LONDON, May 8, 2008 (PRIME NEWSWIRE) -- Virgin Media Inc. (Nasdaq:VMED) announces results for the quarter ended March 31, 2008.
Quarterly highlights
* Continued customer and RGU growth
* 204,300 total RGU net additions (Q1-07: 145,100)
* 4,900 on-net customer net additions (Q1-07: 46,900 net
disconnects)
* On-net churn declined to 1.2% (Q1-07: 1.6%); lowest since
2004(1)
* 88,400 on-net broadband net additions (Q1-07: 87,900)
* 29,000 on-net telephony net additions (Q1-07: 63,400 net
disconnects)
* 36,800 TV net additions (Q1-07: 36,100)
* 59,400 contract mobile net additions (Q1-07: 54,200)
* 127,600 prepay mobile net disconnections (Q1-07: 115,500
net disconnects)
* On-net cable ARPU of GBP 41.91 (Q1-07: GBP 42.75)
* Record triple-play penetration of 51.3% (Q1-07: 42.9%)
* OCF of GBP 324m (Q1-07: GBP 306m)
* Operating loss of GBP 5m (Q1-07: GBP 15m)
(1) - pro forma for cable merger in March 2006
Neil Berkett, Chief Executive Officer of Virgin Media, said:
"Our first quarter results represent another solid operational performance. In particular, churn continued to decline, reflecting the emphasis that we have placed on this area. Our results demonstrate that our customers are continuing to respond positively to our compelling consumer propositions. We remain focused on leading in next generation broadband and redefining the TV experience through on-demand. With our focus on customer value, reducing churn and stabilizing ARPU, we are well positioned for growth."
Conference call details
There will be a webcast and conference call for analysts and investors today at 9am ET / 2pm UK time.
The presentation can be accessed live via webcast on the Company's website, www.virginmedia.com/investors.
Analysts and investors can dial in to the presentation by calling +1 866 966 5335 in the United States or +44 (0) 20 3023 4472 for international access, passcode "Virgin Media Inc." for all participants.
The teleconference replay will be available for one week beginning approximately two hours after the end of the call until Thursday, May 15, 2008. The dial-in replay number for the US is: +1 866 583 1035 and the international dial-in replay number is: +44 (0) 20 8196 1998, passcode: 499513#.
Note to the financial and operational results for the three months ended March 31, 2008
OCF is operating income before depreciation, amortization and other charges and is a non-GAAP financial measure. Please see Appendix E for a reconciliation of non-GAAP financial measures to their nearest GAAP equivalents.
SUMMARY FINANCIAL RESULTS (unaudited)
-------------------------------------
Q1 2008 Q4 2007 Q1 2007
-------- -------- --------
GBP m GBP m GBP m
Revenue
Cable
Consumer 618.2 621.9 637.3
Business 160.7 163.0 163.0
-------- -------- --------
778.9 784.9 800.3
Mobile 139.5 151.6 141.0
Content 83.4 114.1 80.6
-------- -------- --------
Total Revenue 1,001.8 1,050.6 1,021.9
OCF 324.2 321.0 305.7
Operating loss (4.6) (17.8) (15.3)
GROUP RESIDENTIAL OPERATIONS
STATISTICS ('000s) Q1 2008 Q4 2007 Q1 2007
---------------------------- -------- -------- --------
Group RGUs
On-net TV 3,514.9 3,478.1 3,390.0
On-net Digital TV 3,311.4 3,253.5 3,081.1
Broadband
On-net 3,502.3 3,413.9 3,146.4
Off-net 279.5 287.3 270.5
-------- -------- --------
3,781.8 3,701.2 3,416.9
Telephone
On-net 4,060.4 4,031.4 4,050.6
Off-net 102.4 103.9 65.1
-------- -------- --------
4,162.8 4,135.3 4,115.7
Mobile
Contract 435.7 376.3 246.3
Total RGUs 11,895.2 11,690.9 11,168.9
======== ======== ========
Net RGU adds
On-net TV 36.8 61.1 36.1
On-net Digital TV 57.9 86.5 75.2
Broadband
On-net 88.4 106.2 87.9
Off-net (7.8) 5.0 9.7
-------- -------- --------
80.6 111.2 97.6
Telephone
On-net 29.0 38.9 (63.4)
Off-net (1.5) 13.4 20.6
-------- -------- --------
27.5 52.3 (42.8)
Mobile
Contract 59.4 47.5 54.2
Total Net RGU adds 204.3 272.1 145.1
======== ======== ========
OVERVIEW
We continued to make excellent progress in the first quarter, both operationally and strategically.
Our strategic priorities are to lead the next generation broadband market in speed and quality and to redefine the mid-market TV experience through on-demand. With respect to broadband, our 4Mb to 10Mb upgrade program is underway and we plan to launch 50Mb later this year. Broadband growth continues and the percentage of customers on our top 20Mb tier continues to grow. We have also significantly enhanced our TV offering with the launch of BBC iPlayer. Both subscriber growth and VOD usage remain strong.
In terms of operational progress, reducing churn remains one of our top priorities and in the first quarter this fell further to 1.2%. We have continued to effectively use cross-sell and up-sell to mitigate pricing pressure. As a result, we have seen ARPU begin to stabilize and are better positioning ourselves for a return to revenue growth. Finally, we have seen the benefits of cost savings come through and drive improvements in OCF.
RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2008
TOTAL REVENUE
Total revenue in the first quarter was GBP 1,001.8m (Q4-07: GBP 1,050.6m; Q1-07: GBP 1,021.9m). The sequential decrease was mainly due to seasonally reduced Content revenue and reduced Mobile revenue. The year-on-year decrease was mainly due to reduced Consumer revenue as discussed further below.
CABLE SEGMENT REVENUE
Consumer
Consumer revenue in the first quarter was GBP 618.2m (Q4-07: GBP 621.9m; Q1-07: GBP 637.3m.) Revenue declined sequentially mainly due to a small reduction in ARPU as discussed below. Revenue was down year-on-year mainly due to lower ARPU resulting from price competition, but this year-on-year decline has slowed from the previous quarter.
On-net cable RGUs increased by 154,200 in the quarter (Q4-07: 206,200; Q1-07: 60,600). The strong year-on-year increase was due to a sharp decline in churn. RGU net additions were down sequentially for the reasons discussed further below.
Average monthly churn declined to 1.2% (Q4-07: 1.4%; Q1-07: 1.6%). We believe this partly reflected a range of operational improvements that we have made, including integrating billing systems, improving credit controls, increasing the quality of our products, and improving value for money for customers. As a result, gross customer disconnections of 176,500 in the quarter, were down 12% from the previous quarter and down 24% from the same quarter last year.
Gross on-net customer additions in the first quarter were 181,400, marginally down 2,900 compared to the same quarter last year. Gross on-net customer additions were seasonally down by 43,700 on the previous quarter. As a result, the on-net customer base was 4.8m at the quarter-end, with net additions of 4,900 in the quarter. This represents a third sequential quarter of positive customer growth.
Cable ARPU declined slightly during the quarter to GBP 41.91 (Q4-07: GBP 42.24; Q1-07: GBP 42.75). The previous quarter had included approximately 20 pence of ARPU relating to benefits such as Pay-Per-View sporting events and high telephony usage, which, as expected, did not recur in the first quarter. The rest of the sequential ARPU decline is due to a continuing shift of existing customers to lower priced bundles partly offset by cross-sell and up-sell.
Successful bundling and cross-sell was reflected in continued strong growth in triple-play penetration, which reached a record 51.3% at the quarter-end compared to 42.9% a year ago. Cable RGUs per customer also grew to 2.32 from 2.20 a year ago.
From June 1, 2008, we will be increasing some of our telephony, TV and bundle pricing which we expect to have a positive impact on ARPU in the third quarter. This will include a GBP 1.50 per month increase in the price of our TV "XL" package and also an increase of GBP 1.00 per month on most of our standard bundles. In order to provide better value for money for customers, over the last year we have increased and improved the VOD content available for free to our TV XL customers, including the launch of the BBC's iPlayer service, as well as adding Setanta Sports channels which include live Premiership football at no additional cost. Many of our broadband customers are experiencing higher broadband speeds and we will be removing all charges on our broadband technical support lines in June.
In addition, as usual for the second quarter, churn is expected to increase seasonally, although we expect it to continue to remain significantly lower than the corresponding period in 2007.
Broadband (On-net)
Broadband net additions were 88,400 (Q4-07: 106,200; Q1-07: 87,900). We continue to emphasize the speed, quality and reliability of our broadband service to consumers. Net additions were slightly up year-on-year but down sequentially due to seasonally lower gross additions, partially offset by lower churn. However, in line with our increased upsell focus, the tier mix has improved and the number of subscribers on our top 20Mb tier has increased by over 80% in the last twelve months. Broadband remains our premier product where our superior network differentiates us from our DSL competitors. We are fully focused on maximizing the unique potential of our cable network to improve the consumer experience and are in the process of upgrading our 4Mb customers to 10Mb. We also plan to launch a 50Mb broadband service during the course of this year. This will mean that by the end of the year, we plan to have four tiers of broadband service at 2Mb, 10Mb, 20Mb and 50Mb, with top headline speeds well ahead of our DSL competitors.
Virgin Media now has 3.5m cable broadband subscribers which, together with 0.3m off-net broadband subscribers, make us the largest residential broadband provider in the UK.
Television
Total TV net additions were 36,800 in the quarter (Q4-07: 61,100; Q1-07: 36,100). As anticipated, this was lower than in the previous quarter partly due to alterations to acquisition offers in order to emphasize higher priced TV tiers.
1.6m of our TV customers are now using our VOD service on a monthly basis, representing a reach of 48%. Average views per user per month in the quarter were 24 compared to 23 in the previous quarter and 11 a year ago. Average monthly views were 36m in the quarter, up 10% on the previous quarter and up 155% on the same quarter last year.
In April 2008, we launched the BBC's iPlayer service on our VOD platform offering hundreds of hours of BBC catch-up content. Developments like this give VOD a new impetus and help establish on-demand as a genuinely mainstream TV service.
During the quarter, we added a record 101,800 V+ DVR subscribers to reach an installed base of 364,200. This represents a penetration level of just 11% of our digital subscribers and so the growth opportunity remains strong. In addition, based on our experience, DVR subscribers and VOD users are less likely to churn.
The mix of TV subscribers improved during the quarter, with growth in the percentage of subscribers on our top basic tier. We believe that this growth continued to be positively affected by increased VOD content and usage and the addition of the Setanta Sports channels into our top basic tier.
Telephony (On-net)
Telephony net additions of 29,000 (Q4-07: 38,900; Q1-07: 63,400 net disconnects) were positive for the second successive quarter following a period of six quarters of subscriber losses. This was driven by our successful bundling of telephony with our broadband and TV products at the point of sale, along with continued cross-selling and reduced churn. Net additions were lower than in the previous quarter, primarily due to a seasonal reduction in gross additions partially offset by reduced churn.
Off-net
Consumer off-net revenue, which is included in total consumer revenue, was GBP 17.2m (Q4-07: GBP 17.1m; Q1-07: GBP 17.3m). At the quarter-end, we had 279,500 off-net broadband subscribers, with a decrease of 7,800 in the quarter. Off-net telephony subscribers declined by 1,500 during the quarter and we now have a base of 102,400.
The primary reason for the subscriber declines is due to our disconnection of historic "Freedom" subscribers. Freedom was one of the brand names under which we marketed broadband and telephone products not directly connected through our cable network. We have been migrating Freedom subscribers to the current Virgin Media off-net products over the last few quarters but due to changes in our billing platforms and the cost associated with continuing to support the Freedom billing platform, we disconnected the final 12,400 Freedom broadband subscribers and 20,200 Freedom telephony subscribers during the quarter.
Business
Business revenue was GBP 160.7m (Q4-07: GBP 163.0m; Q1-07: GBP 163.0m) with the sequential revenue decline mainly due to lower voice and other retail revenue. The year-on-year revenue decline was mainly due to lower wholesale and voice revenue.
Consistent with our strategy to replace declining voice revenues with data revenues, we continue to experience a mix-shift in retail revenues from voice to data. Retail data revenue was GBP 45.0m (Q4-07: GBP 43.4m; Q1-07: GBP 41.2m). Retail voice revenue was GBP 50.2m (Q4-07: GBP 51.3m; Q1-07: GBP 56.4m).
Other retail revenue in the quarter was GBP 18.6m (Q4-07: GBP 21.4m; Q1-07: GBP 14.9m). The majority of this revenue is from infrastructure projects which are non-recurring in nature. Our largest infrastructure project is the provision of telecoms network equipment for Heathrow airport's new Terminal 5, which contributed GBP 9.7m of revenue in the first quarter compared to GBP 9.0m in the previous quarter and GBP 4.7m in the same quarter last year.
Wholesale revenue in the quarter was GBP 46.9m (Q4-07: GBP 46.9m; Q1-07: GBP 50.5m). Revenue was down year-on-year due to a reduction in our ISP subscriber base and contract decline in mobile accounts.
Our main focus within Business is selling retail data services and we anticipate growth in this area in 2008 as compared to 2007. As previously discussed, we anticipate that revenue from the Heathrow airport contract will fall away in the second quarter of 2008 after the opening of Terminal 5. However, this contract was operating at a very low margin and, consequently, its completion will not have a significant impact on Cable OCF. As previously discussed, we anticipate that wholesale revenue will also decline in 2008 as compared to 2007 due to continued reduction in our ISP subscriber base and contract decline in mobile accounts, although at a slower rate than previously expected. As a result, total Business revenue for 2008 is expected to be lower than in 2007, although we continue to expect higher retail data revenue.
CABLE SEGMENT OCF
Cable segment OCF in the quarter was GBP 301.9m (Q4-07: GBP 309.5m; Q1-07: GBP 266.8m).
OCF was up strongly compared to the same quarter last year, due mainly to a reduction in branding and marketing expense associated with the rebrand to Virgin Media in February 2007, plus other cost savings resulting from integration activities, partially offset by reduced revenue.
OCF was down compared to the previous quarter due mainly to lower Consumer and Business revenues. As expected, OCF was affected by higher employee incentive-based expense in the first quarter as compared to the previous quarter, reflecting our expectations that a greater percentage of performance targets will be achieved in 2008, compared with the level achieved in 2007.
MOBILE SEGMENT
Mobile Revenue
Mobile revenue in the quarter was GBP 139.5m (Q4-07: GBP 151.6m; Q1-07: GBP 141.0m), comprising GBP 134.5m service revenue (Q4-07: GBP 142.0m; Q1-07: GBP 136.0m) and GBP 5.0m equipment revenue (Q4-07: GBP 9.6m; Q1-07: GBP 5.0m).
The sequential service revenue decline was mainly due to higher pre-pay churn and lower pre-pay ARPU.
The sequential decline in equipment revenue was due to both fewer handset sales, reflecting the usual fourth quarter peak in the run up to Christmas, and lower handset revenue per sale due to increased promotional activity.
Total mobile net disconnections in the quarter were 68,200 (Q4-07: 60,500 net adds; Q1-07: 61,300 net disconnects).
Contract net additions in the quarter were 59,400 (Q4-07: 47,500; Q1-07: 54,200) as we continued to successfully cross-sell mobile contracts to our Virgin Media cable customers.
Prepay net disconnections in the quarter were 127,600 (Q4-07: 13,000 net adds; Q1-07: 115,500 net disconnects). The sequential decline is due to a significant increase in churn due to increased competition.
Overall mobile ARPU for the quarter was GBP 10.04 (Q4-07: GBP 10.69; Q1-07: GBP 10.07). ARPU was down sequentially due to lower prepay usage, partially offset by improved contract mix. Prepay usage was mainly lower due to increased competition.
Mobile OCF
Mobile OCF was GBP 17.2m in the quarter (Q4-07: GBP 17.8m; Q1-07: GBP 26.7m). Mobile OCF was down compared to the same quarter last year due mainly to increased equipment costs related to higher handset volumes and increased interconnect costs due to increases in "in bundle" text and minute volumes. Mobile OCF was relatively flat compared to the previous quarter as lower revenue was offset by lower commissions and other cost savings.
We are undertaking actions to improve Mobile prepay performance including selective price increases, better focused customer retention activity and efforts to reduce customer acquisition costs.
CONTENT SEGMENT
Content Revenue
The Content segment consists of VMtv and Sit-up.
Total Content segment revenue, after inter segment elimination, was GBP 83.4m (Q4-07: GBP 114.1m; Q1-07: GBP 80.6m), comprising GBP 28.4m (Q4-07: GBP 27.3m; Q1-07: GBP 29.3m) from VMtv and GBP 55.0m (Q4-07: GBP 86.8m; Q1-07: GBP 51.3m) from Sit-up. VMtv sells channels to and receives subscriptions from the Virgin Media cable segment. As a result, for consolidation purposes, GBP 6.3m of inter segment revenue has been eliminated in the quarter.
VMtv revenue was up from the previous quarter mainly due to increased advertising revenue. VMtv revenue was down slightly compared to the same quarter last year due to lower other revenue partially offset by increased advertising revenue. Other revenue was down by GBP 4m relating to the loss of rights revenue from our Minotaur licensing business disposed of in July 2007.
The number of commercial impacts of VMtv's channels for the quarter increased by 11% compared to the same quarter last year, reflecting the strong performance of its channels, positioning us well to take an increased share of the TV advertising market.
As expected, Sit-up revenue was seasonally lower than the previous quarter. Sit-up revenue was 7.2% higher compared to the same quarter last year due to increased sales volumes.
Content OCF
Content segment OCF in the quarter was GBP 5.1m (Q4-07: GBP 6.3m loss; Q1-07: GBP 12.2m). Content OCF improved sequentially mainly due to the seasonal decrease in programming costs following the Christmas Holiday season, partially offset by the usual seasonal reduction in Sit-up. Content OCF was down compared to the same quarter last year, as that quarter had included the reversal of a historic accrual of GBP 7.9m relating to the settlement of a legal claim.
UKTV JOINT VENTURE
Virgin Media owns 50% of the companies that comprise UKTV, a group of joint ventures formed with BBC Worldwide. UKTV produces a portfolio of television channels based on the BBC's program library and other acquired programming and which are carried on Virgin Media's cable platform and also on satellite. Some channels are also available on Freeview.
Virgin Media accounts for its interest in UKTV under the equity method and recognized a share of UKTV's net income of GBP 6.2m in the quarter (Q4-07: GBP 0.3m; Q1-07: GBP 7.1m). UKTV's financial results are not consolidated in Virgin Media's revenue, operating income or OCF.
UKTV is funded by a loan from Virgin Media, which was GBP 148.7m at March 31, 2008. This loan effectively acts as a revolving facility for UKTV. Virgin Media made cash payments to UKTV in the form of loan capital drawdowns of GBP 4.9m for the first quarter. Virgin Media received cash payments from UKTV in the quarter totaling GBP 5.9m, which consisted of dividends, interest payments and payment for consortium tax relief.
Virgin Media's investment in UKTV is carried on the balance sheet at March 31, 2008 at GBP 376.4m, which includes the outstanding loan of GBP 148.7m.
OPERATING COSTS (EXCLUSIVE OF DEPRECIATION AND AMORTIZATION)
Operating costs (exclusive of depreciation and amortization) were GBP 460.4m in the quarter (Q4-07: GBP 491.6m; Q1-07: GBP 449.3m). Costs were up compared to the same quarter last year mainly due to higher Mobile handset costs and higher VMtv programming costs due to the launch of Virgin 1 in October 2007. These costs were down sequentially mainly due to seasonally lower VMtv and Sit-up costs as well as lower Mobile commissions.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A)
SG&A was GBP 217.2m in the quarter (Q4-07: GBP 238.0m; Q1-07: GBP 266.9m).
SG&A was down compared to the same quarter last year due mainly to a reduction in branding and marketing expense associated with the rebrand to Virgin Media in February 2007 and integration cost savings.
SG&A was down compared to the previous quarter mainly due to integration cost savings, partially offset by higher employee incentive-based expense.
Marketing expenses are expected to increase in the second quarter, partially due to a new television advertising campaign.
OPERATING INCOME BEFORE DEPRECIATION, AMORTIZATION AND OTHER CHARGES (OCF)
OCF was GBP 324.2m in the quarter (Q4-07: GBP 321.0m; Q1-07: GBP 305.7m). The increase, compared to the same quarter last year, was mainly due to the increase in Cable OCF discussed above, partially offset by the declines in Mobile and Content OCF. The sequential increase was mainly due to the increase in Content OCF discussed above, partially offset by the decline in Cable OCF.
As expected, OCF was affected by higher employee incentive-based expense in the first quarter as compared to the previous quarter, reflecting our expectations that a greater percentage of performance targets will be achieved in 2008, compared with the level achieved in 2007.
OCF is a non-GAAP financial measure. See Appendix E for reconciliations of non-GAAP financial measures to their nearest GAAP equivalents.
Operating Loss and Net Loss
Operating loss was GBP 4.6m (Q4-07: GBP 17.8m; Q1-07: GBP 15.3m) with the year-on-year decrease mainly due to reduced SG&A, partially offset by increased operating costs. The sequential decrease is mainly due to reduced costs.
Net loss was GBP 104.4m (Q4-07: GBP 163.2m; Q1-07: GBP 120.3m). The decrease in net loss compared to the same quarter last year was mainly due to a reduced operating loss. The sequential decrease was mainly due to a reduced operating loss, reduced interest expense and increased interest income and other, net arising as a result of decreased losses on disposal of fixed assets.
CAPITAL EXPENDITURE
Fixed asset additions (accrual basis) were GBP 137.1m for the quarter (Q4-07: GBP 140.3m; Q1-07: GBP 154.9m).
This represents 13.7% of total revenue. Fixed asset additions (accrual basis) is down from the same quarter last year due mainly to integration cost savings.
The total purchase of fixed assets and intangible assets was GBP 125.0m in the first quarter (Q4-07: GBP 112.2m; Q1-07: GBP 152.6m).
Fixed asset additions (accrual basis) is a non-GAAP financial measure. See Appendix E for reconciliations of non-GAAP financial measures to their nearest GAAP equivalents.
DEBT
As of March 31, 2008, long term debt (net of GBP 32m current portion) was GBP 5,983m. This consisted of GBP 4,834m outstanding under our Senior Credit Facility, GBP 1,045m of Senior Notes, and GBP 104m of capital leases and other indebtedness. Cash and cash equivalents were GBP 282m.
Cash interest paid (exclusive of amounts capitalized) was GBP 142.1m in the quarter and GBP 474.0m for the last twelve months.
Since the quarter-end, on April 16, 2008, we issued $1bn of 6.50% Convertible Senior Notes due 2016 and on April 22, 2008 used the net proceeds combined with existing cash reserves to prepay GBP 261m of "A" loans and GBP 243m of "B" loans under our senior credit facilities.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:
Various statements contained in this document constitute "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995. Words like "believe," "anticipate," "should," "intend," "plan," "will," "expects," "estimates," "projects," "positioned," "strategy," and similar expressions identify these forward-looking statements, which 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, by these forward-looking statements. These factors, among others, include: (1) the ability to compete with a range of other communications and content providers; (2) the ability to manage customer churn; (3) the continued right to use the Virgin name and logo; (4) the ability to maintain and upgrade our networks in a cost-effective and timely manner; (5) possible losses in revenues due to systems failures; (6) the ability to provide attractive programming at a reasonable cost; (7) the ability to control unauthorized access to our network; (8) the effect of technological changes on our businesses; (9) the reliance on single-source suppliers for some equipment, software and services and third party distributors of our mobile services; (10) the ability to achieve our business plans; (11) the ability to fund debt service obligations through operating cash flow; (12) the ability to obtain additional financing in the future and react to competitive and technological changes; (13) the ability to comply with restrictive covenants in our indebtedness agreements; and (14) the extent to which our future cash flow will be sufficient to cover our fixed charges.
These and other factors are discussed in more detail under "Risk Factors" and elsewhere in Virgin Media's Form 10-K filed with the SEC on February 29, 2008, as amended, and Virgin Media's 10-Q to be filed with the SEC on or about May 9, 2008. We assume no obligation to update our forward-looking statements to reflect actual results, changes in assumptions or changes in factors affecting these statements.
Non-GAAP Financial Measures
We use non-GAAP financial measures with a view to providing investors with a better understanding of the operating results and underlying trends to measure past and future performance and liquidity.
We evaluate operating performance based on several non-GAAP financial measures, including (i) operating income before depreciation, amortization and other charges (OCF), and (ii) fixed asset additions (accrual basis), as we believe these are important measures of the operational strength of our business and our liquidity. Since these measures are not calculated in accordance with GAAP, they should not be considered as substitutes for operating income (loss) and purchase of fixed assets and purchase of intangible assets, respectively.
Please see Appendix E for a discussion of our use of non-GAAP financial measures and reconciliations to their nearest GAAP equivalents.
Appendices:
A) Financial Statements
o Condensed Consolidated Statements of Operations
o Condensed Consolidated Balance Sheets
o Condensed Consolidated Statements of Cash Flows
o Quarterly Condensed Consolidated Statements of Operations
o Additional Quarterly Condensed Cash Flow Information
B) Group Residential Operations Statistics
C) Segmental Analysis
D) Fixed Asset Additions (Accrual Basis)
E) Use of Non-GAAP Financial Measures and Reconciliations to GAAP
Appendices:
-----------
A) FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in GBP millions, except share and per share data)
Three months ended
March 31,
--------------------
2008 2007
-------- --------
(unaudited) (unaudited)
Revenue 1,001.8 1,021.9
Costs and expenses
Operating costs (exclusive of depreciation
shown separately below) 460.4 449.3
Selling, general and administrative expenses 217.2 266.9
Other charges 4.6 11.6
Depreciation 231.5 232.1
Amortization 92.7 77.3
-------- --------
Total costs and expenses 1,006.4 1,037.2
-------- --------
Operating loss (4.6) (15.3)
Other income (expense)
Interest income and other, net 6.3 7.0
Interest expense (123.4) (118.5)
Share of income from equity investments 5.1 7.2
Foreign currency (losses) gains (28.4) 3.3
Gains (losses) on derivative instruments 33.4 (0.5)
-------- --------
Loss before income taxes and minority interest (111.6) (116.8)
Income tax benefit (expense) 7.3 (3.5)
Minority interest (0.1) --
-------- --------
Net loss (104.4) (120.3)
======== ========
Basic and diluted net loss per share (GBP 0.32) (GBP 0.37)
======== ========
Dividends per share (in U.S. Dollars) $ 0.04 $ 0.02
======== ========
Average number of shares outstanding
(in millions) 327.8 324.2
======== ========
CONDENSED CONSOLIDATED BALANCE SHEETS
(in GBP millions)
March 31, Dec. 31,
2008 2007
-------- --------
(Unaudited) (See Note)
Assets
Current assets
Cash and cash equivalents 282.3 321.4
Restricted cash 6.0 6.1
Accounts receivable - trade, less allowances
for doubtful accounts of GBP 18.7 (2008)
and GBP 19.5 (2007) 470.0 455.6
Inventory 99.5 75.4
Prepaid expenses and other current assets 102.9 94.8
-------- --------
Total current assets 960.7 953.3
Fixed assets, net 5,565.4 5,655.6
Goodwill and other indefinite-lived intangible
assets 2,486.1 2,488.2
Intangible assets, net 725.8 816.7
Equity investments 376.2 368.7
Other assets, net of accumulated amortization
of GBP 50.5 (2008) and GBP 45.0 (2007) 245.4 183.6
-------- --------
Total assets 10,359.6 10,466.1
======== ========
Liabilities and shareholders' equity
Current liabilities
Accounts payable 351.4 372.9
Accrued expenses and other current liabilities 430.6 406.2
VAT and employee taxes payable 73.3 86.1
Restructuring liabilities 64.5 89.6
Interest payable 144.9 172.5
Deferred revenue 247.0 250.3
Current portion of long term debt 31.8 29.1
-------- --------
Total current liabilities 1,343.5 1,406.7
Long term debt, net of current portion 5,982.8 5,929.4
Deferred revenue and other long term liabilities 242.6 238.5
Deferred income taxes 82.1 81.0
-------- --------
Total liabilities 7,651.0 7,655.6
-------- --------
Commitments and contingent liabilities
Minority interest 0.1 --
Shareholders' equity
Common stock - $.01 par value; authorized
1,000.0 (2008 and 2007) shares; issued
329.0 (2008) and 328.9 (2007) and outstanding
328.0 (2008) and 327.5 (2007) shares 1.8 1.8
Additional paid-in capital 4,338.6 4,335.9
Accumulated other comprehensive income 154.9 148.6
Accumulated deficit (1,786.8) (1,675.8)
-------- --------
Total shareholders' equity 2,708.5 2,810.5
-------- --------
Total liabilities and shareholders' equity 10,359.6 10,466.1
======== ========
Note: The balance sheet at December 31, 2007 has been derived from
the audited financial statements at that date.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in GBP millions) (unaudited)
Three months ended
March 31,
--------------------
2008 2007
-------- --------
Operating activities
Net loss (104.4) (120.3)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 324.2 309.4
Non-cash interest (22.9) (45.5)
Non-cash compensation 2.1 7.2
Income from equity accounted investments,
net of dividends received (4.4) (5.6)
Income taxes (6.3) 5.5
Amortization of original issue discount and
deferred finance costs 5.5 5.9
Unrealized foreign currency losses (gains) 26.9 (1.1)
(Gains) losses on derivative instruments (33.4) 0.5
Other 0.1 0.3
Changes in operating assets and liabilities (82.1) (51.6)
-------- --------
Net cash provided by operating activities 105.3 104.7
-------- --------
Investing activities
Purchase of fixed and intangible assets (125.0) (152.6)
Principal (drawdowns) repayments on loans to
equity investments (4.9) 5.1
Acquisitions, net of cash acquired -- (1.0)
Other 0.3 0.6
-------- --------
Net cash used in investing activities (129.6) (147.9)
-------- --------
Financing activities
New borrowings, net of financing fees -- (0.1)
Proceeds from employee stock option exercises 0.6 0.4
Principal payments on long term debt and
capital leases (8.8) (6.2)
Dividends paid (6.6) (3.3)
-------- --------
Net cash used in financing activities (14.8) (9.2)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents -- (1.0)
Decrease in cash and cash equivalents (39.1) (53.4)
Cash and cash equivalents, at beginning of period 321.4 418.5
-------- --------
Cash and cash equivalents, at end of period 282.3 365.1
======== ========
Supplemental disclosure of cash flow information
Cash paid during the period for interest
exclusive of amounts capitalized 142.1 155.0
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in GBP millions, except share and per share data) (unaudited)
Three months ended
-----------------------------------------------------
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2008 2007 2007 2007 2007
-----------------------------------------------------
Revenue 1,001.8 1,050.6 1,006.2 995.0 1,021.9
Costs and
expenses
Operating
costs
(exclusive of
depreciation
shown
separately
below) 460.4 491.6 454.0 435.1 449.3
Selling,
general and
administra-
tive expenses 217.2 238.0 210.7 244.6 266.9
Other charges
(income) 4.6 22.9 (8.9) 3.1 11.6
Depreciation 231.5 235.5 225.7 231.6 232.1
Amortization 92.7 80.4 78.0 77.6 77.3
-----------------------------------------------------
Total costs
and expenses 1,006.4 1,068.4 959.5 992.0 1,037.2
-----------------------------------------------------
Operating (loss)
income (4.6) (17.8) 46.7 3.0 (15.3)
Other income
(expense)
Interest
income and
other, net 6.3 (6.1) 10.8 7.8 7.0
Interest
expense (123.4) (139.7) (127.9) (128.1) (118.5)
Share of
income (loss)
from equity
investments 5.1 (0.8) 6.0 5.3 7.2
Foreign
currency
(losses) gains (28.4) (2.7) 2.2 2.3 3.3
Loss on
extinguish-
ment of
debt -- (2.1) -- (1.1) --
Gains (losses)
on derivative
instruments 33.4 (1.8) 0.8 (1.0) (0.5)
-----------------------------------------------------
Loss before
income taxes
and minority
interest (111.6) (171.0) (61.4) (111.8) (116.8)
Income tax
benefit
(expense) 7.3 7.8 0.4 (7.2) (3.5)
Minority
interest (0.1) -- -- -- --
-----------------------------------------------------
Net loss (104.4) (163.2) (61.0) (119.0) (120.3)
=====================================================
-----------------------------------------------------
Basic and
diluted net
loss per share (GBP 0.32) (GBP 0.50) (GBP 0.19) (GBP 0.37) (GBP 0.37)
=====================================================
Average number
of shares
outstanding
(in millions) 327.8 327.4 326.4 325.5 324.2
=====================================================
ADDITIONAL QUARTERLY CONDENSED CASH FLOW INFORMATION
(in GBP millions) (unaudited)
Three months ended
-----------------------------------------------------
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2008 2007 2007 2007 2007
-----------------------------------------------------
Operating
activities
Net loss (104.4) (163.2) (61.0) (119.0) (120.3)
Adjustments to
reconcile net
loss to net
cash provided by
operating
activities:
Depreciation and
amortization 324.2 315.9 303.7 309.2 309.4
Non-cash
interest (22.9) 25.4 37.5 (18.0) (45.5)
Non-cash
compensation 2.1 3.4 (0.2) 7.1 7.2
Income from
equity
accounted
investments,
net of
dividends
received (4.4) 1.7 (3.3) (3.6) (5.6)
Income taxes (6.3) 1.6 -- 7.2 5.5
Amortization of
original issue
discount and
deferred
finance costs 5.5 5.8 5.7 5.7 5.9
Unrealized
foreign
currency
losses (gains) 26.9 (2.3) 0.8 (0.1) (1.1)
(Gains) losses
on derivative
instruments (33.4) 1.8 (0.8) 1.0 0.5
Other 0.1 15.6 (2.8) 0.9 0.3
Changes in
operating assets
and liabilities (82.1) 62.2 (55.9) (72.0) (51.6)
-----------------------------------------------------
Net cash
provided by
operating
activities 105.3 267.9 223.7 118.4 104.7
-----------------------------------------------------
Investing
activities
Purchase of
fixed and
intangible
assets (125.0) (112.2) (137.8) (133.6) (152.6)
Principal
(drawdowns)
repayments on
loans to
equity
investments (4.9) 1.9 8.3 1.1 5.1
Acquisitions,
net of cash
acquired -- -- -- -- (1.0)
Other 0.3 4.6 4.3 1.5 0.6
-----------------------------------------------------
Net cash
used in
investing
activities (129.6) (105.7) (125.2) (131.0) (147.9)
-----------------------------------------------------
Financing
activities
New borrowings,
net of
financing fees -- -- -- 874.6 (0.1)
Proceeds from
employee stock
option
exercises 0.6 3.6 7.4 3.6 0.4
Principal
payments on
long term debt
and capital
leases (8.8) (204.0) (12.1) (947.2) (6.2)
Dividends paid (6.6) (6.4) (6.5) (5.0) (3.3)
-----------------------------------------------------
Net cash used
in financing
activities (14.8) (206.8) (11.2) (74.0) (9.2)
-----------------------------------------------------
Effect of
exchange rate
changes on cash
and cash
equivalents -- 2.0 (0.4) (1.4) (1.0)
(Decrease)
increase in
cash and cash
equivalents (39.1) (42.6) 86.9 (88.0) (53.4)
Cash and cash
equivalents, at
beginning of
period 321.4 364.0 277.1 365.1 418.5
-----------------------------------------------------
Cash and cash
equivalents, at
end of period 282.3 321.4 364.0 277.1 365.1
=====================================================
Supplemental
disclosure of
cash flow
information
Cash paid during
the period for
interest
exclusive of
amounts
capitalized 142.1 106.1 85.8 140.0 155.0
B) GROUP RESIDENTIAL OPERATIONS STATISTICS
(data in 000's)
Q1-08 Q4-07 Q3-07 Q2-07 Q1-07
-----------------------------------------------------
Group RGUs(1)
Opening RGUs 11,690.9 11,418.8 11,232.1 11,168.9 11,023.8
Data
Cleanse(2) -- -- -- 4.2 --
Adjusted
Opening RGUs 11,690.9 11,418.8 11,232.1 11,173.1 11,023.8
Net RGU adds 204.3 272.1 186.7 59.0 145.1
-----------------------------------------------------
Closing Group
RGUs(1) 11,895.2 11,690.9 11,418.8 11,232.1 11,168.9
=====================================================
Group RGUs(1)
Telephone
On-net 4,060.4 4,031.4 3,992.5 3,993.8 4,050.6
Off-net 102.4 103.9 90.5 75.5 65.1
-----------------------------------------------------
4,162.8 4,135.3 4,083.0 4,069.3 4,115.7
On-net TV 3,514.9 3,478.1 3,417.0 3,396.6 3,390.0
On-net DTV 3,311.4 3,253.5 3,167.0 3,125.3 3,081.1
Broadband
On-net 3,502.3 3,413.9 3,307.7 3,191.9 3,146.4
Off-net 279.5 287.3 282.3 275.2 270.5
-----------------------------------------------------
3,781.8 3,701.2 3,590.0 3,467.1 3,416.9
Mobile
Contract 435.7 376.3 328.8 299.1 246.3
-----------------------------------------------------
Total RGUs(1) 11,895.2 11,690.9 11,418.8 11,232.1 11,168.9
=====================================================
Net RGU adds
(1) & (2)
Telephone
On-net 29.0 38.9 (1.3) (56.9) (63.4)
Off-net (1.5) 13.4 15.0 10.4 20.6
-----------------------------------------------------
27.5 52.3 13.7 (46.5) (42.8)
On-net TV 36.8 61.1 20.4 2.2 36.1
On-net DTV 57.9 86.5 41.7 40.0 75.2
Broadband
On-net 88.4 106.2 115.8 45.8 87.9
Off-net (7.8) 5.0 7.1 4.7 9.7
-----------------------------------------------------
80.6 111.2 122.9 50.5 97.6
Mobile
Contract 59.4 47.5 29.7 52.8 54.2
-----------------------------------------------------
Total Net RGU
adds(1) 204.3 272.1 186.7 59.0 145.1
=====================================================
Notes
(1) The operating statistics relating to prepay mobile are included
within Mobile Operations Statistics, below.
(2) Data cleanse activity in Q2-07 resulted in an increase of 4,200
RGUs, comprised of an increase of approximately 4,400 Television
and 100 Telephone RGUs and a decrease of approximately 300
Broadband RGUs. Net RGU adds above exclude the data cleanse
increases/decrease.
RESIDENTIAL CABLE OPERATIONS STATISTICS (excluding Off-net and Mobile)
(data in 000's except percentages, RGU/Customer and ARPU)
Q1-08 Q4-07 Q3-07 Q2-07 Q1-07
-----------------------------------------------------
Customers
Opening
Customers 4,774.7 4,750.3 4,737.3 4,807.6 4,854.5
Gross customer
adds 181.4 225.1 256.5 191.9 184.3
Total Customer
disconnections (176.5) (200.7) (243.5) (262.2) (231.2)
Net customer adds 4.9 24.4 13.0 (70.3) (46.9)
-----------------------------------------------------
Closing Customers 4,779.6 4,774.7 4,750.3 4,737.3 4,807.6
Monthly customer
churn % 1.2% 1.4% 1.7% 1.8% 1.6%
Cable RGUs
Opening Cable
RGUs 10,923.4 10,717.2 10,582.3 10,587.0 10,526.4
Data
Cleanse(1) -- -- -- 4.2 --
Adjusted
Opening Cable
RGUs 10,923.4 10,717.2 10,582.3 10,591.2 10,526.4
Net Cable RGU
adds 154.2 206.2 134.9 (8.9) 60.6
-----------------------------------------------------
Closing Cable
RGUs 11,077.6 10,923.4 10,717.2 10,582.3 10,587.0
Net Cable RGU
Adds(1)
Telephone 29.0 38.9 (1.3) (56.9) (63.4)
Television 36.8 61.1 20.4 2.2 36.1
DTV 57.9 86.5 41.7 40.0 75.2
Broadband 88.4 106.2 115.8 45.8 87.9
-----------------------------------------------------
Total Net Cable
RGU Adds 154.2 206.2 134.9 (8.9) 60.6
Cable Revenue
Generating
Units (RGUs)
Telephone 4,060.4 4,031.4 3,992.5 3,993.8 4,050.6
Television 3,514.9 3,478.1 3,417.0 3,396.6 3,390.0
DTV 3,311.4 3,253.5 3,167.0 3,125.3 3,081.1
Broadband 3,502.3 3,413.9 3,307.7 3,191.9 3,146.4
-----------------------------------------------------
Total Cable RGUs 11,077.6 10,923.4 10,717.2 10,582.3 10,587.0
Cable RGU /
Customer 2.32 2.29 2.26 2.23 2.20
Bundled Customers
Dual Cable RGU 1,394.9 1,423.3 1,506.0 1,563.0 1,657.7
Triple Cable
RGU 2,451.6 2,362.6 2,230.5 2,141.0 2,061.2
Percentage of
dual or triple
Cable RGUs 80.5% 79.3% 78.7% 78.2% 77.4%
Percentage of
triple Cable
RGUs 51.3% 49.5% 47.0% 45.2% 42.9%
Cable ARPU
(GBP)(2) 41.91 42.24 41.55 42.16 42.75
ARPU
calculation:
On-net
revenues
(GBP) 601,000 604,700 590,500 603,100 620,000
Average
customers 4,780.2 4,771.7 4,737.1 4,768.0 4,834.9
Homes Marketable
On-net(3)
Telephone 12,309.0 12,313.8 12,353.5 12,349.5 12,348.2
Television -
Total 12,578.1 12,586.8 12,701.5 12,697.4 12,696.2
Television -
DTV 11,990.2 11,993.8 12,050.5 12,046.5 12,045.2
Broadband 12,054.7 12,058.2 11,807.0 11,803.0 11,801.7
Total homes 12,578.1 12,586.8 12,701.5 12,697.4 12,696.2
Penetration of
Homes Marketable
On-net
Telephone 33.0% 32.7% 32.3% 32.3% 32.8%
Television -
Total 27.9% 27.6% 26.9% 26.8% 26.7%
Television -
DTV 27.6% 27.1% 26.3% 25.9% 25.6%
Broadband 29.1% 28.3% 28.0% 27.0% 26.7%
Total Customer 38.0% 37.9% 37.4% 37.3% 37.9%
Notes
(1) Data cleanse activity in Q2-07 did not result in a change in
customer numbers but did result in an increase of 4,200 RGUs
comprised of an increase of approximately 4,400 Television and
100 Telephone RGUs and a decrease of approximately 300
Broadband RGUs. Net RGU adds above exclude the data cleanse
increases/decrease.
(2) Cable monthly ARPU is calculated on a quarterly basis by dividing
total revenue generated from the provision of telephone,
television and internet services to customers who are directly
connected to our network in that period together with revenue
generated from our customers using our virginmedia.com website,
exclusive of VAT, by the average number of customers directly
connected to our network in that period divided by three.
(3) Homes marketable on-net represents management's estimate of homes
passed by our cable network that are capable of taking our
respective products.
CABLE SEGMENT OFF-NET OPERATIONS STATISTICS
(data in 000's)
Q1-08 Q4-07 Q3-07 Q2-07 Q1-07
-----------------------------------------------------
Off-net RGUs
Opening RGUs
Telephone 103.9 90.5 75.5 65.1 44.5
Broadband 287.3 282.3 275.2 270.5 260.8
-----------------------------------------------------
391.2 372.8 350.7 335.6 305.3
Net RGU adds
Telephone (1.5) 13.4 15.0 10.4 20.6
Broadband (7.8) 5.0 7.1 4.7 9.7
-----------------------------------------------------
(9.3) 18.4 22.1 15.1 30.3
Closing RGUs
Telephone 102.4 103.9 90.5 75.5 65.1
Broadband 279.5 287.3 282.3 275.2 270.5
-----------------------------------------------------
381.9 391.2 372.8 350.7 335.6
MOBILE OPERATIONS STATISTICS
(data in 000's except ARPU)
Q1-08 Q4-07 Q3-07 Q2-07 Q1-07
-----------------------------------------------------
Mobile
Customers(1)
Opening
Customers
Prepay 4,115.1 4,102.1 4,115.9 4,215.2 4,330.7
Contract 376.3 328.8 299.1 246.3 192.1
-----------------------------------------------------
4,491.4 4,430.9 4,415.0 4,461.5 4,522.8
Net customer
adds
Prepay (127.6) 13.0 (13.8) (99.3) (115.5)
Contract 59.4 47.5 29.7 52.8 54.2
-----------------------------------------------------
(68.2) 60.5 15.9 (46.5) (61.3)
Closing Mobile
Customers(1)
Prepay 3,987.5 4,115.1 4,102.1 4,115.9 4,215.2
Contract 435.7 376.3 328.8 299.1 246.3
-----------------------------------------------------
4,423.2 4,491.4 4,430.9 4,415.0 4,461.5
Mobile monthly
ARPU (GBP) (2) 10.04 10.69 11.11 10.70 10.07
ARPU
calculation:
Service
revenue (GBP) 134,500 142,000 147,300 142,300 136,000
Average
customers 4,465.2 4,429.2 4,417.9 4,434.7 4,499.3
Notes
(1) Mobile customer information is for active customers. Prepay
customers are defined as active customers if they have made an
outbound call or text in the preceding 90 days. Contract
customers are defined as active customers if they have entered
into a contract with Virgin Mobile for a minimum 30-day period
and have not been disconnected.
(2) Mobile monthly ARPU is calculated on service revenue for the
period divided by the average number of active customers for the
period, divided by three.
C) SEGMENTAL ANALYSIS
(in GBP millions) (unaudited)
Three months ended
-----------------------------------------------------
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2008 2007 2007 2007 2007
-----------------------------------------------------
Revenue
Cable segment
Consumer 618.8 623.2 608.4 620.2 638.1
Business 160.8 163.1 160.1 155.9 163.1
-----------------------------------------------------
Total 779.6 786.3 768.5 776.1 801.2
Inter
segment
revenue (0.7) (1.4) (0.8) (1.0) (0.9)
-----------------------------------------------------
778.9 784.9 767.7 775.1 800.3
-----------------------------------------------------
Mobile segment
Virgin
Mobile 139.5 151.6 158.7 146.3 141.0
-----------------------------------------------------
Content segment
Virgin
Media TV 34.7 33.5 33.2 32.0 35.2
Sit-up 55.0 86.8 52.8 47.7 51.3
-----------------------------------------------------
Total 89.7 120.3 86.0 79.7 86.5
Inter
segment
revenue (6.3) (6.2) (6.2) (6.1) (5.9)
-----------------------------------------------------
83.4 114.1 79.8 73.6 80.6
-----------------------------------------------------
-----------------------------------------------------
Total revenue 1,001.8 1,050.6 1,006.2 995.0 1,021.9
-----------------------------------------------------
Segment OCF(1)
Cable
segment OCF 301.9 309.5 303.5 282.5 266.8
Mobile
segment OCF 17.2 17.8 31.5 32.7 26.7
Content
segment OCF 5.1 (6.3) 6.5 0.1 12.2
-----------------------------------------------------
OCF (Total) 324.2 321.0 341.5 315.3 305.7
-----------------------------------------------------
Note:
(1) Segment OCF includes inter segment revenue and costs as
applicable. OCF (Total) is a non-GAAP financial measure - see
Appendix E.
D) FIXED ASSET ADDITIONS (ACCRUAL BASIS)
(in GBP millions) (unaudited)
Three months ended
-----------------------------------------------------
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2008 2007 2007 2007 2007
-----------------------------------------------------
NCTA Fixed Asset
Additions
CPE 62.5 53.3 49.1 58.9 62.5
Scaleable
infrastructure 29.1 33.7 28.4 35.7 33.5
Commercial 18.9 17.1 17.1 18.5 15.4
Line extensions 0.5 0.6 0.1 -- --
Upgrade/rebuild 0.8 6.4 2.1 4.0 3.5
Support capital 20.3 24.9 25.1 29.6 38.0
-----------------------------------------------------
Total NCTA Fixed
Asset Additions 132.1 136.0 121.9 146.7 152.9
Non NCTA Fixed
Asset Additions 5.0 4.3 6.3 9.5 2.0
-----------------------------------------------------
Total Fixed
Asset Additions
(Accrual Basis) 137.1 140.3 128.2 156.2 154.9
Fixed assets
acquired under
capital leases (22.7) (17.9) (12.7) (8.6) (6.6)
Changes in
liabilities
related to:
Fixed Asset
Additions
(Accrual Basis) 10.6 (10.2) 22.3 (14.0) 4.3
-----------------------------------------------------
Total Purchase
of Fixed Assets
and Intangible
Assets 125.0 112.2 137.8 133.6 152.6
=====================================================
Comprising:
Purchase of
Fixed Assets 123.2 104.5 137.7 133.5 151.0
Purchase of
Intangible
Assets 1.8 7.7 0.1 0.1 1.6
-----------------------------------------------------
125.0 112.2 137.8 133.6 152.6
=====================================================
Note
Virgin Media is not a member of NCTA and is providing this
information solely for comparative purposes.
Fixed Asset Additions (Accrual Basis) are from continuing operations.
See Appendix E for a discussion of the use of Fixed Asset Additions
(Accrual Basis) as a non-GAAP financial measure and the
reconciliation of Fixed Asset Additions (Accrual Basis) to GAAP
Purchase of Fixed Assets and Purchase of Intangible Assets.
E) USE OF NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS TO GAAP
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 GAAP. These
non-GAAP financial measures reflect an additional way of viewing
aspects of our operations that, when viewed with our GAAP results
and the accompanying reconciliations to corresponding GAAP
financial measures, provide a more complete understanding of
factors and trends affecting our business. We encourage investors
to review our financial statements and publicly-filed reports in
their entirety and to not rely on any single financial measure.
(i) Operating income before depreciation, amortization and other
charges (OCF)
Operating income before depreciation, amortization and other
charges, which we refer to as OCF or OCF (Total), is not a
financial measure recognised under GAAP. OCF represents our
earnings before interest, taxes, depreciation and amortization,
other charges, share of income from equity investments, loss on
extinguishment of debt, loss on derivative instruments and
foreign currency transaction gains (losses). Our management,
including our chief executive officer, who is our chief operating
decision maker, considers OCF as an important indicator of our
operational strength and performance. OCF excludes the impact of
costs and expenses that do not directly affect our cash flows.
Other charges, including restructuring charges, are also excluded
from OCF as management believes they are not characteristic of
our underlying business operations. OCF is most directly
comparable to the GAAP financial measure operating income (loss).
Some of the significant limitations associated with the use of
OCF as compared to operating income (loss) are that OCF does not
consider the amount of required reinvestment in depreciable fixed
assets and ignores the impact on our results of operations of
items that management believes are not characteristic of our
underlying business operations.
We believe OCF 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 reconciliation to operating income (loss) shown below,
provides 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 OCF with
other companies' non-GAAP financial measures that have the same
or similar names.
Reconciliation of operating income before depreciation, amortization
and other charges (OCF) to GAAP operating income (loss)
(in GBP millions) (unaudited)
Three months ended
-----------------------------------------------------
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2008 2007 2007 2007 2007
-----------------------------------------------------
Operating income
before
depreciation,
amortization
and other
charges (OCF) 324.2 321.0 341.5 315.3 305.7
Reconciling
items
Depreciation
and
amortization (324.2) (315.9) (303.7) (309.2) (309.4)
Other (charges)
income (4.6) (22.9) 8.9 (3.1) (11.6)
-----------------------------------------------------
Operating (loss)
income (4.6) (17.8) 46.7 3.0 (15.3)
=====================================================
(ii) Fixed Asset Additions (Accrual Basis)
Our 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 and intangible
assets as measured on an accrual basis. Our business is
underpinned by significant investment in network infrastructure
and information technology. Our management therefore considers
Fixed Asset Additions (Accrual Basis) an important component in
evaluating our liquidity and financial condition since purchases
of fixed assets are a necessary component of ongoing operations.
Fixed Asset Additions (Accrual Basis) is most directly
comparable to the GAAP financial measure purchase of fixed and
intangible 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 purchase of fixed
assets and purchase of intangible assets is that Fixed Asset
Additions (Accrual Basis) excludes timing differences from
payments of liabilities related to purchase of fixed assets and
purchase of intangible assets. We exclude these amounts from
Fixed Asset Additions (Accrual Basis) because timing differences
from payments of liabilities are more related to the cash
management treasury function than to our management of fixed
asset purchases for long-term operational performance and
liquidity. We compensate for the limitation by separately
measuring and forecasting working capital. Fixed Asset Additions
(Accrual Basis) also includes fixed assets acquired under
capital leases.
Reconciliation of Fixed Asset Additions (Accrual Basis) to GAAP
purchase of fixed assets and purchase of intangible assets
(in GBP millions) (unaudited)
Three months ended
-----------------------------------------------------
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
2008 2007 2007 2007 2007
--------- --------- --------- --------- ---------
Fixed Asset
Additions
(Accrual Basis) 137.1 140.3 128.2 156.2 154.9
Fixed assets
acquired under
capital leases (22.7) (17.9) (12.7) (8.6) (6.6)
Changes in
liabilities
related to:
Fixed Asset
Additions
(Accrual Basis) 10.6 (10.2) 22.3 (14.0) 4.3
--------- --------- --------- --------- ---------
Total Purchase
of Fixed Assets
and Intangible
Assets 125.0 112.2 137.8 133.6 152.6
========= ========= ========= ========= =========
Comprising:
Purchase of
fixed assets 123.2 104.5 137.7 133.5 151.0
Purchase of
intangible
assets 1.8 7.7 0.1 0.1 1.6
--------- --------- --------- --------- ---------
125.0 112.2 137.8 133.6 152.6
========= ========= ========= ========= =========