Virgin Media 2007 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... customer experience including installation, call handling, billing and provisioning. In our Content division, our television channels have continued to grow ratings and grow market share. In October, we launched a new channel, Virgin 1, on cable, satellite and free-to-air platforms. Our Business...

  • Page 3
    ... New York (Address of principal executive office) (212) 906-8440 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 per share Series A Warrants to purchase shares of Common Stock NASDAQ National Market NASDAQ...

  • Page 4
    ... ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions and Director Independence ...Principal Accountant Fees and Services ... ... 83 83 83 83 83 Exhibits and Financial Statement...

  • Page 5
    ...This annual report on Form 10-K (excepting financial statements responsive to Part IV, Item 15) covers both Virgin Media Inc., or Virgin Media, and Virgin Media Investment Holdings Limited, or VMIH, an English company with an address at 160 Great Portland Street, London W1W 5QA, United Kingdom, that...

  • Page 6
    ... reporting currency of our consolidated financial statements is U.K. pounds sterling. Note Concerning Historical Structure of the Company Virgin Media Inc. is a Delaware corporation and is publicly traded on the NASDAQ National Market in the United States. Our historical structure is as follows: NTL...

  • Page 7
    ... and fixed line telephone. The total acquisition price was £3.5 billion, including £2.3 billion in cash, common stock valued at £1.1 billion and stock options and transaction costs. On July 4, 2006, we added a mobile phone offering by acquiring 100% of the outstanding shares and options of Virgin...

  • Page 8
    ...other intermediate companies. Virgin Media Inc. (1) Intermediate Holding Companies, including Virgin Media Holdings Inc. Virgin Media Finance PLC (2) Virgin Media Investment Holdings Limited (3) Virgin Media Limited (4) Virgin Mobile Holdings (UK) Limited (5) Telewest UK Limited Subsidiaries...

  • Page 9
    ...play'' offering of television, broadband, fixed line telephone and mobile telephone services in the U.K. together with one of the most advanced TV on demand services available in the U.K. market. By customer numbers, we are the U.K.'s largest residential broadband and mobile virtual network operator...

  • Page 10
    ... television, internet (broadband and dial-up) and fixed line telephone services under the Virgin Media brand to residential customers in the U.K. Our services are distributed principally via our wholly-owned, cabled, local access communications network and are available to an addressable market of...

  • Page 11
    ... Media began offering the U.K.'s first ''quad-play'' of television, broadband, fixed line telephone and mobile telephone services to residential customers. We expect to drive both mobile and cable penetration through the two customer bases by applying our past experience of cross selling products...

  • Page 12
    ... premium TV shows and music videos, all included within the price of their monthly subscription. Customers on our other TV packages can also receive the SVOD package on payment of a monthly subscription charge. In 2007, we launched an innovative new kind of television channel called ''Virgin Central...

  • Page 13
    ...In addition to a core line rental fee, we offer Size M, L and XL variants of our fixed line telephone service as alternatives to straight usage-based billing. These packages include ''Talk Plans'' that enable customers to make unlimited local and national calls for a fixed monthly fee in addition to...

  • Page 14
    ... needs of the U.K. private sector, from small businesses to large, national corporations. Centralized telephone account managers serve small organizations (with approximately 5 to 99 employees), while regionally-located account, service and project management teams, supported by pre-sales technical...

  • Page 15
    ...:Telewest Business offers a wide portfolio of voice and data services, from analog telephony to managed data networks and applications. Our product strategy is focused on delivering managed services, such as customer contact solutions, national Ethernet and internet protocol virtual private networks...

  • Page 16
    ... is centered around five key strengths: a strong brand; a capital-light business model; a differentiated approach to the market; award-winning customer service; and a focused management team. Increasingly, the opportunity to sell mobile services into the Virgin Media cable customer base will be...

  • Page 17
    ... Media TV's advertising sales department, IDS (Interactive Digital Sales Limited). Most channels also generate distribution revenue based on either the number of customers subscribing to programming packages carried by the relevant platform operators or a fixed monthly fee. Virgin Media TV and UKTV...

  • Page 18
    ... can be replaced with a direct connection at a later date if traffic volumes justify doing so. Nationally, approximately 94% of the homes passed by our cable network can receive all of our broadband, digital television and fixed line telephone services. We cannot however currently provide all three...

  • Page 19
    ... mobile calls outside the home. BT also acquired two small internet service providers, Plusnet plc and Brightview Group Limited. • British Sky Broadcasting Group plc. BSkyB, a long-time competitor in the pay television market, heavily markets triple play bundles (broadband, fixed line telephone...

  • Page 20
    ... trade on BSkyB's rate card terms and pricing for their premium movie and sports channels. These terms can be changed by BSkyB on 45 days' notice. Additionally, BSkyB has refused to supply us certain enhancements to these services, such as High Definition TV content, some sports programming offered...

  • Page 21
    ... look to gain the customer scale to make a return on their investment, there is the longer term threat of new access technology. 3G mobile technology, other wireless technologies such as Wi-Fi and Wi-Max, broadband power line (which utilizes existing electricity networks to deliver high-speed 19

  • Page 22
    ... price pressure in fixed line telephone services. Through our acquisition of Virgin Mobile in July 2006, we now provide mobile telephony services to approximately 4.5 million customers. There is also competition from companies offering VoIP services using the customer's existing broadband connection...

  • Page 23
    ... in the pay TV market to substantially reduce carriage subscription payments made to Virgin Media. Virgin Media TV competes for program rights with broadcasters transmitting similar channels. As a result of this and competition for a limited number of well-known program rights, the price of these...

  • Page 24
    ...The wholesale rate cap should result in a reduction in the wholesale cost per minute incurred by Virgin Mobile when its customers roam in the EU, although the requirement that the wholesale price cap be based on a 12 month average charge will delay the flow-through to Virgin Mobile of the benefit of...

  • Page 25
    ...end-user can access the emergency services and that accurate customer location data is made available to the emergency services • a requirement to offer outbound number portability to customers wishing to switch to another network provider and to support inbound number portability where we acquire...

  • Page 26
    ... independent business unit in January 2006. Ofcom stated that these changes had benefited competition and end consumers. In addition, Ofcom now wants to ensure that Openreach has clear incentives to improve its performance levels to deliver better products and service to its own retail business and...

  • Page 27
    ... February 2008. A statement and action plan is expected in summer 2008. This will remove certain regulatory obligations on BT to provide wholesale services currently used by operators to provide broadband access in the most competitive areas of the U.K. Until the timing for these changes is proposed...

  • Page 28
    ...networks and services, we are still required to hold individual licenses under the Broadcasting Acts 1990 and 1996 for any television channels which we own or operate and for the provision of certain other services (e.g. electronic program guides) on our cable TV platform. We therefore hold a number...

  • Page 29
    ... powers to impose structural and behavioral remedies or both. Pay TV Market Investigation In January 2007, we made a joint submission to Ofcom with BT, Setanta Sport Holdings Limited (Setanta) and Top Up TV Europe Limited (Top Up) indicating that there are a number of features of the U.K. Pay TV...

  • Page 30
    ... for the TV, broadband internet, telephone and mobile phone services we provide to our residential customers, as well as the acquisition and branding of sports, movies and other premium television content and the sale of certain communications equipment, such as set top boxes and cable modems. For...

  • Page 31
    ... to offer the ''triple-play'' of digital television, fixed line telephone and broadband services, or ''quad-play'' bundles including mobile telephone services. In the digital television market, we compete primarily with BSkyB in providing digital pay television services. Competition increased as...

  • Page 32
    ... asymmetric digital subscriber lines, or ADSL+2, to deliver higher speeds. Local loop unbundling may decrease costs for new entrants and existing BT wholesale customers, leading to increased price competition. Our fixed line telephony business competes with fixed line operators such as BT, telephone...

  • Page 33
    ...ability to: • modify network infrastructure for new products and services, including faster broadband speeds; • install and maintain cable and equipment; and • finance maintenance and upgrades. Our covenants in our senior credit facility effectively restrict our use of cash. If these covenants...

  • Page 34
    ... the U.K. We buy BSkyB wholesale premium content on the basis of BSkyB's rate card terms and pricing, which can be changed on 45 days' notice by BSkyB, and not under a long term supply contract. Our agreement with BSkyB to purchase its basic programming channels expired on February 28, 2007, and we...

  • Page 35
    ...offerings becoming less competitive and render our existing products and services obsolete. We may not be able to develop new products and services at the same rate as competitors or keep up with trends in the technology market as well as our competitors. The cost of implementing emerging and future...

  • Page 36
    ... services, ownership of media companies, programming, local loop unbundling, data protection, the provision of open access by U.K. cable operators to other telecommunications operators, the adoption of uniform digital technology standards or the bundling of services. Regulatory changes relating...

  • Page 37
    ...relies on T-Mobile's network to carry its communications traffic. Virgin Mobile relies on its long-term agreement with T-Mobile for voice, non-voice and other telecommunications services we provide our mobile customers, as well as for certain ancillary services such as pre-pay account management. If...

  • Page 38
    ... arise, this director may not be disinterested. Disruptions in Virgin Media TV's or sit-up's satellite transmissions could materially adversely affect their respective operations. Virgin Media TV and sit-up currently broadcast their digital programming content with leased satellite transponders...

  • Page 39
    ... a material effect on our reported net earnings. We have limited capacity on our cable platform. Our analog television, digital television, broadband internet and video on demand services are transmitted through our core and access networks, which have limited capacity. We have plans in place to add...

  • Page 40
    ... 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 £6.0 billion as of December 31, 2007. This high degree of...

  • Page 41
    ... competitors' earnings releases, announcements of technological innovations, changes in financial estimates by securities analysts, trading volume, rumors of private equity interest in our company, market conditions in the industry and the general state of the securities markets and the market for...

  • Page 42
    ...to acquire these securities or our common stock. In any case, the result would ultimately be dilutive to our common stock by increasing the number of shares outstanding. We cannot predict the effect this dilution may have on the price of our common stock. We have not historically paid cash dividends...

  • Page 43
    ...head-ends, hubs, switching centers, points of presence, repeater nodes and radio sites and we also have network equipment in over 580 significant customer/third party sites. We also own or lease warehouses and other non-operational properties, as well as operating various cable television, telephone...

  • Page 44
    ...'s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities (a) Market Information Our shares are traded on the NASDAQ National Market under the symbol ''VMED''. The following table sets forth the reported high and low price per share of our common stock on the NASDAQ...

  • Page 45
    Future payments of regular quarterly dividends by us are at the discretion of the board of directors and will be subject to our future needs and uses of cash, which could include investments in operations, the repayment of debt, and share repurchase programs. In addition, the terms of our and our ...

  • Page 46
    .... The new holding company, Telewest Global, Inc., changed its name to NTL Incorporated on March 3, 2006. From March 6, 2006, share prices reflect the market price for that company, which was renamed Virgin Media Inc. on February 6, 2007. (b) Not applicable. (c) Purchases of Equity Securities by the...

  • Page 47
    ... 2007 As of December 31, 2006 2005 2004 (in millions, except per share data) 2003 Balance Sheet Data: Cash, cash equivalents and marketable securities ...Working capital ...Fixed assets ...Total assets ...Long term debt ...Shareholders' equity ...Dividends declared per common share (in U.S. dollars...

  • Page 48
    ...'' offering of television, broadband, fixed line telephone and mobile telephone services in the U.K. together with one of the most advanced TV on demand services available in the U.K. market. By number of customers, we are the U.K.'s largest residential broadband and mobile virtual network operator...

  • Page 49
    ...and other employee-related costs; • television programming costs; • interconnect costs paid to carriers relating to call termination services; • facility-related costs, such as rent, utilities and rates; • marketing and selling costs; • costs of maintaining our cable network infrastructure...

  • Page 50
    ... as a reverse acquisition of Telewest using the purchase method. In connection with this transaction, Telewest changed its name to NTL Incorporated, and has since changed its name to Virgin Media Inc. The total purchase price was £3.5 billion, including cash of £2.3 billion, common stock valued at...

  • Page 51
    ...potential revenue from our residential cable customers on our network. We believe that our ''triple-play'' cable offering of television, broadband and fixed line telephone services is attractive to our existing customer base and generally allows us to increase our Cable ARPU by facilitating the sale...

  • Page 52
    ...majority of revenue for Virgin Media TV is from advertisers. Consequently, Virgin Media TV's revenue is directly affected by changes in the total spend on television advertising in the U.K., the viewing levels for its channels and the proportion of the U.K. advertising market represented by IDS. 50

  • Page 53
    ... our cash flows and earnings caused by changes in underlying rates. Integration. We continue to integrate our legacy NTL and Telewest cable businesses and Virgin Mobile. This involves the incurrence of substantial operating and capital expenditures and, in some cases, involves the outsourcing of key...

  • Page 54
    ... the accounting for these acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed. In particular, liabilities in relation to tax exposures or liabilities to restructure the pre-acquisition businesses of NTL, Telewest and Virgin Mobile...

  • Page 55
    ... to sublessees, amounts of lease termination costs, and discount rates. Income Taxes Our provision for income taxes is based on our current period income, changes in deferred income tax assets and liabilities, income tax rates, and tax planning opportunities available in the jurisdictions in which...

  • Page 56
    ... of Telewest and the new Mobile segment subsequent to the acquisition of Virgin Mobile, since these segments have lower gross margins than our Cable segment. Selling, general and administrative expenses. For the year ended December 31, 2007, selling, general and administrative expenses increased by...

  • Page 57
    ... year ended December 31, 2007, depreciation expense increased to £924.9 million from £799.1 million for the same period in 2006. This increase was primarily attributable to the reverse acquisition of Telewest and the acquisition of Virgin Mobile, together with purchases of new fixed assets during...

  • Page 58
    ...the reverse acquisition of Telewest and the acquisition of Virgin Mobile, and changes in the timing of interest payments. Loss on extinguishment of debt For the year ended December 31, 2007, loss on extinguishment of debt was £3.2 million, and related to the write off of deferred financing costs as...

  • Page 59
    ... data, for each segment can be found in note 19 to Virgin Media's consolidated financial statements. The segment results for the year ended December 31, 2007 included in our consolidated financial statements are reported on an actual basis and include the results of Telewest and Virgin Mobile...

  • Page 60
    ... the year ended December 31, 2007, revenue from residential customers decreased by 3.2% to £2,486.2 million from pro forma revenue of £2,568.6 million for the year ended December 31, 2006. This decrease was primarily due to a decline in the number of fixed line telephone customers, reductions in...

  • Page 61
    ... acquisition of Telewest, including improvements in bad debt expense, lower company bonus scheme payments and a reduction in share based compensation expense were partially offset by marketing and advertising costs incurred in connection with the rebrand to Virgin Media in the first quarter of 2007...

  • Page 62
    ... for residential cable customers of Virgin Media, excluding customers off our network and Virgin Mobile customers, for the three months ended December 31, 2007 as well as the four prior quarters, are set forth in the table below. The total number of cable customers directly connected to our network...

  • Page 63
    ... 104.6% (1) Equipment revenue is stated net of discounts earned through service usage. For the year ended December 31, 2007 revenue increased to £597.6 million from £292.1 million for the year ended December 31, 2006. The increase was primarily attributable to the acquisition of Virgin Mobile in...

  • Page 64
    ... channels, such as cross-selling with our Cable segment products and other direct channels with lower subscriber acquisition costs. Summary Mobile Statistics Selected statistics for Virgin Mobile are set forth in the table below. In the year ended December 31, 2007, the number of mobile customers...

  • Page 65
    ... based on the BBC's program library and other acquired programming and which are carried on Virgin Media's cable platform and also satellite. Some channels are also available on Freeview. UKTV is the second largest pay television operator in the U.K. by viewing share. We account for our interest in...

  • Page 66
    ... the acquisition of Virgin Mobile and the inclusion of its revenues from July 4, 2006. Cable ARPU increased steadily through the year, reflecting our drive to encourage ''triple-play'' bundling and a focus on better quality customers. Our focus on acquiring new bundled customers and on cross-selling...

  • Page 67
    ... from the reverse acquisition of Telewest (in millions): Involuntary Employee Termination and Related Costs Acquisition Restructuring Accruals Lease Exit Costs Total Balance, January 1, 2006 ...Accruals resulting from business acquisition Charged to expense ...Utilized ... ...recognized under...

  • Page 68
    ...on the forward rate contracts and collars taken out in December 2005 in connection with £1.8 billion of the expected cash purchase price of Telewest offset by losses on the revaluation of foreign currency denominated long term debt and related forward contracts. Income tax expense (benefit) For the...

  • Page 69
    ... of the products and services, as well as year-to-date financial data, for each segment can be found in note 19 to Virgin Media's consolidated financial statements. The segment results for the year ended December 31, 2006 included in our consolidated financial statements were reported on an...

  • Page 70
    ... price rises partially offset by lower telephony usage. Cable ARPU increased steadily through the year, reflecting our drive to encourage triple-play bundling and a focus on better quality customers. Our focus on acquiring new bundled customers and on cross-selling to existing customers resulted...

  • Page 71
    ... increased share of the TV advertising revenue market as a result of the cumulative effect of the relative strength of the viewing performance of the Virgin Media TV channels, and increased subscription revenue arising from contractual price increases. Content segment OCF For the year ended December...

  • Page 72
    ... This increase resulted from the higher levels of borrowings and repayment of existing facilities following the reverse acquisition of Telewest and the acquisition of Virgin Mobile. For the year ended December 31, 2007, cash used in investing activities was £509.8 million compared with cash used in...

  • Page 73
    ... amounts of capital required to connect customers to our network, expand and upgrade our network, offer new services and integrate our billing systems and customer databases. We expect that our cash on hand, together with cash from operations and undrawn credit facility, will be sufficient for...

  • Page 74
    ..., to pay increased levels of dividends on our common stock. On May 15, 2007, we made a mandatory prepayment of £73.6 million under our senior credit facility as a result of cash flow generated in 2006. On December 17, 2007, we made a voluntary prepayment of £200 million utilizing available cash...

  • Page 75
    ... 15, 2007. The senior notes due 2016 mature on August 15, 2016 and are guaranteed by Virgin Media, Virgin Media Group LLC, VMIH and certain other intermediate holding companies of Virgin Media. The U.S. dollar denominated 8.75% senior notes due 2014 were issued by Virgin Media Finance PLC on April...

  • Page 76
    ... increased competitive pressure in the telephony and mobile businesses. The Company's ratings were unchanged. On November 15, 2007, Standard & Poor's raised the outlook for Virgin Media to ''Stable'', and affirmed the Company's ratings. Cash Dividends We commenced the payment of regular quarterly...

  • Page 77
    ... value of each bond. Derivative Instruments and Hedging Activities We have a number of derivative instruments with a number of counterparties to manage our exposures to changes in interest rates and foreign currency exchange rates. We account for these instruments as hedges under FASB Statement...

  • Page 78
    ... at various fixed and floating rates. We have designated some of the cross-currency interest rate swaps as cash flow hedges under FAS 133, because they hedge against changes in the pound sterling value of the interest payments on the senior notes that result from changes in the U.S. dollar and euro...

  • Page 79
    ...to Virgin Media's consolidated financial statements-Derivative Financial Instruments and Hedging Activities, and Management's Discussion and Analysis of Financial Condition and Results of Operations-Derivative Instruments and Hedging Activities. The fair market value of long term fixed interest rate...

  • Page 80
    ...changes in interest rates and foreign currency exchange rates (in millions). Year ended December 31, 2009 2010 2011 Fair Value December 31, 2007 2008 Long term debt (including current portion) U.S. Dollars Fixed rate ...Average interest rate ...Average forward exchange rate ...Pounds Sterling Fixed...

  • Page 81
    ...changes in interest rates and foreign currency exchange rates (in millions). Year ended December 31, 2008 2009 2010 Fair Value December 31, 2006 2007 Long term debt (including current portion) U.S. Dollars Fixed rate ...Average interest rate ...Average forward exchange rate ...Pounds Sterling Fixed...

  • Page 82
    ...and communicated to the registrant's management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. (b) Management's Annual Report on Internal Control Over Financial Reporting for Virgin Media Inc. Our management...

  • Page 83
    ... as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Virgin Media Investment Holdings Limited's financial statements for...

  • Page 84
    ... Oversight Board (United States), the consolidated balance sheets of Virgin Media Inc. as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2007, and our report dated...

  • Page 85
    .... Item 13. Certain Relationships and Related Transactions and Director Independence The information required by this Item is incorporated by reference to our Proxy Statement for the 2008 Annual Meeting of Stockholders. Item 14. Principal Accountant Fees and Services The information required by...

  • Page 86
    (This page has been left blank intentionally.)

  • Page 87
    ... financial statements of Virgin Media Investment Holdings Limited and Subsidiaries are included in Item 8: Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets-December 31, 2007 and 2006 ...Consolidated Statements of Operations-Years ended December 31, 2007...

  • Page 88
    ... PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders Virgin Media Inc. We have audited the accompanying consolidated balance sheets of Virgin Media Inc. and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders' equity, and cash...

  • Page 89
    ... MEDIA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except par value) December 31, 2007 2006 Assets Current assets Cash and cash equivalents ...Restricted cash ...Accounts receivable-trade, less allowance (2007) and £51.8 (2006) ...Inventory ...Prepaid expenses and other current...

  • Page 90
    VIRGIN MEDIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) Year ended December 31, 2007 2006 2005 Revenue ...Costs and expenses Operating costs (exclusive of depreciation shown separately below) Selling, general and administrative expenses ...Other...

  • Page 91
    ... of investments ...Acquisitions, net of cash acquired ...(Increase) decrease in restricted cash ...Proceeds from the sale of Broadcast operations, net Proceeds from the sale of Ireland operations, net . . Financing activities New borrowings, net of financing fees ...Proceeds from employee stock...

  • Page 92
    ... 2005 . . Exercise of stock options and tax effect ...Cancellation of treasury stock . Issuance of stock for acquisition of Telewest ...Issuance of stock for acquisition of Virgin Mobile . Stock compensation costs ...Dividends paid ...Comprehensive loss: Net loss for the year ended December 31, 2006...

  • Page 93
    ...as Virgin Media Holdings Inc. (formerly known as NTL Holdings Inc.). For the period since March 3, 2006 these financial statements reflect the reverse acquisition of Telewest. On July 4, 2006, we acquired 100% of the outstanding shares and options of Virgin Mobile Holdings (UK) plc, or Virgin Mobile...

  • Page 94
    ...'' offering of television, broadband, fixed line telephone and mobile telephone services in the U.K. together with one of the most advanced TV on demand services available in the U.K. market. By number of customers, we are the U.K.'s largest residential broadband and mobile virtual network operator...

  • Page 95
    ... Media Holdings only. The results of operations and cash flows for Telewest, the acquired company for accounting purposes, are included in the consolidated financial statements from March 3, 2006, the date on which the merger was completed. The results of operations and cashflows for Virgin Mobile...

  • Page 96
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Significant Accounting Policies (Continued) earnings and losses of the companies in which we have an investment and such investments are generally reflected in the consolidated balance sheet at historical ...

  • Page 97
    ... in connection with the design and installation of our operating network equipment and facilities. Costs associated with initial customer installations, additions of network equipment necessary to enable enhanced services, acquisition of additional fixed assets and replacement of existing fixed...

  • Page 98
    ... FAS 142 if market values decline and we do not achieve expected cash flow growth rates. Intangible assets include trademark license agreements and customer lists. Trademark license agreements represent the portion of purchase price allocated to agreements to license trademarks acquired in business...

  • Page 99
    ... utilized, projected future operating results of the asset group, discount rate and long term growth rate. As of December 31, 2007, there were no indicators of impairment that suggest the carrying amounts of our long-lived assets are not recoverable. Deferred Financing Costs Deferred financing costs...

  • Page 100
    ... Reporting by Cable Television Companies, in relation to connection and activation fees for cable television, as well as fixed line telephone and internet services, on the basis that we market and maintain a unified fiber network through which we provide all of these services. Installation revenues...

  • Page 101
    ... FINANCIAL STATEMENTS (Continued) 2. Significant Accounting Policies (Continued) Stock-Based Compensation We have a number of stock-based employee compensation plans, as described more fully in note 12. Prior to January 1, 2006 we accounted for these plans using the fair value recognition...

  • Page 102
    ... currency payments in relation to operating costs incurred in the normal course of business. Our objective in managing exposure to fluctuations in interest rates and foreign currency exchange rates is to decrease the volatility of our earnings and cash flows caused by changes in underlying rates. To...

  • Page 103
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Significant Accounting Policies (Continued) Software Development Costs We capitalize costs related to computer software developed or obtained for internal use in accordance with SOP 98-1, Accounting for the...

  • Page 104
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Recent Accounting Pronouncements In September 2006, the FASB issued Statement No. 157, Fair Value Measurements, or FAS 157. FAS 157 provides guidance for using fair value to measure assets and liabilities. ...

  • Page 105
    ...The average market price per share of common stock utilized in determining the value of new common stock issued of £15.07 ($26.59) was based on an average of the closing prices of our common stock divided by the Telewest acquisition conversion ratio of 2.5 times for a range of trading days (January...

  • Page 106
    ... and direct transaction costs of £25.1 million. The average market price per share of common stock utilized in determining the value of the new common stock issued of £13.00 ($22.90) was based on an average of the closing prices of Telewest common stock for a range of trading days (September 29...

  • Page 107
    ... (in millions): Acquisition Date Cash and cash equivalents, including restricted cash Accounts receivable ...Prepaid expenses and other current assets ...Fixed assets ...Inventory ...Investments in and loans to affiliates ...Amortizable intangible assets: Customer lists ...Trade names ...Licenses...

  • Page 108
    ... or financial condition of Virgin Media. Year ended December 31, 2006 2005 2007 Pro Forma Pro Forma Actual (unaudited) (unaudited) Revenue ...Operating income ...Loss from continuing operations before income taxes, minority interest and cumulative effect of changes in accounting principle . Loss...

  • Page 109
    ...FINANCIAL STATEMENTS (Continued) 6. Fixed Assets (Including Leases) Fixed assets consist of (in millions): December 31, 2007 Under Capital Leases 2006 Under Capital Leases Useful Economic Life Total Total Operating equipment Cable distribution plant ...Switches... less, the lease term 3-5 years 5-...

  • Page 110
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Fixed Assets (Including Leases) (Continued) Future minimum annual payments at December 31, 2007 are as follows (in millions). The table reflects our contractual obligations. Year ending December 31: Capital...

  • Page 111
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. Goodwill and Intangible Assets Goodwill and intangible assets consist of (in millions): Estimated Useful Life December 31, 2007 2006 Goodwill and intangible assets not subject to amortization: Goodwill ......

  • Page 112
    ... was acquired as part of the acquisition of Telewest on March 3, 2006. In accordance with the joint venture agreements between Flextech Broadband Limited and BBC Worldwide, we are required to recognize 100% of any losses for those companies which represent UKTV. The Setanta Sports News channel was...

  • Page 113
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. Long Term Debt Long term debt consists of (in millions): December 31, 2007 2006 8.75% U.S. Dollar senior notes due 2014 . 9.75% Sterling senior notes due 2014 ...8.75% Euro senior notes due 2014 ...9.125% ...

  • Page 114
    ... Media Finance PLC. In addition, the bulk of the facility is secured through guarantees and first priority pledges of the shares and assets of substantially all of the operating subsidiaries of Virgin Media Investment Holdings Limited, or VMIH, and of receivables arising under any intercompany loans...

  • Page 115
    ... to pay increased levels of dividends on our common stock. On May 15, 2007, we made a mandatory prepayment of £73.6 million on our senior credit facility as a result of cash flow generated in 2006. On December 17, 2007, we made a voluntary prepayment of £200 million utilizing available cash...

  • Page 116
    ...NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. Derivative Financial Instruments and Hedging Activities The fair values of our derivative instruments held on our balance sheet were as follows (in millions): December 31, 2007 2006 Included within other current assets: Interest rate swaps...

  • Page 117
    ...into a number of interest rate swaps to fix at least two-thirds of the interest payments on our current financing arrangements. On October 2, 2005, we and VMIH entered into an agreement with several financial institutions to provide financing in connection with the merger agreement with Telewest. As...

  • Page 118
    ... U.S. dollar and pound sterling exchange rates. These foreign currency forward rate contracts have not been designated as accounting hedges under FAS 133. As such, the contracts are carried at fair value on our balance sheet with changes in the fair value recognized immediately in the statement of...

  • Page 119
    ... offset changes in the pound sterling value of the borrowed position of the cash purchase price of Telewest. These foreign currency forward rate and collar contracts were not accounted for as hedges under FAS 133. As such, the contracts were carried at fair value in our balance sheet with changes in...

  • Page 120
    ... intended to encourage Virgin Media stock ownership by employees, directors and independent contractors so that they may acquire or increase their proprietary interest in our company, and to encourage such employees, directors and independent contractors to remain in our employ or service and to put...

  • Page 121
    ... Telewest, each share of our common stock issued and outstanding immediately prior to the effective date of the acquisition was converted into the right to receive 2.5 shares of the new parent company. A summary of the status of the company's non-vested shares as of December 31, 2007, and of changes...

  • Page 122
    ... will be settled, at our discretion, in either common stock or an amount of cash equivalent to the fair market value at the date of vesting. The total number of restricted stock units awarded under the 2007, 2006 and 2005 Long Term Incentive Plans was 1,330,456, 1,143,472 and 440,563, respectively...

  • Page 123
    ... 0.2 1.0 £323.9 £339.8 Benefit obligation at end of year ...The change in plan assets was as follows (in millions): Year ended December 31, 2007 2006 Fair value of plan assets at beginning of year Actual return on plan assets ...Employer contributions ...Employee contributions ...Benefits paid...

  • Page 124
    ...NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. Employee Benefit Plans (Continued) The funded status as of December 31, 2007 and 2006 were as follows (in millions): Year ended December 31, 2007 2006 Projected benefit obligation ...Plan assets ...Funded status ...Current liability ...Non...

  • Page 125
    ... Projected benefit obligation ...Fair value of plan assets ...The components of net periodic benefit costs were as follows (in millions): £323.9 318.6 £339.8 298.1 Year ended December 31, 2007 2006 2005 Service cost ...Interest cost ...Expected return on plan assets Recognized actuarial loss...

  • Page 126
    ... FINANCIAL STATEMENTS (Continued) 13. Employee Benefit Plans (Continued) The weighted-average assumptions used to determine net periodic benefit costs were as follows: December 31, 2007 2006 Discount rate ...Expected long term rate of return on plan assets ...Rate of compensation increase...

  • Page 127
    ... to changes in cash flow estimates with respect to lease exit costs in connection with properties that had been vacated during our historical restructuring activities. On April 7, 2004, we announced the consolidation over 18 months of our 13 U.K. customer service call centers into three equipped to...

  • Page 128
    ... (11.0) £ 35.9 Balance, December 31, 2007 ... Acquisition Restructuring Accruals Lease Exit Costs Agreement Modifications Other Total Balance, December 31, 2005 ...Accruals resulting from business acquisition recognized under EITF 95-3 ...Charged to expense ...Utilized ...Balance, December 31...

  • Page 129
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 15. Income Taxes The expense/(benefit) for income taxes consists of the following (in millions): Year ended December 31, 2007 2006 2005 Current: Federal ...State and local ...Foreign ...Total current ......

  • Page 130
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 15. Income Taxes (Continued) The U.K. enacted changes in tax legislation in July 2007 that will impact our future U.K. tax position. These changes include a reduction in the rate of taxation from 30% to 28%. ...

  • Page 131
    ... effect on our consolidated financial statements. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in millions): Balance at January 1, 2007 ...Additions based on tax positions related to the current year . Additions for tax provisions of prior years...

  • Page 132
    ... for the TV, broadband internet, telephone and mobile phone services we provide to our residential customers, as well as the acquisition and branding of sports, movies and other premium television content and the sale of certain communications equipment, such as set top boxes and cable modems. For...

  • Page 133
    ...party to us. We had agreements with Virgin Retail Limited in respect to sales of our communications services (such as internet, television, fixed line telephone and mobile telephone services), through the various Virgin Megastores outlets. On September 17, 2007, the Virgin Group sold its interest in...

  • Page 134
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 16. Related Party Transactions (Continued) During the year ended December 31, 2007 and the period from March 3, 2006 to December 31, 2006, we received cash payments from UKTV for loan principal payments, interest, dividends and consortium tax relief...

  • Page 135
    ...regular quarterly dividends by us are at the discretion of our Board of Directors and will be subject to our future needs and uses of cash, which could include investments in operations, the repayment of debt, and share repurchase programs. Series A Warrants On the effective date of the Plan, Series...

  • Page 136
    ... by New York law. The Series A warrants are listed on the NASDAQ National Market under the symbol ''VMEDW.'' The Series A warrants may be subject to further change. Stock Repurchase Program On January 31, 2005, we announced that we intended to use up to £475.0 million of the proceeds from the sale...

  • Page 137
    ... of broadband and fixed line telephone services to consumers, businesses and public sector organizations on our cable network and, to a lesser extent, off our cable network. We operate our Content segment through our wholly-owned subsidiaries Virgin Media Television Limited, or Virgin Media TV, and...

  • Page 138
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 19. Industry Segments (Continued) Segment information for the year ended December 31, 2007 and 2006 is as follows (in millions): Cable Year ended December 31, 2007 Content Mobile Elims. Total Revenue ...Inter...

  • Page 139
    ...) Balance sheet Company Total Cash and cash equivalents ...£ Restricted cash ...Other current assets ...Total current assets ...Fixed assets, net ...Intangible assets, net ...Investments in, and loans to, parent and subsidiary companies ...Other assets, net ...Current liabilities ...Long term...

  • Page 140
    ... FINANCIAL STATEMENTS (Continued) 20. Condensed Consolidated Financial Information (Continued) Year ended December 31, 2007 Virgin Media Other All other Company Finance guarantors VMIH subsidiaries Adjustments (in millions) Statement of operations Total Revenue ...Operating costs ...Selling...

  • Page 141
    ...Consolidated Financial Information (Continued) Year ended December 31, 2006 Virgin Media Other All other Company Finance guarantors VMIH subsidiaries Adjustments (in millions) Statement of operations Total Revenue ...Operating costs ...Selling, general and administrative expenses ...Other charges...

  • Page 142
    ...Consolidated Financial Information (Continued) Year ended December 31, 2005 Virgin Media Other All other Company Finance guarantors VMIH subsidiaries Adjustments (in millions) Statement of operations Total Revenue ...Operating costs ...Selling, general and administrative expenses ...Other charges...

  • Page 143
    ... from sale of investments . . - Proceeds from sale of fixed assets . . - Other ...- Net cash (used in) provided by investing activities ...Financing activities: Dividends paid ...New borrowings, net of financing fees ...Proceeds from employee stock option exercises ...Principal payments on long term...

  • Page 144
    ... cash (used in) provided by investing activities ...Financing activities: Dividends paid ...New borrowings net of financing fees ...Issuance of stock ...Proceeds from employee stock option exercises ...Share redemption ...Principal payments on long term debt and capital leases ...Net cash provided...

  • Page 145
    ...- - Proceeds from sale of Ireland operations, net ...- - - Net cash provided by investing activities ...Financing activities: Dividend paid ...Proceeds from new borrowings Proceeds from employee stock option exercises ...Purchase of stock ...Principal payments including capital lease payments ...580...

  • Page 146
    VIRGIN MEDIA INC. SCHEDULE I-CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED BALANCE SHEETS (in millions except par value) December 31, 2007 2006 Assets Current assets Cash and cash equivalents ...Other current assets ...Total current assets ...Fixed assets, net ...Investments in and loans ...

  • Page 147
    VIRGIN MEDIA INC. CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENT OF OPERATIONS (in millions) Year ended December 31, 2007 2006 2005 Costs and expenses General and administrative expenses ...Other charges ...Operating loss ...Other income (expense) Interest income and other, net ...Interest...

  • Page 148
    ...) Year ended December 31, 2007 2006 2005 Net cash used in operating activities ...Investing activities Dividend received ...Investments in and loans to affiliates ...Net cash provided by investing activities ...Financing activities Proceeds from new borrowings ...Proceeds from employee stock option...

  • Page 149
    VIRGIN MEDIA INC. NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT 1. Basis of Presentation In our condensed financial statements, our investment in subsidiaries is stated at cost plus equity in the undistributed earnings of the subsidiaries. Our share of net loss of our subsidiaries is ...

  • Page 150
    VIRGIN MEDIA INC. AND SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS (in millions) Balance at Beginning of Period Charged to Costs and Expenses Charged to Other Accounts Balance at End of Period Description Acquisitions Deductions Year ended December 31, 2007 Allowance for doubtful ...

  • Page 151
    ... the accompanying consolidated balance sheets of Virgin Media Investment Holdings Limited and subsidiaries (the ''Company'') an indirect wholly-owned subsidiary of Virgin Media Inc. (the ''Parent'') as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders...

  • Page 152
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except share data) December 31, 2007 2006 Assets Current assets Cash and cash equivalents ...Restricted cash ...Accounts receivable-trade, less allowance for doubtful accounts of £17.1 (2007) and £...

  • Page 153
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions) Year ended December 31, 2007 2006 2005 Revenue ...Costs and expenses Operating costs (exclusive of depreciation shown separately below) Selling, general and administrative expenses ...Other...

  • Page 154
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year ended December 31, 2007 Operating activities Net (loss) income ...Cumulative effect of changes in accounting principle ...Income from discontinued operations ...Loss from continuing ...

  • Page 155
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (in millions, except share data) Accumulated Other Comprehensive Income (Loss) Net Share Capital Unrealized £0.001 Additional Pension (Losses) par value Paid-In Comprehensive Liability Gains On ...

  • Page 156
    ...'' offering of television, broadband, fixed line telephone and mobile telephone services in the U.K. together with one of the most advanced TV on demand services available in the U.K. market. By number of customers, we are the U.K.'s largest residential broadband and mobile virtual network operator...

  • Page 157
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Organization and Business (Continued) ventures with BBC Worldwide; and through the portfolio of retail television channels operated by sit-up tv. We presently manage our business ...

  • Page 158
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Significant Accounting Policies (Continued) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that...

  • Page 159
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Significant Accounting Policies (Continued) Reclassification Certain prior year amounts have been reclassified to conform to the current year presentation. The consolidated statements...

  • Page 160
    ... in connection with the design and installation of our operating network equipment and facilities. Costs associated with initial customer installations, additions of network equipment necessary to enable enhanced services, acquisition of additional fixed assets and replacement of existing fixed...

  • Page 161
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Significant Accounting Policies (Continued) Intangible assets include trademark license agreements and customer lists. Trademark license agreements represent the portion of purchase ...

  • Page 162
    ... earned but unbilled services. Installation revenues are recognized in accordance with the provisions of FASB Statement No. 51, Financial Reporting by Cable Television Companies, in relation to connection and activation fees for cable television, as well as fixed line telephone and internet services...

  • Page 163
    ... to customers is recognized on a straight-line basis over the term of the rental agreement. Mobile handset and other equipment revenues are recognized when the goods have been delivered and title has passed. Equipment revenue is stated net of discounts earned through service usage. Mobile service...

  • Page 164
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Significant Accounting Policies (Continued) FASB Statement No. 123, Accounting for Stock-Based Compensation, or FAS 123. On December 16, 2004, the FASB issued Statement No. 123 (...

  • Page 165
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Significant Accounting Policies (Continued) interest rate swaps and foreign currency forward rate contracts. By policy, we do not enter into derivative financial instruments with a ...

  • Page 166
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Significant Accounting Policies (Continued) recognized. In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB ...

  • Page 167
    ... costs of £15.2 million. The average market price per share of common stock utilized in determining the value of new common stock issued of £15.07 ($26.59) was based on an average of the closing prices of Virgin Media common stock divided by the Telewest acquisition conversion ratio of 2.5 times...

  • Page 168
    ... 3, 2006, Virgin Media merged with Telewest and the merger was accounted for as a reverse acquisition of Telewest using the purchase method. This merger created the U.K.'s largest provider of residential broadband and the U.K.'s leading provider of ''triple-play'' services. In connection with this...

  • Page 169
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Fixed Assets (Including Leases) Fixed assets consist of (in millions): December 31, 2007 Under Capital Leases 2006 Under Capital Leases Useful Economic Life Total Total Operating ...

  • Page 170
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Fixed Assets (Including Leases) (Continued) Future minimum annual payments at December 31, 2007 are as follows (in millions). The table reflects our contractual obligations. Capital ...

  • Page 171
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. Goodwill and Intangible Assets Goodwill and intangible assets consist of (in millions): Estimated Useful Life December 31, 2007 2006 Goodwill and intangible assets not subject to ...

  • Page 172
    ... was acquired as part of the acquisition of Telewest on March 3, 2006. In accordance with the joint venture agreements between Flextech Broadband Limited and BBC Worldwide, we are required to recognize 100% of any losses for those companies which represent UKTV. The Setanta Sports News channel was...

  • Page 173
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. Long Term Debt Long term debt consists of (in millions): December 31, 2007 2006 8.75% U.S. Dollar senior loan notes due 2014 due to Virgin Media Finance PLC 9.75% Sterling senior ...

  • Page 174
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. Long Term Debt (Continued) 5.0%. Interest is payable quarterly on January 15, April 15, July 15 and October 15 commencing July 15, 2004. Senior Credit Facility The principal amount ...

  • Page 175
    ...pay increased levels of dividends on Virgin Media's common stock. On May 15, 2007, we made a mandatory prepayment of £73.6 million on our senior credit facility as a result of cash flow generated in 2006. On December 17, 2007, we made a voluntary prepayment of £200 million utilizing available cash...

  • Page 176
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. Derivative Financial Instruments and Hedging Activities The fair values of our derivative instruments held on our balance sheet were as follows (in millions): December 31, 2007 2006...

  • Page 177
    ... a number of interest rate swaps to fix at least two-thirds of the interest payments on our current financing arrangements. On October 2, 2005, we and Virgin Media entered into an agreement with several financial institutions to provide financing in connection with the merger agreement with Telewest...

  • Page 178
    ... U.S. dollar and pound sterling exchange rates. These foreign currency forward rate contracts have not been designated as accounting hedges under FAS 133. As such, the contracts are carried at fair value on our balance sheet with changes in the fair value recognized immediately in the statement of...

  • Page 179
    ...the quoted market prices. The carrying amounts and fair values of our long term debt are as follows (in millions): December 31, 2007 Carrying Fair Amount Value December 31, 2006 Carrying Fair Amount Value 8.75% U.S. dollar loan notes due 2014 to Virgin Media Finance PLC ...9.75% Sterling loan notes...

  • Page 180
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12. Employee Benefit Plans (Continued) We adopted the provisions of Statement of Financial Accounting Standards No. 158, Employers' Accounting for Defined Benefit Pension and Other ...

  • Page 181
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12. Employee Benefit Plans (Continued) The change in plan assets was as follows (in millions): Year ended December 31, 2007 2006 Fair value of plan assets at beginning of year Actual ...

  • Page 182
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12. Employee Benefit Plans (Continued) The following table presents the amounts recognized in accumulated other comprehensive income as at December 31, 2007 and 2006 that have not yet ...

  • Page 183
    ... and cash at December 31, 2007. Relatively small deviations from these central targets are permitted from time to time due to market movements and the discretion of the fund manager based on his tactical views. As all our defined benefit pension plans are now closed to new entrants, the investment...

  • Page 184
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12. Employee Benefit Plans (Continued) There were no directly owned shares of Virgin Media's common stock included in the equity securities at December 31, 2007 or 2006. Cash Flows We ...

  • Page 185
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. Other Charges Including Restructuring Charges (Continued) The following tables summarize our historical restructuring accruals incurred and utilized in 2005, 2006 and 2007, and the ...

  • Page 186
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. Income Taxes The expense (benefit) for income taxes consists of the following (in millions): Year ended December 31, 2007 2006 2005 Current: U.K. taxes ...Total current ...Deferred:...

  • Page 187
    ... date. However, we do not expect to realize any significant benefit from these capital losses, which can only be used to the extent we generate U.K. taxable capital gain income in the future from assets held by former NTL companies. At December 31, 2007, we had fixed assets on which future U.K. tax...

  • Page 188
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. Income Taxes (Continued) A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in millions): Balance at January 1, 2007 ...Additions based ...

  • Page 189
    ... for the TV, broadband internet, telephone and mobile phone services we provide to our residential customers, as well as the acquisition and branding of sports, movies and other premium television content and the sale of certain communications equipment, such as set top boxes and cable modems. For...

  • Page 190
    ...party to us. We had agreements with Virgin Retail Limited in respect to sales of our communications services (such as internet, television, fixed line telephone and mobile telephone services), through the various Virgin Megastores outlets. On September 17, 2007, the Virgin Group sold its interest in...

  • Page 191
    ...our method of internal reporting. Our primary segment is our Cable segment, which consists of the distribution of television programming to consumers and the provision of broadband and fixed line telephone services to consumers, businesses and public sector organizations on our cable network and, to...

  • Page 192
    ...our cable network. We operate a Content segment through our wholly-owned subsidiaries Virgin Media Television Limited, or Virgin Media TV, and sit-up Limited, or sit-up, which supply television programming to the U.K. pay-television broadcasting market including our televised shopping unit sit-up tv...

  • Page 193
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 17. Industry Segments (Continued) Year ended December 31, 2006 Content Mobile Elims. Cable Total Revenue ...Inter segment revenue ...Operating costs ...Selling, general and ...

  • Page 194
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS (in millions) Balance at Charged to Charged to Beginning of Costs and Other Period Expenses Accounts Acquisitions Balance at End of Period Description Deductions Year ended December 31, 2007 ...

  • Page 195
    ... Neil Berkett Acting Chief Executive Officer By: Date: February 29, 2008 /s/ JACQUES KERREST Jacques Kerrest Chief Financial Officer VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED By: Date: February 29, 2008 /s/ NEIL BERKETT Neil Berkett Acting Chief Executive Officer By: Date: February 29, 2008...

  • Page 196
    ... Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. VIRGIN MEDIA INC. Name Title Date By: /s/ NEIL BERKETT Neil Berkett Acting Chief Executive Officer (principal executive officer...

  • Page 197
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED Name Title Date By: /s/ NEIL BERKETT Neil Berkett Acting Chief Executive Officer (principal executive officer) February 29, 2008 By: /s/ JACQUES KERREST Jacques Kerrest Chief Financial Officer (principal accounting and financial officer) February 29, ...

  • Page 198
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  • Page 199
    ...to the Current Report on Form 8-K of Virgin Media Holdings Inc. as filed with the Securities and Exchange Commission on February 3, 2005). Deed of Accession and Adherence to the Master Agreement among NTL Group Limited, NTL (Chichester) Limited, NTL Digital Ventures Limited, Macquarie U.K. Broadcast...

  • Page 200
    ...by reference to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on March 1, 2007). High Yield Intercreditor Deed among NTL Cable PLC as Issuer, NTL Investment Holdings Limited as Borrower and as High Yield Guarantor, Credit Suisse First Boston...

  • Page 201
    ... 30, 2006, among NTL Holdings Inc., NTL (UK) Group, Inc., NTL Communications Limited, NTL Incorporated, NTL, Telewest LLC and The Bank of New York as trustee (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange...

  • Page 202
    ...). Form of Restricted Stock Unit Agreement used for grants made on May 16, 2007 by Virgin Media Inc. to its executive officers pursuant to the 2007-2009 long-term incentive plan (Incorporated by reference to the Current Report on Form 8-K of Virgin Media Inc. filed with the Securities and Exchange...

  • Page 203
    ... 10-Q of Virgin Media Inc. as filed with the Securities and Exchange Commission on May 10, 2007). Service Agreement between ntl Group Limited and Neil Berkett, dated as of August 11, 2005 (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Virgin Media Holdings Inc. as...

  • Page 204
    ... Malcolm Wall and Telewest Communications Group Limited (Incorporated by reference to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 7, 2006). Restricted Stock Agreement, dated as of May 26, 2006, between NTL Incorporated and...

  • Page 205
    ... Inc., Telewest Communications Group Limited and Neil R. Smith (Incorporated by reference to Exhibit 10.7 to the Quarterly Report on Form 10-Q of Virgin Media Inc. as filed with the Securities and Exchange Commission on May 10, 2007). Restricted Stock Agreement, dated as of May 26, 2006, between NTL...

  • Page 206
    ... of Scotland Plc and Goldman Sachs International (as Bookrunners and Mandated Lead Arrangers) (Incorporated by reference to Virgin Media Inc.'s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 10, 2007). Computation of Ratio of Earnings to Fixed Charges. Code of...

  • Page 207
    ... 2863 New York, NY 10022 Tel: +1 212 906 8440 Head Office Media House Bartley Wood Business Park Hook Hampshire RG27 9UP Tel: +44 (0) 1256 75 2000 Independent Auditors Ernst & Young LLP 1 More London Place London SE1 2AF Tel: +44 (0) 20 7951 2000 Transfer Agent and Registrar for Common Stock BNY...

  • Page 208