10-Q 1 libertyglobalmarch31201510q.htm 10-Q Liberty Global March 31, 2015 10Q

 
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, 2015
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.)
 
 
38 Hans Crescent, London, England

 
SW1X 0LZ
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code:
+44.20.7190.6449 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 April 30, 2015 was: 252,066,702 Class A ordinary shares;
10,472,517 Class B ordinary shares; and 619,261,384 Class C ordinary shares.

 



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,
2015
 
December 31,
2014
 
in millions
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
630.4

 
$
1,158.5

Trade receivables, net
1,307.8

 
1,499.5

Derivative instruments (note 4)
230.9

 
446.6

Deferred income taxes
304.4

 
290.3

Prepaid expenses
224.8

 
189.7

Other current assets
263.2

 
335.9

Total current assets
2,961.5

 
3,920.5

Investments (including $1,804.4 million and $1,662.7 million, respectively, measured at fair value)
2,032.9

 
1,808.2

Property and equipment, net (note 6)
21,821.9

 
23,840.6

Goodwill (note 6)
26,930.1

 
29,001.6

Intangible assets subject to amortization, net (note 6)
7,917.5

 
9,189.8

Other assets, net (note 4)
6,016.9

 
5,081.2

Total assets
$
67,680.8

 
$
72,841.9

 




























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,
2015
 
December 31,
2014
 
in millions
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,072.4

 
$
1,039.0

Deferred revenue and advance payments from subscribers and others
1,479.9

 
1,452.2

Current portion of debt and capital lease obligations (note 7)
1,292.8

 
1,550.9

Accrued interest
578.6

 
690.6

Derivative instruments (note 4)
390.8

 
1,043.7

Other accrued and current liabilities (note 11)
3,028.4

 
3,413.9

Total current liabilities
7,842.9

 
9,190.3

Long-term debt and capital lease obligations (note 7)
42,790.5

 
44,608.1

Other long-term liabilities (notes 4 and 11)
4,671.1

 
4,927.5

Total liabilities
55,304.5

 
58,725.9

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

 

Equity (note 9):
 
 
 
Liberty Global shareholders:
 
 
 
Class A ordinary shares, $0.01 nominal value. Issued and outstanding 252,025,447 and 251,167,686 shares, respectively
2.5

 
2.5

Class B ordinary shares, $0.01 nominal value. Issued and outstanding 10,472,517 and 10,139,184 shares, respectively
0.1

 
0.1

Class C ordinary shares, $0.01 nominal value. Issued and outstanding 622,180,578 and 630,353,372 shares, respectively
6.2

 
6.3

Additional paid-in capital
16,540.7

 
17,070.8

Accumulated deficit
(4,545.1
)
 
(4,007.6
)
Accumulated other comprehensive earnings, net of taxes
954.0

 
1,646.6

Treasury shares, at cost
(3.8
)
 
(4.2
)
Total Liberty Global shareholders
12,954.6

 
14,714.5

Noncontrolling interests
(578.3
)
 
(598.5
)
Total equity
12,376.3

 
14,116.0

Total liabilities and equity
$
67,680.8

 
$
72,841.9










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,
 
2015
 
2014
 
in millions, except share and per share amounts
 
 
 
 
Revenue (note 14)
$
4,516.9

 
$
4,533.7

Operating costs and expenses:
 
 
 
Operating (other than depreciation and amortization) (including share-based compensation) (note 10)
1,685.9

 
1,698.8

Selling, general and administrative (SG&A) (including share-based compensation) (note 10)
805.1

 
762.5

Depreciation and amortization
1,451.4

 
1,377.1

Impairment, restructuring and other operating items, net (note 11)
17.0

 
113.6

 
3,959.4

 
3,952.0

Operating income
557.5

 
581.7

Non-operating income (expense):
 
 
 
Interest expense
(615.9
)
 
(653.5
)
Realized and unrealized gains (losses) on derivative instruments, net (note 4)
618.5

 
(376.6
)
Foreign currency transaction losses, net
(1,035.6
)
 
(20.8
)
Realized and unrealized gains (losses) due to changes in fair values of certain investments, net (note 5)
151.4

 
(60.2
)
Losses on debt modification and extinguishment, net (note 7)
(274.5
)
 
(20.9
)
Other income (expense), net
(1.0
)
 
13.3

 
(1,157.1
)
 
(1,118.7
)
Loss from continuing operations before income taxes
(599.6
)
 
(537.0
)
Income tax benefit (note 8)
77.9

 
117.0

Loss from continuing operations
(521.7
)
 
(420.0
)
Discontinued operation (note 1):
 
 
 
Earnings from discontinued operation, net of taxes

 
0.8

Gain on disposal of discontinued operation, net of taxes

 
339.9

 


340.7

Net loss
(521.7
)
 
(79.3
)
Net loss (earnings) attributable to noncontrolling interests
(15.8
)
 
0.5

Net loss attributable to Liberty Global shareholders
$
(537.5
)
 
$
(78.8
)
 
 
 
 
Basic and diluted earnings (loss) attributable to Liberty Global shareholders per share (note 12):
 
 
 
Continuing operations
$
(0.61
)
 
$
(0.53
)
Discontinued operation

 
0.43

 
$
(0.61
)
 
$
(0.10
)
 
 
 
 
Weighted average ordinary shares outstanding – basic and diluted
887,264,545

 
787,737,909


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

3


LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
(unaudited)
 
 
Three months ended
 
March 31,
 
2015
 
2014
 
in millions
 
 
 
 
Net loss
$
(521.7
)
 
$
(79.3
)
Other comprehensive earnings (loss), net of taxes:
 
 
 
Foreign currency translation adjustments
(691.1
)
 
58.1

Reclassification adjustments included in net loss
0.1

 
64.1

Other
(1.5
)
 

Other comprehensive earnings (loss)
(692.5
)
 
122.2

Comprehensive earnings (loss)
(1,214.2
)
 
42.9

Comprehensive loss (earnings) attributable to noncontrolling interests
(15.9
)
 
0.5

Comprehensive earnings (loss) attributable to Liberty Global shareholders
$
(1,230.1
)
 
$
43.4


































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

4


LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(unaudited)
 
 
Liberty Global shareholders
 
Non-controlling
interests
 
Total
equity
 
Ordinary shares
 
Additional
paid-in
capital
 
Accumulated
deficit
 
Accumulated
other
comprehensive
earnings,
net of taxes
 
Treasury shares, at cost
 
Total Liberty Global
shareholders
 
 
Class A
 
Class B
 
Class C
 
 
in millions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2015
$
2.5

 
$
0.1

 
$
6.3

 
$
17,070.8

 
$
(4,007.6
)
 
$
1,646.6

 
$
(4.2
)
 
$
14,714.5

 
$
(598.5
)
 
$
14,116.0

Net loss

 

 

 

 
(537.5
)
 

 

 
(537.5
)
 
15.8

 
(521.7
)
Other comprehensive loss, net of taxes

 

 

 

 

 
(692.6
)
 

 
(692.6
)
 
0.1

 
(692.5
)
Repurchase and cancellation of Liberty Global ordinary shares

 

 
(0.1
)
 
(478.0
)
 

 

 

 
(478.1
)
 

 
(478.1
)
Liberty Global call option contracts

 

 

 
(71.6
)
 

 

 


(71.6
)
 

 
(71.6
)
Share-based compensation (note 10)

 

 

 
57.0

 

 

 

 
57.0

 

 
57.0

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

 

 

 
(37.5
)
 

 

 
0.4

 
(37.1
)
 
4.3

 
(32.8
)
Balance at March 31, 2015
$
2.5

 
$
0.1

 
$
6.2

 
$
16,540.7

 
$
(4,545.1
)
 
$
954.0

 
$
(3.8
)
 
$
12,954.6

 
$
(578.3
)
 
$
12,376.3












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

5


LIBERTY GLOBAL PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
 
Three months ended
 
March 31,
 
2015
 
2014
 
in millions
Cash flows from operating activities:
 
 
 
Net loss
$
(521.7
)
 
$
(79.3
)
Earnings from discontinued operation

 
(340.7
)
Loss from continuing operations
(521.7
)
 
(420.0
)
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities:
 
 
 
Share-based compensation expense
71.4

 
55.1

Depreciation and amortization
1,451.4

 
1,377.1

Impairment, restructuring and other operating items, net
17.0

 
113.6

Amortization of deferred financing costs and non-cash interest accretion
18.5

 
22.0

Realized and unrealized losses (gains) on derivative instruments, net
(618.5
)
 
376.6

Foreign currency transaction losses, net
1,035.6

 
20.8

Realized and unrealized losses (gains) due to changes in fair values of certain investments, net
(151.4
)
 
60.2

Losses on debt modification and extinguishment, net
274.5

 
20.9

Deferred income tax benefit
(187.2
)
 
(184.2
)
Excess tax benefit from share-based compensation
(20.0
)
 

Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions
4.3

 
(121.7
)
Net cash used by operating activities of discontinued operation

 
(9.6
)
Net cash provided by operating activities
1,373.9

 
1,310.8

Cash flows from investing activities:
 
 
 
Capital expenditures
(661.2
)
 
(735.0
)
Investments in and loans to affiliates and others
(122.7
)
 
(9.1
)
Proceeds received upon disposition of discontinued operation, net of disposal costs

 
993.0

Other investing activities, net
8.9

 
(17.2
)
Net cash used by investing activities of discontinued operation

 
(3.8
)
Net cash provided (used) by investing activities
$
(775.0
)
 
$
227.9

 













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,
 
2015
 
2014
 
in millions
Cash flows from financing activities:
 
 
 
Borrowings of debt
$
6,695.2

 
$
1,547.8

Repayments and repurchases of debt and capital lease obligations
(6,543.0
)
 
(2,051.6
)
Net cash paid related to derivative instruments
(486.5
)
 
(98.2
)
Repurchase of Liberty Global shares
(425.9
)
 
(376.8
)
Payment of financing costs and debt premiums
(269.8
)
 
(39.1
)
Net cash paid associated with call option contracts on Liberty Global shares
(122.9
)
 
(156.0
)
Change in cash collateral
61.8

 
4.4

Other financing activities, net
(19.5
)
 
7.2

Net cash used by financing activities of discontinued operation

 
(1.2
)
Net cash used by financing activities
(1,110.6
)
 
(1,163.5
)
 
 
 
 
Effect of exchange rate changes on cash – continuing operations
(16.4
)
 
15.0

 


 


Net increase (decrease) in cash and cash equivalents:
 
 
 
Continuing operations
(528.1
)
 
404.8

Discontinued operation

 
(14.6
)
Net increase (decrease) in cash and cash equivalents
(528.1
)
 
390.2

Cash and cash equivalents:
 
 
 
Beginning of period
1,158.5

 
2,701.9

End of period
$
630.4

 
$
3,092.1

 
 
 
 
Cash paid for interest – continuing operations
$
672.4

 
$
631.1

Net cash paid for taxes:
 
 
 
Continuing operations
$
123.0

 
$
32.5

Discontinued operation

 
0.9

Total
$
123.0

 
$
33.4





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, 2015
(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, 2015 in 14 countries. Through Unitymedia GmbH (Unitymedia), formerly known as Unitymedia KabelBW GmbH, and Ziggo Group Holding B.V. (Ziggo Group Holding), each a wholly-owned subsidiary, and Telenet Group Holding NV (Telenet), a 56.8%-owned subsidiary, we provide video, broadband internet, fixed-line telephony and mobile services in Germany, the Netherlands and Belgium, respectively. In addition, through our wholly-owned subsidiary Virgin Media Inc. (Virgin Media), we provide (i) video, broadband internet and fixed-line telephony services in the United Kingdom (U.K.) and Ireland and (ii) mobile services in the U.K. We also provide (a) video, broadband internet and fixed-line telephony services in eight other European countries and (b) mobile services in four other European countries. The operations of Virgin Media, Unitymedia, Ziggo Group Holding, Telenet and our other operations in Europe are collectively referred to herein as the “European Operations Division.” In Chile, we provide video, broadband internet, fixed-line telephony and mobile services through VTR GlobalCom SpA (VTR). Our consolidated operations also include the broadband communications operations of Liberty Cablevision of Puerto Rico LLC (Liberty Puerto Rico), an entity in which we hold a 60.0% ownership interest.

On January 31, 2014, we completed the sale of substantially all of the assets (the Chellomedia Disposal Group) of Chellomedia B.V. (Chellomedia). Chellomedia held certain of our programming interests in Europe and Latin America. We have accounted for the sale of the Chellomedia Disposal Group as a discontinued operation in our condensed consolidated financial statements.

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 2014 consolidated financial statements and notes thereto included in our 2014 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, 2015.

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

(2)   Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update 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 will replace existing revenue recognition guidance in GAAP when it becomes effective, currently scheduled for January 1, 2017, although an extension to January 1, 2018 has been proposed by the FASB. Early application is not permitted. This new standard permits the use of either the retrospective or cumulative effect transition method. We are currently evaluating the effect that ASU 2014-09 will have on

8


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



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.

(3)    Acquisitions

Pending 2015 Acquisitions

On December 9, 2014, one of our subsidiaries, together with investment funds affiliated with Searchlight Capital Partners, L.P. (collectively, Searchlight), entered into an agreement to acquire 100% of the parent of Puerto Rico Cable Acquisition Company Inc., dba Choice Cable TV (Choice), the second largest cable and broadband services provider in Puerto Rico (the Choice Acquisition). The transaction values Choice at an enterprise value, before transaction costs, of approximately $272.5 million. This purchase price is expected to be funded through (i) $257.5 million of committed facilities under Liberty Puerto Rico’s existing bank facility and (ii) equity contributions, related-party loans and/or other existing sources of liquidity. The Choice Acquisition is subject to customary closing conditions, including regulatory approvals, and is expected to close in the second quarter of 2015. Upon completion of the Choice Acquisition, Choice’s operations will be combined with those of Liberty Puerto Rico, and the combined business will be 60%-owned by our company and 40%-owned by Searchlight.
For information regarding a purchase agreement that Telenet entered into subsequent to March 31, 2015, see note 15.
2014 Acquisition of Ziggo

On November 11, 2014, pursuant to an Agreement and Plan of Merger with respect to an offer to acquire all of the shares of Ziggo Holding B.V. (Ziggo) that we did not already own, we gained control of Ziggo through the acquisition of 136,603,794 additional Ziggo shares, which increased our ownership interest in Ziggo to 88.9% (the Ziggo Acquisition). From November 12, 2014 through November 19, 2014, we acquired 18,998,057 additional Ziggo shares, further increasing our ownership interest in Ziggo to 98.4% (the Ziggo NCI Acquisition). For accounting purposes, (i) the Ziggo Acquisition was treated as the acquisition of Ziggo by Liberty Global and (ii) the Ziggo NCI Acquisition was treated as the acquisition of a noncontrolling interest. Ziggo is a provider of video, broadband internet, fixed-line telephony and mobile services in the Netherlands.

In December 2014, we initiated a statutory squeeze-out procedure in accordance with the Dutch Civil Code (the Statutory Squeeze-out) in order to acquire the remaining 3,162,605 Ziggo shares not tendered through November 19, 2014. Under the Statutory Squeeze-out, Ziggo shareholders other than Liberty Global will receive cash consideration of €39.78 ($42.68) per share, which amount was approved in April 2015 by the Enterprise Court in the Netherlands. The Statutory Squeeze-out is expected to be completed during the second quarter of 2015.

We received regulatory clearance from the European Commission for the Ziggo Acquisition on October 10, 2014. The clearance was conditioned upon our commitment to divest our Film1 channel to a third party and to carry Film1 on our network in the Netherlands for a period of three years. On March 27, 2015, we agreed to sell our Film1 channel to Sony Pictures Television Networks, which sale is subject to customary closing conditions, including regulatory approval. Under the terms of the agreement, all five Film1 channels will continue to be carried on our networks for a period of at least three years.


9


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



Pro Forma Information

The following unaudited pro forma condensed consolidated operating results for the three months ended March 31, 2014 give effect to the acquisition of 100% of Ziggo as if it had been completed as of January 1, 2014. These pro forma amounts are not necessarily indicative of the operating results that would have occurred if this transaction had occurred on such date. The pro forma adjustments are based on certain assumptions that we believe are reasonable.
 
Three months ended March 31, 2014
 
in millions, except per share amount
Revenue:
 
Continuing operations
$
5,069.3

Discontinued operation
26.6

Total
$
5,095.9

 
 
Net loss attributable to Liberty Global shareholders
$
(264.7
)
Basic and diluted loss attributable to Liberty Global shareholders per share
$
(0.29
)

(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). We generally 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.


10


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



The following table provides details of the fair values of our derivative instrument assets and liabilities:
 
March 31, 2015
 
December 31, 2014
 
Current
 
Long-term (a)
 
Total
 
Current
 
Long-term (a)
 
Total
 
in millions
Assets:
 
 
 
 
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts (b)
$
224.5

 
$
2,014.6

 
$
2,239.1

 
$
443.6

 
$
913.7

 
$
1,357.3

Equity-related derivative instruments (c)

 
389.0

 
389.0

 

 
400.2

 
400.2

Foreign currency forward contracts
5.3

 

 
5.3

 
2.5

 

 
2.5

Other
1.1

 
1.3

 
2.4

 
0.5

 
0.9

 
1.4

Total
$
230.9


$
2,404.9


$
2,635.8


$
446.6


$
1,314.8


$
1,761.4

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts (b)
$
362.3

 
$
1,550.8

 
$
1,913.1

 
$
1,027.4

 
$
1,443.9

 
$
2,471.3

Equity-related derivative instruments (c)
13.6

 
178.5

 
192.1

 
15.3

 
73.1

 
88.4

Foreign currency forward contracts
14.7

 

 
14.7

 
0.8

 

 
0.8

Other
0.2

 
0.1

 
0.3

 
0.2

 
0.1

 
0.3

Total
$
390.8


$
1,729.4


$
2,120.2


$
1,043.7


$
1,517.1


$
2,560.8

_______________ 

(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, 2015 and December 31, 2014, (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 $78.1 million and $30.9 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 $90.5 million and $64.6 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 net losses of $16.9 million and $29.5 million during the three months ended March 31, 2015 and 2014, 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 include the fair value of (i) the share collar (the ITV Collar) with respect to the ITV plc (ITV) shares held by our company at March 31, 2015, (ii) the share collar (the Sumitomo Collar) with respect to the shares of Sumitomo Corporation held by our company and (iii) 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 our equity collars 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.


11


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



The details of our realized and unrealized gains (losses) on derivative instruments, net, are as follows:
 
Three months ended
 
March 31,
 
2015
 
2014
 
in millions
Cross-currency and interest rate derivative contracts
$
740.5


$
(420.2
)
Equity-related derivative instruments:





ITV Collar
(105.4
)
 

Sumitomo Collar
(10.1
)
 
8.5

Virgin Media Capped Calls
0.6


0.2

Ziggo Collar

 
15.4

Total equity-related derivative instruments
(114.9
)

24.1

Foreign currency forward contracts
(8.1
)

20.0

Other
1.0


(0.5
)
Total
$
618.5


$
(376.6
)
 
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 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 cash inflows (outflows) is as follows:
 
Three months ended
 
March 31,
 
2015
 
2014
 
in millions
Operating activities
$
(137.8
)
 
$
(210.8
)
Investing activities
2.6

 

Financing activities
(486.5
)
 
(98.2
)
Total
$
(621.7
)
 
$
(309.0
)

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, 2015, our exposure to counterparty credit risk included derivative assets with an aggregate fair value of $2,197.7 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, the notional amount of multiple derivative instruments that mature within the same calendar month 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, 2015, we present a single date that represents the applicable final maturity date. For derivative instruments that become effective subsequent to March 31, 2015, we present a range of dates that represents the period covered by the applicable derivative instruments.
  

12


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



Cross-currency and Interest Rate Derivative Contracts

Cross-currency Swaps:

The terms of our outstanding cross-currency swap contracts at March 31, 2015 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
counterparty
 
 
in millions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Virgin Media Investment Holdings Limited (VMIH), a subsidiary of Virgin Media:
 
 
 
 
 
 
 
 
 
January 2023
 
$
400.0

 
339.6

 
5.75%
 
4.33%
February 2022
 
$
1,400.0

 
£
873.6

 
5.01%
 
5.49%
October 2020
 
$
1,370.4

 
£
881.6

 
6 mo. LIBOR + 2.75%
 
6 mo. GBP LIBOR + 3.10%
June 2020
 
$
984.6

 
£
640.1

 
6 mo. LIBOR + 2.75%
 
6 mo. GBP LIBOR + 3.18%
January 2021
 
$
500.0

 
£
308.9

 
5.25%
 
6 mo. GBP LIBOR + 2.06%
January 2023
 
$
500.0

 
£
325.1

 
5.25%
 
5.26%
October 2022
 
$
450.0

 
£
272.0

 
6.00%
 
6.43%
January 2022
 
$
425.0

 
£
255.8

 
5.50%
 
5.82%
April 2019
 
$
191.5

 
£
122.3

 
5.38%
 
5.49%
November 2016 (a)
 
$
55.0

 
£
27.7

 
6.50%
 
7.03%
October 2019
 
$
50.0

 
£
30.3

 
8.38%
 
8.98%
October 2019 - October 2022
 
$
50.0

 
£
30.7

 
6.00%
 
5.75%
UPC Broadband Holding BV (UPC Broadband Holding), a subsidiary of UPC Holding BV (UPC Holding):
 
 
 
 
 
 
 
 
 
July 2016 (a)
 
$
575.0

 
434.1

 
6 mo. LIBOR + 2.40%
 
3.78%
July 2016 - July 2018
 
$
575.0

 
434.1

 
6 mo. LIBOR + 2.40%
 
6.68%
July 2021
 
$
440.0

 
337.2

 
6 mo. LIBOR + 2.50%
 
6 mo. EURIBOR + 2.87%
January 2020
 
$
327.5

 
249.5

 
6 mo. LIBOR + 4.92%
 
7.52%
October 2020
 
$
300.0

 
219.1

 
6 mo. LIBOR + 3.00%
 
6 mo. EURIBOR + 3.04%
January 2017 - July 2021
 
$
262.1

 
194.1

 
6 mo. LIBOR + 2.50%
 
6 mo. EURIBOR + 2.51%
July 2018
 
$
250.0

 
188.7

 
6 mo. LIBOR + 1.75%
 
5.91%
November 2019
 
$
250.0

 
181.5

 
7.25%
 
7.74%
November 2021
 
$
250.0

 
181.4

 
7.25%
 
7.50%
January 2020
 
$
197.5

 
150.5

 
6 mo. LIBOR + 4.92%
 
6 mo. EURIBOR + 4.91%
December 2016
 
$
340.0

 
CHF
370.9

 
6 mo. LIBOR + 3.50%
 
6 mo. CHF LIBOR + 4.01%
January 2017 - July 2021
 
$
300.0

 
CHF
278.3

 
6 mo. LIBOR + 2.50%
 
6 mo. CHF LIBOR + 2.46%
November 2019
 
$
250.0

 
CHF
226.8

 
7.25%
 
6 mo. CHF LIBOR + 5.01%
July 2016 (a)
 
$
225.0

 
CHF
206.3

 
6 mo. LIBOR + 4.81%
 
1.00%

13


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



Subsidiary /
Final maturity date
 
Notional
amount
due from
counterparty
 
Notional
amount
due to
counterparty
 
Interest rate
due from
counterparty
 
Interest rate
due to
counterparty
 
 
in millions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
July 2016 - January 2020
 
$
225.0

 
CHF
206.3

 
6 mo. LIBOR + 4.81%
 
5.44%
July 2021
 
$
200.0

 
CHF
186.0

 
6 mo. LIBOR + 2.50%
 
6 mo. CHF LIBOR + 2.55%
July 2016 (a)
 
$
201.5

 
RON
489.3

 
6 mo. LIBOR + 3.50%
 
1.40%
July 2016 - July 2020
 
$
201.5

 
RON
489.3

 
6 mo. LIBOR + 3.50%
 
11.34%
January 2021
 
720.8

 
CHF
877.0

 
6 mo. EURIBOR + 2.50%
 
6 mo. CHF LIBOR + 2.62%
January 2017 - September 2022
 
383.8

 
CHF
477.0

 
6 mo. EURIBOR + 2.00%
 
6 mo. CHF LIBOR + 2.22%
January 2017
 
360.4

 
CHF
589.0

 
6 mo. EURIBOR + 3.75%
 
6 mo. CHF LIBOR + 3.94%
April 2018
 
285.1

 
CHF
346.7

 
10.51%
 
9.87%
January 2020
 
175.0

 
CHF
258.6

 
7.63%
 
6.76%
July 2021
 
161.4

 
CHF
187.1

 
6 mo. EURIBOR + 2.35%
 
6 mo. CHF LIBOR + 2.76%
July 2020
 
107.4

 
CHF
129.0

 
6 mo. EURIBOR + 3.00%
 
6 mo. CHF LIBOR + 3.28%
January 2017
 
75.0

 
CHF
110.9

 
7.63%
 
6.98%
December 2015
 
69.1

 
CLP
53,000.0

 
3.50%
 
5.75%
January 2020
 
318.9

 
CZK
8,818.7

 
5.58%
 
5.44%
January 2017
 
60.0

 
CZK
1,703.1

 
5.50%
 
6.99%
July 2017
 
39.6

 
CZK
1,000.0

 
3.00%
 
3.75%
July 2016 (a)
 
260.0

 
HUF
75,570.0

 
5.50%
 
5.00%
July 2016 - January 2017
 
260.0

 
HUF
75,570.0

 
5.50%
 
10.56%
December 2016
 
150.0

 
HUF
43,367.5

 
5.50%
 
2.00%
July 2018
 
78.0

 
HUF
19,500.0

 
5.50%
 
9.15%
January 2017
 
245.0

 
PLN
1,000.6

 
5.50%
 
9.03%
September 2016
 
200.0

 
PLN
892.7

 
6.00%
 
3.91%
January 2020
 
144.6

 
PLN
605.0

 
5.50%
 
7.98%
July 2017
 
82.0

 
PLN
318.0

 
3.00%
 
5.60%
December 2015
 
CLP 53,000.0

 
69.1

 
5.75%
 
3.50%
Amsterdamse Beheer-en Consultingmaatschappij BV (ABC B.V.), a subsidiary of Ziggo Group Holding:
 
 
 
 
 
 
 
 
 
January 2022
 
$
2,350.0

 
1,727.0

 
6 mo. LIBOR + 2.75%
 
4.56%
January 2023
 
$
400.0

 
339.0

 
5.88%
 
4.58%
Unitymedia Hessen GmbH & Co. KG (Unitymedia Hessen), a subsidiary of Unitymedia:
 


 



 

 

January 2023
 
$
1,652.9

 
1,252.5

 
5.67%
 
4.50%
January 2021
 
$
797.1

 
546.5

 
5.50%
 
5.60%
VTR:
 
 
 
 
 
 
 
 
 
January 2022
 
$
1,400.0

 
CLP
760,340.0

 
6.88%
 
10.94%

14


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



_______________ 

(a)
Unlike the other cross-currency swaps presented in this table, the identified cross-currency swaps do not involve the exchange of notional amounts at the inception and maturity of the instruments. Accordingly, the only cash flows associated with these instruments are interest payments and receipts.

Interest Rate Swaps:

The terms of our outstanding interest rate swap contracts at March 31, 2015 are as follows:
Subsidiary / Final maturity date
 
Notional amount
 
Interest rate due from
counterparty
 
Interest rate due to
counterparty
 
 
in millions
 
 
 
 
VMIH:
 
 
 
 
 
 
 
October 2018
 
£
2,155.0

 
6 mo. GBP LIBOR
 
1.52%
January 2021
 
£
650.0

 
5.50%
 
6 mo. GBP LIBOR + 1.84%
January 2021
 
£
650.0

 
6 mo. GBP LIBOR + 1.84%
 
3.87%
December 2015
 
£
600.0

 
6 mo. GBP LIBOR
 
2.90%
April 2018
 
£
300.0

 
6 mo. GBP LIBOR
 
1.37%
UPC Broadband Holding:
 
 
 
 
 
 
 
July 2020
 
$
1,000.0

 
6.63%
 
6 mo. LIBOR + 3.03%
January 2022
 
$
750.0

 
6.88%
 
6 mo. LIBOR + 4.89%
July 2020
 
750.0

 
6.38%
 
6 mo. EURIBOR + 3.16%
July 2016
 
631.3

 
6 mo. EURIBOR
 
0.20%
July 2016 - January 2021
 
250.0

 
6 mo. EURIBOR
 
2.52%
July 2016 - January 2023
 
210.0

 
6 mo. EURIBOR
 
2.88%
July 2016 - July 2020
 
171.3

 
6 mo. EURIBOR
 
3.95%
November 2021
 
107.0

 
6 mo. EURIBOR
 
2.89%
July 2016
 
CHF
900.0

 
6 mo. CHF LIBOR
 
0.05%
January 2022
 
CHF
711.5

 
6 mo. CHF LIBOR
 
1.89%
July 2016 - January 2021
 
CHF
500.0

 
6 mo. CHF LIBOR
 
1.65%
July 2016 - January 2018
 
CHF
400.0

 
6 mo. CHF LIBOR
 
2.51%
December 2016
 
CHF
370.9

 
6 mo. CHF LIBOR
 
3.82%
November 2019
 
CHF
226.8

 
6 mo. CHF LIBOR + 5.01%
 
6.88%
ABC B.V.:
 
 
 
 
 
 
 
January 2022
 
1,566.0

 
6 mo. EURIBOR
 
1.66%
January 2016
 
689.0

 
1 mo. EURIBOR + 3.75%
 
6 mo. EURIBOR + 3.59%
January 2021
 
500.0

 
6 mo. EURIBOR
 
2.60%
July 2016
 
290.0

 
6 mo. EURIBOR
 
0.20%
July 2016 - January 2023
 
290.0

 
6 mo. EURIBOR
 
2.84%
March 2021
 
175.0

 
6 mo. EURIBOR
 
2.32%
July 2016
 
171.3

 
6 mo. EURIBOR
 
0.20%
July 2016 - January 2022
 
171.3

 
6 mo. EURIBOR
 
3.44%
Telenet International Finance S.a.r.l (Telenet International), a subsidiary of Telenet:
 
 
 
 
 
 
 
June 2023
 
500.0

 
3 mo. EURIBOR
 
1.45%

15


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



Subsidiary / Final maturity date
 
Notional amount
 
Interest rate due from
counterparty
 
Interest rate due to
counterparty
 
 
in millions
 
 
 
 
July 2017 - June 2022
 
420.0

 
3 mo. EURIBOR
 
2.08%
June 2021
 
400.0

 
3 mo. EURIBOR
 
0.41%
July 2017 - June 2023
 
382.0

 
3 mo. EURIBOR
 
1.89%
July 2017
 
150.0

 
3 mo. EURIBOR
 
3.55%
August 2015 - June 2022
 
55.0

 
3 mo. EURIBOR
 
1.81%
June 2015
 
50.0

 
3 mo. EURIBOR
 
3.55%

Interest Rate Caps

Our purchased and sold interest rate cap contracts with respect to EURIBOR at March 31, 2015 are detailed below:
Subsidiary / Final maturity date
 
Notional  amount
 
EURIBOR cap rate
 
 
in millions
 
 
Interest rate caps purchased (a):
 
 
 
 
Liberty Global Europe Financing BV (LGE Financing), the immediate parent of UPC Holding:
 
 
 
January 2020
735.0

 
7.00%
Telenet International:
 
 
 
June 2015 - June 2017
50.0

 
4.50%
Telenet NV, a subsidiary of Telenet:
 
 
 
December 2017
0.6

 
6.50%
December 2017
0.6

 
5.50%
 
 
 
 
 
Interest rate cap sold (b):
 
 
 
 
UPC Broadband Holding:
 
 
 
January 2020
735.0

 
7.00%
 _______________

(a)
Our purchased interest rate caps entitle us to receive payments from the counterparty when EURIBOR exceeds the EURIBOR cap rate.

(b)
Our sold interest rate cap requires that we make payments to the counterparty when EURIBOR exceeds the EURIBOR cap rate.


16


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



Interest Rate Collars

Our interest rate collar contracts establish floor and cap rates with respect to EURIBOR on the indicated notional amounts at March 31, 2015, as detailed below:
Subsidiary / Final maturity date
 
Notional
amount
 
EURIBOR floor rate (a)
 
EURIBOR cap rate (b)
 
 
in millions
 
 
 
 
UPC Broadband Holding:
 
 
 
 
 
 
January 2020
1,135.0

 
1.00%
 
3.54%
Telenet International:
 
 
 
 
 
 
July 2017
650.0

 
2.00%
 
4.00%
 _______________

(a)
We make payments to the counterparty when EURIBOR is less than the EURIBOR floor rate.

(b)
We receive payments from the counterparty when EURIBOR is greater than the EURIBOR cap rate.

Foreign Currency Forwards

The following table summarizes our outstanding foreign currency forward contracts at March 31, 2015:
Subsidiary
 
Currency
purchased
forward
 
Currency
sold
forward
 
Maturity dates
 
 
in millions
 
 
 
 
 
 
 
 
 
 
 
LGE Financing
$
674.9

 
629.0

 
April 2015
LGE Financing
255.0

 
$
277.2

 
April 2015
LGE Financing
45.4

 
£
33.0

 
April 2015
UPC Broadband Holding
$
22.2

 
CZK
540.0

 
April 2015 - March 2016
UPC Broadband Holding
97.5

 
CHF
109.5

 
April 2015 - March 2016
UPC Broadband Holding
19.5

 
CZK
540.0

 
April 2015 - March 2016
UPC Broadband Holding
19.3

 
HUF
6,000.0

 
April 2015 - March 2016
UPC Broadband Holding
42.6

 
PLN
180.0

 
April 2015 - December 2015
UPC Broadband Holding
39.2

 
RON
175.2

 
April 2015 - March 2016
UPC Broadband Holding
£
3.6

 
4.8

 
April 2015 - March 2016
UPC Broadband Holding
CZK
249.0

 
9.0

 
April 2015
UPC Broadband Holding
HUF
1,950.0

 
6.5

 
April 2015
UPC Broadband Holding
PLN
79.5

 
19.4

 
April 2015
Telenet NV
$
49.4

 
43.7

 
April 2015 - March 2016
VTR
$
62.7

 
CLP
38,702.9

 
April 2015 - December 2015


17


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



(5)    Fair Value Measurements

We use the fair value method to account for (i) certain of our investments and (ii) our derivative instruments. The reported fair values of these investments and derivative instruments as of March 31, 2015 likely will not represent the value that will be paid or received upon the ultimate settlement or disposition of these assets and liabilities. In the case of the investments that we account for using the fair value method, the values we realize upon disposition will be dependent upon, among other factors, market conditions and the forecasted financial performance of the investees at the time of any such disposition. With respect to our derivative instruments, we expect that the values realized generally will be based on market conditions at the time of settlement, which may occur at the maturity of the derivative instrument or at the time of the repayment or refinancing of the underlying debt instrument.

GAAP provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. We record transfers of assets or liabilities in or out of Levels 1, 2 or 3 at the beginning of the quarter during which the transfer occurred. During the three months ended March 31, 2015, no such transfers were made.

All of our Level 2 inputs (interest rate futures, swap rates and certain of the inputs for our weighted average cost of capital calculations) and certain of our Level 3 inputs (forecasted volatilities and credit spreads) are obtained from pricing services. These inputs, or interpolations or extrapolations thereof, are used in our internal models to calculate, among other items, yield curves, forward interest and currency rates and weighted average cost of capital rates. In the normal course of business, we receive market value assessments from the counterparties to our derivative contracts. Although we compare these assessments to our internal valuations and investigate unexpected differences, we do not otherwise rely on counterparty quotes to determine the fair values of our derivative instruments. The midpoints of applicable bid and ask ranges generally are used as inputs for our internal valuations.

For our investments in ITV and Sumitomo, the recurring fair value measurements are based on the quoted closing price of the respective shares at each reporting date. Accordingly, the valuations of these investments fall under Level 1 of the fair value hierarchy. Our other investments that we account for at fair value are privately-held companies, and therefore, quoted market prices are unavailable. The valuation technique we use for such investments is a combination of an income approach (discounted cash flow model based on forecasts) and a market approach (market multiples of similar businesses). With the exception of certain inputs for our weighted average cost of capital calculations that are derived from pricing services, the inputs used to value these investments are based on unobservable inputs derived from our assumptions. Therefore, the valuation of our privately-held investments falls under Level 3 of the fair value hierarchy. Any reasonably foreseeable changes in assumed levels of unobservable inputs for the valuations of our Level 3 investments would not be expected to have a material impact on our financial position or results of operations.

The recurring fair value measurement of our equity-related derivatives are based on binomial option pricing models, which require the input of observable and unobservable variables such as exchange traded equity prices, risk-free interest rates, dividend yields and forecasted volatilities of the underlying equity securities. The valuations of our equity-related derivatives are based on a combination of Level 1 inputs (exchange traded equity prices), Level 2 inputs (interest rate futures and swap rates) and Level 3 inputs (forecasted volatilities). As changes in volatilities could have a significant impact on the overall valuations, we have determined that these valuations fall under Level 3 of the fair value hierarchy. For the March 31, 2015 valuation of the ITV Collar, we used estimated volatilities ranging from 24.4% to 30.1%. At March 31, 2015, the valuations of the Sumitomo Collar and the Virgin Media Capped Calls were not significantly impacted by forecasted volatilities.

As further described in note 4, we have entered into various derivative instruments to manage our interest rate and foreign currency exchange risk. The recurring fair value measurements of these derivative instruments are determined using discounted cash flow models. Most of the inputs to these discounted cash flow models consist of, or are derived from, observable Level 2 data for substantially the full term of these derivative instruments. This observable data includes most interest rate futures and swap rates, which are retrieved or derived from available market data. Although we may extrapolate or interpolate this data, we do not otherwise alter this data in performing our valuations. We incorporate a credit risk valuation adjustment in our fair value measurements to estimate the impact of both our own nonperformance risk and the nonperformance risk of our counterparties. Our and our counterparties’ credit spreads represent our most significant Level 3 inputs, and these inputs are used to derive the credit risk valuation adjustments with respect to our various interest rate and foreign currency derivative valuations. As we would

18


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



not expect changes in our or our counterparties’ credit spreads to have a significant impact on the valuations of these derivative instruments, we have determined that these valuations fall under Level 2 of the fair value hierarchy. Our credit risk valuation adjustments with respect to our cross-currency and interest rate swaps are quantified and further explained in note 4.

Fair value measurements are also used in connection with nonrecurring valuations performed in connection with impairment assessments and acquisition accounting. These nonrecurring valuations include the valuation of reporting units, customer relationship intangible assets, property and equipment and the implied value of goodwill. The valuation of private reporting units is based at least in part on discounted cash flow analyses. With the exception of certain inputs for our weighted average cost of capital and discount rate calculations that are derived from pricing services, the inputs used in our discounted cash flow analyses, such as forecasts of future cash flows, are based on our assumptions. The valuation of customer relationships is primarily based on an excess earnings methodology, which is a form of a discounted cash flow analysis. The excess earnings methodology requires us to estimate the specific cash flows expected from the customer relationship, considering such factors as estimated customer life, the revenue expected to be generated over the life of the customer, contributory asset charges, and other factors. Tangible assets are typically valued using a replacement or reproduction cost approach, considering factors such as current prices of the same or similar equipment, the age of the equipment and economic obsolescence. The implied value of goodwill is determined by allocating the fair value of a reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination, with the residual amount allocated to goodwill. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. During the three months ended March 31, 2015 and 2014, we did not perform significant nonrecurring fair value measurements.

A summary of our assets and liabilities that are measured at fair value on a recurring basis is as follows:
 
 
 
Fair value measurements at  March 31, 2015 using:
Description
March 31,
2015
 
Quoted prices
in active
markets for
identical assets
(Level 1)
 
Significant
other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
in millions
Assets:
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts
$
2,239.1

 
$

 
$
2,239.1

 
$

Equity-related derivative instruments
389.0

 

 

 
389.0

Foreign currency forward contracts
5.3

 

 
5.3

 

Other
2.4

 

 
2.4

 

Total derivative instruments
2,635.8

 

 
2,246.8

 
389.0

Investments
1,804.4

 
1,464.6

 

 
339.8

Total assets
$
4,440.2

 
$
1,464.6

 
$
2,246.8

 
$
728.8

 
 
 
 
 
 
 
 
Liabilities - derivative instruments:
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts
$
1,913.1

 
$

 
$
1,913.1

 
$

Equity-related derivative instruments
192.1

 

 

 
192.1

Foreign currency forward contracts
14.7

 

 
14.7

 

Other
0.3

 

 
0.3

 

Total liabilities
$
2,120.2

 
$

 
$
1,928.1

 
$
192.1


19


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



 
 
 
Fair value measurements at 
December 31, 2014 using:
Description
December 31, 2014
 
Quoted prices
in active
markets for
identical assets
(Level 1)
 
Significant
other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
in millions
Assets:
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts
$
1,357.3

 
$

 
$
1,357.3

 
$

Equity-related derivative instruments
400.2

 

 

 
400.2

Foreign currency forward contracts
2.5

 

 
2.5

 

Other
1.4

 

 
1.4

 

Total derivative instruments
1,761.4

 

 
1,361.2

 
400.2

Investments
1,662.7

 
1,344.3

 

 
318.4

Total assets
$
3,424.1

 
$
1,344.3

 
$
1,361.2

 
$
718.6

Liabilities - derivative instruments:
 
 
 
 
 
 
 
Cross-currency and interest rate derivative contracts
$
2,471.3

 
$

 
$
2,471.3

 
$

Equity-related derivative instruments
88.4

 

 

 
88.4

Foreign currency forward contracts
0.8

 

 
0.8

 

Other
0.3

 

 
0.3

 

Total liabilities
$
2,560.8

 
$

 
$
2,472.4

 
$
88.4


A reconciliation of the beginning and ending balances of our assets and liabilities measured at fair value on a recurring basis using significant unobservable, or Level 3, inputs is as follows:
 
Investments
 
Equity-related
derivative
instruments
 
Total
 
in millions
 
 
 
 
 
 
Balance of net assets at January 1, 2015
$
318.4

 
$
311.8

 
$
630.2

Gains (losses) included in net loss (a):
 
 
 
 


Realized and unrealized losses on derivative instruments, net

 
(114.9
)
 
(114.9
)
Realized and unrealized gains due to changes in fair values of certain investments, net
31.1

 

 
31.1

Foreign currency translation adjustments, investments and other, net
(9.7
)
 

 
(9.7
)
Balance of net assets at March 31, 2015
$
339.8

 
$
196.9

 
$
536.7

 
_______________

(a)
Most of these net gains (losses) relate to assets and liabilities that we continue to carry on our condensed consolidated balance sheet as of March 31, 2015.


20


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



(6)    Long-lived Assets

Property and Equipment, Net
        
The details of our property and equipment and the related accumulated depreciation are set forth below:
 
March 31,
2015
 
December 31,
2014
 
in millions
 
 
 
 
Distribution systems
$
24,366.0

 
$
26,012.5

Customer premises equipment
5,977.1

 
6,213.9

Support equipment, buildings and land
4,126.0

 
4,298.4

 
34,469.1

 
36,524.8

Accumulated depreciation
(12,647.2
)
 
(12,684.2
)
Total property and equipment, net
$
21,821.9

 
$
23,840.6


During the three months ended March 31, 2015 and 2014, we recorded non-cash increases related to vendor financing arrangements of $295.0 million and $170.5 million, respectively, which exclude related value-added taxes (VAT) of $35.0 million and $16.3 million, respectively, that were also financed by our vendors under these arrangements. In addition, during the three months ended March 31, 2015 and 2014, we recorded non-cash increases to our property and equipment related to assets acquired under capital leases of $62.0 million and $49.0 million, respectively.

Goodwill

Changes in the carrying amount of our goodwill during the three months ended March 31, 2015 are set forth below:
 
January 1, 2015
 
Acquisitions
and related
adjustments
 
Foreign
currency
translation
adjustments
 
March 31,
2015
 
in millions
European Operations Division:
 
 
 
 
 
 
 
U.K./Ireland
$
9,245.1

 
$
0.4

 
$
(451.8
)
 
$
8,793.7

The Netherlands
8,605.0

 
132.5

 
(994.2
)
 
7,743.3

Germany
3,456.9

 

 
(392.0
)
 
3,064.9

Belgium
1,978.9

 

 
(224.4
)
 
1,754.5

Switzerland/Austria
3,591.9

 

 
(21.4
)
 
3,570.5

Total Western Europe
26,877.8

 
132.9

 
(2,083.8
)
 
24,926.9

Central and Eastern Europe
1,302.1

 
0.6

 
(108.3
)
 
1,194.4

Total European Operations Division
28,179.9

 
133.5

 
(2,192.1
)
 
26,121.3

Chile
440.3

 

 
(12.9
)
 
427.4

Corporate and other
381.4

 

 

 
381.4

Total
$
29,001.6


$
133.5


$
(2,205.0
)

$
26,930.1



21


LIBERTY GLOBAL PLC
Notes to Condensed Consolidated Financial Statements — (Continued)
March 31, 2015
(unaudited)



Intangible Assets Subject to Amortization, Net

The details of our intangible assets subject to amortization are set forth below: 
 
 
March 31, 2015
 
December 31, 2014
 
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
 
 
in millions
 
 
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
 
$
10,962.6

 
$
(3,130.9
)
 
$
7,831.7

 
$
12,142.5

 
$
(3,056.3
)
 
$
9,086.2

Other
 
198.9

 
(113.1
)