LIBERTY GLOBAL LTD. The following discussion and analysis, which should be read in conjunction with our consolidated financial statements and the discussion and analysis included in our 10-K, is intended to assist in providing an understanding of our financial condition, changes in financial condition and results of operations and is organized as follows: •Forward-looking Statements. This section provides a description of certain factors that could cause actual results or events to differ materially from anticipated results or events. •Overview. This section provides a general description of our business and recent events. •Material Changes in Results of Operations. This section provides an analysis of our results of operations for the three and nine months endedSeptember 30, 2021 and 2020. •Material Changes in Financial Condition. This section provides an analysis of our corporate and subsidiary liquidity, condensed consolidated statements of cash flows and contractual commitments. The capitalized terms used below have been defined in the notes to our condensed consolidated financial statements. In the following text, the terms "we," "our," "our company" and "us" may refer, as the context requires, toLiberty Global or collectively toLiberty Global and its subsidiaries.
Unless otherwise indicated, convenience translations into
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. To the extent that statements in this Quarterly Report are not recitations of historical fact, such statements constitute forward-looking statements, which, by definition, involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. In particular, statements under Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk and Part II, Item 2. Unregistered Sales ofEquity Securities and Use of Proceeds may contain forward-looking statements, including statements regarding our business, product, foreign currency and finance strategies, our property and equipment additions (including with respect to the Network Extensions, as defined below), subscriber growth and retention rates, competitive, regulatory and economic factors, the timing and impacts of proposed transactions, the maturity of our markets, the potential impact of COVID-19 on our company, the anticipated impacts of new legislation (or changes to existing rules and regulations), anticipated changes in our revenue, costs or growth rates, our liquidity, credit risks, foreign currency risks, interest rate risks, target leverage levels, debt covenants, our future projected contractual commitments and cash flows, our share repurchase program and other information and statements that are not historical fact. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. In evaluating these statements, you should consider the risks and uncertainties discussed in our 10-K, as well as the following list of some but not all of the factors that could cause actual results or events (including with respect to our affiliates) to differ materially from anticipated results or events: •economic and business conditions and industry trends in the countries in which we or our affiliates operate; •the competitive environment in the industries in the countries in which we or our affiliates operate, including competitor responses to our products and services; •fluctuations in currency exchange rates and interest rates; •instability in global financial markets, including sovereign debt issues and related fiscal reforms; •consumer disposable income and spending levels, including the availability and amount of individual consumer debt; •changes in consumer television viewing and broadband usage preferences and habits; •consumer acceptance of our existing service offerings, including our broadband internet, television, fixed-line telephony, mobile and business service offerings, and of new technology, programming alternatives and other products and service offerings in the future; •our ability to manage rapid technological changes; 52 -------------------------------------------------------------------------------- •our ability to maintain or increase the number of subscriptions to our broadband internet, television, fixed-line telephony and mobile service offerings and our average revenue per household; •our ability to provide satisfactory customer service, including support for new and evolving products and services; •our ability to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers; •the impact of our future financial performance, or market conditions generally, on the availability, terms and deployment of capital; •changes in, or failure or inability to comply with, government regulations in the countries in which we or our affiliates operate and adverse outcomes from regulatory proceedings; •government intervention that requires opening our broadband distribution networks to competitors, such as the obligations imposed inBelgium ; •our ability to obtain regulatory approval and shareholder approval and satisfy other conditions necessary to close acquisitions and dispositions and the impact of conditions imposed by competition and other regulatory authorities in connection with acquisitions; •our ability to successfully acquire new businesses and, if acquired, to integrate, realize anticipated efficiencies from, and implement our business plan with respect to, the businesses we have acquired or that we expect to acquire; •changes in laws or treaties relating to taxation, or the interpretation thereof, in theU.K. , theU.S. or in other countries in which we or our affiliates operate; •changes in laws and government regulations that may impact the availability and cost of capital and the derivative instruments that hedge certain of our financial risks; •the ability of suppliers and vendors (including our third-party wireless network providers under our mobile virtual network operator arrangements) to timely deliver quality products, equipment, software, services and access; •the availability of attractive programming for our video services and the costs associated with such programming, including retransmission and copyright fees payable to public and private broadcasters; •uncertainties inherent in the development and integration of new business lines and business strategies; •our ability to adequately forecast and plan future network requirements, including the costs and benefits associated with our network extension programs; •the availability of capital for the acquisition and/or development of telecommunications networks and services; •problems we may discover post-closing with the operations, including the internal controls and financial reporting process, of businesses we acquire; •the leakage of sensitive customer data; •the outcome of any pending or threatened litigation; •the loss of key employees and the availability of qualified personnel; •changes in the nature of key strategic relationships with partners and joint venturers; •our equity capital structure; and •events that are outside of our control, such as political unrest in international markets, terrorist attacks, malicious human acts, natural disasters, epidemics, pandemics (such as COVID-19) and other similar events. The broadband distribution and mobile service industries are changing rapidly and, therefore, the forward-looking statements of expectations, plans and intent in this Quarterly Report are subject to a significant degree of risk. These forward-looking statements and the above-described risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based. Readers are cautioned not to place undue reliance on any forward-looking statement. 53 --------------------------------------------------------------------------------
Overview
General
We are an international provider of broadband internet, video, fixed-line telephony and mobile communications services to residential customers and businesses inEurope . Our operations comprise businesses that provide residential and B2B communications services in (i)Switzerland andSlovakia throughUPC Holding , (ii)Belgium through Telenet and (iii)Ireland through another wholly-owned subsidiary ofLiberty Global . In addition, we own 50% noncontrolling interests in (a) the VodafoneZiggo JV, which provides residential and B2B communication services inthe Netherlands , and (b) the VMED O2 JV, which provides residential and B2B communication services in theU.K. In addition, we currently provide residential and B2B communications services inPoland throughUPC Holding . OnSeptember 22, 2021 , we entered into an agreement to sell our operations inPoland . Accordingly, our operations inPoland are reflected as discontinued operations for all periods presented. In the following discussion and analysis, the operating statistics, results of operations, cash flows and financial condition that we present and discuss are those of our continuing operations unless otherwise indicated. For additional information regarding the pending sale of UPC Poland, including with respect to our current expectations on timing and use of proceeds, see note 4 to our condensed consolidated financial statements. ThroughMay 31, 2021 , our consolidated operations also provided residential and B2B communications services in theU.K. throughVirgin Media . OnJune 1, 2021 , we contributed theU.K. JV Entities to the VMED O2 JV and began accounting for our 50% interest in the VMED O2 JV as an equity method investment. For additional information, see note 4 to our condensed consolidated financial statements.
Operations
At
Competition and Other External Factors
We are experiencing competition in all of the markets in which we or our affiliates operate. This competition, together with macroeconomic and regulatory factors, has adversely impacted our revenue, number of customers and/or average monthly subscription revenue per fixed-line customer or mobile subscriber, as applicable (ARPU). For additional information regarding the revenue impact of changes in fixed-line customers and ARPU of our consolidated reportable segments, see Discussion and Analysis of our Reportable Segments below. The global COVID-19 pandemic continues to impact the economies of the countries in which we operate. However, during the third quarter of 2021, the impact on our company continued to be relatively minimal as demand for our products and services remained strong. It is not currently possible to estimate the duration and severity of the COVID-19 pandemic or the adverse economic impact resulting from the preventative measures taken to contain or mitigate its outbreak, therefore no assurance can be given that an extended period of global economic disruption would not have a material adverse impact on our business, financial condition and results of operations in future periods. For further information regarding the COVID-19 pandemic, see the discussion under Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview included in our 10-K. For additional information regarding the impact of COVID-19 on our results of operations for the nine months endedSeptember 30, 2021 , see Discussion and Analysis of our Reportable Segments below. 54 --------------------------------------------------------------------------------
Material Changes in Results of Operations
We have completed a number of transactions that impact the comparability of our results of operations, the most notable of which are the Sunrise Acquisition onNovember 11, 2020 and theU.K. JV Transaction onJune 1, 2021 . For further information regarding our pending and completed acquisitions and dispositions, see note 4 to our condensed consolidated financial statements. In the following discussion, we quantify the estimated impact of material acquisitions (the Acquisition Impact) and dispositions on our operating results. The Acquisition Impact represents our estimate of the difference between the operating results of the periods under comparison that is attributable to an acquisition. In general, we base our estimate of the Acquisition Impact on an acquired entity's operating results during the first three to twelve months following the acquisition date, as adjusted to remove integration costs and any other material unusual or nonoperational items, such that changes from those operating results in subsequent periods are considered to be organic changes. Accordingly, in the following discussion, (i) organic variances attributed to an acquired entity during the first 12 months following the acquisition date represent differences between the Acquisition Impact and the actual results and (ii) the calculation of our organic change percentages includes the organic activity of an acquired entity relative to the Acquisition Impact of such entity. With respect to material dispositions, the organic changes that are discussed below reflect adjustments to exclude the historical prior-year results of any disposed entities to the extent that such entities are not included in the corresponding results for the current-year periods. Changes in foreign currency exchange rates have a significant impact on our reported operating results as all of our operating segments have functional currencies other than theU.S. dollar. Our primary exposure to foreign exchange (FX) risk during the three months endedSeptember 30, 2021 was to the euro and Swiss franc as 55.1% and 43.7% of our reported revenue during the period was derived from subsidiaries whose functional currencies are the euro and Swiss franc, respectively. In addition, our reported operating results are impacted by changes in the exchange rates for certain other local currencies inEurope . The portions of the changes in the various components of our results of operations that are attributable to changes in FX are highlighted under Discussion and Analysis of our Reportable Segments and Discussion and Analysis of our Consolidated Operating Results below. For information regarding our foreign currency risks and the applicable foreign currency exchange rates in effect for the periods covered by this Quarterly Report, see Part I, Item 3. Quantitative and Qualitative Disclosures about Market Risk - Foreign Currency Risk below. The amounts presented and discussed below represent 100% of each of our consolidated reportable segment's results of operations. As we have the ability to control Telenet, we consolidate 100% of its revenue and expenses in our condensed consolidated statements of operations despite the fact that third parties own a significant interest. The noncontrolling owners' interests in the operating results of Telenet and other less significant majority-owned subsidiaries are reflected in net earnings or loss attributable to noncontrolling interests in our condensed consolidated statements of operations.
Discussion and Analysis of our Reportable Segments
General
All of our reportable segments derive their revenue primarily from residential and B2B communications services, including broadband internet, video, fixed-line telephony and mobile services. For detailed information regarding the composition of our reportable segments and how we define and categorize our revenue components, see note 16 to our condensed consolidated financial statements. For information regarding the results of operations of the VodafoneZiggo JV and, for the period beginningJune 1, 2021 , the VMED O2 JV, refer to Discussion and Analysis of our Consolidated Operating Results - Share of results of affiliates below. The tables presented below in this section provide the details of the revenue and Adjusted EBITDA of our consolidated reportable segments for the three and nine months endedSeptember 30, 2021 and 2020. These tables present (i) the amounts reported for the current and comparative periods, (ii) the reportedU.S. dollar change and percentage change from period to period and (iii) the organicU.S. dollar change and percentage change from period to period. For our organic comparisons, which exclude the impact of FX, we assume that exchange rates remained constant at the prior-year rate during all periods presented. We also provide a table showing the Adjusted EBITDA margins of our consolidated reportable segments for the three and nine months endedSeptember 30, 2021 and 2020 at the end of this section. 55 -------------------------------------------------------------------------------- Consolidated Adjusted EBITDA is a non-GAAP measure, which we believe is a meaningful measure because it represents a transparent view of our recurring operating performance that is unaffected by our capital structure and allows management to readily view operating trends from a consolidated view. Investors should view consolidated Adjusted EBITDA as a supplement to, and not a substitute for, GAAP measures of performance included in our condensed consolidated statements of operations. The following table provides a reconciliation of earnings (loss) from continuing operations to Adjusted EBITDA: Three months ended Nine months ended September 30, September 30, 2021 2020 2021 2020 in millions Earnings (loss) from continuing operations$ 315.6 $ (985.6) $ 12,889.2 $ (502.2) Income tax expense (benefit) 2.2 (165.5) 444.2 (252.2) Other income, net (8.2) (5.4) (25.6) (67.4) Gain on Atlas Edge JV Transactions (213.7) - (213.7) - (Gain) adjustment to gain on U.K. JV Transaction 347.3 - (10,790.7) - Share of results of affiliates, net 29.2 27.1 35.6 99.1 Losses on debt extinguishment, net - 0.3 90.6 220.4
Realized and unrealized losses (gains) due to changes in fair values of certain investments and debt, net 109.4
21.5 (373.3) 399.0
Foreign currency transaction losses (gains), net (422.4) 754.6 (857.6) 836.3
Realized and unrealized losses (gains) gains on
derivative instruments, net (199.3) 717.5 (707.4) (200.4)
Interest expense 140.9 279.3 748.1 873.5
Operating income 101.0 643.8 1,239.4 1,406.1Impairment, restructuring and other operating items, net
17.2 (16.7) 68.4 46.5
Depreciation and amortization 582.3 432.0 1,744.8 1,710.1
Share-based compensation expense 58.0 104.4 220.6 243.4
Adjusted EBITDA $ 758.5 $ 1,163.5 $ 3,273.2 $ 3,406.1
56--------------------------------------------------------------------------------
Revenue of our Consolidated Reportable Segments
General. While not specifically discussed in the below explanations of the changes in the revenue of our consolidated reportable segments, we are experiencing competition in all of our markets. This competition has an adverse impact on our ability to increase or maintain our total number of customers and/or our ARPU.
Variances in the subscription revenue that we receive from our customers are a function of (i) changes in the number of our fixed-line customers or mobile subscribers outstanding during the period and (ii) changes in ARPU. Changes in ARPU can be attributable to (a) changes in prices, (b) changes in bundling or promotional discounts, (c) changes in the tier of services selected, (d) variances in subscriber usage patterns and (e) the overall mix of fixed and mobile products within a segment during the period.
Revenue
Three months ended September 30, Increase (decrease) Organic increase (decrease)
2021 2020 $ % $ %
in millions, except percentages
U.K. (a) $ -$ 1,543.6 $ (1,543.6) (100.0) $ - - Belgium 755.4 746.6 8.8 1.2 3.0 0.4 Switzerland 830.2 315.0 515.2 163.6 1.8 0.2 Ireland 136.0 126.4 9.6 7.6 8.7 6.9 Central and Other 181.4 118.9 62.5 52.6 (2.5) (2.1) Intersegment eliminations (1.6) (5.1) 3.5 N.M. 3.5 N.M. Total$ 1,901.4 $ 2,845.4 $ (944.0) (33.2) $ 14.5 0.8 Nine months ended September 30, Increase (decrease) Organic increase (decrease) 2021 2020 $ % $ % in millions, except percentages
U.K. (a)$ 2,736.4 $ 4,457.3 $ (1,720.9) (38.6) $ 63.1 2.6 Belgium 2,302.9 2,147.2 155.7 7.3 19.2 0.9 Switzerland 2,497.4 930.9 1,566.5 168.3 (23.7) (1.0) Ireland 406.2 366.2 40.0 10.9 15.6 4.3 Central and Other 458.7 346.9 111.8 32.2 13.8 4.0 Intersegment eliminations (11.1) (14.8) 3.7 N.M. 3.7 N.M. Total$ 8,390.5 $ 8,233.7 $ 156.8 1.9 $ 91.7 1.2 _______________ N.M. - Not Meaningful.
(a)Represents the revenue of the
57
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U.K. The details of the decrease in the U.K.'s revenue during the nine months
ended September 30, 2021 , as compared to the corresponding period in 2020, is
set forth below:
Nine-month period
Subscription Non-subscription
revenue revenue Total
in millions
Increase (decrease) in residential fixed subscription
revenue due to change in:
Average number of customers $ 55.4 $ - $ 55.4
ARPU (a) (74.4) - (74.4)
Increase in residential fixed non-subscription revenue (b) - 12.9 12.9
Total increase (decrease) in residential fixed revenue (19.0) 12.9 (6.1)
Increase in residential mobile revenue (c) 1.1 32.4 33.5
Increase in B2B revenue (d) 9.8 26.2 36.0
Decrease in other revenue - (0.3) (0.3)
Total organic increase (decrease) (8.1) 71.2 63.1
Impact of dispositions (1,587.0) (422.9) (2,009.9)
Impact of FX 178.4 47.5 225.9
Total $ (1,416.7) $ (304.2) $ (1,720.9)
_______________
(a)The decrease in fixed subscription revenue related to a change in ARPU
includes an increase of approximately $19 million associated with the pausing or
cancellation of certain sporting events during the second quarter of 2020, as
further described under Discussion and Analysis of our Consolidated Operating
Results - Programming and other direct costs of services below.
(b)The increase in residential fixed non-subscription revenue is primarily attributable to increases in (i) revenue from late fees, (ii) cancellation revenue and (iii) installation revenue.
(c)The increase in residential mobile non-subscription revenue is primarily attributable to an increase in revenue from mobile handset sales.
(d)The increase in B2B subscription revenue is primarily due to an increase in
the average number of customers. The increase in B2B non-subscription revenue is
primarily attributable to the net effect of (i) an increase in revenue
associated with long-term leases of a portion of our network and (ii) lower
revenue from data services.
58
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Belgium . The details of the increases in Belgium's revenue during the three and
nine months ended September 30, 2021 , as compared to the corresponding periods
in 2020, are set forth below:
Three-month period Nine-month period
Subscription Non-subscription Subscription Non-subscription
revenue revenue Total revenue revenue Total
in millions
Increase (decrease) in residential
fixed subscription revenue due to
change in:
Average number of customers $ (6.3) $ - $ (6.3) $ (18.3) $ - $ (18.3)
ARPU 2.6 - 2.6 9.2 - 9.2
Increase in residential fixed
non-subscription revenue - 0.1 0.1 - 2.3 2.3
Total increase (decrease) in residential fixed revenue (3.7) 0.1 (3.6) (9.1) 2.3
(6.8)
Increase (decrease) in residential mobile revenue (a) 6.1 (14.3) (8.2) 7.1 (21.3) (14.2) Increase in B2B revenue (b) 4.8 6.2 11.0 13.6 8.0 21.6 Increase in other revenue (c) - 3.8 3.8 - 18.6 18.6 Total organic increase (decrease) 7.2 (4.2) 3.0 11.6 7.6 19.2 Impact of dispositions - - - (1.7) (0.5) (2.2) Impact of FX 4.8 1.0 5.8 104.5 34.2 138.7 Total$ 12.0 $ (3.2)$ 8.8 $ 114.4 $ 41.3$ 155.7 _______________
(a)The decreases in residential mobile non-subscription revenue are primarily attributable to lower interconnect and mobile roaming revenue.
(b)The increases in B2B subscription revenue are primarily due to increases in the average number of customers. The increases in B2B non-subscription revenue are primarily attributable to the net effect of (i) higher revenue from wholesale services, (ii) increases in revenue from mobile handset sales and (iii) lower interconnect revenue.
(c)The increases in other revenue are attributable to higher broadcasting revenue.
For information concerning certain regulatory developments that could have an adverse impact on our revenue inBelgium , see Legal and Regulatory Proceedings and Other Contingencies - Belgium Regulatory Developments in note 15 to our condensed consolidated financial statements. 59 --------------------------------------------------------------------------------Switzerland . The details of the increases inSwitzerland's revenue during the three and nine months endedSeptember 30, 2021 , as compared to the corresponding periods in 2020, are set forth below: Three-month period Nine-month period Subscription Non-subscription Subscription Non-subscription revenue revenue Total revenue revenue Total in millions Increase (decrease) in residential fixed subscription revenue due to change in: Average number of customers$ (9.1) $ -$ (9.1) $ (34.8) $ -$ (34.8) ARPU (1.7) - (1.7) 2.0 - 2.0 Increase in residential fixed non-subscription revenue - 1.0 1.0 - 2.6 2.6 Total increase (decrease) in residential fixed revenue (10.8) 1.0 (9.8) (32.8) 2.6
(30.2)
Increase (decrease) in residential mobile revenue (a) 26.1 (16.7) 9.4 37.7 (39.0) (1.3) Increase (decrease) in B2B revenue (b) 1.2 2.6 3.8 (0.1) 11.4 11.3 Decrease in other revenue - (1.6) (1.6) - (3.5) (3.5) Total organic increase (decrease) 16.5 (14.7) 1.8 4.8 (28.5) (23.7) Impact of acquisitions 343.1 169.4 512.5 996.0 491.6 1,487.6 Impact of FX 0.3 0.6 0.9 73.0 29.6 102.6 Total$ 359.9 $ 155.3$ 515.2 $ 1,073.8 $ 492.7$ 1,566.5 _______________
(a)The increases in residential mobile subscription revenue are primarily due to increases in the average number of mobile subscribers. The decreases in residential mobile non-subscription revenue are largely attributable to decreases in (i) revenue from mobile handset sales and (ii) interconnect revenue.
(b)The increases in B2B non-subscription revenue are primarily attributable to higher revenue from wholesale services.
60
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Ireland . The details of the increases in Ireland's revenue during the three and
nine months ended September 30, 2021 , as compared to the corresponding periods
in 2020, are set forth below:
Three-month period Nine-month period
Subscription Non-subscription Subscription Non-subscription
revenue revenue Total revenue revenue Total
in millions
Increase (decrease) in residential
fixed subscription revenue due to
change in:
Average number of customers $ (0.8) $ - $ (0.8) $ (0.5) $ - $ (0.5)
ARPU 0.1 - 0.1 0.7 - 0.7
Increase in residential fixed
non-subscription revenue - 0.3 0.3 - 0.3 0.3
Total increase (decrease) in residential fixed revenue (0.7) 0.3 (0.4) 0.2 0.3
0.5
Increase (decrease) in residential mobile revenue 1.0 (0.1) 0.9 2.8 (0.6)
2.2
Increase (decrease) in B2B revenue 0.2 (1.3) (1.1) 0.6 (2.4) (1.8) Increase in other revenue (a) - 9.3 9.3 - 14.7 14.7 Total organic increase 0.5 8.2 8.7 3.6 12.0 15.6 Impact of FX 0.9 - 0.9 18.5 5.9 24.4 Total $ 1.4 $ 8.2$ 9.6 $ 22.1 $ 17.9$ 40.0 _______________
(a)The increases in other revenue are attributable to higher broadcasting revenue.
Programming and Other Direct Costs of Services, Other Operating Expenses and SG&A Expenses of our Consolidated Reportable Segments
For information regarding the changes in our (i) programming and other direct costs of services, (ii) other operating expenses and (iii) SG&A expenses, see Discussion and Analysis of our Consolidated Operating Results below.
Adjusted EBITDA of our Consolidated Reportable Segments
Adjusted EBITDA is the primary measure used by our chief operating decision
maker to evaluate segment operating performance. As presented below,
consolidated Adjusted EBITDA is a non-GAAP measure, which investors should view
as a supplement to, and not a substitute for, GAAP measures of performance
included in our condensed consolidated statements of operations. The following
tables set forth the Adjusted EBITDA of our consolidated reportable segments:
Three months ended September
30, Increase (decrease) Organic increase (decrease)
2021 2020 $ % $ %
in millions, except percentages
U.K. (a) $ -$ 610.9 $ (610.9) (100.0) $ - - Belgium 369.1 367.4 1.7 0.5 (1.4) (0.4) Switzerland 330.8 154.4 176.4 114.2 22.1 7.2 Ireland 59.1 49.9 9.2 18.4 8.8 17.6 Central and Other 1.5 (20.5) 22.0 107.3 (12.8) (62.4) Intersegment eliminations (2.0) 1.4 (3.4) N.M. (3.4) N.M. Total$ 758.5 $ 1,163.5 $ (405.0) (34.8) $ 13.3 1.8 61
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Nine months ended
September 30, Increase (decrease) Organic increase (decrease)
2021 2020 $ % $ %
in millions, except percentages
U.K. (a)$ 1,085.3 $ 1,819.6 $ (734.3) (40.4)$ (13.0) (1.3) Belgium 1,130.5 1,053.1 77.4 7.3 11.4 1.1 Switzerland 910.9 439.4 471.5 107.3 (12.1) (1.4) Ireland 160.7 143.2 17.5 12.2 8.0 5.6 Central and Other (15.8) (50.6) 34.8 68.8 (1.5) (3.0) Intersegment eliminations 1.6 1.4 0.2 N.M. 0.2 N.M. Total$ 3,273.2 $ 3,406.1 $ (132.9) (3.9)$ (7.0) (0.2) _______________ N.M. - Not Meaningful.
(a)Represents the Adjusted EBITDA of the
Adjusted EBITDA Margin
The following table sets forth the Adjusted EBITDA margins (Adjusted EBITDA divided by revenue) of each of our consolidated reportable segments:
Nine months ended
Three months ended September 30, September 30,
2021 2020 2021 2020
U.K. (a) N.A. 39.6 % 39.7 % 40.8 %
Belgium 48.9 % 49.2 % 49.1 % 49.0 %
Switzerland 39.8 % 49.0 % 36.5 % 47.2 %
Ireland 43.5 % 39.5 % 39.6 % 39.1 %
_______________
N.A. - Not Applicable.
(a)Represents the results of the
In addition to organic changes in the revenue, operating and SG&A expenses of our consolidated reportable segments, the Adjusted EBITDA margins presented above are impacted by acquisitions, as applicable. In this regard, the Sunrise Acquisition had a significant adverse impact on the Adjusted EBITDA margin inSwitzerland , as the acquired Sunrise mobile business generates a relatively lower Adjusted EBITDA margin than our legacy operations inSwitzerland . For discussion of the factors contributing to the changes in the Adjusted EBITDA margins of our consolidated reportable segments, see the analysis of our revenue included in Discussion and Analysis of our Reportable Segments above and the analysis of our expenses included in Discussion and Analysis of our Consolidated Operating Results below. 62 --------------------------------------------------------------------------------
Discussion and Analysis of our Consolidated Operating Results
Revenue
Our revenue by major category is set forth below:
Three months ended
September 30, Increase (decrease) Organic increase (decrease)
2021 2020 $ % $ %
in millions, except percentages
Residential revenue:
Residential fixed revenue (a):
Subscription revenue (b):
Broadband internet $ 366.4 $ 799.7 $ (433.3) (54.2) $ 11.0 3.1
Video 302.6 612.2 (309.6) (50.6) (14.6) (4.6)
Fixed-line telephony 111.4 328.2 (216.8) (66.1) (11.6) (9.5)
Total subscription revenue 780.4 1,740.1 (959.7) (55.2) (15.2) (1.9)
Non-subscription revenue 25.5 47.8 (22.3) (46.7) 1.5 6.1
Total residential fixed revenue 805.9 1,787.9 (982.0) (54.9) (13.7) (1.7)
Residential mobile revenue (c): Subscription revenue (b) 376.0 250.7 125.3 50.0 33.2 9.7 Non-subscription revenue 150.0 179.3 (29.3) (16.3) (30.9) (17.0) Total residential mobile revenue 526.0 430.0 96.0 22.3 2.3 0.4 Total residential revenue 1,331.9 2,217.9 (886.0) (39.9) (11.4) (0.9) B2B revenue (d): Subscription revenue 139.1 149.0 (9.9) (6.6) 6.3 4.8 Non-subscription revenue 207.4 341.0 (133.6) (39.2) 5.7 2.8 Total B2B revenue 346.5 490.0 (143.5) (29.3) 12.0 3.6 Other revenue (e) 223.0 137.5 85.5 62.2 13.9 9.8 Total$ 1,901.4 $ 2,845.4 $ (944.0) (33.2) $ 14.5 0.8 63
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Nine months ended
September 30, Increase (decrease) Organic increase (decrease)
2021 2020 $ % $ %
in millions, except percentages
Residential revenue:
Residential fixed revenue (a):
Subscription revenue (b):
Broadband internet $ 2,008.5 $ 2,333.7 $ (325.2) (13.9) $ 27.9 1.5
Video 1,537.5 1,799.2 (261.7) (14.5) (14.2) (1.0)
Fixed-line telephony 732.5 986.7 (254.2) (25.8) (74.7) (9.9)
Total subscription revenue 4,278.5 5,119.6 (841.1) (16.4) (61.0) (1.5)
Non-subscription revenue 127.9 134.7 (6.8) (5.0) 17.6 17.2
Total residential fixed revenue 4,406.4 5,254.3 (847.9) (16.1) (43.4) (1.0)
Residential mobile revenue (c): Subscription revenue (b) 1,271.3 713.4 557.9 78.2 48.7 4.2 Non-subscription revenue 627.2 454.0 173.2 38.1 (28.1) (4.5) Total residential mobile revenue 1,898.5 1,167.4 731.1 62.6 20.6 1.2 Total residential revenue 6,304.9 6,421.7 (116.8) (1.8) (22.8) (0.4) B2B revenue (d): Subscription revenue 482.1 403.5 78.6 19.5 23.9 5.6 Non-subscription revenue 1,011.3 996.0 15.3 1.5 38.6 4.2 Total B2B revenue 1,493.4 1,399.5 93.9 6.7 62.5 4.7 Other revenue (e) 592.2 412.5 179.7 43.6 52.0 12.0 Total$ 8,390.5 $ 8,233.7 $ 156.8 1.9 $ 91.7 1.2 _______________ (a)Residential fixed subscription revenue includes amounts received from subscribers for ongoing services and the recognition of deferred installation revenue over the associated contract period. Residential fixed non-subscription revenue includes, among other items, channel carriage fees, late fees and revenue from the sale of equipment.
(b)Residential subscription revenue from subscribers who purchase bundled services at a discounted rate is generally allocated proportionally to each service based on the standalone price for each individual service. As a result, changes in the standalone pricing of our fixed and mobile products or the composition of bundles can contribute to changes in our product revenue categories from period to period.
(c)Residential mobile subscription revenue includes amounts received from subscribers for ongoing services. Residential mobile non-subscription revenue includes, among other items, interconnect revenue and revenue from sales of mobile handsets and other devices. Residential mobile interconnect revenue was$46.3 million and$58.4 million during the three months endedSeptember 30, 2021 and 2020, respectively, and$181.8 million and$166.9 million during the nine months endedSeptember 30, 2021 and 2020, respectively. (d)B2B subscription revenue represents revenue from (i) services provided to SOHO subscribers and (ii) mobile services provided to medium and large enterprises. SOHO subscribers pay a premium price to receive expanded service levels along with broadband internet, video fixed-line telephony or mobile services that are the same or similar to the mass marketed products offered to our residential subscribers. A portion of the increase in our B2B subscription revenue is attributable to the conversion of certain residential subscribers to SOHO subscribers. B2B non-subscription revenue includes (a) revenue from business broadband internet, video, fixed-line telephony and data services offered to medium to large enterprises and, on a wholesale basis, to other operators and (b) revenue from long-term leases of portions of our network. 64 -------------------------------------------------------------------------------- (e)Other revenue includes, among other items, (i) revenue earned from theU.K. JV Services, the NL JV Services and the sale of customer premises equipment to the VodafoneZiggo JV, (ii) broadcasting revenue inBelgium andIreland and (iii) revenue earned from transitional and other services provided to various third parties. Total revenue. Our consolidated revenue increased (decreased) ($944.0 million ) or (33.2%) and$156.8 million or 1.9% during the three and nine months endedSeptember 30, 2021 , respectively, as compared to the corresponding periods in 2020. These changes include increases of$512.5 million and$1,487.6 million , respectively, attributable to the impact of the Sunrise Acquisition and decreases of$1,543.6 million and$2,009.9 million , respectively, attributable to the impact of theU.K. JV Transaction. On an organic basis, our consolidated revenue increased$14.5 million or 0.8% and$91.7 million or 1.2%, respectively.
Residential revenue. The details of the decreases in our consolidated
residential revenue during the three and nine months ended
Three-month Nine-month
period period
in millions
Increase (decrease) in residential fixed subscription revenue due to change in: Average number of customers
$ (15.7) $ 5.6 ARPU 0.5 (66.6) Increase in residential fixed non-subscription revenue 1.5 17.6 Total decrease in residential fixed revenue (13.7) (43.4) Increase in residential mobile subscription revenue 33.2 48.7 Decrease in residential mobile non-subscription revenue (30.9) (28.1) Total organic decrease in residential revenue (11.4) (22.8) Impact of acquisitions and dispositions (878.8) (484.3) Impact of FX 4.2 390.3 Total decrease in residential revenue $
(886.0)
On an organic basis, our consolidated residential fixed subscription revenue decreased$15.2 million or 1.9% and$61.0 million or 1.5% during the three and nine months endedSeptember 30, 2021 , as compared to the corresponding periods in 2020, primarily attributable to decreases inSwitzerland and, for the nine-month comparison, theU.K. On an organic basis, our consolidated residential fixed non-subscription revenue increased$1.5 million or 6.1% and$17.6 million or 17.2% during the three and nine months endedSeptember 30, 2021 , respectively, as compared to the corresponding periods in 2020, primarily due to increases inSwitzerland and, for the nine-month comparison, theU.K. On an organic basis, our consolidated residential mobile subscription revenue increased$33.2 million or 9.7% and$48.7 million or 4.2% during the three and nine months endedSeptember 30, 2021 , respectively, as compared to the corresponding periods in 2020, primarily attributable to increases inSwitzerland . On an organic basis, our consolidated residential mobile non-subscription revenue decreased$30.9 million or 17.0% and$28.1 million or 4.5% during the three and nine months endedSeptember 30, 2021 , respectively, as compared to the corresponding periods in 2020, primarily due to the net effect of (i) decreases inSwitzerland andBelgium and (ii) for the nine-month comparison, an increase in theU.K. B2B revenue. On an organic basis, our consolidated B2B subscription revenue increased$6.3 million or 4.8% and$23.9 million or 5.6% during the three and nine months endedSeptember 30, 2021 , respectively, as compared to the corresponding periods in 2020, primarily attributable to increases inBelgium and, for the nine-month comparison, theU.K. On an organic basis, our consolidated B2B non-subscription revenue increased$5.7 million or 2.8% and$38.6 million or 4.2% during the three and nine months endedSeptember 30, 2021 , respectively, as compared to the corresponding periods in 2020, primarily due to increases inSwitzerland ,Belgium and, for the nine-month comparison, theU.K. 65 -------------------------------------------------------------------------------- Other revenue. On an organic basis, our consolidated other revenue increased$13.9 million or 9.8% and$52.0 million or 12.0% during the three and nine months endedSeptember 30, 2021 , respectively, as compared to the corresponding periods in 2020, primarily attributable to (i) higher broadcasting revenue inBelgium andIreland and (ii) increases in Central and Other related to revenue earned from the NL JV Services.
For additional information concerning the changes in our residential, B2B and other revenue, see Discussion and Analysis of our Reportable Segments above.
Programming and other direct costs of services
Programming and other direct costs of services include programming and copyright
costs, interconnect and access costs, costs of mobile handsets and other devices
and other direct costs related to our operations, including costs associated
with our transitional service agreements. Programming and copyright costs
represent a significant portion of our operating costs and are subject to rise
in future periods due to various factors, including (i) higher costs associated
with the expansion of our digital video content, including rights associated
with ancillary product offerings and rights that provide for the broadcast of
live sporting events and (ii) rate increases.
The details of our programming and other direct costs of services are as
follows:
Three months ended
September 30, Increase (decrease) Organic increase (decrease)
2021 2020 $ % $ %
in millions, except percentages
U.K. (a) $ - $ 478.3 $ (478.3) (100.0) $ - -
Belgium 170.0 167.2 2.8 1.7 1.6 1.0
Switzerland 254.4 63.9 190.5 298.1 (9.0) (3.4)
Ireland 35.1 34.4 0.7 2.0 0.2 0.7
Central and Other 62.1 48.2 13.9 28.8 1.9 3.9
Intersegment eliminations 0.8 (1.0) 1.8 N.M. 1.8 N.M.
Total $ 522.4 $ 791.0 $ (268.6) (34.0) $ (3.5) (0.7)
Nine months ended
September 30, Increase (decrease) Organic increase (decrease)
2021 2020 $ % $ %
in millions, except percentages
U.K. (a)$ 868.1 $ 1,384.5 $ (516.4) (37.3) $ 35.4 4.6 Belgium 518.3 498.5 19.8 4.0 (11.1) (2.2) Switzerland 801.0 204.8 596.2 291.1 (15.3) (2.0) Ireland 117.3 102.3 15.0 14.7 7.6 7.5 Central and Other 145.0 117.7 27.3 23.2 0.1 0.1 Intersegment eliminations (4.0) (2.8) (1.2) N.M. (1.2) N.M. Total$ 2,445.7 $ 2,305.0 $ 140.7 6.1 $ 15.5 0.7 _______________ N.M. - Not Meaningful.
(a)Represents the programming and other direct costs of the
66
--------------------------------------------------------------------------------
Our programming and other direct costs of services increased (decreased) ($268.6
million ) or (34.0%) and $140.7 million or 6.1% during the three and nine months
ended September 30, 2021 , respectively, as compared to the corresponding periods
in 2020. These changes include increases of $199.1 million and $577.5 million ,
respectively, attributable to the impact of the Sunrise Acquisition and
decreases of $478.3 million and $623.2 million , respectively, attributable to
the impact of the U.K. JV Transaction. On an organic basis, our programming and
other direct costs of services increased (decreased) ($3.5 million ) or (0.7%)
and $15.5 million or 0.7%, respectively. These changes include the following
factors:
•Increases in programming and copyright costs of $9.2 million or 2.4% and $49.5
million or 4.3%, respectively, primarily due to increases in the Belgium ,
Ireland and Switzerland and, for the nine-month comparison, the U.K.
attributable to higher costs for certain premium and/or basic content. The
higher costs in the U.K. for the nine-month comparison include an increase of
$14.1 million related to the net impact of credits received during the second
quarters of 2020 and 2021 in connection with (i) the pausing or cancellation of
certain sporting events due to the COVID-19 pandemic during 2020, which offset
the aforementioned revenue increases, and (ii) the loss of certain content;
•Decreases in interconnect and access costs of $3.0 million or 1.4% and $33.8
million or 5.5%, respectively, primarily due to the net effect of (i) lower
interconnect and mobile roaming costs, primarily due to decreases in Belgium and
Switzerland and, for the nine-month comparison, the U.K. , (ii) higher leased
tower costs in Switzerland and (iii) lower MVNO costs, primarily due to
decreases in Switzerland and, for the nine-month comparison, the U.K. Across all
of our markets, interconnect and mobile roaming costs have been impacted by
changes in usage per subscriber associated with factors such as lower travel and
the use of WiFi alternatives during the COVID-19 pandemic; and
•Decreases in mobile handset and other device costs of $13.2 million or 15.2%
and $11.8 million or 4.9%, respectively, primarily due to lower sales volumes in
Switzerland . In addition, the decrease for the nine-month comparison includes an
increase in costs in the U.K. driven by higher sales volumes and higher average
costs per handset sold.
Other operating expenses
Other operating expenses include network operations, customer operations, customer care, share-based compensation and other costs related to our operations. We do not include share-based compensation in the following discussion and analysis of the other operating expenses of our consolidated reportable segments as share-based compensation expense is not included in the performance measures of our consolidated reportable segments. Share-based compensation expense is separately discussed further below. The details of our other operating expenses are as follows:
Three months ended
September 30, Increase (decrease) Organic increase (decrease)
2021 2020 $ % $ %
in millions, except percentages
U.K. (a) $ -$ 252.3 $ (252.3) (100.0) $ - - Belgium 113.1 115.0 (1.9) (1.7) (2.7) (2.3) Switzerland 101.7 45.7 56.0 122.5 (1.4) (1.4) Ireland 22.5 24.7 (2.2) (8.9) (1.9) (8.1) Central and Other 41.5 16.5 25.0 151.5 18.1 109.7 Intersegment eliminations (0.9) (0.5) (0.4) N.M. (0.4) N.M. Total other operating expenses excluding share-based compensation expense 277.9 453.7 (175.8) (38.7) $ 11.7
4.4
Share-based compensation expense 1.6 2.5 (0.9) (36.0) Total$ 279.5 $ 456.2 $ (176.7) (38.7) 67
--------------------------------------------------------------------------------
Nine months ended
September 30, Increase (decrease) Organic increase (decrease)
2021 2020 $ % $ %
in millions, except percentages
U.K. (a)$ 405.9 $ 676.8 $ (270.9) (40.0) $ 12.1 3.4 Belgium 341.6 303.1 38.5 12.7 17.8 5.9 Switzerland 314.1 137.6 176.5 128.3 (2.7) (0.9) Ireland 71.0 69.9 1.1 1.6 (2.8) (4.0) Central and Other 84.1 56.8 27.3 48.1 18.2 32.0 Intersegment eliminations (1.5) 1.7 (3.2) N.M. (3.2) N.M. Total other operating expenses excluding share-based compensation expense 1,215.2 1,245.9 (30.7) (2.5) $ 39.4
3.6
Share-based compensation expense 10.4 4.8 5.6 116.7 Total$ 1,225.6 $ 1,250.7 $ (25.1) (2.0) _______________ N.M. - Not Meaningful.
(a)Represents the other operating expenses of the
Our other operating expenses (exclusive of share-based compensation expense) decreased$175.8 million or 38.7% and$30.7 million or 2.5% during the three and nine months endedSeptember 30, 2021 , respectively, as compared to the corresponding periods in 2020. These decreases include increases of$56.1 million and$162.5 million , respectively, attributable to the impact of the Sunrise Acquisition and decreases of$246.1 million and$307.6 million , respectively, attributable to the impact of theU.K. JV Transaction. On an organic basis, our other operating expenses increased$11.7 million or 4.4% and$39.4 million or 3.6%, respectively. These increases include the following factors: •Increases in personnel costs of$8.9 million or 7.2% and$23.6 million or 6.3%, respectively, primarily due to the net effect of (i) higher staffing levels, primarily in Central and Other,Switzerland ,Ireland and, for the nine-month comparison, theU.K. and (ii) higher average costs per employee resulting from the net effect of (a) increases inBelgium , (b) decreases in Central and Other and (c) for the nine-month comparison, an increase in theU.K. In addition, the increase in personnel costs during the nine-month comparison include lower costs due to higher capitalizable activities in theU.K. ; •Increases in core network and information technology-related costs of$3.5 million or 5.0% and$13.6 million or 6.8%, respectively, primarily due to the net effect of (i) higher information technology-related expenses, primarily in Central and Other and, for the nine-month comparison, theU.K. , (ii) for the three-month comparison, lower network maintenance costs, primarily in Central and Other, and (iii) for the nine-month comparison, higher network maintenance costs, primarily inSwitzerland ; and •An increase (decrease) in customer service costs of ($5.9 million ) or (9.8%) and$5.1 million or 3.0%, respectively. The decrease during the three-month comparison is due to lower call center costs primarily inBelgium ,Ireland andSwitzerland . The increase during the nine-month comparison is primarily due to higher call center costs in theU.K. andBelgium . The higher call center costs in theU.K. during the nine-month comparison are primarily due to the impact of lockdowns during the second quarter of 2020 associated with the COVID-19 pandemic, which prevented certain outsourced contract services from being performed during such period. 68 --------------------------------------------------------------------------------
SG&A expenses
SG&A expenses include human resources, information technology, general services, management, finance, legal, external sales and marketing costs, share-based compensation and other general expenses. We do not include share-based compensation in the following discussion and analysis of the SG&A expenses of our consolidated reportable segments as share-based compensation expense is not included in the performance measures of our consolidated reportable segments. Share-based compensation expense is separately discussed further below.
The details of our SG&A expenses are as follows:
Three months ended
September 30, Increase (decrease) Organic increase (decrease)
2021 2020 $ % $ %
in millions, except percentages
U.K. (a) $ - $ 202.1 $ (202.1) (100.0) $ - -
Belgium 103.2 97.0 6.2 6.4 5.5 5.7
Switzerland 143.3 51.0 92.3 181.0 (9.9) (6.5)
Ireland 19.3 17.4 1.9 10.9 1.6 9.3
Central and Other 76.3 74.7 1.6 2.1 (9.7) (13.0)
Intersegment eliminations 0.5 (5.0) 5.5 N.M. 5.5 N.M.
Total SG&A expenses excluding
share-based compensation expense 342.6 437.2 (94.6) (21.6) $ (7.0) (2.0)
Share-based compensation expense 56.4 101.9 (45.5) (44.7) Total$ 399.0 $ 539.1 $ (140.1) (26.0) Nine months ended September 30, Increase (decrease) Organic increase (decrease) 2021 2020 $ % $ % in millions, except percentages
U.K. (a)$ 377.1 $ 576.4 $ (199.3) (34.6) $ 28.6 9.0 Belgium 312.5 292.5 20.0 6.8 1.1 0.4 Switzerland 471.4 149.1 322.3 216.2 6.4 1.4 Ireland 57.2 50.8 6.4 12.6 2.8 5.5 Central and Other 245.4 223.0 22.4 10.0 (3.0) (1.3) Intersegment eliminations (7.2) (15.1) 7.9 N.M. 7.9 N.M. Total SG&A expenses excluding share-based compensation expense 1,456.4 1,276.7 179.7 14.1 $ 43.8
3.3
Share-based compensation expense 210.2 238.6 (28.4) (11.9) Total$ 1,666.6 $ 1,515.3 $ 151.3 10.0 _______________ N.M. - Not Meaningful.
(a)Represents the SG&A expenses of the
69
--------------------------------------------------------------------------------Supplemental SG&A expense information
Three months ended
September 30, Decrease Organic increase (decrease)
2021 2020 $ % $ %
in millions, except percentages
General and administrative (a) $ 274.2 $ 334.3 $ (60.1) (18.0) $ 6.8 2.7
External sales and marketing 68.4 102.9 (34.5) (33.5) (13.8) (16.9) Total$ 342.6 $ 437.2 $ (94.6) (21.6) $ (7.0) (2.0) Nine months ended September 30, Increase Organic increase (decrease) 2021 2020 $ % $ % in millions, except percentages General and administrative (a)$ 1,142.8 $ 1,003.5 $ 139.3 13.9 $ 52.4
5.2
External sales and marketing 313.6 273.2 40.4 14.8 (8.2) (2.7) Total$ 1,456.4 $ 1,276.7 $ 179.7 14.1 $ 44.2 3.3 _______________
(a)General and administrative expenses include all personnel-related costs within our SG&A expenses, including personnel-related costs associated with our sales and marketing function.
Our SG&A expenses (exclusive of share-based compensation expense) increased (decreased) ($94.6 million ) or (21.6%) and$179.7 million or 14.1% during the three and nine months endedSeptember 30, 2021 , respectively, as compared to the corresponding periods in 2020. These changes include increases of$102.1 million and$296.6 million , respectively, attributable to the impact of the Sunrise Acquisition and decreases of$197.8 million and$253.6 million , respectively, attributable to the impact of theU.K. JV Transaction. On an organic basis, our SG&A expenses increased (decreased) ($7.0 million ) or (2.0%) and$43.8 million or 3.3%, respectively. These changes include the following factors: •Increases in personnel costs of$9.1 million or 4.6% and$38.4 million or 6.4%, respectively, primarily at Central and Other, driven by the net effect of (i) higher average costs per employee, (ii) higher staffing levels, (iii) for the nine-month comparison, lower costs due to higher capitalizable activities and (iv) decreases in temporary personnel costs. In addition, the increase in personnel costs for the nine-month comparison include higher costs in theU.K. , primarily due to the net effect of (a) lower average costs per employee, (b) an increase in temporary personnel costs, (c) an increase in costs due to lower capitalizable activities, (d) higher incentive compensation costs and (e) lower staffing levels;
•Increases in core network and information technology-related costs of
•Decreases in external sales and marketing costs of$13.8 million or 16.9% and$8.2 million or 2.7%, respectively, primarily attributable to the net effect of (i) lower costs inSwitzerland andBelgium associated with (a) advertising campaigns and (b) third-party sales commissions and (ii) for the nine-month comparison, higher costs in theU.K. in each of these two expense categories. 70 --------------------------------------------------------------------------------
Share-based compensation expense
Our share-based compensation expense primarily relates to the share-based incentive awards issued byLiberty Global to its employees and employees of its subsidiaries. A summary of our aggregate share-based compensation expense is set forth below: Three months ended Nine months ended September 30, September 30, 2021 2020 2021 2020 in millions Liberty Global: Performance-based incentive awards (a)$ 11.9 $ 57.0 $ 50.3 $ 106.3 Non-performance based incentive awards (b) 31.4 27.8 116.2 93.9 Other (c) 7.8 6.9 22.2 19.1 Total Liberty Global 51.1 91.7 188.7 219.3 Other (d) 6.9 12.7 31.9 24.1 Total$ 58.0 $ 104.4 $ 220.6 $ 243.4 Included in: Other operating expense$ 1.6 $ 2.5 $ 10.4 $ 4.8 SG&A expense 56.4 101.9 210.2 238.6 Total$ 58.0 $ 104.4 $ 220.6 $ 243.4 _______________
(a)Includes share-based compensation expense related to (i) PSUs, (ii) our 2019 CEO Performance Award and (iii) our 2019 Challenge Performance Awards.
(b)InApril 2021 with respect to 2014 and 2015 grants andApril 2020 with respect to 2013 grants, the compensation committee of our board of directors approved the extension of the expiration dates of outstanding SARs and director options from a seven-year term to a ten-year term. Accordingly, the Black-Scholes fair values of the outstanding awards increased, resulting in the recognition of an aggregate incremental share-based compensation expense of$22.7 million and$18.9 million during the second quarters of 2021 and 2020, respectively. (c)Represents annual incentive compensation and defined contribution plan liabilities that have been or are expected to be settled withLiberty Global ordinary shares. In the case of the annual incentive compensation, shares have been or will be issued to senior management and key employees pursuant to a shareholding incentive program. The shareholding incentive program allows these employees to elect to receive up to 100% of their annual incentive compensation in ordinary shares ofLiberty Global in lieu of cash. In addition, the 2021 amounts include compensation expense related to the 2021 Ventures Incentive Plan.
(d)Amounts primarily relate to share-based compensation expense associated with Telenet's share-based incentive awards.
For additional information regarding our share-based compensation expense, see note 13 to our condensed consolidated financial statements.
71
--------------------------------------------------------------------------------Depreciation and amortization expense
Our depreciation and amortization expense was$582.3 million and$1,744.8 million for the three and nine months endedSeptember 30, 2021 , respectively, and$432.0 million and$1,710.1 million for the three and nine months endedSeptember 30, 2020 , respectively. Excluding the effects of FX, depreciation and amortization expense increased (decreased)$144.5 million or 33.4% and ($54.8 million ) or (3.2%) during the three and nine months endedSeptember 30, 2021 , respectively, as compared to the corresponding periods in 2020. These changes are primarily due to the net effect of (i) for the nine-month period, a decrease in theU.K. of$571.9 million as a result of the held-for-sale presentation of theU.K. JV Entities effectiveMay 7, 2020 , (ii) increases due to the Sunrise Acquisition, (iii) increases associated with property and equipment additions related to the installation of customer premises equipment, the expansion and upgrade of our networks and other capital initiatives, primarily in Central and Other,Belgium andSwitzerland , and (iv) decreases associated with certain assets becoming fully depreciated, primarily in Central and Other,Belgium andSwitzerland . For information regarding the held-for-sale presentation of theU.K. JV Entities prior to the completion of theU.K. JV Transaction, see note 4 to our condensed consolidated financial statements.
Impairment, restructuring and other operating items, net
We recognized impairment, restructuring and other operating items, net, of$17.2 million and$68.4 million during the three and nine months endedSeptember 30, 2021 , respectively, and$16.7 million and$46.5 million during the three and nine months endedSeptember 30, 2020 , respectively. The amounts for the 2021 periods include (i) restructuring charges of$2.4 million and$55.0 million , respectively, including$50.4 million of employee severance and termination costs during the nine-month period related to certain reorganization activities, primarily inSwitzerland , (ii) direct acquisition and disposition costs of$12.3 million and$41.7 million , respectively, related to the formation of the VMED O2 JV, and (iii) a$38.0 million gain in Central and Other during the second quarter of 2021 associated with a provision release related to a legal contingency. The amounts for the 2020 periods include (i) a$43.8 million gain inBelgium during the third quarter associated with the disposal of certain content assets and liabilities, (ii) restructuring charges of$5.2 million and$41.8 million , respectively, including$4.0 million and$32.3 million , respectively, of employee severance and termination costs related to certain reorganization activities, primarily inSwitzerland , theU.K. and Central and Other, (iii) direct acquisition and disposition costs of$12.9 million and$32.8 million , respectively, primarily related to the formation of the VMED O2 JV, and (iv) impairment charges of$5.5 million and$11.6 million , respectively, primarily inBelgium and the U.K. If , among other factors, (i) our equity values were to decline or (ii) the adverse impacts of economic, competitive, regulatory or other factors were to cause our results of operations or cash flows to be worse than anticipated, we could conclude in future periods that impairment charges are required in order to reduce the carrying values of our goodwill and, to a lesser extent, other long-lived assets. Any such impairment charges could be significant.
Interest expense
We recognized interest expense of$140.9 million and$748.1 million during the three and nine months endedSeptember 30, 2021 , respectively, and$279.3 million and$873.5 million during the three and nine months endedSeptember 30, 2020 , respectively. Excluding the effects of FX, interest expense decreased$139.2 million or 49.8% and$176.5 million or 20.2% during the three and nine months endedSeptember 30, 2021 , respectively, as compared to the corresponding periods in 2020. These decreases are primarily attributable to lower (i) weighted average interest rates and (ii) average outstanding debt balances, as decreases related to theU.K. JV Transaction were only partially offset by borrowings used to fund the Sunrise Acquisition. For additional information regarding our outstanding indebtedness, see note 9 to our condensed consolidated financial statements. It is possible that the interest rates on (i) any new borrowings could be higher than the current interest rates on our existing indebtedness and (ii) our variable-rate indebtedness could increase in future periods. As further discussed in note 6 to our condensed consolidated financial statements and under Quantitative and Qualitative Disclosures about Market Risk below, we use derivative instruments to manage our interest rate risks. 72 --------------------------------------------------------------------------------
Realized and unrealized gains (losses) on derivative instruments, net
Our realized and unrealized gains or losses on derivative instruments include
(i) unrealized changes in the fair values of our derivative instruments that are
non-cash in nature until such time as the derivative contracts are fully or
partially settled and (ii) realized gains or losses upon the full or partial
settlement of the derivative contracts. The details of our realized and
unrealized gains (losses) on derivative instruments, net, are as follows:
Three months ended Nine months ended
September 30, September 30,
2021 2020 2021 2020
in millions
Cross-currency and interest rate derivative
contracts (a) $ 170.9 $ (755.4) $ 658.0 $ (222.5)
Equity-related derivative instruments:
ITV Collar - 82.9 (11.8) 433.2
Other 50.8 (5.8) 86.1 21.5
Total equity-related derivative instruments (b) 50.8 77.1 74.3 454.7
Foreign currency forward and option contracts (22.4) (39.2) (27.1) (31.8)
Other - - 2.2 -
Total $ 199.3 $ (717.5) $ 707.4 $ 200.4
_______________
(a)The results for the 2021 periods are attributable to net gains associated
with changes in (i) certain market interest rates and (ii) the relative value of
certain currencies. In addition, the results for the 2021 periods include net
losses of $34.0 million and $34.8 million , respectively, resulting from changes
in our credit risk valuation adjustments. The results for the 2020 periods are
attributable to the net effect of (a) net losses associated with changes in the
relative value of certain currencies and (b) a net loss for the three-month
period and a net gain for the nine-month period associated with changes in
certain market interest rates. In addition, the results for the 2020 periods
include net gains of $222.6 million and $294.3 million , respectively, resulting
from changes in our credit risk valuation adjustments.
(b)The recurring fair value measurements of our equity-related derivative instruments are based on Black-Scholes pricing models.
For additional information concerning our derivative instruments, see notes 6
and 7 to our condensed consolidated financial statements and Part I, Item 3.
Quantitative and Qualitative Disclosures about Market Risk below.
73
--------------------------------------------------------------------------------Foreign currency transaction gains (losses), net
Our foreign currency transaction gains or losses primarily result from the
remeasurement of monetary assets and liabilities that are denominated in
currencies other than the underlying functional currency of the applicable
entity. Unrealized foreign currency transaction gains or losses are computed
based on period-end exchange rates and are non-cash in nature until such time as
the amounts are settled. The details of our foreign currency transaction gains
(losses), net, are as follows:
Three months ended Nine months ended
September 30, September 30,
2021 2020 2021 2020
in millions
Intercompany payables and receivables denominated in a
currency other than the entity's functional currency (a)
(188.5) 132.8 (275.5) 162.2
24.0 160.2 222.1 (189.2)
Cash and restricted cash denominated in a currency other than the entity's functional currency
(1.1) (32.1) (106.3) (52.1)
Euro-denominated debt issued by British pound sterling functional currency entities
(24.1) - - 30.5
British pound sterling-denominated debt issued by a
- - - 88.9
Other 1.3 17.4 9.0 (8.6)
Total $ 422.4 $ (754.6) $ 857.6 $ (836.3)
_______________
(a)Amounts primarily relate to (i) loans between certain of our non-operating
and operating subsidiaries in Europe , which generally are denominated in the
currency of the applicable operating subsidiary and (ii) loans between certain
of our non-operating subsidiaries in the U.S. and Europe .
74
--------------------------------------------------------------------------------Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net
Our realized and unrealized gains or losses due to changes in fair values of
certain investments and debt include unrealized gains or losses associated with
changes in fair values that are non-cash in nature until such time as these
gains or losses are realized through cash transactions. For additional
information regarding our investments, fair value measurements and debt, see
notes 5, 7 and 9, respectively, to our condensed consolidated financial
statements. The details of our realized and unrealized gains (losses) due to
changes in fair values of certain investments and debt, net, are as follows:
Three months ended Nine months ended
September 30, September 30,
2021 2020 2021 2020
in millions
Investments:
Univision $ 5.9 $ - $ 161.3 $ -
Plume 78.7 - 133.8 29.6
Skillz (104.6) (0.1) (83.3) 45.3
Aviatrix 42.6 - 65.4 -
Lacework - - 48.8 -
EdgeConneX 2.7 - 20.5 -
Lionsgate (39.6) 13.1 18.0 (7.8)
ITV (118.6) (20.5) (9.1) (450.2)
Other, net 23.5 (15.1) 17.9 (25.9)
Total investments (109.4) (22.6) 373.3 (409.0)
Debt - 1.1 - 10.0
Total $ (109.4) $ (21.5) $ 373.3 $ (399.0) Losses on debt extinguishment, net
We recognized net losses on debt extinguishment of nil and$0.3 million during the three months endedSeptember 30, 2021 and 2020, respectively, and$90.6 million and$220.4 million during the nine months endedSeptember 30, 2021 and 2020, respectively. The loss during the nine months endedSeptember 30, 2021 is attributable to (i) the write-off of$77.7 million of unamortized deferred financing costs and discounts and (ii) the payment of$12.9 million of redemption premiums, all of which occurred during the second quarter. The loss during the nine months endedSeptember 30, 2020 is primarily attributable to (i) the payment of$188.2 million of aggregate redemption premiums and (ii) the write-off of$35.2 million of aggregate net unamortized deferred financing costs, discounts and premiums during the first and second quarters.
For additional information concerning our losses on debt extinguishment, see note 9 to our condensed consolidated financial statements.
75
--------------------------------------------------------------------------------Share of results of affiliates, net
The following table sets forth the details of our share of results of
affiliates, net:
Three months ended Nine months ended
September 30, September 30,
2021 2020 2021 2020
in millions
All3Media $ (3.4) $ (0.3) $ (18.2) $ (40.1)
VMED O2 JV (a) (10.4) - (10.7) -
VodafoneZiggo JV (b) (2.6) (6.8) 6.8 (34.9)
Formula E (10.9) (17.4) (6.5) (16.7)
Other, net (1.9) (2.6) (7.0) (7.4)
Total $ (29.2) $ (27.1) $ (35.6) $ (99.1)
_______________
(a)Represents our share of the results of operations of the VMED O2 JV beginning
June 1, 2021 , which includes 100% of the share-based compensation expense
associated with Liberty Global awards held by VMED O2 JV employees who were
formerly employees of Liberty Global , as these awards remain our responsibility.
The summarized results of operations of the VMED O2 JV are set forth below:
Period from June 1,
Three months ended 2021 through
September 30, 2021 September 30, 2021
in millions
Revenue $ 3,614.0 $ 4,822.5
Adjusted EBITDA $ 1,180.3 $ 1,591.3
Operating income $ 82.1 $ 90.7
Non-operating income (expense) (1) $ (21.1) $ (195.7)
Net earnings (loss) $ 31.9 $ (2.7)
_______________
(1)Includes interest expense of
(b)Represents (i) interest income of$14.7 million ,$12.8 million ,$41.7 million and$34.4 million , respectively, representing 100% of the interest earned on the VodafoneZiggo JV Receivables and (ii) our share of the results of operations of the VodafoneZiggo JV. The summarized results of operations of the VodafoneZiggo JV are set forth below: Three months ended Nine months ended September 30, September 30, 2021 2020 2021 2020 in millions Revenue$ 1,206.1 $ 1,166.7 $ 3,638.4 $ 3,345.4 Adjusted EBITDA$ 578.1 $ 559.1 $ 1,713.4 $ 1,593.4 Operating income$ 84.2 $ 124.2 $ 270.9 $ 275.4 Non-operating expense (1)$ (117.1) $ (155.8) $ (344.8) $ (333.9) Net loss$ (24.7) $ (25.6) $ (56.3) $ (111.3) _______________
(1)Includes interest expense of
76
--------------------------------------------------------------------------------
Gain (adjustment to gain) on
In connection with theU.K. JV Transaction, we recognized a pre-tax gain during the second quarter of 2021 of$11,138.0 million , net of the recognition of a cumulative foreign currency translation loss of$1,198.6 million . During the third quarter of 2021, we recorded a measurement period adjustment that reduced the pre-tax gain by$347.3 million . For additional information, see note 4 to our condensed consolidated financial statements.
Gain on Atlas Edge JV Transactions
In connection with the Atlas Edge JV Transactions, we recognized a pre-tax gain during the third quarter of 2021 of$213.7 million , net of the recognition of a cumulative foreign currency translation loss of$1.8 million . For additional information, see note 4 to our condensed consolidated financial statements.
Other income, net
We recognized other income, net, of$8.2 million and$5.4 million for the three months endedSeptember 30, 2021 and 2020, respectively, and$25.6 million and$67.4 million for the nine months endedSeptember 30, 2021 and 2020, respectively. These amounts include (i) credits related to the non-service components of our net periodic pension costs of$5.7 million and$4.6 million during the three-month periods, respectively, and$21.9 million and$13.4 million during the nine-month periods, respectively, (ii) interest and dividend income of$2.4 million and$8.1 million during the three-month periods, respectively, and$9.4 million and$50.5 million during the nine-month periods, respectively, and (iii) for the nine months endedSeptember 30, 2020 , a gain of$15.3 million related to certain assets that were contributed to a joint venture.
Income tax benefit (expense)
We recognized income tax benefit (expense) of (
The income tax expense during the three months endedSeptember 30, 2021 differs from the expected income tax expense of$60.4 million (based on theU.K. statutory income tax rate of 19.0%), primarily due to the positive impact of (i) certain permanent differences between the financial and tax accounting treatment of items associated with investments in subsidiaries, including a non-taxable gain associated with the Atlas Edge JV Transactions and (ii) non-deductible or non-taxable foreign currency exchange results. The positive impact of these items was partially offset by the negative impact of the measurement period adjustment to the non-taxable gain associated with theU.K. JV Transaction. The income tax benefit during the three months endedSeptember 30, 2020 differs from the expected income tax benefit of$218.7 million (based on theU.K. statutory income tax rate of 19.0%), primarily due to the net negative impact of (i) non-deductible or non-taxable foreign currency exchange results and (ii) an increase in valuation allowances. The net negative impact of these items was partially offset by the net positive impact of an increase in deferred tax assets in theU.K. due to an enacted change in tax law.
We recognized income tax benefit (expense) of (
The income tax expense during the nine months endedSeptember 30, 2021 differs from the expected income tax expense of$2,533.3 million (based on theU.K. statutory income tax rate of 19.0%), primarily due to the positive impact of the non-taxable gain associated with theU.K. JV Transaction. The income tax benefit during the nine months endedSeptember 30, 2020 differs from the expected income tax benefit of$143.3 million (based on theU.K. statutory income tax rate of 19.0%), primarily due to the net positive impact of (i) an increase in deferred tax assets in theU.K. due to an enacted change in tax law, (ii) the recognition of previously unrecognized tax benefits and (iii) tax benefits associated with technology innovation incentives. The net positive impact of these items was partially offset by the net negative impact of (a) an increase in valuation allowances and (b) non-deductible or non-taxable foreign currency exchange results.
For additional information concerning our income taxes, see note 11 to our condensed consolidated financial statements.
77
--------------------------------------------------------------------------------Earnings (loss) from continuing operations
During the three months endedSeptember 30, 2021 and 2020, we reported earnings (loss) from continuing operations of$315.6 million and ($985.6 million ), respectively, consisting of (i) operating income of$101.0 million and$643.8 million , respectively, (ii) net non-operating expense of$216.8 million and$1,794.9 million , respectively, and (iii) income tax benefit of$2.2 million and$165.5 million , respectively. During the nine months endedSeptember 30, 2021 and 2020, we reported earnings (loss) from continuing operations of$12,889.2 million and ($502.2 million ), respectively, consisting of (i) operating income of$1,239.4 million and$1,406.1 million , respectively, (ii) net non-operating income (expense) of$12,094.0 million and ($2,160.5 million ), respectively, and (iii) income tax benefit (expense) of ($444.2 million ) and$252.2 million , respectively. Gains or losses associated with (i) changes in the fair values of derivative instruments, (ii) movements in foreign currency exchange rates and (iii) the disposition of assets and changes in ownership are subject to a high degree of volatility and, as such, any gains from these sources do not represent a reliable source of income. In the absence of significant gains in the future from these sources or from other non-operating items, our ability to achieve earnings is largely dependent on our ability to increase our aggregate operating income to a level that more than offsets the aggregate amount of our (a) interest expense, (b) other non-operating expenses and (c) income tax expense. Due largely to the fact that we seek to maintain our debt at levels that provide for attractive equity returns, as discussed below under Material Changes in Financial Condition - Capitalization, we expect we will continue to report significant levels of interest expense for the foreseeable future. For information concerning our expectations with respect to trends that may affect certain aspects of our operating results in future periods, see the discussion under Overview above. For information concerning the reasons for changes in specific line items in our condensed consolidated statements of operations, see Discussion and Analysis of our Reportable Segments and Discussion and Analysis of our Consolidated Operating Results above.
Earnings from discontinued operations, net of taxes
We reported earnings from discontinued operations, net of taxes, of$3.1 million and$12.0 million during the three months endedSeptember 30, 2021 and 2020, respectively, and$44.3 million and$42.5 million during the nine months endedSeptember 30, 2021 and 2020, respectively, related to the results of UPC Poland. For additional information, see note 4 to our condensed consolidated financial statements.
Net earnings attributable to noncontrolling interests
Net earnings attributable to noncontrolling interests increased (decreased)$7.9 million and ($5.0 million ) during the three and nine months endedSeptember 30, 2021 , respectively, as compared to the corresponding periods in 2020, primarily attributable to the results of operations of Telenet. 78 --------------------------------------------------------------------------------
Material Changes in Financial Condition
Sources and Uses of Cash
We are a holding company that is dependent on the capital resources of our subsidiaries to satisfy our liquidity requirements at the corporate level. Each of our significant operating subsidiaries is separately financed within one of our three subsidiary "borrowing groups." These borrowing groups include the respective restricted parent and subsidiary entities withinUPC Holding , Telenet and VM Ireland. Although our borrowing groups typically generate cash from operating activities, the terms of the instruments governing the indebtedness of these borrowing groups may restrict our ability to access the liquidity of these subsidiaries. In addition, our ability to access the liquidity of these and other subsidiaries may be limited by tax and legal considerations, the presence of noncontrolling interests and other factors.
Cash and cash equivalents
The details of theU.S. dollar equivalent balances of our consolidated cash and cash equivalents atSeptember 30, 2021 are set forth in the following table (in millions): Cash and cash equivalents held by:Liberty Global and unrestricted subsidiaries:Liberty Global (a)$ 17.0 Unrestricted subsidiaries (b) 478.6 TotalLiberty Global and unrestricted subsidiaries 495.6 Borrowing groups (c): Telenet 224.8UPC Holding 40.8 VM Ireland 5.0 Total borrowing groups 270.6 Total cash and cash equivalents$ 766.2
_______________
(a)Represents the amount held by
(b)Represents the aggregate amount held by subsidiaries that are outside of our borrowing groups.
(c)Represents the aggregate amounts held by the parent entity and restricted subsidiaries of our borrowing groups. Liquidity ofLiberty Global and its unrestricted subsidiaries The$17.0 million of cash and cash equivalents held byLiberty Global and, subject to certain tax and legal considerations, the$478.6 million of aggregate cash and cash equivalents held by unrestricted subsidiaries, together with the$2,942.6 million of investments held under SMAs, represented available liquidity at the corporate level atSeptember 30, 2021 . Our remaining cash and cash equivalents of$270.6 million atSeptember 30, 2021 were held by our borrowing groups, as set forth in the table above. As noted above, various factors may limit our ability to access the cash of our borrowing groups. For information regarding certain limitations imposed by our subsidiaries' debt instruments atSeptember 30, 2021 , see note 9 to our condensed consolidated financial statements. Our current sources of corporate liquidity include (i) cash and cash equivalents held byLiberty Global and, subject to certain tax and legal considerations,Liberty Global's unrestricted subsidiaries, (ii) investments held under SMAs, (iii) interest and dividend income received on our and, subject to certain tax and legal considerations, our unrestricted subsidiaries' cash and cash equivalents and investments, including dividends received from the VodafoneZiggo JV or the VMED O2 JV, (iv) cash received with respect to transitional and other services provided to various third parties and (v) interest payments received with respect to the VodafoneZiggo JV Receivables. 79 -------------------------------------------------------------------------------- From time to time,Liberty Global and its unrestricted subsidiaries may also receive (i) proceeds in the form of distributions or loan repayments fromLiberty Global's borrowing groups or affiliates (including amounts from the VodafoneZiggo JV or the VMED O2 JV) upon (a) the completion of recapitalizations, refinancings, asset sales or similar transactions by these entities or (b) the accumulation of excess cash from operations or other means, (ii) proceeds upon the disposition of investments and other assets ofLiberty Global and its unrestricted subsidiaries, such as the pending sale of UPCPoland , and (iii) proceeds in connection with the incurrence of debt byLiberty Global or its unrestricted subsidiaries or the issuance of equity securities byLiberty Global , including equity securities issued to satisfy subsidiary obligations. No assurance can be given that any external funding would be available toLiberty Global or its unrestricted subsidiaries on favorable terms, or at all. AtSeptember 30, 2021 , our consolidated cash and cash equivalents balance included$749.2 million held by entities that are domiciled outside of theU.K. Based on our assessment of our ability to access the liquidity of our subsidiaries on a tax efficient basis and our expectations with respect to our corporate liquidity requirements, we do not anticipate that tax considerations will adversely impact our corporate liquidity over the next 12 months. Our ability to access the liquidity of our subsidiaries on a tax efficient basis is a consideration in assessing the extent of our share repurchase program. In addition, the amount of cash we receive from our subsidiaries to satisfyU.S. dollar-denominated liquidity requirements is impacted by fluctuations in exchange rates, particularly with regard to the translation of British pounds sterling and euros intoU.S. dollars. In this regard, the strengthening (weakening) of theU.S. dollar against these currencies will result in decreases (increases) in theU.S. dollars received from the applicable subsidiaries to fund the repurchase of our equity securities and otherU.S. dollar-denominated liquidity requirements. Our corporate liquidity requirements include corporate general and administrative expenses and, from time to time, cash requirements in connection with (i) the repayment of third-party and intercompany debt, (ii) the satisfaction of contingent liabilities, (iii) acquisitions, (iv) the repurchase of equity and debt securities, (v) other investment opportunities, (vi) any funding requirements of our subsidiaries and affiliates or (vii) income tax payments. In addition, our parent entity uses available liquidity to make interest and principal payments on notes payable to certain of our unrestricted subsidiaries (aggregate outstanding principal of$10.9 billion atSeptember 30, 2021 with varying maturity dates). During the nine months endedSeptember 30, 2021 , the aggregate amount of our share repurchases was$1,026.8 million , including direct acquisition costs. AtSeptember 30, 2021 , the remaining amount authorized for share repurchases during the remainder of 2021 was$378.7 million . For information regarding our share repurchase authorization for 2022 and 2023, see note 12 to our condensed consolidated financial statements.
Liquidity of borrowing groups
The cash and cash equivalents of our borrowing groups are detailed in the table above. In addition to cash and cash equivalents, the primary sources of liquidity of our borrowing groups are cash provided by operations and borrowing availability under their respective debt instruments. For the details of the borrowing availability of our borrowing groups atSeptember 30, 2021 , see note 9 to our condensed consolidated financial statements. The aforementioned sources of liquidity may be supplemented in certain cases by contributions and/or loans fromLiberty Global and its unrestricted subsidiaries. The liquidity of our borrowing groups generally is used to fund (i) property and equipment additions, (ii) debt service requirements and (iii) income tax payments, as well as to settle certain obligations that are not included on ourSeptember 30, 2021 condensed consolidated balance sheet. In this regard, we have significant commitments related to (a) programming, studio output and sports rights contracts, (b) certain operating costs associated with our networks and (c) purchase obligations associated with customer premises equipment and certain service-related commitments. These obligations are expected to represent a significant liquidity requirement of our borrowing groups, the majority of which is due over the next 12 to 24 months. For additional information regarding our commitments, see note 15 to our condensed consolidated financial statements. From time to time, our borrowing groups may also require liquidity in connection with (i) acquisitions and other investment opportunities, (ii) loans toLiberty Global , (iii) capital distributions toLiberty Global and other equity owners or (iv) the satisfaction of contingent liabilities. No assurance can be given that any external funding would be available to our borrowing groups on favorable terms, or at all.
For additional information regarding our consolidated cash flows, see the discussion under Condensed Consolidated Statements of Cash Flows below.
80
--------------------------------------------------------------------------------Capitalization
We seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk. In this regard, we generally seek to cause our operating subsidiaries to maintain their debt at levels that result in a consolidated debt balance (measured using subsidiary debt figures at swapped foreign currency exchange rates, consistent with the covenant calculation requirements of our subsidiary debt agreements) that is between four and five times our consolidated Adjusted EBITDA, although the timing of our acquisitions and financing transactions and the interplay of average and spot foreign currency rates may impact this ratio. Consolidated Adjusted EBITDA is a non-GAAP measure, which investors should view as a supplement to, and not a substitute for, GAAP measures of performance included in our condensed consolidated statements of operations. Our ability to service or refinance our debt and to maintain compliance with the leverage covenants in the credit agreements and indentures of our borrowing groups is dependent primarily on our ability to maintain or increase the Adjusted EBITDA of our operating subsidiaries and to achieve adequate returns on our property and equipment additions and acquisitions. In addition, our ability to obtain additional debt financing is limited by the incurrence-based leverage covenants contained in the various debt instruments of our borrowing groups. For example, if the Adjusted EBITDA of one of our borrowing groups were to decline, our ability to obtain additional debt could be limited. Under our credit facilities and senior and senior secured notes there is no cross-default risk between subsidiary borrowing groups in the event that one or more of our borrowing groups were to experience significant declines in their Adjusted EBITDA to the extent they were no longer able to service their debt obligations. Any mandatory prepayment events or events of default that may occur would only impact the relevant borrowing group in which these events occur and do not allow for any recourse to other borrowing groups orLiberty Global plc . Our credit facilities and senior and senior secured notes require that certain members of the relevant borrowing group guarantee the payment of all sums payable thereunder and such group members are required to grant first-ranking security over their shares or, in certain borrowing groups, over substantially all of their assets to secure the payment of all sums payable thereunder. AtSeptember 30, 2021 , each of our borrowing groups was in compliance with its debt covenants. In addition, we do not anticipate any instances of non-compliance with respect to the debt covenants of our borrowing groups that would have a material adverse impact on our liquidity during the next 12 months. AtSeptember 30, 2021 , the outstanding principal amount of our consolidated debt, together with our finance lease obligations, aggregated$15.1 billion , including$1.0 billion that is classified as current on our condensed consolidated balance sheet and$13.8 billion that is not due until 2027 or thereafter. All of our consolidated debt and finance lease obligations have been borrowed or incurred by our subsidiaries atSeptember 30, 2021 . We believe we have sufficient resources to repay or refinance the current portion of our debt and finance lease obligations and to fund our foreseeable liquidity requirements during the next 12 months. However, as our maturing debt grows in later years, we anticipate we will seek to refinance or otherwise extend our debt maturities. No assurance can be given that we will be able to complete these refinancing transactions or otherwise extend our debt maturities. In this regard, it is not possible to predict how political and economic conditions (including with respect to the COVID-19 pandemic), sovereign debt concerns or any adverse regulatory developments could impact the credit and equity markets we access and, accordingly, our future liquidity and financial position. Our ability to access debt financing on favorable terms, or at all, could be adversely impacted by (i) the financial failure of any of our counterparties, which could (a) reduce amounts available under committed credit facilities and (b) adversely impact our ability to access cash deposited with any failed financial institution and (ii) tightening of the credit markets. In addition, any weakness in the equity markets could make it less attractive to use our shares to satisfy contingent or other obligations, and sustained or increased competition, particularly in combination with adverse economic or regulatory developments, could have an unfavorable impact on our cash flows and liquidity.
For additional information concerning our debt and finance lease obligations, see notes 9 and 10, respectively, to our condensed consolidated financial statements.
81
--------------------------------------------------------------------------------Condensed Consolidated Statements of Cash Flows
General. Our cash flows are subject to significant variations due to FX.
Summary. Our condensed consolidated statements of cash flows for our continuing operations for the nine months endedSeptember 30, 2021 and 2020 are summarized as follows:
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