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Liberty Global plc - Quarter Report: 2018 March (Form 10-Q)

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended
March 31, 2018
OR
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                     to                    
Commission file number 001-35961
lgbloomlogo.jpg
Liberty Global plc
(Exact name of Registrant as specified in its charter)
England and Wales
 
98-1112770
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
Griffin House, 161 Hammersmith Rd, London, United Kingdom
 
W6 8BS
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code:
+44.208.483.6449 or 303.220.6600
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) 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, a smaller reporting company, or an emerging growth 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):
Large Accelerated Filer  þ Accelerated Filer ¨  Non-Accelerated Filer (Do not check if a smaller reporting company) ¨  
Smaller Reporting Company  ¨ Emerging Growth Company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  ¨
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.    Yes  ¨        No  þ

The number of outstanding ordinary shares of Liberty Global plc as of April 30, 2018 was: 216,973,376 class A ordinary shares, 11,102,619 class B ordinary shares and 570,148,328 class C ordinary shares.

 



LIBERTY GLOBAL PLC
TABLE OF CONTENTS
 
 
 
Page
Number
 
PART I — FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS
 
 
 
 
 
 
 
ITEM 2.
ITEM 3.
ITEM 4.
 
PART II — OTHER INFORMATION
 
ITEM 2.
ITEM 6.




LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
 
 
March 31,
2018
 
December 31,
2017
 
in millions
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
554.9

 
$
1,672.4

Trade receivables, net
1,623.6

 
1,540.4

Derivative instruments (note 6)
374.2

 
576.0

Prepaid expenses
267.2

 
144.4

Current assets held for sale (note 4)
38.4

 
34.9

Other current assets (notes 3 and 5)
599.5

 
363.5

Total current assets
3,457.8

 
4,331.6

Investments and related note receivables (including $2,288.8 million and $2,315.3 million, respectively, measured at fair value on a recurring basis) (note 5)
6,862.2

 
6,671.4

Property and equipment, net (note 8)
20,196.3

 
19,535.4

Goodwill (note 8)
19,000.5

 
18,547.4

Deferred tax assets (note 10)
3,266.0

 
3,157.2

Long-term assets held for sale (note 4)
1,245.9

 
1,187.3

Other assets, net (notes 3, 6 and 8)
4,282.9

 
4,166.5

Total assets
$
58,311.6

 
$
57,596.8

 


























The accompanying notes are an integral part of these condensed consolidated financial statements.

1


LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
(unaudited)
 
 
March 31,
2018
 
December 31,
2017
 
in millions
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,061.2

 
$
1,046.6

Deferred revenue
1,230.0

 
1,048.1

Current portion of debt and capital lease obligations (note 9)
4,290.7

 
4,165.4

Accrued capital expenditures
609.7

 
718.9

Accrued interest
370.7

 
515.2

Accrued income taxes
517.2

 
472.3

Current liabilities held for sale (note 4)
97.9

 
78.5

Other accrued and current liabilities (notes 6 and 13)
2,211.4

 
1,920.8

Total current liabilities
10,388.8

 
9,965.8

Long-term debt and capital lease obligations (note 9)
38,276.0

 
38,049.5

Long-term liabilities held for sale (note 4)
85.8

 
77.8

Other long-term liabilities (notes 6, 10, and 13)
3,926.3

 
3,110.7

Total liabilities
52,676.9

 
51,203.8

Commitments and contingencies (notes 6, 9, 10 and 15)

 

Equity (note 11):
 
 
 
Liberty Global shareholders:
 
 
 
Class A ordinary shares, $0.01 nominal value. Issued and outstanding 217,547,694 and 219,668,579 shares, respectively
2.2

 
2.2

Class B ordinary shares, $0.01 nominal value. Issued and outstanding 11,102,619 shares at each date
0.1

 
0.1

Class C ordinary shares, $0.01 nominal value. Issued and outstanding 572,061,952 and 584,332,055 shares, respectively
5.7

 
5.8

Additional paid-in capital
10,860.5

 
11,358.6

Accumulated deficit
(7,084.0
)
 
(6,217.6
)
Accumulated other comprehensive earnings, net of taxes
2,248.2

 
1,656.0

Treasury shares, at cost
(0.1
)
 
(0.1
)
Total Liberty Global shareholders
6,032.6

 
6,805.0

Noncontrolling interests
(397.9
)
 
(412.0
)
Total equity
5,634.7

 
6,393.0

Total liabilities and equity
$
58,311.6

 
$
57,596.8


The accompanying notes are an integral part of these condensed consolidated financial statements.

2


LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
Three months ended
 
March 31,
 
2018
 
2017
 
in millions, except share and per share amounts
 
 
 
 
Revenue (notes 3, 5 and 16)
$
4,156.1

 
$
3,519.0

Operating costs and expenses (exclusive of depreciation and amortization, shown separately below):
 
 
 
Programming and other direct costs of services
1,002.6

 
812.0

Other operating (note 12)
608.5

 
520.1

Selling, general and administrative (SG&A) (note 12)
691.9

 
619.7

Depreciation and amortization
1,296.4

 
1,128.3

Impairment, restructuring and other operating items, net (note 13)
63.6

 
11.8

 
3,663.0

 
3,091.9

Operating income
493.1

 
427.1

Non-operating income (expense):
 
 
 
Interest expense
(487.8
)
 
(453.2
)
Realized and unrealized losses on derivative instruments, net (note 6)
(300.3
)
 
(241.8
)
Foreign currency transaction gains (losses), net
(30.5
)
 
64.4

Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net (notes 5, 7 and 9)
(57.2
)
 
94.4

Losses on debt modification and extinguishment, net (note 9)
(2.6
)
 
(45.3
)
Share of losses of affiliates, net (note 5)
(36.5
)
 
(15.7
)
Other income, net
9.3

 
16.0

 
(905.6
)
 
(581.2
)
Loss from continuing operations before income taxes
(412.5
)

(154.1
)
Income tax expense (note 10)
(766.1
)
 
(102.2
)
Loss from continuing operations
(1,178.6
)
 
(256.3
)
Loss from discontinued operations, net of taxes (note 4)

 
(10.9
)
Net loss
(1,178.6
)
 
(267.2
)
Net earnings attributable to noncontrolling interests
(7.9
)
 
(53.0
)
Net loss attributable to Liberty Global shareholders
$
(1,186.5
)
 
$
(320.2
)
 
 
 
 
Basic and diluted loss from continuing operations attributable to Liberty Global shareholders per share (note 14)
$
(1.47
)
 
$
(0.35
)
 
 
 
 
Weighted average ordinary shares outstanding - basic and diluted (note 14)
807,879,932

 
890,464,735


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
 
March 31,
 
2018
 
2017
 
in millions
 
 
 
 
Net loss
$
(1,178.6
)
 
$
(267.2
)
Other comprehensive earnings, net of taxes:
 
 
 
Continuing operations:
 
 
 
Foreign currency translation adjustments
593.0

 
252.9

Pension-related adjustments and other
(0.8
)
 
(1.3
)
Other comprehensive earnings from continuing operations
592.2

 
251.6

Other comprehensive loss from discontinued operations

 
(11.7
)
Other comprehensive earnings
592.2

 
239.9

Comprehensive loss
(586.4
)

(27.3
)
Comprehensive earnings attributable to noncontrolling interests
(7.9
)
 
(52.5
)
Comprehensive loss attributable to Liberty Global shareholders
$
(594.3
)
 
$
(79.8
)



























The accompanying notes are an integral part of these condensed consolidated financial statements.

4


LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(unaudited)
 
 
Liberty Global shareholders
 
Non-controlling
interests
 
Total
equity
 
Ordinary shares
 
Additional
paid-in
capital
 
Accumulated
deficit
 
Accumulated
other
comprehensive
earnings, net of taxes
 
Treasury shares, at cost
 
Total Liberty Global
shareholders
 
 
Class A
 
Class B
 
Class C
 
 
 
 
 
 
 
in millions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2018, before effect of accounting change
$
2.2

 
$
0.1

 
$
5.8

 
$
11,358.6

 
$
(6,217.6
)
 
$
1,656.0

 
$
(0.1
)
 
$
6,805.0

 
$
(412.0
)
 
$
6,393.0

Accounting change (note 2)

 

 

 

 
320.1

 

 

 
320.1

 
4.4

 
324.5

Balance at January 1, 2018, as adjusted for accounting change
2.2

 
0.1

 
5.8

 
11,358.6

 
(5,897.5
)
 
1,656.0

 
(0.1
)
 
7,125.1

 
(407.6
)
 
6,717.5

Net loss

 

 

 

 
(1,186.5
)
 

 

 
(1,186.5
)
 
7.9

 
(1,178.6
)
Other comprehensive earnings, net of taxes

 

 

 

 

 
592.2

 

 
592.2

 

 
592.2

Repurchase and cancellation of Liberty Global ordinary shares (note 11)

 

 
(0.1
)
 
(496.2
)
 

 

 

 
(496.3
)
 

 
(496.3
)
Share-based compensation (note 12)

 

 

 
40.4

 

 

 

 
40.4

 

 
40.4

Adjustments due to changes in subsidiaries’ equity and other, net

 

 

 
(42.3
)
 

 

 

 
(42.3
)
 
1.8

 
(40.5
)
Balance at March 31, 2018
$
2.2

 
$
0.1


$
5.7


$
10,860.5


$
(7,084.0
)

$
2,248.2


$
(0.1
)

$
6,032.6


$
(397.9
)

$
5,634.7











The accompanying notes are an integral part of these condensed consolidated financial statements.

5


LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
 
Three months ended
 
March 31,
 
2018
 
2017
 
in millions
Cash flows from operating activities:
 
 
 
Net loss
$
(1,178.6
)
 
$
(267.2
)
Loss from discontinued operations

 
(10.9
)
Loss from continuing operations
(1,178.6
)
 
(256.3
)
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities from continuing operations:
 
 
 
Share-based compensation expense
45.8

 
33.4

Depreciation and amortization
1,296.4

 
1,128.3

Impairment, restructuring and other operating items, net
63.6

 
11.8

Amortization of deferred financing costs and non-cash interest
16.3

 
16.6

Realized and unrealized losses on derivative instruments, net
300.3

 
241.8

Foreign currency transaction losses (gains), net
30.5

 
(64.4
)
Realized and unrealized losses (gains) due to changes in fair values of certain investments and debt, net
57.2

 
(94.4
)
Losses on debt modification and extinguishment, net
2.6

 
45.3

Share of losses of affiliates, net
36.5

 
15.7

Deferred income tax benefit
(42.4
)
 
(12.6
)
Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions
651.1

 
(160.8
)
Net cash provided by operating activities of continuing operations
1,279.3

 
904.4

Net cash provided by operating activities of discontinued operations

 
75.0

Net cash provided by operating activities
1,279.3


979.4

 
 
 
 
Cash flows from investing activities:
 
 
 
Capital expenditures
(646.0
)
 
(500.4
)
Investments in and loans to affiliates and others
(22.4
)
 
(25.1
)
Distributions received from affiliates

 
1,569.4

Equalization payment related to the VodafoneZiggo JV Transaction

 
840.8

Other investing activities, net
(2.7
)
 
4.5

Net cash provided (used) by investing activities of continuing operations
(671.1
)
 
1,889.2

Net cash used by investing activities of discontinued operations

 
(127.0
)
Net cash provided (used) by investing activities
$
(671.1
)

$
1,762.2

 








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,
 
2018
 
2017
 
in millions
Cash flows from financing activities:
 
 
 
Repayments and repurchases of debt and capital lease obligations
$
(1,933.4
)
 
$
(2,950.8
)
Borrowings of debt
720.5

 
2,527.6

Repurchase of Liberty Global ordinary shares
(480.1
)
 
(959.6
)
Payment of financing costs and debt premiums
(10.2
)
 
(71.1
)
Net cash received (paid) related to derivative instruments
9.8

 
(150.5
)
Value-added taxes (VAT) paid on behalf of the VodafoneZiggo JV

 
(162.6
)
Other financing activities, net
(39.0
)
 
(16.1
)
Net cash used by financing activities of continuing operations
(1,732.4
)
 
(1,783.1
)
Net cash provided by financing activities of discontinued operations

 
34.5

Net cash used by financing activities
(1,732.4
)
 
(1,748.6
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents and restricted cash:
 
 
 
Continuing operations
14.1

 
22.7

Discontinued operations

 
(0.5
)
Total
14.1

 
22.2

 


 


Net increase (decrease) in cash and cash equivalents and restricted cash:
 
 
 
Continuing operations
(1,110.1
)
 
1,033.2

Discontinued operations

 
(18.0
)
Total
(1,110.1
)
 
1,015.2

 
 
 
 
Cash and cash equivalents and restricted cash  continuing operations:
 
 
 
Beginning of period
1,682.9

 
1,087.4

End of period
$
572.8

 
$
2,120.6

 
 
 
 
Cash paid for interest:
 
 
 
Continuing operations
$
628.3

 
$
685.1

Discontinued operations

 
168.2

Total
$
628.3

 
$
853.3

 
 
 
 
Net cash paid for taxes:
 
 
 
Continuing operations
$
123.0

 
$
181.6

Discontinued operations

 
34.6

Total
$
123.0

 
$
216.2

 
 
 
 
Reconciliation of end of period cash and cash equivalents and restricted cash — continuing operations:
 
 
 
Cash and cash equivalents
$
554.9

 
$
2,109.6

Restricted cash included in other current assets
15.3

 
8.6

Restricted cash included in other assets, net
2.6

 
2.4

Total cash and cash equivalents and restricted cash
$
572.8

 
$
2,120.6


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, 2018
(unaudited)


(1)   Basis of Presentation

Liberty Global plc (Liberty Global) is a public limited company organized under the laws of England and Wales. In these notes, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to Liberty Global or collectively to Liberty Global and its subsidiaries. We are an international provider of video, broadband internet, fixed-line telephony, mobile and other communications services to residential customers and businesses, with consolidated operations at March 31, 2018 in 11 European countries.

We provide residential and business-to-business (B2B) communication 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 57.6%-owned subsidiary, and (iv) seven other European countries through UPC Holding B.V. and UPC Broadband Slovakia s.r.o (collectively, UPC Holding). Virgin Media, Unitymedia and UPC Holding are each wholly-owned subsidiaries of Liberty Global. In addition, we own a 50% noncontrolling interest in the VodafoneZiggo JV (as defined in note 5), which provides video, broadband internet, fixed-line telephony, mobile and B2B services in the Netherlands.

Prior to the completion of the Split-off Transaction (as defined and described in note 4), we also provided residential and B2B services in (i) 18 countries, predominantly in Latin America and the Caribbean, through Cable &Wireless Communications Limited (C&W), (ii) Chile through VTR.com SpA (VTR) and (iii) Puerto Rico through Liberty Cablevision of Puerto Rico LLC (Liberty Puerto Rico). C&W and VTR were wholly-owned subsidiaries, and Liberty Puerto Rico was an entity in which we held a 60.0% ownership interest. C&W also provided (a) B2B services in certain other countries in Latin America and the Caribbean and (b) wholesale services over its sub-sea and terrestrial networks that connected over 40 markets in that region. The operations of C&W, VTR, Liberty Puerto Rico and certain other entities that were associated with our businesses in Latin America and the Caribbean are collectively referred to here as the “LiLAC Group.” As a result of the Split-off Transaction, the entities attributed to the LiLAC Group are reflected as discontinued operations in our condensed consolidated statements of operations and cash flows for the three months ended March 31, 2017. Unless otherwise noted, the amounts presented in these notes relate only to our continuing operations.

Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information required by U.S. GAAP or Securities and Exchange Commission rules and regulations for complete financial statements. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with our 2017 consolidated financial statements and notes thereto included in our 2017 Annual Report on Form 10-K (our 10-K).

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates and assumptions are used in accounting for, among other things, the valuation of acquisition-related assets and liabilities, allowances for uncollectible accounts, certain components of revenue, programming and copyright costs, deferred income taxes and related valuation allowances, loss contingencies, fair value measurements, impairment assessments, capitalization of internal costs associated with construction and installation activities, useful lives of long-lived assets, share-based compensation and actuarial liabilities associated with certain benefit plans. Actual results could differ from those estimates.

Unless otherwise indicated, ownership percentages and convenience translations into United States (U.S.) dollars are calculated as of March 31, 2018.

Certain prior period amounts have been reclassified to conform to the current period presentation.


8


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



(2)    Accounting Changes and Recent Accounting Pronouncements

Accounting Changes

ASU 2014-09

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of goods or services to customers. We adopted ASU 2014-09 effective January 1, 2018 by recording the cumulative effect of the adoption to our accumulated deficit. We applied the new standard to contracts that were not complete at January 1, 2018. The comparative information for the three months ended March 31, 2017 contained within these condensed consolidated financial statements and notes has not been restated and continues to be reported under the accounting standards in effect for such period. The implementation of ASU 2014-09 did not have a material impact on our consolidated financial statements.

The principal impacts of ASU 2014-09 on our revenue recognition policies relate to our accounting for (i) time-limited discounts and free service periods provided to our customers and (ii) certain upfront fees charged to our customers, as follows:

When we enter into contracts to provide services to our customers, we often provide time-limited discounts or free service periods. Under previous accounting rules, we recognized revenue, net of discounts, during the promotional periods and did not recognize any revenue during free service periods. Under ASU 2014-09, revenue recognition for those contracts that contain substantive termination penalties is accelerated, as the impact of the discounts or free service periods is recognized uniformly over the contractual period. For contracts that do not have substantive termination penalties, we continue to record the impacts of partial or full discounts during the applicable promotional periods.

When we enter into contracts to provide services to our customers, we often charge installation or other upfront fees. Under previous accounting rules, installation fees related to services provided over our cable networks were recognized as revenue during the period in which the installation occurred to the extent these fees were equal to or less than direct selling costs. Under ASU 2014-09, these fees are generally deferred and recognized as revenue over the contractual period, or longer if the upfront fee results in a material renewal right.

ASU 2014-09 also impacted our accounting for certain upfront costs directly associated with obtaining and fulfilling customer contracts. Under our previous policy, these costs were expensed as incurred unless the costs were in the scope of another accounting topic that allowed for capitalization. Under ASU 2014-09, the upfront costs associated with contracts that have substantive termination penalties and a term of one year or more are recognized as assets and amortized to operating costs and expenses over the applicable period benefited. 

We did not make any significant changes to our internal control environment as a result of adopting ASU 2014-09.

For additional information regarding our adoption of ASU 2014-09, see note 3.

9


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



The cumulative effect of the adoption of ASU 2014-09 on our summary balance sheet information as of January 1, 2018 is as follows:
 
Balance at December 31, 2017
 
ASU 2014-09 Adjustments
 
Balance at January 1, 2018
 
in millions
Assets:
 
 
 
 
 
Trade receivables, net
$
1,540.4

 
(3.2
)
 
$
1,537.2

Other current assets
$
363.5

 
177.3

 
$
540.8

Investments and related note receivables (a)
$
6,671.4

 
191.2

 
$
6,862.6

Deferred tax assets
$
3,157.2

 
(16.0
)
 
$
3,141.2

Other assets, net
$
4,166.5

 
50.5

 
$
4,217.0

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
Deferred revenue
$
1,048.1

 
32.3

 
$
1,080.4

Other accrued and current liabilities
$
1,920.8

 
1.2

 
$
1,922.0

Other long-term liabilities
$
3,110.7

 
41.8

 
$
3,152.5

 
 
 
 
 
 
Equity:
 
 
 
 
 
Accumulated deficit (a)
$
(6,217.6
)
 
320.1

 
$
(5,897.5
)
Noncontrolling interests
$
(412.0
)
 
4.4

 
$
(407.6
)
_______________

(a)
The ASU 2014-09 adjustment amounts include the impact of our $191.2 million share of the VodafoneZiggo JV’s adjustment to its accumulated deficit.

The impact of our adoption of ASU 2014-09 on our condensed consolidated balance sheet as of March 31, 2018 was not materially different from the impacts set forth in the above January 1, 2018 summary balance sheet information. Similarly, the adoption of ASU 2014-09 did not have a material impact on our condensed consolidated statement of operations for the three months ended March 31, 2018.

ASU 2017-07

In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of the Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07), which changes the presentation of periodic benefit cost components. Under ASU 2017-07, we continue to present the service component of our net benefit cost as a component of operating income but present the other components of our net benefit cost, which can include credits, within non-operating income (expense) in our consolidated statements of operations. We adopted ASU 2017-07 on January 1, 2018 on a retrospective basis, which resulted in the reclassification to other income, net, of credits within our SG&A expenses and operating expenses of $3.2 million and $0.9 million, respectively, in our condensed consolidated statement of operations for the three months ended March 31, 2017.

ASU 2016-01

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 primarily impacts our accounting for certain equity investments that were previously accounted for under the cost method. Under ASU 2016-01, these investments, which do not have readily determinable fair values, are accounted for at cost minus impairment, adjusted for any observable price changes of similar investments of the same issuer. We adopted the amendments of ASU 2016-01 related to equity securities without readily determinable fair values on January 1, 2018 on a prospective basis.


10


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



ASU 2016-18

In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash (ASU 2016-18), which requires the change in restricted cash to be included together with the change in cash and cash equivalents in our consolidated statement of cash flows. We adopted ASU 2016-18 on January 1, 2018 on a retrospective basis.

Recent Accounting Pronouncements

ASU 2016-02

In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU 2016-02), which, for most leases, will result in lessees recognizing right-of-use assets and lease liabilities on the balance sheet 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, although the FASB has proposed an additional transition method to simplify the 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, the main impact of the adoption of this standard will be the recognition of right-of-use assets and lease liabilities in our consolidated balance sheet for those leases classified as operating leases under current U.S. GAAP. For a summary of our undiscounted future minimum lease payments under non-cancellable operating leases as of March 31, 2018, see note 15. We currently do not expect ASU 2016-02 to have a significant impact on our consolidated statements of operations or cash flows.

(3)    Revenue Recognition and Related Costs

Policies

Our revenue recognition and certain other accounting polices, as revised to reflect the impacts of our adoption of ASU 2014-09, are set forth below.

Service Revenue — Cable Networks. We recognize revenue from the provision of video, broadband internet and fixed-line telephony services over our cable network to customers in the periods the related services are provided, with the exception of revenue recognized pursuant to certain contracts that contain promotional discounts, as described below. Installation fees related to services provided over our cable network are generally deferred and recognized as revenue over the contractual period, or longer if the upfront fee results in a material renewal right.

Sale of Multiple Products and Services. We sell video, broadband internet, fixed-line telephony and, in most of our markets, mobile services to our customers in bundled packages at a rate lower than if the customer purchased each product on a standalone basis. Revenue from bundled packages generally is allocated proportionally to the individual products or services based on the relative standalone selling price for each respective product or service.

Mobile Revenue — General. Consideration from mobile contracts is allocated to the airtime service component and the handset component based on the relative standalone selling prices of each component. In markets where we offer handsets and airtime services in separate contracts entered into at the same time, we account for these contracts as a single contract.

Mobile Revenue — Airtime Services. We recognize revenue from mobile services in the periods in which the related services are provided. Revenue from pre-pay customers is deferred prior to the commencement of services and recognized as the services are rendered or usage rights expire.

Mobile Revenue — Handset Revenue. Revenue from the sale of handsets is recognized at the point in which the goods have been transferred to the customer. Some of our mobile handset contracts that permit the customer to take control of the handset upfront and pay for the handset in installments over a contractual period may contain a significant financing component. For contracts with terms of one year or more, we recognize any significant financing component as revenue over the contractual period using the effective interest method. We do not record the effect of a significant financing component if the contractual period is less than one year.

11


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



B2B Revenue. We defer upfront installation and certain nonrecurring fees received on B2B contracts where we maintain ownership of the installed equipment. The deferred fees are amortized into revenue on a straight-line basis, generally over the longer of the term of the arrangement or the expected period of performance.

Contract Costs. Incremental costs to obtain a contract with a customer, such as incremental sales commissions, are generally recognized as assets and amortized to SG&A expenses over the applicable period benefited, which generally is the contract life. If, however, the amortization period is less than one year, we expense such costs in the period incurred.

Contract fulfillment costs, such as porting costs, are recognized as assets and amortized to other operating costs over the applicable period benefited, which is generally the substantive contract term for the related service contract.

Promotional Discounts. For subscriber promotions, such as discounted or free services during an introductory period, revenue is recognized uniformly over the contractual period if the contract has substantive termination penalties. If a contract does not have substantive termination penalties, revenue is recognized only to the extent of the discounted monthly fees charged to the subscriber, if any.

Subscriber Advance Payments. Payments received in advance for the services we provide are deferred and recognized as revenue when the associated services are provided.

Sales, Use and Other Value-Added Taxes. Revenue is recorded net of applicable sales, use and other value-added taxes.

For a disaggregation of our revenue by major category and by reportable and geographic segment, see note 16.

Contract Balances

The timing of revenue recognition may differ from the timing of invoicing our customers. We record a trade receivable when we have transferred goods or services to a customer but have not yet received payment. Our trade receivables are reported net of an allowance for doubtful accounts. Such allowance aggregated $107.4 million and $108.0 million at March 31, 2018 and January 1, 2018, respectively.

If we transfer goods or services to a customer but do not have an unconditional right to payment, we record a contract asset. Contract assets typically arise from the uniform recognition of introductory promotional discounts over the contract period. Our contract assets were $46.8 million and $42.0 million as of March 31, 2018 and January 1, 2018, respectively. The current- and long-term portions of our contract asset balance at March 31, 2018 are included within other current assets and other assets, net, respectively, in our condensed consolidated balance sheet.

We record deferred revenue when we receive payment prior to transferring goods or services to a customer. We primarily defer revenue for (i) installation and other upfront services and (ii) other services that are invoiced prior to when services are provided. Our deferred revenue balances were $1,306.3 million and $1,160.6 million as of March 31, 2018 and January 1, 2018, respectively. The increase in deferred revenue for the three months ended March 31, 2018 is primarily due to increased advanced billings in certain markets, partially offset by $719.3 million of revenue recognized that was included in our deferred revenue balance at January 1, 2018. The current- and long-term portions of our deferred revenue balance at March 31, 2018 are included within deferred revenue and other long-term liabilities, respectively, in our condensed consolidated balance sheet.

Contract Costs

Our aggregate assets associated with incremental costs to obtain a contract and contract fulfillment costs were $186.1 million and $182.1 million at March 31, 2018 and January 1, 2018, respectively. The current and long-term portions of our assets related to contract costs at March 31, 2018 are included within other current assets and other assets, net, respectively, in our condensed consolidated balance sheet. We recorded amortization of $54.1 million during the three months ended March 31, 2018 related to these assets.


12


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



Unsatisfied Performance Obligations

A large portion of our revenue is derived from customers who are not subject to contracts. Revenue from customers who are subject to contracts is generally recognized over the term of such contracts, which is typically 12 to 24 months for our residential service and mobile contracts and one to five years for our B2B contracts.

(4)    Acquisitions, Disposals and Discontinued Operations

2017 Acquisitions

SFR BeLux. On June 19, 2017, Telenet acquired Coditel Brabant sprl, operating under the SFR brand (SFR BeLux), for a cash and debt free purchase price of €369.0 million ($410.3 million at the applicable rates) (the SFR BeLux Acquisition) after post-closing adjustments. SFR BeLux provides cable services to households and businesses in Belgium (Brussels and Wallonia regions) and Luxembourg and offers mobile services in Belgium through a mobile virtual network operator (MVNO) agreement with Telenet Group BVBA (BASE).

Pending Disposal

On December 22, 2017, we reached an agreement to sell our Austrian operations, “UPC Austria,” to a third party for a total enterprise value of approximately €1.9 billion ($2.3 billion), subject to customary debt and working capital adjustments at completion. Closing of the transaction is subject to regulatory approval, which is not expected until the second half of 2018. The proceeds from the sale are expected to be used for general corporate purposes, which may include leverage reduction for the remaining UPC Holding borrowing group, re-investment into our business and support for our share repurchase program. In our segment presentation, UPC Austria is included in our Switzerland/Austria segment.

In addition, we have agreed to provide certain transitional services for a period of up to four years. These services principally comprise network and information technology-related functions. The annual charges will depend on the actual level of services required by the purchaser. Liberty Global will also allow the use of the UPC brand for a transitional period of up to three years as part of the transaction.

Effective with the signing of the agreement, we began accounting for UPC Austria as held for sale. Accordingly, we no longer depreciate or amortize the long-lived assets of UPC Austria. Long-lived assets classified as held for sale are measured at the lower of carrying amount or fair value less cost to sell. Since the aggregate carrying value of UPC Austria is less than the estimated fair value less cost to sell, no adjustment to the carrying value was necessary. The carrying amounts of UPC Austria’s major classes of assets and liabilities, which are are classified as held for sale, are summarized below:
 
March 31,
2018
 
December 31,
2017
 
in millions
Assets:
 
 
 
Current assets other than cash
$
33.3

 
$
29.2

Property and equipment, net
494.0

 
451.9

Goodwill
748.5

 
732.2

Other assets, net
3.4

 
3.2

Total assets
$
1,279.2

 
$
1,216.5

 
 
 
 
Liabilities:
 
 
 
Current portion of debt and capital lease obligations
$
0.8

 
$
0.8

Other accrued and current liabilities
97.1

 
77.7

Other long-term liabilities
85.8

 
77.8

Total liabilities
$
183.7

 
$
156.3




13


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



Our condensed consolidated statements of operations include aggregate earnings before income taxes attributable to UPC Austria of $55.5 million and $30.2 million during the three months ended March 31, 2018 and 2017, respectively, and aggregate earnings before income taxes attributable to Liberty Global shareholders of $53.2 million and $28.5 million, respectively.

Discontinued Operations

On December 29, 2017, in order to effect the split-off of the LiLAC Group (the Split-off Transaction), we distributed 100% of the common shares (the Distribution) of Liberty Latin America Ltd. (Liberty Latin America) to the holders of our then outstanding LiLAC Class A, Class B and Class C ordinary shares (collectively, the LiLAC Shares). Just prior to the completion of the Split-off Transaction, all of the businesses, assets and liabilities of the LiLAC Group were transferred to Liberty Latin America, which was then a wholly-owned subsidiary of Liberty Global. Following the Distribution, the LiLAC Shares were redesignated as deferred shares (with virtually no economic rights) and Liberty Latin America became an independent publicly-traded company that is no longer consolidated by Liberty Global. Accordingly, the entities comprising the LiLAC Group are reflected as discontinued operations in our condensed consolidated statements of operations and cash flows for the three months ended March 31, 2017. No gain or loss was recognized in connection with the Split-off Transaction.

In connection with the Split-off Transaction, we entered into several agreements that govern certain transactions and other matters between our company and Liberty Latin America (the Split-off Agreements). During the three months ended March 31, 2018, the impacts of the Split-off Agreements and other normal recurring transactions between our company and Liberty Latin America were not material.

The operating results of the LiLAC Group for the three months ended March 31, 2017, which are classified as discontinued operations in our condensed consolidated statement of operations, are summarized in the following table (in millions, except share and per share amount). These amounts exclude the LiLAC Group’s intercompany revenue and expenses that are eliminated within our condensed consolidated statement of operations.
Revenue
$
910.9

Operating income
$
134.8

Earnings before income taxes and noncontrolling interests
$
33.7

Income tax expense
$
(44.6
)
Net earnings attributable to noncontrolling interests
$
(16.4
)
Loss from discontinued operations attributable to Liberty Global shareholders, net of taxes
$
(27.3
)
Basic and diluted loss from discontinued operations attributable to Liberty Global shareholders per LiLAC Share
$
(0.16
)
 
 
Weighted average ordinary shares outstanding - basic and diluted
172,743,854



We reported a loss from discontinued operations attributable to Liberty Global shareholders during the three months ended March 31, 2017. Therefore, the potentially dilutive effect of certain share-based incentive awards with respect to LiLAC Shares was not included in the computation of diluted loss from discontinued operations attributable to Liberty Global shareholders per LiLAC Share because their inclusion would have been anti-dilutive to the computation or, in the case of certain performance-based restricted share units (PSUs), because such awards had not yet met the applicable performance criteria.

Other

Multimedia. On October 18, 2016, our subsidiary UPC Polska SP Z.o.o. (UPC Poland) entered into a definitive agreement to acquire the cable business of Multimedia Polska S.A. (Multimedia), the third-largest cable operator in Poland. On October 18, 2017, the Polish regulator issued a statement of objection against the proposed transaction on the basis that such transaction could restrict competition in a number of cities across the country. On March 23, 2018, UPC Poland withdrew its application for regulatory clearance to acquire Multimedia after failing to agree to revised commercial terms with the sellers that take into account current regulatory and market conditions. In addition, the agreement to acquire Multimedia has been terminated.


14


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



(5)    Investments

The details of our investments are set forth below:
Accounting Method
 
March 31,
2018
 
December 31,
2017
 
in millions
Equity (a):
 
 
 
VodafoneZiggo JV (b)
$
4,408.0

 
$
4,162.8

Other
165.4

 
161.8

Total — equity
4,573.4

 
4,324.6

Fair value:
 
 
 
ITV plc (ITV) — subject to re-use rights
805.2

 
892.0

Sumitomo Corporation (Sumitomo)
768.3

 
776.5

ITI Neovision S.A. (ITI Neovision)
169.1

 
161.9

Casa Systems, Inc. (Casa)
130.1

 
76.3

Lions Gate Entertainment Corp (Lionsgate)
124.8

 
163.9

Other
291.3

 
244.7

Total — fair value
2,288.8

 
2,315.3

Cost (c)

 
31.5

Total
$
6,862.2

 
$
6,671.4

_______________

(a)
At March 31, 2018 and December 31, 2017, 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 $1,106.2 million and $1,081.9 million, respectively, due from a subsidiary of the VodafoneZiggo JV (as defined below) to a subsidiary of Liberty Global. The VodafoneZiggo JV Receivable bears interest at 5.55% and requires €100.0 million ($122.9 million) of principal to be paid annually during the first three years of the agreement, with the remaining principal due on January 16, 2027. The accrued interest on the VodafoneZiggo JV Receivable will be payable in a manner mutually agreed upon by Liberty Global and the VodafoneZiggo JV. During the three months ended March 31, 2018, interest accrued on the VodafoneZiggo JV Receivable was $15.2 million, all of which has been cash settled.

(c)
As a result of the January 1, 2018 adoption of ASU 2016-01, all of our cost investments have been reclassified to fair value investments.

For information regarding the impact of the adoption of ASU 2014-09 on our accumulated deficit and our investment in the VodafoneZiggo JV, see note 2.



15


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



Equity Method Investments

The following table sets forth the details of our share of losses of affiliates, net:
 
Three months ended
March 31,
 
2018
 
2017
 
in millions
 
 
 
 
VodafoneZiggo JV (a)
$
26.8

 
$
1.3

Other
9.7

 
14.4

Total
$
36.5

 
$
15.7

_______________

(a)
Amounts include the net effect of (i) 100% of the interest income earned on the VodafoneZiggo JV Receivable, (ii) 100% of the share-based compensation expense associated with Liberty Global awards held by VodafoneZiggo JV employees who were formerly employees of Liberty Global, as these awards remain our responsibility, and (iii) our 50% share of the remaining results of operations of the VodafoneZiggo JV.

VodafoneZiggo JV. On December 31, 2016, one of our wholly-owned subsidiaries contributed VodafoneZiggo Holding B.V. and its subsidiaries (VodafoneZiggo Holding) to VodafoneZiggo Group Holding B.V., an entity that was formed as a 50:50 joint venture (the “VodafoneZiggo JV”) between Vodafone Group plc (Vodafone) and Liberty Global (the VodafoneZiggo JV Transaction).

On January 4, 2017, in connection with the completion of the VodafoneZiggo JV Transaction, we received cash of €2.2 billion ($2.4 billion at the transaction date) comprising (i) a distribution reflecting our 50% share of the €2.8 billion ($2.9 billion at the transaction date) of net proceeds from the various debt financing arrangements entered into by certain subsidiaries of VodafoneZiggo Holding during the third quarter of 2016 and (ii) an equalization payment from Vodafone of €802.9 million ($840.8 million at the transaction date) that was subject to post-closing adjustments. During the second quarter of 2017, the equalization amount was finalized, resulting in the receipt of an additional €3.9 million ($4.5 million at the transaction date) from Vodafone.

During the first quarter of 2017, we paid $162.6 million of VAT on behalf of the VodafoneZiggo JV associated with the termination of a services agreement with Ziggo Group Holding B.V. that was in effect prior to the closing of the VodafoneZiggo JV Transaction. This advance was repaid during the first quarter of 2017.

Pursuant to an agreement entered into in connection with the formation of the VodafoneZiggo JV (the Framework Agreement), Liberty Global provides certain services to the VodafoneZiggo JV on a transitional or ongoing basis (collectively, the JV Services). The JV Services provided by Liberty Global consist primarily of (i) technology and other services and (ii) capital-related expenditures for assets that will be used by, or will otherwise benefit, the VodafoneZiggo JV. Liberty Global charges both fixed and usage-based fees to the VodafoneZiggo JV for the JV Services provided during the term of the Framework Agreement. During the three months ended March 31, 2018 and 2017, we recorded revenue of $34.5 million and $31.5 million, respectively, related to the JV Services. In addition, at March 31, 2018 and December 31, 2017, $65.9 million and $33.3 million, respectively, 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. Amounts due from the VodafoneZiggo JV, which are periodically cash settled, are included in other current assets in our condensed consolidated balance sheet.


16


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



The VodafoneZiggo JV is experiencing significant competition. In particular, the mobile operations of the VodafoneZiggo JV continue to experience competitive pressure on pricing, characterized by aggressive promotion campaigns, heavy marketing efforts and increasing or unlimited data bundles. If the adverse impacts of economic, competitive, regulatory or other factors were to cause significant deterioration of the results of operations or cash flows of the VodafoneZiggo JV, we could conclude in future periods that our investment in the VodafoneZiggo JV is impaired or management of the VodafoneZiggo JV could conclude that an impairment of the VodafoneZiggo JV goodwill and, to a lesser extent, long-lived assets, is required. Any such impairment of the VodafoneZiggo JV’s goodwill or our investment in the VodafoneZiggo JV would be reflected as a component of share of results of affiliates, net, in our condensed consolidated statement of operations. Our share of any such impairment charges could be significant.

The summarized results of operations of the VodafoneZiggo JV are set forth below:
 
Three months ended
 
March 31,
 
2018
 
2017
 
in millions
 
 
 
 
Revenue
$
1,195.0

 
$
1,083.8

Loss before income taxes
$
(104.0
)
 
$
(43.6
)
Net loss
$
(76.7
)
 
$
(30.6
)


(6)    Derivative Instruments

In general, we seek to enter into derivative instruments to protect against (i) increases in the interest rates on our variable-rate debt, (ii) foreign currency movements, particularly with respect to borrowings that are denominated in a currency other than the functional currency of the borrowing entity, and (iii) decreases in the market prices of certain publicly traded securities that we own. In this regard, through our subsidiaries, we have entered into various derivative instruments to manage interest rate exposure and foreign currency exposure primarily with respect to the U.S. dollar ($), the euro (), the British pound sterling (£), the Swiss franc (CHF), the Czech koruna (CZK), the Hungarian forint (HUF), the Polish zloty (PLN) and the Romanian lei (RON). With the exception of a limited number of our foreign currency forward contracts, we do not apply hedge accounting to our derivative instruments. Accordingly, changes in the fair values of most of our derivative instruments are recorded in realized and unrealized gains or losses on derivative instruments, net, in our condensed consolidated statements of operations.

The following table provides details of the fair values of our derivative instrument assets and liabilities:

17


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



 
March 31, 2018
 
December 31, 2017
 
Current (a)
 
Long-term (a)
 
Total
 
Current (a)
 
Long-term (a)
 
Total
 
in millions
Assets:
 
 
 
 
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts (b)
$
362.7

 
$
1,089.9

 
$
1,452.6

 
$
558.5

 
$
1,171.4

 
$
1,729.9

Equity-related derivative instruments (c)

 
705.3

 
705.3

 

 
560.9

 
560.9

Foreign currency forward and option contracts
11.0

 

 
11.0

 
17.0

 
0.1

 
17.1

Other
0.5

 
0.5

 
1.0

 
0.5

 
0.6

 
1.1

Total
$
374.2


$
1,795.7


$
2,169.9


$
576.0


$
1,733.0


$
2,309.0

 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2018
 
December 31, 2017
 
Current (a)
 
Long-term (a)
 
Total
 
Current (a)
 
Long-term (a)
 
Total
 
in millions
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts (b)
$
380.1

 
$
1,967.1

 
$
2,347.2

 
$
239.1

 
$
1,866.4

 
$
2,105.5

Equity-related derivative instruments (c)
5.1

 

 
5.1

 
5.4

 

 
5.4

Foreign currency forward and option contracts
5.8

 

 
5.8

 
7.7

 
0.2

 
7.9

Total
$
391.0


$
1,967.1


$
2,358.1


$
252.2


$
1,866.6


$
2,118.8

_______________ 

(a)
Our current derivative liabilities, long-term derivative assets and long-term derivative liabilities are included in other current and accrued liabilities, other assets, net, and other long-term liabilities, respectively, in our condensed consolidated balance sheets.

(b)
We consider credit risk relating to our and our counterparties’ nonperformance in the fair value assessment of our derivative instruments. In all cases, the adjustments take into account offsetting liability or asset positions within each of our subsidiary borrowing groups (as defined and described in note 9). The changes in the credit risk valuation adjustments associated with our cross-currency and interest rate derivative contracts resulted in a net gain of $47.2 million and $65.9 million during the three months ended March 31, 2018 and 2017, respectively. These amounts are included in realized and unrealized losses on derivative instruments, net, in our condensed consolidated statements of operations. For further information regarding our fair value measurements, see note 7.

(c)
Our equity-related derivative instruments primarily include the fair value of (i) the share collar (the ITV Collar) with respect to ITV shares held by our company, (ii) the 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 1.25 million of our voting and 1.25 million of our non-voting Lionsgate shares. The fair values of the ITV Collar, the Sumitomo Collar and the Lionsgate Forward do not include credit risk valuation adjustments as we assume that any losses incurred by our company in the event of nonperformance by the respective counterparty would be, subject to relevant insolvency laws, fully offset against amounts we owe to such counterparty pursuant to the related secured borrowing arrangements.

The details of our realized and unrealized losses on derivative instruments, net, are as follows:
 
Three months ended
 
March 31,
 
2018
 
2017
 
in millions
Cross-currency and interest rate derivative contracts
$
(451.0
)
 
$
(154.3
)
Equity-related derivative instruments:
 

 
ITV Collar
123.6

 
(53.2
)
Sumitomo Collar
11.4

 
(23.5
)
Lionsgate Forward
9.0

 
0.5

Other
1.2

 
(5.8
)
Total equity-related derivative instruments
145.2


(82.0
)
Foreign currency forward and option contracts
6.4

 
(6.0
)
Other
(0.9
)
 
0.5

Total
$
(300.3
)

$
(241.8
)


18


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



The net cash received or paid related to our derivative instruments is classified as an operating, investing or financing activity in our condensed consolidated statements of cash flows based on the objective of the derivative instrument and the classification of the applicable underlying cash flows. For foreign currency forward contracts that are used to hedge capital expenditures, the net cash received or paid is classified as an adjustment to capital expenditures in our condensed consolidated statements of cash flows. For derivative contracts that are terminated prior to maturity, the cash paid or received upon termination that relates to future periods is classified as a financing activity. The following table sets forth the classification of the net cash inflows (outflows) of our derivative instruments:
 
Three months ended
 
March 31,
 
2018
 
2017
 
in millions
Operating activities
$
64.7

 
$
92.9

Financing activities
9.8

 
(150.5
)
Total
$
74.5

 
$
(57.6
)


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, 2018, our exposure to counterparty credit risk included derivative assets with an aggregate fair value of $205.3 million.


19


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



Details of our Derivative Instruments

Cross-currency Derivative Contracts

As noted above, we are exposed to foreign currency exchange rate risk in situations where our debt is denominated in a currency other than the functional currency of the operations whose cash flows support our ability to repay or refinance such debt. Although we generally seek to match the denomination of our subsidiaries’ borrowings with the functional currency of the operations that are supporting the respective borrowings, market conditions or other factors may cause us to enter into borrowing arrangements that are not denominated in the functional currency of the underlying operations (unmatched debt). Our policy is generally to provide for an economic hedge against foreign currency exchange rate movements by using derivative instruments to synthetically convert unmatched debt into the applicable underlying currency. At March 31, 2018, substantially all of our debt was either directly or synthetically matched to the applicable functional currencies of the underlying operations. The following table sets forth the total notional amounts and the related weighted average remaining contractual lives of our cross-currency swap contracts at March 31, 2018:
Borrowing group
 
Notional amount due from counterparty
 
Notional amount due to counterparty
 
 
Weighted average remaining life
 
 
in millions
 
 
in years
 
 
 
 
 
 
 
 
 
 
Virgin Media
$
400.0

 
339.6

 
 
4.8
 
 
$
8,933.0

 
£
5,844.3

 
(a) (b)
5.5
 
 
£
2,396.1

 
$
3,450.0

 
(a)
6.8
 
 
 
 
 
 
 
 
 
 
UPC Holding
$
2,765.0

 
2,276.7

 
 
6.5
 
 
$
1,200.0

 
CHF
1,107.5

 
(b)
7.0
 
 
2,521.2

 
CHF
2,901.0

 
(b)
5.7
 
 
418.5

 
CZK
11,521.8

 
 
2.3
 
 
488.0

 
HUF
138,437.5

 
 
3.8
 
 
851.6

 
PLN
3,604.5

 
 
3.5
 
 
225.9

 
RON
650.0

 
 
3.9
 
 
 
 
 
 
 
 
 
 
Unitymedia
$
3,155.0

 
2,603.5

 
 
6.3
 
 
 
 
 
 
 
 
 
 
Telenet
$
3,195.0

 
2,834.1

 
(b)
7.1
_______________ 

(a)
Includes certain derivative instruments that do not involve the exchange of notional amounts at the inception and maturity of the instruments. Accordingly, the only cash flows associated with these derivative instruments are coupon-related payments and receipts. At March 31, 2018, the total U.S. dollar equivalents of the notional amount of these derivative instruments was $3.8 billion.

(b)
Includes certain derivative instruments that are “forward-starting,” such that the initial exchange occurs at a date subsequent to March 31, 2018. These instruments are typically entered into in order to extend existing hedges without the need to amend existing contracts.


20


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



Interest Rate Swap Contracts

As noted above, we enter into interest rate swaps to protect against increases in the interest rates on our variable-rate debt. The following table sets forth the total U.S. dollar equivalents of the notional amounts and the related weighted average remaining contractual lives of our interest rate swap contracts at March 31, 2018:
 
 
Borrowing group pays fixed rate (a)
 
Borrowing group receives fixed rate
Borrowing group
 
Notional amount
 
Weighted average remaining life
 
Notional amount
 
Weighted average remaining life
 
 
in millions
 
in years
 
in millions
 
in years
 
 
 
 
 
 
 
 
 
Virgin Media
$
19,778.6

 
3.9
 
$
12,515.8

 
5.9
 
 
 
 
 
 
 
 
 
UPC Holding
$
5,988.0

 
5.3
 
$
3,543.8

 
7.5
 
 
 
 
 
 
 
 
 
Unitymedia
$
8,766.1

 
4.1
 
$
6,208.0

 
7.2
 
 
 
 
 
 
 
 
 
Telenet
$
3,880.3

 
5.7
 
$
1,753.9

 
5.5

_______________ 

(a)
Includes forward-starting derivative instruments.

Interest Rate Swap Options

We have entered into various interest rate swap options (swaptions), which give us the right, but not the obligation, to enter into certain interest rate swap contracts at set dates in the future, with each such contract having a life of no more than three years. At the transaction date, the strike rate of each of these contracts was above the corresponding market rate. The following table sets forth certain information regarding our swaptions at March 31, 2018:
Borrowing group
 
Notional amount
 
Underlying swap currency
 
Weighted average option expiration period (a)
 
Weighted average strike rate (b)
 
 
in millions
 
 
 
in years
 
 
 
 
 
 
 
 
 
 
 
Virgin Media
$
7,445.5

 
£
 
1.5
 
2.45%
 
 
$
878.4

 
 
1.2
 
1.98%
 
 
 
 
 
 
 
 
 
UPC Holding
$
1,376.6

 
CHF
 
0.8
 
1.22%
 
 
 
 
 
 
 
 
 
Unitymedia
$
4,372.2

 
 
1.6
 
1.93%
______________ 

(a)
Represents the weighted average period until the date on which we have the option to enter into the interest rate swap contracts.

(b)
Represents the weighted average interest rate that we would pay if we exercised our option to enter into the interest rate swap contracts.

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 se

21


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



ts forth the total U.S. dollar equivalents of the notional amounts and related weighted average remaining contractual lives of our basis swap contracts at March 31, 2018:
Borrowing group
 
Notional amount due from counterparty
 
Weighted average remaining life
 
 
in millions
 
in years
 
 
 
 
 
Virgin Media
$
4,661.5

 
0.7
 
 
 
 
 
UPC Holding
$
1,975.0

 
0.8
 
 
 
 
 
Unitymedia
$
1,705.0

 
0.6
 
 
 
 
 
Telenet (a)
$
1,600.0

 
0.8

_______________

(a)
Includes forward-starting derivative instruments.

Interest Rate Caps and Collars

We enter into interest rate cap and collar agreements that lock in a maximum interest rate if variable rates rise, but also allow our company to benefit, to a limited extent in the case of collars, from declines in market rates. At March 31, 2018, the total U.S. dollar equivalents of the notional amounts of our interest rate caps and collars were $175.2 million and $697.5 million, respectively.

Impact of Derivative Instruments on Borrowing Costs

The impact of the derivative instruments that mitigate our foreign currency and interest rate risk, as described above, on our borrowing costs is as follows:
 
 
Increase (decrease) to borrowing costs at March 31, 2018 (a)
 
 
 
Virgin Media
(0.21
)%
UPC Holding
0.15
 %
Unitymedia
(0.62
)%
Telenet
(0.33
)%
Total decrease to borrowing costs
(0.27
)%

_______________ 

(a)
Represents the effect of derivative instruments in effect at March 31, 2018 and does not include forward-starting derivative instruments or swaptions.

Foreign Currency Forwards and Options

Certain of our subsidiaries enter into foreign currency forward and option contracts with respect to non-functional currency exposure. As of March 31, 2018, the total U.S. dollar equivalents of the notional amount of foreign currency forward and option contracts was $1.2 billion.


22


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



(7)    Fair Value Measurements

We use the fair value method to account for (i) certain of our investments, (ii) our derivative instruments, (iii) certain instruments that we classify as debt and (iv) the borrowed shares of Sumitomo pursuant to a securities lending arrangement (the Sumitomo Share Loan). The reported fair values of these investments and instruments as of March 31, 2018 likely will not represent the value that will be paid or received upon the ultimate settlement or disposition of these assets and liabilities.

U.S. GAAP provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

We incorporate a credit risk valuation adjustment in our fair value measurements to estimate the impact of both our own nonperformance risk and the nonperformance risk of our counterparties. Our credit risk valuation adjustments with respect to our cross-currency and interest rate swaps are quantified and further explained in note 6.

Fair value measurements are also used in connection with nonrecurring valuations performed in connection with acquisition accounting and impairment assessments. The nonrecurring valuations associated with acquisition accounting primarily include the valuation of reporting units, customer relationship and other intangible assets and property and equipment. Unless a reporting unit has a readily determinable fair value, the valuation of reporting units is based at least in part on discounted cash flow analyses. With the exception of certain inputs for our weighted average cost of capital and discount rate calculations that are derived from pricing services, the inputs used in our discounted cash flow analyses, such as forecasts of future cash flows, are based on our assumptions. The valuation of customer relationships is primarily based on an excess earnings methodology, which is a form of a discounted cash flow analysis. The excess earnings methodology requires us to estimate the specific cash flows expected from the customer relationship, considering such factors as estimated customer life, the revenue expected to be generated over the life of the customer relationship, contributory asset charges and other factors. Tangible assets are typically valued using a replacement or reproduction cost approach, considering factors such as current prices of the same or similar equipment, the age of the equipment and economic obsolescence. Most of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. During the three months ended March 31, 2018 and 2017, we did not perform significant nonrecurring fair value measurements.

For additional information concerning our fair value measurements, see note 8 to the consolidated financial statements included in our 10-K.


23


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



A summary of our assets and liabilities that are measured at fair value on a recurring basis is as follows:
 
 
 
Fair value measurements at 
March 31, 2018 using:
Description
March 31,
2018
 
Quoted prices
in active
markets for
identical assets
(Level 1)
 
Significant
other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
in millions
Assets:
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts
$
1,452.6

 
$

 
$
1,443.8

 
$
8.8

Equity-related derivative instruments
705.3

 

 

 
705.3

Foreign currency forward and option contracts
11.0

 

 
11.0

 

Other
1.0

 

 
1.0

 

Total derivative instruments
2,169.9

 

 
1,455.8

 
714.1

Investments
2,288.8

 
1,828.4

 

 
460.4

Total assets
$
4,458.7

 
$
1,828.4

 
$
1,455.8

 
$
1,174.5

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts
$
2,347.2

 
$

 
$
2,343.9

 
$
3.3

Equity-related derivative instruments
5.1

 

 

 
5.1

Foreign currency forward and option contracts
5.8

 

 
5.8

 

Total derivative liabilities
2,358.1

 

 
2,349.7

 
8.4

Debt
949.6

 
615.1

 
334.5

 

Total liabilities
$
3,307.7

 
$
615.1

 
$
2,684.2

 
$
8.4


24


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



 
 
 
Fair value measurements at 
December 31, 2017 using:
Description
December 31, 2017
 
Quoted prices
in active
markets for
identical assets
(Level 1)
 
Significant
other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
in millions
Assets:
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts
$
1,729.9

 
$

 
$
1,722.2

 
$
7.7

Equity-related derivative instruments
560.9

 

 

 
560.9

Foreign currency forward and option contracts
17.1

 

 
17.1

 

Other
1.1

 

 
1.1

 

Total derivative instruments
2,309.0

 

 
1,740.4

 
568.6

Investments
2,315.3

 
1,908.7

 

 
406.6

Total assets
$
4,624.3

 
$
1,908.7

 
$
1,740.4

 
$
975.2

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts
$
2,105.5

 
$

 
$
2,102.3

 
$
3.2

Equity-related derivative instruments
5.4

 

 

 
5.4

Foreign currency forward and option contracts
7.9

 

 
7.9

 

Total derivative instruments
2,118.8

 

 
2,110.2

 
8.6

Debt
965.7

 
621.7

 
344.0

 

Total liabilities
$
3,084.5

 
$
621.7

 
$
2,454.2

 
$
8.6



A reconciliation of the beginning and ending balances of our assets and liabilities measured at fair value on a recurring basis using significant unobservable, or Level 3, inputs is as follows:
 
Investments
 
Cross-currency and interest rate derivative contracts
 
Equity-related
derivative
instruments
 
Total
 
in millions
 
 
 
 
 
 
 
 
Balance of net assets at January 1, 2018
$
406.6

 
$
4.5

 
$
555.5

 
$
966.6

Gains included in net loss (a):
 
 
 
 
 
 


Realized and unrealized gains on derivative instruments, net

 
1.0

 
145.2

 
146.2

Realized and unrealized gains due to changes in fair values of certain investments and debt, net
3.0

 

 

 
3.0

Additions
14.7

 

 

 
14.7

Impact of ASU 2016-01
31.9

 

 

 
31.9

Foreign currency translation adjustments and other, net
4.2

 

 
(0.5
)
 
3.7

Balance of net assets at March 31, 2018
$
460.4

 
$
5.5

 
$
700.2

 
$
1,166.1

 

25


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



_______________

(a)
Most of these net gains relate to assets and liabilities that we continue to carry on our condensed consolidated balance sheet as of March 31, 2018.

(8)    Long-lived Assets

Property and Equipment, Net
        
The details of our property and equipment and the related accumulated depreciation are set forth below:
 
March 31,
2018
 
December 31,
2017
 
in millions
 
 
 
 
Distribution systems
$
26,482.9

 
$
25,202.2

Customer premises equipment
5,930.3

 
5,617.7

Support equipment, buildings and land
5,759.4

 
5,415.1

Total property and equipment, gross
38,172.6

 
36,235.0

Accumulated depreciation
(17,976.3
)
 
(16,699.6
)
Total property and equipment, net
$
20,196.3

 
$
19,535.4



During the three months ended March 31, 2018 and 2017, we recorded non-cash increases to our property and equipment related to vendor financing arrangements of $743.4 million and $614.4 million, respectively, which exclude related VAT of $107.1 million and $97.7 million, respectively, that was also financed by our vendors under these arrangements. In addition, during the three months ended March 31, 2018 and 2017, we recorded non-cash increases to our property and equipment related to assets acquired under capital leases of $29.5 million and $31.4 million, respectively.

Goodwill

Changes in the carrying amount of our goodwill during the three months ended March 31, 2018 are set forth below:
 
January 1, 2018
 
Acquisitions
and related
adjustments
 
Foreign
currency
translation
adjustments
 
March 31,
2018
 
in millions
 
 
 
 
 
 
 
 
U.K./Ireland
$
8,134.1

 
$

 
$
292.2

 
$
8,426.3

Belgium
2,681.7

 
(50.0
)
 
55.0

 
2,686.7

Germany
3,434.5

 

 
77.0

 
3,511.5

Switzerland/Austria
2,931.3

 

 
50.5

 
2,981.8

Central and Eastern Europe
1,353.5

 
2.1

 
26.3

 
1,381.9

Central and Corporate
12.3

 

 

 
12.3

Total
$
18,547.4


$
(47.9
)

$
501.0


$
19,000.5



If among other factors, (i) our equity values were to decline or (ii) the adverse impacts of economic, competitive, regulatory or other factors were to cause our results of operations or cash flows to be worse than anticipated, we could conclude in future periods that impairment charges are required in order to reduce the carrying values of our goodwill and, to a lesser extent, other long-lived assets. Any such impairment charges could be significant.


26


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



Intangible Assets Subject to Amortization, Net

The details of our intangible assets subject to amortization, which are included in other assets, net, in our condensed consolidated balance sheets, are set forth below:
 
March 31, 2018
 
December 31, 2017
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
 
in millions
 
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$
5,095.0

 
$
(3,512.8
)
 
$
1,582.2

 
$
4,862.4

 
$
(3,240.3
)
 
$
1,622.1

Other
555.3

 
(249.7
)
 
305.6

 
542.7

 
(229.4
)
 
313.3

Total
$
5,650.3

 
$
(3,762.5
)
 
$
1,887.8

 
$
5,405.1

 
$
(3,469.7
)
 
$
1,935.4




27


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



(9)    Debt and Capital Lease Obligations

The U.S. dollar equivalents of the components of our debt are as follows:
 
March 31, 2018
 
 
 
Principal amount
Weighted
average
interest
rate (a)
 
Unused borrowing capacity (b)
 
Estimated fair value (c)
Borrowing currency
 
U.S. $
equivalent
 
March 31, 2018
 
December 31, 2017
 
March 31, 2018
 
December 31, 2017
 
 
 
in millions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VM Notes
5.54
%
 

 
$

 
$
9,891.3

 
$
9,987.4

 
$
9,750.9

 
$
9,565.7

VM Credit Facilities
4.19
%
 
(d)
 
946.2

 
4,889.0

 
4,681.5

 
4,869.2

 
4,676.2

Unitymedia Notes
4.73
%
 

 

 
5,892.3

 
5,773.3

 
5,555.2

 
5,465.2

Unitymedia Credit Facilities
3.55
%
 
500.0

 
614.6

 
2,718.7

 
2,698.4

 
2,719.0

 
2,696.8

UPCB SPE Notes
4.49
%
 

 

 
2,580.9

 
2,638.8

 
2,614.9

 
2,582.6

UPC Holding Bank Facility
3.91
%
 
990.1

 
1,216.9

 
2,596.8

 
2,576.4

 
2,589.6

 
2,576.1

UPC Holding Senior Notes
4.55
%
 

 

 
1,242.2

 
1,272.5

 
1,330.5

 
1,313.4

Telenet Credit Facility
3.65
%
 
(e)
 
846.9

 
2,211.3

 
2,188.9

 
2,197.2

 
2,177.6

Telenet Senior Secured Notes
4.65
%
 

 

 
1,677.3

 
1,724.4

 
1,737.5

 
1,721.3

Telenet SPE Notes
5.52
%
 

 

 
960.2

 
1,014.4

 
893.6

 
937.7

Vendor financing (f)
3.74
%
 

 

 
3,768.1

 
4,039.7

 
3,768.1

 
4,039.7

ITV Collar Loan
0.71
%
 

 

 
1,484.6

 
1,445.8

 
1,517.1

 
1,463.8

Sumitomo Share Loan (g)
0.95
%
 

 

 
615.1

 
621.7

 
615.1

 
621.7

Derivative-related debt instruments (h)
3.38
%
 

 

 
604.4

 
612.4

 
585.6

 
592.5

Sumitomo Collar Loan
1.88
%
 

 

 
179.4

 
170.3

 
178.9

 
169.1

Other (i)
5.70
%
 

 

 
404.7

 
413.4

 
410.7

 
418.2

Total debt before deferred financing costs, discounts and premiums
4.35
%
 
 
 
$
3,624.6

 
$
41,716.3

 
$
41,859.3

 
$
41,333.1

 
$
41,017.6


The following table provides a reconciliation of total debt before deferred financing costs, discounts and premiums to total debt and capital lease obligations:
 
March 31, 2018
 
December 31, 2017
 
in millions
 
 
 
 
Total debt before deferred financing costs, discounts and premiums
$
41,333.1

 
$
41,017.6

Deferred financing costs, discounts and premiums, net
(216.7
)
 
(223.2
)
Total carrying amount of debt
41,116.4

 
40,794.4

Capital lease obligations (j)
1,450.3

 
1,420.5

Total debt and capital lease obligations
42,566.7

 
42,214.9

Current maturities of debt and capital lease obligations
(4,290.7
)
 
(4,165.4
)
Long-term debt and capital lease obligations
$
38,276.0

 
$
38,049.5


_______________

(a)
Represents the weighted average interest rate in effect at March 31, 2018 for all borrowings outstanding pursuant to each debt instrument, including any applicable margin. The interest rates presented represent stated rates and do not include the

28


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



impact of derivative instruments, deferred financing costs, original issue premiums or discounts and commitment fees, all of which affect our overall cost of borrowing. Including the effects of derivative instruments, original issue premiums or discounts and commitment fees, but excluding the impact of deferred financing costs, our weighted average interest rate on our aggregate variable- and fixed-rate indebtedness was 4.20% at March 31, 2018. For information regarding our derivative instruments, see note 6.

(b)
Unused borrowing capacity represents the maximum availability under the applicable facility at March 31, 2018 without regard to covenant compliance calculations or other conditions precedent to borrowing. At March 31, 2018, 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 based on the applicable leverage-based restricted payment tests, there were no restrictions on the respective subsidiary's ability to make loans or distributions from this availability to Liberty Global or its subsidiaries or other equity holders. Upon completion of the relevant March 31, 2018 compliance reporting requirements, we expect that the full amount of unused borrowing capacity will continue to be available and that there will be no restrictions with respect to loans or distributions.

(c)
The estimated fair values of our debt instruments are generally determined using the average of applicable bid and ask prices (mostly Level 1 of the fair value hierarchy) or, when quoted market prices are unavailable or not considered indicative of fair value, discounted cash flow models (mostly Level 2 of the fair value hierarchy). The discount rates used in the cash flow models are based on the market interest rates and estimated credit spreads of the applicable entity, to the extent available, and other relevant factors. For additional information regarding fair value hierarchies, see note 7.

(d)
Unused borrowing capacity under the VM Credit Facilities relates to multi-currency revolving facilities with an aggregate maximum borrowing capacity equivalent to £675.0 million ($946.2 million). In February 2018, the VM Revolving Facility was amended and split into two revolving facilities. VM Revolving Facility A is a multi-currency revolving facility maturing on December 31, 2021 with a maximum borrowing capacity equivalent to £75.0 million ($105.2 million), and VM Revolving Facility B is a multi-currency revolving facility maturing on January 15, 2024 with a maximum borrowing capacity equivalent to £600.0 million ($841.0 million). All other terms from the previously existing VM Revolving Facility continue to apply to the new revolving facilities.

(e)
Unused borrowing capacity under the Telenet Credit Facility comprises (i) €400.0 million ($491.6 million) under Telenet Facility AG, (ii) $300.0 million under the Telenet Facility AL Add-on, as defined and described below, (iii) €25.0 million ($30.7 million) under the Telenet Overdraft Facility and (iv) €20.0 million ($24.6 million) under the Telenet Revolving Facility, each of which were undrawn at March 31, 2018.

(f)
Represents amounts owed pursuant to interest-bearing vendor financing arrangements that are used to finance certain of our property and equipment additions and, to a lesser extent, certain of our operating expenses. These obligations are generally due within one year and include VAT that was paid on our behalf by the vendor. Repayments of vendor financing obligations are included in repayments and repurchases of debt and capital lease obligations in our condensed consolidated statements of cash flows.

(g)
The Sumitomo Share Loan is carried at fair value. For information regarding fair value hierarchies, see note 7.

(h)
Represents amounts associated with certain derivative-related borrowing instruments, including $334.5 million and $344.0 million at March 31, 2018 and December 31, 2017, respectively, carried at fair value. These instruments mature at various dates through January 2025. For information regarding fair value hierarchies, see note 7.

(i)
Amounts include $158.4 million and $160.9 million at March 31, 2018 and December 31, 2017, respectively, of debt collateralized by certain trade receivables of Virgin Media.

29


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



(j)
The U.S. dollar equivalents of our consolidated capital lease obligations are as follows:
 
 
March 31, 2018
 
December 31, 2017
 
 
in millions
 
 
 
 
 
Unitymedia
 
$
733.6

 
$
722.4

Telenet
 
476.2

 
456.1

UPC Holding
 
95.4

 
95.7

Virgin Media
 
81.3

 
79.1

Other subsidiaries
 
63.8

 
67.2

Total
 
$
1,450.3

 
$
1,420.5



Refinancing Transactions - General Information

At March 31, 2018, most of our outstanding debt had been incurred by one of our four subsidiary “borrowing groups.” References to these borrowing groups, which comprise Virgin Media, Unitymedia, UPC Holding and Telenet, include their respective restricted parent and subsidiary entities. Below we provide summary descriptions of any financing transactions completed during the first three months of 2018. Unless otherwise noted, the terms and conditions of any new notes and/or credit facilities are largely consistent with those of existing notes and credit facilities of the corresponding borrowing group with regard to covenants, events of default and change of control provisions, among other items. For information regarding the general terms and conditions of our debt and capitalized terms not defined herein, see note 10 to the consolidated financial statements included in our 10-K.

Telenet Refinancing Transactions

In March 2018, Telenet used existing cash to prepay 10% of the original principal amount of Telenet Funded Facility AB, together with accrued and unpaid interest and the related prepayment premiums, which was owed to Telenet Finance VI and, in turn, Telenet Finance VI used such proceeds to redeem 10% of the original principal amount of the Telenet Finance VI Notes. In connection with this transaction, Telenet recognized a loss on debt modification and extinguishment, net, of $2.6 million related to (i) the payment of $2.0 million of redemption premiums and (ii) the write-off of $0.6 million of unamortized deferred financing costs and discounts.

In March 2018, commitments under Telenet Facility AL were increased by $300.0 million (the Telenet Facility AL Add-on). The terms of the Telenet Facility AL Add-on are consistent with those of Telenet Facility AL. In April 2018, Telenet drew the full $300.0 million of the Telenet Facility AL Add-on and used the net proceeds, together with existing cash, to prepay in full the €250.0 million ($307.3 million) outstanding principal amount under Telenet Facility V, together with accrued and unpaid interest and the related prepayment premiums, which was owed to Telenet Finance V and, in turn, Telenet Finance V used such proceeds to redeem in full the €250.0 million outstanding principal amount of the Telenet Finance V Notes.

30


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



Maturities of Debt and Capital Lease Obligations

Maturities of our debt and capital lease obligations as of March 31, 2018 are presented below for the named entity and its subsidiaries, unless otherwise noted. Amounts presented below represent U.S. dollar equivalents based on March 31, 2018 exchange rates:

Debt:
 
Virgin Media
 
Unitymedia
 
UPC
Holding (a)
 
Telenet (b)
 
Other
 
Total
 
in millions
Year ending December 31:
 
 
 
 
 
 
 
 
 
 
 
2018 (remainder of year)
$
2,320.0

 
$
389.2

 
$
542.0

 
$
710.4

 
$
197.8

 
$
4,159.4

2019
133.8

 
57.6

 
79.4

 
47.2

 
42.2

 
360.2

2020
92.6

 
3.7

 
20.3

 
13.9

 
215.9

 
346.4

2021
1,402.6

 
3.6

 
20.0

 
12.3

 
1,657.1

 
3,095.6

2022
407.8

 
3.4

 
15.3

 
12.6

 
338.5

 
777.6

2023
979.6

 
515.1

 
9.9

 
12.8

 

 
1,517.4

Thereafter
11,960.2

 
7,973.0

 
6,534.9

 
4,608.4

 

 
31,076.5

Total debt maturities
17,296.6

 
8,945.6

 
7,221.8

 
5,417.6

 
2,451.5

 
41,333.1

Deferred financing costs, discounts and premiums, net
(61.6
)
 
(50.7
)
 
(52.4
)
 
(24.5
)
 
(27.5
)
 
(216.7
)
Total debt
$
17,235.0

 
$
8,894.9

 
$
7,169.4

 
$
5,393.1

 
$
2,424.0

 
$
41,116.4

Current portion
$
2,325.7

 
$
445.2

 
$
616.8

 
$
736.7

 
$
25.8

 
$
4,150.2

Noncurrent portion
$
14,909.3

 
$
8,449.7

 
$
6,552.6

 
$
4,656.4

 
$
2,398.2

 
$
36,966.2

_______________

(a)
Amounts include certain senior secured notes issued by special purpose financing entities that are consolidated by UPC Holding and Liberty Global.

(b)
Amounts include certain senior secured notes issued by special purpose financing entities that are consolidated by Telenet and Liberty Global.

31


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



Capital lease obligations:
 
Unitymedia
 
Telenet
 
UPC
Holding
 
Virgin Media
 
Other
 
Total
 
in millions
Year ending December 31:
 
 
 
 
 
 
 
 
 
 
 
2018 (remainder of year)
$
69.7

 
$
70.0

 
$
12.8

 
$
14.7

 
$
18.4

 
$
185.6

2019
92.3

 
75.8

 
17.5

 
11.5

 
16.9

 
214.0

2020
92.0

 
71.6

 
17.7

 
8.3

 
10.6

 
200.2

2021
91.7

 
68.1

 
18.6

 
8.6

 
5.2

 
192.2

2022
91.3

 
69.1

 
14.7

 
10.2

 
3.0

 
188.3

2023
90.1

 
57.9

 
12.6

 
6.0

 
18.2

 
184.8

Thereafter
620.7

 
220.5

 
21.8

 
183.6

 

 
1,046.6

Total principal and interest payments
1,147.8

 
633.0

 
115.7

 
242.9

 
72.3

 
2,211.7

Amounts representing interest
(414.2
)
 
(156.8
)
 
(20.3
)
 
(161.6
)
 
(8.5
)
 
(761.4
)
Present value of net minimum lease payments
$
733.6

 
$
476.2

 
$
95.4

 
$
81.3

 
$
63.8

 
$
1,450.3

Current portion
$
37.7

 
$
58.8

 
$
11.5

 
$
13.5

 
$
19.0

 
$
140.5

Noncurrent portion
$
695.9

 
$
417.4

 
$
83.9

 
$
67.8

 
$
44.8

 
$
1,309.8



Non-cash Refinancing Transactions

During the three months ended March 31, 2017, certain of our refinancing transactions included non-cash borrowings and repayments of debt aggregating $2,800.5 million.


32


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



(10)    Income Taxes

Income tax expense attributable to our loss from continuing operations before income taxes differs from the amounts computed using the applicable income tax rate as a result of the following factors:
 
Three months ended
 
March 31,
 
2018
 
2017
 
in millions
 
 
 
 
Computed “expected” tax benefit (a)
$
78.4

 
$
29.7

Mandatory Repatriation Tax (b)
(1,210.5
)
 

Change in valuation allowances (b) (c):
 
 
 
Benefit
553.4

 
12.1

Expense
(35.3
)
 
(68.0
)
Non-deductible or non-taxable foreign currency exchange results (c):
 
 
 
Expense
(83.0
)
 
(29.1
)
Benefit
2.3

 
1.2

Non-deductible or non-taxable interest and other items (c):
 
 
 
Expense
(39.7
)
 
(55.7
)
Benefit
13.1

 
8.7

Basis and other differences in the treatment of items associated with investments in subsidiaries and affiliates (c):
 
 
 
Expense
(29.9
)
 
(14.0
)
Benefit
3.7

 
0.4

International rate differences (c) (d):
 
 
 
Expense
(21.1
)
 
(17.3
)
Benefit
6.9

 
25.3

Recognition of previously unrecognized tax benefits
4.2

 

Other, net
(8.6
)
 
4.5

Total income tax expense
$
(766.1
)
 
$
(102.2
)
_______________

(a)
The statutory or “expected” tax rates are U.K. rates of 19.0% for the 2018 period and 19.25% for the 2017 period. The statutory rate for the 2017 period represents the blended rate in effect for the year ended December 31, 2017 based on the 20.0% statutory rate that was in effect for the first quarter of 2017 and the 19.0% statutory rate that was in effect for the remainder of 2017.

(b)
As further discussed below, the liability we have recorded for the Mandatory Repatriation Tax (as defined and described below) is significantly lower than the amount included in our income tax expense due primarily to the expected use of carryforward tax attributes in the U.S., all of which were subject to valuation allowances prior to the recognition of the Mandatory Repatriation Tax during the first quarter of 2018.

(c)
Country jurisdictions giving rise to income tax benefits are grouped together and shown separately from country jurisdictions giving rise to income tax expenses.

(d)
Amounts reflect adjustments (either a benefit or an expense) to the “expected” tax benefit for statutory rates in jurisdictions in which we operate outside of the U.K.



33


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



The Tax Cuts and Jobs Act (the 2017 U.S. Tax Act) was signed into law on December 22, 2017. In addition to lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018, the 2017 U.S. Tax Act contains significant changes to the U.S. income tax regime, including (i) changes to the formation and use of net operating losses incurred after December 31, 2017, (ii) changes to the income tax deductibility of certain business expenses, including interest expense and compensation paid to certain executive officers, (iii) the imposition of taxes on a one-time deemed mandatory repatriation of earnings and profits of foreign corporations (the Mandatory Repatriation Tax) and (iv) a new tax on global intangible low-taxed income.

The Mandatory Repatriation Tax requires that the aggregate post-1986 earnings and profits of our foreign corporations be included in our U.S. taxable income. The one-time repatriation of undistributed foreign earnings and profits is then taxed at a rate of 15.5% for cash earnings and 8% for non-cash earnings, both as defined in the 2017 U.S. Tax Act, and is payable, interest free, over an eight year period according to a prescribed payment schedule with 45% of the tax due in the last two years. At March 31, 2018, we have recorded an estimate of our liability for the Mandatory Repatriation Tax of $417.9 million after considering the expected use of carryforward tax attributes and other filing positions. As the calculations and application of the tax laws underlying the Mandatory Repatriation Tax are complex and given we are continuing to evaluate various historical transactions and analyze substantial information that supports our ownership structure and the operating history of our foreign subsidiaries, our estimate is subject to change during the remaining quarters of 2018.

At March 31, 2018, our unrecognized tax benefits of $790.5 million included $573.7 million of tax benefits that would have a favorable impact on our effective income tax rate if ultimately recognized, after considering amounts that we would expect to be offset by valuation allowances and other factors.

During the next 12 months, it is reasonably possible that the resolution of ongoing examinations by tax authorities, as well as the expiration of statutes of limitation, could result in reductions to our unrecognized tax benefits related to tax positions taken as of March 31, 2018. The amount of any such reductions could range up to $125.0 million, all of which would have a positive impact on our effective tax rate. Other than the potential impacts of these ongoing examinations and the expected expiration of certain statutes of limitation, we do not expect any material changes to our unrecognized tax benefits during the next 12 months. No assurance can be given as to the nature or impact of any changes in our unrecognized tax positions during the next 12 months.

We are currently undergoing income tax audits in Belgium, Germany, the Netherlands and the U.S. Except as noted below, any adjustments that might arise from the foregoing examinations are not expected to have a material impact on our consolidated financial position or results of operations. In the U.S., we have received notices of adjustment from the Internal Revenue Service with respect to our 2009 and 2010 income tax returns, and have entered into the appeals process with respect to the 2009 and 2010 matters. While we believe that the ultimate resolution of these proposed adjustments will not have a material impact on our consolidated financial position, results of operations or cash flows, no assurance can be given that this will be the case given the amounts involved and the complex nature of the related issues.

(11)    Equity

During the three months ended March 31, 2018, we repurchased (i) 2,258,800 shares of our class A ordinary shares at an average price per share of $32.44 and (ii) 12,551,500 shares of our class C ordinary shares at an average price per share of $33.70, for an aggregate purchase price of $496.3 million, including direct acquisition costs. At March 31, 2018, the remaining amount authorized for share repurchases was $1,571.5 million.


34


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



(12)    Share-based Compensation

Our share-based compensation expense primarily relates to the share-based incentive awards issued by Liberty Global to its employees and employees of its subsidiaries. A summary of our aggregate share-based compensation expense is set forth below: 
 
Three months ended
March 31,
 
2018
 
2017
 
in millions
Liberty Global:
 
 
 
Performance-based incentive awards (a)
$
9.7

 
$
3.8

Non-performance based share-based incentive awards
24.5

 
25.5

Other (b)
7.1

 

Total Liberty Global
41.3

 
29.3

Telenet share-based incentive awards
4.3

 
4.0

Other
0.2

 
0.1

Total
$
45.8

 
$
33.4

Included in:
 
 
 
Other operating expense
$
1.0

 
$
0.9

SG&A expense
44.8

 
32.5

Total
$
45.8

 
$
33.4

_______________

(a)
Includes share-based compensation expense related to (i) PSUs and (ii) through March 31, 2017, performance grant units (PGUs) held by our Chief Executive Officer.

(b)
Represents annual incentive compensation and defined contribution plan liabilities that have been or are expected to be settled with Liberty Global ordinary shares. In the case of the annual incentive compensation, shares will be issued to senior management and key employees pursuant to a shareholding incentive program that was implemented in 2018. The shareholding incentive program allows these employees to elect to receive up to 100% of their annual incentive compensation in ordinary shares of Liberty Global in lieu of cash.

The following table provides the aggregate number of options and share appreciation rights (SARs) with respect to awards issued by Liberty Global that were (i) outstanding and (ii) exercisable as of March 31, 2018.
 
Class A
 
Class C
 
Number of shares underlying awards
 
Weighted Average exercise or base price
 
Number of shares underlying awards
 
Weighted Average exercise or base price
Held by Liberty Global employees:
 
 
 
 
 
 
 
Outstanding
13,646,355

 
$
32.42

 
33,039,573

 
$
30.17

Exercisable
9,288,574

 
$
30.98

 
23,002,488

 
$
28.68

 
 
 
 
 
 
 
 
Held by former Liberty Global employees:
 
 
 
 
 
 
 
Outstanding
1,119,188

 
$
31.69

 
2,694,366

 
$
29.41

Exercisable
883,260

 
$
30.57

 
2,221,060

 
$
28.28



35


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



The following table provides the aggregate number of restricted share units (RSUs) and PSUs that were outstanding as of March 31, 2018:
 
Class A
 
Class C
Held by Liberty Global employees:
 
 
 
RSUs
441,526

 
867,216

PSUs
2,288,455

 
4,582,600

Held by former Liberty Global employees:
 
 
 
RSUs
14,914

 
29,898

PSUs
136,617

 
273,591



2018 PSUs

In March 2018, the compensation committee of our board of directors approved the grant of 1,303,776 PSUs to executive officers and key employees (the 2018 PSUs) pursuant to a performance plan that is based on the achievement of a specified compound annual growth rate (CAGR) with respect to our Adjusted OIBDA (as defined in note 16) during the two-year period ending December 31, 2019. The 2018 PSUs include over- and under-performance payout opportunities should the Adjusted OIBDA CAGR exceed or fail to meet the target, as applicable. A performance range of 50% to 125% of the target Adjusted OIBDA CAGR will generally result in award recipients earning 50% to 150% of their target 2018 PSUs, subject to reduction or forfeiture based on individual performance. The earned 2018 PSUs will vest 50% on April 1, 2020 and 50% on October 1, 2020.

(13) Restructuring Liability

A summary of changes in our restructuring liabilities during the three months ended March 31, 2018 is set forth in the table below:
 
Employee
severance
and
termination
 
Office
closures
 
Contract termination and other
 
Total
 
in millions
 
 
 
 
 
 
 
 
Restructuring liability as of January 1, 2018
$
36.1

 
$
9.5

 
$
16.4

 
$
62.0

Restructuring charges
16.4

 
0.7

 
41.2

 
58.3

Cash paid
(20.4
)
 
(1.4
)
 
(11.6
)
 
(33.4
)
Foreign currency translation adjustments and other
0.3

 
0.3

 
0.2

 
0.8

Restructuring liability as of March, 31, 2018
$
32.4

 
$
9.1

 
$
46.2

 
$
87.7

 
 
 
 
 
 
 
 
Current portion
$
30.7

 
$
4.7

 
$
34.6

 
$
70.0

Noncurrent portion
1.7

 
4.4

 
11.6

 
17.7

Total
$
32.4

 
$
9.1

 
$
46.2

 
$
87.7



Our restructuring charges during the three months ended March 31, 2018 included $39.2 million of costs in Belgium attributable to the migration of Telenet’s mobile subscribers from an MVNO arrangement to Telenet’s mobile network. In March 2018, Telenet completed the migration and recorded the costs associated with meeting its minimum guarantee commitment under the MVNO agreement as a restructuring charge. The MVNO agreement does not expire until the end of 2018.

(14)    Earnings or Loss per Share

Basic earnings or loss per share (EPS) is computed by dividing net earnings or loss by the weighted average number of shares outstanding for the period. Diluted EPS presents the dilutive effect, if any, on a per share basis of potential shares (e.g., options, SARs, RSUs and PSUs) as if they had been exercised, vested or converted at the beginning of the periods presented.

36


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2018
(unaudited)



We reported losses attributable to Liberty Global shareholders for the three months ended March 31, 2018 and 2017. Therefore, the potentially dilutive effect at March 31, 2018 and 2017 of the following items were not included in the computation of diluted loss per share attributable to Liberty Global shareholders because their inclusion would have been anti-dilutive to the computation or, in the case of certain PSUs, because such awards had not yet met the applicable performance criteria: (i) the aggregate number of outstanding options, SARs and RSUs of approximately 51.9 million and 48.7 million, respectively, and (ii) the aggregate number of PSUs of approximately 7.3 million and 7.9 million, respectively.

(15)    Commitments and Contingencies

Commitments

In the normal course of business, we have entered into agreements that commit our company to make cash payments in future periods with respect to programming commitments, network and connectivity commitments, purchases of customer premises and other equipment and services, non-cancellable operating leases and other items. The following table sets forth the U.S. dollar equivalents of such commitments as of March 31, 2018. The commitments included in this table do not reflect liabilities that are included in our March 31, 2018 condensed consolidated balance sheet. 
 
Payments due during:
 
 
 
Remainder
of 2018
 
 
 
 
 
 
 
2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Total
 
in millions