LIBERTY GLOBAL PLC
10-Ks and 10-Qs
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
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March 31, 2017
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OR
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
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(Exact name of Registrant as specified in its charter)
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England and Wales
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98-1112770
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Griffin House, 161 Hammersmith Rd, London, United Kingdom
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W6 8BS
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(Address of principal executive offices)
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(Zip Code)
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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. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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 April 30, 2017 was:
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Class A
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Class B
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Class C
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||||||
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Liberty Global ordinary shares
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LiLAC ordinary shares
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LIBERTY GLOBAL PLC
TABLE OF CONTENTS
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Page
Number
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PART I — FINANCIAL INFORMATION
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ITEM 1.
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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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ITEM 2.
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ITEM 3.
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||
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ITEM 4.
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PART II — OTHER INFORMATION
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ITEM 2.
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ITEM 6.
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||
LIBERTY GLOBAL PLC
(unaudited)
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March 31,
2017 |
December 31,
2016 |
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in millions
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||||||
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ASSETS
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|||||||
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Current assets:
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|||||||
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Cash and cash equivalents
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$
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$
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Trade receivables, net
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Derivative instruments (note 5)
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Prepaid expenses
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Receivable from the VodafoneZiggo JV (note 4)
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Other current assets:
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Third-party
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Related-party — VodafoneZiggo JV (note 4)
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Total current assets
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Investments and related note receivables (including $2,229.2
million and $2,057.2 million, respectively, measured at fair value on a recurring basis) (note 4)
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Property and equipment, net (note 7)
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Goodwill (note 7)
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Intangible assets subject to amortization, net (note 7)
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Other assets, net (note 5)
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Total assets
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$
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$
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
(unaudited)
|
March 31,
2017 |
December 31,
2016 |
||||||
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in millions
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||||||
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LIABILITIES AND EQUITY
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|||||||
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Current liabilities:
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|||||||
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Accounts payable
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$
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$
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Deferred revenue and advance payments from subscribers and others
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Current portion of debt and capital lease obligations (note 8)
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Accrued capital expenditures
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Accrued income taxes
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Accrued interest
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Other accrued and current liabilities (notes 5 and 12)
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Total current liabilities
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Long-term debt and capital lease obligations (note 8)
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Other long-term liabilities (notes 5, 9, and 12)
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Total liabilities
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Commitments and contingencies (notes 3, 5, 8, 9, 14 and 16)
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Equity (note 10):
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Liberty Global shareholders:
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|||||||
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Liberty Global Shares — Class A, $0.01 nominal value. Issued and outstanding 243,503,655 and 253,827,604 shares, respectively
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Liberty Global Shares — Class B, $0.01 nominal value. Issued and outstanding 11,139,184 and 10,805,850 shares, respectively
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Liberty Global Shares — Class C, $0.01 nominal value. Issued and outstanding 617,227,678 and 634,391,072 shares, respectively
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LiLAC Shares — Class A, $0.01 nominal value. Issued and outstanding 49,857,001 and 50,317,930 shares, respectively
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LiLAC Shares — Class B, $0.01 nominal value. Issued and outstanding 1,946,579 and 1,888,323 shares, respectively
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LiLAC Shares — Class C, $0.01 nominal value. Issued and outstanding 120,649,676 and 120,889,034 shares, respectively
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Additional paid-in capital
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Accumulated deficit
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(
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)
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(
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)
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Accumulated other comprehensive loss, net of taxes
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(
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)
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(
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)
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|||
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Treasury shares, at cost
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(
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)
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(
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)
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|||
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Total Liberty Global shareholders
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Noncontrolling interests
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Total equity
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Total liabilities and equity
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$
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$
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|
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
LIBERTY GLOBAL PLC
(unaudited)
|
Three months ended
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|||||||
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March 31,
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|||||||
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2017
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2016
|
|||||
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in millions, except share and per share amounts
|
||||||
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Revenue (notes 4 and 15)
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$
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$
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Operating costs and expenses (exclusive of depreciation and amortization, shown separately below):
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|||||||
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Programming and other direct costs of services (note 14)
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Other operating (note 11)
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Selling, general and administrative (
SG&A
) (notes 11 and 14)
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Depreciation and amortization (note 7)
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Impairment, restructuring and other operating items, net (notes 3, 7 and 12)
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Operating income
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Non-operating income (expense):
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Interest expense
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(
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)
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(
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)
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|||
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Realized and unrealized
losses
on derivative instruments, net (note 5)
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(
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)
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(
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)
|
|||
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Foreign currency transaction gains, net
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|||
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Realized and unrealized
gains (losses)
due to changes in fair values of certain investments and debt, net (notes 4, 6 and 8)
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(
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)
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Losses on debt modification and extinguishment, net (note 8)
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(
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)
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(
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)
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|||
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Share of losses of affiliates, net (notes 4 and 11)
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(
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)
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(
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)
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Other income, net
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(
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)
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(
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)
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||||
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Loss
before income taxes
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(
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)
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(
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)
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|||
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Income tax benefit (expense)
(note 9)
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(
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)
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|||
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Net
loss
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(
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)
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(
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)
|
|||
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Net loss (earnings) attributable to noncontrolling interests
|
(
|
)
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|
|||
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Net
loss
attributable to Liberty Global shareholders
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$
|
(
|
)
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$
|
(
|
)
|
|
|
Basic and diluted loss
attributable to Liberty Global shareholders per share (notes 1 and 13):
|
|||||||
|
Liberty Global Shares
|
$
|
(
|
)
|
$
|
(
|
)
|
|
|
LiLAC Shares
|
$
|
(
|
)
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$
|
(
|
)
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|
|
Weighted average ordinary shares outstanding - basic and diluted:
|
|||||||
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Liberty Global Shares
|
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|
|||
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LiLAC Shares
|
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|
|||
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
|
|||||||
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March 31,
|
||||||
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|
2017
|
2016
|
|||||
|
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in millions
|
||||||
|
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
|
|
Other comprehensive earnings (loss), net of taxes:
|
|||||||
|
Foreign currency translation adjustments
|
|
|
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|
|||
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Pension-related adjustments and other
|
(
|
)
|
(
|
)
|
|||
|
Other comprehensive earnings
|
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|
|||
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Comprehensive loss
|
(
|
)
|
(
|
)
|
|||
|
Comprehensive loss (earnings) attributable to noncontrolling interests
|
(
|
)
|
|
|
|||
|
Comprehensive
loss
attributable to Liberty Global shareholders
|
$
|
(
|
)
|
$
|
(
|
)
|
|
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
loss, net of taxes
|
Treasury shares, at cost
|
Total Liberty Global
shareholders
|
||||||||||||||||||||||||||||
|
|
in millions
|
||||||||||||||||||||||||||||||||||
|
Balance at January 1, 2017, before effect of accounting change
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|
$
|
|
|
$
|
|
|
||||||||
|
Accounting change (note 2)
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
—
|
|
|
|
—
|
|
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|
|||||||||||||||||
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Balance at January 1, 2017, as adjusted for accounting change
|
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(
|
)
|
(
|
)
|
(
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)
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|||||||||||||||||
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Net loss
|
—
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—
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—
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(
|
)
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—
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—
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(
|
)
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(
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)
|
|||||||||||||||||
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Other comprehensive earnings, net of taxes
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—
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—
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—
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—
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—
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|
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|
(
|
)
|
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|
|||||||||||||||||
|
Fair value adjustment related to the CWC Acquisition (note 3)
|
—
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—
|
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—
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—
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—
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|
—
|
|
—
|
|
|
|
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|
|||||||||||||||||
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Repurchase and cancellation of Liberty Global ordinary shares (note 10)
|
(
|
)
|
—
|
|
(
|
)
|
—
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|
—
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—
|
|
(
|
)
|
—
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|
(
|
)
|
|||||||||||||||||
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Share-based compensation (note 11)
|
—
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—
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—
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—
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—
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—
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|
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|
|||||||||||||||||
|
Adjustments due to changes in subsidiaries’ equity and other, net
|
|
|
—
|
|
(
|
)
|
—
|
|
—
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||||||
|
Balance at March 31, 2017
|
$
|
|
|
|
$
|
|
|
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$
|
|
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$
|
(
|
)
|
|
$
|
(
|
)
|
|
$
|
(
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
LIBERTY GLOBAL PLC
(unaudited)
|
Three months ended
|
|||||||
|
|
March 31,
|
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Cash flows from operating activities:
|
|||||||
|
Net
loss
|
$
|
(
|
)
|
$
|
(
|
)
|
|
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|||||||
|
Share-based compensation expense
|
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|
|||
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Depreciation and amortization
|
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|
|||
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Impairment, restructuring and other operating items, net
|
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|
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|
|||
|
Amortization of deferred financing costs and non-cash interest
|
|
|
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|
|||
|
Realized and unrealized losses on derivative instruments, net
|
|
|
|
|
|||
|
Foreign currency transaction gains, net
|
(
|
)
|
(
|
)
|
|||
|
Realized and unrealized losses (gains)
due to changes in fair values of certain investments and debt, including impact of dividends
|
(
|
)
|
|
|
|||
|
Losses on debt modification and extinguishment, net
|
|
|
|
|
|||
|
Share of losses of affiliates, net
|
|
|
|
|
|||
|
Deferred income tax benefits
|
(
|
)
|
(
|
)
|
|||
|
Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions
|
(
|
)
|
(
|
)
|
|||
|
Net cash provided by operating activities
|
|
|
|
|
|||
|
Cash flows from investing activities:
|
|||||||
|
Distributions received from affiliates
|
|
|
|
|
|||
|
Equalization payment related to the VodafoneZiggo JV Transaction
|
|
|
|
|
|||
|
Capital expenditures
|
(
|
)
|
(
|
)
|
|||
|
Investments in and loans to affiliates and others
|
(
|
)
|
(
|
)
|
|||
|
Cash paid in connection with acquisitions, net of cash acquired
|
(
|
)
|
(
|
)
|
|||
|
Other investing activities, net
|
|
|
|
|
|||
|
Net cash provided (used) by investing activities
|
$
|
|
|
|
$
|
(
|
)
|
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)
|
Three months ended
|
|||||||
|
|
March 31,
|
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Cash flows from financing activities:
|
|||||||
|
Repayments and repurchases of debt and capital lease obligations
|
$
|
(
|
)
|
$
|
(
|
)
|
|
|
Borrowings of debt
|
|
|
|
|
|||
|
Repurchase of Liberty Global ordinary shares
|
(
|
)
|
(
|
)
|
|||
|
Value-added taxes (
VAT
) paid on behalf of the VodafoneZiggo JV
|
(
|
)
|
|
|
|||
|
Net cash paid related to derivative instruments
|
(
|
)
|
(
|
)
|
|||
|
Payment of financing costs and debt premiums
|
(
|
)
|
(
|
)
|
|||
|
Change in cash collateral
|
(
|
)
|
|
|
|||
|
Net cash paid associated with call option contracts on Liberty Global ordinary shares
|
|
|
(
|
)
|
|||
|
Other financing activities, net
|
(
|
)
|
(
|
)
|
|||
|
Net cash provided (used) by financing activities
|
(
|
)
|
|
|
|||
|
Effect of exchange rate changes on cash
|
|
|
|
|
|||
|
|
|
|
|
||||
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(
|
)
|
|||
|
Cash and cash equivalents:
|
|||||||
|
Beginning of period
|
|
|
|
|
|||
|
End of period
|
$
|
|
|
$
|
|
|
|
|
Cash paid for interest
|
$
|
|
|
$
|
|
|
|
|
Net cash paid for taxes
|
$
|
|
|
$
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements
March 31, 2017
(unaudited)
(
1
)
Basis of Presentation
Liberty Global plc (
Liberty Global
) is a public limited company organized under the laws of England and Wales. In these notes, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to
Liberty Global
or collectively to
Liberty Global
and its subsidiaries. We are an international provider of video, broadband internet, fixed-line telephony, mobile and other communications services to residential customers and businesses, with consolidated operations at
March 31, 2017
in more than
30
countries.
In Europe, we provide residential and business-to-business (
B2B
) services in (i) the United Kingdom (
U.K.
) and Ireland through Virgin Media Inc. (
Virgin Media
), (ii) Germany through Unitymedia GmbH (
Unitymedia
), (iii) Belgium through Telenet Group Holding N.V. (
Telenet
), a
57.4
%
-owned subsidiary, and (iv)
seven
other European countries through UPC Holding B.V. (
UPC Holding
). 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
services in the Netherlands through VodafoneZiggo Group B.V., formerly known as Ziggo Group Holding B.V. and 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, 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
,
Unitymedia
,
Telenet
,
UPC Holding
and, through December 31, 2016,
Ziggo Group Holding
are collectively referred to herein as the “
European Division
.”
Outside of Europe, we provide residential and
B2B
services in (i)
18
countries, predominantly in Latin America and the Caribbean, through our wholly-owned subsidiary Cable & Wireless Communications Limited (
CWC
), (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.
CWC
also provides (a)
B2B
services in certain other countries in Latin America and the Caribbean and (b) wholesale services over its sub-sea and terrestrial networks that connect over
30
markets in that region.
CWC
owns less than 100% of certain of its consolidated subsidiaries, including Cable & Wireless Panama, SA (a
49.0
%
-owned entity that owns most of our operations in Panama), The Bahamas Telecommunications Company Limited (a
49.0
%
-owned entity that owns all of our operations in the Bahamas), Cable & Wireless Jamaica Limited (an
82.0
%
-owned entity that owns the majority of our operations in Jamaica) and Cable & Wireless Barbados Limited (an
81.1
%
-owned entity that owns the majority of our operations in Barbados). The operations of
CWC
,
VTR
and
Liberty Puerto Rico
are collectively referred to herein as the “
LiLAC Division
.”
Our share capital comprises (i) Class A, B and C
Liberty Global
ordinary shares (collectively,
Liberty Global Shares
) and (ii) Class A, B and C LiLAC ordinary shares (collectively,
LiLAC Shares
). 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 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 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
, (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 Communications Inc. (
LiLAC Communications
) and its subsidiaries, which include
Liberty Puerto Rico
. The “
Liberty Global Group
” comprises our businesses, assets and liabilities not attributed to the
LiLAC Group
, including
Virgin Media
,
Ziggo Group Holding
(through December 31, 2016),
Unitymedia
,
Telenet
,
UPC Holding
, our corporate entities (excluding
LiLAC Communications
) and certain other less significant entities.
8
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 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
2016
consolidated financial statements and notes thereto included in our
2016
Annual Report on Form 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
March 31, 2017
.
(
2
)
Accounting Change and Recent Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (
FASB
) issued Accounting Standards Update (
ASU
) No. 2016-09,
Compensation
—
Stock Compensation, Improvements to Employee Share-Based Payment Accounting
(
ASU 2016-09
), which simplifies 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.
ASU 2016-09
was effective for annual reporting periods beginning after December 15, 2016. We adopted
ASU 2016-09
on January 1, 2017. As a result of adopting this standard, we (i) recognized a cumulative effect adjustment to our accumulated deficit as of January 1, 2017 and (ii) 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. The cumulative effect adjustment, which totaled
$
15.3
million
, represents the tax effect of deductions in excess of the financial reporting expense for share-based compensation that were not previously recognized for financial reporting purposes as these tax benefits were not realized as a reduction of income taxes payable.
9
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
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. 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. While we are continuing 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 up-front fees charged to our customers. These impacts are discussed below:
|
•
|
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 will be accelerated for these contracts as the impact of the discount or free service period will be recognized uniformly over the total contractual period.
|
|
•
|
When we enter into contracts to provide services to our customers, we often charge installation or other up-front fees. Under current accounting rules, installation fees related to 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 up-front 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 expect
ASU 2014-09
to have a material impact on our reported 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 costs are in the scope of another accounting topic that allows for capitalization. Under
ASU 2014-09
, the upfront costs that are currently expensed as incurred will be recognized as assets and amortized to other operating expenses over a period that is consistent with the transfer to the customers of the goods or services to which the assets relate, which we have generally interpreted to be the expected life of the customer relationship. The impact of the accounting change for these costs will be dependent on numerous factors, including the number of new subscriber contracts added in any given period, but we expect the adoption of this accounting change will initially result in the deferral of a significant amount of operating and selling costs.
The ultimate impact of adopting
ASU 2014-09
for both revenue recognition and costs to obtain and fulfill contracts will depend on the promotions and offers in place
during the period leading up to and after 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, we expect the adoption of this standard will increase the number of leases to be accounted for as capital leases in our consolidated balance sheet.
10
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
ASU 2017-04
(
3
)
Acquisitions
Pending Acquisitions
SFR BeLux
. On December 22, 2016, a subsidiary of
Telenet
entered into a definitive agreement to acquire Coditel Brabant sprl, operating under the SFR brand (
SFR BeLux
), for
€
400.0
million
(
$
427.9
million
) on a cash and debt free basis.
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.
Telenet
intends to finance the acquisition of
SFR BeLux
through a combination of existing cash and cash equivalents and available liquidity under its revolving credit facilities. The transaction is subject to customary closing conditions, including approval from the relevant competition authorities, and is expected to close during the second half of 2017.
Multimedia
. 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
(
$
758.6
million
), which is equal to the enterprise 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, and is expected to close in late 2017 or early 2018.
2016 Acquisitions
CWC
.
On
May 16, 2016
, we acquired
CWC
for shares of
Liberty Global
(the
CWC Acquisition
). The
CWC Acquisition
triggered regulatory approval requirements in certain jurisdictions in which
CWC
operates. The regulatory authorities in certain of these jurisdictions, including the Bahamas, Jamaica, Trinidad and Tobago, the Seychelles and the Cayman Islands, have not completed their review of the
CWC 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
’s operations and financial condition.
In connection with the
CWC Acquisition
and an acquisition made by
CWC
in 2015, certain entities (the
Carve-out Entities
) that held licenses granted by the U.S. Federal Communications Commission (the
FCC
) were transferred to entities not controlled by our company or
CWC
. The arrangements with respect to the
Carve-out Entities
, which were executed in connection with the
CWC Acquisition
, contemplated that upon receipt of regulatory approval, we would acquire the
Carve-out Entities
. On March 8, 2017, the
FCC
granted its approval for our acquisition of the
Carve-out Entities
. Accordingly, on April 1, 2017, subsidiaries of
CWC
acquired the
Carve-out Entities
for an aggregate purchase price of
$
86.2
million
. At March 31, 2017, the
Carve-out Entities
owed
$
148.8
million
to a subsidiary of
CWC
.
11
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
We have accounted for the
CWC 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. Although most items in the valuation process remain open, the items with the highest likelihood of changing upon finalization of the valuation process include
property and equipment, goodwill, customer relationships and income taxes.
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
|
$
|
|
|
|
Other current assets
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
Goodwill (a)
|
|
|
|
|
Intangible assets subject to amortization, net (b)
|
|
|
|
|
Other assets, net
|
|
|
|
|
Current portion of debt and capital lease obligations
|
(
|
)
|
|
|
Other accrued and current liabilities
|
(
|
)
|
|
|
Long-term debt and capital lease obligations
|
(
|
)
|
|
|
Other long-term liabilities
|
(
|
)
|
|
|
Noncontrolling interests (c)
|
(
|
)
|
|
|
Total purchase price (d)
|
$
|
|
|
_______________
|
(a)
|
The goodwill recognized in connection with the
CWC Acquisition
is primarily attributable to (i) the ability to take advantage of
CWC
’s existing terrestrial and sub-sea 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 of
CWC
’s intangible assets was approximately
|
|
(c)
|
Represents the estimated aggregate fair value of the noncontrolling interests in
CWC
’s subsidiaries as of
May 16, 2016
.
|
|
(d)
|
Excludes direct acquisition costs of
$
|
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 the third-largest mobile network operator in Belgium.
12
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
Pro Forma Information
|
Three months ended
|
|||
|
March 31,
|
|||
|
2016
|
|||
|
Revenue (in millions):
|
|||
|
Liberty Global Group
|
$
|
|
|
|
LiLAC Group
|
|
|
|
|
Total
|
$
|
|
|
|
Net earnings (loss) attributable to Liberty Global shareholders (in millions):
|
|||
|
Liberty Global Shares
|
$
|
(
|
)
|
|
LiLAC Shares
|
|
|
|
|
Total
|
$
|
(
|
)
|
|
Basic and diluted earnings (loss) attributable to Liberty Global shareholders per share:
|
|||
|
Liberty Global Shares – basic and diluted
|
$
|
(
|
)
|
|
LiLAC Shares:
|
|||
|
Basic
|
$
|
|
|
|
Diluted
|
$
|
|
|
(
4
)
Investments
|
Accounting Method
|
March 31,
2017 |
December 31,
2016 |
||||||
|
|
in millions
|
|||||||
|
Equity (a):
|
||||||||
|
VodafoneZiggo JV (b)
|
$
|
|
|
$
|
|
|
||
|
Other
|
|
|
|
|
||||
|
Total — equity
|
|
|
|
|
||||
|
Fair value:
|
||||||||
|
ITV plc (
ITV
) — subject to re-use rights
|
|
|
|
|
||||
|
Sumitomo Corporation (
Sumitomo
)
|
|
|
|
|
||||
|
ITI Neovision S.A.
|
|
|
|
|
||||
|
Lions Gate Entertainment Corp (
Lionsgate
)
|
|
|
|
|
||||
|
Other
|
|
|
|
|
||||
|
Total — fair value
|
|
|
|
|
||||
|
Cost
|
|
|
|
|
||||
|
Total
|
$
|
|
|
$
|
|
|
||
13
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
_______________
|
(a)
|
At March 31, 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.
|
|
(b)
|
Amounts include a related-party note receivable (the
VodafoneZiggo JV Receivable
) with a principal amount of
$
|
Equity Method Investments
|
|
Three months ended
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
VodafoneZiggo JV (a)
|
$
|
|
|
$
|
|
|
|
|
Other
|
|
|
|
|
|||
|
Total
|
$
|
|
|
$
|
|
|
|
_______________
|
(a)
|
|
VodafoneZiggo JV
.
On December 31, 2016, pursuant to a Contribution and Transfer Agreement with Vodafone Group plc (
Vodafone
) and one of its wholly-owned subsidiaries, we and Liberty Global Europe Holding B.V., our wholly-owned subsidiary, 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 between
Vodafone
and Liberty Global (the “
VodafoneZiggo JV
”).
Ziggo Sport
, which became a subsidiary of
Ziggo Group Holding
during the fourth quarter of 2016, operates premium sports channels in the Netherlands. The
VodafoneZiggo JV
combined
Ziggo Group Holding
with
Vodafone
’s mobile business 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 (the
VodafoneZiggo JV Transaction
). As a result of the
VodafoneZiggo JV Transaction
, effective December 31, 2016 we no longer consolidate
Ziggo Group Holding
. We account for our
50
%
interest in the
VodafoneZiggo JV
, which has been attributed to the
Liberty Global Group
, as an equity method investment. We consider the
VodafoneZiggo JV
to be a related party.
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 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 is subject to post-closing adjustments, which are expected to be finalized during the second quarter of 2017. At December 31, 2016, our right to receive this cash is reflected as a current receivable from the
VodafoneZiggo JV
in our condensed consolidated balance sheet. In addition, 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.
14
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(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 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
it provides during the term of the
Framework Agreement
. During the
three months ended March 31, 2017
, we recorded revenue of
$
31.5
million
related to the
JV Services
. In addition, at
March 31, 2017
,
$
87.5
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.
|
Revenue
|
$
|
|
|
|
Loss before income taxes
|
$
|
(
|
)
|
|
Net loss
|
$
|
(
|
)
|
(
5
)
Derivative Instruments
In general, we seek to enter into derivative instruments to protect against (i) foreign currency movements, particularly with respect to borrowings that are denominated in a currency other than the functional currency of the borrowing 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 Czech koruna (
CZK
), the Hungarian forint (
HUF
), the Indian rupee (
INR
), the Jamaican dollar (
JMD
), the Philippine Peso (
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.
15
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
|
|
March 31, 2017
|
December 31, 2016
|
|||||||||||||||||||||
|
|
Current (a)
|
Long-term (a)
|
Total
|
Current (a)
|
Long-term (a)
|
Total
|
|||||||||||||||||
|
|
in millions
|
||||||||||||||||||||||
|
Assets:
|
|||||||||||||||||||||||
|
Cross-currency and interest rate derivative contracts:
|
|||||||||||||||||||||||
|
Liberty Global Group
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||
|
LiLAC Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total cross-currency and interest rate derivative contracts (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Equity-related derivative instruments – Liberty Global Group (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Foreign currency forward and option contracts:
|
|
|
|||||||||||||||||||||
|
Liberty Global Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
LiLAC Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total foreign currency forward and option contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Other – Liberty Global Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total assets:
|
|||||||||||||||||||||||
|
Liberty Global Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
LiLAC Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Liabilities:
|
|||||||||||||||||||||||
|
Cross-currency and interest rate derivative contracts:
|
|||||||||||||||||||||||
|
Liberty Global Group
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||
|
LiLAC Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total cross-currency and interest rate derivative contracts (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Equity-related derivative instruments – Liberty Global Group (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Foreign currency forward and option contracts:
|
|||||||||||||||||||||||
|
Liberty Global Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
LiLAC Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total foreign currency forward and option contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Other – Liberty Global Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total liabilities:
|
|||||||||||||||||||||||
|
Liberty Global Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
LiLAC Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
16
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
_______________
|
(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 in our fair value assessments. As of
March 31, 2017
and
December 31, 2016
, (i) the fair values of our cross-currency and interest rate derivative contracts that represented assets have been reduced by credit risk valuation adjustments aggregating
$
|
|
(c)
|
Our equity-related derivative instruments primarily include the fair value of (i) the share collar (the
ITV Collar
) with respect
ITV
shares held by our company, (ii) the share collar (the
Sumitomo Collar
) with respect to a portion of the shares of
Sumitomo
held by our company and (iii) the prepaid forward transaction (the
Lionsgate Forward
) with respect to
|
17
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
|
Three months ended
|
|||||||
|
|
March 31,
|
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Cross-currency and interest rate derivative contracts:
|
|
||||||
|
Liberty Global Group
|
$
|
(
|
)
|
$
|
(
|
)
|
|
|
LiLAC Group
|
(
|
)
|
(
|
)
|
|||
|
Total cross-currency and interest rate derivative contracts
|
(
|
)
|
(
|
)
|
|||
|
Equity-related derivative instruments – Liberty Global Group:
|
|
||||||
|
ITV Collar
|
(
|
)
|
|
|
|||
|
Sumitomo Collar
|
(
|
)
|
|
|
|||
|
Lionsgate Forward
|
|
|
|
|
|||
|
Other
|
(
|
)
|
|
|
|||
|
Total equity-related derivative instruments
|
(
|
)
|
|
|
|
||
|
Foreign currency forward contracts:
|
|
||||||
|
Liberty Global Group
|
(
|
)
|
(
|
)
|
|||
|
LiLAC Group
|
(
|
)
|
(
|
)
|
|||
|
Total foreign currency forward contracts
|
(
|
)
|
(
|
)
|
|||
|
Other – Liberty Global Group
|
|
|
(
|
)
|
|||
|
Total Liberty Global Group
|
(
|
)
|
(
|
)
|
|||
|
Total LiLAC Group
|
(
|
)
|
(
|
)
|
|||
|
Total
|
$
|
(
|
)
|
|
$
|
(
|
)
|
18
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
|
Three months ended
|
|||||||
|
|
March 31,
|
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Operating activities:
|
|||||||
|
Liberty Global Group
|
$
|
|
|
$
|
|
|
|
|
LiLAC Group
|
(
|
)
|
|
|
|||
|
Total operating activities
|
|
|
|
|
|||
|
Investing activities – LiLAC Group
|
(
|
)
|
|
|
|||
|
Financing activities – Liberty Global Group
|
(
|
)
|
(
|
)
|
|||
|
Total cash inflow (outflow):
|
|||||||
|
Liberty Global Group
|
(
|
)
|
(
|
)
|
|||
|
LiLAC Group
|
(
|
)
|
|
|
|||
|
Total
|
$
|
(
|
)
|
$
|
(
|
)
|
|
Counterparty Credit Risk
We are exposed to the risk that the counterparties to the derivative instruments of our subsidiary borrowing groups will default on their obligations to us. We manage these credit risks through the evaluation and monitoring of the creditworthiness of, and concentration of risk with, the respective counterparties. In this regard, credit risk associated with our derivative instruments is spread across a relatively broad counterparty base of banks and financial institutions. With the exception of a limited number of instances where we have required a counterparty to post collateral, neither party has posted collateral under the derivative instruments of our subsidiary borrowing groups. At
March 31, 2017
, our exposure to counterparty credit risk included derivative assets with an aggregate fair value of
$
1,694.9
million
.
19
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
Details of our Derivative Instruments
Cross-currency Derivative Contracts
As noted above, we are exposed to foreign currency exchange rate risk in situations where our debt is denominated in a currency other than the functional currency of the operations whose cash flows support our ability to repay or refinance such debt. Although we generally seek to match the denomination of our and our subsidiaries’ borrowings with the functional currency of the operations that are supporting the respective borrowings, market conditions or other factors may cause us to enter into borrowing arrangements that are not denominated in the functional currency of the underlying operations (unmatched debt). Our policy is generally to provide for an economic hedge against foreign currency exchange rate movements by using derivative instruments to synthetically convert unmatched debt into the applicable underlying currency. At
March 31, 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 and the related weighted average remaining contractual life of our cross-currency swap contracts at
March 31, 2017
:
|
Borrowing group
|
Notional amount due from counterparty
|
Notional amount due to counterparty
|
Weighted average remaining life
|
||||||||
|
|
in millions
|
in years
|
|||||||||
|
Virgin Media
|
$
|
|
|
€
|
|
|
|
||||
|
$
|
|
|
£
|
|
|
(a) (b)
|
|
||||
|
£
|
|
|
$
|
|
|
(a)
|
|
||||
|
UPC Holding
|
$
|
|
|
€
|
|
|
|
||||
|
$
|
|
|
CHF
|
|
|
(b)
|
|
||||
|
€
|
|
|
$
|
|
|
(a)
|
|
||||
|
€
|
|
|
CHF
|
|
|
|
|||||
|
€
|
|
|
CZK
|
|
|
|
|||||
|
€
|
|
|
HUF
|
|
|
|
|||||
|
€
|
|
|
PLN
|
|
|
|
|||||
|
€
|
|
|
RON
|
|
|
|
|||||
|
Unitymedia
|
$
|
|
|
€
|
|
|
|
||||
|
Telenet
|
$
|
|
|
€
|
|
|
|
||||
|
€
|
|
|
$
|
|
|
(a)
|
|
||||
|
CWC
|
$
|
|
|
JMD
|
|
|
|
||||
|
£
|
|
|
$
|
|
|
|
|||||
|
VTR Finance
|
$
|
|
|
CLP
|
|
|
|
||||
_______________
|
(a)
|
Includes certain derivative instruments that do not involve the exchange of notional amounts at the inception and maturity of the instruments. Accordingly, the only cash flows associated with these derivative instruments are interest-related payments and receipts. At March 31, 2017, the total
U.S.
dollar equivalents of the notional amounts of these derivative instruments for the
Virgin Media
,
UPC Holding
and
Telenet
borrowing groups were
$
|
20
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
|
(b)
|
|
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 life of our interest rate swap contracts at
March 31, 2017
:
|
Borrowing group
|
Notional amount due from counterparty
|
Weighted average remaining life
|
||||
|
|
in millions
|
in years
|
||||
|
Virgin Media (a)
|
$
|
|
|
|
||
|
UPC Holding
|
$
|
|
|
|
||
|
Unitymedia
|
$
|
|
|
|
||
|
Telenet (a)
|
$
|
|
|
|
||
|
CWC
|
$
|
|
|
|
||
|
Liberty Puerto Rico
|
$
|
|
|
|
||
_______________
|
(a)
|
|
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 life of our basis swap contracts at
March 31, 2017
:
|
Borrowing group
|
Notional amount due from counterparty
|
Weighted average remaining life
|
||||
|
|
in millions
|
in years
|
||||
|
Virgin Media
|
$
|
|
|
|
||
|
UPC Holding
|
$
|
|
|
|
||
|
Telenet
|
$
|
|
|
|
||
|
CWC
|
$
|
|
|
|
||
21
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
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
March 31, 2017
, the total
U.S.
dollar equivalents of the notional amounts of our interest rate caps and collars were
$
1,433.4
million
and
$
1,214.2
million
, respectively.
Impact of Derivative Instruments on Borrowing Costs
|
Borrowing group
|
Increase (decrease) to borrowing costs at March 31, 2017 (a)
|
||
|
|
|||
|
Virgin Media
|
|
%
|
|
|
Telenet
|
(
|
)%
|
|
|
Unitymedia
|
(
|
)%
|
|
|
UPC Holding
|
|
%
|
|
|
CWC
|
|
%
|
|
|
VTR Finance
|
(
|
)%
|
|
|
Liberty Puerto Rico
|
|
%
|
|
|
(a)
|
Represents the effect of derivative instruments in effect at March 31, 2017 and does not include forward-starting derivative instruments.
|
Foreign Currency Forwards and Options
(
6
)
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
, as defined and described below. The reported fair values of these investments and instruments as of
March 31, 2017
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
three months ended March 31, 2017
, no such transfers were made.
22
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
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, one of our subsidiaries entered into a securities lending arrangement (the
Sumitomo Share Loan
), pursuant to which we borrowed shares of
Sumitomo
. 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 over the terms of the derivative instruments, we have determined that these valuations fall under Level 3 of the fair value hierarchy. At
March 31, 2017
, the valuations of the
ITV Collar
, the
Sumitomo Collar
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 notes
5
and
8
, respectively. The recurring fair value measurements of these instruments are determined using discounted cash flow models. Most of the inputs to these discounted cash flow models consist of, or are derived from, observable Level 2 data for substantially the full term of these instruments. This observable data mostly includes 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. Effective January 1, 2017, we incorporated a Monte Carlo based approach into our calculation 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 current mark-to-market valuation to calculate the impact of counterparty credit risk. The adoption of a Monte Carlo based approach did not have a material impact on the overall fair value of our derivative instruments. Our and our counterparties’ credit spreads represent our most significant Level 3 inputs, and these inputs are used to derive the credit risk valuation adjustments with respect to these instruments. As we would not expect changes in our or our counterparties’ credit spreads to have a significant impact on the valuations of these instruments, we have determined that these valuations fall under Level 2 of the fair value hierarchy. Due to the lack of Level 2 inputs for the valuation of the
U.S.
dollar to Jamaican dollar cross-currency swaps held by
Sable
, we believe this valuation falls under Level 3 of the fair value hierarchy. Our credit risk valuation adjustments with respect to our cross-currency and interest rate swaps are quantified and further explained in note
5
.
Fair value measurements are also used in connection with nonrecurring valuations performed in connection with impairment assessments, acquisition accounting and the accounting for our initial investment in the
VodafoneZiggo JV
. These nonrecurring valuations include the valuation of reporting units, customer relationship and other intangible assets, property and equipment, the implied value of goodwill and the valuation of our initial investment in the
VodafoneZiggo JV
. The valuation of private reporting
23
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
units and our initial investment in the
VodafoneZiggo JV
is based at least in part on discounted cash flow analyses. With the exception of certain inputs for our weighted average cost of capital and discount rate calculations that are derived from pricing services, the inputs used in our discounted cash flow analyses, such as forecasts of future cash flows, are based on our assumptions. The valuation of customer relationships is primarily based on an excess earnings methodology, which is a form of a discounted cash flow analysis. The excess earnings methodology requires us to estimate the specific cash flows expected from the customer relationship, considering such factors as estimated customer life, the revenue expected to be generated over the life of the customer relationship, contributory asset charges and other factors. Tangible assets are typically valued using a replacement or reproduction cost approach, considering factors such as current prices of the same or similar equipment, the age of the equipment and economic obsolescence. 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, with the residual amount allocated to goodwill. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. With the exception of valuations performed in connection with updates to the acquisition accounting for the
CWC Acquisition
, we did not perform significant nonrecurring fair value measurements during the
three months ended March 31, 2017
.
|
|
|
Fair value measurements at
March 31, 2017 using:
|
|||||||||||||
|
Description
|
March 31,
2017 |
Quoted prices
in active
markets for
identical assets
(Level 1)
|
Significant
other
observable
inputs
(Level 2)
|
Significant
unobservable
inputs
(Level 3)
|
|||||||||||
|
|
in millions
|
||||||||||||||
|
Assets:
|
|||||||||||||||
|
Derivative instruments:
|
|||||||||||||||
|
Cross-currency and interest rate derivative contracts
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||
|
Equity-related derivative instruments
|
|
|
|
|
|
|
|
|
|||||||
|
Foreign currency forward and option contracts
|
|
|
|
|
|
|
|
|
|||||||
|
Other
|
|
|
|
|
|
|
|
|
|||||||
|
Total derivative instruments
|
|
|
|
|
|
|
|
|
|||||||
|
Investments
|
|
|
|
|
|
|
|
|
|||||||
|
Total assets
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||
|
Liabilities:
|
|||||||||||||||
|
Derivative instruments:
|
|||||||||||||||
|
Cross-currency and interest rate derivative contracts
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||
|
Equity-related derivative instruments
|
|
|
|
|
|
|
|
|
|||||||
|
Foreign currency forward and option contracts
|
|
|
|
|
|
|
|
|
|||||||
|
Total derivative liabilities
|
|
|
|
|
|
|
|
|
|||||||
|
Debt
|
|
|
|
|
|
|
|
|
|||||||
|
Total liabilities
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||
24
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(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
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||
|
Equity-related derivative instruments
|
|
|
|
|
|
|
|
|
|||||||
|
Foreign currency forward and option contracts
|
|
|
|
|
|
|
|
|
|||||||
|
Other
|
|
|
|
|
|
|
|
|
|||||||
|
Total derivative instruments
|
|
|
|
|
|
|
|
|
|||||||
|
Investments
|
|
|
|
|
|
|
|
|
|||||||
|
Total assets
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||
|
Liabilities:
|
|||||||||||||||
|
Derivative instruments:
|
|||||||||||||||
|
Cross-currency and interest rate derivative contracts
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||
|
Equity-related derivative instruments
|
|
|
|
|
|
|
|
|
|||||||
|
Foreign currency forward and option contracts
|
|
|
|
|
|
|
|
|
|||||||
|
Other
|
|
|
|
|
|
|
|
|
|||||||
|
Total derivative instruments
|
|
|
|
|
|
|
|
|
|||||||
|
Debt
|
|
|
|
|
|
|
|
|
|||||||
|
Total liabilities
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||
|
Investments
|
Cross-currency and interest rate derivative contracts
|
Equity-related
derivative
instruments
|
Total
|
||||||||||||
|
|
in millions
|
||||||||||||||
|
Balance of net asset (liability) at January 1, 2017
|
$
|
|
|
$
|
(
|
)
|
$
|
|
|
$
|
|
|
|||
|
Gains (losses) included in net loss (a):
|
|
|
|||||||||||||
|
Realized and unrealized losses on derivative instruments, net
|
—
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||
|
Realized and unrealized gains due to changes in fair values of certain investments and debt, net
|
|
|
—
|
|
—
|
|
|
|
|||||||
|
Additions
|
|
|
|
|
|
|
|
|
|||||||
|
Foreign currency translation adjustments, dividends and other, net
|
(
|
)
|
|
|
|
|
(
|
)
|
|||||||
|
Balance of net asset (liability) at March 31, 2017
|
$
|
|
|
$
|
(
|
)
|
$
|
|
|
$
|
|
|
|||
25
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
_______________
|
(a)
|
|
(
7
)
Long-lived Assets
Property and Equipment, Net
|
March 31,
2017 |
December 31,
2016 |
||||||
|
|
in millions
|
||||||
|
Distribution systems:
|
|||||||
|
Liberty Global Group
|
$
|
|
|
$
|
|
|
|
|
LiLAC Group
|
|
|
|
|
|||
|
Total
|
|
|
|
|
|||
|
Customer premises equipment:
|
|||||||
|
Liberty Global Group
|
|
|
|
|
|||
|
LiLAC Group
|
|
|
|
|
|||
|
Total
|
|
|
|
|
|||
|
Support equipment, buildings and land:
|
|||||||
|
Liberty Global Group
|
|
|
|
|
|||
|
LiLAC Group
|
|
|
|
|
|||
|
Total
|
|
|
|
|
|||
|
Total property and equipment, gross:
|
|||||||
|
Liberty Global Group
|
|
|
|
|
|||
|
LiLAC Group
|
|
|
|
|
|||
|
Total
|
|
|
|
|
|||
|
Accumulated depreciation:
|
|||||||
|
Liberty Global Group
|
(
|
)
|
(
|
)
|
|||
|
LiLAC Group
|
(
|
)
|
(
|
)
|
|||
|
Total
|
(
|
)
|
(
|
)
|
|||
|
Total property and equipment, net:
|
|||||||
|
Liberty Global Group
|
|
|
|
|
|||
|
LiLAC Group
|
|
|
|
|
|||
|
Total
|
$
|
|
|
$
|
|
|
|
During the
three months ended March 31, 2017
and
2016
, we recorded non-cash increases to our property and equipment related to vendor financing arrangements of
$
628.5
million
and
$
438.9
million
, respectively, which exclude related
VAT
of
$
98.4
million
and
$
61.1
million
, respectively, that were also financed by our vendors under these arrangements. In addition, during the
three months ended March 31, 2017
and
2016
, we recorded non-cash increases to our property and equipment related to assets acquired under capital leases of
$
32.3
million
and
$
27.9
million
, respectively.
26
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
Goodwill
|
January 1, 2017
|
Acquisitions
and related
adjustments
|
Foreign
currency
translation
adjustments
|
March 31,
2017 |
||||||||||||
|
|
in millions
|
||||||||||||||
|
Liberty Global Group:
|
|||||||||||||||
|
European Division:
|
|||||||||||||||
|
U.K./Ireland
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||
|
Belgium
|
|
|
|
|
|
|
|
|
|||||||
|
Germany
|
|
|
|
|
|
|
|
|
|||||||
|
Switzerland/Austria
|
|
|
|
|
|
|
|
|
|||||||
|
Total Western Europe
|
|
|
|
|
|
|
|
|
|||||||
|
Central and Eastern Europe
|
|
|
|
|
|
|
|
|
|||||||
|
Total European Division
|
|
|
|
|
|
|
|
|
|||||||
|
Corporate and other
|
|
|
|
|
|
|
|
|
|||||||
|
Total Liberty Global Group
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
LiLAC Group:
|
|||||||||||||||
|
LiLAC Division:
|
|||||||||||||||
|
CWC
|
|
|
(
|
)
|
(
|
)
|
|
|
|||||||
|
Chile
|
|
|
|
|
|
|
|
|
|||||||
|
Puerto Rico
|
|
|
|
|
|
|
|
|
|||||||
|
Total LiLAC Division
|
|
|
|
(
|
)
|
|
|
|
|
|
|
||||
|
Corporate and other (a)
|
|
|
|
|
|
|
|
|
|||||||
|
Total LiLAC Group
|
|
|
|
(
|
)
|
|
|
|
|
|
|
||||
|
Total
|
$
|
|
|
|
$
|
(
|
)
|
|
$
|
|
|
|
$
|
|
|
_______________
|
(a)
|
|
Based on the results of our October 1, 2016 goodwill impairment test, a hypothetical decline of 20% or more in the fair value of any of
CWC
’s reporting units could result in the need to record a goodwill impairment charge. If, among other factors, (i) the equity values of the
LiLAC Group
were to remain depressed or decline further or (ii) the adverse impacts of economic, competitive, regulatory or other factors were to cause
CWC
’s results of operations or cash flows to be worse than anticipated, we could conclude in future periods that impairment charges are required in order to reduce the carrying values of our goodwill and, to a lesser extent, other long-lived assets. Any such impairment charges could be significant.
27
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
Intangible Assets Subject to Amortization, Net
|
March 31, 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
|
$
|
|
|
$
|
(
|
)
|
$
|
|
|
$
|
|
|
$
|
(
|
)
|
$
|
|
|
|||||
|
LiLAC Group
|
|
|
(
|
)
|
|
|
|
|
(
|
)
|
|
|
|||||||||||
|
Total
|
|
|
(
|
)
|
|
|
|
|
(
|
)
|
|
|
|||||||||||
|
Other:
|
|||||||||||||||||||||||
|
Liberty Global Group
|
|
|
(
|
)
|
|
|
|
|
(
|
)
|
|
|
|||||||||||
|
LiLAC Group
|
|
|
(
|
)
|
|
|
|
|
(
|
)
|
|
|
|||||||||||
|
Total
|
|
|
(
|
)
|
|
|
|
|
(
|
)
|
|
|
|||||||||||
|
Total intangible assets subject to amortization, net:
|
|||||||||||||||||||||||
|
Liberty Global Group
|
|
|
(
|
)
|
|
|
|
|
(
|
)
|
|
|
|||||||||||
|
LiLAC Group
|
|
|
(
|
)
|
|
|
|
|
(
|
)
|
|
|
|||||||||||
|
Total
|
$
|
|
|
$
|
(
|
)
|
$
|
|
|
$
|
|
|
$
|
(
|
)
|
$
|
|
|
|||||
28
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
(
8
)
Debt and Capital Lease Obligations
|
|
March 31, 2017
|
Principal amount
|
||||||||||||||||||||||||
|
Weighted
average
interest
rate (a)
|
Unused borrowing capacity (b)
|
Estimated fair value (c)
|
||||||||||||||||||||||||
|
Borrowing currency
|
U.S. $
equivalent
|
March 31, 2017
|
December 31, 2016
|
March 31, 2017
|
December 31, 2016
|
|||||||||||||||||||||
|
|
|
in millions
|
||||||||||||||||||||||||
|
Liberty Global Group:
|
||||||||||||||||||||||||||
|
VM Notes
|
|
%
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||||
|
VM Credit Facilities
|
|
%
|
(d)
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Unitymedia Notes
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Unitymedia Revolving Credit Facilities
|
|
|
€
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
UPC Broadband Holding Bank Facility
|
|
%
|
€
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
UPCB SPE Notes
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
UPC Holding Senior Notes
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Telenet Credit Facility
|
|
%
|
€
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Telenet SPE Notes
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Vendor financing (e)
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
ITV Collar Loan
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Derivative-related debt instruments (f)
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Sumitomo Collar Loan
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Other (g)
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Total Liberty Global
Group
|
|
%
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
LiLAC Group:
|
||||||||||||||||||||||||||
|
CWC Notes
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
CWC Credit Facilities
|
|
%
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
VTR Finance Senior Secured Notes
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
VTR Credit Facility
|
|
|
(h)
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Liberty Puerto Rico Bank Facility
|
|
%
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Vendor financing (e)
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Total LiLAC Group
|
|
%
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total debt before unamortized premiums, discounts and deferred financing costs
|
|
%
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||||||
29
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(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:
|
March 31, 2017
|
December 31, 2016
|
|||||||||||||||
|
in millions
|
||||||||||||||||
|
Total debt before unamortized premiums, discounts and deferred financing costs
|
$
|
|
|
$
|
|
|
||||||||||
|
Unamortized premiums, net of discounts
|
|
|
|
|
||||||||||||
|
Unamortized deferred financing costs
|
(
|
)
|
(
|
)
|
||||||||||||
|
Total carrying amount of debt
|
|
|
|
|
||||||||||||
|
Capital lease obligations (i)
|
|
|
|
|
||||||||||||
|
Total debt and capital lease obligations
|
|
|
|
|
||||||||||||
|
Current maturities of debt and capital lease obligations
|
(
|
)
|
(
|
)
|
||||||||||||
|
Long-term debt and capital lease obligations
|
$
|
|
|
$
|
|
|
||||||||||
_______________
|
(a)
|
Represents the weighted average interest rate in effect at
March 31, 2017
for all borrowings outstanding pursuant to each debt instrument, including any applicable margin. The interest rates presented represent stated rates and do not include the impact of derivative instruments, deferred financing costs, original issue premiums or discounts and commitment fees, all of which affect our overall cost of borrowing. Including the effects of derivative instruments, original issue premiums or discounts and commitment fees, but excluding the impact of financing costs, our weighted average interest rate on our aggregate variable- and fixed-rate indebtedness was
|
|
(b)
|
Unused borrowing capacity represents the maximum availability under the applicable facility at
March 31, 2017
without regard to covenant compliance calculations or other conditions precedent to borrowing. At
March 31, 2017
, based on the applicable 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) 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.
|
|
Limitation on availability
|
||||||||||||||||
|
March 31, 2017
|
Upon completion of relevant March 31, 2017 compliance reporting requirements
|
|||||||||||||||
|
Borrowing currency
|
U.S. $ equivalent
|
Borrowing currency
|
U.S. $ equivalent
|
|||||||||||||
|
in millions
|
||||||||||||||||
|
Limitation on availability to be borrowed under:
|
||||||||||||||||
|
CWC Credit Facilities (1)
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
||||
|
Limitation on availability to be loaned or distributed by:
|
||||||||||||||||
|
Virgin Media
|
£
|
|
|
$
|
|
|
£
|
|
|
$
|
|
|
||||
|
Unitymedia
|
€
|
|
|
$
|
|
|
€
|
|
|
$
|
|
|
||||
30
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
_______________
|
(1)
|
The limitation on availability under the
CWC Credit Facilities
reflects letters of credit issued in connection with certain pension obligations.
|
|
(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
6
.
|
|
(d)
|
Unused borrowing capacity under the
VM Credit Facilities
relates to a multi-currency revolving facility with maximum borrowing capacity equivalent to
£
|
|
(e)
|
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
|
|
(f)
|
Represents amounts associated with certain derivative-related borrowing instruments, including
$
|
|
(g)
|
The
March 31, 2017
balance includes (i)
$
|
|
(h)
|
The
VTR Credit Facility
is the senior secured credit facility of
VTR
and certain of its subsidiaries and comprises a
$
|
|
(i)
|
|
|
March 31, 2017
|
December 31, 2016
|
||||||||||||||||
|
in millions
|
|||||||||||||||||
|
Liberty Global Group:
|
|||||||||||||||||
|
Unitymedia
|
$
|
|
|
$
|
|
|
|||||||||||
|
Telenet
|
|
|
|
|
|||||||||||||
|
Virgin Media
|
|
|
|
|
|||||||||||||
|
Other subsidiaries
|
|
|
|
|
|||||||||||||
|
Total Liberty Global Group
|
|
|
|
|
|||||||||||||
|
LiLAC Group:
|
|||||||||||||||||
|
CWC
|
|
|
|
|
|||||||||||||
|
VTR
|
|
|
|
|
|||||||||||||
|
Liberty Puerto Rico
|
|
|
|
|
|||||||||||||
|
Total LiLAC Group
|
|
|
|
|
|||||||||||||
|
Total capital lease obligations
|
$
|
|
|
$
|
|
|
|||||||||||
31
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
Refinancing Transactions - General Information
We have completed various refinancing transactions during the first
three
months of
2017
. Unless otherwise noted, the terms and conditions of the notes and credit facilities entered into are largely consistent with those of our existing notes and credit facilities with regard to covenants, events of default and change of control provisions, among other items. For information concerning the general terms and conditions of our debt, see note 10 to the consolidated financial statements included in our
10-K
.
Virgin Media
Refinancing Transactions
In January 2017, Virgin Media Secured Finance PLC (
Virgin Media Secured Finance
), a wholly-owned subsidiary of
Virgin Media
, issued
£
675.0
million
(
$
846.6
million
) principal amount of
5.0
%
senior secured notes due April 15, 2027 (the
April 2027 VM Senior Secured Notes
). The net proceeds from the
April 2027 VM Senior Secured Notes
were used to redeem in full the
£
640.0
million
(
$
802.7
million
) outstanding principal amount under the
April 2021 VM Sterling Senior Secured Notes
. In connection with these transactions,
Virgin Media
recognized a loss on debt modification and 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 deferred financing costs.
Subject to the circumstances described below, the
April 2027 VM Senior Secured Notes
are non-callable until April 15, 2022. At any time prior to April 15, 2022,
Virgin Media Secured Finance
may redeem some or all of the
April 2027 VM Senior Secured Notes
by paying a “make-whole” premium, which is the present value of all remaining scheduled interest payments to April 15, 2022 using the discount rate (as specified in the indenture) as of the redemption date plus
50
basis points
.
|
|
Redemption price
|
|
|
12-month period commencing April 15:
|
||
|
2022
|
|
|
|
2023
|
|
|
|
2024
|
|
|
|
2025 and thereafter
|
|
|
In February 2017, Virgin Media SFA Finance Limited, a wholly-owned subsidiary of
Virgin Media
, entered into a new
£
865.0
million
(
$
1,084.9
million
) term loan facility (
VM Facility J
).
VM Facility J
matures on January 31, 2026, bears interest at a rate of LIBOR +
3.50
%
and is subject to a LIBOR floor of
0.0
%
. The net proceeds from
VM Facility J
were used to prepay in full the
£
849.4
million
(
$
1,065.3
million
) outstanding principal amount under
VM Facility E
. In connection with these transactions,
Virgin Media
recognized a loss on debt modification and extinguishment, net, of
$
2.4
million
. This loss includes (i) the write-off of
$
2.0
million
of deferred financing costs and (ii) the write-off of
$
0.4
million
of unamortized discount.
In February 2017,
Virgin Media Secured Finance
launched an offer (the
Exchange Offer
) to exchange the
January 2021 VM Sterling Senior Secured Notes
for new senior secured notes due January 15, 2025 (the
2025 VM Sterling Senior Secured Notes
). The
Exchange Offer
was consummated on March 21, 2017 and
£
521.3
million
(
$
653.8
million
) aggregate principal amount of the
January 2021 VM Sterling Senior Secured Notes
were exchanged for
£
521.3
million
(
$
653.8
million
) aggregate principal amount of the
2025 VM Sterling Senior Secured Notes
. Interest on the
2025 VM Sterling Senior Secured Notes
will initially accrue at a rate of
6.0
%
up to January 15, 2021 and at a rate of
11.0
%
thereafter. The
January 2021 VM Sterling Senior Secured Notes
were exchanged for the
2025 VM Sterling Senior Secured Notes
in a non-cash transaction, other than the payment of accrued and unpaid interest on the exchanged
January 2021 VM Sterling Senior Secured Notes
. 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 write-off of
$
7.0
million
of unamortized premium and (ii) the payment of
$
1.3
million
of third-party costs.
Subject to the circumstances described below, the
2025 VM Sterling Senior Secured Notes
are non-callable until January 15, 2021. At any time prior to January 15, 2021,
Virgin Media Secured Finance
may redeem some or all of the
2025 VM Sterling Senior Secured Notes
by paying a “make-whole” premium, which is the present value of all remaining scheduled interest payments to January 15, 2021 using the discount rate (as specified in the indenture) as of the redemption date plus
50
basis points
.
32
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
|
|
Redemption price
|
|
|
12-month period commencing January 15:
|
||
|
2021
|
|
|
|
2022
|
|
|
|
2023 and thereafter
|
|
|
UPC Broadband Holding
Refinancing Transaction
In February 2017, UPC Financing Partnership, a wholly-owned subsidiary of
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
, in conjunction 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 Broadband Holding B.V. (
UPC Broadband Holding
) recognized a loss on debt modification and extinguishment, net, of
$
8.9
million
. This loss includes (i) the write-off of
$
5.8
million
of deferred financing costs and (ii) the write-off of
$
3.1
million
of unamortized discount.
For information regarding a refinancing transaction completed by a subsidiary of
Telenet
subsequent to March 31, 2017, see note
16
.
Maturities of our debt and capital lease obligations as of
March 31, 2017
are presented below (
U.S.
dollar equivalents based on
March 31, 2017
exchange rates) for the named entity and its subsidiaries, unless otherwise noted:
Debt:
|
Liberty Global Group
|
|||||||||||||||||||||||
|
Virgin Media
|
Unitymedia
|
UPC
Holding (a) |
Telenet (b)
|
Other
|
Total Liberty Global Group
|
||||||||||||||||||
|
|
in millions
|
||||||||||||||||||||||
|
Year ending December 31:
|
|||||||||||||||||||||||
|
2017 (remainder of year)
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total debt maturities
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Unamortized premiums (discounts), net
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
(
|
)
|
|||||||||||
|
Unamortized deferred financing costs
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||
|
Total debt
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||
|
Current portion
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||
|
Noncurrent portion
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||
33
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
|
LiLAC Group
|
|||||||||||||||||||||||
|
Total Liberty Global Group
|
CWC
|
VTR
|
Liberty Puerto Rico
|
Total LiLAC Group
|
Total Liberty Global
|
||||||||||||||||||
|
|
in millions
|
||||||||||||||||||||||
|
Year ending December 31:
|
|||||||||||||||||||||||
|
2017 (remainder of year)
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total debt maturities
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Unamortized premiums (discounts), net
|
(
|
)
|
|
|
|
|
(
|
)
|
|
|
|
|
|||||||||||
|
Unamortized deferred financing costs
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||
|
Total debt
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||
|
Current portion
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||
|
Noncurrent portion
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||
_______________
|
(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
.
|
34
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
|
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)
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
||||||
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total principal and interest payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Amounts representing interest
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||
|
Present value of net minimum lease payments
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
||||||
|
Current portion
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
||||||
|
Noncurrent portion
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
||||||
Non-cash Financing Transactions
35
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
(
9
)
Income Taxes
|
Three months ended
|
|||||||
|
|
March 31,
|
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Computed “expected” tax benefit (a)
|
$
|
|
|
$
|
|
|
|
|
Change in valuation allowances (b):
|
|||||||
|
Expense
|
(
|
)
|
(
|
)
|
|||
|
Benefit
|
|
|
|
|
|||
|
Non-deductible or non-taxable foreign currency exchange results (b):
|
|||||||
|
Expense
|
(
|
)
|
(
|
)
|
|||
|
Benefit
|
|
|
|
|
|||
|
Non-deductible or non-taxable interest and other items (b):
|
|||||||
|
Expense
|
(
|
)
|
(
|
)
|
|||
|
Benefit
|
|
|
|
|
|||
|
Basis and other differences in the treatment of items associated with investments in subsidiaries and affiliates (b):
|
|||||||
|
Expense
|
(
|
)
|
(
|
)
|
|||
|
Benefit
|
|
|
|
|
|||
|
Enacted tax law and rate change
|
|
|
(
|
)
|
|||
|
Recognition of previously unrecognized tax benefits
|
|
|
|
|
|||
|
International rate differences (b) (c):
|
|||||||
|
Benefit
|
|
|
|
|
|||
|
Expense
|
(
|
)
|
(
|
)
|
|||
|
Tax effect of intercompany financing
|
|
|
|
|
|||
|
Other, net
|
(
|
)
|
(
|
)
|
|||
|
Total income tax benefit (expense)
|
$
|
(
|
)
|
$
|
|
|
|
_______________
|
(a)
|
The statutory or “expected” tax rates are
U.K.
rates of
|
|
(b)
|
Country jurisdictions giving rise to income tax benefits are grouped together and shown separately from country jurisdictions giving rise to income tax expenses.
|
|
(c)
|
|
At
March 31, 2017
, our unrecognized tax benefits of
$
604.4
million
included
$
491.3
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.
36
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
We are currently undergoing income tax audits in Austria, Chile, the Czech Republic, Germany, the Netherlands, Panama, Poland, Trinidad and Tobago, the
U.S.
and certain other jurisdictions within the Caribbean and Latin America. Except as noted below, any adjustments that might arise from the foregoing examinations are not expected to have a material impact on our consolidated financial position or results of operations. In the
U.S.
, we have received notices of adjustment from the Internal Revenue Service with respect to our 2009 and 2010 income tax returns, and have entered into the appeals process with respect to the 2009 and 2010 matters. In Chile, adjustments received from the tax authorities for the tax years 2011 and 2012 are in dispute. We have appealed these adjustments to the Chilean tax court. 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. We intend to pursue the payment of the remaining portion of this receivable through all available methods. While we believe that the ultimate resolution of these proposed adjustments will not have a material impact on our consolidated financial position, results of operations or cash flows, no assurance can be given that this will be the case given the amounts involved and the complex nature of the related issues.
(
10
)
Equity
|
|
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
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||||
|
Repurchase and cancellation of Liberty Global ordinary shares
|
(
|
)
|
—
|
|
(
|
)
|
(
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||||
|
Adjustments due to changes in subsidiaries’ equity and other, net
|
—
|
|
—
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||||
|
Balance at March 31, 2017
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||||
|
|
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
|
|
|
$
|
|
|
|
|
$
|
|
|
$
|
|
|
|||||
|
LiLAC Shares
|
|
|
$
|
|
|
|
|
$
|
|
|
$
|
|
|
|||||
_______________
|
(a)
|
|
37
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
(
11
)
Share-based Compensation
Our share-based compensation expense primarily relates to the share-based incentive awards issued by
Liberty Global
to its employees and employees of its subsidiaries.
A summary of our aggregate share-based compensation expense is set forth below:
|
|
Three months ended March 31,
|
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Liberty Global:
|
|||||||
|
Performance-based incentive awards (a)
|
$
|
|
|
$
|
|
|
|
|
Other share-based incentive awards
|
|
|
|
|
|||
|
Total Liberty Global
|
|
|
|
|
|||
|
Telenet share-based incentive awards
|
|
|
|
|
|||
|
Other
|
|
|
|
|
|||
|
Total
|
$
|
|
|
$
|
|
|
|
|
Included in:
|
|||||||
|
Other operating expense:
|
|||||||
|
Liberty Global Group
|
$
|
|
|
$
|
|
|
|
|
LiLAC Group
|
|
|
|
|
|||
|
Total other operating expense
|
|
|
|
|
|||
|
SG&A expense:
|
|||||||
|
Liberty Global Group
|
|
|
|
|
|||
|
LiLAC Group
|
|
|
|
|
|||
|
Total SG&A expense
|
|
|
|
|
|||
|
Total
|
$
|
|
|
$
|
|
|
|
_______________
|
(a)
|
|
38
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
(
12
)
Restructuring Liability
|
Employee
severance
and
termination
|
Office
closures
|
Contract termination and other
|
Total
|
||||||||||||
|
|
in millions
|
||||||||||||||
|
Restructuring liability as of January 1, 2017
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||
|
Restructuring charges
|
|
|
|
|
|
|
|
|
|||||||
|
Cash paid
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||
|
Foreign currency translation adjustments and other
|
|
|
(
|
)
|
|
|
|
|
|||||||
|
Restructuring liability as of March 31, 2017
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||
|
Current portion
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||
|
Noncurrent portion
|
|
|
|
|
|
|
|
|
|||||||
|
Total
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||
(
13
)
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, share appreciation rights (
SAR
s),
PSAR
s, restricted share units (
RSU
s) and convertible securities) as if they had been exercised, vested or converted at the beginning of the periods presented.
|
Three months ended
|
|||||||
|
|
March 31,
|
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Net loss attributable to holders of:
|
|||||||
|
Liberty Global Shares
|
$
|
(
|
)
|
$
|
(
|
)
|
|
|
LiLAC Shares
|
(
|
)
|
(
|
)
|
|||
|
Net loss attributable to Liberty Global shareholders
|
$
|
(
|
)
|
$
|
(
|
)
|
|
Liberty Global Shares
We reported losses attributable to holders of
Liberty Global Shares
for the
three months ended March 31, 2017
and
2016
. Therefore, the potentially dilutive effect at
March 31, 2017
and
2016
of the following items were 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
PSU
s and, at
March 31, 2016
,
PGUs
, because such awards had not yet met the applicable performance criteria: (i) the aggregate number of shares issuable pursuant to outstanding options,
SAR
s,
PSAR
s and
RSU
s of approximately
48.7
million
and
41.9
million
, respectively, (ii) the aggregate number of shares issuable pursuant to
PSU
s and
PGUs
39
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
of approximately
7.9
million
and
10.0
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
2.7
million
, respectively.
LiLAC Shares
(
14
)
Commitments and Contingencies
Commitments
In the normal course of business, we have entered into agreements that commit our company to make cash payments in future periods with respect to network and connectivity commitments, programming 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
March 31, 2017
:
|
|
Payments due during:
|
|
|||||||||||||||||||||||||||||
|
|
Remainder
of 2017 |
|
|
||||||||||||||||||||||||||||
|
|
2018
|
2019
|
2020
|
2021
|
2022
|
Thereafter
|
Total
|
||||||||||||||||||||||||
|
|
in millions
|
||||||||||||||||||||||||||||||
|
Network and connectivity commitments
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|||||||
|
Programming commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Purchase commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Operating leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Other commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total (a)
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
_______________
|
(a)
|
The commitments included in this table do not reflect any liabilities that are included in our
March 31, 2017
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
40
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
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
$
540.3
million
(including
$
438.6
million
for the
Liberty Global Group
and
$
101.7
million
for the
LiLAC Group
) and
$
599.5
million
(including
$
534.1
million
for the
Liberty Global Group
and
$
65.4
million
for the
LiLAC Group
) during the
three
months ended
March 31, 2017
and
2016
, respectively.
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 acquisition agreements, see note
3
.
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
three
months ended
March 31, 2017
and
2016
, see note
5
.
We also have commitments pursuant to agreements with, and obligations imposed by, franchise authorities and municipalities, which may include obligations in certain markets to move aerial cable to underground ducts or to upgrade, rebuild or extend portions of our broadband communication systems. Such amounts are not included in the above table because they are not fixed or determinable.
Guarantees and Other Credit Enhancements
In the ordinary course of business, we may provide (i) indemnifications to our lenders, our vendors and certain other parties and (ii) performance and/or financial guarantees to local municipalities, our customers and vendors. Historically, these arrangements have not resulted in our company making any material payments and we do not believe that they will result in material payments in the future.
Legal and Regulatory Proceedings and Other Contingencies
Interkabel Acquisition.
On
November 26, 2007
,
Telenet
and
four
associations of municipalities in Belgium, which we refer to as the pure intercommunales or the “
PICs
,” announced a non-binding agreement-in-principle to transfer the analog and digital television activities of the
PICs
, including all existing subscribers to
Telenet
. Subsequently,
Telenet
and the
PICs
entered into a binding agreement (the
2008 PICs Agreement
), which closed effective
October 1, 2008
. Beginning in December
2007
, Proximus NV/SA (
Proximus
), the incumbent telecommunications operator in Belgium, instituted several proceedings seeking to block implementation of these agreements.
Proximus
lodged summary proceedings with the President of the Court of First Instance of Antwerp to obtain a provisional injunction preventing the
PICs
from effecting the agreement-in-principle and initiated a civil procedure on the merits claiming the annulment of the agreement-in-principle. In March
2008
, the President of the Court of First Instance of Antwerp ruled in favor of
Proximus
in the summary proceedings, which ruling was overturned by the Court of Appeal of Antwerp in June
2008
.
Proximus
brought this appeal judgment before the Cour de Cassation (the
Belgian Supreme Court
), which confirmed the appeal judgment in September 2010. On
April 6, 2009
, the Court of First Instance of Antwerp ruled in favor of the
PICs
and
Telenet
in the civil procedure on the merits, dismissing
Proximus
’s request for the rescission of the agreement-in-principle and the
2008 PICs Agreement
. On
June 12, 2009
,
Proximus
appealed this judgment with the Court of Appeal of Antwerp. In this appeal,
Proximus
is now also seeking compensation for damages should the
2008 PICs Agreement
not be rescinded. 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
(
$
1.5
billion
).
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
41
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
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
(
$
21.4
million
). We do not expect the ultimate resolution of this matter to have a material impact on our results of operations, cash flows or financial position.
No
amounts have been accrued by us with respect to this matter as the likelihood of loss is not considered to be probable.
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
(
$
81
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. We 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.
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 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.
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.
The
July 2011 Decision
aims to, and in its application may, strengthen
Telenet
’s competitors by granting them resale access to
Telenet
’s network to offer competing products and services notwithstanding
Telenet
’s substantial historical financial outlays in
42
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
developing the infrastructure. In addition, any resale access granted to competitors could (i) limit the bandwidth available to
Telenet
to provide new or expanded products and services to the customers served by its network and (ii) adversely impact
Telenet
’s ability to maintain or increase its revenue and cash flows. The extent of any such adverse impacts ultimately will be dependent on the extent that competitors take advantage of the resale access 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
£
46.6
million
(
$
58.4
million
) as of
March 31, 2017
.
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 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
(
$
18.8
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. On February 2, 2017, the Hungarian tax authorities appealed the Budapest court decision to the Hungarian Supreme Court.
No
portion of this exposure has been accrued by us as the likelihood of loss is not considered to be probable.
Other Regulatory Issues.
Video distribution, broadband internet, fixed-line telephony, mobile and content businesses are regulated in each of the countries in which we or our affiliates operate. The scope of regulation varies from country to country, although in some significant respects regulation in European markets is harmonized under the regulatory structure of the
E.U.
Adverse regulatory developments could subject our businesses to a number of risks. Regulation, including conditions imposed on us by competition or other authorities as a requirement to close acquisitions or dispositions, could limit growth, revenue and the number and types of services offered and could lead to increased operating costs and property and equipment additions. In addition, regulation may restrict our operations and subject them to further competitive pressure, including pricing restrictions, interconnect
43
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
and other access obligations, and restrictions or controls on content, including content provided by third parties. Failure to comply with current or future regulation could expose our businesses to various penalties.
Effective April 1, 2017, the rateable value of our existing network and other assets in the
U.K.
increased significantly. This increase affects the amount we pay for network infrastructure charges as the annual amount payable to the
U.K.
government is calculated by applying a percentage multiplier to the rateable value of assets. This change, together with a similar change in Ireland, will result in significant increases in our network infrastructure charges. We estimate that the aggregate amount of these increases will be approximately
£
30
million
(
$
38
million
) during 2017 and will build to a maximum aggregate increase of up to
£
100
million
(
$
125
million
) in 2021. We continue to believe that these increases are excessive and retain the right of appeal should more favorable agreements be reached with other operators. The rateable value of network and other assets constructed under our network extension program in the
U.K.
remains subject to review by the
U.K.
government.
(
15
)
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 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.
44
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
As of
March 31, 2017
, our
reportable segments
were as follows:
Consolidated:
|
•
|
European Division
:
|
|
•
|
U.K./Ireland
|
|
•
|
Germany
|
|
•
|
Belgium
|
|
•
|
Switzerland/Austria
|
|
•
|
Central and Eastern Europe
|
|
•
|
LiLAC Division:
|
|
•
|
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 months ended March 31, 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 residential and
B2B
services, including video, broadband internet and fixed-line telephony services and, with the exception of Puerto Rico, mobile services. At
March 31, 2017
, our operations in the
European Division
provided residential and
B2B
services in
11
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 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 Division
. In addition, our
LiLAC Division
provides residential and
B2B
services in (a)
18
countries, all but
one
of which are located in Latin America and the Caribbean, through
CWC
, (b) Chile through
VTR
and (c) Puerto Rico through
Liberty Puerto Rico
.
CWC
also provides (1)
B2B
services in certain other countries in Latin America and the Caribbean and (2) wholesale services over its sub-sea and terrestrial networks that connect over
30
markets in that region. The corporate and other category for the
Liberty Global Group
includes less significant consolidated operating segments that provide programming and other services, including
Ziggo Sport
through December 31, 2016. Intersegment eliminations primarily represent the elimination of intercompany transactions between our broadband communications and programming operations.
45
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(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
CWC
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
CWC
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 statement of operations. For additional information, see note
1
.
|
Revenue
|
|||||||
|
|
Three months ended
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Liberty Global Group:
|
|||||||
|
European Division:
|
|||||||
|
U.K./Ireland
|
$
|
|
|
$
|
|
|
|
|
Belgium (a)
|
|
|
|
|
|||
|
Germany
|
|
|
|
|
|||
|
Switzerland/Austria
|
|
|
|
|
|||
|
The Netherlands
|
|
|
|
|
|||
|
Total Western Europe
|
|
|
|
|
|||
|
Central and Eastern Europe
|
|
|
|
|
|||
|
Central and other (b)
|
|
|
(
|
)
|
|||
|
Total European Division
|
|
|
|
|
|||
|
Corporate and other
|
|
|
|
|
|||
|
Intersegment eliminations (c)
|
|
|
(
|
)
|
|||
|
Total Liberty Global Group
|
|
|
|
|
|
||
|
LiLAC Group:
|
|||||||
|
LiLAC Division:
|
|||||||
|
CWC
|
|
|
|
|
|||
|
Chile
|
|
|
|
|
|||
|
Puerto Rico
|
|
|
|
|
|||
|
Total LiLAC Division
|
|
|
|
|
|||
|
Intersegment eliminations
|
(
|
)
|
|
|
|||
|
Total LiLAC Group
|
|
|
|
|
|
||
|
Total consolidated revenue
|
$
|
|
|
|
$
|
|
|
|
VodafoneZiggo JV
|
$
|
|
|
$
|
|
|
|
_______________
|
(a)
|
The amount presented for the 2016 period excludes the pre-acquisition revenue of
BASE
, which was acquired on February 11, 2016.
|
46
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
|
(b)
|
The amount presented for the 2017 period primarily includes revenue earned from services provided to the
VodafoneZiggo JV
. For additional information, see note
4
.
|
|
(c)
|
The amount presented for the 2016 period primarily relates to transactions between our
European Division
and
Ziggo Sport
, which was contributed to the
VodafoneZiggo JV
as part of the
VodafoneZiggo JV Transaction
.
|
|
Adjusted OIBDA
|
|||||||
|
|
Three months ended
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Liberty Global Group:
|
|||||||
|
European Division:
|
|||||||
|
U.K./Ireland
|
$
|
|
|
$
|
|
|
|
|
Belgium (a)
|
|
|
|
|
|||
|
Germany
|
|
|
|
|
|||
|
Switzerland/Austria
|
|
|
|
|
|||
|
The Netherlands
|
|
|
|
|
|||
|
Total Western Europe
|
|
|
|
|
|||
|
Central and Eastern Europe
|
|
|
|
|
|||
|
Central and other
|
(
|
)
|
(
|
)
|
|||
|
Total European Division
|
|
|
|
|
|||
|
Corporate and other
|
(
|
)
|
(
|
)
|
|||
|
Total Liberty Global Group
|
|
|
|
|
|
||
|
LiLAC Group:
|
|||||||
|
LiLAC Division:
|
|||||||
|
CWC
|
|
|
|
|
|||
|
Chile
|
|
|
|
|
|||
|
Puerto Rico
|
|
|
|
|
|||
|
Total LiLAC Division
|
|
|
|
|
|
||
|
Corporate
|
(
|
)
|
(
|
)
|
|||
|
Total LiLAC Group
|
|
|
|
|
|
||
|
Total Adjusted OIBDA of our consolidated reportable segments
|
$
|
|
|
|
$
|
|
|
|
VodafoneZiggo JV
|
$
|
|
|
$
|
|
|
|
_______________
|
(a)
|
|
47
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
The following table provides a reconciliation of total
Adjusted OIBDA
of our
consolidated reportable segments
to
loss before income taxes:
|
|
Three months ended
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Total Adjusted OIBDA of our consolidated reportable segments
|
$
|
|
|
$
|
|
|
|
|
Share-based compensation expense
|
(
|
)
|
(
|
)
|
|||
|
Depreciation and amortization
|
(
|
)
|
(
|
)
|
|||
|
Impairment, restructuring and other operating items, net
|
(
|
)
|
(
|
)
|
|||
|
Operating income
|
|
|
|
|
|||
|
Interest expense
|
(
|
)
|
(
|
)
|
|||
|
Realized and unrealized losses on derivative instruments, net
|
(
|
)
|
(
|
)
|
|||
|
Foreign currency transaction gains, net
|
|
|
|
|
|||
|
Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net
|
|
|
(
|
)
|
|||
|
Losses on debt modification and extinguishment, net
|
(
|
)
|
(
|
)
|
|||
|
Share of losses of affiliates, net
|
(
|
)
|
(
|
)
|
|||
|
Other income, net
|
|
|
|
|
|||
|
Loss before income taxes
|
$
|
(
|
)
|
$
|
(
|
)
|
|
48
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(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
8
.
|
|
Three months ended
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Liberty Global Group:
|
|||||||
|
European Division:
|
|||||||
|
U.K./Ireland
|
$
|
|
|
$
|
|
|
|
|
Belgium (a)
|
|
|
|
|
|||
|
Germany
|
|
|
|
|
|||
|
Switzerland/Austria
|
|
|
|
|
|||
|
The Netherlands
|
|
|
|
|
|||
|
Total Western Europe
|
|
|
|
|
|||
|
Central and Eastern Europe
|
|
|
|
|
|||
|
Central and other
|
|
|
|
|
|||
|
Total European Division
|
|
|
|
|
|||
|
Corporate and other (b)
|
(
|
)
|
|
|
|||
|
Total Liberty Global Group
|
|
|
|
|
|||
|
LiLAC Group:
|
|||||||
|
CWC
|
|
|
|
|
|||
|
Chile
|
|
|
|
|
|||
|
Puerto Rico
|
|
|
|
|
|||
|
Total LiLAC Group
|
|
|
|
|
|||
|
Total consolidated property and equipment additions
|
|
|
|
|
|||
|
Assets acquired under capital-related vendor financing arrangements
|
(
|
)
|
(
|
)
|
|||
|
Assets acquired under capital leases
|
(
|
)
|
(
|
)
|
|||
|
Changes in current liabilities related to capital expenditures
|
|
|
|
|
|||
|
Total consolidated capital expenditures
|
$
|
|
|
$
|
|
|
|
|
Property and equipment additions - VodafoneZiggo JV
|
$
|
|
|
$
|
|
|
|
_______________
|
(a)
|
The amount presented for the 2016 period excludes the pre-acquisition property and equipment additions of
BASE
, which was acquired on February 11, 2016.
|
|
(b)
|
Includes amounts that represent the net impact of changes in inventory levels associated with certain centrally-procured network equipment. This equipment is ultimately transferred to operating subsidiaries within the
European Division
.
|
49
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
Revenue by Major Category
Our revenue by major category for our
consolidated reportable segments
is set forth below:
|
|
Three months ended
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Subscription revenue (a):
|
|||||||
|
Video
|
$
|
|
|
$
|
|
|
|
|
Broadband internet
|
|
|
|
|
|||
|
Fixed-line telephony
|
|
|
|
|
|||
|
Cable subscription revenue
|
|
|
|
|
|||
|
Mobile (b)
|
|
|
|
|
|||
|
Total subscription revenue
|
|
|
|
|
|||
|
B2B revenue (c)
|
|
|
|
|
|||
|
Other revenue (b) (d)
|
|
|
|
|
|||
|
Total
|
$
|
|
|
$
|
|
|
|
_______________
|
(a)
|
Subscription revenue includes amounts received from subscribers for ongoing services, excluding installation fees and late fees. 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
$
|
|
(c)
|
B2B
revenue includes 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 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 subscription revenue, aggregated
$
|
|
(d)
|
Other revenue includes, among other items,
interconnect fees, mobile handset sales, installation fees, channel carriage fees and revenue earned from services provided to the VodafoneZiggo JV.
|
50
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
Geographic Segments
The revenue of our geographic segments is set forth below:
|
|
Three months ended
March 31,
|
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Liberty Global Group:
|
|||||||
|
European Division:
|
|||||||
|
U.K.
|
$
|
|
|
$
|
|
|
|
|
Belgium (a)
|
|
|
|
|
|||
|
Germany
|
|
|
|
|
|||
|
Switzerland
|
|
|
|
|
|||
|
Ireland
|
|
|
|
|
|||
|
Poland
|
|
|
|
|
|||
|
Austria
|
|
|
|
|
|||
|
Hungary
|
|
|
|
|
|||
|
The Czech Republic
|
|
|
|
|
|||
|
Romania
|
|
|
|
|
|||
|
Slovakia
|
|
|
|
|
|||
|
Other (b)
|
|
|
|
|
|||
|
The Netherlands
|
|
|
|
|
|||
|
Total European Division
|
|
|
|
|
|||
|
Other, including intersegment eliminations
|
|
|
|
|
|||
|
Total Liberty Global Group
|
|
|
|
|
|
||
|
LiLAC Group:
|
|||||||
|
LiLAC Division:
|
|||||||
|
CWC (c):
|
|||||||
|
Panama
|
|
|
|
|
|||
|
Jamaica
|
|
|
|
|
|||
|
Bahamas
|
|
|
|
|
|||
|
Barbados
|
|
|
|
|
|||
|
Trinidad and Tobago
|
|
|
|
|
|||
|
Other (d)
|
|
|
|
|
|||
|
Total CWC
|
|
|
|
|
|||
|
Chile
|
|
|
|
|
|||
|
Puerto Rico
|
|
|
|
|
|||
|
Total LiLAC Division
|
|
|
|
|
|||
|
Intersegment eliminations
|
(
|
)
|
|
|
|||
|
Total LiLAC Group
|
|
|
|
|
|
||
|
Total consolidated revenue
|
$
|
|
|
|
$
|
|
|
|
VodafoneZiggo JV (the Netherlands)
|
$
|
|
|
$
|
|
|
|
51
LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2017
(unaudited)
_______________
|
(a)
|
The amount presented for the 2016 period excludes the pre-acquisition revenue of
BASE
, which was acquired on February 11, 2016.
|
|
(b)
|
The amount presented for the 2017 period primarily includes revenue earned from services provided to the
VodafoneZiggo JV
. For additional information, see note
4
.
|
|
(c)
|
For each
CWC
jurisdiction, the amounts presented include (i) revenue from residential and
B2B
operations and (ii) revenue derived from wholesale network customers, as applicable.
|
|
(d)
|
|
(
16
)
Subsequent Event
Telenet
Refinancing Transaction
52
|
Item 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following discussion and analysis, which should be read in conjunction with our condensed consolidated financial statements and the discussion and analysis included in our
10-K
, is intended to assist in providing an understanding of our financial condition, changes in financial condition and results of operations and is organized as follows:
|
•
|
Forward-looking Statements.
This section provides a description of certain factors that could cause actual results or events to differ materially from anticipated results or events.
|
|
•
|
Overview.
This section provides a general description of our business and recent events.
|
|
•
|
Material Changes in Results of Operations.
This section provides an analysis of our results of operations for the
three months ended March 31, 2017
and
2016
.
|
|
•
|
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
March 31, 2017
.
Forward-looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. To the extent that statements in this Quarterly Report are not recitations of historical fact, such statements constitute forward-looking statements, which, by definition, involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. In particular, statements under
Management’s Discussion and Analysis of Financial Condition and Results of Operations
and
Quantitative and Qualitative Disclosures About Market Risk
may
contain forward-looking statements, including statements regarding our business, product, foreign currency and finance strategies, our property and equipment additions (including with respect to 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 evaluating these statements, you should consider the risks and uncertainties discussed in our
10-K
, as well as the following list of some but not all of the factors that could cause actual results or events to differ materially from anticipated results or events:
|
•
|
economic and business conditions and industry trends in the countries in which we or our affiliates operate;
|
|
•
|
the competitive environment in the industries in the countries in which we or our affiliates operate, including competitor responses to our products and services;
|
|
•
|
fluctuations in currency exchange rates and interest rates;
|
|
•
|
instability in global financial markets, including sovereign debt issues and related fiscal reforms;
|
|
•
|
consumer disposable income and spending levels, including the availability and amount of individual consumer debt;
|
|
•
|
changes in consumer television viewing preferences and habits;
|
53
|
•
|
consumer acceptance of our existing service offerings, including our cable television, broadband internet, fixed-line telephony, mobile and business service offerings, and of new technology, programming alternatives and other products and services that we may offer in the future;
|
|
•
|
our ability to manage rapid technological changes;
|
|
•
|
our ability to maintain or increase the number of subscriptions to our cable television, broadband internet, fixed-line telephony and mobile service offerings and our average revenue per household;
|
|
•
|
our ability to provide satisfactory customer service, including support for new and evolving products and services;
|
|
•
|
our ability to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers;
|
|
•
|
the impact of our future financial performance, or market conditions generally, on the availability, terms and deployment of capital;
|
|
•
|
changes in, or failure or inability to comply with, government regulations in the countries in which we or our affiliates operate and adverse outcomes from regulatory proceedings;
|
|
•
|
government intervention that requires opening our broadband distribution networks to competitors, such as the obligations imposed in Belgium;
|
|
•
|
our ability to obtain regulatory approval and satisfy other conditions necessary to close acquisitions and dispositions, 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
CWC
and
BASE
, 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 extensions;
|
|
•
|
the availability of capital for the acquisition and/or development of telecommunications networks and services;
|
|
•
|
problems we may discover post-closing with the operations, including the internal controls and financial reporting process, of businesses we acquire;
|
|
•
|
the leakage of sensitive customer data;
|
|
•
|
the outcome of any pending or threatened litigation;
|
|
•
|
the loss of key employees and the availability of qualified personnel;
|
|
•
|
changes in the nature of key strategic relationships with partners and joint venturers;
|
|
•
|
our equity capital structure; and
|
54
|
•
|
events that are outside of our control, such as political unrest in international markets, terrorist attacks, malicious human acts, natural disasters, pandemics and other similar events.
|
The broadband distribution and mobile service industries are changing rapidly and, therefore, the forward-looking statements of expectations, plans and intent in this Quarterly Report are subject to a significant degree of risk. These forward-looking statements and the above-described risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based. Readers are cautioned not to place undue reliance on any forward-looking statement.
Overview
General
We are an international provider of video, broadband internet, fixed-line telephony, mobile and other communications services to residential customers and businesses, with consolidated operations at
March 31, 2017
in more than
30
countries. We provide residential and
B2B
services in (i) the
U.K.
and Ireland through
Virgin Media
, (ii) Germany through
Unitymedia
, (iii) Belgium through
Telenet
and (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 services in the Netherlands through
Ziggo Group Holding
. Following the completion of the
VodafoneZiggo JV
, 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
are collectively referred to herein as the “
European Division
.” In addition, we provide residential and
B2B
services in (a)
18
countries, predominantly in Latin America and the Caribbean, through
CWC
, (b) Chile through
VTR
and (c) Puerto Rico through
Liberty Puerto Rico
.
CWC
also provides (1)
B2B
services in certain other countries in Latin America and the Caribbean and (2) wholesale services over its sub-sea and terrestrial networks that connect over 30 markets in that region. The operations of
CWC
,
VTR
and
Liberty Puerto Rico
are collectively referred to herein as the “
LiLAC Division
.”
We have completed a number of transactions that impact the comparability of our
2017
and
2016
results of operations, including (i) the completion of the
VodafoneZiggo JV Transaction
on December 31, 2016, (ii) the
CWC Acquisition
on May 16, 2016 and (iii) the
BASE Acquisition
on February 11, 2016. For further information regarding our completed and pending 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.
Operations
At
March 31, 2017
, we owned and operated networks that passed
50,124,600
homes and served
50,442,600
revenue generating units (
RGU
s
), consisting of
20,189,600
video subscribers,
16,547,800
broadband internet subscribers and
13,705,200
fixed-line telephony subscribers. In addition, at
March 31, 2017
, we served
10,156,200
mobile subscribers.
55
The following table provides details of our organic
RGU
and mobile subscriber changes during the
three months ended March 31, 2017
and
2016
. The subscriber data provided below excludes the effect of acquisitions (
RGU
s and mobile subscribers added on the acquisition date) and other non-organic adjustments, but includes post-acquisition date
RGU
and mobile subscriber additions or losses. For definitions of our
RGU
s and mobile subscribers, see Part I of our
10-K
.
|
Liberty Global Group
|
LiLAC Group
|
Total Liberty Global
|
|||||||||||||||
|
Three months ended
March 31, |
Three months ended
March 31, |
Three months ended
March 31, |
|||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
Organic RGU additions (losses):
|
|||||||||||||||||
|
Video:
|
|||||||||||||||||
|
Basic
|
(82,100
|
)
|
(157,400
|
)
|
(1,900
|
)
|
(3,600
|
)
|
(84,000
|
)
|
(161,000
|
)
|
|||||
|
Enhanced
|
79,900
|
|
19,300
|
|
4,300
|
|
7,100
|
|
84,200
|
|
26,400
|
|
|||||
|
DTH
|
(12,900
|
)
|
(3,700
|
)
|
2,800
|
|
—
|
|
(10,100
|
)
|
(3,700
|
)
|
|||||
|
Total video
|
(15,100
|
)
|
(141,800
|
)
|
5,200
|
|
3,500
|
|
(9,900
|
)
|
|
(138,300
|
)
|
||||
|
Broadband internet
|
154,400
|
|
152,700
|
|
38,600
|
|
25,500
|
|
193,000
|
|
178,200
|
|
|||||
|
Fixed-line telephony
|
105,000
|
|
123,700
|
|
(1,900
|
)
|
(7,700
|
)
|
103,100
|
|
116,000
|
|
|||||
|
Total organic RGU additions
|
244,300
|
|
134,600
|
|
41,900
|
|
21,300
|
|
286,200
|
|
155,900
|
|
|||||
|
Organic mobile subscriber additions (losses):
|
|||||||||||||||||
|
Prepaid
|
(73,000
|
)
|
(66,500
|
)
|
27,000
|
|
(1,000
|
)
|
(46,000
|
)
|
(67,500
|
)
|
|||||
|
Postpaid
|
91,200
|
|
98,800
|
|
12,100
|
|
1,000
|
|
103,300
|
|
99,800
|
|
|||||
|
Total organic mobile subscriber additions
|
18,200
|
|
32,300
|
|
39,100
|
|
—
|
|
57,300
|
|
32,300
|
|
|||||
Competition and Other External Factors
We are experiencing significant competition from incumbent telecommunications operators,
DTH
operators and/or other providers in all of our markets, particularly in Switzerland and many of
CWC
’s markets. In the Bahamas, where
CWC
previously was the only provider of mobile services, competition has increased significantly due to the commercial launch of mobile services by a competitor during the fourth quarter of 2016.
In addition, two new fixed-line competitors have entered the market in Trinidad and Tobago. In certain of its markets,
CWC
is also experiencing increased regulatory intervention that would, if implemented, facilitate increased competition.
The significant competition we are experiencing, together with macroeconomic factors, has adversely impacted our revenue,
RGU
s and/or average monthly subscription revenue per average cable
RGU
or mobile subscriber, as applicable (
ARPU
), particularly in Barbados, the Bahamas and Trinidad and Tobago. In addition, the
VodafoneZiggo JV
is facing significant competition in the Netherlands. For additional information regarding the revenue impact of changes in the
RGU
s and
ARPU
of our consolidated reportable segments, see
Discussion and Analysis of our Reportable Segments
below
.
In addition to competition, our operations are subject to macroeconomic, political and other risks that are outside of our control. 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
.” The terms of any withdrawal 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 against the British pound sterling during the period following
Brexit
. The effects of
Brexit
could adversely affect our business, results of operations, financial condition and 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.
56
We are facing a challenging economic environment in Puerto Rico due in part to the government’s liquidity issues. In this regard, the Puerto Rico government failed to make significant portions of its scheduled debt payments during 2016 and 2017. On May 3, 2017, pursuant to a law passed in January 2016 by the U.S. Congress designed to assist with the Puerto Rico government’s debt and economic issues, the Puerto Rico government commenced a debt-restructuring process. If the fiscal and economic conditions in Puerto Rico were to worsen, 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.
Material Changes in Results of Operations
As noted under
Overview
above, the comparability of our operating results during
2017
and
2016
is affected by acquisitions, dispositions and foreign currency translation effects (
FX
). As we use the term, organic growth excludes 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 Impact
represents our estimate of the difference between the operating results of the periods under comparison that is attributable to an acquisition. In general, we base our estimate of the
Acquisition Impact
on an acquired entity’s operating results during the first three to six months following the acquisition date, as adjusted to remove integration costs and any other material unusual or nonoperational items, such that changes from those operating results in subsequent periods are considered to be organic changes. Accordingly, in the following discussion, (i) organic variances attributed to an acquired entity during the first 12 months following the acquisition date represent differences between the
Acquisition Impact
and the actual results and (ii) the calculation of our organic growth percentages includes the organic growth of an acquired entity relative to the
Acquisition Impact
of such entity.
During 2016, we changed how we calculate our organic growth 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. Notwithstanding the above and due largely to the fact that
CWC
represents a new reportable segment, we have excluded
CWC
’s operating results (excluding
$1.3 million
of integration costs that are included in the organic change for SG&A expenses and
Adjusted OIBDA
for the
three months ended March 31, 2017
) for the period from the May 16, 2016 acquisition date through March 31, 2017 from the numerator of the calculation of organic growth. In addition, in the following discussion of organic changes, we quantify the impact of the
VodafoneZiggo JV Transaction
on our results of operations. In this regard, the organic changes of
Liberty Global
are adjusted to exclude (i) the operations of
Ziggo Group Holding
and
Ziggo Sport
for the 2016 period, (ii) the revenue earned during the 2017 period from services provided to the
VodafoneZiggo JV
and (iii) certain operating and SG&A expenses incurred during the 2017 period that were allocated to our Netherlands segment during the 2016 period.
Changes in foreign currency exchange rates have a significant impact on our reported operating results as all of our operating segments, except for Puerto Rico and most of
CWC
’s operating segments, have functional currencies other than the
U.S.
dollar. Our primary exposure to
FX
risk during the
three months ended March 31, 2017
was to the euro and British pound sterling as 35.0% and 31.6% of our reported revenue during the period was derived from subsidiaries whose functional currencies are the euro and British pound sterling, respectively. In addition, our reported operating results are impacted by changes in the exchange rates for other local currencies in Europe, the Caribbean and Latin America. The portions of the changes
in the various components of our results of operations that are attributable to changes in
FX
are highlighted under
Discussion and Analysis of our Reportable Segments
and
Discussion and Analysis of our Consolidated Operating Results
below. For information 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 consolidated reportable segment’s revenue and
Adjusted OIBDA
. As we have the ability to control
Telenet
,
Liberty Puerto Rico
and certain subsidiaries of
CWC
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
CWC
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.
57
Discussion and Analysis of our Reportable Segments
General
All of the
reportable segments
set forth below derive their revenue primarily from (i) broadband communications services, including video, broadband internet and fixed-line telephony services, (ii)
B2B
services and (iii) with the exception of Puerto Rico, mobile services. For detailed information regarding the composition of our
reportable segments
, see note
15
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
of our
consolidated reportable segments
, as further discussed in note
15
to our condensed consolidated financial statements, as well as an analysis of
Adjusted OIBDA
of our
consolidated reportable segments
for the
three months ended March 31, 2017
and
2016
. 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). 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 months ended March 31, 2017
and
2016
at the end of this section.
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
as share-based compensation expense is not included in the performance measures of our
consolidated reportable segments
. Share-based compensation expense is discussed under
Discussion and Analysis of our Consolidated Operating Results
below.
The revenue 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, installation fees, channel carriage fees, revenue earned from the
VodafoneZiggo JV
, late fees and advertising revenue. Consistent with the presentation of our revenue categories in note
15
to 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.
In the
U.K.
, Belgium and
Switzerland/Austria
, we 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 Program
s, 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. 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.
58
Revenue of our Reportable Segments
General.
While not specifically discussed in the below explanations of the changes in the revenue of our
consolidated reportable segments
, we are experiencing significant competition in all of our markets. This competition has an adverse impact on our ability to increase or maintain our
RGU
s and/or
ARPU
.
Variances in the subscription revenue that we receive from our customers are a function of (i) changes in the number of
RGU
s or mobile subscribers outstanding during the period and (ii) changes in
ARPU
. Changes in
ARPU
can be attributable to (a) changes in prices, (b) changes in bundling or promotional discounts, (c) changes in the tier of services selected, (d) variances in subscriber usage patterns and (e) the overall mix of cable and mobile products within a segment during the period. In the following discussion, we discuss
ARPU
changes in terms of the net impact of the above factors on the
ARPU
that is derived from our video, broadband internet, fixed-line telephony and mobile products.
|
Three months ended March 31,
|
Increase (decrease)
|
Organic increase (decrease)
|
|||||||||||||||||||
|
|
2017
|
2016
|
$
|
%
|
$
|
%
|
|||||||||||||||
|
|
in millions, except percentages
|
||||||||||||||||||||
|
Liberty Global Group:
|
|||||||||||||||||||||
|
European Division:
|
|||||||||||||||||||||
|
U.K./Ireland
|
$
|
1,504.4
|
|
$
|
1,686.5
|
|
$
|
(182.1
|
)
|
(10.8
|
)
|
$
|
32.0
|
|
1.9
|
|
|||||
|
Belgium (a)
|
661.4
|
|
610.2
|
|
51.2
|
|
8.4
|
|
6.4
|
|
0.9
|
|
|||||||||
|
Germany
|
629.1
|
|
617.1
|
|
12.0
|
|
1.9
|
|
34.5
|
|
5.6
|
|
|||||||||
|
Switzerland/Austria
|
423.7
|
|
433.4
|
|
(9.7
|
)
|
(2.2
|
)
|
(4.8
|
)
|
(1.1
|
)
|
|||||||||
|
The Netherlands
|
—
|
|
669.8
|
|
(669.8
|
)
|
(100.0
|
)
|
—
|
|
—
|
|
|||||||||
|
Total Western Europe
|
3,218.6
|
|
4,017.0
|
|
(798.4
|
)
|
(19.9
|
)
|
68.1
|
|
2.0
|
|
|||||||||
|
Central and Eastern Europe
|
271.3
|
|
266.1
|
|
5.2
|
|
2.0
|
|
13.8
|
|
5.2
|
|
|||||||||
|
Central and other (b)
|
28.7
|
|
(2.4
|
)
|
31.1
|
|
N.M.
|
|
(0.7
|
)
|
N.M.
|
|
|||||||||
|
Total European Division
|
3,518.6
|
|
4,280.7
|
|
(762.1
|
)
|
(17.8
|
)
|
81.2
|
|
2.2
|
|
|||||||||
|
Corporate and other
|
0.4
|
|
14.6
|
|
(14.2
|
)
|
N.M.
|
|
(0.1
|
)
|
N.M.
|
|
|||||||||
|
Intersegment eliminations (c)
|
—
|
|
(11.2
|
)
|
11.2
|
|
N.M.
|
|
—
|
|
N.M.
|
|
|||||||||
|
Total Liberty Global Group
|
3,519.0
|
|
4,284.1
|
|
(765.1
|
)
|
(17.9
|
)
|
81.1
|
|
2.2
|
|
|||||||||
|
LiLAC Group:
|
|||||||||||||||||||||
|
LiLAC Division:
|
|||||||||||||||||||||
|
CWC
|
575.6
|
|
—
|
|
575.6
|
|
N.M.
|
|
—
|
|
N.M.
|
|
|||||||||
|
Chile
|
229.3
|
|
200.0
|
|
29.3
|
|
14.7
|
|
14.1
|
|
7.1
|
|
|||||||||
|
Puerto Rico
|
106.7
|
|
103.9
|
|
2.8
|
|
2.7
|
|
2.8
|
|
2.7
|
|
|||||||||
|
Total LiLAC Division
|
911.6
|
|
303.9
|
|
607.7
|
|
200.0
|
|
16.9
|
|
1.9
|
|
|||||||||
|
Intersegment eliminations
|
(0.7
|
)
|
—
|
|
(0.7
|
)
|
N.M.
|
|
(0.7
|
)
|
N.M.
|
|
|||||||||
|
Total LiLAC Group
|
910.9
|
|
303.9
|
|
607.0
|
|
199.7
|
|
16.2
|
|
1.8
|
|
|||||||||
|
Total
|
$
|
4,429.9
|
|
$
|
4,588.0
|
|
$
|
(158.1
|
)
|
(3.4
|
)
|
$
|
97.3
|
|
2.1
|
|
|||||
_______________
|
(a)
|
The amount presented for the 2016 period excludes the pre-acquisition revenue of
BASE
, which was acquired on February 11, 2016.
|
|
(b)
|
The amount presented for the 2017 period primarily includes the revenue earned from services provided to the
VodafoneZiggo JV
. For additional information, see note
4
to our condensed consolidated financial statements.
|
|
(c)
|
The amount presented for the 2016 period primarily relates to transactions between our
European Division
and
Ziggo Sport
, which was contributed to the
VodafoneZiggo JV
as part of the
VodafoneZiggo JV Transaction
.
|
59
N.M. — Not Meaningful.
U.K./Ireland
.
The
decrease
in
U.K./Ireland
’s revenue during
the
three months ended March 31, 2017
,
as compared to the corresponding period in
2016
, includes (i) an organic
increase
of
$32.0 million
or
1.9%
, (ii) the impact of acquisitions, (iii) the impact of a disposal and (iv) the impact of
FX
, as set f
orth below:
|
Subscription
revenue
|
Non-subscription
revenue
|
Total
|
|||||||||
|
in millions
|
|||||||||||
|
Increase in cable subscription revenue due to change in:
|
|||||||||||
|
Average number of RGUs (a)
|
$
|
24.7
|
|
$
|
—
|
|
$
|
24.7
|
|
||
|
ARPU (b)
|
18.5
|
|
—
|
|
18.5
|
|
|||||
|
Total increase in cable subscription revenue
|
43.2
|
|
—
|
|
43.2
|
|
|||||
|
Decrease in mobile subscription revenue (c)
|
(17.1
|
)
|
—
|
|
(17.1
|
)
|
|||||
|
Total increase in subscription revenue
|
26.1
|
|
—
|
|
26.1
|
|
|||||
|
Increase in B2B revenue (d)
|
—
|
|
3.7
|
|
3.7
|
|
|||||
|
Increase in other revenue (e)
|
—
|
|
2.2
|
|
2.2
|
|
|||||
|
Total organic increase
|
26.1
|
|
5.9
|
|
32.0
|
|
|||||
|
Impact of acquisitions
|
—
|
|
9.5
|
|
9.5
|
|
|||||
|
Impact of a disposal
|
—
|
|
(2.5
|
)
|
(2.5
|
)
|
|||||
|
Impact of FX
|
(175.4
|
)
|
(45.7
|
)
|
(221.1
|
)
|
|||||
|
Total
|
$
|
(149.3
|
)
|
$
|
(32.8
|
)
|
$
|
(182.1
|
)
|
||
_______________
|
(a)
|
The increase in cable subscription revenue related to a change in the average number of
RGU
s is attributable to the net effect of (i) an increase in the average number of broadband internet and fixed-line telephony
RGU
s in the
U.K.
, (ii) a decline in the average number of enhanced video
RGU
s in Ireland, which was mostly offset by an increase in the average number of enhanced video
RGU
s in the
U.K.
, and (iii) a decline in the average number of basic video
RGU
s in Ireland.
|
|
(b)
|
The increase in cable subscription revenue related to a change in
ARPU
is primarily attributable to the net effect of (i) a net increase primarily due to (a) higher
ARPU
from broadband internet services and (b) lower
ARPU
from video services and (ii) an improvement in
RGU
mix, as an increase in the
U.K.
was only partially offset by a decrease in Ireland. In addition,
ARPU
from video, broadband internet and fixed-line telephony services was adversely impacted by an aggregate $8.8 million decrease in revenue associated with a change in the regulations governing payment handling fees that
Virgin Media
charges to its customers in the
U.K.
|
|
(c)
|
The decrease in mobile subscription revenue relates to the net effect of (i) lower
ARPU
in the
U.K.
, including a decline of $22.9 million in postpaid mobile services revenue associated with the
U.K.
Split-contract Program
, and (ii) an increase in the average number of mobile subscribers, as an increase in the average number of postpaid mobile subscribers more than offset the decrease in the average number of prepaid mobile subscribers in the
U.K.
|
|
(d)
|
The increase in
B2B
revenue is largely due to an increase in data revenue, primarily attributable to higher volumes.
|
|
(e)
|
The increase in other revenue is primarily due to the net effect of (i) a decrease in interconnect revenue in the
U.K.
of $5.4 million, primarily due to (a) a decline in mobile short message service or “
SMS
” termination volumes and (b) lower mobile termination rates and volumes, (ii) an increase in installation revenue in the
U.K.
and (iii) an increase in broadcasting revenue in Ireland.
|
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.
60
Belgium.
The
increase
in Belgium’s revenue during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
, includes (i) an organic
increase
of
$6.4 million
or
0.9%
, (ii) the impact of the
BASE Acquisition
, (iii) the impact of disposals and (iv) the impact of
FX
, as set f
orth below:
|
Subscription
revenue
|
Non-subscription
revenue
|
Total
|
|||||||||
|
in millions
|
|||||||||||
|
Increase in cable subscription revenue due to change in:
|
|||||||||||
|
Average number of RGUs (a)
|
$
|
1.5
|
|
$
|
—
|
|
$
|
1.5
|
|
||
|
ARPU (b)
|
8.0
|
|
—
|
|
8.0
|
|
|||||
|
Total increase in cable subscription revenue
|
9.5
|
|
—
|
|
9.5
|
|
|||||
|
Decrease in mobile subscription revenue (c)
|
(4.0
|
)
|
—
|
|
(4.0
|
)
|
|||||
|
Total increase in subscription revenue
|
5.5
|
|
—
|
|
5.5
|
|
|||||
|
Increase in B2B revenue (d)
|
—
|
|
3.5
|
|
3.5
|
|
|||||
|
Decrease in other revenue (e)
|
—
|
|
(2.6
|
)
|
(2.6
|
)
|
|||||
|
Total organic increase
|
5.5
|
|
0.9
|
|
6.4
|
|
|||||
|
Impact of the BASE Acquisition
|
43.8
|
|
29.0
|
|
72.8
|
|
|||||
|
Impact of disposals
|
(2.0
|
)
|
(1.5
|
)
|
(3.5
|
)
|
|||||
|
Impact of FX
|
(19.4
|
)
|
(5.1
|
)
|
(24.5
|
)
|
|||||
|
Total
|
$
|
27.9
|
|
$
|
23.3
|
|
$
|
51.2
|
|
||
_______________
|
(a)
|
The increase in cable subscription revenue related to a change in the average number of
RGU
s is attributable to increases in the average number of broadband internet, fixed-line telephony and enhanced video
RGU
s that were mostly offset by a decline in the average number of basic video
RGU
s.
|
|
(b)
|
The increase in cable subscription revenue related to a change in
ARPU
is attributable to (i) a net increase due to (a) higher
ARPU
from broadband internet and video services and (b) lower
ARPU
from fixed-line telephony services and (ii) an improvement in
RGU
mix.
|
|
(c)
|
The decrease in mobile subscription revenue is primarily due to the net effect of (i) lower
ARPU
, largely due to a decline in usage, and (ii) an increase in the average number of subscribers, as the increase in postpaid mobile subscribers more than offset the decrease in prepaid mobile subscribers.
|
|
(d)
|
The increase in
B2B
revenue is predominantly due to higher revenue from (i) information technology security services and related equipment sales and (ii) fixed-line telephony services.
|
|
(e)
|
The decrease in other revenue is primarily due to the net impact of (i) a $5.5 million increase due to an adjustment recorded during the 2017 period to reflect the expected recovery of
VAT
paid in prior periods with respect to copyright costs, (ii) a decrease of $5.1 million in mobile handset sales, (iii) a decrease in mobile interconnect revenue, primarily due to lower mobile call volume,
and (iv) a decrease in tablet sales.
|
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.
61
Germany.
The
increase
in Germany’s revenue during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
, includes (i) an organic
increase
of
$34.5 million
or
5.6%
and (ii) the impact of
FX
, as set forth below:
|
Subscription
revenue (a)
|
Non-subscription
revenue
|
Total
|
|||||||||
|
in millions
|
|||||||||||
|
Increase in cable subscription revenue due to change in:
|
|||||||||||
|
Average number of RGUs (b)
|
$
|
15.3
|
|
$
|
—
|
|
$
|
15.3
|
|
||
|
ARPU (c)
|
9.4
|
|
—
|
|
9.4
|
|
|||||
|
Total increase in cable subscription revenue
|
24.7
|
|
—
|
|
24.7
|
|
|||||
|
Decrease in mobile subscription revenue
|
(1.2
|
)
|
—
|
|
(1.2
|
)
|
|||||
|
Total increase in subscription revenue
|
23.5
|
|
—
|
|
23.5
|
|
|||||
|
Increase in B2B revenue (d)
|
—
|
|
2.5
|
|
2.5
|
|
|||||
|
Increase in other revenue (e) (f)
|
—
|
|
8.5
|
|
8.5
|
|
|||||
|
Total organic increase
|
23.5
|
|
11.0
|
|
34.5
|
|
|||||
|
Impact of FX
|
(20.4
|
)
|
(2.1
|
)
|
(22.5
|
)
|
|||||
|
Total
|
$
|
3.1
|
|
$
|
8.9
|
|
$
|
12.0
|
|
||
_______________
|
(a)
|
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
March 31, 2017
, bulk agreements covering approximately 36% of the video subscribers that Germany serves expire by the end of 2018 or are terminable on 30-days notice. During the three months ended
March 31, 2017
, Germany’s 20 largest bulk agreement accounts generated approximately 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)
|
The increase in cable subscription revenue related to a change in the average number of
RGU
s is attributable to increases in the average number of broadband internet, fixed-line telephony and enhanced video
RGU
s that were only partially offset by a decline in the average number of basic video
RGU
s.
|
|
(c)
|
The increase in cable subscription revenue related to a change in
ARPU
is attributable to (i) an improvement in
RGU
mix and (ii) a net increase due to (a) lower
ARPU
from fixed-line telephony services and (b) higher
ARPU
from video and broadband internet services.
|
|
(d)
|
The increase in
B2B
revenue is due to higher revenue from data and voice services.
|
|
(e)
|
Other revenue includes 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 2017 through 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
March 31, 2017
. No assurance can be given that these contracts will be renewed or extended on financially equivalent terms, or at all. In June 2017, we plan to discontinue our analog video service in Germany. We estimate that the discontinuance of this service will reduce Germany’s annual channel carriage revenue and operating income by approximately
€30.0 million
(
$32.1 million
).
|
|
(f)
|
The increase in other revenue is primarily
due to the net effect of (i) an increase of $6.5 million in mobile handset sales, which typically generate relatively low or no margins, associated with the fourth quarter 2016 launch of a wholesale handset program,
(ii) an increase in installation revenue and (iii) a decrease in interconnect revenue, primarily due to lower fixed-line telephony termination rates.
|
62
Switzerland/Austria
.
The
decrease
in
Switzerland/Austria
’s revenue during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
, includes (i) an organic
decrease
of
$4.8 million
or
1.1%
, (ii) the impact of acquisitions and (iii) the impact of
FX
, as set forth below:
|
Subscription
revenue
|
Non-subscription
revenue
|
Total
|
|||||||||
|
in millions
|
|||||||||||
|
Increase (decrease) in cable subscription revenue due to change in:
|
|||||||||||
|
Average number of RGUs (a)
|
$
|
0.2
|
|
$
|
—
|
|
$
|
0.2
|
|
||
|
ARPU (b)
|
(11.3
|
)
|
—
|
|
(11.3
|
)
|
|||||
|
Total decrease in cable subscription revenue
|
(11.1
|
)
|
—
|
|
(11.1
|
)
|
|||||
|
Increase in mobile subscription revenue (c)
|
4.3
|
|
—
|
|
4.3
|
|
|||||
|
Total decrease in subscription revenue
|
(6.8
|
)
|
—
|
|
(6.8
|
)
|
|||||
|
Increase in B2B revenue (d)
|
—
|
|
0.4
|
|
0.4
|
|
|||||
|
Increase in other revenue (e)
|
—
|
|
1.6
|
|
1.6
|
|
|||||
|
Total organic increase (decrease)
|
(6.8
|
)
|
2.0
|
|
(4.8
|
)
|
|||||
|
Impact of acquisitions
|
0.4
|
|
1.6
|
|
2.0
|
|
|||||
|
Impact of FX
|
(5.5
|
)
|
(1.4
|
)
|
(6.9
|
)
|
|||||
|
Total
|
$
|
(11.9
|
)
|
$
|
2.2
|
|
$
|
(9.7
|
)
|
||
_______________
|
(a)
|
The increase in cable subscription revenue related to a change in the average number of
RGU
s is primarily attributable to the net effect of (i) a decline in the average number of basic video
RGU
s, (ii) increases in the average number of fixed-line telephony
RGU
s, broadband internet
RGU
s in Austria and enhanced video
RGU
s and (iii) a decrease in the average number of broadband internet
RGU
s in Switzerland.
|
|
(b)
|
The decrease in cable subscription revenue related to a change in
ARPU
is attributable to (i) a decrease due to lower
ARPU
from (a) fixed-line telephony and video services and (b) broadband internet services, as a decline in Switzerland was only partially offset by an increase in Austria, and (ii) an adverse change in
RGU
mix in Austria.
|
|
(c)
|
The increase in mobile subscription revenue is due to an increase in the average number of mobile subscribers.
|
|
(d)
|
The increase in
B2B
revenue is largely due to the net effect of (i) higher revenue from data services and (ii) lower revenue from fixed-line telephony services.
|
|
(e)
|
The increase in other revenue is largely due to the net effect of (i) a $3.7 million increase in Switzerland due to the release of unclaimed customer credits during the 2017 period and (ii) a decrease in installation revenue in Switzerland.
|
63
Central and Eastern Europe.
The
increase
in Central and Eastern Europe’s revenue during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
, includes (i) an organic
increase
of
$13.8 million
or
5.2%
and (ii) the impact of
FX
, as set forth below:
|
Subscription
revenue
|
Non-subscription
revenue
|
Total
|
|||||||||
|
in millions
|
|||||||||||
|
Increase (decrease) in cable subscription revenue due to change in:
|
|||||||||||
|
Average number of RGUs (a)
|
$
|
10.3
|
|
$
|
—
|
|
$
|
10.3
|
|
||
|
ARPU (b)
|
(2.6
|
)
|
—
|
|
(2.6
|
)
|
|||||
|
Total increase in cable subscription revenue
|
7.7
|
|
—
|
|
7.7
|
|
|||||
|
Increase in mobile subscription revenue
|
0.9
|
|
—
|
|
0.9
|
|
|||||
|
Total increase in subscription revenue
|
8.6
|
|
—
|
|
8.6
|
|
|||||
|
Increase in B2B revenue
|
—
|
|
2.9
|
|
2.9
|
|
|||||
|
Increase in other revenue
|
—
|
|
2.3
|
|
2.3
|
|
|||||
|
Total organic increase
|
8.6
|
|
5.2
|
|
13.8
|
|
|||||
|
Impact of FX
|
(7.2
|
)
|
(1.4
|
)
|
(8.6
|
)
|
|||||
|
Total
|
$
|
1.4
|
|
$
|
3.8
|
|
$
|
5.2
|
|
||
_______________
|
(a)
|
The increase in cable subscription revenue related to a change in the average number of
RGU
s is primarily attributable to the net effect of (i) increases in the average numbers of broadband internet, fixed-line telephony and enhanced video
RGU
s in Romania, Hungary, Poland and Slovakia, (ii) a decline in the average number of basic video
RGU
s in Hungary, Poland, Romania and Slovakia, (iii) increases in the average number of basic video and broadband internet
RGU
s in the Czech Republic, (iv) declines in the average number of fixed-line telephony and enhanced video
RGU
s in the Czech Republic and (v) an increase in the average number of
DTH
RGU
s.
|
|
(b)
|
The decrease in cable subscription revenue related to a change in
ARPU
is attributable to the net effect of (i) higher
ARPU
from video services, primarily in Poland, Hungary and
UPC DTH
, (ii) lower
ARPU
from fixed-line telephony services and (iii) lower
ARPU
from broadband internet services, primarily in Poland.
|
CWC
.
The increase in
CWC
’s revenue during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
, is 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.
64
Chile.
The
increase
in Chile’s revenue during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
, includes (i) an organic
increase
of
$14.1 million
or
7.1%
and (ii) the impact of
FX
, as set forth below:
|
Subscription
revenue
|
Non-subscription
revenue
|
Total
|
|||||||||
|
in millions
|
|||||||||||
|
Increase in cable subscription revenue due to change in:
|
|||||||||||
|
Average number of RGUs (a)
|
$
|
5.6
|
|
$
|
—
|
|
$
|
5.6
|
|
||
|
ARPU (b)
|
7.8
|
|
—
|
|
7.8
|
|
|||||
|
Total increase in cable subscription revenue
|
13.4
|
|
—
|
|
13.4
|
|
|||||
|
Increase in mobile subscription revenue (c)
|
2.9
|
|
—
|
|
2.9
|
|
|||||
|
Total increase in subscription revenue
|
16.3
|
|
—
|
|
16.3
|
|
|||||
|
Decrease in other revenue (d)
|
—
|
|
(2.2
|
)
|
(2.2
|
)
|
|||||
|
Total organic increase (decrease)
|
16.3
|
|
(2.2
|
)
|
14.1
|
|
|||||
|
Impact of FX
|
14.5
|
|
0.7
|
|
15.2
|
|
|||||
|
Total
|
$
|
30.8
|
|
$
|
(1.5
|
)
|
$
|
29.3
|
|
||
_______________
|
(a)
|
The increase in cable subscription revenue related to a change in the average number of
RGU
s is attributable to increases in the average number of broadband internet and enhanced video
RGU
s that were only partially offset by declines in the average number of fixed-line telephony and basic video
RGU
s.
|
|
(b)
|
The increase in cable subscription revenue related to a change in
ARPU
is attributable to (i) higher
ARPU
from video, broadband internet and fixed-line telephony services and (ii) an improvement in
RGU
mix. In addition, the increase in cable subscription revenue includes the $1.9 million positive impact of an adjustment recorded during the first quarter of 2016 to reflect the retroactive application of a tariff on ancillary services provided directly to customers for the period from July 2013 through February 2014.
|
|
(c)
|
The increase in mobile subscription revenue is primarily due to an increase in the average number of mobile subscribers.
|
|
(d)
|
The decrease in other revenue is predominantly due to a decrease in advertising revenue.
|
65
Puerto Rico.
The
increase
in Puerto Rico’s revenue during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
, is set forth below:
|
Subscription
revenue
|
Non-subscription
revenue
|
Total
|
|||||||||
|
in millions
|
|||||||||||
|
Increase (decrease) in cable subscription revenue due to change in:
|
|||||||||||
|
Average number of RGUs (a)
|
$
|
2.8
|
|
$
|
—
|
|
$
|
2.8
|
|
||
|
ARPU (b)
|
(0.6
|
)
|
—
|
|
(0.6
|
)
|
|||||
|
Total increase in cable subscription revenue
|
2.2
|
|
—
|
|
2.2
|
|
|||||
|
Increase in B2B revenue
|
—
|
|
0.9
|
|
0.9
|
|
|||||
|
Decrease in other revenue
|
—
|
|
(0.3
|
)
|
(0.3
|
)
|
|||||
|
Total
|
$
|
2.2
|
|
$
|
0.6
|
|
$
|
2.8
|
|
||
_______________
|
(a)
|
The increase in cable subscription revenue related to a change in the average number of
RGU
s is attributable to increases in the average number of fixed-line telephony and broadband internet
RGU
s that were only partially offset by a decline in the average number of enhanced video
RGU
s.
|
|
(b)
|
The decrease in cable subscription revenue related to a change in
ARPU
is attributable to the net effect of (i) an adverse change in
RGU
mix and (ii) a net increase due to (a) higher
ARPU
from broadband internet services and (b) lower
ARPU
from fixed-line telephony and video services.
|
Programming and Other Direct Costs of Services of our Reportable Segments
General.
Programming and other direct costs of services include programming and copyright costs, mobile access and interconnect costs, mobile handset and other equipment cost of goods sold and other direct costs related to our operations. Programming and copyright costs, which represent a significant portion of our operating costs, are expected to rise in future periods as a result of (i) higher costs associated with the expansion of our digital video content, including rights associated with ancillary product offerings and rights that provide for the broadcast of live sporting events, (ii) rate increases and (iii) growth in the number of our enhanced video subscribers.
66
|
|
Three months ended March 31,
|
Increase (decrease)
|
Organic increase (decrease)
|
||||||||||||||||||
|
|
2017
|
2016
|
$
|
%
|
$
|
%
|
|||||||||||||||
|
|
in millions, except percentages
|
||||||||||||||||||||
|
Liberty Global Group:
|
|||||||||||||||||||||
|
European Division:
|
|||||||||||||||||||||
|
U.K./Ireland
|
$
|
448.4
|
|
$
|
505.2
|
|
$
|
(56.8
|
)
|
(11.2
|
)
|
$
|
4.8
|
|
0.9
|
|
|||||
|
Belgium (a)
|
178.5
|
|
168.4
|
|
10.1
|
|
6.0
|
|
(7.2
|
)
|
(3.8
|
)
|
|||||||||
|
Germany
|
58.3
|
|
54.7
|
|
3.6
|
|
6.6
|
|
5.6
|
|
10.3
|
|
|||||||||
|
Switzerland/Austria
|
56.4
|
|
58.0
|
|
(1.6
|
)
|
(2.8
|
)
|
(0.6
|
)
|
(1.0
|
)
|
|||||||||
|
The Netherlands
|
—
|
|
124.7
|
|
(124.7
|
)
|
(100.0
|
)
|
—
|
|
—
|
|
|||||||||
|
Total Western Europe
|
741.6
|
|
911.0
|
|
(169.4
|
)
|
(18.6
|
)
|
2.6
|
|
0.3
|
|
|||||||||
|
Central and Eastern Europe
|
69.3
|
|
60.2
|
|
9.1
|
|
15.1
|
|
10.9
|
|
18.2
|
|
|||||||||
|
Central and other
|
1.0
|
|
(1.5
|
)
|
2.5
|
|
N.M.
|
|
1.8
|
|
N.M.
|
|
|||||||||
|
Total European Division
|
811.9
|
|
969.7
|
|
(157.8
|
)
|
(16.3
|
)
|
15.3
|
|
1.7
|
|
|||||||||
|
Corporate and other
|
0.1
|
|
13.9
|
|
(13.8
|
)
|
N.M.
|
|
(0.1
|
)
|
N.M.
|
|
|||||||||
|
Intersegment eliminations
|
—
|
|
(11.2
|
)
|
11.2
|
|
N.M.
|
|
0.1
|
|
N.M.
|
|
|||||||||
|
Total Liberty Global Group
|
812.0
|
|
972.4
|
|
(160.4
|
)
|
(16.5
|
)
|
15.3
|
|
1.7
|
|
|||||||||
|
LiLAC Group:
|
|||||||||||||||||||||
|
LiLAC Division:
|
|||||||||||||||||||||
|
CWC
|
133.4
|
|
—
|
|
133.4
|
|
N.M.
|
|
—
|
|
N.M.
|
|
|||||||||
|
Chile
|
61.6
|
|
54.6
|
|
7.0
|
|
12.8
|
|
2.9
|
|
5.3
|
|
|||||||||
|
Puerto Rico
|
27.6
|
|
29.4
|
|
(1.8
|
)
|
(6.1
|
)
|
(1.8
|
)
|
(6.1
|
)
|
|||||||||
|
Total LiLAC Division
|
222.6
|
|
84.0
|
|
138.6
|
|
165.0
|
|
1.1
|
|
0.5
|
|
|||||||||
|
Intersegment eliminations
|
(0.7
|
)
|
(0.1
|
)
|
(0.6
|
)
|
N.M.
|
|
(0.6
|
)
|
N.M.
|
|
|||||||||
|
Total LiLAC Group
|
221.9
|
|
83.9
|
|
138.0
|
|
164.5
|
|
0.5
|
|
0.2
|
|
|||||||||
|
Total
|
$
|
1,033.9
|
|
$
|
1,056.3
|
|
$
|
(22.4
|
)
|
(2.1
|
)
|
$
|
15.8
|
|
1.4
|
|
|||||
_______________
|
(a)
|
The amount presented for the 2016 period excludes the pre-acquisition programming and other direct costs of services of
BASE
, which was acquired on February 11, 2016.
|
N.M. — Not Meaningful.
67
European Division
.
The
European Division
’s programming and other direct costs of services decreased
$157.8 million
or
16.3%
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This decrease includes (i) a decrease of
$124.5 million
attributable to the net impact of the
VodafoneZiggo JV Transaction
, (ii) an increase of
$31.9 million
attributable to the
BASE Acquisition
and other less significant acquisitions and (iii) a decrease of
$3.0 million
attributable to the impact of dispositions. Excluding the effects of the
VodafoneZiggo JV Transaction
, acquisitions, dispositions and
FX
, the
European Division
’s programming and other direct costs of services
increased
$15.3 million
or
1.7%
. This increase includes the following factors:
|
•
|
An increase in programming and copyright costs of $36.0 million or 7.8%,
primarily due to increases in
U.K./Ireland
and, to a lesser extent, Belgium and Hungary.
These increases are primarily due to (i) higher costs for certain premium and/or basic content, including (a) an increase of $6.4 million associated with a Europe-wide programming contract that was entered into in June 2016 with retroactive impact to January 1, 2016 and (b) higher costs for sports rights in
U.K./Ireland
, and (ii) growth in the number of enhanced video subscribers in Belgium;
|
|
•
|
A decrease in mobile access and interconnect costs of $11.0 million or 4.5%, primarily due to (i) lower mobile usage in
U.K./Ireland
and Belgium, (ii) higher
MVNO
costs, primarily in
U.K./Ireland
, Switzerland/Austria and Belgium, (iii) lower fixed-line telephony call volumes in
U.K./Ireland
, Switzerland/Austria and Germany and (iv) a decline resulting from lower interconnect rates, primarily in
U.K./Ireland
and Germany; and
|
|
•
|
A decrease in mobile handset costs of $9.2 million, primarily due to the net effect of (i) lower mobile handset sales volumes, as decreases in Belgium and
U.K./Ireland
were only partially offset by an increase in Germany, and (ii) a higher average cost per handset sold in
U.K./Ireland
. The lower number of handsets sold in Belgium is partially attributable to a reduction in subsidized handset promotions.
|
LiLAC Division
.
The
LiLAC Division
’s programming and other direct costs of services increased
$138.6 million
or
165.0%
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This increase includes an increase of
$133.4 million
attributable to the impact of the
CWC
Acquisition. Excluding the effects of this acquisition and
FX
, the
LiLAC Division
’s programming and other direct costs of services increased
$1.1 million
or
0.5%
. This increase includes the following factors:
|
•
|
An increase in mobile handset costs of $1.5 million, primarily due to higher mobile handset sales in Chile;
|
|
•
|
An increase in mobile access and interconnect costs of $0.8 million or 4.9%, primarily in Chile, due to the net effect of (i) higher
MVNO
charges and (ii) a net decline resulting from lower interconnect rates and higher call volumes; and
|
|
•
|
A decrease in programming and copyright costs of $0.8 million or 1.3%, primarily associated with the net effect of (i) decreased costs for certain premium content, (ii) growth in the number of enhanced video subscribers in Chile, (iii) an increase arising from foreign currency exchange rate fluctuations, after giving effect to derivative instruments that hedge the currency exposure associated with Chile’s
U.S.
dollar-denominated programming contracts, and (iv) declines in the number of basic video subscribers in Chile. During 2016,
CWC
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, which are excluded from the calculation of organic growth, represents a significant portion of
CWC
’s programming costs.
|
68
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 March 31,
|
Increase (decrease)
|
Organic increase (decrease)
|
||||||||||||||||||
|
|
2017
|
2016
|
$
|
%
|
$
|
%
|
|||||||||||||||
|
|
in millions, except percentages
|
||||||||||||||||||||
|
Liberty Global Group:
|
|||||||||||||||||||||
|
European Division:
|
|||||||||||||||||||||
|
U.K./Ireland
|
$
|
201.5
|
|
$
|
221.6
|
|
$
|
(20.1
|
)
|
(9.1
|
)
|
$
|
8.1
|
|
3.6
|
|
|||||
|
Belgium (a)
|
92.5
|
|
80.4
|
|
12.1
|
|
15.0
|
|
3.6
|
|
3.9
|
|
|||||||||
|
Germany
|
89.9
|
|
88.5
|
|
1.4
|
|
1.6
|
|
4.5
|
|
5.1
|
|
|||||||||
|
Switzerland/Austria
|
57.1
|
|
59.5
|
|
(2.4
|
)
|
(4.0
|
)
|
(2.2
|
)
|
(3.7
|
)
|
|||||||||
|
The Netherlands
|
—
|
|
87.0
|
|
(87.0
|
)
|
(100.0
|
)
|
—
|
|
—
|
|
|||||||||
|
Total Western Europe
|
441.0
|
|
537.0
|
|
(96.0
|
)
|
(17.9
|
)
|
14.0
|
|
3.0
|
|
|||||||||
|
Central and Eastern Europe
|
49.4
|
|
51.2
|
|
(1.8
|
)
|
(3.5
|
)
|
(0.1
|
)
|
(0.2
|
)
|
|||||||||
|
Central and other
|
32.3
|
|
32.1
|
|
0.2
|
|
0.6
|
|
(1.5
|
)
|
(4.1
|
)
|
|||||||||
|
Total European Division
|
522.7
|
|
620.3
|
|
(97.6
|
)
|
(15.7
|
)
|
12.4
|
|
2.2
|
|
|||||||||
|
Corporate and other
|
4.0
|
|
1.0
|
|
3.0
|
|
N.M.
|
|
3.4
|
|
N.M.
|
|
|||||||||
|
Intersegment eliminations
|
0.4
|
|
0.2
|
|
0.2
|
|
N.M.
|
|
(0.4
|
)
|
N.M.
|
|
|||||||||
|
Total Liberty Global Group
|
527.1
|
|
621.5
|
|
(94.4
|
)
|
(15.2
|
)
|
15.4
|
|
2.8
|
|
|||||||||
|
LiLAC Group:
|
|||||||||||||||||||||
|
LiLAC Division:
|
|||||||||||||||||||||
|
CWC
|
109.0
|
|
—
|
|
109.0
|
|
N.M.
|
|
—
|
|
N.M.
|
|
|||||||||
|
Chile
|
36.9
|
|
33.7
|
|
3.2
|
|
9.5
|
|
0.9
|
|
2.6
|
|
|||||||||
|
Puerto Rico
|
15.4
|
|
16.1
|
|
(0.7
|
)
|
(4.3
|
)
|
(0.7
|
)
|
(4.3
|
)
|
|||||||||
|
Total LiLAC Division
|
161.3
|
|
49.8
|
|
111.5
|
|
223.9
|
|
0.2
|
|
0.1
|
|
|||||||||
|
Corporate
|
(0.1
|
)
|
—
|
|
(0.1
|
)
|
N.M.
|
|
—
|
|
N.M.
|
|
|||||||||
|
Intersegment eliminations
|
—
|
|
0.1
|
|
(0.1
|
)
|
N.M.
|
|
(0.1
|
)
|
N.M.
|
|
|||||||||
|
Total LiLAC Group
|
161.2
|
|
49.9
|
|
111.3
|
|
223.0
|
|
0.1
|
|
0.1
|
|
|||||||||
|
Total other operating expenses excluding share-based compensation expense
|
688.3
|
|
671.4
|
|
16.9
|
|
2.5
|
|
$
|
15.5
|
|
2.2
|
|
||||||||
|
Share-based compensation expense
|
1.4
|
|
0.7
|
|
0.7
|
|
100.0
|
|
|||||||||||||
|
Total
|
$
|
689.7
|
|
$
|
672.1
|
|
$
|
17.6
|
|
2.6
|
|
||||||||||
_______________
|
(a)
|
The amount presented for the 2016 period excludes the pre-acquisition other operating expenses of
BASE
, which was acquired on February 11, 2016.
|
N.M. — Not Meaningful.
69
European Division
.
The
European Division
’s other operating expenses (exclusive of share-based compensation expense) decreased
$97.6 million
or
15.7%
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This decrease includes (i) a net decrease of
$82.2 million
attributable to the impact of the
VodafoneZiggo JV Transaction
, (ii) an increase of
$13.8 million
attributable to the impact of the
BASE Acquisition
and other less significant acquisitions and (iii) a decrease of
$0.3 million
attributable to the impact of dispositions. Excluding the effects of the
VodafoneZiggo JV Transaction
, acquisitions, dispositions and
FX
, the
European Division
’s other operating expenses increased
$12.4 million
or
2.2%
. This increase includes the following factors:
|
•
|
An increase in network-related expenses of $15.9 million or 8.9%.
This increase is primarily due to the net effect of (i) higher network maintenance costs, primarily in
U.K./Ireland
and Belgium, (ii) a $5.9 million increase in
U.K./Ireland
associated with the impact of the settlement of an operational contingency recorded during the first quarter of 2016 and (iii) lower outsourced labor costs primarily associated with customer-facing activities in Germany.
For information regarding significantly increased charges for network infrastructure in
U.K./Ireland
that became effective April 1, 2017, see note
14
to our condensed consolidated financial statements;
|
|
•
|
A decrease in personnel costs of $13.8 million or 7.5%, due primarily to the net effect of (i) lower staffing levels, as decreases in
U.K./Ireland
, the
European Division
’s central operations, Germany and Switzerland/Austria were only partially offset by an increase in Belgium, (ii) decreased costs in
U.K./Ireland
resulting from higher proportions of capitalized labor costs associated with the network extension project in the
U.K.
, (iii) annual wage increases and (iv) lower incentive compensation costs, primarily in
U.K./Ireland
;
|
|
•
|
An increase in outsourced labor and professional fees of $8.4 million or 12.3%, primarily due to higher third-party call center costs in Germany and
U.K./Ireland
;
|
|
•
|
A decrease in vehicle expenses of $1.4 million or 16.1%, primarily in
U.K./Ireland
and, to a lesser extent, Switzerland/Austria and Romania. This decrease is due largely to (i) a higher proportion of vehicles accounted for as capital leases, as a result of the conversion of certain operating leases to capital leases, and (ii) fewer vehicles; and
|
|
•
|
A net increase resulting from individually insignificant changes in other operating expense categories.
|
LiLAC Division
.
The
LiLAC Division
’s other operating expenses (exclusive of share-based compensation expense) increased
$111.5 million
or
223.9%
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This
increase includes an increase of
$109.0 million
attributable to the impact of the
CWC Acquisition
. Excluding the effects of this acquisition and
FX
, the
LiLAC Division
’s other operating expenses increased
$0.2 million
or
0.1%
. This increase includes the following factors:
|
•
|
An increase in outsourced labor and professional fees of $1.4 million or 39.1%, primarily due to higher third-party call center costs in Chile; and
|
|
•
|
A decrease in personnel costs of $1.3 million or 8.6%, predominantly in Chile, primarily due to (i) lower staffing levels and (ii) lower incentive compensation costs.
|
70
SG&A Expenses of our Reportable Segments
General.
SG&A expenses include human resources, information technology, general services, management, finance, legal, external sales and marketing costs, share-based compensation and other general expenses.
|
|
Three months ended March 31,
|
Increase (decrease)
|
Organic increase (decrease)
|
||||||||||||||||||
|
|
2017
|
2016
|
$
|
%
|
$
|
%
|
|||||||||||||||
|
|
in millions, except percentages
|
||||||||||||||||||||
|
Liberty Global Group:
|
|||||||||||||||||||||
|
European Division:
|
|||||||||||||||||||||
|
U.K./Ireland
|
$
|
206.0
|
|
$
|
215.1
|
|
$
|
(9.1
|
)
|
(4.2
|
)
|
$
|
17.8
|
|
8.2
|
|
|||||
|
Belgium (a)
|
92.5
|
|
91.6
|
|
0.9
|
|
1.0
|
|
(13.0
|
)
|
(11.9
|
)
|
|||||||||
|
Germany
|
98.1
|
|
94.5
|
|
3.6
|
|
3.8
|
|
7.1
|
|
7.5
|
|
|||||||||
|
Switzerland/Austria
|
55.1
|
|
57.8
|
|
(2.7
|
)
|
(4.7
|
)
|
(1.8
|
)
|
(3.0
|
)
|
|||||||||
|
The Netherlands
|
—
|
|
90.2
|
|
(90.2
|
)
|
(100.0
|
)
|
—
|
|
—
|
|
|||||||||
|
Total Western Europe
|
451.7
|
|
549.2
|
|
(97.5
|
)
|
(17.8
|
)
|
10.1
|
|
2.1
|
|
|||||||||
|
Central and Eastern Europe
|
41.6
|
|
43.8
|
|
(2.2
|
)
|
(5.0
|
)
|
(1.0
|
)
|
(2.4
|
)
|
|||||||||
|
Central and other
|
37.4
|
|
51.3
|
|
(13.9
|
)
|
(27.1
|
)
|
(12.2
|
)
|
(23.8
|
)
|
|||||||||
|
Total European Division
|
530.7
|
|
644.3
|
|
(113.6
|
)
|
(17.6
|
)
|
(3.1
|
)
|
(0.5
|
)
|
|||||||||
|
Corporate and other
|
44.9
|
|
52.5
|
|
(7.6
|
)
|
N.M.
|
|
(5.1
|
)
|
N.M.
|
|
|||||||||
|
Intersegment eliminations
|
(0.4
|
)
|
(0.2
|
)
|
(0.2
|
)
|
N.M.
|
|
0.3
|
|
N.M.
|
|
|||||||||
|
Total Liberty Global Group
|
575.2
|
|
696.6
|
|
(121.4
|
)
|
(17.4
|
)
|
(7.9
|
)
|
(1.3
|
)
|
|||||||||
|
LiLAC Group:
|
|||||||||||||||||||||
|
LiLAC Division:
|
|||||||||||||||||||||
|
CWC
|
120.1
|
|
—
|
|
120.1
|
|
N.M.
|
|
1.3
|
|
1.1
|
|
|||||||||
|
Chile
|
39.2
|
|
35.4
|
|
3.8
|
|
10.7
|
|
1.2
|
|
3.4
|
|
|||||||||
|
Puerto Rico
|
12.4
|
|
11.6
|
|
0.8
|
|
6.9
|
|
0.8
|
|
6.9
|
|
|||||||||
|
Total LiLAC Division
|
171.7
|
|
47.0
|
|
124.7
|
|
265.3
|
|
3.3
|
|
2.0
|
|
|||||||||
|
Corporate
|
2.2
|
|
1.2
|
|
1.0
|
|
83.3
|
|
0.9
|
|
3.4
|
|
|||||||||
|
Total LiLAC Group
|
173.9
|
|
48.2
|
|
125.7
|
|
260.8
|
|
4.2
|
|
2.5
|
|
|||||||||
|
Total SG&A expenses excluding share-based compensation expense
|
749.1
|
|
744.8
|
|
4.3
|
|
0.6
|
|
$
|
(3.7
|
)
|
(0.5
|
)
|
||||||||
|
Share-based compensation expense
|
37.6
|
|
68.3
|
|
(30.7
|
)
|
(44.9
|
)
|
|||||||||||||
|
Total
|
$
|
786.7
|
|
$
|
813.1
|
|
$
|
(26.4
|
)
|
(3.2
|
)
|
||||||||||
_______________
|
(a)
|
The amount presented for the 2016 period excludes the pre-acquisition SG&A expenses of
BASE
, which was acquired on February 11, 2016.
|
N.M. — Not Meaningful.
71
Supplemental SG&A expense information:
|
|
Three months ended March 31,
|
Increase (decrease)
|
Organic increase (decrease)
|
||||||||||||||||||
|
|
2017
|
2016
|
$
|
%
|
$
|
%
|
|||||||||||||||
|
|
in millions, except percentages
|
||||||||||||||||||||
|
Liberty Global Group:
|
|||||||||||||||||||||
|
General and administrative (a)
|
$
|
390.3
|
|
$
|
483.6
|
|
$
|
(93.3
|
)
|
(19.3
|
)
|
$
|
(16.1
|
)
|
(3.7
|
)
|
|||||
|
External sales and marketing
|
184.9
|
|
213.0
|
|
(28.1
|
)
|
(13.2
|
)
|
8.2
|
|
4.3
|
|
|||||||||
|
575.2
|
|
696.6
|
|
(121.4
|
)
|
(17.4
|
)
|
(7.9
|
)
|
(1.3
|
)
|
||||||||||
|
LiLAC Group:
|
|||||||||||||||||||||
|
General and administrative (a)
|
142.3
|
|
31.6
|
|
110.7
|
|
350.3
|
|
4.7
|
|
3.5
|
|
|||||||||
|
External sales and marketing
|
31.6
|
|
16.6
|
|
15.0
|
|
90.4
|
|
(0.5
|
)
|
(1.7
|
)
|
|||||||||
|
173.9
|
|
48.2
|
|
125.7
|
|
260.8
|
|
4.2
|
|
2.5
|
|
||||||||||
|
Total:
|
|||||||||||||||||||||
|
General and administrative (a)
|
532.6
|
|
515.2
|
|
17.4
|
|
3.4
|
|
(11.4
|
)
|
(2.0
|
)
|
|||||||||
|
External sales and marketing
|
216.5
|
|
229.6
|
|
(13.1
|
)
|
(5.7
|
)
|
7.7
|
|
3.4
|
|
|||||||||
|
Total
|
$
|
749.1
|
|
$
|
744.8
|
|
$
|
4.3
|
|
0.6
|
|
$
|
(3.7
|
)
|
(0.5
|
)
|
|||||
_______________
|
(a)
|
General and administrative expenses include all personnel-related costs within our SG&A expenses, including personnel-related costs associated with our sales and marketing function.
|
European Division
.
The
European Division
’s SG&A expenses (exclusive of share-based compensation expense)
decreased
$113.6 million
or
17.6%
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This decrease includes (i) a decrease of
$90.2 million
attributable to the impact of the
VodafoneZiggo JV Transaction
, (ii) an increase of
$20.8 million
attributable to the impact of the
BASE Acquisition
and other less significant acquisitions and (iii)
$0.1 million
attributable to the impact of dispositions. Excluding the effects of the
VodafoneZiggo JV Transaction
, acquisitions, dispositions and
FX
, the
European Division
’s SG&A expenses decreased
$3.1 million
or
0.5%
. This decrease includes the following factors:
|
•
|
An increase in external sales and marketing costs of $6.4 million or 3.4%,
primarily due to (i) higher costs associated with advertising campaigns, as an increase in
U.K./Ireland
was only partially offset by a decrease in Belgium, and (ii) higher third-party sales commissions, primarily in
U.K./Ireland
and Germany;
|
|
•
|
A decrease in information technology-related expenses of $5.5 million or 23.7%, primarily due to lower software and other information technology-related maintenance costs in the
European Division
’s central operations and Belgium; and
|
|
•
|
A decrease in outsourced labor and professional fees of $4.5 million or 13.5%,
primarily due to decreases in (i) consulting costs, primarily in the
European Division
’s central operations, and (ii)
legal costs.
|
LiLAC Division
.
The
LiLAC Division
’s SG&A expenses (exclusive of share-based compensation expense) increased
$124.7 million
or
265.3%
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This increase includes an increase of
$118.8 million
attributable to the impact of the
CWC Acquisition
. Excluding the effects of this acquisition and
FX
, the
LiLAC Division
’s SG&A expenses increased
$3.3 million
or
2.0%
. This increase includes the following factors:
|
•
|
An increase in personnel costs of $1.4 million or 9.4%, primarily due to (i) annual wage increases and (ii) higher severance costs in Chile; and
|
|
•
|
An increase in integration costs of $1.3 million incurred during 2017, primarily related to the integration of
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.
|
72
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
Adjusted OIBDA
of our
consolidated reportable segments
to our loss before income taxes, see note
15
to our condensed consolidated financial statements.
|
|
Three months ended March 31,
|
Increase (decrease)
|
Organic increase (decrease)
|
||||||||||||||||||
|
|
2017
|
2016
|
$
|
%
|
$
|
%
|
|||||||||||||||
|
|
in millions, except percentages
|
||||||||||||||||||||
|
Liberty Global Group:
|
|||||||||||||||||||||
|
European Division:
|
|||||||||||||||||||||
|
U.K./Ireland
|
$
|
648.5
|
|
$
|
744.6
|
|
$
|
(96.1
|
)
|
(12.9
|
)
|
$
|
1.3
|
|
0.2
|
|
|||||
|
Belgium (a)
|
297.9
|
|
269.8
|
|
28.1
|
|
10.4
|
|
23.0
|
|
8.0
|
|
|||||||||
|
Germany
|
382.8
|
|
379.4
|
|
3.4
|
|
0.9
|
|
17.3
|
|
4.6
|
|
|||||||||
|
Switzerland/Austria
|
255.1
|
|
258.1
|
|
(3.0
|
)
|
(1.2
|
)
|
(0.2
|
)
|
(0.1
|
)
|
|||||||||
|
The Netherlands
|
—
|
|
367.9
|
|
(367.9
|
)
|
(100.0
|
)
|
—
|
|
—
|
|
|||||||||
|
Total Western Europe
|
1,584.3
|
|
2,019.8
|
|
(435.5
|
)
|
(21.6
|
)
|
41.4
|
|
2.5
|
|
|||||||||
|
Central and Eastern Europe
|
111.0
|
|
110.9
|
|
0.1
|
|
0.1
|
|
4.0
|
|
3.6
|
|
|||||||||
|
Central and other
|
(42.0
|
)
|
(84.3
|
)
|
42.3
|
|
50.2
|
|
11.2
|
|
10.2
|
|
|||||||||
|
Total European Division
|
1,653.3
|
|
2,046.4
|
|
(393.1
|
)
|
(19.2
|
)
|
56.6
|
|
3.3
|
|
|||||||||
|
Corporate and other
|
(48.6
|
)
|
(52.8
|
)
|
4.2
|
|
8.0
|
|
1.7
|
|
N.M.
|
|
|||||||||
|
Intersegment eliminations
|
—
|
|
—
|
|
—
|
|
N.M.
|
|
—
|
|
N.M.
|
|
|||||||||
|
Total Liberty Global Group
|
1,604.7
|
|
1,993.6
|
|
(388.9
|
)
|
(19.5
|
)
|
58.3
|
|
3.5
|
|
|||||||||
|
LiLAC Group:
|
|||||||||||||||||||||
|
LiLAC Division:
|
|||||||||||||||||||||
|
CWC
|
213.1
|
|
—
|
|
213.1
|
|
N.M.
|
|
(1.3
|
)
|
(0.6
|
)
|
|||||||||
|
Chile
|
91.6
|
|
76.3
|
|
15.3
|
|
20.1
|
|
9.1
|
|
12.1
|
|
|||||||||
|
Puerto Rico
|
51.3
|
|
46.8
|
|
4.5
|
|
9.6
|
|
4.5
|
|
9.6
|
|
|||||||||
|
Total LiLAC Division
|
356.0
|
|
123.1
|
|
232.9
|
|
189.2
|
|
12.3
|
|
3.7
|
|
|||||||||
|
Corporate
|
(2.1
|
)
|
(1.2
|
)
|
(0.9
|
)
|
(75.0
|
)
|
(0.9
|
)
|
(75.0
|
)
|
|||||||||
|
Total LiLAC Group
|
353.9
|
|
121.9
|
|
232.0
|
|
190.3
|
|
11.4
|
|
3.4
|
|
|||||||||
|
Total
|
$
|
1,958.6
|
|
$
|
2,115.5
|
|
$
|
(156.9
|
)
|
(7.4
|
)
|
$
|
69.7
|
|
3.5
|
|
|||||
_______________
|
(a)
|
The amount presented for the 2016 period excludes the pre-acquisition
Adjusted OIBDA
of
BASE
, which was acquired on February 11, 2016.
|
N.M. — Not Meaningful.
73
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 March 31,
|
||
|
|
2017
|
2016
|
|
|
|
%
|
||
|
Liberty Global Group:
|
|||
|
European Division:
|
|||
|
U.K./Ireland
|
43.1
|
44.2
|
|
|
Belgium
|
45.0
|
44.2
|
|
|
Germany
|
60.8
|
61.5
|
|
|
Switzerland/Austria
|
60.2
|
59.6
|
|
|
The Netherlands
|
—
|
54.9
|
|
|
Total Western Europe
|
49.2
|
50.3
|
|
|
Central and Eastern Europe
|
40.9
|
41.7
|
|
|
Total European Division
|
47.0
|
47.8
|
|
|
LiLAC Group:
|
|||
|
LiLAC Division:
|
|||
|
CWC
|
37.0
|
—
|
|
|
Chile
|
39.9
|
38.2
|
|
|
Puerto Rico
|
48.1
|
45.0
|
|
|
Total LiLAC Division
|
39.1
|
40.5
|
|
In addition to organic changes in the revenue, programming and other direct costs of services, other operating expenses and SG&A expenses of our
consolidated reportable segments
, the
Adjusted OIBDA
margins presented above include the impact of (i) acquisitions, the most significant of which are the
CWC Acquisition
and the
BASE Acquisition
and (ii) the
VodafoneZiggo JV Transaction
.
In this regard, the
Adjusted OIBDA
margin of the
European Division
for the 2017 period was adversely impacted by the contribution of our operations in the Netherlands to the VodafoneZiggo JV and the inclusion of
BASE
in our Belgium operations for the full period. The
Adjusted OIBDA
margin of the
LiLAC Division
for the 2017 period was adversely impacted by the inclusion of
CWC
. For discussion of the factors contributing to other changes in the
Adjusted OIBDA
margins of our
consolidated reportable segments
, see the above analyses of the revenue and expenses of our
consolidated reportable segments
.
74
Discussion and Analysis of our Consolidated Operating Results
General
For more detailed explanations of the changes in our revenue and operating (including direct costs of services and other operating costs) and SG&A expenses, see
Discussion and Analysis of our Reportable Segments
above.
Revenue
Our revenue by major category is set forth below:
|
|
Three months ended
March 31, |
Increase (decrease)
|
Organic increase (decrease)
|
||||||||||||||||||
|
|
2017
|
2016
|
$
|
%
|
$
|
%
|
|||||||||||||||
|
|
in millions, except percentages
|
||||||||||||||||||||
|
Subscription revenue (a):
|
|||||||||||||||||||||
|
Video
|
$
|
1,238.6
|
|
$
|
1,568.4
|
|
$
|
(329.8
|
)
|
(21.0
|
)
|
$
|
(17.4
|
)
|
(1.3
|
)
|
|||||
|
Broadband internet
|
1,168.4
|
|
1,282.6
|
|
(114.2
|
)
|
(8.9
|
)
|
100.0
|
|
8.7
|
|
|||||||||
|
Fixed-line telephony
|
617.6
|
|
752.9
|
|
(135.3
|
)
|
(18.0
|
)
|
7.2
|
|
1.1
|
|
|||||||||
|
Cable subscription revenue
|
3,024.6
|
|
3,603.9
|
|
(579.3
|
)
|
(16.1
|
)
|
89.8
|
|
2.9
|
|
|||||||||
|
Mobile (b)
|
451.5
|
|
293.2
|
|
158.3
|
|
54.0
|
|
(14.2
|
)
|
(2.9
|
)
|
|||||||||
|
Total subscription revenue
|
3,476.1
|
|
3,897.1
|
|
(421.0
|
)
|
(10.8
|
)
|
75.6
|
|
2.1
|
|
|||||||||
|
B2B revenue (c)
|
578.0
|
|
386.1
|
|
191.9
|
|
49.7
|
|
12.1
|
|
2.0
|
|
|||||||||
|
Other revenue (b) (d)
|
375.8
|
|
304.8
|
|
71.0
|
|
23.3
|
|
9.6
|
|
2.5
|
|
|||||||||
|
Total
|
$
|
4,429.9
|
|
$
|
4,588.0
|
|
$
|
(158.1
|
)
|
(3.4
|
)
|
$
|
97.3
|
|
2.1
|
|
|||||
_______________
|
(a)
|
Subscription revenue includes amounts received from subscribers for ongoing services, excluding installation fees and late fees. 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
$76.4 million
and
$65.0 million
during the
three months ended March 31, 2017
and
2016
, respectively. Mobile interconnect revenue and revenue from mobile handset sales are included in other revenue. On an organic basis, our total mobile revenue, including mobile interconnect revenue and revenue from mobile handset sales, decreased 3.1% for the
three months ended March 31, 2017
, as compared to the prior-year period.
|
|
(c)
|
B2B
revenue includes 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
$114.8 million
and
$102.7 million
during the
three months ended March 31, 2017
and
2016
, respectively. On an organic basis, our total
B2B
revenue, including revenue from
SOHO
subscribers, increased
6.2%
for the
three months ended March 31, 2017
, as compared to the corresponding prior-year period. A portion of the increase in our
SOHO
revenue is attributable to the conversion of our residential subscribers to
SOHO
subscribers.
|
|
(d)
|
Other revenue includes, among other items,
interconnect fees, mobile handset sales, installation fees, channel carriage fees and revenue earned from services provided to the VodafoneZiggo JV.
|
75
Total revenue.
Our consolidated revenue
decreased
$158.1 million
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This decrease includes (i) an increase of $660.1 million attributable to the impact of acquisitions, (ii) a decrease of $642.9 million attributable to the net impact of the
VodafoneZiggo JV Transaction
and (iii) a decrease of $6.2 million attributable to the impact of dispositions. Excluding the effects of acquisitions, the
VodafoneZiggo JV Transaction
, dispositions and
FX
, our consolidated revenue
increased
$97.3 million
or
2.1%
.
Subscription revenue.
The details of the changes in our consolidated subscription revenue for the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
, are as follows (in millions):
|
Increase in cable subscription revenue due to change in:
|
|||
|
Average number of RGUs
|
$
|
85.2
|
|
|
ARPU
|
4.6
|
|
|
|
Total increase in cable subscription revenue
|
89.8
|
|
|
|
Decrease in mobile subscription revenue
|
(14.2
|
)
|
|
|
Total organic increase in subscription revenue
|
75.6
|
|
|
|
Impact of acquisitions
|
330.3
|
|
|
|
Impact of the VodafoneZiggo JV Transaction and disposals
|
(613.8
|
)
|
|
|
Impact of FX
|
(213.1
|
)
|
|
|
Total
|
$
|
(421.0
|
)
|
Excluding the effects of the
VodafoneZiggo JV Transaction
, acquisitions and
FX
, our consolidated cable subscription revenue increased
$89.8 million
or
2.9%
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This increase is attributable to the net effect of (i) an increase from broadband internet services of
$100.0 million
or
8.7%
attributable to increases in the average number of broadband internet
RGU
s and higher
ARPU
from broadband internet services, (ii) decrease from video services of
$17.4 million
or
1.3%
attributable to the net effect of (a) a decline in the average number of video
RGU
s and (b) higher
ARPU
from video services and (iii) an increase from fixed-line telephony services of
$7.2 million
or
1.1%
attributable to the net effect of (1) an increase in the average number of fixed-line telephony
RGU
s and (2) lower
ARPU
from fixed-line telephony services.
Excluding the effects of acquisitions, the
VodafoneZiggo JV Transaction
, a disposition and
FX
, our consolidated mobile subscription revenue decreased
$14.2 million
or
2.9%
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This decrease is primarily due to a decline in the
U.K.
, mostly associated with the impact of the U.K.
Split-contract Program
.
B2B
revenue.
Excluding the effects the
VodafoneZiggo JV Transaction
, acquisitions and
FX
, our consolidated
B2B
revenue increased
$12.1 million
or
2.0%
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This increase, which excludes the organic growth in our
SOHO
revenue, is predominantly due to increases in the
U.K.
, Belgium and Germany.
Other revenue.
Excluding the effects of acquisitions, the
VodafoneZiggo JV Transaction
, dispositions and
FX
, our consolidated other revenue increased
$9.6 million
or
2.5%
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
.
This increase is largely attributable to the net effect of (i) a decrease in interconnect revenue, primarily in the
U.K.
, Belgium and Germany, (ii) an increase of $5.5 million due to the expected recovery of
VAT
paid in prior periods with respect to copyright costs in Belgium, (iii) an increase in mobile handset sales, primarily due to an increase in Germany that was only partially offset by a decrease in Belgium, (iv) an increase in installation revenue, as increases in the
U.K.
and Germany were only partially offset by a decrease in Switzerland, and (v) an increase of $3.5 million in Switzerland due to the release of unclaimed customer credits.
For additional information concerning the changes in our subscription,
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.
76
Supplemental revenue information
Our revenue by major category for the
Liberty Global Group
is set forth below:
|
|
Three months ended
March 31, |
Increase (decrease)
|
Organic increase (decrease)
|
||||||||||||||||||
|
|
2017
|
2016
|
$
|
%
|
$
|
%
|
|||||||||||||||
|
|
in millions, except percentages
|
||||||||||||||||||||
|
Liberty Global Group:
|
|||||||||||||||||||||
|
Subscription revenue:
|
|||||||||||||||||||||
|
Video
|
$
|
1,065.3
|
|
$
|
1,438.1
|
|
$
|
(372.8
|
)
|
(25.9
|
)
|
$
|
(13.1
|
)
|
(1.1
|
)
|
|||||
|
Broadband internet
|
989.2
|
|
1,175.4
|
|
(186.2
|
)
|
(15.8
|
)
|
84.9
|
|
8.6
|
|
|||||||||
|
Fixed-line telephony
|
542.7
|
|
716.6
|
|
(173.9
|
)
|
(24.3
|
)
|
2.4
|
|
0.4
|
|
|||||||||
|
Cable subscription revenue
|
2,597.2
|
|
3,330.1
|
|
(732.9
|
)
|
(22.0
|
)
|
74.2
|
|
2.7
|
|
|||||||||
|
Mobile (a)
|
277.1
|
|
284.3
|
|
(7.2
|
)
|
(2.5
|
)
|
(17.1
|
)
|
(5.4
|
)
|
|||||||||
|
Total subscription revenue
|
2,874.3
|
|
3,614.4
|
|
(740.1
|
)
|
(20.5
|
)
|
57.1
|
|
1.9
|
|
|||||||||
|
B2B revenue (b)
|
329.3
|
|
382.2
|
|
(52.9
|
)
|
(13.8
|
)
|
11.2
|
|
3.2
|
|
|||||||||
|
Other revenue
|
315.4
|
|
287.5
|
|
27.9
|
|
9.7
|
|
12.8
|
|
3.9
|
|
|||||||||
|
Total Liberty Global Group
|
$
|
3,519.0
|
|
$
|
4,284.1
|
|
$
|
(765.1
|
)
|
(17.9
|
)
|
$
|
81.1
|
|
2.2
|
|
|||||
_______________
|
(a)
|
Mobile subscription revenue excludes mobile interconnect revenue of
$64.0 million
and
$64.1 million
during the
three months ended March 31, 2017
and
2016
, respectively. Mobile interconnect revenue and revenue from mobile handset sales are included in other revenue. On an organic basis, the
Liberty Global Group
’s total mobile revenue, including mobile interconnect revenue and revenue from mobile handset sales, decreased 5.0% for the
three months ended March 31, 2017
, as compared to the prior-year period.
|
|
(b)
|
Revenue from
SOHO
subscribers, which is included in subscription revenue, aggregated
$105.4 million
and
$97.1 million
during the
three months ended March 31, 2017
and
2016
, respectively. On an organic basis, the
Liberty Global Group
’s total
B2B
revenue, including revenue from
SOHO
subscribers, increased
8.8%
for the
three months ended March 31, 2017
, as compared to the corresponding prior-year period.
|
77
Our revenue by major category for the
LiLAC Group
is set forth below:
|
|
Three months ended
March 31, |
Increase
|
Organic increase (decrease)
|
|||||||||||||||||
|
|
2017
|
2016
|
$
|
%
|
$
|
%
|
||||||||||||||
|
|
in millions, except percentages
|
|||||||||||||||||||
|
LiLAC Group:
|
||||||||||||||||||||
|
Subscription revenue:
|
||||||||||||||||||||
|
Video
|
$
|
173.3
|
|
$
|
130.3
|
|
$
|
43.0
|
|
33.0
|
$
|
(4.3
|
)
|
(2.5
|
)
|
|||||
|
Broadband internet
|
179.2
|
|
107.2
|
|
72.0
|
|
67.2
|
15.1
|
|
9.5
|
|
|||||||||
|
Fixed-line telephony
|
74.9
|
|
36.3
|
|
38.6
|
|
106.3
|
4.8
|
|
7.1
|
|
|||||||||
|
Cable subscription revenue
|
427.4
|
|
273.8
|
|
153.6
|
|
56.1
|
15.6
|
|
3.9
|
|
|||||||||
|
Mobile (a)
|
174.4
|
|
8.9
|
|
165.5
|
|
N.M.
|
2.9
|
|
1.7
|
|
|||||||||
|
Total subscription revenue
|
601.8
|
|
282.7
|
|
319.1
|
|
112.9
|
18.5
|
|
3.3
|
|
|||||||||
|
B2B revenue (b)
|
248.7
|
|
3.9
|
|
244.8
|
|
N.M.
|
0.9
|
|
0.4
|
|
|||||||||
|
Other revenue
|
60.4
|
|
17.3
|
|
43.1
|
|
249.1
|
(3.2
|
)
|
(5.1
|
)
|
|||||||||
|
Total LiLAC Group
|
$
|
910.9
|
|
$
|
303.9
|
|
$
|
607.0
|
|
199.7
|
$
|
16.2
|
|
1.8
|
|
|||||
_______________
|
(a)
|
Mobile subscription revenue excludes mobile interconnect revenue of
$12.4 million
and
$0.9 million
during the
three months ended March 31, 2017
and
2016
, respectively. Mobile interconnect revenue and revenue from mobile handset sales are included in other revenue. On an organic basis, the
LiLAC Group
’s total mobile revenue, including mobile interconnect revenue and revenue from mobile handset sales, increased 1.6% for the
three months ended March 31, 2017
, as compared to the prior-year period.
|
|
(b)
|
Revenue from
SOHO
subscribers, which is included in subscription revenue, aggregated
$9.4 million
and
$5.6 million
during the
three months ended March 31, 2017
and
2016
, respectively. On an organic basis, the
LiLAC Group
’s total
B2B
revenue, including revenue from
SOHO
subscribers, increased 1.9% for the
three months ended March 31, 2017
, as compared to the corresponding prior-year period.
|
N.M. — Not Meaningful.
Programming and other direct costs of services
Our programming and other direct costs of services decreased
$22.4 million
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This decrease includes (i) an increase of $165.3 million attributable to the impact of the
CWC Acquisition
, the
BASE Acquisition
, and other less significant acquisitions, (ii) a decrease of $127.0 million attributable to the net impact of the
VodafoneZiggo JV Transaction
and (iii)
a
decrease of
$3.0 million attributable to the impact of
dispositions.
Excluding the effects of acquisitions, the
VodafoneZiggo JV Transaction
, dispositions and
FX
, our programming and other direct costs of services increased
$15.8 million
or
1.4%
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This increase is primarily attributable to the net effect of (a) an increase in programming and copyright costs,
(b) a decrease in mobile access and interconnect costs and (c) a decrease in mobile handset costs.
For additional information regarding the changes in our programming and other direct costs of services, see
Discussion and Analysis of our Reportable Segments — Programming and Other Direct Costs of Services of our Reportable Segments
above.
Other operating expenses
Our other operating expenses increased
$17.6 million
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This increase includes (i) an increase of $122.8 million attributable to the
CWC Acquisition
, the
BASE Acquisition
and other less significant acquisitions, (ii) a decrease of $82.1 million attributable to the net impact of the
VodafoneZiggo JV Transaction
and (iii) a decrease of $0.3 million attributable to the impact of dispositions. Our other operating expenses include share-based compensation, which increased
$0.7 million
during the
three months ended March 31, 2017
. For additional information, see the discussion under
Share-based compensation expense
below. Excluding the effects of acquisitions, the
VodafoneZiggo JV Transaction
, dispositions,
FX
and share-based compensation expense, our other operating expenses
78
increased
$15.5 million
or
2.2%
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This increase is primarily attributable to the net effect of (a) an increase in network-related expenses, (b) a decrease in personnel costs and
(c) an increase in outsourced labor and professional fees. For additional information regarding the changes in our other operating expenses, see
Discussion and Analysis of our Reportable Segments — Other Operating Expenses of our Reportable Segments
above.
SG&A expenses
Our SG&A expenses
decreased
$26.4 million
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This decrease includes (i) an increase of $139.6 million
attributable to the impact of the
CWC Acquisition
, the
BASE Acquisition
and other less significant acquisitions, (ii) a decrease of $91.2 million attributable to the impact of the
VodafoneZiggo JV Transaction
and (iii) a decrease of $0.1 million attributable to the impact of dispositions. Our SG&A expenses include share-based compensation expense, which increased
$30.7 million
during the
three months ended March 31, 2017
. For additional information, see the discussion under
Share-based compensation expense
below. Excluding the effects of acquisitions, the
VodafoneZiggo JV Transaction
, dispositions,
FX
and share-based compensation expense, our SG&A expenses decreased
$3.7 million
or
0.5%
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This decrease is primarily attributable to the net effect of (i) a decrease in outsourced labor and professional fees,
(ii) an increase in personnel costs, (iii) an increase in external sales and marketing costs
and (iv) a decrease in information technology-related expenses. Certain of these changes include (a) an aggregate decrease in integration-related costs in Belgium of $3.8 million and (b) an aggregate increase in costs related to the integration of
CWC
of $1.4 million, most of which were incurred by
CWC
. 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 our aggregate share-based compensation expense is set forth below:
|
|
Three months ended March 31,
|
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Liberty Global:
|
|||||||
|
Performance-based incentive awards (a)
|
$
|
4.5
|
|
$
|
41.1
|
|
|
|
Other share-based incentive awards
|
28.1
|
|
25.4
|
|
|||
|
Total Liberty Global
|
32.6
|
|
66.5
|
|
|||
|
Telenet share-based incentive awards
|
4.0
|
|
1.0
|
|
|||
|
Other
|
2.4
|
|
1.5
|
|
|||
|
Total
|
$
|
39.0
|
|
$
|
69.0
|
|
|
|
Included in:
|
|||||||
|
Other operating expense:
|
|||||||
|
Liberty Global Group
|
$
|
0.9
|
|
$
|
0.5
|
|
|
|
LiLAC Group
|
0.5
|
|
0.2
|
|
|||
|
Total other operating expense
|
1.4
|
|
0.7
|
|
|||
|
SG&A expense:
|
|||||||
|
Liberty Global Group
|
32.5
|
|
66.7
|
|
|||
|
LiLAC Group
|
5.1
|
|
1.6
|
|
|||
|
Total SG&A expense
|
37.6
|
|
68.3
|
|
|||
|
Total
|
$
|
39.0
|
|
$
|
69.0
|
|
|
79
_______________
|
(a)
|
Includes share-based compensation expense related to (i)
PSU
s, (ii) for the
2016
period, the
Challenge Performance Awards
and (iii)
PGUs
. The decrease is due to a significant number of performance awards becoming fully vested during 2016 and a change in the expected achievement level for one of our performance-based incentive plans.
|
For additional information regarding our share-based compensation, see note
11
to our condensed consolidated financial statements.
Depreciation and amortization expense
The details of our depreciation and amortization expense are as follows:
|
|
Three months ended
March 31, |
Increase (decrease)
|
||||||||||||
|
|
2017
|
2016
|
$
|
%
|
||||||||||
|
|
in millions
|
|
||||||||||||
|
Liberty Global Group
|
$
|
1,128.3
|
|
$
|
1,383.2
|
|
$
|
(254.9
|
)
|
(18.4
|
)
|
|||
|
LiLAC Group
|
193.9
|
|
52.3
|
|
141.6
|
|
270.7
|
|
||||||
|
Total
|
$
|
1,322.2
|
|
$
|
1,435.5
|
|
$
|
(113.3
|
)
|
(7.9
|
)
|
|||
Excluding the effects of
FX
, depreciation and amortization expense decreased $15.4 million or 1.1% during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
. This
decrease is primarily due to the net effect of (i)
a decrease associated with the
VodafoneZiggo JV Transaction
, (ii) an increase associated with property and equipment additions related to the installation of customer premises equipment, the expansion and upgrade of our networks and other capital initiatives,
(iii) an increase associated with acquisitions, primarily as a result of the
CWC Acquisition
and
BASE Acquisition
, and (iv) a decrease associated with certain assets becoming fully depreciated, primarily in the
European Division
’s central operations,
U.K./Ireland
, Belgium and, to a lesser extent, Germany,
Switzerland/Austria
and Chile.
Impairment, restructuring and other operating items, net
The details of our impairment, restructuring and other operating items, net, are as follows:
|
|
Three months ended
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Liberty Global Group
|
$
|
14.8
|
|
$
|
18.7
|
|
|
|
LiLAC Group
|
13.4
|
|
5.7
|
|
|||
|
Total
|
$
|
28.2
|
|
$
|
24.4
|
|
|
The total for the
2017
period includes restructuring charges of
$25.7 million
, including
$23.0 million
of employee severance and termination costs related to certain reorganization activities, primarily in
CWC
, Germany and the
European Division
’s central operations.
The total for the
2016
period includes (i) restructuring charges of $17.8 million, including $15.7 million of employee severance and termination costs related to certain reorganization activities, primarily in the
European Division
’s central operations,
U.K./Ireland
and the Netherlands, and (ii) direct acquisition costs of $14.1 million, primarily related to the
CWC Acquisition
, the
VodafoneZiggo JV Transaction
and the
BASE Acquisition
.
For information regarding the
CWC Acquisition
and
BASE Acquisition
, see note
3
to our condensed consolidated financial statements. For information regarding the
VodafoneZiggo JV
, see note
4
to our condensed consolidated financial statements.
80
For additional information regarding our restructuring charges, see note
12
to our condensed consolidated financial statements.
Based on the results of our October 1, 2016 goodwill impairment test, a hypothetical decline of 20% or more in the fair value of any of
CWC
’s reporting units could result in the need to record a goodwill impairment charge. If, among other factors, (i) the equity values of the
LiLAC Group
were to remain depressed or decline further or (ii) the adverse impacts of economic, competitive, regulatory or other factors were to cause
CWC
’s results of operations or cash flows to be worse than anticipated, we could conclude in future periods that impairment charges are required in order to reduce the carrying values of our goodwill and, to a lesser extent, other long-lived assets. Any such impairment charges could be significant.
Interest expense
The details of our interest expense are as follows:
|
|
Three months ended March 31,
|
Increase (decrease)
|
||||||||||||
|
|
2017
|
2016
|
$
|
%
|
||||||||||
|
|
in millions
|
|
||||||||||||
|
Liberty Global Group
|
$
|
453.2
|
|
$
|
565.2
|
|
$
|
(112.0
|
)
|
(19.8
|
)
|
|||
|
LiLAC Group
|
94.3
|
|
54.1
|
|
40.2
|
|
74.3
|
|
||||||
|
Total
|
$
|
547.5
|
|
$
|
619.3
|
|
$
|
(71.8
|
)
|
(11.6
|
)
|
|||
Excluding the effects of
FX
, interest expense decreased $88.9 million or 14.3% during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
.
This decrease is primarily attributable to (i) a lower average outstanding debt balance, largely due to the
VodafoneZiggo JV Transaction
, which was partially offset by debt incurred in connection with the
CWC Acquisition
, and (ii) a lower weighted average interest rate related to the completion of certain refinancing transactions that resulted in extended maturities and decreases to certain of our interest rates.
For additional information regarding our outstanding indebtedness, see note
8
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
5
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.
81
Realized and unrealized losses on derivative instruments, net
Our realized and unrealized gains or losses on derivative instruments include (i) unrealized changes in the fair values of our derivative instruments that are non-cash in nature until such time as the derivative contracts are fully or partially settled and (ii) realized gains or losses upon the full or partial settlement of the derivative contracts. The details of our realized and unrealized losses on derivative instruments, net, are as follows:
|
|
Three months ended
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Cross-currency and interest rate derivative contracts:
|
|||||||
|
Liberty Global Group
|
$
|
(153.8
|
)
|
$
|
(635.4
|
)
|
|
|
LiLAC Group
|
(25.5
|
)
|
(137.6
|
)
|
|||
|
Total cross-currency and interest rate derivative contracts (a)
|
(179.3
|
)
|
(773.0
|
)
|
|||
|
Equity-related derivative instruments – Liberty Global Group:
|
|||||||
|
ITV Collar
|
(53.2
|
)
|
205.4
|
|
|||
|
Sumitomo Collar
|
(23.5
|
)
|
68.7
|
|
|||
|
Lionsgate Forward
|
0.5
|
|
18.7
|
|
|||
|
Other
|
(5.8
|
)
|
0.4
|
|
|||
|
Total equity-related derivative instruments (b)
|
(82.0
|
)
|
293.2
|
|
|||
|
Foreign currency forward contracts:
|
|||||||
|
Liberty Global Group
|
(6.5
|
)
|
(21.7
|
)
|
|||
|
LiLAC Group
|
(1.8
|
)
|
(7.1
|
)
|
|||
|
Total foreign currency forward contracts
|
(8.3
|
)
|
(28.8
|
)
|
|||
|
Other – Liberty Global Group
|
0.5
|
|
(0.1
|
)
|
|||
|
Total Liberty Global Group
|
(241.8
|
)
|
(364.0
|
)
|
|||
|
Total LiLAC Group
|
(27.3
|
)
|
(144.7
|
)
|
|||
|
Total
|
$
|
(269.1
|
)
|
$
|
(508.7
|
)
|
|
|
(a)
|
The loss during the
2017
period is primarily attributable to the net effect of (i) losses associated with increases in the values of the euro and British pound sterling relative to the
U.S.
dollar, (ii) gains associated with increases in the market interest rates in the euro market, (iii) losses associated with an increase in market interest rates in the
U.S.
dollar market and (iv) losses associated with an increase in the value of the Polish zloty relative to the euro. In addition, the loss during the
2017
period includes a net gain of
$73.1 million
, resulting from changes in our credit risk valuation adjustments. The loss during the
2016
period is primarily attributable to the net effect of (a) losses associated with increases in the values of the euro, Chilean peso and Swiss franc relative to the
U.S.
dollar, (b) losses associated with decreases in market interest rates in the euro and British pound sterling markets, (c) gains associated with decreases in market interest rates in the
U.S.
dollar market and (d) gains associated with a decrease in the value of the British pound sterling relative to the
U.S.
dollar. In addition, the loss during the
2016
period includes a net gain of
$21.4 million
, resulting from changes in our credit risk valuation adjustments.
|
|
(b)
|
For information concerning the factors that impact the valuations of our equity-related derivative instruments, see note
6
to our condensed consolidated financial statements.
|
For additional information concerning our derivative instruments, see notes
5
and
6
to our condensed consolidated financial statements and
Quantitative and Qualitative Disclosures about Market Risk
below.
82
Foreign currency transaction gains, 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, net, are as follows:
|
|
Three months ended
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Liberty Global Group:
|
|||||||
|
U.S. dollar-denominated debt issued by euro functional currency entities
|
$
|
80.3
|
|
$
|
286.9
|
|
|
|
U.S. dollar-denominated debt issued by British pound sterling functional currency entities
|
69.6
|
|
(127.1
|
)
|
|||
|
Cash and restricted cash denominated in a currency other than the entity’s functional currency
|
(39.8
|
)
|
(57.9
|
)
|
|||
|
Yen-denominated debt issued by a U.S. dollar functional currency entity
|
(23.4
|
)
|
(54.1
|
)
|
|||
|
British pound sterling-denominated debt issued by a U.S. dollar functional currency entity
|
(20.9
|
)
|
35.4
|
|
|||
|
Intercompany payables and receivables denominated in a currency other than the entity’s functional currency (a)
|
(1.8
|
)
|
200.1
|
|
|||
|
Euro-denominated debt issued by British pound sterling functional currency entities
|
(0.9
|
)
|
(35.1
|
)
|
|||
|
Other
|
1.3
|
|
3.2
|
|
|||
|
Total Liberty Global Group
|
64.4
|
|
251.4
|
|
|||
|
LiLAC Group:
|
|||||||
|
U.S. dollar-denominated debt issued by a Chilean peso functional currency entity
|
20.5
|
|
86.5
|
|
|||
|
British pound sterling-denominated debt issued by a U.S. dollar functional currency entity
|
(3.7
|
)
|
—
|
|
|||
|
Other
|
(2.3
|
)
|
1.1
|
|
|||
|
Total LiLAC Group
|
14.5
|
|
87.6
|
|
|||
|
Total
|
$
|
78.9
|
|
$
|
339.0
|
|
|
_______________
|
(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.
|
83
Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net
Our realized and unrealized gains or losses due to changes in fair values of certain investments and debt include unrealized gains or losses associated with changes in fair values that are non-cash in nature until such time as these gains or losses are realized through cash transactions. For additional information regarding our investments, fair value measurements and debt, see notes
4
,
6
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
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Investments:
|
|||||||
|
ITV
|
$
|
78.7
|
|
$
|
(240.5
|
)
|
|
|
Sumitomo
|
75.8
|
|
(17.3
|
)
|
|||
|
Lionsgate
|
(1.3
|
)
|
(52.7
|
)
|
|||
|
Other, net
|
9.8
|
|
42.3
|
|
|||
|
Total investments
|
163.0
|
|
(268.2
|
)
|
|||
|
Debt
|
(68.6
|
)
|
—
|
|
|||
|
Total
|
$
|
94.4
|
|
$
|
(268.2
|
)
|
|
Losses on debt modification and extinguishment, net
We recognized losses on debt modification and extinguishment, net, of
$45.3 million
and
$4.3 million
during the
three months ended March 31, 2017
and
2016
, respectively, with each amount attributed to the
Liberty Global Group
. The loss during the
2017
period is attributable to the net effect of (i) the payment of
$32.6 million
of redemption premium, (ii) the write-off of
$14.2 million
of deferred financing costs, (iii) the write-off of
$2.8 million
of net unamortized premiums and (iv) the payment of
$1.3 million
of third-party costs. The loss during the
2016
period is attributable to (a) the payment of
$3.4 million
of redemption premium and (b) the write-off of
$0.9 million
of deferred financing costs.
For additional information concerning our losses on debt modification and extinguishment, net, see note
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
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
VodafoneZiggo JV (a)
|
$
|
1.3
|
|
$
|
—
|
|
|
|
Other
|
14.1
|
|
27.9
|
|
|||
|
Total
|
$
|
15.4
|
|
$
|
27.9
|
|
|
_______________
|
(a)
|
Amount includes 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
. During the
three months ended March 31, 2017
, the
VodafoneZiggo JV
generated revenue of
$1,083.8 million
,
Adjusted OIBDA
of
$459.5 million
, operating income of
$56.7 million
, net non-operating expenses of
$100.3 million
(including
$153.4 million
of interest expense) and a net loss of
|
84
$30.6 million
. The
VodafoneZiggo JV
’s operating income includes depreciation and amortization of
$399.7 million
, which is based on the preliminary fair value accounting applied to the net assets of the
VodafoneZiggo JV
. The
VodafoneZiggo JV
is experiencing significant competition, particularly with respect to its mobile services.
Other income, net
The details of our other
income, net, are as follows:
|
|
Three months ended
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Liberty Global Group
|
$
|
11.9
|
|
$
|
80.6
|
|
|
|
LiLAC Group
|
2.5
|
|
0.6
|
|
|||
|
Total
|
$
|
14.4
|
|
$
|
81.2
|
|
|
The amounts for the
2017
and
2016
periods include interest and dividend income of
$13.6 million
and
$13.4 million
, respectively. In addition, the amount for the 2016 period includes income of $69.8 million, representing our share of the settlement of certain litigation.
Income tax benefit (expense)
The details of our income tax
benefit (expense) are as follows:
|
|
Three months ended
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Liberty Global Group
|
$
|
(102.2
|
)
|
$
|
36.9
|
|
|
|
LiLAC Group
|
(44.6
|
)
|
12.0
|
|
|||
|
Total
|
$
|
(146.8
|
)
|
$
|
48.9
|
|
|
The income tax expense during the three months ended
March 31, 2017
differs from the expected income tax benefit
of
$23.2 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, (ii) non-deductible or non-taxable foreign currency exchange results and (iii) certain permanent differences between the financial and tax accounting treatment of interest and other items.
The income tax benefit during the three months ended
March 31, 2016
differs from the expected income tax benefit of
$84.3 million
(based on the
U.K.
statutory income tax rate of
20.0%
) primarily due to the net negative impact of an increase in valuation allowances. The net negative impact of this item was partially offset by the net positive impact of (i) the tax effect of intercompany financing and (ii) statutory tax rates in certain jurisdictions in which we operate that are different than the
U.K.
statutory income tax rate.
For additional information concerning our income taxes, see note
9
to our condensed consolidated financial statements.
85
Net loss
The details of our net loss are as follows:
|
|
Three months ended
March 31, |
||||||
|
|
2017
|
2016
|
|||||
|
|
in millions
|
||||||
|
Liberty Global Group
|
$
|
(256.3
|
)
|
$
|
(333.8
|
)
|
|
|
LiLAC Group
|
(10.9
|
)
|
(38.9
|
)
|
|||
|
Total
|
$
|
(267.2
|
)
|
$
|
(372.7
|
)
|
|
Our net loss for the
three months ended March 31, 2017
and
2016
consists
of (i) operating income of
$569.2 million
and
$586.6 million
, respectively, (ii) net non-operating expense of
$689.6 million
and
$1,008.2 million
, respectively, and (iii) income tax benefit (expense) of (
$146.8 million
) and
$48.9 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 loss (earnings)
attributable to noncontrolling interests
The details of our net loss (earnings)
attributable to noncontrolling interests are as follows:
|
|
Three months ended
March 31, |
||||||||||
|
|
2017
|
2016
|
Change
|
||||||||
|
|
in millions
|
||||||||||
|
Liberty Global Group
|
$
|
(36.6
|
)
|
$
|
3.2
|
|
$
|
(39.8
|
)
|
||
|
LiLAC Group
|
(16.4
|
)
|
0.4
|
|
(16.8
|
)
|
|||||
|
Total
|
$
|
(53.0
|
)
|
$
|
3.6
|
|
$
|
(56.6
|
)
|
||
The change in net
loss (earnings) attributable to noncontrolling interests during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
, is primarily attributable to the results of operations of (i)
Telenet
and (ii)
CWC
following the
CWC Acquisition
.
86
Material Changes in Financial Condition
Sources and Uses of Cash
We are a holding company that is dependent on the capital resources of our subsidiaries to satisfy our liquidity requirements at the corporate level. Each of our significant operating subsidiaries is included within one of our seven primary subsidiary “borrowing groups.” These borrowing groups include the respective restricted parent and subsidiary entities within
Virgin Media
,
Unitymedia
,
UPC Holding
,
Telenet
,
CWC
,
VTR Finance
and
Liberty Puerto Rico
. Our borrowing groups, which typically generate cash from operating activities, accounted for a significant portion of our consolidated cash and cash equivalents at
March 31, 2017
. 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
CWC
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
March 31, 2017
are set forth in the following table (in millions):
|
Cash and cash equivalents held by:
|
|||
|
Liberty Global and unrestricted subsidiaries:
|
|||
|
Liberty Global (a)
|
$
|
67.9
|
|
|
Unrestricted subsidiaries:
|
|||
|
Liberty Global Group (b) (c)
|
1,887.4
|
|
|
|
LiLAC Group (d)
|
93.8
|
|
|
|
Total Liberty Global and unrestricted subsidiaries
|
2,049.1
|
|
|
|
Borrowing groups (e):
|
|||
|
CWC (f)
|
288.4
|
|
|
|
VTR Finance
|
98.9
|
|
|
|
Telenet
|
76.2
|
|
|
|
Virgin Media (c)
|
60.6
|
|
|
|
Liberty Puerto Rico
|
46.0
|
|
|
|
UPC Holding
|
15.6
|
|
|
|
Unitymedia
|
1.9
|
|
|
|
Total borrowing groups
|
587.6
|
|
|
|
Total cash and cash equivalents
|
$
|
2,636.7
|
|
|
Liberty Global Group
|
$
|
2,109.6
|
|
|
LiLAC Group
|
527.1
|
|
|
|
Total cash and cash equivalents
|
$
|
2,636.7
|
|
_______________
|
(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.
|
87
|
(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)
|
CWC
's subsidiaries hold the majority of
CWC
's consolidated cash. The ability of certain of these subsidiaries to loan or distribute their cash to
CWC
is limited by foreign exchange restrictions, the existence of noncontrolling interests, tax considerations and restrictions contained within the debt agreements of certain
CWC
subsidiaries. As a result, a significant portion of the cash held by
CWC
subsidiaries is not considered to be an immediate source of corporate liquidity for
CWC
.
|
Liquidity of
Liberty Global
and its unrestricted subsidiaries
The
$67.9 million
of cash and cash equivalents held by
Liberty Global
and, subject to certain tax and legal considerations, the
$1,981.2 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
March 31, 2017
. Our remaining cash and cash equivalents of
$587.6 million
at
March 31, 2017
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
March 31, 2017
, see note
8
to our condensed consolidated financial statements.
Our current sources of corporate liquidity include (i) cash and cash equivalents held by
Liberty Global
and, subject to certain tax and legal considerations,
Liberty Global
’s unrestricted subsidiaries, and (ii) interest and dividend income received on our and, subject to certain tax and legal considerations, our unrestricted subsidiaries’ cash and cash equivalents and investments. 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
March 31, 2017
, all outstanding principal due in 2021).
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. On January 4, 2017, in connection with the completion of the
VodafoneZiggo JV Transaction
, our company received cash of
€2.2 billion
(
$2.4 billion
at transaction date). For additional information, see note
4
to our consolidated financial statements.
At
March 31, 2017
, our consolidated cash and cash equivalents balance includes
$2,515.7 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.
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. The
U.S.
dollar has significantly strengthened against the British pound sterling during the period following
Brexit
.
Our corporate liquidity requirements include (i) corporate general and administrative expenses, (ii) interest payments on 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
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)
88
the repurchase of equity and debt securities, (e) other investment opportunities or (f) 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 $6,853.9 million at
March 31, 2017
and no stated maturity). For information regarding our commitments and contingencies, see note
14
to our condensed consolidated financial statements.
During the
three months ended March 31, 2017
, we repurchased
Liberty Global Shares
and
LiLAC Shares
for an aggregate purchase price of
$1,001.2 million
and
$18.9 million
, respectively, including direct acquisition costs. At
March 31, 2017
, the remaining amount authorized for share repurchases of
Liberty Global Shares
and
LiLAC Shares
was
$1,947.8 million
and
$259.8 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
March 31, 2017
, see note
8
to our condensed consolidated financial statements. The aforementioned sources of liquidity may be supplemented in certain cases by contributions and/or loans from
Liberty Global
and its unrestricted subsidiaries. The liquidity of our borrowing groups generally is used to fund property and equipment additions, debt service requirements and income tax payments. From time to time, our borrowing groups may also require liquidity in connection with (i) acquisitions and other investment opportunities, (ii) loans to
Liberty Global
, (iii) capital distributions to
Liberty Global
and other equity owners or (iv) the satisfaction of contingent liabilities. No assurance can be given that any external funding would be available to our borrowing groups on favorable terms, or at all. For information regarding our borrowing groups’ commitments and contingencies, see note
14
to our condensed consolidated financial statements.
For additional information regarding our consolidated cash flows, see the discussion under
Condensed Consolidated Statements of Cash Flows
below.
Capitalization
We seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk. In this regard, we generally seek to cause our operating subsidiaries to maintain their debt at levels that result in a consolidated debt balance (excluding the
ITV Collar Loan
,
Sumitomo Collar Loan
,
Sumitomo Share Loan
and
Lionsgate Loan
and measured using subsidiary debt figures at swapped foreign currency exchange rates, consistent with the covenant calculation requirements of our subsidiary debt agreements) that is between four and five times our consolidated
Adjusted OIBDA
, although 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
March 31, 2017
consolidated debt to our annualized consolidated
Adjusted OIBDA
for the quarter ended
March 31, 2017
was 5.1x. In addition, the ratio of our
March 31, 2017
consolidated net debt (debt, as defined above, less cash and cash equivalents) to our annualized consolidated
Adjusted OIBDA
for the quarter ended
March 31, 2017
was 4.8x.
When it is cost effective, we generally seek to match the denomination of the borrowings of our subsidiaries with the functional currency of the operations that support the respective borrowings. As further discussed in note
5
to our condensed consolidated financial statements, we also use derivative instruments to mitigate foreign currency and interest rate risk associated with our debt instruments.
Our ability to service or refinance our debt and to maintain compliance with the leverage covenants in the credit agreements and indentures of our borrowing groups is dependent primarily on our ability to maintain or increase the
Adjusted OIBDA
of our operating subsidiaries and to achieve adequate returns on our property and equipment additions and acquisitions. In addition, our ability to obtain additional debt financing is limited by the leverage covenants contained in the various debt instruments of our borrowing groups. For example, if the
Adjusted OIBDA
of
UPC Broadband Holding
were to decline, we 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. 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
March 31, 2017
, each of our borrowing groups was in compliance with its debt covenants. In addition, we do not anticipate any instances of non-compliance with respect to the debt covenants of our borrowing groups that would have a material adverse impact on our liquidity during the next 12 months.
89
At
March 31, 2017
, the outstanding principal amount of our consolidated debt, together with our capital lease obligations, aggregated
$44.6 billion
, including
$2,971.8 million
that is classified as current in our condensed consolidated balance sheet and
$39.3 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
March 31, 2017
. For additional information concerning our debt maturities, see note
8
to our condensed consolidated financial statements.
Notwithstanding our negative working capital position at
March 31, 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. Our ability to access debt financing on favorable terms, or at all, could be adversely impacted by (i) the financial failure of any of our counterparties, which could (a) reduce amounts available under committed credit facilities and (b) adversely impact our ability to access cash deposited with any failed financial institution and (ii) tightening of the credit markets. In addition, any weakness in the equity markets could make it less attractive to use our shares to satisfy contingent or other obligations, and sustained or increased competition, particularly in combination with adverse economic or regulatory developments, could have an unfavorable impact on our cash flows and liquidity.
For additional information concerning our debt and capital lease obligations, see note
8
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
three
months ended
March 31, 2017
and
2016
are summarized as follows:
|
Three months ended
|
|||||||||||
|
March 31,
|
|||||||||||
|
2017
|
2016
|
Change
|
|||||||||
|
in millions
|
|||||||||||
|
Net cash provided by operating activities
|
$
|
978.7
|
|
$
|
1,090.7
|
|
$
|
(112.0
|
)
|
||
|
Net cash provided (used) by investing activities
|
1,760.9
|
|
(1,927.5
|
)
|
3,688.4
|
|
|||||
|
Net cash provided (used) by financing activities
|
(1,754.2
|
)
|
781.0
|
|
(2,535.2
|
)
|
|||||
|
Effect of exchange rate changes on cash
|
22.1
|
|
54.2
|
|
(32.1
|
)
|
|||||
|
Net increase (decrease) in cash and cash equivalents
|
$
|
1,007.5
|
|
$
|
(1.6
|
)
|
$
|
1,009.1
|
|
||
Operating Activities.
Our net cash flows from operating activities are as follows:
|
|
Three months ended
|
||||||||||
|
March 31,
|
|||||||||||
|
|
2017
|
2016
|
Change
|
||||||||
|
|
in millions
|
||||||||||
|
Net cash provided by operating activities:
|
|||||||||||
|
Liberty Global Group
|
$
|
902.8
|
|
$
|
1,020.8
|
|
$
|
(118.0
|
)
|
||
|
LiLAC Group
|
75.9
|
|
69.9
|
|
6.0
|
|
|||||
|
Total
|
$
|
978.7
|
|
$
|
1,090.7
|
|
$
|
(112.0
|
)
|
||
The
decrease
in total net cash provided by our operating activities is primarily attributable to the net effect of (i) a decrease in cash provided due to higher payments of taxes, (ii) a decrease in cash provided due to higher payments of interest, including higher payments due to the impact of the
CWC Acquisition
and lower payments due to the impact of the
VodafoneZiggo JV Transaction
, (iii) an increase in cash provided due to higher cash receipts related to derivative instruments, (iv) a decrease in
90
the reported net cash provided by operating activities due to
FX
, (v) an increase in cash provided due to higher interest income and (vi) an increase 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
CWC Acquisition
.
Investing Activities.
Our net cash flows from investing activities are as follows:
|
|
Three months ended
|
||||||||||
|
March 31,
|
|||||||||||
|
|
2017
|
2016
|
Change
|
||||||||
|
|
in millions
|
||||||||||
|
Net cash provided (used) by investing activities:
|
|||||||||||
|
Liberty Global Group
|
$
|
1,890.7
|
|
$
|
(1,879.3
|
)
|
$
|
3,770.0
|
|
||
|
LiLAC Group
|
(129.8
|
)
|
(55.5
|
)
|
(74.3
|
)
|
|||||
|
Inter-group eliminations
|
—
|
|
7.3
|
|
(7.3
|
)
|
|||||
|
Total
|
$
|
1,760.9
|
|
$
|
(1,927.5
|
)
|
$
|
3,688.4
|
|
||
The
change in total net cash provided (used) by our investing activities is primarily attributable to an increase in cash of (i)
$1,569.4 million
related to distributions received from affiliates, (ii)
$1,337.9 million
associated with lower cash paid in connection with acquisitions, (iii)
$840.8 million
associated with the equalization payment received in connection with the completion of the
VodafoneZiggo JV Transaction
and (iv)
$12.3 million
due to lower capital expenditures. Capital expenditures
decreased
from
$637.1 million
during the first
three
months of
2016
to
$624.8 million
during the first
three
months of
2017
due to the
net effect of (a) a decrease due to the impact of the
VodafoneZiggo JV Transaction
, (b) an increase due to the impact of the
CWC Acquisition
, (c) a net increase in the local currency capital expenditures of our subsidiaries, including a decrease associated with higher capital-related vendor financing and an increase in related working capital items, 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
15
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:
|
|
Three months ended March 31,
|
||||||||||||||||||||||
|
|
2017
|
2016
|
|||||||||||||||||||||
|
|
Liberty Global Group
|
LiLAC Group
|
Total
|
Liberty Global Group
|
LiLAC Group
|
Total
|
|||||||||||||||||
|
in millions
|
|||||||||||||||||||||||
|
Property and equipment additions
|
$
|
884.4
|
|
$
|
139.2
|
|
$
|
1,023.6
|
|
$
|
925.5
|
|
$
|
71.5
|
|
$
|
997.0
|
|
|||||
|
Assets acquired under capital-related vendor financing arrangements
|
(614.4
|
)
|
(14.1
|
)
|
(628.5
|
)
|
(438.9
|
)
|
—
|
|
(438.9
|
)
|
|||||||||||
|
Assets acquired under capital leases
|
(31.4
|
)
|
(0.9
|
)
|
(32.3
|
)
|
(27.9
|
)
|
—
|
|
(27.9
|
)
|
|||||||||||
|
Changes in current liabilities related to capital expenditures
|
261.8
|
|
0.2
|
|
262.0
|
|
128.4
|
|
(21.5
|
)
|
106.9
|
|
|||||||||||
|
Capital expenditures
|
$
|
500.4
|
|
$
|
124.4
|
|
$
|
624.8
|
|
$
|
587.1
|
|
$
|
50.0
|
|
$
|
637.1
|
|
|||||
The property and equipment additions attributable to the
Liberty Global Group
are primarily related to the
European Division
, which accounted for
$886.8 million
and
$921.4 million
of
Liberty Global Group
’s property and equipment additions during the
three months ended March 31, 2017
and
2016
, respectively. The
decrease
in the
European Division
’s property and equipment additions is primarily due to the
net effect of (i) a decrease due to the impact of the
VodafoneZiggo JV Transaction
, (ii) an
91
increase in expenditures for the purchase and installation of customer premises equipment, (iii) an increase in expenditures for new build and upgrade projects and (iv) a decrease due to
FX
.
Property and equipment additions attributable to the
LiLAC Group
increased
during the
three months ended March 31, 2017
, as compared to the corresponding period in
2016
, primarily due to (i) an increase due to the impact of the
CWC Acquisition
,
(ii) an increase in expenditures for the purchase and installation of customer premises equipment,
(iii) an increase in expenditures for new build and upgrade projects and (iv) an increase due to
FX
.
Financing Activities.
Our net cash flows from financing activities are as follows:
|
|
Three months ended
|
||||||||||
|
March 31,
|
|||||||||||
|
|
2017
|
2016
|
Change
|
||||||||
|
|
in millions
|
||||||||||
|
Net cash provided (used) by financing activities:
|
|||||||||||
|
Liberty Global Group
|
$
|
(1,783.1
|
)
|
$
|
788.5
|
|
$
|
(2,571.6
|
)
|
||
|
LiLAC Group
|
28.9
|
|
(0.2
|
)
|
29.1
|
|
|||||
|
Inter-group eliminations
|
—
|
|
(7.3
|
)
|
7.3
|
|
|||||
|
Total
|
$
|
(1,754.2
|
)
|
$
|
781.0
|
|
$
|
(2,535.2
|
)
|
||
The change in total net cash provided (used) by our financing activities is primarily attributable to the net effect of (i) a decrease in cash of
$1,409.0 million
related to higher net repayments and repurchases of debt and capital lease obligations, (ii) a decrease in cash of
$768.0 million
due to higher repurchases of
Liberty Global
ordinary shares, (iii) a decrease in cash of
$162.6 million
related to
VAT
paid on behalf of the
VodafoneZiggo JV
, (iv) a decrease in cash of
$123.3 million
related to changes in cash collateral and (v) a decrease in cash of
$118.5 million
due to higher payments related to derivative instruments.
Adjusted Free Cash Flow
We define adjusted free cash flow as net cash provided by our operating activities, plus (i) cash payments for third-party costs directly associated with successful and unsuccessful acquisitions and dispositions and (ii) expenses financed by an intermediary, less (a) capital expenditures, as reported in our 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). 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.
92
The following table provides the details of our adjusted free cash flow:
|
|
Three months ended March 31,
|
||||||||||||||||||||||
|
|
2017
|
2016
|
|||||||||||||||||||||
|
|
Liberty Global Group
|
LiLAC Group
|
Total
|
Liberty Global Group
|
LiLAC Group
|
Total
|
|||||||||||||||||
|
in millions
|
|||||||||||||||||||||||
|
Net cash provided by operating activities
|
$
|
902.8
|
|
$
|
75.9
|
|
$
|
978.7
|
|
$
|
1,020.8
|
|
$
|
69.9
|
|
$
|
1,090.7
|
|
|||||
|
Cash payments for direct acquisition and disposition costs
|
1.8
|
|
0.9
|
|
2.7
|
|
8.1
|
|
0.1
|
|
8.2
|
|
|||||||||||
|
Expenses financed by an intermediary (a)
|
297.8
|
|
10.3
|
|
308.1
|
|
153.5
|
|
—
|
|
153.5
|
|
|||||||||||
|
Capital expenditures
|
(500.4
|
)
|
(124.4
|
)
|
(624.8
|
)
|
(587.1
|
)
|
(50.0
|
)
|
(637.1
|
)
|
|||||||||||
|
Principal payments on amounts financed by vendors and intermediaries
|
(1,014.2
|
)
|
(18.8
|
)
|
(1,033.0
|
)
|
(672.9
|
)
|
—
|
|
(672.9
|
)
|
|||||||||||
|
Principal payments on certain capital leases
|
(20.4
|
)
|
(1.9
|
)
|
(22.3
|
)
|
(27.3
|
)
|
(0.1
|
)
|
(27.4
|
)
|
|||||||||||
|
Adjusted free cash flow
|
$
|
(332.6
|
)
|
$
|
(58.0
|
)
|
$
|
(390.6
|
)
|
$
|
(104.9
|
)
|
$
|
19.9
|
|
$
|
(85.0
|
)
|
|||||
_______________
|
(a)
|
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.
|
93
Contractual Commitments
The following table sets forth the
U.S.
dollar equivalents of our commitments as of
March 31, 2017
:
|
|
Payments due during:
|
Total
|
|||||||||||||||||||||||||||||
|
|
Remainder
of 2017 |
||||||||||||||||||||||||||||||
|
2018
|
2019
|
2020
|
2021
|
2022
|
Thereafter
|
||||||||||||||||||||||||||
|
|
in millions
|
||||||||||||||||||||||||||||||
|
Debt (excluding interest)
|
$
|
2,547.5
|
|
$
|
1,549.1
|
|
$
|
691.3
|
|
$
|
166.3
|
|
$
|
2,278.1
|
|
$
|
4,767.1
|
|
$
|
31,301.9
|
|
$
|
43,301.3
|
|
|||||||
|
Capital leases (excluding interest)
|
105.8
|
|
120.3
|
|
92.6
|
|
85.9
|
|
85.1
|
|
87.8
|
|
683.8
|
|
1,261.3
|
|
|||||||||||||||
|
Network and connectivity commitments
|
958.2
|
|
424.3
|
|
340.6
|
|
259.0
|
|
244.2
|
|
70.1
|
|
835.2
|
|
3,131.6
|
|
|||||||||||||||
|
Programming commitments
|
822.8
|
|
945.9
|
|
497.5
|
|
201.1
|
|
63.3
|
|
36.7
|
|
59.6
|
|
2,626.9
|
|
|||||||||||||||
|
Purchase commitments
|
1,163.9
|
|
251.2
|
|
169.2
|
|
115.8
|
|
25.7
|
|
21.1
|
|
58.5
|
|
1,805.4
|
|
|||||||||||||||
|
Operating leases
|
103.3
|
|
111.3
|
|
93.7
|
|
74.3
|
|
60.2
|
|
78.4
|
|
177.8
|
|
699.0
|
|
|||||||||||||||
|
Other commitments
|
42.3
|
|
19.6
|
|
13.5
|
|
8.2
|
|
7.5
|
|
7.5
|
|
7.1
|
|
105.7
|
|
|||||||||||||||
|
Total (a)
|
$
|
5,743.8
|
|
$
|
3,421.7
|
|
$
|
1,898.4
|
|
$
|
910.6
|
|
$
|
2,764.1
|
|
$
|
5,068.7
|
|
$
|
33,123.9
|
|
$
|
52,931.2
|
|
|||||||
|
Projected cash interest payments on debt and capital lease obligations (b):
|
|||||||||||||||||||||||||||||||
|
Liberty Global Group
|
$
|
1,100.8
|
|
$
|
1,722.3
|
|
$
|
1,697.7
|
|
$
|
1,691.1
|
|
$
|
1,677.0
|
|
$
|
1,642.4
|
|
$
|
4,145.7
|
|
$
|
13,677.0
|
|
|||||||
|
LiLAC Group
|
231.6
|
|
384.1
|
|
382.1
|
|
362.4
|
|
311.3
|
|
232.7
|
|
154.7
|
|
2,058.9
|
|
|||||||||||||||
|
Total
|
$
|
1,332.4
|
|
$
|
2,106.4
|
|
$
|
2,079.8
|
|
$
|
2,053.5
|
|
$
|
1,988.3
|
|
$
|
1,875.1
|
|
$
|
4,300.4
|
|
$
|
15,735.9
|
|
|||||||
_______________
|
(a)
|
The commitments included in this table do not reflect any liabilities that are included in our
March 31, 2017
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 (
$461.4 million
at
March 31, 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
March 31, 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.
|
For information concerning our debt and capital lease obligations, see note
8
to our condensed consolidated financial statements. For information concerning our commitments, see note
14
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
three
months ended
March 31, 2017
and
2016
, see note
5
to our condensed consolidated financial statements.
94
|
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
10-K
. The following discussion updates selected numerical information to
March 31, 2017
.
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
March 31, 2017
,
$1,941.8 million
or
73.6%
and
$393.6 million
or
14.9%
of our consolidated cash balances were denominated in
U.S.
dollars and
euros
, respectively.
Foreign Currency Exchange Rates
The relationships between (i) the euro, the British pound sterling, the Swiss franc, the Hungarian forint, the Polish zloty, the Czech koruna, the Romanian lei, the Chilean peso and the Jamaican dollar and (ii) the
U.S.
dollar, which is our reporting currency, are shown below, per one
U.S.
dollar:
|
March 31, 2017
|
December 31, 2016
|
||||
|
Spot rates:
|
|||||
|
Euro
|
0.9348
|
|
0.9481
|
|
|
|
British pound sterling
|
0.7973
|
|
0.8100
|
|
|
|
Swiss franc
|
0.9999
|
|
1.0172
|
|
|
|
Hungarian forint
|
288.67
|
|
293.29
|
|
|
|
Polish zloty
|
3.9549
|
|
4.1769
|
|
|
|
Czech koruna
|
25.260
|
|
25.623
|
|
|
|
Romanian lei
|
4.2541
|
|
4.3077
|
|
|
|
Chilean peso
|
660.37
|
|
670.23
|
|
|
|
Jamaican dollar
|
128.13
|
|
128.77
|
|
|
95
|
Three months ended
|
|||||
|
|
March 31,
|
||||
|
|
2017
|
2016
|
|||
|
Average rates:
|
|||||
|
Euro
|
0.9389
|
|
0.9066
|
|
|
|
British pound sterling
|
0.8070
|
|
0.6984
|
|
|
|
Swiss franc
|
1.0040
|
|
0.9935
|
|
|
|
Hungarian forint
|
290.18
|
|
282.95
|
|
|
|
Polish zloty
|
4.0559
|
|
3.9570
|
|
|
|
Czech koruna
|
25.373
|
|
24.515
|
|
|
|
Romanian lei
|
4.2452
|
|
4.0748
|
|
|
|
Chilean peso
|
655.13
|
|
701.61
|
|
|
|
Jamaican dollar
|
128.58
|
|
121.07
|
|
|
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
March 31, 2017
, we effectively paid a fixed interest rate on 97% 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 impacts of these interest rate derivative instruments, see note
5
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
5
and
6
to our condensed consolidated financial statements.
Virgin Media
Cross-currency and Interest Rate Derivative Contracts
Holding all other factors constant, at
March 31, 2017
:
|
(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
£607 million
(
$761 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
£120 million
(
$151 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
£37 million
(
$46 million
).
|
96
UPC Broadband Holding
Cross-currency and Interest Rate Derivative Contracts
Holding all other factors constant, at
March 31, 2017
:
|
(i)
|
an instantaneous increase (decrease) of 10% in the value of the Swiss franc, Polish zloty, Hungarian forint, 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
€514 million
(
$550 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
€241 million
(
$258 million
);
|
|
(iii)
|
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
€132 million
(
$141 million
); and
|
|
(iv)
|
an instantaneous increase (decrease) of 10% in the value of the Swiss franc 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
€100 million
(
$107 million
).
|
Unitymedia
Cross-currency and Interest Rate Derivative Contracts
Holding all other factors constant, at
March 31, 2017
, 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 and interest rate derivative contracts by approximately
€234 million
(
$250 million
).
Telenet
Cross-currency and Interest Rate Derivative Contracts and Interest Rate Caps, Collars and Swaps
Holding all other factors constant, at
March 31, 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
€166 million
(
$178 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
€116 million
(
$124 million
).
|
CWC
Cross-currency and Interest Rate Derivative Contracts
Holding all other factors constant, at
March 31, 2017
, 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 and interest rate derivative contracts by approximately JMD
4 billion
(
$32 million
).
VTR
Cross-currency Derivative Contracts
Holding all other factors constant, at
March 31, 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
109 billion
(
$165 million
).
97
ITV Collar
Holding all other factors constant, at
March 31, 2017
, an instantaneous increase of 10% in the per share market price of
ITV
’s ordinary shares would have decreased the fair value of the
ITV Collar
by approximately
£85 million
(
$107 million
) and, conversely, a decrease of 10% in the per share market price of
ITV
’s ordinary shares would have increased the aggregate fair value by approximately
£84 million
(
$105 million
).
Sumitomo Collar
Holding all other factors constant, at
March 31, 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 billion
(
$36 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
March 31, 2017
. 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
5
to our condensed consolidated financial statements.
|
|
Payments (receipts) due during:
|
Total
|
|||||||||||||||||||||||||||||
|
|
Remainder of 2017
|
||||||||||||||||||||||||||||||
|
|
2018
|
2019
|
2020
|
2021
|
2022
|
Thereafter
|
|||||||||||||||||||||||||
|
|
in millions
|
||||||||||||||||||||||||||||||
|
Projected derivative cash payments (receipts), net:
|
|||||||||||||||||||||||||||||||
|
Liberty Global Group:
|
|||||||||||||||||||||||||||||||
|
Interest-related (a)
|
$
|
(50.5
|
)
|
$
|
(17.3
|
)
|
$
|
(65.3
|
)
|
$
|
(68.7
|
)
|
$
|
(52.0
|
)
|
$
|
(65.9
|
)
|
$
|
47.7
|
|
$
|
(272.0
|
)
|
|||||||
|
Principal-related (b)
|
—
|
|
—
|
|
5.6
|
|
121.7
|
|
(140.8
|
)
|
(181.0
|
)
|
(1,947.8
|
)
|
(2,142.3
|
)
|
|||||||||||||||
|
Other (c)
|
(54.7
|
)
|
(160.5
|
)
|
(61.2
|
)
|
(6.4
|
)
|
—
|
|
(6.4
|
)
|
—
|
|
(289.2
|
)
|
|||||||||||||||
|
Total Liberty Global Group
|
(105.2
|
)
|
(177.8
|
)
|
(120.9
|
)
|
46.6
|
|
(192.8
|
)
|
(253.3
|
)
|
(1,900.1
|
)
|
(2,703.5
|
)
|
|||||||||||||||
|
LiLAC Group:
|
|||||||||||||||||||||||||||||||
|
Interest-related (a)
|
1.9
|
|
25.0
|
|
23.7
|
|
20.3
|
|
20.2
|
|
16.6
|
|
—
|
|
107.7
|
|
|||||||||||||||
|
Principal-related (b)
|
—
|
|
—
|
|
10.3
|
|
—
|
|
—
|
|
40.2
|
|
—
|
|
50.5
|
|
|||||||||||||||
|
Other (c)
|
4.8
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4.8
|
|
|||||||||||||||
|
Total LiLAC Group
|
6.7
|
|
25.0
|
|
34.0
|
|
20.3
|
|
20.2
|
|
56.8
|
|
—
|
|
163.0
|
|
|||||||||||||||
|
Total
|
$
|
(98.5
|
)
|
$
|
(152.8
|
)
|
$
|
(86.9
|
)
|
$
|
66.9
|
|
$
|
(172.6
|
)
|
$
|
(196.5
|
)
|
$
|
(1,900.1
|
)
|
$
|
(2,540.5
|
)
|
|||||||
_______________
|
(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 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
.
|
98
|
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 and chief financial officer (the Executives), of the effectiveness of our disclosure controls and procedures as of
March 31, 2017
. 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
March 31, 2017
, in timely making known to them material 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.
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.
99
|
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
March 31, 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
|
||||||||
|
Liberty Global Shares:
|
||||||||||||
|
January 1, 2017 through January 31, 2017:
|
||||||||||||
|
Class A
|
491,000
|
|
$
|
31.14
|
|
491,000
|
|
(b)
|
||||
|
Class C
|
2,851,900
|
|
$
|
33.50
|
|
2,851,900
|
|
(b)
|
||||
|
February 1, 2017 through February 28, 2017:
|
|
|
||||||||||
|
Class A
|
2,305,600
|
|
$
|
36.72
|
|
2,305,600
|
|
(b)
|
||||
|
Class C
|
4,246,000
|
|
$
|
35.53
|
|
4,246,000
|
|
(b)
|
||||
|
March 1, 2017 through March 31, 2017:
|
||||||||||||
|
Class A
|
7,779,600
|
|
$
|
35.79
|
|
7,779,600
|
|
(b)
|
||||
|
Class C
|
10,721,000
|
|
$
|
35.10
|
|
10,721,000
|
|
(b)
|
||||
|
Total Liberty Global Shares — January 1, 2017 through March 31, 2017:
|
|
|||||||||||
|
Class A
|
10,576,200
|
|
$
|
35.78
|
|
10,576,200
|
|
(b)
|
||||
|
Class C
|
17,818,900
|
|
$
|
34.95
|
|
17,818,900
|
|
(b)
|
||||
|
LiLAC Shares:
|
||||||||||||
|
January 1, 2017 through January 31, 2017:
|
||||||||||||
|
Class A
|
80,000
|
|
$
|
23.09
|
|
80,000
|
|
(c)
|
||||
|
Class C
|
212,572
|
|
$
|
22.19
|
|
212,572
|
|
(c)
|
||||
|
February 1, 2017 through February 28, 2017:
|
||||||||||||
|
Class A
|
145,300
|
|
$
|
24.38
|
|
145,300
|
|
(c)
|
||||
|
Class C
|
73,000
|
|
$
|
22.41
|
|
73,000
|
|
(c)
|
||||
|
March 1, 2017 through March 31, 2017:
|
||||||||||||
|
Class A
|
316,900
|
|
$
|
22.64
|
|
316,900
|
|
(c)
|
||||
|
Class C
|
—
|
|
$
|
—
|
|
—
|
|
(c)
|
||||
|
Total LiLAC Shares — January 1, 2017 through March 31, 2017:
|
||||||||||||
|
Class A
|
542,200
|
|
$
|
23.17
|
|
542,200
|
|
(c)
|
||||
|
Class C
|
285,572
|
|
$
|
22.25
|
|
285,572
|
|
(c)
|
||||
_______________
|
(a)
|
Average price paid per share includes direct acquisition costs and the effects of derivative instruments, where applicable.
|
|
(b)
|
At
March 31, 2017
, the remaining amount authorized for repurchases of
Liberty Global Shares
was
$1,947.8 million
.
|
|
(c)
|
At
March 31, 2017
, the remaining amount authorized for repurchases of
LiLAC Shares
was
$259.8 million
.
|
100
|
Item 6.
|
EXHIBITS
|
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
|
Additional Facility AP Accession Agreement dated February 2, 2017, between, among others, UPC Financing as the Borrower, UPC Broadband Holding and The Bank of Nova Scotia as the Facility Agent and Security Agent under the UPC Broadband Holding Bank Facility (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed February 7, 2017 (File No. 001-35961) (the February 2017 8-K)).
|
|
|
4.2
|
Additional J Facility Accession Deed dated February 2, 2017, between Virgin Media Investment Holdings Limited as the Company, Virgin Media SFA Finance Limited as the Borrower, The Bank of Nova Scotia as the Facility Agent and The Bank of Nova Scotia as Additional J Facility Lender under the VMF Senior Facilities Agreement (incorporated by reference to Exhibit 4.1 to the February 2017 8-K).
|
|
|
4.3
|
Telenet Additional Facility AH Accession Agreement dated April 4, 2017 and entered into between, among others, Telenet International Finance S.á.r.l. and The Bank of Nova Scotia (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed April 10, 2017 (File No. 001-35961)(the April 2017 8-K)).
|
|
|
4.4
|
Telenet Additional Facility AI Accession Agreement dated April 4, 2017 and entered into between, among others, Telenet Financing USD LLC and The Bank of Nova Scotia (incorporated by reference to Exhibit 4.2 to the April 2017 8-K).
|
|
|
4.5
|
Senior Facilities Agreement dated June 7, 2013, as amended on June 14, 2013 and as amended and restated on July 30, 2015, as further amended December 16, 2016 and as further amended and restated on April 19, 2017, among, inter alia, Virgin Media Finance PLC and certain other subsidiaries of Virgin Media Inc. as borrowers and/or guarantors and The Bank of Nova Scotia as facility agent, Deutsche Bank AG, London Branch, as security trustee, and the lenders thereto (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed April 28, 2017 (File No. 001-35961)).
|
|
|
10 — Material Contracts:
|
||
|
10.1
|
Liberty Global 2017 Annual Cash Performance Award Program for executive officers under the Incentive Plan (a description of said plan is incorporated by reference to the description thereof included in Item 5.02(e) of the Registrant’s Current Report on Form 8-K filed February 27, 2017 (File No. 001-35961)).
|
|
|
31 — Rule 13a-14(a)/15d-14(a) Certification:
|
||
|
31.1
|
Certification of President and Chief Executive Officer*
|
|
|
31.2
|
Certification of Executive Vice President and Chief Financial Officer*
|
|
|
32 — Section 1350 Certification**
|
||
|
99.1
|
Unaudited Attributed Financial Information*
|
|
|
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*
|
|
|
*
|
Filed herewith
|
|
**
|
Furnished herewith
|
101
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:
|
May 8, 2017
|
|
/s/ M
ICHAEL
T. F
RIES
|
|
|
Michael T. Fries
President and Chief Executive Officer
|
||
|
Dated:
|
May 8, 2017
|
|
/s/ C
HARLES
H.R. B
RACKEN
|
|
|
Charles H.R. Bracken
Executive Vice President and Chief
Financial Officer
|
||
102
EXHIBIT INDEX
|
4 — Instruments Defining the Rights of Securities Holders, including Indentures:
|
||
|
4.1
|
Additional Facility AP Accession Agreement dated February 2, 2017, between, among others, UPC Financing as the Borrower, UPC Broadband Holding and The Bank of Nova Scotia as the Facility Agent and Security Agent under the UPC Broadband Holding Bank Facility (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed February 7, 2017 (File No. 001-35961) (the February 2017 8-K)).
|
|
|
4.2
|
Additional J Facility Accession Deed dated February 2, 2017, between Virgin Media Investment Holdings Limited as the Company, Virgin Media SFA Finance Limited as the Borrower, The Bank of Nova Scotia as the Facility Agent and The Bank of Nova Scotia as Additional J Facility Lender under the VMF Senior Facilities Agreement (incorporated by reference to Exhibit 4.1 to the February 2017 8-K).
|
|
|
4.3
|
Telenet Additional Facility AH Accession Agreement dated April 4, 2017 and entered into between, among others, Telenet International Finance S.á.r.l. and The Bank of Nova Scotia (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed April 10, 2017 (File No. 001-35961)(the April 2017 8-K)).
|
|
|
4.4
|
Telenet Additional Facility AI Accession Agreement dated April 4, 2017 and entered into between, among others, Telenet Financing USD LLC and The Bank of Nova Scotia (incorporated by reference to Exhibit 4.2 to the April 2017 8-K).
|
|
|
4.5
|
Senior Facilities Agreement dated June 7, 2013, as amended on June 14, 2013 and as amended and restated on July 30, 2015, as further amended December 16, 2016 and as further amended and restated on April 19, 2017, among, inter alia, Virgin Media Finance PLC and certain other subsidiaries of Virgin Media Inc. as borrowers and/or guarantors and The Bank of Nova Scotia as facility agent, Deutsche Bank AG, London Branch, as security trustee, and the lenders thereto (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed April 28, 2017 (File No. 001-35961)).
|
|
|
10 — Material Contracts:
|
||
|
10.1
|
Liberty Global 2017 Annual Cash Performance Award Program for executive officers under the Incentive Plan (a description of said plan is incorporated by reference to the description thereof included in Item 5.02(e) of the Registrant’s Current Report on Form 8-K filed February 27, 2017 (File No. 001-35961)).
|
|
|
31 — Rule 13a-14(a)/15d-14(a) Certification:
|
||
|
31.1
|
Certification of President and Chief Executive Officer*
|
|
|
31.2
|
Certification of Executive Vice President and Chief Financial Officer*
|
|
|
32 — Section 1350 Certification**
|
||
|
99.1
|
Unaudited Attributed Financial Information*
|
|
|
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*
|
_______________
|
*
|
Filed herewith
|
|
**
|
Furnished herewith
|
TABLE OF CONTENTS