ITEM 1. BUSINESS.
NTL Communications Corp. ("NTL Communications" or the "Company") is a leading broadband communications company in the U.K. and the Republic of Ireland.
Our predominant lines of business are:
- - CONSUMER SERVICES including residential telephony, cable television, Internet access and interactive services;
- - BUSINESS SERVICES including business telephony, national and international carrier telecommunications, Internet services and radio communications services; and
- - BROADCAST TRANSMISSION AND TOWER SERVICES including digital and analog television and radio broadcasting, wireless network management, tower and site leasing and satellite distribution services.
In this Report on Form 10-K, references to "pound sterling" "pounds sterling," "pound," "pence" or "p" are to the lawful currency of the United Kingdom, references to "euro" or "Euro" are to the lawful currency of the European Monetary Union, references to "IR pound" or "Irish punts" are to the lawful currency of the Republic of Ireland and references to "U.S. dollars," "dollars," "$" or "cent" are to the lawful currency of the United States. Solely for the convenience of the reader, this Form 10-K contains translations of certain foreign currency amounts into U.S. dollars and certain U.S. dollar amounts into foreign currencies. These translations should not be construed as representations that the foreign currency amounts actually represent such U.S. dollar amounts or vice versa or could have been or could be or will be converted into U.S. dollars or foreign currencies, as the case may be, at the rate indicated or at any other rate. Unless otherwise indicated, the translations of foreign currencies into U.S. dollars and U.S. dollars into foreign currencies have been made at $1.4955 per pound 1.00, $.9388 per euro 1.00 and $1.1940 per IR pound 1.00, the noon buying rates in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate") on December 31, 2000. On March 16, 2001, the Noon Buying Rate was $1.4940 per pound 1.00, $.8929 per euro 1.00 and $1.1337 per IR pound 1.00.
NTL Incorporated, a Delaware corporation, was incorporated in February 1999, to effect a reorganization into a holding company structure under Section 251(g) of the Delaware General Corporation Law. The holding company structure, which was implemented to pursue opportunities outside of the U.K. and Ireland, was accomplished through a merger. The stockholders of NTL Communications (formerly NTL Incorporated), at the effective time of the merger became stockholders of the new holding company, and NTL Communications became a subsidiary of the new holding company. The new holding company took the name NTL Incorporated.
NTL Incorporated completed a second reorganization in May 2000, A new holding company structured, which was implemented in connection with the acquisition of the residential assets of Cable & Wireless Communications plc ("CWC") (the operations acquired from CWC are called "ConsumerCo"), was accomplished through a merger. The stockholders of NTL (Delaware), Inc., (formerly NTL Incorporated), at the effective time of the merger became stockholders of the new holding company, and NTL (Delaware), Inc. became a subsidiary of the new holding company. The new holding company then took the name NTL Incorporated.
On February 21, 2001, NTL Incorporated contributed the assets of ConsumerCo to NTL Communications and NTL (Delaware), Inc. ("NTL Delaware") contributed the assets of NTL Business Limited ("NTL Business") (formerly Workplace Technologies plc) to NTL Communications. NTL Group Limited, a wholly-owned indirect subsidiary of NTL Communications, which was acquired in 1996, has a 30-year history in the United Kingdom as a provider of reliable communications services. NTL Communications conducts its operations through direct and indirect wholly-owned subsidiaries. NTL Communications' principal executive office is located at 110 East 59th Street, New York, New York 10022, and its telephone number is (212) 906-8440.
ITEM 2.
ITEM 2. PROPERTIES.
We own, lease or occupy under license business unit and regional head-offices throughout the United Kingdom and Ireland, our corporate head-office in Hook, England, and retail shops in the United Kingdom. In addition, we own or lease switching centers/head-ends and operational hub-sites together with warehouses and other non-operational properties, as well as various cable television, telephone and telecommunications equipment used in the United Kingdom and Ireland.
We own, lease or occupy under license properties in the United Kingdom for our broadcast transmission and tower services business, of which the majority are used as transmitter sites. In addition, we also are the lessee or licensee for additional transmitter sites, which are owned by Castle Transmission and shared between the two organizations pursuant to a site sharing agreement.
We maintain offices under lease for our corporate staff in New York City.
We believe that our facilities are presently adequate for their current use. We intend to continue to expand the systems in accordance with the requirements of the network build schedules and acquire new sites as part of the ongoing expansion of our transmission networks.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
We are involved in, or have been involved in, certain disputes and litigation arising in the ordinary course of business, including claims involving contractual disputes and claims for damages to property and personal injury resulting from the construction of our networks and the maintenance and servicing of our transmission masts, none of which are expected to have a material adverse effect on our financial position or results of operations or cash flows.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted pursuant to General Instructions I (2) (c) of Form 10-K.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company is an indirect wholly-owned subsidiary of NTL Incorporated.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain financial data for the years ended December 31, 2000, 1999, 1998, 1997 and 1996. This information should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 10-K.
(1) In March 1999, the Company purchased Diamond Cable Communications plc ("Diamond") for an aggregate purchase price of $984.6 million, including intangibles aggregating $1,323.0 million. In July 1999, the Company acquired Cablelink Limited ("Cablelink") for an aggregate purchase price of $700.5 million, including intangibles of $669.6 million. The net assets and results of operations of Diamond and Cablelink are included in the consolidated financial statements from their respective dates of acquisition.
(2) In June and September 1998, the Company purchased ComTel Limited and Telecential Communications (collectively "Comtel") for an aggregate purchase price of $969 million, including intangibles aggregating $224 million. In October 1998, the Company purchased Comcast U.K. Cable Partners Limited ("Comcast U.K.") for an aggregate purchase price of $600 million, including intangibles of $130 million. In December 1998, the Company purchased Eastern Group Telecoms ("EGT") for an aggregate purchase price of $151 million, including intangibles of $45 million. The net assets and results of operations of ComTel, Comcast U.K. and EGT are included in the consolidated financial statements from their respective dates of acquisition.
(3) In May 1996, the Company purchased NTL Group Limited for an aggregate purchase price of $439 million, including goodwill of approximately $263 million. The net assets and results of operations of NTL Group Limited are included in the consolidated financial statements from the date of the acquisition.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000 and 1999
As a result of the completion of the acquisitions of Diamond in March 1999 and Cablelink in July 1999, the Company consolidated the results of operations of these businesses from the dates of acquisition.
For the year ended December 31, 1999, certain revenues have been reclassified from business telecommunications to broadcast transmission and other and certain costs have been reclassified from operating expenses to selling, general and administrative expenses to conform to the 2000 classifications.
Consumer telecommunications and television revenues increased to $986.1 million from $827.3 million as a result of acquisitions and from customer growth that increased the Company's current revenue stream. The 2000 and 1999 revenue includes $241.5 million and $162.4 million, respectively, from acquired companies. The Company's immediate goal is to drive the majority of revenue growth from ARPU increases rather than adding new customers; this allows the Company to maintain revenue targets, has a lower capital requirement, due to fewer installations, and drives higher EBITDA as the Company reduces front-loaded costs such as customer acquisition costs and higher initial maintenance costs.
Business telecommunications revenues increased to $515.5 million from $393.3 million as a result of acquisitions, customer growth and increases in carrier services revenues. The 2000 and 1999 revenue includes $47.6 million and $33.6 million, respectively, from acquired companies. The Company continues to focus specific sales and marketing effort on winning business customers in its franchise areas and promoting broadband for small businesses. Carrier services revenues increased due to growth in services provided by the Company's wholesale operation to other telephone companies. Revenue growth in carrier services is primarily dependent upon the Company's ability to continue to attract new customers and expand services to existing customers.
Broadcast transmission and other revenues increased to $263.8 million from $257.3 million due to increases in broadcast television and FM radio customers and accounts, which exceeded price cap reductions in the Company's regulated services, and increases in satellite and media services used by broadcast and media customers. The Company expects growth in broadcast services to be driven primarily by contracts related to the increased demand for tower infrastructure by wireless services operators expanding and upgrading their networks for wireless broadband, the privatization of national broadcast networks, the digitalization of analog television and radio signals and the further development of programming for the European markets requiring satellite and terrestrial distribution services.
Operating expenses (including network expense) increased to $842.4 million from $703.6 million as a result of increases in interconnection costs and programming costs due to customer growth. Operating expenses as a percentage of revenues increased to 47.7% from 47.6%. The 2000 and 1999 expense includes $121.8 million and $84.0 million respectively, from acquired companies.
Selling, general and administrative expenses increased to $717.9 million from $562.9 million as a result of increases
in telecommunications and cable television sales and marketing costs and increases in additional personnel and overhead to service the increasing customer base. The 2000 and 1999 expense includes $126.7 million and $52.5 million respectively, from acquired companies.
Pursuant to the terms of various United Kingdom licenses, the Company incurred license fees paid to the Independent Television Commission ("ITC") to operate as the exclusive service provider in certain of its franchise areas. Upon a request by the Company in 1999, the ITC converted all of the Company's fee bearing exclusive licenses to non-exclusive licenses at the end of 1999, and the Company's liability for license payments ceased upon the conversion. Franchise fees were $16.5 million in 1999.
In September 2000, the Board of Directors approved modifications to certain stock options granted to employees in November 1999 through May 2000. Options to purchase an aggregate of approximately 16.5 million shares of NTL Incorporated's common stock with a weighted average exercise price of $64.39 per share were modified such that the exercise price was reduced to $44.50 per share and the vesting schedule was delayed and/or lengthened. This change did not affect the exercise price of options granted to the Chairman of the Board, the President and Chief Executive Officer and the Company's Directors. In accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations, NTL Incorporated is accounting for these options as a variable plan beginning in September 2000. The Company will recognize non-cash compensation expense for the difference between the quoted market price of NTL Incorporated's common stock and the exercise price of the vested options while the options remain outstanding. There was no compensation expense recognized in the year ended December 31, 2000 as a result of these option modifications.
Other charges of $82.0 million in 2000 include restructuring costs of $55.2 million and information technology integration costs of $26.8 million. Restructuring costs relate to NTL Incorporated's announcement in November 2000 of its completion of a consolidation review. Based on a comprehensive review of the combined company following NTL Incorporated's acquisition of ConsumerCo in May 2000 and the integration of several other acquired businesses, NTL Incorporated identified significant efficiency improvements and cost savings. The Company's restructuring provision includes employee severance and related costs of $39.5 million for approximately 1,900 employees to be terminated and lease exit costs of $15.7 million. As of December 31, 2000, approximately 290 of the employees had been terminated. None of the provision had been utilized through December 31, 2000. The information technology integration costs of $26.8 million were incurred for the integration of acquired companies' information technology. Other charges of $16.2 million in 1999 were incurred for the cancellation of certain contracts.
Corporate expenses decreased to $23.7 million from $25.3 million due to a decrease in various overhead costs.
Depreciation and amortization expense increased to $867.6 million from $762.9 million due to an increase in depreciation of telecommunications and cable television equipment. The 2000 and 1999 expense includes $233.2 million and $187.7 million respectively, from acquired companies, including amortization of acquisition related intangibles.
Interest income and other, net decreased to $(6.2) million from $29.8 million as a result of increases in the net losses of affiliates accounted for by the equity method and decreases in interest income.
Interest expense increased to $751.1 million from $678.0 million due to the issuance of additional debt, and the increase in the accretion of original issue discount on the deferred coupon notes. The 2000 and 1999 expense includes $163.7 million and $133.8 million, respectively, from acquired companies. Interest of $323.8 million and $221.6 million was paid in the years ended December 31, 2000 and 1999, respectively.
Other gains of $493.1 million in 1999 are from the sale of the Company's investment in Cable London.
Foreign currency transaction (losses) gains decreased to losses of $58.6 million from gains of $22.7 million primarily due to the effect of unfavorable changes in exchange rates. The Company's results of operations are impacted by changes in foreign currency exchange rates as follows. The Company and certain of its subsidiaries have cash, cash equivalents and debt denominated in foreign currencies that are affected by changes in exchange rates. In addition, foreign subsidiaries of the Company whose functional currency is not the U.S. dollar hold cash, cash equivalents and debt denominated in U.S. dollars which are affected by changes in exchange rates.
The Company recorded an extraordinary loss from the early extinguishment of debt of $3.0 million in 1999 as a result of the repayment of the bridge loan incurred in connection with the Cablelink acquisition.
YEARS ENDED DECEMBER 31, 1999 and 1998
As a result of the completion of the acquisitions of ComTel in June and September 1998, NTL (Triangle) LLC (formerly Comcast U.K. Cable Partners Limited) ("NTL Triangle") in October 1998, EGT in December 1998, Diamond in March 1999 and Cablelink in July 1999, the Company consolidated the results of operations of these businesses from the dates of acquisition. The results of these businesses are not included in the 1998 results except for the results of operations of ComTel, NTL Triangle and EGT from the dates of acquisition.
For the years ended December 31, 1999 and 1998, certain revenues have been reclassified from business telecommunications to broadcast transmission and other and certain costs have been reclassified between selling, general and administrative expenses and operating expenses to conform to 2000 classifications.
Consumer telecommunications and television revenues increased to $827.3 million from $355.6 million primarily as a result of customer growth that increased the Company's current revenue stream. The 1999 and 1998 revenue includes $467.2 million and $74.2 million, respectively, from acquired companies.
Business telecommunications revenues increased to $393.3 million from $157.7 million as a result of acquisitions, customer growth and increases in carrier service revenues. The 1999 and 1998 revenue includes $141.6 million and $8.5 million, respectively from acquired companies. Carrier services revenues increased due to growth in telephone services provided by the Company's wholesale operation to other telephone companies. Revenue growth in carrier services is primarily dependent upon the Company's ability to continue to attract new customers and expand services to existing customers.
Broadcast transmission and other revenues increased to $257.3 million from $231.3 million due to increases in broadcast television and FM radio customers and accounts, which exceeded price cap reductions in the Company's regulated services and from increases in satellite and media services used by broadcast and media customers.
Other telecommunications revenues decreased to zero from $2.4 million due to the sales of the assets of the Company's wholly-owned subsidiary, OCOM Corporation to AirTouch Communications, Inc. and to Cellular Communications of Puerto Rico, Inc. during 1998.
Operating expenses increased to $703.6 million from $400.9 million as a result of increases in interconnection costs and programming costs due to customer growth. The 1999 and 1998 expense includes $272.1 million and $51.1 million, respectively, from acquired companies.
Selling, general and administrative expenses increased to $562.9 million from $270.7 million as a result of increases in telecommunications and cable television sales and marketing costs and increases in additional personnel and overhead to service the increasing customer base. In addition, $47.4 million of the increase was due to the new national brand and advertising campaign, which began in the second quarter of 1999 and continued into 2000. The 1999 and 1998 expense includes $215.8 million and $25.1 million, respectively, from acquired companies.
Pursuant to the terms of various United Kingdom licenses, the Company incurred license fees paid to the ITC to operate as the exclusive service provider in certain of its franchise areas. Upon a request by the Company in 1999, the ITC converted all of the Company's fee bearing exclusive licenses to non-exclusive licenses by the end of 1999, and the Company's liability for license payments ceased upon the conversion. Franchise fees decreased to $16.5 million from $25.0 million due to the reversal of the accrued liability for franchise fees of $13.6 million. The 1999 amount includes Diamond franchise fees of $5.0 million.
Other charges of $16.2 million in 1999 were incurred for the cancellation of certain contracts. Other charges of $4.2 reversed in 1998 were the result of changes to a restructuring reserve that was recorded in 1997.
Corporate expenses increased to $25.3 million from $17.1 million due to an increase in various overhead costs.
Depreciation and amortization expense increased to $762.9 million from $266.1 million due to an increase in depreciation of telecommunications and cable television equipment. The 1999 and 1998 expense includes $404.2 million and $45.9 million, respectively, from acquired companies, including amortization of acquisition related intangibles.
Interest expense increased to $678.0 million from $328.8 million due to the issuance of additional debt and the increase in the accretion of original issue discount on the deferred coupon notes. The 1999 expense includes $184.8 million from acquired companies. Interest of $221.6 million and $118.3 million was paid in the years ended December 31, 1999 and 1998, respectively.
Other gains of $493.1 million in 1999 are from the sale of the Company's investment in Cable London.
Foreign currency transaction gains increased to $22.7 million from $4.2 million primarily due to favorable changes in the exchange rate on the Company's pounds sterling and Euro denominated notes in 1999.
The Company recorded an extraordinary loss from the early extinguishment of debt of $3.0 million in 1999 as a result of the repayment of the bridge loan incurred in connection with the Cablelink acquisition. The Company recorded an extraordinary loss from the early extinguishment of debt of $30.7 million in 1998 as a result of the redemption of the 10-7/8% Notes and the repayment of a bank loan.
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.
On January 1, 2001, the Company recorded all of its outstanding derivative instruments at their fair value. The outstanding derivative instruments were comprised of cross currency swaps to hedge exposure to movements in the British pound/U.S. dollar exchange rate. The aggregate fair value on January 1, 2001 was a liability of $2.2 million, which was recorded as other comprehensive loss.
LIQUIDITY AND CAPITAL RESOURCES
The Company will continue to require significant amounts of capital to finance construction of its local and national networks, for connection of telephone, telecommunications, Internet and cable television customers to the networks, for other capital expenditures and for debt service. The Company estimates that these requirements, net of cash from operations, and as adjusted for the contributions of ConsumerCo and NTL Business from NTL Incorporated and NTL Delaware, respectively, will aggregate up to approximately $1,900.0 million in 2001. The Company's commitments at December 31, 2000 for equipment and services through 2001 of approximately $162.0 million are included in the anticipated requirements. Including the cash on hand at ConsumerCo and NTL Business, the Company had approximately $423.5 million in cash and securities on hand at December 31, 2000. The Company expects to utilize the proceeds from the issuance of notes in January and February 2001 and a portion of its bank credit facilities to fund the balance of these requirements.
In January 2001, the Company issued euro 200.0 million ($187.8 million) principal amount of 12-3/8% Senior Notes due 2008. In February 2001, the Company issued an additional euro 100.0 million principal amount of 12-3/8% Senior Notes due 2008 at a price of 101.0% of the aggregate principal amount at maturity, plus accrued interest, or euro 101.5 million ($95.3 million) (together, the "2001 Euro Notes"). The underwriter's discount and commissions were euro 6.8 million ($6.4 million). Interest is payable semiannually in cash at the rate of 12-3/8% per annum beginning on August 1, 2001. The 2001 Euro Notes may not be redeemed by the Company except in limited circumstances.
NTL Communications Limited ("NTLCL"), a wholly-owned indirect subsidiary of the Company and NTL Business, effective February 21, 2001, a wholly-owned direct subsidiary of the Company, have the option to draw on the unused portion of the pound sterling 2,500.0 million ($3,738.8 million) commitment amounting to pound sterling 222.8 million ($333.2 million) at December 31, 2000. NTLCL had pound sterling 250.9 million ($375.3 million) and NTL Business had pound sterling 2,026.3 million ($3,030.3 million) outstanding under the credit agreement at December 31, 2000. The unused portion of the commitment is available for refinancing ConsumerCo indebtedness and for working capital requirements of the UK Group, as defined. For purposes of this credit agreement, Diamond and subsidiaries and NTL Triangle and subsidiaries and certain other entities are excluded from the UK Group.
NTLCL entered into a pound sterling 1,300.0 million ($1,944.2 million) credit agreement with a group of banks dated May 30, 2000. Pursuant to the credit agreement, in connection with the issuance in October 2000 of $500.0 million aggregate principal amount of the Company's 11-7/8% notes, and the issuance in January and February 2001 of euro 300.0 million aggregate principal amount of the Company's 2001 Euro Notes, the commitment was reduced by pound sterling 255.1 million ($381.4 million). As of December 31, 2000, there were no amounts borrowed under this agreement. NTLCL and other members of the UK Group (as defined above) may utilize the proceeds under this credit agreement to finance the working capital requirements of the UK Group, provided that in no event shall the proceeds be used for a purpose other than to finance the construction, capital expenditure and working capital needs of a cable television or telephone or telecommunications business, or a related business, in the United Kingdom or Ireland. Interest is payable at least every six months at LIBOR plus a margin rate of 4.5% per annum. The margin rate shall increase by 0.5% on the three month anniversary of the initial advance and by an additional 0.5% on each subsequent three month anniversary, up to a maximum total interest rate of 16% per annum. The unused portion of the commitment is subject to a commitment fee of 0.75% payable quarterly. Principal is due in full on March 31, 2006.
Regarding the Company's estimated cash requirements described above, there can be no assurance that: (a) actual construction costs will not exceed the amounts estimated or that additional funding substantially in excess of the amounts estimated will not be required, (b) conditions precedent to advances under credit facilities will be satisfied when funds are required, (c) the Company and its subsidiaries will be able to generate sufficient cash from operations to meet capital requirements, debt service and other obligations when required, (d) the Company will be able to access such cash flow or (e) the Company will not incur losses from its exposure to exchange rate fluctuations or be adversely affected by interest rate fluctuations.
The accreted value at December 31, 2000 of the Company's consolidated long-term indebtedness, as adjusted for the contribution of ConsumerCo and NTL Business from NTL Incorporated and NTL Delaware respectively, is $11,843.4 million, representing approximately 76.2% of total capitalization. The following summarizes the terms of the significant credit facilities and notes issued by the Company and its subsidiaries.
NTL Communications:
(1) 12-3/4% Senior Deferred Coupon Notes due April 15, 2005, principal amount at maturity of $277.8 million, interest payable semiannually beginning on October 15, 2000, redeemable at the Company's option on or after April 15, 2000;
(2) 11-1/2% Senior Deferred Coupon Notes due February 1, 2006, principal amount at maturity of $1,050.0 million, interest payable semiannually beginning on August 1, 2001, redeemable at the Company's option on or after February 1, 2001;
(3) 10% Senior Notes due February 15, 2007, principal amount of $400.0 million, interest payable semiannually from August 15, 1997, redeemable at the Company's option on or after February 15, 2002;
(4) 9-1/2% Senior Sterling Notes due April 1, 2008, principal amount of pound sterling 125.0 million ($186.9 million), interest payable semiannually from October 1, 1998, redeemable at the Company's option on or after April 1, 2003;
(5) 10-3/4% Senior Deferred Coupon Sterling Notes due April 1, 2008, principal amount at maturity of pound sterling 300.0 million ($448.7 million), interest payable semiannually from October 1, 2003, redeemable at the Company's option on or after April 1, 2003;
(6) 9-3/4% Senior Deferred Coupon Notes due April 1, 2008, principal amount at maturity of $1,300.0 million, interest payable semiannually beginning on October 1, 2003, redeemable at the Company's option on or after April 1, 2003;
(7) 9-3/4% Senior Deferred Coupon Sterling Notes due April 15, 2009, principal amount at maturity of pound sterling 330.0 million ($493.5 million), interest payable semiannually beginning on October 15, 2004, redeemable at the Company's option on or after April 15, 2004;
(8) 11-1/2% Senior Notes due October 1, 2008, principal amount of $625.0 million, interest payable semiannually from April 1, 1999, redeemable at the Company's option on or after October 1, 2003;
(9) 12-3/8% Senior Deferred Coupon Notes due October 1, 2008, principal amount at maturity of $450.0 million, interest payable semiannually beginning on April 1, 2004, redeemable at the Company's option on or after October 1, 2003;
(10) 7% Convertible Subordinated Notes due December 15, 2008, principal amount of $599.3 million, interest payable semiannually from June 15, 1999, convertible into shares of NTL Incorporated common stock at a conversion price of $39.20 per share, redeemable at the Company's option on or after December 15, 2001;
(11) 9-1/4% Senior Euro Notes due November 15, 2006, principal amount of euro 250.0 million ($234.7 million), interest payable semiannually beginning on May 15, 2000;
(12) 9-7/8% Senior Euro Notes due November 15, 2009, principal amount of euro 350.0 million ($328.6 million), interest payable semiannually beginning on May 15, 2000, redeemable at the Company's option on or after November 15, 2004;
(13) 11-1/2% Senior Deferred Coupon Euro Notes due November 15, 2009, principal amount at maturity of euro 210.0 million ($197.1 million), interest payable semiannually beginning on May 15, 2005, redeemable at the Company's option on or after November 15, 2004;
(14) 11-7/8% Senior Notes due October 1, 2010, principal amount at maturity of $500.0 million, interest payable semiannually beginning on April 1, 2001, redeemable at the Company's option on or after October 1, 2005;
(15) 12-3/8% Senior Euro Notes due February 1, 2008, principal amount at maturity of euro 300.0 million, interest payable semiannually beginning on August 1, 2001;
NTLCL:
(16) Credit Agreement of pound sterling 1,300.0 million ($1,944.2 million), no amounts were outstanding at December 31, 2000, interest payable at least every six months at LIBOR plus a margin rate of 4.5% per annum, which is subject to adjustment, the unused portion of the commitment is subject to a commitment fee of 0.75% payable quarterly, principal is due in full on March 31, 2006, pursuant to the credit agreement, following the issuance in October 2000 of $500.0 million aggregate principal amount of the Company's 11-7/8% senior notes and the issuance in January and February 2001 of euro 300.0 million aggregate principal amount of the Company's 12-3/8% senior notes, the commitment was reduced by pound sterling 255.1 ($381.4 million);
NTLCL and NTL Business:
(17) Credit Agreement of pound sterling 2,500.0 million ($3,738.3 million), of which pound sterling 2,277.2 million ($3,405.6 million) was outstanding at December 31, 2000, interest payable at least every six months at LIBOR plus a margin rate of 2.25% per annum, which is subject to adjustment, effective interest rate of 8.283% at December 31, 2000, the unused portion of the commitment is subject to a commitment fee of 0.75% payable quarterly, which is reduced to 0.50% when over 50% of the commitment is utilized, principal is due in six quarterly installments beginning on June 30, 2004;
NTL Triangle:
(18) 11.2% Senior Discount Debentures due November 15, 2007, principal amount at maturity of $517.3 million, interest payable semiannually beginning on May 15, 2001, redeemable at NTL Triangle's option after November 15, 2000;
Diamond:
(19) 13-1/4% Senior Discount Notes due September 30, 2004, principal amount at maturity of $285.1 million, interest payable semiannually from March 31, 2000, redeemable at Diamond's option on or after September 30, 1999;
(20) 11-3/4% Senior Discount Notes due December 15, 2005, principal amount at maturity of $531.0 million, interest payable semiannually beginning on June 15, 2001, redeemable at Diamond's option on or after December 15, 2000;
(21) 10-3/4% Senior Discount Notes due February 15, 2007, principal amount at maturity of $420.5 million, interest payable semiannually beginning on August 15, 2002, redeemable at Diamond's option on or after December 15, 2002;
(22) 10% Senior Notes due February 1, 2008, issued by Diamond Holdings plc, a wholly-owned subsidiary of Diamond, principal amount at maturity of pound sterling 135.0 million ($201.9 million), interest payable semiannually from August 1, 1998, redeemable at Diamond's option on or after February 1, 2003; and
(23) 9-1/8% Senior Notes due February 1, 2008, issued by Diamond Holdings plc, principal amount of $110.0 million, interest payable semiannually from August 1, 1998, redeemable at Diamond's option on or after February 1, 2003.
Management does not anticipate that the Company and its subsidiaries will generate sufficient cash flow from operations to repay at maturity the entire principal amount of the outstanding indebtedness of the Company and its subsidiaries. Accordingly, the Company may be required to consider a number of measures, including: (a) refinancing all or a portion of such indebtedness, (b) seeking modifications to the terms of such indebtedness, (c) seeking additional debt financing, which may be subject to obtaining necessary lender consents, (d) seeking additional equity financing, or (e) a combination of the foregoing.
The Company's operations are conducted through its direct and indirect wholly-owned subsidiaries. As a holding company, the Company holds no significant assets other than cash, securities and its investments in and advances to its subsidiaries. Accordingly, the Company's ability to make scheduled interest and principal payments when due to holders of its indebtedness may be dependent upon the receipt of sufficient funds from its subsidiaries.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash provided by operating activities was $37.3 million and $71.5 million in the years ended December 2000 and 1999, respectively. Cash paid during the year for interest exclusive of amounts capitalized was $242.5 million and $179.8 million in 2000 and 1999, respectively. The remainder of this change is primarily due to the increase in the net loss and changes in working capital as a result of the timing of receipts and disbursements.
Purchases of fixed assets were $1,550.5 million in 2000 and $1,196.5 million in 1999 as a result of the continuing fixed asset purchases and construction, including purchases and construction by acquired companies.
Proceeds from borrowings, net of financing costs, was from the Company's issuance of its 11-7/8% senior notes in the amount of $476.4 million net of unamortized discount and $548.1 million of borrowings under bank credit facilities. Included in principal repayments is $73.7 million related to the Company's redemption of its Variable Rate Redeemable Guaranteed Loan Notes and $167.7 million of repayments of amounts borrowed under bank credit facilities.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
MARKET RISK
The Company is exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. The Company does not enter into derivative financial instruments for trading or speculative purposes. The Company has entered into derivative financial instruments to hedge exposure to movements in the British pound/U.S. dollar exchange rate. The counterparties are major financial institutions.
FOREIGN EXCHANGE CONTRACTS
To the extent that the Company obtains financing in U.S. dollars and incurs construction and operating costs in various other currencies, it will encounter currency exchange rate risks. At December 31, 2000, the Company had approximately $178.8 million in cash equivalents denominated in foreign currencies to reduce this risk. In addition, the Company's pounds sterling and euro denominated notes also reduce this risk. Furthermore, the Company's revenues are generated in foreign currencies while its interest and principal obligations with respect to most of the Company's existing indebtedness are payable in U.S. dollars. In October 2000, the Company entered into cross currency swaps to hedge exposure to movements in the British pound to U.S. dollar exchange rate. The notional amount of the cross currency swaps was pound sterling 135.0 million at December 31, 2000.
INTEREST RATES
The fair market value of long-term fixed interest rate debt and the amount of future interest payments on floating interest rate debt are subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise.
The following table provides information about the Company's long-term fixed and floating interest rate debt and derivative financial instruments that are sensitive to changes in interest rates and foreign currency exchange rates.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company are filed under this Item commencing on page of this Report.
The following is a summary of the quarterly results of operations for the years ended December 31, 2000 and 1999.
(1)In November 1999, the Company sold its investment in Cable London for cash of approximately $692.5 million and recognized a gain of $493.1 million.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
ITEM 10, 11, 12 and 13.
Omitted, pursuant to General Instruction I(2) (c) of Form 10-K.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements - See list of Financial Statements on page.
(2) Financial Statement Schedules - See list of Financial Statement Schedules on page.
(3) Exhibits - See Exhibit Index on page 11.
(b) During the fourth quarter of 2000, the Company filed the following Current Report on Form 8-K: Form 8-K, dated September 28, 2000 (filed October 3, 2000) under Item 5. Reporting the pricing of $500.0 million of its 11-7/8% Senior Notes.
(c) Exhibits - The response to this portion of Item 14 is submitted as a separate section of this report.
(d) Financial Statement Schedules - See list of Financial Statement Schedules on page.
EXHIBIT INDEX
EXHIBIT NO. - -----------
2.1 Agreement and Plan of Merger, dated as of February 9, 2000, among NTL Incorporated, NTL (Delaware), Inc. and Holdings Merger Sub Inc. (Incorporated by reference to the Registration Statement on Form S-3/A Exhibit 2.1, File No. 333-36434)
2.2 Agreement and Plan of Merger, dated as of March 26, 1999, among NTL Incorporated, NTL Communications and NTL Merger Inc. (Incorporated by reference to the Registration Statement on Form S-3, File No. 333-72335)
2.3 Agreement and Plan of Amalgamation, dated as of February 4, 1998, as amended, among NTL Incorporated, NTL (Bermuda) Limited, and Comcast U.K. Cable Partners Limited (Incorporated by reference to the Registration Statement on Form S-4, File No. 333-64727)
2.4 Amendment No. 1 to Agreement and Plan of Amalgamation, dated as of May 28, 1998, among NTL Incorporated, NTL (Bermuda) Limited and Comcast U.K. Cable Partners Limited (Incorporated by reference to the Registration Statement on Form S-4, File No. 333-64727)
2.5 Share Exchange Agreement, dated as of June 16, 1998, as amended, among NTL Incorporated and the shareholders of Diamond Cable Communications plc (Incorporated by reference to the Proxy Statement, filed by NTL Communications (File No. 0-22616) on January 29, 1999)
2.6 Amendment No. 1 to Share Exchange Agreement, dated as of December 21, 1998, among NTL Incorporated and the shareholders of Diamond Cable, Communications plc (Incorporated by reference to the Form 8-K filed by NTL Communications (File No. 0-22616) on December 23, 1998)
2.7 Transaction Agreement, dated as of July 26, 1999, by and between, Bell Atlantic Corporation, Cable & Wireless plc, Cable & Wireless Communications plc and NTL Incorporated (Incorporated by reference to the Proxy Statement (File No. 000-25691), filed on February 11, 2000)
2.8 Investment Agreement, dated as of July 26, 1999, by and between, NTL Incorporated and France Telecom S.A. (Incorporated by reference to the Proxy Statement (File No. 000-25691), filed on February 11, 2000)
2.9(a) Amendment No. 1 to the Investment Agreement, dated as of August 6, 1999 (Incorporated by reference to the Proxy Statement, filed on February 11, 2000)
2.9(b) Amendment No. 2 to the Investment Agreement, dated as of October 8, 1999 (Incorporated by reference to the Proxy Statement filed on February 11, 2000)
2.10 Purchase Agreement, dated as of February 17, 2000, by and between France Telecom, S.A. and NTL Incorporated (Incorporated by reference to the Form 8-K, filed on February 22, 2000)
2.11 Transaction Agreement dated as of December 12, 1999 among Cablecom Holding AG and NTL Incorporated and certain other parties thereto (Incorporated by reference to the 1999 Form 10-K (File No. 000-25691), filed on March 17, 2000)
3.1 Restated Certificate of Incorporation of NTL Communications Corp. (Incorporated by reference to the Form S-3 (File No. 333-72335), filed on June 3, 1999)
3.2 By-Laws of NTL Communications Corp. (Incorporated by reference to the Form S-3 (File No. 333-72335), filed on June 3, 1999)
4.1 Specimen of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1, File No. 33-63570)
4.2 Warrant Agreement, dated February 14, 1996 between NTL Incorporated and Chemical Bank as Warrant Agent (Incorporated by reference to the Registration Statement on Form S-4, File No. 333-00118)
4.3 Form of Warrant to Purchase Common Stock (included in Exhibit 4.2)
4.4 Indenture, dated as of April 20, 1995, by and between NTL Communications Corp. and Chemical Bank as Trustee, with respect to the 12-3/4% Senior Notes (Incorporated by reference to the Registration Statement on Form S-4, File No. 33-92794)
4.5 Indenture, dated as of January 30, 1996, by and between NTL Communications Corp. and Chemical Bank as Trustee, with respect to the 11-1/2% Senior Notes (Incorporated by reference to the Registration Statement on Form S-4, File No. 333-00118)
4.6 First Supplemental Indenture, dated as of January 23, 1996, by and among NTL Communications Corp. and Chemical Bank, as Trustee, with respect to the 10% Notes (Incorporated by reference to the Registration Statement on Form S-4, File No. 333-00118)
4.7 Indenture, dated as of February 12, 1997, by and between NTL Communications Corp. and The Chase Manhattan Bank, as Trustee, with respect to the 10% Senior Notes (Incorporated by reference to the 1996 Form 10-K, filed by NTL Communications (File No. 0-22616) on March 28, 1997)
4.8 Indenture, dated as of March 13, 1998, by and between NTL Communications Corp. and The Chase Manhattan Bank, as Trustee, with respect to the 9-1/2% Senior Notes (Incorporated by reference to the 1997 Form 10-K filed by NTL Communications (File No. 0-22616) on March 30, 1998)
4.9 Indenture, dated as of March 13, 1998, by and between NTL Communications Corp. and The Chase Manhattan Bank, as Trustee, with respect to the 9-3/4% Senior Deferred Coupon Notes (Incorporated by reference to the 1997 Form 10-K filed by NTL Communications (File No. 0-22616) on March 30, 1998)
4.10 Indenture, dated as of March 13, 1998, by and between NTL Communications Corp. and The Chase Manhattan Bank, as Trustee, with respect to the 10-3/4% Senior Deferred Coupon Notes (Incorporated by reference to the 1997 Form 10-K filed by NTL Communications (File No. 0-22616) on March 30, 1998)
4.11 Indenture, dated as of November 2, 1998, by and among NTL Communications Corp. and The Chase Manhattan Bank, as Trustee, with respect to the 11-1/2% Senior Notes due 2008 (Incorporated by reference to the 1998 Form 10-K filed by NTL Communications (File No. 0-22616) on March 30, 1999)
4.12 Indenture, dated as of November 6, 1998, by and among NTL Communications Corp. and The Chase Manhattan Bank, as Trustee, with respect to the 12-3/8% Senior Deferred Coupon Notes due 2008 (Incorporated by reference to the 1998 Form 10-K filed by NTL Communications (File No. 0-22616) on March 30, 1999)
4.13 Indenture, dated as of December 16, 1998, by and among NTL Communications Corp. and The Chase Manhattan Bank, as Trustee, with respect to the 7% Convertible Subordinated Notes due 2008 (Incorporated by reference to the 1998 Form 10-K filed by NTL Communications (File No. 0-22616) on March 30,1999)
4.14 First Supplemental Indenture, dated as of March 31, 1999, between NTL Incorporated, NTL Communications Corp. and The Chase Manhattan Bank (Trustee), with respect to the 7% Convertible Subordinated Notes due 2008 ($600,000,000 principal amount) (Incorporated by reference to the Registration Statement on Form S-4, File No. 333-72335)
4.15 Second Supplemental Indenture, dated as of March 16, 2000, between NTL Incorporated, NTL Communications Corp. (formerly NTL Incorporated) and The Chase Manhattan Bank (Trustee), with respect to the 7% Convertible Subordinated Notes due 2008 (Incorporated by reference to the Registration Statement on Form S-3/A (File No. 333-42792), filed on August 30, 2000)
4.16 Third Supplemental Indenture, dated as of May 17, 2000, between NTL Incorporated, NTL Communications Corp. (formerly NTL Incorporated) and The Chase Manhattan Bank (Trustee), with respect to the 7% Convertible Subordinated Notes due 2008 (Incorporated by reference to the Registration Statement on Form S-3/A (File No. 333-42792), filed on August 30, 2000)
4.17 Indenture, dated as of April 14, 1999, between NTL Communications Corp. (Issuer) and The Chase Manhattan Bank (Trustee), with respect to the 9-3/4% Senior Deferred Coupon Notes due 2009 (pound sterling 330,000,000 principal amount) (Incorporated by reference to the Registration Statement on Form S-4, File No. 333-78405)
4.18 Indenture, dated as of February 6, 1998, between Diamond Holdings plc (Issuer), Diamond Cable Communications plc (Guarantor), and The Bank of New York (Trustee), with respect to the 10% Senior Notes due February 1, 2008 (pound sterling 135,000,000 principal amount) and 9-1/8% Senior Notes due February 1, 2008 (pound sterling 110,000,000 principal amount) (Incorporated by reference to Diamond Cable Communications plc's Registration Statement on Form S-4, File No. 333-48413)
4.19 Indenture, dated as of February 27, 1997, between Diamond Cable Communications plc (Issuer) and The Bank of New York (Trustee), with respect to the 10-3/4% Senior Discount Notes due February 15, 2007 ($420,500,000 principal amount) (Incorporated by reference to Diamond Cable Communications plc's Registration Statement on Form S-4, File No. 333-25193)
4.20 Indenture, dated as of December 15, 1995, between Diamond Cable Communications plc (Issuer) and The Bank of New York (Trustee), with respect to the 11-3/4% Senior Discount Notes due December 15, 2005 (Incorporated by reference to Diamond Cable Communications plc's Registration Statement on Form S-1, File No. 33-98374)
4.21 Indenture, dated as of November 11, 1995, between Comcast UK Cable Partners Limited and Bank of Montreal Trust Company with respect to the 11.20% Senior Discount Debentures due 2007 (Incorporated by reference to the Registration Statement on Form S-1 of NTL Triangle LLC (File No. 33-96932) declared effective November 9, 1995)
4.22 Indenture, dated as of September 28, 1994, between Diamond Cable Communications plc (Issuer) and The Bank of New York (Trustee), with respect to the 13-1/4% Senior Discount Notes due September 30, 2004 (Incorporated by reference to Diamond Cable Communications plc's Registration Statement on Form S-1, File No. 33-83740)
4.23 First Supplemental Indenture, dated as of March 31, 1996, between Diamond Cable Communications plc (Issuer) and The Bank of New York (Trustee) (Incorporated by reference to Diamond Cable Communications plc's Registration Statement on Form S-1, File No. 33-83740)
4.24 Indenture, dated as of November 24, 1999, between NTL Communications Corp. (Issuer) and The Chase Manhattan Bank (Trustee), with respect to the 9-1/4% Senior Notes due 2006 (euro 250,000,000 principal amount) (Incorporated by reference to the Registration Statement on Form S-4, File No.333-95267)
4.25 Indenture, dated as of November 24, 1999, between NTL Communications Corp. (Issuer) and The Chase Manhattan Bank (Trustee), with respect to the 9-7/8% Senior Notes Due 2009 (euro 350,000,000 principal amount) (Incorporated by reference to the Registration Statement on Form S-4, File No. 333-95267)
4.26 Indenture, dated as of November 24, 1999, between NTL Communications Corp. (Issuer) and The Chase Manhattan Bank (Trustee), with respect to the 11-1/2% Senior Deferred Coupon Notes due 2009 (euro 175,000,000 principal amount) (Incorporated by reference to the Registration Statement on Form S-4, File No. 333-95267)
4.27 Indenture, dated as of December 22, 1999, between NTL Incorporated (Issuer) and The Chase Manhattan Bank (Trustee), with respect to the 5-3/4% Convertible Subordinated Notes Due 2009 ($1,200,000,000 principal amount) (Incorporated by reference to the 1999 Form 10-K filed by NTL Incorporated (File No. 000-25691) on March 17, 2000)
4.28 First Supplemental Indenture, dated as of May 17, 2000, between NTL Incorporated and The Chase Manhattan Bank (Trustee) (Incorporated by reference to the Registration Statement on Form S-3/A (File No. 333-36434), filed on July 14, 2000)
4.29 Indenture, dated as of October 2, 2000, between NTL Communications Corp. (Issuer) and The Chase Manhattan Bank (Trustee), with respect to the 11-7/8% Senior Notes due 2010 (Incorporated by reference to the Registration Statement on Form S-4 (File No. 333-48648), filed on October 26, 2000)
4.30 Indenture, dated as of January 24, 2001, between NTL Communications Corp. (Issuer) and The Chase Manhattan Bank (Trustee), with respect to the 12-3/8% Senior Notes due 2008 (Incorporated by reference to the Registration Statement on Form S-4 (File No. 333-55288), filed on February 9, 2001)
4.31 Indenture, dated as of April 14, 1999, between NTL Communications Corp. (Issuer) and The Chase Manhattan Bank (Trustee), with respect to the 9-3/4% Senior Notes due 2009 (Incorporated by reference to the Registration Statement
4.32 Registration Rights Agreement, dated as of December 16, 1998 by and among NTL Communications Corp. and Donaldson, Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co., Chase Securities Inc., Salomon Smith Barney Inc, BT Alex. Brown Incorporated and Warburg Dillon Read LLC with respect to the 7% Convertible Subordinated Notes due 2008. (Incorporated by reference to the 1998 Form 10-K filed by NTL Communications (File No. 0-22616) on March 30, 1999)
4.33 Registration Rights Agreement, dated as of January 24, 2001, by and among NTL Communications Corp. and Morgan Stanley & Co. International Limited, J.P. Morgan Securities Ltd., Goldman Sachs International, Bank of America International Limited, BNP Paribas Securities Corp., CIBC World Markets plc and the Royal Bank of Scotland plc (Incorporated by reference to NTL Communication Corp.'s Registration Statement on Form S-4 (File No. 333-55288), filed on February 9, 2001)
4.34 Registration Rights Agreement, dated as of February 8, 2001, by and among NTL Communications Corp. and Morgan Stanley & Co. International Limited, J.P. Morgan Securities Ltd., Goldman Sachs International, Bank of America International Limited, BNP Paribas Securities Corp., CIBC World Markets plc and the Royal Bank of Scotland plc (Incorporated by reference to NTL Communication Corp.'s Registration Statement on Form S-4 (File No. 333-55288), filed on February 9, 2001)
4.35 Rights Agreement entered into by NTL Incorporated and Continental Stock Transfer & Trust Company (Incorporated by reference to Exhibit 4.2, to the Registration Statement on Form S-1, File No. 33-63570)
4.35(a) Amendment No. 1 to the Rights Agreement, dated as of March 31, 1999, between NTL Incorporated and Continental Stock Transfer & Trust Company, as Rights Agent. (Incorporated by reference to the Registration Statement on Form S-8, File No. 333-76601)
4.35(b) Amendment No. 2 to the Rights Agreement, dated as of October 23, 1999, between NTL Incorporated and Continental Stock Transfer & Trust Company, as Rights Agent (Incorporated by reference to the 1999 Form 10-K Incorporated (File No. 000-25691), filed on March 17, 2000)
4.35(c) Amendment No. 3 to the Rights Agreement, dated as of March 28, 2000, between NTL Incorporated and Continental Stock Transfer & Trust Company, as Rights Agent*
4.35(d) Amendment No. 4 to the Rights Agreement, dated as of May 17, 2000, between NTL Incorporated and Continental Stock Transfer & Trust Company, as Rights Agent*
4.35(e) Amendment No. 5 to the Rights Agreement, dated as of May 25, 2000, between Incorporated and Continental Stock Transfer & Trust Company, as Rights Agent*
10.1 Compensation Plan and Agreements, as amended and restated effective June 3, 1997 (Incorporated by reference to the 1997 Form 10-K filed by NTL Communications (File No. 0-22616) on March 30, 1998)
10.2 Rules of the NTL Sharesave Plan, adopted by NTL Incorporated on October 28, 1997 (Incorporated by reference to the 1998 Form 10-K filed by NTL Communications (File No. 0-22616) on March 30, 1999)
10.3 Form of Director and Officer Indemnity Agreement (together with a schedule of executed Indemnity Agreements) (Incorporated by reference to the 1999 Form 10-K (File No. 000-25691), filed on March 17, 2000)
10.4 1998 Non-Qualified Stock Option Plan, as Amended and Restated October 1998 (Incorporated by reference to the 1998 Form 10-K filed by NTL Communications (File No. 0-22616) on March 30, 1999)
10.5 Bridge Loan Agreement, dated as of March 17, 1999, among NTL Incorporated the Lenders named therein and Goldman Sachs Credit Partners L.P. (Incorporated by reference to the 1998 Form 10-K filed by NTL Communications (File No. 0-22616) on March 30, 1999)
10.6 Agreement, dated August 14, 1998, among TeleWest Communications PLC, TeleWest Communications Holdings Limited, NTL (Bermuda) Limited, and NTL Incorporated (Incorporated by reference to the Form 8-K, filed by NTL Communications (File No. 0-22616) on August 18, 1998)
10.7 Note Purchase Agreement, dated as of February 4, 2000, between NTL Incorporated and Morgan Stanley and Co. Incorporated re: Senior Increasing Rate Notes due 2001 (pound sterling 2,376,000,000 principal amount) (Incorporated by reference to the Proxy Statement, filed February 11, 2000)
10.8 Credit Agreement, dated as of May 30, 2000, between NTL Communications Corp., NTL (UK) Group, Inc., NTL Communications Limited, Morgan Stanley Dean Witter Bank Limited and Chase Manhattan PLC*
10.9 Credit Agreement relating to the acquisition of Cable & Wireless Communications (Holdings) PLC, dated as of May 30, 2000, between NTL Communications Limited, NTL Business Limited, NTL Communications Corp., Chase Manhattan PLC and Morgan Stanley Dean Witter Limited, Chase Manhattan International Limited*
23 Consent of Ernst & Young LLP*
- ------------ * Filed herewith.
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 COMMUNICATIONS CORP.
By: /s/ Barclay Knapp ----------------- President and Chief Executive Officer (Principal Executive Officer)
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.
Form 10-K--Item 14(a)(1) and (2)
NTL Communications Corp. and Subsidiaries
Index to Consolidated Financial Statements and Financial Statement Schedules
The following consolidated financial statements of NTL Communications Corp. and subsidiaries are included in Item 8:
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore have been omitted.
Report of Independent Auditors
The Board of Directors and Shareholder NTL Communications Corp.
We have audited the consolidated balance sheets of NTL Communications Corp. and Subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, shareholder's (deficiency) equity and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
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, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of NTL Communications Corp. and Subsidiaries at 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 schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
New York, New York March 2, 2001
NTL Communications Corp. and Subsidiaries Consolidated Balance Sheets (dollars in millions)
NTL Communications Corp. and Subsidiaries Consolidated Balance Sheets (continued) (dollars in millions)
See accompanying notes.
NTL Communications Corp. and Subsidiaries Consolidated Statements of Operations (dollars in millions)
See accompanying notes.
NTL Communications Corp. and Subsidiaries Consolidated Statement of Shareholder's Equity (Deficiency) (dollars in millions)
See accompanying notes.
NTL Communications Corp. and Subsidiaries Consolidated Statement of Shareholder's Equity (Deficiency) (continued) (dollars in millions)
See accompanying notes.
NTL Communications Corp. and Subsidiaries Consolidated Statements of Cash Flows (dollars in millions)
NTL Communications Corp. and Subsidiaries Consolidated Statements of Cash Flows (continued) (dollars in millions)
See accompanying notes.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements
1. CORPORATE RESTRUCTURING AND BUSINESS
On April 1, 1999, NTL Incorporated completed a corporate restructuring to create a holding company structure. The holding company restructuring was accomplished through a merger so that all the stockholders of NTL Incorporated at the effective time of the merger became stockholders of the new holding company, and NTL Incorporated became a subsidiary of the new holding company. The new holding company took the name NTL Incorporated and the holding company's subsidiary simultaneously changed its name to NTL Communications Corp. The "Company" refers to NTL Incorporated and subsidiaries up to and including March 31, 1999, and to NTL Communications Corp. and subsidiaries beginning April 1, 1999. In addition, in April 1999, the Company distributed $500 million to NTL Incorporated, principally to finance the acquisition of the Australian National Transmission Network.
On May 18, 2000, NTL Incorporated completed a second corporate restructuring to create a holding company structure in connection with the acquisition of certain assets of Cable & Wireless Communications plc ("CWC"). The holding company restructuring was accomplished through a merger so that all the stockholders of NTL Incorporated at the effective time of the merger became stockholders of the new holding company, and NTL Incorporated became a subsidiary of the new holding company. The new holding company has taken the name NTL Incorporated and the holding company's subsidiary simultaneously changed its name to NTL (Delaware), Inc. ("NTL Delaware"). The Company is a wholly-owned subsidiary of NTL Delaware.
The Company, through its subsidiaries, owns and operates broadband communications networks for telephone, cable television and Internet services in the United Kingdom and Ireland, and transmission networks for television and radio broadcasting in the United Kingdom. Based on revenues and identifiable assets, the Company's predominant lines of business are consumer services, business services and broadcast transmission and related services in the United Kingdom. Consumer services include telephony, cable television, Internet access and interactive services. Business services include telephony, national and international wholesale carrier telecommunications, and radio communications services for the emergency services community. Broadcast transmission and related services include digital and analog television and radio broadcasting, rental of antenna space on the Company's owned and leased towers and sites and associated services, and satellite and media services.
2. 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 amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and entities where the Company's interest is greater than 50%. Significant intercompany accounts and transactions have been eliminated in consolidation.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the current year presentation.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's foreign subsidiaries have been translated into U.S. dollars 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 respective balance sheet dates. Statement of operations amounts have been translated using the average exchange rates for the respective years. The translation 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.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
Cash equivalents are short-term highly liquid investments purchased with a maturity of three months or less. Cash equivalents were $211.3 million and $605.3 million at December 31, 2000 and 1999, respectively, which consisted primarily of U.S. Treasury bills (2000 only), bank time deposits and corporate commercial paper. At December 31, 2000 and 1999, $57.2 million and $574.8 million, respectively, of the cash equivalents were denominated in foreign currencies.
MARKETABLE SECURITIES
Marketable securities were classified as available-for-sale, which are carried at fair value. Unrealized holding gains and losses on securities, net of tax, are carried as a component of accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Realized gains and losses and declines in value judged to be other than temporary will be included in interest income. The cost of securities sold or matured is based on the specific identification method. Interest on securities is included in interest income.
Marketable securities at December 31, 1999 consisted of corporate commercial paper. During the years ended December 31, 2000, 1999 and 1998, there were no realized gains or losses on sales of securities. All of the marketable securities as of December 31, 1999 had a contractual maturity of less than one year.
FIXED ASSETS
Fixed assets are stated at cost, which includes amounts capitalized for labor and overhead expended in connection with the design and installation of operating equipment. Depreciation is computed by the straight-line method over the estimated useful lives of the assets. Estimated useful lives are as follows: operating equipment - 5 to 40 years and other equipment - 3 to 40 years.
Long-lived 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.
INTANGIBLE ASSETS
Intangible assets include goodwill, license acquisition costs and customer lists. 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 periods benefited of 10, 15 or 30 years. License acquisition costs represent the portion of 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, which vary from approximately two years to 23 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 Company continually reviews the recoverability of the carrying value of these assets using the same methodology that it uses for the evaluation of its other long-lived assets.
EQUITY METHOD INVESTMENTS
All investments in which the Company has the ability to exercise significant influence over the investee, but less than a controlling voting interest, are accounted for using the equity method. The investment in Cable London PLC was 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 difference between the Company's recorded investment and its proportionate interest in the book value of the investees' net assets are being amortized on a straight-line basis over 10 years
DEFERRED FINANCING COSTS
Deferred financing costs are incurred in connection with the issuance of debt and are amortized over the term of the related debt.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CAPITALIZED INTEREST
Interest is capitalized as a component of the cost of fixed assets constructed. In 2000, 1999 and 1998, interest of $81.4 million, $41.8 million and $27.8 million, respectively, was capitalized.
REVENUE RECOGNITION
Revenues are 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. Rental revenues are recognized when earned on a monthly basis. Installation and maintenance service revenues are recognized when the performance of the service has been completed.
CABLE TELEVISION SYSTEM COSTS, EXPENSES AND REVENUES
The Company accounts for costs, expenses and revenues applicable to the construction and operation of its broadband communications networks in accordance with SFAS No. 51, "Financial Reporting by Cable Television Companies."
ADVERTISING EXPENSE
The Company charges the cost of advertising to expense as incurred. Advertising costs were $51.1 million, $35.8 million and $34.0 million in 2000, 1999 and 1998, respectively.
STOCK-BASED COMPENSATION
The Company adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." The Company applied APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for the stock option plans in which it participates.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses financial instruments to hedge a portion, but not all, of its exposure from movements in the British pound/U.S. dollar exchange rate. Gains and losses on these instruments are deferred and recognized in the statement of operations when the related hedged transactions are recognized. To date, premiums paid for these contracts have not been material. The Company does not use derivative financial instruments for trading or speculative purposes
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.
On January 1, 2001, the Company recorded all of its outstanding derivative instruments at their fair value. The outstanding derivative instruments were comprised of cross currency swaps to hedge exposure to movements in the British pound/U.S. dollar exchange rate. The aggregate fair value on January 1, 2001 was a liability of $2.2 million, which was recorded as other comprehensive loss.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
4. CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
NEED FOR ADDITIONAL FINANCING
The Company will require additional financing in the future. There can be no assurance that the required financing will be obtainable on acceptable terms.
CONCENTRATIONS
The Company's broadcast transmission and related services business is substantially dependent upon contracts with a small group of companies for the right to broadcast their programming, and upon a site sharing agreement for a large number of its transmission sites. The loss of any one of these contracts or the site sharing agreement could have a material adverse effect on the business of the Company.
CURRENCY RISK
To the extent that the Company obtains financing in U.S. dollars and incurs construction and operating costs in various other currencies, it will encounter currency exchange rate risks. In addition, the Company's revenues are generated in foreign currencies while its interest and principal obligations with respect to most of the Company's existing indebtedness are payable in U.S. dollars.
5. FIXED ASSETS
Fixed assets consist of:
Depreciation expense for the years ended December 31, 2000, 1999 and 1998 was $605.0 million, $475.1 million and $207.5 million, respectively.
6. INTANGIBLE ASSETS
Intangible assets consist of:
The Company made the following acquisitions in 1999:
In March 1999, the Company acquired Diamond Cable Communications plc ("Diamond"). The Company issued an aggregate of 19.9 million shares of common stock in exchange for each ordinary share and deferred share of Diamond. The Company's common stock was valued at $971.4 million, the fair value at the time of the announcement. In addition, the Company issued options to purchase 191,000 shares of the Company's common stock to holders of Diamond options, which were valued at $6.6 million. The Company assumed Diamond's debt including five different notes with an aggregate principal amount at maturity of $1,564.6 million. Diamond is a provider of telephone, cable television and Internet services in England.
6. INTANGIBLE ASSETS (CONTINUED)
In July 1999, the Company acquired Cablelink Limited ("Cablelink") for IR pound sterling 535.2 million ($692.5 million), of which IR pound sterling 455.2 million ($589.0 million) was paid in cash and IR pound sterling 80.0 million ($103.5 million) was paid through the issuance of Variable Rate Redeemable Guaranteed Loan Notes due 2002. Cablelink provides multi-channel television and information services in Dublin, Galway and Waterford, Ireland.
These acquisitions were accounted for as purchases, and accordingly, the net assets and results of operations of the acquired businesses have been included in the consolidated financial statements from the dates of acquisition. The aggregate purchase price of $1,685.1 million, including costs incurred of $14.6 million, plus the fair value of liabilities assumed net of tangible assets acquired aggregated $1,992.6 million, which has been allocated as follows: $143.5 million to license acquisition costs, $130.9 million to customer lists and $1,718.2 million to goodwill.
The pro forma unaudited consolidated results of operations for the year ended December 31, 1999 assuming consummation of the above mentioned transactions as of January 1, 1999 is as follows (in millions):
Amortization of intangibles and other assets charged to expense for the years ended December 31, 2000, 1999 and 1998 was $262.6 million, $287.8 million and $58.6 million respectively.
7. INVESTMENT IN CABLE LONDON PLC
NTL (Triangle) LLC ("NTL Triangle") (formerly known as NTL (Bermuda) Limited), a wholly-owned subsidiary of the Company, owned a 50% interest in Cable London plc ("Cable London"). Pursuant to an agreement with Telewest Communications plc ("Telewest") relating to NTL Triangle's and Telewest's respective 50% ownership interests in Cable London, in November 1999 Telewest purchased all of NTL Triangle's shares of Cable London for pound sterling 428.0 million ($692.5 million) in cash. The Company recorded a gain of $493.1 million on the sale. The sale of the Cable London interest was an "Asset Sale" for purposes of the Company's Indentures for certain of its notes. The Company used an amount equal to the proceeds from the sale to invest in "Replacement Assets" by November 2000.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
8. LONG-TERM DEBT
Long-term debt consists of:
(a) 12-3/4% Notes due April 15, 2005, principal amount at maturity of $277.8 million, interest payable semiannually from October 15, 2000, redeemable at the Company's option on or after April 15, 2000;
(b) 11-1/2% Notes due February 1, 2006, principal amount at maturity of $1,050.0 million, interest payable semiannually beginning on August 1, 2001, redeemable at the Company's option on or after February 1, 2001;
(c) 10% Notes due February 15, 2007, principal amount at maturity of $400.0 million, interest payable semiannually from August 15, 1997, redeemable at the Company's option on or after February 15, 2002;
(d) 9-1/2% Sterling Notes due April 1, 2008, principal amount at maturity of pound sterling 125.0 million ($186.9 million), interest payable semiannually from October 1, 1998, redeemable at the Company's option on or after April 1, 2003;
(e) 10-3/4% Sterling Notes due April 1, 2008, principal amount at maturity of pound sterling 300.0 million ($448.7 million), interest payable semiannually beginning on October 1, 2003, redeemable at the Company's option on or after April 1, 2003;
(f) 9-3/4% Notes due April 1, 2008, principal amount at maturity of $1,300.0 million, interest payable semiannually beginning on October 1, 2003, redeemable at the Company's option on or after April 1, 2003;
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
8. LONG-TERM DEBT (CONTINUED)
(g) 9-3/4% Sterling Notes due April 15, 2009, principal amount at maturity of pound sterling 330.0 million ($493.5 million), interest payable semiannually beginning on October 15, 2004, redeemable at the Company's option on or after April 15, 2004;
(h) 11-1/2% Notes due October 1, 2008, principal amount at maturity of $625.0 million, interest payable semiannually from April 1, 1999, redeemable at the Company's option on or after October 1, 2003;
(i) 12-3/8% Notes due October 1, 2008, principal amount at maturity of $450.0 million, interest payable semiannually beginning on April 1, 2004, redeemable at the Company's option on or after October 1, 2003;
(j) 7% Convertible Notes due December 15, 2008, principal amount at maturity of $599.3 million, interest payable semiannually from June 15, 1999, convertible into shares of NTL Incorporated common stock at a conversion price of $39.20 per share, redeemable at the Company's option on or after December 15, 2001 (there are approximately 15.3 million shares of NTL Incorporated common stock reserved for issuance upon conversion);
(k) Variable Rate Redeemable Guaranteed Notes due January 5, 2002, principal amount at maturity of IR pound sterling 60.0 million after redemption of IR pound sterling 20.0 million ($25.7 million) in 1999 using cash held in escrow, remainder redeemed in March 2000 ($73.7 million) using cash held in escrow;
(l) 9-1/4% Euro Notes due November 15, 2006, principal amount at maturity of euro 250.0 million, ($234.7 million), interest payable semiannually from May 15, 2000;
(m) 9-7/8% Euro Notes due November 15, 2009, principal amount at maturity of euro 350.0 million, ($328.6 million), interest payable semiannually from May 15, 2000 redeemable at the Company's option on or after November 15, 2004;
(n) 11-1/2% Deferred Euro Notes due November 15, 2009, principal amount at maturity of euro 210.0 million ($197.1 million), interest payable semiannually beginning on May 15, 2005, redeemable at the Company's option on or after November 15, 2004;
(o) 11-7/8% Notes due October 1, 2010, issued in October 2000, principal amount at maturity of $500.0 million, interest payable semiannually beginning on April 1, 2001, redeemable at the Company's option on or after October 1, 2005;
(p) 11.2% Debentures due November 15, 2007, principal amount at maturity of $517.3 million, interest payable semiannually beginning on May 15, 2001, redeemable at NTL Triangle's option after November 15, 2000;
(q) 13-1/4% Notes due September 30, 2004, principal amount at maturity of $285.1 million, interest payable semiannually from March 31, 2000, redeemable at Diamond's option on or after September 30, 1999;
(r) 11-3/4% Notes due December 15, 2005, principal amount at maturity of $531.0 million, interest payable semiannually beginning on June 15, 2001, redeemable at Diamond's option on or after December 15, 2000;
(s) 10-3/4% Notes due February 15, 2007, principal amount at maturity of $420.5 million, interest payable semiannually beginning on August 15, 2002, redeemable at Diamond's option on or after December 15, 2002;
(t) 10% Sterling Notes due February 1, 2008, issued by Diamond Holdings plc, principal amount at maturity of pound sterling 135.0 million ($201.9 million), interest payable semiannually from August 1, 1998, redeemable at Diamond's option on or after February 1, 2003; and
(u) 9-1/8% Notes due February 1, 2008, issued by Diamond Holdings plc, principal amount of $110.0 million, interest payable semiannually from August 1, 1998, redeemable at Diamond's option on or after February 1, 2003.
The indentures governing the notes contain restrictions relating to, among other things: (i) incurrence of additional indebtedness and issuance of preferred stock, (ii) dividend and other payment restrictions and (iii) mergers, consolidations and sales of assets.
During 2000, 1999 and 1998, the Company recognized $473.1 million, $451.4 million and $232.7 million, respectively, of original issue discount as interest expense.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
8. LONG-TERM DEBT (CONTINUED)
In addition to the notes described above, a subsidiary of the Company has the following bank credit agreements outstanding:
(v) In May 2000, NTL Communications Limited ("NTLCL"), a wholly-owned indirect subsidiary of the Company and NTL Business Limited ("NTL Business"), a wholly-owned subsidiary of NTL Delaware, entered into a pound sterling 2,500.0 million ($3,738.8 million) credit agreement in connection with the acquisition by NTL Incorporated of the consumer cable telephone, Internet and television operations of CWC in the United Kingdom ("ConsumerCo"). As of December 31, 2000, NTLCL had pounds sterling 250.9 million ($375.3 million) and NTL Business had pound sterling 2,026.3 million ($3,030.3 million) outstanding under the credit agreement. Interest is payable at least every six months at LIBOR plus a margin rate of 2.25% per annum, which is subject to adjustment based on the ratio of EBITDA to finance charges of the UK Group. The effective rate of interest at December 31, 2000 was 8.283%. The unused portion of the commitment is available for refinancing ConsumerCo indebtedness and for working capital requirements of the UK Group. For purposes of this credit agreement, Diamond and subsidiaries and NTL Triangle and subsidiaries and certain other entities are excluded from the UK Group. The unused portion of the commitment is subject to a commitment fee of 0.75% payable quarterly, which is reduced to 0.50% when over 50% of the commitment is utilized. Principal is due in six quarterly installments beginning on June 30, 2004. The credit agreement contains various financial and other covenants with respect to the UK Group, and restrictions on dividends and distributions by the UK Group.
NTLCL entered into a pound sterling 1,300.0 million ($1,944.2 million) credit agreement with a group of banks dated May 30, 2000. Pursuant to the credit agreement, in connection with the issuance in October 2000 of $500.0 million aggregate principal amount of the Company's 11-7/8% notes, the issuance in January 2001 of euro 200.0 million aggregate principal amount of the Company's 12-3/8% Euro notes and the issuance in February 2001 of euro 100.0 million aggregate principal amount of the Company's 12-3/8% Euro notes, the commitment was reduced by pound sterling 255.1 million ($381.4 million). As of December 31, 2000, there were no amounts borrowed under this agreement. NTLCL and other members of the UK Group (as defined above) may utilize the proceeds under this credit agreement to finance the working capital requirements of the UK Group, provided that in no event shall the proceeds be used for a purpose other than to finance the construction, capital expenditure and working capital needs of a cable television or telephone or telecommunications business, or a related business, in the United Kingdom or Ireland. Interest is payable at least every six months at LIBOR plus a margin rate of 4.5% per annum. The margin rate shall increase by 0.5% on the three month anniversary of the initial advance and by an additional 0.5% on each subsequent three month anniversary, up to a maximum total interest rate of 16% per annum. The unused portion of the commitment is subject to a commitment fee of 0.75% payable quarterly. Principal is due in full on March 31, 2006. The credit agreement contains various financial and other covenants with respect to the UK Group, and restrictions on dividends and distributions by the UK Group.
In September 1999, NTL Triangle repaid at maturity the $21.5 million due under its notes payable to Comcast U.K. Holdings, Inc.
In connection with the Cablelink acquisition, the Company issued $704.6 million principal amount Senior Increasing Rate Notes due 2000. In November 1999, the Company received net proceeds of $720.7 million from the issuance of the 9-1/4% Euro Notes, the 9-7/8% Euro Notes and the 11-1/2% Deferred Euro Notes, of which $716.5 million was used to repay the Senior Increasing Rate Notes plus accrued interest. The Company recorded an extraordinary loss from the early extinguishment of the notes of $3.0 million in 1999.
In connection with an acquisition, the Company borrowed an aggregate of pound sterling 475.0 million under a bank credit facility. In November 1998, the Company received net proceeds of $849.0 million from the issuance of the 11-1/2% Notes and the 12-3/8% Notes, a substantial portion of which was used to repay the $799.0 million outstanding under the bank loan. The Company recorded an extraordinary loss from the early extinguishment of the bank loan of $18.6 million in 1998.
In October 1998, the Company redeemed its 10-7/8% Senior Deferred Coupon Notes with an accreted value of $211.0 million for cash of $218.0 million. The Company recorded an extraordinary loss from the early extinguishment of the 10-7/8% Notes of $12.1 million in 1998, which included approximately $4.8 million of unamortized deferred financing costs.
In 1998, the Company required consents from the holders of some of its notes to modify certain indenture provisions in order to proceed with an acquisition. In October 1998, the Company paid $11.3 million in consent payments and issued warrants to purchase 1.2 million shares of common stock in lieu of additional consent payments of $10.1 million.
The NTLCL bank credit facilities, as well as the NTL Triangle and Diamond notes restrict the payment of cash dividends and loans to the Company. At December 31, 2000, restricted net assets were approximately $5,064.1 million.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
8. LONG-TERM DEBT (CONTINUED)
Long-term debt repayments are due as follows (in millions):
Year ending December 31: 2001 $3.4 2002 1.5 2003 1.1 2004 300.9 2005 1,170.1 Thereafter 8,066.8 --------- $9,543.8 =========
In January and February 2001, the Company issued euro 300.0 million ($281.6 million) aggregate principal amount of 12-3/8% Senior Euro Notes due February 1, 2008. The Company received proceeds of approximately $275.3 million after underwriters' discount and commissions and other fees. Interest is payable semiannually in cash at a rate of 12-3/8% per annum beginning on August 1, 2001. These notes may not be redeemed by the Company except in limited circumstances.
On February 21, 2001, as required by the NTLCL and NTL Business credit agreement, the Company completed a transaction whereby it acquired the entire issued share capital of NTL (CWC Holdings) Limited (the entity that owns ConsumerCo) from NTL Incorporated and the entire issued share capital of NTL Business from NTL Delaware in exchange for shares of its common stock. As a result of this transaction, ConsumerCo and NTL Business became subsidiaries of the Company.
9. OTHER CHARGES INCLUDING RESTRUCTURING CHARGES
Other charges of $82.0 million in 2000 include restructuring costs of $55.2 million and information technology integration costs of $26.8 million. Restructuring costs relate to the NTL Incorporated's announcement in November 2000 of its completion of a consolidation review. Based on a comprehensive review of the combined company following the acquisition of ConsumerCo and the integration of several other acquired businesses, NTL Incorporated identified significant efficiency improvements and cost savings. The restructuring provision includes employee severance and related costs of $39.5 million for approximately 1,900 employees to be terminated and lease exit costs of $15.7 million. As of December 31, 2000, approximately 290 of the employees had been terminated. None of the provision had been utilized through December 31, 2000. The information technology integration costs of $26.8 million were incurred for the integration of acquired companies' information technology.
Other charges of $16.2 million in 1999 were incurred for the cancellation of certain contracts. Other charges of $4.2 million reversed in 1998 were the result of changes to a restructuring reserve that was recorded in 1997.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
10. INCOME TAXES
The benefit for income taxes consists of the following:
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 the deferred tax liabilities and assets are as follows:
At December 31, 2000, the Company had a valuation allowance against its deferred tax assets to the extent it was not more likely than not that such assets would be realized in the future.
At December 31, 2000, the Company had net operating loss carryforwards of approximately $550.0 million for U.S. federal income tax purposes that expire in varying amounts commencing in 2009. The Company also has United Kingdom net operating loss carryforwards of approximately $1,300.0 million that have no expiration date. Pursuant to United Kingdom law, these losses are only available to offset income of the separate entity that generated the loss.
In 2000, the Internal Revenue Service completed its federal income tax audit of the Company for the years 1993, 1994 and 1995. The audit resulted in a reduction in U.S. net operating loss carryforwards that had no material impact on the Company. The Company is currently undergoing a U. S. federal income tax audit for the years 1996 and 1997. The Company does not expect that the audit adjustments will have a material adverse effect on its financial position, results of operations or cash flows.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
10. INCOME TAXES (CONTINUED)
The reconciliation of income taxes computed at U.S. federal statutory rates to income tax expense is as follows:
11. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets approximate fair value.
Long-term debt: The carrying amounts of the bank credit facility and Variable Rate Notes approximate their fair values. The fair values of the Company's other debt are based on the quoted market prices.
The carrying amounts and fair values of the Company's financial instruments are as follows:
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
11. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The Company has derivative financial instruments for purposes other than trading as follows. In 2000, the Company entered into cross currency swaps to hedge exposure to movements in the British pound/U.S. dollar exchange rate. The notional amount of the cross currency swaps was pounds sterling 135.0 million at December 31, 2000. These swaps have payment dates in 2001 that match interest payment dates for a portion of the Company's notes. The fair value of the swaps at December 31, 2000 was $(2.2) million based on quoted market prices for comparable instruments.
12. RELATED PARTY TRANSACTIONS
The Company provided management, financial, legal and technical services to Cellular Communications International, Inc. ("CCII") and Cellular Communications of Puerto Rico, Inc. ("CCPR"). Certain officers and directors of the Company were officers and directors of CCII and CCPR.
In 1998, the Company charged CCPR, CCII and CoreComm Limited ("CoreComm") (which was formed in 1998 and has certain common officers and directors with the Company) $1.1 million, $1.0 million and $0.3 million, respectively, for direct costs where identifiable and a fixed percentage of its corporate overhead. In the fourth quarter of 1999, CoreComm began charging the Company a percentage of CoreComm's office rent and supplies expense. In 1999, the Company charged CCPR, CCII and CoreComm $0.1 million, $0.4 million and $1.3 million, respectively, for direct costs where identifiable and a fixed percentage of its corporate overhead, net of CoreComm's charges to the Company. Charges to CCPR and to CCII ceased in 1999 due to each of them being acquired and a resulting termination of services. In 2000, the Company charged CoreComm $0.9 million for direct costs where identifiable and a fixed percentage of its corporate overhead, net of CoreComm's charges to the Company. These charges reduced corporate expenses in 2000, 1999 and 1998. 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 methods are reasonable.
The Company obtains billing and software development services from CoreComm. CoreComm billed the Company $5.9 million, $4.6 million and $2.9 million in 2000, 1999 and 1998, respectively, for these services. In addition, CoreComm billed the Company $6.7 million in October 2000 for services to be rendered from January to September 2001. In March 2000, the Company and CoreComm announced that they had entered into an agreement to link their networks in order to create an international Internet backbone. In November 2000, CoreComm billed the Company $9.1 million primarily for usage of the network in 2001.
At December 31, 2000 and 1999, the Company had a payable to CoreComm of $17.1 million and a receivable from CoreComm of $0.5 million, respectively.
13. SHAREHOLDER'S EQUITY
SALES OF PREFERRED STOCK AND WARRANTS
In January 1999, the Company received $500.0 million in cash from Microsoft Corp. ("Microsoft") in exchange for 500,000 shares of the Company's 5.25% Convertible Preferred Stock and warrants to purchase 1.9 million shares of the Company's common stock at an exercise price of $53.76 per share (as adjusted for stock splits in 1999 and 2000).
SERIES PREFERRED STOCK
In February 1997, the Company issued 100,000 shares of its 13% Senior Redeemable Exchangeable Preferred Stock.
In September 1998, the Company issued 125,000 shares of 9.9% Non-voting Mandatorily Redeemable Preferred Stock, Series A (the "Series A Preferred Stock") in connection with an acquisition. Each share of Series A Preferred Stock had a stated value of $1,000. Cumulative dividends accrued at 9.9% of the stated value per share. Dividends were payable when and if declared by the Board of Directors.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
13. SHAREHOLDER'S EQUITY (CONTINUED)
In December 1998, the Company issued 52,000 shares of 9.9% Non-voting Mandatorily Redeemable Preferred Stock, Series B (the "Series B Preferred Stock") in connection with an acquisition. Each share of Series B Preferred Stock had a stated value of $1,000. Cumulative dividends accrued at 9.9% of the stated value per share. Dividends were payable when and if declared by the Board of Directors.
The changes in the number of shares of Series Preferred Stock were as follows:
STOCK OPTIONS
The Company's employees participate in the following NTL Incorporated stock option plans.
There are 3,381,000 shares and 10,396,000 shares of common stock reserved for issuance under the 1991 Stock Option Plan and the 1993 Stock Option Plan, respectively. These plans provide that incentive stock options ("ISOs") be granted at the fair market value of NTL Incorporated's common stock on the date of grant, and nonqualified stock options ("NQSOs") be granted at not less than 85% of the fair market value of NTL Incorporated's common stock on the date of grant. Options are exercisable as to 20% of the shares subject thereto on the date of grant and become exercisable as to an additional 20% of the shares subject thereto on each January 1 thereafter, while the optionee remains an employee of the Company. Options will expire ten years after the date of the grant. No additional options will be granted under these plans.
There are 156,000 shares and 500,000 shares of common stock reserved for issuance under 1991 and 1993 Non-Employee Director Stock Option Plans, respectively. Under the terms of these plans, options will be granted to members of the Board of Directors who are not employees of the Company or any of its affiliates. These plans provide that all options be granted at the fair market value of NTL Incorporated's common stock on the date of grant, and options will expire ten years after the date of the grant. Options are exercisable as to 20% of the shares subject thereto on the date of grant and become exercisable as to an additional 20% of the shares subject thereto on each subsequent anniversary of the grant date while the optionee remains a director of the Company. Options will expire ten years after the date of the grant. No additional options will be granted under these plans.
There are 83,438,000 shares of common stock reserved for issuance under the 1998 Non-Qualified Stock Option Plan, and there are 31,478,000 shares available for issuance at December 31, 2000. The exercise price of a NQSO shall be determined by the Compensation and Option Committee. Options are generally exercisable ratably over five to ten years while the optionee remains an employee of the Company. Options will expire ten years after the date of the grant.
In September 2000, the Board of Directors approved modifications to certain stock options granted to employees in November 1999 through May 2000. Options to purchase an aggregate of approximately 16.5 million shares of NTL Incorporated's common stock with a weighted average exercise price of $64.39 per share were modified such that the exercise price was reduced to $44.50 per share and the vesting schedule was delayed and/or lengthened. This change did not affect the exercise price of options granted to the Chairman of the Board, the Chief Executive Officer and the Company's Directors. In accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations, NTL Incorporated is accounting for these options as a variable plan beginning in September 2000. The Company will recognize non-cash compensation expense for the difference between the quoted market price of NTL Incorporated's common stock and the exercise price of the vested options while the options remain outstanding.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
13. SHAREHOLDER'S EQUITY (CONTINUED)
There were 34.8 million, 6.4 million and 13.9 million options granted under these plans for the years ended December 31, 2000, 1999, and 1998, respectively.
Pro forma information regarding net loss and net loss per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for 2000, 1999 and 1998: risk-free interest rates of 5.30%, 6.81% and 5.02%, respectively, dividend yield of 0%, volatility factor of the expected market price of NTL Incorporated's common stock of .385, .336, and .331, respectively, and a weighted-average expected life of the option of 10 years.
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because NTL Incorporated's stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. Pro forma net loss would have been approximately $1,780.7 million, $802.0 million and $580.7 million for the years ended December 31, 2000, 1999 and 1998, respectively.
14. EMPLOYEE BENEFIT PLANS
Certain subsidiaries of the Company operate defined benefit pension plans in the United Kingdom. The assets of the Plans are held separately from those of the Company and are invested in specialized portfolios under the management of an investment group. The pension cost is calculated using the attained age method. The Company's policy is to fund amounts to the defined benefit plans necessary to comply with the funding requirements as prescribed by the laws and regulations in the United Kingdom.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
14. EMPLOYEE BENEFIT PLANS (CONTINUED)
The components of net pension costs are as follows:
15. LEASES
Leases for buildings, office space and equipment extend through 2031. Total rental expense for the years ended December 31, 2000, 1999 and 1998 under operating leases was $29.6 million, $27.5 million and $29.4 million, respectively.
Future minimum lease payments under noncancellable operating leases as of December 31, 2000 are as follows (in millions):
16. COMMITMENTS AND CONTINGENT LIABILITIES
At December 31, 2000, the Company was committed to pay approximately $162.0 million for equipment and services.
The Company had certain exclusive local delivery operator licenses for Northern Ireland and other franchise areas in the United Kingdom. Pursuant to these licenses, various subsidiaries of the Company were required to make monthly cash payments to the Independent Television Commission ("ITC") during the 15-year license terms. Upon a request by the Company in 1999, the ITC converted all of the Company's fee bearing exclusive licenses to non-exclusive licenses by the end of 1999. In 1999 and 1998, the Company paid $30.1 million and $25.0 million, respectively, in connection with these licenses. Since the Company's liability for the license payments ceased upon the conversion, in 1999 the Company reversed an accrual for franchise fees of $13.6 million.
The Company is involved in certain disputes and litigation arising in the ordinary course of its business. None of these matters are expected to have a material adverse effect on the Company's financial position, results of operations or cash flows.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
17. INDUSTRY SEGMENTS
The Company has four reportable segments: Broadcast Services, Consumer Services, Business Services, and Shared Services. The Broadcast Services segment operates in the United Kingdom and includes digital and analog television and radio broadcasting, rental of antenna space on the Company's owned and leased towers and sites and associated services, and satellite and media services. Consumer Services include telephony, cable television, Internet access and interactive services in regional franchise areas in the United Kingdom and Ireland. The Business Services segment operates primarily in the United Kingdom and includes telephony, national and international wholesale carrier telecommunications, and radio communications services to the emergency services community. Shared Services principally include network and information technology management, finance, human resources and facilities management. Shared Services also includes assets and related depreciation and amortization that are not allocated to another segment. In 1998, Shared Services included OCOM Corporation, a subsidiary that operated long distance and microwave transmission businesses in the United States until June 1998.
In 2000, components of the National Telecoms segment became part of the Broadcast Services segment, and the remainder of National Telecoms was renamed Business Services. The rental of antenna space on the Company's owned and leased towers and sites and associated services, and satellite and media services became components of Broadcast Services. The 1999 and 1998 segment information has been reclassified to conform to the 2000 segments. Also, certain goodwill and related amortization was reclassified to Broadcast Services from Shared Services in all of the periods presented.
The accounting policies of the segments are the same as those described in the Significant Accounting Policies note. The Company's management evaluates segment performance based on various financial and non-financial measurements. The results of operations data utilized in financial measurements are revenues and EBITDA, which is earnings before interest, taxes, depreciation and amortization, corporate expenses, franchise fees, other charges, other gains, foreign currency transactions gains (losses) and extraordinary items. The Company's primary measure of profit or loss is EBITDA. Certain selling, general and administrative expenses are allocated to segments based on revenues. Management does not allocate costs of shared services departments and jointly used assets for purposes of measuring segment performance. The reportable segments are strategic business units that are managed separately and offer different services.
(1) Represents earnings before interest, taxes, depreciation and amortization, franchise fees, other charges, corporate expenses, other gains, foreign currency transaction (losses) gains and extraordinary items. (2) At December 31, 2000, shared assets included $355.0 million of cash, cash equivalents and marketable securities, $418.5 million of goodwill and $896.9 million of other assets. (3) At December 31, 1999, shared assets included $828.6 million of cash, cash equivalents and marketable securities, $788.0 million of goodwill and $545.3 million in other assets.
NTL Communications Corp. and Subsidiaries Notes to Consolidated Financial Statements (continued)
17. INDUSTRY SEGMENTS (CONTINUED)
The reconciliation of segment combined EBITDA to loss before income taxes and extraordinary item is as follows:
18. GEOGRAPHIC INFORMATION
NTL Communications Corp. Schedule I--Condensed Financial Information of Registrant Condensed Balance Sheets (in millions)
See accompanying notes.
NTL Communications Corp. Schedule I--Condensed Financial Information of Registrant (continued) Condensed Statements of Operations (in millions)
See accompanying notes.
NTL Communications Corp. Schedule I--Condensed Financial Information of Registrant (continued) Condensed Statements of Cash Flows (in millions)
See accompanying notes.
NTL Communications Corp. and Subsidiaries Schedule I-Condensed Financial Information of Registrant (continued) Notes to Condensed Financial Statements
1. CORPORATE RESTRUCTURING
On April 1, 1999, NTL Incorporated completed a corporate restructuring to create a holding company structure. The holding company restructuring was accomplished through a merger so that all the stockholders of NTL Incorporated at the effective time of the merger became stockholders of the new holding company, and NTL Incorporated became a subsidiary of the new holding company. The new holding company took the name NTL Incorporated and the holding company's subsidiary simultaneously changed its name to NTL Communications Corp.
On May 18, 2000, NTL Incorporated completed a second corporate restructuring to create a holding company structure in connection with the acquisition of ConsumerCo. The holding company restructuring was accomplished through a merger so that all the stockholders of NTL Incorporated at the effective time of the merger became stockholders of the new holding company, and NTL Incorporated became a subsidiary of the new holding company. The new holding company has taken the name NTL Incorporated and the holding company's subsidiary simultaneously changed its name to NTL (Delaware), Inc. NTL Communications Corp. (the "Company") is a wholly-owned subsidiary of NTL (Delaware), Inc.
2. BASIS OF PRESENTATION
In the Company's condensed financial statements, the Company's investment in subsidiaries is stated at cost plus equity in the undistributed earnings of the subsidiaries. The Company's share of net loss of its subsidiaries is included in net loss using the equity method of accounting. The condensed financial statements should be read in conjunction with the Company's consolidated financial statements.
3. LONG-TERM DEBT
Long-term debt consists of:
NTL Communications Corp. Schedule I-Condensed Financial Information of Registrant (continued) Notes to Condensed Financial Statements (continued)
3. LONG-TERM DEBT (CONTINUED)
(a) 12-3/4% Notes due April 15, 2005, principal amount at maturity of $277.8 million, interest payable semiannually from on October 15, 2000, redeemable at the Company's option on or after April 15, 2000;
(b) 11-1/2% Notes due February 1, 2006, principal amount at maturity of $1,050.0 million, interest payable semiannually beginning on August 1, 2001, redeemable at the Company's option on or after February 1, 2001;
(c) 10% Notes due February 15, 2007, principal amount at maturity of $400.0 million, interest payable semiannually from August 15, 1997, redeemable at the Company's option on or after February 15, 2002;
(d) 9-1/2% Sterling Notes due April 1, 2008, principal amount at maturity of pound sterling 125.0 million ($186.9 million), interest payable semiannually from October 1, 1998, redeemable at the Company's option on or after April 1, 2003;
(e) 10-3/4% Sterling Notes due April 1, 2008, principal amount at maturity of pound sterling 300.0 million ($448.7 million), interest payable semiannually beginning on October 1, 2003, redeemable at the Company's option on or after April 1, 2003;
(f) 9-3/4% Notes due April 1, 2008, principal amount at maturity of $1,300.0 million, interest payable semiannually beginning on October 1, 2003, redeemable at the Company's option on or after April 1, 2003;
(g) 9-3/4% Sterling Notes due April 15, 2009, principal amount at maturity of pound sterling 330.0 million ($493.5 million), interest payable semiannually beginning on October 15, 2004, redeemable at the Company's option on or after April 15, 2004;
(h) 11-1/2% Notes due October 1, 2008, principal amount at maturity of $625.0 million, interest payable semiannually from April 1, 1999, redeemable at the Company's option on or after October 1, 2003;
(i) 12-3/8% Notes due October 1, 2008, principal amount at maturity of $450.0 million, interest payable semiannually beginning on April 1, 2004, redeemable at the Company's option on or after October 1, 2003;
(j) 7% Convertible Notes due December 15, 2008, principal amount at maturity of $599.3 million, interest payable semiannually from June 15, 1999, convertible into shares of NTL Incorporated common stock at a conversion price of $39.20 per share, redeemable at the Company's option on or after December 15, 2001 (there are approximately 15.3 million shares of NTL Incorporated common stock reserved for issuance upon conversion);
(k) Variable Rate Redeemable Guaranteed Notes due January 5, 2002, principal amount at maturity of IR pound sterling 60.0 million after redemption of IR pound sterling 20.0 million ($25.7 million) in 1999 using cash held in escrow, remainder redeemed in March 2000 ($73.7 million) using cash held in escrow;
(1) 9-1/4% Euro Notes due November 15, 2006, principal amount at maturity of euro 250.0 million ($234.7 million), interest payable semiannually from May 15, 2000;
(m) 9-7/8% Euro Notes due November 15, 2009, principal amount at maturity of euro 350.0 million ($328.6 million), interest payable semiannually from beginning May 15, 2000, redeemable at the Company's option on or after November 15, 2004;
(n) 11-1/2% Deferred Euro Notes due November 15, 2009, principal amount at maturity of euro 210.0 million ($197.1 million), interest payable semiannually beginning on May 15, 2005, redeemable at the Company's option on or after November 15, 2004 and;
(o) 11-7/8% Notes due October 1, 2010, issued in October 2000, principal amount at maturity of $500.0 million, interest payable semiannually beginning on April 1, 2001, redeemable at the Company's option on or after October 1, 2005;
The indentures governing the notes contain restrictions relating to, among other things: (i) incurrence of additional indebtedness and issuance of preferred stock, (ii) dividend and other payment restrictions and (iii) mergers, consolidations and sales of assets.
NTL Communications Corp. Schedule I-Condensed Financial Information of Registrant (continued) Notes to Condensed Financial Statements (continued)
3. LONG-TERM DEBT (CONTINUED)
During 2000, 1999 and 1998, the Company recognized $334.3 million, $308.1 million and $232.7 million, respectively, of original issue discount as interest expense.
In connection with the Cablelink acquisition, the Company issued $704.6 million principal amount Senior Increasing Rate Notes due 2000. In November 1999, the Company received net proceeds of $720.7 million from the issuance of the 9-1/4% Euro Notes, the 9-7/8% Euro Notes and the 11-1/2% Deferred Euro Notes, of which $716.5 million was used to repay the Senior Increasing Rate Notes plus accrued interest. The Company recorded an extraordinary loss from the early extinguishment of the notes of $3.0 million in 1999.
In October 1998, the Company redeemed its 10-7/8% Senior Deferred Coupon Notes with an accreted value of $211.0 million for cash of $218.0 million. The Company recorded an extraordinary loss from the early extinguishment of the 10-7/8% Notes of $12.1 million in 1998, which included approximately $4.8 million of unamortized deferred financing costs.
In 1998, the Company required consents from the holders of some of its notes to modify certain indenture provisions in order to proceed with an acquisition. In October 1998, the Company paid $11.3 million in consent payments and issued warrants to purchase 1.2 million shares of common stock in lieu of additional consent payments of $10.1 million.
Long-term debt repayments are due as follows (in millions):
In January and February 2001, the Company issued euro 300.0 million ($281.6 million) aggregate principal amount of 12-3/8% Senior Euro Notes due February 1, 2008. The Company received proceeds of approximately $275.3 million after underwriters' discount and commissions and other fees. Interest is payable semiannually in cash at a rate of 12-3/8% per annum beginning on August 1, 2001. These notes may not be redeemed by the Company except in limited circumstances.
4. LEASES
Leases for office space end in 2004. Total rental expense for the years ended December 31, 2000, 1999 and 1998 under operating leases was $2.0 million, $1.2 million and $0.6 million, respectively.
Future minimum lease payments under noncancellable operating leases as of December 31, 2000 are (in millions): $1.0 (2001), $1.1 (2002), $1.1 (2003) and $0.7 (2004).
5. OTHER
No cash dividends were paid to the registrant by subsidiaries for the years ended December 31, 2000, 1999 and 1998.
NTL Communications Corp. and Subsidiaries Schedule II--Valuation and Qualifying Accounts
(a) Uncollectible accounts written-off, net of recoveries of $29.3 million and $6.3 million foreign exchange currency translation adjustments.
(b) Uncollectible accounts written-off, net of recoveries of $15.1 million and $1.1 million foreign currency exchange translation adjustments, offset by $15.4 million allowance for doubtful accounts as of acquisition dates of purchased subsidiaries.
(c) Uncollectible accounts written-off, net of recoveries of $9.2 million, offset by $12.2 million allowance for doubtful accounts as of acquisition dates of purchased subsidiaries and $0.1 million foreign currency translation adjustments.