England and Wales | 001-35961 | 98-1112770 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification #) |
LIBERTY GLOBAL PLC | ||
By: | /s/ RANDY L. LAZZELL | |
Randy L. Lazzell | ||
Vice President |
Liberty Global Reports Third Quarter 2018 Results | |||||
Record Q3 RGU additions at Virgin Media, driven by 104,000 net adds in the U.K. Q3 continuing operations operating income of $209 million Q3 continuing operations rebased OCF growth of 5.2% led by Belgium & U.K. Reconfirming all full-year 2018 guidance Denver, Colorado: November 7, 2018 Liberty Global plc today announced its three months ("Q3") and nine months ("YTD") 2018 financial results. Our operations in Germany, Austria, Hungary, Romania and the Czech Republic (collectively, the "Discontinued European Operations") and the former LiLAC Group have been accounted for as discontinued operations. Unless otherwise indicated, the information in this release relates only to our continuing operations. As used in this release, the term "Full Company" includes our continuing operations and the Discontinued European Operations. For additional information, including the reasons that we present selected information on a Full Company basis, see note 1. In addition, on January 1, 2018, we adopted new revenue recognition rules on a prospective basis and a new presentation of certain components of our pension expense on a retrospective basis. All information in this release is presented on a comparable basis with respect to both of these accounting changes. For additional information concerning our discontinued operations and these accounting changes, see notes 2 and 3. CEO Mike Fries stated, "The continued operating and financial momentum at Virgin Media helped fuel our Q3 results. With respect to our U.K. subscriber growth, we generated over 100,000 net additions, which represents a record third quarter performance. This achievement was supported by strong volume growth in both our Project Lightning and legacy footprints. From a product perspective, we continue to reap the benefits of our next-generation V6 set-top box and Hub 3 WiFi router deployments, as we saw meaningful year-over-year improvement in churn. We also announced a 4.5% average U.K. customer price rise, which should underpin our results in the coming quarters. In our other markets, we reported mixed results as Telenet delivered 8.4% rebased OCF growth in the quarter, driven by synergy realization, while we posted a 9% rebased OCF contraction in Switzerland. | Q3 Continuing Operations | ||||
Revenue & YoY Growth4 | |||||
$3.0bn +1.9% | |||||
OCF & YoY Growth4 | |||||
$1.3bn +5.2% | |||||
YTD Continuing Operations | |||||
Revenue & YoY Growth4 | |||||
$9.1bn +2.4% | |||||
OCF & YoY Growth4 | |||||
$3.9bn +3.6% | |||||
Full Company 1 | |||||
Q3 OCF & YoY Growth4 | |||||
$1.8bn +5.3% | |||||
YTD OCF & YoY Growth4 | |||||
$5.7bn +4.6% | |||||
NASDAQ: LBTYA | LBTYB | LBTYK |
2018 Guidance* | Rebased OCF Growth | P&E Additions | New Build & Upgrade | Adjusted Free Cash Flow |
Continuing Operations | ~4% | $4.0 BN | $0.8 BN | Not provided |
Full Company | ~5% | $5.1 BN | $1.2 BN | $1.6 BN |
"The Swiss market remains challenging but we have a number of initiatives that we believe will improve performance. Our turnaround plan is underpinned by revamped video products, a refreshed MySports programming line-up, the launch of 1 Gig broadband speeds and a new and improved MVNO offering. The cornerstone of our enhanced video offering is the introduction of Horizon 4, our cutting-edge, next-generation TV entertainment platform, which will revolutionize the video experience for our customers. Switzerland is the first market where we've launched this innovation and we look forward to expanding the platform across more markets in the coming years. | Our previously announced deal to sell our German and certain CEE operations to Vodafone remains on track. Last month, Vodafone officially filed the submission paperwork with the European Union and we still expect that the deal will close in mid-2019. Turning to our balance sheet, at the end of Q3 our continuing operations had an average debt tenor5 of more than seven years, a fully-swapped borrowing cost of 4.3% and a liquidity6 position in excess of $3 billion. During the quarter we bought back nearly $400 million of stock and continue to anticipate at least $2 billion of share repurchases in 2018." | |
Contacts Investor Relations Matt Coates +44 20 8483 6333 John Rea +1 303 220 4238 Stefan Halters +1 303 784 4528 Corporate Communications Bill Myers +1 303 220 6686 Matt Beake +44 20 8483 6428 Corporate Website www.libertyglobal.com | About Liberty Global Liberty Global (NASDAQ: LBTYA, LBTYB and LBTYK) is the world’s largest international TV and broadband company, with operations in 10 European countries under the consumer brands Virgin Media, Unitymedia, Telenet and UPC. We invest in the infrastructure and digital platforms that empower our customers to make the most of the video, internet and communications revolution. Our substantial scale and commitment to innovation enable us to develop market-leading products delivered through next-generation networks that connect 21 million customers subscribing to 45 million TV, broadband internet and telephony services. We also serve 6 million mobile subscribers and offer WiFi service through 12 million access points across our footprint.* In addition, Liberty Global owns 50% of VodafoneZiggo, a joint venture in the Netherlands with 4 million customers subscribing to 10 million fixed-line and 5 million mobile services, as well as significant investments in ITV, All3Media, ITI Neovision, Casa Systems, LionsGate, the Formula E racing series and several regional sports networks. |
Liberty Global (continuing operations unless otherwise noted) | Q3 2018 | YoY Growth (Decline)(i) | YTD 2018 | YoY Growth/(Decline)(i) | ||||||||||
Subscribers | ||||||||||||||
Organic RGU Net Additions10 | 28,100 | (51.0 | %) | 28,500 | (87.3 | %) | ||||||||
Financial (in USD millions) | ||||||||||||||
Revenue | ||||||||||||||
Continuing operations | $ | 2,958.1 | 1.9 | % | $ | 9,097.7 | 2.4 | % | ||||||
OCF: | ||||||||||||||
Continuing operations | $ | 1,294.1 | 5.2 | % | $ | 3,875.7 | 3.6 | % | ||||||
Full Company(ii) | 5.3 | % | 4.6 | % | ||||||||||
Operating income | $ | 208.6 | (1.0 | %) | $ | 592.9 | (4.8 | %) | ||||||
Adjusted FCF: | ||||||||||||||
Continuing operations | $ | 165.3 | $ | (962.6 | ) | |||||||||
Pro forma continuing operations(iii) | $ | 244.8 | $ | (746.9 | ) | |||||||||
Full Company | $ | 394.6 | $ | (15.7 | ) | |||||||||
Cash provided by operating activities | $ | 587.2 | $ | 2,730.1 | ||||||||||
Cash provided by investing activities | $ | 1,687.1 | $ | 790.8 | ||||||||||
Cash used by financing activities | $ | (2,388.8 | ) | $ | (5,426.3 | ) |
(i) | Revenue and OCF YoY growth rates are on a rebased basis |
(ii) | Full Company rebased OCF growth in the Q3 and YTD periods includes the net positive impacts of certain German channel carriage settlements of $13.7 million and $36.9 million, respectively |
(iii) | Pro forma Adjusted FCF gives pro forma effect to certain increases in our recurring cash flows that we expect to realize following the disposition of the Discontinued European Operations. For additional details, see the information and reconciliation included within the Glossary |
Three months ended | Nine months ended | |||||||||||
September 30, | September 30, | |||||||||||
2018 | 2017 | 2018* | 2017 | |||||||||
Organic RGU net additions (losses) by product | ||||||||||||
Video | (36,700 | ) | (29,100 | ) | (120,100 | ) | (55,300 | ) | ||||
Data | 24,000 | 62,700 | 73,600 | 203,700 | ||||||||
Voice | 40,800 | 23,800 | 75,000 | 76,300 | ||||||||
Total | 28,100 | 57,400 | 28,500 | 224,700 | ||||||||
Organic RGU net additions (losses) by market | ||||||||||||
U.K./Ireland | 105,300 | 92,400 | 262,400 | 328,500 | ||||||||
Belgium | (52,900 | ) | (14,600 | ) | (99,800 | ) | (41,900 | ) | ||||
Switzerland | (41,500 | ) | (15,500 | ) | (139,000 | ) | (18,300 | ) | ||||
Continuing CEE (Poland, Slovakia and DTH) | 17,200 | (4,900 | ) | 4,900 | (43,600 | ) | ||||||
Total | 28,100 | 57,400 | 28,500 | 224,700 | ||||||||
Organic Mobile SIM additions (losses) by product | ||||||||||||
Postpaid | 54,800 | 67,000 | 248,700 | 240,700 | ||||||||
Prepaid | (37,100 | ) | (27,600 | ) | (122,900 | ) | (193,500 | ) | ||||
Total | 17,700 | 39,400 | 125,800 | 47,200 | ||||||||
Organic Mobile SIM additions (losses) by market | ||||||||||||
U.K./Ireland | 5,000 | (16,200 | ) | 50,900 | (20,300 | ) | ||||||
Belgium | 4,500 | 43,400 | 52,600 | 43,800 | ||||||||
Other | 8,200 | 12,200 | 22,300 | 23,700 | ||||||||
Total | 17,700 | 39,400 | 125,800 | 47,200 |
• | Cable Product Performance: During Q3 we added 28,000 RGUs, a decline compared to the 57,000 RGUs added in the prior-year period, as an improved performance at Virgin Media was largely offset by weakness in Belgium and Switzerland. From a product perspective, data and video adds showed a year-over-year decrease, while telephony net adds increased year-over-year |
• | U.K./Ireland: Record Q3 RGU additions of 105,000 were 14% higher than the prior year, with contributions both from our new build areas and our existing footprint. A shift in our sales and marketing focus to high value triple-play bundles has successfully driven growth in telephony, broadband and video product subscriptions |
• | Belgium: RGU attrition of 53,000 in Q3 was primarily due to intensified competition and churn stemming from our July price increase |
• | Switzerland: Lost 41,500 RGUs in Q3, compared to a loss of 15,500 in Q3 2017, primarily due to heightened competition |
• | Continuing CEE (Poland, Slovakia and DTH): Gained 17,000 RGUs in Q3, as compared to a loss of 5,000 in the prior-year period, mainly driven by stronger video and voice adds in Poland |
• | Next-Generation Video Penetration (including Horizon TV, Horizon-Lite, TiVo, Virgin TV V6 and Yelo TV): Added 70,000 subscribers to our advanced platforms in Q3 and reached 6.7 million or 78% of our total cable video base (excluding DTH) by the end of the quarter |
• | WiFi Connect Box: Deployments of our latest WiFi Connect box increased by 552,000 in Q3, ending the quarter with an installed base of nearly 5.6 million or 61% of broadband subscribers across our continuing operations |
• | Mobile: Added 18,000 mobile subscribers in Q3, as 55,000 postpaid additions were partially offset by continued attrition in our low-ARPU prepaid base |
◦ | Belgium added 4,500 mobile subscribers during Q3 |
◦ | U.K./Ireland added 5,000 mobile subscribers in Q3 as postpaid growth was partially offset by low-ARPU prepaid losses. The penetration of 4G at Virgin Media increased to 75% of our postpaid base at the end of Q3, and over 50% of our mobile base has now migrated to our full MVNO platform in the U.K. allowing us to offer more converged bundles |
◦ | Switzerland added 8,000 mobile subscribers in Q3, driven by bundling success |
Three months ended | Increase/(decrease) | Nine months ended | Increase/(decrease) | |||||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||||||
Revenue | 2018 | 20173 | % | Rebased % | 2018 | 20173 | % | Rebased % | ||||||||||||||||||||
in millions, except % amounts | ||||||||||||||||||||||||||||
Continuing operations: | ||||||||||||||||||||||||||||
U.K./Ireland | $ | 1,667.7 | $ | 1,609.9 | 3.6 | 4.1 | $ | 5,180.8 | $ | 4,676.2 | 10.8 | 4.5 | ||||||||||||||||
Belgium | 746.8 | 758.7 | (1.6 | ) | (1.5 | ) | 2,260.3 | 2,103.5 | 7.5 | (1.2 | ) | |||||||||||||||||
Switzerland | 323.3 | 351.7 | (8.1 | ) | (6.3 | ) | 1,000.4 | 1,020.7 | (2.0 | ) | (3.2 | ) | ||||||||||||||||
Continuing CEE | 148.6 | 149.9 | (0.9 | ) | 1.0 | 462.0 | 426.2 | 8.4 | 0.8 | |||||||||||||||||||
Central and Corporate | 71.9 | 53.0 | 35.7 | 31.7 | 197.4 | 137.8 | 43.3 | 31.7 | ||||||||||||||||||||
Intersegment eliminations | (0.2 | ) | (3.0 | ) | N.M. | N.M. | (3.2 | ) | (8.3 | ) | N.M. | N.M. | ||||||||||||||||
Total continuing operations | $ | 2,958.1 | $ | 2,920.2 | 1.3 | 1.9 | $ | 9,097.7 | $ | 8,356.1 | 8.9 | 2.4 | ||||||||||||||||
Discontinued European Operations(i): | ||||||||||||||||||||||||||||
Germany | $ | 714.4 | $ | 685.5 | 4.2 | 5.1 | $ | 2,226.1 | $ | 1,943.7 | 14.5 | 6.6 | ||||||||||||||||
Austria | 35.2 | 103.2 | (65.9 | ) | 3.0 | 253.7 | 291.9 | (13.1 | ) | 3.4 | ||||||||||||||||||
Discontinued CEE | 159.6 | 156.6 | 1.9 | 5.4 | 494.7 | 439.4 | 12.6 | 5.6 | ||||||||||||||||||||
Intersegment eliminations | (1.0 | ) | (0.9 | ) | N.M. | N.M. | (4.4 | ) | (2.6 | ) | N.M. | N.M. | ||||||||||||||||
Total discontinued European operations | $ | 908.2 | $ | 944.4 | (3.8 | ) | 5.3 | $ | 2,970.1 | $ | 2,672.4 | 11.1 | 6.2 | |||||||||||||||
• | Reported revenue for the three and nine months ended September 30, 2018, increased 1.3% and 8.9% year-over-year, respectively |
◦ | The YTD results were primarily driven by the impact of (i) positive foreign exchange ("FX") movements, mainly related to the strengthening of the British Pound and Euro against the U.S. dollar, and (ii) organic revenue growth |
• | Rebased revenue grew 1.9% and 2.4% in the Q3 and YTD 2018 periods, respectively. The result in the YTD period included: |
◦ | A $6.4 million headwind from the release of unclaimed customer credits in Switzerland in H1 2017 |
◦ | A $5.6 million headwind from the expected recovery of VAT paid in prior periods with respect to copyright fees in Belgium, which benefited revenue in H1 2017 |
◦ | The unfavorable $3.9 million impact due to the reversal during the first quarter of 2018 of revenue in Switzerland that was recognized during prior-year periods |
◦ | The favorable impact of $3.8 million of mobile subscription revenue recognized in the U.K. during the third quarter of 2018 related to the expected recovery of certain prior-period VAT payments |
• | U.K./Ireland: Rebased revenue growth of 4.1% in Q3 reflects (i) 2.9% rebased growth in our residential cable business supported by subscriber growth and accelerating cable ARPU, (ii) 13.0% rebased growth in residential mobile revenue (including interconnect and mobile handset revenue), reflecting higher value mobile handset sales and the aforementioned benefit related to the expected recovery of certain prior-period VAT payments, and (iii) 2.8% rebased revenue growth in our B2B business, driven by continued growth in our SOHO base |
• | Belgium: Rebased revenue decline of 1.5% in Q3 was mainly driven by the net effect of (i) lower mobile revenue growth, (ii) higher B2B growth and (iii) lower cable subscription revenue due to lower video subscribers |
• | Switzerland: Rebased revenue declined 6.3% in Q3, primarily due to the net effect of lower residential cable subscription revenue, which was driven primarily by competitive pressures, and higher mobile revenue due to increases in the average number of mobile subscribers |
• | Continuing CEE (Poland, Slovakia and DTH): Rebased revenue growth of 1.0% in Q3, due to the net effect of growth in our B2B business and a decrease in residential cable subscription revenue |
• | Central and Corporate: Rebased revenue increased 31.7% in Q3 due largely to the low-margin sale of customer premises equipment to the VodafoneZiggo JV, which began in the second quarter of 2018 |
• | Operating income of $208.6 million and $210.7 million in Q3 2018 and Q3 2017, respectively, representing a decrease of 1.0% year-over-year. For the nine months ended September 30, 2018, our operating income of $592.9 million reflects a decrease of 4.8% as compared to $622.7 million in YTD 2017 |
• | The decrease in operating income in the QTD period resulted from the net effect of (i) higher OCF, as further described below, (ii) an increase in impairment, restructuring and other operating items, net, including higher provisions for litigation, (iii) an increase in share-based compensation expense and (iv) a decrease in depreciation and amortization expense |
• | The decrease in operating income in the YTD period resulted from the net effect of (i) higher OCF, as further described below, (ii) an increase in depreciation and amortization expense, (iii) an increase in impairment, restructuring and other operating items, net, including the aforementioned increase in litigation provisions, and (iv) an increase in share-based compensation expense |
Three months ended | Increase/(decrease) | Nine months ended | Increase/(decrease) | |||||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||||||
OCF | 2018 | 20173 | % | Rebased % | 2018 | 20173 | % | Rebased % | ||||||||||||||||||||
in millions, except % amounts | ||||||||||||||||||||||||||||
Continuing operations: | ||||||||||||||||||||||||||||
U.K./Ireland | $ | 742.1 | $ | 708.2 | 4.8 | 5.3 | $ | 2,268.3 | $ | 2,052.1 | 10.5 | 4.3 | ||||||||||||||||
Belgium | 383.4 | 356.4 | 7.6 | 8.4 | 1,124.7 | 969.6 | 16.0 | 6.7 | ||||||||||||||||||||
Switzerland | 191.0 | 214.1 | (10.8 | ) | (9.0 | ) | 566.5 | 630.2 | (10.1 | ) | (11.2 | ) | ||||||||||||||||
Continuing CEE | 69.6 | 70.6 | (1.4 | ) | 0.5 | 209.4 | 193.7 | 8.1 | 0.7 | |||||||||||||||||||
Central and Corporate | (88.7 | ) | (104.0 | ) | 14.7 | 14.0 | (283.3 | ) | (307.5 | ) | 7.9 | 12.6 | ||||||||||||||||
Intersegment eliminations | (3.3 | ) | (4.8 | ) | N.M. | N.M. | (9.9 | ) | (9.2 | ) | N.M. | N.M. | ||||||||||||||||
Total continuing operations | $ | 1,294.1 | $ | 1,240.5 | 4.3 | 5.2 | $ | 3,875.7 | $ | 3,528.9 | 9.8 | 3.6 | ||||||||||||||||
OCF margin - continuing operations | 43.7 | % | 42.5 | % | 42.6 | % | 42.2 | % | ||||||||||||||||||||
Discontinued European Operations(i): | ||||||||||||||||||||||||||||
Germany | $ | 463.4 | $ | 440.5 | 5.2 | 6.2 | $ | 1,418.9 | $ | 1,231.8 | 15.2 | 7.4 | ||||||||||||||||
Austria | 19.6 | 57.2 | (65.7 | ) | 5.8 | 137.3 | 159.7 | (14.0 | ) | 3.2 | ||||||||||||||||||
Discontinued CEE | 66.0 | 67.4 | (2.1 | ) | 0.7 | 201.8 | 178.1 | 13.3 | 6.1 | |||||||||||||||||||
Intersegment eliminations | 6.2 | 10.5 | N.M. | N.M. | 24.8 | 28.2 | N.M. | N.M. | ||||||||||||||||||||
Total discontinued European operations | $ | 555.2 | $ | 575.6 | (3.5 | ) | 5.8 | $ | 1,782.8 | $ | 1,597.8 | 11.6 | 6.9 | |||||||||||||||
Full Company | 5.3 | 4.6 |
(i) | For information concerning our discontinued operations, see note 2. |
• | Reported OCF for the three and nine months ended September 30, 2018, increased 4.3% and 9.8% year-over-year, respectively |
◦ | The YTD result was primarily driven by (i) the aforementioned positive impact of FX movements and (ii) organic OCF growth |
• | Rebased OCF growth of 5.2% in Q3 and 3.6% in YTD 2018 included: |
◦ | The net unfavorable impact on our revenue of certain items, as discussed in the "Revenue Highlights" section above |
◦ | Higher costs of $23.8 million in U.K./Ireland in the YTD period resulting from the net impact of credits recorded during the second quarter of 2017 ($28.8 million) and the second quarter of 2018 ($5.0 million) in connection with a telecommunications operator's agreement to compensate Virgin Media and other communications providers for certain prior-period contractual breaches related to network charges |
◦ | Unfavorable network tax increases of $4.7 million and $17.7 million, respectively, following an increase in the rateable value of our existing U.K. networks, which is being phased in over a six-year period ending in 2022 |
◦ | Favorable impacts of $9.3 million and $28.7 million, respectively, due to the expected settlement of a portion of our 2018 annual incentive compensation with Liberty Global ordinary shares through a shareholding incentive program that was implemented in 2018 |
◦ | The impacts of the reassessment of certain accruals in the U.K., including a $5.2 million aggregate decrease in costs in Q3 and a $6.4 million increase in costs during the second quarter of 2018. |
• | As compared to the prior-year periods, our Q3 and YTD 2018 OCF margins were up 120 and up 40 basis points, respectively, to 43.7% and 42.6% |
• | U.K./Ireland: Rebased OCF growth of 5.3% was attributable to strong revenue growth and lower marketing spend partially offset by higher mobile handset costs, increased programming expenses and an increase in network taxes |
• | Belgium: Rebased OCF growth of 8.4%, largely driven by the net effect of lower direct costs as a result of the migration of subscribers to our own mobile network and the aforementioned revenue decrease |
• | Switzerland: Rebased OCF decline of 9.0% in Q3, largely due to the aforementioned residential cable subscription revenue decline |
• | Continuing CEE (Poland, Slovakia and DTH): Rebased OCF growth of 0.5%, driven by the net effect of the aforementioned revenue trend and an increase in interconnect costs |
• | Net earnings (loss) attributable to Liberty Global shareholders was $974.1 million and ($804.5 million) for the three months ended September 30, 2018 and 2017, respectively, and $700.2 million and ($1,814.2 million) during the nine months ended September 30, 2018 and 2017, respectively |
• | Total capital leases and principal amount of third-party debt: $29.7 billion for continuing operations |
• | Leverage ratios9: At September 30, 2018, our adjusted gross and net leverage ratios for the Full Company were 5.1x and 4.9x, respectively. |
• | Average debt tenor: Over 7 years, with ~74% not due until 2024 or thereafter for continuing operations |
• | Borrowing costs: Blended fully-swapped borrowing cost of our third-party debt was 4.3% for continuing operations |
• | Liquidity: $3.4 billion, including (i) $0.9 billion of cash at September 30, 2018 and (ii) aggregate unused borrowing capacity11 under our credit facilities of $2.5 billion, for our continuing operations |
Revenue | OCF | |||||||||||||||
Three months ended September 30, | Nine months ended September 30, | Three months ended September 30, | Nine months ended September 30, | |||||||||||||
2017 | 2017 | 2017 | 2017 | |||||||||||||
in millions | ||||||||||||||||
Continuing operations: | ||||||||||||||||
Acquisitions | $ | 16.4 | $ | 57.2 | $ | 2.9 | $ | 22.4 | ||||||||
Revenue Recognition (ASU 2014-09) | (8.8 | ) | (17.6 | ) | (10.9 | ) | (24.3 | ) | ||||||||
Dispositions(i) | (5.7 | ) | (20.7 | ) | (2.1 | ) | (9.2 | ) | ||||||||
Foreign Currency | (26.6 | ) | 487.6 | (10.7 | ) | 198.8 | ||||||||||
Total increase (decrease) | $ | (24.7 | ) | $ | 506.5 | $ | (20.8 | ) | $ | 187.7 | ||||||
Discontinued European Operations: | ||||||||||||||||
Revenue Recognition (ASU 2014-09) | $ | (5.2 | ) | $ | (15.2 | ) | $ | (4.7 | ) | $ | (9.8 | ) | ||||
Dispositions | (68.0 | ) | (68.0 | ) | (37.6 | ) | (37.6 | ) | ||||||||
Foreign Currency | (13.6 | ) | 192.1 | (12.8 | ) | 108.0 | ||||||||||
Total increase (decrease) | $ | (86.8 | ) | $ | 108.9 | $ | (55.1 | ) | $ | 60.6 | ||||||
Full Company: | ||||||||||||||||
Acquisitions | $ | 16.4 | $ | 57.2 | $ | 2.9 | $ | 22.4 | ||||||||
Revenue Recognition (ASU 2014-09) | (14.0 | ) | (32.8 | ) | (15.6 | ) | (34.1 | ) | ||||||||
Dispositions(i) | (73.7 | ) | (88.7 | ) | (39.7 | ) | (46.8 | ) | ||||||||
Foreign Currency | (40.2 | ) | 679.7 | (23.5 | ) | 306.8 | ||||||||||
Total increase (decrease) | $ | (111.5 | ) | $ | 615.4 | $ | (75.9 | ) | $ | 248.3 |
(i) | Includes rebase adjustments related to agreements to provide transitional and other services to the VodafoneZiggo JV, Liberty Latin America and UPC Austria. These adjustments result in an equal amount of fees in both the 2018 and 2017 periods for those services that are deemed to be temporary in nature. The net amount of these adjustments resulted in an increase (decrease) in revenue and OCF of $1.2 million and ($0.7 million), respectively, for the three months ended September 30, 2017 and decreases in revenue and OCF of $0.4 million and $2.2 million, respectively, for the nine months ended September 30, 2017. |
Capital | Debt & Capital | Cash | ||||||||||||||
Lease | Lease | and Cash | ||||||||||||||
Debt(ii), (iii) | Obligations | Obligations | Equivalents | |||||||||||||
in millions | ||||||||||||||||
Liberty Global and unrestricted subsidiaries | $ | 1,583.7 | $ | 49.4 | $ | 1,633.1 | $ | 795.7 | ||||||||
Virgin Media(iv) | 16,398.7 | 70.9 | 16,469.6 | 42.6 | ||||||||||||
UPC Holding | 5,951.0 | 78.0 | 6,029.0 | 14.7 | ||||||||||||
Telenet | 5,265.1 | 464.9 | 5,730.0 | 96.2 | ||||||||||||
Total | $ | 29,198.5 | $ | 663.2 | $ | 29,861.7 | $ | 949.2 |
(i) | Except as otherwise indicated, the amounts reported in the table include the named entity and its subsidiaries. |
(ii) | Debt amounts for UPC Holding and Telenet include notes issued by special purpose entities that are consolidated by the respective subsidiary. |
(iii) | Debt amounts for UPC Holding include those amounts that are not a direct obligation of the entities to be disposed within the UPC Holding borrowing group. Certain of these obligations have been or are expected to be repaid with portions of the proceeds from the disposition of UPC Austria and the Vodafone Disposal Group. |
(iv) | The Virgin Media borrowing group includes certain subsidiaries of Virgin Media, but excludes the parent entity, Virgin Media Inc. The cash and cash equivalents amount includes cash and cash equivalents held by the Virgin Media borrowing group, but excludes cash and cash equivalents held by Virgin Media Inc. This amount is included in the amount shown for Liberty Global and unrestricted subsidiaries. |
Three months ended September 30, | ||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
Continuing operations | Discontinued European Operations | Full Company | ||||||||||||||||||||||
in millions, except % amounts | ||||||||||||||||||||||||
Customer premises equipment | $ | 202.7 | $ | 227.9 | $ | 60.9 | $ | 75.0 | $ | 263.6 | $ | 302.9 | ||||||||||||
New Build & Upgrade | 153.2 | 244.1 | 69.9 | 79.6 | 223.1 | 323.7 | ||||||||||||||||||
Capacity | 96.7 | 133.8 | 32.5 | 39.4 | 129.2 | 173.2 | ||||||||||||||||||
Baseline | 264.5 | 235.3 | 40.5 | 56.4 | 305.0 | 291.7 | ||||||||||||||||||
Product & Enablers | 174.2 | 185.2 | 25.7 | 11.5 | 199.9 | 196.7 | ||||||||||||||||||
Total P&E Additions | 891.3 | 1,026.3 | $ | 229.5 | $ | 261.9 | $ | 1,120.8 | $ | 1,288.2 | ||||||||||||||
Reconciliation of P&E Additions to capital expenditures: | ||||||||||||||||||||||||
Assets acquired under capital-related vendor financing arrangements(i) | (471.3 | ) | (576.4 | ) | ||||||||||||||||||||
Assets acquired under capital leases | (21.6 | ) | (30.5 | ) | ||||||||||||||||||||
Changes in current liabilities related to capital expenditures | (53.3 | ) | (156.6 | ) | ||||||||||||||||||||
Total capital expenditures, net(ii) | $ | 345.1 | $ | 262.8 | ||||||||||||||||||||
Capital expenditures, net: | ||||||||||||||||||||||||
Third-party payments | $ | 361.0 | $ | 356.6 | ||||||||||||||||||||
Proceeds received for transfers to related parties(iii) | (15.9 | ) | (93.8 | ) | ||||||||||||||||||||
Total capital expenditures, net | $ | 345.1 | $ | 262.8 | ||||||||||||||||||||
P&E Additions as % of revenue3 | 30.1 | % | 35.1 | % |
Nine months ended September 30, | ||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
Continuing operations | Discontinued European Operations | Full Company | ||||||||||||||||||||||
in millions, except % amounts | ||||||||||||||||||||||||
Customer premises equipment | $ | 719.5 | $ | 668.6 | $ | 197.4 | $ | 234.5 | $ | 916.9 | $ | 903.1 | ||||||||||||
New Build & Upgrade | 541.1 | 608.7 | 218.6 | 210.3 | 759.7 | 819.0 | ||||||||||||||||||
Capacity | 312.4 | 362.6 | 92.6 | 90.2 | 405.0 | 452.8 | ||||||||||||||||||
Baseline | 605.6 | 507.3 | 145.9 | 141.6 | 751.5 | 648.9 | ||||||||||||||||||
Product & Enablers | 563.1 | 510.7 | 85.3 | 41.9 | 648.4 | 552.6 | ||||||||||||||||||
Total P&E Additions | 2,741.7 | 2,657.9 | $ | 739.8 | $ | 718.5 | $ | 3,481.5 | $ | 3,376.4 | ||||||||||||||
Reconciliation of P&E Additions to capital expenditures: | ||||||||||||||||||||||||
Assets acquired under capital-related vendor financing arrangements(i) | (1,659.2 | ) | (1,740.2 | ) | ||||||||||||||||||||
Assets acquired under capital leases | (68.1 | ) | (128.4 | ) | ||||||||||||||||||||
Changes in current liabilities related to capital expenditures | 128.5 | 61.4 | ||||||||||||||||||||||
Total capital expenditures, net(ii) | $ | 1,142.9 | $ | 850.7 | ||||||||||||||||||||
Capital expenditures, net: | ||||||||||||||||||||||||
Third-party payments | $ | 1,216.1 | $ | 1,139.5 | ||||||||||||||||||||
Proceeds received for transfers to related parties(iii) | (73.2 | ) | (288.8 | ) | ||||||||||||||||||||
Total capital expenditures, net | $ | 1,142.9 | $ | 850.7 | ||||||||||||||||||||
P&E Additions as % of revenue3 | 30.1 | % | 31.8 | % |
(i) | Amounts exclude related VAT of $82 million and $101 million during the three months ended September 30, 2018 and 2017, respectively, and $268 million and $285 million during the nine months ended September 30, 2018 and 2017, respectively, that were also financed by our vendors under these arrangements. |
(ii) | The capital expenditures that we report in our consolidated statements of cash flows do not include amounts that are financed under vendor financing or capital lease arrangements. Instead, these expenditures are reflected as non-cash additions to our property and equipment when the underlying assets are delivered, and as repayments of debt when the related principal is repaid. |
(iii) | Primarily relates to transfers of centrally-procured property and equipment to our discontinued operations and the VodafoneZiggo JV. |
Three months ended September 30, | % | Rebased | ||||||||||||
2018 | 20173 | Change | % Change | |||||||||||
Liberty Global | $ | 57.17 | $ | 57.06 | 0.2 | % | 1.7 | % | ||||||
U.K. & Ireland (Virgin Media) | £ | 51.09 | £ | 50.10 | 2.0 | % | 1.9 | % | ||||||
Belgium (Telenet) | € | 56.49 | € | 55.07 | 2.6 | % | 2.6 | % | ||||||
UPC | € | 31.27 | € | 32.20 | (2.9 | %) | (1.8 | %) |
ARPU per Mobile Subscriber | ||||||||||||||
Three months ended September 30, | % | Rebased | ||||||||||||
2018 | 20173 | Change | % Change | |||||||||||
Liberty Global: | ||||||||||||||
Including interconnect revenue | $ | 19.39 | $ | 20.09 | (3.5 | %) | (1.8 | %) | ||||||
Excluding interconnect revenue | $ | 15.56 | $ | 15.59 | (0.2 | %) | (1.7 | %) |
Consolidated Operating Data — September 30, 2018 | |||||||||||||||||||||||||
Video | |||||||||||||||||||||||||
Homes Passed | Two-way Homes Passed | Cable Customer Relationships | Basic Video Subscribers(i) | Enhanced Video Subscribers | DTH Subscribers | Total Video | Internet Subscribers(ii) | Telephony Subscribers(iii) | Total RGUs | Total Mobile Subscribers(iv) | |||||||||||||||
Continuing operations: | |||||||||||||||||||||||||
U.K. | 14,324,600 | 14,312,800 | 5,499,900 | — | 3,901,400 | — | 3,901,400 | 5,202,900 | 4,540,700 | 13,645,000 | 3,031,200 | ||||||||||||||
Belgium | 3,341,700 | 3,341,700 | 2,135,700 | 209,700 | 1,756,500 | — | 1,966,200 | 1,666,500 | 1,275,500 | 4,908,200 | 2,729,100 | ||||||||||||||
Switzerland(v) | 2,327,600 | 2,327,600 | 1,147,800 | 457,800 | 656,700 | — | 1,114,500 | 712,400 | 524,600 | 2,351,500 | 137,800 | ||||||||||||||
Ireland | 912,100 | 879,000 | 437,700 | 6,500 | 264,200 | — | 270,700 | 375,100 | 352,600 | 998,400 | 72,400 | ||||||||||||||
Poland | 3,430,800 | 3,375,200 | 1,430,900 | 179,700 | 1,033,100 | — | 1,212,800 | 1,153,500 | 643,900 | 3,010,200 | 3,300 | ||||||||||||||
Slovakia | 611,800 | 597,000 | 193,400 | 27,100 | 141,400 | — | 168,500 | 135,200 | 83,000 | 386,700 | — | ||||||||||||||
DTH | — | — | 774,200 | — | — | 774,200 | 774,200 | 11,000 | 11,000 | 796,200 | — | ||||||||||||||
Total continuing operations | 24,948,600 | 24,833,300 | 11,619,600 | 880,800 | 7,753,300 | 774,200 | 9,408,300 | 9,256,600 | 7,431,300 | 26,096,200 | 5,973,800 | ||||||||||||||
Discontinued European Operations: | |||||||||||||||||||||||||
Germany | 13,083,200 | 13,007,000 | 7,175,900 | 4,674,000 | 1,627,200 | — | 6,301,200 | 3,573,800 | 3,339,300 | 13,214,300 | 285,500 | ||||||||||||||
Romania | 3,146,400 | 3,110,500 | 975,100 | 236,300 | 692,600 | — | 928,900 | 592,900 | 567,800 | 2,089,600 | — | ||||||||||||||
Hungary | 1,816,600 | 1,799,100 | 858,600 | 72,800 | 616,800 | — | 689,600 | 688,100 | 665,500 | 2,043,200 | 103,300 | ||||||||||||||
Czech Republic | 1,543,800 | 1,523,900 | 615,800 | 172,600 | 364,200 | — | 536,800 | 503,300 | 184,700 | 1,224,800 | — | ||||||||||||||
Total Discontinued European Operations | 19,590,000 | 19,440,500 | 9,625,400 | 5,155,700 | 3,300,800 | — | 8,456,500 | 5,358,100 | 4,757,300 | 18,571,900 | 388,800 |
Subscriber Variance Table - September 30, 2018 vs June 30, 2018 | |||||||||||||||||||||||||
Video | |||||||||||||||||||||||||
Homes Passed | Two-way Homes Passed | Cable Customer Relationships | Basic Video Subscribers(i) | Enhanced Video Subscribers | DTH Subscribers | Total Video | Internet Subscribers(ii) | Telephony Subscribers(iii) | Total RGUs | Total Mobile Subscribers(iv) | |||||||||||||||
Continuing operations: | |||||||||||||||||||||||||
U.K. | 94,700 | 94,700 | 26,700 | — | 13,000 | — | 13,000 | 36,400 | 54,600 | 104,000 | (3,200 | ) | |||||||||||||
Belgium | 8,400 | 8,400 | (23,500 | ) | (10,500 | ) | (26,500 | ) | — | (37,000 | ) | (12,900 | ) | (20,000 | ) | (69,900 | ) | 4,500 | |||||||
Switzerland(v) | 25,100 | 25,100 | (20,700 | ) | (11,400 | ) | (8,600 | ) | — | (20,000 | ) | (12,700 | ) | (5,800 | ) | (38,500 | ) | 8,400 | |||||||
Ireland | 8,600 | 9,200 | 2,600 | (4,200 | ) | 4,100 | — | (100 | ) | 4,000 | 100 | 4,000 | 8,200 | ||||||||||||
Poland | 22,400 | 23,300 | 700 | (900 | ) | 3,800 | — | 2,900 | 5,700 | 7,100 | 15,700 | (200 | ) | ||||||||||||
Slovakia | 2,600 | 2,600 | 600 | 400 | 1,200 | — | 1,600 | 1,900 | 1,900 | 5,400 | — | ||||||||||||||
DTH | — | — | (4,100 | ) | — | — | (4,100 | ) | (4,100 | ) | 100 | 100 | (3,900 | ) | — | ||||||||||
Total continuing operations | 161,800 | 163,300 | (17,700 | ) | (26,600 | ) | (13,000 | ) | (4,100 | ) | (43,700 | ) | 22,500 | 38,000 | 16,800 | 17,700 | |||||||||
Discontinued European Operations: | |||||||||||||||||||||||||
Germany | 45,300 | 47,500 | 11,300 | 8,600 | (13,200 | ) | — | (4,600 | ) | 32,800 | 27,900 | 56,100 | (7,400 | ) | |||||||||||
Romania | 9,000 | 12,900 | (3,300 | ) | (9,500 | ) | 6,800 | — | (2,700 | ) | 3,100 | 10,500 | 10,900 | — | |||||||||||
Hungary | 9,300 | 9,300 | 5,400 | (4,600 | ) | 6,500 | — | 1,900 | 7,800 | 12,800 | 22,500 | 4,300 | |||||||||||||
Czech Republic | 6,700 | 6,600 | — | (1,400 | ) | 3,800 | — | 2,400 | 1,900 | 5,900 | 10,200 | — | |||||||||||||
Total Discontinued European Operations | 70,300 | 76,300 | 13,400 | (6,900 | ) | 3,900 | — | (3,000 | ) | 45,600 | 57,100 | 99,700 | (3,100 | ) |
Subscriber Variance Table - September 30, 2018 vs June 30, 2018 | |||||||||||||||||||||||||
Video | |||||||||||||||||||||||||
Homes Passed | Two-way Homes Passed | Cable Customer Relationships | Basic Video Subscribers(i) | Enhanced Video Subscribers | DTH Subscribers | Total Video | Internet Subscribers(ii) | Telephony Subscribers(iii) | Total RGUs | Total Mobile Subscribers(iv) | |||||||||||||||
Organic Change Summary: | |||||||||||||||||||||||||
U.K. | 94,700 | 94,700 | 26,700 | — | 13,000 | — | 13,000 | 36,400 | 54,600 | 104,000 | (3,200 | ) | |||||||||||||
Belgium | 8,400 | 8,400 | (22,100 | ) | (9,900 | ) | (16,300 | ) | — | (26,200 | ) | (9,800 | ) | (16,900 | ) | (52,900 | ) | 4,500 | |||||||
Other Europe | 43,200 | 44,700 | (22,800 | ) | (19,100 | ) | (300 | ) | (4,100 | ) | (23,500 | ) | (2,600 | ) | 3,100 | (23,000 | ) | 16,400 | |||||||
Total Organic Change | 146,300 | 147,800 | (18,200 | ) | (29,000 | ) | (3,600 | ) | (4,100 | ) | (36,700 | ) | 24,000 | 40,800 | 28,100 | 17,700 | |||||||||
Q3 2018 Adjustments: | |||||||||||||||||||||||||
Q3 2018 Acquisition - Ireland | — | — | 1,900 | — | 800 | — | 800 | 1,600 | 300 | 2,700 | |||||||||||||||
Q3 2018 Acquisition - Switzerland | 15,500 | 15,500 | — | 3,000 | — | — | 3,000 | — | — | 3,000 | — | ||||||||||||||
Q3 2018 Belgium Adjustment(vi) | — | — | (1,400 | ) | (600 | ) | (10,200 | ) | — | (10,800 | ) | (3,100 | ) | (3,100 | ) | (17,000 | ) | (300 | ) | ||||||
Net Adds (Reductions) | 161,800 | 163,300 | (17,700 | ) | (26,600 | ) | (13,000 | ) | (4,100 | ) | (43,700 | ) | 22,500 | 38,000 | 16,800 | 17,400 |
(i) | We have approximately 25,100 “lifeline” customers that are counted on a per connection basis, representing the least expensive regulated tier of video cable service, with only a few channels. |
(ii) | In Switzerland, we offer a 2 Mbps internet service to our Basic and Enhanced Video Subscribers without an incremental recurring fee. Our Internet Subscribers in Switzerland include 77,700 subscribers who have requested and received this service. |
(iii) | In Switzerland, we offer a basic phone service to our Basic and Enhanced Video Subscribers without an incremental recurring fee. Our Telephony Subscribers in Switzerland include 143,400 subscribers who have requested and received this service. |
(iv) | In a number of countries, our mobile subscribers receive mobile services pursuant to prepaid contracts. As of September 30, 2018, our mobile subscriber count included 496,000 and 410,600 prepaid mobile subscribers in Belgium and the U.K., respectively. |
(v) | Pursuant to service agreements, Switzerland offers enhanced video, broadband internet and telephony services over networks owned by third-party cable operators (“partner networks”). A partner network RGU is only recognized if there is a direct billing relationship with the customer. At September 30, 2018, Switzerland’s partner networks account for 127,500 Cable Customer Relationships, 299,200 RGUs, which include 107,500 Enhanced Video Subscribers, 109,300 Internet Subscribers, and 82,400 Telephony Subscribers. Subscribers to our enhanced video services provided over partner networks receive basic video services from the partner networks as opposed to our operations. Due to the fact that we do not own these partner networks, we do not report homes passed for Switzerland’s partner networks. |
(vi) | Represents the aggregate effect of adjustments to correct the overstatement of our and Telenet's Q1 2018 and Q2 2018 net RGU additions. These corrections, which relate to an entity that was acquired by Telenet in June 2017, include reductions to Telenet's and our reported RGU net additions of 3,700 and 13,300 for Q1 2018 and Q2 2018, respectively. Our and Telenet's RGU additions for Q1 2018 and Q2 2018 as restated for the above adjustments are detailed below: |
Three months ended | Three months ended | |||||||||||
March 31, 2018 | June 30, 2018 | |||||||||||
Telenet | Liberty Global* | Telenet | Liberty Global* | |||||||||
Organic RGU net additions (losses) by product | ||||||||||||
Video | (22,600 | ) | (64,500 | ) | (16,300 | ) | (18,900 | ) | ||||
Data | 2,100 | 30,700 | 100 | 18,900 | ||||||||
Voice | (4,700 | ) | 4,600 | (5,500 | ) | 29,600 | ||||||
Total | (25,200 | ) | (29,200 | ) | (21,700 | ) | 29,600 |
1 | The term "Full Company" includes our continuing operations and our Discontinued European Operations, which is the basis (i) on which analyst consensus estimates for our key performance indicators are currently derived and on which we originally provided our 2018 guidance for OCF, Adjusted FCF and Property and Equipment Additions and (ii) that we use to calculate our respective leverage ratios for debt covenant compliance purposes. We present OCF, Adjusted FCF and Property and Equipment Additions on a Full Company basis in order to allow readers to track our performance against analyst consensus estimates and our original 2018 guidance, as applicable. We plan to provide Full Company information with respect to our original 2018 guidance in our fourth quarter 2018 earnings releases so that investors can continue to track our progress against this guidance. |
2 | On December 29, 2017, the former LiLAC Group was split-off into a separate public company, and on May 9, 2018, we agreed to sell our operations in Germany, Hungary, Romania and the Czech Republic. Previously we had agreed to sell our operations in Austria and this transaction was completed on July 31, 2018. As a result of the foregoing, the former LiLAC Group and our operations in Germany, Austria, Hungary, Romania and the Czech Republic have all been accounted for as discontinued operations in our 10-Q. Unless otherwise indicated, the information in this release relates only to our continuing operations. For additional information regarding our discontinued operations, see note 4 to the condensed consolidated financial statements included in our 10-Q. |
3 | Effective January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), on a prospective basis. All applicable 2017 amounts in this release are presented on a pro forma basis that gives effect to the adoption of ASU 2014-09 as if such adoption had occurred on January 1, 2017. In addition, on January 1, 2018, we adopted ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”) on a retrospective basis. Accordingly, the operating income and OCF amounts for the 2017 periods in this release have been retrospectively revised to reflect the impact of ASU 2017-07. For additional information regarding these accounting changes, see note 2 to the condensed consolidated financial statements included in our 10-Q. |
4 | The indicated growth rates are rebased for acquisitions, dispositions, FX and other items that impact the comparability of our year-over-year results. Please see Rebase Information for information on rebased growth. |
5 | For purposes of calculating our average tenor, total third-party debt excludes vendor financing. |
6 | Liquidity refers to cash and cash equivalents plus the maximum undrawn commitments under subsidiary borrowing facilities, without regard to covenant compliance calculations. |
7 | Includes subscription and non-subscription revenue. For additional information regarding how we define our revenue categories, see note 16 to the condensed consolidated financial statements included in our 10-Q. |
8 | Total B2B includes subscription (SOHO) and non-subscription revenue. B2B and SOHO growth rates include upsell from our residential businesses. |
9 | Consistent with how we calculate our leverage ratios under our debt agreements, we calculate our debt ratios on a Full Company basis, with the gross and net debt ratios defined as total debt and net debt, respectively, divided by annualized OCF of the latest quarter. Net debt is defined as total debt less cash and cash equivalents. For purposes of these calculations, debt is measured using swapped foreign currency rates, consistent with the covenant calculation requirements of our subsidiary debt agreements, and excludes the loans backed or secured by the shares we hold in ITV plc and Lions Gate Entertainment Corp. We have not presented leverage ratios on a continuing operations basis as we believe that such a presentation would overstate our leverage and would not be representative of the actual leverage ratios that we will report once all dispositions are completed. This is due to the fact that our continuing operations exclude all of the OCF of the entities to be disposed but include a portion of the debt that we expect to repay with the proceeds from such dispositions. For additional information, see the details of our pro forma Adjusted FCF within the Glossary and note 4 to the condensed consolidated financial statements included in our 10-Q. |
September 30, 2018 | |||
in millions, except ratios | |||
Consolidated Debt to Annualized Consolidated OCF: | |||
Debt and capital lease obligations before deferred financing costs, discounts and premiums | $ | 39,741.1 | |
Principal related projected derivative cash payments | (1,273.1 | ) | |
ITV Collar Loan | (1,411.6 | ) | |
Lionsgate Collar Loan | (82.9 | ) | |
Adjusted debt and capital lease obligations before deferred financing costs, discounts and premiums | $ | 36,973.5 | |
Annualized quarterly OCF* | $ | 7,318.8 | |
Consolidated debt to annualized consolidated OCF ratio | 5.1 | ||
Consolidated Net Debt to Annualized Consolidated OCF: | |||
Adjusted debt and capital lease obligations before deferred financing costs, discounts and premiums | $ | 36,973.5 | |
Cash and cash equivalents | (957.9 | ) | |
Adjusted net debt and capital lease obligations before deferred financing costs, discounts and premiums | $ | 36,015.6 | |
Annualized quarterly OCF* | $ | 7,318.8 | |
Consolidated net debt to annualized consolidated OCF ratio | 4.9 |
10 | Organic figures exclude RGUs of acquired entities at the date of acquisition and other nonorganic adjustments, but include the impact of changes in RGUs from the date of acquisition. All subscriber/RGU additions or losses refer to net organic changes, unless otherwise noted. |
11 | Our aggregate unused borrowing capacity of $2.5 billion represents the maximum undrawn commitments under the applicable facilities of our continuing operations without regard to covenant compliance calculations. Upon completion of the relevant September 30, 2018 compliance reporting requirements for our credit facilities, and assuming no further changes from quarter-end borrowing levels, we anticipate that the borrowing capacity of our continuing operations will continue to be $2.5 billion. |
Three months ended September 30, | |||||||||||||||||||||||
2018 | 2017(i) | 2018 | 2017(i) | 2018 | 2017(i) | ||||||||||||||||||
Continuing operations | Discontinued European Operations | Full Company | |||||||||||||||||||||
in millions | |||||||||||||||||||||||
Net cash provided by operating activities of our continuing operations | $ | 587.2 | $ | 904.1 | $ | 348.1 | $ | 324.3 | $ | 935.3 | $ | 1,228.4 | |||||||||||
Cash payments for direct acquisition and disposition costs | 9.2 | 0.9 | — | — | 9.2 | 0.9 | |||||||||||||||||
Expenses financed by an intermediary(ii) | 507.4 | 375.4 | 127.2 | 47.1 | 634.6 | 422.5 | |||||||||||||||||
Capital expenditures, net | (345.1 | ) | (262.7 | ) | (103.3 | ) | (170.1 | ) | (448.4 | ) | (432.8 | ) | |||||||||||
Principal payments on amounts financed by vendors and intermediaries | (570.3 | ) | (396.6 | ) | (141.3 | ) | (84.9 | ) | (711.6 | ) | (481.5 | ) | |||||||||||
Principal payments on certain capital leases | (23.1 | ) | (22.0 | ) | (1.4 | ) | (1.0 | ) | (24.5 | ) | (23.0 | ) | |||||||||||
Adjusted FCF | 165.3 | $ | 599.1 | $ | 229.3 | $ | 115.4 | $ | 394.6 | $ | 714.5 | ||||||||||||
Pro forma adjustments for sale of the Discontinued European Operations related to: | |||||||||||||||||||||||
Interest and derivative payments(iii) | 37.5 | ||||||||||||||||||||||
Transition services agreements(iv) | 42.0 | ||||||||||||||||||||||
Pro forma Adjusted FCF(v) | $ | 244.8 |
Nine months ended September 30, | |||||||||||||||||||||||
2018 | 2017(i) | 2018 | 2017(i) | 2018 | 2017(i) | ||||||||||||||||||
Continuing operations | Discontinued European Operations | Full company | |||||||||||||||||||||
in millions | |||||||||||||||||||||||
Net cash provided by operating activities of our continuing operations | $ | 2,730.1 | $ | 2,462.5 | $ | 1,470.3 | $ | 1,178.8 | $ | 4,200.4 | $ | 3,641.3 | |||||||||||
Cash payments for direct acquisition and disposition costs | 14.0 | 6.9 | — | — | 14.0 | 6.9 | |||||||||||||||||
Expenses financed by an intermediary(ii) | 1,423.8 | 952.6 | 255.5 | 114.5 | 1,679.3 | 1,067.1 | |||||||||||||||||
Capital expenditures, net | (1,142.9 | ) | (850.7 | ) | (384.5 | ) | (526.7 | ) | (1,527.4 | ) | (1,377.4 | ) | |||||||||||
Principal payments on amounts financed by vendors and intermediaries | (3,923.6 | ) | (2,341.0 | ) | (390.2 | ) | (221.8 | ) | (4,313.8 | ) | (2,562.8 | ) | |||||||||||
Principal payments on certain capital leases | (64.0 | ) | (63.8 | ) | (4.2 | ) | (2.9 | ) | (68.2 | ) | (66.7 | ) | |||||||||||
Adjusted FCF | (962.6 | ) | $ | 166.5 | $ | 946.9 | $ | 541.9 | $ | (15.7 | ) | $ | 708.4 | ||||||||||
Pro forma adjustments for sale of Discontinued European Operations related to: | |||||||||||||||||||||||
Interest and derivative payments(iii) | 71.2 | ||||||||||||||||||||||
Transition services agreements(iv) | 144.5 | ||||||||||||||||||||||
Pro forma Adjusted FCF(v) | $ | (746.9 | ) |
(i) | Adjusted free cash flow for the three and nine months ended September 30, 2017 has been restated to reflect our January 1, 2018 adoption of ASU 2016-18, Restricted Cash. |
(ii) | For purposes of our condensed consolidated statements of cash flows, expenses financed by an intermediary are treated as hypothetical operating cash outflows and hypothetical financing cash inflows when the expenses are incurred. When we pay the financing intermediary, we record financing cash outflows in our condensed consolidated statements of cash flows. For purposes of our Adjusted Free Cash Flow definition, we add back the hypothetical operating cash outflow when these financed expenses are incurred and deduct the financing cash outflows when we pay the financing intermediary. |
(iii) | No debt, interest expense or derivative instruments of the UPC Holding borrowing group, other than with respect to certain borrowings that are direct obligations of the entities to be disposed, has been allocated to discontinued operations in the condensed consolidated financial statements that are included in our 10-Q. Notwithstanding the foregoing, we expect to use proceeds from the disposition of the Vodafone Disposal Group and have used proceeds from the July 31, 2018 sale of UPC Austria to repay debt of the UPC Holding borrowing group to the extent necessary to maintain a leverage ratio that is approximately four to five times UPC Holding's Covenant EBITDA. As a result, this pro forma adjustment represents the estimated interest and related derivative payments that would not have been made by UPC Holding if the sale of the Discontinued European Operations had been completed on January 1, 2018. These estimated payments are calculated based on the Discontinued European Operation's pro rata share of UPC Holding's OCF and UPC Holding's aggregate interest and derivative payments during the applicable period. Although we believe that these estimated payments represent a reasonable estimate of the reduction in annual interest and related derivative payments that will occur as a result of the sale of the Discontinued European Operations, no assurance can be given that the actual debt repayments will result in reductions equivalent to the amounts presented. No pro forma adjustments are required with respect to Unitymedia's interest and derivative payments as substantially all of Unitymedia’s debt and related derivative instruments are direct obligations of entities within the Vodafone Disposal Group. As a result, the interest and related derivative payments associated with such debt and derivative instruments of Unitymedia are included in discontinued operations. |
(iv) | Represents our preliminary estimate of the net cash flows that we would have received from transition services agreements if the sale of the Discontinued European Operations had occurred on January 1, 2018. The estimated net cash flows are based on the estimated revenue that we expect to recognize from our transition services agreements during the first 12 months following the completion of the sale of the Discontinued European Operations, less the estimated incremental costs that we expect to incur to provide such transition services. |
(v) | Represents the Adjusted FCF that we estimate would have resulted if the sale of the Discontinued European Operations had been completed on January 1, 2018. Actual amounts may differ from the amounts assumed for purposes of this pro forma calculation. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||||
2018 | 20173 | 2018 | 20173 | ||||||||||||||||||||||||||||
Continuing operations | Full Company | Continuing operations | Full Company | Continuing operations | Full Company | Continuing operations | Full Company | ||||||||||||||||||||||||
in millions | |||||||||||||||||||||||||||||||
Operating income | $ | 208.6 | $ | 757.0 | $ | 210.7 | $ | 517.7 | $ | 592.9 | $ | 1,995.7 | $ | 622.7 | $ | 1,404.7 | |||||||||||||||
Share-based compensation expense | 42.8 | 47.1 | 21.5 | 23.2 | 131.0 | 141.6 | 101.8 | 110.0 | |||||||||||||||||||||||
Depreciation and amortization | 935.3 | 935.3 | 953.7 | 1,216.5 | 2,952.8 | 3,308.8 | 2,743.4 | 3,523.3 | |||||||||||||||||||||||
Impairment, restructuring and other operating items, net | 107.4 | 109.9 | 54.6 | 58.7 | 199.0 | 212.4 | 61.0 | 88.7 | |||||||||||||||||||||||
Total OCF | $ | 1,294.1 | $ | 1,849.3 | $ | 1,240.5 | $ | 1,816.1 | $ | 3,875.7 | $ | 5,658.5 | $ | 3,528.9 | $ | 5,126.7 |