Item 7. 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 consolidated financial statements, is intended to assist in providing an understanding of our results of operations and financial condition and is organized as follows:
•Overview. This section provides a general description of our business and recent events.
•Results of Operations. This section provides an analysis of our results of operations for the years ended December 31, 2020 and 2019.
•Liquidity and Capital Resources. This section provides an analysis of our corporate and subsidiary liquidity, consolidated statements of cash flows and contractual commitments.
•Critical Accounting Policies, Judgments and Estimates. This section discusses those material accounting policies that involve uncertainties and require significant judgment in their application.
•Quantitative and Qualitative Disclosures about Market Risk. This section provides discussion and analysis of the foreign currency, interest rate and other market risk that our company faces.
Unless otherwise indicated, convenience translations into U.S. dollars are calculated, and operational data is presented, as of December 31, 2020.
Included below is an analysis of our results of operations and cash flows for 2020, as compared to 2019. An analysis of our results of operations and cash flows for 2019, as compared to 2018, can be found under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2019 (our 2019 10-K), which is available through the Securities and Exchange Commission’s website at www.sec.gov.
Overview
General
We are an international provider of broadband internet, video, fixed-line telephony and mobile communications services to residential customers and businesses in Europe. Our operations comprise businesses that provide residential and B2B communications services in (i) the U.K. and Ireland through Virgin Media, (ii) Belgium through Telenet and (iii) Switzerland, Poland and Slovakia through UPC Holding. In addition, we own a 50% noncontrolling interest in the VodafoneZiggo JV, which provides residential and B2B communications services in the Netherlands.
Effective May 7, 2020, in connection with the pending formation of the U.K. JV, we began accounting for the U.K. JV Entities as held for sale. Accordingly, the assets and liabilities of the U.K. JV Entities are included in assets held for sale and liabilities associated with assets held for sale, respectively, on our December 31, 2020 consolidated balance sheet. Consistent with the applicable guidance, we have not reflected similar reclassifications in our consolidated statements of operations or cash flows. For further information regarding the pending formation of the U.K. JV, see note 6 to our consolidated financial statements.
As further described in note 6 to our consolidated financial statements, we completed the sale of (i) our operations in Germany, Romania, Hungary and the Czech Republic (exclusive of our DTH operations) on July 31, 2019 and (ii) the operations of UPC DTH on May 2, 2019. Accordingly, (a) our operations in Germany, Romania, Hungary and the Czech Republic and the operations of UPC DTH are presented as discontinued operations for all applicable periods. 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
Our company delivers market-leading products through next-generation networks that connect our customers to broadband internet, video, fixed-line telephony and mobile services. At December 31, 2020, our consolidated businesses owned and operated networks that passed 26,296,100 homes and served 11,303,000 fixed-line customers and 8,537,600 mobile subscribers.
Broadband internet services. We offer multiple tiers of broadband internet service up to Gigabit speeds depending on location. We continue to invest in new technologies that allow us to increase the internet speeds we offer to our customers.
Video services. We provide video services, including various enhanced products that enable our customers to control when they watch their programming. These products range from digital video recorders to multimedia home gateway systems capable of distributing video, voice and data content throughout the home and to multiple devices.
Fixed-line telephony services. We offer fixed-line telephony services via either voice-over-internet-protocol or “VoIP” technology or circuit-switched telephony, depending on location.
Mobile services. We offer voice and data mobile services, either over our own networks or as an MVNO over third-party networks, depending on location. In addition, we generate revenue from the sale of mobile handsets.
B2B services. Our B2B services include voice, broadband internet, data, video, wireless and cloud services.
Other. We also have significant investments in ITV, Skillz, All3Media, Univision, CANAL+ Polska, EdgeConneX, Lionsgate, the Formula E racing series and several regional sports networks.
For additional information regarding the details of our products and services, see Item 1. Business included in Part I of this Annual Report on Form 10-K.
Strategy and Management Focus
From a strategic perspective, we are seeking to build national fixed-mobile converged communications businesses that have strong prospects for future growth. As discussed further under Liquidity and Capital Resources — Capitalization below, we also seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk.
We strive to achieve organic revenue and customer growth in our operations by developing and marketing bundled entertainment and information and communications services, and extending and upgrading the quality of our networks where appropriate. As we use the term, organic growth excludes foreign currency translation effects (FX) and the estimated impact of acquisitions and dispositions. While we seek to increase our customer base, we also seek to maximize the average revenue we receive from each household by increasing the penetration of our broadband internet, digital video, fixed-line telephony and mobile services with existing customers through product bundling and upselling.
We currently are engaged in certain network extension programs across our footprint, which we collectively refer to as the “Network Extensions.” During 2020, pursuant to the Network Extensions, we connected approximately 561,000 additional residential and commercial premises (excluding upgrades) to our two-way networks, including approximately 426,000 residential and commercial premises connected by Virgin Media in the U.K. and Ireland. We expect to continue the Network Extensions in 2021. Depending on a variety of factors, including the financial and operational results of these programs, the Network Extensions may be continued, modified or cancelled at our discretion.
The capital costs associated with the Network Extensions, which include the costs to build out the networks and the purchase and installation of related customer premises equipment, are expected to decline in 2021 as compared to 2020, but still represent a large portion of our capital costs. For information regarding our expected property and equipment additions during 2021, see Liquidity and Capital Resources — Consolidated Statements of Cash Flows below.
Our assessment of the impacts of the Network Extensions are subject to competitive, economic, regulatory and other factors outside of our control.
Impact of COVID-19
In March 2020, the World Health Organization declared the outbreak of a novel strain of the coronavirus (COVID-19) to be a global pandemic. In response, emergency measures were imposed by governments worldwide, including travel restrictions, restrictions on social activity and the shutdown of non-essential businesses. These measures have adversely impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. In accordance with government mandates or recommended guidelines, as well as our desire to protect the health and safety of our employees, customers and communities, many of our retail stores were temporarily closed in mid-March 2020 and remained closed for up to several months. In addition, on March 16, 2020, most of our office personnel began working remotely, and many continue to do so. We also undertook certain short-term commercial initiatives in response to the pandemic with respect to our product and
service offerings, including (i) free-of-charge speed upgrades for many of our broadband internet customers, (ii) the offering of unlimited minutes to many of our postpaid mobile subscribers, (iii) increases in the number of available kids channels, as well as the offering of several free movies and television series to many of our video subscribers, (iv) modifications to our disconnection policies for non-paying customers, including (a) extended time periods for delinquent accounts before we commence service restrictions or disconnections and (b) the temporary suspension of certain late payment charges, and (v) the temporary pausing of certain sports subscription charges.
The facts and circumstances surrounding the COVID-19 pandemic continue to change rapidly and, accordingly, the ultimate impact that COVID-19 will have on the global economy and our company is highly uncertain and impossible to predict. To date, our company has not experienced an overall material adverse impact from the COVID-19 pandemic, as demand for the products and services that we provide has increased following the stay-at-home and remote work restrictions or recommendations that have been implemented throughout the countries in which we operate. In this regard, we have experienced reductions in our residential churn rates during 2020 in all of our markets. During the period from mid-March through December 31, 2020, certain of our revenue streams were adversely impacted by the COVID-19 pandemic, the most notable of which include (i) lower revenue associated with the loss of exclusive programming content, primarily during the second quarter of 2020, (ii) lower sales of mobile handsets, due largely to the fact that, as discussed above, many of our retail stores were closed for a significant portion of the second quarter, (iii) lower broadcasting revenue in Belgium and Ireland and (iv) lower interconnect and mobile roaming revenue resulting from changes in mobile usage associated with factors such as reduced travel and the use of WiFi alternatives during stay-at-home mandates or recommendations. With respect to our Adjusted EBITDA during this timeframe, the aforementioned revenue declines had a less significant impact, as (a) we received certain credits for content costs and lost revenue associated with the loss of exclusive programming content, which offset the related revenue declines, (b) mobile handset sales generate low margins and (c) the lower interconnect and roaming revenue was largely offset by similar declines in interconnect and roaming expenses. In addition, our Adjusted EBITDA has been positively impacted by various other factors relating to the COVID-19 pandemic, including (1) lower costs associated with customer service and sales and marketing and (2) the benefits to our Adjusted EBITDA related to the aforementioned declines in residential churn rates. In this regard, we estimate that the overall adverse impact of the COVID-19 pandemic on our Adjusted EBITDA during the 2020 was relatively minimal. For additional information regarding the impact of COVID-19 on our results of operations for the year ended December 31, 2020, see Discussion and Analysis of our Reportable Segments below.
Although we have not yet experienced any material adverse impact to cash collections from our residential or B2B customers, the risk that certain customers will be unable to continue to pay for our services in future periods could increase to the extent that the current economic disruption is prolonged.
As our residential and business customers navigate through the COVID-19 pandemic, the connectivity that our broadband networks allow has been essential, and demand for the products and services that we provide has increased. This has resulted in a significant increase in data consumption by our customers, as well as the extension of peak traffic times, which were previously concentrated during evening hours and now span the majority of the day. Notwithstanding these increased traffic levels, our networks have continued to perform exceptionally well, and our technicians have and will continue to work diligently to ensure the reliability of our networks.
As indicated above, the COVID-19 pandemic has caused significant distress in global financial markets that could have an adverse impact on our company. However, we currently believe our financial risks are mitigated by several factors, including the following: (i) our access to our cash and cash equivalents and short-term investments has not been impaired, (ii) we do not currently perceive a significant risk of a credit event that would impair our cash holdings, derivative assets or restrict available credit facilities, (iii) we continue to maintain a strong balance sheet, with over 87% of our debt not due until 2026 or later, (iv) our credit facilities do not contain maintenance-based leverage covenants, with the exception of any revolving facilities that are drawn in excess of 40% of total availability (such revolving facilities were undrawn at December 31, 2020), and (v) our derivative instruments provide protection against adverse changes in financial markets, such as the weakening of the British pound sterling and declines in the value of certain of our fair value investments. In addition, we have implemented enhanced risk monitoring procedures at this time of heightened market volatility.
While it is not currently possible to estimate the duration and severity of the COVID-19 pandemic or the adverse economic impact resulting from the preventative measures taken to contain or mitigate its outbreak, an extended period of global economic disruption could have a material adverse impact on our business, financial condition and results of operations in future periods.
Competition and Other External Factors
We are experiencing competition in all of the markets in which we or our affiliates operate. This competition, together with macroeconomic and regulatory factors, has adversely impacted our revenue, number of customers and/or average monthly subscription revenue per average cable fixed-line customer or mobile subscriber, as applicable (ARPU). For additional information regarding the competition we face, see Item 1. Business - Competition and - Regulatory Matters included in Part I of this Annual Report on Form 10-K. For additional information regarding the revenue impact of changes in the fixed-line customers 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 voters approved, on an advisory basis, an exit from the E.U., commonly referred to as “Brexit.” The U.K. formally exited the E.U. on January 31, 2020, and in December 2020, the U.K. and the E.U. announced a deal for “Trade and Cooperation” agreement. For additional information regarding certain risks to our company associated with Brexit, see Item 1A. Risk Factors included in Part I of this Annual Report on Form 10-K.
For information regarding certain other regulatory developments that could adversely impact our results of operations in future periods, see Legal and Regulatory Proceedings and Other Contingencies - Other Regulatory Matters in note 19 to our consolidated financial statements.
Results of Operations
We have completed a number of transactions that impact the comparability of our 2020 and 2019 results of operations, the most notable of which are the (i) Sunrise Acquisition on November 11, 2020 and (ii) De Vijver Media Acquisition on June 3, 2019. For further information, see note 5 to our 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 FX risk during the three months ended December 31, 2020 was to the British pound sterling, euro and Swiss franc as 47.3%, 30.6% and 18.8% of our reported revenue during the period was derived from subsidiaries whose functional currencies are the British pound sterling, euro and Swiss franc, 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 our foreign currency risks and the applicable foreign currency exchange rates in effect for the periods covered by this Annual Report on Form 10-K, see Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Risk below.
The amounts presented and discussed below represent 100% of each of our consolidated reportable segment’s results of operations. As we have the ability to control Telenet, we consolidate 100% of its revenue and expenses in our 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 consolidated statements of operations.
Discussion and Analysis of our Reportable Segments
General
All of our reportable segments derive their revenue primarily from residential and B2B communications services, including broadband internet, video, 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 20 to our consolidated financial statements. For information regarding the results of operations of the VodafoneZiggo JV, refer to Discussion and Analysis of our Consolidated Operating Results - Share of results of affiliates below.
The tables presented below in this section provide the details of the revenue and Adjusted EBITDA of our consolidated reportable segments for 2020, as compared to 2019. 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. For our organic comparisons, which exclude the impact of FX, we assume that exchange rates remained constant at the prior-period rate during all periods presented. We also provide a table showing the Adjusted EBITDA margins of our consolidated reportable segments for 2020, 2019 and 2018 at the end of this section.
Most of our revenue is derived from jurisdictions that administer VAT or similar revenue-based taxes. Any increases in these taxes could have an adverse impact on our ability to maintain or increase our revenue to the extent that we are unable to pass such tax increases on to our customers. In the case of revenue-based taxes for which we are the ultimate taxpayer, we will also experience increases in our operating costs and expenses and corresponding declines in our Adjusted EBITDA and Adjusted EBITDA margins to the extent of any such tax increases.
We pay interconnection fees to other telephony providers when calls or text messages from our subscribers terminate on another network, and we receive similar fees from such providers when calls or text messages from their customers terminate on our networks or networks that we access through MVNO or other arrangements. The amounts we charge and incur with respect to fixed-line telephony and mobile interconnection fees are subject to regulatory oversight. To the extent that regulatory authorities introduce fixed-line or mobile termination rate changes, we would experience prospective changes and, in very limited cases, we could experience retroactive changes in our interconnect revenue and/or costs. The ultimate impact of any such changes in termination rates on our Adjusted EBITDA would be dependent on the call or text messaging patterns that are subject to the changed termination rates.
We are subject to inflationary pressures with respect to certain costs and foreign currency exchange risk with respect to costs and expenses that are denominated in currencies other than the respective functional currencies of our consolidated reportable segments (non-functional currency expenses). Any cost increases that we are not able to pass on to our subscribers through rate increases would result in increased pressure on our operating margins. For additional information regarding our foreign currency exchange risks see Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Risk below.
Consolidated Adjusted EBITDA is a non-GAAP measure, which we believe 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 readily view operating trends from a consolidated view. Investors should view consolidated Adjusted EBITDA as a supplement to, and not a substitute for, GAAP measures of performance included in our consolidated statements of operations.
The following table provides a reconciliation of loss from continuing operations to Adjusted EBITDA:
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|
|
|
|
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|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
Loss from continuing operations
|
$
|
(1,466.7)
|
|
|
$
|
(1,409.0)
|
|
|
$
|
(1,411.5)
|
|
Income tax expense (benefit)
|
(256.9)
|
|
|
253.0
|
|
|
1,573.3
|
|
Other income, net
|
(76.1)
|
|
|
(114.4)
|
|
|
(43.4)
|
|
Share of results of affiliates, net
|
245.3
|
|
|
198.5
|
|
|
8.7
|
|
Losses on debt extinguishment, net
|
233.2
|
|
|
216.7
|
|
|
65.0
|
|
Realized and unrealized losses (gains) due to changes in fair values of certain investments and debt, net
|
(45.2)
|
|
|
(72.0)
|
|
|
384.5
|
|
Foreign currency transaction losses (gains), net
|
1,416.3
|
|
|
94.8
|
|
|
(90.4)
|
|
Realized and unrealized losses (gains) on derivative instruments, net
|
879.3
|
|
|
192.0
|
|
|
(1,125.8)
|
|
Interest expense
|
1,188.5
|
|
|
1,385.9
|
|
|
1,478.7
|
|
Operating income
|
2,117.7
|
|
|
745.5
|
|
|
839.1
|
|
Impairment, restructuring and other operating items, net
|
98.6
|
|
|
156.0
|
|
|
248.2
|
|
Depreciation and amortization
|
2,331.3
|
|
|
3,652.2
|
|
|
3,858.2
|
|
Share-based compensation expense
|
348.0
|
|
|
305.8
|
|
|
206.0
|
|
Adjusted EBITDA
|
$
|
4,895.6
|
|
|
$
|
4,859.5
|
|
|
$
|
5,151.5
|
|
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 competition in all of our markets. This competition has an adverse impact on our ability to increase or maintain our total number of customers and/or our ARPU.
Variances in the subscription revenue that we receive from our customers are a function of (i) changes in the number of our fixed-line customers 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.
Revenue — 2020 compared to 2019
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|
|
|
|
|
Year ended December 31,
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Increase (decrease)
|
|
Organic
increase (decrease)
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|
2020
|
|
2019
|
|
$
|
|
%
|
|
$
|
|
%
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
6,588.4
|
|
|
$
|
6,600.3
|
|
|
$
|
(11.9)
|
|
|
(0.2)
|
|
|
$
|
(58.1)
|
|
|
(0.9)
|
|
Belgium
|
2,940.9
|
|
|
2,893.0
|
|
|
47.9
|
|
|
1.7
|
|
|
(45.8)
|
|
|
(1.6)
|
|
Switzerland
|
1,573.8
|
|
|
1,258.8
|
|
|
315.0
|
|
|
25.0
|
|
|
(69.4)
|
|
|
(5.5)
|
|
Central and Eastern Europe
|
486.9
|
|
|
475.4
|
|
|
11.5
|
|
|
2.4
|
|
|
16.6
|
|
|
3.5
|
|
Central and Corporate (a)
|
394.4
|
|
|
316.4
|
|
|
78.0
|
|
|
24.7
|
|
|
(10.6)
|
|
|
(3.4)
|
|
Intersegment eliminations
|
(4.3)
|
|
|
(2.4)
|
|
|
(1.9)
|
|
|
N.M.
|
|
(1.9)
|
|
|
N.M.
|
Total
|
$
|
11,980.1
|
|
|
$
|
11,541.5
|
|
|
$
|
438.6
|
|
|
3.8
|
|
|
$
|
(169.2)
|
|
|
(1.5)
|
|
_______________
N.M. — Not Meaningful.
(a)Amounts primarily include revenue earned from transition and other services provided to the VodafoneZiggo JV and various third parties and the sale of customer premises equipment to the VodafoneZiggo JV. For additional information, see notes 6 and 7 to our consolidated financial statements.
U.K./Ireland. The details of the decrease in U.K./Ireland’s revenue during 2020, as compared to 2019, are set forth below:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription
revenue
|
|
Non-subscription
revenue
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
Increase (decrease) in residential cable subscription revenue due to change in:
|
|
|
|
|
|
Average number of customers
|
$
|
7.1
|
|
|
$
|
—
|
|
|
$
|
7.1
|
|
ARPU (a)
|
(64.0)
|
|
|
—
|
|
|
(64.0)
|
|
Increase in residential cable non-subscription revenue
|
—
|
|
|
5.0
|
|
|
5.0
|
|
Total increase (decrease) in residential cable revenue
|
(56.9)
|
|
|
5.0
|
|
|
(51.9)
|
|
Decrease in residential mobile revenue (b)
|
(1.7)
|
|
|
(18.9)
|
|
|
(20.6)
|
|
Increase in B2B revenue (c)
|
14.6
|
|
|
14.5
|
|
|
29.1
|
|
Decrease in other revenue (d)
|
—
|
|
|
(14.7)
|
|
|
(14.7)
|
|
Total organic decrease
|
(44.0)
|
|
|
(14.1)
|
|
|
(58.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of FX
|
32.8
|
|
|
13.4
|
|
|
46.2
|
|
Total
|
$
|
(11.2)
|
|
|
$
|
(0.7)
|
|
|
$
|
(11.9)
|
|
_______________
(a)The decrease in cable subscription revenue related to a change in ARPU was adversely impacted by (i) the COVID-19 pandemic, most notably with respect to video services, including lower revenue of approximately $28 million associated with the loss of exclusive programming content, primarily during the second and third quarters of 2020, comprising (a) credits that were given to certain customers and (b) the estimated impact of certain customers canceling their premium sports subscriptions, and (ii) lower revenue related to regulated contract notifications. For additional information regarding the contract notification requirements, see Legal and Regulatory Proceedings and Other Contingencies - Other Regulatory Matters in note 19 to our consolidated financial statements.
(b)The decrease in residential mobile non-subscription revenue is primarily attributable to a decrease in revenue from mobile handset sales, including (i) $20.3 million recognized during 2020 in connection with the completion of the VM Receivables Financing Sale, (ii) the adverse impact of retail store closures during the COVID-19 pandemic and (iii) the unfavorable impact of $7.5 million of revenue recognized during 2019 in connection with the sale of rights to future commission payments on customer handset insurance arrangements in the U.K.
(c)The increase in B2B subscription revenue is primarily due to an increase in the average number of SOHO customers in the U.K. The increase in B2B non-subscription revenue is primarily attributable to our operations in the U.K., including the net effect of (i) an increase in revenue associated with long-term leases of a portion of our network and (ii) a decrease in lower margin revenue related to business network services.
(d)The decrease in other revenue is attributable to lower broadcasting revenue in Ireland, largely due to the impact of the COVID-19 pandemic.
Belgium. The details of the increase in Belgium’s revenue during 2020, as compared to 2019, are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription
revenue
|
|
Non-subscription
revenue
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
Increase (decrease) in residential cable subscription revenue due to change in:
|
|
|
|
|
|
Average number of customers
|
$
|
(36.0)
|
|
|
$
|
—
|
|
|
$
|
(36.0)
|
|
ARPU
|
12.0
|
|
|
—
|
|
|
12.0
|
|
Decrease in residential cable non-subscription revenue
|
—
|
|
|
(0.7)
|
|
|
(0.7)
|
|
Total decrease in residential cable revenue
|
(24.0)
|
|
|
(0.7)
|
|
|
(24.7)
|
|
Increase (decrease) in residential mobile revenue (a)
|
4.6
|
|
|
(38.5)
|
|
|
(33.9)
|
|
Increase (decrease) in B2B revenue (b)
|
25.7
|
|
|
(7.8)
|
|
|
17.9
|
|
Decrease in other revenue
|
—
|
|
|
(5.1)
|
|
|
(5.1)
|
|
Total organic increase (decrease)
|
6.3
|
|
|
(52.1)
|
|
|
(45.8)
|
|
Impact of acquisitions
|
—
|
|
|
42.4
|
|
|
42.4
|
|
Impact of dispositions
|
(5.8)
|
|
|
(1.8)
|
|
|
(7.6)
|
|
Impact of FX
|
41.4
|
|
|
17.5
|
|
|
58.9
|
|
Total
|
$
|
41.9
|
|
|
$
|
6.0
|
|
|
$
|
47.9
|
|
_______________
(a)The decrease in residential mobile non-subscription revenue is primarily attributable to (i) lower interconnect and mobile roaming revenue, largely driven by stay-at-home behaviors during the COVID-19 pandemic, and (ii) a decrease in revenue from mobile handset sales, due in large part to the impact of temporary retail store closures during the COVID-19 pandemic.
(b)The increase in B2B subscription revenue is primarily attributable to an increase in the average number of SOHO customers.
For information concerning certain regulatory developments that could have an adverse impact on our revenue in Belgium, see “Belgium Regulatory Developments” in note 19 to our consolidated financial statements.
Switzerland. The details of the increase in Switzerland’s revenue during 2020, as compared to 2019, are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription
revenue
|
|
Non-subscription
revenue
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
Decrease in residential cable subscription revenue due to change in:
|
|
|
|
|
|
Average number of customers
|
$
|
(61.1)
|
|
|
$
|
—
|
|
|
$
|
(61.1)
|
|
ARPU
|
(15.6)
|
|
|
—
|
|
|
(15.6)
|
|
Decrease in residential cable non-subscription revenue (a)
|
—
|
|
|
(10.6)
|
|
|
(10.6)
|
|
Total decrease in residential cable revenue
|
(76.7)
|
|
|
(10.6)
|
|
|
(87.3)
|
|
Increase in residential mobile revenue (b)
|
15.5
|
|
|
2.7
|
|
|
18.2
|
|
Increase (decrease) in B2B revenue
|
(1.0)
|
|
|
0.5
|
|
|
(0.5)
|
|
Increase in other revenue
|
—
|
|
|
0.2
|
|
|
0.2
|
|
Total organic decrease
|
(62.2)
|
|
|
(7.2)
|
|
|
(69.4)
|
|
Impact of acquisitions
|
167.7
|
|
|
115.9
|
|
|
283.6
|
|
Impact of FX
|
72.6
|
|
|
28.2
|
|
|
100.8
|
|
Total
|
$
|
178.1
|
|
|
$
|
136.9
|
|
|
$
|
315.0
|
|
_______________
(a)The decrease in residential cable non-subscription revenue is primarily attributable to (i) a decrease in revenue associated with our Swiss sports channels, (ii) lower revenue from construction services provided to our partner networks and (iii) lower revenue from late fees.
(b)The increase in residential mobile subscription revenue is primarily due to an increase in the average number of mobile subscribers.
Central and Eastern Europe. The details of the increase in Central and Eastern Europe’s revenue during 2020, as compared to 2019, are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription
revenue
|
|
Non-subscription
revenue
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
Increase in residential cable subscription revenue due to change in:
|
|
|
|
|
|
Average number of customers
|
$
|
6.0
|
|
|
$
|
—
|
|
|
$
|
6.0
|
|
ARPU
|
4.5
|
|
|
—
|
|
|
4.5
|
|
Decrease in residential cable non-subscription revenue
|
—
|
|
|
(0.2)
|
|
|
(0.2)
|
|
Total increase (decrease) in residential cable revenue
|
10.5
|
|
|
(0.2)
|
|
|
10.3
|
|
Increase in residential mobile revenue
|
1.7
|
|
|
0.4
|
|
|
2.1
|
|
Increase in B2B revenue
|
2.8
|
|
|
1.0
|
|
|
3.8
|
|
Increase in other revenue
|
—
|
|
|
0.4
|
|
|
0.4
|
|
Total organic increase
|
15.0
|
|
|
1.6
|
|
|
16.6
|
|
Impact of FX
|
(5.0)
|
|
|
(0.1)
|
|
|
(5.1)
|
|
Total
|
$
|
10.0
|
|
|
$
|
1.5
|
|
|
$
|
11.5
|
|
Revenue — 2019 compared to 2018
For discussion and analysis of the revenue of our consolidated reportable segments during 2019, as compared to 2018, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II of our 2019 10-K.
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 EBITDA of our Consolidated Reportable Segments
Adjusted EBITDA is the primary measure used by our chief operating decision maker to evaluate segment operating performance. As presented below, consolidated Adjusted EBITDA is a non-GAAP measure, which investors should view as a supplement to, and not a substitute for, GAAP measures of performance included in our consolidated statements of operations. The following tables set forth the Adjusted EBITDA of our consolidated reportable segments.
Adjusted EBITDA — 2020 compared to 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
Increase (decrease)
|
|
Organic
increase (decrease)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|
$
|
|
%
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
2,672.4
|
|
|
$
|
2,800.5
|
|
|
$
|
(128.1)
|
|
|
(4.6)
|
|
|
$
|
(144.7)
|
|
|
(5.0)
|
|
Belgium
|
1,413.4
|
|
|
1,386.1
|
|
|
27.3
|
|
|
2.0
|
|
|
12.4
|
|
|
0.9
|
|
Switzerland
|
693.8
|
|
|
627.9
|
|
|
65.9
|
|
|
10.5
|
|
|
(76.5)
|
|
|
(12.2)
|
|
Central and Eastern Europe
|
215.6
|
|
|
215.0
|
|
|
0.6
|
|
|
0.3
|
|
|
3.2
|
|
|
1.5
|
|
Central and Corporate
|
(99.6)
|
|
|
(171.1)
|
|
|
71.5
|
|
|
41.8
|
|
|
(1.5)
|
|
|
(0.9)
|
|
Intersegment eliminations (a)
|
—
|
|
|
1.1
|
|
|
(1.1)
|
|
|
N.M.
|
|
(1.1)
|
|
|
N.M.
|
Total
|
$
|
4,895.6
|
|
|
$
|
4,859.5
|
|
|
$
|
36.1
|
|
|
0.7
|
|
|
$
|
(208.2)
|
|
|
(4.3)
|
|
_______________
N.M. — Not Meaningful.
(a)The amount for the 2019 period includes transactions between our continuing and discontinued operations prior to the disposal dates of such discontinued operations.
Adjusted EBITDA Margin
The following table sets forth the Adjusted EBITDA margins (Adjusted EBITDA divided by revenue) of each of our consolidated reportable segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
|
|
|
U.K./Ireland
|
40.6
|
%
|
|
42.4
|
%
|
Belgium
|
48.1
|
%
|
|
47.9
|
%
|
Switzerland
|
44.1
|
%
|
|
49.9
|
%
|
Central and Eastern Europe
|
44.3
|
%
|
|
45.2
|
%
|
In addition to organic changes in the revenue, operating and SG&A expenses of our consolidated reportable segments, the Adjusted EBITDA margins presented above include the impact of acquisitions. For discussion of the factors contributing to the changes in the Adjusted EBITDA margins of our consolidated 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.
Adjusted EBITDA — 2019 compared to 2018
For the details of our Adjusted EBITDA and Adjusted EBITDA margins during 2019, as compared to 2018, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II of our 2019 10-K.
Discussion and Analysis of our Consolidated Operating Results
General
For more detailed explanations of the changes in our revenue, see Discussion and Analysis of our Reportable Segments above.
2020 compared to 2019
Revenue
Our revenue by major category is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
Increase (decrease)
|
|
Organic
increase (decrease)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|
$
|
|
%
|
|
in millions, except percentages
|
Residential revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Residential cable revenue (a):
|
|
|
|
|
|
|
|
|
|
|
|
Subscription revenue (b):
|
|
|
|
|
|
|
|
|
|
|
|
Broadband internet
|
$
|
3,272.5
|
|
|
$
|
3,187.4
|
|
|
$
|
85.1
|
|
|
2.7
|
|
|
$
|
9.9
|
|
|
0.3
|
|
Video
|
2,714.5
|
|
|
2,723.9
|
|
|
(9.4)
|
|
|
(0.3)
|
|
|
(59.7)
|
|
|
(2.2)
|
|
Fixed-line telephony
|
1,344.6
|
|
|
1,413.2
|
|
|
(68.6)
|
|
|
(4.9)
|
|
|
(97.3)
|
|
|
(6.9)
|
|
Total subscription revenue
|
7,331.6
|
|
|
7,324.5
|
|
|
7.1
|
|
|
0.1
|
|
|
(147.1)
|
|
|
(2.0)
|
|
Non-subscription revenue
|
220.7
|
|
|
198.1
|
|
|
22.6
|
|
|
11.4
|
|
|
(6.5)
|
|
|
(3.3)
|
|
Total residential cable revenue
|
7,552.3
|
|
|
7,522.6
|
|
|
29.7
|
|
|
0.4
|
|
|
(153.6)
|
|
|
(2.0)
|
|
Residential mobile revenue (c):
|
|
|
|
|
|
|
|
|
|
|
|
Subscription revenue (b)
|
1,091.8
|
|
|
932.1
|
|
|
159.7
|
|
|
17.1
|
|
|
20.1
|
|
|
2.2
|
|
Non-subscription revenue
|
692.0
|
|
|
688.2
|
|
|
3.8
|
|
|
0.6
|
|
|
(54.1)
|
|
|
(7.9)
|
|
Total residential mobile revenue
|
1,783.8
|
|
|
1,620.3
|
|
|
163.5
|
|
|
10.1
|
|
|
(34.0)
|
|
|
(2.1)
|
|
Total residential revenue
|
9,336.1
|
|
|
9,142.9
|
|
|
193.2
|
|
|
2.1
|
|
|
(187.6)
|
|
|
(2.1)
|
|
B2B revenue (d):
|
|
|
|
|
|
|
|
|
|
|
|
Subscription revenue
|
524.5
|
|
|
472.5
|
|
|
52.0
|
|
|
11.0
|
|
|
42.1
|
|
|
8.9
|
|
Non-subscription revenue
|
1,524.5
|
|
|
1,441.5
|
|
|
83.0
|
|
|
5.8
|
|
|
8.5
|
|
|
0.6
|
|
Total B2B revenue
|
2,049.0
|
|
|
1,914.0
|
|
|
135.0
|
|
|
7.1
|
|
|
50.6
|
|
|
2.6
|
|
Other revenue (e)
|
595.0
|
|
|
484.6
|
|
|
110.4
|
|
|
22.8
|
|
|
(32.2)
|
|
|
(6.1)
|
|
Total
|
$
|
11,980.1
|
|
|
$
|
11,541.5
|
|
|
$
|
438.6
|
|
|
3.8
|
|
|
$
|
(169.2)
|
|
|
(1.5)
|
|
_______________
(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 $227.9 million and $247.4 million during 2020 and 2019, respectively.
(d)B2B subscription revenue represents revenue from SOHO subscribers. SOHO subscribers pay a premium price to receive expanded service levels along with broadband internet, video, 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 increase in our B2B subscription revenue is attributable to the conversion of certain residential subscribers to SOHO subscribers. B2B non-subscription revenue includes (i) 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 and (ii) revenue from long-term leases of portions of our network.
(e)Other revenue includes, among other items, (i) broadcasting revenue in Belgium and Ireland, (ii) revenue earned from transitional and other services provided to various third parties and (iii) revenue earned from the JV Services and the sale of customer premises equipment to the VodafoneZiggo JV.
Total revenue. Our consolidated revenue increased $438.6 million or 3.8% during 2020, as compared to 2019. This increase includes an increase of $326.0 million attributable to the aggregate impact of the Sunrise Acquisition and the De Vijver Media Acquisition and a decrease of $7.6 million attributable to the impact of a disposition. On an organic basis, our consolidated revenue decreased $169.2 million or 1.5%.
Residential revenue. The details of the increase in our consolidated residential revenue during 2020, as compared to 2019, are as follows (in millions):
|
|
|
|
|
|
Decrease in residential cable subscription revenue due to change in:
|
|
Average number of customers
|
$
|
(62.4)
|
|
ARPU
|
(84.7)
|
|
Decrease in residential cable non-subscription revenue
|
(6.5)
|
|
Total decrease in residential cable revenue
|
(153.6)
|
|
Increase in residential mobile subscription revenue
|
20.1
|
|
Decrease in residential mobile non-subscription revenue
|
(54.1)
|
|
Total organic decrease in residential revenue
|
(187.6)
|
|
Impact of acquisitions and dispositions
|
224.5
|
|
Impact of FX
|
156.3
|
|
Total increase in residential revenue
|
$
|
193.2
|
|
On an organic basis, our consolidated residential cable subscription revenue decreased $147.1 million or 2.0% during 2020, as compared to 2019, primarily attributable to decreases in Switzerland and U.K./Ireland.
On an organic basis, our consolidated residential cable non-subscription revenue decreased $6.5 million or 3.3% during 2020, as compared to 2019, primarily due to a decrease in Switzerland.
On an organic basis, our consolidated residential mobile subscription revenue increased $20.1 million or 2.2% during 2020, as compared to 2019, primarily attributable to an increase in Switzerland.
On an organic basis, our consolidated residential mobile non-subscription revenue decreased $54.1 million or 7.9% during 2020, as compared to 2019, primarily due to decreases in Belgium and U.K./Ireland.
B2B revenue. On an organic basis, our consolidated B2B subscription revenue increased $42.1 million or 8.9% during 2020, as compared to 2019, primarily due to increases in Belgium and U.K./Ireland.
On an organic basis, our consolidated B2B non-subscription revenue increased $8.5 million or 0.6% during 2020, as compared to 2019, primarily attributable to an increase in U.K./Ireland.
Other revenue. On an organic basis, our consolidated other revenue decreased $32.2 million or 6.1% during 2020, as compared to 2019, primarily attributable to (i) a decrease in revenue earned from sales of customer premises equipment to the VodafoneZiggo JV and (ii) lower broadcasting revenue in Ireland and Belgium.
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 represent a significant portion of our operating costs and are subject to rise in future periods due to various factors, including (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 and (ii) rate increases.
The details of our programming and other direct costs of services are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
Increase (decrease)
|
|
Organic
increase (decrease)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|
$
|
|
%
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
2,053.8
|
|
|
$
|
2,058.3
|
|
|
$
|
(4.5)
|
|
|
(0.2)
|
|
|
$
|
(19.7)
|
|
|
(1.0)
|
|
Belgium
|
695.9
|
|
|
694.5
|
|
|
1.4
|
|
|
0.2
|
|
|
(44.6)
|
|
|
(6.1)
|
|
Switzerland
|
417.7
|
|
|
265.9
|
|
|
151.8
|
|
|
57.1
|
|
|
2.8
|
|
|
1.1
|
|
Central and Eastern Europe
|
124.8
|
|
|
116.1
|
|
|
8.7
|
|
|
7.5
|
|
|
10.2
|
|
|
8.8
|
|
Central and Corporate
|
149.3
|
|
|
104.3
|
|
|
45.0
|
|
|
43.1
|
|
|
30.8
|
|
|
29.5
|
|
Intersegment eliminations
|
(4.5)
|
|
|
(0.4)
|
|
|
(4.1)
|
|
|
N.M.
|
|
(4.1)
|
|
|
N.M.
|
Total
|
$
|
3,437.0
|
|
|
$
|
3,238.7
|
|
|
$
|
198.3
|
|
|
6.1
|
|
|
$
|
(24.6)
|
|
|
(0.8)
|
|
_______________
N.M. — Not Meaningful.
Our programming and other direct costs of services increased $198.3 million or 6.1% during 2020, as compared to 2019. This increase includes an increase of $153.0 million attributable to the aggregate impact of the Sunrise Acquisition and the De Vijver Media Acquisition. On an organic basis, our programming and other direct costs of services decreased $24.6 million or 0.8%. This decrease includes the following factors:
•A decrease in programming and copyright costs of $39.5 million or 2.4%, attributable to lower costs for certain premium and/or basic content, as decreases in U.K./Ireland and Switzerland were only partially offset by an increase in Poland. The decrease in U.K./Ireland is due to aggregate credits or rebates of $52.0 million received in connection with the loss of exclusive programming content due to the COVID-19 pandemic, which generally offset the aforementioned adverse revenue impacts in U.K./Ireland resulting from the COVID-19 pandemic;
•The impact of the classification of costs associated with the delivery of certain transitional services provided by Central and Corporate to various third parties in connection with our recent dispositions. Beginning on the effective dates of the underlying agreements, these costs became direct costs of services, which resulted in an increase in direct costs of $25.2 million that was fully offset by decreases in various other operating and SG&A expenses within Central and Corporate, as further discussed below;
•A decrease in interconnect and access costs of $23.4 million or 2.8%, primarily due to the net effect (i) lower interconnect and mobile roaming costs and (ii) higher MVNO costs in Switzerland and U.K./Ireland. The lower interconnect and mobile roaming costs are primarily attributable to a decrease in Belgium that was only partially offset by an increase in U.K./Ireland. Across all of our markets, interconnect and mobile roaming costs have been impacted by changes in usage per mobile subscriber associated with factors such as lower travel and the use of WiFi alternatives during stay-at-home mandates or recommendations as a result of the COVID-19 pandemic; and
•A decrease in mobile handset and other device costs of $20.1 million or 5.3%, primarily due to lower sales volumes in U.K./Ireland and Belgium, largely due to certain retail store closures as a result of the COVID-19 pandemic.
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 consolidated reportable segments as share-based compensation expense is not included in the performance measures of our consolidated reportable segments. Share-based compensation expense is separately discussed further below.
The details of our other operating expenses are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
Increase (decrease)
|
|
Organic
increase (decrease)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|
$
|
|
%
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
1,010.6
|
|
|
$
|
904.0
|
|
|
$
|
106.6
|
|
|
11.8
|
|
|
$
|
98.9
|
|
|
10.9
|
|
Belgium
|
416.2
|
|
|
389.1
|
|
|
27.1
|
|
|
7.0
|
|
|
15.9
|
|
|
4.1
|
|
Switzerland
|
210.5
|
|
|
178.9
|
|
|
31.6
|
|
|
17.7
|
|
|
(6.1)
|
|
|
(3.4)
|
|
Central and Eastern Europe
|
68.5
|
|
|
70.9
|
|
|
(2.4)
|
|
|
(3.4)
|
|
|
(1.9)
|
|
|
(2.7)
|
|
Central and Corporate
|
61.0
|
|
|
102.2
|
|
|
(41.2)
|
|
|
(40.3)
|
|
|
(39.2)
|
|
|
(38.4)
|
|
Intersegment eliminations
|
2.8
|
|
|
(7.7)
|
|
|
10.5
|
|
|
N.M.
|
|
10.5
|
|
|
N.M.
|
Total other operating expenses excluding share-based compensation expense
|
1,769.6
|
|
|
1,637.4
|
|
|
132.2
|
|
|
8.1
|
|
|
$
|
78.1
|
|
|
4.8
|
|
Share-based compensation expense
|
7.6
|
|
|
3.9
|
|
|
3.7
|
|
|
94.9
|
|
|
|
|
|
Total
|
$
|
1,777.2
|
|
|
$
|
1,641.3
|
|
|
$
|
135.9
|
|
|
8.3
|
|
|
|
|
|
_______________
N.M. — Not Meaningful.
Our other operating expenses (exclusive of share-based compensation expense) increased $132.2 million or 8.1% during 2020, as compared to 2019. This increase includes an increase of $29.3 million attributable to the aggregate impact of the Sunrise Acquisition and the De Vijver Media Acquisition. On an organic basis, our other operating expenses increased $78.1 million or 4.8%. This increase includes the following factors:
•An increase in personnel costs of $34.9 million or 7.3%, primarily due to the net effect of (i) higher staffing levels in U.K./Ireland and Belgium that were only partially offset by lower staffing levels in Switzerland, (ii) lower average costs per employee, primarily due to decreases in U.K./Ireland and Belgium that were only partially offset by an increase in Switzerland, (iii) a decrease in temporary personnel costs, primarily in U.K./Ireland and (iv) lower costs due to higher capitalizable activities, primarily in U.K./Ireland. The increase in personnel costs in U.K./Ireland also includes the impact of higher costs associated with regulated contract notifications, as further described in note 19 to our consolidated financial statements;
•The aforementioned impact of the classification of costs associated with the delivery of certain transitional services provided by Central and Corporate to various third parties in connection with our recent dispositions. Beginning on the effective dates of the underlying agreements, these costs became direct costs of services, which resulted in a decrease in various other operating expenses of $24.2 million within Central and Corporate;
•An increase in network infrastructure charges in U.K./Ireland of $20.1 million following an increase in the rateable value of certain of Virgin Media’s assets. For additional information, see “Other Regulatory Issues” in note 19 to our consolidated financial statements;
•An increase in other operating expenses due to $19.5 million recognized during the third quarter of 2020 in U.K./Ireland associated with the completion of the VM Receivables Financing Sale, representing the difference between the carrying amount of the associated receivables and the amount received pursuant to the sale;
•Higher costs in U.K./Ireland associated with a $15.9 million charge recorded during the third quarter of 2020 in connection with the reassessment of certain items related to prior years;
•A decrease in customer service costs of $10.3 million or 4.1%, primarily due to lower external call center costs in U.K./Ireland. The lower call center costs in U.K./Ireland include the impact of lockdowns during the second and, to a lesser extent, third quarter of 2020 associated with the COVID-19 pandemic, which prevented certain outsourced contract services from being performed; and
•An increase in core network and information technology-related costs of $7.0 million or 2.5%, primarily due to the net effect of (i) higher information technology-related expenses, primarily due to an increase in Central and Corporate that was only partially offset by a decrease in Switzerland, (ii) lower network maintenance costs, primarily due to a decrease in Central and Corporate that was only partially offset by increases in U.K./Ireland and Switzerland and (iii) an increase in leased bandwidth and outsourced data center costs in Central and Corporate.
SG&A expenses
SG&A expenses include human resources, information technology, general services, management, finance, legal, external sales and marketing costs, 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 consolidated reportable segments as share-based compensation expense is not included in the performance measures of our consolidated reportable segments. Share-based compensation expense is separately discussed further below.
The details of our SG&A expenses are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
Increase (decrease)
|
|
Organic
increase (decrease)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|
$
|
|
%
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
851.6
|
|
|
$
|
837.5
|
|
|
$
|
14.1
|
|
|
1.7
|
|
|
$
|
7.4
|
|
|
0.9
|
|
Belgium
|
415.4
|
|
|
423.3
|
|
|
(7.9)
|
|
|
(1.9)
|
|
|
(29.5)
|
|
|
(6.8)
|
|
Switzerland
|
251.8
|
|
|
186.1
|
|
|
65.7
|
|
|
35.3
|
|
|
10.4
|
|
|
5.6
|
|
Central and Eastern Europe
|
78.0
|
|
|
73.4
|
|
|
4.6
|
|
|
6.3
|
|
|
5.1
|
|
|
6.9
|
|
Central and Corporate
|
283.7
|
|
|
281.0
|
|
|
2.7
|
|
|
1.0
|
|
|
(0.7)
|
|
|
(0.2)
|
|
Intersegment eliminations
|
(2.6)
|
|
|
4.6
|
|
|
(7.2)
|
|
|
N.M.
|
|
(7.2)
|
|
|
N.M.
|
Total SG&A expenses excluding share-based compensation expense
|
1,877.9
|
|
|
1,805.9
|
|
|
72.0
|
|
|
4.0
|
|
|
$
|
(14.5)
|
|
|
(0.8)
|
|
Share-based compensation expense
|
340.4
|
|
|
301.9
|
|
|
38.5
|
|
|
12.8
|
|
|
|
|
|
Total
|
$
|
2,218.3
|
|
|
$
|
2,107.8
|
|
|
$
|
110.5
|
|
|
5.2
|
|
|
|
|
|
______________
N.M. — Not Meaningful.
Supplemental SG&A expense information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
Increase
|
|
Organic increase (decrease)
|
|
2020
|
|
2019
|
|
$
|
|
%
|
|
$
|
|
%
|
|
in millions, except percentages
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative (a)
|
$
|
1,453.6
|
|
|
$
|
1,400.4
|
|
|
$
|
53.2
|
|
|
3.8
|
|
|
$
|
(11.5)
|
|
|
(0.8)
|
|
External sales and marketing
|
424.3
|
|
|
405.5
|
|
|
18.8
|
|
|
4.6
|
|
|
(3.0)
|
|
|
(0.7)
|
|
Total
|
$
|
1,877.9
|
|
|
$
|
1,805.9
|
|
|
$
|
72.0
|
|
|
4.0
|
|
|
$
|
(14.5)
|
|
|
(0.8)
|
|
______________
(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 $72.0 million or 4.0% during 2020, as compared to 2019. This increase includes an increase of $52.8 million attributable to the aggregate impact of the Sunrise Acquisition and the De Vijver Media Acquisition. On an organic basis, our SG&A expenses decreased $14.5 million or 0.8%. This decrease includes the following factors:
•A decrease in customer service costs of $10.3 million or 26.4%, primarily due to lower external call center costs in Belgium and U.K./Ireland;
•An increase in business service costs of $8.5 million or 4.6%, primarily due to the net effect of (i) higher consulting costs, primarily due to increases in U.K./Ireland, Central and Corporate and Switzerland that were only partially offset by a decrease in Belgium, (ii) a decrease in travel and entertainment expenses and (iii) a decrease in vehicle expenses, primarily in U.K./Ireland and Belgium;
•A decrease in property costs of $8.8 million or 8.7%, primarily due to lower rent expense resulting from retail store closures in U.K./Ireland;
•A decrease in external sales and marketing costs of $3.0 million or 0.7%, primarily due to the net effect of (i) lower costs associated with third-party sales commissions in Belgium and (ii) higher costs associated with advertising campaigns, primarily due to increases in U.K./Ireland and Poland that were only partially offset by decreases in Switzerland and Belgium. The increase in costs associated with advertising campaigns in U.K./Ireland includes higher costs associated with regulated contract notifications, as further described in note 19 to our consolidated financial statements; and
•An increase in personnel costs of $2.2 million or 0.3%, primarily due to the net effect of (i) higher staffing levels, primarily due to an increase in Central and Corporate that was only partially offset by decreases in U.K./Ireland and Belgium, (ii) lower average costs per employee, primarily due to a decrease in Central and Corporate that was only partially offset by increases in U.K./Ireland and Belgium, (iii) a decrease in temporary personnel costs, primarily due to a decrease in U.K./Ireland that was only partially offset by an increase in Belgium and (iv) higher incentive compensation costs, primarily in U.K./Ireland. The lower average cost per employee includes the impact of (a) lower severance costs in U.K./Ireland of $6.3 million associated with severance payments recorded during the second quarter of 2019 in connection with revisions to our operating model and decreases in senior management personnel and (b) a decrease in Central and Corporate related to a $5.0 million cash bonus paid in the second quarter of 2019 associated with the renewal of an existing executive employment contract on similar terms.
Share-based compensation expense
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
in millions
|
Liberty Global:
|
|
|
|
Performance-based incentive awards (a)
|
$
|
127.4
|
|
|
$
|
134.5
|
|
Non-performance based incentive awards (b)
|
134.1
|
|
|
107.6
|
|
Other (c)
|
46.2
|
|
|
39.0
|
|
Total Liberty Global
|
307.7
|
|
|
281.1
|
|
Telenet share-based incentive awards (d)
|
35.5
|
|
|
15.6
|
|
Other
|
4.8
|
|
|
9.1
|
|
Total
|
$
|
348.0
|
|
|
$
|
305.8
|
|
Included in:
|
|
|
|
Other operating expenses
|
$
|
7.6
|
|
|
$
|
3.9
|
|
Total SG&A expenses
|
340.4
|
|
|
301.9
|
|
Total
|
$
|
348.0
|
|
|
$
|
305.8
|
|
_______________
(a)Includes share-based compensation expense related to (i) PSUs, (ii) the 2019 Challenge Performance Awards and (iii) the performance-based portion of the 2019 CEO Performance Award.
(b)In 2019, we changed our policy to provide that all new equity grants would have ten-year contractual terms in order to more closely align with common market practice. In April 2020, the compensation committee of our board of directors approved the extension of the expiration dates of outstanding SARs and director options granted in 2013 from a 7-year term to a 10-year term in order to align with this new policy. Accordingly, the Black-Scholes fair values of the outstanding awards increased, resulting in the recognition of an aggregate incremental share-based compensation expense of $18.9 million during the second quarter of 2020. The 2019 amount includes share-based compensation expense related to the RSAs issued under the 2019 CEO Performance Award.
(c)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 have been or will be issued to senior management and key employees pursuant to a shareholding incentive program. 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.
(d)Represents the share-based compensation expense associated with Telenet’s share-based incentive awards, which, at December 31, 2020, included performance- and non-performance-based stock option awards with respect to 5,001,814 Telenet shares. These stock option awards had a weighted average exercise price of €40.69 ($49.74).
For additional information concerning our share-based compensation, see note 15 to our consolidated financial statements.
Depreciation and amortization expense
Our depreciation and amortization expense was $2,331.3 million and $3,652.2 million during 2020 and 2019, respectively. Excluding the effects of FX, depreciation and amortization expense decreased $1,368.8 million or 37.5% during 2020, as compared to 2019. This decrease is primarily due to the net effect of (i) a decrease in U.K./Ireland of $1,051.4 million as a result of the held-for-sale presentation of the U.K. JV Entities effective May 7, 2020, (ii) a decrease associated with certain assets becoming fully depreciated, primarily in U.K./Ireland, Central and Corporate, Belgium and Switzerland, (iii) an increase 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 and (iv) a decrease due to assets becoming fully amortized, primarily in U.K./Ireland. For information regarding the held-for-sale presentation of the U.K. JV Entities, see note 6 to our consolidated financial statements.
Impairment, restructuring and other operating items, net
We recognized impairment, restructuring and other operating items, net, of $98.6 million during 2020, as compared to $156.0 million during 2019.
The 2020 amount primarily includes (i) direct acquisition and disposition costs of $76.9 million, primarily related to costs incurred in connection with the Sunrise Acquisition and the pending formation of the U.K. JV, (ii) restructuring charges of $47.5 million, including $34.9 million of employee severance and termination costs related to certain reorganization activities, primarily in Switzerland, U.K./Ireland and Belgium, (iii) a $42.0 million gain in Belgium during 2020 associated with the disposal of certain content assets and liabilities and (iv) impairment charges of $13.8 million, respectively, primarily in Belgium and U.K./Ireland.
The 2019 amount primarily includes (i) restructuring charges of $89.9 million, including $84.3 million of employee severance and termination costs related to certain reorganization activities, primarily in U.K./Ireland, Central and Corporate and Switzerland, (ii) a net provision for litigation of £41.3 million ($54.0 million at the applicable rate) related to a VAT matter in the U.K. recorded during the fourth quarter of 2019, (iii) impairment charges of $34.2 million, primarily related to the write-off of certain network assets in U.K./Ireland, and (iv) an aggregate credit related to direct acquisition and disposition costs of $18.1 million, primarily related to the net effect of (a) a $50.4 million cash termination fee received from Sunrise during the fourth quarter in connection with the termination of a share purchase agreement to sell our operations in Switzerland (the Sunrise SPA) and (b) costs incurred in connection with (1) the sales of the Vodafone Disposal Group and UPC DTH and (2) the Sunrise SPA.
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 16 to our consolidated financial statements. For additional information regarding the aforementioned VAT matter in the U.K., see note 19 to our consolidated financial statements. For additional information regarding our impairments, see Critical Accounting Policies, Judgments and Estimates — Impairment of Property and Equipment and Intangible Assets below.
Interest expense
We recognized interest expense of $1,188.5 million and $1,385.9 million during 2020 and 2019, respectively, including interest expense of the U.K. JV Entities. Excluding the effects of FX, interest expense decreased $230.8 million or 16.7% during 2020, as compared to 2019. This decrease is primarily attributable to (i) a lower weighted average interest rate and (ii) a slightly lower average outstanding debt balance. For additional information regarding our outstanding indebtedness, see note 11 to our 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 8 to our 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 losses on derivative instruments, net, for the indicated periods are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
in millions
|
|
|
|
|
Cross-currency and interest rate derivative contracts (a)
|
$
|
(1,184.3)
|
|
|
$
|
(207.3)
|
|
Equity-related derivative instruments:
|
|
|
|
ITV Collar
|
364.2
|
|
|
(84.4)
|
|
Lionsgate Forward
|
0.8
|
|
|
13.0
|
|
|
|
|
|
Other
|
21.7
|
|
|
8.0
|
|
Total equity-related derivative instruments (b)
|
386.7
|
|
|
(63.4)
|
|
Foreign currency forward and option contracts
|
(81.1)
|
|
|
77.4
|
|
Other
|
(0.6)
|
|
|
1.3
|
|
Total
|
$
|
(879.3)
|
|
|
$
|
(192.0)
|
|
_______________
(a)The loss during 2020 is attributable to net losses associated with (i) changes in the relative value of certain currencies and (ii) changes in certain market interest rates. In addition, the loss during 2020 includes a net gain of $336.0 million resulting from changes in our credit risk valuation adjustments. The loss during 2019 is attributable to net losses associated with (a) changes in certain market interest rates and (b) changes in the relative value of certain currencies. In addition, the loss during 2019 includes a net gain of $16.6 million resulting from changes in our credit risk valuation adjustments.
(b)For information concerning the factors that impact the valuations of our equity-related derivative instruments, see note 9 to our consolidated financial statements.
For additional information concerning our derivative instruments, see notes 8 and 9 to our 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 losses, net, for the indicated periods are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
in millions
|
|
|
|
|
Intercompany payables and receivables denominated in a currency other than the entity’s functional currency (a)
|
$
|
(1,887.0)
|
|
|
$
|
(116.7)
|
|
U.S. dollar denominated debt issued by euro functional currency entities
|
433.8
|
|
|
(110.3)
|
|
Cash and restricted cash denominated in a currency other than the entity’s functional currency
|
(131.2)
|
|
|
—
|
|
British pound sterling denominated debt issued by a U.S. dollar functional currency entity
|
88.9
|
|
|
(51.3)
|
|
U.S. dollar denominated debt issued by British pound sterling functional currency entities
|
50.7
|
|
|
215.6
|
|
Euro denominated debt issued by British pound sterling functional currency entities
|
30.5
|
|
|
(30.3)
|
|
Other
|
(2.0)
|
|
|
(1.8)
|
|
Total
|
$
|
(1,416.3)
|
|
|
$
|
(94.8)
|
|
_______________
(a)Amounts primarily relate to (i) loans between certain of our non-operating and operating subsidiaries in Europe, which generally are denominated in the currency of the applicable operating subsidiary and (ii) loans between certain of our non-operating subsidiaries in the U.S. and Europe.
For information regarding how we manage our exposure to foreign currency risk, see Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Risk below.
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 7, 9 and 11, respectively, to our consolidated financial statements. The details of our realized and unrealized gains due to changes in fair values of certain investments and debt, net, for the indicated periods are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
in millions
|
Investments:
|
|
|
|
Skillz
|
$
|
238.0
|
|
|
$
|
1.1
|
|
ITV
|
(217.1)
|
|
|
163.9
|
|
EdgeConneX
|
33.1
|
|
|
—
|
|
CANAL+ Polska
|
(26.3)
|
|
|
2.7
|
|
SMAs
|
5.2
|
|
|
—
|
|
Lionsgate
|
4.0
|
|
|
(25.0)
|
|
|
|
|
|
Other, net
|
(1.1)
|
|
|
(43.7)
|
|
Total investments
|
35.8
|
|
|
99.0
|
|
Debt
|
9.4
|
|
|
(27.0)
|
|
Total
|
$
|
45.2
|
|
|
$
|
72.0
|
|
Losses on debt extinguishment, net
We recognized net losses on debt extinguishment of $233.2 million and $216.7 million during 2020 and 2019, respectively.
The loss during 2020 is primarily attributable to (i) the payment of $206.6 million of redemption premiums and (ii) the write-off of $30.0 million of net unamortized deferred financing costs, discounts and premiums.
The loss during 2019 is primarily attributable to (i) the payment of $172.2 million of redemption premiums and (ii) the write-off of $42.5 million of net unamortized deferred financing costs, discounts and premiums.
For additional information concerning our losses on debt extinguishment, net, see note 11 to our consolidated financial statements.
Share of results of affiliates, net
The following table sets forth the details of our share of results of affiliates, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
in millions
|
|
|
|
|
|
|
|
|
VodafoneZiggo JV (a)
|
$
|
(201.1)
|
|
|
$
|
(185.9)
|
|
All3Media
|
(27.9)
|
|
|
(8.8)
|
|
Formula E
|
(8.4)
|
|
|
1.7
|
|
Other
|
(7.9)
|
|
|
(5.5)
|
|
Total
|
$
|
(245.3)
|
|
|
$
|
(198.5)
|
|
_______________
(a)Amounts include the net effect of (i) our 50% share of the results of operations of the VodafoneZiggo JV and (ii) interest income of $48.0 million and $50.4 million, respectively, representing 100% of the interest earned on the VodafoneZiggo JV Receivables. The summarized results of operations of the VodafoneZiggo JV are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
in millions
|
|
|
|
|
Revenue
|
$
|
4,565.4
|
|
|
$
|
4,407.8
|
|
Adjusted EBITDA
|
$
|
2,142.0
|
|
|
$
|
1,987.7
|
|
Operating income (1)
|
$
|
283.7
|
|
|
$
|
119.1
|
|
Non-operating expense (2)
|
$
|
(570.9)
|
|
|
$
|
(631.6)
|
|
Net loss
|
$
|
(448.7)
|
|
|
$
|
(470.0)
|
|
_______________
(1)Includes depreciation and amortization of $1,871.4 million and $1,822.1 million, respectively.
(2)Includes interest expense of $598.6 million and $647.3 million, respectively.
For additional information regarding our equity method investments, see note 7 to our consolidated financial statements.
Other income, net
We recognized other income, net, of $76.1 million and $114.4 million during 2020 and 2019, respectively. These amounts include (i) interest and dividend income of $57.1 million and $77.8 million, respectively, (ii) credits related to the non-service components of our net periodic pension costs of $16.7 million and $12.7 million, respectively. In addition, other income, net, includes (a) for 2020, a $15.3 million gain related to certain assets that were contributed to a joint venture and (b) for 2019, a
$25.7 million gain associated with the De Vijver Media Acquisition, representing the difference between the fair value and carrying amount of our then-existing 50% ownership interest in De Vijver Media.
Income tax expense
We recognized income tax benefit (expense) of $256.9 million and ($253.0 million) during 2020 and 2019, respectively.
The income tax benefit during 2020 differs from the expected income tax benefit of $327.5 million (based on the U.K. statutory income tax rate of 19.0%) primarily due to the net negative impact of (i) non-deductible or non-taxable foreign currency exchange results and (ii) certain permanent differences between the financial and tax accounting treatment of items associated with investments in subsidiaries. The negative impact of these items was partially offset by the net positive impact of (a) the recognition of previously unrecognized tax benefits, (b) an increase in deferred tax assets in the U.K. due to an enacted change in tax law and (c) tax benefits associated with technology innovation incentives.
The income tax expense during 2019 differs from the expected income tax benefit of $219.6 million (based on the U.K. statutory income tax rate of 19.0%) primarily due to the net negative impact of (i) certain permanent differences between the financial and tax accounting treatment of (a) interest and other items and (b) items associated with investments in subsidiaries, and (ii) a net increase in valuation allowances.
For additional information concerning our income taxes, see note 13 to our consolidated financial statements.
Loss from continuing operations
During 2020 and 2019, we reported losses from continuing operations of $1,466.7 million and $1,409.0 million, respectively, consisting of (i) operating income of $2,117.7 million and $745.5 million, respectively, (ii) net non-operating expense of $3,841.3 million and $1,901.5 million, respectively, and (iii) income tax expense of $256.9 million and $253.0 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 operating income to a level that more than offsets the aggregate amount of our (a) interest expense, (b) other non-operating expenses and (c) 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 under Material Changes in Financial Condition — Capitalization below, 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 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 $730.3 million during 2019 related to the operations of the Vodafone Disposal Group and UPC DTH. In addition, we recognized a gain of $12.2 billion related to the third quarter 2019 sale of the Vodafone Disposal Group and a gain of $106.0 million related to the second quarter 2019 sale of UPC DTH. For additional information, see note 6 to our 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. Our net earnings attributable to noncontrolling interests were $161.3 million and $116.8 million during 2020 and 2019, respectively. The increase is primarily attributable to the results of operations of Telenet.
2019 compared to 2018
For information regarding the discussion and analysis of our consolidated operating results during 2019, as compared to 2018, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II of our 2019 10-K.
Liquidity and Capital Resources
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 Telenet, Virgin Media and UPC Holding. 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 December 31, 2020 are set forth in the following table (in millions):
|
|
|
|
|
|
Cash and cash equivalents held by:
|
|
Liberty Global and unrestricted subsidiaries:
|
|
Liberty Global (a)
|
$
|
33.1
|
|
Unrestricted subsidiaries (b)
|
1,132.4
|
|
Total Liberty Global and unrestricted subsidiaries
|
1,165.5
|
|
Borrowing groups (c):
|
|
Telenet
|
100.2
|
|
UPC Holding
|
31.4
|
|
Virgin Media (d)
|
30.1
|
|
Total borrowing groups
|
161.7
|
|
Total cash and cash equivalents
|
$
|
1,327.2
|
|
_______________
(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)Represents the cash and cash equivalents of the Virgin Media borrowing group, which includes (i) certain subsidiaries of Virgin Media, but excludes the parent entity, Virgin Media Inc., and (ii) the cash and cash equivalents of the U.K. JV Entities, as such cash and cash equivalents will be retained by Liberty Global upon the formation of the U.K. JV and are therefore not classified as held for sale. Amount excludes the Escrowed Proceeds associated with the VM O2 Notes. For information regarding the held-for-sale presentation of the U.K. JV Entities and the Escrowed Proceeds, see notes 6 and 11, respectively, to our consolidated financial statements.
Liquidity of Liberty Global and its unrestricted subsidiaries
The $33.1 million of cash and cash equivalents held by Liberty Global and, subject to certain tax and legal considerations, the $1,132.4 million of aggregate cash and cash equivalents held by unrestricted subsidiaries, together with the $1,965.9 million of investments held under SMAs, represented available liquidity at the corporate level at December 31, 2020. Our remaining cash and cash equivalents of $161.7 million at December 31, 2020 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 December 31, 2020, see note 11 to our 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, (ii) investments held under SMAs, (iii) 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, (iv) cash received with respect to transitional and other services provided to various third parties and (v) interest payments received with respect to the VodafoneZiggo JV Receivables.
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.
At December 31, 2020, our consolidated cash and cash equivalents balance included $1,282.7 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 and our expectations with respect to our corporate liquidity requirements, 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, for information regarding certain limitations imposed by our subsidiaries’ debt instruments at December 31, 2020, see note 11 to our consolidated financial statements.
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 the ITV Collar Loan and (iii) principal payments on the ITV Collar 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 $9.3 billion at December 31, 2020 with varying maturity dates).
During 2020, the aggregate amount of our share repurchases, including direct acquisition costs, was $1,072.3 million. At December 31, 2020, the remaining amount authorized for share repurchases was $1.0 billion. As a U.K. incorporated company, we may only elect to repurchase shares or pay dividends to the extent of our Distributable Reserves. For additional information regarding our share repurchase programs, see note 14 to our consolidated financial statements.
For information regarding the liquidity impacts of the Sunrise Acquisition, see note 5 to our consolidated financial statements.
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 our borrowing groups at December 31, 2020, see note 11 to our 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 (i) property and equipment additions, (ii) debt service requirements and (iii) income tax payments, as well as to settle certain obligations that are not included on our December 31, 2020 consolidated balance sheet. In this regard, we have significant commitments related to (a) programming, studio output and sports rights contracts, (b) certain operating costs associated with our networks and (c) purchase obligations associated with customer premises equipment and certain service-related commitments. These obligations are expected to represent a significant liquidity requirement of our borrowing groups, the majority of which is due over the next 12 to 24 months. For additional information regarding our commitments, see note 19 to our consolidated financial statements.
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 additional information regarding our consolidated cash flows, see the discussion under 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 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 EBITDA, although the timing of our acquisitions and financing transactions and the interplay of average and spot foreign currency rates may impact this ratio. Consolidated Adjusted EBITDA is a non-GAAP measure, which investors should view as a supplement to, and not a substitute for, GAAP measures of performance included in our consolidated statements of operations.
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 EBITDA 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 EBITDA of one of our borrowing groups were to decline, our ability to obtain additional debt could be limited. Under our credit facilities and senior and senior secured notes there is no cross-default risk between subsidiary borrowing groups in the event that one or more of our borrowing groups were to experience significant declines in their Adjusted EBITDA to the extent they were no longer able to service their debt obligations. Any mandatory prepayment events or events of default that may occur would only impact the relevant borrowing group in which these events occur and do not allow for any recourse to other borrowing groups or Liberty Global plc. Our credit facilities and senior and senior secured notes require that certain members of the relevant borrowing group guarantee the payment of all sums payable thereunder and such group members are required to grant first-ranking security over their shares or, in certain borrowing groups, over substantially all of their assets to secure the payment of all sums payable thereunder. At December 31, 2020, 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 December 31, 2020, the outstanding principal amount of our consolidated debt, together with our finance lease obligations, aggregated $15.1 billion, including $1.1 billion that is classified as current on our consolidated balance sheet and $13.1 billion that is not due until 2026 or thereafter. All of our consolidated debt and finance lease obligations have been borrowed or incurred by our subsidiaries at December 31, 2020.
We believe we have sufficient resources to repay or refinance the current portion of our debt and finance 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 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 (including with respect to the COVID-19 pandemic), 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 information regarding potential impacts of the COVID-19 pandemic on our company’s liquidity, see the discussion included above in Overview. For additional information concerning our debt and finance lease obligations, see notes 11 and 12, respectively, to our consolidated financial statements.
Consolidated Statements of Cash Flows
General. Our cash flows are subject to significant variations due to FX. See related discussion under Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Risk below.
Consolidated Statements of Cash Flows — 2020 compared to 2019
Summary. The 2020 and 2019 consolidated statements of cash flows of our continuing operations are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2020
|
|
2019
|
|
Change
|
|
in millions
|
|
|
|
|
|
|
Net cash provided by operating activities
|
$
|
4,185.8
|
|
|
$
|
3,714.1
|
|
|
$
|
471.7
|
|
Net cash provided (used) by investing activities
|
(8,874.0)
|
|
|
9,541.0
|
|
|
(18,415.0)
|
|
Net cash provided (used) by financing activities
|
1,083.6
|
|
|
(6,922.3)
|
|
|
8,005.9
|
|
Effect of exchange rate changes on cash and cash equivalents and restricted cash
|
141.0
|
|
|
0.4
|
|
|
140.6
|
|
Net increase (decrease) in cash and cash equivalents and restricted cash
|
$
|
(3,463.6)
|
|
|
$
|
6,333.2
|
|
|
$
|
(9,796.8)
|
|
Operating Activities. The increase in net cash provided by our operating activities is primarily attributable to the net effect of (i) an increase in the reported cash provided by operating activities due to FX, (ii) a decrease in the cash provided by our Adjusted EBITDA and related working capital items, which includes an increase in cash of $272.1 million (at the applicable rate) in connection with the VM Receivables Financing Sale, (iii) an increase in cash provided due to lower payments of interest, (iv) a decrease in cash provided due to higher cash payments related to derivative instruments, (v) an increase in cash provided due to lower payments for taxes and (vi) an increase in cash provided due to higher cash received from dividends. Consolidated Adjusted EBITDA is a non-GAAP measure, which investors should view as a supplement to, and not a substitute for, GAAP measures of performance included in our consolidated statements of operations.
Investing Activities. The change in net cash provided (used) by our investing activities is primarily attributable to the net effect of (i) a decrease in cash of $11,203.1 million as a result of higher net cash proceeds received from the sale of discontinued operations during 2019, (ii) a decrease in cash of $5,244.7 million associated with higher net cash paid for acquisitions, primarily related to the Sunrise Acquisition, (iii) a decrease in cash of $2,114.8 million associated with higher net cash paid for investments, primarily related to our investments held under SMAs, (iv) an increase in cash of $400.1 million as a result of cash released from the Vodafone Escrow Accounts and (v) a decrease in cash of $107.1 million due to higher capital expenditures. Capital expenditures increased from $1,243.1 million during 2019 to $1,350.2 million during 2020 primarily attributable to an increase due to lower proceeds received for transfers to related parties.
The capital expenditures we report in our consolidated statements of cash flows do not include amounts that are financed under capital-related vendor financing or finance lease arrangements. Instead, these amounts are reflected as non-cash additions to our property and equipment when the underlying assets are delivered and as repayments of debt when the principal is repaid. In this discussion, we refer to (i) our capital expenditures as reported in our consolidated statements of cash flows, which exclude amounts financed under capital-related vendor financing or finance lease arrangements, and (ii) our total property and equipment additions, which include our capital expenditures on an accrual basis and amounts financed under capital-related vendor financing or finance lease arrangements. For further details regarding our property and equipment additions, see note 20 to our consolidated financial statements. A reconciliation of our consolidated property and equipment additions to our consolidated capital expenditures, as reported in our consolidated statements of cash flows, is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
in millions
|
|
|
|
|
Property and equipment additions
|
$
|
2,695.3
|
|
|
$
|
2,880.5
|
|
Assets acquired under capital-related vendor financing arrangements
|
(1,371.1)
|
|
|
(1,727.0)
|
|
Assets acquired under finance leases
|
(49.7)
|
|
|
(66.9)
|
|
Changes in current liabilities related to capital expenditures
|
75.7
|
|
|
156.5
|
|
Capital expenditures, net
|
$
|
1,350.2
|
|
|
$
|
1,243.1
|
|
|
|
|
|
Capital expenditures, net:
|
|
|
|
Third-party payments
|
$
|
1,352.7
|
|
|
$
|
1,323.9
|
|
Proceeds received for transfers to related parties (a)
|
(2.5)
|
|
|
(80.8)
|
|
Total capital expenditures, net
|
$
|
1,350.2
|
|
|
$
|
1,243.1
|
|
_______________
(a)Primarily relates to transfers of centrally-procured property and equipment to the VodafoneZiggo JV and our discontinued operations, as applicable.
The decrease in our property and equipment additions during 2020 is due to (i) a decrease in local currency expenditures of our subsidiaries due to the net effect of (a) a decrease in expenditures for the purchase and installation of customer premises equipment, (b) a decrease in baseline expenditures, including network improvements and expenditures for property and facilities and information technology systems, (c) a decrease in expenditures for new build and upgrade projects, (d) an increase due to the Sunrise Acquisition and (e) an increase in expenditures to support new customer products and operational efficiency initiatives and (ii) an increase due to FX. During 2020 and 2019, our property and equipment additions represented 22.5% and 25.0% of revenue, respectively.
We expect our 2021 property and equipment additions to remain relatively stable as compared to our 2020 property and equipment additions. The actual amount of our 2021 property and equipment additions may vary from our expectations for a variety of reasons, including (i) changes in (a) the competitive or regulatory environment, (b) business plans, (c) our expected future operating results or (d) foreign currency exchange rates and (ii) the availability of sufficient capital. Accordingly, no assurance can be given that our actual property and equipment additions will not vary materially from our expectations.
Financing Activities. The change in net cash provided (used) by our financing activities is primarily attributable to an increase in cash of (i) $6,207.7 million due to higher net borrowings of debt and (ii) $2,147.1 million due to lower repurchases of Liberty Global ordinary shares.
Consolidated Statements of Cash Flows — 2019 compared to 2018
For information regarding (i) the consolidated statements of cash flows of our continuing operations for 2019, as compared to 2018, and (ii) our adjusted free cash flow for 2018, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II of our 2019 10-K.
Adjusted Free Cash Flow
We define adjusted free cash flow as net cash provided by the operating activities of our continuing operations, 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 finance leases (exclusive of the portions of the network lease in Belgium that we assumed in connection with an acquisition), with each item excluding any cash provided or used by our discontinued operations. We believe 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, which is a non-GAAP measure, should not be understood to represent our ability to fund discretionary amounts, as we have various mandatory and contractual obligations, including debt repayments, that are not deducted to arrive at this amount. Investors should view adjusted free cash flow as a supplement to, and not a substitute for, GAAP measures of liquidity included in our consolidated statements of cash flows.
The following table provides the details of our adjusted free cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
in millions
|
|
|
|
|
Net cash provided by operating activities of our continuing operations (a)
|
$
|
4,185.8
|
|
|
$
|
3,714.1
|
|
Cash payments (receipts) for direct acquisition and disposition costs
|
34.7
|
|
|
(13.5)
|
|
Expenses financed by an intermediary (b)
|
2,770.0
|
|
|
2,171.4
|
|
Capital expenditures, net
|
(1,350.2)
|
|
|
(1,243.1)
|
|
Principal payments on amounts financed by vendors and intermediaries
|
(4,506.0)
|
|
|
(3,934.7)
|
|
Principal payments on certain finance leases
|
(64.5)
|
|
|
(62.9)
|
|
Adjusted free cash flow
|
$
|
1,069.8
|
|
|
$
|
631.3
|
|
_______________
(a)The 2019 amount includes interest payments related to debt that was repaid in connection with the completion of the disposition of the Vodafone Disposal Group. These interest payments were not allocated to discontinued operations.
(b)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.
Critical Accounting Policies, Judgments and Estimates
In connection with the preparation of our consolidated financial statements, we make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. Critical accounting policies are defined as those policies that are reflective of significant judgments, estimates and uncertainties, which would potentially result in materially different results under different assumptions and conditions. We believe the following accounting policies are critical in the preparation of our consolidated financial statements because of the judgment necessary to account for these matters and the significant estimates involved, which are susceptible to change:
•Impairment of property and equipment and intangible assets (including goodwill);
•Costs associated with construction and installation activities;
•Fair value measurements; and
•Income tax accounting.
We have discussed the selection of the aforementioned critical accounting policies with the audit committee of our board of directors. For additional information concerning our significant accounting policies, see note 3 to our consolidated financial statements.
Impairment of Property and Equipment and Intangible Assets
Carrying Value. The aggregate carrying value of our property and equipment and intangible assets (including goodwill) that was held for use comprised 36.2% of our total assets at December 31, 2020.
When circumstances warrant, we review the carrying amounts of our property and equipment and our intangible assets (other than goodwill and other indefinite-lived intangible assets) to determine whether such carrying amounts continue to be recoverable. Such changes in circumstance may include (i) an expectation of a sale or disposal of a long-lived asset or asset group, (ii) adverse changes in market or competitive conditions, (iii) an adverse change in legal factors or business climate in the markets in which we operate and (iv) operating or cash flow losses. For purposes of impairment testing, long-lived assets are grouped at the lowest level for which cash flows are largely independent of other assets and liabilities, generally at or below the reporting unit level (see below). If the carrying amount of the asset or asset group is greater than the expected undiscounted cash flows to be generated by such asset or asset group, an impairment adjustment is recognized. Such adjustment is measured by the amount that the carrying value of such asset or asset group exceeds its fair value. We generally measure fair value by considering (a) sale prices for similar assets, (b) discounted estimated future cash flows using an appropriate discount rate and/or (c) estimated replacement cost. Assets to be disposed of are recorded at the lower of their carrying amount or fair value less costs to sell.
We evaluate goodwill and other indefinite-lived intangible assets for impairment at least annually on October 1 and whenever facts and circumstances indicate that their carrying amounts may not be recoverable. For impairment evaluations with respect to both goodwill and other indefinite-lived intangibles, we first make a qualitative assessment to determine if the goodwill or other indefinite-lived intangible may be impaired. In the case of goodwill, if it is more-likely-than-not that a reporting unit’s fair value is less than its carrying value, we then compare the fair value of the reporting unit to its respective carrying amount. Any excess of the carrying amount over the fair value would be charged to operations as an impairment loss. A reporting unit is an operating segment or one level below an operating segment (referred to as a “component”). With respect to other indefinite-lived intangible assets, if it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying value, we then estimate its fair value and any excess of the carrying value over the fair value is also charged to operations as an impairment loss.
When required, considerable management judgment is necessary to estimate the fair value of reporting units and underlying long-lived and indefinite-lived assets. The equity of one of our reporting units, Telenet, is publicly traded in an active market. For this reporting unit, our fair value determination is based on quoted market prices. For other reporting units, we typically determine fair value using an income-based approach (discounted cash flows) based on assumptions in our long-range business plans and, in some cases, a combination of an income-based approach and a market-based approach. With respect to our discounted cash flow analysis used in the income-based approach, the timing and amount of future cash flows under these business plans require estimates of, among other items, subscriber growth and retention rates, rates charged per product, expected gross margins and Adjusted EBITDA margins and expected property and equipment additions. The development of these cash flows, and the discount rate applied to the cash flows, is subject to inherent uncertainties, and actual results could vary significantly from such estimates. Our determination of the discount rate is based on a weighted average cost of capital approach, which uses a market participant’s cost of equity and after-tax cost of debt and reflects the risks inherent in
the cash flows. Based on the results of our 2020 qualitative assessment of our reporting unit carrying values, we determined that it was more-likely-than-not that fair value exceeded carrying value for all of our reporting units.
During the three years ended December 31, 2020, we did not record any significant impairment charges with respect to our property and equipment and intangible assets. For additional information regarding our long-lived assets, see note 10 to our consolidated financial statements.
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.
Costs Associated with Construction and Installation Activities
We capitalize costs associated with the construction of new cable and mobile transmission and distribution facilities and the installation of new cable services. Installation activities that are capitalized include (i) the initial connection (or drop) from our cable system to a customer location, (ii) the replacement of a drop and (iii) the installation of equipment for additional services, such as digital cable, telephone or broadband internet service. The costs of other customer-facing activities, such as reconnecting customer locations where a drop already exists, disconnecting customer locations and repairing or maintaining drops, are expensed as incurred.
The nature and amount of labor and other costs to be capitalized with respect to construction and installation activities involves significant judgment. In addition to direct external and internal labor and materials, we also capitalize other costs directly attributable to our construction and installation activities, including dispatch costs, quality-control costs, vehicle-related costs and certain warehouse-related costs. The capitalization of these costs is based on time sheets, time studies, standard costs, call tracking systems and other verifiable means that directly link the costs incurred with the applicable capitalizable activity. We continuously monitor the appropriateness of our capitalization policies and update the policies when necessary to respond to changes in facts and circumstances, such as the development of new products and services and changes in the manner that installations or construction activities are performed.
Fair Value Measurements
GAAP provides guidance with respect to the recurring and nonrecurring fair value measurements and 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.
Recurring Valuations. We perform recurring fair value measurements with respect to our derivative instruments, our fair value method investments and certain instruments that we classify as debt, each of which are carried at fair value. We use (i) cash flow valuation models to determine the fair values of our interest rate and foreign currency derivative instruments and (ii) a Black Scholes option pricing model to determine the fair values of our equity-related derivative instruments. We use quoted market prices when available and, when not available, we use a combination of an income approach (discounted cash flows) and a market approach (market multiples of similar businesses) to determine the fair value of our fair value method investments. For a detailed discussion of the inputs we use to determine the fair value of our derivative instruments and fair value method investments, see note 9 to our consolidated financial statements. See also notes 7 and 8 to our consolidated financial statements for information concerning our fair value method investments and derivative instruments, respectively.
Changes in the fair values of our derivative instruments, fair value method investments and certain instruments that we classify as debt have had, and we believe will continue to have, a significant and volatile impact on our results of operations. During 2020, 2019 and 2018, we recognized net gains (losses) of ($834.1 million), ($120.0 million) and $741.3 million, respectively, attributable to changes in the fair values of these items.
As further described in note 9 to our consolidated financial statements, actual amounts received or paid upon the settlement or disposition of these investments and instruments may differ materially from the recorded fair values at December 31, 2020.
For information concerning the sensitivity of the fair value of certain of our more significant derivative instruments to changes in market conditions, see Quantitative and Qualitative Disclosures About Market Risk — Sensitivity Information below.
Nonrecurring Valuations. Our nonrecurring valuations are primarily associated with (i) the application of acquisition accounting and (ii) impairment assessments, both of which require that we make fair value determinations as of the applicable valuation date. In making these determinations, we are required to make estimates and assumptions that affect the recorded amounts, including, but not limited to, expected future cash flows, market comparables and discount rates, remaining useful lives of long-lived assets, replacement or reproduction costs of property and equipment and the amounts to be recovered in future periods from acquired net operating losses and other deferred tax assets. To assist us in making these fair value determinations, we may engage third-party valuation specialists. Our estimates in this area impact, among other items, the amount of depreciation and amortization, impairment charges and income tax expense or benefit that we report. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain. A significant portion of our long-lived assets were initially recorded through the application of acquisition accounting and all of our long-lived assets are subject to impairment assessments. For additional information, see note 9 to our consolidated financial statements. For information regarding our acquisitions and long-lived assets, see notes 5 and 10 to our consolidated financial statements, respectively.
Income Tax Accounting
We are required to estimate the amount of tax payable or refundable for the current year and the deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and income tax basis of assets and liabilities and the expected benefits of utilizing net operating loss and tax credit carryforwards, using enacted tax rates in effect for each taxing jurisdiction in which we operate for the year in which those temporary differences are expected to be recovered or settled. This process requires our management to make assessments regarding the timing and probability of the ultimate tax impact of such items.
Net deferred tax assets are reduced by a valuation allowance if we believe that it is more-likely-than-not such net deferred tax assets will not be realized. Establishing or reducing a tax valuation allowance requires us to make assessments about the timing of future events, including the probability of expected future taxable income and available tax planning strategies. At December 31, 2020, the aggregate valuation allowance provided against deferred tax assets was $1,578.9 million. The actual amount of deferred income tax benefits realized in future periods will likely differ from the net deferred tax assets reflected in our December 31, 2020 consolidated balance sheet due to, among other factors, possible future changes in income tax law or interpretations thereof in the jurisdictions in which we operate and differences between estimated and actual future taxable income. Any such factors could have a material effect on our current and deferred tax positions as reported in our consolidated financial statements. A high degree of judgment is required to assess the impact of possible future outcomes on our current and deferred tax positions.
Tax laws in jurisdictions in which we have a presence are subject to varied interpretation, and many tax positions we take are subject to significant uncertainty regarding whether the position will be ultimately sustained after review by the relevant tax authority. We recognize the financial statement effects of a tax position when it is more-likely-than-not, based on technical merits, that the position will be sustained upon examination. The determination of whether the tax position meets the more-likely-than-not threshold requires a facts-based judgment using all information available. In a number of cases, we have concluded that the more-likely-than-not threshold is not met and, accordingly, the amount of tax benefit recognized in our consolidated financial statements is different than the amount taken or expected to be taken in our tax returns. As of December 31, 2020, the amount of unrecognized tax benefits for financial reporting purposes, but taken or expected to be taken in our tax returns, was $604.9 million, of which $421.5 million 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.
We are required to continually assess our tax positions, and the results of tax examinations or changes in judgment can result in substantial changes to our unrecognized tax benefits.
Item 9B. OTHER INFORMATION
Not applicable.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of internal control over financial reporting as of December 31, 2020, using the criteria in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management believes that our internal control over financial reporting was effective as of December 31, 2020. The effectiveness of our internal control over financial reporting has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report included herein. In November 2020, we acquired Sunrise Communications Group AG (Sunrise). Our evaluation of internal control over financial reporting did not include the internal control of Sunrise. The amount of total assets and revenue included in our consolidated financial statements as of and for the year ended December 31, 2020 that is attributable to Sunrise was $9.6 billion and $314.0 million, respectively.
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Liberty Global plc:
Opinion on Internal Control Over Financial Reporting
We have audited Liberty Global plc and subsidiaries (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive earnings (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement schedules I and II (collectively, the consolidated financial statements), and our report dated February 16, 2021 expressed an unqualified opinion on those consolidated financial statements.
The Company acquired Sunrise Communications Group AG (Sunrise) during 2020, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020, Sunrise’s internal control over financial reporting associated with total assets of $9.6 billion and total revenues of $314.0 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2020. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Sunrise.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Denver, Colorado
February 16, 2021
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Liberty Global plc:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Liberty Global plc and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive earnings (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement schedules I and II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 16, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 2, the Company changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Update No. 2016-02, Leases.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Capitalization of internal and external labor and overhead costs for construction and installation activities
As discussed in Notes 3 and 10 to the consolidated financial statements, the Company capitalizes certain internal and external labor and overhead costs. Capitalized internal and external labor and overhead costs are recorded within property and equipment, including property and equipment classified as assets held for sale. Property and equipment, and property and equipment classified as assets held for sale were $8,054.1 million and $8,614.0 million, respectively as of December 31, 2020.
We identified the assessment of the capitalization of internal and external labor and overhead costs for construction and installation activities as a critical audit matter. Assessing the Company’s determination of which costs qualify for capitalization or expense in the period involved subjective auditor judgment.
The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature of procedures to be performed over the capitalization of internal and external labor and overhead costs for construction and installation activities. This included comparing the internal and external labor and overhead costs capitalized in the current year for construction and installation activities to the historical internal and external labor and overhead costs capitalized, considering the nature of the Company’s business activities, to identify, for further investigation, inconsistent trends or unexpected patterns of capitalization. We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. This included controls related to (1) the Company’s identification of qualifying capital internal and external labor and overhead costs and (2) the Company’s review of the nature of the underlying activity. We selected a sample of capitalized internal and external labor and overhead costs and assessed the capitalization by investigating the nature of the costs based on underlying internal and third-party documentation. We interviewed operational personnel at the Company to assess the relevance and reliability of the internal documentation provided to support the determination of capitalization versus expense treatment for construction and installation activities.
Preliminary fair value measurement of the customer relationship intangible asset and property and equipment acquired in the Sunrise acquisition
As discussed in Note 5 to the consolidated financial statements, Liberty Global plc (the “Company”) acquired Sunrise Communications AG (Sunrise) on November 11, 2020 for total consideration of $5,427.8 million. Based on the preliminary estimated allocation of the purchase price, the acquisition resulted in the recognition of $2,485.8 million of intangible assets subject to amortization, including a customer relationship intangible, and $1,494.2 million of property and equipment. The purchase price allocated to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill, is based on preliminary information, which is subject to change as additional information is obtained by the Company. The preliminary information that was available to allocate consideration to the assets acquired and liabilities assumed was affected by the proximity of the acquisition date to the Company’s fiscal year-end date of December 31, 2020. During the measurement period, the Company will adjust the preliminary estimated values allocated to the assets acquired and liabilities assumed as additional information is obtained about the facts and circumstances that existed as of the acquisition date.
We identified the assessment of the preliminary fair value measurement of the customer relationship intangible asset and property and equipment acquired in the Sunrise acquisition as a critical audit matter. Testing the projected revenue growth rates, the estimated customer attrition rate, the discount rate, and the methodologies used to estimate the fair value of property and equipment required a higher degree of auditor judgment due to the nature of the assumptions and the proximity of the acquisition to the end of the year. Additionally, addressing the matter involved specialized skill and knowledge.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s preliminary fair value measurement process related to the acquisition, including controls related to the development of the above assumptions. Due to the proximity of the acquisition to the end of the year we applied auditor judgment to determine the nature of procedures to be performed for the above assumptions. This included performing sensitivity analyses to assess the impact of possible changes to certain assumptions on the preliminary fair value measurement of the customer relationship intangible asset. We evaluated the revenue growth rates used by the Company to determine projected revenue by comparing them to historical average growth rates of Sunrise, and publicly available industry data. We assessed the customer attrition rate based on historical data of Sunrise and by comparing it to the historical attrition rate of Sunrise. We involved valuation professionals with specialized skills and knowledge, who assisted in:
–Evaluating the methodologies employed to estimate the fair value of the customer relationship intangible asset and property and equipment based on information available as of December 31, 2020;
–Evaluating the discount rate by comparing it to an independently developed range using publicly available market data for comparable entities; and
–Developing an estimated range of fair values of the customer relationship acquired using the Company’s cash flow assumptions and an independently developed range of discount rates, and comparing it to the Company’s fair value estimate.
/s/ KPMG LLP
We have served as the Company’s auditor since 2004.
Denver, Colorado
February 16, 2021
LIBERTY GLOBAL PLC
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
|
in millions
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
1,327.2
|
|
|
$
|
8,142.4
|
|
Trade receivables, net
|
1,090.7
|
|
|
1,404.8
|
|
Short-term investments (measured at fair value on a recurring basis) (note 7)
|
1,600.2
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Other current assets (notes 4, 6, 7 and 8)
|
831.0
|
|
|
1,026.1
|
|
Total current assets
|
4,849.1
|
|
|
10,573.3
|
|
Investments and related notes receivable (including $3,466.0 million and $1,289.2 million, respectively, measured at fair value on a recurring basis) (note 7)
|
5,354.5
|
|
|
4,782.0
|
|
Property and equipment, net (notes 10 and 12)
|
8,054.1
|
|
|
13,843.4
|
|
Goodwill (note 10 )
|
10,466.7
|
|
|
14,052.1
|
|
Intangible assets subject to amortization, net (note 10)
|
2,886.0
|
|
|
572.1
|
|
Deferred tax assets (note 13)
|
565.1
|
|
|
2,457.4
|
|
Assets held for sale (note 6)
|
24,282.7
|
|
|
—
|
|
Other assets, net (notes 4, 6, 8, 10 and 12)
|
2,634.5
|
|
|
2,766.0
|
|
Total assets
|
$
|
59,092.7
|
|
|
$
|
49,046.3
|
|
The accompanying notes are an integral part of these consolidated financial statements.
II-48
LIBERTY GLOBAL PLC
CONSOLIDATED BALANCE SHEETS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
|
in millions
|
LIABILITIES AND EQUITY
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable
|
$
|
618.2
|
|
|
$
|
963.9
|
|
Deferred revenue (note 4)
|
430.9
|
|
|
834.9
|
|
Current portion of debt and finance lease obligations (notes 11 and 12)
|
1,130.4
|
|
|
3,877.2
|
|
|
|
|
|
Accrued income taxes
|
253.6
|
|
|
307.0
|
|
Derivative instruments (note 8)
|
252.7
|
|
|
390.4
|
|
Other accrued and current liabilities (notes 12 and 16)
|
1,781.2
|
|
|
2,278.3
|
|
Total current liabilities
|
4,467.0
|
|
|
8,651.7
|
|
Long-term debt and finance lease obligations (notes 11 and 12)
|
13,867.3
|
|
|
24,305.3
|
|
Liabilities associated with assets held for sale (note 6)
|
23,197.2
|
|
|
—
|
|
Other long-term liabilities (notes 4, 8, 12, 13, 16 and 17)
|
4,262.8
|
|
|
2,890.7
|
|
Total liabilities
|
45,794.3
|
|
|
35,847.7
|
|
|
|
|
|
Commitments and contingencies (notes 8, 11, 13, 17 and 19)
|
|
|
|
|
|
|
|
Equity (note 14):
|
|
|
|
Liberty Global shareholders:
|
|
|
|
Class A ordinary shares, $0.01 nominal value. Issued and outstanding 181,348,114 and 181,560,735 shares, respectively
|
1.8
|
|
|
1.8
|
|
Class B ordinary shares, $0.01 nominal value. Issued and outstanding 12,561,444 and 12,151,526 shares, respectively
|
0.1
|
|
|
0.1
|
|
Class C ordinary shares, $0.01 nominal value. Issued and outstanding 386,588,921 and 438,867,447 shares, respectively
|
3.9
|
|
|
4.4
|
|
Additional paid-in capital
|
5,271.7
|
|
|
6,136.9
|
|
Accumulated earnings
|
4,692.1
|
|
|
6,350.4
|
|
Accumulated other comprehensive earnings, net of taxes
|
3,693.1
|
|
|
1,112.7
|
|
Treasury shares, at cost
|
(0.1)
|
|
|
(0.1)
|
|
Total Liberty Global shareholders
|
13,662.6
|
|
|
13,606.2
|
|
Noncontrolling interests
|
(364.2)
|
|
|
(407.6)
|
|
Total equity
|
13,298.4
|
|
|
13,198.6
|
|
Total liabilities and equity
|
$
|
59,092.7
|
|
|
$
|
49,046.3
|
|
The accompanying notes are an integral part of these consolidated financial statements.
II-49
LIBERTY GLOBAL PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions, except share and per share amounts
|
|
|
|
|
|
|
Revenue (notes 4, 6, 7 and 20)
|
$
|
11,980.1
|
|
|
$
|
11,541.5
|
|
|
$
|
11,957.9
|
|
Operating costs and expenses (exclusive of depreciation and amortization, shown separately below):
|
|
|
|
|
|
Programming and other direct costs of services
|
3,437.0
|
|
|
3,238.7
|
|
|
3,246.1
|
|
Other operating (note 15)
|
1,777.2
|
|
|
1,641.3
|
|
|
1,717.2
|
|
Selling, general and administrative (SG&A) (note 15)
|
2,218.3
|
|
|
2,107.8
|
|
|
2,049.1
|
|
Depreciation and amortization (note 10)
|
2,331.3
|
|
|
3,652.2
|
|
|
3,858.2
|
|
Impairment, restructuring and other operating items, net (notes 5, 16 and 17)
|
98.6
|
|
|
156.0
|
|
|
248.2
|
|
|
9,862.4
|
|
|
10,796.0
|
|
|
11,118.8
|
|
Operating income
|
2,117.7
|
|
|
745.5
|
|
|
839.1
|
|
Non-operating income (expense):
|
|
|
|
|
|
Interest expense
|
(1,188.5)
|
|
|
(1,385.9)
|
|
|
(1,478.7)
|
|
Realized and unrealized gains (losses) on derivative instruments, net (note 8)
|
(879.3)
|
|
|
(192.0)
|
|
|
1,125.8
|
|
Foreign currency transaction gains (losses), net
|
(1,416.3)
|
|
|
(94.8)
|
|
|
90.4
|
|
Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net (notes 7, 9 and 11)
|
45.2
|
|
|
72.0
|
|
|
(384.5)
|
|
Losses on debt extinguishment, net (note 11)
|
(233.2)
|
|
|
(216.7)
|
|
|
(65.0)
|
|
Share of results of affiliates, net (note 7)
|
(245.3)
|
|
|
(198.5)
|
|
|
(8.7)
|
|
Other income, net
|
76.1
|
|
|
114.4
|
|
|
43.4
|
|
|
(3,841.3)
|
|
|
(1,901.5)
|
|
|
(677.3)
|
|
Earnings (loss) from continuing operations before income taxes
|
(1,723.6)
|
|
|
(1,156.0)
|
|
|
161.8
|
|
Income tax benefit (expense) (note 13)
|
256.9
|
|
|
(253.0)
|
|
|
(1,573.3)
|
|
Loss from continuing operations
|
(1,466.7)
|
|
|
(1,409.0)
|
|
|
(1,411.5)
|
|
Discontinued operations (note 6):
|
|
|
|
|
|
Earnings from discontinued operations, net of taxes
|
—
|
|
|
730.3
|
|
|
1,163.4
|
|
Gain on disposal of discontinued operations, net of taxes
|
—
|
|
|
12,316.9
|
|
|
1,098.1
|
|
|
—
|
|
|
13,047.2
|
|
|
2,261.5
|
|
Net earnings (loss)
|
(1,466.7)
|
|
|
11,638.2
|
|
|
850.0
|
|
Net earnings attributable to noncontrolling interests
|
(161.3)
|
|
|
(116.8)
|
|
|
(124.7)
|
|
Net earnings (loss) attributable to Liberty Global shareholders
|
$
|
(1,628.0)
|
|
|
$
|
11,521.4
|
|
|
$
|
725.3
|
|
|
|
|
|
|
|
Basic and diluted loss from continuing operations attributable to Liberty Global shareholders per share (note 3)
|
$
|
(2.70)
|
|
|
$
|
(2.16)
|
|
|
$
|
(1.97)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted
|
602,083,910
|
|
|
705,794,546
|
|
|
778,675,957
|
|
The accompanying notes are an integral part of these consolidated financial statements.
II-50
LIBERTY GLOBAL PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
Net earnings (loss)
|
$
|
(1,466.7)
|
|
|
$
|
11,638.2
|
|
|
$
|
850.0
|
|
Other comprehensive earnings (loss), net of taxes (note 18):
|
|
|
|
|
|
Continuing operations:
|
|
|
|
|
|
Foreign currency translation adjustments
|
2,599.7
|
|
|
435.5
|
|
|
(897.9)
|
|
Pension-related adjustments and other
|
(18.7)
|
|
|
(14.4)
|
|
|
(20.0)
|
|
Other comprehensive earnings (loss) from continuing operations
|
2,581.0
|
|
|
421.1
|
|
|
(917.9)
|
|
Other comprehensive earnings (loss) from discontinued operations (note 6)
|
—
|
|
|
61.0
|
|
|
(106.1)
|
|
Other comprehensive earnings (loss)
|
2,581.0
|
|
|
482.1
|
|
|
(1,024.0)
|
|
Comprehensive earnings (loss)
|
1,114.3
|
|
|
12,120.3
|
|
|
(174.0)
|
|
Comprehensive earnings attributable to noncontrolling interests
|
(161.9)
|
|
|
(118.0)
|
|
|
(124.9)
|
|
Comprehensive earnings (loss) attributable to Liberty Global shareholders
|
$
|
952.4
|
|
|
$
|
12,002.3
|
|
|
$
|
(298.9)
|
|
The accompanying notes are an integral part of these consolidated financial statements.
II-51
LIBERTY GLOBAL PLC
CONSOLIDATED STATEMENTS OF EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
$
|
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 earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
725.3
|
|
|
—
|
|
|
—
|
|
|
725.3
|
|
|
124.7
|
|
|
850.0
|
|
Other comprehensive loss, net of taxes (note 18)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,024.2)
|
|
|
—
|
|
|
(1,024.2)
|
|
|
0.2
|
|
|
(1,024.0)
|
|
Repurchases and cancellations of Liberty Global ordinary shares (note 14)
|
(0.2)
|
|
|
—
|
|
|
(0.5)
|
|
|
(2,009.3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,010.0)
|
|
|
—
|
|
|
(2,010.0)
|
|
Distributions by subsidiaries to noncontrolling interest owners (note 14)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(298.4)
|
|
|
(298.4)
|
|
Repurchases by Telenet of its outstanding shares
|
—
|
|
|
—
|
|
|
—
|
|
|
(294.0)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(294.0)
|
|
|
35.4
|
|
|
(258.6)
|
|
Share-based compensation (note 15)
|
—
|
|
|
—
|
|
|
—
|
|
|
154.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
154.4
|
|
|
—
|
|
|
154.4
|
|
Adjustments due to changes in subsidiaries’ equity and other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
4.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.8
|
|
|
12.6
|
|
|
17.4
|
|
Balance at December 31, 2018
|
$
|
2.0
|
|
|
$
|
0.1
|
|
|
$
|
5.3
|
|
|
$
|
9,214.5
|
|
|
$
|
(5,172.2)
|
|
|
$
|
631.8
|
|
|
$
|
(0.1)
|
|
|
$
|
4,681.4
|
|
|
$
|
(533.1)
|
|
|
$
|
4,148.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
II-52
LIBERTY GLOBAL PLC
CONSOLIDATED STATEMENTS OF EQUITY — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liberty Global shareholders
|
|
Non-controlling
interests
|
|
Total
equity
|
|
Ordinary shares
|
|
Additional
paid-in
capital
|
|
Accumulated earnings
(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, 2019, before effect of accounting change
|
$
|
2.0
|
|
|
$
|
0.1
|
|
|
$
|
5.3
|
|
|
$
|
9,214.5
|
|
|
$
|
(5,172.2)
|
|
|
$
|
631.8
|
|
|
$
|
(0.1)
|
|
|
$
|
4,681.4
|
|
|
$
|
(533.1)
|
|
|
$
|
4,148.3
|
|
Impact of ASU No. 2016-02, Leases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
|
1.2
|
|
Balance at January 1, 2019, as adjusted for accounting change
|
2.0
|
|
|
0.1
|
|
|
5.3
|
|
|
9,214.5
|
|
|
(5,171.0)
|
|
|
631.8
|
|
|
(0.1)
|
|
|
4,682.6
|
|
|
(533.1)
|
|
|
4,149.5
|
|
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,521.4
|
|
|
—
|
|
|
—
|
|
|
11,521.4
|
|
|
116.8
|
|
|
11,638.2
|
|
Other comprehensive earnings, net of taxes (note 18)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
480.9
|
|
|
—
|
|
|
480.9
|
|
|
1.2
|
|
|
482.1
|
|
Repurchases and cancellations of Liberty Global ordinary shares (note 14)
|
(0.2)
|
|
|
—
|
|
|
(0.9)
|
|
|
(3,219.1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,220.2)
|
|
|
—
|
|
|
(3,220.2)
|
|
Share-based compensation (note 15)
|
—
|
|
|
—
|
|
|
—
|
|
|
250.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
250.1
|
|
|
—
|
|
|
250.1
|
|
Repurchases by Telenet of its outstanding shares
|
—
|
|
|
—
|
|
|
—
|
|
|
(134.5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(134.5)
|
|
|
20.4
|
|
|
(114.1)
|
|
Adjustments due to changes in subsidiaries’ equity and other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
25.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25.9
|
|
|
(12.9)
|
|
|
13.0
|
|
Balance at December 31, 2019
|
$
|
1.8
|
|
|
$
|
0.1
|
|
|
$
|
4.4
|
|
|
$
|
6,136.9
|
|
|
$
|
6,350.4
|
|
|
$
|
1,112.7
|
|
|
$
|
(0.1)
|
|
|
$
|
13,606.2
|
|
|
$
|
(407.6)
|
|
|
$
|
13,198.6
|
|
The accompanying notes are an integral part of these consolidated financial statements.
II-53
LIBERTY GLOBAL PLC
CONSOLIDATED STATEMENTS OF EQUITY — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liberty Global shareholders
|
|
Non-controlling
interests
|
|
Total
equity
|
|
Ordinary shares
|
|
Additional
paid-in
capital
|
|
Accumulated
earnings
|
|
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, 2020, before effect of accounting change
|
$
|
1.8
|
|
|
$
|
0.1
|
|
|
$
|
4.4
|
|
|
$
|
6,136.9
|
|
|
$
|
6,350.4
|
|
|
$
|
1,112.7
|
|
|
$
|
(0.1)
|
|
|
$
|
13,606.2
|
|
|
$
|
(407.6)
|
|
|
$
|
13,198.6
|
|
Impact of ASU No. 2016-13 (note 2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30.3)
|
|
|
—
|
|
|
—
|
|
|
(30.3)
|
|
|
0.2
|
|
|
(30.1)
|
|
Balance at January 1, 2020, as adjusted for accounting change
|
1.8
|
|
|
0.1
|
|
|
4.4
|
|
|
6,136.9
|
|
|
6,320.1
|
|
|
1,112.7
|
|
|
(0.1)
|
|
|
13,575.9
|
|
|
(407.4)
|
|
|
13,168.5
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,628.0)
|
|
|
—
|
|
|
—
|
|
|
(1,628.0)
|
|
|
161.3
|
|
|
(1,466.7)
|
|
Other comprehensive earnings, net of taxes (note 18)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,580.4
|
|
|
—
|
|
|
2,580.4
|
|
|
0.6
|
|
|
2,581.0
|
|
Repurchases and cancellations of Liberty Global ordinary shares (note 14)
|
—
|
|
|
—
|
|
|
(0.5)
|
|
|
(1,071.8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,072.3)
|
|
|
—
|
|
|
(1,072.3)
|
|
Share-based compensation (note 15)
|
—
|
|
|
—
|
|
|
—
|
|
|
261.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
261.7
|
|
|
—
|
|
|
261.7
|
|
Distributions by subsidiaries to noncontrolling interest owners
(note 14)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(139.2)
|
|
|
(139.2)
|
|
Repurchases by Telenet of its outstanding shares
|
—
|
|
|
—
|
|
|
—
|
|
|
(45.3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45.3)
|
|
|
7.2
|
|
|
(38.1)
|
|
Adjustments due to changes in subsidiaries’ equity and other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(9.8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9.8)
|
|
|
13.3
|
|
|
3.5
|
|
Balance at December 31, 2020
|
$
|
1.8
|
|
|
$
|
0.1
|
|
|
$
|
3.9
|
|
|
$
|
5,271.7
|
|
|
$
|
4,692.1
|
|
|
$
|
3,693.1
|
|
|
$
|
(0.1)
|
|
|
$
|
13,662.6
|
|
|
$
|
(364.2)
|
|
|
$
|
13,298.4
|
|
The accompanying notes are an integral part of these consolidated financial statements.
II-54
LIBERTY GLOBAL PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
Cash flows from operating activities:
|
|
|
|
|
|
Net earnings (loss)
|
$
|
(1,466.7)
|
|
|
$
|
11,638.2
|
|
|
$
|
850.0
|
|
Earnings from discontinued operations
|
—
|
|
|
13,047.2
|
|
|
2,261.5
|
|
Loss from continuing operations
|
(1,466.7)
|
|
|
(1,409.0)
|
|
|
(1,411.5)
|
|
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities from continuing operations:
|
|
|
|
|
|
Share-based compensation expense
|
348.0
|
|
|
305.8
|
|
|
206.0
|
|
Depreciation and amortization
|
2,331.3
|
|
|
3,652.2
|
|
|
3,858.2
|
|
Impairment, restructuring and other operating items, net
|
98.6
|
|
|
156.0
|
|
|
248.2
|
|
Amortization of deferred financing costs and non-cash interest
|
44.8
|
|
|
53.7
|
|
|
56.4
|
|
Realized and unrealized losses (gains) on derivative instruments, net
|
879.3
|
|
|
192.0
|
|
|
(1,125.8)
|
|
Foreign currency transaction losses (gains), net
|
1,416.3
|
|
|
94.8
|
|
|
(90.4)
|
|
Realized and unrealized losses (gains) due to changes in fair values of certain investments and debt, net
|
(45.2)
|
|
|
(72.0)
|
|
|
384.5
|
|
Losses on debt extinguishment, net
|
233.2
|
|
|
216.7
|
|
|
65.0
|
|
Share of results of affiliates, net
|
245.3
|
|
|
198.5
|
|
|
8.7
|
|
|
|
|
|
|
|
Deferred income tax expense (benefit)
|
(261.7)
|
|
|
65.5
|
|
|
438.1
|
|
Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions:
|
|
|
|
|
|
Receivables and other operating assets
|
938.0
|
|
|
876.9
|
|
|
635.4
|
|
Payables and accruals
|
(841.5)
|
|
|
(787.2)
|
|
|
459.4
|
|
Dividends from affiliates and others
|
266.1
|
|
|
170.2
|
|
|
252.8
|
|
Net cash provided by operating activities of continuing operations
|
4,185.8
|
|
|
3,714.1
|
|
|
3,985.0
|
|
Net cash provided by operating activities of discontinued operations
|
—
|
|
|
871.3
|
|
|
1,978.1
|
|
Net cash provided by operating activities
|
4,185.8
|
|
|
4,585.4
|
|
|
5,963.1
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Cash paid for investments
|
(8,363.2)
|
|
|
(256.1)
|
|
|
(88.8)
|
|
Cash received from sale of investments
|
6,031.9
|
|
|
39.6
|
|
|
36.2
|
|
Cash paid in connection with acquisitions, net of cash acquired
|
(5,267.8)
|
|
|
(23.1)
|
|
|
(82.5)
|
|
Capital expenditures, net
|
(1,350.2)
|
|
|
(1,243.1)
|
|
|
(1,453.0)
|
|
Cash released from (used to fund) the Vodafone Escrow Accounts, net
|
104.9
|
|
|
(295.2)
|
|
|
—
|
|
Proceeds received upon disposition of discontinued operations, net
|
—
|
|
|
11,203.1
|
|
|
2,058.2
|
|
Other investing activities, net
|
(29.6)
|
|
|
115.8
|
|
|
131.4
|
|
Net cash provided (used) by investing activities of continuing operations
|
(8,874.0)
|
|
|
9,541.0
|
|
|
601.5
|
|
Net cash used by investing activities of discontinued operations
|
—
|
|
|
(266.4)
|
|
|
(514.2)
|
|
Net cash provided (used) by investing activities
|
$
|
(8,874.0)
|
|
|
$
|
9,274.6
|
|
|
$
|
87.3
|
|
The accompanying notes are an integral part of these consolidated financial statements.
II-55
LIBERTY GLOBAL PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
Cash flows from financing activities:
|
|
|
|
|
|
Borrowings of debt
|
$
|
15,975.9
|
|
|
$
|
6,618.8
|
|
|
$
|
4,396.5
|
|
Repayments and repurchases of debt and finance lease obligations
|
(13,450.1)
|
|
|
(10,300.7)
|
|
|
(8,170.6)
|
|
Repurchases of Liberty Global ordinary shares
|
(1,072.3)
|
|
|
(3,219.4)
|
|
|
(2,009.9)
|
|
Payment of financing costs and debt premiums
|
(290.0)
|
|
|
(206.8)
|
|
|
(73.1)
|
|
Distributions by subsidiaries to noncontrolling interest owners
|
(137.1)
|
|
|
(32.6)
|
|
|
(290.3)
|
|
Net cash received related to derivative instruments
|
129.1
|
|
|
331.5
|
|
|
112.8
|
|
Repurchases by Telenet of its outstanding shares
|
(38.1)
|
|
|
(114.1)
|
|
|
(244.7)
|
|
Other financing activities, net
|
(33.8)
|
|
|
1.0
|
|
|
(7.3)
|
|
Net cash provided (used) by financing activities of continuing operations
|
1,083.6
|
|
|
(6,922.3)
|
|
|
(6,286.6)
|
|
Net cash provided (used) by financing activities of discontinued operations
|
—
|
|
|
(254.3)
|
|
|
96.8
|
|
Net cash provided (used) by financing activities
|
1,083.6
|
|
|
(7,176.6)
|
|
|
(6,189.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents and restricted cash:
|
|
|
|
|
|
Continuing operations
|
141.0
|
|
|
0.4
|
|
|
(43.2)
|
|
Discontinued operations
|
—
|
|
|
(1.2)
|
|
|
(1.9)
|
|
Total
|
141.0
|
|
|
(0.8)
|
|
|
(45.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents and restricted cash:
|
|
|
|
|
|
Continuing operations
|
(3,463.6)
|
|
|
6,333.2
|
|
|
(1,743.3)
|
|
Discontinued operations
|
—
|
|
|
349.4
|
|
|
1,558.8
|
|
|
|
|
|
|
|
Total
|
$
|
(3,463.6)
|
|
|
$
|
6,682.6
|
|
|
$
|
(184.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and restricted cash:
|
|
|
|
|
|
Beginning of year
|
$
|
8,180.9
|
|
|
$
|
1,498.3
|
|
|
$
|
1,682.8
|
|
Net increase (decrease)
|
(3,463.6)
|
|
|
6,682.6
|
|
|
(184.5)
|
|
End of year
|
$
|
4,717.3
|
|
|
$
|
8,180.9
|
|
|
$
|
1,498.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest:
|
|
|
|
|
|
Continuing operations
|
$
|
1,127.7
|
|
|
$
|
1,422.7
|
|
|
$
|
1,405.7
|
|
Discontinued operations
|
—
|
|
|
361.5
|
|
|
436.4
|
|
Total
|
$
|
1,127.7
|
|
|
$
|
1,784.2
|
|
|
$
|
1,842.1
|
|
|
|
|
|
|
|
Net cash paid for taxes:
|
|
|
|
|
|
Continuing operations
|
$
|
247.7
|
|
|
$
|
358.2
|
|
|
$
|
309.0
|
|
Discontinued operations
|
—
|
|
|
135.9
|
|
|
55.1
|
|
Total
|
$
|
247.7
|
|
|
$
|
494.1
|
|
|
$
|
364.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details of end of period cash and cash equivalents and restricted cash:
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,327.2
|
|
|
$
|
8,142.4
|
|
|
$
|
1,480.5
|
|
Restricted cash included in assets held for sale
|
3,383.3
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
Restricted cash included in other current assets and other assets, net
|
6.8
|
|
|
38.5
|
|
|
15.9
|
|
Restricted cash included in current and long-term assets of discontinued operations
|
—
|
|
|
—
|
|
|
1.9
|
|
Total cash and cash equivalents and restricted cash
|
$
|
4,717.3
|
|
|
$
|
8,180.9
|
|
|
$
|
1,498.3
|
|
The accompanying notes are an integral part of these consolidated financial statements.
II-56
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements
December 31, 2020, 2019 and 2018
(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 broadband internet, video, fixed-line telephony and mobile communications services to residential customers and businesses in Europe.
We provide residential and business-to-business (B2B) communications services in (i) the United Kingdom (U.K.) and Ireland through Virgin Media Inc. (Virgin Media), a wholly-owned subsidiary, (ii) Belgium through Telenet Group Holding N.V. (Telenet), a 60.7%-owned subsidiary, and (iii) Switzerland, Poland and Slovakia through various wholly-owned subsidiaries that we collectively refer to as “UPC Holding.” In addition, we own a 50% noncontrolling interest in a 50:50 joint venture between Vodafone Group plc (Vodafone) and Liberty Global (the VodafoneZiggo JV), which provides residential and B2B communication services in the Netherlands.
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP).
Effective May 7, 2020, in connection with the pending formation of the U.K. JV (as defined in note 6), we began accounting for the U.K. JV Entities (as defined in note 6) as held for sale. Accordingly, the assets and liabilities of the U.K. JV Entities are included in assets held for sale and liabilities associated with assets held for sale, respectively, on our December 31, 2020 consolidated balance sheet. Consistent with the applicable guidance, we have not reflected similar reclassifications in our consolidated statements of operations or cash flows. For additional information, see note 6.
Through July 31, 2019, we provided residential and B2B communication services in (i) Germany through Unitymedia GmbH (Unitymedia) and (ii) Hungary, the Czech Republic and Romania through UPC Holding B.V. In addition, (a) through May 2, 2019, we provided direct-to-home satellite (DTH) services to residential customers in Hungary, the Czech Republic, Romania and Slovakia through a Luxembourg-based subsidiary of UPC Holding B.V. that we refer to as “UPC DTH” and (b) through July 31, 2018, we provided residential and B2B communication services in Austria. In these consolidated financial statements, our operations in Austria, Germany, Romania, Hungary and the Czech Republic and the operations of UPC DTH are presented as discontinued operations for all applicable periods. For information regarding the disposition of these entities, see note 6.
Unless otherwise indicated, the amounts presented in these notes relate only to our continuing operations, and ownership percentages and convenience translations into United States (U.S.) dollars are calculated as of December 31, 2020.
(2) Accounting Changes and Recent Accounting Pronouncements
Accounting Changes
ASU 2018-15
In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (ASU 2018-15), which requires entities to defer implementation costs incurred that are related to the application development stage in a cloud computing arrangement that is a service contract. ASU 2018-15 requires deferred implementation costs to be amortized over the term of the cloud computing arrangement and presented in the same expense line item as the cloud computing arrangement. All other implementation costs are generally expensed as incurred. We adopted ASU 2018-15 on January 1, 2020 on a prospective basis. As a result of the adoption of ASU 2018-15, (i) certain implementation costs that were previously expensed as incurred are now deferred as prepaid expenses and amortized over the term of the cloud computing arrangement and (ii) certain costs associated with developing interfaces between a cloud computing arrangement and internal-use software that were previously capitalized as property and equipment are now deferred as prepaid expenses and amortized over the term of the cloud computing arrangement. The adoption of ASU 2018-15 did not have a significant impact on our consolidated financial statements.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
ASU 2019-02
In March 2019, the FASB issued ASU No. 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials (ASU 2019-02), which aligns the accounting for production costs of an episodic television series with the accounting for production costs of films. ASU 2019-02 removes the existing constraint that restricts capitalization of production costs to contracted revenue for episodic television series. The amended guidance also permits entities to test a film or license agreement for impairment at the film group level, addresses cash flow classification and provides new disclosure requirements. We adopted ASU 2019-02 on January 1, 2020 on a prospective basis. The adoption of ASU 2019-02 did not have a significant impact on our consolidated financial statements.
ASU 2016-13
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Statements (ASU 2016-13), which changes the recognition model for credit losses related to assets held at amortized cost. ASU 2016-13 eliminates the threshold that a loss must be considered probable to recognize a credit loss and instead requires an entity to reflect its current estimate of lifetime expected credit losses. We adopted ASU 2016-13 on January 1, 2020 on a modified retrospective basis by recording a cumulative effect adjustment of $30.3 million to our accumulated earnings related to increases to our allowances for certain trade and notes receivable.
ASU 2016-02
In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU 2016-02), which, for most leases, results in lessees recognizing right-of-use (ROU) assets and lease liabilities on the balance sheet. 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. We adopted ASU 2016-02 on January 1, 2019.
The main impact of the adoption of ASU 2016-02 relates to the recognition of ROU assets and lease liabilities on our consolidated balance sheet for those leases classified as operating leases under previous GAAP. In transition, we have applied 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 have not used hindsight during transition.
We have implemented a new lease accounting system and related internal controls over financial reporting to meet the requirements of ASU 2016-02.
For additional information regarding our leases, see note 12.
Recent Accounting Pronouncements
ASU 2019-12
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (ASU 2019-12), which is intended to improve consistency and simplify several areas of existing guidance. ASU 2019-12 removes certain exceptions to the general principles related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted. We do not expect the adoption of ASU 2019-12 to have a significant impact on our consolidated financial statements.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
(3) Summary of Significant Accounting Policies
Estimates
The preparation of financial statements in conformity with 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.
Principles of Consolidation
The accompanying consolidated financial statements include our accounts and the accounts of all voting interest entities where we exercise a controlling financial interest through the ownership of a direct or indirect controlling voting interest and variable interest entities for which our company is the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents and Restricted Cash
Cash equivalents consist of money market funds and other investments that are readily convertible into cash and have maturities of three months or less at the time of acquisition. We record money market funds at the net asset value as there are no restrictions on our ability, contractual or otherwise, to redeem our investments at the stated net asset value.
Restricted cash consists of cash held in restricted accounts, including cash held as collateral for debt and other compensating balances. Restricted cash amounts that are required to be used to purchase long-term assets or repay long-term debt are classified as long-term assets. All other cash that is restricted to a specific use is classified as current or long-term based on the expected timing of the disbursement.
Our significant non-cash investing and financing activities are disclosed in our consolidated statements of equity and in notes 5, 6, 8, 10, 11 and 12.
Trade Receivables
Our trade receivables are reported net of an allowance for doubtful accounts. Such allowance aggregated $49.8 million and $42.8 million at December 31, 2020 and 2019, respectively. The allowance for doubtful accounts is based upon our current estimate of lifetime expected credit losses related to uncollectible accounts receivable. We use a number of factors in determining the allowance, including, among other things, collection trends, prevailing and anticipated economic conditions and specific customer credit risk. The allowance is maintained until either payment is received or the likelihood of collection is considered to be remote.
Concentration of credit risk with respect to trade receivables is limited due to the large number of residential and business customers. We also manage this risk by disconnecting services to customers whose accounts are delinquent.
Investments
We make elections, on an investment-by-investment basis, as to whether we measure our investments at fair value. Such elections are generally irrevocable. With the exception of those investments over which we exercise significant influence, we generally elect the fair value method. For those investments over which we exercise significant influence, we generally elect the equity method. We determine the appropriate classification of our investments in debt securities at the time of purchase based on the underlying nature and characteristics of each security. All of our debt securities are classified as available for sale and are reported at fair value.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Under the fair value method, investments are recorded at fair value and any changes in fair value are reported in realized and unrealized gains or losses due to changes in fair values of certain investments and debt, net, in our consolidated statements of operations. All costs directly associated with the acquisition of an investment to be accounted for using the fair value method are expensed as incurred. In addition, any interest received on our debt securities is reported as interest income in our statements of operations. Under the equity method of accounting, investments are recorded at cost and are subsequently increased or reduced to reflect our share of income or losses of the investee. All costs directly associated with the acquisition of an investment to be accounted for using the equity method are included in the carrying amount of the investment. For additional information regarding our fair value and equity method investments, see notes 7 and 9.
Under the equity method, investments, originally recorded at cost, are adjusted to recognize our share of net earnings or losses of the affiliates as they occur rather than as dividends or other distributions are received, with our recognition of losses generally limited to the extent of our investment in, and advances and commitments to, the investee. The portion of the difference between our investment and our share of the net assets of the investee that represents goodwill is not amortized, but continues to be considered for impairment. Profits on transactions with equity affiliates for which assets remain on our or our investee’s balance sheet are eliminated to the extent of our ownership in the investee.
Dividends from publicly-traded investees that are not accounted for under the equity method are recognized when declared as dividend income in our consolidated statements of operations. Dividends from our equity method investees and all of our privately-held investees are reflected as reductions of the carrying values of the applicable investments. Dividends that are deemed to be (i) returns on our investments are included in cash flows from operating activities in our consolidated statements of cash flows and (ii) returns of our investments are included in cash flows from investing activities in our consolidated statements of cash flows.
We continually review all of our equity investments to determine whether a decline in fair value below the cost basis is other-than-temporary. The primary factors we consider in our determination are the extent and length of time that the fair value of the investment is below our company’s carrying value and the financial condition, operating performance and near-term prospects of the investee, changes in the stock price or valuation subsequent to the balance sheet date, and the impacts of exchange rates, if applicable. If the decline in fair value of an equity method investment is deemed to be other-than-temporary, the cost basis of the security is written down to fair value.
Realized gains and losses are determined on an average cost basis. Securities transactions are recorded on the trade date.
Financial Instruments
Due to the short maturities of cash and cash equivalents, restricted cash, short-term liquid investments, trade and other receivables, other current assets, accounts payable, accrued liabilities and other accrued and current liabilities, their respective carrying values approximate their respective fair values. For information concerning the fair values of certain of our investments, derivatives and debt, see notes 7, 8 and 11, respectively. For information regarding how we arrive at certain of our fair value measurements, see note 9.
Derivative Instruments
All derivative instruments, whether designated as hedging relationships or not, are recorded on the balance sheet at fair value. If the derivative instrument is not designated as a hedge, changes in the fair value of the derivative instrument are recognized in earnings. If the derivative instrument is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative instrument are recorded in other comprehensive earnings or loss and subsequently reclassified into our consolidated statements of operations when the hedged forecasted transaction affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings. We generally do not apply hedge accounting to our derivative instruments.
The net cash received or paid related to our derivative instruments is classified as an operating, investing or financing activity in our consolidated statements of cash flows based on the objective of the derivative instrument and the classification of the applicable underlying 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 in our consolidated statement of cash flows.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
For information regarding our derivative instruments, see note 8.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. We capitalize costs associated with the construction of new cable and mobile transmission and distribution facilities and the installation of new cable services. Capitalized construction and installation costs include materials, labor and other directly attributable costs. Installation activities that are capitalized include (i) the initial connection (or drop) from our cable system to a customer location, (ii) the replacement of a drop and (iii) the installation of equipment for additional services, such as digital cable, telephone or broadband internet service. The costs of other customer-facing activities, such as reconnecting and disconnecting customer locations and repairing or maintaining drops, are expensed as incurred. Interest capitalized with respect to construction activities was not material during any of the periods presented.
Capitalized internal-use software is included as a component of property and equipment. We capitalize internal and external costs directly associated with the development of internal-use software. We also capitalize costs associated with the purchase of software licenses. Maintenance and training costs, as well as costs incurred during the preliminary stage of an internal-use software development project, are expensed as incurred.
Depreciation is computed using the straight-line method over the estimated useful life of the underlying asset. Equipment under finance leases is amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. Useful lives used to depreciate our property and equipment are assessed periodically and are adjusted when warranted. The useful lives of cable and mobile distribution systems that are undergoing a rebuild are adjusted such that property and equipment to be retired will be fully depreciated by the time the rebuild is completed. For additional information regarding the useful lives of our property and equipment, see note 10.
Additions, replacements and improvements that extend the asset life are capitalized. Repairs and maintenance are charged to operations.
We recognize a liability for asset retirement obligations in the period in which it is incurred if sufficient information is available to make a reasonable estimate of fair values. Asset retirement obligations may arise from the loss of rights of way that we obtain from local municipalities or other relevant authorities, as well as our obligations under certain lease arrangements to restore the property to its original condition at the end of the lease term. Given the nature of our operations, most of our rights of way and certain leased premises are considered integral to our business. Accordingly, for most of our rights of way and certain lease agreements, the possibility is remote that we will incur significant removal costs in the foreseeable future and, as such, we do not have sufficient information to make a reasonable estimate of fair value for these asset retirement obligations.
As of December 31, 2020 and 2019, the recorded value of our asset retirement obligations was $82.2 million and $55.5 million, respectively.
Intangible Assets
Our primary intangible assets relate to goodwill and customer relationships. Goodwill represents the excess purchase price over the fair value of the identifiable net assets acquired in a business combination. Customer relationships are initially recorded at their fair value in connection with business combinations.
Goodwill and other intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment at least annually. Intangible assets with finite lives are amortized on a straight-line basis over their respective estimated useful lives to their estimated residual values and reviewed for impairment.
For additional information regarding the useful lives of our intangible assets, see note 10.
Impairment of Property and Equipment and Intangible Assets
When circumstances warrant, we review the carrying amounts of our property and equipment and our intangible assets (other than goodwill and other indefinite-lived intangible assets) to determine whether such carrying amounts continue to be recoverable. Such changes in circumstance may include (i) an expectation of a sale or disposal of a long-lived asset or asset
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
group, (ii) adverse changes in market or competitive conditions, (iii) an adverse change in legal factors or business climate in the markets in which we operate and (iv) operating or cash flow losses. For purposes of impairment testing, long-lived assets are grouped at the lowest level for which cash flows are largely independent of other assets and liabilities, generally at or below the reporting unit level (see below). If the carrying amount of the asset or asset group is greater than the expected undiscounted cash flows to be generated by such asset or asset group, an impairment adjustment is recognized. Such adjustment is measured by the amount that the carrying value of such asset or asset group exceeds its fair value. We generally measure fair value by considering (a) sale prices for similar assets, (b) discounted estimated future cash flows using an appropriate discount rate and/or (c) estimated replacement cost. Assets to be disposed of are recorded at the lower of their carrying amount or fair value less costs to sell.
We evaluate goodwill and other indefinite-lived intangible assets for impairment at least annually on October 1 and whenever facts and circumstances indicate that their carrying amounts may not be recoverable. For impairment evaluations with respect to both goodwill and other indefinite-lived intangibles, we first make a qualitative assessment to determine if the goodwill or other indefinite-lived intangible may be impaired. In the case of goodwill, if it is more-likely-than-not that a reporting unit’s fair value is less than its carrying value, we then compare the fair value of the reporting unit to its respective carrying amount. Any excess of the carrying amount over the fair value would be charged to operations as an impairment loss. A reporting unit is an operating segment or one level below an operating segment (referred to as a “component”). With respect to other indefinite-lived intangible assets, if it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying value, we then estimate its fair value and any excess of the carrying value over the fair value is also charged to operations as an impairment loss.
Leases
For leases with a term greater than 12 months, we recognize on the lease commencement date (i) ROU assets representing our right to use an underlying asset and (ii) lease liabilities representing our obligation to make lease payments over the lease term. Lease and non-lease components in a contract are generally accounted for separately.
We initially measure lease liabilities at the present value of the remaining lease payments over the lease term. Options to extend or terminate the lease are included only when it is reasonably certain that we will exercise that option. As most of our leases do not provide enough information to determine an implicit interest rate, we generally use a portfolio level incremental borrowing rate in our present value calculation. We initially measure ROU assets at the value of the lease liability, plus any initial direct costs and prepaid lease payments, less any lease incentives received.
With respect to our finance leases, (i) ROU assets are generally depreciated on a straight-line basis over the shorter of the lease term or the useful life of the asset and (ii) interest expense on the lease liability is recorded using the effective interest method. Operating lease expense is recognized on a straight-line basis over the lease term. For leases with a term of 12 months or less (short-term leases), we do not recognize ROU assets or lease liabilities. Short-term lease expense is recognized on a straight-line basis over the lease term.
Income Taxes
Income taxes are accounted for under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and income tax basis of assets and liabilities and the expected benefits of utilizing net operating loss and tax credit carryforwards, using enacted tax rates in effect for each taxing jurisdiction in which we operate for the year in which those temporary differences are expected to be recovered or settled. We recognize the financial statement effects of a tax position when it is more-likely-than-not, based on technical merits, that the position will be sustained upon examination. Net deferred tax assets are then reduced by a valuation allowance if we believe it is more-likely-than-not such net deferred tax assets will not be realized. Certain of our valuation allowances and tax uncertainties are associated with entities that we acquired in business combinations. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. Deferred tax liabilities related to investments in foreign subsidiaries and foreign corporate joint ventures that are essentially permanent in duration are not recognized until it becomes apparent that such amounts will reverse in the foreseeable future. In order to be considered essentially permanent in duration, sufficient evidence must indicate that the foreign subsidiary has invested or will invest its undistributed earnings indefinitely, or that earnings will be remitted in a tax-free manner. Interest and
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
penalties related to income tax liabilities are included in income tax benefit or expense in our consolidated statements of operations.
For additional information regarding our income taxes, see note 13.
Foreign Currency Translation and Transactions
The reporting currency of our company is the U.S. dollar. The functional currency of our foreign operations generally is the applicable local currency for each foreign subsidiary and equity method investee. Assets and liabilities of foreign subsidiaries (including intercompany balances for which settlement is not anticipated in the foreseeable future) are translated at the spot rate in effect at the applicable reporting date. With the exception of certain material transactions, the amounts reported in our consolidated statements of operations are translated at the average exchange rates in effect during the applicable period. The resulting unrealized cumulative translation adjustment, net of applicable income taxes, is recorded as a component of accumulated other comprehensive earnings or loss in our consolidated statements of equity. With the exception of certain material transactions, the cash flows from our operations in foreign countries are translated at the average rate for the applicable period in our consolidated statements of cash flows. The impacts of material transactions generally are recorded at the applicable spot rates in our consolidated statements of operations and cash flows. The effect of exchange rates on cash balances held in foreign currencies are separately reported in our consolidated statements of cash flows.
Transactions denominated in currencies other than our or our subsidiaries’ functional currencies are recorded based on exchange rates at the time such transactions arise. Changes in exchange rates with respect to amounts recorded on our consolidated balance sheets related to these non-functional currency transactions result in transaction gains and losses that are reflected in our consolidated statements of operations as unrealized (based on the applicable period end exchange rates) or realized upon settlement of the transactions.
Revenue Recognition
Service Revenue — Cable Networks. We recognize revenue from the provision of broadband internet, video and fixed-line telephony services over our cable network to customers in the period 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 broadband internet, video, 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 period in which the related services are provided. Revenue from prepaid 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
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
longer of the term of the arrangement or the expected period of performance. From time to time, we also enter into agreements with certain B2B customers pursuant to which they are provided the right to use certain elements of our network. If these agreements are determined to contain a lease that meets the criteria to be considered a sales-type lease, we recognize revenue from the lease component when control of the network element is transferred to the customer.
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 costs for installation activities for B2B customers, 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.
For additional information regarding our revenue recognition and related costs, see note 4. For a disaggregation of our revenue by major category and by reportable and geographic segment, see note 20.
Share-based Compensation
We recognize all share-based payments to employees, including grants of employee share-based incentive awards, based on their grant-date fair values and our estimates of forfeitures. We recognize share-based compensation expense as a charge to operations over the vesting period based on the grant-date fair value of outstanding awards, which may differ from the fair value of such awards on any given date. Our share of payroll taxes incurred in connection with the vesting or exercise of our share-based incentive awards are recorded as a component of share-based compensation expense in our consolidated statements of operations.
We use the straight-line method to recognize share-based compensation expense for our outstanding share awards that do not contain a performance condition and the accelerated expense attribution method for our outstanding share awards that contain a performance condition and vest on a graded basis.
The grant date fair values for options, share appreciation rights (SARs) and performance-based share appreciation rights (PSARs) are estimated using the Black-Scholes option pricing model, and the grant date fair values for restricted share units (RSUs), restricted share awards (RSAs) and performance-based restricted share units (PSUs) are based upon the closing share price of Liberty Global ordinary shares on the date of grant. We consider historical exercise trends in our calculation of the expected life of options and SARs granted by Liberty Global to employees. The expected volatility for options and SARs related to our ordinary shares is generally based on a combination of (i) historical volatilities for a period equal to the expected average life of the awards and (ii) volatilities implied from publicly-traded options for our shares.
We generally issue new Liberty Global ordinary shares when Liberty Global options or SARs are exercised, when RSUs and PSUs vest and when RSAs are granted. Our company settles SARs and PSARs on a net basis when exercised by the award holder, whereby the number of shares issued represents the excess value of the award based on the market price of the respective Liberty Global shares at the time of exercise relative to the award’s exercise price. In addition, the number of shares issued is further reduced by the amount of the employee’s required income tax withholding.
Although we repurchase Liberty Global ordinary shares from time to time, the parameters of our share purchase and redemption activities are not established with reference to the dilutive impact of our share-based compensation plans.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
For additional information regarding our share-based compensation, see note 15.
Litigation Costs
Legal fees and related litigation costs are expensed as incurred.
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, SARs, RSUs, RSAs, PSARs and PSUs) as if they had been exercised, vested or converted at the beginning of the periods presented.
The details of our net loss from continuing operations attributable to Liberty Global shareholders are set forth below:
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Year ended December 31,
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2020
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2019
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2018
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in millions
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Loss from continuing operations
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$
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(1,466.7)
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$
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(1,409.0)
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|
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$
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(1,411.5)
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Net earnings from continuing operations attributable to noncontrolling interests
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(161.3)
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|
|
(116.8)
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|
|
(120.5)
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|
Net loss from continuing operations attributable to Liberty Global shareholders
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$
|
(1,628.0)
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|
|
$
|
(1,525.8)
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|
|
$
|
(1,532.0)
|
|
We reported losses from continuing operations attributable to Liberty Global shareholders during 2020, 2019 and 2018. Therefore, the potentially dilutive effect at December 31, 2020, 2019 and 2018 of the following items was not included in the computation of diluted loss from continuing operations attributable to Liberty Global shareholders per share because their inclusion would have been anti-dilutive to the computation or, in the case of certain PSARs and PSUs, because such awards had not yet met the applicable performance criteria: (i) the aggregate number of shares issuable pursuant to outstanding options, SARs, RSUs and RSAs of 76.1 million, 62.5 million and 58.7 million, respectively, and (ii) the aggregate number of shares issuable pursuant to PSARs and PSUs of 18.4 million, 23.9 million and 9.2 million, respectively.
(4) Revenue Recognition and Related Costs
Contract Balances
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 $44.3 million and $30.6 million as of December 31, 2020 and 2019, respectively. The current and long-term portions of our contract asset balances are included within other current assets and other assets, net, respectively, on our consolidated balance sheets.
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 $442.6 million and $867.1 million as of December 31, 2020 and 2019, respectively. The decrease in deferred revenue during 2020 is primarily due to the net effect of (a) the recognition of $795.3 million of revenue that was included in our deferred revenue balance at December 31, 2019, (b) $475.3 million of deferred revenue related to the U.K. JV Entities that was reclassified to liabilities associated with assets held for sale and (c) advanced billings in certain markets. The long-term portions of our deferred revenue balances are included within other long-term liabilities on our consolidated balance sheets.
Contract Costs
Our aggregate assets associated with incremental costs to obtain and fulfill our contracts were $46.6 million and $92.6 million at December 31, 2020 and 2019, respectively. The current and long-term portions of our assets related to contract costs are included within other current assets and other assets, net, respectively, on our consolidated balance sheets. During 2020,
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
2019 and 2018, we amortized $134.8 million, $101.1 million and $99.8 million, respectively, to operating costs and expenses associated with our assets related to contract costs (including with respect to the U.K. JV Entities (as defined in note 6), which assets are presented as held for sale).
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 contracts, one to three years for our mobile service contracts and one to five years for our B2B service contracts.
(5) Acquisitions
2020 Acquisition
Sunrise Acquisition. On November 11, 2020, Liberty Global completed the acquisition of Sunrise Communications Group AG (Sunrise) (the Sunrise Acquisition). The Sunrise Acquisition was effected through an all cash public tender offer (the Offer) of the outstanding shares of Sunrise (the Sunrise Shares) for CHF 110 ($120 at the transaction date) per share, for a total purchase price of CHF 5.0 billion ($5.4 billion at the transaction date). As of December 31, 2020, Liberty Global holds 98.9% of the share capital of Sunrise and has initiated a statutory “squeeze-out” procedure according to applicable Swiss law pursuant to which we will acquire the remaining 1.1% of Sunrise Shares that we do not yet own. This “squeeze-out” procedure is expected to be completed during the first half of 2021. As of December 31, 2020, we have recorded a liability of $59.8 million associated with the Sunrise Shares we have not yet acquired.
The Offer was funded through (i) borrowings of CHF 3.2 billion ($3.5 billion at the applicable date) under new term loan facilities and (ii) existing liquidity of Liberty Global. In addition, we used amounts under these term loan facilities to (a) refinance CHF 1.4 billion ($1.5 billion at the applicable date) principal amount of Sunrise’s existing debt and (b) redeem in full CHF 200.0 million ($219.3 million at the applicable date) outstanding principal amount of Sunrise’s senior secured notes. For additional information regarding financing arrangements entered into by UPC Holding in connection with the Sunrise Acquisition, see note 11.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
We have accounted for the Sunrise Acquisition using the acquisition method of accounting, whereby the total purchase price (including with respect to the aforementioned squeeze-out procedure) was allocated to the acquired identifiable net assets of Sunrise based on assessments of their respective fair values, and the excess of the purchase price over the fair values of these identifiable net assets was allocated to goodwill. A summary of the preliminary purchase price and the opening balance sheet of Sunrise at the November 11, 2020 acquisition date is presented in the following table. The preliminary opening balance sheet is subject to adjustment based on our final assessment of the fair values of the acquired identifiable assets and liabilities. Although most items in the valuation process remain open, the items with the highest likelihood of changing upon finalization of the valuation process include (i) property and equipment, (ii) goodwill, (iii) intangible assets associated with customer relationships, mobile spectrum assets and trade names and (iv) income taxes (in millions):
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|
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|
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Cash and cash equivalents
|
$
|
108.5
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Trade receivables, net
|
489.2
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Other current assets
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163.5
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Property and equipment, net
|
1,494.2
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|
Goodwill (a)
|
3,465.7
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|
Intangible assets subject to amortization, net
|
2,485.8
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|
Operating lease ROU assets
|
1,047.1
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Other assets, net
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232.3
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|
Current portion of debt and finance lease obligations
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(133.2)
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|
Current operating lease liabilities
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(136.5)
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Other accrued and current liabilities
|
(535.9)
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Long-term debt and finance lease obligations
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(1,762.5)
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Long-term operating lease liabilities
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(877.6)
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Other long-term liabilities
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(612.8)
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|
Total purchase price (b)
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$
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5,427.8
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|
_______________
(a) The goodwill recognized in connection with the Sunrise Acquisition is primarily attributable to (i) the opportunity to leverage Sunrise’s existing mobile network to gain immediate access to potential customers and (ii) estimated synergy benefits through the integration of Sunrise with our existing operations in Switzerland.
(b) Excludes direct acquisition costs of $27.8 million incurred during 2020, which are included in impairment, restructuring and other operating items, net, in our consolidated statement of operations.
2019 Acquisition
De Vijver Media. Prior to June 3, 2019, Telenet owned a 50.0% equity method investment in De Vijver Media NV (De Vijver Media), which provides content production, broadcasting and advertising services in Belgium. On June 3, 2019, Telenet acquired the remaining 50.0% ownership interest in De Vijver Media (the De Vijver Media Acquisition) for cash consideration of €52.5 million ($58.9 million at the transaction date) after post-closing adjustments. Immediately following this transaction, Telenet repaid in full De Vijver Media’s €62.0 million ($69.5 million at the transaction date) of outstanding third-party debt. In connection with the De Vijver Media Acquisition, we recognized a $25.7 million gain during the second quarter of 2019, representing the difference between the fair value of $57.9 million and carrying amount of our then-existing 50.0% ownership interest in De Vijver Media. This gain is included in other income, net, in our consolidated statement of operations.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Pro Forma Information
The following unaudited pro forma consolidated operating results give effect to the Sunrise Acquisition as if it had been completed as of January 1, 2019. No effect has been given to the De Vijver Media Acquisition since it would not have had a significant impact on our results of operations during 2019 or 2018. These pro forma amounts are not necessarily indicative of the operating results that would have occurred if the Sunrise Acquisition had occurred on such date. The pro forma adjustments are based on certain assumptions that we believe are reasonable.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
in millions, except per share amounts
|
|
|
|
|
Revenue
|
$
|
13,698.2
|
|
|
$
|
13,453.2
|
|
Net loss from continuing operations attributable to Liberty Global shareholders
|
$
|
(1,879.3)
|
|
|
$
|
(1,889.8)
|
|
Basic and diluted loss from continuing operations attributable to Liberty Global shareholders
per share
|
$
|
(3.12)
|
|
|
$
|
(2.68)
|
|
Our consolidated statement of operations for 2020 includes revenue and net earnings of $314.0 million and $11.9 million, respectively, attributable to Sunrise.
(6) Dispositions
Pending Joint Venture Transaction
On May 7, 2020, we entered into a Contribution Agreement (the Contribution Agreement) with, among others, Telefonica SA (Telefónica). Pursuant to the Contribution Agreement, Liberty Global and Telefónica agreed to form a 50:50 joint venture (the U.K. JV), which will combine Virgin Media’s operations in the U.K. along with certain other Liberty Global subsidiaries created as a result of the pending U.K. JV (together, the U.K. JV Entities) with Telefónica’s mobile business in the U.K. to create a nationwide integrated communications provider. In our segment presentation, the U.K. JV Entities are included in our U.K./Ireland segment.
In connection with the transaction, we have completed certain recapitalization financings, as described in note 11. The outstanding third-party debt associated with the U.K. JV Entities will be contributed in full to the U.K. JV, and Telefónica’s business in the U.K. will be contributed on a debt-free basis. The transaction will not trigger a change of control under Virgin Media’s debt agreements.
Effectively all of Liberty Global’s U.K. tax capital allowances and tax loss carryforwards, which primarily resulted from prior infrastructure investments, reside in the U.K. JV Entities and, therefore, will be available for use solely within the U.K. JV upon the closing of the transaction.
At closing, we expect to pay Telefónica an equalization payment estimated to be approximately £2.5 billion ($3.4 billion), as adjusted for debt and debt-like items and certain working capital and other adjustments. After taking into account the recapitalizations and the equalization payment, Liberty Global is expected to receive an estimated £1.4 billion ($1.9 billion) in total, including approximately £800 million ($1.1 billion) from the recapitalization of Virgin Media’s retained and 100.0% owned Ireland business.
Pursuant to the framework agreement that we expect to enter into in connection with the closing of the U.K. JV, our company and Telefónica will provide certain services to the U.K. JV. The annual charges to the U.K. JV will ultimately depend on the actual level of services required by the U.K. JV.
The U.K. JV intends to distribute available cash to the shareholders periodically and is expected to undertake periodic further recapitalizations, subject to market and operating conditions, to maintain a target net leverage ratio ranging between 4.0 and 5.0 times EBITDA (as defined in the applicable shareholders’ agreement). Our company will retain the cash generated by
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
the operations of the U.K. JV Entities through the closing date and is required to fund any deficit in the associated defined pension plans that arises from the next triennial actuarial valuation.
The consummation of the transaction contemplated by the Contribution Agreement is subject to certain conditions, including competition clearance by the applicable regulatory authorities. The Contribution Agreement also includes customary termination rights, including a right of the parties to terminate the agreement if the transaction has not closed within 24 months following the date of the Contribution Agreement, which may be extended by six months under certain circumstances. We currently expect the U.K. JV transaction to close in mid-2021. Following completion of the transaction, we expect to account for our 50% interest in the U.K. JV as an equity method investment.
Effective with the signing of the Contribution Agreement, we began accounting for the U.K. JV Entities as held for sale. Accordingly, we ceased to depreciate or amortize the long-lived assets of the U.K. JV Entities. We have not presented the U.K. JV Entities as a discontinued operation as this transaction does not represent a strategic shift that will have a major effect on our financial results or operations. The carrying amounts of the major classes of assets and liabilities that are classified as held for sale at December 31, 2020 are summarized below (in millions):
|
|
|
|
|
|
Assets:
|
|
Current assets (a)
|
$
|
4,519.8
|
|
Property and equipment, net
|
8,614.0
|
|
Goodwill
|
7,918.5
|
|
Other assets, net
|
3,230.4
|
|
Total assets
|
$
|
24,282.7
|
|
|
|
Liabilities:
|
|
Current portion of debt and finance lease obligations
|
$
|
2,699.5
|
|
Other accrued and current liabilities
|
2,207.3
|
|
Long-term debt and finance lease obligations
|
16,724.1
|
|
Other long-term liabilities
|
1,566.3
|
|
Total liabilities
|
$
|
23,197.2
|
|
_______________
(a) Amount includes restricted cash, but excludes cash and cash equivalents, as the cash and cash equivalents of the U.K. JV Entities will be retained by Liberty Global upon the formation of the U.K. JV and are therefore not classified as held for sale.
Dispositions
Vodafone Disposal Group
On July 31, 2019, we completed the sale of our operations in Germany, Romania, Hungary and the Czech Republic to Vodafone. The operations of Germany, Romania, Hungary and the Czech Republic are collectively referred to herein as the “Vodafone Disposal Group.”
After considering debt and working capital adjustments (including cash disposed) and €183.7 million ($205.8 million at the transaction date) of cash paid by our company to settle centrally-held vendor financing obligations associated with the Vodafone Disposal Group, we received net cash proceeds of €10.0 billion ($11.1 billion at the applicable rates). Pursuant to the agreement underlying the sale of the Vodafone Disposal Group, we transferred cash to fund certain third-party escrow accounts (the Vodafone Escrow Accounts) pending the fulfillment by our company of certain terms of the agreement. The current and long-term portions of the receivables associated with the Vodafone Escrow Accounts are included in “other current assets” and “other assets, net”, respectively, on our consolidated balance sheets. The aggregate balance of the Vodafone Escrow Accounts was $190.4 million and $295.2 million at December 31, 2020 and 2019, respectively.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
In connection with the sale of the Vodafone Disposal Group, we recognized a gain of $12.2 billion that includes cumulative foreign currency translation gains of $88.2 million and income taxes of $35.4 million.
In connection with the sale of the Vodafone Disposal Group, we have agreed to provide certain transitional services to Vodafone for a period of up to four years. These services principally comprise network and information technology-related functions. During 2020 and 2019, we recorded revenue of $152.6 million and $63.1 million, respectively, associated with these transitional services.
For information regarding certain tax indemnities we provided in connection with the sale of the Vodafone Disposal Group, see note 19.
UPC DTH
On May 2, 2019, we completed the sale of UPC DTH to M7 Group (M7). After considering debt and working capital adjustments (including cash disposed), we received net cash proceeds of €128.9 million ($144.1 million at the applicable rates).
In connection with the sale of UPC DTH, we recognized a gain of $106.0 million that includes cumulative foreign currency translation losses of $10.0 million. No income taxes were required to be provided on this gain.
In connection with the sale of UPC DTH, we have agreed to provide certain transitional services to M7 for a period of up to two years. These services principally comprise network and information technology-related functions. During 2020 and 2019, we recorded revenue of $1.9 million and $1.4 million, respectively, associated with these transitional services.
UPC Austria
On July 31, 2018, we completed the sale of our Austrian operations, “UPC Austria,” to Deutsche Telekom AG (Deutsche Telekom). After considering debt, working capital and noncontrolling interest adjustments and $35.5 million (equivalent at the transaction date) of cash paid by our company to settle centrally-held vendor financing obligations associated with UPC Austria, we received net cash proceeds of $2,058.2 million (equivalent at the applicable rates). A portion of the net proceeds were used to repay or redeem an aggregate $1.5 billion (equivalent at the applicable dates) principal amount of our outstanding debt, including (i) the repayment of $913.4 million (equivalent at the repayment date) principal amount under the UPC Holding Bank Facility, (ii) the redemption of $69.6 million (equivalent at the redemption date) principal amount of the UPCB SPE Notes and (iii) the redemption of $515.5 million (equivalent at the redemption date) principal amount of the VM Notes. The remaining net proceeds from the sale of UPC Austria were made available for general corporate purposes, including an additional $500.0 million of share repurchases.
In connection with the sale of UPC Austria, we recognized a gain of $1,098.1 million that includes cumulative foreign currency translation gains of $79.5 million. No income taxes were required to be provided on this gain, which is included in gain on disposal of discontinued operations, net of taxes, in our consolidated statement of operations.
In connection with the sale of UPC Austria, we have agreed to provide certain transitional services to Deutsche Telekom for a period of up to four years. These services principally comprise network and information technology-related functions. During 2020, 2019 and 2018, we recorded revenue of $35.0 million, $42.8 million and $17.9 million, respectively, associated with these transitional services.
In October of 2019, we received notification of certain claims made by Deutsche Telekom related to our disposal of UPC Austria. For additional information, see note 19.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Presentation of Discontinued Operations
The operations of UPC Austria, the Vodafone Disposal Group and UPC DTH are presented as discontinued operations in our consolidated financial statements for 2019 and 2018, as applicable, and are summarized in the following tables. These amounts exclude intercompany revenue and expenses that are eliminated within our consolidated statements of operations. For information regarding our basic and diluted ordinary shares outstanding, see note 3.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vodafone Disposal Group (a)
|
|
UPC DTH (b)
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
Year ended December 31, 2019
|
|
|
|
|
|
Revenue
|
$
|
2,017.9
|
|
|
$
|
36.7
|
|
|
$
|
2,054.6
|
|
Operating income
|
$
|
1,165.6
|
|
|
$
|
10.7
|
|
|
$
|
1,176.3
|
|
|
|
|
|
|
|
Earnings before income taxes
|
$
|
994.7
|
|
|
$
|
9.5
|
|
|
$
|
1,004.2
|
|
Income tax expense
|
(273.9)
|
|
|
—
|
|
|
(273.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Liberty Global shareholders
|
$
|
720.8
|
|
|
$
|
9.5
|
|
|
$
|
730.3
|
|
Basic and diluted earnings from discontinued operations
attributable to Liberty Global shareholders per share
|
|
|
|
|
$
|
1.03
|
|
_______________
(a) Includes the operating results of the Vodafone Disposal Group through July 31, 2019, the date the Vodafone Disposal Group was sold.
(b) Includes the operating results of UPC DTH through May 2, 2019, the date UPC DTH was sold.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPC Austria (a)
|
|
Vodafone Disposal Group
|
|
UPC DTH
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
|
|
Year ended December 31, 2018
|
|
|
|
|
|
|
|
Revenue
|
$
|
252.4
|
|
|
$
|
3,584.2
|
|
|
$
|
117.0
|
|
|
$
|
3,953.6
|
|
Operating income
|
$
|
139.0
|
|
|
$
|
1,787.0
|
|
|
$
|
11.7
|
|
|
$
|
1,937.7
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
$
|
138.7
|
|
|
$
|
1,396.3
|
|
|
$
|
9.6
|
|
|
$
|
1,544.6
|
|
Income tax benefit (expense)
|
(23.3)
|
|
|
(365.2)
|
|
|
7.3
|
|
|
(381.2)
|
|
Net earnings
|
115.4
|
|
|
1,031.1
|
|
|
16.9
|
|
|
1,163.4
|
|
Net earnings attributable to noncontrolling interests
|
(4.2)
|
|
|
—
|
|
|
—
|
|
|
(4.2)
|
|
Net earnings attributable to Liberty Global shareholders
|
$
|
111.2
|
|
|
$
|
1,031.1
|
|
|
$
|
16.9
|
|
|
$
|
1,159.2
|
|
Basic and diluted earnings from discontinued operations attributable to Liberty Global shareholders per share
|
|
|
|
|
|
|
$
|
1.49
|
|
_______________
(a) Includes the operating results of UPC Austria through July 31, 2018, the date UPC Austria was sold.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
(7) Investments
The details of our investments are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2020
|
|
2019
|
|
Ownership (a)
|
Accounting Method
|
|
in millions
|
|
%
|
|
|
|
|
|
|
|
Equity (b):
|
|
|
|
|
|
Long-term:
|
|
|
|
|
|
VodafoneZiggo JV (c)
|
$
|
3,052.3
|
|
|
$
|
3,174.1
|
|
|
50.0
|
All3Media Group (All3Media)
|
157.7
|
|
|
172.8
|
|
|
50.0
|
Formula E Holdings Ltd (Formula E)
|
105.8
|
|
|
105.2
|
|
|
32.9
|
Other
|
172.9
|
|
|
40.7
|
|
|
|
Total — equity
|
3,488.7
|
|
|
3,492.8
|
|
|
|
Fair value:
|
|
|
|
|
|
Short-term:
|
|
|
|
|
|
Separately-managed accounts (SMAs) (d)
|
1,600.2
|
|
|
—
|
|
|
|
Long-term:
|
|
|
|
|
|
ITV plc (ITV) — subject to re-use rights (e)
|
581.0
|
|
|
798.1
|
|
|
10.0
|
SMAs (d)
|
365.7
|
|
|
—
|
|
|
|
Skillz Inc. (Skillz) (f)
|
225.4
|
|
|
10.2
|
|
|
3.0
|
Univision Holdings Inc. (Univision)
|
100.0
|
|
|
—
|
|
|
11.5
|
CANAL+ Polska S.A. (CANAL+ Polska) - formerly known as ITI Neovision S.A.
|
92.3
|
|
|
122.4
|
|
|
17.0
|
EdgeConneX Inc. (EdgeConneX) (f)
|
75.1
|
|
|
34.4
|
|
|
5.1
|
Lions Gate Entertainment Corp (Lionsgate) (g)
|
72.0
|
|
|
68.0
|
|
|
3.0
|
Other (h)
|
354.3
|
|
|
256.1
|
|
|
|
Total — fair value
|
3,466.0
|
|
|
1,289.2
|
|
|
|
Total investments (i)
|
$
|
6,954.7
|
|
|
$
|
4,782.0
|
|
|
|
Short-term investments
|
$
|
1,600.2
|
|
|
$
|
—
|
|
|
|
Long-term investments
|
$
|
5,354.5
|
|
|
$
|
4,782.0
|
|
|
|
_______________
(a)Our ownership percentages are determined based on our legal ownership as of the most recent balance sheet date or are estimated based on the number of shares we own and the most recent publicly-available information.
(b)Our equity method investments are originally recorded at cost and are adjusted to recognize our share of net earnings or losses of the affiliates as they occur rather than as dividends or other distributions are received, with our recognition of losses generally limited to the extent of our investment in, and advances and commitments to, the investee. Accordingly, the carrying values of our equity method investments may not equal the respective fair values. At December 31, 2020 and 2019, the aggregate carrying amounts of our equity method investments exceeded our proportionate share of the respective investee’s net assets by $1,198.5 million and $1,041.0 million, respectively, which include amounts associated with the VodafoneZiggo JV Receivables, as defined below, and amounts we are owed under a long-term note receivable from All3Media.
(c)Amounts include certain notes receivable due from a subsidiary of the VodafoneZiggo JV to a subsidiary of Liberty Global comprising (i) a euro-denominated note receivable with a principal amount of $855.8 million and $786.1 million, respectively (the VodafoneZiggo JV Receivable I), and (ii) a euro-denominated note receivable entered into during the third quarter of 2020 with a principal amount of $127.1 million at December 31, 2020 (the VodafoneZiggo JV
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Receivable II and, together with the VodafoneZiggo JV Receivable I, the VodafoneZiggo JV Receivables). The VodafoneZiggo JV Receivable I, as amended in June 2020, and the VodafoneZiggo JV Receivable II each bear interest at 5.55% and have a final maturity date of December 31, 2030. In each of 2019 and 2018, we received a €100.0 million principal payment on the VodafoneZiggo JV Receivable I ($112.1 million and $114.5 million at the respective transaction dates). During 2020, interest accrued on the VodafoneZiggo JV Receivables was $48.0 million, all of which was cash settled.
(d)Represents investments held under SMAs, which are maintained by investments managers acting as agents on our behalf. We classify, measure and report these investments, the composition of which may change from time to time, based on the underlying nature and characteristics of each security held under the SMAs. As of December 31, 2020, all of our investments held under SMAs were classified as available-for-sale debt securities, as further described in note 3. At December 31, 2020, interest accrued on our debt securities, which is included in other current assets on our consolidated balance sheet, was $7.1 million.
(e)In connection with our investment in ITV, we entered into a share collar (the ITV Collar) with respect to the ITV shares held by our company. The aggregate purchase price paid to acquire our investment in ITV was financed through borrowings under a secured borrowing agreement (the ITV Collar Loan). We may elect to use cash or the collective value of the related shares and equity-related derivative instrument to settle the ITV Collar Loan. During 2020, we cash settled a portion of the ITV Collar Loan and unwound the associated portion of the ITV Collar, as further described in note 8.
(f)At December 31, 2020, the fair values of our investments in Skillz and EdgeConneX reflect the merger of Skillz with Flying Eagle Acquisition Corporation and EdgeConneX with Herndon Merger Sub Inc, each completed during 2020.
(g)In connection with our investment in Lionsgate, we previously entered into (i) the Lionsgate Forward (as defined in note 8) and (ii) a related borrowing agreement (the Lionsgate Loan), each of which were fully settled during 2020, as further described in note 8.
(h)As of December 31, 2020, we hold a $9.7 million noncontrolling junior interest in receivables we have securitized.
(i)The purchase and sale of investments are presented on a gross basis in our consolidated statements of cash flows, including those made by investment managers acting as agents on our behalf.
Equity Method Investments
The following table sets forth the details of our share of results of affiliates, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
VodafoneZiggo JV (a)
|
$
|
(201.1)
|
|
|
$
|
(185.9)
|
|
|
$
|
11.4
|
|
All3Media
|
(27.9)
|
|
|
(8.8)
|
|
|
(19.2)
|
|
Formula E
|
(8.4)
|
|
|
1.7
|
|
|
(0.2)
|
|
Other
|
(7.9)
|
|
|
(5.5)
|
|
|
(0.7)
|
|
Total
|
$
|
(245.3)
|
|
|
$
|
(198.5)
|
|
|
$
|
(8.7)
|
|
_______________
(a)Amounts include the net effect of (i) our 50% share of the results of operations of the VodafoneZiggo JV and (ii) 100% of the interest income earned on the VodafoneZiggo JV Receivables.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
VodafoneZiggo JV. Each of Liberty Global and Vodafone (each a “Shareholder”) holds 50% of the issued share capital of the VodafoneZiggo JV. The Shareholders intend for the VodafoneZiggo JV to be funded solely from its net cash flow from operations and third-party financing. We account for our 50% interest in the VodafoneZiggo JV as an equity method investment. We consider the VodafoneZiggo JV to be a related party.
In connection with the formation of the VodafoneZiggo JV, the Shareholders entered into a shareholders agreement (the Shareholders Agreement). The Shareholders Agreement contains customary provisions for the governance of a 50:50 joint venture that result in Liberty Global and Vodafone having joint control over decision making with respect to the VodafoneZiggo JV.
The Shareholders Agreement also provides (i) for a dividend policy that requires the VodafoneZiggo JV to distribute all unrestricted cash to the Shareholders every two months (subject to the VodafoneZiggo JV maintaining a minimum amount of cash and complying with the terms of its financing arrangements) and (ii) that the VodafoneZiggo JV will be managed with a leverage ratio of between 4.5 and 5.0 times EBITDA (as calculated pursuant to its existing financing arrangements) with the VodafoneZiggo JV undertaking periodic recapitalizations and/or refinancings accordingly. During 2020, 2019 and 2018, we received dividend distributions from the VodafoneZiggo JV of $249.5 million, $162.7 million and $232.5 million, respectively, which were accounted for as returns on capital for purposes of our consolidated statements of cash flows.
Each Shareholder has the right to initiate an initial public offering (IPO) of the VodafoneZiggo JV with the opportunity for the other Shareholder to sell shares in the IPO on a pro rata basis. As of January 1, 2021, each Shareholder has the right to initiate a sale of all of its interest in the VodafoneZiggo JV to a third party and, under certain circumstances, initiate a sale of the entire VodafoneZiggo JV, subject, in each case, to a right of first offer in favor of the other Shareholder.
Pursuant to an agreement (the Framework Agreement), Liberty Global provides certain services to the VodafoneZiggo JV (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. During 2020, 2019 and 2018, we recorded revenue from the VodafoneZiggo JV of $178.9 million, $189.1 million and $189.1 million, respectively, primarily related to (a) the JV Services and (b) sales of customer premises equipment at a mark-up. In addition, during 2019 and 2018, we purchased certain assets on the VodafoneZiggo JV’s behalf with an aggregate cost of $14.4 million and $13.1 million, respectively. At December 31, 2020 and 2019, $27.4 million and $19.3 million, respectively, were due from the VodafoneZiggo JV related to the aforementioned transactions. The amounts due from the VodafoneZiggo JV, which are periodically cash settled, are included in other current assets on our consolidated balance sheets.
The summarized results of operations of the VodafoneZiggo JV are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
Revenue
|
$
|
4,565.4
|
|
|
$
|
4,407.8
|
|
|
$
|
4,602.2
|
|
Loss before income taxes
|
$
|
(287.2)
|
|
|
$
|
(512.5)
|
|
|
$
|
(467.8)
|
|
Net loss
|
$
|
(448.7)
|
|
|
$
|
(470.0)
|
|
|
$
|
(91.6)
|
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
The summarized financial position of the VodafoneZiggo JV is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
|
in millions
|
|
|
|
|
Current assets
|
$
|
1,067.2
|
|
|
$
|
918.4
|
|
Long-term assets
|
22,563.6
|
|
|
21,508.1
|
|
Total assets
|
$
|
23,630.8
|
|
|
$
|
22,426.5
|
|
|
|
|
|
Current liabilities
|
$
|
2,967.7
|
|
|
$
|
2,726.4
|
|
Long-term liabilities
|
16,450.8
|
|
|
14,920.7
|
|
Owners’ equity
|
4,212.3
|
|
|
4,779.4
|
|
Total liabilities and owners’ equity
|
$
|
23,630.8
|
|
|
$
|
22,426.5
|
|
Fair Value Investments
The following table sets forth the details of our realized and unrealized gains (losses) due to changes in fair values of certain investments, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
Skillz
|
$
|
238.0
|
|
|
$
|
1.1
|
|
|
$
|
—
|
|
ITV
|
(217.1)
|
|
|
163.9
|
|
|
(257.8)
|
|
EdgeConneX
|
33.1
|
|
|
—
|
|
|
—
|
|
CANAL+ Polska
|
(26.3)
|
|
|
2.7
|
|
|
(24.9)
|
|
SMAs
|
5.2
|
|
|
—
|
|
|
—
|
|
Lionsgate
|
4.0
|
|
|
(25.0)
|
|
|
(86.4)
|
|
|
|
|
|
|
|
Other, net
|
(1.1)
|
|
|
(43.7)
|
|
|
(24.1)
|
|
Total
|
$
|
35.8
|
|
|
$
|
99.0
|
|
|
$
|
(393.2)
|
|
Debt Securities
The following table sets forth the details of our debt securities, which comprise all of our investment held under SMAs, as of and for the year ended December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized cost basis
|
|
Unrealized gains
|
|
Fair Value
|
|
in millions
|
|
|
|
|
|
|
Corporate debt securities
|
$
|
713.2
|
|
|
$
|
2.3
|
|
|
$
|
715.5
|
|
Commercial paper
|
523.7
|
|
|
0.6
|
|
|
524.3
|
|
Government bonds
|
474.8
|
|
|
0.2
|
|
|
475.0
|
|
Certificates of deposit
|
251.0
|
|
|
0.1
|
|
|
251.1
|
|
|
|
|
|
|
|
Total debt securities
|
$
|
1,962.7
|
|
|
$
|
3.2
|
|
|
$
|
1,965.9
|
|
During 2020, we received proceeds from the sale of debt securities of $6.0 billion, the majority of which were reinvested in new debt securities held under SMAs. The sale of debt securities during 2020 resulted in a net gain of $2.0 million.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
The fair values of our debt securities as of December 31, 2020 by contractual maturity are shown below (in millions):
|
|
|
|
|
|
Due in one year or less
|
$
|
1,600.2
|
|
Due in one to five years
|
359.3
|
|
Due in five to ten years
|
6.4
|
|
Total (a)
|
$
|
1,965.9
|
|
_______________
(a)The weighted average life our total debt securities was 0.5 years as of December 31, 2020.
(8) Derivative Instruments
In general, we 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) and the Polish zloty (PLN). Generally, 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 consolidated statements of operations.
The following table provides details of the fair values of our derivative instrument assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
Current
|
|
Long-term
|
|
Total
|
|
Current
|
|
Long-term
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets (a):
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency and interest rate derivative contracts (b)
|
$
|
148.8
|
|
|
$
|
418.4
|
|
|
$
|
567.2
|
|
|
$
|
270.8
|
|
|
$
|
886.4
|
|
|
$
|
1,157.2
|
|
Equity-related derivative instruments (c)
|
49.3
|
|
|
231.6
|
|
|
280.9
|
|
|
55.2
|
|
|
608.2
|
|
|
663.4
|
|
Foreign currency forward and option contracts
|
36.5
|
|
|
0.1
|
|
|
36.6
|
|
|
4.6
|
|
|
1.4
|
|
|
6.0
|
|
Other
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
0.5
|
|
|
0.4
|
|
|
0.9
|
|
Total
|
$
|
234.6
|
|
|
$
|
650.2
|
|
|
$
|
884.8
|
|
|
$
|
331.1
|
|
|
$
|
1,496.4
|
|
|
$
|
1,827.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities (a):
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency and interest rate derivative contracts (b)
|
$
|
171.2
|
|
|
$
|
1,364.1
|
|
|
$
|
1,535.3
|
|
|
$
|
389.2
|
|
|
$
|
1,192.3
|
|
|
$
|
1,581.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward and option contracts
|
81.5
|
|
|
—
|
|
|
81.5
|
|
|
1.2
|
|
|
—
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
252.7
|
|
|
$
|
1,364.1
|
|
|
$
|
1,616.8
|
|
|
$
|
390.4
|
|
|
$
|
1,192.3
|
|
|
$
|
1,582.7
|
|
_______________
(a)Our current derivative assets, long-term derivative assets and long-term derivative liabilities are included in other current assets, other assets, net, and other long-term liabilities, respectively, on our 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 11). The changes in the credit risk valuation adjustments associated with our cross-currency and interest rate derivative contracts resulted in net gains (losses) of $336.0 million, $16.6 million and ($71.1 million) during 2020, 2019 and 2018, respectively. These amounts are included in realized and unrealized gains (losses) on derivative instruments, net, in our consolidated statements of operations. For further information regarding our fair value measurements, see note 9.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
(c)Our equity-related derivative instruments primarily include the ITV Collar, and as of December 31, 2019, the Lionsgate Forward (as defined and described below). The fair value of the ITV Collar does 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 arrangement.
The details of our realized and unrealized gains (losses) on derivative instruments, net, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
Cross-currency and interest rate derivative contracts
|
$
|
(1,184.3)
|
|
|
$
|
(207.3)
|
|
|
$
|
905.8
|
|
Equity-related derivative instruments:
|
|
|
|
|
|
ITV Collar
|
364.2
|
|
|
(84.4)
|
|
|
176.7
|
|
Lionsgate Forward
|
0.8
|
|
|
13.0
|
|
|
30.1
|
|
|
|
|
|
|
|
Other
|
21.7
|
|
|
8.0
|
|
|
(9.3)
|
|
Total equity-related derivative instruments
|
386.7
|
|
|
(63.4)
|
|
|
197.5
|
|
Foreign currency forward and option contracts
|
(81.1)
|
|
|
77.4
|
|
|
22.7
|
|
Other
|
(0.6)
|
|
|
1.3
|
|
|
(0.2)
|
|
Total
|
$
|
(879.3)
|
|
|
$
|
(192.0)
|
|
|
$
|
1,125.8
|
|
The net cash received or paid related to our derivative instruments is classified as an operating, investing or financing activity in our consolidated statements of cash flows based on the objective of the derivative instrument and the classification of the applicable underlying 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 of our derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
Operating activities
|
$
|
(55.9)
|
|
|
$
|
179.0
|
|
|
$
|
244.4
|
|
Investing activities
|
(39.8)
|
|
|
—
|
|
|
—
|
|
Financing activities
|
129.1
|
|
|
331.5
|
|
|
112.8
|
|
Total
|
$
|
33.4
|
|
|
$
|
510.5
|
|
|
$
|
357.2
|
|
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. Collateral is generally not posted by either party under our derivative instruments. At December 31, 2020, our exposure to counterparty credit risk included derivative assets with an aggregate fair value of $83.2 million.
Each of our subsidiary borrowing groups have entered into derivative instruments under master agreements with each counterparty that contain master netting arrangements that are applicable in the event of early termination by either party to such derivative instrument. The master netting arrangements are limited to the derivative instruments and derivative-related debt instruments, governed by the relevant master agreement within each individual borrowing group and are independent of similar arrangements of our other subsidiary borrowing groups.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Under our derivative contracts, it is generally only the non-defaulting party that has a contractual option to exercise early termination rights upon the default of the other counterparty and to set off other liabilities against sums due upon such termination. However, in an insolvency of a derivative counterparty, under the laws of certain jurisdictions, the defaulting counterparty or its insolvency representatives may be able to compel the termination of one or more derivative contracts and trigger early termination payment liabilities payable by us, reflecting any mark-to-market value of the contracts for the counterparty. Alternatively, or in addition, the insolvency laws of certain jurisdictions may require the mandatory set off of amounts due under such derivative contracts against present and future liabilities owed to us under other contracts between us and the relevant counterparty. Accordingly, it is possible that we may be subject to obligations to make payments, or may have present or future liabilities owed to us partially or fully discharged by set off as a result of such obligations, in the event of the insolvency of a derivative counterparty, even though it is the counterparty that is in default and not us. To the extent that we are required to make such payments, our ability to do so will depend on our liquidity and capital resources at the time. In an insolvency of a defaulting counterparty, we will be an unsecured creditor in respect of any amount owed to us by the defaulting counterparty, except to the extent of the value of any collateral we have obtained from that counterparty.
In addition, where a counterparty is in financial difficulty, under the laws of certain jurisdictions, the relevant regulators may be able to (i) compel the termination of one or more derivative instruments, determine the settlement amount and/or compel, without any payment, the partial or full discharge of liabilities arising from such early termination that are payable by the relevant counterparty or (ii) transfer the derivative instruments to an alternative counterparty.
Details of our Derivative Instruments
Cross-currency Derivative Contracts
We generally match the denomination of our subsidiaries’ borrowings with the functional currency of the supporting operations or, when it is more cost effective, we 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 December 31, 2020, 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 December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount due from counterparty
|
|
Notional amount due
to counterparty
|
|
Weighted average remaining life
|
|
|
|
in millions
|
|
|
in years
|
|
|
|
|
|
|
|
|
|
|
|
UPC Holding
|
|
$
|
360.0
|
|
|
€
|
267.9
|
|
|
|
4.8
|
|
|
|
$
|
4,200.0
|
|
|
CHF
|
3,838.7
|
|
|
(a)(b)
|
7.0
|
|
|
|
€
|
3,418.3
|
|
|
CHF
|
3,802.7
|
|
|
(a)(b)
|
4.7
|
|
|
|
€
|
707.0
|
|
|
PLN
|
2,999.5
|
|
|
|
3.4
|
|
|
|
CHF
|
740.0
|
|
|
€
|
701.1
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
Telenet
|
|
$
|
3,940.0
|
|
|
€
|
3,489.6
|
|
|
(a)
|
6.1
|
|
|
|
€
|
45.2
|
|
|
$
|
50.0
|
|
|
(c)
|
4.1
|
_______________
(a)Includes certain derivative instruments that are “forward-starting,” such that the initial exchange occurs at a date subsequent to December 31, 2020. These instruments are typically entered into in order to extend existing hedges without the need to amend existing contracts.
(b)Includes amounts subject to a 0.0% floor.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
(c)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 December 31, 2020, the total U.S. dollar equivalent of the notional amount of these derivative instruments was $55.2 million.
Interest Rate Swap Contracts
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 December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pays fixed rate
|
|
Receives fixed rate
|
|
|
Notional
amount
|
|
Weighted average remaining life
|
|
Notional
amount
|
|
Weighted average remaining life
|
|
|
in millions
|
|
in years
|
|
in millions
|
|
in years
|
|
|
|
|
|
|
|
|
|
|
|
UPC Holding
|
$
|
11,053.1
|
|
(a)
|
|
3.5
|
|
$
|
4,970.4
|
|
|
|
4.9
|
|
|
|
|
|
|
|
|
|
|
|
Telenet
|
$
|
3,526.3
|
|
(a)
|
|
4.2
|
|
$
|
1,744.7
|
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
$
|
104.4
|
|
|
|
3.0
|
|
$
|
—
|
|
|
|
—
|
______________
(a)Includes forward-starting derivative instruments.
Interest Rate Swap Options
From time to time, we enter into interest rate swap options (swaptions), which give us the right, but not the obligation, to enter into certain interest rate swap contracts at set dates in the future. Such contracts typically have a life of no more than three years. At December 31, 2020, the option expiration period on each of our swaptions had expired.
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 December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount due from counterparty
|
|
Weighted average remaining life
|
|
|
in millions
|
|
in years
|
|
|
|
|
|
UPC Holding
|
$
|
3,300.0
|
|
(a)
|
0.6
|
|
|
|
|
|
Telenet
|
$
|
2,295.0
|
|
(a)
|
1.0
|
|
|
|
|
|
Other
|
$
|
104.4
|
|
|
(b)
|
______________
(a)Includes amounts subject to a 0.0% floor.
(b)Contractual life expired on January 15, 2021.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Interest Rate Caps, Floors and Collars
From time to time, we enter into interest rate cap, floor and collar agreements. Purchased interest rate caps and collars 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. Purchased interest rate floors protect us from interest rates falling below a certain level, generally to match a floating rate floor on a debt instrument. At December 31, 2020, we had no interest rate collar agreements, and the total U.S. dollar equivalents of the notional amounts of our purchased interest rate caps and floors were $489.0 million and $7,930.2 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase to
borrowing costs at December 31, 2020 (a)
|
|
|
|
|
UPC Holding
|
0.42
|
%
|
Telenet
|
0.33
|
%
|
|
|
|
|
Total increase to borrowing costs
|
0.38
|
%
|
_______________
(a)Represents the effect of derivative instruments in effect at December 31, 2020 and does not include forward-starting derivative instruments.
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 December 31, 2020, the total U.S. dollar equivalent of the notional amounts of our foreign currency forward and option contracts was $2.4 billion.
Equity-related Derivative Instruments
ITV Collar and Secured Borrowing. The ITV Collar comprises (i) purchased put options exercisable by our company and (ii) written call options exercisable by the counterparty. The ITV Collar effectively hedges a portion of the value of our investment in ITV shares from losses due to market price decreases below the put option price while retaining a portion of the gains from market price increases up to the call option price. The ITV Collar has settlement dates ranging through 2022.
The ITV Collar and related borrowing agreement also provide our company with the ability to borrow against the value of its ITV shares. At December 31, 2020, certain of the ITV shares our company holds remain subject to the ITV Collar, which are held in a custody account and are pledged under the ITV Collar Loan. The ITV Collar Loan, which has maturity dates consistent with the ITV Collar and contains no financial covenants, provides for customary representations and warranties, events of default and certain adjustment and termination events. Under the terms of the ITV Collar, the counterparty has the right to re-use the pledged ITV shares held in the custody account, but we have the right to recall the shares that are re-used by the counterparty subject to certain costs. In addition, the counterparty retains dividends on the ITV shares that the counterparty would need to borrow from the custody account to hedge its exposure under the ITV Collar. During 2020, we cash settled a portion of the ITV Collar Loan and unwound the associated portion of the ITV Collar. As of December 31, 2020, the fair value of the ITV Collar was a net asset of $252.6 million and principal borrowings outstanding under the ITV Collar Loan were $415.9 million.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Lionsgate Forward and Secured Borrowing. During 2020, we cash settled the remaining tranches of a prepaid forward (the Lionsgate Forward) with respect to 833,333 of our voting and 833,334 of our non-voting Lionsgate shares and the related borrowings under the Lionsgate Loan. Accordingly, at December 31, 2020, the Lionsgate Forward and the Lionsgate Loan had been fully settled.
For additional information regarding our investments in ITV and Lionsgate, see note 7.
(9) Fair Value Measurements
We use the fair value method to account for (i) certain of our investments, (ii) our derivative instruments and (iii) certain instruments that we classify as debt. The reported fair values of these investments and instruments as of December 31, 2020 are unlikely to represent the value that will be paid or received upon the ultimate settlement or disposition of these assets and liabilities.
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. During the fourth quarter of 2020, (i) our investment in Skillz transferred from Level 3 to Level 1 in connection with an initial public offering that was completed subsequent to Skillz’s merger with Flying Eagle Corporation, (ii) our investment in CANAL+ Polska transferred from Level 3 to Level 2 in connection with an attempted initial public offering and (iii) certain probability weighted, deal contingent cross-currency, interest rate and foreign currency derivative contracts entered into in connection with the Sunrise Acquisition moved from Level 3 to Level 2 upon the completion of the acquisition.
All of our Level 2 inputs (interest rate futures, swap rates and certain of the inputs for our weighted average cost of capital calculations) and certain of our Level 3 inputs (forecasted volatilities and credit spreads) are obtained from pricing services. These inputs, or interpolations or extrapolations thereof, are used in our internal models to calculate, among other items, yield curves, forward interest and currency rates and weighted average cost of capital rates. In the normal course of business, we receive market value assessments from the counterparties to our derivative contracts. Although we compare these assessments to our internal valuations and investigate unexpected differences, we do not otherwise rely on counterparty quotes to determine the fair values of our derivative instruments. The midpoints of applicable bid and ask ranges generally are used as inputs for our internal valuations.
For our investments in publicly-traded companies, the recurring fair value measurements are based on the quoted closing price of the respective shares at each reporting date. Accordingly, the valuations of these investments fall under Level 1 of the fair value hierarchy. Our other investments that we account for at fair value are privately-held companies, and therefore, quoted market prices are unavailable. The valuation technique we use for such investments is a combination of an income approach (discounted cash flow model based on forecasts) and a market approach (market multiples of similar businesses). With the exception of certain inputs for our weighted average cost of capital calculations that are derived from pricing services, the inputs used to value these investments are based on unobservable inputs derived from our assumptions. Therefore, the valuation of our privately-held investments falls under Level 3 of the fair value hierarchy. Any reasonably foreseeable changes in assumed levels of unobservable inputs for the valuations of our Level 3 investments would not be expected to have a material impact on our financial position or results of operations.
The recurring fair value measurement of our equity-related derivative instruments are based on standard option pricing models, which require the input of observable and unobservable variables such as exchange-traded equity prices, risk-free interest rates, dividend forecasts and forecasted volatilities of the underlying equity securities. The valuations of our equity-related derivative instruments are based on a combination of Level 1 inputs (exchange-traded equity prices), Level 2 inputs (interest rate futures and swap rates) and Level 3 inputs (forecasted volatilities). As changes in volatilities could have a significant impact on the overall valuations over the terms of the derivative instruments, we have determined that these valuations fall under Level 3 of the fair value hierarchy. At December 31, 2020, our equity-related derivatives were not significantly impacted by forecasted volatilities.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
In order to manage our interest rate and foreign currency exchange risk, we have entered into (i) various derivative instruments and (ii) certain instruments that we classify as debt, as further described in notes 8 and 11, respectively. The recurring fair value measurements of these instruments are determined using discounted cash flow models. With the exception of the inputs for certain swaptions, most of the inputs to these discounted cash flow models consist of, or are derived from, observable Level 2 data for substantially the full term of these instruments. This observable data mostly includes currency rates, interest rate futures and swap rates, which are retrieved or derived from available market data. Although we may extrapolate or interpolate this data, we do not otherwise alter this data in performing our valuations. We use a Monte Carlo based approach to 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. The inputs used for our credit risk valuations, including our and our counterparties’ credit spreads, represent our most significant Level 3 inputs, and these inputs are used to derive the credit risk valuation adjustments with respect to these instruments. As we would not expect these parameters to have a significant impact on the valuations of these instruments, we have determined that these valuations (other than the valuations of the aforementioned swaptions) fall under Level 2 of the fair value hierarchy. Due to the lack of Level 2 inputs for the swaption valuations, we believe these valuations fall under Level 3 of the fair value hierarchy. Our credit risk valuation adjustments with respect to our cross-currency and interest rate swaps are quantified and further explained in note 8.
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 2020, we performed a nonrecurring fair value measurement associated with the Sunrise Acquisition. The weighted average discount rate used in the preliminary valuation of the customer relationships acquired in connection with the Sunrise Acquisition was 6.75%. During 2019, we performed a nonrecurring fair value measurement associated with the De Vijver Media Acquisition. This valuation had no significant impact on our consolidated balance sheet at December 31, 2019. For information regarding our acquisitions, see note 5.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
A summary of our assets and liabilities that are measured at fair value on a recurring basis is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements at December 31, 2020 using:
|
Description
|
|
December 31,
2020
|
|
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
|
$
|
567.2
|
|
|
$
|
—
|
|
|
$
|
567.2
|
|
|
$
|
—
|
|
Equity-related derivative instruments
|
280.9
|
|
|
—
|
|
|
—
|
|
|
280.9
|
|
Foreign currency forward and option contracts
|
36.6
|
|
|
—
|
|
|
36.6
|
|
|
—
|
|
Other
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
Total derivative instruments
|
884.8
|
|
|
—
|
|
|
603.9
|
|
|
280.9
|
|
Investments:
|
|
|
|
|
|
|
|
SMAs
|
1,965.9
|
|
|
405.7
|
|
|
1,560.2
|
|
|
—
|
|
Other investments
|
1,500.1
|
|
|
888.2
|
|
|
92.3
|
|
|
519.6
|
|
Total investments
|
3,466.0
|
|
|
1,293.9
|
|
|
1,652.5
|
|
|
519.6
|
|
Total assets
|
$
|
4,350.8
|
|
|
$
|
1,293.9
|
|
|
$
|
2,256.4
|
|
|
$
|
800.5
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Derivative instruments:
|
|
|
|
|
|
|
|
Cross-currency and interest rate derivative contracts
|
$
|
1,535.3
|
|
|
$
|
—
|
|
|
$
|
1,535.3
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Foreign currency forward and option contracts
|
81.5
|
|
|
—
|
|
|
81.5
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
$
|
1,616.8
|
|
|
$
|
—
|
|
|
$
|
1,616.8
|
|
|
$
|
—
|
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements
at December 31, 2019 using:
|
Description
|
|
December 31,
2019
|
|
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
|
$
|
1,157.2
|
|
|
$
|
—
|
|
|
$
|
1,157.2
|
|
|
$
|
—
|
|
Equity-related derivative instruments
|
663.4
|
|
|
—
|
|
|
—
|
|
|
663.4
|
|
Foreign currency forward and option contracts
|
6.0
|
|
|
—
|
|
|
6.0
|
|
|
—
|
|
Other
|
0.9
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
Total derivative instruments
|
1,827.5
|
|
|
—
|
|
|
1,164.1
|
|
|
663.4
|
|
Investments
|
1,289.2
|
|
|
869.2
|
|
|
—
|
|
|
420.0
|
|
Total assets
|
$
|
3,116.7
|
|
|
$
|
869.2
|
|
|
$
|
1,164.1
|
|
|
$
|
1,083.4
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Derivative instruments:
|
|
|
|
|
|
|
|
Cross-currency and interest rate derivative contracts
|
$
|
1,581.5
|
|
|
$
|
—
|
|
|
$
|
1,561.6
|
|
|
$
|
19.9
|
|
|
|
|
|
|
|
|
|
Foreign currency forward and option contracts
|
1.2
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities
|
1,582.7
|
|
|
—
|
|
|
1,562.8
|
|
|
19.9
|
|
Debt
|
45.6
|
|
|
—
|
|
|
45.6
|
|
|
—
|
|
Total liabilities
|
$
|
1,628.3
|
|
|
$
|
—
|
|
|
$
|
1,608.4
|
|
|
$
|
19.9
|
|
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, interest rate and foreign currency derivative contracts
|
|
Equity-related
derivative
instruments
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
|
|
Balance of net assets (liabilities) at January 1, 2020
|
$
|
420.0
|
|
|
$
|
(19.9)
|
|
|
$
|
663.4
|
|
|
$
|
1,063.5
|
|
Gains included in loss from continuing operations (a):
|
|
|
|
|
|
|
|
Realized and unrealized gains (losses) on derivative instruments, net
|
—
|
|
|
(366.1)
|
|
|
386.7
|
|
|
20.6
|
|
Realized and unrealized gains due to changes in fair values of certain investments and debt, net
|
68.1
|
|
|
—
|
|
|
—
|
|
|
68.1
|
|
Partial settlement of ITV collar (b)
|
—
|
|
|
—
|
|
|
(731.2)
|
|
|
(731.2)
|
|
Settlement of Lionsgate Forward (c)
|
—
|
|
|
—
|
|
|
(38.0)
|
|
|
(38.0)
|
|
Additions
|
201.6
|
|
|
—
|
|
|
—
|
|
|
201.6
|
|
Reclassification of liability to held for sale (d)
|
|
|
225.6
|
|
|
—
|
|
|
225.6
|
|
Transfers out of Level 3
|
(180.8)
|
|
|
170.1
|
|
|
—
|
|
|
(10.7)
|
|
Foreign currency translation adjustments and other, net
|
10.7
|
|
|
(9.7)
|
|
|
—
|
|
|
1.0
|
|
Balance of net assets at December 31, 2020
|
$
|
519.6
|
|
|
$
|
—
|
|
|
$
|
280.9
|
|
|
$
|
800.5
|
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
_______________
(a)Most of these net gains relate to assets and liabilities that we continue to carry on our consolidated balance sheet as of December 31, 2020.
(b)For additional information regarding the ITV Collar, see note 8.
(c)For additional information regarding the Lionsgate Forward, see note 8.
(d)Represents the reclassification of the derivative liabilities associated with the U.K. JV Entities as of December 31, 2020 to liabilities associated with assets held for sale. For information regarding the held-for-sale presentation of the U.K. JV Entities, see note 6.
(10) Long-lived Assets
Property and Equipment, Net
The details of our property and equipment and the related accumulated depreciation are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
useful life at
December 31, 2020
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
|
in millions
|
|
|
|
|
|
|
Distribution systems
|
3 to 30 years
|
|
$
|
10,264.0
|
|
|
$
|
19,007.2
|
|
Customer premises equipment
|
3 to 7 years
|
|
1,800.4
|
|
|
4,294.7
|
|
Support equipment, buildings and land
|
2 to 40 years
|
|
4,491.9
|
|
|
5,344.3
|
|
Total property and equipment, gross
|
|
16,556.3
|
|
|
28,646.2
|
|
Accumulated depreciation
|
|
(8,502.2)
|
|
|
(14,802.8)
|
|
Total property and equipment, net
|
|
$
|
8,054.1
|
|
|
$
|
13,843.4
|
|
Depreciation expense related to our property and equipment was $2,155.6 million, $3,123.5 million and $3,217.1 million during 2020, 2019 and 2018, respectively.
During 2020, 2019 and 2018, we recorded non-cash increases to our property and equipment related to vendor financing arrangements (including amounts related to the U.K. JV Entities) of $1,371.1 million, $1,727.0 million and $2,175.5 million, respectively, which exclude related VAT of $226.7 million, $286.1 million and $347.3 million, respectively, that were also financed under these arrangements.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Goodwill
Changes in the carrying amount of our goodwill during 2020 are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
2020
|
|
Acquisitions
and related
adjustments
|
|
Reclassification to assets held for sale (a)
|
|
Foreign currency translation adjustments and other
|
|
December 31,
2020
|
|
in millions
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
7,965.4
|
|
|
$
|
—
|
|
|
$
|
(7,918.5)
|
|
|
$
|
249.3
|
|
|
$
|
296.2
|
|
Switzerland
|
2,953.2
|
|
|
3,465.7
|
|
|
—
|
|
|
397.1
|
|
|
6,816.0
|
|
Belgium
|
2,576.1
|
|
|
6.7
|
|
|
—
|
|
|
200.9
|
|
|
2,783.7
|
|
Central and Eastern Europe
|
557.4
|
|
|
—
|
|
|
—
|
|
|
12.8
|
|
|
570.2
|
|
Central and Corporate
|
—
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
Total
|
$
|
14,052.1
|
|
|
$
|
3,473.0
|
|
|
$
|
(7,918.5)
|
|
|
$
|
860.1
|
|
|
$
|
10,466.7
|
|
_______________
(a)Represents goodwill of the U.K. JV Entities. For additional information regarding the held-for-sale presentation of the U.K. JV Entities, see note 6.
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.
Changes in the carrying amount of our goodwill during 2019 are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
2019
|
|
Acquisitions
and related
adjustments
|
|
Foreign
currency
translation
adjustments
|
|
December 31,
2019
|
|
|
|
in millions
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
7,671.0
|
|
|
$
|
—
|
|
|
$
|
294.4
|
|
|
$
|
7,965.4
|
|
Belgium
|
2,576.3
|
|
|
48.7
|
|
|
(48.9)
|
|
|
2,576.1
|
|
Switzerland
|
2,903.9
|
|
|
—
|
|
|
49.3
|
|
|
2,953.2
|
|
Central and Eastern Europe
|
564.6
|
|
|
—
|
|
|
(7.2)
|
|
|
557.4
|
|
Total
|
$
|
13,715.8
|
|
|
$
|
48.7
|
|
|
$
|
287.6
|
|
|
$
|
14,052.1
|
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Intangible Assets Subject to Amortization, Net
The details of our intangible assets subject to amortization, which are included in other assets, net, on our consolidated balance sheets, are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated useful life at December 31, 2020
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
|
|
|
in millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
5 to 11 years
|
|
$
|
2,426.6
|
|
|
$
|
(246.4)
|
|
|
$
|
2,180.2
|
|
|
$
|
3,653.9
|
|
|
$
|
(3,363.6)
|
|
|
$
|
290.3
|
|
Other
|
2 to 15 years
|
|
1,072.1
|
|
|
(366.3)
|
|
|
705.8
|
|
|
563.7
|
|
|
(281.9)
|
|
|
281.8
|
|
Total
|
|
$
|
3,498.7
|
|
|
$
|
(612.7)
|
|
|
$
|
2,886.0
|
|
|
$
|
4,217.6
|
|
|
$
|
(3,645.5)
|
|
|
$
|
572.1
|
|
Amortization expense related to intangible assets with finite useful lives was $175.7 million, $528.7 million and $641.1 million during 2020, 2019 and 2018, respectively. Based on our amortizable intangible asset balances at December 31, 2020, we expect that amortization expense will be as follows for the next five years and thereafter (in millions):
|
|
|
|
|
|
2021
|
$
|
449.6
|
|
2022
|
428.9
|
|
2023
|
417.8
|
|
2024
|
405.9
|
|
2025
|
399.1
|
|
Thereafter
|
784.7
|
|
Total
|
$
|
2,886.0
|
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
(11) Debt
The U.S. dollar equivalents of the components of our debt are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Principal amount
|
Weighted
average
interest
rate (a)
|
|
Unused borrowing capacity (b)
|
|
Borrowing currency
|
|
U.S. $
equivalent
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
|
in millions
|
|
|
|
|
|
|
|
|
|
|
UPC Holding Bank Facility (c)
|
3.32
|
%
|
|
€
|
716.6
|
|
|
$
|
876.0
|
|
|
$
|
4,767.1
|
|
|
$
|
—
|
|
UPCB SPE Notes
|
3.80
|
%
|
|
—
|
|
|
—
|
|
|
1,393.7
|
|
|
2,420.1
|
|
UPC Holding Senior Notes
|
4.56
|
%
|
|
—
|
|
|
—
|
|
|
1,261.5
|
|
|
1,202.3
|
|
Telenet Credit Facility (d)
|
2.19
|
%
|
|
€
|
555.0
|
|
|
678.5
|
|
|
3,652.0
|
|
|
3,541.4
|
|
Telenet Senior Secured Notes
|
4.70
|
%
|
|
—
|
|
|
—
|
|
|
1,660.2
|
|
|
1,673.7
|
|
|
|
|
|
|
|
|
|
|
|
Vendor financing (e) (f)
|
2.21
|
%
|
|
—
|
|
|
—
|
|
|
1,142.9
|
|
|
1,374.3
|
|
ITV Collar Loan
|
0.90
|
%
|
|
—
|
|
|
—
|
|
|
415.9
|
|
|
1,435.5
|
|
Virgin Media debt (g)
|
—
|
|
|
(f)
|
|
(f)
|
|
(f)
|
|
15,693.5
|
|
Other (f) (h)
|
5.56
|
%
|
|
—
|
|
|
—
|
|
|
266.3
|
|
|
307.3
|
|
Total debt before deferred financing costs, discounts and premiums (i)
|
3.23
|
%
|
|
|
|
$
|
1,554.5
|
|
|
$
|
14,559.6
|
|
|
$
|
27,648.1
|
|
The following table provides a reconciliation of total debt before deferred financing costs, discounts and premiums to total debt and finance lease obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
in millions
|
|
|
|
|
|
Total debt before deferred financing costs, discounts and premiums
|
$
|
14,559.6
|
|
|
$
|
27,648.1
|
|
Deferred financing costs, discounts and premiums, net
|
(118.4)
|
|
|
(82.7)
|
|
Total carrying amount of debt
|
14,441.2
|
|
|
27,565.4
|
|
Finance lease obligations (f) (note 12)
|
556.5
|
|
|
617.1
|
|
Total debt and finance lease obligations
|
14,997.7
|
|
|
28,182.5
|
|
Current maturities of debt and finance lease obligations
|
(1,130.4)
|
|
|
(3,877.2)
|
|
Long-term debt and finance lease obligations
|
$
|
13,867.3
|
|
|
$
|
24,305.3
|
|
_______________
(a)Represents the weighted average interest rate in effect at December 31, 2020 for all borrowings outstanding (except those of the U.K. JV Entities) 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 variable- and fixed-rate indebtedness was 3.64% at December 31, 2020. For information regarding our derivative instruments, see note 8.
(b)Unused borrowing capacity represents the maximum availability under the applicable facility at December 31, 2020 without regard to covenant compliance calculations or other conditions precedent to borrowing. At December 31, 2020, 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-
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
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. Upon completion of the relevant December 31, 2020 compliance reporting requirements, we expect the full amount of unused borrowing capacity will continue to be available under each of the respective subsidiary facilities, with no additional restriction to loan or distribute. Our above expectations do not consider any actual or potential changes to our borrowing levels or any amounts loaned or distributed subsequent to December 31, 2020, or the impact of additional amounts that may be available to borrow, loan or distribute under certain defined baskets within each respective facility.
(c)Unused borrowing capacity under the UPC Holding Bank Facility comprises (i) €500.0 million ($611.2 million) under the UPC Revolving Facility (as defined below) and (ii) €216.6 million ($264.8 million) under the Revolving Facility (as defined within Financing Transactions below), each of which were undrawn at December 31, 2020. During 2020, as a result of the sale of certain entities within the UPC Holding borrowing group in prior years, and an associated reduction in the outstanding debt and Covenant EBITDA (as defined and described in the related debt agreement) of the remaining UPC Holding borrowing group, UPC Facility AM was cancelled in full and replaced with a new revolving facility which bears interest at a rate of EURIBOR + 2.50% and has a final maturity date of May 31, 2026 (the UPC Revolving Facility).
(d)Unused borrowing capacity under the Telenet Credit Facility comprises (i) €510.0 million ($623.5 million) under the Telenet Revolving Facility I (as defined below), (ii) €25.0 million ($30.6 million) under the Telenet Overdraft Facility and (iii) €20.0 million ($24.4 million) under the Telenet Revolving Facility, each of which were undrawn at December 31, 2020. During 2020, Telenet Facility AG and Telenet Facility AP were cancelled in full and replaced with a single revolving facility which bears interest at a rate of EURIBOR + 2.25%, is subject to a EURIBOR floor of 0.0% and has a final maturity date of May 31, 2026 (the Telenet Revolving Facility I). In addition, during 2020, certain lenders under the Telenet Revolving Facility agreed to extend and reprice their commitments and as a result, the Telenet Revolving Facility, as amended, bears interest at a rate of EURIBOR + 2.25%, is subject to a EURIBOR floor of 0.0% and has a final maturity date of September 30, 2026.
(e)Represents amounts owed to various creditors pursuant to interest-bearing vendor financing arrangements that are used to finance certain of our property and equipment additions and operating expenses. These arrangements extend our repayment terms beyond a vendor’s original due dates (e.g. extension beyond a vendor’s customary payment terms, which are generally 90 days or less) and as such are classified outside of accounts payable on our consolidated balance sheet. These obligations are generally due within one year and include VAT that was also financed under these arrangements. Repayments of vendor financing obligations are included in repayments and repurchases of debt and finance lease obligations in our consolidated statements of cash flows.
(f)In connection with the pending formation of the U.K. JV, the outstanding third-party debt of the U.K. JV Entities has been classified as liabilities associated with assets held for sale on our December 31, 2020 consolidated balance sheet. For information regarding the pending formation of the U.K. JV and the held-for-sale presentation of the U.K. JV Entities, see note 6.
(g)The December 31, 2019 amount includes $264.6 million of debt collateralized by certain trade receivables of Virgin Media (VM Receivables Financing). During 2020, the amount outstanding under the VM Receivables Financing was repaid, and the associated trade receivables were sold to a third party (the VM Receivables Financing Sale).
(h)The December 31, 2019 amount includes $55.3 million of principal borrowings outstanding under the Lionsgate Loan. During 2020, we cash settled the outstanding amount under the Lionsgate Loan, as further described in note 8.
(i)As of December 31, 2020 and 2019, our debt had an estimated fair value of $14.7 billion (excluding the U.K. JV Entities) and $28.4 billion, respectively. 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 9.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
General Information
At December 31, 2020, most of our outstanding debt had been incurred by one of our three subsidiary “borrowing groups.” References to these borrowing groups, which comprise UPC Holding, Telenet and Virgin Media, include their respective restricted parent and subsidiary entities.
Credit Facilities. Each of our borrowing groups has entered into one or more credit facility agreements with certain financial and other institutions. Each of these credit facilities contain certain covenants, the more notable of which are as follows:
•Our credit facilities contain certain consolidated net leverage ratios, as specified in the relevant credit facility, which are required to be complied with (i) on an incurrence basis and/or (ii) when the associated revolving credit facilities have been drawn beyond a specified percentage of the total available revolving credit commitments, on a maintenance basis;
•Subject to certain customary and agreed exceptions, our credit facilities contain certain restrictions which, among other things, restrict the ability of the members of the relevant borrowing group to (i) incur or guarantee certain financial indebtedness, (ii) make certain disposals and acquisitions, (iii) create certain security interests over their assets and (iv) make certain restricted payments to their direct and/or indirect parent companies (and indirectly to Liberty Global) through dividends, loans or other distributions;
•Our credit facilities require that certain members of the relevant borrowing group guarantee the payment of all sums payable under the relevant credit facility and such group members are required to grant first-ranking security over their shares and, in certain borrowing groups, over substantially all of their assets to secure the payment of all sums payable thereunder;
•In addition to certain mandatory prepayment events, our credit facilities provide that the instructing group of lenders under the relevant credit facility, under certain circumstances, may cancel the group’s commitments thereunder and declare the loan(s) thereunder due and payable after the applicable notice period following the occurrence of a change of control (as specified in the relevant credit facility);
•Our credit facilities contain certain customary events of default, the occurrence of which, subject to certain exceptions, materiality qualifications and cure rights, would allow the instructing group of lenders to (i) cancel the total commitments, (ii) declare that all or part of the loans be payable on demand and/or (iii) accelerate all outstanding loans and terminate their commitments thereunder;
•Our credit facilities require members of the relevant borrowing group to observe certain affirmative and negative undertakings and covenants, which are subject to certain materiality qualifications and other customary and agreed exceptions; and
•In addition to customary default provisions, our credit facilities generally include certain cross-default or cross-acceleration provisions with respect to other indebtedness of members of the relevant borrowing group, subject to agreed minimum thresholds and other customary and agreed exceptions.
Senior and Senior Secured Notes. Certain of our borrowing groups have issued senior and/or senior secured notes. In general, our senior and senior secured notes (i) are senior obligations of each respective issuer within the relevant borrowing group that rank equally with all of the existing and future senior debt of such issuer and are senior to all existing and future subordinated debt of such issuer within the relevant borrowing group, (ii) contain, in most instances, certain guarantees from other members of the relevant borrowing group (as specified in the applicable indenture) and (iii) with respect to our senior secured notes, are secured by certain pledges or liens over the shares of certain members of the relevant borrowing group and, in certain borrowing groups, over substantially all of their assets. In addition, the indentures governing our senior and senior secured notes contain certain covenants, the more notable of which are as follows:
•Our notes contain certain customary incurrence-based covenants. In addition, our notes provide that any failure to pay principal at its stated maturity (after giving effect to any applicable grace period) of, or any acceleration with respect
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
to, other indebtedness of the issuer or certain subsidiaries over agreed minimum thresholds (as specified under the applicable indenture), is an event of default under the respective notes;
•Subject to certain customary and agreed exceptions, our notes contain certain restrictions that, among other things, restrict the ability of the members of the relevant borrowing group to (i) incur or guarantee certain financial indebtedness, (ii) make certain disposals and acquisitions, (iii) create certain security interests over their assets and (iv) make certain restricted payments to its direct and/or indirect parent companies (and indirectly to Liberty Global) through dividends, loans or other distributions;
•If the relevant issuer or certain of its subsidiaries (as specified in the applicable indenture) sell certain assets, such issuer must, subject to certain customary and agreed exceptions, offer to repurchase the applicable notes at par, or if a change of control (as specified in the applicable indenture) occurs, such issuer must offer to repurchase all of the relevant notes at a redemption price of 101%;
•Our senior secured notes contain certain early redemption provisions including the ability to, during each 12-month period commencing on the issue date for such notes until the applicable call date, redeem up to 10% of the principal amount of the notes at a redemption price equal to 103% of the principal amount of the notes to be redeemed plus accrued and unpaid interest; and
•Our notes are non-callable prior to their respective call date (as specified under the applicable indenture). At any time prior to the applicable call date, we may redeem some or all of the applicable notes by paying a “make-whole” premium, which is the present value of all remaining scheduled interest payments to the applicable call date using the discount rate as of the redemption date plus a premium (as specified in the applicable indenture). On or after the applicable call date, we may redeem some or all of these notes at various redemption prices plus accrued interest and additional amounts (as specified in the applicable indenture), if any, to the applicable redemption date.
SPE Notes. From time to time, we create special purpose financing entities (SPEs), most of which are 100% owned by third parties, for the primary purpose of facilitating the offering of senior secured notes, which we collectively refer to as the “SPE Notes.”
The SPEs used the proceeds from the issuance of SPE Notes to fund term loan facilities under the credit facilities made available to their respective borrowing group (as further described below), each a “Funded Facility” and collectively the “Funded Facilities.” Each SPE is dependent on payments from the relevant borrowing entity under the applicable Funded Facility in order to service its payment obligations under each respective SPE Note. Each of the Funded Facility term loans creates a variable interest in the respective SPE for which the relevant borrowing entity is the primary beneficiary and are consolidated by the relevant parent entities, including Liberty Global. As a result, the amounts outstanding under the Funded Facilities are eliminated in the respective borrowing group’s and Liberty Global’s consolidated financial statements. At December 31, 2020, we had outstanding SPE Notes issued by entities consolidated by UPC Holding, collectively the “UPCB SPEs”.
Pursuant to the respective indentures for the SPE Notes (the SPE Indentures) and the respective accession agreements for the Funded Facilities, the call provisions, maturity and applicable interest rate for each Funded Facility are the same as those of the related SPE Notes. The SPEs, as lenders under the relevant Funded Facility for the relevant borrowing group, are treated the same as the other lenders under the respective credit facility, with benefits, rights and protections similar to those afforded to the other lenders. Through the covenants in the applicable SPE Indentures and the applicable security interests over the relevant SPE’s rights under the applicable Funded Facility granted to secure the relevant SPE’s obligations under the relevant SPE Notes, the holders of the SPE Notes are provided indirectly with the benefits, rights, protections and covenants granted to the SPEs as lenders under the applicable Funded Facility. The SPEs are prohibited from incurring any additional indebtedness, subject to certain exceptions under the SPE Indentures.
The SPE Notes are non-callable prior to their respective call date (as specified under the applicable SPE Indenture). If, however, at any time prior to the applicable SPE Notes call date, all or a portion of the loans under the related Funded Facility are voluntarily prepaid (a SPE Early Redemption Event), then the SPE will be required to redeem an aggregate principal amount of its respective SPE Notes equal to the aggregate principal amount of the loans prepaid under the relevant Funded Facility. In general, the redemption price payable will equal 100% of the principal amount of the applicable SPE Notes to be
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
redeemed and a “make-whole” premium, which is the present value of all remaining scheduled interest payments to the applicable SPE Notes call date using the discount rate (as specified in the applicable SPE Indenture) as of the redemption date plus a premium (as specified in the applicable SPE Indenture).
Upon the occurrence of a SPE Early Redemption Event on or after the applicable SPE Notes call date, the SPE will redeem an aggregate principal amount of its respective SPE Notes equal to the principal amount of the related Funded Facility prepaid at a redemption price (expressed as a percentage of the principal amount), plus accrued and unpaid interest and additional amounts (as specified in the applicable SPE Indenture), if any, to the applicable redemption date.
Financing Transactions
Below we provide summary descriptions of certain financing transactions completed during 2020, 2019 and 2018. A portion of our financing transactions may include non-cash borrowings and repayments. During 2020, 2019 and 2018, non-cash borrowings and repayments aggregated $3,525.2 million, $3,300.2 million and $2,583.3 million, respectively, including amounts related to the U.K. JV Entities.
UPC Holding - 2020 Financing Transactions
In January 2020, UPC Holding entered into (i) a $700.0 million term loan facility (UPC Facility AT) and (ii) a €400.0 million ($489.0 million) term loan facility (UPC Facility AU). UPC Facility AT was issued at 99.75% of par, matures on April 30, 2028 and bears interest at a rate of LIBOR + 2.25%, subject to a LIBOR floor of 0.0%. UPC Facility AU was issued at 99.875% of par, matures on April 30, 2029 and bears interest at a rate of EURIBOR + 2.50%, subject to a EURIBOR floor of 0.0%. The net proceeds from UPC Facility AT and UPC Facility AU were used to prepay in full the $1,140.0 million outstanding principal amount under UPC Facility AL, together with accrued and unpaid interest and the related prepayment premiums, which was owed to UPCB Finance IV and, in turn, UPCB Finance IV used such proceeds to redeem in full the $1,140.0 million outstanding principal amount of UPCB Finance IV Dollar Notes. In connection with this transaction, UPC Holding recognized a loss on debt extinguishment of $35.6 million related to (a) the payment of $30.7 million of redemption premiums and (b) the write-off of $4.9 million of unamortized deferred financing costs and discounts.
In August 2020, in connection with the Sunrise Acquisition, UPC Holding entered into (i) a $1,300.0 million term loan facility (UPC Facility AV), (ii) a €400.0 million ($489.0 million) term loan facility (UPC Facility AW), (iii) a $1,300.0 million term loan facility (UPC Facility AV1), (iv) a €400.0 million term loan facility (UPC Facility AW1) and (v) a €236.4 million ($289.0 million) equivalent multi-currency revolving facility, part of which has been made available as an ancillary facility (the Revolving Facility, and together with UPC Facility AV, UPC Facility AW, UPC Facility AV1 and UPC Facility AW1, the UPC Sunrise Facilities). UPC Facility AV and UPC Facility AV1 were each issued at 99.0% of par, mature on January 31, 2029 and bear interest at a rate of LIBOR + 3.50%, subject to a LIBOR floor of 0.0%. UPC Facility AW and UPC Facility AW1 were each issued at 98.5% of par, mature on January 31, 2029 and bear interest at a rate of EURIBOR + 3.50%, subject to a EURIBOR floor of 0.0%. The Revolving Facility matures on May 31, 2026 and bears interest at a rate of EURIBOR + 2.50%. The Revolving Facility, which is only available to be utilized by the borrowers under UPC Facility AV1 and UPC Facility AW1 and the entities acquired in the Sunrise Acquisition, can be used for ongoing working capital requirements and general corporate purposes.
In November 2020, upon completion of the Sunrise Acquisition, the proceeds from (i) UPC Facility AV and UPC Facility AW, together with existing liquidity of Liberty Global, were used to fund the Offer and (ii) UPC Facility AV1 and UPC Facility AW1 were used to refinance the existing debt of Sunrise, as further described in note 5. In connection with these transactions, UPC Holding recognized a net loss on debt extinguishment of $7.5 million primarily related to (a) the payment of $13.1 million of redemption premiums and (b) the write-off of $5.2 million of unamortized deferred financing costs, discounts and premiums.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
UPC Holding - 2019 and 2018 Financing Transactions
During 2019 and 2018, UPC Holding completed a number of financing transactions that generally resulted in lower interest rates and extended maturities. In connection with these transactions, UPC Holding recognized losses on debt extinguishment of $15.4 million and $8.9 million during 2019 and 2018, respectively. These losses include (i) the write-off of unamortized deferred financing costs and discounts of $15.4 million and $6.9 million, respectively, and (ii) during 2018, the payment of $2.0 million of redemption premiums.
Telenet - 2020 Financing Transactions
In January 2020, Telenet entered into (i) a $2,295.0 million term loan facility (Telenet Facility AR) and (ii) a €1,110.0 million ($1,357.0 million) term loan facility (Telenet Facility AQ). Telenet Facility AR was issued at 99.75% of par, matures on April 30, 2028 and bears interest at a rate of LIBOR + 2.0%, subject to a LIBOR floor of 0.0%. Telenet Facility AQ was issued at par, matures on April 30, 2029 and bears interest at a rate of EURIBOR + 2.25%, subject to a EURIBOR floor of 0.0%. The net proceeds from Telenet Facility AR and Telenet Facility AQ, together with existing cash, were used to prepay in full (a) the $2,295.0 million outstanding principal amount under Telenet Facility AN and (b) the €1,110.0 million outstanding principal amount under Telenet Facility AO. In connection with these transactions, Telenet recognized a net loss on debt extinguishment of $18.9 million related to the write-off of unamortized deferred financing costs, discounts and premiums.
Telenet - 2019 and 2018 Financing Transactions
During 2019 and 2018, Telenet completed a number of financing transactions that generally resulted in lower interest rates and extended maturities. In connection with these transactions, Telenet recognized losses on debt extinguishment of $54.7 million and $31.5 million during 2019 and 2018, respectively. These losses include (i) the payment of redemption premiums of $50.4 million and $19.3 million, respectively, and (ii) the write-off of unamortized deferred financing costs and discounts of $4.3 million and $12.2 million, respectively.
Virgin Media - 2020 Financing Transactions
In connection with the pending formation of the U.K. JV, the outstanding third-party debt of Virgin Media and certain of its subsidiaries has been classified as liabilities associated with assets held for sale on our December 31, 2020 consolidated balance sheet. For information regarding the pending formation of the U.K. JV and the held-for-sale presentation of the U.K. JV Entities, see note 6.
Trade Receivables Transaction. In May 2020, Virgin Media Trade Receivables Financing plc, a third-party special purpose financing entity, was created for the purpose of facilitating the offering of certain notes. These notes are collateralized by certain trade receivables of Virgin Media, creating a variable interest in which Virgin Media is the primary beneficiary and, accordingly, Virgin Media, and ultimately Liberty Global, are required to consolidate Virgin Media Trade Receivables Financing plc. The offering of these notes resulted in net proceeds of £214.4 million ($292.7 million) (the May 2020 Proceeds).
Senior Notes Transactions. In June 2020, Virgin Media issued $675.0 million principal amount of U.S. dollar-denominated senior notes (the 2030 VM Dollar Senior Notes). The 2030 VM Dollar Senior Notes were issued at par, mature on July 15, 2030 and bear interest at a rate of 5.0%. The net proceeds from the issuance of these notes, together with the May 2020 Proceeds, were used to redeem in full (i) €460.0 million ($562.3 million) outstanding principal amount of 2025 VM Euro Senior Notes and (ii) $388.7 million outstanding principal amount of 2025 VM Dollar Senior Notes. Virgin Media then issued (a) an additional $250.0 million principal amount of 2030 VM Dollar Senior Notes at 101% of par and (b) €500.0 million ($611.2 million) principal amount of euro-denominated senior notes (the 2030 VM Euro Senior Notes). The 2030 VM Euro Senior Notes were issued at par, mature on July 15, 2030 and bear interest at a rate of 3.75%. The net proceeds from the issuance of these notes were used (1) to redeem in full (A) $497.0 million outstanding principal amount of 2024 VM Dollar Senior Notes, (B) $71.6 million outstanding principal amount of 2022 VM 4.875% Dollar Senior Notes, (C) $51.5 million outstanding principal amount of 2022 VM 5.25% Dollar Senior Notes and (D) £44.1 million ($60.2 million) outstanding principal amount of 2022 VM Sterling Senior Notes and (2) for general corporate purposes. In connection with these transactions, Virgin Media recognized a net loss on debt extinguishment of $57.5 million related to (I) the payment of $50.8
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
million of redemption premiums and (II) the write-off of $6.7 million of unamortized deferred financing costs, discounts and premiums.
Senior Secured Notes Transactions. In June 2020, Virgin Media issued (i) $650.0 million principal amount of U.S. dollar-denominated senior secured notes (the 2030 VM Dollar Senior Secured Notes) and (ii) £450.0 million ($614.3 million) principal amount of sterling-denominated senior secured notes (the 2030 VM 4.125% Sterling Senior Secured Notes). The 2030 VM Dollar Senior Secured Notes and 2030 VM 4.125% Sterling Senior Secured Notes were each issued at par, mature on August 15, 2030 and bear interest at a rate of 4.5% and 4.125%, respectively. The net proceeds from the issuance of these notes, together with existing cash, were used to (a) redeem in full £525.0 million ($716.7 million) outstanding principal amount of 2027 VM 4.875% Sterling Senior Secured Notes, (b) redeem in full £360.0 million ($491.5 million) outstanding principal amount of 2029 VM 6.25% Sterling Senior Secured Notes and (c) redeem £80.0 million ($109.2 million) of the £521.3 million ($711.7 million) outstanding principal amount of 2025 VM Sterling Senior Secured Notes. In connection with these transactions, Virgin Media recognized a net loss on debt extinguishment of $65.7 million related to (1) the payment of $64.7 million of redemption premiums and (2) the write-off of $1.0 million of unamortized deferred financing costs, discounts and premiums.
In November 2020, Virgin Media issued via a private placement an additional (i) $265.0 million principal amount of 2030 VM Dollar Senior Secured Notes, (ii) £235.0 million ($320.8 million) principal amount of 4.25% sterling-denominated senior secured notes and (iii) £30.0 million ($41.0 million) principal amount of 2030 VM 4.125% Sterling Senior Secured Notes. The net proceeds from the issuance of these notes were used (a) to redeem in full the £441.3 million ($602.5 million) outstanding principal amount of 2025 VM Sterling Senior Secured Notes and (b) for general corporate purposes. In connection with this transaction, Virgin Media recognized a loss on debt extinguishment of $5.3 million related to the payment of redemption premiums.
Vendor Financing Notes Transactions. In June 2020, Virgin Media Vendor Financing Notes III Designated Activity Company (Virgin Media Financing III Company) and Virgin Media Vendor Financing Notes IV Designated Activity Company (Virgin Media Financing IV Company, and together with Virgin Media Financing III Company, the 2020 VM Financing Companies) were created for the purpose of issuing certain vendor financing notes. The 2020 VM Financing Companies are third-party special purpose financing entities that are not consolidated by Virgin Media or Liberty Global.
Virgin Media Financing III Company issued (i) £500.0 million ($682.6 million) principal amount of 4.875% vendor financing notes at par and (ii) £400.0 million ($546.1 million) principal amount of 4.875% vendor financing notes at 99.5% of par, each due July 15, 2028 (together, the VM Vendor Financing III Notes). Virgin Media Financing IV Company issued $500.0 million principal amount of 5.0% vendor financing notes due July 15, 2028 at par (the VM Vendor Financing IV Notes, and together with the VM Vendor Financing III Notes, the June 2020 Vendor Financing Notes). The net proceeds from the June 2020 Vendor Financing Notes were used by the 2020 VM Financing Companies to purchase certain vendor-financed receivables owed by Virgin Media and its subsidiaries from previously-existing third-party special purpose financing entities (the Original VM Financing Companies) and various other third parties. As a result, Virgin Media paid $42.0 million of redemption premiums, which is included in losses on debt extinguishment, net, in our consolidated statement of operations for the year ended December 31, 2020. To the extent that the proceeds from the June 2020 Vendor Financing Notes exceed the amount of vendor-financed receivables available to be purchased from the Original VM Financing Companies and various other third parties, the excess proceeds are used to fund excess cash facilities under certain credit facilities of Virgin Media. As additional vendor financed receivables become available for purchase, the 2020 VM Financing Companies can request that Virgin Media repay any amounts available under these excess cash facilities.
Virgin Media - 2019 and 2018 Financing Transactions
During 2019 and 2018, Virgin Media completed a number of financing transactions that generally resulted in lower interest rates and extended maturities. In connection with these transactions, Virgin Media recognized losses on debt extinguishment of $144.6 million and $36.4 million during 2019 and 2018, respectively. These losses include (i) the payment of redemption premiums of $121.8 million and $28.2 million, respectively, and (ii) the write-off of net unamortized deferred financing costs, discounts and premiums of $22.8 million and $8.2 million, respectively.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Other 2020 Financing Transactions
In September 2020, in connection with the pending formation of the U.K. JV, certain subsidiaries of Liberty Global completed various financing transactions, as further described below. Due to the held-for-sale presentation of the U.K. JV Entities, the results of the below transactions have been classified as liabilities associated with assets held for sale on our December 31, 2020 consolidated balance sheet. For additional information regarding the pending formation of the U.K. JV and the held-for-sale presentation of the U.K. JV Entities, see note 6.
Senior Secured Notes Transactions. Certain of the U.K. JV Entities outside of the Virgin Media borrowing group issued (i) $1,350.0 million principal amount of U.S. dollar-denominated senior secured notes (the 2031 VM O2 Dollar Senior Secured Notes), (ii) €950.0 million ($1,161.4 million) principal amount of euro-denominated senior secured notes (the 2031 VM O2 Euro Senior Secured Notes) and (iii) £600.0 million ($819.1 million) principal amount of sterling-denominated senior secured notes (the 2029 VM O2 Sterling Senior Secured Notes, and together with the 2031 VM O2 Dollar Senior Secured Notes and the 2031 VM O2 Euro Senior Secured Notes, the VM O2 Notes). The 2031 VM O2 Dollar Senior Secured Notes and 2031 VM O2 Euro Senior Secured Notes were each issued at par, mature on January 31, 2031 and bear interest at a rate of 4.25% and 3.25%, respectively. The 2029 VM O2 Sterling Senior Secured Notes were issued at par, mature on January 31, 2029 and bear interest at a rate of 4.0%. The proceeds from the issuance of the VM O2 Notes were placed into certain escrow accounts (the Escrowed Proceeds), which are included in assets held for sale on our December 31, 2020 consolidated balance sheet. Upon formation of the U.K. JV, the Escrowed Proceeds will be used to fund certain facility loans under the existing Virgin Media credit facility agreement to VMED O2 UK Holdco 4 Limited (the New VM Credit Facility Borrower), an entity that upon closing of the U.K. JV will be within the Virgin Media senior secured borrowing group. The New VM Credit Facility Borrower will use such loan proceeds, together with the proceeds from the VM O2 Facilities (as defined and described below), for the purpose of (a) funding a dividend, distribution or other payment to VMED O2 UK Limited (which, upon formation of the U.K. JV, will become the ultimate parent company of the U.K. JV), and ultimately to Liberty Global and Telefónica, and (b) paying fees and expenses related to the formation of the U.K. JV.
If the formation of the U.K. JV is not consummated on or before May 7, 2022 (the Long Stop Date) or, if the Long Stop Date is postponed in accordance with the terms of the agreement, on or before November 7, 2022, or upon the occurrence of certain other events, the VM O2 Notes will be redeemed at a redemption price equal to 100% of the principal amount of the applicable VM O2 Notes plus accrued and unpaid interest and additional amounts, if any, up to but excluding the date of the redemption.
Facility Transactions. In addition to the senior secured notes transactions described above, (i) the New VM Credit Facility Borrower entered into (a) a £1,500.0 million ($2,047.8 million) term loan facility (VM O2 Facility P) and (b) a €750.0 million ($916.9 million) term loan facility (VM O2 Facility R) and (ii) an entity within the Virgin Media borrowing group entered into a $1,300.0 million term loan facility (VM O2 Facility Q, and together with VM O2 Facility P and VM O2 Facility R, the VM O2 Facilities). VM O2 Facility P will be issued at par, mature on January 31, 2026 and bear interest at a rate of LIBOR + 2.75%. VM O2 Facility R will be issued at 99.0% of par, mature on January 31, 2029 and bear interest at a rate of EURIBOR + 3.25%, subject to a EURIBOR floor of 0.0%. VM O2 Facility Q will be issued at 98.5% of par, mature on January 31, 2029 and bear interest at a rate of LIBOR + 3.25%, subject to a LIBOR floor of 0.0%.
At December 31, 2020, the VM O2 Facilities were undrawn and are only available to be drawn and utilized upon consummation of the U.K. JV, as further described above. Accordingly, Liberty Global and Virgin Media’s unused borrowing capacity at December 31, 2020 excludes the availability under the VM O2 Facilities, as applicable. In the event that the formation of the U.K. JV is not successfully completed, the VM O2 Facilities will be cancelled.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Maturities of Debt
Maturities of our debt as of December 31, 2020 are presented below for the named borrowing group, unless otherwise noted, and represent U.S. dollar equivalents based on December 31, 2020 exchange rates. As a result of the held-for-sale presentation of the U.K. JV Entities on our December 31, 2020 consolidated balance sheet, the amounts presented below do not include maturities of the debt obligations of these entities. For information regarding the held-for-sale presentation of the U.K. JV Entities, see note 6.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telenet
|
|
UPC
Holding (a)
|
|
Other (b)
|
|
Total
|
|
in millions
|
Year ending December 31:
|
|
|
|
|
|
|
|
2021
|
$
|
443.2
|
|
|
$
|
380.2
|
|
|
$
|
231.0
|
|
|
$
|
1,054.4
|
|
2022
|
11.3
|
|
|
—
|
|
|
428.4
|
|
|
439.7
|
|
2023
|
12.0
|
|
|
—
|
|
|
173.7
|
|
|
185.7
|
|
2024
|
11.9
|
|
|
—
|
|
|
19.5
|
|
|
31.4
|
|
2025
|
12.0
|
|
|
—
|
|
|
1.2
|
|
|
13.2
|
|
Thereafter
|
5,412.9
|
|
|
7,422.3
|
|
|
—
|
|
|
12,835.2
|
|
Total debt maturities (c)
|
5,903.3
|
|
|
7,802.5
|
|
|
853.8
|
|
|
14,559.6
|
|
Deferred financing costs, discounts and premiums, net
|
(17.2)
|
|
|
(98.5)
|
|
|
(2.7)
|
|
|
(118.4)
|
|
Total debt
|
$
|
5,886.1
|
|
|
$
|
7,704.0
|
|
|
$
|
851.1
|
|
|
$
|
14,441.2
|
|
Current portion
|
$
|
443.2
|
|
|
$
|
380.2
|
|
|
$
|
230.7
|
|
|
$
|
1,054.1
|
|
Noncurrent portion
|
$
|
5,442.9
|
|
|
$
|
7,323.8
|
|
|
$
|
620.4
|
|
|
$
|
13,387.1
|
|
_______________
(a)Amounts include the UPCB SPE Notes issued by the UPCB SPEs. As described above, the UPCB SPEs are consolidated by UPC Holding and Liberty Global.
(b)Amounts include $415.9 million related to the ITV Collar Loan. The ITV Collar Loan has various maturity dates through 2022 consistent with the ITV Collar (see notes 7 and 8). We may elect to use cash or the collective value of the related shares and equity-related derivative instrument to settle the remaining amounts under the ITV Collar Loan.
(c)Amounts include vendor financing obligations of $1,142.9 million, as set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telenet
|
|
UPC
Holding
|
|
Other
|
|
Total
|
|
in millions
|
Year ending December 31:
|
|
|
|
|
|
|
|
2021
|
$
|
429.2
|
|
|
$
|
380.2
|
|
|
$
|
149.9
|
|
|
$
|
959.3
|
|
2022
|
—
|
|
|
—
|
|
|
93.6
|
|
|
93.6
|
|
2023
|
—
|
|
|
—
|
|
|
69.2
|
|
|
69.2
|
|
2024
|
—
|
|
|
—
|
|
|
19.5
|
|
|
19.5
|
|
2025
|
—
|
|
|
—
|
|
|
1.3
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
Total vendor financing maturities
|
$
|
429.2
|
|
|
$
|
380.2
|
|
|
$
|
333.5
|
|
|
$
|
1,142.9
|
|
Current portion
|
$
|
429.2
|
|
|
$
|
380.2
|
|
|
$
|
149.9
|
|
|
$
|
959.3
|
|
Noncurrent portion
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
183.6
|
|
|
$
|
183.6
|
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
(12) Leases
General
We enter into operating and finance leases for network equipment, real estate, mobile site sharing and vehicles. We provide residual value guarantees on certain of our vehicle leases.
Lease Balances
A summary of our ROU assets and lease liabilities is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2020
|
|
2019
|
|
|
|
in millions
|
|
|
|
|
|
|
|
|
ROU assets:
|
|
|
|
|
|
Finance leases (a)
|
$
|
477.8
|
|
|
$
|
531.0
|
|
|
|
Operating leases (b)
|
1,454.7
|
|
|
512.7
|
|
|
|
Total ROU assets
|
$
|
1,932.5
|
|
|
$
|
1,043.7
|
|
|
|
|
|
|
|
|
|
Lease liabilities:
|
|
|
|
|
|
Finance leases (c)
|
$
|
556.5
|
|
|
$
|
617.1
|
|
|
|
Operating leases (d)
|
1,447.7
|
|
|
545.1
|
|
|
|
Total lease liabilities
|
$
|
2,004.2
|
|
|
$
|
1,162.2
|
|
|
|
_______________
(a)Our finance lease ROU assets are included in property and equipment, net, on our consolidated balance sheets. At December 31, 2020, the weighted average remaining lease term for finance leases was 22.8 years and the weighted average discount rate was 6.0%. During 2020, 2019 and 2018, we recorded non-cash additions to our finance lease ROU assets (including amounts related to the U.K. JV Entities) of $49.7 million, $66.9 million and $102.4 million, respectively.
(b)Our operating lease ROU assets are included in other assets, net, on our consolidated balance sheets. At December 31, 2020, the weighted average remaining lease term for operating leases was 12.8 years and the weighted average discount rate was 5.8%. During 2020 and 2019, we recorded non-cash additions to our operating lease ROU assets (including amounts related to the U.K. JV Entities) of $124.7 million and $88.5 million, respectively.
(c)The current and long-term portions of our finance lease liabilities are included within current portion of debt and finance lease liabilities and long-term debt and finance lease liabilities, respectively, on our consolidated balance sheets.
(d)The current and long-term portions of our operating lease liabilities are included within other accrued and current liabilities and other long-term liabilities, respectively, on our consolidated balance sheets.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
A summary of our aggregate lease expense is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
in millions
|
|
|
|
|
Finance lease expense:
|
|
|
|
Depreciation and amortization
|
$
|
75.3
|
|
|
$
|
84.2
|
|
Interest expense
|
33.4
|
|
|
33.8
|
|
Total finance lease expense
|
108.7
|
|
|
118.0
|
|
Operating lease expense (a)
|
151.1
|
|
|
135.7
|
|
Short-term lease expense (a)
|
6.8
|
|
|
8.0
|
|
Variable lease expense (b)
|
4.6
|
|
|
4.8
|
|
Total lease expense
|
$
|
271.2
|
|
|
$
|
266.5
|
|
_______________
(a)Our operating lease expense and short-term lease expense are included in other operating expenses, SG&A expenses and impairment, restructuring and other operating items in our consolidated statements of operations.
(b)Variable lease expense represents payments made to a lessor during the lease term that vary because of a change in circumstance that occurred after the lease commencement date. Variable lease payments are expensed as incurred and are included in other operating expenses in our consolidated statements of operations.
A summary of our cash outflows from operating and finance leases is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2020
|
|
2019
|
|
|
|
in millions
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
Operating cash outflows from operating leases
|
$
|
126.2
|
|
|
$
|
135.5
|
|
|
|
Operating cash outflows from finance leases
|
33.4
|
|
|
33.8
|
|
|
|
Financing cash outflows from finance leases
|
98.2
|
|
|
60.0
|
|
|
|
Total cash outflows from operating and finance leases
|
$
|
257.8
|
|
|
$
|
229.3
|
|
|
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Maturities of our operating and finance lease liabilities as of December 31, 2020 are presented below. As a result of the held-for-sale presentation of the U.K. JV Entities on our December 31, 2020 consolidated balance sheet, the amounts presented below do not include maturities of operating and finance lease liabilities of these entities. For information regarding the held-for-sale presentation of the U.K. JV Entities, see note 6. Amounts represent U.S. dollar equivalents based on December 31, 2020 exchange rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
Finance
leases
|
|
in millions
|
Year ending December 31:
|
|
|
|
2021
|
$
|
212.2
|
|
|
$
|
107.2
|
|
2022
|
196.1
|
|
|
98.8
|
|
2023
|
184.8
|
|
|
101.3
|
|
2024
|
168.8
|
|
|
62.2
|
|
2025
|
155.0
|
|
|
59.1
|
|
Thereafter
|
1,190.0
|
|
|
292.0
|
|
Total payments
|
2,106.9
|
|
|
720.6
|
|
Less: present value discount
|
(659.2)
|
|
|
(164.1)
|
|
Present value of lease payments
|
$
|
1,447.7
|
|
|
$
|
556.5
|
|
Current portion
|
$
|
180.3
|
|
|
$
|
76.3
|
|
Noncurrent portion
|
$
|
1,267.4
|
|
|
$
|
480.2
|
|
(13) Income Taxes
Liberty Global files its primary income tax return in the U.K. Its subsidiaries file income tax returns in the U.S., the U.K. and a number of other European jurisdictions. The income taxes of Liberty Global and its subsidiaries are presented on a separate return basis for each tax-paying entity or group.
The components of our earnings (loss) from continuing operations before income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
U.K.
|
$
|
(1,470.0)
|
|
|
$
|
(831.0)
|
|
|
$
|
330.9
|
|
The Netherlands
|
(606.0)
|
|
|
(662.8)
|
|
|
(321.1)
|
|
Belgium
|
343.5
|
|
|
409.3
|
|
|
392.4
|
|
Luxembourg
|
95.5
|
|
|
(5.3)
|
|
|
0.7
|
|
U.S.
|
(46.0)
|
|
|
(7.0)
|
|
|
(51.6)
|
|
Switzerland
|
(21.2)
|
|
|
178.5
|
|
|
318.8
|
|
Intercompany activity with discontinued operations
|
—
|
|
|
(237.2)
|
|
|
(426.4)
|
|
Other
|
(19.4)
|
|
|
(0.5)
|
|
|
(81.9)
|
|
Total
|
$
|
(1,723.6)
|
|
|
$
|
(1,156.0)
|
|
|
$
|
161.8
|
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Income tax benefit (expense) consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
Deferred
|
|
Total
|
|
in millions
|
Year ended December 31, 2020:
|
|
|
|
|
|
U.S. (a)
|
$
|
81.5
|
|
|
$
|
159.7
|
|
|
$
|
241.2
|
|
U.K.
|
(1.3)
|
|
|
52.2
|
|
|
50.9
|
|
Switzerland
|
(3.5)
|
|
|
41.2
|
|
|
37.7
|
|
Luxembourg
|
(0.3)
|
|
|
(27.1)
|
|
|
(27.4)
|
|
Belgium
|
(54.5)
|
|
|
36.3
|
|
|
(18.2)
|
|
The Netherlands
|
(7.7)
|
|
|
—
|
|
|
(7.7)
|
|
Other
|
(19.0)
|
|
|
(0.6)
|
|
|
(19.6)
|
|
Total
|
$
|
(4.8)
|
|
|
$
|
261.7
|
|
|
$
|
256.9
|
|
|
|
|
|
|
|
Year ended December 31, 2019:
|
|
|
|
|
|
The Netherlands
|
$
|
—
|
|
|
$
|
(275.3)
|
|
|
$
|
(275.3)
|
|
Belgium
|
(134.7)
|
|
|
3.6
|
|
|
(131.1)
|
|
U.K
|
(1.5)
|
|
|
118.8
|
|
|
117.3
|
|
U.S. (a)
|
(4.1)
|
|
|
81.9
|
|
|
77.8
|
|
Switzerland
|
(27.8)
|
|
|
(1.1)
|
|
|
(28.9)
|
|
Luxembourg
|
(1.2)
|
|
|
7.7
|
|
|
6.5
|
|
Other
|
(18.2)
|
|
|
(1.1)
|
|
|
(19.3)
|
|
Total
|
$
|
(187.5)
|
|
|
$
|
(65.5)
|
|
|
$
|
(253.0)
|
|
|
|
|
|
|
|
Year ended December 31, 2018:
|
|
|
|
|
|
U.S. (a)
|
$
|
(957.5)
|
|
|
$
|
7.6
|
|
|
$
|
(949.9)
|
|
The Netherlands
|
14.2
|
|
|
(519.4)
|
|
|
(505.2)
|
|
Belgium
|
(153.9)
|
|
|
41.6
|
|
|
(112.3)
|
|
U.K
|
(7.2)
|
|
|
32.2
|
|
|
25.0
|
|
Switzerland
|
(16.6)
|
|
|
6.2
|
|
|
(10.4)
|
|
Luxembourg
|
(3.1)
|
|
|
0.3
|
|
|
(2.8)
|
|
Other
|
(11.1)
|
|
|
(6.6)
|
|
|
(17.7)
|
|
Total
|
$
|
(1,135.2)
|
|
|
$
|
(438.1)
|
|
|
$
|
(1,573.3)
|
|
_______________
(a) Includes federal and state income taxes. Our U.S. state income taxes were not material during any of the years presented.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Income tax benefit (expense) attributable to our earnings (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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
Computed “expected” tax benefit (expense) (a)
|
$
|
327.5
|
|
|
$
|
219.6
|
|
|
$
|
(30.7)
|
|
Non-deductible or non-taxable foreign currency exchange results
|
(395.1)
|
|
|
(26.5)
|
|
|
132.5
|
|
Recognition of previously unrecognized tax benefits
|
285.8
|
|
|
5.9
|
|
|
49.6
|
|
Basis and other differences in the treatment of items associated with investments in subsidiaries and affiliates (b)
|
(248.6)
|
|
|
(167.9)
|
|
|
(360.1)
|
|
Enacted tax law and rate changes (c)
|
248.2
|
|
|
19.2
|
|
|
(13.5)
|
|
Tax benefit associated with technologies innovation (d)
|
62.2
|
|
|
—
|
|
|
—
|
|
Non-deductible or non-taxable interest and other expenses
|
(25.6)
|
|
|
(191.7)
|
|
|
(153.8)
|
|
Change in valuation allowances
|
(8.4)
|
|
|
(113.6)
|
|
|
(34.9)
|
|
Mandatory Repatriation Tax (e)
|
—
|
|
|
—
|
|
|
(1,137.2)
|
|
Other, net
|
10.9
|
|
|
2.0
|
|
|
(25.2)
|
|
Total income tax expense
|
$
|
256.9
|
|
|
$
|
(253.0)
|
|
|
$
|
(1,573.3)
|
|
_______________
(a)The statutory or “expected” tax rate is the U.K. rate of 19.0%.
(b)These amounts reflect the net impact of differences in the treatment of income and loss items between financial reporting and tax accounting related to investments in subsidiaries and affiliates including the effects of foreign earnings.
(c)On July 22, 2020, legislation was enacted in the U.K. to maintain the corporate income tax rate at 19.0%, reversing previous legislation that had reduced the U.K. rate to 17.0% from April, 1, 2020. The impact of this rate change on our deferred balances was recorded during the third quarter of 2020. On December 23, 2020, legislation was enacted in the Netherlands to eliminate the corporate income tax rate reduction that had previously been enacted in December 2019. As a result, the corporate income tax rate remains at 25% in 2021 instead of reducing to 21.7%. Substantially all of the impacts of the new rate change in the Netherlands on our deferred tax balances were recorded during the fourth quarter of 2020, modifying the impacts of the 2019 rate change that were previously recorded during the fourth quarter of 2019. The December 2019 legislation delayed and lessened the corporate income tax rate reduction that had previously been enacted in December 2018, maintaining the 25% rate in 2020 and reducing to 21.7% in 2021 instead of reducing the rate to 22.5% in 2020 and 20.5% in 2021. Substantially all of the impacts of this change on our deferred tax balances were recorded during the fourth quarter of 2019, modifying the impacts of the 2018 rate change that were previously recorded during the fourth quarter of 2018.
(d)The amount reflects the recognition of the innovation income tax deduction in Belgium, including the one-time effect of deductions related to prior periods.
(e)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 in part to the expected use of carryforward 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.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
The components of our net deferred tax assets (liabilities) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020 (a)
|
|
2019
|
|
in millions
|
|
|
|
|
Deferred tax assets
|
$
|
565.1
|
|
|
$
|
2,457.4
|
|
Deferred tax liabilities (b)
|
(672.9)
|
|
|
(246.4)
|
|
Net deferred tax asset (liability)
|
$
|
(107.8)
|
|
|
$
|
2,211.0
|
|
_______________
(a)Due to the held-for-sale presentation of the U.K. JV Entities, amounts as of December 31, 2020 exclude the deferred tax assets and liabilities associated with such entities.
(b)Our deferred tax liabilities are included in other long-term liabilities on our consolidated balance sheets.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
|
in millions
|
|
|
|
|
Deferred tax assets:
|
|
|
|
Net operating loss and other carryforwards
|
$
|
1,589.8
|
|
|
$
|
4,367.5
|
|
Derivative instruments
|
272.3
|
|
|
113.3
|
|
Debt
|
218.9
|
|
|
231.5
|
|
Leases
|
204.5
|
|
|
58.5
|
|
Investments
|
194.6
|
|
|
136.4
|
|
Property and equipment, net
|
107.5
|
|
|
1,969.0
|
|
Other future deductible amounts
|
217.6
|
|
|
208.8
|
|
Deferred tax assets
|
2,805.2
|
|
|
7,085.0
|
|
Valuation allowance
|
(1,578.9)
|
|
|
(4,235.5)
|
|
Deferred tax assets, net of valuation allowance
|
1,226.3
|
|
|
2,849.5
|
|
Deferred tax liabilities:
|
|
|
|
Intangible assets
|
(514.7)
|
|
|
(114.1)
|
|
Property and equipment, net
|
(243.6)
|
|
|
(169.9)
|
|
Right of use assets
|
(204.4)
|
|
|
(56.8)
|
|
Debt
|
(182.6)
|
|
|
(65.7)
|
|
Deferred revenue
|
(157.0)
|
|
|
(168.1)
|
|
Other future taxable amounts
|
(31.8)
|
|
|
(63.9)
|
|
Deferred tax liabilities
|
(1,334.1)
|
|
|
(638.5)
|
|
Net deferred tax asset (liability)
|
$
|
(107.8)
|
|
|
$
|
2,211.0
|
|
Our deferred income tax valuation allowance decreased $2,656.6 million in 2020. This decrease reflects the net effect of (i) the impact of the held-for-sale presentation of the U.K. JV Entities (see note 6), (ii) the effect of enacted tax law and rate changes, (iii) a decrease in deferred tax assets, (iv) foreign currency translation adjustments, (v) business acquisitions and (vi) other individually insignificant items.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
The significant components of our tax loss carryforwards and related tax assets at December 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax loss
carryforward
|
|
Related
tax asset
|
|
Expiration
date
|
Country
|
|
in millions
|
|
|
|
|
|
|
|
|
|
The Netherlands
|
$
|
3,353.8
|
|
|
$
|
838.4
|
|
|
2021-2027
|
Belgium
|
1,342.7
|
|
|
335.7
|
|
|
Indefinite
|
Luxembourg
|
980.6
|
|
|
256.0
|
|
|
Various
|
Ireland
|
796.5
|
|
|
99.8
|
|
|
Indefinite
|
U.K (a)
|
264.3
|
|
|
50.2
|
|
|
Indefinite
|
Other
|
46.5
|
|
|
9.7
|
|
|
Various
|
Total
|
$
|
6,784.4
|
|
|
$
|
1,589.8
|
|
|
|
_______________
(a)Due to the held-for-sale presentation of the U.K. JV Entities, amounts exclude the tax loss carryforwards and related tax assets associated with such entities.
Our tax loss carryforwards within each jurisdiction combine all companies’ tax losses (both capital and ordinary losses) in that jurisdiction, however, certain tax jurisdictions limit the ability to offset taxable income of a separate company or different tax group with the tax losses associated with another separate company or group. Further, tax jurisdictions restrict the type of taxable income that the above losses are able to offset. The majority of the tax losses shown in the above table are not expected to be realized, including certain losses that are limited in use due to change in control or same business tests.
We have taxable outside basis differences on certain investments in non-U.S. subsidiaries. No additional income taxes have been provided for any undistributed foreign earnings, or any additional outside basis difference inherent in these entities, as these amounts continue to be reinvested in foreign operations. At December 31, 2020, we have not provided deferred tax liabilities on an estimated $1.4 billion of cumulative temporary differences on the outside bases of our non-U.S. subsidiaries.
Through our subsidiaries, we maintain a presence in many countries. Many of these countries maintain highly complex tax regimes that differ significantly from the system of income taxation used in the U.K. and the U.S. We have accounted for the effect of these taxes based on what we believe is reasonably expected to apply to us and our subsidiaries based on tax laws currently in effect and reasonable interpretations of these laws.
The Tax Cuts and Jobs Act (the 2017 U.S. Tax Act) was signed into U.S. law on December 22, 2017. Significant changes to the U.S. income tax regime include the imposition of taxes on a one-time deemed mandatory repatriation of earnings and profits of foreign corporations (the Mandatory Repatriation Tax) and a new tax on global intangible low-taxed income (the GILTI Tax).
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 December 31, 2020 and 2019, after considering the expected use of carryforward tax attributes and other filing positions, our liability for the Mandatory Repatriation Tax was $295.7 million and $357.2 million, respectively.
The GILTI Tax will require our U.S. subsidiaries that are shareholders in foreign corporations to include in their taxable income for each year beginning after December 31, 2017, their pro rata share of global intangible low-taxed income. The GILTI Tax is calculated as the excess of the net foreign corporation income over a deemed return. The GILTI Tax is reported as a period cost when it is incurred.
We and our subsidiaries file consolidated and standalone income tax returns in various jurisdictions. In the normal course of business, our income tax filings are subject to review by various taxing authorities. In connection with such reviews, disputes could arise with the taxing authorities over the interpretation or application of certain income tax rules related to our business in
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
that tax jurisdiction. Such disputes may result in future tax and interest and penalty assessments by these taxing authorities. The ultimate resolution of tax contingencies will take place upon the earlier of (i) the settlement date with the applicable taxing authorities in either cash or agreement of income tax positions or (ii) the date when the tax authorities are statutorily prohibited from adjusting the company’s tax computations.
In general, tax returns filed by our company or our subsidiaries for years prior to 2010 are no longer subject to examination by tax authorities. Certain of our subsidiaries are currently involved in income tax examinations in various jurisdictions in which we operate, including the Netherlands, Poland, the U.K. and the U.S. While we do not expect adjustments from the foregoing examinations to 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.
The changes in our unrecognized tax benefits are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
Balance at January 1
|
$
|
664.3
|
|
|
$
|
857.8
|
|
|
$
|
350.4
|
|
Reductions for tax positions of prior years
|
(361.5)
|
|
|
(80.7)
|
|
|
(117.9)
|
|
Additions based on tax positions related to the current year
|
290.9
|
|
|
1.8
|
|
|
180.0
|
|
Additions for tax positions of prior years
|
134.4
|
|
|
1.0
|
|
|
457.4
|
|
Reduction related to the held for sale group
|
(131.8)
|
|
|
—
|
|
|
—
|
|
Foreign currency translation
|
15.4
|
|
|
(4.3)
|
|
|
(8.5)
|
|
Settlements with tax authorities
|
(4.1)
|
|
|
(111.3)
|
|
|
—
|
|
Lapse of statute of limitations
|
(2.7)
|
|
|
—
|
|
|
(3.6)
|
|
Balance at December 31
|
$
|
604.9
|
|
|
$
|
664.3
|
|
|
$
|
857.8
|
|
No assurance can be given that any of these tax benefits will be recognized or realized.
As of December 31, 2020, 2019 and 2018, there are $421.5 million, $546.5 million, and $759.8 million of unrecognized 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 2021, it is reasonably possible that the resolution of ongoing examinations by tax authorities, as well as the expiration of statutes of limitation and other items, could result in reductions to our unrecognized tax benefits related to tax positions taken as of December 31, 2020. The amount of any such reductions could range up to $175.0 million, of which an immaterial amount 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 2021. No assurance can be given as to the nature or impact of any changes in our unrecognized tax positions during 2021.
During 2020, 2019 and 2018, the income tax expense of our continuing operations includes net income tax expense of $26.2 million, $22.6 million and $58.9 million, respectively, representing the net accrual of interest and penalties during the period. Our other long-term liabilities include accrued interest and penalties of $139.9 million at December 31, 2020.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
(14) Equity
Capitalization
At December 31, 2020, our authorized share capital consisted of an aggregate nominal amount of $20.0 million, consisting of any of the following: (i) ordinary shares (Class A, B or C), each with a nominal value of $0.01 per share, (ii) preference shares, with a nominal value to be determined by the board of directors, the issuance of one or more classes or series of which may be authorized by the board of directors, and (iii) any other shares of one or more classes as may be determined by the board of directors or by the shareholders of Liberty Global.
Under Liberty Global’s Articles of Association, effective July 1, 2015, holders of Liberty Global Class A ordinary shares are entitled to one vote for each such share held, and holders of Liberty Global Class B ordinary shares are entitled to 10 votes for each such share held, on all matters submitted to a vote of Liberty Global shareholders at any general meeting (annual or special). Holders of Liberty Global Class C ordinary shares are not entitled to any voting powers except as required by law.
At the option of the holder, each Liberty Global Class B ordinary share is convertible into one Liberty Global Class A ordinary share. One Liberty Global Class A ordinary share is reserved for issuance for each Liberty Global Class B ordinary share that is issued (12,561,444 shares issued as of December 31, 2020). Additionally, at December 31, 2020, we have reserved the following ordinary shares for the issuance of outstanding share-based incentive awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
Class B
|
|
Class C
|
|
|
|
|
|
|
Options
|
623,572
|
|
|
—
|
|
|
3,463,971
|
|
SARs
|
19,245,884
|
|
|
—
|
|
|
40,890,502
|
|
RSUs
|
2,443,306
|
|
|
—
|
|
|
4,878,115
|
|
PSUs and PSARS
|
5,920,958
|
|
|
660,000
|
|
|
11,841,916
|
|
Subject to any preferential rights of any outstanding class of our preference shares, the holders of our ordinary shares are entitled to dividends as may be declared from time to time by our board of directors from funds available therefore. Except with respect to share distributions, whenever a dividend is paid in cash to the holder of one class of our ordinary shares, we shall also pay to the holders of the other classes of our ordinary shares an equal per share dividend. There are currently no contractual restrictions on our ability to pay dividends in cash or shares.
In the event of our liquidation, dissolution and winding up, after payment or provision for payment of our debts and liabilities and subject to the prior payment in full of any preferential amounts to which our preference shareholders, if any, may be entitled, the holders of our ordinary shares will be entitled to receive their proportionate interests, expressed in liquidation units, in any assets available for distribution to our ordinary shares.
Share Repurchase Programs
As a U.K. incorporated company, we may only elect to repurchase shares or pay dividends to the extent of our “Distributable Reserves.” Distributable Reserves, which are not linked to a GAAP reported amount, may be created through the earnings of the U.K. parent company and, among other methods, through a reduction in share premium approved by the English Companies Court. Based on the amounts set forth in our 2019 U.K. Companies Act Report dated May 21, 2020, which are our most recent “Relevant Accounts” for the purposes of determining our Distributable Reserves under U.K. law, our Distributable Reserves were $17.1 billion as of December 31, 2019. This amount does not reflect earnings, share repurchases or other activity that occurred in 2020, each of which impacts the amount of our Distributable Reserves.
Our board of directors has approved share repurchase programs for our Liberty Global ordinary shares. Under our share repurchase program, we receive authorization to acquire up to the specified amount (before direct acquisition costs) of Class A and Class C Liberty Global ordinary shares, or other authorized securities, from time to time through open market or privately negotiated transactions, which may include derivative transactions. The timing of the repurchase of shares or other securities pursuant to our equity repurchase programs, which may be suspended or discontinued at any time, is dependent on a variety of
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
factors, including market conditions. At December 31, 2020, the remaining amount authorized for share repurchases was $1.0 billion.
The following table provides details of our share repurchases during 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares
|
|
Class C ordinary shares
|
|
|
|
Shares
repurchased
|
|
Average price
paid per share (a)
|
|
Shares
repurchased
|
|
Average price
paid per share (a)
|
|
Total cost (a)
|
|
|
|
|
|
|
|
|
|
in millions
|
Liberty Global Shares:
|
|
|
|
|
|
|
|
|
|
2020
|
1,309,000
|
|
|
$
|
22.38
|
|
|
54,473,323
|
|
|
$
|
19.15
|
|
|
$
|
1,072.3
|
|
2019 (b)
|
24,348,562
|
|
|
$
|
27.61
|
|
|
95,395,291
|
|
|
$
|
26.64
|
|
|
$
|
3,220.2
|
|
2018
|
15,649,900
|
|
|
$
|
29.67
|
|
|
54,211,059
|
|
|
$
|
28.51
|
|
|
$
|
2,010.0
|
|
_______________
(a)Includes direct acquisition costs, where applicable.
(b)Includes repurchases made pursuant to modified Dutch auction cash tenders, comprising 24,002,262 shares of our class A ordinary shares at a per share price of $27.50 and 75,420,009 shares of our class C ordinary shares at a price per share of $27.00, for an aggregate purchase price of $2.7 billion, including direct acquisition costs.
Subsidiary Distributions
From time to time, Telenet and certain other of our subsidiaries make cash distributions to their respective shareholders. Our share of these distributions is eliminated in consolidation and the noncontrolling interest owners’ share of these distributions is reflected as a charge against noncontrolling interests in our consolidated statements of equity. In this regard, Telenet paid aggregate dividends to its shareholders during 2020, 2019 and 2018 of €292.4 million, €62.8 million and €600.0 million, respectively. Our share of these dividends was €177.8 million ($205.4 million at the applicable rate), €37.8 million ($42.0 million at the applicable rate) and €351.6 million ($404.8 million at the applicable rate), respectively.
Restricted Net Assets
The ability of certain of our subsidiaries to distribute or loan all or a portion of their net assets to our company is limited by the terms of applicable debt facilities. At December 31, 2020, substantially all of our net assets represented net assets of our subsidiaries that were subject to such limitations.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
(15) 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
Liberty Global:
|
|
|
|
|
|
Performance-based incentive awards (a)
|
$
|
127.4
|
|
|
$
|
134.5
|
|
|
$
|
50.8
|
|
Non-performance based incentive awards (b)
|
134.1
|
|
|
107.6
|
|
|
90.1
|
|
Other (c)
|
46.2
|
|
|
39.0
|
|
|
43.4
|
|
Total Liberty Global
|
307.7
|
|
|
281.1
|
|
|
184.3
|
|
Telenet share-based incentive awards (d)
|
35.5
|
|
|
15.6
|
|
|
19.6
|
|
Other
|
4.8
|
|
|
9.1
|
|
|
2.1
|
|
Total
|
$
|
348.0
|
|
|
$
|
305.8
|
|
|
$
|
206.0
|
|
Included in:
|
|
|
|
|
|
Other operating expenses
|
$
|
7.6
|
|
|
$
|
3.9
|
|
|
$
|
4.4
|
|
SG&A expenses
|
340.4
|
|
|
301.9
|
|
|
201.6
|
|
Total
|
$
|
348.0
|
|
|
$
|
305.8
|
|
|
$
|
206.0
|
|
_______________
(a)Includes share-based compensation expense related to (i) PSUs and (ii) in 2020 and 2019, (a) the 2019 Challenge Performance Awards and (b) the performance-based portion of the 2019 CEO Performance Award, each as defined and described below.
(b)In 2019, we changed our policy to provide that all new equity grants would have ten-year contractual terms in order to more closely align with common market practice. In April 2020, the compensation committee of our board of directors approved the extension of the expiration dates of outstanding SARs and director options granted in 2013 from a seven-year term to a ten-year term in order to align with this new policy. Accordingly, the Black-Scholes fair values of the outstanding awards increased, resulting in the recognition of an aggregate incremental share-based compensation expense of $18.9 million during 2020. The 2019 amount includes share-based compensation expense related to the RSAs issued under the 2019 CEO Performance Award, as defined and described below.
(c)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 have been or will be issued to senior management and key employees pursuant to a shareholding incentive program. 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.
(d)Represents the share-based compensation expense associated with Telenet’s share-based incentive awards, which, at December 31, 2020, included performance- and non-performance-based stock option awards with respect to 5,001,814 Telenet shares. These stock option awards had a weighted average exercise price of €40.69 ($49.74).
As of December 31, 2020, $244.8 million of total unrecognized compensation cost related to our Liberty Global share-based incentive awards is expected to be recognized by our company over a weighted-average period of approximately 1.8 years.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
The following table summarizes certain information related to the share-based incentive awards granted and exercised with respect to Liberty Global ordinary shares (includes amounts related to awards held by employees of our discontinued operations, unless otherwise noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Assumptions used to estimate fair value of options, SARs and PSARs granted:
|
|
|
|
|
|
Risk-free interest rate
|
0.13 - 0.47%
|
|
1.59 - 2.45%
|
|
2.68 - 2.92%
|
Expected life
|
3.2 - 6.2 years
|
|
3.2 - 6.2 years
|
|
3.0 - 4.2 years
|
Expected volatility
|
34.6 - 38.8%
|
|
29.9 - 33.8%
|
|
30.2 - 33.6%
|
Expected dividend yield
|
none
|
|
none
|
|
none
|
Weighted average grant-date fair value per share of awards granted:
|
|
|
|
|
|
Options
|
$
|
5.92
|
|
|
$
|
8.60
|
|
|
$
|
8.99
|
|
SARs
|
$
|
4.19
|
|
|
$
|
6.79
|
|
|
$
|
7.92
|
|
PSARs
|
(a)
|
|
$
|
6.92
|
|
|
(a)
|
RSUs
|
$
|
15.66
|
|
|
$
|
24.66
|
|
|
$
|
28.72
|
|
RSAs
|
(a)
|
|
$
|
25.29
|
|
|
(a)
|
PSUs
|
(a)
|
|
$
|
25.00
|
|
|
$
|
23.60
|
|
Total intrinsic value of awards exercised (in millions):
|
|
|
|
|
|
Options
|
$
|
1.2
|
|
|
$
|
4.2
|
|
|
$
|
3.8
|
|
SARs
|
(b)
|
|
$
|
13.6
|
|
|
$
|
22.5
|
|
|
|
|
|
|
|
Cash received from exercise of options (in millions)
|
$
|
2.2
|
|
|
$
|
2.3
|
|
|
$
|
5.7
|
|
Income tax benefit related to share-based compensation of our continuing operations (in millions)
|
$
|
36.9
|
|
|
$
|
21.0
|
|
|
$
|
18.6
|
|
_______________
(a)There were no grants of this award type made during the indicated period.
(b)There were no exercises of SARs during the year ended December 31, 2020.
Share Incentive Plans — Liberty Global Ordinary Shares
Incentive Plans
As of December 31, 2020, we are authorized to grant incentive awards under the Liberty Global 2014 Incentive Plan and the Liberty Global 2014 Nonemployee Director Incentive Plan. Generally, we may grant non-qualified share options, SARs, PSARs, restricted shares, RSUs, cash awards, performance awards or any combination of the foregoing under either of these incentive plans (collectively, awards). Ordinary shares issuable pursuant to awards made under these incentive plans will be made available from either authorized but unissued shares or shares that have been issued but reacquired by our company. Awards may be granted at or above fair value in any class of ordinary shares. The maximum number of Liberty Global shares with respect to which awards may be issued under the Liberty Global 2014 Incentive Plan and the Liberty Global 2014 Nonemployee Director Incentive Plan is 155 million (of which no more than 50.25 million shares may consist of Class B ordinary shares) and 10.5 million, respectively, in each case, subject to anti-dilution and other adjustment provisions in the respective plan. As of December 31, 2020, the Liberty Global 2014 Incentive Plan and the Liberty Global 2014 Nonemployee Director Incentive Plan had 60,799,181 and 8,005,545 ordinary shares available for grant, respectively.
Awards (other than performance-based awards) under the Liberty Global 2014 Incentive Plan generally (i) vest (a) prior to 2020, 12.5% on the six month anniversary of the grant date and then at a rate of 6.25% each quarter thereafter and (b) commencing in 2020, annually over a three-year period and (ii) expire (1) prior to 2019, seven years after the grant date and (2) commencing in 2019, 10 years after the grant date. Awards (other than RSUs) issued under the Liberty Global 2014 Nonemployee Director Incentive Plan generally vest in three equal annual installments, provided the director continues to serve
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
as director immediately prior to the vesting date, and expire seven years after the grant date. Commencing with awards made in 2019, the term was increased to 10 years. RSUs vest on the date of the first annual general meeting of shareholders following the grant date. These awards may be granted at or above fair value in any class of ordinary shares.
Performance Awards
The following is a summary of the material terms and conditions with respect to our performance-based awards for certain executive officers and key employees.
2019 CEO Performance Award
In April 2019, the compensation committee of our board of directors approved the grant of RSAs and PSUs to our Chief Executive Officer (CEO) (the 2019 CEO Performance Award), comprising 670,000 RSAs and 1,330,000 PSUs, each with respect to Liberty Global Class B ordinary shares. Subject to certain terms, the RSAs vested on December 31, 2019. Subject to forfeitures, the satisfaction of performance conditions and certain other terms, 670,000 PSUs vested on May 15, 2020, and the remaining 660,000 PSUs will vest on May 15, 2021. Prior to vesting, our CEO may change the PSUs to a mix of Liberty Global Class A, B or C ordinary shares of comparable value. The performance criteria for the 2019 CEO Performance Award PSUs is based on the achievement of our CEO’s performance conditions, as established by the compensation committee.
2019 Challenge Performance Awards
In March 2019, the compensation committee of our board of directors approved a challenge performance award for executive officers and certain employees (the 2019 Challenge Performance Awards), which consists of a combination of PSARs and PSUs, in each case divided on a 1:2 ratio based on Liberty Global Class A ordinary shares and Liberty Global Class C ordinary shares. Each PSU represents the right to receive one Liberty Global Class A ordinary share or one Liberty Global Class C ordinary share, as applicable. The performance criteria for the 2019 Challenge Performance Awards is based on the participant’s performance and achievement of individual goals during a performance period of three years ending on December 31, 2021. Subject to forfeitures, the satisfaction of performance conditions and certain other terms, 100% of each participant’s 2019 Challenge Performance Awards will vest on March 7, 2022. The PSARs have a term of ten years and base prices equal to the respective market closing prices of the applicable class on the grant date.
Liberty Global PSUs
In April 2019, the compensation committee of our board of directors approved the grant of PSUs to executive officers and key employees (the 2019 PSUs) pursuant to a performance plan that was based on the achievement of a specified Adjusted EBITDA CAGR during the two-year period ended December 31, 2020. The 2019 PSUs include over- and under-performance payout opportunities should the Adjusted EBITDA CAGR exceed or fail to meet the target, as applicable. A performance range of 50% to 125% of the target Adjusted EBITDA CAGR will generally result in award recipients earning 50% to 150% of their target 2019 PSUs, subject to reduction or forfeiture based on individual performance. The earned 2019 PSUs will vest 50% on April 1, 2021 and 50% on October 1, 2021.
During 2018, the compensation committee of our board of directors approved the grant of PSUs to executive officers and key employees (the 2018 PSUs) pursuant to a performance plan that was based on the achievement of a specified Adjusted EBITDA CAGR during the two-year period ended December 31, 2019. Participants earned 106.1% of their targeted awards under the 2018 PSUs, which vested 50% on each of April 1, 2020 and October 1, 2020. The target Adjusted EBITDA CAGR for the 2018 PSUs was determined on October 26, 2018 and, accordingly, associated compensation expense was recognized prospectively from that date.
In February 2016, our compensation committee approved the grant of PSUs to executive officers and key employees (the 2016 PSUs). The performance plan for the 2016 PSUs covered a three-year period that ended on December 31, 2018 and included a performance target based on the achievement of a specified compound annual growth rate (CAGR) in a consolidated Adjusted EBITDA metric (as defined in note 20). The performance target was adjusted for events such as acquisitions, dispositions and changes in foreign currency exchange rates that affect comparability (Adjusted EBITDA CAGR). The 2016 PSUs, as adjusted through the 2017 Award Modification, required delivery of compound annual growth rates of consolidated Adjusted EBITDA CAGR of 6.0% during the three-year performance period for Liberty Global or Liberty Latin America
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
depending on the respective class of shares underlying the award. Participants earned 82.3% of their targeted awards under the 2016 PSUs, which vested 50% on each of April 1, 2019 and October 1, 2019.
Share-based Award Activity — Liberty Global Ordinary Shares
The following tables summarize the share-based award activity during 2020 with respect to awards issued by Liberty Global. Our company settles SARs and PSARs on a net basis when exercised by the award holder, whereby the number of shares issued represents the excess value of the award based on the market price of the respective Liberty Global shares at the time of exercise relative to the award’s exercise price. In addition, with respect to share-based awards held by Liberty Global employees, the number of shares to be issued upon vesting or exercise is reduced by the amount of the employee’s required income tax withholding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options — Class A ordinary shares
|
|
Number of awards
|
|
Weighted
average
exercise price
|
|
Weighted
average
remaining
contractual
term
|
|
Aggregate
intrinsic value
|
|
|
|
|
|
|
in years
|
|
in millions
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2020
|
|
588,258
|
|
|
$
|
29.25
|
|
|
|
|
|
Granted
|
|
78,948
|
|
|
$
|
21.86
|
|
|
|
|
|
Forfeited
|
|
(2,533)
|
|
|
$
|
22.65
|
|
|
|
|
|
Exercised
|
|
(41,101)
|
|
|
$
|
13.00
|
|
|
|
|
|
Outstanding at December 31, 2020
|
|
623,572
|
|
|
$
|
29.41
|
|
|
3.6
|
|
$
|
0.6
|
|
Exercisable at December 31, 2020
|
|
495,900
|
|
|
$
|
30.67
|
|
|
2.3
|
|
$
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options — Class C ordinary shares
|
|
Number of awards
|
|
Weighted
average
exercise price
|
|
Weighted
average
remaining
contractual
term
|
|
Aggregate
intrinsic value
|
|
|
|
|
|
|
in years
|
|
in millions
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2020
|
|
3,506,568
|
|
|
$
|
25.81
|
|
|
|
|
|
Granted
|
|
542,801
|
|
|
$
|
16.98
|
|
|
|
|
|
Forfeited
|
|
(483,100)
|
|
|
$
|
25.38
|
|
|
|
|
|
Exercised
|
|
(102,298)
|
|
|
$
|
12.88
|
|
|
|
|
|
Outstanding at December 31, 2020
|
|
3,463,971
|
|
|
$
|
24.87
|
|
|
3.8
|
|
$
|
4.8
|
|
Exercisable at December 31, 2020
|
|
2,570,677
|
|
|
$
|
26.41
|
|
|
2.3
|
|
$
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SARs — Class A ordinary shares
|
|
Number of awards
|
|
Weighted
average
base price
|
|
Weighted
average
remaining
contractual
term
|
|
Aggregate
intrinsic value
|
|
|
|
|
|
|
in years
|
|
in millions
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2020
|
|
16,251,617
|
|
|
$
|
31.18
|
|
|
|
|
|
Granted
|
|
5,084,564
|
|
|
$
|
16.20
|
|
|
|
|
|
Forfeited
|
|
(2,085,032)
|
|
|
$
|
30.52
|
|
|
|
|
|
Exercised
|
|
(5,265)
|
|
|
$
|
24.90
|
|
|
|
|
|
Outstanding at December 31, 2020
|
|
19,245,884
|
|
|
$
|
27.29
|
|
|
5.1
|
|
$
|
40.2
|
|
Exercisable at December 31, 2020
|
|
11,367,027
|
|
|
$
|
32.23
|
|
|
2.8
|
|
$
|
—
|
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SARs — Class C ordinary shares
|
|
Number of awards
|
|
Weighted
average
base price
|
|
Weighted
average
remaining
contractual
term
|
|
Aggregate
intrinsic value
|
|
|
|
|
|
|
in years
|
|
in millions
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2020
|
|
35,682,862
|
|
|
$
|
29.77
|
|
|
|
|
|
Granted
|
|
10,169,128
|
|
|
$
|
15.28
|
|
|
|
|
|
Forfeited
|
|
(4,952,165)
|
|
|
$
|
28.95
|
|
|
|
|
|
Exercised
|
|
(9,323)
|
|
|
$
|
24.15
|
|
|
|
|
|
Outstanding at December 31, 2020
|
|
40,890,502
|
|
|
$
|
26.27
|
|
|
4.9
|
|
$
|
83.9
|
|
Exercisable at December 31, 2020
|
|
25,082,821
|
|
|
$
|
30.83
|
|
|
2.8
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSARs — Class A ordinary shares
|
|
Number of awards
|
|
Weighted
average
base price
|
|
Weighted
average
remaining
contractual
term
|
|
Aggregate
intrinsic value
|
|
|
|
|
|
|
in years
|
|
in millions
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2020
|
|
4,071,616
|
|
|
$
|
25.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
(347,946)
|
|
|
$
|
25.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2020
|
|
3,723,670
|
|
|
$
|
25.97
|
|
|
8.2
|
|
$
|
—
|
|
Exercisable at December 31, 2020
|
|
1,473
|
|
|
$
|
25.97
|
|
|
0.8
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSARs — Class C ordinary shares
|
|
Number of awards
|
|
Weighted
average
base price
|
|
Weighted
average
remaining
contractual
term
|
|
Aggregate
intrinsic value
|
|
|
|
|
|
|
in years
|
|
in millions
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2020
|
|
8,143,232
|
|
|
$
|
25.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
(695,892)
|
|
|
$
|
25.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2020
|
|
7,447,340
|
|
|
$
|
25.22
|
|
|
8.2
|
|
$
|
—
|
|
Exercisable at December 31, 2020
|
|
2,946
|
|
|
$
|
25.22
|
|
|
0.8
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs — Class A ordinary shares
|
|
Number of awards
|
|
Weighted
average
grant-date
fair value
per share
|
|
Weighted
average
remaining
contractual
term
|
|
|
|
|
|
|
in years
|
|
|
|
|
|
|
|
Outstanding at January 1, 2020
|
|
515,496
|
|
|
$
|
27.86
|
|
|
|
Granted
|
|
2,234,496
|
|
|
$
|
16.28
|
|
|
|
Forfeited
|
|
(91,229)
|
|
|
$
|
22.62
|
|
|
|
Released from restrictions
|
|
(215,457)
|
|
|
$
|
28.46
|
|
|
|
Outstanding at December 31, 2020
|
|
2,443,306
|
|
|
$
|
17.41
|
|
|
2.2
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs — Class B ordinary shares
|
|
Number of awards
|
|
Weighted
average
grant-date
fair value
per share
|
|
Weighted
average
remaining
contractual
term
|
|
|
|
|
|
|
in years
|
|
|
|
|
|
|
|
Outstanding at January 1, 2020
|
|
48,786
|
|
|
$
|
26.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Released from restrictions
|
|
(48,786)
|
|
|
$
|
26.03
|
|
|
|
Outstanding at December 31, 2020
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs — Class C ordinary shares
|
|
Number of awards
|
|
Weighted
average
grant-date
fair value
per share
|
|
Weighted
average
remaining
contractual
term
|
|
|
|
|
|
|
in years
|
|
|
|
|
|
|
|
Outstanding at January 1, 2020
|
|
1,026,010
|
|
|
$
|
26.95
|
|
|
|
Granted
|
|
4,468,992
|
|
|
$
|
15.36
|
|
|
|
Forfeited
|
|
(183,173)
|
|
|
$
|
21.77
|
|
|
|
Released from restrictions
|
|
(433,714)
|
|
|
$
|
27.58
|
|
|
|
Outstanding at December 31, 2020
|
|
4,878,115
|
|
|
$
|
16.47
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSUs — Class A ordinary shares
|
|
Number of awards
|
|
Weighted
average
grant-date
fair value
per share
|
|
Weighted
average
remaining
contractual
term
|
|
|
|
|
|
|
in years
|
|
|
|
|
|
|
|
Outstanding at January 1, 2020
|
|
3,388,371
|
|
|
$
|
25.00
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
(132,789)
|
|
|
$
|
26.04
|
|
|
|
Released from restrictions
|
|
(1,058,294)
|
|
|
$
|
24.01
|
|
|
|
Outstanding at December 31, 2020
|
|
2,197,288
|
|
|
$
|
25.41
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSUs — Class B ordinary shares
|
|
Number of awards
|
|
Weighted
average
grant-date
fair value
per share
|
|
Weighted
average
remaining
contractual
term
|
|
|
|
|
|
|
in years
|
|
|
|
|
|
|
|
Outstanding at January 1, 2020
|
|
1,330,000
|
|
|
$
|
25.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Released from restrictions
|
|
(670,000)
|
|
|
$
|
25.29
|
|
|
|
Outstanding at December 31, 2020
|
|
660,000
|
|
|
$
|
25.29
|
|
|
0.4
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSUs — Class C ordinary shares
|
|
Number of awards
|
|
Weighted
average
grant-date
fair value
per share
|
|
Weighted
average
remaining
contractual
term
|
|
|
|
|
|
|
in years
|
|
|
|
|
|
|
|
Outstanding at January 1, 2020
|
|
6,776,048
|
|
|
$
|
24.29
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
(263,994)
|
|
|
$
|
25.26
|
|
|
|
Released from restrictions
|
|
(2,117,478)
|
|
|
$
|
23.39
|
|
|
|
Outstanding at December 31, 2020
|
|
4,394,576
|
|
|
$
|
24.66
|
|
|
1.0
|
Share-based Award Activity — Liberty Global Ordinary Shares Held by Former Liberty Global Employees
The following tables summarize the share-based awards held by former employees of Liberty Global subsequent to certain split-off or disposal transactions. Although we do not recognize share-based compensation expense with respect to these awards, any future exercises of SARs and any future vesting of RSUs and PSUs will increase the number of our outstanding ordinary shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of awards
|
|
Weighted average exercise or base price
|
|
Weighted average remaining contractual term
|
|
Aggregate intrinsic value
|
SARs:
|
|
|
|
|
|
|
|
|
Class A:
|
|
|
|
|
|
|
|
|
Outstanding
|
|
1,413,040
|
|
|
$
|
34.11
|
|
|
1.7
|
|
$
|
—
|
|
Exercisable
|
|
1,396,581
|
|
|
$
|
34.09
|
|
|
1.6
|
|
$
|
—
|
|
Class C:
|
|
|
|
|
|
|
|
|
Outstanding
|
|
3,142,227
|
|
|
$
|
32.23
|
|
|
1.7
|
|
$
|
—
|
|
Exercisable
|
|
3,109,319
|
|
|
$
|
32.21
|
|
|
1.7
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of awards
|
|
Weighted average grant date fair value per share
|
|
Weighted average remaining contractual term
|
Outstanding RSUs and PSUs:
|
|
|
|
|
|
|
Class A:
|
|
|
|
|
|
|
RSUs
|
|
597
|
|
|
$
|
35.32
|
|
|
0.4
|
PSUs
|
|
1,357
|
|
|
$
|
24.90
|
|
|
0.8
|
Class C:
|
|
|
|
|
|
|
RSUs
|
|
1,183
|
|
|
$
|
34.43
|
|
|
0.4
|
PSUs
|
|
2,714
|
|
|
$
|
24.90
|
|
|
0.8
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
(16) Restructuring Liabilities
A summary of changes in our restructuring liabilities during 2020 is set forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
severance
and
termination
|
|
Office
closures
|
|
Contract termination
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
|
|
Restructuring liability as of January 1, 2020
|
$
|
19.1
|
|
|
$
|
2.2
|
|
|
$
|
10.6
|
|
|
$
|
31.9
|
|
Restructuring charges
|
34.9
|
|
|
5.8
|
|
|
6.8
|
|
|
47.5
|
|
Cash paid
|
(43.8)
|
|
|
(4.9)
|
|
|
(7.5)
|
|
|
(56.2)
|
|
Reclassification to held for sale (a)
|
(2.2)
|
|
|
(3.2)
|
|
|
—
|
|
|
(5.4)
|
|
Foreign currency translation adjustments and other
|
2.1
|
|
|
0.3
|
|
|
(0.8)
|
|
|
1.6
|
|
Restructuring liability as of December 31, 2020
|
$
|
10.1
|
|
|
$
|
0.2
|
|
|
$
|
9.1
|
|
|
$
|
19.4
|
|
|
|
|
|
|
|
|
|
Current portion
|
$
|
10.1
|
|
|
$
|
0.1
|
|
|
$
|
3.2
|
|
|
$
|
13.4
|
|
Noncurrent portion
|
—
|
|
|
0.1
|
|
|
5.9
|
|
|
6.0
|
|
Total
|
$
|
10.1
|
|
|
$
|
0.2
|
|
|
$
|
9.1
|
|
|
$
|
19.4
|
|
_______________
(a)Represents the reclassification of the restructuring liabilities associated with the U.K. JV Entities as of December 31, 2020 to liabilities associated with assets held for sale. For information regarding the held-for-sale presentation of the U.K. JV Entities, see note 6.
Our restructuring charges during 2020 included employee severance and termination costs related to certain reorganization activities of $15.0 million in Switzerland, $12.9 million in U.K./Ireland and $5.9 million in Central and Corporate.
A summary of changes in our restructuring liabilities during 2019 is set forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
severance
and
termination
|
|
Office
closures
|
|
Contract termination
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
|
|
Restructuring liability as of January 1, 2019, before effect of accounting change
|
$
|
14.7
|
|
|
$
|
8.5
|
|
|
$
|
17.9
|
|
|
$
|
41.1
|
|
Impact of ASU 2016-02
|
—
|
|
|
(2.4)
|
|
|
—
|
|
|
(2.4)
|
|
Restructuring liability as of January 1, 2019, as adjusted for accounting change
|
14.7
|
|
|
6.1
|
|
|
17.9
|
|
|
38.7
|
|
Restructuring charges
|
84.3
|
|
|
1.1
|
|
|
4.5
|
|
|
89.9
|
|
Cash paid
|
(81.3)
|
|
|
(4.4)
|
|
|
(10.9)
|
|
|
(96.6)
|
|
Foreign currency translation adjustments and other
|
1.4
|
|
|
(0.6)
|
|
|
(0.9)
|
|
|
(0.1)
|
|
Restructuring liability as of December 31, 2019
|
$
|
19.1
|
|
|
$
|
2.2
|
|
|
$
|
10.6
|
|
|
$
|
31.9
|
|
|
|
|
|
|
|
|
|
Current portion
|
$
|
17.6
|
|
|
$
|
1.9
|
|
|
$
|
3.2
|
|
|
$
|
22.7
|
|
Noncurrent portion
|
1.5
|
|
|
0.3
|
|
|
7.4
|
|
|
9.2
|
|
Total
|
$
|
19.1
|
|
|
$
|
2.2
|
|
|
$
|
10.6
|
|
|
$
|
31.9
|
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Our restructuring charges during 2019 included employee severance and termination costs related to certain reorganization activities of $40.2 million in U.K./Ireland, $32.3 million in Central and Corporate and $10.5 million in Switzerland.
A summary of changes in our restructuring liabilities during 2018 is set forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
severance
and
termination
|
|
Office
closures
|
|
Contract termination
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
|
|
Restructuring liability as of January 1, 2018
|
$
|
11.3
|
|
|
$
|
9.5
|
|
|
$
|
16.5
|
|
|
$
|
37.3
|
|
Restructuring charges
|
42.2
|
|
|
5.5
|
|
|
48.7
|
|
|
96.4
|
|
Cash paid
|
(35.5)
|
|
|
(6.0)
|
|
|
(44.7)
|
|
|
(86.2)
|
|
Foreign currency translation adjustments and other
|
(3.3)
|
|
|
(0.5)
|
|
|
(2.6)
|
|
|
(6.4)
|
|
Restructuring liability as of December 31, 2018
|
$
|
14.7
|
|
|
$
|
8.5
|
|
|
$
|
17.9
|
|
|
$
|
41.1
|
|
|
|
|
|
|
|
|
|
Current portion
|
$
|
13.3
|
|
|
$
|
4.5
|
|
|
$
|
8.4
|
|
|
$
|
26.2
|
|
Noncurrent portion
|
1.4
|
|
|
4.0
|
|
|
9.5
|
|
|
14.9
|
|
Total
|
$
|
14.7
|
|
|
$
|
8.5
|
|
|
$
|
17.9
|
|
|
$
|
41.1
|
|
Our restructuring charges during 2018 included (i) $40.5 million of costs in Belgium attributed to the migration of Telenet’s mobile subscribers from a mobile virtual network operator (MVNO) arrangement to Telenet’s mobile network and (ii) employee severance and termination costs related to certain reorganization and integration activities of $23.7 million in U.K./Ireland and $14.2 million in Central and Corporate.
In connection with the acquisition of Telenet Group BVBA, formerly known as BASE Company BVBA (BASE), Telenet acquired BASE’s mobile network in Belgium. As a result, Telenet migrated its mobile subscribers from an MVNO arrangement to the BASE mobile network. In March 2018, Telenet completed this migration and recorded the costs associated with meeting its minimum guarantee commitment under the MVNO agreement as a restructuring charge. Telenet’s MVNO agreement expired at the end of 2018.
(17) Defined Benefit Plans
Certain of our subsidiaries maintain various funded and unfunded defined benefit plans for their employees.
The table below provides summary information on the defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020 (a)
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
Fair value of plan assets (b)
|
$
|
1,196.8
|
|
|
$
|
1,500.0
|
|
|
$
|
1,305.0
|
|
Projected benefit obligation
|
$
|
1,302.7
|
|
|
$
|
1,407.5
|
|
|
$
|
1,217.5
|
|
Net asset (liability)
|
$
|
(105.9)
|
|
|
$
|
92.5
|
|
|
$
|
87.5
|
|
_______________
(a)Due to the held-for-sale presentation of the U.K. JV Entities, amounts as of December 31, 2020 exclude the defined benefit pension plans associated with such entities.
(b)The fair value of plan assets at December 31, 2020 includes $710.3 million and $486.5 million of assets that are valued based on Level 1 and Level 2 inputs, respectively, of the fair value hierarchy (as further described in note 9). Our plan
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
assets comprise investments in debt securities, equity securities, hedge funds, insurance contracts and certain other assets.
Our net periodic pension cost was $14.8 million, $8.6 million and $7.4 million during 2020, 2019 and 2018, respectively, including $33.4 million, $20.9 million and $24.4 million, respectively, representing the service cost component. The 2019 and 2018 amounts exclude aggregate curtailment gains of $1.4 million and $1.1 million, respectively, which are included in impairment, restructuring and other operating items, net, in our consolidated statements of operations.
During 2020, our subsidiaries’ contributions to their respective defined benefit plans aggregated $35.7 million, including with respect to the defined benefit pension plans associated with the U.K. JV Entities. Based on December 31, 2020 exchange rates and information available as of that date, we expect this amount to be $55.3 million in 2021.
(18) Accumulated Other Comprehensive Earnings
Accumulated other comprehensive earnings included on our consolidated balance sheets and statements of equity reflect the aggregate impact of foreign currency translation adjustments and pension-related adjustments and other. The changes in the components of accumulated other comprehensive earnings, net of taxes, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liberty Global shareholders
|
|
|
|
Total
accumulated
other
comprehensive
earnings
|
|
Foreign
currency
translation
adjustments
|
|
Pension-
related adjustments and other
|
|
Accumulated
other
comprehensive
earnings
|
|
Noncontrolling
interests
|
|
|
in millions
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2018
|
$
|
1,726.6
|
|
|
$
|
(70.6)
|
|
|
$
|
1,656.0
|
|
|
$
|
(4.2)
|
|
|
$
|
1,651.8
|
|
Other comprehensive loss
|
(1,007.3)
|
|
|
(16.9)
|
|
|
(1,024.2)
|
|
|
0.2
|
|
|
(1,024.0)
|
|
Balance at December 31, 2018
|
719.3
|
|
|
(87.5)
|
|
|
631.8
|
|
|
(4.0)
|
|
|
627.8
|
|
Other comprehensive earnings
|
490.3
|
|
|
(9.4)
|
|
|
480.9
|
|
|
1.2
|
|
|
482.1
|
|
Balance at December 31, 2019
|
1,209.6
|
|
|
(96.9)
|
|
|
1,112.7
|
|
|
(2.8)
|
|
|
1,109.9
|
|
Other comprehensive earnings
|
2,599.7
|
|
|
(19.3)
|
|
|
2,580.4
|
|
|
0.6
|
|
|
2,581.0
|
|
Balance at December 31, 2020
|
$
|
3,809.3
|
|
|
$
|
(116.2)
|
|
|
$
|
3,693.1
|
|
|
$
|
(2.2)
|
|
|
$
|
3,690.9
|
|
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
The components of other comprehensive earnings (loss), net of taxes, are reflected in our consolidated statements of comprehensive earnings (loss). The following table summarizes the tax effects related to each component of other comprehensive earnings (loss), net, of amounts reclassified to our consolidated statements of operations:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
amount
|
|
Tax
benefit
|
|
Net-of-tax
amount
|
|
|
in millions
|
|
|
|
|
|
|
|
Year ended December 31, 2020:
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
$
|
2,599.9
|
|
|
$
|
(0.2)
|
|
|
$
|
2,599.7
|
|
Pension-related adjustments and other
|
|
(22.5)
|
|
|
3.8
|
|
|
(18.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings
|
|
2,577.4
|
|
|
3.6
|
|
|
2,581.0
|
|
Other comprehensive earnings attributable to noncontrolling interests (a)
|
|
(0.9)
|
|
|
0.3
|
|
|
(0.6)
|
|
Other comprehensive earnings attributable to Liberty Global shareholders
|
|
$
|
2,576.5
|
|
|
$
|
3.9
|
|
|
$
|
2,580.4
|
|
|
|
|
|
|
|
|
Year ended December 31, 2019:
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
$
|
432.2
|
|
|
$
|
3.3
|
|
|
$
|
435.5
|
|
Pension-related adjustments and other
|
|
(16.7)
|
|
|
2.3
|
|
|
(14.4)
|
|
Other comprehensive earnings from continuing operations
|
|
415.5
|
|
|
5.6
|
|
|
421.1
|
|
Other comprehensive earnings from discontinued operations (b)
|
|
61.1
|
|
|
(0.1)
|
|
|
61.0
|
|
Other comprehensive earnings
|
|
476.6
|
|
|
5.5
|
|
|
482.1
|
|
Other comprehensive earnings attributable to noncontrolling interests (a)
|
|
(1.5)
|
|
|
0.3
|
|
|
(1.2)
|
|
Other comprehensive earnings attributable to Liberty Global shareholders
|
|
$
|
475.1
|
|
|
$
|
5.8
|
|
|
$
|
480.9
|
|
|
|
|
|
|
|
|
Year ended December 31, 2018:
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
$
|
(897.9)
|
|
|
$
|
—
|
|
|
$
|
(897.9)
|
|
Pension-related adjustments and other
|
|
(24.4)
|
|
|
4.4
|
|
|
(20.0)
|
|
Other comprehensive loss from continuing operations
|
|
(922.3)
|
|
|
4.4
|
|
|
(917.9)
|
|
Other comprehensive loss from discontinued operations (b)
|
|
(105.9)
|
|
|
(0.2)
|
|
|
(106.1)
|
|
Other comprehensive loss
|
|
(1,028.2)
|
|
|
4.2
|
|
|
(1,024.0)
|
|
Other comprehensive earnings attributable to noncontrolling interests (a)
|
|
(0.3)
|
|
|
0.1
|
|
|
(0.2)
|
|
Other comprehensive loss attributable to Liberty Global shareholders
|
|
$
|
(1,028.5)
|
|
|
$
|
4.3
|
|
|
$
|
(1,024.2)
|
|
_______________
(a)Amounts represent the noncontrolling interest owners’ share of our pension-related adjustments.
(b)For additional information regarding the reclassification of foreign currency translation adjustments included in net earnings, see note 6.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
(19) 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, purchases of customer premises and other equipment and services, programming contracts and other items. The following table sets forth the U.S. dollar equivalents of such commitments as of December 31, 2020. Due to the held-for-sale presentation of the U.K. JV Entities at December 31, 2020, the contractual commitments of these entities have been shown separately in the table below. For information regarding the held-for-sale presentation of the U.K. JV Entities, see note 6. The commitments included in this table do not reflect any liabilities that are included on our December 31, 2020 consolidated balance sheet.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due during:
|
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Thereafter
|
|
Total
|
|
in millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network and connectivity
commitments
|
$
|
274.6
|
|
|
$
|
96.8
|
|
|
$
|
49.1
|
|
|
$
|
40.2
|
|
|
$
|
38.5
|
|
|
$
|
745.0
|
|
|
$
|
1,244.2
|
|
Purchase commitments
|
473.3
|
|
|
72.9
|
|
|
47.6
|
|
|
21.2
|
|
|
16.0
|
|
|
11.6
|
|
|
642.6
|
|
Programming commitments
|
276.9
|
|
|
175.3
|
|
|
76.4
|
|
|
40.9
|
|
|
33.6
|
|
|
17.6
|
|
|
620.7
|
|
Other commitments
|
3.7
|
|
|
3.1
|
|
|
2.1
|
|
|
1.8
|
|
|
0.7
|
|
|
2.0
|
|
|
13.4
|
|
Total
|
$
|
1,028.5
|
|
|
$
|
348.1
|
|
|
$
|
175.2
|
|
|
$
|
104.1
|
|
|
$
|
88.8
|
|
|
$
|
776.2
|
|
|
$
|
2,520.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K. JV Entities
|
$
|
1,705.5
|
|
|
$
|
386.7
|
|
|
$
|
16.1
|
|
|
$
|
5.3
|
|
|
$
|
4.5
|
|
|
$
|
20.0
|
|
|
$
|
2,138.1
|
|
Network and connectivity commitments include (i) Telenet’s commitments for certain operating costs associated with its leased network and (ii) costs associated with certain fiber leasing arrangements in Switzerland. 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.
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.
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 this will continue to be the case in future periods. In this regard, our total programming and copyright costs (including amounts related to the U.K. JV Entities) aggregated $1,724.0 million, $1,702.4 million and $1,671.4 million during 2020, 2019 and 2018, respectively.
Programming costs include (i) agreements to distribute channels to our customers, (ii) exhibition rights of programming content and (iii) sports rights.
Channel Distribution Agreements. Our channel distribution agreements are generally multi-year contracts for which we are charged either (i) variable rates based upon the number of subscribers or (ii) on a flat fee basis. Certain of our variable rate contracts require minimum guarantees. Programming costs under such arrangements are recorded in operating costs and expenses in our consolidated statement of operations when the programming is available for viewing.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Exhibition Rights. Our agreements for exhibition rights are generally multi-year license agreements for which we are typically charged either (i) a percentage of the revenue earned per program or (ii) a flat fee per program. The current and long-term portions of our exhibition rights acquired under licenses are recorded as other current assets and other assets, net, respectively, on our consolidated balance sheet when the license period begins and the program is available for its first showing. Capitalized exhibition rights are amortized based on the projected future showings of the content using a straight-line or accelerated method of amortization, as appropriate. Exhibition rights are regularly reviewed for impairment and held at the lower of unamortized cost or estimated net realizable value.
Sports Rights. Our sports rights agreements are generally multi-year contracts for which we are typically charged a flat fee per season. We typically pay for sports rights in advance of the respective season. The current and long-term portions of any payments made in advance of the respective season are recorded as other current assets and other assets, net, respectively, on our consolidated balance sheet and are amortized on a straight-line basis over the respective sporting season. Sports rights are regularly reviewed for impairment and held at the lower of unamortized cost or estimated net realizable value.
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 2020, 2019 and 2018, see note 8. For information regarding our defined benefit plans, see note 17.
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.
Rental expense under non-cancellable operating lease arrangements amounted to $111.8 million during 2018. It is expected that in the normal course of business, operating leases that expire generally will be renewed or replaced by similar leases. For information regarding our operating lease arrangements for 2020 and 2019 following the adoption of ASU 2016-02, see note 12.
We have established various defined contribution benefit plans for our and our subsidiaries’ employees. Our aggregate expense for matching contributions under the various defined contribution employee benefit plans was $44.8 million, $42.6 million and $41.0 million during 2020, 2019 and 2018, respectively.
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
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
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 ($1.7 billion).
In December 2017, the Court of Appeals of Antwerp issued a judgment rejecting Proximus’ claims. In June 2019, Proximus filed an appeal of the Court of Appeals of Antwerp’s judgment with the Belgian Supreme Court. In January 2021, the Belgian Supreme Court partially annulled the Court of Appeals of Antwerp’s judgment. The case will be referred to the Court of Appeals of Brussels, which will need to make a new decision on the matter within the boundaries of the annulment by the Belgian Supreme Court. A decision on the matter is likely to take several years. 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. 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 sought a reduction of the annual lease fees 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. In connection with our sale of the Vodafone Disposal Group, we will 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. Any amount we may recover related to this matter will not be reflected in our consolidated financial statements until such time as the final disposition of this matter has been reached.
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 imposed a 17% interim price reduction in monthly wholesale cable access prices. On May 26, 2020, the Belgium Regulatory Authorities adopted a final decision regarding the “reasonable access tariffs” to replace the interim prices, which represents an estimated decrease of 11.5%, as compared to the initial August 1, 2018 interim rates, and is applicable as of July 1, 2020. These rates are expected to evolve over time due to, among other reasons, broadband capacity usage.
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 appealed the 2018 Decision, which was rejected in September 2019.
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 (HMRC). HMRC claimed that amounts charged to certain Virgin Media customers
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
for payment handling services are subject to VAT, while Virgin Media took the position that such charges were exempt from VAT under existing law. At the time of HMRC’s initial challenge in 2009, Virgin Media remitted all related VAT amounts claimed by HMRC, and continued to make such VAT payments pending a ruling on Virgin Media’s appeal to the First Tier Tribunal. As the likelihood of loss was not considered probable and Virgin Media believed that the amounts paid would be recoverable, such amounts were recorded as a receivable on our consolidated balance sheet. In January 2020, the First Tier Tribunal rejected our appeal and ruled in favor of HMRC. Accordingly, during the fourth quarter of 2019, we recorded a net provision for litigation of £41.3 million ($54.0 million at the applicable rate). Virgin Media has been granted permission to appeal the case to the Upper Tribunal, with the appeal being stayed pending the outcome of a related case. The timing of the final outcome of the litigation remains uncertain, although any further hearing on this matter is unlikely to occur before the third quarter of 2021.
In a separate matter, 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. HMRC 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 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), comprising (i) the challenged amount of £63.7 million (which we paid during the fourth quarter of 2015) and (ii) related interest of £3.3 million (which we paid during the first quarter of 2016). No provision was recorded by our company at that time as the likelihood of loss was not considered to be probable. The aggregate amount paid does not include penalties, which could be significant in the event that penalties were to be assessed. In September 2018, the court rejected our appeal and ruled in favor of HMRC. Accordingly, during the third quarter of 2018, we recorded a provision for litigation of £63.7 million ($83.1 million at the average rate for the period) and related interest expense of £3.3 million ($4.4 million at the average rate for the period) in our consolidated statement of operations. The First Tier Tribunal gave permission to appeal to the Upper Tribunal and we submitted grounds for appeal on February 22, 2019. We subsequently lost the appeal at the Upper Tribunal and in October 2020 our request to further appeal the case was denied by the Court of Appeal.
UPC Austria Matter. As further described in note 6, we completed the sale of UPC Austria on July 31, 2018. In October of 2019, we received notification under the terms of the relevant acquisition agreements from Deutsche Telekom and its subsidiary T-Mobile Austria Holding GmbH (together, the UPC Austria Sale Counterparties), asserting claims of approximately €70.5 million ($86.2 million) together with an invitation to engage in amicable discussions to resolve the matter in a time and cost effective manner. We since received further asserted claims of approximately €34.7 million ($42.4 million). Discussions regarding the claims are preliminary and no amounts have been accrued by our company with respect to this matter as the likelihood of loss is not considered to be probable at this stage. We are unable to provide any meaningful estimate of a possible range of loss because, among other reasons, (i) we believe the assertions are unsupported and/or exaggerated, (ii) there are significant factual matters to be resolved and (iii) the matter is in a preliminary stage and we have yet to engage in detail with the UPC Austria Sale Counterparties. The acquisition agreement provides for arbitration of disputes in the event the parties are unable to resolve any differences. We intend to vigorously defend this matter.
Other Contingency Matters. In connection with the dispositions of certain of our operations, we provided tax indemnities to the counterparties for certain tax liabilities that could arise from the period we owned the respective operations, subject to certain thresholds. While we have not received notification from the counterparties for indemnification, it is reasonably possible that we could, and the amounts involved could be significant. No amounts have been accrued by our company as the likelihood of any loss is not considered to be probable.
Other Regulatory Matters. 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 European Union (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. Regulation may also 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.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
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 has significantly increased our network infrastructure charges and we expect further but declining increases to these charges through the first quarter of 2022. 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 our network and other assets in the U.K. remains subject to review by the U.K. government.
In 2019, the U.K. Office of Communications regulatory authority (Ofcom) issued new regulatory requirements originating from the European Electronic Communications Code, that, effective from February 2020, obligate providers to (i) alert customers who are approaching the end of a minimum contract term to the fact that their contract period is coming to an end and to set out the best new price that the provider can offer them and (ii) once a year, alert customers who are out of contract to that fact and again confirm the best new price the provider can offer them. In both cases, we must also set out the price available to new customers for an equivalent service offering. These new requirements adversely impacted our revenue and increased certain of our costs in the U.K. during 2020, and we expect additional and potentially more significant adverse impacts on our operating results in the U.K. in future periods. For additional information, see Item 1. Business - Regulatory Matters, included in Part I of this Annual Report on Form 10-K, and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Discussion and Analysis of our Reportable Segments.
In late February 2020, we became aware that one of our databases did not have adequate access security protection and was accessed without permission. We immediately took remedial actions, ceased access to the database and commenced an investigation. The information in the database did not include any individual’s passwords or financial details, such as credit card information or bank account numbers. We have taken steps to inform those individuals impacted and relevant regulatory authorities. The database had information pertaining to approximately 900,000 individuals (including customers and non-customers), representing a number that would be less than 15% of our total customer base. During the fourth quarter of 2020, we were formally notified by the relevant regulatory authorities that they consider this matter to be closed without enforcement action.
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.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
(20) Segment Reporting
We generally identify our reportable segments as (i) those consolidated subsidiaries that represent 10% or more of our revenue, Adjusted EBITDA (as defined below) or total assets or (ii) those equity method affiliates where our investment or share of revenue or Adjusted EBITDA represents 10% or more of our total assets, revenue or Adjusted EBITDA, 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 EBITDA. In addition, we review non-financial measures such as customer growth, as appropriate.
Adjusted EBITDA 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 EBITDA” is defined as earnings (loss) from continuing operations before net income tax benefit (expense), other non-operating income or expenses, net share of results of affiliates, net gains (losses) on extinguishment of debt, net realized and unrealized gains (losses) due to changes in fair value of certain investments and debt, net foreign currency gains (losses), net gains (losses) on derivative instruments, net interest expense, 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 EBITDA 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. A reconciliation of Adjusted EBITDA from continuing operations to earnings (loss) from continuing operations is presented below.
As of December 31, 2020, our reportable segments are as follows:
Consolidated:
•U.K./Ireland
•Belgium
•Switzerland
•Central and Eastern Europe
Nonconsolidated:
•VodafoneZiggo JV
All of our reportable segments derive their revenue primarily from residential and B2B communications services, including broadband internet, video, fixed-line telephony and mobile services.
Our central and corporate functions (Central and Corporate) primarily include (i) services provided to the VodafoneZiggo JV and various third parties related to transitional service agreements, (ii) sales of customer premises equipment to the VodafoneZiggo JV and (iii) certain centralized functions, including billing systems, network operations, technology, marketing, facilities, finance and other administrative functions.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Performance Measures of Our Reportable Segments
The amounts presented below represent 100% of each of our reportable segment’s revenue and Adjusted EBITDA. As we have the ability to control Telenet, we consolidate 100% of Telenet’s revenue and expenses in our 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 consolidated statements of operations. Similarly, despite only holding a 50% noncontrolling interest in the VodafoneZiggo JV, we present 100% of its revenue and Adjusted EBITDA in the tables below. Our share of the VodafoneZiggo JV’s operating results is included in share of results of affiliates, net, in our consolidated statements of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
Revenue
|
|
Adjusted EBITDA
|
|
Revenue
|
|
Adjusted EBITDA
|
|
Revenue
|
|
Adjusted EBITDA
|
|
in millions
|
|
|
|
|
|
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
6,588.4
|
|
|
$
|
2,672.4
|
|
|
$
|
6,600.3
|
|
|
$
|
2,800.5
|
|
|
$
|
6,875.1
|
|
|
$
|
2,995.5
|
|
Belgium
|
2,940.9
|
|
|
1,413.4
|
|
|
2,893.0
|
|
|
1,386.1
|
|
|
2,993.6
|
|
|
1,480.0
|
|
Switzerland
|
1,573.8
|
|
|
693.8
|
|
|
1,258.8
|
|
|
627.9
|
|
|
1,326.0
|
|
|
712.0
|
|
Central and Eastern Europe
|
486.9
|
|
|
215.6
|
|
|
475.4
|
|
|
215.0
|
|
|
492.2
|
|
|
233.6
|
|
Central and Corporate
|
394.4
|
|
|
(99.6)
|
|
|
316.4
|
|
|
(171.1)
|
|
|
274.2
|
|
|
(257.8)
|
|
Intersegment eliminations (a)
|
(4.3)
|
|
|
—
|
|
|
(2.4)
|
|
|
1.1
|
|
|
(3.2)
|
|
|
(11.8)
|
|
Total
|
$
|
11,980.1
|
|
|
$
|
4,895.6
|
|
|
$
|
11,541.5
|
|
|
$
|
4,859.5
|
|
|
$
|
11,957.9
|
|
|
$
|
5,151.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VodafoneZiggo JV
|
$
|
4,565.4
|
|
|
$
|
2,142.0
|
|
|
$
|
4,407.8
|
|
|
$
|
1,987.7
|
|
|
$
|
4,602.2
|
|
|
$
|
2,009.7
|
|
_______________
(a)Amounts for 2019 and 2018 include transactions between our continuing and discontinued operations prior to the disposal dates of such discontinued operations.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
The following table provides a reconciliation of loss from continuing operations to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
Loss from continuing operations
|
$
|
(1,466.7)
|
|
|
$
|
(1,409.0)
|
|
|
$
|
(1,411.5)
|
|
Income tax expense (benefit)
|
(256.9)
|
|
|
253.0
|
|
|
1,573.3
|
|
Other income, net
|
(76.1)
|
|
|
(114.4)
|
|
|
(43.4)
|
|
Share of results of affiliates, net
|
245.3
|
|
|
198.5
|
|
|
8.7
|
|
Losses on debt extinguishment, net
|
233.2
|
|
|
216.7
|
|
|
65.0
|
|
Realized and unrealized losses (gains) due to changes in fair values of certain investments and debt, net
|
(45.2)
|
|
|
(72.0)
|
|
|
384.5
|
|
Foreign currency transaction losses (gains), net
|
1,416.3
|
|
|
94.8
|
|
|
(90.4)
|
|
Realized and unrealized losses (gains) on derivative instruments, net
|
879.3
|
|
|
192.0
|
|
|
(1,125.8)
|
|
Interest expense
|
1,188.5
|
|
|
1,385.9
|
|
|
1,478.7
|
|
Operating income
|
2,117.7
|
|
|
745.5
|
|
|
839.1
|
|
Impairment, restructuring and other operating items, net
|
98.6
|
|
|
156.0
|
|
|
248.2
|
|
Depreciation and amortization
|
2,331.3
|
|
|
3,652.2
|
|
|
3,858.2
|
|
Share-based compensation expense
|
348.0
|
|
|
305.8
|
|
|
206.0
|
|
Adjusted EBITDA
|
$
|
4,895.6
|
|
|
$
|
4,859.5
|
|
|
$
|
5,151.5
|
|
Balance Sheet Data of our Reportable Segments
Selected balance sheet data of our reportable segments is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets
|
|
Total assets
|
|
December 31,
|
|
December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
in millions
|
|
|
|
|
|
|
|
|
U.K./Ireland (a)
|
$
|
856.3
|
|
|
$
|
16,170.9
|
|
|
$
|
21,684.7
|
|
|
$
|
20,665.5
|
|
Switzerland
|
12,258.8
|
|
|
4,247.7
|
|
|
14,659.9
|
|
|
4,647.8
|
|
Belgium
|
6,221.7
|
|
|
5,910.3
|
|
|
7,571.1
|
|
|
7,148.2
|
|
Central and Eastern Europe
|
1,074.0
|
|
|
1,062.2
|
|
|
1,135.4
|
|
|
1,135.2
|
|
Central and Corporate
|
999.1
|
|
|
1,079.6
|
|
|
14,041.6
|
|
|
15,449.6
|
|
Total
|
$
|
21,409.9
|
|
|
$
|
28,470.7
|
|
|
$
|
59,092.7
|
|
|
$
|
49,046.3
|
|
|
|
|
|
|
|
|
|
VodafoneZiggo JV
|
$
|
21,808.3
|
|
|
$
|
20,674.8
|
|
|
$
|
23,630.8
|
|
|
$
|
22,426.5
|
|
_______________
(a)The December 31, 2020 long-lived asset amount relates to (i) Ireland and (ii) certain Liberty Global subsidiaries located in the U.K. that will not be contributed to the U.K. JV pursuant to the Contribution Agreement. As of December 31, 2020, the long-lived assets associated with the U.K. JV Entities are presented in assets held for sale on our consolidated balance sheet.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
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 finance lease arrangements) are presented below and reconciled to the capital expenditure amounts included in our consolidated statements of cash flows. For additional information concerning capital additions financed under vendor financing and finance lease arrangements, see notes 10 and 12, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
U.K./Ireland
|
$
|
1,432.7
|
|
|
$
|
1,578.0
|
|
|
$
|
1,988.9
|
|
Belgium
|
513.6
|
|
|
537.2
|
|
|
790.8
|
|
Switzerland
|
302.8
|
|
|
277.9
|
|
|
249.6
|
|
Central and Eastern Europe
|
105.5
|
|
|
107.0
|
|
|
152.8
|
|
Central and Corporate (a)
|
340.7
|
|
|
380.4
|
|
|
523.5
|
|
Total property and equipment additions
|
2,695.3
|
|
|
2,880.5
|
|
|
3,705.6
|
|
Assets acquired under capital-related vendor financing arrangements
|
(1,371.1)
|
|
|
(1,727.0)
|
|
|
(2,175.5)
|
|
Assets acquired under finance leases
|
(49.7)
|
|
|
(66.9)
|
|
|
(102.4)
|
|
Changes in current liabilities related to capital expenditures
|
75.7
|
|
|
156.5
|
|
|
25.3
|
|
Total capital expenditures, net
|
$
|
1,350.2
|
|
|
$
|
1,243.1
|
|
|
$
|
1,453.0
|
|
|
|
|
|
|
|
Capital expenditures, net:
|
|
|
|
|
|
Third-party payments
|
$
|
1,352.7
|
|
|
$
|
1,323.9
|
|
|
$
|
1,552.7
|
|
Proceeds received for transfers to related parties (b)
|
(2.5)
|
|
|
(80.8)
|
|
|
(99.7)
|
|
Total capital expenditures, net
|
$
|
1,350.2
|
|
|
$
|
1,243.1
|
|
|
$
|
1,453.0
|
|
|
|
|
|
|
|
Property and equipment additions - VodafoneZiggo JV
|
$
|
918.7
|
|
|
$
|
887.9
|
|
|
$
|
988.7
|
|
_______________
(a)Includes (i) property and equipment additions representing centrally-owned assets that benefit our operating segments and (ii) the net impact of certain centrally-procured network equipment that is ultimately transferred to our operating segments.
(b)Primarily relates to transfers of centrally-procured property and equipment to the VodafoneZiggo JV and, for 2019 and 2018, our discontinued operations.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
Revenue by Major Category
Our revenue by major category for our consolidated reportable segments is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
Residential revenue:
|
|
|
|
|
|
Residential cable revenue (a):
|
|
|
|
|
|
Subscription revenue (b):
|
|
|
|
|
|
Broadband internet
|
$
|
3,272.5
|
|
|
$
|
3,187.4
|
|
|
$
|
3,226.6
|
|
Video
|
2,714.5
|
|
|
2,723.9
|
|
|
2,863.2
|
|
Fixed-line telephony
|
1,344.6
|
|
|
1,413.2
|
|
|
1,607.8
|
|
Total subscription revenue
|
7,331.6
|
|
|
7,324.5
|
|
|
7,697.6
|
|
Non-subscription revenue
|
220.7
|
|
|
198.1
|
|
|
279.1
|
|
Total residential cable revenue
|
7,552.3
|
|
|
7,522.6
|
|
|
7,976.7
|
|
Residential mobile revenue (c):
|
|
|
|
|
|
Subscription revenue (b)
|
1,091.8
|
|
|
932.1
|
|
|
983.5
|
|
Non-subscription revenue
|
692.0
|
|
|
688.2
|
|
|
694.8
|
|
Total residential mobile revenue
|
1,783.8
|
|
|
1,620.3
|
|
|
1,678.3
|
|
Total residential revenue
|
9,336.1
|
|
|
9,142.9
|
|
|
9,655.0
|
|
B2B revenue (d):
|
|
|
|
|
|
Subscription revenue
|
524.5
|
|
|
472.5
|
|
|
446.4
|
|
Non-subscription revenue
|
1,524.5
|
|
|
1,441.5
|
|
|
1,537.1
|
|
Total B2B revenue
|
2,049.0
|
|
|
1,914.0
|
|
|
1,983.5
|
|
Other revenue (e)
|
595.0
|
|
|
484.6
|
|
|
319.4
|
|
Total
|
$
|
11,980.1
|
|
|
$
|
11,541.5
|
|
|
$
|
11,957.9
|
|
_______________
(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.
(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 broadband internet, video, 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 (i) 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 and (ii) revenue from long-term leases of portions of our network.
LIBERTY GLOBAL PLC
Notes to Consolidated Financial Statements — (Continued)
December 31, 2020, 2019 and 2018
(e) Other revenue includes, among other items, (i) broadcasting revenue in Belgium and Ireland, (ii) revenue earned from transitional and other services provided to various third parties and (iii) revenue earned from the JV Services and the sale of customer premises equipment to the VodafoneZiggo JV.
Geographic Segments
The revenue of our geographic segments is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
in millions
|
|
|
|
|
|
|
U.K.
|
$
|
6,076.7
|
|
|
$
|
6,086.2
|
|
|
$
|
6,351.2
|
|
Belgium
|
2,940.9
|
|
|
2,893.0
|
|
|
2,993.6
|
|
Switzerland
|
1,573.8
|
|
|
1,258.8
|
|
|
1,326.0
|
|
Ireland
|
511.7
|
|
|
514.1
|
|
|
523.9
|
|
Poland
|
436.2
|
|
|
425.7
|
|
|
440.7
|
|
Slovakia
|
50.7
|
|
|
49.7
|
|
|
51.5
|
|
Other, including intersegment eliminations
|
390.1
|
|
|
314.0
|
|
|
271.0
|
|
Total
|
$
|
11,980.1
|
|
|
$
|
11,541.5
|
|
|
$
|
11,957.9
|
|
|
|
|
|
|
|
VodafoneZiggo JV (the Netherlands)
|
$
|
4,565.4
|
|
|
$
|
4,407.8
|
|
|
$
|
4,602.2
|
|
The long-lived assets of our geographic segments are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
|
in millions
|
|
|
|
|
Switzerland
|
$
|
12,258.8
|
|
|
$
|
4,247.7
|
|
Belgium
|
6,221.7
|
|
|
5,910.3
|
|
Poland
|
938.5
|
|
|
937.0
|
|
Ireland
|
817.3
|
|
|
748.5
|
|
Slovakia
|
135.5
|
|
|
125.2
|
|
U.K. (a)
|
39.0
|
|
|
15,422.4
|
|
U.S. and other (b)
|
999.1
|
|
|
1,079.6
|
|
Total
|
$
|
21,409.9
|
|
|
$
|
28,470.7
|
|
|
|
|
|
VodafoneZiggo JV (the Netherlands)
|
$
|
21,808.3
|
|
|
$
|
20,674.8
|
|
_______________
(a) The December 31, 2020 amount relates to certain Liberty Global subsidiaries located in the U.K. that will not be contributed to the U.K. JV pursuant to the Contribution Agreement. As of December 31, 2020, the long-lived assets associated with the U.K. JV Entities are presented in assets held for sale on our consolidated balance sheet.
(b) Primarily relates to certain long-lived assets included in Central and Corporate.