UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| [X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended September 30, 2002 | ||||
| OR | ||||
| [ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No. 0-22616
NTL COMMUNICATIONS CORP.
| Delaware | 52-1822078 | |
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| (State or other jurisdiction of incorporation or organization) |
(I.R.S.Employer Identification No.) | |
| 110 East 59th Street, New York, New York | 10022 | |
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| (Address of principal executive offices) | (Zip Code) |
(212) 906-8440
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the issuer’s common stock as of September 30, 2002 was 13. The Registrant is an indirect wholly-owned subsidiary of NTL Incorporated and there is no market for the Registrant’s common stock.
NTL COMMUNICATIONS CORP. (DEBTOR-IN-POSSESSION) AND SUBSIDIARIES
INDEX
| Page | ||||||||
| PART I. FINANCIAL INFORMATION | ||||||||
| Item 1. | Financial Statements | |||||||
| Condensed Consolidated Balance Sheets- September 30, 2002 and December 31, 2001 | 2 | |||||||
| Condensed Consolidated Statements of Operations- Three and nine months ended September 30, 2002 and 2001 | 4 | |||||||
| Condensed Consolidated Statement of Shareholder’s (Deficiency)- Nine months ended September 30, 2002 | 5 | |||||||
| Condensed Consolidated Statements of Cash Flows- Nine months ended September 30, 2002 and 2001 | 7 | |||||||
| Notes to Condensed Consolidated Financial Statements | 8 | |||||||
| Item 2. | Management’s Discussion and Analysis of Results of Operations and Financial Condition | 35 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 61 | ||||||
| Item 4. | Controls and Procedures | 63 | ||||||
| Risk Factors | 63 | |||||||
| PART II. OTHER INFORMATION | ||||||||
| Item 1. | Legal Proceedings | 73 | ||||||
| Item 2. | Changes in Securities and Use of Proceeds | 73 | ||||||
| Item 3. | Defaults Upon Senior Securities | 73 | ||||||
| Item 6. | Exhibits and Reports on Form 8-K | 75 | ||||||
| SIGNATURES | 76 | |||||||
IN REVIEWING THIS DOCUMENT, YOU
ARE CAUTIONED TO READ THE SECTION
ENTITLED “RISK FACTORS” WHICH FORMS AN IMPORTANT PART OF
THIS REPORT.
PART I. FINANCIAL INFORMATIONS
ITEM 1. FINANCIAL STATEMENTS
NTL Communications Corp. (Debtor-in Possession) and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in millions)
| September 30, | December 31, | ||||||||
| 2002 | 2001 | ||||||||
| (unaudited) | (see note) | ||||||||
Assets |
|||||||||
Current assets: |
|||||||||
Cash and cash equivalents |
$ | 471.7 | $ | 251.1 | |||||
Marketable securities |
4.0 | – | |||||||
Accounts receivable-trade, less allowance for doubtful
accounts of $97.5 (2002) and $126.1 (2001) |
421.3 | 516.2 | |||||||
Due from affiliates, less allowance of $135.4 (2002) |
20.7 | 6.9 | |||||||
Other |
279.3 | 238.8 | |||||||
Loans to affiliates |
11.3 | – | |||||||
Total current assets |
1,208.3 | 1,013.0 | |||||||
Fixed assets, net |
11,137.1 | 10,840.3 | |||||||
Intangible assets, net |
783.2 | 767.3 | |||||||
Investments in and loans to affiliates, net |
7.0 | 4.6 | |||||||
Other assets, net of accumulated amortization of
$176.2 (2002) and $125.0 (2001) |
415.0 | 255.2 | |||||||
Loan to NTL Incorporated, less allowance of $150.0 (2002) |
– | 150.0 | |||||||
Total assets |
$ | 13,550.6 | $ | 13,030.4 | |||||
2
NTL Communications Corp. (Debtor-in Possession) and Subsidiaries
Condensed Consolidated Balance Sheets — Continued
(dollars in millions)
| September 30, | December 31, | ||||||||
| 2002 | 2001 | ||||||||
| (unaudited) | (see note) | ||||||||
Liabilities and shareholder’s (deficiency) |
|||||||||
Liabilities not subject to compromise |
|||||||||
Current liabilities: |
|||||||||
Accounts payable |
$ | 395.9 | $ | 390.5 | |||||
Accrued expenses and other |
725.0 | 840.3 | |||||||
Accrued construction costs |
84.0 | 107.8 | |||||||
Interest payable |
102.3 | 252.0 | |||||||
Deferred revenue |
336.9 | 290.2 | |||||||
Current portion of long-term debt |
5,826.3 | 14,205.9 | |||||||
Total current liabilities |
7,470.4 | 16,086.7 | |||||||
Long-term debt |
– | – | |||||||
Other |
5.5 | 8.9 | |||||||
Loan payable to NTL (Delaware), Inc. |
148.9 | – | |||||||
Commitments and contingent liabilities |
|||||||||
Deferred income taxes |
84.4 | 113.8 | |||||||
Liabilities subject to compromise |
10,050.0 | – | |||||||
Shareholder’s (deficiency): |
|||||||||
Common stock-$.01 par value; authorized 100 shares;
issued and outstanding 13 (2002) and 13 (2001) shares |
– | – | |||||||
Additional paid-in capital |
14,047.2 | 13,917.7 | |||||||
Accumulated other comprehensive (loss) |
(619.1 | ) | (904.5 | ) | |||||
(Deficit) |
(17,636.7 | ) | (16,192.2 | ) | |||||
| (4,208.6 | ) | (3,179.0 | ) | ||||||
Total liabilities and shareholder’s (deficiency) |
$ | 13,550.6 | $ | 13,030.4 | |||||
Note: The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date.
See accompanying notes.
3
NTL Communications Corp. (Debtor-in-Possession) and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
(in millions)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||
Revenues |
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Consumer telecommunications and television |
$ | 524.0 | $ | 523.0 | $ | 1,538.5 | $ | 1,537.1 | ||||||||
Business telecommunications |
226.3 | 221.7 | 655.6 | 618.5 | ||||||||||||
Broadcast transmission and other |
80.0 | 71.3 | 231.9 | 207.8 | ||||||||||||
| 830.3 | 816.0 | 2,426.0 | 2,363.4 | |||||||||||||
Costs and expenses |
||||||||||||||||
Operating expenses (exclusive of depreciation
shown separately below) |
383.6 | 397.6 | 1,128.7 | 1,180.3 | ||||||||||||
Selling, general and administrative expenses |
189.9 | 252.6 | 565.6 | 775.1 | ||||||||||||
Other charges |
28.5 | 27.9 | 32.2 | 53.2 | ||||||||||||
Non-cash compensation |
– | 30.6 | – | 30.6 | ||||||||||||
Corporate expenses |
290.9 | 3.7 | 301.3 | 13.8 | ||||||||||||
Depreciation |
385.6 | 309.6 | 1,050.0 | 923.6 | ||||||||||||
Amortization |
16.5 | 288.3 | 46.9 | 953.5 | ||||||||||||
| 1,295.0 | 1,310.3 | 3,124.7 | 3,930.1 | |||||||||||||
Operating (loss) |
(464.7 | ) | (494.3 | ) | (698.7 | ) | (1,566.7 | ) | ||||||||
Other income (expense) |
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Interest income and other, net |
1.6 | 4.9 | 19.7 | 21.2 | ||||||||||||
Interest expense (contractual interest of
$1,041.8 (2002)) |
(100.9 | ) | (303.1 | ) | (652.3 | ) | (895.7 | ) | ||||||||
Share of (losses) from equity investments |
(3.5 | ) | (3.8 | ) | (3.0 | ) | (10.7 | ) | ||||||||
Foreign currency transaction gains (losses) |
22.1 | (14.1 | ) | (47.4 | ) | 4.3 | ||||||||||
(Loss) before recapitalization items and
income taxes |
(545.4 | ) | (810.4 | ) | (1,381.7 | ) | (2,447.6 | ) | ||||||||
Recapitalization items, net |
(32.6 | ) | – | (95.8 | ) | – | ||||||||||
(Loss) before income taxes |
(578.0 | ) | (810.4 | ) | (1,477.5 | ) | (2,447.6 | ) | ||||||||
Income tax benefit |
10.4 | 1.2 | 33.0 | 3.7 | ||||||||||||
Net (loss) |
$ | (567.6 | ) | $ | (809.2 | ) | $ | (1,444.5 | ) | $ | (2,443.9 | ) | ||||
See accompanying notes.
4
NTL Communications Corp. (Debtor-in-Possession) and Subsidiaries
Condensed Consolidated Statement of Shareholder’s (Deficiency)
(unaudited)
(dollars in millions)
| Common Stock | |||||||||
| $.01 Par Value | |||||||||
| Shares | Par | ||||||||
Balance, December 31, 2001 |
13 | $ | — | ||||||
Contribution from NTL
(Delaware), Inc. |
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Comprehensive loss: |
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Net loss for the nine months ended
September 30, 2002 |
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Currency translation adjustment |
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Unrealized net gains on derivatives |
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Total |
|||||||||
Balance, September 30, 2002 |
13 | $ | — | ||||||
5
NTL Communications Corp. (Debtor-in-Possession) and Subsidiaries
Condensed Consolidated Statement of Shareholder’s (Deficiency)
(unaudited) – continued
(dollars in millions)
| Accumulated Other | |||||||||||||||||||||
| Comprehensive | |||||||||||||||||||||
| (Loss) | |||||||||||||||||||||
| Unrealized | |||||||||||||||||||||
| Additional | Foreign | Net (Losses) | |||||||||||||||||||
| Paid-In | Comprehensive | Currency | Gains on | ||||||||||||||||||
| Capital | Loss | Translation | Derivatives | (Deficit) | |||||||||||||||||
Balance, December 31, 2001 |
$ | 13,917.7 | $ | (900.9 | ) | $ | (3.6 | ) | $ | (16,192.2 | ) | ||||||||||
Contribution from NTL
(Delaware), Inc. |
129.5 | ||||||||||||||||||||
Comprehensive loss: |
|||||||||||||||||||||
Net loss for the nine months ended
September 30, 2002 |
$ | (1,444.5 | ) | (1,444.5 | ) | ||||||||||||||||
Currency translation adjustment |
281.8 | 281.8 | |||||||||||||||||||
Unrealized net gains on derivatives |
3.6 | 3.6 | |||||||||||||||||||
Total |
$ | (1,159.1 | ) | ||||||||||||||||||
Balance, September 30, 2002 |
$ | 14,047.2 | $ | (619.1 | ) | $ | — | $ | (17,636.7 | ) | |||||||||||
See accompanying notes.
6
NTL Communications Corp. (Debtor-in-Possession) and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in millions)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2002 | 2001 | |||||||
Net cash provided by (used in) operating activities |
$ | 100.7 | $ | (469.6 | ) | |||
Investing activities |
||||||||
Purchase of fixed assets |
(505.5 | ) | (1,345.6 | ) | ||||
Investments in and loans to affiliates |
(4.9 | ) | (10.1 | ) | ||||
(Increase) decrease in other assets |
(186.3 | ) | 1.7 | |||||
Loan to NTL Incorporated |
– | (150.0 | ) | |||||
Purchase of marketable securities |
(9.6 | ) | (9.9 | ) | ||||
Proceeds from sales of marketable securities |
5.6 | 10.0 | ||||||
Net cash (used in) investing activities |
(700.7 | ) | (1,503.9 | ) | ||||
Financing activities |
||||||||
Proceeds from borrowings from NTL (Delaware), Inc. |
133.2 | – | ||||||
Proceeds from borrowings, net of financing costs |
662.8 | 2,245.7 | ||||||
Principal payments |
(6.6 | ) | (418.5 | ) | ||||
Contribution from NTL (Delaware), Inc. |
3.9 | 9.0 | ||||||
Distribution to NTL (Delaware), Inc. |
– | (10.6 | ) | |||||
Net cash provided by financing activities |
793.3 | 1,825.6 | ||||||
Effect of exchange rate changes on cash |
27.3 | (7.3 | ) | |||||
Increase (decrease) in cash and cash equivalents |
220.6 | (155.2 | ) | |||||