-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S8PcbVAUA+zXtJBZfEvDxL08NdPChCYNKVOnBQYILNuW/Bj+R/YZ8MyXkZRBnoyA 0jey+OWWsfT1Azcwijnk9w== 0000940180-96-000093.txt : 19960531 0000940180-96-000093.hdr.sgml : 19960531 ACCESSION NUMBER: 0000940180-96-000093 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960509 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960530 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL CABLETEL INC CENTRAL INDEX KEY: 0000906347 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 521822078 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-22616 FILM NUMBER: 96574306 BUSINESS ADDRESS: STREET 1: 110 E 59TH ST STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 MAIL ADDRESS: STREET 1: 110 EAST 59TH STREET STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 8-K/A 1 FORM 8-K/A-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________ FORM 8-K/A-1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) May 9, 1996 ------------------- International CableTel Incorporated - -------------------------------------------------------------------------------- (Exact name of Registrant as Specified in its Charter) Delaware 0-22616 52-1822078 - -------------------------------------------------------------------------------- (State or Other (Commission (IRS Employer Jurisdiction of File Number) Identification No.) Incorporation) 110 East 59th Street, New York, New York 10022 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 371-3714 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Business Acquired. See Index to Financial Statements on page F-1. (b) Pro Forma Financial Information. See Index to Financial Statements on page F-1. (c) Exhibits. * 2.1 Deed of Irrevocable Undertaking dated March 28, 1996 by and among Addroute Limited, certain shareholders in the NTL Group Limited, NTL Group Limited and International CableTel Incorporated 2.2 Form of Offer Document dated March 28, 1996 of Addroute Limited for NTL Group Limited 2.3 Deed of Adjustment dated March 28, 1996 by and among Addroute Limited and Mercury Asset Management plc. 10.1 The A Facilities Agreement, dated March 28, 1996, by and among Addroute Limited, Chase Investment Bank Limited and The Chase Manhattan Bank, N.A. 10.2 The B Facility Agreement, dated March 28, 1996, by and among Addroute Limited, Chase Investment Bank Limited and The Chase Manhattan Bank, N.A. 10.3 Guarantee of Certain Liabilities of Addroute Limited, dated March 28, 1996, by and among the Registrant, OCOM Corporation, OCOM Sub I Inc., CableTel (UK) Group Inc., OCOM Sub III Inc., CableTel (UK) Limited, and the Chase Manhattan Bank, N.A. 10.4 Deed of Undertaking of the Registrant to Addroute Limited dated March 28, 1996 in relation to the Further Payment. 10.5 Short Term Po Deed of Undertaking of the Registrant to Chase Manhattan Bank, N.A. and Addroute Limited dated March 28, 1996 in relation to the Reduction Amount - ------------------------------- * All exhibits are incorporated herein by reference to exhibits to Amendment No. 2 to the Company's Form S-4 Registration Statement (333-1010), filed on April 16, 1996. SIGNATURE 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 hereunto duly authorized. INTERNATIONAL CABLETEL INCORPORATED Date: May 30, 1996 By: /s/ RICHARD J. LUBASCH -------------------------------- Name: Richard J. Lubasch Title: Senior Vice President 2 INDEX TO FINANCIAL STATEMENTS INTERNATIONAL CABLETEL INCORPORATED Pro forma Condensed Consolidated Financial Statements (Unaudited)......... F-2 Pro forma Condensed Consolidated Balance Sheet as of March 31, 1996 (Unau- dited)................................................................... F-3 Pro forma Condensed Consolidated Statement of Operations for the three months ended March 31, 1996 (Unaudited).................................. F-4 Pro forma Condensed Consolidated Statement of Operations for the year ended December 31, 1995 (Unaudited)...................................... F-5 Notes to Pro forma Condensed Consolidated Financial Statements (Unau- dited)................................................................... F-6 NTL GROUP LIMITED Consolidated Group Profit and Loss Accounts for the three months ended March 31, 1996 and 1995 (Unaudited)...................................... F-7 Consolidated Group Balance Sheet as of March 31, 1996 (Unaudited)......... F-8 Consolidated Group Statements of Cash Flows for the three months ended March 31, 1996 and 1995 (Unaudited)...................................... F-9 Notes to the Accounts (Unaudited)......................................... F-10 Report of Independent Auditors............................................ F-13 Consolidated Group Profit and Loss Accounts for the years ended December 31, 1995 and 1994........................................................ F-14 Consolidated Statement of Total Recognised Gains and Losses............... F-14 Consolidated Group Balance Sheets as of December 31, 1995 and 1994........ F-15 Consolidated Group Statements of Cash Flows for the years ended December 31, 1995 and 1994........................................................ F-16 Notes to the Accounts..................................................... F-17
F-1 INTERNATIONAL CABLETEL INCORPORATED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) In May 1996, a wholly owned subsidiary of International CableTel Incorporated ("CableTel"), entered into an agreement (the "Agreement") and acquired all of the issued and outstanding stock of NTL Group Limited ("NTL") in exchange for cash of approximately (Pounds)200,000,000, subject to adjustment, an additional cash payment of (Pounds)17,100,000 payable in October 1996, (which represents a tax credit expected to be received by NTL in October 1996, although the (Pounds)17,100,000 payment is unconditional) and an agreement to pay (Pounds)35,000,000, subject to adjustment, one year from closing. A substantial portion of the purchase price was financed (the "Financing") through (i) a bank facility of (Pounds)140,000,000 and (ii) a (Pounds)60,000,000 short term bank loan. The following unaudited pro forma condensed consolidated financial statements of CableTel give effect to the Agreement and the Financing. In accordance with FAS 52, the balance sheet of NTL has been translated into United States dollars using the exchange rate on March 31, 1996 ((Pounds)1=$1.5254) and the statement of operations has been translated into dollars using the average exchange rate for the three months ended March 31, 1996 ((Pounds)=$1.5312) and for the year then ended December 31, 1995 ((Pounds)1=$1.5782). The NTL historical financial statements have been adjusted to reflect U.S. GAAP and to eliminate the gain on the sale of its Advanced Products Division and the operations of that division. The unaudited pro forma condensed consolidated balance sheet as of March 31, 1996 gives effect to the Agreement using the purchase method of accounting, and is based upon CableTel's estimate of the fair value of the net assets to be acquired. Such allocations of purchase price may change upon final appraisal of the fair value of the net assets acquired. The unaudited condensed consolidated pro forma balance sheet as of March 31, 1996 gives effect to the Agreement and Financing as if they had been consummated on March 31, 1996. The unaudited pro forma condensed consolidated statement of operations for the three months ended March 31, 1996 and for the year ended December 31, 1995 gives effect to the Agreement and Financing as if they had occurred at the beginning of the respective periods. The pro forma financial statements have been prepared by CableTel's management. These pro forma financial statements may not be indicative of the results that actually would have occurred if the transactions had been in effect on the dates indicated or which may be obtained in the future. The pro forma financial statements should be read in conjunction with the consolidated financial statements and notes of CableTel and NTL. F-2 INTERNATIONAL CABLETEL INCORPORATED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) MARCH 31, 1996 (IN THOUSANDS)
CABLETEL NTL ADJUSTMENTS PRO FORMA ---------- -------- ----------- ---------- ASSETS Current assets: Cash and cash equivalents (Pro forma includes $95,338 of restricted cash)......... $ 661,945 $ 19,068 $305,080 (b) $ 675,522 (310,571)(a) Trade accounts receivable.... 9,786 17,724 27,510 Prepaid expenses and other current assets.............. 16,784 11,166 27,950 ---------- -------- -------- ---------- Total current assets........... 688,515 47,958 (5,491) 730,982 Fixed assets, net.............. 716,084 101,944 50,000 (a) 868,028 License acquisition costs...... 134,917 -- 134,917 Goodwill....................... -- 7,090 247,068 (a) 254,158 Other assets................... 53,177 12,851 66,028 ---------- -------- -------- ---------- Total assets................... $1,592,693 $169,843 $291,577 $2,054,113 ========== ======== ======== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable....... $ 27,063 $ 19,548 $ (3,034)(a) $ 43,577 Accrued expenses............. 68,085 -- 68,085 Current portion of long term debt........................ 44,351 68,519 99,275 (a)(b) 212,145 Other current liabilities.... 297 4,505 79,473 (a) 84,275 ---------- -------- -------- ---------- Total current liabilities...... 139,796 92,572 175,714 408,082 Long term debt................. 1,134,122 -- 137,286 (a)(b) 1,271,408 Other non-current liabilities.. 630 12,635 (12,635)(a) 630 Deferred tax liability......... -- 52,797 3,051 (a) 55,848 Minority interests............. 25,768 -- 25,768 Total stockholders' equity..... 292,377 11,839 (11,839)(a) 292,377 ---------- -------- -------- ---------- Total liabilities and stockholders' equity.......... $1,592,693 $169,843 $291,577 $2,054,113 ========== ======== ======== ==========
See accompanying notes. F-3 INTERNATIONAL CABLETEL INCORPORATED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 1996 (IN THOUSANDS)
PRO CABLETEL NTL ADJUSTMENTS FORMA -------- ------- ----------- -------- Revenues............................ $ 18,434 $44,134 $ 62,568 Costs and expenses: Operating expenses................ 12,629 24,949 37,578 Selling, general and administra- tive............................. 21,798 5,473 27,271 Depreciation and amortization..... 12,190 4,021 $ 4,044(c) 20,255 -------- ------- ------- -------- Total costs and expenses............ 46,617 34,443 4,044 85,104 -------- ------- ------- -------- Income (loss) from operations....... (28,183) 9,691 (4,044) (22,536) Interest (expense).................. (24,711) (1,130) (6,240)(d) (32,081) Interest income..................... 7,763 340 -- 8,103 Other............................... (123) -- -- (123) -------- ------- ------- -------- Income (loss) before provision for income taxes and minority interests.......................... (45,254) 8,901 (10,284) (46,637) Benefit (provision) for income tax- es................................. (42) (2,672) 2,672 (e) (42) -------- ------- ------- -------- Income (loss) before minority inter- ests............................... (45,296) 6,229 (7,612) (46,679) Minority interests.................. 2,572 -- -- 2,572 -------- ------- ------- -------- Income (loss) from continuing opera- tions.............................. $(42,724) $ 6,229 $(7,612) $(44,107) ======== ======= ======= ======== Net (loss) per share................ $ (1.41) -- -- $ (1.46) ======== ======= ======= ======== Weighted average number of shares used in calculation of earnings per share.............................. 30,211 -- -- 30,211 ======== ======= ======= ========
See accompanying notes. F-4 INTERNATIONAL CABLETEL INCORPORATED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS)
CABLETEL NTL ADJUSTMENTS PRO FORMA --------- -------- ----------- --------- Revenues......................... $ 33,741 $172,590 $ 206,331 Costs and expenses: Operating expenses............. 24,415 104,690 129,105 Selling, general and adminis- trative....................... 72,629 18,489 91,118 Depreciation and amortization.. 29,823 15,421 $ 16,177(c) 61,421 --------- -------- -------- --------- Total costs and expenses......... 126,867 138,600 16,177 281,644 --------- -------- -------- --------- Income (loss) from operations.... (93,126) 33,990 (16,177) (75,313) Interest (expense)............... (28,379) (3,278) (26,579)(d) (58,236) Interest income.................. 21,185 1,046 22,231 Other............................ 84 84 --------- -------- -------- --------- Income (loss) before provision for income taxes and minority interests....................... (100,236) 31,758 (42,756) (111,234) Benefit (provision) for income taxes........................... 2,477 (9,998) 352 (e) (7,169) --------- -------- -------- --------- Income (loss) before minority in- terests......................... (97,759) 21,760 (42,404) (118,403) Minority interests............... 6,974 -- -- 6,974 --------- -------- -------- --------- Income (loss) from continuing op- erations........................ $ (90,785) $ 21,760 $(42,404) $(111,429) ========= ======== ======== ========= Net (loss) per share............. $ (3.01) -- -- $ (3.69) ========= ======== ======== ========= Weighted average number of shares used in calculation of earnings per share....................... 30,190 -- -- 30,190 ========= ======== ======== =========
See accompanying notes. F-5 INTERNATIONAL CABLETEL INCORPORATED NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) For purposes of determining the effect of the Agreement and Financing on CableTel's Condensed Consolidated Statement of Operations for the three months ended March 31, 1996 and the year ended December 31, 1995 and on the Condensed Consolidated Balance Sheet as of March 31, 1996, the following pro forma adjustments have been made:
MARCH 31, 1996 -------------- (IN THOUSANDS) (a) The excess of the purchase price paid over the historical book value of the net assets acquired has been allocated to property and equipment and goodwill Cash paid........................................ $310,571 Deferred consideration payable................... 79,473 -------- 390,044 NTL term loan, revolver loan and accrued interest retired (1)..................................... $71,553 Non recoverable ACT tax.......................... (3,051) Negative goodwill of NTL......................... 12,635 Historical book value of net assets.............. 11,839 92,976 ------- -------- Excess........................................... $297,068 ======== Amount allocated to property and equipment....... $ 50,000 Amount allocated to goodwill..................... 247,068 -------- $297,068 ======== (b) Proceeds from issuance of (Pounds)60,000,000 of short term debt.................................... $ 91,524 Proceeds from issuance of (Pounds)140,000,000 of long term debt of which (Pounds)50,000 is due on December 31, 1996 unless certain events take place and is in-cluded in current portion of long term debt............................................... 213,556 -------- $305,080 ========
THREE YEAR ENDED MONTHS ENDED DECEMBER 31, 1995 MARCH 31, 1996 ------------------ ---------------- (IN THOUSANDS) (IN THOUSANDS) (c) Depreciation of increase in basis of property and equipment............... $(10,000) $(2,500) Amortization of goodwill over 40 years............................... (6,177) (1,544) -------- ------- $(16,177) $(4,044) (d) Interest expense on debt in (b) above at 10 1/2% per annum for the short term debt and 9 1/4% per annum for the long term debt................... $(29,857) $(7,370) Less interest on NTL debt retired.... 3,278 1,130 -------- ------- (26,579) (6,240) (e) Estimated tax benefit from filing for group relief......................... 352 2,672 -------- ------- $(42,404) $(7,612) ======== =======
(1) Includes interest of (Pounds)408,000 and estimated additional borrowings of (Pounds)1,581,000 used to pay off existing liabilities (aggregating $3,034,000). F-6 NTL GROUP LIMITED CONSOLIDATED GROUP PROFIT AND LOSS ACCOUNTS (UNAUDITED)
THREE MONTHS ENDED 31 MARCH ------------------------------------------------ 1996 1995 ----------- ------------------------------------ TOTAL CONTINUING DISCONTINUED TOTAL ----------- ----------- ------------ ----------- (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 TURNOVER 28,823 27,427 5,517 32,944 Cost of sales................. 18,976 22,501 4,655 27,156 ------ ------ ----- ------ Gross profit.................. 9,847 4,926 862 5,788 ------ ------ ----- ------ Administrative expenses....... 3,566 2,292 298 2,590 Loss in associated undertaking.................. 15 25 -- 25 ------ ------ ----- ------ PROFIT BEFORE INTEREST........ 6,266 2,609 564 3,173 ------ ------ ----- ------ Interest receivable........... 237 72 Interest payable.............. (738) (625) ------ ------ (501) (553) ------ ------ PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION.............. 5,765 2,620 Tax on profit on ordinary activities................... 1,745 1,565 ------ ------ PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION AND RETAINED PROFIT FOR THE PERIOD*....... 4,020 1,055 ====== ======
- -------- * A summary of the significant adjustments to profit on ordinary activities after taxation which would be required if United States generally accepted accounting principles had been applied instead of those generally accepted in the United Kingdom is given in Note 3 of Notes to the Accounts. F-7 NTL GROUP LIMITED CONSOLIDATED GROUP BALANCE SHEET (UNAUDITED)
31 MARCH 1996 ----------- (Pounds)000 FIXED ASSETS Tangible assets..................................................... 68,053 Investments......................................................... 40 ------ 68,093 ------ CURRENT ASSETS Stocks.............................................................. 4,320 DEBTORS: amounts falling due: after one year.................................................... 8,385 within one year................................................... 11,619 ------ 20,004 Cash at bank and in hand............................................ 12,500 ------ 36,824 CREDITORS: amounts falling due within one year...................... 39,687 ------ Net current liabilities............................................. (2,863) ------ Total assets less current liabilities........................... 65,230 ------ CREDITORS: amounts falling due after more than one year............. 21,000 ------ 44,230 ======
CAPITAL AND RESERVES* Called up share capital............................................. 50 Share premium account............................................... 2,483 Capital reserve account............................................. 1,433 Capital redemption reserve.......................................... 11 Goodwill write-off reserve.......................................... 4,500 Profit and loss account............................................. 35,753 ------ 44,230 ======
- -------- * A summary of the significant adjustments to capital and reserves which would be required if United States generally accepted accounting principles had been applied instead of those generally accepted in the United Kingdom is given in Note 3 of Notes to the Accounts. F-8 NTL GROUP LIMITED CONSOLIDATED GROUP STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED 31 MARCH ----------------------- 1996 1995 ----------- ----------- (Pounds)000 (Pounds)000 Net cash inflow from operating activities.............. 4,742 9,759 ------- ------ RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received...................................... 237 74 Interest paid.......................................... (271) (36) ------- ------ Net cash (outflow) inflow from returns on investments and servicing of finance.............................. (34) 38 ------- ------ TAXATION Taxation paid.......................................... (21,552) (142) ------- ------ Tax paid............................................... (21,552) (142) ------- ------ INVESTING ACTIVITIES Payments to acquire tangible fixed assets.............. (4,485) (4,546) Receipts from sales of tangible fixed assets........... 98 12 ------- ------ Net cash inflow/(outflow) from investing activities.... (4,387) (4,534) ------- ------ Net cash inflow before financing....................... (21,231) 5,121 ======= ====== FINANCING Unsecured loan stock received.......................... -- (4,000) Grants received........................................ -- 39 ------- ------ Net cash outflow from financing........................ -- (3,961) Increase/(decrease) in cash and cash equivalents....... (21,231) 9,082 ------- ------ (21,231) 5,121 ======= ======
- -------- * The significant differences between the cash flow statement presented above and that required under United States generally accepted accounting principles are described in Note 3 of Notes to the Accounts. F-9 NTL GROUP LIMITED NOTES TO THE ACCOUNTS (UNAUDITED) NOTE 1--BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended 31 March 1996 are not necessarily indicative of the results that may be expected for the year ending 31 December 1996. For further information, refer to the consolidated financial statements and footnotes thereto included herein for the year ended 31 December, 1995. NOTE 2--SALE OF COMPANY On 8 May 1996, NTL Group Limited and its subsidiaries were acquired by Addroute Limited--a wholly owned subsidiary of International CableTel Inc.-- for (Pounds)204m with a further (Pounds)35m conditional, deferred consideration. Part of the consideration paid was to repay NTL's long term loan and the amount drawn down on the revolver loan facility. As such both amounts shown in the balance sheet as at 31 March 1996 have now been fully repaid. NOTE 3--DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED KINGDOM AND THE UNITED STATES The Group's financial statements are prepared in accordance with UK GAAP which differ in certain respects from US GAAP. Those differences which have a significant effect on the Group are described below. Goodwill Goodwill arising on consolidation is eliminated against retained earnings and other reserves. Under US GAAP, goodwill is capitalised and amortised over its respective useful economic life. For the purposes of the reconciliation below, a period of 40 years has been utilised. The carrying amount of goodwill and the amortisation period assigned to it are reviewed for impairment by reference to expected future cash flows. Negative goodwill is credited to the goodwill write-off reserve. Under US GAAP, negative goodwill would be apportioned to the fixed assets acquired, thereby reducing the annual depreciation charge, and any remainder would be carried forward and released to the profit and loss account over its useful life. For the purposes of the reconciliation below, a period of 40 years has again been utilised. Fair Value Adjustment Under UK GAAP, fair values of acquired assets can be assessed for the full accounting period following the acquisition. Under US GAAP, this period of hindsight only stretches for 12 months. Hence the adjustment taken to the goodwill write-off reserve under UK GAAP in the year ended 31 December 1995 has been expensed in the reconciliation below. Dividends Under UK GAAP final dividends are provided for in the accounts for the year in respect of which they are proposed by the Directors for approval by the shareholders. Under US GAAP, dividends would not be provided for until declared. Deferred Tax Under UK GAAP, deferred taxes are accounted for using the liability method to the extent that it is considered probable that a liability or asset will crystallize in the foreseeable future. Under US GAAP, deferred taxes are accounted for using the liability method on all temporary differences and deferred tax assets are recognized where it is more likely than not that they will be realized. F-10 NTL GROUP LIMITED NOTES TO THE ACCOUNTS (UNAUDITED) The effect on profit on ordinary activities after taxation (net income) and capital and reserves (shareholders' equity) of applying US GAAP is summarised as follows:
THREE MONTHS ENDED 31 MARCH ------------------------ 1996 1995 ----------- ----------- (Pounds)000 (Pounds)000 NET INCOME Profit on ordinary activities after taxation as reported .......................................... 4,020 4,260 Adjustments: Amortization of goodwill............................ 21 21 Depreciation........................................ 35 35 Pension costs....................................... (8) 928 Deferred tax........................................ -- 154 ----- ----- Net income as adjusted to accord with US GAAP....... 4,068 5,398 ===== ===== Comprising: Income from continuing operations................... 4,068 4,536 Income from discontinued operations................. -- 862 ----- ----- Net income.......................................... 4,068 5,398 ===== =====
31 MARCH 1995 ----------- (Pounds)000 SHAREHOLDERS' EQUITY Capital and reserves as reported................................. 44,230 Adjustments: Intangible assets Goodwill....................................................... 5,350 Amortization................................................... (702) Tangible assets Negative goodwill adjustment................................... (1,573) Depreciation adjustment........................................ 351 Negative goodwill Deferred credit................................................ (8,736) Released to profit & loss...................................... 453 Current assets (liabilities) Pension costs.................................................. 3,000 Deferred taxes................................................. (34,612) ------- Shareholder's equity as adjusted to accord with US GAAP.......... 7,761 =======
F-11 NTL GROUP LIMITED NOTES TO THE ACCOUNTS (UNAUDITED) CASH FLOWS The Cash Flow Statements prepared under UK GAAP in accordance with Financial Reporting Standard No. 1 present substantially the same information as that required under US GAAP by FAS 95, "Statement of Cash Flows". These standards differ, however, with regard to classification of items within the statements and as regards the definition of cash and cash equivalents. Under US GAAP, cash and cash equivalents would not include bank overdrafts and borrowings with initial maturities of less than three months. Under US GAAP, bank overdrafts and the revolver loan would be classified as financing activities. Under UK GAAP, cash flows are presented separately for operating activities, returns on investments and servicing of finance, taxation, investing activities and financing activities. US GAAP, however, requires only three categories of cash flow activity to be reported: operating, investing and financing. Cash flows from taxation and returns on investments and servicing of finance shown under UK GAAP would, with the exception of dividends paid, be included as operating activities under US GAAP. The payment of dividends would be included as a financing activity under US GAAP. The categories of cash flow activity under US GAAP can be summarised as follows:
THREE MONTHS ENDED 31 MARCH ----------------------- 1996 1995 ----------- ----------- (Pounds)000 (Pounds)000 Cash inflow/(outflow) from operating activities...... (16,844) 9,655 Cash inflow/(outflow) on investing activities........ (4,387) (4,534) Cash inflow/(outflow) from financing activities...... 21,068 (5,437) ------- ------ Increase/(decrease) in cash and cash equivalents..... (163) (316) Cash and cash equivalents at January 1............... 13,744 3,066 ------- ------ Cash and cash equivalents at March 31................ 13,581 2,750 ======= ======
F-12 REPORT OF INDEPENDENT AUDITORS To the Board of Directors NTL Group Limited We have audited the accompanying consolidated balance sheets of NTL Group Limited as of December 31, 1995 and 1994, and the related consolidated group profit and loss accounts, statements of total recognized gains and losses and statements of cash flows for the years then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with United Kingdom auditing standards which do not differ in any significant respect from United States generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurances about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NTL Group Limited at December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United Kingdom which differ in certain respects from those followed in the United States (See Note 29 of Notes to the Accounts). ERNST & YOUNG Chartered Accountants London, England March 5, 1996 F-13 NTL GROUP LIMITED CONSOLIDATED GROUP PROFIT AND LOSS ACCOUNTS
YEAR ENDED 31 DECEMBER ------------------------------------------------------------------------- 1995 1994 ------------------------------------ ------------------------------------ NOTES CONTINUING DISCONTINUED TOTAL CONTINUING DISCONTINUED TOTAL ----- ----------- ------------ ----------- ----------- ------------ ----------- (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 TURNOVER 2 109,359 25,206 134,565 102,298 13,398 115,696 Cost of sales........... 3 76,330 21,016 97,346 72,998 6,926 79,924 ------- ------ ------- ------- ------ ------- Gross profit............ 33,029 4,190 37,219 29,300 6,472 35,772 ------- ------ ------- ------- ------ ------- Administrative expenses............... 3 14,265 895 15,160 3,485 7,084 10,569 Restructuring costs..... -- -- -- 5,853 -- 5,853 Loss in associated undertaking............ 4 40 -- 40 226 -- 226 ------- ------ ------- ------- ------ ------- OPERATING PROFIT (LOSS)................. 5 18,724 3,295 22,019 19,736 (612) 19,124 ------- ------ ------- ------- ------ ------- Non operating exceptional item--sale of discontinued operation.............. 7 86,471 -- ------- ------- PROFIT BEFORE INTEREST.. 108,490 19,124 ------- ------- Interest receivable..... 8 703 418 Interest payable........ 9 (2,077) (3,541) ------- ------- (1,374) (3,123) ------- ------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION............... 107,116 16,001 Tax on profit on ordinary activities.... 10 7,450 5,990 ------- ------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION*.............. 99,666 10,011 Interim dividend paid... 86,211 -- Final dividend proposed............... 11 4,398 3,282 ------- ------- RETAINED PROFIT FOR THE YEAR................... 12 9,057 6,729 ======= =======
- -------- * A summary of the significant adjustments to profit on ordinary activities after taxation which would be required if United States generally accepted accounting principles had been applied instead of those generally accepted in the United Kingdom is given in Note 29 of Notes to the Accounts. A statement on the movement in reserves is given in note 12. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES There are no recognised gains or losses other than the profit attributable to shareholders of the company of (Pounds)99,666,000 in the year ended 31 December 1995 and of (Pounds)10,011,000 in the year ended 31 December 1994. F-14 NTL GROUP LIMITED CONSOLIDATED GROUP BALANCE SHEETS
31 DECEMBER NOTES 1995 1994 ----- ----------- ----------- (Pounds)000 (Pounds)000 FIXED ASSETS Tangible assets.................................. 13 66,327 67,489 Investments...................................... 15 -- 7 ------ ------ 66,327 67,496 ------ ------ CURRENT ASSETS Stocks........................................... 16 4,413 8,014 DEBTORS: amounts falling due: 17 after one year................................. 8,786 7,337 within one year................................ 26,792 18,218 ------ ------ 35,578 25,555 Cash at bank and in hand......................... 18 13,744 3,066 ------ ------ 53,735 36,635 CREDITORS: amounts falling due within one year... 19 55,556 34,790 ------ ------ Net current (liabilities)/assets................. (1,821) 1,845 ------ ------ Total assets less current liabilities........ 64,506 69,341 ------ ------ CREDITORS: amounts falling due after more than one year........................................ 20 14,000 25,000 Provision for liabilities and charges............ 21 5,224 4,218 Accruals and deferred income..................... 22 5,072 8,511 ------ ------ 24,296 37,729 ------ ------ 40,210 31,612 ====== ====== CAPITAL AND RESERVES* Called up share capital.......................... 23 50 50 Share premium account............................ 12 2,483 2,483 Capital reserve account.......................... 12 1,433 1,433 Capital redemption reserve....................... 12 11 11 Goodwill write-off reserve....................... 12 4,500 4,959 Profit and loss account.......................... 12 31,733 22,676 ------ ------ 40,210 31,612 ====== ======
- -------- * A summary of the significant adjustments to capital and reserves which would be required if United States generally accepted accounting principles had been applied instead of those generally accepted in the United Kingdom is given in Note 29 of Notes to the Accounts. F-15 NTL GROUP LIMITED CONSOLIDATED GROUP STATEMENTS OF CASH FLOWS
YEAR ENDED 31 DECEMBER ----------------------- NOTES 1995 1994 ----- ----------- ----------- (Pounds)000 (Pounds)000 Net cash inflow from operating activities....... 5(b) 35,243 30,315 ------- ------- RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received............................... 715 406 Interest paid................................... (1,996) (3,858) Dividends paid.................................. (89,493) -- ------- ------- Net cash outflow from returns on investments and servicing of finance........................... (90,774) (3,452) ------- ------- TAXATION Taxation paid................................... (6,287) (4,542) ------- ------- Tax paid........................................ (6,287) (4,542) ------- ------- INVESTING ACTIVITIES Purchase of DTELS Ltd........................... -- (6,827) Disposal of Advanced Products Division.......... 7 91,775 -- Payments to acquire tangible fixed assets....... (11,287) (15,962) Receipts from sales of tangible fixed assets.... 483 1,186 Purchase of redeemable preference shares in Prospectre Ltd................................. -- (200) ------- ------- Net cash inflow/(outflow) from investing activi- ties........................................... 80,971 (21,803) ------- ------- Net cash inflow before financing................ 19,153 518 ======= ======= FINANCING Issue of ordinary share capital................. 24 -- (6) Re-purchase of ordinary shares.................. 24 -- 329 Unsecured loan stock repaid/(received).......... 24 4,000 (4,000) Term loan repaid................................ 24 7,000 7,000 Grants received................................. 24 (70) (59) ------- ------- Net cash outflow from financing................. 10,930 3,264 Increase/(decrease) in cash and cash equiva- lents.......................................... 25 8,223 (2,746) ------- ------- 19,153 518 ======= =======
- -------- * The significant differences between the cash flow statement presented above and that required under United States generally accepted accounting principles are described in Note 29 of Notes to the Accounts. F-16 NTL GROUP LIMITED NOTES TO THE ACCOUNTS NOTE 1--ACCOUNTING POLICIES Basis of preparation The accounts are prepared under the historical cost convention. The accounts are prepared in accordance with United Kingdom ("UK") applicable accounting standards. Basis of consolidation The group accounts consolidate the accounts of NTL Group Limited and all its subsidiary undertakings drawn up to 31 December. Undertakings, other than subsidiary undertakings, in which the group has an investment representing not less than 20% of the voting rights and over which it exerts significant influence are treated as associated undertakings. The group accounts include the appropriate share of these undertakings' results and reserves based on audited accounts to 31 December. The consolidated accounts also include the accounts for NTL Limited, NTL Trustees Limited and NTL Networks Limited, which have not traded since their incorporation. Goodwill Purchased goodwill is set-off directly against reserves. Turnover Turnover includes the value of goods and services supplied to third party customers and is exclusive of VAT. Turnover related to facilities leasing and other contracts which span financial years are included to the extent that the proportion of the contract period falls into the current financial year. Finance and operating leases Assets acquired under finance leases are capitalised and subsequently dealt with under the same accounting policies as other tangible fixed assets, excluding the interest portion of costs which is expensed. Costs arising under operating leases are charged evenly over the term of the lease. Assets leased to customers under agreements which transfer substantially all the risks and rewards associated with ownership, other than legal title, are classified as finance leases. Amounts receivable under finance leases represent the unpaid capital element of the original cost of equipment. The interest element of income from such leasing contracts is credited to the profit and loss account on a straight line basis over the term of the lease. Fixed assets Tangible fixed assets represent the cost of capital works and equipment purchased from third parties. Where a contribution is received towards the cost of an asset, the recorded cost is reduced by the contribution. Where the contribution is in excess of the cost, the excess contribution is included as turnover. F-17 NTL GROUP LIMITED NOTES TO THE ACCOUNTS Assets are capitalised in the month following the month in which the asset goes into service. The cost of company staff effort and their related costs associated with capital projects are not capitalised, but are written off as incurred. Depreciation The depreciation of tangible fixed assets is calculated on a straight line basis by reference to the cost, expected useful lives, and the possible effect of technological change. Depreciation is charged on a monthly basis with effect from the month of capitalisation. The principal rates of depreciation are as follows: Freehold land --Nil Freehold buildings --2% per annum Leasehold land and buildings --Over the lesser of the term of the lease or 50 years Plant and equipment --5% to 25% per annum Test equipment --20% per annum Computer equipment --33% per annum Furniture and fixtures --10% to 33% per annum Satellite equipment --25% per annum Vehicles --25% per annum The fixed assets of the group acquired as part of the purchase of National Transcommunications Limited and of DTELS Limited are being depreciated over the remaining useful lives of the assets concerned. Stocks Stocks held by the group are maintenance spares and manufacturing stocks. Stocks are valued at average cost less provisions for obsolescence, slow moving and surplus items. Stock items are charged to profit and loss as they are consumed. Manufacturing stocks are valued at the lower of cost and net realisable value. Research and development The cost of research and development expenditure is written off as incurred. Equipment used in the research and development area is capitalised and a depreciation charge is made to research and development expenditure under the depreciation policy. Deferred taxation Deferred taxation is provided using the liability method on all timing differences which are expected to reverse in the future without being replaced, calculated at the rate at which it is anticipated the timing differences will reverse. Currency translation Transactions in foreign currency are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currency are retranslated at the rate of exchange ruling at the balance sheet date, all differences are taken to the profit and loss account. Pensions National Transcommunications Limited, the principal subsidiary of NTL Group Limited, operates a pension plan ("the Plan") of the defined benefit type which was established on 1 January 1991. DTELS Limited, another subsidiary of NTL Group Limited, is a participating employer in the Plan. The assets of the Plan are held F-18 NTL GROUP LIMITED NOTES TO THE ACCOUNTS separately from those of the company and are invested in specialised portfolios under the management of Clerical Medical Investment Group. The regular pension cost is assessed using the attained age method. Variations in pension cost, which are identified as a result of actuarial valuations, are amortised over the average expected remaining working lifetimes of employees in proportion to their expected payroll costs. Differences between the amounts funded and the amounts charged to the profit and loss accounts are treated as either provisions or prepayments in the balance sheet. Government grants Grants of a revenue nature are credited to income in the period to which they relate. Warranties An appropriate provision is made for potential customer claims relating to current year sales of video compression products. NOTE 2--TURNOVER Turnover includes the value of charges made for transmission services, distribution services, products, facilities leasing, interest on rental of equipment under finance leases, research and development contracts, other contracts, rents from properties, excess above cost in respect of capital works contributions from third parties and site charges made to the BBC under the site sharing agreement. Turnover is analysed by geographical area as follows:
YEAR ENDED 31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 GEOGRAPHICAL AREA United Kingdom.......................................... 113,762 105,969 Europe.................................................. 6,553 5,062 Scandinavia............................................. 248 1,108 North America........................................... 2,494 621 Africa, Asia and Australasia............................ 11,426 2,936 Middle East............................................. 82 -- ------- ------- 134,565 115,696 ======= =======
Turnover has not been analysed by class of business as in the directors' opinion such information, if disclosed, would not be in the interests of the group. NOTE 3--COST OF SALES AND ADMINISTRATIVE EXPENSES Included in cost of sales is an amount of (Pounds)2,275,000 (1994-- (Pounds)49,000) and in administrative expenses a credit of (Pounds)(93,000) (1994 charge--(Pounds)275,000) in respect of reorganisation costs as follows:
YEAR ENDED 31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Provision made for reorganisation costs 2,255 275 Provision made for rent and rates costs of vacated premises (46) 49 Relocation costs of premises and plant and equipment (27) -- ----- --- 2,182 324 ===== ===
NOTE 4--LOSS IN ASSOCIATED UNDERTAKING The loss in associated undertaking is in respect of 50% share in the operating losses of Prospectre Limited. F-19 NTL GROUP LIMITED NOTES TO THE ACCOUNTS NOTE 5--OPERATING PROFIT (a) This is stated after charging/(crediting):
YEAR ENDED 31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Staff costs....................................... 37,074 31,363 Auditors' remuneration--as auditors............... 62 57 Auditors' remuneration--for other services........ 50 47 Depreciation of owned fixed assets................ 9,995 9,473 Operating lease rentals--land and buildings....... 2,672 2,330 Operating lease rentals--plant and machinery...... 3,044 3,369 Independent Local Radio (ILR) contract provision.. -- (164) Grants receivable................................. (35) (83) Directors' emoluments............................. 5,074 986 (b) Reconciliation of operating profit to net cash inflow from operating activities: YEAR ENDED 31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Operating profit........ 22,019 19,124 Depreciation............ 9,995 9,473 Profit on disposal of tangible fixed assets.. (429) (271) ILR contract provision released............... -- (164) Grants received......... (35) (83) Increase in stocks...... (4,402) (2,805) Increase in debtors..... (2,477) (10,079) Increase in creditors... 8,091 11,882 Decrease in finance lease debtor........... 2,481 3,238 ------ -------- Net cash inflow from or- dinary operating activ- ities.................. 35,243 30,315 ====== ======== (c) Staff costs YEAR ENDED 31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Wages and salaries...... 30,514 25,779 Social security costs... 2,640 2,249 Pension costs........... 3,920 3,335 ------ -------- 37,074 31,363 ====== ========
The average number of employees of the group during the year ended 31 December was as follows:
1995 1994 ----- ----- NO. NO. Regional operations.............................................. 681 693 Engineering services............................................. 199 180 Administrative................................................... 111 97 Business development............................................. 59 49 Advanced products................................................ 132 86 Nexus............................................................ 8 3 ----- ----- 1,190 1,108 ===== =====
F-20 NTL GROUP LIMITED NOTES TO THE ACCOUNTS NOTE 6(A)--DIRECTORS' REMUNERATION Directors' emoluments, including pension contributions, amounted to (Pounds)5,074,464 (1994--(Pounds)985,771). This includes an amount of (Pounds)39,282 (1994--(Pounds)40,136) paid to third party companies in respect of directors' fees. The remuneration of the chairman, excluding pension contributions, amounted to (Pounds)231,171 (1994--(Pounds)94,902). The remuneration of the highest paid director, excluding pension contributions, amounted to (Pounds)4,070,647 (1994--(Pounds)109,386). Directors emoluments include (Pounds)4,004,117 in respect of non-recurring payments made to four directors in recognition for the sale of NTL's Advanced Products business. Remuneration totalling (Pounds)24,693 was deferred by one director. The remuneration of those directors employed under executive service agreements includes payments related to the achievement of financial and personal performance objectives which have been determined by the remuneration committee. The emoluments (including non-recurring payments), excluding pension contributions, of the directors fell within the following ranges:
YEAR ENDED 31 DECEMBER ------------ 1995 1994 ----- ----- NO. NO. Nil -- (Pounds)5,000............................ 1 -- (Pounds)5,001 -- (Pounds)10,000 ........................... 1 -- (Pounds)15,001 -- (Pounds)20,000 ........................... 2 2 (Pounds)20,001 -- (Pounds)25,000 ........................... -- 1 (Pounds)90,001 -- (Pounds)95,000 ........................... -- 2 (Pounds)95,001 -- (Pounds)100,000............................ -- 2 (Pounds)100,001 -- (Pounds)105,000............................ 1 -- (Pounds)110,001 -- (Pounds)115,000............................ 1 -- (Pounds)120,001 -- (Pounds)125,000............................ -- 1 (Pounds)215,001 -- (Pounds)220,000............................ 1 -- (Pounds)230,001 -- (Pounds)235,000............................ 2 -- (Pounds)365,001 -- (Pounds)370,000............................ -- 1 (Pounds)4,070,001 -- (Pounds)4,075,000........................... 1 --
NOTE 6(B)--DIRECTORS' INTERESTS IN SHARES AND OPTIONS
OPTIONS OVER 'A' ORDINARY SHARES 'B' ORDINARY SHARES 'C' ORDINARY SHARES 'C' ORDINARY SHARES ---------------------- -------------------- -------------------- -------------------- 31.12.95 1.1.95 31.12.95 1.1.95 31.12.95 1.1.95 31.12.95 1.1.95 ---------- ---------- ---------- --------- ---------- --------- ---------- --------- I Armitage.............. -- 1,294 -- -- -- 1,294 -- -- D S Chambers............ -- -- 13,000 13,000 13,000 13,000 -- -- Dr J R Forrest.......... -- -- 14,000 14,000 14,000 14,000 -- -- R A F Heath............. -- -- -- -- -- -- -- -- Ms F C Jacob............ 531 -- -- -- 531 -- -- -- R A McKellar............ -- -- 14,000 14,000 14,000 14,000 5,816 -- J A Okas................ -- -- 14,000 14,000 14,000 14,000 5,490 -- Sir Alfred Shepperd..... -- -- -- -- -- -- -- -- A J Sukawaty............ -- -- 1,520 1,520 1,520 1,520 167,304 167,304 A S Walsh............... -- -- -- -- -- -- 6,275 6,275
Mr Armitage resigned as a director on 21 February 1995. Ms Jacob was appointed as a director on 21 February 1995 and held 431 'A' ordinary shares and 431 'C' ordinary shares at that time. F-21 NTL GROUP LIMITED NOTES TO THE ACCOUNTS No other director of the company had a notifiable interest in the shares of the company or in any subsidiary undertaking as at 31 December 1995. NOTE 7--NON OPERATING EXCEPTIONAL ITEM On 31 October 1995 the group completed the sale of the Advanced Products Division of National Transcommunications Limited. The disposal is analysed as follows:
YEAR ENDED 31 DECEMBER 1995 ----------------------- (Pounds)000 (Pounds)000 Cash consideration................................... 92,000 Less fees paid....................................... (225) ------ Net cash inflow as at 31.12.95....................... 91,775 less: consideration adjustment............................. 2,148 fees outstanding..................................... 777 net assets disposed of: Fixed assets......................................... 2,401 Stocks............................................... 8,003 Debtors.............................................. 3,541 Creditors............................................ (11,566) ------- 2,379 ------ Gain on disposal..................................... 86,471 ======
NOTE 8--INTEREST RECEIVABLE
YEAR ENDED 31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Interest receivable on short-term deposits........... 671 410 Interest received net of tax......................... 26 8 Other interest received.............................. 6 -- ------- ------ 703 418 ======= ======
NOTE 9--INTEREST PAYABLE
YEAR ENDED 31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Term loan interest................................... 2,018 2,983 Unsecured loan stock interest........................ 36 357 Legal costs in respect of restructured facilities.... -- 195 Other interest....................................... 23 6 ------- ------ 2,077 3,541 ======= ======
F-22 NTL GROUP LIMITED NOTES TO THE ACCOUNTS NOTE 10--TAX ON PROFIT ON ORDINARY ACTIVITIES
YEAR ENDED 31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Based on profit for the year: UK corporation tax at 33.0%.......................... 7,594 6,365 UK corporation tax--prior years...................... (147) (377) Overseas tax incurred on royalty income.............. 3 4 Double taxation relief............................... -- (2) ----- ----- 7,450 5,990 ===== =====
NOTE 11--DIVIDENDS
YEAR ENDED 31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Interim paid......................................... 86,211 -- Final proposed....................................... 4,398 3,282 ------ ----- 90,609 3,282 ====== =====
NOTE 12--SHARE CAPITAL, MOVEMENT ON RESERVES AND RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
TOTAL PROFIT CAPITAL GOODWILL SHARE- SHARE SHARE AND LOSS CAPITAL REDEMPTION WRITE OFF HOLDERS' CAPITAL PREMIUM ACCOUNT RESERVE RESERVE RESERVE FUNDS ----------- ----------- ----------- ----------- ----------- ----------- ----------- (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 As at 1 January 1994.... 25 2,513 16,440 1,269 -- (5,350) 14,897 Shares issued during the year................... 6 6 Bonus issue of 'C' ordinary shares........ 25 (25) Shares re-purchased during the year for cancellation........... (11) (329) 11 (329) Arising on acquisition of DTELS Ltd........... 10,309 10,309 ILR Contract Provision released............... (164) 164 Profit attributable to members of the group... 10,011 10,011 Dividends............... (3,282) (3,282) --- ----- ------- ----- --- ------ ------- As at 31 December 1994.. 50 2,483 22,676 1,433 11 4,959 31,612 Fair value adjustment DTELS Ltd.............. (459) (459) Profit attributable to members of the group... 99,666 99,666 Dividends............... (90,609) (90,609) --- ----- ------- ----- --- ------ ------- As at 31 December 1995.. 50 2,483 31,733 1,433 11 4,500 40,210 === ===== ======= ===== === ====== =======
F-23 NTL GROUP LIMITED NOTES TO THE ACCOUNTS NOTE 13--TANGIBLE ASSETS
LAND & BUILDINGS ----------------------- PLANT FURNITURE TOTAL ASSETS LONG SHORT AND AND ASSETS UNDER FREEHOLD LEASE LEASE EQUIPMENT FITTINGS IN USE CONSTRUCTION TOTAL ----------- ----------- ----------- ----------- ----------- ----------- ------------ ----------- (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Cost: At 1 January 1994....... 9,285 -- 4,802 59,871 5,091 79,049 5,174 84,223 Assets acquired on purchase of subsidiary.......... 1,520 195 -- 821 79 2,615 -- 2,615 Additions............... -- -- -- -- -- -- 14,305 14,305 Assets brought into commission............. 295 -- 112 12,628 1,381 14,416 (14,416) -- Disposals............... (5) -- -- (1,526) (140) (1,671) -- (1,671) Reclassification of assets................. (33) -- (54) 131 (44) -- -- -- ------ --- ----- ------- ------ ------- ------- ------- At 31 December 1994..... 11,062 195 4,860 71,925 6,367 94,409 5,063 99,472 ------ --- ----- ------- ------ ------- ------- ------- Depreciation: At 1 January 1994....... (425) -- (466) (19,523) (2,852) (23,266) -- (23,266) Charge to profit and loss................... (236) (3) (237) (7,915) (1,082) (9,473) -- (9,473) Disposals............... -- -- -- 628 128 756 -- 756 Reclassification of assets................. 15 -- -- (63) 48 -- -- -- ------ --- ----- ------- ------ ------- ------- ------- At 31 December 1994..... (646) (3) (703) (26,873) (3,758) (31,983) -- (31,983) ------ --- ----- ------- ------ ------- ------- ------- Cost: At 1 January 1995....... 11,062 195 4,860 71,925 6,367 94,409 5,063 99,472 Additions............... -- -- -- -- -- -- 11,287 11,287 Assets brought into commission............. 491 -- 233 9,563 1,985 12,272 (12,272) -- Disposals............... (2) -- (47) (2,628) (3,152) (5,829) (604) (6,433) Reclassification of assets................. (103) -- 14 88 1 -- -- -- ------ --- ----- ------- ------ ------- ------- ------- At 31 December 1995..... 11,448 195 5,060 78,948 5,201 100,852 3,474 104,326 ------ --- ----- ------- ------ ------- ------- ------- Depreciation: At 1 January 1995....... (646) (3) (703) (26,873) (3,758) (31,983) -- (31,983) Charge to profit and loss................... (258) (4) (240) (7,987) (1,506) (9,995) -- (9,995) Disposals............... 2 -- 9 1,745 2,223 3,979 -- 3,979 Reclassification of assets................. 2 -- -- (1) (1) -- -- -- ------ --- ----- ------- ------ ------- ------- ------- At 31 December 1995..... (900) (7) (934) (33,116) (3,042) (37,999) -- (37,999) ------ --- ----- ------- ------ ------- ------- ------- Net book value: At 31 December 1995..... 10,548 188 4,126 45,832 2,159 62,853 3,474 66,327 ====== === ===== ======= ====== ======= ======= ======= At 31 December 1994..... 10,416 192 4,157 45,052 2,609 62,426 5,063 67,489 ====== === ===== ======= ====== ======= ======= ======= At 1 January 1994....... 8,860 -- 4,336 40,348 2,239 55,783 5,174 60,957 ====== === ===== ======= ====== ======= ======= =======
F-24 NTL GROUP LIMITED NOTES TO THE ACCOUNTS The total provision for the permanent diminution in value of fixed assets at 31 December 1995 was (Pounds)100,000 (1994--(Pounds)175,000) which was expensed during the year.
31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Capital expenditure Amounts contracted but not provided.................. 8,078 1,769 Amounts authorised but not contracted for............ 5,002 4,388
NOTE 14--INVESTMENT IN SUBSIDIARY During the year certain fair value adjustments were made to the book values of the assets of DTELS Limited to reflect their fair value to NTL Group Limited. These comprised a write down of finance lease debtor to net realisable value. This adjustment of (Pounds)459,000 was charged in the goodwill write off reserve (Note 12). NOTE 15--INVESTMENTS Details of associated undertaking:
COUNTRY OF PROPORTION NAME OF COMPANY REGISTRATION HOLDINGS HELD NATURE OF BUSINESS ---------------- ------------ -------- ---------- ------------------ Prospectre Limited...... Scotland Ordinary shares 50%* Satellite uplinking & telephony services Preference shares 50%*
The investment in Prospectre Limited has been written down to nil in the year. * 100% held by a subsidiary undertaking NOTE 16--STOCKS
31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Spares.................................................. 4,413 4,517 Manufacturing stocks/finished goods..................... -- 3,497 ----- ----- 4,413 8,014 ===== =====
The difference between purchase price or production cost of stocks and their replacement cost is not material. NOTE 17--DEBTORS
31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Corporation tax recoverable............................. 9,914 -- Trade debtors........................................... 11,902 13,781 Capital amount receivable under finance leases.......... 5,840 8,780 Other debtors........................................... 1,073 303 Prepayments and accrued income.......................... 2,601 2,672 VAT recoverable......................................... 97 19 Advance corporation tax................................. 4,151 -- ------ ------ 35,578 25,555 ====== ======
F-25 NTL GROUP LIMITED NOTES TO THE ACCOUNTS Capital amount receivable under finance leases includes an amount of (Pounds)4,592,000 (1994--(Pounds)7,276,000) which is due after more than one year. Original cost of assets acquired for the purpose of letting under finance leases was (Pounds)10,092,000. Included in other debtors is an amount of (Pounds)43,000 (1994-- (Pounds)61,000) which is due after more than one year. This is in respect of house purchase loans and car purchase loans to employees, under the approved company schemes. Advance corporation tax is due after more than one year. NOTE 18--CASH AT BANK AND IN HAND
31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Cash in escrow account................................ 12,615 -- Cash at bank.......................................... 1,097 743 Cash in hand.......................................... 32 23 Cash on short-term deposit............................ -- 2,300 ------ ----- 13,744 3,066 ====== =====
(Pounds)12,500,000 of the cash in escrow will revert to NTL Group Limited control in 1997. (Pounds)115,000 of the cash in escrow represents interest earned which has been credited to the profit and loss account and reverted to NTL Group Limited control in January 1996. NOTE 19--CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Interest due on term loan............................... 332 252 Bank overdraft.......................................... 932 1,477 Revolver loan........................................... 3,000 -- Trade creditors......................................... 12,185 12,098 Current corporation tax................................. -- 6,321 Other taxes and social security......................... 1,938 2,541 Other creditors......................................... 4,218 1,819 Current installments due on term loan................... 7,000 7,000 Dividend payable........................................ 4,398 3,282 Advance corporation tax................................. 21,553 -- ------ ------ 55,556 34,790 ====== ======
F-26 NTL GROUP LIMITED NOTES TO THE ACCOUNTS NOTE 20--CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Term loan: due between two and five years....................... 7,000 14,000 due between one and two years........................ 7,000 7,000 ------ ------ 14,000 21,000 Unsecured loan stock 1997/2000 due between two and five years...................... -- 4,000 ------ ------ 14,000 25,000 ====== ======
The term loan is scheduled to be repaid between 1996 and 1998. The unsecured loan stock 1997/2000 was redeemed on 31 January 1995 at par. NOTE 21--PROVISIONS FOR LIABILITIES AND CHARGES
31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Reorganisation provision............................. 4,924 3,032 Relocation provision................................. 271 344 Rent and rates provision............................. 29 220 Product warranty..................................... -- 622 ----- ----- 5,224 4,218 ===== =====
The reorganisation provision is in respect of the termination costs of employees which arises from a restructuring of the group. The relocation provision is in respect of commitments made by the group to employees who have moved location within the group. The rent and rates provision is in respect of vacated premises. Deferred taxation amounts not provided are as follows:
31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Capital allowances in advance of depreciation....... 7,572 7,334 Rental equipment.................................... 381 258 Other timing differences............................ (1,841) (863) ------ ----- 6,112 6,729 Less: advance corporation tax recoverable........... (4,151) -- ------ ----- 1,961 6,729 ====== =====
No provision for deferred tax has been made as the current capital expenditure plan for the group for the foreseeable future indicates an excess in aggregate of capital allowances over depreciation. F-27 NTL GROUP LIMITED NOTES TO THE ACCOUNTS The amounts above do not include the potential deferred tax liability of (Pounds)28.5 million arising upon the sale of the Advanced Products Division of National Transcommunications Limited. It is assumed that these gains will be held over into qualifying assets. NOTE 22--ACCRUALS AND DEFERRED INCOME
31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Accruals................................................ 2,309 4,819 Deferred income......................................... 2,763 3,692 ----- ----- 5,072 8,511 ===== =====
NOTE 23--SHARE CAPITAL
ALLOTTED, CALLED UP AND AUTHORISED FULLY PAID ----------- ------------- (Pounds)000 (Pounds)000 2,198,000 'A' ordinary shares of 1p each......... 22 22 296,375 'B' ordinary shares of 1p each of which 289,925 represents fully paid up issued shares.. 3 3 2,884,000 'C' ordinary shares of 1p each of which 2,487,925 represents fully paid up issued shares.......................................... 29 25 12 Redeemable special shares of 1p each.......... -- -- --- --- As at 1 January 1994 and 31 December 1994 and 1995............................................ 54 50 === ===
'A' ordinary shares The 'A' ordinary shares have the right to the payment of a dividend equal to one third of the consolidated post tax profits (the 'Participating 'A' Ordinary Dividend'). The 'A' ordinary shares each carry one vote. 'B' and 'C' ordinary shares The 'B' and 'C' ordinary shares rank pari passu with the 'A' ordinary shares for any dividend declared after payment of the Participating 'A' Ordinary Dividend and also for any distribution on a winding up. The 'B' and 'C' ordinary shares ordinarily carry no voting rights. Redeemable special shares The 12 redeemable special shares carry no voting rights, nor any rights to a dividend or to a distribution on a winding up. Redeemable special shares may be redeemed at par, or converted to deferred shares, upon any of the following events: (i) the holder ceasing to hold 'A' ordinary shares; (ii) the company obtaining a Stock Exchange listing; or (iii) the sale of at least 50% of the equity other than to a qualifying institution (as defined in the articles of association). The articles of association also require that the consent of 75% of the holders of the redeemable special shares shall be obtained in respect of certain transactions or events. F-28 NTL GROUP LIMITED NOTES TO THE ACCOUNTS NOTE 24--ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR
SHARE SHARE PROFIT AND LOANS AND GRANTS CAPITAL PREMIUM LOSS ACCOUNT DEBENTURES RECEIVABLE ----------- ----------- ------------ ----------- ----------- (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Balance at 1 January 1994................... 25 2,513 16,440 35,000 (11) Cash inflows from financing.............. -- 6 -- 4,000 59 Cash outflows from financing.............. -- -- (329) (7,000) -- Non-cash movements...... 25 (36) 6,565 -- (83) --- ----- ------ ------- --- Balance at 31 December 1994................... 50 2,483 22,676 32,000 (35) Cash inflows from financing.............. -- -- -- -- 70 Cash outflows from financing.............. -- -- -- (11,000) -- Non-cash movements...... -- -- 9,057 -- (35) --- ----- ------ ------- --- Balance at 31 December 1995................... 50 2,483 31,733 21,000 -- === ===== ====== ======= ===
NOTE 25--CASH AND CASH EQUIVALENTS Analysis of balances as shown in the group balance sheet and changes during the current year and previous year:
YEAR ENDED 31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 At 1 January........................................... 1,589 4,335 Net cash inflow/(outflow).............................. 8,223 (2,746) ------ ------ Balance at 31 December................................. 9,812 1,589 ====== ====== Represented by: Cash in escrow account................................. 12,615 -- Cash at bank........................................... 1,097 743 Cash in hand........................................... 32 23 Cash on short-term deposit............................. -- 2,300 Overdraft.............................................. (932) (1,477) Revolver loan.......................................... (3,000) -- ------ ------ 9,812 1,589 ====== ======
NOTE 26--PENSION COMMITMENTS The Plan is operated by National Transcommunications Limited, a wholly owned subsidiary of NTL Group Limited. The pension cost is assessed in accordance with the advice of a qualified actuary using the attained age method. The most recent actuarial valuation of the Plan was performed as at 1 January 1994. The principal assumptions employed in this valuation were that investment returns would be 9.5% per annum, that salary increases would be 8.0% per annum and that dividend income would increase at 4.75% per annum. The pension cost for the year was (Pounds)3,919,551 (1994-- (Pounds)3,538,130). This included (Pounds)59,780 (1994--(Pounds)52,213) in respect of amortisation of past service liabilities over the future working lifetime of the current membership. The regular costs included an allowance for the possible effect of the favourable early retirement terms offered under the Plan. F-29 NTL GROUP LIMITED NOTES TO THE ACCOUNTS At the date of the actuarial valuation of the Plan the market value of the assets was (Pounds)75.0 million and the actuarial value of the assets was sufficient to cover 99% of the benefits that had accrued to members, after allowing for expected future increases in earnings. A division of NTL was sold on 31 October 1995. The effects of this sale on the funding position of the pension plan are minor. The pension cost in future years is expected to reduce in line with the reduction in payroll due to the sale. NOTE 27--OTHER FINANCIAL COMMITMENTS The group had annual commitments under non-cancellable operating leases as set out below:
LAND AND BUILDINGS OTHER ----------------------- ----------------------- 31 DECEMBER ----------------------------------------------- 1995 1994 1995 1994 ----------- ----------- ----------- ----------- (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Operating leases which expire: Within one year................ 102 120 -- -- Within two to five years....... 183 342 -- -- In over five years............. 1,868 1,658 3,384 2,987 ----- ----- ----- ----- 2,153 2,120 3,384 2,987 ===== ===== ===== =====
NOTE 28--COMPANIES ACT 1985 These financial statements do not comprise the Company's statutory accounts within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 1994 have been, and statutory accounts for the year ended 31 December 1995 will be, delivered to the Registrar of Companies for England and Wales. The auditors' reports on such accounts were unqualified. NOTE 29--DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED KINGDOM AND THE UNITED STATES The Group's financial statements are prepared in accordance with UK GAAP which differ in certain respects from US GAAP. Those differences which have a significant effect on the Group are described below. Goodwill Goodwill arising on consolidation is eliminated against retained earnings and other reserves. Under US GAAP, goodwill is capitalised and amortised over its respective useful economic life. For the purposes of the reconciliation below, a period of 40 years has been utilised. The carrying amount of goodwill and the amortisation period assigned to it are reviewed for impairment by reference to expected future cash flows. Negative goodwill is credited to the goodwill write-off reserve. Under US GAAP, negative goodwill would be apportioned to the fixed assets acquired, thereby reducing the annual depreciation charge, and any remainder would be carried forward and released to the profit and loss account over its useful life. For the purposes of the reconciliation below, a period of 40 years has again been utilised. F-30 NTL GROUP LIMITED NOTES TO THE ACCOUNTS Fair Value Adjustment Under UK GAAP, fair values of acquired assets can be assessed for the full accounting period following the acquisition. Under US GAAP, this period of hindsight only stretches for 12 months. Hence the adjustment taken to the goodwill write-off reserve under UK GAAP in the year ended 31 December 1995 has been expensed in the reconciliation below. Dividends Under UK GAAP final dividends are provided for in the accounts for the year in respect of which they are proposed by the Directors for approval by the shareholders. Under US GAAP, dividends would not be provided for until declared. Deferred tax Under UK GAAP, deferred taxes are accounted for using the liability method to the extent that it is considered probable that a liability or asset will crystallize in the foreseeable future. Under US GAAP, deferred taxes are accounted for using the liability method on all temporary differences and deferred tax assets are recognized where it is more likely than not that they will be realized. F-31 NTL GROUP LIMITED NOTES TO THE ACCOUNTS The effect on profit on ordinary activities after taxation (net income) and capital and reserves (shareholders' equity) of applying US GAAP is summarised as follows:
YEAR ENDED 31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 NET INCOME Profit on ordinary activities after taxation as reported .......................................... 99,666 10,011 Adjustments: Amortization of goodwill............................ 84 48 Depreciation........................................ 140 176 Fair value adjustment............................... (459) -- Pension costs....................................... 3,008 (701) Deferred tax........................................ (27,883) (728) ------- ------ Net income as adjusted to accord with US GAAP....... 74,556 8,806 ======= ====== Comprising: Income from continuing operations................... 13,788 9,418 Income from discontinued operations................. 2,180 (612) Gain on sale of discontinued operation.............. 58,588 -- ------- ------ Net income.......................................... 74,556 8,806 ======= ======
31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 SHAREHOLDERS' EQUITY Capital and reserves as reported.................... 40,210 31,612 Adjustments: Intangible assets Goodwill.......................................... 5,350 5,350 Amortization...................................... (670) (536) Tangible assets Negative goodwill adjustment...................... (1,573) (1,573) Depreciation adjustment........................... 316 176 Negative goodwill Deferred credit................................... (8,736) (8,736) Released to profit & loss......................... 400 182 Current assets (liabilities) Pension costs..................................... 3,008 (701) Deferred taxes.................................... (34,612) (6,729) Dividends proposed.................................. 4,398 3,282 ------- ------ Shareholder's equity as adjusted to accord with US GAAP............................................... 8,091 22,327 ======= ======
F-32 NTL GROUP LIMITED NOTES TO THE ACCOUNTS Cash flows The Cash Flow Statements prepared under UK GAAP in accordance with Financial Reporting Standard No. 1 present substantially the same information as that required under US GAAP by FAS 95, "Statement of Cash Flows". These standards differ, however, with regard to classification of items within the statements and as regards the definition of cash and cash equivalents. Under US GAAP, cash and cash equivalents would not include bank overdrafts and borrowings with initial maturities of less than three months (see Note 25). Under US GAAP, bank overdrafts and the revolver loan would be classified as financing activities. Under UK GAAP, cash flows are presented separately for operating activities, returns on investments and servicing of finance, taxation, investing activities and financing activities. US GAAP, however, requires only three categories of cash flow activity to be reported: operating, investing and financing. Cash flows from taxation and returns on investments and servicing of finance shown under UK GAAP would, with the exception of dividends paid, be included as operating activities under US GAAP. The payment of dividends would be included as a financing activity under US GAAP. The categories of cash flow activity under US GAAP can be summarised as follows:
YEAR ENDED 31 DECEMBER ----------------------- 1995 1994 ----------- ----------- (Pounds)000 (Pounds)000 Cash inflow from operating activities................ 27,675 22,321 Cash inflow/(outflow) on investing activities........ 80,971 (21,803) Cash (outflow) from financing activities............. (97,968) (2,335) ------- ------- Increase/(decrease) in cash and cash equivalents..... 10,678 (1,817) Cash and cash equivalents at January 1............... 3,066 4,883 ------- ------- Cash and cash equivalents at December 31............. 13,744 3,066 ======= =======
F-33
EXHIBIT INDEX EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- ----------- ------ 2.1 Deed of Irrevocable Undertaking dated March 28, 1996 by and among Addroute Limited, certain shareholders in the NTL Group Limited, NTL Group Limited and International CableTel Incorporated 2.2 Form of Offer Document dated March 28, 1996 of Addroute Limited for NTL Group Limited 2.3 Deed of Adjustment dated March 28, 1996 by and among Addroute Limited and Mercury Asset Management plc. 10.1 The A Facilities Agreement, dated March 28, 1996, by and among Addroute Limited, Chase Investment Bank Limited and The Chase Manhattan Bank, N.A. 10.2 The B Facility Agreement, dated March 28, 1996, by and among Addroute Limited, Chase Investment Bank Limited and The Chase Manhattan Bank, N.A. 10.3 Guarantee of Certain Liabilities of Addroute Limited, dated March 28, 1996, by and among the Registrant, OCOM Corporation, OCOM Sub I Inc., CableTel (UK) Group Inc., OCOM Sub III Inc., CableTel (UK) Limited, and the Chase Manhattan Bank, N.A. 10.4 Deed of Undertaking of the Registrant to Addroute Limited dated March 28, 1996 in relation to the Further Payment. 10.5 Short Term Po Deed of Undertaking of the Registrant to Chase Manhattan Bank, N.A. and Addroute Limited dated March 28, 1996 in relation to the Reduction Amount
- ------------------------------- * All exhibits are incorporated herein by reference to exhibits to Amendment No. 2 to the Company's Form S-4 Registration Statement (333-1010), filed on April 16, 1996. -----END PRIVACY-ENHANCED MESSAGE-----