Edgar Filing: Liberty Global, Inc.

FORM 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-51360

LOGO

Liberty Global, Inc.

(Exact name of Registrant as specified in its charter)


State of Delaware		20-2197030
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

12300 Liberty Boulevard Englewood, Colorado		80112
(Address of principal executive offices)		(Zip Code)

Registrant’s 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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer þ Accelerated Filer ¨ Non-Accelerated Filer ¨ Smaller Reporting Company ¨

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No þ

The number of outstanding shares of Liberty Global, Inc.’s common stock as of October 29, 2010 was:

Series A common stock — 118,682,013 shares;

Series B common stock — 9,355,501 shares; and

Series C common stock — 114,437,488 shares.

LIBERTY GLOBAL, INC.

INDEX


		Page Number
	PART I — FINANCIAL INFORMATION

ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Condensed Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009 (unaudited)		1

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2010 and 2009 (unaudited)		3

	Condensed Consolidated Statements of Comprehensive Earnings (Loss) for the Three and Nine Months Ended September 30, 2010 and 2009 (unaudited)		4

	Condensed Consolidated Statement of Equity for the Nine Months Ended September 30, 2010 (unaudited)		5

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009 (unaudited)		6

	Notes to Condensed Consolidated Financial Statements (unaudited)		8

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		59

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		93

ITEM 4.	CONTROLS AND PROCEDURES		98

	PART II — OTHER INFORMATION

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		100

ITEM 6.	EXHIBITS		101

LIBERTY GLOBAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	September 30, 2010		December 31, 2009
	in millions
ASSETS
Current assets:
Cash and cash equivalents	$	3,208.2	$	3,269.6
Trade receivables, net		694.8		1,016.7
Deferred income taxes		253.6		504.2
Derivative instruments (note 5)		82.4		157.6
Other current assets		284.0		330.1

Total current assets		4,523.0		5,278.2
Restricted cash (note 8)		12.5		4,135.8
Investments (note 4)		1,002.2		1,008.6
Property and equipment, net (note 7)		11,103.6		12,010.7
Goodwill (note 7)		11,802.7		13,353.8
Intangible assets subject to amortization, net (note 7)		2,228.5		2,130.0
Other assets, net (note 5)		1,705.1		1,982.8

Total assets	$	32,377.6	$	39,899.9

LIBERTY GLOBAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS — continued

(unaudited)


	September 30, 2010			December 31, 2009
	in millions
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	507.8		$	734.9
Deferred revenue and advance payments from subscribers and others		631.9			886.4
Current portion of debt and capital lease obligations (note 8)		595.1			487.7
Derivative instruments (note 5)		587.8			741.6
Accrued interest		274.7			168.6
Other accrued and current liabilities		1,451.8			1,516.7

Total current liabilities		4,049.1			4,535.9
Long-term debt and capital lease obligations (note 8)		21,463.0			25,364.9
Deferred tax liabilities		1,293.9			890.5
Other long-term liabilities (note 5)		2,414.9			2,611.5

Total liabilities		29,220.9			33,402.8

Commitments and contingencies (note 14)

Equity (note 10):
LGI stockholders:
Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 118,866,257 and 134,687,250 shares, respectively		1.2			1.3
Series B common stock, $.01 par value. Authorized 50,000,000 shares; issued and outstanding 9,355,501 and 9,369,101 shares, respectively		0.1			0.1
Series C common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 114,384,910 and 123,483,527 shares, respectively		1.1			1.2
Additional paid-in capital		3,550.1			4,105.5
Accumulated deficit		(1,956.3	)		(2,287.0	)
Accumulated other comprehensive earnings, net of taxes		1,214.9			1,299.0

Total LGI stockholders		2,811.1			3,120.1
Noncontrolling interests		345.6			3,377.0

Total equity		3,156.7			6,497.1

Total liabilities and equity	$	32,377.6		$	39,899.9

The accompanying notes are an integral part of these condensed consolidated financial statements.

LIBERTY GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three months ended September 30,						Nine months ended September 30,
	2010			2009			2010			2009
	in millions, except per share amounts

Revenue (note 13)	$	2,246.8		$	1,930.4		$	6,591.3		$	5,439.1

Operating costs and expenses:
Operating (other than depreciation and amortization) (including stock-based compensation) (notes 11 and 13)		802.1			726.3			2,429.0			2,071.9
Selling, general and administrative (SG&A) (including stock-based compensation) (notes 11 and 13)		390.8			354.7			1,215.2			1,018.2
Depreciation and amortization		580.7			538.4			1,760.2			1,528.7
Impairment, restructuring and other operating charges, net (notes 3 and 7)		26.5			1.8			109.5			125.8

		1,800.1			1,621.2			5,513.9			4,744.6

Operating income		446.7			309.2			1,077.4			694.5

Non-operating income (expense):
Interest expense		(329.6	)		(210.1	)		(988.8	)		(590.3	)
Interest and dividend income		12.0			13.1			30.2			40.4
Realized and unrealized losses on derivative instruments, net (note 5)		(610.9	)		(221.3	)		(974.6	)		(767.4	)
Foreign currency transaction gains (losses), net		726.1			64.4			(167.3	)		101.5
Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net (notes 4, 6 and 8)		83.0			(51.0	)		106.7			16.2
Losses on debt modifications and extinguishments, net (note 8)		(25.2	)		(9.7	)		(24.9	)		(34.0	)
Other income (expense), net		(1.4	)		3.2			(3.2	)		0.6

		(146.0	)		(411.4	)		(2,021.9	)		(1,233.0	)

Earnings (loss) from continuing operations before income taxes		300.7			(102.2	)		(944.5	)		(538.5	)
Income tax benefit (expense) (note 9)		16.9			7.8			(27.7	)		18.4

Earnings (loss) from continuing operations		317.6			(94.4	)		(972.2	)		(520.1	)

Discontinued operations (note 3):
Earnings (loss) from discontinued operations, net of taxes		(1.9	)		33.0			47.0			216.0
Gain on disposal of discontinued operations, net of taxes		—			25.7			1,372.6			25.7

		(1.9	)		58.7			1,419.6			241.7

Net earnings (loss)		315.7			(35.7	)		447.4			(278.4	)
Net earnings attributable to noncontrolling interests		(37.2	)		(84.6	)		(116.7	)		(233.7	)

Net earnings (loss) attributable to LGI stockholders	$	278.5		$	(120.3	)	$	330.7		$	(512.1	)

Basic earnings (loss) attributable to LGI stockholders per share — Series A, Series B and Series C common stock (note 12):
Continuing operations	$	1.16		$	(0.46	)	$	(4.06	)	$	(2.17	)
Discontinued operations		(0.01	)		0.01			5.35			0.28

	$	1.15		$	(0.45	)	$	1.29		$	(1.89	)

Diluted earnings (loss) attributable to LGI stockholders per share — Series A, Series B and Series C common stock (note 12):
Continuing operations	$	1.00		$	(0.46	)	$	(4.06	)	$	(2.17	)
Discontinued operations		(0.01	)		0.01			5.35			0.28

	$	0.99		$	(0.45	)	$	1.29		$	(1.89	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LIBERTY GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)

(unaudited)


	Three months ended September 30,						Nine months ended September 30,
	2010			2009			2010			2009
	in millions

Net earnings (loss)	$	315.7		$	(35.7	)	$	447.4		$	(278.4	)

Other comprehensive earnings (loss), net of taxes:
Foreign currency translation adjustments		11.9			402.3			371.3			220.5
Reclassification adjustment for foreign currency translation gains included in net earnings		—			(3.7	)		(390.9	)		(3.7	)
Other		(0.5	)		(3.6	)		(0.5	)		(3.5	)

Other comprehensive earnings (loss)		11.4			395.0			(20.1	)		213.3

Comprehensive earnings (loss)		327.1			359.3			427.3			(65.1	)
Comprehensive earnings attributable to noncontrolling interests		(21.8	)		(250.7	)		(180.7	)		(250.4	)

Comprehensive earnings (loss) attributable to LGI stockholders	$	305.3		$	108.6		$	246.6		$	(315.5	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

LIBERTY GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(unaudited)


	LGI stockholders
	Common stock								Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive earnings, net of taxes			Total LGI stockholders			Noncontrolling interests			Total equity
	Series A			Series B		Series C			Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive earnings, net of taxes			Total LGI stockholders			Noncontrolling interests			Total equity
	in millions

Balance at January 1, 2010	$	1.3		$	0.1	$	1.2		$	4,105.5		$	(2,287.0	)	$	1,299.0		$	3,120.1		$	3,377.0		$	6,497.1
Net earnings		—			—		—			—			330.7			—			330.7			116.7			447.4
Other comprehensive loss, net of taxes		—			—		—			—			—			(84.1	)		(84.1	)		64.0			(20.1	)
Repurchase and cancellation of common stock (note 10)		(0.1	)		—		(0.1	)		(806.9	)		—			—			(807.1	)		—			(807.1	)
Stock-based compensation (note 11)		—			—		—			60.1			—			—			60.1			—			60.1
Issuance of LGI stock incentive awards to satisfy obligation under the LGI Performance Plans (note 11)		—			—		—			117.8			—			—			117.8			—			117.8
Excess tax benefits from stock-based compensation		—			—		—			48.9			—			—			48.9			—			48.9
Disposition of J:COM Disposal Group (note 3)		—			—		—			—			—			—			—			(3,024.2	)		(3,024.2	)
Distributions by subsidiaries to noncontrolling interest owners (note 10)		—			—		—			—			—			—			—			(193.2	)		(193.2	)
Adjustments due to changes in subsidiaries’ equity and other, net		—			—		—			24.7			—			—			24.7			5.3			30.0

Balance at September 30, 2010	$	1.2		$	0.1	$	1.1		$	3,550.1		$	(1,956.3	)	$	1,214.9		$	2,811.1		$	345.6		$	3,156.7

The accompanying notes are an integral part of these condensed consolidated financial statements.

LIBERTY GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Nine months ended September 30,
	2010			2009
	in millions
Cash flows from operating activities:
Net earnings (loss)	$	447.4		$	(278.4	)
Earnings from discontinued operations		(1,419.6	)		(241.7	)

Loss from continuing operations		(972.2	)		(520.1	)
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities:
Stock-based compensation expense		91.8			98.3
Depreciation and amortization		1,760.2			1,528.7
Impairment, restructuring and other operating charges, net		109.5			125.8
Amortization of deferred financing costs and non-cash interest		73.5			38.5
Realized and unrealized losses on derivative instruments, net		974.6			767.4
Foreign currency transaction losses (gains), net		167.3			(101.5	)
Realized and unrealized losses due to changes in fair values of certain investments and debt, net of dividends		(97.0	)		2.4
Losses on debt modifications and extinguishments, net		24.9			34.0
Deferred income tax expense (benefit)		753.1			(59.0	)
Excess tax benefits from stock-based compensation		(48.9	)		—
Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions		(1,425.1	)		(560.3	)
Net cash provided by operating activities of discontinued operations		161.9			926.2

Net cash provided by operating activities		1,573.6			2,280.4

Cash flows from investing activities:
Proceeds received upon disposition of discontinued operations, net of deconsolidated cash and disposal costs		3,163.8			173.6
Cash paid in connection with acquisitions, net of cash acquired		(2,636.0	)		(13.3	)
Capital expended for property and equipment		(1,297.3	)		(1,239.8	)
Other investing activities, net		(3.3	)		(22.3	)
Net cash used by investing activities of discontinued operations		(88.4	)		(368.9	)

Net cash used by investing activities	$	(861.2	)	$	(1,470.7	)

LIBERTY GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — continued

(unaudited)


	Nine months ended September 30,
	2010			2009
	in millions
Cash flows from financing activities:
Repayments and repurchases of debt and capital lease obligations	$	(5,449.4	)	$	(1,341.3	)
Borrowings of debt		2,288.4			1,741.1
Decrease in cash collateral		3,557.8			4.9
Repurchase of LGI common stock		(804.9	)		(366.3	)
Distributions by subsidiaries to noncontrolling interest owners		(193.7	)		(49.6	)
Net cash paid related to derivative instruments		(119.5	)		(18.9	)
Excess tax benefits from stock-based compensation		48.9			—
Payment of deferred financing costs and debt premiums		(64.8	)		(101.8	)
Other financing activities, net		43.8			(0.2	)
Net cash used by financing activities of discontinued operations		(22.2	)		(171.4	)

Net cash used by financing activities		(715.6	)		(303.5	)

Effect of exchange rate changes on cash:
Continuing operations		(71.5	)		58.5
Discontinued operations		13.3			30.1

Total		(58.2	)		88.6

Net increase (decrease) in cash and cash equivalents:
Continuing operations		(126.0	)		178.8
Discontinued operations		64.6			416.0

Total		(61.4	)		594.8
Cash and cash equivalents:
Beginning of period		3,269.6			1,374.0

End of period	$	3,208.2		$	1,968.8

Cash paid for interest:
Continuing operations	$	784.3		$	550.6
Discontinued operations		—			55.7

Total	$	784.3		$	606.3

Net cash paid for taxes:
Continuing operations	$	208.2		$	14.1
Discontinued operations		6.4			195.1

Total	$	214.6		$	209.2

The accompanying notes are an integral part of these condensed consolidated financial statements.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(unaudited)

(1)

Basis of Presentation

Liberty Global, Inc. (LGI) is an international provider of video, voice and broadband internet services, with consolidated broadband communications and/or direct-to-home satellite (DTH) operations at September 30, 2010 in 14 countries, primarily in Europe, Chile and Australia. In the following text, the terms “we,” “our,” “our company” and “us” may refer, as the context requires, to LGI or collectively to LGI and its subsidiaries.

Through our indirect subsidiary UPC Holding BV (UPC Holding), we provide video, voice and broadband internet services in nine European countries and in Chile. The European broadband communications and DTH operations of UPC Holding and the broadband communications operations in Germany of Unitymedia GmbH (Unitymedia), another indirect subsidiary of LGI, are collectively referred to as the UPC Broadband Division. UPC Holding’s broadband communications operations in Chile are provided through its 80%-owned indirect subsidiary, VTR Global Com SA (VTR). Through our indirect majority ownership interest in Telenet Group Holding NV (Telenet) (50.3% at September 30, 2010), we provide broadband communications services in Belgium. Through our indirect majority ownership interest in Austar United Communications Limited (Austar) (54.1% at September 30, 2010), we provide DTH services in Australia. Our operations also include (i) consolidated broadband communications operations in Puerto Rico and (ii) consolidated interests in certain programming businesses in Europe and Argentina. Our consolidated programming interests in Europe are primarily held through Chellomedia BV (Chellomedia), which also owns or manages investments in various other businesses, primarily in Europe. Certain of Chellomedia’s subsidiaries and affiliates provide programming services to certain of our broadband communications operations, primarily in Europe.

Effective September 30, 2010, we closed down the DTH operations of Unitymedia’s arena segment. On February 18, 2010, we sold our ownership interests in three of our subsidiaries (the J:COM Disposal Group), including Liberty Jupiter LLC (Liberty Jupiter) (formerly Liberty Jupiter, Inc.), which directly or indirectly, including through certain trust arrangements, held our ownership interests in Jupiter Telecommunications Co., Ltd (J:COM), a broadband communications provider in Japan. On July 15, 2009, one of our subsidiaries sold 100% of its interest in our Slovenian cable operations (UPC Slovenia). We have presented Unitymedia’s arena segment, the J:COM Disposal Group and UPC Slovenia as discontinued operations in our condensed consolidated statements of operations and cash flows. As such, all statement of operations and cash flow statement amounts presented in the notes to these condensed consolidated financial statements relate only to our continuing operations, unless otherwise noted. See note 3.

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 financial 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 financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations 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 2009 consolidated financial statements and notes thereto included in our Current Report on Form 8-K filed with the SEC on May 12, 2010.

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

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

uncollectible accounts, deferred income taxes and related valuation allowances, loss contingencies, fair values of derivative instruments, financial instruments and investments, fair values of long-lived assets and any related impairments, capitalization of internal costs associated with construction and installation activities, useful lives of long-lived assets, including certain leased 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 United States (U.S.) dollars are calculated as of September 30, 2010.

Certain prior period amounts have been reclassified to conform to the current year presentation.

(2)

Accounting Changes

SFAS 166

In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 166, Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140 (SFAS 166). FASB Statement No. 140, as amended by SFAS 166, was subsequently codified within various FASB Accounting Standards Codification (FASB ASC) Topics, primarily FASB ASC Topic 860, Transfers and Servicing. SFAS 166, among other matters, (i) eliminates the concept of a qualifying special-purpose entity, (ii) creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, (iii) clarifies other sale-accounting criteria and (iv) changes the initial measurement of a transferor’s interest in transferred financial assets. SFAS 166 is applicable for fiscal years and interim periods beginning after November 15, 2009. We adopted SFAS 166 effective January 1, 2010 and such adoption did not have a material impact on our condensed consolidated financial statements.

SFAS 167

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167). FASB Interpretation No. 46(R) (FIN 46(R)), as amended by SFAS 167, was subsequently codified within various FASB ASC Topics, primarily FASB ASC 810. SFAS 167, among other matters, (i) eliminates the exceptions of FIN 46(R) with respect to the consolidation of qualifying special-purpose entities, (ii) contains new criteria for determining the primary beneficiary and (iii) increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a variable interest entity. SFAS 167 also contains a new requirement that any term, transaction or arrangement that does not have a substantive effect on an entity’s status as a variable interest entity, a company’s power over a variable interest entity or a company’s obligation to absorb losses or its right to receive benefits of an entity must be disregarded in applying the provisions of FASB Interpretation No. 46(R). SFAS 167 is applicable for fiscal years and interim periods beginning after November 15, 2009. We adopted SFAS 167 effective January 1, 2010 such adoption did not have a material impact on our condensed consolidated financial statements.

FASB ASU 2009-05

In August 2009, the FASB issued Accounting Standards Update (FASB ASU) No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) — Measuring Liabilities at Fair Value (FASB ASU 2009-05). FASB ASU 2009-05 provides clarification in measuring the fair value of liabilities in circumstances in which a quoted price in an active market for the identical liability is not available and in circumstances in which a liability is restricted from being transferred. FASB ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. We adopted FASB ASU 2009-05 effective January 1, 2010 and such adoption did not have a material impact on our condensed consolidated financial statements.

FASB ASU 2009-13

In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements — a consensus of the FASB Emerging Issues Task Force (FASB ASU 2009-13). FASB ASU 2009-13 provides amendments to the criteria for separating consideration in multiple-deliverable arrangements by establishing an expanded selling price hierarchy for determining the selling price of a deliverable. FASB ASU 2009-13 also replaces the term “fair value” in the revenue allocation guidance with “selling price” to clarify that the allocation of revenue is based on entity-specific assumptions rather than assumptions of a marketplace participant. FASB ASU 2009-13 is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. We adopted FASB ASU 2009-13 effective January 1, 2010 and such adoption did not have a material impact on our condensed consolidated financial statements.

(3)

Acquisitions and Dispositions

Unitymedia Acquisition

On January 28, 2010, Unitymedia, formerly UPC Germany GmbH, our indirect subsidiary, paid cash of €2,006.0 million ($2,803.0 million at the transaction date) (the Unitymedia Purchase Price), to acquire from Unity Media S.C.A. all of the issued and outstanding capital stock of the entity (Old Unitymedia) that owned the second largest cable television provider in Germany based on the number of video cable subscribers (the Unitymedia Acquisition). The €2,006.0 million Unitymedia Purchase Price, together with Old Unitymedia’s net debt (aggregate principal amount of debt and capital lease obligations outstanding less cash and cash equivalents) of €2,091.2 million ($2,922.0 million at the transaction date) at January 28, 2010, results in total consideration of €4,097.2 million ($5,725.0 million at the transaction date) before direct acquisition costs of €37.0 million ($51.4 million at the applicable rates). These direct acquisition costs, which were recorded during the fourth quarter of 2009 and the first quarter of 2010, are included in impairment, restructuring and other operating charges in our condensed consolidated statements of operations. We acquired Old Unitymedia in order to achieve certain financial, operational and strategic benefits through the integration of Old Unitymedia with our existing European operations. On September 16, 2010, we merged Old Unitymedia with Unitymedia and Unitymedia became the surviving corporation.

The Unitymedia Purchase Price was funded with (i) €849.2 million ($1,186.6 million at the transaction date) of cash from the escrow accounts associated with the Unitymedia Senior Notes (as defined in note 8) and (ii) our existing cash and cash equivalent balances. We obtained financing for the Unitymedia Acquisition in November 2009 through (i) Unitymedia’s issuance of the Unitymedia Senior Notes, (ii) LGI’s issuance of 4.50% convertible senior notes due November 16, 2016 (the LGI Convertible Notes) and (iii) LGI’s sale of its Series A and Series C common stock in a private placement transaction.

We have accounted for the Unitymedia Acquisition using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets based on assessments of their respective fair values, and the excess of the purchase price over the fair values of these identifiable net assets was allocated to goodwill. The purchase price allocation as reflected in these condensed consolidated financial statements is preliminary and subject to adjustment based on our final assessment of the fair values of the acquired identifiable assets and liabilities. Although certain items in the valuation process remain open, we expect that any further adjustments to the preliminary allocation will not be material to our financial position or results of operations.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

A summary of the preliminary purchase price and opening balance sheet for the Unitymedia Acquisition at the January 28, 2010 acquisition date is presented in the following table (in millions):


Cash	$	175.9
Other current assets		314.1
Property and equipment, net		3,575.4
Goodwill (a)		2,105.2
Intangible assets subject to amortization (b)		991.5
Other assets, net		43.4
Current portion of long-term debt and capital lease obligations		(13.5	)
Other current liabilities		(649.4	)
Long-term debt and capital lease obligations		(3,084.4	)
Other long-term liabilities		(655.2	)

Total purchase price	$	2,803.0

(a)

The goodwill recognized in connection with the Unitymedia Acquisition is primarily attributable to (i) the ability to exploit Old Unitymedia’s existing advanced broadband communications network to gain immediate access to potential customers and (ii) substantial synergies that are expected to be achieved through the integration of Old Unitymedia with our other operations in Europe.

(b)	Amount primarily includes intangible assets related to customer relationships. At January 28, 2010, the weighted average useful life of Old Unitymedia’s intangible assets was approximately seven years.

Pro Forma Information

The following unaudited pro forma condensed consolidated operating results for the nine months ended September 30, 2010 and the three and nine months ended September 30, 2009 give effect to the Unitymedia Acquisition as if such acquisition had been completed as of January 1, 2010 (for the 2010 period) and January 1, 2009 (for the 2009 periods). These pro forma amounts are not necessarily indicative of the operating results that would have occurred if these transactions had occurred on such date. The pro forma adjustments are based on currently available information and certain assumptions that we believe are reasonable.


	Three months ended September 30, 2009			Nine months ended September 30,
	Three months ended September 30, 2009			2010		2009
	in millions, except per share amounts
Revenue:
Continuing operations	$	2,237.6		$	6,685.8	$	6,330.3
Discontinued operations		891.3			650.8		2,623.6

Total	$	3,128.9		$	7,336.6	$	8,953.9

Net earnings (loss) attributable to LGI stockholders	$	(186.3	)	$	342.3	$	(717.2	)

Basic and diluted earnings (loss) attributable to LGI stockholders per share — Series A, Series B and Series C common stock	$	(0.70	)	$	1.34	$	(2.65	)

Our condensed consolidated statements of operations for the three and nine months ended September 30, 2010 include revenue attributable to Old Unitymedia of $306.5 million and $817.2 million, respectively, and net income attributable to Old Unitymedia of $43.5 million and $0.6 million, respectively.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

Dispositions

Unitymedia’s arena segment — Effective September 30, 2010, we closed down the DTH operations of Unitymedia’s arena segment. As a result, we have presented Unitymedia’s arena segment as a discontinued operation.

J:COM Disposal Group — On February 18, 2010, we sold the J:COM Disposal Group to KDDI Corporation, the second largest wireless operator in Japan. As a result of this disposition, we have presented the J:COM Disposal Group as a discontinued operation. As part of the sale agreement, we retained the right to receive the final 2009 dividend of ¥490 ($5.43 at the transaction date) per share attributable to our interest in J:COM, which we received in March 2010. Including both the proceeds received upon the sale and the dividend, we realized gross proceeds of approximately ¥362.9 billion ($4,013.7 million at the applicable rates). In connection with the sale of the J:COM Disposal Group, we (i) repaid in full the ¥75 billion ($831.8 million at the applicable rate) senior secured credit facility of our subsidiary LGJ Holdings LLC (the LGJ Holdings Credit Facility), (ii) paid $35.0 million to settle the related interest rate swaps and (iii) incurred transaction costs of $11.8 million. In addition, (i) prior to the closing date, the noncontrolling interest held by Sumitomo Corporation (Sumitomo) in LGI/Sumisho Super Media, LP, our then indirect majority-owned subsidiary, which owned a controlling interest in J:COM, was redeemed for the J:COM shares attributable to such interest and (ii) prior to closing, we acquired the noncontrolling interests in Liberty Jupiter for cash consideration of $32.0 million. Upon the deconsolidation of the J:COM Disposal Group, our cash and cash equivalents were reduced by the ¥73.6 billion ($806.1 million at the transaction date) of cash and cash equivalents of the J:COM Disposal Group.

In connection with the sale of the J:COM Disposal Group, we recognized a pre-tax gain of $2,179.4 million that includes cumulative foreign currency translation gains of $376.0 million. The related income tax expense of $806.8 million differs from the actual federal and state income taxes that we expect our U.S. tax group to pay in 2010 of $225 million to $300 million, as the actual income taxes to be paid by our U.S. tax group during 2010 will be a function of (i) the U.S. tax attributes available at December 31, 2010 to offset the liability resulting from the taxable gain and (ii) our other 2010 taxable activities in the U.S.

We were contractually required to use a portion of the proceeds from the sale of the J:COM Disposal Group to (i) repay the LGJ Holdings Credit Facility and (ii) settle the related interest rate swaps. Accordingly, (i) interest expense related to the LGJ Holdings Credit Facility of $5.1 million and $26.6 million, (ii) realized and unrealized losses on derivative instruments related to the settled interest rate swaps of $2.2 million and $5.3 million and (iii) foreign currency transaction losses related to the Japanese yen denominated LGJ Holdings Credit Facility of $36.6 million and $10.0 million are included in discontinued operations in our condensed consolidated statements of operations for the nine months ended September 30, 2010 and 2009, respectively.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

The summarized financial position of the J:COM Disposal Group as of December 31, 2009 is as follows (in millions):


Current assets	$	1,057.7
Property and equipment, net		4,058.5
Intangibles assets, net		3,979.4
Other assets		335.5

Total assets	$	9,431.1

Current liabilities	$	1,088.4
Long-term debt and capital lease obligations		2,280.1
Other liabilities		1,055.7

Total liabilities		4,424.2

Equity attributable to noncontrolling interests		2,888.7
Equity attributable to LGI stockholders		2,118.2

Total equity		5,006.9

Total liabilities and equity	$	9,431.1

UPC Slovenia — On July 15, 2009, one of our subsidiaries sold 100% of its interest in UPC Slovenia to Mid Europa Partners for a cash purchase price of €119.5 million ($168.4 million at the transaction date). As a result of this disposition, we have presented UPC Slovenia as a discontinued operation.

The combined operating results of Unitymedia’s arena segment, the J:COM Disposal Group and UPC Slovenia are classified as discontinued operations in our condensed consolidated statements of operations and are summarized in the following table:


	Three months ended September 30,						Nine months ended September 30,
	2010			2009			2010			2009
	in millions
Revenue	$	3.1		$	891.3		$	650.8		$	2,623.6

Operating income (loss)	$	(2.2	)	$	152.6		$	133.3		$	476.3

Earnings (loss) before income taxes and noncontrolling interests	$	(2.2	)	$	71.7		$	82.0		$	404.0

Income tax benefit (expense)	$	0.3		$	(38.7	)	$	(35.0	)	$	(188.0	)

Earnings (loss) from discontinued operations attributable to LGI stockholders, net of taxes	$	(1.9	)	$	(23.8	)	$	(4.3	)	$	49.3

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

(4)

Investments

The details of our investments are set forth below:


Accounting Method	September 30, 2010		December 31, 2009
	in millions
Fair value (a)	$	944.0	$	831.9
Equity		57.6		152.9
Cost		0.6		23.8

Total	$	1,002.2	$	1,008.6

(a)	Includes $588.6 million and $462.2 million, respectively, representing the fair value of our investment in shares of common stock of Sumitomo. These shares secure a loan (the Sumitomo Collar Loan) to Liberty Programming Japan LLC, our wholly-owned indirect subsidiary.

(5)

Derivative Instruments

Through our subsidiaries, we have entered into various derivative instruments to manage interest rate and foreign currency exposure with respect to the U.S. dollar ($), the euro (€), the Czech koruna (CZK), the Hungarian forint (HUF), the Polish zloty (PLN), the Romanian lei (RON), the Swiss franc (CHF), the Chilean peso (CLP) and the Australian dollar (AUD). As we generally do not apply hedge accounting to our derivative instruments, changes in the fair values of our derivative instruments are recorded in realized and unrealized losses on derivative instruments in our condensed consolidated statements of operations. The following table provides details of the fair values of our derivative instrument assets and liabilities:


	September 30, 2010						December 31, 2009
	Current		Long-term (a)		Total		Current		Long-term (a)		Total
	in millions
Assets:
Cross-currency and interest rate derivative contracts (b)	$	79.8	$	179.0	$	258.8	$	153.6	$	186.6	$	340.2
Equity-related derivatives (c)		—		590.3		590.3		—		561.2		561.2
Foreign currency forward contracts		0.7		—		0.7		1.0		—		1.0
Other		1.9		2.7		4.6		3.0		2.3		5.3

Total	$	82.4	$	772.0	$	854.4	$	157.6	$	750.1	$	907.7

Liabilities:
Cross-currency and interest rate derivative contracts (b)	$	571.0	$	1,599.7	$	2,170.7	$	715.1	$	1,166.9	$	1,882.0
Equity-related derivatives (c)		8.8		—		8.8		18.4		—		18.4
Foreign currency forward contracts		7.3		—		7.3		7.1		0.2		7.3
Other		0.7		1.5		2.2		1.0		1.7		2.7

Total	$	587.8	$	1,601.2	$	2,189.0	$	741.6	$	1,168.8	$	1,910.4

(a)	Our long-term derivative assets and liabilities are included in other assets and other long-term liabilities, respectively, in our condensed consolidated balance sheets.

(b)	As of September 30, 2010, the fair values of our cross-currency and interest rate derivative contracts that represented assets have been reduced by credit risk valuation adjustments aggregating $10.9 million and the

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

fair values of our cross-currency and interest rate derivative contracts that represented liabilities have been reduced by credit risk valuation adjustments aggregating $191.6 million. The adjustments to our derivative assets relate to the credit risk associated with counterparty nonperformance and the adjustments to our derivative liabilities relate to credit risk associated with our own nonperformance. In all cases, the adjustments take into account offsetting liability or asset positions within a given contract. Our determination of credit risk valuation adjustments generally is based on our and our counterparties’ credit risks, as observed in the credit default swap market and market quotations for certain of our subsidiaries’ debt instruments, as applicable. The change in the credit risk valuation adjustments associated with the derivative instruments of our continuing operations resulted in net gains of $63.1 million and $122.8 million during the three and nine months ended September 30, 2010, respectively, compared to a net gain (loss) of $9.7 million and ($7.3 million) during the three and nine months ended September 30, 2009, respectively. These amounts are included in realized and unrealized gains (losses) on derivative instruments, net, in our condensed consolidated statements of operations. For further information concerning our fair value measurements, see note 6.

(c)

The fair values of our equity-related derivatives primarily relate to the share collar (the Sumitomo Collar) with respect to the Sumitomo shares held by our company. These fair value amounts do not include credit risk valuation adjustments as we assume that any losses incurred by our company in the event of nonperformance by the counterparty would, subject to relevant insolvency laws, be fully offset against amounts we owe to the counterparty pursuant to the secured borrowing arrangements of the Sumitomo Collar.

The details of our realized and unrealized losses on derivative instruments, net, are as follows:


	Three months ended September 30,						Nine months ended September 30,
	2010			2009			2010			2009
	in millions
Cross-currency and interest rate derivative contracts	$	(559.7	)	$	(302.5	)	$	(966.0	)	$	(701.6	)
Equity-related derivatives (a)		(40.4	)		71.3			33.9			(57.8	)
Foreign currency forward contracts		(13.4	)		6.3			(43.2	)		(12.5	)
Other		2.6			3.6			0.7			4.5

Total	$	(610.9	)	$	(221.3	)	$	(974.6	)	$	(767.4	)

(a)	Primarily includes activity related to the Sumitomo Collar and, during the 2009 periods, the prepaid forward sale contract on our previously-held shares of The News Corporation Class A common stock (the News Corp. Forward).

The net cash received (paid) related to our derivative instruments is classified as an operating, investing or financing activity in our condensed consolidated statements of cash flows based on the classification of the applicable underlying cash flows. The classifications of these cash flows are as follows:


	Nine months ended September 30,
	2010			2009
	in millions
Operating activities	$	(508.9	)	$	(381.6	)
Investing activities		(0.2	)		3.8
Financing activities		(119.5	)		(18.9	)

Total	$	(628.6	)	$	(396.7	)

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

Counterparty Credit Risk

We are exposed to the risk that the counterparties to our derivative contracts will default on their obligations to us. We manage these credit risks through the evaluation and monitoring of the creditworthiness of, and concentration of risk with, the respective counterparties. In this regard, credit risk associated with our derivative contracts is spread across a relatively broad counterparty base of banks and financial institutions. We generally do not require counterparties to our derivative instruments to provide collateral or other security or to enter into master netting arrangements. At September 30, 2010, our exposure to credit risk included derivative assets with a fair value of $854.4 million.

Under our derivative contracts, the exercise of termination and set-off provisions is generally at the option of the non-defaulting party only. However, in an insolvency of a derivative counterparty, a liquidator may be able to force the termination of a derivative contract. In addition, mandatory set-off of amounts due under the derivative contract and potentially other contracts between our company and the relevant counterparty may be applied under the insolvency regime of the relevant jurisdiction. Accordingly, it is possible that certain amounts owing between our company and an insolvent counterparty could be set-off, even if that counterparty had previously defaulted on its obligations under a derivative contract with our company. While we anticipate that, in the event of the insolvency of one of our derivative counterparties, we would seek to novate our derivative contracts to different counterparties, no assurance can be given that we would be able to do this on terms or pricing that would be acceptable to us. If we are unable to, or choose not to, novate to a different party, the risks that were the subject of the original derivative contract would no longer be hedged.

While we currently have no specific concerns about the creditworthiness of any particular counterparty, we cannot rule out the possibility that one or more of our counterparties could fail or otherwise be unable to meet its obligations to us. Any such instance could have an adverse effect on our cash flows, results of operations and financial condition.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

Cross-currency and Interest Rate Derivative Contracts

Cross-currency Swaps:

The terms of our outstanding cross-currency swap contracts at September 30, 2010 are as follows:


Subsidiary / Final maturity date (a)	Notional amount due from counterparty		Notional amount due to counterparty		Interest rate due from counterparty		Interest rate due to counterparty
	in millions
UPC Holding:
April 2016	$	400.0	CHF	441.8		9.88%		9.87%

UPC Broadband Holding BV (UPC Broadband Holding), a subsidiary of UPC Holding:
December 2014	€	165.8	CZK	4,721.8		5.50%		5.89%
December 2014	€	200.0	CZK	5,800.0		5.46%		5.30%
December 2014 — December 2016	€	60.0	CZK	1,703.1		5.50%		6.99%
July 2017	€	39.6	CZK	1,000.0		3.00%		3.75%

December 2014	€	488.0	HUF	138,437.5		5.50%		9.21%
December 2014 — December 2016	€	260.0	HUF	75,570.0		5.50%		10.56%

December 2014	€	400.5	PLN	1,605.6		5.50%		7.50%
December 2014 — December 2016	€	245.0	PLN	1,000.6		5.50%		9.03%
July 2017	€	82.0	PLN	318.0		3.00%		5.60%

December 2014	$	171.5	CHF	187.1		6 mo. LIBOR + 2.75%		6 mo. CHF LIBOR + 2.95%
December 2016	$	340.0	CHF	370.9		6 mo. LIBOR + 3.50%		6 mo. CHF LIBOR + 4.01%

July 2015	€	123.8	CLP	86,500.0		2.50%		5.84%
December 2015	€	69.1	CLP	53,000.0		3.50%		5.75%

December 2016	€	31.9	RON	116.8		5.50%		11.58%

September 2012	€	229.1	CHF	355.8		6 mo. EURIBOR + 2.50%		6 mo. CHF LIBOR + 2.46%
December 2014	€	653.0	CHF	1,066.0		6 mo. EURIBOR + 2.00%		6 mo. CHF LIBOR + 1.95%
December 2014	€	245.4	CHF	400.0		6 mo. EURIBOR + 0.82%		6 mo. CHF LIBOR + 1.94%
December 2014 — December 2016	€	360.4	CHF	589.0		6 mo. EURIBOR + 3.75%		6 mo. CHF LIBOR + 3.94%
January 2017	€	75.0	CHF	110.9		7.63%		6.98%
January 2020	€	175.0	CHF	258.6		7.63%		6.76%

Chellomedia Programming Financing Holdco BV (Chellomedia PFH), an indirect subsidiary of Chellomedia:
July 2013	€	32.5	HUF	8,632.0		5.50%		9.55%

December 2013	€	19.4	CZK	517.0		3.50%		4.49%

December 2013	$	14.7	PLN	50.0		3.50%		5.56%

Unitymedia:
December 2017	$	845.0	€	569.4		8.13%		8.49%

(a)

For each subsidiary, the notional amount of multiple derivative instruments that mature within the same calendar month are shown in the aggregate and interest rates are presented on a weighted average basis. For derivative instruments that were in effect as of September 30, 2010, we present a single date that represents the applicable final maturity date. For derivative instruments that become effective subsequent to September 30, 2010, we present a range of dates that represents the period covered by the applicable derivative instrument.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

Cross-currency Interest Rate Swaps:

The terms of our outstanding cross-currency interest rate swap contracts at September 30, 2010 are as follows:


Subsidiary / Final maturity date (a)	Notional amount due from counterparty		Notional amount due to counterparty		Interest rate due from counterparty			Interest rate due to counterparty
	in millions
UPC Broadband Holding:
March 2013	$	200.0	€	150.9		6 mo. LIBOR + 2.00	%		5.73	%
December 2014	$	725.0	€	547.3		6 mo. LIBOR + 1.75	%		5.74	%
December 2016	$	160.0	€	120.7		6 mo. LIBOR + 3.50	%		7.56	%
December 2010	$	292.0	RON	709.1		6 mo. LIBOR + 3.50	%		10.24	%
December 2010 — December 2016	$	292.0	RON	709.1		6 mo. LIBOR + 3.50	%		14.01	%
December 2016	$	84.1	RON	203.3		6 mo. LIBOR + 3.50	%		13.35	%
December 2014	$	340.0	CLP	181,322.0		6 mo. LIBOR + 1.75	%		8.76	%
December 2014	€	134.2	CLP	107,800.0		6 mo. EURIBOR + 2.00	%		10.00	%

VTR:
September 2014	$	456.0	CLP	252,396.0		6 mo. LIBOR + 3.00	%		11.16	%

(a)

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

Interest Rate Swaps:

The terms of our outstanding interest rate swap contracts at September 30, 2010 are as follows:


Subsidiary / Final maturity date (a)	Notional amount		Interest rate due from counterparty		Interest rate due to counterparty
	in millions
UPC Broadband Holding:
January 2011	€	1,500.0		1 mo. EURIBOR + 3.40%		6 mo. EURIBOR + 3.09%
January 2011	€	193.5		6 mo. EURIBOR		3.83%
July 2011	€	850.0		1 mo. EURIBOR + 3.00%		6 mo. EURIBOR + 2.59%
January 2012	€	1,500.0		1 mo. EURIBOR + 4.00%		6 mo. EURIBOR + 3.68%
April 2012	€	555.0		6 mo. EURIBOR		3.32%
September 2012	€	500.0		3 mo. EURIBOR		2.96%
December 2013	€	90.5		6 mo. EURIBOR		3.84%
January 2014	€	185.0		6 mo. EURIBOR		4.04%
April 2012 — July 2014	€	337.0		6 mo. EURIBOR		3.94%
January 2011 — December 2014	€	193.5		6 mo. EURIBOR		4.68%
December 2014	€	1,659.5		6 mo. EURIBOR		4.66%
April 2012 — December 2015	€	263.3		6 mo. EURIBOR		3.97%
January 2015 — December 2016	€	500.0		6 mo. EURIBOR		4.32%

December 2010	CHF	618.5		6 mo. CHF LIBOR		2.19%
September 2012	CHF	711.5		6 mo. CHF LIBOR		2.33%
January 2011 — December 2014	CHF	618.5		6 mo. CHF LIBOR		3.56%
October 2012 — December 2014	CHF	711.5		6 mo. CHF LIBOR		3.65%
December 2014	CHF	1,050.0		6 mo. CHF LIBOR		3.47%
January 2015 — December 2016	CHF	370.9		6 mo. CHF LIBOR		3.82%

July 2013	CLP	86,100.0		6.77%		6 mo. TAB

July 2013	HUF	5,908.8		6 mo. BUBOR		8.52%

July 2013	PLN	115.1		6 mo. WIBOR		5.41%

Chellomedia PFH:
December 2013	$	86.4		6 mo. LIBOR		4.98%

December 2013	€	150.1		6 mo. EURIBOR		4.14%

Austar Entertainment Pty Ltd. (Austar Entertainment), a subsidiary of Austar:
August 2011	AUD	250.0		3 mo. AUD BBSY		6.21%
August 2012	AUD	50.0		3 mo. AUD BBSY		3.90%
August 2013	AUD	475.0		3 mo. AUD BBSY		6.53%
August 2011 — August 2013	AUD	25.0		3 mo. AUD BBSY		6.97%
August 2011 — August 2014	AUD	175.9		3 mo. AUD BBSY		6.50%

Liberty Cablevision of Puerto Rico Ltd. (Liberty Puerto Rico), an indirect subsidiary of LGI:
June 2014	$	164.6		3 mo. LIBOR		5.14%

VTR:
July 2013	CLP	86,100.0		6 mo. TAB		7.78%

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)


Subsidiary / Final maturity date (a)	Notional amount		Interest rate due from counterparty		Interest rate due to counterparty
	in millions
Telenet NV, an indirect subsidiary of Telenet:
December 2011	€	50.0		3 mo. EURIBOR		5.29%

Telenet NV (formerly known as Telenet Bidco NV), an indirect subsidiary of Telenet:
September 2012	€	350.0		3 mo. EURIBOR		4.35%
June 2012 — June 2015	€	50.0		3 mo. EURIBOR		3.55%
June 2011 — August 2015	€	350.0		3 mo. EURIBOR		3.54%
July 2011 — December 2015	€	200.0		3 mo. EURIBOR		3.55%
January 2012 — July 2017	€	150.0		3 mo. EURIBOR		3.55%
December 2017	€	50.0		3 mo. EURIBOR		3.52%

Unitymedia:
April 2011	€	800.0		3 mo. EURIBOR		3.35%

(a)

Interest Rate Caps

Each contract establishes the maximum EURIBOR rate payable on the indicated notional amount, as detailed below:


	September 30, 2010
Subsidiary / Final maturity date (a)	Notional amount		Maximum rate
	in millions
Liberty Global Europe Financing BV (LGE Financing), the immediate parent of UPC Holding:
January 2015 — January 2020	€	1,135.0		7.00	%
Telenet NV:
December 2017	€	3.7		6.50	%
December 2017	€	3.7		5.50	%
Telenet NV:
June 2011	€	550.0		3.50	%
January 2012	€	150.0		3.50	%
June 2012	€	50.0		3.50	%
September 2015	€	250.0		4.50	%
June 2015 — June 2017	€	50.0		4.50	%

(a)

For derivative instruments that were in effect as of September 30, 2010, we present a single date that represents the applicable final maturity date. For derivative instruments that become effective subsequent to September 30, 2010, we present a range of dates that represents the period covered by the applicable derivative instrument.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

Telenet Interest Rate Collars

Telenet’s interest rate collar contracts establish the minimum and maximum EURIBOR rate payable on the indicated notional amount, as detailed below:


	September 30, 2010
Subsidiary / Final maturity date	Notional amount		Minimum rate			Maximum rate
	in millions
Telenet NV:
December 2011	€	50.0		2.50	%		4.50	%
December 2011	€	25.0		2.50	%		5.50	%
Telenet NV:
July 2017	€	950.0		1.00	%		4.00	%

UPC Holding Cross-Currency Options

Pursuant to its cross-currency option contracts, UPC Holding has the option to require the counterparty to deliver U.S. dollars in exchange for Swiss francs at a fixed exchange rate of 1.10 Swiss francs per one U.S. dollar, in the notional amounts listed below:


Contract expiration date	Notional amount at September 30, 2010
	in millions
October 2016	$	19.8
April 2017	$	19.8
October 2017	$	19.8
April 2018	$	419.8

Foreign Currency Forwards

The following table summarizes our outstanding foreign currency forward contracts at September 30, 2010:


Subsidiary	Currency purchased forward		Currency sold forward		Maturity dates
	in millions
UPC Broadband Holding	€	1.4	HUF	394.7	October 2010 — October 2011
UPC Broadband Holding	€	0.5	PLN	2.1	October 2010 — March 2011
UPC Broadband Holding	€	1.4	CZK	35.2	October 2010 — September 2011
UPC Broadband Holding	€	94.0	$	127.4	October 2010
VTR	$	61.9	CLP	32,464.2	October 2010 — September 2011
Telenet NV	$	22.0	€	17.3	OCtober 2010 — March 2011
Austar Entertainment	$	22.4	AUD	24.6	October 2010 — September 2011
LGE Financing	$	4.9	€	3.7	October 2010 — October 2011

(6)

Fair Value Measurements

We use the fair value method to account for (i) certain of our investments, (ii) our derivative instruments and (iii) the 1.75% euro-denominated convertible senior notes issued by UnitedGlobalCom, Inc. (UGC) (the UGC

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

Convertible Notes) (see note 8). UGC is a wholly-owned subsidiary of LGI. The reported fair values of these assets and liabilities as of September 30, 2010 likely will not represent the value that will be realized upon the ultimate settlement or disposition of these assets and liabilities. In the case of the investments that we account for using the fair value method, the values we realize upon disposition will be dependent upon, among other factors, market conditions and the historical and forecasted financial performance of the investees at the time of any such disposition. With respect to the Sumitomo Collar, we expect settlement to occur through the surrender of the underlying shares. With respect to our foreign currency and interest rate derivative instruments, we expect that the values realized generally will be based on market conditions at the time of settlement, which may occur at the maturity of the derivative instrument or at the time of the repayment or refinancing of the underlying debt instrument.

GAAP provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

All of our Level 2 inputs (interest rates, yield curves, dividend yields and certain of the inputs for our weighted average cost of capital calculations) and certain of our Level 3 inputs (forecasted volatilities and credit spreads) are obtained from pricing services. These inputs, or interpolations or extrapolations thereof, are used in our internal models to calculate, among other items, yield curves, forward interest and currency rates and weighted average cost of capital rates. In the normal course of business, we receive fair value assessments from the counterparties to our derivative contracts. Although we compare these assessments to our internal valuations and investigate unexpected differences, we do not otherwise rely on counterparty quotes to determine the fair values of our derivative instruments. The midpoints of applicable bid and ask ranges generally are used as inputs for our internal valuations.

For our investment in Sumitomo common stock, the fair value measurement is based on the quoted closing price of the shares at each reporting date. Accordingly, the valuation of this investment falls under Level 1 of the fair value hierarchy. Our other investments that we account for at fair value are privately-held companies, and therefore, quoted market prices are unavailable. The valuation technique we use for such investments is a combination of an income approach (discounted cash flow model based on forecasts) and a market approach (market multiples of similar businesses). With the exception of certain inputs for our weighted average cost of capital calculations that are derived from pricing services, the inputs used to value these investments are based on unobservable inputs derived from our assumptions. Therefore, the valuation of our privately-held investments falls under Level 3 of the fair value hierarchy.

The fair value measurements of our equity-related derivatives are based on the binomial option pricing model, which requires the input of observable and unobservable variables such as exchange traded equity prices, risk-free interest rates, dividend yields and forecasted volatilities of the underlying equity securities. The valuations of our equity-related derivative instruments are based on a combination of Level 1 inputs (exchange traded equity prices), Level 2 inputs (interest rates and dividend yields) and Level 3 inputs (forecasted volatilities). As changes in volatilities could have a significant impact on the overall valuation, we believe that these valuations fall under Level 3 of the fair value hierarchy.

As further described in note 5, we have entered into various derivative instruments to manage our interest rate and foreign currency exchange risk. The fair value measurements of these derivative instruments are determined using discounted cash flow models. All but one of the inputs to these discounted cash flow models consist of, or are

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

derived from, observable Level 2 data for substantially the full term of these derivative instruments. This observable data includes interest rates, swap rates and yield curves, which are retrieved or derived from available market data. Although we may extrapolate or interpolate this data, we do not otherwise alter this data in performing our valuations. We incorporate a credit risk valuation adjustment in our fair value measurements to estimate the impact of both our own nonperformance risk and the nonperformance risk of our counterparties. Our and our counterparties’ credit spreads are Level 3 inputs that are used to derive the credit risk valuation adjustments with respect to our various interest rate and foreign currency derivative valuations. As we would not expect changes in our or our counterparties’ credit spreads to have a significant impact on the valuations of these derivative instruments, we believe that these valuations fall under Level 2 of the fair value hierarchy. Our credit risk valuation adjustments with respect to our cross-currency and interest rate swaps are quantified and further explained in note 5.

The UGC Convertible Notes are traded, but not in a market that is considered active. Fair value is determined using a discounted cash flow valuation model, consisting of inputs such as quoted market prices for LGI Series A and Series C common stock, risk-free interest rates, yield curves, credit spreads and forecasted stock volatility. The stock volatility input is based on the historical volatilities of the LGI Series A and Series C common stock. The valuation of the UGC Convertible Notes is based on Level 1 inputs (quoted market prices for LGI Series A and Series C common stock), Level 2 inputs (interest rates and yield curves) and Level 3 inputs (forecasted volatilities and credit spreads). As changes in volatilities and credit spreads could have a significant impact on the overall valuation of the UGC Convertible Notes, we believe that this valuation falls under Level 3 of the fair value hierarchy. Our credit risk valuation adjustment with respect to the UGC Convertible Notes is quantified and explained in note 8.

Fair value measurements are also used in connection with nonrecurring valuations performed in connection with impairment assessments and acquisition accounting. These nonrecurring valuations typically involve the use of discounted cash flow analyses to assess enterprise values, the values of customer relationship intangible assets, the implied value of goodwill, replacement costs of tangible assets and the values of certain other assets and liabilities. With the exception of certain inputs for our weighted average cost of capital calculations that are derived from pricing services, the inputs used in our discounted cash flow analyses, such as forecasts of future cash flows, are based on our assumptions. Accordingly, nonrecurring valuations that involve the use of discounted cash flow analyses fall under Level 3 of the fair value hierarchy. During the nine months ended September 30, 2010, we performed nonrecurring fair value measurements in connection with the Unitymedia Acquisition and goodwill impairment assessments. See notes 3 and 7.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

A summary of the assets and liabilities that are measured at fair value is as follows:


			Fair value measurements at September 30, 2010 using:
Description	September 30, 2010		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	in millions
Assets:
Derivative instruments:
Cross-currency and interest rate derivative contracts	$	258.8	$	—	$	258.8	$	—
Equity-related derivatives		590.3		—		—		590.3
Foreign currency forward contracts		0.7		—		0.7		—
Other		4.6		—		4.6		—

Total derivative instruments		854.4		—		264.1		590.3
Investments		944.0		588.6		—		355.4

Total assets	$	1,798.4	$	588.6	$	264.1	$	945.7

Liabilities:
UGC Convertible Notes	$	483.5	$	—	$	—	$	483.5

Derivative instruments:
Cross-currency and interest rate derivative contracts		2,170.7		—		2,170.7		—
Equity-related derivatives		8.8		—		—		8.8
Foreign currency forward contracts		7.3		—		7.3		—
Other		2.2		—		2.2		—

Total derivative instruments		2,189.0		—		2,180.2		8.8

Total liabilities	$	2,672.5	$	—	$	2,180.2	$	492.3


			Fair value measurements at December 31, 2009 using:
Description	December 31, 2009		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	in millions
Assets:
Derivative instruments:
Cross-currency and interest rate derivative contracts	$	340.2	$	—	$	340.2	$	—
Equity-related derivatives		561.2		—		—		561.2
Foreign currency forward contracts		1.0		—		1.0		—
Other		5.3		—		5.3		—

Total derivative instruments		907.7		—		346.5		561.2
Investments		831.9		462.2		—		369.7

Total assets	$	1,739.6	$	462.2	$	346.5	$	930.9

Liabilities:
UGC Convertible Notes	$	564.1	$	—	$	—	$	564.1

Derivative instruments:
Cross-currency and interest rate derivative contracts		1,882.0		—		1,882.0		—
Equity-related derivatives		18.4		—		—		18.4
Foreign currency forward contracts		7.3		—		7.3		—
Other		2.7		—		2.7		—

Total derivative instruments		1,910.4		—		1,892.0		18.4

Total liabilities	$	2,474.5	$	—	$	1,892.0	$	582.5

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

A reconciliation of the beginning and ending balances of our assets and liabilities measured at fair value using significant unobservable, or Level 3, inputs is as follows:


	Investments			Equity-related derivative instruments		UGC Convertible Notes			Total
	in millions
Balance of asset (liability) at January 1, 2010	$	369.7		$	542.8	$	(564.1	)	$	348.4
Gains (losses) included in net loss (a):
Realized and unrealized gains on derivative instruments, net		—			33.9		—			33.9
Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net		(12.8	)		—		(6.9	)		(19.7	)
Repurchase of UGC Convertible Notes (note 8)		—			—		89.1			89.1
Reclassifications, distributions, investments, settlements and other		14.8			4.8		(1.6	)		18.0
Foreign currency translation adjustments		(16.3	)		—		—			(16.3	)

Balance of asset (liability) at September 30, 2010	$	355.4		$	581.5	$	(483.5	)	$	453.4

(a)

With the exception of a $10.7 million gain associated with the portion of the UGC Convertible Notes that we repurchased during the second quarter of 2010, substantially all of the gains (losses) recognized during the nine months ended September 30, 2010 relate to assets and liabilities that we continue to carry on our condensed consolidated balance sheet as of September 30, 2010.

(7)

Long-lived Assets

Property and Equipment, Net

The details of our property and equipment and the related accumulated depreciation are set forth below:


	September 30, 2010			December 31, 2009
	in millions
Distribution systems	$	16,074.0		$	19,306.6
Support equipment, buildings and land		2,456.5			2,845.8

		18,530.5			22,152.4
Accumulated depreciation		(7,426.9	)		(10,141.7	)

Total property and equipment, net	$	11,103.6		$	12,010.7

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

Goodwill

Changes in the carrying amount of our goodwill for the nine months ended September 30, 2010 are set forth below:


	January 1, 2010		Acquisitions and related adjustments		Impairment			Sale of J:COM Disposal Group			Foreign currency translation adjustments and other			September 30, 2010
	in millions
UPC Broadband Division:
Germany	$	—	$	2,097.5	$	—		$	—		$	(53.0	)	$	2,044.5
The Netherlands		1,306.8		—		—			—			(64.9	)		1,241.9
Switzerland		2,745.9		—		—			—			151.3			2,897.2
Other Western Europe		1,120.1		—		—			—			(55.5	)		1,064.6

Total Western Europe		5,172.8		2,097.5		—			—			(22.1	)		7,248.2
Central and Eastern Europe		1,123.8		—		—			—			(29.3	)		1,094.5

Total UPC Broadband Division		6,296.6		2,097.5		—			—			(51.4	)		8,342.7
Telenet (Belgium)		2,341.7		2.5		—			—			(115.8	)		2,228.4
J:COM (Japan)		3,487.8		—		—			(3,553.8	)		66.0			—
VTR (Chile)		526.5		—		—			—			25.6			552.1
Austar		314.5		—		—			—			9.6			324.1
Corporate and other		386.7		1.8		(22.7	)		—			(10.4	)		355.4

Total	$	13,353.8	$	2,101.8	$	(22.7	)	$	(3,553.8	)	$	(76.4	)	$	11,802.7

During the second quarter of 2010, we recorded a $24.5 million impairment charge to reduce the goodwill associated with Chellomedia’s programming operations in central and eastern Europe, which are included within the corporate and other category in the above table. During the second quarter of 2010, we concluded that this impairment charge was warranted, due largely to adverse economic factors that have led to a significant decline in current and projected advertising revenues, as compared to previous forecasts. In addition, the costs of certain sports programming have increased significantly, while the forecasted revenue increases associated with this sports programming have not materialized. These factors led to lower projected cash flows, and accordingly, to a valuation of this reporting unit that was lower than its carrying value as of June 30, 2010. Our assessment of the fair value of this reporting unit was based primarily on a discounted cash flow analysis due to the limited number of recent transactions involving businesses similar to Chellomedia’s programming operations in central and eastern Europe. This discounted cash flow analysis reflected the aforementioned decline in projected cash flows and a discount rate of 14%. During the third quarter of 2010, this impairment charge was reduced by $1.8 million upon the completion of our assessment of the implied fair value of the goodwill associated with this reporting unit.

We continue to experience difficult economic environments and significant competition in most of our markets, particularly in Romania and Hungary, which collectively accounted for $417.8 million of the goodwill associated with the broadband communications operations included in our Central and Eastern Europe reportable segment at September 30, 2010. If, among other factors, (i) our or our subsidiaries’ equity values decline significantly or (ii) the adverse impacts of economic, competitive or regulatoy factors are worse than anticipated, we could conclude in future periods that further impairment charges are required in order to reduce the carrying values of our goodwill, and to a lesser extent, other long-lived assets. Any such impairment charges could be significant.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

At September 30, 2010 and December 31, 2009 and based on exchange rates as of those dates, the amount of our accumulated impairments was $275.2 million and $263.1 million, respectively. The September 30, 2010 amount includes accumulated impairments related to our broadband communications operations in Romania, which are included within the UPC Broadband Division’s Central and Eastern Europe segment, and Chellomedia’s programming operations in central and eastern Europe, which are included in our corporate and other category.

Intangible Assets Subject to Amortization, Net

The details of our intangible assets subject to amortization are set forth below:


	September 30, 2010			December 31, 2009
	in millions
Gross carrying amount:
Customer relationships	$	3,536.2		$	3,257.9
Other		298.4			307.4

	$	3,834.6		$	3,565.3

Accumulated amortization:
Customer relationships	$	(1,510.0	)	$	(1,344.1	)
Other		(96.1	)		(91.2	)

	$	(1,606.1	)	$	(1,435.3	)

Net carrying amount:
Customer relationships	$	2,026.2		$	1,913.8
Other		202.3			216.2

	$	2,228.5		$	2,130.0

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

(8)

Debt and Capital Lease Obligations

The U.S. dollar equivalents of the components of our consolidated debt and capital lease obligations are as follows:


	September 30, 2010							Estimated fair value (c)				Carrying value (d)
	Weighted average interest rate (a)			Unused borrowing capacity (b)				Estimated fair value (c)				Carrying value (d)
	Weighted average interest rate (a)			Borrowing currency		U.S. $ equivalent		September 30, 2010		December 31, 2009		September 30, 2010			December 31, 2009
				in millions
Debt:
Parent:
LGI Convertible Notes (e)		4.50	%	$	—	$	—	$	1,253.0	$	992.4	$	652.5		$	630.7
Subsidiaries:
UPC Broadband Holding Bank Facility		3.89	%	€	820.8		1,118.0		7,553.3		8,506.6		7,961.0			9,052.1
UPC Holding Senior Notes		8.91	%		—		—		2,314.0		2,295.8		2,164.2			2,219.0
UPCB Finance Senior Secured Notes (f)		7.63	%		—		—		711.9		—		675.4			—
Unitymedia Senior Notes (g)		8.49	%		—		—		3,914.3		3,911.8		3,622.7			3,763.3
Unitymedia Revolving Credit Facility		4.29	%		—		—		65.9		—		68.1			—
Telenet Credit Facility		4.01	%	€	175.0		238.4		2,825.3		2,802.3		2,894.3			2,851.9
Sumitomo Collar Loan		1.88	%		—		—		1,122.2		1,005.6		1,122.2			1,005.6
Austar Bank Facility		6.23	%		AUD75.0		72.4		699.2		696.0		747.1			740.7
UGC Convertible Notes (h)		1.75	%		—		—		483.5		564.1		483.5			564.1
Chellomedia Bank Facility		3.94	%	€	25.0		34.1		233.6		218.1		256.7			268.4
Liberty Puerto Rico Bank Facility		2.29	%	$	10.0		10.0		153.9		154.8		164.6			175.9
J:COM Credit Facility		—			—		—		—		96.5		—			96.5
Other J:COM debt		—			—		—		—		1,942.5		—			1,923.1
LGJ Holdings Credit Facility		—			—		—		—		765.0		—			805.2
VTR Bank Facility (i)		—			—		—		—		460.8		—			460.8
Other		10.75	%		—		—		115.4		131.2		115.4			131.2

Total debt		5.34	%			$	1,472.9	$	21,445.5	$	24,543.5		20,927.7			24,688.5

Capital lease obligations:
Unitymedia (j)													683.5			—
Telenet													415.2			444.5
J:COM													—			684.9
Other subsidiaries													31.7			34.7

Total capital lease obligations													1,130.4			1,164.1

Total debt and capital lease obligations													22,058.1			25,852.6
Current maturities													(595.1	)		(487.7	)

Long-term debt and capital lease obligations												$	21,463.0		$	25,364.9

(a)

Represents the weighted average interest rate in effect at September 30, 2010 for all borrowings outstanding pursuant to each debt instrument including the applicable margin. The interest rates presented represent stated rates and do not include the impact of our interest rate derivative agreements, deferred financing costs, discounts or commitment fees, all of which affect our overall cost of borrowing. Including the effects of derivative instruments, discounts and commitments fees, but excluding the impact of financing costs, our

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

estimated weighted average interest rate on our aggregate variable and fixed rate indebtedness was approximately 7.7% at September 30, 2010. For information concerning our derivative instruments, see note 5.

(b)

Unused borrowing capacity represents the maximum availability under the applicable facility at September 30, 2010 without regard to covenant compliance calculations. At September 30, 2010, our availability under the UPC Broadband Holding Bank Facility (as defined below) was limited to €169.7 million ($231.1 million). Additionally, when the September 30, 2010 compliance reporting requirements have been completed, we anticipate that our availability under the UPC Broadband Holding Bank Facility will be limited to €438.7 million ($597.5 million).

(c)

The estimated fair values of our debt instruments were determined using the average of the midpoint of applicable bid and ask prices or, when quoted market prices are unavailable or not considered indicative of fair value, discounted cash flow models. The discount rates used in the cash flow models are based on the estimated credit spread of each entity, taking into account market data, to the extent available, and other relevant factors.

(d)	Amounts include the impact of discounts, where applicable.

(e)

The $935.0 million principal amount of the LGI Convertible Notes has been allocated to debt and equity components. The amounts reported in the carrying value columns represent the debt component and the amounts reported in the estimated fair value columns represent the estimated fair value of the entire instrument, including both the debt and equity components.

(f)

UPCB Finance Limited (UPCB Finance), the issuer of 7.625% senior secured notes (the UPCB Senior Secured Notes), is a special purpose financing company created for the primary purpose of issuing the UPCB Senior Secured Notes and is owned 100% by a charitable trust. UPCB Finance used the proceeds from the UPCB Senior Secured Notes to fund a new additional facility (Facility V) under the UPC Broadband Holding Bank Facility (as defined below), with UPC Financing Partnership (UPC Financing), a direct subsidiary of UPC Holding, as the borrower. UPCB Finance is dependent on payments from UPC Financing under Facility V in order to service its payment obligations under the UPCB Senior Secured Notes. As such, UPCB Finance is a variable interest entity and UPC Financing and its parent entities, including UPC Holding and LGI, are required by GAAP to consolidate UPCB Finance. Accordingly, the amount outstanding under Facility V is eliminated through the consolidation of UPCB Finance within LGI’s condensed consolidated financial statements.

(g)

The proceeds received from the November 2009 issuance of the Unitymedia Senior Notes (as defined below) were placed into two escrow accounts. At December 31, 2009, the aggregate amount included in the escrow accounts of €2,560.7 million ($3,487.7 million) is included in long-term restricted cash in our condensed consolidated balance sheet. On January 28, 2010, we used €849.2 million ($1,186.6 million at the transaction date) of cash from the escrow accounts to fund a portion of the Unitymedia Purchase Price, and on March 2, 2010, the remaining balances of the escrow accounts were released in connection with the repayment of Old Unitymedia’s then-existing indebtedness.

(h)	The UGC Convertible Notes are measured at fair value. See related discussion below.

(i)

Pursuant to the deposit arrangements with the lender in relation to VTR’s amended and restated senior secured credit facility (the VTR Bank Facility), we were required to fund a cash collateral account in an amount equal to the outstanding principal and interest under the VTR Bank Facility. On March 22, 2010, the third-party lender under the VTR Bank Facility assigned its rights and obligations under the VTR Bank Facility to a subsidiary of UPC Broadband Holding. As consideration for this assignment, the deposit in the collateral account was transferred to the third-party lender in a non-cash transaction.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

(j)

Primarily represents Unitymedia’s obligations under a duct network lease agreement. The original contracts were concluded effective July 1, 2000 and have an indefinite term, subject to certain mandatory statutory termination rights for either party after a term of 30 years. With certain limited exceptions, the lessor generally is not entitled to terminate the lease.

UPC Broadband Holding Bank Facility

The UPC Broadband Holding Bank Facility, as amended, is the senior secured credit facility of UPC Broadband Holding. During the first nine months of 2010, pursuant to various additional facility accession agreements, (i) new Facilities W and X were executed and (ii) commitments under existing Facilities R, S and T were increased. Facility W is a redrawable term loan facility and Facility X is a non-redrawable term loan facility. In connection with the completion of these transactions, certain lenders under existing Facilities M, N and P novated their commitments to UPC Broadband Operations BV (UPC Broadband Operations), a direct subsidiary of UPC Broadband Holding, and entered into one or more of Facilities R, S, T, W or X. As a result, total commitments of (i) €218.1 million ($297.1 million) under Facility M were rolled into Facility W, (ii) $1,042.8 million under Facility N were rolled into Facility X and (iii) $322.9 million under Facility P were rolled into Facilities R, S, T and W. In addition, in July 2010, Facility W was increased by an aggregate principal amount of €25.0 million ($34.1 million). Among other matters, the completion of the foregoing transactions resulted in the extension of a significant portion of the maturities under the UPC Broadband Holding Bank Facility.

Prior to the redemption of the 2014 Senior Notes (as defined below) in August 2010, Facilities M, N, Q, R, S, T, U, W and X of the UPC Broadband Holding Bank Facility matured on the earlier of (i) the respective final maturity dates specified in the applicable accession agreements for each such Facility and (ii) October 17, 2013, being the date falling 90 days prior to the date on which the 2014 Senior Notes were originally specified to fall due (the Contingent Early Maturity Date) if, (a), in respect of Facilities S, T, U, W and X, on such date, the 2014 Senior Notes are outstanding in an aggregate amount of €250.0 million ($340.5 million) or more or (b), in respect of Facilities M, N, Q and R, the 2014 Senior Notes have not been repaid, refinanced or redeemed prior to such date. Pursuant to the settlement of the Tender Offers and Post-Closing Redemption (each as defined below), all 2014 Senior Notes were refinanced or redeemed and so the Contingent Early Maturity Date, in respect of each of the abovementioned Facilities, are no longer applicable.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

The details of our borrowings under the UPC Broadband Holding Bank Facility as of September 30, 2010 are summarized in the following table:


		September 30, 2010
Facility	Final maturity date	Interest rate	Facility amount (in borrowing currency) (a)			Unused borrowing capacity (b)		Carrying value (c)
			in millions
L	July 3, 2012	EURIBOR + 2.25%	€	129.7		$	176.7	$	—
M	December 31, 2014	EURIBOR + 2.00%	€	566.6			—		771.7
N	December 31, 2014	LIBOR + 1.75%	$	357.2			—		357.2
O	July 31, 2013	(d)		(d)			—		68.9
P	September 2, 2013	LIBOR + 2.75%	$	188.6			—		188.6
Q	July 31, 2014	EURIBOR + 2.75%	€	422.0			574.8		—
R	December 31, 2015	EURIBOR + 3.25%	€	290.7			—		396.0
S	December 31, 2016	EURIBOR + 3.75%	€	1,740.0			—		2,369.9
T	December 31, 2016	LIBOR + 3.50%	$	1,071.5			—		1,062.3
U	December 31, 2017	EURIBOR + 4.00%	€	1,250.8			—		1,703.6
V (e)	January 15, 2020	7.625%	€	500.0			—		681.0
W	March 31, 2015	EURIBOR + 3.00%	€	269.1			366.5		—
X	December 31, 2017	LIBOR + 3.50%	$	1,042.8			—		1,042.8
Elimination of Facility V in consolidation (e)			€	(500.0	)		—		(681.0	)

Total						$	1,118.0	$	7,961.0

(a)

Amounts represent total third-party commitments at September 30, 2010 without giving effect to the impact of discounts. Certain of the originally committed amounts under Facilities L, M, N and P have been novated to UPC Broadband Operations, a direct subsidiary of UPC Broadband Holding, and, accordingly, such amounts are not included in the table above.

(b)

At September 30, 2010, our availability under the UPC Broadband Holding Bank Facility was limited to €169.7 million ($231.1 million). When the September 30, 2010 compliance reporting requirements have been completed, we anticipate that our availability under the UPC Broadband Holding Bank Facility will be limited to €438.7 million ($597.5 million).

(c)	The Facility T amount includes the impact of discounts.

(d)

The applicable interest payable under Facility O is 2.75% per annum plus the specified percentage rate per annum determined by the Polish Association of Banking Dealers — Forex Poland or the National Bank of Hungary, as appropriate for the relevant period. The principal amount of Facility O is comprised of (i) a HUF 5,962.5 million ($29.4 million) sub-tranche and (ii) a PLN 115.1 million ($39.5 million) sub-tranche.

(e)

As discussed above, the amount outstanding under Facility V is eliminated through the consolidation of UPCB Finance within LGI’s condensed consolidated financial statements. Pursuant to the Facility V accession agreement, the call provisions, maturity and applicable interest rates for Facility V are the same as those of the UPCB Finance Senior Secured Notes.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

UPC Holding Senior Notes

On August 13, 2010, UPC Holding issued €640.0 million ($871.1 million) principal amount of 8.375% Senior Notes (the 8.375% Senior Notes), resulting in net cash proceeds after fees of €627.2 million ($818.7 million at the transaction date). The 8.375% Senior Notes mature on August 15, 2020. The 8.375% Senior Notes are senior obligations of UPC Holding and rank equally with all of the other existing and future senior debt of UPC Holding and senior to all existing and future subordinated debt of UPC Holding. The 8.375% Senior Notes are secured (on a shared basis) by a pledge over the shares of UPC Holding.

Concurrently with the offering of the 8.375% Senior Notes, holders of UPC Holding’s (i) €384.6 million ($523.8 million) aggregate principal amount of 7.75% Senior Notes due 2014 (the 7.75% Senior Notes) and (ii) €230.9 million ($314.5 million) aggregate principal amount of 8.625% Senior Notes due 2014 (the 8.625% Senior Notes and together with the 7.75% Senior Notes, the 2014 Senior Notes) were invited, subject to certain offering restrictions, to tender their 7.75% Senior Notes and 8.625% Senior Notes to UPC Holding (the Tender Offers). A total of €205.5 million ($279.9 million) aggregate principal amount of the 7.75% Senior Notes and €101.3 million ($138.0 million) aggregate principal amount of the 8.625% Senior Notes were tendered. The proceeds of the issuance of the 8.375% Senior Notes were used to (i) purchase the 2014 Senior Notes tendered pursuant to the Tender Offers, (ii) redeem and discharge the 2014 Senior Notes not tendered in the Tender Offers (the Post Closing Redemption) and (iii) pay fees and expenses incurred in connection with the offering of the 8.375% Senior Notes and the Tender Offers. To effect the Post-Closing Redemption, UPC Holding deposited funds sufficient to redeem and discharge such notes and such redemption was completed on (i) August 20, 2010 for the 7.75% Senior Notes and (ii) September 13, 2010 for the 8.625% Senior Notes. In connection with the repurchase and redemption of the 2014 Senior Notes, we paid debt redemption premiums of $16.1 million and wrote-off deferred financing costs of $8.8 million. These amounts are included in losses on debt modifications and extinguishments, net, in our condensed consolidated statement of operations.

The 8.375% Senior Notes are non-callable until August 15, 2015. At any time prior to August 15, 2015, UPC Holding may redeem some or all of the Senior 8.375% Notes by paying a “make-whole” premium, which is the present value of all remaining scheduled interest payments using the discount rate (as specified in the indenture governing the 8.375% Senior Notes) as of the redemption date plus 50 basis points. UPC Holding may redeem some or all of the 8.375% Senior Notes at the following redemption prices (expressed as a percentage of the principal amount), plus accrued and unpaid interest and additional amounts, if any, to the applicable redemption date, if redeemed during the twelve-month period commencing on August 15 of the years set out below:


Year	Percentage of principal
2015		104.188	%
2016		102.792	%
2017		101.396	%
2018 and thereafter		100.000	%

Unitymedia Senior Notes

On November 20, 2009, Unitymedia issued (i) €1,430.0 million ($1,947.7 million) principal amount of 8.125% senior secured notes (the UM Euro Senior Secured Notes) at an issue price of 97.844%, (ii) $845.0 million principal amount of 8.125% senior secured notes (together with the UM Euro Senior Secured Notes, the UM Senior Secured Notes) at an issue price of 97.844% and (iii) €665.0 million ($905.7 million) principal amount of 9.625% senior notes (the UM Senior Notes) at an issue price of 97.652% (collectively, the Unitymedia Senior Notes). The UM

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

Senior Secured Notes mature on December 1, 2017 and the UM Senior Notes mature on December 1, 2019. Upon closing, and after deducting issuance costs of €65.1 million ($96.7 million at the transaction date), the €2,541.0 million ($3,773.5 million at the transaction date) of net proceeds from the sale of the Unitymedia Senior Notes were placed into two escrow accounts. As further discussed in note 3, on January 28, 2010, we used €849.2 million ($1,186.6 million at the transaction date) of cash from the escrow accounts to fund a portion of the Unitymedia Purchase Price. On March 2, 2010, (i) the remaining balances in the escrow accounts were released in connection with the repayment of Old Unitymedia’s then-existing indebtedness, (ii) the obligations under the UM Senior Secured Notes were assumed by certain indirect subsidiaries of Old Unitymedia and (iii) the obligations under the UM Senior Notes were assumed by Old Unitymedia.

UGC Convertible Notes

The UGC Convertible Notes are measured at fair value. Our assessments of the fair value of the UGC Convertible Notes include estimated credit risk components of $6.3 million and $31.8 million at September 30, 2010 and December 31, 2009, respectively. These credit risk components are estimated as the difference between (i) the fair value of the UGC Convertible Notes and (ii) the value of the UGC Convertible Notes derived by holding all other inputs constant and replacing the market credit spread with a credit spread of nil. The estimated change in UGC’s credit risk resulted in losses of $6.4 million and $23.5 million during the three and nine months ended September 30, 2010, respectively, and losses of $25.4 million and $28.9 million during the three and nine months ended September 30, 2009, respectively. These amounts are included in realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net, in our condensed consolidated statements of operations. For information regarding our fair value measurements, see note 6.

During May 2010, we paid in the aggregate €72.6 million ($89.1 million at the transaction dates) to repurchase €70.8 million ($86.9 million at the transaction dates) principal amount of the UGC Convertible Notes at a weighted average purchase price (including accrued interest) equal to approximately 102.5% of face value. The change in the fair value of the repurchased UGC Convertible Notes from March 31, 2010 through the repurchase dates is included in realized and unrealized losses due to changes in fair values of certain investments and debt, net, in our condensed consolidated statement of operations.

After giving effect to the May 2010 repurchase transactions, the UGC Convertible Notes in the aggregate are convertible into 7,324,979 shares of LGI Series A shares and 7,249,530 LGI Series C shares, which is equivalent to a conversion rate of approximately 22.32 shares of LGI Series A common stock and approximately 22.09 shares of LGI Series C common stock for each €1,000 principal amount of UGC Convertible Notes.

Telenet

For information regarding certain financing transactions completed by Telenet subsequent to September 30, 2010, see note 16.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

Maturities of Debt and Capital Lease Obligations

Maturities of our debt and capital lease obligations for the indicated periods are presented below for the named entity and its subsidiaries, unless otherwise noted. Amounts presented represent U.S. dollar equivalents based on September 30, 2010 exchange rates:

Debt:


	LGI (excluding subsidiaries)			UPC Holding (including UPCB Finance)			Unitymedia			Telenet		Austar		Other (a)		Total
	in millions
Year ended December 31:
Remainder of 2010	$	—		$	—		$	—		$	—	$	—	$	1.8	$	1.8
2011		—			0.2			—			—		47.4		454.2		501.8
2012		—			0.2			—			105.2		47.0		5.2		157.6
2013		—			257.7			—			103.5		482.8		254.0		1,098.0
2014		—			1,128.9			68.1			668.4		169.9		160.1		2,195.4
2015		—			396.0			—			683.4		—		0.9		1,080.3
Thereafter		935.0			9,094.0			3,698.4			1,420.9		—		1,142.0		16,290.3

Total debt maturities		935.0			10,877.0			3,766.5			2,981.4		747.1		2,018.2		21,325.2
Fair value adjustment and unamortized discount		(282.5	)		(75.8	)		(75.7	)		—		—		36.5		(397.5	)

Total debt	$	652.5		$	10,801.2		$	3,690.8		$	2,981.4	$	747.1	$	2,054.7	$	20,927.7

Current portion	$	—		$	—		$	—		$	—	$	47.4	$	491.6	$	539.0

Noncurrent portion	$	652.5		$	10,801.2		$	3,690.8		$	2,981.4	$	699.7	$	1,563.1	$	20,388.7

(a)

The 2011 amount includes the €328.2 million ($447.0 million) principal amount outstanding under the UGC Convertible Notes. Although the final maturity date of the UGC Convertible Notes is April 15, 2024, holders have the right to tender all or part of their UGC Convertible Notes for purchase by UGC on April 15, 2011, April 15, 2014 and April 15, 2019, for a purchase price in euros equal to 100% of the principal amount.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

Capital lease obligations:


	Unitymedia			Telenet			Other			Total
	in millions
Year ended December 31:
Remainder of 2010	$	17.0		$	11.7		$	1.3		$	30.0
2011		70.0			61.4			4.4			135.8
2012		67.8			60.1			3.7			131.6
2013		67.1			56.4			3.4			126.9
2014		67.1			54.8			3.2			125.1
2015		67.1			49.6			3.1			119.8
Thereafter		972.0			281.0			33.8			1,286.8

		1,328.1			575.0			52.9			1,956.0
Amounts representing interest		(644.6	)		(159.8	)		(21.2	)		(825.6	)

Present value of net minimum lease payments	$	683.5		$	415.2		$	31.7		$	1,130.4

Current portion	$	16.3		$	37.2		$	2.6		$	56.1

Noncurrent portion	$	667.2		$	378.0		$	29.1		$	1,074.3

Non-cash Refinancing Transactions

During the nine months ended September 30, 2010 and 2009, we completed certain refinancing transactions that resulted in non-cash borrowings and repayments of debt aggregating $1,304.5 million and $5,585.0 million, respectively.

(9)

Income Taxes

Income tax benefit (expense) attributable to our loss from continuing operations before income taxes differs from the income tax benefit computed by applying the U.S. federal income tax rate of 35%, as a result of the following:


	Three months ended September 30,						Nine months ended September 30,
	2010			2009			2010			2009
	in millions
Computed “expected” income tax benefit (expense)	$	(105.2	)	$	35.8		$	330.6		$	188.5
Change in valuation allowance		95.6			(16.7	)		(216.3	)		(47.9	)
International rate differences		31.5			(12.8	)		(83.8	)		(85.7	)
Non-deductible or non-taxable interest and other expenses		(15.9	)		(4.1	)		(51.6	)		(19.5	)
Basis and other differences in the treatment of items associated with investments in subsidiaries and affiliates		(1.9	)		—			(26.9	)		10.0
Recognition of previously unrecognized tax benefits		—			—			17.5			—
Change in tax status of foreign consolidated subsidiary		11.2			—			11.2			—
Enacted tax law and rate change		7.1			0.2			7.1			(0.3	)
Impairment of goodwill		0.4			(0.4	)		(4.8	)		(18.4	)
Other, net		(5.9	)		5.8			(10.7	)		(8.3	)

Total	$	16.9		$	7.8		$	(27.7	)	$	18.4

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

The changes in our unrecognized tax benefits during the nine months ended September 30, 2010 are summarized below (in millions):


Balance at January 1, 2010	$	400.6
Reduction related to the sale of the J:COM Disposal Group		(176.7	)
Additions based on tax positions related to the current year		186.8
Reductions for tax positions of prior years		(48.6	)
Additions for tax positions of prior years		12.5
Lapse of statute of limitations and settlement with tax authorities		(0.9	)
Foreign currency translation		(2.3	)

Balance at September 30, 2010	$	371.4

No assurance can be given that any of these tax benefits will be recognized or realized.

As of September 30, 2010, our unrecognized tax benefits included $347.2 million of tax benefits that would have a favorable impact on our effective income tax rate if ultimately recognized, after considering amounts that we would expect to be offset by valuation allowances.

During the next 12 months, it is reasonably possible that the resolution of currently ongoing examinations by tax authorities could result in changes to our unrecognized tax benefits related to tax positions taken as of September 30, 2010. We do not expect that any such changes will have a material impact on our unrecognized tax benefits. No assurance can be given as to the nature or impact of any other changes in our unrecognized tax positions during the remainder of 2010.

(10)

Equity

Stock Repurchases

During the first nine months of 2010, we purchased 18,144,837 shares of our LGI Series A common stock at a weighted average price of $26.95 per share and 11,736,263 shares of our LGI Series C common stock at a weighted average price of $27.10 per share, for an aggregate purchase price of $807.1 million, including direct acquisition costs. On June 16, 2010 and September 13, 2010, we announced that our board of directors authorized increases to our current stock repurchase program of $250 million and $212 million, respectively. At September 30, 2010, the remaining amount authorized under this repurchase program was $193.5 million.

Call Option Contract

On March 30, 2010, we agreed to pay $19.7 million to enter into a call option contract pursuant to which we contemporaneously (i) sold call options on 700,000 shares of LGI Series A common stock at an exercise price of $29.28 per share and (ii) purchased call options on an equivalent number of shares of LGI Series A common stock with an exercise price of zero. The $19.7 million cost of this call option contract, which expired on May 11, 2010, was paid in April 2010. In connection with the expiration of this agreement, we exercised our call options and acquired 700,000 shares of LGI Series A common stock at a per share price of $28.17.

Telenet Capital Distribution

On April 28, 2010, Telenet’s shareholders approved a distribution of €2.23 ($2.93 at the approval date) per share or approximately €249.9 million ($328.9 million at the approval date) based on Telenet’s outstanding ordinary

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

shares as of June 30, 2010. This distribution, the payment of which was initiated on August 2, 2010, was accrued by Telenet during the second quarter of 2010 following shareholder approval. Our share of this capital distribution was approximately €125.8 million ($165.5 million at the transaction date).

(11)

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:


	Three months ended September 30,					Nine months ended September 30,
	2010			2009		2010		2009
	in millions
LGI common stock:
LGI performance-based incentive awards (a)	$	11.2		$	20.2	$	43.1	$	51.2
Other LGI stock-based incentive awards		10.0			11.9		31.1		32.6

Total LGI common stock		21.2			32.1		74.2		83.8
Telenet stock-based incentive awards		1.7			1.9		7.5		3.2
Austar Performance Plan		2.4			3.6		7.2		10.5
Other		(0.2	)		1.9		2.9		1.4

Total	$	25.1		$	39.5	$	91.8	$	98.9

Included in:

Continuing operations:
Operating expense	$	2.0		$	3.3	$	7.5	$	7.7
SG&A expense		23.1			36.2		84.3		90.6

Total — continuing operations		25.1			39.5		91.8		98.3
Discontinued operations		—			—		—		0.6

Total	$	25.1		$	39.5	$	91.8	$	98.9

(a)

Includes stock-based compensation expense related to the LGI Performance Plans (as defined below) and, for the 2010 periods, LGI performance-based restricted share units (PSUs). See below for information regarding the LGI Performance Plans and LGI PSUs. The amount presented for the nine months ended September 30, 2009 includes a $5.1 million reduction associated with the first quarter 2009 settlement of the second installment of awards under the LGI Performance Plans and a $10.7 million reduction related to the first quarter 2009 forfeiture of certain awards granted under the LGI Performance Plans.

The following table provides certain information related to stock-based compensation not yet recognized for stock incentive awards related to LGI common stock as of September 30, 2010:


	LGI common stock (a)		LGI performance plans (b)		LGI PSUs
Total compensation expense not yet recognized (in millions)	$	78.9	$	15.8	$	21.3

Weighted average period remaining for expense recognition (in years)		2.7		0.8		1.8

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

(a)

Amounts relate to (i) the Liberty Global, Inc. 2005 Incentive Plan (as amended and restated October 31, 2006) (the LGI Incentive Plan) and (ii) the Liberty Global, Inc. 2005 Nonemployee Director Incentive Plan (as amended and restated November 1, 2006) (the LGI Director Incentive Plan). The LGI Incentive Plan had 14,408,516 shares available for grant as of September 30, 2010. These shares may be awarded at or above fair value in any series of our common stock. The LGI Director Incentive Plan had 9,196,585 shares available for grant as of September 30, 2010. These shares may be awarded at or above fair value in any series of our common stock, except that no more than 5,000,000 shares may be awarded in LGI Series B common stock.

(b)

Includes compensation expense under the LGI Performance Plans. This compensation expense is reported as stock-based compensation in our condensed consolidated statements of operations, notwithstanding the fact that the compensation committee of our board of directors has elected to cash settle a portion of the vested awards under the LGI Performance Plans.

The following table summarizes certain information related to the incentive awards granted and exercised with respect to LGI common stock:


	Nine months ended September 30,
LGI common stock:	2010		2009
Assumptions used to estimate fair value of options and stock appreciation rights (SARs) granted:
Risk-free interest rate		1.26 –3.30%		1.82 – 3.81%
Expected life		3.2 – 9.0 years		3.2 – 8.2 years
Expected volatility		40.0 – 56.8%		43.00 – 54.50%
Expected dividend yield		none		none

Weighted average grant-date fair value per share of awards granted:
Options		$14.26		$ 8.08
SARs		$ 9.70		$ 6.25
Restricted stock		$24.68		$12.70
PSUs		$27.95		$ —

Total intrinsic value of awards exercised (in millions):
Options		$ 32.6		$ 8.1
SARs		$ 26.3		$ 3.2
Cash received from exercise of options (in millions)		$ 38.8		$ 8.1
Income tax benefit related to stock-based compensation (in millions)		$ 19.7		$ 25.9

LGI Performance Plans

The LGI Performance Plans are five-year performance-based incentive plans for our senior executives and certain key employees. The LGI Performance Plans have a two-year performance period, beginning January 1, 2007, and a three-year service period beginning January 1, 2009. At the end of the two-year performance period, each participant became eligible to receive varying percentages of the maximum achievable award specified for such participant based on our achievement of specified compound annual growth rates (CAGR) in consolidated operating cash flow (see note 15), adjusted for events such as acquisitions, dispositions and changes in foreign currency exchange rates that affect comparability (OCF CAGR), and the participant’s annual performance ratings during the performance period.

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

On February 16, 2010, the compensation committee of our board of directors determined the method of payment for the four remaining installments of the awards that had been earned. In accordance with the compensation committee’s determination, we (i) paid cash aggregating $50.9 million, together with 32,802 restricted plan shares (as defined in the performance plans) of LGI Series A common stock and 31,708 restricted plan shares of LGI Series C common stock to settle the March 31, 2010 installment, and (ii) granted an aggregate of 3,248,061 restricted plan shares of LGI Series A common stock and 3,139,707 restricted plan shares of LGI Series C common stock to settle the remaining balance of each participant’s earned award, which shares vest in three equal installments. In accordance with the performance plans, restricted plan shares may be restricted shares or restricted share units. The restricted plan shares issued in relation to the March 31, 2010 and September 30, 2010 installments vested in full on those dates and the remaining restricted plan shares are scheduled to vest in equal installments on March 31, 2011 and September 30, 2011. For purposes of determining the number of restricted plan shares to be granted, the compensation committee valued the restricted plan shares at the respective closing market prices for LGI Series A and Series C common stock on February 16, 2010. The decision by the compensation committee to settle the final three installments of each earned award with restricted plan shares represents a modification that resulted in the reclassification of this portion of the earned awards from a liability to equity during the first quarter of 2010.

LGI PSUs

In March 2010, the compensation committee of our board of directors determined to modify the equity incentive award component of our executive officers’ and other key employees’ compensation packages, whereby a target annual equity value would be set for each executive or key employee, of which approximately two-thirds will be delivered in the form of an annual award of PSUs and approximately one-third in the form of an annual award of SARs.

In connection with each year’s award of PSUs, the compensation committee will select one or more performance measures for the ensuing two-year performance period. Different performance measures may be selected for the awards in subsequent years. The compensation committee will also set the performance targets corresponding to the selected performance measure(s), which will determine the percentage of the PSU award earned during the relevant performance period, and a base performance objective that must be achieved in order for any portion of the PSU award to be earned. Earned PSUs will then vest in two equal installments on March 31 and September 30 of the year following the end of the performance period. Each year’s award of SARs will be made at the same time as awards are made under our annual equity grant program for employees and on terms consistent with our standard form of SAR award agreement.

In March and April 2010, the compensation committee granted to our executive officers and certain key employees a total of 692,678 LGI Series A PSUs and 692,678 LGI Series C PSUs pursuant to the LGI Incentive Plan. Each PSU represents the right to receive one share of Series A common stock or Series C common stock, as applicable, subject to performance and vesting.

The performance period for the 2010 PSUs is January 1, 2010 to December 31, 2011. The performance target selected by the committee is achievement of an OCF CAGR of approximately 7% for the two-year performance period, subject to upward or downward adjustment for certain events in accordance with the terms of the grant agreement. A performance range of 75% to 125% of the target OCF CAGR would generally result in award recipients earning 50% to 150% of their 2010 PSUs, subject to reduction or forfeiture based on individual performance. One-half of the earned 2010 PSUs will vest on March 31, 2012 and the balance on September 30, 2012. The compensation committee also established a base performance objective of a 5.0% OCF CAGR, which must be satisfied in order for

LIBERTY GLOBAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued

September 30, 2010

(unaudited)

award recipients to be eligible to earn any of their 2010 PSUs and is not subject to adjustment. Compensation costs attributable to the 2010 PSUs are recognized over the requisite service period of the awards.

Stock Award Activity — LGI Common Stock

The following tables summarize the stock award activity during the nine months ended September 30, 2010 with respect to LGI common stock:

Options — LGI Series A common stock:

Number of
shares

Weighted
average
exercise price

Weighted
average
remaining
contractual
term

Aggregate
intrinsic value

in years

in millions

Outstanding at January 1, 2010