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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
Form 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 000-50886
___________________________
VIRGIN MEDIA INC.
(Exact name of registrant as specified in its charter)
VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED
(Additional Registrant)
VIRGIN MEDIA INVESTMENTS LIMITED
(Additional Registrant)
___________________________
Delaware 59-3778247
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer
Identification No.)
65 Bleecker Street, 6th Floor, New York, NY 10012
(Address of principal executive offices) (Zip Code)
(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 NASDAQ Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer
(Do not check if a smaller reporting company) Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
The aggregate market value of the registrant’s voting stock held by non-affiliates as of June 30, 2012 based on the closing price for the registrant’s common stock on
the NASDAQ Global Select Market on such date, was $6,477,527,761.
As of February 4, 2013, there were 269,341,204 shares of the registrant’s common stock, par value $0.01 per share, issued and outstanding.
The Additional Registrants meet the conditions set forth in General Instructions I(1)(a) and (b) of Form 10-K and are therefore filing this form with the reduced disclosure
format. See “Note Concerning Virgin Media Investment Holdings Limited and Virgin Media Investments Limited” in this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its 2013 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

Table of contents

  • Page 1
    ... INVESTMENT HOLDINGS LIMITED VIRGIN MEDIA INVESTMENTS LIMITED (Additional Registrant) _____ Delaware (State or other jurisdiction of incorporation or organization) 59-3778247 (I.R.S. Employer Identification No.) 65 Bleecker Street, 6th Floor, New York, NY (Address of principal executive offices...

  • Page 2
    ..., and Director Independence Principal Accountant Fees and Services 69 69 69 69 69 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations...

  • Page 3
    ... to set prices, enter new markets or control our costs; We have substantial indebtedness that 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 change...

  • Page 4
    ... financial statements is pounds sterling. Corporate Structure and Governance Virgin Media Inc. is a Delaware corporation and its common stock is publicly traded in the United States on the NASDAQ Global Select Market and in the United Kingdom on the London Stock Exchange. The primary listing...

  • Page 5
    ... of residential broadband internet, pay television and fixed line telephony services by number of customers. We believe our advanced, deep fiber access network enables us to offer faster and higher quality broadband services than our digital subscriber line, or DSL, competitors. As a result, we...

  • Page 6
    ...the merger as the holders of Common Stock. The convertible holders will also be offered the right to put their notes to the company at 100% of the principal amount plus accrued interest. KEY DEVELOPMENTS IN 2012 Superfast Broadband We expect the growth in the market for faster broadband services to...

  • Page 7
    ...customer base. During 2012 we have enhanced our TiVo television service with the introduction of Virgin TV Anywhere, TiVo to TiVo streaming and the relaunch of our ondemand pay-per-view service as Virgin Movies. Financing & Long Term Debt During 2012, we have used our strong cash position to access...

  • Page 8
    ... capable of supporting the latest Very High Speed Digital Subscriber Line 2, or VDSL2, broadband technologies. As a result of the extensive use of fiber in our access networks, we are also able to provide high-speed data network services to business customers delivering nationwide connectivity. We...

  • Page 9
    ... this program. In January 2012, we also commenced a marketing campaign starring Usain Bolt to communicate this news to our customers. We currently have three tiers of high-speed cable broadband services available to new subscribers. We offer download speeds of 100 Mbit/s to more than 1 million homes...

  • Page 10
    ... than 700 hours of BBC programs. Virgin TV's Catch Up On Demand service also includes content from 4OD, Demand Five and ITV Player. Subscription Video On Demand We also offer our television customers basic subscription VOD, or SVOD, with a selection of content that increases in volume in line with...

  • Page 11
    ... networks. Our non-cable broadband internet services are provided via BT's local access network and unbundled BT exchanges from Cable & Wireless plc, or C&W. We offer various price and feature packages, including broadband service provided over asymmetric digital subscriber line, or ADSL, technology...

  • Page 12
    ... subscribe to multiple services. We offer broadband internet, fixed line telephony and mobile telephony and data services throughout the U.K., and currently offer television services exclusively in areas served by our cable network. Our primary competitors are BT, British Sky Broadcasting Group plc...

  • Page 13
    ... subscriber line, or ADSL2+, connections. In addition to the increasing competition and pricing pressure in the broadband market arising from LLU we may be subject to increased competition in the provision of broadband services from mobile broadband and technological developments (such as long-term...

  • Page 14
    ... field based teams managing service levels face to face based on customer premises. Data and Internet Services Converged Solutions Converged solutions use a single network to transport voice, data and video, allowing our customers to benefit from cost synergies. Additionally, we offer services such...

  • Page 15
    ... service management teams support carriers, mobile operators, SIs and ISPs. We provide predominantly data connectivity services, both in terms of local access and core networks, including high bandwidth connections between a site and the core network. Business Segment Competition The U.K. business...

  • Page 16
    ... 90% of the U.K. using money from the publicly funded BBC License Fee, under-spend from the Digital TV Switch Off Project and private investment. Two key projects have been announced: the Broadband Delivery Program, which is focused on delivering broadband to areas that the market will not serve of...

  • Page 17
    ...at the time of writing, BT's application is still being considered. In relation to movies, Ofcom decided in August 2010 to refer the linear and VOD movie markets to the U.K. Competition Commission for a 2-year market investigation. In August 2012, the Competition Commission concluded that Sky Movies...

  • Page 18
    ... duct access) and Wholesale Broadband Access, or WBA, market (virtual or active network access via methods such as provision of wholesale managed service products). The outcome of those reviews could have consequences for both Virgin Media's cable and non-cable operations. We anticipate that BT will...

  • Page 19
    ...benefits from what digital technology has to offer. In 2012, we prioritized three areas of focus to improve sustainability across the Virgin Media business: our products, our operations and our people. Targets for improved performance were set across each of these areas, in addition to our long-term...

  • Page 20
    ... terms to be agreed. They entitle us to use the "Virgin" name for the television, broadband internet, fixed line telephony and mobile phone services we provide to our consumer and business customers, and in connection with the sale of certain communications equipment, such as set-top boxes and cable...

  • Page 21
    ... are highly competitive and, in certain markets, we compete with established companies that hold positions of market power in these and/or closely related markets. We face competition from these companies, other established companies and potential new entrants. Technological advances may increase...

  • Page 22
    ... number of media choices available to subscribers. In addition, continued consolidation within the media industry may permit more competitors to offer "triple-play" bundles of digital television, fixed line telephony and broadband services, or "quad-play" bundles including mobile telephone services...

  • Page 23
    ... effect on our business and results of operations. Unauthorized access to our network resulting in piracy could result in a loss of revenue. We rely on the integrity of our technology to ensure that our services are provided only to identifiable paying customers. Increasingly sophisticated means of...

  • Page 24
    ... and its premium sports and movies channels on our cable TV service. However, for SD we are still exposed to BSkyB changing the ratecard terms of supply on 60 days' notice and we are also exposed to BSkyB offering HD versions of its channels exclusively to its digital satellite customers and not to...

  • Page 25
    ... a customer of Virgin Media Business. Any disagreements between EE and our mobile operations or between EE and Virgin Media Business could have a material adverse effect on the relationship of the other Virgin Media businesses and EE. We do not insure the underground portion of our cable network and...

  • Page 26
    ... may attempt to use the non-significant market power, or non-SMP, access provisions to require us to make available access to our ducts. In addition, Ofcom may look to impose regulation on the cable network, which is currently unregulated. Such regulation would allow customers to switch with ease...

  • Page 27
    ... to fund our debt service obligations, particularly in times of turbulent capital markets. The covenants under our debt agreements place certain limitations on our ability to finance future operations and how we manage our business. The agreements that govern our indebtedness contain financial...

  • Page 28
    ... to raise capital through offerings of our common stock, securities convertible into our common stock, or rights 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...

  • Page 29
    .... Sales of the company's common stock, and the possibility of these sales, could make it more difficult for the company to sell equity, or equity related securities, in the future at a time, and price, that it considers appropriate. Provisions of our debt agreements, our stockholder rights plan...

  • Page 30
    ...involving Huff Asset Management and relating to fees received by Huff Asset Management in 2004 for advisory services furnished to NTL Incorporated, or NTL, and Telewest Communications PLC, or Telewest. The businesses of NTL and Telewest merged in 2006 to form the Company. Neither the Company nor any...

  • Page 31
    ... the United States. Our common stock is also listed in the U.K. on the London Stock Exchange. As of February 4, 2013, there were 110 record holders of our common stock. The following table sets forth the reported high and low price per share of our common stock on the NASDAQ Global Select Market for...

  • Page 32
    ...addition, on October 27, 2011, we announced our intention to expend up to a further £250 million on share repurchases from the proceeds from the sale of our UKTV joint venture companies. On December 14, 2012, we announced a further capital restructure optimization program to include the application...

  • Page 33
    ... Telecom SA, Liberty Global, Inc., Rogers Communication Inc., Talk Talk Telephone Group and Verizon Communications Inc. Comparison of Cumulative Total Return January 1, 2008 December 31, 2008 December 31, 2009 December 31, 2010 December 31, 2011 December 31, 2012 Virgin Media S&P 500 Peer...

  • Page 34
    ... Income and Balance Sheet data for the years ended December 31, 2008 and 2009 have been adjusted for the disposals of Virgin Media TV and sit-up as described in the notes to our consolidated financial statements in our 2011 Annual Report. Year ended December 31, 2012 2011 2010 2009 2008 (in millions...

  • Page 35
    ... Consumer Segment Our strategy of revenue growth through customer additions, product cross sell, tier mix and selective price increases led to Consumer segment revenues increasing by 2.3% during 2012 to £3,430.2 million compared to £3,354.4 million in 2011. Demand for superfast broadband and TiVo...

  • Page 36
    ... with 1.3% in the quarter ended December 31, 2011. Increased subscription to TiVo and strong demand for higher broadband speeds improved the product mix which, together with a price rise in April 2012, increased monthly average revenue per user for our cable customers, or cable ARPU. Average monthly...

  • Page 37
    .... During the year we invested an additional £101.5 million of cash in upgrading our customer's broadband speeds, which contributed to our total purchase of fixed assets increasing to £783.2 million for the year, compared to £656.7 million in 2011, and £628.4 million in 2010. During 2012, we paid...

  • Page 38
    ... new services in customer premises, and the addition of network equipment to provide new or enhanced services are capitalized. Costs capitalized as part of initial customer installations include materials and direct labor. Capitalizable labor costs incurred in connection with customer installations...

  • Page 39
    ...our available tax assets to reduce the tax liabilities that would have otherwise arisen in those periods. Our U.K. capital allowances and NOLs do not have an expiration date. Our financial performance has continued to improve despite challenging macroeconomic conditions. Steady growth in revenue and...

  • Page 40
    ... time limited. In performing our analysis, we used the most updated plans and estimates that we currently use to manage the underlying business and calculated the utilisation of our deferred tax assets under a number of scenarios. We do not require material increases in the current levels of cash...

  • Page 41
    ... capital losses. The reversal of the valuation allowance on our U.K. deferred tax assets resulted an income tax benefit of £2,488.9 million, or £9.07 per basic share and £7.52 per diluted share during the year ended December 31, 2012, and an increase in current and non-current deferred tax assets...

  • Page 42
    ...and usage charges for our fixed line and mobile telephone, broadband and television products. We also earn revenues from connecting customers to our network, and supplying them with mobile handsets and other equipment. Revenue by customer type for the years ended December 31, 2012, 2011 and 2010 was...

  • Page 43
    ... service in November 2012 which allows our TV customers to stream up to 45 live channels to tablet computers and smartphones and access further content online, including thousands of hours of on-demand programming. It also allows Virgin Media TiVo customers to connect to their TiVo boxes to manage...

  • Page 44
    ...500 non-cable products during 2011 was also due to increased competition in the market. As a result of this drop in customer numbers, although partially offset by prices rises, non-cable revenues have decreased by 10.4% in 2012 to £71.4 million compared to 2011. Non-cable revenue for the year ended...

  • Page 45
    ... 2011 respectively, and their related four prior quarters. 3 months ended June 30, 2012 4,826,800 181,700 (196,400) (14,700) 4,812,100 1.4% Opening customers Customer additions Customer disconnections Net customer additions (disconnections) Closing customers Cable churn(1) Cable products: Telephone...

  • Page 46
    ...2012 and 2011 respectively, and their related four prior quarters. December 31, 2012 Contract mobile customers(1): Opening contract mobile customers Net contract mobile customer additions Closing contract mobile customers Prepay mobile customers(1): Opening prepay mobile customers Net prepay mobile...

  • Page 47
    ... related four prior quarters. 3 months ended September June 30, March 31, 30, 2012 2012 2012 218,600 233,000 248,200 (14,700) (14,400) (15,200) 203,900 218,600 233,000 Opening customers Net customer (disconnections) additions Closing customers Opening Non-cable products: Telephone Broadband Net Non...

  • Page 48
    ... installing equipment and connecting customers to our network. Business segment revenue is inherently subject to quarter-on-quarter and year-on-year fluctuations due to the uneven way we earn revenue from significant contracts. Our strategy to grow business data revenues has continued through 2012...

  • Page 49
    ... industry, and our consumer segment, as customers migrated from using fixed line telephony to other forms such as mobile telephony and internet based solutions, including video calling. The decline in retail voice revenues in 2012 of 9.5% to £139.1m was principally as a result of this trend. Retail...

  • Page 50
    ... the Business segment due to increased install activity and higher retail and wholesale data revenues, partially offset in both segments by lower telephony costs as a result of lower usage. The increase in segment cost of sales in 2011 was offset by a decrease in Network and other operating costs...

  • Page 51
    ... however 2011 benefited from of a reduction in rent and related property costs resulting from accrual adjustments in connection with a review of our property portfolio. Restructuring and Other Charges Our restructuring plan announced during the fourth quarter of 2008 continued during 2012, incurring...

  • Page 52
    ... from equity investments during 2012. UKTV received financing through loans from Virgin Media, which effectively acted as a revolving facility for UKTV. We received cash payments from UKTV in the form of loan capital repayments of £108.2 million for the year ended December 31, 2011. We received...

  • Page 53
    ...our U.K. deferred tax assets. The federal income tax benefit for the year ended December 31, 2012 related to the reversal of the valuation allowance on the U.S. deferred tax assets in our dual resident companies. The basis for these reversals is explained in the critical accounting estimates section...

  • Page 54
    ...EFFECT OF OPERATIONS DISCONTINUED IN PRIOR YEARS) Gain on Disposal In 2010 we reported a gain on disposal of £19.2 million, net of tax of £15 million, relating the sale of our Virgin Media TV business. We had no such disposals during either 2011 or 2012. (Loss) Income on Discontinued Operations We...

  • Page 55
    ...purchases of fixed assets totaling £783.2 million, which has increased from £656.7 million in 2011 primarily as a result of our broadband speed upgrade program. In 2012 we have not benefited from cash inflows from disposals as experienced in 2011 and 2010. In 2011 cash used in investing activities...

  • Page 56
    ...cash to repurchase our common stock during 2012. Capital lease payments during 2012 increased to £97.7 million compared to £79.2 million in 2011, principally as a result of increased leasing activity related to customer premises equipment to support our TiVo rollout. In 2011 cash used in financing...

  • Page 57
    ... market capitalization at December 14, 2012. Under the terms of the Merger Agreement we signed with Liberty Global on February 5, 2013, we have suspended our capital returns program pending consummation of the merger. If the merger is not consummated we intend to resume our capital returns program...

  • Page 58
    ...current report on Form 8-K as filed with the SEC on or around the date of issuance or amendment of the relevant instrument. Under the terms of the Merger Agreement we signed with Liberty Global on February 5, 2013, our financial indebtedness will be materially changed and the level of debt increased...

  • Page 59
    ...., Virgin Media Group LLC, Virgin Media Holdings Inc., Virgin Media (UK) Group, Inc. and Virgin Media Communications Limited and on a senior subordinated basis by VMIH and VMIL. Interest accrues from date of issuance. Senior Secured Notes Our wholly owned subsidiary Virgin Media Secured Finance PLC...

  • Page 60
    ... date. Prior to August 15, 2016, notes may be tendered by the holder if: (i) in any quarter, if the closing sale price of Virgin Media Inc.'s common stock during at least 20 of the last 30 trading days of the prior quarter was more than 120% of the applicable conversion price per share of common...

  • Page 61
    ... with the SEC on commencing each program. Open Market Repurchases, or OMRs During 2012, we made open market repurchases of a further 4.2 million shares of common stock in connection with the second phase capital structure optimization program, at an average purchase price per share of $22.54 ($94...

  • Page 62
    ...our consolidated financial statements as of December 31, 2012 , and the periods in which payments are due (in £ millions). Payments Due by Period (Undiscounted) Less than Contractual Obligations Total 1 year 1-3 years 3-5 years More than 5 years Long Term Debt Obligations Capital Lease Obligations...

  • Page 63
    ... the accounting for derivative instruments see note 8 to the consolidated financial statements in Item 8 of this Form 10-K. Further discussion of our long term debt and related derivative instruments is also contained within "Management's Discussion and Analysis of Financial Condition and Results of...

  • Page 64
    ...December 31, Fair Value December 31, 2012 2013 Long term debt (including current portion) U.S. Dollars Fixed rate Average interest rate Average forward exchange rate Pounds Sterling Fixed rate Average interest rate Variable rate Average interest rate - - - 2014 2015 2016 2017 Thereafter Total...

  • Page 65
    ... December 31, Fair Value December 31, 2011 2012 Long term debt (including current portion) U.S. Dollars Fixed rate Average interest rate Average forward exchange rate euros Fixed rate Average interest rate Average forward exchange rate Pounds Sterling Fixed rate Average interest rate Variable rate...

  • Page 66
    ... in the Critical Accounting Estimates section of Management's Discussion and Analysis of Financial Results of Operations contained in Item 7 of this Form 10-K. The reduction of this allowance will not result in any change to the amount of cash payments we make to the tax authorities. During the...

  • Page 67
    ... 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 is responsible for establishing and maintaining...

  • Page 68
    Table of Contents (d) Management's Annual Report on Internal Control Over Financial Reporting for Virgin Media Investments Limited Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Exchange Act Rule 13a-...

  • Page 69
    ... the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Virgin Media Inc. and subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of comprehensive income, shareholders' equity, and cash flows for each of the three years in...

  • Page 70
    ... for the 2013 Annual Meeting of Stockholders. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference to our Proxy Statement for the 2013 Annual Meeting of Stockholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED...

  • Page 71
    ... Holdings Limited, Virgin Media Investments Limited and Subsidiaries are included in Item 8: Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets-December 31, 2012 and 2011 Consolidated Statements of Comprehensive Income -Years ended December 31, 2012, 2011 and 2010...

  • Page 72
    ... the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Virgin Media Inc.'s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control...

  • Page 73
    ... VIRGIN MEDIA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except par value) December 31, 2012 December 31, 2011 Assets Current assets Cash and cash equivalents Restricted cash Accounts receivable - trade, less allowances for doubtful accounts of £9.0 (2012) and £10.9 (2011...

  • Page 74
    Table of Contents VIRGIN MEDIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions, except per share data) Year ended December 31, 2012 Revenue Costs and expenses Operating costs (exclusive of depreciation shown separately below) Selling, general and administrative ...

  • Page 75
    ... Net cash used in investing activities Financing activities: New borrowings, net of financing fees Repurchase of common stock Purchase of conversion hedges Proceeds from employee stock option exercises, net of taxes reimbursed Principal payments on long term debt Principal payments on capital leases...

  • Page 76
    ... VIRGIN MEDIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in millions) Accumulated Other Comprehensive Income (Loss) Common Stock $0.01 Par Value Balance, December 31, 2009 Exercise of stock options and tax effect Repurchase of common stock Stock compensation costs...

  • Page 77
    ... of residential broadband internet, pay television and fixed line telephony services by number of customers. We believe our advanced, deep fiber access network enables us to offer faster and higher quality broadband services than our digital subscriber line, or DSL, competitors. As a result, we...

  • Page 78
    ... our pension expense and pension funding requirements, amounts to be paid under our employee incentive plans, costs for interconnection, the amount of costs to be capitalized in connection with the construction and installation of our network and facilities, goodwill and indefinite life assets, long...

  • Page 79
    ... in the consolidated statement of comprehensive income. The movements in our allowance for doubtful accounts for the years ended December 31, 2012, 2011 and 2010 are as follows (in millions): Year ended December 31, 2012 2011 2010 Balance, January 1 Charged to costs and expenses Write offs, net of...

  • Page 80
    ...obtained for internal use has generally been enterprise-level business and finance software that we customize to meet our specific operational needs. Costs incurred in the application development phase are capitalized and amortized over their useful lives, which are generally three to five years. We...

  • Page 81
    ... ASC in relation to installation fees for cable television, fixed line telephone, and broadband internet services. Installation revenues are recognized at the time the installation is completed to the extent those fees are less than direct selling costs, which is generally the case. Mobile handset...

  • Page 82
    ... installation services, is limited to the amount of cash collected. Subscriber Acquisition Costs Costs incurred in respect of the acquisition of our customers, including commissions and the cost of mobile handsets, are expensed as incurred. Advertising and Marketing Expense We expense the cost...

  • Page 83
    ... MEDIA INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 2-Significant Accounting Policies (continued) with foreign currency payments in relation to operating costs and purchases of fixed assets incurred in the normal course of business. Our objective in managing...

  • Page 84
    Table of Contents VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 2-Significant Accounting Policies (continued) Recent Accounting Pronouncements On January 1, 2012 we adopted the FASB's new guidance for presentation of net income and other ...

  • Page 85
    ... sets forth the number of potential common shares excluded from the calculation of the denominator for diluted income (loss) per common shares (in millions): Year ended December 31, 2012 2011 2010 Stock options Sharesave options Restricted stock held in escrow Restricted stock units Warrants Shares...

  • Page 86
    ... in terms of progression within a specific range. Sharesave Option Grants All options granted under the Virgin Media Inc. Sharesave Plan enable eligible employees to purchase shares of our common stock at a discount. Employees are invited to take out savings contracts that last for three years. At...

  • Page 87
    ... where the price exceeds market values, the issuance of certain rights or warrants or certain cash dividends or distributions. Note 4-Fixed Assets (Including Leases) Fixed assets consist of (in millions): 2012 Useful Life Total Under Capital Leases Total December 31, 2011 Under Capital Leases...

  • Page 88
    Table of Contents VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 4-Fixed Assets (Including Leases) (continued) Capital Leases Operating Leases Year ending December 31, 2013 2014 2015 2016 2017 Thereafter Total minimum lease payments Less: amounts ...

  • Page 89
    Table of Contents VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 6-Long Term Debt Long term debt consists of (in millions): December 31, 2012 Secured Obligations U.S. Dollar 6.50% senior secured notes due 2018 5.25% senior secured notes due 2021 ...

  • Page 90
    ... 15 and August 15 each year, beginning on August 15, 2012. The senior notes due 2022 rank pari passu with Virgin Media Finance PLC's outstanding senior notes due 2019 and 2022. On March 28, 2012, we used the net proceeds from these new senior notes, and cash on our balance sheet, to redeem $500...

  • Page 91
    ...15, 2008. The convertible senior notes mature on November 15, 2016 and may not be redeemed by us prior to their maturity date. Upon conversion, we may elect to settle in cash, shares of common stock or a combination of cash and shares of our common stock. Based on the December 31, 2012 closing price...

  • Page 92
    .... The facility is secured through a guarantee from Virgin 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, and of...

  • Page 93
    ... the fair value of our financial assets and liabilities, we used the following methods and assumptions: Derivative financial instruments: As a result of our financing activities, we are exposed to market risks from changes in interest and foreign currency exchange rates, which may adversely affect...

  • Page 94
    ... 5.50% senior secured notes due 2021 include increases of £42.9 million and £109.1 million, respectively, at December 31, 2012, and increases of £45.7 million and £77.9 million, respectively, at December 31, 2011, as a result of our application of fair value hedge accounting to these instruments...

  • Page 95
    ...accounts receivable. Concentrations of credit risk with respect to derivative contracts are focused within a limited number of international financial institutions with which we operate and relate only to derivatives with gross recorded asset balances at December 31, 2012. We perform regular reviews...

  • Page 96
    ... dollar forward rate contracts to manage our foreign exchange rate currency exposures related to certain committed and forecasted purchases. Whenever it is practical to do so, we designate a derivative contract as either a cash flow or fair value hedge for accounting purposes. These relationships...

  • Page 97
    ... STATEMENTS (continued) Note 8-Derivative Financial Instruments and Hedging Activities (continued) The fair values of our derivative instruments recorded on our consolidated balance sheets were as follows (in millions): December 31, 2012 December 31, 2011 Included within current assets: Accounting...

  • Page 98
    ... interest rate swaps to mitigate the interest and foreign exchange rate risks relating to the pounds sterling value of interest and principal payments on the U.S. dollar denominated senior notes and senior secured notes. The terms of our outstanding cross-currency interest rate swaps at December 31...

  • Page 99
    ... in net income in the consolidated statements of comprehensive income in the period in which they occur. During the years ended December 31, 2012 and 2011 we recognized no gain or loss relating to ineffectiveness on our cash flow hedges and £0.5 million in the year ended December 31, 2010. F-28

  • Page 100
    ...ended December 31, 2012, 2011 and 2010 (in millions): Crosscurrency interest rate swaps Forward foreign exchange contracts Total Interest rate swaps Tax Effect Balance at December 31, 2009 Amounts recognized in other comprehensive income (loss) Amounts reclassified as a result of cash flow hedge...

  • Page 101
    ... to encourage Virgin Media stock ownership by employees and directors so that they may acquire or increase their proprietary interest in our company, to encourage such employees and directors to remain in our employ or service and to put forth maximum efforts for the success of the business. To...

  • Page 102
    ... VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 9-Stock-Based Compensation Plans (continued) posted at the date of grant having a term equal to the expected life of the option. An increase in the risk-free rates will increase compensation cost...

  • Page 103
    ...the proportion of restricted stock units subject to the TSV performance measure as of the grant date. Year ended December 31, 2012 Risk-free Interest Rate Expected Dividend Yield Expected Volatility of Virgin Media Shares Expected Volatility of Selected Comparator Group Shares Expected Lives 0.312...

  • Page 104
    ... management of investment groups. The pension cost is calculated using the projected unit method. Our defined benefit pension plans use a measurement date of December 31. Our funding requirements are reviewed and generally revised based on a valuation that is performed every three years. The current...

  • Page 105
    ... VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 10-Employee Benefit Plans (continued) Obligations and Funded Status The change in projected benefit obligation was as follows (in millions): Year ended December 31, 2012 2011 Benefit obligation...

  • Page 106
    ... 94.1 (0.1) 94.0 Net Periodic Benefit Costs The components of net periodic benefit costs were as follows (in millions): Year ended December 31, 2012 2011 2010 Service cost Interest cost Expected return on plan assets Amortization of prior service cost Recognized actuarial loss Total net periodic...

  • Page 107
    ...December 31, 2012 2011 Discount rate Rate of compensation increase 4.40% 3.30% 4.80% 3.50% The weighted-average assumptions used to determine net periodic benefit costs were as follows: Year ended December 31, 2012 2011 2010 Discount rate Expected long term rate of return on plan assets Rate of...

  • Page 108
    ...31, 2012. The assets are managed by a number of fund managers, which means as markets move relative to each other the assets move away from the target investment strategy. Rebalancing of the assets will be carried out from time to time. As the main defined benefit pension scheme is now closed to new...

  • Page 109
    ...our available tax assets to reduce the tax liabilities that would have otherwise arisen in those periods. Our U.K. capital allowances and NOLs do not have an expiration date. Our financial performance has continued to improve despite challenging macroeconomic conditions. Steady growth in revenue and...

  • Page 110
    ... time limited. In performing our analysis, we used the most updated plans and estimates that we currently use to manage the underlying business and calculated the utilization of our deferred tax assets under a number of scenarios. We do not require material increases in the current levels of cash...

  • Page 111
    ...assets other than capital losses. The reversal of the valuation allowance on our U.K. deferred tax assets resulted in an income tax benefit of £2,488.9 million, or £9.07 per basic share and £7.52 per diluted share during the year ended December 31, 2012, and an increase in current and non-current...

  • Page 112
    ... VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 11-Income Taxes (continued) Income tax benefit (expense) The benefit (expense) for income taxes consists of the following (in millions): Year ended December 31, 2011 2010 2012 Current: Federal State...

  • Page 113
    ...Employee benefits Derivative instruments Capital costs and others Total deferred tax assets Valuation allowance for deferred tax assets Total deferred tax assets, net of valuation allowance Deferred tax liabilities: Depreciation and amortization Convertible bond accretion Unrealized foreign exchange...

  • Page 114
    ... significant benefit from these capital losses, which can only be used to the extent we generate future U.K. taxable capital gain income from assets held by subsidiaries owned by the group prior to the merger with Telewest in 2006. At December 31, 2012, we had fixed assets on which future U.K. tax...

  • Page 115
    ... Limited is for a 30-year term and exclusive to us within the U.K. and Ireland. The license entitles us to use the "Virgin" name 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...

  • Page 116
    ... 8.2 8.1 Future payments of 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. In addition, the terms of our...

  • Page 117
    ... 2012 we made open market repurchases of 4.2 million shares of common stock in connection with the second phase capital structure optimization program, at an average purchase price per share of $22.54 ($94.9 million, £60.3 million, in aggregate). The shares of the common stock so acquired were...

  • Page 118
    ... to be paid under certain programming contracts where amounts payable are generally based on the number of customers receiving the programming. This table excludes £668.9 million of accounts payable and accrued liabilities as at December 31, 2012 which will be paid in 2013. We are involved in...

  • Page 119
    ... fixed line telephony services to residential customers outside of our cable network, and the provision of mobile telephony and mobile broadband to residential customers. Our Business segment comprises our operations carried out through Virgin Media Business which provides voice, data and internet...

  • Page 120
    ... (in millions): Year ended December 31, 2012 2011 2010 Total segment contribution Other operating and corporate costs Restructuring and other charges Depreciation Amortization Consolidated operating income Other income (expense) Interest expense Loss on extinguishment of debt Share of income from...

  • Page 121
    ... basis. December 31, 2012 Virgin Media Finance Other guarantors All other subsidiaries Balance sheets Company VMIH VMIL Adjustments Total (in millions) Cash and cash equivalents Restricted cash Deferred income taxes Other current assets Total current assets Fixed assets, net Goodwill and...

  • Page 122
    ... Financial Information-Senior Notes (continued) December 31, 2011 Virgin Media Finance Other guarantors All other subsidiaries Balance sheets Company VMIH VMIL (in millions) Adjustments Total Cash and cash equivalents Restricted cash Other current assets Total current assets Fixed assets...

  • Page 123
    ... 16-Condensed Consolidating Financial Information-Senior Notes (continued) Year ended December 31, 2012 Statements of comprehensive income Virgin Media Finance Other guarantors All other subsidiaries Company VMIH VMIL (in millions) Adjustments Total Revenue Operating costs Selling, general and...

  • Page 124
    ... 16-Condensed Consolidating Financial Information-Senior Notes (continued) Year ended December 31, 2011 Statements of comprehensive income Virgin Media Finance Other guarantors All other subsidiaries Company VMIH VMIL Adjustments Total (in millions) Revenue Operating costs Selling, general and...

  • Page 125
    ... 16-Condensed Consolidating Financial Information-Senior Notes (continued) Year ended December 31, 2010 Statements of comprehensive income Virgin Media Finance Other guarantors All other subsidiaries Company VMIH VMIL (in millions) Adjustments Total Revenue Operating costs Selling, general and...

  • Page 126
    ..., net Net cash (used in) provided by investing activities Financing activities: New borrowings, net of financing fees Repurchase of common stock Proceeds from employee stock option exercises, net of taxes reimbursed Principal payments on long term debt and capital leases Payments for settlement of...

  • Page 127
    ..., net Other Net cash (used in) provided by investing activities Financing activities: New borrowings, net of financing fees Repurchase of common stock Proceeds from employee stock option exercises, net of taxes reimbursed Principal payments on long term debt and capital leases Proceeds from...

  • Page 128
    ...loans to group companies Disposal of businesses, net Other Net cash (used in) provided by investing activities Financing activities: New borrowings, net of financing fees Repurchase of common stock Purchase of conversion hedges Proceeds from employee stock option exercises Principal payments on long...

  • Page 129
    ... 31, 2012 Virgin Media Secured Finance NonGuarantors Balance sheets Company Guarantors Adjustments Total (in millions) Cash and cash equivalents Restricted cash Deferred income taxes Other current assets Total current assets Fixed assets, net Goodwill and intangible assets, net Investments in...

  • Page 130
    ... Financial Information - Senior Secured Notes (continued) December 31, 2011 Virgin Media Secured Finance NonGuarantors Balance sheets Company Guarantors Adjustments Total (in millions) Cash and cash equivalents Restricted cash Other current assets Total current assets Fixed assets...

  • Page 131
    ...) Note 17-Condensed Consolidating Financial Information - Senior Secured Notes (continued) Year ended December 31, 2012 Virgin Media Secured Finance NonGuarantors Statements of comprehensive income Company Guarantors Adjustments Total (in millions) Revenue Operating costs Selling, general and...

  • Page 132
    ...) Note 17-Condensed Consolidating Financial Information - Senior Secured Notes (continued) Year ended December 31, 2011 Virgin Media Secured Finance NonGuarantors Statements of comprehensive income Company Guarantors Adjustments Total (in millions) Revenue Operating costs Selling, general and...

  • Page 133
    ...) Note 17-Condensed Consolidating Financial Information - Senior Secured Notes (continued) Year ended December 31, 2010 Virgin Media Secured Finance NonGuarantors Statements of comprehensive income Company Guarantors Adjustments Total (in millions) Revenue Operating costs Selling, general and...

  • Page 134
    ..., net Net cash (used in) provided by investing activities Financing activities: New borrowings, net of financing fees Repurchase of common stock Proceeds from employee stock option exercises, net of taxes reimbursed Principal payments on long term debt and capital leases Payments for settlement of...

  • Page 135
    ..., net Other Net cash (used in) provided by investing activities Financing activities: New borrowings, net of financing fees Repurchase of common stock Proceeds from employee stock option exercises, net of taxes reimbursed Principal payments on long term debt and capital leases Proceeds from...

  • Page 136
    ... by a new U.K. public limited company, or the Ultimate Parent, listed on NASDAQ, the common stock of which will in turn be held by Liberty Global and Virgin Media Shareholders. We will continue to operate under the Virgin Media brand in the U.K.. Under the Merger Agreement, we have agreed to use our...

  • Page 137
    ...unbudgeted capital expenditures, acquire substantial assets, make substantial investments, increase the salary of certain of our employees or directors, pay certain bonuses or incentive compensation, grant new equity or non-equity based compensation awards, hire new employees, redeem common stock or...

  • Page 138
    ...VIRGIN MEDIA INC. SCHEDULE I-FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEET (in millions, except par value) December 31, 2012 2011 Assets Current assets Cash and cash equivalents Other current assets Total current assets Investments in and loans to affiliates, net Other assets, net Total assets...

  • Page 139
    ...VIRGIN MEDIA INC. FINANCIAL INFORMATION OF REGISTRANT STATEMENT OF COMPREHENSIVE INCOME (in millions) Year ended December 31, 2012 2011 2010 Costs...Net income (loss) Other Comprehensive (loss) income, net of tax Currency translation adjustment Equity in other comprehensive (loss) income of ...

  • Page 140
    ...Contents VIRGIN MEDIA INC. FINANCIAL INFORMATION OF REGISTRANT STATEMENT OF CASH FLOWS (in millions) Year ended December 31, 2012 2011 2010 Net cash used in operating activities Investing activities Principal drawdowns on loans to group companies Net cash provided by investing activities Financing...

  • Page 141
    ..., to be acquired by Liberty Global and merge into one of the Merger Subsidiaries. If consummated, the merger will result in both Liberty Global and Virgin Media becoming directly owned by a new U.K. public limited company, or the Ultimate Parent, listed on NASDAQ, the common stock of which will...

  • Page 142
    ...financial position of Virgin Media Investment Holdings Limited and subsidiaries at December 31, 2012 and 2011, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with U.S. generally accepted accounting...

  • Page 143
    ... financial position of Virgin Media Investments Limited and subsidiaries at December 31, 2012 and 2011, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with U.S. generally accepted accounting...

  • Page 144
    ...VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except share data) December 31, 2012 Assets Current assets Cash and cash equivalents Restricted cash Accounts receivable - trade, less allowances for doubtful accounts of £9.0 (2012) and £10.9 (2011...

  • Page 145
    Table of Contents VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Year ended December 31, 2012 2011 2010 Revenue Costs and expenses Operating costs (exclusive of depreciation shown separately below) Selling, general and ...

  • Page 146
    Table of Contents VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year ended December 31, 2011 2010 £ 187.7 1.2 188.9 £ (101.5) (27.8) (129.3) 2012 Operating activities: Net income (loss) Loss (income) from discontinued operations ...

  • Page 147
    ... VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (in millions, except share data) Accumulated Other Comprehensive Income (Loss) Share Capital £0.001 Par Value Shares Balance, December 31, 2009 Net loss for the year ended December 31, 2010...

  • Page 148
    ... of Contents VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except par value) December 31, 2012 Assets Current assets Cash and cash equivalents Restricted cash Accounts receivable - trade, less allowances for doubtful accounts of £9.0 (2012) and £10...

  • Page 149
    Table of Contents VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Year ended December 31, 2012 2011 2010 Revenue Costs and expenses Operating costs (exclusive of depreciation shown separately below) Selling, general and administrative ...

  • Page 150
    ...net of cash acquired Disposal of equity investments, net Disposal of businesses, net Other Net cash (used in) provided by investing activities Financing activities: New borrowings, net of financing fees Principal payments on long term debt Principal payments on capital leases (Payments) proceeds for...

  • Page 151
    ...VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (in millions, except share data) Accumulated Other Comprehensive Income (Loss) Common Stock £1.0 Par Value Balance, December 31, 2009 Issue of common stock Net loss for the year ended December 31, 2010...

  • Page 152
    ... of residential broadband internet, pay television and fixed line telephony services by number of customers. We believe our advanced, deep fiber access network enables us to offer faster and higher quality broadband services than our digital subscriber line, or DSL, competitors. As a result, we...

  • Page 153
    ... resulted in a loss on disposal of £7.2 million. On July 12, 2010, we completed the sale of our television channel business known as Virgin Media TV to BSkyB. Virgin Media TV's operations comprised our former Content segment. These consolidated financial statements reflect Virgin Media TV...

  • Page 154
    ... INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 2-Significant Accounting Policies (continued) Cash and Cash Equivalents and Restricted Cash Cash equivalents are short term highly...

  • Page 155
    ... INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 2-Significant Accounting Policies (continued) Capitalizable labor costs incurred in connection with customer installations relate...

  • Page 156
    ... ASC in relation to installation fees for cable television, fixed line telephone, and broadband internet services. Installation revenues are recognized at the time the installation is completed to the extent those fees are less than direct selling costs, which is generally the case. Mobile handset...

  • Page 157
    ... VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 2-Significant Accounting Policies (continued) Rental revenues in respect of connectivity services provided to customers are recognized on a straight-line basis over the term...

  • Page 158
    ... HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 2-Significant Accounting Policies (continued) cash flows and earnings associated with changes in foreign currency exchange rates on payments...

  • Page 159
    ... MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 3-Fixed Assets (Including Leases) Fixed assets consist of (in millions): December 31, 2012 Under Capital Total Leases 2011...

  • Page 160
    ...VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 3-Fixed Assets (Including Leases) (continued) Total rental expense for the years ended December 31, 2012, 2011 and 2010...

  • Page 161
    ... HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 5-Long Term Debt Long term debt reflects our obligations under the terms of the indentures governing the senior notes and senior secured...

  • Page 162
    ... 28, 2012, we used the net proceeds from these new senior notes, and cash on our balance sheet, to redeem $500 million of the principal amount of the $1,350 million 9.50% senior notes due 2016. Virgin Media Finance PLC recognized a loss on extinguishment of debt of £58.6 million as a result of this...

  • Page 163
    ... LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 5-Long Term Debt (continued) We used the net proceeds from the senior notes due 2022, issued in October 2012, to redeem in full the outstanding balance...

  • Page 164
    ... VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 6-Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market...

  • Page 165
    ...total accounts receivable. Concentrations of credit risk with respect to derivative contracts are focused within a limited number of international financial institutions with which we operate and relate only to derivatives with recorded asset balances at December 31, 2012. We perform regular reviews...

  • Page 166
    ... of Contents VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 7-Derivative Financial Instruments and Hedging Activities Strategies and Objectives for Holding Derivative...

  • Page 167
    Table of Contents VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 7-Derivative Financial Instruments and Hedging Activities (continued) The fair values of our ...

  • Page 168
    Table of Contents VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 7-Derivative Financial Instruments and Hedging Activities (continued) As of December 31, 2012, we had...

  • Page 169
    ...of Contents VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 7-Derivative Financial Instruments and Hedging Activities (continued) The terms of our outstanding interest...

  • Page 170
    ...ended December 31, 2012, 2011 and 2010 (in millions): Crosscurrency interest rate swaps Forward foreign exchange contracts Total Interest rate swaps Tax Effect Balance at December 31, 2009 Amounts recognized in other comprehensive income (loss) Amounts reclassified as a result of cash flow hedge...

  • Page 171
    ... management of investment groups. The pension cost is calculated using the projected unit method. Our defined benefit pension plans use a measurement date of December 31. Our funding requirements are reviewed and generally revised based on a valuation that is performed every three years. The current...

  • Page 172
    ... INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 8-Employee Benefit Plans (continued) The change in plan assets was as follows (in millions): Year ended December 31, 2012 2011...

  • Page 173
    ... periodic benefit costs were as follows: December 31, 2011 2012 2010 Discount rate Expected long term rate of return on plan assets Rate of compensation increase 4.80% 5.41% 3.50% 5.50% 6.31% 4.00% 5.75% 6.50% 4.00% The expected rate of return on plan assets is the expected future long term...

  • Page 174
    ...31, 2012. The assets are managed by a number of fund managers, which means as markets move relative to each other the assets move away from the target investment strategy. Rebalancing of the assets will be carried out from time to time. As the main defined benefit pension scheme is now closed to new...

  • Page 175
    Table of Contents VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 8-Employee Benefit Plans (continued) Estimated Future Benefit Payments The benefits expected to be ...

  • Page 176
    Table of Contents VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 9 - Income Taxes (continued) loss position over the most recent three year period. While there has ...

  • Page 177
    ... time limited. In performing our analysis, we used the most updated plans and estimates that we currently use to manage the underlying business and calculated the utilization of our deferred tax assets under a number of scenarios. We do not require material increases in the current levels of cash...

  • Page 178
    Table of Contents VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 9 - Income Taxes (continued) as a discrete item in the period in which the change occurs. We are ...

  • Page 179
    ... no expiration 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 future U.K. taxable capital gain income from assets held by subsidiaries owned by the group prior to the merger with Telewest in 2006. F-108

  • Page 180
    ... Limited is for a 30-year term and exclusive to us within the U.K. and Ireland. The license entitles us to use the "Virgin" name 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...

  • Page 181
    ... this right, Virgin Enterprises Limited proposed Gordon McCallum who was appointed to Virgin Media Inc.'s Board of Directors. During the first quarter of 2010, ntl:Telewest Business announced that it would rebrand using the Virgin trade marks to "Virgin Media Business". Virgin Media has entered into...

  • Page 182
    ... line telephony services to residential customers on its cable network, the provision of broadband and fixed line telephone services to residential customers outside of its cable network, and the provision of mobile telephony and broadband to residential customers. Virgin Media's Business segment...

  • Page 183
    ... reviewed on a consolidated basis and are not allocated to segments for management reporting since the primary asset of the business is the cable network infrastructure, which is shared by Virgin Media's Consumer and Business segments. Segment information for the years ended December 31, 2012, 2011...

  • Page 184
    ... MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTED TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 12-Industry Segments (continued) 1) Interest expense represents the total of interest expense and interest expense to group...

  • Page 185
    ... by a new U.K. public limited company, or the Ultimate Parent, listed on Nasdaq, the common stock of which will in turn be held by Liberty Global and Virgin Media Shareholders. We will continue to operate under the Virgin Media brand in the U.K.. Under the Merger Agreement, we have agreed to use our...

  • Page 186
    Table of Contents VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 13-Subsequent Events (continued) Financing implications of the Merger on our existing debt ...

  • Page 187
    ...Chief Financial Officer Date: February 7, 2013 By: VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED Date: February 7, 2013 By: /S/ Neil A. Berkett Neil A. Berkett Chief Executive Officer /S/ Eamonn O'Hare Eamonn O'Hare Chief Financial Officer Date: February 7, 2013 By: VIRGIN MEDIA INVESTMENTS LIMITED...

  • Page 188
    ...Contents Pursuant to the requirements of the 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 A. Berkett Neil A. Berkett /S/ Eamonn...

  • Page 189
    ... Chief Executive Officer (principal executive officer) Chief Financial Officer (principal financial officer) Director (principal accounting officer) Director February 7, 2013 By: February 7, 2013 By: February 7, 2013 By: February 7, 2013 VIRGIN MEDIA INVESTMENTS LIMITED Name Title Date...

  • Page 190
    ... Limited, Barclays Bank PLC and Deutsche Bank AG, London Branch as Security Trustee. (Incorporated by reference to Exhibit 4.3 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on March 1, 2007). Equity Registration Rights Agreement, dated...

  • Page 191
    ... Securities and Exchange Commission on April 16, 2008). Indenture, dated as of November 9, 2009, among Virgin Media Inc., Virgin Media Finance PLC, Virgin Media Group LLC, Virgin Media Holdings Inc., Virgin Media (UK) Group, Inc., Virgin Media Communications Limited, Virgin Media Investment Holdings...

  • Page 192
    ... to Exhibit 4.6 to the Quarterly Report on Form 10-Q of Virgin Media Inc. as filed with the Securities and Exchange Commission on May 5, 2011). Blocked Account Charge dated February 9, 2010 and made between Virgin Media Investment Holdings Limited and Deutsche Bank AG, London Branch (Incorporated by...

  • Page 193
    ... the Securities and Exchange Commission on May 23, 2011). Indenture, dated as of March 13, 2012, among Virgin Media Finance PLC, Virgin Media Inc., Virgin Media Group LLC, Virgin Media Holdings Inc., Virgin Media (UK) Group, Inc., Virgin Media Communications Limited, Virgin Media Investment Holdings...

  • Page 194
    ... to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 26, 2010). Form of Restricted Stock Unit Agreement used for grants by Virgin Media Inc. to its executive officers pursuant to the 2010-2012 Long Term Incentive Plan (Incorporated...

  • Page 195
    ... Stock Unit Agreement used for grants made under the Virgin Media Inc. 2011-2013 Long Term Incentive Plan. (Incorporated by reference to Exhibit 10.39 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 22, 2011). Form of Non...

  • Page 196
    ... Exhibit 10.40 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on March 1, 2007). Investment Agreement, dated as of April 13, 2006, between NTL Incorporated and Virgin Entertainment Investment Holdings Limited (Incorporated by reference to...

  • Page 197
    ... Virgin Enterprises Limited and Virgin Media Limited dated December 16, 2009 (Incorporated by reference to Exhibit 10.83 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 26, 2010). Letter Agreement, dated as of April 3, 2006...