SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30 , 1997
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 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 Identification No.)
Incorporation or Organization)
GENESIS BUSINESS PARK
ALBERT DRIVE, WOKING
SURREY, GU21 5RW
UNITED KINGDOM
Telephone number: 001 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 August 13, 1997, 927,567,600 ordinary shares of 10p each were
outstanding.
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PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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TELEWEST COMMUNICATIONS PLC
US GAAP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
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3 months 3 months 3 months 6 months 6 months 6 months
ended ended ended ended ended ended
June 30 June 30 June 30 June 30 June 30 June 30
1997 1997 1996 1997 1997 1996
(note 1) (note 1)
REVENUE
<S> <C> <C> <C> <C> <C> <C>
Cable television $64,509 (pound) 38,744 (pound) 28,799 $ 127,947 (pound) 76,845 (pound) 56,872
Telephony - residential 63,561 38,175 29,349 129,619 77,849 57,324
Telephony - business 17,672 10,614 8,054 33,135 19,901 15,232
Other ((pound)925 and(pound)
814 in 1997 and 1996,
respectively, from related parties ) 5,859 3,519 2,118 11,400 6,847 4,052
--------- --------- --------- --------- ---------- ---------
151,601 91,052 68,320 302,101 181,442 133,480
--------- --------- --------- --------- ---------- ---------
OPERATING COSTS AND EXPENSES
Programming (including(pound)6,579
and(pound)3,059
in 1997 and 1996, respectively, (39,008) (23,428) (15,466) (77,632) (46,626) (30,760)
to related parties)
Telephony (21,747) (13,061) (13,084) (45,688) (27,440) (25,317)
Selling, general, and administrative
(including (pound)481 and (pound)
1,216 in 1997 and 1996, respectively,
to related parties) (75,714) (45,474) (43,128) (151,520) (91,003) (84,509)
Depreciation (64,772) (38,902) (28,609) (127,136) (76,358) (54,673)
Amortization of goodwill (11,002) (6,608) (6,569) (21,981) (13,202) (13,014)
--------- --------- --------- --------- ---------- ---------
(212,243) (127,473) (106,856) (423,957) (254,629) (208,273)
---------- --------- --------- --------- --------- ---------
OPERATING LOSS (60,642) (36,421) (38,536) (121,856) (73,187) (74,793)
OTHER INCOME/(EXPENSE)
Interest income((pound)1,659
and(pound)846 in 1997
and 1996, respectively,
from related parties) 2,910 1,748 4,666 6,843 4,110 11,482
Interest expense (54,812) (32,920) (28,286) (105,285) (63,234) (52,272)
Foreign exchange losses, net (286) (172) (31,002) (40,458) (24,299) (47,668)
Share of net losses of affiliates (8,899) (5,345) (3,934) (17,188) (10,323) (7,491)
Gain on disposal of assets 586 352 119 788 473 158
Minority interests in profits
of consolidated
subsidiaries, net (155) (93) (37) (350) (210) (54)
--------- --------- --------- --------- ---------- ---------
LOSS BEFORE INCOME TAXES (121,298) (72,851) (97,010) (277,506) (166,670) (170,638)
Income tax expense (85) (51) (70) (191) (115) (89)
--------- --------- --------- --------- ---------- ---------
NET LOSS $(121,383) (pound) (72,902) (pound) (97,080) (277,697) (pound)(166,785) (pound)(170,727)
========== ========= ========= ========= ========= =========
LOSS PER ORDINARY SHARE
(DOLLARS/POUNDS) (NOTE 7) $ (0.13) (pound) (0.08) (pound) (0.10) (0.30) (pound) (0.18) (pound) (0.18)
========== ========== ========= ========= ========= =========
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
1
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TELEWEST COMMUNICATIONS PLC
US GAAP
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT FOR NUMBER OF SHARES)
<TABLE>
<CAPTION>
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June 30, June 30, December 31,
1997 1997 1996
(note 1)
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 102,784 (pound) 61,732 (pound) 79,116
Trade receivables (net of allowance for doubtful
accounts of(pound)8,184 and(pound)5,405) 58,848 35,344 29,305
Other receivables 44,285 26,598 32,394
Prepaid expenses 10,386 6,238 5,168
Investments in affiliates, accounted for under the equity method, and
related receivables 112,342 67,473 69,420
Other investments, at cost 42,734 25,666 25,666
Property and equipment (less accumulated depreciation
of(pound)385,274 and(pound)308,240) 2,667,989 1,602,396 1,447,194
Goodwill (less accumulated amortization of(pound)51,109 and(pound)37,907) 797,029 478,696 491,290
Other assets (less accumulated amortization of(pound)6,755 and(pound)4,162) 87,298 52,431 62,387
----------- ----------- ----------
TOTAL ASSETS $ 3,923,695 (pound) 2,356,574 (pound)2,241,940
=========== =========== ==========
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
Accounts payable $ 60,834 (pound) 36,537 (pound) 46,855
Other liabilities 318,413 191,239 190,200
Debt 1,927,805 1,157,841 879,351
Capital lease obligations 109,937 66,028 54,390
------------- ------------- ---------------
TOTAL LIABILITIES 2,416,989 1,451,645 1,170,796
------------- ------------- ---------------
Minority interests 927 557 347
------------- ------------- ---------------
SHAREHOLDERS' EQUITY
Convertible preference shares, 10 pence par value;
661,000,000 shares authorized, and
496,066,708 shares issued and outstanding 82,596 49,607 49,607
Ordinary shares, 10 pence par value;
2,010,000,000 shares authorized, and
927,567,600 shares issued and outstanding 154,440 92,757 92,757
Additional paid-in capital 2,219,257 1,332,887 1,332,887
Accumulated deficit (947,207) (568,893) (402,108)
------------- ---------------
-------------
1,509,086 906,358 1,073,143
Ordinary shares held in trust for the Telewest
Restricted Share Scheme (3,307) (1,986) (2,346)
------------- ------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 1,505,779 904,372 1,070,797
------------- ------------- ---------------
Commitments and contingencies (note 8)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,923,695 (pound) 2,356,574 (pound) 2,241,940
============= ============= ===============
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
2
<PAGE>
TELEWEST COMMUNICATIONS PLC
US GAAP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
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6 months 6 months 6 months
ended ended ended
June 30, June 30, June 30,
1997 1997 1996
(note 1)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $(277,697) (pound) (166,785) (pound) (170,727)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation 127,136 76,358 54,673
Amortization of goodwill 21,981 13,202 13,014
Amortization of deferred financing costs and issue
discount on senior discount debentures 61,901 37,178 38,648
Unrealized loss on foreign currency translation 40,062 24,061 47,668
Share of losses of affiliates 17,188 10,323 7,491
Gain on disposals of assets (788) (473) (158)
Minority interests in profits 350 210 54
Changes in operating assets and liabilities, net of
effect of
acquisition of subsidiaries:
Change in receivables (195) (117) (10,281)
Change in prepaid expenses (1,813) (1,089) 1,622
Change in accounts payable (14,399) (8,648) (7,321)
Change in other liabilities (10,594) (6,363) 18,806
------------- -------------
-----------
NET CASH USED IN OPERATING ACTIVITIES (36,868) (22,143) (6,511)
----------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property and equipment (345,494) (207,504) (196,378)
Cash paid for acquisition of subsidiaries 0 0 (14,098)
Additional investments in and loans to affiliates (15,173) (9,113) (5,000)
Proceeds from disposals of assets 1,535 922 866
----------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (359,132) (215,695) (214,610)
----------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 370,463 222,500 0
Cash paid for credit facility arrangement costs 0 0 (17,780)
Cash paid for debenture issue costs 0 (549)
Capital element of finance lease repayments (3,435) (2,063) (860)
----------- ------------- -------------
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES 367,028 220,437 (19,189)
----------- ------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (28,972) (17,401) (240,310)
Effect of exchange rate changes on cash and
cash equivalents 28 17 (126)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 131,728 79,116 464,818
----------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $102,784 (pound) 61,732 (pound) 224,382
=========== ============= =============
</TABLE>
3
<PAGE>
TELEWEST COMMUNICATIONS PLC
US GAAP
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
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CONVERTIBLE ADDITIONAL
PREFERENCE ORDINARY SHARES HELD PAID-IN ACCUMULATED
SHARES SHARES IN TRUST CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 (pound)49,607 (pound)92,757 (pound)(2,346) (pound)1,332,887 (pound)(402,108) (POUND)1,070,797
Accrued employee compensation relating to
the Telewest Restricted Share Scheme 0 0 360 0 0 360
Net loss for the period to June 30, 1997 0 0 0 0 (166,785) (166,785)
----------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1997 (pound)49,607 (pound)92,757 (pound)(1,986) (pound)1,332,887 (pound)(568,893) (POUND)904,372
==================================================================================
See accompanying notes to the unaudited condensed consolidated financial
statements.
4
</TABLE>
<PAGE>
TELEWEST COMMUNICATIONS PLC
US GAAP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The unaudited condensed 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.
The economic environment in which the Company operates is the United
Kingdom ("UK") and hence its reporting currency is Pounds Sterling
("(pound)"). Merely for convenience, the financial statements contain
translations of certain Pounds Sterling amounts into US Dollars at
$1.6650 per (pound)1.00, the Noon Buying Rate of the Federal Reserve
Bank of New York on June 30, 1997. The presentation of the US Dollar
amounts should not be construed as a representation that the Pounds
Sterling amounts could be so converted into US Dollars at the rate
indicated or at any other rate.
2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements as of and for the
periods ended June 30, 1996 and 1997 are unaudited; however, in the
opinion of the management, such statements include all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of the results of operations for the interim periods
presented. The results of operations for any interim period are not
necessarily indicative of the results of 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 Company's Annual Report on Form 10-K for
the year ended December 31, 1996 filed with the Securities and Exchange
Commission (the "1996 Annual Report").
3. NEW ACCOUNTING STANDARD APPLICABLE TO THE COMPANY
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share", which establishes new standards for computing and
presenting earnings per share. SFAS No. 128 will be effective for
interim and annual financial statements after December 15, 1997. The
Company believes that the adoption of SFAS No. 128 will not have a
material impact on the Company's reported earnings per share.
4. 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 in "other assets" or "other liabilities" at their
fair value at the 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.
Interest rate swap agreements which are used to manage interest rate
risk on the Company's borrowings are accounted for using the accruals
method. Net income or expense resulting from the differential between
exchanging floating and fixed rate interest payments is recorded on an
5
<PAGE>
TELEWEST COMMUNICATIONS PLC
US GAAP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACCOUNTING POLICIES - FINANCIAL INSTRUMENTS (continued)
accruals basis.
5. DEPRECIATION
The Company regularly reviews the estimated useful lives of its
property and equipment. In 1996, the estimated useful lives of cable
and ducting and system electronics assets were reassessed and, with
effect from January 1, 1996, were changed from 25-30 years and 10 years
to 20 years and 8 years, respectively. The net book value of these
assets is being written-off over their revised estimated remaining
lives.
The impact of the change in estimated useful lives of these assets for
the year ended 31 December 1996 was to increase the depreciation charge
for the year from (pound)110,233,000 to (pound)129,716,000. A large
proportion of the increase in the depreciation charge was accounted for
in the fourth quarter 1996, however, had the change been accounted for
with effect from the beginning of the first quarter 1996, depreciation
expense for the six month period ended June 30, 1996 would have
increased by (pound)4,400,000.
6. CAPITALIZATION OF LABOR AND OVERHEADS
The Company regularly reviews the estimates used in calculating the
capitalizable labor and overhead costs which relate to the construction
of its cable network. In 1996, the Company revised these estimates and
the impact of this revision was to increase the capitalization of labor
and overhead costs during the year from (pound)38,812,000 to
(pound)54,019,000. The impact of the revision was accounted for
entirely in the fourth quarter of 1996, however, had the revision been
accounted for with effect from the beginning of the first quarter 1996,
selling, general, and administrative expenses for the six month period
ended June 30, 1996 would have decreased by (pound)7,037,000.
7. LOSS PER ORDINARY SHARE
Loss per ordinary share is based on the weighted average number of
ordinary shares outstanding of 927,567,600 and 923,487,142 for the six
month periods ended June 30, 1997 and 1996, respectively.
8. 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 financial review contained in
the 1996 Annual Report.
SAFE HARBOR STATEMENT UNDER THE US PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: The discussion and analysis below includes certain forward looking
statements that involve risks and uncertainties that could lead to actual
results that are significantly different from those anticipated by the Company.
These risks and uncertainties relate to, among other things, the extent consumer
preference develops for cable television over other methods of providing in-home
entertainment and for the Company as a viable alternative to British
Telecommunications plc ("BT") and others as a provider of telephony service; the
ability of the Company to manage growth and expansion; the ability of the
Company to improve operating efficiencies (including achieving anticipated cost
reductions); the ability of the Company to construct its network in a cost
efficient and timely manner; the ability of the Company to raise additional
financing if there is a material adverse change in the Company's anticipated
revenues or expenses; the ability of the Company to respond to changes or
increases in competition and adverse changes in government regulation; the
extent programming is available at reasonable costs; adverse changes in the
pricing of telephony interconnection; disruptions in supply of services and
equipment; and the performance of Birmingham Cable Corporation Limited, Cable
London plc, and The Cable Corporation Limited (together "the Affiliated
Companies"), companies in which the Company has substantial investments but
which are not controlled by the Company.
SUMMARY OF OPERATIONS (THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997)
The Company's consolidated revenue increased by (pound)22.7 million or 33% from
(pound)68.3 million in the three month period ended June 30, 1996 to (pound)91.0
million in the three month period ended June 30, 1997 and by (pounD)47.9 million
or 36% from (pound)133.5 million in the six month period ended June 30, 1996 to
(pound)181.4 million in tHe six month period ended June 30, 1997 primarily due
to the larger customer base created by the Company's continuing network
construction.
CABLE TELEVISION REVENUE
Cable television revenue increased by (pound)9.9 million or 35% from (pound)28.8
million in the three months endeD June 30, 1996 to (pound)38.7 million in the
three months ended June 30, 1997 and by (pound)19.9 million or 35% from
(pound)56.9 million in the six months ended June 30, 1996 to (pound)76.8 million
in the six months ended June 30, 1997. The increase was primarily attributable
to a 32% increase (from 418,341 to 550,311) and a 32% increase (from 411,466 to
542,015) in the average number of customers in the three and six month periods
ended June 30, 1997, respectively, compared to the corresponding periods in
1996. The increase in the average number of customers results from primarily an
increase in the number of homes passed and marketed from 2,021,623 at June 30,
1996 to 2,542,992 at June 30, 1997.
Penetration decreased slightly from 22.2% as at March 31, 1997 to 22.0% as at
June 30, 1997 and from 21.6% as at March 31, 1996 to 21.1% as at June 30, 1996.
Penetration decreased from 22.6% as at December 31, 1996 to 22.0% as at June 30,
1997 and from 21.9% as at December 31, 1995 to 21.1% as at June 30 1996. Churn
decreased from 35.3% in the three month period ended June 30, 1996 to 32.9% in
the three month period ended June 30, 1997 and from 36.4% in the twelve-month
period ended June 30, 1996 to 32.2% in the twelve month period ended June 30,
1997.
Prior to April 1, 1996, the Company had calculated churn by including in the
total of those customers who disconnect within the period, those who transfer
their cable television/residential telephony service from one premise to another
within an owned and operated company franchise. While this had no effect on the
calculation of penetration, which is based on period end figures, it has meant
that churn has been overstated. Like other companies within the UK cable
industry, and with effect from April 1, 1996, the Company has calculated churn
to exclude those customers who so transfer their service.
7
<PAGE>
For the purposes of comparison, the churn rates above for the twelve month
period ended June 30, 1996 have been restated to exclude transfers.
Average monthly revenue per cable television customer increased slightly by 1%
from (pound)22.95 in the three month period ended June 30, 1996 to (pound)23.18
in the three month period ended June 30, 1997 and by 1% from (pound)23.04 in the
six month period ended June 30, 1996 to (pound)23.37 in the six month period
ended June 30, 1997 primarily due to a decrease in promotional discounts offered
by the Company.
TELEPHONY REVENUE
Telephony revenue increased by (pound)11.4 million or 30% from (pound)37.4
million in the three month period endeD June 30, 1996 to (pound)48.8 million in
the three month period ended June 30, 1997 and by (pound)25.2 million or 35%
from (pound)72.6 million in the six month period ended June 30, 1996 to
(pound)97.8 million in the six month period ended June 30, 1997.
Residential telephony revenue increased by (pound)8.9 million or 30% from
(pound)29.3 million in the three month Period ended June 30, 1996 to (pound)38.2
million in the three month period ended June 30, 1997 and by (pound)20.5 millIon
or 36% from (pound)57.3 million in the six months ended June 30, 1996 to
(pound)77.8 million in the six months ended June 30, 1997. Business telephony
revenue increased by (pound)2.5 million or 31% from (pound)8.1 million in the
three months ended June 30, 1996 to (pound)10.6 million in the three months
ended June 30, 1997 and by (pound)4.7 million or 31% from (pound)15.2 million in
the six month period ended June 30, 1996 to (pound)19.9 million in the six month
period ended June 30, 1997.
The increase in residential telephony revenue in the three and six month periods
ended June 30, 1997 compared to the corresponding periods ended June 30, 1996
was primarily due to a 47% increase (from 482,907 to 708,569) and a 46% increase
(from 465,558 to 679,789), respectively, in the average number of residential
lines, which was partially offset by a decrease in the average monthly revenue
per residential line of 11%, from (pound)20.28 in the three month period ended
June 30, 1996 to (pound)17.97 in the three month period endeD June 30, 1997, and
7%, from (pound) 20.52 in the six month period ended June 30, 1996 to
(pound)19.09 in the six month period ended June 30, 1997. The increase in the
average number of residential lines results primarily from an increase in the
number of homes passed and marketed (from 1,887,286 at June 30, 1996 to
2,496,754 at June 30, 1997) and from increased penetration. The decrease in the
average monthly revenue per line was mainly attributable to price reductions in
per minute call charges in response to price cutting by BT, the Company's main
competitor in residential telephony. The Company intends to continue reducing
per minute call tariffs and expects the revenue impact of these reductions to be
mitigated through higher line rentals, increased call volumes, and sales of
value added services such as call waiting and voice messaging.
Residential telephony penetration increased from 28.2% at March 31, 1997 to
28.9% at June 30, 1997 and decreased from 26.7% at March 31, 1996 to 26.4% at
June 30, 1996. Penetration increased from 27.5% at December 31, 1996 to 28.9 %
at June 30, 1997 and from 26.0% at December 31, 1995 to 26.4% at June 30, 1996.
Churn decreased from 20.6% in the three months ended June 30, 1996 to 19.1% in
the three months ended June 30, 1997. Churn decreased from 20.2% in the
twelve-month period ended June 30, 1996 to 19.2% in the twelve months ended June
30, 1997.
As set out above in the discussion of cable television revenue, the Company has
modified its calculation of churn to exclude from such calculation those
customers who transfer their service within an owned and operated franchise. For
the purposes of comparison, the churn rates above for the twelve month period
ended June 30, 1996 have been restated to exclude transfers.
The increase in business telephony revenue in the three and six month periods
ended June 30, 1997 compared to the corresponding periods ended June 30, 1996
was attributable to a 60% increase (from 48,956 to 78,559) and a 63% increase
(from 45,805 to 74,740) in the average number of business telephony lines in the
three and six month periods, respectively, ended June 30, 1997. This increase
was partially offset by a decrease in the average monthly revenue per business
line, which decreased by 17% from (pound)54.87 in the three month period ended
June 30, 1996 to (pound)45.60 in the three month period ended June 30, 1997, and
decreased by 19% from (pound)55.42 in the six month period ended June 30, 1996
to (pound)44.67 in the six month period ended June 30, 1997. The increase in the
average number of business telephony lines was attributable to a 24% increase in
the number of business premises passed and marketed
8
<PAGE>
(from 91,250 at June 30, 1996 to 113,519 at June 30, 1997) and to an increased
focus on marketing services to larger businesses which generally purchase more
lines. The decrease in the average monthly revenue per line was mainly
attributable to price reductions in both per minute call charges and increased
volume discounts, together with increased sales of Centrex, a business
telecommunications product which provides more lines to customers but which has
a lower average monthly revenue per line.
Other revenue increased by 66% from (pound)2.1 million in the three month period
ended June 30, 1996 to (pouNd)3.5 million in the three month period ended June
30, 1997, and by 69% from (pound)4.1 million in the six month period ended June
30, 1996 to (pound)6.8 million in the six month period ended June 30, 1997 and
is derived primarily from management services provided to Affiliated Companies,
internet sales, 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 (which include direct
costs of programming and interconnection; selling, general and administrative
expenses; depreciation expense and amortization expense) increased by 19% from
(pound)106.9 million in the three month period ended June 30, 1996 to
(pound)127.5 million In the three month period ended June 30, 1997, and
increased by 22% from (pound)208.3 million in the six month period ended June
30, 1996 to (pound)254.6 million in the six month period ended June 30 1997.
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
54% in both the three and six month periods ended June 30, 1996, to 60% and 61%
for the three and six month periods ended June 30, 1997, respectively,
principally as a result of increases in programming costs for certain channels
and an increase in the number of channels included in the basic cable television
package, with no increase in the price charged to customers.
Interconnection charges are the largest component of the Company's telephony
operating costs in providing telephony services. As a percentage of telephony
revenue, telephony operating costs decreased from 35% in both the three and six
month period ended June 30, 1996, respectively, to 27% and 28% for the three and
six month periods ended June 30, 1997, respectively, as line rental income,
which incurs no third party cost, represented a larger proportion of total
average revenue per line in 1997 than in 1996. Interconnection charges in 1997
also were reduced by the continuing reduction in interconnection charges in the
UK telephony market and by credits relating to interconnection charges of
earlier periods.
Selling, general and administrative expenses, which include, among other items,
salary and marketing costs, decreased as a percentage of revenue from 63 % in
both the three and six month periods ended June 30, 1996 to 50% for both the
corresponding periods in 1997. The decrease is largely due to reductions in
support costs as the Company benefits from the economies of scale resulting from
its enlarged operations. The remainder of the decrease is the result of
revising, with effect from January 1, 1996, the estimates used in calculating
the proportion of labor and overhead costs which is capitalized as a network
asset. The impact of the revision was accounted for entirely in the fourth
quarter 1996, however, had the revision been accounted for with effect from the
beginning of the first quarter 1996, selling, general and administrative
expenses for the three and six month periods ended June 30, 1996 would have been
reduced by approximately (pound)3.6 million and (pound)7.0 million,
respectively. Total labor and overhead costs capitalized in the three and six
month periods ended June 30, 1997 were (pound)20.8 million and (pound)40.3
million, respectively, compared to (pound)9.5 milliOn and (pound)18.6 million
for the corresponding periods in 1996. The Company expects that its selling,
general and administrative expenses will continue to decline as a percentage of
revenue, as revenues increase and the efficiency gains of its fixed cost base
are increasingly exploited. In addition, the Company has announced its intention
to further reduce its selling, general and administrative costs through a
planned redundancy program of up to 1,400 employees. The Company expects that
the cost of the redundancy program will be approximately (pound)5 million (in
1997) and will result in cash savings of approximately (pound)40 million for the
first full year.
Depreciation expense increased 36% from (pound)28.6 million in the three month
period ended June 30, 1996 to (pound)38.9 million in the three month period
ended June 30, 1997 and by 40 % from (pound)54.7 million in the six
9
<PAGE>
month period ended June 30, 1996 to (pound)76.4 million in the six month period
ended June 30, 1997. This increase was attributable to capital expenditure
associated with the Company's continuing construction activities and, with
effect from January 1, 1996, the revision of the estimated useful lives of cable
and ducting assets from 25 years to 20 years. The effect of this revision on
depreciation expense was accounted for entirely in the fourth quarter 1996,
however, had the revision been accounted for with effect from the beginning of
the first quarter 1996, depreciation expense for the three and six month periods
ended June 30 1996 would have increased by approximately (pound)2.3 million and
(pound)4.4 million, respectively. Amortization expense remained stable at
(pound)6.6 million in both the three month periods ended June 30, 1996 and 1997
and increased slightly from (pound)13.0 million in the six month period ended
June 30, 1996 to (pound)13.2 mIllion in the six month period ended June 30,
1997.
OTHER INCOME/(EXPENSE)
The Company'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)3.9 million and (pound)5.3 million for the three
month periods ended June 30, 1996 and 1997, respectively, and (pound)7.5 million
and (pound)10.3 million for the six month periods ended June 30, 1996 and 1997,
respectively.
Financial expenses, net, consist primarily of interest expense of (pound)32.9
million and (pound)63.2 million fOr the three and six month periods ended June
30, 1997, respectively ((pound)28.3 million and (pound)52.3 million fOr the
corresponding periods in 1996) and foreign exchange losses of (pound)0.2 million
and (pound)24.3 million for the three and six month periods ended June 30, 1997,
respectively ((pound)31.0 million and (pound)47.7 million foR the corresponding
periods in 1996) offset in part by interest income earned on short-term
investments and loans to Affiliated Companies of (pound)1.7 million and
(pound)4.1 million for the three and six month periods ended June 30, 1997
((pound)4.7 million and (pound)11.5 million for the corresponding periods in
1996). Interest expense increaSed by (pound)4.6 million and (pound)10.9 million
in the three and six month periods ended June 30, 1997, respectIvely, primarily
as a result of the interest expense relating to the Senior Secured Facility (as
defined below) entered into in May 1996 and higher accrued interest expense on
the Senior Discount Debentures (as defined below) issued by the Company in
October 1995. The foreign exchange losses arise principally from the
re-translation of the US Dollar denominated debentures to Pounds Sterling using
the June 30, 1997 exchange rate and marking the associated hedging instruments
to their market value at June 30, 1997. It is the Company's policy to hedge
non-Sterling denominated borrowings to reduce exchange rate exposure.
LIQUIDITY AND CAPITAL RESOURCES
On May 22, 1996, the Company (through a directly wholly owned subsidiary)
entered into a (pound)1.2 billion senior secured credit facility with a
syndicate of banks (the "Senior Secured Facility"). The Senior Secured Facility
is being used to finance the capital expenditure, working capital requirements
and other permitted related activities for the construction and operation of
directly or indirectly wholly owned telephony and television franchises of the
Company; to fund the payment of cash interest on the Senior Debentures and
Senior Discount Debentures (as defined below); to fund the repayment of existing
secured borrowings of the Company in respect of the London South and South West
Regional Franchise Areas; to fund loans to or investments in Affiliated
Companies; to fund the acquisition, and subsequent construction, of local
delivery operators/franchises; and to refinance advances and the payment of
interest, fees and expenses in respect of the Senior Secured Facility.
The Senior Secured Facility is divided into two tranches, the first, Tranche A,
is available on a revolving basis for up to (pound)300 million, reducing to
(pound)100 million by June 30, 1998, with full repayment by DecembEr 31, 1998.
The second tranche, Tranche B, is available on a revolving basis concurrently
with Tranche A for an amount up to 6.5 times the trailing, rolling six month
annualized consolidated net operating cash flow, gradually reducing throughout
the period of the facility to 4 times by January 1, 2000. Thereafter, the amount
outstanding under the facility converts to a term loan amortizing over 5 years.
The aggregate drawing at any time under both tranches cannot exceed (pound)1.2
billion. Borrowings under the Senior Secured Facility are secured by assets
including the partnership interests and shares of subsidiaries of the Company
and bear interest at 2.25% above LIBOR for Tranche A and between 0.5% and 1.875%
above LIBOR (depending on the ratio of borrowings to the trailing, rolling six
month annualized consolidated net operating cash flow) for Tranche B. The
Company's ability to borrow under the Senior Secured Facility
10
<PAGE>
is subject to, among other things, its compliance with the financial and other
covenants and borrowing conditions contained therein. The failure to comply with
such covenants could result in all such amounts outstanding under the facility
becoming due and payable. As at June 30, 1997, the Company has drawn down
(pound)150 million and (pound)172.5 million under Tranche A and Tranche B,
respectively.
The Company (through a directly wholly owned subsidiary) entered into certain
delayed starting interest rate swap agreements in order to manage interest rate
risk on the Senior Secured Facility. The interest rate swaps convert floating
rate interest payable on drawdowns under the facility to fixed interest rate
payments in the range of 7.835% - 7.975%. The swap agreements, which commenced
in early 1997, have a five-year maturity and a notional principal amount which
adjusts upwards on a semi-annual basis to a maximum of (pound)750 million. As at
June 30, 1997, the aggregate notional principal amount of the swaps was
(pound)200 million.
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 and commenced on April 1, 1996.
Interest on the Senior Discount Debentures will be payable semi-annually
commencing on April 1, 2001. The proceeds of the issue were used by the Company
to fund general working capital, capital expenditures, additional investments in
Affiliated Companies, to repay a credit facility entered into by a directly
wholly owned subsidiary and to purchase the currency hedge arrangements
described below.
The Company's principal hedge instruments are a combined foreign currency and
interest rate swap ("Foreign Currency Swap") and a foreign currency option. The
Foreign Currency Swap fully hedges against adverse exchange rate fluctuations on
the principal amount of the Senior Debentures and the associated interest
payments. The foreign currency option provides protection against exchange rate
fluctuations on the Senior Discount Debentures below a rate of $1.452:(pound)1,
and allows the Company to benefit from positive exchange rate movements. Both
hedging instruments provide protection up to October 1, 2000, the early
redemption date of the Senior Debentures and the Senior Discount Debentures.
The Company's results may be materially influenced by future exchange rate
movements, particularly in the US GAAP financial statements, due to the
requirement that the hedge instruments are marked to their market value at the
end of the financial period and the US Dollar denominated debentures are
re-translated to Pounds Sterling using the period end exchange rate.
The Company incurred a net cash outflow from operating activities of (pound)22.1
million in the six month period ended June 30, 1997 compared with a net cash
outflow of (pound)6.5 million in the six month period ended June 30, 1996.
The Company incurred a net cash outflow from investing activities of
(pound)214.6 million and (pound)215.7 millIon in the six month periods ended
June 30 1996 and 1997, respectively. The Company's principal investing
activities continue to be the construction of the network and the provision of
funding to the Affiliated Companies, and in the six month period ended June 30,
1996, the acquisition of a franchise covering the Worcester area from Bell
Cablemedia for (pound)9.8 million.
Cash (used in)/provided by financing activities amounted to ((pound)19.2)
million and (pound)220.4 million in tHe six month period ended June 30, 1996 and
1997, respectively. Cash (used in)/provided by financing activities principally
related to loan arrangement and agency fees of (pound)17.8 million relating to
the (pound)1.2 billion Senior Secured Facility which were paid in the six month
period ended June 30, 1996, and to the drawdown of (pound)222.5 million under
the Senior Secured Facility in the six month period ended June 30, 1997.
At June 30, 1997, the construction of the Company's broadband network had passed
approximately 70% of the homes in its owned and operated franchise areas
compared to 57% of homes in its owned and operated franchises at June 30, 1996.
Total capital expenditure in the six month period ended June 30, 1997 was
(pound)232.0 million compared with (pound)230.2 million in the six month period
ended June 30, 1996. The Company expects to incur a similar level of capital
expenditure in the second half of 1997, but has announced its intention to
reduce the pace of its network construction and its expenditure on certain
discretionary capital projects commencing in the first quarter 1998.
11
<PAGE>
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. 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. As a consequence of its
intention to reduce the pace of its network construction, the Company currently
is negotiating with the Director General for appropriate modifications to its
current milestone obligations, although there can be no assurance that any such
modifications will be granted.
Cash and deposit balances at June 30, 1997 were (pound)61.7 million.
The Company currently expects that the anticipated funding requirements (after
taking into account current cash and deposit balances and anticipated revenues)
required to substantially complete the construction of the owned and operated
network (including the recently acquired franchise of East Lothian), to fund the
Company's operations, to upgrade older portions of the network, to complete
construction of the interfranchise network, to launch digital services, and to
pay interest on the Company's debt, will be provided by the Senior Secured
Facility. The Company's intends to reduce the pace of its network construction,
delay the launch of its digital services and implement operational cost
reduction measures, and therefore the Company currently does not intend to seek
additional debt financing for its anticipated funding requirements. There can be
no assurance, however, that the Company will not elect to use funding sources
other than the Senior Secured Facility, the Company will not elect to pursue
additional investment opportunities that require additional funding or the
Company's current anticipated funding requirements will be in line with
expectations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
12
<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.
The Company's 1997 Annual General Meeting was held on May 9, 1997. At
the Annual General Meeting, each of the following resolutions was approved, in
accordance with the Company's Articles of Association, by a show of hands of
those shareholders (or persons holding proxies) voting in person at the Annual
General Meeting:
Resolution 1. Adoption of the Directors' Report and Accounts of the
Company for the year ended December 31, 1996;
Resolutions 2-12. Appointment of the following Directors:
Fred A. Vierra
Anthony W.P. Stenham
Arthur G. Ames
John H. Atterbury III
Lord Borrie QC
Charles J. Burdick
Stephen J. Davidson
Lord Griffiths of Fforestfach
Charles M. Lillis
James O. Robbins
Adam N. Singer;
Resolution 13. Granting authority to the Directors to allot
shares up to an aggregate nominal value of
(pound)30,918,920, with such authority to expire
(unless previously renewed, varied or revoked by the
Company in a general meeting) on the earlier of
August 8, 1998 or the conclusion of the 1998 Annual
General Meeting;
Resolution 14. Granting authority to the Directors to allow
shares up to an aggregate nominal value of
(pound)4,637,838 for cash without first offering such
shares pro rata to existing shareholders as otherwise
required by the Companies Act 1985, with such
authority to expire on the earlier of August 8, 1998
or the conclusion of the 1998 Annual General Meeting;
Resolution 15. Appointment of KPMG Audit plc, as auditors, to
serve from the conclusion of the 1997 Annual General
Meeting until the 1998 Annual General Meeting and
authorization for the Board of Directors of the
Company to fix the remuneration of the auditors;
13
<PAGE>
Resolution 16. Adoption of the Telewest Equity Participation Plan
for Company Directors and employees;
Resolution 17. Adoption of the Telewest Long Term Incentive Scheme
for Company Directors and employees;
Resolution 18. Increasing the borrowing powers of the Company from
the greater of(pound)2 billion and four times the
adjusted capital and reserves to the greater of
(pound)4 billion and five times the adjusted capital
and reserves.
At the Annual General meeting, in accordance with the Company's
Articles of Association and UK practice, there was not a tabulation of the exact
number of votes cast (in person or by proxy) for, against or withheld with
respect to any resolution, or the number of abstentions and brokers non-votes as
to each such resolution.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits.
3 ---- Amendment to Articles of Association of the Company
27 ---- Telewest Communications plc financial data schedule
99 ---- Telewest Communications plc Press Release issued on
August 7, 1997 with respect to results of operations for the
six month period ended June 30, 1997 (including unaudited
consolidated financial statements prepared in accordance with
UK GAAP).
b. Reports on Form 8-K.
None.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELEWEST COMMUNICATIONS PLC
By: /S/CHARLES J. BURDICK
--------------------------------
Name: Charles J. Burdick
Title: Chief Financial Officer
(duly authorized
officer and principal
financial officer)
August 14, 1997
15
<PAGE>
EXHIBITS
EXHIBIT
- -------
3 --- Amendment to Articles of Association of the Company
27 --- Telewest Communications plc Financial Data Schedule
99 --- Telewest Communications plc Press Release issued on August 7,
1997 with respect to results of operations for the six month
period ended June 30, 1997 (including unaudited consolidated
financial statements prepared in accordance with UK GAAP)
16
EXHIBIT 3
Amendment to Articles of Association of the Company
<PAGE>
COMPANY NO: 2983307
THE COMPANIES ACT 1985 AND 1989
----------------------------------------
PUBLIC COMPANY LIMITED BY SHARES
----------------------------------------
SPECIAL AND ORDINARY RESOLUTIONS
OF
TELEWEST COMMUNICATIONS PLC
At the ANNUAL GENERAL MEETING of the Company held at The Grocers' Hall, Princes
Street, London EC2R 8AD on Friday, 9 May 1997 at 10.00 a.m. the following
resolutions were duly passed:
..........
18. SPECIAL RESOLUTION
THAT the Articles of Association of the Company be altered by:
(i) the deletion in Article 104(B)(i) of(pound)2,000,000,000 and the
substitution for it of(pound)4,000,000,000; and
(ii) the deletion in Article 104(B)(ii) of the word "four" and the
substitution for it of the word "five".
/s/ Victoria Hull
SECRETARY
<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
<CURRENCY> POUNDS STERLING
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1.6650
<CASH> 61,732
<SECURITIES> 0
<RECEIVABLES> 61,942
<ALLOWANCES> 8,184
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,987,670
<DEPRECIATION> 385,274
<TOTAL-ASSETS> 2,356,574
<CURRENT-LIABILITIES> 0
<BONDS> (1,157,841)
0
(49,607)
<COMMON> (92,757)
<OTHER-SE> (762,008)
<TOTAL-LIABILITY-AND-EQUITY> (2,356,574)
<SALES> 0
<TOTAL-REVENUES> 181,442
<CGS> 0
<TOTAL-COSTS> 74,066
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,234
<INCOME-PRETAX> (166,670)
<INCOME-TAX> (115)
<INCOME-CONTINUING> (166,785)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (166,785)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99
Telewest Communications plc Press Release issued on August 7, 1997 with respect
to results of operations for the six month period ended June 30, 1997 (including
unaudited consolidated financial statements prepared in accordance with UK
GAAP).
<PAGE>
FOR IMMEDIATE RELEASE 7 AUGUST 1997
TELEWEST COMMUNICATIONS PLC
INTERIM RESULTS 1997
HIGHLIGHTS
NETWORK 69.8% COMPLETE
CONTINUED EMPHASIS ON CUSTOMER ACQUISITION, SERVICE AND RETENTION
CORPORATE RESTRUCTURING TO REDUCE COSTS AND INCREASE EFFECTIVENESS
SUCCESSFUL TRIALS OF DIFFERENT PACKAGES
CONTINUING IMPROVEMENT IN PENETRATION AND CHURN
2.80M HOMES PASSED
2.54M HOMES PASSED AND MARKETED
34% HOUSEHOLD PENETRATION
559,963 CABLE TELEVISION CUSTOMERS
720,508 RESIDENTIAL TELEPHONY CUSTOMERS
82,601 BUSINESS LINES
CATV 22.0% CATV PENETRATION
32.2% CATV CHURN
39.3% MARGIN
(POUND)23.37 REVENUE PER CATV SUB
RESTEL 28.9% RESTEL PENETRATION
19.2% RESTEL CHURN
(POUND)19.09 AVERAGE REVENUE PER LINE
71.9% OVERALL TELEPHONY MARGIN
BUSTEL 82,601 BUSINESS LINES
3.6 AVERAGE NUMBER OF LINES PER CUSTOMER
(POUND)44.67 AVERAGE REVENUE PER LINE
TELEWEST TODAY ANNOUNCED ITS INTERIM RESULTS AND ITS PLANS FOLLOWING A STRATEGIC
AND OPERATIONAL REVIEW.
COMMENTING ON THE COMPANY'S RESULTS, CHARLES BURDICK, GROUP FINANCE DIRECTOR,
SAID;
"THE INTERIM RESULTS REFLECT AN IMPROVED PERFORMANCE BY THE COMPANY OVER THE
COMPARABLE PERIOD IN 1996 WITH 91,532 NEW CUSTOMERS ADDED DURING THE PERIOD AND
EBITDA REACHING (POUND)16.4M. SERVICE IS NOW PROVIDED TO 881,000 CUSTOMERS.
RESIDENTIAL TELEPHONY PENETRATION IMPROVED FROM 26.4% TO 28.9% AND 54% MORE
TELEPHONE LINES WERE ADDED OVER THE CORRESPONDING PERIOD LAST YEAR. CABLE
TELEVISION PENETRATION INCREASED FROM 21.1% TO 22.0%, WITH 30% MORE CABLE TV
CUSTOMERS ADDED OVER THE PERIOD. CHURN DECLINED FROM 36% TO 32.2%. TOTAL
BUSINESS TELEPHONY LINES INCREASED BY 59% TO 82,601. CUSTOMERS TAKING MORE THAN
ONE SERVICE INCREASED TO 422,484 COMPARED TO 289,151 AND TURNOVER INCREASED BY
36.1% TO (POUND)181M. TELEPHONY MARGINS REMAIN ROBUST AT 71.9% BUT THERE HAS
BEEN CONTINUED ADVERSE PRESSURE ON CATV MARGINS AT 39.3%.
<PAGE>
OVER THE LAST SIX MONTHS WE INCURRED (POUND)232M OF CAPITAL EXPENDITURE AND WE
ANTICIPATE THAT A SIMILAR AMOUNT WILL BE INVESTED OVER THE REST OF THE FINANCIAL
YEAR. CAPITAL EXPENDITURE REQUIREMENTS WILL DECLINE SUBSTANTIALLY AS THE NETWORK
BUILD PROGRAMME SLOWS. AS WE HAVE PREVIOUSLY INDICATED, OUR FUNDING IS IN PLACE
TO COMPLETE THE BUILD."
STRATEGIC AND OPERATIONAL REVIEW
STEPHEN DAVIDSON, CHIEF EXECUTIVE, EXPLAINED THE BASIS AND CONCLUSIONS OF THE
REVIEW:
"TELEWEST HAS UNDERGONE A RAPID EXPANSION OF ITS BUSINESS WITH TURNOVER
INCREASING FROM (POUND)19M IN 1992 TO (POUND)290M IN 1996, DRIVEN BY THE
DRAMATIC PACE OF THE NETWORK BUILD AND THE CONSEQUENT GROWTH IN THE CUSTOMER
BASE. THIS PACE OF GROWTH HAS BEEN ACCOMPANIED BY A SIGNIFICANT INCREASE IN THE
COST STRUCTURE. THEREFORE, AND AS PREVIOUSLY ANNOUNCED, MANAGEMENT HAS BEEN
CARRYING OUT A DETAILED OPERATIONAL AND STRATEGIC REVIEW DESIGNED TO ENSURE THAT
THE GROUP'S COST STRUCTURE IS APPROPRIATELY BALANCED TO MAXIMISE OPERATING CASH
FLOW. DECISIVE ACTION IS BEING TAKEN TO ACHIEVE THIS OBJECTIVE.
TELEWEST'S NETWORK IS 70% COMPLETE, SUBSTANTIALLY MORE THAN THE INDUSTRY
AVERAGE, AND THE COMPANY BELIEVES IT IS NOW APPROPRIATE TO REDUCE THE PACE OF
THE BUILD PROGRAMME, AND TO SHIFT THE EMPHASIS OF THE COMPANY MORE QUICKLY FROM
NETWORK CONSTRUCTION, TO SALES AND CUSTOMER SERVICE. WE WILL FOCUS ON RETENTION,
ADDING INCREMENTAL CUSTOMERS TO OUR COMPLETED NETWORKS, AND INCREASING THE
NUMBER OF SERVICES TO WHICH THEY SUBSCRIBE.
MANAGEMENT WILL SIMPLIFY THE OPERATING STRUCTURE OF THE BUSINESS AND CONCENTRATE
ON THE CORE PRODUCTS OF CABLE TELEVISION, RESIDENTIAL AND BUSINESS TELEPHONY,
AND DATA SERVICES. THE SEVEN REGIONAL FRANCHISE AREAS WILL BE CONSOLIDATED INTO
FOUR WITH A STREAMLINING OF OPERATIONAL STRUCTURES. RESPONSIBILITY AND
ACCOUNTABILITY FOR ALL CONSUMER AND SMALL BUSINESS OPERATIONS WILL BE DEVOLVED
TO THE REGIONS FROM OUR CORPORATE HEAD OFFICE. A SMALLER CORPORATE GROUP WILL
FOCUS SPECIFICALLY ON THE COMPLEX MEDIUM AND LARGE BUSINESS TELEPHONY AND DATA
MARKETS.
AS A RESULT OF THESE PLANS, THE COMPANY EXPECTS TO MAKE APPROXIMATELY 25% OF THE
CURRENT WORKFORCE REDUNDANT, LEADING TO CASH SAVINGS OF APPROXIMATELY (POUND)40M
FOR THE FIRST FULL YEAR. THE COSTS OF THE REDUNDANCY PROGRAMME ARE ESTIMATED AT
(POUND)5M AND WILL BE TAKEN AS AN EXCEPTIONAL ITEM IN 1997.
<PAGE>
THERE IS NOW GROWING INDUSTRY EVIDENCE TO SUGGEST THAT CABLE PENETRATION RATES
FOR MULTI-CHANNEL TELEVISION IN PARTICULAR, CAN BE IMPROVED BY PROVIDING
CUSTOMERS WITH MORE CHOICE IN THE PACKAGES WE OFFER. DURING THE PAST EIGHT
MONTHS WE HAVE BEEN TESTING A FURTHER DEVELOPMENT OF OUR TELEPLUS PACKAGING.
CUSTOMERS ARE GIVEN THE OPTION TO PURCHASE A SMALLER SELECTION OF TELEVISION
CHANNELS, WITH A RESIDENTIAL TELEPHONE LINE, AT A REDUCED SUBSCRIPTION. THE
PENETRATION RATES FOR THE OFFERS HAVE BEEN APPROXIMATELY 40% FOR BOTH TELEVISION
AND TELEPHONY, AND A 10% IMPROVEMENT IN CHURN RATES FOR TELEPHONY AND
TELEVISION. TELEWEST IS LOOKING AT WAYS TO FURTHER DEVELOP THESE PRODUCT
OFFERINGS.
AS I HAVE PREVIOUSLY REPORTED, THE COMPANY HAS ALSO BEEN REVIEWING ARRANGEMENTS
WITH PROGRAMME SUPPLIERS AND HAS STARTED RE-NEGOTIATING TERMS. OUR AIM IS TO
REDUCE THE COST OF PROGRAMMING AND TO ACHIEVE GREATER FLEXIBILITY TO ENABLE THE
INTRODUCTION OF PACKAGES FOR WHICH THERE IS CLEAR MARKET DEMAND.
THE ADVENT OF DIGITAL TELEVISION PROVIDES THE OPPORTUNITY TO EXPAND OUR RANGE OF
SERVICES TO INCLUDE NEAR VIDEO ON DEMAND. WE ARE MONITORING THE DEVELOPMENT OF
DIGITAL TELEVISION, AND THE ACTIVITIES OF POSSIBLE SUPPLIERS SUCH AS MICROSOFT,
AND HAVE DECIDED TO REVIEW THE POSSIBLE LAUNCH DATES FOR A DIGITAL SERVICE. THE
COMPANY REMAINS COMMITTED TO LAUNCHING A DIGITAL SERVICE CONCURRENT WITH THAT OF
OUR COMPETITORS.
THE COMPANY BELIEVES THAT THESE MEASURES WILL IMPROVE THE COMPETITIVE POSITION
OF THE GROUP FOR THE FUTURE AND ENHANCE SHAREHOLDER VALUE."
NOTE:
THE FOLLOWING IS INCLUDED IN CONNECTION WITH LEGISLATION IN THE UNITED STATES OF
AMERICA, THE SAFE HARBOUR STATEMENT UNDER THE US PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. THE FOREGOING INCLUDES CERTAIN FORWARD LOOKING STATEMENTS
THAT INVOLVE VARIOUS RISKS AND UNCERTAINTIES WHICH COULD LEAD TO ACTUAL RESULTS
SIGNIFICANTLY DIFFERENT THAN THOSE ANTICIPATED BY TELEWEST.
Enquiries to: TELEWEST COMMUNICATIONS PLC
Stephen Davidson, Chief Executive
Tel: 01483 750 900
Anna Miller, Director of Investor Relations
Tel: 01483 251 881
Issued by: DEWE ROGERSON
Anthony Carlisle
Tel: 0171 638 9571
<PAGE>
TELEWEST COMMUNICATIONS PLC
Operating Statistics - Owned and operated on an equity basis
2nd Quarter 1997 Net Additions
<TABLE>
<CAPTION>
NET ADDITIONS NET ADDITIONS NET ADDITIONS NET ADDITIONS
Q2 FIRST HALF Q2 FIRST HALF
1997 1997 1996 1996
-------------------------- ------------------ --------------------- -----------------------
<S> <C> <C> <C> <C>
CABLE TELEVISION
- ----------------
Homes marketed 103,615 207,039 116,030 190,165
CATV customers 18,235 31,821 14,172 24,541
RESIDENTIAL TELEPHONY
- ---------------------
Homes marketed 119,243 242,020 144,654 234,682
Residential telephony customers 50,931 100,131 33,485 69,241
Residential telephony lines 56,282 109,168 34,742 70,862
BUSINESS TELEPHONY
- ------------------
Business telephony customers 1,668 2,291 1,619 3,140
Business telephony lines 8,061 14,778 6,299 11,851
</TABLE>
<TABLE>
<CAPTION>
AS AT 30 JUNE AS AT 30 JUNE
1997 1996
-------------------- ---------------------
<S> <C> <C>
CABLE TELEVISION
- ----------------
Homes marketed 2,542,992 2,021,623
CATV customers 559,963 426,010
CATV penetration 22.0% 21.1%
Quarterly churn rate (annualised) 32.9% 35.3%
Rolling 12 month churn rate 32.2% 36.4%
RESIDENTIAL TELEPHONY
- ---------------------
Homes marketed 2,496,754 1,887,286
Residential telephony customers 720,508 498,646
Residential telephony penetration 28.9% 26.4%
Residential telephony lines 736,177 501,778
Quarterly churn rate per line
(annualised) 19.1% 20.6%
Rolling 12 month churn rate 19.2% 20.2%
BUSINESS TELEPHONY
- ------------------
Business telephony customers 23,173 17,365
Business telephony lines 82,601 51,872
Average number of lines per
customer 3.6 3.0
Quarterly churn rate per line
(annualised) 14.2% 13.3%
Rolling 12 month churn rate 15.7% 12.5%
Cable television and residential
telephony customers 422,484 289,151
Cable television only customers 137,479 136,859
Residential telephony only
customers 298,024 209,495
</TABLE>
<PAGE>
TELEWEST COMMUNICATIONS PLC
Operating Statistics - Owned and operated and affiliated franchises
* On an equity basis
2nd Quarter 1997 Net Additions
<TABLE>
<CAPTION>
NET ADDITIONS NET ADDITIONS NET ADDITIONS NET ADDITIONS
Q2 YEAR TO DATE Q2 YEAR TO DATE
1997 1997 1996 1996
---------------- ------------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
CABLE TELEVISION
- ----------------
Homes marketed 114,776 233,650 129,502 209,139
CATV customers 19,445 36,854 16,910 29,608
RESIDENTIAL TELEPHONY
- ---------------------
Homes marketed 130,503 268,790 157,828 255,225
Residential telephony customers 55,835 109,647 38,038 77,015
Residential telephony lines 61,423 119,129 39,400 78,839
BUSINESS TELEPHONY
- ------------------
Business telephony customers 1,764 2,508 1,741 3,432
Business telephony lines 8,988 16,535 7,261 13,421
</TABLE>
AS AT 30 JUNE AS AT 30 JUNE
1997 1996
---------------- -------------------
CABLE TELEVISION
- ----------------
Homes marketed 2,859,878 2,275,793
CATV customers 636,453 487,079
RESIDENTIAL TELEPHONY
- ---------------------
Homes marketed 2,811,225 2,137,784
Residential telephony customers 795,747 554,670
Residential telephony lines 812,650 558,303
BUSINESS TELEPHONY
- ------------------
Business telephony customers 25,806 19,418
Business telephony lines 95,104 60,939
Average number of lines per
customer 3.7 3.1
Note:
* The affiliated franchises include Telewest's interests in Cable London plc
(50.0% interest, 1996 49.0% interest), Birmingham Cable Corporation (27.5%
interest) and The Cable Corporation (16.5% interest).
<PAGE>
TELEWEST COMMUNICATIONS PLC
Owned and Operated Franchises
As at 30 June 1997
<TABLE>
<CAPTION>
London South South West North East Scotland South East North West Midlands Total
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CABLE TELEVISION
- ----------------
Homes marketed 360,673 354,027 189,593 481,228 202,814 548,026 406,631 2,542,992
CATV customers 81,416 72,398 36,647 105,494 54,192 121,087 88,729 559,963
CATV penetration 22.6% 20.4% 19.3% 21.9% 26.7% 22.1% 21.8% 22.0%
RESIDENTIAL TELEPHONY
- ---------------------
Homes marketed 351,989 354,171 186,351 447,797 202,814 547,001 406,631 2,496,754
Residential telephony customers 68,356 102,136 57,725 124,635 65,026 165,727 136,903 720,508
Residential telephony penetration 19.4% 28.8% 31.0% 27.8% 32.1% 30.3% 33.7% 28.9%
Residential telephony lines 71,530 104,970 58,238 128,380 66,345 169,074 137,640 736,177
BUSINESS TELEPHONY
- ------------------
Business telephony customers 4,433 4,726 1,589 3,649 1,234 4,647 2,895 23,173
Business telephony lines 20,674 17,159 3,409 10,489 4,299 15,097 11,474 82,601
Average number of lines per
customer 4.7 3.6 2.1 2.9 3.5 3.2 4.0 3.6
</TABLE>
<PAGE>
TELEWEST COMMUNICATIONS PLC
UK GAAP
UNAUDITED SUMMARISED CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS
ENDED 30 JUNE 1997
<TABLE>
<CAPTION>
Note 6 MONTHS 6 months Year
ENDED ended ended
30 JUNE 30 June 31 December
1997 1996 1996
(pound)000 (pound)000 (pound)000
<S> <C> <C> <C>
TURNOVER
Cable television 76,845 56,872 121,224
Telephony - residential 77,849 57,324 125,013
Telephony - business 19,901 15,232 34,562
Other (Internet, Ad Sales etc) 6,847 4,052 9,467
--------------------- ------------------ ------------------------
181,442 133,480 290,266
===================== ================== ========================
OPERATING LOSS (59,985) (61,741) (129,251)
Share of results of associated undertakings (10,323) (7,491) (15,203)
Other interest receivable and similar income 4,583 11,640 17,222
Interest payable and similar charges 3 (76,618) (59,917) (122,671)
--------------------- ------------------ ------------------------
LOSS ON ORDINARY ACTIVITIES BEFORE TAX (142,343) (117,509) (249,903)
Tax on loss on ordinary activities (115) (89) (820)
--------------------- ------------------ ------------------------
LOSS ON ORDINARY ACTIVITIES AFTER TAX (142,458) (117,598) (250,723)
Minority interests (210) (54) (180)
--------------------- ------------------ ------------------------
LOSS FOR THE FINANCIAL PERIOD (142,668) (117,652) (250,903)
===================== ================== ========================
LOSS PER EQUITY SHARE (10.0) (8.3) (17.7)
===================== ================== ========================
1 EARNINGS/ (LOSS) BEFORE INTEREST, TAXES, DEPRECIATION,
AND AMORTISATION ("EBITDA")
Operating loss (59,985) (61,741) (129,251)
Add: Depreciation and amortisation 76,358 54,673 129,716
--------------------- -------------- ---------------------
EBITDA 16,373 (7,068) 465
===================== ============== =====================
2 OPERATING COSTS
Programming expenses 46,626 30,760 69,906
Telephony expenses 27,440 25,317 52,572
Selling, general, and administrative expenses 91,003 84,471 167,323
Depreciation and amortisation 76,358 54,673 129,716
--------------------- -------------- ----------------------
241,427 195,221 419,517
===================== =============== ======================
3 INTEREST PAYABLE AND SIMILAR CHARGES
On bank loans and overdrafts and other loans
Wholly repayable within 5 years 8,207 1,259 3,816
Wholly or partly repayable in more than five years 5,282 - 1,924
Finance costs of Senior Discount Debentures 34,344 29,089 60,696
Finance costs of Senior Debentures 11,318 11,278 22,471
Finance charges payable in respect of finance
lease and hire purchase contracts 1,976 1,463 3,442
Exchange losses on foreign currency translation,
net 15,023 12,761 25,852
Other 468 4,067 4,470
--------------------- --------------- --------------------
76,618 59,917 122,671
===================== ================ ====================
</TABLE>
The consolidated financial statements as set out on pages 7 and 8 which are
unaudited, have been prepared on the basis of the accounting policies set out in
the Group's 1996 Annual Report. The balance sheet, profit and loss account and
cash flow statement at 31 December 1996 is derived from the statutory accounts
for 1996 which have been delivered to the Registrar of Companies. 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.
<PAGE>
TELEWEST COMMUNICATIONS PLC
UK GAAP
UNAUDITED SUMMARISED CONSOLIDATED BALANCE SHEETS AT 30 JUNE 1997
<TABLE>
<CAPTION>
30 JUNE 30 June 31 December
1997 1996 1996
(pound)000 (pound)000 (pound)000
<S> <C> <C> <C>
FIXED ASSETS 1,720,546 1,418,161 1,564,604
----------------- -------------------- --------------------
CURRENT ASSETS
Stocks 72 67 53
Debtors 68,242 79,463 66,929
Cash at bank and in hand 61,732 224,382 79,116
----------------- -------------------- --------------------
130,046 303,912 146,098
CREDITORS: amounts falling due within one year (210,395) (165,460) (212,434)
----------------- -------------------- --------------------
NET CURRENT (LIABILITIES)/ASSETS (80,349) 138,452 (66,336)
----------------- -------------------- --------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 1,640,197 1,556,613 1,498,268
CREDITORS: amounts falling due after more than one year (1,203,004) (842,151) (918,008)
Minority interests (557) (221) (347)
----------------- -------------------- --------------------
CAPITAL AND RESERVES 436,636 714,241 579,913
================= ==================== ====================
</TABLE>
UNUAUDITED SUMMARISED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED
30 JUNE 1997
<TABLE>
<CAPTION>
6 MONTHS 6 months
ENDED ended Year ended
30 JUNE 30 June 31 December
1997 1996 1996
(pound)000 (pound)000 (pound)000
<S> <C> <C> <C>
OPERATING LOSS (59,985) (61,741) (129,251)
Depreciation and amortisation 76,358 54,673 129,716
Increase in stocks (19) (27) (13)
Increase in debtors (62) (10,405) (16,493)
(Decrease)/increase in creditors (18,785) 11,872 44,520
---------- -------------------- --------------------
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES
(2,493) (5,628) 28,479
Returns on investments and servicing of finance
Capital expenditure and financial investment (19,650) (883) (10,343)
Acquisitions and disposals (206,582) (195,512) (461,308)
Management of liquid resources (9,113) (19,098) (21,895)
Financing 21,523 242,202 376,808
220,437 (19,189) 79,003
---------- -------------------- --------------------
INCREASE/(DECREASE) IN CASH
4,122 1,892 (9,256)
========== ==================== ====================
</TABLE>
<PAGE>
TELEWEST COMMUNICATIONS PLC
US GAAP
<TABLE>
<CAPTION>
Unaudited summarised consolidated statements of operations
3 months 3 MONTHS 3 months 6 months 6 MONTHS 6 months
ended ENDED ended ended ENDED ended
30 June 30 JUNE 30 June 30 June 30 JUNE 30 June
1997 1997 1996 1997 1997 1996
$000 (pound)000 (pound)000 $000 (pound)000 (pound)000
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Cable telephony 64,509 38,744 28,799 127,947 76,845 56,872
Telephony - residential 63,561 38,175 29,349 129,619 77,849 57,324
Telephony - business 17,672 10,614 8,054 33,135 19,901 15,232
Other 5,859 3,519 2,118 11,400 6,847 4,052
---------------- ---------------- ------------ ------------ ------------ ----------------
151,601 91,052 68,320 302,101 181,442 133,480
================ ================ ============ ============ ============ ===============
OPERATING LOSS (60,642) (36,421) (38,536) (121,856) (73,187) (74,793)
Interest income 2,910 1,748 4,666 6,843 4,110 11,482
Interest expense (54,812) (32,920) (28,286) (105,285) (63,234) (52,272)
Foreign exchange losses, net (286) (172) (31,002) (40,458) (24,299) (47,668)
Share of losses of affiliates (8,899) (5,345) (3,934) (17,188) (10,323) (7,491)
Minority interest in profits of
consolidated subsidiaries,
net (155) (93) (37) (350) (210) (54)
Other, net 586 352 119 788 473 158
---------------- ---------------- ------------ ------------ ------------ ----------------
LOSS BEFORE INCOME TAXES (121,298) (72,851) (97,010) (277,506) (166,670) (170,638)
Income tax expense (85) (51) (70) (191) (115) (89)
---------------- ---------------- ------------ ------------ ------------ ----------------
NET LOSS (121,383) (72,902) (97,080) (277,697) (166,785) (170,727)
================ ================ ============ ============ ============ ================
LOSS PER ORDINARY SHARE
(DOLLARS/POUNDS) (.13) (.08) (.10) (.30) (.18) (.18)
================ ================ ============ ============ ============ ================
1 EARNINGS/(LOSS) BEFORE
INTEREST, TAXES,
DEPRECIATION AND
AMORTISATION ("EBITDA")
Operating loss (60,642) (36,421) (38,536) (121,856) (73,187) (74,793)
Add: depreciation and
amortisation of goodwill 75,774 45,510 35,178 149,117 89,560 67,687
---------------- ---------------- ------------ ------------ ------------- ----------------
EBITDA 15,132 9,089 (3,358) 27,261 16,373 (7,106)
================ ================ ========================= ============= ================
2 OPERATING COSTS AND
EXPENSES
Programming (39,008) (23,428) (15,466) (77,632) (46,626) (30,760)
Telephony (21,747) (13,061) (13,084) (45,688) (27,440) (25,317)
Selling, general and
administration (75,714) (45,474) (43,128) (151,520) (91,003) (84,509)
Depreciation (64,772) (38,902) (28,609) (127,136) (76,358) (54,673)
Amortisation of goodwill (11,002) (6,608) (6,569) (21,981) (13,202) (13,014)
---------------- ---------------- ------------ ------------ ------------ ----------------
(212,243) (127,473) (106,856) (423,957) (254,629) (208,273)
================ ================ ============ ============ ============= ================
</TABLE>
<PAGE>
TELEWEST COMMUNICATIONS PLC
US GAAP
<TABLE>
<CAPTION>
Unaudited summarised consolidated balance sheets
30 JUNE 30 JUNE 31 DECEMBER
1997 1997 1996
$000 (pound)000 (pound)000
----------------------- --------------------- ----------------------
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents 102,784 61,732 79,116
Receivables and prepaid expenses 113,519 68,180 66,867
Investments 155,076 93,139 95,086
Property and equipment 2,667,989 1,602,396 1,447,194
Goodwill 797,029 478,696 491,290
Other assets 87,298 52,431 62,387
------------------- -------------------- ----------------------
TOTAL ASSETS 3,923,695 2,356,574 2,241,940
=================== ==================== ======================
LIABILITIES
Debt 1,927,805 1,157,841 879,351
Other liabilities 489,184 293,804 291,445
------------------- -------------------- ----------------------
TOTAL LIABILITIES 2,416,989 1,451,645 1,170,796
MINORITY INTERESTS 927 557 347
SHAREHOLDERS' EQUITY 1,505,779 904,372 1,070,797
------------------- -------------------- ----------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 3,923,695 2,356,574 2,241,940
=================== ==================== ======================
</TABLE>
Unaudited summarised consolidated statements of cash flows
<TABLE>
<CAPTION>
6 MONTHS 6 MONTHS 6 MONTHS
ENDED ENDED ENDED
30 JUNE 30 JUNE 30 JUNE
1997 1997 1996
$000 (pound)000 (pound)000
---------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (277,697) (166,785) (170,727)
Adjustments to reconcile net loss to net cash used in operating
activities
Depreciation 127,136 76,358 54,673
Amortisation of goodwill 21,981 13,202 13,014
Amortisation of deferred financing costs and issue
discount on senior discount debentures 61,901 37,178 38,648
Unrealised loss on foreign currency translation 40,062 24,061 47,668
Share of losses of affiliates 17,188 10,323 7,491
Gain on disposals of assets (788) (473) (158)
Minority interests in profits 350 210 54
Changes in operating assets and liabilities
Change in receivables (195) (117) (10,281)
Change in prepaid expenses (1,813) (1,089) 1,622
Change in accounts payable (14,399) (8,648) (7,321)
Change in other liabilities (10,594) (6,363) 18,806
------------------- -------------------- ---------------------
NET CASH USED IN OPERATING ACTIVITIES (36,868) (22,143) (6,511)
NET CASH USED IN INVESTING ACTIVITIES (359,132) (215,695) (214,610)
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES 367,028 220,437 (19,189)
------------------- -------------------- ---------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (28,972) (17,401) (240,310)
Effect of exchange rate changes on cash and cash equivalents 28 17 (126)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 131,728 79,116 464,818
------------------- -------------------- ---------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR 102,784 61,732 224,382
=================== ==================== =====================
</TABLE>
