"Now that our network is over half built, TeleWest will increase its focus on
marketing and service development.
"We have made a good start to the year, and I believe we are well positioned for
the remainder of the year with the forthcoming introduction of number
portability, participation in the (pound)12 million national cable awareness
campaign and the increased value and choice we continue to provide to our
customers as demonstrated by the recent launch of our residential internet
access and the enthusiastic take up of our first pay-per-view event."
ENQUIRIES TO:
TeleWest
Alan Michels, Chief Executive Officer
Stephen Davidson, Finance Director Tel: 01483 750900
Dewe Rogerson
Anthony Carlisle
John Antcliffe Tel: 0171 638 9571
2
<PAGE>
CABLE TELEVISION
The 125% increase in cable television revenue (51% increase on a pro forma
basis) was primarily attributable to the 121% increase in the average number of
customers in each period (36% increase on a pro forma basis). Approximately two
thirds of this customer increase was due to the inclusion of the former SBCC
franchises with the remaining resulting from an increase in the number of homes
passed and marketed.
Average monthly revenue per cable television customer increased to (pound)23.12
((pound)22.61 Q1 1995 and (pound)20.82 Q1 1995 on a pro forma basis) reflecting
an increase in the average premium channels purchased per customer, particularly
in the former SBCC franchises, an increase in the basic channel charge
implemented in the fourth quarter 1995, and the additional revenues generated
from the UK's first national pay-per-view programming aired in March 1996.
Penetration remained stable at 21.6% (21.8% at 31 March 1995 and 21.7% at 31
March 1995 on a pro forma basis) and annualised quarterly churn decreased to
42.2% (48.7% Q1 1995 and 57.3% Q1 1995 on a pro forma basis). The rolling 12
month churn fell to 40.7% (47.7% Q1 1995 and 53.7% Q1 1995 on a pro forma
basis).
RESIDENTIAL TELEPHONY
The increase in residential telephony revenue was primarily due to a 222%
increase (74% increase on a pro forma basis) in the average number of
residential telephony lines during each period. Approximately two thirds of this
customer increase was due to the inclusion of the former SBCC franchises with
the remainder resulting from an increase in the number of homes passed and
marketed. This increase was partially offset by a 9% decrease (3% decrease on a
pro forma basis) to (pound)20.78 in the average monthly revenue per residential
line (from (pound)22.96 Q1 1995 and (pound)21.41 Q1 1995 on a pro forma basis).
The decrease was mainly attributable to the inclusion of the former SBCC
franchises which have a lower average monthly revenue per line, and price
reductions in per minute call charges in response to an increasingly competitive
market. TeleWest intends that the impact of these reductions on revenue will be
mitigated through increased call volumes, higher line rentals and lower
operating costs.
Residential telephony penetration increased to 26.7% (22.9% at 31 March 1995 and
25.0% at 31 March 1995 on a pro forma basis) and annualised quarterly churn
increased to 24.1% (19.1% Q1 1995 and 20.4% Q1 1995 on a pro forma basis). The
rolling 12 month churn increased to 22.5% (18.7% Q1 1995 and 20.6% Q1 1995 on a
pro forma basis).
BUSINESS TELEPHONY
The increase in business telephony revenue was primarily attributable to a 155%
increase (97% increase on a pro forma basis) in the average number of business
telephony lines, primarily arising from a substantial marketing effort. This was
partially offset by a 19% decrease (16% decrease on a pro forma basis) to
(pound)56.16 in the average monthly revenue per business line (from (pound)69.51
Q1 1995 and (pound)66.96 Q1 1995 on a pro forma basis). The decrease in the
average monthly revenue per line was attributable to the inclusion of the former
SBCC franchises, which have historically marketed their services to smaller
businesses, and price reductions in per minute call charges in response to
competition.
OPERATING COSTS AND EXPENSES
TeleWest's consolidated operating costs and expenses increased by 117% from
(pound)43.8 million in the first quarter 1995 to (pound)95.0 million in the
first quarter 1996 (Under US GAAP 131% from (pound)43.8 million in the first
quarter 1995 to (pound)101.4 million in the first quarter 1996). On a pro forma
basis, TeleWest's consolidated operating costs and expenses increased by 45%
from (pound)65.7 million in the first quarter 1995 to (pound)95.0 million in the
first quarter 1996.
Programming fees are the largest component of TeleWest's operating costs in
providing cable television services. TeleWest obtains most of its programming
under contracts which provide for payments based upon the number of customers.
As a percentage of cable television revenues, programming costs increased to 54%
(47% Q1 1995 and 49% Q1 1995 on a pro forma basis) as a result of more channels
being provided to customers and a higher
3
<PAGE>
premium to basic channel ratio. Programming fees as a percentage of revenue are
generally higher for premium channels than for basic channels.
Interconnection charges are the largest component of operating costs in
providing telephony services. As a percentage of telephony revenue,
interconnection charges declined to 35% (40% Q1 1995 and 38% Q1 1995 on a pro
forma basis) as interconnect costs have reduced and line rental income, which
gives rise to no third party cost, represented a larger proportion of total
average revenue per line in the first quarter of 1996 than in the first quarter
1995. TeleWest expects the trend of decreasing call charge rates and increasing
line rentals to continue.
Selling, general and administrative expenses, which include, among other items,
salary and marketing costs, decreased as a percentage of revenue to 63% (77% Q1
95 and 74% Q1 1995 on a pro forma basis) in the first quarter 1996. TeleWest
expects that its selling, general and administrative expenses will remain
significant as a percentage of revenue while the network continues to be built
out. TeleWest increased its workforce by 82% from 2,296 as at 31 March 1995 to
4,188 as at 31 March 1996 (including 1,321 employees in the former SBCC
franchises). The portion of labour and overhead costs capitalised in the first
quarter 1996 amounted to (pound)9.1 million ((pound)9.0 million Q1 1995).
Under UK GAAP, depreciation expense increased 109% to (pound)26.1 million from
(pound)12.5 million (39% on a pro forma basis from (pound)18.7 million). Under
US GAAP, depreciation expense increased 118% to (pound)26.1 million from
(pound)12.0 million (39% on a pro forma basis from (pound)18.7 million). This
increase was principally attributable to capital expenditure associated with
TeleWest's continuing construction activities, a reduction in the estimated
useful lives of certain network assets, and, in respect of the increase on an
actual basis, depreciation recorded by the former SBCC franchises.
Under US GAAP, amortisation expense increased from (pound)0.5 million in the
first quarter 1995 to (pound)6.4 million in the first quarter 1996 primarily due
to the amortisation of goodwill arising on the acquisition of SBCC. Under UK
GAAP, this goodwill has been written off to reserves.
AFFILIATED COMPANIES
TeleWest's share of the net losses of its Affiliated Companies accounted for
under the equity method, principally Birmingham Cable Corporation Limited and
Cable London plc, was (pound)2.4 million and (pound)3.6 million for the first
quarter 1995 and 1996, respectively. The performance of the Affiliated Companies
was broadly in line with TeleWest's expectations.
FINANCING COSTS
Financial expenses consist primarily of interest expense of (pound)21.5 million
((pound)24.0 million under US GAAP) for the first quarter 1996 ((pound)1.0
million for the first quarter 1995), and foreign exchange losses of (pound)5.4
million ((pound)16.7 million under US GAAP) for the first quarter 1996
((pound)nil for the first quarter 1995) offset by interest income earned on
short-term investments and loans to Affiliated Companies of (pound)6.9 million
((pound)6.8 million under US GAAP) for the first quarter 1996 ((pound)3.0
million in the first quarter 1995).
Interest expense increased by (pound)20.5 million ((pound)23.0 million under US
GAAP) in the first quarter 1996 primarily as a result of the accrued interest
expense on the US Dollar denominated Senior Debentures due 2006 and the Senior
Discount Debentures due 2007 issued by TeleWest in October 1995.
Exchange losses arising in the first quarter 1996 relate to the US Dollar
denominated debentures and the associated hedging instruments purchased by
TeleWest. The main hedge instrument, a foreign currency option, provides
protection against exchange rate fluctuations up to the early redemption date of
1 October 2000, down to a rate of $1.452:(pound)1 and allows TeleWest to
benefit from a strengthening of Pounds Sterling. Under UK GAAP, exchange losses
to this floor on retranslating the Senior Discount Debentures are spread over
the life of the instrument as is the cost of the instrument. Any gains are
recorded as they arise. Under US GAAP, the instrument is marked to its market
value and exchange gains and losses on the Senior Discount Debenture are
4
<PAGE>
recorded as they arise. TeleWest's results may continue to be materially
influenced by future exchange rate movements.
LIQUIDITY AND CAPITAL RESOURCES
On 3 October 1995, TeleWest raised (pound)734 million through the issue of $300
million principal amount of 9 5/8% Senior Debentures due 2006 and $1,536 million
principal amount at maturity of 11% Senior Discount Debentures due 2007. The
aggregate cost of the currency hedge arrangements associated with the debentures
was (pound)88 million.
Cash balances at 31 March 1996 amounted to (pound)379.5 million. TeleWest has
available to it unused debt and lease facilities of more than (pound)400
million.
TeleWest currently expects that the anticipated funding requirements (after
taking into account current cash and deposit balances, together with anticipated
revenues) to substantially complete the construction of the owned and operated
network (including the recently acquired franchises of Worcester and Southport),
to fund TeleWest's operations, to upgrade older portions of the network, to
develop and introduce certain new products, to pay interest on TeleWest's debt
and to refinance the existing London South/Avon and Scotland Credit Facilities
(aggregating (pound)385 million), will be approximately (pound)1 billion.
TeleWest currently intends to obtain such funding from syndicated bank financing
and has secured bank commitment letters aggregating (pound)1.2 billion, although
there can be no assurance that such funding or any other funding will be
available to TeleWest, that TeleWest will not elect to use alternative funding
sources or that TeleWest's current anticipated funding requirements will be in
line with TeleWest's expectations.
5
<PAGE>
TELEWEST plc
<TABLE>
<CAPTION>
Operating statistics -
Owned and operated on equity basis
1st quarter net additions
- - ------------------------- ACTUAL PRO FORMA
(see note below) (see note below)
Net additions Net additions Net additions
1st qtr 1996 1st qtr 1995 1st qtr 1995
------------------------------------------------------------------------------------
<S> <C> <C> <C>
CABLE TELEVISION
- - ----------------
Homes marketed 74,134 76,448 113,568
CATV customers 10,369 12,960 10,698
RESIDENTIAL TELEPHONY
- - ---------------------
Homes marketed 90,027 80,372 129,762
Residential telephony customers 35,756 23,219 41,952
Residential telephony lines 36,120 23,394 42,127
BUSINESS TELEPHONY
- - ------------------
Business telephony customers 1,520 783 1,248
Business telephony lines 5,552 2,516 3,452
<CAPTION>
At 31.3.96
- - ---------- ACTUAL PRO FORMA
(see note below) (see note below)
As at 31 March As at 31 March As at 31 March
1996 1995 1995
------------------------------------------------------------------------
<S> <C> <C> <C>
CABLE TELEVISION
- - ----------------
Homes marketed 1,905,593 881,923 1,412,570
CATV customers 411,838 192,056 306,723
CATV penetration 21.6% 21.8% 21.7%
Quarterly churn rate (annualised) 42.2% 48.7% 57.3%
Rolling 12 month churn rate 40.7% 47.7% 53.7%
RESIDENTIAL TELEPHONY
- - ---------------------
Homes marketed 1,742,632 661,080 1,117,814
Residential telephony customers 465,161 151,368 279,670
Residential telephony penetration 26.7% 22.9% 25.0%
Residential telephony lines 467,036 151,924 280,226
Quarterly churn rate per line (annualised) 24.1% 19.1% 20.4%
Rolling 12 month churn rate 22.5% 18.7% 20.6%
BUSINESS TELEPHONY
- - ------------------
Business telephony customers 15,746 5,865 9,254
Business telephony lines 45,573 18,076 23,502
Average number of lines per customer 2.9 3.1 2.5
Quarterly churn rate per line (annualised) 12.5% 14.0% 14.9%
Rolling 12 month churn rate 12.3% 12.8% 15.9%
</TABLE>
Note:Actual refers to comparative figures for the Group as constituted during
the first quarter 1995 (excluding the results of the former SBCC
franchises). Pro forma refers to comparative figures for the Group during
the first quarter 1995 including the results of the former SBCC franchises.
6
<PAGE>
TELEWEST plc
<TABLE>
<CAPTION>
Operating statistics -
Owned and operated and affiliated franchises on equity basis
1st quarter net additions
- - ------------------------- ACTUAL PRO FORMA
(see note below) (see note below)
Net additions Net additions Net additions
1st qtr 1996 1st qtr 1995 1st qtr 1995
-------------------------------------------------------------------------
<S> <C> <C> <C>
CABLE TELEVISION
- - ----------------
Homes marketed 80,143 86,756 123,875
CATV customers 12,694 14,275 12,013
RESIDENTIAL TELEPHONY
- - ---------------------
Homes marketed 97,316 91,946 141,335
Residential telephony customers 38,971 26,658 45,390
Residential telephony lines 39,432 26,794 45,527
BUSINESS TELEPHONY
- - ------------------
Business telephony customers 1,691 867 1,332
Business telephony lines 6,156 3,009 3,945
<CAPTION>
At 31.3.96
- - ---------- ACTUAL PRO FORMA
(see note below) (see note below)
As at 31 March As at 31 March As at 31 March
1996 1995 1995
-------------------------------------------------------------------------
<S> <C> <C> <C>
CABLE TELEVISION
- - ----------------
Homes marketed 2,146,291 1,059,624 1,590,271
CATV customers 470,085 238,848 353,515
RESIDENTIAL TELEPHONY
- - ---------------------
Homes marketed 1,979,434 828,026 1,284,760
Residential telephony customers 516,511 189,030 317,331
Residential telephony lines 518,783 189,767 318,069
BUSINESS TELEPHONY
- - ------------------
Business telephony customers 17,672 7,260 10,649
Business telephony lines 53,630 23,926 29,352
Average number of lines per customer 3.0 3.3 2.8
</TABLE>
Note:Actual refers to comparative figures for the Group as constituted during
the first quarter 1995 (excluding the results of the former SBCC
franchises). Pro forma refers to comparative figures for the Group during
the first quarter 1995 including the results of the former SBCC franchises.
7
<PAGE>
TELEWEST plc
<TABLE>
<CAPTION>
Operating statistics - owned and operated franchises
As at 31 March 1996
London Avon North Scotland South Cotswolds North Midlands Total
South East East (96% owned) West
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CABLE TELEVISION
Homes marketed 356,248 239,106 109,584 364,654 87,091 37,493 426,331 285,086 1,905,593
CATV customers 78,236 47,185 23,331 75,284 24,191 9,473 91,244 62,894 411,838
CATV penetration 22.0% 19.7% 21.3% 20.6% 27.8% 25.3% 21.4% 22.1% 21.6%
RESIDENTIAL TELEPHONY
Homes marketed 297,281 239,635 106,423 266,406 87,091 37,493 423,217 285,086 1,742,632
Residential telephony customers 53,117 62,573 34,405 66,953 26,977 10,237 120,417 90,482 465,161
Residential telephony penetration 17.9% 26.1% 32.3% 25.1% 31.0% 27.3% 28.5% 31.7% 26.7%
Residential telephony lines 54,124 62,974 34,408 67,183 27,183 10,265 120,417 90,482 467,036
BUSINESS TELEPHONY
Business telephony customers 3,262 3,143 926 2,156 497 300 3,723 1,739 15,746
Business telephony lines 14,749 8,962 1,691 5,628 1,641 675 7,883 4,344 45,573
Average number of lines per customer 4.5 2.9 1.8 2.6 3.3 2.3 2.1 2.5 2.9
</TABLE>
8
<PAGE>
TeleWest plc
UK GAAP
<TABLE>
<CAPTION>
Unaudited consolidated profit and loss account
for the three month period ended 31 March 1996
- - -------------------------------------------------------------------------------------------------------------------------
Three months Three months
ended ended
31 March 31 March
Note 1996 1995
(pound)'000 (pound)'000
<S> <C> <C> <C>
Turnover
Continuing operations 4 65,160 26,431
Operating costs 5 (94,953) (43,797)
-------------------------- ---------------------------
Operating loss
Continuing operations (29,793) (17,366)
Share of results of associated undertakings (3,557) (2,421)
Other interest receivable and similar income 6,855 3,003
Interest payable and similar charges 6 (26,874) (974)
-------------------------- ---------------------------
Loss on ordinary activities
before taxation (53,369) (17,758)
Tax on loss on ordinary activities (19) (7)
-------------------------- ---------------------------
Loss on ordinary activities
after taxation (53,388) (17,765)
Minority interests (17) 36
-------------------------- ---------------------------
Loss for the financial period (53,405) (17,729)
========================== ===========================
Loss per ordinary share (pence) (5.8) (2.1)
========================== ===========================
Loss per equity share (pence) (3.8) (1.8)
========================== ===========================
</TABLE>
The Group had no recognised gains or losses other than those reflected in the
profit and loss account.
See Notes to Unaudited Consolidated Financial Statements.
9
<PAGE>
TeleWest plc
UK GAAP
<TABLE>
<CAPTION>
Unaudited consolidated balance sheet
as at 31 March 1996
- - -----------------------------------------------------------------------------------------------------------------------
31 March 31 December
1996 1995
(pound)'000 (pound)'000
<S> <C> <C>
Fixed assets
Tangible assets 1,133,329 1,063,808
Investments 185,212 191,028
-------------------------- ---------------------------
1,318,541 1,254,836
Current assets
Stocks 37 40
Debtors 60,388 54,980
Cash and deposits 379,500 464,818
-------------------------- ---------------------------
439,925 519,838
Creditors: amounts falling due within one year (163,190) (137,744)
-------------------------- ---------------------------
Net current assets 276,735 382,094
-------------------------- ---------------------------
Total assets less current liabilities 1,595,276 1,636,930
Creditors: amounts falling
due after more than one year (816,600) (795,066)
Minority interests (184) (167)
-------------------------- ---------------------------
Net assets 778,492 841,697
========================== ===========================
Capital and reserves
Called up share capital 141,603 141,603
Merger reserve 546,295 556,095
Other reserves 270,237 270,237
Profit and loss account (179,643) (126,238)
-------------------------- ---------------------------
Total equity shareholders' funds 778,492 841,697
========================== ===========================
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
10
<PAGE>
TeleWest plc
UK GAAP
<TABLE>
<CAPTION>
Unaudited consolidated cash flow statement
for the three month period ended 31 March 1996
- - -----------------------------------------------------------------------------------------------------------------------------
Three months Three months
ended 31 March ended 31 March
Note 1996 1995
(pound)'000 (pound)'000
<S> <C> <C> <C>
Net cash inflow/(outflow) from operating activities 7 335 (11,469)
-------------------------- ---------------------------
Returns on investments and servicing of finance
Interest received 4,653 2,438
Interest paid (1,076) (1,596)
Interest element of finance lease rentals (687) (436)
-------------------------- ---------------------------
Net cash inflow from returns on
investments and servicing of finance 2,890 406
-------------------------- ---------------------------
Investing activities
Purchase of tangible fixed assets (74,714) (65,449)
Sale of tangible fixed assets 559 19
Purchase of subsidiary undertakings (14,098) -
-------------------------- ---------------------------
Net cash outflow from investing activities (88,253) (65,430)
-------------------------- ---------------------------
Net cash outflow before financing (85,028) (76,493)
-------------------------- ---------------------------
Financing
Cash paid for debenture issue costs (549) -
Payment of share issue costs - (5,643)
Capital element of finance lease rental payments (618) 2,107
-------------------------- ---------------------------
Net cash outflow from financing (1,167) (3,536)
-------------------------- ---------------------------
Decrease in cash and cash
equivalents 8/9 (86,195) (80,029)
========================== ===========================
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
11
<PAGE>
TeleWest plc
UK GAAP
<TABLE>
<CAPTION>
Unaudited reconciliation of movements in shareholders' funds
for the three month period ended 31 March 1996
- - --------------------------------------------------------------------------------------------------------------------
Three months Three months
ended ended
31 March 31 March
1996 1995
(pound)'000 (pound)'000
<S> <C> <C>
Opening equity shareholders' funds 841,697 743,716
Loss for the period (53,405) (17,729)
Goodwill written off on acquisition of
Bell Cablemedia (Worcester) Limited (9,800) -
-------------------------- ---------------------------
Closing equity shareholders' funds 778,492 725,987
========================== ===========================
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
12
<PAGE>
TELEWEST PLC
UK GAAP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
TeleWest plc (the "Company") was incorporated on 20 October 1994 under
the laws of England and Wales. On 2 October 1995, the entire issued
share capital of TeleWest Communications plc ("Old TeleWest") was
transferred to the Company in exchange for fully paid up shares of the
Company pursuant to a Court-approved scheme of arrangement (the "Scheme
of Arrangement") made between Old TeleWest, the Company, and the
shareholders of Old TeleWest. TeleWest plc thereby became the new
holding company for the Group. On 3 October 1995, the Company acquired
the entire issued share capital of SBC CableComms (UK) ("SBCC") by the
issue of fully paid up shares of the Company ("the SBCC Share Exchange
Agreement"). Prior to these transactions, the Company did not trade and
hence did not incur any income or expenditure on its own account. Full
details regarding the organisation and history of Old TeleWest, the
Scheme of Arrangement, SBCC, and the SBCC Share Exchange Agreement can
be found in the 1995 Annual Report.
The Group financial statements consolidate the financial statements of
the Company and its subsidiary undertakings, together with associated
undertakings to the extent of the Group's interests in those
undertakings. The principles of merger accounting have been adopted in
respect of the effective acquisition of Old TeleWest. The consolidated
results are presented as if Old TeleWest had been owned by the Company
throughout the comparative accounting period. The acquisition method of
accounting has been adopted in respect of all other aquisitions and
therefore the consolidated profit and loss account reflects the results
of the acquired subsidiary undertakings and the Group's share of the
results of associated undertakings for the period.
The consolidated financial statements, which are unaudited, have been
prepared on the basis of the accounting policies set out in the Group's
1995 Annual Report. The balance sheet at 31 December 1995 is derived
from the statutory accounts for 1995 which will be delivered to the
registrar of companies after the Annual General Meeting. The auditors
have reported on those accounts; their report was unqualified and did
not contain a statement under section 237(2) or (3) of the Companies Act
1985.
2. ACCOUNTING POLICIES - FINANCIAL INSTRUMENTS
The Group uses foreign currency options which permit, but do not
require, the Group to exchange foreign currencies at a future date with
another party at a contracted exchange rate (the "Forward Rate"). Such
contracts are used to hedge against adverse changes in foreign currency
exchange rates associated with obligations denominated in foreign
currency. The premium paid to enter into these options is included on
the balance sheet as a fixed asset investment and is amortised to the
profit and loss account over the life of the option at a constant rate
to the carrying value of the obligation it hedges. The difference
between the contracted amount to be exchanged under the option
translated at the Forward Rate and the contracted amount translated at
the spot rate at the inception of the contract is also amortised to the
profit and loss account over the life of the option at a constant rate
to the carrying value of the obligation. The carrying value of the
obligation is increased for the amortised portion of the difference.
The Group also enters into combined foreign currency and interest rate
swap contracts ("Foreign Currency Swaps") to hedge against adverse
changes in foreign currency exchange rates associated with certain
obligations denominated in foreign currency. The principal element of
Foreign Currency Swaps is translated at the spot rate at the reporting
date with any gain or loss on translation recognised in the profit and
loss account. Such gains and losses are offset against gains and losses
arising on the translation of the obligations which have been hedged.
13
<PAGE>
TELEWEST PLC
UK GAAP
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES - FINANCIAL INSTRUMENTS (CONTINUED)
The interest element of Foreign Currency Swaps is accounted for on an
accruals basis with the net interest income or expense recognised in the
profit and loss account as it is earned and payable.
3. DEPRECIATION
The estimated useful lives of certain assets within system electronics
and cable and ducting were re-assessed during the period and changed
from 10 years and 30 years to 8 years and 25 years, respectively.
These assets will be written off over their revised estimated
remaining lives. The change in asset lives does not have a material
effect on the current period financial statements.
4. TURNOVER
<TABLE>
<CAPTION>
Three months Three months
ended ended
31 March 31 March
1996 1995
(pound)'000 (pound)'000
<S> <C> <C>
Cable television 28,073 12,504
Telephony - residential 27,975 9,610
Telephony - business 7,178 3,483
Other 1,934 834
---------------- ----------------
65,160 26,431
================ ================
</TABLE>
5. OPERATING COSTS
<TABLE>
<CAPTION>
Three months Three months
ended ended
31 March 31 March
1996 1995
(pound)'000 (pound)'000
<S> <C> <C>
Programming expenses 15,294 5,817
Telephony expenses 12,233 5,267
Selling, general and administrative 41,362 20,255
Depreciation and amortisation 26,064 12,458
----------------- -----------------
94,953 43,797
================= =================
</TABLE>
14
<PAGE>
TELEWEST PLC
UK GAAP
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
Three months Three months
ended ended
31 March 31 March
1996 1995
(pound)'000 (pound)'000
<S> <C> <C>
On bank loans and overdrafts and other loans
wholly repayable within 5 years 950 630
Finance costs of Senior Discount Debentures 14,242 -
Finance costs of Senior Debentures 5,637 -
Finance charges payable in respect of finance
leases and hire purchase contracts 687 344
Exchange losses on foreign currency translation,
net 5,358 -
----------------- -----------------
26,874 974
================= =================
</TABLE>
The accounting treatment of the hedging instruments associated with the
Senior Discount Debentures and the Senior Debentures is described in
note 2 to the unaudited consolidated financial statements.
7. RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW/(OUTFLOW) FROM
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
Three months Three months
ended ended
31 March 31 March
1996 1995
(pound)'000 (pound)'000
<S> <C> <C>
Operating loss (29,793) (17,366)
Depreciation and amortisation 26,064 12,458
Decrease/(increase) in stocks 3 (20)
Increase in debtors (3,888) (950)
Increase/(decrease) in other creditors 7,949 (5,591)
----------------- -----------------
NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES 335 (11,469)
================= =================
</TABLE>
15
<PAGE>
TELEWEST PLC
UK GAAP
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS FOR THE THREE MONTHS TO
31 MARCH 1996
<TABLE>
<CAPTION>
Cash
(pound)'000
<S> <C>
Balance at 1 January 1996 464,818
Net cash outflow before foreign exchange (86,195)
Foreign exchange movement on cash 877
------------
BALANCE AT 31 MARCH 1996 379,500
============
</TABLE>
9. ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS FOR THE THREE MONTHS TO
31 MARCH 1995
<TABLE>
<CAPTION>
Cash Overdraft Net
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Balance at 1 January 1995 248,002 - 248,002
Net cash outflow (79,581) (448) (80,029)
-------------- ------------- ------------
BALANCE AT 31 MARCH 1995 168,421 (448) 167,973
============== ============= ============
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
The Company is party to various legal proceedings in the ordinary course
of business which it does not believe will result, in aggregate, in a
material adverse effect on its financial condition.
16
<PAGE>
TeleWest plc
<TABLE>
<CAPTION>
Reconciliation of loss for the financial period under UK GAAP to net loss under US GAAP
for the three month period ended 31 March 1996
- - ------------------------------------------------------------------------------------------------------------------------------
Three months Three months
ended ended
31 March 31 March
1996 1995
(pound)'000 (pound)'000
<S> <C> <C>
Loss for the financial period under UK GAAP (53,405) (17,729)
Adjustments:
Reversal of amortisation of interest rate swaps - 502
Amortisation of goodwill (6,445) (525)
Foreign exchange loss on financial instruments (11,308) -
Finance charges on Senior Discount Debentures (2,470) -
Reduction in fair value of interest rate swaps - (2,561)
Other (19) -
-------------------------- ---------------------------
Net loss under US GAAP (73,647) (20,313)
========================== ===========================
</TABLE>
17
<PAGE>
TeleWest plc
UK GAAP
<TABLE>
<CAPTION>
Unaudited consolidated profit and loss account for the three month period ended
31 March 1996
This supplemental information is included to demonstrate the comparative effect
of including the former SBCC franchises in the results of first quarter 1995 on
a pro forma basis.
ACTUAL PRO FORMA
Three months Three months
ended ended
31 March 31 March
1996 1995
(pound)000 (pound)000
<S> <C> <C>
Turnover
Cable television 28,073 18,623
Telephony - residential 27,975 16,555
Telephony - business 7,178 4,350
Other 1,934 834
-------------------------- ---------------------------
65,160 40,362
Operating costs
Programming expenses (15,294) (9,141)
Telephony expenses (12,233) (8,008)
Selling, general and administrative expenses (41,362) (29,850)
-------------------------- ---------------------------
Earnings before interest, tax, depreciation,
and amortisation ("EBITDA") (3,729) (6,637)
Depreciation and amortisation (26,064) (18,685)
-------------------------- ---------------------------
Operating loss (29,793) (25,322)
========================== ===========================
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
TELEWEST PLC
US GAAP
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS)
- - -----------------------------------------------------------------------------------------------------------------------------------
3 months 3 months 3 months
ended ended ended
March 31, March 31, March 31,
1996 1996 1995
<S> <C> <C> <C>
REVENUE
Cable television $ 42,845 (pound) 28,073 (pound) 12,504
Telephony - residential 42,695 27,975 9,610
Telephony - business 10,955 7,178 3,483
Other ((pound)407 and(pound)288 in 1996 and 1995 from related parties) 2,952 1,934 834
---------- ----------- -----------
99,447 65,160 26,431
---------- ----------- -----------
OPERATING COSTS AND EXPENSES
Programming (23,342) (15,294) (5,817)
Telephony (18,670) (12,233) (5,267)
Selling, general, and administrative (including(pound)710 and(pound)509 in 1996 (63,156) (41,381) (20,255)
and 1995 from related parties)
Depreciation (39,779) (26,064) (11,956)
Amortization of goodwill (9,836) (6,445) (525)
---------- ----------- -----------
(154,783) (101,417) (43,820)
---------- ----------- -----------
OPERATING LOSS (55,336) (36,257) (17,389)
OTHER INCOME/(EXPENSE)
Interest income((pound)432 and(pound)12 in 1996 and 1995 from related parties) 10,403 6,816 3,003
Interest expense and similar charges ((pound)nil and(pound)471 in 1996 and
1995 from related parties) (36,607) (23,986) (979)
Unrealized loss on interest rate swaps - - (2,561)
Foreign exchange losses, net (25,436) (16,666) -
Share of net losses of affiliates (5,429) (3,557) (2,421)
Gain on disposal of assets 60 39 -
Minority interests in (profits)/losses of consolidated subsidiaries, net (26) (17) 36
Other, net - - 5
---------- ----------- -----------
LOSS BEFORE INCOME TAXES (112,371) (73,628) (20,306)
Income tax expense (29) (19) (7)
---------- ----------- -----------
NET LOSS $ (112,400) (pound) (73,647) (pound)(20,313)
========== =========== ===========
LOSS PER ORDINARY SHARE (DOLLARS/POUND) (NOTE 5) $ (0.12) (pound) (0.08) (pound) (0.02)
========== =========== ============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
19
<PAGE>
<TABLE>
<CAPTION>
TELEWEST PLC
US GAAP
UNAUDITED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
- - -------------------------------------------------------------------------------------------------------------------------------
March 31, March 31, December 31,
1996 1996 1995
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 579,193 (pound) 379,500 (pound) 464,818
Trade receivables (net of allowance for doubtful accounts
of(pound)5,324 and(pound)4,695) 37,003 24,245 23,123
Other receivables 44,629 29,242 25,657
Prepaid expenses 9,722 6,370 6,133
Investments in affiliates, accounted for under the equity
method, and related receivables 119,408 78,239 80,703
Other investments, at cost 31,540 20,666 20,666
Property and equipment (less accumulated depreciation
of(pound)207,788 and(pound)182,142) 1,729,687 1,133,329 1,063,808
Goodwill (less accumulated amortization of
(pound)18,203 and(pound)11,758) 761,934 499,236 495,881
Other assets (less accumulated amortization
of(pound)1,491 and(pound)742) 154,297 101,099 108,931
------------- ------------- --------------
TOTAL ASSETS $ 3,467,413 (pound) 2,271,926 (pound) 2,289,720
============= ============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 63,322 (pound) 41,490 (pound) 40,402
Other liabilities 192,086 125,859 103,824
Debt 1,255,144 822,398 792,265
Capital lease obligations 49,676 32,549 30,314
------------- ------------- --------------
TOTAL LIABILITIES 1,560,228 1,022,296 966,805
------------- ------------- --------------
Minority interests 281 184 167
------------- ------------- --------------
Shareholders' equity
Convertible preference shares, 10 pence par value;
661,000,000 shares authorized in 1996 and 1995; 75,710 49,607 49,607
496,066,708 shares issued and outstanding
in 1996 and 1995
Ordinary shares, 10 pence par value;
2,010,000,000 shares authorized in 1996 and 1995;
919,963,400 shares issued and outstanding
in 1996 and 1995 140,404 91,996 91,996
Additional paid-in capital 2,019,118 1,322,971 1,322,971
Accumulated deficit (325,636) (213,364) (139,717)
------------- -------------- -------------
1,909,596 1,251,210 1,324,857
Ordinary shares held in trust for the TeleWest
Restricted Share Scheme (2,692) (1,764) (2,109)
------------- -------------- --------------
TOTAL SHAREHOLDERS' EQUITY 1,906,904 1,249,446 1,322,748
------------- -------------- --------------
Commitments and contingencies (note 6)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,467,413 (pound) 2,271,926 (pound) 2,289,720
============= ============== ==============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
20
<PAGE>
<TABLE>
<CAPTION>
TELEWEST PLC
US GAAP
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
- - -----------------------------------------------------------------------------------------------------------------------------------
3 months 3 months 3 months
ended ended ended
March 31, March 31, March 31,
1996 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (112,400) (pound) (73,647) (pound) (20,313)
Adjustments to reconcile net loss to
net cash provided by/(used in) operating activities:
Depreciation 39,779 26,064 11,956
Amortization of goodwill 9,836 6,445 525
Amortization of deferred financing costs and issue
discount on senior discount debentures 25,791 16,899 -
Accrued interest on senior debentures 8,319 5,451 -
Unrealized loss on foreign currency translation 25,436 16,666 -
Unrealized loss on interest rate swap - - 2,561
Share of losses of affiliates 5,429 3,557 2,421
Gain on disposals of assets (60) (39) -
Minority interests in profit/(loss) 26 17 (36)
Changes in operating assets and liabilities, net of effect of
acquisition of subsidiaries:
Change in receivables (8,871) (5,812) (869)
Change in prepaid expenses (362) (237) (205)
Change in accounts payable (9,777) (6,406) (11,600)
Change in other liabilities 21,775 14,267 4,502
Other (net) - - (5)
---------- --------- ----------
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES 4,921 3,225 (11,063)
---------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property and equipment (114,029) (74,714) (65,449)
Cash paid for acquisition of subsidiaries (21,516) (14,098) -
Proceeds from disposals of assets 853 559 19
---------- --------- ----------
NET CASH USED IN INVESTING ACTIVITIES (134,692) (88,253) (65,430)
---------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash paid for debenture issue costs (838) (549) -
Cash paid for share issue costs - - (5,643)
Increase in overdraft - - 448
Capital element of finance lease repayments (943) (618) 2,107
---------- --------- ----------
NET CASH USED IN FINANCING ACTIVITIES (1,781) (1,167) (3,088)
---------- --------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (131,552) (86,195) (79,581)
Effect of exchange rate changes on cash and
cash equivalents 1,339 877 -
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 709,406 464,818 248,002
---------- --------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 579,193 (pound) 379,500 (pound) 168,421
========== ========= ==========
.
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
21
<PAGE>
TELEWEST PLC
US GAAP
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
- - -----------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE ADDITIONAL
PREFERENCE ORDINARY SHARES HELD PAID-IN ACCUMULATED
SHARES SHARES IN TRUST CAPITAL DEFICIT TOTAL
(pound) (pound) (pound) (pound) (pound) (POUND)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 49,607 91,996 (2,109) 1,322,971 (139,717) 1,322,748
Accrued employee compensation relating to
the TeleWest Restricted Share Scheme - - 345 - - 345
Net loss for the period to March 31, 1996 - - - - (73,647) (73,647)
---------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1996 49,607 91,996 (1,764) 1,322,971 (213,364) 1,249,446
=======================================================================================
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
22
<PAGE>
TELEWEST PLC
US GAAP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
TeleWest plc (the "Company") was incorporated on October 20, 1994 under
the laws of England and Wales. On October 2, 1995, the entire issued
share capital of TeleWest Communications plc ("Old TeleWest") was
transferred to the Company in exchange for fully paid up shares of the
Company pursuant to a court-approved scheme of arrangement (the "Scheme
of Arrangement") made between Old TeleWest, the Company and the
shareholders of Old TeleWest. Details regarding the organization and
history of Old TeleWest and the Scheme of Arrangement can be found in
the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission (the "1995 Annual Report").
On October 3, 1995, immediately following the completion of the Scheme
of the Arrangement, the Company acquired the entire issued share capital
of SBC CableComms (UK) ("SBCC"), a company that holds cable television
and telephony interests in the United Kingdom ( "UK"), from its former
shareholders in exchange for fully paid up shares of the Company.
Details regarding the acquisition can be found in the 1995 Annual
Report.
The unaudited consolidated financial statements of the Company and its
majority owned subsidiaries (and, where appropriate, their predecessor
companies, collectively, the "TeleWest Group") have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to those rules and regulations.
As the currency in which the Company operates is UK pounds sterling and
the economic environment in which the Company operates is the United
Kingdom, the financial statements are stated in pounds sterling
((pound)). Merely for convenience, the financial statements contain
translations of certain pounds sterling amounts into US dollars at
$1.5262 per (pound)1.00, the Noon Buying Rate of the Federal Reserve
Bank of New York on March 29, 1996.
2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements as of and for the
periods ended March 31, 1995 and 1996 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 of operations for the interim periods
presented. The results of operations for any interim period are not
necessarily indicative of the results for the full year. The unaudited
condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the 1995 Annual Report .
3. ACCOUNTING POLICIES - FINANCIAL INSTRUMENTS
The Company uses foreign currency option contracts which permit, but do
not require, the Company to exchange foreign currencies at a future date
with another party at a contracted exchange rate. The Company also
enters into combined foreign currency and interest rate swap contracts
("Foreign Currency Swaps"). Such contracts are used to hedge against
adverse changes in foreign currency exchange rates associated with
certain obligations denominated in foreign currency.
The foreign currency option and the Foreign Currency Swaps are
recorded on the balance sheet
23
<PAGE>
TELEWEST PLC
US GAAP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACCOUNTING POLICIES - FINANCIAL INSTRUMENTS (CONTINUED)
in other assets or other liabilities at their fair value at the end of
each reporting period with changes in their fair value during the
reporting period being reported as part of the foreign exchange gain or
loss in the statement of operations. Such gains and losses are offset
against foreign exchange gains and losses on the obligations denominated
in foreign currencies which have been hedged.
4. DEPRECIATION
The estimated useful lives of certain assets within system electronics
and cable and ducting were re-assessed during the period and changed
from 10 years and 30 years to 8 years and 25 years, respectively. These
assets will be written off over their revised estimated remaining lives.
The change in asset lives does not have a material effect on the current
period financial statements.
5. LOSS PER SHARE
Loss per share is based on the number of ordinary shares outstanding for
the period of 919,963,400 shares.
6. COMMITMENTS AND CONTINGENCIES
The Company is party to various legal proceedings in the ordinary course
of business which it does not believe will result, in aggregate, in a
material adverse effect on its balance sheet position and its results.
24
