Liberty .(LBTYB) - 2021 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Presents Liberty Global's unaudited condensed consolidated financial statements for Q1 2021, including balance sheets, operations, cash flows, and detailed notes Condensed Consolidated Balance Sheets Total assets decreased to $57.4 billion, liabilities to $44.0 billion, with significant portions held for sale Condensed Consolidated Balance Sheet Summary (in millions) | Balance Sheet Item | March 31, 2021 (in millions) | December 31, 2020 (in millions) | | :--- | :--- | :--- | | Total Assets | $57,447.4 | $59,092.7 | | Total Current Assets | $4,116.5 | $4,849.1 | | Assets held for sale | $24,954.4 | $24,282.7 | | Total Liabilities | $43,959.3 | $45,794.3 | | Total Current Liabilities | $4,147.8 | $4,467.0 | | Liabilities associated with assets held for sale | $23,202.3 | $23,197.2 | | Total Equity | $13,488.1 | $13,298.4 | Condensed Consolidated Statements of Operations Q1 2021 revenue increased to $3.62 billion, operating income to $625.3 million, and net earnings to $1.39 billion Q1 2021 vs Q1 2020 Statement of Operations (in millions, except per share data) | Metric | Q1 2021 (in millions) | Q1 2020 (in millions) | | :--- | :--- | :--- | | Revenue | $3,615.3 | $2,875.8 | | Operating Income | $625.3 | $280.6 | | Earnings before income taxes | $1,610.8 | $1,097.8 | | Net earnings attributable to Liberty Global shareholders | $1,385.4 | $949.8 | | Diluted EPS | $2.37 | $1.50 | Condensed Consolidated Statements of Cash Flows Net cash from operations increased to $821.2 million, investing activities used $509.4 million, resulting in a $434.2 million net cash decrease Q1 2021 vs Q1 2020 Cash Flow Summary (in millions) | Cash Flow Category | Q1 2021 (in millions) | Q1 2020 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $821.2 | $449.8 | | Net cash used by investing activities | $(509.4) | $(2,349.2) | | Net cash used by financing activities | $(699.7) | $(783.2) | | Net decrease in cash and cash equivalents | $(434.2) | $(2,698.8) | Notes to Condensed Consolidated Financial Statements Detailed notes explain financial statements, covering European operations, Sunrise acquisition, U.K. JV held for sale, investments, derivatives, debt, and segment reporting - The company's operations are primarily residential and B2B communication services in the U.K., Ireland, Belgium, Switzerland, Poland, and Slovakia. It also holds a 50% interest in the VodafoneZiggo JV in the Netherlands[29] - Effective May 7, 2020, the company began accounting for its U.K. operations (U.K. JV Entities) as held for sale in connection with the pending 50:50 joint venture with Telefónica[30][46] - On November 11, 2020, the company completed the acquisition of Sunrise Communications Group AG for a total purchase price of CHF 5.0 billion ($5.4 billion)[43] - The company uses derivative instruments extensively to manage risks related to interest rates and foreign currency movements on its debt[66] MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A) Management discusses Q1 2021 financial performance, focusing on Sunrise acquisition impact, segment revenue, Adjusted EBITDA, liquidity, and capitalization strategy Overview Liberty Global provides broadband, video, telephony, and mobile services across Europe, serving millions of customers and expanding its network - As of March 31, 2021, consolidated operations passed 26,461,000 homes, serving 11,341,700 fixed-line customers and 8,622,000 mobile subscribers[200] - The company's Network Extensions program connected approximately 113,000 additional premises in Q1 2021, with 80,000 of those in the U.K. and Ireland[201] - The impact of the COVID-19 pandemic on the company's operations was relatively minimal during Q1 2021, with strong demand for products and services continuing[203] Material Changes in Results of Operations Consolidated revenue increased 25.7% to $3.6 billion, Adjusted EBITDA rose 18.9% to $1.37 billion, with varied organic performance Consolidated Revenue by Segment (in millions) | Segment | Q1 2021 Revenue (in millions) | YoY Change | Organic YoY Change | | :--- | :--- | :--- | :--- | | U.K./Ireland | $1,770.7 | +9.3% | +1.4% | | Belgium | $772.7 | +7.6% | -1.3% | | Switzerland | $841.8 | +165.7% | -5.3% | | Central and Eastern Europe | $128.6 | +8.0% | +3.2% | | Total | $3,615.3 | +25.7% | -0.2% | Consolidated Adjusted EBITDA by Segment (in millions) | Segment | Q1 2021 Adj. EBITDA (in millions) | YoY Change | Organic YoY Change | | :--- | :--- | :--- | :--- | | U.K./Ireland | $692.6 | +5.7% | -1.9% | | Belgium | $371.8 | +12.1% | +3.2% | | Switzerland | $281.6 | +110.0% | -12.9% | | Central and Eastern Europe | $57.0 | +5.0% | +0.3% | | Total | $1,367.3 | +18.9% | -1.9% | - Depreciation and amortization expense decreased by $191.6 million (24.5%) on an organic basis, primarily due to ceasing depreciation on U.K. JV Entities' assets after they were classified as held-for-sale[254] - The company recorded net realized and unrealized gains on derivative instruments of $811.1 million in Q1 2021, compared to $1,237.3 million in Q1 2020[262] Material Changes in Financial Condition Liberty Global had $928.7 million in cash, $2.6 billion in corporate liquidity, $14.4 billion in total debt, and positive Adjusted Free Cash Flow of $93.1 million - At March 31, 2021, available liquidity at the corporate level (Liberty Global and unrestricted subsidiaries) was $650.4 million in cash plus $1,961.2 million in investments held under SMAs[283][284] - The company's capitalization strategy targets a consolidated debt level of four to five times consolidated Adjusted EBITDA[295] - Total outstanding principal debt plus finance lease obligations was $14.4 billion at quarter-end, with $12.8 billion not due until 2027 or later[297] Adjusted Free Cash Flow (in millions) | Period | Q1 2021 (in millions) | Q1 2020 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $821.2 | $449.8 | | Capital expenditures, net | $(475.8) | $(347.8) | | Adjusted free cash flow | $93.1 | $(317.0) | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company manages market risks from foreign currency and interest rates using derivatives, with $9.5 billion in variable-rate debt, and is preparing for the LIBOR transition - The company is exposed to foreign currency risk as its debt is often denominated in a currency different from the functional currency of the supporting operations. This risk is managed using derivative instruments[314] - At March 31, 2021, the company had $9.5 billion in variable-rate debt. A hypothetical 50 basis point (0.50%) increase in the variable interest rate would increase annual interest expense by $47.5 million, before the effects of hedging[320][321] - The company is actively managing the transition from LIBOR to alternative reference rates, noting that its loan documents have fallback provisions and it is adhering to ISDA protocols for its derivatives[318][319] CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal controls - Based on an evaluation as of March 31, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures are effective at a reasonable assurance level[326] - There were no changes in internal controls over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[327] PART II — OTHER INFORMATION LEGAL PROCEEDINGS The company and its subsidiaries are involved in various legal proceedings in the normal course of business, with details in Note 15 - The company is involved in various legal proceedings arising from normal business operations. Detailed information is provided in Note 15 to the financial statements[329] UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During Q1 2021, Liberty Global repurchased $323.4 million of Class A and Class C shares, with $678.4 million remaining authorized Issuer Purchases of Equity Securities (Q1 2021) | Share Class | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | Class A | 666,600 | $24.43 | | Class C | 12,211,300 | $25.15 | - As of March 31, 2021, the remaining authorized amount for share repurchases was $678.4 million[331] EXHIBITS This section lists exhibits filed with the Form 10-Q, including credit agreements, CEO/CFO certifications, and interactive data files - Exhibits filed include several Additional Facility Accession Agreements for UPC Financing Partnership and UPC Broadband Holding B.V[333] - Certifications from the President and CEO (Michael T. Fries) and the Executive Vice President and CFO (Charles H.R. Bracken) are included as exhibits 31.1 and 31.2[333]