UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
| For the quarterly period ended September 30, 2003 | Commission File Number 0-30673 |
NTL EUROPE, INC.
| Delaware | 13-4105887 | |
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| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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| 37 Purchase Street Rye, New York |
10580 | |
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| (Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code: (914) 921-1800
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 and 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 o
Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Act. YES o NO x
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan by a court. YES x NO o
Number of shares outstanding at November 5, 2003: 19,660,505 shares of Common
Stock, par value $.01 per share.
NTL EUROPE, INC.
INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2003.
PART I: FINANCIAL INFORMATION |
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| Item 1. | Financial Statements | |||||||
Condensed Consolidated Balance Sheets as of September 30, 2003 (Unaudited)
and December 31, 2002 (Audited) |
2 | |||||||
Condensed Consolidated Statements of Operations for the three
months and nine months ended September 30, 2003 and 2002 (Unaudited) |
4 | |||||||
Condensed Consolidated Statement of Shareholders’ (Deficiency) for
the nine months ended September 30, 2003 and 2002 (Unaudited) |
5 | |||||||
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2003 and 2002 (Unaudited) |
6 | |||||||
Notes to Condensed Consolidated Financial Statements (Unaudited) |
8 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 35 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 45 | ||||||
| Item 4. | Controls and Procedures | 46 | ||||||
| RISK FACTORS | 47 | |||||||
PART II: OTHER INFORMATION |
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| Item 1. | Legal Proceedings | 52 | ||||||
| Item 2. | Changes in Securities and Use of Proceeds | 52 | ||||||
| Item 3. | Defaults Upon Senior Securities | 52 | ||||||
| Item 4. | Submission of Matters to a Vote of Security Holders | 52 | ||||||
| Item 5. | Other Information | 52 | ||||||
| Item 6. | Exhibits and Reports on Form 8-K | 53 | ||||||
| SIGNATURES | 54 | |||||||
1
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
NTL Europe, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(amounts in millions)
| December 31, 2002 | ||||||||||
| September 30, 2003 | Predecessor Company | |||||||||
| Reorganized Company | (see note) | |||||||||
| (unaudited) | (audited) | |||||||||
Assets |
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Current assets: |
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Cash and cash equivalents |
$ | 126.7 | $ | 277.5 | ||||||
Marketable securities |
– | 17.3 | ||||||||
Accounts receivable — trade, less allowance for doubtful accounts of $11.1 (2003) and
$9.4 (2002) |
50.1 | 243.4 | ||||||||
Other |
78.4 | 50.3 | ||||||||
Discontinued operations |
– | 12,968.1 | ||||||||
Total current assets |
255.2 | 13,556.6 | ||||||||
Fixed assets, net |
1,164.3 | 1,682.1 | ||||||||
Goodwill |
– | 218.7 | ||||||||
Reorganization value in excess of amounts allocable to identifiable assets |
226.5 | – | ||||||||
Customer lists, net of accumulated amortization of $8.2 (2003) and $171.4 (2002) |
211.3 | 62.8 | ||||||||
Investments in and loans to affiliates, net |
21.2 | 13.0 | ||||||||
Deferred tax asset |
91.5 | 195.3 | ||||||||
Other assets, net of accumulated amortization of $62.4 (2002) |
15.0 | 120.9 | ||||||||
Total assets |
$ | 1,985.0 | $ | 15,849.4 | ||||||
2
NTL Europe, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets — continued
(amounts in millions)
| December 31, 2002 | ||||||||||
| September 30, 2003 | Predecessor Company | |||||||||
| Reorganized Company | (see note) | |||||||||
| (unaudited) | (audited) | |||||||||
Liabilities and shareholders’ (deficiency) |
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Liabilities not subject to compromise |
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Current liabilities: |
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Accounts payable |
$ | 49.1 | $ | 49.3 | ||||||
Accrued expenses and other |
58.6 | 92.5 | ||||||||
Interest payable |
12.1 | 43.5 | ||||||||
Dividends payable |
17.2 | – | ||||||||
Deferred revenue |
88.4 | 235.6 | ||||||||
Current portion of long-term debt |
2,875.5 | 2,719.3 | ||||||||
Discontinued operations (including liabilities subject to
compromise of $10,157.8) |
– | 17,956.2 | ||||||||
Total current liabilities |
3,100.9 | 21,096.4 | ||||||||
Mandatorily redeemable preferred stock – authorized 20.0 shares;
issued and outstanding 6.9 shares, liquidation preference $351.8 |
102.1 | – | ||||||||
Other |
145.0 | 132.7 | ||||||||
Deferred income taxes |
135.7 | 226.0 | ||||||||
Liabilities subject to compromise, including redeemable preferred stock |
– | 4,294.1 | ||||||||
Commitments and contingent liabilities |
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Shareholders’ (deficiency): |
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Common stock — $.01 par value; authorized 60.0 shares; issued and
outstanding 19.7 shares (2003); $.01 par value; authorized 800.0 shares; issued and outstanding 276.6 shares (2002) |
0.2 | 2.8 | ||||||||
Additional paid-in capital |
– | 13,574.9 | ||||||||
Accumulated other comprehensive (loss) |
(45.4 | ) | (830.2 | ) | ||||||
(Deficit) |
(1,453.5 | ) | (22,647.3 | ) | ||||||
| (1,498.7 | ) | (9,899.8 | ) | |||||||
Total liabilities and shareholders’ (deficiency) |
$ | 1,985.0 | $ | 15,849.4 | ||||||
See accompanying notes.
3
NTL Europe, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
(amounts in millions, except per share amounts)
| Three months ended | Nine months ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||||
| Reorganized | Predecessor Company | Reorganized | Predecessor Company | |||||||||||||||||
| Company | (see note) | Company | (see note) | |||||||||||||||||
Revenues |
$ | 123.7 | $ | 109.7 | $ | 366.0 | $ | 298.5 | ||||||||||||
Costs and expenses |
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Operating expenses (exclusive of depreciation shown separately below) |
46.5 | 50.6 | 137.4 | 132.8 | ||||||||||||||||
Selling, general and administrative expenses |
27.3 | 28.4 | 97.1 | 100.2 | ||||||||||||||||
Asset impairments |
– | 4.7 | – | 17.6 | ||||||||||||||||
Other charges |
2.8 | 0.1 | 6.4 | 3.5 | ||||||||||||||||
Corporate expenses |
4.1 | 3.2 | 13.3 | 14.4 | ||||||||||||||||
Depreciation |
45.6 | 53.4 | 138.0 | 148.3 | ||||||||||||||||
Amortization |
2.6 | 33.4 | 8.1 | 70.1 | ||||||||||||||||
| 128.9 | 173.8 | 400.3 | 486.9 | |||||||||||||||||
Operating (loss) |
(5.2 | ) | (64.1 | ) | (34.3 | ) | (188.4 | ) | ||||||||||||
Other income (expense) |
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Interest income and other, net |
1.5 | 9.8 | 3.4 | 17.7 | ||||||||||||||||
Interest expense |
(13.6 | ) | (46.7 | ) | (1,412.0 | ) | (132.7 | ) | ||||||||||||
Share of (losses) from equity investments |
(0.1 | ) | (81.4 | ) | (1.8 | ) | (168.1 | ) | ||||||||||||
Foreign currency transaction gains |
0.5 | 4.7 | 1.2 | 6.9 | ||||||||||||||||
(Loss) before recapitalization items, income taxes and discontinued operations |
(16.9 | ) | (177.7 | ) | (1,443.5 | ) | (464.6 | ) | ||||||||||||
Recapitalization items, net |
– | 10.1 | – | (11.6 | ) | |||||||||||||||
(Loss) before income taxes and discontinued operations |
(16.9 | ) | (167.6 | ) | (1,443.5 | ) | (476.2 | ) | ||||||||||||
Income tax benefit (expense) |
(0.1 | ) | 14.7 | (1.4 | ) | 40.2 | ||||||||||||||
(Loss) from continuing operations |
(17.0 | ) | (152.9 | ) | (1,444.9 | ) | (436.0 | ) | ||||||||||||
Discontinued operations: |
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(Loss) from discontinued operations, net of income tax benefits of $10.3 and $29.1
(2002) |
– | (295.9 | ) | – | (1,174.8 | ) | ||||||||||||||
Net (loss) |
(17.0 | ) | (448.8 | ) | (1,444.9 | ) | (1,610.8 | ) | ||||||||||||
Preferred stock dividends and accretion |
– | (1.6 | ) | (8.6 | ) | (143.5 | ) | |||||||||||||
Net (loss) available to common shareholders |
$ | (17.0 | ) | $ | (450.4 | ) | $ | (1,453.5 | ) | $ | (1,754.3 | ) | ||||||||
Basic and diluted net (loss) per share: |
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(Loss) from continuing operations |
$ | (0.86 | ) | $ | (0.56 | ) | $ | (73.94 | ) | $ | (2.10 | ) | ||||||||
(Loss) from discontinued operations |
– | (1.07 | ) | – | (4.25 | ) | ||||||||||||||
Net (loss) per common share |
$ | (0.86 | ) | $ | (1.63 | ) | $ | (73.94 | ) | $ | (6.35 | ) | ||||||||
Weighted average shares |
19,657,660 | 276,626,475 | 19,657,524 | 276,626,475 | ||||||||||||||||
| January 1, | ||||
| 2003 | ||||
| Predecessor | ||||
| Company | ||||
Fresh start adoption – fixed assets |
$ | (507.2 | ) | |
Fresh start adoption – debt |
1,313.2 | |||
Fresh start adoption – intangible assets |
145.3 | |||
Fresh start adoption – deferred taxes |
(13.5 | ) | ||
Fresh start adoption – pensions |
(31.2 | ) | ||
Fresh start adoption – all other |
(10.3 | ) | ||
| 896.3 | ||||
Gain on discontinued operations |
5,041.3 | |||
Gain on debt discharge |
3,962.4 | |||
Net income |
$ | 9,900.0 | ||
Basic and diluted net income per share |
$ | 35.79 | ||
See accompanying notes.
4
NTL Europe, Inc. and Subsidiaries
Condensed Consolidated Statement of Shareholders’ (Deficiency)
(unaudited)
(dollars in millions)
| Accumulated Other | ||||||||||||||||||||||||||||||||||||||||
| Comprehensive | ||||||||||||||||||||||||||||||||||||||||
| (Loss) | ||||||||||||||||||||||||||||||||||||||||
| Series Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||
| $.01 Par Value | $.01 Par Value | Additional | Foreign | Unrealized Net | Pension | |||||||||||||||||||||||||||||||||||
| Paid-in | Comprehensive | Currency | Losses on | Liability | ||||||||||||||||||||||||||||||||||||
| Shares | Par | Shares | Par | Capital | (Loss) | Translation | Derivatives | Adjustments | (Deficit) | |||||||||||||||||||||||||||||||
Predecessor Company |
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Balance, December 31, 2002 |
3,000,000 | $ | – | 276,626,475 | $ | 2.8 | $ | 13,574.9 | $ | (770.1 | ) | $ | (30.1 | ) | $ | (30.0 | ) | $ | (22,647.3 | ) | ||||||||||||||||||||
Net Income January 1, 2003 |
$ | 9,900.0 | 9,900.0 | |||||||||||||||||||||||||||||||||||||
Issuance of Common Stock |
19,657,433 | 0.2 | ||||||||||||||||||||||||||||||||||||||
Fresh-start adoptions – other |
(3,000,000 | ) | (276,626,475 | ) | (2.8 | ) | (13,574.9 | ) | 770.1 | $ | (30.1 | ) | $ | (30.0 | ) | 12,747.3 | ||||||||||||||||||||||||