Liberty(LSXMA) - 2019 Q1 - Quarterly Report

Part I – Financial Information Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2019, including balance sheets, operations, cash flows, and key accounting notes Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Summary (in millions) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Assets | $43,910 | $40,828 | | Total Current Assets | $1,732 | $1,082 | | Goodwill | $19,927 | $18,386 | | Total Liabilities | $20,715 | $19,130 | | Total Current Liabilities | $3,961 | $3,244 | | Long-term Debt | $14,026 | $13,371 | | Total Equity | $23,195 | $21,698 | | Total Stockholders' Equity | $16,707 | $16,595 | - Total assets increased primarily due to the acquisition of Pandora, which added significant goodwill and intangible assets[57][58] Condensed Consolidated Statements of Operations Condensed Consolidated Statement of Operations Summary (in millions, except per share data) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Total Revenue | $2,012 | $1,517 | | Operating Income | $200 | $227 | | Net Earnings (Loss) | ($127) | $213 | | Net Earnings (Loss) Attributable to Liberty Stockholders | ($158) | $131 | | Diluted EPS (Liberty SiriusXM) | $0.19 | $0.59 | | Diluted EPS (Liberty Braves) | ($1.39) | ($1.02) | | Diluted EPS (Liberty Formula One) | ($0.64) | ($0.07) | - Revenue increased significantly due to Pandora's inclusion and an additional Formula 1 event, while net earnings swung to a loss from acquisition costs and unrealized losses[17] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statement of Cash Flows Summary (in millions) | Cash Flow Activity | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $649 | $624 | | Net cash provided (used) by investing activities | $254 | ($424) | | Net cash provided (used) by financing activities | ($685) | ($170) | | Net increase (decrease) in cash | $219 | $32 | - Cash from operations remained strong, while investing activities were positive due to cash from the Pandora acquisition and financing activities reflected significant share repurchases[26] Notes to Condensed Consolidated Financial Statements This section details accounting policies, the tracking stock structure, the Pandora acquisition, and the adoption of new lease accounting standards - The company operates in media, communications, and entertainment through its main subsidiaries: SIRIUS XM Holdings, Formula 1, and Braves Holdings[36] - The tracking stock structure (Liberty SiriusXM, Braves, Formula One) is designed to reflect the economic performance of attributed businesses without creating separate legal entities[46] - On February 1, 2019, SIRIUS XM Holdings acquired Pandora for approximately $2.9 billion, adding $1.54 billion in goodwill[54][57][58] - The new lease accounting standard ASC 842 was adopted on January 1, 2019, resulting in the recognition of significant right-of-use assets and lease liabilities[153][154] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2019 financial performance and condition, detailing results by tracking stock group and key business segments Results of Operations—Consolidated Consolidated revenue grew to $2.01 billion, driven by SIRIUS XM and Formula 1, though operating income declined while Adjusted OIBDA improved Consolidated Operating Results (in millions) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Revenue | $2,012 | $1,517 | | Liberty SiriusXM Group | $1,744 | $1,375 | | Braves Group | $22 | $28 | | Formula One Group | $246 | $114 | | Operating Income | $200 | $227 | | Adjusted OIBDA | $614 | $489 | Other Income and Expense The company reported a net 'Other Expense' of $269 million, a major shift from 'Other Income' in the prior year due to unrealized losses on financial instruments - Realized and unrealized losses on financial instruments were $(98) million, a significant reversal from a $153 million gain in Q1 2018, driven by losses on debt at fair value[217][219] - Share of losses from affiliates increased to $20 million, primarily due to higher losses from the Live Nation investment[217][219] Material Changes in Financial Condition The company's liquidity is supported by cash balances and credit facilities, with primary cash use in Q1 being $222 million for share repurchases Cash and Cash Equivalents by Group (in millions) | Group | Cash and Cash Equivalents | | :--- | :--- | | Liberty SiriusXM Group | $98 | | Braves Group | $163 | | Formula One Group | $372 | - Liberty has $550 million available under the SIRIUS XM Holdings Margin Loan and $600 million available under the Live Nation Margin Loan[229] Results of Operations—Businesses SIRIUS XM Holdings' results, including Pandora, showed strong growth, while Formula 1 revenue surged due to an extra race and Braves Holdings' revenue declined - SIRIUS XM Holdings' revenue increased to $1.74 billion, including $251 million from Pandora, with its Adjusted OIBDA reaching $590 million[244] - Formula 1 revenue more than doubled to $246 million and Adjusted OIBDA improved to $65 million, driven by an additional race in the quarter[272][273] - Braves Holdings' revenue decreased to $22 million from $28 million due to having no home games in Q1 2019 versus three in the prior year[285] Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market risks from stock price and interest rate changes, managed through a mix of fixed and variable rate debt Debt Composition as of March 31, 2019 (Principal in millions) | Group | Variable Rate Debt | Fixed Rate Debt | | :--- | :--- | :--- | | Liberty SiriusXM Group | $1,382 | $7,094 | | Braves Group | $143 | $337 | | Formula One Group | $407 | $4,575 | - The fair value of marketable securities was $703 million, with a hypothetical 10% price decline resulting in a $70 million value reduction[292] Controls and Procedures Management concluded that disclosure controls and procedures were effective, while the integration of Pandora's internal controls is ongoing - The company's executives concluded that disclosure controls and procedures were effective as of March 31, 2019[293] - SIRIUS XM Holdings is actively reviewing and integrating the internal controls of the newly acquired Pandora business[294] Part II — Other Information Legal Proceedings This section outlines significant legal actions, including a pending $25 million settlement for a TCPA class action against SIRIUS XM and royalty suits against Pandora - SIRIUS XM Holdings has a memorandum of understanding to settle a Telephone Consumer Protection Act (TCPA) class action suit for $25 million[297] - Pandora is involved in multiple class action lawsuits concerning public performance royalties for sound recordings created prior to February 15, 1972[298][299][300] Risk Factors This section updates risks, focusing on challenges for SIRIUS XM post-Pandora acquisition, including competition, advertising dependency, and music royalty costs - SIRIUS XM Holdings faces substantial and increasing competition from terrestrial radio, free internet services, and large online platforms[303][304] - The Pandora business model is highly dependent on attracting and retaining advertisers and growing its ad-supported listener base[317][318] - The Copyright Royalty Board's decision to increase the satellite radio royalty rate to 15.5% of gross revenue represents a substantial cost increase[350][352][358] - Risks related to the Pandora acquisition include difficulties in integration, inability to achieve anticipated synergies, and diversion of management's attention[377][378] Unregistered Sales of Equity Securities and Use of Proceeds The company details its Q1 2019 share repurchase activity, which focused exclusively on Series C Liberty SiriusXM Common Stock Share Repurchase Activity - Q1 2019 | Period | Stock Series | Shares Purchased | Average Price Paid | | :--- | :--- | :--- | :--- | | Jan 2019 | Series C Liberty SiriusXM | 2,309,200 | $38.13 | | Feb 2019 | Series C Liberty SiriusXM | 1,852,163 | $40.38 | | Mar 2019 | Series C Liberty SiriusXM | 1,461,936 | $40.63 | | Total | Series C Liberty SiriusXM | 5,623,299 | - | Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications, attributed financial information, and XBRL data files - Exhibits filed include CEO/CFO certifications, unaudited attributed financial information for tracking stock groups, and various XBRL documents[402]