Virgin Media Inc. (NASDAQ: VMED; LSE: VMED) announces results for the
year and quarter ended December 31, 2012.
Solid financial performance
Multiple sources of high quality revenue growth
Neil Berkett, Chief Executive Officer of Virgin Media, said:
"2012 was a year of record cable customer growth, where mainstream
demand for superfast broadband and TiVo has led to lower churn and a
strong increase in new subscribers. Combined with growth in our business
division, we have delivered solid financial progress."
Note: The notes preceding the
Appendices relating to non-GAAP financial measures and other matters and
the Appendices to this earnings release are considered an integral part
of the financial and operational information in this release. Financial
and statistical information is as at and for the three months ended
December 31, 2012, unless otherwise stated. Comparisons of financial and
operating statistics are to the fourth quarter of 2011, unless otherwise
stated. Where financial information is given for the year ended December
31, 2012, any comparisons are to the year ended December 31, 2011 unless
Conference call details
There will not be a conference call to specifically discuss these
results. However, there will be a conference call to discuss the
combination transaction with Liberty Global, Inc. Details of that
conference call can be found in the press release detailing that
On February 5, 2013, Liberty Global, Inc. and Virgin Media Inc.
announced that they had entered into an agreement, subject to
shareholder approvals, pursuant to which Liberty Global, Inc. will
acquire Virgin Media Inc. in a stock and cash merger. For further
information, please see the press release announcing the proposed merger
and other documents filed or to be filed with the SEC as further
detailed at the end of this release.
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of any
vote or approval. Lynx Europe Limited, a company that has been
established in connection with the transaction, will file a registration
statement with the Securities and Exchange Commission (SEC), which will
include a joint proxy statement of Virgin Media Inc. and Liberty Global,
Inc. VIRGIN MEDIA STOCKHOLDERS ARE ADVISED TO READ THE REGISTRATION
STATEMENT/JOINT PROXY STATEMENT WHEN IT BECOMES AVAILABLE (INCLUDING ALL
AMENDMENTS AND SUPPLEMENTS THERETO) BECAUSE IT WILL CONTAIN IMPORTANT
INFORMATION. Investors may obtain a free copy of the registration
statement/joint proxy statement (when it becomes available) and other
relevant documents filed by Liberty Global and Virgin Media with the SEC
at the SEC's Web site at http://www.sec.gov.
The joint proxy statement and such other documents filed by Virgin Media
with the SEC may also be obtained for free from the Investor Relations
section of Virgin Media's web site (www.virginmedia.com)
or by directing a request to Virgin Media Limited, Media House, Bartley
Wood Business Park, Hook, Hampshire, RG27 9UP, UK, Attention: Investor
Relations. Copies of documents filed by Liberty Global with the SEC may
also be obtained for free from the Investor Relations section of Liberty
Global's website (www.lgi.com)
or by directing a request to Liberty Global, 12300 Liberty Boulevard,
Englewood, Colorado 80112, Attention: Investor Relations.
Virgin Media and Liberty Global and their respective directors,
executive officers and other members of their respective management and
employees are deemed to be participants in the solicitation of proxies
from their respective stockholders in connection with the proposed
transaction. Information concerning the interests of Virgin Media's
participants in the solicitation, which may be different than those of
Virgin Media's stockholders generally, is set forth in Virgin Media's
proxy statement relating to its 2012 annual meeting of stockholders
filed with the SEC on April 30, 2012. Information concerning the
interests of Liberty Global's participants in the solicitation, which
may be different than those of Liberty Global's stockholders generally,
is set forth in Liberty Global's proxy statement relating to its 2012
annual meeting of stockholders filed with the SEC on April 27, 2012.
Additional information regarding the interests of those deemed
participants in the proposed transaction will be included in the
registration statement/joint proxy statement to be filed with the SEC in
connection with the proposed transaction.
Various statements contained in this release may include
"forward-looking statements", both with respect to us and our industry,
that reflect our current views with respect to future events and
financial performance Words like "believe", "anticipate", "should",
"intend", "plan", "will", "expects", "may", "estimates", "projects",
"positioned", "strategy", and similar expressions identify these
forward-looking statements, which involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements or budgeted, whether expressed or implied,
by these forward-looking statements.
These factors include the following factors relating to the proposed
In addition, factors relating to the ordinary course operation of our
business are discussed under "Risk Factors" and elsewhere in our annual
report on Form 10-K for the year ended December 31, 2011, or the 2011
Annual Report, as filed with the U.S. Securities and Exchange
Commission, or SEC, on February 21, 2012 and on Form 10-Q for the three
months ended September 30, 2012 as filed with the SEC on October 31,
2012. We assume no obligation to update our forward-looking statements
to reflect actual results, changes in assumptions or changes in factors
affecting these statements. Virgin Media cautions that the foregoing
list of important factors that that may affect future results is not
SUMMARY FINANCIAL RESULTS
SELECTED CONSUMER OPERATIONS STATISTICS
A year of sustainable revenue growth
Total revenue for the year was up 2.7% to £4.1bn. Gross margin6
expanded to 60.3%, while SG&A increased by 2.7%, mainly due to a planned
increase in marketing expenses. This resulted in OCF increasing by 4.0%
to £1,654m. Operating income rose 29% to £699m.
Free Cash Flow was down 4.9% to £473m for the year as OCF growth and
lower interest expense was offset by the an incremental £102m investment
in our broadband speed upgrade programme. Net cash provided by operating
activities was down 9.5% to £1,040m.
We repurchased 20.5m shares during the year, reducing our average share
count by 11.5%.
Improved cable revenue growth
Full year consumer cable revenue increased by 3.0% to £2.8bn driven by
2.2% cable ARPU growth and 1.8% growth in the customer base during the
year. Consumer cable revenue growth for the quarter was 3.8%,
Cable customer net additions were 88,700 in the full year which is a
record for Virgin Media and a significant improvement on the 5,500 added
in 2011. Net additions for the quarter were 42,700 with gross additions
increasing 2.8% while gross disconnections fell 11.7%, a year-on-year
improvement for the fifth quarter in a row. This led to churn improving
from 1.3% to 1.1%.
We added a net 112,700 triple-play customers in the year and 36,800
during the quarter, increasing triple-play penetration to 64.9% compared
to 63.7% a year ago.
Strong demand for superfast broadband and TiVo
A year ago we introduced new product "Collections" which included
superfast broadband, TiVo and HD TV as standard. These were created to
meet increasingly widespread consumer demand for better connectivity and
next generation entertainment by further differentiating our products
from those of our competitors.
During 2012, the number of customers on superfast speeds (30Mb and
above) increased by 1.5m, including 419,400 during the last quarter,
taking the total to 2.176m or 51% of our broadband base. Total broadband
net additions in the year were 169,300, with 62,700 in the quarter
compared to 30,000 a year ago.
Demand for even faster speeds remains strong with around 41% of new
broadband subscribers taking speeds of 60Mb or higher during Q4. Our
programme to double the broadband speeds of over 4m customers is on
track with 76% of our network upgraded for the new faster speeds.
At the same time, the recognized appeal of our TiVo service is driving
pay TV growth. We added 896,900 more TiVo customers during 2012,
including 187,300 in the fourth quarter to reach a total of 1.33m or 35%
of our TV customer base. This uptake has helped to drive the overall
number of paying TV customers, which increased by 210,000 in the year,
including 59,900 in the final quarter.
We launched our Virgin TV Anywhere service towards the end of the year
which allows our TV customers to stream up to 45 live channels to
tablets and smartphones, with even more content available online,
including thousands of hours of on demand programming. It also allows
Virgin Media TiVo customers to connect to their TiVo boxes to manage
their recordings wherever they are.
We continue to add more TV content to all our entertainment services.
After the period end, we introduced two further HD channels from Turner
Broadcasting, bolstering the total number of HD channels available to
our customers to 39.
Mobile - continued contract revenue growth
Full year mobile revenue was £554.8m, which was relatively flat compared
to 2011 as strong contract revenue growth was offset by prepay revenue
decline and regulatory changes to mobile termination rates ("MTR").
Contract service revenue increased 8.9% to £399.8m in 2012, while prepay
service revenue declined by 18% to £140.7m. The MTR change reduced the
amount of inbound mobile revenue we received by approximately £24.1m.
Mobile revenue would have increased by approximately 4.5% excluding this
regulatory factor. Due to a similar associated reduction in interconnect
costs for our mobile and fixed line businesses from these regulatory
rates changes, the impact on group OCF of the MTR changes was broadly
Mobile revenue grew by 0.6% or £0.9m in the quarter as a 4.6% growth in
contract service revenue to £102.3m was offset by a 16% prepay service
revenue decline to £34.9m and an approximate £6.5m regulatory MTR impact.
We increased our contract mobile base by 38,100 in the quarter. The
total contract base increased 12% from a year ago to 1.7m, while our
prepay subscriber base reduced by 32,100 compared to a decline of 53,500
in the comparable period last year.
At the quarter-end, we had approximately 834,600 cable households with
at least one Virgin Mobile contract, which is up 15% year-on-year. These
homes had around 1.2m contract mobiles. We also estimate we have a
further 202,500 cable households with at least one of our prepay phones,
meaning total mobile penetration of the cable base is around 21%,
providing further significant growth opportunities to cross-sell to the
Quad-play penetration, where a household takes all three cable products
and at least one mobile phone service, increased to around 15.8% of our
residential cable customer base, compared to around 14.5% a year ago. We
have approximately 774,600 quad-play customers, which is up 11%
Growing Business data
Full year Virgin Media Business ("VMB") revenue was £670.3m, up 5.2% on
2011 mainly due to growth in data revenues. VMB accounted for 30% of
group revenue growth. We have continued to make steady progress during
the year with new product launches and strategic contract wins.
In the quarter, VMB revenue was £165.3m, down 4.5% mainly due to
declining voice revenues and reduced wholesale data revenue partially
offset by growth in retail data.
During the quarter, we concluded agreements to enhance our provision of
high capacity connectivity to two existing customers, by modifying or
extending these tailored solutions. At the same time we negotiated
separate agreements for the provision of offnet, last mile Ethernet
circuits from both counterparties, which gives us greater choice and
therefore lower costs going forward when looking at providing off net
solutions for our business customers.
On signing these high capacity connectivity agreements we became
entitled to a combined £12 million under these contracts as up front
cash payments. We have recognized these payments as deferred revenue on
our balance sheet, rather than immediately in our profit and loss
account. We expect to recognise substantially all this deferred revenue
and OCF in our profit and loss account over the next three years.
VMB will also be linking up public sector organisations across Yorkshire
and Humberside as part of a brand new Public Services Network (PSN)
initiative. The network is one of the first PSN projects to be delivered
through the Government's PSN connectivity and services frameworks and
has the potential to connect up to 52 public service providers including
local authorities, health, police and other services.
Retail data revenue was up 2.2% to £75.0m in the quarter. Retail voice
revenue was down 14% to £33.8m, reflecting a continuation of the
structural decline in this area. Wholesale data revenue was down 5.3% at
£43.1m. Wholesale data revenue in the fourth quarter of 2011 had been
particularly high. Wholesale voice revenue was down £2.2m at £5.0m.
Local Area Network Solutions and other revenue was flat at £8.4m.
RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2012
Comparisons of financial and operating statistics are to the fourth
quarter of 2011, unless otherwise stated.
Total revenue was up 1.6% to £1,040m, due to consumer revenue growth
partially offset by a fall in business revenue.
OPERATING COSTS AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating costs (exclusive of depreciation) were £405.8m, up 0.7% as
higher consumer cost of sales were partially offset by lower business
cost of sales and lower network and other operating costs. Gross margin
percentage grew slightly from 60.6% to 61.0%.
SG&A fell by 2.7% to £191.7m reflecting lower employee and outsourcing
and other costs, partially offset by increased marketing and facilities
OPERATING INCOME BEFORE DEPRECIATION, AMORTIZATION, GOODWILL AND
INTANGIBLE ASSET IMPAIRMENTS AND RESTRUCTURING AND OTHER CHARGES (OCF)
OCF was up 4.4% at £442.2m, mainly due to improved revenue
and gross margin and reduced SG&A expenses.
Operating income increased 25% to £208.6m, mainly due to the growth in
revenue and gross margin, reduced SG&A and reduced amortization expense.
Depreciation expense was up 2.8% at £235.0m. The increase in
depreciation expense was primarily a result of depreciation in respect
of fixed asset additions with a generally shorter useful economic life
than existing assets, combined with the acceleration of depreciation on
certain assets that will no longer be required as a result of our
re-tiering program, partially offset by fixed assets becoming fully
No amortization expense was incurred, compared to £28.1m in the same
quarter last year, as all intangible assets subject to amortization
became fully amortized in the fourth quarter of 2011.
Income tax benefit
Over the last two decades we have invested over £13bn building our cable
network and have incurred losses in operating that infrastructure. Under
UK tax law certain of these investment costs and operating losses are
offset against future operating profits, giving rise to deferred tax
assets. We have historically recorded a full valuation allowance to
reduce the value of these assets to zero.
Under US GAAP accounting principles, we are required
to continually evaluate the need for a valuation allowance and have
determined it is more likely than not that in future we will generate
sufficient pre-tax income to utilise substantially all of our UK
deferred tax assets related to unclaimed capital allowances and net
operating losses. An important factor in our assessment was the fact
that during 2012, we moved into a three year cumulative pre-tax profit
position in the UK for the first time. Therefore, as required by the
applicable accounting rules, we have reduced the valuation allowance,
which has resulted in a non-cash income tax benefit of £2.6billion.
Net income was £2.7bn compared to £48.2m in the fourth quarter last
year. The improvement was mainly due to the reduction in the deferred
tax asset valuation allowance outlined above.
Fixed asset additions (accrual basis)7 in the quarter were
down £18.3m to £208.7m. This was mainly due to the fourth quarter of
2011 including £30m in relation to conversion of TiVo operating leases
to capital leases for set top boxes received prior to that quarter,
together with lower spend on non-upgrade network activities and other
projects, partially offset by £36.3m spent on our broadband speed
upgrade in the fourth quarter of 2012.
The total purchase of fixed and intangible assets in the quarter was up
£33.4m at £210.8m mainly due to a reduction in assets acquired under
capital leases. Total purchase of fixed and intangible assets included
£51.0m spent on the ongoing broadband speed upgrade programme
Fixed asset additions (accrual basis) in the full year were up 16% to
£883.4m mainly due to increased spend on consumer premise equipment and
scalable infrastructure related to the rollout of TiVo set top boxes and
our broadband speed upgrade. We incurred £114.1m on the broadband speed
upgrade programme in the year.
The total purchase of fixed and intangible assets for the year was
£783.2m, which included £101.5m spent on the broadband upgrade
programme. Excluding this amount, total purchase of fixed and intangible
assets was £681.7m, which represents 16.6% of group revenue.
The total amount of fixed assets acquired under capital leases was
£10.6m in the quarter. We made principal payments on capital leases of
£25.8m and the capital lease balance decreased from £244.2m at the end
of the third quarter to £229.0m at the end of the fourth quarter. The
interest charge on capital leases was £3.5m during the quarter.
For the full year, the total amount of fixed assets acquired under
capital leases was £88.9m, which represented 2.2% of revenue. We made
principal payments on capital leases of £97.4m and the capital lease
balance decreased from £258.0m to £229.0m during the year. The interest
charge on capital leases was £16.0m for the year.
Capital expenditure guidance
It is anticipated that Virgin Media's cash capital expenditure (purchase
of fixed and intangible assets) will remain 15% to 17% of revenue for
2013 and for future years. In addition, it is expected that the cost of
fixed assets acquired under leases will continue to be no greater than
2% to 3% of revenue per annum, in line with recent years.
FREE CASH FLOW
Free Cash Flow for the quarter was down 1.4% to £137.6m mainly due to
higher purchase of fixed and intangible assets, partially offset by
increased OCF and lower net interest expense. Net cash provided by
operating activities was down 21% at £232.1m mainly due to the premia
paid on the redemption of debt partially offset by increased operating
During the quarter, we issued $900m of dollar-denominated 4.875% Senior
Notes and £400m Senior Notes 5.125%, both due 2022.
The net proceeds were used to repurchase all of our $850m
dollar-denominated and €180m euro-denominated 9.50% Senior Notes due
2016, and $93 million of our dollar-denominated 8.375% Senior Notes and
£97m of our sterling-denominated 8.875% Senior Notes, both due 2019, and
to pay approximately £113m in premia and related fees and expenses.
These transactions allow us to lower our ongoing interest costs and
enhance our capital structure, by further extending our amortization
As of December 31, 2012, total debt consisted of £750m outstanding under
our Senior Credit Facility, £1,824m of Senior Notes, £2,582m of Senior
Secured Notes, £544m of Convertible Senior Notes and £229m of capital
leases and other indebtedness. Cash and cash equivalents were £206m. Net
debt8 was £5,723m at the quarter-end.
Interest expense was £94.1m, down 10.8% mainly due to lower average
"Safe Harbour" Statement under the Private Securities Litigation
Reform Act of 1995
Various statements contained in this document constitute
"forward-looking statements" as that term is defined under the Private
Securities Litigation Reform Act of 1995. Words like "believe,"
"anticipate," "should," "intend," "plan," "will," "expects,"
"estimates," "projects," "positioned," "think", "strategy," and similar
expressions identify these forward- looking statements, which involve
known and unknown risks, uncertainties and other factors that may cause
our actual results, performance or achievements or industry results to
be materially different from those contemplated, projected, forecasted,
estimated or budgeted, whether expressed or implied, by these
forward-looking statements. These factors, among others, include the
These and other factors are discussed in more detail under "Risk
Factors" and elsewhere in our annual report on Form 10-K for the year
ended December 31, 2011, or the 2011 Annual Report, as filed with the
U.S. Securities and Exchange Commission, or SEC, on February 21, 2012.
We assume no obligation to update our forward-looking statements to
reflect actual results, changes in assumptions or changes in factors
affecting these statements.
Please see Appendix F for a reconciliation of all non-GAAP financial
measures to their nearest GAAP equivalents.
1 OCF is operating income before depreciation, amortization,
goodwill and intangible asset impairments and restructuring and other
charges. OCF is a non-GAAP financial measure and the most directly
comparable GAAP measure is operating income.
2 Free Cash Flow, or FCF, is OCF reduced by purchase of fixed
and intangible assets, as reported in our statements of cash flows, and
net interest expense, as reported in our statements of operations. FCF
is a non-GAAP financial measure and the most directly comparable GAAP
measure is net cash provided by operating activities.
3 Paying TV base is our total TV customer base less those on
packages which include a free TV service provided with a non-TiVo set
4 Full year Cable ARPU is calculated by dividing total annual
revenue generated from the provision of telephone, television and
internet services to customers who are directly connected to our network
in that period together with revenue generated form our customers using
our virginmedia.com website, exclusive of VAT, by the average number of
customers directly connected to our network in the period divided by
twelve. The average number of customers is calculated by adding the
number of customers at the start of the year and at the end of each
month of the year and dividing by thirteen.
5 Full year Mobile ARPU is calculated by dividing total
annual mobile service revenue (contract and prepay) for the period by
the average number of active customers (contract and prepay) for the
period, divided by twelve. The average number of customers is calculated
by adding the number of customers at the start of the year and at the
end of each month of the year and dividing by thirteen.
6 Gross margin is revenue less operating costs. Gross margin
percentage is revenue less operating costs, divided by revenue.
7 Based on closing share price as of February 4, 2013 and
269.3m shares outstanding at December 31, 2012.
8 Net Debt to OCF is Net Debt divided by OCF on a hedged last
twelve months basis. It is hedged Net Debt divided by OCF for the last
twelve months. Net Debt and Net Debt to OCF are non-GAAP financial
measures. See Appendix F for calculations.
9 Fixed asset additions (accrual basis) is the purchase of
fixed and intangible assets as measured on an accrual basis, excluding
asset retirement obligation related assets. Fixed asset additions
(accrual basis) is a non-GAAP financial measure and the most directly
comparable GAAP measure is purchase of fixed and intangible assets.
10 Net Debt is long term debt inclusive of current portion,
less cash and cash equivalents. Net debt is a non-GAAP financial measure
and the most directly comparable GAAP measure is long term debt (net of
Reclassification of derivative gains (losses)
to net income, net of tax
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in £ millions, except per share data) (unaudited)
(in £ millions) (unaudited)
C1) CABLE OPERATIONS STATISTICS (excluding Non-cable and Mobile
C2) NON-CABLE OPERATIONS STATISTICS
C3) MOBILE OPERATIONS STATISTICS
(data in 000's except ARPU)
D) FREE CASH FLOW CALCULATION (in £ millions)
FCF is defined as OCF reduced by purchase of fixed and intangible
assets, as reported in our statements of cash flows, and net interest
expense, as reported in our statements of operations. See Appendix F for
a discussion of the use of FCF as a non-GAAP financial measure and the
reconciliation of FCF to GAAP net cash provided by operating activities.
E1) FIXED ASSET ADDITIONS (ACCRUAL BASIS) (in £
Virgin Media is not a member of NCTA (National Cable Telecommunications
Association) and is providing this information solely for comparative
purposes. See Appendix F for a discussion of the use of Fixed Asset
Additions (Accrual Basis) as a non-GAAP financial measure and the
reconciliation of Fixed Asset Additions (Accrual Basis) to GAAP purchase
of fixed and intangible assets.
F) USE OF NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS TO
Virgin Media uses certain financial measures with a view to providing
investors with a better understanding of the operating results and
underlying trends to measure past and future performance and liquidity.
These measures which are not calculated and presented in accordance with
U.S. generally accepted accounting principles ("GAAP") are defined as
We also use non-GAAP measures in the calculation of certain ratios, such
as Net debt/annualized OCF and Net debt/last twelve months OCF on both
an as reported and unhedged basis. Net debt/annualized OCF is net
debt divided by the last quarter of OCF multiplied by four. Net
debt/last twelve months OCF is net debt divided by the last twelve
months of OCF.
Our management considers OCF is an important indicator of our
operational strength and performance during the relevant periods. This
measure excludes the impact of costs and expenses that do not directly
affect our cash flows. Other charges, including restructuring charges,
are also excluded from this measure as management believes they are not
characteristic of our underlying business operations. Our management
considers FCF as a helpful measure in assessing our liquidity and
prospects for the future. We believe FCF is useful to investors as a
basis for comparing our performance and coverage ratios and is an
additional way of viewing aspects of our operations that provide a more
complete understanding of factors and trends affecting our business. Our
management considers Fixed Asset Additions (Accrual Basis) an important
component in evaluating our liquidity and financial condition since
purchases of fixed assets are a necessary component of ongoing
operations. Our management considers net debt is a measure that is
helpful for understanding our debt funding obligations and that net
debt/annualized OCF and net debt/last twelve months OCF are helpful in
understanding and analyzing our level of indebtedness in relation to our
capital structure and earnings capabilities.
Some of the significant limitations associated with the use of OCF as
compared to operating income are that OCF does not consider the amount
of required reinvestment in depreciable fixed assets and ignores the
impact on our results of operations of items that management believes
are not characteristic of our underlying business operations. FCF should
not be understood to represent our ability to fund discretionary
amounts, as we have various contractual obligations which are not
deducted to arrive at FCF. We compensate for this limitation by
separately measuring and forecasting working capital. The significant
limitations associated with the use of Fixed Asset Additions (Accrual
Basis) as compared to purchase of fixed and intangible assets is that
Fixed Asset Additions (Accrual Basis) excludes timing differences from
payments of liabilities, including finance leases, related to purchase
of fixed and intangible assets. We exclude these amounts from Fixed
Asset Additions (Accrual Basis) because timing differences from payments
of liabilities, including the use of finance leases, are more related to
the cash management treasury function than to our management of fixed
asset purchases for long term operational performance and liquidity. The
significant limitation associated with the use of net debt as compared
to long term debt, net of current portion, is that net debt includes the
current portion of long term debt. This measure also assumes that all of
the cash and cash equivalents are available to service debt.
OCF is most directly comparable to the GAAP financial measure operating
income. FCF is most directly comparable to the GAAP financial measure
net cash provided by operating activities. Fixed Asset Additions
(Accrual Basis) is most directly comparable to the GAAP financial
measure purchase of fixed and intangible assets, as reported in our
statements of cash flows. Since these measures are not calculated in
accordance with GAAP, they should not be considered as substitutes for
operating income, net cash provided by operating activities and purchase
of fixed and intangible assets, respectively. Net debt is most directly
comparable to the GAAP financial measure long term debt (net of current
portion). Because non-GAAP financial measures are not standardized, it
may not be possible to compare our OCF, FCF, Fixed Asset Additions
(Accrual Basis) or Net debt with other companies' non-GAAP financial
measures that have the same or similar names.
The presentation of this supplemental information is not meant to be
considered in isolation or as a substitute for other measures of
financial performance reported in accordance with GAAP. These non-GAAP
financial measures reflect an additional way of viewing aspects of our
operations that, when viewed with our GAAP results and the accompanying
reconciliations to corresponding GAAP financial measures, provide a more
complete understanding of factors and trends affecting our business. We
encourage investors to review our financial statements and
publicly-filed reports in their entirety and to not rely on any single
The following tables present the reconciliations of OCF, FCF and Fixed
Asset Additions (Accrual Basis) and Net debt to their nearest measure of
financial performance in accordance with GAAP, and the calculations of
Net debt/Annualized OCF and Net debt/Last Twelve Months OCF.
Reconciliations of operating income before depreciation,
amortization, goodwill and intangible asset impairments
and restructuring and other charges (OCF) to GAAP operating income (in
£ millions) (unaudited)
Reconciliation of gross debt (including current portion) to net
debt, and calculations of net debt (as reported and
hedged) to last twelve months OCF
revolving facility (utilised portion)
Face value of €180m hedged to August 2016 at €1.1351. €180m were
repurchased on October 31, 2012 and November 30, 2012.
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