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FORM 10-K
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2000
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 (TRIANGLE) LLC
(Exact name of registrant as specified in its charter)
Delaware 13-4086747
(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)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ X ]
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As of March 26, 2001, 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.
The Registrant meets the conditions set forth in General Instructions I(1)(a)
and I(1)(b) of Form 10-K and is filing this form with the reduced disclosure
format pursuant to General Instructions I(2)(b) and I(2)(c).
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DOCUMENTS INCORPORATED BY REFERENCE
NONE
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NTL (TRIANGLE) LLC
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2000 FORM 10-K ANNUAL REPORT
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TABLE OF CONTENTS
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PART I
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Item 1 Business........................................................... 1
Item 2 Properties......................................................... 1
Item 3 Legal Proceedings.................................................. 1
Item 4 Submission of Matters to a Vote of Security Holders................ 1
PART II
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Item 5 Market for the Registrant's Common Equity and
Related Shareholder Matters ....................................... 1
Item 6 Selected Financial and Other Data.................................. 2
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 3
Item 7A Quantitative and Qualitative Disclosures About Market Risk......... 5
Item 8 Financial Statements and Supplementary Data........................ 7
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................23
PART III
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Item 10 Directors and Executive Officers of the Registrant.................23
Item 11 Executive Compensation.............................................23
Item 12 Security Ownership of Certain Beneficial Owners and Management.....23
Item 13 Certain Relationships and Related Transactions.....................23
PART IV
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Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K....24
SIGNATURES...................................................................26
This Annual Report on Form 10-K for the year ended December 31, 2000, at the
time of filing with the Securities and Exchange Commission, modifies and
supersedes all prior documents filed pursuant to Sections 13, 14 and 15(d) of
the Securities Exchange Act of 1934 for purposes of any offers or sales of any
securities after the date of such filing pursuant to any Registration Statement
or Prospectus filed pursuant to the Securities Act of 1933 which incorporates by
reference this Annual Report.
This Annual Report on Form 10-K contains "forward-looking statements" as that
term is defined under the provisions of the Private Securities Litigation Reform
Act of 1995. When used in this Form 10-K, the words "believe," "anticipate,"
"should," "intend," "plan," "will," "expects," "estimates," "projects,"
"positioned," "strategy," and similar expressions identify such forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Registrant, or industry results, to be materially
different from those contemplated, projected, forecasted, estimated or budgeted,
whether expressed or implied, by such forward-looking statements. Such factors
include, among others: general economic and business conditions, the
Registrant's ability to continue to design networks, install facilities, obtain
and maintain any required governmental licenses or approvals and finance
construction and development, all in a timely manner at reasonable costs and on
satisfactory terms and conditions, as well as assumptions about customer
acceptance, churn rates, overall market penetration and competition from
providers of alternative services, the impact of new business opportunities
requiring significant up-front investment, and availability, terms and
deployment of capital.
PART I
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ITEM 1 BUSINESS
- ------ --------
NTL (Triangle) LLC (formerly Comcast UK Cable Partners Limited) (formerly NTL
(Bermuda) Limited) (formerly NTL (Bermuda) LLC) (the "Company") is a holding
company which holds all of the shares of various companies principally engaged
in the development, construction, management and operation of broadband
communications networks for telephone, cable television and Internet services in
the United Kingdom ("UK") and Ireland. The Company owns the companies that have
franchises for Darlington and Teesside (collectively, "Teesside") and Cambridge
Holding Company Limited ("Cambridge") in the UK, and Cablelink Limited
("Cablelink"), which owns the companies that provide services in Dublin, Galway
and Waterford, Ireland. The Company previously owned a 50% interest in Cable
London PLC ("Cable London") which it sold in November 1999 and a 27.5% interest
in Birmingham Cable Corporation Limited ("Birmingham Cable") which it sold in
October 1998.
In July 1999, NTL Communications Corp., an indirect wholly-owned subsidiary of
NTL Incorporated ("NTL"), acquired Cablelink for (IR Pound)535.18 million ((UK
Pound)421.9 million). In December 1999, NTL Communications Corp. sold its 100%
interest in Cablelink to the Company for (UK Pound)423.6 million in cash. This
transaction was accounted for at historical cost in a manner consistent with a
transfer of entities under common control which is similar to that used in a
"pooling of interests." Accordingly, the Company's financial statements include
the results of Cablelink from July 1999.
In November 1999, the Company converted to a Delaware limited liability company
and thereby changed its name to NTL (Triangle) LLC. Under the Delaware Limited
Liability Company Act, the Company is deemed to be the same entity as it was
prior to the conversion.
The Company is an indirect wholly-owned subsidiary of NTL. NTL (Triangle) LLC's
executive office is located at 110 East 59th Street, New York, NY 10022 and its
telephone number is (212) 906-8440.
ITEM 2 PROPERTIES
- ------ ----------
The Company does not own or lease any significant real or personal property
other than through Teesside, Cambridge and Cablelink.
Teesside, Cambridge and Cablelink own their cable and telephony plant and
equipment and generally own or lease, under long-term leases, the head-end and
switching node sites. The Company believes that its subsidiaries' facilities are
adequate to serve their existing customers.
ITEM 3 LEGAL PROCEEDINGS
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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.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
Omitted pursuant to General Instruction I(2)(c) of Form 10-K.
PART II
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ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
- ------ -----------------------------------------------------------------
MATTERS
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The Company is an indirect wholly-owned subsidiary of NTL Incorporated.
- 1 -
ITEM 6 SELECTED FINANCIAL AND OTHER DATA
- ------ ---------------------------------
The following table sets forth certain financial data for the years ended
December 31, 2000, 1999, 1998, 1997 and 1996. The information has been derived
from and should be read in conjunction with the consolidated financial
statements and notes thereto included in Part II Item 8 of this Form 10-K.
Year Ended December 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(1) (1)(2) (3) (4)
(In thousands)
Statement of Operations Data:
Service income....................... (UK Pound)160,734 (UK Pound)118,963 (UK Pound)77,649 (UK Pound)55,603 (UK Pound)31,358
Consulting fee income................ - - 938 1,059 1,070
Operating loss....................... (80,556) (35,999) (15,567) (22,604) (24,553)
Equity in net losses of affiliates... - (6,801) (19,696) (21,359) (18,432)
(Loss) income before
extraordinary item................. (139,424) 329,465 43,205 (67,356) (40,575)
Extraordinary item................... - - (1,107) - -
Net (loss) income.................... (139,424) 329,465 42,098 (67,356) (40,575)
Balance Sheet Data:
At year end:
Total assets...................... (UK Pound)920,605 (UK Pound)901,269 (UK Pound)514,802 (UK Pound)445,854 (UK Pound)484,370
Long-term debt including loans
from affiliates............. 374,310 293,285 259,104 247,970 216,027
Contributed capital............... 394,115 363,974 359,057 359,049 359,049
Retained earnings
(accumulated deficit)....... 44,766 184,190 (145,275) (187,373) (120,017)
Notes to Selected Financial and Other Data
(1) Beginning in the fourth quarter of 1999, an NTL subsidiary began
charging the Company a fee for shared services. The Company was charged
(UK Pound)26.3 million and (UK Pound)2.9 million in 2000 and 1999,
respectively.
(2) In 1999, the Company sold its 50.0% ownership interest in Cable London
to Telewest Communications plc for (UK Pound)428.0 million and
recognized a gain on the sale of (UK Pound)404.8 million. In addition,
the results of operations and financial position include Cablelink
beginning July 1999.
(3) In 1998, the Company sold its 27.5% ownership interest in Birmingham
Cable Corporation Limited to Telewest Communications plc for (UK
Pound)130.0 million and recognized a gain on the sale of (UK
Pound)110.5 million.
(4) As a result of an acquisition, the Company consolidated the financial
position and results of operations of Cambridge beginning on March 31,
1996.
- 2 -
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------ ---------------------------------------------------------------
RESULTS OF OPERATIONS
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Liquidity and Capital Resources
- -------------------------------
In November 1995, the Company issued $517.3 million principal amount at maturity
of 11.20% Senior Discount Debentures due 2007 (the "2007 Discount Debentures").
Interest accreted on the 2007 Discount Debentures at 11.20% per annum compounded
semiannually from November 15, 1995 to November 15, 2000, after which date
interest became payable 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 currently estimates that it will require approximately (UK
Pound)113.0 million in 2001 for capital expenditures and debt service, net of
cash from operations. Management believes that the entire (UK Pound)113.0
million required will be funded through cash on hand, debt or equity from NTL or
its subsidiaries and from the Joint Purchasing Alliance Agreement deposit of (UK
Pound)21.3 million. Subsidiaries of the Company and Diamond Cable Communications
plc, a subsidiary of NTL, entered into this agreement in 1999 for joint fixed
asset purchases. The Company's ability to meet its long-term liquidity and
capital requirements is contingent upon Cambridge, Teesside and Cablelink'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.
Consolidated Statement of Cash Flows
- ------------------------------------
Net cash provided by operating activities amounted to (UK Pound)19.7 million,
(UK Pound)43.1 million and (UK Pound)11.2 million for the years ended December
31, 2000, 1999 and 1998, respectively. The change in net cash provided by
operating activities in 2000 as compared to 1999 and in 1999 as compared to 1998
is primarily due to the change in the Company's operating income before
depreciation and amortization and changes in working capital as a result of the
timing of receipts and disbursements.
Net cash (used in) provided by investing activities was (UK Pound)(96.2)
million, (UK Pound)(103.3) million and (UK Pound)62.2 million for the years
ended December 31, 2000, 1999 and 1998, respectively. Net cash used in investing
activities in 2000 includes capital expenditures of (UK Pound)96.2 million. Net
cash used in investing activities in 1999 includes the Joint Purchasing
Agreement deposit of (UK Pound)51.9 million for combined purchases of fixed
assets by NTL affiliates, capital expenditures of (UK Pound)57.2 million and the
net acquisition costs of Cablelink of (UK Pound)422.1 million, offset by the
proceeds from the sale of Cable London of (UK Pound)428.0 million. Net cash
provided by investing activities in 1998 includes the proceeds from the sale of
Birmingham Cable of (UK Pound)130.0 million, offset by capital expenditures of
(UK Pound)61.8 million.
Net cash provided by (used in) financing activities was (UK Pound)53.5 million,
(UK Pound)(15.2) million and (UK Pound)(7.4) million for the years ended
December 31, 2000, 1999 and 1998, respectively. Net cash provided by financing
activities in 2000 includes contributions from NTL Group Limited of (UK
Pound)30.1 million and loans from affiliates of (UK Pound)24.8 million. Net cash
used in financing activities in 1999 includes the repayment of the Company's 9%
Subordinated Notes payable to Comcast UK Holdings, Inc. of (UK Pound)13.1
million. Net cash used in financing activities in 1998 includes the proceeds,
net of financing costs, provided under the Company's credit facility of (UK
Pound)98.5 million offset by the repayment of such credit facility of (UK
Pound)102.0 million.
Results of Operations
- ---------------------
In December 1999, Cablelink was acquired by the Company from NTL Communications
Corp. This transaction was accounted for at historical cost in a manner
consistent with a transfer of entities under common control, which is similar to
that used in a "pooling of interests." Accordingly, the Company consolidated the
results of operations of Cablelink from July 1999, the date it was originally
acquired by NTL Communications Corp. The results of Cablelink are not included
in the 1998 results.
Summarized consolidated financial information for the Company for the three
years ended December 31, 2000 is as follows (in thousands, "NM" denotes
percentage is not meaningful):
- 3 -
Year Ended
December 31, Increase/(Decrease)
2000 1999 (UK Pound) %
---- ---- ---------- ----
Revenues....................................... (UK Pound)160,734 (UK Pound)118,963 (UK Pound)41,771 35.1%
Operating, selling, general
and administrative expenses.................. 145,532 91,392 54,140 59.2
Other charges.................................. 8,543 - 8,543 NM
Depreciation and amortization.................. 87,215 63,570 23,645 37.2
------------------ ----------------
Operating loss................................. (80,556) (35,999) (44,557) (123.8)
------------------ ----------------
Interest expense............................... 36,251 31,542 4,709 14.9
Interest expense to affiliate.................. 199 - 199 NM
Investment income.............................. (1,510) (5,429) (3,919) (72.2)
Equity in net losses of affiliates............. - 6,801 (6,801) (100.0)
Gain on sale of investments.................... - (404,750) (404,750) (100.0)
Amalgamation costs............................. - 145 (145) (100.0)
Exchange losses and other...................... 27,588 7,584 20,004 263.8
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Income before income taxes..................... (143,084) 328,108 (471,192) (143.6)
Income tax benefit............................. 3,660 1,357 2,303 169.7
------------------ ----------------
Net (loss) income.............................. (UK Pound)(139,424) (UK Pound)329,465 (UK Pound)(468,889) (142.3)
================== ================
Year Ended
December 31, Increase/(Decrease)
1999 1998 (UK Pound) %
---- ---- ---------- ----
Revenues....................................... (UK Pound)118,963 (UK Pound)78,587 (UK Pound)40,376 51.4%
Operating, selling, general
and administrative expenses.................. 91,392 62,969 28,423 45.1
Depreciation and amortization.................. 63,570 31,185 32,385 103.8
------------------ ----------------
Operating loss................................. (35,999) (15,567) (20,432) (131.3)
------------------ ----------------
Interest expense............................... 31,542 34,898 (3,356) (9.6)
Investment income.............................. (5,429) (9,054) (3,625) 40.0
Equity in net losses of affiliates............. 6,801 19,696 (12,895) (65.5)
Gain on sale of investments.................... (404,750) (110,497) 294,253 266.3
Amalgamation costs............................. 145 4,095 (3,950) (96.5)
Exchange losses and other...................... 7,584 2,090 5,494 262.9
------------------ ----------------
Income before income taxes
and extraordinary item....................... 328,108 43,205 284,903 659.4
Income tax benefit............................. 1,357 - 1,357 NM
------------------ ----------------
Income before extraordinary item............... 329,465 43,205 286,260 662.6
Loss from early extinguishment of debt......... - (1,107) 1,107 100.0
------------------ ----------------
Net income..................................... (UK Pound)329,465 (UK Pound)42,098 (UK Pound)287,367 682.6
================== ================
Substantially all of the increases in revenues, operating expenses, selling,
general and administrative expenses, and depreciation and amortization expense
from 1999 to 2000 and from 1998 to 1999 are attributable to the effects of the
acquisition of Cablelink, as well as the continued development of the Company's
operations and increased business activity resulting from the growth in number
of subscribers in Cambridge, Teesside and Cablelink.
Operating costs were (UK Pound)65.8 million, (UK Pound)47.0 million and (UK
Pound)29.5 million for the years ended December 31, 2000, 1999 and 1998,
respectively. Operating costs as a percentage of service income was 41.0%, 39.5%
and 38.0% for 2000, 1999 and 1998, respectively.
Selling, general and administrative expenses were (UK Pound)79.7 million, (UK
Pound)44.4 million and (UK Pound)33.5 million in December 31, 2000, 1999 and
1998, respectively. Beginning in the fourth quarter of 1999, a subsidiary of NTL
Communications Corp. began charging the Company for management, financial, legal
and technical services it provides to the Company. These charges were (UK
Pound)26.3 million and (UK Pound)2.9 million in 2000 and 1999, respectively.
Included in the 1998 expenses are management fees charged by the Company's
former parent and a former affiliate of (UK Pound)2.4 million. After adjusting
for these charges, selling, general and administrative expenses as a percentage
of service income was 33.2%, 34.8% and 40.0% for 2000, 1999 and 1998,
respectively.
-4-
In 2001, the Company intends to drive the majority of revenue growth from
increases in the average revenue per customer rather than through the addition
of new customers. This allows the Company to maintain revenue targets, has lower
capital requirements due to fewer installs, and drives higher operating income
due to the reduction in front-loaded costs such as customer acquisition costs
and initial maintenance costs.
Other charges in 2000 are for restructuring costs of (UK Pound)8.5 million
related to an announcement in November 2000 of the completion of a consolidation
review. The restructuring provision includes employee severance and related
costs of (UK Pound)5.6 million for approximately 470 employees to be terminated
and lease exit costs of (UK Pound)2.9 million. As of December 31, 2000,
approximately 15 of the employees had been terminated. None of the provision had
been utilized through December 31, 2000.
Interest expense for the years ended December 31, 2000, 1999 and 1998 was (UK
Pound)36.3 million, (UK Pound)31.5 million and (UK Pound)34.9 million,
respectively, representing an increase of (UK Pound)4.7 million from 1999 to
2000 and a decrease of (UK Pound)3.4 million from 1998 to 1999. The increase
from 1999 to 2000 is primarily attributable to the compounding of interest on
the 2007 Discount Debentures partially offset by the repayment of the note
payable to Comcast U.K. Holdings, Inc. in September 1999. The decrease from 1998
to 1999 is attributable to the repayment of the note payable to Comcast U.K.
Holdings, Inc. in September 1999 and the repayment of the bank credit facility
in October 1998.
In October 2000, Cablelink entered into a loan agreement with a subsidiary of
NTL Communications Corp. to provide funding of up to (IR Pound)300.0 million
((UK Pound)239.5 million), of which (IR Pound)32.0 million ((UK Pound)25.5
million) had been borrowed at December 31, 2000. The outstanding borrowings are
due in October 2007. Interest is payable quarterly in arrears beginning March
31, 2001 at EURIBOR plus 1%. Interest expense to affiliate was (UK Pound)199,000
in 2000.
Investment income for the years ended December 31, 2000, 1999 and 1998 was (UK
Pound)1.5 million, (UK Pound)5.4 million and (UK Pound)9.1 million,
respectively, representing a decrease of (UK Pound)3.9 million from 1999 to 2000
and a decrease of (UK Pound)3.7 million from 1998 to 1999. The decreases from
1999 to 2000 and 1998 to 1999 are primarily attributable to decreases in the
average cash balances available for investment in 2000 and 1999 and the
termination of loans to Cable London in November 1999.
Equity in net losses of affiliates for the years ended December 31, 2000, 1999
and 1998 were none, (UK Pound)6.8 million and (UK Pound)19.7 million,
respectively, representing decreases of (UK Pound)6.8 million from 1999 to 2000
and (UK Pound)12.9 million from 1998 to 1999. The decrease from 1999 to 2000 is
attributable to the sale of Cable London in November 1999. The decrease from
1998 to 1999 is attributable to the sale of Cable London and the sale of
Birmingham Cable in October 1998.
Gain on sale of investments of (UK Pound)404.8 million in 1999 is from the sale
of Cable London in November 1999, and (UK Pound)110.5 million in 1998 is from
the sale of Birmingham Cable in October 1998.
The Company incurred (UK Pound)145,000 and (UK Pound)4.1 million in costs
associated with the amalgamation with NTL in the years ended December 31, 1999
and 1998, respectively.
Exchange losses and other for the years ended December 31, 2000, 1999 and 1998
were (UK Pound)27.6 million, (UK Pound)7.6 million and (UK Pound)2.1 million,
respectively, representing increases of (UK Pound)20.0 million from 1999 to 2000
and (UK Pound)5.5 million from 1998 to 1999. These increases primarily result
from the impact of fluctuations in the valuation of the UK Pound Sterling on the
2007 Discount Debentures, which are denominated in US Dollars. The Company's
results of operations will continue to be affected by foreign exchange rate
fluctuations.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------- ----------------------------------------------------------
The Company is exposed to market risk including changes in foreign currency
exchange rates. To manage the volatility relating to this exposure, the Company
may enter into various derivative transactions pursuant to the Company's
policies and hedging practices. The Company does not hold or issue any
derivative financial instruments for trading purposes and is not a party to
leveraged instruments. The credit risks associated with the Company's derivative
financial instruments would be controlled through the evaluation and monitoring
of the creditworthiness of the counterparties.
- 5 -
Interest Rate Sensitivity
Principal Amount by Expected Maturity
Average Interest Rate and Average Forward Foreign Exchange Rate (US$/UK Pounds)
Fair
Value
2001 2002 2003 2004 2005 Thereafter Total 12/31/00
---- ---- ---- ---- ---- ---------- ----- --------
(dollars in millions)
Long-term Debt, including
Current Portion
11.20% Senior Discount
Debentures due 2007
Fixed Rate -- -- -- -- -- $517.3 $517.3 $439.7
Average Interest Rate 11.2%
Average Forward
Exchange Rate .6648
- 6 -
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholder
NTL (Triangle) LLC
We have audited the accompanying consolidated balance sheets of NTL (Triangle)
LLC and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of operations, shareholder's equity and cash flows for
each of the three years in the period ended December 31, 2000. Our audits also
included the financial statement schedule listed in the index at Item 14(b)(i).
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. The financial statements of Cable London PLC and subsidiaries
("Cable London") (a corporation in which the Company had a 50% interest) have
been audited by other auditors whose report has been furnished to us; insofar as
our opinion on the 1998 consolidated financial statements relates to data
included for Cable London, it is based solely on their report.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance 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, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of NTL (Triangle) LLC and
subsidiaries as of December 31, 2000 and 1999, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
New York, New York
March 2, 2001
- 7 -
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Cable London PLC
We have audited the consolidated statements of operations, shareholders'
(deficiency) and cash flows of Cable London PLC (a company incorporated in the
United Kingdom) for the year ended December 31, 1998 (which statements are not
presented separately herein). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance 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 audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of Cable London PLC
for the year ended December 31, 1998 in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche
London, England
February 5, 1999
- 8 -
NTL (TRIANGLE) LLC
- ------------------
CONSOLIDATED BALANCE SHEETS
(in (UK Pound)000's, except share data)
December 31,
2000 1999
---- ----
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents................................ (UK Pound)4,706 (UK Pound)27,895
Accounts receivable, less allowance for doubtful accounts
of(UK Pound)8,914 (2000) and (UK Pound)9,452 (1999).... 18,933 10,170
Other current assets..................................... 13,850 4,240
----------------- -------------------
Total current assets................................. 37,489 42,305
PROPERTY AND EQUIPMENT, NET................................. 466,157 382,078
INTANGIBLE ASSETS, NET...................................... 395,683 434,333
OTHER ASSETS, NET........................................... 21,276 42,553
----------------- -------------------
(UK Pound)920,605 (UK Pound)901,269
================= ===================
LIABILITIES AND SHAREHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses.................... (UK Pound)53,268 (UK Pound)34,431
Interest payable......................................... 4,883 -
Deferred revenue......................................... 14,928 10,572
Due to affiliates........................................ 24,316 5,905
Current portion of long-term debt........................ 662 864
----------------- -------------------
Total current liabilities.............................. 98,057 51,772
LOANS FROM AFFILIATE........................................ 25,549 -
LONG-TERM DEBT, less current portion........................ 348,761 293,285
COMMITMENTS AND CONTINGENT LIABILITIES
DEFERRED INCOME TAXES....................................... 8,611 8,237
SHAREHOLDER'S EQUITY
Common membership interests, (UK Pound).01 par value
- authorized and issued 800,000 shares................... 8 8
Additional capital....................................... 394,107 363,966
Accumulated other comprehensive income (loss)............ 746 (189)
Retained earnings........................................ 44,766 184,190
----------------- -------------------
Total shareholder's equity............................. 439,627 547,975
----------------- -------------------
(UK Pound)920,605 (UK Pound)901,269
================= ===================
See notes to consolidated financial statements.
- 9 -
NTL (TRIANGLE) LLC
- ------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
(in (UK Pound)000's)
Year Ended December 31,
2000 1999 1998
------------------ ----------------- ----------------
REVENUES
Service income................................. (UK Pound)160,734 (UK Pound)118,963 (UK Pound)77,649
Consulting fee income.......................... - - 938
------------------ ----------------- ----------------
160,734 118,963 78,587
------------------ ----------------- ----------------
COSTS AND EXPENSES
Operating...................................... 65,843 47,034 29,515
Selling, general and administrative............ 79,689 44,358 33,454
Other charges.................................. 8,543 - -
Depreciation and amortization.................. 87,215 63,570 31,185
------------------ ----------------- ----------------
241,290 154,962 94,154
------------------ ----------------- ----------------
OPERATING LOSS.................................... (80,556) (35,999) (15,567)
OTHER (INCOME) EXPENSE
Interest expense............................... 36,251 31,542 34,898
Interest expense to affiliate.................. 199 - -
Investment income.............................. (1,510) (5,429) (9,054)
Equity in net losses of affiliates............. - 6,801 19,696
Gain on sale of investments.................... - (404,750) (110,497)
Amalgamation costs............................. - 145 4,095
Exchange losses and other...................... 27,588 7,584 2,090
------------------ ----------------- ----------------
62,528 (364,107) (58,772)
------------------ ----------------- ----------------
(Loss) income before income taxes and
extraordinary item............................. (143,084) 328,108 43,205
Income tax benefit................................ 3,660 1,357 -
------------------ ----------------- ----------------
(Loss) income before extraordinary item........... (139,424) 329,465 43,205
Loss from early extinguishment of debt............ - - (1,107)
------------------ ----------------- ----------------
NET (LOSS) INCOME................................. (UK Pound)(139,424) (UK Pound)329,465 (UK Pound)42,098
================== ================= ================
See notes to consolidated financial statements.
- 10 -
NTL (TRIANGLE) LLC
- ------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in (UK Pound)000's)
Year Ended December 31,
2000 1999 1998
----------------- ----------------- ----------------
OPERATING ACTIVITIES
Net (loss) income.................................... (UK Pound)(139,424)(UK Pound)329,465 (UK Pound)42,098
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization...................... 87,215 63,570 31,185
Loss from early extinguishment of debt............. - - 1,107
Amortization of premium on foreign
exchange contracts.............................. 2,308 2,770 2,770
Non-cash interest expense.......................... 30,860 30,851 27,264
Non-cash investment income......................... - (1,870) (2,841)
Gain on sale of investment......................... - (404,750) (110,497)
Exchange losses (gains)............................ 25,904 4,994 (3,870)
Equity in net losses of affiliates................. - 6,801 19,696
Other.............................................. (1,551) (1,116) 4,095
----------------- ----------------- ----------------
5,312 30,715 11,007
Accounts receivable and other current assets....... (20,867) 360 (1,879)
Accounts payable and other current liabilities..... 35,233 12,022 2,115
----------------- ----------------- ----------------
Net cash provided by operating activities...... 19,678 43,097 11,243
----------------- ----------------- ----------------
INVESTING ACTIVITIES
Acquisition, net of cash acquired.................... - (422,070) -
Proceeds from sale of affiliate...................... - 428,018 130,000
Fixed asset deposit with affiliate................... - (51,915) -
Capital expenditures................................. (96,226) (57,216) (61,816)
Additions to deferred charges........................ - (94) (5,941)
Purchase of marketable securities.................... (2,166) - -
Proceeds from sales of marketable securities......... 2,199 - -
----------------- ----------------- ----------------
Net cash (used in) provided by
investing activities......................... (96,193) (103,277) 62,243
----------------- ----------------- ----------------
FINANCING ACTIVITIES
Repayments of debt................................... (1,448) (15,215) (102,064)
Proceeds from borrowings............................. - - 100,000
Deferred financing costs............................. - - (1,463)
Issuance of common stock............................. - - 8
Loans from (to) affiliates........................... 24,784 - (1,768)
Contributions from NTL Group Limited................. 30,141 - -
Net transactions with affiliates..................... - - (2,120)
----------------- ----------------- ----------------
Net cash provided by (used in)
financing activities......................... 53,477 (15,215) (7,407)
----------------- ----------------- ----------------
Effect of exchange rate changes on cash................. (151) (161) -
----------------- ----------------- ----------------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS.......................................... (23,189) (75,556) 66,079
CASH AND CASH EQUIVALENTS, beginning of year............ 27,895 103,451 37,372
----------------- ----------------- ----------------
CASH AND CASH EQUIVALENTS, end of year.................. (UK Pound)4,706 (UK Pound)27,895 (UK Pound)103,451
================= ================= ================
See notes to consolidated financial statements.
- 11 -
NTL (TRIANGLE) LLC
- ------------------
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
(in (UK Pound)000's)
A Common B Common Common Additional
Shares Par Shares Par Shares Par Capital
------ --- ------ --- ------ --- -------
BALANCE, JANUARY 1, 1998 ............ 37,232 (UK Pound)372 12,873 (UK Pound)129 (UK Pound)358,548
Net income ..........................
Amalgamation with NTL Incorporated .. (37,232) (372) (12,873) (129) 800 (UK Pound)8 501
-------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 .......... - - - - 800 8 359,049
Pooling of interest acquisition ..... 4,917
Net income ..........................
Currency translation adjustment .....
Comprehensive income ................
-------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 .......... - - - - 800 8 363,966
Contributions from NTL Group Ltd. ... 30,141
Net loss ............................
Currency translation adjustment .....
Comprehensive income ................
-------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2000 .......... - (UK Pound)- - (UK Pound)- 800 (UK Pound)8 (UK Pound)394,107
===========================================================================================
Accum-
ulated
Other Retained
Compre- Compre- Earnings
hensive hensive (Accum-
Income Income ulated
(Loss) (Loss) Deficit) Total
------ ----- ------- -----
BALANCE, JANUARY 1, 1998 (UK Pound)(187,373) (UK Pound)171,676
Net income (UK Pound)42,098 42,098 42,098
Amalgamation with NTL Incorporated 8
----------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 (145,275) 213,782
Pooling of interest acquisition 4,917
Net income (UK Pound)329,465 329,465 329,465
Currency translation adjustment (189) (UK Pound)(189) (189)
----------------------
Comprehensive income (UK Pound)329,276 -
----------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 (189) 184,190 547,975
Contributions from NTL Group Ltd. 30,141
Net loss (UK Pound)(139,424) (139,424) (139,424)
Currency translation adjustment 935 935 935
----------------------
Comprehensive income (UK Pound)(138,489)
----------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2000 (UK Pound)746 (UK Pound)44,766 (UK Pound)439,627
==================================================================================
See notes to consolidated financial statements.
- 12 -
NTL (TRIANGLE) LLC
- ------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND AMALGAMATION WITH NTL INCORPORATED
NTL (Triangle) LLC (formerly Comcast UK Cable Partners Limited) (formerly
NTL (Bermuda) Limited) (formerly NTL (Bermuda) LLC) (the "Company") and its
subsidiaries are principally engaged in the development, construction,
management and operation of broadband communications networks for
telephone, cable television and Internet services in the United Kingdom
("UK") and Ireland. The Company owns the companies that have franchises for
Darlington and Teesside (collectively, "Teesside") and Cambridge Holding
Company Limited ("Cambridge") in the UK, and Cablelink Limited
("Cablelink"), which owns the companies that provide services in Dublin,
Galway and Waterford, Ireland. The Company previously owned a 50% interest
in Cable London PLC ("Cable London") which it sold in November 1999 and a
27.5% interest in Birmingham Cable Corporation Limited ("Birmingham Cable")
which it sold in October 1998.
In November 1999, the Company converted to a Delaware limited liability
company and thereby changed its name to NTL (Triangle) LLC. Under the
Delaware Limited Liability Company Act, the Company is deemed to be the
same entity as it was prior to the conversion.
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.
Immediately following the Amalgamation, the Company and Bank of Montreal
Trust Company, as trustee, executed a First Supplemental Indenture (the
"First Supplemental Indenture") relating to Partner's 11.20% Senior
Discount Debentures due 2007 (the "Debentures"), which provided for the
assumption by the Company of the liabilities and the obligations of
Partners under the Indenture, dated as of November 15, 1995, governing the
Debentures (together with the First Supplemental Indenture, the
"Indenture") and the Debentures issued pursuant thereto. The First
Supplemental Indenture likewise provides that the Company shall succeed to,
and be substituted for, and may exercise every right and power of, Partners
under the Indenture and the Debentures.
Pursuant to then existing arrangements between Partners and Telewest
Communications plc ("Telewest"), a co- owner of interests in Cable London
and 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)125.0 million, plus (UK
Pound)5.0 million for certain subordinated debt and fees. The Company
recorded a gain of (UK Pound)110.5 million on the sale. Additionally, in
November 1999, the Company sold its 50% ownership interest in Cable London
to Telewest for (UK Pound)428.0 million in cash. The Company recorded a
gain of (UK Pound)404.8 million on the sale.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
- 13 -
NTL (TRIANGLE) LLC
- ------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Foreign Currency Translation
The financial statements of Cablelink have been translated into UK pounds
sterling in accordance with Statement of Financial Accounting Standards
("SFAS") No. 52, "Foreign Currency Translation." All balance sheet accounts
have been translated using the current exchange rates at the balance sheet
date. Statement of operations amounts have been translated using the
average exchange rate for the period. The gains or losses resulting from
the change in exchange rates have been reported as a component of
accumulated other comprehensive income (loss). Foreign currency transaction
gains and losses are included in the results of operations as incurred.
Cash Equivalents
Cash equivalents are short-term, highly liquid investments with maturities
of three months or less when purchased. Cash equivalents of (UK
Pound)443,000 and (UK Pound)15.9 million at December 31, 2000 and 1999,
respectively, consist principally of commercial paper, time deposits and
money market funds.
Investments in Affiliates
Investments in entities in which the Company has the ability to exercise
significant influence over the operating and financial policies of the
investee are accounted for under the equity method. Equity method
investments are recorded at original cost and adjusted periodically to
recognize the Company's proportionate share of the investees' net income or
losses after the date of investment, additional contributions made and
dividends received. The differences between the Company's recorded
investments and its proportionate interests in the book value of the
investees' net assets were being amortized to equity in net losses of
affiliates over the remaining original lives of the related franchises of
eight years.
Property and Equipment
Property and equipment is stated at cost. Improvements that extend asset
lives are capitalized; other repairs and maintenance charges are expensed
as incurred. Depreciation is computed by the straight-line method over the
estimated useful lives of the assets. Estimated useful lives are as
follows: operating equipment - 6 to 40 years and other equipment - 3 to 40
years.
Intangible Assets
Intangible assets include goodwill, license acquisition costs, customer
lists and other deferred charges. Goodwill is the excess of the purchase
price over the fair value of net assets acquired in business combinations
accounted for as purchases. Goodwill is amortized on a straight-line basis
over the period benefited of 15 years. License acquisition costs represent
the portion of the purchase price allocated to the cable television and
telecommunications licenses acquired in business combinations. License
acquisition costs are amortized on a straight-line basis over the remaining
lives of the licenses at acquisition of 5 years. Customer lists represent
the portion of the purchase price allocated to the value of the customer
base. Customer lists are amortized on a straight- line basis over 5 years.
The other deferred charges are amortized on a straight-line basis primarily
over 12 to 15 years.
Valuation of Long-Lived Assets
Long-lived assets, including property and equipment and intangible assets,
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. If the sum of the
expected future undiscounted cash flows is less than the carrying amount of
the asset, a loss is recognized for the difference between the fair value
and the carrying value of the asset.
Derivative Financial Instruments
The Company may use derivative financial instruments to manage its exposure
to fluctuations in foreign currency exchange rates. Derivative financial
instruments entered into by the Company are periodically examined by the
Company to ensure that the instruments are matched with underlying
liabilities, reduce the Company's risks relating to foreign currency
exchange rates, and, through market value and sensitivity analysis,
maintain a high correlation to the underlying value of the hedged item. For
those instruments that do not meet the above criteria, variations in their
fair value would be marked-to-market on a current basis in the Company's
consolidated statement of operations.
-14-
NTL (TRIANGLE) LLC
- ------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company does not hold or issue any derivative financial instruments for
trading or speculative purposes and is not a party to leveraged
instruments. The credit risks associated with the Company's derivative
financial instruments would be controlled through the evaluation and
monitoring of the creditworthiness of the counterparties.
Revenue Recognition
Service income is recognized at the time the service is rendered to the
customer or the performance of the service has been completed. Charges for
services that are billed in advance are deferred and recognized when
earned.
Cable Television System Costs, Expenses and Revenues
The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable television, telephone and
telecommunications systems in accordance with SFAS No. 51, "Financial
Reporting by Cable Television Companies."
Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year presentation.
3. RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. SAB 101 was required to be
adopted retroactive to January 1, 2000. The adoption of SAB 101 had no
significant effect on revenues or results of operations.
Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities, " as amended by SFAS
Nos. 137 and 138. The new accounting standard requires that all derivative
instruments be recorded on the balance sheet at fair value. Changes in the
fair value of derivatives are recorded each period in the results of
operations or in other comprehensive income (loss), depending on whether a
derivative is designated as a fair value or cash flow hedge. The
ineffective portion of all hedges will be recognized in the results of
operations. There were no derivative instruments outstanding at December
31, 2000, therefore the adoption of this standard had no effect on the
financial position or results of operations.
4. OTHER CHARGES
Other charges in 2000 are for restructuring costs of (UK Pound)8.5 million
related to an announcement in November 2000 of the completion of a
consolidation review. The restructuring provision includes employee
severance and related costs of (UK Pound)5.6 million for approximately 470
employees to be terminated and lease exit costs of (UK Pound)2.9 million.
As of December 31, 2000, approximately 15 of the employees had been
terminated. None of the provision had been utilized through December 31,
2000.
5. JOINT PURCHASING ALLIANCE AGREEMENT
At December 31, 2000 and 1999, other assets include a receivable for a
deposit of (UK Pound)21.3 million and (UK Pound)40.1 million, respectively,
which will be utilized under a Joint Purchasing Alliance Agreement entered
into between subsidiaries of the Company and Diamond Cable Communications
Limited, a subsidiary of NTL, for combined fixed asset purchases. The
Company's original deposit was (UK Pound)51.9 million in March 1999.
- 15 -
NTL (TRIANGLE) LLC
- ------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. INVESTMENTS IN AFFILIATES
Summarized financial information for affiliates accounted for under the
equity method for 1999 and 1998, is as follows (in (UK Pound)000's):
Birmingham Cable
Cable(1) London(2) Combined
---------- -------- --------
YEAR ENDED DECEMBER 31, 1999
Results of operations
Company's equity in net loss............................ (UK Pound)(6,801) (UK Pound)(6,801)
YEAR ENDED DECEMBER 31, 1998
Results of operations
Service income.......................................... 66,987 66,987
Operating, selling, general and administrative expenses. (52,128) (52,128)
Depreciation and amortization........................... (22,659) (22,659)
Operating loss.......................................... (7,800) (7,800)
Net loss................................................ (23,325) (23,325)
Company's equity in net loss............................ (UK Pound)(7,841) (11,855) (19,696)
- ---------------
(1) The Company sold its 27.5% interest in Birmingham Cable in October 1998.
(2) The Company sold its 50.0% interest in Cable London in November 1999.
7. PROPERTY AND EQUIPMENT
Property and equipment consists of (in (UK Pound)000's):
December 31,
2000 1999
------------------ ------------------
Operating equipment................. (UK Pound)498,922 (UK Pound)414,276
Other equipment..................... 57,125 61,364
Construction in progress............ 51,652 4,358
------------------ ------------------
607,699 479,998
Accumulated depreciation............ (141,542) (97,920)
------------------ ------------------
(UK Pound)466,157 (UK Pound)382,078
================== ==================
- 16 -
NTL (TRIANGLE) LLC
- ------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. INTANGIBLE ASSETS
Intangible assets consist of (in (UK Pound)000's):
December 31,
2000 1999
-------------------- ------------------
Goodwill, net of accumulated amortization of (UK Pound)34,955 (2000)
and (UK Pound)11,928 (1999).................................. (UK Pound)314,953 (UK Pound)333,971
License acquisition costs, net of accumulated amortization
of (UK Pound)10,820 (2000) and (UK Pound)3,607 (1999)........ 25,248 32,461
Customer lists, net of accumulated amortization of
(UK Pound)8,365 (2000) and (UK Pound)1,616 (1999)............ 23,957 30,706
Other, net of accumulated amortization of (UK Pound)26,838 (2000)
and (UK Pound)21,168 (1999).................................. 31,525 37,195
-------------------- ------------------
(UK Pound)395,683 (UK Pound)434,333
==================== ==================
In July 1999, NTL Communications Corp., a wholly-owned subsidiary of NTL,
acquired Cablelink for (IR Pound)535.18 million ((UK Pound)421.9 million).
Cablelink provides multi-channel television and information services in
Dublin, Galway and Waterford, Ireland. NTL Communications Corp. accounted
for the acquisition as a purchase. The aggregate purchase price of (IR
Pound)541.4 million ((UK Pound)428.5 million), including costs incurred of
(IR Pound)6.2 million ((UK Pound)4.9 million), net of tangible assets
acquired aggregated (IR Pound)523.4 million ((UK Pound)414.3 million),
which was allocated as follows: (IR Pound)45.6 million ((UK Pound)36.1
million) to license acquisition costs, (IR Pound)40.8 million ((UK
Pound)32.3 million) to customer lists and (IR Pound)437.0 million ((UK
Pound)345.9 million) to goodwill.
In December 1999, the Company acquired Cablelink from NTL Communications
Corp. for (UK Pound)423.6 million in cash. The Company accounted for the
acquisition at historical cost in a manner consistent with a transfer of
entities under common control, which is similar to that used in a "pooling
of interests." Accordingly, the net assets and results of operations of
Cablelink have been included in the consolidated financial statements from
July 1999. The difference in the purchase price paid by the Company ((UK
Pound)423.6 million) as compared to the purchase price paid by NTL
Communications Corp. ((UK Pound)428.5 million) of approximately (UK
Pound)4.9 million is included in the statement of shareholder's equity as
an increase in additional capital.
The pro forma unaudited consolidated results of operations for the year
ended December 31, 1999 assuming the consummation of the above mentioned
transaction as of January 1, 1999 is as follows (in (UK Pound)000's):
Total revenue.............................. (UK Pound)138,488
Income before extraordinary item........... 313,596
Net income................................. 313,596
9. LONG-TERM DEBT
2007 Discount Debentures
In November 1995, the Company received net proceeds of approximately $291.1
million (UK Pound)(186.9 million) from the sale of its 2007 Discount
Debentures in a public offering ($517.3 million principal at maturity).
Interest accreted on the 2007 Discount Debentures at 11.20% per annum
compounded semiannually from November 15, 1995 to November 15, 2000, after
which date interest became payable in cash on each May 15 and November 15
through November 15, 2007. The accreted value of the 2007 Discount
Debentures was (UK Pound)345.9 million and (UK Pound)289.2 million as of
December 31, 2000 and 1999, respectively.
- 17 -
NTL (TRIANGLE) LLC
- ------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The 2007 Discount Debentures contain restrictive covenants which limit the
Company's ability to enter into arrangements for the sale of assets,
mergers, the incurrence of additional debt and the payment of dividends.
The Company was in compliance with such restrictive covenants as of
December 31, 2000.
UK Holdings Credit Facility
In December 1997, Comcast UK Holdings Limited, a wholly owned subsidiary of
the Company, entered into a loan agreement with a consortium of banks to
provide financing under a credit facility (the "UK Holdings Credit
Facility") up to a maximum of (UK Pound)200.0 million. The UK Holdings
Credit Facility's interest rate per annum was equal to the London Interbank
Offered Rate ("LIBOR") plus 1/2% to 2 1/4%. The consummation of the
Amalgamation resulted in a change in control and all amounts outstanding
thereunder became immediately due and payable. The Company repaid the (UK
Pound)100.0 million outstanding on October 29, 1998 using proceeds from the
sale of the Birmingham Cable interests. The Company recorded an
extraordinary loss from early extinguishment of debt of (UK Pound)1.1
million from the write-off of unamortized deferred financing costs.
Other
In 2000, Cambridge repaid the balance due under its two bank loans of (UK
Pound)433,000. Also included in long- term debt at December 31, 2000 and
1999 are capital lease obligations.
10. RELATED PARTY TRANSACTIONS
In October 2000, Cablelink entered into a loan agreement with a subsidiary
of NTL Communications Corp. to provide funding of up to (IR Pound)300.0
million ((UK Pound)239.5 million), of which (IR Pound)32.0 million ((UK
Pound)25.5 million) had been borrowed at December 31, 2000. The outstanding
borrowings are due in October 2007. Interest is payable quarterly in
arrears beginning March 31, 2001 at EURIBOR plus 1%. The effective interest
rate at December 31, 2000 was 4.88%. Accrued interest at December 31, 2000
was (IR Pound)257,000 ((UK Pound)205,000) which is included in due to
affiliates in the consolidated balance sheet.
Since the Amalgamation, a subsidiary of NTL Communications Corp. has been
providing management, financial, legal and technical services to the
Company. Beginning in the fourth quarter of 1999, this subsidiary began
charging the Company for these services using an allocation formula based
on customers. The Company was charged (UK Pound)26.3 million and (UK
Pound)2.9 million in 2000 and 1999, respectively, which is included in
selling, general and administrative expenses and in due to affiliates in
the consolidated balance sheet. It is not practicable to determine the
amounts of these expenses that would have been incurred had the Company
operated as an unaffiliated entity. In the opinion of management of the
Company, the allocation method is reasonable. Management fees of (UK
Pound)2.4 million were incurred under agreements with the Company's former
parent and one of its former affiliates in 1998, which is included in
selling, general and administrative expenses. The management agreements
were terminated upon the amalgamation with NTL.
Comcast U.K. Consulting, Inc., a former wholly-owned subsidiary of the
Company, earned consulting fee income under consulting agreements with
Birmingham Cable and Cable London in 1998. The consulting fee income was
generally based on a percentage of gross revenues or a fixed amount per
dwelling unit. The consulting agreements were terminated in 1998 pursuant
to the Telewest Agreement.
Investment income includes (UK Pound)1.9 million and (UK Pound)2.8 million
of interest income in 1999 and 1998, respectively, relating to the loans to
Birmingham Cable and Cable London.
Notes payable to Comcast U.K. Holdings, Inc. consisted of 9% Subordinated
Notes payable of (UK Pound)13.1 million which the Company repaid at
maturity in September 1999. During the years ended December 31, 1999 and
1998, interest expense on the Notes was (UK Pound)822,000 and (UK Pound)1.0
million, respectively.
- 18 -
NTL (TRIANGLE) LLC
- ------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of deferred income taxes are as follows (in (UK
Pound)000's):
December 31,
2000 1999
---- ----
Deferred tax liabilities:
Intangibles.................................... (UK Pound)7,828 (UK Pound)10,233
Fixed asset depreciation....................... 3,492 -
--------------------- -------------------
Total deferred tax liabilities.......................... 11,320 10,233
Deferred tax assets:
Net operating loss carryforwards............... 9,711 9,297
Differences between book and tax
basis of property............................. 32,947 19,580
Other.......................................... 1,844 1,220
--------------------- -------------------
Total deferred tax assets............................... 44,502 30,097
Less: Valuation allowance............................... (41,793) (28,101)
--------------------- -------------------
Net deferred tax assets................................. 2,709 1,996
--------------------- -------------------
Net deferred tax liabilities............................ (UK Pound)8,611 (UK Pound)8,237
===================== ===================
The Company's wholly-owned subsidiaries have a deferred tax asset arising
from the carryforward of net operating losses and the differences between
the book and tax basis of property. However, a valuation allowance has been
recorded as the realization of the deferred tax assets is uncertain.
12. FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.
Current assets and current liabilities: The carrying amounts of cash and
cash equivalents, accounts receivable, other current assets, accounts
payable and accrued liabilities, interest payable, deferred revenue and due
to affiliates reported in the balance sheet approximate fair value due to
the short-term maturities of these assets and liabilities.
Long-term debt: The estimated fair value of the Company's publicly traded
debt is based on quoted market prices. The carrying amount of the loans
from affiliate approximates the fair value. Interest rates that are
currently available to the Company for issuance of debt with similar terms
and remaining maturities are used to estimate fair value for debt issues
for which quoted market prices are not available. At December 31, 2000 and
1999, the estimated fair values of the Company's long-term debt were (UK
Pound)322.3 million and (UK Pound)305.0 million, respectively.
FX Puts: The estimated fair value of the Company's FX Puts is based on
quoted market prices. At December 31, 1999, the estimated fair values of
the Company's FX Puts were (UK Pound)101,000.
The Company is exposed to market risk including changes in foreign currency
exchange rates. To manage the volatility relating to this exposure, the
Company entered into various derivative transactions pursuant to the
Company's policies and hedging practices. Positions were monitored using
techniques including market value and sensitivity analyses. During 1995,
the Company entered into foreign exchange put option contracts ("FX Puts")
to limit the Company's exposure to the risk that the eventual cash outflows
related to the Company's long-term debt denominated in currencies other
than its functional currency (which is the UK Pound) are adversely affected
by changes in exchange rates. The Company had (UK Pound)250.0 million
notional amount of FX Puts to purchase United States dollars at an exchange
rate of $1.35 per (UK Pound)1.00. In November 2000, the Company sold all of
its FX Puts with a
- 19 -
NTL (TRIANGLE) LLC
- ------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
carrying value of (UK Pound)110,000 for (UK Pound)21,000, and recognized a
loss on the sale of (UK Pound)89,000. Premiums paid for the FX Puts of (UK
Pound)13.9 million were included in other assets in the Company's
consolidated balance sheet, net of related amortization. These premiums
were being amortized over the terms of the related contracts of five years.
13. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The Company made cash payments for interest of approximately (UK
Pound)367,000, (UK Pound)691,000 and (UK Pound)7.6 million during the years
ended December 31, 2000, 1999 and 1998, respectively.
The Company's wholly-owned subsidiaries incurred capital lease obligations
of none, (UK Pound)139,000 and (UK Pound)3.4 million during the years ended
December 31, 2000, 1999 and 1998, respectively.
14. COMMITMENTS AND CONTINGENCIES
As of December 31, 2000, the Company was committed to purchase
approximately (UK Pound)4.7 million for equipment and services.
Certain of the Company's facilities and equipment are held under operating
or capital leases which expire in 2033.
A summary of assets held under capital lease are as follows (in (UK
Pound)000's):
December 31,
2000 1999
---- ----
Land, buildings and equipment (UK Pound)11,647 (UK Pound)13,271
Less: Accumulated depreciation (6,185) (6,324)
------------------- --------------------
(UK Pound)5,462 (UK Pound)6,947
=================== ====================
Future minimum rental payments at December 31, 2000 are as follows (in (UK
Pound)000's):
Capital Operating
leases leases
------ -------
Year ending December 31:
2001 (UK Pound)935 (UK Pound)4,817
2002 851 4,342
2003 745 3,902
2004 653 3,232
2005 519 2,873
Thereafter............................................. 725 40,767
--------------------- --------------------
Total minimum rental commitments....................... 4,428 (UK Pound)59,933
====================
Less: Amount representing interest..................... (923)
---------------------
Present value of minimum rental commitments............ 3,505
Less: Current portion of capital lease obligations..... (662)
---------------------
Long-term portion of capital lease obligations......... (UK Pound)2,843
=====================
Rental expense for the years ended December 31, 2000, 1999 and 1998 was (UK
Pound)4.0 million, (UK Pound)2.7 million and (UK Pound)1.6 million,
respectively.
The Company is involved in 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.
- 20 -
NTL (TRIANGLE) LLC
- ------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
First Second Third Fourth Total
Quarter Quarter Quarter (1) Quarter (2) Year
------- ------- ----------- ----------- ----
(in (UK Pound)000's)
2000
Revenues......................... (UK Pound)38,677 (UK Pound)38,935 (UK Pound)39,679 (UK Pound)43,443 (UK Pound)160,734
Operating loss................... (6,485) (16,553) (23,857) (33,661) (80,556)
Net loss......................... (20,801) (40,807) (41,168) (36,648) (139,424)
1999
Revenues......................... (UK Pound)23,189 (UK Pound)24,291 (UK Pound)33,342 (UK Pound)38,141 (UK Pound)118,963
Operating loss................... (3,503) (2,576) (10,579) (19,341) (35,999)
Equity in net losses of affiliates (2,060) (1,912) (1,601) (1,228) (6,801)
Net (loss) income................ (19,375) (17,398) (9,224) 375,462 329,465
- ---------------
(1) The results of operations include Cablelink from the date of acquisition in
July 1999.
(2) Fourth quarter and total year net income in 1999 resulted from a gain of
(UK Pound)404.8 million due to the sale of the interests in Cable London in
November 1999.
- 21 -
NTL (TRIANGLE) LLC
------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------
(in (UK Pound)000's)
Additions (Deductions
Balance at Charged to from) Balance
Beginning Costs and Additions to at End
of Year Expenses Reserves of Year
------- -------- -------- -------
Allowance for Doubtful Accounts
-------------------------------
2000............................ (UK Pound)9,452 (UK Pound)3,149 (UK Pound)(3,687) (a) (UK Pound)8,914
1999............................ 2,840 3,129 3,483 (b) 9,452
1998............................ 2,598 1,720 (1,478) 2,840
(a) Uncollectible accounts written off, net of recoveries of (UK
Pound)3,677,000 and (UK Pound)10,000 foreign exchange currency translation
adjustments.
(b) Uncollectible accounts written off, net of recoveries of (UK
Pound)1,038,000 and (UK Pound)172,000 foreign exchange currency translation
adjustments, offset by (UK Pound)4,693,000 allowance for doubtful accounts
as of the acquisition date of Cablelink.
- 22 -
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not applicable.
PART III
--------
ITEMS 10, 11, 12 AND 13
- -----------------------
Omitted, pursuant to General Instruction I(2)(c) of Form 10-K.
- 23 -
PART IV
-------
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------- ---------------------------------------------------------------
(a) The following consolidated financial statements of NTL (Triangle) LLC
are included in Part II, Item 8:
Page
----
Report of Independent Auditors....................................7
Consolidated Balance Sheets--December 31, 2000 and 1999...........9
Consolidated Statements of Operations--Years
Ended December 31, 2000, 1999 and 1998..........................10
Consolidated Statements of Cash Flows--Years
Ended December 31, 2000, 1999 and 1998..........................11
Consolidated Statement of Shareholder's
Equity--Years Ended December 31, 2000, 1999 and 1998............12
Notes to Consolidated Financial Statements.......................13
(b) (i) The following financial statement schedule required to be
filed by Items 8 and 14(d) of Form 10-K is included in Part II:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable,
not required or the required information is included in the
consolidated financial statements or notes thereto.
(c) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 2000.
(d) Exhibits required to be filed by Item 601 of Regulation S-K:
EXHIBIT NO.
2.l Reorganization Agreement, dated 19 September 1994, among
Warburg, Pincus Investors, L.P., Bankers Trust Investments PLC
("Bankers Trust"), Comcast Corporation ("Comcast"), Comcast
U.K. Holdings, Inc., ("Holdings"), the Company and UK Cable
Partners Limited ("UKCPL") (Incorporated by reference to the
Company's Registration Statement on Form S-1 (File No.
33-96932) declared effective November 9, 1995)
2.2 Agreement and Plan of Amalgamation dated 4 February 1998 among
NTL Incorporated, NTL (Bermuda) Limited and the Company, as
amended (Incorporated by reference to the Registration
Statement of NTL Communications Corp. on Form S-4 (File No.
333-64727))
2.3 Deed of Transfer, dated December 13, 1999 (Incorporated by
reference to the Company's Current Report on Form 8-K, filed
December 28, 1999)
3.1 Memorandum of Association of the Company (Incorporated by
reference to the Company's Registration Statement on Form S-1
(File No. 33-76160) declared effective September 20, 1994)
3.2 By-laws of the Company (Incorporated by reference to the
Company's Registration Statement on Form S-1 (File No.
33-76160) declared effective September 20, 1994)
3.3 Certificate of Formation, filed with the Delaware Secretary of
State on November 12, 1999 (Incorporated by reference to the
Company's Current Report on Form 8-K, filed December 9, 1999)
3.4 Certificate of Amendment, filed with the Delaware Secretary of
State on November 18, 1999 (Incorporated by reference to the
Company's Current Report on Form 8-K, filed December 9, 1999)
- 24 -
3.5 Operating Agreement of NTL (Triangle) LLC, dated as of
November 14, 1999 (Incorporated by reference to the Company's
Current Report on Form 8-K, filed December 9, 1999)
3.6 Corrected Certificate of Conversion, filed with the Delaware
Secretary of State on November 16, 1999 (Incorporated by
reference to the Company's Current Report on Form 8-K, filed
December 9, 1999)
4.l Form of Certificate for Class A Common Shares, par value (UK
Pound)0.01 per share (Incorporated by reference to the
Company's Registration Statement on Form S-1 (File No.
33-76160) declared effective September 20, 1994)
4.2 Indenture dated as of 15 November 1995, between the Company
and Bank of Montreal Trust Company, as Trustee, with respect
to the Company's 11.20% Senior Discount Debentures due 2007
(Incorporated by reference to the Company's Registration
Statement on Form S-1 (File No. 33-96932) declared effective
November 9, 1995)
10.1 Subscription and Contribution Agreement, dated October 26,
1992, among Comcast, UKCPL, the Company, Holdings, Comcast
Cablevision of Birmingham, Inc. ("Comcast Birmingham") and
Comcast Cablevision of London, Inc. (Incorporated by reference
to the Company's Registration Statement on Form S-1 (File No.
33-76160) declared effective September 20, 1994)
10.2 Shareholders Agreement, dated 11 December 1992, among
Holdings, UKCPL, the Company and Comcast (Incorporated by
reference to the Company's Registration Statement on Form S-1
(File No. 33-76160) declared effective September 20, 1994)
10.3 Supplemental Agreement, dated 21 June 1995, among the Company,
Comcast Consulting, Comcast, Holdings, Warburg Pincus and UK
Consulting to the NewCo Services Agreement, the Delegation
Agreement and the Shareholders Agreement (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q,
filed for the quarter ended June 30, 1995 (File No. 0-24792))
10.4 Share Exchange Agreement, dated 4 December 1995, among
Singapore Telecom International Pte. Limited, Cambridge Cable,
the Company and Holdings (Incorporated by reference to the
Company's Current Report on Form 8-K, filed on January 22,
1996)
10.5 Share Exchange Agreement, dated 5 May 1994, between Avalon
Telecommunications L.L.C. and the Company (Incorporated by
reference to the Company's Registration Statement on Form S-1
(File No. 33-76160) declared effective September 20, 1994)
10.6 Agreement dated August 14, 1998 among Telewest Communications
plc, Telewest Communications Holding Limited, the Company and
NTL Incorporated (Incorporated by reference to NTL
Incorporated's Current Report on Form 8-K, dated August 18,
1998. (File No. 000-22616))
99.1 Consolidated financial statements of Cambridge Holding Company
Limited (a United Kingdom corporation in the prematurity
stage) and subsidiaries as of and for the years ended December
31, 1995 and 1994 (Incorporated by reference to the Current
Report on Form 8-K, (File No. 000-22616),
filed by NTL Communications Corp. on August 18, 1998)
- 25 -
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: March 30, 2001
NTL (Triangle) LLC
(Registrant)
By: NTL Group Limited
Its Sole Managing Member (on behalf of Registrant)
/s/ Robert Mackenzie
- -----------------------------
Robert Mackenzie
Director and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Stephen Carter (Director, and Chief Operating Officer March 30, 2001
- --------------------- of NTL Group Ltd., the sole managing
Stephen Carter member) on behalf of registrant
/s/ Robert Mackenzie (Director and Secretary of NTL March 30, 2001
- --------------------- Group Ltd., the sole managing
Robert Mackenzie member) on behalf of registrant
/s/ Stuart Ross (Director and Chief Financial March 30, 2001
- --------------------- Officer of NTL Group Ltd.,
Stuart Ross the sole managing member) on
behalf of registrant
/s/ Bryony Dew (Director of NTL Group Ltd., March 30, 2001
- --------------------- the sole managing member) on
Bryony Dew behalf of registrant
/s/ Peter Douglas (Director of NTL Group Ltd., March 30, 2001
- --------------------- the sole managing member) on
Peter Douglas behalf of registrant