0001570585 us-gaap:OperatingSegmentsMember lbtya:EuropeanOperationsDivisionGermanyMember 2016-01-01 2016-09-30
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
|
| | |
| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the quarterly period ended | September 30, 20162017 |
OR
|
| |
¨
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the transition period from to |
Liberty Global plc
(Exact name of Registrant as specified in its charter)
|
| | |
| England and Wales | | 98-1112770 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | |
| Griffin House, 161 Hammersmith Rd, London, United Kingdom | | W6 8BS |
| (Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code:
+44.208.483.6449 or 303.220.6600
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer þ Accelerated Filer ¨
Non-Accelerated Filer (Do not check if a smaller reporting company) ¨
Smaller Reporting Company ¨Emerging Growth Company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No þ
The number of outstanding ordinary shares of Liberty Global plc as of October 27, 2016 25, 2017was:
| | | | Class A | | Class B | | Class C | Class A | | Class B | | Class C |
| Liberty Global ordinary shares | 256,854,989 |
| | 10,805,850 |
| | 638,673,677 |
| 221,090,644 |
| | 11,102,619 |
| | 588,313,516 |
|
| LiLAC ordinary shares | 51,037,232 |
| | 1,888,323 |
| | 121,221,345 |
| 48,416,945 |
| | 1,940,193 |
| | 120,819,385 |
|
LIBERTY GLOBAL PLC
TABLE OF CONTENTS
|
| | |
| | | Page Number |
| | PART I — FINANCIAL INFORMATION | |
| ITEM 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| ITEM 2. | | |
| ITEM 3. | | |
| ITEM 4. | | |
| | PART II — OTHER INFORMATION | |
ITEM 1A. | | |
ITEM 2. | | |
| ITEM 5. | | |
| ITEM 6. | | |
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
|
| | | | | | | |
| | September 30,
2016 | | December 31,
2015 |
| | in millions |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 977.1 |
| | $ | 982.1 |
|
| Trade receivables, net | 1,728.4 |
| | 1,467.7 |
|
| Derivative instruments (note 4) | 416.8 |
| | 421.9 |
|
| Prepaid expenses | 276.5 |
| | 144.2 |
|
| Other current assets | 525.8 |
| | 341.5 |
|
| Total current assets | 3,924.6 |
| | 3,357.4 |
|
| Investments (including $1,936.1 million and $2,591.8 million, respectively, measured at fair value) | 2,243.8 |
| | 2,839.6 |
|
| Property and equipment, net (note 6) | 21,606.2 |
| | 21,684.0 |
|
| Goodwill (note 6) | 24,360.0 |
| | 27,020.4 |
|
| Intangible assets subject to amortization, net (note 6) | 4,076.2 |
| | 7,092.5 |
|
| Assets held for sale (note 3) | 18,546.6 |
| | — |
|
| Other assets, net (note 4) | 6,216.1 |
| | 5,565.1 |
|
| Total assets | $ | 80,973.5 |
| | $ | 67,559.0 |
|
|
| | | | | | | |
| | September 30,
2017 | | December 31,
2016 |
| | in millions |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 2,110.1 |
| | $ | 1,629.2 |
|
| Trade receivables, net | 1,938.7 |
| | 1,906.5 |
|
| Derivative instruments (note 5) | 345.2 |
| | 412.7 |
|
| Prepaid expenses | 258.5 |
| | 209.4 |
|
| Receivable from the VodafoneZiggo JV (note 4) | — |
| | 2,346.6 |
|
| Other current assets: | | | |
| Third-party | 500.5 |
| | 526.4 |
|
| Related-party — VodafoneZiggo JV (note 4) | 48.8 |
| | 21.0 |
|
| Total current assets | 5,201.8 |
| | 7,051.8 |
|
| Investments and related note receivables (including $2,160.8 million and $2,057.2 million, respectively, measured at fair value on a recurring basis) (note 4) | 6,806.8 |
| | 6,483.7 |
|
| Property and equipment, net (note 7) | 23,550.7 |
| | 21,110.2 |
|
| Goodwill (note 7) | 24,910.5 |
| | 23,366.3 |
|
| Intangible assets subject to amortization, net (note 7) | 3,314.3 |
| | 3,657.7 |
|
| Other assets, net (notes 5 and 7) | 6,761.2 |
| | 7,014.4 |
|
| Total assets | $ | 70,545.3 |
| | $ | 68,684.1 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
(unaudited)
| | | | September 30,
2016 | | December 31,
2015 | September 30,
2017 | | December 31,
2016 |
| | in millions | in millions |
| LIABILITIES AND EQUITY | | | | | | |
| Current liabilities: | | | | | | |
| Accounts payable | $ | 1,092.3 |
| | $ | 1,050.1 |
| $ | 1,281.4 |
| | $ | 1,168.2 |
|
| Deferred revenue and advance payments from subscribers and others | 1,141.8 |
| | 1,393.5 |
| 1,194.3 |
| | 1,240.1 |
|
| Current portion of debt and capital lease obligations (notes 5 and 7) | 2,155.4 |
| | 2,537.9 |
| |
| Current portion of debt and capital lease obligations (note 8) | | 4,268.7 |
| | 2,775.1 |
|
| Accrued capital expenditures | | 759.9 |
| | 765.4 |
|
| Accrued income taxes | 555.9 |
| | 483.5 |
| 527.7 |
| | 457.9 |
|
| Accrued capital expenditures | 502.1 |
| | 441.8 |
| |
| Accrued interest | 498.0 |
| | 832.8 |
| 425.9 |
| | 671.4 |
|
| Derivative instruments (note 4) | 482.5 |
| | 346.3 |
| |
| Other accrued and current liabilities (note 11) | 2,208.6 |
| | 2,072.0 |
| |
| Other accrued and current liabilities (notes 5 and 12) | | 2,529.6 |
| | 2,644.7 |
|
| Total current liabilities | 8,636.6 |
| | 9,157.9 |
| 10,987.5 |
| | 9,722.8 |
|
| Long-term debt and capital lease obligations (notes 5 and 7) | 41,792.1 |
| | 44,211.2 |
| |
| Liabilities associated with assets held for sale (note 3) | 13,411.7 |
| | — |
| |
| Other long-term liabilities (notes 4 and 11) | 4,167.8 |
| | 4,015.6 |
| |
| Long-term debt and capital lease obligations (note 8) | | 43,727.0 |
| | 40,783.6 |
|
| Other long-term liabilities (notes 5, 9, and 12) | | 3,828.5 |
| | 3,445.7 |
|
| Total liabilities | 68,008.2 |
| | 57,384.7 |
| 58,543.0 |
| | 53,952.1 |
|
| Commitments and contingencies (notes 3, 4, 7, 8, 13 and 15) |
| |
| |
| Equity (note 9): | | | | |
| Commitments and contingencies (notes 3, 5, 8, 9 and 14) | |
| |
|
| Equity (note 10): | | | | |
| Liberty Global shareholders: | | | | | | |
Liberty Global Shares — Class A, $0.01 nominal value. Issued and outstanding 259,394,782 and 252,766,455 shares, respectively | 2.6 |
| | 2.5 |
| |
| Liberty Global Shares — Class B, $0.01 nominal value. Issued and outstanding 10,805,850 and 10,472,517 shares, respectively | 0.1 |
| | 0.1 |
| |
| Liberty Global Shares — Class C, $0.01 nominal value. Issued and outstanding 639,468,548 and 584,044,394 shares, respectively | 6.4 |
| | 5.9 |
| |
| LiLAC Shares — Class A, $0.01 nominal value. Issued and outstanding 51,014,561 and 12,630,580 shares, respectively | 0.5 |
| | 0.1 |
| |
| LiLAC Shares — Class B, $0.01 nominal value. Issued and outstanding 1,888,323 and 523,423 shares, respectively | — |
| | — |
| |
| LiLAC Shares — Class C, $0.01 nominal value. Issued and outstanding 121,175,885 and 30,772,874 shares, respectively | 1.2 |
| | 0.3 |
| |
| Liberty Global Shares — Class A, $0.01 nominal value. Issued and outstanding 221,893,831 and 253,827,604 shares, respectively | | 2.2 |
| | 2.5 |
|
| Liberty Global Shares — Class B, $0.01 nominal value. Issued and outstanding 11,102,619 and 10,805,850 shares, respectively | | 0.1 |
| | 0.1 |
|
| Liberty Global Shares — Class C, $0.01 nominal value. Issued and outstanding 591,439,089 and 634,391,072 shares, respectively | | 5.9 |
| | 6.3 |
|
| LiLAC Shares — Class A, $0.01 nominal value. Issued and outstanding 48,397,769 and 50,317,930 shares, respectively | | 0.5 |
| | 0.5 |
|
| LiLAC Shares — Class B, $0.01 nominal value. Issued and outstanding 1,940,193 and 1,888,323 shares, respectively | | — |
| | — |
|
| LiLAC Shares — Class C, $0.01 nominal value. Issued and outstanding 120,780,972 and 120,889,034 shares, respectively | | 1.2 |
| | 1.2 |
|
| Additional paid-in capital | 17,982.0 |
| | 14,908.1 |
| 14,966.9 |
| | 17,578.2 |
|
| Accumulated deficit | (5,677.3 | ) | | (5,160.1 | ) | (5,225.6 | ) | | (3,454.8 | ) |
| Accumulated other comprehensive earnings (loss), net of taxes | (316.7 | ) | | 895.9 |
| 1,279.1 |
| | (372.4 | ) |
| Treasury shares, at cost | (0.3 | ) | | (0.4 | ) | (0.1 | ) | | (0.3 | ) |
| Total Liberty Global shareholders | 11,998.5 |
| | 10,652.4 |
| 11,030.2 |
| | 13,761.3 |
|
| Noncontrolling interests | 966.8 |
| | (478.1 | ) | 972.1 |
| | 970.7 |
|
| Total equity | 12,965.3 |
| | 10,174.3 |
| 12,002.3 |
| | 14,732.0 |
|
| Total liabilities and equity | $ | 80,973.5 |
| | $ | 67,559.0 |
| $ | 70,545.3 |
| | $ | 68,684.1 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
| | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 |
| | in millions, except per share amounts |
| | | | | | | | |
| Revenue (note 14) | $ | 5,207.2 |
| | $ | 4,597.4 |
| | $ | 14,869.3 |
| | $ | 13,680.8 |
|
| Operating costs and expenses: | | | | | | | |
| Operating (other than depreciation and amortization) (including share-based compensation) (note 10) | 1,920.3 |
| | 1,700.2 |
| | 5,574.9 |
| | 5,064.4 |
|
Selling, general and administrative (SG&A) (including share-based compensation) (note 10) | 935.1 |
| | 830.3 |
| | 2,665.0 |
| | 2,395.2 |
|
| Depreciation and amortization | 1,416.9 |
| | 1,458.4 |
| | 4,405.4 |
| | 4,387.6 |
|
| Impairment, restructuring and other operating items, net (notes 3 and 11) | 32.2 |
| | 63.0 |
| | 246.9 |
| | 105.7 |
|
| | 4,304.5 |
| | 4,051.9 |
| | 12,892.2 |
| | 11,952.9 |
|
| Operating income | 902.7 |
| | 545.5 |
| | 1,977.1 |
| | 1,727.9 |
|
| Non-operating income (expense): | | | | | | | |
| Interest expense | (664.4 | ) | | (617.7 | ) | | (1,940.8 | ) | | (1,834.4 | ) |
| Realized and unrealized gains (losses) on derivative instruments, net (note 4) | (436.4 | ) | | 742.0 |
| | 106.9 |
| | 680.8 |
|
| Foreign currency transaction gains (losses), net | 92.3 |
| | (216.2 | ) | | 133.2 |
| | (911.4 | ) |
| Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net (note 5) | 73.8 |
| | (276.1 | ) | | (570.8 | ) | | (13.9 | ) |
| Losses on debt modification and extinguishment, net (note 7) | (64.8 | ) | | (34.3 | ) | | (88.7 | ) | | (382.6 | ) |
| Other income (expense), net (note 13) | 1.2 |
| | (5.1 | ) | | 31.0 |
| | (7.8 | ) |
| | (998.3 | ) | | (407.4 | ) | | (2,329.2 | ) | | (2,469.3 | ) |
| Earnings (loss) before income taxes | (95.6 | ) | | 138.1 |
| | (352.1 | ) | | (741.4 | ) |
| Income tax benefit (expense) (note 8) | (109.5 | ) | | 2.5 |
| | (116.6 | ) | | (49.6 | ) |
| Net earnings (loss) | (205.1 | ) | | 140.6 |
| | (468.7 | ) | | (791.0 | ) |
| Net earnings attributable to noncontrolling interests | (44.4 | ) | | (7.3 | ) | | (48.5 | ) | | (77.9 | ) |
| Net earnings (loss) attributable to Liberty Global shareholders | $ | (249.5 | ) | | $ | 133.3 |
| | $ | (517.2 | ) | | $ | (868.9 | ) |
| | | | | | | | |
| Basic and diluted earnings (loss) attributable to Liberty Global shareholders per share (notes 1 and 12): | | | | | | | |
| Liberty Global Shares | $ | (0.18 | ) | | $ | 0.12 |
| | $ | (0.33 | ) | | $ | 0.12 |
|
| LiLAC Shares | $ | (0.47 | ) | | $ | 0.69 |
| | $ | (2.49 | ) | | $ | 0.69 |
|
| Old Liberty Global Shares | | | | | | | $ | (1.13 | ) |
| | | | | | | | |
|
| | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions, except share and per share amounts |
| | | | | | | | |
| Revenue (notes 4 and 15) | $ | 4,785.4 |
| | $ | 5,207.2 |
| | $ | 13,799.9 |
| | $ | 14,869.3 |
|
| Operating costs and expenses (exclusive of depreciation and amortization, shown separately below): | | | | | | | |
| Programming and other direct costs of services | 1,106.4 |
| | 1,178.7 |
| | 3,174.7 |
| | 3,416.8 |
|
| Other operating (note 11) | 749.1 |
| | 778.9 |
| | 2,135.1 |
| | 2,207.7 |
|
Selling, general and administrative (SG&A) (note 11) | 761.3 |
| | 897.8 |
| | 2,357.0 |
| | 2,615.4 |
|
| Depreciation and amortization | 1,416.2 |
| | 1,416.9 |
| | 4,109.8 |
| | 4,405.4 |
|
| Impairment, restructuring and other operating items, net (notes 3, 7 and 12) | 416.6 |
| | 32.2 |
| | 476.4 |
| | 246.9 |
|
| | 4,449.6 |
| | 4,304.5 |
| | 12,253.0 |
| | 12,892.2 |
|
| Operating income | 335.8 |
| | 902.7 |
| | 1,546.9 |
| | 1,977.1 |
|
| Non-operating income (expense): | | | | | | | |
| Interest expense | (582.1 | ) | | (664.4 | ) | | (1,691.0 | ) | | (1,940.8 | ) |
| Realized and unrealized gains (losses) on derivative instruments, net (note 5) | (365.9 | ) | | (436.4 | ) | | (1,149.5 | ) | | 106.9 |
|
| Foreign currency transaction gains (losses), net | (30.5 | ) | | 92.3 |
| | 180.6 |
| | 133.2 |
|
| Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net (notes 4, 6 and 8) | 38.8 |
| | 73.8 |
| | (6.2 | ) | | (570.8 | ) |
| Losses on debt modification and extinguishment, net (note 8) | (85.7 | ) | | (64.8 | ) | | (220.6 | ) | | (88.7 | ) |
| Share of losses of affiliates, net (note 4) | (26.2 | ) | | (16.1 | ) | | (43.3 | ) | | (71.2 | ) |
| Other income, net | 4.6 |
| | 17.3 |
| | 28.8 |
| | 102.2 |
|
| | (1,047.0 | ) | | (998.3 | ) | | (2,901.2 | ) | | (2,329.2 | ) |
| Loss before income taxes | (711.2 | ) |
| (95.6 | ) |
| (1,354.3 | ) |
| (352.1 | ) |
| Income tax expense (note 9) | (67.8 | ) | | (109.5 | ) | | (344.3 | ) | | (116.6 | ) |
| Net loss | (779.0 | ) | | (205.1 | ) | | (1,698.6 | ) | | (468.7 | ) |
| Net earnings attributable to noncontrolling interests | (12.6 | ) | | (44.4 | ) | | (87.5 | ) | | (48.5 | ) |
| Net loss attributable to Liberty Global shareholders | $ | (791.6 | ) | | $ | (249.5 | ) | | $ | (1,786.1 | ) | | $ | (517.2 | ) |
| | | | | | | | |
| Basic and diluted loss attributable to Liberty Global shareholders per share (notes 1 and 13): | | | | | | | |
| Liberty Global Shares | $ | (0.55 | ) | | $ | (0.18 | ) | | $ | (1.62 | ) | | $ | (0.33 | ) |
| LiLAC Shares | $ | (1.93 | ) | | $ | (0.47 | ) | | $ | (2.30 | ) | | $ | (2.49 | ) |
| | | | | | | | |
| Weighted average ordinary shares outstanding - basic and diluted: | | | | | | | |
| Liberty Global Shares | 830,301,600 |
| | 917,345,591 |
| | 857,905,832 |
| | 884,567,424 |
|
| LiLAC Shares | 171,304,720 |
| | 174,075,080 |
| | 172,051,945 |
| | 89,764,378 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
| | | | Three months ended | | Nine months ended | Three months ended | | Nine months ended |
| | September 30, | | September 30, | September 30, | | September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions | in millions |
| | | | | | | | | | | | | | | |
| Net earnings (loss) | $ | (205.1 | ) | | $ | 140.6 |
| | $ | (468.7 | ) | | $ | (791.0 | ) | |
| Net loss | | $ | (779.0 | ) | | $ | (205.1 | ) | | $ | (1,698.6 | ) | | $ | (468.7 | ) |
| Other comprehensive earnings (loss), net of taxes: | | | | | | | | | | | | | | |
| Foreign currency translation adjustments | (177.7 | ) | | (515.2 | ) | | (1,171.9 | ) | | (276.6 | ) | 548.6 |
| | (177.7 | ) | | 1,659.5 |
| | (1,171.9 | ) |
| Reclassification adjustments included in net earnings (loss) | 0.5 |
| | 0.5 |
| | (0.1 | ) | | 1.5 |
| |
| Pension-related adjustments and other | (36.4 | ) | | 0.9 |
| | (41.0 | ) | | (0.1 | ) | (7.9 | ) | | (35.9 | ) | | (8.4 | ) | | (41.1 | ) |
| Other comprehensive loss | (213.6 | ) | | (513.8 | ) | | (1,213.0 | ) | | (275.2 | ) | |
| Other comprehensive earnings (loss) | | 540.7 |
|
| (213.6 | ) | | 1,651.1 |
| | (1,213.0 | ) |
Comprehensive loss | (418.7 | ) | | (373.2 | ) | | (1,681.7 | ) | | (1,066.2 | ) | (238.3 | ) |
| (418.7 | ) |
| (47.5 | ) |
| (1,681.7 | ) |
| Comprehensive earnings attributable to noncontrolling interests | (44.6 | ) | | (7.3 | ) | | (48.1 | ) | | (78.0 | ) | (12.6 | ) | | (44.6 | ) | | (87.1 | ) | | (48.1 | ) |
| Comprehensive loss attributable to Liberty Global shareholders | $ | (463.3 | ) | | $ | (380.5 | ) | | $ | (1,729.8 | ) | | $ | (1,144.2 | ) | $ | (250.9 | ) |
| $ | (463.3 | ) | | $ | (134.6 | ) | | $ | (1,729.8 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Liberty Global shareholders | | Non-controlling interests | | Total equity |
| | Liberty Global Shares | | LiLAC Shares | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive earnings (loss), net of taxes | | Treasury shares, at cost | | Total Liberty Global shareholders | |
| | in millions |
| | | | | | | | | | | | | | | | | | |
| Balance at January 1, 2016 | $ | 8.5 |
| | $ | 0.4 |
| | $ | 14,908.1 |
| | $ | (5,160.1 | ) | | $ | 895.9 |
| | $ | (0.4 | ) | | $ | 10,652.4 |
| | $ | (478.1 | ) | | $ | 10,174.3 |
|
| Net loss | — |
| | — |
| | — |
| | (517.2 | ) | | — |
| | — |
| | (517.2 | ) | | 48.5 |
| | (468.7 | ) |
| Other comprehensive loss, net of taxes | — |
| | — |
| | — |
| | — |
| | (1,212.6 | ) | | — |
| | (1,212.6 | ) | | (0.4 | ) | | (1,213.0 | ) |
| Impact of the CWC Acquisition (note 3) | 1.1 |
| | 0.1 |
| | 4,488.9 |
| | — |
| | — |
| | — |
| | 4,490.1 |
| | 1,451.8 |
| | 5,941.9 |
|
| Repurchase and cancellation of Liberty Global ordinary shares (note 9) | (0.5 | ) | | — |
| | (1,615.1 | ) | | — |
| | — |
| | — |
| | (1,615.6 | ) | | — |
| | (1,615.6 | ) |
| Share-based compensation (note 10) | — |
| | — |
| | 186.2 |
| | — |
| | — |
| | — |
| | 186.2 |
| | — |
| | 186.2 |
|
| Liberty Global call option contracts | — |
| | — |
| | 119.1 |
| | — |
| | — |
| | — |
| | 119.1 |
| | — |
| | 119.1 |
|
| Impact of the LiLAC Distribution (note 3) | — |
| | 1.2 |
| | (1.2 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Adjustments due to changes in subsidiaries’ equity and other, net | — |
| | — |
| | (104.0 | ) | | — |
| | — |
| | 0.1 |
| | (103.9 | ) | | (55.0 | ) | | (158.9 | ) |
| Balance at September 30, 2016 | $ | 9.1 |
| | $ | 1.7 |
| | $ | 17,982.0 |
| | $ | (5,677.3 | ) | | $ | (316.7 | ) | | $ | (0.3 | ) | | $ | 11,998.5 |
| | $ | 966.8 |
| | $ | 12,965.3 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Liberty Global shareholders | | Non-controlling interests | | Total equity |
| | Liberty Global Shares | | LiLAC Shares | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive earnings (loss), net of taxes | | Treasury shares, at cost | | Total Liberty Global shareholders | |
| | in millions |
| | | | | | | | | | | | | | | | | | |
| Balance at January 1, 2017, before effect of accounting change | $ | 8.9 |
| | $ | 1.7 |
| | $ | 17,578.2 |
| | $ | (3,454.8 | ) | | $ | (372.4 | ) | | $ | (0.3 | ) | | $ | 13,761.3 |
| | $ | 970.7 |
| | $ | 14,732.0 |
|
| Accounting change (note 2) | — |
| | — |
| | — |
| | 15.3 |
| | — |
| | — |
| | 15.3 |
| | — |
| | 15.3 |
|
| Balance at January 1, 2017, as adjusted for accounting change | 8.9 |
| | 1.7 |
| | 17,578.2 |
| | (3,439.5 | ) | | (372.4 | ) | | (0.3 | ) | | 13,776.6 |
| | 970.7 |
| | 14,747.3 |
|
| Net loss | — |
| | — |
| | — |
| | (1,786.1 | ) | | — |
| | — |
| | (1,786.1 | ) | | 87.5 |
| | (1,698.6 | ) |
| Other comprehensive earnings, net of taxes | — |
| | — |
| | — |
| | — |
| | 1,651.5 |
| | — |
| | 1,651.5 |
| | (0.4 | ) | | 1,651.1 |
|
| Repurchase and cancellation of Liberty Global ordinary shares (note 10) | (0.7 | ) | | — |
| | (2,643.2 | ) | | — |
| | — |
| | — |
| | (2,643.9 | ) | | — |
| | (2,643.9 | ) |
| Share-based compensation (note 11) | — |
| | — |
| | 103.7 |
| | — |
| | — |
| | — |
| | 103.7 |
| | — |
| | 103.7 |
|
| Adjustments due to changes in subsidiaries’ equity and other, net | — |
| | — |
| | (71.8 | ) | | — |
| | — |
| | 0.2 |
| | (71.6 | ) | | (85.7 | ) | | (157.3 | ) |
| Balance at September 30, 2017 | $ | 8.2 |
|
| $ | 1.7 |
|
| $ | 14,966.9 |
|
| $ | (5,225.6 | ) |
| $ | 1,279.1 |
|
| $ | (0.1 | ) |
| $ | 11,030.2 |
|
| $ | 972.1 |
|
| $ | 12,002.3 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| | | | Nine months ended | Nine months ended |
| | September 30, | September 30, |
| | 2016 | | 2015 | 2017 | | 2016 |
| | in millions | in millions |
| Cash flows from operating activities: | | | | | | |
| Net loss | $ | (468.7 | ) | | $ | (791.0 | ) | $ | (1,698.6 | ) | | $ | (468.7 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | |
| Share-based compensation expense | 206.4 |
| | 253.0 |
| 121.9 |
| | 206.4 |
|
| Depreciation and amortization | 4,405.4 |
| | 4,387.6 |
| 4,109.8 |
| | 4,405.4 |
|
| Impairment, restructuring and other operating items, net | 246.9 |
| | 105.7 |
| 476.4 |
| | 246.9 |
|
| Amortization of deferred financing costs and non-cash interest accretion | 54.6 |
| | 59.6 |
| |
| Realized and unrealized gains on derivative instruments, net | (106.9 | ) | | (680.8 | ) | |
| Foreign currency transaction losses (gains), net | (133.2 | ) | | 911.4 |
| |
| Realized and unrealized losses due to changes in fair values of certain investments and debt, including impact of dividends | 584.0 |
| | 15.0 |
| |
| Amortization of deferred financing costs and non-cash interest | | 39.6 |
| | 54.6 |
|
| Realized and unrealized losses (gains) on derivative instruments, net | | 1,149.5 |
| | (106.9 | ) |
| Foreign currency transaction gains, net | | (180.6 | ) | | (133.2 | ) |
| Realized and unrealized losses due to changes in fair values of certain investments and debt | | 6.2 |
| | 570.8 |
|
Losses on debt modification and extinguishment, net | 88.7 |
| | 382.6 |
| 220.6 |
| | 88.7 |
|
| Deferred income tax benefit | (221.3 | ) | | (280.7 | ) | |
| Excess tax benefit from share-based compensation | (4.0 | ) | | (27.0 | ) | |
| Share of losses of affiliates, net | | 43.3 |
| | 71.2 |
|
| Deferred income tax benefits | | (127.8 | ) | | (221.3 | ) |
| Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions | (610.4 | ) | | (176.1 | ) | (315.2 | ) | | (682.9 | ) |
| Dividends from affiliates and others | | 188.0 |
| | 14.5 |
|
| Net cash provided by operating activities | 4,041.5 |
| | 4,159.3 |
| 4,033.1 |
|
| 4,045.5 |
|
| | | | | |
| Cash flows from investing activities: | | | | | | |
| Capital expenditures | (1,945.0 | ) | | (1,851.5 | ) | (1,824.9 | ) | | (1,945.0 | ) |
| Distributions received from affiliates | | 1,569.4 |
| | — |
|
| Equalization payment related to the VodafoneZiggo JV Transaction | | 845.3 |
| | — |
|
| Cash paid in connection with acquisitions, net of cash acquired | (1,327.4 | ) | | (281.2 | ) | (446.7 | ) | | (1,327.4 | ) |
| Investments in and loans to affiliates and others | | (92.9 | ) | | (90.3 | ) |
| Sale of investments | 137.8 |
| | — |
| 4.0 |
| | 137.8 |
|
| Investments in and loans to affiliates and others | (90.3 | ) | | (771.4 | ) | |
| Other investing activities, net | 88.3 |
| | 41.4 |
| (1.4 | ) | | 88.3 |
|
| Net cash used by investing activities | $ | (3,136.6 | ) | | $ | (2,862.7 | ) | |
| Net cash provided (used) by investing activities | | $ | 52.8 |
|
| $ | (3,136.6 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
(unaudited)
| | | | Nine months ended | Nine months ended |
| | September 30, | September 30, |
| | 2016 | | 2015 | 2017 | | 2016 |
| | in millions | in millions |
| Cash flows from financing activities: | | | | | | |
| Borrowings of debt | $ | 7,633.1 |
| | $ | 13,293.5 |
| $ | 8,233.2 |
| | $ | 7,633.1 |
|
| Repayments and repurchases of debt and capital lease obligations | (6,880.8 | ) | | (12,293.6 | ) | (7,878.7 | ) | | (6,880.8 | ) |
| Repurchase of Liberty Global ordinary shares | (1,504.3 | ) | | (1,404.7 | ) | (2,658.0 | ) | | (1,504.3 | ) |
| Change in cash collateral | | (685.3 | ) | | 117.7 |
|
| Payment of financing costs and debt premiums | (148.9 | ) | | (395.0 | ) | (297.6 | ) | | (148.9 | ) |
| Change in cash collateral | 117.7 |
| | 61.8 |
| |
Value-added taxes (VAT) paid on behalf of the VodafoneZiggo JV | | (162.6 | ) | | — |
|
| Net cash paid related to derivative instruments | (39.5 | ) | | (298.8 | ) | (104.3 | ) | | (39.5 | ) |
| Net cash received (paid) associated with call option contracts on Liberty Global ordinary shares | 9.2 |
| | (121.1 | ) | |
| Purchase of additional shares of subsidiaries | — |
| | (142.2 | ) | |
| Other financing activities, net | (136.2 | ) | | (51.2 | ) | (149.0 | ) | | (131.0 | ) |
| Net cash used by financing activities | (949.7 | ) | | (1,351.3 | ) | (3,702.3 | ) | | (953.7 | ) |
| | | | | | | |
| Effect of exchange rate changes on cash | 39.8 |
| | 7.4 |
| 97.3 |
| | 39.8 |
|
| |
|
| |
|
|
|
| |
|
|
| Net decrease in cash and cash equivalents | (5.0 | ) | | (47.3 | ) | |
| Net increase (decrease) in cash and cash equivalents | | 480.9 |
| | (5.0 | ) |
| Cash and cash equivalents: | | | | | | |
| Beginning of period | 982.1 |
| | 1,158.5 |
| 1,629.2 |
| | 982.1 |
|
| End of period | $ | 977.1 |
| | $ | 1,111.2 |
| $ | 2,110.1 |
| | $ | 977.1 |
|
| | | | | | | |
| Cash paid for interest | $ | 2,170.6 |
| | $ | 1,767.4 |
| $ | 1,926.5 |
| | $ | 2,170.6 |
|
| Net cash paid for taxes | $ | 330.2 |
| | $ | 192.6 |
| $ | 344.7 |
| | $ | 330.2 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements
September 30, 20162017
(unaudited)
(1) Basis of Presentation
Liberty Global plc (Liberty Global) is a public limited company organized under the laws of England and Wales. In these notes, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to Liberty Global or collectively to Liberty Global and its subsidiaries. We are an international provider of video, broadband internet, fixed-line telephony, mobile and other communications services to consumersresidential customers and businesses, with consolidated operations at September 30, 20162017 in more than 30 countries.
In Europe, we provide consumerresidential and business-to-business (B2B) communications services in (i) the United Kingdom (U.K.) and Ireland through Virgin Media Inc. (Virgin Media), (ii) the Netherlands through Ziggo Group Holding B.V. (Ziggo Group Holding), (iii) Germany through Unitymedia GmbH (Unitymedia), (iv)(iii) Belgium and Luxembourg through Telenet Group Holding N.V. (Telenet), a 57.5%57.6%-owned subsidiary, and (v)(iv) seven other European countries through UPC Holding B.V. (UPC Holding). Virgin Media, In addition, through the December 31, 2016 completion of the VodafoneZiggo JV Transaction (as defined and described in note 4), we provided residential and B2B communications services in the Netherlands through VodafoneZiggo Group B.V., which is referred to herein as “Ziggo Group Holding”. Following the completion of the VodafoneZiggo JV Transaction, we own a 50% noncontrolling interest in the VodafoneZiggo JV (as defined in note 4), which provides video, broadband internet, mobile and B2B services in the Netherlands. Virgin Media, Unitymedia and UPC Holding are each wholly-owned subsidiaries of Liberty Global. The operations of Virgin Media, Ziggo Group Holding, Unitymedia, Telenet, UPC Holding and, UPCthrough December 31, 2016, Ziggo Group Holding are collectively referred to herein as the “European Operations Division.”
In addition,Outside of Europe, we provide consumerresidential and B2B communications services in (i) 18 countries, predominantly in Latin America and the Caribbean, through our wholly-owned subsidiary Cable & Wireless Communications Limited (formerly known as Cable & Wireless Communications Plc) (CWCC&W), (ii) Chile through our wholly-owned subsidiary VTR.com SpA (VTR) and (iii) Puerto Rico through Liberty Cablevision of Puerto Rico LLC (Liberty Puerto Rico), an entity in which we hold a 60.0% ownership interest. CWCC&W also provides (a) B2B communications services in certain other countries in Latin America and the Caribbean and (b) wholesale communications services over its sub-sea and terrestrial networksfiber optic cable network that connectconnects over 3040 markets in that region. CWCC&W owns less than 100% of certain of its consolidated subsidiaries, including Cable & Wireless Panama, SA (CWC Panama) (a 49.0%-owned entity that owns most of our operations in Panama), The Bahamas Telecommunications Company Limited (CWC BTC) (a 49.0%-owned entity that owns all of our operations in the Bahamas), and Cable & Wireless Jamaica Limited (CWC Jamaica) (an 82.0%-owned entity that owns the majority of our operations in Jamaica) and Cable & Wireless Barbados Limited (CWC Barbados) (an 81.1%-owned entity that owns the majority of our operations in Barbados). The operations of CWC,C&W, VTR and Liberty Puerto Rico are collectively referred to herein as the “LiLAC Division.”
Effective August 3, 2016, in connection with the pending formation of the Dutch JV (as defined and described in note 3), we began accounting for Ziggo Group Holding and its subsidiaries and Ziggo Sport Totaal (Ziggo Sport and, together with Ziggo Group Holding and its subsidiaries, the Dutch JV Entities) as held for sale. Ziggo Sport operates premium sports channels in the Netherlands. Accordingly, the assets and liabilities of these subsidiaries are included in assets held for sale and liabilities associated with assets held for sale, respectively, in our September 30, 2016 condensed consolidated balance sheet. Consistent with the applicable guidance, we have not reflected similar reclassifications in our condensed consolidated statements of operations or our condensed consolidated statements of cash flows. For additional information, see note 3.
On July 1, 2015, we completed the approved steps of the “LiLAC Transaction” whereby weOur share capital comprises (i) reclassified our then outstanding Class A, Class B and Class C Liberty Global ordinary shares into corresponding classes of new (collectively, Liberty Global Shares) and (ii) Class A, B and C LiLAC ordinary shares (collectively, the Liberty Global Shares) and (ii) capitalized a portion of our share premium account and distributed as a dividend (or a “bonus issue” under U.K. law) our LiLAC Class A, Class B and Class C ordinary shares (collectively, the LiLAC Shares). In these notes, the term “Old Liberty Global Shares” refers to our previously-outstanding Class A, Class B and Class C Liberty Global ordinary shares. The impact of the LiLAC Transaction on our capitalization and earnings or loss per share (EPS) presentation has been reflected in these condensed consolidated financial statements prospectively from July 1, 2015. Accordingly, (a) our net earnings (loss) attributed to Liberty Global Shares and LiLAC Shares relates to the three and nine months ended September 30, 2016 and the three months ended September 30, 2015 and (b) our net loss attributed to Old Liberty Global Shares relates to the six months ended June 30, 2015.
The Liberty Global Shares and the LiLAC Shares are tracking shares. Tracking shares are intended by the issuing company
to reflect or “track” the economic performance of a particular business or “group,” rather than the economic performance of the
company as a whole. The Liberty Global Shares and the LiLAC Shares are intended to track the economic performance of the Liberty Global Group and the LiLAC Group, respectively (each as defined and described below). While the Liberty Global Group and the LiLAC Group have separate collections of businesses, assets and liabilities attributed to them, neither group is a separate legal entity and therefore cannot own assets, issue securities or enter into legally binding agreements. Holders of tracking shares have no direct claim to the group’s assets and are not represented by separate boards of directors. Instead, holders of tracking
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
shares are shareholders of the parent corporation, with a single board of directors, and are subject to all of the risks and liabilities of the parent corporation. We and our subsidiaries each continue to be responsible for our respective liabilities. Holders of Liberty Global Shares, LiLAC Shares and any other of our capital shares designated as ordinary shares from time to time will continue to be subject to risks associated with an investment in our company as a whole, even if a holder does not own both Liberty Global Shares and LiLAC Shares.
The “LiLAC Group” comprises our businesses, assets and liabilities in Latin America and the Caribbean and has attributed to it (i) LGE Coral Holdco Limited (LGE Coral) and its subsidiaries, which include CWC,C&W, (ii) VTR Finance B.V. (VTR Finance) and its subsidiaries, which include VTR, (iii) Lila Chile Holding B.V. (Lila Chile Holding), which is the parent entity of VTR Finance and (iv) LiLAC HoldingsCommunications Inc. (LiLAC HoldingsCommunications) and its subsidiaries, which include Liberty Puerto Rico, and (v) prior to July 1, 2015, the costs associated with certain corporate employees of Liberty Global that are exclusively focused on the management of the LiLAC Group (the LiLAC Corporate Costs). Effective July 1, 2015, these corporate employees were transferred to LiLAC Holdings.Rico. The “Liberty Global Group” comprises our businesses, assets and liabilities not attributed to the LiLAC Group, including Virgin Media, Ziggo Group Holding, Unitymedia, Telenet, UPC Holding, our 50% interest in the VodafoneZiggo JV (from December 31, 2016), Ziggo Group Holding (up to December 31, 2016), our corporate entities (excluding LiLAC Holdings)Communications) and certain other less significant entities. We have announced our intention to split-off the entities that comprise the LiLAC Group around the end of 2017 (the Split-off).
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
For additional information regarding our tracking share capital structure, including unaudited attributed financial information of the Liberty Global Group and the LiLAC Group, see Exhibit 99.1 to this Quarterly Report on Form 10-Q.
Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information required by U.S. GAAP or Securities and Exchange Commission rules and regulations for complete financial statements. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with our 20152016 consolidated financial statements and notes thereto included in our 20152016 Annual Report on Form 10-K.10-K, as amended (our 10-K).
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates and assumptions are used in accounting for, among other things, the valuation of acquisition-related assets and liabilities, allowances for uncollectible accounts, 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.
Unless otherwise indicated, ownership percentages and convenience translations into United States (U.S.) dollars are calculated as of September 30, 2016.2017.
Certain prior period amounts have been reclassified to conform to the current period presentation, including the reclassification of deferred financing costs from other long-term assets to long-term debt and capital lease obligations and the reclassification of certain costs between programming and other direct costs of services, other operating and SG&A expenses. For additional information regarding the change in the classification of deferred financing costs, see “Accounting Changes” in note 2.
(2) Accounting Changes and Recent Accounting Pronouncements
Accounting Changes
In April 2015,March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-03, Simplifying the Presentation of Debt Issuance Costs 2016-09, Compensation —Stock Compensation, Improvements to Employee Share-Based Payment Accounting(ASU 2015-032016-09), which requires debt issuance costs relatedsimplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification within the statement of cash flows. We adopted ASU 2016-09 on January 1, 2017. As a result of adopting this standard, we (i) recognized a cumulative effect adjustment to a recognized debt liability to be presented on the balance sheetour accumulated deficit as a direct deduction from the debt liability, similar toof January 1, 2017 and (ii) retrospectively revised the presentation of debt discounts. For public entities, ASU 2015-03 is effectiveour condensed consolidated statements of cash flows to remove the operating cash outflows and financing cash inflows associated with excess tax benefits from share-based compensation. The cumulative effect adjustment, which totaled $15.3 million, represents the tax effect of deductions in excess of the financial reporting expense for annualshare-based compensation that were not previously recognized for financial reporting periods beginning after December 15, 2015. We adopted ASU 2015-03 on January 1, 2016 and, accordingly, deferred financing costs are presentedpurposes as these tax benefits were not realized as a reduction of debtincome taxes payable.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (ASU 2017-04), which eliminates the requirement to estimate the implied fair value of a reporting unit’s goodwill as determined following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, a company should recognize any goodwill impairment by comparing the fair value of a reporting unit to its carrying amount. We early-adopted ASU 2017-04 effective January 1, 2017. The adoption of ASU 2017-04 reduces the complexity surrounding the evaluation of our goodwill for impairment.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
September 30, 2016 and December 31, 2015 condensed consolidated balance sheets. Prior to the adoption of ASU 2015-03, we presented deferred financing costs in other assets, net.
Recent Accounting Pronouncements
ASU 2014-09
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09, as amended by ASU No. 2015-14, will replace existing revenue recognition guidance when it becomes effective for annual and interim reporting periods beginning after December 15, 2017. Early application is permitted for annual and interim reporting periods that begin after December 15, 2016. This new standard permits the use of either the retrospective or cumulative effect transition method. We will adopt ASU 2014-09 effective January 1, 2018 using the cumulative effect transition method. WeWhile we are currently evaluatingcontinuing to evaluate the effect that ASU 2014-09 will have on our consolidated financial statements, we have identified a number of our current revenue recognition policies that will be impacted by ASU 2014-09, including the accounting for (i) time-limited discounts and free service periods provided to our customers and (ii) certain upfront fees charged to our customers. Although we continue to evaluate the impacts of adopting ASU 2014-09, our current views are as follows:
| |
| • | When we enter into contracts to provide services to our customers, we often provide time-limited discounts or free service periods. Under current accounting rules, we recognize revenue net of discounts during the promotional periods and do not recognize any revenue during free service periods. Under ASU 2014-09, revenue recognition for those contracts that contain substantive termination penalties will be accelerated, as the impact of the discounts or free service periods will be recognized uniformly over the contractual period. For contracts that do not have substantive termination penalties, we will continue to record the impacts of partial or full discounts during the applicable promotional periods. |
When we enter into contracts to provide services to our customers, we often charge installation or other upfront fees. Under current accounting rules, installation fees related disclosures. Weto services provided over our cable networks are recognized as revenue during the period in which the installation occurs to the extent these fees are equal to or less than direct selling costs. Under ASU 2014-09, these fees will generally be deferred and recognized as revenue over the contractual period, or longer if the upfront fee results in a material renewal right.
As the above revenue recognition changes have offsetting impacts and both result in a relatively minor shift in the timing of revenue recognition, we currently do not yet determinedexpect ASU 2014-09 to have a material impact on our consolidated revenue.
ASU 2014-09 will also impact our accounting for certain upfront costs directly associated with obtaining and fulfilling customer contracts. Under our current policy, these costs are expensed as incurred unless the effectcosts are in the scope of another accounting topic that allows for capitalization. Under ASU 2014-09, the upfront costs associated with contracts that have substantive termination penalties and a term of one year or more will be recognized as assets and amortized to other operating expenses over the applicable period benefited. Although the impact of the standardaccounting change for the upfront costs will be dependent on numerous factors, including the number and terms of new subscriber contracts added during any given period, we do not expect the initial or ongoing impact of this accounting change to be material based on our ongoingassessments of the current practices and contracts in effect in our various markets.
Although the ultimate impact of adopting ASU 2014-09 for both revenue recognition and costs to obtain and fulfill contracts will depend on numerous factors, including the promotions and offers in placeduring the period leading up to and after the adoptionof ASU 2014-09, we currently do not expect the adoption of ASU 2014-09 to have a material impact on our revenue, operating expenses or financial reporting.position. In addition, we do not expect to make material changes to our internal control environment as a result of the adoption of ASU 2014-09.
ASU 2016-02
In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU 2016-02), which, for most leases, will result in lessees recognizing lease assets and lease liabilities on the balance sheet with additional disclosures about leasing arrangements. ASU 2016-02 requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach also includes a number of optional practical expedients an entity may elect to apply. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We will adopt ASU 2016-02 on January 1, 2019. Although we are currently evaluating the effect that ASU 2016-02 will have on our consolidated financial statements, and related disclosures.
In March 2016, the FASB issued ASU No. 2016-09, Compensation —Stock Compensation, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09), which simplifies several aspectsmain impact of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification within the statement of cash flows. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. ASU 2016-09 will result in the reclassification of cash flows from excess tax benefits of share-based compensation from financing activities to operating activities. Further, the accumulation of excess tax benefits will no longer need to be recognized within additional paid-in capital or included as an adjustment within the computation of earnings per share under ASU 2016-09.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (ASU 2016-13), which changes the way entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net earnings. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the effect that ASU 2016-13 will have on our consolidated financial statements and related disclosures.
(3) Acquisition and Joint Venture Transactions
Pending Joint Venture Transaction
On February 15, 2016, we and Liberty Global Europe Holding B.V., our wholly-owned subsidiary, entered into a Contribution and Transfer Agreement (the Contribution Agreement) with Vodafone Group plc (Vodafone) and one of its wholly-owned subsidiaries. Pursuant to the Contribution Agreement, our company and Vodafone agreed to form a 50:50 joint venture (the Dutch JV), which will combine Ziggo Group Holding and Ziggo Sport with Vodafone’s mobile businesses in the Netherlands (Vodafone NL) to create a national unified communications provider in the Netherlands with complementary strengths across video, broadband, mobile and B2B services. In our segment presentation, Ziggo Group Holding is separately reported as “The Netherlands” and Ziggo Sport is included in our “Corporate and Other” category.
At the closing of the transaction contemplated by the Contribution Agreement, Vodafone will pay to our company an equalization payment equal to approximately €1.0 billion($1.1 billion), as adjusted for the defined net debt of Ziggo Group Holding and Vodafone NL at the time of closing and certain working capital adjustments. Ziggo Group Holding will be contributed to the Dutch JV together with its outstanding third-party debt, while Ziggo Sport and Vodafone’s business in the Netherlands will be contributed on a debt and cash free basis.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
As further describedthe adoption of this standard will be the recognition of lease assets and lease liabilities in note 7, certain subsidiariesour consolidated balance sheets for those leases classified as operating leases under previous U.S. GAAP. ASU 2016-02 will not have significant impacts on our consolidated statements of Ziggo Group Holdingoperations or cash flows.
ASU 2017-07
In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of the Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07), which changes the presentation of periodic benefit cost components. Under ASU 2017-07, we will continue to present the service component of our net benefit cost as a component of operating income but present the other components of our net benefit cost computation, which can include credits, within non-operating income (expense) in our consolidated statements of operations. ASU 2017-07 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. We will adopt ASU 2017-07 on January 1, 2018 on a retrospective basis.
(3) Acquisitions
Pending Acquisitions
Multimedia. On October 18, 2016, our subsidiary UPC Polska SP Z.o.o. entered into various debt financing arrangementsa definitive agreement to acquire the cable business of Multimedia Polska S.A. (Multimedia), the third-largest cable operator in anticipationPoland, for cash consideration of the formation of the Dutch JV. The parties currently expect to make a pro rata distribution of the net proceeds from the additional debt to our company and Vodafone. The Dutch JV will be required to make regular cash distributions to its shareholders on a pro rata basis3.0 billion Polish zlotys ($821.1 million), which is equal to the unrestricted cash heldenterprise value assigned to Multimedia for purposes of this transaction. We intend to finance the acquisition of Multimedia with existing liquidity. The final purchase price is subject to potential downward adjustments for the operational and financial performance of Multimedia prior to closing. The transaction is subject to customary closing conditions, including regulatory approval. On October 18, 2017, the Polish regulator issued a statement of objection against the proposed transaction on the basis that such transaction could restrict competition in a number of cities across the country. We are in the process of responding to the Polish regulator’s statement of objections and remain confident of clearance in due course. We do not expect the transaction to be completed in 2017.
2017 Acquisitions
Carve-out Entities. In connection with the C&W Acquisition, as defined and described below, and an acquisition made by C&W in 2015, certain entities (the Carve-out Entities) that hold licenses granted by the Dutch JV (subjectU.S. Federal Communications Commission (the FCC) were transferred to entities not controlled by our company or C&W. The arrangements with respect to the Dutch JV maintaining a minimum amount of cash and complying with the terms of its financing arrangements). As an ongoing operation, it is intended that the Dutch JV will be funded solely from its net cash flow from operations and third-party financing. This transaction will not trigger any of Ziggo Group Holding’s requirements under its debt agreements to redeem its outstanding debt pursuant to applicable change in control provisions.
Pursuant to the Framework Agreement that we expect to enter intoCarve-out Entities, which were executed in connection with the closingC&W Acquisition and the acquisition made by C&W in 2015, contemplated that upon receipt of regulatory approval, C&W would acquire the Carve-out Entities. On March 8, 2017, the FCC granted its approval for C&W’s acquisition of the Dutch JV, our company and Vodafone will provide certain services toCarve-out Entities. Accordingly, on April 1, 2017, subsidiaries of C&W acquired the Dutch JV.
Following completionCarve-out Entities (the C&W Carve-out Acquisition) for an aggregate purchase price of $86.2 million, which represents the amount due under notes receivable that were exchanged for the equity of the transaction, we expect to accountCarve-out Entities.
SFR BeLux. On June 19, 2017, Telenet acquired Coditel Brabant sprl, operating under the SFR brand (SFR BeLux), for our 50% interest in the Dutch JV as an equity method investment,a cash and we expect to attribute our 50% interest in the Dutch JV to the Liberty Global Group.
The consummationdebt free purchase price of €391.0 million ($453.2 million at the transaction contemplated by the Contribution Agreement isdate), subject to certain conditions, including competition clearance byadjustments (the SFR BeLux Acquisition). SFR BeLux provides cable services to households and businesses in Brussels, Wallonia and Luxembourg and offers mobile services in Belgium through a mobile virtual network operator (MVNO) agreement with BASE, as defined and described below. The SFR BeLux Acquisition was funded through a combination of €210.0 million ($247.9 million) of borrowings under the European Commission. On August 3, 2016, the European Commission approved the transaction subject to the divestment by VodafoneTelenet Credit Facility and existing liquidity of its fixed-line business in the Netherlands. It is anticipated that the transaction contemplated by the Contribution Agreement will close around the end of 2016. The Contribution Agreement also includes customary termination rights, including a right of the parties to terminate the transaction if it has not closed by August 15, 2017.Telenet.
Effective August 3, 2016, in connection with conditional approval from the European Commission, we began accounting for the Dutch JV Entities as held for sale. Accordingly, effective August 3, 2016, we no longer depreciate or amortize the long-lived assets of the Dutch JV Entities. We do not present these entities as discontinued operations as this transaction does not represent a strategic shift for Liberty Global. Long-lived assets classified as held for sale are measured at the lower of carrying amount or fair value less cost to sell. Since the aggregate carrying value of the Dutch JV Entities was less than the estimated fair value less cost to sell, no adjustments to the carrying values of these entities were necessary. The carrying amounts of the major classes of assets and liabilities that are classified as held for sale at September 30, 2016 are summarized below (in millions):
|
| | | |
| Assets: | |
| Current assets other than cash (a) | $ | 214.4 |
|
| Property and equipment, net | 3,232.2 |
|
| Goodwill | 8,113.2 |
|
| Intangible assets subject to amortization, net | 3,626.6 |
|
| Long-term restricted cash | 3,195.2 |
|
| Other assets, net | 165.0 |
|
| Total assets | $ | 18,546.6 |
|
| | |
| Liabilities: | |
| Current portion of debt and capital lease obligations | $ | 281.5 |
|
| Other accrued and current liabilities | 821.8 |
|
| Long-term debt and capital lease obligations | 11,097.8 |
|
| Other long-term liabilities | 1,210.6 |
|
| Total liabilities | $ | 13,411.7 |
|
_______________
| |
(a) | Under the terms of the Contribution Agreement, we are not required to contribute Ziggo Group Holding’s cash to the Dutch JV. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
Our condensed consolidated statements of operations include aggregate net loss attributable to Ziggo Group Holding and Ziggo Sport of (i) $166.8 million and $118.8 million for the three months ended September 30, 2016 and 2015, respectively, and (ii) $426.3 million and $286.6 million for the nine months ended September 30, 2016 and 2015, respectively.
Pending Acquisition
For information regarding a purchase agreement that our subsidiary entered into subsequent to September 30, 2016, see note 15.
2016 Acquisitions
CWC.C&W. On May 16, 2016, pursuant to a scheme of arrangement and following shareholder approvals, we acquired CWCC&W for shares of Liberty Global (the CWCC&W Acquisition). Under the terms of the transaction, CWC shareholders received in the aggregate: 31,607,008 Class A Liberty Global Shares, 77,379,774 ClassThe C Liberty Global Shares, 3,648,513 Class A LiLAC Shares and 8,939,316 Class C LiLAC Shares. Further, in accordance with the scheme of arrangement and immediately prior to the acquisition, CWC declared a special cash dividend (the Special Dividend) to its shareholders in the amount of £0.03 ($0.04 at the transaction date) per CWC share. The Special Dividend was paid to CWC shareholders promptly following the closing and the payment, together with fees and expenses related to the acquisition, was funded with CWC liquidity, including incremental debt borrowings, and LiLAC Group corporate liquidity. We acquired CWC in order to achieve certain financial, operational and strategic benefits through the integration of CWC with our existing operations in the LiLAC Group.
The CWC&W Acquisition triggered regulatory approval requirements in certain jurisdictions in which CWCC&W operates. The regulatory authorities in certain of these jurisdictions, including the Bahamas, Jamaica, Trinidad and Tobago the Seychelles and the Cayman Islands,Seychelles, have not completed their review of the CWCC&W Acquisition or granted their approval. While we expect to receive all outstanding approvals, such approvals may include binding conditions or requirements that could have an adverse impact on CWC’sC&W’s operations and financial condition.
For accounting purposes, the CWC Acquisition was treated as the acquisition of CWC by Liberty Global. In this regard, the equity and cash consideration paid to acquire CWC is set forth below (in millions):
|
| | | |
| Class A Liberty Global Shares (a) | $ | 1,167.2 |
|
| Class C Liberty Global Shares (a) | 2,803.5 |
|
| Class A LiLAC Shares (a) | 144.1 |
|
| Class C LiLAC Shares (a) | 375.3 |
|
| Special Dividend (b) | 193.8 |
|
| Total | $ | 4,683.9 |
|
_______________
| |
(a) | Represents the fair value of the 31,607,008 Class A Liberty Global Shares, 77,379,774 Class C Liberty Global Shares, 3,648,513 Class A LiLAC Shares and 8,939,316 Class C LiLAC Shares issued to CWC shareholders in connection with the CWC Acquisition. These amounts are based on the market price per share at closing on May 16, 2016 of $36.93, $36.23, $39.50 and $41.98, respectively. |
| |
(b) | Represents the Special Dividend of £0.03 ($0.04 at the transaction date) per CWC share paid pursuant to the scheme of arrangement based on 4,433,222,313 outstanding shares of CWC on May 16, 2016. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
We have accounted for the CWCC&W Acquisition using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets of CWC 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. 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. Most items in the valuation process remain open and are subject to change upon finalization of the valuation process. A summary of the purchase price and the preliminary opening balance sheet of CWC at the May 16, 2016 acquisition date is presented in the following table (in millions):
|
| | | |
| Cash and cash equivalents | $ | 210.8 |
|
| Other current assets | 582.2 |
|
| Property and equipment, net | 2,907.2 |
|
| Goodwill (a) | 5,559.8 |
|
| Intangible assets subject to amortization, net (b) | 1,268.5 |
|
| Other assets, net | 581.5 |
|
| Current portion of debt and capital lease obligations | (92.2 | ) |
| Other accrued and current liabilities | (743.5 | ) |
| Long-term debt and capital lease obligations | (3,287.8 | ) |
| Other long-term liabilities | (850.8 | ) |
| Noncontrolling interests (c) | (1,451.8 | ) |
| Total purchase price (d) | $ | 4,683.9 |
|
_______________
| |
(a) | The goodwill recognized in connection with the CWC Acquisition is primarily attributable to (i) the ability to take advantage of CWC’s existing advanced broadband communications and sub-sea and terrestrial networks to gain immediate access to potential customers and (ii) synergies that are expected to be achieved through the integration of CWC with other operations in the LiLAC Group. |
| |
(b) | Amount primarily includes intangible assets related to customer relationships. At May 16, 2016, the preliminary assessment of the weighted average useful life ofCWC’s intangible assets was approximately eight years.
|
| |
(c) | Represents the aggregate fair value of the noncontrolling interests in CWC’s subsidiaries as of May 16, 2016. |
| |
(d) | Excludes direct acquisition costs of $117.0 million, which are included in impairment, restructuring and other operating items, net, in our condensed consolidated statements of operations. |
Following completion of the CWC Acquisition, we attributed CWC to the LiLAC Group, with the Liberty Global Group being granted an inter-group interest in the LiLAC Group representing the fair value (as determined by our board of directors) of the Liberty Global Shares issued as part of the purchase consideration. On July 1, 2016, we distributed (as a bonus issue) 117,425,359 LiLAC Shares to Liberty Global Group shareholders on a pro-rata basis (the LiLAC Distribution), thereby eliminating the Liberty Global Group's inter-group interest in the LiLAC Group. The LiLAC Distribution was accounted for prospectively effective July 1, 2016.
BASE. On February 11, 2016, pursuant to a definitive agreement and following regulatory approval, Telenet acquired Telenet Group BVBA, formerly known as BASE Company NV (BASE), for a cash purchase price of €1,321.9 million ($1,497.7 million at the transaction date) (the BASE Acquisition). BASE is the third-largest mobile network operator in Belgium. We expect that the BASE Acquisition will provide Telenet with cost-effective long-term mobile access to effectively compete for future growth opportunities in the Belgium mobile market. The BASE Acquisition was funded through a combination of €1.0 billion ($1.1 billion at the transaction date) of new debt facilities and existing liquidity of Telenet. The acquisition was approved by the European Commission subject to Telenet’s agreement to divest both the JIM Mobile prepaid customer base and BASE’s 50% stake in Viking Co NV (Viking) to MEDIALAAN NV. In February 2016, Telenet completed the sale of its stake in Viking. The divestiture of the JIM Mobile prepaid customer base is expected to occur during the third quarter of 2017.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
We have accounted for the BASE Acquisition using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets of BASE 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. 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 includeproperty and equipment, goodwill, intangible assets associated with mobile spectrum, customer relationships and trademarks and income taxes. A summary of the purchase price and the preliminary opening balance sheet of BASE at the February 11, 2016 acquisition date is presented in the following table (in millions):
|
| | | |
| Cash and cash equivalents | $ | 160.1 |
|
| Other current assets | 172.6 |
|
| Property and equipment, net | 785.6 |
|
| Goodwill (a) | 343.2 |
|
| Intangible assets subject to amortization, net: | |
| Mobile spectrum (b) | 261.0 |
|
| Customer relationships (c) | 127.0 |
|
| Trademarks (d) | 40.7 |
|
| Other assets, net | 10.7 |
|
| Other accrued and current liabilities | (311.8 | ) |
| Other long-term liabilities | (91.4 | ) |
| Total purchase price (e) | $ | 1,497.7 |
|
_______________
| |
(a) | The goodwill recognized in connection with the BASE Acquisition is primarily attributable to (i) the ability to take advantage of BASE’s existing mobile network to gain immediate access to potential customers and (ii) synergies that are expected to be achieved through the integration of BASE with Telenet. |
| |
(b) | As of February 11, 2016, the weighted average useful life of BASE’s mobile spectrum was approximately 11 years. |
| |
(c) | As of February 11, 2016, the weighted average useful life of BASE’s customer relationships was approximately seven years. |
| |
(d) | As of February 11, 2016, the weighted average useful life of BASE’s trademarks was approximately 20 years. |
| |
(e) | Excludes direct acquisition costs of $17.1 million, including $7.1 million incurred during 2016, which are included in impairment, restructuring and other operating items, net, in our consolidated statements of operations. |
2015 Acquisition
On June 3, 2015, pursuant to a stock purchase agreement with the parent entity of Puerto Rico Cable Acquisition Company Inc., dba Choice Cable TV (Choice) and following regulatory approval, one of our subsidiaries, together with investment funds affiliated with Searchlight Capital Partners, L.P. (collectively, Searchlight), acquired 100% of Choice (the Choice Acquisition). Choice is a cable and broadband services provider in Puerto Rico. We acquired Choice in order to achieve certain financial, operational and strategic benefits through the integration of Choice with Liberty Puerto Rico. The combined business is 60.0%-owned by our company and 40.0%-owned by Searchlight.
The purchase price for Choice of $276.4 million was funded through (i) Liberty Puerto Rico’s incremental debt borrowings, net of discount and fees, of $259.1 million, (ii) cash of $10.5 million and (iii) an equity contribution from Searchlight of $6.8 million.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
We have accounted for the Choice Acquisition using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets of ChoiceC&W 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 purchase price and the opening balance sheet of ChoiceC&W at the June 3, 2015May 16, 2016 acquisition date is presented in the following table. The opening balance sheet presented below reflects our final purchase price allocation (in millions):
| | | Cash and cash equivalents | $ | 3.6 |
| $ | 210.8 |
|
| Other current assets | 7.8 |
| 578.5 |
|
| Property and equipment, net | 79.8 |
| 2,914.2 |
|
| Goodwill (a) | 51.6 |
| 5,344.3 |
|
| Intangible assets subject to amortization, net (b) | 59.1 |
| 1,416.0 |
|
| Franchise rights | 147.8 |
| |
| Other assets, net | 0.3 |
| 577.8 |
|
| Current portion of debt and capital lease obligations | | (94.1 | ) |
| Other accrued and current liabilities | (13.2 | ) | (753.2 | ) |
| Non-current deferred tax liabilities | (60.4 | ) | |
| Total purchase price (c) | $ | 276.4 |
| |
| Long-term debt and capital lease obligations | | (3,305.4 | ) |
| Other long-term liabilities | | (751.8 | ) |
| Noncontrolling interests (c) | | (1,453.2 | ) |
| Total purchase price (d) | | $ | 4,683.9 |
|
_______________
| |
| (a) | The goodwill recognized in connection with the ChoiceC&W Acquisition is primarily attributable to (i) the ability to take advantage of Choice’sC&W’s existing advanced broadband communications networkterrestrial and sub-sea networks to gain immediate access to potential customers and (ii) synergies that are expected to be achieved through the integration of ChoiceC&W with Liberty Puerto Rico.other operations in the LiLAC Group. |
| |
| (b) | Amount primarily includes intangible assets related to customer relationships. As of June 3, 2015, theThe weighted average useful life of Choice’sC&W’s intangible assets at the May 16, 2016 acquisition date was approximately tennine years. |
| |
| (c) | ExcludesRepresents the estimated aggregate fair value of the noncontrolling interests in C&W’s subsidiaries as of May 16, 2016. |
| |
| (d) | The total purchase price (i) includes the issuance of Liberty Global Shares and LiLAC Shares that were collectively valued at $4,490.1 million and a special cash dividend of $193.8 million and (ii) excludes direct acquisition costs of $8.5$135.0 million, incurred through December 31, 2015,most of which were incurred during 2016. Direct acquisition costs are included in impairment, restructuring and other operating items, net, in our consolidated statementstatements of operations for the year ended December 31, 2015.operations. |
BASE. On February 11, 2016, Telenet acquired Telenet Group BVBA, formerly known as BASE Company NV (BASE), for a cash purchase price of €1,318.9 million ($1,494.3 million at the transaction date) (the BASE Acquisition). BASE is a mobile network operator in Belgium.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
Pro Forma Information
The following unaudited pro forma condensed consolidated operating results give effect to (i) the CWCC&W Acquisition (ii)and the BASE Acquisition and (iii) the Choice Acquisition as if they had been completed as of January 1, 2015. No effect has been given to the C&W Carve-out Acquisition or the SFR BeLux Acquisition as the assumed completion of these acquisitions on January 1, 2016 would not have had a significant impact on our results of operations for the three and nine months ended September 30, 2016. These pro forma amounts are not necessarily indicative of the operating results that would have occurred if these transactions had occurred on such date. The pro forma adjustments are based on certain assumptions that we believe are reasonable. In the following table, we present the revenue that is attributed to the Liberty Global Group and the LiLAC Group as if such revenue had been attributed to each group at the beginning
|
| | | | | | | |
| | Three months ended September 30, 2016 | | Nine months ended September 30, 2016 |
| Revenue (in millions): | | | |
| Liberty Global Group | $ | 4,313.1 |
| | $ | 13,142.8 |
|
| LiLAC Group | 894.1 |
| | 2,698.3 |
|
| Total | $ | 5,207.2 |
| | $ | 15,841.1 |
|
| | | | |
| Net earnings (loss) attributable to Liberty Global shareholders (in millions): | | | |
| Liberty Global Shares | $ | (167.7 | ) | | $ | (297.6 | ) |
| LiLAC Shares | (79.8 | ) | | 28.3 |
|
| Total | $ | (247.5 | ) | | $ | (269.3 | ) |
| | | | |
| Basic and diluted earnings (loss) attributable to Liberty Global shareholders per share: | | | |
| Liberty Global Shares | $ | (0.18 | ) | | $ | (0.32 | ) |
| LiLAC Shares | $ | (0.46 | ) | | $ | 0.29 |
|
(4) Investments
The details of each period presented. However, our presentation of net earnings (loss) and basic and diluted earnings (loss)per share attributed to (a) Liberty Global Shares, (b) LiLAC Shares and (c) Old Liberty Global Shares only includes the results of operations for the periods during which these shares were outstanding. Accordingly, (1) ourpro formanet earnings (loss)attributed to Liberty Global Shares and LiLAC Shares relates to the nine months ended September 30, 2016 and the three months ended September 30, 2015 and (2) our pro forma net loss attributed to Old Liberty Global Shares relates to the six months ended June 30, 2015.
investments are set forth below:
|
| | | | | | | | |
| Accounting Method | | September 30,
2017 | | December 31,
2016 |
| | in millions |
| Equity (a): | | | |
| VodafoneZiggo JV (b) | $ | 4,360.7 |
| | $ | 4,186.6 |
|
| Other | 161.9 |
| | 142.7 |
|
| Total — equity | 4,522.6 |
| | 4,329.3 |
|
| Fair value: | | | |
ITV plc (ITV) — subject to re-use rights | 932.5 |
| | 1,015.4 |
|
Sumitomo Corporation (Sumitomo) | 656.1 |
| | 538.4 |
|
| ITI Neovision S.A. | 151.3 |
| | 129.3 |
|
Lions Gate Entertainment Corp (Lionsgate) | 163.1 |
| | 128.6 |
|
| Other | 257.8 |
| | 245.5 |
|
| Total — fair value | 2,160.8 |
| | 2,057.2 |
|
| Cost | 123.4 |
| | 97.2 |
|
| Total | $ | 6,806.8 |
| | $ | 6,483.7 |
|
_______________
| |
| (a) | At September 30, 2017 and December 31, 2016, the aggregate carrying amounts of our equity method investments did not materially exceed our proportionate share of the respective investees’ net assets. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
| |
| (b) | Amounts include a related-party note receivable (the VodafoneZiggo JV Receivable) with a principal amount of $1,180.3 million and $1,054.7 million, respectively, due from a subsidiary of the VodafoneZiggo JV (as defined below) to a subsidiary of Liberty Global. The VodafoneZiggo JV Receivable bears interest at 5.55% and requires €100.0 million ($118.0 million) of principal to be paid annually during the first three years of the agreement, with the remaining principal due on January 16, 2027. The accrued interest on the VodafoneZiggo JV Receivable will be payable in a manner mutually agreed upon by Liberty Global and the VodafoneZiggo JV. During the three and nine months ended September 30, 2017, interest accrued on the VodafoneZiggo JV Receivable was $16.9 million and $47.5 million, respectively, all of which has been cash settled. |
Equity Method Investments
The following table sets forth the details of our share of losses of affiliates, net:
|
| | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| | 2015 | | 2016 | | 2015 |
| | in millions, except per share amounts |
| Revenue: | | | | | |
| Liberty Global Group | $ | 4,461.8 |
| | $ | 13,142.8 |
| | $ | 13,284.5 |
|
| LiLAC Group | 904.8 |
| | 2,694.8 |
| | 2,734.1 |
|
| Total | $ | 5,366.6 |
| | $ | 15,837.6 |
| | $ | 16,018.6 |
|
| | | | | | |
| Net earnings (loss) attributable to Liberty Global shareholders: | | | | | |
| Liberty Global Shares | $ | 101.1 |
| | $ | (297.6 | ) | | $ | 101.1 |
|
| LiLAC Shares | (1.6 | ) | | 45.3 |
| | (1.6 | ) |
| Old Liberty Global Shares | — |
| | — |
| | (1,230.7 | ) |
| Total | $ | 99.5 |
| | $ | (252.3 | ) | | $ | (1,131.2 | ) |
| | | | | | |
| Basic and diluted earnings (loss) attributable to Liberty Global shareholders per share: | | | | | |
| Liberty Global Shares: | | | | | |
| Basic | $ | 0.10 |
| | $ | (0.32 | ) | | $ | 0.10 |
|
| Diluted | $ | 0.10 |
| | $ | (0.32 | ) | | $ | 0.10 |
|
| LiLAC Shares: | | | | | |
| Basic | $ | (0.03 | ) | | $ | 0.47 |
| | $ | (0.03 | ) |
| Diluted | $ | (0.03 | ) | | $ | 0.47 |
| | $ | (0.03 | ) |
| Old Liberty Global Shares: | | | | | |
| Basic | | | | | $ | (1.25 | ) |
| Diluted | | | | | $ | (1.25 | ) |
|
| | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions |
| | | | | | | | |
| VodafoneZiggo JV (a) | $ | (23.4 | ) | | $ | — |
| | $ | (18.2 | ) | | $ | — |
|
| Other | (2.8 | ) | | (16.1 | ) | | (25.1 | ) | | (71.2 | ) |
| Total | $ | (26.2 | ) |
| $ | (16.1 | ) | | $ | (43.3 | ) | | $ | (71.2 | ) |
_______________
Our
| |
| (a) | Amounts include the net effect of (i) 100% of the interest income earned on the VodafoneZiggo JV Receivable, (ii) 100% of the share-based compensation expense associated with Liberty Global awards held by VodafoneZiggo JV employees who were formerly employees of Liberty Global, as these awards remain our responsibility, and (iii) our 50% share of the remaining results of operations of the VodafoneZiggo JV. |
VodafoneZiggo JV. On December 31, 2016, one of our wholly-owned subsidiaries contributed Ziggo Group Holding and its subsidiaries (including Liberty Global Netherlands Content B.V., referred to herein as “Ziggo Sport”) to VodafoneZiggo Group Holding B.V., a newly-formed entity that was formed as a 50:50 joint venture (the “VodafoneZiggo JV”) between Vodafone Group plc (Vodafone) and Liberty Global. Ziggo Sport, which became a subsidiary of Ziggo Group Holding during the fourth quarter of 2016, operates premium sports channels in the Netherlands. As a result of the formation of the VodafoneZiggo JV (the VodafoneZiggo JV Transaction), effective December 31, 2016, we no longer consolidate Ziggo Group Holding.
On January 4, 2017, in connection with the completion of the VodafoneZiggo JV Transaction, we received cash of €2.2 billion ($2.4 billion at the transaction date) comprising (i) a distribution reflecting our 50% share of the €2.8 billion ($2.9 billion at the transaction date) of net proceeds from the various debt financing arrangements entered into by certain subsidiaries of Ziggo Group Holding during the third quarter of 2016 and (ii) an equalization payment from Vodafone of €802.9 million ($840.8 million at the transaction date) that was subject to post-closing adjustments. At December 31, 2016, our right to receive this cash is reflected as a current receivable from the VodafoneZiggo JV in our condensed consolidated statementsbalance sheet. During the second quarter of operations for2017, the three andequalization payment amount was finalized, resulting in an additional €3.9 million ($4.5 million at the transaction date) being received from Vodafone.
During the first quarter of 2017, we paid $162.6 million of VAT on behalf of the VodafoneZiggo JV associated with the termination of a services agreement with Ziggo Group Holding that was in effect prior to the closing of the VodafoneZiggo JV Transaction. This advance was repaid during the first quarter of 2017. In addition, during the first nine months ended September 30, 2016 include (i) revenue (after intercompany eliminations) of $568.02017, we received dividends from the VodafoneZiggo JV aggregating $163.7 million, and $853.4 million, respectively, and netlosswhich were accounted for as returns on capital for purposes of $11.6 million and $56.4 million, respectively, attributable to CWC and (ii) revenue (after intercompany eliminations)our condensed consolidated statement of $159.8 million and $416.0 million, respectively, and net loss of $3.0 million and $21.8 million, respectively, attributable to BASE.cash flows.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
Pursuant to an agreement entered into in connection with the formation of the VodafoneZiggo JV Transaction (the Framework Agreement), Liberty Global provides certain services to the VodafoneZiggo JV on a transitional or ongoing basis (collectively, the JV Services). Pursuant to the terms of the Framework Agreement, the ongoing services will be provided for a period of four to six years depending on the type of service, while transitional services will be provided for a period of not less than 12 months, after which both parties shall be entitled to terminate the Framework Agreement based on specified notice periods. 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 the three and nine months ended September 30, 2017, we recorded revenue of $37.1 million and $100.4 million, respectively, related to the JV Services. In addition, at September 30, 2017, $48.8 million was due from the VodafoneZiggo JV, primarily related to (a) services performed under the Framework Agreement and (b) amounts incurred by Liberty Global for certain equipment and licenses purchased on behalf of the VodafoneZiggo JV. This amount, which is periodically cash settled, is included in other current assets in our condensed consolidated balance sheet.
The mobile and fixed-line operations of the VodafoneZiggo JV are experiencing significant competition. In particular, the mobile operations of the VodafoneZiggo JV continue to experience pressure on pricing, characterized by aggressive promotion campaigns, heavy marketing spend and increasing or unlimited data bundles. If the adverse impacts of economic, competitive, regulatory or other factors were to cause significant deterioration of the results of operations or cash flows of the VodafoneZiggo JV, we could conclude in future periods that our investment in the VodafoneZiggo JV is impaired or management of the VodafoneZiggo JV could conclude that an impairment of the VodafoneZiggo JV goodwill and, to a lesser extent, long-lived assets, is required. Any such impairment of the VodafoneZiggo JV’s goodwill or our investment in the VodafoneZiggo JV would be reflected as a component of share of results of affiliates, net, in our condensed consolidated statement of operations. Our share of any such impairment charges could be significant.
The summarized results of operations of the VodafoneZiggo JV are set forth below:
|
| | | | | | | |
| | Three months ended September 30, 2017 | | Nine months ended September 30, 2017 |
| |
| | in millions |
| | | | |
| Revenue | $ | 1,173.6 |
| | $ | 3,353.9 |
|
| Loss before income taxes | $ | (115.7 | ) | | $ | (184.9 | ) |
| Net loss | $ | (79.6 | ) | | $ | (128.3 | ) |
(45) Derivative Instruments
In general, we seek to enter into derivative instruments to protect against (i) increases in the interest rates on our variable-rate debt and (ii) foreign currency movements, particularly with respect to borrowings that are denominated in a currency other than the functional currency of the borrowing entity.entity, (ii) increases in the interest rates on our variable-rate debt 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 with respect to the U.S. dollar ($), the euro (€), the British pound sterling (£), the Swiss franc (CHF), the Chilean peso (CLP), the Colombian peso (COP), the Czech koruna (CZK), the Hungarian forint (HUF), the Indian Rupeerupee (INR), the Jamaican dollar (JMD), the Philippine Pesopeso (PHP), the Polish zloty (PLN) and the Romanian lei (RON). With the exception of a limited number of our foreign currency forward contracts, we do not apply hedge accounting to our derivative instruments. Accordingly, changes in the fair values of most of our derivative instruments are recorded in realized and unrealized gains or losses on derivative instruments, net, in our condensed consolidated statements of operations. For those derivative instruments that we account for using hedge accounting, the effective portions of the gains and losses on these instruments are recorded in other comprehensive loss and are subsequently reclassified into our statement of operations when the hedged forecasted transaction affects earnings.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
The following table provides details of the fair values of our derivative instrument assets and liabilities:
| | | | September 30, 2016 | | December 31, 2015 | September 30, 2017 | | December 31, 2016 |
| | Current | | Long-term (a) | | Total | | Current | | Long-term (a) | | Total | Current (a) | | Long-term (a) | | Total | | Current (a) | | Long-term (a) | | Total |
| | in millions | in millions |
| Assets: | | | | | | | | | | | | | | | | | | | | | | |
| Cross-currency and interest rate derivative contracts: | | | | | | | | | | | | | | | | | | | | | | |
| Liberty Global Group | $ | 358.8 |
| | $ | 1,803.9 |
| | $ | 2,162.7 |
| | $ | 263.6 |
| | $ | 1,518.5 |
| | $ | 1,782.1 |
| $ | 318.0 |
| | $ | 1,358.1 |
| | $ | 1,676.1 |
| | $ | 337.5 |
| | $ | 2,123.1 |
| | $ | 2,460.6 |
|
| LiLAC Group | 6.2 |
| | 146.8 |
| | 153.0 |
| | 11.8 |
| | 291.7 |
| | 303.5 |
| 10.0 |
| | 44.5 |
| | 54.5 |
| | 6.9 |
| | 139.0 |
| | 145.9 |
|
| Total cross-currency and interest rate derivative contracts (b) | 365.0 |
| | 1,950.7 |
| | 2,315.7 |
| | 275.4 |
| | 1,810.2 |
| | 2,085.6 |
| 328.0 |
| | 1,402.6 |
| | 1,730.6 |
| | 344.4 |
| | 2,262.1 |
| | 2,606.5 |
|
| Equity-related derivative instruments – Liberty Global Group (c) | 36.3 |
| | 839.3 |
| | 875.6 |
| | 135.5 |
| | 273.0 |
| | 408.5 |
| — |
| | 567.2 |
| | 567.2 |
| | 37.1 |
| | 486.9 |
| | 524.0 |
|
| Foreign currency forward and option contracts: | | | | |
|
| | | | | | | | | | |
|
| | | | | | |
| Liberty Global Group | 15.2 |
| | 14.3 |
| | 29.5 |
| | 6.2 |
| | — |
| | 6.2 |
| 16.9 |
| | 2.4 |
| | 19.3 |
| | 30.7 |
| | 14.1 |
| | 44.8 |
|
| LiLAC Group | — |
| | — |
| | — |
| | 4.2 |
| | — |
| | 4.2 |
| — |
| | — |
| | — |
| | 0.3 |
| | — |
| | 0.3 |
|
| Total foreign currency forward and option contracts | 15.2 |
| | 14.3 |
| | 29.5 |
| | 10.4 |
| | — |
| | 10.4 |
| 16.9 |
| | 2.4 |
| | 19.3 |
| | 31.0 |
| | 14.1 |
| | 45.1 |
|
| Other – Liberty Global Group | 0.3 |
| | 0.3 |
| | 0.6 |
| | 0.6 |
| | 1.0 |
| | 1.6 |
| 0.3 |
| | 0.4 |
| | 0.7 |
| | 0.2 |
| | 0.3 |
| | 0.5 |
|
| Total assets: | | | | | | | | | | | | | | | | | | | | | | |
| Liberty Global Group | 410.6 |
| | 2,657.8 |
| | 3,068.4 |
| | 405.9 |
| | 1,792.5 |
| | 2,198.4 |
| 335.2 |
| | 1,928.1 |
| | 2,263.3 |
| | 405.5 |
| | 2,624.4 |
| | 3,029.9 |
|
| LiLAC Group | 6.2 |
| | 146.8 |
| | 153.0 |
| | 16.0 |
| | 291.7 |
| | 307.7 |
| 10.0 |
| | 44.5 |
| | 54.5 |
| | 7.2 |
| | 139.0 |
| | 146.2 |
|
| Total | $ | 416.8 |
|
| $ | 2,804.6 |
|
| $ | 3,221.4 |
|
| $ | 421.9 |
|
| $ | 2,084.2 |
|
| $ | 2,506.1 |
| $ | 345.2 |
|
| $ | 1,972.6 |
|
| $ | 2,317.8 |
|
| $ | 412.7 |
|
| $ | 2,763.4 |
|
| $ | 3,176.1 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | |
| Cross-currency and interest rate derivative contracts: | | | | | | | | | | | | |
| Liberty Global Group | | $ | 267.4 |
| | $ | 1,242.1 |
| | $ | 1,509.5 |
| | $ | 239.1 |
| | $ | 999.6 |
| | $ | 1,238.7 |
|
| LiLAC Group | | 27.0 |
| | 17.8 |
| | 44.8 |
| | 24.6 |
| | 28.9 |
| | 53.5 |
|
| Total cross-currency and interest rate derivative contracts (b) | | 294.4 |
| | 1,259.9 |
| | 1,554.3 |
| | 263.7 |
| | 1,028.5 |
| | 1,292.2 |
|
| Equity-related derivative instruments – Liberty Global Group (c) | | 10.7 |
| | — |
| | 10.7 |
| | 8.6 |
| | — |
| | 8.6 |
|
| Foreign currency forward and option contracts: | | | | | | | | | | | | |
| Liberty Global Group | | 15.0 |
| | 0.5 |
| | 15.5 |
| | 4.7 |
| | 0.1 |
| | 4.8 |
|
| LiLAC Group | | 6.5 |
| | 1.0 |
| | 7.5 |
| | 4.2 |
| | — |
| | 4.2 |
|
| Total foreign currency forward and option contracts | | 21.5 |
| | 1.5 |
| | 23.0 |
| | 8.9 |
| | 0.1 |
| | 9.0 |
|
| Other – Liberty Global Group | | — |
| | — |
| | — |
| | — |
| | 0.1 |
| | 0.1 |
|
| Total liabilities: | | | | | | | | | | | | |
| Liberty Global Group | | 293.1 |
| | 1,242.6 |
| | 1,535.7 |
| | 252.4 |
| | 999.8 |
| | 1,252.2 |
|
| LiLAC Group | | 33.5 |
| | 18.8 |
| | 52.3 |
| | 28.8 |
| | 28.9 |
| | 57.7 |
|
| Total | | $ | 326.6 |
|
| $ | 1,261.4 |
|
| $ | 1,588.0 |
|
| $ | 281.2 |
|
| $ | 1,028.7 |
|
| $ | 1,309.9 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2016 | | December 31, 2015 |
| | Current | | Long-term (a) | | Total | | Current | | Long-term (a) | | Total |
| | in millions |
| Liabilities: | | | | | | | | | | | |
| Cross-currency and interest rate derivative contracts: | | | | | | | | | | | |
| Liberty Global Group | $ | 432.8 |
| | $ | 1,391.4 |
| | $ | 1,824.2 |
| | $ | 304.9 |
| | $ | 1,194.7 |
| | $ | 1,499.6 |
|
| LiLAC Group | 24.2 |
| | 55.8 |
| | 80.0 |
| | — |
| | 13.8 |
| | 13.8 |
|
| Total cross-currency and interest rate derivative contracts (b) | 457.0 |
| | 1,447.2 |
| | 1,904.2 |
| | 304.9 |
| | 1,208.5 |
| | 1,513.4 |
|
| Equity-related derivative instruments – Liberty Global Group (c) | 13.1 |
| | — |
| | 13.1 |
| | 34.7 |
| | 39.7 |
| | 74.4 |
|
| Foreign currency forward and option contracts: | | | | | | | | | | | |
| Liberty Global Group | 3.5 |
| | 0.2 |
| | 3.7 |
| | 1.1 |
| | — |
| | 1.1 |
|
| LiLAC Group | 8.9 |
| | 0.1 |
| | 9.0 |
| | — |
| | — |
| | — |
|
| Total foreign currency forward and option contracts | 12.4 |
| | 0.3 |
| | 12.7 |
| | 1.1 |
| | — |
| | 1.1 |
|
| Other – Liberty Global Group | — |
| | 0.1 |
| | 0.1 |
| | 5.6 |
| | 0.1 |
| | 5.7 |
|
| Total liabilities: | | | | | | | | | | | |
| Liberty Global Group | 449.4 |
| | 1,391.7 |
| | 1,841.1 |
| | 346.3 |
| | 1,234.5 |
| | 1,580.8 |
|
| LiLAC Group | 33.1 |
| | 55.9 |
| | 89.0 |
| | — |
| | 13.8 |
| | 13.8 |
|
| Total | $ | 482.5 |
|
| $ | 1,447.6 |
|
| $ | 1,930.1 |
|
| $ | 346.3 |
|
| $ | 1,248.3 |
|
| $ | 1,594.6 |
|
_______________
| |
| (a) | Our current derivative liabilities, long-term derivative assets and long-term derivative liabilities are included in other accrued and current liabilities, other assets, net, and other long-term liabilities, respectively, in our condensed consolidated balance sheets. |
| |
| (b) | We consider credit risk relating to our and our counterparties’ nonperformance in ourthe fair value assessments. As of September 30, 2016 and December 31, 2015, (i) the fair valuesassessment of our cross-currency and interest rate derivative contracts that represented assets have been reduced by credit risk valuation adjustments aggregating $98.8 million (excluding $3.5 million related to Ziggo Group Holding, which is accounted for as held for sale) and $64.0 million, respectively, and (ii) the fair values of our cross-currency and interest rate derivative contracts that represented liabilities have been reduced by credit risk valuation adjustments aggregating $144.1 million (excluding $74.5 million related to Ziggo Group Holding, which is accounted for as held for sale) and $86.5 million, respectively. The adjustments to our derivative assets relate to the credit risk associated with counterparty nonperformance, and the adjustments to our derivative liabilities relate to credit risk associated with our own nonperformance.instruments. In all cases, the adjustments take into account offsetting liability or asset positions within a given contract. Our determination of credit risk valuation adjustments generally is based on our and our counterparties’ credit risks, as observed in the credit default swap market and market quotations for certaineach of our subsidiaries’ debt instruments, as applicable.primary borrowing groups (as defined and described in note 8). The changes in the credit risk valuation adjustments associated with our cross-currency and interest rate derivative contracts resulted in a net gain (loss) of $37.3 million and $80.4 million and ($29.9 million) during the three months ended September 30, 20162017 and 2015,2016, respectively, and a net gainsgain of $87.5$182.6 millionand $30.4$87.5 million during the nine months ended September 30, 20162017 and 2015,2016, respectively. These amounts are included in realized and unrealizedgains (losses) on derivative instruments, net, in our condensed consolidated statements of operations. For further information regarding our fair value measurements, see note 5.6. |
| |
| (c) | Our equity-related derivative instruments primarily include the fair value of (i) the share collar (the ITV Collar) with respect to ITV plc (ITV) shares held by our company, (ii) the share collar (the Sumitomo Collar) with respect to a portion of the shares of Sumitomo Corporation (Sumitomo) held by our company and (iii) the prepaid forward transaction (the Lionsgate Forward) with respect to2.5 million of the shares of Lions Gate Entertainment Corp (Lionsgate) held by our company and (iv) Virgin Media’s conversion hedges (the Virgin Media Capped Calls) with respect to Virgin Media’s 6.50% convertible senior notes.company. The fair values of the ITV Collar, the Sumitomo Collar and the Lionsgate Forward do not include credit risk valuation adjustments as we assume that any losses incurred by our company in the event of nonperformance by the respective counterparty would be, subject to relevant insolvency laws, fully offset against amounts we owe to such counterparty pursuant to the related secured borrowing arrangements. |
The details of our realized and unrealizedgains (losses) on derivative instruments, net, are as follows:
18 |
| | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions |
| Cross-currency and interest rate derivative contracts: | | | | | |
| |
| Liberty Global Group | $ | (289.2 | ) | | $ | (300.1 | ) | | $ | (1,099.9 | ) | | $ | (235.7 | ) |
| LiLAC Group | (70.5 | ) | | (52.4 | ) | | (107.8 | ) | | (233.6 | ) |
| Total cross-currency and interest rate derivative contracts | (359.7 | ) | | (352.5 | ) | | (1,207.7 | ) | | (469.3 | ) |
| Equity-related derivative instruments – Liberty Global Group: | | | | | |
| |
| ITV Collar | 44.2 |
| | (46.8 | ) | | 154.4 |
| | 466.9 |
|
| Sumitomo Collar | (29.5 | ) | | (38.8 | ) | | (50.8 | ) | | 96.2 |
|
| Lionsgate Forward | (7.3 | ) | | (0.1 | ) | | (9.3 | ) | | 21.9 |
|
| Other | 1.2 |
| | 0.7 |
| | (4.2 | ) | | 1.6 |
|
| Total equity-related derivative instruments | 8.6 |
| | (85.0 | ) | | 90.1 |
|
| 586.6 |
|
| Foreign currency forward contracts: | | | | | |
| |
| Liberty Global Group | (6.4 | ) | | 2.6 |
| | (25.0 | ) | | 0.7 |
|
| LiLAC Group | (8.1 | ) | | (1.4 | ) | | (7.3 | ) | | (10.3 | ) |
| Total foreign currency forward contracts | (14.5 | ) | | 1.2 |
| | (32.3 | ) | | (9.6 | ) |
| Other – Liberty Global Group | (0.3 | ) | | (0.1 | ) | | 0.4 |
| | (0.8 | ) |
| | | | | | | | |
| Total Liberty Global Group | (287.3 | ) | | (382.6 | ) | | (1,034.4 | ) | | 350.8 |
|
| Total LiLAC Group | (78.6 | ) | | (53.8 | ) | | (115.1 | ) | | (243.9 | ) |
| Total | $ | (365.9 | ) |
| $ | (436.4 | ) |
| $ | (1,149.5 | ) |
| $ | 106.9 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
adjustments as we assume that any losses incurred by our company in the event of nonperformance by the respective counterparty would be, subject to relevant insolvency laws, fully offset against amounts we owe to such counterparty pursuant to the related secured borrowing arrangements.
The details of our realized and unrealized gains (losses) on derivative instruments, net, are as follows:
|
| | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 |
| | in millions |
| Cross-currency and interest rate derivative contracts: | | | | | |
| |
| Liberty Global Group | $ | (300.1 | ) | | $ | 392.4 |
| | $ | (235.7 | ) | | $ | 507.0 |
|
| LiLAC Group | (52.4 | ) | | 139.9 |
| | (233.6 | ) | | 217.5 |
|
| Total cross-currency and interest rate derivative contracts | (352.5 | ) | | 532.3 |
| | (469.3 | ) | | 724.5 |
|
| Equity-related derivative instruments – Liberty Global Group: | | | | | |
| |
| ITV Collar | (46.8 | ) | | 103.1 |
| | 466.9 |
| | (55.8 | ) |
| Sumitomo Collar | (38.8 | ) | | 92.0 |
| | 96.2 |
| | 20.1 |
|
| Lionsgate Forward | (0.1 | ) | | — |
| | 21.9 |
| | — |
|
| Other | 0.7 |
| | (1.3 | ) | | 1.6 |
| | (0.2 | ) |
| Total equity-related derivative instruments | (85.0 | ) | | 193.8 |
| | 586.6 |
|
| (35.9 | ) |
| Foreign currency forward contracts: | | | | | |
| |
| Liberty Global Group | 2.6 |
| | 10.8 |
| | 0.7 |
| | (16.6 | ) |
| LiLAC Group | (1.4 | ) | | 5.3 |
| | (10.3 | ) | | 8.3 |
|
| Total foreign currency forward contracts | 1.2 |
| | 16.1 |
| | (9.6 | ) | | (8.3 | ) |
| Other – Liberty Global Group | (0.1 | ) | | (0.2 | ) | | (0.8 | ) | | 0.5 |
|
| | | | | | | | |
| Total Liberty Global Group | (382.6 | ) | | 596.8 |
| | 350.8 |
| | 455.0 |
|
| Total LiLAC Group | (53.8 | ) | | 145.2 |
| | (243.9 | ) | | 225.8 |
|
| Total | $ | (436.4 | ) |
| $ | 742.0 |
|
| $ | 106.9 |
|
| $ | 680.8 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
The net cash received or paid related to our derivative instruments is classified as an operating, investing or financing activity in our condensed consolidated statements of cash flows based on the objective of the derivative instrument and the classification of the applicable underlying cash flows. For foreign currency forward contracts that are used to hedge capital expenditures, the net cash received or paid is classified as an adjustment to capital expenditures in our condensed consolidated statements of cash flows. For derivative contracts that are terminated prior to maturity, the cash paid or received upon termination that relates to future periods is classified as a financing activity. The classification of these net cash outflowsinflows (outflows) is as follows:
|
| | | | | | | |
| | Nine months ended |
| | September 30, |
| | 2017 | | 2016 |
| | in millions |
| Operating activities: | | | |
| Liberty Global Group | $ | 143.6 |
| | $ | 24.2 |
|
| LiLAC Group | (23.7 | ) | | 0.5 |
|
| Total operating activities | 119.9 |
| | 24.7 |
|
| Investing activities: | | | |
| Liberty Global Group | (0.5 | ) | | — |
|
| LiLAC Group | (2.6 | ) | | (1.7 | ) |
| Total investing activities | (3.1 | ) | | (1.7 | ) |
| Financing activities – Liberty Global Group | (104.3 | ) | | (39.5 | ) |
| Total cash inflows (outflows): | | | |
| Liberty Global Group | 38.8 |
| | (15.3 | ) |
| LiLAC Group | (26.3 | ) | | (1.2 | ) |
| Total | $ | 12.5 |
| | $ | (16.5 | ) |
|
| | | | | | | |
| | Nine months ended |
| | September 30, |
| | 2016 | | 2015 |
| | in millions |
| Operating activities: | | | |
| Liberty Global Group | $ | 24.2 |
| | $ | (159.3 | ) |
| LiLAC Group | 0.5 |
| | (31.1 | ) |
| Total operating activities | 24.7 |
| | (190.4 | ) |
| Investing activities: | | | |
| Liberty Global Group | — |
| | 14.5 |
|
| LiLAC Group | (1.7 | ) | | 0.6 |
|
| Total investing activities | (1.7 | ) | | 15.1 |
|
| Financing activities – Liberty Global Group | (39.5 | ) | | (298.8 | ) |
| Total cash outflows: | | | |
| Liberty Global Group | (15.3 | ) | | (443.6 | ) |
| LiLAC Group | (1.2 | ) | | (30.5 | ) |
| Total | $ | (16.5 | ) | | $ | (474.1 | ) |
Counterparty Credit Risk
We are exposed to the risk that the counterparties to the derivative instruments of our subsidiary borrowing groups will default on their obligations to us. We manage these credit risks through the evaluation and monitoring of the creditworthiness of, and concentration of risk with, the respective counterparties. In this regard, credit risk associated with our derivative instruments is spread across a relatively broad counterparty base of banks and financial institutions. With the exception of a limited number of instances where we have required a counterparty to post collateral, collateralneither party has not been posted by either partycollateral under the derivative instruments of our subsidiary borrowing groups. At September 30, 2016,2017, our exposure to counterparty credit risk included derivative assets with an aggregate fair value of $2,145.0$413.6 million.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
Details of our Derivative Instruments
InCross-currency Derivative Contracts
As noted above, we are exposed to foreign currency exchange rate risk in situations where our debt is denominated in a currency other than the following tables, we present the detailsfunctional currency of the various categoriesoperations whose cash flows support our ability to repay or refinance such debt. Although we generally seek to match the denomination of our and our subsidiaries’ derivative instruments. For each subsidiaryborrowings with multiplethe functional currency of the operations that are supporting the respective borrowings, market conditions or other factors may cause us to enter into borrowing arrangements that are not denominated in the functional currency of the underlying operations (unmatched debt). Our policy is generally to provide for an economic hedge against foreign currency exchange rate movements by using derivative instruments that mature withinto synthetically convert unmatched debt into the same calendar month,applicable underlying currency. At September 30, 2017, 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 are shown inand the aggregate, and interest rates are presented on arelated weighted average basis. In addition, for derivative instruments that were in effect asremaining contractual lives of September 30, 2016, we present a single date that represents the applicable final maturity date. For derivative instruments that become effective subsequent to September 30, 2016, we present a range of dates that represents the period covered by the applicable derivative instruments.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
Cross-currency and Interest Rate Derivative Contracts
Cross-currency Swaps:
The terms of our outstanding cross-currency swap contracts at September 30, 2016 are as follows:2017:
|
| | | | | | | | | | | | |
Subsidiary / Final maturity date | | Notional amount due from counterparty | | Notional amount due to counterparty | | Interest rate due from counterparty | | Interest rate
due to (from)
counterparty |
| | | in millions | | | | |
| | | | | | | | | | |
Virgin Media Investment Holdings Limited (VMIH), a subsidiary of Virgin Media: | | | | | | | | | |
| January 2023 | | $ | 400.0 |
| | € | 339.6 |
| | 5.75% | | 4.33% |
| June 2023 | | $ | 1,855.0 |
| | £ | 1,198.3 |
| | 6 mo. LIBOR + 2.75% | | 6 mo. GBP LIBOR + 3.18% |
| February 2022 | | $ | 1,275.0 |
| | £ | 795.2 |
| | 4.99% | | 5.44% |
| January 2023 | | $ | 1,000.0 |
| | £ | 648.6 |
| | 5.25% | | 5.32% |
| August 2024 | | $ | 750.0 |
| | £ | 527.0 |
| | 5.50% | | 5.46% |
| February 2022 (a) | | $ | 708.5 |
| | £ | 442.8 |
| | 0.29% | | 0.33% |
| April 2023 (a) | | $ | 480.0 |
| | £ | 299.1 |
| | 1.55% | | 1.78% |
| February 2022 - April 2023 | | $ | 475.0 |
| | £ | 295.6 |
| | 4.88% | | 5.32% |
| October 2022 | | $ | 450.0 |
| | £ | 272.0 |
| | 6.00% | | 6.43% |
| January 2021 | | $ | 447.9 |
| | £ | 276.7 |
| | 5.25% | | 6 mo. GBP LIBOR + 2.06% |
| January 2022 | | $ | 425.0 |
| | £ | 255.8 |
| | 5.50% | | 4.86% |
| January 2022 - January 2025 | | $ | 425.0 |
| | £ | 255.8 |
| | 3 mo. LIBOR | | 4.86% |
| April 2019 | | $ | 191.5 |
| | £ | 122.3 |
| | 5.38% | | 5.49% |
| April 2019 - February 2022 | | $ | 191.5 |
| | £ | 122.3 |
| | 5.38% | | 5.54% |
| February 2022 | | $ | 125.0 |
| | £ | 78.4 |
| | 5.25% | | 5.91% |
| October 2019 | | $ | 100.0 |
| | £ | 65.4 |
| | 7.19% | | 7.23% |
| February 2022 (a) | | $ | 100.0 |
| | £ | 62.2 |
| | 0.50% | | 0.56% |
| November 2016 (a) | | $ | 55.0 |
| | £ | 27.7 |
| | 6.50% | | 7.03% |
| October 2019 - October 2022 | | $ | 50.0 |
| | £ | 30.7 |
| | 6.00% | | 5.75% |
| October 2019 - April 2023 | | $ | 50.0 |
| | £ | 30.3 |
| | 6.38% | | 6.84% |
| October 2019 (a) | | £ | 30.3 |
| | $ | 50.0 |
| | 2.14% | | 2.00% |
UPC Broadband Holding B.V. (UPC Broadband Holding), a subsidiary of UPC Holding: | | | | | | | | | |
| January 2023 | | $ | 1,140.0 |
| | € | 1,043.7 |
| | 5.38% | | 3.71% |
| August 2024 | | $ | 338.5 |
| | € | 259.4 |
| | 6 mo. LIBOR + 3.00% | | 6 mo. EURIBOR + 3.32% |
| August 2024 | | $ | 325.0 |
| | € | 238.7 |
| | 6 mo. LIBOR + 3.00% | | 3.87% |
| January 2017 - August 2024 | | $ | 262.1 |
| | € | 194.1 |
| | 6 mo. LIBOR + 3.00% | | 6 mo. EURIBOR + 3.13% |
| August 2024 | | $ | 250.0 |
| | € | 181.4 |
| | 7.25% | | 7.15% |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
|
| | | | | | | | | | | | |
Subsidiary / Final maturity date | | Notional amount due from counterparty | | Notional amount due to counterparty | | Interest rate due from counterparty | | Interest rate
due to (from)
counterparty |
| | | in millions | | | | |
| | | | | | | | | | |
| January 2022 | | $ | 221.0 |
| | € | 165.3 |
| | 6 mo. LIBOR + 4.07% | | 6 mo. EURIBOR + 4.27% |
| January 2022 | | $ | 177.5 |
| | € | 135.3 |
| | 6 mo. LIBOR + 4.96% | | 6.89% |
| July 2021 | | $ | 128.0 |
| | € | 97.2 |
| | 6 mo. LIBOR + 2.50% | | 6 mo. EURIBOR + 2.90% |
| December 2016 | | $ | 340.0 |
| | CHF | 370.9 |
| | 6 mo. LIBOR + 3.50% | | 6 mo. CHF LIBOR + 4.01% |
| August 2024 | | $ | 225.0 |
| | CHF | 206.3 |
| | 6 mo. LIBOR + 3.00% | | 3.02% |
| January 2017 - July 2023 | | $ | 200.0 |
| | CHF | 185.5 |
| | 6 mo. LIBOR + 2.50% | | 6 mo. CHF LIBOR + 2.48% |
| August 2024 | | $ | 200.0 |
| | CHF | 186.0 |
| | 6 mo. LIBOR + 3.00% | | 6 mo. CHF LIBOR + 3.05% |
| November 2016 | | $ | 175.0 |
| | CHF | 158.7 |
| | 7.25% | | 6 mo. CHF LIBOR + 5.01% |
| November 2016 - August 2024 | | $ | 175.0 |
| | CHF | 158.7 |
| | 7.25% | | 6 mo. CHF LIBOR + 5.01% |
| January 2017 - July 2021 | | $ | 100.0 |
| | CHF | 92.8 |
| | 6 mo. LIBOR + 2.50% | | 6 mo. CHF LIBOR + 2.49% |
| July 2021 - August 2024 | | $ | 100.0 |
| | CHF | 92.8 |
| | 6 mo. LIBOR + 3.00% | | 6 mo. CHF LIBOR + 2.48% |
| January 2022 | | $ | 201.5 |
| | RON | 489.3 |
| | 6 mo. LIBOR + 3.50% | | 10.94% |
| August 2024 (a) | | € | 379.2 |
| | $ | 425.0 |
| | 2.45% | | 2.76% |
| September 2022 | | € | 600.0 |
| | CHF | 728.2 |
| | 6 mo. EURIBOR + 2.59% | | 6 mo. CHF LIBOR + 2.71% |
| July 2023 | | € | 450.0 |
| | CHF | 488.6 |
| | —% | | (0.45)% |
| January 2017 - August 2024 | | € | 383.8 |
| | CHF | 477.0 |
| | 6 mo. EURIBOR + 2.00% | | 6 mo. CHF LIBOR + 2.27% |
| October 2016 | | € | 285.1 |
| | CHF | 346.7 |
| | 10.51% | | (0.73)% |
| October 2016 - January 2020 | | € | 285.1 |
| | CHF | 346.7 |
| | 10.51% | | 9.42% |
| January 2021 | | € | 234.2 |
| | CHF | 285.0 |
| | 6 mo. EURIBOR + 2.50% | | 6 mo. CHF LIBOR + 2.67% |
| January 2017 | | € | 199.4 |
| | CHF | 325.0 |
| | 6 mo. EURIBOR + 3.75% | | 6 mo. CHF LIBOR + 3.95% |
| January 2020 | | € | 175.0 |
| | CHF | 258.6 |
| | 7.63% | | 6.76% |
| January 2020 | | € | 161.0 |
| | CHF | 264.0 |
| | 6 mo. EURIBOR + 3.75% | | 6 mo. CHF LIBOR + 2.88% |
| July 2023 | | € | 85.3 |
| | CHF | 95.0 |
| | 6 mo. EURIBOR + 2.21% | | 6 mo. CHF LIBOR + 2.65% |
| January 2017 | | € | 75.0 |
| | CHF | 110.9 |
| | 7.63% | | 6.98% |
| August 2024 | | € | 70.1 |
| | CHF | 84.8 |
| | 6 mo. EURIBOR + 2.50% | | 6 mo. CHF LIBOR + 3.07% |
| January 2020 | | € | 318.9 |
| | CZK | 8,818.7 |
| | 5.58% | | 5.44% |
| January 2022 | | € | 99.6 |
| | CZK | 2,703.1 |
| | 4.51% | | 4.82% |
| December 2021 | | € | 488.0 |
| | HUF | 138,437.5 |
| | 5.50% | | 7.39% |
| January 2022 | | € | 707.0 |
| | PLN | 2,999.5 |
| | 5.10% | | 8.15% |
| January 2020 | | € | 144.6 |
| | PLN | 605.0 |
| | 5.50% | | 7.98% |
Unitymedia Hessen GmbH & Co. KG (Unitymedia Hessen), a subsidiary of Unitymedia: | |
|
| |
|
|
| |
| |
|
| January 2023 | | $ | 2,450.0 |
| | € | 1,799.0 |
| | 5.62% | | 4.76% |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
|
| | | | | | | | | | | | |
Subsidiary / Final maturity date | | Notional amount due from counterparty | | Notional amount due to counterparty | | Interest rate due from counterparty | | Interest rate
due to (from)
counterparty |
| | | in millions | | | | |
| | | | | | | | | | |
Telenet International Finance S.a.r.l (Telenet International), a subsidiary of Telenet: | | | | | | | | | |
| June 2024 | | $ | 850.0 |
| | € | 743.3 |
| | 3 mo. LIBOR + 3.50% | | 3.47% |
Sable International Finance Limited (Sable), a subsidiary of CWC: | | | | | | | | | |
| December 2022 | | $ | 108.3 |
| | JMD | 13,817.5 |
| | —% | | 8.75% |
| March 2019 | | £ | 146.7 |
| | $ | 194.3 |
| | 8.63% | | 9.79% |
| VTR: | | | | | | | | | |
| January 2022 | | $ | 1,400.0 |
| | CLP | 951,390.0 |
| | 6.88% | | 6.36% |
|
| | | | | | | | | | | | |
| Borrowing group | | | Notional amount due from counterparty | | Notional amount due to counterparty | | | Weighted average remaining life |
| | | | in millions | | | in years |
| | | | | | | | | | | |
| Virgin Media | | $ | 400.0 |
| | € | 339.6 |
| | | 5.3 |
| | | | $ | 8,933.0 |
| | £ | 5,844.3 |
| | (a) (b) | 6.0 |
| | | | £ | 30.3 |
| | $ | 50.0 |
| | (a) | 2.0 |
| | | | | | | | | | | |
| UPC Holding | | $ | 2,390.0 |
| | € | 1,973.7 |
| | | 6.1 |
| | | | € | 379.2 |
| | $ | 425.0 |
| | (a) | 6.9 |
| | | | $ | 1,000.0 |
| | CHF | 922.0 |
| | (b) | 6.4 |
| | | | € | 2,415.2 |
| | CHF | 2,781.0 |
| | | 5.4 |
| | | | € | 418.5 |
| | CZK | 11,521.8 |
| | | 2.8 |
| | | | € | 488.0 |
| | HUF | 138,437.5 |
| | | 4.3 |
| | | | € | 851.6 |
| | PLN | 3,604.5 |
| | | 4.0 |
| | | | € | 225.9 |
| | RON | 650.0 |
| | | 4.4 |
| | | | | | | | | | | |
| Unitymedia | | $ | 3,305.0 |
| | € | 2,562.1 |
| | | 6.0 |
| | | | € | 89.4 |
| | $ | 100.0 |
| | | 5.3 |
| | | | | | | | | | | |
| Telenet | | $ | 2,300.0 |
| | € | 2,067.6 |
| | | 7.4 |
| | | | € | 520.1 |
| | $ | 595.0 |
| | (a) | 6.8 |
| | | | | | | | | | | |
| C&W | | $ | 108.3 |
| | JMD | 13,817.5 |
| | | 5.3 |
| | | | $ | 35.4 |
| | COP | 106,000.0 |
| | | 4.8 |
| | | | £ | 146.7 |
| | $ | 194.3 |
| | | 1.5 |
| | | | | | | | | | | |
| VTR Finance | | $ | 1,400.0 |
| | CLP | 951,390.0 |
| | | 4.6 |
_______________
| |
| (a) | Unlike the other cross-currency swaps presented in this table, the identified cross-currency swapsIncludes 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 interestcoupon-related payments and receipts. At September 30, 2017, the total U.S. dollar equivalents of the notional amounts of these derivative instruments for the Virgin Media, UPC Holding and Telenet borrowing groupswere $515.6 million, $447.6 million and $613.8 million, respectively. |
Interest Rate Swaps:
The terms of our outstanding interest rate swap contracts at September 30, 2016 are as follows:
|
| | | | | | | | |
| Subsidiary / Final maturity date | | Notional amount | | Interest rate due from counterparty | | Interest rate due to (from) counterparty |
| | | in millions | | | | |
| VMIH: | | | | | | | |
| October 2016 - October 2017 | | $ | 1,885.0 |
| | 6 mo. LIBOR + 2.47% | | 1 mo. LIBOR + 2.75% |
| October 2018 | | £ | 1,198.3 |
| | 6 mo. GBP LIBOR | | 1.52% |
| October 2018 - June 2023 | | £ | 1,198.3 |
| | 6 mo. GBP LIBOR | | 2.49% |
| June 2023 | | £ | 882.7 |
| | 6 mo. GBP LIBOR | | 1.68% |
| January 2021 | | £ | 628.4 |
| | 5.50% | | 6 mo. GBP LIBOR + 1.84% |
| January 2021 | | £ | 555.1 |
| | 6 mo. GBP LIBOR | | 1.42% |
| June 2023 | | £ | 375.0 |
| | 6 mo. GBP LIBOR + 3.13% | | 4.35% |
| January 2021 | | £ | 350.0 |
| | 6 mo. GBP LIBOR + 1.84% | | 3.87% |
| June 2022 | | £ | 100.0 |
| | 6 mo. GBP LIBOR | | 1.54% |
| February 2022 | | £ | 140.6 |
| | 5.83% | | 6 mo. GBP LIBOR + 4.72% |
| April 2023 | | £ | 108.9 |
| | 6.85% | | 6 mo. GBP LIBOR + 5.62% |
| October 2022 | | £ | 51.5 |
| | 6.42% | | 6 mo. GBP LIBOR + 5.23% |
| UPC Broadband Holding: | | | | | | | |
| January 2017 - January 2018 | | $ | 2,150.0 |
| | 1 mo. LIBOR + 3.00% | | 6 mo. LIBOR + 2.56% |
| January 2022 | | $ | 600.0 |
| | 6.88% | | 6 mo. LIBOR + 4.90% |
| August 2024 | | $ | 425.0 |
| | 6 mo. LIBOR + 5.76% | | 7.25% |
| September 2022 | | € | 600.0 |
| | 6.38% | | 6 mo. EURIBOR + 4.14% |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
| |
| (b) | Includes certain derivative instruments that are “forward-starting,” such that the initial exchange occurs at a date subsequent to September 30, 2017. These instruments are typically entered into in order to extend existing hedges without the need to amend existing contracts. |
Interest Rate Derivative Contracts
As noted above, we enter into interest rate swaps to protect against increases in the interest rates on our variable-rate debt. Pursuant to these derivative instruments, we typically pay fixed interest rates and receive variable interest rates on specified notional amounts. 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 September 30, 2017:
|
| | | | | | |
| Borrowing group | | Notional amount due from counterparty | | Weighted average remaining life |
| | | in millions | | in years |
| | | | | |
| Virgin Media (a) | $ | 8,745.5 |
| | 4.8 |
| | | | | |
| UPC Holding (a) | $ | 4,661.9 |
| | 6.8 |
| | | | | |
| Unitymedia | $ | 316.5 |
| | 5.3 |
| | | | | |
| Telenet (a) | $ | 5,410.5 |
| | 6.4 |
| | | | | |
| C&W (a) | $ | 2,925.0 |
| | 6.6 |
| | | | | |
| Liberty Puerto Rico | $ | 675.0 |
| | 3.5 |
|
| | | | | | | | |
| Subsidiary / Final maturity date | | Notional amount | | Interest rate due from counterparty | | Interest rate due to (from) counterparty |
| | | in millions | | | | |
| January 2021 | | € | 235.1 |
| | 6 mo. EURIBOR | | 2.52% |
| January 2023 | | € | 210.0 |
| | 6 mo. EURIBOR | | 2.88% |
| January 2022 | | € | 165.3 |
| | 6 mo. EURIBOR | | 2.85% |
| July 2020 | | € | 150.0 |
| | 6.38% | | 6 mo. EURIBOR + 3.17% |
| August 2024 | | CHF | 870.9 |
| | 6 mo. CHF LIBOR | | 0.48% |
| September 2022 | | CHF | 729.8 |
| | 6 mo. CHF LIBOR | | 1.75% |
| July 2021 - August 2024 | | CHF | 400.0 |
| | 6 mo. CHF LIBOR | | 0.02% |
| July 2021 | | CHF | 400.0 |
| | 6 mo. CHF LIBOR | | 0.40% |
| November 2016 | | CHF | 226.8 |
| | 6 mo. CHF LIBOR | | (1.27)% |
| November 2016 - August 2024 | | CHF | 226.8 |
| | 6 mo. CHF LIBOR + 5.01% | | 5.66% |
| Unitymedia Hessen: | | | | | | | |
| January 2023 | | € | 268.2 |
| | 5.01% | | 6 mo. EURIBOR + 4.82% |
| Telenet International: | | | | | | | |
| June 2023 | | € | 1,300.0 |
| | 3 mo. EURIBOR | | 0.33% |
| July 2017 | | € | 800.0 |
| | 3 mo. EURIBOR | | (0.17)% |
| July 2017 - June 2022 | | € | 420.0 |
| | 3 mo. EURIBOR | | 2.08% |
| July 2017 - June 2023 | | € | 382.0 |
| | 3 mo. EURIBOR | | 1.89% |
| June 2022 | | € | 55.0 |
| | 3 mo. EURIBOR | | 1.81% |
| Sable: | | | | | | | |
| December 2022 | | $ | 800.0 |
| | 3 mo. LIBOR | | 1.83% |
| Liberty Puerto Rico: | | | | | | | |
| October 2016 - January 2022 | | $ | 506.3 |
| | 3 mo. LIBOR | | 2.49% |
| October 2016 - January 2019 | | $ | 168.8 |
| | 3 mo. LIBOR | | 1.96% |
| |
| (a) | Includes forward-starting derivative instruments. |
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 September 30, 2017:
24 |
| | | | | | |
| Borrowing group | | Notional amount due from counterparty | | Weighted average remaining life |
| | | in millions | | in years |
| | | | | |
| Virgin Media (a) | $ | 7,958.6 |
| | 0.6 |
| | | | | |
| UPC Holding (a) | $ | 4,300.0 |
| | 0.8 |
| | | | | |
| Unitymedia | $ | 855.0 |
| | 1.0 |
| | | | | |
| Telenet (a) | $ | 4,100.0 |
| | 0.8 |
| | | | | |
| C&W (a) | $ | 2,925.0 |
| | 0.8 |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
Interest Rate Caps
Our purchased and sold interest rate cap contracts with respect to EURIBOR and LIBOR at September 30, 2016 are detailed below:
|
| | | | | | |
| Subsidiary / Final maturity date | | Notional amount | | Cap rate |
| | | in millions | | |
| Interest rate caps purchased: | | | | |
Liberty Global Europe Financing B.V. (LGE Financing), the immediate parent of UPC Holding (a): | | | |
| January 2020 | € | 735.0 |
| | 7.00% |
| Telenet International (a): | | | |
| June 2017 | € | 50.0 |
| | 4.50% |
| Telenet N.V., a subsidiary of Telenet (a): | | | |
| December 2017 | € | 0.3 |
| | 6.50% |
| December 2017 | € | 0.3 |
| | 5.50% |
| Liberty Puerto Rico (b): | | | |
| October 2016 - January 2022 | $ | 258.8 |
| | 3.50% |
| January 2019 - July 2023 | $ | 177.5 |
| | 3.50% |
| | | | | |
| Interest rate cap sold (c): | | | | |
| UPC Broadband Holding: | | | |
| January 2020 | € | 735.0 |
| | 7.00% |
_______________
| |
| (a) | These purchased interest rate caps entitle us to receive payments from the counterparty when the relevant EURIBOR exceeds the EURIBOR cap rate during the specified observation periods.
Includes forward-starting derivative instruments. |
Interest Rate Caps and Collars
We enter into interest rate cap and collar agreements that lock in a maximum interest rate if variable rates rise, but also allow our company to benefit, to a limited extent in the case of collars, from declines in market rates. At September 30, 2017, the total U.S. dollar equivalents of the notional amounts of our interest rate caps and collars were $603.7 million and $669.8 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:
|
| | | | |
(b) | These purchased interest rate caps entitle us | Increase (decrease) to receive payments from the counterparty when the relevant LIBOR exceeds the LIBOR cap rate during the specified observation periods. |
| borrowing costs at September 30, 2017 (a) |
(c) | Our sold interest rate cap requires that we make payments to the counterparty when the relevant EURIBOR exceeds the EURIBOR cap rate during the specified observation periods.
| | |
| | | |
| Liberty Global Group borrowing groups | 0.03 | % |
| Virgin Media | 0.09 | % |
| Telenet | 0.04 | % |
| Unitymedia | (0.53 | )% |
| UPC Holding | 0.69 | % |
| LiLAC Group borrowing groups | 0.39 | % |
| C&W | 0.62 | % |
| VTR Finance | (0.52 | )% |
| Liberty Puerto Rico | 0.75 | % |
Interest Rate Collars_______________
Our interest rate collar contracts establish floor and cap rates with respect to EURIBOR on the indicated notional amounts at September 30, 2016, as detailed below:
|
| | | | | | | | |
| Subsidiary / Final maturity date | | Notional amount | | EURIBOR floor rate (a) | | EURIBOR cap rate (b) |
| | | in millions | | | | |
| UPC Broadband Holding: | | | | | | |
| January 2020 | € | 1,135.0 |
| | 1.00% | | 3.54% |
_______________
| |
| (a) | We make payments toRepresents the counterparty when the relevant EURIBOR is less than the EURIBOR floor rate during the specified observation periods.
effect of derivative instruments in effect at September 30, 2017 and does not include forward-starting derivative instruments. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
| |
(b) | We receive payments from the counterparty when the relevant EURIBOR is greater than the EURIBOR cap rate during the specified observation periods.
|
Foreign Currency Forwards and Options
The following table summarizesCertain of our outstandingsubsidiaries enter into foreign currency forward and option contracts at with respect to non-functional currency exposure. As of September 30, 2016:
|
| | | | | | | | | | |
| Subsidiary | | Currency purchased forward | | Currency sold forward | | Maturity dates |
| | | in millions | | |
| | | | | | | | | |
| LGE Financing | $ | 206.1 |
| | € | 179.1 |
| | October 2016 - October 2018 |
| LGE Financing | $ | 127.9 |
| | £ | 89.1 |
| | October 2016 - December 2018 |
| LGE Financing | € | 155.3 |
| | £ | 124.2 |
| | October 2016 - December 2018 |
| LGE Financing | £ | 2.7 |
| | € | 3.2 |
| | April 2017 - December 2017 |
| UPC Broadband Holding | $ | 3.2 |
| | CZK | 75.0 |
| | October 2016 - December 2017 |
| UPC Broadband Holding | € | 47.8 |
| | CHF | 52.4 |
| | October 2016 - June 2017 |
| UPC Broadband Holding | € | 25.1 |
| | CZK | 675.0 |
| | October 2016 - December 2017 |
| UPC Broadband Holding | € | 23.7 |
| | HUF | 7,500.0 |
| | October 2016 - December 2017 |
| UPC Broadband Holding | € | 45.0 |
| | PLN | 199.6 |
| | October 2016 - December 2017 |
| UPC Broadband Holding | € | 1.5 |
| | RON | 6.5 |
| | October 2016 |
| UPC Broadband Holding | £ | 1.8 |
| | € | 2.4 |
| | October 2016 - March 2017 |
| UPC Broadband Holding | CHF | 53.0 |
| | € | 48.8 |
| | October 2016 |
| UPC Broadband Holding | CZK | 410.0 |
| | € | 15.2 |
| | October 2016 |
| UPC Broadband Holding | HUF | 3,500.0 |
| | € | 11.3 |
| | October 2016 |
| UPC Broadband Holding | PLN | 81.0 |
| | € | 18.8 |
| | October 2016 |
| Telenet N.V. | $ | 47.1 |
| | € | 41.9 |
| | October 2016 - May 2017 |
| VTR | $ | 186.9 |
| | CLP | 131,042.1 |
| | October 2016 - December 2017 |
Foreign Currency Forward Options
The following tables sets forth2017, the outstandingtotal U.S. dollar equivalents of the notional amount of foreign currency forward and option contracts outstanding as of September 30, 2016:was $1,469.1 million.
|
| | | | | | | | | | | | |
| Subsidiary | | Notional (a) | | Exchange Currency | | Option Price per £1 | | Maturity dates |
| | | in millions | | | | | | | |
| | | | | | | | | | |
| Virgin Media | £ | 7.1 |
| | Indian rupee | | INR | 92.27 |
| | October 2016 - January 2017 |
| Virgin Media | £ | 2.2 |
| | Indian rupee | | INR | 89.06 |
| | October 2016 - February 2017 |
| Virgin Media | £ | 1.0 |
| | Indian rupee | | INR | 100.53 |
| | October 2016 - February 2017 |
| Virgin Media | £ | 6.3 |
| | Philippine peso | | PHP | 66.75 |
| | October 2016 - February 2017 |
| Virgin Media | £ | 4.4 |
| | Philippine peso | | PHP | 66.31 |
| | March 2017 |
| Virgin Media | £ | 2.9 |
| | Philippine peso | | PHP | 66.69 |
| | October 2016 - January 2017 |
| Virgin Media | £ | 1.5 |
| | Philippine peso | | PHP | 65.84 |
| | January 2017 - March 2017 |
| |
(a) | We account for all of these contracts using hedge accounting. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
Equity-related Derivatives
On May 22, 2016,2017, we settled the firstthird tranches of the Sumitomo Collar ($51.0 million asset on the settlement date) and related borrowings (the Sumitomo Collar Loan) became due and were settled using($169.9 million liability on the settlement date) with shares of Sumitomo that were borrowed pursuant to a securities lending arrangement (the Sumitomo Share Loan). The aggregate market value of the borrowed Sumitomo shares on the transaction date was $91.4$117.4 million. For additional information, see note 7.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
(56) Fair Value Measurements
We use the fair value method to account for (i) certain of our investments, (ii) our derivative instruments, (iii) certain instruments that we classify as debt and (iv) the Sumitomo Share Loan. The reported fair values of these investments and instruments as of September 30, 20162017 likely will not represent the value that will be paid or received upon the ultimate settlement or disposition of these assets and liabilities. In the case of the investments that we account for using the fair value method, the values we realize upon disposition will be dependent upon, among other factors, market conditions and the forecasted financial performance of the investees at the time of any such disposition. With respect to our derivative and certain debt instruments, we expect that the values realized generally will be based on market conditions at the time of settlement, which may occur at the maturity of the derivative instrument or at the time of the repayment or refinancing of the underlying debt instrument.
U.S. GAAP provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. We record transfers of assets or liabilities into or out of Levels 1, 2 or 3 at the beginning of the quarter during which the transfer occurred. During the nine months ended September 30, 2016, no such transfers were made.
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 ITV, Sumitomo and Lionsgate, 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.
During the second quarter of 2016, we entered into the Sumitomo Share Loan. As the primary input for this recurring fair value measurement is the quoted market price of the borrowed shares of Sumitomo, we believe this valuation falls under Level 1 of the fair value hierarchy.
The recurring fair value measurement of our equity-related derivative instruments are based on binomial option pricing models, which require the input of observable and unobservable variables such as exchange-traded equity prices, risk-free interest rates, dividend yields 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, we have determined that these valuations fall under Level 3 of the fair value hierarchy. At September 30, 2016, the
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
valuations of the ITV Collar, the Sumitomo Collar, the Virgin Media Capped Calls and the Lionsgate Forward were not significantly impacted by forecasted volatilities.
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 note 4. The recurring fair value measurements of these instruments are determined using discounted cash flow models. With the exception of the inputs for the U.S. dollar to Jamaican dollar cross-currency swaps (the Sable Currency Swap) held by Sable, 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 includes most 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 incorporate a credit risk valuation adjustment in our fair value measurements to estimate the impact of both our own nonperformance risk and the nonperformance risk of our counterparties. Our andEffective January 1, 2017, we incorporated a Monte Carlo based approach into our counterparties’ credit spreads representcalculation of the value assigned to the risk that we or our counterparties will default on our respective derivative obligations. Previously, we used a static calculation derived from our most significant Level 3 inputs, and these inputs are usedcurrent mark-to-market valuation to derivecalculate the impact of counterparty credit risk valuation adjustments with respect to these instruments. As we wouldrisk. The adoption of a Monte Carlo based approach did not expect changes in our or our counterparties’ credit spreads to have a significantmaterial impact on the valuations of these instruments, we have determined that these valuations (other than the Sable Currency Swap valuation) fall under Level 2 of theoverall fair value hierarchy. Due to the lack of Level 2 inputs for the Sable Currency Swap valuation, we believe this valuation falls under Level 3 of the fair value hierarchy.our derivative instruments. Our credit risk valuation adjustments with respect to our cross-currency and interest rate swaps are quantified and further explained in note 45.
Fair value measurements are also used in connection with nonrecurring valuations performed in connection with acquisition accounting and impairment assessments and acquisition accounting. Theseassessments. The nonrecurring valuations associated with acquisition accounting primarily include the valuation of reporting units, customer relationship and other intangible assets and property and equipment andequipment. Unless a reporting unit has a readily determinable fair value, the implied value of goodwill. The valuation of private 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 isand cable television franchise rights are primarily based on an excess earnings methodology, which is a form of a discounted cash flow analysis. The excess earnings methodology for customer relationship intangibles 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. The excess earnings methodology for cable television franchise rights requires us to measure the cash flows associated with our right to solicit and service potential customers, and the right to deploy and market new services in the service areas covered by currently held franchise agreements, considering expectations on future customer additions and other factors similar to those used in valuing customer relationships. 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. The implied value of goodwill is determined by allocating the fair value of a reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination,nonrecurring valuations associated with the residual amount allocated to goodwill. All of our nonrecurring valuationsacquisition accounting use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. During the nine months ended September 30, 2016,2017, we performed nonrecurring valuations for the purpose of determining (i)finalized the acquisition accounting forassociated with the CWC Acquisition and BASE Acquisition and (ii) the held-for-sale accounting for the Dutch JV Entities.C&W Acquisition. The weighted average discount rates used to valuein the final valuation of the customer relationships acquired as a result of the CWCC&W Acquisition ranged from 8.8%9.0% to 12.8%,12.0%.
In September 2017, Hurricanes Irma and Maria impacted a number of our markets in the weighted average costCaribbean, resulting in varying degrees of capital useddamage to value the Dutch JV Entities was 7.5%. Nonehomes, businesses and infrastructure in these markets. The most extensive damage occurred in Puerto Rico and certain markets within our C&W reportable segment. The effects of the hurricanes were deemed to constitute triggering events with respect to the need to assess certain assets for impairment. Nonrecurring valuations were performed in connection with these impairment assessments, most notably to measure the fair value of Liberty Puerto Rico and certain reporting units within C&W for purposes of assessing goodwill impairments, and to measure the fair value of Liberty Puerto Rico’s cable television franchise rights. The nonrecurring valuations for impairment assessments used significant unobservable inputs and therefore fall under Level 3 of the BASE Acquisition hadfair value hierarchy. We used discount rates of 8% and 10% in the valuation of Liberty Puerto Rico and certain reporting units within C&W, respectively, while a significant impact on our consolidated balance sheet. For additional information, see note 3.
discount rate of 9% was used in the valuation of Liberty Puerto Rico’s cable television franchise rights. The valuations of Liberty Puerto Rico and certain reporting units within C&W used projected cash flows that
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
reflected the significant risks and uncertainties associated with our recovery from Hurricanes Irma and Maria, including variables such as (i) the length of time it will take to restore the power and transmission systems, particularly in Puerto Rico, (ii) the number of people that will leave these islands for an extended period or permanently and the associated impact on customer churn and (iii) the amount of potential insurance recoveries. For additional information regarding the impairment charges related to the hurricanes, see note 7.
For additional information concerning our fair value measurements, see note 8 to the consolidated financial statements included in our 10-K.
A summary of our assets and liabilities that are measured at fair value on a recurring basis is as follows:
| | | | | | Fair value measurements at September 30, 2016 using: | | | Fair value measurements at September 30, 2017 using: |
| Description | September 30,
2016 | | Quoted prices in active markets for identical assets (Level 1) | | Significant other observable inputs (Level 2) | | Significant unobservable inputs (Level 3) | September 30,
2017 | | Quoted prices in active markets for identical assets (Level 1) | | Significant other observable inputs (Level 2) | | Significant unobservable inputs (Level 3) |
| | in millions | in millions |
| Assets: | | | | | | | | | | | | | | |
| Derivative instruments: | | | | | | | | | | | | | | |
| Cross-currency and interest rate derivative contracts | $ | 2,315.7 |
| | $ | — |
| | $ | 2,315.7 |
| | $ | — |
| $ | 1,730.6 |
| | $ | — |
| | $ | 1,730.6 |
| | $ | — |
|
| Equity-related derivative instruments | 875.6 |
| | — |
| | — |
| | 875.6 |
| 567.2 |
| | — |
| | — |
| | 567.2 |
|
| Foreign currency forward and option contracts | 29.5 |
| | — |
| | 29.5 |
| | — |
| 19.3 |
| | — |
| | 19.3 |
| | — |
|
| Other | 0.6 |
| | — |
| | 0.6 |
| | — |
| 0.7 |
| | — |
| | 0.7 |
| | — |
|
| Total derivative instruments | 3,221.4 |
| | — |
| | 2,345.8 |
| | 875.6 |
| 2,317.8 |
| | — |
| | 1,750.6 |
| | 567.2 |
|
| Investments | 1,936.1 |
| | 1,573.0 |
| | — |
| | 363.1 |
| 2,160.8 |
| | 1,751.7 |
| | — |
| | 409.1 |
|
| Total assets | $ | 5,157.5 |
| | $ | 1,573.0 |
| | $ | 2,345.8 |
| | $ | 1,238.7 |
| $ | 4,478.6 |
| | $ | 1,751.7 |
| | $ | 1,750.6 |
| | $ | 976.3 |
|
| | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | |
| Derivative instruments: | | | | | | | | | | | | | | |
| Cross-currency and interest rate derivative contracts | $ | 1,904.2 |
| | $ | — |
| | $ | 1,895.6 |
| | $ | 8.6 |
| $ | 1,554.3 |
| | $ | — |
| | $ | 1,542.2 |
| | $ | 12.1 |
|
| Equity-related derivative instruments | 13.1 |
| | — |
| | — |
| | 13.1 |
| 10.7 |
| | — |
| | — |
| | 10.7 |
|
| Foreign currency forward and option contracts | 12.7 |
| | — |
| | 12.7 |
| | — |
| 23.0 |
| | — |
| | 23.0 |
| | — |
|
| Other | 0.1 |
| | — |
| | 0.1 |
| | — |
| |
| Total derivative liabilities | 1,930.1 |
| | — |
| | 1,908.4 |
| | 21.7 |
| 1,588.0 |
| | — |
| | 1,565.2 |
| | 22.8 |
|
| Debt | 287.4 |
| | 101.2 |
| | 186.2 |
| | — |
| 795.9 |
| | 394.0 |
| | 401.9 |
| | — |
|
| Total liabilities | $ | 2,217.5 |
| | $ | 101.2 |
| | $ | 2,094.6 |
| | $ | 21.7 |
| $ | 2,383.9 |
| | $ | 394.0 |
| | $ | 1,967.1 |
| | $ | 22.8 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
|
| | | | | | | | | | | | | | | |
| | | | Fair value measurements at December 31, 2016 using: |
| Description | December 31, 2016 | | 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 | $ | 2,606.5 |
| | $ | — |
| | $ | 2,606.5 |
| | $ | — |
|
| Equity-related derivative instruments | 524.0 |
| | — |
| | — |
| | 524.0 |
|
| Foreign currency forward and option contracts | 45.1 |
| | — |
| | 45.1 |
| | — |
|
| Other | 0.5 |
| | — |
| | 0.5 |
| | — |
|
| Total derivative instruments | 3,176.1 |
| | — |
| | 2,652.1 |
| | 524.0 |
|
| Investments | 2,057.2 |
| | 1,682.4 |
| | — |
| | 374.8 |
|
| Total assets | $ | 5,233.3 |
| | $ | 1,682.4 |
| | $ | 2,652.1 |
| | $ | 898.8 |
|
| | | | | | | | |
| Liabilities: | | | | | | | |
| Derivative instruments: | | | | | | | |
| Cross-currency and interest rate derivative contracts | $ | 1,292.2 |
| | $ | — |
| | $ | 1,281.5 |
| | $ | 10.7 |
|
| Equity-related derivative instruments | 8.6 |
| | — |
| | — |
| | 8.6 |
|
| Foreign currency forward and option contracts | 9.0 |
| | — |
| | 9.0 |
| | — |
|
| Other | 0.1 |
| | — |
| | 0.1 |
| | — |
|
| Total derivative instruments | 1,309.9 |
| | — |
| | 1,290.6 |
| | 19.3 |
|
| Debt | 344.4 |
| | 215.5 |
| | 128.9 |
| | — |
|
| Total liabilities | $ | 1,654.3 |
| | $ | 215.5 |
| | $ | 1,419.5 |
| | $ | 19.3 |
|
|
| | | | | | | | | | | | | | | |
| | | | Fair value measurements at December 31, 2015 using: |
| Description | December 31, 2015 | | 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 | $ | 2,085.6 |
| | $ | — |
| | $ | 2,085.6 |
| | $ | — |
|
| Equity-related derivative instruments | 408.5 |
| | — |
| | — |
| | 408.5 |
|
| Foreign currency forward contracts | 10.4 |
| | — |
| | 10.4 |
| | — |
|
| Other | 1.6 |
| | — |
| | 1.6 |
| | — |
|
| Total derivative instruments | 2,506.1 |
| | — |
| | 2,097.6 |
| | 408.5 |
|
| Investments | 2,591.8 |
| | 2,257.2 |
| | — |
| | 334.6 |
|
| Total assets | $ | 5,097.9 |
| | $ | 2,257.2 |
| | $ | 2,097.6 |
| | $ | 743.1 |
|
| | | | | | | | |
| Liabilities - derivative instruments: | | | | | | | |
| Cross-currency and interest rate derivative contracts | $ | 1,513.4 |
| | $ | — |
| | $ | 1,513.4 |
| | $ | — |
|
| Equity-related derivative instruments | 74.4 |
| | — |
| | — |
| | 74.4 |
|
| Foreign currency forward contracts | 1.1 |
| | — |
| | 1.1 |
| | — |
|
| Other | 5.7 |
| | — |
| | 5.7 |
| | — |
|
| Total liabilities | $ | 1,594.6 |
| | $ | — |
| | $ | 1,520.2 |
| | $ | 74.4 |
|
A reconciliation of the beginning and ending balances of our assets and liabilities measured at fair value on a recurring basis using significant unobservable, or Level 3, inputs is as follows:
|
| | | | | | | | | | | | | | | |
| | Investments | | Cross-currency and interest rate derivative contracts | | Equity-related derivative instruments | | Total |
| | in millions |
| | | | | | | | |
| Balance of net assets at January 1, 2016 | $ | 334.6 |
| | $ | — |
| | $ | 334.1 |
| | $ | 668.7 |
|
| Gains included in net earnings (loss) (a): | | | | | | |
|
|
| Realized and unrealized gains (losses) on derivative instruments, net | — |
| | (8.6 | ) | | 586.6 |
| | 578.0 |
|
| Realized and unrealized gains due to changes in fair values of certain investments and debt, net | 116.2 |
| | — |
| | — |
| | 116.2 |
|
| Partial settlement of Sumitomo Collar (b) | — |
| | — |
| | (83.2 | ) | | (83.2 | ) |
| Dispositions | (121.4 | ) | | — |
| | — |
| | (121.4 | ) |
| Additions | 45.8 |
| | — |
| | — |
| | 45.8 |
|
| Foreign currency translation adjustments and other, net | (12.1 | ) | | — |
| | 4.5 |
| | (7.6 | ) |
| Reclassification of liability to held for sale (c) | — |
| | — |
| | 20.5 |
| | 20.5 |
|
| Balance of net assets at September 30, 2016 | $ | 363.1 |
| | $ | (8.6 | ) | | $ | 862.5 |
| | $ | 1,217.0 |
|
|
| | | | | | | | | | | | | | | |
| | Investments | | Cross-currency and interest rate derivative contracts | | Equity-related derivative instruments | | Total |
| | in millions |
| | | | | | | | |
| Balance of net asset (liability) at January 1, 2017 | $ | 374.8 |
| | $ | (10.7 | ) | | $ | 515.4 |
| | $ | 879.5 |
|
Gains included in net loss (a): | | | | | | |
|
|
| Realized and unrealized gains (losses) on derivative instruments, net | — |
| | (1.4 | ) | | 90.1 |
| | 88.7 |
|
| Realized and unrealized gains due to changes in fair values of certain investments and debt, net | 12.7 |
| | — |
| | — |
| | 12.7 |
|
| Partial settlement of Sumitomo Collar (b) | — |
| | — |
| | (51.0 | ) | | (51.0 | ) |
| Additions | 37.1 |
| | — |
| | — |
| | 37.1 |
|
| Foreign currency translation adjustments, dividends and other, net | (15.5 | ) | | — |
| | 2.0 |
| | (13.5 | ) |
| Balance of net asset (liability) at September 30, 2017 | $ | 409.1 |
| | $ | (12.1 | ) | | $ | 556.5 |
| | $ | 953.5 |
|
_______________
| |
(a) | Includes an aggregate gain of $100.8 million related to net assets that were sold or settled and, accordingly, are no longer included on our September 30, 2016 balance sheet. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
_______________
| |
| (a) | Most of these net gains relate to assets and liabilities that we continue to carry on our condensed consolidated balance sheet as of September 30, 2017. |
| |
| (b) | For additional information regarding the partial settlement of the Sumitomo Collar, see note 4.5. |
(7) Long-lived Assets
Impairment Charges Associated with Hurricanes
In September 2017, certain of our operations in the Caribbean were severely impacted by Hurricanes Irma and Maria, with the most extensive damage occurring in Puerto Rico and certain of C&W’s markets. Based on our initial estimates of the impacts on our operations from these hurricanes, we recorded impairment charges to reduce the carrying values of our goodwill, property and equipment and other indefinite-lived intangible assets during the third quarter of 2017, as set forth in the table below. These impairment charges are based on our assessments of currently available information and, accordingly, it is possible that further impairment charges will be required as additional information becomes available regarding the impacts of the hurricanes on our networks and the macro-economic, competitive and demographic trends within the impacted markets.
|
| | | | | | | | | | | | | | | |
| | C&W | | Liberty Puerto Rico | | LiLAC Group - Corporate and other | | Total |
| | in millions |
| | | | | | | | |
| Goodwill (a) | $ | 117.3 |
| | $ | — |
| | $ | 120.9 |
| | $ | 238.2 |
|
| Property and equipment (b) | 18.3 |
| | 42.0 |
| | — |
| | 60.3 |
|
| Other indefinite-lived intangible assets (c) | — |
| | 44.1 |
| | — |
| | 44.1 |
|
| Total | $ | 135.6 |
| | $ | 86.1 |
| | $ | 120.9 |
| | $ | 342.6 |
|
_______________
| |
| (a) | We have concluded that the goodwill impairment charges were necessary to reduce the carrying values of Liberty Puerto Rico and certain C&W reporting units to their respective estimated fair values at September 30, 2017. |
| |
| (b) | Amounts represent estimated impairments recorded in order to write-off the net carrying amount of certain property and equipment that was damaged beyond repair. |
| |
| (c) | Represents a derivative liabilityWe concluded that an impairment charge was necessary to reduce the carrying value of the Dutch JV Entities. For additional information regarding the held-for-sale presentation of the Dutch JV Entities, see note 3.Liberty Puerto Rico’s cable television franchise rights to their estimated fair value at September 30, 2017. |
For additional information regarding the impacts of the hurricanes and the fair value methods and related assumptions used in our impairment assessments, see note 6. For information regarding the impact of the hurricanes on our debt, see note 8. (6) Long-lived Assets
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
Property and Equipment, Net
The details of our property and equipment and the related accumulated depreciation are set forth below:
|
| | | | | | | |
| | September 30,
2017 | | December 31,
2016 |
| | in millions |
| Distribution systems: | | | |
| Liberty Global Group | $ | 25,032.4 |
| | $ | 21,249.9 |
|
| LiLAC Group | 3,728.7 |
| | 3,522.0 |
|
| Total | 28,761.1 |
| | 24,771.9 |
|
| Customer premises equipment: | | | |
| Liberty Global Group | 6,047.7 |
| | 4,829.9 |
|
| LiLAC Group | 1,315.7 |
| | 1,205.4 |
|
| Total | 7,363.4 |
| | 6,035.3 |
|
| Support equipment, buildings and land: | | | |
| Liberty Global Group | 5,407.3 |
| | 4,385.5 |
|
| LiLAC Group | 1,238.4 |
| | 954.8 |
|
| Total | 6,645.7 |
| | 5,340.3 |
|
| Total property and equipment, gross: | | | |
| Liberty Global Group | 36,487.4 |
| | 30,465.3 |
|
| LiLAC Group | 6,282.8 |
| | 5,682.2 |
|
| Total | 42,770.2 |
| | 36,147.5 |
|
| Accumulated depreciation: | | | |
| Liberty Global Group | (16,989.0 | ) | | (13,216.0 | ) |
| LiLAC Group | (2,230.5 | ) | | (1,821.3 | ) |
| Total | (19,219.5 | ) | | (15,037.3 | ) |
| Total property and equipment, net: | | | |
| Liberty Global Group | 19,498.4 |
| | 17,249.3 |
|
| LiLAC Group | 4,052.3 |
| | 3,860.9 |
|
| Total | $ | 23,550.7 |
| | $ | 21,110.2 |
|
|
| | | | | | | |
| | September 30,
2016 | | December 31,
2015 |
| | in millions |
| Distribution systems: | | | |
| Liberty Global Group | $ | 22,009.5 |
| | $ | 24,447.2 |
|
| LiLAC Group | 3,575.8 |
| | 1,037.8 |
|
| Total | 25,585.3 |
| | 25,485.0 |
|
| Customer premises equipment: | | | |
| Liberty Global Group | 5,091.6 |
| | 5,651.1 |
|
| LiLAC Group | 1,020.5 |
| | 801.4 |
|
| Total | 6,112.1 |
| | 6,452.5 |
|
| Support equipment, buildings and land: | | | |
| Liberty Global Group | 4,359.5 |
| | 4,461.4 |
|
| LiLAC Group | 921.6 |
| | 341.0 |
|
| Total | 5,281.1 |
| | 4,802.4 |
|
| Total property and equipment, gross: | | | |
| Liberty Global Group | 31,460.6 |
| | 34,559.7 |
|
| LiLAC Group | 5,517.9 |
| | 2,180.2 |
|
| Total | 36,978.5 |
| | 36,739.9 |
|
| Accumulated depreciation: | | | |
| Liberty Global Group | (13,674.2 | ) | | (13,719.2 | ) |
| LiLAC Group | (1,698.1 | ) | | (1,336.7 | ) |
| Total | (15,372.3 | ) | | (15,055.9 | ) |
| Total property and equipment, net: | | | |
| Liberty Global Group | 17,786.4 |
| | 20,840.5 |
|
| LiLAC Group | 3,819.8 |
| | 843.5 |
|
| Total | $ | 21,606.2 |
| | $ | 21,684.0 |
|
During the nine months ended September 30, 20162017 and 20152016, we recorded non-cash increases to our property and equipment related to vendor financing arrangements of $1,439.3$1,981.3 million and $1,090.6$1,439.3 million,, respectively, which exclude related value-added taxes (VAT) of $193.4$311.1 million and $139.2$193.4 million,, respectively, that were also financed by our vendors under these arrangements. In addition, during the nine months ended September 30, 20162017 and 2015,2016, we recorded non-cash increases to our property and equipment related to assets acquired under capital leases of $78.0$139.5 million and $89.378.0 million, respectively.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
Goodwill
Changes in the carrying amount of our goodwill during the nine months ended September 30, 20162017 are set forth below:
|
| | | | | | | | | | | | | | | | | | | |
| | January 1, 2017 | | Acquisitions and related adjustments | | Foreign currency translation adjustments | | Impairments (a) | | September 30,
2017 |
| | in millions |
| Liberty Global Group: | | | | | | | | | |
| European Division: | | | | | | | | | |
| U.K./Ireland | $ | 7,412.3 |
| | $ | 2.3 |
| | $ | 639.1 |
| | $ | — |
| | $ | 8,053.7 |
|
| Belgium | 2,032.7 |
| | 360.1 |
| | 262.9 |
| | — |
| | 2,655.7 |
|
| Germany | 3,013.2 |
| | — |
| | 358.8 |
| | — |
| | 3,372.0 |
|
| Switzerland/Austria | 3,443.4 |
| | — |
| | 214.7 |
| | — |
| | 3,658.1 |
|
| Total Western Europe | 15,901.6 |
| | 362.4 |
| | 1,475.5 |
| | — |
| | 17,739.5 |
|
| Central and Eastern Europe | 1,144.4 |
| | 0.9 |
| | 159.6 |
| | — |
| | 1,304.9 |
|
| Total European Division | 17,046.0 |
| | 363.3 |
| | 1,635.1 |
| | — |
| | 19,044.4 |
|
| Corporate and other | 17.7 |
| | — |
| | — |
| | — |
| | 17.7 |
|
| Total Liberty Global Group | 17,063.7 |
|
| 363.3 |
|
| 1,635.1 |
| | — |
|
| 19,062.1 |
|
| LiLAC Group: | | | | | | | | | |
| LiLAC Division: | | | | | | | | | |
| C&W | 5,506.1 |
| | (182.5 | ) | | (53.1 | ) | | (117.3 | ) | | 5,153.2 |
|
| Chile | 397.9 |
| | — |
| | 19.6 |
| | — |
| | 417.5 |
|
| Puerto Rico | 277.7 |
| | — |
| | — |
| | — |
| | 277.7 |
|
| Total LiLAC Division | 6,181.7 |
|
| (182.5 | ) |
| (33.5 | ) | | (117.3 | ) |
| 5,848.4 |
|
| Corporate and other (b) | 120.9 |
| | — |
| | — |
| | (120.9 | ) | | — |
|
| Total LiLAC Group | 6,302.6 |
|
| (182.5 | ) |
| (33.5 | ) | | (238.2 | ) |
| 5,848.4 |
|
| Total | $ | 23,366.3 |
|
| $ | 180.8 |
|
| $ | 1,601.6 |
| | $ | (238.2 | ) |
| $ | 24,910.5 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | January 1, 2016 | | Acquisitions and related adjustments | | Reclassification to assets held for sale (b) | | Foreign currency translation adjustments and other | | September 30,
2016 |
| | in millions |
| Liberty Global Group: | | | | | | | | | |
| European Operations Division: | | | | | | | | | |
| U.K./Ireland | $ | 8,790.7 |
| | $ | 0.2 |
| | $ | — |
| | $ | (1,012.8 | ) | | $ | 7,778.1 |
|
| The Netherlands | 7,851.3 |
| | — |
| | (8,097.6 | ) | | 246.3 |
| | — |
|
| Germany | 3,104.4 |
| | — |
| | — |
| | 103.4 |
| | 3,207.8 |
|
| Belgium | 1,777.1 |
| | 343.2 |
| | — |
| | 56.1 |
| | 2,176.4 |
|
| Switzerland/Austria | 3,500.4 |
| | — |
| | — |
| | 103.1 |
| | 3,603.5 |
|
| Total Western Europe | 25,023.9 |
| | 343.4 |
| | (8,097.6 | ) | | (503.9 | ) | | 16,765.8 |
|
| Central and Eastern Europe | 1,186.9 |
| | 1.5 |
| | — |
| | 42.7 |
| | 1,231.1 |
|
| Total European Operations Division | 26,210.8 |
| | 344.9 |
| | (8,097.6 | ) | | (461.2 | ) | | 17,996.9 |
|
| Corporate and other | 34.0 |
| | — |
| | — |
| | (0.3 | ) | | 33.7 |
|
| Total Liberty Global Group | 26,244.8 |
|
| 344.9 |
|
| (8,097.6 | ) | | (461.5 | ) |
| 18,030.6 |
|
| LiLAC Group: | | | | | | | | | |
| LiLAC Division: | | | | | | | | | |
| CWC | — |
| | 5,559.8 |
| | — |
| | (35.0 | ) | | 5,524.8 |
|
| Chile | 377.0 |
| | — |
| | — |
| | 29.0 |
| | 406.0 |
|
| Puerto Rico | 277.7 |
| | — |
| | — |
| | — |
| | 277.7 |
|
| Total LiLAC Division | 654.7 |
|
| 5,559.8 |
|
| — |
| | (6.0 | ) |
| 6,208.5 |
|
| Corporate and other (a) | 120.9 |
| | — |
| | — |
| | — |
| | 120.9 |
|
| Total LiLAC Group | 775.6 |
|
| 5,559.8 |
|
| — |
| | (6.0 | ) |
| 6,329.4 |
|
| Total | $ | 27,020.4 |
|
| $ | 5,904.7 |
|
| $ | (8,097.6 | ) | | $ | (467.5 | ) |
| $ | 24,360.0 |
|
_______________
| |
| (a) | Amounts represent impairment charges that were recorded during the third quarter of 2017 based on our preliminary assessments of the impacts of Hurricanes Irma and Maria. For additional information regarding the impacts of Hurricanes Irma and Maria and the fair value method and related assumptions used in our impairment assessment, see above and note 6. |
| |
| (b) | Represents enterprise-level goodwill that iswas allocated to our Puerto Rico segment for purposes of our impairment tests. |
| |
(b) | Represents goodwill of the Dutch JV Entities. For additional information regarding the held-for-sale presentation of the Dutch JV Entities, see note 3. |
If,Based on the results of our most recent goodwill impairment tests, declines in the fair value of Liberty Puerto Rico and certain reporting units within C&W resulted in goodwill impairment charges during the third quarter of 2017. Additionally, if among other factors, (i) ourthe equity values of the LiLAC Group were to decline significantly or (ii) the adverse impacts of economic, competitive, regulatory or other factors were to cause ourLiberty Puerto Rico’s or C&W’s results of operations or cash flows to be worse than anticipated, we could conclude in future periods that additional impairment charges are required in order to reduce the carrying values of ourthe goodwill, cable television franchise rights and, to a lesser extent, other long-lived assets.assets of these entities. Additionally, as discussed above, further impairment charges could be recorded with respect to Liberty Puerto Rico or certain reporting units within C&W as more information becomes available regarding the impacts of Hurricanes Irma and Maria. Any such impairment charges could be significant.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
Intangible Assets Subject to Amortization, Net
The details of our intangible assets subject to amortization are set forth below:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Gross carrying amount | | Accumulated amortization | | Net carrying amount | | Gross carrying amount | | Accumulated amortization | | Net carrying amount |
| | in millions |
| | | | | | | | | | | | |
| Customer relationships: | | | | | | | | | | | |
| Liberty Global Group | $ | 4,828.2 |
| | $ | (3,063.1 | ) | | $ | 1,765.1 |
| | $ | 5,499.4 |
| | $ | (3,404.5 | ) | | $ | 2,094.9 |
|
| LiLAC Group | 1,406.3 |
| | (239.1 | ) | | 1,167.2 |
| | 1,303.3 |
| | (160.1 | ) | | 1,143.2 |
|
| Total | 6,234.5 |
| | (3,302.2 | ) | | 2,932.3 |
| | 6,802.7 |
| | (3,564.6 | ) | | 3,238.1 |
|
| Other: | | | | | | | | | | | |
| Liberty Global Group | 536.9 |
| | (214.7 | ) | | 322.2 |
| | 478.3 |
| | (150.0 | ) | | 328.3 |
|
| LiLAC Group | 73.4 |
| | (13.6 | ) | | 59.8 |
| | 99.0 |
| | (7.7 | ) | | 91.3 |
|
| Total | 610.3 |
| | (228.3 | ) | | 382.0 |
| | 577.3 |
| | (157.7 | ) | | 419.6 |
|
| Total intangible assets subject to amortization, net: | | | | | | | | | | | |
| Liberty Global Group | 5,365.1 |
| | (3,277.8 | ) | | 2,087.3 |
| | 5,977.7 |
| | (3,554.5 | ) | | 2,423.2 |
|
| LiLAC Group | 1,479.7 |
| | (252.7 | ) | | 1,227.0 |
| | 1,402.3 |
| | (167.8 | ) | | 1,234.5 |
|
| Total | $ | 6,844.8 |
| | $ | (3,530.5 | ) | | $ | 3,314.3 |
| | $ | 7,380.0 |
| | $ | (3,722.3 | ) | | $ | 3,657.7 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2016 | | December 31, 2015 |
| | Gross carrying amount | | Accumulated amortization | | Net carrying amount | | Gross carrying amount | | Accumulated amortization | | Net carrying amount |
| | in millions |
| | | | | | | | | | | | |
| Customer relationships: | | | | | | | | | | | |
| Liberty Global Group | $ | 5,809.4 |
| | $ | (3,387.4 | ) | | $ | 2,422.0 |
| | $ | 10,285.3 |
| | $ | (3,410.7 | ) | | $ | 6,874.6 |
|
| LiLAC Group | 1,303.9 |
| | (112.2 | ) | | 1,191.7 |
| | 149.0 |
| | (31.7 | ) | | 117.3 |
|
| Total | 7,113.3 |
| | (3,499.6 | ) | | 3,613.7 |
| | 10,434.3 |
| | (3,442.4 | ) | | 6,991.9 |
|
| Other: | | | | | | | | | | | |
| Liberty Global Group | 509.4 |
| | (146.1 | ) | | 363.3 |
| | 205.3 |
| | (104.8 | ) | | 100.5 |
|
| LiLAC Group | 102.7 |
| | (3.5 | ) | | 99.2 |
| | 0.2 |
| | (0.1 | ) | | 0.1 |
|
| Total | 612.1 |
| | (149.6 | ) | | 462.5 |
| | 205.5 |
| | (104.9 | ) | | 100.6 |
|
| Total intangible assets subject to amortization, net: | | | | | | | | | | | |
| Liberty Global Group | 6,318.8 |
| | (3,533.5 | ) | | 2,785.3 |
| | 10,490.6 |
| | (3,515.5 | ) | | 6,975.1 |
|
| LiLAC Group | 1,406.6 |
| | (115.7 | ) | | 1,290.9 |
| | 149.2 |
| | (31.8 | ) | | 117.4 |
|
| Total | $ | 7,725.4 |
| | $ | (3,649.2 | ) | | $ | 4,076.2 |
| | $ | 10,639.8 |
| | $ | (3,547.3 | ) | | $ | 7,092.5 |
|
Other Indefinite-lived Intangible Assets
Our other indefinite-lived intangible assets are included in other assets, net, in our condensed consolidated balance sheets. At September 30, 2017 and December 31, 2016, our other indefinite-lived intangible assets aggregated $567.3 million and $610.3 million, respectively, including $540.0 million and $584.1 million, respectively, related to the cable television franchise rights of Liberty Puerto Rico.
33
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
(78) Debt and Capital Lease Obligations
The U.S. dollar equivalents of the components of our consolidated third-party debt are as follows:
| | | | September 30, 2016 | | | | Principal amount | September 30, 2017 | | | | Principal amount |
Weighted average interest rate (a) | | Unused borrowing capacity (b) | | Estimated fair value (c) | Weighted average interest rate (a) | | Unused borrowing capacity (b) | | Estimated fair value (c) |
| Borrowing currency | | U.S. $ equivalent | | September 30, 2016 | | December 31, 2015 | | September 30, 2016 | | December 31, 2015 | Borrowing currency | | U.S. $ equivalent | | September 30, 2017 | | December 31, 2016 | | September 30, 2017 | | December 31, 2016 |
| | | | in millions | | | in millions |
| Liberty Global Group: | | | | | | |
| VM Notes | 5.59 | % | | — |
| | $ | — |
| | $ | 11,021.9 |
| | $ | 10,594.1 |
| | $ | 10,643.5 |
| | $ | 10,551.5 |
| 5.54 | % | | — |
| | $ | — |
| | $ | 10,070.2 |
| | $ | 9,311.0 |
| | $ | 9,510.2 |
| | $ | 9,041.0 |
|
| VM Credit Facility (d) | 3.87 | % | | (e) | | 875.5 |
| | 3,209.5 |
| | 3,413.7 |
| | 3,198.7 |
| | 3,471.1 |
| |
| VM Credit Facilities | | 4.12 | % | | (d) | | 904.1 |
| | 5,231.6 |
| | 4,531.5 |
| | 5,192.4 |
| | 4,505.5 |
|
| Unitymedia Notes | 4.99 | % | | — |
| | — |
| | 8,034.4 |
| | 7,631.6 |
| | 7,740.1 |
| | 7,682.0 |
| 4.92 | % | | — |
| | — |
| | 7,555.5 |
| | 7,679.7 |
| | 7,152.6 |
| | 7,419.3 |
|
| Unitymedia Revolving Credit Facilities | — |
| | € | 500.0 |
| | 561.4 |
| | — |
| | — |
| | — |
| | — |
| |
| Unitymedia Credit Facilities | | 3.49 | % | | € | 500.0 |
| | 590.2 |
| | 853.7 |
| | — |
| | 855.0 |
| | — |
|
| UPCB SPE Notes | 5.36 | % | | — |
| | — |
| | 2,447.1 |
| | 3,131.7 |
| | 2,413.7 |
| | 3,142.0 |
| 4.51 | % | | — |
| | — |
| | 2,637.9 |
| | 1,783.7 |
| | 2,556.4 |
| | 1,772.8 |
|
| UPC Holding Bank Facility | | 3.98 | % | | € | 990.1 |
| | 1,168.7 |
| | 2,160.3 |
| | 2,811.9 |
| | 2,150.0 |
| | 2,782.8 |
|
| UPC Holding Senior Notes | 6.59 | % | | — |
| | — |
| | 1,650.7 |
| | 1,601.4 |
| | 1,539.0 |
| | 1,491.1 |
| 5.44 | % | | — |
| | — |
| | 1,663.4 |
| | 1,569.8 |
| | 1,641.7 |
| | 1,451.5 |
|
| UPC Broadband Holding Bank Facility | 4.08 | % | | € | 990.1 |
| | 1,111.7 |
| | 2,160.8 |
| | 1,284.3 |
| | 2,150.0 |
| | 1,305.0 |
| |
Telenet Credit Facility (f)(e) | 3.66 | % | | € | 491.0 |
| | 551.3 |
| | 3,328.5 |
| | 1,443.0 |
| | 3,311.2 |
| | 1,474.5 |
| 3.57 | % | | € | 425.0 |
| | 501.7 |
| | 3,945.2 |
| | 3,210.0 |
| | 3,927.9 |
| | 3,187.5 |
|
| Telenet SPE Notes | 5.76 | % | | — |
| | — |
| | 1,475.4 |
| | 2,155.8 |
| | 1,381.0 |
| | 2,097.2 |
| 5.48 | % | | — |
| | — |
| | 1,011.4 |
| | 1,383.9 |
| | 920.6 |
| | 1,297.3 |
|
| Vendor financing (g) (h) | 3.45 | % | | — |
| | — |
| | 1,769.5 |
| | 1,688.9 |
| | 1,769.5 |
| | 1,688.9 |
| |
| Vendor financing (f) | | 3.53 | % | | — |
| | — |
| | 3,230.6 |
| | 2,284.5 |
| | 3,230.6 |
| | 2,284.5 |
|
| ITV Collar Loan | 1.35 | % | | — |
| | — |
| | 1,392.4 |
| | 1,547.9 |
| | 1,403.9 |
| | 1,594.7 |
| 0.71 | % | | — |
| | — |
| | 1,425.7 |
| | 1,323.7 |
| | 1,449.8 |
| | 1,336.2 |
|
| Sumitomo Collar Loan (i) | 1.88 | % | | — |
| | — |
| | 759.4 |
| | 805.6 |
| | 747.6 |
| | 787.6 |
| |
| Ziggo Group Holding debt | — |
| | (h) | | (h) | | (h) | | 7,698.8 |
| | (h) | | 7,861.3 |
| |
| Other (j) | 4.95 | % | | — |
| | — |
| | 750.8 |
| | 395.0 |
| | 649.3 |
| | 291.8 |
| |
| Derivative-related debt instruments (g) | | 3.34 | % | | — |
| | — |
| | 814.8 |
| | 450.7 |
| | 780.1 |
| | 426.3 |
|
| Sumitomo Share Loan (h) | | 1.00 | % | | — |
| | — |
| | 394.0 |
| | 215.5 |
| | 394.0 |
| | 215.5 |
|
| Sumitomo Collar Loan | | 1.88 | % | | — |
| | — |
| | 340.0 |
| | 499.7 |
| | 337.6 |
| | 488.2 |
|
| Other (i) | | 5.59 | % | | — |
| | — |
| | 398.5 |
| | 343.2 |
| | 403.3 |
| | 349.0 |
|
| Total Liberty Global Group | 4.74 | % | | | | 3,099.9 |
| | 38,000.4 |
| | 43,391.8 |
| | 36,947.5 |
| | 43,438.7 |
| 4.41 | % | | | | 3,164.7 |
| | 41,732.8 |
| | 37,398.8 |
| | 40,502.2 |
| | 36,557.4 |
|
| LiLAC Group: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CWC Notes | 7.31 | % | | — |
| | — |
| | 2,316.3 |
| | — |
| | 2,190.3 |
| | — |
| |
| CWC Credit Facilities | 4.89 | % | | $ | 364.0 |
| | 364.0 |
| | 1,371.8 |
| | — |
| | 1,374.4 |
| | — |
| |
| C&W Credit Facilities (j)(k) | | 4.60 | % | | $ | 696.5 |
| | 696.5 |
| | 2,234.0 |
| | 1,427.9 |
| | 2,251.1 |
| | 1,411.9 |
|
| C&W Notes (k) | | 7.08 | % | | — |
| | — |
| | 1,753.2 |
| | 2,319.6 |
| | 1,646.5 |
| | 2,181.1 |
|
| VTR Finance Senior Secured Notes | 6.88 | % | | — |
| | — |
| | 1,463.0 |
| | 1,301.1 |
| | 1,400.0 |
| | 1,400.0 |
| 6.88 | % | | — |
| | — |
| | 1,486.0 |
| | 1,463.9 |
| | 1,400.0 |
| | 1,400.0 |
|
| VTR Credit Facility | — |
| | (k) | | 193.5 |
| | — |
| | — |
| | — |
| | — |
| — |
| | (l) | | 228.9 |
| | — |
| | — |
| | — |
| | — |
|
| Liberty Puerto Rico Bank Facility | 5.11 | % | | $ | 40.0 |
| | 40.0 |
| | 924.9 |
| | 913.0 |
| | 942.5 |
| | 942.5 |
| |
| Vendor financing (g) | 3.94 | % | | — |
| | — |
| | 35.7 |
| | — |
| | 35.7 |
| | — |
| |
| LPR Bank Facility (k) | | 5.12 | % | | $ | 40.0 |
| | 40.0 |
| | 904.7 |
| | 935.2 |
| | 942.5 |
| | 942.5 |
|
| Vendor financing (f) | | 4.39 | % | | — |
| | — |
| | 107.4 |
| | 48.9 |
| | 107.4 |
| | 48.9 |
|
| Total LiLAC Group | 6.28 | % | | | | 597.5 |
| | 6,111.7 |
| | 2,214.1 |
| | 5,942.9 |
| | 2,342.5 |
| 5.82 | % | | | | 965.4 |
| | 6,485.3 |
| | 6,195.5 |
| | 6,347.5 |
| | 5,984.4 |
|
| Total debt before unamortized premiums, discounts and deferred financing costs | 4.95 | % | | | | $ | 3,697.4 |
| | $ | 44,112.1 |
| | $ | 45,605.9 |
| | $ | 42,890.4 |
| | $ | 45,781.2 |
| |
| Total debt before premiums, discounts and deferred financing costs | | 4.60 | % | | | | $ | 4,130.1 |
| | $ | 48,218.1 |
| | $ | 43,594.3 |
| | $ | 46,849.7 |
| | $ | 42,541.8 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
The following table provides a reconciliation of total debt before unamortized premiums, discounts and deferred financing costs to total debt and capital lease obligations:
|
| | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | in millions |
| | | | |
| Total debt before premiums, discounts and deferred financing costs | $ | 46,849.7 |
| | $ | 42,541.8 |
|
| Premiums, discounts and deferred financing costs, net | (270.5 | ) | | (225.9 | ) |
| Total carrying amount of debt | 46,579.2 |
| | 42,315.9 |
|
| Capital lease obligations (m) | 1,416.5 |
| | 1,242.8 |
|
| Total debt and capital lease obligations | 47,995.7 |
| | 43,558.7 |
|
| Current maturities of debt and capital lease obligations | (4,268.7 | ) | | (2,775.1 | ) |
| Long-term debt and capital lease obligations | $ | 43,727.0 |
| | $ | 40,783.6 |
|
|
| | | | | | | | | | | | | | | | |
| | September 30, 2016 | | December 31, 2015 |
| | in millions |
| | | | |
| Total debt before unamortized premiums, discounts and deferred financing costs | $ | 42,890.4 |
| | $ | 45,781.2 |
|
| Unamortized premiums (discounts), net | 35.8 |
| | (46.7 | ) |
| Unamortized deferred financing costs | (299.9 | ) | | (308.2 | ) |
| Total carrying amount of debt | 42,626.3 |
| | 45,426.3 |
|
| Capital lease obligations (h) (l) | 1,321.2 |
| | 1,322.8 |
|
| Total debt and capital lease obligations | 43,947.5 |
| | 46,749.1 |
|
| Current maturities of debt and capital lease obligations | (2,155.4 | ) | | (2,537.9 | ) |
| Long-term debt and capital lease obligations | $ | 41,792.1 |
| | $ | 44,211.2 |
|
_______________
| |
| (a) | Represents the weighted average interest rate in effect at September 30, 20162017 for all borrowings (excluding those of Ziggo Group Holding and its subsidiaries) outstanding pursuant to each debt instrument, including any applicable margin. The interest rates presented represent stated rates and do not include the impact of derivative instruments, deferred financing costs, original issue premiums or discounts and commitment fees, all of which affect our overall cost of borrowing. Including the effects of derivative instruments, original issue premiums or discounts and commitment fees, but excluding the impact of financing costs, ourthe weighted average interest rate on our aggregate variable- and fixed-rate indebtedness was 5.0%4.71% (including 4.8%4.47% for the Liberty Global Group and 6.5%6.28% for the LiLAC Group) at September 30, 2016.2017. For information regarding our derivative instruments, see note 45. |
| |
| (b) | Unused borrowing capacity represents the maximum availability under the applicable facility at September 30, 20162017 without regard to covenant compliance calculations or other conditions precedent to borrowing. At September 30, 2016,2017, based on the applicable leverage-based restricted payment tests and leverage covenants, the full amount of unused borrowing capacity was available to be borrowed under each of the respective subsidiary facilities, and there were no restrictions on the respective subsidiary's ability to make loans or distributions from this availability to Liberty Global or its subsidiaries or other equity holders, except as shown in the table below. In the following table for each facility that is subject to limitations on borrowing availability, we present (i) for each subsidiary where the ability to borrow is limited, the actual borrowing availability under the respective facility and (ii) for each subsidiary where the ability to make loans or distributions from this availability is limited, the amount that can be loaned or distributed to Liberty Global or its subsidiaries or other equity holders. The amounts presented below assume no changes from September 30, 20162017 borrowing levels and are based on the applicable leverage-based restricted payment tests and covenant and other limitations in effect withinfor each borrowing group at September 30, 2016,2017, both before and after considering the impact of the completion of the September 30, 20162017 compliance requirements. For information regarding certain refinancing transactions completed subsequent to September 30, 2017 that could have an impact on unused borrowing capacity and/or the availability to be borrowed, loaned or distributed, see note 16. |
|
| | | | | | | | | | | | | | | | |
| | | | Limitation on availability |
| | | September 30, 2017 | | Upon completion of relevant September 30, 2017 compliance reporting requirements |
| | | Borrowing currency | | U.S. $ equivalent | | Borrowing currency | | U.S. $ equivalent |
| | | | in millions |
| Limitation on availability to be borrowed under: | | | | | | | | | | |
| VM Credit Facilities (d) | | £ | 500.0 |
| | $ | 669.7 |
| | £ | 626.6 |
| | $ | 839.3 |
|
| UPC Holding Bank Facility | | € | 933.7 |
| | $ | 1,102.1 |
| | € | 990.1 |
| | $ | 1,168.7 |
|
| | | | | | | | | | | |
| Limitation on availability to be loaned or distributed by: | | | | | | | | | | |
| Unitymedia | | € | 174.1 |
| | $ | 205.5 |
| | € | 317.1 |
| | $ | 374.3 |
|
| C&W | | $ | 607.6 |
| | $ | 607.6 |
| | $ | 696.5 |
| | $ | 696.5 |
|
|
| | | | | | | | | | | | | | | | |
| | | Limitation on availability |
| | | September 30, 2016 | | Upon completion of relevant September 30, 2016 compliance reporting requirements |
| | | Borrowing currency | | U.S. $ equivalent | | Borrowing currency | | U.S. $ equivalent |
| | | in millions |
| Limitation on availability to be borrowed under: | | | | | | | | |
| Unitymedia Revolving Credit Facilities | | € | 470.1 |
| | $ | 527.8 |
| | € | 500.0 |
| | $ | 561.4 |
|
| UPC Broadband Holding Bank Facility | | € | 538.3 |
| | $ | 604.4 |
| | € | 741.6 |
| | $ | 832.7 |
|
| CWC Credit Facilities | | $ | 220.0 |
| | $ | 220.0 |
| | $ | 220.0 |
| | $ | 220.0 |
|
| | | | | | | | | |
| Limitation on availability to be loaned or distributed by: | | | | | | | | |
| Virgin Media | | £ | 457.5 |
| | $ | 593.4 |
| | £ | 567.6 |
| | $ | 736.2 |
|
| Unitymedia | | € | 52.6 |
| | $ | 59.1 |
| | € | 246.4 |
| | $ | 276.7 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
| |
| (c) | The estimated fair values of our debt instruments are 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 56. |
| |
| (d) | On March 31, 2016, VMIH entered into (i) a €75.0 million ($84.2 million) term loan facility, which matures on January 15, 2022, bears interest at a rate of EURIBOR plus 3.0% and is subject to a EURIBOR floor of 0.75% and (ii) a €25.0 million ($28.1 million) term loan facility, which matures on March 31, 2021, bears interest at a rate of EURIBOR plus 3.75% and is subject to a EURIBOR floor of 0.0%. |
| |
(e) | Unused borrowing capacity under the VM Credit FacilityFacilities relates to a multi-currency revolving facility (the VM Revolving Facility) with maximum borrowing capacity equivalent to £675.0 million ($875.5904.1 million). |
| |
(f)(e) | In connection with the June 19, 2017 closing of the BASESFR BeLux Acquisition, Telenet borrowed (i) the full €200.0€120.0 million ($224.6141.6 million) amount under Telenet Facility Z a revolving credit facility that bears interest at EURIBOR plus a marginand (ii) €90.0 million ($106.2 million) of 2.25%, (ii) the full €800.0total €400.0 million ($898.3472.1 million) amount under Telenet Facility AA, a term loan facility that bears interest at EURIBOR plus a margin of 3.5%, and (iii) €217.0 million ($243.7 million)AG. At September 30, 2017, the outstanding balances under Telenet Facility X, a revolving credit facility that bears interest at EURIBOR plus a margin of 2.75%.Z and Telenet Facility AG were €45.0 million ($53.1 million) and nil, respectively. For further information concerningregarding the BASESFR BeLux Acquisition, see note 3. For information regarding a refinancing transaction completed by certain subsidiaries of Telenet subsequent to September 30, 2016, see note 15. |
| |
(g)(f) | Represents amounts owed pursuant to interest-bearing vendor financing arrangements that are used to finance certain of our property and equipment additions and, to a lesser extent, certain of our operating expenses. These obligations are generally due within one year and include VAT that was paid on our behalf by the vendor. Repayments of vendor financing obligations are included in repayments and repurchases of debt and capital lease obligations in our condensed consolidated statements of cash flows. |
| |
| (g) | Represents amounts associated with certain derivative-related borrowing instruments, including $401.9 million and $128.9 million, respectively, that are carried at fair value. For information regarding fair value hierarchies, see note 6. |
| |
| (h) | In connection with the pending formation of the Dutch JV, the outstanding third-party debt and capital lease obligations of the Dutch JV Entities have been classified as liabilities associated with assets held for sale in our September 30, 2016 condensed consolidated balance sheet.The Sumitomo Share Loan is carried at fair value. For further information, regarding the pending formation of the Dutch JV and the held-for-sale presentation of the Dutch JV Entities, see note 3.5. |
| |
| (i) | For information regarding the partial settlementAmounts include $147.3 million and $116.0 million, respectively, of the Sumitomo Collar Loan, see note 4.
debt collateralized by certain trade receivables of Virgin Media. |
| |
| (j) | TheAt September 30, 2016 balance2017, the principal amount includes $186.2$50.0 million associated with certain derivative-related borrowing instruments and $101.2 million associated withunder the Sumitomo Share Loan. AllC&W Revolving Credit Facility, which was borrowed to fund a portion of these instruments are carried at fair value.the contribution to the CWSF (as defined in note 14). For additional information, see note 5.14. |
| |
| (k) | As discussed in note 6, Hurricanes Irma and Maria impacted a number of our markets in the Caribbean, resulting in varying degrees of damage to the homes, businesses and infrastructure in these markets. The VTR Credit Facility is the senior secured credit facility of VTRmost extensive damage occurred in Puerto Rico and certain markets within our C&W reportable segment. The operations of its subsidiariesLiberty Puerto Rico support the debt outstanding under the LPR Bank Facility and comprises a $160.0 million U.S. dollar facilityour operations in the impacted C&W markets, together with certain other C&W operations, support the debt outstanding under the C&W Notes and a CLP 22.0 billion ($33.5 million) Chilean peso facility, eachthe C&W Credit Facilities. We expect that the effects of which were undrawn atthe hurricanes will not impact our ability to comply with the terms of the C&W Notes and the C&W Credit Facilities. We also expect to fully comply with the terms of the LPR Bank Facility as of September 30, 2016.2017 and, accordingly, we continue to classify this debt as a long-term obligation in our September 30, 2017 condensed consolidated balance sheet. However, we expect that our ability to comply with the leverage covenants under the LPR Bank Facility in future periods will be impacted by the challenging circumstances we are experiencing as a result of the damage caused by the hurricanes in Puerto Rico, where only a small portion of Liberty Puerto Rico’s customers currently are receiving service. In this regard, we expect that Liberty Puerto Rico’s results for the fourth quarter of 2017 will fall short of what is required to meet the December 31, 2017 leverage covenants under the LPR Bank Facility. Further shortfalls are possible during 2018. Under the LPR Bank Facility, we have the ability to cure the financial covenants up to five times during the life of the LPR Bank Facility, with no more than two cures to be exercised during any period of four consecutive quarters. The financial covenants can be cured with either equity contributions or loans in an amount up to, but not exceeding, the amount required to comply with the applicable covenant. We also have the ability under the LPR Bank Facility to adjust for, among other items, certain impacts of one-off events such as the hurricanes and certain expected and actual insurance proceeds. If we are unable to meet the leverage covenants of the LPR Bank Facility in any particular quarter and we are unable to cure such shortfall or are not otherwise able to obtain relief from the lenders, we would be in default under the LPR Bank Facility. Any such default would not trigger any cross defaults at other Liberty Global borrowings groups. Although we intend to cure any covenant shortfalls to the extent permitted by the LPR Bank Facility and to work with Liberty Puerto Rico’s lenders to avoid a default, we have not yet concluded on a course of action given that our assessment of the ultimate impacts of the hurricanes on Liberty Puerto |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
Rico’s business is in the early stages. Any failure to remain in compliance with the terms of the LPR Bank Facility could have a material adverse impact on Liberty Puerto Rico’s business, liquidity and results of operations. Subsequent to September 30, 2017, Liberty Puerto Rico borrowed in full the $40.0 million revolving credit facility under the LPR Bank Facility.
| |
| (l) | The VTR Credit Facility is a senior secured credit facility that comprises a $160.0 million revolving credit facility and a CLP 44.0 billion ($68.9 million) revolving credit facility, each of which were undrawn at September 30, 2017. |
| |
| (m) | The U.S. dollar equivalents of our consolidated capital lease obligations are as follows: |
|
| | | | | | | | | | | | | | | | | |
| | | September 30, 2017 | | December 31, 2016 |
| | | in millions |
| Liberty Global Group: | | | | |
| Unitymedia | | $ | 715.1 |
| | $ | 657.0 |
|
| Telenet | | 437.9 |
| | 374.0 |
|
| Virgin Media | | 78.3 |
| | 91.2 |
|
| Other subsidiaries | | 166.4 |
| | 98.9 |
|
| Total Liberty Global Group | | 1,397.7 |
| | 1,221.1 |
|
| LiLAC Group: | | | | |
| C&W | | 18.0 |
| | 20.8 |
|
| VTR | | 0.8 |
| | 0.7 |
|
| Liberty Puerto Rico | | — |
| | 0.2 |
|
| Total LiLAC Group | | 18.8 |
| | 21.7 |
|
| Total capital lease obligations | | $ | 1,416.5 |
| | $ | 1,242.8 |
|
|
| | | | | | | | | | | | | | | | | |
| | | September 30, 2016 | | December 31, 2015 |
| | | in millions |
| Liberty Global Group: | | | | |
| Unitymedia | | $ | 706.3 |
| | $ | 703.1 |
|
| Telenet | | 393.6 |
| | 371.1 |
|
| Virgin Media | | 110.7 |
| | 159.5 |
|
| Other subsidiaries | | 90.1 |
| | 88.2 |
|
| Total Liberty Global Group | | 1,300.7 |
| | 1,321.9 |
|
| LiLAC Group: | | | | |
| CWC | | 19.6 |
| | — |
|
| Liberty Puerto Rico | | 0.2 |
| | 0.6 |
|
| VTR | | 0.7 |
| | 0.3 |
|
| Total LiLAC Group | | 20.5 |
| | 0.9 |
|
| Total capital lease obligations | | $ | 1,321.2 |
| | $ | 1,322.8 |
|
Refinancing Transactions - General Information
At September 30, 2017, most of our outstanding debt had been incurred by one of our seven primary subsidiary "borrowing groups." References to these primary borrowing groups, which comprise Virgin Media, Unitymedia, UPC Holding, Telenet, C&W, VTR Finance and Liberty Puerto Rico, include their respective restricted parent and subsidiary entities. We have completed various refinancing transactions during the first nine months of 2016, as further described below.2017. Unless otherwise noted, the terms and conditions of the new notes and credit facilities entered into are largely consistent with those of our existing notes and credit facilities of the corresponding borrowing group with regard to covenants, events of default and change of control provisions, among other items. For information concerningregarding the general terms and conditions of our debt, see note 10 to the consolidated financial statements included in our 2015 Annual Report on Form 10-K.
Virgin Media Refinancing TransactionTransactions
In April 2016, Virgin Media Secured Finance PLC (Virgin Media Secured Finance), a wholly-owned subsidiary ofJanuary 2017, Virgin Media issued $750.0£675.0 million ($904.1 million) principal amount of 5.5%5.0% senior secured notes due AugustApril 15, 2026 (the August 20262027(the April 2027 VM Senior Secured Notes). The net proceeds from the August 2026April 2027 VM Senior Secured Notes were used to repayredeem in full the £640.0 million ($857.2 million) outstanding principal amount under the April 2021 VM Revolving FacilitySterling Senior Secured Notes. In connection with these transactions, Virgin Media recognized a loss on debt modification and for general corporate purposes.extinguishment, net, of $39.9 million. This loss includes (i) the payment of $32.6 million of redemption premium and (ii) the write-off of $7.3 million of unamortized discount and deferred financing costs.
Subject to the circumstances described below, the August 2026April 2027 VM Senior Secured Notes are non-callable until AugustApril 15, 2021.2022. At any time prior to AugustApril 15, 2021,2022, Virgin Media Secured Finance may redeem some or all of the August 2026April 2027 VM Senior Secured Notes by paying a “make-whole” premium, which is the present value of all remaining scheduled interest payments to AugustApril 15, 20212022 using the discount rate (as specified in the indenture) as of the redemption date plus 50 basis points.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
Virgin Media Secured Finance may redeem some or all of the August 2026April 2027 VM Senior Secured Notes at the following redemption prices (expressed as a percentage of the principal amount) plus accrued and unpaid interest and additional amounts (as specified in the indenture), if any, to the applicable redemption date, as set forth below:
|
| | |
| | | Redemption price |
| 12-month period commencing April 15: | |
| 2022 | 102.500% |
| 2023 | 101.250% |
| 2024 | 100.625% |
| 2025 and thereafter | 100.000% |
|
| | |
| | | Redemption price |
| | | |
| 12-month period commencing August 15: | |
| 2021 | 102.750% |
| 2022 | 101.375% |
| 2023 | 100.688% |
| 2024 and thereafter | 100.000% |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
Unitymedia Refinancing Transaction
In December 2015, Unitymedia Hessen and Unitymedia NRW GmbH, each a wholly-owned subsidiary of Unitymedia, issued €420.0 million ($471.6 million) of 4.625% senior secured notes due February 15, 2026 (the 2026 UM Senior Secured Notes). A portion of the net proceeds from the 2026 UM Senior Secured Notes, which were held in escrow at December 31, 2015 as cash collateral, were used in January 2016 to redeem 10% of the principal amount of each of the following series of notes: (i) the €585.0 million ($656.9 million) outstanding principal amount of 5.5% senior secured notes due September 15, 2022 and (ii) the €450.0 million ($505.3 million) outstanding principal amount of 5.125% senior secured notes due January 21, 2023, each at a redemption price equal to 103% of the applicable redeemed principal amount in accordance with the indentures governing each of the notes. In connection with these transactions, we recognized a loss on debt modification and extinguishment, net, of $4.3 million. This loss includes (a) the payment of $3.4 million of redemption premium and (b) the write-off of $0.9 million of deferred financing costs.
UPC Broadband Holding Refinancing Transaction
In August 2016, UPC Broadband Holding2017, Virgin Media entered into a new $2,150.0£865.0 million ($1,158.6 million) term loan facility (UPCVM Facility ANJ). UPCVM Facility AN was issued at 99.5% of par,J matures on AugustJanuary 31, 2024,2026, bears interest at a rate of LIBOR plus 3.0% and is subject to a LIBOR floor of 0.0%. In a non-cash refinancing transaction, the net proceeds from UPC Facility AN were used to prepay (i) in full the $1,305.0 million outstanding principal amount under UPC Facility AH, (ii) in full the $675.0 million outstanding principal amount under UPC Facility AC, together with accrued and unpaid interest and the related prepayment premium, to UPCB Finance V Limited (UPCB Finance V) and, in turn, UPCB Finance V used such proceeds to fully redeem the $675.0 million principal amount of its 7.250% senior secured notes and (iii) 10% of the $750.0 million original principal amount under UPC Facility AD, together with accrued and unpaid interest and the related prepayment premium, to UPCB Finance VI Limited (UPCB Finance VI) and, in turn, UPCB Finance VI usedsuch proceeds to redeem 10% of its $750.0 million original principal amount of 6.875% senior secured notes due January 15, 2022 (the UPCB Finance VI Notes). The redemption price for the UPCB Finance VI Notes was 103% of the applicable redeemed principal amount. In connection with these transactions, we recognized a loss on debt modification and extinguishment, net, of $48.8 million. This loss includes (a) the payment of $34.2 million of redemption premium, (b) the write-off of $11.0 million of deferred financing costs and (c) the write-off of unamortized discount of $3.6 million.
Telenet Refinancing Transaction
In May 2016, Telenet Financing USD LLC (Telenet Finance), a wholly-owned subsidiary of Telenet, entered into a new $850.0 million term loan facility (Telenet Facility AD). Telenet Facility AD was issued at 99.5% of par, matures on June 30, 2024, bears interest at a rate of LIBOR plus+ 3.50% and is subject to a LIBOR floor of 0.75%. The net proceeds from Telenet Facility AD were used to repay in full (i) the €400.0 million ($449.1 million) outstanding principal amount under Telenet Facility P, together with accrued and unpaid interest and the related prepayment premium, to Telenet Finance IV Luxembourg S.C.A. (Telenet Finance IV) and, in turn, Telenet Finance IV used such proceeds to fully redeem the €400.0 million ($449.1 million) principal amount of its senior secured floating rate notes and (ii) the €300.0 million ($336.9 million) outstanding principal amount under Telenet Facility O, together with accrued and unpaid interest and the related prepayment premium, to Telenet Finance III Luxembourg S.C.A. (Telenet Finance III) and, in turn, Telenet Finance III used such proceeds to fully redeem the €300.0 million ($336.9 million) principal amount of its 6.625% senior secured notes. In connection with these transactions, we recognized a loss on debt modification and extinguishment, net, of $18.9 million. This loss includes (a) the payment of $11.1 million of redemption premium and (b) the write-off of $7.8 million of deferred financing costs.
For information regarding a refinancing transaction completed by certain subsidiaries of Telenet subsequent to September 30, 2016, see note 15.
Ziggo Group Holding Financing Transactions
In connection with the pending formation of the Dutch JV, the outstanding third-party debt and capital lease obligations of Ziggo Group Holding and certain of its subsidiaries have been classified as liabilities associated with assets held for sale in our September 30, 2016 condensed consolidated balance sheet. For information regarding the pending formation of the Dutch JV and the held-for-sale presentation of the Dutch JV Entities, see note 3.
In August 2016, (i) Ziggo Secured Finance B.V. (Ziggo Secured Finance), a special purpose financing entity owned 100% by a third-party, entered into a €2,598.2 million ($2,917.4 million) term loan facility (Ziggo Facility C) and (ii) Ziggo Secured Finance
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
Partnership (Ziggo Secured Partnership), a subsidiary of Ziggo Secured Finance, entered into a $1,000.0 million term loan facility (Ziggo Facility D). Ziggo Facility C and Ziggo Facility D were each issued at 99.5% of par and mature on August 31, 2024. Ziggo Facility C bears interest at a rate of EURIBOR plus 3.75% and is subject to a EURIBOR floor of 0.0%. Ziggo Facility D bears interest at a rate of LIBOR plus 3.00% and is subject to a LIBOR floor of 0.0%. The net proceeds from ZiggoVM Facility CJ were used in conjunction with existing cash, to prepay in full (a) the €664.2£849.4 million ($745.81,137.7 million) outstanding principal amount under an existing Ziggo Group Holding credit facility that was due on March 31, 2021 and (b) the €1,925.0 million ($2,161.5 million) outstanding principal amount under the Ziggo EuroVM Facility and the net proceeds from Ziggo Facility D were used, in conjunction with existing cash, to prepay $1,000.0 million of the $2,350.0 million outstanding principal amount under the Ziggo Dollar Facility, which bears interest at a rate of LIBOR plus 2.75% and matures on January 15, 2022. Except as noted above, these transactions were completed as non-cash refinancings.E. In connection with these transactions, we Virgin Mediarecognized aloss on debt modification and extinguishment, net, of $16.0 million. This loss includes (1) the write-off of$2.4 million related to unamortized discount of $12.8 million and (2) the write-off of $3.2 million of deferred financing costs.
In September 2016, (i) Ziggo Secured Finance issued (a) $2,000.0 million principal amount of 5.50% senior secured notesFebruary 2017, Virgin Media launched an offer (the Ziggo 2027 Dollar Senior Secured NotesExchange Offer) and (b) €775.0 million ($870.2 million) of 4.25% senior secured notes (the Ziggo 2027 Euro Senior Secured Notes and, together withto exchange the Ziggo 2027 DollarJanuary 2021 VM Sterling Senior Secured Notes the Ziggo 2027 Senior Secured Notes), each due January 15, 2027, and (ii) Ziggo Bond Finance B.V. (Ziggo Bond Finance), a special purpose finance entity owned 100% by a third party, issued $625.0 million principal amount of 6.00%for new senior secured notes due January 15, 20272025 (the Ziggo 20272025 VM Sterling Senior Secured Notes). Ziggo Secured Finance used $300.0The Exchange Offer was consummated on March 21, 2017 and £521.3 million ($698.2 million) aggregate principal amount of the net proceeds from the Ziggo 2027 DollarJanuary 2021 VM Sterling Senior Secured Notes (the Funded Amount) to fund a senior secured proceeds loan (the Ziggo Dollar Senior Secured Proceeds Loans) under a term loan facility agreement. The Ziggo Dollar Senior Secured Proceeds Loans were used to prepay $300.0was exchanged for £521.3 million of the principal amount outstanding under the Ziggo Dollar Facility.
Pending the formation of the Dutch JV, the remaining net proceeds from the Ziggo 2027 Senior Secured Notes and the Ziggo 2027 Senior Notes were placed into certain escrow accounts (the Escrowed Proceeds). Upon consummation of the Dutch JV, the Escrowed Proceeds will be used, subject to certain conditions, to fund senior and senior secured proceeds loans under term loan facility agreements to one or more subsidiaries of Ziggo Group Holding or Vodafone, in each case, for the purpose of funding a loan, dividend, distribution or other payment to Ziggo Group Holding (which upon consummation of the Dutch JV will become the ultimate parent company of the Dutch JV), and ultimately to Liberty Global and Vodafone, and paying related fees and expenses. If the Dutch JV is not consummated on or before September 23, 2017 (the Longstop Date), the Escrowed Proceeds will be used to fund certain senior and senior secured proceeds loans under term loan facility agreements to one or more subsidiaries of Ziggo Group Holding for the purpose of refinancing indebtedness of Ziggo Group Holding or for general corporate purposes. If the Dutch JV is not consummated on or before the Longstop Date and all or a portion of the Escrowed Proceeds are released to one or more subsidiaries of Ziggo Group Holding for the purpose of refinancing indebtedness of Ziggo Group Holding or for general corporate purposes, the aggregate principal amount outstanding of the Ziggo 2027 Dollar2025 VM Sterling Senior Secured Notes. Interest on the 2025 VM Sterling Senior Secured Notes will be no less than $500.0 million, the aggregate principal amount outstandinginitially accrue at a rate of the Ziggo 2027 Euro6.0% up to January 15, 2021 and at a rate of 11.0% thereafter. The January 2021 VM Sterling Senior Secured Notes will be no less than €400.0 million ($449.1 million) (together withwere exchanged for the minimum outstanding principal amount of the Ziggo 2027 Dollar2025 VM Sterling Senior Secured Notes the Senior Secured Financing Amounts) and the aggregate principal amount outstanding of the Ziggo 2027 Senior Notes will be no less than $500.0 million (the Senior Financing Amount).
Although Ziggo Bond Finance, Ziggo Secured Finance and Ziggo Secured Partnership are each special purpose financing entities that are 100% owned byin a third party, the various financing transactions completed by Ziggo Bond Finance, Ziggo Secured Finance and Ziggo Secured Partnership create variable interests for which Ziggo Group Holding and its subsidiaries are the primary beneficiary. As such, Ziggo Group Holding and Liberty Global are required to consolidate Ziggo Bond Finance, Ziggo Secured Finance and Ziggo Secured Partnership.
In the event that the Dutch JV is not or will not be consummated on or before the Longstop Date, or upon the occurrence of certain other events that would result in the termination of the escrow accounts (the Escrow Termination Date), Ziggo Secured Finance and Ziggo Bond Finance will redeem all of the Ziggo 2027 Senior Secured Notes and the Ziggo 2027 Senior Notes, as applicable, other than (i) the Funded Amount, (ii) the Senior Secured Financing Amounts and (iii) the Senior Financing Amount at a redemption price equal to 100% of the principal amount of the Ziggo 2027 Senior Secured Notes and the Ziggo 2027 Senior Notes redeemed, respectively, plus accrued but unpaid interest and additional amounts, if any, to the date of the redemption (the Special Mandatory Redemption).
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
At any time on or prior to the earlier of the date of the release of the Escrowed Proceeds and the Escrow Termination Date, Ziggo Secured Finance and Ziggo Bond Finance may, at their option, elect to redeem all or a portion of the Ziggo 2027 Senior Secured Notes and the Ziggo 2027 Senior Notes, as applicable,non-cash transaction, other than the Funded Amount at a redemption price equal to 100%payment of accrued and unpaid interest on the principal amount of the Ziggo 2027exchanged January 2021 VM Sterling Senior Secured NotesNotes. In connection with these transactions, Virgin Media recognized a gain on debt modification and extinguishment, net, of $5.7 million. This gain includes (i) the Ziggo 2027 Senior Notes redeemed, respectively, plus accrued but unpaid interestwrite-off of $7.0 million of unamortized premium and additional amounts, if any, to(ii) the datepayment of the redemption (the Special Optional Redemption).$1.3 million of third-party costs.
Subject to the Special Mandatory Redemption,circumstances described below, the Special Optional Redemption and certain other circumstances (as specified in the indenture), the Ziggo 20272025 VM Sterling Senior Secured Notes and the Ziggo 2027 Senior Notes are non-callable until January 15, 2022.2021. At any time prior to January 15, 2022, Ziggo Secured Finance and Ziggo Bond Finance2021, Virgin Media may redeem some or all of the Ziggo 20272025 VM Sterling Senior Secured Notes and the Ziggo 2027 Senior Notes, as applicable, by paying a “make-whole” premium, which is the present value of all remaining scheduled interest payments to January 15, 20222021 using the discount rate (as specified in the indenture) as of the redemption date plus 50 basis points.
On or after January 15, 2022, Ziggo Secured Finance and Ziggo Bond FinanceVirgin Media may redeem all,some or from time to time a part,all of the Ziggo 20272025 VM Sterling Senior Secured Notes and the Ziggo 2027 Senior Notes, as applicable, at the following redemption prices (expressed as a percentage of the principal amount) plus accrued and unpaid interest and additional amounts (as specified in the indenture), if any, to the applicable redemption date, as set forth below:
|
| | |
| | | Redemption price |
| 12-month period commencing January 15: | |
| 2021 | 105.000% |
| 2022 | 102.500% |
| 2023 and thereafter | 100.000% |
|
| | | | | | |
| | | Redemption price |
| | | Ziggo 2027 Dollar Senior Secured Notes | | Ziggo 2027 Euro Senior Secured Notes | | Ziggo 2027 Senior Notes |
| | | | | | | |
| 12-month period commencing January 15: | | | | | |
| 2022 | 102.750% | | 102.125% | | 103.000% |
| 2023 | 101.833% | | 101.417% | | 102.000% |
| 2024 | 100.917% | | 100.708% | | 101.000% |
| 2025 and thereafter | 100.000% | | 100.000% | | 100.000% |
In September 2017, borrowings under the VM Financing Facility were increased by £459.0 million ($614.8 million) as a result of additional loans from Virgin Media Receivables Financing Notes I Designated Activity Company, a third-party special purpose financing entity that is not consolidated by Virgin Media or Liberty Global
CWC Notes
Unitymedia Refinancing Transactions
In June 2017, Unitymedia entered into a new $855.0 million term loan facility (UM Facility B). UM Facility B was issued at 99.75% of par, matures on September 30, 2025, bears interest at a rate of LIBOR + 2.25% and is subject to a LIBOR floor of 0.0%. The details$240.0 million of net proceeds from UM Facility B that were drawn in June 2017, together with existing cash, were used to (i) redeem 10% of the outstanding notesoriginal principal amount of CWC aseach of September 30, 2016 are summarized in the following table:series of notes: (a) the January 2023 UM Dollar Senior
|
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | Outstanding principal
amount | | | | |
| CWC Notes | | Maturity | | Interest
rate | | Borrowing
currency | | U.S. $ equivalent | | Estimated
fair value | | Carrying
value (a) |
| | | | | | | in millions |
| | | | | | | | | | | | | |
| Columbus Senior Notes (b) | March 30, 2021 | | 7.375% | | $ | 1,250.0 |
| | $ | 1,250.0 |
| | $ | 1,326.5 |
| | $ | 1,326.9 |
|
| Sable Senior Notes (c) | August 1, 2022 | | 6.875% | | $ | 750.0 |
| | 750.0 |
| | 780.0 |
| | 771.9 |
|
| CWC Senior Notes (d) | March 25, 2019 | | 8.625% | | £ | 146.7 |
| | 190.3 |
| | 209.8 |
| | 204.8 |
|
| Total | | $ | 2,190.3 |
| | $ | 2,316.3 |
| | $ | 2,303.6 |
|
_______________ | |
(a) | Amounts include the impact of premiums recorded in connection with the acquisition accounting for the CWC Acquisition. |
| |
(b) | The Columbus Senior Notes were issued by Columbus International Inc. (Columbus), a wholly-owned subsidiary of CWC.
|
| |
(c) | The Sable Senior Notes were issued by Sable. |
| |
(d) | The CWC Senior Notes, which are non-callable, were issued by Cable & Wireless International Finance B.V., a wholly-owned subsidiary of CWC. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
Secured Notes and (b) the April 2023 UM Senior Secured Notes and (ii) redeem 10% of the outstanding principal amount of each of the following series of notes: (1) the January 2023 5.75% UM Euro Senior Secured Notes and (2) the January 2023 5.125% UM Euro Senior Secured Notes. In connection with these transactions, Unitymedia recognized a loss on debt modification and extinguishment, net, of $8.2 million. This loss includes (I) the payment of $6.9 million of redemption premium and (II) the write-off of $1.3 million of unamortized discounts and deferred financing costs.
In September 2017, Unitymedia borrowed the remaining $615.0 million under UM Facility B. The net proceeds from the September 2017 borrowing under UM Facility B, together with existing cash, were used to redeem in full the €526.5 million ($621.5 million) outstanding principal amount of the 2022 UM Senior Secured Notes. In connection with these transactions, Unitymedia recognized a loss on debt modification and extinguishment, net, of $22.6 million. This loss includes (i) the payment of $17.3 million of redemption premium and (ii) the write-off of $5.3 million of unamortized discounts and deferred financing costs.
For information regarding a refinancing transaction completed by Unitymedia subsequent to September 30, 2017, see note 16.
UPC Holding Refinancing Transactions
In February 2017, UPC Holding entered into a new $2,150.0 million term loan facility (UPC Facility AP). UPC Facility AP was issued at 99.75% of par, matures on April 15, 2025, bears interest at a rate of LIBOR + 2.75% and is subject to a LIBOR floor of 0.0%. The net proceeds from UPC Facility AP, together with existing cash, were used to prepay in full the $2,150.0 million outstanding principal amount under UPC Facility AN. In connection with these transactions, UPC Holding recognized a loss on debt modification and extinguishment, net, of $8.9 million related to unamortized discount and deferred financing costs.
In June 2017, UPCB Finance VII Limited (UPCB Finance VII) issued €600.0 million ($708.2 million) principal amount of 3.625% senior secured notes due June 15, 2029(the UPCB Finance VII Notes). UPCB Finance VII is a special purpose financing entity, which is 100% owned by a third party, created for the primary purpose of facilitating the offering of senior secured notes, for which UPC Holding is the primary beneficiary. As such, UPC Holding and Liberty Global are required to consolidate UPCB Finance VII. UPCB Finance VII used the proceeds to fund UPC Facility AQ, an additional facility under the UPC Holding Bank Facility, with a subsidiary of UPC Holding as the borrower. The call provisions, maturity and applicable interest rate for UPC Facility AQ are the same as those for the UPCB Finance VII Notes.
The CWC Notes contain certain covenants, eventsnet proceeds from UPC Facility AQ were used, together with existing cash, to prepay in full the €600 million ($708.2 million) outstanding principal amount under UPC Facility AO. In connection with these transactions, UPC Holding recognized a loss on debt modification and extinguishment, net, of default$5.4 million related to unamortized discount and change of control provisions, in addition to other terms and conditions, that are broadly consistent with the general terms and conditions of other Liberty Global notes. For information concerning the general terms and conditions of our notes, see note 10 to the consolidated financial statements included in our 2015 Annual Report on Form 10-K.deferred financing costs.
Subject to the circumstances described below, the Columbus SeniorUPCB Finance VII Notes are non-callable until March 30, 2018 and the Sable Senior Notes are non-callable until August 1, 2018.June 15, 2022. At any time prior to March 30, 2018, in the case of the Columbus Senior Notes and August 1, 2018, in the case of the Sable Senior Notes, Columbus and SableJune 15, 2022, UPCB Finance VII may redeem some or all of the applicable notesUPCB Finance VII Notes by paying a “make-whole” premium, which is generally based on the present value of all remaining scheduled interest payments until March 30, 2018 or August 1, 2018 (as applicable)to June 15, 2022 using the discount rate (as specified in the applicable indenture) as of the redemption date plus 50 basis points, and in the case of theSable Senior Notes is subject to a minimum 1% of the principal amount outstanding at any redemption date prior to August 1, 2018.points.
Columbus and Sable (as applicable)UPCB Finance VII may redeem some or all of the Columbus SeniorUPCB Finance VII Notes and Sable Senior Notes, respectively, at the following redemption prices (expressed as a percentage of the principal amount) plus accrued and unpaid interest and additional amounts (as specified in the applicable indenture), if any, to the applicable redemption date, as set forth below:
|
| | |
| | | Redemption price |
| 12-month period commencing June 15: | |
| 2022 | 101.813% |
| 2023 | 100.906% |
| 2024 | 100.453% |
| 2025 and thereafter | 100.000% |
|
| | | | | | |
| | | | | Redemption price |
| | | | | Columbus Senior Notes | | Sable Senior Notes |
| | | | | | | |
| 12-month period commencing | | March 30 | | August 1 |
| | | | | |
| 2018 | | 103.688% | | 105.156% |
| 2019 | | 101.844% | | 103.438% |
| 2020 | | 100.000% | | 101.719% |
| 2021 and thereafter | | N.A. | | 100.000% |
CWC Credit Facilities
The CWC Credit Facilities are the senior secured credit facilities of certain subsidiaries of CWC. The details of our borrowings under the CWC Credit Facilities as of September 30, 2016 are summarized in the following table:
|
| | | | | | | | | | | | | | | | |
| CWC Credit Facility | | Maturity | | Interest rate | | Facility amount (in borrowing currency) | | Unused borrowing capacity | | Carrying value (a) |
| | | | | | | in millions |
| | | | | | | | | | | |
| CWC Term Loans | December 31, 2022 | | LIBOR + 4.75% (b) | | $ | 800.0 |
| | $ | — |
| | $ | 784.7 |
|
| CWC Revolving Credit Facility | July 31, 2021 | | LIBOR + 3.50% (c) | | $ | 570.0 |
| | 282.0 |
| | 288.0 |
|
| CWC Regional Facilities (d) | various dates ranging from 2016 to 2038 | | 3.33% (e) | | $ | 368.4 |
| | 82.0 |
| | 286.4 |
|
| Total | | $ | 364.0 |
| | $ | 1,359.1 |
|
_______________
| |
(a) | Amounts include the impact of discounts and deferred financing costs, where applicable. |
| |
(b) | The CWC Term Loans are subject to a LIBOR floor of 0.75%. |
| |
(c) | The CWC Revolving Credit Facility has a fee on unused commitments of 0.5%per year.
|
| |
(d) | Represents certain amounts borrowed by CWC Panama, CWC BTC and CWC Jamaica. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
| |
(e) | Represents a blended weighted average rate for all CWC Regional Facilities. |
On May 17, 2016, Sable and Coral-US Co-Borrower LLC (Coral-US), a wholly-owned subsidiaryIn June 2017, UPC Holding issued €635.0 million ($749.5 million) principal amount of CWC, acceded as borrowers and assumed obligations under 3.875% senior notes due June 15, 2029(the credit agreement dated May 16, 2016, pursuant to which (i) Coral-US entered into the CWC Term Loans and (ii) Sable and Coral-US entered into the CWC Revolving Credit Facility.
A portion of theUPC Holding 3.875% Senior Notes). The net proceeds from the CWC Term LoansUPC Holding 3.875% Senior Notes were held in escrow as cash collateral at June 30, 2017, and amounts drawn undersubsequently released in a non-cash transaction to redeem in full the CWC Revolving Credit Facility were used to (i) repay amounts€600.0 million ($708.2 million) outstanding underprincipal of the then existing revolving credit facility and (ii) redeem certain senior secured notes issued by Sable.UPC Holding 6.375% Senior Notes. In connection with these transactions, weUPC Holding recognized a gainloss on debt modification and extinguishment, net, of $1.5$37.7 million. This gainloss includes (i) the payment of $30.7 million of redemption premium and (ii) the write-off of $7.0 million of unamortized discounts and deferred financing costs.
Subject to the circumstances described below, the UPC Holding 3.875% Senior Notes are non-callable until June 15, 2022. At any time prior to June 15, 2022, UPC Holding may redeem some or all of the UPC Holding 3.875% Senior Notes by paying a “make-whole” premium, which is the present value of all remaining scheduled interest payments to June 15, 2022 using the discount rate (as specified in the indenture) as of the redemption date plus 50 basis points.
UPC Holding may redeem some or all of the UPC Holding 3.875% Senior Notes at the following redemption prices (expressed as a percentage of the principal amount) plus accrued and unpaid interest and additional amounts (as specified in the indenture), if any, to the applicable redemption date, as set forth below:
|
| | |
| | | Redemption price |
| 12-month period commencing June 15: | |
| 2022 | 101.938% |
| 2023 | 100.969% |
| 2024 | 100.484% |
| 2025 and thereafter | 100.000% |
For information regarding refinancing transactions completed by UPC Holding subsequent to September 30, 2017, see note 16.
Telenet Refinancing Transactions
In April 2017, Telenet entered into (i) a €1,330.0 million ($1,569.9 million) term loan facility (Telenet Facility AH), which was issued at 99.75% of par, matures on March 31, 2026, bears interest at a rate of EURIBOR + 3.00% and is subject to a EURIBOR floor of 0.0%, and (ii) a $1,800.0 million term loan facility (Telenet Facility AI), which was issued at 99.75% of par, matures on June 30, 2025, bears interest at a rate of LIBOR + 2.75% and is subject to a LIBOR floor of 0.0%. The net proceeds from Telenet Facility AHandTelenet Facility AI were used to prepay in full (a) the €1,600.0 million ($1,888.6 million) outstanding principal amount under Telenet Facility AEand(b) the $1,500.0 million outstanding principal amount under Telenet Facility AF. In connection with these transactions, Telenet recognized a loss on debt modification and extinguishment, net, of $22.1 million related to unamortized discounts and deferred financing costs.
In May 2017, commitments under Telenet Facility AI were increased by $500.0 million (the Telenet Facility AI Add-on). The Telenet Facility AI Add-on was issued at 100% of par with the same maturity and interest rate as Telenet Facility AI. The proceeds from the Telenet Facility AI Add-on were used to prepay in full the €450.0 million ($531.2 million) outstanding principal amount under Telenet Facility U, together with accrued and unpaid interest and the related prepayment premium, to Telenet Finance V Luxembourg S.C.A (Telenet Finance V) and, in turn, Telenet Finance V used such proceeds to redeem in full the €450.0 million outstanding principal amount of its 6.25% senior secured notes. Telenet Finance V is a special purpose financing entity, which is 100% owned by a third party, created for the primary purpose of facilitating the offering of senior secured notes, for which Telenet is the primary beneficiary. As such, Telenet and Liberty Global are required to consolidate Telenet Finance V. In connection with these transactions, Telenet recognized a loss on debt modification and extinguishment, net, of $27.7 million. This loss includes (i) the payment of $21.5 million of redemption premium and (ii) the write-off of $6.2 million of unamortized discount and deferred financing costs.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
C&W Refinancing Transactions
In May 2017, C&W entered into a new $1,125.0 million term loan facility (the C&W Term Loan B-3 Facility). The C&W Term Loan B-3 Facility was issued at 99.5% of par, matures on January 31, 2025, bears interest at a rate of LIBOR + 3.50% and is subject to a LIBOR floor of 0.0%. The net proceeds from the C&W Term Loan B-3 Facility were used to prepay in full the $1,100.0 million outstanding principal amount under the C&W Term Loans. In connection with these transactions, C&W recognized a loss on debt modification and extinguishment, net, of $24.9 million. This loss includes (i) the write-off of $22.7 million of unamortized discount and deferred financing costs and (ii) the payment of $2.2 million of third-party costs.
In July 2017, the commitments under the C&W Term Loan B-3 Facility were increased by $700.0 million (the C&W Term Loan B-3 Facility Add-on). The C&W Term Loan B-3 Facility Add-on was issued at 99.5% of par with the same maturity and interest rate as the C&W Term Loan B-3 Facility.
In August 2017, C&W Senior Financing Designated Activity Company (C&W Senior Financing) issued $700.0 million principal amount of 6.875% senior notes due September 15, 2027 (the 2027 C&W Senior Notes).C&W Senior Financing, which was created for the primary purpose of facilitating the offering of the 2027 C&W Senior Notes, is a special purpose financing entity that is 100% owned by a third-party.
C&W Senior Financing used the proceeds from the 2027 C&W Senior Notes to fund a new term loan (the C&W Financing Loan) under the C&W Credit Facilities, with a subsidiary of C&W as the borrower and certain other C&W subsidiaries as guarantors. The call provisions, maturity and applicable interest rate for the C&W Financing Loan are the same as those for the 2027 C&W Senior Notes. C&W Senior Financing’s obligations under the 2027 C&W Senior Notes are secured by interests over (i) certain of C&W Senior Financing’s bank accounts and (ii) C&W Senior Financing’s rights under the C&W Financing Loan. C&W Senior Financing is prohibited from incurring any additional indebtedness, subject to certain exceptions under the applicable indenture. C&W Senior Financing is dependent upon payments from C&W in order to service its payment obligations under the 2027 C&W Senior Notes.
The C&W Financing Loan creates a variable interest in C&W Senior Financing for which C&W is the primary beneficiary. As a result, C&W and Liberty Global are required to consolidate C&W Senior Financing and, accordingly, the C&W Financing Loan is eliminated in our consolidated financial statements.
Subject to the circumstances described below, the 2027 C&W Senior Notes are non-callable until September 15, 2022. At any time prior to September 15, 2022, C&W Senior Financing may redeem some or all of the 2027 C&W Senior Notes by paying a “make-whole” premium, which is the present value of all remaining scheduled interest payments to September 15, 2022 using the discount rate (as specified in the indenture) as of the redemption date plus 50 basis points.
C&W Senior Financing may redeem some or all of the 2027 C&W Senior Notes at the following redemption prices (expressed as a percentage of the principal amount) plus accrued and unpaid interest and additional amounts (as specified in the indenture), if any, to the applicable redemption date, as set forth below:
|
| | |
| | | Redemption price |
| 12-month period commencing September 15: | |
| 2022 | 103.438% |
| 2023 | 101.719% |
| 2024 | 100.859% |
| 2025 and thereafter | 100.000% |
The net proceeds from the C&W Term Loan B-3 Facility Add-on and the C&W Financing Loan were used (i) to redeem in full the $1,250.0 million outstanding principal amount of the Columbus Senior Notes and (ii) for general corporate purposes. In connection with these transactions, C&W recognized a loss on debt modification and extinguishment, net, of $25.8 million. This loss includes (a) the write-offpayment of $19.0$85.1 million of unamortizedredemption premium and (b) the paymentwrite-off of $17.5$59.3 million of redemptionunamortized premium.
The CWC Credit Facilities contain certain covenants, events of default and change of control provisions, in addition
LIBERTY GLOBAL PLC
Notes to other terms and conditions, that are largely consistent with the general terms and conditions of other Liberty Global credit facilities. For information concerning the general terms of our credit facilities, see note 10 to the consolidated financial statements included in our 2015 Annual Report on Form 10-K.Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
Maturities of Debt and Capital Lease Obligations
Maturities of our debt and capital lease obligations as of September 30, 20162017 are presented below (U.S.(U.S. dollar equivalents based on September 30, 20162017 exchange rates) for the named entity and its subsidiaries, unless otherwise noted. As a result of the held-for-sale presentation of the debt and capital lease obligations of the Dutch JV Entities in our September 30, 2016 condensed consolidated balance sheet, the amounts presented below do not include maturities of the debt and capital lease obligations of these entities. For information regarding the held-for-sale presentation of the Dutch JV Entities, see note 3.noted:
Debt:
| | | | Liberty Global Group | Liberty Global Group |
| | Virgin Media | | Unitymedia | | UPC
Holding (a) | | Telenet (b) | | Other | | Total Liberty Global Group | Virgin Media | | Unitymedia | | UPC
Holding (a) | | Telenet (b) | | Other | | Total Liberty Global Group |
| | in millions | in millions |
| Year ending December 31: | | | | | | | | | | | | | | | | | | | | | | |
| 2016 (remainder of year) | $ | 80.8 |
| | $ | 45.3 |
| | $ | 173.3 |
| | $ | 47.6 |
| | $ | 14.8 |
| | $ | 361.8 |
| |
| 2017 | 767.4 |
| | 145.4 |
| | 547.2 |
| | 18.9 |
| | 376.8 |
| | 1,855.7 |
| |
| 2017 (remainder of year) | | $ | 683.3 |
| | $ | 98.8 |
| | $ | 303.1 |
| | $ | 105.7 |
| | $ | 196.1 |
| | $ | 1,387.0 |
|
| 2018 | 0.8 |
| | 2.3 |
| | — |
| | 8.3 |
| | 1,168.7 |
| | 1,180.1 |
| 1,583.8 |
| | 252.1 |
| | 619.2 |
| | 187.9 |
| | 202.7 |
| | 2,845.7 |
|
| 2019 | 0.8 |
| | 2.4 |
| | — |
| | 19.0 |
| | 316.1 |
| | 338.3 |
| 117.1 |
| | 8.5 |
| | 2.2 |
| | 20.1 |
| | 36.9 |
| | 184.8 |
|
| 2020 | 0.8 |
| | 2.5 |
| | — |
| | 12.6 |
| | 27.6 |
| | 43.5 |
| 83.6 |
| | 8.1 |
| | 5.4 |
| | 13.4 |
| | 202.5 |
| | 313.0 |
|
| 2021 | 3,475.9 |
| | 2.5 |
| | — |
| | 11.1 |
| | 475.0 |
| | 3,964.5 |
| 1,353.1 |
| | 7.6 |
| | 11.3 |
| | 11.8 |
| | 1,384.4 |
| | 2,768.2 |
|
| 2022 | | 385.1 |
| | 7.2 |
| | 4.5 |
| | 12.1 |
| | 322.1 |
| | 731.0 |
|
| Thereafter | 10,462.0 |
| | 7,882.2 |
| | 6,102.8 |
| | 4,736.9 |
| | 27.4 |
| | 29,211.3 |
| 12,652.2 |
| | 8,389.4 |
| | 6,349.7 |
| | 4,881.2 |
| | — |
| | 32,272.5 |
|
| Total debt maturities | 14,788.5 |
| | 8,082.6 |
| | 6,823.3 |
| | 4,854.4 |
| | 2,406.4 |
| | 36,955.2 |
| 16,858.2 |
| | 8,771.7 |
| | 7,295.4 |
| | 5,232.2 |
| | 2,344.7 |
| | 40,502.2 |
|
| Unamortized premiums (discounts), net | 12.7 |
| | — |
| | (13.6 | ) | | (6.6 | ) | | (45.7 | ) | | (53.2 | ) | |
| Unamortized deferred financing costs | (114.6 | ) | | (54.0 | ) | | (34.5 | ) | | (54.5 | ) | | (1.1 | ) | | (258.7 | ) | |
| Premiums, discounts and deferred financing costs, net | | (86.3 | ) | | (49.9 | ) | | (43.0 | ) | | (32.2 | ) | | (30.9 | ) | | (242.3 | ) |
| Total debt | $ | 14,686.6 |
| | $ | 8,028.6 |
| | $ | 6,775.2 |
| | $ | 4,793.3 |
| | $ | 2,359.6 |
| | $ | 36,643.3 |
| $ | 16,771.9 |
| | $ | 8,721.8 |
| | $ | 7,252.4 |
| | $ | 5,200.0 |
| | $ | 2,313.8 |
| | $ | 40,259.9 |
|
| Current portion | $ | 852.6 |
| | $ | 194.3 |
| | $ | 720.6 |
| | $ | 58.2 |
| | $ | 32.9 |
| | $ | 1,858.6 |
| $ | 2,266.6 |
| | $ | 350.9 |
| | $ | 921.7 |
| | $ | 284.7 |
| | $ | 57.9 |
| | $ | 3,881.8 |
|
| Noncurrent portion | $ | 13,834.0 |
| | $ | 7,834.3 |
| | $ | 6,054.6 |
| | $ | 4,735.1 |
| | $ | 2,326.7 |
| | $ | 34,784.7 |
| $ | 14,505.3 |
| | $ | 8,370.9 |
| | $ | 6,330.7 |
| | $ | 4,915.3 |
| | $ | 2,255.9 |
| | $ | 36,378.1 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | LiLAC Group | | |
| | Total Liberty Global Group | | C&W (c) | | VTR | | Liberty Puerto Rico | | Total LiLAC Group | | Total Liberty Global |
| | in millions |
| Year ending December 31: | | | | | | | | | | | |
| 2017 (remainder of year) | $ | 1,387.0 |
| | $ | 98.7 |
| | $ | 7.3 |
| | $ | — |
| | $ | 106.0 |
| | $ | 1,493.0 |
|
| 2018 | 2,845.7 |
| | 79.1 |
| | 79.9 |
| | — |
| | 159.0 |
| | 3,004.7 |
|
| 2019 | 184.8 |
| | 243.9 |
| | — |
| | — |
| | 243.9 |
| | 428.7 |
|
| 2020 | 313.0 |
| | 39.3 |
| | — |
| | — |
| | 39.3 |
| | 352.3 |
|
| 2021 | 2,768.2 |
| | 135.0 |
| | — |
| | — |
| | 135.0 |
| | 2,903.2 |
|
| 2022 | 731.0 |
| | 775.1 |
| | — |
| | 850.0 |
| | 1,625.1 |
| | 2,356.1 |
|
| Thereafter | 32,272.5 |
| | 2,546.7 |
| | 1,400.0 |
| | 92.5 |
| | 4,039.2 |
| | 36,311.7 |
|
| Total debt maturities | 40,502.2 |
| | 3,917.8 |
| | 1,487.2 |
| | 942.5 |
| | 6,347.5 |
| | 46,849.7 |
|
| Premiums, discounts and deferred financing costs, net | (242.3 | ) | | 6.4 |
| | (22.7 | ) | | (11.9 | ) | | (28.2 | ) | | (270.5 | ) |
| Total debt | $ | 40,259.9 |
| | $ | 3,924.2 |
| | $ | 1,464.5 |
| | $ | 930.6 |
| | $ | 6,319.3 |
| | $ | 46,579.2 |
|
| Current portion | $ | 3,881.8 |
| | $ | 160.2 |
| | $ | 87.2 |
| | $ | — |
| | $ | 247.4 |
| | $ | 4,129.2 |
|
| Noncurrent portion | $ | 36,378.1 |
| | $ | 3,764.0 |
| | $ | 1,377.3 |
| | $ | 930.6 |
| | $ | 6,071.9 |
| | $ | 42,450.0 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | LiLAC Group | | |
| | Total Liberty Global Group | | CWC | | VTR | | Liberty Puerto Rico | | Total LiLAC Group | | Total Liberty Global |
| | | | in millions |
| Year ending December 31: | | | | | | | | | | | |
| 2016 (remainder of year) | $ | 361.8 |
| | $ | 58.3 |
| | $ | — |
| | $ | — |
| | $ | 58.3 |
| | $ | 420.1 |
|
| 2017 | 1,855.7 |
| | 83.3 |
| | 35.7 |
| | — |
| | 119.0 |
| | 1,974.7 |
|
| 2018 | 1,180.1 |
| | 40.2 |
| | — |
| | — |
| | 40.2 |
| | 1,220.3 |
|
| 2019 | 338.3 |
| | 226.2 |
| | — |
| | — |
| | 226.2 |
| | 564.5 |
|
| 2020 | 43.5 |
| | 28.4 |
| | — |
| | — |
| | 28.4 |
| | 71.9 |
|
| 2021 | 3,964.5 |
| | 1,561.0 |
| | — |
| | — |
| | 1,561.0 |
| | 5,525.5 |
|
| Thereafter | 29,211.3 |
| | 1,567.3 |
| | 1,400.0 |
| | 942.5 |
| | 3,909.8 |
| | 33,121.1 |
|
| Total debt maturities | 36,955.2 |
| | 3,564.7 |
| | 1,435.7 |
| | 942.5 |
| | 5,942.9 |
| | 42,898.1 |
|
| Unamortized premiums (discounts), net | (53.2 | ) | | 96.7 |
| | — |
| | (7.7 | ) | | 89.0 |
| | 35.8 |
|
| Unamortized deferred financing costs | (258.7 | ) | | (7.5 | ) | | (25.6 | ) | | (8.1 | ) | | (41.2 | ) | | (299.9 | ) |
| Total debt | $ | 36,643.3 |
| | $ | 3,653.9 |
| | $ | 1,410.1 |
| | $ | 926.7 |
| | $ | 5,990.7 |
| | $ | 42,634.0 |
|
| Current portion | $ | 1,858.6 |
| | $ | 116.6 |
| | $ | 35.7 |
| | $ | — |
| | $ | 152.3 |
| | $ | 2,010.9 |
|
| Noncurrent portion | $ | 34,784.7 |
| | $ | 3,537.3 |
| | $ | 1,374.4 |
| | $ | 926.7 |
| | $ | 5,838.4 |
| | $ | 40,623.1 |
|
_______________
| |
| (a) | Amounts include certain senior and senior secured notes issued by special purpose financing entities that are consolidated by UPC Holding and Liberty Global. |
| |
| (b) | Amounts include certain senior and senior secured notes issued by special purpose financing entities that are consolidated by Telenet and Liberty Global. |
| |
| (c) | Amounts include certain senior notes issued by special purpose financing entities that are consolidated by C&W and Liberty Global. |
Capital lease obligations:
43 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Liberty Global Group | | | | |
| | Unitymedia | | Telenet | | Virgin Media | | Other | | Total Liberty Global Group | | Total LiLAC Group | | Total |
| | in millions |
| Year ending December 31: | | | | | | | | | | | | | |
| 2017 (remainder of year) | $ | 22.0 |
| | $ | 22.1 |
| | $ | 7.4 |
| | $ | 12.8 |
| | $ | 64.3 |
| | $ | 7.0 |
| | $ | 71.3 |
|
| 2018 | 87.8 |
| | 75.5 |
| | 17.9 |
| | 38.4 |
| | 219.6 |
| | 7.5 |
| | 227.1 |
|
| 2019 | 87.3 |
| | 66.3 |
| | 9.4 |
| | 32.0 |
| | 195.0 |
| | 3.8 |
| | 198.8 |
|
| 2020 | 86.9 |
| | 62.8 |
| | 6.4 |
| | 26.1 |
| | 182.2 |
| | 1.2 |
| | 183.4 |
|
| 2021 | 86.7 |
| | 60.6 |
| | 6.2 |
| | 21.6 |
| | 175.1 |
| | 0.1 |
| | 175.2 |
|
| 2022 | 86.5 |
| | 62.1 |
| | 7.0 |
| | 16.1 |
| | 171.7 |
| | — |
| | 171.7 |
|
| Thereafter | 682.6 |
| | 233.2 |
| | 179.4 |
| | 50.7 |
| | 1,145.9 |
| | — |
| | 1,145.9 |
|
| Total principal and interest payments | 1,139.8 |
| | 582.6 |
| | 233.7 |
| | 197.7 |
| | 2,153.8 |
| | 19.6 |
| | 2,173.4 |
|
| Amounts representing interest | (424.7 | ) | | (144.7 | ) | | (155.4 | ) | | (31.3 | ) | | (756.1 | ) | | (0.8 | ) | | (756.9 | ) |
| Present value of net minimum lease payments | $ | 715.1 |
| | $ | 437.9 |
| | $ | 78.3 |
| | $ | 166.4 |
| | $ | 1,397.7 |
| | $ | 18.8 |
| | $ | 1,416.5 |
|
| Current portion | $ | 33.9 |
| | $ | 52.3 |
| | $ | 17.0 |
| | $ | 29.6 |
| | $ | 132.8 |
| | $ | 6.7 |
| | $ | 139.5 |
|
| Noncurrent portion | $ | 681.2 |
| | $ | 385.6 |
| | $ | 61.3 |
| | $ | 136.8 |
| | $ | 1,264.9 |
| | $ | 12.1 |
| | $ | 1,277.0 |
|
Non-cash Financing Transactions
During the nine months ended September 30, 2017 and 2016, certain of our refinancing transactions included non-cash borrowings and repayments of debt aggregating $7,731.2 million (excluding a $684.5 million equivalent non-cash repayment of debt from proceeds held in escrow) and $6,131.6 million, respectively.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
Capital lease obligations:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Liberty Global Group | | | | |
| | Unitymedia | | Telenet | | Virgin Media | | Other | | Total Liberty Global Group | | Total LiLAC Group | | Total |
| | in millions |
| Year ending December 31: | | | | | | | | | | | | | |
| 2016 (remainder of year) | $ | 20.6 |
| | $ | 19.6 |
| | $ | 17.6 |
| | $ | 6.7 |
| | $ | 64.5 |
| | $ | 2.1 |
| | $ | 66.6 |
|
| 2017 | 82.3 |
| | 66.1 |
| | 39.0 |
| | 23.5 |
| | 210.9 |
| | 6.5 |
| | 217.4 |
|
| 2018 | 82.3 |
| | 65.0 |
| | 15.8 |
| | 17.5 |
| | 180.6 |
| | 9.4 |
| | 190.0 |
|
| 2019 | 82.4 |
| | 55.0 |
| | 7.5 |
| | 12.6 |
| | 157.5 |
| | 1.8 |
| | 159.3 |
|
| 2020 | 82.3 |
| | 52.0 |
| | 4.4 |
| | 7.6 |
| | 146.3 |
| | 1.2 |
| | 147.5 |
|
| 2021 | 82.3 |
| | 50.1 |
| | 3.7 |
| | 6.8 |
| | 142.9 |
| | 0.1 |
| | 143.0 |
|
| Thereafter | 731.5 |
| | 215.4 |
| | 177.6 |
| | 39.8 |
| | 1,164.3 |
| | — |
| | 1,164.3 |
|
| Total principal and interest payments | 1,163.7 |
| | 523.2 |
| | 265.6 |
| | 114.5 |
| | 2,067.0 |
| | 21.1 |
| | 2,088.1 |
|
| Amounts representing interest | (457.4 | ) | | (129.6 | ) | | (154.9 | ) | | (24.4 | ) | | (766.3 | ) | | (0.6 | ) | | (766.9 | ) |
| Present value of net minimum lease payments | $ | 706.3 |
| | $ | 393.6 |
| | $ | 110.7 |
| | $ | 90.1 |
| | $ | 1,300.7 |
| | $ | 20.5 |
| | $ | 1,321.2 |
|
| Current portion | $ | 28.9 |
| | $ | 44.7 |
| | $ | 44.6 |
| | $ | 19.9 |
| | $ | 138.1 |
| | $ | 6.4 |
| | $ | 144.5 |
|
| Noncurrent portion | $ | 677.4 |
| | $ | 348.9 |
| | $ | 66.1 |
| | $ | 70.2 |
| | $ | 1,162.6 |
| | $ | 14.1 |
| | $ | 1,176.7 |
|
Non-cash Financing Transactions
During the nine months ended September 30, 2016 and 2015, certain of our refinancing transactions included non-cash borrowings and repayments of debt aggregating $6,131.6 million and $3,586.5 million, respectively. In addition, we also completed certain non-cash financing transactions at Ziggo Group Holding, as discussed above.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
(89) Income Taxes
Income tax benefit (expense)expense attributable to our earnings (loss)loss before income taxes differs from the amounts computed using the applicable income tax rate as a result of the following factors:
|
| | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 |
| | in millions |
| | | | | | | | |
| Computed “expected” tax benefit (expense) (a) | $ | 19.1 |
| | $ | (27.6 | ) | | $ | 70.4 |
| | $ | 148.3 |
|
| Change in valuation allowances (b): | | | | | | | |
| Decrease | (21.5 | ) | | (33.5 | ) | | (256.6 | ) | | (419.8 | ) |
| Increase | 1.7 |
| | (4.0 | ) | | 15.6 |
| | 39.8 |
|
| Non-deductible or non-taxable foreign currency exchange results (b): | | | | | | | |
| Increase | 32.3 |
| | 29.3 |
| | 154.4 |
| | 31.5 |
|
| Decrease | (2.6 | ) | | 15.7 |
| | (4.9 | ) | | (14.2 | ) |
| Enacted tax law and rate change (a) | (135.4 | ) | | (1.5 | ) | | (140.6 | ) | | (0.4 | ) |
| Tax effect of intercompany financing | 40.6 |
| | 39.1 |
| | 125.7 |
| | 115.8 |
|
| Non-deductible or non-taxable interest and other expenses (b): | | | | | | | |
| Decrease | (82.7 | ) | | (20.1 | ) | | (127.9 | ) | | (69.1 | ) |
| Increase | 12.5 |
| | 10.4 |
| | 34.4 |
| | 33.7 |
|
| Basis and other differences in the treatment of items associated with investments in subsidiaries and affiliates (b): | | | | | | | |
| Decrease | (18.8 | ) | | (61.1 | ) | | (117.2 | ) | | (88.8 | ) |
| Increase | 18.7 |
| | (2.7 | ) | | 37.5 |
| | 9.1 |
|
| International rate differences (b) (c): | | | | | | | |
| Increase | 47.8 |
| | 29.4 |
| | 124.8 |
| | 154.7 |
|
| Decrease | (22.2 | ) | | (4.7 | ) | | (45.2 | ) | | (39.2 | ) |
| Recognition of previously unrecognized tax benefits | 14.5 |
| | 20.2 |
| | 32.4 |
| | 33.8 |
|
| Other, net | (13.5 | ) | | 13.6 |
| | (19.4 | ) | | 15.2 |
|
| Total income tax benefit (expense) | $ | (109.5 | ) | | $ | 2.5 |
| | $ | (116.6 | ) | | $ | (49.6 | ) |
|
| | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions |
| | | | | | | | |
| Computed “expected” tax benefit (a) | $ | 136.9 |
| | $ | 19.1 |
| | $ | 260.7 |
| | $ | 70.4 |
|
| Change in valuation allowances (b): | | | | | | | |
| Expense | (97.0 | ) | | (21.5 | ) | | (304.7 | ) | | (256.6 | ) |
| Benefit | 22.2 |
| | 1.7 |
| | 57.6 |
| | 15.6 |
|
| Non-deductible or non-taxable foreign currency exchange results (b): | | | | | | | |
| Expense | (71.8 | ) | | (2.6 | ) | | (246.4 | ) | | (4.9 | ) |
| Benefit | 4.0 |
| | 32.3 |
| | 8.3 |
| | 154.4 |
|
| Non-deductible or non-taxable interest and other items (b): | | | | | | | |
| Expense | (27.4 | ) | | (82.7 | ) | | (126.6 | ) | | (127.9 | ) |
| Benefit | 13.8 |
| | 12.5 |
| | 37.8 |
| | 34.4 |
|
| Basis and other differences in the treatment of items associated with investments in subsidiaries and affiliates (b): | | | | | | | |
| Expense | (31.4 | ) | | (15.3 | ) | | (59.4 | ) | | (112.4 | ) |
| Benefit | (0.4 | ) | | 18.7 |
| | 2.2 |
| | 37.5 |
|
| Goodwill impairment | (43.5 | ) | | — |
| | (43.5 | ) | | — |
|
| International rate differences (b) (c): | | | | | | | |
| Benefit | 57.0 |
| | 47.8 |
| | 136.0 |
| | 124.8 |
|
| Expense | (46.3 | ) | | (22.2 | ) | | (92.9 | ) | | (45.2 | ) |
| Enacted tax law and rate change | 1.9 |
| | (135.4 | ) | | 18.3 |
| | (140.6 | ) |
| Recognition of previously unrecognized tax benefits | 4.9 |
| | 14.5 |
| | 13.8 |
| | 32.4 |
|
| Foreign taxes | 2.7 |
| | (12.5 | ) | | (10.6 | ) | | (22.9 | ) |
| Tax effect of intercompany financing | 0.9 |
| | 40.6 |
| | (5.5 | ) | | 125.7 |
|
| Other, net | 5.7 |
| | (4.5 | ) | | 10.6 |
| | (1.3 | ) |
| Total income tax expense | $ | (67.8 | ) | | $ | (109.5 | ) | | $ | (344.3 | ) | | $ | (116.6 | ) |
_______________
| |
| (a) | The statutory or “expected” tax rates are U.K. rates of 19.25% for the 2017 periods and 20.0% for the 2016 periods. The statutory rate isfor the U.K.2017 periods represents the blended rate of 20.0%. During 2015, the U.K. enacted legislation that will changebe in effect for the corporate income taxyear ended December 31, 2017 based on the 20.0% statutory rate fromthat was in effect for the current ratefirst quarter of 20.0% to 19.0% in April 2017 and 18.0%the 19.0% statutory rate that is in April 2020. Substantially alleffect for the remainder of the impact of these rate changes on our deferred tax balances was recorded in the fourth quarter of 2015 when the change in law was enacted. During the third quarter of 2016, the U.K. enacted legislation that will further reduce the corporate income tax rate in April 2020 from 18.0% to 17.0%. The impact of this rate change on our deferred tax balances was recorded this quarter.2017. |
| |
| (b) | Country jurisdictions giving rise to increases within the nine-month periodincome tax benefits are grouped together and shown separately from country jurisdictions giving rise to decreases within the nine-month period.income tax expenses. |
| |
| (c) | Amounts reflect adjustments (either a benefit or an increase or a decrease)expense) to the “expected” tax benefit (expense) for statutory rates in jurisdictions in which we operate outside of the U.K. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
At September 30, 2016,2017, our unrecognized tax benefits of $689.0$589.9 millionincluded $372.4$537.9 million of tax benefits that would have a favorable impact on our effective income tax rate if ultimately recognized, after considering amounts that we would expect to be offset by valuation allowances and other factors.
LIBERTY GLOBAL PLC
NotesDuring the next 12 months, it is reasonably possible that the resolution of ongoing examinations by tax authorities, as well as the expiration of statutes of limitation, could result in reductions to Condensed Consolidated Financial Statements — (Continued)
our unrecognized tax benefits related to tax positions taken as of September 30, 20162017. Other than the potential impacts of these ongoing examinations and the expected expiration of certain statutes of limitation, we do not expect any material changes to our unrecognized tax benefits during the next 12 months. No assurance can be given as to the nature or impact of any changes in our unrecognized tax positions during the next 12 months.
(unaudited)
We are currently undergoing income tax audits in Austria, Chile, the Czech Republic, Germany, Hungary, the Netherlands, Panama, Poland, Slovakia, Trinidad and Tobago, the U.S. and certain other jurisdictions within Latin America and the Caribbean and Latin America.Caribbean. Except as noted below, any adjustments that might arise from the foregoing examinations are not expected to have a material impact on our consolidated financial position or results of operations. In the U.S., we have received notices of adjustment from the Internal Revenue Service with respect to our 20102009 and 20092010 income tax returns, as well as a proposed adjustment to our 2013 withholding tax return. Weand have entered into the appeals process with respect to the 2013,2009 and 2010 and 2009 matters. In Chile, adjustments received from the tax authorities for the tax years 2011, 2012 and 2013 are in dispute. We have appealed the adjustments related to the 2011 and 2012 tax years to the Chilean tax court and intend to file an appeal for the 2013 tax year. Also in Chile, we recorded an income tax receivable in connection with the expected utilization of certain net operating loss carryforwards upon the completion of a merger transaction of two indirect subsidiaries of Liberty Global. We are engaged in an ongoing examination by tax authorities in Chile in connection with this receivable and were notified during the third quarter of 2016 that approximately 48% of our claim has been agreed by the tax authorities. This refund was received during the second quarter of 2017. We intend to pursueare pursuing the payment of the remaining portion of this receivable through all available methods. While we believe that the ultimate resolution of these proposed adjustments and resolution processes will not have a material impact on our consolidated financial position, results of operations or cash flows, no assurance can be given that this will be the case given the amounts involved and the complex nature of the related issues. During the next 12 months, it is reasonably possible that the resolution of ongoing examinations by tax authorities as well as expiration of statutes of limitation could result in significant reductions to our unrecognized tax benefits related to tax positions taken as of September 30, 2016. The amount of any such reductions could range up to $200 million. Other than the potential impacts of these ongoing examinations and the expected expiration of certain statutes of limitation, we do not expect any material changes to our unrecognized tax benefits during the next 12 months. No assurance can be given as to the nature or impact of any changes in our unrecognized tax positions during the next 12 months.
(910) Equity
Liberty Global Shareholders
A summary of the changes in our share capital during the nine months ended September 30, 20162017 is set forth in the table below:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Liberty Global Shares | | LiLAC Shares |
| | Class A | | Class B | | Class C | | Total | | Class A | | Class B | | Class C | | Total |
| | in millions |
| Balance at January 1, 2017 | $ | 2.5 |
| | $ | 0.1 |
| | $ | 6.3 |
| | $ | 8.9 |
| | $ | 0.5 |
| | $ | — |
| | $ | 1.2 |
| | $ | 1.7 |
|
| Repurchase and cancellation of Liberty Global ordinary shares | (0.3 | ) | | — |
| | (0.4 | ) | | (0.7 | ) | | — |
| | — |
| | — |
| | — |
|
| Balance at September 30, 2017 | $ | 2.2 |
| | $ | 0.1 |
| | $ | 5.9 |
| | $ | 8.2 |
| | $ | 0.5 |
| | $ | — |
| | $ | 1.2 |
| | $ | 1.7 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Liberty Global Shares | | LiLAC Shares |
| | Class A | | Class B | | Class C | | Total | | Class A | | Class B | | Class C | | Total |
| | in millions |
| Balance at January 1, 2016 | $ | 2.5 |
| | $ | 0.1 |
| | $ | 5.9 |
| | $ | 8.5 |
| | $ | 0.1 |
| | $ | — |
| | $ | 0.3 |
| | $ | 0.4 |
|
| Impact of the CWC Acquisition (note 3) | 0.3 |
| | — |
| | 0.8 |
| | 1.1 |
| | — |
| | — |
| | 0.1 |
| | 0.1 |
|
| Repurchase and cancellation of Liberty Global ordinary shares | (0.2 | ) | | — |
| | (0.3 | ) | | (0.5 | ) | | — |
| | — |
| | — |
| | — |
|
| Liberty Global call option contracts | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Impact of the LiLAC Distribution | — |
| | — |
| | — |
| | — |
| | 0.4 |
| | — |
| | 0.8 |
| | 1.2 |
|
| Balance at September 30, 2016 | $ | 2.6 |
| | $ | 0.1 |
| | $ | 6.4 |
| | $ | 9.1 |
| | $ | 0.5 |
| | $ | — |
| | $ | 1.2 |
| | $ | 1.7 |
|
Share Repurchases
DuringThe following table provides details of our share repurchases during the nine months ended September 30, 2016, we purchased a total of 25,686,822 Class A Liberty Global Shares at a weighted average price of $32.36 and 23,700,789 Class C Liberty Global Shares at a weighted average price of $33.09 for an aggregate purchase price of $1,615.6 million, including direct acquisition costs and the effects of derivative instruments. At September 30, 2016, the remaining amount authorized for share repurchases was $2,393.3 million.
2017:
46 |
| | | | | | | | | | | | | | | | | | |
| | | 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 | | 32,697,810 |
| | $ | 33.86 |
| | 44,810,851 |
| | $ | 33.10 |
| | $ | 2,590.4 |
|
| | | | | | | | | | | |
| LiLAC Shares | | 2,062,233 |
| | $ | 22.84 |
| | 285,572 |
| | $ | 22.25 |
| | $ | 53.5 |
|
_______________
| |
| (a) | Includes direct acquisition costs, where applicable. As of September 30, 2017, the remaining amount authorized for repurchases of Liberty Global Shares and LiLAC Shares was $367.7 million and $225.5 million, respectively. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
(1011) 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 theour aggregate share-based compensation expense that is included in our operating and SG&A expenses is set forth below:
| | | | Three months ended
September 30, | | Nine months ended September 30, | Three months ended September 30, | | Nine months ended September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions | in millions |
| Liberty Global: | | | | | | | | | | | | | | |
| Performance-based incentive awards (a) | $ | 28.5 |
| | $ | 55.4 |
| | $ | 105.7 |
| | $ | 126.0 |
| $ | (5.7 | ) | | $ | 28.5 |
| | $ | 19.6 |
| | $ | 105.7 |
|
| Other share-based incentive awards | 28.6 |
| | 66.1 |
| | 86.8 |
| | 116.6 |
| 28.5 |
| | 28.6 |
| | 88.1 |
| | 86.8 |
|
Total Liberty Global (b) | 57.1 |
| | 121.5 |
| | 192.5 |
| | 242.6 |
| 22.8 |
| | 57.1 |
| | 107.7 |
| | 192.5 |
|
| Telenet share-based incentive awards | 3.6 |
| | 2.1 |
| | 8.2 |
| | 7.7 |
| 3.4 |
| | 3.6 |
| | 10.9 |
| | 8.2 |
|
| Other | 2.1 |
| | 1.4 |
| | 5.7 |
| | 2.7 |
| 0.3 |
| | 2.1 |
| | 3.3 |
| | 5.7 |
|
| Total | $ | 62.8 |
| | $ | 125.0 |
| | $ | 206.4 |
| | $ | 253.0 |
| $ | 26.5 |
| | $ | 62.8 |
| | $ | 121.9 |
| | $ | 206.4 |
|
| Included in: | | | | | | | | | | | | | | |
| Operating expense: | | | | | | | | |
| Other operating expense: | | | | | | | | |
| Liberty Global Group | $ | 0.8 |
| | $ | 0.9 |
| | $ | 2.4 |
| | $ | 2.7 |
| $ | 1.1 |
| | $ | 0.8 |
| | $ | 2.8 |
| | $ | 2.4 |
|
| LiLAC Group | 0.4 |
| | 0.2 |
| | 0.9 |
| | 0.5 |
| (0.1 | ) | | 0.4 |
| | 0.5 |
| | 0.9 |
|
| Total operating expense | 1.2 |
| | 1.1 |
| | 3.3 |
| | 3.2 |
| |
| Total other operating expense | | 1.0 |
| | 1.2 |
| | 3.3 |
| | 3.3 |
|
| SG&A expense: | | | | | | | | | | | | | | |
| Liberty Global Group | 56.3 |
| | 122.4 |
| | 193.3 |
| | 248.1 |
| 22.1 |
| | 56.3 |
| | 107.2 |
| | 193.3 |
|
| LiLAC Group | 5.3 |
| | 1.5 |
| | 9.8 |
| | 1.7 |
| 3.4 |
| | 5.3 |
| | 11.4 |
| | 9.8 |
|
| Total SG&A expense | 61.6 |
| | 123.9 |
| | 203.1 |
| | 249.8 |
| 25.5 |
| | 61.6 |
| | 118.6 |
| | 203.1 |
|
| Total | $ | 62.8 |
| | $ | 125.0 |
| | $ | 206.4 |
| | $ | 253.0 |
| $ | 26.5 |
| | $ | 62.8 |
| | $ | 121.9 |
| | $ | 206.4 |
|
_______________
| |
| (a) | Includes share-based compensation expense related to (i) performance-based restricted share units (PSUs), including amounts resulting from the 2016 PSUs, as described and defined below, (ii) for the nine-month period,2016 periods, a challenge performance award plan for certain executive officers and key employees (the Challenge Performance Awards) and (iii) the May 2014 grant ofthrough March 2017, performance grant units (PGUs) toheld by our Chief Executive Officer. The Challenge Performance Awards include performance-based share appreciation rights (PSARs) and PSUs. |
| |
(b) | In connection with the LiLAC Transaction, the compensation committee of our board of directors approved modifications to our outstanding share-based incentive awards (the 2015 Award Modifications) in accordance with the underlying share-based incentive plans. As a result of the 2015 Award Modifications, the Black-Scholes fair values of our options, share appreciation rights (SARs) and PSARs increased, resulting in incremental share-based compensation expense of $99.3 million, of which $63.5 million was recognized during the third quarter of 2015 related to awards that vested on or prior to September 30, 2015.
|
The following table provides the aggregate number of options, share appreciation rights (SARs) and PSARs with respect to (i) Liberty Global Shares and (ii) LiLAC Shares that were (a) outstanding and (b) exercisable as of September 30, 2017:
47 |
| | | | | | | | | | | | | |
| | Class A | | Class C |
| | Number of shares underlying awards | | Weighted Average exercise or base price | | Number of shares underlying awards | | Weighted Average exercise or base price |
| | | | | | | | |
| Aggregate number of Liberty Global options, SARs and PSARs: | | | | | | | |
| Outstanding at September 30, 2017 | 15,573,819 |
| | $ | 32.37 |
| | 37,016,924 |
| | $ | 30.20 |
|
| Exercisable at September 30, 2017 | 9,051,140 |
| | $ | 30.06 |
| | 23,933,705 |
| | $ | 27.87 |
|
| Aggregate number of LiLAC options, SARs and PSARs: | | | | | | | |
| Outstanding at September 30, 2017 | 2,535,326 |
| | $ | 31.57 |
| | 5,883,880 |
| | $ | 31.55 |
|
| Exercisable at September 30, 2017 | 1,277,144 |
| | $ | 33.83 |
| | 3,366,278 |
| | $ | 32.91 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
The following table provides certain information relatedthe aggregate number of restricted share units (RSUs) and PSUs with respect to share-based compensation not yet recognized for share-based incentive awards related to(i) Liberty Global ordinary sharesShares and (ii) LiLAC Shares that were outstanding as of September 30, 2016: 2017:
|
| | | | | |
| | Class A | | Class C |
| | | | |
| Aggregate number of RSUs: | | | |
| Liberty Global | 616,517 |
| | 1,219,654 |
|
| LiLAC | 180,279 |
| | 370,298 |
|
| Aggregate number of PSUs: | | | |
| Liberty Global | 2,409,091 |
| | 4,825,099 |
|
| LiLAC | 440,167 |
| | 880,376 |
|
|
| | | | | | | |
| | Non-performance-based awards (a) | | Performance- based awards (a) (b) |
| | | | |
| Total compensation expense not yet recognized (in millions) | $ | 234.6 |
| | $ | 191.4 |
|
| Weighted average period remaining for expense recognition (in years) | 2.8 |
| | 2.5 |
|
_______________
| |
(a) | Amounts relate to awards granted or assumed by Liberty Global under (i) the Liberty Global 2014 Incentive Plan (as amended and restated effective February 24, 2015), (ii) theLiberty Global 2014 Nonemployee Director Incentive Plan, (iii) the Liberty Global, Inc. 2005 Incentive Plan (as amended and restated effective June 7, 2013), (iv) the Liberty Global, Inc. 2005 Nonemployee Director Incentive Plan (as amended and restated effective June 7, 2013) and (v) certain other incentive plans of Virgin Media, including Virgin Media’s 2010 stock incentive plan. All new awards are granted under the Liberty Global 2014 Incentive Plan or the Liberty Global 2014 Nonemployee Director Incentive Plan.
|
| |
(b) | Amounts relate to (i) PSUs, including $171.2 million related to the 2016 PSUs, and (ii) the PGUs. |
The following table summarizes certain information related to the incentive awards granted and exercised with respect to Liberty Global ordinary shares:
|
| | | | | | | |
| | Nine months ended |
| | September 30, |
| | 2016 | | 2015 |
| Assumptions used to estimate fair value of options and SARs granted: | | | |
| Risk-free interest rate | 0.88 - 1.46% |
| 0.96 - 1.89% |
| Expected life | 3.2 - 5.5 years |
| 3.0 - 5.5 years |
| Expected volatility | 27.4 - 37.4% |
| 23.1 - 30.1% |
| Expected dividend yield | none | | none |
| Weighted average grant-date fair value per share of awards granted: | | | |
| Options | $ | 10.31 |
| | $ | 14.73 |
|
| SARs | $ | 8.60 |
| | $ | 10.77 |
|
Restricted share units (RSUs) | $ | 36.83 |
| | $ | 51.85 |
|
| PSUs | $ | 34.03 |
| | $ | 51.57 |
|
| Total intrinsic value of awards exercised (in millions): | | | |
| Options | $ | 15.1 |
| | $ | 105.8 |
|
| SARs | $ | 38.6 |
| | $ | 47.0 |
|
| PSARs | $ | 0.6 |
| | $ | 0.2 |
|
| Cash received from exercise of options (in millions) | $ | 16.1 |
| | $ | 39.9 |
|
| Income tax benefit related to share-based compensation (in millions) | $ | 39.4 |
| | $ | 55.0 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
2016 PSUs
In February 2016, the compensation committee of our board of directors approved the grant of PSUs to executive officers and key employees (the 2016 PSUs) pursuant to a performance plan that is based on the achievement of a specified Adjusted OIBDA CAGR during the three-year period ended December 31, 2018. The 2016 PSUs require delivery of a compound annual growth rate of our consolidated operating cash flow (OCF CAGR) of 6.0% during the three-year performance period ending December 31, 2018, with over- and under-performance payout opportunities should the OCF CAGR exceed or fail to meet the target, as applicable. A performance range of 75% to 167.5% of the target OCF CAGR will generally result in award recipients earning 75% to 300% of their target 2016 PSUs, subject to reduction or forfeiture based on individual performance. The earned 2016 PSUs will vest 50% each on April 1, 2019 and October 1, 2019.
LiLAC Distribution
In connection with the LiLAC Distribution, the compensation committee of our board of directors approved modifications to our outstanding share-based incentive awards (the 2016 Award Modification) in accordance with the underlying share-based incentive plans. The objective of the compensation committee was to ensure a relatively unchanged intrinsic value of outstanding equity awards before and after the LiLAC Distribution. The mechanism to modify outstanding share-based incentive awards, as approved by the compensation committee, utilized the volume-weighted average price of the respective shares for the five days prior to and the five days following the bonus issuance. Based upon this approach, we determined the incremental value associated with the 2016 Award Modification was immaterial. As a result, we did not recognize any incremental share-based compensation expense associated with the 2016 Award Modification. The tables set forth below present the impact resulting from this transaction.
Share-based Award Activity — Liberty Global Ordinary Shares
The following tables summarize the share-based award activity during 2016 with respect to awards issued by Liberty Global:
Liberty Global Shares
|
| | | | | | | | | | | | | |
Options — Class A ordinary shares | | Number of shares | | Weighted average exercise price | | Weighted average remaining contractual term | | Aggregate intrinsic value |
| | | | | | | in years | | in millions |
| Outstanding at January 1, 2016 | | 873,333 |
| | $ | 22.85 |
| | | | |
| Granted | | 79,899 |
| | $ | 36.06 |
| | | | |
| Forfeited | | (9,328 | ) | | $ | 34.59 |
| | | | |
| Exercised | | (207,034 | ) | | $ | 20.99 |
| | | | |
| Outstanding at June 30, 2016 | | 736,870 |
| | $ | 24.66 |
| | | | |
| Impact of the LiLAC Distribution | | 39,000 |
| | $ | (3.49 | ) | | | | |
| Outstanding at July 1, 2016 | | 775,870 |
| | $ | 21.17 |
| | | | |
| Forfeited | | (2,665 | ) | | $ | 17.34 |
| | | | |
| Exercised | | (27,323 | ) | | $ | 19.37 |
| | | | |
| Outstanding at September 30, 2016 | | 745,882 |
| | $ | 21.25 |
| | 4.3 | | $ | 10.2 |
|
| Exercisable at September 30, 2016 | | 528,299 |
| | $ | 17.81 |
| | 3.5 | | $ | 8.9 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
Liberty Global Shares — continued:
|
| | | | | | | | | | | | | |
| Options — Class C ordinary shares | | Number of shares | | Weighted average exercise price | | Weighted average remaining contractual term | | Aggregate intrinsic value |
| | | | | | | in years | | in millions |
| Outstanding at January 1, 2016 | | 2,738,536 |
| | $ | 23.98 |
| | | | |
| Granted | | 159,798 |
| | $ | 35.15 |
| | | | |
| Forfeited | | (51,787 | ) | | $ | 35.07 |
| | | | |
| Exercised | | (541,147 | ) | | $ | 19.40 |
| | | | |
| Outstanding at June 30, 2016 | | 2,305,400 |
| | $ | 25.58 |
| | | | |
| Impact of the LiLAC Distribution | | 166,139 |
| | $ | (3.43 | ) | | | | |
| Outstanding at July 1, 2016 | | 2,471,539 |
| | $ | 22.15 |
| | | | |
| Forfeited | | (31,424 | ) | | $ | 28.98 |
| | | | |
| Exercised | | (78,001 | ) | | $ | 17.86 |
| | | | |
| Outstanding at September 30, 2016 | | 2,362,114 |
| | $ | 22.20 |
| | 5.1 | | $ | 26.6 |
|
| Exercisable at September 30, 2016 | | 1,362,367 |
| | $ | 16.43 |
| | 3.4 | | $ | 23.0 |
|
|
| | | | | | | | | | | | | |
| SARs — Class A ordinary shares | | Number of shares | | Weighted average base price | | Weighted average remaining contractual term | | Aggregate intrinsic value |
| | | | | | | in years | | in millions |
| Outstanding at January 1, 2016 | | 7,693,152 |
| | $ | 34.89 |
| | | | |
| Granted | | 2,641,914 |
| | $ | 37.73 |
| | | | |
| Forfeited | | (123,302 | ) | | $ | 43.48 |
| | | | |
| Exercised | | (336,732 | ) | | $ | 11.64 |
| | | | |
| Outstanding at June 30, 2016 | | 9,875,032 |
| | $ | 36.34 |
| | | | |
| Impact of the LiLAC Distribution | | 616,160 |
| | $ | (4.62 | ) | | | | |
| Outstanding at July 1, 2016 | | 10,491,192 |
| | $ | 31.72 |
| | | | |
| Granted | | 87,750 |
| | $ | 32.04 |
| | | | |
| Forfeited | | (87,183 | ) | | $ | 38.02 |
| | | | |
| Exercised | | (82,765 | ) | | $ | 20.00 |
| | | | |
| Outstanding at September 30, 2016 | | 10,408,994 |
| | $ | 31.76 |
| | 4.7 | | $ | 45.2 |
|
| Exercisable at September 30, 2016 | | 4,629,580 |
| | $ | 27.23 |
| | 3.3 | | $ | 38.5 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
Liberty Global Shares — continued:
|
| | | | | | | | | | | | | |
| SARs — Class C ordinary shares | | Number of shares | | Weighted average base price | | Weighted average remaining contractual term | | Aggregate intrinsic value |
| | | | | | | in years | | in millions |
| Outstanding at January 1, 2016 | | 18,685,347 |
| | $ | 31.70 |
| | | | |
| Granted | | 5,283,828 |
| | $ | 36.60 |
| | | | |
| Forfeited | | (256,622 | ) | | $ | 41.60 |
| | | | |
| Exercised | | (995,103 | ) | | $ | 11.66 |
| | | | |
| Outstanding at June 30, 2016 | | 22,717,450 |
| | $ | 33.61 |
| | | | |
| Impact of the LiLAC Distribution | | 1,412,585 |
| | $ | (4.42 | ) | | | | |
| Outstanding at July 1, 2016 | | 24,130,035 |
| | $ | 29.19 |
| | | | |
| Granted | | 175,500 |
| | $ | 31.00 |
| | | | |
| Forfeited | | (179,988 | ) | | $ | 36.37 |
| | | | |
| Exercised | | (272,380 | ) | | $ | 18.94 |
| | | | |
| Outstanding at September 30, 2016 | | 23,853,167 |
| | $ | 29.27 |
| | 4.4 | | $ | 128.6 |
|
| Exercisable at September 30, 2016 | | 12,022,123 |
| | $ | 24.67 |
| | 3.1 | | $ | 112.9 |
|
|
| | | | | | | | | | | | | |
| PSARs — Class A ordinary shares | | Number of shares | | Weighted average base price | | Weighted average remaining contractual term | | Aggregate intrinsic value |
| | | | | | | in years | | in millions |
| Outstanding at January 1, 2016 | | 2,889,457 |
| | $ | 31.93 |
| | | | |
| Forfeited | | (657 | ) | | $ | 31.87 |
| | | | |
| Outstanding at June 30, 2016 | | 2,888,800 |
| | $ | 31.93 |
| | | | |
| Impact of the LiLAC Distribution | | 16,559 |
| | $ | (4.17 | ) | | | | |
| Outstanding at July 1, 2016 | | 2,905,359 |
| | $ | 27.76 |
| | | | |
| Exercised | | (23,631 | ) | | $ | 27.71 |
| | | | |
| Outstanding at September 30, 2016 (a) | | 2,881,728 |
| | $ | 27.76 |
| | 3.7 | | $ | 18.5 |
|
| Exercisable at September 30, 2016 | | 2,881,728 |
| | $ | 27.76 |
| | 3.7 | | $ | 18.5 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
Liberty Global Shares — continued:
|
| | | | | | | | | | | | | |
| PSARs — Class C ordinary shares | | Number of shares | | Weighted average base price | | Weighted average remaining contractual term | | Aggregate intrinsic value |
| | | | | | | in years | | in millions |
| Outstanding at January 1, 2016 | | 8,629,481 |
| | $ | 30.52 |
| | | | |
| Forfeited | | (1,961 | ) | | $ | 30.46 |
| | | | |
| Outstanding at June 30, 2016 | | 8,627,520 |
| | $ | 30.52 |
| | | | |
| Impact of the LiLAC Distribution | | 51,613 |
| | $ | (4.12 | ) | | | | |
| Outstanding at July 1, 2016 | | 8,679,133 |
| | $ | 26.40 |
| | | | |
| Exercised | | (85,072 | ) | | $ | 26.25 |
| | | | |
| Outstanding at September 30, 2016 (a) | | 8,594,061 |
| | $ | 26.40 |
| | 3.7 | | $ | 57.1 |
|
| Exercisable at September 30, 2016 | | 8,594,061 |
| | $ | 26.40 |
| | 3.7 | | $ | 57.1 |
|
|
| | | | | | | | | |
| RSUs — Class A ordinary shares | | Number of shares | | Weighted average grant-date fair value per share | | Weighted average remaining contractual term |
| | | | | | | in years |
| Outstanding at January 1, 2016 | | 564,976 |
| | $ | 44.06 |
| | |
| Granted | | 268,427 |
| | $ | 37.72 |
| | |
| Forfeited | | (23,233 | ) | | $ | 46.22 |
| | |
| Released from restrictions | | (101,374 | ) | | $ | 41.30 |
| | |
| Outstanding at June 30, 2016 | | 708,796 |
| | $ | 41.98 |
| | |
| Impact of the LiLAC Distribution | | 101,140 |
| | $ | (8.44 | ) | | |
| Outstanding at July 1, 2016 | | 809,936 |
| | $ | 33.54 |
| | |
| Granted | | 25,885 |
| | $ | 32.04 |
| | |
| Forfeited | | (18,226 | ) | | $ | 32.60 |
| | |
| Released from restrictions | | (44,059 | ) | | $ | 32.05 |
| | |
| Outstanding at September 30, 2016 | | 773,536 |
| | $ | 33.60 |
| | 3.0 |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
Liberty Global Shares — continued:
|
| | | | | | | | | |
| RSUs — Class C ordinary shares | | Number of shares | | Weighted
average
grant-date
fair value
per share | | Weighted average remaining contractual term |
| | | | | | | in years |
| Outstanding at January 1, 2016 | | 1,194,182 |
| | $ | 41.64 |
| | |
| Granted | | 536,854 |
| | $ | 36.59 |
| | |
| Forfeited | | (50,385 | ) | | $ | 44.29 |
| | |
| Released from restrictions | | (236,244 | ) | | $ | 38.06 |
| | |
| Outstanding at June 30, 2016 | | 1,444,407 |
| | $ | 40.26 |
| | |
| Impact of the LiLAC Distribution | | 215,866 |
| | $ | (5.38 | ) | | |
| Outstanding at July 1, 2016 | | 1,660,273 |
| | $ | 34.88 |
| | |
| Granted | | 51,770 |
| | $ | 31.00 |
| | |
| Forfeited | | (37,535 | ) | | $ | 37.56 |
| | |
| Released from restrictions | | (97,834 | ) | | $ | 35.90 |
| | |
| Outstanding at September 30, 2016 | | 1,576,674 |
| | $ | 34.63 |
| | 3.2 |
|
| | | | | | | | | |
| PSUs and PGUs — Class A ordinary shares | | Number of shares | | Weighted
average
grant-date
fair value
per share | | Weighted average remaining contractual term |
| | | | | | | in years |
| Outstanding at January 1, 2016 | | 1,690,200 |
| | $ | 42.61 |
| | |
| Granted | | 2,075,660 |
| | $ | 34.70 |
| | |
| Performance adjustment (b) | | 17,499 |
| | $ | 39.33 |
| | |
| Forfeited | | (16,719 | ) | | $ | 45.12 |
| | |
| Released from restrictions | | (696,341 | ) | | $ | 39.51 |
| | |
| Outstanding at June 30, 2016 | | 3,070,299 |
| | $ | 37.93 |
| | |
| Impact of the LiLAC Distribution | | 97,105 |
| | $ | (4.47 | ) | | |
| Outstanding at July 1, 2016 | | 3,167,404 |
| | $ | 33.46 |
| | |
| Granted | | 52,110 |
| | $ | 32.04 |
| | |
| Forfeited | | (3,131 | ) | | $ | 32.47 |
| | |
| Released from restrictions | | (7,778 | ) | | $ | 29.55 |
| | |
| Outstanding at September 30, 2016 | | 3,208,605 |
| | $ | 33.45 |
| | 2.3 |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
Liberty Global Shares — continued:
|
| | | | | | | | | |
| PGUs — Class B ordinary shares | | Number of shares | | Weighted
average
grant-date
fair value
per share | | Weighted average remaining contractual term |
| | | | | | | in years |
| Outstanding at January 1, 2016 | | 666,667 |
| | $ | 42.43 |
| | |
| Released from restriction | | (333,333 | ) | | $ | 42.43 |
| | |
| Outstanding at June 30, 2016 | | 333,334 |
| | $ | 42.43 |
| | |
| Impact of the LiLAC Distribution | | — |
| | $ | (4.71 | ) | | |
| Outstanding at July 1, 2016 | | 333,334 |
| | $ | 37.72 |
| |
|
| Outstanding at September 30, 2016 | | 333,334 |
| | $ | 37.72 |
| | 0.5 |
|
| | | | | | | | | |
| PSUs — Class C ordinary shares | | Number of shares | | Weighted
average
grant-date
fair value
per share | | Weighted average remaining contractual term |
| | | | | | | in years |
| Outstanding at January 1, 2016 | | 2,158,351 |
| | $ | 41.30 |
| | |
| Granted | | 4,151,320 |
| | $ | 33.63 |
| | |
| Performance adjustment (b) | | 35,000 |
| | $ | 38.08 |
| | |
| Forfeited | | (33,508 | ) | | $ | 43.47 |
| | |
| Released from restrictions | | (837,276 | ) | | $ | 35.58 |
| | |
| Outstanding at June 30, 2016 | | 5,473,887 |
| | $ | 36.32 |
| | |
| Impact of the LiLAC Distribution | | 204,111 |
| | $ | (4.30 | ) | | |
| Outstanding at July 1, 2016 | | 5,677,998 |
| | $ | 32.02 |
| | |
| Granted | | 104,220 |
| | $ | 31.00 |
| | |
| Forfeited | | (6,375 | ) | | $ | 34.01 |
| | |
| Released from restrictions | | (17,136 | ) | | $ | 39.98 |
| | |
| Outstanding at September 30, 2016 | | 5,758,707 |
| | $ | 31.98 |
| | 2.5 |
_______________
| |
(a) | All outstanding awards became fully exercisable during 2016 as the performance criteria was achieved during the year. |
| |
(b) | Represents the increase in PSUs associated with the first quarter 2016 determination that 103.6% of the PSUs that were granted in 2014 (the 2014 PSUs) had been earned. Subject to forfeitures, half of the earned 2014 PSUs were released from restrictions on April 1, 2016 and the remainder were released on October 1, 2016.
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
LiLAC Shares
|
| | | | | | | | | | | | | |
| Options — Class A ordinary shares | | Number of shares | | Weighted average exercise price | | Weighted average remaining contractual term | | Aggregate intrinsic value |
| | | | | | | in years | | in millions |
| Outstanding at January 1, 2016 | | 21,233 |
| | $ | 24.29 |
| | | | |
| Granted | | 3,995 |
| | $ | 37.16 |
| | | | |
| Forfeited | | (238 | ) | | $ | 43.84 |
| | | | |
| Exercised | | (1,312 | ) | | $ | 9.56 |
| | | | |
| Outstanding at June 30, 2016 | | 23,678 |
| | $ | 27.08 |
| | | | |
| Impact of the LiLAC Distribution | | 59,140 |
| | $ | 1.71 |
| | | | |
| Outstanding at July 1, 2016 | | 82,818 |
| | $ | 28.79 |
| | | | |
| Outstanding at September 30, 2016 | | 82,818 |
| | $ | 28.79 |
| | 3.9 | | $ | 0.5 |
|
| Exercisable at September 30, 2016 | | 57,331 |
| | $ | 23.13 |
| | 2.9 | | $ | 0.5 |
|
|
| | | | | | | | | | | | | |
| Options — Class C ordinary shares | | Number of shares | | Weighted average exercise price | | Weighted average remaining contractual term | | Aggregate intrinsic value |
| | | | | | | in years | | in millions |
| Outstanding at January 1, 2016 | | 57,742 |
| | $ | 22.42 |
| | | | |
| Granted | | 7,990 |
| | $ | 38.67 |
| | | | |
| Forfeited | | (474 | ) | | $ | 43.91 |
| | | | |
| Exercised | | (4,439 | ) | | $ | 9.86 |
| | | | |
| Outstanding at June 30, 2016 | | 60,819 |
| | $ | 25.30 |
| |
| |
|
| Impact of the LiLAC Distribution | | 151,783 |
| | $ | 1.27 |
| | | | |
| Outstanding at July 1, 2016 | | 212,602 |
| | $ | 26.57 |
| | | | |
| Outstanding at September 30, 2016 | | 212,602 |
| | $ | 26.57 |
| | 3.6 | | $ | 1.5 |
|
| Exercisable at September 30, 2016 | | 161,637 |
| | $ | 21.78 |
| | 2.8 | | $ | 1.5 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
LiLAC Shares — continued:
|
| | | | | | | | | | | | | |
| SARs — Class A ordinary shares | | Number of shares | | Weighted average base price | | Weighted average remaining contractual term | | Aggregate intrinsic value |
| | | | | | | in years | | in millions |
| Outstanding at January 1, 2016 | | 233,192 |
| | $ | 31.07 |
| | | | |
| Granted | | 71,990 |
| | $ | 37.53 |
| | | | |
| Forfeited | | (1,963 | ) | | $ | 39.57 |
| | | | |
| Exercised | | (6,852 | ) | | $ | 7.84 |
| | | | |
| Outstanding at June 30, 2016 | | 296,367 |
| | $ | 33.12 |
| | | | |
| Impact of the LiLAC Distribution | | 719,933 |
| | $ | 2.36 |
| | | | |
| Outstanding at July 1, 2016 | | 1,016,300 |
| | $ | 35.48 |
| | | | |
| Granted | | 492,894 |
| | $ | 34.85 |
| | | | |
| Outstanding at September 30, 2016 | | 1,509,194 |
| | $ | 35.27 |
| | 5.2 | | $ | 1.9 |
|
| Exercisable at September 30, 2016 | | 508,688 |
| | $ | 29.83 |
| | 3.1 | | $ | 1.9 |
|
|
| | | | | | | | | | | | | |
| SARs — Class C ordinary shares | | Number of shares | | Weighted average base price | | Weighted average remaining contractual term | | Aggregate intrinsic value |
| | | | | | | in years | | in millions |
| Outstanding at January 1, 2016 | | 579,273 |
| | $ | 29.73 |
| | | | |
| Granted | | 143,980 |
| | $ | 40.61 |
| | | | |
| Forfeited | | (4,173 | ) | | $ | 39.81 |
| | | | |
| Exercised | | (19,413 | ) | | $ | 8.01 |
| | | | |
| Outstanding at June 30, 2016 | | 699,667 |
| | $ | 32.51 |
| | | | |
| Impact of the LiLAC Distribution | | 1,709,612 |
| | $ | 1.53 |
| | | | |
| Outstanding at July 1, 2016 | | 2,409,279 |
| | $ | 34.04 |
| | | | |
| Granted | | 985,788 |
| | $ | 35.24 |
| | | | |
| Exercised | | (2,126 | ) | | $ | 21.89 |
| | | | |
| Outstanding at September 30, 2016 | | 3,392,941 |
| | $ | 34.40 |
| | 4.9 | | $ | 6.1 |
|
| Exercisable at September 30, 2016 | | 1,366,196 |
| | $ | 28.32 |
| | 2.9 | | $ | 6.1 |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
LiLAC Shares — continued:
|
| | | | | | | | | | | | | |
| PSARs — Class A ordinary shares | | Number of shares | | Weighted average base price | | Weighted average remaining contractual term | | Aggregate intrinsic value |
| | | | | | | in years | | in millions |
| Outstanding at January 1, 2016 | | 140,127 |
| | $ | 30.08 |
| | | | |
| Forfeited | | (33 | ) | | $ | 30.02 |
| | | | |
| Outstanding at June 30, 2016 | | 140,094 |
| | $ | 30.08 |
| | | | |
| Impact of the LiLAC Distribution | | 346,640 |
| | $ | 2.38 |
| | | | |
| Outstanding at July 1, 2016 | | 486,734 |
| | $ | 32.46 |
| | | | |
| Outstanding at September 30, 2016 (a) | | 486,734 |
| | $ | 32.46 |
| | 3.7 | | $ | — |
|
| Exercisable at September 30, 2016 | | 486,734 |
| | $ | 32.46 |
| | 3.7 | | $ | — |
|
|
| | | | | | | | | | | | | |
| PSARs — Class C ordinary shares | | Number of shares | | Weighted average base price | | Weighted average remaining contractual term | | Aggregate intrinsic value |
| | | | | | | in years | | in millions |
| Outstanding at January 1, 2016 | | 418,492 |
| | $ | 30.30 |
| | | | |
| Forfeited | | (99 | ) | | $ | 30.23 |
| | | | |
| Outstanding at June 30, 2016 | | 418,393 |
| | $ | 30.30 |
| | | | |
| Impact of the LiLAC Distribution | | 1,035,238 |
| | $ | 2.01 |
| | | | |
| Outstanding at July 1, 2016 | | 1,453,631 |
| | $ | 32.31 |
| | | | |
| Outstanding at September 30, 2016 (a) | | 1,453,631 |
| | $ | 32.31 |
| | 3.7 | | $ | — |
|
| Exercisable at September 30, 2016 | | 1,453,631 |
| | $ | 32.31 |
| | 3.7 | | $ | — |
|
|
| | | | | | | | | |
| RSUs — Class A ordinary shares | | Number of shares | | Weighted
average
grant-date
fair value
per share | | Weighted average remaining contractual term |
| | | | | | | in years |
| Outstanding at January 1, 2016 | | 1,713 |
| | $ | 45.12 |
| | |
| Granted (b) | | 52,349 |
| | $ | 40.79 |
| | |
| Released from restrictions | | (301 | ) | | $ | 48.09 |
| | |
| Outstanding at June 30, 2016 | | 53,761 |
| | $ | 40.89 |
| | |
| Impact of the LiLAC Distribution | | 3,365 |
| | $ | 0.01 |
| | |
| Outstanding at July 1, 2016 | | 57,126 |
| | $ | 40.90 |
| | |
| Granted | | 126,902 |
| | $ | 34.85 |
| | |
| Forfeited | | (1,574 | ) | | $ | 40.79 |
| | |
| Released from restrictions | | (9,031 | ) | | $ | 40.75 |
| | |
| Outstanding at September 30, 2016 | | 173,423 |
| | $ | 36.48 |
| | 3.2 |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
LiLAC Shares — continued:
|
| | | | | | | | | |
| RSUs — Class C ordinary shares | | Number of shares | | Weighted
average
grant-date
fair value
per share | | Weighted average remaining contractual term |
| | | | | | | in years |
| Outstanding at January 1, 2016 | | 3,428 |
| | $ | 43.97 |
| | |
| Granted (b) | | 128,186 |
| | $ | 42.79 |
| | |
| Released from restrictions | | (606 | ) | | $ | 44.03 |
| | |
| Outstanding at June 30, 2016 | | 131,008 |
| | $ | 42.82 |
| | |
| Impact of the LiLAC Distribution | | 6,938 |
| | $ | (0.18 | ) | | |
| Outstanding at July 1, 2016 | | 137,946 |
| | $ | 42.64 |
| | |
| Granted | | 253,838 |
| | $ | 35.24 |
| | |
| Forfeited | | (3,857 | ) | | $ | 42.79 |
| | |
| Released from restrictions | | (22,043 | ) | | $ | 42.62 |
| | |
| Outstanding at September 30, 2016 | | 365,884 |
| | $ | 37.51 |
| | 3.1 |
|
| | | | | | | | | |
| PSUs and PGUs — Class A ordinary shares | | Number of shares | | Weighted
average
grant-date
fair value
per share | | Weighted average remaining contractual term |
| | | | | | | in years |
| Outstanding at January 1, 2016 | | 86,303 |
| | $ | 42.56 |
| | |
| Granted | | 72,848 |
| | $ | 35.46 |
| | |
| Performance adjustment (c) | | 870 |
| | $ | 39.33 |
| | |
| Forfeited | | (755 | ) | | $ | 46.11 |
| | |
| Released from restrictions | | (34,413 | ) | | $ | 39.57 |
| | |
| Outstanding at June 30, 2016 | | 124,853 |
| | $ | 39.20 |
| | |
| Impact of the LiLAC Distribution | | 316,800 |
| | $ | (3.51 | ) | | |
| Outstanding at July 1, 2016 | | 441,653 |
| | $ | 35.69 |
| | |
| Granted | | 3,116 |
| | $ | 34.85 |
| | |
| Forfeited | | (32 | ) | | $ | 45.75 |
| | |
| Released from restrictions | | (13,698 | ) | | $ | 34.98 |
| | |
| Outstanding at September 30, 2016 | | 431,039 |
| | $ | 35.71 |
| | 2.0 |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
LiLAC Shares — continued:
|
| | | | | | | | | |
| PGUs — Class B ordinary shares | | Number of shares | | Weighted
average
grant-date
fair value
per share | | Weighted average remaining contractual term |
| | | | | | | in years |
| Outstanding at January 1, 2016 | | 33,333 |
| | $ | 42.43 |
| | |
| Released from restriction | | (16,666 | ) | | $ | 42.43 |
| | |
| Outstanding at June 30, 2016 | | 16,667 |
| | $ | 42.43 |
| | |
| Impact of the LiLAC Distribution | | 41,589 |
| | $ | (3.36 | ) | | |
| Outstanding at July 1, 2016 and September 30, 2016 | | 58,256 |
| | $ | 39.07 |
| | 0.5 |
|
| | | | | | | | | |
| PSUs — Class C ordinary shares | | Number of shares | | Weighted
average
grant-date
fair value
per share | | Weighted average remaining contractual term |
| | | | | | | in years |
| Outstanding at January 1, 2016 | | 111,215 |
| | $ | 41.36 |
| | |
| Granted | | 145,696 |
| | $ | 37.70 |
| | |
| Performance adjustment (c) | | 1,741 |
| | $ | 38.08 |
| | |
| Forfeited | | (1,518 | ) | | $ | 44.44 |
| | |
| Released from restrictions | | (40,692 | ) | | $ | 35.69 |
| | |
| Outstanding at June 30, 2016 | | 216,442 |
| | $ | 39.91 |
| | |
| Impact of the LiLAC Distribution | | 563,081 |
| | $ | (5.17 | ) | | |
| Outstanding at July 1, 2016 | | 779,523 |
| | $ | 34.74 |
| | |
| Granted | | 6,232 |
| | $ | 35.24 |
| | |
| Forfeited | | (64 | ) | | $ | 42.85 |
| | |
| Released from restrictions | | (39,982 | ) | | $ | 32.04 |
| | |
| Outstanding at September 30, 2016 | | 745,709 |
| | $ | 34.89 |
| | 2.3 |
_______________
| |
(a) | All outstanding awards became fully exercisable during 2016 as the performance criteria was achieved during the year. |
| |
(b) | Includes 52,306 of LiLAC Class A and 128,100 of LiLAC Class C share-based incentive awards granted to CWC employees following the CWC Acquisition. These awards include 8,370 LiLAC Class A and 20,506 LiLAC Class C awards that will vest on June 1, 2017 and 43,936 LiLAC Class A and 107,594 LiLAC Class C awards that will vest on June 1, 2018. The weighted average grant-date fair values for the LiLAC Class A and LiLAC Class C awards granted to CWC employees were $40.79 and $42.79, respectively. |
| |
(c) | Represents the increase in PSUs associated with the first quarter 2016 determination that 103.6% of the 2014 PSUs had been earned. Half of the earned 2014 PSUs were released from restrictions on April 1, 2016, and, subject to forfeitures, the remainder were released on October 1, 2016. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
(11) (12) Restructuring Liability
A summary of the changes in our restructuring liability during the nine months ended September 30, 20162017 is set forth in the table below:
|
| | | | | | | | | | | | | | | |
| | Employee severance and termination | | Office closures | | Contract termination and other | | Total |
| | in millions |
| | | | | | | | |
| Restructuring liability as of January 1, 2017 | $ | 77.6 |
| | $ | 7.3 |
| | $ | 58.7 |
| | $ | 143.6 |
|
| Restructuring charges | 69.3 |
| | 6.8 |
| | 5.9 |
| | 82.0 |
|
| Cash paid | (105.0 | ) | | (3.3 | ) | | (24.2 | ) | | (132.5 | ) |
| Foreign currency translation adjustments and other | 5.9 |
| | 0.6 |
| | 3.0 |
| | 9.5 |
|
| Restructuring liability as of September 30, 2017 | $ | 47.8 |
| | $ | 11.4 |
| | $ | 43.4 |
| | $ | 102.6 |
|
| | | | | | | | |
| Current portion | $ | 46.3 |
| | $ | 6.1 |
| | $ | 16.0 |
| | $ | 68.4 |
|
| Noncurrent portion | 1.5 |
| | 5.3 |
| | 27.4 |
| | 34.2 |
|
| Total | $ | 47.8 |
| | $ | 11.4 |
| | $ | 43.4 |
| | $ | 102.6 |
|
|
| | | | | | | | | | | | | | | |
| | Employee severance and termination | | Office closures | | Contract termination and other | | Total |
| | in millions |
| | | | | | | | |
| Restructuring liability as of January 1, 2016 | $ | 68.5 |
| | $ | 7.3 |
| | $ | 70.7 |
| | $ | 146.5 |
|
| Restructuring charges (credits) | 105.5 |
| | (3.1 | ) | | 9.3 |
| | 111.7 |
|
| Cash paid | (72.7 | ) | | (2.2 | ) | | (43.6 | ) | | (118.5 | ) |
| Reclassification to held for sale (a) | (29.6 | ) | | (0.6 | ) | | — |
| | (30.2 | ) |
| CWC and BASE liabilities at acquisition date | 7.6 |
| | 8.3 |
| | 1.5 |
| | 17.4 |
|
| Foreign currency translation adjustments and other | (3.0 | ) | | (3.5 | ) | | 9.4 |
| | 2.9 |
|
| Restructuring liability as of September 30, 2016 | $ | 76.3 |
| | $ | 6.2 |
| | $ | 47.3 |
| | $ | 129.8 |
|
| | | | | | | | |
| Current portion | $ | 66.9 |
| | $ | 1.7 |
| | $ | 13.6 |
| | $ | 82.2 |
|
| Noncurrent portion | 9.4 |
| | 4.5 |
| | 33.7 |
| | 47.6 |
|
| Total | $ | 76.3 |
| | $ | 6.2 |
| | $ | 47.3 |
| | $ | 129.8 |
|
_______________
| |
(a) | Represents restructuring liabilities associated with the Dutch JV Entities. For information regarding the held-for-sale presentation of the Dutch JV Entities, see note 3. |
Our restructuring charges during the nine months ended September 30, 20162017 includeemployee severance and termination costs related to certain reorganization and integration activities of $40.7$20.6 million at C&W, $18.6 million in Germany, $20.7$14.9 million in U.K./Ireland $15.3and $8.7 million in the European Operations Division’s central operations, $10.6 million in Chile and $7.1 million in the Netherlands.operations.
We expect to continue to record significant restructuring charges over the next 12 months, due largely to our ongoing company-wide effort to optimize our operating model. In addition, we expect to undertake further restructuring programs in certain of our operating segments, including programs in connection with the integration of acquired entities.
(1213) Earnings or Loss per Share
Basic earnings or loss per shares (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, PSARs, RSUs and convertible securities) as if they had been exercised, vested or converted at the beginning of the periods presented.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
The details of our net earnings (loss)loss attributable to holders of Liberty Global Shares LiLAC Shares and Old Liberty GlobalLiLAC Shares are set forth below:
|
| | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions |
| Net loss attributable to holders of: | | | | | | | |
| Liberty Global Shares | $ | (460.4 | ) | | $ | (167.7 | ) | | $ | (1,389.9 | ) | | $ | (294.1 | ) |
| LiLAC Shares | (331.2 | ) | | (81.8 | ) | | (396.2 | ) | | (223.1 | ) |
| Net loss attributable to Liberty Global shareholders | $ | (791.6 | ) | | $ | (249.5 | ) | | $ | (1,786.1 | ) | | $ | (517.2 | ) |
|
| | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 |
| | in millions |
Net earnings (loss) attributable to holders of: | | | | | | | |
| Liberty Global Shares (a) | $ | (167.7 | ) | | $ | 102.9 |
| | $ | (294.1 | ) | | $ | 102.9 |
|
| LiLAC Shares (a) | (81.8 | ) | | 30.4 |
| | (223.1 | ) | | 30.4 |
|
| Old Liberty Global Shares (b) | — |
| | — |
| | — |
| | (1,002.2 | ) |
Net earnings (loss) attributable to Liberty Global shareholders | $ | (249.5 | ) | | $ | 133.3 |
| | $ | (517.2 | ) | | $ | (868.9 | ) |
_______________
| |
(a) | The amount presented for the 2015 nine-month period relates to the period from July 1, 2015 through September 30, 2015. |
| |
(b) | The amount presented for the 2015 nine-month period relates to the period from January 1, 2015 through June 30, 2015. |
The details of our weighted average ordinary shares outstanding are set forth below:
|
| | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | September 30, | | September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 |
| Weighted average ordinary shares outstanding: | | | | | | | |
| Liberty Global Shares (a): | | | | | | | |
| Basic | 917,345,591 |
| | 872,802,928 |
| | 884,567,424 |
| | 872,802,928 |
|
| Diluted | 917,345,591 |
| | 885,904,765 |
| | 884,567,424 |
| | 885,904,765 |
|
| LiLAC Shares (a): | | | | | | | |
| Basic | 174,075,080 |
| | 43,905,783 |
| | 89,764,378 |
| | 43,905,783 |
|
| Diluted | 174,075,080 |
| | 44,229,892 |
| | 89,764,378 |
| | 44,229,892 |
|
| Old Liberty Global Shares (b): | | | | | | | |
| Basic | | | | | | | 884,040,481 |
|
| Diluted | | | | | | | 884,040,481 |
|
_______________
| |
(a) | The amounts presented for the 2015 nine-month period relate to the period from July 1, 2015 through September 30, 2015. |
| |
(b) | The amounts presented for the 2015 nine-month period relate to the period from January 1, 2015 through June 30, 2015. |
Liberty Global Shares
We reported losses attributable to holders of Liberty Global Shares for the three and nine months ended September 30, 2017 and 2016. Therefore, the potentially dilutive effect at September 30, 2017 and 2016 of the following items waswere not included in the computation of diluted loss per share attributable to holders of Liberty Global Shares because their inclusion would have been anti-dilutive to the computation or, in the case of certain PSUs and, at September 30, 2016, PGUs, because such awards had not yet met the applicable performance criteria: (i) the aggregate number of shares issuable pursuant to outstanding options, SARs, PSARs and RSUs of approximately 54.4 million and 51.2 million, respectively, (ii) the aggregate number of shares issuable pursuant to PSUs and PGUs of approximately 7.2 million and 9.3 million, respectively, and (iii) the aggregate number of shares issuable pursuant to obligations that may be settled in cash or shares of nil and approximately 3.2 million.million, respectively.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
The details of the calculation of EPS with respect to Liberty Global Shares for the three months ended September 30, 2015are set forth in the following table:
|
| | | |
| Numerator: | |
| Net earnings attributable to holders of Liberty Global Shares (basic and diluted EPS computation) (in millions) | $ | 102.9 |
|
| | |
| Denominator: | |
| Weighted average ordinary shares (basic EPS computation) | 872,802,928 |
|
| Incremental shares attributable to the assumed exercise of outstanding options, SARs and PSARs and the release of share units upon vesting (treasury stock method) | 13,101,837 |
|
| Weighted average ordinary shares (diluted EPS computation) | 885,904,765 |
|
A total of 9.7 million options, SARs, PSARs and RSUs and 2.6 million shares issuable upon conversion of Virgin Media’s 6.50% convertible senior notes were excluded from the calculation of diluted earnings per share during the three months ended September 30, 2015 because their effect would have been anti-dilutive.
LiLAC Shares
We reported losses attributable to holders of LiLAC Shares for the three and nine months ended September 30, 2017 and 2016. Therefore, the potentially dilutive effect at September 30, 2017 and 2016 of the following items waswere not included in the computation of diluted loss per share attributable to holders of LiLAC Shares because their inclusion would have been anti-dilutive to the computation or, in the case of certain PSUs and, at September 30, 2016, PGUs, because such awards had not yet met the applicable performance criteria: (i) the aggregate number of shares issuable pursuant to outstanding options, SARs, PSARs and RSUs of approximately 9.0 million and 7.7 million, respectively, and (ii) the aggregate number of shares issuable pursuant to PSUs and PGUs of approximately 1.2 million.
The details of the calculation of EPS with respect to LiLAC Shares for the three months ended September 30, 2015are set forth in the following table:
|
| | | |
| Numerator: | |
| Net earnings attributable to holders of LiLAC Shares (basic and diluted EPS computation) (in millions) | $ | 30.4 |
|
| | |
| Denominator: | |
| Weighted average ordinary shares (basic EPS computation) | 43,905,783 |
|
| Incremental shares attributable to the assumed exercise of outstanding options, SARs and PSARs and the release of share units upon vesting (treasury stock method) | 324,109 |
|
| Weighted average ordinary shares (diluted EPS computation) | 44,229,892 |
|
A total of 0.7 million options, SARs, PSARs and RSUs were excluded from the calculation of diluted earnings per share during the three months ended September 30, 2015 because their effect would have been anti-dilutive.
Old Liberty Global Shares
We reported losses attributable to holders of Old Liberty Global Shares for the six months ended June 30, 2015. Therefore, the potentially dilutive effect at June 30, 2015 of the following items was not included in the computation of diluted loss per share attributable to holders of Old Liberty Global Shares because their inclusion would have been anti-dilutive to the computation or, in the case of certain PSUs and PGUs, because such awards had not yet met the applicable performance criteria: (i) the aggregate number of shares issuable pursuant to outstanding options, SARs, PSARs and RSUs of approximately 42.0 million, (ii) the number of shares issuable pursuant to PSUs and PGUs of approximately 5.31.3 million and (iii) the aggregate number of shares issuable pursuant to obligations that may be settled in cash or shares of approximately 2.6 million.1.2 million, respectively.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
(1314) 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 programming contracts, network and connectivity commitments, programming contracts, purchases of customer premises and other equipment and services, non-cancellable operating leases and other items. The following table sets forth the U.S. dollar equivalents of such commitments as of September 30, 2016. The commitments of CWC have been excluded from the table pending our verification of the amounts. These excluded commitments are not expected to be material in relation to our total commitments.
Due to the held-for-sale presentation of the Dutch JV Entities at September 30, 2016, the amounts presented below do not include the contractual commitments of these entities. For information regarding the held-for-sale presentation of the Dutch JV Entities, see note 3.
2017:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Payments due during: | | |
| | Remainder
of 2017 | | | | | | |
| | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | | Total |
| | in millions |
| | | | | | | | | | | | | | | | |
| Network and connectivity commitments | $ | 478.2 |
| | $ | 516.5 |
| | $ | 378.5 |
| | $ | 285.2 |
| | $ | 266.1 |
| | $ | 74.7 |
| | $ | 924.7 |
| | $ | 2,923.9 |
|
| Programming commitments | 332.6 |
| | 1,134.3 |
| | 647.7 |
| | 282.1 |
| | 96.9 |
| | 48.7 |
| | 63.5 |
| | 2,605.8 |
|
| Purchase commitments | 721.9 |
| | 367.9 |
| | 283.4 |
| | 198.0 |
| | 85.5 |
| | 25.8 |
| | 64.3 |
| | 1,746.8 |
|
| Operating leases | 41.4 |
| | 130.1 |
| | 108.4 |
| | 87.2 |
| | 70.0 |
| | 57.9 |
| | 216.3 |
| | 711.3 |
|
| Other commitments | 15.3 |
| | 30.6 |
| | 14.7 |
| | 9.3 |
| | 8.3 |
| | 8.3 |
| | 7.8 |
| | 94.3 |
|
| Total (a) | $ | 1,589.4 |
|
| $ | 2,179.4 |
|
| $ | 1,432.7 |
|
| $ | 861.8 |
|
| $ | 526.8 |
|
| $ | 215.4 |
|
| $ | 1,276.6 |
|
| $ | 8,082.1 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Payments due during: | | |
| | Remainder
of 2016 | | | | | | |
| | 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | Total |
| | in millions |
| | | | | | | | | | | | | | | | |
| Programming commitments | $ | 255.0 |
| | $ | 964.7 |
| | $ | 836.3 |
| | $ | 424.0 |
| | $ | 174.1 |
| | $ | 48.6 |
| | $ | 21.7 |
| | $ | 2,724.4 |
|
| Network and connectivity commitments | 504.1 |
| | 571.7 |
| | 198.4 |
| | 104.6 |
| | 62.5 |
| | 53.6 |
| | 889.2 |
| | 2,384.1 |
|
| Purchase commitments | 647.3 |
| | 347.9 |
| | 185.3 |
| | 108.0 |
| | 88.9 |
| | 14.4 |
| | 64.8 |
| | 1,456.6 |
|
| Operating leases | 35.3 |
| | 119.6 |
| | 101.8 |
| | 82.3 |
| | 63.7 |
| | 52.2 |
| | 242.5 |
| | 697.4 |
|
| Other commitments | 43.0 |
| | 49.7 |
| | 31.3 |
| | 28.5 |
| | 12.2 |
| | 11.6 |
| | 15.4 |
| | 191.7 |
|
| Total (a) | $ | 1,484.7 |
|
| $ | 2,053.6 |
|
| $ | 1,353.1 |
|
| $ | 747.4 |
|
| $ | 401.4 |
|
| $ | 180.4 |
|
| $ | 1,233.6 |
|
| $ | 7,454.2 |
|
_______________
| |
| (a) | The commitments included in this table do not reflect any liabilities that are included in our September 30, 20162017 condensed consolidated balance sheet. |
Network and connectivity commitments include (i) Telenet’s commitments for certain operating costs associated with its leased network, (ii) commitments associated with our MVNO agreements and (iii) service commitments associated with our network extension projects, primarily in the U.K. Telenet’s commitments for certain operating costs are subject to adjustment based on changes in the network operating costs incurred by Telenet with respect to its own networks. These potential adjustments are not subject to reasonable estimation and, therefore, are not included in the above table. The amounts reflected in the above table with respect to certain of our MVNO commitments represent fixed minimum amounts payable under these agreements and, therefore, may be significantly less than the actual amounts we ultimately pay in these periods.
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. In addition, programming commitments do not include increases in future periods associated with contractual inflation or other price adjustments that are not fixed. Accordingly, the amounts reflected in the above table with respect to these contracts are significantly less than the amounts we expect to pay in these periods under these contracts. Historically, payments to programming vendors have represented a significant portion of our operating costs, and we expect that this will continue to be the case in future periods.In this regard, our total programming and copyright costs aggregated $1,851.5$1,638.0 million(including $1,335.7 million for the Liberty Global Group and $302.3 million for the LiLAC Group) and$1,851.5 million (including $1,609.7 million for the Liberty Global Group and $241.8 million for the LiLAC Group) and$1,716.6 million (including $1,531.8 million for the Liberty Global Group and $184.8 million for the LiLAC Group) during the nine months ended September 30, 2017 and 2016, and 2015, respectively.
Network and connectivity commitments include (i) Telenet’s commitments for certain operating costs associated with its leased network, (ii) service commitments associated with our network extension projects, primarily in the U.K., (iii) commitments associated with our mobile virtual network operator (MVNO) agreements and (iv) certain repair and maintenance, fiber capacity and energy commitments of Unitymedia. Telenet’s commitments for certain operating costs are subject to adjustment based on changes in the network operating costs incurred by Telenet with respect to its own networks. These potential adjustments are not subject to reasonable estimation and, therefore, are not included in the above table. The amounts reflected in the above table with respect to certain of our MVNO commitments represent fixed minimum amounts payable under these agreements and, therefore, may be significantly less than the actual amounts we ultimately pay in these periods.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
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.
Commitments arising from acquisition agreements are not reflected in the above table. For information regarding our commitments under an acquisition agreements,agreement, see note 3.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
In addition to the commitments set forth in the table above, we have significant commitments under (i) derivative instruments and (ii) defined benefit plans and similar agreements, pursuant to which we expect to make payments in future periods. For information regarding our derivative instruments, including the net cash paid or received in connection with these instruments during the nine months ended September 30, 20162017 and 20152016, see note 45.
We also have commitments pursuant to agreements with, and obligations imposed by, franchise authorities and municipalities, which may include obligations in certain markets to move aerial cable to underground ducts or to upgrade, rebuild or extend portions of our broadband communication systems. Such amounts are not included in the above table because they are not fixed or determinable.
Guarantees and Other Credit Enhancements
In the ordinary course of business, we may provide (i) indemnifications to our lenders, our vendors and certain other parties and (ii) performance and/or financial guarantees to local municipalities, our customers and vendors. Historically, these arrangements have not resulted in our company making any material payments and we do not believe that they will result in material payments in the future. In addition, C&W has provided indemnifications of (a) up to $300.0 million in respect of any potential tax-related claims related to the disposal of C&W’s interests in certain businesses in April 2013 and (b) an unlimited amount of qualifying claims associated with the disposal of another business in May 2014. The first indemnification expires in April 2020 and the second expires in May 2020. We do not expect that either of these arrangements will require us to make material payments to the indemnified parties.
The C&W Acquisition constituted a “change of control” under a contingent funding agreement (the Contingent Funding Agreement) between C&W and the trustee of the Cable & Wireless Superannuation Fund (CWSF). Under the terms of the Contingent Funding Agreement, the change in control provided the trustee of the CWSF with the right to satisfy certain funding requirements of the CWSF through the utilization of letters of credit aggregating £100.0 million that were put in place in connection with a previous acquisition made by C&W. On June 26, 2017, the trustee of the CWSF elected to drawdown the full £100.0 million ($129.6 million at the applicable rate) available under the letters of credit, which amount was contributed to the CWSF on July 3, 2017.
Taking into account the aforementioned £100.0 million contribution and based on the triennial valuation that was completed in July 2017, no funding deficit exists with respect to the CWSF. As a result, we do not expect to make material contributions to the CWSF through April 2019.
Legal and Regulatory Proceedings and Other Contingencies
Interkabel Acquisition. On November 26, 2007, Telenet and four associations of municipalities in Belgium, which we refer to as the pure intercommunales or the “PICs,” announced a non-binding agreement-in-principle to transfer the analog and digital television activities of the PICs, including all existing subscribers to Telenet. Subsequently, Telenet and the PICs entered into a binding agreement (the 2008 PICs Agreement), which closed effective October 1, 2008. Beginning in December 2007, Proximus NV/SA (Proximus), the incumbent telecommunications operator in Belgium, instituted several proceedings seeking to block implementation of these agreements. Proximus lodged summary proceedings with the President of the Court of First Instance of Antwerp to obtain a provisional injunction preventing the PICs from effecting the agreement-in-principle and initiated a civil procedure on the merits claiming the annulment of the agreement-in-principle. In March 2008, the President of the Court of First Instance of Antwerp ruled in favor of Proximus in the summary proceedings, which ruling was overturned by the Court of Appeal of Antwerp in June 2008. Proximus brought this appeal judgment before the Cour de Cassation (the Belgian Supreme Court), which confirmed the appeal judgment in September 2010. On April 6, 2009, the Court of First Instance of Antwerp ruled in favor of the PICs and Telenet in the civil procedure on the merits, dismissing Proximus’s request for the rescission of the agreement-in-principle and the 2008 PICs Agreement. On June 12, 2009, Proximus appealed this judgment with the Court of Appeal of Antwerp. In this appeal, Proximus is now also seeking compensation for damages should the 2008 PICs Agreement not be rescinded.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 ($1.61.7 billion).
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
Telenet intends to defend itself vigorously in the resumed proceedings and does not expect an outcome before the end of 2017. No assurance can be given as to the outcome of these or other proceedings. However, an unfavorable outcome of existing or future proceedings could potentially lead to the annulment of the 2008 PICs Agreement and/or to an obligation of Telenet to pay compensation for damages, subject to the relevant provisions of the 2008 PICs Agreement, which stipulate that Telenet is responsible for damages in excess of €20.0 million ($22.523.6 million). We do not expect the ultimate resolution of this matter to have a material impact on our results of operations, cash flows or financial position. No amounts have been accrued by us with respect to this matter as the likelihood of loss is not considered to be probable.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
Deutsche Telekom Litigation. On December 28, 2012, Unitymedia filed a lawsuit against Telekom Deutschland GmbH (Deutsche Telekom), an operating subsidiary of Deutsche Telekom AG, in which Unitymedia asserts that it pays excessive prices for the co-use of Deutsche Telekom’s cable ducts in Unitymedia’s footprint. The Federal Network Agency approved rates for the co-use of certain ducts of Deutsche Telekom in March 2011. Based in part on these approved rates, Unitymedia is seeking a reduction of the annual lease fees (approximately €76 million ($8590 million) for 2012) by approximately two-thirds and 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. Unitymedia is evaluating whether to appealWe have appealed this decision, however, the resolution of this matter may take several years and no assurance can be given that Unitymedia’s claims will be successful. Any recovery by Unitymedia will not be reflected in our consolidated financial statements until such time as the final disposition of this matter has been reached.
Vivendi Litigation. A wholly-owned subsidiary of our company was a plaintiff in certain litigation titled Liberty Media Corporation, et. al. v. Vivendi S.A. and Universal Studios. A predecessor of Liberty Global was a subsidiary of Liberty Media Corporation (Liberty Media) through June 6, 2004. In connection with Liberty Media’s prosecution of the action, our subsidiary assigned its rights to Liberty Media in exchange for a contingent payout in the event Liberty Media recovered any amounts as a result of the action. In February 2016, Vivendi S.A. (Vivendi) and Liberty Media settled the litigation and, as a result of such settlement, our subsidiary received a cash payment of $69.8 million, which is included in other income (expense), net, in our condensed consolidated statement of operations and other investing activities, net, in our condensed consolidated statement of cash flows.We consider this matter to be closed.
Liberty Puerto Rico Matter. In November 2012, we completed a business combination that resulted in, among other matters, the combination of our then operating subsidiary in Puerto Rico with San Juan Cable, LLC dba OneLink Communications (OneLink). In connection with this transaction (the OneLink Acquisition), Liberty Puerto Rico, as the surviving entity, became a party to certain claims previously asserted by the incumbent telephone operator (PRTC) against OneLink based on alleged conduct of OneLink that occurred prior to the OneLink Acquisition (the PRTC Claim). The PRTC Claim includes an allegation that OneLink acted in an anticompetitive manner in connection with a series of legal and regulatory proceedings it initiated against PRTC in Puerto Rico beginning in 2009. In March 2014, a separate class action claim was filed in Puerto Rico (the Class Action Claim) containing allegations substantially similar to those asserted in the PRTC Claim, but alleging ongoing injury on behalf of a consumer class (as opposed to harm to a competitor). In July 2016, the judge presiding over the PRTC Claim in the United States District Court for the District of Maine (the District Court) granted OneLink summary judgment that dismissed the PRTC Claim in its entirety. In August 2016, PRTC filed a notice with the United States First Circuit Court of Appeals indicating it will appeal the District Court’s decision. Based on Liberty Puerto Rico’s assessment of the PRTC Claim on appeal and the Class Action Claim, we have determined that the possibility of loss is remote. Accordingly, Liberty Puerto Rico has reversed its previously-recorded provision and related indemnification asset associated with the PRTC Claim, resulting in a $5.1 million reduction to our SG&A expenses during the third quarter of 2016. Pursuant to indemnification arrangements entered into with the former owners of OneLink, we may recover a portion of the legal fees we incurred in connection with the PRTC Claim.
Belgium Regulatory Developments. In December 2010, the Belgisch Instituut voor Post en Telecommunicatie and the regional regulators for the media sectors (together, the Belgium Regulatory Authorities) published their respective draft decisions reflecting the results of their joint analysis of the broadcasting market in Belgium.
The Belgium Regulatory Authorities adopted a final decision on July 1, 2011 (the July 2011 Decision) with some minor revisions. The regulatory obligations imposed by the July 2011 Decision include (i) an obligation to make a resale offer at “retail minus’’ of the cable analog package available to third-party operators (including Proximus), (ii) an obligation to grant third-party operators (except Proximus) access to digital television platforms (including the basic digital video package) at “retail minus” and (iii) an obligation to make a resale offer at “retail minus’’ of broadband internet access available to beneficiaries of the digital television access obligation that wish to offer bundles of digital video and broadband internet services to their customers (except Proximus).
In February 2012, Telenet submitted draft reference offers regarding the obligations described above, and the Belgium Regulatory Authorities published the final decision on September 9, 2013. Telenet has implemented the access obligations as described in its reference offers and, on March 1, 2016, Orange Belgium NV (Orange Belgium), formerly known as Mobistar SA, launched a commercial offer combining a cable TV package and broadband internet access for certain of their mobile customers. In addition, as a result of the November 2014 decision by the Brussels Court of Appeal described below, on November 14, 2014, Proximus submitted a request to Telenet to commence access negotiations. Telenet contests this request and has asked the Belgium
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
Regulatory Authorities to assess the reasonableness of the Proximus request. The timing for a decision regarding this assessment by the Belgium Regulatory Authorities is not known, but is expected before the end of 2016.known.
On December 14, 2015, the Belgium Regulatory Authorities published a draft decision, which amended previously-issued decisions and sets forth the “retail minus” tariffs of minus 26% for basic television (basic analog and digital video package) and minus 18% for the bundle of basic television and broadband internet services during an initial two-year period. Following this two-year period, the tariffs would change to minus 15% and 7%, respectively. The draft decision was notified to the European Commission and a final decision was adopted on February 19, 2016. A “retail minus” method of pricing involves a wholesale tariff calculated as the retail price for the offered service by Telenet, excluding VAT and copyrights, and further deducting the retail costs avoided by offering the wholesale service (such as costs for billing, franchise, consumer service, marketing and sales).
Telenet filed an appeal against the July 2011 Decision with the Brussels Court of Appeal. On November 12, 2014, the Brussels Court of Appeal rejected Telenet’s appeal of the July 2011 Decision and accepted Proximus’s claim that Proximus should be allowed access to Telenet’s, among other operators, digital television platform and the resale of bundles of digital video and broadband internet services. On November 30, 2015, Telenet filed an appeal of this decision with the Belgian Supreme Court. In 2014, Telenet and wireless operator Orange Belgium each filed an appeal with the Brussels Court of Appeal against the initial retail minus decisions. These appeals are still pending. On April 25, 2016, Telenet also filed an appeal with the Brussels Court of Appeal challenging the February 19, 2016 retail minus decision. There can be no certainty that Telenet’s appeals will be successful.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
On July 7, 2017, the Belgium Regulatory Authorities published draft market review decisions for public consultation regarding the regulation of the wholesale broadband and broadcasting markets (the July 2017 Draft Market Review Decisions). The July 2017 Draft Market Review Decisions include proposals regarding the following regulatory obligations (based on "reasonable tariffs") on cable operators within their respective footprints: (i) an obligation to grant third-party operators access to digital television platforms (including the basic digital video package and analogue TV) and separately (ii) an obligation to make a bitstream offer of broadband internet access available (including fixed voice as an option). The Belgium Regulatory Authorities also propose the continuation of access regulation to Proximus for digital subscriber lines (DSL), adding access to fiber-to-the-home (FTTH) and multicast. DSL would continue to be regulated on cost orientation, while FTTH would be regulated at "reasonable tariffs". The public consultation ran until September 29, 2017, followed by a notification to the European Commission for review. If the July 2017 Draft Market Review Decisions are adopted, they will replace the July 2011 Decision. However, Telenet has serious concerns with these proposals as they would lead to regulating two broadband infrastructures, which is inconsistent with the European Single Market Strategy to stimulate further investments in broadband networks. Telenet has submitted its comments on these proposals to the public consultation.
The July 2011 Decision aimsand the July 2017 Draft Market Review Decisions aim to, and in itstheir 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 growth in the 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 ultimately afforded to Telenet’s network and other competitive factors or market developments.
Financial Transactions Tax. Certain countries in the European Union (E.U.), including Germany, Austria and Slovakia, are participating in an enhanced cooperation procedure to introduce a financial transactions tax (the FTT). Under the draft language of the FTT proposal, a wide range of financial transactions could be taxed at rates of at least 0.01% for derivative transactions based on the notional amount and 0.1% for other covered financial transactions based on the underlying transaction price. Each of the individual countries would be permitted to determine an exact rate, which could be higher than the proposed rates of 0.01% and 0.1%. Any implementation of the FTT could have a global impact because it would apply to all financial transactions where a financial institution is involved (including unregulated entities that engage in certain types of covered activity) and either of the parties (whether the financial institution or its counterparty) is in one of the participating countries. Although there continues to be ongoing discussions in the relevant countries around the FTT, uncertainty remains as to if and when the FTT will be implemented and the breadth of its application. Based on our understanding of the current status of the potential FTT, we do not expect that any implementation of the FTT would occur before 2018. Any imposition of the FTT could increase banking fees and introduce taxes on internal transactions that we currently perform. Due to the uncertainty regarding the FTT, we are currently unable to estimate the financial impact that the FTT could have on our results of operations, cash flows or financial position.
Virgin Media VAT Matters. Virgin Media’s application of VAT with respect to certain revenue generating activities has been challenged by the U.K. tax authorities. Virgin Media has estimated its maximum exposure in the event of an unfavorable outcome to be £46.4£46.7 million ($60.262.6 million) as of September 30, 20162017. No portion of this exposure has been accrued by Virgin Media as the likelihood of loss is not considered to be probable. A court hearing was held at the end of September 2014 in relation to the U.K. tax authorities’ challenge and the timing of the court’s decision is uncertain.
On March 19, 2014, the U.K. government announced a change in legislation with respect to the charging of VAT in connection with prompt payment discounts such as those that we offer to our fixed-line telephony customers. This change, which took effect on May 1, 2014, impacted our company and some of our competitors. The U.K. tax authority issued a decision in the fourth quarter of 2015 challenging our application of the prompt payment discount rules prior to the May 1, 2014 change in legislation. We have appealed this decision. As part of the appeal process, we were required to make aggregate payments of £67.0 million($99.1 million at the respective transaction dates), which included the challenged amount of £63.7 million and related interest of £3.3 million. The aggregate amount paid does not include penalties, which could be significant in the unlikely event that penalties were to be assessed. This matter will likely be subject to court proceedings that could delay the ultimate resolution for an extended period of
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
time. No portion of this potential exposure has been accrued by our company as the likelihood of loss is not considered to be probable.
Hungary VAT Matter. In February 2016, our direct-to-home satellite (DTH) operations in Luxembourg received a second instance decision from the Hungarian tax authorities as a result of an audit with respect to VAT payments that the Hungarian tax authorities conducted for the years 2010 through 2012. The Hungarian tax authorities assessed our DTH operations with an obligation to pay VAT for the years audited of HUF 5,413.2 million ($19.720.5 million), excluding interest and penalties, which could be significant. We believe that our DTH operations have operated in compliance with all applicable rules, regulations and interpretations thereof, including a binding tax ruling that we received from the Hungarian government in 2010. In October 2016 a Budapest court disagreed with the tax authorities and dismissed the assessment. We expectOn February 2, 2017, the final written opinion byHungarian tax authorities appealed the judge in late November, whichBudapest court decision is subject to appeal to the Hungarian Supreme Court.Court and a hearing has been scheduled for November 9, 2017. No portion of this exposure has been accrued by us as the likelihood of loss is not considered to be probable.
Telenet MVNOZiggo Acquisition Matter. Telenet and Orange BelgiumOn August 5, 2015, KPN N.V. appealed the European Commission’s 2014 approval of the acquisition by Liberty Global of Ziggo Holding B.V. (Ziggo). We were not a party to that case. On October 26, 2017, the E.U. General Court annulled the European Commission’s approval on procedural grounds in dispute over amounts payable to Orange Belgium with respect to certain provisions of their MVNO agreement, and Orange Belgium initiated legal proceedings against Telenet claiming, among other things,that it found that the migration period after termination or expirationEuropean Commission had failed to adequately explain the reasons for elements of its decision. This annulment has no impact on day-to-day operations of the MVNO agreement shouldVodafoneZiggo JV. However, Liberty Global’s acquisition of Ziggo will need to be shortened from 24renotified to the European Commission for a new merger clearance. We are in the process of exploring the procedure for this with the European Commission, Vodafone and
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
the VodafoneZiggo JV. The 2014 merger clearance was based on remedies and our expectation is that these remedies will continue. However, there can be no assurance that other remedies will not be required and such remedies may have operational impact for the VodafoneZiggo JV. Our expectation is that a new merger clearance will be secured within six to 12 months to six months. In May 2016,following the parties reached an agreement settling all outstanding legal disputes between both companies and defining the terms and conditions of the MVNO arrangement including the future termination date of the MVNO agreement. We consider this matter closed.annulment decision.
Other Regulatory Issues. Video distribution, broadband internet, fixed-line telephony, mobile and content businesses are regulated in each of the countries in which we or our affiliates operate. The scope of regulation varies from country to country, although in some significant respects regulation in European markets is harmonized under the regulatory structure of the 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. In addition, regulation may restrict our operations and subject them to further competitive pressure, including pricing restrictions, interconnect and other access obligations, and restrictions or controls on content, including content provided by third parties. Failure to comply with current or future regulation could expose our businesses to various penalties.
We have been notified of a fourfold increase inEffective April 1, 2017, the rateable value of our existing network and other assets in the U.K. that is scheduled to become effective on April 1, 2017.increased significantly. This increase will affectaffects 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. The multiplier applicable for 2017 and future years has not yet been confirmed. The phasing of the increase in rates will also be affected by transitional relief, the mechanism for which remains under consultation. If implemented, this proposedThis change, together with a similar proposed change in Ireland, wouldwill result in significant increases in our network infrastructure charges. Depending on the final determinations with respect to the multiplier and transitional relief, weWe estimate that the aggregate amount of these increases will range betweenbe approximately £25 million ($32 million) and £35 million ($4533 million) during 2017 and will build to a maximum aggregate increase of up to £150£100 million ($195134 million) in 2021. We continue to believe that the proposedthese increases are excessive and we will challengeretain the underlying methodologyright of appeal should more favorable agreements be reached with other operators. The rateable value of network and assumptions.
We have security accreditations across a range of B2B products and services in order to increaseother assets constructed under our offerings to public sector organizationsnetwork extension program in the U.K. These accreditations are grantedremains subject to periodic reviews of our policies and proceduresreview by the U.K. governmental authorities. If we were to fail to maintain these accreditations or obtain new accreditations when required, it could impact our ability to provide certain offerings to the public sector.government.
In addition to the foregoing items, we have contingent liabilities related to matters arising in the ordinary course of business, including (i) legal proceedings, (ii) issues involving VAT and wage, property, withholding and other tax issues and (iii) disputes over interconnection, programming, copyright and channel carriage fees. While we generally expect that the amounts required to satisfy these contingencies will not materially differ from any estimated amounts we have accrued, no assurance can be given that the resolution of one or more of these contingencies will not result in a material impact on our results of operations, cash flows or financial position in any given period. Due, in general, to the complexity of the issues involved and, in certain cases, the lack of a clear basis for predicting outcomes, we cannot provide a meaningful range of potential losses or cash outflows that might result from any unfavorable outcomes.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 2016
(unaudited)
(1415) Segment Reporting
We generally identify our reportable segments as segments for which discrete financial information is regularly reviewed by our chief operating decision maker and (i) those consolidated subsidiaries that represent 10% or more of our revenue, Adjusted OIBDA (as defined below) or total assets.assets or (ii) those equity method affiliates where our investment or share of revenue or Adjusted OIBDA represents 10% or more of our total assets, revenue or Adjusted OIBDA, respectively. In certain cases, we may elect to include an operating segment in our segment disclosure that does not meet the above-described criteria for a reportable segment. We evaluate performance and make decisions about allocating resources to our operating segments based on financial measures such as revenue and Adjusted OIBDA. In addition, we review non-financial measures such as subscriber growth, as appropriate.
Adjusted operating income before depreciation and amortization (Adjusted OIBDA) is the primary measure used by our chief operating decision maker to evaluate segment operating performance. Adjusted OIBDA is also a key factor that is used by our internal decision makers to (i) determine how to allocate resources to segments and (ii) evaluate the effectiveness of our management for purposes of annual and other incentive compensation plans. As we use the term, Adjusted OIBDA is defined as operating income before depreciation and amortization, share-based compensation, provisions and provision releases related to significant litigation and impairment, restructuring and other operating items. Other operating items include (a) gains and losses on the disposition of long-lived assets, (b) third-party costs directly associated with successful and unsuccessful acquisitions and dispositions, including legal, advisory and due diligence fees, as applicable, and (c) other acquisition-related items, such as gains and losses on the settlement of contingent consideration. Our internal decision makers believe Adjusted OIBDA is a meaningful measure because it represents a transparent view of our recurring operating performance 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 total segment Adjusted OIBDA
LIBERTY GLOBAL PLC
Notes to our earnings (loss) before income taxes is presented below.Condensed Consolidated Financial Statements — (Continued)
September 30, 2017
(unaudited)
As of September 30, 2016,2017, our reportable segments arewere as follows:
Consolidated:
European Operations Division:
The NetherlandsGermany
Belgium
| |
| • | Central and Eastern Europe |
Central and Eastern Europe
CWC
Chile
Puerto Rico
Nonconsolidated:
VodafoneZiggo JV
On December 31, 2016, we completed the VodafoneZiggo JV Transaction, whereby we contributed Ziggo Group Holding (including Ziggo Sport) to the VodafoneZiggo JV. In our segment presentation for the three and nine months ended September 30, 2016, Ziggo Group Holding is separately reported as “The Netherlands” and Ziggo Sport is included in our “Corporate and Other” category.Effective January 1, 2017, following the closing of the VodafoneZiggo JV Transaction, we have identified the VodafoneZiggo JV as a nonconsolidated reportable segment. Our investment in the VodafoneZiggo JV is attributed to the Liberty Global Group. For additional information regarding the VodafoneZiggo JV Transaction, see note 4.
All of the reportable segments set forth above derive their revenue primarily from consumerresidential and B2B communications services, including video, broadband internet and fixed-line telephony services and, with the exception of Puerto Rico, mobile services. At September 30, 20162017, our operating segmentsoperations in the European Operations Division provided consumerresidential and B2B communications services in 12 European countries and DTH services to customers in the Czech Republic, Hungary, Romania and Slovakia through a Luxembourg-based organization that we refer to as “UPC DTH.” In addition to UPC DTH, our Central and Eastern Europe segment includes our broadband communications operations in the Czech Republic, Hungary, Poland, Romania and Slovakia. The European Operations Division’s central and other category includes (i) costs associated with certain centralized functions, including billing systems, network operations, technology, marketing, facilities, finance and other administrative functions, and (ii) intersegment eliminations within the European Operations Division. In addition, our LiLAC Division provides consumerresidential and B2B communications services in (a) 18 countries, all but one of which are located in Latin America and the Caribbean, through CWC,C&W, (b) Chile through VTR and (c) Puerto Rico through Liberty Puerto Rico. CWCC&W also provides (1) B2B communications services in certain other countries in Latin America and the Caribbean and (2) wholesale communications services over its sub-sea and terrestrial networks that connect over 3040 markets in that region. The corporate and other category for the Liberty Global Group includes the Liberty Global Group’s corporate operations and less significant consolidated operating segments that provide programming and other services. Intersegment eliminations primarily represent the elimination of intercompany transactions between our broadband communications and programming operations.services, including Ziggo Sport through December 31, 2016.
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
Performance Measures of Our Reportable Segments
The amounts presented below represent 100% of each of our reportable segment’s revenue and Adjusted OIBDA. As we have the ability to control Telenet, Liberty Puerto Rico and certain subsidiaries of CWCC&W that are not wholly owned, we consolidate 100% of the revenue and expenses of these entities in our condensed consolidated statements of operations despite the fact that third parties own significant interests in these entities. The noncontrolling owners’ interests in the operating results of Telenet, Liberty Puerto Rico, certain subsidiaries of CWCC&W and other less significant majority-owned subsidiaries are reflected in net earnings or loss attributable to noncontrolling interests in our condensed consolidated statements of operations. Similarly, despite only holding a 50% noncontrolling interest in the VodafoneZiggo JV, we present 100% of its revenue and Adjusted OIBDA in the tables below. Our share of the VodafoneZiggo JV's operating results is included in share of losses of affiliates, net, in our condensed consolidated statements of operations. For additional information, see note 1.notes 1 and 4.
| | | | Revenue | Revenue |
| | Three months ended
September 30, | | Nine months ended
September 30, | Three months ended September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions | in millions |
| Liberty Global Group: | | | | | | | | | | | | | | |
| European Operations Division: | | | | | | | | |
| European Division: | | | | | | | | |
| U.K./Ireland | $ | 1,581.4 |
| | $ | 1,783.3 |
| | $ | 4,985.6 |
| | $ | 5,254.3 |
| $ | 1,617.1 |
| | $ | 1,581.4 |
| | $ | 4,687.6 |
| | $ | 4,985.6 |
|
| Belgium (a) | | 759.1 |
| | 693.4 |
| | 2,106.5 |
| | 2,010.9 |
|
| Germany | | 703.7 |
| | 639.4 |
| | 1,988.6 |
| | 1,900.0 |
|
| Switzerland/Austria | | 456.0 |
| | 439.3 |
| | 1,314.8 |
| | 1,319.7 |
|
| The Netherlands | 681.8 |
| | 681.4 |
| | 2,030.4 |
| | 2,072.7 |
| — |
| | 681.8 |
| | — |
| | 2,030.4 |
|
| Germany | 639.4 |
| | 603.5 |
| | 1,900.0 |
| | 1,792.4 |
| |
| Belgium (a) | 693.4 |
| | 512.5 |
| | 2,010.9 |
| | 1,515.5 |
| |
| Switzerland/Austria | 439.3 |
| | 437.9 |
| | 1,319.7 |
| | 1,326.0 |
| |
| Total Western Europe | 4,035.3 |
| | 4,018.6 |
| | 12,246.6 |
| | 11,960.9 |
| 3,535.9 |
| | 4,035.3 |
| | 10,097.5 |
| | 12,246.6 |
|
| Central and Eastern Europe | 274.5 |
| | 266.2 |
| | 814.6 |
| | 801.6 |
| 306.6 |
| | 274.5 |
| | 866.5 |
| | 814.6 |
|
Central and other | (1.9 | ) | | 0.1 |
| | (5.2 | ) | | (3.7 | ) | 35.4 |
| | (1.9 | ) | | 95.7 |
| | (5.2 | ) |
| Total European Operations Division | 4,307.9 |
| | 4,284.9 |
| | 13,056.0 |
| | 12,758.8 |
| |
| Total European Division | | 3,877.9 |
| | 4,307.9 |
| | 11,059.7 |
| | 13,056.0 |
|
| Corporate and other | 18.0 |
| | 8.3 |
| | 47.8 |
| | 33.9 |
| 0.8 |
| | 18.0 |
| | 1.7 |
| | 47.8 |
|
Intersegment eliminations (b)(c) | (12.8 | ) | | (4.6 | ) | | (35.4 | ) | | (19.9 | ) | (0.2 | ) | | (12.8 | ) | | (0.2 | ) | | (35.4 | ) |
| Total Liberty Global Group | 4,313.1 |
|
| 4,288.6 |
|
| 13,068.4 |
|
| 12,772.8 |
| 3,878.5 |
|
| 4,313.1 |
|
| 11,061.2 |
|
| 13,068.4 |
|
| LiLAC Group: | | | | | | | | | | | | | | |
| LiLAC Division: | | | | | | | | | | | | | | |
| CWC (c) | 568.5 |
| | — |
| | 854.1 |
| | — |
| |
| C&W (d) | | 578.9 |
| | 568.5 |
| | 1,737.2 |
| | 854.1 |
|
| Chile | 221.3 |
| | 204.3 |
| | 631.9 |
| | 633.9 |
| 242.2 |
| | 221.3 |
| | 702.6 |
| | 631.9 |
|
Puerto Rico (d) | 104.8 |
| | 104.5 |
| | 315.6 |
| | 274.1 |
| 88.6 |
| | 104.8 |
| | 303.6 |
| | 315.6 |
|
| Total LiLAC Division | 894.6 |
| | 308.8 |
| | 1,801.6 |
| | 908.0 |
| 909.7 |
| | 894.6 |
| | 2,743.4 |
| | 1,801.6 |
|
| Intersegment eliminations | (0.5 | ) | | — |
| | (0.7 | ) | | — |
| (1.6 | ) | | (0.5 | ) | | (3.5 | ) | | (0.7 | ) |
| Total LiLAC Group | 894.1 |
|
| 308.8 |
|
| 1,800.9 |
|
| 908.0 |
| 908.1 |
|
| 894.1 |
|
| 2,739.9 |
|
| 1,800.9 |
|
| Total | $ | 5,207.2 |
|
| $ | 4,597.4 |
|
| $ | 14,869.3 |
|
| $ | 13,680.8 |
| |
| Intergroup eliminations | | (1.2 | ) | | — |
| | (1.2 | ) | | — |
|
| Total consolidated revenue | | $ | 4,785.4 |
|
| $ | 5,207.2 |
|
| $ | 13,799.9 |
|
| $ | 14,869.3 |
|
| | | | | | | | | |
| VodafoneZiggo JV | | $ | 1,173.6 |
| | $ | — |
| | $ | 3,353.9 |
| | $ | — |
|
_______________
| |
| (a) | The amountsamount presented for the nine months ended September 30, 2016 periods includeexcludes the post-acquisitionpre-acquisition revenue of BASE, which was acquired on February 11, 2016. |
| |
(b) | Amounts are primarily related to transactions between our European Operations Division and our programming operations.
|
| |
(c) | The amounts presented for the 2016 periods reflect the post-acquisition revenue of CWC, which was acquired on May 16, 2016. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
| |
(d)(b) | The amounts presented for the 20152017 periods excludeprimarily include revenue earned from services provided to the pre-acquisition revenue of Choice, which was acquired on June 3, 2015.VodafoneZiggo JV. For additional information, see note 4. |
|
| | | | | | | | | | | | | | | |
| | Adjusted OIBDA |
| | Three months ended
September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 |
| | in millions |
| Liberty Global Group: | | | | | | | |
| European Operations Division: | | | | | | | |
| U.K./Ireland | $ | 696.0 |
| | $ | 777.0 |
| | $ | 2,206.1 |
| | $ | 2,345.9 |
|
| The Netherlands | 375.5 |
| | 388.6 |
| | 1,107.5 |
| | 1,127.5 |
|
| Germany | 408.0 |
| | 380.9 |
| | 1,187.7 |
| | 1,111.8 |
|
| Belgium (a) | 311.1 |
| | 258.3 |
| | 892.2 |
| | 766.1 |
|
| Switzerland/Austria | 273.4 |
| | 269.6 |
| | 795.1 |
| | 778.1 |
|
| Total Western Europe | 2,064.0 |
| | 2,074.4 |
| | 6,188.6 |
| | 6,129.4 |
|
| Central and Eastern Europe | 120.4 |
| | 119.0 |
| | 345.9 |
| | 355.5 |
|
| Central and other | (77.0 | ) | | (74.0 | ) | | (243.7 | ) | | (214.6 | ) |
| Total European Operations Division | 2,107.4 |
| | 2,119.4 |
| | 6,290.8 |
| | 6,270.3 |
|
| Corporate and other | (47.4 | ) | | (55.3 | ) | | (162.6 | ) | | (159.7 | ) |
| Total Liberty Global Group | 2,060.0 |
|
| 2,064.1 |
|
| 6,128.2 |
|
| 6,110.6 |
|
| LiLAC Group: | | | | | | | |
| LiLAC Division: | | | | | | | |
| CWC (b) | 214.5 |
| | — |
| | 315.5 |
| | — |
|
| Chile | 86.9 |
| | 82.5 |
| | 245.0 |
| | 246.1 |
|
| Puerto Rico (c) | 56.1 |
| | 46.4 |
| | 152.9 |
| | 120.7 |
|
| Total LiLAC Division | 357.5 |
|
| 128.9 |
|
| 713.4 |
|
| 366.8 |
|
| Corporate | (2.9 | ) | | (1.1 | ) | | (5.8 | ) | | (3.2 | ) |
| Total LiLAC Group | 354.6 |
|
| 127.8 |
|
| 707.6 |
|
| 363.6 |
|
| Total | $ | 2,414.6 |
|
| $ | 2,191.9 |
|
| $ | 6,835.8 |
|
| $ | 6,474.2 |
|
_______________
| |
(a)(c) | The amounts presented for the 2016 periods includeprimarily relate to transactions between our European Division and Ziggo Sport, which was contributed to the post-acquisitionVodafoneZiggo JV as part of the VodafoneZiggo JV Transaction. |
| |
| (d) | The amount presented for the nine months ended September 30, 2016 excludes the pre-acquisition revenue of C&W, which was acquired on May 16, 2016. |
|
| | | | | | | | | | | | | | | |
| | Adjusted OIBDA |
| | Three months ended September 30, | | Nine months ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions |
| Liberty Global Group: | | | | | | | |
| European Division: | | | | | | | |
| U.K./Ireland | $ | 721.2 |
| | $ | 696.0 |
| | $ | 2,079.5 |
| | $ | 2,206.1 |
|
| Belgium (a) | 356.7 |
| | 311.1 |
| | 972.4 |
| | 892.2 |
|
| Germany | 444.6 |
| | 408.0 |
| | 1,240.2 |
| | 1,187.7 |
|
| Switzerland/Austria | 272.3 |
| | 273.4 |
| | 794.3 |
| | 795.1 |
|
| The Netherlands | — |
| | 375.5 |
| | — |
| | 1,107.5 |
|
| Total Western Europe | 1,794.8 |
| | 2,064.0 |
| | 5,086.4 |
| | 6,188.6 |
|
| Central and Eastern Europe | 137.6 |
| | 120.4 |
| | 371.5 |
| | 345.9 |
|
| Central and other | (46.0 | ) | | (77.0 | ) | | (139.2 | ) | | (243.7 | ) |
| Total European Division | 1,886.4 |
| | 2,107.4 |
| | 5,318.7 |
| | 6,290.8 |
|
| Corporate and other | (50.7 | ) | | (47.4 | ) | | (145.0 | ) | | (162.6 | ) |
| Total Liberty Global Group | 1,835.7 |
|
| 2,060.0 |
|
| 5,173.7 |
|
| 6,128.2 |
|
| LiLAC Group: | | | | | | | |
| LiLAC Division: | | | | | | | |
| C&W (b) | 223.9 |
| | 214.5 |
| | 661.1 |
| | 315.5 |
|
| Chile | 98.0 |
| | 86.9 |
| | 281.9 |
| | 245.0 |
|
| Puerto Rico | 39.6 |
| | 56.1 |
| | 144.7 |
| | 152.9 |
|
| Total LiLAC Division | 361.5 |
|
| 357.5 |
|
| 1,087.7 |
|
| 713.4 |
|
| Corporate and other | (2.1 | ) | | (2.9 | ) | | (6.4 | ) | | (5.8 | ) |
| Total LiLAC Group | 359.4 |
|
| 354.6 |
|
| 1,081.3 |
|
| 707.6 |
|
| Total Adjusted OIBDA of our consolidated reportable segments | $ | 2,195.1 |
|
| $ | 2,414.6 |
|
| $ | 6,255.0 |
|
| $ | 6,835.8 |
|
| | | | | | | | |
| VodafoneZiggo JV | $ | 524.6 |
| | $ | — |
| | $ | 1,454.9 |
| | $ | — |
|
_______________
| |
| (a) | The amount presented for the nine months ended September 30, 2016 excludes the pre-acquisition Adjusted OIBDA of BASE, which was acquired on February 11, 2016. |
| |
| (b) | The amountsamount presented for the nine months ended September 30, 2016 periods reflectexcludes the post-acquisitionpre-acquisition Adjusted OIBDA of CWC,C&W, which was acquired on May 16, 2016. |
| |
(c) | The amounts presented for the 2015 periods exclude the pre-acquisition Adjusted OIBDA of Choice, which was acquired on June 3, 2015. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
The following table provides a reconciliation of total segment Adjusted OIBDA of our consolidated reportable segments to earnings (loss)loss before income taxes:
|
| | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions |
| | | | | | | | |
| Total Adjusted OIBDA of our consolidated reportable segments | $ | 2,195.1 |
| | $ | 2,414.6 |
| | $ | 6,255.0 |
| | $ | 6,835.8 |
|
| Share-based compensation expense | (26.5 | ) | | (62.8 | ) | | (121.9 | ) | | (206.4 | ) |
| Depreciation and amortization | (1,416.2 | ) | | (1,416.9 | ) | | (4,109.8 | ) | | (4,405.4 | ) |
| Impairment, restructuring and other operating items, net | (416.6 | ) | | (32.2 | ) | | (476.4 | ) | | (246.9 | ) |
| Operating income | 335.8 |
| | 902.7 |
| | 1,546.9 |
| | 1,977.1 |
|
| Interest expense | (582.1 | ) | | (664.4 | ) | | (1,691.0 | ) | | (1,940.8 | ) |
| Realized and unrealized gains (losses) on derivative instruments, net | (365.9 | ) | | (436.4 | ) | | (1,149.5 | ) | | 106.9 |
|
| Foreign currency transaction gains (losses), net | (30.5 | ) | | 92.3 |
| | 180.6 |
| | 133.2 |
|
| Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net | 38.8 |
| | 73.8 |
| | (6.2 | ) | | (570.8 | ) |
| Losses on debt modification and extinguishment, net | (85.7 | ) | | (64.8 | ) | | (220.6 | ) | | (88.7 | ) |
| Share of losses of affiliates, net | (26.2 | ) | | (16.1 | ) | | (43.3 | ) | | (71.2 | ) |
| Other income, net | 4.6 |
| | 17.3 |
| | 28.8 |
| | 102.2 |
|
| Loss before income taxes | $ | (711.2 | ) | | $ | (95.6 | ) | | $ | (1,354.3 | ) | | $ | (352.1 | ) |
|
| | | | | | | | | | | | | | | |
| | Three months ended
September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 |
| | in millions |
| | | | | | | | |
| Total segment Adjusted OIBDA | $ | 2,414.6 |
| | $ | 2,191.9 |
| | $ | 6,835.8 |
| | $ | 6,474.2 |
|
| Share-based compensation expense | (62.8 | ) | | (125.0 | ) | | (206.4 | ) | | (253.0 | ) |
| Depreciation and amortization | (1,416.9 | ) | | (1,458.4 | ) | | (4,405.4 | ) | | (4,387.6 | ) |
| Impairment, restructuring and other operating items, net | (32.2 | ) | | (63.0 | ) | | (246.9 | ) | | (105.7 | ) |
| Operating income | 902.7 |
| | 545.5 |
| | 1,977.1 |
| | 1,727.9 |
|
| Interest expense | (664.4 | ) | | (617.7 | ) | | (1,940.8 | ) | | (1,834.4 | ) |
| Realized and unrealized gains (losses) on derivative instruments, net | (436.4 | ) | | 742.0 |
| | 106.9 |
| | 680.8 |
|
| Foreign currency transaction gains (losses), net | 92.3 |
| | (216.2 | ) | | 133.2 |
| | (911.4 | ) |
| Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net | 73.8 |
| | (276.1 | ) | | (570.8 | ) | | (13.9 | ) |
| Losses on debt modification and extinguishment, net | (64.8 | ) | | (34.3 | ) | | (88.7 | ) | | (382.6 | ) |
| Other income (expense), net | 1.2 |
| | (5.1 | ) | | 31.0 |
| | (7.8 | ) |
| Earnings (loss) before income taxes | $ | (95.6 | ) | | $ | 138.1 |
| | $ | (352.1 | ) | | $ | (741.4 | ) |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
Property and Equipment Additions of our Reportable Segments
The property and equipment additions of our consolidated reportable segments (including capital additions financed under vendor financing or capital lease arrangements) are presented below and reconciled to the capital expenditure amounts included in our condensed consolidated statements of cash flows. For additional information concerning capital additions financed under vendor financing and capital lease arrangements, see note 7.8.
| | | | Nine months ended
September 30, | Nine months ended
September 30, |
| | 2016 | | 2015 | 2017 | | 2016 |
| | in millions | in millions |
| Liberty Global Group: | | | | | | |
| European Operations Division: | | | | |
| European Division: | | | | |
| U.K./Ireland | $ | 1,179.3 |
| | $ | 1,114.5 |
| $ | 1,586.9 |
| | $ | 1,179.3 |
|
| Belgium (a) | | 468.1 |
| | 366.5 |
|
| Germany | | 500.3 |
| | 426.8 |
|
| Switzerland/Austria | | 250.2 |
| | 241.3 |
|
| The Netherlands | 421.0 |
| | 382.3 |
| — |
| | 421.0 |
|
| Germany | 426.8 |
| | 415.1 |
| |
| Belgium (a) | 366.5 |
| | 231.5 |
| |
| Switzerland/Austria | 241.3 |
| | 220.7 |
| |
| Total Western Europe | 2,634.9 |
| | 2,364.1 |
| 2,805.5 |
| | 2,634.9 |
|
| Central and Eastern Europe | 221.5 |
| | 185.1 |
| 297.9 |
| | 221.5 |
|
| Central and other | 249.1 |
| | 219.9 |
| 268.9 |
| | 249.1 |
|
| Total European Operations Division | 3,105.5 |
| | 2,769.1 |
| |
| Total European Division | | 3,372.3 |
| | 3,105.5 |
|
Corporate and other | 4.1 |
| | 51.7 |
| 4.1 |
| | 4.1 |
|
| Total Liberty Global Group | 3,109.6 |
| | 2,820.8 |
| 3,376.4 |
| | 3,109.6 |
|
| LiLAC Group: | | | | | | |
| CWC (b) | 144.9 |
| | — |
| |
| C&W (c) | | 280.6 |
| | 144.9 |
|
| Chile | 155.0 |
| | 129.1 |
| 157.3 |
| | 155.0 |
|
Puerto Rico (c) | 65.1 |
| | 55.7 |
| 65.6 |
| | 65.1 |
|
| Total LiLAC Group | 365.0 |
| | 184.8 |
| 503.5 |
| | 365.0 |
|
| Total property and equipment additions | 3,474.6 |
| | 3,005.6 |
| |
| Total consolidated property and equipment additions | | 3,879.9 |
| | 3,474.6 |
|
| Assets acquired under capital-related vendor financing arrangements | (1,439.3 | ) | | (1,090.6 | ) | (1,981.3 | ) | | (1,439.3 | ) |
| Assets acquired under capital leases | (78.0 | ) | | (89.3 | ) | (139.5 | ) | | (78.0 | ) |
| Changes in current liabilities related to capital expenditures | (12.3 | ) | | 25.8 |
| 65.8 |
| | (12.3 | ) |
| Total capital expenditures | $ | 1,945.0 |
| | $ | 1,851.5 |
| |
| Total consolidated capital expenditures | | $ | 1,824.9 |
| | $ | 1,945.0 |
|
| | | | | |
| Property and equipment additions - VodafoneZiggo JV | | $ | 646.5 |
| | $ | — |
|
_______________
| |
| (a) | The amount presented for the nine months ended September 30, 2016 period includesexcludes the post-acquisitionpre-acquisition property and equipment additions of BASE, which was acquired on February 11, 2016. |
| |
| (b) | The amount presented forIncludes amounts that represent the 2016 period reflectsnet impact of changes in inventory levels associated with certain centrally-procured network equipment. This equipment is ultimately transferred to operating subsidiaries within the post-acquisition property and equipment additions of CWC, which was acquired on May 16, 2016.European Division. |
| |
| (c) | The amount presented for the 20152016 period excludes the pre-acquisition property and equipment additions of Choice,C&W, which was acquired on June 3, 2015.May 16, 2016. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
Revenue by Major Category
Our revenue by major category for our consolidated reportable segments is set forth below:below. Effective April 1, 2017, we changed the categories that we present in this table in order to align with our internal reporting. These changes were retroactively reflected in the prior-year periods.
| | | | Three months ended
September 30, | | Nine months ended
September 30, | Three months ended September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions | in millions |
| Subscription revenue (a): | | | | | | | | |
| Residential revenue: | | | | | | | | |
| Residential cable revenue (a): | | | | | | | | |
| Subscription revenue (b): | | | | | | | | |
| Video | $ | 1,632.1 |
| | $ | 1,587.3 |
| | $ | 4,813.8 |
| | $ | 4,798.1 |
| $ | 1,308.1 |
| | $ | 1,598.8 |
| | $ | 3,803.2 |
| | $ | 4,723.5 |
|
| Broadband internet | 1,338.0 |
| | 1,287.5 |
| | 3,980.7 |
| | 3,793.1 |
| 1,211.8 |
| | 1,287.3 |
| | 3,482.7 |
| | 3,844.0 |
|
| Fixed-line telephony | 757.8 |
| | 792.5 |
| | 2,291.3 |
| | 2,387.5 |
| 626.3 |
| | 738.4 |
| | 1,831.2 |
| | 2,239.1 |
|
| Cable subscription revenue | 3,727.9 |
| | 3,667.3 |
| | 11,085.8 |
| | 10,978.7 |
| |
| Mobile (b) | 513.8 |
| | 270.1 |
| | 1,226.1 |
| | 783.0 |
| |
| Total subscription revenue | 4,241.7 |
| | 3,937.4 |
| | 12,311.9 |
| | 11,761.7 |
| 3,146.2 |
| | 3,624.5 |
| | 9,117.1 |
| | 10,806.6 |
|
| B2B revenue (c) | 597.9 |
| | 393.5 |
| | 1,504.6 |
| | 1,154.7 |
| |
| Other revenue (b) (d) | 367.6 |
| | 266.5 |
| | 1,052.8 |
| | 764.4 |
| |
| Non-subscription revenue | | 155.6 |
| | 160.4 |
| | 459.8 |
| | 462.3 |
|
| Total residential cable revenue | | 3,301.8 |
| | 3,784.9 |
| | 9,576.9 |
| | 11,268.9 |
|
| Residential mobile revenue (c): | | | | | | | | |
| Subscription revenue (b) | | 451.6 |
| | 477.0 |
| | 1,296.6 |
| | 1,148.3 |
|
| Non-subscription revenue | | 189.8 |
| | 169.5 |
| | 517.3 |
| | 487.5 |
|
| Total residential mobile revenue | | 641.4 |
| | 646.5 |
| | 1,813.9 |
| | 1,635.8 |
|
| Total residential revenue | | 3,943.2 |
| | 4,431.4 |
| | 11,390.8 |
| | 12,904.7 |
|
| B2B revenue (d): | | | | | | | | |
| Subscription revenue | | 144.3 |
| | 131.5 |
| | 391.8 |
| | 361.4 |
|
| Non-subscription revenue | | 639.1 |
| | 621.9 |
| | 1,854.6 |
| | 1,536.6 |
|
| Total B2B revenue | | 783.4 |
| | 753.4 |
| | 2,246.4 |
| | 1,898.0 |
|
| Other revenue (e) | | 58.8 |
| | 22.4 |
| | 162.7 |
| | 66.6 |
|
| Total | $ | 5,207.2 |
| | $ | 4,597.4 |
| | $ | 14,869.3 |
| | $ | 13,680.8 |
| $ | 4,785.4 |
| | $ | 5,207.2 |
| | $ | 13,799.9 |
| | $ | 14,869.3 |
|
_______________
| |
| (a) | SubscriptionResidential cable subscription revenue includes amounts received from subscribers for ongoing services, excludingservices. Residential cable non-subscription revenue includes, among other items, channel carriage fees, installation revenue, late fees and late fees. revenue from the sale of equipment. |
| |
| (b) | 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. |
| |
(b) | Mobile subscription revenue excludes mobile interconnect revenue of $78.4 million and $52.6 million during the three months ended September 30, 2016 and 2015, respectively, and $232.6 million and $160.1 million during the nine months ended September 30, 2016 and 2015, respectively. Mobile interconnect revenue and revenue from mobile handset sales are included in other revenue. |
| |
| (c) | B2BResidential 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 business broadband internet, video, voice,sales of mobile handsets and data services offered to medium to large enterprises and, on a wholesale basis, to other operators. We also providedevices.
|
| |
| (d) | B2B subscription revenue represents revenue from services to certain small or home office (SOHO) subscribers. SOHO subscribers pay a premium price to receive expanded service levels along with video, broadband internet, fixed-line telephony or mobile services that are the same or similar to the mass marketed products offered to our residential subscribers. Revenue from SOHO subscribers, which is included in subscriptionB2B non-subscription revenue aggregated $132.7 millionincludes business broadband internet, video, fixed-line telephony, mobile and $78.7 million during the three months ended September 30, 2016data services offered to medium to large enterprises and, 2015, respectively, and $356.7 million and $213.5 million during the nine months ended September 30, 2016 and 2015, respectively.on a wholesale basis, to other operators. |
| |
(d)(e) | Other revenue includes, among other items, mobile handset sales, interconnect, channel carriage fee and installation revenue.revenue earned from services provided to the VodafoneZiggo JV. |
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
Geographic Segments
The revenue of our geographic segments is set forth below:
|
| | | | | | | | | | | | | | | |
| | Three months ended
September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 |
| | in millions |
| Liberty Global Group: | | | | | | | |
| European Operations Division: | | | | | | | |
| U.K. | $ | 1,473.6 |
| | $ | 1,686.0 |
| | $ | 4,657.7 |
| | $ | 4,960.4 |
|
| The Netherlands | 681.8 |
| | 681.4 |
| | 2,030.4 |
| | 2,072.7 |
|
| Belgium (a) | 693.4 |
| | 512.5 |
| | 2,010.9 |
| | 1,515.5 |
|
| Germany | 639.4 |
| | 603.5 |
| | 1,900.0 |
| | 1,792.4 |
|
| Switzerland | 344.0 |
| | 345.4 |
| | 1,033.8 |
| | 1,049.5 |
|
| Ireland | 107.8 |
| | 97.3 |
| | 327.9 |
| | 293.9 |
|
| Poland | 98.9 |
| | 99.1 |
| | 294.9 |
| | 301.3 |
|
| Austria | 95.3 |
| | 92.5 |
| | 285.9 |
| | 276.5 |
|
| Hungary | 69.1 |
| | 64.6 |
| | 202.5 |
| | 194.8 |
|
| The Czech Republic | 44.7 |
| | 44.6 |
| | 134.2 |
| | 132.8 |
|
| Romania | 43.2 |
| | 40.0 |
| | 127.5 |
| | 117.6 |
|
| Slovakia | 14.4 |
| | 14.7 |
| | 44.1 |
| | 44.7 |
|
| Other | 2.3 |
| | 3.3 |
| | 6.2 |
| | 6.7 |
|
| Total European Operations Division | 4,307.9 |
| | 4,284.9 |
| | 13,056.0 |
| | 12,758.8 |
|
| Other, including intersegment eliminations | 5.2 |
| | 3.7 |
| | 12.4 |
| | 14.0 |
|
| Total Liberty Global Group | 4,313.1 |
|
| 4,288.6 |
|
| 13,068.4 |
|
| 12,772.8 |
|
| LiLAC Group: | | | | | | | |
| LiLAC Division: | | | | | | | |
| CWC (b): | | | | | | | |
| Panama | 159.1 |
| | — |
| | 242.3 |
| | — |
|
| Jamaica | 79.1 |
| | — |
| | 119.5 |
| | — |
|
| Bahamas | 71.7 |
| | — |
| | 108.9 |
| | — |
|
| Barbados | 55.7 |
| | — |
| | 82.3 |
| | — |
|
| Trinidad and Tobago | 40.4 |
| | — |
| | 60.5 |
| | — |
|
| Other (c) | 162.5 |
| | — |
| | 240.6 |
| | — |
|
| Total CWC | 568.5 |
| | — |
| | 854.1 |
| | — |
|
| Chile | 221.3 |
| | 204.3 |
| | 631.9 |
| | 633.9 |
|
| Puerto Rico (d) | 104.8 |
| | 104.5 |
| | 315.6 |
| | 274.1 |
|
| Total LiLAC Division | 894.6 |
| | 308.8 |
| | 1,801.6 |
| | 908.0 |
|
| Intersegment eliminations | (0.5 | ) | | — |
| | (0.7 | ) | | — |
|
| Total LiLAC Group | 894.1 |
|
| 308.8 |
|
| 1,800.9 |
|
| 908.0 |
|
| Total | $ | 5,207.2 |
|
| $ | 4,597.4 |
|
| $ | 14,869.3 |
|
| $ | 13,680.8 |
|
_______________
| |
(a) | The amounts presented for the 2016 periods include the post-acquisition revenue of BASE, which was acquired on February 11, 2016. |
|
| | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions |
| Liberty Global Group: | | | | | | | |
| European Division: | | | | | | | |
| U.K. | $ | 1,495.7 |
| | $ | 1,473.6 |
| | $ | 4,350.9 |
| | $ | 4,657.7 |
|
| Belgium (a) | 759.1 |
| | 693.4 |
| | 2,106.5 |
| | 2,010.9 |
|
| Germany | 703.7 |
| | 639.4 |
| | 1,988.6 |
| | 1,900.0 |
|
| Switzerland | 352.8 |
| | 344.0 |
| | 1,023.0 |
| | 1,033.8 |
|
| Ireland | 121.4 |
| | 107.8 |
| | 336.7 |
| | 327.9 |
|
| Poland | 107.5 |
| | 98.9 |
| | 305.2 |
| | 294.9 |
|
| Austria | 103.2 |
| | 95.3 |
| | 291.8 |
| | 285.9 |
|
| Hungary | 80.6 |
| | 69.1 |
| | 225.3 |
| | 202.5 |
|
| The Czech Republic | 51.3 |
| | 44.7 |
| | 145.2 |
| | 134.2 |
|
| Romania | 47.2 |
| | 43.2 |
| | 133.5 |
| | 127.5 |
|
| Slovakia | 15.5 |
| | 14.4 |
| | 44.0 |
| | 44.1 |
|
| Other (b) | 39.9 |
| | 2.3 |
| | 109.0 |
| | 6.2 |
|
| The Netherlands | — |
| | 681.8 |
| | — |
| | 2,030.4 |
|
| Total European Division | 3,877.9 |
| | 4,307.9 |
| | 11,059.7 |
| | 13,056.0 |
|
| Other, including intersegment eliminations | 0.6 |
| | 5.2 |
| | 1.5 |
| | 12.4 |
|
| Total Liberty Global Group | 3,878.5 |
|
| 4,313.1 |
|
| 11,061.2 |
|
| 13,068.4 |
|
| LiLAC Group: | | | | | | | |
| LiLAC Division: | | | | | | | |
| C&W (c): | | | | | | | |
| Panama | 160.1 |
| | 159.1 |
| | 477.2 |
| | 242.3 |
|
| Jamaica | 87.3 |
| | 79.1 |
| | 255.0 |
| | 119.5 |
|
| Bahamas | 62.1 |
| | 71.7 |
| | 199.1 |
| | 108.9 |
|
| Barbados | 58.2 |
| | 55.7 |
| | 178.5 |
| | 82.3 |
|
| Trinidad and Tobago | 38.9 |
| | 40.4 |
| | 120.1 |
| | 60.5 |
|
| Other (d) | 172.3 |
| | 162.5 |
| | 507.3 |
| | 240.6 |
|
| Total C&W | 578.9 |
| | 568.5 |
| | 1,737.2 |
| | 854.1 |
|
| Chile | 242.2 |
| | 221.3 |
| | 702.6 |
| | 631.9 |
|
| Puerto Rico | 88.6 |
| | 104.8 |
| | 303.6 |
| | 315.6 |
|
| Total LiLAC Division | 909.7 |
| | 894.6 |
| | 2,743.4 |
| | 1,801.6 |
|
| Intersegment eliminations | (1.6 | ) | | (0.5 | ) | | (3.5 | ) | | (0.7 | ) |
| Total LiLAC Group | 908.1 |
|
| 894.1 |
|
| 2,739.9 |
|
| 1,800.9 |
|
| Intergroup eliminations | (1.2 | ) | | — |
| | (1.2 | ) | | — |
|
| Total consolidated revenue | $ | 4,785.4 |
|
| $ | 5,207.2 |
|
| $ | 13,799.9 |
|
| $ | 14,869.3 |
|
| | | | | | | | |
| VodafoneZiggo JV (the Netherlands) | $ | 1,173.6 |
| | $ | — |
| | $ | 3,353.9 |
| | $ | — |
|
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
September 30, 20162017
(unaudited)
_______________
| |
| (a) | The amount presented for the nine months ended September 30, 2016 excludes the pre-acquisition revenue of BASE, which was acquired on February 11, 2016. |
| |
| (b) | The amounts presented for the 2017 periods primarily include revenue earned from services provided to the VodafoneZiggo JV. For additional information, see note 4. |
| |
| (c) | For each C&W jurisdiction, the amounts presented include (i) revenue from residential and B2B operations and (ii) revenue derived from wholesale network customers, as applicable. The amount presented for the nine months ended September 30, 2016 periods reflectexcludes the post-acquisitionpre-acquisition revenue of CWC,C&W, which was acquired on May 16, 2016. |
| |
(c) | Amounts for the 2016 periods include revenue from CWC’s other consumer and B2B operations, primarily in other countries in the Caribbean and Latin America, as well as intercompany eliminations. |
| |
| (d) | The amounts presented for the 20152017 periods excluderelate to a number of countries in which C&W has less significant operations, most of which are located in Latin America and the pre-acquisitionCaribbean, and include (i) revenue of Choice, which was acquired on June 3, 2015.from residential and B2B operations, (ii) revenue from wholesale network customers and (iii) intercompany eliminations. |
(15) (16) Subsequent Events
TelenetUPC Holding Refinancing TransactionTransactions
In November 2016,October 2017, UPC Holding (i) Telenet International, a wholly-owned subsidiary of Telenet, entered into a new €1,600.0$1,975.0 million ($1,796.5 million) term loan facility (TelenetUPC Facility AEAR), which matures on January 31, 2025,15, 2026, bears interest at a rate of 3.25%LIBOR + 2.50% and is subject to a LIBOR floor of 0.0%, and (ii) Telenet Finance entered into a new $1,500.0€500.0 million ($590.2 million) term loan facility (TelenetUPC Facility AFAS), which matures on October 15, 2026, bears interest at a rate of EURIBOR + 2.75% and is subject to a EURIBOR floor of 0.0%, and (iii) issued $550.0 million principal amount of 5.50% senior notes due January 15, 2028(the UPC Holding 5.50% Senior Notes). The net proceeds from UPC Facility AR, UPC Facility AS and the UPC Holding 5.50% Senior Notes were used to (a) prepay in full the $2,150.0 million outstanding principal amount under UPC Facility AP, (b) redeem in full the €450.0 million ($531.2 million) outstanding principal amount under the UPC Holding 6.75% Euro Senior Notes due 2023 and (c) redeem in full the CHF 350.0 million ($361.1 million) outstanding principal amount under the UPC Holding 6.75% CHF Senior Notes due 2023.
Subject to the circumstances described below, the UPC Holding 5.50% Senior Notes are non-callable until October 15, 2022. At any time prior to October 15, 2022, UPC Holding may redeem some or all of the UPC Holding 5.50% Senior Notes by paying a “make-whole” premium, which is the present value of all remaining scheduled interest payments to October 15, 2022 using the discount rate (as specified in the indenture) as of the redemption date plus 50 basis points.
UPC Holding may redeem some or all of the UPC Holding 5.50% Senior Notes at the following redemption prices (expressed as a percentage of the principal amount) plus accrued and unpaid interest and additional amounts (as specified in the indenture), if any, to the applicable redemption date, as set forth below:
|
| | |
| | | Redemption price |
| 12-month period commencing October 15: | |
| 2022 | 102.750% |
| 2023 | 101.375% |
| 2024 | 100.688% |
| 2025 and thereafter | 100.000% |
Unitymedia Financing Transactions
In October 2017, Unitymedia entered into (i) an €825.0 million ($973.8 million) term loan facility (UM Facility C), which matures on January 31, 2025,15, 2027, bears interest at a rate of EURIBOR + 2.75% and is subject to a EURIBOR floor of 0.0% and (ii) an $850.0 million term loan facility (UM Facility D), which matures on January 15, 2026, bears interest at a rate of LIBOR plus 3.0%+ 2.25% and is subject to a LIBOR floor of 0.0%. The net proceeds from Telenet Facility AEandTelenet Facility AF will be used to prepay in full (a) the €474.1 million ($532.3 million) outstanding principal amount under Telenet Facility W,(b) the €882.9 million ($991.4 million) outstanding principal amount under Telenet Facility Y, (c) the €800.0 million ($898.3 million) outstanding principal amount under Telenet Facility AA and (d) the $850.0 million outstanding principal amount under Telenet Facility AD., both of which are currently undrawn.
Pending Acquisition
On October 18, 2016, our subsidiary UPC Polska SP Z.o.o. entered into a definitive agreement to acquire the cable business of Multimedia Polska S.A. (Multimedia), the third-largest cable operator in Poland, for cash consideration of PLN 3.0 billion ($783.6 million), which is equal to the enterprise value assigned to Multimedia for purposes of this transaction. The final purchase price is subject to potential downward adjustments for the operational and financial performance of Multimedia prior to closing. The transaction is subject to customary closing conditions, including regulatory approval, and is expected to close within the next 12 months.
| |
| Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis, which should be read in conjunction with our condensed consolidated financial statements and the discussion and analysis included in our2015 Annual Report on Form 10-K, is intended to assist in providing an understanding of our financial condition, changes in financial condition and results of operations and is organized as follows:
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| • | Forward-looking Statements. This section provides a description of certain factors that could cause actual results or events to differ materially from anticipated results or events. |
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| • | Overview. This section provides a general description of our business and recent events. |
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| • | Material Changes in Results of Operations. This section provides an analysis of our results of operations for the three and nine months ended September 30, 2017 and 2016. |
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| • | Material Changes in Financial Condition. This section provides an analysis of our corporate and subsidiary liquidity, condensed consolidated statements of cash flows and contractual commitments. |
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| • | 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. |
Forward-looking Statements. This section provides a description of certain factors that could cause actual results or events to differ materially from anticipated results or events.
Overview. This section provides a general description of our business and recent events.
Material Changes in Results of Operations. This section provides an analysis of our results of operations for the three and nine months ended September 30, 2016 and 2015.
Material Changes in Financial Condition. This section provides an analysis of our corporate and subsidiary liquidity, condensed consolidated statements of cash flows and contractual commitments.
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.
The capitalized terms used below have been defined in the notes to our condensed consolidated financial statements. In the following text, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to Liberty Global or collectively to Liberty Global and its subsidiaries.
Unless otherwise indicated, convenience translations into U.S. dollars are calculated as of September 30, 20162017.
Forward-looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. To the extent that statements in this Quarterly Report are not recitations of historical fact, such statements constitute forward-looking statements, which, by definition, involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. In particular, statements under Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk maycontain forward-looking statements, including statements regarding our business, product, foreign currency and finance strategies, our property and equipment additions (including with respect to our network extensions), subscriber growth and retention rates, competitive, regulatory and economic factors, the timing and impacts of proposed transactions, the maturity of our markets, the anticipated impacts of new legislation (or changes to existing rules and regulations), anticipated changes in our revenue, costs or growth rates, our liquidity, credit risks, foreign currency risks, target leverage levels, our future projected contractual commitments and cash flows and other information and statements that are not historical fact. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. In addition toevaluating these statements, you should consider the risk factors describedrisks and uncertainties discussed in our 2015 Annual Report on Form 10-K, and in our June 30, 2016 Quarterly Report on Form 10-Q,as well as the following arelist of some but not all of the factors that could cause actual results or events to differ materially from anticipated results or events:
economic and business conditions and industry trends in the countries in which we or our affiliates operate;
the competitive environment in the industries in the countries in which we or our affiliates operate, including competitor responses to our products and services;
fluctuations in currency exchange rates and interest rates;
instability in global financial markets, including sovereign debt issues and related fiscal reforms;
consumer disposable income and spending levels, including the availability and amount of individual consumer debt;
changes in consumer television viewing preferences and habits;
consumercustomer acceptance of our existing service offerings, including our cable television, broadband internet, fixed-line telephony, mobile and business service offerings, and of new technology, programming alternatives and other products and services that we may offer in the future;
our ability to manage rapid technological changes;
our ability to maintain or increase the number of subscriptions to our cable television, broadband internet, fixed-line telephony and mobile service offerings and our average revenue per household;
our ability to provide satisfactory customer service, including support for new and evolving products and services;
our ability to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers;
the impact of our future financial performance, or market conditions generally, on the availability, terms and deployment of capital;
changes in, or failure or inability to comply with, government regulations in the countries in which we or our affiliates operate and adverse outcomes from regulatory proceedings;
government intervention that opensrequires opening our broadband distribution networks to competitors, such as the obligations imposed in Belgium;
our ability to obtain regulatory approval and satisfy other conditions necessary to close acquisitions and dispositions, and the impact of conditions imposed by competition and other regulatory authorities in connection with acquisitions;
our ability to successfully acquire new businesses and, if acquired, to integrate, realize anticipated efficiencies from and implement our business plan with respect to the businesses we have acquired such as Ziggo Holding B.V. (Ziggo), Choice, BASE and CWC, or that we expect to acquire;
changes in laws or treaties relating to taxation, or the interpretation thereof, in the U.K., the U.S. or in other countries in which we or our affiliates operate;
changes in laws and government regulations that may impact the availability and cost of capital and the derivative instruments that hedge certain of our financial risks;
the ability of suppliers and vendors (including our third-party wireless network providers under our MVNO arrangements) to timely deliver quality products, equipment, software, services and access;
the availability of attractive programming for our video services and the costs associated with such programming, including retransmission and copyright fees payable to public and private broadcasters;
uncertainties inherent in the development and integration of new business lines and business strategies;
our ability to adequately forecast and plan future network requirements, including the costs and benefits associated with our planned network extension programs;extensions;
the availability of capital for the acquisition and/or development of telecommunications networks and services;
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| • | certain factors outside of the LiLAC Group's control that may impact the timing and extent of the restoration of our networks and services in Puerto Rico and certain of our C&W markets following Hurricanes Irma and Maria, as further discussed under Overview below; |
problems we may discover post-closing with the operations, including the internal controls and financial reporting process, of businesses we acquire;
the leakage of sensitive customer data;
the outcome of any pending or threatened litigation;
the loss of key employees and the availability of qualified personnel;
changes in the nature of key strategic relationships with partners and joint venturers;
our equitytracking stock capital structure; and
events that are outside of our control, such as political unrest in international markets, terrorist attacks, malicious human acts, natural disasters, pandemics and other similar events.
The broadband distribution and mobile service industries are changing rapidly and, therefore, the forward-looking statements of expectations, plans and intent in this Quarterly Report are subject to a significant degree of risk. These forward-looking statements and the above-described risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based. Readers are cautioned not to place undue reliance on any forward-looking statement.
Overview
General
We are an international provider of video, broadband internet, fixed-line telephony, mobile and other communications services to consumersresidential customers and businesses, with consolidated operations at September 30, 20162017 in more than 30 countries. We provide consumerresidential and B2B communications services in (i) the U.K. and Ireland through Virgin Media, (ii) the Netherlands through Ziggo Group Holding, (iii) Germany through Unitymedia, (iv)(iii) Belgium and Luxembourg through Telenet and (v)(iv) seven other European countries through UPC Holding. In addition, through the December 31, 2016 completion of the VodafoneZiggo JV Transaction, we provided residential and B2B communications services in the Netherlands through Ziggo Group Holding. Following the completion of the VodafoneZiggo JV Transaction, we own a 50% noncontrolling interest in the VodafoneZiggo JV, which provides video, broadband internet, mobile and B2B services in the Netherlands. The operations of Virgin Media, Unitymedia, Telenet, UPC Holding and, through December 31, 2016, Ziggo Group Holding, Unitymedia, Telenet and UPC Holding are collectively referred to herein as the “European Operations Division.“European Division.” In addition, we provide consumerresidential and B2B communications services in (a) 18 countries, predominantly in Latin America orand the Caribbean, through CWC,C&W, (b) Chile through VTR and (c) Puerto Rico through Liberty Puerto Rico. CWCC&W also provides (1) B2B communications services in certain other countries in Latin America and the Caribbean and (2) wholesale communications services over its sub-sea and terrestrial networksfiber optic cable network that connectconnects over 3040 markets in that region. The operations of CWC,C&W, VTR and Liberty Puerto Rico are collectively referred to herein as the “LiLAC Division.”
On July 1, 2015, we completed the LiLAC Transaction, pursuant to which we (i) reclassified our then outstanding Old Liberty Global Shares into Liberty Global Shares and (ii) distributed LiLAC Shares to holders of our Old Liberty Global Shares. The Liberty Global Shares and the LiLAC Shares are intended to reflect or “track” the economic performance of the Liberty Global Group and the LiLAC Group, respectively. For additional information, see note 1 to our condensed consolidated financial statements.
We have completed a number of transactions that impact the comparability of our 20162017 and 20152016 results of operations, including the CWCmost significant of which include (i) the completion of the VodafoneZiggo JV Transaction on December 31, 2016, (ii) the C&W Acquisition on May 16, 2016 and (iii) theBASE Acquisition on February 11, 2016 and theChoice Acquisition on June 3, 2015.2016. For further information regarding our acquisitionscompleted and the pending formation of the Dutch JV,acquisitions, see note 3 to our condensed consolidated financial statements. For further information regarding the VodafoneZiggo JV Transaction, see note 4 to our condensed consolidated financial statements.
Impacts of Hurricanes
In September 2017, Hurricanes Irma and Maria impacted a number of our markets in the Caribbean, resulting in varying degrees of damage to homes, businesses and infrastructure in these markets. The most extensive damage occurred in Puerto Rico and certain markets within our C&W reportable segment (collectively, the Impacted Markets). During the three months ended June 30, 2017, Liberty Puerto Rico accounted for 2.4% and 2.6% of our consolidated revenue and Adjusted OIBDA, respectively, and 11.8% and 14.6% of the revenue and Adjusted OIBDA, respectively, attributed to the LiLAC Group, while the operations in C&W’s Impacted Markets collectively accounted for 0.6% and 0.4% of our consolidated revenue and Adjusted OIBDA, respectively, and 3.0% and 2.1% of the revenue and Adjusted OIBDA, respectively, attributed to the LiLAC Group. Below we have included the net impact of the hurricanes on the revenue and Adjusted OIBDA of the Impacted Markets during the three months ended September 30, 2017. Our assessment of the losses attributable to the hurricanes is ongoing, and as discussed and quantified below, we expect to incur additional costs and losses during the fourth quarter of 2017 and beyond as we restore the damaged networks and reconnect customers. We are uncertain as to the timing and extent of our restoration and reconnection efforts in the Impacted Markets.
We maintain an integrated group property and business interruption insurance program covering all Impacted Markets up to a limit of $75 million per occurrence, which is generally subject to $15 million per occurrence of self-insurance. Although we are in the early stages of assessing the alternatives under our insurance policy, we currently believe that the hurricanes will result in at least two occurrences. This policy is subject to the normal terms and conditions applicable to this type of insurance. We expect that the insurance recovery will only cover a portion of the incurred losses of each of our impacted businesses. We
Throughhave not recognized any potential insurance proceeds related to the hurricane losses, and we do not currently expect to receive any significant reimbursement in 2017.
Further details regarding the impacts of Hurricanes Irma and Maria are discussed below. For information regarding impairment charges that have been recorded as a result of Hurricanes Irma and Maria, see notes 6 and 7 to our subsidiariescondensed consolidated financial statements. For information regarding the impacts of Hurricanes Irma and affiliates,Maria on the outstanding debt of Liberty Puerto Rico and C&W, see note 8 to our condensed consolidated financial statements.
Liberty Puerto Rico. In Puerto Rico, the damage caused by Hurricanes Maria and, to a lesser extent, Irma was extensive and widespread. Individuals and businesses across Puerto Rico are dealing with significant challenges caused by the severe damage to essential infrastructure, including damage to Puerto Rico’s power supply and transmission system. Similarly, Liberty Puerto Rico’s broadband communications network suffered extensive damage. We are currently providing service to only a small portion of Liberty Puerto Rico’s customers, and we estimate that more than $100 million of property and equipment additions would be required to restore 100% of Liberty Puerto Rico’s broadband communications network.
During the three months ended September 30, 2017, the effects of the hurricanes negatively impacted Liberty Puerto Rico’s revenue and Adjusted OIBDA by an estimated $19 million and $15 million, respectively. We currently estimate that the effects of the hurricanes (before considering any insurance recoveries) will negatively impact Liberty Puerto Rico’s revenue by between $80 million to $100 million and Adjusted OIBDA by between $60 million to $80 million during the fourth quarter of 2017 and will result in negative total Adjusted OIBDA for that quarter. Although these negative impacts will decline as the network is restored and customers are reconnected, we expect that the adverse impacts of the hurricanes on Liberty Puerto Rico’s revenue and Adjusted OIBDA may continue through 2018 and beyond. Our estimates of the cost to restore Liberty Puerto Rico’s network and the impacts on Liberty Puerto Rico’s revenue and Adjusted OIBDA are preliminary and subject to change based in part on the following uncertainties:
the length of time that it will take to restore Puerto Rico’s power and transmission system;
the number of people that will choose to leave Puerto Rico for an extended period or permanently; and
the ability of the Puerto Rico and U.S. governments to effectively oversee the recovery process in Puerto Rico.
In terms of liquidity for Liberty Puerto Rico, the cash provided by its operations was a significant source of pre-hurricane liquidity, and it is unclear when Liberty Puerto Rico will again be able to generate positive cash from its operating activities in light of the hurricane impacts. In this regard, we anticipate that Liberty Puerto Rico’s immediate liquidity needs will be funded by available cash on hand. Cash available to Liberty Puerto Rico includes $40.0 million that was drawn under the LPR Bank Facility subsequent to September 30, 2017. No further amounts are available to be borrowed under the LPR Bank Facility. Future liquidity sources besides cash on hand and any cash from operations may also include proceeds from insurance and funds from Liberty Puerto Rico’s equity holders, including the LiLAC Group and the 40% indirect owner of Liberty Puerto Rico. No assurance can be given as to the amount of liquidity to be received from these sources or whether these sources will provide funding sufficient to satisfy Liberty Puerto Rico’s liquidity requirements over the next 12 months.
C&W. C&W generally offers services over fixed and mobile networks, and portions of these networks in the Impacted Markets were significantly damaged as a result of the hurricanes, most notably in the British Virgin Islands and Dominica. In these collective areas, services to the majority of our fixed-line customers have not yet been restored. While mobile services have been largely restored in C&W’s Impacted Markets, we are still in the largest international broadband communications operatorprocess of completing the restoration of our mobile network infrastructure. In addition to network damage, these markets are also dealing with extensive damage to homes, businesses and essential infrastructure.
During the three months ended September 30, 2017, the effects of the hurricanes negatively impacted C&W’s revenue and Adjusted OIBDA by an estimated $3 million and $9 million, respectively. We currently estimate that more than $50 million of property and equipment additions would be required to restore 100% of the damaged networks in termsC&W’s Impacted Markets, and that the effects of customers. the hurricanes will negatively impact C&W’s revenue and Adjusted OIBDA by between $15 million to $25 million during the fourth quarter of 2017. Although these negative impacts will decline as the networks are restored and customers are reconnected, we expect that the adverse impacts of the hurricanes on C&W’s revenue and Adjusted OIBDA may continue through 2018 and beyond. These estimates are preliminary and are subject to change.
Operations
As described above, Hurricanes Irma and Maria caused significant damage to our operations in the Impacted Markets, resulting in disruptions to our telecommunications services within these locations. As we are still in the process of assessing the operational impacts of the hurricanes in the Impacted Markets, we are unable to accurately estimate our homes passed and subscriber numbers in these areas as of September 30, 2017. Accordingly, the homes passed and subscriber numbers in the following paragraph include such amounts as of August 31, 2017 for the Impacted Markets.
At September 30, 2016,2017 (or August 31, 2017 for the Impacted Markets), we (i) owned and operated networks that passed 56,246,70051,174,000 homes and served 59,576,10050,903,200 revenue generating units (RGUs)RGUs), consisting of 24,210,700comprising 20,246,800 video subscribers, 19,319,80016,893,300 broadband internet subscribers and 16,045,60013,763,100 fixed-line telephony subscribers and (ii) served 10,146,600 mobile subscribers. In addition, at September 30,These amounts include the August 31, 2017 data of the Impacted Markets, which accounted for 1,171,600 homes passed (including 1,106,900 homes passed in Puerto Rico) and served 840,500 RGUs (including 803,500 RGUs in Puerto Rico) as of that date. A high percentage of the RGUs within the Impacted Markets relate to households and businesses to which we have not yet restored service as of October 25, 2017. At August 31, 2017, the Impacted Markets accounted for 66,400 of our mobile subscribers.
During 2015 and 2016, we served 10,421,400 mobile subscribers.
Includinginitiated network extension programs in the effect of acquisitions, we added a total of 293,700U.K., Ireland, Central and 2,617,200 RGUs duringEastern Europe, Germany, Chile and certain other markets. We collectively refer to these network extension programs as the three and“Network Extensions.”The Network Extensions will be completed in phases with priority given to the most accretive expansion opportunities. During the nine months ended September 30, 2016, respectively. Excluding2017, pursuant to the effect of acquisitions (RGUs added onNetwork Extensions, we (i) connected approximately 800,000 additional homes and commercial premises (excluding upgrades) to our two-way networks attributed to the acquisition date), butLiberty Global Group, including post-acquisition date changesapproximately 375,000 homes connected by Virgin Media in RGUs, we added 283,700the U.K. and 716,600 RGUs on an organic basis during the three and nine months ended September 30, 2016, respectively, as compared to 321,300 and 532,700 RGUs added on an organic basis during the corresponding prior-year periods. The organic RGU growth during the three and nine months ended September 30, 2016 is primarily attributable to thenet effect of (i) increases of 207,500 and 576,700 broadband internet RGUs, respectively, (ii) decreases of 104,400 and 382,000 basic video RGUs, respectively, (iii) increases of 110,100 and 374,600 fixed-line telephony RGUs, respectively, and (iv) increases of 63,200 and 142,300 enhanced video RGUs, respectively.
Including the effect of acquisitions, we added 44,700 and 5,837,900 mobile subscribers during the three and nine months ended September 30, 2016, respectively. Excluding the effect of acquisitions, we added 44,700and138,800mobile subscribers on an organic basis during the three and nine months ended September 30, 2016, respectively, as compared to 69,800 and 216,200 added on an organic basis during the corresponding prior-year periods. The organic growth during the three and nine months ended September 30, 2016 includes (i) increasesin postpaid mobile subscribers of 140,200 and 359,100, respectively,Ireland, and (ii) decreasesconnected or upgraded approximately 330,000 additional homes and commercial premises to our two-way networks attributed to the LiLAC Group. During 2017, we have experienced increased construction costs related to the Network Extensions in prepaid mobile subscribersthe U.K. There can be no assurance that our new build costs will not increase further in the U.K.; however, we will only continue to extend our U.K. footprint through new construction to the extent we believe we can obtain attractive returns on our investments. Depending on a variety of 95,500factors, including the financial and 220,300, respectively.operational results of the 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 be significant. For information regarding our expectations with regard to the percentage of revenue represented by the property and equipment additions of the Liberty Global Group and the LiLAC Group during 2017, see Material Changes in Financial Condition — Condensed Consolidated Statements of Cash Flows below.
Competition and Other External Factors
We are experiencing significant competition from incumbent telecommunications operators, (particularly in the Netherlands and, to a lesser extent, Switzerland, where the incumbent telecommunications operators are overbuilding our networks with fiber-to-the-home, -cabinet, -building or -node and advanced digital subscriber line technologies), DTH operators and/or other providers in all of our markets, particularly in Switzerland and many of C&W’s markets. In the Bahamas, where CWC has beenC&W previously was the only provider of mobile services, competition will increasehas increased significantly oncedue to the commercial launch of mobile services are launched by a competitor which is expected to occur beforeduring the endfourth quarter of 2016.In addition, fixed-line competition has increased in a number of C&W’s markets in the Caribbean, including Trinidad and Tobago, Jamaica and Barbados. In certain of CWC'sits markets, CWCC&W is also experiencing increased regulatory intervention that would, if implemented, facilitate increased competition. In certain of our markets, thisThe significant competition we are experiencing, together with the maturation of these markets,macroeconomic factors, has contributed to organic declines inadversely impacted our revenue, RGUs and/or average monthly subscription revenue per average cable RGU or mobile subscriber, as applicable (ARPU), the more notablein Switzerland and a number of which include:
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(i) | organic declines in (a) cable subscription in the Netherlands and Switzerland and (b) overall revenue in the Netherlands during the third quarter of 2016, as compared to the third quarter of 2015; |
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(ii) | organic declines during the third quarter of 2016 in (a) video RGUs in the majority of our markets, (b) fixed-line telephony RGUs in Chile, the Netherlands and Switzerland and (c) total RGUs in Switzerland and the Netherlands; and |
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(iii) | organic declines in overall cable ARPU in many of our markets during the third quarter of 2016, as compared to the third quarter of 2015. |
C&W’s markets. In addition, duethe VodafoneZiggo JV is facing significant competition in the Netherlands, particularly with respect to competitiveits mobile operations. For additional information regarding the revenue impact of changes in the RGUs 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, factors, CWC has experienced organic revenue declines in manypolitical and other risks that are outside of its markets, including Barbados, the Bahamas, Panama and Trinidad and Tobago during the third quarter of 2016, as compared to the corresponding period in 2015. We acquired CWC on May 16, 2016.
our control. On June 23, 2016, the U.K. held a referendum in which U.K. citizens voted in favor of, on an advisory basis, an exit from the E.U. commonly referred to as “Brexit.” Although the vote is non-binding, the British government has announced it will formally notify the E.U. in March 2017 of its intention to leave the E.U. The U.K. High Court ruled on November 3, 2016 that the U.K. parliament must vote on whether the U.K. can start the process of leaving the E.U. The British government has appealed the ruling, which may take several months. The outcome of the appeal is relevant for the timing and terms under which the parties will commence negotiations to determine the terms of the U.K.’sany withdrawal from the E.U.are subject to a negotiation period that could take until March 2019. A withdrawal could, among other outcomes, disrupt the free movement of goods, services, people and capital between the U.K. and the E.U., undermine bilateral cooperation in key geographic areas and significantly disrupt trade between the U.K. and the E.U. or other nations (including the U.S.) as the U.K. pursues independent trade relations. The initial impact of the announcement of Brexit caused significant volatility in global stock markets, including in the prices of our shares. In addition, the U.S. dollar has significantly strengthened againstvalue of the British pound sterling duringrelative to the period following Brexit.U.S. dollar remains at levels that are significantly below pre-Brexit levels. The effects of Brexit could adversely affect our business, results of operations, financial condition and financial condition.liquidity.
In addition, high levels of sovereign debt in the U.S. and several countries in which we or our affiliates operate, combined with weak growth and high unemployment, could potentially lead to fiscal reforms (including austerity measures), tax increases, sovereign debt restructurings, currency instability, increased counterparty credit risk, high levels of volatility and disruptions in the credit and equity markets, as well as other outcomes that might adversely impact our company. The occurrence of any of these events, especially within the eurozone countries given our significant exposure to the euro and pound sterling, could have an adverse impact on, among other matters, our liquidity and cash flows.
We are facing a challenging economic environmentenvironments in many of our markets, most notably in Trinidad and Tobago, Barbados and Puerto Rico. In Puerto Rico, this environment is due in part to the government’s liquidity issues. In this regard, the Puerto Rico government has failed to make significant portions of its scheduled debt payments during 2016.2016 and 2017. Although the Puerto Rico government hashad implemented tax increases and other measures to improve its solvency and the U.S. hashad implemented legislation designed to help manage Puerto Rico’s debt crisis, it remains possible, if not likely, thatthe Puerto Rico will be requiredgovernment filed for a form of bankruptcy protection in May 2017, and Puerto Rico’s public utility followed suit in July 2017. In addition, myriad austerity measures, including with respect to restructure its debt obligations.public spending on pensions, public healthcare and education, have been either recommended, mandated by the fiscal oversight board charged with overseeing Puerto Rico’s recovery and/or adopted by the Puerto Rico government. If the fiscal and economic conditions in Puerto Rico were to continue to worsen, including with respect to the impact of the hurricanes discussed above, the population of Puerto Rico could continue to decline and the demand and ability of customers to pay for Liberty Puerto Rico’s services could be impaired, both of which could have a negative impact on Liberty Puerto Rico’s results of operations, cash flows and financial condition.
In early October 2016, our fixed-line and mobile networks in the Bahamas suffered extensive damage as a result of Hurricane Matthew. Although many of our customers experienced significant outages as a result of Hurricane Matthew, service to mostof our fixed-line and mobile subscribers has now been restored. As a result of the damage caused by Hurricane Mathew, we expect that our revenue and Adjusted OIBDA in the Bahamas will be adversely impacted for a number of monthsand that we will be required to make significant property and equipment additions in order to fully repair the damage to our fixed-line and mobile networks. Although we are continuing to gather information regarding the condition of our networks and the time frames that customers will not be connected to our networks, our preliminary estimate is that the adverse impact of Hurricane Matthew on our revenue and Adjusted OIBDA in the Bahamas during the fourth quarter of 2016 will range from $8 million to $10 million and $8 million to $12 million, respectively. In addition, we expect that the total property and equipment additions required to repair our networks in the Bahamas will ultimately range from $35 million to $45 million, with $9 million to $12 million of these additions expected to occur during the fourth quarter of 2016. In 2017, we expect the adverse impacts on our revenue and
Adjusted OIBDA from Hurricane Matthew to progressively decline. Although we have property and business interruption insurance that we expect will cover a significant portion of our Hurricane Matthew losses, no assurance can be given as to the amount and timing of the insurance proceeds that we will ultimately recover.
Material Changes in Results of Operations
As noted under Overview above, the comparability of our operating results during 20162017 and 20152016 is affected by acquisitions. acquisitions, dispositions and foreign currency translation effects (FX). As we use the term, organic changes exclude FX and the estimated impact of acquisitions and dispositions.
In the following discussion, we quantify the estimated impact of acquisitions (the Acquisition Impact) on our operating results. The acquisition impactAcquisition 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 impactAcquisition Impact on an acquired entity’s operating results during the first three to six months following the acquisition date, as adjusted to remove integration costs and any other material nonrecurringunusual 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 estimated acquisition impactAcquisition Impact and the actual results and (ii) the calculation of our organic growthchange percentages includes the organic growthactivity of an acquired entity relative to the Acquisition Impact of such entity. In the case of C&W, our estimateorganic growth calculation for the nine-month period compares C&W's current- and prior-year results for the period from May 16 to September 30. In addition, we include all integration costs incurred by C&W subsequent to the May 16, 2016 acquisition date in the calculation of C&W's organic changes in SG&A expenses. In the following discussion of organic changes, we also quantify the impact of the acquisition impactVodafoneZiggo JV Transaction on our results of such entity.operations. In this regard, the organic changes of Liberty Global are adjusted to exclude (a) the operations of Ziggo Group Holding and Ziggo Sport for the 2016 periods, (b) the revenue earned during the 2017 periods from services provided to the VodafoneZiggo JV and (c) certain operating and SG&A expenses incurred during the 2017 periods that were allocated to our Netherlands segment during the 2016 periods.
During 2016, we changed how we calculate our organic change percentages to include the Acquisition Impact in the denominator of the calculation, as this methodology takes into account the size of the acquired entity's operations relative to our existing operations. This change has been reflected retroactively for all periods presented herein.
Changes in foreign currency exchange rates have a significant impact on our reported operating results as all of our operating subsidiaries,segments, except for Puerto Rico CWC and certainmost of CWC’s subsidiaries,C&W’s operating segments, have functional currencies other than the U.S. dollar. Our primary exposure to foreign currency translation effects (FX) risk during the three months ended September 30, 20162017 was to the euro and British pound sterling as43.3% 36.7% and 28.3% 31.2%of our U.S. dollarreported revenue during the period was derived from subsidiaries whose functional currencies are the euro and British pound sterling, respectively. In addition, our reported operating results are impacted by changes in the exchange rates for the Swiss franc and other local currencies in Europe, as well asLatin America and the Chilean peso.Caribbean. The portions of the changesin 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 concerning our foreign currency risks and the applicable foreign currency exchange rates in effect for the periods covered by this Quarterly Report, see Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Exchange Rates below.
The amounts presented and discussed below represent 100% of each operatingconsolidated reportable segment’s revenue and Adjusted OIBDA. As we have the ability to control Telenet, Liberty Puerto Rico and certain subsidiaries of CWCC&W that are not wholly owned, we consolidate 100% of the revenue and expenses of these entities in our condensed consolidated statements of operations despite the fact that third parties own significant interests in these entities. The noncontrolling owners’ interests in the operating results of Telenet, Liberty Puerto Rico, certain subsidiaries of CWCC&W and other less significant majority-owned subsidiaries are reflected in net earnings or loss attributable to noncontrolling interests in our condensed consolidated statements of operations. For additional information, see note 1 to our condensed consolidated financial statements.
Discussion and Analysis of our Reportable Segments
General
All of the reportable segments set forth below derive their revenue primarily from (i) residential broadband communications services, including video, broadband internet and fixed-line telephony services, (ii) B2B communications services and (iii) with the exception of Puerto Rico, residential mobile services. For detailed information regarding the composition of our reportable segments and how we define and categorize our revenue components, see note 1415 to our condensed consolidated financial statements. For more information regarding the results of operations of the VodafoneZiggo JV, refer to Discussion and Analysis of our Consolidated Operating Results — Share of losses of affiliates below.
The tables presented below in this section provide a separate analysis of each of the line items that comprise Adjusted OIBDA as further discussed in note 14 toof our condensed consolidated financial statements,reportable segments, as well as an analysis of Adjusted OIBDA byof our consolidated reportable segmentsegments for the three and nine months ended September 30, 20162017 and 20152016. These tables present (i) the amounts reported by each of our consolidated reportable segments 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 (percentage change after removing FX and the estimated impacts of acquisitions and dispositions).period. The comparisons that exclude FX assume that exchange rates remained constant at the prior-year rate during the comparative periods that are included in each table. We also provide a table showing the Adjusted OIBDA margins of our consolidated reportable segments for the three and nine months ended September 30, 20162017 and 20152016 at the end of this section.
The revenue We do not include share-based compensation in the discussion and analysis of the other operating and SG&A expenses of our consolidated reportable segments includes revenue earned from (i) subscribers to our broadband communication and other fixed-line and DTH services (collectively referred to herein as “cable subscription revenue”) and our mobile services and (ii) B2B services, interconnect fees, mobile handset sales, channel carriage fees, installation fees, late fees and advertising revenue. Consistent withshare-based compensation expense is not included in the presentationperformance measures of our revenue categories in note 14 toconsolidated reportable segments. Share-based compensation expense is discussed under Discussion and Analysis of our condensed consolidated financial statements, we use the term “subscription revenue” in the following discussion to refer to amounts received from subscribers for ongoing services, excluding installation fees and late fees. In the following tables, mobile subscription revenue excludes the related interconnect revenue.Consolidated Operating Results below.
In the U.K., Belgium and Switzerland/Austria,certain of our other markets, we now offer our customers the option to purchase a mobile handset pursuant to a contract that is independent of a mobile airtime services contract (a Split-contract Program). Revenue associated with handsets sold under a Split-contract Program is recognized upfront and included in other non-subscription revenue. We generally recognize the full sales price for the mobile handset upon delivery, regardless of whether the sales price is received upfront or in installments. Prior to the Split-contract Programs, all revenue from handset sales that was contingent upon delivering future airtime services was recognized over the life of the customer contract as part of the monthly fee and included in subscription revenue.
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 OIBDA and Adjusted OIBDA 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 in many of our markets.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 OIBDA 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.
Revenue of our Reportable Segments
|
| | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % |
| | in millions | | | | |
| Liberty Global Group: | | | | | | | | | |
| European Operations Division: | | | | | | | | | |
| U.K./Ireland | $ | 1,581.4 |
| | $ | 1,783.3 |
| | $ | (201.9 | ) | | (11.3 | ) | | 3.0 |
|
| The Netherlands | 681.8 |
| | 681.4 |
| | 0.4 |
| | 0.1 |
| | (0.3 | ) |
| Germany | 639.4 |
| | 603.5 |
| | 35.9 |
| | 5.9 |
| | 5.6 |
|
| Belgium (a) | 693.4 |
| | 512.5 |
| | 180.9 |
| | 35.3 |
| | 2.2 |
|
| Switzerland/Austria | 439.3 |
| | 437.9 |
| | 1.4 |
| | 0.3 |
| | 1.1 |
|
| Total Western Europe | 4,035.3 |
| | 4,018.6 |
| | 16.7 |
| | 0.4 |
| | 2.5 |
|
| Central and Eastern Europe | 274.5 |
| | 266.2 |
| | 8.3 |
| | 3.1 |
| | 3.8 |
|
| Central and other | (1.9 | ) | | 0.1 |
| | (2.0 | ) | | N.M. |
| | N.M. |
|
| Total European Operations Division | 4,307.9 |
| | 4,284.9 |
| | 23.0 |
| | 0.5 |
| | 2.6 |
|
| Corporate and other | 18.0 |
| | 8.3 |
| | 9.7 |
| | 116.9 |
| | 142.6 |
|
| Intersegment eliminations | (12.8 | ) | | (4.6 | ) | | (8.2 | ) | | N.M. |
| | N.M. |
|
| Total Liberty Global Group | 4,313.1 |
|
| 4,288.6 |
|
| 24.5 |
| | 0.6 |
| | 2.6 |
|
| LiLAC Group: | | | | | | | | | |
| LiLAC Division: | | | | | | | | | |
| CWC (b) | 568.5 |
| | — |
| | 568.5 |
| | N.M. |
| | N.M. |
|
| Chile | 221.3 |
| | 204.3 |
| | 17.0 |
| | 8.3 |
| | 6.0 |
|
| Puerto Rico (c) | 104.8 |
| | 104.5 |
| | 0.3 |
| | 0.3 |
| | 0.3 |
|
| Total LiLAC Division | 894.6 |
| | 308.8 |
| | 585.8 |
| | 189.7 |
| | 1.4 |
|
| Intersegment eliminations | (0.5 | ) | | — |
| | (0.5 | ) | | N.M. |
| | N.M. |
|
| Total LiLAC Group | 894.1 |
|
| 308.8 |
|
| 585.3 |
| | 189.5 |
| | 1.4 |
|
| Total | $ | 5,207.2 |
|
| $ | 4,597.4 |
|
| $ | 609.8 |
| | 13.3 |
| | 2.4 |
|
|
| | | | | | | | | | | | | | | | | |
| | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % |
| | in millions | | | | |
| Liberty Global Group: | | | | | | | | | |
| European Operations Division: | | | | | | | | | |
| U.K./Ireland | $ | 4,985.6 |
| | $ | 5,254.3 |
| | $ | (268.7 | ) | | (5.1 | ) | | 3.3 |
|
| The Netherlands | 2,030.4 |
| | 2,072.7 |
| | (42.3 | ) | | (2.0 | ) | | (2.1 | ) |
| Germany | 1,900.0 |
| | 1,792.4 |
| | 107.6 |
| | 6.0 |
| | 5.9 |
|
| Belgium (a) | 2,010.9 |
| | 1,515.5 |
| | 495.4 |
| | 32.7 |
| | 3.8 |
|
| Switzerland/Austria | 1,319.7 |
| | 1,326.0 |
| | (6.3 | ) | | (0.5 | ) | | 1.7 |
|
| Total Western Europe | 12,246.6 |
| | 11,960.9 |
| | 285.7 |
| | 2.4 |
| | 2.7 |
|
| Central and Eastern Europe | 814.6 |
| | 801.6 |
| | 13.0 |
| | 1.6 |
| | 3.2 |
|
| Central and other | (5.2 | ) | | (3.7 | ) | | (1.5 | ) | | N.M. |
| | N.M. |
|
| Total European Operations Division | 13,056.0 |
| | 12,758.8 |
| | 297.2 |
| | 2.3 |
| | 2.7 |
|
| Corporate and other | 47.8 |
| | 33.9 |
| | 13.9 |
| | 41.0 |
| | 117.7 |
|
| Intersegment eliminations | (35.4 | ) | | (19.9 | ) | | (15.5 | ) | | N.M. |
| | N.M. |
|
| Total Liberty Global Group | 13,068.4 |
| | 12,772.8 |
| | 295.6 |
| | 2.3 |
| | 2.8 |
|
| LiLAC Group: | | | | | | | | | |
| LiLAC Division: | | | | | | | | | |
| CWC (b) | 854.1 |
| | — |
| | 854.1 |
| | N.M. |
| | N.M. |
|
| Chile | 631.9 |
| | 633.9 |
| | (2.0 | ) | | (0.3 | ) | | 6.0 |
|
| Puerto Rico (c) | 315.6 |
| | 274.1 |
| | 41.5 |
| | 15.1 |
| | 1.3 |
|
| Total LiLAC Division | 1,801.6 |
| | 908.0 |
| | 893.6 |
| | 98.4 |
| | 2.3 |
|
| Intersegment eliminations | (0.7 | ) | | — |
| | (0.7 | ) | | N.M. |
| | N.M. |
|
| Total LiLAC Group | 1,800.9 |
| | 908.0 |
| | 892.9 |
| | 98.3 |
| | 2.3 |
|
| Total | $ | 14,869.3 |
| | $ | 13,680.8 |
| | $ | 1,188.5 |
| | 8.7 |
| | 2.7 |
|
_______________
| |
(a) | The amounts presented for the 2016 periods include the post-acquisition revenue of BASE, which was acquired on February 11, 2016. |
| |
(b) | The amounts presented for the 2016 periods reflect the post-acquisition revenue of CWC, which was acquired on May 16, 2016. |
| |
(c) | The amount presented for the 2015 nine-month period excludes the pre-acquisition revenue of Choice, which was acquired on June 3, 2015.
|
N.M. — Not Meaningful.
General. While not specifically discussed in the below explanations of the changes in the revenue of our consolidated reportable segments, we are experiencing significant competition in all of our markets. This competition has an adverse impact on our ability to increase or maintain our RGUs and/or ARPU. For a description of the more notable recent impacts of this competition on our broadband communications markets, see Overview above.
Variances in the subscription revenue that we receive from our customers are a function of (i) changes in the number of RGUs or mobile subscribers outstanding during the period and (ii) changes in ARPU. Changes in ARPU can be attributable to (a) price increases,changes in prices, (b) changes in bundling or promotional discounts, (c) changes in the tier of services selected, (d) variances in subscriber usage patterns and (e) the overall mix of cable and mobile products within a segment during the period. In the
following discussion, we discuss ARPU changes in terms of the net impact of the above factors on the ARPU that is derived from our video, broadband internet, fixed-line telephony and mobile products.
|
| | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | |
| European Division: | | | | | | | | | | | |
| U.K./Ireland | $ | 1,617.1 |
| | $ | 1,581.4 |
| | $ | 35.7 |
| | 2.3 |
| | $ | 25.7 |
| | 1.6 |
|
| Belgium | 759.1 |
| | 693.4 |
| | 65.7 |
| | 9.5 |
| | 19.9 |
| | 2.8 |
|
| Germany | 703.7 |
| | 639.4 |
| | 64.3 |
| | 10.1 |
| | 29.2 |
| | 4.6 |
|
| Switzerland/Austria | 456.0 |
| | 439.3 |
| | 16.7 |
| | 3.8 |
| | 4.8 |
| | 1.1 |
|
| The Netherlands | — |
| | 681.8 |
| | (681.8 | ) | | (100.0 | ) | | — |
| | — |
|
| Total Western Europe | 3,535.9 |
| | 4,035.3 |
| | (499.4 | ) | | (12.4 | ) | | 79.6 |
| | 2.4 |
|
| Central and Eastern Europe | 306.6 |
| | 274.5 |
| | 32.1 |
| | 11.7 |
| | 13.5 |
| | 4.9 |
|
| Central and other (a) | 35.4 |
| | (1.9 | ) | | 37.3 |
| | N.M. |
| | (1.4 | ) | | (3.6 | ) |
| Total European Division | 3,877.9 |
| | 4,307.9 |
| | (430.0 | ) | | (10.0 | ) | | 91.7 |
| | 2.5 |
|
| Corporate and other | 0.8 |
| | 18.0 |
| | (17.2 | ) | | (95.6 | ) | | — |
| | — |
|
| Intersegment eliminations (b) | (0.2 | ) | | (12.8 | ) | | 12.6 |
| | N.M. |
| | — |
| | N.M. |
|
| Total Liberty Global Group | 3,878.5 |
| | 4,313.1 |
| | (434.6 | ) | | (10.1 | ) | | 91.7 |
| | 2.5 |
|
| LiLAC Group: | | | | | | | | | | | |
| LiLAC Division: | | | | | | | | | | | |
| C&W | 578.9 |
| | 568.5 |
| | 10.4 |
| | 1.8 |
| | 5.8 |
| | 1.0 |
|
| Chile | 242.2 |
| | 221.3 |
| | 20.9 |
| | 9.4 |
| | 13.8 |
| | 6.1 |
|
| Puerto Rico | 88.6 |
| | 104.8 |
| | (16.2 | ) | | (15.5 | ) | | (16.2 | ) | | (15.5 | ) |
| Total LiLAC Division | 909.7 |
| | 894.6 |
| | 15.1 |
| | 1.7 |
| | 3.4 |
| | 0.4 |
|
| Intersegment eliminations | (1.6 | ) | | (0.5 | ) | | (1.1 | ) | | N.M. |
| | (1.1 | ) | | N.M. |
|
| Total LiLAC Group | 908.1 |
| | 894.1 |
| | 14.0 |
| | 1.6 |
| | 2.3 |
| | 0.3 |
|
| Intergroup eliminations | (1.2 | ) | | — |
| | (1.2 | ) | | N.M. |
| | — |
| | N.M. |
|
| Total | $ | 4,785.4 |
| | $ | 5,207.2 |
| | $ | (421.8 | ) | | (8.1 | ) | | $ | 94.0 |
| | 2.1 |
|
|
| | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | |
| European Division: | | | | | | | | | | | |
| U.K./Ireland | $ | 4,687.6 |
| | $ | 4,985.6 |
| | $ | (298.0 | ) | | (6.0 | ) | | $ | 77.3 |
| | 1.5 |
|
| Belgium | 2,106.5 |
| | 2,010.9 |
| | 95.6 |
| | 4.8 |
| | 30.1 |
| | 1.4 |
|
| Germany | 1,988.6 |
| | 1,900.0 |
| | 88.6 |
| | 4.7 |
| | 93.5 |
| | 4.9 |
|
| Switzerland/Austria | 1,314.8 |
| | 1,319.7 |
| | (4.9 | ) | | (0.4 | ) | | (6.3 | ) | | (0.5 | ) |
| The Netherlands | — |
| | 2,030.4 |
| | (2,030.4 | ) | | (100.0 | ) | | — |
| | — |
|
| Total Western Europe | 10,097.5 |
| | 12,246.6 |
| | (2,149.1 | ) | | (17.5 | ) | | 194.6 |
| | 1.9 |
|
| Central and Eastern Europe | 866.5 |
| | 814.6 |
| | 51.9 |
| | 6.4 |
| | 44.9 |
| | 5.5 |
|
| Central and other (a) | 95.7 |
| | (5.2 | ) | | 100.9 |
| | N.M. |
| | (1.2 | ) | | (1.1 | ) |
| Total European Division | 11,059.7 |
| | 13,056.0 |
| | (1,996.3 | ) | | (15.3 | ) | | 238.3 |
| | 2.1 |
|
| Corporate and other | 1.7 |
| | 47.8 |
| | (46.1 | ) | | (96.4 | ) | | (0.1 | ) | | (6.2 | ) |
| Intersegment eliminations (b) | (0.2 | ) | | (35.4 | ) | | 35.2 |
| | N.M. |
| | — |
| | N.M. |
|
| Total Liberty Global Group | 11,061.2 |
| | 13,068.4 |
| | (2,007.2 | ) | | (15.4 | ) | | 238.2 |
| | 2.1 |
|
| LiLAC Group: | | | | | | | | | | | |
| LiLAC Division: | | | | | | | | | | | |
| C&W | 1,737.2 |
| | 854.1 |
| | 883.1 |
| | 103.4 |
| | 7.4 |
| | 0.4 |
|
| Chile | 702.6 |
| | 631.9 |
| | 70.7 |
| | 11.2 |
| | 43.9 |
| | 6.9 |
|
| Puerto Rico | 303.6 |
| | 315.6 |
| | (12.0 | ) | | (3.8 | ) | | (12.0 | ) | | (3.8 | ) |
| Total LiLAC Division | 2,743.4 |
| | 1,801.6 |
| | 941.8 |
| | 52.3 |
| | 39.3 |
| | 1.5 |
|
| Intersegment eliminations | (3.5 | ) | | (0.7 | ) | | (2.8 | ) | | N.M. |
| | (2.8 | ) | | N.M. |
|
| Total LiLAC Group | 2,739.9 |
| | 1,800.9 |
| | 939.0 |
| | 52.1 |
| | 36.5 |
| | 1.4 |
|
| Intergroup eliminations | (1.2 | ) | | — |
| | (1.2 | ) | | N.M. |
| | — |
| | N.M. |
|
| Total | $ | 13,799.9 |
| | $ | 14,869.3 |
| | $ | (1,069.4 | ) | | (7.2 | ) | | $ | 274.7 |
| | 2.0 |
|
_______________
| |
| (a) | The amounts presented for the 2017 periods primarily include the revenue earned from services provided to the VodafoneZiggo JV. For additional information, see note 4 to our condensed consolidated financial statements. |
| |
| (b) | The amounts presented for the 2016 periods primarily relate to transactions between our European Division and Ziggo Sport, which was contributed to the VodafoneZiggo JV as part of the VodafoneZiggo JV Transaction. |
N.M. — Not Meaningful.
U.K./Ireland. The decreases details of the changes in U.K./Ireland’s revenue during the three and nine months ended September 30, 20162017, as compared to the corresponding periods in 20152016, include (i) organic increases of $54.5 million or 3.0% and $175.2 million or 3.3%, respectively, (ii) the impact of an acquisition, (iii) the impact of disposals and (iv) the impact of FX, asare set forth below:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase in cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | 31.4 |
| | $ | — |
| | $ | 31.4 |
| | $ | 81.0 |
| | $ | — |
| | $ | 81.0 |
|
| ARPU (b) | 22.5 |
| | — |
| | 22.5 |
| | 42.5 |
| | — |
| | 42.5 |
|
| Total increase in cable subscription revenue | 53.9 |
| | — |
| | 53.9 |
| | 123.5 |
| | — |
| | 123.5 |
|
| Decrease in mobile subscription revenue (c) | (18.8 | ) | | — |
| | (18.8 | ) | | (51.3 | ) | | — |
| | (51.3 | ) |
| Total increase in subscription revenue | 35.1 |
| | — |
| | 35.1 |
| | 72.2 |
| | — |
| | 72.2 |
|
| Increase in B2B revenue (d) | — |
| | 8.4 |
| | 8.4 |
| | — |
| | 32.1 |
| | 32.1 |
|
| Increase in other revenue (e) | — |
| | 11.0 |
| | 11.0 |
| | — |
| | 70.9 |
| | 70.9 |
|
| Total organic increase | 35.1 |
| | 19.4 |
| | 54.5 |
| | 72.2 |
| | 103.0 |
| | 175.2 |
|
| Impact of an acquisition | — |
| | 12.1 |
| | 12.1 |
| | — |
| | 36.5 |
| | 36.5 |
|
Impact of disposals (f) | (3.5 | ) | | (0.7 | ) | | (4.2 | ) | | (8.6 | ) | | (5.8 | ) | | (14.4 | ) |
| Impact of FX | (208.7 | ) | | (55.6 | ) | | (264.3 | ) | | (368.3 | ) | | (97.7 | ) | | (466.0 | ) |
| Total | $ | (177.1 | ) | | $ | (24.8 | ) | | $ | (201.9 | ) | | $ | (304.7 | ) | | $ | 36.0 |
| | $ | (268.7 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase (decrease) in residential cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | 20.7 |
| | $ | — |
| | $ | 20.7 |
| | $ | 59.8 |
| | $ | — |
| | $ | 59.8 |
|
| ARPU (b) | (1.3 | ) | | — |
| | (1.3 | ) | | 19.9 |
| | — |
| | 19.9 |
|
| Increase in residential cable non-subscription revenue (c) | — |
| | 4.6 |
| | 4.6 |
| | — |
| | 15.4 |
| | 15.4 |
|
| Total increase in residential cable revenue | 19.4 |
| | 4.6 |
| | 24.0 |
| | 79.7 |
| | 15.4 |
| | 95.1 |
|
| Increase (decrease) in residential mobile revenue (d) | (9.4 | ) | | 4.2 |
| | (5.2 | ) | | (44.4 | ) | | (4.6 | ) | | (49.0 | ) |
| Increase (decrease) in B2B revenue (e) | 8.8 |
| | (4.1 | ) | | 4.7 |
| | 27.6 |
| | 0.2 |
| | 27.8 |
|
| Increase in other revenue | — |
| | 2.2 |
| | 2.2 |
| | — |
| | 3.4 |
| | 3.4 |
|
| Total organic increase | 18.8 |
| | 6.9 |
| | 25.7 |
| | 62.9 |
| | 14.4 |
| | 77.3 |
|
| Impact of acquisitions | — |
| | 9.0 |
| | 9.0 |
| | — |
| | 28.1 |
| | 28.1 |
|
| Impact of a disposal | — |
| | — |
| | — |
| | — |
| | (2.9 | ) | | (2.9 | ) |
| Impact of FX | 0.4 |
| | 0.6 |
| | 1.0 |
| | (316.8 | ) | | (83.7 | ) | | (400.5 | ) |
| Total | $ | 19.2 |
| | $ | 16.5 |
| | $ | 35.7 |
| | $ | (253.9 | ) | | $ | (44.1 | ) | | $ | (298.0 | ) |
_______________
| |
| (a) | The increases in residential cable subscription revenue related to changes in the average numbersnumber of RGUsRGUs are primarily attributable to the net effect of (i) increases in the average numbersnumber of broadband internet and fixed-line telephony RGUsRGUs in the U.K. and (ii) declinesnet increases in the average number of enhanced video RGUs and, to a much lesser extent, the average numbers of basicvideo RGUs in Ireland. In addition, theRGUs, as increases in each period include a slight decrease for the three-month comparison and a slight increase for the nine-month comparison in the average number of fixed-line telephony RGUsU.K. were only partially offset by decreases in Ireland. |
| |
| (b) | The increaseschanges in cable subscriptionsubscription revenue related to changes in ARPU are primarily attributable to (i) the net effect of (i) net increases primarily due to (a) higher ARPU from broadband internet services and (b) lower ARPU from video and fixed-line telephony services and (ii) an improvement in RGU mix, as increases in the U.K. were only partially offset by decreases in Ireland. In addition, ARPU from video, broadband internet and fixed-line telephony services in the U.K., (c) lower ARPU resulting fromnine-month comparison was adversely impacted by an aggregate revenue decrease of $12.4 million associated with the impact of a changeApril 2016 changes in the regulations governing payment handling fees that Virgin Media charges to its customers in the U.K., which reduced revenue by $9.1 million and $18.6 million, respectively, and (d) higher ARPU from video services, as increases in the U.K. were only partially offset by decreases in Ireland and (ii) adverse changes in RGU mix. |
| |
| (c) | The increases in residential cable non-subscription revenue are largely due to increases in installation revenue in the U.K. |
| |
| (d) | The decreases in residential mobile subscription revenue relate to the net effect of (i) lower ARPUdecreases in the U.K., including declines of $28.0 milliondue primarily to lower ARPU, and $74.8 million, respectively, in postpaid mobile services revenue due to the continued growth of the U.K. Split-contract Program, (ii) increases in the average number of postpaid mobile subscribers and (iii) declinesIreland, mainly due to increases in the average number of prepaid mobile subscriberssubscribers. The lower ARPU in the U.K. includes the net effect of (a) revenue decreases of $22.7 million and $91.1 million, respectively, attributable to declines in the number of customers under subsidized handset contracts, (b) revenue increases of $9.6 million and $36.4 million, respectively, attributable to growth in the number of customers under the Split-contract Program and (c) revenue increases of $1.8 million and $6.0 million, respectively, attributable to growth in the number of customers under subscriber identification module or “SIM”-only contracts. The increase in residential mobile non-subscription revenue for the three-month comparison is primarily due to increases in sales of mobile handsets and other devices. The decrease in residential mobile non-subscription revenue for the nine-month comparison is primarily due to (1) a decrease in interconnect revenue in the U.K. that was only partially offset by a volume-related increase in interconnect revenue in Ireland and (2) an increase in sales of mobile handsets and other devices, as an increase in Ireland was only partially offset by a decrease in the U.K. The decrease in interconnect revenue in the U.K. during the nine-month comparison is primarily due to (I) declines in mobile short message service or “SMS” termination volumes and (II) lower mobile termination rates and volumes. |
| |
| (e) | The increases in B2B subscription revenue are primarily due to increases in the average number of broadband internet SOHO RGUs in the U.K. The decrease in B2B non-subscription revenue for the three-month comparison is primarily due to lower revenue from data and fixed-line telephony services in the U.K. |
For information regarding certain regulatory developments that could have an adverse impact on our revenue in the U.K., see note 14 to our condensed consolidated financial statements.
Belgium. The details of the increases in Belgium’s revenue during the three and nine months ended September 30, 2017, as compared to the corresponding periods in 2016, are set forth below:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase (decrease) in residential cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | (11.4 | ) | | $ | — |
| | $ | (11.4 | ) | | $ | (25.8 | ) | | $ | — |
| | $ | (25.8 | ) |
| ARPU (b) | 4.0 |
| | — |
| | 4.0 |
| | 11.0 |
| | — |
| | 11.0 |
|
Increase in residential cable non-subscription revenue (c) | — |
| | 0.6 |
| | 0.6 |
| | — |
| | 3.3 |
| | 3.3 |
|
| Total increase (decrease) in residential cable revenue | (7.4 | ) | | 0.6 |
| | (6.8 | ) | | (14.8 | ) | | 3.3 |
| | (11.5 | ) |
| Increase (decrease) in residential mobile revenue (d) | (6.1 | ) | | 0.4 |
| | (5.7 | ) | | (18.6 | ) | | (20.3 | ) | | (38.9 | ) |
| Increase in B2B revenue (e) | 15.6 |
| | 16.8 |
| | 32.4 |
| | 45.0 |
| | 35.5 |
| | 80.5 |
|
Total organic increase | 2.1 |
| | 17.8 |
| | 19.9 |
| | 11.6 |
| | 18.5 |
| | 30.1 |
|
| Impact of acquisitions | 14.6 |
| | 2.3 |
| | 16.9 |
| | 60.8 |
| | 32.1 |
| | 92.9 |
|
| Impact of disposals | (6.6 | ) | | (2.5 | ) | | (9.1 | ) | | (15.1 | ) | | (6.7 | ) | | (21.8 | ) |
| Impact of FX | 29.5 |
| | 8.5 |
| | 38.0 |
| | (4.3 | ) | | (1.3 | ) | | (5.6 | ) |
| Total | $ | 39.6 |
| | $ | 26.1 |
| | $ | 65.7 |
| | $ | 53.0 |
| | $ | 42.6 |
| | $ | 95.6 |
|
_______________
| |
| (a) | The decreases in residential cable subscription revenue related to changes in the average number of RGUs are attributable to decreases in the average number of video, broadband internet and fixed-line telephony RGUs. |
| |
| (b) | The increases in residential cable subscription revenue related to changes in ARPU are attributable to(i) net increases due to (a) higher ARPU from broadband internet and video services and (b) lower ARPU from fixed-line telephony services and (ii) improvements in RGU mix. |
| |
| (c) | The increases in residential cable non-subscription revenue are attributable to (i) an increase of $5.8 million for the nine-month comparison due to adjustments recorded during the 2017 period to reflect the expected recovery of certain prior-period VAT payments, (ii) decreases in revenue from services provided through third-party networks and (iii) an increase for the three-month comparison and a decrease for the nine-month comparison in equipment sales. |
| |
| (d) | The increasesdecreases in B2Bresidential mobile subscription revenue are primarily due to the net effect of(i) increases in data revenue, primarily attributable to (a) higher volumes and (b) increases of $2.8 million and $11.6 million, respectively, in the U.K.’s amortization of deferred upfront fees on B2B contracts, (ii) lower voice revenue in the U.K., primarily attributable to declines in usage, and (iii) for the nine-month comparison, an increase in low-margin equipment sales in the U.K. |
| |
(e) | The increases in other revenue are largely due to the net effect of (i) increases in mobile handset sales in the U.K., primarily attributable to increases of $8.2 million and $65.7 million, respectively, associated with the U.K. Split-contract Program, (ii) decreases in interconnect revenue in the U.K. of $4.4 million and $12.7 million, respectively, primarily due to (a) declines in mobile short message service (or SMS) termination volumes and (b) lower fixed-line telephony termination volumes, (iii) increases in installation revenue in the U.K. and (iv) increases in broadcasting revenue in Ireland. The increases in revenue from the Split-contract Program are due to the net effect of (1) increased volume associated with the continued growth of the program and (2) lower average revenue per handset sold.
|
| |
(f) | Represents the estimated impact of (i) the multi-channel multi-point (microwave) distribution system subscribers in Ireland that have disconnected since we announced the switch-off of this service effective April 2016 and (ii) the non-cable subscribers in the U.K. that we sold in the fourth quarter of 2014 (the U.K. Non-Cable Disposal). The non-cable subscribers were migrated to a third party during the first nine months of 2015.
|
As discussed above, Virgin Media has reduced certain fees it charges to customers in the U.K. as a result of a change in the regulations governing these fees, with the largest reduction effective April 1, 2016. We estimate that these reduced charges will result in a £6 million ($8 million) reduction of the U.K.’s cable subscription revenue and operating income for the last three months of 2016 when compared to the corresponding prior-year period.
The Netherlands. The increase (decrease) in the Netherlands’ revenue during the three and nine months ended September 30, 2016, as compared to the corresponding periods in 2015, includes (i) organic decreases of $2.0 million or 0.3% and $43.9 million or 2.1%, respectively, and (ii) the impact of FX, as set forth below:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase (decrease) in cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | (8.5 | ) | | $ | — |
| | $ | (8.5 | ) | | $ | (31.6 | ) | | $ | — |
| | $ | (31.6 | ) |
| ARPU (b) | 2.2 |
| | — |
| | 2.2 |
| | (17.0 | ) | | — |
| | (17.0 | ) |
| Total decrease in cable subscription revenue | (6.3 | ) | | — |
| | (6.3 | ) | | (48.6 | ) | | — |
| | (48.6 | ) |
| Increase in mobile subscription revenue (c) | 1.3 |
| | — |
| | 1.3 |
| | 3.8 |
| | — |
| | 3.8 |
|
| Total decrease in subscription revenue | (5.0 | ) | | — |
| | (5.0 | ) | | (44.8 | ) | | — |
| | (44.8 | ) |
| Increase in B2B revenue (d) | — |
| | 1.8 |
| | 1.8 |
| | — |
| | 1.2 |
| | 1.2 |
|
| Increase (decrease) in other revenue (e) | — |
| | 1.2 |
| | 1.2 |
| | — |
| | (0.3 | ) | | (0.3 | ) |
| Total organic increase (decrease) | (5.0 | ) | | 3.0 |
| | (2.0 | ) | | (44.8 | ) | | 0.9 |
| | (43.9 | ) |
| Impact of FX | 2.2 |
| | 0.2 |
| | 2.4 |
| | 1.6 |
| | — |
| | 1.6 |
|
| Total | $ | (2.8 | ) | | $ | 3.2 |
| | $ | 0.4 |
| | $ | (43.2 | ) | | $ | 0.9 |
| | $ | (42.3 | ) |
_______________
| |
(a) | The decreases in cable subscription revenue related to changes in the average numbers of RGUs are attributable to declines in the average numbersnumber of basic video, enhanced video and fixed-line telephony RGUs that weresubscribers, as decreases in the average number of prepaid subscribers was only partially offset by increases in the average number of broadband internet RGUs.
|
| |
(b) | postpaid subscribers, and (ii) for the nine-month comparison, lower ARPU, and for the three-month comparison, higher ARPU.The changes in cable subscriptionresidential mobile non-subscription revenue related to changes in ARPUare attributable toprimarily driven by the net effect of (i) a net(a) decreases in sales of mobile handsets and other devices, (b) an increase for the three-month comparison and a net decrease for the nine-month comparison due to (a) higher ARPU from video services and (b) lower ARPU from broadband internet and fixed-line telephony services and (ii) improvements in RGU mix. |
| |
(c) | The increases in mobile subscriptioninterconnect revenue, are due to the net effect of (i) increases in the average number of mobile subscriberslower SMS termination volumes, higher roaming revenue and (ii) lower ARPU.
|
| |
(d) | The increases in B2B revenue are primarily due to the net effect of (i)termination rates, and (c) higher revenue from data services and (ii) lower revenue from voice services.late fees.
|
| |
| (e) | The decrease increasesin otherB2B subscription revenue forare largely attributable to increases in the nine-month comparison includes the net effectaverage number of (i) an increasebroadband internet SOHO RGUs and mobile SOHO subscribers. The increases in B2B non-subscription revenue are primarily due to the favorable impact of $3.3 million of nonrecurring(i) higher revenue recorded during the first quarter of 2016 following the settlement of prior period amounts,from wholesale services, (ii) a decreaseincreases in interconnect revenue, of $1.6 million resulting from the termination of a partner network agreement in the Netherlands shortly after the November 2014 acquisition of Ziggomainly due to higher mobile volumes, and (iii) a net decrease resulting from individually insignificant changesincreases in other non-subscription revenue categories.installation revenue. |
For information concerning certain regulatory developments that could have an adverse impact on our revenue in Belgium, see note 14 to our condensed consolidated financial statements.
Germany. The details of the increases in Germany’s revenue during the three and nine months ended September 30, 2016,2017, as compared to the corresponding periods in 2015, include (i) organic increases of $33.6 million or 5.6% and $105.7 million or 5.9%, respectively, and (ii) the impact of FX, as2016, are set forth below:
| | | | Three-month period | | Nine-month period | Three-month period | | Nine-month period |
| | Subscription revenue (a) | | Non-subscription revenue (b) | | Total | | Subscription revenue (a) | | Non-subscription revenue (b) | | Total | Subscription revenue (a) | | Non-subscription revenue | | Total | | Subscription revenue (a) | | Non-subscription revenue | | Total |
| | in millions | in millions |
| Increase in cable subscription revenue due to change in: | | | | | | | | | | | | |
| Increase in residential cable subscription revenue due to change in: | | | | | | | | | | | | |
Average number of RGUs (c)(b) | $ | 14.8 |
| | $ | — |
| | $ | 14.8 |
| | $ | 43.8 |
| | $ | — |
| | $ | 43.8 |
| $ | 10.3 |
| | $ | — |
| | $ | 10.3 |
| | $ | 35.3 |
| | $ | — |
| | $ | 35.3 |
|
ARPU (d)(c) | 19.3 |
| | — |
| | 19.3 |
| | 62.3 |
| | — |
| | 62.3 |
| 6.8 |
| | — |
| | 6.8 |
| | 24.0 |
| | — |
| | 24.0 |
|
| Total increase in cable subscription revenue | 34.1 |
| | — |
| | 34.1 |
| | 106.1 |
| | — |
| | 106.1 |
| |
| Increase (decrease) in mobile subscription revenue | (0.2 | ) | | — |
| | (0.2 | ) | | 1.6 |
| | — |
| | 1.6 |
| |
| Total increase in subscription revenue | 33.9 |
| | — |
| | 33.9 |
| | 107.7 |
| | — |
| | 107.7 |
| |
| Decrease in residential cable non-subscription revenue (d) | | — |
| | (4.8 | ) | | (4.8 | ) | | — |
| | (5.6 | ) | | (5.6 | ) |
| Total increase (decrease) in residential cable revenue | | 17.1 |
| | (4.8 | ) | | 12.3 |
| | 59.3 |
| | (5.6 | ) | | 53.7 |
|
Increase (decrease) in residential mobile revenue (e) | | (0.2 | ) | | 11.5 |
| | 11.3 |
| | (2.7 | ) | | 26.7 |
| | 24.0 |
|
Increase in B2B revenue | — |
| | 0.2 |
| | 0.2 |
| | — |
| | 1.2 |
| | 1.2 |
| 3.8 |
| | 2.5 |
| | 6.3 |
| | 10.0 |
| | 7.0 |
| | 17.0 |
|
Decrease in other revenue (e) | — |
| | (0.5 | ) | | (0.5 | ) | | — |
| | (3.2 | ) | | (3.2 | ) | — |
| | (0.7 | ) | | (0.7 | ) | | — |
| | (1.2 | ) | | (1.2 | ) |
| Total organic increase (decrease) | 33.9 |
| | (0.3 | ) | | 33.6 |
| | 107.7 |
| | (2.0 | ) | | 105.7 |
| |
| Total organic increase | | 20.7 |
| | 8.5 |
| | 29.2 |
| | 66.6 |
| | 26.9 |
| | 93.5 |
|
| Impact of FX | 1.7 |
| | 0.6 |
| | 2.3 |
| | 1.7 |
| | 0.2 |
| | 1.9 |
| 32.4 |
| | 2.7 |
| | 35.1 |
| | (4.0 | ) | | (0.9 | ) | | (4.9 | ) |
| Total | $ | 35.6 |
| | $ | 0.3 |
| | $ | 35.9 |
| | $ | 109.4 |
| | $ | (1.8 | ) | | $ | 107.6 |
| $ | 53.1 |
| | $ | 11.2 |
| | $ | 64.3 |
| | $ | 62.6 |
| | $ | 26.0 |
| | $ | 88.6 |
|
_______________
| |
| (a) | SubscriptionResidential cable subscription revenue includes revenue from multi-year bulk agreements with landlords or housing associations or with third parties that operate and administer the in-building networks on behalf of housing associations. These bulk agreements, which generally allow for the procurement of the basic video signals at volume-based discounts, provide access to approximately two-thirds of Germany’s video subscribers. Germany’s bulk agreements are, to a significant extent, medium- and long-term contracts. As of September 30, 2016,2017, bulk agreements covering approximately 35%34% of the video subscribers that Germany serves expire by the end of 20172018 or are terminable on 30-days notice. During the three months ended September 30, 2016,2017, Germany’s 20 largest bulk agreement accounts generated approximately 8%9% of its total revenue (including estimated amounts billed directly to the building occupants for digital video, broadband internet and fixed-line telephony services). No assurance can be given that Germany’s bulk agreements will be renewed or extended on financially equivalent terms, or at all. |
| |
| (b) | OtherTheincreases in residential cable subscription revenue includesrelated to changes in the average number of RGUs are attributable toincreases in the average number of broadband internet, fixed-line telephony and video RGUs. |
| |
| (c) | The increases in residential cable subscription revenue related to changes in ARPU are attributable to (i) improvements in RGU mix and (ii) net increases due to (a) higher ARPU from broadband internet and video services and (b) lower ARPU from fixed-line telephony services. |
| |
| (d) | The decreases in residential cable non-subscription revenue are primarily due to the net effect of (i) decreases in channel carriage fee revenue, (ii) increases in installation revenue and (iii) decreases in interconnect revenue, primarily due to lower fixed-line telephony termination rates and volumes. Channel carriage revenue relates to fees received for the carriage of certain channels included in Germany’s basic and enhanced video offerings. This channel carriage fee revenue is subject to contracts that expire or are otherwise terminable by either party on various dates ranging from 20162017 through 2018.2020. The aggregate amount of revenue related to these channel carriage contracts represented approximately 4% of Germany’s total revenue during the three months ended September 30, 2016. No assurance can be given that these contracts will be renewed or extended on financially equivalent terms, or at all. Also, our ability to increase the aggregate channel carriage fees that Germany receives for each channel is limited through the end of 2016 by certain commitments we made to regulators in connection with the acquisition of Unitymedia BW GmbH. In June 2017, we plan to discontinue our analog video service. We estimate that the discontinuance of this service will reduce Germany’s channel carriage revenue and operating income by approximately €30 million ($34 million) annually. |
aggregate amount of revenue related to these channel carriage contracts represented approximately 3% of Germany’s total revenue during the three months ended September 30, 2017. No assurance can be given that these contracts will be renewed or extended on financially equivalent terms, or at all. The decreases in channel carriage fee revenue are primarily due to the June 2017 discontinuation of our analog video service in Germany, resulting in revenue decreases during the three and nine months ended September 30, 2017 of $7.5 million and $10.4 million, respectively, as compared to the corresponding prior-year periods.
| |
(c)(e) | Theincreases in residential mobile non-subscription revenue are primarily due to increases in mobile handset sales of $8.0 million and $20.0 million, respectively, associated with the fourth quarter 2016 launch of a wholesale handset program. These mobile handset sales typically generate relatively low margins. |
| |
| (f) | The increases in B2B subscription revenue are primarily attributable to increases in the average number of broadband internet and fixed-line telephony SOHO RGUs. The increases in B2B non-subscription revenue are largely due to higher revenue from data services and increases in interconnect revenue, mainly due to higher fixed-line telephony volumes. |
Switzerland/Austria. The details of the changes in Switzerland/Austria’s revenue during the three and nine months ended September 30, 2017, as compared to the corresponding periods in 2016, are set forth below:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase (decrease) in residential cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | 2.4 |
| | $ | — |
| | $ | 2.4 |
| | $ | 2.1 |
| | $ | — |
| | $ | 2.1 |
|
| ARPU (b) | (14.7 | ) | | — |
| | (14.7 | ) | | (36.3 | ) | | — |
| | (36.3 | ) |
| Increase in residential cable non-subscription revenue (c) | — |
| | 4.7 |
| | 4.7 |
| | — |
| | 6.1 |
| | 6.1 |
|
| Total increase (decrease) in residential cable revenue | (12.3 | ) | | 4.7 |
| | (7.6 | ) | | (34.2 | ) | | 6.1 |
| | (28.1 | ) |
Increase (decrease) in residential mobile revenue (d) | 3.9 |
| | 0.8 |
| | 4.7 |
| | 12.7 |
| | (2.5 | ) | | 10.2 |
|
| Increase in B2B revenue (e) | 0.8 |
| | 6.9 |
| | 7.7 |
| | 3.0 |
| | 8.7 |
| | 11.7 |
|
| Decrease in other revenue | — |
| | — |
| | — |
| | — |
| | (0.1 | ) | | (0.1 | ) |
| Total organic increase (decrease) | (7.6 | ) | | 12.4 |
| | 4.8 |
| | (18.5 | ) | | 12.2 |
| | (6.3 | ) |
| Impact of acquisitions | 0.4 |
| | 1.6 |
| | 2.0 |
| | 1.2 |
| | 4.8 |
| | 6.0 |
|
| Impact of FX | 8.4 |
| | 1.5 |
| | 9.9 |
| | (4.0 | ) | | (0.6 | ) | | (4.6 | ) |
| Total | $ | 1.2 |
| | $ | 15.5 |
| | $ | 16.7 |
| | $ | (21.3 | ) | | $ | 16.4 |
| | $ | (4.9 | ) |
_______________
| |
| (a) | The increases in residential cable subscription revenue related to changes in the average numbersnumber of RGUs are attributable to increases in the average numbersnet effect of broadband internet, fixed-line telephony and enhanced video RGUs that were only partially offset by(i) declines in the average number of basic video RGUs and (ii) increases in the average number of fixed-line telephony and broadband internet RGUs. |
| |
(d)(b) | The increasesdecreases in residential cable subscription revenue related to changes in ARPU are attributable to (i) decreases due to lower ARPU from fixed-line telephony, video and broadband internet services and (ii) adverse changes in RGU mix. |
| |
| (c) | The increases in residential cable non-subscription revenue are primarily attributable to the net effect of (i) increases in revenue from the distribution of our Swiss sports channel, (ii) decreases in installation revenue, as decreases in Switzerland were only slightly offset by increases in Austria, and (iii) decreases in equipment sales in Switzerland. In addition, the increase in residential cable non-subscription revenue for the nine-month comparison includes the favorable impact of the release of unclaimed customer credits in Switzerland during the 2017 period of $6.5 million. |
| |
| (d) | The increases in residential mobile subscription revenue are due to the net impact of (i) increases in the average number of mobile subscribers and (ii) lower ARPU from mobile services. The decrease in residential mobile non-subscription |
revenue for the nine-month period is largely due to decreases in sales of mobile handsets and other devices, as decreases in Switzerland were only partially offset by increases in Austria.
| |
| (e) | The increases in B2B subscription revenue are primarily attributable to increases in the average number of broadband internet and video SOHO RGUs.The increases in B2B non-subscription revenue are mostly due to higher revenue from data and fixed-line telephony services in Switzerland. |
Central and Eastern Europe. The details of the increases in Central and Eastern Europe’s revenue during the three and nine months ended September 30, 2017, as compared to the corresponding periods in 2016, are set forth below:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase (decrease) in residential cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | 6.8 |
| | $ | — |
| | $ | 6.8 |
| | $ | 23.3 |
| | $ | — |
| | $ | 23.3 |
|
| ARPU (b) | (1.8 | ) | | — |
| | (1.8 | ) | | (6.3 | ) | | — |
| | (6.3 | ) |
| Increase in residential cable non-subscription revenue (c) | — |
| | 0.7 |
| | 0.7 |
| | — |
| | 4.3 |
| | 4.3 |
|
| Total increase in residential cable revenue | 5.0 |
| | 0.7 |
| | 5.7 |
| | 17.0 |
| | 4.3 |
| | 21.3 |
|
Increase in residential mobile revenue (d) | 0.6 |
| | 0.2 |
| | 0.8 |
| | 2.2 |
| | 0.4 |
| | 2.6 |
|
| Increase in B2B revenue (e) | 2.2 |
| | 4.8 |
| | 7.0 |
| | 6.6 |
| | 14.4 |
| | 21.0 |
|
| Total organic increase | 7.8 |
| | 5.7 |
| | 13.5 |
| | 25.8 |
| | 19.1 |
| | 44.9 |
|
| Impact of FX | 16.6 |
| | 2.0 |
| | 18.6 |
| | 6.5 |
| | 0.5 |
| | 7.0 |
|
| Total | $ | 24.4 |
| | $ | 7.7 |
| | $ | 32.1 |
| | $ | 32.3 |
| | $ | 19.6 |
| | $ | 51.9 |
|
_______________
| |
| (a) | Theincreases in residential cable subscription revenue related to changes in the average number of RGUs are attributable to (i) increases in the average number of broadband internet RGUs, due primarily to increases in Hungary, Czech Republic, Romania and Poland, (ii) increases in the average number of video RGUs, primarily due to increases in Hungary, Poland and Romania and (iii) increases in the average number of fixed-line telephony RGUs, due primarily to increases in Hungary. |
| |
| (b) | The decreases in residential cable subscription revenue related to changes in ARPU are primarily attributable to (i) the net effect of (a) higher ARPU from video services, due primarily to increases in Poland, UPC DTH, Czech Republic and Hungary, (b) lower ARPU from broadband internet services, primarily driven by decreases in Poland and Hungary that were only partially offset by increases in Romania, and (c) lower ARPU from fixed-line telephony services, primarily in Poland, Romania and Hungary and (ii) improvements in RGU mix, as improvements in Hungary and Poland were only partially offset by adverse changes in Romania and the Czech Republic. |
| |
| (c) | The increases in residential cable non-subscription revenue are largely attributable to net increases in Hungary and at UPC DTH. |
| |
| (d) | The increases in residential mobile subscription revenue are primarily due to increases in the average number of mobile subscribers in Hungary. |
| |
| (e) | Theincreases in B2B subscription revenue are largely attributable to increases in the average number of broadband internet SOHO RGUs.The increases in B2B non-subscription revenue are primarily due to (i) higher revenue from fixed-line telephony services, primarily in the Czech Republic, and (ii) higher interconnect revenue, primarily due to higher volumes in Poland and Hungary. |
C&W. The details of the changes in C&W’s revenue during the three and nine months ended September 30, 2017, as compared to the corresponding periods in 2016, are set forth below:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase (decrease) in residential cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | (0.9 | ) | | $ | — |
| | $ | (0.9 | ) | | $ | (1.0 | ) | | $ | — |
| | $ | (1.0 | ) |
| ARPU (b) | 2.9 |
| | — |
| | 2.9 |
| | 2.7 |
| | — |
| | 2.7 |
|
| Decrease in residential cable non-subscription revenue (c) | — |
| | (3.8 | ) | | (3.8 | ) | | — |
| | (5.3 | ) | | (5.3 | ) |
| Impact of hurricanes on residential cable revenue (d) | (2.5 | ) | | — |
| | (2.5 | ) | | (2.5 | ) | | — |
| | (2.5 | ) |
| Total decrease in residential cable revenue | (0.5 | ) | | (3.8 | ) | | (4.3 | ) | | (0.8 | ) | | (5.3 | ) | | (6.1 | ) |
Increase (decrease) in residential mobile revenue (e) | (8.3 | ) | | 1.4 |
| | (6.9 | ) | | (13.9 | ) | | 2.5 |
| | (11.4 | ) |
| Impact of hurricanes on residential mobile revenue (d) | (0.3 | ) | | — |
| | (0.3 | ) | | (0.3 | ) | | — |
| | (0.3 | ) |
| Increase in B2B revenue (f) | — |
| | 17.7 |
| | 17.7 |
| | — |
| | 29.6 |
| | 29.6 |
|
| Impact of hurricanes on B2B revenue (d) | — |
| | (0.6 | ) | | (0.6 | ) | | — |
| | (0.6 | ) | | (0.6 | ) |
| Increase (decrease) in other revenue | — |
| | 0.2 |
| | 0.2 |
| | — |
| | (3.8 | ) | | (3.8 | ) |
| Total organic increase (decrease) | (9.1 | ) | | 14.9 |
| | 5.8 |
| | (15.0 | ) | | 22.4 |
| | 7.4 |
|
| Impact of acquisitions | — |
| | 6.9 |
| | 6.9 |
| | 434.3 |
| | 455.2 |
| | 889.5 |
|
| Impact of FX | (1.3 | ) | | (1.0 | ) | | (2.3 | ) | | (7.5 | ) | | (6.3 | ) | | (13.8 | ) |
| Total | $ | (10.4 | ) | | $ | 20.8 |
| | $ | 10.4 |
| | $ | 411.8 |
| | $ | 471.3 |
| | $ | 883.1 |
|
| |
| (a) | The decrease in residential cable subscription revenue related to changes in the average number of RGUs for the three-month comparison is primarily attributable to a decrease in the average number of video RGUs. The decrease in residential cable subscription revenue related to changes in the average number of RGUs for the nine-month comparison is attributable to the net effect of (i) decreases in the average number of broadband internet and video RGUs and (ii) an increase in the average number of fixed-line telephony RGUs. |
| |
| (b) | The increases in residential cable subscription revenue related to changes in ARPU are attributable to the net effect of (i) net increases due to (a) higher ARPU from broadband internet and video services and (b) lower ARPU from fixed-line telephony services and (ii) improvementsadverse changes in RGU mix. |
| |
| (c) | The decreases in residential cable non-subscription revenue are largely attributable todecreases in interconnect revenue, mainly due to lower fixed-line telephony termination volumes. |
| |
| (d) | Amounts represent customer credits recorded through September 30, 2017 associated with service interruptions resulting from the hurricanes. For additional information, see Overview above. |
| |
| (e) | The decreases in otherresidential mobile subscription revenue are dueprimarily attributable to lower revenue in the Bahamas associated with decreases in the average number of subscribers and lower ARPU, primarily driven by the commercial launch of mobile services by a competitor during the fourth quarter of 2016. |
| |
| (f) | The increases in B2B non-subscription revenue are primarily attributable to the net effect of (i) higher revenue from wholesale services, data services, interconnect fees, video services and installation fees and (ii) lower revenue from fixed-line telephony services. In addition, the increases include $0.9 million and $5.8 million, respectively, of organic impacts associated with wholesale revenue recognized on a cash basis during the second and third quarters of 2017 related to services provided to a significant customer in installation revenue, (ii) for the nine-month comparison, a decrease due to legislative developments that have reduced the fees we can charge our late-paying customers and (iii) net decreases resulting from individually insignificant changes in other non-subscription categories.prior quarters. |
Belgium.Chile. The increasesdetails of the changes in Belgium’sChile’s revenue during the three and nine months ended September 30, 2016,2017, as compared to the corresponding periods in 2015, include (i) organic increases of $14.9 million or 2.2% and $73.3 million or 3.8%, respectively, (ii) the impact of the BASE Acquisition and (iii) the impact of FX, as2016, are set forth below:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase in cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | 5.1 |
| | $ | — |
| | $ | 5.1 |
| | $ | 16.7 |
| | $ | — |
| | $ | 16.7 |
|
| ARPU (b) | 10.7 |
| | — |
| | 10.7 |
| | 32.4 |
| | — |
| | 32.4 |
|
| Total increase in cable subscription revenue | 15.8 |
| | — |
| | 15.8 |
| | 49.1 |
| | — |
| | 49.1 |
|
| Increase in mobile subscription revenue (c) | 4.0 |
| | — |
| | 4.0 |
| | 10.0 |
| | — |
| | 10.0 |
|
| Total increase in subscription revenue | 19.8 |
| | — |
| | 19.8 |
| | 59.1 |
| | — |
| | 59.1 |
|
| Increase in B2B revenue (d) | — |
| | — |
| | — |
| | — |
| | 4.8 |
| | 4.8 |
|
| Increase (decrease) in other revenue (e) | — |
| | (4.9 | ) | | (4.9 | ) | | — |
| | 9.4 |
| | 9.4 |
|
| Total organic increase (decrease) | 19.8 |
| | (4.9 | ) | | 14.9 |
| | 59.1 |
| | 14.2 |
| | 73.3 |
|
| Impact of the BASE Acquisition | 98.4 |
| | 65.1 |
| | 163.5 |
| | 251.7 |
| | 166.7 |
| | 418.4 |
|
| Impact of FX | 1.7 |
| | 0.8 |
| | 2.5 |
| | 2.7 |
| | 1.0 |
| | 3.7 |
|
| Total | $ | 119.9 |
| | $ | 61.0 |
| | $ | 180.9 |
| | $ | 313.5 |
| | $ | 181.9 |
| | $ | 495.4 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase in residential cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | 3.6 |
| | $ | — |
| | $ | 3.6 |
| | $ | 10.7 |
| | $ | — |
| | $ | 10.7 |
|
| ARPU (b) | 4.4 |
| | — |
| | 4.4 |
| | 20.1 |
| | — |
| | 20.1 |
|
| Decrease in residential cable non-subscription revenue (c) | — |
| | (0.9 | ) | | (0.9 | ) | | — |
| | (6.2 | ) | | (6.2 | ) |
| Total increase (decrease) in residential cable revenue | 8.0 |
| | (0.9 | ) |
| 7.1 |
| | 30.8 |
| | (6.2 | ) | | 24.6 |
|
Increase in residential mobile revenue (d) | 3.3 |
| | — |
| | 3.3 |
| | 9.6 |
| | 0.4 |
| | 10.0 |
|
| Increase (decrease) in B2B revenue (e) | 3.5 |
| | (0.1 | ) | | 3.4 |
| | 10.1 |
| | (0.8 | ) | | 9.3 |
|
| Total organic increase (decrease) | 14.8 |
| | (1.0 | ) | | 13.8 |
| | 50.5 |
| | (6.6 | ) | | 43.9 |
|
| Impact of FX | 6.7 |
| | 0.4 |
| | 7.1 |
| | 24.5 |
| | 2.3 |
| | 26.8 |
|
| Total | $ | 21.5 |
| | $ | (0.6 | ) | | $ | 20.9 |
| | $ | 75.0 |
| | $ | (4.3 | ) | | $ | 70.7 |
|
_______________
| |
| (a) | The increases in residential cable subscription revenue related to changes in the average numbersnumber of RGUs are attributable to the net effect of (i) increases in the average numbersnumber of fixed-line telephony, broadband internet and enhanced video RGUs that were only partially offset byand (ii) declines in the average number of basic videofixed-line telephony RGUs. |
| |
| (b) | The increases in residential cable subscription revenue related to changes in ARPU are attributable to (i) the net effect of (a) higher ARPU from video services and (b) lower ARPU from fixed-line telephony and broadband internet and fixed-line telephony services and (ii) improvementsan improvement in RGU mix. In addition, the increase in Chile’s residential cable subscription revenue for the nine-month comparison includes an increase of $3.8 million resulting from the impact of unfavorable adjustments recorded during the first and second quarters of 2016 to reflect the retroactive application of a tariff for the period from July 2013 through February 2014. |
| |
| (c) | The increasesdecrease in mobile subscriptionresidential cable non-subscription revenue areis primarily due to the net effect of (i) lower advertising revenue, (ii) lower interconnect revenue, attributable to lower fixed-line telephony termination rates and volumes, and (iii) increases in the average number of mobile subscribers and (ii) lower ARPU due to (a) declines of $3.3 million and $8.7 million, respectively, in mobile services revenue due to the June 2015 introduction of a Split-contract Program and (b) declines in usage.installation revenue. |
| |
| (d) | The changes in B2B revenue are largely due to the net impact of (i) higher revenue from information technology security services and related equipment sales, (ii) lower revenue from mobile services and (iii) higher revenue from data services. |
| |
(e) | The changes in other revenue are primarily due to (i) a decrease of $4.3 million for the three-month comparison and an increase of $4.8 million for the nine-month comparison in mobile handset sales, (ii) increases in tablet sales of $0.2 million and $3.9 million, respectively, and (iii) decreases in mobile interconnect revenue due to the net effect of (a) lower SMS usage and (b) growth in mobile call volumes. The changes in Belgium’s mobile handset sales, which typically generate relatively low or negative margins, include the net impact of (1) a decrease of $3.7 million for the three-month comparison and an increase of $9.4 million for the nine-month comparison in non-subsidized handset sales, including a decrease of $2.6 million in the three-month comparison and an increase of $3.5 million in the nine-month comparison associated with the June 2015 introduction of a Split-contract Program, and (2) for the nine-month comparison, a decrease of $3.1 million in subsidized handset sales. |
For information concerning certain regulatory developments that could have an adverse impact on our revenue in Belgium, see note 13 to our condensed consolidated financial statements.
Switzerland/Austria. The changes in Switzerland/Austria’s revenue during the three and nine months ended September 30, 2016, as compared to the corresponding periods in 2015, include (i) organic increases of $4.9 million or 1.1% and $22.3 million or 1.7%, respectively, and (ii) the impact of FX, as set forth below:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase (decrease) in cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | (3.7 | ) | | $ | — |
| | $ | (3.7 | ) | | $ | (5.9 | ) | | $ | — |
| | $ | (5.9 | ) |
| ARPU (b) | 4.6 |
| | — |
| | 4.6 |
| | 7.6 |
| | — |
| | 7.6 |
|
| Total increase in cable subscription revenue | 0.9 |
| | — |
| | 0.9 |
| | 1.7 |
| | — |
| | 1.7 |
|
| Increase in mobile subscription revenue (c) | 5.0 |
| | — |
| | 5.0 |
| | 12.4 |
| | — |
| | 12.4 |
|
| Total increase in subscription revenue | 5.9 |
| | — |
| | 5.9 |
| | 14.1 |
| | — |
| | 14.1 |
|
| Increase in B2B revenue | — |
| | 0.4 |
| | 0.4 |
| | — |
| | 2.2 |
| | 2.2 |
|
| Increase (decrease) in other revenue (d) | — |
| | (1.4 | ) | | (1.4 | ) | | — |
| | 6.0 |
| | 6.0 |
|
| Total organic increase (decrease) | 5.9 |
| | (1.0 | ) | | 4.9 |
| | 14.1 |
| | 8.2 |
| | 22.3 |
|
| Impact of FX | (3.6 | ) | | 0.1 |
| | (3.5 | ) | | (24.3 | ) | | (4.3 | ) | | (28.6 | ) |
| Total | $ | 2.3 |
| | $ | (0.9 | ) | | $ | 1.4 |
| | $ | (10.2 | ) | | $ | 3.9 |
| | $ | (6.3 | ) |
_______________
| |
(a) | The decreases in cable subscription revenue related to changes in the average numbers of RGUs are primarily attributable to declines in the average numbers of (i) basic video RGUs, (ii) enhanced video RGUs in Switzerland and (iii) for the three month-comparison, broadband internet RGUs in Switzerland, that were mostly offset by increases in the average numbers of (a) fixed-line telephony RGUs and (b) broadband internet RGUs in Austria and, for the nine-month comparison, Switzerland. |
| |
(b) | The increases in cable subscription revenue related to changes in ARPU are attributable to (i) net increases due to (a) higher ARPU from video services, (b) lower ARPU from fixed-line telephony services and (c) higher ARPU from broadband internet services and (ii) slight improvements in RGU mix, as favorable changes in Switzerland were mostly offset by adverse changes in Austria.
|
| |
(c) | The increases inresidential mobile subscription revenue are primarily due to increases in the average number of mobile subscribers. |
| |
(d) | The changes in other revenue are primarily due to the net effect of (i) increases of $1.3 million and $7.6 million, respectively, in mobile handset sales in Switzerland, which typically generate relatively low margins, including increases of $0.8 million and $2.9 million, respectively, associated with the September 2015 introduction of a Split-contract Program, and (ii) decreases in installation revenue in Switzerland. |
Central and Eastern Europe. The increases in Central and Eastern Europe’s revenue during the three and nine months ended September 30, 2016, as compared to the corresponding periods in 2015, include (i) organic increases of $10.1 million or 3.8% and $25.4 million or 3.2%, respectively, (ii) the impact of an acquisition and (iii) the impact of FX, as set forth below:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase (decrease) in cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | 13.3 |
| | $ | — |
| | $ | 13.3 |
| | $ | 38.4 |
| | $ | — |
| | $ | 38.4 |
|
| ARPU (b) | (6.5 | ) | | — |
| | (6.5 | ) | | (19.5 | ) | | — |
| | (19.5 | ) |
| Total increase in cable subscription revenue | 6.8 |
| | — |
| | 6.8 |
| | 18.9 |
| | — |
| | 18.9 |
|
| Increase in mobile subscription revenue | 1.1 |
| | — |
| | 1.1 |
| | 3.0 |
| | — |
| | 3.0 |
|
| Total increase in subscription revenue | 7.9 |
| | — |
| | 7.9 |
| | 21.9 |
| | — |
| | 21.9 |
|
| Increase (decrease) in B2B revenue | — |
| | (0.2 | ) | | (0.2 | ) | | — |
| | 0.2 |
| | 0.2 |
|
| Increase in other revenue | — |
| | 2.4 |
| | 2.4 |
| | — |
| | 3.3 |
| | 3.3 |
|
| Total organic increase | 7.9 |
| | 2.2 |
| | 10.1 |
| | 21.9 |
| | 3.5 |
| | 25.4 |
|
| Impact of an acquisition | 0.8 |
| | 0.1 |
| | 0.9 |
| | 2.4 |
| | 0.2 |
| | 2.6 |
|
| Impact of FX | (2.6 | ) | | (0.1 | ) | | (2.7 | ) | | (14.1 | ) | | (0.9 | ) | | (15.0 | ) |
| Total | $ | 6.1 |
| | $ | 2.2 |
| | $ | 8.3 |
| | $ | 10.2 |
| | $ | 2.8 |
| | $ | 13.0 |
|
_______________
| |
(a)(e) | The increases in cableB2B subscription revenue related to changes in the average numbers of RGUs are primarily attributable to the net effect of (i) increases in the average numbers of fixed-line telephony, broadband internet and enhanced video RGUs in Romania, Hungary and Poland, (ii) declines in the average numbers of basic video RGUs in Hungary, Poland, Romania and Slovakia, (iii) increases in the average number of DTH RGUs, (iv) increases in the average numbers of basic video and broadband internet RGUs in the Czech Republic, (v) declines in the average numbers of fixed-line telephony and enhanced video RGUs in the Czech Republic and (vi) increases in the average numbers of fixed-line telephony, broadband internet and for the nine-month comparison, enhanced video RGUs in Slovakia.fixed-line telephony SOHO RGUs. |
| |
(b) | The decreases in cable subscription revenue related to changes in ARPU are attributable to (i) net decreases due to (a) lower ARPU from fixed-line telephony and broadband internet services and (b) higher ARPU from video services, primarily in Poland, and (ii) to a much lesser extent, adverse changes in RGU mix, as adverse changes in Romania were mostly offset by improvements in Hungary. |
CWC. The increases in CWC’s revenue during the three and nine months ended September 30, 2016, as compared to the corresponding periods in 2015, are entirely attributable to the May 16, 2016 CWC Acquisition. Accordingly, we do not separately discuss the changes in the revenue for the CWC segment. As further discussed under Overview above, CWC is experiencing significant competition in all of its markets.
Effective April 1, 2016, CWC began recognizing revenue on a cash, rather than accrual, basis with respect to twoPuerto Rico. The details of its more significant B2B customers due primarily to unfavorable collection experience and unfavorable macroeconomic factors. The aggregate amount billed, but not recognized, with respect to these customers during the three months ended September 30, 2016 was $4.2 million.
Chile. The changes in Chile’s revenue during the three and nine months ended September 30, 2016, as compared to the corresponding periods in 2015, include (i) organic increases of $12.2 million or 6.0% and $38.0 million or 6.0%, respectively, and (ii) the impact of FX, as set forth below:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase in cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | 4.8 |
| | $ | — |
| | $ | 4.8 |
| | $ | 15.8 |
| | $ | — |
| | $ | 15.8 |
|
| ARPU (b) | 7.0 |
| | — |
| | 7.0 |
| | 17.4 |
| | — |
| | 17.4 |
|
| Total increase in cable subscription revenue | 11.8 |
| | — |
| | 11.8 |
| | 33.2 |
| | — |
| | 33.2 |
|
| Increase in mobile subscription revenue (c) | 1.4 |
| | — |
| | 1.4 |
| | 4.7 |
| | — |
| | 4.7 |
|
| Total increase in subscription revenue | 13.2 |
| | — |
| | 13.2 |
| | 37.9 |
| | — |
| | 37.9 |
|
| Increase (decrease) in other revenue (d) | — |
| | (1.0 | ) | | (1.0 | ) | | — |
| | 0.1 |
| | 0.1 |
|
| Total organic increase (decrease) | 13.2 |
| | (1.0 | ) | | 12.2 |
| | 37.9 |
| | 0.1 |
| | 38.0 |
|
| Impact of FX | 4.8 |
| | — |
| | 4.8 |
| | (37.7 | ) | | (2.3 | ) | | (40.0 | ) |
| Total | $ | 18.0 |
| | $ | (1.0 | ) | | $ | 17.0 |
| | $ | 0.2 |
| | $ | (2.2 | ) | | $ | (2.0 | ) |
_______________
| |
(a) | The increases in cable subscription revenue related to changes in the average numbers of RGUs are attributable to increases in the average numbers of broadband internet and enhanced video RGUs that were only partially offset by declines in the average numbers of fixed-line telephony and basic video RGUs. |
| |
(b) | The increases in cable subscription revenue related to changes in ARPU are attributable to (i) net increases due to (a) higher ARPU from video and broadband internet services and (b) lower ARPU from fixed-line telephony services and (ii) improvements in RGU mix. In addition, the increase in Chile’s cable subscription revenue for the nine-month comparison includes adjustments to reflect the retroactive application of a tariff on ancillary services provided directly to customers for the period from July 2013 through February 2014, including (1) a decrease in revenue of $4.2 million due to the impact of unfavorable adjustments recorded during the first and second quarters of 2016 and (2) an increase in revenue due to the impact of a $2.2 million unfavorable adjustment recorded during the first quarter of 2015. |
| |
(c) | The increases in mobile subscription revenue are due to (i) increases in the average number of mobile subscribers, as increases in the average number of postpaid mobile subscribers more than offset the decreases in the average number of prepaid mobile subscribers, and (ii) higher ARPU, primarily due to higher proportions of mobile subscribers on postpaid plans, which generate higher ARPU than prepaid plans.
|
| |
(d) | The changes in other revenue include (i) increases of $1.6 million and $2.7 million, respectively, in interconnect revenue due to the impacts of unfavorable adjustments recorded during the first and third quarters of 2015 to reflect the retroactive application of a tariff reduction to June 2012 and (ii) decreases in advertising revenue. |
Puerto Rico. The increases in Puerto Rico’s revenue during the three and nine months ended September 30, 2016,2017, as compared to the corresponding periods in 2015, include (i) organic increases of $0.3 million or 0.3% and $3.9 million or 1.3%, respectively, and (ii) the impact of the Choice Acquisition, as2016, are set forth below:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase (decrease) in cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | 2.4 |
| | $ | — |
| | $ | 2.4 |
| | $ | 2.5 |
| | $ | — |
| | $ | 2.5 |
|
| ARPU (b) | (3.2 | ) | | — |
| | (3.2 | ) | | (2.8 | ) | | — |
| | (2.8 | ) |
| Total decrease in cable subscription revenue | (0.8 | ) | | — |
| | (0.8 | ) | | (0.3 | ) | | — |
| | (0.3 | ) |
| Increase in B2B revenue (c) | — |
| | 1.5 |
| | 1.5 |
| | — |
| | 5.2 |
| | 5.2 |
|
| Decrease in other revenue | — |
| | (0.4 | ) | | (0.4 | ) | | — |
| | (1.0 | ) | | (1.0 | ) |
| Total organic increase (decrease) | (0.8 | ) | | 1.1 |
| | 0.3 |
| | (0.3 | ) | | 4.2 |
| | 3.9 |
|
| Impact of the Choice Acquisition | — |
| | — |
| | — |
| | 33.7 |
| | 3.9 |
| | 37.6 |
|
| Total | $ | (0.8 | ) | | $ | 1.1 |
| | $ | 0.3 |
| | $ | 33.4 |
| | $ | 8.1 |
| | $ | 41.5 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three-month period | | Nine-month period |
| | Subscription revenue | | Non-subscription revenue | | Total | | Subscription revenue | | Non-subscription revenue | | Total |
| | in millions |
| Increase in residential cable subscription revenue due to change in: | | | | | | | | | | | |
| Average number of RGUs (a) | $ | 1.6 |
| | $ | — |
| | $ | 1.6 |
| | $ | 6.1 |
| | $ | — |
| | $ | 6.1 |
|
| ARPU (b) | 0.9 |
| | — |
| | 0.9 |
| | 0.4 |
| | — |
| | 0.4 |
|
| Increase in residential cable non-subscription revenue | — |
| | 0.4 |
| | 0.4 |
| | — |
| | 1.1 |
| | 1.1 |
|
| Impact of hurricanes on residential cable revenue (c) | (16.8 | ) | | (1.5 | ) | | (18.3 | ) | | (16.8 | ) | | (1.5 | ) | | (18.3 | ) |
| Total decrease in residential cable revenue | (14.3 | ) | | (1.1 | ) | | (15.4 | ) | | (10.3 | ) | | (0.4 | ) | | (10.7 | ) |
| Increase (decrease) in B2B revenue | (0.5 | ) | | 0.8 |
| | 0.3 |
| | (1.3 | ) | | 1.8 |
| | 0.5 |
|
| Decrease in other revenue | — |
| | (0.3 | ) | | (0.3 | ) | | — |
| | (1.0 | ) | | (1.0 | ) |
| Impact of hurricanes on B2B and other revenue (c) | — |
| | (0.8 | ) | | (0.8 | ) | | — |
| | (0.8 | ) | | (0.8 | ) |
| Total | $ | (14.8 | ) | | $ | (1.4 | ) | | $ | (16.2 | ) | | $ | (11.6 | ) | | $ | (0.4 | ) | | $ | (12.0 | ) |
_______________
| |
| (a) | The increases in residential cable subscription revenue related to changes in the average numbersnumber of RGUs are primarily attributable to the net effect of (i) increases in the average number of fixed-line telephony RGUs, (ii) declines in the average number of enhanced video RGUs and (iii) increases in the average number of broadband internet RGUs that were only partially offset by declines in the average number of video RGUs. |
| |
| (b) | The decreasesincreases in residential cable subscription revenue related to changes in ARPU are attributable to the net effect of (i) adverse changes in RGU mix and (ii) a net increase for the nine-month comparison and a net decrease for the three-month comparisonincreases due to (a) higher ARPU from broadband internet services and (b) lower ARPU from fixed-line telephony and video services. |
| |
(c) | The increasesservices and (ii) adverse changes in B2B revenue are largely due to higher revenue from broadband internet services. |
Operating Expenses of our Reportable Segments |
| | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % |
| | in millions | | | | |
| Liberty Global Group: | | | | | | | | | |
| European Operations Division: | | | | | | | | | |
| U.K./Ireland | $ | 676.2 |
| | $ | 783.8 |
| | $ | (107.6 | ) | | (13.7 | ) | | (0.6 | ) |
| The Netherlands | 218.8 |
| | 200.2 |
| | 18.6 |
| | 9.3 |
| | 8.8 |
|
| Germany | 130.0 |
| | 133.0 |
| | (3.0 | ) | | (2.3 | ) | | (2.6 | ) |
| Belgium (a) | 274.1 |
| | 189.4 |
| | 84.7 |
| | 44.7 |
| | (1.9 | ) |
| Switzerland/Austria | 114.3 |
| | 119.7 |
| | (5.4 | ) | | (4.5 | ) | | (3.7 | ) |
| Total Western Europe | 1,413.4 |
| | 1,426.1 |
| | (12.7 | ) | | (0.9 | ) | | — |
|
| Central and Eastern Europe | 113.8 |
| | 107.2 |
| | 6.6 |
| | 6.2 |
| | 6.8 |
|
| Central and other | 29.9 |
| | 27.2 |
| | 2.7 |
| | 9.9 |
| | 8.6 |
|
| Total European Operations Division | 1,557.1 |
| | 1,560.5 |
| | (3.4 | ) | | (0.2 | ) | | 0.6 |
|
| Corporate and other | 16.0 |
| | 10.0 |
| | 6.0 |
| | 60.0 |
| | 71.4 |
|
| Intersegment eliminations | (12.6 | ) | | (4.6 | ) | | (8.0 | ) | | N.M. |
| | N.M. |
|
| Total Liberty Global Group | 1,560.5 |
| | 1,565.9 |
| | (5.4 | ) | | (0.3 | ) | | 0.5 |
|
| LiLAC Group: | | | | | | | | | |
| LiLAC Division: | | | | | | | | | |
| CWC (b) | 222.4 |
| | — |
| | 222.4 |
| | N.M. |
| | N.M. |
|
| Chile | 94.4 |
| | 87.9 |
| | 6.5 |
| | 7.4 |
| | 5.0 |
|
| Puerto Rico (c) | 42.4 |
| | 45.3 |
| | (2.9 | ) | | (6.4 | ) | | (6.4 | ) |
| Total LiLAC Division (d) | 359.2 |
|
| 133.2 |
|
| 226.0 |
| | 169.7 |
| | 0.4 |
|
| Intersegment eliminations | (0.6 | ) | | — |
| | (0.6 | ) | | N.M. |
| | N.M. |
|
| Total LiLAC Group | 358.6 |
| | 133.2 |
| | 225.4 |
| | 169.2 |
| | 0.3 |
|
| Total operating expenses excluding share-based compensation expense | 1,919.1 |
| | 1,699.1 |
| | 220.0 |
| | 12.9 |
| | 0.4 |
|
| Share-based compensation expense | 1.2 |
| | 1.1 |
| | 0.1 |
| | 9.1 |
| | |
| Total | $ | 1,920.3 |
| | $ | 1,700.2 |
| | $ | 220.1 |
| | 12.9 |
| | |
|
| | | | | | | | | | | | | | | | | |
| | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % |
| | in millions | | | | |
| Liberty Global Group: | | | | | | | | | |
| European Operations Division: | | | | | | | | | |
| U.K./Ireland | $ | 2,151.6 |
| | $ | 2,253.5 |
| | $ | (101.9 | ) | | (4.5 | ) | | 3.3 |
|
| The Netherlands | 652.0 |
| | 645.7 |
| | 6.3 |
| | 1.0 |
| | 0.9 |
|
| Germany | 421.2 |
| | 407.6 |
| | 13.6 |
| | 3.3 |
| | 3.3 |
|
| Belgium (a) | 813.7 |
| | 571.7 |
| | 242.0 |
| | 42.3 |
| | 1.6 |
|
| Switzerland/Austria | 359.5 |
| | 374.1 |
| | (14.6 | ) | | (3.9 | ) | | (1.9 | ) |
| Total Western Europe | 4,398.0 |
| | 4,252.6 |
| | 145.4 |
| | 3.4 |
| | 2.2 |
|
| Central and Eastern Europe | 339.7 |
| | 324.7 |
| | 15.0 |
| | 4.6 |
| | 6.1 |
|
| Central and other | 90.6 |
| | 74.9 |
| | 15.7 |
| | 21.0 |
| | 20.3 |
|
| Total European Operations Division | 4,828.3 |
| | 4,652.2 |
| | 176.1 |
| | 3.8 |
| | 2.7 |
|
| Corporate and other | 45.7 |
| | 37.5 |
| | 8.2 |
| | 21.9 |
| | 52.1 |
|
| Intersegment eliminations | (35.1 | ) | | (20.4 | ) | | (14.7 | ) | | N.M. |
| | N.M. |
|
| Total Liberty Global Group | 4,838.9 |
| | 4,669.3 |
| | 169.6 |
| | 3.6 |
| | 2.7 |
|
| LiLAC Group: | | | | | | | | | |
| LiLAC Division: | | | | | | | | | |
| CWC (b) | 330.3 |
| | — |
| | 330.3 |
| | N.M. |
| | 1.0 |
|
| Chile | 272.5 |
| | 271.3 |
| | 1.2 |
| | 0.4 |
| | 7.1 |
|
| Puerto Rico (c) | 130.7 |
| | 120.6 |
| | 10.1 |
| | 8.4 |
| | (4.8 | ) |
| Total LiLAC Division | 733.5 |
| | 391.9 |
| | 341.6 |
| | 87.2 |
| | 2.2 |
|
| Intersegment eliminations | (0.8 | ) | | — |
| | (0.8 | ) | | N.M. |
| | N.M. |
|
| Total LiLAC Group | 732.7 |
| | 391.9 |
| | 340.8 |
| | 87.0 |
| | 2.1 |
|
| Total operating expenses excluding share-based compensation expense | 5,571.6 |
| | 5,061.2 |
| | 510.4 |
| | 10.1 |
| | 2.7 |
|
| Share-based compensation expense | 3.3 |
| | 3.2 |
| | 0.1 |
| | 3.1 |
| | |
| Total | $ | 5,574.9 |
| | $ | 5,064.4 |
| | $ | 510.5 |
| | 10.1 |
| | |
_______________
| |
(a) | The amounts presented for the 2016 periods include the post-acquisition operating expenses of BASE, which was acquired on February 11, 2016.RGU mix. |
| |
(b) | The amounts presented for the 2016 periods reflect the post-acquisition operating expenses of CWC, which was acquired on May 16, 2016. |
| |
| (c) | The amount presented forAmounts represent customer credits recorded through September 30, 2017 associated with service interruptions resulting from the 2015 nine-month period excludes the pre-acquisition operating expenses of Choice, which was acquired on June 3, 2015.hurricanes. For additional information, see Overview above. |
Programming and Other Direct Costs of Services of our Reportable Segments
General. Operating expenses Programming and other direct costs of services include programming and copyright network operations,costs, interconnect and access costs, costs of mobile accesshandsets and interconnect, customer operations, customer care, share-based compensationother devices and other direct costs related to our operations. We do not include share-based compensation in the following discussion and analysis of the operating expenses of our reportable segments as share-based compensation expense is not included in the performance measures of our reportable segments. Share-based compensation expense is discussed under Discussion and Analysis of our Consolidated Operating Results below. Programming and copyright costs, which represent a significant portion of our operating costs, are expected to rise in future periods as a result of (i) higher costs associated with the expansion of our digital video content, including rights associated with ancillary product offerings and rights that provide for the broadcast of live sporting events, (ii) rate increases and (iii) growth in the number of our enhanced video subscribers. In addition, we are subject to inflationary pressures with respect to our labor and other 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 operating 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.
|
| | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | |
| European Division: | | | | | | | | | | | |
| U.K./Ireland | $ | 484.4 |
| | $ | 466.8 |
| | $ | 17.6 |
| | 3.8 |
| | $ | 12.2 |
| | 2.6 |
|
| Belgium | 192.7 |
| | 185.0 |
| | 7.7 |
| | 4.2 |
| | 1.1 |
| | 0.6 |
|
| Germany | 68.1 |
| | 55.9 |
| | 12.2 |
| | 21.8 |
| | 8.8 |
| | 15.7 |
|
| Switzerland/Austria | 71.7 |
| | 61.7 |
| | 10.0 |
| | 16.2 |
| | 8.5 |
| | 13.7 |
|
| The Netherlands | — |
| | 129.7 |
| | (129.7 | ) | | (100.0 | ) | | — |
| | — |
|
| Total Western Europe | 816.9 |
| | 899.1 |
| | (82.2 | ) | | (9.1 | ) | | 30.6 |
| | 4.0 |
|
| Central and Eastern Europe | 76.5 |
| | 64.8 |
| | 11.7 |
| | 18.1 |
| | 7.3 |
| | 11.3 |
|
| Central and other | 0.8 |
| | (1.7 | ) | | 2.5 |
| | 147.1 |
| | 1.1 |
| | 47.8 |
|
| Total European Division | 894.2 |
| | 962.2 |
| | (68.0 | ) | | (7.1 | ) | | 39.0 |
| | 4.7 |
|
| Corporate and other | (0.1 | ) | | 15.6 |
| | (15.7 | ) | | (100.6 | ) | | (0.1 | ) | | (100.0 | ) |
| Intersegment eliminations | — |
| | (12.3 | ) | | 12.3 |
| | N.M. |
| | (0.6 | ) | | N.M. |
|
| Total Liberty Global Group | 894.1 |
| | 965.5 |
| | (71.4 | ) | | (7.4 | ) | | 38.3 |
| | 4.6 |
|
| LiLAC Group: | | | | | | | | | | | |
| LiLAC Division: | | | | | | | | | | | |
| C&W | 128.1 |
| | 124.8 |
| | 3.3 |
| | 2.6 |
| | (0.4 | ) | | (0.3 | ) |
| Chile | 65.5 |
| | 61.5 |
| | 4.0 |
| | 6.5 |
| | 2.0 |
| | 3.3 |
|
| Puerto Rico | 21.7 |
| | 27.5 |
| | (5.8 | ) | | (21.1 | ) | | (5.8 | ) | | (21.1 | ) |
| Total LiLAC Division | 215.3 |
| | 213.8 |
| | 1.5 |
| | 0.7 |
| | (4.2 | ) | | (1.9 | ) |
| Intersegment eliminations | (1.8 | ) | | (0.6 | ) | | (1.2 | ) | | N.M. |
| | (1.2 | ) | | N.M. |
|
| Total LiLAC Group | 213.5 |
| | 213.2 |
| | 0.3 |
| | 0.1 |
| | (5.4 | ) | | (2.5 | ) |
| Intergroup eliminations | (1.2 | ) | | — |
| | (1.2 | ) | | N.M. |
| | — |
| | N.M. |
|
| Total | $ | 1,106.4 |
| | $ | 1,178.7 |
| | $ | (72.3 | ) | | (6.1 | ) | | $ | 32.9 |
| | 3.1 |
|
|
| | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | |
| European Division: | | | | | | | | | | | |
| U.K./Ireland | $ | 1,370.3 |
| | $ | 1,498.9 |
| | $ | (128.6 | ) | | (8.6 | ) | | $ | (25.9 | ) | | (1.7 | ) |
| Belgium | 548.5 |
| | 540.8 |
| | 7.7 |
| | 1.4 |
| | (6.7 | ) | | (1.2 | ) |
| Germany | 186.4 |
| | 168.1 |
| | 18.3 |
| | 10.9 |
| | 18.6 |
| | 11.1 |
|
| Switzerland/Austria | 187.4 |
| | 185.3 |
| | 2.1 |
| | 1.1 |
| | 2.1 |
| | 1.1 |
|
| The Netherlands | — |
| | 385.2 |
| | (385.2 | ) | | (100.0 | ) | | — |
| | — |
|
| Total Western Europe | 2,292.6 |
| | 2,778.3 |
| | (485.7 | ) | | (17.5 | ) | | (11.9 | ) | | (0.5 | ) |
| Central and Eastern Europe | 221.4 |
| | 189.9 |
| | 31.5 |
| | 16.6 |
| | 30.4 |
| | 16.0 |
|
| Central and other | 2.0 |
| | (4.8 | ) | | 6.8 |
| | 141.7 |
| | 4.1 |
| | 56.9 |
|
| Total European Division | 2,516.0 |
| | 2,963.4 |
| | (447.4 | ) | | (15.1 | ) | | 22.6 |
| | 0.9 |
|
| Corporate and other | — |
| | 42.6 |
| | (42.6 | ) | | (100.0 | ) | | — |
| | — |
|
| Intersegment eliminations | — |
| | (35.5 | ) | | 35.5 |
| | N.M. |
| | 0.2 |
| | N.M. |
|
| Total Liberty Global Group | 2,516.0 |
| | 2,970.5 |
| | (454.5 | ) | | (15.3 | ) | | 22.8 |
| | 0.9 |
|
| LiLAC Group: | | | | | | | | | | | |
| LiLAC Division: | | | | | | | | | | | |
| C&W | 397.1 |
| | 184.6 |
| | 212.5 |
| | 115.1 |
| | 5.8 |
| | 1.5 |
|
| Chile | 190.1 |
| | 176.4 |
| | 13.7 |
| | 7.8 |
| | 6.5 |
| | 3.7 |
|
| Puerto Rico | 76.3 |
| | 86.1 |
| | (9.8 | ) | | (11.4 | ) | | (9.8 | ) | | (11.4 | ) |
| Total LiLAC Division | 663.5 |
| | 447.1 |
| | 216.4 |
| | 48.4 |
| | 2.5 |
| | 0.4 |
|
| Intersegment eliminations | (3.6 | ) | | (0.8 | ) | | (2.8 | ) | | N.M. |
| | (2.8 | ) | | N.M. |
|
| Total LiLAC Group | 659.9 |
| | 446.3 |
| | 213.6 |
| | 47.9 |
| | (0.3 | ) | | (0.1 | ) |
| Intergroup eliminations | (1.2 | ) | | — |
| | (1.2 | ) | | N.M. |
| | — |
| | N.M. |
|
| Total | $ | 3,174.7 |
| | $ | 3,416.8 |
| | $ | (242.1 | ) | | (7.1 | ) | | $ | 22.5 |
| | 0.7 |
|
_______________
N.M. — Not Meaningful.
European Operations Division. The European Operations Division’s operating expenses (exclusiveprogramming and other direct costs of share-based compensation expense) increased (decreased) (services decreased$3.4 million) 68.0 millionor (0.2%) 7.1%and $176.1$447.4 million or 3.8%15.1% during the three and nine months ended September 30, 20162017, respectively, as compared to the corresponding periods in 20152016. These changesdecreases include(i) increasesdecreases of $100.6$128.8 million and $261.9$382.8 million, respectively, attributable to the impact of the VodafoneZiggo JV Transaction, (ii) increases of $8.2 million and $46.6 million, respectively, attributable to the BASE Acquisition and other less significant acquisitions and (ii)(iii) decreases of $0.5$5.7 million and $8.2$14.0 million, respectively, attributable to the U.K. Non-Cable Disposalimpact of dispositions. On an organic basis, the European Division’s programming and another less significant disposition. Excluding the effectsother direct costs of acquisitions, dispositions and FX, the European Operations Division’s operating expensesservicesincreased $9.6$39.0 million or 0.6%4.7% and $134.8$22.6 million or 2.7%0.9%, respectively. These increases include the following factors:
| |
| • | Increases in programming and copyright costs of $16.5 million or 3.6% and $63.5 million or 4.6%, respectively,primarily due to increases in U.K./Ireland and, to a lesser extent, Hungary and Belgiumand, for the three-month comparison, Switzerland/Austria.These increases are primarily due to (i) higher costs for certain premium and/or basic content, including higher costs for sports rights, primarily in U.K./Ireland and Switzerland/Austria,and (ii) growth in the number of enhanced video subscribers, primarily due to increases in Germany, Hungary, Romania, Poland and U.K./Ireland that were only partially offset by decreases in Belgium; |
| |
| • | An increase (decrease) in interconnect and access costs of $3.7 million or 1.5% and ($39.2 million) or (5.2%), respectively. The higher costs for the three-month comparison are primarily due to higher fixed-line telephony volumes in Switzerland/Austria and the Czech Republic that were only partially offset by lower MVNO costs in Belgium. The lower costs for the nine-month comparison are primarily due to the net effect of (i)a $32.3 million decrease in U.K./Ireland associated with a telecommunications operator’s agreement during the second quarter of 2017 to compensate communications providers, including Virgin Media, for certain contractual breaches related to network charges, (ii) declines resulting from lower interconnect rates, primarily in U.K./Ireland and Germany, (iii) higher MVNO costs, primarily in U.K./Ireland and Switzerland/Austria,(iv) lower mobile voice and data usage in U.K./Ireland and Belgium, (v) an increase of $6.8 million due to the release of an accrual during the second quarter of 2016 related to the settlement of an operational contingency in Belgium and (vi) slightly lower fixed-line telephony call volumes, as declines in U.K./Ireland and Germany were largely offset by an increase in the Czech Republic; and |
| |
| • | An increase (decrease) in mobile handset and other device costs of $13.7 million or 17.6% and($8.8 million) or (3.5%), respectively. The higher costs for the three-month comparison are primarily due to (i) higher average cost per handset sold in U.K./Ireland and (ii) higher mobile handset sales volumes, as increases in Germany and Belgium were only partially offset by decreases in U.K./Ireland. The lower costs for the nine-month comparison are primarily due to the net effect of (a) lower mobile handset and other device sales volumes, as decreases in U.K./Ireland, Belgium and Switzerland/Austria were only partially offset by an increase in Germany, and (b) a higher average cost per handset sold in U.K./Ireland. |
LiLAC Division. The LiLAC Division’s programming and other direct costs of services increased $1.5 million or 0.7% and $216.4 million or 48.4% during the three and nine months ended September 30, 2017, respectively, as compared to the corresponding periods in 2016. These increases include increases of $4.4 million and $210.4 million, respectively, attributable to the impact of the C&W Acquisition and the C&W Carve-out Acquisition. On an organic basis, the LiLAC Division’s programming and other direct costs of services increased (decreased) ($4.2 million) or (1.9%) and $2.5 million or 0.4%, respectively. These changes include the following factors:
Increases in programming and copyright costs of $56.5$0.2 million or 10.7%0.2% and $178.6$3.4 million or 11.5%1.4%, respectively, primarily associated with the net effect of (i) increased costs associated with premium content, as increases at C&W due to increasesthe carriage of live Premier League games were only partially offset by decreases in U.K./IrelandPuerto Rico and to a lesser extent, the Netherlands, Belgium and Germany. These increases are primarily attributable to higher costs for certain premium and/or basic content, including increases of (i) $8.7 million and $55.2 million, respectively, associated with a sports programming contract entered into in August 2015 in U.K./Ireland andChile, (ii) $4.8 million and $14.4 million, respectively, associated with a new Europe-wide programming contract that was entered into in June 2016 with retroactive impact to January 1, 2016. In addition, growth in the number of enhanced video subscribers contributed to the increases in Germany and Belgium;
Decreases in mobile access and interconnect costs(iii) a decrease of $10.0$4.1 million or 3.7% and $38.1 million or 4.6%, respectively, primarily due to the net effect of (i) declines resulting from lower rates, primarily in U.K./Ireland, (ii) lower fixed-line telephony call volumes in U.K./Ireland and, to a lesser extent, the Netherlands, (iii) higher mobile usage in the Netherlands, Switzerland/Austria, Belgium and, for the nine-month comparison, U.K./Ireland, (iv) for the nine-month comparison, a $6.6 million decrease in Belgium due to the release of an accrual during the second quarter of 2016 as a result of the settlement of an operational contingency and (v) a $3.9 million increase during each period in Switzerland/Austria as a result of the favorable settlement of an operational contingency during the third quarter of 2015;
Decreases in personnel costs of $3.9 million or 1.8% and $21.9 million or 3.1%, respectively, due primarily to the net effect of (i) decreased staffing levels in U.K./Ireland, Switzerland/Austria and the Netherlands that were only partially offset by increases in Belgium, (ii) annual wage increases and (iii) decreased costs in U.K./Ireland resulting from higher proportions of capitalized labor costs associated with the network extension project in the U.K.;
Increases in network-related expenses of $1.3 million or 0.7% and $13.5 million or 2.5%, respectively. The increase for the three-month comparison is due primarily to the net effect of (i) an increase in network maintenance costs, primarily in Belgium and, to a lesser extent, U.K./Ireland, (ii) a net decrease of $4.4 million in Germany associated with certain reassessments of an accrual during the third quarters of 2016 and 2015, (iii) a net decrease of $4.2 million resulting from a favorable adjustment associated with the reassessment of operational contingencies in U.K./Ireland that we recorded during the third quarter of 2015 and (iv) lower outsourced labor costs associated with customer-facing activities in Germany. The increase for the nine-month comparison is primarily2017 due to service interruptions stemming from the net effectimpacts of (a) an $18.1 million increase resulting from nonrecurring adjustments recorded during the firstHurricanes Irma and second quarters of 2015 to reflect lower local authority charges for certain elements of network infrastructureMaria in the U.K., (b) lower outsourced labor costs associated with customer-facing activities in U.K./Ireland, Germany, Switzerland/AustriaPuerto Rico, where we do not incur programming and the Netherlands,(c) higher network maintenance costs, as increases in Belgium and Hungary were only partially offset by a decrease in Switzerland/Austria,(d) a $6.2 million decrease in U.K./Ireland associated with the favorable settlement of an operational contingency during the first quarter of 2016,(e) a net decrease of $4.0 million in Germany associated with the aforementioned accrual reassessments and (f) a decrease of $2.5 million as a result of costs incurred during the first
half of 2015 associated with network harmonization activities following the acquisition of Ziggo. For information regarding the potential for increased charges for network infrastructure in the U.K. effective April 1, 2017, see note 13 to our condensed consolidated financial statements;
Decreases in bad debt and collection expenses of $4.8 million or 13.5% and $7.2 million or 7.2%, respectively. The decrease for the three-month comparison is primarily related to activity in U.K./Ireland and Belgium, while the decrease for the nine-month comparison mainly includes declines in the Netherlands, Belgium, Switzerland/Austria and Hungary that were only partially offset by an increase in Poland;
An increase (decrease) in mobile handset costs of ($15.8 million) and $5.9 million, respectively. The lowerother content costs for the three-month comparison are primarily due to (i) lower average cost per handset sold in U.K./Ireland and (ii) lower mobile handset sales volume, as a decrease in the number of handsets sold in Belgium was only partially offset by an increase in U.K./Ireland. The higher mobile handset costs for the nine-month comparison are primarily due to the net effect of (a) higher mobile handset sales volume in U.K./Ireland and, to a lesser extent, Switzerland/Austria that were only partially offset by lower handset sales in Belgium and (b) lower average cost per handset sold in U.K./Ireland. The lower number of handsets sold in Belgium is primarily attributable to a reduction in subsidized handset promotions;
Increases in outsourced labor and professional fees of $2.7 million or 3.2% and $4.5 million or 1.7%, respectively. The increase for the three-month comparison is primarily due to the net effect of (i) higher call center costs in U.K./Ireland and the Netherlands and (ii) a decrease in consulting costs, as lower consulting costs in Belgium were only partially offset by an increase in U.K./Ireland. The increase for the nine-month comparison is primarily due to (a) higher call center costs in U.K./Ireland that were only partially offset by lower costs in the Netherlands and (b) higher consulting costs, as an increase in consulting costs in the European Operations Division’s central operations was only partially offset by decreases in U.K./Ireland, Belgium and Switzerland/Austria. The lower call center costs in the Netherlands for the nine-month comparison includes a net decrease of $12.5 million associated with the net impact of third-party costs recorded in 2015 and 2016 related to network and product harmonization activities and certain other third-party customer care costs following the acquisition of Ziggo; and
A net decrease for the three-month comparison resulting from individually insignificant changes in other operating expense categories.
LiLAC Division. The LiLAC Division’s operating expenses (exclusive of share-based compensation expense) increased $226.0 million or 169.7% and $341.6 million or 87.2% during the three and nine months ended September 30, 2016, respectively, as compared to the corresponding periods in 2015. These increases include increases of $222.4 million and $343.6 million, respectively, attributable to the impact of the CWC Acquisition and the Choice Acquisition. Excluding the effects of these acquisitions and FX, the LiLAC Division’s operating expenses increased $1.5 million or 0.4% and $15.9 million or 2.2%, respectively. These increases include the following factors:
Increases in programming and copyright costs of $1.3 million or 2.1% and $11.3 million or 6.1%, respectively, primarily associated with (i) growth in the number of enhanced video subscribers in Chile, (ii) increases arising from foreign currency exchange rate fluctuations, after giving effect to the application of hedge accounting for certain derivative instrumentscustomers that are used to mitigate a portion of our foreign currency exchange rate risk with respect to Chile’s U.S. dollar denominated programming contracts, and (iii) increased costs for certain content. A significant portion of Chile’s programming contracts are denominated in U.S. dollars. During the third quarter ofnot receiving video services. In August 2016, CWCC&W began broadcasting live Premier League games in a number of its markets pursuant to a new multi-year agreement. The cost of the rights to broadcast these games, a portion of which did not contribute tois excluded from the year-to-date organic increases describedincrease in this paragraph, will continue to result in a significant increase to CWC’sC&W’s programming costs;
An increaseand copyright costs for purposes of the nine-month comparison, represents a significant portion of C&W’s programming costs;
Decreases in integration costs of $3.4 million that were incurred during the second quarter of 2016 to integrate Columbus (acquired by CWC on March 31, 2015) with CWC’s operations. These costs are excluded from the CWC Acquisition effect and, accordingly, are included in our organic increases;
Increases in mobile handsetother direct costs of $1.4 million and $2.1 million, respectively, primarily due to higher mobile handset salesa favorable mix of lower cost managed services projects at C&W;
An increase in Chile;
Decreases in mobileinterconnect and access and interconnect costs of $2.1$1.9 million or 14.3% and $1.8 million or 4.8%, respectively,1.3% during the nine-month comparison, primarily attributablein Chile, due to the net effect of (i) higher MVNO charges and (ii) net declines resulting from lower interconnect rates and higher call volumes; and
Decreases in mobile handset costs of $2.7 million and $0.8 million, respectively, primarily due to lower mobile access chargeshandset subsidy promotions at C&W, primarily in Panama and, to a lesser extent, lower mobile usage in ChileBarbados, Jamaica and (ii) for the nine-month comparison, a $2.3 million increase in Chile related to a nonrecurring adjustment that was recorded in the prior-year period for a February 2015 tariff decline that was retroactive to May 2014;Cayman Islands.
Increases in outsourced labor and professional fees of $1.5 million or 18.7% and $1.7 million or 6.8%, respectively, primarily due to increases in call center costs in Chile;
Decreases in bad debt and collection expenses of $0.5 million or 4.8% and $1.6 million or 5.5%, respectively; and
Increases in personnel costs of $0.3 million or 2.2% and $1.0 million or 1.7%, respectively, due primarily to higher incentive compensation costs in Chile that were only partially offset by lower staffing levels in Chile.
SG&A
Other Operating Expenses of our Reportable Segments
General. Other operating expenses include network operations, customer operations, customer care, share-based compensation and other costs related to our operations.
| | | | Three months ended September 30, | | Increase (decrease) | | Organic increase (decrease) | Three months ended September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions | | | | | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | | | | | | | | | | |
| European Operations Division: | | | | | | | | | | |
| European Division: | | | | | | | | | | | | |
| U.K./Ireland | $ | 209.2 |
| | $ | 222.5 |
| | $ | (13.3 | ) | | (6.0 | ) | | 7.9 |
| $ | 219.6 |
| | $ | 206.2 |
| | $ | 13.4 |
| | 6.5 |
| | $ | 11.8 |
| | 5.7 |
|
| Belgium | | 104.6 |
| | 96.0 |
| | 8.6 |
| | 9.0 |
| | 1.1 |
| | 1.1 |
|
| Germany | | 94.6 |
| | 86.7 |
| | 7.9 |
| | 9.1 |
| | 3.0 |
| | 3.5 |
|
| Switzerland/Austria | | 57.9 |
| | 54.1 |
| | 3.8 |
| | 7.0 |
| | 1.6 |
| | 2.9 |
|
| The Netherlands | 87.5 |
| | 92.6 |
| | (5.1 | ) | | (5.5 | ) | | (5.9 | ) | — |
| | 89.1 |
| | (89.1 | ) | | (100.0 | ) | | — |
| | — |
|
| Germany | 101.4 |
| | 89.6 |
| | 11.8 |
| | 13.2 |
| | 12.9 |
| |
| Belgium (a) | 108.2 |
| | 64.8 |
| | 43.4 |
| | 67.0 |
| | 3.6 |
| |
| Switzerland/Austria | 51.6 |
| | 48.6 |
| | 3.0 |
| | 6.2 |
| | 7.4 |
| |
| Total Western Europe | 557.9 |
| | 518.1 |
| | 39.8 |
| | 7.7 |
| | 5.6 |
| 476.7 |
| | 532.1 |
| | (55.4 | ) | | (10.4 | ) | | 17.5 |
| | 3.9 |
|
| Central and Eastern Europe | 40.3 |
| | 40.0 |
| | 0.3 |
| | 0.8 |
| | 1.7 |
| 48.2 |
| | 48.8 |
| | (0.6 | ) | | (1.2 | ) | | (3.5 | ) | | (7.2 | ) |
| Central and other | 45.2 |
| | 46.9 |
| | (1.7 | ) | | (3.6 | ) | | (3.9 | ) | 46.8 |
| | 35.9 |
| | 10.9 |
| | 30.4 |
| | 4.7 |
| | 11.7 |
|
| Total European Operations Division | 643.4 |
| | 605.0 |
| | 38.4 |
| | 6.3 |
| | 4.7 |
| |
| Total European Division | | 571.7 |
| | 616.8 |
| | (45.1 | ) | | (7.3 | ) | | 18.7 |
| | 3.5 |
|
| Corporate and other | 48.6 |
| | 53.6 |
| | (5.0 | ) | | (9.3 | ) | | (4.2 | ) | 6.2 |
| | 0.9 |
| | 5.3 |
| | 588.9 |
| | 5.7 |
| | 588.9 |
|
| Intersegment eliminations | 0.6 |
| | — |
| | 0.6 |
| | N.M. |
| | N.M. |
| — |
| | (0.6 | ) | | 0.6 |
| | N.M. |
| | 0.8 |
| | N.M. |
|
| Total Liberty Global Group | 692.6 |
| | 658.6 |
| | 34.0 |
| | 5.2 |
| | 4.0 |
| 577.9 |
| | 617.1 |
| | (39.2 | ) | | (6.4 | ) | | 25.2 |
| | 4.7 |
|
| LiLAC Group: | | | | | | | | | | | | | | | | | | | | |
| LiLAC Division: | | | | | | | | | | | | | | | | | | | | |
| CWC (b) | 131.6 |
| | — |
| | 131.6 |
| | N.M. |
| | 1.4 |
| |
| C&W | | 114.5 |
| | 108.4 |
| | 6.1 |
| | 5.6 |
| | 5.2 |
| | 4.7 |
|
| Chile | 40.0 |
| | 33.9 |
| | 6.1 |
| | 18.0 |
| | 15.7 |
| 40.4 |
| | 37.1 |
| | 3.3 |
| | 8.9 |
| | 2.2 |
| | 5.9 |
|
Puerto Rico (c) | 6.3 |
| | 12.8 |
| | (6.5 | ) | | (50.8 | ) | | (50.8 | ) | 15.1 |
| | 15.1 |
| | — |
| | — |
| | — |
| | — |
|
Total LiLAC Division (d) | 177.9 |
|
| 46.7 |
|
| 131.2 |
| | 280.9 |
| | 0.4 |
| 170.0 |
| | 160.6 |
| | 9.4 |
| | 5.9 |
| | 7.4 |
| | 4.5 |
|
| Corporate | 3.0 |
| | 1.1 |
| | 1.9 |
| | 172.7 |
| | 172.7 |
| |
| Intersegment eliminations | | 0.2 |
| | — |
| | 0.2 |
| | N.M. |
| | 0.2 |
| | N.M. |
|
| Total LiLAC Group | 180.9 |
|
| 47.8 |
|
| 133.1 |
| | 278.5 |
| | 1.4 |
| 170.2 |
| | 160.6 |
| | 9.6 |
| | 6.0 |
| | 7.6 |
| | 4.4 |
|
| Total SG&A expenses excluding share-based compensation expense | 873.5 |
| | 706.4 |
| | 167.1 |
| | 23.7 |
| | 3.5 |
| |
| Total other operating expenses excluding share-based compensation expense | | 748.1 |
| | 777.7 |
| | (29.6 | ) | | (3.8 | ) | | $ | 32.8 |
| | 4.6 |
|
| Share-based compensation expense | 61.6 |
| | 123.9 |
| | (62.3 | ) | | (50.3 | ) | | | 1.0 |
| | 1.2 |
| | (0.2 | ) | | (16.7 | ) | | | | |
| Total | $ | 935.1 |
| | $ | 830.3 |
| | $ | 104.8 |
| | 12.6 |
| | | $ | 749.1 |
| | $ | 778.9 |
| | $ | (29.8 | ) | | (3.8 | ) | | | | |
|
| | | | | | | | | | | | | | | | | |
| | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % |
| | in millions | | | | |
| Liberty Global Group: | | | | | | | | | |
| European Operations Division: | | | | | | | | | |
| U.K./Ireland | $ | 627.9 |
| | $ | 654.9 |
| | $ | (27.0 | ) | | (4.1 | ) | | 3.3 |
|
| The Netherlands | 270.9 |
| | 299.5 |
| | (28.6 | ) | | (9.5 | ) | | (9.7 | ) |
| Germany | 291.1 |
| | 273.0 |
| | 18.1 |
| | 6.6 |
| | 6.6 |
|
| Belgium (a) | 305.0 |
| | 177.7 |
| | 127.3 |
| | 71.6 |
| | 9.5 |
|
| Switzerland/Austria | 165.1 |
| | 173.8 |
| | (8.7 | ) | | (5.0 | ) | | (3.3 | ) |
| Total Western Europe | 1,660.0 |
| | 1,578.9 |
| | 81.1 |
| | 5.1 |
| | 1.9 |
|
| Central and Eastern Europe | 129.0 |
| | 121.4 |
| | 7.6 |
| | 6.3 |
| | 7.9 |
|
| Central and other | 147.9 |
| | 136.0 |
| | 11.9 |
| | 8.8 |
| | 8.6 |
|
| Total European Operations Division | 1,936.9 |
| | 1,836.3 |
| | 100.6 |
| | 5.5 |
| | 2.7 |
|
| Corporate and other | 164.2 |
| | 156.1 |
| | 8.1 |
| | 5.2 |
| | 6.9 |
|
| Intersegment eliminations | 0.2 |
| | 0.5 |
| | (0.3 | ) | | N.M. |
| | N.M. |
|
| Total Liberty Global Group | 2,101.3 |
| | 1,992.9 |
| | 108.4 |
| | 5.4 |
| | 3.1 |
|
| LiLAC Group: | | | | | | | | | |
| LiLAC Division: | | | | | | | | | |
| CWC (b) | 208.3 |
| | — |
| | 208.3 |
| | N.M. |
| | 1.6 |
|
| Chile | 114.4 |
| | 116.5 |
| | (2.1 | ) | | (1.8 | ) | | 4.1 |
|
| Puerto Rico (c) | 32.0 |
| | 32.8 |
| | (0.8 | ) | | (2.4 | ) | | (16.5 | ) |
| Total LiLAC Division (d) | 354.7 |
| | 149.3 |
| | 205.4 |
| | 137.6 |
| | 0.4 |
|
| Corporate | 5.9 |
| | 3.2 |
| | 2.7 |
| | 84.4 |
| | 84.4 |
|
| Total LiLAC Group | 360.6 |
| | 152.5 |
| | 208.1 |
| | 136.5 |
| | 1.2 |
|
| Total SG&A expenses excluding share-based compensation expense | 2,461.9 |
| | 2,145.4 |
| | 316.5 |
| | 14.8 |
| | 2.8 |
|
| Share-based compensation expense | 203.1 |
| | 249.8 |
| | (46.7 | ) | | (18.7 | ) | | |
| Total | $ | 2,665.0 |
| | $ | 2,395.2 |
| | $ | 269.8 |
| | 11.3 |
| | |
_______________ |
| | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | |
| European Division: | | | | | | | | | | | |
| U.K./Ireland | $ | 637.8 |
| | $ | 652.7 |
| | $ | (14.9 | ) | | (2.3 | ) | | $ | 35.2 |
| | 5.4 |
|
| Belgium | 288.4 |
| | 274.7 |
| | 13.7 |
| | 5.0 |
| | 0.9 |
| | 0.3 |
|
| Germany | 270.7 |
| | 265.4 |
| | 5.3 |
| | 2.0 |
| | 5.8 |
| | 2.2 |
|
| Switzerland/Austria | 170.6 |
| | 174.1 |
| | (3.5 | ) | | (2.0 | ) | | (4.6 | ) | | (2.6 | ) |
| The Netherlands | — |
| | 266.8 |
| | (266.8 | ) | | (100.0 | ) | | — |
| | — |
|
| Total Western Europe | 1,367.5 |
| | 1,633.7 |
| | (266.2 | ) | | (16.3 | ) | | 37.3 |
| | 2.7 |
|
| Central and Eastern Europe | 144.0 |
| | 149.6 |
| | (5.6 | ) | | (3.7 | ) | | (6.3 | ) | | (4.2 | ) |
| Central and other | 116.6 |
| | 104.9 |
| | 11.7 |
| | 11.2 |
| | (3.2 | ) | | (2.7 | ) |
| Total European Division | 1,628.1 |
| | 1,888.2 |
| | (260.1 | ) | | (13.8 | ) | | 27.8 |
| | 1.7 |
|
| Corporate and other | 12.1 |
| | 3.6 |
| | 8.5 |
| | 236.1 |
| | 9.7 |
| | 374.1 |
|
| Intersegment eliminations | 0.9 |
| | 0.1 |
| | 0.8 |
| | N.M. |
| | — |
| | N.M. |
|
| Total Liberty Global Group | 1,641.1 |
| | 1,891.9 |
| | (250.8 | ) | | (13.3 | ) | | 37.5 |
| | 2.3 |
|
| LiLAC Group: | | | | | | | | | | | |
| LiLAC Division: | | | | | | | | | | | |
| C&W | 329.9 |
| | 163.8 |
| | 166.1 |
| | 101.4 |
| | 4.1 |
| | 1.3 |
|
| Chile | 115.3 |
| | 103.3 |
| | 12.0 |
| | 11.6 |
| | 7.7 |
| | 7.5 |
|
| Puerto Rico | 45.4 |
| | 45.4 |
| | — |
| | — |
| | — |
| | — |
|
| Total LiLAC Division | 490.6 |
| | 312.5 |
| | 178.1 |
| | 57.0 |
| | 11.8 |
| | 2.5 |
|
| Intersegment eliminations | 0.1 |
| | — |
| | 0.1 |
| | N.M. |
| | 0.1 |
| | N.M. |
|
| Total LiLAC Group | 490.7 |
| | 312.5 |
| | 178.2 |
| | 57.0 |
| | 11.9 |
| | 2.5 |
|
| Total SG&A expenses excluding share-based compensation expense | 2,131.8 |
| | 2,204.4 |
| | (72.6 | ) | | (3.3 | ) | | $ | 49.4 |
| | 2.3 |
|
| Share-based compensation expense | 3.3 |
| | 3.3 |
| | — |
| | — |
| | | | |
| Total | $ | 2,135.1 |
| | $ | 2,207.7 |
| | $ | (72.6 | ) | | (3.3 | ) | | | | |
| |
(a) | The amounts presented for the 2016 periods include the post-acquisition SG&A expenses of BASE, which was acquired on February 11, 2016. |
_______________
| |
(b) | The amounts presented for the 2016 periods reflect the post-acquisition SG&A expenses of CWC, which was acquired on May 16, 2016. |
| |
(c) | The amount presented for the 2015 nine-month period excludes the pre-acquisition SG&A expenses of Choice, which was acquired on June 3, 2015. |
N.M. — Not Meaningful.
General. SG&A expenses include human resources, information technology, general services, management, finance, legal, sales and marketing, share-based compensation and other general expenses. We do not include share-based compensation in the following discussion and analysis of the SG&A expenses of our reportable segments as share-based compensation expense is not included in the performance measures of our reportable segments. Share-based compensation expense is discussed under Discussion and Analysis of our Consolidated Operating Results below. As noted under Operating Expenses of our Reportable Segments above, we are subject to inflationary pressures with respect to our labor and other costs and foreign currency exchange risk with respect to non-functional currency expenses.
European Operations Division.The European Operations Division’s SG&ADivision’s other operating expenses (exclusive of share-based compensation expense)increased $38.4 decreased $45.1 million or 6.3%7.3% and$100.6 $260.1 million or 5.5%13.8% during the three and nine months ended September 30, 2016,2017, respectively, as compared to the corresponding periods in 20152016. These increasesdecreases include (i) decreases of $84.0 million and $252.3 million, respectively, attributable to the impact of the VodafoneZiggo JV Transaction and (ii) increases of $42.3$3.9 million and $109.9$20.1 million, respectively, attributable to the impact of the BASE Acquisition and other less significant acquisitions. ExcludingOn an organic basis, the effects of acquisitions and FX, the European Operations Division’s SG&ADivision’s other operating expenses increased $30.2$18.7 million or 4.7%3.5% and $53.3$27.8 million or 2.7%1.7%, respectively.These increases include the following factors:
| |
| • | Decreases in personnel costs of $6.8 million or 4.1% and $39.1 million or 7.2%, respectively, due primarily to the net effect of (i) lower staffing levels, as decreases in Germany, the European Division’s central operations and U.K./Ireland were only partially offset by increases in Belgium, (ii) decreased costs in U.K./Ireland resulting from higher capitalized labor costs associated with (a) the network extension project and (b) increased installations of new customer premises equipment, (iii) annual wage increases and (iv)lower incentive compensation costs, primarily in U.K./Ireland; |
| |
| • | Increases in network-related expenses of $11.8 million or 5.9% and $26.9 million or 4.6%, respectively.These increases are primarily due to the net effect of (i) increases of $10.2 million and $23.4 million, respectively, in U.K./Ireland related to network infrastructure charges following an April 1, 2017 increase in the rateable value of existing assets,(ii) higher network maintenance costs,primarily in the European Division’s central operations and, for the nine-month comparison, Belgium, (iii) lower duct and pole rental fees in Belgium, (iv) for the nine-month comparison, a $5.9 million increase in U.K./Ireland associated with the impact of the settlement of an operational contingency during the first quarter of 2016 and (v) lower outsourced labor costs primarily associated with customer-facing activities in Germany. For additional information regarding the increased network infrastructure charges in U.K./Ireland, see note 14 to our condensed consolidated financial statements; |
| |
| • | Increases in outsourced labor and professional fees of $8.0 million or 12.2% and $26.7 million or 13.4%, respectively,primarily due to higher third-party call center costs in U.K./Ireland and Germany, largely driven by increased call volumes; and |
| |
| • | Increases in information technology-related expenses of $1.2 million or 4.3% and $7.5 million or 9.2%, respectively,primarily due to higher software and other information technology-related maintenance costs in U.K./Ireland, Germany and, for the nine-month comparison, the European Division’s central operations. |
Increases in personnel costsLiLAC Division. The LiLAC Division’s other operating expenses (exclusive of $8.1share-based compensation expense) increased $9.4 million or 3.4%5.9% and $29.5$178.1 million or 4.0%,57.0% during the three and nine months ended September 30, 2017, respectively, as compared to the corresponding periods in 2016. These increases include increases of $1.4 million and $164.0 million, respectively, primarily due to (i) increased staffing levels, primarily in U.K./Ireland, Germany, the European Operations Division’s central operations and, to a lesser extent, Switzerland/Austria,that were only partially offset by decreased staffing levels in the Netherlandsand, for the three-month comparison, Belgium and (ii) annual wage increases;
An increase of $8.4 million for the nine-month comparison dueattributable to the impact of the C&W Acquisition and the C&W Carve-out Acquisition. On an accrual release recorded duringorganic basis, the second quarter 2015 related toLiLAC Division’s other operating expenses increased $7.4 million or 4.5% and $11.8 million or 2.5%, respectively. These increases include the resolution of a contingency associated with universal service obligations in Belgium;following factors:
Increases in facilitiesnetwork-related expenses of $5.8$6.4 million or 11.5%13.3% and $7.1$6.8 million or 4.7%6.6%, respectively, primarily due to higher rentmaintenance costs at VTR and other facilities-relatedC&W, including approximately $1.5 million at C&W due to the impact of Hurricanes Irma and Maria;
Increases in bad debt and collection expenses in U.K./Irelandof $3.8 million or 18.9% and $4.6 million or 10.8%, respectively, due primarily to increases at VTR and C&W. The increases at C&W include an increase of approximately $4.2 million during the European Operations Division’s central operations;third quarter of 2017 that is attributable to the impacts of Hurricanes Irma and Maria; and
IncreasesAn increase in outsourced labor and professional fees of $1.3$2.3 million or 3.2%7.6%, for the nine-month comparison, primarily due to outsourcing of call center services in Chile beginning in July 2016.
SG&A Expenses of our Reportable Segments
General. SG&A expenses include human resources, information technology, general services, management, finance, legal, external sales and $6.7marketing costs, share-based compensation and other general expenses.
|
| | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | |
| European Division: | | | | | | | | | | | |
| U.K./Ireland | $ | 191.9 |
| | $ | 212.4 |
| | $ | (20.5 | ) | | (9.7 | ) | | $ | (23.5 | ) | | (10.9 | ) |
| Belgium | 105.1 |
| | 101.3 |
| | 3.8 |
| | 3.8 |
| | (2.3 | ) | | (2.3 | ) |
| Germany | 96.4 |
| | 88.8 |
| | 7.6 |
| | 8.6 |
| | 3.0 |
| | 3.4 |
|
| Switzerland/Austria | 54.1 |
| | 50.1 |
| | 4.0 |
| | 8.0 |
| | 2.2 |
| | 4.4 |
|
| The Netherlands | — |
| | 87.5 |
| | (87.5 | ) | | (100.0 | ) | | — |
| | — |
|
| Total Western Europe | 447.5 |
| | 540.1 |
| | (92.6 | ) | | (17.1 | ) | | (20.6 | ) | | (4.5 | ) |
| Central and Eastern Europe | 44.3 |
| | 40.5 |
| | 3.8 |
| | 9.4 |
| | 1.5 |
| | 3.7 |
|
| Central and other | 33.8 |
| | 41.2 |
| | (7.4 | ) | | (18.0 | ) | | (8.5 | ) | | (20.5 | ) |
| Total European Division | 525.6 |
| | 621.8 |
| | (96.2 | ) | | (15.5 | ) | | (27.6 | ) | | (5.1 | ) |
| Corporate and other | 45.4 |
| | 48.6 |
| | (3.2 | ) | | (6.6 | ) | | (1.8 | ) | | (3.9 | ) |
| Intersegment eliminations | (0.2 | ) | | 0.1 |
| | (0.3 | ) | | N.M. |
| | (0.2 | ) | | N.M. |
|
| Total Liberty Global Group | 570.8 |
| | 670.5 |
| | (99.7 | ) | | (14.9 | ) | | (29.6 | ) | | (5.1 | ) |
| LiLAC Group: | | | | | | | | | | | |
| LiLAC Division: | | | | | | | | | | | |
| C&W | 112.4 |
| | 120.8 |
| | (8.4 | ) | | (7.0 | ) | | (10.1 | ) | | (8.2 | ) |
| Chile | 38.3 |
| | 35.8 |
| | 2.5 |
| | 7.0 |
| | 1.4 |
| | 3.9 |
|
| Puerto Rico | 12.2 |
| | 6.1 |
| | 6.1 |
| | 100.0 |
| | 6.1 |
| | 100.0 |
|
| Total LiLAC Division | 162.9 |
| | 162.7 |
| | 0.2 |
| | 0.1 |
| | (2.6 | ) | | (1.6 | ) |
| Corporate and other | 2.1 |
| | 2.9 |
| | (0.8 | ) | | (27.6 | ) | | (0.8 | ) | | (27.6 | ) |
| Intersegment eliminations | — |
| | 0.1 |
| | (0.1 | ) | | N.M. |
| | (0.1 | ) | | N.M. |
|
| Total LiLAC Group | 165.0 |
| | 165.7 |
| | (0.7 | ) | | (0.4 | ) | | (3.5 | ) | | (1.9 | ) |
| Total SG&A expenses excluding share-based compensation expense | 735.8 |
| | 836.2 |
| | (100.4 | ) | | (12.0 | ) | | $ | (33.1 | ) | | (4.4 | ) |
| Share-based compensation expense | 25.5 |
| | 61.6 |
| | (36.1 | ) | | (58.6 | ) | | | | |
| Total | $ | 761.3 |
| | $ | 897.8 |
| | $ | (136.5 | ) | | (15.2 | ) | | | | |
|
| | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | |
| European Division: | | | | | | | | | | | |
| U.K./Ireland | $ | 600.0 |
| | $ | 627.9 |
| | $ | (27.9 | ) | | (4.4 | ) | | $ | 13.2 |
| | 2.1 |
|
| Belgium | 297.2 |
| | 303.2 |
| | (6.0 | ) | | (2.0 | ) | | (23.9 | ) | | (7.4 | ) |
| Germany | 291.3 |
| | 278.8 |
| | 12.5 |
| | 4.5 |
| | 14.1 |
| | 5.1 |
|
| Switzerland/Austria | 162.5 |
| | 165.2 |
| | (2.7 | ) | | (1.6 | ) | | (2.5 | ) | | (1.5 | ) |
| The Netherlands | — |
| | 270.9 |
| | (270.9 | ) | | (100.0 | ) | | — |
| | — |
|
| Total Western Europe | 1,351.0 |
| | 1,646.0 |
| | (295.0 | ) | | (17.9 | ) | | 0.9 |
| | 0.1 |
|
| Central and Eastern Europe | 129.6 |
| | 129.2 |
| | 0.4 |
| | 0.3 |
| | (0.1 | ) | | (0.1 | ) |
| Central and other | 116.3 |
| | 138.4 |
| | (22.1 | ) | | (16.0 | ) | | (20.3 | ) | | (14.7 | ) |
| Total European Division | 1,596.9 |
| | 1,913.6 |
| | (316.7 | ) | | (16.5 | ) | | (19.5 | ) | | (1.2 | ) |
| Corporate and other | 134.6 |
| | 164.2 |
| | (29.6 | ) | | (18.0 | ) | | (23.3 | ) | | (14.5 | ) |
| Intersegment eliminations | (1.1 | ) | | — |
| | (1.1 | ) | | N.M. |
| | (0.2 | ) | | N.M. |
|
| Total Liberty Global Group | 1,730.4 |
| | 2,077.8 |
| | (347.4 | ) | | (16.7 | ) | | (43.0 | ) | | (2.3 | ) |
| LiLAC Group: | | | | | | | | | | | |
| LiLAC Division: | | | | | | | | | | | |
| C&W | 349.1 |
| | 190.2 |
| | 158.9 |
| | 83.5 |
| | (20.1 | ) | | (5.4 | ) |
| Chile | 115.3 |
| | 107.2 |
| | 8.1 |
| | 7.6 |
| | 3.8 |
| | 3.5 |
|
| Puerto Rico | 37.2 |
| | 31.2 |
| | 6.0 |
| | 19.2 |
| | 6.0 |
| | 19.2 |
|
| Total LiLAC Division | 501.6 |
| | 328.6 |
| | 173.0 |
| | 52.6 |
| | (10.3 | ) | | (2.0 | ) |
| Corporate and other | 6.4 |
| | 5.8 |
| | 0.6 |
| | 10.3 |
| | 0.6 |
| | 10.3 |
|
| Intersegment eliminations | — |
| | 0.1 |
| | (0.1 | ) | | N.M. |
| | (0.1 | ) | | N.M. |
|
| Total LiLAC Group | 508.0 |
| | 334.5 |
| | 173.5 |
| | 51.9 |
| | (9.8 | ) | | (1.9 | ) |
| Total SG&A expenses excluding share-based compensation expense | 2,238.4 |
| | 2,412.3 |
| | (173.9 | ) | | (7.2 | ) | | $ | (52.8 | ) | | (2.2 | ) |
| Share-based compensation expense | 118.6 |
| | 203.1 |
| | (84.5 | ) | | (41.6 | ) | | | | |
| Total | $ | 2,357.0 |
| | $ | 2,615.4 |
| | $ | (258.4 | ) | | (9.9 | ) | | | | |
N.M. — Not Meaningful.
Supplemental SG&A expense information:
|
| | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | |
| General and administrative (a) | $ | 396.9 |
| | $ | 460.9 |
| | $ | (64.0 | ) | | (13.9 | ) | | $ | (17.5 | ) | | (4.3 | ) |
| External sales and marketing | 173.9 |
| | 209.6 |
| | (35.7 | ) | | (17.0 | ) | | (12.1 | ) | | (6.7 | ) |
| | 570.8 |
| | 670.5 |
| | (99.7 | ) | | (14.9 | ) | | (29.6 | ) | | (5.1 | ) |
| LiLAC Group: | | | | | | | | | | | |
| General and administrative (a) | 138.4 |
| | 137.7 |
| | 0.7 |
| | 0.5 |
| | (0.8 | ) | | (0.6 | ) |
| External sales and marketing | 26.6 |
| | 28.0 |
| | (1.4 | ) | | (5.0 | ) | | (2.7 | ) | | (8.2 | ) |
| | 165.0 |
| | 165.7 |
| | (0.7 | ) | | (0.4 | ) | | (3.5 | ) | | (1.9 | ) |
| Total: | | | | | | | | | | | |
| General and administrative (a) | 535.3 |
| | 598.6 |
| | (63.3 | ) | | (10.6 | ) | | (18.3 | ) | | (3.4 | ) |
| External sales and marketing | 200.5 |
| | 237.6 |
| | (37.1 | ) | | (15.6 | ) | | (14.8 | ) | | (6.8 | ) |
| Total | $ | 735.8 |
| | $ | 836.2 |
| | $ | (100.4 | ) | | (12.0 | ) | | $ | (33.1 | ) | | (4.4 | ) |
|
| | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | |
| General and administrative (a) | $ | 1,188.6 |
| | $ | 1,445.1 |
| | $ | (256.5 | ) | | (17.7 | ) | | $ | (48.4 | ) | | (3.8 | ) |
| External sales and marketing | 541.8 |
| | 632.7 |
| | (90.9 | ) | | (14.4 | ) | | 5.4 |
| | 1.0 |
|
| | 1,730.4 |
| | 2,077.8 |
| | (347.4 | ) | | (16.7 | ) | | (43.0 | ) | | (2.3 | ) |
| LiLAC Group: | | | | | | | | | | | |
| General and administrative (a) | 418.6 |
| | 267.4 |
| | 151.2 |
| | 56.5 |
| | (6.7 | ) | | (1.5 | ) |
| External sales and marketing | 89.4 |
| | 67.1 |
| | 22.3 |
| | 33.2 |
| | (3.1 | ) | | (3.5 | ) |
| | 508.0 |
| | 334.5 |
| | 173.5 |
| | 51.9 |
| | (9.8 | ) | | (1.9 | ) |
| Total: | | | | | | | | | | | |
| General and administrative (a) | 1,607.2 |
| | 1,712.5 |
| | (105.3 | ) | | (6.1 | ) | | (55.1 | ) | | (3.2 | ) |
| External sales and marketing | 631.2 |
| | 699.8 |
| | (68.6 | ) | | (9.8 | ) | | 2.3 |
| | 0.3 |
|
| Total | $ | 2,238.4 |
| | $ | 2,412.3 |
| | $ | (173.9 | ) | | (7.2 | ) | | $ | (52.8 | ) | | (2.2 | ) |
_______________
| |
| (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. |
European Division. The European Division’s SG&A expenses (exclusive of share-based compensation expense)decreased$96.2 million or 5.7%15.5% and $316.7 million or 16.5% during the three and nine months ended September 30, 2017, respectively, as compared to the corresponding periods in 2016. These decreases include (i) decreases of $87.6 million and $270.9 million, respectively, attributable to the impact of the VodafoneZiggo JV Transaction and (ii) increases of $5.0 million and $29.8 million, respectively, attributable to the impact of the BASE Acquisition and other less significant acquisitions. On an organic basis, the European Division’s SG&A expenses decreased $27.6 million or 5.1% and $19.5 million or 1.2%, respectively. These decreases include the following factors:
Decreases in personnel costs of $10.3 million or 4.7% and $15.4 million or 2.2%, respectively, primarily due in part to the net effect of (i) decreased staffing levels, as decreases in the European Division’s central operations and Belgium were only partially offset by increases in Germany, Switzerland/Austria and, for the nine-month comparison, U.K./Ireland, (ii) annual wage increases and (iii) a decrease for the three-month comparison and an increase for the nine-month comparison in consultingincentive compensation costs. The decrease in incentive compensation costs and (ii) increased legal costsfor the three-month comparison is primarily due to decreases in U.K./Ireland, and the European Operations Division’s central operations. The changes in consulting costs include (a)operations and Germany that were only partially offset by an increase (decrease) of ($2.6 million) and $2.7 million, respectively, associated with the integration of BASE with our operations in Belgium, (b) decreases of $1.5 million and $3.5 million, respectively, associated with integrationSwitzerland/Austria. The increase in incentive compensation costs incurred during the 2015 periods following the acquisition of Ziggo and (c) for the nine-month comparison is primarily due to increases in the European Division’s central operations, Belgium and Switzerland/Austria that were only partially offset by a net increase resulting from other individually insignificant changes;decrease in U.K./Ireland;
| |
| • | Decreases in outsourced labor and professional fees of $8.1 million or 18.2% and $15.0 million or 11.6%, respectively,primarily due to the net effect of (i) decreases in consulting costs, primarily in Belgium, U.K./Ireland and, for the nine-month comparison, the European Division’s central operations, and (ii) increases in call center costs, primarily in U.K./Ireland. The decreases in consulting costs in Belgium include the impact of costs incurred during the 2016 periods associated with the integration of BASE with our operations in Belgium; and |
An increase (decrease) in external sales and marketing costs of $0.1($7.0 million) or (4.0%) and $9.3 million or 1.7%, respectively, primarily due to (i) higher third-party sales commissions, primarily in U.K./Ireland and Germany, and (ii) for the three-month comparison, lower costs associated with advertising campaigns in U.K./Ireland.
LiLAC Division. The LiLAC Division’s SG&A expenses (exclusive of share-based compensation expense) increased $0.2 million or 0.1% and ($1.6 million)$173.0 million or (0.2%)52.6% during the three and nine months ended September 30, 2017, respectively, as compared to the corresponding periods in 2016. These increases include increases of $2.1 million and $181.8 million, respectively, attributable to the impact of the C&W Acquisition and the C&W Carve-out Acquisition. On an organic basis, the LiLAC Division’s SG&A expenses decreased $2.6 million or 1.6% and $10.3 million or 2.0%, respectively. These decreases include the following factors:
Decreases in outsourced labor and professional fees of $1.0 million or 4.1% and $6.6 million or 16.8%, respectively, primarily due to the net effect of (i) higher third-party sales commissions, as increasesa decrease in Germanyintegration and U.K./Ireland more than offset declines inother consulting costs at C&W and (ii) an increase of $5.1 million during each period resulting from the Netherlands, (ii) lower costsreversal at Liberty Puerto Rico during the third quarter of 2016 of a previously-recorded provision and related indemnification asset relating to the resolution of certain legal claims that were associated with a company that Liberty Puerto Rico acquired in 2012;
Decreases in marketing and advertising campaigns, (iii) forexpenses of $6.2 million or 19.0% and $5.8 million or 8.7%, respectively, primarily due to marketing costs incurred by C&W in connection with the nine-month comparison, lower third-partySummer Olympic Games during the 2016 periods;
Increases in facilities related expenses of $3.0 million or 13.5% and $3.0 million or 7.6%, respectively, primarily due to higher utilities and rent expenses at C&W;
Increases in information technology-related expenses of $1.9 million or 28.1% and $2.7 million or 19.7%, respectively, primarily due to higher software and other information technology-related maintenance costs;
Increases in personnel costs inof $0.4 million or 0.7% and $0.6 million or 0.4%, respectively, primarily due to the Netherlandsnet effect of (i) decreases of $4.0 million related to the impact of rebranding costs incurred during the 2015 period following the acquisition of Ziggo and (iv) a net increase of $0.9$6.2 million, in each period in Germany due to the impact of accrual releases recorded in the third quarters of 2016 and 2015respectively, associated with the reassessment of an operational contingency, including lower costs of $2.7 millionhigher net credits from C&W’s pension and $3.6 million during the 2016 and 2015 periods, respectively. For the three-month comparison, the lower costs associated with advertising campaigns are primarily attributable to lower costs in Belgium that were only partially offset by higher costs in Switzerland/Austria. For the nine-month comparison, lower costs associated with advertising campaigns areother benefit plans, due primarily to lowerhigher expected returns on plan assets, (ii) higher incentive compensation costs in U.K./Ireland, Switzerland/Austriaat C&W, (iii) annual wage increases at Liberty Puerto Rico and the Netherlands that were only partially offset by(iv) higher costs in Belgium;staffing levels at VTR; and
Net increasesdecreases resulting from individually insignificant changes in other SG&A expense categories.
LiLAC Division. The LiLAC Division’s SG&A expenses (exclusive of share-based compensation expense) increased $131.2 million or 280.9% and $205.4 million or 137.6% during the three and nine months ended September 30, 2016, respectively, as compared to the corresponding periods in 2015. These increases include increases of$129.8 million and $210.6 million, respectively, attributable to the impact of the CWC Acquisition and the Choice Acquisition. Excluding the effects of these acquisitions and FX, the LiLAC Division’s SG&A expenses increased $0.6 million or 0.4% and $1.6 million or 0.4%, respectively. These increases include the following factors:
Decreases in outsourced labor and professional fees of $5.0 million or 16.2% and $4.8 million or 4.2%, respectively, primarily due to a decrease of $5.1 million in each period resulting from the reversal by Liberty Puerto Rico of its previously-recorded provision and related indemnification asset relating to the PRTC Claim that was recorded in connection with the acquisition of OneLink, as further described in note 13 to our condensed consolidated financial statements;
Increases in integration costs of $1.8 million and $3.2 million, respectively, incurred during the second and third quarters of 2016 to integrate Columbus (acquired by CWC on March 31, 2015) with CWC’s operations and CWC’s operations with Liberty Global and the LiLAC Division.These costs are excluded from the CWC Acquisition effect and, accordingly, are included in our organic increases;
Increases in personnel costs of $1.5 million or 9.4% and $2.6 million or 5.5%, respectively, primarily due to higher incentive compensation costs and increased wages in Chile;
Decreases in facilities-related costs of $0.3 million or 5.6% and $1.3 million or 9.3%, respectively, primarily due to lower facilities maintenance in Chile; and
Net increases from individually insignificant changes in other SG&A expense categories.
Adjusted OIBDA of our Reportable Segments
General. Adjusted OIBDA is the primary measure used by our chief operating decision maker to evaluate segment operating performance. For the definition of this performance measure and for a reconciliation of total segment Adjusted OIBDA of our consolidated reportable segments to our earnings (loss) from continuing operationsloss before income taxes, see note 1415 to our condensed consolidated financial statements.
| | | | Three months ended September 30, | | Increase (decrease) | | Organic increase (decrease) | Three months ended September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions | | | | | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | | | | | | | | | | |
| European Operations Division: | | | | | | | | | | |
| European Division: | | | | | | | | | | | | |
| U.K./Ireland | $ | 696.0 |
| | $ | 777.0 |
| | $ | (81.0 | ) | | (10.4 | ) | | 5.3 |
| $ | 721.2 |
| | $ | 696.0 |
| | $ | 25.2 |
| | 3.6 |
| | $ | 25.2 |
| | 3.6 |
|
| Belgium | | 356.7 |
| | 311.1 |
| | 45.6 |
| | 14.7 |
| | 20.0 |
| | 6.3 |
|
| Germany | | 444.6 |
| | 408.0 |
| | 36.6 |
| | 9.0 |
| | 14.4 |
| | 3.5 |
|
| Switzerland/Austria | | 272.3 |
| | 273.4 |
| | (1.1 | ) | | (0.4 | ) | | (7.5 | ) | | (2.7 | ) |
| The Netherlands | 375.5 |
| | 388.6 |
| | (13.1 | ) | | (3.4 | ) | | (3.7 | ) | — |
| | 375.5 |
| | (375.5 | ) | | (100.0 | ) | | — |
| | — |
|
| Germany | 408.0 |
| | 380.9 |
| | 27.1 |
| | 7.1 |
| | 6.7 |
| |
| Belgium (a) | 311.1 |
| | 258.3 |
| | 52.8 |
| | 20.4 |
| | 5.7 |
| |
| Switzerland/Austria | 273.4 |
| | 269.6 |
| | 3.8 |
| | 1.4 |
| | 2.1 |
| |
| Total Western Europe | 2,064.0 |
| | 2,074.4 |
| | (10.4 | ) | | (0.5 | ) | | 3.5 |
| 1,794.8 |
| | 2,064.0 |
| | (269.2 | ) | | (13.0 | ) | | 52.1 |
| | 3.1 |
|
| Central and Eastern Europe | 120.4 |
| | 119.0 |
| | 1.4 |
| | 1.2 |
| | 1.7 |
| 137.6 |
| | 120.4 |
| | 17.2 |
| | 14.3 |
| | 8.2 |
| | 6.8 |
|
| Central and other | (77.0 | ) | | (74.0 | ) | | (3.0 | ) | | (4.1 | ) | | (2.2 | ) | (46.0 | ) | | (77.0 | ) | | 31.0 |
| | 40.3 |
| | 1.3 |
| | 1.2 |
|
| Total European Operations Division | 2,107.4 |
| | 2,119.4 |
| | (12.0 | ) | | (0.6 | ) | | 3.5 |
| |
| Total European Division | | 1,886.4 |
| | 2,107.4 |
| | (221.0 | ) | | (10.5 | ) | | 61.6 |
| | 3.5 |
|
| Corporate and other | (47.4 | ) | | (55.3 | ) | | 7.9 |
| | 14.3 |
| | 11.3 |
| (50.7 | ) | | (47.4 | ) | | (3.3 | ) | | (7.0 | ) | | (3.8 | ) | | (8.0 | ) |
| Total Liberty Global Group | 2,060.0 |
| | 2,064.1 |
| | (4.1 | ) | | (0.2 | ) | | 3.9 |
| 1,835.7 |
| | 2,060.0 |
| | (224.3 | ) | | (10.9 | ) | | 57.8 |
| | 3.4 |
|
| LiLAC Group: | | | | | | | | | | | | | | | | | | | | |
| LiLAC Division: | | | | | | | | | | | | | | | | | | | | |
| CWC (b) | 214.5 |
| | — |
| | 214.5 |
| | N.M. |
| | (0.8 | ) | |
| C&W | | 223.9 |
| | 214.5 |
| | 9.4 |
| | 4.4 |
| | 11.1 |
| | 5.2 |
|
| Chile | 86.9 |
| | 82.5 |
| | 4.4 |
| | 5.3 |
| | 3.0 |
| 98.0 |
| | 86.9 |
| | 11.1 |
| | 12.8 |
| | 8.2 |
| | 9.4 |
|
Puerto Rico (c) | 56.1 |
| | 46.4 |
| | 9.7 |
| | 20.9 |
| | 20.9 |
| 39.6 |
| | 56.1 |
| | (16.5 | ) | | (29.4 | ) | | (16.5 | ) | | (29.4 | ) |
Total LiLAC Division (d) | 357.5 |
| | 128.9 |
| | 228.6 |
| | 177.3 |
| | 3.0 |
| 361.5 |
| | 357.5 |
| | 4.0 |
| | 1.1 |
| | 2.8 |
| | 0.8 |
|
| Corporate | (2.9 | ) | | (1.1 | ) | | (1.8 | ) | | (163.6 | ) | | (163.6 | ) | |
| Corporate and other | | (2.1 | ) | | (2.9 | ) | | 0.8 |
| | 27.6 |
| | 0.8 |
| | 27.6 |
|
| Total LiLAC Group | 354.6 |
| | 127.8 |
| | 226.8 |
| | 177.5 |
| | 2.5 |
| 359.4 |
| | 354.6 |
| | 4.8 |
| | 1.4 |
| | 3.6 |
| | 1.1 |
|
| Total | $ | 2,414.6 |
| | $ | 2,191.9 |
| | $ | 222.7 |
| | 10.2 |
| | 3.7 |
| $ | 2,195.1 |
| | $ | 2,414.6 |
| | $ | (219.5 | ) | | (9.1 | ) | | $ | 61.4 |
| | 3.0 |
|
| | | | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions | | | | | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | | | | | | | | | | |
| European Operations Division: | | | | | | | | | | |
| European Division: | | | | | | | | | | | | |
| U.K./Ireland | $ | 2,206.1 |
| | $ | 2,345.9 |
| | $ | (139.8 | ) | | (6.0 | ) | | 3.4 |
| $ | 2,079.5 |
| | $ | 2,206.1 |
| | $ | (126.6 | ) | | (5.7 | ) | | $ | 54.8 |
| | 2.5 |
|
| Belgium | | 972.4 |
| | 892.2 |
| | 80.2 |
| | 9.0 |
| | 59.8 |
| | 6.5 |
|
| Germany | | 1,240.2 |
| | 1,187.7 |
| | 52.5 |
| | 4.4 |
| | 55.0 |
| | 4.6 |
|
| Switzerland/Austria | | 794.3 |
| | 795.1 |
| | (0.8 | ) | | (0.1 | ) | | (1.3 | ) | | (0.2 | ) |
| The Netherlands | 1,107.5 |
| | 1,127.5 |
| | (20.0 | ) | | (1.8 | ) | | (1.8 | ) | — |
| | 1,107.5 |
| | (1,107.5 | ) | | (100.0 | ) | | — |
| | — |
|
| Germany | 1,187.7 |
| | 1,111.8 |
| | 75.9 |
| | 6.8 |
| | 6.7 |
| |
| Belgium (a) | 892.2 |
| | 766.1 |
| | 126.1 |
| | 16.5 |
| | 3.9 |
| |
| Switzerland/Austria | 795.1 |
| | 778.1 |
| | 17.0 |
| | 2.2 |
| | 4.5 |
| |
| Total Western Europe | 6,188.6 |
| | 6,129.4 |
| | 59.2 |
| | 1.0 |
| | 3.2 |
| 5,086.4 |
| | 6,188.6 |
| | (1,102.2 | ) | | (17.8 | ) | | 168.3 |
| | 3.3 |
|
| Central and Eastern Europe | 345.9 |
| | 355.5 |
| | (9.6 | ) | | (2.7 | ) | | (1.1 | ) | 371.5 |
| | 345.9 |
| | 25.6 |
| | 7.4 |
| | 20.9 |
| | 6.0 |
|
| Central and other | (243.7 | ) | | (214.6 | ) | | (29.1 | ) | | (13.6 | ) | | (12.8 | ) | (139.2 | ) | | (243.7 | ) | | 104.5 |
| | 42.9 |
| | 18.2 |
| | 3.5 |
|
| Total European Operations Division | 6,290.8 |
| | 6,270.3 |
| | 20.5 |
| | 0.3 |
| | 2.7 |
| |
| Total European Division | | 5,318.7 |
| | 6,290.8 |
| | (972.1 | ) | | (15.5 | ) | | 207.4 |
| | 3.9 |
|
| Corporate and other | (162.6 | ) | | (159.7 | ) | | (2.9 | ) | | (1.8 | ) | | (1.1 | ) | (145.0 | ) | | (162.6 | ) | | 17.6 |
| | 10.8 |
| | 13.5 |
| | 8.1 |
|
| Total Liberty Global Group | 6,128.2 |
| | 6,110.6 |
| | 17.6 |
| | 0.3 |
| | 2.7 |
| 5,173.7 |
| | 6,128.2 |
| | (954.5 | ) | | (15.6 | ) | | 220.9 |
| | 4.2 |
|
| LiLAC Group: | | | | | | | | | | | | | | | | | | | | |
| LiLAC Division: | | | | | | | | | | | | | | | | | | | | |
| CWC (b) | 315.5 |
| | — |
| | 315.5 |
| | N.M. |
| | (2.0 | ) | |
| C&W | | 661.1 |
| | 315.5 |
| | 345.6 |
| | 109.5 |
| | 17.6 |
| | 2.8 |
|
| Chile | 245.0 |
| | 246.1 |
| | (1.1 | ) | | (0.4 | ) | | 5.7 |
| 281.9 |
| | 245.0 |
| | 36.9 |
| | 15.1 |
| | 25.9 |
| | 10.6 |
|
Puerto Rico (c) | 152.9 |
| | 120.7 |
| | 32.2 |
| | 26.7 |
| | 12.4 |
| 144.7 |
| | 152.9 |
| | (8.2 | ) | | (5.4 | ) | | (8.2 | ) | | (5.4 | ) |
Total LiLAC Division (d) | 713.4 |
| | 366.8 |
| | 346.6 |
| | 94.5 |
| | 3.5 |
| 1,087.7 |
| | 713.4 |
| | 374.3 |
| | 52.5 |
| | 35.3 |
| | 3.4 |
|
| Corporate | (5.8 | ) | | (3.2 | ) | | (2.6 | ) | | (81.3 | ) | | (81.3 | ) | |
| Corporate and other | | (6.4 | ) | | (5.8 | ) | | (0.6 | ) | | (10.3 | ) | | (0.6 | ) | | (10.3 | ) |
| Total LiLAC Group | 707.6 |
| | 363.6 |
| | 344.0 |
| | 94.6 |
| | 3.1 |
| 1,081.3 |
| | 707.6 |
| | 373.7 |
| | 52.8 |
| | 34.7 |
| | 3.4 |
|
| Total | $ | 6,835.8 |
| | $ | 6,474.2 |
| | $ | 361.6 |
| | 5.6 |
| | 2.7 |
| $ | 6,255.0 |
| | $ | 6,835.8 |
| | $ | (580.8 | ) | | (8.5 | ) | | $ | 255.6 |
| | 4.2 |
|
_______________
| |
(a) | The amounts presented for the 2016 periods include the post-acquisition Adjusted OIBDA of BASE, which was acquired on February 11, 2016. |
| |
(b) | The amounts presented for the 2016 periods reflect the post-acquisition Adjusted OIBDA of CWC, which was acquired on May 16, 2016. |
| |
(c) | The amount presented for the 2015 nine-month period excludes the pre-acquisition Adjusted OIBDA of Choice, which was acquired on June 3, 2015. |
Adjusted OIBDA Margin
The following table sets forth the Adjusted OIBDA margins (Adjusted OIBDA divided by revenue) of each of our consolidated reportable segments:
| | | | Three months ended September 30, | | Nine months ended
September 30, | Three months ended September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | % | % |
| Liberty Global Group: | | |
| European Operations Division: | | |
| European Division: | | |
| U.K./Ireland | 44.0 | | 43.6 | | 44.2 | | 44.6 | 44.6 | | 44.0 | | 44.4 | | 44.2 |
| Belgium | | 47.0 | | 44.9 | | 46.2 | | 44.4 |
| Germany | | 63.2 | | 63.8 | | 62.4 | | 62.5 |
| Switzerland/Austria | | 59.7 | | 62.2 | | 60.4 | | 60.2 |
| The Netherlands | 55.1 | | 57.0 | | 54.5 | | 54.4 | — | | 55.1 | | — | | 54.5 |
| Germany | 63.8 | | 63.1 | | 62.5 | | 62.0 | |
| Belgium | 44.9 | | 50.4 | | 44.4 | | 50.6 | |
| Switzerland/Austria | 62.2 | | 61.6 | | 60.2 | | 58.7 | |
| Total Western Europe | 51.1 | | 51.6 | | 50.5 | | 51.2 | 50.8 | | 51.1 | | 50.4 | | 50.5 |
| Central and Eastern Europe | 43.9 | | 44.7 | | 42.5 | | 44.3 | 44.9 | | 43.9 | | 42.9 | | 42.5 |
| Total European Operations Division | 48.9 | | 49.5 | | 48.2 | | 49.1 | |
| Total European Division | | 48.6 | | 48.9 | | 48.1 | | 48.2 |
| LiLAC Group: | | |
| LiLAC Division: | | |
| CWC | 37.7 | | N.M. | | 36.9 | | N.M. | |
| C&W | | 38.7 | | 37.7 | | 38.1 | | 36.9 |
| Chile | 39.3 | | 40.4 | | 38.8 | | 38.8 | 40.5 | | 39.3 | | 40.1 | | 38.8 |
| Puerto Rico | 53.5 | | 44.4 | | 48.4 | | 44.0 | 44.7 | | 53.5 | | 47.7 | | 48.4 |
| Total LiLAC Division | 40.0 | | 41.7 | | 39.6 | | 40.4 | 39.7 | | 40.0 | | 39.6 | | 39.6 |
_______________
N.M. — Not Meaningful.
In addition to organic changes in the revenue, operating expenses and SG&A expenses of our consolidated reportable segments as discussed above, the Adjusted OIBDA margins presented above include the impact of (i) acquisitions and (ii) the most significant of which are the CWC Acquisition, the BASE Acquisition and the Choice Acquisition.VodafoneZiggo JV Transaction. In this regard, the Adjusted OIBDA margins of Belgium during 2016the European Division for both 2017 periods were adversely impacted by the inclusion of BASE, while the 2016 Adjusted OIBDA marginscontribution of our Puerto Rico operation were positively impacted by realized synergies with respectoperations in the Netherlands to the Choice Acquisition.For discussion of the factors contributing to other changes inVodafoneZiggo JV. In addition, the Adjusted OIBDA margins of our reportable segments, seePuerto Rico and, to a lesser extent, C&W and the above analysesLiLAC Division for the 2017 periods were adversely impacted by the impacts of the revenue, operating expensesHurricanes Irma and SG&A expenses of our reportable segments.Maria, as more fully described in Overview above.
Discussion and Analysis of our Consolidated Operating Results
General
For more detailed explanations of the changes in our revenue and operating expenses(including direct costs of services and other operating costs) and SG&A expenses, including the impacts of nonrecurring and nonoperational items, see the Discussion and Analysis of our Reportable Segments above.
Revenue
Our revenue by major category is set forth below:
| | | | Three months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) | Three months ended September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions | | | | | in millions, except percentages |
| Subscription revenue (a): | | | | | | | | | | |
| Residential revenue: | | | | | | | | | | | | |
| Residential cable revenue (a): | | | | | | | | | | | | |
| Subscription revenue (b): | | | | | | | | | | | | |
| Video | $ | 1,632.1 |
| | $ | 1,587.3 |
| | $ | 44.8 |
| | 2.8 |
| | 3.6 |
| $ | 1,308.1 |
| | $ | 1,598.8 |
| | $ | (290.7 | ) | | (18.2 | ) | | $ | (31.4 | ) | | (2.4 | ) |
| Broadband internet | 1,338.0 |
| | 1,287.5 |
| | 50.5 |
| | 3.9 |
| | 5.4 |
| 1,211.8 |
| | 1,287.3 |
| | (75.5 | ) | | (5.9 | ) | | 65.3 |
| | 5.8 |
|
| Fixed-line telephony | 757.8 |
| | 792.5 |
| | (34.7 | ) | | (4.4 | ) | | (1.9 | ) | 626.3 |
| | 738.4 |
| | (112.1 | ) | | (15.2 | ) | | (18.4 | ) | | (2.9 | ) |
| Cable subscription revenue | 3,727.9 |
| | 3,667.3 |
| | 60.6 |
| | 1.7 |
| | 3.1 |
| |
| Mobile (b) | 513.8 |
| | 270.1 |
| | 243.7 |
| | 90.2 |
| | (1.2 | ) | |
| Total subscription revenue | 4,241.7 |
| | 3,937.4 |
| | 304.3 |
| | 7.7 |
| | 2.5 |
| 3,146.2 |
| | 3,624.5 |
| | (478.3 | ) | | (13.2 | ) | | 15.5 |
| | 0.5 |
|
| B2B revenue (c) | 597.9 |
| | 393.5 |
| | 204.4 |
| | 51.9 |
| | 1.6 |
| |
| Other revenue (b) (d) | 367.6 |
| | 266.5 |
| | 101.1 |
| | 37.9 |
| | 2.3 |
| |
| Non-subscription revenue | | 155.6 |
| | 160.4 |
| | (4.8 | ) | | (3.0 | ) | | 0.4 |
| | 0.3 |
|
| Total residential cable revenue | | 3,301.8 |
| | 3,784.9 |
| | (483.1 | ) | | (12.8 | ) | | 15.9 |
| | 0.5 |
|
| Residential mobile revenue (c): | | | | | | | | | | | | |
| Subscription revenue (b) | | 451.6 |
| | 477.0 |
| | (25.4 | ) | | (5.3 | ) | | (16.5 | ) | | (3.6 | ) |
| Non-subscription revenue | | 189.8 |
| | 169.5 |
| | 20.3 |
| | 12.0 |
| | 18.5 |
| | 11.0 |
|
| Total residential mobile revenue | | 641.4 |
| | 646.5 |
| | (5.1 | ) | | (0.8 | ) | | 2.0 |
| | 0.3 |
|
| Total residential revenue | | 3,943.2 |
| | 4,431.4 |
| | (488.2 | ) | | (11.0 | ) | | 17.9 |
| | 0.5 |
|
| B2B revenue (d): | | | | | | | | | | | | |
| Subscription revenue | | 144.3 |
| | 131.5 |
| | 12.8 |
| | 9.7 |
| | 34.3 |
| | 33.0 |
|
| Non-subscription revenue | | 639.1 |
| | 621.9 |
| | 17.2 |
| | 2.8 |
| | 44.1 |
| | 7.5 |
|
| Total B2B revenue | | 783.4 |
| | 753.4 |
| | 30.0 |
| | 4.0 |
| | 78.4 |
| | 11.1 |
|
| Other revenue (e) | | 58.8 |
| | 22.4 |
| | 36.4 |
| | 162.5 |
| | (2.3 | ) | | (3.7 | ) |
| Total | $ | 5,207.2 |
| | $ | 4,597.4 |
| | $ | 609.8 |
| | 13.3 |
| | 2.4 |
| $ | 4,785.4 |
| | $ | 5,207.2 |
| | $ | (421.8 | ) | | (8.1 | ) | | $ | 94.0 |
| | 2.1 |
|
| | | | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions | | | | | in millions, except percentages |
| Subscription revenue (a): | | | | | | | | | | |
| Residential revenue: | | | | | | | | | | | | |
| Residential cable revenue (a): | | | | | | | | | | | | |
| Subscription revenue (b): | | | | | | | | | | | | |
| Video | $ | 4,813.8 |
| | $ | 4,798.1 |
| | $ | 15.7 |
| | 0.3 |
| | 1.6 |
| $ | 3,803.2 |
| | $ | 4,723.5 |
| | $ | (920.3 | ) | | (19.5 | ) | | $ | (40.2 | ) | | (1.0 | ) |
| Broadband internet | 3,980.7 |
| | 3,793.1 |
| | 187.6 |
| | 4.9 |
| | 6.3 |
| 3,482.7 |
| | 3,844.0 |
| | (361.3 | ) | | (9.4 | ) | | 204.3 |
| | 6.0 |
|
| Fixed-line telephony | 2,291.3 |
| | 2,387.5 |
| | (96.2 | ) | | (4.0 | ) | | (1.8 | ) | 1,831.2 |
| | 2,239.1 |
| | (407.9 | ) | | (18.2 | ) | | (34.9 | ) | | (1.8 | ) |
| Cable subscription revenue | 11,085.8 |
| | 10,978.7 |
| | 107.1 |
| | 1.0 |
| | 2.5 |
| |
| Mobile (b) | 1,226.1 |
| | 783.0 |
| | 443.1 |
| | 56.6 |
| | (1.2 | ) | |
| Total subscription revenue | 12,311.9 |
| | 11,761.7 |
| | 550.2 |
| | 4.7 |
| | 2.1 |
| 9,117.1 |
| | 10,806.6 |
| | (1,689.5 | ) | | (15.6 | ) | | 129.2 |
| | 1.4 |
|
| B2B revenue (c) | 1,504.6 |
| | 1,154.7 |
| | 349.9 |
| | 30.3 |
| | 3.0 |
| |
| Other revenue (b) (d) | 1,052.8 |
| | 764.4 |
| | 288.4 |
| | 37.7 |
| | 9.7 |
| |
| Non-subscription revenue | | 459.8 |
| | 462.3 |
| | (2.5 | ) | | (0.5 | ) | | 10.0 |
| | 2.2 |
|
| Total residential cable revenue | | 9,576.9 |
| | 11,268.9 |
| | (1,692.0 | ) | | (15.0 | ) | | 139.2 |
| | 1.4 |
|
| Residential mobile revenue (c): | | | | | | | | | | | | |
| Subscription revenue (b) | | 1,296.6 |
| | 1,148.3 |
| | 148.3 |
| | 12.9 |
| | (55.4 | ) | | (4.0 | ) |
| Non-subscription revenue | | 517.3 |
| | 487.5 |
| | 29.8 |
| | 6.1 |
| | 2.6 |
| | 0.5 |
|
| Total residential mobile revenue | | 1,813.9 |
| | 1,635.8 |
| | 178.1 |
| | 10.9 |
| | (52.8 | ) | | (2.7 | ) |
| Total residential revenue | | 11,390.8 |
| | 12,904.7 |
| | (1,513.9 | ) | | (11.7 | ) | | 86.4 |
| | 0.7 |
|
| B2B revenue (d): | | | | | | | | | | | | |
| Subscription revenue | | 391.8 |
| | 361.4 |
| | 30.4 |
| | 8.4 |
| | 100.9 |
| | 34.2 |
|
| Non-subscription revenue | | 1,854.6 |
| | 1,536.6 |
| | 318.0 |
| | 20.7 |
| | 92.8 |
| | 5.1 |
|
| Total B2B revenue | | 2,246.4 |
| | 1,898.0 |
| | 348.4 |
| | 18.4 |
| | 193.7 |
| | 9.1 |
|
| Other revenue (e) | | 162.7 |
| | 66.6 |
| | 96.1 |
| | 144.3 |
| | (5.4 | ) | | (3.2 | ) |
| Total | $ | 14,869.3 |
| | $ | 13,680.8 |
| | $ | 1,188.5 |
| | 8.7 |
| | 2.7 |
| $ | 13,799.9 |
| | $ | 14,869.3 |
| | $ | (1,069.4 | ) | | (7.2 | ) | | $ | 274.7 |
| | 2.0 |
|
_______________
| |
| (a) | SubscriptionResidential cable subscription revenue includes amounts received from subscribers for ongoing services, excludingservices. Residential cable non-subscription revenue includes, among other items, channel carriage fees, installation revenue, late fees and late fees. Subscriptionrevenue 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. |
| |
(b)(c) | MobileResidential mobile subscription revenue excludesincludes 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 ofwas $88.8 millionand $78.4 million and $52.6 million during the three months ended September 30, 2017 and 2016, respectively, and 2015, respectively,$246.0 million and $232.6 million and $160.1 million during the nine months ended September 30, 2017 and 2016, respectively. |
ended September 30, 2016 and 2015, respectively. Mobile interconnect revenue and revenue from mobile handset sales are included in other revenue.
| |
(c)(d) | B2B subscription revenue includesrepresents revenue from business broadband internet, video, voice, mobile and data services offered to medium to large enterprises and, on a wholesale basis, to other operators. We also provide services to certain SOHO subscribers. SOHO subscribers pay a premium price to receive expanded service levels along with video, broadband internet, fixed-line telephony or mobile services that are the same or similar to the mass marketed products offered to our residential subscribers. Revenue from SOHO subscribers, which is included in subscription revenue, aggregated $132.7 million and $78.7 million during the three months ended September 30, 2016 and 2015, respectively, and $356.7 million and $213.5 million during the nine months ended September 30, 2016 and 2015, respectively. On an organic basis, our total B2B revenue, including revenue from SOHO subscribers, increased 7.1% and 8.7% for the three and nine months ended September 30, 2016, respectively, as compared to the corresponding prior-year periods. A portion of the increaseincreases in our SOHOB2B subscription revenue is attributable to the conversion of ourcertain residential subscribers to SOHO subscribers. B2B non-subscription revenue includes revenue from business broadband internet, video, fixed-line telephony, mobile and data services offered to medium to large enterprises and, on a wholesale basis, to other operators. |
| |
(d)(e) | Other revenue includes, among other items, mobile handset sales, interconnect, channel carriage fee and installation revenue.revenue earned from services provided to the VodafoneZiggo JV. |
Total revenue. Our consolidated revenue increased $609.8decreased $421.8 million and $1,188.5$1,069.4 million during the three and nine months ended September 30, 2016,2017, respectively, as compared to the corresponding periods in 2015.2016. These increasesdecreases include (i) increases of $745.2$34.8 million and $1,349.1$1,016.5 million, respectively, attributable to the impact of acquisitions, and (ii) decreases of $5.1$649.6 million and $26.4$1,939.1million, respectively, attributable to the net impact of the VodafoneZiggo JV Transaction and (iii) decreases of $9.1 million and $24.7 million, respectively, attributable to the impact of dispositions. Excluding the effects of acquisitions, dispositions and FX,On an organic basis, our consolidated revenue increased $128.3$94.0 million or 2.4%2.1% and $408.0$274.7 million or 2.7%2.0%, respectively.
SubscriptionResidential revenue. The details of the changes in our consolidated subscriptionresidential revenue for the three and nine months ended September 30, 20162017, respectively, as compared to the corresponding periods in 20152016, are as follows:
|
| | | | | | | |
| | Three-month period | | Nine-month period |
| | in millions |
| Increase in cable subscription revenue due to change in: | | | |
| Average number of RGUs | $ | 72.7 |
| | $ | 200.6 |
|
| ARPU | 43.1 |
| | 82.1 |
|
| Total increase in cable subscription revenue | 115.8 |
| | 282.7 |
|
| Decrease in mobile subscription revenue | (6.6 | ) | | (16.0 | ) |
| Total organic increase in subscription revenue | 109.2 |
| | 266.7 |
|
| Impact of acquisitions | 402.9 |
| | 729.8 |
|
| Impact of a disposal | (3.5 | ) | | (8.6 | ) |
| Impact of FX | (204.3 | ) | | (437.7 | ) |
| Total | $ | 304.3 |
| | $ | 550.2 |
|
|
| | | | | | | |
| | Three-month period | | Nine-month period |
| | in millions |
| Organic increase (decrease) in residential cable subscription revenue due to change in: | | | |
| Average number of RGUs | $ | 33.1 |
| | $ | 110.5 |
|
| ARPU | 1.2 |
| | 35.5 |
|
| Organic increase in residential cable non-subscription revenue | 2.4 |
| | 14.0 |
|
| Impact of hurricanes on residential cable revenue (a) | (20.8 | ) | | (20.8 | ) |
| Total organic increase in residential cable revenue | 15.9 |
| | 139.2 |
|
| Organic decrease in residential mobile subscription revenue | (16.2 | ) | | (55.1 | ) |
| Organic increase in residential mobile non-subscription revenue | 18.5 |
| | 2.6 |
|
| Impact of hurricanes on residential mobile revenue (a) | (0.3 | ) | | (0.3 | ) |
| Total organic increase in residential revenue | 17.9 |
| | 86.4 |
|
| Impact of acquisitions | 15.6 |
| | 569.8 |
|
| Impact of the VodafoneZiggo JV Transaction and disposals | (616.5 | ) | | (1,841.7 | ) |
| Impact of FX | 94.8 |
| | (328.4 | ) |
| Total decrease in residential revenue | $ | (488.2 | ) | | $ | (1,513.9 | ) |
_______________
Excluding the effects of acquisitions, dispositions and FX,
| |
| (a) | For information regarding the impacts of Hurricanes Irma and Maria on the revenue of Liberty Puerto Rico and certain of C&W’s subsidiaries, see Overview and Discussion and Analysis of our Reportable Segments - Revenue of our Reportable Segments above. |
On an organic basis, our consolidated residential cable subscription revenue increased $115.8$15.5 million or 3.1%0.5% and $282.7$129.2 million or 2.5%1.4% during the three and nine months ended September 30, 2016,2017, respectively, as compared to the corresponding periods in 2015.2016. These increases are attributable to the net effect of (i)increases from broadband internet services of $72.8$65.3 million or 5.4%5.8% and $246.6$204.3 million or 6.3%6.0%, respectively, attributable to higher ARPU from broadband internet services and increases in the average number of broadband internet RGUs, and higher ARPU from broadband internet services, (ii) increases from video services of $58.7 million or 3.6% and $78.9 million or 1.6%, respectively, attributable to the net effect of (a) higher ARPU from video services and (b) declines in the average number of video RGUs and (iii) decreasesfrom fixed-line telephony services of $15.7$18.4 million or 1.9%2.9% and $42.8$34.9 million or 1.8%, respectively, attributable to the net effect of (1)(a) lower ARPU from fixed-line telephony services and (2)(b) increases in the average number of fixed-line telephony RGUs.RGUs, and (iii) decreasesfrom video services of $31.4 millionor 2.4% and $40.2 million or 1.0%, respectively, attributable to the net effect of (1) declines in the average number of video RGUs and (2) lower ARPU for the three-month comparison and higher ARPU for the nine-month comparison from video services.
Excluding the effects of acquisitions and FX,On an organic basis, our consolidated mobile subscriptionresidential cable non-subscription revenue decreased $6.6increased $0.4 million or 1.2%0.3% and $16.0$10.0 million or 1.2%2.2% during the three and nine months ended September 30, 2016,2017, respectively, as compared to the corresponding periods in 2015.2016. These changes are largely attributable to the net effect of (i) for the nine-month comparison, (a) an increase of $6.5 million in Switzerland due to the release of unclaimed customer credits and (b) an increase of $5.8 million due to adjustments recorded during the 2017 period to reflect the expected recovery of certain prior-period VAT payments in Belgium, (ii) increases in installation revenue, primarily due to increases in the U.K. and Germany, (iii) decreases in fixed-line telephony interconnect revenue, primarily due to decreases in Germany, at C&W, and in Chile and the U.K., (iv) decreases in advertising revenue, primarily due to decreases in Chile and the U.K., (v) decreases in channel carriage fee revenue in Germany and (vi) decreases in equipment sales, primarily due to decreases in Switzerland and Belgium.
On an organic basis, our consolidated residential mobile subscription revenue decreased $16.5 million or 3.6% and $55.4 million or 4.0% during the three and nine months ended September 30, 2017, respectively, as compared to the corresponding
periods in 2016. These decreases are largelyprimarily due to the net effect of (i) declines in the U.K., largely associated with the continued growth of the U.K. Split-contract Program,Belgium and at C&W and (ii) increases in BelgiumSwitzerland and Switzerland.Chile.
B2B revenue. Excluding the effects of acquisitions and FX,On an organic basis, our consolidated B2Bresidential mobile non-subscription revenue increased $10.3increased $18.5 million or 1.6%11.0% and $45.7$2.6 million or 3.0%0.5% during the three and nine months ended September 30, 2016,2017, respectively, as compared to the corresponding periods in 2015.2016. These increases are primarily due to increases in Germany, Ireland, at C&W and in Austria that, for the nine-month comparison, were only partially offset by decreases in Belgium, the U.K., Belgium and Puerto Rico.Switzerland.
OtherB2B revenue. Excluding the effects of acquisitions, dispositions and FX,On an organic basis, our consolidated otherB2B subscription revenue increased $8.8$34.3 million or 2.3%33.0% and $95.6$100.9 million or 9.7%34.2% during the three and nine months ended September 30, 2016,2017, respectively, as compared to the corresponding periods in 2015.2016. These increases are largely attributableprimarily due to increases in mobile handset sales, mainlySOHO revenue in Belgium, the U.K., Germany and Chile.
On an organic basis, our consolidated B2B non-subscription revenue increased $44.1 million or 7.5% and $92.8 million or 5.1% during the three and nine months ended September 30, 2017, respectively, as compared to the corresponding periods in 2016. These increases are primarily due to increases in Belgium, at C&W, in the Czech Republic, Switzerland and Germany. The increases at C&W include $0.9 million and $5.8 million, respectively, of organic impacts associated with wholesale revenue recognized on a cash basis during the continued growthsecond and third quarters of Split-contract Programs, primarily2017 related to services provided to a significant customer in the U.K.prior quarters.
For additional information concerning the changes in our subscription, residential, B2B and other revenue, see Discussion and Analysis of our Reportable Segments above. For information regarding the competitive environment in certain of our markets, see Overview and Discussion and Analysis of our Reportable Segments above.
Supplemental revenue information
Our revenue by major category for the Liberty Global Group is set forth below:
| | | | Three months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) | Three months ended September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions | | | | | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | | | | | | | | | | |
| Residential revenue: | | | | | | | | | | | | |
| Residential cable revenue: | | | | | | | | | | | | |
| Subscription revenue: | | | | | | | | | | | | | | | | | | | | |
| Video | $ | 1,449.2 |
| | $ | 1,454.5 |
| | $ | (5.3 | ) | | (0.4 | ) | | 3.8 |
| $ | 1,141.9 |
| | $ | 1,430.1 |
| | $ | (288.2 | ) | | (20.2 | ) | | $ | (26.6 | ) | | (2.4 | ) |
| Broadband internet | 1,171.4 |
| | 1,182.6 |
| | (11.2 | ) | | (0.9 | ) | | 5.3 |
| 1,037.4 |
| | 1,119.5 |
| | (82.1 | ) | | (7.3 | ) | | 61.0 |
| | 6.4 |
|
| Fixed-line telephony | 686.6 |
| | 752.3 |
| | (65.7 | ) | | (8.7 | ) | | (1.7 | ) | 559.2 |
| | 666.4 |
| | (107.2 | ) | | (16.1 | ) | | (12.7 | ) | | (2.3 | ) |
| Cable subscription revenue | 3,307.2 |
| | 3,389.4 |
| | (82.2 | ) | | (2.4 | ) | | 3.1 |
| |
| Mobile (a) | 326.6 |
| | 260.9 |
| | 65.7 |
| | 25.2 |
| | (2.2 | ) | |
| Total subscription revenue | 3,633.8 |
| | 3,650.3 |
| | (16.5 | ) | | (0.5 | ) | | 2.6 |
| 2,738.5 |
| | 3,216.0 |
| | (477.5 | ) | | (14.8 | ) | | 21.7 |
| | 0.8 |
|
| B2B revenue (b) | 377.9 |
| | 390.9 |
| | (13.0 | ) | | (3.3 | ) | | 2.1 |
| |
| Non-subscription revenue | | 127.8 |
| | 126.7 |
| | 1.1 |
| | 0.9 |
| | 6.6 |
| | 5.7 |
|
| Total residential cable revenue | | 2,866.3 |
| | 3,342.7 |
| | (476.4 | ) | | (14.3 | ) | | 28.3 |
| | 1.0 |
|
| Residential mobile revenue: | | | | | | | | | | | | |
| Subscription revenue | | 274.4 |
| | 294.5 |
| | (20.1 | ) | | (6.8 | ) | | (11.2 | ) | | (4.0 | ) |
| Non-subscription revenue (a) | | 167.3 |
| | 147.1 |
| | 20.2 |
| | 13.7 |
| | 17.1 |
| | 11.7 |
|
| Total residential mobile revenue | | 441.7 |
| | 441.6 |
| | 0.1 |
| | — |
| | 5.9 |
| | 1.4 |
|
| Total residential revenue | | 3,308.0 |
| | 3,784.3 |
| | (476.3 | ) | | (12.6 | ) | | 34.2 |
| | 1.1 |
|
| B2B revenue: | | | | | | | | | | | | |
| Subscription revenue | | 133.4 |
| | 123.7 |
| | 9.7 |
| | 7.8 |
| | 31.2 |
| | 32.4 |
|
| Non-subscription revenue | | 380.0 |
| | 385.0 |
| | (5.0 | ) | | (1.3 | ) | | 28.0 |
| | 8.2 |
|
| Total B2B revenue | | 513.4 |
| | 508.7 |
| | 4.7 |
| | 0.9 |
| | 59.2 |
| | 13.1 |
|
| Other revenue | 301.4 |
| | 247.4 |
| | 54.0 |
| | 21.8 |
| | 3.5 |
| 57.1 |
| | 20.1 |
| | 37.0 |
| | 184.1 |
| | (1.7 | ) | | (2.8 | ) |
| Total Liberty Global Group | $ | 4,313.1 |
| | $ | 4,288.6 |
| | $ | 24.5 |
| | 0.6 |
| | 2.6 |
| |
| Total | | $ | 3,878.5 |
| | $ | 4,313.1 |
| | $ | (434.6 | ) | | (10.1 | ) | | $ | 91.7 |
| | 2.5 |
|
| | | | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions | | | | | in millions, except percentages |
| Liberty Global Group: | | | | | | | | | | | | | | | | | | | | |
| Residential revenue: | | | | | | | | | | | | |
| Residential cable revenue: | | | | | | | | | | | | |
| Subscription revenue: | | | | | | | | | | | | | | | | | | | | |
| Video | $ | 4,343.2 |
| | $ | 4,403.1 |
| | $ | (59.9 | ) | | (1.4 | ) | | 1.5 |
| $ | 3,292.0 |
| | $ | 4,289.7 |
| | $ | (997.7 | ) | | (23.3 | ) | | $ | (45.5 | ) | | (1.3 | ) |
| Broadband internet | 3,569.8 |
| | 3,494.1 |
| | 75.7 |
| | 2.2 |
| | 6.1 |
| 2,958.1 |
| | 3,429.2 |
| | (471.1 | ) | | (13.7 | ) | | 180.7 |
| | 6.2 |
|
| Fixed-line telephony | 2,132.9 |
| | 2,261.7 |
| | (128.8 | ) | | (5.7 | ) | | (1.4 | ) | 1,621.7 |
| | 2,073.8 |
| | (452.1 | ) | | (21.8 | ) | | (28.3 | ) | | (1.6 | ) |
| Cable subscription revenue | 10,045.9 |
| | 10,158.9 |
| | (113.0 | ) | | (1.1 | ) | | 2.5 |
| |
| Mobile (a) | 943.9 |
| | 756.5 |
| | 187.4 |
| | 24.8 |
| | (2.1 | ) | |
| Total subscription revenue | 10,989.8 |
| | 10,915.4 |
| | 74.4 |
| | 0.7 |
| | 2.1 |
| 7,871.8 |
| | 9,792.7 |
| | (1,920.9 | ) | | (19.6 | ) | | 106.9 |
| | 1.3 |
|
| B2B revenue (b) | 1,161.0 |
| | 1,149.0 |
| | 12.0 |
| | 1.0 |
| | 3.4 |
| |
| Non-subscription revenue | | 368.1 |
| | 387.7 |
| | (19.6 | ) | | (5.1 | ) | | 24.7 |
| | 7.0 |
|
| Total residential cable revenue | | 8,239.9 |
| | 10,180.4 |
| | (1,940.5 | ) | | (19.1 | ) | | 131.6 |
| | 1.6 |
|
| Residential mobile revenue: | | | | | | | | | | | | |
| Subscription revenue | | 772.8 |
| | 862.6 |
| | (89.8 | ) | | (10.4 | ) | | (50.8 | ) | | (5.9 | ) |
| Non-subscription revenue (a) | | 448.1 |
| | 451.0 |
| | (2.9 | ) | | (0.6 | ) | | (0.3 | ) | | (0.1 | ) |
| Total residential mobile revenue | | 1,220.9 |
| | 1,313.6 |
| | (92.7 | ) | | (7.1 | ) | | (51.1 | ) | | (3.9 | ) |
| Total residential revenue | | 9,460.8 |
| | 11,494.0 |
| | (2,033.2 | ) | | (17.7 | ) | | 80.5 |
| | 0.8 |
|
| B2B revenue: | | | | | | | | | | | | |
| Subscription revenue | | 361.2 |
| | 339.1 |
| | 22.1 |
| | 6.5 |
| | 92.1 |
| | 33.8 |
|
| Non-subscription revenue | | 1,080.7 |
| | 1,175.6 |
| | (94.9 | ) | | (8.1 | ) | | 66.2 |
| | 6.2 |
|
| Total B2B revenue | | 1,441.9 |
| | 1,514.7 |
| | (72.8 | ) | | (4.8 | ) | | 158.3 |
| | 11.7 |
|
| Other revenue | 917.6 |
| | 708.4 |
| | 209.2 |
| | 29.5 |
| | 11.4 |
| 158.5 |
| | 59.7 |
| | 98.8 |
| | 165.5 |
| | (0.6 | ) | | (0.4 | ) |
| Total Liberty Global Group | $ | 13,068.4 |
| | $ | 12,772.8 |
| | $ | 295.6 |
| | 2.3 |
| | 2.8 |
| |
| Total | | $ | 11,061.2 |
| | $ | 13,068.4 |
| | $ | (2,007.2 | ) | | (15.4 | ) | | $ | 238.2 |
| | 2.1 |
|
_______________
| |
| (a) | Mobile subscriptionResidential mobile non-subscription revenue excludesincludes mobile interconnect revenue of $70.7$75.3 million and $51.7$70.7 million during the three months ended September 30, 20162017 and 2015,2016, respectively, and $211.4$206.3 million and $157.4$211.4 millionduring the nine months ended September 30, 2017 and 2016, and 2015, respectively. Mobile interconnect revenue and revenue from mobile handset sales are included in other revenue. |
| |
(b) | Revenue from SOHO subscribers, which is included in subscription revenue, aggregated $123.5 million and $72.8 million during the three months ended September 30, 2016 and 2015, respectively, and $334.6 million and $198.1 million during the nine months ended September 30, 2016 and 2015, respectively. On an organic basis, the Liberty Global Group’s total B2B revenue, including revenue from SOHO subscribers, increased 9.9% and 10.5% for the three and nine months ended September 30, 2016, respectively, as compared to the corresponding prior-year periods. |
Our revenue by major category for the LiLAC Group is set forth below:
| | | | Three months ended
September 30, | | Increase | | Organic increase (decrease) | Three months ended September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions | | | | | in millions, except percentages |
| LiLAC Group: | | | | | | | | | | | | | | | | | | |
| Residential revenue: | | | | | | | | | | | | |
| Residential cable revenue: | | | | | | | | | | | | |
| Subscription revenue: | | | | | | | | | | | | | | | | | | |
| Video | $ | 182.9 |
| | $ | 132.8 |
| | $ | 50.1 |
| | 37.7 | | 1.9 |
| $ | 166.2 |
| | $ | 168.7 |
| | $ | (2.5 | ) | | (1.5 | ) | | $ | (4.8 | ) | | (2.8 | ) |
| Broadband internet | 166.6 |
| | 104.9 |
| | 61.7 |
| | 58.8 | | 6.7 |
| 174.4 |
| | 167.8 |
| | 6.6 |
| | 3.9 |
| | 4.3 |
| | 2.6 |
|
| Fixed-line telephony | 71.2 |
| | 40.2 |
| | 31.0 |
| | 77.1 | | (4.0 | ) | 67.1 |
| | 72.0 |
| | (4.9 | ) | | (6.8 | ) | | (5.7 | ) | | (7.9 | ) |
| Cable subscription revenue | 420.7 |
| | 277.9 |
| | 142.8 |
| | 51.4 | | 2.7 |
| |
| Mobile (a) | 187.2 |
| | 9.2 |
| | 178.0 |
| | N.M. | | 0.8 |
| |
| Total subscription revenue | 607.9 |
| | 287.1 |
| | 320.8 |
| | 111.7 | | 2.1 |
| 407.7 |
| | 408.5 |
| | (0.8 | ) | | (0.2 | ) | | (6.2 | ) | | (1.5 | ) |
| B2B revenue (b) | 220.0 |
| | 2.6 |
| | 217.4 |
| | N.M. | | 0.7 |
| |
| Non-subscription revenue | | 27.8 |
| | 33.7 |
| | (5.9 | ) | | (17.5 | ) | | (6.2 | ) | | (18.4 | ) |
| Total residential cable revenue | | 435.5 |
| | 442.2 |
| | (6.7 | ) | | (1.5 | ) | | (12.4 | ) | | (2.8 | ) |
| Residential mobile revenue: | | | | | | | | | | | | |
| Subscription revenue | | 177.2 |
| | 182.5 |
| | (5.3 | ) | | (2.9 | ) | | (5.3 | ) | | (2.9 | ) |
| Non-subscription revenue (a) | | 23.7 |
| | 22.4 |
| | 1.3 |
| | 5.8 |
| | 1.4 |
| | 6.3 |
|
| Total residential mobile revenue | | 200.9 |
| | 204.9 |
| | (4.0 | ) | | (2.0 | ) | | (3.9 | ) | | (1.9 | ) |
| Total residential revenue | | 636.4 |
| | 647.1 |
| | (10.7 | ) | | (1.7 | ) | | (16.3 | ) | | (2.5 | ) |
| B2B revenue: | | | | | | | | | | | | |
| Subscription revenue | | 10.9 |
| | 7.8 |
| | 3.1 |
| | 39.7 |
| | 3.1 |
| | 39.7 |
|
| Non-subscription revenue | | 259.1 |
| | 236.9 |
| | 22.2 |
| | 9.4 |
| | 16.1 |
| | 6.6 |
|
| Total B2B revenue | | 270.0 |
| | 244.7 |
| | 25.3 |
| | 10.3 |
| | 19.2 |
| | 7.5 |
|
| Other revenue | 66.2 |
| | 19.1 |
| | 47.1 |
| | 246.6 | | (2.7 | ) | 1.7 |
| | 2.3 |
| | (0.6 | ) | | (26.1 | ) | | (0.6 | ) | | (26.1 | ) |
| Total LiLAC Group | $ | 894.1 |
| | $ | 308.8 |
| | $ | 585.3 |
| | 189.5 | | 1.4 |
| |
| Total | | $ | 908.1 |
| | $ | 894.1 |
| | $ | 14.0 |
| | 1.6 |
| | $ | 2.3 |
| | 0.3 |
|
| | | | Nine months ended
September 30, | | Increase | | Organic increase (decrease) | Nine months ended
September 30, | | Increase (decrease) | | Organic increase (decrease) |
| | 2016 | | 2015 | | $ | | % | | % | 2017 | | 2016 | | $ | | % | | $ | | % |
| | in millions | | | | | in millions, except percentages |
| LiLAC Group: | | | | | | | | | | | | | | | | | | |
| Residential revenue: | | | | | | | | | | | | |
| Residential cable revenue: | | | | | | | | | | | | |
| Subscription revenue: | | | | | | | | | | | | | | | | | | |
| Video | $ | 470.6 |
| | $ | 395.0 |
| | $ | 75.6 |
| | 19.1 | | 2.6 |
| $ | 511.2 |
| | $ | 433.8 |
| | $ | 77.4 |
| | 17.8 |
| | $ | 5.3 |
| | 1.1 |
|
| Broadband internet | 410.9 |
| | 299.0 |
| | 111.9 |
| | 37.4 | | 8.1 |
| 524.6 |
| | 414.8 |
| | 109.8 |
| | 26.5 |
| | 23.6 |
| | 4.8 |
|
| Fixed-line telephony | 158.4 |
| | 125.8 |
| | 32.6 |
| | 25.9 | | (6.6 | ) | 209.5 |
| | 165.3 |
| | 44.2 |
| | 26.7 |
| | (6.6 | ) | | (3.1 | ) |
| Cable subscription revenue | 1,039.9 |
| | 819.8 |
| | 220.1 |
| | 26.8 | | 3.2 |
| |
| Mobile (a) | 282.2 |
| | 26.5 |
| | 255.7 |
| | N.M. | | 1.7 |
| |
| Total subscription revenue | 1,322.1 |
| | 846.3 |
| | 475.8 |
| | 56.2 | | 2.8 |
| 1,245.3 |
| | 1,013.9 |
| | 231.4 |
| | 22.8 |
| | 22.3 |
| | 1.9 |
|
| B2B revenue (b) | 343.6 |
| | 5.7 |
| | 337.9 |
| | N.M. | | 1.5 |
| |
| Non-subscription revenue | | 91.7 |
| | 74.6 |
| | 17.1 |
| | 22.9 |
| | (14.7 | ) | | (13.8 | ) |
| Total residential cable revenue | | 1,337.0 |
| | 1,088.5 |
| | 248.5 |
| | 22.8 |
| | 7.6 |
| | 0.6 |
|
| Residential mobile revenue: | | | | | | | | | | | | |
| Subscription revenue | | 523.8 |
| | 285.7 |
| | 238.1 |
| | 83.3 |
| | (4.6 | ) | | (0.9 | ) |
| Non-subscription revenue (a) | | 70.4 |
| | 36.5 |
| | 33.9 |
| | 92.9 |
| | 2.9 |
| | 4.3 |
|
| Total residential mobile revenue | | 594.2 |
| | 322.2 |
| | 272.0 |
| | 84.4 |
| | (1.7 | ) | | (0.3 | ) |
| Total residential revenue | | 1,931.2 |
| | 1,410.7 |
| | 520.5 |
| | 36.9 |
| | 5.9 |
| | 0.3 |
|
| B2B revenue: | | | | | | | | | | | | |
| Subscription revenue | | 30.6 |
| | 22.3 |
| | 8.3 |
| | 37.2 |
| | 8.8 |
| | 39.5 |
|
| Non-subscription revenue | | 773.9 |
| | 361.0 |
| | 412.9 |
| | 114.4 |
| | 26.6 |
| | 3.5 |
|
| Total B2B revenue | | 804.5 |
| | 383.3 |
| | 421.2 |
| | 109.9 |
| | 35.4 |
| | 4.6 |
|
| Other revenue | 135.2 |
| | 56.0 |
| | 79.2 |
| | 141.4 | | (1.1 | ) | 4.2 |
| | 6.9 |
| | (2.7 | ) | | (39.1 | ) | | (4.8 | ) | | (53.0 | ) |
| Total LiLAC Group | $ | 1,800.9 |
| | $ | 908.0 |
| | $ | 892.9 |
| | 98.3 | | 2.3 |
| |
| Total | | $ | 2,739.9 |
| | $ | 1,800.9 |
| | $ | 939.0 |
| | 52.1 |
| | $ | 36.5 |
| | 1.4 |
|
_______________
| |
| (a) | Mobile subscriptionResidential mobile non-subscription revenue excludesincludes mobile interconnect revenue of $7.7$13.5 million and $0.9$7.7 million during the three months ended September 30, 20162017 and 2015,2016, respectively, and $21.2$39.7 million and $2.7 million during the nine months |
ended September 30, 2016 and 2015, respectively. Mobile interconnect revenue and revenue from mobile handset sales are included in other revenue.
| |
(b) | Revenue from SOHO subscribers, which is included in subscription revenue, aggregated $9.2 million and $5.9 million during the three months ended September 30, 2016 and 2015, respectively, and $22.1 million and $15.4$21.2 million during the nine months ended September 30, 2017 and 2016, and 2015, respectively. On an organic basis, the LiLAC Group’s total B2B revenue, including revenue from SOHO subscribers, increased 0.9% and 1.6% for the three and nine months ended September 30, 2016, respectively, as compared to the corresponding prior-year periods. |
N.M. — Not Meaningful.Programming and other direct costs of services
Operating expenses
Our operating expenses increased $220.1programming and other direct costs of services decreased $72.3 million and $510.5$242.1 millionduring the three and nine months ended September 30, 2016,2017, respectively, as compared to the corresponding periods in 2015. 2016.These increases decreasesinclude(i)increases of $323.0$12.6 million and $605.4$257.0 million, respectively, attributable to the impact of the CWCC&W Acquisition, the BASE Acquisition, the Choice Acquisition and other less significant acquisitions, and (ii)decreases of$1.2 $131.3 million and $17.3$390.0 million, respectively, attributable to the U.K. Non-Cable Disposalimpact of the VodafoneZiggo JV Transaction and (iii) decreases of $5.7 million and $14.0 million, respectively, attributable to the impact of dispositions. On an organic basis,our programming and other less significant dispositions.Our operating expenses include share-based compensation expense, which remained relatively unchanged direct costs of servicesincreased $32.9 million or 3.1% and $22.5 million or 0.7%during the three and nine months ended September 30, 2016. For additional information, see the discussion under Share-based compensation expense below. Excluding the effects of acquisitions, dispositions, FX and share-based compensation expense, our operating expenses increased $9.0 million or 0.4% and $150.0 million or 2.7% during the three and nine months ended September 30, 2016,2017, respectively, as compared to the corresponding periods in 2015. 2016.These increasesare primarily attributable to the net effect of (a) increases in programming and copyright costs, (b) decreases in mobile access and interconnect costs, (c) decreases in personnel costs, (d) increases in network-related expenses and (e) decreases in bad debt and collection expenses.Certain of these changes include (1) decreases in integration-related costs in the Netherlands that aggregate to $0.1 million and $15.0 million, respectively, and (2) an increase in integration-related costs of $3.4 million duringfor the three-month comparison and a decrease for the nine-month comparison that were incurred by CWC in connection withinterconnect and access costs and (c) an increase for the integration of Columbus with CWC’s operations.three-month comparison and a decrease for the nine-month comparison in mobile handset and other device costs. For additional information regarding the changes in our operating expenses,programming and other direct costs of services, see Discussion and Analysis of our Reportable Segments — Operating ExpensesProgramming and Other Direct Costs of Services of our Reportable Segments above.
SG&AOther operating expenses
Our SG&Aother operating expensesincreased $104.8 decreased $29.8 millionand $269.8$72.6 millionduring the three and nine months ended September 30, 2016,2017, respectively, as compared to the corresponding periods in 2015. 2016.These increases decreasesinclude(i) increases of $172.1$4.6 million
and $184.1 million, respectively, attributable to the C&W Acquisition, the BASE Acquisition and other less significant acquisitions and (ii) decreases of $84.0 million and $320.6$252.4 million, respectively,attributable to the impact of the CWC Acquisition, the BASE Acquisition, the Choice Acquisition andVodafoneZiggo JV Transaction. Our other less significant acquisitions. Our SG&Aoperating expenses include share-based compensation, which is discussed separately under Share-based compensation expense below. Excludingshare-based compensation expense, which decreased $62.3on an organic basisour other operating expensesincreased $32.8 million or 4.6% and $46.7$49.4 million or 2.3%during the three and nine months ended September 30, 2016, respectively.2017, respectively, as compared to the corresponding periods in 2016. These increases are primarily attributable to the net effect of (a) decreases in personnel costs, (b) increases in network-related expenses, (c) increases in outsourced labor and professional fees and (d) increases in information technology-related expenses. For additional information regarding the changes in our other operating expenses, see the discussion under Share-based compensation expense below. Excluding the effectsDiscussion and Analysis of acquisitions, FX and share-based compensation expense, our Reportable Segments — Other Operating Expenses of our Reportable Segments above.
SG&A expenses increased $30.5
Our SG&A expensesdecreased $136.5 million or 3.5% and $68.5$258.4 million or 2.8% during the three and nine months ended September 30, 2016,2017, respectively, as compared to the corresponding periods in 2015.2016. Thesedecreases include (i) increases of $7.2 million and $211.6 million, respectively, attributable to the impact of the C&W Acquisition, the BASE Acquisition and other less significant acquisitions and (ii) decreases of $89.5 million and $274.7 million, respectively, attributable to the impact of the VodafoneZiggo JV Transaction.Our SG&A expenses include share-based compensation expense, which is discussed separately under Share-based compensation expense below.Excluding share-based compensation expense, on an organic basis our SG&A expenses decreased $33.1 million or 4.4% and $52.8 million or 2.2%during the three and nine months ended September 30, 2017, respectively, as compared to the corresponding periods in 2016. Thesedecreasesare primarily attributable to (i) increases in personnel costs, (ii) for the nine-month comparison, increasesnet effect of (a)decreases in outsourced labor and professional fees, (b) a decrease for the three-month comparison and (iii) increasesan increase for the nine-month comparison in facilities expenses.external sales and marketing costs and (c) decreases in personnel costs. Certain of these changes include (a)(1) aggregate decreases inintegration-related costs in the Netherlands that aggregate to $1.3 million and $9.1 million, respectively, (b) increases (decreases) in integration-related costs in Belgium that aggregate to ($2.3 million)of $2.4 million and $4.3$9.0 million, respectively, and (c) increases(2) aggregate decreases in integration-related costs associated with CWC that aggregaterelated to $3.6 million and $5.9 million, respectively, including $1.8 million and $3.2 million, respectively, incurred by CWC in connection with the integration of Columbus with CWC’s operationsC&W of $3.7 million and CWC’s operations with Liberty Global and the LiLAC Division. $6.5 million, respectively, most of which were incurred by C&W.For additional information regarding the changes in our SG&A expenses, see Discussion and Analysis of our Reportable Segments — SG&A Expenses of our Reportable Segments above.
Share-based compensation expense (included in other operating and SG&A expenses)
Our share-based compensation expense primarily relates to the share-based incentive awards issued by Liberty Global to its employees and employees of its subsidiaries. A summary of theour aggregate share-based compensation expense that is included in our operating and SG&A expenses is set forth below:
| | | | Three months ended
September 30, | | Nine months ended September 30, | Three months ended September 30, | | Nine months ended September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions | in millions |
| Liberty Global: | | | | | | | | | | | | | | |
| Performance-based incentive awards (a) | $ | 28.5 |
| | $ | 55.4 |
| | $ | 105.7 |
| | $ | 126.0 |
| $ | (5.7 | ) | | $ | 28.5 |
| | $ | 19.6 |
| | $ | 105.7 |
|
| Other share-based incentive awards | 28.6 |
| | 66.1 |
| | 86.8 |
| | 116.6 |
| 28.5 |
| | 28.6 |
| | 88.1 |
| | 86.8 |
|
Total Liberty Global (b) | 57.1 |
| | 121.5 |
| | 192.5 |
| | 242.6 |
| 22.8 |
| | 57.1 |
| | 107.7 |
| | 192.5 |
|
| Telenet share-based incentive awards | 3.6 |
| | 2.1 |
| | 8.2 |
| | 7.7 |
| 3.4 |
| | 3.6 |
| | 10.9 |
| | 8.2 |
|
| Other | 2.1 |
| | 1.4 |
| | 5.7 |
| | 2.7 |
| 0.3 |
| | 2.1 |
| | 3.3 |
| | 5.7 |
|
| Total | $ | 62.8 |
| | $ | 125.0 |
| | $ | 206.4 |
| | $ | 253.0 |
| $ | 26.5 |
| | $ | 62.8 |
| | $ | 121.9 |
| | $ | 206.4 |
|
| Included in: | | | | | | | | | | | | | | |
| Operating expense: | | | | | | | | |
| Other operating expense: | | | | | | | | |
| Liberty Global Group | $ | 0.8 |
| | $ | 0.9 |
| | $ | 2.4 |
| | $ | 2.7 |
| $ | 1.1 |
| | $ | 0.8 |
| | $ | 2.8 |
| | $ | 2.4 |
|
| LiLAC Group | 0.4 |
| | 0.2 |
| | 0.9 |
| | 0.5 |
| (0.1 | ) | | 0.4 |
| | 0.5 |
| | 0.9 |
|
| Total operating expense | 1.2 |
| | 1.1 |
| | 3.3 |
| | 3.2 |
| |
| Total other operating expense | | 1.0 |
| | 1.2 |
| | 3.3 |
| | 3.3 |
|
| SG&A expense: | | | | | | | | | | | | | | |
| Liberty Global Group | 56.3 |
| | 122.4 |
| | 193.3 |
| | 248.1 |
| 22.1 |
| | 56.3 |
| | 107.2 |
| | 193.3 |
|
| LiLAC Group | 5.3 |
| | 1.5 |
| | 9.8 |
| | 1.7 |
| 3.4 |
| | 5.3 |
| | 11.4 |
| | 9.8 |
|
| Total SG&A expense | 61.6 |
| | 123.9 |
| | 203.1 |
| | 249.8 |
| 25.5 |
| | 61.6 |
| | 118.6 |
| | 203.1 |
|
| Total | $ | 62.8 |
| | $ | 125.0 |
| | $ | 206.4 |
| | $ | 253.0 |
| $ | 26.5 |
| | $ | 62.8 |
| | $ | 121.9 |
| | $ | 206.4 |
|
_______________
| |
| (a) | Includes share-based compensation expense related to (i) PSUs, including the 2016 PSUs, (ii) for the nine-month period,2016 periods, the Challenge Performance Awards and (iii) through March 2017, PGUs. held by our Chief Executive Officer. The Challenge Performance Awards include PSARs and PSUs. The decreases are due to a significant number of performance awards becoming fully vested during 2016 and changes during the first and third quarters of 2017 in the expected achievement level for one of our performance-based incentive plans. |
| |
(b) | In connection with the LiLAC Transaction, the compensation committee of our board of directors approved the 2015 Award Modifications in accordance with the underlying share-based incentive plans. As a result of the 2015 Award Modifications, the Black-Scholes fair values of our options, SARs and PSARs increased, resulting in incremental share-based compensation expense of $99.3 million, of which $63.5 million was recognized during the third quarter of 2015 related to awards that vested on or prior to September 30, 2015. |
For additional information regarding our share-based compensation expense, see note 1011 to our condensed consolidated financial statements.
Depreciation and amortization expense
The details of our depreciation and amortization expense are as follows:
| | | | Three months ended
September 30, | | Increase (decrease) | Three months ended September 30, | | Increase (decrease) |
| | 2016 | | 2015 | | $ | | % | 2017 | | 2016 | | $ | | % |
| | in millions | | | in millions | | |
| | | | | | | | | | | | | | | |
| Liberty Global Group | $ | 1,216.2 |
| | $ | 1,404.1 |
| | $ | (187.9 | ) | | (13.4 | ) | $ | 1,216.5 |
| | $ | 1,216.2 |
| | $ | 0.3 |
| | — |
|
| LiLAC Group | 200.7 |
| | 54.3 |
| | 146.4 |
| | 269.6 |
| 199.7 |
| | 200.7 |
| | (1.0 | ) | | (0.5 | ) |
| Total | $ | 1,416.9 |
| | $ | 1,458.4 |
| | $ | (41.5 | ) | | (2.8 | ) | $ | 1,416.2 |
| | $ | 1,416.9 |
| | $ | (0.7 | ) | | — |
|
| | | | Nine months ended
September 30, | | Increase (decrease) | Nine months ended
September 30, | | Increase (decrease) |
| | 2016 | | 2015 | | $ | | % | 2017 | | 2016 | | $ | | % |
| | in millions | | | in millions | | |
| | | | | | | | | | | | | | | |
| Liberty Global Group | $ | 4,026.3 |
| | $ | 4,226.8 |
| | $ | (200.5 | ) | | (4.7 | ) | $ | 3,523.3 |
| | $ | 4,026.3 |
| | $ | (503.0 | ) | | (12.5 | ) |
| LiLAC Group | 379.1 |
| | 160.8 |
| | 218.3 |
| | 135.8 |
| 586.5 |
| | 379.1 |
| | 207.4 |
| | 54.7 |
|
| Total | $ | 4,405.4 |
| | $ | 4,387.6 |
| | $ | 17.8 |
| | 0.4 |
| $ | 4,109.8 |
| | $ | 4,405.4 |
| | $ | (295.6 | ) | | (6.7 | ) |
Excluding the effects of FX, depreciation and amortization expense increased $50.4decreased $32.5 million or 3.5%2.3% and $193.7$148.9 million or 4.4%3.4% during the three and nine months ended September 30, 2016,2017, respectively, as compared to the corresponding periods in 2015.2016. Theseincreasesdecreases are primarily due to the net effect of(i)increases associated with property and equipment additions related to the installation of customer premises equipment, the expansion and upgrade of our networks and other capital initiatives, (ii) decreases associated with the VodafoneZiggo JV Transaction, (iii) decreases associated with certain assets becoming fully depreciated, primarily in U.K./Ireland, the NetherlandsEuropean Division’s central operations, Belgium and, to a lesser extent, Germany, Switzerland/Austria and Chile, Belgium and Germany, (iii)(iv) increases associated with acquisitions, primarily as a result of the CWCC&W Acquisition and BASE Acquisition, and (iv) decreases in the Netherlands as a result of the held-for-sale presentation of the Dutch JV Entities effective August 3, 2016. For information regarding the held-for-sale presentation of the Dutch JV Entities, see note 3 to our condensed consolidated financial statements.Acquisition.
Impairment, restructuring and other operating items, net
The details of our impairment, restructuring and other operating items, net, are as follows:
| | | | Three months ended
September 30, | | Nine months ended
September 30, | Three months ended September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions | in millions |
| | | | | | | | | | | | | | | |
| Liberty Global Group | $ | 25.0 |
| | $ | 60.2 |
| | $ | 113.4 |
| | $ | 92.0 |
| $ | 61.7 |
| | $ | 25.0 |
| | $ | 97.7 |
| | $ | 113.4 |
|
| LiLAC Group | 7.2 |
| | 2.8 |
| | 133.5 |
| | 13.7 |
| 354.9 |
| | 7.2 |
| | 378.7 |
| | 133.5 |
|
| Total | $ | 32.2 |
| | $ | 63.0 |
| | $ | 246.9 |
| | $ | 105.7 |
| $ | 416.6 |
| | $ | 32.2 |
| | $ | 476.4 |
| | $ | 246.9 |
|
The totaltotals for the 2017 periods primarily include (i) impairment charges of $342.6 million recorded during the third quarter related to the reduction of the carrying values of our goodwill, property and equipment and other indefinite-lived intangible assets associated with Liberty Puerto Rico and certain reporting units within C&W due to the impacts of Hurricanes Irma and Maria, (ii) restructuring chargesof $29.9 million and $82.0 million, respectively, including $23.6 million and $69.3 million, respectively, of employee severance and termination costs related to certain reorganization activities, primarily at C&W and in Germany, U.K./Ireland and the European Division’s central operations and (iii) a $40 million legal settlement recorded during the third quarter of 2017. For information regarding the impairment charges related to Hurricanes Irma and Maria, see note 7 to our condensed consolidated financial statements. For additional information regarding the impacts of Hurricanes Irma and Maria, see Overview above.
The totals for the 2016 amountsperiods include (i) direct acquisition costs of $8.9 million and $142.3 million, respectively, largely related to the CWCC&W Acquisition and, to a lesser extent, the BASE Acquisition and the DutchVodafoneZiggo JV Transaction, and (ii) restructuring charges of $27.4 million and $111.7 million, respectively, including $26.8 million and $105.5 million, respectively, of employee severance and termination costs related to certain reorganization activities, primarily in Germany, U.K./Ireland, the European Operations Division’s central operations, Chile and, for the nine-month period, the Netherlands.
The total for the 2015 three-month period includes (i) a $23.1 million loss on the divestiture of our Film1 channels in connection with the acquisition of Ziggo, (ii) restructuring charges of $18.8 million, including $15.6 million of employee severance and termination costs related to certain reorganization activities, primarily in the Netherlands and U.K./Ireland, and
(iii) direct acquisition costs of $16.9 million, a portion of which was incurred in connection with our acquisition of additional shares of ITV and the BASE Acquisition.
The total for the 2015 nine-month period includes (i) restructuring charges of $50.1 million, including $42.3 million of employee severance and termination costs related to certain reorganization activities, primarily in U.K./Ireland, the Netherlands, Switzerland/Austria and Puerto Rico, (ii) direct acquisition costs of $31.6 million, largely related to the BASE Acquisition, the Choice Acquisition, the acquisition of Ziggo and our acquisition of additional shares of ITV, (iii) impairment charges of $20.7 million, primarily in U.K./Ireland, the Netherlands and Switzerland/Austria, and (iv) a loss from the disposition of assets of $3.3 million, including a $23.1 million loss on the divestiture of our Film1 channels and a $12.0 million gain in U.K./Ireland.
For information regarding the CWC Acquisition, the BASEC&W Acquisition and the Dutch JV,BASE Acquisition, see note 3 to our condensed consolidated financial statements.
We expect to continue to record significant restructuring charges over For information regarding the next 12 months, due largelyVodafoneZiggo JV Transaction, see note 4 to our ongoing company-wide effort to optimize our operating model. In addition, we expect to undertake further restructuring programs in certain of our operating segments, including programs in connection with the integration of acquired entities.condensed consolidated financial statements.
For additional information regarding our restructuring charges, see note 1112 to our condensed consolidated financial statements.
If,Based on the results of our most recent goodwill impairment tests, declines in the fair value of Liberty Puerto Rico and certain reporting units within C&W resulted in goodwill impairment charges during the third quarter of 2017. Additionally, if among other factors, (i) ourthe equity values of the LiLAC Group were to decline significantly or (ii) the adverse impacts of economic, competitive, regulatory or other factors were to cause ourLiberty Puerto Rico’s or C&W’s results of operations or cash flows to be worse than anticipated, we could conclude in future periods that additional impairment charges are required in order to reduce the carrying values of ourthe goodwill, cable television franchise rights and, to a lesser extent, other long-lived assets.assets of these entities. Additionally, as discussed in note 7 to our condensed consolidated financial statements, further impairment charges could be recorded with respect to Liberty Puerto Rico or certain reporting units within C&W as more information becomes available regarding the impacts of Hurricanes Irma and Maria. Any such impairment charges could be significant.
Interest expense
The details of our interest expense are as follows:
| | | | Three months ended September 30, | | Increase (decrease) | Three months ended September 30, | | Increase (decrease) |
| | 2016 | | 2015 | | $ | | % | 2017 | | 2016 | | $ | | % |
| | in millions | | | in millions | | |
| | | | | | | | | | | | | | | |
| Liberty Global Group | $ | 569.3 |
| | $ | 579.0 |
| | $ | (9.7 | ) | | (1.7 | ) | $ | 482.8 |
| | $ | 569.3 |
| | $ | (86.5 | ) | | (15.2 | ) |
| LiLAC Group | 95.3 |
| | 38.9 |
| | 56.4 |
| | 145.0 |
| 99.3 |
| | 95.3 |
| | 4.0 |
| | 4.2 |
|
| Inter-group eliminations | (0.2 | ) | | (0.2 | ) | | — |
| | N.M. |
| — |
| | (0.2 | ) | | 0.2 |
| | N.M. |
|
| Total | $ | 664.4 |
| | $ | 617.7 |
| | $ | 46.7 |
| | 7.6 |
| $ | 582.1 |
| | $ | 664.4 |
| | $ | (82.3 | ) | | (12.4 | ) |
| | | | Nine months ended
September 30, | | Increase (decrease) | Nine months ended
September 30, | | Increase (decrease) |
| | 2016 | | 2015 | | $ | | % | 2017 | | 2016 | | $ | | % |
| | in millions | | | in millions | | |
| | | | | | | | | | | | | | | |
| Liberty Global Group | $ | 1,715.3 |
| | $ | 1,717.2 |
| | $ | (1.9 | ) | | (0.1 | ) | $ | 1,401.2 |
| | $ | 1,715.3 |
| | $ | (314.1 | ) | | (18.3 | ) |
| LiLAC Group | 225.8 |
| | 117.7 |
| | 108.1 |
| | 91.8 |
| 289.8 |
| | 225.8 |
| | 64.0 |
| | 28.3 |
|
| Inter-group eliminations | (0.3 | ) | | (0.5 | ) | | 0.2 |
| | N.M. |
| — |
| | (0.3 | ) | | 0.3 |
| | N.M. |
|
| Total | $ | 1,940.8 |
| | $ | 1,834.4 |
| | $ | 106.4 |
| | 5.8 |
| $ | 1,691.0 |
| | $ | 1,940.8 |
| | $ | (250.1 | ) | | (12.9 | ) |
_______________
N.M. — Not Meaningful.
Excluding the effects of FX, interest expense increased $23.9decreased $96.8 million or 3.9%14.6% and $59.1$194.7 million or 3.2%, respectively.10.0% during the three and nine months ended September 30, 2017, respectively, as compared to the corresponding periods in 2016. These increasesdecreases are primarily attributable to the net effect of (i) higher average outstanding debt balances, largely due to debt incurred in connection with the CWC Acquisition and the BASE Acquisition, and (ii)lower weighted average interest rates related to the completion of certain financingrefinancing transactions that resulted in extended maturities and decreases to certain of our interest rates.rates and (ii) lower average outstanding debt balances, largely due to decreases related to the VodafoneZiggo JV Transaction that were only partially offset by debt incurred in connection with the C&W Acquisition. For additional information regarding our outstanding indebtedness, see note 78 to our condensed consolidated financial statements.
It is possible that the interest rates on (i) any new borrowings could be higher than the current interest rates on our existing indebtedness and (ii) our variable-rate indebtedness could increase in future periods. As further discussed in note 45 to our condensed consolidated financial statements and under Qualitative and Quantitative Disclosures about Market Risk below, we use derivative instruments to manage our interest rate risks.
Realized and unrealized gains (losses) on derivative instruments, net
Our realized and unrealized gains or losses on derivative instruments include (i) unrealized changes in the fair values of our derivative instruments that are non-cash in nature until such time as the derivative contracts are fully or partially settled and (ii) realized gains or losses upon the full or partial settlement of the derivative contracts. The details of our realized and unrealized gains (losses) on derivative instruments, net, are as follows:
| | | | Three months ended
September 30, | | Nine months ended
September 30, | Three months ended September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions | in millions |
| | | | | | | | | | | | | | | |
| Cross-currency and interest rate derivative contracts: | | | | | | | | | | | | | | |
| Liberty Global Group | $ | (300.1 | ) | | $ | 392.4 |
| | $ | (235.7 | ) | | $ | 507.0 |
| $ | (289.2 | ) | | $ | (300.1 | ) | | $ | (1,099.9 | ) | | $ | (235.7 | ) |
| LiLAC Group | (52.4 | ) | | 139.9 |
| | (233.6 | ) | | 217.5 |
| (70.5 | ) | | (52.4 | ) | | (107.8 | ) | | (233.6 | ) |
| Total cross-currency and interest rate derivative contracts (a) | (352.5 | ) | | 532.3 |
| | (469.3 | ) | | 724.5 |
| (359.7 | ) | | (352.5 | ) | | (1,207.7 | ) | | (469.3 | ) |
| Equity-related derivative instruments – Liberty Global Group: | | | | | | | | | | | | | | |
| ITV Collar | (46.8 | ) | | 103.1 |
| | 466.9 |
| | (55.8 | ) | 44.2 |
| | (46.8 | ) | | 154.4 |
| | 466.9 |
|
| Sumitomo Collar | (38.8 | ) | | 92.0 |
| | 96.2 |
| | 20.1 |
| (29.5 | ) | | (38.8 | ) | | (50.8 | ) | | 96.2 |
|
| Lionsgate Forward | (0.1 | ) | | — |
| | 21.9 |
| | — |
| (7.3 | ) | | (0.1 | ) | | (9.3 | ) | | 21.9 |
|
| Other | 0.7 |
| | (1.3 | ) | | 1.6 |
| | (0.2 | ) | 1.2 |
| | 0.7 |
| | (4.2 | ) | | 1.6 |
|
| Total equity-related derivative instruments (b) | (85.0 | ) | | 193.8 |
| | 586.6 |
| | (35.9 | ) | 8.6 |
| | (85.0 | ) | | 90.1 |
| | 586.6 |
|
| Foreign currency forward contracts: | | | | | | | | | | | | | | |
| Liberty Global Group | 2.6 |
| | 10.8 |
| | 0.7 |
| | (16.6 | ) | (6.4 | ) | | 2.6 |
| | (25.0 | ) | | 0.7 |
|
| LiLAC Group | (1.4 | ) | | 5.3 |
| | (10.3 | ) | | 8.3 |
| (8.1 | ) | | (1.4 | ) | | (7.3 | ) | | (10.3 | ) |
| Total foreign currency forward contracts | 1.2 |
| | 16.1 |
| | (9.6 | ) | | (8.3 | ) | (14.5 | ) | | 1.2 |
| | (32.3 | ) | | (9.6 | ) |
| Other – Liberty Global Group | (0.1 | ) | | (0.2 | ) | | (0.8 | ) | | 0.5 |
| (0.3 | ) | | (0.1 | ) | | 0.4 |
| | (0.8 | ) |
| | | | | | | | | | | | | | | |
| Total Liberty Global Group | (382.6 | ) | | 596.8 |
| | 350.8 |
| | 455.0 |
| (287.3 | ) | | (382.6 | ) | | (1,034.4 | ) | | 350.8 |
|
| Total LiLAC Group | (53.8 | ) | | 145.2 |
| | (243.9 | ) | | 225.8 |
| (78.6 | ) | | (53.8 | ) | | (115.1 | ) | | (243.9 | ) |
| Total | $ | (436.4 | ) | | $ | 742.0 |
| | $ | 106.9 |
| | $ | 680.8 |
| $ | (365.9 | ) | | $ | (436.4 | ) | | $ | (1,149.5 | ) | | $ | 106.9 |
|
| |
| (a) | The lossduring the 20162017 three-month period is primarily attributable to the net effect of (i) losses associated with an increaseincreases in the valuevalues of the euro, British pound sterling and Chilean peso relative to the U.S. dollar, (ii) gains associated with a decreasedecreases in the valuevalues of the British pound sterlingSwiss franc and Polish zloty relative to the U.S. dollar,euro, (iii) gains associated with increases in |
market interest rates in the British pound sterling, Czech koruna and Swiss franc markets and (iv) losses associated with increases in market interest rates in the U.S. dollar market. The loss during the 2017 nine-month period is primarily attributable to the net effect of (a) losses associated with increases in the values of the euro, British pound sterling, Chilean peso and Swiss franc relative to the U.S. dollar, (b) gains associated with increases in market interest rates in the euro, British pound sterling, Swiss franc and Czech koruna markets, (c) gains associated with a decrease in the value of the Swiss franc relative to the euro and (d) losses associated with increases in the values of the Czech koruna and Polish zloty relative to the euro. In addition, the losses during the 2017 periods include net gains of $37.3 million and $182.6 million, respectively, resulting from changes in our credit risk valuation adjustments. The lossduring the 2016 three-month period is primarily attributable to the net effect of (1) losses associated with an increase in the value of the euro relative to the U.S. dollar, (2) gains associated with a decrease in the value of the British pound sterling relative to the U.S. dollar, (3) losses associated with increases in market interest rates in the U.S. dollar market and (4) losses associated with decreases in market interest rates in the euro, the British pound sterling and the Chilean peso markets. The loss during the 2016 nine-month period is primarily attributable to the net effect of (I) losses associated with decreases in market interest rates in the British pound sterling, euro and Chilean peso markets, (II) gains associated with a decrease in the value of the British pound sterling relative to the U.S. dollar, (III) losses associated with increases in market interest rates in the U.S. dollar market and (iv) losses associated with decreases in market interest rates in the euro, the British pound sterling and the Chilean peso markets. The loss during the 2016 nine-month period is primarily attributable to the net effect of (a) losses associated with decreases in market interest rates in the British pound sterling, euro and Chilean peso markets, (b) gains associated with a decrease in the value of the British pound sterling relative to the U.S. dollar, (c) losses associated with
increases in the values of the euro, the Chilean peso and the Swiss franc relative to the U.S. dollar, and (d)(IV) gains associated with decreases in market interest rates in the U.S. dollar market. In addition, the gain (loss) during the 2016 periods includeincludes net gains of $80.4 million and $87.5 million, respectively, resulting from changes in our credit risk valuation adjustments. The gain during the 2015 three-month period is primarily attributable to the net effect of (1) gains associated with decreases in the values of the British pound sterling and Chilean peso relative to the U.S. dollar, (2) gains associated with decreases in market interest rates in the U.S. dollar market, (3) losses associated with decreases in market interest rates in the euro and British pound sterling markets and (4) gains associated with a decrease in the value of the Swiss franc relative to the euro. The gain during the 2015 nine-month period is primarily attributable to the net effect of (I) gains associated with decreases in the values of the euro, British pound sterling and Chilean peso relative to the U.S. dollar, (II) gains associated with decreases in market interest rates in the U.S. dollar market, (III) losses associated with an increase in the value of the Swiss franc relative to the euro, (IV) gains associated with increases in market interest rates in the Chilean peso market and (V) losses associated with decreases in market interest rates in the Swiss franc market. In addition, the gains during the 2015 periods include a net gain (loss) of ($29.9 million) and $30.4 million, respectively, resulting from changes in our credit risk valuation adjustments.
| |
| (b) | For information concerning the factors that impact the valuationsThe recurring fair value measurements of our equity-related derivative instruments see note 5 to our condensed consolidated financial statements.are based on binomial pricing models. |
For additional information concerning our derivative instruments, see notes 45 and 56 to our condensed consolidated financial statements and Quantitative and Qualitative DisclosureDisclosures about Market Risk below.
Foreign currency transaction gains (losses), net
Our foreign currency transaction gains or losses primarily result from the remeasurement of monetary assets and liabilities that are denominated in currencies other than the underlying functional currency of the applicable entity. Unrealized foreign currency transaction gains or losses are computed based on period-end exchange rates and are non-cash in nature until such time as the amounts are settled. The details of our foreign currency transaction gains (losses), net, are as follows:
| | | | Three months ended
September 30, | | Nine months ended
September 30, | Three months ended September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions | in millions |
| | | | | | | | | | | | | | | |
| Liberty Global Group: | | | | | | | | | | | | | | |
| U.S. dollar denominated debt issued by British pound sterling functional currency entities | $ | (128.0 | ) | | $ | (176.4 | ) | | $ | (698.5 | ) | | $ | (94.8 | ) | |
| U.S. dollar-denominated debt issued by euro functional currency entities | | $ | 236.8 |
| | $ | 92.7 |
| | $ | 747.7 |
| | $ | 184.0 |
|
| Intercompany payables and receivables denominated in a currency other than the entity’s functional currency (a) | 134.6 |
| | 56.0 |
| | 578.3 |
| | (79.4 | ) | (396.9 | ) | | 134.6 |
| | (747.1 | ) | | 578.3 |
|
| British pound sterling denominated debt issued by a U.S. dollar functional currency entity | 31.4 |
| | 54.3 |
| | 185.2 |
| | 48.0 |
| |
| U.S. dollar denominated debt issued by euro functional currency entities | 92.7 |
| | 32.5 |
| | 184.0 |
| | (553.2 | ) | |
| Yen denominated debt issued by a U.S. dollar functional currency entity | (12.7 | ) | | (15.9 | ) | | (131.2 | ) | | (1.4 | ) | |
| Euro denominated debt issued by British pound sterling functional currency entities | (18.8 | ) | | (21.2 | ) | | (82.3 | ) | | 6.5 |
| |
| U.S. dollar-denominated debt issued by British pound sterling functional currency entities | | 122.8 |
| | (128.0 | ) | | 320.1 |
| | (698.5 | ) |
| British pound sterling-denominated debt issued by a U.S. dollar functional currency entity | | (41.2 | ) | | 31.4 |
| | (111.7 | ) | | 185.2 |
|
| Cash and restricted cash denominated in a currency other than the entity’s functional currency | (9.4 | ) | | (8.8 | ) | | (23.8 | ) | | (24.0 | ) | (9.2 | ) | | (9.4 | ) | | (91.1 | ) | | (23.8 | ) |
| Yen-denominated debt issued by a U.S. dollar functional currency entity | | 1.0 |
| | (12.7 | ) | | (18.7 | ) | | (131.2 | ) |
| Euro-denominated debt issued by British pound sterling functional currency entities | | 2.4 |
| | (18.8 | ) | | 15.4 |
| | (82.3 | ) |
| Other | (4.2 | ) | | (11.4 | ) | | (10.2 | ) | | (14.1 | ) | 10.3 |
| | (4.2 | ) | | 24.8 |
| | (10.2 | ) |
| Total Liberty Global Group | 85.6 |
| | (90.9 | ) | | 1.5 |
| | (712.4 | ) | (74.0 | ) | | 85.6 |
| | 139.4 |
| | 1.5 |
|
| LiLAC Group: | | | | | | | | | | | | | | |
| U.S. dollar denominated debt issued by a Chilean peso functional currency entity | 5.4 |
| | (121.7 | ) | | 110.5 |
| | (193.0 | ) | |
| British pound sterling denominated debt issued by a U.S. dollar functional currency entity | 9.2 |
| | — |
| | 21.9 |
| | — |
| |
| U.S. dollar-denominated debt issued by a Chilean peso functional currency entity | | 52.7 |
| | 5.4 |
| | 65.9 |
| | 110.5 |
|
| British pound sterling-denominated debt issued by a U.S. dollar functional currency entity | | (12.6 | ) | | 9.2 |
| | (20.1 | ) | | 21.9 |
|
| Other | (7.9 | ) | | (3.6 | ) | | (0.7 | ) | | (6.0 | ) | 3.4 |
| | (7.9 | ) | | (4.6 | ) | | (0.7 | ) |
| Total LiLAC Group | 6.7 |
| | (125.3 | ) | | 131.7 |
| | (199.0 | ) | 43.5 |
| | 6.7 |
| | 41.2 |
| | 131.7 |
|
| Total | $ | 92.3 |
| | $ | (216.2 | ) | | $ | 133.2 |
| | $ | (911.4 | ) | $ | (30.5 | ) | | $ | 92.3 |
| | $ | 180.6 |
| | $ | 133.2 |
|
_______________
| |
| (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. |
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 note 5notes 4 and 8, respectively, to our condensed consolidated financial statements. All of our investments and debt that we account for using the fair value method are attributed to the Liberty Global Group. The details of our realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net, are as follows:
| | | | Three months ended
September 30, | | Nine months ended
September 30, | Three months ended September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions | in millions |
| | | | | | | | | | | | | | | |
| Investments: | | | | | | | | | | | | | | |
| Sumitomo | | $ | 62.0 |
| | $ | 52.2 |
| | $ | 117.7 |
| | $ | 34.3 |
|
| ITV | $ | 17.5 |
| | $ | (179.5 | ) | | $ | (656.4 | ) | | $ | 25.0 |
| (7.9 | ) | | 17.5 |
| | (82.9 | ) | | (656.4 | ) |
| Lionsgate | (1.2 | ) | | — |
| | (62.0 | ) | | — |
| 26.9 |
| | (1.2 | ) | | 34.5 |
| | (62.0 | ) |
| Sumitomo | 52.2 |
| | (92.9 | ) | | 34.3 |
| | (33.6 | ) | |
| Other, net (a) | 21.2 |
| | (3.7 | ) | | 116.2 |
| | (5.3 | ) | (8.6 | ) | | 21.2 |
| | 12.7 |
| | 116.2 |
|
| Total investments | | 72.4 |
| | 89.7 |
| | 82.0 |
| | (567.9 | ) |
| Debt | (15.9 | ) | | — |
| | (2.9 | ) | | — |
| (33.6 | ) | | (15.9 | ) | | (88.2 | ) | | (2.9 | ) |
| Total | $ | 73.8 |
| | $ | (276.1 | ) | | $ | (570.8 | ) | | $ | (13.9 | ) | $ | 38.8 |
| | $ | 73.8 |
| | $ | (6.2 | ) | | $ | (570.8 | ) |
_______________
| |
| (a) | The amounts for the three and nine months ended September 30, 2016 include gains of $5.6 million and $84.4 million, respectively, related to an investment that was sold during the third quarter of 2016. |
Losses on debt modification and extinguishment, net
The following table sets forth the details of our losses on debt modification and extinguishment, net:
| | | | Three months ended
September 30, | | Nine months ended
September 30, | Three months ended September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions | in millions |
| | | | | | | | | | | | | | | |
| Liberty Global Group | $ | (64.8 | ) | | $ | (34.3 | ) | | $ | (90.2 | ) | | $ | (382.6 | ) | $ | (59.9 | ) | | $ | (64.8 | ) | | $ | (167.0 | ) | | $ | (90.2 | ) |
| LiLAC Group | — |
| | — |
| | 1.5 |
| | — |
| (25.8 | ) | | — |
| | (53.6 | ) | | 1.5 |
|
| Total | $ | (64.8 | ) | | $ | (34.3 | ) | | $ | (88.7 | ) | | $ | (382.6 | ) | $ | (85.7 | ) | | $ | (64.8 | ) | | $ | (220.6 | ) | | $ | (88.7 | ) |
The loss during the nine months ended September 30, 2017 is primarily attributable to losses associated with (i) the payment of $194.1 million of redemption premiums (including $133.1 million during the third quarter) and (ii) the write-off of $24.9 million of net unamortized premiums, discounts and deferred financing costs (including a net gain of $47.0 million during the third quarter).
The loss during the nine months ended September 30, 2016 is primarily attributable to the net effect of (i) the payment of redemption premium of $66.2 million of redemption premiums (including $34.2 million during the third quarter), and (ii) the write-off of $20.3 million of net unamortized premium of $2.6 million (including $16.4 million of unamortized discount during the third quarter), (iii) the write-off ofpremiums, discounts and deferred financing costs of $22.9 million (including $14.2$30.6 million during the third quarter) and (iv) a loss related to the settlement of portions of the Sumitomo Collar and the Sumitomo Collar Loan of $2.2 million..
The loss during the nine months ended September 30, 2015 is attributable to (i) the payment of redemption premium of $308.3 million (including $34.3 million during the third quarter), (ii) the write-off of deferred financing costs of $63.1 million, (iii) the write-off of unamortized discount of $10.4 million and (iv) the payment of third-party costs of $0.8 million.
For additional information concerning our losses on debt modification and extinguishment, net, see notes 4 and 7note 8 to our condensed consolidated financial statements.
Share of losses of affiliates, net
The following table sets forth the details of our share of losses of affiliates, net:
|
| | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended
September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions |
| | | | | | | | |
| VodafoneZiggo JV (a) | $ | (23.4 | ) | | $ | — |
| | $ | (18.2 | ) | | $ | — |
|
| Other | (2.8 | ) | | (16.1 | ) | | (25.1 | ) | | (71.2 | ) |
| Total | $ | (26.2 | ) | | $ | (16.1 | ) | | $ | (43.3 | ) | | $ | (71.2 | ) |
_______________
| |
| (a) | Amounts include the net effect of(i) $16.9 million and $47.5 million, respectively, representing 100% of the interest income earned on the VodafoneZiggo JV Receivable, (ii) 100% of the share-based compensation expense associated with Liberty Global awards held by VodafoneZiggo JV employees who were formerly employees of Liberty Global, as these awards remain our responsibility, and (iii) our 50% share of the remaining results of operations of the VodafoneZiggo JV.During the three and nine months ended September 30, 2017, the VodafoneZiggo JV generated (a) revenue of $1,173.6 million and $3,353.9 million, respectively, (b) Adjusted OIBDA of $524.6 million and $1,454.9 million, respectively, (c) operating income of $99.0 million and $206.5 million, respectively, (d) net non-operating expenses of $214.7 million and $391.4 million (including $165.5 million and $476.9 million of interest expense), respectively, and (e) net losses of $79.6 million and $128.3 million, respectively. The VodafoneZiggo JV’s operating income includes depreciation and amortization of $427.2 million and $1,242.6 million, respectively, which is based on the preliminary fair value accounting applied to the net assets of the VodafoneZiggo JV. |
The mobile and fixed-line operations of the VodafoneZiggo JV are experiencing significant competition. In particular, the mobile operations of the VodafoneZiggo JV continue to experience pressure on pricing, characterized by aggressive promotion campaigns, heavy marketing spend and increasing or unlimited data bundles. If the adverse impacts of economic, competitive, regulatory or other factors were to cause significant deterioration of the results of operations or cash flows of the VodafoneZiggo JV, we could conclude in future periods that our investment in the VodafoneZiggo JV is impaired or management of the VodafoneZiggo JV could conclude that an impairment of the VodafoneZiggo JV goodwill and, to a lesser extent, long-lived assets, is required. Any such impairment of the VodafoneZiggo JV’s goodwill or our investment in the VodafoneZiggo JV would be reflected as a component of share of results of affiliates, net, in our condensed consolidated statement of operations. Our share of any such impairment charges could be significant.
Other income, (expense), net
The details of our otherincome, (expense), net, are as follows:
| | | | Three months ended
September 30, | | Nine months ended
September 30, | Three months ended September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions | in millions |
| | | | | | | | | | | | | | | |
| Liberty Global Group | $ | (6.5 | ) | | $ | (5.4 | ) | | $ | 23.5 |
| | $ | (8.0 | ) | $ | 5.0 |
| | $ | 9.5 |
| | $ | 28.9 |
| | $ | 93.9 |
|
| LiLAC Group | 7.9 |
| | 0.5 |
| | 7.8 |
| | 0.7 |
| (0.4 | ) | | 8.0 |
| | (0.1 | ) | | 8.6 |
|
| Inter-group eliminations | (0.2 | ) | | (0.2 | ) | | (0.3 | ) | | (0.5 | ) | — |
| | (0.2 | ) | | — |
| | (0.3 | ) |
| Total | $ | 1.2 |
| | $ | (5.1 | ) | | $ | 31.0 |
| | $ | (7.8 | ) | $ | 4.6 |
| | $ | 17.3 |
| | $ | 28.8 |
| | $ | 102.2 |
|
The total 2016 amountstotals for the 2017 periods primarily include (i) expenseinterest and dividend income of $16.9$9.1 million and $72.1$31.6 million, respectively, representing our share ofrespectively.
The totals for the results of affiliates, and (ii)2016 periods primarily include (i) interest income of $15.8 million and $36.6 million, respectively. In addition,respectively, and (ii) for the 2016 nine-month amount includesperiod, income of $69.8 million representing our share of the settlement of certain litigation between Vivendi and Liberty Media, as further described in note 13 to our condensed consolidated financial statements.litigation.
The total 2015 amounts include (i) expense of $15.6 million and $38.8 million, respectively, representing our share of the results of affiliates, and (ii) interest income of $11.4 million and $33.4 million, respectively.
Income tax benefit (expense)expense
The details of our income tax benefit (expense)expense are as follows:
| | | | Three months ended
September 30, | | Nine months ended
September 30, | Three months ended September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions | in millions |
| | | | | | | | | | | | | | | |
| Liberty Global Group | $ | (36.9 | ) | | $ | 20.8 |
| | $ | (45.5 | ) | | $ | (16.8 | ) | $ | (85.7 | ) | | $ | (36.9 | ) | | $ | (287.0 | ) | | $ | (45.5 | ) |
| LiLAC Group | (72.6 | ) | | (18.3 | ) | | (71.1 | ) | | (32.8 | ) | 17.9 |
| | (72.6 | ) | | (57.3 | ) | | (71.1 | ) |
| Total | $ | (109.5 | ) | | $ | 2.5 |
| | $ | (116.6 | ) | | $ | (49.6 | ) | $ | (67.8 | ) | | $ | (109.5 | ) | | $ | (344.3 | ) | | $ | (116.6 | ) |
The income tax expense during the three months ended September 30, 2017 differs from the expected income tax benefit of $136.9 million (based on the blended U.K. statutory income tax rate of 19.25%) primarily due to the net negative impact of (i) an increase in valuation allowances and (ii) non-deductible or non-taxable foreign currency exchange results.
The income tax expense during the three months ended September 30, 2016 differs from the expected income tax benefit of $19.1 million (based on the U.K. statutory income tax rate of 20.0%) primarily due to the net negative impact of (i) a reduction in net deferred tax assets in the U.K. due to enacted changes in tax law and (ii) certain permanent differences between the financial and tax accounting treatment of interest and other items. The net negative impact of these items was partially offset by the net positive impact of (a) the tax effect of intercompany financing, (b) non-deductible or non-taxable foreign currency exchange results and (c) statutory tax rates in certain jurisdictions in which we operate that are different than the U.K. statutory income tax rate.
The income tax benefitexpense during the threenine months ended September 30, 20152017 differs from the expected income tax expensebenefit of $27.6$260.7 million (based on the blended U.K. statutory income tax rate of 20.0%19.25%) primarily due to the net positivenegative impact of (i) an increase in valuation allowances, (ii) non-deductible or non-taxable foreign currency exchange results (ii) the tax effect of intercompany financing,and (iii) statutory tax rates in certain jurisdictions in which we operate that are different than the U.K. statutory income tax rate and (iv) the recognition of previously unrecognized tax benefits. The net positive impact of these items was partially offset by the net negative impact of (a) certain permanent differences between the financial and tax accounting treatment of items associated with investments in subsidiariesinterest and affiliates and (b) an increase in valuation allowances.other items.
The income tax expense during the nine months ended September 30, 2016 differs from the expected income tax benefit of $70.4 million (based on the U.K. statutory income tax rate of 20.0%) primarily due to the net negative impact of (i) an increase in valuation allowances, (ii) a reduction in net deferred tax assets in the U.K. due to enacted changes in tax law, (iii) certain permanent differences between the financial and tax accounting treatment of interest and other items and (iv) certain permanent differences between the financial and tax accounting treatment of items associated with investments in subsidiaries and affiliates.
The net negative impact of these items was partially offset by the net positive impact of (a) non-deductible or non-taxable foreign currency exchange results, (b) the tax effect of intercompany financing and (c) statutory tax rates in certain jurisdictions in which we operate that are different than the U.K. statutory income tax rate.
The income tax expense during the nine months ended September 30, 2015 differs from the expected income tax benefit of $148.3 million (based on the U.K. statutory income tax rate of 20.0%) primarily due to the net negative impact of (i) an increase in valuation allowances, (ii) certain permanent differences between the financial and tax accounting treatment of items associated with investments in subsidiaries and affiliates and (iii) certain permanent differences between the financial and tax accounting treatment of interest and other items. The net negative impact of these items was partially offset by the net positive impact of (a) the tax effect of intercompany financing, (b) statutory tax rates in certain jurisdictions in which we operate that are different than the U.K. statutory income tax rate and (c) the recognition of previously unrecognized tax benefits.
For additional information concerning our income taxes, see note 89 to our condensed consolidated financial statements.
Net earnings (loss)loss
The details of our net earnings (loss)loss are as follows:
| | | | Three months ended
September 30, | | Nine months ended
September 30, | Three months ended September 30, | | Nine months ended
September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | in millions | in millions |
| | | | | | | | | | | | | | | |
| Liberty Global Group | $ | (136.8 | ) | | $ | 110.5 |
| | $ | (246.8 | ) | | $ | (852.8 | ) | $ | (435.4 | ) | | $ | (136.8 | ) | | $ | (1,321.9 | ) | | $ | (246.8 | ) |
| LiLAC Group | (68.3 | ) | | 30.1 |
| | (221.9 | ) | | 61.8 |
| (343.6 | ) | | (68.3 | ) | | (376.7 | ) | | (221.9 | ) |
| Total | $ | (205.1 | ) | | $ | 140.6 |
| | $ | (468.7 | ) | | $ | (791.0 | ) | $ | (779.0 | ) | | $ | (205.1 | ) | | $ | (1,698.6 | ) | | $ | (468.7 | ) |
DuringOur net loss for the three months ended September 30, 2017 and 2016, and 2015, we reported net earnings (loss)consists of ($205.1 million) and $140.6 million, respectively, including (i) operating income of $902.7$335.8 million and $545.5$902.7 million, respectively, (ii) net non-operating expense of $998.3$1,047.0 million and $407.4 million, respectively, and (iii) income taxbenefit (expense) of ($109.5 million) and $2.5 million, respectively.
During the nine months ended September 30, 2016 and 2015, we reported net lossesof $468.7 million and $791.0 million, respectively, including (i) operating income of $1,977.1 million and $1,727.9 million, respectively, (ii) net non-operating expense of $2,329.2 million and $2,469.3$998.3 million, respectively, and (iii) income tax expense of $67.8 million and $109.5 million, respectively.
Our net loss for the nine months ended September 30, 2017 and 2016, consists of (i) operating income of $1,546.9 million and $1,977.1 million, respectively, (ii) net non-operating expense of $2,901.2 million and $2,329.2 million, respectively, and (iii) income tax expense of $344.3 million and $116.6 million, and $49.6 million, respectively.
Gains or losses associated with (i) changes in the fair values of derivative instruments, (ii) movements in foreign currency exchange rates and (iii) the disposition of assets and changes in ownership are subject to a high degree of volatility and, as such, any gains from these sources do not represent a reliable source of income. In the absence of significant gains in the future from these sources or from other non-operating items, our ability to achieve earnings is largely dependent on our ability to increase our aggregate Adjusted OIBDA to a level that more than offsets the aggregate amount of our (a) share-based compensation expense, (b) depreciation and amortization, (c) impairment, restructuring and other operating items, (d) interest expense, (e) other non-operating expenses and (f) income tax expenses.
Due largely to the fact that we seek to maintain our debt at levels that provide for attractive equity returns, as discussed 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 condensed consolidated statements of operations, see the discussion under Discussion and Analysis of our Reportable Segments and Discussion and Analysis of our Consolidated Operating Results above.
Net earnings (loss)attributable to noncontrolling interests
The details of our net earnings (loss) attributable to noncontrolling interests are as follows:
| | | | Three months ended
September 30, | | | Three months ended September 30, | | |
| | 2016 | | 2015 | | Change | 2017 | | 2016 | | Change |
| | in millions | in millions |
| | | | | | | | | | | |
| Liberty Global Group | $ | (30.9 | ) | | $ | (7.6 | ) | | $ | (23.3 | ) | $ | 25.0 |
| | $ | 30.9 |
| | $ | (5.9 | ) |
| LiLAC Group | (13.5 | ) | | 0.3 |
| | (13.8 | ) | (12.4 | ) | | 13.5 |
| | (25.9 | ) |
| Total | $ | (44.4 | ) | | $ | (7.3 | ) | | $ | (37.1 | ) | $ | 12.6 |
| | $ | 44.4 |
| | $ | (31.8 | ) |
| | | | Nine months ended
September 30, | | | Nine months ended
September 30, | | |
| | 2016 | | 2015 | | Change | 2017 | | 2016 | | Change |
| | in millions | in millions |
| | | | | | | | | | | |
| Liberty Global Group | $ | (27.6 | ) | | $ | (73.2 | ) | | $ | 45.6 |
| $ | 68.0 |
| | $ | 27.6 |
| | $ | 40.4 |
|
| LiLAC Group | (20.9 | ) | | (4.7 | ) | | (16.2 | ) | 19.5 |
| | 20.9 |
| | (1.4 | ) |
| Total | $ | (48.5 | ) | | $ | (77.9 | ) | | $ | 29.4 |
| $ | 87.5 |
| | $ | 48.5 |
| | $ | 39.0 |
|
The changesincrease in netearnings (loss) attributable to noncontrolling interests during the three and nine months ended September 30, 2016,2017, as compared to the corresponding periods in 2015,2016, are primarily attributable to the results of operations of (i) Telenet and (ii) CWCcertain subsidiaries of C&W following the CWCC&W Acquisition.
Material Changes in Financial Condition
Sources and Uses of Cash
We are a holding company that is dependent on the capital resources of our subsidiaries to satisfy our liquidity requirements at the corporate level. Although our consolidated operating subsidiaries generate cash from operating activities, eachEach of our significant operating subsidiaries is includedseparately financed within one of our nineseven primary subsidiary “borrowing groups.” These borrowing groups include the respective restricted parent and subsidiary entities within Virgin Media, Ziggo Group Holding, Unitymedia, UPC Holding, Telenet, CWC, Columbus,C&W, VTR Finance and Liberty Puerto Rico. As set forth in the table below, ourOur borrowing groups, which typically generate cash from operating activities, accounted for a significant portion of our consolidated cash and cash equivalents at September 30, 20162017. 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, foreign currency exchange restrictions with respect to certain C&W subsidiaries and other factors.
Cash and cash equivalents
The details of the U.S. dollar equivalent balances of our consolidated cash and cash equivalents at September 30, 20162017 are set forth in the following table (in millions):
| | | Cash and cash equivalents held by: | | |
| Liberty Global and unrestricted subsidiaries: | | |
| Liberty Global (a) | $ | 26.7 |
| $ | 82.7 |
|
| Unrestricted subsidiaries: | | |
| Liberty Global Group (b) (c) | 398.8 |
| 1,373.8 |
|
| LiLAC Group (d) | 74.5 |
| 40.6 |
|
| Total Liberty Global and unrestricted subsidiaries | 500.0 |
| 1,497.1 |
|
| Borrowing groups (e): | | |
| CWC (f) | 230.7 |
| |
| C&W (f) | | 285.6 |
|
| VTR Finance | 115.2 |
| 158.8 |
|
| Virgin Media (c) | | 57.1 |
|
| Liberty Puerto Rico | 50.6 |
| 46.0 |
|
| Virgin Media (c) | 26.8 |
| |
| Telenet | | 43.7 |
|
| UPC Holding | 26.5 |
| 20.1 |
|
| Telenet | 25.7 |
| |
| Unitymedia | 1.5 |
| 1.7 |
|
| Ziggo Group Holding | 0.1 |
| |
| Total borrowing groups | 477.1 |
| 613.0 |
|
| Total cash and cash equivalents | $ | 977.1 |
| $ | 2,110.1 |
|
| | | |
| Liberty Global Group | $ | 506.1 |
| $ | 1,579.1 |
|
| LiLAC Group | 471.0 |
| 531.0 |
|
| Total cash and cash equivalents | $ | 977.1 |
| $ | 2,110.1 |
|
_______________
| |
| (a) | Represents the amount held by Liberty Global on a standalone basis, which is attributed to the Liberty Global Group. |
| |
| (b) | Represents the aggregate amount held by subsidiaries attributed to the Liberty Global Group that are outside of our borrowing groups. |
| |
| (c) | The Virgin Media borrowing group includes certain subsidiaries of Virgin Media, but excludes Virgin Media. The $0.3 million of cash and cash equivalents held by Virgin Media is included in the amount shown for the Liberty Global Group’s unrestricted subsidiaries.Inc. |
| |
| (d) | Represents the aggregate amount held by subsidiaries attributed to the LiLAC Group that are outside of our borrowing groups. |
| |
| (e) | Except as otherwise noted, represents the aggregate amounts held by the parent entity and restricted subsidiaries of our borrowing groups. |
| |
| (f) | Amount includes $78.0 millionC&W's subsidiaries hold the majority of C&W's consolidated cash. The ability of certain of these subsidiaries to loan or distribute their cash to C&W is limited by foreign exchange restrictions, the existence of noncontrolling interests, tax considerations and restrictions contained within the debt agreements of certain C&W subsidiaries. As a result, a significant portion of the cash held by Columbus and itsC&W subsidiaries which together constitute a separate borrowing group within CWC.
is not considered to be an immediate source of corporate liquidity for C&W. |
Liquidity of Liberty Global and its unrestricted subsidiaries
The $26.7$82.7 million of cash and cash equivalents held by Liberty Global and, subject to certain tax and legal considerations, the $473.3$1,414.4 million of aggregate cash and cash equivalents held by the unrestricted subsidiaries attributed to the Liberty Global Group and the LiLAC Group, represented available liquidity at the corporate level at September 30, 2016.2017. Our remaining cash and cash equivalents of $477.1$613.0 million at September 30, 20162017 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 September 30, 20162017, see note 78 to our condensed consolidated financial statements.
Our current sources of corporate liquidity include (i) cash and cash equivalents held by Liberty Global and, subject to certain tax and legal considerations, Liberty Global’sGlobal’s unrestricted subsidiaries, and (ii) interest and dividend income received on our and, subject to certain tax and legal considerations, our unrestricted subsidiaries’ cash and cash equivalents and investments. In addition, our parent entity’s short-term liquidity is supplemented by interest payments that it receives on a note receivable from one of our unrestricted subsidiaries (outstanding principal of $9.6 billion at September 30, 2016, all outstanding principal2017, due in 2021)., as well as additional borrowings under notes payable with certain unrestricted subsidiaries, as discussed below.
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. UponIn connection with the formationcompletion of the DutchVodafoneZiggo JV we will receive a significant amountTransaction, our company received cash of cash, and€2.2 billion ($2.4 billion at the debt and capital lease obligations of the Dutch JV Entities will no longer be included in our condensed consolidated balance sheet.transaction dates). For additional information, see notes 3 and 7note 4 to our condensed consolidated financial statements.
At September 30, 2017, our consolidated cash and cash equivalents balance included $1,978.5 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, 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. In addition, theThe U.S. dollar has significantly strengthened against the British pound sterling during the period following Brexit.
At September 30, 2016, our consolidated cash and cash equivalents balance includes $930.6 million that is 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.
Our corporate liquidity requirements include (i) corporate general and administrative expenses, (ii) interest payments on our secured borrowing arrangement with respect to our ITV shares (the ITV Collar Loan), the Sumitomo Collar Loan and the Sumitomo Share Loan and (iii) principal payments on our secured borrowing arrangement with respect to our ITV shares (the the ITV Collar Loan,), the Sumitomo Collar Loan, the Sumitomo Share Loan and our secured borrowing arrangement with respect to 2.5 million of our Lionsgate shares (the Lionsgate Loan) to the extent not settled through the delivery of the underlying shares. In addition, Liberty Global and its unrestricted subsidiaries may require cash in connection with (a) the repayment of third-party and intercompany debt, (b) the satisfaction of contingent liabilities, (c) acquisitions, (d) the repurchase of equity and debt securities, (e) other investment opportunities, (f) any funding requirements of our consolidated subsidiaries or (f)(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 $3,335.8$8,405.5 millionat September 30, 20162017 and no stated maturity). For information regarding the liquidity impacts of the pending creation of the Dutch JV, see note 3 to our condensed consolidated financial statements. For information regarding our commitments and contingencies, see note 1314 to our condensed consolidated financial statements.
During the nine months ended September 30, 2016,2017, we purchased a total of 25,686,822 Class Arepurchased Liberty Global Shares at a weighted average price of $32.36 and 23,700,789 Class C Liberty GlobalLiLAC Shares at a weighted average price of $33.09 for an aggregate purchase price of $1,615.6$2,590.4 million and $53.5 million, respectively, including direct acquisition costs and the effects of derivative instruments.costs. At September 30, 2016,2017, the remaining amount authorized for share repurchases of Liberty Global Shares and LiLAC Shares was $2,393.3 million.$367.7 million and $225.5 million, respectively.
Liquidity of borrowing groups
The cash and cash equivalents of our borrowing groups are detailed in the table above. In addition to cash and cash equivalents, the primary sources of liquidity of our borrowing groups are cash provided by operations and borrowing availability under their respective debt instruments. For the details of the borrowing availability of such entities at September 30, 20162017, see note 78 to our condensed consolidated financial statements. The aforementioned sources of liquidity may be supplemented in certain cases by contributions and/or loans from Liberty Global and its unrestricted subsidiaries. The liquidity of our borrowing groups generally is used to fund property and equipment additions, and debt service requirements.requirements and income tax payments. From time to time, our borrowing groups may also require liquidity in connection with (i) acquisitions and other investment opportunities, (ii) loans to Liberty Global, (iii) capital distributions to Liberty Global and other equity owners or (iv) the satisfaction of contingencies.contingent liabilities. No assurance can be given that any external funding would be available to our borrowing groups on favorable terms, or at all. For information regarding our borrowing groups’ commitments and contingencies, see note 1314 to our condensed consolidated financial statements.
Hurricanes Irma and Maria are expected to have a significant impact on Liberty Puerto Rico's cash flows and liquidity. For additional information, see the discussion under Overview above.
For additional information regarding our consolidated cash flows, see the discussion under Condensed Consolidated Statements of Cash Flows below.
Capitalization
We seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk. In this regard, we generally seek to cause our operating subsidiaries to maintain their debt at levels that result in a consolidated debt balance (excluding the ITV Collar Loan, the Sumitomo Collar Loan, the Sumitomo Share Loan, and the Lionsgate Loan and certain debt collateralized by cash and measured using subsidiary debt figures at swapped foreign currency exchange rates, consistent with the covenant calculation requirements of our subsidiary debt agreements) that is between four and five times our consolidated Adjusted OIBDA, although it should be noted that the timing of our acquisitions and financing transactions and the interplay of average and spot foreign currency rates may impact this ratio. The ratio of our September 30, 20162017 consolidated debt (which excludes the debt of Ziggo Group Holding due to the application of held-for-sale accounting) to our annualized consolidated Adjusted OIBDA for the quarter ended September 30, 2016 (as adjusted to exclude the Adjusted OIBDA of Ziggo Group Holding and Ziggo Sport for the full quarter)2017 was 5.0x.5.1x. In addition, the ratio of our September 30, 20162017 consolidated net debt (debt, as defined above, less cash and cash equivalents) to our annualized consolidated Adjusted OIBDA for the quarter ended September 30, 2016 (as adjusted to exclude the Adjusted OIBDA of Ziggo Group Holding and Ziggo Sport for the full quarter)2017 was4.8x. 4.9x.
When it is cost effective, we generally seek to match the denomination of the borrowings of our subsidiaries with the functional currency of the operations that are supportingsupport the respective borrowings. As further discussed in note 45to our condensed consolidated financial statements, we also use derivative instruments to mitigate foreign currency and interest rate risk associated with our debt instruments.
Our ability to service or refinance our debt and to maintain compliance with the leverage covenants in the credit agreements and indentures of our borrowing groups is dependent primarily on our ability to maintain or increase the Adjusted OIBDA of our operating subsidiaries and to achieve adequate returns on our property and equipment additions and acquisitions. In addition, our ability to obtain additional debt financing is limited by theincurrence-based leverage covenants contained in the various debt instruments of our borrowing groups. For example, if the Adjusted OIBDA of UPC Broadband Holding and its subsidiaries were to decline, weour ability to obtain additional debt could be required to partially repay or limit our borrowings under the UPC Broadband Holding Bank Facility in order to maintain compliance with applicable covenants.limited. No assurance can be given that we would have sufficient sources of liquidity, or that any external funding would be available on favorable terms, or at all, to fund any such required repayment. At September 30, 2016,2017, each of our borrowing groups was in compliance with its debt covenants. In addition, with the exception of Liberty Puerto Rico, 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. For information regarding our assessment of the impacts of the hurricanes on Liberty Puerto Rico's ability to comply with the covenants of the LPR Bank Facility, see note 8 to our condensed consolidated financial statements.
At September 30, 20162017, the outstanding principal amount of our consolidated debt, together with our capital lease obligations, aggregated $44.2$48.3 billion, including $2,154.5$4,268.7 million that is classified as current in our condensed consolidated balance sheet and $39.5$42.6 billion that is not due until 2021 or thereafter. All of our consolidated debt and capital lease obligations have been borrowed or incurred by our subsidiaries at September 30, 2017. For additional information concerning our current debt maturities, see note 78 to our condensed consolidated financial statements.
Notwithstanding our negative working capital position at September 30, 2016,2017, we believe that we have sufficient resources to repay or refinance the current portion of our debt and capital lease obligations and to fund our foreseeable liquidity requirements during the next 12 months. However, as our maturing debt grows in later years, we anticipate that we will seek to refinance or otherwise extend our debt maturities. No assurance can be given that we will be able to complete these refinancing transactions or otherwise extend our debt maturities. In this regard, it is not possible to predict how political and economic conditions, sovereign debt concerns or any adverse regulatory developments could impact the credit and equity markets we access and, accordingly, our future liquidity and financial position. However,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 could adversely impactmarkets. In the case of Liberty Puerto Rico, our ability to access debt financing on favorable terms or at all.will be compromised for the foreseeable future as we work through our recovery from the hurricanes and the related impacts on our liquidity and ability to comply with the terms of the LPR Bank Facility. For additional information, see the related discussion under Overview above and in note 8 to our condensed consolidated financial statements. 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.
All of our consolidated debt and capital lease obligations have been borrowed or incurred by our subsidiaries at September 30, 2016.
For additional information concerning our debt and capital lease obligations, see note 78 to our condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
General. Our cash flows are subject to significant variations due to FX.
Summary. Our condensed consolidated statements of cash flows for the nine months ended September 30, 20162017 and 20152016 are summarized as follows:
| | | | Nine months ended | | | Nine months ended | | |
| | September 30, | | | September 30, | | |
| | 2016 | | 2015 | | Change | 2017 | | 2016 | | Change |
| | in millions | in millions |
| | | | | | | | | | | |
| Net cash provided by operating activities | $ | 4,041.5 |
| | $ | 4,159.3 |
| | $ | (117.8 | ) | $ | 4,033.1 |
| | $ | 4,045.5 |
| | $ | (12.4 | ) |
| Net cash used by investing activities | (3,136.6 | ) | | (2,862.7 | ) | | (273.9 | ) | |
| Net cash provided (used) by investing activities | | 52.8 |
| | (3,136.6 | ) | | 3,189.4 |
|
| Net cash used by financing activities | (949.7 | ) | | (1,351.3 | ) | | 401.6 |
| (3,702.3 | ) | | (953.7 | ) | | (2,748.6 | ) |
| Effect of exchange rate changes on cash | 39.8 |
| | 7.4 |
| | 32.4 |
| 97.3 |
| | 39.8 |
| | 57.5 |
|
| Net decrease in cash and cash equivalents | $ | (5.0 | ) | | $ | (47.3 | ) | | $ | 42.3 |
| |
| Net increase (decrease) in cash and cash equivalents | | $ | 480.9 |
| | $ | (5.0 | ) | | $ | 485.9 |
|
Operating Activities. Our net cash flows from operating activities are as follows:
| | | | Nine months ended | | | Nine months ended | | |
| | September 30, | | | September 30, | | |
| | 2016 | | 2015 | | Change | 2017 | | 2016 | | Change |
| | in millions | in millions |
| | | | | | | | | | | |
| Net cash provided by operating activities: | | | | | | | | | | |
| Liberty Global Group | $ | 3,814.0 |
| | $ | 3,957.7 |
| | $ | (143.7 | ) | $ | 3,640.0 |
| | $ | 3,818.0 |
| | $ | (178.0 | ) |
| LiLAC Group | 227.5 |
| | 201.6 |
| | 25.9 |
| 393.1 |
| | 227.5 |
| | 165.6 |
|
| Total | $ | 4,041.5 |
| | $ | 4,159.3 |
| | $ | (117.8 | ) | $ | 4,033.1 |
| | $ | 4,045.5 |
| | $ | (12.4 | ) |
The decreasein total net cash provided by our operating activities is primarily attributable to the net effect of (i) a decrease in cash provided by our Adjusted OIBDA and related working capital items, including a decrease due to the impact of the VodafoneZiggo JV Transaction and an increase due to the impact of the C&W Acquisition,(ii) an increase in cash provided due to lower payments of interest, including higher payments due to the impact of the C&W Acquisition and lower payments due to the impact of the VodafoneZiggo JV Transaction, (iii) an increase in cash provided due to higher payments of interest, (ii)cash dividends received from the VodafoneZiggo JV and (iv) an increase in cash provided due to higher cash receipts related to derivative instruments, (iii) an increase in the cash provided by our Adjusted OIBDA and related working capital items due to the impact of the acquisition of CWC and (iv) a decrease in cash provided due to higher payments for taxes.instruments.
Investing Activities. Our net cash flows from investing activities are as follows:
| | | | Nine months ended | | | Nine months ended | | |
| | September 30, | | | September 30, | | |
| | 2016 | | 2015 | | Change | 2017 | | 2016 | | Change |
| | in millions | in millions |
| | | | | | | | | | | |
| Net cash used by investing activities: | | | | | | |
| Net cash provided (used) by investing activities: | | | | | | |
| Liberty Global Group | $ | (2,833.3 | ) | | $ | (2,531.0 | ) | | $ | (302.3 | ) | $ | 507.0 |
| | $ | (2,833.3 | ) | | $ | 3,340.3 |
|
| LiLAC Group | (308.0 | ) | | (440.1 | ) | | 132.1 |
| (453.8 | ) | | (308.0 | ) | | (145.8 | ) |
| Inter-group eliminations | 4.7 |
| | 108.4 |
| | (103.7 | ) | (0.4 | ) | | 4.7 |
| | (5.1 | ) |
| Total | $ | (3,136.6 | ) | | $ | (2,862.7 | ) | | $ | (273.9 | ) | $ | 52.8 |
| | $ | (3,136.6 | ) | | $ | 3,189.4 |
|
Theincrease change in total net cash usedprovided (used) by our investing activities is primarily attributable to the net effect of (i) an increase in cash used of $1,046.2(i) $1,569.4 million related to distributions received from affiliates, (ii) $880.7 million associated with higherlower cash paid in connection with acquisitions(ii) a decrease in cash used of $681.1 and (iii) $845.3 million associated with lower cash paid related to investments in and loans to affiliates and others, (iii) a decrease in cash used of $137.8 million as a result of cash proceeds received from the sale of investments, (iv) an increase in cash used of $93.5 million due to higher capital expenditures and (v) a decrease in cash used of $69.8 million as a result of cash proceedsequalization payment received in connection with the Vivendi settlement, as further described in note 13 to our condensed consolidated financial statements.completion of the VodafoneZiggo JV Transaction. Capital expenditures increaseddecreased from $1,851.5 million during the first nine months of 2015 to $1,945.0 million during the first nine months of 2016 to $1,824.9 million during the first nine months of 2017due to thenet effect of (a) an increase due to the impact of the C&W Acquisition, (b) a decrease resulting from FX, (b) an increase resulting from acquisitions anddue to the impact of the VodafoneZiggo JV Transaction, (c) a net increasedecrease in the local currency capital expenditures of our subsidiaries, including a decrease associated with higher capital-related vendor financing.financing and an increase associated with related working capital movements and (d) a decrease resulting from FX.
The capital expenditures that we report in our condensed consolidated statements of cash flows do not include amounts that are financed under capital-related vendor financing or capital 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 condensed consolidated statements of cash flows, which exclude amounts financed under capital-related vendor financing or capital 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 capital lease arrangements. For further details regarding our property and equipment additions, see note 1415 to our condensed consolidated financial statements. A reconciliation of our consolidated property and equipment additions to our consolidated capital expenditures, as reported in our condensed consolidated statements of cash flows, is set forth below:
| | | | Nine months ended September 30, | Nine months ended September 30, |
| | 2016 | | 2015 | 2017 | | 2016 |
| | Liberty Global Group | | LiLAC Group | | Total | | Liberty Global Group | | LiLAC Group | | Total | Liberty Global Group | | LiLAC Group | | Total | | Liberty Global Group | | LiLAC Group | | Total |
| | in millions | in millions |
| | | | | | | | | | | | | | | | | | | | | | | |
| Property and equipment additions | $ | 3,109.6 |
| | $ | 365.0 |
| | $ | 3,474.6 |
| | $ | 2,820.8 |
| | $ | 184.8 |
| | $ | 3,005.6 |
| $ | 3,376.4 |
| | $ | 503.5 |
| | $ | 3,879.9 |
| | $ | 3,109.6 |
| | $ | 365.0 |
| | $ | 3,474.6 |
|
| Assets acquired under capital-related vendor financing arrangements | (1,405.6 | ) | | (33.7 | ) | | (1,439.3 | ) | | (1,090.6 | ) | | — |
| | (1,090.6 | ) | (1,934.1 | ) | | (47.2 | ) | | (1,981.3 | ) | | (1,405.6 | ) | | (33.7 | ) | | (1,439.3 | ) |
| Assets acquired under capital leases | (73.0 | ) | | (5.0 | ) | | (78.0 | ) | | (89.3 | ) | | — |
| | (89.3 | ) | (135.8 | ) | | (3.7 | ) | | (139.5 | ) | | (73.0 | ) | | (5.0 | ) | | (78.0 | ) |
| Changes in current liabilities related to capital expenditures | (28.5 | ) | | 16.2 |
| | (12.3 | ) | | 40.8 |
| | (15.0 | ) | | 25.8 |
| 70.9 |
| | (5.1 | ) | | 65.8 |
| | (28.5 | ) | | 16.2 |
| | (12.3 | ) |
| Capital expenditures | $ | 1,602.5 |
| | $ | 342.5 |
| | $ | 1,945.0 |
| | $ | 1,681.7 |
| | $ | 169.8 |
| | $ | 1,851.5 |
| $ | 1,377.4 |
| | $ | 447.5 |
| | $ | 1,824.9 |
| | $ | 1,602.5 |
| | $ | 342.5 |
| | $ | 1,945.0 |
|
The property and equipment additions attributable to the Liberty Global Group are primarily related to the European Operations Division, which accounted for $3,105.5$3,372.3 millionand $2,769.1$3,105.5 million of Liberty Global Group’s property and equipment additions during the nine months ended September 30, 20162017 and 2015,2016, respectively. Theincreasein the European Operations Division’s property and equipment additions is primarily due to thenet effect of (i) a decrease due to the impact of the VodafoneZiggo JV Transaction, (ii) an increase in expenditures for new build and upgrade projects,(ii) a decrease due to FX, (iii) an increase in expenditures for support capital, such as information technology upgrades and general support systems, (iv) an increase due to the impact of the BASE Acquisition and (v) an increase in expenditures for the purchase and installation of customer premises equipment.
Property and equipment additions attributable to the LiLAC Group increasedduring the nine months ended September 30, 2016, as compared to the corresponding period in 2015, primarily due to the net effect of (i) an increase due to the impacts of the CWC Acquisition and the Choice Acquisition, (ii) an increase in expenditures for the purchase and installation of customer premises equipment, (iii)(iv) an increase in expenditures forto support new buildcustomer products and upgrade projects, (iv)operational efficiency initiatives and (v) a decrease due to FXFX.
Property and (v)equipment additions attributable to the LiLAC Group increased during the nine months ended September 30, 2017, as compared to the corresponding period in 2016, primarily due to an increase in expenditures for support capital, such as information technology upgrades and general support systems.Duringdue to the first nine monthsimpact of 2016, approximately 43% of VTR’s purchases of property and equipment were denominated in U.S. dollars.the C&W Acquisition.
Including BASE and CWC, but excluding Ziggo Group Holding, weWe expect the percentage of revenue represented by our aggregate 20162017 consolidated property and equipment additions to range from 25% to 27%, including (i) 26% to 28% for the Liberty Global Group and (ii) 19% to 21% for the LiLAC Group. These ranges reflect changesThis range reflects a change from the expectationsexpectation disclosed in our 2015 Annual Report on Form 10-K, which included Ziggo Group Holding and excluded BASE and CWC.10-K. In this regard, the range for the Liberty Global Group represents an increase from our previously-reported expectation of 25% to 27% and the range for the LiLAC Group represents a decrease from our previously-reported expectation of 21% to 23%. The range for the Liberty Global on a consolidated basisGroup of 29% to 31% remains unchanged from our previously-reported expectations.expectation. The actual amount of our 20162017 consolidated property and equipment additions and the 20162017 property and equipment additions of the Liberty Global Group and the LiLAC Group may vary from expected amounts for a variety of reasons, including (a)(i) changes in (1)(a) the competitive or regulatory environment, (2)(b) business plans, (3)including with respect to the timing of our recovery from Hurricanes Irma and Maria in Puerto Rico and certain markets withinC&W, (c) our current or expected future operating results or (4)(d) foreign currency exchange rates and (b)(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. Our net cash flows from financing activities are as follows:
| | | | Nine months ended | | | Nine months ended | | |
| | September 30, | | | September 30, | | |
| | 2016 | | 2015 | | Change | 2017 | | 2016 | | Change |
| | in millions | in millions |
| | | | | | | | | | | |
| Net cash used by financing activities: | | | | | | | | | | |
| Liberty Global Group | $ | (1,214.8 | ) | | $ | (1,620.7 | ) | | $ | 405.9 |
| $ | (3,739.5 | ) | | $ | (1,218.8 | ) | | $ | (2,520.7 | ) |
| LiLAC Group | 269.8 |
| | 377.8 |
| | (108.0 | ) | 36.8 |
| | 269.8 |
| | (233.0 | ) |
| Inter-group eliminations | (4.7 | ) | | (108.4 | ) | | 103.7 |
| 0.4 |
| | (4.7 | ) | | 5.1 |
|
| Total | $ | (949.7 | ) | | $ | (1,351.3 | ) | | $ | 401.6 |
| $ | (3,702.3 | ) | | $ | (953.7 | ) | | $ | (2,748.6 | ) |
Thedecrease increase in total net cashused by our financing activities is primarily attributable to the net effectincreases of (i) a decrease in cash used of $259.3 million due to lower payments related to derivative instruments,(ii) an increase in cash used of $247.6 million related to lower net borrowings of debt,(iii) a decrease in cash used of $246.1 million due to lower payments for financing costs and debt premiums, (iv) a decrease in cash used of $142.2 million related lower to purchases of additional shares of our subsidiaries,(v) a decrease in cash used of $130.3 million associated with call option contracts on Liberty Global ordinary shares and(vi) an increase in cash used of $99.6$1,153.7 million due to higher repurchases of Liberty Global ordinary shares.shares, (ii) $803.0 million related to an increase in cash collateral, primarily due to a UPC Holding refinancing transaction, as further described in note 8 to our condensed consolidated financial statements, (iii) $397.8 million related to lower net borrowings of debt, (iv) $162.6 million related to VAT paid on behalf of the VodafoneZiggo JV and (v) $148.7 million due to higher payments of financing costs and debt premiums.
Adjusted free cash flowFree Cash Flow
We define adjusted free cash flow as net cash provided by our operating activities, plus (i) excess tax benefits related to the exercise of share-based incentive awards, (ii) cash payments for third-party costs directly associated with successful and unsuccessful acquisitions and dispositions and (iii)(ii) expenses financed by an intermediary, less (a) capital expenditures, as reported in our condensed consolidated statements of cash flows, (b) principal payments on amounts financed by vendors and intermediaries and (c) principal payments on capital leases (exclusive of the portions of the network lease in Belgium and the duct leases in Germany that we assumed in connection with certain acquisitions), with each item excluding any cash provided or used by our discontinued operations.. We believe that our presentation of adjusted free cash flow provides useful information to our investors because this measure can be used to gauge our ability to service debt and fund new investment opportunities. Adjusted free cash flow should not be understood to represent our ability to fund discretionary amounts, as we have various mandatory and contractual obligations, including debt repayments, which are not deducted to arrive at this amount. Investors should view adjusted free cash flow as a supplement to, and not a substitute for, U.S. GAAP measures of liquidity included in our condensed consolidated statements of cash flows. We changed our definition of adjusted free cash flow effective January 1, 2017 to remove the add-back of excess tax benefits from share-based compensation. This change, which was given effect for all periods presented, was made to accommodate our January 1, 2017 adoption of ASU 2016-09, pursuant to which we retrospectively revised the presentation of our condensed consolidated statements of cash flows to remove the operating cash outflows and financing cash inflows associated with excess tax benefits from share-based compensation. For additional information, see note 2 to our condensed consolidated financial statements.
The following table provides the details of our adjusted free cash flow:
| | | | Nine months ended September 30, | Nine months ended September 30, |
| | 2016 | | 2015 | 2017 | | 2016 |
| | Liberty Global Group | | LiLAC Group | | Total | | Liberty Global Group | | LiLAC Group | | Total | Liberty Global Group | | LiLAC Group | | Total | | Liberty Global Group | | LiLAC Group | | Total |
| | in millions | in millions |
| | | | | | | | | | | | | | | | | | | | | | | |
| Net cash provided by operating activities | $ | 3,814.0 |
| | $ | 227.5 |
| | $ | 4,041.5 |
| | $ | 3,957.7 |
| | $ | 201.6 |
| | $ | 4,159.3 |
| $ | 3,640.0 |
| | $ | 393.1 |
| | $ | 4,033.1 |
| | $ | 3,818.0 |
| | $ | 227.5 |
| | $ | 4,045.5 |
|
| Excess tax benefits from share-based compensation (a) | 4.0 |
| | — |
| | 4.0 |
| | 23.3 |
| | 3.7 |
| | 27.0 |
| |
| Cash payments for direct acquisition and disposition costs | 26.8 |
| | 62.7 |
| | 89.5 |
| | 244.9 |
| | 4.6 |
| | 249.5 |
| 6.9 |
| | 2.8 |
| | 9.7 |
| | 26.8 |
| | 62.7 |
| | 89.5 |
|
| Expenses financed by an intermediary (b) | 605.9 |
| | 1.1 |
| | 607.0 |
| | 132.8 |
| | — |
| | 132.8 |
| |
| Expenses financed by an intermediary (a) | | 1,067.1 |
| | 56.9 |
| | 1,124.0 |
| | 605.9 |
| | 1.1 |
| | 607.0 |
|
| Capital expenditures | (1,602.5 | ) | | (342.5 | ) | | (1,945.0 | ) | | (1,681.7 | ) | | (169.8 | ) | | (1,851.5 | ) | (1,377.4 | ) | | (447.5 | ) | | (1,824.9 | ) | | (1,602.5 | ) | | (342.5 | ) | | (1,945.0 | ) |
| Principal payments on amounts financed by vendors and intermediaries | (1,796.2 | ) | | — |
| | (1,796.2 | ) | | (909.7 | ) | | — |
| | (909.7 | ) | (2,562.8 | ) | | (52.1 | ) | | (2,614.9 | ) | | (1,796.2 | ) | | — |
| | (1,796.2 | ) |
| Principal payments on certain capital leases | (82.2 | ) | | (3.5 | ) | | (85.7 | ) | | (114.2 | ) | | (0.6 | ) | | (114.8 | ) | (66.7 | ) | | (6.7 | ) | | (73.4 | ) | | (82.2 | ) | | (3.5 | ) | | (85.7 | ) |
| Adjusted free cash flow | $ | 969.8 |
| | $ | (54.7 | ) | | $ | 915.1 |
| | $ | 1,653.1 |
| | $ | 39.5 |
| | $ | 1,692.6 |
| $ | 707.1 |
| | $ | (53.5 | ) | | $ | 653.6 |
| | $ | 969.8 |
| | $ | (54.7 | ) | | $ | 915.1 |
|
_______________
| |
| (a) | Excess tax benefits from share-based compensation represent the excess of tax deductions over the related financial reporting share-based compensation expense. The hypothetical cash flows associated with these excess tax benefits are reported as an increase to cash flows from financing activities and a corresponding decrease to cash flows from operating activities in our condensed consolidated statements of cash flows. |
| |
(b) | For purposes of our condensed 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 condensed 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. |
Off Balance Sheet Arrangements
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. For information concerning certain guarantee and letter of credit arrangements of C&W, see note 14 to our condensed consolidated financial statements.
Contractual Commitments
The following table sets forth the U.S. dollar equivalents of our commitments as of September 30, 2016. With the exception of debt, capital leases and the related projected interest payments (which include CWC amounts), the commitments of CWC have been excluded from the table pending our verification of the amounts. These excluded commitments are not expected to be material in relation to our total commitments. Due to the held-for-sale presentation of the Dutch JV Entities at September 30, 2016, the amounts presented below do not include the maturities of the debt and capital lease obligations, contractual commitments or the related projected cash interest payments of these entities. For information regarding the held-for-sale presentation of the Dutch JV Entities, see note 3 to our condensed consolidated financial statements.2017:
| | | | Payments due during: | | Total | Payments due during: | | Total |
| | Remainder
of 2016 | | | | | | Remainder
of 2017 | | | | | |
| 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | |
| | in millions | in millions |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Debt (excluding interest) | $ | 420.1 |
| | $ | 1,974.7 |
| | $ | 1,220.3 |
| | $ | 564.5 |
| | $ | 71.9 |
| | $ | 5,525.5 |
| | $ | 33,121.1 |
| | $ | 42,898.1 |
| $ | 1,493.0 |
| | $ | 3,004.7 |
| | $ | 428.7 |
| | $ | 352.3 |
| | $ | 2,903.2 |
| | $ | 2,356.1 |
| | $ | 36,311.7 |
| | $ | 46,849.7 |
|
| Capital leases (excluding interest) | 42.4 |
| | 131.5 |
| | 111.4 |
| | 87.4 |
| | 81.6 |
| | 82.7 |
| | 784.2 |
| | 1,321.2 |
| 46.0 |
| | 137.1 |
| | 116.5 |
| | 108.7 |
| | 106.8 |
| | 110.3 |
| | 791.1 |
| | 1,416.5 |
|
| Network and connectivity commitments | | 478.2 |
| | 516.5 |
| | 378.5 |
| | 285.2 |
| | 266.1 |
| | 74.7 |
| | 924.7 |
| | 2,923.9 |
|
| Programming commitments | 255.0 |
| | 964.7 |
| | 836.3 |
| | 424.0 |
| | 174.1 |
| | 48.6 |
| | 21.7 |
| | 2,724.4 |
| 332.6 |
| | 1,134.3 |
| | 647.7 |
| | 282.1 |
| | 96.9 |
| | 48.7 |
| | 63.5 |
| | 2,605.8 |
|
| Network and connectivity commitments | 504.1 |
| | 571.7 |
| | 198.4 |
| | 104.6 |
| | 62.5 |
| | 53.6 |
| | 889.2 |
| | 2,384.1 |
| |
| Purchase commitments | 647.3 |
| | 347.9 |
| | 185.3 |
| | 108.0 |
| | 88.9 |
| | 14.4 |
| | 64.8 |
| | 1,456.6 |
| 721.9 |
| | 367.9 |
| | 283.4 |
| | 198.0 |
| | 85.5 |
| | 25.8 |
| | 64.3 |
| | 1,746.8 |
|
| Operating leases | 35.3 |
| | 119.6 |
| | 101.8 |
| | 82.3 |
| | 63.7 |
| | 52.2 |
| | 242.5 |
| | 697.4 |
| 41.4 |
| | 130.1 |
| | 108.4 |
| | 87.2 |
| | 70.0 |
| | 57.9 |
| | 216.3 |
| | 711.3 |
|
| Other commitments | 43.0 |
| | 49.7 |
| | 31.3 |
| | 28.5 |
| | 12.2 |
| | 11.6 |
| | 15.4 |
| | 191.7 |
| 15.3 |
| | 30.6 |
| | 14.7 |
| | 9.3 |
| | 8.3 |
| | 8.3 |
| | 7.8 |
| | 94.3 |
|
| Total (a) | $ | 1,947.2 |
| | $ | 4,159.8 |
| | $ | 2,684.8 |
| | $ | 1,399.3 |
| | $ | 554.9 |
| | $ | 5,788.6 |
| | $ | 35,138.9 |
| | $ | 51,673.5 |
| $ | 3,128.4 |
| | $ | 5,321.2 |
| | $ | 1,977.9 |
| | $ | 1,322.8 |
| | $ | 3,536.8 |
| | $ | 2,681.8 |
| | $ | 38,379.4 |
| | $ | 56,348.3 |
|
| Projected cash interest payments on debt and capital lease obligations (b): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liberty Global Group | $ | 294.6 |
| | $ | 1,827.4 |
| | $ | 1,733.5 |
| | $ | 1,722.3 |
| | $ | 1,717.1 |
| | $ | 1,602.8 |
| | $ | 4,592.4 |
| | $ | 13,490.1 |
| $ | 333.2 |
| | $ | 1,875.6 |
| | $ | 1,791.9 |
| | $ | 1,782.8 |
| | $ | 1,743.4 |
| | $ | 1,653.3 |
| | $ | 4,736.6 |
| | $ | 13,916.8 |
|
| LiLAC Group | 37.9 |
| | 372.6 |
| | 370.6 |
| | 368.5 |
| | 350.1 |
| | 297.3 |
| | 370.9 |
| | 2,167.9 |
| 76.6 |
| | 369.8 |
| | 367.8 |
| | 346.7 |
| | 343.0 |
| | 312.2 |
| | 591.1 |
| | 2,407.2 |
|
| Total | $ | 332.5 |
| | $ | 2,200.0 |
| | $ | 2,104.1 |
| | $ | 2,090.8 |
| | $ | 2,067.2 |
| | $ | 1,900.1 |
| | $ | 4,963.3 |
| | $ | 15,658.0 |
| $ | 409.8 |
| | $ | 2,245.4 |
| | $ | 2,159.7 |
| | $ | 2,129.5 |
| | $ | 2,086.4 |
| | $ | 1,965.5 |
| | $ | 5,327.7 |
| | $ | 16,324.0 |
|
_______________
| |
| (a) | The commitments included in this table do not reflect any liabilities that are included in our September 30, 20162017 condensed consolidated balance sheet other than debt and capital lease obligations. Our liability for uncertain tax positions in the various jurisdictions in which we operate ($464.7436.5 millionat September 30, 2016, including $81.7 millionrelated to CWC and its subsidiaries)2017) has been excluded from the table as the amount and timing of any related payments are not subject to reasonable estimation. |
| |
| (b) | Amounts are based on interest rates, interest payment dates, commitment fees and contractual maturities in effect as of September 30, 2017. These amounts are presented for illustrative purposes only and will likely differ from the actual cash payments required in future periods. In addition, the amounts presented do not include the impact of our interest rate derivative contracts, deferred financing costs, original issue premiums or discounts. |
September 30, 2016. These amounts are presented for illustrative purposes only and will likely differ from the actual cash payments required in future periods. In addition, the amounts presented do not include the impact of our interest rate derivative contracts, deferred financing costs, original issue premiums or discounts.
For information concerning our debt and capital lease obligations, see note 78 to our condensed consolidated financial statements. For information concerning our commitments, see note 1314 to our condensed consolidated financial statements.
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 projected cash flows associated with our derivative instruments, see Quantitative and Qualitative Disclosures about Market Risk — Projected Cash Flows Associated with Derivative Instruments below. For information regarding our derivative instruments, including the net cash paid or received in connection with these instruments during the nine months ended September 30, 20162017 and 20152016, see note 45 to our condensed consolidated financial statements.
| |
| Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
General
The information in this section should be read in conjunction with the more complete discussion that appears under Quantitative and Qualitative Disclosures About Market Risk in our 2015 Annual Report on Form 10-K. The following discussion updates selected numerical information to September 30, 20162017.
We are exposed to market risk in the normal course of our business operations due to our investments in various foreign countries and ongoing investing and financing activities. Market risk refers to the risk of loss arising from adverse changes in foreign currency exchange rates, interest rates and stock prices. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. As further described below, we have established policies, procedures and processes governing our management of market risks and the use of derivative instruments to manage our exposure to such risks.
Cash
We invest our cash in highly liquid instruments that meet high credit quality standards. We are exposed to exchange rate risk to the extent that the denominations of our cash and cash equivalent balances, revolving lines of credit and other short-term sources of liquidity do not correspond to the denominations of our and our subsidiaries’ short-term liquidity requirements. In order to mitigate this risk, we actively manage the denominations of our cash balances in light of our and our subsidiaries’ forecasted liquidity requirements. At September 30, 2016, $697.02017, $1,114.3 million or 71.3%, $103.952.8% and $687.7 million or 10.6% and $98.0 million or 10.0%32.6% of our consolidated cash balances were denominated in U.S. dollars Chilean pesos and euros,British pound sterling, respectively.
Foreign Currency Exchange Rates
The relationshiprelationships between (i) the euro,primary currencies of the British pound sterling, the Swiss franc, the Hungarian forint, the Polish zloty, the Czech koruna, the Romanian lei, the Chilean pesocountries in which we operate and the Jamaican dollar and (ii) the U.S. dollar, which is our reporting currency, isare shown below, per one U.S. dollar:
| | | | September 30, 2016 | | December 31, 2015 | September 30, 2017 | | December 31, 2016 |
| Spot rates: | | | | | | |
| Euro | 0.8906 |
| | 0.9203 |
| 0.8472 |
| | 0.9481 |
|
| British pound sterling | 0.7710 |
| | 0.6787 |
| 0.7466 |
| | 0.8100 |
|
| Swiss franc | 0.9720 |
| | 0.9997 |
| 0.9693 |
| | 1.0172 |
|
| Hungarian forint | 275.21 |
| | 290.85 |
| 263.97 |
| | 293.29 |
|
| Polish zloty | 3.8283 |
| | 3.9286 |
| 3.6538 |
| | 4.1769 |
|
| Czech koruna | 24.067 |
| | 24.867 |
| 22.014 |
| | 25.623 |
|
| Romanian lei | 3.9632 |
| | 4.1604 |
| 3.8959 |
| | 4.3077 |
|
| Chilean peso | 656.85 |
| | 708.60 |
| 638.65 |
| | 670.23 |
|
| Jamaican dollar | 127.59 |
| | 119.95 |
| 129.55 |
| | 128.77 |
|
| | | | Three months ended | | Nine months ended | Three months ended | | Nine months ended |
| | September 30, | | September 30, | September 30, | | September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| Average rates: | | | | | | | | | | | | | | |
| Euro | 0.8961 |
| | 0.8992 |
| | 0.8957 |
| | 0.8968 |
| 0.8514 |
| | 0.8961 |
| | 0.8979 |
| | 0.8957 |
|
| British pound sterling | 0.7616 |
| | 0.6456 |
| | 0.7193 |
| | 0.6528 |
| 0.7643 |
| | 0.7616 |
| | 0.7845 |
| | 0.7193 |
|
| Swiss franc | 0.9758 |
| | 0.9651 |
| | 0.9797 |
| | 0.9536 |
| 0.9629 |
| | 0.9758 |
| | 0.9839 |
| | 0.9797 |
|
| Hungarian forint | 278.79 |
| | 280.67 |
| | 279.65 |
| | 277.25 |
| 260.96 |
| | 278.79 |
| | 277.57 |
| | 279.65 |
|
| Polish zloty | 3.8891 |
| | 3.7678 |
| | 3.9040 |
| | 3.7293 |
| 3.6255 |
| | 3.8891 |
| | 3.8377 |
| | 3.9040 |
|
| Czech koruna | 24.221 |
| | 24.353 |
| | 24.221 |
| | 24.551 |
| 22.217 |
| | 24.221 |
| | 23.902 |
| | 24.221 |
|
| Romanian lei | 4.0002 |
| | 3.9819 |
| | 4.0181 |
| | 3.9852 |
| 3.9018 |
| | 4.0002 |
| | 4.0944 |
| | 4.0181 |
|
| Chilean peso | 661.52 |
| | 677.25 |
| | 679.85 |
| | 640.03 |
| 642.20 |
| | 661.52 |
| | 654.02 |
| | 679.85 |
|
| Jamaican dollar | 126.98 |
| | 116.38 |
| | 123.88 |
| | 115.51 |
| 128.51 |
| | 126.98 |
| | 128.72 |
| | 123.88 |
|
Interest Rate Risks
In general, we seek to enter into derivative instruments to protect against increases in the interest rates on our variable-rate debt. Accordingly, we have entered into various derivative transactions to reduce exposure to increases in interest rates. We use interest rate derivative contracts to exchange, at specified intervals, the difference between fixed and variable interest rates calculated by reference to an agreed-upon notional principal amount. We also use interest rate cap and collar agreements that lock in a maximum interest rate if variable rates rise, but also allow our company to benefit, to a limited extent in the case of collars, from declines in market rates. At September 30, 20162017, we effectively paid a fixed interest rate on 96%substantially all of our total debt. The final maturity dates of our various portfolios of interest rate derivative instruments generally fall short of the respective maturities of the underlying variable-rate debt. In this regard, we use judgment to determine the appropriate maturity dates of our portfolios of interest rate derivative instruments, taking into account the relative costs and benefits of different maturity profiles in light of current and expected future market conditions, liquidity issues and other factors. For additional information concerning the termsimpacts of these interest rate derivative instruments, see note 45 to our condensed consolidated financial statements.
Sensitivity Information
Information concerning the sensitivity of the fair value of certain of our more significant derivative instruments to changes in market conditions is set forth below. The potential changes in fair value set forth below do not include any amounts associated with the remeasurement of the derivative asset or liability into the applicable functional currency. For additional information, see notes 45 and 56 to our condensed consolidated financial statements.
Virgin Media Cross-currency and Interest Rate Derivative Contracts
Holding all other factors constant, at September 30, 20162017:
| |
| (i) | an instantaneous increase (decrease) of 10% in the value of the British pound sterling relative to the U.S. dollar would have decreased (increased) the aggregate fair value of the Virgin Media cross-currency and interest rate derivative contracts by approximately £564£608 million ($732814 million); |
| |
| (ii) | an instantaneous increase (decrease) in the relevant base rate of 50 basis points (0.50%) would have increased (decreased) the aggregate fair value of the Virgin Media cross-currency and interest rate derivative contracts by approximately £75£136 million ($97182 million); and |
| |
| (iii) | an instantaneous increase (decrease) of 10% in the value of the euro relative to the U.S. dollar would have decreased (increased) the aggregate fair value of the Virgin Media cross-currency derivative contracts by approximately £39£37 million ($5150 million). |
UPC Broadband Holding Cross-currency and Interest Rate Derivative Contracts
Holding all other factors constant, at September 30, 20162017:
| |
| (i) | an instantaneous increase (decrease) of 10% in the value of the Swiss franc, Polish zloty, Hungarian forint, and Czech koruna and Romanian lei relative to the euro would have decreased (increased) the aggregate fair value of the UPC Broadband Holding cross-currency and interest rate derivative contracts by approximately €553€503 million ($621594 million); |
| |
| (ii) | an instantaneous increase (decrease) of 10% in the value of the euro relative to the U.S. dollar would have decreased (increased) the aggregate fair value of the UPC Broadband Holding cross-currency and interest rate derivative contracts by approximately €287€248 million ($322293 million); |
| |
| (iii) | an instantaneous increase (decrease) of 10% in the value of the Swiss franc and Romanian lei relative to the U.S. dollar would have decreased (increased) the aggregate fair value of the UPC Broadband Holding cross-currency and interest rate derivative contracts by approximately €128€91 million ($144107 million); and |
| |
| (iv) | an instantaneous increase (decrease) in the relevant base rate of 50 basis points (0.50%) would have increased (decreased) the aggregate fair value of the UPC Broadband Holding cross-currency and interest rate derivative contracts by approximately €105€49 million ($11858 million). |
Unitymedia Cross-currency and Interest Rate Derivative Contracts
Holding all other factors constant, at September 30, 2016, an instantaneous increase (decrease) of 10% in the value of the euro relative to the U.S. dollar would have decreased (increased) the aggregate value of the Unitymedia cross-currency derivative contracts by approximately €245 million ($275 million).2017:
| |
| (i) | an instantaneous increase (decrease) of 10% in the value of the euro relative to the U.S. dollar would have decreased (increased) the aggregate fair value of the Unitymedia cross-currency and interest rate derivative contracts by approximately €320 million ($378 million); and |
| |
| (ii) | an instantaneous increase (decrease) in the relevant base rate of 50 basis points (0.50%) would have increased (decreased) the aggregate fair value of the Unitymedia cross-currency and interest rate derivative contracts by approximately €38 million ($45 million). |
Telenet Cross-currency and Interest Rate Derivative Contracts and Interest Rate Caps, Collars and Swaps
Holding all other factors constant, at September 30, 2016:2017:
| |
| (i) | an instantaneous increase (decrease) of 10% in the value of the euro relative to the U.S. dollar would have decreased (increased) the aggregate fair value of the Telenet cross-currency derivative contracts by approximately €254 million ($300 million); and |
| |
| (ii) | an instantaneous increase (decrease) in the relevant base rate of 50 basis points (0.50%) would have increased (decreased) the aggregate fair value of the Telenet interest rate cap, collar and swap contracts by approximately €107€131 million ($120 million); and |
| |
(ii) | an instantaneous increase (decrease) of 10% in the value of the euro relative to the U.S. dollar would have decreased (increased) the aggregate fair value of the Telenet cross-currency derivative contracts by approximately €99 million ($111155 million). |
CWC Cross-currency Derivative Contracts
Holding all other factors constant, at September 30, 2016, an instantaneous increase (decrease) in the relevant base rate of 50 basis points (0.50%) would have increased (decreased) the aggregate fair value of the CWC cross-currency derivative contracts by approximately JMD 3.3 billion ($26 million).
VTR Cross-currency Derivative Contracts
Holding all other factors constant, at September 30, 2016,2017, an instantaneous increase (decrease) of 10% in the value of the Chilean peso relative to the U.S. dollar would have decreased (increased) the aggregate fair value of the VTR cross-currency derivative contracts by approximately CLP 110.0108 billion ($167169 million).
ITV Collar
Holding all other factors constant, at September 30, 20162017, an instantaneous increase (decrease) of 10% in the per share market price of ITV’s ordinary shares would have decreased (increased) the fair value of the ITV Collar by approximately £73£70 million ($95 million) ($93 million).
Sumitomo Collar
Holding all other factors constant, at September 30, 2016,2017, an instantaneous increase (decrease) of 10% in the per share market price of Sumitomo’s common stock would have decreased (increased) the fair value of the Sumitomo Collar by approximately ¥4.0¥3 billion ($39 million) ($26 million).
Projected Cash Flows Associated with Derivative Instruments
The following table provides information regarding the projected cash flows associated with our derivative instruments. The U.S. dollar equivalents presented below are based on interest rates and exchange rates that were in effect as of September 30, 20162017. These amounts are presented for illustrative purposes only and will likely differ from the actual cash payments required in future periods. For additional information regarding our derivative instruments, including our counterparty credit risk, see note 45 to our condensed consolidated financial statements. Consistent with the inclusion of CWC debt maturities and the related projected interest payments in our contractual commitments, as presented under "Material Changes in Financial Condition - Contractual Commitments" above, the table below includes the projected derivative cash flows associated with the debt of CWC. Additionally, as a result of the held-for-sale presentation of the debt and capital lease obligations of the Dutch JV Entities in our September 30, 2016 condensed consolidated balance sheet, the amounts presented below do not include projected derivative cash flows related to the Dutch JV Entities. For information regarding the held-for-sale presentation of the Dutch JV Entities, see note 3 to our condensed consolidated financial statements.
| | | | Payments (receipts) due during: | | Total | Payments (receipts) due during: | | Total |
| | Remainder of 2016 | | | | Remainder of 2017 | | | |
| | 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | |
| | in millions | in millions |
| Projected derivative cash payments (receipts), net: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liberty Global Group: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-related (a) | $ | (8.5 | ) | | $ | (61.3 | ) | | $ | 3.1 |
| | $ | (14.7 | ) | | $ | (31.9 | ) | | $ | (13.8 | ) | | $ | (36.6 | ) | | $ | (163.7 | ) | $ | (2.9 | ) | | $ | 15.4 |
| | $ | 36.8 |
| | $ | (41.1 | ) | | $ | (23.8 | ) | | $ | (43.2 | ) | | $ | 56.0 |
| | $ | (2.8 | ) |
| Principal-related (b) | 5.5 |
| | 138.5 |
| | — |
| | 5.8 |
| | 201.0 |
| | (122.4 | ) | | (1,716.7 | ) | | (1,488.3 | ) | — |
| | 0.2 |
| | 6.0 |
| | 90.5 |
| | (144.2 | ) | | (237.6 | ) | | (905.1 | ) | | (1,190.2 | ) |
| Other (c) | (59.1 | ) | | (158.2 | ) | | (360.1 | ) | | (110.5 | ) | | (4.9 | ) | | — |
| | (10.9 | ) | | (703.7 | ) | (33.8 | ) | | (6.9 | ) | | 41.1 |
| | (16.6 | ) | | (339.4 | ) | | (117.6 | ) | | — |
| | (473.2 | ) |
| Total Liberty Global Group | (62.1 | ) | | (81.0 | ) | | (357.0 | ) | | (119.4 | ) | | 164.2 |
| | (136.2 | ) | | (1,764.2 | ) | | (2,355.7 | ) | (36.7 | ) | | 8.7 |
| | 83.9 |
| | 32.8 |
| | (507.4 | ) | | (398.4 | ) | | (849.1 | ) | | (1,666.2 | ) |
| LiLAC Group: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-related (a) | 6.4 |
| | 28.0 |
| | 27.9 |
| | 26.7 |
| | 23.6 |
| | 23.6 |
| | 19.2 |
| | 155.4 |
| 2.7 |
| | 43.6 |
| | 28.2 |
| | 27.0 |
| | 26.4 |
| | 25.6 |
| | 57.3 |
| | 210.8 |
|
| Principal-related (b) | — |
| | — |
| | — |
| | 4.0 |
| | — |
| | — |
| | 48.4 |
| | 52.4 |
| — |
| | — |
| | (2.2 | ) | | — |
| | — |
| | 81.6 |
| | 7.1 |
| | 86.5 |
|
| Other (c) | 0.6 |
| | (2.6 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (2.0 | ) | 2.6 |
| | 6.5 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 9.1 |
|
| Total LiLAC Group | 7.0 |
| | 25.4 |
| | 27.9 |
| | 30.7 |
| | 23.6 |
| | 23.6 |
| | 67.6 |
| | 205.8 |
| 5.3 |
| | 50.1 |
| | 26.0 |
| | 27.0 |
| | 26.4 |
| | 107.2 |
| | 64.4 |
| | 306.4 |
|
| Total | $ | (55.1 | ) | | $ | (55.6 | ) | | $ | (329.1 | ) | | $ | (88.7 | ) | | $ | 187.8 |
| | $ | (112.6 | ) | | $ | (1,696.6 | ) | | $ | (2,149.9 | ) | $ | (31.4 | ) | | $ | 58.8 |
| | $ | 109.9 |
| | $ | 59.8 |
| | $ | (481.0 | ) | | $ | (291.2 | ) | | $ | (784.7 | ) | | $ | (1,359.8 | ) |
_______________
| |
| (a) | Includes (i) the cash flows of our interest rate cap, collar and swap contracts and (ii) the interest-related cash flows of our cross-currency, and interest rate and basis swap contracts. |
| |
| (b) | Includes the principal-related cash flows of our cross-currency swap contracts. |
| |
| (c) | Includes amounts related to our equity-related derivative instruments and foreign currency forward contracts. 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, the Sumitomo Collar Loan and the Lionsgate Loan. |
| |
| Item 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
In accordance with Exchange Act Rule 13a-15, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer principal accounting officer and principalchief financial officer (the Executives), of the effectiveness of our disclosure controls and procedures as of September 30, 20162017. In designing and evaluating the disclosure controls and procedures, the Executives recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is necessarily required to apply judgment in evaluating the cost-benefit relationship of possible controls and objectives. Based on that evaluation, the Executives concluded that our disclosure controls and procedures are effective as of September 30, 20162017, in timely making known to them materialprovide reasonable assurance that information relating to us and our consolidated subsidiaries required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934. 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal controls over financial reporting identified in connection with the evaluation described above that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II — OTHER INFORMATION
Item 1A. RISK FACTORS
In addition toUnless otherwise defined herein, the other information containedcapitalized terms used in Part II of this Quarterly Report on Form 10-Q you should consider the risk factors described in our 2015 Annual Report on Form 10-K and our June 30, 2016 Quarter Report on Form 10-Q in evaluating our results of operations, financial condition, business and operations or an investmentare defined in the shares ofnotes to our company.condensed consolidated financial statements.
| |
| Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
| |
| (c) | Issuer Purchases of Equity Securities |
The following table sets forth information concerning our company’s purchase of its own equity securities during the three months ended September 30, 2016:2017:
|
| | | | | | | | | | | | |
| Period | | Total number of shares purchased | | Average price paid per share (a) | | Total number of shares purchased as part of publicly announced plans or programs | | Approximate dollar value of shares that may yet be purchased under the plans or programs |
| | | | | | | | | |
| July 1, 2016 through July 31, 2016: | | | | | | | |
| Class A Liberty Global Shares | 8,208,500 |
| | $ | 30.26 |
| | 8,208,500 |
| | (b) |
| Class C Liberty Global Shares | 1,955,600 |
| | $ | 29.88 |
| | 1,955,600 |
| | (b) |
| August 1, 2016 through August 31, 2016: | | | | |
|
| | |
| Class A Liberty Global Shares | 2,174,300 |
| | $ | 31.92 |
| | 2,174,300 |
| | (b) |
| Class C Liberty Global Shares | 4,632,200 |
| | $ | 30.89 |
| | 4,632,200 |
| | (b) |
| September 1, 2016 through September 30, 2016: | | | | | | | |
| Class A Liberty Global Shares | 2,872,700 |
| | $ | 33.15 |
| | 2,872,700 |
| | (b) |
| Class C Liberty Global Shares | 868,100 |
| | $ | 31.76 |
| | 868,100 |
| | (b) |
| Total — July 1, 2016 through September 30, 2016: |
| | | | | | |
| Class A Liberty Global Shares | 13,255,500 |
| | $ | 31.16 |
| | 13,255,500 |
| | (b) |
| Class C Liberty Global Shares | 7,455,900 |
| | $ | 30.73 |
| | 7,455,900 |
| | (b) |
|
| | | | | | | | | | | | |
| Period | | Total number of shares purchased | | Average price paid per share (a) | | Total number of shares purchased as part of publicly announced plans or programs | | Approximate dollar value of shares that may yet be purchased under the plans or programs |
| | | | | | | | | |
| Liberty Global Shares: | | | | | | | |
| July 1, 2017 through July 31, 2017: | | | | | | | |
| Class A | 1,740,100 |
| | $ | 32.45 |
| | 1,740,100 |
| | (b) |
| Class C | 2,514,900 |
| | $ | 31.86 |
| | 2,514,900 |
| | (b) |
| August 1, 2017 through August 31, 2017: | | | | |
|
| | |
| Class A | 1,085,800 |
| | $ | 34.02 |
| | 1,085,800 |
| | (b) |
| Class C | 3,148,151 |
| | $ | 33.09 |
| | 3,148,151 |
| | (b) |
| September 1, 2017 through September 30, 2017: | | | | | | | |
| Class A | 2,614,800 |
| | $ | 33.52 |
| | 2,614,800 |
| | (b) |
| Class C | 1,174,400 |
| | $ | 32.50 |
| | 1,174,400 |
| | (b) |
| Total Liberty Global Shares — July 1, 2017 through September 30, 2017: |
| | | | | | |
| Class A | 5,440,700 |
| | $ | 33.27 |
| | 5,440,700 |
| | (b) |
| Class C | 6,837,451 |
| | $ | 32.54 |
| | 6,837,451 |
| | (b) |
| | | | | | | | |
| LiLAC Shares: | | | | | | | |
| July 1, 2017 through July 31, 2017: | | | | | | | |
| Class A | 209,556 |
| | $ | 24.46 |
| | 209,556 |
| | (c) |
| Class C | — |
| | $ | — |
| | — |
| | (c) |
| August 1, 2017 through August 31, 2017: | | | | | | | |
| Class A | 191,342 |
| | $ | 26.37 |
| | 191,342 |
| | (c) |
| Class C | — |
| | $ | — |
| | — |
| | (c) |
| September 1, 2017 through September 30, 2017: | | | | | | | |
| Class A | 84,235 |
| | $ | 25.74 |
| | 84,235 |
| | (c) |
| Class C | — |
| | $ | — |
| | — |
| | (c) |
| Total LiLAC Shares — July 1, 2017 through September 30, 2017: | | | | | | | |
| Class A | 485,133 |
| | $ | 25.44 |
| | 485,133 |
| | (c) |
| Class C | — |
| | $ | — |
| | — |
| | (c) |
_______________
| |
| (a) | Average price paid per share includes direct acquisition costs and the effects of derivative instruments, where applicable. |
| |
| (b) | At September 30, 20162017, the remaining amount authorized for share repurchases of Liberty Global Shares was $2,393.3$367.7 million. |
| |
| (c) | At September 30, 2017, the remaining amount authorized for repurchases of LiLAC Shares was $225.5 million. |
ITEM 5. OTHER INFORMATION
Information Regarding Internal Separations in Preparation for the Split-off
In anticipation of and to facilitate the Split-off, under which Liberty Global will split-off its Latin American and Caribbean businesses, Liberty Global is planning to separate these businesses through a series of transactions that are intended to be tax-efficient from a United States perspective.
Liberty Global’s separation of its Latin American and Caribbean businesses is expected to consist of two phases: (i) a series of internal transactions undertaken by Liberty Global and its direct and indirect subsidiaries to separate the Latin American and Caribbean businesses that comprise Liberty Global’s LiLAC Group, including multiple distributions intended to qualify as tax-free spin-offs for U.S. tax purposes under Section 355 of the Internal Revenue Code followed by (ii) an external split-off by Liberty Global of the stock of a newly-formed corporation owning the LiLAC Group businesses to the current Liberty Global shareholders owning LiLAC Shares (i.e., the Split-off) in a distribution that is intended to qualify as a tax-free spinoff for U.S. tax purposes under Section 355 of the Internal Revenue Code.
In addition, Liberty Global is planning for the internal separation of LiLAC Communications through a series of transactions (collectively, the U.S. Internal Restructuring) that are intended to qualify as tax-free spin-offs for U.S. tax purposes under Section 355 of the Internal Revenue Code.
The Liberty Global subsidiaries or their successors that are anticipated to be distributing corporations under Section 355 in the U.S. Internal Restructuring include LGI International Inc. and Liberty Global, Inc.
Listed below are the exhibits filed as part of this Quarterly Report (according to the number assigned to them in Item 601 of Regulation S-K): |
| | |
| 4 — Instruments Defining the Rights of Securities Holders, including Indentures: |
4.1 | | Fourth Supplemental Indenture, dated as of July 1, 2016, among Virgin Media, the Registrant and the Bank of New York Mellon as trustee to the Indenture, dated as of April 16, 2008, as amended and supplemented, for the Virgin Media 6.50% Convertible Senior Notes due 2016 (incorporated by reference to Exhibit 4.9 to the Registrant’s Quarterly Report on Form 10-Q filed August 4, 2016 (File No. 001-35961)). |
| | | |
4.24.1 | | |
| | | |
4.34.2 | | Senior FacilitiesAmended and Restated Telenet Credit Agreement dated March 5, 2015,August 10, 2017, between, among Ziggo Secured Finance B.V.others, Telenet BVBA as SPV Borrower, Ziggo Secured Finance Partnership as US SPV Borrower,original borrower, The Bank of Nova Scotia as Facility Agent, the parties listed thereinsenior agent and KBC Bank NV as Original Guarantors and Deutsche Trustee Company Limited as SPV Security Trustee and the Original Lendersecurity agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed August 22, 201616, 2017 (File No. 001-35961) (the August 2016 8-K)).
|
| | | |
4.44.3 | | Ziggo Secured Finance B.V. Additional Facility C Accession DeedIndenture dated August 16, 20162017, by and entered into between, among others, Ziggo Secured Finance B.V.C&W Senior Financing Designated Activity Company as issuer, The Bank of New York Mellon, London Branch, as trustee, principal paying agent and security trustee and The Bank of Nova Scotia (incorporated by referenceNew York Mellon as paying agent, transfer agent and registrar in New York, relating to Exhibit 4.2 to the August 2016 8-K).
|
| | |
4.5 | | Ziggo Secured Finance Partnership Additional Facility D Accession Deed dated August 16, 2016 and entered into between, among others, Ziggo Secured Finance Partnership and The Bank$700.0 million aggregate principal amount of Nova Scotia (incorporated by reference to Exhibit 4.3 to the August 2016 8-K).
|
| | |
4.6 | | Amendment Letter in relation to the Senior Facilities Agreement of January 27, 2014, dated September 14, 2016 from Amsterdamse Beheer-En Consultingmaatschappij B.V. as Parent to The Bank of Nova Scotia as Facility Agent6.875% senior notes due 2027 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed September 20, 2016August 16, 2017 (File No. 001-35961)).
|
| | | |
4.74.4 | | Indenture dated September 23, 2016, among Ziggo Secured Finance B.V. as Issuer, Deutsche Trustee Company Limited as Trustee and Security Trustee, Deutsche Bank Trust Company Americas, as Dollar Paying Agent, Registrar and Transfer Agent, Deutsche Bank AG, London Branch, as Euro Paying Agent and Deutsche Bank Luxembourg S.A. as Euro Registrar and Transfer Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K/A filed September 29, 2016 (File No. 001-35961) (the September 2016 8-K)).
|
| | |
4.8 | | Indenture dated September 23, 2016, among Ziggo Bond Finance B.V. as Issuer, Deutsche Trustee Company Limited as Trustee and Security Trustee, and Deutsche Bank Trust Company Americas as Paying Agent, Registrar and Transfer Agent (incorporated by reference to Exhibit 4.2 of the September 2016 8-K).
|
| | |
4.9 | | JoinderAdditional Facility AR Accession Agreement dated October 7, 2016,13, 2017 and entered into between, among Sable International Finance Limitedothers, UPC Financing Partnership, UPC Broadband Holding B.V. and Coral-US Co-Borrower LLC, as Borrowers, the other Guarantors party thereto, The Bank of Nova Scotia as Administrative Agent and Security Trustee, and the financial institutions party thereto as Revolving Credit Lenders (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed October 13, 201619, 2017 (File No. 001-35961) (the October 19, 2017 8-K)). |
| | |
| 4.5 | | |
| | |
|
| | |
| 4.6 | | Amendment and Restatement Agreement dated June 19, 2017 between, among others, Unitymedia Hessen GmbH & Co. KG as original borrower, The Bank of Nova Scotia as Facility Agent and Credit Suisse AG as Security Trustee, London Branch and, attached as a schedule thereto, a copy of the Senior Facilities Agreement, originally dated July 25, 2014, between, among others, Unitymedia Hessen GmbH & Co. KG as original borrower, The Bank of Nova Scotia and Credit Suisse AG, London Branch as amended and restated by the Amendment and Restatement Agreement (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed October 26, 2017 (File No. 001-35961) (the October 26, 2017 8-K). |
| | |
| 4.7 | | |
| | |
| 4.8 | | |
| | | |
| 31 — Rule 13a-14(a)/15d-14(a) Certification: |
| | | |
| 31.1 | | |
| | | |
| 31.2 | | |
| | | |
31.3 | | Certification of Executive Vice President and Co-Chief Financial Officer (Principal Accounting Officer)* |
| | |
|
| | | |
| 99.1 | | |
| | | |
101.INS | | XBRL Instance Document* |
| | |
| 101.SCH | | XBRL Taxonomy Extension Schema Document* |
| | |
|
| | |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document* |
| | |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase* |
| | |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document* |
| | |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document* |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| | | |
| | | | LIBERTY GLOBAL PLC |
| | | |
| Dated: | November 3, 20161, 2017 | | /s/ MICHAEL T. FRIES |
| | | | Michael T. Fries President and Chief Executive Officer |
| | | |
| Dated: | November 3, 20161, 2017 | | /s/ CHARLES H.R. BRACKEN |
| | | | Charles H.R. Bracken Executive Vice President and Co-ChiefChief Financial Officer (Principal Financial Officer) |
| | |
Dated: | November 3, 2016 | | /s/ BERNARD G. DVORAK
|
| | | Bernard G. Dvorak
Executive Vice President and Co-Chief
Financial Officer (Principal Accounting Officer)
|
EXHIBIT INDEX
|
| | |
| 4 — Instruments Defining the Rights of Securities Holders, including Indentures: |
| 4.1 | | Fourth Supplemental Indenture, dated as of July 1, 2016, among Virgin Media, the Registrant and the Bank of New York Mellon as trustee to the Indenture, dated as of April 16, 2008, as amended and supplemented, for the Virgin Media 6.50% Convertible Senior Notes due 2016 (incorporated by reference to Exhibit 4.9 to the Registrant’s Quarterly Report on Form 10-Q filed August 4, 2016 (File No. 001-35961)). |
| | |
4.2 | | |
| | | |
4.34.2 | | Senior FacilitiesAmended and Restated Telenet Credit Agreement dated March 5, 2015,August 10, 2017, between, among Ziggo Secured Finance B.V.others, Telenet BVBA as SPV Borrower, Ziggo Secured Finance Partnership as US SPV Borrower,original borrower, The Bank of Nova Scotia as Facility Agent, the parties listed thereinsenior agent and KBC Bank NV as Original Guarantors and Deutsche Trustee Company Limited as SPV Security Trustee and the Original Lendersecurity agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed August 22, 201616, 2017 (File No. 001-35961) (the August 2016 8-K)).
|
| | | |
4.44.3 | | Ziggo Secured Finance B.V. Additional Facility C Accession DeedIndenture dated August 16, 20162017, by and entered into between, among others, Ziggo Secured Finance B.V.C&W Senior Financing Designated Activity Company as issuer, The Bank of New York Mellon, London Branch, as trustee, principal paying agent and security trustee and The Bank of Nova Scotia (incorporated by referenceNew York Mellon as paying agent, transfer agent and registrar in New York, relating to Exhibit 4.2 to the August 2016 8-K).
|
| | |
4.5 | | Ziggo Secured Finance Partnership Additional Facility D Accession Deed dated August 16, 2016 and entered into between, among others, Ziggo Secured Finance Partnership and The Bank$700.0 million aggregate principal amount of Nova Scotia (incorporated by reference to Exhibit 4.3 to the August 2016 8-K).
|
| | |
4.6 | | Amendment Letter in relation to the Senior Facilities Agreement of January 27, 2014, dated September 14, 2016 from Amsterdamse Beheer-En Consultingmaatschappij B.V. as Parent to The Bank of Nova Scotia as Facility Agent6.875% senior notes due 2027 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed September 20, 2016August 16, 2017 (File No. 001-35961)).
|
| | | |
4.74.4 | | Indenture dated September 23, 2016, among Ziggo Secured Finance B.V. as Issuer, Deutsche Trustee Company Limited as Trustee and Security Trustee, Deutsche Bank Trust Company Americas, as Dollar Paying Agent, Registrar and Transfer Agent, Deutsche Bank AG, London Branch, as Euro Paying Agent and Deutsche Bank Luxembourg S.A. as Euro Registrar and Transfer Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K/A filed September 29, 2016 (File No. 001-35961) (the September 2016 8-K)).
|
| | |
4.8 | | Indenture dated September 23, 2016, among Ziggo Bond Finance B.V. as Issuer, Deutsche Trustee Company Limited as Trustee and Security Trustee, and Deutsche Bank Trust Company Americas as Paying Agent, Registrar and Transfer Agent (incorporated by reference to Exhibit 4.2 of the September 2016 8-K).
|
| | |
4.9 | | JoinderAdditional Facility AR Accession Agreement dated October 7, 2016,13, 2017 and entered into between, among Sable International Finance Limitedothers, UPC Financing Partnership, UPC Broadband Holding B.V. and Coral-US Co-Borrower LLC, as Borrowers, the other Guarantors party thereto, The Bank of Nova Scotia as Administrative Agent and Security Trustee, and the financial institutions party thereto as Revolving Credit Lenders (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed October 13, 201619, 2017 (File No. 001-35961) (the October 19, 2017 8-K)).
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| 4.5 | | |
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| 4.6 | | Amendment and Restatement Agreement dated June 19, 2017 between, among others, Unitymedia Hessen GmbH & Co. KG as original borrower, The Bank of Nova Scotia as Facility Agent and Credit Suisse AG as Security Trustee, London Branch and, attached as a schedule thereto, a copy of the Senior Facilities Agreement, originally dated July 25, 2014, between, among others, Unitymedia Hessen GmbH & Co. KG as original borrower, The Bank of Nova Scotia and Credit Suisse AG, London Branch as amended and restated by the Amendment and Restatement Agreement (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed October 26, 2017 (File No. 001-35961) (the October 26, 2017 8-K). |
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| 4.7 | | |
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| 4.8 | | |
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| 31 — Rule 13a-14(a)/15d-14(a) Certification: |
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| 31.1 | | |
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| 31.2 | | |
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31.3 | | Certification of Executive Vice President and Co-Chief Financial Officer (Principal Accounting Officer)* |
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| 99.1 | | |
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101.INS | | XBRL Instance Document* |
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| 101.SCH | | XBRL Taxonomy Extension Schema Document* |
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| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document* |
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| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase* |
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| 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document* |
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| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document* |
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