Telewest Global, Inc. ("Telewest" or the "Reorganized Company")
(NASDAQ TLWT) today announces first quarter financial results for
2005. Highlights -- Adjusted EBITDA growth of 10% over Q1 04 --
Operating income increased 26% over Q1 04 -- Consumer sales
division revenue growth of 5% over Q1 04 -- Triple play penetration
increased by 11.4 percentage points over Q1 04 to 30.3% -- Revenue
Generating Units grew by 113,000 in the quarter; RGUs per customer
grew from 1.93 at Q1 04 to 2.08 at Q1 05 -0- *T Financial
highlights
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Telewest Global, Telewest Global, Inc. Inc. Predecessor
---------------- ---------------- --------------- (unaudited in GBP
m) Q1 2005 Q4 2004 Q1 2004 Revenue 338 336 328 Operating income 24
18 19 Adjusted EBITDA 134 128 122 Net income/(loss) 1 (17) (4) Free
cash flow 63 (3)(a) 25
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(a) Q4 2004 free cash flow was impacted by an extra 87 days or GBP
34m of bank cash interest, as a result of the timing of interest
payments in connection with the refinancing of bank facilities
during Q4. Operational highlights
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Q1 2005 Q4 2004 Q1 2004 Customer net adds 23,000 30,000 12,000
Broadband net adds 88,000 91,000 51,000 RGU net adds 113,000
132,000 77,000 Triple play percentage 30.3% 27.4% 18.9%
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*T Barry Elson, Acting Chief Executive Officer of Telewest Global,
Inc., commented: "Telewest continues to build on its strong
performance and we are encouraged by the operational and financial
trends in our consumer and content businesses. In particular, we
have seen increased triple play penetration and ARPU and reduced
churn and our customer growth and RGU growth is higher than the
corresponding quarter last year. Our roll-out plans for DVR and VOD
are progressing and we are optimistic that these products will add
to our competitiveness and increase loyalty as we strive to provide
the best service and product suite for our customers." OPERATIONAL
REVIEW Cable segment Consumer sales division The Consumer division
has had another strong quarter with a net increase of 23,000
customer relationships, further increases in ARPU to GBP 45.34 and
a reduction in monthly churn from 1.1% to 1.0% as compared to
quarter 4, 2004. Customer and RGU growth was lower than in the
seasonally strong fourth quarter, but higher than in the
corresponding quarter last year. We have achieved the quarter's
strong results through effective marketing and continued use of
promotional campaigns, such as our triple play "3 for GBP 30" offer
and our "Easy Switch" broadband offer, which offers a discount on
entry level broadband when taken with a phone line. The continued
increase in ARPU is particularly encouraging and reflects our
successful focus on selling bundled products. The percentage of
"triple play" customers has increased by 3 percentage points to 30%
in the quarter. 34% of customer acquisitions in the quarter took
the full "triple play". Consequently, RGU per customer also grew to
2.08 in the first quarter. Triple play growth over the last two
quarters has been stronger than expected. Consequently, we now
expect to reach 40% triple play penetration during 2007, over two
years earlier than our previously stated guidance. We will
implement selected price increases in television from July 1, 2005,
which we expect to have a positive impact on household ARPU in the
third quarter of 2005. Consumer internet We have experienced
continued strong growth in the number of broadband subscribers,
with 88,000 net additions in the quarter. Most of the growth has
been in our lowest tier, where we have increased connection speeds
from 256Kb to 512Kb. This has impacted the mix of broadband
subscribers and broadband ARPU, which fell GBP 0.34 (less than 2%)
in the quarter to GBP 19.89. Over 60% of our broadband subscriber
base take a 1Mb or higher speed service. Broadband continues to be
successful in attracting new customers to Telewest - 41% of
broadband installations were for customers who were not existing
customers. Multi-service penetration remains high in broadband,
with 70% of all broadband internet subscribers subscribing to the
full "triple play" and 93% subscribing to at least one other
product. Consumer television Digital TV subscribers rose by 27,000
in the quarter and total TV subscribers rose by 8,000 net
additions. TV ARPU increased by GBP 0.24 in the quarter to GBP
21.12 due to a full quarter's effect of last November's GBP 1 price
increase on our "Starter" package and selected price increases on
our premium channels. We have introduced promotions to improve the
take-up of higher tier packages and consequently the number of
subscribers to our "Supreme" package, increased during the quarter.
From July 1, 2005, we will be increasing the price of our two
lowest digital TV tiers by GBP 1 each. The price of the "Starter"
tier will increase to GBP 5.50 per month and the "Essential" tier
will increase to GBP 10.50 per month. 87% of our TV subscribers now
take our digital service. We are accelerating migration of the
remaining 171,000 analog customers to digital. We estimate that we
will be fully digital by the end of 2006. Once complete, this will
free up significant amounts of bandwidth in our network, which will
allow extra capacity for Video-On-Demand, (VOD), High Definition
TV, broadband speed increases and other services. We launched VOD
services in Bristol in the first quarter and the next stage of the
roll-out is scheduled for early July to 26,000 subscribers in
Cheltenham. We plan to complete the national roll-out of VOD by
early 2006. We continue to work on our plans for the launch of DVR
(Digital Video Recorder) services later in the year. Consumer
telephony The number of telephony subscribers increased by 17,000
in the quarter, primarily as a result of the continued success of
our bundled offerings. Telephony penetration is now 35.8%. We have
continued our strategy of migrating subscribers to flat rate
packages to minimize the impact of declining telephony usage. As a
result, 37% of all telephony subscribers are now on a "Talk" flat
rate package. At the start of the quarter, we withdrew our 3-2-1
metered telephony package from sale to new customers. From July 1,
2005, we will be migrating all our existing 3-2-1 subscribers to
"Talk Weekends" which gives subscribers free local and national
calls at weekends. This package is charged at GBP 10.50 per month
compared to GBP 10 for the existing 3-2-1 service. Business sales
division Revenues fell by GBP 2 million to GBP 61 million compared
to the previous quarter primarily due to continued weakness in the
business voice market. We are addressing these market conditions
through new and more advanced products. For example, within the
Public Sector, we have signed a new deal worth GBP 2.2 million over
5 years with Maidstone and Tunbridge Wells NHS Trust for our
managed voice product Centrex and our new SRS Advanced platform to
integrate telephony services across three hospital sites. We have
signed a large number of data contracts in the quarter including
large IPVPN contracts with Oxford Swindon and Gloucester Co-op and
Royal London. Our new Ethernet portfolio has enabled the division
to sign some new Ethernet deals, including a three-year deal with
Bristol City Council for GBP 1.3 million. Content segment Overall
revenue growth in our content segment, Flextech, was up 19% from
GBP 26 million in the first quarter of 2004 to GBP 31 million in
the first quarter of 2005, although it was down GBP 1 million as
compared to the fourth quarter of 2004. Advertising revenue was up
GBP 1 million on the fourth quarter of 2004 and up GBP 4 million on
the first quarter of 2004. This growth was driven by increases in
UK Pay-television penetration, the strong performance of Flextech's
channels and strong growth in the UK advertising market in the
first quarter. Subscription revenue remained flat at GBP 11 million
compared to the previous quarter, but up GBP 1 million compared to
the same quarter last year. Other non-core revenues fell by GBP 2
million compared to the fourth quarter of 2004, but were flat at
GBP 3 million compared to the first quarter of 2004. The portfolio
of content assets is soon to be enhanced by the acquisition of
sit-up Limited, which we expect to complete during June 2005. Costs
Total gross margin increased to 74% from 72% in the fourth quarter
and from 71% in the first quarter of last year, due primarily to
the growing number of high margin broadband subscribers, television
price increases and reduced cable segment expenses. SG&A of GBP
115 million was up GBP 1 million from the fourth quarter of 2004.
Debt and Capital Resources Capital expenditure was GBP 54 million
for the quarter. Capital expenditure is expected to be in the range
of GBP 230 million to GBP 250 million in 2005. Telewest's soon to
be completed acquisition of the remaining equity in sit-up Limited
will in part be financed by a new GBP 130 million senior secured
bank facility entered into by Telewest's Flextech subsidiaries. The
bank facility consists of GBP 110 million of term loans, which were
fully drawn in connection with the acquisition and a GBP 20 million
revolving credit facility, which remains undrawn. As at March 31,
2005, net debt was GBP 1,728 million. This consisted of GBP 1,701
million drawn down on our credit facilities, GBP 114 million of
leases and other loans, offset by cash balances of GBP 87 million.
The GBP 1,701 million drawn amount includes US$150 million and Euro
100 million, with the remainder in pounds sterling. -0- *T
FINANCIAL RESULTS GAAP Financial Measures 3 months ended March 31,
---------------------------- (unaudited in GBP millions) 2005 2004
Reorganized Predecessor Company Company
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Operating income 24 19 Net income/(loss) 1 (4) Net cash provided by
operating activities 116 82
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*T Operating income for the first quarter of 2005 was GBP 24
million, up from GBP 19 million for the first quarter of 2004, due
principally to revenue growth, lower cable segment expenses and
SG&A partially offset by increased content segment expenses,
depreciation and amortization. SG&A in the first quarter of
2004 was impacted by GBP 9 million of financial restructuring
charges compared to GBP 0 in the first quarter of 2005 and the
first quarter of 2005 was impacted by GBP 3 million of stock-based
compensation expense compared to GBP 0 in the first quarter of
2004. The improvement from net loss of GBP 4 million for the first
quarter of 2004 to net income of GBP 1 million for the first
quarter of 2005, was due principally to enhanced operating income
and lower interest costs following our financial restructuring,
partially offset by lower foreign exchange gains. There were GBP 77
million of foreign exchange gains in the first quarter of 2004
relating to dollar-denominated debt, which was extinguished as part
of our predecessor's financial restructuring. This is the first
time that Telewest has generated net income. Net cash provided by
operating activities increased from GBP 82 million for the first
quarter of 2004 to GBP 116 million for the first quarter of 2005.
This increase arose principally as a result of improvements in
operating income and reduced interest payments being partially
offset by increased net working capital. -0- *T Non-GAAP Financial
Measures 3 months ended March 31, ---------------------------
(unaudited in GBP millions) 2005 2004 Reorganized Predecessor
Company Company
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Adjusted EBITDA 134 122 Free cash flow 63 25
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*T Adjusted EBITDA (earnings before interest, taxation,
depreciation, amortization and financial restructuring expenses)
for the first quarter of 2005 was GBP 134 million, up 10% as
compared to the first quarter of 2004. This increase reflects
increased revenues, particularly in the consumer sales division and
content segment, lower operating costs and expenses in the cable
segment, and improved gross margin, partially offset by higher
operating costs and expenses in the content segment. Adjusted
EBITDA margin (Adjusted EBITDA as a percentage of revenue) has
increased from 37.2% to 39.6%. Stock-based compensation expense
("SBCE") of GBP 3 million was incurred in the first quarter of
2005. SBCE arises as a result of options and restricted stock
granted upon completion of the financial restructuring of our
predecessor. SBCE will similarly affect future periods. This is a
non-cash item and no such expense was incurred in the first quarter
of 2004. Adjusted EBITDA before the deduction of SBCE was GBP 137
million in the first quarter of 2005, an increase of GBP 15
million, or 12%, over the first quarter of 2004 on the same basis.
Free cash flow (cash flow from operating activities excluding
financial restructuring expenses less capital expenditure) for the
three months ended March 31, 2005 was GBP 63 million, compared with
GBP 25 million for the three months ended March 31, 2004. The
increase was primarily due to reduced cash interest payments
relating to our bank facilities, reduced capital expenditure and
increased Adjusted EBITDA. Cash interest paid in the first quarter
of 2005 was lower than the first quarter of 2004 by approximately
GBP 20 million. This decrease resulted primarily from the lower
levels of our bank facilities and capital lease obligations for the
first quarter of 2005 compared to the first quarter of 2004. In
addition, capital expenditure was GBP 12 million less in the first
quarter of 2005 compared with the same period in 2004, due to
reduced CPE costs, increased efficiency in the install process and
improvements in the supply chain. Reconciliations of these non-GAAP
financial measures, Adjusted EBITDA and free cash flow, to the most
directly comparable GAAP financial measures are explained and shown
on pages 14 and 15. -0- *T Principal affiliates UKTV (unaudited in
GBP millions) 3 months ended March 31, ---------------------------
2005 2004
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Share of net income of UKTV 5 4 Cash inflow from UKTV, being
interest received, repayment of loans made, net, and dividends
received 6 3
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*T Telewest owns 50% of the companies that comprise UKTV, a group
of joint ventures formed with BBC Worldwide. UKTV offers a
portfolio of multi-channel television channels based on the BBC's
program library. Telewest accounts for its interest in UKTV under
the equity method and recognized a share of net income of GBP 5
million for the three months ended March 31, 2005. This compares
with GBP 4 million share of net income for the three months ended
March 31, 2004. UKTV is funded by a loan from Telewest, the balance
of which was GBP 184 million at March 31, 2005. Total cash interest
and repayments received in respect of this loan by Telewest were
GBP 4 million in the first quarter of 2005. Telewest's cash
interest receipts from UKTV are recorded in free cash flow but not
in Telewest's Adjusted EBITDA. During the three months ended March
31, 2005, we received GBP 2 million of dividends from UKTV. We
expect to continue to receive dividends from UKTV as it continues
to generate cash. sit-up On March 23, 2005, Telewest acquired 21.2%
(on a fully diluted basis) of sit-up Limited (sit-up), a UK-based
interactive television retailer, for a cash consideration of
approximately GBP 41 million, bringing its total holding of
sit-up's share capital to approximately 49.7% (on a fully diluted
basis). In addition, pursuant to agreements entered into with
sit-up's founders and an offer to sit-up shareholders, Telewest has
since acquired or offered to acquire the remaining 50.3% (on a
fully diluted basis) of sit-up not already owned by it for an
aggregate consideration of approximately GBP 97.5 million. In
addition, sit-up's existing management will remain with the company
following completion of the acquisition. Telewest expects to
complete this acquisition in June 2005 and to finance it in part
from borrowings under a new GBP 130 million bank facility entered
into by its Flextech subsidiaries on May 10, 2005. sit-up owns the
second, third and fourth most distributed television home shopping
channels in the UK, with over five million viewers per month.
Supplementary financial information in respect of sit-up's
operations and cash flows for 2003 and 2004 is included on page 16
of this earnings release. -0- *T Telewest Global, Inc. Consolidated
Statements of Operations (amounts in GBP millions, except share and
per share data) (unaudited)
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Three months ended March 31, ----------------------------- 2005
2004 --------------- ------------- Reorganized Predecessor Company
Company
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Revenue Consumer Sales Division 246 235 Business Sales Division 61
67
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Total Cable Segment 307 302 Content Segment 31 26
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Total revenue 338 328
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Operating costs and expenses Cable segment expenses 69 79 Content
segment expenses 20 16 Depreciation 101 94 Amortization 9 -
Selling, general and administrative expenses 115 120
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314 309
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Operating income 24 19 Other income/(expense) Interest income 4 7
Interest expense (including amortization of debt discount) (29)
(109) Foreign exchange (losses)/gains, net (4) 77 Share of net
income of affiliates 6 3 Other, net - (1)
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Income/(loss) before income taxes 1 (4) Income taxes charge - -
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Net income/(loss) 1 (4)
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Basic and diluted loss per share of common stock - Weighted average
number of shares of common stock - (in millions) 245
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Telewest Global, Inc. Consolidated Balance Sheets (amounts in GBP
millions, except share and per share data)
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March 31, December 31, 2005 2004 ----------- ------------
Reorganized Reorganized Company Company
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Assets Cash and cash equivalents 87 68 Restricted cash 25 26 Trade
receivables 119 108 Other receivables 33 33 Prepaid expenses 34 17
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Total current assets 298 252 Investments accounted for under the
equity method 349 304 Property and equipment, net 2,925 2,974
Intangible assets, net 305 314 Reorganization value in excess of
amounts allocable to identifiable assets 425 425 Programming
inventory 32 24 Deferred financing costs (net of amortization of
GBP 1 million; 2004: GBP 0 million) 51 51
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Total assets 4,385 4,344
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Liabilities and shareholders' equity Accounts payable 127 93 Other
liabilities 427 424 Debt repayable within one year 21 21 Capital
lease obligations repayable within one year 43 38
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Total current liabilities 618 576 Deferred taxes 105 105 Debt
repayable after more than one year 1,686 1,686 Capital lease
obligations repayable after more than one year 65 69
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Total liabilities 2,474 2,436
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Minority interest (1) (1)
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Shareholders' equity Preferred stock - US$0.01 par value;
authorized 5,000,000 shares, issued none (2005 and 2004) - - Common
stock - US$0.01 par value; authorized 1,000,000,000 shares, issued
245,080,629 (2005 and 2004) 1 1 Additional paid-in capital 1,957
1,954 Accumulated other comprehensive loss (1) - Accumulated
deficit (45) (46)
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Total shareholders' equity 1,912 1,909
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----------------------------------------------------------------------
Total liabilities and shareholders' equity 4,385 4,344
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Telewest Global, Inc. Consolidated Statements of Cash Flows
(amounts in GBP millions) (unaudited)
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Three months ended March 31, ----------------------------- 2005
2004 -------------- -------------- Reorganized Predecessor Company
Company
----------------------------------------------------------------------
Cash flows from operating activities Net income/(loss) 1 (4)
Adjustments to reconcile net income/(loss) to net cash provided by
operating activities: Depreciation 101 94 Amortization 9 -
Amortization of deferred financing costs and debt discount 1 20
Fair value adjustment of interest rate swaps (10) - Unrealized
losses/(gains) on foreign currency translation 4 (77) Stock-based
compensation expense 3 - Share of net income of affiliates (4) (3)
Profit on disposal of assets - (1) Amounts written off investments
- 1 Changes in operating assets and liabilities, net of effect of
acquisition of subsidiaries: Change in receivables (12) (2) Change
in prepaid expenses (18) (5) Change in other assets (8) (2) Change
in accounts payable 31 15 Change in other liabilities 18 46
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Net cash provided by operating activities 116 82
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Cash flows from investing activities Capital expenditure (54) (66)
Additional investments in and loans to affiliates (41) - Repayment
of loans made to affiliates, net 2 3 Proceeds from sale and
leaseback 4 -
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Net cash used in investing activities (89) (63)
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Cash flows from financing activities Release of restricted cash 1 -
Repayment of other debt (1) - Cash paid for loan issue costs (1) -
Principal element of capital lease repayments (7) (12)
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Net cash used in financing activities (8) (12)
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Net increase in cash and cash equivalents 19 7 Cash and cash
equivalents at beginning of period 68 427
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Cash and cash equivalents at end of period 87 434
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Supplementary cash flow information: Cash paid for interest, net
(12) (32) Cash received for income taxes - - Telewest Global, Inc.
Selected Quarterly Operating Data - unaudited The following table
sets out certain operating data for the three-month periods shown.
The information represents combined operating statistics for all of
our franchises.
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Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, 2005 2004 2004 2004
2004 Reorganized Company Predecessor Company
------------------------------ -------------------- Customer Data
------------------ Homes passed and marketed (1) 4,694,480
4,686,794 4,686,799 4,682,777 4,678,182 Total customer
relationships (2) 1,822,530 1,799,556 1,769,263 1,752,553 1,742,144
Customer penetration 38.8% 38.4% 37.7% 37.4% 37.2% Customer
additions 78,695 89,452 78,707 67,118 61,997 Customer
disconnections (55,721) (59,159) (61,997) (56,709) (50,291) Net
customer additions 22,974 30,293 16,710 10,409 11,706 Revenue
Generating Units ("RGUs") (3) 3,784,835 3,671,402 3,539,185
3,447,254 3,363,240 RGUs per customer 2.08 2.04 2.00 1.97 1.93 Net
RGU additions 113,433 132,217 91,931 84,014 76,534 Average monthly
revenue per customer (4) GBP 45.34 GBP 45.13 GBP 45.05 GBP 44.98
GBP 45.05 Average monthly churn (5) 1.0% 1.1% 1.2% 1.1% 1.0%
----------------------------------------------------------------------
Bundled customers ------------------- Customers subscribing to two
or more services 1,409,998 1,379,057 1,338,632 1,312,842 1,291,141
Customers subscribing to three services ("triple play") 552,307
492,789 431,290 381,859 329,955 Percentage of dual or triple play
customers 77.4% 76.6% 75.7% 74.9% 74.1% Percentage of triple play
customers 30.3% 27.4% 24.4% 21.8% 18.9%
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Consumer Television ------------------- Television ready homes
passed and marketed 4,694,480 4,686,794 4,686,799 4,682,777
4,678,182 Total subscribers 1,320,487 1,312,825 1,297,304 1,288,272
1,285,797 Quarterly net additions 7,662 15,521 9,032 2,475 13,733
Television penetration 28.1% 28.0% 27.7% 27.5% 27.5% Digital ready
homes passed and marketed 4,451,420 4,420,388 4,405,162 4,401,860
4,386,050 Digital subscribers 1,149,641 1,122,301 1,078,623
1,052,855 1,029,759 Quarterly net digital additions 27,340 43,678
25,768 23,096 41,886 Penetration of digital subscribers to total
subscribers 87.1% 85.5% 83.1% 81.7% 80.1% Average monthly churn (5)
1.4% 1.5% 1.4% 1.3% 1.2% Average monthly revenue per subscriber (4)
GBP 21.12 GBP 20.88 GBP 20.72 GBP 20.53 GBP 21.18
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Consumer Telephony ------------------- Telephony ready homes passed
and marketed 4,691,704 4,683,153 4,682,002 4,677,861 4,674,932
"3-2-1" and "Talk Weekends" telephony subscribers 1,053,226
1,080,893 1,082,125 1,105,056 1,130,171 "Talk Unlimited" and "Talk
Evenings and Weekends" subscribers 624,417 579,448 552,534 516,313
481,976 Total subscribers 1,677,643 1,660,341 1,634,659 1,621,369
1,612,147 Quarterly net additions 17,302 25,682 13,290 9,222 12,114
Telephony penetration 35.8% 35.5% 34.9% 34.7% 34.5% Average monthly
churn (5) 1.0% 1.1% 1.2% 1.1% 1.0% Average monthly revenue per
subscriber (4) GBP 23.00 GBP 23.18 GBP 23.53 GBP 23.70 GBP 24.20
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Telewest Global, Inc. Selected Quarterly Operating Data - unaudited
(continued)
----------------------------------------------------------------------
Mar. 31, Dec. 31, Sep. 30, 2005 2004 2004 Reorganized Company
----------------------------------- Consumer Internet
---------------------------------- Broadband ready homes passed and
marketed 4,451,420 4,420,388 4,405,162 Total metered dial-up
internet subscribers 29,376 33,417 39,196 Total unmetered dial-up
internet subscribers 85,909 107,220 127,745 Total broadband
internet subscribers 786,705 698,236 607,222 Quarterly net
broadband internet additions 88,469 91,014 69,609 Broadband
internet penetration 17.7% 15.8% 13.8% Average monthly broadband
internet churn (5) 1.0% 1.0% 1.3% Average monthly revenue per
broadband internet subscriber(4) GBP 19.89 GBP 20.23 GBP 21.50(a)
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NCTA Capital expenditure (6) GBP m GBP m GBP m
---------------------------------------------------------------------
Customer premise equipment ("CPE") 16 25 19 Scaleable
infrastructure 7 14 8 Commercial 8 8 12 Line extensions 2 1 1
Upgrade/rebuild 6 10 1 Support capital 13 7 10
----------------------------------- Total NCTA Capital expenditure
52 65 51 Non NCTA Capital expenditure: Content Segment - 1 - Change
in capital accruals 2 (2) (1)
----------------------------------------------------------------------
Total Capital expenditure 54 64 50
----------------------------------------------------------------------
Jun. 30, Mar. 31, 2004 2004 Predecessor Company
------------------------ Consumer Internet
-------------------------------------------- Broadband ready homes
passed and marketed 4,401,860 4,386,050 Total metered dial-up
internet subscribers 47,884 50,953 Total unmetered dial-up internet
subscribers 151,457 177,250 Total broadband internet subscribers
537,613 465,296 Quarterly net broadband internet additions 72,317
50,687 Broadband internet penetration 12.2% 10.6% Average monthly
broadband internet churn (5) 1.2% 1.0% Average monthly revenue per
broadband internet subscriber (4) GBP 22.45(a)GBP 22.29(a)
----------------------------------------------------------------------
NCTA Capital expenditure (6) GBP m GBP m
----------------------------------------------------------------------
Customer premise equipment ("CPE") 23 23 Scaleable infrastructure 7
7 Commercial 9 11 Line extensions 1 1 Upgrade/rebuild 4 2 Support
capital 9 8 ------------------------- Total NCTA Capital
expenditure 53 52 Non NCTA Capital expenditure: Content Segment 1 -
Change in capital accruals 7 14
----------------------------------------------------------------------
Total Capital expenditure 61 66
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(a) The product ARPUs for broadband internet in these quarters have
been adjusted to reflect the full value of promotional discounts
offered. (1) The number of homes within our service area that can
potentially be served by our network with minimal connection costs.
Information concerning the number of homes "passed and marketed" is
based on physical counts made by us during network construction or
marketing phases. (2) The number of customers who receive at least
one of our television, telephony or broadband internet services.
(3) Revenue Generating Units ("RGUs"), refer to subscriptions to
each of our analog television, digital television, telephony and
broadband internet services on an individual basis. For example,
when we provide one customer with digital television and broadband
internet services, we record two RGUs. Dial-up internet services,
second telephone lines and additional TV outlets are not recorded
as RGUs although they generate revenue for us. (4) Average monthly
revenue per customer (often referred to as "ARPU" or "Average
Revenue per User") represents the consumer sales division's total
quarterly revenue of residential customers, including installation
revenues, divided by the average number of residential customers in
the quarter, divided by three. The same methodology is used for
television, telephony and broadband internet ARPU. (5) Average
monthly churn represents the total number of customers who
disconnected during the quarter divided by the average number of
customers in the quarter, divided by three. Subscribers who move
premises within our addressable areas (known as "Moves and
Transfers") and retain our services are excluded from this churn
calculation. (6) In order to provide comparable data to the US and
UK cable industry, and in accordance with NCTA (National Cable
& Telecommunications Association) reporting guidelines,
Telewest has allocated capital expenditure to the standard
reporting categories as per below. Telewest is not a member of the
NCTA and is providing this information solely for comparative
purposes. CPE - costs incurred at the customer's house to secure
new customers, revenue units and additional bandwidth revenues.
Includes connections to previously unserved houses in accordance
with SFAS 51 and customer premise equipment. Scaleable
infrastructure - costs, not CPE or network related, to secure
growth of new customers, revenue units and additional bandwidth
revenues or provide service enhancements. Commercial - costs to
provide high speed data and telephony services to businesses and
institutions. Includes network and infrastructure expenditures.
Line extensions - network costs associated with entering new
service areas including costs of fiber, coaxial cable, amplifiers,
electronic equipment, make-ready and design/engineering.
Upgrade/rebuild - costs to modify or replace existing coax and
fiber networks. Includes materials, contract labor, in-house labor,
make-ready, design engineering and other miscellaneous costs
associated with all aspects of the construction of the plant miles
along an existing route. Benefits include added bandwidth and/or
reliability/extended life to the existing plant. Support capital -
costs associated with the replacement or enhancement of non-network
assets due to obsolescence and wear-out, replacement of network
assets unrelated to line extensions, rebuild/upgrade or customer
growth. *T Telewest Global, Inc. Supplemental Analysis --
Forward-Looking Statements -- Fresh-Start Reporting -- Quarterly
Historical Information -- Segmental Information -- Use of Non-GAAP
Financial Measures -- sit-up Limited Forward-Looking Statements
Some of the statements in this earnings release constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements relate
to future events or our future financial performance, including,
but not limited to, strategic plans, potential growth (including
penetration of developed markets and opportunities in emerging
markets), product introductions and innovation, meeting customer
expectations, planned operational changes (including product
improvements), expected capital expenditures, future cash sources
and requirements, liquidity, customer service improvements, cost
savings and other benefits of acquisitions or joint ventures -
potential and/or completed - that involve known and unknown risks,
uncertainties and other factors that may cause our or our
businesses' actual results, levels of activity, performance or
achievements to be materially different from those expressed or
implied by any forward-looking statements. In some cases, you can
identify forward-looking statements by terminology such as "may,"
"will," "could," "would," "should," "expect," "plan," "anticipate,"
"intend," "believe," "estimate," "predict," "potential," or
"continue," or the negative of those terms or other comparable
terminology. There are a number of important factors that could
cause our actual results and future development to differ
materially from those expressed or implied by those forward-looking
statements. These factors include those discussed under the caption
"Risk Factors" in the Annual Report on Form 10-K for the year ended
December 31, 2004 (No. 000-50886) filed by Telewest Global, Inc. on
March 22, 2005 with the United States Securities and Exchange
Commission, although those risk factors may not be exhaustive.
Other sections of this earnings release may describe additional
factors that could adversely impact our business and financial
performance. We operate in a continually changing business
environment, and new risk factors may emerge from time to time.
Management cannot anticipate all of these new risk factors, nor can
they definitively assess the impact, if any, of new risk factors on
us or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those projected
in any forward-looking statements. Accordingly, forward-looking
statements should not be relied upon as a prediction of actual
results. Unless otherwise required by applicable securities laws,
we assume no obligation to publicly update or revise any of the
forward-looking statements after the date of this earnings release
to reflect actual results, whether as a result of new information,
future events or otherwise. Fresh-Start Reporting As a result of
the completion of the financial restructuring of Telewest
Communications plc, our predecessor, on July 15, 2004, Telewest
adopted fresh-start reporting in accordance with Statement of
Position 90-7, "Reporting by Entities in Reorganization under the
Bankruptcy Code", ("SOP 90-7"), with effect from July 1, 2004.
Under SOP 90-7, Telewest established a new accounting basis,
recording our predecessor's assets at their fair value and
liabilities at the present value of amounts to be paid. A
reconciliation of our predecessor's balance sheet at June 30, 2004
to the fresh-start balance sheet at July 1, 2004, is included in
Telewest's Annual Report on Form 10-K for the year ended December
31, 2004. As a result of the adoption of fresh-start reporting, our
balance sheets and results of operations subsequent to July 1, 2004
will not be comparable in many material respects to the balance
sheets or results of operations reflected in our predecessor's
historical financial statements for periods prior to July 1, 2004.
-0- *T Telewest Global, Inc. Quarterly Historical Information
(amounts in GBP millions, except share and per share data)
--------------------------- Three months ended
--------------------------- Mar. 31, Dec. 31, Sep. 30, 2005 2004
2004 Reorganized Company
----------------------------------------------------------------------
Revenue Consumer Sales Division 246 241 238 Business Sales Division
61 63 63
---------------------------------------------------------------------
Total Cable Segment 307 304 301 Content Segment 31 32 27
---------------------------------------------------------------------
Total revenue 338 336 328
---------------------------------------------------------------------
Operating costs and expenses Cable segment expenses 69 69 72
Content segment expenses 20 25 17 Depreciation 101 101 103
Amortization 9 9 9
---------------------------------------------------------------------
Cost of revenue 199 204 201 Selling, general and administrative
expenses 115 114 117
---------------------------------------------------------------------
314 318 318
---------------------------------------------------------------------
Operating income 24 18 10 Other income/(expense) Interest income 4
5 6 Interest expense (including amortization of debt discount) (29)
(47) (49) Foreign exchange (losses)/gains, net (4) 3 - Share of net
income of affiliates 6 4 4 Other, net - - -
---------------------------------------------------------------------
Income/(loss) before income taxes 1 (17) (29) Income taxes charge -
- -
---------------------------------------------------------------------
Net income/(loss) 1 (17) (29)
---------------------------------------------------------------------
Basic and diluted loss per share of common stock -
GBP(0.07)GBP(0.12) Weighted average number of shares of common
stock - (in millions) 245 245 245
----------------------------------------------------------------------
Three months ended ------------------------- Jun. 30, Mar. 31, 2004
2004 Predecessor Company
----------------------------------------------------------------------
Revenue Consumer Sales Division 235 235 Business Sales Division 63
67
----------------------------------------------------------------------
Total Cable Segment 298 302 Content Segment 28 26
----------------------------------------------------------------------
Total revenue 326 328
----------------------------------------------------------------------
Operating costs and expenses Cable segment expenses 74 79 Content
segment expenses 18 16 Depreciation 90 94 Amortization - -
----------------------------------------------------------------------
Cost of revenue 182 189 Selling, general and administrative
expenses 124 120
----------------------------------------------------------------------
306 309
----------------------------------------------------------------------
Operating income 20 19 Other income/(expense) Interest income 8 7
Interest expense (including amortization of debt discount) (121)
(109) Foreign exchange (losses)/gains, net (37) 77 Share of net
income of affiliates 5 3 Other, net - (1)
----------------------------------------------------------------------
Income/(loss) before income taxes (125) (4) Income taxes charge (1)
-
----------------------------------------------------------------------
Net income/(loss) (126) (4)
----------------------------------------------------------------------
Basic and diluted loss per share of common stock Weighted average
number of shares of common stock - (in millions)
----------------------------------------------------------------------
Telewest Global, Inc. Segment Information (amounts in GBP millions)
Three months ended March 31, ----------------------------- 2005
2004 ----------------------------- Reorganized Predecessor Company
Company
----------------------------------------------------------------------
CABLE SEGMENT Consumer Sales Division revenue 246 235 Business
Sales Division revenue 61 67
----------------------------------------------------------------------
Third party revenue 307 302 Operating costs and expenses (before
financial restructuring charges) (179) (188)
----------------------------------------------------------------------
Adjusted EBITDA including inter-segment costs 128 114 Inter-segment
costs (1) 3 3
----------------------------------------------------------------------
Adjusted EBITDA 131 117
----------------------------------------------------------------------
CONTENT SEGMENT Content segment revenue 34 29 Operating costs and
expenses (before financial restructuring charges) (28) (21)
----------------------------------------------------------------------
Adjusted EBITDA including inter-segment revenues 6 8 Inter-segment
revenues (1) (3) (3)
----------------------------------------------------------------------
Adjusted EBITDA 3 5
----------------------------------------------------------------------
Reconciliation to operating income Cable Segment Adjusted EBITDA
131 117 Content Segment Adjusted EBITDA 3 5
----------------------------------------------------------------------
Adjusted EBITDA 134 122 Financial restructuring charges - (9)
Depreciation (101) (94) Amortization (9) -
----------------------------------------------------------------------
Operating income 24 19
----------------------------------------------------------------------
(1) Inter-segment revenues are revenues of our Content Segment
which are costs in our Cable Segment and which are eliminated on
consolidation. *T Telewest Global, Inc. Use of Non-GAAP Financial
Measures Adjusted EBITDA Telewest's primary measure of income or
loss for each of our reportable segments is Adjusted EBITDA. Our
management, including our chief operating decision maker, considers
Adjusted EBITDA an important indicator of the operational strength
and performance of our reportable segments. Adjusted EBITDA for
each segment and in total 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, amortization, financial
restructuring charges, interest expense, foreign exchange
gains/(losses), share of net income/(loss) from affiliates and
income taxes. It is the belief of management that the legal and
professional costs relating to our financial restructuring are not
characteristic of our underlying business operations. Furthermore
management believes that some of the components of these charges
are not directly related to the performance of a single reportable
segment. Adjusted EBITDA is not a financial measure recognised
under GAAP. This measure is most directly comparable to the GAAP
financial measure net income/(loss). Some of the significant
limitations associated with the use of Adjusted EBITDA as compared
to net income/(loss) are that Adjusted EBITDA does not reflect the
amount of required reinvestment in depreciable fixed assets,
financial restructuring charges, interest expense, foreign exchange
gains or losses, income taxes expense or benefit and similar items
on our results of operations. We believe Adjusted EBITDA 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-GAAP financial measure reflects
an additional way of viewing aspects of our operations that, when
viewed with our 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-GAAP
financial measures are not standardized, it may not be possible to
compare Adjusted EBITDA with other companies' non-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 cash provided by operating
activities, operating income/(loss), net income/(loss), or other
measures of financial performance reported in accordance with GAAP.
Free cash flow Telewest's primary measure of cash flow is free cash
flow. Free cash flow is defined as net cash provided by/(used in)
operating activities excluding cash paid for financial
restructuring charges, less capital expenditure. Our management,
including our chief operating decision maker, considers free cash
flow an important indicator of the operational performance of our
business. Free cash flow is not a financial measure recognized
under GAAP. This measure is most directly comparable to the GAAP
financial measure net cash provided by/(used in) operating
activities. The significant limitation associated with the use of
free cash flow as compared to net cash provided by/(used in)
operating activities is that free cash flow does not consider the
amount of cash required to pay financial restructuring charges. We
believe free cash flow is helpful for understanding our performance
and it provides useful supplemental information to investors.
Because non-GAAP financial measures are not standardized, it may
not be possible to compare free cash flow with other companies'
non-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 cash provided
by/(used in) operating activities, or other measures of financial
performance reported in accordance with GAAP. Net debt Net debt is
defined as the sum of debt repayable, capital lease obligations and
accrued interest payable on notes and debentures less cash and cash
equivalents. The Company's management, including its chief
operating decision-maker, considers net debt an important measure
of the financing obligations undertaken by the Company. Net debt is
not a financial measure recognized under GAAP. This measure is most
directly comparable to the GAAP financial measure, total
liabilities. The significant limitation associated with the use of
net debt as compared total liabilities is that net debt does not
consider current liabilities due in respect of accounts payable and
other liabilities. It also assumes that all of cash and cash
equivalents is available to service debt. Telewest believes net
debt is helpful for understanding its entire net debt funding
obligations and it provides useful supplemental information to
investors. Because non-GAAP financial measures are not
standardized, it may not be possible to compare net debt with other
companies' non-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
total liabilities, or other measures of financial performance
reported in accordance with GAAP. -0- *T Telewest Global, Inc. Use
of Non-GAAP Financial Measures (continued)
----------------------------------------------------------------------
Reconciliations of Non-GAAP Financial Measures (amounts in GBP
millions)
----------------------------------------------------------------------
Three months ended ------------------------------------ Mar. 31,
Mar. 31, Dec. 31, 2005 2004 2004
------------------------------------ Reorganized Predecessor
Reorganized Company Company Company
----------------------------------------------------------------------
Reconciliation of Adjusted EBITDA to net income/(loss)
----------------------------------------------------------------------
Adjusted EBITDA 134 122 128 Financial restructuring charges - (9) -
Depreciation (101) (94) (101) Amortization (9) - (9)
----------------------------------------------------------------------
Operating income 24 19 18 Interest income 4 7 5 Interest expense
(including amortization of debt discount) (29) (109) (47) Foreign
exchange (losses)/gains, net (4) 77 3 Share of net income of
affiliates 6 3 4 Other, net - (1) -
----------------------------------------------------------------------
Net income/(loss) 1 (4) (17)
----------------------------------------------------------------------
Reconciliation of free cash flow to net cash provided by operating
activities
----------------------------------------------------------------------
Free cash flow 63 25 (3) Deduct cash paid for financial
restructuring charges (1) (9) (9) Add capital expenditure 54 66 64
----------------------------------------------------------------------
Net cash provided by operating activities 116 82 52
----------------------------------------------------------------------
Free cash flow is reported after cash paid for interest, net, and
cash received for income taxes. Supplementary cash flow
information: Cash paid for interest, net 12 32 72 Cash received for
income taxes - - (2)
----------------------------------------------------------------------
Mar. 31, Dec. 31, 2005 2004 ------------------------ Reorganized
Reorganized Company Company
----------------------------------------------------------------------
Reconciliation of net debt to total liabilities
----------------------------------------------------------------------
Net debt 1,728 1,746 Cash and cash equivalents 87 68
----------------------------------------------------------------------
Total debt 1,815 1,814 Accounts payable 127 93 Other liabilities
427 424 Deferred taxes 105 105
----------------------------------------------------------------------
Total liabilities 2,474 2,436
----------------------------------------------------------------------
Telewest Global, Inc. sit-up Limited *T The following supplementary
financial information has been derived from the audited financial
statements of sit-up Limited for the years ended December 31, 2003
and 2004. The information has been prepared in accordance with
generally accepted accounting principles in the United Kingdom (UK
GAAP). This presentation of the financial information in respect of
sit-up is not intended to suggest that and should not be construed
as suggesting that Telewest's management controlled or directed the
operations of sit-up during the periods presented or that a
consolidated presentation of the results for these periods with
those of Telewest is otherwise appropriate under GAAP. -0- *T
Profit and loss account (amounts in GBP millions)
----------------------------------------------------------------------
Year ended ------------------ Dec. 31, Dec. 31, 2004 2003 ---------
-------- Turnover 206 119 Other operating income 1 - ---------
-------- 207 119 Cost of sales (151) (91) --------- -------- Gross
profit 56 28 Depreciation (2) (1) Administrative expenses
(excluding depreciation) (43) (28) --------- -------- Profit/(loss)
on ordinary activities before taxation 11 (1) Taxation (3) 5
--------- -------- Profit on ordinary activities after taxation 8 4
Preference share dividend/appropriation (1) (1) --------- --------
Retained profit for the financial year 7 3
----------------------------------------------------------------------
Summarized cash flow information (amounts in GBP millions)
----------------------------------------------------------------------
Year ended ----------------- Dec. 31, Dec. 31, 2004 2003 --------
-------- Net cash inflow from operations 23 13 Net cash inflow from
returns on investments and servicing of finance 1 - Net cash
outflow from capital expenditure and financial investment (2) (2)
Net cash outflow from financing (1) (2) -------- -------- Increase
in cash in the year 21 9 -------- -------- *T
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