TIDMVMED
London, England, October 23, 2012 - Virgin Media Inc. (NASDAQ:
VMED; LSE: VMED) announces results for the nine months and quarter
ended September 30, 2012.
Solid financial performance
-- Revenue up 3.1% to GBP3,061m for the nine months
Revenue up 2.8% to GBP1,028m for the quarter
-- OCF1 up 3.8% to GBP1,211m for the nine months
OCF up 6.1% to GBP423m for the quarter
Operating income of GBP491m for the nine months; GBP180m for
the
quarter
Net income of GBP196m for the nine months; GBP124m for the
quarter
-- FCF2 down 6.3% to GBP336m for the nine months; down 11% to
GBP120m for the quarter
Net cash provided by operating activities of GBP808m for the
nine
months; GBP365m for the quarter
Multiple sources of high quality revenue growth
-- Net cable customer additions of 39,500 in the quarter, up from 6,300
Churn down from 1.7% to 1.4% in the quarter
-- Cable ARPU up 1.8% to GBP48.73 in the quarter
-- On-going improvement of customer base mix in the quarter
TiVo customers increased 205,900 to 1.14m; now 30% of TV
base
52,200 increase in the paying TV base3
Superfast broadband customers (30Mb and above) increased
452,900
to 1.8m, now 42% of broadband base
-- Mobile revenue down 3.1% to GBP137m in the quarter
-- Business division revenue up 9.5% to GBP169m in the quarter
Capital Return programme continued
-- GBP113m of stock buybacks executed in Q3; GBP122m remaining buyback
authority this year
-- Tendering for up to $1.6bn of high coupon unsecured debt to reduce
interest costs and lengthen debt maturities
Neil Berkett, Chief Executive Officer of Virgin Media, said:
"This has been a quarter where continued strong demand for
superfast broadband and TiVo has led to lower churn and meaningful
cable customer growth. Combined with progress in our business
division, we have again delivered solid financial progress with
continued revenue and OCF growth, translating into strong Free Cash
Flow and shareholder returns."
Note: The notes preceding the Appendices relating to non-GAAP
financial measures and other matters and the Appendices to this
earnings release are considered an integral part of the financial
and operational information in this release. Financial and
statistical information is as at and for the three months ended
September 30, 2012, unless otherwise stated. Comparisons of
financial and operating statistics are to the third quarter of
2011, unless otherwise stated. Where financial information is given
for the nine months ended September 30, 2012, any comparisons are
to the nine months ended September 30,2011, unless otherwise
stated.
Conference call details
There will be a conference call today for analysts and investors
in London at 1pm UK time / 8am ET, which can be accessed live on
the Company's website, www.virginmedia.com/investors. Analysts and
investors can also dial in on +1 646 254 3360 in the United States
or +44 (0) 20 7784 1036 outside of the US - passcode 7849656# for
all participants. The conference call replay will be available
approximately two hours after the end of the call until midnight on
Tuesday, October 30, 2012. The dial-in replay number for the US is:
+1 347 366 9565 and the international dial-in replay number is: +44
(0)20 3427 0598 - passcode: 7849656#.
Forward-looking statements
This release contains certain forward-looking statements within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995. Please refer below to "Safe Harbour Statement under the U.S.
Private Securities Litigation Reform Act of 1995" for a more
detailed discussion regarding these forward-looking statements.
SUMMARY 3 Months ended 9 Months ended
FINANCIAL
RESULTS
Sept 30, 2012 Sept 30, 2011 Sept 30, 2012 Sept 30, 2011
GBPm GBPm GBPm GBPm
Revenue
Cable 704.7 685.0 2,089.2 2,033.3
Mobile 136.8 141.2 411.6 410.7
Non-cable 17.6 19.8 55.0 59.8
Consumer 859.1 846.0 2,555.8 2,503.8
segment
- Total
Business 168.6 154.0 505.0 464.3
segment
Total 1,027.7 1,000.0 3,060.8 2,968.1
Revenue
OCF 422.7 398.3 1,211.3 1,166.5
Operating 180.0 128.4 490.5 373.9
income
FCF 120.0 135.5 335.5 358.1
Net cash 364.5 297.0 807.6 854.7
provided
by
operating
activities
SELECTED
CONSUMER
OPERATIONS
STATISTICS
Sept 30, 2012 Sept 30, 2011 Sept 30, 2012 Sept 30, 2011
000's 000's 000's 000's
Consumer 4,851.6 4,790.6 4,851.6 4,790.6
cable
customers
Consumer
cable
products
Broadband 4,209.5 4,072.9 4,209.5 4,072.9
Television 3,778.4 3,762.0 3,778.4 3,762.0
Telephone 4,157.7 4,141.0 4,157.7 4,141.0
12,145.6 11,975.9 12,145.6 11,975.9
Mobile - 1,670.9 1,421.4 1,670.9 1,421.4
contract
3 Months ended 9 Months ended
Sept 30, 2012 Sept 30, 2011 Sept 30, 2012 Sept 30, 2011
000's 000's 000's 000's
Consumer 39.5 6.3 46.0 (9.5 )
cable
customer
net
additions
(disconnections)
Net
consumer
cable
product
additions
(disconnections)
Broadband 56.9 24.3 106.6 61.8
Television 10.7 (5.7 ) 15.3 (16.8 )
Telephone 9.4 (14.0 ) 25.1 (20.8 )
77.0 4.6 147.0 24.2
Mobile - 29.0 74.8 147.0 210.6
contract
Cable ARPU GBP48.73 GBP47.86 GBP48.17 GBP47.14
Mobile ARPU GBP14.72 GBP15.22 GBP14.84 GBP14.73
OVERVIEW
Sustainable revenue growth
Total revenue increased 2.8% in the quarter to GBP1,028m due to
growth in both consumer and business segments. Gross margin4
improved by 4.4% to GBP624m. SG&A remained relatively flat at
GBP202m, resulting in OCF of GBP423m, up 6.1%. Operating income
increased 40% to GBP180m and net income was GBP124m, compared to a
net loss of GBP74m in the third quarter last year.
Free Cash Flow was down 11% to GBP120m reflecting the
incremental capital investment in our broadband speed upgrade
programme. Net cash provided by operating activities was up 23% to
GBP365m.
Continued cable revenue growth
Consumer cable revenue increased 2.9% to GBP704.7m, reflecting
1.8% cable ARPU growth and an increase of 1.3% in the size of our
customer base.
The number of cable customers we serve grew by 39,500 during the
quarter compared to 6,300 in Q3-11. Churn fell from 1.7% to 1.4%
with gross disconnections down year-on-year for the fourth quarter
in a row. These fell by 14% to 203,500.
We added a net 30,200 triple-play customers during the quarter
with triple-play penetration increasing to 64.7%.
Strong superfast broadband and TiVo demand
Total broadband net additions in the quarter were 56,900 which
is more than double as many as a year ago. We continued to add
customers taking superfast speeds (30Mb and above) through new
customers joining as well as upgrading existing customers. This
superfast customer base increased by 452,900 during the quarter,
taking the total to 1.8m or 42% of our broadband base.
Demand for even faster speeds remains strong with around 44% of
new broadband subscribers taking speeds of 60Mb or higher during
the quarter. We now have 837,500 customers on tiers between 50Mb
and 120Mb.
Our programme to double the broadband speeds of over 4m
customers continues with over 40% of our network upgraded for the
new faster speeds as of October 22, 2012.
At the same time, the appeal of our TiVo service is driving pay
TV growth. We added 205,900 more TiVo customers during the quarter
to reach a total of 1.14m at the quarter-end, which represents 30%
of our TV customer base. This uptake has helped to drive the
overall number of paying TV customers, which increased by 52,200 in
the quarter.
While TiVo demand remained strong, we managed the mix between
new and existing customers to optimise returns resulting in lower
net additions than in the previous quarter. However, we achieved
our highest ever TiVo gross additions from new customers in the
third quarter, whilst migrations and cross-sell only accounted for
around 48% of TiVo gross additions. This compares to around 60% of
TiVo gross additions coming from migrations and cross-sell in the
previous four quarters.
In the coming weeks, we will be launching the latest enhancement
to our Virgin Media TiVo service - Virgin TV Anywhere. This new
development will allow our TV customers to stream live channels to
their iPhone or iPad, with even more available on their PC, Mac or
laptop, including thousands of hours of on demand content. The iPad
and online versions will also allow Virgin Media TiVo customers to
tap into their TiVo boxes to record shows, manage their recordings
and change their series links.
We also re-launched our on demand movie pay-per-view service as
'Virgin Movies'. The revitalised movie service offers over 500 of
the latest films straight from the cinema as well as a massive
catalogue of films available on-demand on TV or via the web with
the online service available to everyone, including non-Virgin
Media customers as well.
Mobile - sustained contract revenue growth
Mobile revenue was GBP136.8m, down 3.1% largely due to
regulatory changes to mobile termination rates ("MTR") which
reduced the amount of inbound mobile revenue we received by
approximately GBP7m in the quarter compared to Q3-11. Due to a
similar associated reduction in interconnect costs for our mobile
and fixed line businesses from these regulatory rates changes, the
impact on group OCF was broadly neutral. A decline in prepay
service revenue of 22% to GBP34.5m was partially offset by the 5.5%
growth in contract service revenue to GBP99.2m.
We increased our contract mobile base by 28,900 in the quarter.
Contract net additions slowed as we shifted focus in the quarter
more towards quality customer growth with the launch of new all
inclusive tariffs. We also focused handset investment more towards
customer retention and particularly those customers coming out of
contract at the end of their initial two-year term. We are planning
a similar approach in the fourth quarter.
The total contract base increased 18% from a year ago to 1.7m,
while our prepay subscriber base reduced by 24,100 compared to a
decline of 138,300 in the comparable period last year.
At the quarter-end, we had approximately 809,800 cable
households with at least one Virgin Mobile contract, which is up
22% year-on-year. These homes had around 1.2m contract mobiles. We
also estimate we have a further 205,400 cable households with at
least one of our prepay phones, meaning total mobile penetration of
the cable base is around 21%, leaving a significant growth
opportunity to cross-sell to the remaining 79%.
Quad-play penetration, where a household takes all three cable
products and at least one mobile phone service, increased to around
15.6% of our residential cable customer base, compared to around
13.7% a year ago. We have approximately 757,000 quad-play
customers, which is up 15% year-on-year.
Growing Business data
Virgin Media Business revenue of GBP168.6m was up 9.5% in the
quarter. Revenue for the nine months was GBP505.0m, up 8.8%, which
represented 44% of total group revenue growth for the nine
months.
Continuing our strength in the Public Sector, we have recently
been selected as supplier by the Yorkshire & Humberside
Partnership Management Board.
As a result of our focus on mobile backhaul we have started to
benefit from incremental revenue this quarter from an extension to
our current MBNL deal for an additional aggregation network and an
extra 150 sites on top of the 2,000 sites under the existing
contract.
Capital Return Programme update
In July 2011, we announced a second phase capital return
programme of up to GBP850m, which was increased in October 2011 by
up to a further GBP250m following the sale of UKTV. The total
second phase programme consists of up to GBP875m of share buybacks
and up to GBP225m in transactions relating to our debt and
convertible debt, which may be effected through open market,
privately negotiated, and/or derivative transactions until the end
of 2012. Combined with our previous capital return programme, this
takes the cumulative total to GBP1.8bn, of which GBP1.25bn is for
completed or expected share buybacks from mid-2010 to the end of
2012.
In July, we entered into a $175m capped accelerated stock
repurchase programme ("ASR") for a sterling cost of GBP113m, under
which we have received approximately 5.9m shares thus far. The
final number of shares that we will ultimately repurchase under
this ASR will be determined on or before October 25, 2012.
We have GBP122m remaining for share buybacks authorised by our
Board to the end of 2012, which represents approximately 2.5% of
our equity market capitalisation as of October 21, 2012. As at
September 30, 2012, we had 268.4m shares outstanding.
Approximately 24% of our share count at June 30, 2010 is
expected to have been repurchased5 by the end of 2012, assuming the
full Board authority is used in 2012, based on the share price as
of October 21, 2012.
On October 10, we announced the commencement of tender offers by
our subsidiary Virgin Media Finance PLC (the "Issuer") to purchase
any and all of its dollar- and euro-denominated 9.50% Senior Notes
due 2016 and up to $500 million aggregate principal amount of its
dollar-denominated 8.375% Senior Notes due 2019 and its
sterling-denominated 8.875% Senior Notes due 2019.
The total premium cost and fees of the tender are expected to be
approximately GBP130m, which forms part of our GBP225 million
second-phase Capital Return Programme, announced in July 2011, of
which GBP175 million remains available to optimise Virgin Media's
outstanding debt structure. The purpose of the tender offers is to
enable Virgin Media to lower its interest cost and enhance its
capital structure by further extending its amortisation schedule.
Virgin Media's ongoing share buyback programme is still in place
and is unaffected.
The terms and conditions of the tender offers are described in
the Offer to Purchase dated October 10, 2012 distributed to holders
of the Notes. The tender offers are subject to the satisfaction of
a financing condition requiring the completion by Virgin Media Inc.
or one of its subsidiaries of an offering of debt securities, a
loan or other financing transaction, on terms satisfactory to
Virgin Media, to raise sufficient funds for the Issuer to pay the
total consideration for the Notes. Neither the tender offer for the
2016 Notes nor the tender offer for the 2019 Notes is conditioned
upon successful completion of the other offer.
We remain on track to achieve our long-term net leverage, Net
Debt to OCF6, target of approximately 3.0x by mid-2013, as
previously announced.
The transactions described above may be implemented by brokers
for the company within certain pre-set parameters and purchases may
continue during closed periods in accordance with applicable
restrictions. The stock so acquired will be held in treasury or
cancelled. Also, in connection with certain derivative and
accelerated buyback transactions, the associated counterparties may
hedge their liabilities through transactions in our common
stock.
RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012
Comparisons of financial and operating statistics are to the
third quarter of 2011, unless otherwise stated.
TOTAL REVENUE
Total revenue was up 2.8% to GBP1,028m, due to growth in both
the consumer and business segments.
CONSUMER SEGMENT
Cable
Cable revenue was up 2.9% at GBP704.7m, reflecting growth in
both cable ARPU and the customer base.
Mobile
Mobile revenue was GBP136.8m, down 3.1% largely due to the
regulated change in MTRs and the decline in prepay service revenue,
partially offset by growth in contract service revenue.
Non-cable
Non-cable revenue was down GBP2.2m to GBP17.6m mainly due to a
reduction in the customer base from 261,300 to 203,900.
BUSINESS SEGMENT
Business revenue was GBP168.6m, up 9.5%.
Retail data revenue was up 12.6% to GBP78.0m, following our
strategy of focusing on increasing demand for data products.
Wholesale data revenue was up 36% at GBP45.5m due mainly to revenue
from new contracts.
Retail voice revenue was down 13.3% to GBP32.7m, reflecting the
continued structural decline in voice telephony. Wholesale voice
revenue was up GBP1.0m to GBP5.0m. Local Area Network Solutions and
other revenue was down GBP2.1m to GBP7.4m.
The nature of this segment is that significant contracts will
cause some unevenness in our revenues as we continue to grow. For
example, revenue growth in this quarter was helped by replacing and
enhancing a contract with a key customer.
OPERATING COSTS AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
(SG&A)
Operating costs (exclusive of depreciation) were GBP403.3m, up
0.4% as lower consumer cost of sales were partially offset by
higher business cost of sales and higher network and other
operating costs. Gross margin percentage grew from 59.8% to
60.8%.
SG&A was relatively flat, increasing by just 0.9% to
GBP201.7m.
OPERATING INCOME BEFORE DEPRECIATION, AMORTIZATION, GOODWILL AND
INTANGIBLE ASSET IMPAIRMENTS AND RESTRUCTURING AND OTHER CHARGES
(OCF)
OCFwas up 6.1% at GBP422.7m, mainly due to improved revenue and
gross margin.
OPERATING INCOME
Operating income was GBP180.0m, up 40%, mainly due to improved
revenue and gross margin and reduced amortization expense.
Depreciation expense was up 3.3% at GBP243.5m. The increase in
depreciation expense was primarily a result of depreciation in
respect of fixed asset additions with a generally shorter useful
economic life than existing assets, combined with the acceleration
of depreciation on certain assets that will no longer be required
as a result of our re-tiering program, partially offset by fixed
assets becoming fully depreciated.
No amortization expense was incurred, compared to GBP28.1m in
the same quarter last year, as all intangible assets subject to
amortization became fully amortized in the fourth quarter of
2011.
NET INCOME
Net income was GBP123.9m compared to a net loss of GBP73.8m in
the third quarter last year. The improvement was mainly due to a
third quarter gain of GBP44.0m on derivative instruments this year
compared to a GBP59.3m loss in the third quarter last year. This
gain was principally due to an increase in the value of our
conversion hedges, which was driven by an increase in our share
price during the quarter.
CAPITAL EXPENDITURE
Capital expenditure guidance
Excluding the incremental GBP110m investment in 2012 on our
broadband speed upgrade that we announced in January, Virgin
Media's cash capital expenditure (purchase of fixed and intangible
assets) will remain within current guidance of 15 to 17% of revenue
for 2012 and for future years. In addition, it is expected that the
cost of fixed assets acquired under leases will continue to be no
greater than 2 to 3% of revenue per annum, in line with recent
years. All other strategic growth opportunities will be met within
this guidance.
Fixed assets
Fixed asset additions (accrual basis)7 were up GBP19.8m to
GBP203.2m mainly due to GBP23.3m spent on the broadband speed
upgrade.
The total purchase of fixed and intangible assets was up
GBP47.0m at GBP202.7m mainly due to the increase in fixed asset
additions (accrual basis) and the timing of cash payments to
suppliers, partially offset by increases in assets acquired under
capital leases. Total purchase of fixed and intangible assets
included GBP31.1m spent on the broadband speed upgrade.
Leasing
The total amount of fixed assets acquired under capital leases
was GBP24.7m, representing 2.4% of revenue in the quarter. We made
principal payments on capital leases of GBP21.5m and the capital
lease balance increased from GBP241.0m at the end of the second
quarter to GBP244.2m at the end of the third quarter.
The interest charge on capital leases was GBP3.6m during the
quarter.
FREE CASH FLOW
Free Cash Flow was down 11% to GBP120.0m mainly due to higher
purchase of fixed and intangible assets, partially offset by
increased OCF and lower net interest expense. Net cash provided by
operating activities was up 23% at GBP364.5m mainly due to
increased operating income, a reduction in cash interest driven by
the timing of payments on our debt, and a favourable change in
operating assets and liabilities.
DEBT
As of September 30, 2012, total debt consisted of GBP750m
outstanding under our Senior Credit Facility, GBP1,676m of Senior
Notes, GBP2,582m of Senior Secured Notes, GBP541m of Convertible
Senior Notes and GBP244m of capital leases and other indebtedness.
Cash and cash equivalents were GBP113m. Net debt8 was GBP5,679m at
the quarter-end.
Interest expense was GBP100.2m, down 6.9% mainly due to a lower
level of debt and lower average interest rates.
"Safe Harbour" 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," "think",
"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 the following:
* We operate in highly competitive markets which may lead to a
decrease in our revenue, increased costs, customer churn or a
reduction in the rate of customer acquisition;
* The sectors in which we compete are subject to rapid and
significant changes in technology, and the effect of technological
changes on our businesses cannot be predicted;
* Our fixed line telephony is in decline and unlikely to
improve;
* A failure in our network and information systems could
significantly disrupt our operations, which could have a material
adverse effect on those operations, our business, our results of
operations and financial conditions;
* Unauthorized access to our network resulting in piracy could
result in a loss of revenue;
* We rely on third-party suppliers and contractors to provide
necessary hardware, software or operational support and are
sometimes reliant on them in a way which could economically
disadvantage us;
* The "Virgin" brand is not under our control and the activities
of the Virgin Group and other licensees could have a material
adverse effect on the goodwill towards us as a licensee;
* Our inability to provide popular programming or to obtain it
at a reasonable cost could potentially have a material adverse
effect on the number of customers or reduce margins;
* Adverse economic developments could reduce customer spending
for our TV, broadband and telephony services and could therefore
have a material adverse effect on our revenue;
* We are subject to currency and interest rate risks;
* We are subject to tax in more than one jurisdiction and our
structure poses various tax risks;
* Virgin Mobile relies on Everything Everywhere's networks to
carry its communications traffic;
* We do not insure the underground portion of our cable network
and various pavement-based electronics associated with our cable
networks;
* We are subject to significant regulation, and changes in the
U.K. and EU laws, regulations or governmental policy affecting the
conduct of our business may have a material adverse effect on our
ability to set prices, enter new markets or control our costs;
* We have substantial indebtedness which may have a material
adverse effect on our available cash flow, our ability to obtain
additional financing if necessary in the future, our flexibility in
reacting to competitive and technological changes and our
operations;
* We may not be able to fund our debt service obligations in the
future; and
* The covenants under our debt agreements place certain
limitations on our ability to finance future operations and how we
manage our business;
These and other factors are discussed in more detail under "Risk
Factors" and elsewhere in our annual report on Form 10-K for the
year ended December 31, 2011, or the 2011 Annual Report, as filed
with the U.S. Securities and Exchange Commission, or SEC, on
February 21, 2012. We assume no obligation to update our
forward-looking statements to reflect actual results, changes in
assumptions or changes in factors affecting these statements.
Notes
Please see Appendix F for a reconciliation of all non-GAAP
financial measures to their nearest GAAP equivalents.
1 OCF is operating income before depreciation, amortization,
goodwill and intangible asset impairments and restructuring and
other charges. OCF is a non-GAAP financial measure and the most
directly comparable GAAP measure is operating income.
2 Free Cash Flow, or FCF, is OCF reduced by purchase of fixed
and intangible assets, as reported in our statements of cash flows,
and net interest expense, as reported in our statements of
operations. FCF is a non-GAAP financial measure and the most
directly comparable GAAP measure is net cash provided by operating
activities.
3 Paying TV base is our total TV customer base less those on
packages which include a free TV service provided with a non-TiVo
set top box.
4 Gross margin is revenue less operating costs. Gross margin
percentage is revenue less operating costs, divided by revenue.
5 Based on closing share price as of October 21, 2012 and 268.4m
shares outstanding at September 30, 2012.
6 Net Debt to OCF is Net Debt divided by OCF. It can be
calculated on a last twelve months or on a quarterly annualized
basis. On a last twelve months basis it is Net Debt divided by OCF
for the last twelve months. On a quarterly annualized basis, it is
Net Debt divided by OCF for the quarter multiplied by four. Net
Debt and Net Debt to OCF are non-GAAP financial measures.
7 Fixed asset additions (accrual basis) is the purchase of fixed
and intangible assets as measured on an accrual basis, excluding
asset retirement obligation related assets. Fixed asset additions
(accrual basis) is a non-GAAP financial measure and the most
directly comparable GAAP measure is purchase of fixed and
intangible assets.
8 Net Debt is long term debt inclusive of current portion, less
cash and cash equivalents. Net debt is a non-GAAP financial measure
and the most directly comparable GAAP measure is long term debt
(net of current portion.)
Appendices:
A) Financial Statements
* Condensed Consolidated Statements of Comprehensive Income
* Condensed Consolidated Balance Sheets
* Condensed Consolidated Statements of Cash Flows
* Quarterly Condensed Consolidated Statements of Comprehensive Income
* Quarterly Condensed Consolidated Statements of Cash Flows
B1) Quarterly Segment Revenue and Contribution, OCF and Operating Income
B2) Quarterly Costs and Expenses
C1) Cable Operations Statistics
C2) Non-Cable Operations Statistics
C3) Mobile Operations Statistics
D) Free Cash Flow Calculation (FCF)
E1) Fixed Asset Additions (Accrual Basis)
E2) Capital Lease Activity
F) Use of Non-GAAP Financial Measures and Reconciliations to GAAP
A) FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
(in GBP millions, except per
share data) (unaudited)
Three months ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
Revenue GBP 1,027.7 GBP 1,000.0 GBP 3,060.8 GBP 2,968.1
Costs and
expenses
Operating costs (exclusive of depreciation shown separately below) 403.3 401.7 1,223.4 1,202.7
Selling, general and administrative expenses 201.7 200.0 626.1 598.9
Restructuring and other charges (0.8 ) 6.2 4.1 7.7
Depreciation 243.5 235.6 716.7 694.6
Amortization - 28.1 - 90.3
847.7 871.6 2,570.3 2,594.2
Operating 180.0 128.4 490.5 373.9
income
Other income
(expense)
Interest expense (100.2 ) (107.6 ) (304.4 ) (335.3 )
Loss on extinguishment of debt - (18.3 ) (58.6 ) (47.2 )
Share of income from equity investments - 3.6 - 18.6
Gain (loss) on disposal of equity investments - (8.0 ) - (8.0 )
Gain (loss) on derivative instruments 44.0 (59.3 ) 67.9 (40.5 )
Foreign currency gain (loss) 0.3 (13.0 ) (5.5 ) 0.8
Interest income and other, net 0.2 0.5 6.5 83.8
Income (loss) from continuing operations 124.3 (73.7 ) 196.4 46.1
before income taxes
Income tax (expense) benefit (0.4 ) (0.1 ) (0.8 ) (17.2 )
Income (loss) from continuing 123.9 (73.8 ) 195.6 28.9
operations
Loss on discontinued operations, - - - (1.2 )
net of tax
Net income GBP 123.9 GBP(73.8 ) GBP 195.6 GBP 27.7
(loss)
Per share
amounts
Income (loss) from continuing
operations
Basic earnings per share GBP 0.46 GBP(0.24 ) GBP 0.71 GBP 0.09
Diluted earnings per share GBP 0.41 GBP(0.24 ) GBP 0.68 GBP 0.09
Net income
(loss)
Basic earnings per share GBP 0.46 GBP(0.24 ) GBP 0.71 GBP 0.09
Diluted earnings per share GBP 0.41 GBP(0.24 ) GBP 0.68 GBP 0.09
Dividends per share $0.04 $0.04 $0.12 $0.12
(in U.S. Dollars)
Total comprehensive GBP 115.4 GBP(83.8 ) GBP 188.8 GBP(6.3 )
income (loss)
CONDENSED CONSOLIDATED BALANCE SHEETS
(in GBP millions, except par value)
September 30, December 31,
2012 2011
(unaudited)
Assets
Current assets
Cash and cash equivalents GBP 113.4 GBP 300.4
Restricted cash 1.9 1.9
Accounts receivable - trade, 456.8 435.4
less allowances for doubtful
accounts of GBP8.8 (2012) and GBP10.9 (2011)
Derivative financial instruments 10.5 9.5
Prepaid expenses and other current assets 97.1 97.0
Total current assets 679.7 844.2
Fixed assets, net 4,546.5 4,602.7
Goodwill and other indefinite-lived assets 2,017.5 2,017.5
Derivative financial instruments 385.4 347.9
Deferred financing costs, net 64.7 75.7
of accumulated amortization
of GBP54.0 (2012) and GBP44.0 (2011)
Other assets 52.2 50.8
Total assets GBP 7,746.0 GBP 7,938.8
Liabilities and shareholders' equity
Current liabilities
Accounts payable GBP 333.7 GBP 304.4
Accrued expenses and other 340.5 373.1
current liabilities
Derivative financial instruments 7.8 16.7
VAT and employee taxes payable 86.1 88.4
Interest payable 103.2 106.8
Deferred revenue 310.1 311.8
Current portion of long term debt 81.3 76.6
Total current liabilities 1,262.7 1,277.8
Long term debt, net of current portion 5,711.3 5,778.5
Derivative financial instruments 106.9 53.6
Deferred revenue and other 169.1 190.0
long term liabilities
Total liabilities 7,250.0 7,299.9
Shareholders' equity
Common stock - $0.01 par value; authorized 1.4 1.6
1,000.0 (2012 and 2011) shares;
issued and outstanding 268.4 (2012)
and 286.7 (2011) shares
Additional paid-in capital 3,618.7 3,866.6
Accumulated other comprehensive income 23.2 30.0
Accumulated deficit (3,147.3 ) (3,259.3 )
Total shareholders' equity 496.0 638.9
Total liabilities and shareholders' equity GBP 7,746.0 GBP 7,938.8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in GBP millions) (unaudited)
Nine months ended
September 30,
2012 2011
Operating activities:
Net income GBP 195.6 GBP 27.7
Loss from discontinued operations - 1.2
Income from continuing operations 195.6 28.9
Adjustments to reconcile income from continuing
operations to net cash provided
provided by operating activities:
Depreciation and amortization 716.7 784.9
Non-cash interest 29.6 14.1
Share based compensation 17.1 17.2
Loss on extinguishment of debt, net 10.5 31.7
of cash prepayment premiums
Income from equity accounted investments, - (0.6 )
net of dividends received
Unrealized gains on derivative instruments, (77.3 ) 29.6
net of cash settlements
Unrealized foreign currency (gain) loss (1.1 ) 0.3
Loss on disposal of equity investments - 8.0
Income taxes 4.1 21.7
Other - 5.3
Changes in operating assets and liabilities, (87.6 ) (86.4 )
net of effect from business disposals
Net cash provided by operating activities 807.6 854.7
Investing activities:
Purchase of fixed and intangible assets (572.4 ) (479.3 )
Proceeds from sale of fixed assets 2.1 1.5
Principal repayments on loans to equity investments - 108.2
Acquisitions, net of cash acquired (0.6 ) (14.6 )
Disposal of equity investments, net (2.5 ) 241.0
Other - 2.5
Net cash used in investing activities (573.4 ) (140.7 )
Financing activities:
New borrowings, net of financing costs 415.6 977.2
Repurchase of common stock (330.2 ) (447.0 )
Proceeds from employee stock option exercises, (0.6 ) 14.4
net of taxes reimbursed
Principal payments on long term debt (414.3 ) (1,265.6 )
Principal payments on capital leases (71.8 ) (62.8 )
Proceeds from settlement of cross 2.3 65.5
currency interest rate swaps
Dividends paid (20.7 ) (23.7 )
Net cash used in financing activities (419.7 ) (742.0 )
Cash flow from discontinued operations:
Net cash used in operating activities - (10.4 )
Net cash used in discontinued operations - (10.4 )
Effect of exchange rate changes (1.5 ) (2.8 )
on cash and cash equivalents
(Decrease) increase in cash and cash equivalents (187.0 ) (41.2 )
Cash and cash equivalents, beginning of period 300.4 479.5
Cash and cash equivalents, end of period GBP 113.4 GBP 438.3
Supplemental disclosure of cash flow information
Cash paid during the period for interest GBP 268.6 GBP 324.5
exclusive of amounts capitalized
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
(in GBP millions, except per
share data) (unaudited)
Three months ended
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
Revenue GBP 1,027.7 GBP 1,026.9 GBP 1,006.2 GBP 1,023.7 GBP 1,000.0
Costs and
expenses
Operating costs (exclusive of depreciation shown separately below) 403.3 403.2 416.9 402.9 401.7
Selling, general and administrative expenses 201.7 211.6 212.8 197.1 200.0
Restructuring and other charges (0.8 ) (0.5 ) 5.4 0.7 6.2
Depreciation 243.5 233.0 240.2 228.6 235.6
Amortization - - - 28.1 28.1
Total costs and expenses 847.7 847.3 875.3 857.4 871.6
Operating 180.0 179.6 130.9 166.3 128.4
income
Other income
(expense)
Interest expense (100.2 ) (98.6 ) (105.6 ) (105.5 ) (107.6 )
Loss on extinguishment of debt - - (58.6 ) - (18.3 )
Share of income from equity investments - - - - 3.6
Gain (loss) on sale of equity investments - - - 0.8 (8.0 )
Gain (loss) on derivative instruments 44.0 (20.6 ) 44.5 (10.2 ) (59.3 )
Foreign currency gain (loss) 0.3 (1.4 ) (4.4 ) (3.2 ) (13.0 )
Interest income and other, net 0.2 6.0 0.3 (1.2 ) 0.5
Income (loss) from continuing operations 124.3 65.0 7.1 47.0 (73.7 )
before income taxes
Income tax (expense) benefit (0.4 ) (0.3 ) (0.1 ) 1.2 (0.1 )
Income (loss) from continuing 123.9 64.7 7.0 48.2 (73.8 )
operations
Discontinued
operations
Loss on disposal, net of tax - - - - -
Loss on discontinued operations, - - - - -
net of tax
Net income GBP 123.9 GBP 64.7 GBP 7.0 GBP 48.2 GBP(73.8 )
(loss)
Per share
amounts
Income (loss) from continuing
operations
Basic earnings per share GBP 0.46 GBP 0.23 GBP 0.02 GBP 0.16 GBP(0.24 )
Diluted earnings per share GBP 0.41 GBP 0.22 GBP 0.02 GBP 0.16 GBP(0.24 )
Net income
(loss)
Basic earnings per share GBP 0.46 GBP 0.23 GBP 0.02 GBP 0.16 GBP(0.24 )
Diluted earnings per share GBP 0.41 GBP 0.22 GBP 0.02 GBP 0.16 GBP(0.24 )
Average number of shares 269.8 276.2 282.3 294.1 310.4
outstanding
Total comprehensive GBP 115.4 GBP 61.5 GBP 11.9 GBP 25.7 GBP(83.8 )
income (loss)
QUARTERLY
CONDENSED
CONSOLIDATED
STATEMENTS
OF
CASH
FLOWS
(in
GBP
millions,
except
per
share
data)
(unaudited)
Three months ended,
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
Operating
activities
Net GBP 123.9 GBP 64.7 GBP 7.0 GBP 48.2 GBP(73.8 )
income
(loss)
Loss - - - - -
on
discontinued
operations
Income 123.9 64.7 7.0 48.2 (73.8 )
(loss)
from
continuing
operations
Adjustments
to
reconcile
net
income
(loss)
from
continuing
operations
to net
cash
provided
by
operating
activities:
Depreciation 243.5 233.0 240.2 256.7 263.7
and
amortization
Non-cash 32.0 (20.3 ) 17.9 (3.6 ) 19.7
interest
Share 3.4 6.1 7.6 5.3 2.9
based
compensation
Loss - - 10.5 - 2.8
on
extinguishment
of debt,
net
of
cash
prepayment
premiums
Income - - - - 0.9
from
equity
accounted
investments,
net
of
dividends
received
Unrealized (48.4 ) 17.6 (46.5 ) (16.8 ) 53.4
losses
(gains)
on
derivative
instruments,
net of
cash
settlements
Foreign (0.4 ) - (0.7 ) 0.6 13.2
currency
(gains)
losses
(Gain) - - - (0.8 ) 8.0
loss
on
disposal
of
equity
investments
Income 1.1 1.6 1.4 (2.1 ) 1.5
taxes
Other - - - 1.7 1.9
Changes 9.4 (71.7 ) (25.3 ) 5.2 2.8
in
operating
assets
and
liabilities
Net cash 364.5 231.0 212.1 294.4 297.0
provided
by
operating
activities
Investing
activities
Purchase (202.7 ) (185.6 ) (184.1 ) (177.4 ) (155.7 )
of
fixed and
intangible
assets
Proceeds 0.4 0.8 0.9 0.7 0.3
from
the sale
of fixed
assets
Principal - - - - 88.8
repayments
on loans
to
equity
investments
Acquisitions, - - (0.6 ) - (0.3 )
net
of
cash
acquired
Disposal - - (2.5 ) 2.4 241.0
of
equity
investments,
net
Other - - - 0.3 -
Net cash (202.3 ) (184.8 ) (186.3 ) (174.0 ) 174.1
(used
in)
provided
by
investing
activities
Financing
activities
New - 99.7 315.9 (0.2 ) 49.6
borrowings,
net
of
financing
costs
Repurchase (112.6 ) (60.3 ) (157.3 ) (188.0 ) (234.2 )
of
common
stock
Proceeds 1.5 - (2.1 ) 3.1 8.5
from
employee
stock
option
exercises,
net of
taxes
reimbursed
Principal (100.1 ) (0.1 ) (314.1 ) (50.1 ) (340.5 )
payments
on long
term
debt
Principal (21.7 ) (28.8 ) (21.3 ) (16.5 ) (32.0 )
payments
on
capital
leases
Proceeds - - 2.3 - 65.5
from
settlement
of cross
currency
interest
rate
swaps
Dividends (6.6 ) (7.1 ) (7.0 ) (7.4 ) (7.9 )
paid
Net cash (239.5 ) 3.4 (183.6 ) (259.1 ) (491.0 )
provided
by (used
in)
financing
activities
Cash flow
from
discontinued
operations
Net cash - - - - -
used
in
operating
activities
Net cash - - - - -
used in
discontinued
operations
Effect of (0.2 ) 0.2 (1.5 ) 0.8 -
exchange
rate
changes
on cash
and
cash
equivalents
(Decrease) (77.5 ) 49.8 (159.3 ) (137.9 ) (19.9 )
increase
in cash
and
cash
equivalents
Cash and 190.9 141.1 300.4 438.3 458.2
cash
equivalents
at
beginning
of period
Cash and GBP 113.4 GBP 190.9 GBP 141.1 GBP 300.4 GBP 438.3
cash
equivalents
at end of
period
Supplemental
disclosure
of
cash
flow
information
Cash paid GBP 67.5 GBP 114.5 GBP 86.6 GBP 110.7 GBP 88.9
during
the
period
for
interest
exclusive
of
amounts
capitalized
B1) QUARTERLY SEGMENT REVENUE AND CONTRIBUTION,
OCF AND OPERATING INCOME
(in GBP millions) (unaudited)
Three months ended
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
Revenue
Consumer segment
Cable GBP 704.7 GBP 706.1 GBP 678.3 GBP 688.5 GBP 685.0
Mobile 136.8 136.4 138.5 142.2 141.2
Non-cable 17.6 18.4 19.0 19.9 19.8
Total 859.1 860.9 835.8 850.6 846.0
Business segment
Business 168.6 166.0 170.4 173.1 154.0
Total revenue GBP 1,027.7 GBP 1,026.9 GBP 1,006.2 GBP 1,023.7 GBP 1,000.0
Segment contribution
Consumer segment GBP 521.9 GBP 513.7 GBP 486.7 GBP 518.5 GBP 493.5
Business segment 95.5 91.7 91.2 102.9 90.1
Total segment contribution 617.4 605.4 577.9 621.4 583.6
Other operating and (194.7 ) (193.3 ) (201.4 ) (197.7 ) (185.3 )
corporate costs
OCF (1) 422.7 412.1 376.5 423.7 398.3
Depreciation (243.5 ) (233.0 ) (240.2 ) (228.6 ) (235.6 )
Amortization - - - (28.1 ) (28.1 )
Restructuring and 0.8 0.5 (5.4 ) (0.7 ) (6.2 )
other charges
Consolidated operating income GBP 180.0 GBP 179.6 GBP 130.9 GBP 166.3 GBP 128.4
(1) OCF is a non-GAAP financial measure. See Appendix F for a
discussion of the use of OCF as a non-GAAP financial measure and
the reconciliation of OCF to GAAP operating income.
B2)
QUARTERLY
COSTS
AND
EXPENSES
(in
GBP
millions)
(unaudited)
Three months ended
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
Costs and
expenses
Operating
costs
Consumer GBP 245.1 GBP 251.4 GBP 255.5 GBP 253.8 GBP 261.4
cost
of sales
Business 56.8 56.7 61.6 54.0 47.2
cost
of sales
Network 101.4 95.1 99.8 95.1 93.1
and
other
operating
costs (1)
Total GBP 403.3 GBP 403.2 GBP 416.9 GBP 402.9 GBP 401.7
operating
costs
Selling,
general
and
administrative
expenses
Employee GBP 110.0 GBP 109.7 GBP 116.0 GBP 115.8 GBP 109.2
and
outsourcing
costs (2)
Marketing 46.7 54.1 52.6 33.3 46.4
costs
(3)
Facilities 15.4 15.8 14.4 14.0 14.3
(4)
Other (5) 29.6 32.0 29.8 34.0 30.1
Total GBP 201.7 GBP 211.6 GBP 212.8 GBP 197.1 GBP 200.0
selling,
general
and
administrative
expenses
(1) Network and other operating costs includes costs associated
with the provision of the network and operating platforms including
associated employee, outsourcing and facilities costs and certain
other operating expenses.
(2) Employee and outsourcing costs includes remuneration and
benefits, temporary and contract staff, training and stock-based
compensation costs together with costs of all major outsourced
business activities.
(3) Marketing costs includes advertising, brand costs, agency
fees, support and research, public relations and internal
communications costs.
(4) Facilities costs include building costs, service costs,
repairs and maintenance and utilities costs.
(5) Other costs include billing, collections and bad debt, IT,
legal and professional, license, insurance, and other indirect
costs.
C1) CABLE OPERATIONS STATISTICS (excl
Non-cable and Mobile Operations)
(data in 000's except percentages,
products/Customer and ARPU)
Three months ended
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
Customers
Opening Customers 4,812.1 4,826.8 4,805.6 4,790.6 4,784.3
Gross adds 243.0 181.7 189.3 203.1 243.7
Gross disconnects (203.5 ) (196.4 ) (168.1 ) (188.1 ) (237.4 )
Net customer adds (disconnects) 39.5 (14.7 ) 21.2 15.0 6.3
Closing Customers 4,851.6 4,812.1 4,826.8 4,805.6 4,790.6
Monthly Cable customer churn % 1.4 % 1.4 % 1.2 % 1.3 % 1.7 %
Products
Opening products 12,068.6 12,071.5 11,998.7 11,975.9 11,971.3
Net product adds (disconnects) 77.0 (2.9 ) 72.8 22.8 4.6
Closing products 12,145.6 12,068.6 12,071.5 11,998.7 11,975.9
Net product adds (disconnects)
Telephone 9.4 0.7 14.9 (8.3 ) (14.0 )
Television 10.7 (7.6 ) 12.2 1.1 (5.7 )
Broadband 56.9 4.0 45.7 30.0 24.3
Total Net product adds 77.0 (2.9 ) 72.8 22.8 4.6
(disconnects)
Products
Telephone 4,157.7 4,148.3 4,147.6 4,132.7 4,141.0
Television 3,778.4 3,767.7 3,775.3 3,763.1 3,762.0
Broadband 4,209.5 4,152.6 4,148.6 4,102.9 4,072.9
Total products 12,145.6 12,068.6 12,071.5 11,998.7 11,975.9
Products / Customer 2.50 2.51 2.50 2.50 2.50
Bundled Customers
Dual products 1,019.1 1,042.0 1,062.0 1,069.8 1,069.7
Triple products 3,137.5 3,107.3 3,091.3 3,061.6 3,057.8
Percentage of dual 85.7 % 86.2 % 86.0 % 86.0 % 86.2 %
or triple products
Percentage of triple products 64.7 % 64.6 % 64.0 % 63.7 % 63.8 %
Cable ARPU (1) GBP 48.73 GBP 48.82 GBP 46.95 GBP 47.85 GBP 47.86
ARPU calculation:
Consumer cable revenue GBP 704.7 GBP 706.1 GBP 678.3 GBP 688.5 GBP 685.0
(millions)
Average customers 4,820.6 4,821.1 4,816.6 4,796.9 4,771.5
(1) 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. The
average number of customers is calculated by adding the number of
customers at the start of the quarter and at the end of each month
of the quarter and dividing by four.
C2)
NON-CABLE
OPERATIONS
STATISTICS
(data in
000's)
Three months ended
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
Customers
Opening 218.6 233.0 248.2 261.3 266.4
Customers
Net (14.7 ) (14.4 ) (15.2 ) (13.1 ) (5.1 )
customer
(disconnects)
adds
Closing 203.9 218.6 233.0 248.2 261.3
Customers
Products
Opening
products
Telephone 146.7 155.3 163.3 169.7 169.0
Broadband 218.6 233.0 248.2 260.7 265.9
365.3 388.3 411.5 430.4 434.9
Net
product
adds
(disconnects)
Telephone (10.2 ) (8.6 ) (8.0 ) (6.4 ) 0.7
Broadband (14.7 ) (14.4 ) (15.2 ) (12.5 ) (5.2 )
(24.9 ) (23.0 ) (23.2 ) (18.9 ) (4.5 )
Closing
products
Telephone 136.5 146.7 155.3 163.3 169.7
Broadband 203.9 218.6 233.0 248.2 260.7
340.4 365.3 388.3 411.5 430.4
C3)
MOBILE
OPERATIONS
STATISTICS
(data
in
000's
except
ARPU)
Three months ended
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
Contract
Customers
(1)(2)
Opening 1,641.9 1,588.0 1,523.9 1,421.4 1,346.6
Contract
Customers
Net 29.0 53.9 64.1 102.5 74.8
contract
customer
adds
Closing 1,670.9 1,641.9 1,588.0 1,523.9 1,421.4
Contract
Customers
(1)
Prepay
Customers
(2)
Opening 1,384.8 1,420.0 1,513.4 1,566.9 1,705.2
Prepay
Customers
Net (24.1 ) (35.2 ) (93.4 ) (53.5 ) (138.3 )
prepay
customer
disconnects
Closing 1,360.7 1,384.8 1,420.0 1,513.4 1,566.9
Prepay
Customers
Total 3,031.6 3,026.7 3,008.0 3,037.3 2,988.3
Closing
Customers
(2)
Mobile
Revenue
Contract GBP 99.3 GBP 99.6 GBP 98.7 GBP 97.6 GBP 94.0
service
revenue
(millions)
(3)
Prepay 34.5 34.9 36.4 41.4 44.1
service
revenue
(millions)
(3)
Equipment 3.0 1.9 3.4 3.2 3.1
revenue
(millions)
GBP 136.8 GBP 136.4 GBP 138.5 GBP 142.2 GBP 141.2
Mobile GBP 14.72 GBP 14.86 GBP 14.96 GBP 15.46 GBP 15.22
ARPU
(4)
ARPU
calculation:
Service GBP 133.8 GBP 134.5 GBP 135.1 GBP 138.9 GBP 138.1
revenue
(millions)
Average 3,030.8 3,017.1 3,009.7 2,995.5 3,022.9
customers
(1) Contract customers represents the number of contracts
relating to either a mobile service or a mobile broadband
contract.
(2) 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 30 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.
(3) Amounts previously reported for contract service revenue
have been reduced by GBP1.2m for the three months ended March 31,
2012 and by GBP2.1m for the three months ended June 30, 2012, to
reflect credits applied to contract customer accounts that had been
reported against prepay service revenue. A corresponding increase
has been included in prepay service revenue for each of these
periods.
(4) Mobile ARPU is calculated on a quarterly basis by dividing
service revenue (contract and prepay) for the period by the average
number of active customers (contract and prepay) for the period,
divided by three. The average number of customers is calculated by
adding the number of customers at the start of the quarter and at
the end of each month of the quarter and dividing by four.
D)FREE CASH FLOW CALCULATION
(in GBP millions) (unaudited)
FCF is defined as OCF reduced by purchase of fixed and
intangible assets, as reported in our statements of cash flows, and
net interest expense, as reported in our statements of operations.
See Appendix F for a discussion of the use of FCF as a non-GAAP
financial measure and the reconciliation of FCF to GAAP net cash
provided by operating activities.
Three months ended
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
. .
Operating GBP 422.7 GBP 412.1 GBP 376.5 GBP 423.7 GBP 398.3
income
before
depreciation,
amortization,
goodwill
and
intangible
asset
impairments
and
restructuring
and
other
charges
(OCF)
Purchase (202.7 ) (185.6 ) (184.1 ) (177.4 ) (155.7 )
of
fixed
and
intangible
assets
Interest (100.0 ) (98.1 ) (105.3 ) (106.7 ) (107.1 )
expense
(net)
(1)
Free GBP 120.0 GBP 128.4 GBP 87.1 GBP 139.6 GBP 135.5
Cash
Flow
(FCF)
(1) For the three months ended June 30, 2012, interest expense
(net) is shown exclusive of the reversal of a contingent liability
of GBP5.5m which expired during the quarter and is included in
interest income and other, net, in the condensed consolidated
statements of comprehensive income.
E1)FIXED ASSET ADDITIONS (ACCRUAL BASIS)
(in GBP millions) (unaudited)
Virgin Media is not a member of NCTA (National Cable
Telecommunications Association) and is providing this information
solely for comparative purposes. See Appendix F 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 and intangible
assets.
Three months ended
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
NCTA Fixed
Asset
Additions
Customer GBP 84.3 GBP 88.9 GBP 96.2 GBP 108.3 GBP 50.8
premises
equipment
(CPE)
Scaleable 51.5 76.2 62.9 56.6 60.0
infrastructure
Commercial 38.5 36.9 41.7 32.9 40.7
Line 1.2 2.5 2.5 3.7 4.7
extensions
Upgrade/rebuild 8.6 9.7 7.3 7.9 6.3
Support 18.0 23.0 21.5 17.0 20.0
capital
Total NCTA 202.1 237.2 232.1 226.4 182.5
Fixed
Asset
Additions
Non NCTA 1.1 1.2 1.0 0.6 0.9
Fixed
Asset
Additions
Total 203.2 238.4 233.1 227.0 183.4
Fixed
Asset
Additions
(Accrual
Basis)
Fixed (24.7 ) (30.1 ) (23.5 ) (61.2 ) (0.7 )
assets
acquired
under
capital
leases
(1)
Changes
in
liabilities
related
to:
Fixed 24.2 (22.7 ) (25.5 ) 11.6 (27.0 )
Asset
Additions
(Accrual
Basis)
Total GBP 202.7 GBP 185.6 GBP 184.1 GBP 177.4 GBP 155.7
Purchase
of Fixed
and
Intangible
Assets
Comprising:
Purchase 202.7 185.6 184.1 177.4 155.7
of Fixed
Assets
Purchase - - - - -
of
Intangible
Assets
GBP 202.7 GBP 185.6 GBP 184.1 GBP 177.4 GBP 155.7
(1) CPE and Fixed assets acquired under capital leases for the
three months ended December 31, 2011 includes GBP55.5 million in
relation to TiVo set-top boxes installed prior to the fourth
quarter that were converted from operating leases to capital
leases. See Appendix E2) Capital Lease Activity.
E2)CAPITAL
LEASE
ACTIVITY
(in
GBP
millions)
(unaudited)
Three months ended
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
Opening GBP 241.0 GBP 260.2 GBP 258.0 GBP 213.3 GBP 244.6
capital
lease
liability
Additions 24.7 30.1 23.5 5.7 0.7
TiVo - - - 55.5 -
operating
lease
conversion
Principal (21.5 ) (28.8 ) (21.3 ) (16.5 ) (32.0 )
payments
on
capital
leases
Lease - (20.5 ) - - -
termination
(1)
Closing GBP 244.2 GBP 241.0 GBP 260.2 GBP 258.0 GBP 213.3
capital
lease
liability
Interest GBP 3.6 GBP 4.5 GBP 4.4 GBP 4.0 GBP 3.9
expense
on
capital
leases
(1) During the three months ended June 30, 2012, we terminated
certain capital leases for assets we longer need, resulting in a
non-cash reduction of our capital lease liability and derecognition
of the related assets.
F)USE OF NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS TO
GAAP
Virgin Media uses certain 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. These measures which are not calculated
and presented in accordance with U.S. generally accepted accounting
principles ("GAAP") are defined as follows:
-- OCF is operating income before depreciation, amortization,
goodwill and intangible asset impairments and restructuring and
other
charges.
-- Free Cash Flow (FCF) is OCF reduced by purchase of fixed and
intangible assets, as reported in our statements of cash flows,
and
net interest expense, as reported in our statements of
operations. Our
definition of FCF excludes the impact of working capital
fluctuations
and restructuring costs.
-- Fixed Asset Additions (Accrual Basis) is the purchase of fixed
and intangible assets as measured on an accrual basis, excluding
asset
retirement obligation related assets.
-- Net debt is long term debt inclusive of current portion, less
cash and cash equivalents.
We also use non-GAAP measures in the calculation of certain
ratios, such as Net debt/annualized OCF and Net debt/last twelve
months OCF on both an as reported and unhedged basis. Net
debt/annualized OCFis net debt divided by the last quarter of OCF
multiplied by four. Net debt/last twelve months OCF is net debt
divided by the last twelve months of OCF.
Our management considers OCF is an important indicator of our
operational strength and performance during the relevant periods.
This measure excludes the impact of costs and expenses that do not
directly affect our cash flows. Other charges, including
restructuring charges, are also excluded from this measure as
management believes they are not characteristic of our underlying
business operations. Our management considers FCF as a helpful
measure in assessing our liquidity and prospects for the future. We
believe FCF is useful to investors as a basis for comparing our
performance and coverage ratios and is an additional way of viewing
aspects of our operations that provide a more complete
understanding of factors and trends affecting our business. Our
management 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. Our management considers net debt is a
measure that is helpful for understanding our debt funding
obligations and that net debt/annualized OCF and net debt/last
twelve months OCF are helpful in understanding and analyzing our
level of indebtedness in relation to our capital structure and
earnings capabilities.
Some of the significant limitations associated with the use of
OCF as compared to operating income 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. FCF should not be understood to represent our
ability to fund discretionary amounts, as we have various
contractual obligations which are not deducted to arrive at FCF. We
compensate for this limitation by separately measuring and
forecasting working capital. The significant limitations associated
with the use of Fixed Asset Additions (Accrual Basis) as compared
to purchase of fixed and intangible assets is that Fixed Asset
Additions (Accrual Basis) excludes timing differences from payments
of liabilities, including finance leases, related to purchase of
fixed and intangible assets. We exclude these amounts from Fixed
Asset Additions (Accrual Basis) because timing differences from
payments of liabilities, including the use of finance leases, are
more related to the cash management treasury function than to our
management of fixed asset purchases for long term operational
performance and liquidity. The significant limitation associated
with the use of net debt as compared to long term debt, net of
current portion, is that net debt includes the current portion of
long term debt. This measure also assumes that all of the cash and
cash equivalents are available to service debt.
OCF is most directly comparable to the GAAP financial measure
operating income. FCF is most directly comparable to the GAAP
financial measure net cash provided by operating activities. Fixed
Asset Additions (Accrual Basis) is most directly comparable to the
GAAP financial measure purchase of fixed and intangible assets, as
reported in our statements of cash flows. Since these measures are
not calculated in accordance with GAAP, they should not be
considered as substitutes for operating income, net cash provided
by operating activities and purchase of fixed and intangible
assets, respectively. Net debt is most directly comparable to the
GAAP financial measure long term debt (net of current portion).
Because non-GAAP financial measures are not standardized, it may
not be possible to compare our OCF, FCF, Fixed Asset Additions
(Accrual Basis) or 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 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.
The following tables present the reconciliations of OCF, FCF and
Fixed Asset Additions (Accrual Basis) and Net debt to their nearest
measure of financial performance in accordance with GAAP, and the
calculations of Net debt/Annualized OCF and Net debt/Last Twelve
Months OCF.
Reconciliations
of
operating
income
before
depreciation,
amortization,
goodwill
and
intangible
asset
impairments
and
restructuring
and other
charges
(OCF)
to GAAP
operating
income
(in
GBP
millions)
(unaudited)
Last twelve months ended Three months ended
September 30, September 30, June 30, March 31, December 31,
2012 2012 2012 2012 2011
Operating GBP 1,635.0 GBP 422.7 GBP 412.1 GBP 376.5 GBP 423.7
income
before
depreciation,
amortization,
goodwill
and
intangible
asset
impairments
and
restructuring
and other
charges
(OCF)
Reconciling
items
Depreciation (973.4 ) (243.5 ) (233.0 ) (240.2 ) (256.7 )
and
amortization
Restructuring (4.8 ) 0.8 0.5 (5.4 ) (0.7 )
and
other
charges
Operating GBP 656.8 GBP 180.0 GBP 179.6 GBP 130.9 GBP 166.3
income
Last twelve months ended Three months ended
September 30, September 30, June 30, March 31, December 31,
2011 2011 2011 2011 2010
Operating GBP 1,570.1 GBP 398.3 GBP 392.1 GBP 376.1 GBP 403.6
income
before
depreciation,
amortization,
goodwill
and
intangible
asset
impairments
and
restructuring
and other
charges
(OCF)
Reconciling
items
Depreciation (1,075.9 ) (263.7 ) (258.3 ) (262.9 ) (291.0 )
and
amortization
Restructuring (49.3 ) (6.2 ) 1.1 (2.6 ) (41.6 )
and
other
charges
Operating GBP 444.9 GBP 128.4 GBP 134.9 GBP 110.6 GBP 71.0
income
Reconciliations of Free Cash Flow (FCF) to GAAP
net cash provided by operating activities
(in GBP millions) (unaudited)
Three months ended
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
Free Cash Flow (FCF) GBP 120.0 GBP 128.4 GBP 87.1 GBP 139.6 GBP 135.5
Reconciling items (see Note below):
Purchase of fixed and 202.7 185.6 184.1 177.4 155.7
intangible assets
Changes in operating assets 9.4 (71.7 ) (25.3 ) 5.2 2.8
and liabilities
Non-cash compensation 3.4 6.1 7.6 5.3 2.9
Non-cash interest 32.0 (20.3 ) 17.9 (3.6 ) 19.7
Share of net income of affiliates - - - - 4.5
Realized foreign exchange (0.1 ) (1.4 ) (5.1 ) (2.6 ) 0.2
(losses) gains
Realized losses on derivatives (4.4 ) (3.0 ) (2.0 ) (27.0 ) (5.9 )
Restructuring and other charges 0.8 0.5 (5.4 ) (0.7 ) (6.2 )
Income taxes 0.7 1.3 1.3 (0.9 ) 1.4
Debt redemption premium cost - - (48.1 ) - (15.5 )
Other (1) - 5.5 - 1.7 1.9
Net cash provided by GBP 364.5 GBP 231.0 GBP 212.1 GBP 294.4 GBP 297.0
operating activities
(1) For the three months ended June 30, 2012, the reversal of a
contingent liability of GBP5.5m is included in other, which is
included within Interest income and other, net, in the condensed
consolidated statement of comprehensive income.
Reconciliation
of Fixed
Asset
Additions
(Accrual
Basis)
to GAAP
purchase
of fixed
and
intangible
assets
(in
GBP
millions)
(unaudited)
Three months ended
September 30, June 30, March 31, December 31, September 30,
2012 2012 2012 2011 2011
Fixed GBP 203.2 GBP 238.4 GBP 233.1 GBP 227.0 GBP 183.4
Asset
Additions
(Accrual
Basis)
Fixed (24.7 ) (30.1 ) (23.5 ) (61.2 ) (0.7 )
assets
acquired
under
capital
leases
Changes 24.2 (22.7 ) (25.5 ) 11.6 (27.0 )
in
liabilities
related
to fixed
asset
additions
Total
Purchase
of Fixed
and
Intangible GBP 202.7 GBP 185.6 GBP 184.1 GBP 177.4 GBP 155.7
Assets
Comprising:
Purchase 202.7 185.6 184.1 177.4 155.7
of fixed
assets
Purchase - - - - -
of
intangible
assets
GBP 202.7 GBP 185.6 GBP 184.1 GBP 177.4 GBP 155.7
Reconciliation of gross debt (including current portion) to net debt, and calculations of net debt (as reported and hedged) to annualized and last twelve months OCF
(in GBP millions, except net debt / annualized OCF, and net debt / last twelve months OCF) (unaudited)
As reported At hedged rate As reported At hedged rate
September 30, 2012 September 30, 2012 (1) September 30, 2011 September 30, 2011 (1)
Bank Debt
Sterling denominated GBP 750.0 GBP 750.0 GBP 750.0 GBP 750.0
Sterling denominated - 0.0 0.0 50.0 50.0
revolving facility (utilised portion)
Senior Notes
$850 / $1,350m senior notes due 2016 (2) 515.6 526.7 845.3 835.9
EUR180m senior notes due 2016 (3) 139.2 158.6 150.6 158.6
$600m senior notes due 2019 (4) 366.3 362.9 379.1 387.9
GBP350m senior notes due 2019 (5) 345.5 350.0 345.1 350.0
$500m senior notes due 2022 (6) 309.3 313.6 - -
GBP875m senior secured notes due 2018 (7) 865.5 875.0 864.1 875.0
$1,000m senior secured notes due 2018 (8) 611.9 615.6 632.8 615.7
$500m senior secured notes due 2021 (9) 353.0 308.9 347.6 308.9
GBP650m senior secured notes due 2021 (10) 751.2 650.0 705.6 650.0
Convertible Notes
$1,000 convertible senior notes due 2016 (11) 540.8 540.8 545.5 545.5
Capital Leases / Other 244.3 244.3 213.7 213.7
Gross debt (including current portion) (12) 5,792.6 5,696.4 5,829.4 5,741.2
Cash and cash equivalents (113.4 ) (113.4 ) (438.3 ) (438.3 )
Net debt GBP 5,679.2 GBP 5,583.0 GBP 5,391.1 GBP 5,302.9
Annualized OCF (quarterly OCF x4) (13) GBP 1,690.8 GBP 1,690.8 GBP 1,593.2 GBP 1,593.2
Net debt / annualized OCF 3.4 3.3 3.4 3.3
Last twelve months OCF (13) GBP 1,635.0 GBP 1,635.0 GBP 1,570.1 GBP 1,570.1
Net debt / last twelve months OCF 3.5 3.4 3.4 3.4
(1) Certain of the derivatives described below do not qualify in
hedge accounting relationships under US GAAP. The hedged rate is
defined as the amount in GBP we would repay at maturity relating to
debt obligations, net of any payments or receipts on related
derivative instruments.
(2) Face value of $850m and $1,350m hedged at $1.6137 and
$1.6149 to August 2016, at September 30, 2012 and September 30,
2011, respectively. $500m were repurchased on March 28, 2012.
(3) Face value of EUR180m hedged to August 2016 at
EUR1.1351.
(4) Face value of $600m hedged at $1.6535 and $1.5468 to October
2019, at September 30, 2012 and September 30, 2011,
respectively.
(5) Face value of GBP350m.
(6) Face value of $500m hedged to February 2022 at $1.5945.
(7) Face value GBP875m.
(8) Face value of $1,000m hedged to January 2018 at $1.6242.
(9) The carrying value of the $500m 5.25% senior secured notes
due 2021 has been increased by GBP45.5m and GBP45.7m as at
September 30, 2012 and September 30, 2011 respectively, as a result
of the application of fair value hedge accounting. Face value of
$500m hedged to January 2021 at $1.6185.
(10) The carrying value of the GBP650m 5.50% senior secured
notes due 2021 has been increased by GBP106.3m and GBP77.9m as at
September 30, 2012 and September 30, 2011 respectively, as a result
of the application of fair value hedge accounting.
(11) Face value of $1,000m. Principal unhedged. Shown at GAAP
net carrying value (principal after the unamortized discount of
equity component).
(12) The carrying value of gross debt is comprised of long term
debt, net of current portion and the current portion of long term
debt.
(13) See Appendix F for a reconciliation of operating income
before depreciation, amortization, goodwill and intangible asset
impairments and restructuring and other charges (OCF) to GAAP
operating income for the three months and last twelve months ended
September 30, 2012 and 2011.
Virgin Media Inc.Investor Relations:Richard Williams, +44
(0)1256 753037richard.williams@virginmedia.co.ukorVani Bassi, +44
(0)1256 752347vani.bassi@virginmedia.co.ukorPhil Rudman, +44
(0)1256 752677phil.rudman@virginmedia.co.ukorMedia:Gareth Mead, +44
(0) 20 7909 3289gareth.mead@virginmedia.co.ukorTavistockMatt
Ridsdale, +44 (0) 20 7920 3150mridsdale@tavistock.co.ukorLulu
Bridges, +44 (0) 20 7920 3150lbridges@tavistock.co.uk
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