Announced the sale of UPC Switzerland for a total enterprise
value of CHF 6.3 billion1 ($6.3
billion2)
Vodafone transaction remains on track for mid-2019
completion
FY 2018 continuing operations operating income up 10% to $839
million; rebased OCF growth of 3.5% and 4.3% for Full
Company3
Achieved all continuing operations full-year 2018
guidance
Full company3 FCF target achieved
Repurchased $2 billion of stock in 2018
Liberty Global (NASDAQ: LBTYA, LBTYB and LBTYK):
Full
Year
Q4
Net Adds
30K
(33K)
Revenue Growth7
2.2%
1.2%
OCF Growth7
3.5%
2.9%
Full
Year
Q4
Net Adds
366K
104K
Revenue Growth7
5.4%
3.8%
OCF Growth7
6.1%
4.8%
Full
Year
Q4
OCF Growth7
4.3%
3.4%
Adj. FCF (As reported)
$1.4 bn
$1.4 bn
Adj. FCF (Guidance FX)8
$1.6 bn
Liberty Global plc today announced its three months ("Q4") and
full year ("FY") 2018 financial results. Our operations in Germany,
Hungary, Romania and the Czech Republic, along with our DTH
operations and our former operations in Austria (collectively, the
"Discontinued European Operations") and the former LiLAC Group have
been accounted for as discontinued operations. Unless otherwise
indicated, the information in this release relates only to our
continuing operations. As used in this release, the term "Full
Company" includes our continuing operations and the Discontinued
European Operations. For additional information, including the
reasons that we present selected information on a Full Company
basis, see note 3. In addition, on January 1, 2018, we adopted new
revenue recognition rules on a prospective basis and a new
presentation of certain components of our pension expense on a
retrospective basis. All information in this release is presented
on a comparable basis with respect to both of these accounting
changes. For additional information concerning our discontinued
operations and these accounting changes, see notes 4 and 5.
CEO Mike Fries stated, "The past fourteen months have
been transformational for Liberty Global. After two decades of
buying, building and growing world-class cable operations in
Europe, we have announced or completed transactions in six of our
twelve markets at premium valuations. Together these deals
represent an aggregate enterprise value of $31 billion and net cash
proceeds to the company, when completed, of $16 billion6. It has
long been our ambition to create or enable national champions, and
we couldn’t be more proud of these fixed-mobile combinations, which
will challenge incumbents, accelerate innovation and benefit
customers for years to come.
"After these transactions, in addition to a significant cash
balance, a $2 billion9 strategic investment portfolio and over $2
billion in net tax assets, we will continue to be the largest cable
operator in the U.K., Ireland, Belgium, Poland and Slovakia.
Together our operations serve 23 million RGUs and generate $11
billion of annual revenue. We also serve another 10 million RGUs
and generate over $4 billion of annual revenue in The Netherlands
through our 50/50 JV with Vodafone. Each of these businesses is
entering a new period of reduced capital intensity and meaningful
operating free cash flow ("OFCF") growth.
"Also, in connection with the changing scope of our business, we
initiated a broader reorganization plan in January, which will
result in a leaner operating structure. As we move through the
year, we will have further updates on this initiative.
"We will be hosting an earnings call this afternoon at 5:00 p.m.
EST to discuss our 2018 results, the just announced UPC Switzerland
transaction and our 2019 financial guidance. We hope you can join
us."
About Liberty Global
Liberty Global (NASDAQ: LBTYA, LBTYB and LBTYK) is the world’s
largest international TV and broadband company, with operations in
10 European countries under the consumer brands Virgin Media,
Unitymedia, Telenet and UPC. We invest in the infrastructure and
digital platforms that empower our customers to make the most of
the video, internet and communications revolution. Our substantial
scale and commitment to innovation enable us to develop
market-leading products delivered through next-generation networks
that connect 21 million customers subscribing to 45 million TV,
broadband internet and telephony services. We also serve 6 million
mobile subscribers and offer WiFi service through 12 million
access points across our footprint.*
In addition, Liberty Global owns 50% of VodafoneZiggo, a joint
venture in the Netherlands with 4 million customers subscribing to
10 million fixed-line and 5 million mobile services, as well as
significant investments in ITV, All3Media, ITI Neovision,
LionsGate, the Formula E racing series and several regional sports
networks.
________________________________________________________________________________
* The figures included in this paragraph include both the
continuing and discontinued operations that we owned on December
31, 2018
Full Year and Q4 Highlights (on a
continuing operations basis unless otherwise noted)
- FY and Q4 rebased revenue up 2.2% and
1.2%, respectively
- Q4 residential cable revenue10
decreased 0.5% year-over-year to $1.9 billion
- Q4 residential mobile revenue10
decreased 4.0% year-over-year to $413 million
- Q4 B2B11 revenue10 increased 7.2%
year-over-year to $501 million
- FY operating income increased 10.3%
year-over-year to $839.1 million
- Q4 operating income increased 73.2%
year-over-year to $252.2 million
- FY rebased OCF growth was 3.5% to $5.2
billion, including 2.9% growth in Q4
- FY results supported by strong
performances in Belgium and Virgin Media
- Built 194,000 new premises in Q4
- Virgin Media delivered 144,000 new
premises in the U.K. & Ireland
- Repurchased $2 billion of stock in
2018
- Solid balance sheet with $4.0 billion
of liquidity12
- Net leverage13 of 4.8x for the Full
Company
- Fully-swapped borrowing cost of
4.3%
Liberty Global(continuing operations
unless otherwise noted)
Q4 2018
YoYGrowth(i)
FY 2018
YoYGrowth(i)
Subscribers
Organic RGU Net Additions (Losses) (32,500 ) 30,000
Financial (in USD
millions)
Revenue Continuing operations $ 2,949.1 1.2 % $ 11,957.9 2.2 % OCF:
Continuing operations $ 1,301.6 2.9 % $ 5,151.5 3.5 % Full
Company(ii) 3.4 % 4.3 % Operating income $ 252.2 73.2 % $ 839.1
10.3 % Adjusted FCF: Continuing operations $ 1,077.9 $ 107.8
Pro forma continuing operations(iii) $ 1,121.8 $ 388.7 Full Company
$ 1,412.9 $ 1,397.2 Cash provided by operating activities $ 1,277.5
$ 3,985.0 Cash provided (used) by investing activities $ (193.8 ) $
601.5 Cash used by financing activities $ (871.0 ) $ (6,286.6 ) (i)
Revenue and OCF YoY growth rates are on a rebased basis (ii)
Full Company rebased OCF growth in the Q4 and FY periods includes
the net positive impacts of certain German channel carriage
settlements of $10.5 million and $47.4 million, respectively (iii)
Pro forma Adjusted FCF gives pro forma effect to certain increases
in our recurring cash flows that we have or expect to realize
following the disposition of the Discontinued European Operations.
For additional details, see the information and reconciliation
included within the Glossary
Subscriber Growth
Three months ended Year
ended December 31, December 31, 2018
2017 2018 2017
Organic RGU net additions (losses) by product Video
(74,900 ) (31,600 ) (160,400 ) (50,100 ) Data 24,800 42,700 98,100
243,800 Voice 17,600 (7,400 ) 92,300 66,300
Total (32,500 ) 3,700 30,000 260,000
Organic RGU net additions (losses) by market U.K./Ireland
23,500 7,700 285,900 336,200 Belgium (54,400 ) (11,800 ) (154,200 )
(53,700 ) Switzerland (48,600 ) (22,500 ) (187,600 ) (40,800 )
Continuing CEE (Poland and Slovakia) 47,000 30,300
85,900 18,300 Total (32,500 ) 3,700 30,000
260,000
Organic Mobile SIM additions
(losses) by product Postpaid 68,200 116,500 316,900 357,200
Prepaid (40,500 ) (23,400 ) (163,400 ) (216,900 ) Total 27,700
93,100 153,500 140,300
Organic Mobile SIM additions by market U.K./Ireland 17,400
32,800 68,300 12,500 Belgium 1,900 50,800 54,500 94,600 Other 8,400
9,500 30,700 33,200 Total 27,700
93,100 153,500 140,300
- Cable Product
Performance: During Q4 we lost 33,000 RGUs, as compared to a
gain of 4,000 RGUs in the prior-year period, as an improved
performance in our CEE operations and at Virgin Media was more than
offset by weakness in Belgium and Switzerland. From a product
perspective, video and data adds showed a year-over-year decrease,
while telephony net adds increased year-over-year
- U.K./Ireland: Q4 RGU additions of 23,500 were 3x
higher than the prior-year period, driven by success in our Project
Lightning footprint
- Belgium:
RGU attrition of 54,000 in Q4 was primarily due to intensified
competition
- Switzerland: Lost 49,000 RGUs in Q4, compared to a
loss of 22,500 in Q4 2017, primarily due to heightened
competition
- Continuing CEE
(Poland and Slovakia): Gained 47,000 RGUs in Q4, as compared
to 30,000 added in the prior-year period, mainly driven by stronger
video, broadband and voice adds in Poland
- Mobile:
Added 28,000 mobile subscribers in Q4, as 68,000 postpaid additions
were partially offset by continued attrition in our low-ARPU
prepaid base
- U.K./Ireland added 17,000 mobile
subscribers in Q4 as postpaid growth was partially offset by
low-ARPU prepaid losses. The penetration of 4G at Virgin Media
increased to 79% of our postpaid base at the end of Q4, and 56% of
our mobile base has now migrated to our full MVNO platform in the
U.K. allowing us to offer more converged bundles
- Belgium added 2,000 mobile subscribers
during Q4
- Switzerland added 8,500 mobile
subscribers in Q4, driven by bundling success
Revenue Highlights
The following table presents (i) revenue of each of our
consolidated reportable segments for the comparative periods and
(ii) the percentage change from period to period on both a reported
and rebased basis:
Three months ended
Increase/(decrease) Year ended
Increase/(decrease) December 31, December
31, Revenue 2018
20175 % Rebased %
2018 20175 %
Rebased % in millions, except % amounts
Continuing operations: U.K./Ireland $ 1,694.3 $ 1,709.6 (0.9
) 2.4 $ 6,875.1 $ 6,385.8 7.7 3.9 Belgium 733.3 758.1 (3.3 ) (0.7 )
2,993.6 2,861.6 4.6 (1.1 ) Switzerland 325.6 345.5 (5.8 ) (5.1 )
1,326.0 1,366.2 (2.9 ) (3.7 ) Continuing CEE 119.1 125.4 (5.0 )
(0.5 ) 492.2 466.5 5.5 1.0 Central and Corporate 76.8 51.6 48.8
22.1 274.2 189.4 44.8 28.8 Intersegment eliminations — (6.3
) N.M. N.M. (3.2 ) (14.6 ) N.M. N.M. Total continuing operations $
2,949.1 $ 2,983.9 (1.2 ) 1.2 $ 11,957.9
$ 11,254.9 6.2 2.2
Discontinued
European Operations(i): Germany $ 704.8 $ 702.0
0.4 3.6 $ 2,930.9 $ 2,645.7 10.8 5.9 Austria — 104.3 (100.0 ) —
253.7 396.2 (36.0 ) 3.4 Discontinued CEE 191.0 192.2 (0.6 ) 4.3
774.6 716.7 8.1 4.3 Intersegment eliminations (1.1 ) (0.9 ) N.M.
N.M. (5.4 ) (3.4 ) N.M. N.M. Total discontinued European operations
$ 894.7 $ 997.6 (10.3 ) 3.8 $ 3,953.8 $
3,755.2 5.3 5.4
N.M. - Not Meaningful
(i) For information concerning our discontinued operations, see
note 4.
- Reported revenue for the three months
and full year ended December 31, 2018, decreased 1.2% and increased
6.2% year-over-year, respectively
- The full-year results were primarily
driven by the impact of (i) positive foreign exchange ("FX")
movements, mainly related to the strengthening of the British Pound
and Euro against the U.S. dollar, and (ii) organic revenue
growth
- Rebased revenue grew 1.2% and 2.2% in
the Q4 and full-year 2018 periods, respectively. The result in the
full-year period included:
- A $6.4 million headwind from the
release of unclaimed customer credits in Switzerland in H1
2017
- A $5.6 million headwind from the
expected recovery of VAT paid in prior periods with respect to
copyright fees in Belgium, which benefited revenue in H1 2017
- The unfavorable $3.9 million impact due
to the reversal during the first quarter of 2018 of revenue in
Switzerland that was recognized during prior-year periods
- The favorable impact of $3.8 million of
mobile subscription revenue recognized in the U.K. during the third
quarter of 2018 related to the expected recovery of certain
prior-period VAT payments
Q4 2018 Rebased Revenue Growth - Segment
Highlights
- U.K./Ireland: Rebased revenue growth of 2.4% in Q4
reflects (i) 3.0% rebased growth in our residential cable business
supported by subscriber growth and accelerating cable ARPU, (ii)
1.3% rebased decline in residential mobile revenue (including
interconnect and mobile handset revenue), reflecting a lower volume
of mobile handset sales and a reduction in subscription revenue due
to lower out-of-bundle usage and regulatory changes such as
roam-like-home, and (iii) 3.1% rebased revenue growth in our B2B
business, driven by continued growth in our SOHO base
- Belgium:
Rebased revenue decline of 0.7% in Q4 was mainly driven by the net
effect of (i) higher B2B growth, (ii) lower mobile revenue and
(iii) lower cable subscription revenue due to lower video
subscribers
- Switzerland: Rebased revenue declined 5.1% in Q4,
primarily due to the net effect of (i) lower residential cable
subscription revenue, which was driven primarily by competitive
pressures, (ii) an increase in B2B revenue and (iii) higher mobile
revenue
- Continuing CEE
(Poland and Slovakia): Rebased revenue declined 0.5% in Q4,
due to the net effect of a decrease in residential cable
subscription revenue and growth in our B2B business
- Central and
Corporate: Rebased revenue increased 22.1% in Q4 due largely
to the low-margin sale of customer premises equipment to the
VodafoneZiggo JV, which began in the second quarter of 2018
Operating Income
- Operating income of $252.2 million and
$145.6 million in Q4 2018 and Q4 2017, respectively, representing
an increase of 73.2% year-over-year. For the year ended December
31, 2018, our operating income of $839.1 million reflects an
increase of 10.3% as compared to $760.5 million in YTD 2017
- The increase in operating income in the
Q4 period resulted from the net effect of (i) a decrease in
depreciation and amortization expense, (ii) an increase in
impairment, restructuring and other operating items, net, (iii) an
increase in share-based compensation expense and (iv) higher OCF,
as further described below
- The increase in operating income in the
YTD period resulted from the net effect of (i) higher OCF, as
further described below, (ii) an increase in impairment,
restructuring and other operating items, net, (iii) an increase in
depreciation and amortization expense and (iv) an increase in
share-based compensation expense
Operating Cash Flow Highlights
The following table presents (i) OCF of each of our consolidated
reportable segments for the comparative periods, and (ii) the
percentage change from period to period on both a reported and
rebased basis:
Three months ended
Increase/(decrease) Year ended
Increase/(decrease) December 31, December
31, OCF 2018 20175
% Rebased % 2018
20175 %
Rebased % in
millions, except % amounts Continuing operations:
U.K./Ireland $ 788.9 $ 805.8 (2.1 ) 1.2 $ 3,057.2 $ 2,857.9 7.0 3.5
Belgium 355.3 327.0 8.7 12.1 1,480.0 1,296.6 14.1 7.9 Switzerland
182.2 199.5 (8.7 ) (8.0 ) 748.7 829.7 (9.8 ) (10.4 ) Continuing CEE
63.9 64.9 (1.5 ) 3.2 249.1 234.3 6.3 2.0 Central and Corporate
(88.4 ) (108.3 ) 18.4 7.5 (371.7 ) (415.8 ) 10.6 11.5 Intersegment
eliminations (0.3 ) 0.6 N.M. N.M. (11.8 ) (9.5 ) N.M. N.M.
Total continuing operations $ 1,301.6 $ 1,289.5 0.9
2.9 $ 5,151.5 $ 4,793.2 7.5 3.5
OCF margin - continuing operations 44.1 % 43.2 % 43.1
% 42.6 %
Discontinued European
Operations(i): Germany $ 469.6 $ 457.3 2.7 6.0 $
1,888.5 $ 1,689.1 11.8 7.1 Austria — 58.7 (100.0 ) — 137.3 218.4
(37.1 ) 3.0 Discontinued CEE 80.0 80.1 (0.1 ) 5.1 306.1 282.5 8.4
4.8 Intersegment eliminations 4.5 12.0 N.M. N.M. 30.9
41.2 N.M. N.M. Total discontinued European operations
$ 554.1 $ 608.1 (8.9 ) 4.8 $ 2,362.8 $
2,231.2 5.9 6.1
Full Company 3.4
4.3
N.M. - Not Meaningful
(i) For information concerning our discontinued operations, see
note 4.
- Reported OCF for the three months and
full year ended December 31, 2018 increased 0.9% and 7.5%
year-over-year, respectively
- The YTD result was primarily driven by
(i) the aforementioned positive impact of FX movements and (ii)
organic growth
- Rebased OCF growth of 2.9% in Q4 and
3.5% in YTD 2018 included:
- For the YTD period, the net unfavorable
impact on our revenue of certain items, as discussed in the
"Revenue Highlights" section above
- Higher costs of $34.3 million in
U.K./Ireland in the YTD period resulting from the net impact of
credits recorded during the second quarter of 2017 ($28.8 million),
the fourth quarter of 2017 ($10.5 million) and the second quarter
of 2018 ($5.0 million) in connection with a telecommunications
operator's agreement to compensate Virgin Media and other
communications providers for certain prior-period contractual
breaches related to network charges
- A favorable impact of $29.1 million in
the YTD period due 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 the fourth quarter of 2017
- Unfavorable network tax increases of
$4.8 million and $22.5 million, respectively, following an increase
in the rateable value of our existing U.K. networks, which is being
phased in over a six-year period ending in 2022
- Unfavorable increases in costs in the
U.K. of $2.7 million and $9.1 million, respectively, due to
accruals in the second and fourth quarters of 2018 related to a
fine imposed by OfCom for certain contractual breaches. This was
settled in the fourth quarter of 2018 and we are currently
appealing this fine
- As compared to the prior-year periods,
our Q4 and YTD 2018 OCF margins were up 90 and 50 basis points,
respectively, to 44.1% and 43.1%
Q4 2018 Rebased Operating Cash Flow Growth
- Segment Highlights
- U.K./Ireland: Rebased OCF growth of 1.2% was
attributable to the aforementioned credits recorded in Q4 2017
related to prior-period contractual breaches related to network
charges, combined with increased programming costs and higher
network taxes, which partially offset revenue growth and lower
marketing costs
- Belgium:
Rebased OCF growth of 12.1%, largely driven by lower direct costs
as a result of the migration of subscribers to our own mobile
network
- Switzerland: Rebased OCF decline of 8.0% in Q4,
largely due to the aforementioned residential cable subscription
revenue decline
- Continuing CEE
(Poland and Slovakia): Rebased OCF growth of 3.2% driven by
the net effect of a decrease in programming and labor costs and the
aforementioned revenue trend
Net Earnings (Loss) Attributable to Liberty Global
Shareholders
- Net earnings (loss) attributable to
Liberty Global shareholders was $25.1 million and ($992.0 million)
for the three months ended December 31, 2018 and 2017,
respectively, and $725.3 million and ($2,778.1 million) during the
years ended December 31, 2018 and 2017, respectively
Leverage and Liquidity
- Total principal
amount of debt and capital leases: $29.9 billion for
continuing operations
- Leverage
ratios13: At December 31, 2018, our adjusted gross and net
leverage ratios for the Full Company were 5.0x and 4.8x,
respectively.
- Average debt
tenor14: Approximately 7 years, with ~76% not due until 2024
or thereafter for continuing operations
- Borrowing
costs: Blended fully-swapped borrowing cost of our debt was
4.3% for continuing operations
- Liquidity12: $4.0 billion for our continuing
operations, including (i) $1.5 billion of cash at December 31, 2018
and (ii) aggregate unused borrowing capacity15 under our credit
facilities of $2.5 billion
Forward-Looking Statements and Disclaimer
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements with respect to our strategies, future
growth prospects and opportunities; expectations with respect to
our OCF growth, our Adjusted FCF, our OFCF growth, and our reduced
capital intensity; expectations with respect to our operating
structure reorganization plan; the anticipated closings and impacts
of each of the Vodafone, DTH and Switzerland transactions; the
estimated cash proceeds from pending disposals to Vodafone, Sunrise
and M7, expectations regarding our share buyback program; the
strength of our balance sheet and tenor of our third-party debt;
and other information and statements that are not historical fact.
These forward-looking statements involve certain risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by these statements. These risks
and uncertainties include events that are outside of our control,
such as the continued use by subscribers and potential subscribers
of our and our affiliates’ services and their willingness to
upgrade to our more advanced offerings; our and our affiliates’
ability to meet challenges from competition, to manage rapid
technological change or to maintain or increase rates to
subscribers or to pass through increased costs to subscribers; the
effects of changes in laws or regulation; general economic factors;
our and our affiliates’ ability to obtain regulatory approval and
satisfy regulatory conditions associated with acquisitions and
dispositions; our and affiliates’ ability to successfully acquire
and integrate new businesses and realize anticipated efficiencies
from acquired businesses; the availability of attractive
programming for our and our affiliates’ video services and the
costs associated with such programming; our and our affiliates’
ability to achieve forecasted financial and operating targets; the
outcome of any pending or threatened litigation; the ability of our
operating companies and affiliates to access cash of their
respective subsidiaries; the impact of our operating companies' and
affiliates’ future financial performance, or market conditions
generally, on the availability, terms and deployment of capital;
fluctuations in currency exchange and interest rates; the ability
of suppliers, vendors and contractors to timely deliver quality
products, equipment, software, services and access; our and our
affiliates’ ability to adequately forecast and plan future network
requirements including the costs and benefits associated with
network expansions; and other factors detailed from time to time in
our filings with the Securities and Exchange Commission, including
our most recently filed Form 10-K. Further, estimated cash proceeds
from pending dispositions are inherently uncertain and represent
management’s expectations and beliefs and do not take into account
the ultimate use of the proceeds or any other changes in our
capital structure or tax effects, directly or indirectly related to
the pending dispositions. These forward-looking statements speak
only as of the date of this release. 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 change in
events, conditions or circumstances on which any such statement is
based.
Balance Sheets, Statements of Operations and Statements of
Cash Flows
The consolidated balance sheets, statements of operations and
statements of cash flows of Liberty Global are in our 10-K.
Rebase Information
For purposes of calculating rebased growth rates on a comparable
basis for all businesses that we owned during 2018, we have
adjusted our historical revenue and OCF for the three months and
year ended December 31, 2017 to (i) include the pre-acquisition
revenue and OCF of entities acquired during 2018 and 2017 in our
rebased amounts for the three months and year ended December 31,
2017 to the same extent that the revenue and OCF of these entities
are included in our results for the three months and year ended
December 31, 2018, (ii) exclude the revenue and OCF of UPC Austria
to the same extent that the revenue and OCF of UPC Austria is
excluded from our results for the three months and year ended
December 31, 2018, and to exclude the revenue and OCF of entities
disposed of during 2017, (iii) include revenue for the temporary
elements of transition and other services provided to the
VodafoneZiggo JV, Deutsche Telekom (the buyer of UPC Austria) and
Liberty Latin America, to reflect amounts related to these services
equal to those included in our results for the three months and
year ended December 31, 2018, (iv) reflect the January 1, 2018
adoption of the new revenue recognition standard (ASU 2014-09,
Revenue from Contracts with Customers) as if such adoption had
occurred on January 1, 2017 and (v) reflect the translation of our
rebased amounts for the three months and year ended December 31,
2017 at the applicable average foreign currency exchange rates that
were used to translate our results for the three months and year
ended December, 2018. We have reflected the revenue and OCF of
these acquired entities in our 2017 rebased amounts based on what
we believe to be the most reliable information that is currently
available to us (generally pre-acquisition financial statements),
as adjusted for the estimated effects of (a) any significant
differences between U.S. GAAP and local generally accepted
accounting principles, (b) any significant effects of acquisition
accounting adjustments, (c) any significant differences between our
accounting policies and those of the acquired entities and (d)
other items we deem appropriate. We do not adjust pre-acquisition
periods to eliminate nonrecurring items or to give retroactive
effect to any changes in estimates that might be implemented during
post-acquisition periods. As we did not own or operate the acquired
businesses during the pre-acquisition periods, no assurance can be
given that we have identified all adjustments necessary to present
the revenue and OCF of these entities on a basis that is comparable
to the corresponding post-acquisition amounts that are included in
our historical results or that the pre-acquisition financial
statements we have relied upon do not contain undetected errors.
The adjustments reflected in our rebased amounts have not been
prepared with a view towards complying with Article 11 of
Regulation S-X. In addition, the rebased growth percentages are not
necessarily indicative of the revenue and OCF that would have
occurred if these transactions had occurred on the dates assumed
for purposes of calculating our rebased amounts or the revenue and
OCF that will occur in the future. The rebased growth percentages
have been presented as a basis for assessing growth rates on a
comparable basis, and are not presented as a measure of our pro
forma financial performance.
The following table provides adjustments made to the 2017
amounts to derive our rebased growth rates:
Revenue OCF
Three monthsendedDecember
31,
Year endedDecember 31,
Three monthsendedDecember
31,
Year endedDecember 31,
2017 2017 2017 2017 in millions
Continuing operations: Acquisitions $ 18.6 $ 75.8 $ 2.9 $ 25.2
Revenue Recognition (ASU 2014-09) (3.9 ) (21.5 ) (7.6 ) (31.9 )
Dispositions(i) (0.3 ) (21.1 ) 8.0 (1.2 ) Foreign Currency (89.2 )
396.5 (35.0 ) 159.5 Total increase (decrease) $ (74.8
) $ 429.7 $ (31.7 ) $ 151.6 Discontinued
European Operations: Revenue Recognition (ASU 2014-09) $ (2.3 ) $
(17.3 ) $ (2.2 ) $ (12.0 ) Dispositions (101.0 ) (169.0 ) (56.8 )
(94.4 ) Foreign Currency (35.2 ) 163.2 (22.9 ) 91.2
Total decrease $ (138.5 ) $ (23.1 ) $ (81.9 ) $ (15.2 ) Full
Company: Acquisitions $ 18.6 $ 75.8 $ 2.9 $ 25.2 Revenue
Recognition (ASU 2014-09) (6.2 ) (38.8 ) (9.8 ) (43.9 )
Dispositions(i) (101.3 ) (190.1 ) (48.8 ) (95.6 ) Foreign Currency
(124.4 ) 559.7 (57.9 ) 250.7 Total increase
(decrease) $ (213.3 ) $ 406.6 $ (113.6 ) $ 136.4 (i)
Includes rebase adjustments related to agreements to provide
transitional and other services to the VodafoneZiggo JV, Liberty
Latin America and UPC Austria. These adjustments result in an equal
amount of fees in both the 2018 and 2017 periods for those services
that are deemed to be temporary in nature. The net amount of these
adjustments resulted in increases in revenue and OCF of $8.4
million and $9.1 million, respectively, for the three months ended
December 31, 2017 and $8.0 million and $6.9 million, respectively,
for the full year ended December 31, 2017.
Summary of Debt, Capital Lease Obligations & Cash and
Cash Equivalents
The following table(i) details the U.S. dollar equivalent
balances of the outstanding principal amount of our continuing
operations debt, capital lease obligations and cash and cash
equivalents at December 31, 2018:
Capital Debt
& Capital Cash Lease
Lease and Cash
Debt(ii),(iii)
Obligations Obligations Equivalents in
millions Liberty Global and unrestricted subsidiaries $ 1,553.2
$ 47.1 $ 1,600.3 $ 1,344.0 Virgin Media(iv) 15,809.4 69.1 15,878.5
21.2 UPC Holding 5,988.5 29.9 6,018.4 14.8 Telenet 5,964.2
475.2 6,439.4 100.5 Total $ 29,315.3 $ 621.3
$ 29,936.6 $ 1,480.5
______________________________
(i) Except as otherwise indicated, the amounts reported in
the table include the named entity and its subsidiaries. (ii) Debt
amounts for UPC Holding and Telenet include notes issued by special
purpose entities that are consolidated by the respective
subsidiary. (iii) Debt amounts for UPC Holding include those
amounts that are not a direct obligation of the entities to be
disposed within the UPC Holding borrowing group. Certain of these
obligations have been or are expected to be repaid with portions of
the proceeds from the disposition of UPC Austria and the Vodafone
Disposal Group. (iv) The Virgin Media borrowing group includes
certain subsidiaries of Virgin Media, but excludes the parent
entity, Virgin Media Inc. The cash and cash equivalents amount
includes cash and cash equivalents held by the Virgin Media
borrowing group, but excludes cash and cash equivalents held by
Virgin Media Inc. This amount is included in the amount shown for
Liberty Global and unrestricted subsidiaries.
Property and Equipment Additions and Capital
Expenditures
The tables below highlight the categories of the property and
equipment additions for the indicated periods and reconcile those
additions to the capital expenditures that are presented in the
consolidated statements of cash flows in our 10-K.
Three months ended December 31, 2018
2017 2018
2017 2018 2017
Continuingoperations
DiscontinuedEuropean
Operations
Full Company in millions, except % amounts Customer
premises equipment $ 202.1 $ 192.4 $ 38.8 $ 65.9 $ 240.9 $ 258.3
New Build & Upgrade 166.4 255.8 71.2 83.2 237.6 339.0 Capacity
128.5 150.3 37.0 40.6 165.5 190.9 Baseline 291.2 239.8 38.8 55.0
330.0 294.8 Product & Enablers 183.2 266.7 45.9
38.7 229.1 305.4 Total P&E Additions 971.4
1,105.0 $ 231.7 $ 283.4 $ 1,203.1 $ 1,388.4
Reconciliation of P&E Additions to capital expenditures: Assets
acquired under capital-related vendor financing arrangements(i)
(519.2 ) (601.9 ) Assets acquired under capital leases (34.6 )
(29.6 ) Changes in current liabilities related to capital
expenditures (103.2 ) (69.7 ) Total capital expenditures, net(ii) $
314.4 $ 403.8 Capital expenditures, net:
Third-party payments $ 340.8 $ 451.6 Proceeds received for
transfers to related parties(iii) (26.4 ) (47.8 ) Total capital
expenditures, net $ 314.4 $ 403.8 P&E
Additions as % of revenue5 32.9 % 37.0 %
Year ended December 31, 2018
2017 2018 2017
2018 2017
Continuingoperations
DiscontinuedEuropean
Operations
Full Company in millions, except % amounts Customer
premises equipment $ 930.3 $ 851.3 $ 243.3 $ 310.1 $ 1,173.6 $
1,161.4 New Build & Upgrade 698.1 864.5 289.8 293.5 987.9
1,158.0 Capacity 434.3 512.9 129.6 113.0 563.9 625.9 Baseline 922.4
747.0 185.0 196.7 1,107.4 943.7 Product & Enablers 720.5
727.8 131.3 148.0 851.8 875.8 Total
P&E Additions 3,705.6 3,703.5 $ 979.0 $ 1,061.3 $
4,684.6 $ 4,764.8 Reconciliation of P&E Additions to
capital expenditures: Assets acquired under capital-related vendor
financing arrangements(i) (2,175.5 ) (2,336.2 ) Assets acquired
under capital leases (102.4 ) (106.7 ) Changes in current
liabilities related to capital expenditures 25.3 (10.6 )
Total capital expenditures, net(ii) $ 1,453.0 $ 1,250.0
Capital expenditures, net: Third-party payments $
1,552.7 $ 1,586.5 Proceeds received for transfers to related
parties(iii) (99.7 ) (336.5 ) Total capital expenditures, net $
1,453.0 $ 1,250.0 P&E Additions as % of
revenue5 31.0 % 32.9 %
______________________________
(i) Amounts exclude related VAT of $80 million and $102
million during the three months ended December 31, 2018 and 2017,
respectively, and $347 million and $387 million during the full
year ended December 31, 2018 and 2017, respectively, that were also
financed by our vendors under these arrangements. (ii) The capital
expenditures that we report in our consolidated statements of cash
flows do not include amounts that are financed under vendor
financing or capital lease arrangements. Instead, these
expenditures are reflected as non-cash additions to our property
and equipment when the underlying assets are delivered, and as
repayments of debt when the related principal is repaid. (iii)
Primarily relates to transfers of centrally-procured property and
equipment to our discontinued operations and the VodafoneZiggo JV.
ARPU per Cable Customer Relationship
The following table provides ARPU per cable customer
relationship for the indicated periods:
Three months ended December 31,
% Rebased 2018
20175 Change % Change Liberty
Global $ 60.18 $ 60.81 (1.0 %) 2.0 % U.K. & Ireland (Virgin
Media) £ 51.71 £ 50.73 1.9 % 2.0 % Belgium (Telenet) € 57.11 €
55.18 3.5 % 3.5 % UPC € 37.57 € 37.63 (0.2 %) (1.3 %)
Mobile ARPU
The following tables provide ARPU per mobile subscriber for the
indicated periods:
ARPU per Mobile Subscriber Three months
ended December 31, %
Rebased 2018 20175
Change % Change Liberty Global: Including
interconnect revenue $ 18.19 $ 19.95 (8.8 %) (1.4 %) Excluding
interconnect revenue $ 14.49 $ 15.68 (7.6 %) (1.3 %)
Consolidated Operating Data — December 31, 2018
Video
HomesPassed
Two-wayHomesPassed
CableCustomerRelationships
Basic
VideoSubscribers(i)
EnhancedVideoSubscribers
DTHSubscribers
TotalVideo
InternetSubscribers(ii)
TelephonySubscribers(iii)
TotalRGUs
Total
MobileSubscribers(iv)
Continuing operations: U.K. 14,417,300 14,410,300
5,509,400 — 3,872,000 — 3,872,000 5,224,600 4,571,200 13,667,800
3,039,500 Belgium 3,350,700 3,350,700 2,115,000 201,200 1,738,700 —
1,939,900 1,657,800 1,256,100 4,853,800 2,731,000 Switzerland(v)
2,338,200 2,338,200 1,115,800 437,200 645,800 — 1,083,000 700,300
519,600 2,302,900 146,300 Ireland 923,000 890,500 437,200 4,500
266,600 — 271,100 375,700 352,300 999,100 81,500 Poland 3,463,800
3,408,900 1,447,800 180,500 1,042,700 — 1,223,200 1,175,200 654,300
3,052,700 3,200 Slovakia 613,900 599,100 194,100
27,700 142,300 — 170,000 136,800
84,400 391,200 —
Total continuing
operations 25,106,900 24,997,700
10,819,300 851,100 7,708,100
— 8,559,200 9,270,400
7,437,900 25,267,500
6,001,500 Discontinued European
Operations: Germany 13,136,200 13,060,200 7,175,900 4,675,500
1,607,500 — 6,283,000 3,615,500 3,380,800 13,279,300 283,300
Romania 3,153,800 3,118,000 965,900 222,000 698,600 — 920,600
592,400 573,300 2,086,300 — Hungary 1,828,000 1,810,600 862,900
68,300 623,600 — 691,900 694,400 677,100 2,063,400 109,900 Czech
Republic 1,549,100 1,529,300 616,400 170,300 369,200 — 539,500
506,100 194,000 1,239,600 — DTH — — 780,800 —
— 780,800 780,800 11,200 11,200
803,200 —
Total Discontinued European
Operations 19,667,100 19,518,100
10,401,900 5,136,100 3,298,900
780,800 9,215,800
5,419,600 4,836,400 19,471,800
393,200 Subscriber Variance
Table - December 31, 2018 vs September 30, 2018
Video
HomesPassed
Two-wayHomesPassed
CableCustomerRelationships
Basic
VideoSubscribers(i)
EnhancedVideoSubscribers
DTHSubscribers
TotalVideo
InternetSubscribers(ii)
TelephonySubscribers(iii)
TotalRGUs
Total
MobileSubscribers(iv)
Continuing operations: U.K. 92,700 97,500 9,500 —
(29,400 ) — (29,400 ) 21,700 30,500 22,800 8,300 Belgium 9,000
9,000 (20,700 ) (8,500 ) (17,800 ) — (26,300 ) (8,700 ) (19,400 )
(54,400 ) 1,900 Switzerland(v) 10,600 10,600 (32,000 ) (20,600 )
(10,900 ) — (31,500 ) (12,100 ) (5,000 ) (48,600 ) 8,500 Ireland
10,900 11,500 (500 ) (2,000 ) 2,400 — 400 600 (300 ) 700 9,100
Poland 33,000 33,700 16,900 800 9,600 — 10,400 21,700 10,400 42,500
(100 ) Slovakia 2,100 2,100 700 600 900
— 1,500 1,600 1,400 4,500
—
Total continuing operations 158,300
164,400 (26,100 ) (29,700
) (45,200 ) — (74,900
) 24,800 17,600 (32,500
) 27,700 Discontinued
European Operations: Germany 53,000 53,200 — 1,500 (19,700 ) —
(18,200 ) 41,700 41,500 65,000 (2,200 ) Romania 7,400 7,500 (9,200
) (14,300 ) 6,000 — (8,300 ) (500 ) 5,500 (3,300 ) — Hungary 11,400
11,500 4,300 (4,500 ) 6,800 — 2,300 6,300 11,600 20,200 6,600 Czech
Republic 5,300 5,400 600 (2,300 ) 5,000 — 2,700 2,800 9,300 14,800
— DTH — — 6,600 — — 6,600
6,600 200 200 7,000 —
Total
Discontinued European Operations 77,100
77,600 2,300 (19,600 )
(1,900 ) 6,600 (14,900 )
50,500 68,100 103,700
4,400 Subscriber Variance
Table - December 31, 2018 vs September 30, 2018
Video
HomesPassed
Two-wayHomesPassed
CableCustomerRelationships
Basic
VideoSubscribers(i)
EnhancedVideoSubscribers
TotalVideo
InternetSubscribers(ii)
TelephonySubscribers(iii)
TotalRGUs
Total
MobileSubscribers(iv)
Organic Change
Summary:
U.K. 92,700 97,500 9,500 — (29,400 ) (29,400 ) 21,700 30,500 22,800
8,300 Belgium 9,000 9,000 (20,700 ) (8,500 ) (17,800 ) (26,300 )
(8,700 ) (19,400 ) (54,400 ) 1,900 Other Europe 56,600
57,900 (14,900 ) (21,200 ) 2,000 (19,200 ) 11,800
6,500 (900 ) 17,500 Total Organic Change 158,300
164,400 (26,100 ) (29,700 ) (45,200 ) (74,900 )
24,800 17,600 (32,500 ) 27,700
Footnotes for Consolidated Operating
Data and Subscriber Variance Tables
(i) We have approximately 194,600 “lifeline” customers that
are counted on a per connection basis, representing the least
expensive regulated tier of video cable service, with only a few
channels. (ii) In Switzerland, we offer a 2 Mbps internet service
to our Basic and Enhanced Video Subscribers without an incremental
recurring fee. Our Internet Subscribers in Switzerland include
76,300 subscribers who have requested and received this service.
(iii) In Switzerland, we offer a basic phone service to our Basic
and Enhanced Video Subscribers without an incremental recurring
fee. Our Telephony Subscribers in Switzerland include 149,500
subscribers who have requested and received this service. (iv) In a
number of countries, our mobile subscribers receive mobile services
pursuant to prepaid contracts. As of December 31, 2018, our mobile
subscriber count included 489,400 and 376,700 prepaid mobile
subscribers in Belgium and the U.K., respectively. (v) Pursuant to
service agreements, Switzerland offers enhanced video, broadband
internet and telephony services over networks owned by third-party
cable operators (“partner networks”). A partner network RGU is only
recognized if there is a direct billing relationship with the
customer. At December 31, 2018, Switzerland’s partner networks
account for 126,200 Cable Customer Relationships, 298,400 RGUs,
which include 107,000 Enhanced Video Subscribers, 109,000 Internet
Subscribers, and 82,400 Telephony Subscribers. Subscribers to our
enhanced video services provided over partner networks receive
basic video services from the partner networks as opposed to our
operations. Due to the fact that we do not own these partner
networks, we do not report homes passed for Switzerland’s partner
networ ks.
Additional General Notes to
Tables:
Most of our broadband communications subsidiaries provide
telephony, broadband internet, data, video or other B2B services.
Certain of our B2B revenue is derived from SOHO subscribers that
pay a premium price to receive enhanced service levels along with
video, internet or telephony services that are the same or similar
to the mass marketed products offered to our residential
subscribers. All mass marketed products provided to SOHOs, whether
or not accompanied by enhanced service levels and/or premium
prices, are included in the respective RGU and customer counts of
our broadband communications operations, with only those services
provided at premium prices considered to be “SOHO RGUs” or “SOHO
customers.” To the extent our existing customers upgrade from a
residential product offering to a SOHO product offering, the number
of SOHO RGUs or SOHO customers will increase, but there is no
impact to our total RGU or customer counts. With the exception of
our B2B SOHO subscribers, we generally do not count customers of
B2B services as customers or RGUs for external reporting
purposes.
In Germany, homes passed reflect the footprint and two-way homes
passed reflect the technological capability of our network up to
the street cabinet, with drops from the street cabinet to the
building generally added, and in-home wiring generally upgraded, on
an as needed or success-based basis. In Belgium, Telenet leases a
portion of its network under a long-term capital lease arrangement.
These tables include operating statistics for Telenet's owned and
leased networks.
While we take appropriate steps to ensure that subscriber
statistics are presented on a consistent and accurate basis at any
given balance sheet date, the variability from country to country
in (i) the nature and pricing of products and services, (ii) the
distribution platform, (iii) billing systems, (iv) bad debt
collection experience and (v) other factors add complexity to the
subscriber counting process. We periodically review our subscriber
counting policies and underlying systems to improve the accuracy
and consistency of the data reported on a prospective basis.
Accordingly, we may from time to time make appropriate adjustments
to our subscriber statistics based on those reviews.
Subscriber information for acquired entities is preliminary and
subject to adjustment until we have completed our review of such
information and determined that it is presented in accordance with
our policies.
Footnotes
1 Based on December 31, 2018 balances and including certain
other debt items, including vendor financing and capital leases. 2
Convenience translation based on USD/CHF spot rate of 1.00. 3 The
term "Full Company" includes our continuing operations and our
Discontinued European Operations, which is the basis (i) on which
analyst consensus estimates for our key performance indicators are
currently derived and on which we originally provided our 2018
guidance for OCF, Adjusted FCF and Property and Equipment Additions
and (ii) that we use to calculate our respective leverage ratios
for debt covenant compliance purposes. We present OCF, Adjusted FCF
and Property and Equipment Additions on a Full Company basis in
order to allow readers to track our performance against analyst
consensus estimates and our original 2018 guidance, as applicable.
4 On December 29, 2017, the former LiLAC Group was split-off into a
separate public company. On May 9, 2018, we agreed to sell our
operations in Germany, Hungary, Romania and the Czech Republic and
on December 21, 2018, we agreed to sell the operations of UPC DTH.
On July 31, 2018, we sold our operations in Austria. As a result of
the foregoing, the former LiLAC Group and our operations in
Germany, Austria, Hungary, Romania, the Czech Republic and UPC DTH
have all been accounted for as discontinued operations in our 10-K.
Unless otherwise indicated, the information in this release relates
only to our continuing operations. For additional information
regarding our discontinued operations, see note 6 to the
consolidated financial statements included in our 10-K. 5 Effective
January 1, 2018, we adopted Accounting Standards Update No.
2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), on
a prospective basis. All applicable 2017 amounts in this release
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. In addition, on January 1, 2018, we adopted ASU No.
2017-07, Improving the Presentation of Net Periodic Pension Cost
and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”) on a
retrospective basis. Accordingly, the operating income and OCF
amounts for the 2017 periods in this release have been
retrospectively revised to reflect the impact of ASU 2017-07. For
additional information regarding these accounting changes, see note
2 to the consolidated financial statements included in our 10-K. 6
Reflects estimated cash proceeds, as of announcement date of the
respective transactions, from pending disposals to Vodafone
($12.1bn), Sunrise ($2.6bn) and M7 ($0.2bn) (at December 31, 2018
fx rates) and $1.1bn from the already closed UPC Austria disposal,
after the repayment of debt that we attributed to UPC Austria. 7
The indicated growth rates are rebased for acquisitions,
dispositions, FX and other items that impact the comparability of
our year-over-year results. Please see Rebase Information for
information on rebased growth. 8 Absolute 2018 U.S. dollar guidance
figures based on FX rates as of February 13, 2018; EUR/USD 1.23;
USD/GBP 1.38. 9 Represents our fair value and equity method
investments (excluding the VodafoneZiggo JV) at December 31, 2018,
adjusted for the value of our share collars on Lionsgate and ITV
plc. 10 Includes subscription and non-subscription revenue. For
additional information regarding how we define our revenue
categories, see note 19 to the consolidated financial statements
included in our 10-K. 11 Total B2B includes subscription (SOHO) and
non-subscription revenue. B2B and SOHO growth rates include upsell
from our residential businesses. 12 Liquidity refers to cash and
cash equivalents plus the maximum undrawn commitments under
subsidiary borrowing facilities, without regard to covenant
compliance calculations.
13
Consistent with how we calculate our
leverage ratios under our debt agreements, we calculate our debt
ratios on a Full Company basis, with the gross and net debt ratios
defined as total debt and net debt, respectively, divided by
annualized OCF of the latest quarter. Net debt is defined as total
debt less cash and cash equivalents. For purposes of these
calculations, debt is measured using swapped foreign currency
rates, consistent with the covenant calculation requirements of our
subsidiary debt agreements, and excludes the loans backed or
secured by the shares we hold in ITV plc and Lions Gate
Entertainment Corp. We have not presented leverage ratios on a
continuing operations basis as we believe that such a presentation
would overstate our leverage and would not be representative of the
actual leverage ratios that we will report once all dispositions
are completed. This is due to the fact that our continuing
operations exclude all of the OCF of the entities to be disposed
but include a portion of the debt that we expect to repay with the
proceeds from such dispositions. For additional information, see
the details of our pro forma Adjusted FCF within the Glossary and
note 6 to the consolidated financial statements included in our
10-K.
The following table details the calculation of our Full Company
consolidated debt and net debt to annualized consolidated OCF
ratios as of and for the quarter ended December 31, 2018:
As of and for thequarter
endedDecember 31, 2018
in millions, except ratios Consolidated Debt to
Annualized Consolidated OCF: Debt and capital lease obligations
before deferred financing costs, discounts and premiums $ 39,876.2
Principal related projected derivative cash payments (1,433.7 ) ITV
Collar Loan (1,379.6 ) Lionsgate Collar Loan (82.9 ) Adjusted debt
and capital lease obligations before deferred financing costs,
discounts and premiums $ 36,980.0 Annualized
quarterly OCF $ 7,422.8 Consolidated debt to annualized
consolidated OCF ratio 5.0
Consolidated Net Debt to
Annualized Consolidated OCF: Adjusted debt and capital lease
obligations before deferred financing costs, discounts and premiums
$ 36,980.0 Cash and cash equivalents (1,486.7 ) Adjusted net debt
and capital lease obligations before deferred financing costs,
discounts and premiums $ 35,493.3 Annualized
quarterly OCF $ 7,422.8 Consolidated net debt to annualized
consolidated OCF ratio 4.8 14 For purposes of
calculating our average tenor, total third-party debt excludes
vendor financing. 15 Our aggregate unused borrowing capacity of
$2.5 billion represents the maximum undrawn commitments under the
applicable facilities of our continuing operations without regard
to covenant compliance calculations. Upon completion of the
relevant December 31, 2018 compliance reporting requirements for
our credit facilities, and assuming no further changes from
quarter-end borrowing levels, we anticipate that the borrowing
capacity of our continuing operations will continue to be $2.5
billion.
Glossary
10-Q or 10-K: As used herein, the
terms 10-Q and 10-K refer to our most recent quarterly or annual
report as filed with the Securities and Exchange Commission on Form
10-Q or Form 10-K, as applicable.
Adjusted Free Cash Flow (FCF): net
cash provided by our operating activities, plus (i) cash payments
for third-party costs directly associated with successful and
unsuccessful acquisitions and dispositions and (ii) expenses
financed by an intermediary, less (a) capital expenditures, as
reported in our consolidated statements of cash flows, (b)
principal payments on amounts financed by vendors and
intermediaries and (c) principal payments on capital leases
(exclusive of the portions of the network lease in Belgium and the
duct leases in Germany that we assumed in connection with certain
acquisitions), with each item excluding any cash provided or used
by our discontinued operations. We believe that our presentation of
Adjusted Free Cash Flow provides useful information to our
investors because this measure can be used to gauge our ability to
service debt and fund new investment opportunities. Adjusted Free
Cash Flow should not be understood to represent our ability to fund
discretionary amounts, as we have various mandatory and contractual
obligations, including debt repayments, which are not deducted to
arrive at this amount. Investors should view Adjusted Free Cash
Flow as a supplement to, and not a substitute for, U.S. GAAP
measures of liquidity included in our consolidated statements of
cash flows.
The following table provides a reconciliation of our net cash
provided by operating activities from continuing operations to
Adjusted Free Cash Flow for the indicated periods. In addition, in
order to provide information regarding the changes to our Adjusted
Free Cash Flow that we expect will occur following the sale of the
Discontinued European Operations, we also present Adjusted Free
Cash Flow on a pro forma basis for three months and year ended
December 31, 2018 as if the sale of the Discontinued European
Operations had been completed on January 1, 2018.
Three months ended December 31, 2018
2017(i) 2018
2017(i) 2018
2017(i)
Continuingoperations
Discontinued
EuropeanOperations
Full Company in millions Net cash provided by
operating activities of our continuing operations $ 1,277.5 $
1,003.1 $ 485.2 $ 489.8 $ 1,762.7 $ 1,492.9 Cash payments for
direct acquisition and disposition costs 9.0 1.8 0.1 — 9.1 1.8
Expenses financed by an intermediary(ii) 459.8 391.3 136.5 48.5
596.3 439.8 Capital expenditures, net (314.5 ) (403.7 ) (128.2 )
(172.0 ) (442.7 ) (575.7 ) Principal payments on amounts financed
by vendors and intermediaries (340.0 ) (387.6 ) (155.7 ) (108.9 )
(495.7 ) (496.5 ) Principal payments on certain capital leases
(13.9 ) (17.2 ) (2.9 ) (2.7 ) (16.8 ) (19.9 ) Adjusted FCF 1,077.9
$ 587.7 $ 335.0 $ 254.7 $ 1,412.9 $
842.4 Pro forma adjustments for sale of the
Discontinued European Operations related to: Interest and
derivative payments(iii) 4.1 Transition services agreements(iv)
39.8 Pro forma Adjusted FCF(v) $ 1,121.8
Year ended December 31, 2018
2017(i) 2018
2017(i) 2018
2017(i) Continuing operations
DiscontinuedEuropean
Operations
Full company in millions Net cash provided by
operating activities of our continuing operations $ 3,985.0 $
3,442.7 $ 1,978.1 $ 1,691.5 $ 5,963.1 $ 5,134.2 Cash payments for
direct acquisition and disposition costs 23.0 8.7 0.1 — 23.1 8.7
Expenses financed by an intermediary(ii) 1,883.7 1,343.9 392.1
163.0 2,275.8 1,506.9 Capital expenditures, net (1,453.0 ) (1,250.0
) (517.2 ) (703.1 ) (1,970.2 ) (1,953.1 ) Principal payments on
amounts financed by vendors and intermediaries (4,258.0 ) (2,721.5
) (551.6 ) (337.8 ) (4,809.6 ) (3,059.3 ) Principal payments on
certain capital leases (72.9 ) (78.6 ) (12.1 ) (8.0 ) (85.0 ) (86.6
) Adjusted FCF 107.8 $ 745.2 $ 1,289.4 $ 805.6
$ 1,397.2 $ 1,550.8
Pro forma adjustments for sale of
Discontinued European Operations related to:
Interest and derivative payments(iii) 91.7 Transition services
agreements(iv) 189.2 Pro forma Adjusted FCF(v) $ 388.7
_______________
(i) Adjusted free cash flow for the three months and year
ended December 30, 2017 has been restated to reflect our January 1,
2018 adoption of ASU 2016-18, Restricted Cash. (ii) For purposes of
our consolidated statements of cash flows, expenses financed by an
intermediary are treated as hypothetical operating cash outflows
and hypothetical financing cash inflows when the expenses are
incurred. When we pay the financing intermediary, we record
financing cash outflows in our consolidated statements of cash
flows. For purposes of our Adjusted Free Cash Flow definition, we
add back the hypothetical operating cash outflow when these
financed expenses are incurred and deduct the financing cash
outflows when we pay the financing intermediary. (iii) No debt,
interest expense or derivative instruments of the UPC Holding
borrowing group, other than with respect to certain borrowings that
are direct obligations of the entities to be disposed, has been
allocated to discontinued operations in the consolidated financial
statements that are included in our 10-K. Notwithstanding the
foregoing, we expect to use proceeds from the dispositions of the
Vodafone Disposal Group and UPC DTH, and have used proceeds from
the July 31, 2018 sale of UPC Austria, to repay debt of the UPC
Holding borrowing group to the extent necessary to maintain a
leverage ratio that is approximately four to five times UPC
Holding's Covenant EBITDA. As a result, this pro forma adjustment
represents the estimated interest and related derivative payments
that would not have been made by UPC Holding if the sale of the
Discontinued European Operations had been completed on January 1,
2018. These estimated payments are calculated based on the
Discontinued European Operation's pro rata share of UPC Holding's
OCF and UPC Holding's aggregate interest and derivative payments
during the applicable period. Although we believe that these
estimated payments represent a reasonable estimate of the reduction
in annual interest and related derivative payments that will occur
as a result of the sale of the Discontinued European Operations, no
assurance can be given that the actual debt repayments will result
in reductions equivalent to the amounts presented. No pro forma
adjustments are required with respect to Unitymedia's interest and
derivative payments as substantially all of Unitymedia’s debt and
related derivative instruments are direct obligations of entities
within the Vodafone Disposal Group. As a result, the interest and
related derivative payments associated with such debt and
derivative instruments of Unitymedia are included in discontinued
operations . (iv) Represents our preliminary estimate of the net
cash flows that we would have received from transition services
agreements if the sale of the Discontinued European Operations had
occurred on January 1, 2018. The estimated net cash flows are based
on the estimated revenue that we expect to recognize from our
transition services agreements during the first 12 months following
the completion of the sale of the Discontinued European Operations,
less the estimated incremental costs that we expect to incur to
provide such transition services. (v) Represents the Adjusted FCF
that we estimate would have resulted if the sale of the
Discontinued European Operations had been completed on January 1,
2018. Actual amounts may differ from the amounts assumed for
purposes of this pro forma calculation. For example, our Pro forma
Adjusted FCF does not include any future benefits related to
reductions in our corporate costs as a result of our operating
model rationalization or any other potential future operating or
capital cost reductions attributable to our continuing or
discontinued operations.
ARPU: Average Revenue Per Unit is
the average monthly subscription revenue per average cable customer
relationship or mobile subscriber, as applicable. Following the
adoption of ASU 2014-09, subscription revenue excludes interconnect
fees, channel carriage fees, mobile handset sales and late fees,
but includes the amortization of installation fees. Prior to the
adoption of ASU 2014-09, installation fees were excluded from
subscription revenue. ARPU per average cable customer relationship
is calculated by dividing the average monthly subscription revenue
from residential cable and SOHO services by the average number of
cable customer relationships for the period. ARPU per average
mobile subscriber is calculated by dividing residential mobile and
SOHO revenue for the indicated period by the average number of
mobile subscribers for the period. Unless otherwise indicated, ARPU
per cable customer relationship or mobile subscriber is not
adjusted for currency impacts. ARPU per RGU refers to average
monthly revenue per average RGU, which is calculated by dividing
the average monthly subscription revenue from residential and SOHO
services for the indicated period, by the average number of the
applicable RGUs for the period. Unless otherwise noted, ARPU in
this release is considered to be ARPU per average cable customer
relationship or mobile subscriber, as applicable. Cable customer
relationships, mobile subscribers and RGUs of entities acquired
during the period are normalized. In addition, for purposes of
calculating the percentage change in ARPU on a rebased basis, we
adjust the prior-year subscription revenue, cable customer
relationships, mobile subscribers and RGUs, as applicable, to
reflect acquisitions, dispositions, FX and the January 1, 2018
adoption of the new revenue recognition standard (ASU 2014-09,
Revenue from Contracts with Customers) on a comparable basis with
the current year, consistent with how we calculate our rebased
growth for revenue and OCF, as further described in the body of
this release.
ARPU per Mobile Subscriber: Our
ARPU per mobile subscriber calculation that excludes interconnect
revenue refers to the average monthly mobile subscription revenue
per average mobile subscriber and is calculated by dividing the
average monthly mobile subscription revenue (excluding handset
sales and late fees) for the indicated period, by the average of
the opening and closing balances of mobile subscribers in service
for the period. Our ARPU per mobile subscriber calculation that
includes interconnect revenue increases the numerator in the
above-described calculation by the amount of mobile interconnect
revenue during the period.
Basic Video Subscriber: a home,
residential multiple dwelling unit or commercial unit that receives
our video service over our broadband network either via an analog
video signal or via a digital video signal without subscribing to
any recurring monthly service that requires the use of
encryption-enabling technology. Encryption-enabling technology
includes smart cards, or other integrated or virtual technologies
that we use to provide our enhanced service offerings. We count
RGUs on a unique premises basis. In other words, a subscriber
with multiple outlets in one premises is counted as one RGU and a
subscriber with two homes and a subscription to our video service
at each home is counted as two RGUs.
Blended fully-swapped debt borrowing
cost: the weighted average interest rate on our aggregate
variable- and fixed-rate indebtedness (excluding capital leases and
including vendor financing obligations), including the effects of
derivative instruments, original issue premiums or discounts and
commitment fees, but excluding the impact of financing costs.
B2B: Business-to-Business.
Cable Customer Relationships: the
number of customers who receive at least one of our video, internet
or telephony services that we count as RGUs, without regard to
which or to how many services they subscribe. Cable Customer
Relationships generally are counted on a unique premises basis.
Accordingly, if an individual receives our services in two premises
(e.g., a primary home and a vacation home), that individual
generally will count as two Cable Customer Relationships. We
exclude mobile-only customers from Cable Customer
Relationships.
Customer Churn: the rate at which
customers relinquish their subscriptions. The annual rolling
average basis is calculated by dividing the number of disconnects
during the preceding 12 months by the average number of customer
relationships. For the purpose of computing churn, a disconnect is
deemed to have occurred if the customer no longer receives any
level of service from us and is required to return our equipment. A
partial product downgrade, typically used to encourage customers to
pay an outstanding bill and avoid complete service disconnection,
is not considered to be disconnected for purposes of our churn
calculations. Customers who move within our cable footprint and
upgrades and downgrades between services are also excluded from the
disconnect figures used in the churn calculation.
DTH Subscriber: a home, residential
multiple dwelling unit or commercial unit that receives our video
programming broadcast directly via a geosynchronous satellite.
Enhanced Video Subscriber: a home,
residential multiple dwelling unit or commercial unit that receives
our video service over our broadband network or through a partner
network via a digital video signal while subscribing to any
recurring monthly service that requires the use of
encryption-enabling technology. Enhanced Video Subscribers are
counted on a unique premises basis. For example, a subscriber
with one or more set-top boxes that receives our video service in
one premises is generally counted as just one subscriber. An
Enhanced Video Subscriber is not counted as a Basic Video
Subscriber. As we migrate customers from basic to enhanced
video services, we report a decrease in our Basic Video Subscribers
equal to the increase in our Enhanced Video Subscribers.
Homes Passed: homes, residential
multiple dwelling units or commercial units that can be connected
to our networks without materially extending the distribution
plant, except for DTH homes. Certain of our Homes Passed counts are
based on census data that can change based on either revisions to
the data or from new census results. We do not count homes passed
for DTH.
Internet Subscriber: a home,
residential multiple dwelling unit or commercial unit that receives
internet services over our networks, or that we service through a
partner network. Our Internet Subscribers do not include customers
that receive services from dial-up connections.
MDU: Multiple Dwelling Unit.
Mobile Subscriber Count: the number
of active SIM cards in service rather than services provided. For
example, if a mobile subscriber has both a data and voice plan on a
smartphone this would equate to one mobile subscriber.
Alternatively, a subscriber who has a voice and data plan for a
mobile handset and a data plan for a laptop would be counted as two
mobile subscribers. Customers who do not pay a recurring monthly
fee are excluded from our mobile telephony subscriber counts after
periods of inactivity ranging from 30 to 90 days, based on industry
standards within the respective country. In a number of countries,
our mobile subscribers receive mobile services pursuant to prepaid
contracts.
MVNO: Mobile Virtual Network
Operator.
NPS: Net Promoter Score.
OCF: As used herein, OCF has the
same meaning as the term "Adjusted OIBDA" that is referenced in our
10-K. OCF is the primary measure used by our chief operating
decision maker to evaluate segment operating performance. OCF 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, OCF 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 OCF is a
meaningful measure because it represents a transparent view of our
recurring operating performance 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. We
believe our OCF measure is useful to investors because it is one of
the bases for comparing our performance with the performance of
other companies in the same or similar industries, although our
measure may not be directly comparable to similar measures used by
other public companies. OCF should be viewed as a measure of
operating performance that is a supplement to, and not a substitute
for, operating income, net earnings or loss, cash flow from
operating activities and other U.S. GAAP measures of income or cash
flows.
A reconciliation of our operating income to total OCF is
presented in the following table:
Three months ended December 31,
Year ended December 31, 2018
20173 2018 20173
Continuingoperations
FullCompany
Continuingoperations
FullCompany
Continuingoperations
FullCompany
Continuing
operations
FullCompany
in millions Operating income $ 252.4 $ 781.2 $ 145.6
$ 479.5 $ 839.1 $ 2,776.8 $ 760.5 $ 1,886.2 Share-based
compensation expense 75.0 79.5 60.4 63.9 206.0 221.2 162.2 174.0
Depreciation and amortization 924.0 929.1 1,064.0 1,333.7 3,858.2
4,238.0 3,790.6 4,857.0 Impairment, restructuring and other
operating items, net 50.2 65.9 19.5 20.5
248.2 278.3 79.9 107.2 Total OCF $
1,301.6 $ 1,855.7 $ 1,289.5 $ 1,897.6 $
5,151.5 $ 7,514.3 $ 4,793.2 $ 7,024.4
OCF margin: calculated by dividing
OCF by total revenue for the applicable period.
Property and equipment additions (P&E
Additions): includes capital expenditures on an accrual
basis, amounts financed under vendor financing or capital lease
arrangements and other non-cash additions.
RGU: A Revenue Generating Unit is
separately a Basic Video Subscriber, Enhanced Video Subscriber, DTH
Subscriber, Internet Subscriber or Telephony Subscriber. A home,
residential multiple dwelling unit, or commercial unit may contain
one or more RGUs. For example, if a residential customer in our
U.K. market subscribed to our enhanced video service, fixed-line
telephony service and broadband internet service, the customer
would constitute three RGUs. Total RGUs is the sum of Basic Video,
Enhanced Video, DTH, Internet and Telephony Subscribers. RGUs
generally are counted on a unique premises basis such that a given
premises does not count as more than one RGU for any given service.
On the other hand, if an individual receives one of our services in
two premises (e.g., a primary home and a vacation home), that
individual will count as two RGUs for that service. Each bundled
cable, internet or telephony service is counted as a separate RGU
regardless of the nature of any bundling discount or promotion.
Non-paying subscribers are counted as subscribers during their free
promotional service period. Some of these subscribers may choose to
disconnect after their free service period. Services offered
without charge on a long-term basis (e.g., VIP subscribers or free
service to employees) generally are not counted as RGUs. We do not
include subscriptions to mobile services in our externally reported
RGU counts. In this regard, our RGU counts exclude our separately
reported postpaid and prepaid mobile subscribers.
SIM: Subscriber Identification
Module.
SOHO: Small or Home Office
Subscribers.
Telephony Subscriber: a home,
residential multiple dwelling unit or commercial unit that receives
voice services over our networks, or that we service through a
partner network. Telephony Subscribers exclude mobile telephony
subscribers.
Two-way Homes Passed: homes passed
by those sections of our networks that are technologically capable
of providing two-way services, including video, internet and
telephony services.
U.S. GAAP: United States Generally
Accepted Accounting Principles.
YoY: Year-over-year.
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version on businesswire.com: https://www.businesswire.com/news/home/20190227005852/en/
Liberty GlobalInvestor RelationsMatt Coates, +44 20 8483
6333John Rea, +1 303 220 4238Stefan Halters, +1 303 784
4528Corporate CommunicationsMolly Bruce, +1 303 220 4202Matt Beake,
+44 20 8483 6428Corporate Websitewww.libertyglobal.com
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