Liberty Latin America(LILA) - 2022 Q2 - Quarterly Report

GLOSSARY OF DEFINED TERMS This section defines key terms, acronyms, and financial instruments used in the Quarterly Report on Form 10-Q for clarity - The glossary provides definitions for various terms, acronyms, and financial instruments used throughout the Quarterly Report on Form 10-Q to ensure clarity and consistent understanding[9] PART I - FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and related disclosures Item 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements, offering a snapshot of financial performance and position Condensed Consolidated Balance Sheets This statement provides a summary of the company's assets, liabilities, and equity at specific reporting dates | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------------- | :--------------------------- | :----------------------------- | | Total Assets | $14,970.1 | $15,386.0 | | Total Liabilities | $12,501.2 | $12,472.6 | | Total Equity | $2,468.9 | $2,913.4 | | Goodwill | $3,367.8 | $3,948.0 | - Total assets decreased by $415.9 million, primarily driven by a reduction in goodwill due to impairment charges. Total equity decreased by $444.5 million, reflecting net losses and share repurchases[17][20][90] Condensed Consolidated Statements of Operations This statement details the company's revenues, expenses, and net earnings or losses over specific periods | Metric | Three months ended June 30, 2022 (in millions) | Three months ended June 30, 2021 (in millions) | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Revenue | $1,217.6 | $1,173.2 | $2,436.3 | $2,338.4 | | Operating income (loss) | $(350.2) | $173.0 | $(161.9) | $354.0 | | Impairment, restructuring and other operating items, net | $568.6 | $17.0 | $576.4 | $19.2 | | Foreign currency transaction losses, net | $(262.0) | $(44.4) | $(165.4) | $(69.8) | | Net earnings (loss) | $(506.6) | $9.3 | $(413.4) | $100.0 | | Basic net earnings (loss) per share | $(2.10) | $0.05 | $(1.72) | $0.44 | - The company reported a significant net loss for both the three and six months ended June 30, 2022, primarily due to a substantial increase in impairment charges and higher foreign currency transaction losses, contrasting with net earnings in the prior year[22][252][258] Condensed Consolidated Statements of Comprehensive Earnings (Loss) This statement presents net earnings or loss and other comprehensive income or loss components | Metric | Three months ended June 30, 2022 (in millions) | Three months ended June 30, 2021 (in millions) | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net earnings (loss) | $(506.6) | $9.3 | $(413.4) | $100.0 | | Foreign currency translation adjustments | $53.7 | $(17.1) | $31.2 | $(43.1) | | Comprehensive earnings (loss) | $(454.3) | $(3.4) | $(394.8) | $62.7 | - Comprehensive earnings shifted from a slight loss in Q2 2021 to a significant loss in Q2 2022, driven by the net loss, partially offset by positive foreign currency translation adjustments in the current period[27] Condensed Consolidated Statements of Equity This statement tracks changes in shareholders' equity, including net income, dividends, and share repurchases | Metric | January 1, 2022 (in millions) | June 30, 2022 (in millions) | | :-------------------------------- | :---------------------------- | :-------------------------- | | Total Liberty Latin America shareholders | $2,236.0 | $1,818.4 | | Accumulated deficit | $(2,677.9) | $(3,067.3) | | Treasury shares | $(74.0) | $(192.8) | - Total equity attributable to Liberty Latin America shareholders decreased by $417.6 million during the first six months of 2022, primarily due to net losses and increased treasury share repurchases[33][138] Condensed Consolidated Statements of Cash Flows This statement reports cash inflows and outflows from operating, investing, and financing activities | Metric | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | $347.1 | $443.7 | | Net cash used by investing activities | $(342.9) | $(340.9) | | Net cash provided by financing activities | $31.1 | $303.4 | | Net increase in cash, cash equivalents and restricted cash | $32.9 | $406.6 | - Net cash provided by operating activities decreased by $96.6 million, and net cash provided by financing activities decreased significantly by $272.3 million, leading to a substantial reduction in the net increase in cash for the six months ended June 30, 2022[35][281] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and additional information supporting the condensed consolidated financial statements (1) Basis of Presentation This note describes the company's business, reporting segments, and the accounting principles used for financial statement preparation - Liberty Latin America Ltd. is an international provider of fixed, mobile, and subsea telecommunications services across Latin America and the Caribbean, operating through segments like C&W, Liberty Communications PR, VTR, and Liberty Costa Rica[38][42] - The Chile JV Entities are accounted for as 'held for sale' as of June 30, 2022, but their operations are still reflected in continuing operations[39] - Financial statements are prepared in accordance with U.S. GAAP for interim financial information, reflecting management's estimates and assumptions[41][42] (2) Accounting Changes and Recent Accounting Pronouncements This note outlines the adoption of new accounting standards and their impact on the financial statements - The company adopted ASU No. 2020-06, 'Accounting for Convertible Instruments and Contracts in an Entity's Own Equity,' effective January 1, 2022, which did not have a material impact on its condensed consolidated financial statements[45] - The phase-out of LIBOR, addressed by ASU No. 2020-04 and ASU No. 2021-01, is not currently expected to have a material impact on the company's condensed consolidated financial statements[46] (3) Current Expected Credit Losses This note details the allowances and provisions for expected credit losses on trade and notes receivables | Metric | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Allowance for trade receivables (end of period) | $90.5 | $91.6 | | Provision for expected losses, net (trade receivables) | $36.0 | $23.2 | | Metric | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Allowance for notes receivables (end of period) | $27.6 | $17.5 | | Provision for expected losses, net (notes receivables) | $(3.6) | $1.3 | - The allowance for expected credit losses for trade receivables increased by $10.2 million during the first six months of 2022, while the allowance for notes receivables decreased by $4.7 million[47][49] (4) Acquisitions This note provides information on recent business acquisitions, including purchase prices and goodwill recognized - The company entered into a definitive agreement to acquire América Móvil's operations in Panama (Claro Panama Acquisition) for an enterprise value of $200 million, which closed on July 1, 2022[50] - The acquisition of Telefónica Costa Rica, completed in August 2021, had its purchase price finalized in Q1 2022, resulting in a $12 million reduction in total consideration paid. Goodwill recognized was $256.7 million[52][53][54] - Effective December 31, 2021, the company acquired 96% of Broadband VI, LLC for $33 million, integrating it into the Liberty Puerto Rico segment[56] (5) Derivative Instruments This note describes the company's use of derivatives to manage interest rate and foreign currency risks - The company uses derivative instruments to mitigate interest rate and foreign currency risks, with changes in fair values generally recorded in realized and unrealized gains or losses on derivative instruments[61] | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------------- | :--------------------------- | :----------------------------- | | Total Derivative Assets | $206.7 | $40.5 | | Total Derivative Liabilities | $37.5 | $101.2 | | Metric | Three months ended June 30, 2022 (in millions) | Three months ended June 30, 2021 (in millions) | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Realized and unrealized gains on derivative instruments, net | $283.3 | $57.3 | $249.6 | $172.2 | - Net cash flows from derivative instruments shifted from an $81.9 million outflow in 6M 2021 to a $7.4 million inflow in 6M 2022, primarily due to settlements of cross-currency swaps at VTR[67] (6) Fair Value Measurements This note explains the fair value hierarchy and valuation techniques used for financial and non-financial assets - The company uses a fair value hierarchy (Level 1, 2, and 3) for derivative instruments and non-recurring valuations like acquisition accounting and impairment assessments[80][84] - Most derivative instruments are valued using Level 2 inputs (observable market data), with credit risk valuation adjustments as Level 3 inputs, which are not expected to significantly impact valuations[81][83] - Goodwill impairment analyses, performed in Q2 2022 due to increased interest rates, utilized an income approach with discounted cash flow models and Level 3 inputs for forecasted cash flows and discount rates (7% to 15%)[87] (7) Long-lived Assets This note details changes in goodwill, property and equipment, and intangible assets, including impairment charges | Metric | January 1, 2022 (in millions) | June 30, 2022 (in millions) | | :-------------------------------- | :---------------------------- | :-------------------------- | | Goodwill | $3,948.0 | $3,367.8 | | Property and equipment, net | $4,168.4 | $4,123.9 | | Intangible assets not subject to amortization | $1,592.4 | $1,592.9 | | Intangible assets subject to amortization, net | $788.6 | $689.4 | - A goodwill impairment charge of $555 million was recorded in Q2 2022 within certain reporting units of the C&W Caribbean and Networks segment, primarily due to macroeconomic factors including higher interest rates[90] - Accumulated goodwill impairments increased to $2,784 million as of June 30, 2022, from $2,229 million at December 31, 2021[91] (8) Assets Held for Sale This note provides information on assets and liabilities classified as held for sale, such as the Chile JV Entities - The company entered into an agreement with América Móvil to form a 50:50 joint venture (Chile JV) by contributing the Chile JV Entities, which are now accounted for as 'held for sale' and expected to close in H2 2022[96][99] | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------------- | :--------------------------- | :----------------------------- | | Total Assets Held for Sale | $1,523.3 | $1,568.7 | | Total Liabilities Associated with Assets Held for Sale | $1,801.3 | $1,854.1 | - Earnings (losses) before income taxes attributable to the Chile JV Entities were $18 million for Q2 2022, a decrease from $63 million for Q2 2021[101] (9) Debt and Finance Lease Obligations This note outlines the company's debt structure, finance lease obligations, and compliance with debt covenants | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------------- | :--------------------------- | :----------------------------- | | Total debt before premiums, discounts and deferred financing costs | $7,893.6 | $7,678.3 | | Total debt and finance lease obligations | $7,795.2 | $7,565.9 | | Long-term debt and finance lease obligations | $7,628.8 | $7,459.6 | | Unused borrowing capacity | $971.0 | N/A | - The weighted average interest rate for all outstanding borrowings was 5.2% at June 30, 2022, increasing to 5.6% when including derivative instruments, premiums/discounts, and commitment fees[104][279] - At June 30, 2022, $6,881 million of the company's debt and finance lease obligations are not due until 2027 or thereafter, and all borrowing groups were in compliance with their debt covenants[277][278] (10) Leases This note details operating lease expenses, right-of-use assets, and lease liabilities | Metric | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total operating lease expense | $67.9 | $50.4 | | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------------- | :--------------------------- | :----------------------------- | | Operating lease right-of-use assets | $413.5 | $441.0 | | Total operating lease liabilities | $439.1 | $453.0 | | Weighted-average remaining lease term | 7.1 years | 7.5 years | - Operating cash outflows related to operating leases increased to $58.7 million for the six months ended June 30, 2022, from $39.7 million in the prior year[117] (11) Unfulfilled Performance Obligations This note describes the company's remaining performance obligations, primarily from long-term subsea contracts - As of June 30, 2022, the company had approximately $350 million of unfulfilled performance obligations, primarily related to long-term subsea capacity contracts[122] - These obligations are generally expected to be recognized as revenue over an average remaining life of 5 years[122] (12) Programming and Other Direct Costs of Services This note breaks down costs related to programming, interconnect, and equipment for service delivery | Metric | Three months ended June 30, 2022 (in millions) | Three months ended June 30, 2021 (in millions) | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Programming and copyright | $101.2 | $114.4 | $210.5 | $226.2 | | Interconnect | $88.4 | $80.1 | $174.1 | $160.7 | | Equipment and other | $109.9 | $84.9 | $217.1 | $176.2 | | Total programming and other direct costs of services | $299.5 | $279.4 | $601.7 | $563.1 | - Total programming and other direct costs increased by $38.6 million for the six months ended June 30, 2022, primarily driven by higher equipment and other costs, partially offset by a decrease in programming and copyright costs[123][223] (13) Other Operating Costs and Expenses This note details various operating expenses, including personnel, network, service, and commercial costs | Metric | Three months ended June 30, 2022 (in millions) | Three months ended June 30, 2021 (in millions) | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Personnel and contract labor | $145.1 | $143.8 | $298.3 | $282.2 | | Network-related | $78.9 | $82.1 | $161.5 | $161.1 | | Service-related | $54.6 | $45.3 | $105.8 | $92.8 | | Commercial | $58.1 | $53.7 | $123.6 | $106.1 | | Facility, provision, franchise and other | $117.9 | $104.9 | $241.7 | $219.8 | | Share-based compensation expense | $31.8 | $32.8 | $61.8 | $55.8 | | Total other operating costs and expenses | $486.4 | $462.6 | $992.7 | $917.8 | - Total other operating costs and expenses increased by $74.9 million for the six months ended June 30, 2022, with organic increases primarily in personnel and contract labor, service-related, and commercial categories[126][236] (14) Income Taxes This note provides information on income tax expense and the effective tax rate, including influencing factors | Metric | Three months ended June 30, 2022 (in millions) | Three months ended June 30, 2021 (in millions) | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Income tax expense | $40.4 | $42.5 | $63.9 | $72.0 | | Effective income tax rate | 8.7% | (82.0%) | 18.3% | (41.9%) | - For the six months ended June 30, 2022, the income tax expense was influenced by detrimental effects of non-deductible goodwill impairment, negative permanent tax differences, and withholding taxes, partially offset by beneficial international rate differences and net decreases in valuation allowances[130] (15) Earnings or Loss Per Share This note presents basic and diluted earnings or loss per share calculations and related share counts | Metric | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic weighted average shares outstanding | 224,871,211 | 233,960,795 | 226,563,314 | 233,189,937 | | Diluted weighted average shares outstanding | 224,871,211 | 234,800,020 | 226,563,314 | 233,945,963 | - The company reported net losses attributable to Liberty Latin America shareholders for the three and six months ended June 30, 2022, resulting in basic and diluted loss per share of $(2.10) and $(1.72), respectively[22][134] - Potentially dilutive items, including outstanding options, SARs, RSUs (36.1 million shares), PSUs, PSARs (9.5 million shares), and Convertible Notes (19.5 million shares), were excluded from diluted EPS computation for 2022 as their inclusion would have been anti-dilutive[134] (16) Equity This note details changes in equity, including share repurchase programs and their impact on common shares - The Directors approved the 2022 Share Repurchase Program, authorizing the repurchase of up to an additional $200 million of Class A and/or Class C common shares through December 2024[137] - During the six months ended June 30, 2022, the company repurchased 2,370,600 Class A and 9,840,400 Class C common shares under the Share Repurchase Programs[138] - At June 30, 2022, $107 million remained authorized for share repurchases under the 2022 program[138] (17) Commitments and Contingencies This note discusses legal and regulatory proceedings, tax issues, and other contingent liabilities - The company is involved in legal and regulatory proceedings, including four class action complaints against VTR in Chile related to broadband service and consumer protection, which have been consolidated[140] - Other contingent liabilities include wage, property, withholding, and other tax issues, as well as disputes over interconnection, programming, and copyright fees[140] - Due to the complexity and lack of clear predictability, the company cannot provide a meaningful range of potential losses or cash outflows for these contingencies[140] (18) Segment Reporting This note provides financial data for the company's reportable segments, including revenue and Adjusted OIBDA - The company's reportable segments include C&W Caribbean and Networks, C&W Panama, Liberty Puerto Rico, VTR, and Liberty Costa Rica, with Adjusted OIBDA as the primary measure for evaluating segment operating performance[143][144] | Segment | Three months ended June 30, 2022 (in millions) | Three months ended June 30, 2021 (in millions) | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total Revenue | $1,217.6 | $1,173.2 | $2,436.3 | $2,338.4 | | Total Adjusted OIBDA | $463.5 | $464.0 | $903.7 | $913.3 | | Total Property and Equipment Additions | N/A | N/A | $367.1 | $367.1 | - VTR's Adjusted OIBDA margin decreased to 25.3% in Q2 2022 from 32.8% in Q2 2021, primarily due to a decline in revenue, while Liberty Costa Rica's margin decreased due to the inclusion of lower-margin Telefónica Costa Rica operations and integration costs[195] Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section analyzes Liberty Latin America's financial performance, operational trends, and factors affecting results Overview This overview introduces the company's business, market position, and recent strategic developments - Liberty Latin America is an international provider of fixed, mobile, and subsea telecommunications services across Latin America and the Caribbean, serving 6,412,200 RGUs and 7,492,300 mobile subscribers as of June 30, 2022[182][187] - The company faces significant competition in all markets, particularly in Chile, which has adversely impacted revenue, RGUs, and ARPU[184] - The acquisition of América Móvil's operations in Panama (Claro Panama Acquisition) was completed on July 1, 2022[183] Material Changes in Results of Operations This section analyzes significant changes in the company's revenue, operating costs, and profitability metrics Consolidated Adjusted OIBDA This section examines the consolidated Adjusted OIBDA and its organic and acquisition-related changes | Metric | Three months ended June 30, 2022 (in millions) | Three months ended June 30, 2021 (in millions) | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Consolidated Adjusted OIBDA | $463.5 | $464.0 | $903.7 | $913.3 | - Consolidated Adjusted OIBDA decreased slightly by $0.5 million for the three months and $9.6 million for the six months ended June 30, 2022, compared to the prior year[193] - Organic changes in Adjusted OIBDA for the six months ended June 30, 2022, included an $8.6 million increase from revenue, a $22.0 million decrease from programming and other direct costs, and a $20.9 million decrease from other operating costs and expenses[194] Adjusted OIBDA Margin This section analyzes the Adjusted OIBDA margins across different segments and their contributing factors | Segment | Three months ended June 30, 2022 (%) | Three months ended June 30, 2021 (%) | Six months ended June 30, 2022 (%) | Six months ended June 30, 2021 (%) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | :--------------------------------- | :--------------------------------- | | C&W Caribbean and Networks | 46.1 | 43.3 | 44.7 | 42.8 | | C&W Panama | 31.4 | 34.2 | 31.6 | 34.4 | | Liberty Puerto Rico | 40.9 | 44.8 | 40.0 | 43.1 | | VTR | 25.3 | 32.8 | 26.3 | 33.2 | | Liberty Costa Rica | 33.0 | 35.0 | 30.5 | 37.0 | - VTR's Adjusted OIBDA margin decreased significantly due to a decline in revenue, while Liberty Costa Rica's margin decreased primarily due to the inclusion of lower-margin Telefónica Costa Rica operations and integration costs[195] Revenue This section discusses total revenue, including organic growth, acquisition impacts, and foreign exchange effects | Metric | Three months ended June 30, 2022 (in millions) | Three months ended June 30, 2021 (in millions) | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total Revenue | $1,217.6 | $1,173.2 | $2,436.3 | $2,338.4 | | Organic Increase (6M) | N/A | N/A | $8.6 | N/A | | Increase from Acquisitions (6M) | N/A | N/A | $152.0 | N/A | | Decrease from FX (6M) | N/A | N/A | $(62.7) | N/A | - VTR experienced a significant organic revenue decrease of $(52.2) million for the six months ended June 30, 2022, primarily due to lower average broadband internet and video RGUs and ARPU, driven by increased competition and strategic initiatives[201][216] - C&W Caribbean and Networks saw an organic revenue increase of $46.4 million for the six months ended June 30, 2022, mainly from higher average broadband internet RGUs and B2B subsea network revenue[201][204] Programming and other direct costs of services This section analyzes changes in programming, interconnect, and equipment costs impacting service delivery | Metric | Three months ended June 30, 2022 (in millions) | Three months ended June 30, 2021 (in millions) | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total programming and other direct costs of services | $299.5 | $279.4 | $601.7 | $563.1 | | Organic Increase (6M) | N/A | N/A | $22.0 | N/A | | Equipment and other (6M) | N/A | N/A | $22.8 (organic increase) | N/A | | Programming and copyright (6M) | N/A | N/A | $(2.0) (organic decrease) | N/A | - The organic increase in equipment and other costs was primarily due to higher volumes of handset sales and data-related equipment sales, while programming and copyright costs saw an organic decrease due to lower average subscribers and reassessment of accruals[224][229][230] Other operating costs and expenses This section details fluctuations in personnel, network, service, and commercial operating expenses | Metric | Three months ended June 30, 2022 (in millions) | Three months ended June 30, 2021 (in millions) | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total other operating costs and expenses | $486.4 | $462.6 | $992.7 | $917.8 | | Organic Increase (6M) | N/A | N/A | $27.3 | N/A | | Personnel and contract labor (6M) | N/A | N/A | $14.4 (organic increase) | N/A | | Facility, provision, franchise and other (6M) | N/A | N/A | $1.5 (organic increase) | N/A | - The organic increase in personnel and contract labor costs was primarily due to higher salaries and amortization of deferred commissions, while facility, provision, franchise and other costs increased due to higher utility charges and bad debt provisions[238][242] - Liberty Costa Rica incurred significant integration-related costs associated with the Telefónica Costa Rica Acquisition, which are expected to continue growing in 2022[248] Results of Operations (below Adjusted OIBDA) This section analyzes items below Adjusted OIBDA, including depreciation, impairment, interest, and foreign currency impacts | Metric | Three months ended June 30, 2022 (in millions) | Three months ended June 30, 2021 (in millions) | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Depreciation and amortization | $(213.3) | $(241.2) | $(427.4) | $(484.3) | | Impairment charges | $556.6 | $0.6 | $558.5 | $2.9 | | Interest expense | $(136.9) | $(133.7) | $(266.6) | $(260.1) | | Realized and unrealized gains on derivative instruments, net | $283.3 | $57.3 | $249.6 | $172.2 | | Foreign currency transaction losses, net | $(262.0) | $(44.4) | $(165.4) | $(69.8) | | Net earnings (loss) | $(506.6) | $9.3 | $(413.4) | $100.0 | - Depreciation and amortization decreased primarily due to VTR assets being classified as held for sale. Impairment charges significantly increased due to goodwill impairment in C&W Caribbean and Networks[251][252] - Foreign currency transaction losses increased substantially, mainly from U.S. dollar-denominated debt in a Chilean peso functional currency entity, contributing to the overall net loss[258][266] Material Changes in Financial Condition This section discusses significant changes in the company's liquidity, capitalization, and cash flow activities Sources and Uses of Cash This section outlines the company's primary liquidity sources and how cash is generated and utilized - The company's primary liquidity sources are cash from operating activities and borrowing availability, with four main borrowing groups: C&W, Liberty Puerto Rico, VTR, and Liberty Costa Rica[269][274] | Metric | June 30, 2022 (in millions) | | :-------------------------------- | :--------------------------- | | Cash and cash equivalents held by Liberty Latin America and unrestricted subsidiaries | $129.7 | | Cash and cash equivalents held by Borrowing groups | $901.0 | | Total cash and cash equivalents | $1,030.7 | - Access to the liquidity of subsidiaries may be limited by tax and legal considerations, noncontrolling interests, and foreign currency exchange restrictions[269][271] Capitalization This section details the company's debt levels, interest rates, and strategies for managing financial risks - The company aims to maintain debt levels that provide attractive equity returns while mitigating foreign currency and interest rate risks through derivative instruments[276] - At June 30, 2022, the outstanding principal amount of debt (excluding VTR) was $7,904 million, with $6,881 million not due until 2027 or thereafter[278] - All borrowing groups were in compliance with their debt covenants at June 30, 2022, and no material adverse impact on liquidity from non-compliance is anticipated for the next 12 months[277] | Metric | June 30, 2022 (%) | | :-------------------------------- | :---------------- | | Weighted average interest rate (stated) | 5.2 | | Weighted average interest rate (including derivatives, premiums/discounts, fees) | 5.6 | Condensed Consolidated Statements of Cash Flows This section analyzes changes in cash flows from operating, investing, and financing activities | Metric | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | $347.1 | $443.7 | | Net cash used by investing activities | $(342.9) | $(340.9) | | Net cash provided by financing activities | $31.1 | $303.4 | | Net increase in cash, cash equivalents and restricted cash | $32.9 | $406.6 | - The decrease in cash provided by operating activities is primarily due to timing associated with changes in working capital[281] - Net cash provided by financing activities decreased significantly due to lower net borrowings of debt and increased repurchase of Liberty Latin America common shares[285] | Metric | Six months ended June 30, 2022 (in millions) | Six months ended June 30, 2021 (in millions) | | :-------------------------------- | :------------------------------------------- | :------------------------------------------- | | Capital expenditures | $319.9 | $334.2 | | Property and equipment additions | $367.1 | $367.1 | Off Balance Sheet Arrangements This section describes the company's indemnifications and guarantees that are not recognized on the balance sheet - The company provides indemnifications and performance/financial guarantees in the ordinary course of business, which historically have not resulted in material payments and are not expected to in the future[287] Contractual Commitments This section refers to detailed information on debt, lease, and derivative obligations in other notes - Information regarding debt and operating lease obligations is detailed in notes 9 and 10, respectively, while derivative instruments and defined benefit plans are discussed in note 5 and Item 3[288] Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section details the company's exposure to market risks, including foreign currency and interest rates, and mitigation strategies Cash and Investments This section describes the company's cash management and investment strategies to mitigate exchange rate risk - The company invests cash in highly liquid instruments meeting high credit quality standards and actively manages the denominations of cash balances to mitigate exchange rate risk related to short-term liquidity requirements[291] Foreign Currency Rates This section provides key foreign currency exchange rates and their impact on financial performance | Currency | June 30, 2022 (Spot Rate) | December 31, 2021 (Spot Rate) | Three months ended June 30, 2022 (Average Rate) | Three months ended June 30, 2021 (Average Rate) | | :------- | :------------------------ | :---------------------------- | :---------------------------------------------- | :---------------------------------------------- | | CLP | 924.96 | 852.00 | 844.36 | 716.14 | | JMD | 150.72 | 153.96 | 153.91 | 150.10 | | CRC | 688.49 | 642.21 | 674.27 | 616.65 | - The U.S. dollar appreciated significantly against the Chilean peso, with the average exchange rate increasing by 18% for the three months ended June 30, 2022, compared to the prior year[187][292] Interest Rate Risks This section outlines the company's use of derivative contracts to manage exposure to variable interest rates - The company uses interest rate derivative contracts to mitigate risks from increases in variable interest rates, resulting in 96% of its total debt having a fixed or capped rate at June 30, 2022[293] Sensitivity Information This section quantifies the potential impact of interest rate changes on the fair value of derivative contracts - An instantaneous 100 basis point increase (decrease) in the relevant base rate would increase (decrease) the aggregate fair value of C&W interest rate derivative contracts by approximately $106 million[295] - For Liberty Puerto Rico interest rate derivative contracts, a 100 basis point increase (decrease) would increase (decrease) the aggregate fair value by approximately $31 million ($28 million)[296] Projected Cash Flows Associated with Derivative Instruments This section presents the anticipated net cash payments or receipts related to derivative instruments | Period | Projected derivative cash payments, net (in millions) | | :---------------- | :------------------------------------ | | Remainder of 2022 | $20.3 | | 2023 | $18.9 | | 2024 | $39.3 | | 2025 | $20.0 | | 2026 | $20.0 | | 2027 | $20.0 | | Thereafter | $14.8 | | Total | $153.3 | - These projected cash flows exclude those related to the Chile JV Entities, which include $36 million in interest-related payments, $221 million in principal-related receipts, and $20 million in foreign currency-related receipts[298] Item 4. CONTROLS AND PROCEDURES This section addresses the effectiveness of disclosure controls and procedures and ongoing remediation efforts Evaluation of disclosure controls and procedures This section reports on the effectiveness of the company's disclosure controls and identified weaknesses - The company's disclosure controls and procedures were concluded to be ineffective as of June 30, 2022, due to un-remediated material weaknesses in internal control over financial reporting[302] Management's Remediation Plans This section outlines the actions being taken to address and strengthen internal control over financial reporting - Management is continuing to implement remediation plans, including designing and implementing additional manual procedures and controls, hiring more accounting and finance resources, and implementing central enterprise resource planning software[303][305] - Trainings are being held to reinforce control concepts and responsibilities for control performers, with the goal of strengthening internal control over financial reporting and remediating identified material weaknesses[303][305] Changes in Internal Control over Financial Reporting This section describes significant changes in internal control over financial reporting during the quarter - During the quarter, changes included designing and implementing additional manual procedures, hiring more accounting and finance resources, implementing central ERP software for a segment, and conducting control trainings[305] PART II - OTHER INFORMATION This part includes disclosures on legal proceedings, equity sales, exhibits, and official signatures Item 1. LEGAL PROCEEDINGS This section refers to detailed disclosures on legal and regulatory proceedings affecting the company - For additional information on legal proceedings, refer to note 17 to the condensed consolidated financial statements in Part I of this Quarterly Report on Form 10-Q[307] Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section provides information on the company's share repurchase activities and authorized amounts - The 2022 Share Repurchase Program, approved on February 22, 2022, authorizes the repurchase of up to an additional $200 million of Class A and/or Class C common shares through December 2024[308] | Period | Class | Total number of shares purchased | Average price paid per share | | :----------------------------------- | :---- | :------------------------------- | :--------------------------- | | April 1, 2022 through June 30, 2022 | Class A | 486,100 | $9.52 | | April 1, 2022 through June 30, 2022 | Class C | 6,316,400 | $9.21 | - At June 30, 2022, the remaining amount authorized for repurchases under the 2022 Share Repurchase Program was $107 million[310] Item 6. EXHIBITS This section lists all supplementary documents and certifications filed as part of the Quarterly Report - Exhibits include forms of Share Appreciation Rights Agreement and Restricted Share Units Agreement, certifications from the President and CEO and SVP and CFO, Section 1350 Certifications, and XBRL Inline Taxonomy Extension documents[313] SIGNATURES This section contains the official certifications from the company's executive officers for the report - The report is signed by Balan Nair, President and Chief Executive Officer, and Christopher Noyes, Senior Vice President and Chief Financial Officer, dated August 3, 2022[317]