e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
June 30, 2007
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number
000-51360
Liberty Global, Inc.
(Exact name of Registrant as
specified in its charter)
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State of Delaware
(State or other
jurisdiction of
incorporation or organization)
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20-2197030
(I.R.S. Employer
Identification No.)
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12300 Liberty Boulevard
Englewood, Colorado
(Address of principal
executive offices)
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80112
(Zip Code)
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Registrants telephone number, including area code:
(303) 220-6600
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months and (2) has been subject to such filing
requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act.
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Large
Accelerated Filer þ
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Accelerated
Filer o
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Non-Accelerated
Filer o
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Indicate by check mark whether the Registrant is a shell company
as defined in
Rule 12b-2
of the Exchange
Act. Yes o No þ
The number of outstanding shares of Liberty Global, Inc.s
common stock as of August 1, 2007 was:
Series A common stock 185,283,655 shares;
Series B common stock 7,282,683 shares; and
Series C common stock 191,407,215 shares.
LIBERTY
GLOBAL, INC.
INDEX
1
LIBERTY
GLOBAL, INC.
(See
note 1)
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
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June 30,
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December 31,
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2007
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2006
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amounts in millions
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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2,514.6
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$
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1,880.5
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Trade receivables, net
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726.0
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726.5
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Other receivables, net
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97.9
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110.3
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Restricted cash (note 7)
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31.5
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496.1
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Other investments (note 13)
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345.0
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Other current assets
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500.7
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349.1
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Total current assets
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4,215.7
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3,562.5
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Restricted cash (note 7)
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482.2
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Investments in affiliates,
accounted for using the equity method, and related receivables
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549.1
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1,062.7
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Other investments
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125.8
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477.6
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Property and equipment, net
(note 6)
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9,584.4
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8,136.9
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Goodwill (note 6)
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11,408.7
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9,942.6
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Franchise rights and other
intangible assets not subject to amortization
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180.6
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177.1
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Intangible assets subject to
amortization, net (note 6)
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2,115.1
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1,578.3
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Other assets, net
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996.6
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631.6
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Total assets
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$
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29,658.2
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$
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25,569.3
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
LIBERTY
GLOBAL, INC.
(See note 1)
CONDENSED
CONSOLIDATED BALANCE SHEETS (Continued)
(unaudited)
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June 30,
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December 31,
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2007
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2006
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amounts in millions
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LIABILITIES AND
STOCKHOLDERS EQUITY
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Current liabilities:
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Accounts payable
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$
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585.7
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$
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652.4
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Accrued liabilities and other
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1,274.7
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810.3
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Deferred revenue and advance
payments from subscribers and others
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746.8
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640.1
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Accrued interest
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163.0
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257.0
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Current portion of debt and
capital lease obligations (notes 5 and 7)
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767.7
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1,384.9
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Total current liabilities
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3,537.9
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3,744.7
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Long-term debt and capital lease
obligations (notes 5 and 7)
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14,988.7
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10,845.2
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Deferred tax liabilities
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408.5
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537.1
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Other long-term liabilities
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1,337.7
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1,283.7
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Total liabilities
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20,272.8
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16,410.7
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Commitments and contingencies
(notes 7 and 11)
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Minority interests in subsidiaries
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2,745.5
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1,911.5
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Stockholders equity
(note 8):
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Series A common stock,
$.01 par value. Authorized 500,000,000 shares; issued
and outstanding 185,036,607 and 196,896,880 shares,
respectively
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1.9
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2.0
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Series B common stock,
$.01 par value. Authorized 50,000,000 shares; issued
and outstanding 7,282,683 and 7,284,799 shares, respectively
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0.1
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0.1
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Series C common stock,
$.01 par value. Authorized 500,000,000 shares; issued
and outstanding 191,154,163 and 197,256,404 shares,
respectively
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1.9
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2.0
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Additional paid-in capital
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7,578.3
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8,093.5
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Accumulated deficit
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(1,162.3
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)
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(1,020.3
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)
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Accumulated other comprehensive
earnings, net of taxes
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220.0
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169.8
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Total stockholders equity
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6,639.9
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7,247.1
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Total liabilities and
stockholders equity
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$
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29,658.2
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$
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25,569.3
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
LIBERTY
GLOBAL, INC.
(See note 1)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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Three months ended
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Six months ended
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June 30,
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June 30,
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2007
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2006
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2007
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2006
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amounts in millions, except per share amounts
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Revenue (note 10)
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$
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2,180.6
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$
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1,590.8
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$
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4,286.6
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$
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3,081.3
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Operating costs and expenses:
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Operating (other than depreciation
and amortization) (including stock-based compensation of
$2.5 million, $1.1 million, $4.8 million and
$2.1 million, respectively) (notes 9 and 10)
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906.1
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690.1
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1,781.8
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1,326.2
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Selling, general and
administrative (SG&A) (including stock-based compensation
of $37.5 million, $18.2 million, $78.7 million
and $33.2 million, respectively) (notes 9 and 10)
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453.5
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352.5
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902.7
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684.5
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Depreciation and amortization
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610.2
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454.6
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1,204.2
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880.4
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Impairment, restructuring and
other operating charges, net
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0.6
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0.1
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5.9
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6.2
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1,970.4
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1,497.3
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3,894.6
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2,897.3
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Operating income
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210.2
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93.5
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392.0
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184.0
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Other income (expense):
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Interest expense (note 10)
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(226.3
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)
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(156.1
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)
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(459.3
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)
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(300.2
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)
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Interest and dividend income
(note 10)
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24.1
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20.3
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48.5
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36.0
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Share of results of affiliates, net
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9.5
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(1.0
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)
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23.1
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0.4
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Realized and unrealized gains
(losses) on financial and derivative instruments, net
(note 5)
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|
(74.3
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)
|
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|
(92.7
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)
|
|
|
(145.8
|
)
|
|
|
21.1
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Foreign currency transaction
gains, net
|
|
|
38.6
|
|
|
|
43.6
|
|
|
|
52.5
|
|
|
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82.2
|
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Losses on extinguishment of debt,
net
|
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|
(23.3
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)
|
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|
(26.7
|
)
|
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|
(23.3
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)
|
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|
(35.6
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)
|
Gains on disposition of assets, net
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|
|
|
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|
|
2.3
|
|
|
|
0.3
|
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|
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47.6
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Other expense, net
|
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|
(1.3
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)
|
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|
(6.1
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)
|
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(4.6
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)
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(6.2
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)
|
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|
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(253.0
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)
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|
(216.4
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)
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|
(508.6
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)
|
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|
(154.7
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)
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Earnings (loss) before income
taxes, minority interests and discontinued operations
|
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|
(42.8
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)
|
|
|
(122.9
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)
|
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|
(116.6
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)
|
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|
29.3
|
|
Income tax benefit (expense)
|
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|
60.9
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|
|
|
(28.6
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)
|
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54.6
|
|
|
|
(98.9
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)
|
Minority interests in earnings of
subsidiaries, net
|
|
|
(147.8
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)
|
|
|
(32.8
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)
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|
(203.8
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)
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(60.3
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)
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Loss from continuing operations
|
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(129.7
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)
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|
(184.3
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)
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(265.8
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)
|
|
|
(129.9
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)
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Discontinued operations
(note 4):
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Earnings from operations
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23.6
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|
|
|
|
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14.3
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Gain on disposal of discontinued
operations
|
|
|
|
|
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|
184.9
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|
|
|
|
|
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|
408.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
208.5
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|
|
|
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|
422.3
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Net earnings (loss)
|
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$
|
(129.7
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)
|
|
$
|
24.2
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|
$
|
(265.8
|
)
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|
$
|
292.4
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|
|
|
|
|
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Basic and diluted earnings (loss)
per common share (note 2):
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|
|
|
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|
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Continuing operations
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|
$
|
(0.34
|
)
|
|
$
|
(0.40
|
)
|
|
$
|
(0.69
|
)
|
|
$
|
(0.28
|
)
|
Discontinued operations
|
|
|
|
|
|
|
0.45
|
|
|
|
|
|
|
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.34
|
)
|
|
$
|
0.05
|
|
|
$
|
(0.69
|
)
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
LIBERTY
GLOBAL, INC.
(See note 1)
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(LOSS)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
Net earnings (loss)
|
|
$
|
(129.7
|
)
|
|
$
|
24.2
|
|
|
$
|
(265.8
|
)
|
|
$
|
292.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings
(loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments
|
|
|
(12.8
|
)
|
|
|
247.7
|
|
|
|
49.2
|
|
|
|
316.3
|
|
Reclassification adjustment for
foreign currency translation gains included in net earnings
(loss)
|
|
|
|
|
|
|
(4.0
|
)
|
|
|
|
|
|
|
(2.3
|
)
|
Unrealized gains (losses) on
available-for-sale securities
|
|
|
(6.8
|
)
|
|
|
5.3
|
|
|
|
(4.7
|
)
|
|
|
5.8
|
|
Reclassification adjustment for
net losses on available-for-sale securities included in net
earnings (loss)
|
|
|
0.4
|
|
|
|
3.0
|
|
|
|
3.8
|
|
|
|
5.8
|
|
Unrealized gains (losses) on cash
flow hedges and other
|
|
|
3.8
|
|
|
|
(0.2
|
)
|
|
|
2.8
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (loss)
|
|
|
(15.4
|
)
|
|
|
251.8
|
|
|
|
51.1
|
|
|
|
326.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive earnings (loss)
|
|
$
|
(145.1
|
)
|
|
$
|
276.0
|
|
|
$
|
(214.7
|
)
|
|
$
|
618.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
comprehensive
|
|
|
Total
|
|
|
|
Common stock
|
|
|
paid-in
|
|
|
Accumulated
|
|
|
earnings (loss),
|
|
|
stockholders
|
|
|
|
Series A
|
|
|
Series B
|
|
|
Series C
|
|
|
capital
|
|
|
deficit
|
|
|
net of taxes
|
|
|
equity
|
|
|
|
amounts in millions
|
|
|
Balance at January 1, 2007,
before effect of accounting change
|
|
$
|
2.0
|
|
|
$
|
0.1
|
|
|
$
|
2.0
|
|
|
$
|
8,093.5
|
|
|
$
|
(1,020.3
|
)
|
|
$
|
169.8
|
|
|
$
|
7,247.1
|
|
Accounting change (note 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71.4
|
|
|
|
123.8
|
|
|
|
|
|
|
|
195.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2007, as
adjusted for accounting change
|
|
|
2.0
|
|
|
|
0.1
|
|
|
|
2.0
|
|
|
|
8,164.9
|
|
|
|
(896.5
|
)
|
|
|
169.8
|
|
|
|
7,442.3
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(265.8
|
)
|
|
|
|
|
|
|
(265.8
|
)
|
Other comprehensive earnings, net
of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51.1
|
|
|
|
51.1
|
|
Repurchase and cancellation of
common stock (note 8)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
(645.3
|
)
|
|
|
|
|
|
|
|
|
|
|
(645.5
|
)
|
Stock-based compensation, net of
taxes (note 9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27.1
|
|
|
|
|
|
|
|
|
|
|
|
27.1
|
|
Stock issued in connection with
equity incentive plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.5
|
|
|
|
|
|
|
|
|
|
|
|
23.5
|
|
Adjustments due to changes in
subsidiaries equity and other, net (note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.1
|
|
|
|
|
|
|
|
(0.9
|
)
|
|
|
7.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2007
|
|
$
|
1.9
|
|
|
$
|
0.1
|
|
|
$
|
1.9
|
|
|
$
|
7,578.3
|
|
|
$
|
(1,162.3
|
)
|
|
$
|
220.0
|
|
|
$
|
6,639.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
LIBERTY
GLOBAL, INC.
(See note 1)
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(265.8
|
)
|
|
$
|
292.4
|
|
Net earnings from discontinued
operations
|
|
|
|
|
|
|
(422.3
|
)
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(265.8
|
)
|
|
|
(129.9
|
)
|
Adjustments to reconcile loss from
continuing operations to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
83.5
|
|
|
|
35.3
|
|
Depreciation and amortization
|
|
|
1,204.2
|
|
|
|
880.4
|
|
Impairment, restructuring and
other operating charges
|
|
|
5.9
|
|
|
|
6.2
|
|
Amortization of deferred financing
costs and non-cash interest
|
|
|
48.7
|
|
|
|
37.7
|
|
Share of results of affiliates,
net of dividends
|
|
|
(19.2
|
)
|
|
|
2.0
|
|
Realized and unrealized losses
(gains) on financial and derivative instruments, net
|
|
|
145.8
|
|
|
|
(21.1
|
)
|
Foreign currency transaction
gains, net
|
|
|
(52.5
|
)
|
|
|
(82.2
|
)
|
Losses on extinguishment of debt
|
|
|
23.3
|
|
|
|
35.6
|
|
Gains on disposition of assets, net
|
|
|
(0.3
|
)
|
|
|
(47.6
|
)
|
Deferred income tax expense
(benefit)
|
|
|
(54.0
|
)
|
|
|
52.0
|
|
Minority interests in earnings of
subsidiaries, net
|
|
|
203.8
|
|
|
|
60.3
|
|
Other non-cash items
|
|
|
6.0
|
|
|
|
9.2
|
|
Changes in operating assets and
liabilities, net of the effects of acquisitions and dispositions
|
|
|
(265.1
|
)
|
|
|
(52.0
|
)
|
Net cash provided by operating
activities of discontinued operations
|
|
|
|
|
|
|
82.3
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
1,064.3
|
|
|
|
868.2
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
Capital expended for property and
equipment
|
|
|
(951.8
|
)
|
|
|
(697.1
|
)
|
Cash paid in connection with
acquisitions, net of cash acquired
|
|
|
(111.0
|
)
|
|
|
(144.2
|
)
|
Net cash received to purchase and
settle derivative instruments
|
|
|
45.9
|
|
|
|
8.7
|
|
Proceeds received upon
dispositions of assets
|
|
|
4.1
|
|
|
|
98.4
|
|
Other investing activities
|
|
|
(35.0
|
)
|
|
|
(9.5
|
)
|
Proceeds received upon disposition
of discontinued operations, net of disposal costs
|
|
|
|
|
|
|
972.5
|
|
Net cash used by investing
activities of discontinued operations
|
|
|
|
|
|
|
(92.5
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by
investing activities
|
|
$
|
(1,047.8
|
)
|
|
$
|
136.3
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
7
LIBERTY
GLOBAL, INC.
(See note 1)
CONDENSED
CONSOLIDATED STATEMENTS OF CASH
FLOWS (Continued)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
Borrowings of debt
|
|
$
|
8,126.2
|
|
|
$
|
5,880.5
|
|
Repayments of debt and capital
lease obligations
|
|
|
(6,925.0
|
)
|
|
|
(5,752.4
|
)
|
Repurchase of common stock
|
|
|
(645.5
|
)
|
|
|
(755.7
|
)
|
Proceeds from issuance of common
stock upon exercise of stock options
|
|
|
28.2
|
|
|
|
3.5
|
|
Proceeds from issuance of stock by
subsidiaries
|
|
|
23.0
|
|
|
|
6.4
|
|
Payment of deferred financing costs
|
|
|
(17.7
|
)
|
|
|
(25.9
|
)
|
Other financing activities, net
|
|
|
(1.4
|
)
|
|
|
7.6
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by
financing activities
|
|
|
587.8
|
|
|
|
(636.0
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash
|
|
|
29.8
|
|
|
|
84.2
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
634.1
|
|
|
|
462.9
|
|
Discontinued operations
|
|
|
|
|
|
|
(10.2
|
)
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
|
634.1
|
|
|
|
452.7
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
1,880.5
|
|
|
|
1,202.2
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
2,514.6
|
|
|
$
|
1,654.9
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
584.1
|
|
|
$
|
294.8
|
|
|
|
|
|
|
|
|
|
|
Net cash paid for taxes
|
|
$
|
31.6
|
|
|
$
|
30.7
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
8
|
|
(1)
|
Basis
of Presentation
|
Liberty Global, Inc. (LGI) was formed on January 13, 2005,
for the purpose of effecting the combination of Liberty Media
International, Inc. (LMI) and UnitedGlobalCom, Inc. (UGC).
LMI is the predecessor to LGI and was formed on March 16,
2004, in contemplation of the spin off of certain international
cable television and programming subsidiaries and assets of
Liberty Media Corporation (Liberty Media), including a majority
interest in UGC, an international broadband communications
provider. In the following text, the terms we,
our, our company, and us may
refer, as the context requires, to LGI and its predecessors and
subsidiaries.
LGI is an international broadband communications provider of
video, voice and Internet access services, with consolidated
broadband operations at June 30, 2007 in 17 countries,
primarily in Europe, Japan and Chile. Through our indirect
wholly owned subsidiary UPC Holding BV (UPC Holding), we provide
broadband communications services in 10 European countries and
in Chile. As further described in note 7, (i) our 100%
ownership interest in Cablecom Holdings GmbH (Cablecom), a
broadband communications operator in Switzerland, and
(ii) our 80% interest in VTR Global Com, S.A. (VTR), a
broadband communications operator in Chile, were transferred
from certain of our other indirect subsidiaries to UPC Broadband
Holding BV (UPC Broadband Holding), a subsidiary of UPC Holding,
during the second quarter of 2007. UPC Broadband Holdings
European broadband communications operations, including
Cablecom, are collectively referred to as the UPC Broadband
Division. Through our indirect controlling ownership interest in
Telenet Group Holding NV (Telenet), which we began accounting
for as a consolidated subsidiary effective January 1, 2007
(as further described in note 4), we provide broadband
communications services in Belgium. Through our indirect 36.5%
controlling ownership interest in Jupiter Telecommunications
Co., Ltd. (J:COM), we provide broadband communications services
in Japan. Through our indirect 53.4%-owned subsidiary
Austar United Communications Limited (Austar), we provide
direct-to-home (DTH) satellite operations in Australia. We also
have (i) consolidated broadband communications operations
in Puerto Rico, Brazil and Peru, (ii) a non-controlling
interest in a broadband communications company in Japan,
(iii) consolidated interests in certain programming
businesses in Europe and Argentina and (iv) non-controlling
interests in certain programming businesses in Europe, Japan,
Australia and the Americas. Our consolidated programming
interests in Europe are primarily held through Chellomedia BV
(Chellomedia), which also provides interactive digital services
and owns or manages investments in various businesses in Europe.
Certain of Chellomedias subsidiaries and affiliates
provide programming and interactive digital services to certain
of our broadband operations, primarily in Europe.
Our unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally
accepted in the United States (GAAP) and with the instructions
to
Form 10-Q
and Article 10 of
Regulation S-X
for interim financial information. Accordingly, these statements
do not include all of the information required by GAAP or
Securities and Exchange Commission (SEC) rules and regulations
for complete financial statements. In the opinion of management,
these statements reflect all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the
results for the interim periods presented. The results of
operations for any interim period are not necessarily indicative
of results for the full year. These unaudited condensed
consolidated financial statements should be read in conjunction
with our consolidated financial statements and notes thereto
included in our 2006 Annual Report on
Form 10-K/A.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Estimates and
assumptions are used in accounting for, among other things, the
valuation of acquisition-related assets and liabilities,
allowances for uncollectible accounts, deferred income taxes and
related valuation allowances, loss contingencies, fair values of
financial and derivative instruments, fair values of long-lived
assets and any related impairments, capitalization of
9
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
internal costs associated with construction and installation
activities, useful lives of long-lived assets, actuarial
liabilities associated with certain benefit plans and
stock-based compensation. Actual results could differ from those
estimates.
Unless otherwise indicated, convenience translations into
U.S. dollars are calculated as of June 30, 2007.
Certain prior period amounts have been reclassified to conform
to the current year presentation.
|
|
(2)
|
Earnings
per Common Share (EPS)
|
Basic EPS is computed by dividing net earnings (loss) by the
weighted average number of common shares (excluding nonvested
common shares) outstanding for the period. Diluted EPS presents
the dilutive effect, if any, on a per share basis of potential
common shares (e.g., options, nonvested shares and convertible
securities) as if they had been exercised or converted at the
beginning of the periods presented. The weighted average shares
used in our basic and diluted EPS calculations are set forth
below for the indicated periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Weighted average common shares
outstanding
|
|
|
384,833,589
|
|
|
|
458,931,096
|
|
|
|
387,907,014
|
|
|
|
463,735,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We reported losses from continuing operations during the three
and six months ended June 30, 2007 and 2006. Therefore, the
dilutive effect for the 2007 and 2006 periods of (i) the
aggregate number of then outstanding options, stock appreciation
rights, and nonvested shares of 30.7 million and
35.8 million, respectively, (ii) the aggregate number
of shares issuable pursuant to the then outstanding convertible
debt securities and other contracts that may be settled in cash
or shares of 35.3 million and 40.9 million,
respectively, and (iii) the number of shares contingently
issuable pursuant to performance-based incentive plans of
9.2 million and nil, respectively, were not included in the
computation of diluted loss per share because their inclusion
would have been anti-dilutive to the computation.
|
|
(3)
|
Accounting
Changes and Recent Accounting Pronouncements
|
Accounting
Changes
FIN 48
In June 2006, the Financial Accounting Standards Board (FASB)
issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes an Interpretation of
FASB Statement No. 109 (FIN 48), which clarifies
the accounting for uncertainty in income taxes recognized in the
financial statements in accordance with Statement of Financial
Accounting Standards (SFAS) Statement No. 109,
Accounting for Income Taxes. FIN 48 prescribes the
recognition threshold and provides guidance for the financial
statement recognition and measurement of uncertain tax positions
taken or expected to be taken in a tax return. FIN 48 also
provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosures, and
transition.
In connection with our January 1, 2007 adoption of
FIN 48, we recognized (i) a $157.9 million
decrease to our other long-term liabilities related to uncertain
income tax positions, (ii) a $187.3 million increase
to our deferred tax assets, net of related valuation allowances,
(iii) a $123.8 million decrease to our accumulated
deficit and (iv) a $145.5 million decrease to our
goodwill. In addition, we recorded a $71.4 million increase
to additional paid-in capital and a $4.5 million increase
to minority interests in subsidiaries related to the minority
interest owners share of the decrease to the
January 1, 2007 accumulated deficit of a majority-owned
subsidiary. See note 8.
10
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
Interest and penalties related to income tax liabilities are
included in income tax expense.
As of January 1, 2007, our unrecognized tax benefits, net
of potential interest and penalties of $17.4 million,
aggregated $471.8 million, including approximately
$80.4 million that would have a favorable impact on our
effective income tax rate if ultimately recognized, after
considering amounts that we would record as reductions of
goodwill or that we would expect to be offset by valuation
allowances. There were no significant changes to these balances
during the six months ended June 30, 2007. No assurance can
be given that any of these tax benefits will be recognized or
realized.
During the next 12 months, the period available for
examination of our prior year tax returns may expire in several
of the tax jurisdictions in which we have operations. If the
examination periods were to expire in all such jurisdictions, it
is reasonably possible that the amount of unrecognized tax
benefits at January 1, 2007 related to these jurisdictions
could change significantly and could result in increases to our
deferred tax assets or decreases to our liabilities for
uncertain tax positions and a favorable impact on our effective
income tax rate of up to $37.0 million. In addition, it is
reasonably possible that we could enter into transactions and
take tax positions with respect to certain of our tax returns
that could result in significant increases to our unrecognized
tax benefits during the next 12 months. We are currently
unable to provide a meaningful estimate of the range of any such
increases. No assurance can be given as to the nature or impact
of changes in our unrecognized tax positions during the next
12 months.
LGI and certain of its subsidiaries are subject to
U.S. federal and state income tax. Other LGI subsidiaries
are subject to the income tax of foreign jurisdictions.
Substantially all material foreign income tax examinations have
been concluded for tax years through 2002. Currently we are or
anticipate being under examination in several jurisdictions in
which we operate. Although no assurance can be given, we
anticipate that the outcome of these examinations will not have
a material adverse effect on our financial position or results
of operations.
Recent
Accounting Pronouncements
SFAS 157
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements (SFAS 157). SFAS 157
defines fair value, establishes a framework for measuring fair
value under GAAP, and expands disclosures about fair value
measurements. SFAS 157 is effective for financial
statements issued for fiscal years and interim periods beginning
after November 15, 2007. We have not completed our
evaluation of the impact of this standard on our consolidated
financial statements.
SFAS 159
In February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities
(SFAS 159). SFAS 159 permits entities to choose to
measure financial assets and financial liabilities at fair
value. Unrealized gains and losses on items for which the fair
value option has been elected are reported in earnings.
SFAS 159 is effective for fiscal years beginning after
November 15, 2007. We have not completed our evaluation of
the impact of this standard on our consolidated financial
statements.
|
|
(4)
|
Acquisitions
and Dispositions
|
2007
Acquisition
Telenet On November 13, 2006, Belgian
Cable Investors, a Delaware partnership (Belgian Cable
Investors) and a then majority owned subsidiary of Chellomedia,
paid cash consideration of 135.0 million
($172.9 million at
11
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
the transaction date) or 20.00 ($25.62 at the transaction
date) per share, before direct acquisition costs, to exercise
certain call options to acquire 6,750,000 ordinary shares of
Telenet from various members of the Mixed
Intercommunales (entities comprised of certain Flanders
municipalities and Electrabel NV). At the time, the Mixed
Intercommunales were, along with certain of our subsidiaries,
members of a syndicate (the Telenet Syndicate) that controls
Telenet by virtue of the Telenet Syndicates collective
ownership of a majority of the outstanding Telenet shares. As a
result of this transaction, we obtained a majority ownership
interest in the Telenet shares owned by the Telenet Syndicate,
thereby acquiring certain governance rights that provide us with
the ability to exercise voting control over Telenet, as further
described below. As we did not obtain regulatory approval to
exercise our voting control over Telenet until February 26,
2007, we accounted for Telenet using the equity method through
December 31, 2006. Effective January 1, 2007, we began
accounting for Telenet as a consolidated subsidiary. We obtained
control of Telenet to enhance our strategic alternatives with
respect to our investment position in Telenet.
Including the 6,750,000 shares acquired upon the
November 13, 2006 exercise of the aforementioned call
options and 1,731,138 additional Telenet shares acquired from
third parties, we acquired an aggregate 8.4% interest in Telenet
during the fourth quarter of 2006.
On May 31, 2007, pursuant to the rights provided us under
the agreement among the Telenet Syndicate shareholders (the
Syndicate Agreement) (which rights we could not exercise until
February 26, 2007, the date we obtained competition
approval from the European Commission), we nominated seven
additional members to the Telenet Board, bringing our total
number of representatives to nine of the 17 total members. Under
the Syndicate Agreement and the Telenet Articles of Association,
certain limited Telenet Board decisions must receive the
affirmative vote of specified directors in order to be
effective. Based on the shareholdings of the other Telenet
Syndicate shareholders at June 30, 2007, these special
voting requirements applied only to certain minority-protective
decisions, including affiliate transactions, incurrence of debt
in excess of that required to fund Telenets business
plan and dispositions of assets representing more than 20% of
Telenets fair market value.
During the first quarter of 2007, we acquired 2,720,970 or 2.7%
of Telenets outstanding ordinary shares through
transactions with third parties and the conversion of certain
subordinated debt warrants, for an aggregate cost of
63.9 million ($83.8 million at the average rate
for the period), including direct acquisition costs and the
4.9 million ($6.4 million at the average rate
for the period) fair value of the converted subordinated debt
warrants.
On June 29, 2007, an indirect subsidiary of Chellomedia
paid cash consideration of 35.3 million
($47.8 million at the transaction date) to acquire from an
unrelated third party the remaining 10.5% interest in Belgian
Cable Investors that we did not already own.
We have accounted for our acquisitions of Telenet and Belgian
Cable Investors interests as step acquisitions, and have
allocated our investment basis to our pro rata share of
Telenets assets and liabilities at each significant
acquisition date based on the estimated fair values of such
assets and liabilities on such dates, and the excess of our
investment basis over the adjusted estimated fair values of such
identifiable net assets has been allocated to goodwill. The
purchase accounting for the Telenet and Belgian Cable Investors
step acquisitions, as reflected in these condensed consolidated
financial statements, is preliminary and subject to adjustment
based upon our final assessment of the fair values of the
identifiable tangible and intangible assets and liabilities of
Telenet. Although all items in the Telenet valuation process
remain open, we expect that the most significant adjustments to
the purchase price allocation will involve property and
equipment, intangible assets and deferred income taxes.
12
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
A summary of the January 1, 2007 opening balance sheet of
Telenet (as adjusted for the Telenet shares and the Belgian
Cable Investors interests acquired through June 30,
2007) is presented in the following table. The opening
balance sheet is based on preliminary purchase price allocations
and is therefore subject to adjustment (amounts in millions):
|
|
|
|
|
Cash
|
|
$
|
77.6
|
|
Other current assets
|
|
|
159.0
|
|
Property and equipment, net
|
|
|
1,376.7
|
|
Goodwill
|
|
|
1,555.5
|
|
Intangible assets subject to
amortization (a)
|
|
|
715.9
|
|
Other assets, net
|
|
|
40.3
|
|
Current liabilities
|
|
|
(612.9
|
)
|
Long-term debt and capital lease
obligations
|
|
|
(1,793.8
|
)
|
Other long-term liabilities
|
|
|
(199.2
|
)
|
Minority interests (b)
|
|
|
(659.1
|
)
|
|
|
|
|
|
Purchase price (c)
|
|
$
|
660.0
|
|
|
|
|
|
|
|
|
|
(a) |
|
The amounts reflected as intangible assets subject to
amortization primarily include intangible assets related to
customer relationships and network rights (see note 7). At
January 1, 2007 and the respective 2007 step acquisition
dates, the weighted average useful lives of Telenets
customer relationships and network rights were approximately
9 years and 14 years, respectively. |
|
(b) |
|
Represents the minority interest owners share of
Telenets net assets. |
|
(c) |
|
Amount includes the $523.3 million carrying value of our
equity method investment in Telenet as of December 31, 2006
and the consideration paid to acquire additional Telenet and
Belgian Cable Investors interests during the first six months of
2007. |
At June 30, 2007, we indirectly owned 31,813,444, or 31.3%,
of Telenets then outstanding ordinary shares. On
July 4, 2007, Belgian Cable Investors paid cash
consideration of 466.7 million or 25.00 per
share ($635.4 million or $34.04 per share at the
transaction date), before direct acquisition costs, to exercise
options to acquire 18,668,826 Telenet shares from certain of the
Telenet Syndicate shareholders. Immediately following this
transaction, we indirectly owned 50,482,270 shares or 49.7%
of Telenets then outstanding ordinary shares. As a result
of this transaction, only one third-party shareholder (the
Financial Consortium) remained within the Telenet Syndicate and
our governance rights increased such that the only Telenet Board
decisions that we do not control under the Syndicate Agreement
and the Telenet Articles of Association are certain
minority-protective decisions, including decisions to sell
certain cable assets or terminate cable services.
Subsequent to June 30, 2007, we exercised 26,417
Subordinated Debt Warrants and Telenet was informed by certain
holders of its Subordinated Debt Warrants that they intend to
exercise in the aggregate a further 3,261,960 Subordinated Debt
Warrants. On or about August, 10, 2007, Telenet expects to issue
(i) an estimated 7,443,826 ordinary shares in the aggregate to
the Financial Consortium and other third parties, and (ii)
96,958 ordinary shares to our company upon the exercise of these
Subordinated Debt Warrants. Upon the issuance of these shares,
we expect that our ownership interest in Telenet will be diluted
from 49.7% to approximately 46.3% and that the Telenet
Syndicates ownership interest will be 51.0%. We have only
limited rights to purchase the shares owned by the Financial
Consortium in the event the Financial Consortium decides to sell
any or all of its shares. Therefore, it is possible that the
Financial Consortium could sell sufficient Telenet shares to
other parties such that the Telenet
13
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
Syndicate would no longer own a majority of Telenets
outstanding shares. In addition, the Financial Consortium could
reduce its ownership interest to less than 3%, either through
sales to our company or others, thereby causing the Telenet
Syndicate to be terminated.
2006
Acquisitions
Cable West During the third and fourth
quarters of 2006, J:COM increased its ownership interest in
Cable West, Inc. (Cable West) from an 8.6% non-controlling
interest to a 95.6% controlling interest for aggregate cash
consideration of ¥63.5 billion ($538.0 million at
the transaction dates) before direct acquisition costs. Cable
West is a broadband communications provider in Japan. For
financial reporting purposes, J:COM began consolidating Cable
West effective September 30, 2006.
Karneval In August 2006, we entered into a
total return swap with independent third parties to acquire
Unite Holdco III BV (Unite Holdco). On September 18,
2006, (i) Unite Holdco acquired 100% of Karneval Media SRO
and Forecable SRO (together Karneval) for aggregate cash
consideration of 331.1 million ($420.1 million
at the transaction date) before direct acquisition costs, and
(ii) Liberty Global Europe NV (Liberty Global Europe), our
indirect subsidiary, began consolidating Unite Holdco pursuant
to the requirements of FASB Interpretation No. 46(R),
Consolidation of Variable interest Entities. On
December 28, 2006, following the receipt of regulatory
approvals, Liberty Global Europe completed its acquisition of
Unite Holdco. Karneval provides cable television and broadband
Internet services to residential customers and managed network
services to corporate customers in the Czech Republic. For
financial reporting purposes, we began consolidating Karneval
effective September 30, 2006.
INODE On March 2, 2006 we acquired INODE
Telekommunikationsdienstleistungs GmbH (INODE), an unbundled
Digital Subscriber Line (DSL) provider in Austria, for cash
consideration before direct acquisition costs of
93 million ($111 million at the transaction
date).
The purchase accounting for our acquisition of Cable West, as
reflected in our condensed consolidated financial statements, is
preliminary and subject to adjustment based upon our final
assessment of the fair values of the identifiable tangible and
intangible assets and liabilities of this acquired entity. As
the open items in the valuation process generally relate to
deferred revenue, we would expect that the primary effects of
any potential adjustments to the preliminary Cable West purchase
price allocation would be changes to the values assigned to
deferred revenue and to the related amortization of deferred
revenue. In addition, our final assessment of the purchase price
allocation could lead to adjustments to the amount of acquired
deferred tax assets or assumed deferred tax liabilities.
The following unaudited pro forma condensed consolidated
operating results for the three and six months ended
June 30, 2006 give effect to (i) the Telenet and
Belgian Cable Investors step acquisitions that were completed
during the fourth quarter of 2006 and the first six months of
2007 and (ii) the September 2006 Cable West and Karneval
acquisitions as if they had been completed as of January 1,
2006. No effect has been given to the acquisition of INODE since
it would not have had a material impact on our results of
operations for the indicated periods. Our results of operations
for the three and six months ended June 30, 2007 would not
have been materially different from our reported results if the
Telenet and Belgian Cable Investors step acquisitions that
occurred following the January 1, 2007 consolidation of
Telenet had occurred on January 1, 2007. These pro forma
amounts are not necessarily indicative of the operating results
that would have occurred if these transactions had occurred on
January 1, 2006. The pro forma adjustments are based upon
currently available information and upon certain assumptions
that we believe are reasonable.
14
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30, 2006
|
|
|
June 30, 2006
|
|
|
|
in millions, except per share amounts
|
|
|
Revenue
|
|
$
|
1,900.7
|
|
|
$
|
3,694.1
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(190.8
|
)
|
|
$
|
(135.0
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted EPS from
continuing operations
|
|
$
|
(0.42
|
)
|
|
$
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
Dispositions
On December 31, 2006, we sold UPC Belgium NV/SA (UPC
Belgium) to Telenet for cash consideration of
184.5 million ($243.3 million at the transaction
date), after deducting cash received to settle net cash and
working capital adjustments of 20.9 million
($27.6 million at the transaction date). Due to our
continuing ownership interest in Telenet, we have not accounted
for UPC Belgium as a discontinued operation.
On December 19, 2005 we reached an agreement to sell 100%
of UPC Norge AS (UPC Norway), and completed the sale on
January 19, 2006. On April 4, 2006, we reached an
agreement to sell 100% of NBS Nordic Broadband Services AB
(Publ) (UPC Sweden), and completed the sale on June 19,
2006. On June 6, 2006, we reached an agreement to sell 100%
of UPC France SA (UPC France) and completed the sale on
July 19, 2006. On June 9, 2006, we sold 100% of
Priority Telecom Norway A.S. (PT Norway). We have presented UPC
Norway, UPC Sweden, UPC France and PT Norway as discontinued
operations in our condensed consolidated financial statements.
The operating results of UPC Sweden, UPC France and PT Norway
that are classified as discontinued operations in our condensed
consolidated statements of operations are summarized in the
following table:
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30, 2006
|
|
|
June 30, 2006
|
|
|
|
amounts in millions
|
|
|
Revenue
|
|
$
|
165.4
|
|
|
$
|
325.4
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
29.8
|
|
|
$
|
32.6
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes and
minority interests
|
|
$
|
23.6
|
|
|
$
|
14.5
|
|
|
|
|
|
|
|
|
|
|
Net earnings from discontinued
operations
|
|
$
|
23.6
|
|
|
$
|
14.3
|
|
|
|
|
|
|
|
|
|
|
We were required to use proceeds from the UPC Norway, UPC Sweden
and UPC France dispositions to repay certain amounts outstanding
under the UPC Broadband Holding Bank Facility. Interest expense
related to such required debt repayments of $8.1 million
and $17.9 million for the three and six months ended
June 30, 2006, respectively, is included in discontinued
operations in the accompanying condensed consolidated statements
of operations.
15
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
|
|
(5)
|
Derivative
Instruments
|
Through our subsidiaries, we have entered into various
derivative instruments to manage interest rate and foreign
currency exposure. With the exception of J:COMs interest
rate swaps, which are accounted for as cash flow hedges, we do
not apply hedge accounting to our derivative instruments.
Accordingly, changes in the fair values of all other derivative
instruments are recorded in realized and unrealized gains
(losses) on financial and derivative instruments in our
condensed consolidated statements of operations. The following
table provides details of the fair value of our financial and
derivative instrument assets (liabilities), net:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
Cross-currency and interest rate
exchange contracts
|
|
$
|
(138.3
|
)
|
|
$
|
(174.6
|
)
|
Embedded derivatives(a)
|
|
|
4.9
|
|
|
|
3.1
|
|
Foreign exchange contracts
|
|
|
(52.5
|
)
|
|
|
28.0
|
|
Call and put contracts
|
|
|
56.4
|
|
|
|
37.4
|
|
|
|
|
|
|
|
|
|
|
Total(a)
|
|
$
|
(129.5
|
)
|
|
$
|
(106.1
|
)
|
|
|
|
|
|
|
|
|
|
Current asset
|
|
$
|
72.8
|
|
|
$
|
51.0
|
|
Long-term asset
|
|
|
283.2
|
|
|
|
166.5
|
|
Current liability
|
|
|
(101.1
|
)
|
|
|
(40.3
|
)
|
Long-term liability
|
|
|
(384.4
|
)
|
|
|
(283.3
|
)
|
|
|
|
|
|
|
|
|
|
Total(a)
|
|
$
|
(129.5
|
)
|
|
$
|
(106.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Excludes the prepaid forward sale of The News Corporation
Limited (News Corp.) Class A common stock, which is
included in long-term debt and capital lease obligations in our
condensed consolidated balance sheets. |
16
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
The details of our realized and unrealized gains (losses) on
financial and derivative instruments, net, are as follows for
the indicated interim periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
Cross-currency and interest rate
exchange contracts
|
|
$
|
79.7
|
|
|
$
|
(68.5
|
)
|
|
$
|
41.8
|
|
|
$
|
(14.2
|
)
|
UGC Convertible Notes (a)
|
|
|
(148.2
|
)
|
|
|
2.8
|
|
|
|
(209.4
|
)
|
|
|
36.1
|
|
Foreign exchange contracts
|
|
|
(14.9
|
)
|
|
|
(6.3
|
)
|
|
|
(1.8
|
)
|
|
|
5.8
|
|
Call and put contracts (b)
|
|
|
9.6
|
|
|
|
(19.8
|
)
|
|
|
20.8
|
|
|
|
(5.2
|
)
|
Other
|
|
|
(0.5
|
)
|
|
|
(0.9
|
)
|
|
|
2.8
|
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(74.3
|
)
|
|
$
|
(92.7
|
)
|
|
$
|
(145.8
|
)
|
|
$
|
21.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Represents the change in the fair value of the UGC Convertible
Notes that is not attributable to the remeasurement of the UGC
Convertible Notes into U.S. dollars. Gains and losses arising
from the remeasurement of the UGC Convertible Notes into U.S.
dollars are reported as foreign currency transaction gains
(losses), net. |
|
(b) |
|
Includes losses associated with the Sumitomo Collar (as
described below) during the 2007 periods and gains and losses
associated with (i) the call options we held with respect
to Telenet ordinary shares and (ii) the forward sale of
News Corp. Class A common stock during the 2007 and 2006
periods. See below and note 4. |
17
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
Cross-currency
and Interest Rate Exchange Contracts
We have various cross currency and interest rate exchange
contracts with respect to the U.S. dollar, the euro, the
Czech koruna (CZK), the Slovakian koruna (SKK), the Hungarian
forint (HUF), the Polish zloty (PLN), the Romanian new lei
(RON), the Swiss franc (CHF), the Chilean peso (CLP) and the
Australian dollar (AUD). The terms of our outstanding contracts
at June 30, 2007 are as follows:
Cross-currency
Interest Rate Swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount
|
|
|
Notional amount
|
|
|
Interest rate
|
|
|
Interest rate
|
|
|
|
due from
|
|
|
due to
|
|
|
due from
|
|
|
due to
|
|
Subsidiary / Final maturity date
|
|
counterparty
|
|
|
counterparty
|
|
|
counterparty
|
|
|
counterparty
|
|
|
|
amounts in millions
|
|
|
|
|
|
|
|
|
UPC Broadband Holding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 2013
|
|
$
|
335.0
|
|
|
|
252.9
|
|
|
|
LIBOR + 2.0
|
%
|
|
|
5.70
|
%
|
December 2013
|
|
|
750.0
|
|
|
|
566.1
|
|
|
|
LIBOR + 2.0
|
%
|
|
|
5.77
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,085.0
|
|
|
|
819.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2009
|
|
|
60.0
|
|
|
CZK
|
1,703.1
|
|
|
|
5.50
|
%
|
|
|
5.15
|
%
|
February 2010
|
|
|
105.8
|
|
|
|
3,018.7
|
|
|
|
5.50
|
%
|
|
|
4.88
|
%
|
July 2010
|
|
|
60.0
|
|
|
|
1,703.1
|
|
|
|
5.50
|
%
|
|
|
5.33
|
%
|
September 2012
|
|
|
200.0
|
|
|
|
5,800.0
|
|
|
|
5.46
|
%
|
|
|
5.30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
425.8
|
|
|
CZK
|
12,224.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2009
|
|
|
25.0
|
|
|
SKK
|
951.1
|
|
|
|
5.50
|
%
|
|
|
6.58
|
%
|
July 2010
|
|
|
25.0
|
|
|
|
951.1
|
|
|
|
5.50
|
%
|
|
|
5.67
|
%
|
September 2012
|
|
|
50.0
|
|
|
|
1,900.0
|
|
|
|
5.46
|
%
|
|
|
6.04
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0
|
|
|
SKK
|
3,802.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2009
|
|
|
410.0
|
|
|
HUF
|
118,937.5
|
|
|
|
5.50
|
%
|
|
|
8.75
|
%
|
July 2009
|
|
|
410.0
|
|
|
|
118,937.5
|
|
|
|
5.50
|
%
|
|
|
7.82
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
820.0
|
|
|
HUF
|
237,875.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2009
|
|
|
245.0
|
|
|
PLN
|
1,000.6
|
|
|
|
5.50
|
%
|
|
|
7.00
|
%
|
July 2010
|
|
|
245.0
|
|
|
|
1,000.6
|
|
|
|
5.50
|
%
|
|
|
6.52
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
490.0
|
|
|
PLN
|
2,001.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2009
|
|
|
200.0
|
|
|
RON
|
709.1
|
|
|
|
5.50
|
%
|
|
|
10.98
|
%
|
January 2010
|
|
|
60.0
|
|
|
|
213.1
|
|
|
|
5.50
|
%
|
|
|
9.65
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
260.0
|
|
|
RON
|
922.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 2012
|
|
|
229.1
|
|
|
CHF
|
335.8
|
|
|
|
EURIBOR + 2.50
|
%
|
|
|
CHF LIBOR + 2.46
|
%
|
December 2014
|
|
|
1,079.8
|
|
|
|
1,760.0
|
|
|
|
EURIBOR + 2.0
|
%
|
|
|
CHF LIBOR + 1.95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,308.9
|
|
|
CHF
|
2,095.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2014
|
|
$
|
340.0
|
|
|
CLP
|
181,288.0
|
|
|
|
LIBOR + 1.75
|
|
|
|
8.76
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chellomedia Programming Financing
Holdco BV (Chellomedia PFH), an indirect subsidiary of
Chellomedia:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2013
|
|
|
32.5
|
|
|
HUF
|
8,632.0
|
|
|
|
5.50
|
%
|
|
|
9.55
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VTR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 2014
|
|
$
|
145.0
|
|
|
CLP
|
80,257.5
|
|
|
|
LIBOR + 3.0
|
%
|
|
|
11.34
|
%
|
September 2014
|
|
|
145.0
|
|
|
|
80,257.5
|
|
|
|
LIBOR + 3.0
|
%
|
|
|
11.06
|
%
|
September 2014
|
|
|
185.0
|
|
|
|
102,397.5
|
|
|
|
LIBOR + 3.0
|
%
|
|
|
11.09
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
475.0
|
|
|
CLP
|
262,912.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
Interest
Rate Swaps:
The terms of our outstanding interest rate swap contracts at
June 30, 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate
|
|
Interest rate
|
|
|
|
|
|
due from
|
|
due to
|
Subsidiary / Final maturity date
|
|
Notional amount
|
|
|
counterparty
|
|
counterparty
|
|
|
in millions
|
|
|
|
|
|
|
UPC Broadband Holding:
|
|
|
|
|
|
|
|
|
July 2008
|
|
|
393.5
|
|
|
3 mos. EURIBOR
|
|
6 mos. EURIBOR+0.01%
|
January 2009
|
|
|
210.0
|
|
|
EURIBOR
|
|
3.58%
|
April 2010
|
|
|
1,000.0
|
|
|
EURIBOR
|
|
3.28%
|
January 2011
|
|
|
193.5
|
|
|
EURIBOR
|
|
3.83%
|
September 2012
|
|
|
500.0
|
|
|
EURIBOR
|
|
2.96%
|
December 2013
|
|
|
90.5
|
|
|
EURIBOR
|
|
3.84%
|
January 2014
|
|
|
185.0
|
|
|
EURIBOR
|
|
4.04%
|
|
|
|
|
|
|
|
|
|
|
|
|
2,572.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2010
|
|
CHF
|
618.5
|
|
|
CHF LIBOR
|
|
2.19%
|
September 2012
|
|
|
711.5
|
|
|
CHF LIBOR
|
|
2.33%
|
|
|
|
|
|
|
|
|
|
|
|
CHF
|
1,330.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2013
|
|
CLP
|
55,350.0
|
|
|
6.67%
|
|
TAB
|
July 2013
|
|
|
55,350.0
|
|
|
6.88%
|
|
TAB
|
|
|
|
|
|
|
|
|
|
|
|
CLP
|
110,700.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chellomedia PFH:
|
|
|
|
|
|
|
|
|
December 2013
|
|
$
|
90.0
|
|
|
LIBOR
|
|
4.98%
|
|
|
|
|
|
|
|
|
|
December 2013
|
|
|
105.0
|
|
|
EURIBOR
|
|
3.95%
|
|
|
|
|
|
|
|
|
|
Austar Entertainment Pty Ltd.
(Austar Entertainment), a subsidiary of Austar:
|
|
|
|
|
|
|
|
|
August 2011
|
|
AUD
|
75.0
|
|
|
AUD BBSY
|
|
6.38%
|
August 2011
|
|
|
175.0
|
|
|
AUD BBSY
|
|
6.14%
|
August 2013
|
|
|
130.0
|
|
|
AUD BBSY
|
|
6.34%
|
August 2013
|
|
|
100.0
|
|
|
AUD BBSY
|
|
6.38%
|
|
|
|
|
|
|
|
|
|
|
|
AUD
|
480.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liberty Cablevision of Puerto Rico
Ltd. (Liberty Puerto Rico):
|
|
|
|
|
|
|
|
|
June 2014
|
|
$
|
75.0
|
|
|
LIBOR
|
|
5.18%
|
June 2014
|
|
|
75.0
|
|
|
LIBOR
|
|
5.19%
|
|
|
|
|
|
|
|
|
|
|
|
$
|
150.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain Telenet subsidiaries:
|
|
|
|
|
|
|
|
|
September 2008
|
|
|
25.0
|
|
|
3 mos. EURIBOR
|
|
4.49%
|
September 2009
|
|
|
43.2
|
|
|
3 mos. EURIBOR
|
|
4.52%
|
September 2010
|
|
|
50.0
|
|
|
3 mos. EURIBOR
|
|
4.70%
|
December 2011
|
|
|
50.0
|
|
|
3 mos. EURIBOR
|
|
5.29%
|
|
|
|
|
|
|
|
|
|
|
|
|
168.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VTR:
|
|
|
|
|
|
|
|
|
July 2013
|
|
CLP
|
55,350.0
|
|
|
TAB
|
|
7.75%
|
July 2013
|
|
|
55,350.0
|
|
|
TAB
|
|
7.80%
|
|
|
|
|
|
|
|
|
|
|
|
CLP
|
110,700.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J:COM:
|
|
|
|
|
|
|
|
|
June 2009
|
|
¥
|
26,094.7
|
|
|
TIBOR
|
|
0.52%
|
December 2009
|
|
|
5,500.0
|
|
|
TIBOR
|
|
0.55%
|
December 2009
|
|
|
1,500.0
|
|
|
TIBOR
|
|
0.69%
|
December 2009
|
|
|
3,000.0
|
|
|
TIBOR
|
|
0.70%
|
September 2010
|
|
|
3,000.0
|
|
|
TIBOR
|
|
1.46%
|
September 2011
|
|
|
2,000.0
|
|
|
TIBOR
|
|
1.37%
|
October 2011
|
|
|
5,000.0
|
|
|
¥ LIBOR
|
|
1.33%
|
October 2011
|
|
|
5,000.0
|
|
|
¥ LIBOR
|
|
1.38%
|
April 2013
|
|
|
10,000.0
|
|
|
¥ LIBOR
|
|
1.75%
|
April 2013
|
|
|
5,000.0
|
|
|
¥ LIBOR
|
|
1.71%
|
April 2013
|
|
|
5,000.0
|
|
|
¥ LIBOR
|
|
1.81%
|
October 2013
|
|
|
5,000.0
|
|
|
¥ LIBOR
|
|
1.59%
|
October 2013
|
|
|
5,000.0
|
|
|
¥ LIBOR
|
|
1.67%
|
October 2013
|
|
|
5,000.0
|
|
|
¥ LIBOR
|
|
1.69%
|
October 2013
|
|
|
4,500.0
|
|
|
¥ LIBOR
|
|
1.58%
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
90,594.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
Telenet
Interest Rate Caps:
Each contract establishes the maximum EURIBOR rate payable by a
Telenet subsidiary on the indicated notional amount, as detailed
below:
|
|
|
|
|
|
|
|
|
Maturity date
|
|
Notional amount
|
|
|
Maximum rate
|
|
|
|
in millions
|
|
|
|
|
|
September 2009
|
|
|
35.5
|
|
|
|
4.0
|
%
|
Telenet
Interest Rate Collars:
Each contract establishes the minimum and maximum EURIBOR rate
payable by a Telenet subsidiary on the indicated notional
amount, as detailed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity date
|
|
Notional amount
|
|
|
Minimum rate
|
|
|
Maximum rate
|
|
|
|
in millions
|
|
|
|
|
|
|
|
|
December 2009
|
|
|
375.0
|
|
|
|
2.5
|
%
|
|
|
5.5
|
%
|
December 2011
|
|
|
50.0
|
|
|
|
2.5
|
%
|
|
|
4.5
|
%
|
December 2011
|
|
|
25.0
|
|
|
|
2.5
|
%
|
|
|
5.5
|
%
|
Foreign
Exchange Contracts
Several of our subsidiaries have outstanding foreign currency
forward contracts. Changes in the fair value of these contracts
are recorded in realized and unrealized gains (losses) on
financial and derivative instruments in our condensed
consolidated statements of operations. The following table
summarizes our outstanding foreign currency forward contracts at
June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
|
|
|
|
|
|
Currency purchased
|
|
|
sold
|
|
|
|
LGI subsidiary
|
|
forward
|
|
|
forward
|
|
|
Maturity dates
|
|
|
amounts in millions
|
|
|
|
|
UPC Broadband Holding
|
|
CZK
|
266.0
|
|
|
|
9.3
|
|
|
July 2007
|
UPC Broadband Holding
|
|
PLN
|
35.0
|
|
|
|
9.3
|
|
|
July 2007
|
UPC Broadband Holding
|
|
HUF
|
4,800.0
|
|
|
|
19.5
|
|
|
July 2007
|
UPC Broadband Holding
|
|
£
|
4.0
|
|
|
|
5.9
|
|
|
July 2007
|
UPC Broadband Holding
|
|
CHF
|
130.0
|
|
|
|
78.6
|
|
|
July 2007
|
UPC Broadband Holding
|
|
|
15.4
|
|
|
RON
|
49.0
|
|
|
July 2007
|
J:COM
|
|
$
|
15.5
|
|
|
¥
|
1,854.4
|
|
|
July 2007 January 2008
|
VTR
|
|
$
|
39.3
|
|
|
CLP
|
21,008.1
|
|
|
July 2007 June 2008
|
Telenet
|
|
$
|
362.7
|
|
|
|
304.0
|
|
|
December 2008
|
Austar Entertainment
|
|
$
|
42.1
|
|
|
AUD
|
55.7
|
|
|
July 2007 March 2009
|
Liberty Global Europe Financing BV
|
|
$
|
121.9
|
|
|
CLP
|
65,789.0
|
|
|
July 2007 December
2007
|
Sumitomo
Collar and Secured Borrowing
During the second quarter of 2007, our wholly owned indirect
subsidiary, Liberty Programming Japan, Inc. (Liberty Programming
Japan), executed a zero cost share collar transaction (the
Sumitomo Collar) with respect to the underlying ordinary shares
of Sumitomo Corporation (Sumitomo) stock received by Liberty
Programming Japan from Sumitomo in connection with the
restructuring of Liberty Programming Japans indirect
interest in
20
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
Jupiter Shop Channel Co., Ltd. (Jupiter Shop Channel) and
certain other assets. As further described in note 13,
Liberty Programming Japan received 45,652,043 Sumitomo shares
with a transaction date market value of ¥104.5 billion
($854.7 million at the transaction date) upon the closing
of this transaction on July 3, 2007. The Sumitomo Collar is
comprised of purchased put options exercisable by Liberty
Programming Japan and written call options exercisable by the
counterparty. The Sumitomo Collar effectively hedges the value
of our investment in Sumitomo shares from losses due to market
price decreases below a per share value of ¥2,118.50
($17.19) while retaining gains from market price increases up to
a per share value of ¥2,787.50 ($22.61). The Sumitomo
Collar provides for a projected gross cash ordinary dividend to
be paid per Sumitomo share during the term of the Sumitomo
Collar. If the actual dividend paid does not exactly match the
projected dividend, then an adjustment amount shall be payable
between the parties to the Sumitomo Collar depending on the
dividend actually paid by Sumitomo. The Sumitomo Collar may, at
the option of Liberty Programming Japan, be settled in Sumitomo
shares or in cash. The Sumitomo Collar also includes a purchased
fair value put option, which effectively provides Liberty
Programming Japan with the ability to sell the Sumitomo shares
when the market price is trading between the put and call strike
prices. The Sumitomo Collar matures in five equal semi-annual
installments beginning on May 22, 2016.
We account for the Sumitomo Collar at fair value with changes in
fair value reported in our condensed consolidated statements of
operations. The fair value of the Sumitomo Collar as of
June 30, 2007 was a liability of $30.2 million.
The Sumitomo Collar and related agreements also provide Liberty
Programming Japan with the ability to borrow funds on a secured
basis. Borrowings under these agreements, which are secured by a
pledge of 100% of the Sumitomo shares owned by Liberty
Programming Japan, bear interest at 1.883%, mature in five equal
semi-annual installments beginning on May 22, 2016, and are
included in long-term debt and capital lease obligations in our
condensed consolidated balance sheet. On June 28, 2007,
Liberty Programming Japan borrowed ¥93.660 billion
($757.6 million at the transaction date) under these
agreements (the Sumitomo Collar Loan). The pledge arrangement
entered into by Liberty Programming Japan provides that Liberty
Programming Japan will receive all dividends paid on the
Sumitomo shares and be able to exercise all voting and
consensual rights.
21
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
Property
and equipment, net
The details of property and equipment and the related
accumulated depreciation are set forth below:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
Cable distribution systems
|
|
$
|
11,942.2
|
|
|
$
|
9,835.5
|
|
Support equipment, buildings and
land
|
|
|
1,511.8
|
|
|
|
1,224.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,454.0
|
|
|
|
11,060.0
|
|
Accumulated depreciation
|
|
|
(3,869.6
|
)
|
|
|
(2,923.1
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
9,584.4
|
|
|
$
|
8,136.9
|
|
|
|
|
|
|
|
|
|
|
Goodwill
Changes in the carrying amount of goodwill for the six months
ended June 30, 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
Release of
|
|
|
|
|
|
currency
|
|
|
|
|
|
|
|
|
|
Acquisition
|
|
|
pre-acquisition
|
|
|
|
|
|
translation
|
|
|
|
|
|
|
January 1,
|
|
|
related
|
|
|
valuation
|
|
|
Adoption of
|
|
|
adjustments
|
|
|
June 30,
|
|
|
|
2007
|
|
|
adjustments
|
|
|
allowance
|
|
|
FIN 48
|
|
|
and other
|
|
|
2007
|
|
|
|
amounts in millions
|
|
|
UPC Broadband Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Netherlands
|
|
$
|
1,403.4
|
|
|
$
|
|
|
|
$
|
(55.6
|
)
|
|
$
|
(27.3
|
)
|
|
$
|
40.4
|
|
|
$
|
1,360.9
|
|
Switzerland
|
|
|
2,349.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3.9
|
)
|
|
|
2,346.0
|
|
Austria
|
|
|
791.1
|
|
|
|
|
|
|
|
|
|
|
|
(8.8
|
)
|
|
|
20.7
|
|
|
|
803.0
|
|
Ireland
|
|
|
250.0
|
|
|
|
|
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
6.7
|
|
|
|
256.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Western Europe
|
|
|
4,794.4
|
|
|
|
|
|
|
|
(55.6
|
)
|
|
|
(36.5
|
)
|
|
|
63.9
|
|
|
|
4,766.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hungary
|
|
|
402.3
|
|
|
|
3.3
|
|
|
|
|
|
|
|
(9.6
|
)
|
|
|
22.1
|
|
|
|
418.1
|
|
Other Central and Eastern Europe
|
|
|
1,048.4
|
|
|
|
(4.5
|
)
|
|
|
|
|
|
|
(11.6
|
)
|
|
|
27.0
|
|
|
|
1,059.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Central and Eastern Europe
|
|
|
1,450.7
|
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
(21.2
|
)
|
|
|
49.1
|
|
|
|
1,477.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UPC Broadband Division
|
|
|
6,245.1
|
|
|
|
(1.2
|
)
|
|
|
(55.6
|
)
|
|
|
(57.7
|
)
|
|
|
113.0
|
|
|
|
6,243.6
|
|
Telenet (Belgium)
|
|
|
|
|
|
|
1,555.5
|
|
|
|
|
|
|
|
|
|
|
|
43.0
|
|
|
|
1,598.5
|
|
J:COM (Japan)
|
|
|
2,354.6
|
|
|
|
6.7
|
|
|
|
(3.5
|
)
|
|
|
|
|
|
|
(78.5
|
)
|
|
|
2,279.3
|
|
VTR (Chile)
|
|
|
527.6
|
|
|
|
|
|
|
|
|
|
|
|
(4.8
|
)
|
|
|
6.8
|
|
|
|
529.6
|
|
Corporate and other
|
|
|
815.3
|
|
|
|
8.0
|
|
|
|
|
|
|
|
(83.0
|
)
|
|
|
17.4
|
|
|
|
757.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total LGI
|
|
$
|
9,942.6
|
|
|
$
|
1,569.0
|
|
|
$
|
(59.1
|
)
|
|
$
|
(145.5
|
)
|
|
$
|
101.7
|
|
|
$
|
11,408.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
Intangible
assets subject to amortization
The details of our amortizable intangible assets are set forth
below:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
Gross carrying
amount:
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
2,210.4
|
|
|
$
|
1,797.0
|
|
Other
|
|
|
432.6
|
|
|
|
120.0
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,643.0
|
|
|
$
|
1,917.0
|
|
|
|
|
|
|
|
|
|
|
Accumulated
amortization:
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
(465.6
|
)
|
|
$
|
(308.2
|
)
|
Other
|
|
|
(62.3
|
)
|
|
|
(30.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(527.9
|
)
|
|
$
|
(338.7
|
)
|
|
|
|
|
|
|
|
|
|
Net carrying
amount:
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
1,744.8
|
|
|
$
|
1,488.8
|
|
Other
|
|
|
370.3
|
|
|
|
89.5
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,115.1
|
|
|
$
|
1,578.3
|
|
|
|
|
|
|
|
|
|
|
23
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
|
|
(7)
|
Debt
and Capital Lease Obligations
|
The components of our consolidated debt and capital lease
obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Unused borrowing
|
|
|
|
|
|
|
|
|
|
average
|
|
|
capacity (b)
|
|
|
Carrying value (c)
|
|
|
|
interest
|
|
|
Borrowing
|
|
|
U.S. $
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
rate (a)
|
|
|
currency
|
|
|
equivalent
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
Parent:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LGI Credit Facility
|
|
|
7.87
|
%
|
|
|
|
|
|
$
|
|
|
|
$
|
215.0
|
|
|
$
|
|
|
Subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPC Broadband Holding Bank Facility
|
|
|
6.22
|
%
|
|
|
1,320.0
|
|
|
|
1,786.9
|
|
|
|
6,502.9
|
|
|
|
4,010.6
|
|
UPC Holding 8.0% Senior Notes
due 2016 (formerly the Cablecom Luxembourg 8.0% Senior
Notes due 2016) (d)
|
|
|
8.00
|
%
|
|
|
|
|
|
|
|
|
|
|
406.1
|
|
|
|
395.7
|
|
UPC Holding 7.75% Senior Notes
due 2014
|
|
|
7.75
|
%
|
|
|
|
|
|
|
|
|
|
|
676.9
|
|
|
|
659.5
|
|
UPC Holding 8.63% Senior Notes
due 2014
|
|
|
8.63
|
%
|
|
|
|
|
|
|
|
|
|
|
406.1
|
|
|
|
395.7
|
|
UPC Holding Facility
|
|
|
7.03
|
%
|
|
|
|
|
|
|
|
|
|
|
338.4
|
|
|
|
|
|
LG Switzerland PIK Loan Facility
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
775.7
|
|
Telenet Senior Credit Facility
|
|
|
5.02
|
%
|
|
|
200.0
|
|
|
|
270.7
|
|
|
|
782.5
|
|
|
|
|
|
Telenet Senior Discount Notes
|
|
|
11.50
|
%
|
|
|
|
|
|
|
|
|
|
|
312.8
|
|
|
|
|
|
Telenet Senior Notes
|
|
|
9.00
|
%
|
|
|
|
|
|
|
|
|
|
|
502.5
|
|
|
|
|
|
J:COM Credit Facility
|
|
|
1.16
|
%
|
|
¥
|
30,000.0
|
|
|
|
243.4
|
|
|
|
568.9
|
|
|
|
642.5
|
|
Other J:COM debt
|
|
|
1.25
|
%
|
|
¥
|
8,000.0
|
|
|
|
64.9
|
|
|
|
919.3
|
|
|
|
966.7
|
|
UGC Convertible Notes (e)
|
|
|
1.75
|
%
|
|
|
|
|
|
|
|
|
|
|
932.4
|
|
|
|
702.3
|
|
Sumitomo Collar Loan (f)
|
|
|
1.88
|
%
|
|
|
|
|
|
|
|
|
|
|
761.2
|
|
|
|
|
|
VTR Bank Facility (g)
|
|
|
7.32
|
%
|
|
CLP
|
136,391.6
|
|
|
|
258.5
|
|
|
|
475.0
|
|
|
|
475.0
|
|
Secured borrowing on ABC Family
Worldwide, Inc. (ABC Family) preferred stock
|
|
|
7.42
|
%
|
|
|
|
|
|
|
|
|
|
|
345.0
|
|
|
|
345.0
|
|
Austar Bank Facility
|
|
|
7.63
|
%
|
|
AUD
|
225.7
|
|
|
|
191.9
|
|
|
|
317.1
|
|
|
|
306.4
|
|
Chellomedia Bank Facility
|
|
|
7.35
|
%
|
|
|
|
|
|
|
|
|
|
|
299.8
|
|
|
|
229.1
|
|
Liberty Puerto Rico Bank Facility
|
|
|
7.36
|
%
|
|
$
|
10.0
|
|
|
|
10.0
|
|
|
|
150.0
|
|
|
|
149.9
|
|
Cablecom Luxembourg Bank Facility
and Cablecom GmbH Revolving Facility
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,094.7
|
|
Cablecom Luxembourg Old Senior Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
424.8
|
|
Other
|
|
|
5.05
|
%
|
|
|
|
|
|
|
|
|
|
|
331.6
|
|
|
|
206.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
5.70
|
%
|
|
|
|
|
|
$
|
2,826.3
|
|
|
|
15,243.5
|
|
|
|
11,780.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J:COM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
417.3
|
|
|
|
423.8
|
|
Telenet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70.4
|
|
|
|
|
|
Other subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25.2
|
|
|
|
26.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital lease obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
512.9
|
|
|
|
449.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt and capital lease
obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,756.4
|
|
|
|
12,230.1
|
|
Current maturities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(767.7
|
)
|
|
|
(1,384.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and capital lease
obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,988.7
|
|
|
$
|
10,845.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
|
|
|
(a) |
|
Represents the weighted average interest rate in effect at
June 30, 2007 for all borrowings outstanding pursuant to
each debt instrument including the applicable margin. The
interest rates presented do not include the impact of our
interest rate exchange agreements. See note 5. |
|
(b) |
|
Unused borrowing capacity represents the maximum availability
under the applicable facility at June 30, 2007 without
regard to covenant compliance calculations. At June 30,
2007, the full amount of unused borrowing capacity was available
to be borrowed under each of the respective facilities except as
indicated below. At June 30, 2007, the availability of the
unused borrowing capacity of the UPC Broadband Holding Bank
Facility and the Austar Bank Facility was limited by covenant
compliance calculations. Based on the June 30, 2007
covenant compliance calculations, the aggregate amount that will
be available for borrowing when the June 30, 2007 bank
reporting requirements have been completed is
601.5 million ($814.3 million) under the UPC
Broadband Holding Bank Facility and AUD 222.3 million
($189.0 million) under the Austar Bank Facility. |
|
(c) |
|
Includes unamortized debt discount or premium, if applicable. |
|
(d) |
|
As further described below, the Cablecom Luxembourg
8.0% Senior Notes due 2016 were assumed by UPC Holding on
April 17, 2007. |
|
(e) |
|
The UGC Convertible Notes are reported at fair value. |
|
(f) |
|
See note 5 for information regarding the Sumitomo Collar
Loan. |
|
(g) |
|
Pursuant to terms of the UPC Broadband Holding Bank Facility
(see below), we are required to fund a cash collateral account
in an amount equal to the outstanding principal and interest
under the VTR Bank Facility. This cash collateral account, which
is presented as long-term restricted cash in our condensed
consolidated balance sheet, had a balance of $482.2 million
at June 30, 2007. |
LGI
Revolving Credit Facility
In June 2007, LGI entered into a $215.0 million Senior
Revolving Facility Agreement (the LGI Credit Facility). The LGI
Credit Facility is available to be used to fund the general
corporate and working capital requirements of LGI and its
subsidiaries. The applicable interest payable under the LGI
Credit Facility is LIBOR plus 2.5%. The final maturity date of
June 25, 2009 may be extended, at LGIs option,
to June 25, 2010. Amounts that are repaid by LGI under the
LGI Credit Facility may be re-borrowed. The LGI Credit Facility
has a commitment fee on undrawn and uncancelled commitments of
0.75% per year. At June 30, 2007, the LGI Credit Facility
was fully drawn.
25
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
UPC
Broadband Holding Bank Facility Refinancing
Transactions
In April and May 2007, our indirect subsidiaries UPC Financing
Partnership (the Partnership) and UPC Broadband Holding
(together, the Borrowers) entered into six additional facility
accession agreements (collectively, the Accession Agreements)
pursuant to UPC Broadband Holdings senior secured credit
agreement (as amended and restated, the UPC Broadband Holding
Bank Facility). The Accession Agreements each provide for an
additional term loan facility under the UPC Broadband Holding
Bank Facility. Including the six term loan facilities added by
the Accession Agreements, the UPC Broadband Holding Bank
Facility was comprised of eight facilities at June 30,
2007, as follows (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
|
|
|
|
|
Facility amount
|
|
|
|
|
|
Unused
|
|
|
Outstanding
|
|
|
|
|
|
|
(in borrowing
|
|
|
|
|
|
borrowing
|
|
|
principal
|
|
Facility
|
|
Effective date
|
|
|
currency)
|
|
|
Interest rate
|
|
|
capacity
|
|
|
amount
|
|
|
I
|
|
|
May 14, 2007
|
|
|
|
250.0
|
|
|
|
EURIBOR + 2.50
|
%
|
|
$
|
338.4
|
|
|
$
|
|
|
L
|
|
|
July 3, 2006
|
|
|
|
830.0
|
|
|
|
EURIBOR + 2.25
|
%
|
|
|
1,110.1
|
|
|
|
13.5
|
|
M1 (a)
|
|
|
April 17, 2007
|
|
|
|
1,695.0
|
|
|
|
EURIBOR + 2.00
|
%
|
|
|
|
|
|
|
2,294.7
|
|
M2 (b)
|
|
|
April 16, 2007
|
|
|
|
1,175.0
|
|
|
|
EURIBOR + 2.00
|
%
|
|
|
|
|
|
|
1,590.7
|
|
M3 (c)
|
|
|
May 18, 2007
|
|
|
|
520.0
|
|
|
|
EURIBOR + 2.00
|
%
|
|
|
|
|
|
|
704.0
|
|
M4 (d)
|
|
|
May 14, 2007
|
|
|
|
250.0
|
|
|
|
EURIBOR + 2.00
|
%
|
|
|
338.4
|
|
|
|
|
|
N1 (e)
|
|
|
May 16, 2007
|
|
|
$
|
1,775.0
|
|
|
|
LIBOR + 1.75
|
%
|
|
|
|
|
|
|
1,775.0
|
|
N2 (f)
|
|
|
May 18, 2007
|
|
|
$
|
125.0
|
|
|
|
LIBOR + 1.75
|
%
|
|
|
|
|
|
|
125.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,786.9
|
|
|
$
|
6,502.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The proceeds of this facility, which we refer to as
Facility M1, were used to refinance all of the
outstanding borrowings under Facility J1 and Facility K1 under
the UPC Broadband Holding Bank Facility. |
|
(b) |
|
The proceeds of this facility, which we refer to as
Facility M2, were indirectly used to repay the
outstanding borrowings under the senior secured credit facility
agreement for Cablecom Luxembourg and Cablecom GmbH, dated
December 5, 2005 (the Cablecom Luxembourg Bank Facility),
and, together with available cash of 207.2 million
($280.8 million at the transaction date), to repay the
outstanding borrowings under the
Payment-in-Kind
(PIK) facility agreement of Liberty Global Switzerland, Inc.,
dated September 30, 2005 (the LG Switzerland PIK Loan
Facility). Effective April 16, 2007, Cablecom and its
subsidiaries became subsidiaries of UPC Broadband Holding. |
|
(c) |
|
The proceeds of this facility, which we refer to as
Facility M3, were used to fund the cash collateral
account that secures the senior secured credit facility for VTR,
dated September 20, 2006 (the VTR Bank Facility) and for
general corporate and working capital purposes. |
|
(d) |
|
The proceeds of this facility, which we refer to as
Facility M4, (and together with Facilities M1, M2
and M3, as Facility M) are available to be drawn as
follows: (i) 100% of the facility proceeds are available to
be drawn through February 14, 2008 (the 50% Date) and
(ii) a maximum of 50% of the facility proceeds (if not
already utilized under (i) above) from the 50% Date up to
May 14, 2008. Commitments in the amount of
250 million ($338.4 million) under Facility I
under the UPC Broadband Holding Bank Facility have been
cancelled by the Borrowers upon execution of the Accession
Agreement for Facility M4. Facility M4 has a commitment fee on
undrawn and uncancelled commitments of 1.0% per year. |
|
(e) |
|
The proceeds of this facility, which we refer to as
Facility N1, were used to refinance all of the
outstanding borrowings under Facility J2 and Facility K2 under
the UPC Broadband Holding Bank Facility. |
26
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
|
|
|
(f) |
|
The proceeds of this facility, which we refer to as
Facility N2, (and together with Facility N1, as
Facility N), were used for general corporate and
working capital purposes. |
Facility M and Facility N have a final maturity date falling on
the earlier of (i) December 31, 2014 and (ii) the
date (the Relevant Date) falling 90 days prior to the date
on which UPC Holdings existing Senior Notes due 2014 fall
due if such Senior Notes have not been repaid, refinanced or
redeemed prior to such Relevant Date. Any voluntary prepayment
of all or part of the principal amount of Facility M (other than
Facility M4) or Facility N made on or before May 16, 2008
will include a premium of 1% such that the prepaid amount will
equal 101% of such principal amount plus accrued interest. Any
voluntary prepayment of all or part of the principal amount of
Facility M4 made within 12 months of the relevant date of
the last drawing under this facility will include a premium of
1% such that the prepaid amount will equal 101% of such
principal amount plus accrued interest.
In connection with the refinancing of Facilities J1, J2, K1 and
K2, UPC Broadband Holding recognized debt extinguishment losses
of 6.2 million ($8.4 million at the average rate
for the period) during the second quarter of 2007, representing
the write-off of unamortized deferred financing costs.
Pursuant to an amendment letter dated April 16, 2007, the
UPC Broadband Holding Bank Facility has also been amended to
permit the acquisition of LGIs indirect 80% interest in
VTR (either directly or indirectly by the acquisition of its
holding company) and its subsidiaries by a member of the
Borrower Group (as defined in the UPC Broadband Holding Bank
Facility) (the VTR Transfer). The amendment letter also amended
the terms of the UPC Broadband Holding Bank Facility to, among
other things, permit security interests granted under the VTR
Bank Facility and over related deposits or similar arrangements
and to permit the disposal of all or any part of any member of
the VTR Group (consisting of VTR, its subsidiaries and its
parent holding company) without impact on the ability to dispose
of other assets in the Borrower Group under applicable covenants.
The VTR Transfer was completed on May 23, 2007, when
certain of our subsidiaries that collectively own an 80%
interest in VTR were transferred to a subsidiary of UPC
Broadband Holding. In connection with the VTR Transfer,
VTRs then existing bank facilities were refinanced. A
single lender acquired the interests and was subrogated to the
rights of the lenders under VTRs then existing term loan B
facility. The existing term loan B facility was then amended and
restated pursuant to an Amended and Restated Senior Secured
Credit Facility Agreement dated May 18, 2007 and effective
May 25, 2007 (the VTR Bank Facility). The amendments
included, among other things, a 100 basis point reduction
in the interest rate margin payable under the term loan B
facility and the elimination of certain restrictive covenants
and undertakings. VTRs then existing term loan A and term
loan C facilities were cancelled and replaced in the VTR Bank
Facility on substantially the same terms. Pursuant to the terms
of the UPC Broadband Holding Bank Facility, we are required to
fund a cash collateral account in an amount equal to the
outstanding principal and interest payable under the VTR Bank
Facility. In this regard we used $482.2 million of
borrowings under Facility M3 to fund a deposit with the new
lender securing VTRs obligations under the VTR Bank
Facility. In connection with the refinancing of VTRs bank
facilities, VTR recognized debt extinguishment losses of CLP
10.3 billion ($19.6 million at the average rate for
the period) during the second quarter of 2007, representing the
write-off of unamortized deferred financing costs.
In June 2007, UPC Holding entered into a 250 million
($338.4 million) term loan facility (the UPC Holding
Facility). The UPC Holding Facility was fully drawn on
June 19, 2007. UPC Holding may, at its option, on or before
May 31, 2008 (the Conversion Date), require each lender
under the UPC Holding Facility to become an additional facility
lender under the UPC Broadband Holding Bank Facility and the
outstanding commitments of the lenders under the UPC Holding
Facility will be rolled over into Facility M under the UPC
Broadband Holding Bank Facility (the Conversion). The terms and
conditions of the UPC Holding Facility are similar to the terms
of the indenture for UPC Holdings existing Senior Notes
due 2014, however, in the event UPC Holding elects to execute
the Conversion, the UPC Holding Facility will be part of
Facility M and will be subject to the terms and conditions
27
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
of the UPC Broadband Holding Bank Facility. The applicable
interest payable under the UPC Holding Facility is
(i) EURIBOR plus 2.75% until May 31, 2008 and
(ii) thereafter, EURIBOR plus 2.0%. The final maturity date
of the UPC Holding Facility is December 31, 2014 unless the
Conversion does not occur, in which case, it will be
May 31, 2008. Any voluntary prepayment of all or part of
the principal amount of the UPC Holding Facility made on or
prior to May 16, 2008 will include a premium of 1% such
that the prepaid amount will equal 101% of such principal amount
plus accrued interest.
Redemption
of Cablecom Luxembourg Old Fixed Rate Notes
On April 16, 2007, Cablecom Luxembourg redeemed in full its
9.375% Senior Notes due 2014 (the Cablecom Luxembourg Old
Fixed Rate Notes) at a redemption price of 109.375% of the
principal amount plus accrued interest through the redemption
date. The total amount of the redemption of
330.7 million ($448.1 million at the transaction
date) was funded by the Cablecom Luxembourg Defeasance Account,
an escrow account created in October 2006 for the benefit of the
holders of the Cablecom Luxembourg Old Fixed Rate Notes in
connection with the covenant defeasance of such Notes. At
December 31, 2006, the amount held in the Cablecom
Luxembourg Defeasance Account (331.6 million
($437.4 million at the December 31, 2006 exchange
rate)) was included in current restricted cash in our condensed
consolidated balance sheets. In connection with the redemption
of the Cablecom Luxembourg Old Fixed Rate Notes, Cablecom
Luxembourg recognized a gain on extinguishment of debt of CHF
6.3 million ($5.2 million at the average rate for the
period), representing the write-off of unamortized premium.
Assumption
of Cablecom Luxembourg Senior Notes by UPC Holding
On April 17, 2007, Cablecom Luxembourgs
300 million ($406.1 million) 8.0% Senior
Notes due 2016 became the direct obligation of UPC Holding on
terms substantially identical (other than as to interest,
maturity and redemption) to those governing UPC Holdings
existing Senior Notes due 2014.
Telenet
Senior Credit Facility
In May 2006, certain direct and indirect subsidiaries of Telenet
Communications NV (Telenet Communications), a wholly owned
subsidiary of Telenet, (as borrowers and guarantors) replaced
the then existing bank credit facility with a new senior credit
facility agreement (the Telenet Senior Credit Facility), with
certain banks and financial institutions as lenders. The Telenet
Senior Credit Facility matures on March 31, 2011.
The Telenet Senior Credit Facility consists of three facilities:
(i) a 600.0 million ($812.2 million)
amortizing loan facility, which was drawn in full upon closing
(the Telenet Tranche A Facility), (ii) a
200 million ($270.7 million) revolving credit
facility which was undrawn as of June 30, 2007 (the Telenet
Revolving Facility) and (iii) an uncommitted facility of up
to 200.0 million ($270.7 million).
The Telenet Tranche A Facility and the Telenet Revolving
Facility currently bear interest equal to EURIBOR plus 0.90%,
and can vary from 0.70% to 1.25% subject to an interest
margin ratchet based on the ratio of Telenets Net Cash Pay
Debt to Consolidated EBITDA. In addition to customary
restrictive covenants, prepayment requirements and events of
default, the Telenet Senior Credit Facility requires compliance
with various financial covenants including Net Cash Pay Debt to
Consolidated EBITDA and Consolidated EBITDA to Total Cash
Interest Payable. The borrowers under the Telenet Senior Credit
Facility are permitted to make certain distributions and
restricted payments to shareholders of Telenet provided that
such payment or distribution does not breach the terms of the
indentures for the Telenet Senior Discount Notes or the Telenet
Senior Notes, each as described below.
The Telenet Revolving Facility has a commitment fee on undrawn
and uncancelled commitments of 40% of the applicable margin of
the Telenet Revolving Facility.
28
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
At June 30, 2007, the outstanding principal balance under
the Telenet Tranche A Facility was 578.0 million
($782.5 million).
Telenet
Senior Discount Notes
On December 22, 2003, Telenet issued Senior Discount Notes
(the Telenet Senior Discount Notes) at 57.298% of par value with
a principal amount due at maturity of $558.0 million,
receiving net proceeds of $300.3 million. Interest on the
Telenet Senior Discount Notes began accreting from
December 22, 2003 at an annual rate of 11.5%, compounded
semi-annually. Commencing on June 15, 2009 until maturity
on June 15, 2014, interest is payable semi-annually at an
annual rate of 11.5%. There are no required principal repayments
prior to maturity. During the fourth quarter of 2005, a portion
of the accreted value outstanding under the Telenet Senior
Discount Notes was redeemed. At June 30, 2007, the accreted
value of the Telenet Senior Discount Notes was
228.2 million ($308.9 million).
The Telenet Senior Discount Notes are senior unsecured
obligations of Telenet and are subordinated to the obligations
of Telenets subsidiaries, including the obligations of
Telenet Communications under the Telenet Senior Notes, as
defined below.
In addition to customary restrictive covenants, redemption
requirements and events of default, the Telenet Senior Discount
Notes require compliance with (i) a limitation on
indebtedness based on an incurrence-based test and Leverage
Ratio, as defined in the indenture, (ii) limitations on
restricted payments and (iii) limitations on sales of
assets and subsidiary stock.
At any time on or after December 15, 2008, Telenet may
redeem some or all of the Telenet Senior Discount Notes at the
following redemption prices (expressed as a percentage of the
accreted value of the Telenet Senior Discount Notes) if redeemed
during the
12-month
period commencing on December 15 of the years set out below:
|
|
|
|
|
Year
|
|
Redemption Price
|
|
|
2008
|
|
|
105.750
|
%
|
2009
|
|
|
103.833
|
%
|
2010
|
|
|
101.917
|
%
|
2011 and thereafter
|
|
|
100.000
|
%
|
In addition, at any time prior to December 15, 2008,
Telenet may redeem some or all of the Telenet Senior Discount
Notes at a redemption price equal to 100% of the accreted value
of the Telenet Senior Discount Notes to be redeemed, plus a
make-whole premium.
Telenet may redeem all of the Telenet Senior Discount Notes at a
price equal to their accreted value upon the occurrence of
specified changes in tax law. In the event of a Change of
Control, as defined in the indenture, Telenet may be required to
offer to purchase the Telenet Senior Discount Notes at a
purchase price equal to 101% of the accreted value.
Telenet
Senior Notes
On December 22, 2003, Telenet Communications issued
500.0 million ($619.1 million at the transaction
date) principal amount of 9.0% Senior Notes (the Telenet
Senior Notes). The Telenet Senior Notes mature on
December 15, 2013. During the fourth quarter of 2005, a
portion of the outstanding principal amount of the Telenet
Senior Notes was redeemed. At June 30, 2007, the
outstanding principal balance of the Telenet Senior Notes was
368.4 million ($498.7 million).
29
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
The Telenet Senior Notes are senior obligations of Telenet
Communications and rank equally with all of Telenet
Communications existing and future senior debt. As
indebtedness of a subsidiary of Telenet, the Telenet Senior
Notes are effectively senior in right of payment to the Telenet
Senior Discount Notes. Certain subsidiaries of Telenet
Communications guarantee the Telenet Senior Notes on a senior
subordinated basis. Telenet guarantees the Telenet Senior Notes
on a senior basis, which ranks equally with Telenets
obligations under the Telenet Senior Discount Notes. The Telenet
Senior Notes and the guarantees of the Telenet Senior Notes are
secured by a second priority security interest in the shares of
certain of Telenets subsidiaries and by a second ranking
pledge of certain intercompany loans. The Telenet Senior Notes
contain covenants and events of default similar to the covenants
governing the Telenet Senior Discount Notes described above.
At any time on or after December 15, 2008, Telenet
Communications may redeem some or all of the Telenet Senior
Notes at the following redemption prices (expressed as a
percentage of the principal amount), plus accrued and unpaid
interest, if redeemed during the
12-month
period commencing on December 15 of the years set out below:
|
|
|
|
|
Year
|
|
Redemption Price
|
|
|
2008
|
|
|
104.5
|
%
|
2009
|
|
|
103.0
|
%
|
2010
|
|
|
101.5
|
%
|
2011 and thereafter
|
|
|
100.0
|
%
|
In addition, at any time prior to December 15, 2008,
Telenet Communications may redeem some or all of the Telenet
Senior Notes at a redemption price equal to 100% of the
principal amount (plus accrued and unpaid interest) of the
Telenet Senior Discount Notes to be redeemed, plus a
make-whole premium.
In the event of a Change of Control, as defined in the
indenture, Telenet Communications may be required to offer to
purchase the notes at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest
thereon.
Other
Telenet Obligations
Pursuant to agreements with four associations of municipalities
in Belgium, which we refer to as the pure intercommunales or the
PICs, Telenet has the exclusive right to provide
point-to-point services and the non-exclusive right to provide
certain other services on the broadband network owned by the
PICs (the Telenet Partner Network). In return for these usage
rights, Telenet issued stock to the PICs and, in addition,
agreed to pay for the capital upgrade of the Telenet Partner
Network so that the Telenet Partner Network would be
technologically capable of providing two-way communications
services (the two-way upgrade). The present value of amounts
payable by Telenet to the PICs pursuant to these agreements that
correspond to the two-way upgrade of the Telenet Partner Network
has been reflected as a financed obligation, with a
corresponding amount reflected as an intangible asset associated
with Telenets right to use the Telenet Partner Network, as
described above. As of June 30, 2007, this financed
obligation totaled 86.4 million
($117.0 million), and is included within other debt in the
above table.
Telenet is required to make payments to the PICs under these
agreements during the term of its usage rights. The usage rights
were granted for an initial term of 50 years, expiring in
2046, and automatically renew for consecutive terms of
15 years unless terminated with ten years notice. Because
the life of the two-way upgrade was estimated to be
20 years at inception, contractual payments after year 20
of the agreements have not been reflected as an asset or in the
financed obligation mentioned above. In addition, Telenet has a
legal obligation to reimburse the PICs for 20% of the
replacements and extensions to the Telenet Partner Network that
are in excess of the cost of the
30
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
two-way upgrade. Amounts recorded with respect to this
obligation are treated as additions to the aforementioned
intangible asset.
The intangible asset includes components that are being
amortized over periods ranging from 10 to 20 years, which
are based on the estimated respective useful lives of the
underlying upgraded assets of the Telenet Partner Network. We
include amortization of this intangible asset in amortization
expense in our condensed consolidated statement of operations.
Pursuant to a separate agreement, Telenet also compensates the
PICs for operations and maintenance services performed with
respect to the Telenet Partner Network. Amounts incurred with
respect to this agreement are included in operating expenses in
our condensed consolidated statement of operations.
As further described in note 11, certain aspects of the
above-described agreements between Telenet and the PICs are the
subject of ongoing negotiations and litigation.
Refinancing
of Liberty Puerto Rico Bank Facility
On June 15, 2007, Liberty Puerto Rico refinanced its then
existing bank facility pursuant to a new senior secured bank
credit facility (the Liberty Puerto Rico Bank Facility). The
Liberty Puerto Rico Bank Facility provides for (i) a
$150 million seven-year amortizing term loan (the LPR Term
Loan), (ii) a $20 million seven-year delayed draw
Senior Credit Facility (the LPR Delayed Draw Term Loan) and
(iii) a $10 million six-year revolving loan (the LPR
Revolving Loan). Borrowings under the Liberty Puerto Rico Bank
Facility, which were used to (i) refinance all of the
outstanding borrowings under Liberty Puerto Ricos prior
bank facility and (ii) fund the general corporate and
working capital requirements of Liberty Puerto Rico, bear
interest at a margin of 2.00% over LIBOR. The LPR Revolving Loan
has a final maturity in 2013 and the LPR Term Loan and LPR
Delayed Draw Term Loan each have a final maturity in 2014. The
LPR Delayed Draw Term Loan, which is available to be drawn up to
March 15, 2008, has a commitment fee on undrawn balances of
1.0% per year. The LPR Revolving Loan has a commitment fee on
undrawn balances of 0.5% per year.
In addition to customary restrictive covenants, prepayment
requirements and events of default, the Liberty Puerto Rico Bank
Facility requires compliance with various financial covenants
such as: (i) Net Debt to Annualized EBITDA and
(ii) Annualized EBITDA to Total Cash Interest Charges, each
capitalized term as defined in the Liberty Puerto Rico Bank
Facility. The Liberty Puerto Rico Bank Facility permits Liberty
Puerto Rico to transfer funds to its parent company (and
indirectly to LGI) through loans, dividends or other
distributions provided that Liberty Puerto Rico maintains
compliance with applicable covenants.
The Liberty Puerto Rico Bank Facility is secured by pledges over
(i) the Liberty Puerto Rico shares indirectly owned by our
company and (ii) certain other assets owned by Liberty
Puerto Rico. The Liberty Puerto Rico Bank Facility also requires
that Liberty Puerto Rico maintain a $10 million cash
collateral account to protect against losses in connection with
an uninsured casualty event.
Stock
Repurchases
On March 8, 2006, our board of directors approved a stock
repurchase program under which we were authorized to acquire
$250 million of our LGI Series A and Series C
common stock through open market transactions or privately
negotiated transactions, which may include derivative
transactions. The timing of the repurchase of shares pursuant to
this program will depend on a variety of factors, including
market conditions. This program may be suspended or discontinued
at any time. Under this program, we acquired shares of our LGI
Series A and Series C common stock for aggregate
purchase prices of (i) $132.1 million during the second and
third quarters
31
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
of 2006 and (ii) $42.6 million during the second quarter of
2007. At June 30, 2007, we were authorized under the
March 8, 2006 stock repurchase program to acquire an
additional $75.3 million of our LGI Series A and
Series C common stock. On July 25, 2007, our board of
directors increased to $150.0 million the remaining amount
authorized under the March 8, 2006 stock repurchase plan.
On January 10, 2007, we purchased 5,084,746 shares of
our LGI Series A common stock at $29.50 per share and
5,246,590 shares of our LGI Series C common stock at
$28.59 per share, for an aggregate purchase price of
$300.0 million before acquisition costs, pursuant to two
modified Dutch auction self-tender offers. On April 25,
2007, we purchased 7,882,862 shares of our LGI
Series A common stock at $35.00 per share and
724,183 shares of our LGI Series C common stock at
$32.65 per share, for an aggregate purchase price of
$299.5 million before acquisition costs, pursuant to two
modified Dutch auction self-tender offers. Shares purchased
pursuant to the foregoing tender offers are not applied against
our March 8, 2006 stock repurchase program.
On August 3, 2007, we announced that our board of directors
had authorized modified Dutch auction cash self-tender offers to
purchase up to 5,682,000 shares of our LGI Series A
common stock and up to 5,682,000 shares of our LGI
Series C common stock, at ranges of $40.00 to $44.00 per
Series A share and $40.00 to $44.00 per Series C
share. If the maximum number of shares of each series is
purchased, the total cost will be between $454.6 million
and $500.0 million. Each of the self tender offers is
expected to commence on or about August 10, 2007 and will
remain open for a minimum of 20 business days. Shares purchased
pursuant to the foregoing tender offers will not be applied
against our March 8, 2006 stock repurchase program.
Subsidiaries
Equity
In connection with our December 2005 acquisition of a
controlling interest in Austar, we recorded the minority
interests share of Austars accumulated deficit at
the acquisition date as a decrease to our additional paid-in
capital and we have recorded subsequent changes in the minority
interest owners share of Austars equity movements as
adjustments to our additional paid-in capital. During the first
quarter of 2007, Austars accumulated deficit became
positive and we began recording the minority interest
owners share of Austars equity movements in minority
interests in subsidiaries in our condensed consolidated balance
sheet.
32
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
|
|
(9)
|
Stock
Incentive Awards
|
Our stock-based compensation expense is based on the stock
incentive awards held by our and our subsidiaries
employees, including stock incentive awards related to LGI
shares and the shares of certain of our subsidiaries. The
following table summarizes our stock-based compensation expense
for the indicated periods:
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
LGI Series A, Series B
and Series C common stock:
|
|
|
|
|
|
|
|
|
Senior Executive and Management
Performance Plans
|
|
$
|
50.0
|
|
|
$
|
|
|
Other
|
|
|
24.8
|
|
|
|
30.1
|
|
|
|
|
|
|
|
|
|
|
Total LGI Series A,
Series B and Series C common stock
|
|
|
74.8
|
|
|
|
30.1
|
|
Other
|
|
|
8.7
|
|
|
|
5.2
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
83.5
|
|
|
$
|
35.3
|
|
|
|
|
|
|
|
|
|
|
The following table provides certain information related to
nonvested stock awards as of June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2007
|
|
|
|
LGI Series A,
|
|
|
LGI Senior
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B and
|
|
|
Executive and
|
|
|
Austar Long
|
|
|
SARs on
|
|
|
|
|
|
Restricted
|
|
|
|
Series C
|
|
|
Management
|
|
|
Term
|
|
|
VTR
|
|
|
J:COM
|
|
|
shares of LGI
|
|
|
|
common
|
|
|
Performance
|
|
|
Incentive
|
|
|
common
|
|
|
ordinary
|
|
|
and
|
|
|
|
stock (a)
|
|
|
Plans (b)
|
|
|
Plan (c)
|
|
|
stock
|
|
|
shares
|
|
|
Zonemedia (d)
|
|
|
Total compensation cost related to
nonvested awards not yet recognized
(in millions)
|
|
$
|
87.4
|
|
|
$
|
329.5
|
|
|
$
|
36.7
|
|
|
$
|
7.1
|
|
|
$
|
0.7
|
|
|
$
|
10.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average period remaining
for expense recognition (in years)
|
|
|
2.9
|
|
|
|
4.3
|
|
|
|
4.3
|
|
|
|
2.5
|
|
|
|
0.6
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Amounts relate to (i) the Liberty Global, Inc. 2005
Incentive Plan (the LGI Incentive Plan), (ii) the Liberty
Global, Inc. 2006 Nonemployee Director Incentive Plan (the LGI
Director Incentive Plan), (iii) the LMI Transitional Stock
Adjustment Plan (the Transitional Plan) and (iv) certain
UGC incentive plans. The LGI Incentive Plan had
33,836,996 shares available for grant as of June 30,
2007. These shares may be awarded at or above fair value in any
series of stock, except that no more than 23,372,168 shares
may be awarded in LGI Series B common stock. The LGI
Directors Incentive Plan had 9,546,640 shares available for
grant as of June 30, 2007. These shares may be awarded at
or above fair value in any series of stock, except that no more
than 5 million shares may be awarded in LGI Series B
common stock. No new grants will be made under the Transitional
Plan and the UGC incentive plans. |
|
(b) |
|
Amounts relate to the LGI Senior Executive Performance Plan and
the LGI Management Performance Plan described below. |
|
(c) |
|
Amounts relate to the Austar Long Term Incentive Plan described
below. |
|
(d) |
|
Amounts relate to the restricted shares of LGI and Zonemedia
common stock held by employees of Zonemedia. |
33
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
The following table summarizes certain information related to
the LGI common stock-incentive awards granted and exercised
pursuant to the LGI and UGC incentive plans:
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
2007
|
|
|
2006
|
|
|
in millions, except per share amounts
|
|
LGI Series A,
Series B and Series C common stock:
|
|
|
|
|
|
|
|
Assumptions used to estimate fair
value of awards granted:
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
4.56−5.02%
|
|
|
|
4.75−5.20%
|
Expected life
|
|
|
4.5−6.0 years
|
|
|
|
4.5−6.0 years
|
Expected volatility
|
|
|
22.70−25.20%
|
|
|
|
26.70-29.60%
|
Expected dividend yield
|
|
|
None
|
|
|
|
None
|
Weighted average grant-date fair
value per share of awards granted:
|
|
|
|
|
|
|
|
Options
|
|
|
$ 10.55
|
|
|
|
$ 6.50
|
SARs
|
|
|
$ 9.98
|
|
|
|
$ 6.36
|
Restricted stock
|
|
|
$ 35.66
|
|
|
|
$ 20.23
|
Total intrinsic value of awards
exercised:
|
|
|
|
|
|
|
|
Options
|
|
|
$ 27.7
|
|
|
|
$ 3.0
|
SARs
|
|
|
$ 21.8
|
|
|
|
$ 1.5
|
Cash received from exercise of
options
|
|
|
$ 28.2
|
|
|
|
$ 3.5
|
Income tax benefit related to
stock-based compensation
|
|
|
$ 12.4
|
|
|
|
$ 5.9
|
Income tax expense related to
exercise of options SARs and restricted stock
|
|
|
$
|
|
|
|
$ 1.4
|
Stock
Award Activity LGI Common Stock
The following tables summarize the activity during the six
months ended June 30, 2007 in LGI stock awards under the
LGI and UGC incentive plans. The tables also include activity
related to LGI stock awards held by Zonemedia employees and
Liberty Media employees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
|
|
|
|
Number of
|
|
|
Weighted average
|
|
|
remaining
|
|
|
Aggregate
|
|
Options LGI Series A common stock:
|
|
shares
|
|
|
exercise price
|
|
|
contractual term
|
|
|
intrinsic value
|
|
|
|
|
|
|
|
|
|
in years
|
|
|
in millions
|
|
|
Outstanding at January 1, 2007
|
|
|
6,748,229
|
|
|
$
|
20.24
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
456,203
|
|
|
$
|
37.39
|
|
|
|
|
|
|
|
|
|
Expired or canceled
|
|
|
(31,470
|
)
|
|
$
|
79.36
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(57,577
|
)
|
|
$
|
21.33
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(839,614
|
)
|
|
$
|
17.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007
|
|
|
6,275,771
|
|
|
$
|
21.60
|
|
|
|
5.41
|
|
|
$
|
131.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2007
|
|
|
3,587,978
|
|
|
$
|
19.71
|
|
|
|
4.83
|
|
|
$
|
85.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
|
|
|
|
Number of
|
|
|
Weighted average
|
|
|
remaining
|
|
|
Aggregate
|
|
Options LGI Series B common stock:
|
|
shares
|
|
|
exercise price
|
|
|
contractual term
|
|
|
intrinsic value
|
|
|
|
|
|
|
|
|
|
in years
|
|
|
in millions
|
|
|
Outstanding at January 1, 2007
|
|
|
3,066,716
|
|
|
$
|
20.01
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Expired or canceled
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007
|
|
|
3,066,716
|
|
|
$
|
20.01
|
|
|
|
5.34
|
|
|
$
|
64.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2007
|
|
|
3,066,716
|
|
|
$
|
20.01
|
|
|
|
5.34
|
|
|
$
|
64.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
|
|
|
|
Number of
|
|
|
Weighted average
|
|
|
remaining
|
|
|
Aggregate
|
|
Options LGI Series C common stock:
|
|
shares
|
|
|
exercise price
|
|
|
contractual term
|
|
|
intrinsic value
|
|
|
|
|
|
|
|
|
|
in years
|
|
|
in millions
|
|
|
Outstanding at January 1, 2007
|
|
|
9,566,033
|
|
|
$
|
19.11
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
456,203
|
|
|
$
|
34.79
|
|
|
|
|
|
|
|
|
|
Expired or canceled
|
|
|
(31,470
|
)
|
|
$
|
75.13
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(57,577
|
)
|
|
$
|
20.32
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(810,365
|
)
|
|
$
|
16.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007
|
|
|
9,122,824
|
|
|
$
|
19.94
|
|
|
|
5.41
|
|
|
$
|
185.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2007
|
|
|
6,435,031
|
|
|
$
|
18.72
|
|
|
|
5.09
|
|
|
$
|
141.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
Weighted average
|
|
|
|
Number of
|
|
|
grant-date fair
|
|
|
remaining
|
|
Restricted stock LGI Series A common
stock:
|
|
shares
|
|
|
value per share
|
|
|
contractual term
|
|
|
|
|
|
|
|
|
|
in years
|
|
|
Outstanding at January 1, 2007
|
|
|
660,189
|
|
|
$
|
21.19
|
|
|
|
|
|
Granted
|
|
|
262,834
|
|
|
$
|
36.99
|
|
|
|
|
|
Expired or canceled
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Forfeited
|
|
|
(11,237
|
)
|
|
$
|
20.55
|
|
|
|
|
|
Released from restrictions
|
|
|
(107,739
|
)
|
|
$
|
21.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007
|
|
|
804,047
|
|
|
$
|
26.33
|
|
|
|
3.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
Weighted average
|
|
|
|
Number of
|
|
|
grant-date fair
|
|
|
remaining
|
|
Restricted stock LGI Series B common
stock:
|
|
shares
|
|
|
value per share
|
|
|
contractual term
|
|
|
|
|
|
|
|
|
|
in years
|
|
|
Outstanding at January 1, 2007
|
|
|
35,562
|
|
|
$
|
22.23
|
|
|
|
|
|
Granted
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Expired or canceled
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Released from restrictions
|
|
|
(11,854
|
)
|
|
$
|
22.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007
|
|
|
23,708
|
|
|
$
|
22.23
|
|
|
|
2.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
Weighted average
|
|
|
|
Number of
|
|
|
grant-date fair
|
|
|
remaining
|
|
Restricted stock LGI Series C common
stock:
|
|
shares
|
|
|
value per share
|
|
|
contractual term
|
|
|
|
|
|
|
|
|
|
in years
|
|
|
Outstanding at January 1, 2007
|
|
|
695,235
|
|
|
$
|
20.47
|
|
|
|
|
|
Granted
|
|
|
262,884
|
|
|
$
|
34.33
|
|
|
|
|
|
Expired or canceled
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Forfeited
|
|
|
(11,237
|
)
|
|
$
|
19.98
|
|
|
|
|
|
Released from restrictions
|
|
|
(119,423
|
)
|
|
$
|
20.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007
|
|
|
827,459
|
|
|
$
|
24.86
|
|
|
|
3.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
|
|
|
|
Number of
|
|
|
Weighted average
|
|
|
remaining
|
|
|
Aggregate
|
|
SARs LGI Series A common stock:
|
|
shares
|
|
|
exercise price
|
|
|
contractual term
|
|
|
intrinsic value
|
|
|
|
|
|
|
|
|
|
in years
|
|
|
in millions
|
|
|
Outstanding at January 1, 2007
|
|
|
5,652,674
|
|
|
$
|
15.54
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
510,150
|
|
|
$
|
37.05
|
|
|
|
|
|
|
|
|
|
Expired or canceled
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(139,856
|
)
|
|
$
|
15.02
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(751,458
|
)
|
|
$
|
16.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007
|
|
|
5,271,510
|
|
|
$
|
17.43
|
|
|
|
6.15
|
|
|
$
|
92.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2007
|
|
|
926,714
|
|
|
$
|
17.63
|
|
|
|
6.02
|
|
|
$
|
18.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
|
|
|
|
Number of
|
|
|
Weighted average
|
|
|
remaining
|
|
|
Aggregate
|
|
SARs LGI Series C common stock:
|
|
shares
|
|
|
exercise price
|
|
|
contractual term
|
|
|
intrinsic value
|
|
|
|
|
|
|
|
|
|
in years
|
|
|
in millions
|
|
|
Outstanding at January 1, 2007
|
|
|
5,651,058
|
|
|
$
|
14.78
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
510,150
|
|
|
$
|
34.37
|
|
|
|
|
|
|
|
|
|
Expired or canceled
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(139,856
|
)
|
|
$
|
14.29
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(754,375
|
)
|
|
$
|
16.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007
|
|
|
5,266,977
|
|
|
$
|
16.51
|
|
|
|
6.15
|
|
|
$
|
89.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2007
|
|
|
922,181
|
|
|
$
|
16.80
|
|
|
|
6.01
|
|
|
$
|
17.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2007, total SARs outstanding included 1,067,912
LGI Series A common stock capped SARs and 1,067,912 LGI
Series C common stock capped SARs and total SARs
exercisable included 102,124 LGI Series A common stock
capped SARs and 102,124 LGI Series C common stock capped
SARs. The holder of an LGI Series A common stock capped SAR
will receive the difference between $6.84 and the lesser of
$10.90 or the market price of LGI Series A common stock on
the date of exercise. The holder of an LGI Series C common
stock capped SAR will receive the difference between $6.48 and
the lesser of $10.31 or the market price of LGI Series C
common stock on the date of exercise.
LGI
Performance Plans
On October 31, 2006 and November 1, 2006, the
compensation committee of our board of directors and our board,
respectively, authorized the implementation of a new
performance-based incentive plan for our senior executives (the
Senior Executive Performance Plan) pursuant to the Liberty
Global, Inc. 2005 Incentive Plan. The aggregate amount of the
maximum achievable awards that may be allocated under the Senior
Executive Performance Plan is $313.5 million. In February
2007, the full amount of the maximum achievable awards was
allocated or reserved for allocation to participants including
our President and Chief Executive Officer, and each of our other
executive officers.
On January 12, 2007, the compensation committee of our
board authorized the implementation of a similar
performance-based incentive plan (the Management Performance
Plan, and together with the Senior Executive Plan, the
Performance Plans) pursuant to the LGI Incentive Plan, for
certain management-level employees not participating in the
Senior Executive Performance Plan. The aggregate amount of the
maximum achievable awards under the Management Performance Plan,
as finalized in February 2007, is $86.5 million.
The Performance Plans were amended and restated effective
May 2, 2007 primarily to comply with certain requirements
imposed by final Treasury Regulations issued pursuant to
Section 409A of the Internal Revenue Code. For purposes of
determining the $50.0 million of stock-based compensation
recorded with respect to the Performance Plans during the six
months ended June 30, 2007, we concluded that it was
probable that the maximum achievable awards would be earned.
Although the compensation committees current intention is
to settle awards earned under each Performance Plan using
restricted or unrestricted stock, we have included the accrued
stock compensation related to the Performance Plans in other
long-term liabilities in our June 30, 2007 condensed
consolidated balance sheet due to the fact that our obligations
under the Performance Plans represent fixed amounts that are
expected to be settled with a variable number of shares.
37
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
Austar
Performance Plan
The Austar Long Term Incentive Plan (the Austar Performance
Plan) is a five-year plan, with a two-year performance period,
beginning on January 1, 2007, and a three-year service
period beginning on January 1, 2009. At the end of the
two-year performance period, each participant may become
eligible to receive varying percentages of the maximum
achievable award specified for such participant based on
achievement of specified compound annual growth rates in
Austars consolidated EBITDA, as defined by the Austar
Performance Plan.
The participants in the Austar Performance Plan include
Austars Chief Executive Officer, certain of Austars
other executive officers and certain of Austars key
employees. The aggregate amount of the maximum awards under the
Austar Performance Plan is AUD 62.9 million
($53.5 million).
If the compound annual growth rate (CAGR) for Austars
consolidated EBITDA from 2006 to 2008, as adjusted for events
such as acquisitions and dispositions that affect comparability,
is less than 15%, no participant will be eligible to receive any
amount under the Austar Performance Plan. At CAGRs ranging from
15% to 20%, the percentages of the maximum achievable awards
that participants will become eligible to receive will range
from 50% to 100%, respectively, subject to the other
requirements of the Austar Performance Plan.
Awards will be paid or will vest during the following three-year
period, and will be subject to forfeiture upon certain events of
termination of employment or acceleration in certain
circumstances. Further, Austars remuneration committee
will have the discretion to reduce the unpaid balance of an
award based on an assessment of the participants
individual job performance during the service period. Awards may
be settled in cash, ordinary restricted or unrestricted shares
of Austar, or any combination of the foregoing, at the
discretion of Austars remuneration committee. Payments
will be made or will vest in six equal semi-annual installments
on each March 31 and September 30, commencing on
March 31, 2009.
In the event a change of control of Austar is announced before
April 1, 2008, the Austar Performance Plan will be
terminated and no amounts will be awarded to participants.
Changes in control that are announced after April 1, 2008
will result in awards of (i) at least 50% of the earned
amount, subject to upward adjustment based on the discretion of
Austars remuneration committee, if the change in control
is announced during the two-year performance period, or
(ii) 100% of the earned amount, adjusted to present value,
if the change in control is announced during the three-year
service period.
The Austar remuneration committee has determined that its
current intention is to settle awards earned under the Austar
Performance Plan using restricted or unrestricted shares,
although it reserves the right to change that determination in
the future. In light of the Austar remuneration committees
current intention, we account for awards granted under the
Performance Plans pursuant to the provisions of
SFAS No. 123(R). The Austar Performance Plan is
accounted for as a liability-based plan given that it is
intended that a variable number of shares will be issued to
settle the fixed obligation that will be determined at the end
of the performance period. Compensation expense under the Austar
Performance Plan is (i) recognized using the accelerated
attribution method based on our assessment of the awards that
are probable to be earned and (ii) reported as stock-based
compensation in our consolidated statements of operations,
notwithstanding the fact that the Austar remuneration committee
could elect at a future date to cash settle all or any portion
of vested awards under the Austar Performance Plan. Austar began
recording stock compensation with respect to the Austar
Performance Plan on May 2, 2007, the date that the Austar
Performance Plan participants were notified of their awards. For
purposes of determining the AUD 2.3 million
($1.9 million at the average rate for the period) of
stock-based compensation recorded by Austar with respect to the
Austar Performance Plan during the three months ended
June 30, 2007, Austar concluded that it was probable that
the maximum achievable awards would be earned.
38
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
Telenet
Option Plan
During periods ended prior to January 1, 2007, Telenet
granted Class A Options and Class B Options to certain
members of Telenet management. The Class A Options and the
Class B Options, both of which must be exercised in
multiples of three, provide the holder with the right to
subscribe to three Class A Profit Certificates for
20.00 ($27.07) and three Class B Profit Certificates
for 25.00 ($33.84), respectively. At June 30, 2007,
1,146,000 Class A Options and 506,256 Class B Options
were outstanding with a weighted average exercise price per
profit certificate of 6.67 ($9.03) and 8.33
($11.28), respectively. All of the Class A Options and
273,720 of the Class B Options were vested at June 30,
2007. Stock-based compensation recorded by Telenet with respect
to the Class A Options and the Class B Options was
0.3 million ($0.4 million at the average rate
for the period) during the six months ended June 30, 2007.
VTR
Phantom SARs Plan
The following table summarizes the activity during the six
months ended June 30, 2007 in VTR stock awards under the
VTR Phantom SARs plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
|
|
|
|
Number of
|
|
|
Weighted average
|
|
|
remaining
|
|
|
Aggregate
|
|
SARs VTR common stock:
|
|
shares
|
|
|
base price
|
|
|
contractual term
|
|
|
intrinsic value
|
|
|
|
|
|
|
|
|
|
in years
|
|
|
in millions
|
|
|
Outstanding at January 1, 2007
|
|
|
643,000
|
|
|
CLP
|
9,503
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
401,000
|
|
|
CLP
|
12,588
|
|
|
|
|
|
|
|
|
|
Expired or canceled
|
|
|
|
|
|
CLP
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(44,375
|
)
|
|
CLP
|
9,503
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
CLP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30,
2007(a)
|
|
|
999,625
|
|
|
CLP
|
10,741
|
|
|
|
2.5
|
|
|
CLP
|
3,523.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2007
|
|
|
173,375
|
|
|
CLP
|
9,503
|
|
|
|
2.5
|
|
|
CLP
|
825.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The fair value of these awards at June 30, 2007 was
calculated using an expected volatility of 24.8%, an expected
life of 2.5 years and a risk-free return of 5.6%. In
addition, we were required to estimate the fair value of VTR
common stock at June 30, 2007. Accordingly, the fair value
of these awards is remeasured each reporting period, and
compensation expense is adjusted to reflect the current fair
value. |
United
Chile Synthetic Option Plan
Pursuant to a synthetic option plan (the United Chile Synthetic
Option Plan) that was adopted in December 2006 to replace the
former UIH Latin America, Inc. Stock Option Plan, certain of our
directors, executive officers and officers, and one of our
employees, hold an aggregate of 574,843 synthetic options with
respect to hypothetical shares of United Chile LLC (United
Chile), the owner of our 80% ownership interest in VTR. These
synthetic options represent a 2.8% fully diluted equity interest
in United Chile. For purposes of determining the value
attributable to these synthetic options, United Chile is assumed
to have a specified share capital and intercompany indebtedness.
These assumptions are designed to replicate at United Chile the
share capital and indebtedness (net of the value of certain
assets) that UIH Latin America, Inc. would have had absent
certain intercompany transactions that occurred in 2006. All of
the synthetic options outstanding under the United Chile Phantom
Plan are fully vested and expire between 2009 and 2011. Assuming
expected volatility of 100%, a risk-free interest rate of
approximately 4.9% and a weighted average expected life of
3.4 years, these synthetic options had an aggregate fair
value of
39
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
$1.9 million as of June 30, 2007. No new grants may be
made under the United Chile Synthetic Option Plan. We account
for the United Chile Synthetic Option Plan awards as
liability-based awards.
|
|
(10)
|
Related
Party Transactions
|
Our related party transactions during the three and six months
ended June 30, 2007 and 2006 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
Revenue earned from related
parties of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J:COM (a)
|
|
$
|
9.3
|
|
|
$
|
14.6
|
|
|
$
|
21.1
|
|
|
$
|
25.5
|
|
LGI and consolidated subsidiaries
other than J:COM (b)
|
|
|
2.7
|
|
|
|
0.6
|
|
|
|
4.6
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total LGI
|
|
$
|
12.0
|
|
|
$
|
15.2
|
|
|
$
|
25.7
|
|
|
$
|
28.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses charged by
related parties of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J:COM (c)
|
|
$
|
17.9
|
|
|
$
|
12.0
|
|
|
$
|
34.0
|
|
|
$
|
23.8
|
|
LGI and consolidated subsidiaries
other than J:COM (d)
|
|
|
5.9
|
|
|
|
9.1
|
|
|
|
10.5
|
|
|
|
12.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total LGI
|
|
$
|
23.8
|
|
|
$
|
21.1
|
|
|
$
|
44.5
|
|
|
$
|
36.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A expenses charged by
related parties of J:COM (e)
|
|
$
|
2.4
|
|
|
$
|
3.1
|
|
|
$
|
5.0
|
|
|
$
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense charged by
related parties of J:COM (f)
|
|
$
|
2.8
|
|
|
$
|
2.4
|
|
|
$
|
5.6
|
|
|
$
|
4.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
recognized from related parties of LGI and consolidated
subsidiaries
|
|
$
|
0.2
|
|
|
$
|
|
|
|
$
|
0.4
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease
additions related parties of J:COM (g)
|
|
$
|
34.0
|
|
|
$
|
27.9
|
|
|
$
|
70.0
|
|
|
$
|
52.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
J:COM provides programming, construction, management and
distribution services to its managed affiliates. In addition,
J:COM sells construction materials to such affiliates, provides
distribution services to other LGI affiliates and received
distribution fees from our affiliate Jupiter TV Co., Ltd.
(Jupiter TV). See note 13. |
|
(b) |
|
Amounts consist primarily of management, advisory and
programming license fees, call center charges and fees for
uplink services charged to our equity method affiliates. |
|
(c) |
|
J:COM (i) purchases certain cable television programming
from Jupiter TV and (ii) incurs rental expense for the use
of certain vehicles and equipment under operating leases with
two subsidiaries of Sumitomo and an affiliate of Sumitomo.
Sumitomo is the owner of a minority interest in LGI/Sumisho
Super Media LLC (Super Media), our indirect majority owned
subsidiary and the owner of a controlling interest in J:COM. |
|
(d) |
|
Amounts consist primarily of programming costs and interconnect
fees charged by equity method affiliates. |
|
(e) |
|
J:COM has management service agreements with Sumitomo under
which officers and management level employees are seconded from
Sumitomo to J:COM, whose services are charged as service fees to
J:COM based on their payroll costs. |
|
(f) |
|
Amounts consist of related party interest expense, primarily
related to assets leased from the aforementioned Sumitomo
entities. |
40
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
|
|
|
(g) |
|
J:COM leases, in the form of capital leases, customer premise
equipment, various office equipment and vehicles from the
aforementioned Sumitomo entities. At June 30, 2007 and
December 31, 2006, capital lease obligations of J:COM
aggregating ¥43.5 billion ($352.9 million) and
¥41.5 billion ($336.7 million), respectively,
were owed to these Sumitomo entities. |
On June 29, 2007, J:COM entered into a revolving loan
agreement with Jupiter TV whereby Jupiter TV could borrow from
J:COM up to a maximum of ¥6.0 billion. The loan
agreement bears interest at agreed upon rates (2.15% at
June 30, 2007). At June 30, 2007, outstanding
borrowings pursuant to this loan agreement were
¥3,650 million ($29.6 million).
|
|
(11)
|
Commitments
and Contingencies
|
Commitments
In the normal course of business, we have entered into
agreements that commit our company to make cash payments in
future periods with respect to non-cancellable leases,
programming contracts, satellite carriage commitments, purchases
of customer premise equipment and construction activities. We
expect that in the normal course of business, operating leases
that expire generally will be renewed or replaced by similar
leases. For a description of Telenets commitments with
respect to its agreements with the PICs, see note 7.
Contingent
Obligations
Our equity method investment in Mediatti Communications, Inc.
(Mediatti) is owned by our consolidated subsidiary, Liberty
Japan MC, LLC (Liberty Japan MC). Another shareholder of
Mediatti, Olympus Capital and certain of its affiliates
(Olympus), has a put right that is first exercisable during July
2008 to require Liberty Japan MC to purchase all of its Mediatti
shares at fair value. If Olympus exercises such right, the two
minority shareholders who are party to the shareholders
agreement may also require Liberty Japan MC to purchase their
Mediatti shares at fair value. If Olympus does not exercise such
right, Liberty Japan MC has a call right that is first
exercisable during July 2009 to require Olympus and the minority
shareholders to sell their Mediatti shares to Liberty Japan MC
at the then fair value. If both the Olympus put right and the
Liberty Japan MC call right are not exercised during the first
exercise period, either may thereafter exercise its put or call
right, as applicable, until October 2010. Upon Olympus
exercise of its put right, or our exercise of our call right,
Liberty Japan MC has the option to use cash, or subject to
certain conditions being met, marketable securities, including
LGI common stock, to acquire Olympus interest in Mediatti.
In connection with the April 13, 2005 combination of VTR
and Metrópolis Intercom SA (Metrópolis),
Cristalerías de Chile SA (Cristalerías) acquired the
right to require UGC to purchase Cristalerías equity
interest in VTR at fair value, subject to a $140 million
floor price. This put right is exercisable by Cristalerías
until April 13, 2015. Upon the exercise of this put right
by Cristalerías, UGC has the option to use cash or shares
of LGI common stock to acquire Cristalerías interest
in VTR. We have reflected the $4.4 million fair value of
this put obligation at June 30, 2007 in other current
liabilities in our condensed consolidated balance sheet.
The minority owner of Sport 1 TV RT (Sport 1), a subsidiary of
Chellomedia in Hungary, has the right to put all (but not part)
of its interest in Sport 1 to one of our subsidiaries each year
between January 1 and January 31, commencing in 2009. This
put option lapses if not exercised by February 1, 2011.
Chellomedia has a corresponding call right. The price payable
upon exercise of the put or call right will be the then fair
value of the minority owners interest in Sport 1. In the
event the then fair value of Sport 1 on exercise of the put
right exceeds a multiple of ten times EBITDA, as defined in the
underlying agreement, Chellomedia may in its sole discretion
elect not to acquire the minority interest and the put right
lapses for that year, with the minority shareholder being
instead entitled to sell
41
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
its minority interest to a third party within three months of
such date, subject to Chellomedias right of first refusal.
After such three-month period elapses, the minority shareholder
cannot sell its shares to third parties without
Chellomedias consent. The put and call rights are to be
settled in cash.
At June 30, 2007, three individuals, including one of our
executive officers and an officer of one of our subsidiaries,
own a 14.3% common stock interest in Liberty Jupiter, Inc.
(Liberty Jupiter), which owned a 4.3% indirect interest in J:COM
at June 30, 2007. Under the amended and restated
shareholders agreement, the individuals can require us to
purchase all of their Liberty Jupiter common stock interest, and
we can require them to sell us all or part of their Liberty
Jupiter common stock interest, in exchange for LGI common stock
with an aggregate market value equal to the fair value of the
Liberty Jupiter shares so exchanged, as determined by agreement
of the parties or independent appraisal.
Guarantees
and Other Credit Enhancements
At June 30, 2007, J:COM guaranteed ¥7.9 billion
($64.1 million) of debt of certain of its non-consolidated
investees. The maturities of the guaranteed debt range from 2007
to 2017.
In the ordinary course of business, we have provided
indemnifications to purchasers of certain of our assets, our
lenders, our vendors and certain other parties. In addition, we
have provided performance
and/or
financial guarantees to local municipalities, our customers and
vendors. Historically, these arrangements have not resulted in
our company making any material payments and we do not believe
that they will result in material payments in the future.
Legal
Proceedings and Other Contingencies
Cignal On April 26, 2002, Liberty Global
Europe received a notice that certain former shareholders of
Cignal Global Communications (Cignal) filed a lawsuit against
Liberty Global Europe in the District Court of Amsterdam, the
Netherlands, claiming $200 million on the basis that
Liberty Global Europe failed to honor certain option rights that
were granted to those shareholders in connection with the
acquisition of Cignal by Priority Telecom BV (Priority Telecom).
Liberty Global Europe believes that it has complied in full with
its obligations to these shareholders through the successful
completion of the initial public offering (IPO) of Priority
Telecom on September 27, 2001. Accordingly, Liberty Global
Europe believes that the Cignal shareholders claims are
without merit and intends to defend this suit vigorously. On
May 4, 2005, the court rendered its decision, dismissing
all claims of the former Cignal shareholders. On August 2,
2005, an appeal against the district court decision was filed.
Subsequently, when the grounds of appeal were filed in November
2005, only damages suffered by nine individual plaintiffs,
rather than all former Cignal shareholders, continued to be
claimed. Based on the share ownership information provided by
the plaintiffs, the damage claims remaining subject to the
litigation are approximately $28 million in the aggregate
before statutory interest. A hearing on the appeal was held on
May 22, 2007, and the court is expected to render its
decision by October 2007.
On June 13, 2006, Liberty Global Europe, Priority Telecom,
Euronext NV and Euronext Amsterdam NV were each served with a
summons for a new action purportedly on behalf of all former
Cignal shareholders. The new action claims, among other things,
that the listing of Priority Telecom on Euronext Amsterdam NV in
September 2001 did not meet the requirements of the applicable
listing rules and, accordingly, the IPO was not valid and did
not satisfy Liberty Global Europes obligations to the
Cignal shareholders. Damages of $200 million, plus
statutory interest, are claimed in this new action. The nine
individual plaintiffs involved in the appeal proceedings
referred to above, conditionally claim compensation from Liberty
Global Europe in this new action in the event that the court of
appeals determines their claims inadmissible in the appeal
proceedings. A hearing has been scheduled for October 9,
2007.
42
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
We cannot estimate the amount of loss, if any, that we will
incur upon the ultimate resolution of this matter. However, we
do not anticipate that the outcome of this case will result in a
material adverse effect on our financial position or results of
operations.
Class Action Lawsuits Relating to the LGI
Combination Since January 18, 2005, 21
lawsuits have been filed in the Delaware Court of Chancery, and
one lawsuit in the Denver District Court, State of Colorado, all
purportedly on behalf of UGCs public stockholders,
regarding the announcement on January 18, 2005 of the
execution by UGC and LMI of the agreement and plan of merger for
the combination of the two companies under LGI. The defendants
named in these actions include UGC, former directors of UGC, and
LMI. The allegations in each of the complaints, which are
substantially similar, assert that the defendants have breached
their fiduciary duties of loyalty, care, good faith and candor
and that various defendants have engaged in self-dealing and
unjust enrichment, approved an unfair price, and impeded or
discouraged other offers for UGC or its assets in bad faith and
for improper motives. The complaints seek various remedies,
including damages for the public holders of UGCs stock and
an award of attorneys fees to plaintiffs counsel. On
February 11, 2005, the Delaware Court of Chancery
consolidated all 21 Delaware lawsuits into a single action.
Also, on April 20, 2005, the Denver District Court, State
of Colorado, issued an order granting a joint stipulation for
stay of the action filed in this court pending the final
resolution of the consolidated action in Delaware. On
May 5, 2005, the plaintiffs in the Delaware action filed a
consolidated amended complaint containing allegations
substantially similar to those found in and naming the same
defendants named in the original complaints. The defendants
filed their answers to the consolidated amended complaint on
September 30, 2005. The parties are proceeding with
pre-trial discovery activity. The defendants believe that a fair
process was followed and a fair price was paid in connection
with the LGI Combination and intend to vigorously defend this
action. We cannot estimate the amount of loss, if any, that we
will incur upon the ultimate resolution of this matter.
Telenet Partner Network Negotiations At
June 30, 2007, Telenet provided services over broadband
networks owned by Telenet and the Telenet Partner Network owned
by the PICs (as further described in note 7), with the
networks owned by Telenet accounting for approximately 70%, and
the Telenet Partner Network accounting for approximately 30%, of
the homes passed by the combined networks. Telenet has been
negotiating with the PICs to increase the capacity available to
Telenet on the Telenet Partner Network. Telenet is seeking the
additional capacity in order to avoid a possible future
degradation of service due to congestion that may arise in
future years. No assurance can be given that Telenet will be
able to negotiate an agreement with the PICs on reasonable
terms, on a timely basis, or at all. In this regard, the
prospects of such an agreement may be adversely affected by the
litigation between Telenet and the PICs, as described below. To
the extent that Telenet cannot conclude its negotiations with
the PICs on satisfactory terms and Telenet has exhausted other
means to resolve network congestion issues, it is possible that
certain areas on the Telenet Partner Network would over time
begin to experience congestion, resulting in a deterioration in
the quality of service that Telenet would be able to provide to
its subscribers and possible damage to Telenets reputation
and its ability to maintain or increase revenue and subscribers
in the affected areas.
Telenet and the PICs had also been discussing the PICs
desire to provide
video-on-demand
and related digital interactive services over the Telenet
Partner Network. These discussions were complicated by
differences in the parties interpretation of the precise
scope of the long-term exclusive right to provide point-to-point
services over the Telenet Partner Network that the PICs
contributed to Telenet in exchange for stock in 1996. Telenet
learned that the PICs intended to launch certain digital
interactive services in breach of Telenets exclusive right
to provide point-to-point services on the Telenet Partner
Network and therefore instituted legal action before the courts
of Brussels to protect its rights. On July 5, 2007, the
Court of Brussels issued an injunction, prohibiting the PICs
from offering
video-on-demand
and other interactive services on the Telenet Partner Network.
The PICs appealed the court decision on July 28, 2007. If
the appeal were to be determined in a manner unfavorable to
Telenet, Telenets
43
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
operations and revenue are likely to be adversely affected,
although the extent of such adverse effect is difficult to
predict at this time.
The Netherlands Regulatory Developments On
September 28, 2005, the Dutch competition authority, NMA,
informed UPC Nederland BV (UPC NL), our Dutch subsidiary, that
it had closed its investigation with respect to the price
increases for UPC NLs analog video services in
2003-2005.
The NMA concluded that the price increases were not excessive
and therefore UPC NL did not abuse what NMA views as UPC
NLs dominant position in the analog video services market.
KPN, the incumbent telecommunications operator in the
Netherlands, submitted an appeal of the NMA decision. The NMA
rejected the appeal of KPN by declaring the appeal inadmissible
on April 7, 2006. On May 3, 2006, UPC NL was informed
that KPN had filed an appeal against the NMA decision with the
Administrative Court (of Rotterdam). On February 6, 2007,
the Administrative Court declared KPNs appeal of the NMA
decision of September 2005 admissible. The NMA has appealed the
Administrative Courts decision and UPC NL has joined NMA
in its appeal. We do not anticipate that the outcome of this
proceeding will result in a material adverse effect on our
financial position or results of operations.
As part of the process of implementing certain directives
promulgated by the European Union in 2003, the Dutch national
regulatory authority (OPTA) analyzed eighteen markets predefined
in the directives to determine if any operator or service
provider has significant market power within the
meaning of the EU directives. In relation to video services,
OPTA analyzed market 18 (wholesale market for video services)
and an additional 19th market relating to the retail
delivery of radio and television packages (retail market). On
March 17, 2006, OPTA announced that UPC NL has significant
market power in the distribution of both free-to-air and pay
television programming on a wholesale and retail level. The OPTA
decision in relation to market 18 included the obligation to
provide access to content providers and packagers that seek to
distribute content over UPC NLs network using their own
conditional access platforms. The OPTA decision with respect to
market 19 expired on March 17, 2007.
UPC NL appealed the OPTA decisions on April 28, 2006 with
the highest administrative court. On July 24, 2007, the
court rendered its decision with respect to the appeal, whereby
the court annulled the OPTA decision in relation to market 18
and dismissed the appeal against the OPTA decision in relation
to market 19. As a result, UPC NLs obligation to
offer wholesale access for video services has been terminated.
OPTA could decide to take new positions in relation to markets
18 and 19.
Income Taxes We operate in numerous countries
around the world and accordingly, we are subject to, and pay
annual income taxes under, the various income tax regimes in the
countries in which we operate. The tax rules and regulations in
many countries are highly complex and subject to interpretation.
In the normal course of business, we may be subject to a review
of our income tax filings by various taxing authorities. In
connection with such reviews, disputes could arise with the
taxing authorities over the interpretation or application of
certain income tax rules related to our business in that tax
jurisdiction. Such disputes may result in future tax and
interest assessments by these taxing authorities. The ultimate
resolution of tax contingencies will take place upon the earlier
of (i) the settlement date with the applicable taxing
authorities in either cash or agreement of income tax positions
or (ii) the date when the tax authorities are statutorily
prohibited from adjusting the companys tax computations.
For information concerning the impact of our January 1,
2007 adoption of FIN 48, see note 3.
Regulatory Issues Video distribution,
broadband Internet, telephony and content businesses are
regulated in each of the countries in which we operate. The
scope of regulation varies from country to country, although in
some significant respects regulation in most European markets is
harmonized under the regulatory structure of the European Union.
Adverse regulatory developments could subject our businesses to
a number of risks. Regulation could limit growth, revenue and
the number and types of services offered. In addition,
regulation may restrict our operations and subject them to
further competitive pressure, including pricing restrictions,
interconnect and other
44
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
access obligations, and restrictions or controls on content,
including content provided by third parties. Failure to comply
with current or future regulation could expose our businesses to
various penalties. On December 12, 2006, Liberty Media
announced publicly that it had agreed to acquire an approximate
39% interest in DirecTV Group, Inc. (DirecTV). On June 26,
2007, VTR received written notice from the Chilean Federal
Economic Prosecutor (FNE) that Liberty Medias acquisition
of the DirecTV interest would violate one of the conditions
imposed by the Chilean Antitrust Court on VTRs combination
with Metrópolis prohibiting VTR and its control group from
participating, directly or indirectly through related persons,
in Chilean satellite or microwave television businesses. If the
FNE ultimately determines that a violation has occurred, it will
commence an action before the Chilean Antitrust Court. We
currently are unable to predict the outcome of this matter.
In addition to the foregoing items, we have contingencies
related to (i) legal proceedings, (ii) wage, property
and sales tax issues, (iii) disputes over interconnection
and copyright fees and (iv) other matters arising in the
ordinary course of business. Although it is reasonably possible
we may incur losses upon conclusion of such matters, an estimate
of any loss or range of loss cannot be made. However, it is
expected that the amounts, if any, which may be required to
satisfy such contingencies will not be material in relation to
our financial position or results of operations.
We own a variety of international subsidiaries and investments
that provide broadband communications services, and to a lesser
extent, video programming services. We identify our reportable
segments as (i) those consolidated subsidiaries that
represent 10% or more of our revenue, operating cash flow (as
defined below), or total assets, and (ii) those equity
method affiliates where our investment or share of operating
cash flow represents 10% or more of our total assets or
operating cash flow, respectively. In certain cases, we may
elect to include an operating segment in our segment disclosure
that does not meet the above-described criteria for a reportable
segment. We evaluate performance and make decisions about
allocating resources to our operating segments based on
financial measures such as revenue and operating cash flow. In
addition, we review non-financial measures such as subscriber
growth and penetration, as appropriate.
Operating cash flow is the primary measure used by our chief
operating decision maker to evaluate segment operating
performance and to decide how to allocate resources to segments.
As we use the term, operating cash flow is defined as revenue
less operating and SG&A expenses (excluding stock-based
compensation, depreciation and amortization, and impairment,
restructuring and other operating charges or credits). We
believe operating cash flow is meaningful because it provides
investors a means to evaluate the operating performance of our
segments and our company on an ongoing basis using criteria that
is used by our internal decision makers. Our internal decision
makers believe operating cash flow is a meaningful measure and
is superior to other available GAAP measures because it
represents a transparent view of our recurring operating
performance and allows management to readily view operating
trends, perform analytical comparisons and benchmarking between
segments in the different countries in which we operate and
identify strategies to improve operating performance. For
example, our internal decision makers believe that the inclusion
of impairment and restructuring charges within operating cash
flow would distort the ability to efficiently assess and view
the core operating trends in our segments. In addition, our
internal decision makers believe our measure of operating cash
flow is important because analysts and investors use it to
compare our performance to other companies in our industry.
However, our definition of operating cash flow may differ from
cash flow measurements provided by other public companies. A
reconciliation of total segment operating cash flow to our
consolidated loss before income taxes, minority interests and
discontinued operations is presented below. Operating cash flow
should be viewed as a measure of operating performance that is a
supplement to, and not a substitute for, operating income, net
earnings, cash flow from operating activities and other GAAP
measures of income.
45
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
We have identified the following consolidated operating segments
as our reportable segments:
|
|
|
|
|
UPC Broadband Division:
|
|
|
|
|
|
The Netherlands
|
|
|
|
Switzerland
|
|
|
|
Austria
|
|
|
|
Ireland
|
|
|
|
Hungary
|
|
|
|
Other Central and Eastern Europe
|
|
|
|
|
|
Telenet (Belgium)
|
|
|
|
J:COM (Japan)
|
|
|
|
VTR (Chile)
|
All of the reportable segments set forth above provide broadband
communications services, including video, voice and broadband
Internet access services. Certain segments also provide
Competitive Local Exchange Carrier (CLEC) and other
business-to-business (B2B) communications services. At
June 30, 2007, our operating segments in the UPC Broadband
Division provided services in 10 European countries. Our other
Central and Eastern Europe segment includes our operating
segments in Poland, Czech Republic, Slovak Republic, Romania and
Slovenia. Telenet provides broadband communications services in
Belgium. J:COM provides broadband communications services in
Japan. VTR provides broadband communications services in Chile.
Our corporate and other category includes (i) Austar and
other less significant consolidated operating segments that
provide broadband communications services in Puerto Rico, Brazil
and Peru and video programming and other services in Europe and
Argentina, and (ii) our corporate category. Intersegment
eliminations primarily represent the elimination of intercompany
transactions between our UPC Broadband Division and Chellomedia.
As further discussed in note 4, we sold UPC Belgium to
Telenet on December 31, 2006, and we began accounting for
Telenet as a consolidated subsidiary effective January 1,
2007. As a result, we began reporting a new segment as of
January 1, 2007 that includes Telenet from the
January 1, 2007 consolidation date and UPC Belgium for all
periods presented. The new reportable segment is not a part of
the UPC Broadband Division. Segment information for all periods
presented has been restated to reflect the transfer of UPC
Belgium to the Telenet segment. We present only the reportable
segments of our continuing operations in the following tables.
Performance
Measures of Our Reportable Segments
The amounts presented below represent 100% of each
businesss revenue and operating cash flow. As we have the
ability to control Telenet, J:COM, VTR and Austar (which we
report in our corporate and other category), GAAP requires that
we consolidate 100% of the revenue and expenses of these
entities in our condensed consolidated statements of operations
despite that fact that third parties own significant interests
in these entities. The third-party owners interests in the
operating results of Telenet, J:COM, VTR, Austar and other less
significant majority owned subsidiaries are reflected in
minority interests in earnings of subsidiaries, net, in our
condensed consolidated statements of operations. Our ability to
consolidate J:COM is dependent on our ability to continue to
control Super Media, which will be dissolved in February 2010
unless we and Sumitomo mutually agree to extend the term. If
Super Media is dissolved and we do not otherwise control J:COM
at the time of any such dissolution, we will no longer be in a
position to consolidate J:COM. When reviewing and analyzing our
operating results, it is
46
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
important to note that other third-party entities own
significant interests in Telenet, J:COM, VTR and Austar and that
Sumitomo effectively has the ability to prevent our company from
consolidating J:COM after February 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
amounts in millions
|
|
|
|
|
|
UPC Broadband Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Netherlands
|
|
$
|
260.6
|
|
|
$
|
224.1
|
|
|
$
|
512.6
|
|
|
$
|
439.4
|
|
Switzerland
|
|
|
212.3
|
|
|
|
193.5
|
|
|
|
419.6
|
|
|
|
372.3
|
|
Austria
|
|
|
122.2
|
|
|
|
108.0
|
|
|
|
242.2
|
|
|
|
196.8
|
|
Ireland
|
|
|
74.7
|
|
|
|
64.8
|
|
|
|
148.4
|
|
|
|
126.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Western Europe
|
|
|
669.8
|
|
|
|
590.4
|
|
|
|
1,322.8
|
|
|
|
1,135.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hungary
|
|
|
93.9
|
|
|
|
75.9
|
|
|
|
183.9
|
|
|
|
150.9
|
|
Other Central and Eastern Europe
|
|
|
195.7
|
|
|
|
137.5
|
|
|
|
379.2
|
|
|
|
264.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Central and Eastern Europe
|
|
|
289.6
|
|
|
|
213.4
|
|
|
|
563.1
|
|
|
|
415.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central and corporate operations
|
|
|
1.8
|
|
|
|
2.1
|
|
|
|
7.2
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UPC Broadband Division
|
|
|
961.2
|
|
|
|
805.9
|
|
|
|
1,893.1
|
|
|
|
1,553.0
|
|
Telenet (Belgium)
|
|
|
313.2
|
|
|
|
10.6
|
|
|
|
613.3
|
|
|
|
20.8
|
|
J:COM (Japan)
|
|
|
533.4
|
|
|
|
460.6
|
|
|
|
1,066.7
|
|
|
|
899.5
|
|
VTR (Chile)
|
|
|
154.5
|
|
|
|
141.1
|
|
|
|
299.9
|
|
|
|
274.0
|
|
Corporate and other
|
|
|
237.9
|
|
|
|
187.6
|
|
|
|
453.7
|
|
|
|
367.9
|
|
Intersegment eliminations
|
|
|
(19.6
|
)
|
|
|
(15.0
|
)
|
|
|
(40.1
|
)
|
|
|
(33.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated LGI
|
|
$
|
2,180.6
|
|
|
$
|
1,590.8
|
|
|
$
|
4,286.6
|
|
|
$
|
3,081.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flow
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
amounts in millions
|
|
|
|
|
|
UPC Broadband Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Netherlands
|
|
$
|
132.6
|
|
|
$
|
103.1
|
|
|
$
|
260.6
|
|
|
$
|
209.2
|
|
Switzerland
|
|
|
102.5
|
|
|
|
88.6
|
|
|
|
205.8
|
|
|
|
164.4
|
|
Austria
|
|
|
59.5
|
|
|
|
49.8
|
|
|
|
117.2
|
|
|
|
94.3
|
|
Ireland
|
|
|
24.1
|
|
|
|
20.4
|
|
|
|
46.7
|
|
|
|
39.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Western Europe
|
|
|
318.7
|
|
|
|
261.9
|
|
|
|
630.3
|
|
|
|
506.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hungary
|
|
|
48.8
|
|
|
|
35.6
|
|
|
|
93.2
|
|
|
|
71.4
|
|
Other Central and Eastern Europe
|
|
|
98.8
|
|
|
|
64.3
|
|
|
|
187.4
|
|
|
|
125.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Central and Eastern Europe
|
|
|
147.6
|
|
|
|
99.9
|
|
|
|
280.6
|
|
|
|
196.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central and corporate operations
|
|
|
(59.0
|
)
|
|
|
(49.6
|
)
|
|
|
(114.2
|
)
|
|
|
(100.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UPC Broadband Division
|
|
|
407.3
|
|
|
|
312.2
|
|
|
|
796.7
|
|
|
|
603.1
|
|
Telenet (Belgium)
|
|
|
147.3
|
|
|
|
5.5
|
|
|
|
284.2
|
|
|
|
11.5
|
|
J:COM (Japan)
|
|
|
213.4
|
|
|
|
178.0
|
|
|
|
431.7
|
|
|
|
350.2
|
|
VTR (Chile)
|
|
|
59.5
|
|
|
|
48.2
|
|
|
|
114.0
|
|
|
|
94.4
|
|
Corporate and other
|
|
|
33.5
|
|
|
|
23.6
|
|
|
|
59.0
|
|
|
|
46.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated LGI
|
|
$
|
861.0
|
|
|
$
|
567.5
|
|
|
$
|
1,685.6
|
|
|
$
|
1,105.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
The following table provides a reconciliation of total segment
operating cash flow to earnings (loss) before income taxes,
minority interests and discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
amounts in millions
|
|
|
|
|
|
Total segment operating cash flow
|
|
$
|
861.0
|
|
|
$
|
567.5
|
|
|
$
|
1,685.6
|
|
|
$
|
1,105.9
|
|
Stock-based compensation expense
|
|
|
(40.0
|
)
|
|
|
(19.3
|
)
|
|
|
(83.5
|
)
|
|
|
(35.3
|
)
|
Depreciation and amortization
|
|
|
(610.2
|
)
|
|
|
(454.6
|
)
|
|
|
(1,204.2
|
)
|
|
|
(880.4
|
)
|
Impairment, restructuring and
other operating charges, net
|
|
|
(0.6
|
)
|
|
|
(0.1
|
)
|
|
|
(5.9
|
)
|
|
|
(6.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
210.2
|
|
|
|
93.5
|
|
|
|
392.0
|
|
|
|
184.0
|
|
Interest expense
|
|
|
(226.3
|
)
|
|
|
(156.1
|
)
|
|
|
(459.3
|
)
|
|
|
(300.2
|
)
|
Interest and dividend income
|
|
|
24.1
|
|
|
|
20.3
|
|
|
|
48.5
|
|
|
|
36.0
|
|
Share of results of affiliates, net
|
|
|
9.5
|
|
|
|
(1.0
|
)
|
|
|
23.1
|
|
|
|
0.4
|
|
Realized and unrealized gains
(losses) on financial and derivative instruments, net
|
|
|
(74.3
|
)
|
|
|
(92.7
|
)
|
|
|
(145.8
|
)
|
|
|
21.1
|
|
Foreign currency transaction
gains, net
|
|
|
38.6
|
|
|
|
43.6
|
|
|
|
52.5
|
|
|
|
82.2
|
|
Losses on extinguishment of debt,
net
|
|
|
(23.3
|
)
|
|
|
(26.7
|
)
|
|
|
(23.3
|
)
|
|
|
(35.6
|
)
|
Gains on disposition of assets, net
|
|
|
|
|
|
|
2.3
|
|
|
|
0.3
|
|
|
|
47.6
|
|
Other expense, net
|
|
|
(1.3
|
)
|
|
|
(6.1
|
)
|
|
|
(4.6
|
)
|
|
|
(6.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income
taxes, minority interests and discontinued operations
|
|
$
|
(42.8
|
)
|
|
$
|
(122.9
|
)
|
|
$
|
(116.6
|
)
|
|
$
|
29.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
Geographic
Segments
The revenue of our geographic segments is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
amounts in millions
|
|
|
|
|
|
Europe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPC Broadband Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Netherlands
|
|
$
|
260.6
|
|
|
$
|
224.1
|
|
|
$
|
512.6
|
|
|
$
|
439.4
|
|
Switzerland
|
|
|
212.3
|
|
|
|
193.5
|
|
|
|
419.6
|
|
|
|
372.3
|
|
Austria
|
|
|
122.2
|
|
|
|
108.0
|
|
|
|
242.2
|
|
|
|
196.8
|
|
Ireland
|
|
|
74.7
|
|
|
|
64.8
|
|
|
|
148.4
|
|
|
|
126.5
|
|
Hungary
|
|
|
93.9
|
|
|
|
75.9
|
|
|
|
183.9
|
|
|
|
150.9
|
|
Romania
|
|
|
60.0
|
|
|
|
46.5
|
|
|
|
117.2
|
|
|
|
88.7
|
|
Czech Republic
|
|
|
53.6
|
|
|
|
30.2
|
|
|
|
106.2
|
|
|
|
58.4
|
|
Poland
|
|
|
55.1
|
|
|
|
41.0
|
|
|
|
104.6
|
|
|
|
79.1
|
|
Slovak Republic
|
|
|
15.2
|
|
|
|
12.1
|
|
|
|
29.6
|
|
|
|
23.6
|
|
Slovenia
|
|
|
11.8
|
|
|
|
7.7
|
|
|
|
21.6
|
|
|
|
14.5
|
|
Central and corporate operations
(a)
|
|
|
1.8
|
|
|
|
2.1
|
|
|
|
7.2
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UPC Broadband Division
|
|
|
961.2
|
|
|
|
805.9
|
|
|
|
1,893.1
|
|
|
|
1,553.0
|
|
Telenet (Belgium)
|
|
|
313.2
|
|
|
|
10.6
|
|
|
|
613.3
|
|
|
|
20.8
|
|
Chellomedia (b)
|
|
|
85.4
|
|
|
|
59.8
|
|
|
|
161.5
|
|
|
|
119.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Europe
|
|
|
1,359.8
|
|
|
|
876.3
|
|
|
|
2,667.9
|
|
|
|
1,693.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J:COM (Japan)
|
|
|
533.4
|
|
|
|
460.6
|
|
|
|
1,066.7
|
|
|
|
899.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Americas:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VTR (Chile)
|
|
|
154.5
|
|
|
|
141.1
|
|
|
|
299.9
|
|
|
|
274.0
|
|
Other (c)
|
|
|
35.6
|
|
|
|
34.9
|
|
|
|
70.4
|
|
|
|
68.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total The Americas
|
|
|
190.1
|
|
|
|
176.0
|
|
|
|
370.3
|
|
|
|
342.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia
|
|
|
116.9
|
|
|
|
92.9
|
|
|
|
221.8
|
|
|
|
179.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment eliminations
|
|
|
(19.6
|
)
|
|
|
(15.0
|
)
|
|
|
(40.1
|
)
|
|
|
(33.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated LGI
|
|
$
|
2,180.6
|
|
|
$
|
1,590.8
|
|
|
$
|
4,286.6
|
|
|
$
|
3,081.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The UPC Broadband Divisions central and corporate
operations are located primarily in the Netherlands. The revenue
reported by the UPC Broadband Divisions central and
corporate operations primarily relates to transitional services
provided to the buyers of certain of our discontinued operations
pursuant to agreements that expire at various dates in 2007. |
|
(b) |
|
Chellomedias geographic segments are located primarily in
the United Kingdom, the Netherlands, Spain and other European
countries. |
|
(c) |
|
Includes certain less significant operating segments that
provide broadband services in Puerto Rico, Brazil and Peru and
video programming services in Argentina. |
50
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
Jupiter
TV
On July 2, 2007, Jupiter TV, our joint venture with
Sumitomo, was split into two separate companies through the
spin-off of the thematics channel business (JTV Thematics). The
business of the newly incorporated JTV Thematics consists of the
operations that invest in, develop, manage and distribute
fee-based television programming through cable, satellite and
broadband platforms systems in Japan. Effective on July 2,
2007, Jupiter TV was renamed SC Media & Commerce Inc.,
(SC Media) and its business will focus on the operation of
Jupiter Shop Channel, through which a wide variety of consumer
products and accessories are marketed and sold, and will also
include On-line TV Co. Ltd., a broadband broadcasting business
and JBS Ltd., a provider of programming distribution services.
On July 3, 2007, pursuant to a share-for-share exchange
agreement with Sumitomo, we exchanged all of our shares in SC
Media for 45,652,043 shares of Sumitomo common stock with a
transaction date market value of ¥104.5 billion
($854.7 million at the transaction date). During the second
quarter of 2007, we executed a zero cost collar transaction with
respect to the Sumitomo shares. See note 5.
On July 17, 2007, JTV Thematics and J:COM entered into an
agreement under which JTV Thematics will merge with J:COM, with
our company and Sumitomo collectively receiving
¥52.5 billion ($425.9 million) in J:COM shares.
We will receive J:COM shares valued at approximately
¥26.2 billion ($212.6 million), increasing our
indirect controlling ownership interest in J:COM from 36.5% to
37.5%. The merger is expected to close in September 2007 and is
subject to customary closing conditions, including regulatory
approvals.
Sale
of 50% interest in Melita Cable Plc (Melita)
On July 26, 2007, an indirect wholly-owned subsidiary of
Chellomedia sold its 50% interest in Melita to an unrelated
third party for cash consideration of 73.6 million
($101.1 million at the transaction date).
Redemption
of ABC Family Preferred Stock
As of June 30, 2007, we owned a 99.9% beneficial interest
in the 9% Series A preferred stock of ABC Family. Our ABC
Family preferred stock was pledged as security for
$345.0 million principal amount of outstanding borrowings
by one of our subsidiaries. On August 2, 2007, the ABC
Family preferred stock was redeemed and we used the resulting
proceeds to repay in full the related secured borrowings.
Telenet
Refinancing and Capital Reduction
On August 1, 2007 (the Signing Date) Telenet Bidco NV (the
Borrower), an indirect subsidiary of Telenet, executed a new
senior credit facility agreement (the Telenet Credit Facility).
The Telenet Credit Facility provides for (i) a
1,700.0 million ($2,301.3 million) eight-year
Term Loan B Facility (the Telenet Term Loan B Facility),
(ii) a 425.0 million ($575.3 million)
seven-year Term Loan A Facility (the Telenet Term Loan A
Facility) and (iii) a 175.0 million
($236.9 million) seven-year Revolving Facility (the Telenet
Revolving Facility). The Telenet Term Loan A Facility and the
Telenet Term Loan B Facility, with respect to the first
1,300.0 million ($1,759.8 million), are
available to be drawn under the Telenet Term Loan A Facility and
the Telenet Term Loan B Facility, from the Signing Date (subject
to satisfaction of conditions precedent) up to and including
September 28, 2007, provided that a request for a Telenet
Term Loan B Facility loan may not be submitted until the Telenet
Term Loan A Facility has been drawn in full or will be drawn in
full simultaneously with the relevant Telenet Term Loan B
Facility loan. Any amount of the Telenet Term Loan B Facility in
excess of the first 1,300.0 million is available to
be drawn from the Signing Date (subject to satisfaction of
conditions precedent) up to and including January 31, 2008.
The Telenet
51
LIBERTY
GLOBAL, INC.
(See note 1)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
June 30, 2007
(unaudited)
Revolving Facility is available to be drawn from the Signing
Date (subject to satisfaction of conditions precedent) to the
date falling one month before the final maturity date of the
Telenet Revolving Facility.
The proceeds of the Telenet Term Loan A Facility and Telenet
Term Loan B Facility, in the case of the first
1,300.0 million to be drawn, may be used to
(i) refinance the Telenet Senior Credit Facility, the
Telenet Senior Discount Notes and the Telenet Senior Notes and
(ii) pay any fees and expenses incurred in connection with
the Telenet Credit Facility. Any remaining availability under
the Telenet Term Loan A Facility and Telenet Term Loan B
Facility may be (i) used to fund a payment to shareholders
via a dividend or intercompany loan or (ii) upstreamed to
Telenet to fund a capital reduction.
In addition to customary restrictive covenants, prepayment
requirements and events of default, the Telenet Credit Facility
requires compliance with a Net Total Debt to Consolidated
Annualized EBITDA covenant, each capitalized term as defined in
the Telenet Credit Facility. The Borrower under the Telenet
Credit Facility is permitted to make certain distributions and
restricted payments to its shareholders subject to compliance
with applicable covenants. The Telenet Credit Facility is
secured by a pledge over the shares of the Borrower and pledges
over certain intercompany and subordinated shareholder loans.
The pricing of the Telenet Credit Facility will be finalized
prior to closing but is subject to an agreed upon cap.
On August 6, 2007, Telenet announced that approximately
665.0 million ($900.2 million) of the cash
proceeds from the Telenet Credit Facility will be used to fund a
distribution to shareholders by way of a capital reduction of
approximately 6.00 ($8.12) per share. This distribution,
which is subject to shareholder approval, is expected to take
place during the fourth quarter of 2007.
52
|
|
Item 2.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The following discussion and analysis is intended to assist in
providing an understanding of our financial condition, changes
in financial condition and results of operations. This
discussion is organized as follows:
|
|
|
|
|
Forward Looking Statements. This section
provides a description of certain of the factors that could
cause actual results or events to differ materially from
anticipated results or events.
|
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Overview. This section provides a general
description of our business and recent events.
|
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|
Material Changes in Results of
Operations. This section provides an analysis of
our results of operations for the three and six months ended
June 30, 2007 and 2006.
|
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Material Changes in Financial Condition. This
section provides an analysis of our corporate and subsidiary
liquidity, condensed consolidated cash flow statements and our
off balance sheet arrangements.
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Quantitative and Qualitative Disclosures about Market
Risk. This section provides discussion and
analysis of the foreign currency, interest rate and other market
risk that our company faces.
|
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, to LGI and its predecessors and subsidiaries.
Unless otherwise indicated, convenience translations into
U.S. dollars are calculated as of June 30, 2007.
Forward
Looking Statements
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 Item 2.
Managements Discussion and Analysis of Financial Condition
and Results of Operations and Item 3. Quantitative
and Qualitative Disclosures About Market Risk contain
forward-looking statements, including statements regarding
business, product, acquisition, disposition and finance
strategies, our capital expenditure priorities, subscriber
growth and retention rates, competition, the maturity of our
markets, anticipated cost increases and target leverage levels.
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 addition to the risk factors described in our
2006 Annual Report on
Form 10-K/A,
the following are some but not all of the factors that could
cause actual results or events to differ materially from
anticipated results or events:
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economic and business conditions and industry trends in the
countries in which we, and the entities in which we have
interests, operate;
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the competitive environment in the broadband communications and
programming industries in the countries in which we, and the
entities in which we have interests, operate;
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competitor responses to our products and services, and the
products and services of the entities in which we have interests;
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fluctuations in currency exchange rates and interest rates;
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consumer disposable income and spending levels, including the
availability and amount of individual consumer debt;
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changes in consumer television viewing preferences and habits;
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consumer acceptance of existing service offerings, including our
newer digital video, voice and broadband Internet access
services;
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53
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consumer acceptance of new technology, programming alternatives
and broadband services that we may offer;
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our ability to manage rapid technological changes;
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our ability to increase the number of subscriptions to our
digital video, voice and broadband Internet access services and
our average revenue per household;
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Telenets ability to favorably resolve negotiations and
litigation with the PICs with respect to the Telenet Partner
Network;
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continued consolidation of the foreign broadband distribution
industry;
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changes in, or failure or inability to comply with, government
regulations in the countries in which we, and the entities in
which we have interests, operate and adverse outcomes from
regulatory proceedings;
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our ability to obtain regulatory approval and satisfy other
conditions necessary to close acquisitions, as well as our
ability to satisfy conditions imposed by competition and other
regulatory authorities in connection with acquisitions;
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government intervention that opens our broadband distribution
networks to competitors;
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our ability to successfully negotiate rate increases with local
authorities;
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changes in laws or treaties relating to taxation, or the
interpretation thereof, in countries in which we, or the
entities in which we have interests, operate;
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uncertainties inherent in the development and integration of new
business lines and business strategies;
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capital spending for the acquisition
and/or
development of telecommunications networks and services;
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our ability to successfully integrate and recognize anticipated
efficiencies from the businesses we acquire;
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problems we may discover post-closing with the operations,
including the internal controls and financial reporting process
of businesses we acquire;
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the impact of our future financial performance, or market
conditions generally, on the availability, terms and deployment
of capital;
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the ability of suppliers and vendors to timely deliver products,
equipment, software and services;
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the availability of attractive programming for our digital video
services at reasonable costs;
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the outcome of any pending or threatened litigation;
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the loss of key employees and the availability of qualified
personnel;
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changes in the nature of key strategic relationships with
partners and joint venturers; and
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events that are outside of our control, such as political unrest
in international markets, terrorist attacks, natural disasters,
pandemics and other similar events.
|
The broadband communications services 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 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.
54
Overview
We are an international broadband communications provider of
video, voice and Internet access services with consolidated
broadband operations at June 30, 2007 in 17 countries,
primarily in Europe, Japan and Chile. Through our indirect
wholly owned subsidiary UPC Holding, we provide broadband
communications services in 10 European countries and in Chile.
As further described in note 7 to our condensed
consolidated financial statements, (i) our 100% ownership
interest in Cablecom, a broadband communications operator in
Switzerland, and (ii) our 80% interest in VTR, a broadband
communications operator in Chile, were transferred from certain
of our other indirect subsidiaries to UPC Broadband Holding
during the second quarter of 2007. UPC Broadband Holdings
European broadband communications operations, including
Cablecom, are collectively referred to as the UPC Broadband
Division. Through our indirect controlling ownership interest in
Telenet, which we began accounting for as a consolidated
subsidiary effective January 1, 2007 (as further described
in note 4 to our condensed consolidated financials
statements), we provide broadband communications services in
Belgium. Through our indirect 36.5% controlling ownership
interest in J:COM, we provide broadband communications services
in Japan. Through our indirect 53.4%-owned subsidiary Austar, we
provide DTH satellite operations in Australia. We also have
(i) consolidated broadband communications operations in
Puerto Rico, Brazil and Peru, (ii) a non-controlling
interest in a broadband communications company in Japan,
(iii) consolidated interests in certain programming
businesses in Europe and Argentina and (iv) non-controlling
interests in certain programming businesses in Europe, Japan,
Australia and the Americas. Our consolidated programming
interests in Europe are primarily held through Chellomedia,
which also provides interactive digital services and owns or
manages investments in various businesses in Europe. Certain of
Chellomedias subsidiaries and affiliates provide
programming and interactive digital services to certain of our
broadband operations, primarily in Europe.
As further described in note 4 to our condensed
consolidated financial statements, we have completed several
transactions since January 1, 2006 that impact the
comparability of our 2007 and 2006 results, including
(i) our consolidation of Telenet effective January 1,
2007, (ii) our consolidation of Karneval effective
September 30, 2006, (iii) J:COMs acquisition of
a controlling interest in Cable West on September 28, 2006
and (iv) our acquisition of INODE on March 2, 2006. In
addition we have completed the acquisition of certain less
significant entities in Europe and Japan since January 1,
2006.
As further discussed in note 4 to our condensed
consolidated financial statements, our condensed consolidated
financial statements have been reclassified to present UPC
Norway, UPC Sweden, UPC France and PT Norway as discontinued
operations. Accordingly, in the following discussion and
analysis, the operating statistics, results of operations and
cash flows that we present and discuss are those of our
continuing operations.
Through our subsidiaries and affiliates, we are the largest
international broadband communications operator in terms of
subscribers. At June 30, 2007, our consolidated
subsidiaries owned and operated networks that passed
29.9 million homes and served 23.1 million revenue
generating units (RGUs), consisting of 14.7 million video
subscribers, 4.9 million broadband Internet subscribers and
3.5 million telephony subscribers.
Including the effects of acquisitions during 2007, our
continuing operations added total RGUs of 297,700 and 3,676,500
during the three and six months ended June 30, 2007,
respectively. Excluding the effects of acquisitions (RGUs added
on the acquisition date), but including post-acquisition RGU
additions, our continuing operations added total RGUs of 265,900
and 622,900 during the three and six months ended June 30,
2007, respectively. Our organic RGU growth during the 2007
periods is attributable to the growth of our broadband Internet
access services and digital telephony (primarily through
voice-over-Internet-protocol or VoIP), as significant increases
in digital video RGUs and slight increases in DTH video RGUs
were more than offset by declines in analog video and, to a
lesser extent, multi-channel multi-point (microwave)
distribution system (MMDS) video RGUs, resulting in a net
decline in video RGUs.
From a strategic perspective, we are seeking to build broadband
and video programming businesses that have strong prospects for
future growth in revenue and operating cash flow (as defined
below and in note 12 to our condensed consolidated
financial statements). Therefore, we seek to acquire entities at
prudent prices that have strong growth potential and sell
businesses that we believe do not meet this profile. We also
seek to leverage the reach of our broadband distribution systems
to create new content opportunities in order to increase our
distribution presence and maximize operating efficiencies. As
discussed further under Material Changes in Financial
55
Condition Capitalization below, we also seek
to maintain our debt at levels that provide for attractive
equity returns without assuming undue risk.
From an operational perspective, we focus on achieving organic
revenue growth in our broadband communications operations by
developing and marketing bundled entertainment, information and
communications services, and extending and upgrading the quality
of our networks where appropriate. As we use the term, organic
growth excludes the effects of foreign currency exchange rate
fluctuations, acquisitions and dispositions. While we seek to
obtain new customers, we also seek to increase the average
revenue we receive from each household by increasing the
penetration of our digital video, broadband Internet and
telephony services with existing customers through product
bundling and upselling, or by migrating analog video customers
to digital video services that include various incremental
service offerings, as described below. We plan to continue to
employ this strategy to achieve organic revenue and RGU growth.
Although we continue to believe that demand for our service
offerings is strong in most of our markets, competitive
developments during 2007 in certain markets, including Romania,
Hungary, Austria and other parts of Europe, have adversely
affected our ability to sustain recent historical levels of
organic revenue and RGU growth during 2007. In this regard, our
net organic RGU additions during the second quarter of 2007 were
significantly lower than our net organic RGU additions during
the second quarter of 2006. We expect that we will continue to
be challenged to maintain recent historical organic revenue and
RGU growth rates in future periods as we expect that competition
will continue to grow and that the markets for certain of our
service offerings will continue to mature. Moreover, our ability
to maintain or increase our monthly subscription fees for our
service offerings has been, and we expect will continue to be,
limited by competitive and, to a lesser extent, regulatory
factors. Notwithstanding the above-described competitive
developments, we continue to believe that most of our organic
revenue growth in 2007 will be attributable to RGU growth.
Although we face competition in all of our markets, we are
experiencing particularly intense competition for video
subscribers in Romania and Hungary, and to a somewhat lesser
extent, for broadband Internet subscribers in Austria and
Romania. As might be expected, this competition has resulted in
declines in RGUs or organic RGU growth rates, lower monthly
subscription fees, higher marketing costs and higher operating
expenses associated with increased levels of subscriber
disconnects. Although we are taking steps to improve our
competitive position and our results of operations in these
markets, no assurance can be given that our efforts will be
successful.
Our analog video service offerings include basic programming and
expanded basic programming in some markets. We tailor both our
basic channel
line-up and
our additional channel offerings to each system according to
culture, demographics, programming preferences and local
regulation. Our digital video service offerings include basic
and premium programming and, in some markets, incremental
product and service offerings such as enhanced
pay-per-view
programming (including
video-on-demand
and near
video-on-demand),
personal video recorders and high definition television services.
We offer broadband Internet access services in all of our
markets. Our residential subscribers can access the Internet via
cable modems connected to their personal computers at faster
speeds than that of conventional
dial-up
modems. We determine pricing for each different tier of
broadband Internet access service through analysis of speed,
data limits, market conditions and other factors.
We offer telephony services in Austria, Belgium, Chile, Czech
Republic, Hungary, Ireland, Japan, the Netherlands, Poland,
Puerto Rico, Romania, Slovak Republic, Slovenia and Switzerland,
primarily over our broadband networks. In Austria, Belgium,
Chile, Hungary, Ireland, Japan and the Netherlands, we provide
circuit switched telephony services and VoIP telephony services.
Telephony services in the remaining countries are provided using
VoIP technology. In select markets, we also offer mobile
telephony services using third-party networks.
The video, broadband Internet access and telephony businesses in
which we operate are capital intensive. Significant capital
expenditures are required to add customers to our networks,
including expenditures for equipment and labor costs. As video,
broadband Internet access and telephony technology changes and
competition increases, we may need to increase our capital
expenditures to further upgrade our systems to remain
competitive in markets that might be impacted by the
introduction of new technology. No assurance can be given that
any such
56
future upgrades could be expected to generate a positive return
or that we would have adequate capital available to finance such
future upgrades. If we are unable to, or elect not to, pay for
costs associated with adding new customers, expanding or
upgrading our networks or making our other planned or unplanned
capital expenditures, our growth could be limited and our
competitive position could be harmed.
Material
Changes in Results of Operations
As noted under Overview above, the comparability of our
operating results during the 2007 and 2006 interim periods is
affected by acquisitions. In the following discussion, we
quantify the impact of acquisitions 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 the timing of an acquisition. In
general, we base our estimate of the acquisition impact on an
acquired entitys operating results during the first three
months following the acquisition date such that changes from
those operating results in subsequent periods are considered to
be organic changes.
Changes in foreign currency exchange rates have a significant
impact on our operating results as all of our operating
segments, except for Puerto Rico, have functional currencies
other than the U.S. dollar. Our primary exposure is
currently to the euro and the Japanese yen. In this regard,
39.0% and 24.5% of our U.S. dollar revenue during the three
months ended June 30, 2007 and 38.9% and 24.9% of our
U.S. dollar revenue during the six months ended
June 30, 2007 was derived from subsidiaries whose
functional currency is the euro and the Japanese yen,
respectively. In addition, our operating results are impacted by
changes in the exchange rates for the Swiss franc, Chilean peso,
the Hungarian forint, the Australian dollar and other local
currencies in Europe.
The amounts presented and discussed below represent 100% of each
businesss revenue and operating cash flow. As we have the
ability to control Telenet, J:COM, VTR and Austar, GAAP requires
that we consolidate 100% of the revenue and expenses of these
entities in our condensed consolidated statements of operations
despite the fact that third parties own significant interests in
these entities. The third-party owners interests in the
operating results of Telenet, J:COM, VTR and, Austar and other
less significant majority owned subsidiaries are reflected in
minority interests in earnings of subsidiaries, net, in our
condensed consolidated statements of operations. Our ability to
consolidate J:COM is dependent on our ability to continue to
control Super Media, which will be dissolved in February 2010
unless we and Sumitomo mutually agree to extend the term. If
Super Media is dissolved and we do not otherwise control J:COM
at the time of any such dissolution, we will no longer be in a
position to consolidate J:COM. When reviewing and analyzing our
operating results, it is important to note that other
third-party entities own significant interests in Telenet,
J:COM, VTR and Austar and that Sumitomo effectively has the
ability to prevent our company from consolidating J:COM after
February 2010.
Discussion
and Analysis of our Reportable Segments
All of the reportable segments set forth below provide broadband
communications services, including video, voice and broadband
Internet access services. Certain segments also provide CLEC and
other B2B services. At June 30, 2007, our operating
segments in the UPC Broadband Division provided services in 10
European countries. Our Other Central and Eastern Europe segment
includes our operating segments in Poland, Czech Republic,
Slovak Republic, Romania and Slovenia. Telenet provides
broadband communications services in Belgium. J:COM provides
broadband communications services in Japan. VTR provides
broadband communications services in Chile. Our corporate and
other category includes (i) Austar and other less
significant operating segments that provide broadband
communications services in Puerto Rico, Brazil and Peru and
video programming and other services in Europe and Argentina and
(ii) our corporate category. Intersegment eliminations
primarily represent the elimination of intercompany transactions
between our UPC Broadband Division and Chellomedia.
As further discussed in note 4 to our condensed
consolidated financial statements, we sold UPC Belgium to
Telenet on December 31, 2006, and we began accounting for
Telenet as a consolidated subsidiary effective January 1,
2007. As a result, we began reporting a new segment as of
January 1, 2007 that includes Telenet from the
January 1, 2007 consolidation date and UPC Belgium for all
periods presented. The new reportable segment is not a part of
the UPC Broadband Division. Segment information for all periods
presented has been restated to reflect the
57
transfer of UPC Belgium to the Telenet segment. We present only
the reportable segments of our continuing operations in the
following tables.
For additional information concerning our reportable segments,
including a discussion of our performance measures and a
reconciliation of total segment operating cash flow to our
consolidated earnings (loss) before income taxes, minority
interests and discontinued operations, see note 12 to our
condensed consolidated financial statements.
The tables presented below in this section provide a separate
analysis of each of the line items that comprise operating cash
flow (revenue, operating expenses and SG&A expenses,
excluding allocable stock-based compensation expense in
accordance with our definition of operating cash flow) as well
as an analysis of operating cash flow by reportable segment for
the three and six months ended June 30, 2007, as compared
to the corresponding prior year periods. In each case, the
tables present (i) the amounts reported by each of our
reportable segments for the comparative interim periods,
(ii) the U.S. dollar change and percentage change from
period to period and (iii) the percentage change from
period to period, after removing foreign currency effects (FX).
The comparisons that exclude FX assume that exchange rates
remained constant during the periods that are included in each
table. As discussed under Quantitative and Qualitative
Disclosures about Market Risk below, we have significant
exposure to movements in foreign currency rates. We also provide
a table showing the operating cash flow margins (operating cash
flow divided by revenue) of our reportable segments for the
three and six months ended June 30, 2007 and 2006 at the
end of this section.
Substantially all of the significant increases during the three
and six months ended June 30, 2007, as compared to the
prior year periods, in our revenue, operating expense and
SG&A expenses for our Telenet (Belgium) segment are
attributable to the effects of our January 1, 2007
consolidation of Telenet, and accordingly, we do not separately
discuss the results of our Telenet (Belgium) segment below.
Telenet provides services over broadband networks owned by
Telenet and the Telenet Partner Network owned by the PICs (as
further described in note 7 to our condensed consolidated
financial statements), with the networks owned by Telenet
accounting for approximately 70%, and the Telenet Partner
Network accounting for 30%, of the aggregate homes passed by the
combined networks. For information concerning Telenets
ongoing negotiations and litigation with the PICs with respect
to the Telenet Partner Network, see note 11 to our
condensed consolidated financial statements.
Revenue derived by our broadband communications operating
segments includes amounts received from subscribers for ongoing
services, installation fees, advertising revenue, mobile
telephony revenue, channel carriage fees, telephony interconnect
fees and amounts received for CLEC and other B2B services. In
the following discussion, we use the term subscription
revenue to refer to amounts received from subscribers for
ongoing services, excluding installation fees and mobile
telephony revenue.
The rates charged for certain video services offered by our
broadband communications operations in Europe and Chile are
subject to rate regulation. Additionally, in Europe, our ability
to bundle or discount our services may be constrained if we are
held to be dominant with respect to any product we offer.
Adverse outcomes from rate regulation or other regulatory
initiatives could have a significant negative impact on our
ability to maintain or increase our revenue.
58
Revenue
of our Reportable Segments
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Increase
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Three months ended
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(decrease)
|
|
|
|
June 30,
|
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Increase (decrease)
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|
|
excluding FX
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|
2007
|
|
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2006
|
|
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$
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%
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|
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%
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|
|
|
amounts in millions, except % amounts
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|
|
UPC Broadband Division:
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|
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The Netherlands
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$
|
260.6
|
|
|
$
|
224.1
|
|
|
$
|
36.5
|
|
|
|
16.3
|
|
|
|
8.4
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Switzerland
|
|
|
212.3
|
|
|
|
193.5
|
|
|
|
18.8
|
|
|
|
9.7
|
|
|
|
7.7
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Austria
|
|
|
122.2
|
|
|
|
108.0
|
|
|
|
14.2
|
|
|
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13.1
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|
|
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5.6
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Ireland
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|
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74.7
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|
|
|
64.8
|
|
|
|
9.9
|
|
|
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15.3
|
|
|
|
7.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total Western Europe
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|
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669.8
|
|
|
|
590.4
|
|
|
|
79.4
|
|
|
|
13.4
|
|
|
|
7.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Hungary
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93.9
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|
|
|
75.9
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|
|
|
18.0
|
|
|
|
23.7
|
|
|
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7.8
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Other Central and Eastern Europe
|
|
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195.7
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|
|
|
137.5
|
|
|
|
58.2
|
|
|
|
42.3
|
|
|
|
27.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total Central and Eastern Europe
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|
|
289.6
|
|
|
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213.4
|
|
|
|
76.2
|
|
|
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35.7
|
|
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20.5
|
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|
|
|
|
|
|
|
|
|
|
Central and corporate operations
|
|
|
1.8
|
|
|
|
2.1
|
|
|
|
(0.3
|
)
|
|
|
(14.3
|
)
|
|
|
(17.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UPC Broadband Division
|
|
|
961.2
|
|
|
|
805.9
|
|
|
|
155.3
|
|
|
|
19.3
|
|
|
|
10.9
|
|
Telenet (Belgium)
|
|
|
313.2
|
|
|
|
10.6
|
|
|
|
302.6
|
|
|
|
N.M.
|
|
|
|
N.M.
|
|
J:COM (Japan)
|
|
|
533.4
|
|
|
|
460.6
|
|
|
|
72.8
|
|
|
|
15.8
|
|
|
|
22.2
|
|
VTR (Chile)
|
|
|
154.5
|
|
|
|
141.1
|
|
|
|
13.4
|
|
|
|
9.5
|
|
|
|
9.4
|
|
Corporate and other
|
|
|
237.9
|
|
|
|
187.6
|
|
|
|
50.3
|
|
|
|
26.8
|
|
|
|
17.6
|
|
Intersegment eliminations
|
|
|
(19.6
|
)
|
|
|
(15.0
|
)
|
|
|
(4.6
|
)
|
|
|
(30.7
|
)
|
|
|
(22.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total LGI
|
|
$
|
2,180.6
|
|
|
$
|
1,590.8
|
|
|
$
|
589.8
|
|
|
|
37.1
|
|
|
|
32.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
Three months ended
|
|
|
|
|
|
(decrease)
|
|
|
|
June 30,
|
|
|
Increase (decrease)
|
|
|
excluding FX
|
|
|
|
2007
|
|
|
2006
|
|
|
$
|
|
|
%
|
|
|
%
|
|
|
|
amounts in millions, except % amounts
|
|
|
UPC Broadband Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Netherlands
|
|
$
|
512.6
|
|
|
$
|
439.4
|
|
|
$
|
73.2
|
|
|
|
16.7
|
|
|
|
7.9
|
|
Switzerland
|
|
|
419.6
|
|
|
|
372.3
|
|
|
|
47.3
|
|
|
|
12.7
|
|
|
|
9.0
|
|
Austria
|
|
|
242.2
|
|
|
|
196.8
|
|
|
|
45.4
|
|
|
|
23.1
|
|
|
|
14.1
|
|
Ireland
|
|
|
148.4
|
|
|
|
126.5
|
|
|
|
21.9
|
|
|
|
17.3
|
|
|
|
8.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Western Europe
|
|
|
1,322.8
|
|
|
|
1,135.0
|
|
|
|
187.8
|
|
|
|
16.5
|
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hungary
|
|
|
183.9
|
|
|
|
150.9
|
|
|
|
33.0
|
|
|
|
21.9
|
|
|
|
8.7
|
|
Other Central and Eastern Europe
|
|
|
379.2
|
|
|
|
264.3
|
|
|
|
114.9
|
|
|
|
43.5
|
|
|
|
28.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Central and Eastern Europe
|
|
|
563.1
|
|
|
|
415.2
|
|
|
|
147.9
|
|
|
|
35.6
|
|
|
|
21.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central and corporate operations
|
|
|
7.2
|
|
|
|
2.8
|
|
|
|
4.4
|
|
|
|
157.1
|
|
|
|
139.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UPC Broadband Division
|
|
|
1,893.1
|
|
|
|
1,553.0
|
|
|
|
340.1
|
|
|
|
21.9
|
|
|
|
12.8
|
|
Telenet (Belgium)
|
|
|
613.3
|
|
|
|
20.8
|
|
|
|
592.5
|
|
|
|
N.M.
|
|
|
|
N.M.
|
|
J:COM (Japan)
|
|
|
1,066.7
|
|
|
|
899.5
|
|
|
|
167.2
|
|
|
|
18.6
|
|
|
|
23.1
|
|
VTR (Chile)
|
|
|
299.9
|
|
|
|
274.0
|
|
|
|
25.9
|
|
|
|
9.5
|
|
|
|
10.8
|
|
Corporate and other
|
|
|
453.7
|
|
|
|
367.9
|
|
|
|
85.8
|
|
|
|
23.3
|
|
|
|
15.1
|
|
Intersegment eliminations
|
|
|
(40.1
|
)
|
|
|
(33.9
|
)
|
|
|
(6.2
|
)
|
|
|
(18.3
|
)
|
|
|
(9.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total LGI
|
|
$
|
4,286.6
|
|
|
$
|
3,081.3
|
|
|
$
|
1,205.3
|
|
|
|
39.1
|
|
|
|
33.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N.M. Not meaningful.
59
The Netherlands. The Netherlands revenue
increased $36.5 million or 16.3% and increased
$73.2 million or 16.7% during the three and six months
ended June 30, 2007, as compared to the corresponding prior
year periods. Excluding the effects of foreign exchange rate
fluctuations, the Netherlands revenue increased
$18.9 million or 8.4% and $34.7 million or 7.9%,
respectively. Most of these increases are attributable to
increases in subscription revenue, due primarily to higher
average RGUs, as increases in average telephony and broadband
Internet RGUs were only partially offset by declines in average
video RGUs. The declines in average video RGUs include declines
in average analog video RGUs that were not fully offset by gains
in average digital video RGUs. The declines in average video
RGUs are due largely to the effects of competition. The average
monthly subscription revenue received per RGU (ARPU) increased
during the respective 2007 periods due primarily to
(i) improvements in the Netherlands RGU mix,
attributable to a higher proportion of digital video RGUs, and
to a lesser extent, broadband Internet and telephony RGUs, and
(ii) lower discounting. The positive effects of the above
factors were only partially offset by the negative effect on
ARPU of a higher proportion of broadband Internet customers
selecting lower-priced tiers of service. ARPU from telephony
services remained relatively constant during the 2007 periods as
compared to the corresponding 2006 periods. Subscription revenue
for the 2006 six-month period includes 4.0 million
($4.9 million at the average rate for the period), related
to the first quarter 2006 release of deferred revenue in
connection with rate settlements with certain municipalities.
There were no such releases during the first six months of 2007.
In July 2007, the incumbent telecommunications operator in the
Netherlands announced significant price reductions for certain
tiers of video services. As a result, we expect that competition
for video subscribers in the Netherlands will continue to be
strong and may increase during the remainder of 2007 and in
future periods.
In October 2005, the Netherlands began providing analog video
customers with a digital interactive television box and, for a
promotional period following acceptance of the box, the digital
entry level service at no incremental charge to the customer
over the standard analog rate. As of June 30, 2007, the
promotional pricing period (currently 3 months) had elapsed
for approximately 80% of the Netherlands digital video
subscribers and these subscribers are currently generating ARPU
that is on average significantly higher than the basic analog
rate.
As compared to the last half of 2006, the net number of digital
video RGUs added by the Netherlands during the first half of
2007 declined substantially. The decline in the net number of
digital video RGU additions during the first half of 2007 is
primarily attributable to (i) the continued emphasis on
more selective marketing strategies, and (ii) competitive
factors. Although the Netherlands emphasis on more
selective marketing strategies has resulted in a more gradual
pacing of the Netherlands digital migration efforts, we are
seeing the positive impact of these strategies in 2007 in the
form of reductions in certain marketing, operating and capital
costs and improved subscriber retention rates.
We believe that the continuing deployment of enhanced digital
video service offerings, such as video on demand (launched in
certain of the Netherlands franchise areas during the
second quarter of 2007 with full deployment expected in the
second half of 2007) and digital video recorders (launched
in December 2006), will have a positive impact on our
ability to add digital video subscribers and improve retention
rates in the Netherlands. No assurance can be given that we will
be successful in our efforts to (i) increase the number of
RGU additions to the Netherlands digital video service or
(ii) continue to improve digital video subscriber retention
rates.
Switzerland. Switzerlands revenue
increased $18.8 million or 9.7% and $47.3 million or
12.7% during the three and six months ended June 30, 2007,
respectively, as compared to the corresponding prior year
periods. Excluding the effects of foreign exchange rate
fluctuations, Switzerlands revenue increased
$14.9 million or 7.7% and $33.4 million or 9.0%,
respectively. Most of these increases are attributable to
increases in subscription revenue, as the number of average
broadband Internet, telephony and video RGUs was higher during
the 2007 periods, as compared to the corresponding 2006 periods.
ARPU remained relatively constant during the 2007 periods, as
the positive impact of an improvement in Switzerlands RGU
mix, attributable to a higher proportion of telephony, broadband
Internet and digital video RGUs, was offset by the negative
impact of (i) higher discounting of digital video services,
in conjunction with Switzerlands efforts during 2007 to
increase digital migration, and (ii) lower ARPU from
telephony and broadband Internet services. ARPU from telephony
services decreased during the 2007 periods primarily due to the
impact of lower call volumes and competitive factors. ARPU from
broadband Internet services decreased during the 2007 periods
primarily due to customers selecting lower-priced tiers of
60
service. Increases in revenue from B2B services and other
non-subscription revenue also contributed to the increases in
Switzerlands revenue.
Austria. Austrias revenue increased
$14.2 million or 13.1% and $45.4 million or 23.1%
during the three and six months ended June 30, 2007,
respectively, as compared to the corresponding prior year
periods. The increase for the six-month period includes
$14.5 million attributable to the impact of the March 2006
INODE acquisition. Excluding the effects of the INODE
acquisition during the six-month period and foreign exchange
rate fluctuations during the three-month and six-month periods,
Austrias revenue increased $6.0 million or 5.6% and
$13.2 million or 6.7%, respectively. The majority of these
increases are attributable to increases in subscription revenue,
as the positive effects of higher average RGUs were only
partially offset by slight declines in ARPU. The increases in
average RGUs during the 2007 periods are attributable to
significant increases in the average number of broadband
Internet RGUs and smaller increases in the average number of
telephony and video RGUs during the 2007 periods. The slight
declines in ARPU during the 2007 periods are due primarily to
the negative impacts of lower ARPU from broadband Internet and
telephony services that were only partially offset by the
positive impacts of (i) an improvement in Austrias
RGU mix, primarily attributable to a higher proportion of
broadband Internet RGUs, and (ii) a January 2007 rate
increase for analog video services. The decrease in ARPU from
broadband Internet services is attributable to a higher
proportion of customers selecting lower-priced tiers of service
and higher discounting in response to increased competition.
ARPU from telephony services decreased, due primarily to
(i) an increase in the proportion of subscribers selecting
VoIP telephony service, which generally is priced slightly lower
than Austrias circuit switched telephony service, and
(ii) lower telephony call volumes. Telephony revenue in
Austria decreased slightly on an organic basis during the 2007
periods, as the negative effect of the decrease in telephony
ARPU was only partially offset by the positive impact of higher
average telephony RGUs. Increases in revenue from B2B services
and other non-subscription revenue also contributed to the
increases in Austrias revenue. During the second quarter
of 2007, competition and other factors have resulted in a slight
decline in the total number of RGUs in Austria, as declines in
analog video and broadband Internet RGUs were not fully offset
by modest gains in digital video and telephony RGUs.
Ireland. Irelands revenue increased
$9.9 million or 15.3% and $21.9 million or 17.3%
during the three and six months ended June 30, 2007,
respectively, as compared to the corresponding prior year
periods. Excluding the effects of foreign exchange rate
fluctuations, Irelands revenue increased $4.9 million
or 7.6% and $10.8 million or 8.6%. These increases are
primarily attributable to increases in subscription revenue as a
result of higher average RGUs and slightly higher ARPU during
the 2007 periods, as compared to the 2006 periods. The increases
in average RGUs are attributable to increases in the average
number of broadband Internet RGUs during the three-month and
six-month periods and an increase in the average number of video
RGUs during the six-month period. The increases in ARPU in
Ireland are due primarily to the positive effects of (i) an
improvement in Irelands RGU mix, primarily attributable to
a higher proportion of digital video and broadband Internet
RGUs, and (ii) a November 2006 price increase for certain
broadband Internet subscribers and lower promotional discounts
for broadband Internet services. During the second quarter of
2007, competition and other factors have resulted in a slight
decline in the total number of RGUs in Ireland, as declines in
analog video and MMDS video RGUs were not fully offset by gains
in digital video, broadband Internet and telephony RGUs.
Hungary. Hungarys revenue increased
$18.0 million or 23.7% and $33.0 million or 21.9%
during the three and six months ended June 30, 2007, as
compared to the corresponding prior year periods. These
increases include $0.5 million and $0.9 million,
respectively, attributable to the impact of a January 2007
acquisition. Excluding the effects of the acquisition and
foreign exchange rate fluctuations, Hungarys revenue
increased $5.4 million or 7.2% and $12.1 million or
8.0%, respectively. The majority of these increases are
attributable to higher subscription revenue, as higher average
numbers of broadband Internet and telephony RGUs were only
partially offset by lower average numbers of analog video and
DTH RGUs. ARPU was relatively unchanged during the 2007 periods,
as the positive effects of (i) improvements in
Hungarys RGU mix, primarily attributable to a higher
proportion of broadband Internet RGUs, and (ii) a January
2007 rate increase for analog video services were offset by the
negative impacts of (a) increases in discounting due to
competitive factors, (b) a higher proportion of customers
selecting lower-priced broadband Internet tiers, (c) growth
in Hungarys VoIP telephony service, which generally is
priced lower than Hungarys circuit switched telephony
services, and (d) lower telephony call volume. The
decreases in ARPU for telephony services more than offset the
positive impact of higher average telephony RGUs, resulting in
61
small decreases in Hungarys telephony revenue during the
2007 periods, as compared to the corresponding 2006 periods.
Hungary is continuing to experience organic declines in analog
video and DTH video RGUs, primarily due to (i) the effects
of intense competition from an alternative DTH provider and
(ii) subscriber reaction to the January 1, 2007 rate
increase for analog video services. The majority of
Hungarys recent analog video subscriber losses have
occurred in certain municipalities where the technology of our
networks limits our ability to create a less expensive tier of
service that would more effectively compete with the alternative
DTH provider. Due to decreases in the average number of DTH and
analog video RGUs and the lower ARPU from DTH video services,
Hungary experienced slight declines in revenue from video
services during each of the 2007 periods, as compared to the
corresponding 2006 periods. Increases in revenue from B2B
services, which more than offset decreases in certain other
categories of non-subscription revenue, also contributed to the
increases in Hungarys revenue during the 2007 periods.
Other Central and Eastern Europe. Other
Central and Eastern Europes revenue increased
$58.2 million or 42.3% and $114.9 million or 43.5%
during the three and six months ended June 30, 2007,
respectively, as compared to the corresponding prior year
periods. These increases include $20.4 million and
$38.9 million, respectively, attributable to the aggregate
impact of the September 2006 consolidation of Karneval and other
less significant acquisitions. Excluding the effects of these
acquisitions and foreign exchange rate fluctuations, Other
Central and Eastern Europes revenue increased
$17.4 million or 12.6% and $36.3 million or 13.7%,
respectively. These increases primarily are attributable to
increases in subscription revenue as a result of higher average
RGUs and slightly higher ARPU during the 2007 periods, as
compared to the 2006 periods. The increases in average RGUs
during the 2007 periods are attributable to higher average
numbers of (i) broadband Internet RGUs (mostly in Poland,
Romania and the Czech Republic), (ii) telephony RGUs
(mostly related to the expansion of VoIP telephony services in
Poland, the Czech Republic and Romania) and (iii) video
RGUs (mostly in Romania and the Czech Republic). ARPU increased
slightly during the 2007 periods as the positive effects of
(i) an improvement in RGU mix, primarily attributable to a
higher proportion of broadband Internet and DTH RGUs, and
(ii) January 2007 rate increases for video services in
certain countries more than offset the negative effects of
higher discounting related to increased competition and a higher
proportion of broadband Internet subscribers selecting
lower-priced tiers.
We continue to experience increased competition for video RGUs
in Central and Eastern Europe due largely to the effects of
competition from several alternative video providers that are
competing with us in most of our Central and Eastern European
markets. In Romania, where we are facing intense competition
from multiple alternative providers (two of which are also
offering telephony and Internet access services), we experienced
significant organic declines in video RGUs during 2007. Most of
these declines are occurring in smaller municipalities where
Romanias network has not yet been upgraded to provide
broadband Internet, telephony and digital video services.
Negative subscriber reaction to a January 1, 2007 rate
increase for Romanias analog video services also
contributed to the decline in video RGUs during the first six
months of 2007. In addition, during the second quarter of 2007,
increased competition and other factors contributed to
(i) slower growth rates for our broadband Internet services
in Romania and our other Central and Eastern Europe markets, and
(ii) small organic declines in video RGUs in Poland, Czech
Republic, Slovak Republic and Slovenia.
J:COM (Japan). J:COMs revenue increased
$72.8 million or 15.8% and $167.2 million or 18.6%
during the three and six months ended June 30, 2007, as
compared to the corresponding prior year periods. These
increases include $54.8 million and $109.8 million,
respectively, attributable to the aggregate impact of the
September 2006 acquisition of Cable West and other less
significant acquisitions. Excluding the effects of these
acquisitions and foreign exchange rate fluctuations,
J:COMs revenue increased $47.5 million or 10.3% and
$98.3 million or 10.9%, respectively. Most of these
increases are attributable to increases in subscription revenue,
due primarily to a higher average number of telephony, broadband
Internet and video RGUs during the 2007 periods. ARPU remained
relatively unchanged during the 2007 periods, as the positive
effects of (i) an improvement in J:COMs RGU mix,
primarily attributable to a higher proportion of digital video
RGUs and (ii) a higher proportion of broadband Internet
subscribers selecting higher-priced tiers of service were
largely offset by the negative effects of (a) bundling
discounts and (b) lower telephony ARPU due to decreases in
customer call volumes and minutes used.
VTR (Chile). VTRs revenue increased
$13.4 million or 9.5% and $25.9 million or 9.5% during
the three and six months ended June 30, 2007, respectively,
as compared to the corresponding prior year periods. Excluding
the effects of foreign exchange rate fluctuations, VTRs
revenue increased $13.3 million or 9.4% and
$29.6 million or
62
10.8%, respectively. Most of these increases are attributable to
increases in subscription revenue, due primarily to a higher
average number of VTRs broadband Internet, telephony and
video RGUs during the 2007 periods. ARPU declined somewhat
during the 2007 periods, due primarily to decreases in ARPU from
broadband Internet and telephony services. ARPU from video
services remained relatively unchanged during the 2007 periods,
as the positive impacts of (i) a higher proportion of
subscribers selecting digital video over analog video services
and (ii) August 2006 and April 2007 inflation adjustments
to certain rates for analog video services were offset by the
negative impact of higher discounts. The lower ARPU from
broadband Internet services is primarily attributable to the
effect of higher discounting, which was slightly offset by an
increase in the proportion of subscribers selecting higher-speed
broadband Internet services over the lower-speed alternatives.
ARPU from telephony services remained relatively unchanged
during the 2007 periods as the positive effects of the migration
of a significant number of subscribers to a fixed-rate plan was
offset by the negative impact of lower call volumes for
subscribers that remain on a usage-based plan.
63
Operating
Expenses of our Reportable Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
Three months ended
|
|
|
|
|
|
(decrease)
|
|
|
|
June 30,
|
|
|
Increase (decrease)
|
|
|
excluding FX
|
|
|
|
2007
|
|
|
2006
|
|
|
$
|
|
|
%
|
|
|
%
|
|
|
|
amounts in millions, except % amounts
|
|
|
UPC Broadband Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Netherlands
|
|
$
|
90.9
|
|
|
$
|
82.6
|
|
|
$
|
8.3
|
|
|
|
10.0
|
|
|
|
2.6
|
|
Switzerland
|
|
|
72.8
|
|
|
|
68.6
|
|
|
|
4.2
|
|
|
|
6.1
|
|
|
|
4.2
|
|
Austria
|
|
|
43.7
|
|
|
|
40.3
|
|
|
|
3.4
|
|
|
|
8.4
|
|
|
|
1.2
|
|
Ireland
|
|
|
39.1
|
|
|
|
33.6
|
|
|
|
5.5
|
|
|
|
16.4
|
|
|
|
8.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Western Europe
|
|
|
246.5
|
|
|
|
225.1
|
|
|
|
21.4
|
|
|
|
9.5
|
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hungary
|
|
|
33.9
|
|
|
|
28.7
|
|
|
|
5.2
|
|
|
|
18.1
|
|
|
|
2.8
|
|
Other Central and Eastern Europe
|
|
|
72.0
|
|
|
|
51.9
|
|
|
|
20.1
|
|
|
|
38.7
|
|
|
|
24.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Central and Eastern Europe
|
|
|
105.9
|
|
|
|
80.6
|
|
|
|
25.3
|
|
|
|
31.4
|
|
|
|
16.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central and corporate operations
|
|
|
19.0
|
|
|
|
19.3
|
|
|
|
(0.3
|
)
|
|
|
(1.6
|
)
|
|
|
(8.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UPC Broadband Division
|
|
|
371.4
|
|
|
|
325.0
|
|
|
|
46.4
|
|
|
|
14.3
|
|
|
|
6.2
|
|
Telenet (Belgium)
|
|
|
116.6
|
|
|
|
3.5
|
|
|
|
113.1
|
|
|
|
N.M.
|
|
|
|
N.M.
|
|
J:COM (Japan)
|
|
|
214.6
|
|
|
|
193.3
|
|
|
|
21.3
|
|
|
|
11.0
|
|
|
|
17.2
|
|
VTR (Chile)
|
|
|
60.6
|
|
|
|
60.8
|
|
|
|
(0.2
|
)
|
|
|
(0.3
|
)
|
|
|
(0.4
|
)
|
Corporate and other
|
|
|
160.2
|
|
|
|
121.1
|
|
|
|
39.1
|
|
|
|
32.3
|
|
|
|
22.6
|
|
Intersegment eliminations
|
|
|
(19.8
|
)
|
|
|
(14.7
|
)
|
|
|
(5.1
|
)
|
|
|
(34.7
|
)
|
|
|
(25.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses excluding
stock-based compensation expense
|
|
|
903.6
|
|
|
|
689.0
|
|
|
|
214.6
|
|
|
|
31.1
|
|
|
|
26.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
2.5
|
|
|
|
1.1
|
|
|
|
1.4
|
|
|
|
127.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total LGI
|
|
$
|
906.1
|
|
|
$
|
690.1
|
|
|
$
|
216.0
|
|
|
|
31.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
Three months ended
|
|
|
|
|
|
(decrease)
|
|
|
|
June 30,
|
|
|
Increase (decrease)
|
|
|
excluding FX
|
|
|
|
2007
|
|
|
2006
|
|
|
$
|
|
|
%
|
|
|
%
|
|
|
|
amounts in millions, except % amounts
|
|
|
UPC Broadband Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Netherlands
|
|
$
|
178.6
|
|
|
$
|
158.1
|
|
|
$
|
20.5
|
|
|
|
13.0
|
|
|
|
4.5
|
|
Switzerland
|
|
|
143.1
|
|
|
|
134.7
|
|
|
|
8.4
|
|
|
|
6.2
|
|
|
|
2.7
|
|
Austria
|
|
|
87.3
|
|
|
|
71.3
|
|
|
|
16.0
|
|
|
|
22.4
|
|
|
|
13.7
|
|
Ireland
|
|
|
78.1
|
|
|
|
66.0
|
|
|
|
12.1
|
|
|
|
18.3
|
|
|
|
9.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Western Europe
|
|
|
487.1
|
|
|
|
430.1
|
|
|
|
57.0
|
|
|
|
13.3
|
|
|
|
6.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hungary
|
|
|
67.4
|
|
|
|
58.0
|
|
|
|
9.4
|
|
|
|
16.2
|
|
|
|
3.7
|
|
Other Central and Eastern Europe
|
|
|
140.2
|
|
|
|
100.1
|
|
|
|
40.1
|
|
|
|
40.1
|
|
|
|
25.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Central and Eastern Europe
|
|
|
207.6
|
|
|
|
158.1
|
|
|
|
49.5
|
|
|
|
31.3
|
|
|
|
17.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central and corporate operations
|
|
|
38.2
|
|
|
|
37.6
|
|
|
|
0.6
|
|
|
|
1.6
|
|
|
|
(5.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UPC Broadband Division
|
|
|
732.9
|
|
|
|
625.8
|
|
|
|
107.1
|
|
|
|
17.1
|
|
|
|
8.3
|
|
Telenet (Belgium)
|
|
|
228.7
|
|
|
|
6.2
|
|
|
|
222.5
|
|
|
|
N.M.
|
|
|
|
N.M.
|
|
J:COM (Japan)
|
|
|
427.1
|
|
|
|
373.1
|
|
|
|
54.0
|
|
|
|
14.5
|
|
|
|
18.9
|
|
VTR (Chile)
|
|
|
122.6
|
|
|
|
116.1
|
|
|
|
6.5
|
|
|
|
5.6
|
|
|
|
6.9
|
|
Corporate and other
|
|
|
306.4
|
|
|
|
237.0
|
|
|
|
69.4
|
|
|
|
29.3
|
|
|
|
20.4
|
|
Intersegment eliminations
|
|
|
(40.7
|
)
|
|
|
(34.1
|
)
|
|
|
(6.6
|
)
|
|
|
(19.4
|
)
|
|
|
(10.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses excluding
stock-based compensation expense
|
|
|
1,777.0
|
|
|
|
1,324.1
|
|
|
|
452.9
|
|
|
|
34.2
|
|
|
|
29.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
4.8
|
|
|
|
2.1
|
|
|
|
2.7
|
|
|
|
128.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total LGI
|
|
$
|
1,781.8
|
|
|
$
|
1,326.2
|
|
|
$
|
455.6
|
|
|
|
34.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N.M. Not meaningful.
64
General. Operating expenses include
programming, network operations, interconnect, customer
operations, customer care, stock-based compensation expense and
other direct costs. We do not include stock-based compensation
in the following discussion and analysis of the operating
expenses of our reportable segments as stock-based compensation
expense is not included in the performance measures of our
reportable segments. Stock-based compensation expense is
discussed under the Discussion and Analysis of Our
Consolidated Operating Results below. Programming costs,
which represent a significant portion of our operating costs,
are expected to rise in future periods as a result of the
expansion of service offerings and the potential for price
increases. Any cost increases that we are not able to pass on to
our subscribers through service rate increases would result in
increased pressure on our operating margins.
UPC Broadband Division. The UPC Broadband
Divisions operating expenses increased $46.4 million
or 14.3% and $107.1 million or 17.1%, respectively, during
the three and six months ended June 30, 2007, as compared
to the corresponding prior year periods. These increases include
$6.8 million and $22.0 million, respectively,
attributable to the aggregate impact of the INODE, Karneval, and
other less significant acquisitions. Excluding the effects of
these acquisitions, foreign exchange rate fluctuations and
stock-based compensation expense, the UPC Broadband
Divisions operating expenses increased $13.4 million
or 4.1% and $30.1 million or 4.8%, respectively, primarily
due to the net effect of the following factors:
|
|
|
|
|
Increases in direct programming and copyright costs of
$2.6 million and $11.3 million during the respective
2007 periods, primarily due to an increase in costs for content
and interactive digital services related to subscriber growth on
the digital and DTH platforms;
|
|
|
|
Increases in interconnect costs of $5.0 million and
$6.8 million during the respective 2007 periods, primarily
due to growth in telephony subscribers in the Netherlands,
Hungary, Poland and Switzerland;
|
|
|
|
Increases in outsourced labor and consulting fees of
$1.8 million and $6.6 million during the respective
2007 periods, driven by the use of third parties to manage
excess call center volume associated with growth in digital
video, broadband Internet and VoIP telephony services, primarily
in Ireland and Switzerland, and increased costs related to
network maintenance and upgrade activity in Ireland; and
|
|
|
|
Increases in bad debt expense and network related costs,
partially offset by decreases in personnel costs and information
technology related expenses.
|
J:COM (Japan). J:COMs operating expenses
increased $21.3 million or 11.0% and $54.0 million or
14.5%, during the three and six months ended June 30, 2007,
respectively, as compared to the corresponding prior year
periods. These increases include $18.5 million and
$37.0 million, respectively, attributable to the impact of
the Cable West and other less significant acquisitions.
Excluding the effects of these acquisitions, foreign exchange
rate fluctuations and stock-based compensation expense,
J:COMs operating expenses increased $14.8 million or
7.6% and $33.5 million or 9.0%, respectively. These
increases, which are primarily attributable to growth in
J:COMs subscriber base, include the following factors:
|
|
|
|
|
Increases in programming and related costs of $3.6 million
and $9.4 million, respectively, as a result of growth in
the number of video RGUs and a higher proportion of subscribers
selecting digital video services over analog video services;
|
|
|
|
Increases in salaries and other staff related costs of
$5.0 million and $7.6 million, respectively;
|
|
|
|
Increases in (i) the costs incurred by J:COM in connection
with construction services provided by J:COM to affiliates and
third parties, (ii) network operating expenses, maintenance
and technical support costs and (iii) other individually
insignificant increases.
|
65
VTR (Chile). VTRs operating expenses
decreased $0.2 million or 0.3% during the three months
ended June 30, 2007 and increased $6.5 million or 5.6%
during the six months ended June 30, 2007, respectively, as
compared to the corresponding prior year periods. Excluding the
effects of foreign exchange rate fluctuations and stock-based
compensation expense, VTRs operating expenses decreased
$0.2 million or 0.4% and increased $8.1 million or
6.9%, respectively. The increase during the six-month period,
which is due largely to the increased scope of VTRs
business, includes (i) an increase in technical services
and network maintenance costs of $2.8 million, (ii) an
increase in programming costs of $2.6 million,
(iii) an increase in labor and related costs, including
consulting and outsourcing, of $2.0 million and
(iv) an increase in telephony access charges. The decrease
during the three-month period is primarily attributable to a
$1.6 million increase in technical services and network
maintenance costs that was more than offset by individually
insignificant net decreases in other components of VTRs
operating expenses.
66
SG&A
Expenses of our Reportable Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
|
|
|
Increase
|
|
|
|
ended
|
|
|
|
|
|
(decrease)
|
|
|
|
June 30,
|
|
|
Increase (decrease)
|
|
|
excluding FX
|
|
|
|
2007
|
|
|
2006
|
|
|
$
|
|
|
%
|
|
|
%
|
|
|
|
amounts in millions, except % amounts
|
|
|
UPC Broadband Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Netherlands
|
|
$
|
37.1
|
|
|
$
|
38.4
|
|
|
$
|
(1.3
|
)
|
|
|
(3.4
|
)
|
|
|
(9.8
|
)
|
Switzerland
|
|
|
37.0
|
|
|
|
36.3
|
|
|
|
0.7
|
|
|
|
1.9
|
|
|
|
0.4
|
|
Austria
|
|
|
19.0
|
|
|
|
17.9
|
|
|
|
1.1
|
|
|
|
6.1
|
|
|
|
(1.4
|
)
|
Ireland
|
|
|
11.5
|
|
|
|
10.8
|
|
|
|
0.7
|
|
|
|
6.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Western Europe
|
|
|
104.6
|
|
|
|
103.4
|
|
|
|
1.2
|
|
|
|
1.2
|
|
|
|
(3.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hungary
|
|
|
11.2
|
|
|
|
11.6
|
|
|
|
(0.4
|
)
|
|
|
(3.4
|
)
|
|
|
(15.9
|
)
|
Other Central and Eastern Europe
|
|
|
24.9
|
|
|
|
21.3
|
|
|
|
3.6
|
|
|
|
16.9
|
|
|
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Central and Eastern Europe
|
|
|
36.1
|
|
|
|
32.9
|
|
|
|
3.2
|
|
|
|
9.7
|
|
|
|
(3.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central and corporate operations
|
|
|
41.8
|
|
|
|
32.4
|
|
|
|
9.4
|
|
|
|
29.0
|
|
|
|
19.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UPC Broadband Division
|
|
|
182.5
|
|
|
|
168.7
|
|
|
|
13.8
|
|
|
|
8.2
|
|
|
|
0.9
|
|
Telenet (Belgium)
|
|
|
49.3
|
|
|
|
1.6
|
|
|
|
47.7
|
|
|
|
N.M.
|
|
|
|
N.M.
|
|
J:COM (Japan)
|
|
|
105.4
|
|
|
|
89.3
|
|
|
|
16.1
|
|
|
|
18.0
|
|
|
|
24.4
|
|
VTR (Chile)
|
|
|
34.4
|
|
|
|
32.1
|
|
|
|
2.3
|
|
|
|
7.2
|
|
|
|
7.2
|
|
Corporate and other
|
|
|
44.2
|
|
|
|
42.9
|
|
|
|
1.3
|
|
|
|
3.0
|
|
|
|
(1.4
|
)
|
Inter-segment eliminations
|
|
|
0.2
|
|
|
|
(0.3
|
)
|
|
|
0.5
|
|
|
|
166.7
|
|
|
|
150.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total SG&A expenses excluding
stock-based compensation expense
|
|
|
416.0
|
|
|
|
334.3
|
|
|
|
81.7
|
|
|
|
24.4
|
|
|
|
20.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
37.5
|
|
|
|
18.2
|
|
|
|
19.3
|
|
|
|
106.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total LGI
|
|
$
|
453.5
|
|
|
$
|
352.5
|
|
|
$
|
101.0
|
|
|
|
28.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months
|
|
|
|
|
|
Increase
|
|
|
|
ended
|
|
|
|
|
|
(decrease)
|
|
|
|
June 30,
|
|
|
Increase (decrease)
|
|
|
excluding FX
|
|
|
|
2007
|
|
|
2006
|
|
|
$
|
|
|
%
|
|
|
%
|
|
|
|
amounts in millions, except % amounts
|
|
|
UPC Broadband Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Netherlands
|
|
$
|
73.4
|
|
|
$
|
72.1
|
|
|
$
|
1.3
|
|
|
|
1.8
|
|
|
|
(5.6
|
)
|
Switzerland
|
|
|
70.7
|
|
|
|
73.2
|
|
|
|
(2.5
|
)
|
|
|
(3.4
|
)
|
|
|
(6.7
|
)
|
Austria
|
|
|
37.7
|
|
|
|
31.2
|
|
|
|
6.5
|
|
|
|
20.8
|
|
|
|
11.9
|
|
Ireland
|
|
|
23.6
|
|
|
|
21.5
|
|
|
|
2.1
|
|
|
|
9.8
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Western Europe
|
|
|
205.4
|
|
|
|
198.0
|
|
|
|
7.4
|
|
|
|
3.7
|
|
|
|
(2.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hungary
|
|
|
23.3
|
|
|
|
21.5
|
|
|
|
1.8
|
|
|
|
8.4
|
|
|
|
(3.3
|
)
|
Other Central and Eastern Europe
|
|
|
51.6
|
|
|
|
38.7
|
|
|
|
12.9
|
|
|
|
33.3
|
|
|
|
19.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Central and Eastern Europe
|
|
|
74.9
|
|
|
|
60.2
|
|
|
|
14.7
|
|
|
|
24.4
|
|
|
|
11.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central and corporate operations
|
|
|
83.2
|
|
|
|
65.9
|
|
|
|
17.3
|
|
|
|
26.3
|
|
|
|
16.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UPC Broadband Division
|
|
|
363.5
|
|
|
|
324.1
|
|
|
|
39.4
|
|
|
|
12.2
|
|
|
|
3.9
|
|
Telenet (Belgium)
|
|
|
100.4
|
|
|
|
3.1
|
|
|
|
97.3
|
|
|
|
N.M.
|
|
|
|
N.M.
|
|
J:COM (Japan)
|
|
|
207.9
|
|
|
|
176.2
|
|
|
|
31.7
|
|
|
|
18.0
|
|
|
|
22.4
|
|
VTR (Chile)
|
|
|
63.3
|
|
|
|
63.5
|
|
|
|
(0.2
|
)
|
|
|
(0.3
|
)
|
|
|
0.9
|
|
Corporate and other
|
|
|
88.3
|
|
|
|
84.2
|
|
|
|
4.1
|
|
|
|
4.9
|
|
|
|
0.7
|
|
Inter-segment eliminations
|
|
|
0.6
|
|
|
|
0.2
|
|
|
|
0.4
|
|
|
|
200.0
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total SG&A expenses excluding
stock-based compensation expense
|
|
|
824.0
|
|
|
|
651.3
|
|
|
|
172.7
|
|
|
|
26.5
|
|
|
|
22.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
78.7
|
|
|
|
33.2
|
|
|
|
45.5
|
|
|
|
137.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total LGI
|
|
$
|
902.7
|
|
|
$
|
684.5
|
|
|
$
|
218.2
|
|
|
|
31.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N.M. Not meaningful.
67
General. SG&A expenses include human
resources, information technology, general services, management,
finance, legal and marketing costs and other general expenses.
We do not include stock-based compensation in the following
discussion and analysis of the SG&A expenses of our
reportable segments as stock-based compensation expense is not
included in the performance measures of our reportable segments.
Stock-based compensation expense is discussed under the
Discussion and Analysis of Our Consolidated Operating Results
below.
UPC Broadband Division. The UPC Broadband
Divisions SG&A expenses increased $13.8 million
or 8.2% and $39.4 million or 12.2% during the three and six
months ended June 30, 2007, respectively, as compared to
the corresponding prior year periods. These increases include
$5.2 million and $14.0 million, respectively,
attributable to the aggregate impact of the INODE, Karneval, and
other less significant acquisitions. Excluding the effects of
these acquisitions, foreign exchange rate fluctuations and
stock-based compensation expense, the UPC Broadband
Divisions SG&A expenses decreased $3.7 million
or 2.2% and $1.3 million or 0.4%, respectively.
The decrease in the UPC Broadband Divisions SG&A
expenses during the three-month period is primarily attributable
to lower marketing expenses and commissions and personnel costs.
The lower marketing expenses and commissions are due primarily
to (i) the curtailment of certain efforts to market
Hungarys video services during the second quarter of 2007
to allow for the development of marketing strategies that will
more effectively address increased competition and
(ii) lower marketing costs in the Netherlands during the
2007 periods due in large part to the continued emphasis on more
selective marketing strategies with respect to the
Netherlands digital video services. These decreases were
partially offset by higher costs due to (i) the
introduction of a new marketing campaign for VoIP telephony
services in Austria and (ii) a program in Ireland to
integrate marketing, align products and address increased
competition.
The decrease in the UPC Broadband Divisions SG&A
expenses during the six-month period includes decreases in
outsourced labor and consulting fees, and facility and other
administrative costs that were mostly offset by a
$3.6 million increase in marketing expenses and
commissions. The increases in marketing expenses and commissions
during the six-month period reflect increased costs during the
first quarter of 2007 that were only partially offset by
decreases in these costs during the second quarter of 2007, as
described in the preceding paragraph. The increase in sales and
marketing costs during the first quarter of 2007 reflects
marketing costs incurred in anticipation of a rebranding
campaign that was launched during the second quarter of 2007,
targeted marketing in Romania to address increased competition,
and increased commissions due to RGU growth, particularly in our
Central and Eastern Europe segment. A favorable first quarter
2007 settlement related to number porting charges in Switzerland
also contributed to the decrease in SG&A expenses during
the six-month period.
J:COM (Japan). J:COMs SG&A expenses
increased $16.1 million or 18.0% and $31.7 million or
18.0% during the three and six months ended June 30, 2007,
respectively, as compared to the corresponding prior year
periods. These increases include $14.7 million and
$29.6 million, respectively, attributable to the aggregate
impact of the Cable West and other less significant
acquisitions. Excluding the effects of these acquisitions,
foreign exchange rate fluctuations and stock-based compensation
expense, J:COMs SG&A expenses increased
$7.0 million or 7.9% and $9.8 million or 5.6%,
respectively. These increases are attributable primarily to
(i) $1.7 million and $5.0 million increases,
respectively, in labor and related overhead costs associated
with higher staffing levels and annual wage increases and
(ii) other individually insignificant increases.
VTR (Chile). VTRs SG&A expenses
increased $2.3 million or 7.2% during the three months
ended June 30, 2007 and decreased $0.2 million or 0.3%
during the six months ended June 30, 2007, as compared to
the corresponding prior year periods. Excluding the effects of
foreign exchange rate fluctuations and stock-based compensation
expense, VTRs SG&A expenses increased
$2.3 million or 7.2% and $0.6 million or 0.9%,
respectively. These increases are primarily attributable to
increases in labor and related costs, including consulting and
outsourcing, of $2.0 million and $1.0 million,
respectively.
Operating
Cash Flow of our Reportable Segments
Operating cash flow is the primary measure used by our chief
operating decision maker to evaluate segment operating
performance and to decide how to allocate resources to segments.
As we use the term, operating cash flow is defined as revenue
less operating and SG&A expenses (excluding stock-based
compensation, depreciation and
68
amortization, and impairment, restructuring and other operating
charges or credits). For additional information and a
reconciliation of total segment operating cash flow to our
consolidated earnings (loss) before income taxes, minority
interests and discontinued operations, see note 12 to our
condensed consolidated financial statements. Operating cash flow
should be viewed as a measure of operating performance that is a
supplement to, and not a substitute for, operating income, net
earnings, cash flow from operating activities and other GAAP
measures of income.
69
Operating
Cash Flow Three months ended June 30, 2007 and
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
Three months ended
|
|
|
|
|
|
(decrease)
|
|
|
|
June 30,
|
|
|
Increase (decrease)
|
|
|
excluding FX
|
|
|
|
2007
|
|
|
2006
|
|
|
$
|
|
|
%
|
|
|
%
|
|
|
|
amounts in millions, except % amounts
|
|
|
UPC Broadband Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Netherlands
|
|
$
|
132.6
|
|
|
$
|
103.1
|
|
|
$
|
29.5
|
|
|
|
28.6
|
|
|
|
19.9
|
|
Switzerland
|
|
|
102.5
|
|
|
|
88.6
|
|
|
|
13.9
|
|
|
|
15.7
|
|
|
|
13.4
|
|
Austria
|
|
|
59.5
|
|
|
|
49.8
|
|
|
|
9.7
|
|
|
|
19.5
|
|
|
|
11.6
|
|
Ireland
|
|
|
24.1
|
|
|
|
20.4
|
|
|
|
3.7
|
|
|
|
18.1
|
|
|
|
10.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Western Europe
|
|
|
318.7
|
|
|
|
261.9
|
|
|
|
56.8
|
|
|
|
21.7
|
|
|
|
15.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hungary
|
|
|
48.8
|
|
|
|
35.6
|
|
|
|
13.2
|
|
|
|
37.1
|
|
|
|
19.5
|
|
Other Central and Eastern Europe
|
|
|
98.8
|
|
|
|
64.3
|
|
|
|
34.5
|
|
|
|
53.7
|
|
|
|
37.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Central and Eastern Europe
|
|
|
147.6
|
|
|
|
99.9
|
|
|
|
47.7
|
|
|
|
47.7
|
|
|
|
31.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central and corporate operations
|
|
|
(59.0
|
)
|
|
|
(49.6
|
)
|
|
|
(9.4
|
)
|
|
|
(19.0
|
)
|
|
|
(10.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UPC Broadband Division
|
|
|
407.3
|
|
|
|
312.2
|
|
|
|
95.1
|
|
|
|
30.5
|
|
|
|
21.3
|
|
Telenet (Belgium)
|
|
|
147.3
|
|
|
|
5.5
|
|
|
|
141.8
|
|
|
|
N.M.
|
|
|
|
N.M.
|
|
J:COM (Japan)
|
|
|
213.4
|
|
|
|
178.0
|
|
|
|
35.4
|
|
|
|
19.9
|
|
|
|
26.5
|
|
VTR (Chile)
|
|
|
59.5
|
|
|
|
48.2
|
|
|
|
11.3
|
|
|
|
23.4
|
|
|
|
23.2
|
|
Corporate and other
|
|
|
33.5
|
|
|
|
23.6
|
|
|
|
9.9
|
|
|
|
41.9
|
|
|
|
24.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
861.0
|
|
|
$
|
567.5
|
|
|
$
|
293.5
|
|
|
|
51.7
|
|
|
|
46.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Cash Flow Six months ended June 30, 2007 and
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
Six months ended
|
|
|
|
|
|
(decrease)
|
|
|
|
June 30,
|
|
|
Increase (decrease)
|
|
|
excluding FX
|
|
|
|
2007
|
|
|
2006
|
|
|
$
|
|
|
%
|
|
|
%
|
|
|
|
amounts in millions, except % amounts
|
|
|
UPC Broadband Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Netherlands
|
|
$
|
260.6
|
|
|
$
|
209.2
|
|
|
$
|
51.4
|
|
|
|
24.6
|
|
|
|
15.1
|
|
Switzerland
|
|
|
205.8
|
|
|
|
164.4
|
|
|
|
41.4
|
|
|
|
25.2
|
|
|
|
21.1
|
|
Austria
|
|
|
117.2
|
|
|
|
94.3
|
|
|
|
22.9
|
|
|
|
24.3
|
|
|
|
15.1
|
|
Ireland
|
|
|
46.7
|
|
|
|
39.0
|
|
|
|
7.7
|
|
|
|
19.7
|
|
|
|
11.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Western Europe
|
|
|
630.3
|
|
|
|
506.9
|
|
|
|
123.4
|
|
|
|
24.3
|
|
|
|
16.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hungary
|
|
|
93.2
|
|
|
|
71.4
|
|
|
|
21.8
|
|
|
|
30.5
|
|
|
|
16.3
|
|
Other Central and Eastern Europe
|
|
|
187.4
|
|
|
|
125.5
|
|
|
|
61.9
|
|
|
|
49.3
|
|
|
|
33.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Central and Eastern Europe
|
|
|
280.6
|
|
|
|
196.9
|
|
|
|
83.7
|
|
|
|
42.5
|
|
|
|
27.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central and corporate operations
|
|
|
(114.2
|
)
|
|
|
(100.7
|
)
|
|
|
(13.5
|
)
|
|
|
(13.4
|
)
|
|
|
(4.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total UPC Broadband Division
|
|
|
796.7
|
|
|
|
603.1
|
|
|
|
193.6
|
|
|
|
32.1
|
|
|
|
22.0
|
|
Telenet (Belgium)
|
|
|
284.2
|
|
|
|
11.5
|
|
|
|
272.7
|
|
|
|
N.M.
|
|
|
|
N.M.
|
|
J:COM (Japan)
|
|
|
431.7
|
|
|
|
350.2
|
|
|
|
81.5
|
|
|
|
23.3
|
|
|
|
28.0
|
|
VTR (Chile)
|
|
|
114.0
|
|
|
|
94.4
|
|
|
|
19.6
|
|
|
|
20.8
|
|
|
|
22.3
|
|
Corporate and other
|
|
|
59.0
|
|
|
|
46.7
|
|
|
|
12.3
|
|
|
|
26.3
|
|
|
|
13.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,685.6
|
|
|
$
|
1,105.9
|
|
|
$
|
579.7
|
|
|
|
52.4
|
|
|
|
45.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N.M. Not meaningful.
70
Operating
Cash Flow Margin Three and six months ended
June 30, 2007 and 2006
The following table sets forth the operating cash flow margins
(operating cash flow divided by revenue) of our reportable
segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
UPC Broadband Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Netherlands
|
|
|
50.9
|
|
|
|
46.0
|
|
|
|
50.8
|
|
|
|
47.6
|
|
Switzerland
|
|
|
48.3
|
|
|
|
45.8
|
|
|
|
49.0
|
|
|
|
44.2
|
|
Austria
|
|
|
48.7
|
|
|
|
46.1
|
|
|
|
48.4
|
|
|
|
47.9
|
|
Ireland
|
|
|
32.3
|
|
|
|
31.5
|
|
|
|
31.5
|
|
|
|
30.8
|
|
Total Western Europe
|
|
|
47.6
|
|
|
|
44.4
|
|
|
|
47.6
|
|
|
|
44.7
|
|
Hungary
|
|
|
52.0
|
|
|
|
46.9
|
|
|
|
50.7
|
|
|
|
47.3
|
|
Other Central and Eastern Europe
|
|
|
50.5
|
|
|
|
46.8
|
|
|
|
49.4
|
|
|
|
47.5
|
|
Total Central and Eastern Europe
|
|
|
51.0
|
|
|
|
46.8
|
|
|
|
49.8
|
|
|
|
47.4
|
|
Total UPC Broadband Division,
including central and corporate costs
|
|
|
42.4
|
|
|
|
38.7
|
|
|
|
42.1
|
|
|
|
38.8
|
|
Telenet (Belgium)
|
|
|
47.0
|
|
|
|
51.9
|
|
|
|
46.3
|
|
|
|
55.3
|
|
J:COM (Japan)
|
|
|
40.0
|
|
|
|
38.6
|
|
|
|
40.5
|
|
|
|
38.9
|
|
VTR (Chile)
|
|
|
38.5
|
|
|
|
34.2
|
|
|
|
38.0
|
|
|
|
34.5
|
|
The improvements in the operating cash flow margins of our
reportable segments during the 2007 periods, as compared to the
respective 2006 periods, are generally attributable to improved
operational leverage resulting from revenue growth that is more
than offsetting the accompanying increases in our operating and
SG&A expenses. Cost containment efforts and synergies and
cost savings resulting from the continued integration of
acquisitions, particularly our 2005 acquisitions in Switzerland
and Chile, have also positively impacted the operating cash flow
margins of our reportable segments. The significant improvement
in the operating cash flow margin of the Netherlands is
principally due to cost reductions associated with the more
gradual pacing of the Netherlands digital migration
efforts during 2007 due to the late 2006 adoption of more
selective marketing strategies. The decrease in the operating
cash flow margin of our Telenet (Belgium) segment is due to the
fact that the 2006 periods only include the results of UPC
Belgium. As discussed under Overview and Revenue of
our Reportable Segments above, our broadband operations are
experiencing significant competition, particularly in Europe.
Sustained or increased competition could adversely affect our
ability to maintain or improve the operating cash flow margins
of our reportable segments.
Discussion
and Analysis of our Consolidated Operating Results
General
As noted under Overview above, the effects of
acquisitions have affected the comparability of our results of
operations during the 2007 and 2006 interim periods. For more
detailed explanations of the changes in our revenue, operating
expenses and SG&A expenses, see the Discussion and
Analysis of Reportable Segments that appears above.
Revenue
Our total consolidated revenue increased $589.8 million or
37.1% and $1,205.3 million or 39.1% during the three and
six months ended June 30, 2007, respectively, as compared
to the corresponding prior year periods. These increases include
$359.2 million and $717.2 million, respectively,
attributable to the impact of acquisitions. Excluding the
effects of acquisitions and foreign exchange rate fluctuations,
total consolidated revenue increased $156.6 million or 9.8%
and $318.7 million or 10.3%, respectively. As discussed in
greater detail under Discussion and Analysis of Reportable
Segments above, most of these increases are attributable to
RGU growth. For information regarding competitive developments
in certain of our markets, see Overview and Discussion
and Analysis of Reportable Segments above.
71
Operating
expenses
Our total consolidated operating expenses increased
$216.0 million or 31.3% and $455.6 or 34.4% during the
three and six months ended June 30, 2007, respectively, as
compared to the corresponding prior year periods. These
increases include $137.1 million and $277.0 million,
respectively, attributable to the impact of acquisitions. Our
operating expenses include stock-based compensation expense,
which increased $1.4 million and $2.7 million,
respectively. For additional information, see discussion
following SG&A expenses below. Excluding the effects
of acquisitions, foreign exchange rate fluctuations and
stock-based compensation expense, total consolidated operating
expenses increased $48.3 million or 7.0% and
$110.0 million or 8.3%, respectively. As discussed in more
detail under Discussion and Analysis of Reportable Segments
above, these increases generally reflect increases in
(i) programming costs, (ii) labor costs,
(iii) network related costs and (iv) less significant
increases in other expense categories. Most of these increases
are a function of increased volumes or levels of activity
associated with the increase in our customer base.
SG&A
expenses
Our total consolidated SG&A expenses increased
$101.0 million or 28.7% and $218.2 million or 31.9%
during the three and six months ended June 30, 2007,
respectively, as compared to the corresponding prior year
period. These increases include $66.3 million and
$136.9 million, respectively, attributable to the impact of
acquisitions. Our SG&A expenses include stock-based
compensation expense, which increased $19.3 million and
$45.5 million, respectively. For additional information,
see discussion in the following section. Excluding the effects
of acquisitions, foreign exchange rate fluctuations and stock
based compensation expense, total consolidated SG&A
expenses increased $2.6 million or 0.8% and
$7.3 million or 1.1%, respectively. As discussed in more
detail under Discussion and Analysis of Reportable Segments
above, these increases generally reflect increases in
(i) labor costs and (ii) marketing and advertising
costs and sales commissions, partially offset by individually
insignificant net decreases. The increases in our marketing and
advertising costs and sales commissions primarily are
attributable to our efforts to promote RGU growth and launch new
product offerings and initiatives. The increases in our labor
costs primarily are a function of the increased levels of
activity associated with the increase in our customer base.
Stock-based
compensation expense (included in operating and SG&A
expenses)
We record stock-based compensation that is associated with LGI
shares and the shares of certain of our subsidiaries. A summary
of the aggregate stock-based compensation expense that is
included in our SG&A and operating expenses is set forth
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
LGI common stock (a)
|
|
$
|
33.4
|
|
|
$
|
17.1
|
|
|
$
|
74.8
|
|
|
$
|
30.1
|
|
Other (b)
|
|
|
6.6
|
|
|
|
2.2
|
|
|
|
8.7
|
|
|
|
5.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
40.0
|
|
|
$
|
19.3
|
|
|
$
|
83.5
|
|
|
$
|
35.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense
|
|
$
|
2.5
|
|
|
$
|
1.1
|
|
|
$
|
4.8
|
|
|
$
|
2.1
|
|
SG&A expense
|
|
|
37.5
|
|
|
|
18.2
|
|
|
|
78.7
|
|
|
|
33.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
40.0
|
|
|
$
|
19.3
|
|
|
$
|
83.5
|
|
|
$
|
35.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Our stock-based compensation expense for the three and six
months ended June 30, 2007 includes $21.1 million and
$50.0 million, respectively, related to our Senior
Executive and Management Performance Plans. Our stock-based
compensation expense for the 2006 periods does not include any
amounts related to our Senior Executive and Management
Performance Plans as no awards were granted during 2006 and the
requisite service period did not begin until January 1,
2007. |
|
(b) |
|
Includes stock-based compensation expense related to certain
equity incentive plans of our subsidiaries. |
72
For additional information concerning our stock-based
compensation, see note 9 to our condensed consolidated
financial statements.
Depreciation
and amortization
Our total consolidated depreciation and amortization expense
increased $155.6 million and $323.8 million during the
three and six months ended June 30, 2007, respectively, as
compared to the corresponding prior year periods. These
increases include $106.2 million and $210.1 million,
respectively, attributable to the impact of acquisitions.
Excluding the effect of acquisitions and foreign exchange rate
fluctuations, depreciation and amortization expense increased
$31.1 million or 6.8% and $67.6 million or 7.7%,
respectively. These increases are due primarily to increases
associated with capital expenditures related to the installation
of customer premise equipment, the expansion and upgrade of our
networks and other capital initiatives.
Interest
expense
Our total consolidated interest expense increased
$70.2 million and $159.1 million during the three and
six months ended June 30, 2007, respectively, as compared
to the corresponding prior year periods. Excluding the effects
of foreign exchange rate fluctuations, interest expense
increased $57.0 million or 36.2% and $132.1 million or
43.8%, respectively, during the 2007 periods. These increases
are primarily attributable to $4.3 billion or 41.9% and
$3.5 billion or 35.2% increases, respectively, in our
average outstanding indebtedness. The increase in debt is
primarily attributable to debt incurred or assumed in connection
with recapitalizations and acquisitions. Our weighted average
interest rates increased during the 2007 periods compared to the
respective 2006 periods, as increases in certain interest rates
were only partially offset by decreases associated with the
refinancing of the LG Switzerland PIK Loan Facility and the UPC
Broadband Holding Bank Facility.
Interest
and dividend income
Our total consolidated interest and dividend income increased
$3.8 million and $12.5 million during the three and
six months ended June 30, 2007, respectively, as compared
to the corresponding prior year periods. These increases
represent the net result of an increase in our average
consolidated cash and cash equivalent balances and, to a lesser
extent, the average interest rates earned on such balances. Our
interest and dividend income for the six months ended
June 30, 2007 includes $15.4 million of dividends
earned on our investment in ABC Family preferred stock. As
further described in note 13 to our condensed consolidated
financial statements, the ABC Family preferred stock was
redeemed on August 2, 2007.
Share of
results of affiliates, net
The following table reflects our share of results of affiliates,
net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
Jupiter TV
|
|
$
|
7.4
|
|
|
$
|
9.1
|
|
|
$
|
17.9
|
|
|
$
|
17.1
|
|
Telenet (a)
|
|
|
|
|
|
|
(9.6
|
)
|
|
|
|
|
|
|
(15.0
|
)
|
Mediatti Communications, Inc.
|
|
|
(0.5
|
)
|
|
|
(1.1
|
)
|
|
|
(0.5
|
)
|
|
|
(2.5
|
)
|
Other
|
|
|
2.6
|
|
|
|
0.6
|
|
|
|
5.7
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9.5
|
|
|
$
|
(1.0
|
)
|
|
$
|
23.1
|
|
|
$
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Effective January 1, 2007, we began accounting for Telenet
as a consolidated subsidiary. |
73
Realized
and unrealized gains (losses) on financial and derivative
instruments, net
The details of our realized and unrealized gains (losses) on
financials and derivative instruments, net, are as follows for
the indicated interim periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
Cross-currency and interest rate
exchange contracts (a)
|
|
$
|
79.7
|
|
|
$
|
(68.5
|
)
|
|
$
|
41.8
|
|
|
$
|
(14.2
|
)
|
UGC Convertible Notes (b)
|
|
|
(148.2
|
)
|
|
|
2.8
|
|
|
|
(209.4
|
)
|
|
|
36.1
|
|
Foreign exchange contracts
|
|
|
(14.9
|
)
|
|
|
(6.3
|
)
|
|
|
(1.8
|
)
|
|
|
5.8
|
|
Call and put contracts (c)
|
|
|
9.6
|
|
|
|
(19.8
|
)
|
|
|
20.8
|
|
|
|
(5.2
|
)
|
Other
|
|
|
(0.5
|
)
|
|
|
(0.9
|
)
|
|
|
2.8
|
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(74.3
|
)
|
|
$
|
(92.7
|
)
|
|
$
|
(145.8
|
)
|
|
$
|
21.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The gains on the cross-currency and interest rate exchange
contracts for the 2007 periods are attributable to the net
effect of (i) gains associated with increases in market
interest rates in euro, Swiss franc, U.S. dollar, Japanese yen,
Chilean peso and Australian dollar markets, (ii) gains
associated with a decrease in the value of the Swiss franc and
the Czech kroner relative to the euro, (iii) losses
associated with a decrease in the value of the U.S. dollar
relative to the euro, (iv) losses associated with an
increase in the value of the Hungarian forint, Polish zloty and
Slovak kroner relative to the euro and (v) losses
associated with an increase in the value of the Chilean peso
relative to the U.S. dollar. The losses on the cross-currency
and interest rate exchange contracts for the 2006 periods
includes a CLP 12.3 billion ($23.3 million at the
average exchange rate for the period) unrealized loss during the
second quarter of 2006 related to certain cross-currency and
interest rate exchange contracts entered into by VTR in
anticipation of the refinancing of its then existing credit
facility. Most of this unrealized loss is associated with the
market spreads contained in these contracts due to the large
notional amount of these contracts relative to the standard size
of similar transactions in Chile. The remaining losses during
the 2006 periods are attributable to the net effect of
(i) gains associated with increases in market interest
rates, (ii) losses associated with a decrease in the value
of the euro relative to the Swiss franc and (iii) losses
associated with a decrease in the value of the U.S. dollar
relative to the euro. |
|
(b) |
|
Represents the change in the fair value of the UGC Convertible
Notes that is not attributable to the remeasurement of the UGC
Convertible Notes into U.S. dollars. Gains and losses arising
from the remeasurement of the UGC Convertible Notes into U.S.
dollars are reported as foreign currency transaction gains
(losses), net, in our condensed consolidated statements of
operations. See below. The fair value of the UGC Convertible
Notes is impacted by changes in (i) the exchange rate for
the U.S. dollar and the euro, (ii) the market price of LGI
common stock, (iii) market interest rates and (iv) the
credit rating of UGC. |
|
(c) |
|
Includes gains and losses associated with the Sumitomo Collar
during the 2007 periods and gains and losses associated with
(i) the call options we held with respect to Telenet
ordinary shares and (ii) the forward sale of News Corp.
Class A common stock during the 2007 and 2006 periods. See
notes 4 and 5 to our condensed consolidated financial
statements. |
74
Foreign
currency transaction gains, net
The details of our foreign currency transaction gains (losses),
net, are as follows for the indicated interim periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
amounts in millions
|
|
|
U.S. dollar debt issued by our
European subsidiaries
|
|
$
|
25.0
|
|
|
$
|
92.0
|
|
|
$
|
52.7
|
|
|
$
|
138.5
|
|
U.S. dollar debt issued by a Latin
American subsidiary
|
|
|
11.3
|
|
|
|
|
|
|
|
6.2
|
|
|
|
|
|
Remeasurement of euro denominated
UGC Convertible Notes
|
|
|
(10.4
|
)
|
|
|
(28.3
|
)
|
|
|
(20.8
|
)
|
|
|
(42.6
|
)
|
Cash denominated in a currency
other than the entities functional currency
|
|
|
(10.7
|
)
|
|
|
|
|
|
|
(7.2
|
)
|
|
|
5.7
|
|
Intercompany notes denominated in
a currency other than the entities functional currency
|
|
|
6.2
|
|
|
|
(14.2
|
)
|
|
|
0.9
|
|
|
|
(7.3
|
)
|
Swiss franc debt issued by
European subsidiary
|
|
|
15.4
|
|
|
|
(10.3
|
)
|
|
|
21.5
|
|
|
|
(8.9
|
)
|
Other
|
|
|
1.8
|
|
|
|
4.4
|
|
|
|
(0.8
|
)
|
|
|
(3.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
38.6
|
|
|
$
|
43.6
|
|
|
$
|
52.5
|
|
|
$
|
82.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses on
extinguishment of debt, net
We recognized losses on extinguishment of debt, net, of
$23.3 million during the three months ended June 30,
2007. These losses include (i) a CLP 10.3 billion
($19.6 million at the average rate for the period) loss
resulting from the write-off of deferred financing costs in
connection with the May 2007 refinancing of VTRs bank
facility, (ii) a 6.2 million ($8.4 million
at the average rate for the period) loss resulting from the
write-off of deferred financing costs in connection with the
second quarter 2007 refinancing of the UPC Broadband Holding
Bank Facility and (iii) a CHF 6.3 million
($5.2 million at the average rate for the period) gain on
the April 2007 redemption of the Cablecom Luxembourg Old Fixed
Rate Notes. We recognized losses on extinguishment of debt, net,
of $26.7 million and $35.6 million during the three
and six months ended June 30, 2006, respectively. The
losses for the six months ended June 30, 2006 include
(i) a $21.1 million write-off of deferred financing
costs and creditor fees in connection with the May 2006
refinancing of the UPC Broadband Holding Bank Facility,
(ii) a $5.6 million loss recognized by J:COM during
the second quarter of 2006, and (iii) a $7.6 million
loss associated with the first quarter 2006 redemption of
Cablecom Luxembourgs floating rate Senior Notes. The gain
on the April 2007 redemption of the Cablecom Luxembourg Old
Fixed Rate Notes and the loss on the first quarter 2006
redemption of the Cablecom Luxembourg Floating Rate Senior Notes
each represent the difference between the redemption and
carrying amounts at the respective dates of redemption. See
note 7 to our condensed consolidated financial statements.
Gains on
disposition of assets, net
We recognized gains on disposition of assets, net, of
$0.3 million during the six months ended June 30, 2007
and $2.3 million and $47.6 million during the three
and six months ended June 30, 2006, respectively. The gain
during the 2006 six-month period includes a $45.3 million
gain on the February 2006 sale of our cost investment in a DTH
satellite provider that operates in Mexico.
Income
tax benefit (expense)
We recognized an income tax benefit of $60.9 million and an
income tax expense of $28.6 million during the three months
ended June 30, 2007 and June 30, 2006, respectively.
The income tax benefit for the three months ended June 30,
2007 differs from the expected income tax benefit of
$15.0 million (based on the U.S. federal 35% income
tax rate) due primarily to the tax benefits recognized in
connection with net decreases in valuation allowances previously
established against deferred tax assets in certain
75
tax jurisdictions, including a tax benefit of
64.0 million ($86.3 million at the average rate
for the period) that we recognized during the second quarter of
2007 in connection with the release of valuation allowances by
Telenet. The full amount of this tax benefit, which represents
the portion of Telenets tax benefit that we did not
allocate to goodwill, was allocated to the minority interest
owners of Telenet. The positive impacts of the aforementioned
tax benefits were partially offset by (i) the increase of
valuation allowances in other jurisdictions and (ii) the
impact of certain permanent differences between the financial
and tax accounting treatment of interest, dividends and other
items associated with intercompany loans, and investments in
subsidiaries.
The income tax expense for the three months ended June 30,
2006 differs from the expected income tax benefit of
$43.0 million (based on the U.S. federal 35% income
tax rate) due primarily to (i) a net increase in valuation
allowances established against deferred tax assets in certain
tax jurisdictions that is partially offset by a decrease in the
valuation allowances in other jurisdictions in which we operate,
(ii) the impact of certain permanent differences between
the financial and tax accounting treatment of interest and other
items associated with intercompany loans, investments in
subsidiaries, and other items that resulted in nondeductible
expenses or tax-exempt income in the tax jurisdiction,
(iii) the impact of differences in the statutory and local
tax rates in certain jurisdictions in which we operate and
(iv) the realization of taxable foreign currency gains and
losses in certain jurisdictions not recognized for financial
reporting purposes.
We recognized an income tax benefit of $54.6 million and
income tax expense of $98.9 million during the six months
ended June 30, 2007 and June 30, 2006, respectively.
The income tax benefit for the six months ended June 30,
2007 differs from the expected income tax benefit of
$40.8 million (based on the U.S. federal 35% income
tax rate) due primarily to tax benefits recognized in connection
with net decreases in valuation allowances previously
established against deferred tax assets in certain tax
jurisdictions, including the tax benefit recognized by Telenet,
as described above. The positive impacts of these tax benefits
were partially offset by (i) the increase of valuation
allowances in other jurisdictions, (ii) the impact of
certain permanent differences between the financial and tax
accounting treatment of interest, dividends and other items
associated with intercompany loans, and investments in
subsidiaries, and (iii) the impact of differences in the
statutory and local tax rates in certain jurisdictions in which
we operate.
The income tax expense for the six months ended June 30,
2006 differs from the expected income tax expense of
$10.3 million (based on the U.S. federal 35% income
tax rate) due primarily to (i) the realization of taxable
foreign currency gains and losses in certain jurisdictions,
(ii) the impact of differences in the statutory and local
tax rates in certain jurisdictions in which we operate and
(iii) the impact of certain permanent differences between
the financial and tax accounting treatment of interest and other
items associated with intercompany loans, and investments in
subsidiaries not recognized for financial reporting purposes.
Material
Changes in Financial Condition
Sources
and Uses of Cash
Although our consolidated operating subsidiaries have generated
cash from operating activities and have borrowed funds under
their respective bank facilities, the terms of the instruments
governing the indebtedness of certain of our subsidiaries,
including UPC Broadband Holding, J:COM, Telenet, VTR, Austar,
Chellomedia and Liberty Puerto Rico, may restrict our ability to
access the assets of these subsidiaries. As set forth in the
table below, these subsidiaries accounted for a significant
portion of our consolidated cash and cash equivalents at
June 30, 2007. In addition, our ability to access the
liquidity of these and other subsidiaries may be limited by tax
considerations, the presence of minority interest owners and
other factors.
76
Cash and
cash equivalents
The details of the U.S. dollar equivalent balances of our
consolidated cash and cash equivalents at June 30, 2007 are
set forth in the following table (amounts in millions):
|
|
|
|
|
Cash and cash equivalents held by:
|
|
|
|
|
LGI
|
|
$
|
13.9
|
|
Non-operating subsidiaries
|
|
|
1,897.7
|
|
UPC Broadband Division:
|
|
|
|
|
UPC Broadband Holding and its
unrestricted subsidiaries
|
|
|
134.0
|
|
UPC Holding
|
|
|
1.0
|
|
J:COM
|
|
|
238.3
|
|
Chellomedia
|
|
|
99.0
|
|
VTR
|
|
|
55.8
|
|
Telenet
|
|
|
34.6
|
|
Austar
|
|
|
23.0
|
|
Liberty Puerto Rico
|
|
|
11.6
|
|
Other operating subsidiaries
|
|
|
5.7
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
$
|
2,514.6
|
|
|
|
|
|
|
LGI and
its Non-operating Subsidiaries
The $13.9 million of cash and cash equivalents held by LGI,
and subject to certain tax considerations, the
$1,897.7 million of cash and cash equivalents held by
LGIs non-operating subsidiaries represented available
liquidity at the corporate level at June 30, 2007. Our
remaining cash and cash equivalents of $603.0 million at
June 30, 2007 were held by our operating subsidiaries as
set forth in the table above. As noted above, various factors
may limit our ability to access the cash of our consolidated
operating subsidiaries. As described in greater detail below,
our current sources of corporate liquidity include (i) cash
and cash equivalents held by LGI and, subject to certain tax
considerations, LGIs non-operating subsidiaries,
(ii) our ability to monetize certain investments and
(iii) interest and dividend income received on our cash and
cash equivalents and investments. As noted under Discussion
and Analysis of our Consolidated Operating Results
Interest and dividend income above, dividends on our
investment in ABC Family preferred stock will no longer
represent a source of corporate liquidity as a result of the
August 2, 2007 redemption of this preferred stock.
From time to time, LGI and its non-operating subsidiaries may
also receive distributions or loan repayments from LGIs
subsidiaries or affiliates and proceeds upon the disposition of
investments and other assets or upon the exercise of stock
options. In this regard, we have received significant cash from
our subsidiaries in the form of loans and loan repayments during
the first six months of 2007. The majority of this cash was used
to purchase LGI common stock. In addition, in June 2007, LGI
borrowed $215.0 million pursuant to the LGI Credit Facility
and Liberty Programming Japan, one of LGIs non-operating
subsidiaries, borrowed ¥93.660 billion
($757.6 million at the transaction date) pursuant to the
Sumitomo Collar Loan. LGI used the proceeds from these
borrowings to repay intercompany loans owed to one of our
European subsidiaries. For additional information, see
notes 5 and 7 to our condensed consolidated financial
statements. See also note 13 for information concerning
Telenets pending refinancing and capital distribution
transactions.
The ongoing cash needs of LGI and its non-operating subsidiaries
include corporate general and administrative expenses and
interest payments on the LGI Credit Facility, the UGC
Convertible Notes and the Sumitomo Collar Loan. From time to
time, LGI and its non-operating subsidiaries may also require
funding in connection with acquisitions, the repurchase of LGI
common stock, or other investment opportunities.
Pursuant to our March 8, 2006 stock repurchase program and
our January 2007 and April 2007 self-tender offers, we
repurchased during the six months ended June 30, 2007 a
total of 12,967,608 shares of our LGI Series A common
stock at a weighted average price of $33.03 per share and
7,090,773 shares of our LGI Series C common
77
stock at a weighted average price of $30.62 per share, for an
aggregate cash purchase price of $645.5 million, including
direct acquisition costs.
At June 30, 2007, we were authorized under our
March 8, 2006 stock repurchase plan to acquire an
additional $75.3 million of LGI Series A common and
LGI Series C common stock. On July 25, 2007, our board
of directors increased to $150.0 million the remaining
amount authorized under the March 8, 2006 stock repurchase
plan.
On August 3, 2007, we announced that our board of directors
had authorized modified Dutch auction cash self-tender offers to
purchase up to 5,682,000 shares of our LGI Series A
common stock and up to 5,682,000 shares of our LGI
Series C common stock, at ranges of $40.00 to $44.00 per
Series A share and $40.00 to $44.00 per Series C
share. If the maximum number of shares of each series is
purchased, the total cost will be between $454.6 million
and $500.0 million. Each of the self tender offers is
expected to commence on or about August 10, 2007 and will
remain open for a minimum of 20 business days. Shares purchased
pursuant to the foregoing tender offers will not be applied
against our March 8, 2006 stock repurchase program.
Operating
Subsidiaries
The cash and cash equivalents of our significant subsidiaries
are detailed in the table above. In addition to cash and cash
equivalents, the primary sources of liquidity of our operating
subsidiaries are cash provided by operations and, in the case of
UPC Broadband Holding, VTR, Telenet, J:COM, Austar, Chellomedia
and Liberty Puerto Rico, borrowing availability under their
respective debt instruments. For the details of the borrowing
availability of such entities at June 30, 2007, see
note 7 to our condensed consolidated financial statements.
Our operating subsidiaries liquidity generally is used to
fund capital expenditures and debt service requirements. From
time to time, our operating subsidiaries may also require
funding in connection with acquisitions or other investment
opportunities. For a discussion of our consolidated capital
expenditures and cash provided by operating activities, see the
discussion under Condensed Consolidated Cash Flow Statements
below.
We began consolidating Telenet effective January 1, 2007.
As a result, we experienced a significant increase in our
consolidated debt and capital lease obligations as a result of
the inclusion of Telenets debt and capital lease
obligations in our condensed consolidated balance sheet. At
June 30, 2007, Telenets total outstanding
indebtedness, including capital lease obligations, was
1,313.0 million ($1,777.4 million). For
information concerning Telenets debt instruments, see
notes 7 and 13 to our condensed consolidated financial
statements.
As further described in note 4 to our condensed
consolidated financial statements, we have acquired significant
additional interests in Telenet during 2007.
Capitalization
We seek to maintain our debt at levels that provide for
attractive equity returns without assuming undue risk. In this
regard, we strive to cause our operating subsidiaries to
maintain their debt at levels that result in a consolidated debt
balance that is between four and five times our consolidated
operating cash flow. The ratio of our June 30, 2007
consolidated debt to our annualized consolidated operating cash
flow was 4.6 for the quarter ended June 30, 2007 and the
ratio of our June 30, 2007 consolidated net debt (debt less
cash and cash equivalents and restricted cash balances related
to our debt instruments) to our annualized consolidated
operating cash flow was 3.7 for the quarter ended June 30,
2007.
When it is cost effective, we generally seek to match the
denomination of the borrowings of our subsidiaries with the
functional currency of the operations that are supporting the
respective subsidiaries borrowings. As further discussed
under Quantitative and Qualitative Disclosures about Market
Risk below and in note 5 to our condensed consolidated
financial statements, we may also use derivative instruments to
mitigate currency and interest rate risk associated with our
debt instruments. Our ability to service or refinance our debt
is dependent primarily on our ability to maintain or increase
our cash provided by operations and to achieve adequate returns
on our capital expenditures and acquisitions.
At June 30, 2007, our outstanding consolidated debt and
capital lease obligations aggregated $15.8 billion,
including $767.7 million that is classified as current in
our consolidated balance sheet. The current portion of our debt
and capital lease obligations includes the $345.0 million
outstanding principle of our secured borrowing on
78
ABC Family preferred stock. On August 2, 2007, the ABC
Family preferred stock was redeemed and we used the resulting
proceeds to repay in full the related secured borrowings. We
believe that we have sufficient resources to repay or refinance
the current portion of our debt and capital lease obligations
during the next 12 months.
At June 30, 2007, all but $215.0 million of our
consolidated debt and capital lease obligations had been
borrowed or incurred by our subsidiaries. For information
concerning our debt balances and significant developments with
respect to our and our subsidiaries debt instruments
during 2007, see notes 7 and 13 to our condensed
consolidated financial statements.
Condensed
Consolidated Cash Flow Statements
Our cash flows are subject to significant variations based on
foreign currency exchange rates. See related discussion under
Quantitative and Qualitative Disclosures about Market Risk
below. See also our Discussion and Analysis of Reportable
Segments above.
During the six months ended June 30, 2007, we used net cash
provided by our operating activities of $1,064.3 million
and net cash provided by our financing activities of
$587.8 million to fund net cash used by our investing
activities of $1,047.8 million and a $604.3 million
increase in our cash and cash equivalent balances (excluding a
$29.8 million increase due to changes in foreign exchange
rates).
Operating
Activities
Including the effects of changes in foreign currency exchange
rates, net cash flows from operating activities during the six
months ended June 30, 2007 increased $196.1 million
from $868.2 million during the 2006 period to
$1,064.3 million during the 2007 period. This increase is
primarily attributable to an increase in revenue during the 2007
period that was only partially offset by (i) increases in
cash used by our operating and SG&A expenses, (ii) an
increase in cash paid for interest and (iii) an increase in
cash used as a result of changes in our working capital accounts.
Investing
Activities
Net cash used by investing activities during the six months
ended June 30, 2007 was $1,047.8 million, compared to
net cash provided by investing activities of $136.3 million
during the same period in 2006. This change, which includes the
effects of changes in foreign currency exchange rates, is
primarily attributable to (i) the 2006 receipt of
$972.5 million of proceeds upon the disposition of
discontinued operations, net of disposal costs, and (ii) a
$254.7 million increase in capital expenditures during the
2007 period as compared to the 2006 period.
The UPC Broadband Division accounted for $514.1 million and
$357.3 million of our consolidated capital expenditures
during the six months ended June 30, 2007 and 2006,
respectively. The increase in the capital expenditures of the
UPC Broadband Division is due primarily to (i) increased
costs for the purchase and installation of customer premise
equipment, (ii) increased expenditures for new build and
upgrade projects to expand services and improve our competitive
position, and to meet increased traffic and certain franchise
commitments, and (iii) increases due to the effects of
acquisitions and (iv) other factors such as information
technology upgrades and expenditures for general support systems.
J:COM accounted for $169.5 million and $200.0 million
of our consolidated capital expenditures during the six months
ended June 30, 2007 and 2006, respectively. J:COM uses
capital lease arrangements to finance a significant portion of
its capital expenditures. From a financial reporting
perspective, capital expenditures that are financed by capital
lease arrangements are treated as non-cash activities and
accordingly are not included in the capital expenditure amounts
presented in our condensed consolidated statements of cash
flows. Including $73.5 million and $53.7 million of
expenditures that were financed under capital lease
arrangements, J:COMs capital expenditures aggregated
$243.0 million and $253.7 million during the six
months ended June 30, 2007 and 2006, respectively. The
decrease in J:COMs capital expenditures (including amounts
financed under capital lease arrangements) is due primarily to
reduced expenditures for new build and upgrade projects to
expand services, partially offset by increased costs related to
(i) the effects of acquisitions and (ii) the purchase
and installation of customer premise equipment.
79
Our Telenet segment accounted for $125.1 million and
$2.6 million of our consolidated capital expenditures
during the six months ended June 30, 2007 and 2006,
respectively. This increase is primarily attributable to our
consolidation of Telenet effective January 1, 2007. Telenet
uses capital lease arrangements to finance a portion of its
capital expenditures. Including $16.0 million of
expenditures that were financed under capital lease
arrangements, Telenets capital expenditures aggregated
$141.1 million during the six months ended June 30,
2007. Telenets capital expenditures during the 2007 period
relate primarily to (i) the purchase and installation of
customer premise equipment, (ii) expenditures for new build
and upgrade projects to expand services and (iii) other
factors such as expenditures for buildings and general support
systems.
Telenets management currently expects that Telenets
aggregate full year 2007 capital expenditures will fall within a
range of 23% to 25% of Telenets 2007 revenue. The actual
amount of the 2007 capital expenditures of Telenet may vary from
the expected amounts for a variety of reasons, including changes
in (i) the competitive or regulatory environment,
(ii) business plans, (iii) current or expected future
operating results and (iv) the availability of capital.
Accordingly, no assurance can be given that Telenets
actual capital expenditures will not vary from the amounts
currently expected.
VTR accounted for $80.7 million and $65.9 million of
our consolidated capital expenditures during the six months
ended June 30, 2007 and 2006, respectively. The increase in
the capital expenditures of VTR is due primarily to
(i) increased expenditures for new build and upgrade
projects to expand services and improve our competitive
position, and to meet increased traffic and certain regulatory
commitments, (ii) increased costs for the purchase and
installation of customer premise equipment, and (iii) other
factors such as information technology upgrades and expenditures
for general support systems.
The timing of cash payments during the six months ended
June 30, 2007, as compared to the corresponding prior year
period, also contributed to the increases in the capital
expenditures of the UPC Broadband Division, J:COM and VTR.
Financing
Activities
Net cash provided by financing activities during the six months
ended June 30, 2007 was $587.8 million, compared to
net cash used by financing activities of $636.0 million
during the same period in 2006. This change, which includes the
effects of changes in foreign currency exchange rates, is
primarily attributable to (i) a $1,073.1 million
increase in cash received from net borrowings of debt and
(ii) a $110.2 million decrease in cash paid to
repurchase common stock.
Off
Balance Sheet Arrangements
For a description of our outstanding guarantees and other off
balance sheet arrangements at June 30, 2007, see
note 11 to our condensed consolidated financial statements.
|
|
Item 3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
We are exposed to market risk in the normal course of our
business operations due to our investments in various foreign
countries and ongoing investing and financial activities. Market
risk refers to the risk of loss arising from adverse changes in
foreign currency exchange rates, interest rates and stock
prices. The risk of loss can be assessed from the perspective of
adverse changes in fair values, cash flows and future earnings.
We have established policies, procedures and internal processes
governing our management of market risks and the use of
financial instruments to manage our exposure to such risks.
Cash
and Investments
We invest our cash in liquid instruments that meet high credit
quality standards and generally have maturities at the date of
purchase of less than three months. We are exposed to exchange
rate risk with respect to certain of our cash balances that are
denominated in Japanese yen, euros and, to a lesser degree,
other currencies. At June 30, 2007, our European
subsidiaries held cash balances of $1,032.5 million that
were denominated in euros and $759.9 million that were
denominated in yen, and J:COM held cash balances of
$238.3 million that were
80
denominated in Japanese yen. Subject to applicable debt
covenants, these euro and Japanese yen cash balances are
available to be used for future liquidity requirements that may
be denominated in such currencies. Subsequent to June 30,
2007, the yen denominated cash held by our European subsidiaries
was converted to euros.
We are also exposed to market price fluctuations related to our
investments in equity securities. At June 30, 2007, the
aggregate fair value of our equity method and available-for-sale
investments that was subject to price risk was
$116.7 million.
On July 3, 2007, we received 45,652,043 ordinary shares of
Sumitomo stock in connection with the restructuring of our
indirect interest in Jupiter Shop Channel with a transaction
date market value of ¥104.5 billion
($854.7 million at the transaction date). During the second
quarter of 2007, and as further described in note 5 to our
condensed consolidated financial statements, Liberty Programming
Japan executed the Sumitomo Collar.
Foreign
Currency Risk
We are exposed to unfavorable and potentially volatile
fluctuations of the U.S. dollar (our functional currency)
against the currencies of our operating subsidiaries and
affiliates. Any increase (decrease) in the value of the
U.S. dollar against any foreign currency that is the
functional currency of one of our operating subsidiaries or
affiliates will cause us to experience unrealized foreign
currency translation losses (gains) with respect to amounts
already invested in such foreign currencies. In addition, we and
our operating subsidiaries and affiliates are exposed to foreign
currency risk to the extent that we enter into transactions
denominated in currencies other than our respective functional
currencies, such as investments in debt and equity securities of
foreign subsidiaries, equipment purchases, programming
contracts, notes payable and notes receivable (including
intercompany amounts) that are denominated in a currency other
than the applicable functional currency. Changes in exchange
rates with respect to these items will result in unrealized
(based upon period-end exchange rates) or realized foreign
currency transaction gains and losses upon settlement of the
transactions. In addition, we are exposed to foreign exchange
rate fluctuations related to our operating subsidiaries
assets and liabilities and the financial results of foreign
subsidiaries and affiliates when their respective financial
statements are translated into U.S. dollars for inclusion
in our consolidated financial statements. Cumulative translation
adjustments are recorded in accumulated other comprehensive
earnings (loss) as a separate component of stockholders
equity. As a result of foreign currency risk, we may experience
economic loss and a negative impact on earnings and equity with
respect to our holdings solely as a result of foreign currency
exchange rate fluctuations. Our primary exposure to foreign
currency risk is to the euro and the Japanese yen, as 39.0% and
24.5% of our U.S. dollar revenue during the three months
ended June 30, 2007 and 38.9% and 24.9% of our
U.S. dollar revenue during the six months ended
June 30, 2006, was derived from subsidiaries whose
functional currency is the euro and the Japanese yen,
respectively. In addition, we have significant exposure to
changes in the exchange rates for the Swiss franc, the Chilean
peso, the Hungarian forint, the Australian dollar and other
local currencies in Europe.
The relationship between (i) the euro, the Swiss franc, the
Japanese yen, the Chilean peso, the Hungarian forint and the
Australian dollar and (ii) the U.S. dollar, which is
our reporting currency, is shown below, per one U.S. dollar:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Spot rates:
|
|
|
|
|
|
|
|
|
Euro
|
|
|
0.7387
|
|
|
|
0.7582
|
|
Swiss franc
|
|
|
1.2217
|
|
|
|
1.2198
|
|
Japanese yen
|
|
|
123.26
|
|
|
|
119.08
|
|
Chilean peso
|
|
|
527.53
|
|
|
|
534.25
|
|
Hungarian forint
|
|
|
182.09
|
|
|
|
190.65
|
|
Australian dollar
|
|
|
1.1763
|
|
|
|
1.2686
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months Ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Average rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro
|
|
|
0.7417
|
|
|
|
0.7959
|
|
|
|
0.7523
|
|
|
|
0.8136
|
|
Swiss franc
|
|
|
1.2224
|
|
|
|
1.2443
|
|
|
|
1.2278
|
|
|
|
1.2703
|
|
Japanese yen
|
|
|
120.81
|
|
|
|
114.47
|
|
|
|
120.10
|
|
|
|
115.69
|
|
Chilean peso
|
|
|
526.85
|
|
|
|
527.19
|
|
|
|
533.71
|
|
|
|
526.89
|
|
Hungarian forint
|
|
|
184.10
|
|
|
|
212.31
|
|
|
|
188.27
|
|
|
|
211.86
|
|
Australian dollar
|
|
|
1.2029
|
|
|
|
1.3395
|
|
|
|
1.2375
|
|
|
|
1.3460
|
|
Interest
Rate Risks
We are exposed to changes in interest rates primarily as a
result of our borrowing and investment activities, which include
fixed-rate and variable-rate investments and borrowings by our
operating subsidiaries that are used to maintain liquidity and
fund their respective business operations. At June 30,
2007, our primary exposure to variable-rate debt was through the
EURIBOR-indexed and LIBOR-indexed debt of UPC Broadband
Holding and Telenet, the Japanese yen LIBOR-indexed and
TIBOR-indexed debt of J:COM, the LIBOR-indexed debt of LGI, the
TAB-indexed debt of VTR, the AUD BBSY-indexed debt of Austar and
the variable-rate debt of certain of our other subsidiaries.
These subsidiaries have entered into various derivative
transactions pursuant to their policies to manage exposure to
movements in interest rates. We use interest rate exchange
agreements to exchange, at specified intervals, the difference
between fixed and variable interest amounts calculated by
reference to an
agreed-upon
notional principal amount. We also use interest rate cap and
collar agreements that lock in a maximum interest rate should
variable rates rise, but which enable our company to otherwise
pay lower market rates.
Weighted Average Variable Interest Rate At
June 30, 2007, our variable-rate indebtedness (exclusive of
the effects of interest rate exchange agreements) aggregated
$10.5 billion and the weighted-average interest rate
(including margin) on such variable-rate indebtedness was
approximately 6.1% (6.6% exclusive of J:COM). Assuming no change
in the amount outstanding, and without giving effect to any
interest rate exchange agreements, a hypothetical 50 basis
point increase (decrease) in our weighted average variable
interest rate would increase (decrease) our annual consolidated
interest expense and cash outflows by $52.6 million. As
discussed above and in note 5 to our condensed consolidated
financial statements, we use interest rate exchange contracts to
manage our exposure to increases in variable interest rates such
that increases in the fair value of these contracts generally
would be expected to largely offset the economic impact of
increases in market interest rates.
Derivative
Instruments
Through our subsidiaries, we have entered into various
derivative instruments to manage interest rate and foreign
currency exposure. For information concerning these derivative
instruments, see note 5 to our condensed consolidated
financial statements. Information concerning the sensitivity of
the fair value of certain of our derivative and financial
instruments to changes in market conditions is set forth below.
UPC
Broadband Holding Cross-currency and Interest Rate Exchange
Contracts
Holding all other factors constant, (i) an instantaneous
increase (decrease) of 10% in the value of the U.S. dollar
relative to the euro at June 30, 2007 would have increased
(decreased) the aggregate fair value of the UPC Broadband
Holding cross-currency and interest rate exchange contracts by
approximately 89.1 million ($120.6 million),
(ii) an instantaneous increase (decrease) of 10% in the
value of the euro relative to the Swiss franc, the Czech koruna,
the Slovakian koruna, the Hungarian forint, the Polish zloty and
the Romanian lei at June 30, 2007 would have decreased
(increased) the aggregate fair value of the UPC Broadband
Holding cross-currency and interest rate exchange contracts by
approximately 310.4 million ($420.2 million),
(iii) an instantaneous increase (decrease) of 10% in the
value of the Chilean peso relative to the U.S. dollar at
June 30, 2007 would
82
have decreased (increased) the aggregate value of the UPC
Broadband Holding cross-currency and interest rate exchange
contracts by approximately 28.5 million
($38.6 million), (iv) an instantaneous increase in the
relevant base rate of 50 basis points (0.50%) at
June 30, 2007 would have increased the aggregate fair value
of the UPC Broadband Holding cross-currency and interest rate
exchange contracts and caps by approximately
69.8 million ($94.5 million) and (iv) an
instantaneous decrease in the relevant base rate of
50 basis points (0.50%) at June 30, 2007 would have
decreased the aggregate fair value of the UPC Broadband Holding
cross-currency and interest rate exchange contracts and caps by
approximately 71.9 million ($97.3 million).
VTR
Cross-currency and Interest Rate Exchange Contracts
Holding all other factors constant, (i) an instantaneous
increase (decrease) of 10% in the value of the Chilean Peso
relative to the U.S. dollar at June 30, 2007 would
have decreased (increased) the aggregate fair value of the VTR
cross-currency and interest rate exchange contracts by
approximately CLP 33.7 billion ($63.8 million),
(ii) an instantaneous increase in the relevant base rate
(excluding margin) of 50 basis points (0.50%) at
June 30, 2007 would have increased the aggregate fair value
of the VTR cross-currency and interest rate exchange contracts
by approximately CLP 8.7 billion ($16.5 million) and
(iii) an instantaneous decrease in the relevant base rate
of 50 basis points (0.50%) at June 30, 2007 would have
decreased the aggregate fair value of the VTR cross-currency and
interest rate exchange contracts by approximately CLP
9.0 billion ($17.1 million).
UGC
Convertible Notes
Holding all other factors constant, (i) an instantaneous
increase of 10% in the value of the euro relative to the
U.S. dollar at June 30, 2007 would have decreased the
fair value of the UGC Convertible Notes by approximately
67.5 million ($91.4 million), (ii) an
instantaneous decrease of 10% in the value of the euro relative
to the U.S. dollar at June 30, 2007 would have
increased the fair value of the UGC Convertible Notes by
approximately 53.5 million ($72.4 million),
(iii) an instantaneous increase (decrease) in the risk free
rate of 50 basis points (0.50%) at June 30, 2007 would
have decreased (increased) the fair value of the UGC Convertible
Notes by approximately 1.4 million
($1.9 million) and (iv) an instantaneous increase
(decrease) of 10% in the combined per share market price of LGI
Series A and Series C common stock at June 30,
2007 would have increased (decreased) the fair value of the UGC
Convertible Notes by approximately 45.5 million
($61.6 million).
Sumitomo
Collar
Holding all other factors constant, (i) an instantaneous
increase of 10% in the per share market price of Sumitomos
common stock would have decreased the aggregate fair value of
the Sumitomo collar by approximately ¥9.12 billion
($74.0 million) and (ii) an instantaneous decrease of
10% in the per share market price of Sumitomos common
stock would have increased the aggregate fair value of the
Sumitomo collar by approximately ¥8.98 billion
($72.8 million).
83
|
|
Item 4.
|
CONTROLS
AND PROCEDURES.
|
|
|
(a)
|
Evaluation
of disclosure controls and procedures
|
In accordance with Exchange Act
Rule 13a-15,
we carried out an evaluation, under the supervision and with the
participation of management, including our chief executive
officer, principal accounting officer, and principal financial
officer (the Executives), of the effectiveness of our disclosure
controls and procedures as of June 30, 2007. In designing
and evaluating the disclosure controls and procedures, the
Executives recognize that any controls and procedures, no matter
how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and
management is necessarily required to apply judgment in
evaluating the cost-benefit relationship of possible controls
and objectives. Based on that evaluation, the Executives
concluded that our disclosure controls and procedures are
effective as of June 30, 2007, in timely making known to
them material information relating to us and our consolidated
subsidiaries required to be disclosed in our reports filed or
submitted under the Securities Exchange Act of 1934. We have
investments in certain unconsolidated entities. As we do not
control these entities, our disclosure controls and procedures
with respect to such entities are necessarily substantially more
limited than those we maintain with respect to our consolidated
subsidiaries.
|
|
(c)
|
Changes
in internal control over financial reporting
|
There have been no changes in our internal controls over
financial reporting identified in connection with the evaluation
described above that occurred during the fiscal quarter covered
by this Quarterly Report on
Form 10-Q
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
84
PART II
OTHER INFORMATION
|
|
Item 1.
|
LEGAL
PROCEEDINGS.
|
Cignal On April 26, 2002, Liberty Global
Europe received a notice that certain former shareholders of
Cignal Global Communications (Cignal) filed a lawsuit against
Liberty Global Europe in the District Court of Amsterdam, the
Netherlands, claiming $200 million on the basis that
Liberty Global Europe failed to honor certain option rights that
were granted to those shareholders in connection with the
acquisition of Cignal by Priority Telecom BV (Priority Telecom).
Liberty Global Europe believes that it has complied in full with
its obligations to these shareholders through the successful
completion of the initial public offering (IPO) of Priority
Telecom on September 27, 2001. Accordingly, Liberty Global
Europe believes that the Cignal shareholders claims are
without merit and intends to defend this suit vigorously. On
May 4, 2005, the court rendered its decision, dismissing
all claims of the former Cignal shareholders. On August 2,
2005, an appeal against the district court decision was filed.
Subsequently, when the grounds of appeal were filed in November
2005, only damages suffered by nine individual plaintiffs,
rather than all former Cignal shareholders, continued to be
claimed. Based on the share ownership information provided by
the plaintiffs, the damage claims remaining subject to the
litigation are approximately $28 million in the aggregate
before statutory interest. A hearing on the appeal was held on
May 22, 2007, and the court is expected to render its
decision by October 2007.
On June 13, 2006, Liberty Global Europe, Priority Telecom,
Euronext NV and Euronext Amsterdam NV were each served with a
summons for a new action purportedly on behalf of all former
Cignal shareholders. The new action claims, among other things,
that the listing of Priority Telecom on Euronext Amsterdam NV in
September 2001 did not meet the requirements of the applicable
listing rules and, accordingly, the IPO was not valid and did
not satisfy Liberty Global Europes obligations to the
Cignal shareholders. Damages of $200 million, plus
statutory interest, are claimed in this new action. The nine
individual plaintiffs involved in the appeal proceedings
referred to above, conditionally claim compensation from Liberty
Global Europe in this new action in the event that the court of
appeals determines their claims inadmissible in the appeal
proceedings. A hearing has been scheduled for October 9,
2007.
|
|
Item 2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|
|
|
(a)
|
Recent
Sales of Unregistered Securities; Use of Proceeds from
Registered Securities
|
On June 6, 2007, our company issued 112,542 shares of
LGI Series A common stock to Robert R. Bennett in exchange
for all of Mr. Bennetts shares of the Class A
common stock of Liberty Jupiter, Inc., a subsidiary of our
company that at that date owned a 4.3% indirect interest in
J:COM. The exchange was effected pursuant to the exercise by
Mr. Bennett of his exchange rights under the Amended and
Restated Stockholders Agreement of Liberty Jupiter, Inc., dated
May 21, 2004. The exchange of shares was based on an agreed
value for Mr. Bennetts Liberty Jupiter shares of
$4.3 million in the aggregate and the closing market price
of the LGI Series A common stock on May 30, 2007 of
$38.26 per share. The shares of LGI Series A common stock
were issued to Mr. Bennett without registration in reliance
on Section 4(2) of the Securities Act of 1933.
85
|
|
(c)
|
Issuer
Purchases of Equity Securities
|
The following table sets forth information concerning our
companys purchase of its own equity securities during the
three months ended June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
|
|
|
|
|
|
|
dollar value
|
|
|
|
|
|
|
|
|
|
|
|
|
of shares that
|
|
|
|
|
|
|
|
|
|
|
|
|
may yet be
|
|
|
|
|
|
|
|
|
|
Total number of shares
|
|
|
purchased
|
|
|
|
|
|
|
|
|
|
purchased as part of
|
|
|
under the
|
|
|
|
Total number of
|
|
|
Average price
|
|
|
publicly announced plans
|
|
|
plans or
|
|
Period
|
|
shares purchased
|
|
|
paid per share(a)
|
|
|
or programs
|
|
|
programs
|
|
|
April 1, 2007 through
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2007
|
|
|
Series A:
|
|
|
|
7,882,862
|
|
|
|
Series A:
|
|
|
$
|
35.21
|
|
|
|
Series A:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C:
|
|
|
|
724,183
|
|
|
|
Series C:
|
|
|
$
|
32.86
|
|
|
|
Series C:
|
|
|
|
|
|
|
$
|
(b
|
)
|
May 1, 2007 through
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31, 2007
|
|
|
Series A:
|
|
|
|
|
|
|
|
Series A:
|
|
|
$
|
|
|
|
|
Series A:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C:
|
|
|
|
|
|
|
|
Series C:
|
|
|
$
|
|
|
|
|
Series C:
|
|
|
|
|
|
|
$
|
(b
|
)
|
June 1, 2007 through
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
|
Series A:
|
|
|
|
|
|
|
|
Series A:
|
|
|
$
|
|
|
|
|
Series A:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C:
|
|
|
|
1,120,000
|
|
|
|
Series C:
|
|
|
$
|
37.99
|
|
|
|
Series C:
|
|
|
|
1,120,000
|
|
|
$
|
(b
|
)
|
Total April 1,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
through June 30, 2007
|
|
|
Series A:
|
|
|
|
7,882,862
|
|
|
|
Series A:
|
|
|
$
|
35.21
|
|
|
|
Series A:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C:
|
|
|
|
1,844,183
|
|
|
|
Series C:
|
|
|
$
|
35.97
|
|
|
|
Series C:
|
|
|
|
1,120,000
|
|
|
$
|
(b
|
)
|
|
|
|
(a) |
|
Average price paid per share includes direct acquisition costs
where applicable. |
|
(b) |
|
On March 8, 2006, our board of directors approved a stock
repurchase program under which we were authorized to acquire
$250 million of our LGI Series A and Series C
common stock through open market transactions or privately
negotiated transactions, which may include derivative
transactions. Under this program, we acquired LGI Series A
and Series C common stock for aggregate purchase prices of
(i) $132.1 million during the second and third quarters of
2006 and (ii) $42.6 million during the second quarter of
2007. At June 30, 2007, we were authorized under the
March 8, 2006 stock repurchase program to acquire an
additional $75.3 million of our LGI Series A and
Series C common stock. On July 25, 2007, our board of
directors increased to $150 million the remaining amount
authorized under the March 8, 2006 stock repurchase plan. |
On April 25, 2007, we purchased 7,882,862 shares of
our LGI Series A common stock at $35.00 per share and
724,183 shares of our LGI Series C common stock at
$32.65 per share, for an aggregate purchase price of
$299.5 million before acquisition costs, pursuant to two
modified Dutch auction self-tender offers. Shares purchased
pursuant to the foregoing tender offers are not applied against
our March 8, 2006 stock repurchase program.
In addition to the shares listed in the table above,
14,792 shares of LGI Series A common stock and
14,790 shares of LGI Series C common stock were
surrendered during the second quarter of 2007 by certain of our
officers and employees to pay withholding taxes and other
deductions in connection with the release of restrictions on
restricted stock.
On August 3, 2007, we announced that our board of directors
authorized modified Dutch auction cash self-tender offers to
purchase up to 5,682,000 shares of our LGI Series A
common stock and up to 5,682,000 shares of our LGI
Series C common stock, at ranges of $40.00 to $44.00 per
Series A share and $40.00 to $44.00 per Series C
share. If the maximum number of shares of each series is
purchased, the total cost will be between $454.6 million
and $500.0 million. Each of the self tender offers is
expected to commence on or about August 10, 2007 and will
remain open for a minimum of 20 business days. Shares purchased
pursuant to the foregoing tender offers will not be applied
against our March 8, 2006 stock repurchase program.
86
|
|
Item 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
On June 19, 2007, we held our annual meeting of
stockholders. At the annual meeting, two matters were considered
and acted upon: (i) the elections of three directors to
serve as Class II members of our Board until the 2010
annual meeting of stockholders or until their respective
successors are elected; and (ii) the ratification of the
selection of KPMG LLP as our independent auditors for the year
ending December 31, 2007. Each of the proposals was
adopted. The following is a summary of the votes for each
proposal:
Election
of John W. Dick as Director
|
|
|
|
|
|
|
|
|
|
|
For
|
|
|
Withheld
|
|
|
Series A
|
|
|
157,265,658
|
|
|
|
1,160,922
|
|
Series B
|
|
|
70,613,420
|
|
|
|
1,385,720
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
227,879,078
|
|
|
|
2,546,642
|
|
|
|
|
|
|
|
|
|
|
Election
of J.C. Sparkman as Director
|
|
|
|
|
|
|
|
|
|
|
For
|
|
|
Withheld
|
|
|
Series A
|
|
|
157,266,602
|
|
|
|
1,170,978
|
|
Series B
|
|
|
70,610,520
|
|
|
|
1,388,620
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
227,877,122
|
|
|
|
2,559,598
|
|
|
|
|
|
|
|
|
|
|
Election
of J. David Wargo as Director
|
|
|
|
|
|
|
|
|
|
|
For
|
|
|
Withheld
|
|
|
Series A
|
|
|
157,031,602
|
|
|
|
1,394,978
|
|
Series B
|
|
|
70,611,940
|
|
|
|
1,387,200
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
227,643,542
|
|
|
|
2,782,178
|
|
|
|
|
|
|
|
|
|
|
Ratification
of KPMG LLP as independent auditors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broker
|
|
|
|
For
|
|
|
Against
|
|
|
Abstentions
|
|
|
Non-Votes
|
|
|
Series A
|
|
|
157,910,941
|
|
|
|
346,287
|
|
|
|
169,352
|
|
|
|
|
|
Series B
|
|
|
70,801,360
|
|
|
|
15,740
|
|
|
|
1,182,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
228,712,301
|
|
|
|
362,027
|
|
|
|
1,351,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
Listed below are the exhibits filed as part of this Quarterly
Report (according to the number assigned to them in
Item 601 of
Regulation S-K):
|
|
|
|
|
|
3
|
|
|
Articles of Incorporation; Bylaws:
|
|
3
|
.1
|
|
Restated Certificate of
Incorporation of the Registrant, dated June 15, 2005
(incorporated by reference to Exhibit 3.1 to the
Registrants Current Report on
Form 8-K,
filed June 15, 2005 (File
No. 000-51360)
(the Merger
8-K))
|
|
3
|
.2
|
|
Bylaws of the Registrant
(incorporated by reference to Exhibit 3.2 to the Merger
8-K)
|
|
4
|
|
|
Instruments Defining the Rights of
Security Holders:
|
|
4
|
.1
|
|
Additional Facility Accession
Agreement, dated April 12, 2007, among UPC Broadband
Holding B.V. and UPC Financing Partnership, as Borrowers,
Toronto Dominion (Texas) LLC as Facility Agent and TD Bank
Europe Limited as Security Agent, and the banks and financial
institutions listed therein as Additional Facility M Lenders,
under the senior secured credit agreement, originally dated
16 January, 2004, as amended and restated from time to
time, among the Borrowers, Toronto Dominion (Texas) LLC, as
facility agent, and the other banks and financial institutions
named therein (the Facility Agreement) (incorporated by
reference to Exhibit 4.1 to the Registrants Current
Report on
Form 8-K,
filed April 17, 2007 (File
No. 000-51360)
(the Facility M
8-K)).
|
|
4
|
.2
|
|
Additional Facility Accession
Agreement, dated April 13, 2007, among UPC Broadband
Holding B.V. and UPC Financing Partnership, as Borrowers,
Toronto Dominion (Texas) LLC as Facility Agent and TD Bank
Europe Limited as Security Agent, and the banks and financial
institutions listed therein as Additional Facility M Lenders,
under the Facility Agreement (incorporated by reference to
Exhibit 4.2 to the Facility M
8-K).
|
|
4
|
.3
|
|
Amendment, dated April 16,
2007, among UPC Broadband Holding B.V. and UPC Financing
Partnership, as Borrowers, the guarantors listed therein, and
Toronto Dominion (Texas) LLC, as Facility Agent, to the Facility
Agreement (incorporated by reference to Exhibit 4.3 to the
Facility M
8-K).
|
|
4
|
.4
|
|
250,000,000 Delayed Draw
Additional Facility M Accession Agreement, dated May 4,
2007, among UPC Broad band Holding, as Borrower, Toronto
Dominion (Texas) LLC, as Facility Agent, TD Bank Europe Limited,
as Security Agent, and the Additional Facility M Lenders listed
therein, under the Facility Agreement (incorporated by reference
to Exhibit 4.4 to the Registrants Quarterly Report on
Form 10-Q
filed May 10, 2007 (the May 10, 2007
10-Q)).
|
|
4
|
.5
|
|
Additional Facility Accession
Agreement, dated May 11, 2007 among UPC Broadband Holding
BV and UPC Financing Partnership, as Borrowers, Toronto Dominion
(Texas) LLC as Facility Agent and TD Bank Europe as Security
Agent, and the Additional Facility N Lenders listed herein under
the Facility Agreement (incorporated by reference to
Exhibit 4.1 to the Registrants Current Report on
Form 8-K
/A filed May 15, 2007 (File
No. 000-51360)).
|
|
4
|
.6
|
|
Additional Facility Accession
Agreement, dated May 18, 2007, among UPC Broadband Holding
BV and UPC Financing Partnership, as Borrowers, Toronto Dominion
(Texas) LLC as Facility Agent and TD Bank Europe Limited as
Security Agent, and the Additional Facility M Lenders listed
therein, under the Facility Agreement (incorporated by reference
to Exhibit 4.1 to the Registrants Current Report on
Form 8-K
filed May 22, 2007 (File
No. 000-51360)
(the Facilities M&N
8-K)).
|
|
4
|
.7
|
|
Additional Facility Accession
Agreement, dated May 18, 2007, among UPC Broadband Holding
BV and UPC Financing Partnership, as Borrowers, Toronto Dominion
(Texas) LLC as Facility Agent and TD Bank Europe Limited as
Security Agent, and the Additional Facility N Lenders listed
therein under the Facility Agreement (incorporated by reference
to Exhibit 4.2 to the Facilities M&N
8-K).
|
|
10
|
.1
|
|
Form of Restricted Share Units
Agreement under the Liberty Global, Inc. 2005 Incentive Plan (As
Amended and Restated Effective October 31, 2006) (the
Incentive Plan) (incorporated by reference to Exhibit 10.1
to the May 10, 2007
10-Q).
|
|
10
|
.2
|
|
Liberty Global, Inc. Senior
Executive Performance Plan (As Amended and Restated Effective
May 2, 2007) (the SEP Incentive Plan) (incorporated by
reference to Exhibit 10.2 to the May 10, 2007
10-Q).
|
|
10
|
.3
|
|
Form of Participation Certificate
under the SEP Incentive Plan (incorporated by reference to
Exhibit 10.3 to the May 10, 2007
10-Q).
|
88
|
|
|
|
|
|
10
|
.4
|
|
Form of Restricted Share Units
Agreement under the Liberty Global, Inc. 2005 Nonemployee
Director Incentive Plan (As Amended and Restated Effective
November 1, 2006) (incorporated by reference to
Exhibit 10.4 to the May 10, 2007
10-Q).
|
|
10
|
.5
|
|
Form of Non-Qualified Stock Option
Agreement under the Incentive Plan (incorporated by reference to
Exhibit 10.5 to the May 10, 2007
10-Q).
|
|
10
|
.6
|
|
Form of Stock Appreciation Rights
Agreement under the Incentive Plan (incorporated by reference to
Exhibit 10.6 to the May 10, 2007
10-Q).
|
|
10
|
.7
|
|
First Amendment dated as of
May 22, 2007 to the Amended and Restated Operating
Agreement dated November 26, 2004 among Liberty Japan,
Inc., Liberty Japan II, Inc., Liberty Global Japan LLC, f/k/a
LMI Holdings Japan, LLC, Liberty Kanto, Inc., Liberty Jupiter
Inc, and Sumitomo Corporation and, solely with respect to
certain provisions thereof, Liberty Media International, Inc.
(incorporated by reference to the Registrants Current
Report on
Form 8-K
filed June 26, 2007 (File
No. 000-51360)).
|
|
10
|
.8
|
|
Employment Agreement, effective
July 2, 2007, between Registrant and Mauricio Ramos.*
|
|
10
|
.9
|
|
Employment Contract, effective
July 2, 2007, between VTR GlobalCom S.A. and Mauricio Ramos
(free translation of the Spanish original).*
|
|
31
|
|
|
Rule 13a-14(a)/15d-14(a)
Certification:
|
|
31
|
.1
|
|
Certification of President and
Chief Executive Officer*
|
|
31
|
.2
|
|
Certification of Senior Vice
President and Co-Chief Financial Officer (Principal Financial
Officer)*
|
|
31
|
.3
|
|
Certification of Senior Vice
President and Co-Chief Financial Officer (Principal Accounting
Officer)*
|
|
32
|
|
|
Section 1350 Certification*
|
89
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Liberty Global, Inc.
|
|
|
Dated: August 8, 2007
|
|
/s/ Michael
T.
Fries Michael
T. Fries
President and Chief Executive
Officer
|
|
|
|
Dated: August 8, 2007
|
|
/s/ Charles
H.R.
Bracken Charles
H.R.. Bracken
Senior Vice President and
Co-Chief
Financial Officer (Principal
Financial Officer)
|
|
|
|
Dated: August 8, 2007
|
|
/s/ Bernard
G.
Dvorak Bernard
G. Dvorak
Senior Vice President and
Co-Chief
Financial Officer (Principal
Accounting Officer)
|
90
EXHIBIT INDEX
|
|
|
|
|
|
3
|
|
|
Articles of Incorporation; Bylaws:
|
|
3
|
.1
|
|
Restated Certificate of
Incorporation of the Registrant, dated June 15, 2005
(incorporated by reference to Exhibit 3.1 to the
Registrants Current Report on
Form 8-K,
filed June 15, 2005 (File
No. 000-51360)
(the Merger
8-K))
|
|
3
|
.2
|
|
Bylaws of the Registrant
(incorporated by reference to Exhibit 3.2 to the Merger
8-K)
|
|
4
|
|
|
Instruments Defining the Rights of
Security Holders:
|
|
4
|
.1
|
|
Additional Facility Accession
Agreement, dated April 12, 2007, among UPC Broadband
Holding B.V. and UPC Financing Partnership, as Borrowers,
Toronto Dominion (Texas) LLC as Facility Agent and TD Bank
Europe Limited as Security Agent, and the banks and financial
institutions listed therein as Additional Facility M Lenders,
under the senior secured credit agreement, originally dated
16 January, 2004, as amended and restated from time to
time, among the Borrowers, Toronto Dominion (Texas) LLC, as
facility agent, and the other banks and financial institutions
named therein (the Facility Agreement) (incorporated by
reference to Exhibit 4.1 to the Registrants Current
Report on
Form 8-K,
filed April 17, 2007 (File
No. 000-51360)
(the Facility M
8-K)).
|
|
4
|
.2
|
|
Additional Facility Accession
Agreement, dated April 13, 2007, among UPC Broadband
Holding B.V. and UPC Financing Partnership, as Borrowers,
Toronto Dominion (Texas) LLC as Facility Agent and TD Bank
Europe Limited as Security Agent, and the banks and financial
institutions listed therein as Additional Facility M Lenders,
under the Facility Agreement (incorporated by reference to
Exhibit 4.2 to the Facility M
8-K).
|
|
4
|
.3
|
|
Amendment, dated April 16,
2007, among UPC Broadband Holding B.V. and UPC Financing
Partnership, as Borrowers, the guarantors listed therein, and
Toronto Dominion (Texas) LLC, as Facility Agent, to the Facility
Agreement (incorporated by reference to Exhibit 4.3 to the
Facility M
8-K).
|
|
4
|
.4
|
|
250,000,000 Delayed Draw
Additional Facility M Accession Agreement, dated May 4,
2007, among UPC Broad band Holding, as Borrower, Toronto
Dominion (Texas) LLC, as Facility Agent, TD Bank Europe Limited,
as Security Agent, and the Additional Facility M Lenders listed
therein, under the Facility Agreement (incorporated by reference
to Exhibit 4.4 to the Registrants Quarterly Report on
Form 10-Q
filed May 10, 2007 (the May 10, 2007
10-Q)).
|
|
4
|
.5
|
|
Additional Facility Accession
Agreement, dated May 11, 2007 among UPC Broadband Holding
BV and UPC Financing Partnership, as Borrowers, Toronto Dominion
(Texas) LLC as Facility Agent and TD Bank Europe as Security
Agent, and the Additional Facility N Lenders listed herein under
the Facility Agreement (incorporated by reference to
Exhibit 4.1 to the Registrants Current Report on
Form 8-K
/A filed May 15, 2007 (File
No. 000-51360)).
|
|
4
|
.6
|
|
Additional Facility Accession
Agreement, dated May 18, 2007, among UPC Broadband Holding
BV and UPC Financing Partnership, as Borrowers, Toronto Dominion
(Texas) LLC as Facility Agent and TD Bank Europe Limited as
Security Agent, and the Additional Facility M Lenders listed
therein, under the Facility Agreement (incorporated by reference
to Exhibit 4.1 to the Registrants Current Report on
Form 8-K
filed May 22, 2007 (File
No. 000-51360)(the
Facilities M&N
8-K)).
|
|
4
|
.7
|
|
Additional Facility Accession
Agreement, dated May 18, 2007, among UPC Broadband Holding
BV and UPC Financing Partnership, as Borrowers, Toronto Dominion
(Texas) LLC as Facility Agent and TD Bank Europe Limited as
Security Agent, and the Additional Facility N Lenders listed
therein under the Facility Agreement (incorporated by reference
to Exhibit 4.2 to the Facilities M&N
8-K).
|
|
10
|
.1
|
|
Form of Restricted Share Units
Agreement under the Liberty Global, Inc. 2005 Incentive Plan (As
Amended and Restated Effective October 31, 2006) (the
Incentive Plan) (incorporated by reference to Exhibit 10.1
to the May 10, 2007
10-Q).
|
|
10
|
.2
|
|
Liberty Global, Inc. Senior
Executive Performance Plan (As Amended and Restated Effective
May 2, 2007) (the SEP Incentive Plan) (incorporated by
reference to Exhibit 10.2 to the May 10, 2007
10-Q).
|
|
10
|
.3
|
|
Form of Participation Certificate
under the SEP Incentive Plan (incorporated by reference to
Exhibit 10.3 to the May 10, 2007
10-Q).
|
|
10
|
.4
|
|
Form of Restricted Share Units
Agreement under the Liberty Global, Inc. 2005 Nonemployee
Director Incentive Plan (As Amended and Restated Effective
November 1, 2006) (incorporated by reference to
Exhibit 10.4 to the May 10, 2007
10-Q).
|
|
10
|
.5
|
|
Form of Non-Qualified Stock Option
Agreement under the Incentive Plan (incorporated by reference to
Exhibit 10.5 to the May 10, 2007
10-Q).
|
|
|
|
|
|
|
10
|
.6
|
|
Form of Stock Appreciation Rights
Agreement under the Incentive Plan (incorporated by reference to
Exhibit 10.6 to the May 10, 2007
10-Q).
|
|
10
|
.7
|
|
First Amendment dated as of
May 22, 2007 to the Amended and Restated Operating
Agreement dated November 26, 2004 among Liberty Japan,
Inc., Liberty Japan II, Inc., Liberty Global Japan LLC, f/k/a
LMI Holdings Japan, LLC, Liberty Kanto, Inc., Liberty Jupiter
Inc, and Sumitomo Corporation and, solely with respect to
certain provisions thereof, Liberty Media International, Inc.
(incorporated by reference to the Registrants Current
Report on
Form 8-K
filed June 26, 2007 (File
No. 000-51360)).
|
|
10
|
.8
|
|
Employment Agreement, effective
July 2, 2007, between Registrant and Mauricio Ramos.*
|
|
10
|
.9
|
|
Employment Contract, effective
July 2, 2007, between VTR GlobalCom S.A. and Mauricio
Ramos.* (free translation of the Spanish original)
|
|
31
|
|
|
Rule 13a-14(a)/15d-14(a)
Certification:
|
|
31
|
.1
|
|
Certification of President and
Chief Executive Officer*
|
|
31
|
.2
|
|
Certification of Senior Vice
President and Co-Chief Financial Officer (Principal Financial
Officer)*
|
|
31
|
.3
|
|
Certification of Senior Vice
President and Co-Chief Financial Officer (Principal Accounting
Officer)*
|
|
32
|
|
|
Section 1350 Certification*
|