Liberty(US:FWONK)2020-05-07 21:27Part I – Financial Information Financial Statements The unaudited statements for Q1 2020 show total assets of $43.9 billion and net earnings of $2 million Condensed Consolidated Balance Sheets Total assets were $43.9 billion as of March 31, 2020, with a notable increase in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Assets | $43,918 | $44,189 | | Total Current Assets | $2,989 | $2,405 | | Goodwill | $19,939 | $19,939 | | Total Liabilities | $22,216 | $22,264 | | Total Current Liabilities | $4,584 | $3,888 | | Long-term Debt | $14,553 | $15,416 | | Total Equity | $21,702 | $21,925 | Condensed Consolidated Statements of Operations Q1 2020 revenue remained flat at $2.013 billion, while operating income increased to $246 million Q1 2020 vs. Q1 2019 Statement of Operations (in millions) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Total Revenue | $2,013 | $2,012 | | - Sirius XM Holdings Revenue | $1,952 | $1,744 | | - Formula 1 Revenue | $39 | $246 | | Operating Income | $246 | $200 | | Net Earnings (Loss) | $2 | $(127) | | Net Earnings (Loss) Attributable to Liberty Stockholders | $(76) | $(158) | Condensed Consolidated Statements of Comprehensive Earnings (Loss) Comprehensive earnings attributable to stockholders improved to $77 million in Q1 2020 from a loss in Q1 2019 Q1 2020 vs. Q1 2019 Comprehensive Earnings (in millions) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net Earnings (Loss) | $2 | $(127) | | Other Comprehensive Earnings (Loss), net | $143 | $(2) | | Comprehensive Earnings (Loss) Attributable to Liberty Stockholders | $77 | $(163) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities was $557 million in Q1 2020, resulting in a net cash increase of $529 million Q1 2020 vs. Q1 2019 Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $557 | $649 | | Net Cash from Investing Activities | $(58) | $254 | | Net Cash from Financing Activities | $38 | $(685) | | Net Increase (Decrease) in Cash | $529 | $219 | Condensed Consolidated Statements of Equity Total equity decreased to $21.7 billion, impacted by a net loss and significant stock repurchases - Key equity movements in Q1 2020 included stock repurchases of $138 million for Liberty SiriusXM stock and an additional $243 million in shares repurchased by a subsidiary30 Notes to Condensed Consolidated Financial Statements Notes detail the significant impact of COVID-19, a major post-quarter asset reattribution, and segment performance - The COVID-19 pandemic caused the delay of the 2020 Formula 1 and Major League Baseball seasons and the suspension of large-scale Live Nation events, with uncertainty regarding their resumption39 - On April 22, 2020, the board approved a major reattribution of assets and liabilities between the Formula One Group and the Liberty SiriusXM Group. Assets valued at $2.8 billion, including the Live Nation stake, were moved to the Liberty SiriusXM Group, while liabilities of $1.3 billion were also transferred585961 - The board authorized a rights offering to raise approximately $750 million to purchase Series C Liberty SiriusXM common stock. The proceeds are intended to repay an intergroup loan created as part of the asset reattribution6063 Total Debt Summary (in millions) | Debt Category | Carrying Value (Mar 31, 2020) | | :--- | :--- | | Total Debt | $15,143 | | Debt classified as current | $(590) | | Total long-term debt | $14,553 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant negative impact of COVID-19 and a major post-quarter asset reattribution Overview The company's operations were materially impacted by COVID-19 and a significant post-quarter asset reattribution - The COVID-19 pandemic has negatively impacted Q1 2020 results by delaying the Formula 1 and MLB seasons and causing Live Nation to suspend events205 - A major reattribution of assets and liabilities between the Formula One and Liberty SiriusXM groups was approved on April 22, 2020. Key assets moved to the SiriusXM Group include Liberty's entire stake in Live Nation200201202 - A $750 million rights offering for Series C Liberty SiriusXM stock was authorized to repay an intergroup loan created during the reattribution203 Results of Operations—Consolidated Consolidated revenue was flat at $2.013 billion, while Adjusted OIBDA decreased by $50 million to $564 million Consolidated Operating Results by Segment (Q1 2020, in millions) | Segment | Revenue | Operating Income (Loss) | Adjusted OIBDA | | :--- | :--- | :--- | :--- | | Liberty SiriusXM Group | $1,952 | $442 | $632 | | Braves Group | $22 | $(44) | $(26) | | Formula One Group | $39 | $(152) | $(42) | | Consolidated Liberty | $2,013 | $246 | $564 | Reconciliation of Operating Income to Adjusted OIBDA (Q1 2020 vs Q1 2019, in millions) | Line Item | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Operating income (loss) | $246 | $200 | | Depreciation and amortization | $267 | $248 | | Stock-based compensation | $67 | $65 | | Legal settlements and reserves | $(16) | $25 | | Acquisition and other related costs | — | $76 | | Adjusted OIBDA | $564 | $614 | Material Changes in Financial Condition The company held $1.8 billion in cash, though access to Formula 1's cash is restricted by a leverage covenant - As of March 31, 2020, Liberty had $1.8 billion in cash and cash equivalents, with $386 million attributed to Liberty SiriusXM Group, $321 million to Braves Group, and $1,094 million to Formula One Group230 - Access to Formula 1's cash is restricted by a leverage ratio test which was not met as of March 31, 2020, preventing distributions to Liberty230 - Primary uses of cash in Q1 2020 included $138 million for Liberty SiriusXM stock repurchases and a $130 million repayment of the Live Nation margin loan233 Results of Operations—Businesses Sirius XM showed strong growth, while Formula 1's revenue and Adjusted OIBDA plummeted due to event cancellations Sirius XM Holdings Pro Forma Operating Results (Q1 2020 vs Q1 2019, in millions) | Metric | Q1 2020 | Q1 2019 (Pro Forma) | | :--- | :--- | :--- | | Total Revenue | $1,952 | $1,860 | | Adjusted OIBDA | $639 | $566 | | Operating Income | $451 | $342 | Formula 1 Operating Results (Q1 2020 vs Q1 2019, in millions) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Total Revenue | $39 | $246 | | Adjusted OIBDA | $(32) | $65 | | Operating Income (Loss) | $(137) | $(47) | | Number of Events | 0 | 2 | Braves Holdings Operating Results (Q1 2020 vs Q1 2019, in millions) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Total Revenue | $22 | $22 | | Adjusted OIBDA | $(25) | $(31) | | Operating Income | $(43) | $(47) | Quantitative and Qualitative Disclosures about Market Risk The company is exposed to interest rate risk on its $15.4 billion debt and stock price risk on its investments Debt Composition by Rate Type (as of March 31, 2020, in millions) | Group | Variable Rate Debt (Principal) | Fixed Rate Debt (Principal) | | :--- | :--- | :--- | | Liberty SiriusXM Group | $350 | $8,948 | | Braves Group | $379 | $319 | | Formula One Group | $1,307 | $4,143 | - The company is exposed to stock price risk on $228 million of marketable securities and its investment in Live Nation. A 10% adverse market change would lower the value of these holdings by approximately $23 million and $317 million, respectively289 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2020 - Management concluded that disclosure controls and procedures were effective as of March 31, 2020290 - No material changes to internal control over financial reporting occurred during Q1 2020, and the transition to remote work due to COVID-19 did not have a material impact on these controls291 Part II — Other Information Legal Proceedings The key ongoing legal matter is the Copyright Royalty Board proceeding to set webcasting royalty rates for 2021-2025 - The key ongoing legal matter is the Copyright Royalty Board (CRB) proceeding to determine webcasting royalty rates for 2021-2025, which will affect Sirius XM and Pandora293 - SoundExchange has proposed an increase in royalty rates, while Sirius XM Holdings has proposed rates below the existing ones. The CRB hearing was delayed from March 2020 due to COVID-19294295 Risk Factors The company faces significant new risks from the COVID-19 pandemic's impact on auto sales and live events - The COVID-19 pandemic is materially and adversely impacting Sirius XM Holdings' business through reduced new and used auto sales (hurting subscriber growth), a decline in advertising revenue, and potential supply chain disruptions297299 - Formula 1, the Atlanta Braves, and Live Nation have been severely impacted by the suspension of live events, which will substantially decrease revenues. The company may not be able to reduce expenses commensurately, leading to adverse effects on results and cash flow301305 - The company cannot reasonably estimate the full impact of the pandemic, but states it has been and will continue to be significant and could have a material adverse effect on the business, revenues, and financial condition308 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 2.9 million shares of its Liberty SiriusXM common stock for approximately $138 million Share Repurchases for Q1 2020 | Period | Total Shares Purchased | Average Price Paid per Share (Blended) | | :--- | :--- | :--- | | Jan 1-31, 2020 | 1,177,893 | $48.56 | | Feb 1-29, 2020 | 1,036,100 | $49.24 | | Mar 1-31, 2020 | 690,457 | $43.65 | | Total | 2,904,450 | - | - No shares of Liberty Braves common stock or Liberty Formula One common stock were repurchased during the three months ended March 31, 2020312 Exhibits This section lists filed exhibits, including CEO/CFO certifications and unaudited attributed financial information - Filed exhibits include CEO/CFO certifications (31.1, 31.2), Section 1350 Certification (32), Unaudited Attributed Financial Information for Tracking Stock Groups (99.1), and various XBRL files314