LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
|
|
|
|
|
|
|
|
|
|
June 30,
2018
|
|
December 31,
2017
|
|
in millions
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
862.4
|
|
|
$
|
1,672.4
|
|
Trade receivables, net
|
1,323.6
|
|
|
1,411.0
|
|
Derivative instruments (note 6)
|
385.3
|
|
|
494.4
|
|
Prepaid expenses
|
197.0
|
|
|
133.8
|
|
Current assets of discontinued operations (note 4)
|
425.2
|
|
|
268.1
|
|
Other current assets (notes 3 and 5)
|
378.0
|
|
|
351.9
|
|
Total current assets
|
3,571.5
|
|
|
4,331.6
|
|
Investments and related note receivables (including $2,164.1 million and $2,315.3 million, respectively, measured at fair value on a recurring basis) (note 5)
|
6,317.8
|
|
|
6,671.4
|
|
Property and equipment, net (note 8)
|
14,053.0
|
|
|
14,245.3
|
|
Goodwill (note 8)
|
13,999.2
|
|
|
14,354.1
|
|
Deferred tax assets (note 10)
|
3,135.6
|
|
|
3,133.1
|
|
Long-term assets of discontinued operations (note 4)
|
10,933.8
|
|
|
11,141.1
|
|
Other assets, net (notes 3, 6 and 8)
|
3,700.0
|
|
|
3,720.2
|
|
Total assets
|
$
|
55,710.9
|
|
|
$
|
57,596.8
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
(unaudited)
|
|
|
|
|
|
|
|
|
|
June 30,
2018
|
|
December 31,
2017
|
|
in millions
|
LIABILITIES AND EQUITY
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable
|
$
|
831.0
|
|
|
$
|
934.1
|
|
Deferred revenue
|
846.2
|
|
|
942.2
|
|
Current portion of debt and capital lease obligations (note 9)
|
3,392.6
|
|
|
3,680.1
|
|
Accrued capital expenditures
|
458.6
|
|
|
581.7
|
|
Current liabilities of discontinued operations (note 4)
|
1,873.1
|
|
|
1,587.7
|
|
Other accrued and current liabilities (notes 6 and 13)
|
2,583.4
|
|
|
2,240.0
|
|
Total current liabilities
|
9,984.9
|
|
|
9,965.8
|
|
Long-term debt and capital lease obligations (note 9)
|
28,425.9
|
|
|
29,023.4
|
|
Long-term liabilities of discontinued operations (note 4)
|
10,125.4
|
|
|
9,967.6
|
|
Other long-term liabilities (notes 6, 10, and 13)
|
2,422.8
|
|
|
2,247.0
|
|
Total liabilities
|
50,959.0
|
|
|
51,203.8
|
|
Commitments and contingencies (notes 6, 9, 10 and 15)
|
|
|
|
Equity (note 11):
|
|
|
|
Liberty Global shareholders:
|
|
|
|
Class A ordinary shares, $0.01 nominal value. Issued and outstanding 207,403,209 and 219,668,579 shares, respectively
|
2.1
|
|
|
2.2
|
|
Class B ordinary shares, $0.01 nominal value. Issued and outstanding 11,102,619 shares at each date
|
0.1
|
|
|
0.1
|
|
Class C ordinary shares, $0.01 nominal value. Issued and outstanding 555,820,059 and 584,332,055 shares, respectively
|
5.6
|
|
|
5.8
|
|
Additional paid-in capital
|
10,095.5
|
|
|
11,358.6
|
|
Accumulated deficit
|
(6,171.4
|
)
|
|
(6,217.6
|
)
|
Accumulated other comprehensive earnings, net of taxes
|
1,186.4
|
|
|
1,656.0
|
|
Treasury shares, at cost
|
(0.1
|
)
|
|
(0.1
|
)
|
Total Liberty Global shareholders
|
5,118.2
|
|
|
6,805.0
|
|
Noncontrolling interests
|
(366.3
|
)
|
|
(412.0
|
)
|
Total equity
|
4,751.9
|
|
|
6,393.0
|
|
Total liabilities and equity
|
$
|
55,710.9
|
|
|
$
|
57,596.8
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
June 30,
|
|
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions, except per share amounts
|
|
|
|
|
|
|
|
|
Revenue (notes 3, 5 and 16)
|
$
|
3,045.1
|
|
|
$
|
2,774.9
|
|
|
$
|
6,139.6
|
|
|
$
|
5,444.7
|
|
Operating costs and expenses (exclusive of depreciation and amortization, shown separately below):
|
|
|
|
|
|
|
|
Programming and other direct costs of services
|
818.0
|
|
|
704.6
|
|
|
1,677.4
|
|
|
1,418.1
|
|
Other operating (note 12)
|
431.2
|
|
|
409.0
|
|
|
899.2
|
|
|
804.9
|
|
Selling, general and administrative (
SG&A
) (note 12)
|
531.6
|
|
|
517.3
|
|
|
1,069.6
|
|
|
1,000.2
|
|
Depreciation and amortization
|
970.2
|
|
|
922.0
|
|
|
2,017.5
|
|
|
1,789.7
|
|
Impairment, restructuring and other operating items, net (note 13)
|
30.2
|
|
|
13.1
|
|
|
91.6
|
|
|
6.4
|
|
|
2,781.2
|
|
|
2,566.0
|
|
|
5,755.3
|
|
|
5,019.3
|
|
Operating income
|
263.9
|
|
|
208.9
|
|
|
384.3
|
|
|
425.4
|
|
Non-operating income (expense):
|
|
|
|
|
|
|
|
Interest expense
|
(381.1
|
)
|
|
(348.8
|
)
|
|
(757.0
|
)
|
|
(688.3
|
)
|
Realized and unrealized gains (
losses)
on derivative instruments, net (note 6)
|
675.5
|
|
|
(351.7
|
)
|
|
464.2
|
|
|
(596.1
|
)
|
Foreign currency transaction gains (losses), net
|
52.1
|
|
|
(18.2
|
)
|
|
(49.6
|
)
|
|
11.0
|
|
Realized and unrealized gains (
losses)
due to changes in fair values of certain investments and debt, net (notes 5, 7 and 9)
|
61.5
|
|
|
(141.4
|
)
|
|
4.3
|
|
|
(42.6
|
)
|
Losses on debt modification and extinguishment, net (note 9)
|
(20.1
|
)
|
|
(53.6
|
)
|
|
(22.7
|
)
|
|
(98.9
|
)
|
Share of losses of affiliates, net (note 5)
|
(82.3
|
)
|
|
(3.6
|
)
|
|
(118.8
|
)
|
|
(19.3
|
)
|
Other income, net
|
6.4
|
|
|
15.8
|
|
|
16.2
|
|
|
32.4
|
|
|
312.0
|
|
|
(901.5
|
)
|
|
(463.4
|
)
|
|
(1,401.8
|
)
|
Earnings (loss)
from continuing operations before income taxes
|
575.9
|
|
|
(692.6
|
)
|
|
(79.1
|
)
|
|
(976.4
|
)
|
Income tax benefit (expense)
(note 10)
|
92.8
|
|
|
(68.7
|
)
|
|
(617.2
|
)
|
|
(150.4
|
)
|
Earnings (loss) from continuing operations
|
668.7
|
|
|
(761.3
|
)
|
|
(696.3
|
)
|
|
(1,126.8
|
)
|
Earnings from discontinued operations, net of taxes (note 4)
|
281.8
|
|
|
108.9
|
|
|
468.2
|
|
|
207.2
|
|
Net earnings (loss)
|
950.5
|
|
|
(652.4
|
)
|
|
(228.1
|
)
|
|
(919.6
|
)
|
Net earnings attributable to noncontrolling interests
|
(37.9
|
)
|
|
(21.9
|
)
|
|
(45.8
|
)
|
|
(74.9
|
)
|
Net earnings (
loss)
attributable to Liberty Global shareholders
|
$
|
912.6
|
|
|
$
|
(674.3
|
)
|
|
$
|
(273.9
|
)
|
|
$
|
(994.5
|
)
|
|
|
|
|
|
|
|
|
Basic earnings (loss) from continuing operations attributable to Liberty Global shareholders per share (note 14)
|
$
|
0.80
|
|
|
$
|
(0.90
|
)
|
|
$
|
(0.93
|
)
|
|
$
|
(1.34
|
)
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) from continuing operations attributable to Liberty Global shareholders per share (note 14)
|
$
|
0.80
|
|
|
$
|
(0.90
|
)
|
|
$
|
(0.93
|
)
|
|
$
|
(1.34
|
)
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
June 30,
|
|
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
$
|
950.5
|
|
|
$
|
(652.4
|
)
|
|
$
|
(228.1
|
)
|
|
$
|
(919.6
|
)
|
Other comprehensive earnings (loss), net of taxes:
|
|
|
|
|
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
(1,012.6
|
)
|
|
875.8
|
|
|
(431.7
|
)
|
|
1,122.2
|
|
Pension-related adjustments and other
|
(6.2
|
)
|
|
(1.1
|
)
|
|
(7.1
|
)
|
|
(2.6
|
)
|
Other comprehensive earnings (loss) from continuing operations
|
(1,018.8
|
)
|
|
874.7
|
|
|
(438.8
|
)
|
|
1,119.6
|
|
Other comprehensive loss from discontinued operations
|
(45.2
|
)
|
|
(4.2
|
)
|
|
(33.0
|
)
|
|
(9.2
|
)
|
Other comprehensive earnings (loss)
|
(1,064.0
|
)
|
|
870.5
|
|
|
(471.8
|
)
|
|
1,110.4
|
|
Comprehensive earnings (loss)
|
(113.5
|
)
|
|
218.1
|
|
|
(699.9
|
)
|
|
190.8
|
|
Comprehensive earnings attributable to noncontrolling interests
|
(35.7
|
)
|
|
(22.0
|
)
|
|
(43.6
|
)
|
|
(74.5
|
)
|
Comprehensive earnings (
loss)
attributable to Liberty Global shareholders
|
$
|
(149.2
|
)
|
|
$
|
196.1
|
|
|
$
|
(743.5
|
)
|
|
$
|
116.3
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liberty Global shareholders
|
|
Non-controlling
interests
|
|
Total
equity
|
|
Ordinary shares
|
|
Additional
paid-in
capital
|
|
Accumulated
deficit
|
|
Accumulated
other
comprehensive
earnings, net of taxes
|
|
Treasury shares, at cost
|
|
Total Liberty Global
shareholders
|
|
|
Class A
|
|
Class B
|
|
Class C
|
|
|
|
|
|
|
|
in millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2018, before effect of accounting change
|
$
|
2.2
|
|
|
$
|
0.1
|
|
|
$
|
5.8
|
|
|
$
|
11,358.6
|
|
|
$
|
(6,217.6
|
)
|
|
$
|
1,656.0
|
|
|
$
|
(0.1
|
)
|
|
$
|
6,805.0
|
|
|
$
|
(412.0
|
)
|
|
$
|
6,393.0
|
|
Accounting change (note 2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
320.1
|
|
|
—
|
|
|
—
|
|
|
320.1
|
|
|
4.4
|
|
|
324.5
|
|
Balance at January 1, 2018, as adjusted for accounting change
|
2.2
|
|
|
0.1
|
|
|
5.8
|
|
|
11,358.6
|
|
|
(5,897.5
|
)
|
|
1,656.0
|
|
|
(0.1
|
)
|
|
7,125.1
|
|
|
(407.6
|
)
|
|
6,717.5
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(273.9
|
)
|
|
—
|
|
|
—
|
|
|
(273.9
|
)
|
|
45.8
|
|
|
(228.1
|
)
|
Other comprehensive loss, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(469.6
|
)
|
|
—
|
|
|
(469.6
|
)
|
|
(2.2
|
)
|
|
(471.8
|
)
|
Repurchase and cancellation of Liberty Global ordinary shares (note 11)
|
(0.1
|
)
|
|
—
|
|
|
(0.2
|
)
|
|
(1,288.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,288.3
|
)
|
|
—
|
|
|
(1,288.3
|
)
|
Share-based compensation (note 12)
|
—
|
|
|
—
|
|
|
—
|
|
|
84.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
84.4
|
|
|
—
|
|
|
84.4
|
|
Adjustments due to changes in subsidiaries’ equity and other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(59.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(59.5
|
)
|
|
(2.3
|
)
|
|
(61.8
|
)
|
Balance at June 30, 2018
|
$
|
2.1
|
|
|
$
|
0.1
|
|
|
$
|
5.6
|
|
|
$
|
10,095.5
|
|
|
$
|
(6,171.4
|
)
|
|
$
|
1,186.4
|
|
|
$
|
(0.1
|
)
|
|
$
|
5,118.2
|
|
|
$
|
(366.3
|
)
|
|
$
|
4,751.9
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
June 30,
|
|
2018
|
|
2017
|
|
in millions
|
Cash flows from operating activities:
|
|
|
|
Net loss
|
$
|
(228.1
|
)
|
|
$
|
(919.6
|
)
|
Earnings from discontinued operations
|
468.2
|
|
|
207.2
|
|
Loss from continuing operations
|
(696.3
|
)
|
|
(1,126.8
|
)
|
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities from continuing operations:
|
|
|
|
Share-based compensation expense
|
88.2
|
|
|
80.3
|
|
Depreciation and amortization
|
2,017.5
|
|
|
1,789.7
|
|
Impairment, restructuring and other operating items, net
|
91.6
|
|
|
6.4
|
|
Amortization of deferred financing costs and non-cash interest
|
29.1
|
|
|
31.6
|
|
Realized and unrealized losses (gains) on derivative instruments, net
|
(464.2
|
)
|
|
596.1
|
|
Foreign currency transaction losses (gains), net
|
49.6
|
|
|
(11.0
|
)
|
Realized and unrealized losses
(gains)
due to changes in fair values of certain investments and debt, net
|
(4.3
|
)
|
|
42.6
|
|
Losses on debt modification and extinguishment, net
|
22.7
|
|
|
98.9
|
|
Share of losses of affiliates, net
|
118.8
|
|
|
19.3
|
|
Deferred income tax benefit
|
(125.3
|
)
|
|
(25.4
|
)
|
Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions
|
885.4
|
|
|
(48.1
|
)
|
Dividends from affiliates and others
|
130.1
|
|
|
104.8
|
|
Net cash provided by operating activities of continuing operations
|
2,142.9
|
|
|
1,558.4
|
|
Net cash provided by operating activities of discontinued operations
|
1,122.2
|
|
|
1,153.2
|
|
Net cash provided by operating activities
|
3,265.1
|
|
|
2,711.6
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
Capital expenditures, net
|
(797.8
|
)
|
|
(588.0
|
)
|
Cash paid in connection with acquisitions, net of cash acquired
|
(71.7
|
)
|
|
(438.6
|
)
|
Investments in and loans to affiliates and others
|
(56.8
|
)
|
|
(64.7
|
)
|
Distributions received from affiliates
|
—
|
|
|
1,569.4
|
|
Equalization payment related to the VodafoneZiggo JV Transaction
|
—
|
|
|
845.3
|
|
Other investing activities, net
|
30.0
|
|
|
(4.3
|
)
|
Net cash provided (used) by investing activities of continuing operations
|
(896.3
|
)
|
|
1,319.1
|
|
Net cash used by investing activities of discontinued operations
|
(281.0
|
)
|
|
(607.0
|
)
|
Net cash provided (used) by investing activities
|
$
|
(1,177.3
|
)
|
|
$
|
712.1
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (continued)
(unaudited)
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
June 30,
|
|
2018
|
|
2017
|
|
in millions
|
Cash flows from financing activities:
|
|
|
|
Repayments and repurchases of debt and capital lease obligations
|
$
|
(3,836.4
|
)
|
|
$
|
(4,698.3
|
)
|
Borrowings of debt
|
2,146.5
|
|
|
4,597.9
|
|
Repurchase of Liberty Global ordinary shares
|
(1,276.2
|
)
|
|
(2,108.7
|
)
|
Payment of financing costs and debt premiums
|
(39.5
|
)
|
|
(122.0
|
)
|
Net cash received (paid) related to derivative instruments
|
10.2
|
|
|
(139.0
|
)
|
Value-added taxes (
VAT
) paid on behalf of the VodafoneZiggo JV
|
—
|
|
|
(162.6
|
)
|
Other financing activities, net
|
(42.1
|
)
|
|
(44.3
|
)
|
Net cash used by financing activities of continuing operations
|
(3,037.5
|
)
|
|
(2,677.0
|
)
|
Net cash provided (used) by financing activities of discontinued operations
|
155.3
|
|
|
(80.0
|
)
|
Net cash used by financing activities
|
(2,882.2
|
)
|
|
(2,757.0
|
)
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents and restricted cash:
|
|
|
|
Continuing operations
|
(9.3
|
)
|
|
93.7
|
|
Discontinued operations
|
—
|
|
|
(2.7
|
)
|
Total
|
(9.3
|
)
|
|
91.0
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents and restricted cash:
|
|
|
|
Continuing operations
|
(1,800.2
|
)
|
|
294.2
|
|
Discontinued operations - Vodafone Disposal Group and UPC Austria
|
996.5
|
|
|
405.5
|
|
Discontinued operations - LiLAC Group
|
—
|
|
|
58.0
|
|
Total
|
$
|
(803.7
|
)
|
|
$
|
757.7
|
|
|
|
|
|
Cash and cash equivalents and restricted cash:
|
|
|
|
Beginning of period
|
$
|
1,683.0
|
|
|
$
|
1,087.4
|
|
Net increase (decrease) (excluding, during the 2017 period, LiLAC Group activity related to cash balances included in discontinued operations)
|
(803.7
|
)
|
|
699.7
|
|
End of period
|
$
|
879.3
|
|
|
$
|
1,787.1
|
|
|
|
|
|
Cash paid for interest:
|
|
|
|
Continuing operations
|
$
|
714.8
|
|
|
$
|
717.8
|
|
Discontinued operations
|
222.3
|
|
|
432.6
|
|
Total
|
$
|
937.1
|
|
|
$
|
1,150.4
|
|
|
|
|
|
Net cash paid for taxes:
|
|
|
|
Continuing operations
|
$
|
174.4
|
|
|
$
|
216.0
|
|
Discontinued operations
|
12.8
|
|
|
70.4
|
|
Total
|
$
|
187.2
|
|
|
$
|
286.4
|
|
|
|
|
|
Details of end of period cash and cash equivalents and restricted cash:
|
|
|
|
Cash and cash equivalents
|
$
|
862.4
|
|
|
$
|
1,090.7
|
|
Restricted cash included in other current assets and other assets, net
|
14.9
|
|
|
694.4
|
|
Restricted cash included in current and long-term assets of discontinued operations
|
2.0
|
|
|
2.0
|
|
Total cash and cash equivalents and restricted cash
|
$
|
879.3
|
|
|
$
|
1,787.1
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements
June 30, 2018
(unaudited)
(
1
)
Basis of Presentation
Liberty Global plc (
Liberty Global
) is a public limited company organized under the laws of England and Wales. In these notes, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to
Liberty Global
or collectively to
Liberty Global
and its subsidiaries. We are an international provider of video, broadband internet, fixed-line telephony, mobile and other communications services to residential customers and businesses in Europe.
Our continuing operations comprise businesses that provide residential and business-to-business (
B2B
) communication services in (i) the United Kingdom (
U.K.
) and Ireland through Virgin Media Inc. (
Virgin Media
), a wholly-owned subsidiary of
Liberty Global
, (ii) Belgium through Telenet Group Holding N.V. (
Telenet
), a
57.7%
-owned subsidiary, and (iii) Switzerland and Poland through UPC Holding B.V. and (iv) Slovakia through UPC Broadband Slovakia s.r.o. UPC Holding B.V. and UPC Broadband Slovakia s.r.o., which are each wholly-owned subsidiaries of
Liberty Global
, are collectively referred to herein as “
UPC Holding
.” In addition, we own a
50%
noncontrolling interest in the
VodafoneZiggo JV
(as defined in note
5
), which provides video, broadband internet, fixed-line telephony, mobile and
B2B
services in the Netherlands.
In addition, (i) we currently provide residential and
B2B
communication services in Germany through Unitymedia GmbH (
Unitymedia
)
and in Romania, Hungary and the Czech Republic through UPC Holding B.V. and (ii) through July 31, 2018, we provided residential and
B2B
communication services in Austria through UPC Holding B.V. On May 9, 2018, we reached an agreement to sell our operations in Germany, Romania, Hungary and the Czech Republic, and on July 31, 2018, we completed the sale of our operations in Austria. In these condensed consolidated financial statements, the operations in each of these countries are reflected as discontinued operations for all periods presented. For additional information regarding these pending and completed dispositions, see note
4
.
Prior to the completion of the
Split-off Transaction
(as defined and described in note
4
), we also provided residential and
B2B
services in (i)
18
countries, predominantly in Latin America and the Caribbean, through Cable &Wireless Communications Limited (
C&W
), (ii) Chile through VTR.com SpA (
VTR
) and (iii) Puerto Rico through Liberty Cablevision of Puerto Rico LLC (
Liberty Puerto Rico
).
C&W
and
VTR
were wholly-owned subsidiaries, and Liberty Puerto Rico was an entity in which we held a
60.0%
ownership interest.
C&W
also provided (a)
B2B
services in certain other countries in Latin America and the Caribbean and (b) wholesale services over its sub-sea and terrestrial networks that connected over
40
markets in that region. The operations of
C&W
,
VTR
,
Liberty Puerto Rico
and certain other entities that were associated with our businesses in Latin America and the Caribbean are collectively referred to herein as the “
LiLAC Group
.” As a result of the
Split-off Transaction
, the entities attributed to the
LiLAC Group
are reflected as discontinued operations in our condensed consolidated statements of operations and cash flows for the three and six months ended June 30, 2017.
Unless otherwise noted, the amounts presented in these notes relate only to our continuing operations.
Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (
U.S. GAAP
) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information required by
U.S. GAAP
or Securities and Exchange Commission rules and regulations for complete financial statements. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with our
2017
consolidated financial statements and notes thereto included in our
2017
Annual Report on Form 10-K (our
10-K
).
The preparation of financial statements in conformity with
U.S. GAAP
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates and assumptions are used in accounting for, among other things, the valuation of acquisition-related assets and liabilities, allowances for uncollectible accounts, certain components of revenue, programming and copyright costs, deferred income taxes and related valuation allowances, loss contingencies, fair value measurements, impairment assessments, capitalization of internal costs associated with construction and installation activities, useful lives of long-lived assets, share-based compensation and actuarial liabilities associated with certain benefit plans. Actual results could differ from those estimates.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
Unless otherwise indicated, ownership percentages and convenience translations into United States (
U.S.
) dollars are calculated as of
June 30, 2018
.
Certain prior period amounts have been reclassified to conform to the current period presentation.
(
2
)
Accounting Changes and Recent Accounting Pronouncements
Accounting Changes
ASU 2014-09
In May 2014, the Financial Accounting Standards Board (
FASB
) issued Accounting Standards Update (
ASU
) No. 2014-09,
Revenue from Contracts with Customers
(
ASU 2014-09
), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of goods or services to customers. We adopted
ASU 2014-09
effective January 1, 2018 by recording the cumulative effect of the adoption to our accumulated deficit. We applied the new standard to contracts that were not complete at January 1, 2018. The comparative information for the
three and six months ended June 30, 2017
contained within these condensed consolidated financial statements and notes has not been restated and continues to be reported under the accounting standards in effect for such period. The implementation of
ASU 2014-09
did not have a material impact on our consolidated financial statements.
The principal impacts of
ASU 2014-09
on our revenue recognition policies relate to our accounting for (i) time-limited discounts and free service periods provided to our customers and (ii) certain upfront fees charged to our customers, as follows:
|
|
•
|
When we enter into contracts to provide services to our customers, we often provide time-limited discounts or free service periods. Under previous accounting rules, we recognized revenue, net of discounts, during the promotional periods and did not recognize any revenue during free service periods. Under
ASU 2014-09
, revenue recognition for those contracts that contain substantive termination penalties is accelerated, as the impact of the discounts or free service periods is recognized uniformly over the contractual period. For contracts that do not have substantive termination penalties, we continue to record the impacts of partial or full discounts during the applicable promotional periods.
|
|
|
•
|
When we enter into contracts to provide services to our customers, we often charge installation or other upfront fees. Under previous accounting rules, installation fees related to services provided over our cable networks were recognized as revenue during the period in which the installation occurred to the extent these fees were equal to or less than direct selling costs. Under
ASU 2014-09
, these fees are generally deferred and recognized as revenue over the contractual period, or longer if the upfront fee results in a material renewal right.
|
ASU 2014-09
also impacted our accounting for certain upfront costs directly associated with obtaining and fulfilling customer contracts. Under our previous policy, these costs were expensed as incurred unless the costs were in the scope of another accounting topic that allowed for capitalization. Under
ASU 2014-09
, certain upfront costs associated with contracts that have substantive termination penalties and a term of one year or more are recognized as assets and amortized to operating costs and expenses over the applicable period benefited.
For additional information regarding our adoption of
ASU 2014-09
, see note
3
.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
The cumulative effect of the adoption of
ASU 2014-09
on our summary balance sheet information as of January 1, 2018 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
ASU 2014-09 Adjustments
|
|
Balance at January 1, 2018
|
|
in millions
|
Assets:
|
|
|
|
|
|
Trade receivables, net
|
$
|
1,411.0
|
|
|
(0.7
|
)
|
|
$
|
1,410.3
|
|
Current assets of discontinued operations
|
$
|
268.1
|
|
|
98.2
|
|
|
$
|
366.3
|
|
Other current assets
|
$
|
351.9
|
|
|
76.6
|
|
|
$
|
428.5
|
|
Investments and related note receivables (a)
|
$
|
6,671.4
|
|
|
191.2
|
|
|
$
|
6,862.6
|
|
Deferred tax assets
|
$
|
3,133.1
|
|
|
(16.0
|
)
|
|
$
|
3,117.1
|
|
Long-term assets of discontinued operations
|
$
|
11,141.1
|
|
|
29.1
|
|
|
$
|
11,170.2
|
|
Other assets, net
|
$
|
3,720.2
|
|
|
21.4
|
|
|
$
|
3,741.6
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Deferred revenue
|
$
|
942.2
|
|
|
5.6
|
|
|
$
|
947.8
|
|
Current liabilities of discontinued operations
|
$
|
1,587.7
|
|
|
26.7
|
|
|
$
|
1,614.4
|
|
Other accrued and current liabilities
|
$
|
2,240.0
|
|
|
1.2
|
|
|
$
|
2,241.2
|
|
Long-term liabilities of discontinued operations
|
$
|
9,967.6
|
|
|
39.1
|
|
|
$
|
10,006.7
|
|
Other long-term liabilities
|
$
|
2,247.0
|
|
|
2.7
|
|
|
$
|
2,249.7
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
Accumulated deficit (a)
|
$
|
(6,217.6
|
)
|
|
320.1
|
|
|
$
|
(5,897.5
|
)
|
Noncontrolling interests
|
$
|
(412.0
|
)
|
|
4.4
|
|
|
$
|
(407.6
|
)
|
_______________
|
|
(a)
|
The
ASU 2014-09
adjustment amounts include the impact of our share of the
VodafoneZiggo JV
’s adjustment to its owners’ equity.
|
The impact of our adoption of
ASU 2014-09
on our condensed consolidated balance sheet as of
June 30, 2018
was not materially different from the impacts set forth in the above January 1, 2018 summary balance sheet information. Similarly, the adoption of
ASU 2014-09
did not have a material impact on our condensed consolidated statement of operations for the
three and six months ended June 30, 2018
.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
ASU 2017-07
In March 2017, the
FASB
issued
ASU
No. 2017-07,
Improving the Presentation of the Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
(
ASU 2017-07
), which changes the presentation of periodic benefit cost components. Under
ASU 2017-07
, we continue to present the service component of our net benefit cost as a component of operating income but present the other components of our net benefit cost, which can include credits, within non-operating income (expense) in our consolidated statements of operations. We adopted
ASU 2017-07
on January 1, 2018 on a retrospective basis, which resulted in the reclassification of credits from SG&A expenses to other income, net, of
$9.2 million
for the six months ended June 30, 2017.
ASU 2016-01
In January 2016, the
FASB
issued
ASU
No. 2016-01,
Recognition and Measurement of Financial Assets and Financial Liabilities
(
ASU 2016-01
), which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments.
ASU 2016-01
primarily impacts our accounting for certain equity investments that were previously accounted for under the cost method. Under
ASU 2016-01
, these investments, which do not have readily determinable fair values, are accounted for at cost minus impairment, adjusted for any observable price changes of similar investments of the same issuer. We adopted the amendments of
ASU 2016-01
related to equity securities without readily determinable fair values on January 1, 2018 on a prospective basis.
ASU 2016-18
In November 2016, the
FASB
issued
ASU
No. 2016-18,
Restricted Cash
(
ASU 2016-18
), which requires the change in restricted cash to be included together with the change in cash and cash equivalents in our consolidated statement of cash flows. We adopted
ASU 2016-18
on January 1, 2018 on a retrospective basis.
Recent Accounting Pronouncements
ASU 2016-02
In February 2016, the
FASB
issued
ASU
No. 2016-02,
Leases
(
ASU 2016-02
), which, for most leases, will result in lessees recognizing right-of-use assets and lease liabilities on the balance sheet and additional disclosures.
ASU 2016-02
, as amended by
ASU
No. 2018-11,
Targeted Improvements
, requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using one of two modified retrospective approaches. A number of optional practical expedients may be applied in transition.
ASU 2016-02
is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We will adopt
ASU 2016-02
on January 1, 2019 by recording the cumulative effect of adoption to our accumulated deficit.
Although we are currently evaluating the effect that
ASU 2016-02
will have on our consolidated financial statements, the main impact of the adoption of this standard will be the recognition of right-of-use assets and lease liabilities in our consolidated balance sheet for those leases classified as operating leases under current
U.S. GAAP
. We do not intend to recognize right-of-use assets or lease liabilities for leases with a term of 12 months or less, as permitted by the short-term lease practical expedient in the standard. We also do not plan to apply the practical expedient that permits a lessee to account for lease and non-lease components in a contract as a single lease component and, accordingly, we will continue to account for these components separately. In transition, we plan to apply the practical expedients that permit us not to reassess (i) whether expired or existing contracts contain a lease under the new standard, (ii) the lease classification for expired or existing leases or (iii) whether previously-capitalized initial direct costs would qualify for capitalization under the new standard. In addition, we do not intend to use hindsight during transition.
For a summary of our undiscounted future minimum lease payments under non-cancellable operating leases as of
June 30, 2018
, see note
15
. We currently do not expect ASU 2016-02 to have a significant impact on our consolidated statements of operations or cash flows.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
(
3
)
Revenue Recognition and Related Costs
Policies
Our revenue recognition and certain other accounting policies, as revised to reflect the impacts of our adoption of
ASU 2014-09
, are set forth below.
Service Revenue — Cable Networks.
We recognize revenue from the provision of video, broadband internet and fixed-line telephony services over our cable network to customers in the periods the related services are provided, with the exception of revenue recognized pursuant to certain contracts that contain promotional discounts, as described below. Installation fees related to services provided over our cable network are generally deferred and recognized as revenue over the contractual period, or longer if the upfront fee results in a material renewal right.
Sale of Multiple Products and Services.
We sell video, broadband internet, fixed-line telephony and, in most of our markets, mobile services to our customers in bundled packages at a rate lower than if the customer purchased each product on a standalone basis. Revenue from bundled packages generally is allocated proportionally to the individual products or services based on the relative standalone selling price for each respective product or service.
Mobile Revenue — General.
Consideration from mobile contracts is allocated to the airtime service component and the handset component based on the relative standalone selling prices of each component. In markets where we offer handsets and airtime services in separate contracts entered into at the same time, we account for these contracts as a single contract.
Mobile Revenue — Airtime Services.
We recognize revenue from mobile services in the periods in which the related services are provided. Revenue from pre-pay customers is deferred prior to the commencement of services and recognized as the services are rendered or usage rights expire.
Mobile Revenue — Handset Revenue.
Revenue from the sale of handsets is recognized at the point in which the goods have been transferred to the customer. Some of our mobile handset contracts that permit the customer to take control of the handset upfront and pay for the handset in installments over a contractual period may contain a significant financing component. For contracts with terms of one year or more, we recognize any significant financing component as revenue over the contractual period using the effective interest method. We do not record the effect of a significant financing component if the contractual period is less than one year.
B2B Revenue.
We defer upfront installation and certain nonrecurring fees received on B2B contracts where we maintain ownership of the installed equipment. The deferred fees are amortized into revenue on a straight-line basis, generally over the longer of the term of the arrangement or the expected period of performance.
Contract Costs.
Incremental costs to obtain a contract with a customer, such as incremental sales commissions, are generally recognized as assets and amortized to SG&A expenses over the applicable period benefited, which generally is the contract life. If, however, the amortization period is less than one year, we expense such costs in the period incurred.
Contract fulfillment costs, such as porting costs, are recognized as assets and amortized to other operating costs over the applicable period benefited, which is generally the substantive contract term for the related service contract.
Promotional Discounts.
For subscriber promotions, such as discounted or free services during an introductory period, revenue is recognized uniformly over the contractual period if the contract has substantive termination penalties. If a contract does not have substantive termination penalties, revenue is recognized only to the extent of the discounted monthly fees charged to the subscriber, if any.
Subscriber Advance Payments.
Payments received in advance for the services we provide are deferred and recognized as revenue when the associated services are provided.
Sales, Use and Other Value-Added Taxes.
Revenue is recorded net of applicable sales, use and other value-added taxes.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
For a disaggregation of our revenue by major category and by reportable and geographic segment, see note
16
.
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing our customers. We record a trade receivable when we have transferred goods or services to a customer but have not yet received payment. Our trade receivables are reported net of an allowance for doubtful accounts. Such allowance aggregated
$57.0 million
and
$89.5 million
at
June 30, 2018
and January 1, 2018, respectively.
If we transfer goods or services to a customer but do not have an unconditional right to payment, we record a contract asset. Contract assets typically arise from the uniform recognition of introductory promotional discounts over the contract period and accrued revenue for handset sales. Our contract assets were
$27.7 million
and
$26.1 million
as of
June 30, 2018
and January 1, 2018, respectively. The current and long-term portions of our contract asset balance at
June 30, 2018
are included within other current assets and other assets, net, respectively, in our condensed consolidated balance sheet.
We record deferred revenue when we receive payment prior to transferring goods or services to a customer. We primarily defer revenue for (i) installation and other upfront services and (ii) other services that are invoiced prior to when services are provided.
Our deferred revenue balances were
$889.2 million
and
$1,005.2 million
as of
June 30, 2018
and January 1, 2018, respectively. The decrease in deferred revenue for the
six months ended June 30, 2018
is primarily due to
$801.8 million
of revenue recognized that was included in our deferred revenue balance at January 1, 2018, partially offset by advanced billings in certain markets. The current and long-term portions of our deferred revenue balance at
June 30, 2018
are included within deferred revenue and other long-term liabilities, respectively, in our condensed consolidated balance sheet.
Contract Costs
Our aggregate assets associated with incremental costs to obtain and fulfill our contracts were
$68.4 million
and
$68.1 million
at
June 30, 2018
and January 1, 2018, respectively. The current and long-term portions of our assets related to contract costs at
June 30, 2018
are included within other current assets and other assets, net, respectively, in our condensed consolidated balance sheet. We amortized
$28.5 million
and
$51.3 million
to operating costs and expenses during the
three and six months ended June 30, 2018
, respectively, related to these assets.
Unsatisfied Performance Obligations
A large portion of our revenue is derived from customers who are not subject to contracts. Revenue from customers who are subject to contracts is generally recognized over the term of such contracts, which is typically
12 months
for our residential service,
one
to
three years
for our mobile contracts and
one
to
five years
for our
B2B
contracts.
(
4
)
Acquisitions and Dispositions
2017 Acquisition
On
June 19, 2017
,
Telenet
acquired Coditel Brabant sprl, operating under the SFR brand (
SFR BeLux
), for a cash and debt free purchase price of
€369.0 million
(
$410.3 million
at the applicable rates) (the
SFR BeLux Acquisition
) after post-closing adjustments.
SFR BeLux
provides cable and mobile services to households and businesses in Belgium and Luxembourg.
Pending and Completed Dispositions
Vodafone Disposal Group
On May 9, 2018, we reached an agreement (the
Vodafone Agreement
) to sell our operations in Germany, Romania, Hungary and the Czech Republic to Vodafone Group plc (
Vodafone
). The cash proceeds that we receive from the transaction will be calculated on the basis of the agreed enterprise value adjusted for the net debt and working capital of such businesses as of the closing date of the transaction, as well as other post-closing adjustments. Based on the net debt and working capital of such
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
businesses as of December 31, 2017, the cash proceeds would be approximately
€10.6 billion
(
$12.4 billion
). The operations of Germany, Romania, Hungary and the Czech Republic are collectively referred to herein as the “
Vodafone Disposal Group
.”
Closing of the transaction is subject to various conditions, including regulatory approval, which is not expected until mid-2019. The
Vodafone Agreement
contains certain termination rights for both our company and
Vodafone
, including if closing has not occurred by November 9, 2019, or May 9, 2020 in certain limited circumstances. If the
Vodafone Agreement
terminates because the condition to obtain antitrust approval is not met,
Vodafone
has agreed to pay us a compensatory payment of
€250.0 million
(
$291.9 million
). Pursuant to the
Vodafone Agreement
, our company will retain all cash generated from the
Vodafone Disposal Group
through the closing of the transaction.
In connection with the sale of the
Vodafone Disposal Group
, we have agreed to provide certain transitional services for a period of up to
four years
. These services principally comprise network and information technology-related functions. The annual charges will depend on the actual level of services required by
Vodafone
.
UPC Austria
On July 31, 2018, we completed the sale of our Austrian operations, “
UPC Austria
,” to a third party for an enterprise value of
€1.9 billion
(
$2.2 billion
at the transaction date). After considering debt, working capital and minority interest adjustments, we received net cash proceeds of
€1.8 billion
(
$2.1 billion
at the transaction date). A portion of the net proceeds were used to repay or redeem an aggregate
$1.5 billion
(equivalent based on the applicable June 30, 2018 exchange rates) principal amount of our outstanding debt, including (i) the repayment of
$913.8 million
(equivalent) principal amount under the UPC Holding Bank Facility, (ii) the redemption of
$70.1 million
(equivalent) principal amount of the UPCB SPE Notes and (iii) the redemption of
$519.9 million
(equivalent) principal amount of the VM Notes. The remaining net proceeds from the sale of
UPC Austria
are expected to be used for general corporate purposes, including an additional
$500.0 million
of share repurchases, as further described in note
11
.
In connection with the sale of
UPC Austria
, we have agreed to provide certain transitional services for a period of up to
four years
. These services principally comprise network and information technology-related functions. The annual charges will depend on the actual level of services required by the purchaser.
Liberty Global
will also allow the use of the UPC brand for a transitional period of up to
three years
as part of the transaction.
Split-off Transaction
Prior to December 29, 2017, our share capital included (i) Liberty Global Class A, Class B and Class C ordinary shares (collectively,
Liberty Global Share
s
) and (ii) LiLAC Class A, Class B and Class C (collectively,
LiLAC Share
s
). On December 29, 2017, in order to effect the split-off of the
LiLAC Group
(the
Split-off Transaction
), we distributed
100%
of the common shares (the
Distribution
) of Liberty Latin America Ltd. (
Liberty Latin America
) to the holders of our then outstanding
LiLAC Share
s. Just prior to the completion of the
Split-off Transaction
, all of the businesses, assets and liabilities of the
LiLAC Group
were transferred to
Liberty Latin America
, which was then a wholly-owned subsidiary of
Liberty Global
. Following the
Distribution
, the
LiLAC Share
s were
redesignated as deferred shares (which had virtually no economic rights) and
Liberty Latin America
became an independent publicly-traded company that is no longer consolidated by
Liberty Global
.
No
gain or loss was recognized in connection with the
Split-off Transaction
.
In connection with the
Split-off Transaction
, we entered into several agreements that govern certain transactions and other matters between our company and
Liberty Latin America
(the
Split-off Agreements
). During the
six months ended June 30, 2018
, the impacts of the
Split-off Agreements
and other normal recurring transactions between our company and
Liberty Latin America
were not material.
Presentation of Discontinued Operations
Effective with the signing of the
Vodafone Agreement
, we began presenting the
Vodafone Disposal Group
as discontinued operations and, accordingly, we no longer depreciate or amortize the long-lived assets of such group. From December 22, 2017, the date we reached an agreement to sell
UPC Austria
, through the signing of the
Vodafone Agreement
, we accounted for
UPC Austria
as held for sale but did not present such entity as a discontinued operation as this disposal was not considered to be a
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
strategic shift that would have a major effect on our operations and financial results. We ceased to depreciate or amortize the long-lived assets of
UPC Austria
on December 22, 2017. Effective with the signing of the
Vodafone Agreement
and in consideration of the additional disposals contemplated therein, we began presenting
UPC Austria
as a discontinued operation. Accordingly,
UPC Austria
and the
Vodafone Disposal Group
are presented as discontinued operations in our condensed consolidated balance sheets, statements of operations and cash flows for all periods presented. Our operations in Romania, Hungary and the Czech Republic are held through
UPC Holding
, as was
UPC Austria
prior to its sale on July 31, 2018. No debt, interest or derivative instruments of the
UPC Holding
borrowing group, other than amounts that are direct obligations of the entities to be disposed, has been allocated to discontinued operations. Conversely, all of Unitymedia’s debt, interest and derivative instruments are included in discontinued operations as they are direct obligations of entities within the
Vodafone Disposal Group
. As discussed above, a portion of the proceeds from the disposition of
UPC Austria
was used to pay down the debt of the
UPC Holding
borrowing group. In addition, we expect that a portion of the proceeds from the disposition of the Vodafone Disposal Group will be used to pay down the debt of the
UPC Holding
borrowing group.
In addition, the entities comprising the
LiLAC Group
are reflected as discontinued operations in our condensed consolidated statements of operations and cash flows for the three and six months ended June 30, 2017.
The carrying amounts of the major classes of assets and liabilities of
UPC Austria
and the
Vodafone Disposal Group
as of
June 30, 2018
are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPC Austria
|
|
Vodafone Disposal Group
|
|
Total
|
|
in millions
|
Assets:
|
|
|
|
|
|
Current assets other than cash
|
$
|
40.9
|
|
|
$
|
384.3
|
|
|
$
|
425.2
|
|
Property and equipment, net
|
479.6
|
|
|
5,245.8
|
|
|
5,725.4
|
|
Goodwill
|
706.0
|
|
|
4,041.0
|
|
|
4,747.0
|
|
Other assets, net
|
3.2
|
|
|
458.2
|
|
|
461.4
|
|
Total assets
|
$
|
1,229.7
|
|
|
$
|
10,129.3
|
|
|
$
|
11,359.0
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Current portion of debt and capital lease obligations
|
$
|
0.8
|
|
|
$
|
602.3
|
|
|
$
|
603.1
|
|
Other accrued and current liabilities
|
82.8
|
|
|
1,187.2
|
|
|
1,270.0
|
|
Long-term debt and capital lease obligations
|
1.3
|
|
|
9,155.7
|
|
|
9,157.0
|
|
Other long-term liabilities
|
85.1
|
|
|
883.3
|
|
|
968.4
|
|
Total liabilities
|
$
|
170.0
|
|
|
$
|
11,828.5
|
|
|
$
|
11,998.5
|
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
The carrying amounts of the major classes of assets and liabilities of
UPC Austria
and the
Vodafone Disposal Group
as of
December 31, 2017
are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPC Austria
|
|
Vodafone Disposal Group
|
|
Total
|
|
in millions
|
Assets:
|
|
|
|
|
|
Current assets other than cash
|
$
|
29.2
|
|
|
$
|
238.9
|
|
|
$
|
268.1
|
|
Property and equipment, net
|
451.9
|
|
|
5,290.1
|
|
|
5,742.0
|
|
Goodwill
|
732.2
|
|
|
4,181.0
|
|
|
4,913.2
|
|
Other assets, net
|
3.2
|
|
|
482.7
|
|
|
485.9
|
|
Total assets
|
$
|
1,216.5
|
|
|
$
|
10,192.7
|
|
|
$
|
11,409.2
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Current portion of debt and capital lease obligations
|
$
|
0.8
|
|
|
$
|
486.9
|
|
|
$
|
487.7
|
|
Other accrued and current liabilities
|
77.7
|
|
|
1,022.3
|
|
|
1,100.0
|
|
Long-term debt and capital lease obligations
|
1.5
|
|
|
9,026.1
|
|
|
9,027.6
|
|
Other long-term liabilities
|
76.3
|
|
|
863.7
|
|
|
940.0
|
|
Total liabilities
|
$
|
156.3
|
|
|
$
|
11,399.0
|
|
|
$
|
11,555.3
|
|
The operating results of
UPC Austria
, the
Vodafone Disposal Group
and the
LiLAC Group
for the three and six months ended
June 30, 2018
and
2017
are summarized in the following tables.
These amounts exclude intercompany revenue and expenses that are eliminated within our condensed consolidated statement of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPC Austria
|
|
Vodafone Disposal Group
|
|
Total
|
|
in millions
|
Three months ended June 30, 2018
|
|
|
|
|
|
Revenue
|
$
|
107.4
|
|
|
$
|
892.9
|
|
|
$
|
1,000.3
|
|
Operating income
|
$
|
61.7
|
|
|
$
|
419.9
|
|
|
$
|
481.6
|
|
|
|
|
|
|
|
Earnings before income taxes and noncontrolling interests
|
$
|
61.5
|
|
|
$
|
310.1
|
|
|
$
|
371.6
|
|
Income tax expense
|
(9.7
|
)
|
|
(80.1
|
)
|
|
(89.8
|
)
|
Net
earnings
|
51.8
|
|
|
230.0
|
|
|
281.8
|
|
Net earnings attributable to noncontrolling interests
|
(1.8
|
)
|
|
—
|
|
|
(1.8
|
)
|
Net earnings attributable to Liberty Global shareholders
|
$
|
50.0
|
|
|
$
|
230.0
|
|
|
$
|
280.0
|
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPC Austria
|
|
Vodafone Disposal Group
|
|
Total
|
|
in millions
|
Six months ended June 30, 2018
|
|
|
|
|
|
Revenue
|
$
|
216.7
|
|
|
$
|
1,845.2
|
|
|
$
|
2,061.9
|
|
Operating income
|
$
|
122.9
|
|
|
$
|
731.5
|
|
|
$
|
854.4
|
|
|
|
|
|
|
|
Earnings before income taxes and noncontrolling interests
|
$
|
122.7
|
|
|
$
|
491.5
|
|
|
$
|
614.2
|
|
Income tax expense
|
(19.2
|
)
|
|
(126.8
|
)
|
|
(146.0
|
)
|
Net earnings
|
103.5
|
|
|
364.7
|
|
|
468.2
|
|
Net earnings
attributable to noncontrolling interests
|
(3.6
|
)
|
|
—
|
|
|
(3.6
|
)
|
Net earnings attributable to Liberty Global shareholders
|
$
|
99.9
|
|
|
$
|
364.7
|
|
|
$
|
464.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPC Austria
|
|
Vodafone Disposal Group
|
|
LiLAC Group
|
|
Total
|
|
in millions
|
Three months ended June 30, 2017
|
|
|
|
|
|
|
|
Revenue
|
$
|
95.9
|
|
|
$
|
792.9
|
|
|
$
|
920.9
|
|
|
$
|
1,809.7
|
|
Operating income
|
$
|
35.6
|
|
|
$
|
234.5
|
|
|
$
|
155.4
|
|
|
$
|
425.5
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes and noncontrolling
interests
|
$
|
35.6
|
|
|
$
|
125.9
|
|
|
$
|
8.4
|
|
|
$
|
169.9
|
|
Income tax expense
|
(3.0
|
)
|
|
(27.4
|
)
|
|
(30.6
|
)
|
|
(61.0
|
)
|
Net earnings (loss)
|
32.6
|
|
|
98.5
|
|
|
(22.2
|
)
|
|
108.9
|
|
Net earnings attributable to noncontrolling
interests
|
(1.6
|
)
|
|
—
|
|
|
(15.5
|
)
|
|
(17.1
|
)
|
Net earnings (loss) attributable to Liberty Global shareholders
|
$
|
31.0
|
|
|
$
|
98.5
|
|
|
$
|
(37.7
|
)
|
|
$
|
91.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPC Austria
|
|
Vodafone Disposal Group
|
|
LiLAC Group
|
|
Total
|
|
in millions
|
Six months ended June 30 2017
|
|
|
|
|
|
|
|
Revenue
|
$
|
188.1
|
|
|
$
|
1,549.9
|
|
|
$
|
1,831.8
|
|
|
$
|
3,569.8
|
|
Operating income
|
$
|
70.1
|
|
|
$
|
410.0
|
|
|
$
|
290.2
|
|
|
$
|
770.3
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes and noncontrolling interests
|
$
|
70.1
|
|
|
$
|
221.1
|
|
|
$
|
42.1
|
|
|
$
|
333.3
|
|
Income tax expense
|
(5.8
|
)
|
|
(45.1
|
)
|
|
(75.2
|
)
|
|
(126.1
|
)
|
Net earnings (loss)
|
64.3
|
|
|
176.0
|
|
|
(33.1
|
)
|
|
207.2
|
|
Net earnings attributable to noncontrolling
interests
|
(3.2
|
)
|
|
—
|
|
|
(31.9
|
)
|
|
(35.1
|
)
|
Net earnings (loss) attributable to Liberty Global shareholders
|
$
|
61.1
|
|
|
$
|
176.0
|
|
|
$
|
(65.0
|
)
|
|
$
|
172.1
|
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
Our basic and diluted earnings from discontinued operations attributable to
Liberty Global
shareholders per
Liberty Global Share
for the three and six months ended
June 30, 2018
and
2017
is presented below. These amounts relate to the operations of
UPC Austria
and the
Vodafone Disposal Group
. For information regarding the calculation of our weighted average shares outstanding with respect to
Liberty Global Share
s, see note
14
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
June 30,
|
|
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Basic earnings from discontinued operations attributable to Liberty Global shareholders per Liberty Global Share
|
$
|
0.35
|
|
|
$
|
0.15
|
|
|
$
|
0.58
|
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
Diluted earnings from discontinued operations attributable to Liberty Global shareholders per Liberty Global Share
|
$
|
0.35
|
|
|
$
|
0.15
|
|
|
$
|
0.58
|
|
|
$
|
0.27
|
|
Our basic and diluted loss from discontinued operations attributable to
Liberty Global
shareholders per
LiLAC Share
for the three and six months ended June 30, 2017 is presented below. These amounts relate to the operations of the
LiLAC Group
.
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, 2017
|
|
Six months ended
June 30, 2017
|
|
|
|
|
Basic and diluted loss from discontinued operations attributable to Liberty Global shareholders per LiLAC Share
|
$
|
(0.22
|
)
|
|
$
|
(0.38
|
)
|
|
|
|
|
Weighted average ordinary shares outstanding (LiLAC Shares) - basic and diluted
|
172,074,934
|
|
|
172,410,613
|
|
Other
Multimedia
. On October 18, 2016, our subsidiary UPC Polska SP Z.o.o. (
UPC Poland
) entered into a definitive agreement to acquire the cable business of Multimedia Polska S.A. (
Multimedia
), the third-largest cable operator in Poland. On October 18, 2017, the Polish regulator issued a statement of objection against the proposed transaction on the basis that such transaction could restrict competition in a number of cities across the country. On March 23, 2018,
UPC Poland
withdrew its application for regulatory clearance to acquire
Multimedia
after failing to agree to revised commercial terms with the sellers that take into account current regulatory and market conditions. In addition, the agreement to acquire
Multimedia
has been terminated.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
(
5
)
Investments
The details of our investments are set forth below:
|
|
|
|
|
|
|
|
|
|
Accounting Method
|
|
June 30,
2018
|
|
December 31,
2017
|
|
in millions
|
Equity (a):
|
|
|
|
VodafoneZiggo JV (b)
|
$
|
3,993.0
|
|
|
$
|
4,162.8
|
|
Other
|
160.7
|
|
|
161.8
|
|
Total — equity
|
4,153.7
|
|
|
4,324.6
|
|
Fair value:
|
|
|
|
ITV plc (
ITV
) — subject to re-use rights
|
914.9
|
|
|
892.0
|
|
Sumitomo Corporation (
Sumitomo
)
|
600.0
|
|
|
776.5
|
|
ITI Neovision S.A.
|
163.8
|
|
|
161.9
|
|
Lions Gate Entertainment Corp (
Lionsgate
)
|
120.7
|
|
|
163.9
|
|
Casa Systems, Inc. (
Casa
)
|
72.4
|
|
|
76.3
|
|
Other
|
292.3
|
|
|
244.7
|
|
Total — fair value
|
2,164.1
|
|
|
2,315.3
|
|
Cost (c)
|
—
|
|
|
31.5
|
|
Total
|
$
|
6,317.8
|
|
|
$
|
6,671.4
|
|
_______________
|
|
(a)
|
At
June 30, 2018
and
December 31, 2017
, the carrying amounts of each of our equity method investments did not materially exceed our proportionate share of the respective investee’s net assets.
|
|
|
(b)
|
Amounts include a related-party euro-denominated note receivable (the
VodafoneZiggo JV Receivable
) with a principal amount of
$1,050.9 million
and
$1,081.9 million
, respectively, due from a subsidiary of the
VodafoneZiggo JV
(as defined below) to a subsidiary of
Liberty Global
. The
VodafoneZiggo JV Receivable
bears interest at
5.55%
and requires
€100.0 million
(
$116.8 million
) of principal to be paid annually through December 31, 2019, with the remaining principal due on January 16, 2027. The accrued interest on the
VodafoneZiggo JV Receivable
will be payable in a manner mutually agreed upon by
Liberty Global
and the
VodafoneZiggo JV
. During the
six months ended June 30, 2018
, interest accrued on the
VodafoneZiggo JV Receivable
was
$30.2 million
, all of which has been cash settled.
|
|
|
(c)
|
As a result of the January 1, 2018 adoption of
ASU 2016-01
, all of our cost investments have been reclassified to fair value investments.
|
For information regarding the impact of the adoption of
ASU 2014-09
on our accumulated deficit and our investment in the
VodafoneZiggo JV
, see note
2
.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
Equity Method Investments
The following table sets forth the details of our share of losses of affiliates, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
|
|
|
|
|
|
|
|
VodafoneZiggo JV (a)
|
$
|
(63.2
|
)
|
|
$
|
6.5
|
|
|
$
|
(90.0
|
)
|
|
$
|
5.2
|
|
Other
|
(19.1
|
)
|
|
(10.1
|
)
|
|
(28.8
|
)
|
|
(24.5
|
)
|
Total
|
$
|
(82.3
|
)
|
|
$
|
(3.6
|
)
|
|
$
|
(118.8
|
)
|
|
$
|
(19.3
|
)
|
_______________
|
|
(a)
|
Amounts include the net effect of (i)
100%
of the interest income earned on the
VodafoneZiggo JV Receivable
, (ii)
100%
of the share-based compensation expense associated with
Liberty Global
awards held by
VodafoneZiggo JV
employees who were formerly employees of
Liberty Global
, as these awards remain our responsibility, and (iii) our
50%
share of the remaining results of operations of the
VodafoneZiggo JV
.
|
VodafoneZiggo JV
.
On December 31, 2016, one of our wholly-owned subsidiaries contributed VodafoneZiggo Holding B.V. and its subsidiaries (
VodafoneZiggo Holding
) to VodafoneZiggo Group Holding B.V., an entity that was formed as a
50
:
50
joint venture (the
VodafoneZiggo JV
) between
Vodafone
and
Liberty Global
(the
VodafoneZiggo JV Transaction
).
On January 4, 2017, in connection with the completion of the
VodafoneZiggo JV Transaction
, we received cash of
€2.2 billion
(
$2.4 billion
at the transaction date) comprising (i) a distribution reflecting our
50%
share of the
€2.8 billion
(
$2.9 billion
at the transaction date) of net proceeds from the various debt financing arrangements entered into by certain subsidiaries of
VodafoneZiggo Holding
during the third quarter of 2016 and (ii) an equalization payment from
Vodafone
of
€802.9 million
(
$840.8 million
at the transaction date) that was subject to post-closing adjustments. During the second quarter of 2017, the equalization amount was finalized, resulting in the receipt of an additional
€3.9 million
(
$4.5 million
at the transaction date) from
Vodafone
.
During the first quarter of 2017, we paid
$162.6 million
of
VAT
on behalf of the
VodafoneZiggo JV
associated with the termination of a services agreement with Ziggo Group Holding B.V. that was in effect prior to the closing of the
VodafoneZiggo JV Transaction
. This advance was repaid during the first quarter of 2017. In addition, during the second quarters of 2018 and 2017, we received dividend distributions from the
VodafoneZiggo JV
of
$116.6 million
and
$87.3 million
, respectively, which were accounted for as returns on capital for purposes of our condensed consolidated statements of cash flows.
Pursuant to an agreement entered into in connection with the formation of the
VodafoneZiggo JV
(the
Framework Agreement
),
Liberty Global
provides certain services to the
VodafoneZiggo JV
on a transitional or ongoing basis (collectively, the
JV Services
). The
JV Services
provided by
Liberty Global
consist primarily of (i) technology and other services and (ii) capital-related expenditures for assets that will be used by, or will otherwise benefit, the
VodafoneZiggo JV
.
Liberty Global
charges both fixed and usage-based fees to the
VodafoneZiggo JV
for the
JV Services
provided during the term of the
Framework Agreement
. We recorded revenue from the
VodafoneZiggo JV
of
$53.8 million
and
$31.8 million
during the
three months ended June 30, 2018
and
2017
, respectively, and
$88.3 million
and
$63.3 million
during the
six months ended June 30, 2018
and
2017
, respectively. These amounts include revenue from (a) the
JV Services
and (b) during the 2018 periods, sales of customer premises equipment at a mark-up. During the
six months ended June 30, 2018
and
2017
, we transferred certain assets to the
VodafoneZiggo JV
that we purchased on its behalf with an aggregate cost of
$30.3 million
and
$107.8 million
, respectively. At
June 30, 2018
and
December 31, 2017
,
$46.8 million
and $
33.3 million
,
respectively,
were due from the
VodafoneZiggo JV
, primarily related to the aforementioned transactions. Amounts due from the
VodafoneZiggo JV
, which are periodically cash settled, are included in other current assets in our condensed consolidated balance sheet.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
The VodafoneZiggo JV is experiencing significant competition. In particular, the mobile operations of the VodafoneZiggo JV continue to experience competitive pressure on pricing, characterized by aggressive promotion campaigns, heavy marketing efforts and increasing or unlimited data bundles. In light of this competition, as well as regulatory and economic factors, we could conclude in future periods that our investment in the VodafoneZiggo JV is impaired or management of the VodafoneZiggo JV could conclude that an impairment of the VodafoneZiggo JV goodwill and, to a lesser extent, long-lived assets, is required. Any such impairment of the VodafoneZiggo JV’s goodwill or our investment in the VodafoneZiggo JV would be reflected as a component of share of results of affiliates, net, in our condensed consolidated statement of operations. Our share of any such impairment charges could be significant.
The summarized results of operations of the
VodafoneZiggo JV
are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
June 30,
|
|
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
1,114.5
|
|
|
$
|
1,081.3
|
|
|
$
|
2,296.1
|
|
|
$
|
2,165.2
|
|
Loss before income taxes
|
$
|
(201.2
|
)
|
|
$
|
(25.8
|
)
|
|
$
|
(319.8
|
)
|
|
$
|
(69.1
|
)
|
Net loss
|
$
|
(150.8
|
)
|
|
$
|
(18.3
|
)
|
|
$
|
(238.1
|
)
|
|
$
|
(48.6
|
)
|
(
6
)
Derivative Instruments
In general, we seek to enter into derivative instruments to protect against (i) increases in the interest rates on our variable-rate debt, (ii) foreign currency movements, particularly with respect to borrowings that are denominated in a currency other than the functional currency of the borrowing entity, and (iii) decreases in the market prices of certain publicly traded securities that we own. In this regard, through our subsidiaries, we have entered into various derivative instruments to manage interest rate exposure and foreign currency exposure primarily with respect to the
U.S.
dollar (
$
), the euro (
€
), the British pound sterling (
£
), the Swiss franc (
CHF
), the Czech koruna (
CZK
), the Hungarian forint (
HUF
), the Polish zloty (
PLN
) and the Romanian lei (
RON
). With the exception of a limited number of our foreign currency forward contracts, we do not apply hedge accounting to our derivative instruments. Accordingly, changes in the fair values of most of our derivative instruments are recorded in realized and unrealized gains or losses on derivative instruments, net, in our condensed consolidated statements of operations.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
The following table provides details of the fair values of our derivative instrument assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
|
Current (a)
|
|
Long-term (a)
|
|
Total
|
|
Current (a)
|
|
Long-term (a)
|
|
Total
|
|
in millions
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency and interest rate derivative contracts (b)
|
$
|
371.6
|
|
|
$
|
1,344.1
|
|
|
$
|
1,715.7
|
|
|
$
|
477.0
|
|
|
$
|
1,071.9
|
|
|
$
|
1,548.9
|
|
Equity-related derivative instruments (c)
|
—
|
|
|
491.9
|
|
|
491.9
|
|
|
—
|
|
|
560.9
|
|
|
560.9
|
|
Foreign currency forward and option contracts
|
13.6
|
|
|
—
|
|
|
13.6
|
|
|
17.0
|
|
|
0.1
|
|
|
17.1
|
|
Other
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
0.4
|
|
|
0.4
|
|
|
0.8
|
|
Total
|
$
|
385.3
|
|
|
$
|
1,836.0
|
|
|
$
|
2,221.3
|
|
|
$
|
494.4
|
|
|
$
|
1,633.3
|
|
|
$
|
2,127.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency and interest rate derivative contracts (b)
|
$
|
386.5
|
|
|
$
|
1,254.1
|
|
|
$
|
1,640.6
|
|
|
$
|
210.2
|
|
|
$
|
1,557.7
|
|
|
$
|
1,767.9
|
|
Equity-related derivative instruments (c)
|
1.7
|
|
|
—
|
|
|
1.7
|
|
|
5.4
|
|
|
—
|
|
|
5.4
|
|
Foreign currency forward and option contracts
|
4.5
|
|
|
—
|
|
|
4.5
|
|
|
7.7
|
|
|
0.2
|
|
|
7.9
|
|
Other
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
392.7
|
|
|
$
|
1,254.2
|
|
|
$
|
1,646.9
|
|
|
$
|
223.3
|
|
|
$
|
1,557.9
|
|
|
$
|
1,781.2
|
|
_______________
|
|
(a)
|
Our current derivative liabilities, long-term derivative assets and long-term derivative liabilities are included in other current and accrued liabilities, other assets, net, and other long-term liabilities, respectively, in our condensed consolidated balance sheets.
|
|
|
(b)
|
We consider credit risk relating to our and our counterparties’ nonperformance in the fair value assessment of our derivative instruments. In all cases, the adjustments take into account offsetting liability or asset positions within each of our subsidiary borrowing groups (as defined and described in note
9
). The changes in the credit risk valuation adjustments associated with our cross-currency and interest rate derivative contracts resulted in a net gain (loss) of (
$65.6 million
)
and
$59.6 million
during the
three months ended June 30, 2018
and
2017
, respectively, and a net gain (loss) of (
$27.9 million
) and
$109.0 million
during the
six months ended June 30, 2018
and
2017
, respectively. These amounts are included in realized and unrealized gains (losses) on derivative instruments, net, in our condensed consolidated statements of operations. For further information regarding our fair value measurements, see note
7
.
|
|
|
(c)
|
Our equity-related derivative instruments primarily include the fair value of (i) the share collar (the
ITV Collar
) with respect to
ITV
shares held by our company, (ii) the prepaid forward transaction (the
Lionsgate Forward
) with respect to
1.25 million
of our voting and
1.25 million
of our non-voting
Lionsgate
shares and (iii) at December 31, 2017, the share collar (the
Sumitomo Collar
) with respect to a portion of the shares of
Sumitomo
held by our company. On May 22, 2018, we settled the final tranche of the
Sumitomo Collar
and related borrowings with a portion of the existing
Sumitomo
shares held by our company. The aggregate market value of these shares on the transaction date was
$159.3 million
.The fair values of the
ITV Collar
and the
Lionsgate Forward
do not include credit risk valuation adjustments as we assume that any losses incurred by our company in the event of nonperformance by the respective counterparty would be, subject to relevant insolvency laws, fully offset against amounts we owe to such counterparty pursuant to the related secured borrowing arrangements.
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
The details of our realized and unrealized
gains (losses) on derivative instruments, net, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
June 30,
|
|
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
Cross-currency and interest rate derivative contracts
|
$
|
870.1
|
|
|
$
|
(502.3
|
)
|
|
$
|
508.2
|
|
|
$
|
(659.1
|
)
|
Equity-related derivative instruments:
|
|
|
|
|
|
|
|
ITV Collar
|
(183.6
|
)
|
|
163.4
|
|
|
(60.0
|
)
|
|
110.2
|
|
Lionsgate Forward
|
3.4
|
|
|
(2.5
|
)
|
|
12.4
|
|
|
(2.0
|
)
|
Sumitomo Collar
|
(23.2
|
)
|
|
2.2
|
|
|
(11.8
|
)
|
|
(21.3
|
)
|
Other
|
1.0
|
|
|
0.4
|
|
|
2.2
|
|
|
(5.4
|
)
|
Total equity-related derivative instruments
|
(202.4
|
)
|
|
163.5
|
|
|
(57.2
|
)
|
|
81.5
|
|
Foreign currency forward and option contracts
|
8.3
|
|
|
(12.9
|
)
|
|
13.9
|
|
|
(19.0
|
)
|
Other
|
(0.5
|
)
|
|
—
|
|
|
(0.7
|
)
|
|
0.5
|
|
Total
|
$
|
675.5
|
|
|
$
|
(351.7
|
)
|
|
$
|
464.2
|
|
|
$
|
(596.1
|
)
|
The net cash received or paid related to our derivative instruments is classified as an operating, investing or financing activity in our condensed consolidated statements of cash flows based on the objective of the derivative instrument and the classification of the applicable underlying cash flows. For foreign currency forward contracts that are used to hedge capital expenditures, the net cash received or paid is classified as an adjustment to capital expenditures in our condensed consolidated statements of cash flows. For derivative contracts that are terminated prior to maturity, the cash paid or received upon termination that relates to future periods is classified as a financing activity. The following table sets forth the classification of the net cash inflows (outflows) of our derivative instruments:
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
June 30,
|
|
2018
|
|
2017
|
|
in millions
|
Operating activities
|
$
|
246.1
|
|
|
$
|
89.5
|
|
Investing activities
|
—
|
|
|
(0.5
|
)
|
Financing activities
|
10.2
|
|
|
(139.0
|
)
|
Total
|
$
|
256.3
|
|
|
$
|
(50.0
|
)
|
Counterparty Credit Risk
We are exposed to the risk that the counterparties to the derivative instruments of our subsidiary borrowing groups will default on their obligations to us. We manage these credit risks through the evaluation and monitoring of the creditworthiness of, and concentration of risk with, the respective counterparties. In this regard, credit risk associated with our derivative instruments is spread across a relatively broad counterparty base of banks and financial institutions. With the exception of a limited number of instances where we have required a counterparty to post collateral, neither party has posted collateral under the derivative instruments of our subsidiary borrowing groups. At
June 30, 2018
, our exposure to counterparty credit risk included derivative assets with an aggregate fair value of
$456.1 million
.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
Details of our Derivative Instruments
Cross-currency Derivative Contracts
As noted above, we are exposed to foreign currency exchange rate risk in situations where our debt is denominated in a currency other than the functional currency of the operations whose cash flows support our ability to repay or refinance such debt. Although we generally seek to match the denomination of our subsidiaries’ borrowings with the functional currency of the operations that are supporting the respective borrowings, market conditions or other factors may cause us to enter into borrowing arrangements that are not denominated in the functional currency of the underlying operations (unmatched debt). Our policy is generally to provide for an economic hedge against foreign currency exchange rate movements by using derivative instruments to synthetically convert unmatched debt into the applicable underlying currency. At
June 30, 2018
, substantially all of our debt was either directly or synthetically matched to the applicable functional currencies of the underlying operations. The following table sets forth the total notional amounts and the related weighted average remaining contractual lives of our cross-currency swap contracts at
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing group
|
|
Notional amount due from counterparty
|
|
Notional amount due to counterparty
|
|
|
Weighted average remaining life
|
|
|
in millions
|
|
|
in years
|
|
|
|
|
|
|
|
|
|
|
Virgin Media
|
$
|
400.0
|
|
|
€
|
339.6
|
|
|
|
4.6
|
|
|
$
|
8,933.0
|
|
|
£
|
5,844.3
|
|
|
(a) (b)
|
5.2
|
|
|
£
|
2,396.1
|
|
|
$
|
3,450.0
|
|
|
(a)
|
6.5
|
|
|
|
|
|
|
|
|
|
|
UPC Holding
|
$
|
2,765.0
|
|
|
€
|
2,276.7
|
|
|
|
6.3
|
|
|
$
|
1,200.0
|
|
|
CHF
|
1,107.5
|
|
|
(b)
|
6.7
|
|
|
€
|
2,521.2
|
|
|
CHF
|
2,901.0
|
|
|
(b)
|
5.5
|
|
|
€
|
418.5
|
|
|
CZK
|
11,521.8
|
|
|
|
2.0
|
|
|
€
|
488.0
|
|
|
HUF
|
138,437.5
|
|
|
|
3.5
|
|
|
€
|
851.6
|
|
|
PLN
|
3,604.5
|
|
|
|
3.2
|
|
|
€
|
225.9
|
|
|
RON
|
650.0
|
|
|
|
3.6
|
|
|
|
|
|
|
|
|
|
|
Telenet
|
$
|
3,195.0
|
|
|
€
|
2,834.1
|
|
|
(b)
|
6.9
|
|
|
€
|
1,431.2
|
|
|
$
|
1,600.0
|
|
|
(a)
|
7.0
|
_______________
|
|
(a)
|
Includes certain derivative instruments that do not involve the exchange of notional amounts at the inception and maturity of the instruments. Accordingly, the only cash flows associated with these derivative instruments are coupon-related payments and receipts. At
June 30, 2018
, the total
U.S.
dollar equivalents of the notional amount of these derivative instruments
was
$5.3 billion
.
|
|
|
(b)
|
Includes certain derivative instruments that are “forward-starting,” such that the initial exchange occurs at a date subsequent to
June 30, 2018
. These instruments are typically entered into in order to extend existing hedges without the need to amend existing contracts.
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
Interest Rate Swap Contracts
As noted above, we enter into interest rate swaps to protect against increases in the interest rates on our variable-rate debt. The following table sets forth the total
U.S.
dollar equivalents of the notional amounts and the related weighted average remaining contractual lives of our interest rate swap contracts at
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing group pays fixed rate (a)
|
|
Borrowing group receives fixed rate
|
Borrowing group
|
|
Notional amount
|
|
Weighted average remaining life
|
|
Notional amount
|
|
Weighted average remaining life
|
|
|
in millions
|
|
in years
|
|
in millions
|
|
in years
|
|
|
|
|
|
|
|
|
|
Virgin Media
|
$
|
18,625.7
|
|
|
3.6
|
|
$
|
11,789.1
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
UPC Holding
|
$
|
5,766.6
|
|
|
5.1
|
|
$
|
3,408.3
|
|
|
7.3
|
|
|
|
|
|
|
|
|
|
Telenet
|
$
|
3,686.4
|
|
|
5.5
|
|
$
|
1,666.3
|
|
|
5.2
|
_______________
|
|
(a)
|
Includes forward-starting derivative instruments.
|
Interest Rate Swap Options
We have entered into various interest rate swap options (
swaption
s
), which give us the right, but not the obligation, to enter into certain interest rate swap contracts at set dates in the future, with each such contract having a life of no more than three years. At the transaction date, the strike rate of each of these contracts was above the corresponding market rate. The following table sets forth certain information regarding our
swaption
s at
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing group
|
|
Notional amount
|
|
Underlying swap currency
|
|
Weighted average option expiration period (a)
|
|
Weighted average strike rate (b)
|
|
|
in millions
|
|
|
|
in years
|
|
|
|
|
|
|
|
|
|
|
|
Virgin Media
|
$
|
6,275.6
|
|
|
£
|
|
1.4
|
|
2.47%
|
|
|
$
|
601.1
|
|
|
€
|
|
1.4
|
|
2.08%
|
|
|
|
|
|
|
|
|
|
UPC Holding
|
$
|
1,328.3
|
|
|
CHF
|
|
0.6
|
|
1.22%
|
______________
|
|
(a)
|
Represents the weighted average period until the date on which we have the option to enter into the interest rate swap contracts.
|
|
|
(b)
|
Represents the weighted average interest rate that we would pay if we exercised our option to enter into the interest rate swap contracts.
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
Basis Swaps
Our basis swaps involve the exchange of attributes used to calculate our floating interest rates, including (i) the benchmark rate, (ii) the underlying currency and/or (iii) the borrowing period. We typically enter into these swaps to optimize our interest rate profile based on our current evaluations of yield curves, our risk management policies and other factors. The following table sets forth the total
U.S.
dollar equivalents of the notional amounts and related weighted average remaining contractual lives of our basis swap contracts at
June 30, 2018
:
|
|
|
|
|
|
|
|
Borrowing group
|
|
Notional amount due from counterparty
|
|
Weighted average remaining life
|
|
|
in millions
|
|
in years
|
|
|
|
|
|
Virgin Media
|
$
|
4,587.5
|
|
|
0.5
|
|
|
|
|
|
UPC Holding
|
$
|
1,975.0
|
|
|
0.5
|
|
|
|
|
|
Telenet
|
$
|
1,600.0
|
|
|
0.5
|
Interest Rate Caps and Collars
We enter into interest rate cap and collar agreements that lock in a maximum interest rate if variable rates rise, but also allow our company to benefit, to a limited extent in the case of collars, from declines in market rates. At
June 30, 2018
, the total
U.S.
dollar equivalents of the notional amounts of our interest rate caps and collars were
$164.9 million
and
$662.7 million
, respectively.
Impact of Derivative Instruments on Borrowing Costs
The impact of the derivative instruments that mitigate our foreign currency and interest rate risk, as described above, on our borrowing costs is as follows:
|
|
|
|
|
Borrowing group
|
|
Decrease to borrowing costs at June 30, 2018 (a)
|
|
|
|
Virgin Media
|
(0.32
|
)%
|
UPC Holding
|
(0.02
|
)%
|
Telenet
|
(0.44
|
)%
|
Total decrease to borrowing costs
|
(0.27
|
)%
|
_______________
|
|
(a)
|
Represents the effect of derivative instruments in effect at
June 30, 2018
and does not include forward-starting derivative instruments or
swaption
s.
|
Foreign Currency Forwards and Options
Certain of our subsidiaries enter into foreign currency forward and option contracts with respect to non-functional currency exposure. As of
June 30, 2018
, the total
U.S.
dollar equivalents of the notional amount of foreign currency forward and option contracts was
$482.4 million
.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
(
7
)
Fair Value Measurements
We use the fair value method to account for (i) certain of our investments, (ii) our derivative instruments, (iii) certain instruments that we classify as debt and (iv) the borrowed shares of
Sumitomo
pursuant to a securities lending arrangement (the
Sumitomo Share Loan
). The reported fair values of these investments and instruments as of
June 30, 2018
likely will not represent the value that will be paid or received upon the ultimate settlement or disposition of these assets and liabilities.
U.S. GAAP
provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. We record transfers of assets or liabilities into or out of Levels 1, 2 or 3 at the beginning of the quarter during which the transfer occurred.
We incorporate a credit risk valuation adjustment in our fair value measurements to estimate the impact of both our own nonperformance risk and the nonperformance risk of our counterparties. Our credit risk valuation adjustments with respect to our cross-currency and interest rate swaps are quantified and further explained in note
6
.
Fair value measurements are also used in connection with nonrecurring valuations performed in connection with acquisition accounting and impairment assessments. The nonrecurring valuations associated with acquisition accounting primarily include the valuation of reporting units, customer relationship and other intangible assets and property and equipment. Unless a reporting unit has a readily determinable fair value, the valuation of reporting units is based at least in part on discounted cash flow analyses. With the exception of certain inputs for our weighted average cost of capital and discount rate calculations that are derived from pricing services, the inputs used in our discounted cash flow analyses, such as forecasts of future cash flows, are based on our assumptions. The valuation of customer relationships is primarily based on an excess earnings methodology, which is a form of a discounted cash flow analysis. The excess earnings methodology requires us to estimate the specific cash flows expected from the customer relationship, considering such factors as estimated customer life, the revenue expected to be generated over the life of the customer relationship, contributory asset charges and other factors. Tangible assets are typically valued using a replacement or reproduction cost approach, considering factors such as current prices of the same or similar equipment, the age of the equipment and economic obsolescence. Most of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. During the
six months ended June 30, 2018
and
2017
, we did not perform significant nonrecurring fair value measurements.
For additional information concerning our fair value measurements, see note 8 to the consolidated financial statements included in our
10-K
.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
A summary of our assets and liabilities that are measured at fair value on a recurring basis is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements at
June 30, 2018 using:
|
Description
|
June 30,
2018
|
|
Quoted prices
in active
markets for
identical assets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
|
in millions
|
Assets:
|
|
|
|
|
|
|
|
Derivative instruments:
|
|
|
|
|
|
|
|
Cross-currency and interest rate derivative contracts
|
$
|
1,715.7
|
|
|
$
|
—
|
|
|
$
|
1,715.0
|
|
|
$
|
0.7
|
|
Equity-related derivative instruments
|
491.9
|
|
|
—
|
|
|
—
|
|
|
491.9
|
|
Foreign currency forward and option contracts
|
13.6
|
|
|
—
|
|
|
13.6
|
|
|
—
|
|
Other
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
Total derivative instruments
|
2,221.3
|
|
|
—
|
|
|
1,728.7
|
|
|
492.6
|
|
Investments
|
2,164.1
|
|
|
1,717.1
|
|
|
—
|
|
|
447.0
|
|
Total assets
|
$
|
4,385.4
|
|
|
$
|
1,717.1
|
|
|
$
|
1,728.7
|
|
|
$
|
939.6
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Derivative instruments:
|
|
|
|
|
|
|
|
Cross-currency and interest rate derivative contracts
|
$
|
1,640.6
|
|
|
$
|
—
|
|
|
$
|
1,632.6
|
|
|
$
|
8.0
|
|
Equity-related derivative instruments
|
1.7
|
|
|
—
|
|
|
—
|
|
|
1.7
|
|
Foreign currency forward and option contracts
|
4.5
|
|
|
—
|
|
|
4.5
|
|
|
—
|
|
Other
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
Total derivative instruments
|
1,646.9
|
|
|
—
|
|
|
1,637.2
|
|
|
9.7
|
|
Debt
|
881.7
|
|
|
600.6
|
|
|
281.1
|
|
|
—
|
|
Total liabilities
|
$
|
2,528.6
|
|
|
$
|
600.6
|
|
|
$
|
1,918.3
|
|
|
$
|
9.7
|
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements at
December 31, 2017 using:
|
Description
|
December 31, 2017
|
|
Quoted prices
in active
markets for
identical assets
(Level 1)
|
|
Significant
other
observable
inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
|
in millions
|
Assets:
|
|
|
|
|
|
|
|
Derivative instruments:
|
|
|
|
|
|
|
|
Cross-currency and interest rate derivative contracts
|
$
|
1,548.9
|
|
|
$
|
—
|
|
|
$
|
1,548.7
|
|
|
$
|
0.2
|
|
Equity-related derivative instruments
|
560.9
|
|
|
—
|
|
|
—
|
|
|
560.9
|
|
Foreign currency forward and option contracts
|
17.1
|
|
|
—
|
|
|
17.1
|
|
|
—
|
|
Other
|
0.8
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
Total derivative instruments
|
2,127.7
|
|
|
—
|
|
|
1,566.6
|
|
|
561.1
|
|
Investments
|
2,315.3
|
|
|
1,908.7
|
|
|
—
|
|
|
406.6
|
|
Total assets
|
$
|
4,443.0
|
|
|
$
|
1,908.7
|
|
|
$
|
1,566.6
|
|
|
$
|
967.7
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Derivative instruments:
|
|
|
|
|
|
|
|
Cross-currency and interest rate derivative contracts
|
$
|
1,767.9
|
|
|
$
|
—
|
|
|
$
|
1,764.5
|
|
|
$
|
3.4
|
|
Equity-related derivative instruments
|
5.4
|
|
|
—
|
|
|
—
|
|
|
5.4
|
|
Foreign currency forward and option contracts
|
7.9
|
|
|
—
|
|
|
7.9
|
|
|
—
|
|
Total derivative instruments
|
1,781.2
|
|
|
—
|
|
|
1,772.4
|
|
|
8.8
|
|
Debt
|
926.6
|
|
|
621.7
|
|
|
304.9
|
|
|
—
|
|
Total liabilities
|
$
|
2,707.8
|
|
|
$
|
621.7
|
|
|
$
|
2,077.3
|
|
|
$
|
8.8
|
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
A reconciliation of the beginning and ending balances of our assets and liabilities measured at fair value on a recurring basis using significant unobservable, or Level 3, inputs is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
Cross-currency and interest rate derivative contracts
|
|
Equity-related
derivative
instruments
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
|
|
Balance of net assets (liabilities) at January 1, 2018
|
$
|
406.6
|
|
|
$
|
(3.2
|
)
|
|
$
|
555.5
|
|
|
$
|
958.9
|
|
Gains (losses) included in earnings (loss) from continuing operations (a):
|
|
|
|
|
|
|
|
|
Realized and unrealized losses
on derivative instruments, net
|
—
|
|
|
(4.5
|
)
|
|
(57.2
|
)
|
|
(61.7
|
)
|
Realized and unrealized gains due to changes in fair values of certain investments and debt, net
|
4.4
|
|
|
—
|
|
|
—
|
|
|
4.4
|
|
Impact of ASU 2016-01
|
31.9
|
|
|
—
|
|
|
—
|
|
|
31.9
|
|
Additions
|
25.1
|
|
|
0.2
|
|
|
—
|
|
|
25.3
|
|
Dispositions
|
(12.1
|
)
|
|
—
|
|
|
—
|
|
|
(12.1
|
)
|
Final settlement of Sumitomo Collar (b)
|
—
|
|
|
—
|
|
|
(7.4
|
)
|
|
(7.4
|
)
|
Transfers out of Level 3
|
(2.0
|
)
|
|
—
|
|
|
—
|
|
|
(2.0
|
)
|
Foreign currency translation adjustments, dividends and other, net
|
(6.9
|
)
|
|
0.2
|
|
|
(0.7
|
)
|
|
(7.4
|
)
|
Balance of net assets (liabilities) at June 30, 2018
|
$
|
447.0
|
|
|
$
|
(7.3
|
)
|
|
$
|
490.2
|
|
|
$
|
929.9
|
|
_______________
|
|
(a)
|
Most of these net gains and losses relate to assets and liabilities that we continue to carry on our condensed consolidated balance sheet as of
June 30, 2018
.
|
|
|
(b)
|
For information regarding the settlement of the final tranche of the
Sumitomo Collar
, see note
6
.
|
(
8
)
Long-lived Assets
Property and Equipment, Net
The details of our property and equipment and the related accumulated depreciation are set forth below:
|
|
|
|
|
|
|
|
|
|
June 30,
2018
|
|
December 31,
2017
|
|
in millions
|
|
|
|
|
Distribution systems
|
$
|
17,714.5
|
|
|
$
|
17,522.9
|
|
Customer premises equipment
|
4,633.9
|
|
|
4,434.3
|
|
Support equipment, buildings and land
|
5,044.8
|
|
|
4,790.2
|
|
Total property and equipment, gross
|
27,393.2
|
|
|
26,747.4
|
|
Accumulated depreciation
|
(13,340.2
|
)
|
|
(12,502.1
|
)
|
Total property and equipment, net
|
$
|
14,053.0
|
|
|
$
|
14,245.3
|
|
During the
six months ended June 30, 2018
and
2017
, we recorded non-cash increases to our property and equipment related to vendor financing arrangements of
$1,187.9 million
and
$1,164.1 million
, respectively, which exclude related
VAT
of
$186.1 million
and
$184.1 million
, respectively, that was also financed by our vendors under these arrangements. In addition, during the
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
six months ended June 30, 2018
and
2017
, we recorded non-cash increases to our property and equipment related to assets acquired under capital leases of
$46.5 million
and
$97.9 million
, respectively.
Goodwill
Changes in the carrying amount of our goodwill during the
six months ended June 30, 2018
are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2018
|
|
Acquisitions
and related
adjustments
|
|
Foreign
currency
translation
adjustments
|
|
June 30, 2018
|
|
in millions
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
8,134.1
|
|
|
$
|
—
|
|
|
$
|
(199.7
|
)
|
|
$
|
7,934.4
|
|
Belgium
|
2,681.7
|
|
|
20.1
|
|
|
(79.6
|
)
|
|
2,622.2
|
|
Switzerland
|
2,931.3
|
|
|
—
|
|
|
(54.2
|
)
|
|
2,877.1
|
|
Central and Eastern Europe
|
607.0
|
|
|
—
|
|
|
(41.5
|
)
|
|
565.5
|
|
Total
|
$
|
14,354.1
|
|
|
$
|
20.1
|
|
|
$
|
(375.0
|
)
|
|
$
|
13,999.2
|
|
If among other factors, (i) our equity values were to decline or (ii) the adverse impacts of economic, competitive, regulatory or other factors were to cause our results of operations or cash flows to be worse than anticipated, we could conclude in future periods that impairment charges are required in order to reduce the carrying values of our goodwill and, to a lesser extent, other long-lived assets. Any such impairment charges could be significant.
Intangible Assets Subject to Amortization, Net
The details of our intangible assets subject to amortization, which are included in other assets, net, in our condensed consolidated balance sheets, are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
|
in millions
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
$
|
4,013.3
|
|
|
$
|
(2,958.7
|
)
|
|
$
|
1,054.6
|
|
|
$
|
4,041.0
|
|
|
$
|
(2,745.8
|
)
|
|
$
|
1,295.2
|
|
Other
|
516.9
|
|
|
(241.0
|
)
|
|
275.9
|
|
|
531.9
|
|
|
(218.6
|
)
|
|
313.3
|
|
Total
|
$
|
4,530.2
|
|
|
$
|
(3,199.7
|
)
|
|
$
|
1,330.5
|
|
|
$
|
4,572.9
|
|
|
$
|
(2,964.4
|
)
|
|
$
|
1,608.5
|
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
(
9
)
Debt and Capital Lease Obligations
The
U.S.
dollar equivalents of the components of our debt are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
|
|
Principal amount
|
Weighted
average
interest
rate (a)
|
|
Unused borrowing capacity (b)
|
|
Estimated fair value (c)
|
Borrowing currency
|
|
U.S. $
equivalent
|
|
June 30, 2018
|
|
December 31, 2017
|
|
June 30, 2018
|
|
December 31, 2017
|
|
|
|
in millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VM Notes (d)
|
5.54
|
%
|
|
—
|
|
|
$
|
—
|
|
|
$
|
9,406.6
|
|
|
$
|
9,987.4
|
|
|
$
|
9,434.0
|
|
|
$
|
9,565.7
|
|
VM Credit Facilities
|
4.57
|
%
|
|
(e)
|
|
890.6
|
|
|
5,482.2
|
|
|
4,681.5
|
|
|
5,511.0
|
|
|
4,676.2
|
|
UPC Holding Bank Facility (d)
|
4.16
|
%
|
|
990.1
|
|
|
1,156.1
|
|
|
2,535.9
|
|
|
2,576.4
|
|
|
2,558.9
|
|
|
2,576.1
|
|
UPCB SPE Notes
|
4.51
|
%
|
|
—
|
|
|
—
|
|
|
2,474.3
|
|
|
2,638.8
|
|
|
2,541.2
|
|
|
2,582.6
|
|
UPC Holding Senior Notes (d)
|
4.57
|
%
|
|
—
|
|
|
—
|
|
|
1,183.5
|
|
|
1,272.5
|
|
|
1,291.5
|
|
|
1,313.4
|
|
Telenet Credit Facility
|
3.97
|
%
|
|
(f)
|
|
519.7
|
|
|
2,436.7
|
|
|
2,188.9
|
|
|
2,452.4
|
|
|
2,177.6
|
|
Telenet Senior Secured Notes
|
4.68
|
%
|
|
—
|
|
|
—
|
|
|
1,586.1
|
|
|
1,724.4
|
|
|
1,700.6
|
|
|
1,721.3
|
|
Telenet SPE Notes
|
4.88
|
%
|
|
—
|
|
|
—
|
|
|
591.4
|
|
|
1,014.4
|
|
|
557.0
|
|
|
937.7
|
|
Vendor financing (g)
|
3.69
|
%
|
|
—
|
|
|
—
|
|
|
2,495.5
|
|
|
3,599.0
|
|
|
2,495.5
|
|
|
3,599.0
|
|
ITV Collar Loan
|
0.71
|
%
|
|
—
|
|
|
—
|
|
|
1,404.8
|
|
|
1,445.8
|
|
|
1,428.1
|
|
|
1,463.8
|
|
Sumitomo Share Loan (h)
|
0.95
|
%
|
|
—
|
|
|
—
|
|
|
600.6
|
|
|
621.7
|
|
|
600.6
|
|
|
621.7
|
|
Derivative-related debt instruments (i)
|
3.41
|
%
|
|
—
|
|
|
—
|
|
|
334.7
|
|
|
359.8
|
|
|
336.4
|
|
|
361.5
|
|
Sumitomo Collar Loan
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
170.3
|
|
|
—
|
|
|
169.1
|
|
Other (j)
|
5.92
|
%
|
|
—
|
|
|
—
|
|
|
384.3
|
|
|
413.4
|
|
|
389.1
|
|
|
418.2
|
|
Total debt before deferred financing costs, discounts and premiums
|
4.48
|
%
|
|
|
|
$
|
2,566.4
|
|
|
$
|
30,916.6
|
|
|
$
|
32,694.3
|
|
|
$
|
31,296.3
|
|
|
$
|
32,183.9
|
|
The following table provides a reconciliation of total debt before deferred financing costs, discounts and premiums to total debt and capital lease obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
|
in millions
|
|
|
|
|
Total debt before deferred financing costs, discounts and premiums
|
$
|
31,296.3
|
|
|
$
|
32,183.9
|
|
Deferred financing costs, discounts and premiums, net
|
(150.6
|
)
|
|
(171.8
|
)
|
Total carrying amount of debt
|
31,145.7
|
|
|
32,012.1
|
|
Capital lease obligations (k)
|
672.8
|
|
|
691.4
|
|
Total debt and capital lease obligations
|
31,818.5
|
|
|
32,703.5
|
|
Current maturities of debt and capital lease obligations
|
(3,392.6
|
)
|
|
(3,680.1
|
)
|
Long-term debt and capital lease obligations
|
$
|
28,425.9
|
|
|
$
|
29,023.4
|
|
_______________
|
|
(a)
|
Represents the weighted average interest rate in effect at
June 30, 2018
for all borrowings outstanding pursuant to each debt instrument, including any applicable margin. The interest rates presented represent stated rates and do not include the impact of derivative instruments, deferred financing costs, original issue premiums or discounts and commitment fees, all of which affect our overall cost of borrowing. Including the effects of derivative instruments, original issue premiums or discounts and commitment fees, but excluding the impact of deferred financing costs, our weighted average interest rate on our aggregate
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
variable- and fixed-rate indebtedness was
3.98%
at
June 30, 2018
. For information regarding our derivative instruments, see note
6
.
|
|
(b)
|
Unused borrowing capacity represents the maximum availability under the applicable facility at
June 30, 2018
without regard to covenant compliance calculations or other conditions precedent to borrowing. At
June 30, 2018
, based on the most restrictive applicable leverage covenants, the full amount of unused borrowing capacity was available to be borrowed under each of the respective subsidiary facilities, and based on the most restrictive applicable leverage-based restricted payment tests, there were no restrictions on the respective subsidiary's ability to make loans or distributions from this availability to
Liberty Global
or its subsidiaries or other equity holders, except as shown in the table below. In the following table we present, based on the most restrictive applicable leverage covenants, leverage-based restricted payment tests and other limitations in effect for each borrowing group, (i) for each subsidiary where the ability to borrow is limited, the actual borrowing availability under the respective facility and (ii) for each subsidiary where the ability to make loans or distributions from this availability is limited, the amount that can be loaned or distributed to
Liberty Global
or its subsidiaries or other equity holders. The amounts presented below do not consider any actual or potential changes to our borrowing levels subsequent to
June 30, 2018
and are based on the most restrictive applicable leverage-based restricted payment tests and covenant and other limitations in effect for each borrowing group at June 30, 2018, both before and after considering the impact of the completion of the
June 30, 2018
compliance requirements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limitation on availability
|
|
|
June 30, 2018
|
|
Upon completion of relevant
June 30, 2018 compliance reporting requirements
|
|
|
Borrowing currency
|
|
U.S. $ equivalent
|
|
Borrowing currency
|
|
U.S. $ equivalent
|
|
|
in millions
|
Limitation on availability to be borrowed under:
|
|
|
|
|
|
|
|
|
|
|
VM Credit Facilities (e)
|
|
£
|
675.0
|
|
|
$
|
890.6
|
|
|
£
|
455.4
|
|
|
$
|
600.9
|
|
|
|
(c)
|
The estimated fair values of our debt instruments are generally determined using the average of applicable bid and ask prices (mostly Level 1 of the fair value hierarchy) or, when quoted market prices are unavailable or not considered indicative of fair value, discounted cash flow models (mostly Level 2 of the fair value hierarchy). The discount rates used in the cash flow models are based on the market interest rates and estimated credit spreads of the applicable entity, to the extent available, and other relevant factors. For additional information regarding fair value hierarchies, see note
7
.
|
|
|
(d)
|
As further described in note
4
, subsequent to June 30, 2018, we used a portion of the net proceeds from the sale of
UPC Austria
to repay or redeem certain debt of the
UPC Holding
and Virgin Media borrowing groups.
|
|
|
(e)
|
Unused borrowing capacity under the
VM Credit Facilities
relates to multi-currency revolving facilities with an aggregate maximum borrowing capacity equivalent to
£675.0 million
(
$890.6 million
). In February 2018, the VM Revolving Facility was amended and split into two revolving facilities. VM Revolving Facility A is a multi-currency revolving facility maturing on December 31, 2021 with a maximum borrowing capacity equivalent to
£75.0 million
(
$98.9 million
), and VM Revolving Facility B is a multi-currency revolving facility maturing on January 15, 2024 with a maximum borrowing capacity equivalent to
£600.0 million
(
$791.7 million
). All other terms from the previously existing VM Revolving Facility continue to apply to the new revolving facilities
|
|
|
(f)
|
Unused borrowing capacity under the
Telenet Credit Facility
comprises (i)
€400.0 million
(
$467.1 million
) under Telenet Facility AG, (ii)
€25.0 million
(
$29.2 million
) under the Telenet Overdraft Facility and (iii)
€20.0 million
(
$23.4 million
) under the Telenet Revolving Facility, each of which were undrawn at
June 30, 2018
.
|
|
|
(g)
|
Represents amounts owed pursuant to interest-bearing vendor financing arrangements that are used to finance certain of our property and equipment additions and, to a lesser extent, certain of our operating expenses. These obligations are generally due within
one year
and include
VAT
that was paid on our behalf by the vendor. Repayments of vendor financing obligations are included in repayments and repurchases of debt and capital lease obligations in our condensed consolidated statements of cash flows.
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
|
|
(h)
|
The
Sumitomo Share Loan
is carried at fair value. For information regarding fair value hierarchies, see note
7
.
|
|
|
(i)
|
Represents amounts associated with certain derivative-related borrowing instruments, including
$281.1 million
and
$304.9 million
at
June 30, 2018
and December 31,
2017
, respectively, carried at fair value. These instruments mature at various dates through January 2025. For information regarding fair value hierarchies, see note
7
.
|
|
|
(j)
|
Amounts include
$131.0 million
and
$160.9 million
at
June 30, 2018
and December 31,
2017
, respectively, of debt collateralized by certain trade receivables of
Virgin Media
.
|
|
|
(k)
|
The
U.S.
dollar equivalents of our consolidated capital lease obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
|
|
in millions
|
|
|
|
|
|
Telenet
|
|
$
|
461.6
|
|
|
$
|
456.1
|
|
UPC Holding
|
|
80.6
|
|
|
89.0
|
|
Virgin Media
|
|
73.5
|
|
|
79.1
|
|
Other subsidiaries
|
|
57.1
|
|
|
67.2
|
|
Total
|
|
$
|
672.8
|
|
|
$
|
691.4
|
|
Refinancing Transactions - General Information
At
June 30, 2018
, most of our outstanding debt had been incurred by one of our
three
subsidiary “borrowing groups.” References to these borrowing groups, which comprise
Virgin Media
,
UPC Holding
and
Telenet
, include their respective restricted parent and subsidiary entities. Below we provide summary descriptions of any financing transactions completed during the first
six
months of
2018
. Unless otherwise noted, the terms and conditions of any new notes and/or credit facilities are largely consistent with those of existing notes and credit facilities of the corresponding borrowing group with regard to covenants, events of default and change of control provisions, among other items. For information regarding the general terms and conditions of our debt and capitalized terms not defined herein, see note 10 to the consolidated financial statements included in our
10-K
.
Virgin Media Financing Transaction
In April 2018, Virgin Media Receivables Financing Notes II Designated Activity Company (
Virgin Media Receivables II Financing Company
), a third-party special purpose financing entity that is not consolidated by
Virgin Media
or Liberty Global, issued
£300.0 million
(
$395.8 million
) principal amount of
5.75%
receivables financing notes due April 15, 2023. In June 2018,
Virgin Media Receivables II Financing Company
issued an additional
£50.0 million
(
$66.0 million
) principal amount of
5.75%
receivables financing notes due April 15, 2023. These notes, together with the initial
£300.0 million
, are collectively referred to as the “
VM Receivables Financing II Notes
.” The
VM Receivables Financing II Notes
are not the obligations of Virgin Media or Liberty Global. The net proceeds from the
VM Receivables Financing II Notes
are used to purchase certain vendor financed receivables of
Virgin Media
and its subsidiaries from various third parties. To the extent that the proceeds from the
VM Receivables Financing II Notes
exceed the amount of vendor financed receivables available to be purchased, the excess proceeds are used to fund an excess cash facility (the
VM Financing Facility II
) under a new credit facility of
Virgin Media
. The
VM Financing Facility II
, together with the
VM Financing Facility
, which was created in connection with the issuance of the
VM Receivables Financing Notes
by
Virgin Media Receivables Financing Company
in 2016, are collectively referred to as the “
VM Financing Facilities
.” At June 30, 2018, the principal amount outstanding under the
VM Financing Facilities
was
£700.0 million
(
$923.6 million
).
Virgin Media Receivables Financing Company
and
Virgin Media Receivables II Financing Company
can request the
VM Financing Facilities
be repaid by
Virgin Media
as additional vendor financed receivables become available for purchase.
Telenet
Refinancing Transactions
In March 2018, Telenet used existing cash to prepay
10%
of the
€530.0 million
(
$618.9 million
)
original principal amount under Telenet Facility AB, together with accrued and unpaid interest and the related prepayment premiums, which was owed to
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
Telenet Finance VI and, in turn, Telenet Finance VI used such proceeds to redeem
10%
of the
€530.0 million
original principal amount of the Telenet Finance VI Notes. In connection with this transaction, Telenet recognized a loss on debt modification and extinguishment, net, of
$2.6 million
related to (i) the payment of
$2.0 million
of redemption premiums and (ii) the write-off of
$0.6 million
of unamortized deferred financing costs and discounts.
In March 2018, commitments under
Telenet Facility AL
were increased by
$300.0 million
(the
Telenet Facility AL Add-on
). The terms of the
Telenet Facility AL Add-on
are consistent with those of
Telenet Facility AL
. In April 2018, Telenet drew the full
$300.0 million
of the
Telenet Facility AL Add-on
and used the net proceeds, together with existing cash, to prepay in full the
€250.0 million
(
$291.9 million
) outstanding principal amount under
Telenet Facility V
, together with accrued and unpaid interest and the related prepayment premiums, which was owed to Telenet Finance V and, in turn, Telenet Finance V used such proceeds to redeem in full the
€250.0 million
outstanding principal amount of the Telenet Finance V Notes. In connection with this transaction, Telenet recognized a loss on debt modification and extinguishment, net, of
$21.3 million
related to (i) the payment of
$17.3 million
of redemption premiums and (ii) the write-off of
$4.0 million
of unamortized deferred financing costs and discounts.
In May 2018, Telenet entered into (i) a
$1,600.0 million
term loan facility (
Telenet Facility AN
), which was issued at
99.875%
of par, matures on August 15, 2026, bears interest at a rate of LIBOR +
2.25%
and is subject to a LIBOR floor of
0.0%
, and (ii) a
€730.0 million
(
$852.4 million
) term loan facility (
Telenet Facility AO
), which was issued at
99.875%
of par, matures on December 15, 2027, bears interest at a rate of EURIBOR +
2.50%
and is subject to a EURIBOR floor of
0.0%
. The net proceeds from
Telenet Facility AN
and
Telenet Facility AO
, together with existing cash, were used to prepay in full (a) the
$1,300.0 million
outstanding principal amount under
Telenet Facility AL
, (b) the
$300.0 million
outstanding principal amount under the
Telenet Facility AL Add-on
and (c) the
€730.0 million
outstanding principal amount under Telenet Facility AM. In connection with these transactions, Telenet recognized a loss on debt modification and extinguishment, net, of
$7.6 million
related to the write-off of of unamortized deferred financing costs and discounts.
Maturities of Debt and Capital Lease Obligations
Maturities of our debt and capital lease obligations as of
June 30, 2018
are presented below for the named entity and its subsidiaries, unless otherwise noted. Amounts presented below represent
U.S.
dollar equivalents based on
June 30, 2018
exchange rates:
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virgin Media
|
|
UPC
Holding (a)
|
|
Telenet (b)
|
|
Other
|
|
Total
|
|
in millions
|
Year ending December 31:
|
|
|
|
|
|
|
|
|
|
2018 (remainder of year)
|
$
|
1,255.2
|
|
|
$
|
281.9
|
|
|
$
|
330.2
|
|
|
$
|
13.5
|
|
|
$
|
1,880.8
|
|
2019
|
1,140.2
|
|
|
230.3
|
|
|
142.0
|
|
|
44.3
|
|
|
1,556.8
|
|
2020
|
80.8
|
|
|
21.5
|
|
|
14.5
|
|
|
207.6
|
|
|
324.4
|
|
2021
|
1,350.0
|
|
|
22.0
|
|
|
12.5
|
|
|
1,584.3
|
|
|
2,968.8
|
|
2022
|
396.0
|
|
|
19.0
|
|
|
12.3
|
|
|
321.2
|
|
|
748.5
|
|
2023
|
957.1
|
|
|
13.8
|
|
|
12.5
|
|
|
—
|
|
|
983.4
|
|
Thereafter
|
11,645.5
|
|
|
6,391.6
|
|
|
4,796.5
|
|
|
—
|
|
|
22,833.6
|
|
Total debt maturities
|
16,824.8
|
|
|
6,980.1
|
|
|
5,320.5
|
|
|
2,170.9
|
|
|
31,296.3
|
|
Deferred financing costs, discounts and premiums, net
|
(54.8
|
)
|
|
(50.2
|
)
|
|
(21.3
|
)
|
|
(24.3
|
)
|
|
(150.6
|
)
|
Total debt
|
$
|
16,770.0
|
|
|
$
|
6,929.9
|
|
|
$
|
5,299.2
|
|
|
$
|
2,146.6
|
|
|
$
|
31,145.7
|
|
Current portion
|
$
|
2,325.5
|
|
|
$
|
508.2
|
|
|
$
|
447.4
|
|
|
$
|
23.3
|
|
|
$
|
3,304.4
|
|
Noncurrent portion
|
$
|
14,444.5
|
|
|
$
|
6,421.7
|
|
|
$
|
4,851.8
|
|
|
$
|
2,123.3
|
|
|
$
|
27,841.3
|
|
_______________
|
|
(a)
|
Amounts include certain senior secured notes issued by special purpose financing entities that are consolidated by
UPC Holding
and
Liberty Global
.
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
|
|
(b)
|
Amounts include certain senior secured notes issued by special purpose financing entities that are consolidated by
Telenet
and
Liberty Global
.
|
Capital lease obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telenet
|
|
UPC
Holding
|
|
Virgin Media
|
|
Other
|
|
Total
|
|
in millions
|
Year ending December 31:
|
|
|
|
|
|
|
|
|
|
2018 (remainder of year)
|
$
|
43.1
|
|
|
$
|
7.8
|
|
|
$
|
8.4
|
|
|
$
|
11.2
|
|
|
$
|
70.5
|
|
2019
|
76.8
|
|
|
14.9
|
|
|
11.5
|
|
|
16.5
|
|
|
119.7
|
|
2020
|
72.6
|
|
|
15.2
|
|
|
8.5
|
|
|
10.4
|
|
|
106.7
|
|
2021
|
68.4
|
|
|
15.6
|
|
|
8.8
|
|
|
5.1
|
|
|
97.9
|
|
2022
|
68.6
|
|
|
12.7
|
|
|
10.6
|
|
|
3.0
|
|
|
94.9
|
|
2023
|
57.2
|
|
|
11.6
|
|
|
6.3
|
|
|
18.1
|
|
|
93.2
|
|
Thereafter
|
224.9
|
|
|
20.2
|
|
|
192.4
|
|
|
—
|
|
|
437.5
|
|
Total principal and interest payments
|
611.6
|
|
|
98.0
|
|
|
246.5
|
|
|
64.3
|
|
|
1,020.4
|
|
Amounts representing interest
|
(150.0
|
)
|
|
(17.4
|
)
|
|
(173.0
|
)
|
|
(7.2
|
)
|
|
(347.6
|
)
|
Present value of net minimum lease payments
|
$
|
461.6
|
|
|
$
|
80.6
|
|
|
$
|
73.5
|
|
|
$
|
57.1
|
|
|
$
|
672.8
|
|
Current portion
|
$
|
51.4
|
|
|
$
|
10.4
|
|
|
$
|
9.7
|
|
|
$
|
16.7
|
|
|
$
|
88.2
|
|
Noncurrent portion
|
$
|
410.2
|
|
|
$
|
70.2
|
|
|
$
|
63.8
|
|
|
$
|
40.4
|
|
|
$
|
584.6
|
|
Non-cash Refinancing Transactions
During the
six
months ended
June 30, 2018
and
June 30, 2017
, certain of our refinancing transactions included non-cash borrowings and repayments of debt aggregating
$2,453.1 million
and
$6,546.2 million
, respectively.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
(
10
)
Income Taxes
Income tax expense attributable to our loss from continuing operations before income taxes differs from the amounts computed using the applicable income tax rate as a result of the following factors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
June 30,
|
|
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
|
|
|
|
|
|
|
|
Computed “expected” tax benefit (expense) (a)
|
$
|
(109.4
|
)
|
|
$
|
133.3
|
|
|
$
|
15.0
|
|
|
$
|
188.0
|
|
Mandatory Repatriation Tax (b)
|
242.0
|
|
|
—
|
|
|
(968.5
|
)
|
|
—
|
|
Change in valuation allowances (b) (c):
|
|
|
|
|
|
|
|
Expense
|
18.9
|
|
|
(102.2
|
)
|
|
(16.1
|
)
|
|
(169.6
|
)
|
Benefit
|
(131.2
|
)
|
|
(2.0
|
)
|
|
422.1
|
|
|
10.0
|
|
Basis and other differences in the treatment of items associated with investments in subsidiaries and affiliates (c):
|
|
|
|
|
|
|
|
Expense
|
(91.4
|
)
|
|
(41.3
|
)
|
|
(146.6
|
)
|
|
(80.8
|
)
|
Benefit
|
(0.4
|
)
|
|
(0.1
|
)
|
|
3.3
|
|
|
0.3
|
|
Non-deductible or non-taxable foreign currency exchange results (c):
|
|
|
|
|
|
|
|
Expense
|
78.0
|
|
|
(103.4
|
)
|
|
(4.9
|
)
|
|
(132.5
|
)
|
Benefit
|
71.3
|
|
|
3.0
|
|
|
73.6
|
|
|
4.3
|
|
Non-deductible or non-taxable interest and other items (c):
|
|
|
|
|
|
|
|
Expense
|
(15.0
|
)
|
|
(5.7
|
)
|
|
(41.8
|
)
|
|
(52.6
|
)
|
Benefit
|
9.3
|
|
|
10.0
|
|
|
22.4
|
|
|
18.8
|
|
International rate differences (c) (d):
|
|
|
|
|
|
|
|
Expense
|
(13.5
|
)
|
|
(3.5
|
)
|
|
(22.6
|
)
|
|
(19.1
|
)
|
Benefit
|
15.5
|
|
|
41.4
|
|
|
31.2
|
|
|
75.3
|
|
Other, net
|
18.7
|
|
|
1.8
|
|
|
15.7
|
|
|
7.5
|
|
Total income tax benefit (expense)
|
$
|
92.8
|
|
|
$
|
(68.7
|
)
|
|
$
|
(617.2
|
)
|
|
$
|
(150.4
|
)
|
_______________
|
|
(a)
|
The statutory or “expected” tax rates are
U.K.
rates of
19.0%
for the 2018 periods and
19.25%
for the 2017 periods. The statutory rate for the 2017 periods represents the blended rate in effect for the year ended December 31, 2017 based on the
20.0%
statutory rate that was in effect for the first quarter of 2017 and the
19.0%
statutory rate that was in effect for the remainder of 2017.
|
|
|
(b)
|
As further discussed below, the liability we have recorded for the
Mandatory Repatriation Tax
(as defined and described below) is significantly lower than the amount included in our income tax expense due primarily to the expected use of carryforward tax attributes in the U.S., all of which were subject to valuation allowances prior to the initial recognition of the
Mandatory Repatriation Tax
during the first quarter of 2018.
|
|
|
(c)
|
Country jurisdictions giving rise to income tax benefits are grouped together and shown separately from country jurisdictions giving rise to income tax expenses.
|
|
|
(d)
|
Amounts reflect adjustments (either a benefit or an expense) to the “expected” tax benefit for statutory rates in jurisdictions in which we operate outside of the
U.K.
|
The Tax Cuts and Jobs Act (the
2017 U.S. Tax Act
) was signed into law on December 22, 2017. In addition to lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018, the
2017 U.S. Tax Act
contains significant changes to the U.S. income tax regime, including (i) changes to the formation and use of net operating losses incurred after December 31, 2017, (ii)
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
changes to the income tax deductibility of certain business expenses, including interest expense and compensation paid to certain executive officers, (iii) the imposition of taxes on a one-time deemed mandatory repatriation of earnings and profits of foreign corporations (the
Mandatory Repatriation Tax
) and (iv) a new tax on global intangible low-taxed income.
The
Mandatory Repatriation Tax
requires that the aggregate post-1986 earnings and profits of our foreign corporations be included in our U.S. taxable income. The one-time repatriation of undistributed foreign earnings and profits is then taxed at a rate of 15.5% for cash earnings and 8% for non-cash earnings, both as defined in the
2017 U.S. Tax Act
, and is payable, interest free, over an eight year period according to a prescribed payment schedule with 45% of the tax due in the last two years. At
June 30, 2018
, we have recorded an estimate of our liability for the
Mandatory Repatriation Tax
of
$289.6 million
after considering the expected use of carryforward tax attributes and other filing positions. Our estimate is subject to change during the remaining quarters of 2018 as we continue to refine the complex calculations, review various historical transactions and analyze substantial information that supports our ownership structure and the operating history of our foreign subsidiaries, as well as evaluate recent guidance from the tax authorities on the application of the tax laws underlying the Mandatory Repatriation Tax.
At
June 30, 2018
, our unrecognized tax benefits of
$585.1 million
included
$425.9 million
of tax benefits that would have a favorable impact on our effective income tax rate if ultimately recognized, after considering amounts that we would expect to be offset by valuation allowances and other factors.
During the next 12 months, it is reasonably possible that the resolution of ongoing examinations by tax authorities, as well as the expiration of statutes of limitation, could result in reductions to our unrecognized tax benefits related to tax positions taken as of
June 30, 2018
. The amount of any such reductions could range up to
$125.0 million
, all of which would have a positive impact on our effective tax rate. Other than the potential impacts of these ongoing examinations and the expected expiration of certain statutes of limitation, we do not expect any material changes to our unrecognized tax benefits during the next 12 months. No assurance can be given as to the nature or impact of any changes in our unrecognized tax positions during the next 12 months.
We are currently undergoing income tax audits in Belgium, the Netherlands and the
U.S.
Except as noted below, any adjustments that might arise from the foregoing examinations are not expected to have a material impact on our consolidated financial position or results of operations. In the
U.S.
, we have received notices of adjustment from the Internal Revenue Service with respect to our 2009 and 2010 income tax returns, and have entered into the appeals process with respect to the 2009 and 2010 matters. While we believe that the ultimate resolution of these proposed adjustments will not have a material impact on our consolidated financial position, results of operations or cash flows, no assurance can be given that this will be the case given the amounts involved and the complex nature of the related issues.
(
11
)
Equity
Share Repurchases.
During the
six months ended June 30, 2018
, we repurchased (i)
12,588,800
shares of our class A ordinary shares at an average price per share of
$30.15
and (ii)
29,342,800
shares of our class C ordinary shares at an average price per share of
$30.97
, for an aggregate purchase price of
$1,288.3 million
, including direct acquisition costs. At
June 30, 2018
, the remaining amount authorized for share repurchases was
$783.9 million
. On July 31, 2018, our board of directors authorized an additional
$500.0 million
for share repurchases.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
(
12
)
Share-based Compensation
Our share-based compensation expense primarily relates to the share-based incentive awards issued by
Liberty Global
to its employees and employees of its subsidiaries. A summary of our aggregate share-based compensation expense is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
Liberty Global:
|
|
|
|
|
|
|
|
Performance-based incentive awards (a)
|
$
|
8.0
|
|
|
$
|
19.1
|
|
|
$
|
16.7
|
|
|
$
|
19.8
|
|
Non-performance based share-based incentive awards
|
24.3
|
|
|
24.6
|
|
|
46.3
|
|
|
46.3
|
|
Other (b)
|
13.4
|
|
|
—
|
|
|
20.5
|
|
|
—
|
|
Total Liberty Global
|
45.7
|
|
|
43.7
|
|
|
83.5
|
|
|
66.1
|
|
Other
|
(0.2
|
)
|
|
7.7
|
|
|
4.7
|
|
|
14.2
|
|
Total
|
$
|
45.5
|
|
|
$
|
51.4
|
|
|
$
|
88.2
|
|
|
$
|
80.3
|
|
Included in:
|
|
|
|
|
|
|
|
Other operating expense
|
$
|
—
|
|
|
$
|
0.9
|
|
|
$
|
1.0
|
|
|
$
|
1.9
|
|
SG&A expense
|
45.5
|
|
|
50.5
|
|
|
87.2
|
|
|
78.4
|
|
Total
|
$
|
45.5
|
|
|
$
|
51.4
|
|
|
$
|
88.2
|
|
|
$
|
80.3
|
|
_______________
|
|
(a)
|
Includes share-based compensation expense related to (i) performance-based restricted share units (
PSU
s
) and (ii) through March 31, 2017, performance grant units (
PGUs
) held by our Chief Executive Officer.
|
|
|
(b)
|
Represents annual incentive compensation and defined contribution plan liabilities that have been or are expected to be settled with
Liberty Global
ordinary shares. In the case of the annual incentive compensation, shares will be issued to senior management and key employees pursuant to a shareholding incentive program that was implemented in 2018. The shareholding incentive program allows these employees to elect to receive up to
100%
of their annual incentive compensation in ordinary shares of
Liberty Global
in lieu of cash.
|
The following table provides the aggregate number of options and share appreciation rights (
SAR
s
) with respect to awards issued by
Liberty Global
that were (i) outstanding and (ii) exercisable as of
June 30, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
Class C
|
|
Number of shares underlying awards
|
|
Weighted Average exercise or base price
|
|
Number of shares underlying awards
|
|
Weighted Average exercise or base price
|
Held by Liberty Global employees:
|
|
|
|
|
|
|
|
Outstanding
|
16,106,261
|
|
|
$
|
32.28
|
|
|
37,449,896
|
|
|
$
|
30.38
|
|
Exercisable
|
9,311,226
|
|
|
$
|
31.85
|
|
|
22,890,732
|
|
|
$
|
29.65
|
|
|
|
|
|
|
|
|
|
Held by former Liberty Global employees:
|
|
|
|
|
|
|
|
Outstanding
|
1,202,625
|
|
|
$
|
32.72
|
|
|
2,825,949
|
|
|
$
|
30.54
|
|
Exercisable
|
952,952
|
|
|
$
|
31.91
|
|
|
2,325,227
|
|
|
$
|
29.64
|
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
The following table provides the aggregate number of restricted share units (
RSU
s
) and
PSU
s that were outstanding as of
June 30, 2018
:
|
|
|
|
|
|
|
|
Class A
|
|
Class C
|
Held by Liberty Global employees:
|
|
|
|
RSUs
|
640,075
|
|
|
1,265,060
|
|
PSUs
|
1,771,830
|
|
|
3,548,966
|
|
Held by former Liberty Global employees:
|
|
|
|
RSUs
|
13,719
|
|
|
27,501
|
|
PSUs
|
172,971
|
|
|
346,299
|
|
2018 PSUs
In March and May 2018, the compensation committee of our board of directors approved the grant of an aggregate
1,114,280
and
2,228,560
Class A and Class C
PSU
s, respectively, to executive officers and key employees (the
2018 PSUs
) pursuant to a performance plan that is based on the achievement of a specified compound annual growth rate
(
CAGR
)
with respect to our
Adjusted OIBDA
(as defined in note
16
) during the
two
-year period ending December 31, 2019. The
2018 PSUs
include over- and under-performance payout opportunities should the
Adjusted OIBDA
CAGR
exceed or fail to meet the target, as applicable. A performance range of
50%
to
125%
of the target
Adjusted OIBDA
CAGR
will generally result in award recipients earning
50%
to
150%
of their target
2018 PSUs
, subject to reduction or forfeiture based on individual performance. The earned
2018 PSUs
will vest
50%
on April 1, 2020 and
50%
on October 1, 2020. As of June 30, 2018, the target
Adjusted OIBDA
CAGR
has not been yet been determined. Accordingly,
no
share-based compensation expense has been recognized related to the
2018 PSUs
and the table above does not include the
2018 PSUs
.
(
13
)
Restructuring Liability
A summary of changes in our restructuring liabilities during the
six months ended June 30, 2018
is set forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
severance
and
termination
|
|
Office
closures
|
|
Contract termination and other
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
|
|
Restructuring liability as of January 1, 2018
|
$
|
11.7
|
|
|
$
|
9.5
|
|
|
$
|
16.5
|
|
|
$
|
37.7
|
|
Restructuring charges
|
22.2
|
|
|
4.5
|
|
|
41.8
|
|
|
68.5
|
|
Cash paid
|
(16.8
|
)
|
|
(3.2
|
)
|
|
(19.7
|
)
|
|
(39.7
|
)
|
Foreign currency translation adjustments
|
(0.4
|
)
|
|
(0.3
|
)
|
|
(2.2
|
)
|
|
(2.9
|
)
|
Restructuring liability as of June 30, 2018
|
$
|
16.7
|
|
|
$
|
10.5
|
|
|
$
|
36.4
|
|
|
$
|
63.6
|
|
|
|
|
|
|
|
|
|
Current portion
|
$
|
15.2
|
|
|
$
|
6.3
|
|
|
$
|
25.8
|
|
|
$
|
47.3
|
|
Noncurrent portion
|
1.5
|
|
|
4.2
|
|
|
10.6
|
|
|
16.3
|
|
Total
|
$
|
16.7
|
|
|
$
|
10.5
|
|
|
$
|
36.4
|
|
|
$
|
63.6
|
|
Our restructuring charges during the
six months ended June 30, 2018
included
$39.2 million
of costs recorded during the first quarter in Belgium attributable to the migration of
Telenet
’s mobile subscribers from a mobile virtual network operator (
MVNO
) arrangement to Telenet’s mobile network. In March 2018,
Telenet
completed the migration and recorded the costs associated with meeting its minimum guarantee commitment under the
MVNO
agreement as a restructuring charge. Telenet’s
MVNO
agreement does not expire until the end of 2018.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
(
14
)
Earnings or Loss per Share
Basic earnings or loss per share (
EPS
) is computed by dividing net earnings or loss by the weighted average number of shares outstanding for the period. Diluted
EPS
presents the dilutive effect, if any, on a per share basis of potential shares (e.g., options,
SAR
s,
RSU
s and
PSU
s) as if they had been exercised, vested or converted at the beginning of the periods presented.
The details of our net earnings (loss) from continuing operations attributable to
Liberty Global
shareholders are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
June 30,
|
|
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
$
|
668.7
|
|
|
$
|
(761.3
|
)
|
|
$
|
(696.3
|
)
|
|
$
|
(1,126.8
|
)
|
Net earnings from continuing operations attributable to noncontrolling interests
|
(36.1
|
)
|
|
(4.8
|
)
|
|
(42.2
|
)
|
|
(39.8
|
)
|
Net earnings (loss) from continuing operations attributable to Liberty Global shareholders
|
$
|
632.6
|
|
|
$
|
(766.1
|
)
|
|
$
|
(738.5
|
)
|
|
$
|
(1,166.6
|
)
|
Our weighted average
Liberty Global Share
outstanding are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
June 30,
|
|
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
Weighted average ordinary shares outstanding (Liberty Global Shares):
|
|
|
|
|
|
|
|
Basic
|
788,815,021
|
|
|
853,612,217
|
|
|
798,215,803
|
|
|
871,936,668
|
|
Diluted
|
791,920,021
|
|
|
853,612,217
|
|
|
798,215,803
|
|
|
871,936,668
|
|
We reported losses from continuing operations attributable to
Liberty Global
shareholders for the
six months ended June 30, 2018
and the
three and six months ended June 30, 2017
. Therefore, the potentially dilutive effect at
June 30, 2018
and
2017
of the following items were not included in the computation of diluted loss from continuing operations attributable to
Liberty Global
shareholders per share for such periods because their inclusion would have been anti-dilutive to the computation or, in the case of certain
PSU
s, because such awards had not yet met the applicable performance criteria: (i) the aggregate number of outstanding options,
SAR
s and
RSU
s of
59.5 million
and
55.5 million
, respectively, and (ii) the aggregate number of
PSU
s of
5.8 million
and
7.3 million
, respectively.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
The details of the calculations of our basic and diluted
EPS
from continuing operations for the
three months ended June 30, 2018
are set forth in the following table:
|
|
|
|
|
Numerator:
|
|
Net earnings from continuing operations attributable to Liberty Global shareholders (basic and diluted EPS computation) (in millions)
|
$
|
632.6
|
|
|
|
Denominator (Liberty Global Shares):
|
|
Weighted average ordinary shares (basic EPS computation)
|
788,815,021
|
|
Incremental shares attributable to the assumed exercise of outstanding options, SARs and the release of restricted shares and share units upon vesting (treasury stock method)
|
3,105,000
|
|
Weighted average ordinary shares outstanding (diluted EPS computation)
|
791,920,021
|
|
A total of
41.7 million
options,
SAR
s and
RSU
s were excluded from the calculation of diluted earnings per share set forth in the table above because their effect would have been anti-dilutive. In addition, at June 30, 2018,
5.8 million
PSU
s were excluded from the calculation of diluted earnings per share because such awards had not yet met the applicable performance criteria.
(
15
)
Commitments and Contingencies
Commitments
In the normal course of business, we have entered into agreements that commit our company to make cash payments in future periods with respect to network and connectivity commitments, programming commitments, purchases of customer premises and other equipment and services, non-cancellable operating leases and other items. The following table sets forth the
U.S.
dollar equivalents of such commitments for our continuing operations as of
June 30, 2018
. The commitments included in this table do not reflect liabilities that are included in our
June 30, 2018
condensed consolidated balance sheet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due during:
|
|
|
|
Remainder
of 2018
|
|
|
|
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network and connectivity commitments
|
$
|
402.8
|
|
|
$
|
345.4
|
|
|
$
|
283.4
|
|
|
$
|
250.2
|
|
|
$
|
67.5
|
|
|
$
|
49.6
|
|
|
$
|
787.8
|
|
|
$
|
2,186.7
|
|
Programming commitments
|
544.1
|
|
|
792.9
|
|
|
470.3
|
|
|
227.7
|
|
|
40.3
|
|
|
14.7
|
|
|
46.6
|
|
|
2,136.6
|
|
Purchase commitments
|
506.7
|
|
|
306.9
|
|
|
136.2
|
|
|
47.7
|
|
|
20.8
|
|
|
17.5
|
|
|
38.6
|
|
|
1,074.4
|
|
Operating leases
|
70.4
|
|
|
99.6
|
|
|
79.0
|
|
|
60.0
|
|
|
47.8
|
|
|
40.1
|
|
|
151.0
|
|
|
547.9
|
|
Other commitments
|
9.8
|
|
|
15.2
|
|
|
2.8
|
|
|
0.4
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
28.4
|
|
Total
|
$
|
1,533.8
|
|
|
$
|
1,560.0
|
|
|
$
|
971.7
|
|
|
$
|
586.0
|
|
|
$
|
176.6
|
|
|
$
|
121.9
|
|
|
$
|
1,024.0
|
|
|
$
|
5,974.0
|
|
Programming commitments consist of obligations associated with certain of our programming, studio output and sports rights contracts that are enforceable and legally binding on us as we have agreed to pay minimum fees without regard to (i) the actual number of subscribers to the programming services, (ii) whether we terminate service to a portion of our subscribers or dispose of a portion of our distribution systems or (iii) whether we discontinue our premium sports services. Programming commitments do not include increases in future periods associated with contractual inflation or other price adjustments that are not fixed. Accordingly, the amounts reflected in the above table with respect to these contracts are significantly less than the amounts we expect to pay in these periods under these contracts. Historically, payments to programming vendors have represented a significant portion of our operating costs, and we expect that this will continue to be the case in future periods.
In this regard, our total programming and copyright costs aggregated
$805.1 million
and
$720.0 million
during the
six
months ended
June 30, 2018
and
2017
, respectively.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
Network and connectivity commitments include (i)
Telenet
’s commitments for certain operating costs associated with its leased network, (ii) commitments associated with our
MVNO
agreements and (iii) service commitments associated with our network extension projects, primarily in the
U.K.
Telenet
’s commitments for certain operating costs are subject to adjustment based on changes in the network operating costs incurred by
Telenet
with respect to its own networks. These potential adjustments are not subject to reasonable estimation and, therefore, are not included in the above table. The amounts reflected in the above table with respect to certain of our
MVNO
commitments represent fixed minimum amounts payable under these agreements and, therefore, may be significantly less than the actual amounts we ultimately pay in these periods.
Purchase commitments include unconditional and legally binding obligations related to (i) the purchase of customer premises and other equipment and (ii) certain service-related commitments, including call center, information technology and maintenance services.
In addition to the commitments set forth in the table above, we have significant commitments under (i) derivative instruments and (ii) defined benefit plans and similar agreements, pursuant to which we expect to make payments in future periods. For information regarding our derivative instruments, including the net cash paid or received in connection with these instruments during the
six
months ended
June 30, 2018
and
2017
, see note
6
.
We also have commitments pursuant to agreements with, and obligations imposed by, franchise authorities and municipalities, which may include obligations in certain markets to move aerial cable to underground ducts or to upgrade, rebuild or extend portions of our broadband communication systems. Such amounts are not included in the above table because they are not fixed or determinable.
Guarantees and Other Credit Enhancements
In the ordinary course of business, we may provide (i) indemnifications to our lenders, our vendors and certain other parties and (ii) performance and/or financial guarantees to local municipalities, our customers and vendors. Historically, these arrangements have not resulted in our company making any material payments and we do not believe that they will result in material payments in the future.
Legal and Regulatory Proceedings and Other Contingencies
Interkabel Acquisition.
On
November 26, 2007
,
Telenet
and
four
associations of municipalities in Belgium, which we refer to as the pure intercommunales or the “
PICs
,” announced a non-binding agreement-in-principle to transfer the analog and digital television activities of the
PICs
, including all existing subscribers, to
Telenet
. Subsequently,
Telenet
and the
PICs
entered into a binding agreement (the
2008 PICs Agreement
), which closed effective
October 1, 2008
. Beginning in December
2007
, Proximus NV/SA (
Proximus
), the incumbent telecommunications operator in Belgium, instituted several proceedings seeking to block implementation of these agreements.
Proximus
lodged summary proceedings with the President of the Court of First Instance of Antwerp to obtain a provisional injunction preventing the
PICs
from effecting the agreement-in-principle and initiated a civil procedure on the merits claiming the annulment of the agreement-in-principle. In March
2008
, the President of the Court of First Instance of Antwerp ruled in favor of
Proximus
in the summary proceedings, which ruling was overturned by the Court of Appeal of Antwerp in June
2008
.
Proximus
brought this appeal judgment before the Cour de Cassation (the
Belgian Supreme Court
), which confirmed the appeal judgment in September 2010. On
April 6, 2009
, the Court of First Instance of Antwerp ruled in favor of the
PICs
and
Telenet
in the civil procedure on the merits, dismissing
Proximus
’s request for the rescission of the agreement-in-principle and the
2008 PICs Agreement
. On
June 12, 2009
,
Proximus
appealed this judgment with the Court of Appeal of Antwerp. In this appeal,
Proximus
is now also seeking compensation for damages. While these proceedings were suspended indefinitely, other proceedings were initiated, which resulted in a ruling by the Belgian Council of State in May 2014 annulling (i) the decision of the
PICs
not to organize a public market consultation and (ii) the decision from the
PICs
’ board of directors to approve the
2008 PICs Agreement
. In December 2015,
Proximus
resumed the civil proceedings pending with the Court of Appeal of Antwerp seeking to have the
2008 PICs Agreement
annulled and claiming damages of
€1.4 billion
(
$1.6 billion
).
In December 2017, the Court of Appeals of Antwerp issued a judgment rejecting Proximus’ claims. Proximus has the right to appeal the Court of Appeals of Antwerp’s judgment with the
Belgian Supreme Court
, however Proximus has not done so to date. No assurance can be given as to the outcome of these or other proceedings. However, an unfavorable outcome of existing or future proceedings could potentially lead to the annulment of the
2008 PICs Agreement
and/or to an obligation of
Telenet
to pay compensation for damages, subject to the relevant provisions of the
2008 PICs Agreement
, which stipulate that
Telenet
is
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
responsible for damages in excess of
€20.0 million
(
$23.4 million
). We do not expect the ultimate resolution of this matter to have a material impact on our results of operations, cash flows or financial position.
No
amounts have been accrued by us with respect to this matter as the likelihood of loss is not considered to be probable.
Telekom Deutschland
Litigation.
On December 28, 2012,
Unitymedia
filed a lawsuit against Telekom Deutschland GmbH (
Telekom Deutschland
), in which
Unitymedia
asserts that it pays excessive prices for the co-use of
Telekom Deutschland
’s cable ducts in
Unitymedia
’s footprint. The Federal Network Agency approved rates for the co-use of certain ducts of
Telekom Deutschland
in March 2011. Based in part on these approved rates,
Unitymedia
initially sought a reduction of the annual lease fees (approximately
€76 million
(
$89 million
) for 2017) by approximately
two-thirds
and has subsequently increased its claim to seek a reduction by approximately
five-sixths
. In addition,
Unitymedia
is seeking the return of similarly calculated overpayments from 2009 through the ultimate settlement date, plus accrued interest. In October 2016, the first instance court dismissed this action, and in March 2018, the court of appeal dismissed Unitymedia’s appeal of the first instance court’s decision and did not grant permission to appeal further to the Federal Court of Justice.
Unitymedia
has filed a motion with the Federal Court of Justice to grant permission to appeal. The resolution of this matter may take several years and no assurance can be given that
Unitymedia
’s claims will be successful. Any recovery by
Unitymedia
will not be reflected in our consolidated financial statements until such time as the final disposition of this matter has been reached. If this matter is settled subsequent to the completion of the sale of the
Vodafone Disposal Group
, we would only share in 50% of any amounts recovered, plus 50% of the net present value of certain cost savings in future periods that are attributable to the favorable resolution of this matter, less 50% of associated legal or other third-party fees paid post-completion of the sale of the
Vodafone Disposal Group
.
Belgium Regulatory Developments.
In June 2018, the Belgisch Instituut voor Post en Telecommunicatie and the regional regulators for the media sectors (together, the
Belgium Regulatory Authorities
) adopted a new decision finding that
Telenet
has significant market power in the wholesale broadband market (the
2018 Decision
). The
2018 Decision
imposes on
Telenet
the obligations to (i) provide third-party operators with access to the digital television platform (including basic digital video and analog video) and (ii) make available to third-party operators a bitstream offer of broadband internet access (including fixed-line telephony as an option). Unlike prior decisions, the
2018 Decision
no longer applies “retail minus” pricing on
Telenet
; however, as of August 1, 2018, this decision imposes a
17%
reduction in monthly wholesale cable resale access prices for an interim period. The
Belgium Regulatory Authorities
will replace these interim prices with “reasonable access tariffs” around mid-2019.
The
2018 Decision
aims to, and in its application, may strengthen
Telenet
’s competitors by granting them resale access to
Telenet
’s network to offer competing products and services notwithstanding
Telenet
’s substantial historical financial outlays in developing the infrastructure. In addition, any resale access granted to competitors could (i) limit the bandwidth available to
Telenet
to provide new or expanded products and services to the customers served by its network and (ii) adversely impact
Telenet
’s ability to maintain or increase its revenue and cash flows. The extent of any such adverse impacts ultimately will be dependent on the extent that competitors take advantage of the resale access afforded to
Telenet
’s network, the rates that
Telenet
receives for such access and other competitive factors or market developments.
Telenet
considers the
2018 Decision
to be inconsistent with the principle of technology-neutral regulation and the European Single Market Strategy to stimulate further investments in broadband networks and intends to challenge the
2018 Decision
to the Brussels Court of Appeal.
Virgin Media VAT
Matters.
Virgin Media
’s application of
VAT
with respect to certain revenue generating activities has been challenged by the
U.K.
tax authorities.
Virgin Media
has estimated its maximum exposure in the event of an unfavorable outcome to be
£47 million
(
$62 million
) as of
June 30, 2018
.
No
portion of this exposure has been accrued by
Virgin Media
as the likelihood of loss is not considered to be probable. A court hearing was held at the end of September 2014 in relation to the
U.K.
tax authorities’ challenge and the timing of the court’s decision is uncertain.
On March 19, 2014, the
U.K.
government announced a change in legislation with respect to the charging of
VAT
in connection with prompt payment discounts such as those that we offer to our fixed-line telephony customers. This change, which took effect on May 1, 2014, impacted our company and some of our competitors. The
U.K.
tax authority issued a decision in the fourth quarter of 2015 challenging our application of the prompt payment discount rules prior to the May 1, 2014 change in legislation. We have appealed this decision. As part of the appeal process, we were required to make aggregate payments of
£67.0 million
(
$99.1 million
at the respective transaction dates), which included the challenged amount of
£63.7 million
and related interest of
£3.3 million
. The aggregate amount paid does not include penalties, which could be significant in the unlikely event that penalties were to be assessed. A court hearing was held in September 2017 and the timing of the court’s decision is uncertain.
No
portion of this potential exposure has been accrued by our company as the likelihood of loss is not considered to be probable.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
Ziggo Acquisition Matter.
In July 2015, KPN N.V. appealed the
European Commission
’s 2014 approval of the acquisition by
Liberty Global
of Ziggo Holding B.V. (
Ziggo
). We were not a party to that case. In October 2017, the
E.U.
General Court annulled the
European Commission
’s approval on procedural grounds in that it found that the
European Commission
had failed to adequately explain the reasons for elements of its decision. We re-notified our acquisition of
Ziggo
to the
European Commission
for a new merger clearance, which was granted on May 30, 2018, and conditioned on remedies substantially similar to the remedies upon which the 2014 merger clearance was based. We consider this matter to be closed.
Other Regulatory Issues.
Video distribution, broadband internet, fixed-line telephony, mobile and content businesses are regulated in each of the countries in which we or our affiliates operate. The scope of regulation varies from country to country, although in some significant respects regulation in European markets is harmonized under the regulatory structure of the
E.U.
Adverse regulatory developments could subject our businesses to a number of risks. Regulation, including conditions imposed on us by competition or other authorities as a requirement to close acquisitions or dispositions, could limit growth, revenue and the number and types of services offered and could lead to increased operating costs and property and equipment additions. In addition, regulation may restrict our operations and subject them to further competitive pressure, including pricing restrictions, interconnect and other access obligations, and restrictions or controls on content, including content provided by third parties. Failure to comply with current or future regulation could expose our businesses to various penalties.
Effective April 1, 2017, the rateable value of our existing network and other assets in the
U.K.
increased significantly. This increase affects the amount we pay for network infrastructure charges as the annual amount payable to the
U.K.
government is calculated by applying a percentage multiplier to the rateable value of assets. This change, together with a similar change in Ireland, has and will continue to significantly increase our network infrastructure charges. We expect the full year 2018 impact of this increase will be approximately
£18 million
(
$24 million
), as compared to 2017, and the impact will build to an aggregate increase of up to
£110 million
(
$145 million
) in 2021, as compared to the 12 months ended March 31, 2017. We continue to believe that these increases are excessive and retain the right of appeal should more favorable agreements be reached with other operators. The rateable value of network and other assets constructed under our network extension program in the
U.K.
remains subject to review by the
U.K.
government.
In addition to the foregoing items, we have contingent liabilities related to matters arising in the ordinary course of business including (i) legal proceedings, (ii) issues involving
VAT
and wage, property, withholding and other tax issues and (iii) disputes over interconnection, programming, copyright and channel carriage fees. While we generally expect that the amounts required to satisfy these contingencies will not materially differ from any estimated amounts we have accrued, no assurance can be given that the resolution of one or more of these contingencies will not result in a material impact on our results of operations, cash flows or financial position in any given period. Due, in general, to the complexity of the issues involved and, in certain cases, the lack of a clear basis for predicting outcomes, we cannot provide a meaningful range of potential losses or cash outflows that might result from any unfavorable outcomes.
(
16
)
Segment Reporting
We generally identify our
reportable segments
as (i) those consolidated subsidiaries that represent
10%
or more of our revenue,
Adjusted OIBDA
(as defined below) or total assets or (ii) those equity method affiliates where our investment or share of revenue or
Adjusted OIBDA
represents
10%
or more of our total assets, revenue or
Adjusted OIBDA
, respectively. In certain cases, we may elect to include an operating segment in our segment disclosure that does not meet the above-described criteria for a reportable segment. We evaluate performance and make decisions about allocating resources to our operating segments based on financial measures such as revenue and
Adjusted OIBDA
. In addition, we review non-financial measures such as subscriber growth, as appropriate.
Adjusted OIBDA
is the primary measure used by our chief operating decision maker to evaluate segment operating performance and is also a key factor that is used by our internal decision makers to (i) determine how to allocate resources to segments and (ii) evaluate the effectiveness of our management for purposes of annual and other incentive compensation plans. As we use the term, “
Adjusted OIBDA
” is defined as operating income before depreciation and amortization, share-based compensation, provisions and provision releases related to significant litigation and impairment, restructuring and other operating items. Other operating items include (a) gains and losses on the disposition of long-lived assets, (b) third-party costs directly associated with successful and unsuccessful acquisitions and dispositions, including legal, advisory and due diligence fees, as applicable, and (c) other acquisition-related items, such as gains and losses on the settlement of contingent consideration. Our internal decision makers believe
Adjusted OIBDA
is a meaningful measure because it represents a transparent view of our recurring operating performance
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
that is unaffected by our capital structure and allows management to (1) readily view operating trends, (2) perform analytical comparisons and benchmarking between segments and (3) identify strategies to improve operating performance in the different countries in which we operate. A reconciliation of
Adjusted OIBDA
from continuing operations to earnings (loss) from continuing operations before income taxes is presented below.
As of
June 30, 2018
, our
reportable segments
are as follows:
Consolidated:
•
U.K./Ireland
•
Belgium
•
Switzerland
•
Central and Eastern Europe
Nonconsolidated:
•
VodafoneZiggo JV
Segment information for all periods has been retrospectively revised to present the
LiLAC Group
and our operating segments in Austria, Germany, Hungary, the Czech Republic and Romania as discontinued operations. As a result, (i) our former Switzerland/Austria reportable segment now only includes our operations in Switzerland and (ii) our
Central and Eastern Europe
segment now only includes (a) our broadband communications operations in Poland and Slovakia and (b) “
UPC DTH
”, which is a Luxembourg-based organization that provides direct-to-home satellite (
DTH
) services to customers in the Czech Republic, Hungary, Romania and Slovakia. Our central and corporate functions are included in an operating segment that we refer to as “
Central and Corporate
,” which primarily includes (1) revenue earned from services provided to the
VodafoneZiggo JV
and
Liberty Latin America
, (2) revenue from sales of customer premises equipment to the
VodafoneZiggo JV
and (3) costs associated with certain centralized functions, including billing systems, network operations, technology, marketing, facilities, finance and other administrative functions. On January 1, 2018, our wholesale handset program was transferred from Germany to an entity included in
Central and Corporate
. In connection with our presentation of our operating segment in Germany as a discontinued operation, the 2017 periods presented herein have been retrospectively revised to reflect this change.
We present only the reportable segments of our continuing operations in the tables below.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
Performance Measures of Our Reportable Segments
The amounts presented below represent
100%
of each of our reportable segment’s revenue and
Adjusted OIBDA
. As we have the ability to control
Telenet
, we consolidate
100%
of
Telenet
’s revenue and expenses in our condensed consolidated statements of operations despite the fact that third parties own a significant interest. The noncontrolling owners’ interests in the operating results of
Telenet
and other less significant majority-owned subsidiaries are reflected in net earnings or loss attributable to noncontrolling interests in our condensed consolidated statements of operations. Similarly, despite only holding a
50%
noncontrolling interest in the
VodafoneZiggo JV
, we present
100%
of its revenue and
Adjusted OIBDA
in the tables below. Our share of the
VodafoneZiggo JV
's operating results is included in share of losses of affiliates, net, in our condensed consolidated statements of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
1,734.9
|
|
|
$
|
1,566.1
|
|
|
$
|
3,513.1
|
|
|
$
|
3,070.5
|
|
Belgium
|
753.9
|
|
|
686.0
|
|
|
1,513.5
|
|
|
1,347.4
|
|
Switzerland
|
332.2
|
|
|
339.0
|
|
|
677.1
|
|
|
670.2
|
|
Central and Eastern Europe
|
152.9
|
|
|
142.0
|
|
|
313.4
|
|
|
277.1
|
|
Central and Corporate
|
72.0
|
|
|
42.7
|
|
|
123.8
|
|
|
83.5
|
|
Intersegment eliminations
|
(0.8
|
)
|
|
(0.9
|
)
|
|
(1.3
|
)
|
|
(4.0
|
)
|
Total
|
$
|
3,045.1
|
|
|
$
|
2,774.9
|
|
|
$
|
6,139.6
|
|
|
$
|
5,444.7
|
|
|
|
|
|
|
|
|
|
VodafoneZiggo JV
|
$
|
1,114.5
|
|
|
$
|
1,081.3
|
|
|
$
|
2,296.1
|
|
|
$
|
2,165.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted OIBDA
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
763.6
|
|
|
$
|
707.1
|
|
|
$
|
1,526.2
|
|
|
$
|
1,353.1
|
|
Belgium
|
383.7
|
|
|
317.9
|
|
|
741.3
|
|
|
615.8
|
|
Switzerland
|
189.0
|
|
|
212.9
|
|
|
375.5
|
|
|
417.7
|
|
Central and Eastern Europe
|
67.9
|
|
|
64.6
|
|
|
139.8
|
|
|
123.1
|
|
Central and Corporate
|
(83.6
|
)
|
|
(98.7
|
)
|
|
(182.7
|
)
|
|
(191.7
|
)
|
Intersegment eliminations (a)
|
(10.8
|
)
|
|
(8.4
|
)
|
|
(18.5
|
)
|
|
(16.2
|
)
|
Total
|
$
|
1,309.8
|
|
|
$
|
1,195.4
|
|
|
$
|
2,581.6
|
|
|
$
|
2,301.8
|
|
|
|
|
|
|
|
|
|
VodafoneZiggo JV
|
$
|
483.6
|
|
|
$
|
471.1
|
|
|
$
|
985.5
|
|
|
$
|
930.6
|
|
_______________
|
|
(a)
|
Amounts are related to transactions between our continuing and discontinued operations, which eliminations will no longer be recorded subsequent to the respective disposals of
UPC Austria
and the
Vodafone Disposal Group
.
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
The following table provides a reconciliation of
Adjusted OIBDA
from continuing operations to earnings (loss) from continuing operations before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
|
|
|
|
|
|
|
|
Adjusted OIBDA from continuing operations
|
$
|
1,309.8
|
|
|
$
|
1,195.4
|
|
|
$
|
2,581.6
|
|
|
$
|
2,301.8
|
|
Share-based compensation expense
|
(45.5
|
)
|
|
(51.4
|
)
|
|
(88.2
|
)
|
|
(80.3
|
)
|
Depreciation and amortization
|
(970.2
|
)
|
|
(922.0
|
)
|
|
(2,017.5
|
)
|
|
(1,789.7
|
)
|
Impairment, restructuring and other operating items, net
|
(30.2
|
)
|
|
(13.1
|
)
|
|
(91.6
|
)
|
|
(6.4
|
)
|
Operating income
|
263.9
|
|
|
208.9
|
|
|
384.3
|
|
|
425.4
|
|
Interest expense
|
(381.1
|
)
|
|
(348.8
|
)
|
|
(757.0
|
)
|
|
(688.3
|
)
|
Realized and unrealized gains (losses) on derivative instruments, net
|
675.5
|
|
|
(351.7
|
)
|
|
464.2
|
|
|
(596.1
|
)
|
Foreign currency transaction gains (losses), net
|
52.1
|
|
|
(18.2
|
)
|
|
(49.6
|
)
|
|
11.0
|
|
Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net
|
61.5
|
|
|
(141.4
|
)
|
|
4.3
|
|
|
(42.6
|
)
|
Losses on debt modification and extinguishment, net
|
(20.1
|
)
|
|
(53.6
|
)
|
|
(22.7
|
)
|
|
(98.9
|
)
|
Share of losses of affiliates, net
|
(82.3
|
)
|
|
(3.6
|
)
|
|
(118.8
|
)
|
|
(19.3
|
)
|
Other income, net
|
6.4
|
|
|
15.8
|
|
|
16.2
|
|
|
32.4
|
|
Earnings (loss) from continuing operations before income taxes
|
$
|
575.9
|
|
|
$
|
(692.6
|
)
|
|
$
|
(79.1
|
)
|
|
$
|
(976.4
|
)
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
Property and Equipment Additions of our Reportable Segments
The property and equipment additions of our reportable segments (including capital additions financed under vendor financing or capital lease arrangements) are presented below and reconciled to the capital expenditure amounts included in our condensed consolidated statements of cash flows. For additional information concerning capital additions financed under vendor financing and capital lease arrangements, see note
8
.
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
in millions
|
|
|
|
|
U.K./Ireland
|
$
|
1,040.1
|
|
|
$
|
970.7
|
|
Belgium
|
355.2
|
|
|
288.4
|
|
Switzerland
|
105.2
|
|
|
96.5
|
|
Central and Eastern Europe
|
71.9
|
|
|
117.0
|
|
Central and Corporate (a)
|
278.0
|
|
|
159.1
|
|
Total property and equipment additions
|
1,850.4
|
|
|
1,631.7
|
|
Assets acquired under capital-related vendor financing arrangements
|
(1,187.9
|
)
|
|
(1,164.1
|
)
|
Assets acquired under capital leases
|
(46.5
|
)
|
|
(97.9
|
)
|
Changes in current liabilities related to capital expenditures
|
181.8
|
|
|
218.3
|
|
Total capital expenditures, net
|
$
|
797.8
|
|
|
$
|
588.0
|
|
|
|
|
|
Capital expenditures, net:
|
|
|
|
Third-party payments
|
$
|
855.1
|
|
|
$
|
782.9
|
|
Proceeds received for transfers to related parties (b)
|
(57.3
|
)
|
|
(194.9
|
)
|
Total capital expenditures, net
|
$
|
797.8
|
|
|
$
|
588.0
|
|
|
|
|
|
Property and equipment additions - VodafoneZiggo JV
|
$
|
476.6
|
|
|
$
|
444.5
|
|
_______________
|
|
(a)
|
Includes amounts that represent the net impact of changes in inventory levels associated with certain centrally-procured network equipment. This equipment is ultimately transferred to our operating subsidiaries.
|
|
|
(b)
|
Primarily relates to transfers of centrally-procured property and equipment to our discontinued operations and the
VodafoneZiggo JV
.
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
Revenue by Major Category
Our revenue by major category for our
consolidated reportable segments
is set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
Residential revenue:
|
|
|
|
|
|
|
|
Residential cable revenue (a):
|
|
|
|
|
|
|
|
Subscription revenue (b):
|
|
|
|
|
|
|
|
Video
|
$
|
743.5
|
|
|
$
|
717.3
|
|
|
$
|
1,518.1
|
|
|
$
|
1,406.2
|
|
Broadband internet
|
816.7
|
|
|
724.8
|
|
|
1,657.9
|
|
|
1,430.7
|
|
Fixed-line telephony
|
407.7
|
|
|
395.9
|
|
|
829.7
|
|
|
787.6
|
|
Total subscription revenue
|
1,967.9
|
|
|
1,838.0
|
|
|
4,005.7
|
|
|
3,624.5
|
|
Non-subscription revenue
|
72.4
|
|
|
76.9
|
|
|
154.1
|
|
|
157.8
|
|
Total residential cable revenue
|
2,040.3
|
|
|
1,914.9
|
|
|
4,159.8
|
|
|
3,782.3
|
|
Residential mobile revenue (c):
|
|
|
|
|
|
|
|
Subscription revenue (b)
|
249.6
|
|
|
245.8
|
|
|
493.4
|
|
|
482.1
|
|
Non-subscription revenue
|
175.2
|
|
|
134.3
|
|
|
354.7
|
|
|
260.9
|
|
Total residential mobile revenue
|
424.8
|
|
|
380.1
|
|
|
848.1
|
|
|
743.0
|
|
Total residential revenue
|
2,465.1
|
|
|
2,295.0
|
|
|
5,007.9
|
|
|
4,525.3
|
|
B2B revenue (d):
|
|
|
|
|
|
|
|
Subscription revenue
|
102.9
|
|
|
91.2
|
|
|
219.6
|
|
|
168.5
|
|
Non-subscription revenue
|
400.2
|
|
|
337.9
|
|
|
771.4
|
|
|
652.7
|
|
Total B2B revenue
|
503.1
|
|
|
429.1
|
|
|
991.0
|
|
|
821.2
|
|
Other revenue (e)
|
76.9
|
|
|
50.8
|
|
|
140.7
|
|
|
98.2
|
|
Total
|
$
|
3,045.1
|
|
|
$
|
2,774.9
|
|
|
$
|
6,139.6
|
|
|
$
|
5,444.7
|
|
_______________
|
|
(a)
|
Residential cable subscription revenue includes amounts received from subscribers for ongoing services. Residential cable non-subscription revenue includes, among other items, channel carriage fees, late fees and revenue from the sale of equipment. As described in note
2
, we adopted
ASU 2014-09
on January 1, 2018 using the cumulative effect transition method. For periods subsequent to our adoption of
ASU 2014-09
, installation revenue is generally deferred and recognized over the contractual period as residential cable subscription revenue. For periods prior to the adoption of
ASU 2014-09
, installation revenue is included in residential cable non-subscription revenue.
|
|
|
(b)
|
Residential subscription revenue from subscribers who purchase bundled services at a discounted rate is generally allocated proportionally to each service based on the standalone price for each individual service. As a result, changes in the standalone pricing of our cable and mobile products or the composition of bundles can contribute to changes in our product revenue categories from period to period.
|
|
|
(c)
|
Residential mobile subscription revenue includes amounts received from subscribers for ongoing services. Residential mobile non-subscription revenue includes, among other items, interconnect revenue and revenue from sales of mobile handsets and other devices.
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
|
|
(d)
|
B2B
subscription revenue represents revenue from services to certain small or home office (
SOHO
) subscribers.
SOHO
subscribers pay a premium price to receive expanded service levels along with video, broadband internet, fixed-line telephony or mobile services that are the same or similar to the mass marketed products offered to our residential subscribers.
B2B
non-subscription revenue includes business broadband internet, video, fixed-line telephony, mobile and data services offered to medium to large enterprises and, on a wholesale basis, to other operators.
|
|
|
(e)
|
Other revenue includes, among other items, revenue earned from the JV Services, broadcasting revenue in Ireland and revenue from Central and Corporate’s wholesale handset program. In addition, the 2018 periods include revenue earned from (i) sales of customer premises equipment to the VodafoneZiggo JV and (ii) services provided to Liberty Latin America.
|
Geographic Segments
The revenue of our geographic segments is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
|
|
|
|
|
|
|
|
U.K.
|
$
|
1,605.6
|
|
|
$
|
1,454.8
|
|
|
$
|
3,250.0
|
|
|
$
|
2,855.2
|
|
Belgium
|
753.9
|
|
|
686.0
|
|
|
1,513.5
|
|
|
1,347.4
|
|
Switzerland
|
332.2
|
|
|
339.0
|
|
|
677.1
|
|
|
670.2
|
|
Ireland
|
129.3
|
|
|
111.3
|
|
|
263.1
|
|
|
215.3
|
|
Poland
|
110.4
|
|
|
101.8
|
|
|
226.4
|
|
|
197.7
|
|
Slovakia
|
15.8
|
|
|
14.6
|
|
|
32.3
|
|
|
28.9
|
|
Other, including intersegment eliminations (a)
|
97.9
|
|
|
67.4
|
|
|
177.2
|
|
|
130.0
|
|
Total
|
$
|
3,045.1
|
|
|
$
|
2,774.9
|
|
|
$
|
6,139.6
|
|
|
$
|
5,444.7
|
|
|
|
|
|
|
|
|
|
VodafoneZiggo JV (the Netherlands)
|
$
|
1,114.5
|
|
|
$
|
1,081.3
|
|
|
$
|
2,296.1
|
|
|
$
|
2,165.2
|
|
_______________
|
|
(a)
|
Includes revenue from
DTH
services provided to customers in the Czech Republic, Hungary and Romania.
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
June 30, 2018
(unaudited)
(
17
)
Subsequent Event
Telenet
Dividend.
On August 1, 2018,
Telenet
announced that its board of directors proposed an extraordinary dividend payment of
€600.0 million
(
$700.6 million
). This dividend payment, which is subject to shareholder approval, is expected to be made in October 2018 and financed with additional borrowings under the Telenet Credit Facility.
|
|
Item 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following discussion and analysis, which should be read in conjunction with our condensed consolidated financial statements and the discussion and analysis included in our
10-K
, is intended to assist in providing an understanding of our financial condition, changes in financial condition and results of operations and is organized as follows:
|
|
•
|
Forward-looking Statements.
This section provides a description of certain factors that could cause actual results or events to differ materially from anticipated results or events.
|
|
|
•
|
Overview.
This section provides a general description of our business and recent events.
|
|
|
•
|
Material Changes in Results of Operations.
This section provides an analysis of our results of operations for the
three and six months ended June 30, 2018
and
2017
.
|
|
|
•
|
Material Changes in Financial Condition.
This section provides an analysis of our corporate and subsidiary liquidity, condensed consolidated statements of cash flows and contractual commitments.
|
The capitalized terms used below have been defined in the notes to our condensed consolidated financial statements. In the following text, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to
Liberty Global
or collectively to
Liberty Global
and its subsidiaries.
Unless otherwise indicated, convenience translations into
U.S.
dollars are calculated as of
June 30, 2018
.
Forward-looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. To the extent that statements in this Quarterly Report are not recitations of historical fact, such statements constitute forward-looking statements, which, by definition, involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. In particular, statements under
Management’s Discussion and Analysis of Financial Condition and Results of Operations
and
Quantitative and Qualitative Disclosures About Market Risk
may
contain forward-looking statements, including statements regarding our business, product, foreign currency and finance strategies, our property and equipment additions (including with respect to the
Network Extensions
, as defined below), subscriber growth and retention rates, competitive, regulatory and economic factors, the timing and impacts of proposed transactions, the maturity of our markets, the anticipated impacts of new legislation (or changes to existing rules and regulations), anticipated changes in our revenue, costs or growth rates, our liquidity, credit risks, foreign currency risks, target leverage levels, our future projected contractual commitments and cash flows and other information and statements that are not historical fact. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. In evaluating these statements, you should consider the risks and uncertainties discussed in our
10-K
, as well as the following list of some but not all of the factors that could cause actual results or events to differ materially from anticipated results or events:
|
|
•
|
economic and business conditions and industry trends in the countries in which we or our affiliates operate;
|
|
|
•
|
the competitive environment in the industries in the countries in which we or our affiliates operate, including competitor responses to our products and services;
|
|
|
•
|
fluctuations in currency exchange rates and interest rates;
|
|
|
•
|
instability in global financial markets, including sovereign debt issues and related fiscal reforms;
|
|
|
•
|
consumer disposable income and spending levels, including the availability and amount of individual consumer debt;
|
|
|
•
|
changes in consumer television viewing preferences and habits;
|
|
|
•
|
consumer acceptance of our existing service offerings, including our cable television, broadband internet, fixed-line telephony, mobile and business service offerings, and of new technology, programming alternatives and other products and services that we may offer in the future;
|
|
|
•
|
our ability to manage rapid technological changes;
|
|
|
•
|
our ability to maintain or increase the number of subscriptions to our cable television, broadband internet, fixed-line telephony and mobile service offerings and our average revenue per household;
|
|
|
•
|
our ability to provide satisfactory customer service, including support for new and evolving products and services;
|
|
|
•
|
our ability to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers;
|
|
|
•
|
the impact of our future financial performance, or market conditions generally, on the availability, terms and deployment of capital;
|
|
|
•
|
changes in, or failure or inability to comply with, government regulations in the countries in which we or our affiliates operate and adverse outcomes from regulatory proceedings;
|
|
|
•
|
government intervention that requires opening our broadband distribution networks to competitors, such as the obligations imposed in Belgium;
|
|
|
•
|
our ability to obtain regulatory approval and satisfy other conditions necessary to close acquisitions and dispositions (including the disposition of the
Vodafone Disposal Group
) and the impact of conditions imposed by competition and other regulatory authorities in connection with acquisitions;
|
|
|
•
|
our ability to successfully acquire new businesses and, if acquired, to integrate, realize anticipated efficiencies from, and implement our business plan with respect to, the businesses we have acquired or that we expect to acquire;
|
|
|
•
|
changes in laws or treaties relating to taxation, or the interpretation thereof, in the
U.K.
, the
U.S.
or in other countries in which we or our affiliates operate;
|
|
|
•
|
changes in laws and government regulations that may impact the availability and cost of capital and the derivative instruments that hedge certain of our financial risks;
|
|
|
•
|
the ability of suppliers and vendors (including our third-party wireless network providers under our
MVNO
arrangements) to timely deliver quality products, equipment, software, services and access;
|
|
|
•
|
the availability of attractive programming for our video services and the costs associated with such programming, including retransmission and copyright fees payable to public and private broadcasters;
|
|
|
•
|
uncertainties inherent in the development and integration of new business lines and business strategies;
|
|
|
•
|
our ability to adequately forecast and plan future network requirements, including the costs and benefits associated with the
Network Extensions
;
|
|
|
•
|
the availability of capital for the acquisition and/or development of telecommunications networks and services;
|
|
|
•
|
problems we may discover post-closing with the operations, including the internal controls and financial reporting process, of businesses we acquire;
|
|
|
•
|
the leakage of sensitive customer data;
|
|
|
•
|
the outcome of any pending or threatened litigation;
|
|
|
•
|
the loss of key employees and the availability of qualified personnel;
|
|
|
•
|
changes in the nature of key strategic relationships with partners and joint venturers;
|
|
|
•
|
our equity capital structure; and
|
|
|
•
|
events that are outside of our control, such as political unrest in international markets, terrorist attacks, malicious human acts, natural disasters, pandemics and other similar events.
|
The broadband distribution and mobile service industries are changing rapidly and, therefore, the forward-looking statements of expectations, plans and intent in this Quarterly Report are subject to a significant degree of risk. These forward-looking statements and the above-described risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based. Readers are cautioned not to place undue reliance on any forward-looking statement.
Overview
General
We are an international provider of video, broadband internet, fixed-line telephony, mobile and other communications services to residential customers and businesses in Europe. We provide residential and
B2B
communication services in (i) the
U.K.
and Ireland through
Virgin Media
, (ii) Belgium through
Telenet
and (iii) Poland and Slovakia through
UPC Holding
. In addition, we own a 50% noncontrolling interest in the
VodafoneZiggo JV
, which provides video, broadband internet, fixed-line telephony, mobile and
B2B
communications services in the Netherlands.
As further described in note
4
to our condensed consolidated financial statements, we (i) completed the sale of our operations in Austria on July 31, 2018, (ii) reached an agreement to sell our operations in Germany, Romania, Hungary and the Czech Republic on May 9, 2018 and (iii) completed the
Split-off Transaction
on December 29, 2017. Accordingly, (a) our operations in Austria, Germany, Romania, Hungary and the Czech Republic are reflected as discontinued operations for all periods presented herein and (b) the entities comprising the
LiLAC Group
are reflected as discontinued operations in our condensed consolidated statements of operations and cash flows the three and six months ended June 30, 2017. In the following discussion and analysis, the operating statistics, results of operations, cash flows and financial condition that we present and discuss are those of our continuing operations unless otherwise indicated.
Operations
At
June 30, 2018
, our continuing operations owned and operated networks that passed
24,786,800
homes and served
26,079,400
revenue generating units (
RGU
s
), consisting of
9,452,000
video subscribers,
9,234,100
broadband internet subscribers and
7,393,300
fixed-line telephony subscribers. In addition, at
June 30, 2018
, our continuing operations served
5,956,400
mobile subscribers.
We currently are engaged in certain network extension programs across our footprint, which we collectively refer to as the “
Network Extensions
.”
During the first six months of 2018, pursuant to the
Network Extensions
, our continuing operations connected approximately 315,000 additional residential and commercial premises (excluding upgrades) to our two-way networks, including approximately 229,000 residential and commercial premises
connected by Virgin Media in the
U.K.
and Ireland.
Depending on a variety of factors, including the financial and operational results of the programs, the
Network Extensions
may be continued, modified or cancelled at our discretion.
Competition and Other External Factors
We are experiencing significant competition from incumbent telecommunications operators,
DTH
operators and/or other providers in all of our markets. The significant competition we are experiencing, together with macroeconomic and regulatory factors, has adversely impacted our revenue,
RGU
s and/or average monthly subscription revenue per average cable
RGU
or mobile subscriber, as applicable (
ARPU
), particularly in Switzerland and Belgium. In addition, the
VodafoneZiggo JV
is facing significant competition in the Netherlands, particularly with respect to its mobile operations. For additional information regarding the revenue impact of changes in the
RGU
s and
ARPU
of our consolidated reportable segments, see
Discussion and Analysis of our Reportable Segments
below
.
In addition to competition, our operations are subject to macroeconomic, political and other risks that are outside of our control. For example, on June 23, 2016, the
U.K.
held a referendum in which
U.K.
citizens voted in favor of, on an advisory basis, an exit from the
E.U.
commonly referred to as “
Brexit
.”
Brexit
is currently scheduled to occur on March 29, 2019. The potential impacts, if any, of the uncertainty relating to
Brexit
or the resulting terms of
Brexit
on the free movement of goods, services, people and capital between the
U.K.
and the
E.U.
, customer behavior, economic conditions, interest rates, currency exchange rates, availability of capital or other matters are unclear. The effects of
Brexit
could adversely affect our business, results of operations, financial condition and liquidity.
Material Changes in Results of Operations
We have completed a number of transactions that impact the comparability of our results of operations, the most notable of which is the
SFR BeLux Acquisition
on June 19, 2017. For further information regarding our pending and completed acquisitions and dispositions, see note
4
to our condensed consolidated financial statements.
In the following discussion, we quantify the estimated impact of acquisitions (the
Acquisition Impact
) on our operating results. The
Acquisition Impact
represents our estimate of the difference between the operating results of the periods under comparison that is attributable to an acquisition. In general, we base our estimate of the
Acquisition Impact
on an acquired entity’s operating results during the first three to twelve months following the acquisition date, as adjusted to remove integration costs and any other material unusual or nonoperational items, such that changes from those operating results in subsequent periods are considered to be organic changes. Accordingly, in the following discussion, (i) organic variances attributed to an acquired entity during the first 12 months following the acquisition date represent differences between the
Acquisition Impact
and the actual results and (ii) the calculation of our organic change percentages includes the organic activity of an acquired entity relative to the
Acquisition Impact
of such entity.
Changes in foreign currency exchange rates have a significant impact on our reported operating results as all of our operating segments have functional currencies other than the
U.S.
dollar. Our primary exposure to foreign exchange (
FX
) risk during the
three months ended June 30, 2018
was to the euro and British pound sterling as 31.6% and 53.2%
of our reported revenue during the period was derived from subsidiaries whose functional currencies are the euro and British pound sterling, respectively. In addition, our reported operating results are impacted by changes in the exchange rates for certain other local currencies in Europe. The portions of the changes
in the various components of our results of operations that are attributable to changes in
FX
are highlighted under
Discussion and Analysis of our Reportable Segments
and
Discussion and Analysis of our Consolidated Operating Results
below. For information regarding the applicable foreign currency exchange rates in effect for the periods covered by this Quarterly Report, see
Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Exchange Rates
below.
The amounts presented and discussed below represent 100% of each of our consolidated reportable segment’s revenue and
Adjusted OIBDA
. As we have the ability to control
Telenet
, we consolidate 100% of its revenue and expenses in our condensed consolidated statements of operations despite the fact that third parties own a significant interest. The noncontrolling owners’ interests in the operating results of
Telenet
and other less significant majority-owned subsidiaries are reflected in net earnings or loss attributable to noncontrolling interests in our condensed consolidated statements of operations.
As further described in note
2
to our condensed consolidated financial statements, we adopted
ASU 2014-09
on January 1, 2018 using the cumulative effect transition method. As such, the comparative information for the
three and six months ended June 30, 2017
included in our condensed consolidated financial statements and notes thereto has not been restated and continues to be reported under the accounting standards in effect for such periods. In order to provide more meaningful comparisons, in the following discussion and analysis of our results of operations, we present our revenue, other operating expenses, SG&A expenses and
Adjusted OIBDA
for the
three and six months ended June 30, 2017
on a pro forma basis that gives effect to the adoption of
ASU 2014-09
as if such adoption had occurred on January 1, 2017.
The following table presents (i) the impact of the adoption of
ASU 2014-09
on the revenue and
Adjusted OIBDA
of our reportable segments for the
three and six months ended June 30, 2018
and (ii) the pro forma impact of the adoption of
ASU 2014-09
on the revenue and
Adjusted OIBDA
of our consolidated reportable segments for the
three and six months ended June 30, 2017
as if such adoption had occurred on January 1, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017 (a)
|
|
2018
|
|
2017 (a)
|
|
in millions
|
Increase (decrease) to revenue:
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
11.2
|
|
|
$
|
(2.3
|
)
|
|
$
|
16.8
|
|
|
$
|
(4.2
|
)
|
Belgium
|
(2.8
|
)
|
|
(1.2
|
)
|
|
(4.3
|
)
|
|
(2.6
|
)
|
Switzerland
|
(0.3
|
)
|
|
(0.3
|
)
|
|
(0.8
|
)
|
|
(1.2
|
)
|
Central and Eastern Europe
|
(0.1
|
)
|
|
(0.2
|
)
|
|
(0.2
|
)
|
|
(0.8
|
)
|
Total increase (decrease) to revenue
|
$
|
8.0
|
|
|
$
|
(4.0
|
)
|
|
$
|
11.5
|
|
|
$
|
(8.8
|
)
|
|
|
|
|
|
|
|
|
Increase (decrease) to Adjusted OIBDA:
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
8.6
|
|
|
$
|
(6.1
|
)
|
|
$
|
8.6
|
|
|
$
|
(9.2
|
)
|
Belgium
|
(2.8
|
)
|
|
(1.2
|
)
|
|
(4.3
|
)
|
|
(2.6
|
)
|
Switzerland
|
(1.1
|
)
|
|
(0.5
|
)
|
|
(1.7
|
)
|
|
(1.6
|
)
|
Central and Eastern Europe
|
(0.4
|
)
|
|
0.2
|
|
|
(0.4
|
)
|
|
—
|
|
Total increase (decrease) to Adjusted OIBDA
|
$
|
4.3
|
|
|
$
|
(7.6
|
)
|
|
$
|
2.2
|
|
|
$
|
(13.4
|
)
|
_______________
|
|
(a)
|
Amounts are presented on a pro forma basis that gives effect to the adoption of
ASU 2014-09
as if such adoption had occurred on January 1, 2017.
|
Discussion and Analysis of our Consolidated Reportable Segments
General
All of the
reportable segments
set forth below derive their revenue primarily from residential and
B2B
communications services, including video, broadband internet, fixed-line telephony and mobile services. For detailed information regarding the composition of our
reportable segments
and how we define and categorize our revenue components, see note
16
to our condensed consolidated financial statements. For more information regarding the results of operations of the
VodafoneZiggo JV
, refer to
Discussion and Analysis of our Consolidated Operating Results — Share of losses of affiliates
below.
The tables presented below in this section provide the details of the revenue and
Adjusted OIBDA
of our
consolidated reportable segments
for the
three and six months ended June 30, 2018
and
2017
. As discussed above, the amounts for the
three and six months ended June 30, 2017
are presented on a pro forma basis that gives effect to the adoption of
ASU 2014-09
as if such adoption had occurred on January 1, 2017. These tables present (i) the amounts reported for the current and comparative periods, (ii) the reported
U.S.
dollar change and percentage change from period to period and (iii) the organic
U.S.
dollar change and percentage change from period to period. The comparisons that exclude
FX
assume that exchange rates remained constant at the prior-year rate during the comparative period that is included in each table. We also provide a table showing the
Adjusted OIBDA
margins of our
consolidated reportable segments
for the
three and six months ended June 30, 2018
and
2017
at the end of this section.
Revenue of our Consolidated Reportable Segments
General.
While not specifically discussed in the below explanations of the changes in the revenue of our
consolidated reportable segments
, we are experiencing significant competition in all of our markets. This competition has an adverse impact on our ability to increase or maintain our
RGU
s and/or
ARPU
.
Variances in the subscription revenue that we receive from our customers are a function of (i) changes in the number of
RGU
s or mobile subscribers outstanding during the period and (ii) changes in
ARPU
. Changes in
ARPU
can be attributable to (a) changes in prices, (b) changes in bundling or promotional discounts, (c) changes in the tier of services selected, (d) variances in subscriber usage patterns and (e) the overall mix of cable and mobile products within a segment during the period. In the following discussion, we discuss
ARPU
changes in terms of the net impact of the above factors on the
ARPU
that is derived from our video, broadband internet, fixed-line telephony and mobile products.
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Increase (decrease)
|
|
Organic increase (decrease)
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
1,734.9
|
|
|
$
|
1,563.8
|
|
|
$
|
171.1
|
|
|
10.9
|
|
|
$
|
64.3
|
|
|
4.1
|
|
Belgium
|
753.9
|
|
|
684.8
|
|
|
69.1
|
|
|
10.1
|
|
|
(5.2
|
)
|
|
(0.7
|
)
|
Switzerland
|
332.2
|
|
|
338.7
|
|
|
(6.5
|
)
|
|
(1.9
|
)
|
|
(6.5
|
)
|
|
(1.9
|
)
|
Central and Eastern Europe
|
152.9
|
|
|
141.8
|
|
|
11.1
|
|
|
7.8
|
|
|
0.4
|
|
|
0.3
|
|
Central and Corporate (a)
|
72.0
|
|
|
42.7
|
|
|
29.3
|
|
|
68.6
|
|
|
25.0
|
|
|
58.0
|
|
Intersegment eliminations
|
(0.8
|
)
|
|
(0.9
|
)
|
|
0.1
|
|
|
N.M.
|
|
|
0.1
|
|
|
N.M.
|
|
Total
|
$
|
3,045.1
|
|
|
$
|
2,770.9
|
|
|
$
|
274.2
|
|
|
9.9
|
|
|
$
|
78.1
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
Increase
|
|
Organic increase (decrease)
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
3,513.1
|
|
|
$
|
3,066.3
|
|
|
$
|
446.8
|
|
|
14.6
|
|
$
|
142.4
|
|
|
4.7
|
|
Belgium
|
1,513.5
|
|
|
1,344.8
|
|
|
168.7
|
|
|
12.5
|
|
(15.3
|
)
|
|
(1.1
|
)
|
Switzerland
|
677.1
|
|
|
669.0
|
|
|
8.1
|
|
|
1.2
|
|
(11.3
|
)
|
|
(1.6
|
)
|
Central and Eastern Europe
|
313.4
|
|
|
276.3
|
|
|
37.1
|
|
|
13.4
|
|
1.9
|
|
|
0.7
|
|
Central and Corporate (a)
|
123.8
|
|
|
83.5
|
|
|
40.3
|
|
|
48.3
|
|
28.5
|
|
|
33.8
|
|
Intersegment eliminations
|
(1.3
|
)
|
|
(4.0
|
)
|
|
2.7
|
|
|
N.M.
|
|
2.7
|
|
|
N.M.
|
|
Total
|
$
|
6,139.6
|
|
|
$
|
5,435.9
|
|
|
$
|
703.7
|
|
|
12.9
|
|
$
|
148.9
|
|
|
2.7
|
|
_______________
|
|
(a)
|
Amounts primarily include the revenue earned from services provided to the
VodafoneZiggo JV
and, during the
2018
periods,
Liberty Latin America
. For additional information, see note
5
to our condensed consolidated financial statements.
|
N.M. — Not Meaningful.
U.K./Ireland
.
The details of the pro forma increases in
U.K./Ireland
’s revenue during
the
three and six months ended June 30, 2018
,
as compared to the corresponding periods in
2017
, are set f
orth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-month period
|
|
Six-month period
|
|
Subscription
revenue
|
|
Non-subscription
revenue
|
|
Total
|
|
Subscription
revenue
|
|
Non-subscription
revenue
|
|
Total
|
|
in millions
|
Increase in residential cable subscription revenue due to change in:
|
|
|
|
|
|
|
|
|
|
|
|
Average number of RGUs (a)
|
$
|
14.6
|
|
|
$
|
—
|
|
|
$
|
14.6
|
|
|
$
|
30.8
|
|
|
$
|
—
|
|
|
$
|
30.8
|
|
ARPU (b)
|
13.2
|
|
|
—
|
|
|
13.2
|
|
|
29.6
|
|
|
—
|
|
|
29.6
|
|
Decrease in residential cable non-subscription revenue
|
—
|
|
|
(1.1
|
)
|
|
(1.1
|
)
|
|
—
|
|
|
(0.2
|
)
|
|
(0.2
|
)
|
Total increase (decrease) in residential cable revenue
|
27.8
|
|
|
(1.1
|
)
|
|
26.7
|
|
|
60.4
|
|
|
(0.2
|
)
|
|
60.2
|
|
Increase (decrease) in residential mobile revenue (c)
|
(1.4
|
)
|
|
30.2
|
|
|
28.8
|
|
|
(4.3
|
)
|
|
63.1
|
|
|
58.8
|
|
Increase (decrease) in B2B revenue (d)
|
6.6
|
|
|
(0.1
|
)
|
|
6.5
|
|
|
13.7
|
|
|
2.2
|
|
|
15.9
|
|
Increase in other revenue (e)
|
—
|
|
|
2.3
|
|
|
2.3
|
|
|
—
|
|
|
7.5
|
|
|
7.5
|
|
Total organic increase
|
33.0
|
|
|
31.3
|
|
|
64.3
|
|
|
69.8
|
|
|
72.6
|
|
|
142.4
|
|
Impact of FX
|
83.4
|
|
|
23.4
|
|
|
106.8
|
|
|
237.3
|
|
|
67.1
|
|
|
304.4
|
|
Total
|
$
|
116.4
|
|
|
$
|
54.7
|
|
|
$
|
171.1
|
|
|
$
|
307.1
|
|
|
$
|
139.7
|
|
|
$
|
446.8
|
|
_______________
|
|
(a)
|
The increases in residential cable subscription revenue related to changes in the average number of
RGU
s are attributable to increases in the average number of broadband internet, video and fixed-line telephony
RGU
s.
|
|
|
(b)
|
The increases in cable subscription revenue related to changes in
ARPU
are primarily attributable to (i) net increases due to
(a) higher
ARPU
from broadband internet services
and (b) lower
ARPU
from fixed-line telephony and video services and (ii) improvements in
RGU
mix.
|
|
|
(c)
|
The decreases in residential mobile subscription revenue relate to the net effect of (i) decreases in the
U.K.
, due primarily to lower
ARPU
, and (ii) increases in Ireland, mainly due to increases in the average number of mobile subscribers. The increases in residential mobile non-subscription revenue are primarily
due to increases in revenue from mobile handset sales in the
U.K.
, which typically generate relatively low margins.
|
|
|
(d)
|
The increases in
B2B
subscription revenue are primarily due to increases in the average number of broadband internet
SOHO
subscribers in the
U.K.
The changes in
B2B
non-subscription revenue are primarily driven by changes in the
U.K.
, including the net effect of (i) higher revenue related to business network services, (ii) decreases in interconnect revenue, (iii) decreases in installation revenue and (iv) decreases in early termination fees.
|
|
|
(e)
|
The increases in other revenue are largely due to increases in broadcasting revenue in Ireland.
|
Belgium.
The details of the pro forma increases in Belgium’s revenue during the
three and six months ended June 30, 2018
, as compared to the corresponding periods in
2017
, are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-month period
|
|
Six-month period
|
|
Subscription
revenue
|
|
Non-subscription
revenue
|
|
Total
|
|
Subscription
revenue
|
|
Non-subscription
revenue
|
|
Total
|
|
in millions
|
Increase (decrease)
in residential cable subscription revenue due to change in:
|
|
|
|
|
|
|
|
|
|
|
|
Average number of RGUs (a)
|
$
|
0.9
|
|
|
$
|
—
|
|
|
$
|
0.9
|
|
|
$
|
(23.3
|
)
|
|
$
|
—
|
|
|
$
|
(23.3
|
)
|
ARPU (b)
|
(12.2
|
)
|
|
—
|
|
|
(12.2
|
)
|
|
0.6
|
|
|
—
|
|
|
0.6
|
|
Decrease
in residential cable non-subscription revenue (c)
|
—
|
|
|
(1.7
|
)
|
|
(1.7
|
)
|
|
—
|
|
|
(6.3
|
)
|
|
(6.3
|
)
|
Total decrease
in residential cable revenue
|
(11.3
|
)
|
|
(1.7
|
)
|
|
(13.0
|
)
|
|
(22.7
|
)
|
|
(6.3
|
)
|
|
(29.0
|
)
|
Decrease in residential mobile
revenue (d)
|
(5.3
|
)
|
|
(1.0
|
)
|
|
(6.3
|
)
|
|
(14.0
|
)
|
|
(2.6
|
)
|
|
(16.6
|
)
|
Increase (decrease) in B2B revenue (e)
|
(4.3
|
)
|
|
18.4
|
|
|
14.1
|
|
|
11.7
|
|
|
18.6
|
|
|
30.3
|
|
Total organic increase (decrease)
|
(20.9
|
)
|
|
15.7
|
|
|
(5.2
|
)
|
|
(25.0
|
)
|
|
9.7
|
|
|
(15.3
|
)
|
Impact of acquisitions
|
12.1
|
|
|
9.6
|
|
|
21.7
|
|
|
26.6
|
|
|
11.5
|
|
|
38.1
|
|
Impact of disposals
|
(4.0
|
)
|
|
(1.4
|
)
|
|
(5.4
|
)
|
|
(11.4
|
)
|
|
(2.0
|
)
|
|
(13.4
|
)
|
Impact of FX
|
43.5
|
|
|
14.5
|
|
|
58.0
|
|
|
121.3
|
|
|
38.0
|
|
|
159.3
|
|
Total
|
$
|
30.7
|
|
|
$
|
38.4
|
|
|
$
|
69.1
|
|
|
$
|
111.5
|
|
|
$
|
57.2
|
|
|
$
|
168.7
|
|
_______________
|
|
(a)
|
The changes in residential cable subscription revenue related to changes in the average number of
RGU
s are primarily attributable to the net effect of (i) decreases in the average number of video
RGU
s, (ii) for the six-month comparison, decreases in the average number of broadband internet and fixed-line telephony
RGU
s and (iii) for the three-month comparison, an increase in the average number of broadband internet
RGU
s.
|
|
|
(b)
|
The decrease in residential cable subscription revenue related to changes in
ARPU
for the three-month comparison is primarily attributable to lower
ARPU
from broadband internet, video and fixed-line telephony services. The increase for the six-month comparison is primarily attributable to the net effect of lower
ARPU
from fixed-line telephony services and higher
ARPU
from broadband internet and, to a lesser extent, video services. In addition, the change in
ARPU
during both periods was positively impacted by improvements in
RGU
mix.
|
|
|
(c)
|
The decreases in residential cable non-subscription revenue are primarily attributable to the net effect of (i) for the six-month comparison, a decrease of $5.6 million related to adjustments recorded during the 2017 period to reflect the expected recovery of certain prior-period
VAT
payments and
(ii) increases in distribution revenue.
|
|
|
(d)
|
The decreases in residential mobile subscription revenue are primarily due to the net effect of (i) lower
ARPU
and (ii) increases in the average number of mobile subscribers.
The decreases in residential mobile non-subscription revenue are
|
primarily attributable to the net effect of (a) an increase for the three-month comparison and a decrease for the six-month comparison in revenue from sales of mobile handsets and other devices and (b) decreases in early termination fees.
|
|
(e)
|
The changes in
B2B
subscription revenue are primarily attributable to the net effect of (i) increases in broadband internet and video
SOHO
subscribers and (ii) lower
ARPU
from mobile
SOHO
services. The increases in
B2B
non-subscription revenue are primarily due to (i) higher revenue from wholesale services and (ii) increases in interconnect revenue.
|
For information concerning certain regulatory developments that could have an adverse impact on our revenue in Belgium, see “
Belgium Regulatory Developments”
in note
15
to our condensed consolidated financial statements.
Switzerland
.
The details of the pro forma changes in
Switzerland
’s revenue during the
three and six months ended June 30, 2018
, as compared to the corresponding periods in
2017
, are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-month period
|
|
Six-month period
|
|
Subscription
revenue
|
|
Non-subscription
revenue
|
|
Total
|
|
Subscription
revenue
|
|
Non-subscription
revenue
|
|
Total
|
|
in millions
|
Decrease in residential cable subscription revenue due to change in:
|
|
|
|
|
|
|
|
|
|
|
|
Average number of RGUs (a)
|
$
|
(9.2
|
)
|
|
$
|
—
|
|
|
$
|
(9.2
|
)
|
|
$
|
(13.1
|
)
|
|
$
|
—
|
|
|
$
|
(13.1
|
)
|
ARPU (b)
|
(14.3
|
)
|
|
—
|
|
|
(14.3
|
)
|
|
(32.3
|
)
|
|
—
|
|
|
(32.3
|
)
|
Increase in residential cable non-subscription revenue (c)
|
—
|
|
|
4.0
|
|
|
4.0
|
|
|
—
|
|
|
12.6
|
|
|
12.6
|
|
Total increase (decrease) in residential cable revenue
|
(23.5
|
)
|
|
4.0
|
|
|
(19.5
|
)
|
|
(45.4
|
)
|
|
12.6
|
|
|
(32.8
|
)
|
Increase
in residential mobile revenue (d)
|
4.0
|
|
|
0.8
|
|
|
4.8
|
|
|
7.2
|
|
|
1.3
|
|
|
8.5
|
|
Increase in B2B revenue (e)
|
0.4
|
|
|
7.1
|
|
|
7.5
|
|
|
0.8
|
|
|
11.3
|
|
|
12.1
|
|
Increase
in other revenue
|
—
|
|
|
0.7
|
|
|
0.7
|
|
|
—
|
|
|
0.9
|
|
|
0.9
|
|
Total organic
increase (decrease)
|
(19.1
|
)
|
|
12.6
|
|
|
(6.5
|
)
|
|
(37.4
|
)
|
|
26.1
|
|
|
(11.3
|
)
|
Impact of FX
|
(0.2
|
)
|
|
0.2
|
|
|
—
|
|
|
15.4
|
|
|
4.0
|
|
|
19.4
|
|
Total
|
$
|
(19.3
|
)
|
|
$
|
12.8
|
|
|
$
|
(6.5
|
)
|
|
$
|
(22.0
|
)
|
|
$
|
30.1
|
|
|
$
|
8.1
|
|
_______________
|
|
(a)
|
The decreases in residential cable subscription revenue related to changes in the average number of
RGU
s are attributable to the net effect of (i) declines in the average number of video and broadband internet
RGU
s and (ii) increases in the average number of fixed-line telephony
RGU
s.
|
|
|
(b)
|
The decreases
in residential cable subscription revenue related to changes in
ARPU
are primarily attributable to decreases due to lower
ARPU
from video, fixed-line telephony and broadband internet services, including, for the six-month comparison, the reversal during the first quarter of 2018 of $3.9 million of revenue in Switzerland that was recognized during prior-year periods.
|
|
|
(c)
|
The increases in residential cable non-subscription revenue are primarily attributable to the net effect of
(i) increases in distribution revenue of $5.3 million and $17.2 million, respectively, associated with the September 2017 launch of our Swiss sports channels and (ii) decreases of $2.7 million and $6.4 million, respectively, due to the impact of unclaimed customer credit accruals that were released during the 2017 periods.
|
|
|
(d)
|
The increases in residential mobile subscription revenue are primarily due to increases in the average number of mobile subscribers.
|
|
|
(e)
|
The increases in
B2B
non-subscription revenue are primarily due to (i) increases in interconnect revenue and (ii) higher revenue from fixed-line telephony and data services.
|
Central and Eastern Europe.
The details of the pro forma increases in Central and Eastern Europe’s revenue during the
three and six months ended June 30, 2018
, as compared to the corresponding periods in
2017
, are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-month period
|
|
Six-month period
|
|
Subscription
revenue
|
|
Non-subscription
revenue
|
|
Total
|
|
Subscription
revenue
|
|
Non-subscription
revenue
|
|
Total
|
|
in millions
|
Decrease in residential cable subscription revenue due to change in:
|
|
|
|
|
|
|
|
|
|
|
|
Average number of RGUs (a)
|
$
|
(0.5
|
)
|
|
$
|
—
|
|
|
$
|
(0.5
|
)
|
|
$
|
(1.8
|
)
|
|
$
|
—
|
|
|
$
|
(1.8
|
)
|
ARPU (b)
|
(1.1
|
)
|
|
—
|
|
|
(1.1
|
)
|
|
(0.6
|
)
|
|
—
|
|
|
(0.6
|
)
|
Increase (decrease) in residential cable non-subscription revenue
|
—
|
|
|
0.4
|
|
|
0.4
|
|
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Total
increase (decrease) in residential cable revenue
|
(1.6
|
)
|
|
0.4
|
|
|
(1.2
|
)
|
|
(2.4
|
)
|
|
(0.1
|
)
|
|
(2.5
|
)
|
Increase
in B2B revenue (c)
|
1.2
|
|
|
0.4
|
|
|
1.6
|
|
|
2.7
|
|
|
1.7
|
|
|
4.4
|
|
Total organic increase (decrease)
|
(0.4
|
)
|
|
0.8
|
|
|
0.4
|
|
|
0.3
|
|
|
1.6
|
|
|
1.9
|
|
Impact of FX
|
10.3
|
|
|
0.4
|
|
|
10.7
|
|
|
33.1
|
|
|
2.1
|
|
|
35.2
|
|
Total
|
$
|
9.9
|
|
|
$
|
1.2
|
|
|
$
|
11.1
|
|
|
$
|
33.4
|
|
|
$
|
3.7
|
|
|
$
|
37.1
|
|
_______________
|
|
(a)
|
The decreases in residential cable subscription revenue related to changes in the average number of
RGU
s are primarily attributable to the net effect of (i) decreases in the average number of video
RGU
s, primarily in
UPC DTH
and Poland, and (ii) increases in the average number of broadband internet
RGU
s.
|
|
|
(b)
|
The decreases in residential cable subscription revenue related to changes in
ARPU
are primarily attributable to the net effect of (i) lower
ARPU
from fixed-line telephony services, primarily in Poland, and (ii) for the six-month comparison, (a) higher
ARPU
from video services, primarily in Poland and
UPC DTH
, and (b) lower
ARPU
from broadband internet services, primarily in Poland.
|
|
|
(c)
|
The increases in
B2B
subscription revenue are attributable to increases in the average number of broadband internet
SOHO
subscribers.
|
Programming and Other Direct Costs of Services, Other Operating Expenses and SG&A Expenses of our Consolidated Reportable Segments
For information regarding the changes in our (i) programming and other direct costs of services, (ii) other operating expenses and (iii) SG&A expenses
,
see
Discussion and Analysis of our Consolidated Operating Results
below.
Adjusted OIBDA
of our Consolidated Reportable Segments
General.
Adjusted OIBDA
is the primary measure used by our chief operating decision maker to evaluate segment operating performance. For the definition of this performance measure and for a reconciliation of
Adjusted OIBDA
from continuing operations to earnings (loss) from continuing operations before income taxes, see note
16
to our condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Increase (decrease)
|
|
Organic increase (decrease)
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
763.6
|
|
|
$
|
701.0
|
|
|
$
|
62.6
|
|
|
8.9
|
|
|
$
|
15.8
|
|
|
2.4
|
|
Belgium
|
383.7
|
|
|
316.7
|
|
|
67.0
|
|
|
21.2
|
|
|
29.4
|
|
|
9.1
|
|
Switzerland
|
189.0
|
|
|
212.4
|
|
|
(23.4
|
)
|
|
(11.0
|
)
|
|
(23.4
|
)
|
|
(11.0
|
)
|
Central and Eastern Europe
|
67.9
|
|
|
64.8
|
|
|
3.1
|
|
|
4.8
|
|
|
(2.1
|
)
|
|
(2.5
|
)
|
Central and Corporate
|
(83.6
|
)
|
|
(98.7
|
)
|
|
15.1
|
|
|
15.3
|
|
|
20.7
|
|
|
20.9
|
|
Intersegment eliminations
|
(10.8
|
)
|
|
(8.4
|
)
|
|
(2.4
|
)
|
|
N.M.
|
|
|
(2.4
|
)
|
|
N.M.
|
|
Total
|
$
|
1,309.8
|
|
|
$
|
1,187.8
|
|
|
$
|
122.0
|
|
|
10.3
|
|
|
$
|
38.0
|
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
Increase (decrease)
|
|
Organic increase (decrease)
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
1,526.2
|
|
|
$
|
1,343.9
|
|
|
$
|
182.3
|
|
|
13.6
|
|
|
$
|
51.3
|
|
|
3.9
|
|
Belgium
|
741.3
|
|
|
613.2
|
|
|
128.1
|
|
|
20.9
|
|
|
36.7
|
|
|
5.9
|
|
Switzerland
|
375.5
|
|
|
416.1
|
|
|
(40.6
|
)
|
|
(9.8
|
)
|
|
(51.0
|
)
|
|
(12.3
|
)
|
Central and Eastern Europe
|
139.8
|
|
|
123.1
|
|
|
16.7
|
|
|
13.6
|
|
|
0.6
|
|
|
0.8
|
|
Central and Corporate
|
(182.7
|
)
|
|
(191.7
|
)
|
|
9.0
|
|
|
4.7
|
|
|
23.1
|
|
|
12.0
|
|
Intersegment eliminations
|
(18.5
|
)
|
|
(16.2
|
)
|
|
(2.3
|
)
|
|
N.M.
|
|
|
(2.3
|
)
|
|
N.M.
|
|
Total
|
$
|
2,581.6
|
|
|
$
|
2,288.4
|
|
|
$
|
293.2
|
|
|
12.8
|
|
|
$
|
58.4
|
|
|
2.5
|
|
_______________
N.M. — Not Meaningful.
Adjusted OIBDA
Margin
The following table sets forth the
Adjusted OIBDA
margins (
Adjusted OIBDA
divided by revenue) of each of our
consolidated reportable segments
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
pro forma
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
44.0
|
%
|
|
44.8
|
%
|
|
43.5
|
%
|
|
43.8
|
%
|
Belgium
|
50.9
|
%
|
|
46.2
|
%
|
|
49.0
|
%
|
|
45.6
|
%
|
Switzerland
|
56.9
|
%
|
|
62.7
|
%
|
|
55.5
|
%
|
|
62.2
|
%
|
Central and Eastern Europe
|
44.4
|
%
|
|
45.6
|
%
|
|
44.6
|
%
|
|
44.6
|
%
|
In addition to organic changes in the revenue, operating and SG&A expenses of our
consolidated reportable segments
, the
Adjusted OIBDA
margins presented above include the impact of acquisitions. For discussion of the factors contributing to the changes in the
Adjusted OIBDA
margins of our reportable segments, see the analysis of our revenue included in
Discussion and Analysis of our Reportable Segments
above and the analysis of our expenses included in
Discussion and Analysis of our Consolidated Operating Results
below.
Discussion and Analysis of our Consolidated Operating Results
Revenue
Our revenue by major category is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Increase
|
|
Organic increase (decrease)
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
Residential revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Residential cable revenue (a):
|
|
|
|
|
|
|
|
|
|
|
|
Subscription revenue (b):
|
|
|
|
|
|
|
|
|
|
|
|
Video
|
$
|
743.5
|
|
|
$
|
721.9
|
|
|
$
|
21.6
|
|
|
3.0
|
|
$
|
(26.5
|
)
|
|
(3.6
|
)
|
Broadband internet
|
816.7
|
|
|
729.3
|
|
|
87.4
|
|
|
12.0
|
|
36.2
|
|
|
4.9
|
|
Fixed-line telephony
|
407.7
|
|
|
399.6
|
|
|
8.1
|
|
|
2.0
|
|
(18.3
|
)
|
|
(4.6
|
)
|
Total subscription revenue
|
1,967.9
|
|
|
1,850.8
|
|
|
117.1
|
|
|
6.3
|
|
(8.6
|
)
|
|
(0.5
|
)
|
Non-subscription revenue
|
72.4
|
|
|
62.5
|
|
|
9.9
|
|
|
15.8
|
|
7.5
|
|
|
11.9
|
|
Total residential cable revenue
|
2,040.3
|
|
|
1,913.3
|
|
|
127.0
|
|
|
6.6
|
|
(1.1
|
)
|
|
(0.1
|
)
|
Residential mobile revenue (c):
|
|
|
|
|
|
|
|
|
|
|
|
Subscription revenue (b)
|
249.6
|
|
|
240.3
|
|
|
9.3
|
|
|
3.9
|
|
(2.7
|
)
|
|
(1.1
|
)
|
Non-subscription revenue
|
175.2
|
|
|
137.6
|
|
|
37.6
|
|
|
27.3
|
|
29.8
|
|
|
22.2
|
|
Total residential mobile revenue
|
424.8
|
|
|
377.9
|
|
|
46.9
|
|
|
12.4
|
|
27.1
|
|
|
7.3
|
|
Total residential revenue
|
2,465.1
|
|
|
2,291.2
|
|
|
173.9
|
|
|
7.6
|
|
26.0
|
|
|
1.1
|
|
B2B revenue (d):
|
|
|
|
|
|
|
|
|
|
|
|
Subscription revenue
|
102.9
|
|
|
91.4
|
|
|
11.5
|
|
|
12.6
|
|
3.9
|
|
|
4.3
|
|
Non-subscription revenue
|
400.2
|
|
|
337.5
|
|
|
62.7
|
|
|
18.6
|
|
25.5
|
|
|
7.3
|
|
Total B2B revenue
|
503.1
|
|
|
428.9
|
|
|
74.2
|
|
|
17.3
|
|
29.4
|
|
|
6.7
|
|
Other revenue (e)
|
76.9
|
|
|
50.8
|
|
|
26.1
|
|
|
51.4
|
|
22.7
|
|
|
44.7
|
|
Total
|
$
|
3,045.1
|
|
|
$
|
2,770.9
|
|
|
$
|
274.2
|
|
|
9.9
|
|
$
|
78.1
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
Increase
|
|
Organic increase (decrease)
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
Residential revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Residential cable revenue (a):
|
|
|
|
|
|
|
|
|
|
|
|
Subscription revenue (b):
|
|
|
|
|
|
|
|
|
|
|
|
Video
|
$
|
1,518.1
|
|
|
$
|
1,415.4
|
|
|
$
|
102.7
|
|
|
7.3
|
|
|
$
|
(39.2
|
)
|
|
(2.7
|
)
|
Broadband internet
|
1,657.9
|
|
|
1,439.9
|
|
|
218.0
|
|
|
15.1
|
|
|
69.5
|
|
|
4.8
|
|
Fixed-line telephony
|
829.7
|
|
|
794.7
|
|
|
35.0
|
|
|
4.4
|
|
|
(40.4
|
)
|
|
(5.1
|
)
|
Total subscription revenue
|
4,005.7
|
|
|
3,650.0
|
|
|
355.7
|
|
|
9.7
|
|
|
(10.1
|
)
|
|
(0.3
|
)
|
Non-subscription revenue
|
154.1
|
|
|
129.5
|
|
|
24.6
|
|
|
19.0
|
|
|
16.8
|
|
|
13.1
|
|
Total residential cable revenue
|
4,159.8
|
|
|
3,779.5
|
|
|
380.3
|
|
|
10.1
|
|
|
6.7
|
|
|
0.2
|
|
Residential mobile revenue (c):
|
|
|
|
|
|
|
|
|
|
|
|
Subscription revenue (b)
|
493.4
|
|
|
469.9
|
|
|
23.5
|
|
|
5.0
|
|
|
(11.1
|
)
|
|
(2.4
|
)
|
Non-subscription revenue
|
354.7
|
|
|
267.5
|
|
|
87.2
|
|
|
32.6
|
|
|
61.6
|
|
|
23.6
|
|
Total residential mobile revenue
|
848.1
|
|
|
737.4
|
|
|
110.7
|
|
|
15.0
|
|
|
50.5
|
|
|
7.0
|
|
Total residential revenue
|
5,007.9
|
|
|
4,516.9
|
|
|
491.0
|
|
|
10.9
|
|
|
57.2
|
|
|
1.3
|
|
B2B revenue (d):
|
|
|
|
|
|
|
|
|
|
|
|
Subscription revenue
|
219.6
|
|
|
168.8
|
|
|
50.8
|
|
|
30.1
|
|
|
28.9
|
|
|
17.1
|
|
Non-subscription revenue
|
771.4
|
|
|
652.0
|
|
|
119.4
|
|
|
18.3
|
|
|
35.4
|
|
|
5.3
|
|
Total B2B revenue
|
991.0
|
|
|
820.8
|
|
|
170.2
|
|
|
20.7
|
|
|
64.3
|
|
|
7.7
|
|
Other revenue (e)
|
140.7
|
|
|
98.2
|
|
|
42.5
|
|
|
43.3
|
|
|
27.4
|
|
|
27.7
|
|
Total
|
$
|
6,139.6
|
|
|
$
|
5,435.9
|
|
|
$
|
703.7
|
|
|
12.9
|
|
|
$
|
148.9
|
|
|
2.7
|
|
_______________
|
|
(a)
|
Residential cable subscription revenue includes amounts received from subscribers for ongoing services and the recognition of deferred installation revenue over the associated contract period. Residential cable non-subscription revenue includes, among other items, channel carriage fees, late fees and revenue from the sale of equipment.
|
|
|
(b)
|
Residential subscription revenue from subscribers who purchase bundled services at a discounted rate is generally allocated proportionally to each service based on the standalone price for each individual service. As a result, changes in the standalone pricing of our cable and mobile products or the composition of bundles can contribute to changes in our product revenue categories from period to period.
|
|
|
(c)
|
Residential mobile subscription revenue includes amounts received from subscribers for ongoing services. Residential mobile non-subscription revenue includes, among other items, interconnect revenue and revenue from sales of mobile handsets and other devices. Residential mobile interconnect revenue was
$67.4 million
and
$66.4 million
during the
three months ended June 30, 2018
and
2017
, respectively, and
$137.3 million
and
$129.9 million
during the
six months ended June 30, 2018
and
2017
, respectively.
|
|
|
(d)
|
B2B
subscription revenue represents revenue from
SOHO
subscribers.
SOHO
subscribers pay a premium price to receive expanded service levels along with video, broadband internet, fixed-line telephony or mobile services that are the same or similar to the mass marketed products offered to our residential subscribers. A portion of the increases in our
B2B
subscription revenue is attributable to the conversion of certain residential subscribers to
SOHO
subscribers.
B2B
non-subscription revenue includes revenue from business broadband internet, video, fixed-line telephony, mobile and data services offered to medium to large enterprises and, on a wholesale basis, to other operators.
|
|
|
(e)
|
Other revenue includes, among other items, revenue earned from the JV Services, broadcasting revenue in Ireland and revenue from Central and Corporate’s wholesale handset program. In addition, the 2018 periods include revenue earned from (i) sales of customer premises equipment to the VodafoneZiggo JV and (ii) services provided to Liberty Latin America.
|
Total revenue.
Our consolidated revenue
increased
$274.2 million
or
9.9%
and
$703.7 million
or
12.9%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These increases include (i) increases of
$21.7 million
and
$38.1 million
, respectively, attributable to the impact of acquisitions and (ii) decreases of
$5.4 million
and
$13.4 million
, respectively, attributable to the impact of dispositions.
On an organic basis, our consolidated revenue increased
$78.1 million
or
2.8%
and
$148.9 million
or
2.7%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
.
Residential revenue.
The details of the pro forma
increases
in our consolidated residential revenue for the
three and six months ended June 30, 2018
, as compared to the corresponding periods in
2017
, are as follows:
|
|
|
|
|
|
|
|
|
|
Three-month period
|
|
Six-month period
|
|
in millions
|
Increase (decrease)
in residential cable subscription revenue due to change in:
|
|
|
|
Average number of RGUs
|
$
|
6.7
|
|
|
$
|
(7.6
|
)
|
ARPU
|
(15.3
|
)
|
|
(2.5
|
)
|
Increase in residential cable non-subscription revenue
|
7.5
|
|
|
16.8
|
|
Total increase (decrease) in residential cable revenue
|
(1.1
|
)
|
|
6.7
|
|
Decrease in residential mobile subscription revenue
|
(2.7
|
)
|
|
(11.1
|
)
|
Increase in residential mobile non-subscription revenue
|
29.8
|
|
|
61.6
|
|
Total organic increase in residential revenue
|
26.0
|
|
|
57.2
|
|
Net impact of acquisitions and disposals
|
5.4
|
|
|
7.3
|
|
Impact of FX
|
142.5
|
|
|
426.5
|
|
Total increase in residential revenue
|
$
|
173.9
|
|
|
$
|
491.0
|
|
On an organic basis, our consolidated residential cable subscription revenue decreased
$8.6 million
or
0.5%
and
$10.1 million
or
0.3%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These decreases are attributable to the net effect of (i)
increases from broadband internet services of
$36.2 million
or
4.9%
and
$69.5 million
or
4.8%
, respectively, attributable to higher
ARPU
and increases in the average number of
RGU
s, (ii) decreases from fixed-line telephony services of
$18.3 million
or
4.6%
and
$40.4 million
or
5.1%
, respectively, attributable to the net effect of lower
ARPU
and, in the three-month comparison, an increase in the average number of
RGU
s and (iii) decreases from video services of
$26.5 million
or
3.6%
and
$39.2 million
or
2.7%
, respectively, primarily attributable to lower
ARPU
and decreases in the average number of
RGU
s.
On an organic basis, our consolidated residential cable non-subscription revenue increased
$7.5 million
or
11.9%
and
$16.8 million
or
13.1%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These increases are primarily attributable to increases in Switzerland that were only partially offset by decreases in Belgium.
On an organic basis, our consolidated residential mobile subscription revenue decreased
$2.7 million
or
1.1%
and
$11.1 million
or
2.4%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These decreases are primarily due to declines in Belgium and the
U.K.
that were only partially offset by increases in Switzerland.
On an organic basis, our consolidated residential mobile non-subscription revenue increased
$29.8 million
or
22.2%
and
$61.6 million
or
23.6%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These increases are primarily due to increases in handset sales in the
U.K.
B2B
revenue.
On an organic basis, our consolidated
B2B
subscription revenue increased
$3.9 million
or
4.3%
and
$28.9 million
or
17.1%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These increases are primarily due to increases in
SOHO
revenue in the
U.K.
and Belgium.
On an organic basis, our consolidated
B2B
non-subscription revenue increased
$25.5 million
or
7.3%
and
$35.4 million
or
5.3%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These increases are primarily due to increases in Belgium and Switzerland.
Other revenue.
On an organic basis, our consolidated other revenue increased
$22.7 million
or
44.7%
and
$27.4 million
or
27.7%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These increases are primarily due to (i) $18.2 million in revenue earned from the sale of customer premises equipment to the VodafoneZiggo JV, which began during the second quarter of 2018, and (ii) increases in broadcasting revenue in Ireland.
For additional information concerning the changes in our residential,
B2B
and other revenue, see
Discussion and Analysis of our Reportable Segments
above.
Programming and other direct costs of services
Programming and other direct costs of services include programming and copyright costs, interconnect and access costs, costs of mobile handsets and other devices and other direct costs related to our operations. Programming and copyright costs, which represent a significant portion of our operating costs, are expected to rise in future periods as a result of (i) higher costs associated with the expansion of our digital video content, including rights associated with ancillary product offerings and rights that provide for the broadcast of live sporting events, (ii) rate increases and (iii) growth in the number of our enhanced video subscribers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Increase (decrease)
|
|
Organic increase (decrease)
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
513.5
|
|
|
$
|
437.4
|
|
|
$
|
76.1
|
|
|
17.4
|
|
|
$
|
44.7
|
|
|
10.2
|
|
Belgium
|
168.1
|
|
|
177.3
|
|
|
(9.2
|
)
|
|
(5.2
|
)
|
|
(23.8
|
)
|
|
(13.3
|
)
|
Switzerland
|
61.9
|
|
|
43.6
|
|
|
18.3
|
|
|
42.0
|
|
|
18.3
|
|
|
42.0
|
|
Central and Eastern Europe
|
42.6
|
|
|
36.9
|
|
|
5.7
|
|
|
15.4
|
|
|
2.6
|
|
|
7.0
|
|
Central and Corporate
|
32.2
|
|
|
9.4
|
|
|
22.8
|
|
|
242.6
|
|
|
21.4
|
|
|
227.7
|
|
Intersegment eliminations
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
N.M.
|
|
|
(0.3
|
)
|
|
N.M.
|
|
Total
|
$
|
818.0
|
|
|
$
|
704.6
|
|
|
$
|
113.4
|
|
|
16.1
|
|
|
$
|
62.9
|
|
|
8.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
Increase (decrease)
|
|
Organic increase (decrease)
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
1,066.7
|
|
|
$
|
885.8
|
|
|
$
|
180.9
|
|
|
20.4
|
|
|
$
|
87.6
|
|
|
9.9
|
|
Belgium
|
348.7
|
|
|
355.8
|
|
|
(7.1
|
)
|
|
(2.0
|
)
|
|
(44.1
|
)
|
|
(12.4
|
)
|
Switzerland
|
132.1
|
|
|
85.2
|
|
|
46.9
|
|
|
55.0
|
|
|
43.1
|
|
|
50.6
|
|
Central and Eastern Europe
|
84.9
|
|
|
72.4
|
|
|
12.5
|
|
|
17.3
|
|
|
3.2
|
|
|
4.4
|
|
Central and Corporate
|
44.8
|
|
|
18.2
|
|
|
26.6
|
|
|
146.2
|
|
|
23.1
|
|
|
126.9
|
|
Intersegment eliminations
|
0.2
|
|
|
0.7
|
|
|
(0.5
|
)
|
|
N.M.
|
|
|
(0.5
|
)
|
|
N.M.
|
|
Total
|
$
|
1,677.4
|
|
|
$
|
1,418.1
|
|
|
$
|
259.3
|
|
|
18.3
|
|
|
$
|
112.4
|
|
|
7.9
|
|
_______________
N.M. — Not Meaningful.
Our programming and other direct costs of services increased
$113.4 million
or
16.1%
and
$259.3 million
or
18.3%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These increases include (i) increases of
$5.6 million
and
$7.9 million
, respectively, attributable to the impact of acquisitions and (ii) decreases of
$3.7 million
and
$7.6 million
, respectively, attributable to the impact of dispositions. On an organic basis, our programming and other direct costs of services increased
$62.9 million
or
8.9%
and
$112.4 million
or
7.9%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These increases includes the following factors:
|
|
•
|
Increases in mobile handset and other device costs of $16.8 million or 21.7% and $50.0 million or 34.2%, respectively, primarily due to (i) higher average cost per handset sold in
U.K./Ireland
and (ii) higher mobile handset and other device sales volumes, primarily due to increases in
Central and Corporate
and
U.K./Ireland
, that were only partially offset by decreases in Belgium. Substantially all of the increases in
Central and Corporate
are attributable to its wholesale handset program;
|
|
|
•
|
Increases in programming and copyright costs of $11.2 million or 3.0% and $42.4 million or 5.7%, respectively, primarily
due to increases in
Switzerland
and
U.K./Ireland
. These increases are primarily due to (i) higher costs for certain premium and/or basic content, including higher costs associated with (a) sports rights in Switzerland and (b) for the six-month comparison, broadcasting rights in Ireland, (ii) growth in the number of enhanced video subscribers, primarily due to increases in
U.K./Ireland
, and (iii) higher costs in
Central and Eastern Europe
due to a $2.6 million accrual during the second quarter of 2018 following the reassessment of an operational contingency. The cost for sports rights in Switzerland increased by
$9.4 million
and
$28.6 million
, respectively, due to the acquisition of the rights to carry live sporting events in connection with the September 2017 launch of our Swiss sports channels. Approximately half of the annual programming costs and the operating and capital costs associated with the production of the related Swiss sports channels are recovered from the revenue earned from the distribution of these sports channels to other cable operators;
|
|
|
•
|
Higher costs of sales of $17.2 million during each period in
Central and Corporate
related to customer premises equipment sold to the
VodafoneZiggo JV
;
|
|
|
•
|
Decreases of $3.2 million and $6.8 million, respectively, in the
U.K.
associated with the fourth quarter 2017 modification of a software agreement that resulted in the acquisition of a perpetual license and related conversion of the operating costs to capitalized costs; and
|
|
|
•
|
Increases in interconnect and access costs of $20.8 million or 10.4% and $5.7 million or 1.4%, respectively, primarily due to the net effect of
(i) lower
MVNO
costs, as decreases in Belgium of $15.6 million and $29.2 million, respectively, were only partially offset by increases in Switzerland,
(ii) higher costs of $23.8 million in
U.K./Ireland
during each period resulting from the net impact of credits recorded during the second quarter of 2017 ($28.8 million) and the second quarter of 2018 ($5.0 million) in connection with a telecommunications operator’s agreement to compensate communications providers, including Virgin Media, for certain contractual breaches related to network charges and (iii) higher interconnect and roaming costs, primarily due to the net effect of (a) increases in
U.K./Ireland
and
Switzerland
and (b) for the six-month comparison, a decrease in Belgium. The lower
MVNO
costs in Belgium are primarily attributable to the impact of the migration of mobile subscribers from Telenet’s
MVNO
arrangement to Telenet’s mobile network, which was completed during the first quarter of 2018. For additional information, see note
13
to our condensed consolidated financial statements.
|
Other operating expenses
Other operating expenses include network operations, customer operations, customer care, share-based compensation and other costs related to our operations. We do not include share-based compensation in the following discussion and analysis of the other operating expenses of our
reportable segments
as share-based compensation expense is not included in the performance measures of our
reportable segments
. Share-based compensation expense is discussed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Increase (decrease)
|
|
Organic increase (decrease)
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
227.9
|
|
|
$
|
206.5
|
|
|
$
|
21.4
|
|
|
10.4
|
|
|
$
|
10.1
|
|
|
4.9
|
|
Belgium
|
98.2
|
|
|
91.3
|
|
|
6.9
|
|
|
7.6
|
|
|
(2.9
|
)
|
|
(3.1
|
)
|
Switzerland
|
37.4
|
|
|
41.8
|
|
|
(4.4
|
)
|
|
(10.5
|
)
|
|
(4.3
|
)
|
|
(10.3
|
)
|
Central and Eastern Europe
|
21.8
|
|
|
20.0
|
|
|
1.8
|
|
|
9.0
|
|
|
1.2
|
|
|
6.0
|
|
Central and Corporate
|
40.1
|
|
|
40.7
|
|
|
(0.6
|
)
|
|
(1.5
|
)
|
|
(4.7
|
)
|
|
(11.5
|
)
|
Intersegment eliminations
|
5.8
|
|
|
7.6
|
|
|
(1.8
|
)
|
|
N.M.
|
|
|
(1.8
|
)
|
|
N.M.
|
|
Total other operating expenses excluding share-based compensation expense
|
431.2
|
|
|
407.9
|
|
|
23.3
|
|
|
5.7
|
|
|
$
|
(2.4
|
)
|
|
(0.6
|
)
|
Share-based compensation expense
|
—
|
|
|
0.9
|
|
|
(0.9
|
)
|
|
(100.0
|
)
|
|
|
|
|
Total
|
$
|
431.2
|
|
|
$
|
408.8
|
|
|
$
|
22.4
|
|
|
5.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
Increase (decrease)
|
|
Organic increase (decrease)
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
459.9
|
|
|
$
|
402.4
|
|
|
$
|
57.5
|
|
|
14.3
|
|
|
$
|
17.5
|
|
|
4.3
|
|
Belgium
|
211.5
|
|
|
183.8
|
|
|
27.7
|
|
|
15.1
|
|
|
0.4
|
|
|
0.2
|
|
Switzerland
|
81.2
|
|
|
83.3
|
|
|
(2.1
|
)
|
|
(2.5
|
)
|
|
(4.7
|
)
|
|
(5.6
|
)
|
Central and Eastern Europe
|
46.5
|
|
|
42.0
|
|
|
4.5
|
|
|
10.7
|
|
|
(0.5
|
)
|
|
(1.2
|
)
|
Central and Corporate
|
84.1
|
|
|
79.7
|
|
|
4.4
|
|
|
5.5
|
|
|
(3.8
|
)
|
|
(4.8
|
)
|
Intersegment eliminations
|
15.0
|
|
|
13.1
|
|
|
1.9
|
|
|
N.M.
|
|
|
1.9
|
|
|
N.M.
|
|
Total other operating expenses excluding share-based compensation expense
|
898.2
|
|
|
804.3
|
|
|
93.9
|
|
|
11.7
|
|
|
$
|
10.8
|
|
|
1.3
|
|
Share-based compensation expense
|
1.0
|
|
|
1.9
|
|
|
(0.9
|
)
|
|
(47.4
|
)
|
|
|
|
|
Total
|
$
|
899.2
|
|
|
$
|
806.2
|
|
|
$
|
93.0
|
|
|
11.5
|
|
|
|
|
|
_______________
N.M. — Not Meaningful.
Our other operating expenses (exclusive of share-based compensation expense) increased
$23.3 million
or
5.7%
and
$93.9 million
or
11.7%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These increases include increases of
$2.3 million
and
$4.7 million
, respectively, attributable to the impact of acquisitions. On an organic basis, our other operating expenses
increased (decreased) (
$2.4 million
) or (
0.6%
) and
$10.8 million
or
1.3%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These changes include the following factors:
|
|
•
|
Increases in network infrastructure charges in
U.K./Ireland
of $4.6 million and $13.0 million, respectively, following an increase in the rateable value of existing assets. For additional information, including our estimate of the full year
|
2018 impact of this rate increase, see “
Other Regulatory Issues”
in note
15
to our condensed consolidated financial statements;
|
|
•
|
Decreases in business service costs of $2.7 million or 5.1% and $6.3 million or 6.4%, respectively, primarily due to (i) decreased vehicle expenses due to the impact of the conversion of certain operating leases on company vehicles to capital leases in Belgium and
U.K./Ireland
, (ii) for the six-month comparison, lower energy costs and (iii) decreases in travel and entertainment expenses; and
|
|
|
•
|
Decreases in personnel costs of $9.2 million or 7.8% and $2.2 million or 0.9%, respectively, primarily due to the net effect of (i) lower staffing levels, as decreases in
U.K./Ireland
, Belgium and Switzerland were only partially offset by increases in
Central and Corporate
, and (ii) higher incentive compensation costs in
U.K./Ireland
.
|
SG&A expenses
SG&A expenses include human resources, information technology, general services, management, finance, legal, sales and marketing, share-based compensation and other general expenses. We do not include share-based compensation in the following discussion and analysis of the SG&A expenses of our reportable segments as share-based compensation expense is not included in the performance measures of our reportable segments. Share-based compensation expense is discussed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Increase (decrease)
|
|
Organic increase (decrease)
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
229.9
|
|
|
$
|
218.9
|
|
|
$
|
11.0
|
|
|
5.0
|
|
|
$
|
(6.3
|
)
|
|
(2.9
|
)
|
Belgium
|
103.9
|
|
|
99.5
|
|
|
4.4
|
|
|
4.4
|
|
|
(7.9
|
)
|
|
(7.6
|
)
|
Switzerland
|
43.9
|
|
|
40.9
|
|
|
3.0
|
|
|
7.3
|
|
|
2.9
|
|
|
7.1
|
|
Central and Eastern Europe
|
20.6
|
|
|
20.1
|
|
|
0.5
|
|
|
2.5
|
|
|
(1.3
|
)
|
|
(6.5
|
)
|
Central and Corporate
|
83.3
|
|
|
91.3
|
|
|
(8.0
|
)
|
|
(8.8
|
)
|
|
(12.4
|
)
|
|
(13.6
|
)
|
Intersegment eliminations
|
4.5
|
|
|
(0.1
|
)
|
|
4.6
|
|
|
N.M.
|
|
|
4.6
|
|
|
N.M.
|
|
Total SG&A expenses excluding share-based compensation expense
|
486.1
|
|
|
470.6
|
|
|
15.5
|
|
|
3.3
|
|
|
$
|
(20.4
|
)
|
|
(4.3
|
)
|
Share-based compensation expense
|
45.5
|
|
|
50.5
|
|
|
(5.0
|
)
|
|
(9.9
|
)
|
|
|
|
|
Total
|
$
|
531.6
|
|
|
$
|
521.1
|
|
|
$
|
10.5
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
Increase
|
|
Organic increase (decrease)
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
460.3
|
|
|
$
|
434.2
|
|
|
$
|
26.1
|
|
|
6.0
|
|
$
|
(14.0
|
)
|
|
(3.2
|
)
|
Belgium
|
212.0
|
|
|
192.0
|
|
|
20.0
|
|
|
10.4
|
|
(8.3
|
)
|
|
(4.2
|
)
|
Switzerland
|
88.3
|
|
|
84.4
|
|
|
3.9
|
|
|
4.6
|
|
1.3
|
|
|
1.5
|
|
Central and Eastern Europe
|
42.2
|
|
|
38.8
|
|
|
3.4
|
|
|
8.8
|
|
(1.4
|
)
|
|
(3.6
|
)
|
Central and Corporate
|
177.6
|
|
|
177.3
|
|
|
0.3
|
|
|
0.2
|
|
(13.9
|
)
|
|
(7.8
|
)
|
Intersegment eliminations
|
2.0
|
|
|
(1.6
|
)
|
|
3.6
|
|
|
N.M.
|
|
3.6
|
|
|
N.M.
|
|
Total SG&A expenses excluding share-based compensation expense
|
982.4
|
|
|
925.1
|
|
|
57.3
|
|
|
6.2
|
|
$
|
(32.7
|
)
|
|
(3.5
|
)
|
Share-based compensation expense
|
87.2
|
|
|
78.4
|
|
|
8.8
|
|
|
11.2
|
|
|
|
|
Total
|
$
|
1,069.6
|
|
|
$
|
1,003.5
|
|
|
$
|
66.1
|
|
|
6.6
|
|
|
|
|
_______________
N.M. — Not Meaningful.
Supplemental SG&A expense information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Increase (decrease)
|
|
Organic decrease
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative (a)
|
$
|
386.7
|
|
|
$
|
367.6
|
|
|
$
|
19.1
|
|
|
5.2
|
|
|
$
|
(9.6
|
)
|
|
(2.6
|
)
|
External sales and marketing
|
99.4
|
|
|
103.0
|
|
|
(3.6
|
)
|
|
(3.5
|
)
|
|
(10.8
|
)
|
|
(10.4
|
)
|
Total
|
$
|
486.1
|
|
|
$
|
470.6
|
|
|
$
|
15.5
|
|
|
3.3
|
|
|
$
|
(20.4
|
)
|
|
(4.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
Increase (decrease)
|
|
Organic decrease
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
pro forma
|
|
|
|
|
|
|
|
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative (a)
|
$
|
779.3
|
|
|
$
|
718.2
|
|
|
$
|
61.1
|
|
|
8.5
|
|
|
$
|
(8.0
|
)
|
|
(1.1
|
)
|
External sales and marketing
|
203.1
|
|
|
206.9
|
|
|
(3.8
|
)
|
|
(1.8
|
)
|
|
(24.7
|
)
|
|
(11.9
|
)
|
Total
|
$
|
982.4
|
|
|
$
|
925.1
|
|
|
$
|
57.3
|
|
|
6.2
|
|
|
$
|
(32.7
|
)
|
|
(3.5
|
)
|
_______________
|
|
(a)
|
General and administrative expenses include all personnel-related costs within our SG&A expenses, including personnel-related costs associated with our sales and marketing function.
|
Our SG&A expenses (exclusive of share-based compensation expense)
increased
$15.5 million
or
3.3%
and
$57.3 million
or
6.2%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These increases include increases of
$4.2 million
and
$6.0 million
, respectively, attributable to the impact of acquisitions. On an organic basis, our SG&A expenses decreased
$20.4 million
or
4.3%
and
$32.7 million
or
3.5%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These decreases include the following factors:
|
|
•
|
Decreases in external sales and marketing costs of $9.3 million or 7.8% and $21.6 million or 9.0%, respectively, primarily due to lower costs associated with advertising campaigns in
U.K./Ireland
and, for the three-month comparison, Belgium;
|
|
|
•
|
Decreases in personnel costs of $8.8 million or 4.4% and $18.0 million or 4.5%, respectively, primarily due to the net effect of (i) lower incentive compensation costs, primarily in
Central and Corporate
, (ii) a higher average cost per employee, primarily due to increases in
U.K./Ireland
that were only partially offset by decreases in
Central and Corporate
, (iii) lower staffing levels, as decreases in
U.K./Ireland
were only partially offset by increases in
Central and Corporate
, and (iv) decreases in temporary personnel costs, primarily in
Central and Corporate
and
U.K./Ireland
. The lower incentive compensation costs include decreases of $12.7 million and $19.4 million, respectively, primarily in
Central and Corporate
, attributable to the expected settlement of a portion of our 2018 annual incentive compensation with
Liberty Global
ordinary shares through a shareholding incentive program that was implemented in 2018. For additional information, see note
12
to our condensed consolidated financial statements;
|
|
|
•
|
Increases in core network and information technology-related costs of $5.2 million or 11.8% and $11.4 million or 13.8%, respectively, primarily due to increases in information technology-related expenses in
Central and Corporate
and, for the six-month comparison,
U.K./Ireland
; and
|
|
|
•
|
Decreases in business service and certain other costs of $1.6 million or 3.0% and $5.3 million or 5.4%, respectively, primarily due to the net effect of (i) an increase of $6.4 million during each period due to the reassessment of an accrual
|
in
U.K./Ireland
, (ii) lower consulting costs, primarily due to decreases in Belgium and
U.K./Ireland
, and (iii) decreases in travel and entertainment expenses in
Central and Corporate
.
Share-based compensation expense (included in other operating and SG&A expenses)
Our share-based compensation expense primarily relates to the share-based incentive awards issued by
Liberty Global
to its employees and employees of its subsidiaries. A summary of our aggregate share-based compensation expense is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
Liberty Global:
|
|
|
|
|
|
|
|
Performance-based incentive awards (a)
|
$
|
8.0
|
|
|
$
|
19.1
|
|
|
$
|
16.7
|
|
|
$
|
19.8
|
|
Non-performance based share-based incentive awards
|
24.3
|
|
|
24.6
|
|
|
46.3
|
|
|
46.3
|
|
Other (b)
|
13.4
|
|
|
—
|
|
|
20.5
|
|
|
—
|
|
Total Liberty Global
|
45.7
|
|
|
43.7
|
|
|
83.5
|
|
|
66.1
|
|
Other
|
(0.2
|
)
|
|
7.7
|
|
|
4.7
|
|
|
14.2
|
|
Total
|
$
|
45.5
|
|
|
$
|
51.4
|
|
|
$
|
88.2
|
|
|
$
|
80.3
|
|
Included in:
|
|
|
|
|
|
|
|
Other operating expense
|
$
|
—
|
|
|
$
|
0.9
|
|
|
$
|
1.0
|
|
|
$
|
1.9
|
|
SG&A expense
|
45.5
|
|
|
50.5
|
|
|
87.2
|
|
|
78.4
|
|
Total
|
$
|
45.5
|
|
|
$
|
51.4
|
|
|
$
|
88.2
|
|
|
$
|
80.3
|
|
_______________
|
|
(a)
|
Includes share-based compensation expense related to (i)
PSU
s and (ii) through March 31, 2017,
PGUs
held by our Chief Executive Officer.
|
|
|
(b)
|
Represents annual incentive compensation and defined contribution plan liabilities that have been or are expected to be settled with
Liberty Global
ordinary shares. In the case of the annual incentive compensation, shares will be issued to senior management and key employees pursuant to a shareholding incentive program that was implemented in 2018. The shareholding incentive program allows these employees to elect to receive up to 100% of their annual incentive compensation in ordinary shares of
Liberty Global
in lieu of cash.
|
For additional information regarding our share-based compensation expense, see note
12
to our condensed consolidated financial statements.
Depreciation and amortization expense
Our depreciation and amortization expense was
$970.2 million
and
$2,017.5 million
for the
three and six months ended June 30, 2018
, respectively, and
$922.0 million
and
$1,789.7 million
for the
three and six months ended June 30, 2017
, respectively. Excluding the effects of
FX
, depreciation and amortization expense increased (decreased) (
$11.5 million
) or (
1.2%
) and
$48.5 million
or
2.7%
during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These changes are primarily due to the net effect of (i) increases associated with property and equipment additions related to the installation of customer premises equipment, the expansion and upgrade of our networks and other capital initiatives,
(ii) decreases associated with certain assets becoming fully depreciated, primarily in
U.K./Ireland
,
Central and Corporate
and
Switzerland
, and (iii) decreases in accelerated depreciation in Belgium.
Impairment, restructuring and other operating items, net
We recognized impairment, restructuring and other operating items, net, of
$30.2 million
and
$91.6 million
during the
three and six months ended June 30, 2018
, respectively, and
$13.1 million
and
$6.4 million
during the
three and six months ended June 30, 2017
, respectively.
The amounts for the three- and six-month periods in
2018
primarily include restructuring charges of
$14.8 million
and
$68.5
million
, respectively, including (i)
$39.2 million
during the six-month period related to Belgium’s migration of
Telenet
’s mobile subscribers from an
MVNO
arrangement to
Telenet
’s mobile network and (ii)
$10.3 million
and
$22.2 million
, respectively, of employee severance and termination costs related to certain reorganization activities, primarily in
U.K./Ireland
and
Central and Corporate
. For additional information regarding Telenet’s exit from its
MVNO
arrangement, see note
13
to our condensed consolidated financial statements.
The amounts for the three- and six-month periods in
2017
include restructuring charges of
$14.0 million
and
$20.1 million
, respectively, including
$11.2 million
and
$15.9 million
, respectively, of employee severance and termination costs related to certain reorganization activities, primarily in
U.K./Ireland
and
Central and Corporate
.
If, among other factors, (i) our equity values were to decline or (ii) the adverse impacts of economic, competitive, regulatory or other factors were to cause our results of operations or cash flows to be worse than anticipated, we could conclude in future periods that impairment charges are required in order to reduce the carrying values of our goodwill and, to a lesser extent, other long-lived assets. Any such impairment charges could be significant.
For additional information regarding our restructuring charges, see note
13
to our condensed consolidated financial statements.
Interest expense
We recognized interest expense of
$381.1 million
and
$757.0 million
during the
three and six months ended June 30, 2018
, respectively, and
$348.8 million
and
$688.3 million
during the
three and six months ended June 30, 2017
, respectively.
Excluding the effects of
FX
, interest expense increased $9.6 million or 2.8% and $4.7 million or 0.7% during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. These increases are primarily attributable to slightly higher average outstanding debt balances. For additional information regarding our outstanding indebtedness, see note
9
to our condensed consolidated financial statements.
It is possible that the interest rates on (i) any new borrowings could be higher than the current interest rates on our existing indebtedness and (ii) our variable-rate indebtedness could increase in future periods. As further discussed in note
6
to our condensed consolidated financial statements and under
Qualitative and Quantitative Disclosures about Market Risk
below, we use derivative instruments to manage our interest rate risks.
Realized and unrealized gains (losses) on derivative instruments, net
Our realized and unrealized gains or losses on derivative instruments include (i) unrealized changes in the fair values of our derivative instruments that are non-cash in nature until such time as the derivative contracts are fully or partially settled and (ii) realized gains or losses upon the full or partial settlement of the derivative contracts. The details of our realized and unrealized (gains) losses on derivative instruments, net, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
|
|
|
|
|
|
|
|
Cross-currency and interest rate derivative contracts (a)
|
$
|
870.1
|
|
|
$
|
(502.3
|
)
|
|
$
|
508.2
|
|
|
$
|
(659.1
|
)
|
Equity-related derivative instruments:
|
|
|
|
|
|
|
|
ITV Collar
|
(183.6
|
)
|
|
163.4
|
|
|
(60.0
|
)
|
|
110.2
|
|
Lionsgate Forward
|
3.4
|
|
|
(2.5
|
)
|
|
12.4
|
|
|
(2.0
|
)
|
Sumitomo Collar
|
(23.2
|
)
|
|
2.2
|
|
|
(11.8
|
)
|
|
(21.3
|
)
|
Other
|
1.0
|
|
|
0.4
|
|
|
2.2
|
|
|
(5.4
|
)
|
Total equity-related derivative instruments (b)
|
(202.4
|
)
|
|
163.5
|
|
|
(57.2
|
)
|
|
81.5
|
|
Foreign currency forward and option contracts
|
8.3
|
|
|
(12.9
|
)
|
|
13.9
|
|
|
(19.0
|
)
|
Other
|
(0.5
|
)
|
|
—
|
|
|
(0.7
|
)
|
|
0.5
|
|
Total
|
$
|
675.5
|
|
|
$
|
(351.7
|
)
|
|
$
|
464.2
|
|
|
$
|
(596.1
|
)
|
_______________
|
|
(a)
|
The gains during the
2018
periods are primarily attributable to the net effect of (i) net gains associated with changes in the relative value of certain currencies and (ii) net losses associated with changes in certain market interest rates.
In addition, the gains during the
2018
periods include net losses of
$65.6 million
and
$27.9 million
, respectively, resulting from changes in our credit risk valuation adjustments. The losses during the
2017
periods are primarily attributable to the net effect of (a) net losses associated with changes in the relative value of certain currencies and (b) net gains associated with changes in certain market interest rates. In addition, the losses during the
2017
periods include net gains of
$59.6 million
and
$109.0 million
, respectively, resulting from changes in our credit risk valuation adjustments.
|
|
|
(b)
|
The recurring fair value measurements of our equity-related derivative instruments are based on Black-Scholes pricing models.
|
For additional information concerning our derivative instruments, see notes
6
and
7
to our condensed consolidated financial statements and
Quantitative and Qualitative Disclosures about Market Risk
below.
Foreign currency transaction gains (losses), net
Our foreign currency transaction gains or losses primarily result from the remeasurement of monetary assets and liabilities that are denominated in currencies other than the underlying functional currency of the applicable entity. Unrealized foreign currency transaction gains or losses are computed based on period-end exchange rates and are non-cash in nature until such time as the amounts are settled. The details of our foreign currency transaction gains (losses), net, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
|
|
|
|
|
|
|
|
Intercompany payables and receivables denominated in a currency other than the entity’s functional currency (a)
|
$
|
450.5
|
|
|
$
|
(348.1
|
)
|
|
$
|
158.8
|
|
|
$
|
(349.8
|
)
|
U.S. dollar-denominated debt issued by euro functional currency entities
|
(228.9
|
)
|
|
267.0
|
|
|
(133.9
|
)
|
|
313.0
|
|
U.S. dollar-denominated debt issued by British pound sterling functional currency entities
|
(271.4
|
)
|
|
126.8
|
|
|
(99.3
|
)
|
|
196.4
|
|
British pound sterling-denominated debt issued by a U.S. dollar functional currency entity
|
87.9
|
|
|
(49.6
|
)
|
|
35.3
|
|
|
(70.5
|
)
|
Cash and restricted cash denominated in a currency other than the entity’s functional currency
|
13.4
|
|
|
(42.4
|
)
|
|
(5.4
|
)
|
|
(82.5
|
)
|
Other
|
0.6
|
|
|
28.1
|
|
|
(5.1
|
)
|
|
4.4
|
|
Total
|
$
|
52.1
|
|
|
$
|
(18.2
|
)
|
|
$
|
(49.6
|
)
|
|
$
|
11.0
|
|
_______________
|
|
(a)
|
Amounts primarily relate to (i) loans between certain of our non-operating subsidiaries in the
U.S.
and Europe and (ii) loans between certain of our non-operating and operating subsidiaries in Europe, which generally are denominated in the currency of the applicable operating subsidiary.
|
Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net
Our realized and unrealized gains or losses due to changes in fair values of certain investments and debt include unrealized gains or losses associated with changes in fair values that are non-cash in nature until such time as these gains or losses are realized through cash transactions. For additional information regarding our investments, fair value measurements and debt, see notes
5
,
7
and
9
, respectively, to our condensed consolidated financial statements. The details of our realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
Investments:
|
|
|
|
|
|
|
|
Lionsgate
|
$
|
(4.1
|
)
|
|
$
|
8.9
|
|
|
$
|
(43.2
|
)
|
|
$
|
7.6
|
|
Sumitomo
|
(8.9
|
)
|
|
(20.1
|
)
|
|
(17.2
|
)
|
|
55.7
|
|
ITV
|
109.7
|
|
|
(153.7
|
)
|
|
22.9
|
|
|
(75.0
|
)
|
Casa
|
(51.0
|
)
|
|
4.2
|
|
|
1.2
|
|
|
5.9
|
|
Other, net
|
8.5
|
|
|
7.3
|
|
|
11.5
|
|
|
15.4
|
|
Total investments
|
54.2
|
|
|
(153.4
|
)
|
|
(24.8
|
)
|
|
9.6
|
|
Debt
|
7.3
|
|
|
12.0
|
|
|
29.1
|
|
|
(52.2
|
)
|
Total
|
$
|
61.5
|
|
|
$
|
(141.4
|
)
|
|
$
|
4.3
|
|
|
$
|
(42.6
|
)
|
Losses on debt modification and extinguishment, net
We recognized net losses on debt modification and extinguishment of
$20.1 million
and
$53.6 million
during the
three months ended June 30, 2018
and
2017
, respectively, and
$22.7 million
and
$98.9 million
during the
six months ended June 30, 2018
and
2017
, respectively.
The loss during the
six months ended June 30, 2018
is primarily attributable to (i) the payment of
$19.3 million
of redemption premiums (including
$17.3 million
during the second quarter), (ii) the write-off of
$12.2 million
of net unamortized deferred financing costs and discounts (including
$11.6 million
during the second quarter) and (iii) the settlement of the the final tranche of the
Sumitomo Collar
, as described in note
6
to our condensed consolidated financial statements.
The loss during the
six months ended June 30, 2017
is primarily attributable to (i) the payment of
$54.1 million
of redemption premiums (including
$21.5 million
during the second quarter) and (ii) the write-off of
$45.1 million
of net unamortized deferred financing costs, discounts and premiums (including $33.7 million during the second quarter).
For additional information concerning our losses on debt modification and extinguishment, net, see note
9
to our condensed consolidated financial statements.
Share of losses of affiliates, net
The following table sets forth the details of our share of losses of affiliates, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
in millions
|
|
|
|
|
|
|
|
|
VodafoneZiggo JV (a)
|
$
|
(63.2
|
)
|
|
$
|
6.5
|
|
|
$
|
(90.0
|
)
|
|
$
|
5.2
|
|
Other
|
(19.1
|
)
|
|
(10.1
|
)
|
|
(28.8
|
)
|
|
(24.5
|
)
|
Total
|
$
|
(82.3
|
)
|
|
$
|
(3.6
|
)
|
|
$
|
(118.8
|
)
|
|
$
|
(19.3
|
)
|
_______________
|
|
(a)
|
Amounts include the net effect of
(i) interest income of
$15.0 million
,
$15.8 million
,
$30.2 million
and
$30.6 million
, respectively, representing
100%
of the interest earned on the
VodafoneZiggo JV Receivable
, (ii)
100%
of the share-based compensation expense associated with
Liberty Global
awards held by
VodafoneZiggo JV
employees who were formerly employees of
Liberty Global
, as these awards remain our responsibility, and (iii) our
50%
share of the remaining results of operations of the
VodafoneZiggo JV
. The summarized results of operations of the
VodafoneZiggo JV
are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
June 30,
|
|
June 30,
|
|
2018
|
|
2017 (1)
|
|
2018
|
|
2017 (1)
|
|
in millions
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
1,114.5
|
|
|
$
|
1,077.9
|
|
|
$
|
2,296.1
|
|
|
$
|
2,150.0
|
|
Adjusted OIBDA
|
$
|
483.6
|
|
|
$
|
471.0
|
|
|
$
|
985.5
|
|
|
$
|
932.7
|
|
Operating income (loss)
|
$
|
(6.1
|
)
|
|
$
|
50.8
|
|
|
$
|
17.6
|
|
|
$
|
109.7
|
|
Non-operating expense (2)
|
$
|
195.1
|
|
|
$
|
76.7
|
|
|
$
|
337.5
|
|
|
$
|
176.7
|
|
Net loss
|
$
|
(150.8
|
)
|
|
$
|
(18.4
|
)
|
|
$
|
(238.1
|
)
|
|
$
|
(46.5
|
)
|
_______________
|
|
(1)
|
Amounts have been presented on a pro forma basis that gives effect to the adoption of
ASU 2014-09
as if such adoption had occurred on January 1, 2017.
|
|
|
(2)
|
Includes interest expense of
$168.6 million
,
$158.0 million
,
$338.2 million
and
$311.4 million
, respectively.
|
The VodafoneZiggo JV is experiencing significant competition. In particular, the mobile operations of the VodafoneZiggo JV continue to experience competitive pressure on pricing, characterized by aggressive promotion campaigns, heavy marketing efforts and increasing or unlimited data bundles. In light of this competition, as well as regulatory and economic factors, we could conclude in future periods that our investment in the VodafoneZiggo JV is impaired or management of the VodafoneZiggo JV could conclude that an impairment of the VodafoneZiggo JV goodwill and, to a lesser extent, long-lived assets, is required. Any such impairment of the VodafoneZiggo JV’s goodwill or our investment in the VodafoneZiggo JV would be reflected as a component of share of results of affiliates, net, in our condensed consolidated statement of operations. Our share of any such impairment charges could be significant.
Other income, net
We recognized other
income, net, of
$6.4 million
and
$15.8 million
for the
three months ended
June 30, 2018
and
2017
, respectively, and
$16.2 million
and
$32.4 million
for the
six months ended June 30, 2018
and
2017
, respectively. Our other income, net, includes interest and dividend income of (i)
$2.1 million
and
$9.1 million
during the three-month periods, respectively, and (ii)
$6.6 million
and
$22.7 million
during the six-month periods, respectively.
Income tax
expense
We recognized income tax benefit (expense) of
$92.8 million
and (
$68.7 million
) during the
three months ended
June 30, 2018
and
2017
, respectively.
The income tax benefit during the
three
months ended
June 30, 2018
differs from the expected income tax expense of
$109.4 million
(based on the
U.K.
statutory income tax rate of
19.0%
) primarily due to the net positive impact of (i) a reduction in our estimated
Mandatory Repatriation Tax
and (ii) non-deductible or non-taxable foreign currency exchange results. The net positive impact of these items was partially offset by the net negative impact of (i) an increase in valuation allowances and (ii) certain permanent differences between the financial and accounting treatment of items associated with investments in subsidiaries .
The income tax expense during the
three
months ended
June 30, 2017
differs from the expected income tax benefit
of
$133.3 million
(based on the
U.K.
blended income tax rate of
19.25%
) primarily due to the net negative impact of (i) an increase in valuation allowances and (ii) non-deductible or non-taxable foreign currency exchange results.
We recognized income tax expense of
$617.2 million
and
$150.4 million
during the
six months ended June 30, 2018
and
2017
, respectively.
The income tax expense
during the
six
months ended
June 30, 2018
differs from the expected income tax benefit of
$15.0 million
(based on the
U.K.
statutory income tax rate of
19.0%
) primarily due to the net negative impact of (i) our estimated
Mandatory Repatriation Tax
and (ii) certain permanent differences between the financial and accounting treatment of items associated with investments in subsidiaries. The net negative impact of these items was partially offset by the net positive impact of (i) a decrease in valuation allowances and (ii) non-deductible or non-taxable foreign currency exchange results.
The income tax expense during the
six
months ended
June 30, 2017
differs from the expected income tax benefit of
$188.0 million
(based on the
U.K.
blended income tax rate of
19.25%
) primarily due to the net negative impact of (i) an increase in valuation allowances and (ii) non-deductible or non-taxable foreign currency exchange results.
For additional information concerning our income taxes, see note
10
to our condensed consolidated financial statements.
Earnings (loss) from continuing operations
During the
three months ended June 30, 2018
and
2017
, we reported earnings (losses) from continuing operations of
$668.7 million
and (
$761.3 million
), respectively, consisting of (i) operating income of
$263.9 million
and
$208.9 million
, respectively, (ii) net non-operating income (expense) of
$312.0 million
and (
$901.5 million
), respectively, and (iii) income tax benefit (expense) of
$92.8 million
and (
$68.7 million
), respectively.
During the
six months ended June 30, 2018
and
2017
, we reported losses from continuing operations of
$696.3 million
and
$1,126.8 million
, respectively, consisting of (i) operating income of
$384.3 million
and
$425.4 million
, respectively, (ii) net non-operating expense of
$463.4 million
and
$1,401.8 million
, respectively, and (iii) income tax expense of
$617.2 million
and
$150.4 million
, respectively.
Gains or losses associated with (i) changes in the fair values of derivative instruments, (ii) movements in foreign currency exchange rates and (iii) the disposition of assets and changes in ownership are subject to a high degree of volatility and, as such, any gains from these sources do not represent a reliable source of income. In the absence of significant gains in the future from these sources or from other non-operating items, our ability to achieve earnings is largely dependent on our ability to increase our aggregate
Adjusted OIBDA
to a level that more than offsets the aggregate amount of our (a) share-based compensation expense, (b) depreciation and amortization, (c) impairment, restructuring and other operating items, (d) interest expense, (e) other non-operating expenses and (f) income tax expenses.
Due largely to the fact that we seek to maintain our debt at levels that provide for attractive equity returns, as discussed below under
Material Changes in Financial Condition
—
Capitalization
, we expect that we will continue to report significant levels of interest expense for the foreseeable future. For information concerning our expectations with respect to trends that may affect certain aspects of our operating results in future periods, see the discussion under
Overview
above. For information concerning the reasons for changes in specific line items in our condensed consolidated statements of operations, see
Discussion and Analysis of our Reportable Segments
and
Discussion and Analysis of our Consolidated Operating Results
above.
Earnings from discontinued operations, net of taxes
We reported earnings from discontinued operations, net of taxes, of
$281.8 million
and
$108.9 million
during the
three months ended June 30, 2018
and
2017
, respectively, and
$468.2 million
and
$207.2 million
during the
six months ended June 30, 2018
and
2017
, respectively, related to the operations of
UPC Austria
, the
Vodafone Disposal Group
and, for the 2017 periods, the
LiLAC Group
. For additional information, see note
4
to our condensed consolidated financial statements.
Net earnings
attributable to noncontrolling interests
Net earnings attributable to noncontrolling interests includes the noncontrolling interests’ share of the results of our continuing and discontinued operations. Net earnings attributable to noncontrolling interests increased (decreased)
$16.0 million
and (
$29.1 million
) during the
three and six months ended June 30, 2018
, respectively, as compared to the corresponding periods in
2017
. The increase for the three-month comparison is primarily attributable to the net effect of improvements in the results of operations of
Telenet
and the impact of the
Split-off Transaction
. The decrease for the six-month comparison is primarily attributable to the impact of the
Split-off Transaction
.
Material Changes in Financial Condition
Sources and Uses of Cash
We are a holding company that is dependent on the capital resources of our subsidiaries to satisfy our liquidity requirements at the corporate level. Each of our significant operating subsidiaries is separately financed within one of our three subsidiary “borrowing groups.” These borrowing groups include the respective restricted parent and subsidiary entities within
Virgin Media
,
UPC Holding
and
Telenet
. Although our borrowing groups typically generate cash from operating activities, the terms of the instruments governing the indebtedness of these borrowing groups may restrict our ability to access the liquidity of these subsidiaries. In addition, our ability to access the liquidity of these and other subsidiaries may be limited by tax and legal considerations, the presence of noncontrolling interests and other factors.
Cash and cash equivalents
The details of the
U.S.
dollar equivalent balances of our consolidated cash and cash equivalents at
June 30, 2018
are set forth in the following table (in millions):
|
|
|
|
|
Cash and cash equivalents held by:
|
|
Liberty Global and unrestricted subsidiaries:
|
|
Liberty Global (a)
|
$
|
31.8
|
|
Unrestricted subsidiaries (b)
|
638.8
|
|
Total Liberty Global and unrestricted subsidiaries
|
670.6
|
|
Borrowing groups (c):
|
|
Telenet
|
147.7
|
|
Virgin Media (d)
|
38.2
|
|
UPC Holding
|
5.9
|
|
Total borrowing groups
|
191.8
|
|
Total cash and cash equivalents
|
$
|
862.4
|
|
_______________
|
|
(a)
|
Represents the amount held by
Liberty Global
on a standalone basis.
|
|
|
(b)
|
Represents the aggregate amount held by subsidiaries that are outside of our borrowing groups.
|
|
|
(c)
|
Except as otherwise noted, represents the aggregate amounts held by the parent entity and restricted subsidiaries of our borrowing groups.
|
|
|
(d)
|
The
Virgin Media
borrowing group includes certain subsidiaries of
Virgin Media
, but excludes the parent entity,
Virgin Media
Inc.
|
Liquidity of
Liberty Global
and its unrestricted subsidiaries
The
$31.8 million
of cash and cash equivalents held by
Liberty Global
and, subject to certain tax and legal considerations, the
$638.8 million
of aggregate cash and cash equivalents held by unrestricted subsidiaries, represented available liquidity at the corporate level at
June 30, 2018
. Our remaining cash and cash equivalents of
$191.8 million
at
June 30, 2018
were held by our borrowing groups, as set forth in the table above. As noted above, various factors may limit our ability to access the cash of our borrowing groups. For information regarding certain limitations imposed by our subsidiaries’ debt instruments at
June 30, 2018
, see note
9
to our condensed consolidated financial statements.
Our current sources of corporate liquidity include (i) cash and cash equivalents held by
Liberty Global
and, subject to certain tax and legal considerations,
Liberty Global
’s unrestricted subsidiaries and (ii) interest and dividend income received on our and, subject to certain tax and legal considerations, our unrestricted subsidiaries’ cash and cash equivalents and investments, including dividends received from the
VodafoneZiggo JV
, (iii) principal and interest payments received with respect to the
VodafoneZiggo JV Receivable
and (iv) cash received with respect to transition services provided to the
VodafoneZiggo JV
and
Liberty Latin America
.
From time to time,
Liberty Global
and its unrestricted subsidiaries may also receive (i) proceeds in the form of distributions or loan repayments from
Liberty Global
’s borrowing groups or affiliates (including amounts from the
VodafoneZiggo JV
) upon (a) the completion of recapitalizations, refinancings, asset sales or similar transactions by these entities or (b) the accumulation of excess cash from operations or other means, (ii) proceeds upon the disposition of investments and other assets of
Liberty Global
and its unrestricted subsidiaries and (iii) proceeds in connection with the incurrence of debt by
Liberty Global
or its unrestricted subsidiaries or the issuance of equity securities by
Liberty Global
, including equity securities issued to satisfy subsidiary obligations. No assurance can be given that any external funding would be available to
Liberty Global
or its unrestricted subsidiaries on favorable terms, or at all. For information regarding the liquidity impacts of the disposition of
UPC Austria
and the pending disposition of the
Vodafone Disposal Group
, see note
4
to our condensed consolidated financial statements. For information regarding a dividend payment announced by
Telenet
subsequent to
June 30, 2018
, see note
17
to our condensed consolidated financial statements.
At
June 30, 2018
, our consolidated cash and cash equivalents balance included
$806.3 million
held by entities that are domiciled outside of the
U.K.
Based on our assessment of our ability to access the liquidity of our subsidiaries on a tax efficient basis, our expectations with respect to our corporate liquidity requirements and our preliminary assessment of the
2017 U.S. Tax Act
, we do not anticipate that tax considerations will adversely impact our corporate liquidity over the next 12 months. Our ability to access the liquidity of our subsidiaries on a tax efficient basis is a consideration in assessing the extent of our share repurchase program.
In addition, the amount of cash we receive from our subsidiaries to satisfy
U.S.
dollar-denominated liquidity requirements is impacted by fluctuations in exchange rates, particularly with regard to the translation of British pounds sterling and euros into
U.S.
dollars. In this regard, the strengthening (weakening) of the
U.S.
dollar against these currencies will result in decreases (increases) in the
U.S.
dollars received from the applicable subsidiaries to fund the repurchase of our equity securities and other
U.S.
dollar-denominated liquidity requirements.
Our corporate liquidity requirements include (i) corporate general and administrative expenses, (ii) interest payments on our secured borrowing arrangement with respect to our ITV shares (the
ITV Collar Loan
), the
Sumitomo Share Loan
and (iii) principal payments on the
ITV Collar Loan
, the
Sumitomo Share Loan
and our secured borrowing arrangement with respect to
2.5 million
of our
Lionsgate
shares (the
Lionsgate Loan
) to the extent not settled through the delivery of the underlying shares. In addition,
Liberty Global
and its unrestricted subsidiaries may require cash in connection with (a) the repayment of third-party and intercompany debt, (b) the satisfaction of contingent liabilities, (c) acquisitions, (d) the repurchase of equity and debt securities, (e) other investment opportunities, (f) any funding requirements of our subsidiaries and affiliates or (g) income tax payments. In addition, our parent entity uses available liquidity to make interest and principal payments on notes payable to certain of our unrestricted subsidiaries (aggregate outstanding principal of
$12.0 billion
at
June 30, 2018
with varying maturity dates). For information regarding our commitments and contingencies, see note
15
to our condensed consolidated financial statements.
During the
six months ended June 30, 2018
, the aggregate purchase price of our share repurchases was
$1,288.3 million
, including direct acquisition costs. At
June 30, 2018
, the remaining amount authorized for share repurchases was
$783.9 million
. On July 31, 2018, our board of directors authorized an additional
$500.0 million
for share repurchases.
Liquidity of borrowing groups
The cash and cash equivalents of our borrowing groups are detailed in the table above. In addition to cash and cash equivalents, the primary sources of liquidity of our borrowing groups are cash provided by operations and borrowing availability under their respective debt instruments. For the details of the borrowing availability of such entities at
June 30, 2018
, see note
9
to our condensed consolidated financial statements. The aforementioned sources of liquidity may be supplemented in certain cases by contributions and/or loans from
Liberty Global
and its unrestricted subsidiaries. The liquidity of our borrowing groups generally is used to fund property and equipment additions, debt service requirements and income tax payments. From time to time, our borrowing groups may also require liquidity in connection with (i) acquisitions and other investment opportunities, (ii) loans to
Liberty Global
, (iii) capital distributions to
Liberty Global
and other equity owners or (iv) the satisfaction of contingent liabilities. No assurance can be given that any external funding would be available to our borrowing groups on favorable terms, or at all. For information regarding our borrowing groups’ commitments and contingencies, see note
15
to our condensed consolidated financial statements.
For additional information regarding our consolidated cash flows, see the discussion under
Condensed Consolidated Statements of Cash Flows
below.
Capitalization
We seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk. In this regard, we generally seek to cause our operating subsidiaries to maintain their debt at levels that result in a consolidated debt balance (excluding the
ITV Collar Loan
,
Sumitomo Share Loan
,
Lionsgate Loan
and measured using subsidiary debt figures at swapped foreign currency exchange rates, consistent with the covenant calculation requirements of our subsidiary debt agreements) that is between four and five times our consolidated
Adjusted OIBDA
, although the timing of our acquisitions and financing transactions and the interplay of average and spot foreign currency rates may impact this ratio. The ratio of our
June 30, 2018
consolidated debt to our annualized consolidated
Adjusted OIBDA
for the quarter ended
June 30, 2018
was
5.0x
. In addition, the ratio of our
June 30, 2018
consolidated net debt (debt, as defined above, less cash and cash equivalents) to our annualized consolidated
Adjusted OIBDA
for the quarter ended
June 30, 2018
was
4.9x
. Consistent with how we calculate our leverage ratios under our debt agreements, these ratios are presented on a basis that includes the debt and Adjusted OIBDA of both our continuing and discontinued operations.
When it is cost effective, we generally seek to match the denomination of the borrowings of our subsidiaries with the functional currency of the operations that support the respective borrowings. As further discussed in note
6
to our condensed consolidated financial statements, we also use derivative instruments to mitigate foreign currency and interest rate risk associated with our debt instruments.
Our ability to service or refinance our debt and to maintain compliance with the leverage covenants in the credit agreements and indentures of our borrowing groups is dependent primarily on our ability to maintain or increase the
Adjusted OIBDA
of our operating subsidiaries and to achieve adequate returns on our property and equipment additions and acquisitions. In addition, our ability to obtain additional debt financing is limited by the incurrence-based leverage covenants contained in the various debt instruments of our borrowing groups. For example, if the
Adjusted OIBDA
of
Virgin Media
were to decline, our ability to obtain additional debt could be limited. No assurance can be given that we would have sufficient sources of liquidity, or that any external funding would be available on favorable terms, or at all, to fund any such required repayment. At
June 30, 2018
, each of our borrowing groups was in compliance with its debt covenants. In addition, we do not anticipate any instances of non-compliance with respect to the debt covenants of our borrowing groups that would have a material adverse impact on our liquidity during the next 12 months.
At
June 30, 2018
, the outstanding principal amount of our consolidated debt, together with our capital lease obligations, aggregated
$32.0 billion
, including
$3.4 billion
that is classified as current in our condensed consolidated balance sheet and
$23.1 billion
that is not due until 2024 or thereafter. All of our consolidated debt and capital lease obligations have been borrowed or incurred by our subsidiaries at
June 30, 2018
. For additional information concerning our debt maturities, see note
9
to our condensed consolidated financial statements.
Notwithstanding our negative working capital position at
June 30, 2018
, we believe that we have sufficient resources to repay or refinance the current portion of our debt and capital lease obligations and to fund our foreseeable liquidity requirements during the next 12 months. However, as our maturing debt grows in later years, we anticipate that we will seek to refinance or otherwise extend our debt maturities. No assurance can be given that we will be able to complete these refinancing transactions or otherwise extend our debt maturities. In this regard, it is not possible to predict how political and economic conditions, sovereign debt concerns or any adverse regulatory developments could impact the credit and equity markets we access and, accordingly, our future liquidity and financial position. Our ability to access debt financing on favorable terms, or at all, could be adversely impacted by (i) the financial failure of any of our counterparties, which could (a) reduce amounts available under committed credit facilities and (b) adversely impact our ability to access cash deposited with any failed financial institution and (ii) tightening of the credit markets. In addition, any weakness in the equity markets could make it less attractive to use our shares to satisfy contingent or other obligations, and sustained or increased competition, particularly in combination with adverse economic or regulatory developments, could have an unfavorable impact on our cash flows and liquidity.
For additional information concerning our debt and capital lease obligations, see note
9
to our condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
General.
Our cash flows are subject to significant variations due to
FX
.
Summary.
The condensed consolidated statements of cash flows of our continuing operations for the
six
months ended
June 30, 2018
and
2017
are summarized as follows: