Virgin Media 2014 Annual Report Download - page 68

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(a) Includes share-based compensation expense related to Liberty Global PSUs and the Challenge Performance Awards, which
were issued on June 24, 2013.
(b) In connection with the LG/VM Transaction, Liberty Global issued Virgin Media Replacement Awards to employees and
former directors of our company in exchange for corresponding Old Virgin Media awards. During the post-acquisition
period ended June 30, 2013, £18.3 million of the June 7, 2013 estimated fair value of the Virgin Media Replacement Awards
was charged to expense in recognition of the Virgin Media Replacement Awards that were fully vested on June 7, 2013 or
for which vesting was accelerated pursuant to the terms of the LG/VM Transaction Agreement on or prior to June 30, 2013.
For additional information concerning our share-based compensation, see note 8 to our condensed consolidated financial
statements.
Depreciation and amortization expense
Our depreciation and amortization expense increased £129.0 million or 46.7% and £288.6 million or 54.9% during the three
and six months ended June 30, 2014, respectively, as compared to the corresponding periods in 2013, due primarily to the net
impacts of (i) higher cost bases of our intangible assets and property and equipment as a result of the push-down of acquisition
accounting in connection with the LG/VM Transaction, (ii) increases associated with property and equipment additions related to
the installation of customer premises equipment, the expansion and upgrade of our networks and other capital initiatives and (iii)
decreases associated with certain assets becoming fully depreciated.
Impairment, restructuring and other operating items, net
We recognized impairment, restructuring and other operating items, net, of £7.2 million and £49.4 million during the three
months ended June 30, 2014 and 2013, respectively, and £12.7 million and £56.6 million during the six months ended June 30,
2014 and 2013, respectively. The 2014 amounts include severance and other costs of £8.9 million and £13.2 million, respectively,
substantially all of which were recorded in connection with certain organizational and staffing changes that we implemented in
connection with our ongoing integration with Liberty Global. The 2013 amounts include direct acquisition costs incurred in
connection with the LG/VM Transaction of £46.0 million and £53.8 million, respectively, and severance and other costs of £5.4
million and £5.8 million, respectively, substantially all of which were recorded in connection with certain organizational and
staffing changes that we implemented in connection with our ongoing integration with Liberty Global. We expect to incur additional
restructuring costs during the remainder of 2014 as the integration process with Liberty Global continues.
Interest expense – third-party
Our interest expense increased £16.5 million or 16.6% and £41.1 million or 21.8% during the three and six months ended
June 30, 2014, respectively, as compared to the corresponding periods in 2013, due primarily to the net effect of (i) higher average
outstanding debt balances and (ii) lower weighted average interest rates. The decreases in our weighted average interest rates are
primarily related to the completion of certain financing transactions that resulted in extended maturities and net decreases to certain
of our interest rates.
For additional information regarding our outstanding indebtedness, see note 6 to our condensed consolidated financial
statements.
Interest expense – related-party
Our related-party interest expense decreased £3.6 million during each of the three and six months ended June 30, 2014, as
compared to the corresponding periods in 2013, due to interest expense incurred during 2013 on a related-party note payable to
LGI that we entered into in connection with the LG/VM Transaction. For additional information regarding our related-party
indebtedness, see note 9 to our condensed consolidated financial statements.
Interest income – related-party
Our related-party interest income increased £46.0 million and £98.1 million during the three and six months ended June 30,
2014, respectively, as compared to the corresponding periods in 2013, primarily due to interest income earned on related-party
notes receivable from Lynx Europe 2 that we entered into following the LG/VM Transaction. For additional information, see note
9 to our condensed consolidated financial statements.