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Liberty Global 10-Q 2016
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, 2016
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
Liberty Global plc
(Exact name of Registrant as specified in its charter)
England and Wales
 
98-1112770
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
Griffin House, 161 Hammersmith Rd, London, United Kingdom
 
W6 8BS
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code:
+44.208.483.6449 or 303.220.6600
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ         No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ        No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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  ¨
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 May 4, 2016 was:
 
Class A
 
Class B
 
Class C
Liberty Global ordinary shares
253,233,390

 
10,805,850

 
577,324,169

LiLAC ordinary shares
12,657,509

 
540,089

 
30,795,947

 



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




LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
 
 
March 31,
2016
 
December 31,
2015
 
in millions
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
980.5

 
$
982.1

Trade receivables, net
1,493.8

 
1,467.7

Derivative instruments (note 4)
515.0

 
421.9

Prepaid expenses
264.8

 
144.2

Other current assets
314.9

 
341.5

Total current assets
3,569.0

 
3,357.4

Investments (including $2,348.0 million and $2,591.8 million, respectively, measured at fair value)
2,583.9

 
2,839.6

Property and equipment, net (note 6)
22,787.3

 
21,684.0

Goodwill (note 6)
28,030.4

 
27,020.4

Intangible assets subject to amortization, net (note 6)
7,369.7

 
7,092.5

Other assets, net (note 4)
5,511.2

 
5,565.1

Total assets
$
69,851.5

 
$
67,559.0

 




























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,
2016
 
December 31,
2015
 
in millions
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
971.0

 
$
1,050.1

Deferred revenue and advance payments from subscribers and others
1,531.6

 
1,393.5

Current portion of debt and capital lease obligations (note 7)
3,240.3

 
2,537.9

Derivative instruments (note 4)
647.8

 
346.3

Accrued interest
617.3

 
832.8

Accrued income taxes
488.4

 
483.5

Accrued capital expenditures
427.3

 
441.8

Other accrued and current liabilities (note 11)
2,245.4

 
2,072.0

Total current liabilities
10,169.1

 
9,157.9

Long-term debt and capital lease obligations (note 7)
45,831.8

 
44,211.2

Other long-term liabilities (notes 4 and 11)
4,272.6

 
4,015.6

Total liabilities
60,273.5

 
57,384.7

Commitments and contingencies (notes 3, 4, 7, 8, 13 and 15)

 

Equity (note 9):
 
 
 
Liberty Global shareholders:
 
 
 
Liberty Global Shares — Class A, $0.01 nominal value. Issued and outstanding 252,932,261 and 252,766,455 shares, respectively
2.5

 
2.5

Liberty Global Shares — Class B, $0.01 nominal value. Issued and outstanding 10,805,850 and 10,472,517 shares, respectively
0.1

 
0.1

Liberty Global Shares — Class C, $0.01 nominal value. Issued and outstanding 576,766,400 and 584,044,394 shares, respectively
5.8

 
5.9

LiLAC Shares — Class A, $0.01 nominal value. Issued and outstanding 12,649,810 and 12,630,580 shares, respectively
0.1

 
0.1

LiLAC Shares — Class B, $0.01 nominal value. Issued and outstanding 540,089 and 523,423 shares, respectively

 

LiLAC Shares — Class C, $0.01 nominal value. Issued and outstanding 30,780,040 and 30,772,874 shares, respectively
0.3

 
0.3

Additional paid-in capital
14,669.6

 
14,908.1

Accumulated deficit
(5,529.2
)
 
(5,160.1
)
Accumulated other comprehensive earnings, net of taxes
908.9

 
895.9

Treasury shares, at cost
(0.6
)
 
(0.4
)
Total Liberty Global shareholders
10,057.5

 
10,652.4

Noncontrolling interests
(479.5
)
 
(478.1
)
Total equity
9,578.0

 
10,174.3

Total liabilities and equity
$
69,851.5

 
$
67,559.0


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,
 
2016
 
2015
 
in millions, except share and per share amounts
 
 
 
 
Revenue (note 14)
$
4,588.0

 
$
4,516.9

Operating costs and expenses:
 
 
 
Operating (other than depreciation and amortization) (including share-based compensation) (note 10)
1,725.1

 
1,688.5

Selling, general and administrative (SG&A) (including share-based compensation) (note 10)
816.4

 
802.5

Depreciation and amortization
1,435.5

 
1,451.4

Impairment, restructuring and other operating items, net (note 11)
24.4

 
17.0

 
4,001.4

 
3,959.4

Operating income
586.6

 
557.5

Non-operating income (expense):
 
 
 
Interest expense
(619.3
)
 
(615.9
)
Realized and unrealized gains (losses) on derivative instruments, net (note 4)
(508.7
)
 
618.5

Foreign currency transaction gains (losses), net
339.0

 
(1,035.6
)
Realized and unrealized gains (losses) due to changes in fair values of certain investments, net (note 5)
(268.2
)
 
151.4

Losses on debt modification and extinguishment, net (note 7)
(4.3
)
 
(274.5
)
Other income (expense), net (note 13)
53.3

 
(1.0
)
 
(1,008.2
)
 
(1,157.1
)
Loss before income taxes
(421.6
)
 
(599.6
)
Income tax benefit (note 8)
48.9

 
77.9

Net loss
(372.7
)
 
(521.7
)
Net loss (earnings) attributable to noncontrolling interests
3.6

 
(15.8
)
Net loss attributable to Liberty Global shareholders
$
(369.1
)
 
$
(537.5
)
 
 
 
 
Basic and diluted loss attributable to Liberty Global shareholders per share (notes 1 and 12):
 
 
 
Liberty Global Shares
$
(0.39
)
 
 
LiLAC Shares
$
(0.88
)
 
 
Old Liberty Global Shares
 
 
$
(0.61
)
 
 
 
 
Weighted average ordinary shares outstanding – basic and diluted:
 
 
 
Liberty Global Shares
843,492,613

 
 
LiLAC Shares
43,933,746

 
 
Old Liberty Global Shares
 
 
887,264,545


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,
 
2016
 
2015
 
in millions
 
 
 
 
Net loss
$
(372.7
)
 
$
(521.7
)
Other comprehensive earnings (loss), net of taxes:
 
 
 
Foreign currency translation adjustments
16.6

 
(691.1
)
Reclassification adjustments included in net loss
(0.7
)
 
0.1

Other
(2.9
)
 
(1.5
)
Other comprehensive earnings (loss)
13.0

 
(692.5
)
Comprehensive loss
(359.7
)
 
(1,214.2
)
Comprehensive loss (earnings) attributable to noncontrolling interests
3.6

 
(15.9
)
Comprehensive loss attributable to Liberty Global shareholders
$
(356.1
)
 
$
(1,230.1
)



























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

4


LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(unaudited)
 
 
Liberty Global shareholders
 
Non-controlling
interests
 
Total
equity
 
Liberty Global Shares
 
LiLAC Shares
 
Additional
paid-in
capital
 
Accumulated
deficit
 
Accumulated
other
comprehensive
earnings,
net of taxes
 
Treasury shares, at cost
 
Total Liberty Global
shareholders
 
 
in millions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2016
$
8.5

 
$
0.4

 
$
14,908.1

 
$
(5,160.1
)
 
$
895.9

 
$
(0.4
)
 
$
10,652.4

 
$
(478.1
)
 
$
10,174.3

Net loss

 

 

 
(369.1
)
 

 

 
(369.1
)
 
(3.6
)
 
(372.7
)
Other comprehensive earnings, net of taxes

 

 

 

 
13.0

 

 
13.0

 

 
13.0

Repurchase and cancellation of Liberty Global ordinary shares (note 9)

 

 
(286.4
)
 

 

 

 
(286.4
)
 

 
(286.4
)
Share-based compensation (note 10)

 

 
65.6

 

 

 

 
65.6

 

 
65.6

Adjustments due to changes in subsidiaries’ equity and other, net
(0.1
)
 

 
(17.7
)
 

 

 
(0.2
)
 
(18.0
)
 
2.2

 
(15.8
)
Balance at March 31, 2016
$
8.4

 
$
0.4

 
$
14,669.6

 
$
(5,529.2
)
 
$
908.9

 
$
(0.6
)
 
$
10,057.5

 
$
(479.5
)
 
$
9,578.0











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,
 
2016
 
2015
 
in millions
Cash flows from operating activities:
 
 
 
Net loss
$
(372.7
)
 
$
(521.7
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Share-based compensation expense
69.0

 
71.4

Depreciation and amortization
1,435.5

 
1,451.4

Impairment, restructuring and other operating items, net
24.4

 
17.0

Amortization of deferred financing costs and non-cash interest accretion
20.0

 
18.5

Realized and unrealized losses (gains) on derivative instruments, net
508.7

 
(618.5
)
Foreign currency transaction losses (gains), net
(339.0
)
 
1,035.6

Realized and unrealized losses (gains) due to changes in fair values of certain investments, net
268.2

 
(151.4
)
Losses on debt modification and extinguishment, net
4.3

 
274.5

Deferred income tax benefit
(118.5
)
 
(187.2
)
Excess tax benefit from share-based compensation
(1.8
)
 
(20.0
)
Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions
(409.2
)
 
4.3

Net cash provided by operating activities
1,088.9

 
1,373.9

Cash flows from investing activities:
 
 
 
Cash paid in connection with acquisitions, net of cash acquired
(1,341.2
)
 
(3.3
)
Capital expenditures
(637.1
)
 
(661.2
)
Investments in and loans to affiliates and others
(26.3
)
 
(122.7
)
Other investing activities, net
77.1

 
12.2

Net cash used by investing activities
$
(1,927.5
)
 
$
(775.0
)
 













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,
 
2016
 
2015
 
in millions
Cash flows from financing activities:
 
 
 
Borrowings of debt
$
2,642.0

 
$
6,695.2

Repayments and repurchases of debt and capital lease obligations
(1,593.6
)
 
(6,543.0
)
Repurchase of Liberty Global ordinary shares
(191.6
)
 
(425.9
)
Change in cash collateral
117.7

 
61.8

Net cash paid associated with call option contracts on Liberty Global ordinary shares
(97.8
)
 
(122.9
)
Net cash paid related to derivative instruments
(32.0
)
 
(486.5
)
Payment of financing costs and debt premiums
(27.6
)
 
(269.8
)
Other financing activities, net
(34.3
)
 
(19.5
)
Net cash provided (used) by financing activities
782.8

 
(1,110.6
)
 
 
 
 
Effect of exchange rate changes on cash
54.2

 
(16.4
)
 


 


Net decrease in cash and cash equivalents
(1.6
)
 
(528.1
)
Cash and cash equivalents:
 
 
 
Beginning of period
982.1

 
1,158.5

End of period
$
980.5

 
$
630.4

 
 
 
 
Cash paid for interest
$
819.6

 
$
672.4

Net cash paid for taxes
$
115.1

 
$
123.0





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, 2016
(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 and mobile services, with consolidated operations at March 31, 2016 in 14 countries. Through our wholly-owned subsidiary Virgin Media Inc. (Virgin Media), we provide video, broadband internet, fixed-line telephony and mobile services in the United Kingdom (U.K.) and Ireland. Through Ziggo Group Holding B.V. (Ziggo Group Holding) and Unitymedia GmbH (Unitymedia), each a wholly-owned subsidiary, and Telenet Group Holding N.V. (Telenet), a 57.1%-owned subsidiary, we provide video, broadband internet, fixed-line telephony and mobile services in the Netherlands, Germany and Belgium, respectively. Through our wholly-owned subsidiary UPC Holding B.V. (UPC Holding), we provide (i) video, broadband internet and fixed-line telephony services in seven other European countries and (ii) mobile services in four other European countries. The operations of Virgin Media, Ziggo Group Holding, Unitymedia, Telenet and UPC Holding are collectively referred to herein as the “European Operations Division.” In Chile, we provide video, broadband internet, fixed-line telephony and mobile services through our wholly-owned subsidiary VTR.com SpA (VTR), the successor to VTR GlobalCom SpA. In Puerto Rico, we provide video, broadband internet and fixed-line telephony services through Liberty Cablevision of Puerto Rico LLC (Liberty Puerto Rico), an entity in which we hold a 60.0% ownership interest. The operations of VTR and Liberty Puerto Rico are collectively referred to herein as the “LiLAC Division.”

On July 1, 2015, we completed the approved steps of the “LiLAC Transaction” whereby we (i) reclassified our then outstanding Class A, Class B and Class C Liberty Global ordinary shares into corresponding classes of new Liberty Global ordinary shares (collectively, the Liberty Global Shares) and (ii) capitalized a portion of our share premium account and distributed as a dividend (or a “bonus issue” under U.K. law) our LiLAC Class A, Class B and Class C ordinary shares (collectively, the LiLAC Shares). In these notes, the term “Old Liberty Global Shares” refers to our previously-outstanding Class A, Class B and Class C Liberty Global ordinary shares. The impact of the LiLAC Transaction on our capitalization and earnings or loss per share presentation has been reflected in these condensed consolidated financial statements prospectively from July 1, 2015. Accordingly, (a) our net loss attributed to Liberty Global Shares and LiLAC Shares relates to the three months ended March 31, 2016 and (b) our net loss attributed to Old Liberty Global Shares relates to the three months ended March 31, 2015.

The Liberty Global Shares and the LiLAC Shares are tracking shares. Tracking shares are intended by the issuing company
to reflect or “track” the economic performance of a particular business or “group,” rather than the economic performance of the
company as a whole. The Liberty Global Shares and the LiLAC Shares are intended to track the economic performance of the Liberty Global Group and the LiLAC Group, respectively (each as defined and described below). While the Liberty Global Group and the LiLAC Group have separate collections of businesses, assets and liabilities attributed to them, neither group is a separate legal entity and therefore cannot own assets, issue securities or enter into legally binding agreements. Holders of tracking shares have no direct claim to the group’s assets and are not represented by separate boards of directors. Instead, holders of tracking shares are shareholders of the parent corporation, with a single board of directors, and are subject to all of the risks and liabilities of the parent corporation. We and our subsidiaries each continue to be responsible for our respective liabilities. Holders of Liberty Global Shares, LiLAC Shares and any other of our capital shares designated as ordinary shares from time to time will continue to be subject to risks associated with an investment in our company as a whole, even if a holder does not own both Liberty Global Shares and LiLAC Shares.

The “LiLAC Group” comprises our businesses, assets and liabilities in Latin America and the Caribbean and has attributed to it (i) VTR Finance B.V. (VTR Finance) and its subsidiaries, which include VTR, (ii) Lila Chile Holding B.V., which is the parent entity of VTR Finance, (iii) LiLAC Holdings Inc. (LiLAC Holdings) and its subsidiaries, which include Liberty Puerto Rico, (iv) LGE Coral Holdco Limited (LGE Coral) and its subsidiary, which were formed in anticipation of the acquisition of CWC (as defined and described in note 3), and (v) prior to July 1, 2015, the costs associated with certain corporate employees of Liberty Global that are exclusively focused on the management of the LiLAC Group (the LiLAC Corporate Costs). Effective July 1, 2015, these corporate employees were transferred to LiLAC Holdings. The “Liberty Global Group” comprises our businesses, assets and liabilities not attributed to the LiLAC Group, including Virgin Media, Ziggo Group Holding, Unitymedia, Telenet, UPC Holding, our corporate entities (excluding the LiLAC Corporate Costs) and certain other less significant entities.


8


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2016
(unaudited)



For additional information regarding our tracking share capital structure, including unaudited attributed financial information of the Liberty Global Group and the LiLAC Group, see Exhibit 99.1 to this Quarterly Report on Form 10-Q.

Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (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 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 2015 consolidated financial statements and notes thereto included in our 2015 Annual Report on Form 10-K.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates and assumptions are used in accounting for, among other things, the valuation of acquisition-related assets and liabilities, allowances for uncollectible accounts, 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, 2016.

Certain prior period amounts, including deferred financing costs, have been reclassified to conform to the current period presentation. For additional information regarding the change in the classification of deferred financing costs, see note 2.

(2)    Accounting Changes and Recent Accounting Pronouncements

Accounting Changes

In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03), which requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. For public entities, ASU 2015-03 is effective for annual reporting periods beginning after December 15, 2015. We adopted ASU 2015-03 on January 1, 2016 and, accordingly, deferred financing costs are presented as a reduction of debt in our March 31, 2016 and December 31, 2015 condensed consolidated balance sheets. Prior to the adoption of ASU 2015-03, we presented deferred financing costs in other assets, net.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09, as amended by ASU No. 2015-14, will replace existing revenue recognition guidance when it becomes effective for annual and interim reporting periods beginning after December 15, 2017. Early application is permitted for annual and interim reporting periods that begin after December 15, 2016. This new standard permits the use of either the retrospective or cumulative effect transition method. We will adopt ASU 2014-09 effective January 1, 2018, and we are currently evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.

In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU 2016-02), which, for most leases, will result in lessees recognizing lease assets and lease liabilities on the balance sheet with additional disclosures about leasing arrangements. ASU 2016-02 requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach also includes a number of optional practical expedients an entity may elect to apply. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, with early

9


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2016
(unaudited)



adoption permitted. We are currently evaluating the effect that ASU 2016-02 will have on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation Stock Compensation, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09), which simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification within the statement of cash flows. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the effect that ASU 2016-09 will have on our consolidated financial statements and related disclosures.
(3)   Acquisition and Joint Venture Transactions

Pending Joint Venture Transaction
On February 15, 2016, we and Liberty Global Europe Holding B.V., our wholly-owned subsidiary, entered into a Contribution and Transfer Agreement (the Contribution Agreement) with Vodafone Group plc (Vodafone) and one of its wholly-owned subsidiaries. Pursuant to the Contribution Agreement, our company and Vodafone agreed to form a 50:50 joint venture (the Dutch JV), which will combine Ziggo Group Holding and our Sport1 premium sports channel with Vodafone’s mobile businesses in the Netherlands (Vodafone NL) to create a national unified communications provider in the Netherlands with complementary strengths across video, broadband, mobile and business-to-business (B2B) services.
At the closing of the transaction contemplated by the Contribution Agreement, Vodafone will pay to our company an equalization payment equal to approximately €1.0 billion ($1.1 billion), as adjusted for the net debt of Ziggo Group Holding and Vodafone NL at the time of closing and certain working capital adjustments. Ziggo Group Holding will be contributed to the Dutch JV together with its outstanding third-party debt, while our Sport1 premium channel and Vodafone’s business in the Netherlands will be contributed on a debt and cash free basis. 
The parties expect to raise additional debt financing at the Dutch JV to increase the Dutch JV’s net leverage ratio to a level that ranges between 4.5 and 5 times EBITDA (as calculated pursuant to Ziggo Group Holding’s existing financing arrangements) and to make a pro rata distribution of the net proceeds from the additional debt to our company and Vodafone.  The Dutch JV will be required to make regular cash distributions to the shareholders on a pro rata basis equal to the unrestricted cash held by the Dutch JV (subject to the Dutch JV maintaining a minimum amount of cash and complying with the terms of its financing arrangements). As an ongoing operation, it is intended that the Dutch JV will be funded solely from its net cash flow from operations and third-party financing. This transaction will not trigger any of Ziggo Group Holding’s requirements under its debt agreements to redeem its outstanding debt pursuant to applicable change in control provisions.

Following completion of the transaction, we expect to account for our 50% interest in the Dutch JV as an equity method investment, and we expect to attribute our 50% interest in the Dutch JV to the Liberty Global Group.

The consummation of the transaction contemplated by the Contribution Agreement is subject to certain conditions, including competition clearance by the applicable regulatory authority in the European Union (EU). It is anticipated that the transaction will close around the end of 2016. The Contribution Agreement also includes customary termination rights, including a right of the parties to terminate the transaction if it has not closed by August 15, 2017.

Pending Acquisition

CWC. On November 16, 2015, we announced, pursuant to Rule 2.7 of the U.K. City Code on Takeovers and Mergers, the terms of a pending acquisition pursuant to which we would acquire Cable & Wireless Communications Plc (CWC) for shares of Liberty Global in a scheme of arrangement. Under the terms of the transaction, CWC shareholders will be entitled to receive up to, in the aggregate: 31,651,616 Class A Liberty Global Shares, 77,488,978 Class C Liberty Global Shares, 3,648,524 Class A LiLAC Shares and 8,939,328 Class C LiLAC Shares. Further, CWC shareholders will be entitled to receive a special dividend in the amount of £0.03 ($0.04) per CWC share at the closing of the transaction, which will be in lieu of any previously-announced CWC dividend. We expect that the dividend and estimated fees and expenses will be funded from CWC liquidity, including incremental debt borrowings, and LiLAC Group liquidity. In April 2016, Liberty Global and CWC each received shareholder

10


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2016
(unaudited)



approval for the transaction, and the court hearing to sanction the scheme of arrangement is scheduled for May 11, 2016. Assuming the court sanctions the scheme of arrangement on May 11, 2016, we expect to complete the acquisition on May 16, 2016.

Following completion of the acquisition of CWC, we intend to attribute CWC to the LiLAC Group, with the Liberty Global Group being granted an inter-group interest in the LiLAC Group. Based on the fully-diluted numbers of Liberty Global Shares, LiLAC Shares and CWC shares outstanding on November 16, 2015, after giving effect to the acquisition and such attribution, and treating the Liberty Global Group’s inter-group interest in the LiLAC Group as being represented by additional LiLAC Shares, Liberty Global Group shareholders would have had an approximate 67.4% ownership interest in the LiLAC Group.

2016 Acquisition

BASE Acquisition. On February 11, 2016, pursuant to a definitive agreement and following regulatory approval, Telenet acquired BASE Company NV (BASE) for a cash purchase price of €1,321.9 million ($1,497.7 million at the transaction date) (the BASE Acquisition). BASE is the third-largest mobile network operator in Belgium. We expect that the BASE Acquisition will provide Telenet with cost-effective long-term mobile access to effectively compete for future growth opportunities in the Belgium mobile market. The BASE Acquisition was funded through a combination of €1.0 billion ($1.1 billion at the transaction date) of new debt facilities and existing liquidity of Telenet. The acquisition was approved by the European Commission subject to Telenet’s agreement to divest both the JIM Mobile prepaid customer base and BASE’s 50% stake in Viking Co NV (Viking) to MEDIALAAN NV. In February 2016, Telenet completed the sale of its stake in Viking. The divestiture of the JIM Mobile prepaid customer base is expected to be phased over the 18-month period following the BASE Acquisition date.

We have accounted for the BASE Acquisition using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets of BASE based on assessments of their respective fair values, and the excess of the purchase price over the fair values of these identifiable net assets was allocated to goodwill. The preliminary opening balance sheet is subject to adjustment based on our final assessment of the fair values of the acquired identifiable assets and liabilities. Although most items in the valuation process remain open, the items with the highest likelihood of changing upon finalization of the valuation process include property and equipment, goodwill, intangible assets associated with mobile spectrum, customer relationships and trademarks and income taxes. A summary of the purchase price and the preliminary opening balance sheet for the BASE Acquisition at the February 11, 2016 acquisition date is presented in the following table (in millions):
Cash and cash equivalents
$
160.1

Other current assets
170.3

Property and equipment, net
786.4

Goodwill (a)
353.5

Intangible assets subject to amortization, net:
 
Mobile spectrum (b)
261.0

Customer relationships (c)
133.1

Trademarks (d)
40.7

Other assets, net
11.4

Other accrued and current liabilities
(326.3
)
Other long-term liabilities
(92.5
)
Total purchase price (e)
$
1,497.7

_______________

(a)
The goodwill recognized in connection with the BASE Acquisition is primarily attributable to (i) the ability to take advantage of BASE’s existing mobile network to gain immediate access to potential customers and (ii) synergies that are expected to be achieved through the integration of BASE with Telenet.

(b)
As of February 11, 2016, the weighted average useful life of BASE’s mobile spectrum was approximately 11 years.

(c)
As of February 11, 2016, the weighted average useful life of BASE’s customer relationships was approximately six years.


11


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2016
(unaudited)



(d)
As of February 11, 2016, the weighted average useful life of BASE’s trademarks was approximately 20 years.

(e)
Excludes direct acquisition costs of $11.2 million, including $1.2 million incurred during the first quarter of 2016, which are included in impairment, restructuring and other operating items, net, in our consolidated statements of operations.

2015 Acquisition

On June 3, 2015, pursuant to a stock purchase agreement with the parent of Puerto Rico Cable Acquisition Company Inc., dba Choice Cable TV (Choice) and following regulatory approval, one of our subsidiaries, together with investment funds affiliated with Searchlight Capital Partners, L.P. (collectively, Searchlight), acquired 100% of Choice (the Choice Acquisition). Choice is a cable and broadband services provider in Puerto Rico. We acquired Choice in order to achieve certain financial, operational and strategic benefits through the integration of Choice with Liberty Puerto Rico. The combined business is 60.0%-owned by our company and 40.0%-owned by Searchlight.
The purchase price for Choice of $276.4 million was funded through (i) Liberty Puerto Rico’s incremental debt borrowings, net of discount and fees, of $259.1 million, (ii) cash of $10.5 million and (iii) an equity contribution from Searchlight of $6.8 million.
We have accounted for the Choice Acquisition using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets of Choice based on assessments of their respective fair values, and the excess of the purchase price over the fair values of these identifiable net assets was allocated to goodwill. A summary of the purchase price and opening balance sheet for the Choice Acquisition at the June 3, 2015 acquisition date is presented in the following table. The opening balance sheet presented below reflects our final purchase price allocation (in millions):
Cash and cash equivalents
$
3.6

Other current assets
7.8

Property and equipment, net
79.8

Goodwill (a)
51.6

Intangible assets subject to amortization, net (b)
59.1

Franchise rights
147.8

Other assets, net
0.3

Other accrued and current liabilities
(13.2
)
Non-current deferred tax liabilities
(60.4
)
Total purchase price (c)
$
276.4

_______________

(a)
The goodwill recognized in connection with the Choice Acquisition is primarily attributable to (i) the ability to take advantage of Choice’s existing advanced broadband communications network to gain immediate access to potential customers and (ii) synergies that are expected to be achieved through the integration of Choice with Liberty Puerto Rico.

(b)
Amount primarily includes intangible assets related to customer relationships. As of June 3, 2015, the weighted average useful life of Choice’s intangible assets was approximately ten years.

(c)
Excludes direct acquisition costs of $8.5 million incurred through December 31, 2015, which were included in impairment, restructuring and other operating items, net, in our consolidated statement of operations for the year ended December 31, 2015.


12


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2016
(unaudited)



Pro Forma Information
The following unaudited pro forma condensed consolidated operating results give effect to (i) the Choice Acquisition and (ii) the BASE Acquisition, as if they had been completed as of January 1, 2015. These pro forma amounts are not necessarily indicative of the operating results that would have occurred if these transactions had occurred on such date. The pro forma adjustments are based on certain assumptions that we believe are reasonable. In the following table, we present the revenue that is attributed to the Liberty Global Group and the LiLAC Group as if such revenue had been attributed to each group at the beginning of each period presented. However, our presentation of net loss and basic and diluted loss per share attributed to (a) Liberty Global Shares, (b) LiLAC Shares and (c) Old Liberty Global Shares only includes the results of operations for the periods during which these shares were outstanding. Accordingly, (1) our net loss attributed to Liberty Global Shares and LiLAC Shares relates to the period from January 1, 2016 through March 31, 2016 and (2) our net loss attributed to Old Liberty Global Shares relates to the period from January 1, 2015 through March 31, 2015.
 
Three months ended
 
March 31,
 
2016
 
2015
 
in millions, except per share amounts
Revenue:
 
 
 
Liberty Global Group
$
4,358.5

 
$
4,398.7

LiLAC Group
303.9

 
309.9

Total
$
4,662.4

 
$
4,708.6

 
 
 
 
Net loss attributable to Liberty Global shareholders:
 
 
 
Liberty Global Shares
$
(334.2
)
 
$

LiLAC Shares
(38.5
)
 

Old Liberty Global Shares

 
(545.0
)
Total
$
(372.7
)
 
$
(545.0
)
 
 
 
 
Basic and diluted loss attributable to Liberty Global shareholders per share:
 
 
 
Liberty Global Shares
$
(0.40
)
 
 
LiLAC Shares
$
(0.88
)
 
 
Old Liberty Global Shares


 
$
(0.61
)
Our condensed consolidated statement of operations for the three months ended March 31, 2016 includes revenue of $90.0 million (after intercompany eliminations) and net loss of $3.0 million attributable to BASE.
(4)    Derivative Instruments

In general, we seek to enter into derivative instruments to protect against (i) increases in the interest rates on our variable-rate debt and (ii) foreign currency movements, particularly with respect to borrowings that are denominated in a currency other than the functional currency of the borrowing entity. In this regard, through our subsidiaries, we have entered into various derivative instruments to manage interest rate exposure and foreign currency exposure with respect to the U.S. dollar ($), the euro (), the British pound sterling (£), the Swiss franc (CHF), the Chilean peso (CLP), the Czech koruna (CZK), the Hungarian forint (HUF), the 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.


13


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2016
(unaudited)



The following table provides details of the fair values of our derivative instrument assets and liabilities:
 
March 31, 2016
 
December 31, 2015
 
Current
 
Long-term (a)
 
Total
 
Current
 
Long-term (a)
 
Total
 
in millions
Assets:
 
 
 
 
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
Liberty Global Group
$
306.1

 
$
1,284.0

 
$
1,590.1

 
$
263.6

 
$
1,518.5

 
$
1,782.1

LiLAC Group
7.2

 
210.5

 
217.7

 
11.8

 
291.7

 
303.5

Total cross-currency and interest rate derivative contracts (b)
313.3

 
1,494.5

 
1,807.8

 
275.4

 
1,810.2

 
2,085.6

Equity-related derivative instruments – Liberty Global Group (c)
198.1

 
465.3

 
663.4

 
135.5

 
273.0

 
408.5

Foreign currency forward contracts:
 
 
 
 


 
 
 
 
 
 
Liberty Global Group
1.9

 

 
1.9

 
6.2

 

 
6.2

LiLAC Group
0.1

 

 
0.1

 
4.2

 

 
4.2

Total foreign currency forward contracts
2.0

 

 
2.0

 
10.4

 

 
10.4

Other – Liberty Global Group
1.6

 
1.3

 
2.9

 
0.6

 
1.0

 
1.6

Total assets:
 
 
 
 
 
 
 
 
 
 
 
Liberty Global Group
507.7

 
1,750.6

 
2,258.3

 
405.9

 
1,792.5

 
2,198.4

LiLAC Group
7.3

 
210.5

 
217.8

 
16.0

 
291.7

 
307.7

Total
$
515.0


$
1,961.1


$
2,476.1


$
421.9


$
2,084.2


$
2,506.1

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
Liberty Global Group
$
587.8

 
$
1,374.1

 
$
1,961.9

 
$
304.9

 
$
1,194.7

 
$
1,499.6

LiLAC Group
9.6

 
45.9

 
55.5

 

 
13.8

 
13.8

Total cross-currency and interest rate derivative contracts (b)
597.4

 
1,420.0

 
2,017.4

 
304.9

 
1,208.5

 
1,513.4

Equity-related derivative instruments – Liberty Global Group (c)
37.2

 

 
37.2

 
34.7

 
39.7

 
74.4

Foreign currency forward contracts:
 
 
 
 
 
 
 
 
 
 
 
Liberty Global Group
4.7

 
0.2

 
4.9

 
1.1

 

 
1.1

LiLAC Group
7.5

 
0.1

 
7.6

 

 

 

Total foreign currency forward contracts
12.2

 
0.3

 
12.5

 
1.1

 

 
1.1

Other – Liberty Global Group
1.0

 
0.7

 
1.7

 
5.6

 
0.1

 
5.7

Total liabilities:
 
 
 
 
 
 
 
 
 
 
 
Liberty Global Group
630.7

 
1,375.0

 
2,005.7

 
346.3

 
1,234.5

 
1,580.8

LiLAC Group
17.1

 
46.0

 
63.1

 

 
13.8

 
13.8

Total
$
647.8


$
1,421.0


$
2,068.8


$
346.3


$
1,248.3


$
1,594.6


14


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2016
(unaudited)



_______________ 

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

(b)
We consider credit risk in our fair value assessments. As of March 31, 2016 and December 31, 2015, (i) the fair values of our cross-currency and interest rate derivative contracts that represented assets have been reduced by credit risk valuation adjustments aggregating $77.5 million and $64.0 million, respectively, and (ii) the fair values of our cross-currency and interest rate derivative contracts that represented liabilities have been reduced by credit risk valuation adjustments aggregating $123.9 million and $86.5 million, respectively. The adjustments to our derivative assets relate to the credit risk associated with counterparty nonperformance, and the adjustments to our derivative liabilities relate to credit risk associated with our own nonperformance. In all cases, the adjustments take into account offsetting liability or asset positions within a given contract. Our determination of credit risk valuation adjustments generally is based on our and our counterparties’ credit risks, as observed in the credit default swap market and market quotations for certain of our subsidiaries’ debt instruments, as applicable. The changes in the credit risk valuation adjustments associated with our cross-currency and interest rate derivative contracts resulted in a net gain (loss) of $21.4 million and ($16.9 million) during the three months ended March 31, 2016 and 2015, respectively. These amounts are included in realized and unrealized gains (losses) on derivative instruments, net, in our condensed consolidated statements of operations. For further information regarding our fair value measurements, see note 5.

(c)
Our equity-related derivative instruments primarily include the fair value of (i) the share collar (the ITV Collar) with respect to ITV plc (ITV) shares held by our company, (ii) the share collar (the Sumitomo Collar) with respect to the shares of Sumitomo Corporation held by our company, (iii) the prepaid forward transaction (the Lionsgate Forward) with respect to 2.5 million of the shares of Lions Gate Entertainment Corp (Lionsgate) held by our company and (iv) Virgin Media’s conversion hedges (the Virgin Media Capped Calls) with respect to Virgin Media’s 6.50% convertible senior notes. 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.


15


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2016
(unaudited)



The details of our realized and unrealized gains (losses) on derivative instruments, net, are as follows:
 
Three months ended
 
March 31,
 
2016
 
2015
 
in millions
Cross-currency and interest rate derivative contracts:
 

 
Liberty Global Group
$
(635.4
)
 
$
662.3

LiLAC Group
(137.6
)
 
78.2

Total cross-currency and interest rate derivative contracts
(773.0
)
 
740.5

Equity-related derivative instruments – Liberty Global Group:
 

 
ITV Collar
205.4

 
(105.4
)
Sumitomo Collar
68.7

 
(10.1
)
Lionsgate Forward
18.7

 

Other
0.4

 
0.6

Total equity-related derivative instruments
293.2


(114.9
)
Foreign currency forward contracts:
 

 
Liberty Global Group
(21.7
)
 
(9.3
)
LiLAC Group
(7.1
)
 
1.2

Total foreign currency forward contracts
(28.8
)
 
(8.1
)
Other – Liberty Global Group
(0.1
)
 
1.0

 
 
 
 
Total Liberty Global Group
(364.0
)
 
539.1

Total LiLAC Group
(144.7
)
 
79.4

Total
$
(508.7
)

$
618.5

 

16


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2016
(unaudited)



The net cash received or paid related to our derivative instruments is classified as an operating, investing or financing activity in our condensed consolidated statements of cash flows based on the objective of the derivative instrument and the classification of the applicable underlying cash flows. For foreign currency forward contracts that are used to hedge capital expenditures, the net cash received or paid is classified as an adjustment to capital expenditures in our condensed consolidated statements of cash flows. For derivative contracts that are terminated prior to maturity, the cash paid or received upon termination that relates to future periods is classified as a financing activity. The classification of these net cash outflows is as follows:
 
Three months ended
 
March 31,
 
2016
 
2015
 
in millions
Operating activities:
 
 
 
Liberty Global Group
$
9.7

 
$
(118.7
)
LiLAC Group
7.5

 
(19.1
)
Total operating activities
17.2

 
(137.8
)
Investing activities (a)

 
2.6

Financing activities (a)
(32.0
)
 
(486.5
)
Total cash outflows:
 
 
 
Liberty Global Group
(22.3
)
 
(602.6
)
LiLAC Group
7.5

 
(19.1
)
Total
$
(14.8
)
 
$
(621.7
)
_______________ 

(a)
Amounts are attributed to the Liberty Global Group.

Counterparty Credit Risk

We are exposed to the risk that the counterparties to the derivative instruments of our subsidiary borrowing groups will default on their obligations to us. We manage these credit risks through the evaluation and monitoring of the creditworthiness of, and concentration of risk with, the respective counterparties. In this regard, credit risk associated with our derivative instruments is spread across a relatively broad counterparty base of banks and financial institutions. Collateral is generally not posted by either party under the derivative instruments of our subsidiary borrowing groups. At March 31, 2016, our exposure to counterparty credit risk included derivative assets with an aggregate fair value of $1,661.5 million.

Details of our Derivative Instruments

In the following tables, we present the details of the various categories of our subsidiaries’ derivative instruments. For each subsidiary with multiple derivative instruments that mature within the same calendar month, the notional amounts are shown in the aggregate, and interest rates are presented on a weighted average basis. In addition, for derivative instruments that were in effect as of March 31, 2016, we present a single date that represents the applicable final maturity date. For derivative instruments that become effective subsequent to March 31, 2016, we present a range of dates that represents the period covered by the applicable derivative instruments.
 

17


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2016
(unaudited)



Cross-currency and Interest Rate Derivative Contracts

Cross-currency Swaps:

The terms of our outstanding cross-currency swap contracts at March 31, 2016 are as follows:
Subsidiary /
Final maturity date
 
Notional
amount
due from
counterparty
 
Notional
amount
due to
counterparty
 
Interest rate
due from
counterparty
 
Interest rate
due to (from)
counterparty
 
 
in millions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Virgin Media Investment Holdings Limited (VMIH), a subsidiary of Virgin Media:
 
 
 
 
 
 
 
 
 
January 2023
 
$
400.0

 
339.6

 
5.75%
 
4.33%
June 2023
 
$
1,855.0

 
£
1,198.3

 
6 mo. LIBOR + 2.75%
 
6 mo. GBP LIBOR + 3.18%
February 2022
 
$
1,400.0

 
£
873.6

 
5.01%
 
5.49%
January 2023
 
$
1,000.0

 
£
648.6

 
5.25%
 
5.32%
January 2021
 
$
447.9

 
£
276.7

 
5.25%
 
6 mo. GBP LIBOR + 2.06%
October 2022
 
$
450.0

 
£
272.0

 
6.00%
 
6.43%
January 2022
 
$
425.0

 
£
255.8

 
5.50%
 
5.40%
January 2022 - January 2025
 
$
425.0

 
£
255.8

 
3 mo. LIBOR
 
4.86%
April 2019
 
$
191.5

 
£
122.3

 
5.38%
 
5.49%
April 2023 (a)
 
$
180.0

 
£
112.5

 
1.64%
 
1.78%
February 2022 - April 2023
 
$
175.0

 
£
108.9

 
4.88%
 
5.19%
October 2019
 
$
100.0

 
£
65.4

 
7.19%
 
7.23%
February 2022 (a)
 
$
100.0

 
£
62.2

 
0.50%
 
0.56%
November 2016 (a)
 
$
55.0

 
£
27.7

 
6.50%
 
7.03%
October 2019 - October 2022
 
$
50.0

 
£
30.7

 
6.00%
 
5.75%
UPC Broadband Holding B.V. (UPC Broadband Holding), a subsidiary of UPC Holding:
 
 
 
 
 
 
 
 
 
January 2023
 
$
1,140.0