Virgin Media 2006 Annual Report Download - page 40

We have incurred and will continue to incur significant costs in connection with the merger and acquisition.
We have incurred a number of costs associated with completing the merger with Telewest and acquisition of Virgin Mobile,
combining the operations of the three companies and achieving desired synergies. These costs have been and will be substantial. We
are in the process of executing integration plans to deliver the planned synergies. Additional unanticipated costs may be incurred in
the integration of the businesses. Although we expect that the elimination of duplicate costs, as well as the realization of other
efficiencies related to the integration of our businesses, will offset the incremental transaction and merger−related costs over time, this
net benefit may not be achieved in the near term, or at all.
We could suffer losses due to asset impairment charges for goodwill and long−lived intangible assets.
In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” which we
refer to in this annual report as “SFAS 142,” goodwill and indefinite−lived intangible assets are subject to annual review for
impairment (or more frequently should indications of impairment arise). Other intangible assets are also reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. On December 31,
2006, we had goodwill and intangible assets of £3,637.0 million. A downward revision in the fair value of a reporting unit or
intangible assets could result in an impairment and a non−cash charge would be required. Any significant shortfall, now or in the
future, could lead to a downward revision in the fair value of such assets. Any such charge could have a material effect on our reported
net earnings.
Risks Relating to Our Financial Indebtedness and Structure
We may not be able to fund our debt service obligations through operating cash flow in the future.
It is possible that we may not achieve or sustain sufficient cash flow in the future for the payment of interest or principal on our
indebtedness when due. If our operating cash flow is not sufficient to meet our debt payment obligations, we may be forced to raise
cash or reduce expenses by doing one or more of the following:
• increasing, to the extent permitted, the amount of borrowings under new credit facilities;
• restructuring or refinancing our indebtedness prior to maturity, and/or on unfavorable terms;
• selling or disposing of some of our assets, possibly on unfavorable terms; or
• foregoing business opportunities, including the introduction of new products and services, acquisitions and joint ventures.
We cannot be sure that any of, or a combination of, the above actions would be sufficient to fund our debt service obligations.
Our current leverage is substantial, which may have an 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 had consolidated total long−term debt of £6,159.1 million as of December 31, 2006. This high degree of leverage could have
important consequences, including the following:
• a substantial portion of the cash flow from operations will have to be dedicated to the payment of interest and principal on
existing indebtedness, thereby reducing the funds available for other purposes;
• the ability to obtain additional financing in the future for working capital, capital expenditures, product development,
acquisitions or general corporate purposes may be impaired;
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007