-----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, LP6liSWwDdZUED0TCi+pVAYXrOyxUNVQFqoAJ8t+BTEo7dvDs3OBoNKk4TT1otyM 1o9cvOPGoDiQu7NPH9KlZg== 0000950159-99-000317.txt : 19991117 0000950159-99-000317.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950159-99-000317 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NTL BERMUDA LLC CENTRAL INDEX KEY: 0000919957 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24792 FILM NUMBER: 99752030 BUSINESS ADDRESS: STREET 1: CEDAR HOUSE STREET 2: 41 CEDAR AVENUE CITY: HAMILTON STATE: D0 ZIP: HM12 BUSINESS PHONE: 4412952244 MAIL ADDRESS: STREET 1: 110 EAST 59TH STREET STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: NTL BERMUDA LTD DATE OF NAME CHANGE: 19981104 FORMER COMPANY: FORMER CONFORMED NAME: COMCAST UK CABLE PARTNERS LTD DATE OF NAME CHANGE: 19940309 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended: SEPTEMBER 30, 1999 OR ( ) 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 0-24792 NTL (BERMUDA) LLC (Exact name of registrant as specified in its charter) (On November 12, 1999, the Registrant converted to a Delaware limited liability company and thereby changed its name to NTL (Bermuda) LLC) Delaware Applied For - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 110 East 59th Street New York, NY 10022 (212) 906-8440 - -------------------------------------------------------------------------------- (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) NTL (Bermuda) Limited 41 Cedar Avenue Hamilton, HM 12, Bermuda - -------------------------------------------------------------------------------- (Former name and former address of the Registrant) -------------------------- 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 twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes __X__ No ____ -------------------------- As of September 30, 1999, there were 800,000 shares of the Registrant's common stock outstanding. The Registrant is an indirect, wholly owned subsidiary of NTL Incorporated and there is no market for the Registrant's Common Stock. NTL (BERMUDA) LLC AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1999 TABLE OF CONTENTS Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 1999 (Unaudited) and December 31, 1998......2 Condensed Consolidated Statements of Operations and Accumulated Deficit for the Nine and Three Months Ended September 30, 1999 and 1998 (Unaudited).............3 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1999 and 1998 (Unaudited)...............................................4 Notes to Condensed Consolidated Financial Statements (Unaudited)......................5 - 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........8 - 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk..............................................12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.........................12 SIGNATURE....................................................................13 ----------------------------------- This Quarterly Report on Form 10-Q contains forward looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that such forward looking statements involve risks and uncertainties which could significantly affect expected results in the future from those expressed in any such forward looking statements made by, or on behalf of, the Company. Certain factors that could cause actual results to differ materially include, without limitation, the effects of legislative and regulatory changes; the potential for increased competition; technological changes; the need to generate substantial growth in the subscriber base by successfully marketing and providing services in identified markets; pricing pressures which could affect demand for the Company's services; the Company's ability to expand its distribution; changes in labor, programming, equipment and capital costs; the Company's continued ability to create or acquire programming and products that customers will find attractive; Year 2000 readiness; future acquisitions; strategic partnerships and divestitures; general business and economic conditions in the United Kingdom; and other risks detailed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission. NTL (BERMUDA) LLC AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1999 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1999 December 31, 1998 ------------------ ----------------- (Unaudited) (See Note) (in (UK Pound)000's, except share data) ASSETS CURRENT ASSETS Cash and cash equivalents....................................... (UK Pound)19,135 (UK Pound)103,451 Accounts receivable, less allowance for doubtful accounts of (UK Pound)3,762 (1999) and (UK Pound)2,840 (1998)........ 5,520 5,603 Other current assets............................................ 5,044 5,404 ----------------- ----------------- Total current assets............................................ 29,699 114,458 ----------------- ----------------- INVESTMENT IN CABLE LONDON PLC......................................... 24,171 28,080 ----------------- ----------------- PROPERTY AND EQUIPMENT................................................. 420,396 379,446 Accumulated depreciation ....................................... (79,766) (57,624) ----------------- ----------------- Property and equipment, net..................................... 340,630 321,822 ----------------- ----------------- DEFERRED CHARGES....................................................... 58,325 58,269 Accumulated amortization........................................ (19,749) (15,493) ----------------- ----------------- Deferred charges, net........................................... 38,576 42,776 ----------------- ----------------- OTHER ASSETS........................................................... 50,567 5,188 ----------------- ----------------- (UK Pound)483,643 (UK Pound)512,324 ================= ================= LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses........................... (UK Pound)23,605 (UK Pound)25,162 Current portion of long-term debt............................... 1,150 1,966 Note payable to Comcast U.K. Holdings, Inc...................... -- 12,310 ----------------- ----------------- Total current liabilities................................ 24,755 39,438 ----------------- ----------------- LONG-TERM DEBT, less current portion................................... 282,321 259,104 ----------------- ----------------- COMMITMENTS AND CONTINGENCIES SHAREHOLDER'S EQUITY Common stock, (UK Pound).01 par value - authorized and issued 800,000 shares........................... 8 8 Additional capital............................................... 359,049 359,049 Accumulated deficit.............................................. (182,490) (145,275) ----------------- ----------------- Total shareholder's equity................................ 176,567 213,782 ----------------- ----------------- (UK Pound)483,643 (UK Pound)512,324 ================= =================
Note: The balance sheet at December 31, 1998 has been derived from the audited financial statements at that date. See notes to condensed consolidated financial statements. 2 NTL (BERMUDA) LLC AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1999 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (Unaudited)
Nine Months Ended Three Months Ended September 30, September 30, 1999 1998 1999 1998 ------------------ ------------------ ------------------ ------------------ (in (UK Pound)000's) REVENUES Service income ....................... (UK Pound)72,240 (UK Pound)55,692 (UK Pound)24,760 (UK Pound)19,665 Consulting fee income ................ -- 840 -- 279 ------------------ ------------------ ------------------ ------------------ 72,240 56,532 24,760 19,944 ------------------ ------------------ ------------------ ------------------ COSTS AND EXPENSES Operating ............................ 24,301 18,147 8,335 6,385 Selling, general and administrative... 29,349 26,089 9,283 8,893 Management fees ...................... -- 2,174 -- 704 Depreciation and amortization ........ 26,547 22,952 9,020 8,268 ------------------ ------------------ ------------------ ------------------ 80,197 69,362 26,638 24,250 ------------------ ------------------ ------------------ ------------------ OPERATING LOSS ......................... (7,957) (12,830) (1,878) (4,306) OTHER (INCOME) EXPENSE Interest expense ..................... 23,650 26,751 8,114 9,344 Investment income .................... (3,565) (6,752) (885) (2,263) Equity in net losses of affiliates.... 5,573 15,916 1,601 4,731 Amalgamation costs ................... 145 -- -- -- Exchange losses (gains) and other .... 3,455 (4,238) (10,266) (3,388) ------------------ ------------------ ------------------ ------------------ 29,258 31,677 (1,436) 8,424 ------------------ ------------------ ------------------ ------------------ NET LOSS ............................... (37,215) (44,507) (442) (12,730) ACCUMULATED DEFICIT Beginning of period .................. (145,275) (187,373) (182,048) (219,150) ------------------ ------------------ ------------------ ------------------ End of period ........................ ((UK Pound)182,490) ((UK Pound)231,880) ((UK Pound)182,490) ((UK Pound)231,880) ================== ================== ================== ==================
See notes to condensed consolidated financial statements. 3 NTL (BERMUDA) LLC AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1999 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 1999 1998 ----------------- ----------------- (in (UK Pound)000's) OPERATING ACTIVITIES Net loss ....................................................... ((UK Pound)37,215) ((UK Pound)44,507) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization .............................. 26,547 22,952 Amortization on foreign exchange contracts ................. 2,072 2,072 Non-cash interest expense .................................. 23,077 20,168 Non-cash investment income ................................. (1,561) (2,181) Exchange losses (gains) .................................... 1,587 (7,211) Equity in net losses of affiliates ......................... 5,573 15,916 Changes in operating assets and liabilities: Accounts receivable and other current assets .......... 443 (333) Accounts payable and accrued expenses ................. (1,569) 2,449 ----------------- ----------------- Net cash provided by operating activities ......... 18,954 9,325 ----------------- ----------------- FINANCING ACTIVITIES Repayments of debt ............................................. (14,711) (1,567) Proceeds from borrowing ........................................ -- 93,000 Deferred financing costs ....................................... -- (1,634) Net transactions with affiliates ............................... (91) (1,020) ----------------- ----------------- Net cash (used in) provided by financing activities (14,802) 88,779 ----------------- ----------------- INVESTING ACTIVITIES Capital contributions and loans to affiliates .................. -- (1,768) Fixed asset deposit with affiliate ............................. (51,915) -- Capital expenditures ........................................... (36,499) (47,012) Additions to deferred charges .................................. (54) (333) ----------------- ----------------- Net cash (used in) investing activities ........... (88,468) (49,113) ----------------- ----------------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS .................... (84,316) 48,991 CASH AND CASH EQUIVALENTS, beginning of period ...................... 103,451 37,372 ----------------- ----------------- CASH AND CASH EQUIVALENTS, end of period ............................ (UK Pound)19,135 (UK Pound)86,363 ================ =================
See notes to condensed consolidated financial statements. 4 NTL (BERMUDA) LLC AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1999 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Basis of Presentation The condensed consolidated balance sheet as of December 31, 1998 has been condensed from the audited consolidated balance sheet as of that date. The condensed consolidated balance sheet as of September 30, 1999 and the condensed consolidated statements of operations and accumulated deficit for the nine and three months ended September 30, 1999 and 1998 and the condensed consolidated statement of cash flows for the nine months ended September 30, 1999 and 1998 have been prepared by NTL (Bermuda) LLC (formerly Comcast UK Cable Partners Limited) (the "Company") and have not been audited by the Company's independent auditors. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of September 30, 1999 and for all periods presented have been made. Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1998 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The results of operations for the period ended September 30, 1999 are not necessarily indicative of operating results for the full year. Conversion to a Delaware Limited Liability Company On November 12, 1999, the Company converted to a Delaware limited liability company and thereby changed its name to NTL (Bermuda) LLC. Under the Delaware Limited Liability Company Act, the Company is deemed to be the same entity as it was prior to the conversion. Recent Accounting Pronouncement In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement, which establishes accounting and reporting standards for derivatives and hedging activities, is required to be adopted in fiscal years beginning after June 15, 2000. Management does not anticipate that the adoption of this standard will have a significant effect on the financial position or results of operations of the Company. 2. AMALGAMATION WITH NTL On October 29, 1998, NTL Incorporated ("NTL"), NTL (Bermuda) Limited, a wholly owned subsidiary of NTL, and Comcast UK Cable Partners Limited ("Partners") consummated a transaction (the "Amalgamation"), whereby NTL (Bermuda) Limited merged with Partners. Pursuant to then existing arrangements between Partners and Telewest Communications plc ("Telewest"), a co-owner of interests in Cable London PLC ("Cable London") and Birmingham Cable Corporation Limited ("Birmingham Cable"), Telewest had certain rights to acquire either or both of Partner's interests in these systems as a result of the Amalgamation. On August 14, 1998, Partners and NTL entered into an agreement (the "Telewest Agreement") with Telewest relating to Partner's ownership interests in Birmingham Cable, Partner's and Telewest's respective ownership interests in Cable London and certain other related matters. Pursuant to the Telewest Agreement, in October 1998, Partners sold its 27.5% ownership interest in Birmingham Cable to Telewest for (UK Pound)125 million, plus (UK Pound)5 million for certain subordinated debt and fees. Partners and Telewest also agreed to rationalize their joint ownership of Cable London pursuant to an agreed procedure (see following). 5 NTL (BERMUDA) LLC AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1999 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) 3. INVESTMENTS IN AFFILIATES Summarized financial information for affiliates accounted for under the equity method is as follows:
Birmingham Cable Cable (1) London Combined --------- ------ -------- (UK Pound)000 (UK Pound)000 (UK Pound)000 NINE MONTHS ENDED SEPTEMBER 30, 1999 Results of operations Service income ........................................ (UK Pound)58,702 Operating, selling, general and administrative expenses (40,844) Depreciation and amortization ......................... (17,844) Operating gain ........................................ 14 Net loss .............................................. (10,854) Company's equity in net loss .......................... (5,573) THREE MONTHS ENDED SEPTEMBER 30, 1999 Results of operations Service income ........................................ 20,128 Operating, selling, general and administrative expenses (13,579) Depreciation and amortization ......................... (5,923) Operating gain ........................................ 626 Net loss .............................................. (3,103) Company's equity in net loss .......................... (1,601) AT SEPTEMBER 30, 1999 Financial position Current assets ........................................ 9,716 Noncurrent assets ..................................... 192,720 Current liabilities ................................... 37,631 Noncurrent liabilities ................................ 199,232 NINE MONTHS ENDED SEPTEMBER 30, 1998 Results of operations Service income ........................................ (UK Pound)57,385 (UK Pound)48,926 (UK Pound)106,311 Operating, selling, general and administrative expenses (43,690) (38,244) (81,934) Depreciation and amortization ......................... (20,717) (16,611) (37,328) Operating loss ........................................ (7,022) (5,929) (12,951) Net loss .............................................. (25,067) (17,523) (42,590) Company's equity in net loss .......................... (7,010) (8,906) (15,916) THREE MONTHS ENDED SEPTEMBER 30, 1998 Results of operations Service income ........................................ 19,410 16,748 36,158 Operating, selling, general and administrative expenses (14,414) (13,037) (27,451) Depreciation and amortization ......................... (6,975) (5,635) (12,610) Operating loss ........................................ (1,979) (1,924) (3,903) Net loss .............................................. (5,989) (5,993) (11,982) Company's equity in net loss .......................... (1,686) (3,045) (4,731)
(1) The Company sold its 27.5% interest in Birmingham Cable in October 1998. 6 NTL (BERMUDA) LLC AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1999 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED (Unaudited) 3. INVESTMENTS IN AFFILIATES - Continued Pursuant to the Telewest Agreement, in August 1999, Telewest exercised its right to purchase all of the Company's shares of Cable London and all of the Company's related rights and interests for approximately (UK Pound)428 million in cash. The closing of the sale is expected to take place in November 1999. Included in Investment in Cable London PLC as of September 30, 1999 and December 31, 1998 are loans of (UK Pound)28.5 million and accrued interest of (UK Pound)10.2 million and (UK Pound)8.6 million, respectively. The loans accrue interest at a rate of 2% above the published base lending rate of Barclays Bank plc (7.25% effective rate as of September 30, 1999) and are subordinate to Cable London's credit facility. Of these loans, (UK Pound)21.0 million as of September 30, 1999 and December 31, 1998 are convertible into ordinary shares of Cable London at a per share conversion price of (UK Pound)2.00. The sales price includes the repayment of these loans and accrued interest. The sale of the Cable London interest is an "Asset Sale" under the Company's 11.2% Senior Discount Debentures. The Company will need to use an amount equal to the proceeds from the sale to repay subsidiary debt or invest in "Replacement Assets" within 365 days after the sale, otherwise the Company is required to make an offer to redeem the Debentures at 100% of their accreted value up to an amount equal to the proceeds. 4. JOINT PURCHASING ALLIANCE AGREEMENT Other assets includes a deposit of (UK Pound)47.5 million which will be utilized under a Joint Purchasing Alliance Agreement entered into between subsidiaries of the Company and Diamond Cable Communications plc ("Diamond"), a subsidiary of NTL, for combined fixed asset purchases. The Company's original deposit was (UK Pound)51.9 million in March 1999. 5. NOTE PAYABLE TO COMCAST U.K. HOLDINGS, INC. In September 1999, the Company repaid at maturity the (UK Pound)13.1 million due under its note payable to Comcast U.K. Holdings, Inc. 6. CONTINGENCIES The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position, results of operations or liquidity of the Company. 7. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION The Company made cash payments for interest of (UK Pound)573,000 and (UK Pound)6.3 million during the nine months ended September 30, 1999 and 1998, respectively. The Company's wholly owned subsidiaries incurred capital lease obligations of (UK Pound)138,000 and (UK Pound)2.2 million during the nine months ended September 30, 1999 and 1998, respectively. 7 NTL (BERMUDA) LLC AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1999 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview NTL (Bermuda) LLC (the "Company") and its subsidiaries are principally engaged in the development, construction, management and operation of companies in the cable television and telecommunications industry in England. The Company owns the companies that have franchises for Darlington and Teesside ("Teesside") and Cambridge Holding Company Limited ("Cambridge"). The Company also has a 50% interest in Cable London PLC ("Cable London") which it has agreed to sell to Telewest Communications PLC ("Telewest"). The Company owned a 27.5% interest in Birmingham Cable Corporation Limited ("Birmingham Cable") which it sold to Telewest in October 1998. On November 12, 1999, the Company converted to a Delaware limited liability company and thereby changed its name to NTL (Bermuda) LLC. Under the Delaware Limited Liability Company Act, the Company is deemed to be the same entity as it was prior to the conversion. Liquidity and Capital Resources Historically, the Company financed its cash requirements through capital contributions from its former shareholders and the issuance of common stock, debentures and other debt. In November 1995, the Company issued $517.3 million principal amount at maturity 11.20% Senior Discount Debentures due 2007 (the "2007 Discount Debentures"). Interest accretes on the 2007 Discount Debentures at 11.20% per annum compounded semi-annually from November 15, 1995 to November 15, 2000, after which date interest will be paid in cash on each May 15 and November 15 through November 15, 2007. The 2007 Discount Debentures contain restrictive covenants which limit the Company's ability to pay dividends. The Company will require approximately (UK Pound)30.1 million from October 1, 1999 through December 31, 2000 for capital expenditures net of cash from operations. Management believes that the entire (UK Pound)30.1 million required will be funded through the Joint Purchasing Alliance Agreement deposit of (UK Pound)47.5 million or cash on hand. The Company's ability to meet its long-term liquidity and capital requirements is contingent upon Teesside and Cambridge's ability to generate positive operating cash flow, or, if necessary, to obtain external financing, although there can be no assurance that any such financing will be obtained on acceptable terms and conditions. In August 1998, the Company and NTL Incorporated ("NTL") entered into an agreement with Telewest relating to the Company's and Telewest's respective 50% ownership interests in Cable London and certain other related matters (the "Telewest Agreement"). Pursuant to the Telewest Agreement, in August 1999, Telewest exercised its right to purchase all of the Company's shares of Cable London and all of the Company's related rights and interests for approximately (UK Pound)428 million in cash. The closing of the sale is expected to take place in November 1999. The sale of the Cable London interest is an "Asset Sale" under the 2007 Discount Debentures. The Company will need to use an amount equal to the proceeds from the sale to repay subsidiary debt or invest in "Replacement Assets" within 365 days after the sale, otherwise the Company is required to make an offer to redeem the 2007 Discount Debentures at 100% of their accreted value up to an amount equal to the proceeds. Year 2000 Issue Strategy The Company's operations are conducted through Teesside and Cambridge, each of which has different configurations of hardware and software. The Company itself is a holding company with very limited activities. The Company uses personal computers and software that are Year 2000 ready. The Cambridge and Teesside Year 2000 programs have been integrated into the NTL Incorporated program. 8 NTL (BERMUDA) LLC AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1999 Status to Date Teesside and Cambridge utilize hardware and software from vendors for substantially all of their activities, including billing, customer service and the operation of the network. Teesside and Cambridge, therefore, are working with these third-party vendors to ensure Year 2000 readiness. Teesside and Cambridge have received Year 2000 ready upgrades from vendors of its main service platforms, including vendors of its telephony switches, cable TV subsystems, and customer management systems ("CMS") that they expect to be Year 2000 ready. The only significant effort remaining is for the Cambridge CMS, which has been tested and modified on a development system. Full installation on the operational systems will be completed by December 1999. Costs There are few major costs directly attributable to the Year 2000 issues, as suppliers will include any remedial software in their normal upgrade process. For the smaller systems, such as PCs, there has been some acceleration of routine replacement and upgrades to ensure all systems are Year 2000 ready. The Company estimates that this will cost approximately (UK Pound)600,000 in 1999. Risks and Contingency Plans The Company currently believes that the most reasonably likely worst case scenario with respect to the Year 2000 is the failure of public electricity supplies during the millennium period. A number of critical sites have permanent automatic standby generators and uninterruptible power supplies. Where critical sites do not have permanent standby power, the Company intends to deploy its mobile generators. In addition, other telephone operators have suggested that the telephone network may overload due to excessive traffic. The Company is reviewing its "cold start" scenarios and alternative interconnection routes in the event of interruptions in the service of other telephone companies. Either or both of the above mentioned scenarios could have a material adverse effect on operations, although it is not possible at this time to quantify the amount of revenues and gross profit that might be lost, or the costs that could be incurred. During the remainder of 1999, the Company may discover additional problems and may not be able to develop, implement or test remediation or contingency plans, or may find that the costs of these activities exceed current expectations. In many cases, the Company is relying on assurances from suppliers that new and upgraded information systems and other products will be Year 2000 ready. The Company has tested these third-party products, but because the Company uses a variety of information systems and has additional systems embedded in its operations and infrastructure, the Company cannot be sure that all of its systems will work together in a Year 2000-ready fashion. Furthermore, the Company cannot be sure that it will not suffer business interruptions, either because of its own Year 2000 problems or those of third-parties upon whom the Company is reliant for services. The Company is continuing to evaluate its Year 2000-related risks and corrective actions. However, the risks associated with the Year 2000 problem are pervasive and complex; they can be difficult to identify and address, and can result in material adverse consequences to the Company. Even if the Company, in a timely manner, completes all of the upgrades that are believed to be adequate, and develops contingency plans that are believed to be adequate, some problems may not be identified or corrected in time to prevent material adverse consequences to the Company. Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities amounted to (UK Pound)19.0 million and (UK Pound)9.3 million for the nine months ended September 30, 1999 and 1998, respectively. The increase in net cash provided by operating activities is due to the increase in the Company's operating income before depreciation and amortization and from the effect of favorable changes in the exchange rate on the Company's dollar denominated 2007 Discount Debentures. Net cash (used in) provided by financing activities amounted to ((UK Pound)14.8) million and (UK Pound)88.8 million for the nine months ended September 30, 1999 and 1998, respectively. During the nine months ended September 30, 1999, net cash used 9 NTL (BERMUDA) LLC AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1999 in financing activities includes the repayment at maturity of the (UK Pound)13.1 million due under the note payable to Comcast U.K. Holdings, Inc. During the nine months ended September 30, 1998, net cash provided by financing activities includes (UK Pound)93.0 million of borrowings under a credit facility from a consortium of banks that was repaid in October 1998, offset by financing costs of (UK Pound)1.6 million. Net cash used in investing activities amounted to (UK Pound)88.5 million and (UK Pound)49.1 million for the nine months ended September 30, 1999 and 1998, respectively. During the nine months ended September 30, 1999, net cash used in investing activities includes the Joint Purchasing Alliance Agreement deposit of (UK Pound)51.9 million for combined purchases of fixed assets by NTL affiliates and capital expenditures of (UK Pound)36.5 million. During the nine months ended September 30, 1998, net cash used in investing activities includes capital expenditures of (UK Pound)47.0 million and capital contributions and loans to affiliates of (UK Pound)1.8 million. Results of Operations Summarized consolidated financial information for the Company for the nine and three months ended September 30, 1999 and 1998 is as follows (in thousands, "NM" denotes percentage is not meaningful):
Nine Months Ended September 30, Increase/(Decrease) 1999 1998 (UK Pound) % ---------------- ---------------- ---------------- --------- Revenues (UK Pound)72,240 (UK Pound)56,532 (UK Pound)15,708 27.8% Operating, selling, general and administrative expenses 53,650 44,236 9,414 21.3 Management fees -- 2,174 (2,174) NM ---------------- ---------------- Operating income before depreciation and amortization 18,590 10,122 8,468 83.7 Depreciation and amortization 26,547 22,952 3,595 15.7 ---------------- ---------------- Operating loss (7,957) (12,830) (4,873) (38.0) ---------------- ---------------- Interest expense 23,650 26,751 (3,101) (11.6) Investment income (3,565) (6,752) (3,187) (47.2) Equity in net losses of affiliates 5,573 15,916 (10,343) (65.0) Amalgamation costs 145 -- 145 NM Exchange losses (gains) and other 3,455 (4,238) 7,693 NM ---------------- ---------------- Net loss ((UK Pound)37,215) ((UK Pound)44,507) ((UK Pound)7,292) (16.4%) ================ ================
Three Months Ended September 30, Increase/(Decrease) 1999 1998 (UK Pound) % ---------------- ---------------- ---------------- --------- Revenues (UK Pound)24,760 (UK Pound)19,944 (UK Pound)4,816 24.1% Operating, selling, general and administrative expenses 17,618 15,278 2,340 15.3 Management fees -- 704 (704) NM ---------------- ---------------- Operating income before depreciation and amortization 7,142 3,962 3,180 80.3 Depreciation and amortization 9,020 8,268 752 9.1 ---------------- ---------------- Operating loss (1,878) (4,306) (2,428) (56.4) ---------------- ---------------- Interest expense 8,114 9,344 (1,230) (13.2) Investment income (885) (2,263) (1,378) (60.9) Equity in net losses of affiliates 1,601 4,731 (3,130) (66.2) Exchange gains and other (10,266) (3,388) (6,878) NM ---------------- ---------------- Net loss ((UK Pound)442) ((UK Pound)12,730) ((UK Pound)12,288) NM ================ ================
10 NTL (BERMUDA) LLC AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1999 Substantially all of the increases in revenues, operating, selling, general and administrative expenses and depreciation and amortization expense for the nine and three months ended September 30, 1999, as compared to the same period in 1998, are attributable to the effects of the continued development of operations and increased business activity resulting from the growth in the number of subscribers in Teesside and Cambridge. These trends are expected to continue for the foreseeable future. The Company's former parent and one of its former affiliates provided management services to the Company. The management agreement was terminated upon the Amalgamation with NTL. Interest expense for the nine and three months ended September 30, 1999 and 1998 was (UK Pound)23.7 million, (UK Pound)26.8 million, (UK Pound)8.1 million and (UK Pound)9.3 million, respectively, representing decreases of (UK Pound)3.1 million and (UK Pound)1.2 million from 1998 as compared to the same periods in 1999. The decreases are primarily attributable to the repayment of the bank credit facility in October 1998. Investment income for the nine and three months ended September 30, 1999 and 1998 was (UK Pound)3.6 million, (UK Pound)6.8 million, (UK Pound)885,000 and (UK Pound)2.3 million, respectively, representing decreases of (UK Pound)3.2 million and (UK Pound)1.4 million from 1998 as compared to the same periods in 1999. The decreases are primarily due to decreases in the average cash balances available for investment in 1999 as compared to the same period in 1998. Equity in net losses of affiliates for the nine and three months ended September 30, 1999 and 1998 was (UK Pound)5.6 million, (UK Pound)15.9 million, (UK Pound)1.6 million and (UK Pound)4.7 million, respectively, representing decreases of (UK Pound)10.3 million and (UK Pound)3.1 million from 1998 as compared to the same periods in 1999. The decreases are attributable to reduced losses of Cable London in 1999 and the sale of Birmingham Cable in October 1998. The Company incurred costs of (UK Pound)145,000 in 1999 related to the Amalgamation with NTL. Exchange losses (gains) and other for the nine and three months ended September 30, 1999 and 1998 were (UK Pound)3.5 million, ((UK Pound)4.2) million, ((UK Pound)10.3) million and ((UK Pound)3.4) million, respectively, representing changes of (UK Pound)7.7 million and (UK Pound)6.9 million from 1998 as compared to the same periods in 1999. These changes primarily resulted from the impact of fluctuations in the valuation of the UK Pound Sterling on the 2007 Discount Debentures, which are denominated in United States dollars. The Company's results of operations will continue to be affected by exchange rate fluctuations. 11 NTL (BERMUDA) LLC AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1999 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have not been any material changes in the reported market risks since the end of the most recent fiscal year. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 27.0 Financial Data Schedule. (b) Reports on Form 8-K: During the quarter ended September 30, 1999, the Company filed a Current Report on Form 8-K dated September 17, 1999 reporting under Item 5, Other Events, that Telewest Communications PLC exercised its right to purchase all of the Company's shares of Cable London PLC and all of the Company's related rights and interests for the purchase price of approximately 428 million pounds sterling in cash. No financial statements were filed with this report. 12 NTL (BERMUDA) LLC AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1999 SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NTL (BERMUDA) LLC Date: November 12, 1999 By: /s/ J. Barclay Knapp ---------------------------------- J. Barclay Knapp President and Chief Executive Officer Date: November 12, 1999 By: /s/ Gregg Gorelick ---------------------------------- Gregg Gorelick Vice President - Controller (Principal Accounting Officer) 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 0000919957 NTL (BERMUDA) LLC U.K. POUNDS 9-MOS DEC-31-1999 SEP-30-1999 1.6464 19,135 0 9,282 (3,762) 0 29,699 420,396 (79,766) 483,643 24,755 282,321 0 0 8 176,559 483,643 72,240 72,240 0 (80,197) (9,173) 0 (23,650) (37,215) 0 (37,215) 0 0 0 (37,215) 0 0
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