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 June 30, 2018

OR

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission file number 001-38335

Liberty Latin America Ltd.

(Exact name of Registrant as specified in its charter)

Bermuda	98-1386359
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2 Church Street, Hamilton	HM 11
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (441) 295-5950 or (303) 925-6000

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), 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 website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  þ        No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Check one:

Large Accelerated Filer  ¨	Accelerated Filer  ¨	Non-Accelerated Filer þ (Do not check if a smaller reporting company)
Smaller Reporting Company  ¨	Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  ¨

Indicate by check mark whether the Registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No þ

The number of outstanding common shares of Liberty Latin America Ltd. as of July 31, 2018 was: 48,472,424 Class A; 1,936,034 Class B; and 120,955,382 Class C.

LIBERTY LATIN AMERICA LTD.

TABLE OF CONTENTS

		Page Number
	PART I - FINANCIAL INFORMATION
Item 1.	FINANCIAL STATEMENTS
	Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017 (unaudited)	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2018 and 2017 (unaudited)	3
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2018 and 2017 (unaudited)	4
	Condensed Consolidated Statement of Equity for the Six Months Ended June 30, 2018 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	36
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	60
Item 4.	CONTROLS AND PROCEDURES	62
	PART II - OTHER INFORMATION
Item 1A.	RISK FACTORS	63
Item 6.	EXHIBITS	64

LIBERTY LATIN AMERICA LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

	June 30, 2018		December 31, 2017
	in millions
ASSETS
Current assets:
Cash and cash equivalents	$	738.0	$	529.9
Trade receivables, net of allowances of $140.8 million and $142.2 million, respectively	562.4		556.5
Prepaid expenses	59.3		65.5
Other current assets	273.1		222.9
Total current assets	1,632.8		1,374.8
Goodwill	5,602.6		5,673.6
Property and equipment, net	4,210.7		4,169.2
Intangible assets subject to amortization, net	1,199.1		1,316.2
Intangible assets not subject to amortization	563.9		565.4
Other assets, net	822.0		517.7
Total assets	$	14,031.1	$	13,616.9

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

1

LIBERTY LATIN AMERICA LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS – (Continued)

(unaudited)

	June 30, 2018			December 31, 2017
	in millions
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	275.0		$	286.8
Deferred revenue	159.9			143.4
Current portion of debt and capital lease obligations	395.3			263.3
Accrued capital expenditures	83.5			128.6
Accrued interest	114.3			115.6
Accrued income taxes	62.1			91.5
Other accrued and current liabilities	696.2			557.7
Total current liabilities	1,786.3			1,586.9
Long-term debt and capital lease obligations	6,257.6			6,108.2
Deferred tax liabilities	567.5			533.4
Other long-term liabilities	858.3			697.8
Total liabilities	9,469.7			8,926.3
Commitments and contingencies
Equity:
Liberty Latin America shareholders:
Class A, $0.01 par value; 500,000,000 shares authorized; 48,471,202 and 48,428,841 shares issued and outstanding, respectively	0.5			0.5
Class B, $0.01 par value; 50,000,000 shares authorized; 1,936,035 and 1,940,193 shares issued and outstanding, respectively	—			—
Class C, $0.01 par value; 500,000,000 shares authorized; 120,933,871 and 120,843,539 shares issued and outstanding, respectively	1.2			1.2
Undesignated preference shares, $0.01 par value; 50,000,000 shares authorized; nil shares issued and outstanding at each period	—			—
Additional paid-in capital	4,404.2			4,402.8
Accumulated deficit	(1,108.5		)	(1,010.7		)
Accumulated other comprehensive loss, net of taxes	(87.8		)	(64.2		)
Total Liberty Latin America shareholders	3,209.6			3,329.6
Noncontrolling interests	1,351.8			1,361.0
Total equity	4,561.4			4,690.6
Total liabilities and equity	$	14,031.1		$	13,616.9

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

2

LIBERTY LATIN AMERICA LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
	in millions, except per share amounts
Revenue	$	922.1		$	920.9		$	1,832.0		$	1,831.8
Operating costs and expenses (exclusive of depreciation and amortization, shown separately below):
Programming and other direct costs of services	218.4			224.5			434.2			446.4
Other operating	163.3			165.0			327.3			333.4
Selling, general and administrative (SG&A)	195.7			172.7			391.5			351.2
Depreciation and amortization	207.6			192.9			409.9			386.8
Impairment, restructuring and other operating items, net	12.9			10.4			46.6			23.8
	797.9			765.5			1,609.5			1,541.6
Operating income	124.2			155.4			222.5			290.2
Non-operating income (expense):
Interest expense	(109.4		)	(96.2		)	(211.9		)	(190.5		)
Realized and unrealized gains (losses) on derivative instruments, net	115.1			(9.2		)	73.6			(36.5		)
Foreign currency transaction losses, net	(120.6		)	(16.8		)	(104.7		)	(2.3		)
Losses on debt modification and extinguishment	—			(27.8		)	(13.0		)	(27.8		)
Other income, net	4.8			3.0			10.1			9.0
	(110.1		)	(147.0		)	(245.9		)	(248.1		)
Earnings (loss) before income taxes	14.1			8.4			(23.4		)	42.1
Income tax expense	(41.6		)	(21.1		)	(58.4		)	(44.2		)
Net loss	(27.5		)	(12.7		)	(81.8		)	(2.1		)
Net earnings attributable to noncontrolling interests	(14.7		)	(15.5		)	(4.9		)	(31.9		)
Net loss attributable to Liberty Latin America shareholders	$	(42.2	)	$	(28.2	)	$	(86.7	)	$	(34.0	)
Basic and diluted net loss per share attributable to Liberty Latin America shareholders	$	(0.25	)	$	(0.16	)	$	(0.51	)	$	(0.20	)

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

3

LIBERTY LATIN AMERICA LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
	in millions
Net loss	$	(27.5	)	$	(12.7	)	$	(81.8	)	$	(2.1	)
Other comprehensive loss, net of taxes:
Foreign currency translation adjustments	(12.0		)	(41.6		)	(43.8		)	(52.2		)
Reclassification adjustments included in net loss	1.1			0.5			2.7			1.5
Pension-related adjustments and other, net	7.5			4.1			8.4			0.6
Other comprehensive loss	(3.4		)	(37.0		)	(32.7		)	(50.1		)
Comprehensive loss	(30.9		)	(49.7		)	(114.5		)	(52.2		)
Comprehensive earnings attributable to noncontrolling interests	(13.3		)	(15.4		)	(3.0		)	(31.3		)
Comprehensive loss attributable to Liberty Latin America shareholders	$	(44.2	)	$	(65.1	)	$	(117.5	)	$	(83.5	)

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

4

LIBERTY LATIN AMERICA LTD.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited)

	Liberty Latin America shareholders																		Non-controlling interests			Total equity
	Common shares						Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive loss, net of taxes			Total Liberty Latin America shareholders
	Class A		Class B		Class C
	in millions
Balance at January 1, 2018, before effect of accounting change	$	0.5	$	—	$	1.2	$	4,402.8		$	(1,010.7	)	$	(64.2	)	$	3,329.6		$	1,361.0		$	4,690.6
Accounting change (note 2)	—		—		—		—			(11.1		)	—			(11.1		)	3.6			(7.5		)
Balance at January 1, 2018, as adjusted for accounting change	0.5		—		1.2		4,402.8			(1,021.8		)	(64.2		)	3,318.5			1,364.6			4,683.1
Net loss	—		—		—		—			(86.7		)	—			(86.7		)	4.9			(81.8		)
Other comprehensive loss	—		—		—		—			—			(30.8		)	(30.8		)	(1.9		)	(32.7		)
C&W Jamaica NCI Acquisition	—		—		—		(13.7		)	—			7.2			(6.5		)	(15.1		)	(21.6		)
Capital contribution from noncontrolling interest owner	—		—		—		—			—			—			—			18.0			18.0
Distribution to noncontrolling interest owner	—		—		—		—			—			—			—			(19.8		)	(19.8		)
Shared-based compensation	—		—		—		13.0			—			—			13.0			1.1			14.1
Other	—		—		—		2.1			—			—			2.1			—			2.1
Balance at June 30, 2018	$	0.5	$	—	$	1.2	$	4,404.2		$	(1,108.5	)	$	(87.8	)	$	3,209.6		$	1,351.8		$	4,561.4

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

5

LIBERTY LATIN AMERICA LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Six months ended June 30,
	2018			2017
	in millions
Cash flows from operating activities:
Net loss	$	(81.8	)	$	(2.1	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Share-based compensation expense	15.2			8.6
Depreciation and amortization	409.9			386.8
Impairment, restructuring and other operating items, net	46.6			23.8
Amortization of debt financing costs, premiums and discounts, net	(1.1		)	(7.7		)
Realized and unrealized losses (gains) on derivative instruments, net	(73.6		)	36.5
Foreign currency transaction losses, net	104.7			2.3
Losses on debt modification and extinguishment	13.0			27.8
Deferred income tax benefit	(29.5		)	(50.6		)
Changes in operating assets and liabilities, net of the effect of an acquisition	(5.4		)	(126.8		)
Net cash provided by operating activities	398.0			298.6
Cash flows from investing activities:
Capital expenditures	(425.1		)	(248.3		)
Other investing activities, net	0.6			(3.0		)
Net cash used by investing activities	(424.5		)	(251.3		)
Cash flows from financing activities:
Borrowings of debt	525.7			218.4
Repayments of debt and capital lease obligations	(273.2		)	(121.6		)
Distributions to noncontrolling interest owners	(19.8		)	(33.3		)
Capital contribution from noncontrolling interest owner	18.0			—
Cash payment related to the C&W Jamaica NCI Acquisition	(19.7		)	—
Distributions to Liberty Global	—			(40.9		)
Other financing activities, net	(7.7		)	(9.2		)
Net cash provided by financing activities	223.3			13.4
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(15.3		)	(2.7		)
Net increase in cash, cash equivalents and restricted cash	181.5			58.0
Cash, cash equivalents and restricted cash:
Beginning of period	568.2			580.8
End of period	$	749.7		$	638.8
Cash paid for interest	$	202.5		$	206.4
Net cash paid for taxes	$	83.8		$	55.4

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

6

Liberty Latin America Ltd.

Notes to Condensed Consolidated Financial Statements

June 30, 2018

(unaudited)

(1) Basis of Presentation

General

Liberty Latin America Ltd. (Liberty Latin America) is a registered company in Bermuda that primarily includes (i) Cable & Wireless Communications Limited and its subsidiaries (C&W), (ii) VTR Finance B.V. (VTR Finance) and its subsidiaries, which includes VTR.com SpA (VTR), and (iii) LiLAC Communications Inc. and its subsidiaries, which includes Liberty Cablevision of Puerto Rico LLC (Liberty Puerto Rico), an entity in which Liberty Latin America owns a 60.0% interest. C&W owns less than 100% of certain of its consolidated subsidiaries, including Cable & Wireless Panama, S.A. (C&W Panama) (a 49.0%-owned entity that owns most of our operations in Panama), The Bahamas Telecommunications Company Limited (a 49.0%-owned entity that owns all of our operations in the Bahamas) and Cable & Wireless Jamaica Limited (C&W Jamaica) (a 92.3%-owned entity that owns the majority of our operations in Jamaica).

We are an international provider of video, broadband internet, fixed-line telephony and mobile services. We provide residential and business-to-business (B2B) services in (i) 18 countries, primarily in Latin America and the Caribbean, through C&W, (ii) Chile through VTR and (iii) Puerto Rico through Liberty Puerto Rico. C&W also provides (i) B2B communication services in certain other countries in Latin America and the Caribbean and (ii) wholesale communication services over its sub-sea and terrestrial fiber optic cable networks that connect over 40 markets in that region.

These condensed consolidated financial statements include the historical financial information of (i) Liberty Latin America and its consolidated subsidiaries for the period following the Split-Off, as defined below, and (ii) certain former subsidiaries of Liberty Global plc (Liberty Global) for periods prior to the Split-Off. Although Liberty Latin America was reported on a combined basis prior to the Split-Off, these financial statements present all prior periods as consolidated. In these notes, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to Liberty Latin America or collectively to Liberty Latin America and its subsidiaries. Unless otherwise indicated, ownership percentages and convenience translations into United States (U.S.) dollars are calculated as of June 30, 2018.

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

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates and assumptions are used in accounting for, among other things, the valuation of acquisition-related assets and liabilities, allowances for uncollectible accounts, programming and copyright expenses, 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 and actuarial liabilities associated with certain benefit plans. Actual results could differ from those estimates.

Reclassifications

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

Split-off of Liberty Latin America from Liberty Global

On December 29, 2017, Liberty Global completed the split-off (the Split-Off) of our company, which at such time was one of Liberty Global's wholly-owned subsidiaries. In the Split-Off, 48,428,841 Class A common shares, 1,940,193 Class B common shares and 120,843,539 Class C common shares of Liberty Latin America (collectively Liberty Latin America Shares) were issued. As a result of the Split-Off, Liberty Latin America became an independent, publicly traded company, and its assets and

7

Liberty Latin America Ltd.

Notes to Condensed Consolidated Financial Statements – (Continued)

June 30, 2018

(unaudited)

liabilities as of the time of the Split-Off consisted of the businesses, assets and liabilities that were formerly attributed to Liberty Global’s “LiLAC Group.” The Split-Off was accounted for at historical cost due to the pro rata distribution of Liberty Latin America Shares to holders of Liberty Global’s LiLAC Shares, as defined below.

Several agreements were entered into in connection with the Split-Off (the Split-Off Agreements) between Liberty Latin America, Liberty Global and/or certain of their respective subsidiaries, including the Tax Sharing Agreement, the Reorganization Agreement, the Services Agreement, the Sublease Agreement and the Facilities Sharing Agreement, each as defined and described in note 11.

LiLAC Transaction

On July 1, 2015, Liberty Global completed the “LiLAC Transaction,” pursuant to which each holder of Class A, Class B and Class C Liberty Global ordinary shares (Liberty Global Shares) received one share of the corresponding class of Liberty Global’s LiLAC ordinary shares (LiLAC Shares) for each 20 Liberty Global Shares held as of the record date for such distribution.

(2) Accounting Changes and Recent Accounting Pronouncements

Accounting Changes

ASU 2014-09

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. We adopted ASU 2014-09 effective January 1, 2018 by recording the cumulative effect to the opening balance of our accumulated deficit. We applied the new standard to contracts that were not complete as of January 1, 2018. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The most significant impacts of ASU 2014-09 on our revenue recognition policies relate to our accounting for (i) long-term capacity contracts, (ii) subsidized handset plans and (iii) certain installation and other upfront fees, each as set forth below:

• We enter into certain long-term capacity contracts with customers where the customer pays the transaction consideration at inception of the contract. Under previous accounting standards, we did not impute interest for advance payments from customers related to services that are provided over time. Under ASU 2014-09, payment received from a customer significantly in advance of the provision of services is indicative of a financing component within the contract. If the financing component is significant, interest expense is accreted over the life of the contract with a corresponding increase to revenue.

• ASU 2014-09 requires the identification of deliverables in contracts with customers that qualify as performance obligations. The transaction price consideration from customers is allocated to each performance obligation under the contract on the basis of relative standalone selling price. Under previous accounting standards, when we offered discounted equipment, such as handsets under a subsidized contract, upfront revenue recognition was limited to the upfront cash collected from the customer as the remaining monthly fees to be received from the customer, including fees associated with the equipment, were contingent upon delivering future airtime. This limitation is not applied under ASU 2014-09. The primary impact on revenue reporting is that when we sell discounted equipment together with airtime services to customers, revenue allocated to equipment and recognized when control of the device passes to the customer will increase and revenue recognized as services are delivered will decrease.

• When we enter into contracts to provide services to our customers, we often charge installation or other upfront fees. Under previous accounting standards, installation fees related to services provided over our fixed networks were recognized as revenue during the period in which the installation occurred to the extent those fees were equal to or less than direct selling costs. Under ASU 2014-09, these fees are generally deferred and recognized as revenue over the contractual period for those contracts with substantive termination penalties, or for the period of time the upfront fees convey a material right for month-to-month contracts and contracts that do not include substantive termination penalties.

8

Liberty Latin America Ltd.

Notes to Condensed Consolidated Financial Statements – (Continued)

June 30, 2018

(unaudited)

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

We implemented internal controls to ensure we adequately evaluated our contracts and properly assessed the impact of ASU 2014-09 on our condensed consolidated financial statements. We do not believe such new controls represent significant changes to our internal control over financial reporting.

For information regarding changes to our accounting policies following the adoption of ASU 2014-09 and our contract assets and deferred revenue balances, see note 3.

The cumulative effect of the changes made to our condensed consolidated balance sheet as of January 1, 2018 is as follows:

	Balance at December 31, 2017			Cumulative catch up adjustments upon adoption			Balance at January 1, 2018
	in millions
Assets:
Other current assets	$	222.9		$	15.8		$	238.7
Other assets, net	$	517.7		$	15.6		$	533.3
Liabilities:
Deferred revenue	$	143.4		$	13.3		$	156.7
Other long-term liabilities	$	697.8		$	25.6		$	723.4
Equity:
Accumulated deficit	$	(1,010.7	)	$	(11.1	)	$	(1,021.8	)
Noncontrolling interests	$	1,361.0		$	3.6		$	1,364.6

The impact of our adoption of ASU 2014-09 to our condensed consolidated statement of operations for the three months ended June 30, 2018 is as follows:

	Before adoption of ASU 2014-09		Impact of ASU 2014-09 Increase (decrease)			As reported
	in millions
Revenue	$	920.1	$	2.0		$	922.1
Operating costs and expenses – selling, general and administrative	$	195.8	$	(0.1	)	$	195.7
Non-operating expense – interest expense	$	104.2	$	5.2		$	109.4
Income tax expense	$	42.0	$	(0.4	)	$	41.6
Net loss	$	24.8	$	2.7		$	27.5

9

Liberty Latin America Ltd.

Notes to Condensed Consolidated Financial Statements – (Continued)

June 30, 2018

(unaudited)

The impact of our adoption of ASU 2014-09 to our condensed consolidated statement of operations for the six months ended June 30, 2018 is as follows:

	Before adoption of ASU 2014-09		Impact of ASU 2014-09 Increase (decrease)			As reported
	in millions
Revenue	$	1,829.1	$	2.9		$	1,832.0
Operating costs and expenses – selling, general and administrative	$	391.9	$	(0.4	)	$	391.5
Non-operating expense – interest expense	$	202.5	$	9.4		$	211.9
Income tax expense	$	59.3	$	(0.9	)	$	58.4
Net loss	$	76.6	$	5.2		$	81.8

ASU 2016-18

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows-Restricted Cash (ASU 2016-18), which addresses the presentation of restricted cash in the statement of cash flows. This ASU requires that the statement of cash flows explain the change in the beginning-of-period and end-of-period totals of cash, cash equivalents and restricted cash balances. We adopted ASU 2016-18 on January 1, 2018, which resulted in an increase (decrease) to our operating, investing and financing cash flows of ($1 million), $1 million, and $11 million, respectively, during the six months ended June 30, 2017. At June 30, 2018 and December 31, 2017, the balance of our restricted cash was $12 million and $38 million, respectively.

ASU 2017-07

In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits—Improving the Presentation of the Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07), which includes changes to the presentation of periodic benefit cost components. Under ASU 2017-07, we will continue to present the service component of our net benefit cost as a component of operating income but present the other components of our net benefit cost computation, which can include credits, within non-operating income in our consolidated statements of operations. We adopted ASU 2017-07 on January 1, 2018. The change in presentation to our condensed consolidated statements of operations from ASU 2017-07 was applied on a retrospective basis. As a result of the adoption of ASU 2017-07, we have presented pension-related credits in other income, net, in our condensed consolidated statements of operations that aggregated $4 million and $3 million during the three months ended June 30, 2018 and 2017, respectively, and $7 million and $6 million during the six months ended June 30, 2018 and 2017, respectively.

Recent Accounting Pronouncements

ASU 2016-02

In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU 2016-02), which, for most leases, will result in lessees recognizing lease assets and lease liabilities on the balance sheet with additional disclosures about leasing arrangements. ASU 2016-02 requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach and additional guidance provided by ASU 2018-01, Leases (Topic 842)—Land Easement Practical Expedient for Transition to Topic 842, includes a number of optional practical expedients an entity may elect to apply. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We will adopt ASU 2016-02 on January 1, 2019. Although we are currently evaluating the effect that ASU 2016-02 will have on our consolidated financial statements, the main impact of the adoption of this standard will be the recognition of lease assets and lease liabilities in our consolidated balance sheets for those leases classified as operating leases under previous U.S. GAAP. ASU 2016-02 will not have significant impacts on our consolidated statements of operations or cash flows.

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Liberty Latin America Ltd.

Notes to Condensed Consolidated Financial Statements – (Continued)

June 30, 2018

(unaudited)

(3)    Summary of Changes in Significant Accounting Policies

The following accounting policies reflect updates to our Summary of Significant Accounting Policies included in our 2017 Form 10-K as a result of the adoption of ASU 2014-09. For additional information regarding the adoption of ASU 2014-09, see note 2.

Contract Assets

When we transfer goods or services to a customer but do not have an unconditional right to payment, we record a contract asset. Contract assets are reclassified to trade receivables, net in our consolidated balance sheet at the point in time we have the unconditional right to payment. Our contract assets were $10 million and $13 million as of June 30, 2018 and January 1, 2018, respectively. The change in our contract assets during the six months ended June 30, 2018 was not material. The current and long-term portion of contract assets are included in other current assets and other assets, net, respectively, in our condensed consolidated balance sheet.

Deferred Contract Costs

Incremental costs to obtain a contract with a customer, such as incremental sales commissions, are recognized as an asset and amortized to SG&A expenses over the applicable period benefited, which is the longer of the contract life or the economic life of the commission. If, however, the amortization period is one year or less, we expense such costs in the period incurred. Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained are recognized as an expense when incurred. Our deferred contract costs were $10 million and $9 million as of June 30, 2018 and January 1, 2018, respectively. The change in our deferred contract costs during the six months ended June 30, 2018 was not material. The current and long-term portion of deferred contract costs are included in other current assets and other assets, net, respectively, in our condensed consolidated balance sheet.

Deferred Revenue