Liberty(LSXMA) - 2020 Q2 - Quarterly Report

Part I – Financial Information Financial Statements This section presents the unaudited condensed consolidated financial statements for Liberty Media Corporation, including balance sheets, statements of operations, cash flows, and equity, with detailed explanatory notes Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2020, shows total assets increased to $46,208 million, driven by a rise in cash and cash equivalents, with total liabilities also increasing to $24,120 million Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Assets | $46,208 | $44,189 | | Cash and cash equivalents | $3,999 | $1,222 | | Goodwill | $19,956 | $19,939 | | Total current assets | $5,381 | $2,405 | | Total Liabilities | $24,120 | $22,264 | | Current portion of debt | $1,874 | $60 | | Long-term debt | $14,980 | $15,416 | | Total current liabilities | $6,015 | $3,888 | | Total Equity | $22,088 | $21,925 | Condensed Consolidated Statements of Operations For Q2 2020, the company reported a net loss of $262 million, a significant downturn from net earnings in 2019, driven by a sharp decline in revenue to $1,909 million due to COVID-19 impacts Key Operating Results (in millions) | Metric | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $1,909 | $2,805 | $3,922 | $4,817 | | Operating Income (Loss) | $214 | $461 | $460 | $661 | | Net Earnings (Loss) | $(262) | $192 | $(260) | $65 | | Net Earnings (Loss) Attributable to Liberty Stockholders | $(326) | $116 | $(402) | $(42) | Diluted EPS Attributable to Liberty Stockholders | Common Stock | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | Liberty SiriusXM | $(0.27) | $0.50 | $0.28 | $0.68 | | Liberty Braves | $(0.75) | $0.46 | $(1.22) | $(0.88) | | Liberty Formula One | $(0.86) | $(0.33) | $(2.34) | $(0.97) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2020, net cash provided by operating activities was $869 million, while financing activities provided $2,069 million, leading to a $2,725 million increase in cash and cash equivalents Six Months Ended June 30 Cash Flow Summary (in millions) | Cash Flow Category | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $869 | $1,172 | | Net cash provided (used) by investing activities | $(203) | $512 | | Net cash provided (used) by financing activities | $2,069 | $(1,385) | | Net increase in cash | $2,725 | $299 | - Financing activities in H1 2020 included $2.84 billion in debt borrowings and $754 million from a Liberty SiriusXM rights offering, partially offset by $884 million in debt repayments and $537 million in stock repurchases by Liberty and its subsidiary[27] Notes to Condensed Consolidated Financial Statements These notes provide critical details on accounting policies, the impact of COVID-19, asset reattribution, acquisitions, stock-based compensation, EPS calculations, fair value measurements, investments, and debt covenants - The COVID-19 pandemic caused significant disruptions, leading to the delay of the 2020 Formula 1 and Major League Baseball seasons and the suspension of large-scale events by Live Nation[47] - On April 22, 2020, the company reattributed certain assets and liabilities between the Formula One Group and the Liberty SiriusXM Group, including moving the Live Nation stake to the Liberty SiriusXM Group[60][61][62] - In June 2020, Sirius XM Holdings acquired Simplecast, a podcast management platform, for $28 million in cash[78] - Braves Holdings is expected to be out of compliance with certain debt covenants as of June 30, 2020, and is in discussions with counterparties for waivers and modifications[174] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) This section details the company's operating results, financial condition, and liquidity, highlighting the significant impact of the COVID-19 pandemic and asset reattribution on segment performance - The COVID-19 pandemic and governmental responses have materially impacted the company's businesses, especially Formula 1, the Atlanta Braves, and Live Nation, leading to event cancellations and postponements[210][228] - A significant reattribution of assets and liabilities between the Formula One Group and Liberty SiriusXM Group occurred on April 22, 2020, moving the Live Nation stake and related debt to the Liberty SiriusXM Group[220][221] Consolidated Operating Results Summary (in millions) | Metric | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,909 | $2,805 | $3,922 | $4,817 | | Operating Income | $214 | $461 | $460 | $661 | | Adjusted OIBDA | $549 | $815 | $1,113 | $1,429 | - The company's cash position increased significantly in H1 2020, driven by net cash from financing activities of $2.07 billion, which included debt borrowings and a $754 million rights offering[257] Results of Operations—Businesses This subsection provides a detailed operational review of the company's main segments, highlighting the varied impact of the pandemic on Sirius XM, Formula 1, and Braves Holdings - Sirius XM's Q2 advertising revenue fell 52% YoY due to lower ad spend from the COVID-19 pandemic, particularly on news and sports channels[278] - Pandora's Q2 advertising revenue decreased 31% YoY, also due to lower ad spend as a result of the COVID-19 pandemic[284] - Formula 1 held no events in Q2 2020, causing primary revenue to fall to $12 million from $531 million in Q2 2019, leading to an Adjusted OIBDA loss of $16 million for the quarter[298][300] - Braves Holdings' baseball revenue dropped to $5 million in Q2 2020 from $198 million in Q2 2019 due to the postponement of the MLB season, resulting in an Adjusted OIBDA loss of $26 million[311] Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market risks from changes in interest rates and stock prices, managing interest rate risk through debt mix and addressing LIBOR phase-out - The company manages interest rate risk with a mix of fixed and variable rate debt, with total principal debt approximately $16.9 billion as of June 30, 2020[318] - The company acknowledges the risk associated with the planned phase-out of LIBOR by the end of 2021, expecting to incorporate alternative reference rates in its debt agreements[318][319] - The company is exposed to stock price risk through its $242 million portfolio of marketable securities and its significant equity investment in Live Nation, where a 10% decline would reduce value by $24 million and $309 million, respectively[321] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal controls despite remote work - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020[322] - No material changes to internal control over financial reporting occurred during the quarter, and the COVID-19 pandemic did not materially impact these controls despite a remote work environment[323] Part II — Other Information Legal Proceedings This section confirms no material changes in legal proceedings from those previously disclosed in the 2019 Form 10-K and Q1 2020 Form 10-Q - There were no material changes to the legal proceedings previously disclosed in the 2019 Form 10-K and Q1 2020 Form 10-Q[325] Risk Factors This section highlights the material and uncertain impact of the COVID-19 pandemic on Formula 1, the Atlanta Braves, and Live Nation, causing revenue decreases and potential long-term adverse effects - The COVID-19 pandemic and related government restrictions have materially and negatively impacted the operations of Formula 1, the Atlanta Braves, and Live Nation[327] - The impact of cancelled events, closed venues, and reduced attendance will substantially decrease revenue, and expenses may not be reducible to the same degree, adversely affecting results of operations and cash flow[330] - Long-term economic recession caused by COVID-19 could lead to a further decline in discretionary consumer spending on sports and entertainment, resulting in long-term negative effects on the businesses[331] Unregistered Sales of Equity Securities and Use of Proceeds The company had approximately $1.23 billion available for share repurchases as of June 30, 2020, with no repurchases made during the quarter - As of June 30, 2020, $1.23 billion was available under the company's share repurchase programs[334] - There were no share repurchases of any Liberty Media common stock during the three months ended June 30, 2020[335] Exhibits This section lists the exhibits filed as part of the Quarterly Report, including officer certifications and unaudited attributed financial information - The report includes exhibits such as officer certifications (Rule 13a-14(a)/15d-14(a) and Section 1350), an employment-related agreement, and unaudited financial information for the tracking stock groups[338][341]