Liberty(LSXMK) - 2019 Q2 - Quarterly Report

Part I – Financial Information Item 1. Financial Statements This section presents Liberty Media Corporation's unaudited condensed consolidated financial statements, including Balance Sheets, Statements of Operations, and Cash Flows, for the period ended June 30, 2019 Condensed Consolidated Balance Sheets Total assets increased to $43.7 billion by June 30, 2019, primarily due to the Pandora acquisition, with total liabilities rising to $21.2 billion and equity reaching $22.5 billion Condensed Consolidated Balance Sheet Summary (in millions) | Balance Sheet Item | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $1,931 | $1,082 | | Total Assets | $43,700 | $40,828 | | Total Current Liabilities | $3,973 | $3,244 | | Long-Term Debt | $14,411 | $13,371 | | Total Liabilities | $21,219 | $19,130 | | Total Stockholders' Equity | $16,596 | $16,595 | | Total Equity | $22,481 | $21,698 | Condensed Consolidated Statements of Operations Q2 2019 total revenue increased to $2.8 billion due to Pandora, with operating income rising to $461 million, while net earnings attributable to Liberty stockholders were $116 million Q2 2019 vs Q2 2018 Statement of Operations (in millions, except per share data) | Metric | Q2 2019 | Q2 2018 | | :--- | :--- | :--- | | Total Revenue | $2,805 | $2,199 | | SIRIUS XM Holdings revenue | $1,977 | $1,432 | | Formula 1 revenue | $620 | $585 | | Operating Income | $461 | $374 | | Net Earnings Attributable to Liberty Stockholders | $116 | $172 | | Diluted EPS (Liberty SiriusXM) | $0.52 | $0.49 | H1 2019 vs H1 2018 Statement of Operations (in millions, except per share data) | Metric | H1 2019 | H1 2018 | | :--- | :--- | :--- | | Total Revenue | $4,817 | $3,716 | | SIRIUS XM Holdings revenue | $3,721 | $2,807 | | Formula 1 revenue | $866 | $699 | | Operating Income | $661 | $601 | | Net Earnings (Loss) Attributable to Liberty Stockholders | ($42) | $303 | | Diluted EPS (Liberty SiriusXM) | $0.70 | $1.08 | Condensed Consolidated Statements of Cash Flows H1 2019 net cash from operating activities decreased to $1.17 billion, while investing activities shifted to a $512 million inflow, and financing activities used $1.39 billion Six Months Ended June 30 Cash Flow Summary (in millions) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,172 | $1,268 | | Net cash provided (used) by investing activities | $512 | ($300) | | Net cash provided (used) by financing activities | ($1,385) | ($1,451) | | Net increase (decrease) in cash | $299 | ($484) | Notes to Condensed Consolidated Financial Statements Detailed notes cover accounting policies, tracking stock structure, the Pandora acquisition, stock-based compensation, debt, new lease accounting standards, and segment performance - The company operates in media, communications, and entertainment, with key subsidiaries like SIRIUS XM Holdings, Formula 1, and Braves Holdings, and a significant investment in Live Nation Entertainment[42] - A tracking stock structure is used for Liberty SiriusXM, Braves, and Formula One Groups, designed to track the economic performance of their attributed businesses and assets[52] - SIRIUS XM Holdings acquired Pandora on February 1, 2019, for approximately $2.9 billion, adding $1.56 billion in goodwill and significant intangible assets[60][63][64] - The adoption of new lease accounting standard ASC 842 on January 1, 2019, led to the recognition of significant right-of-use assets and lease liabilities for operating leases[155][158][160] - SIRIUS XM Holdings settled a TCPA class action lawsuit for $25 million in April 2019[178] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and results, detailing consolidated and segment performance, including the Pandora acquisition's impact, liquidity, capital resources, and cash flow Results of Operations—Consolidated Consolidated revenue grew 27.6% in Q2 and 29.6% in H1 2019, driven by Pandora and organic growth, with operating income and Adjusted OIBDA also increasing Consolidated Revenue by Group (in millions) | Group | Q2 2019 | Q2 2018 | H1 2019 | H1 2018 | | :--- | :--- | :--- | :--- | :--- | | Liberty SiriusXM Group | $1,977 | $1,432 | $3,721 | $2,807 | | Braves Group | $208 | $182 | $230 | $210 | | Formula One Group | $620 | $585 | $866 | $699 | | Total | $2,805 | $2,199 | $4,817 | $3,716 | Consolidated Adjusted OIBDA by Group (in millions) | Group | Q2 2019 | Q2 2018 | H1 2019 | H1 2018 | | :--- | :--- | :--- | :--- | :--- | | Liberty SiriusXM Group | $618 | $536 | $1,206 | $1,061 | | Braves Group | $61 | $63 | $28 | $28 | | Formula One Group | $136 | $128 | $195 | $127 | | Total | $815 | $727 | $1,429 | $1,216 | - Stock-based compensation increased to $141 million for H1 2019, primarily due to higher expenses at SIRIUS XM Holdings[220] - Realized and unrealized losses on financial instruments totaled $185 million for H1 2019, a significant reversal from a $211 million gain in H1 2018, driven by fair value changes in debt and derivatives[225][228] Results of Operations—Businesses This section details segment performance, with SIRIUS XM Holdings showing strong growth from Pandora, Formula 1 revenue increasing due to contractual fees, and Braves Holdings benefiting from higher attendance - SIRIUS XM Holdings reported Q2 2019 revenue of $1.98 billion and Adjusted OIBDA of $622 million, including Pandora's contribution, with 34.3 million SIRIUS XM subscribers and 64.9 million Pandora active users as of June 30, 2019[252][254][258] - Formula 1 Q2 2019 revenue increased to $620 million with Adjusted OIBDA of $145 million, driven by contractual broadcasting fees and an additional H1 event[290][291][292] - Braves Holdings Q2 2019 revenue grew to $208 million due to more home games and increased ticket/concession sales, though Adjusted OIBDA slightly declined to $62 million due to higher costs[303] Material Changes in Financial Condition As of June 30, 2019, Liberty held $697 million in cash, with primary cash uses including $306 million for share repurchases and subsidiary debt/dividend payments, maintaining liquidity through cash and credit facilities Cash and Cash Equivalents by Group (as of June 30, 2019, in millions) | Group | Cash and Cash Equivalents | | :--- | :--- | | Liberty SiriusXM Group | $236 | | Braves Group | $127 | | Formula One Group | $334 | | Total | $697 | - Primary cash use at the corporate level during H1 2019 was $306 million for repurchases of Series C Liberty SiriusXM common stock[242] - SIRIUS XM Holdings paid $113 million in dividends in H1 2019, with Liberty receiving $77 million, and expects to continue regular quarterly dividends[243] - Significant liquidity is available via credit facilities, including $875 million under the SIRIUS XM Holdings Margin Loan and $600 million under the Live Nation Margin Loan as of June 30, 2019[241] Quantitative and Qualitative Disclosures about Market Risk The company faces market risk from interest rate and stock price fluctuations, with $13.2 billion of its $14.3 billion debt fixed-rate, and significant exposure from its $361 million marketable securities and Live Nation investment Debt Structure by Interest Rate Type (as of June 30, 2019, in millions) | Debt Type | Principal Amount | Weighted Avg. Interest Rate | | :--- | :--- | :--- | | Variable Rate | $1,065 | ~4.5% | | Fixed Rate | $13,204 | ~4.4% | - Stock price volatility impacts the $361 million marketable securities portfolio, where a 10% price drop would reduce value by $36 million[311] - The Live Nation investment is subject to market risk, with a 10% stock price decline reducing its value by $461 million[311] Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2019, while SIRIUS XM Holdings is integrating Pandora's internal controls post-acquisition - The CEO and principal financial officer affirmed the effectiveness of the company's disclosure controls and procedures as of June 30, 2019[312] - SIRIUS XM Holdings is reviewing and adjusting Pandora's internal controls following its acquisition[313] Part II — Other Information Legal Proceedings This section details significant legal matters, including SIRIUS XM Holdings' $25 million TCPA settlement and Pandora's ongoing pre-1972 sound recording royalty lawsuits, where it asserts MMA defenses - In April 2019, SIRIUS XM Holdings agreed to a $25 million settlement for a TCPA class action lawsuit[316] - Pandora faces class action lawsuits over pre-1972 sound recording royalties, asserting the Music Modernization Act (MMA) as a federal preemption defense[317][319][320] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2019, Liberty repurchased 2.2 million shares of Series C Liberty SiriusXM common stock for $84 million, with $505 million remaining for future repurchases Share Repurchases for Q2 2019 (Series C Liberty SiriusXM Common Stock) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2019 | 645,049 | $39.53 | | May 2019 | 703,730 | $38.72 | | June 2019 | 843,488 | $36.75 | | Total | 2,192,267 | - | - As of June 2019, approximately $505 million remained available for share repurchases under the current plan[322] Exhibits This section lists exhibits filed with the Form 10-Q, including officer certifications, unaudited attributed financial information, and XBRL data files - Filed exhibits include CEO and CFO certifications, unaudited financial information for tracking stock groups, and XBRL interactive data files[324][326]