ntl Incorporated's Third Quarter Results Led by Continued Growth in ntl: Home.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- ntl Incorporated --Consolidated revenues up 5.0 per cent over Q3 2003 to GBP GBP In currencies, this is the abbreviation for the British Pound. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 583.1m and ntl: Home revenues up 8.9 per cent to GBP 405.0m --Combined segment profit of GBP 178.5m includes GBP 29.4m charge in Broadcast(1) --Net loss declined to GBP 95.4m, an improvement of 19.4 per cent over Q3 2003 --Continued strong growth in ntl: Home -- Highest quarterly gross customer adds in 15 quarters of 187,900 -- Added 83,600 broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). RGUs -- Reached 23.1 per cent triple play penetration The successful unauthorized breach of a security perimeter. See penetration test. , up 3.5 percentage points over Q3 2003 -- Confirming market leadership by increasing broadband speeds to 1Mb, 2Mb and 3Mb --Broadcast separation in final stages -- Proposals received from prospective purchasers in an active auction process
Financial Highlights GBP
(In millions) Q3-2004 Q3-2003
Revenues
Home 405.0 371.8
Business 64.2 69.4
Broadcast 66.6 67.6
Carriers 29.4 28.5
Ireland 17.9 17.9
--------- -----------
Total revenues 583.1 555.2
========= ===========
Segment profit (loss)
Home 180.2 176.5
Business 27.7 26.9
Broadcast (1) 2.4 28.2
Carriers 24.4 23.9
Ireland 6.0 7.5
Shared Services - services (2) (58.9) (60.9)
--------- -----------
181.8 202.1
Shared Services - stock based compensation
expense (SBCE)(2) (3.3) (2.0)
--------- -----------
Combined segment profit 178.5 200.1
========= ===========
Combined segment profit margin % 30.6 36.0
Operating income (loss) (26.0) (17.7)
Net (loss) (95.4) (118.4)
(1) Charge of GBP 29.4 million in Broadcast segment reflects estimated costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc a fixed price contract. For further detail, see discussion on page 8. (2) Shared Services shared services, n.pl the administrative, clinical, or other service functions that are common to two or more hospitals or their health care facilities and used jointly or cooperatively by them. consists of two components: services and stock based compensation expense (which excludes SBCE SBCE Scott Bradford Creative Enterprises SBCE Society for Better Computing Ethics SBCE Subspace-Based Channel Estimation SBCE Server Blade Chassis Enterprise in connection with performance related bonus plans amounting to GBP 0.3 million) and totaled GBP 62.2 million in Q3 04 and GBP 62.9 million in Q3 03. For a description of the services component and the SBCE component, please see page 10. Page 2 ntl Incorporated (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : NTLI) announced today its third quarter 2004 results. Commenting on the results, Simon Duffy Duffy is a surname of Irish origin. It comes from the original Irish name Ó Dubhthaigh, meaning descendant or grandson of Dubhthach. Dubhthach was an Old Irish first name meaning "Dark one". , Chief Executive Officer of ntl, said: "During the third quarter, we remained focussed on our four stated objectives and, despite a more intense competitive environment, were successful in increasing market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" , growing total revenues year over year, expanding underlying margins and enhancing cash flow. We have seen an improvement in sales productivity during the quarter, with 187,900 gross customers added, the highest number for the past fifteen quarters. In addition, we increased revenues by 5.0 per cent over Q3 2003 to GBP 583.1 million, and delivered free cash flow of GBP 52.2 million. ntl: Home delivered strong broadband growth in the third quarter, adding 83,600 RGUs and increasing broadband customer penetration to 38.9 per cent. To retain our leadership position in broadband, we will be increasing the speeds of our ntl: Home products in Q1 2005 to 1Mb, 2Mb and 3Mb at existing prices. This decision reflects our determination to ensure that we will always have the most competitive range of broadband products in the marketplace. Significant progress was made in the call centre consolidation programme with two centres closed during the quarter and a further three closures announced. We will close six call centres in total during the fourth quarter. The call centre consolidation, together with other efficiency initiatives, will reduce overall headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. to around 13,100 by the end of the year, underscoring our continuing efforts to improve margins. The separation of ntl: Broadcast is on track for completion by the end of this year. In assessing our strategic alternatives, we are soliciting bids in an active auction process and considerable interest has been expressed by prospective purchasers. The charge in ntl: Broadcast results from a single bid for a fixed price contract and does not reflect on the current performance or value of the business. I am very pleased to welcome Jacques Jacques [ʒɑk] (French for Jacob and James) can refer to: People with the surname of Jacques:
execute - execution on our key objectives for the remainder of 2004 and beyond." For the use of non-GAAP financial measures please reference pages 17-20. Page 3 Group Highlights Quarter ended September September: see month. 30, 2004 Revenue Third quarter consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: revenues increased by 5.0 per cent to GBP 583.1 million ($1,060.8 million) from GBP 555.2 million ($894.1 million) for the same period of 2003. The revenue increase was mainly associated with the net addition of 308,900 broadband RGUs and 102,600 telephony Meaning "sound over distance," it refers to electronically transmitting the human voice. In the beginning, telephony dealt only with analog signals in the circuit-switched networks of the telephone companies. RGUs in ntl: Home, where reported revenues increased by GBP 33.2 million or 8.9 per cent to GBP 405.0 million ($736.8 million). This increase was partly offset by lower voice revenues in ntl: Business and lower project revenues in ntl: Broadcast. Combined segment profit Third quarter combined segment profit decreased by 10.8 per cent to GBP 178.5 million ($324.7 million) from GBP 200.1 million ($322.4 million) for the same period of 2003. The decrease in segment profit includes a GBP 29.4 million ($53.6 million) charge in ntl: Broadcast with respect to a confidential confidential, adj pertaining to information that is only shared with those directly responsible for patient care. fixed price contract. Increased revenues in ntl: Home were partly offset by additional investments in sales and marketing and higher bad debt and programming costs, resulting in increased segment profit of GBP 3.7 million over Q3 2003. The increases in segment profit in ntl: Business and ntl: Carriers were offset by a decrease in ntl: Ireland Ireland, Irish Eire (âr`ə) [to it are related the poetic Erin and perhaps the Latin Hibernia], island, 32,598 sq mi (84,429 sq km), second largest of the British Isles. , where one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. benefits realised in Q3 2003 were not repeated, and higher stock based compensation expense. Operating and net loss Including the charge of GBP 29.4 million ($53.6 million), the third quarter 2004 operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. was GBP 26.0 million ($47.5 million) compared with an operating loss in Q3 2003 of GBP 17.7 million ($28.5 million). Third quarter net loss was GBP 95.4 million ($173.5 million), a 19.4 per cent reduction from the Q3 2003 net loss of GBP 118.4 million ($190.8 million), reflecting decreased interest expense following our successful rights offering and refinancing Refinancing An extension and/or increase in amount of existing debt. . Page 4 Fixed asset additions (accrual basis A method of accounting that reflects expenses incurred and income earned for Income Tax purposes for any one year. Taxpayers who use the accrual method must include in their taxable income any money that they have the right to receive as payment for services, once it ) To provide comparable data to the US Cable industry, and in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with NCTA NCTA National Cable & Telecommunications Association (fka National Cable Television Association) NCTA National Cable Television Association (now the National Cable & Telecommunications Association) (National Cable & Telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. Association) reporting guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. *, ntl has allocated fixed asset additions (accrual basis) to the standard NCTA reporting categories. Third quarter fixed asset additions were GBP 84.7 million ($154.0 million) of which approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 53 per cent related to ntl: Home and 26 per cent related to ntl: Shared Services. Fixed asset additions increased by GBP 25.8 million ($59.0 million) in the third quarter 2004 over Q3 2003. Scaleable infrastructure costs rose due to increased wholesale internet costs, localised localised - localisation broadband capacity requirements and higher activity in access engineering together with video on demand product development costs. Upgrade costs increased as a result of progress in the London London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. network upgrade programme which released 30,000 broadband homes to market in September, with another 100,000 homes to be upgraded to broadband during Q4 2004. Commercial and ntl: Broadcast expenditure also increased as new contracts in ntl: Carriers and ntl: Broadcast required upfront capital spend. The largest component of ntl's NCTA fixed asset additions relates to customer premise equipment (CPE (Customer Premises Equipment) Communications equipment that resides on the customer's premises. CPE - Customer Premises Equipment ). Through increased installation efficiencies and the ongoing reduction of set top box and cable modem cable modem Modem used to convert analog data signals to digital form and vise versa, for transmission or receipt over cable television lines, especially for connecting to the Internet. costs, CPE fixed asset additions have remained flat over Q3 2003 despite increasing gross customer additions by 29,400 in Q3 2004 over Q3 2003. During the fourth quarter 2004, we expect to spend approximately GBP 100.0 million ($180.9 million) in fixed asset additions, within previously stated full year 2004 guidance of between GBP 300.0 million ($542.7 million) to GBP 350.0 million ($633.2 million) in respect of fixed asset additions.
(figures in millions) unaudited Q3 2004 Q3 2003
------------------ ----------------
GBP $ GBP $
------------------ ----------------
UK Fixed Asset Additions
(Accrual Basis)
NCTA Fixed Asset Additions
(Accrual Basis)
CPE 32.6 59.3 30.7 49.5
Scaleable Infrastructure 17.3 31.6 8.7 14.0
Commercial 7.9 14.3 3.2 5.4
Line Extensions 0 (0.1) 0 0
Upgrade/Rebuild 5.6 10.1 0 0
Support Capital 14.2 26.0 13.5 21.6
------------------ ----------------
Total NCTA Fixed Asset Additions
(Accrual Basis) 77.6 141.2 56.1 90.5
Non NCTA Fixed Asset Additions
(Accrual Basis)
Broadcast/Other 4.6 8.2 0.3 0.5
-------------------------------------
Total UK Fixed Asset Additions
(Accrual Basis) 82.2 149.4 56.4 91.0
Ireland 2.5 4.6 2.5 4.0
-------------------------------------
Total Fixed Asset Additions
(Accrual Basis) 84.7 154.0 58.9 95.0
================== ================
* ntl is not a member of the NCTA and is providing this information solely for comparative purposes. Cash and cash equivalents At September 30, 2004, cash and cash equivalents were GBP 149.1 million ($269.7 million). Page 5 Segment Review ntl: Home ntl: Home provides bundled bun·dle n. 1. A group of objects held together, as by tying or wrapping. 2. Something wrapped or tied up for carrying; a package. 3. Biology A cluster or strand of closely bound muscle or nerve fibers. products and services including local and long distance telephone services, digital and analogue (electronics) analogue - (US: "analog") A description of a continuously variable signal or a circuit or device designed to handle such signals. The opposite is "discrete" or "digital". cable television, and a range of broadband and dial-up Refers to using the regular "dial-up" telephone network to send data from a computer to a remote network or to a remote device. The computer's digital data are converted to analog signals in the same frequency range as human voice by a modem. internet services, to an addressable Reachable. When something is addressable, it can be identified and manipulated independently of its surroundings. For example, screen pixels and RAM memory are addressable. Each of the screen's picture elements can be individually turned on and off, and each of the memory's bytes can be market of 7.9 million households in the UK. At 187,900, ntl: Home enjoyed its highest number of quarterly gross customer additions since 2000, ending the third quarter with 3,013,800 customers, a 7.3 per cent increase from Q3 2003. In addition, ntl: Home added 98,700 RGUs in Q3 2004 ending the quarter with 5,822,000 RGUs, a 9.2 per cent increase from Q3 2003. Triple play penetration increased by 3.5 percentage points over Q2 2003 to 23.1 per cent. We are undertaking a review of how our existing disconnection dis·con·nect v. dis·con·nect·ed, dis·con·nect·ing, dis·con·nects v.tr. 1. To sever or interrupt the connection of or between: disconnected the hose. 2. and credit management practices have been applied and complied with. As a result of this ongoing review, we have identified 23,800 customers (representing approximately 35,600 RGUs) which we have removed from the customer count at the end of Q3. We are in the process of disconnecting these customers during Q4. These customers were not disconnected previously, as they should have been, due to non-compliance with our policies. These disconnections have limited revenue impact. We have reduced our revenue by GBP 1.9 million ($3.5 million) in Q3 2004 which takes into account revenue adjusted for prior quarters. We are continuing to review our practices in order to ensure more effective compliance with our policies and to more accurately track disconnects. In addition, during the fourth quarter ntl: Home will be implementing a revised and standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. credit policy which will reduce the number of days an account can be overdue OVERDUE. A bill, note, bond or other contract, for the payment of money at a particular day, when not paid upon the day, is overdue. 2. The indorsement of a note or bill overdue, is equivalent to drawing a new bill payable at sight. 2 Conn. 419; 18 Pick. prior to full disconnection. Implementation of this new policy has led to the reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of approximately 49,300 additional customers (representing approximately 81,000 RGUs) as pending disconnects. We are still seeking payment from these customers and, depending upon the success of our collection efforts, some or all of them may be disconnected in Q4. Revenue increased by 8.9 per cent to GBP 405.0 million ($736.8 million) in Q3 2004 from GBP 371.8 million ($598.7 million) in Q3 2003 and average revenue per user (ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. ) increased by GBP 0.13 over Q3 2003 to GBP 41.56. This was achieved by adding 492,600 RGUs during the year, over half of which were telephone talk plan customers and family pack television customers, both of which contribute higher than average revenue per RGU RGU The Robert Gordon University (Aberdeen, Scotland) RGU Responsible Governmental Unit RGU Revenue-Generating Unit . ntl: Home segment profit increased by 2.1 per cent to GBP 180.2 million ($327.8 million) in Q3 2004 from GBP 176.5 million ($284.1 million) in Q3 2003. The increase in revenues was partly offset by investment in sales and marketing and an increase in bad debt and programming costs. Third quarter 2004 monthly churn churn: see butter. rose to 1.5 per cent, mainly due to a higher number of customers moving outside our network area. Of the additional 28,500 disconnects during the third quarter when compared to the prior quarter, approximately 19,000 related to customers moving out of ntl: Home franchise areas during a buoyant Buoyant The term used to describe a commodities market where the prices generally rise with ease when there are considerable signals of strength. Notes: These types of markets can be very volatile as the prices are rapid to rise and fall with investor sentiment. UK housing boom. As the UK's number one broadband provider, ntl: Home intends to maintain its leadership position by significantly increasing the speed of its broadband products while holding prices constant: 1Mb at GBP 17.99, 2Mb at GBP 24.99 and 3Mb at GBP 37.99. The speed increases will be rolled out to new customers during Q1 2005. Existing customers can also upgrade from Q1 2005 by paying a GBP 25.00 administration fee. Page 6 ntl: Home increased third quarter broadband users by 94,100 of whom 48,100 were taking ntl: Home's 60 day free trial at the end of September. Our experience to date is that approximately 78 per cent of those on the 60 day free trial convert to paying customers at the end of the trial period. Accordingly, we have excluded 22 per cent of the triallists from the RGU total and included only 83,600 broadband RGUs in Q3 2004. We have also restated Q2 2004 to include 5,300 (78 per cent of the second quarter's 6,800 60 day free trial customers) as RGUs, thereby ending Q3 2004 with 1,173,500 broadband RGUs and increasing broadband penetration of the customer base to 38.9 per cent from 30.8 per cent in Q3 2003.
000s Q3 2004 Q2 2004
Opening broadband RGUs 1,094.2 1,028.8
Paying broadband users 46.0 59.9
60 day free trial users 48.1 6.8
94.1 66.7
------------------------
1,188.3 1,095.5
22% of 60 day free trial users (10.5) (1.5)
------------------------
Quarterly movement 83.6 -
Reduction to customer count* (6.2) 0.0
Data cleanse* 1.9 0.2
------------------------
Closing RGU total 1,173.5 1,094.2
========================
* See explanations on pages 5 and 7. ntl: Home increased third quarter on-net Connected to the Internet, or connected to a LAN or WAN. Contrast with off-net. telephone customers by 18,500 to 2,592,400 and increased the number of digital television customers by 15,200 to 1,414,700. The overall television base declined by 3,300 to 2,056,100. The table below reconciles the underlying quarterly RGU movements with the data cleanse cleanse tr.v. cleansed, cleans·ing, cleans·es To free from dirt, defilement, or guilt; purge or clean. [Middle English clensen, from Old English and the RGU count reduction adjustments detailed in notes 2,3 and 5 on page 7:
000s DTV Television Telephone Broadband Total
Q2 2004 closing
RGUs 1,408.7 2,070.6 2,593.1 1,094.2 5,757.9
Data cleanse (0.8) (1.0) 0 1.9 0.9
Reduction to RGU
count (8.4) (10.2) (19.2) (6.2) (35.6)
----------------------------------------------------
1,399.5 2,059.4 2,573.9 1,089.9 5,723.2
Quarterly movement 15.2 (3.3) 18.5 83.6 98.7
----------------------------------------------------
Q3 2004 closing
RGUs 1,414.7 2,056.1 2,592.4 1,173.5 5,822.0
====================================================
Note rounding differences. Page 7 ntl: Home - summary customer statistics:
000s Q3-2004 Q2-2004 Q1-2004
On-net
Opening Customers (1) 2,981.5 2,923.2 2,867.9
Data cleanse (2) 2.7 (2.2) (6.2)
Adjusted opening customers 2,984.2 2,921.0 2,861.7
Customer additions 187.9 166.5 160.3
Customer disconnects (134.5) (106.0) (98.8)
Net customer movement 53.4 60.5 61.5
Reduction to customer count (3) (23.8) 0 0
Closing Customers (1) 3,013.8 2,981.5 2,923.2
Churn (4) 1.5% 1.2% 1.1%
Revenue Generating Units (2,3,5) 5,822.0 5,757.9 5,636.1
Television 2,056.1 2,070.6 2,048.9
DTV 1,414.7 1,408.7 1,371.0
Telephone 2,592.4 2,593.1 2,558.4
Broadband 1,173.5 1,094.2 1,028.8
60 day free trial 48.1 6.8 0
RGU/Customer 1.93x 1.93x 1.93x
Internet dial-up and DTV access (6) 258.8 293.3 321.1
ARPU (7) GBP 41.56 GBP 41.38 GBP 41.91
000s Q4-2003 Q3-2003
On-net
Opening Customers (1) 2,809.5 2,753.3
Data cleanse (2) 0 0
Adjusted opening customers 2,809.5 2,753.3
Customer additions 153.9 158.5
Customer disconnects (95.5) (102.3)
Net customer movement 58.4 56.2
Reduction to customer count (3) 0 0
Closing Customers (1) 2,867.9 2,809.5
Churn (4) 1.1% 1.2%
Revenue Generating Units (2,3,5) 5,497.8 5,364.1
Television 2,023.6 2,009.7
DTV 1,330.0 1,294.8
Telephone 2,525.0 2,489.8
Broadband 949.2 864.6
60 day free trial 0 0
RGU/Customer 1.92x 1.91x
Internet dial-up and DTV access (6) 324.3 332.1
ARPU (7) GBP 41.96 GBP 41.43
(1)Opening and closing customers include master antenna television, or
MATV customers.
(2)Data cleanse activity, as part of the harmonisation of billing
systems, resulted in an increase of recorded customers by
approximately 2,700 and an increase of RGUs by approximately 900.
The data cleanse reduced DTV RGUs by 800, reduced ATV RGUs by 200
and increased broadband RGUs by 1,900.
(3)After reviewing how our existing disconnection and credit
management practices have been applied and complied with, we have
removed approximately 23,800 customers, representing approximately
35,600 RGUs, from the customer count; see discussion on page 5. Of
the 35,600 RGUs, 19,200 were telephony RGUs, 8,400 were DTV RGUs,
1,800 were ATV RGUs and 6,200 were broadband RGUs.
(4)Monthly customer churn is calculated by taking the total
disconnects during the month and dividing them by the average
number of customers during the month. Average monthly churn during
a quarter is the average of the three monthly churn calculations
within the quarter. The 23,800 customers removed from the customer
count (see footnote 3) will be disconnected in Q4 and are not
included in the Q3 monthly churn.
(5)Telephone, television and broadband internet subscribers directly
connected to our network count as one RGU each. Accordingly, a
subscriber who receives both telephone and television service
counts as two RGUs. RGUs may include subscribers receiving some
services at a reduced rate in connection with incentive offers. 78
per cent of the 60 day free trial broadband customers are included
in the RGU numbers. NCTA reporting guidelines for the US Cable
industry do not recognise dial-up internet customers as RGUs,
although they are revenue generating for ntl.
(6)Dial-up internet subscribers exclude metered customers who have not
used the service for 30 days or more.
(7)Average Revenue Per User is calculated on a monthly basis by
dividing total revenues generated from the provision of telephone,
cable television and internet services to customers who are
directly connected to our network in that month, exclusive of VAT,
by the average number of customers in that month. Quarterly ARPU
is an average of the three months in that quarter. In calculating
ARPU, the 23,800 customers removed from the customer count (see
footnote 3) and the GBP 1.9 million of revenue relating thereto
have been added back to customer numbers and revenues.
Page 8 ntl: Business ntl: Business provides a range of voice, data and internet products and services to private and public sector organisations. ntl: Business revenues decreased by 7.5 per cent to GBP 64.2 million ($116.9 million) in Q3 2004 from GBP 69.4 million ($111.8 million) in Q3 2003. The decrease in revenue was primarily due to a reduction in voice revenues in an increasingly competitive market, which was compounded by seasonally low voice usage and project revenues. The decline in voice revenues was partly offset by the continued growth in data revenues. Despite the intense price pressure in the market, ntl: Business segment profit increased by 3.0 per cent to GBP 27.7 million ($50.5 million) in Q3 2004 from GBP 26.9 million ($43.3 million) in Q3 2003, reflecting a greater proportion of higher margin data revenues as well as continued tight control of costs. ntl: Broadcast ntl: Broadcast provides digital and analogue television and radio broadcast transmission services, network management, tower site rental RENTAL. A roll or list of the rents of an estate containing the description of the lands let, the names of the tenants, and other particulars connected with such estate. This is the same as rent roll, from which it is said to be corrupted. and satellite and media services as well as communications support to public safety organisations in the UK. ntl: Broadcast revenues decreased by 1.5 per cent to GBP 66.6 million ($121.1 million) in Q3 2004 from GBP 67.6 million ($108.8 million) in Q3 2003, primarily reflecting the non-recurrence of project revenues in Q3 2003 in our public safety business. Following a GBP 29.4 million ($53.6 million) charge under a confidential fixed price contract, ntl: Broadcast segment profit decreased by 91.5 per cent to GBP 2.4 million ($4.2 million) in Q3 2004 from GBP 28.2 million ($45.4 million) in Q3 2003. We are presently discussing with the customer revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. to the contract. Based upon a review of our outstanding obligations under this contract, we estimate that our costs to complete the contract with these revisions will exceed our revenues from the project by the amount of the charge. Since this figure is an estimate, there can be no assurance that we will not incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. additional costs above the estimate or that the costs will in fact be as high as the estimate. If any additional costs were to be incurred, additional charges may have to be taken at the time these costs have been identified. We have reviewed the events leading up to this charge and have concluded that they are principally due to a material underestimation by us of the costs of the project, a lack of adequate project management resources and significant reliance upon a subcontractor One who takes a portion of a contract from the principal contractor or from another subcontractor. When an individual or a company is involved in a large-scale project, a contractor is often hired to see that the work is done. . We have strengthened our procedures governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. the costing, pricing and management of projects to ensure a more balanced risk:reward structure in the terms and conditions of new contracts we enter into. We also have placed limitations on our reliance upon sub-contractors to fulfill ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. our obligations under material contracts. The terms of our credit and bond agreements include the ability to separate our Broadcast business. We have taken steps to effect the separation, which is now in its final stages. As part of our strategic review we are soliciting bids in an active auction process and considerable interest has been expressed by prospective purchasers. Page 9 ntl: Carriers ntl: Carriers provides a range of wholesale telecommunications services In telecommunication, the term telecommunications service has the following meanings: 1. Any service provided by a telecommunication provider. 2. supporting voice, data and mobile operators. Products include network design and build, voice transit transit, in astronomy, passage of a body across a meridian or passage of a small body across the visible disk of a larger one. (The passage of a large body across a smaller one is called an eclipse or occultation. and termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. , managed infrastructure services such as fibre and co-location Placing equipment owned by a customer or competitor in an organization's own facility. Telephone companies often allow co-location in order to provide the best interconnection between devices. and retail products such as leased lines A private communications channel leased from a common carrier. Most digital lines require four wires (two pairs) for full-duplex transmission. (communications, networking) leased line . Including a GBP 2.1 million ($3.8 million) settlement from Energis Energis Communications Limited, briefly Telecom Electric, or more usually just Energis was a 'technology driven communications company' based in the UK and Ireland. for early termination of their contract, ntl: Carriers revenues increased by 3.2 per cent to GBP 29.4 million ($53.5 million) in Q3 2004 from GBP 28.5 million ($45.9 million) in Q3 2003. Owing to owing to prep. Because of; on account of: I couldn't attend, owing to illness. owing to prep → debido a, por causa de the Energis settlement, which more than offset the impact on underlying revenue and profits of increased price competition, ntl: Carriers segment profit increased by 2.1 per cent to GBP 24.4 million ($44.5 million) in Q3 2004 from GBP 23.9 million ($38.5 million) in Q3 2003. During the third quarter ntl: Carriers launched its 'wires only' DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary service, initially on a bespoke be·spoke v. Past tense and a past participle of bespeak. adj. 1. Custom-made. Said especially of clothes. 2. Making or selling custom-made clothes: a bespoke tailor. basis for large-scale large-scale adj. 1. Large in scope or extent. 2. Drawn or made large to show detail. large-scale Adjective 1. wide-ranging or extensive 2. deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. to a single wholesale customer. The full launch of the standard DSL product will take place in early 2005. ntl: Ireland ntl: Ireland offers digital and analogue television to homes in its network areas of Dublin Dublin, city, Republic of Ireland Dublin, Irish Baile Átha Cliath, county borough (1991 pop. 915,516), Leinster, capital of the Republic of Ireland, on Dublin Bay at the mouth of the Liffey River. , Waterford Waterford, county, Republic of Ireland Waterford (wô`tərfərd), county (1991 pop. 91,624), 710 sq mi (1,839 sq km), S Republic of Ireland. The county seat is the port town of Waterford. and Galway Galway, city, Republic of Ireland Galway, city (1991 pop. 50,853), seat of Co. Galway, W Republic of Ireland, on Galway Bay near the mouth of the Corrib River. . It also offers broadband in parts of Dublin. In addition, ntl: Ireland also offers a full range of business telecommunication telecommunication Communication between parties at a distance from one another. Modern telecommunication systems—capable of transmitting telephone, fax, data, radio, or television signals—can transmit large volumes of information over long distances. services including voice, data and internet products. ntl: Ireland revenues were unchanged at GBP 17.9 million ($32.5 million) in Q3 2004 when compared to Q3 2003 ($28.9 million). Underlying Euro revenues increased by 3.5 per cent due to the January January: see month. 1, 2004 price increase and additional growth in digital television subscribers. ntl: Ireland segment profit decreased by 20.0 per cent to GBP 6.0 million ($10.9 million) in Q3 2004 from GBP 7.5 million ($12.2 million) in Q3 2003. Local currency segment profit decreased by 17.6 per cent, reflecting the absence of the benefit in Q3 2003 of the renegotiation of major supplier contracts. In Q3 2004, residential customer numbers increased by 2,500 to reach approximately 343,600 (including MMDS (Multichannel Multipoint Distribution Service or Microwave Multipoint Distribution Service) A digital wireless transmission system that works in the 2.2-2.4 GHz range. customers). This encouraging performance was reinforced re·in·force also re-en·force or re·en·force tr.v. re·in·forced, re·in·forc·ing, re·in·forc·es 1. To give more force or effectiveness to; strengthen: The news reinforced her hopes. by growth in digital television customers of 6,600 to approximately 88,800. Monthly customer churn remained in line with our expectations at 0.8 per cent in Q3 2004. During Q3 2004, ntl: Ireland commenced an investment programme to enable its network to deliver broadband services See broadband and broadband service provider. to consumers. Homes marketable Marketable are securities that can be easily converted into cash. Such securities will generally have highly liquid markets allowing the security to be sold at a reasonable price very quickly. for broadband increased by 38,500 to reach approximately 66,500. Broadband customer numbers grew to approximately 5,400 at the end of Q3 2004 reaching a penetration level of 8.1 per cent. In October October: see month. , ntl: Ireland ceased its domestic direct telephone service, which had a customer base of 2,200, after identifying a potential safety risk. This decision did not affect any other service provided by ntl: Ireland. Page 10 Shared Services Shared Services predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. support our UK operations, with ntl: Ireland being largely self-sufficient self-suf·fi·cient adj. 1. Able to provide for oneself without the help of others; independent. 2. Having undue confidence; smug. self . Shared Services consist of two components: services and stock based compensation expense (SBCE). The services component is further divided into networks, central support and IT. The SBCE component represents all SBCE for the group with the exception of that in connection with performance related bonus plans which is charged to the individual divisions (including Shared Services). In Q3 2004, Shared Services totaled GBP 62.2 million ($113.2 million), comprising GBP 58.9 million ($107.1 million) of services and GBP 3.3 million ($6.1 million) of SBCE. In Q3 2003, Shared Services totaled GBP 62.9 million ($101.1 million) comprising GBP 60.9 million ($97.9 million) of services and GBP 2.0 million ($3.2 million) of SBCE. The majority of the networks portion of Shared Services cost relates to the day-to-day day-to-day adj. 1. Occurring on a routine or daily basis: the day-to-day movements of the stock market. 2. running of the network, with the remainder comprising data and voice capacity management and, to a lesser degree, architecture and standards. The central support and IT portion of Shared Services comprises a range of functions including group site services, finance, human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. , supply chain, legal affairs, risk assurance, communications, IT and US corporate costs. The services component has decreased to 10.1 per cent of revenues in Q3 2004 compared with 11.0 per cent of revenues in Q3 2003. ntl continues to recognise the provisions of FASB Statement FASB Statement A standard set by the Financial Accounting Standards Board regarding a financial accounting and reporting method. Essentially, FASB statements determine the acceptable accounting practices that Certified Public Accountants use in reporting No.123, Accounting for Stock-Based Compensation, which has been and will be applied to all employee stock awards granted, modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. , or settled after January 1, 2003. The SBCE component of Shared Services increased in Q3 2004 over Q3 2003 following the approval of the stock awards plan at our annual meeting of shareholders in May 2004. Page 11 Other Matters Harmony harmony, in music, simultaneous sounding of two or more tones and, especially, the study of chords and their relations. Harmony was the last in the development of what may be considered the basic elements of modern music—harmony, melody, rhythm, and tone A significant step was taken in the Harmony programme during the third quarter with the implementation of release 4.5. Almost 980,000 customer accounts were migrated and 1.4 million premises premises n. 1) in real estate, land and the improvements on it, a building, store, shop, apartment, or other designated structure. The exact premises may be important in determining if an outbuilding (shed, cabana, detached garage) is insured or whether a person added to the Harmony system. Over 3.5 million customer accounts have now been migrated since the beginning of the programme with seven main billing systems reduced to three. Senior Management Appointment ntl has appointed ap·point tr.v. ap·point·ed, ap·point·ing, ap·points 1. To select or designate to fill an office or a position: appointed her the chief operating officer of the company. 2. Jacques Kerrest as its Chief Financial Officer. As CFO See Chief Financial Officer. , Jacques is responsible for all of ntl's financial activities including cash and credit management, capital budgeting, financial planning Financial planning Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against and analysis, corporate finance, tax, financial reporting, SEC and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. filings, accounting systems and controls, internal audit, bank relationships, financing and investor relations Investor relations The process by which the corporation communicates with its investors. . Jacques has over 30 years' experience of financial management in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. . Most recently Jacques was Managing Director
and Chief Financial Officer of Equant E´quantn. 1. (Ptolemaic Astron.) A circle around whose circumference a planet or the center of ann epicycle was conceived to move uniformly; - called also eccentric equator ltname>. , a leading provider of global IP and data services for businesses. Acquisition of Virgin.net On September 28, ntl announced that it has agreed to acquire Virgin Media Group's remaining interests in Virgin.Net Ltd., together with all the remaining minority interests held by existing and former management. These acquisitions will take ntl's ownership of Virgin.Net, the joint venture formed by ntl and Virgin in 1996, to 100 per cent. We have received the required regulatory clearance CLEARANCE, com. law. The name of a certificate given by the collector of a port, in which is stated the master or commander (naming him) of a ship or vessel named and described, bound for a port, named, and having on board goods described, has entered and cleared his ship or vessel from the Irish Competition Authority, and expect to close the transaction in November November: see month. . Virgin.Net is currently the UK's 5th largest Internet Service Provider Internet service provider (ISP) Company that provides Internet connections and services to individuals and organizations. For a monthly fee, ISPs provide computer users with a connection to their site (see data transmission), as well as a log-in name and password. (ISP (1) See in-system programmable. (2) (Internet Service Provider) An organization that provides access to the Internet. Connection to the user is provided via dial-up, ISDN, cable, DSL and T1/T3 lines. ) serving 590,000 customers, of whom around 54,000 take broadband. Virgin.Net subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. figures and financials are not consolidated in ntl's third quarter results. Page 12 REVENUE SUMMARY (in GBP millions) (unaudited)
Q3- 2004 Q2 -2004 Q1-2004 Q4-2003 Q3-2003
----------------------------------------------------------------------
HOME
On-Net GBP 373.4 GBP 366.3 GBP 363.2 GBP 358.1 GBP 345.5
Wholesale &
Off-Net 31.6 31.5 35.2 32.6 26.3
--------- --------- --------- --------- ---------
Total 405.0 397.8 398.4 390.7 371.8
BUSINESS 64.2 66.8 69.2 66.5 69.4
BROADCAST 66.6 72.6 71.4 71.9 67.6
CARRIERS 29.4 29.3 28.5 28.9 28.5
IRELAND 17.9 17.9 17.5 18.7 17.9
TOTAL REVENUES GBP 583.1 GBP 584.4 GBP 585.0 GBP 576.7 GBP 555.2
=====================================================
SEGMENT PROFIT (LOSS) SUMMARY (in GBP millions) (unaudited)
Q3-2004 Q2-2004 Q1-2004 Q4-2003 Q3-2003
----------------------------------------------------------------------
HOME
On-Net GBP 172.8 GBP 169.2 GBP 168.2 GBP 171.5 GBP 164.1
Wholesale &
Off-Net 7.4 7.0 8.5 10.6 12.4
--------- --------- --------- --------- ---------
Total 180.2 176.2 176.7 182.1 176.5
BUSINESS 27.7 26.5 26.2 32.6 26.9
BROADCAST* 2.4 33.6 29.9 32.2 28.2
CARRIERS 24.4 23.4 22.9 23.1 23.9
IRELAND 6.0 6.1 6.1 7.4 7.5
SHARED
SERVICES**
Services
component:
Networks (16.1) (14.1) (16.2) (13.6) (14.0)
Central
Support/IT (42.8) (44.4) (48.8) (55.8) (46.9)
--------- --------- --------- --------- ---------
Total (58.9) (58.5) (65.0) (69.4) (60.9)
Stock based
compensation
expense
component*** (3.3) (4.9) (1.9) (3.4) (2.0)
COMBINED
SEGMENT PROFIT GBP 178.5 GBP 202.4 GBP 194.9 GBP 204.6 GBP 200.1
=====================================================
*In Q3 2004 ntl: Broadcast segment profit includes a charge of GBP 29.4 million with respect to a confidential fixed price contract. **Shared Services consists of two components: services and stock based compensation expense. ***Stock based compensation expense component of Shared Services includes stock options and restricted stock but excludes SBCE in connection with performance related bonus plans amounting to GBP 0.3 million. Prior periods have been adjusted to remove this component and show it separately. Page 13 The reporting currency Reporting Currency The currency used in published reports and financial documents. Notes: All annual and quarterly reports state the currency in which their results are listed. for the company is the U.S. dollar, however, the functional currencies of our subsidiaries are the British Pound Sterling and the Euro. Unless otherwise disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). , all amounts in U.S. dollars as of September 30, 2004 are based on an exchange rate of $1.8090 to GBP 1, all amounts disclosed for the nine months ended September 30, 2004 are based on an average exchange rate of $1.8216 to GBP 1 and all amounts disclosed for the nine months ended September 30, 2003 are based on an average exchange rate of $1.6107 to GBP 1. All amounts in U.S. dollars as of December December: see month. 31, 2003 are based on an exchange rate of $1.7842 to GBP 1. All rates are based on the noon buying rate in the City of New York for cable transfers as certified See certification. for customs purposes by the Federal Reserve Bank of New York The Bank of New York, abbrieviated to BNY, was a global financial services company that existed until its merger with the Mellon Financial Corporation on July 2, 2007.[1] The bank now continues under the new name of The Bank of New York Mellon Corporation. . U.S. dollar amounts for the three months ended September 30, 2003 and 2004 are determined by subtracting the U.S. dollar converted financial result for the six months ended June June: see month. 30, 2003 and 2004 from the U.S. dollar converted financial result for the nine months ended September 30, 2003 and 2004 respectively. The variation between the 2003 and 2004 exchange rates has impacted the dollar comparisons significantly. CONDENSED con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. CONSOLIDATED STATEMENT OF OPERATIONS See Income statement. (Unaudited) (in millions, except per share data)
Three months ended
September 30,
2004 2003
----------------------
Revenue $1,060.8 $894.1
Costs and expenses
Operating costs (exclusive of (493.5) (359.4)
depreciation shown separately below)
Selling, general and administrative
expenses (242.6) (212.3)
Other charges (11.5) (4.2)
Depreciation (304.1) (296.5)
Amortisation (56.6) (50.2)
----------- ----------
Total costs and expenses (1,108.3) (922.6)
----------- ----------
Operating income (loss) (47.5) (28.5)
Other income (expense)
Interest income and other, net 2.4 5.2
Interest expense (111.1) (188.9)
Loss on extinguishment of debt - -
Share of income (loss) from equity
investments 0.9 -
Foreign currency transaction (losses)
gains (16.5) 3.4
----------- ----------
(Loss) before income taxes (171.8) (208.8)
Income tax (expense) (1.7) 18.0
----------- ----------
Net (loss) ($173.5) ($190.8)
=========== ==========
Basic and diluted net (loss) per common share ($1.99) ($3.20)
=========== ==========
Average number of shares outstanding 87.4 59.6
=========== ==========
Page 14 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (in millions, except per share data)
Nine months ended
September 30,
2004 2003
----------------------
Revenue $3,192.4 $2,662.5
Costs and expenses
Operating costs (exclusive of (1,417.7) (1,157.2)
depreciation shown separately below)
Selling, general and administrative
expenses (725.8) (653.1)
Other charges (39.3) (28.0)
Depreciation (895.9) (871.6)
Amortisation (169.9) (150.4)
---------- -----------
Total costs and expenses (3,248.6) (2,860.3)
---------- -----------
Operating income (loss) (56.2) (197.8)
Other income (expense)
Interest income and other, net 11.9 11.1
Interest expense (376.3) (552.3)
Loss on extinguishment of debt (290.1) -
Share of income (loss) from equity
investments 3.1 (1.5)
Foreign currency transaction (losses)
gains (28.9) 21.0
---------- -----------
(Loss) before income taxes (736.5) (719.5)
Income tax (expense) (5.8) (10.8)
---------- -----------
Net (loss) ($742.3) ($730.3)
========== ===========
Basic and diluted net (loss) per common
share ($8.52) ($12.27)
========== ===========
Average number of shares outstanding 87.1 59.5
========== ===========
Page 15 CONDENSED CONSOLIDATED BALANCE SHEET consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. (in millions, except per share data)
September 30, December 31,
2004 2003
------------- -------------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $269.7 $795.9
Accounts receivable - trade, less 453.9 405.3
allowance for doubtful accounts of
$76.6 (2004) and $28.8 (2003)
Prepaid expenses 113.7 85.2
Other current assets 43.5 55.8
------------- -------------
Total current assets 880.8 1,342.2
Fixed assets, net 7,497.0 7,880.5
Reorganisation value in excess of amounts
allocable to identifiable assets 543.9 539.1
Customer lists, net of accumulated
amortisation of $393.8 (2004) and $221.9
(2003) 1,026.5 1,178.9
Investments in and loans to affiliates, net 1.0 2.3
Other assets, net of accumulated
amortisation of $9.3 (2004) and $70.1
(2003) 229.2 229.8
------------- -------------
Total assets $10,178.4 $11,172.8
============= =============
Liabilities and shareholders' equity
Current
liabilities
Accounts payable $256.5 $260.0
Accrued expenses 577.1 633.1
Accrued construction costs 34.7 33.6
Interest payable 165.6 194.6
Deferred revenue 274.7 269.9
Other current liabilities 24.7 27.1
Current portion of long-term debt 110.7 2.3
------------- -------------
Total current liabilities 1,444.0 1,420.6
Long-term debt, net of current portion 5,378.7 5,728.4
Deferred revenue and other long-term
liabilities 334.6 325.7
Deferred income taxes 0.5 0.1
Commitments and contingent liabilities - -
Shareholders' equity
Preferred stock - $.01 par value; - -
authorised 5.0 (2004 and 2003)
shares; issued and outstanding none
Common stock - $.01 par value; 0.9 0.9
authorised 400.0 (2004 and 2003)
shares; issued and outstanding 87.6
(2004) and 86.9 (2003) shares
Additional paid-in capital 4,375.6 4,325.0
Unearned stock-based compensation (36.0) (15.0)
Accumulated other comprehensive
income 376.6 341.3
Accumulated (deficit) (1,696.5) (954.2)
------------- -------------
Total shareholders' equity 3,020.6 3,698.0
------------- -------------
Total liabilities and
shareholders' equity $10,178.4 $11,172.8
============= =============
Page 16 CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS (Unaudited) (in millions)
Nine months ended
September 30,
-------------------
2004 2003
--------- ---------
Net cash provided by operating activities $527.7 $267.9
Investing
activities
Purchase of fixed assets (386.6) (457.5)
Investments in and loans to affiliates 4.5 3.2
Decrease in other assets - 2.1
Purchase of marketable securities (17.1)
Proceeds from sale of assets 5.1 -
Proceeds from sale of marketable securities - 22.3
--------- ---------
Net cash (used in) investing activities (377.0) (447.0)
Financing activities
Proceeds from employee stock option exercises 6.4 -
Proceeds from new borrowings, net 5,275.7 -
Principal payments on long-term debt (5,957.3) (7.0)
--------- ---------
Net cash (used in) financing activities (675.2) (7.0)
Effect of exchange rate changes on cash and cash
equivalents (1.7) 14.8
--------- ---------
(Decrease) in cash and cash equivalents (526.2) (171.3)
Cash and cash equivalents, beginning of period 795.9 640.7
--------- ---------
Cash and cash equivalents, end of period $269.7 $469.4
========= =========
Supplemental disclosure of cash flow information
Cash paid during the period for interest,
exclusive of amounts capitalised $359.1
Income taxes paid 0.2 $466.2
Page 17 Use of non-US GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). (Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ) Financial Measures Segment Profit (Loss) ntl's primary measure of profit or loss for each of our reportable segments is segment profit (loss). Our management, including our chief executive officer who is our chief operating decision maker, considers segment profit (loss) an important indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of the operational strength and performance of our reportable segments. Segment profit (loss) for each segment excludes the impact of costs and expenses that do not directly affect our cash flows or do not directly relate to the operating performance of that segment. These costs and expenses include depreciation, amortisation Noun 1. amortisation - the reduction of the value of an asset by prorating its cost over a period of years amortization reduction, step-down, diminution, decrease - the act of decreasing or reducing something 2. , interest expense, loss on extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt, foreign currency transaction gains (losses), share of income (losses) from equity investments, and taxation. Other charges, including restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. and other losses are also excluded from segment profit (loss) as management believes they are not characteristic of our underlying business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets . Furthermore management believes that some of the components of these charges are not directly related to the performance of a single reportable segment. Combined Segment Profit Combined segment profit is not a financial measure recognised under US GAAP. Combined segment profit represents our combined earnings before interest, taxes, depreciation and amortisation, other charges, share of income from equity investments, loss on extinguishment of debt and foreign currency transaction gains (losses), for each of our reportable business segments. This measure is most directly comparable to the US GAAP financial measure net income (loss). Some of the significant limitations associated with the use of combined segment profit as compared to net income (loss) are that combined segment profit does not consider the amount of required reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. in depreciable depreciable Of, relating to, or being a long-term tangible asset that is subject to depreciation. fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → , interest expense, gains or losses on foreign currency transactions, income tax expense or benefit and similar items on our results of operations. Combined segment profit also ignores the impact on our results of operations of items that management believes are not characteristic of our underlying business operations. We compensate for these limitations by using combined segment profit to measure profit or loss on a combined divisional basis and not to determine our consolidated results of operations. We believe combined segment profit is helpful for understanding our performance and assessing our prospects for the future, and that it provides useful supplemental information to investors. In particular, this non-US GAAP financial measure reflects an additional way of viewing aspects of our operations that, when viewed with our US GAAP results and the reconciliations to net income (loss), shown below, provide a more complete understanding of factors and trends affecting our business. Because non-US GAAP financial measures are not standardised Adj. 1. standardised - brought into conformity with a standard; "standardized education" standardized standard - conforming to or constituting a standard of measurement or value; or of the usual or regularized or accepted kind; "windows of standard width"; , it may not be possible to compare combined segment profit (loss) with other companies' non-US GAAP financial measures that have the same or similar names. The presentation of this supplemental information is not meant to be considered in isolation or as a substitute for net income (loss) or other measures of financial performance reported in accordance with US GAAP. Page 18 Fixed Asset Additions (Accrual Basis) ntl's primary measure of expenditures for fixed assets is Fixed Asset Additions (Accrual Basis). Fixed Asset Additions (Accrual Basis) is defined as the purchase of fixed assets as measured on an accrual basis. ntl's business is underpinned by its significant investment in network infrastructure and information technology. Management therefore considers Fixed Asset Additions (Accrual Basis) an important component in evaluating ntl's liquidity and financial condition since purchases of fixed assets are a necessary component of ongoing operations. Fixed Asset Additions (Accrual Basis) (formerly Capital Expenditure) is most directly comparable to the US GAAP financial measure purchases of fixed assets as reported in the Statement of Cash Flows. The significant limitations associated with the use of Fixed Asset Additions (Accrual Basis) as compared to purchases of fixed assets are (1) Fixed Asset Additions (Accrual Basis) excludes timing differences from payments of liabilities related to purchases of fixed assets and (2) Fixed Asset Additions (Accrual Basis) excludes capitalised interest. Management excludes these amounts from Fixed Asset Additions (Accrual Basis) because both are more related to the cash management treasury function than to ntl's management of fixed asset purchases for long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. operational performance and liquidity. Management compensates for these limitations by separately measuring and forecasting working capital and interest payments. Free Cash Flow ntl's primary measure of cash flow is Free Cash Flow. Free Cash Flow is defined as net cash provided by (used in) operating activities less purchase of fixed assets. ntl's business is underpinned by its significant investment in network infrastructure and information technology. Management therefore considers it important to measure cash flow after cash used in the purchase of fixed assets. Free Cash Flow is most directly comparable to the US GAAP financial measure net cash provided by (used in) operating activities. The significant limitation associated with Free Cash Flow as compared to net cash provided by (used in) operating activities is that it includes cash used in the investing activity, purchase of fixed assets. Management deducts purchase of fixed assets in arriving at Free Cash Flow because it considers the amount invested in the purchase of fixed assets to be an important component in evaluating ntl's liquidity. The presentation of this supplemental information is not meant to be considered in isolation or as a substitute for other measures of financial performance reported in accordance with US GAAP accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . These non-US GAAP financial measures reflect an additional way of viewing aspects of ntl's operations that, when viewed with ntl's US GAAP results and the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. reconciliations to corresponding US GAAP financial measures, provide a more complete understanding of factors and trends affecting ntl's business. Management encourages investors to review ntl's financial statements and publicly-filed reports in their entirety The whole, in contradistinction to a moiety or part only. When land is conveyed to Husband and Wife, they do not take by moieties, but both are seised of the entirety. and to not rely on any single financial measure. Page 19 RECONCILIATION OF REVENUE TO US GAAP REVENUE AND RECONCILIATION OF COMBINED SEGMENT PROFIT TO US GAAP NET LOSS (Unaudited) (in millions)
3 months 3 months 3 months
ended ended ended
September June March 31,
30, 2004 30, 2004 2004
Revenue (in GBP's) GBP 583.1 GBP 584.4 GBP 585.0
Effective exchange rate 1.82 1.81 1.84
-----------------------------------
US GAAP Revenue (in US $'s) $1,060.8 $1,055.5 $1,076.1
===================================
Combined Segment Profit (in GBP's) GBP 178.5 GBP 202.4 GBP 194.9
Effective exchange rate 1.82 1.81 1.84
-----------------------------------
Combined Segment Profit (in US $'s) $324.7 $365.7 $358.5
Reconciling items:
Other Charges (11.5) (26.9) (0.9)
Depreciation & Amortisation (360.7) (351.5) (353.6)
-----------------------------------
Operating income (loss) (47.5) (12.7) 4.0
Interest income (expense) and
other, net (108.7) (120.8) (134.9)
Loss on extinguishment of debt - (290.1) -
Share of income (losses) from
equity investments 0.9 1.0 1.2
Foreign currency transaction
(losses) gains (16.5) (25.3) 12.9
Income tax benefit (expense) (1.7) (0.6) (3.5)
-----------------------------------
US GAAP net (loss) in (US $) ($173.5) ($448.5) ($120.3)
===================================
GBP Equivalent net loss (GBP 95.4) (GBP 249.8) (GBP 65.4)
GBP Equivalent operating income GBP (26.0) (GBP 7.0) GBP 2.2
(loss)
3 months 3 months
ended ended
December September
31, 2003 30, 2003
Revenue (in GBP's) GBP 576.7 GBP 555.2
Effective exchange rate 1.70 1.61
------------------------
US GAAP Revenue (in US $'s) $982.7 $894.1
========================
Combined Segment Profit (in GBP's) GBP 204.6 GBP 200.1
Effective exchange rate 1.70 1.61
------------------------
Combined Segment Profit (in US $'s) $346.9 $322.4
Reconciling items:
Other Charges (12.7) (4.2)
Depreciation & Amortisation (414.6) (346.7)
------------------------
Operating income (loss) (80.4) (28.5)
Interest income (expense) and other, net (188.2) (183.7)
Loss on extinguishment of debt - -
Share of income (losses) from equity
investments 1.0 -
Foreign currency transaction (losses) gains 33.0 3.4
Income tax benefit (expense) 10.7 18.0
------------------------
US GAAP net (loss) in (US $) ($223.9) ($190.8)
========================
GBP Equivalent net loss (GBP 130.2) (GBP 118.4)
GBP Equivalent operating income (loss) (GBP 47.4) (GBP 17.7)
Page 20 RECONCILIATION OF FIXED ASSET ADDITIONS (ACCRUAL BASIS) TO US GAAP PURCHASE OF FIXED ASSETS (in millions) unaudited
3 months 3 months 3 months 3 months 3 months
ended ended ended ended ended
September June March December September
30, 2004 30, 2004 31, 2004 31, 2003 30, 2003
Fixed Asset Additions GBP 84.7 GBP 69.3 GBP 68.5 GBP 63.6 GBP 58.9
(accrual basis)
(in GBP 's)
Effective exchange rate 1.81 1.81 1.84 1.71 1.61
-----------------------------------------------
Fixed Asset Additions
(accrual basis)
(in US $'s) $154.0 $125.4 $125.9 $109.0 $95.0
Other items:
Changes in liabilities
related to Fixed Asset
Additions
(accrual basis) (1.6) 4.1 (21.2) 7.7 62.8
-----------------------------------------------
Subtotal (1.6) 4.1 (21.2) 7.7 62.8
-----------------------------------------------
Purchase of Fixed
Assets (in US $'s) $152.4 $129.5 $104.7 $116.7 $157.8
===============================================
RECONCILIATION OF FREE CASHFLOW TO U.S.GAAP NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (in millions) Unaudited
3 months 3 months 3 months 3 months 3 months
ended ended ended ended ended
September June March December September
30, 2004 30, 2004 31, 2004 31, 2003 30, 2003
Free cashflow
(GBP m) GBP 52.2 GBP 38.0 (GBP 12.8) 85.3 (78.4)
Effective exchange
rate 1.81 1.85 1.84 1.60 1.61
---------- -------- ---------- --------- ----------
Free cashflow ($m) $94.4 $70.2 ($23.5) $136.5 ($126.3)
Add back: Purchase
of Fixed Assets 152.4 129.5 104.7 116.7 157.8
---------- -------- ---------- --------- ----------
Net Cash provided
by (used in)
operating
activities ($m) $246.8 $199.7 $81.2 $253.2 $31.5
========== ======== ========== ========= ==========
Page 21 Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 Various statements contained herein constitute "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " as that term is defined under the Private Securities Litigation Reform Act of 1995. When used herein, the words "believe," "anticipate," "should," "intend," "plan," "will," "expects," "estimates," "projects," "positioned," "strategy," and similar expressions identify these forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements or industry results to be materially different from those contemplated, projected, forecasted, estimated or budgeted, whether expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. , by these forward-looking statements. These factors include those set forth under the caption "Risk Factors" in our form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. that was filed with the SEC on March 11, 2004 and under the caption "Risks Factors" in a Registration Statement on Form S-8 that was filed with the SEC on September 9, 2004 such as: --potential adverse developments with respect to our liquidity or results of operations; --our significant debt payments and other contractual commitments; --our ability to fund and execute our business plan; --our ability to generate sufficient cash to service our debt; --the impact of new business opportunities requiring significant up-front up-front or up·front Informal adj. 1. Straightforward; frank. 2. Paid or due in advance: up-front cash. adv. investments; --our ability to attract and retain customers, increase our overall market penetration and react to competition from providers of alternative services; --our ability to integrate our billing systems; --our significant management changes since our emergence from Chapter 11 reorganisation Noun 1. reorganisation - the imposition of a new organization; organizing differently (often involving extensive and drastic changes); "a committee was appointed to oversee the reorganization of the curriculum"; "top officials were forced out in the cabinet ; --our ability to develop and maintain back-up In cartography, an image printed on the reverse side of a map sheet already printed on one side. Also the printing of such images. for our critical systems; --our ability to respond adequately to technological developments; --our ability to maintain contracts that are critical to our operations; --our ability to continue to design networks, install facilities, obtain and maintain any required governmental licenses or approvals, and finance construction and development, in a timely manner at reasonable costs and on satisfactory terms and conditions; --interest rate and currency exchange rate fluctuations; --the impact of our reorganisation and subsequent organisational restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). ; and --our plan to separate ntl: Broadcast from our other operations and the results of our ongoing auction process. We assume no obligation to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements. Page 22 For more information contact: Investor Relations: US: Patti Leahy, +1 610 667 5554 UK: Virginia Ramsden, +44 (0)20 7967 3338 Media: Alison Kirkwood, +44 (0)1256 752662 / (0)7788 186154 Buchanan Communications Richard Oldworth or Jeremy Garcia, +44 (0)20 7466 5000 There will be a conference call to analysts and investors today at 08.30 EDT/ 13.30 UK time. Analysts and investors can dial in to the presentation by calling + 1 334 420 4951 or +1 334 323 6201 in the United States or + 44 (0)20 7162 0025 for international access or via a live webcast of the conference call and presentation on the Company's website, www.ntl.com/investors. The replay will be available for one week beginning approximately two hours after the end of the call until November 10, 2004. The dial-in number is as follows: US Replay Dial-in Number: + 1 334 323 6222 and the International Replay Dial-in Number is + 44 (0)20 8288 4459 Conference ID: 437552. Page 23 RESIDENTIAL OPERATING STATISTICS AS OF SEPTEMBER 30, 2004
(subscriber totals in 000s) UK Ireland (1) Total
---------------------------------
Homes Marketable (2)
Telco - On Net 7,730.1 23.0 7,753.1
ATV 7,910.0 468.9 8,378.9
DTV 7,411.0 403.3 7,814.3
Broadband 6,854.9 66.5 6,921.4
=================================
Customers
Single RGU 889.3 317.9 1,221.2
Dual RGU 1,428.7 7.6 1,444.2
Triple RGU 695.8 0 697.7
---------------------------------
Total 3,013.8 325.5 3,339.3
=================================
Telephone Customers 2,592.4 2.2 2,594.6
Television Customers
DTV - Cable 1,414.7 70.7 1,485.4
ATV - Cable & Master Antenna
Television 641.4 254.8 896.2
---------------------------------
Total 2,056.1 325.5 2,381.6
=================================
Internet
Dial-Up (metered - active last 30
days) (5) 56.7 0 56.7
Dial-Up (unmetered - active last
30 days) (5) 193.9 1.3 195.2
DTV Access 8.2 0 8.2
Broadband 1,136.0 5.4 1,130.8
Broadband 60 day free trial (78%
of 48.1) 37.5 37.5
---------------------------------
Total 1,432.3 6.7 1,439.0
=================================
RGUs (3)
Telephone 2,592.4 2.2 2,594.6
Television 2,056.1 325.5 2,381.6
Broadband Internet 1,173.5 5.4 1,178.9
---------------------------------
Total 5,822.0 333.1 6,155.1
=================================
RGUs/Customer 1.93 1.02 1.84
Penetration (4)
Telephone 33.5% 9.6% 33.5%
Television 26.0% 69.4% 28.4%
Broadband Internet 17.1% 8.1% 17.0%
Customer 38.1% 69.4% 39.9%
Customer/RGU Movement
Opening Customers (at June 30,
2004) 2,981.5 324.2 3,305.7
Data cleanse (5) 2.7 0 2.7
---------------------------------
Adjusted opening Customers 2,984.2 324.2 3,308.4
Gross Adds 187.9 9.4 197.3
Disconnects (134.5) (8.1) (142.6)
Reduction to customer count (6) (23.8) 0 (23.8)
---------------------------------
Closing Customers (at September 30,
2004) 3,013.8 325.5 3,339.3
=================================
Quarterly Customer Adds 53.4 1.3 54.7
Quarterly RGU Adds 98.7 2.6 101.3
% Customer Churn (7) 1.5% 0.8% 1.4%
Off-Net Telephony
Telephone 7.3 0.7 8.0
Telephone and Internet 81.7 0.5 82.2
---------------------------------
Total 89.0 1.2 90.2
=================================
(1)ntl: Ireland also offers MMDS services to 70,000 marketable homes
and had approximately 18,100 digital MMDS customers at September
30, 2004. In October, ntl: Ireland ceased its domestic direct
telephone service to its 2,200 customers after identifying a
potential safety risk.
(2)Homes marketable refer to the number of homes within our service
area that can potentially be served by our network with minimal
connection costs.
(3)Telephone, television and broadband internet subscribers directly
connected to our network count as one RGU each. As such, a
subscriber who receives both telephone and television service
counts as two RGUs. RGUs may include subscribers receiving some
services at a reduced rate in connection with incentive offers.
(4)Penetration rate measures the number of subscribers for our
services divided by the number of marketable homes that our
services pass.
(5)Data cleanse activity, as part of the harmonisation of billing
systems, resulted in an increase of recorded customers by
approximately 2,700 and an increase of RGUs by approximately 900.
The data cleanse reduced DTV RGUs by 800, reduced ATV RGUs by 200
and increased broadband RGUs by 1,900.
(6)After reviewing how our existing disconnection and credit
management practices have been applied and complied with, we have
removed approximately 23,800 customers, representing approximately
35,600 RGUs, from the customer count; see discussion on page 5. Of
the 35,600 RGUs, 19,200 were telephony RGUs, 8,400 were DTV RGUs,
1,800 were ATV RGUs and 6,200 were broadband RGUs.
(7)Monthly customer churn is calculated by taking the total
disconnects during the month and dividing them by the average
number of customers during the month. Average monthly churn
during a quarter is the average of the three monthly churn
calculations within the quarter. The 23,800 customers removed
from the customer count (see footnote 6) will be disconnected in
Q4 and are not included in the Q3 monthly churn.
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