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 September 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 every Interactive Data File required to be submitted 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 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
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 October 31, 2018 was: 48,482,353 Class A; 1,936,034 Class B; and 130,485,270 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 September 30, 2018 and December 31, 2017 (unaudited)	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2018 and 2017 (unaudited)	3
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2018 and 2017 (unaudited)	4
	Condensed Consolidated Statement of Equity for the Nine Months Ended September 30, 2018 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 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	41
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	67
Item 4.	CONTROLS AND PROCEDURES	69
	PART II - OTHER INFORMATION
Item 6.	EXHIBITS	70

LIBERTY LATIN AMERICA LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

	September 30, 2018		December 31, 2017
	in millions
ASSETS
Current assets:
Cash and cash equivalents	$	525.1	$	529.9
Trade receivables, net of allowances of $144.3 million and $142.2 million, respectively	571.5		556.5
Restricted cash	261.8		38.3
Prepaid expenses	81.3		65.5
Other current assets	261.7		184.6
Total current assets	1,701.4		1,374.8
Goodwill	5,544.9		5,673.6
Property and equipment, net	4,182.6		4,169.2
Intangible assets subject to amortization, net	1,145.8		1,316.2
Intangible assets not subject to amortization	563.8		565.4
Other assets, net	812.9		517.7
Total assets	$	13,951.4	$	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)

	September 30, 2018			December 31, 2017
	in millions
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	276.7		$	286.8
Deferred revenue	165.3			143.4
Current portion of debt and capital lease obligations	381.7			263.3
Accrued capital expenditures	71.2			128.6
Accrued interest	74.6			115.6
Accrued income taxes	69.6			91.5
Other accrued and current liabilities	753.4			557.7
Total current liabilities	1,792.5			1,586.9
Long-term debt and capital lease obligations	6,248.1			6,108.2
Deferred tax liabilities	570.5			533.4
Other long-term liabilities	855.0			697.8
Total liabilities	9,466.1			8,926.3
Commitments and contingencies
Equity:
Liberty Latin America shareholders:
Class A, $0.01 par value; 500,000,000 shares authorized; 48,480,869 and 48,428,841 shares issued and outstanding, respectively	0.5			0.5
Class B, $0.01 par value; 50,000,000 shares authorized; 1,936,034 and 1,940,193 shares issued and outstanding, respectively	—			—
Class C, $0.01 par value; 500,000,000 shares authorized; 120,972,443 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	4,413.6			4,402.8
Accumulated deficit	(1,134.0		)	(1,010.7		)
Accumulated other comprehensive loss, net of taxes	(154.4		)	(64.2		)
Total Liberty Latin America shareholders	3,126.9			3,329.6
Noncontrolling interests	1,358.4			1,361.0
Total equity	4,485.3			4,690.6
Total liabilities and equity	$	13,951.4		$	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 September 30,						Nine months ended September 30,
	2018			2017			2018			2017
	in millions, except per share amounts
Revenue	$	925.2		$	908.1		$	2,757.2		$	2,739.9
Operating costs and expenses (exclusive of depreciation and amortization, shown separately below):
Programming and other direct costs of services	218.3			213.5			652.5			659.9
Other operating	157.6			168.9			484.9			502.3
Selling, general and administrative (SG&A)	196.9			176.8			588.4			528.0
Depreciation and amortization	204.8			199.7			614.7			586.5
Impairment, restructuring and other operating items, net	8.8			354.9			55.4			378.7
	786.4			1,113.8			2,395.9			2,655.4
Operating income (loss)	138.8			(205.7		)	361.3			84.5
Non-operating income (expense):
Interest expense	(110.2		)	(99.3		)	(322.1		)	(289.8		)
Realized and unrealized gains (losses) on derivative instruments, net	8.9			(78.6		)	82.5			(115.1		)
Foreign currency transaction gains (losses), net	(16.4		)	43.5			(121.1		)	41.2
Losses on debt modification and extinguishment	—			(25.8		)	(13.0		)	(53.6		)
Other income (expense), net	(12.0		)	4.4			(1.9		)	13.4
	(129.7		)	(155.8		)	(375.6		)	(403.9		)
Earnings (loss) before income taxes	9.1			(361.5		)	(14.3		)	(319.4		)
Income tax benefit (expense)	(27.9		)	5.8			(86.3		)	(38.4		)
Net loss	(18.8		)	(355.7		)	(100.6		)	(357.8		)
Net loss (earnings) attributable to noncontrolling interests	(6.7		)	12.4			(11.6		)	(19.5		)
Net loss attributable to Liberty Latin America shareholders	$	(25.5	)	$	(343.3	)	$	(112.2	)	$	(377.3	)
Basic and diluted net loss per share attributable to Liberty Latin America shareholders	$	(0.15	)	$	(2.00	)	$	(0.65	)	$	(2.19	)

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 September 30,						Nine months ended September 30,
	2018			2017			2018			2017
	in millions
Net loss	$	(18.8	)	$	(355.7	)	$	(100.6	)	$	(357.8	)
Other comprehensive loss, net of taxes:
Foreign currency translation adjustments	(66.6		)	(34.2		)	(110.4		)	(86.4		)
Reclassification adjustments included in net loss	(0.1		)	1.3			2.6			2.8
Pension-related adjustments and other, net	(0.4		)	(3.2		)	8.0			(2.6		)
Other comprehensive loss	(67.1		)	(36.1		)	(99.8		)	(86.2		)
Comprehensive loss	(85.9		)	(391.8		)	(200.4		)	(444.0		)
Comprehensive loss (earnings) attributable to noncontrolling interests	(6.2		)	12.4			(9.2		)	(18.9		)
Comprehensive loss attributable to Liberty Latin America shareholders	$	(92.1	)	$	(379.4	)	$	(209.6	)	$	(462.9	)

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	—		—		—		—			(112.2		)	—			(112.2		)	11.6			(100.6		)
Other comprehensive loss	—		—		—		—			—			(97.4		)	(97.4		)	(2.4		)	(99.8		)
C&W Jamaica NCI Acquisition	—		—		—		(13.7		)	—			7.2			(6.5		)	(15.1		)	(21.6		)
Capital contributions from noncontrolling interest owner	—		—		—		—			—			—			—			18.0			18.0
Distributions to noncontrolling interest owners	—		—		—		—			—			—			—			(19.8		)	(19.8		)
Shared-based compensation	—		—		—		23.0			—			—			23.0			1.5			24.5
Other	—		—		—		1.5			—			—			1.5			—			1.5
Balance at September 30, 2018	$	0.5	$	—	$	1.2	$	4,413.6		$	(1,134.0	)	$	(154.4	)	$	3,126.9		$	1,358.4		$	4,485.3

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) 

	Nine months ended September 30,
	2018			2017
	in millions
Cash flows from operating activities:
Net loss	$	(100.6	)	$	(357.8	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Share-based compensation expense	26.8			11.9
Depreciation and amortization	614.7			586.5
Impairment, restructuring and other operating items, net	55.4			378.7
Amortization of debt financing costs, premiums and discounts, net	(1.9		)	(12.1		)
Realized and unrealized losses (gains) on derivative instruments, net	(82.5		)	115.1
Foreign currency transaction losses (gains), net	121.1			(41.2		)
Losses on debt modification and extinguishment	13.0			53.6
Unrealized loss due to change in fair value of an investment	16.4			—
Deferred income tax benefit	(22.6		)	(90.9		)
Changes in operating assets and liabilities, net of the effect of an acquisition	(31.1		)	(251.5		)
Net cash provided by operating activities	608.7			392.3
Cash flows from investing activities:
Capital expenditures	(593.0		)	(447.5		)
Other investing activities, net	1.5			(6.6		)
Net cash used by investing activities	(591.5		)	(454.1		)
Cash flows from financing activities:
Borrowings of debt	553.3			1,674.0
Repayments of debt and capital lease obligations	(315.8		)	(1,403.5		)
Payment of financing costs and debt premiums	(9.8		)	(104.2		)
Distributions to noncontrolling interest owners	(19.8		)	(33.3		)
Capital contributions from noncontrolling interest owner	18.0			—
Cash payments related to NCI Acquisitions	(19.7		)	(30.3		)
Distributions to Liberty Global	—			(54.3		)
Other financing activities, net	10.9			(0.4		)
Net cash provided by financing activities	217.1			48.0
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(15.6		)	2.3
Net increase (decrease) in cash, cash equivalents and restricted cash	218.7			(11.5		)
Cash, cash equivalents and restricted cash:
Beginning of period	568.2			580.8
End of period	$	786.9		$	569.3
Cash paid for interest	$	347.7		$	353.0
Net cash paid for taxes	$	112.4		$	86.4

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

6

Liberty Latin America Ltd.

Notes to Condensed Consolidated Financial Statements

September 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. As further described in note 18, in October 2018, we acquired the remaining 40.0% interest in Liberty Puerto Rico that we did not already own. 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).

Effective October 1, 2018, we acquired Televisora de Costa Rica S.A.’s (Televisora) cable operations in Costa Rica, as further described in note 4.

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 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 those regions.

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 September 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.

7

Liberty Latin America Ltd.

Notes to Condensed Consolidated Financial Statements – (Continued)

September 30, 2018

(unaudited)

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 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 12.

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

8

Liberty Latin America Ltd.

Notes to Condensed Consolidated Financial Statements – (Continued)

September 30, 2018

(unaudited)

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.

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	$	184.6		$	15.8		$	200.4
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 September 30, 2018 is as follows:

	Before adoption of ASU 2014-09		Impact of ASU 2014-09 Increase (decrease)			As reported
	in millions
Revenue	$	922.2	$	3.0		$	925.2
Operating costs and expenses – selling, general and administrative	$	196.9	$	—		$	196.9
Non-operating expense – interest expense	$	105.3	$	4.9		$	110.2
Income tax expense	$	28.2	$	(0.3	)	$	27.9
Net loss	$	17.2	$	1.6		$	18.8

9

Liberty Latin America Ltd.

Notes to Condensed Consolidated Financial Statements – (Continued)

September 30, 2018

(unaudited)

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

	Before adoption of ASU 2014-09		Impact of ASU 2014-09 Increase (decrease)			As reported
	in millions
Revenue	$	2,751.3	$	5.9		$	2,757.2
Operating costs and expenses – selling, general and administrative	$	588.8	$	(0.4	)	$	588.4
Non-operating expense – interest expense	$