Liberty Media Corporation ("Liberty Media" or “Liberty”)
(NASDAQ: LSXMA, LSXMB, LSXMK, FWONA, FWONK, BATRA, BATRK) today
reported second quarter 2018 results. Highlights include(1):
- Attributed to Liberty SiriusXM Group
- SiriusXM reported strong second quarter
2018 results
- Added 483,000 net new self-pay
subscribers in the quarter
- Second quarter revenue climbed 6% to
$1.4 billion
- Net income grew 45% to $292 million in
the quarter; diluted EPS climbed 49% to $0.06
- Adjusted EBITDA(2) grew 4% to $543
million
- Operating cash flow climbed 20% to $579
million; free cash flow(2) climbed 17% to $486 million
- SiriusXM increased 2018 guidance for
self-pay subscribers, revenue and adjusted EBITDA(2) on July
25th
- Liberty Media’s ownership of SiriusXM
stood at 70.5% as of July 23rd
- From May 1st through July
31st, repurchased 3.6 million LSXMK shares at an average price per
share of $45.45 and total cash consideration of $161 million
- Attributed to Formula One Group
- Entered into multi-year agreement with
Amazon Web Services Inc. (“AWS”) under which AWS has become an
Official Technology Provider and global sponsor for F1
- Extended the Belgian Grand Prix
- Repaid $125 million of F1 debt during
the quarter
- Attributed to Braves Group
- thyssenkrupp Elevator announced planned
development of North American headquarters, high-rise test tower
and innovation complex in Battery Atlanta
- Progressing on sale of residential
portion of Battery Atlanta
- Braves record 61-49 as of August 7th,
second in NL East division
“It’s been an exciting season for F1 with four different winners
over twelve Grands Prix. We look forward to the season starting
back up in Belgium at the end of August,” said Greg Maffei, Liberty
Media President and CEO. “Live Nation achieved spectacular results
as all the business units continue their solid growth. SiriusXM
also posted an outstanding quarter, notably with churn down to
1.6%. At the Braves, The Battery announced the planned development
of thyssenkrupp’s North American Headquarters and continues with
the sale of the residential assets.”
Unless otherwise noted, the following discussion compares
financial information for the three months ended June 30, 2018 to
the same period in 2017.
LIBERTY SIRIUSXM GROUP – The following table provides the
financial results attributed to Liberty SiriusXM Group for the
second quarter of 2018. In the second quarter, approximately $12
million of corporate level selling, general and administrative
expense (including stock-based compensation expense) was allocated
to the Liberty SiriusXM Group.
2Q17
2Q18 % Change amounts in millions
Liberty SiriusXM Group
Revenue SiriusXM $ 1,348 $ 1,432
6 % Total Liberty SiriusXM Group $ 1,348 $ 1,432
6 %
Operating Income (Loss) SiriusXM
402 344 (14 ) % Corporate and other (10 ) (11 )
(10 ) % Total Liberty SiriusXM Group $ 392 $ 333
(15 ) %
Adjusted OIBDA SiriusXM 519 542 4 %
Corporate and other (3 ) (6 ) (100 ) % Total
Liberty SiriusXM Group $ 516 $ 536 4 %
The increase in Liberty SiriusXM Group revenue was primarily
driven by an increase in SiriusXM’s daily weighted average number
of subscribers. Revenue growth at Liberty SiriusXM Group was
partially offset by the impact of the adoption of a new revenue
recognition accounting standard, as described in detail in Liberty
Media’s Form 10-Q for the quarter ended June 30, 2018. Operating
income declined, primarily driven by a $69 million charge related
to a legal settlement at SiriusXM for sound recordings for the
period from January 1, 2007 through December 31, 2017. Adjusted
OIBDA(2) increased primarily attributable to revenue growth at
SiriusXM.
SiriusXM is a separate publicly traded company and additional
information about SiriusXM can be obtained through its website and
filings with the Securities and Exchange Commission. SiriusXM
reported its stand-alone second quarter results on July 25, 2018.
For additional detail on SiriusXM’s financial results for the
second quarter, please see SiriusXM’s earnings release posted to
their Investor Relations website. For presentation purposes on page
one of this release, we include the results of SiriusXM, as
reported by SiriusXM, without regard to the purchase accounting
adjustments applied by us for purposes of our financial statements.
Liberty Media believes the presentation of financial results as
reported by SiriusXM is useful to investors as the comparability of
those results is best understood in the context of SiriusXM's
historical financial presentation.
The businesses and assets attributed to Liberty SiriusXM Group
consist primarily of Liberty Media’s interest in SiriusXM.
FORMULA ONE GROUP – The following table provides the
financial results attributed to the Formula One Group for the
second quarter of 2018. In the second quarter, the Formula One
Group incurred approximately $6 million of corporate level selling,
general and administrative expense (including stock-based
compensation expense).
“The 2018 season continues to excite with unpredictable outcomes
and a varied group of podium finishers,” said Chase Carey, Formula
1 Chairman and CEO. “We successfully returned to France, at the
Paul Ricard Circuit, for the first time since 1990 and hosted our
second fan festival for 2018. We made progress across many fronts
as we entered into an exciting global sponsorship agreement with
AWS, renewed global sponsorship deals, renewed the Belgian Grand
Prix and continued to expand on our digital content offerings.”
2Q17 2Q18 amounts
in millions
Formula One Group Revenue Formula 1 $ 616
$ 585 Total Formula One Group $ 616 $ 585
Operating Income (Loss) Formula 1 $ 45 $ 14 Corporate
and other (12 ) (8 ) Total Formula One Group $ 33
$ 6
Adjusted OIBDA Formula 1 $ 164 $ 134
Corporate and other (9 ) (6 ) Total Formula One Group
$ 155 $ 128
The following table provides the operating results of Formula 1
(“F1”).
Pro Forma F1 Operating Results
2Q17 2Q18 %
Change amounts in millions Primary Formula 1 revenue $ 527 $ 491 (7
) % Other Formula 1 revenue 89 94 6
% Total Formula 1 revenue $ 616 $ 585 (5 ) % Operating
expenses (excluding stock-based compensation included below): Team
payments (330 ) (307 ) 7 % Other cost of Formula 1 revenue
(85 ) (106 ) (25 ) % Cost of Formula 1 revenue $ (415 ) $
(413 ) — % Selling, general and administrative expenses (32
)(1) (38 ) (19 ) % Adjusted OIBDA $
169
(1)
$ 134 (21 ) % Stock-based compensation (9 ) (5 ) 44 % Depreciation
and Amortization (115 ) (115 ) — % Operating
income $ 45 $ 14 (69 ) %
Number of races in
period
7 7 (1) The second
quarter of 2017 includes an adjustment related to transaction costs
that reduced SG&A by $5 million. Excluding this adjustment,
F1’s pro forma adjusted OIBDA in the second quarter of 2017 was
$164 million.
Primary F1 revenue is comprised of (i) race promotion fees, (ii)
broadcasting fees and (iii) advertising and sponsorship fees.
Broadcast revenue decreased due to the impact of slightly lower
proportionate recognition of season-based income during the quarter
(7/21 races in the second quarter of 2018 compared to 7/20 races in
the second quarter of 2017). Race promotion and advertising and
sponsorship revenue decreased in the second quarter primarily due
to differing events on the calendar, with one additional European
race taking place in the second quarter of 2018 (France) compared
to one additional flyaway event taking place in the second quarter
of 2017 (Russia), partially offset by fee inflation in underlying
contracts. Typically, flyaway races such as the Russian Grand Prix
carry a higher promotion fee than European races.
Advertising and sponsorship revenue was impacted by the adoption
of the new revenue recognition accounting standard (ASC 606), which
accelerated the recognition of certain elements of fees related to
F1’s Global Partner and Official Supplier contracts. These fee
elements were previously recognized pro-rata with the race
calendar, but the majority are now being recognized evenly over the
calendar year and others over a smaller number of specific events.
This change provided a modest tailwind to advertising and
sponsorship revenue in the second quarter of 2018 but will be
neutral on a full calendar year basis.
Other F1 revenue increased during the second quarter primarily
due to the sale of F2 component parts to competing F2 teams as 2018
marks the start of the next three year vehicle cycle for the
championship.
Operating income and adjusted OIBDA(2) decreased in the second
quarter. Cost of F1 revenue decreased modestly, driven by reduced
team payments due to the pro rata recognition of such payments
during the season, partially offset by increased costs associated
with providing component parts to F2 teams and costs associated
with increased fan engagement activities, freight, technical
activities and digital media. Selling, general and administrative
expense increased primarily as a result of increased marketing and
research costs and foreign exchange movements.
F1’s total net debt to covenant OIBDA ratio, as defined in F1’s
credit facilities for covenant calculations, was approximately 7.3x
as of June 30, 2018, as compared to a maximum allowable leverage
ratio of 8.75x.
The businesses and assets attributed to the Formula One Group
consist of all of Liberty Media’s businesses and assets other than
those attributed to the Liberty SiriusXM Group and the Braves
Group, including Liberty Media’s subsidiary F1, its interest in
Live Nation, minority equity investments and an intergroup interest
in the Braves Group. There are approximately 9.1 million notional
shares of the Braves Group underlying the Formula One Group’s 15.1%
intergroup interest as of July 31, 2018.
BRAVES GROUP - The following table provides the financial
results attributed to the Braves Group for the second quarter of
2018. In the second quarter, approximately $2 million of corporate
level selling, general and administrative expense (including
stock-based compensation expense) was allocated to the Braves
Group.
2Q17 2Q18 amounts
in millions
Braves Group Revenue Corporate and other
$ 176 $ 182 Total Braves Group $ 176 $ 182
Operating Income (Loss) Corporate and other (3 )
35 Total Braves Group $ (3 ) $ 35
Adjusted OIBDA
Corporate and other 27 63 Total Braves Group $
27 $ 63
The following table provides the operating results of Braves
Holdings, LLC (“Braves”).
Braves Operating
Results
2Q17 2Q18 % Change
amounts in millions Baseball revenue $ 173 $ 172 (1 ) % Development
revenue 3 10 233 % Total revenue
176 182 3 % Operating expenses (excluding stock-based compensation
included below): Other operating expenses (126 ) (95 ) 25 %
Selling, general and administrative expenses (22 )
(23 ) (5 ) % Adjusted OIBDA $ 28 $ 64 129 % Stock-based
compensation (5 ) (4 ) 20 % Depreciation and Amortization
(24 ) (23 ) 4 % Operating income (loss) $ (1 ) $ 37
3,800 % Number of home game openings in period
40 37 Baseball revenue per home game $ 4.3 $ 4.6
Baseball revenue is comprised of (i) ballpark operations, (ii)
local and national broadcast rights and (iii) licensing and other
shared MLB revenue streams. Development revenue is derived from the
Battery Atlanta mixed-use facilities and primarily includes rental
income.
Baseball revenue per game grew due to increased ticket sales
with better attendance and higher concessions per turnstile. Total
baseball revenue in the second quarter decreased due to fewer home
games in 2018 compared to the same period in 2017. Development
revenue was nominal in the second quarter of 2017 as the project
was still ramping.
Operating income and adjusted OIBDA(2) increased, primarily
driven by higher revenue and reduced operating expense from lower
player salaries due to the acceleration of player salary expense in
previous quarters as a result of released and injured players.
Selling, general and administrative expense was relatively flat in
the second quarter.
The Formula One Group holds an approximate 15.1% intergroup
interest in the Braves Group as of July 31, 2018. Assuming the
issuance of the shares underlying the intergroup interest held by
the Formula One Group, the Braves Group outstanding share count as
of July 31, 2018 would have been 60 million.
The businesses and assets attributed to the Braves Group consist
primarily of Liberty Media’s subsidiary the Braves, which
indirectly owns the Atlanta Braves Major League Baseball Club, six
minor league baseball clubs and certain assets and liabilities
associated with the Braves’ ballpark and mixed-use development
project.
Share Repurchases
From May 1, 2018 through July 31, 2018, Liberty Media
repurchased approximately 3.6 million Series C Liberty SiriusXM
shares (Nasdaq: LSXMK) at an average cost per share of $45.45 for
total cash consideration of $161.4 million. The total remaining
repurchase authorization for Liberty Media is approximately $1.0
billion and can be applied to repurchases of Series A and Series C
shares of any of the Liberty Media Corporation tracking stocks.
FOOTNOTES
- Liberty Media's President and CEO, Greg
Maffei, will discuss these highlights and other matters on Liberty
Media's earnings conference call which will begin at 12:15 p.m.
(E.D.T.) on August 8, 2018. For information regarding how to access
the call, please see “Important Notice” later in this
document.
- For definitions of adjusted OIBDA (as
defined by Liberty Media) and adjusted EBITDA and free cash flow
(as defined by SiriusXM) and applicable reconciliations see the
accompanying schedules.
NOTES
The following financial information with respect to Liberty
Media's equity affiliates and available for sale securities is
intended to supplement Liberty Media's condensed consolidated
balance sheet and statement of operations to be included in its
Form 10-Q for the period ended June 30, 2018.
Fair Value of
Corporate Public Holdings
(amounts in millions) 3/31/2018
6/30/2018 Liberty SiriusXM Group iHeart Debt(1) $ 519 $ 505 Total
Liberty SiriusXM Group(2) $ 519 $ 505 Formula One Group Live Nation
Investment(3) $ 2,935 3,383 Other Public Holdings(4) 471
259 Total Formula One Group $ 3,406 $ 3,642 Braves Group
N/A N/A
Total Liberty Media $
3,925 $ 4,147
____________________________
(1) Liberty has purchased $660 million in aggregate
principal amount of iHeart bonds to-date. (2) SiriusXM’s investment
in Pandora excluded from public holdings presented above. (3)
Represents the fair value of the equity investment attributed to
Formula One Group. In accordance with GAAP, Liberty Media accounts
for its investment in the equity of Live Nation using the equity
method of accounting and includes it in its condensed consolidated
balance sheet at $743 million and $751 million as of March 31, 2018
and June 30, 2018, respectively. (4) Represents the carrying value
of other public holdings which are accounted for at fair value.
Reduction in fair value in the second quarter of 2018 primarily
driven by acquisition of Time Warner Inc. (“TWX”) by AT&T Inc.
(“AT&T”). Excludes Braves Group intergroup interest.
Cash and Debt
The following presentation is provided to separately identify
cash and liquid investments and debt information.
(amounts in millions) 3/31/2018
6/30/2018
Cash and Cash Equivalents Attributable to: Liberty
SiriusXM Group(1) $ 658 $ 174 Formula One Group(2) 270 198 Braves
Group 114 113
Total Liberty Consolidated Cash and
Cash Equivalents (GAAP) $ 1,042 $ 485
Debt: SiriusXM senior notes(3) $ 6,500 $ 6,500 2.125%
exchangeable senior debentures due 2048(4) 400 400 Margin loans 750
450 Other subsidiary debt(5) 375 8
Total Attributed Liberty SiriusXM Group Debt $
8,025 $ 7,358 Unamortized
discount, fair market value adjustment and deferred loan costs
(69 ) (66 )
Total Attributed Liberty SiriusXM
Group Debt (GAAP) $ 7,956 $
7,292 1.375% cash convertible notes due
2023(4) 1,000 1,000 1% cash convertible notes due 2023(4) 450 450
2.25% exchangeable senior debentures due 2046(4) 445 216 Live
Nation margin loan 350 350 Formula 1 bank loan 3,102 2,977 Other
corporate level debt 34 34
Total
Attributed Formula One Group Debt $ 5,381
$ 5,027 Fair market value adjustment
177 326
Total Attributed Formula One Group
Debt (GAAP) $ 5,558 $ 5,353
Formula 1 leverage(6) 6.8x 7.3x Atlanta Braves debt
603 629
Total Attributed Braves
Group Debt $ 603 $ 629
Deferred loan costs (4 ) (4 )
Total
Attributed Braves Group Debt (GAAP) $ 599
$ 625 Total
Liberty Media Corporation Debt (GAAP) $ 14,113
$ 13,270
_____________________________________________________________
(1) Includes $79 million and $64 million of cash and
liquid investments held at SiriusXM as of March 31, 2018 and June
30, 2018, respectively. (2) Includes $140 million and $89 million
of cash and liquid investments held at Formula 1 as of March 31,
2018 and June 30, 2018, respectively. (3) Outstanding principal
amount of Senior Notes with no reduction for the net unamortized
discount. (4) Face amount of the cash convertible notes and
exchangeable debentures with no fair market value adjustment. (5)
Includes SiriusXM revolving credit facility and capital leases. (6)
Net debt to covenant OIBDA ratio of F1
operating business as defined in F1’s credit facilities for
covenant calculations.
Total cash and liquid investments attributed to Liberty SiriusXM
Group decreased $484 million during the quarter. Cash from
operations at SiriusXM was more than offset by debt repayment and
return of capital at both Liberty SiriusXM Group and SiriusXM.
Included in the cash and liquid investments balance attributed to
Liberty SiriusXM Group at June 30, 2018 is $64 million held at
SiriusXM. Although SiriusXM is a consolidated subsidiary, it is a
separate public company with a significant non-controlling
interest, therefore Liberty Media does not have ready access to
SiriusXM’s cash balances.
Total debt attributed to Liberty SiriusXM Group decreased $667
million during the quarter primarily due to the repayment of
SiriusXM’s revolving credit facility and repayment of a portion
Liberty SiriusXM’s margin loan.
Total cash and liquid investments attributed to the Formula One
Group decreased $72 million during the quarter, primarily as a
result of debt repayments and interest and tax payments, which were
partially offset by cash from operations.
Total debt attributed to Formula One Group decreased $354
million during the quarter primarily as a result of debt repayment.
During the second quarter, F1 repaid $125 million under its
revolving credit facility. Liberty Media also repaid a portion of
its 2.25% exchangeable senior debentures due 2046 (attributed to
the Formula One Group) in connection with the acquisition of TWX by
AT&T. On June 22, 2018, Liberty Media paid to bondholders an
extraordinary additional distribution of $514.1295 per $1,000
original principal amount of debentures, which is attributable to
the cash consideration of $53.75 per share paid to former holders
of common stock of TWX in connection with the acquisition. The
reference shares attributable to each $1,000 original principal of
debentures now consists of 13.7452 shares of common stock of
AT&T (NYSE: T). The principal amount of 2.25% debentures
outstanding as of June 30, 2018 is $216 million.
Total cash and liquid investments attributed to the Braves Group
was flat in the quarter as increased cash from operations and net
borrowing was offset by capital expenditures related to the
mixed-use development.
Total debt attributed to the Braves Group increased by $26
million primarily as a result of the refinancing of certain of its
mixed-use debt facilities.
Important Notice: Liberty Media Corporation (Nasdaq:
LSXMA, LSXMB, LSXMK, FWONA, FWONK, BATRA, BATRK) President and CEO,
Greg Maffei, will discuss Liberty Media's earnings release on a
conference call which will begin at 12:15 p.m. (E.D.T.) on August
8, 2018. The call can be accessed by dialing (888) 394-8218 or
(323) 794-2149, passcode 2089509 at least 10 minutes prior to the
start time. The call will also be broadcast live across the
Internet and archived on our website. To access the webcast go to
http://www.libertymedia.com/events. Links to this press release
will also be available on the Liberty Media website.
This press release includes certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements about business strategies, market
potential, future financial prospects, plans for the Battery
Atlanta and the associated mixed-use development, the continuation
of our stock repurchase plan and other matters that are not
historical facts. These forward-looking statements involve many
risks and uncertainties that could cause actual results to differ
materially from those expressed or implied by such statements,
including, without limitation, possible changes in market
acceptance of new products or services, regulatory matters
affecting our businesses, the unfavorable outcome of pending or
future litigation, the failure to realize benefits of acquisitions,
rapid technological and industry change, failure of third parties
to perform, changes in consumer protection laws and their
enforcement, continued access to capital on terms acceptable to
Liberty Media, and changes in law and market conditions conducive
to stock repurchases. These forward-looking statements speak only
as of the date of this press release, and Liberty Media expressly
disclaims any obligation or undertaking to disseminate any updates
or revisions to any forward-looking statement contained herein to
reflect any change in Liberty Media's expectations with regard
thereto or any change in events, conditions or circumstances on
which any such statement is based. Please refer to the publicly
filed documents of Liberty Media, including the most recent Forms
10-K and 10-Q, for additional information about Liberty Media and
about the risks and uncertainties related to Liberty Media's
business which may affect the statements made in this press
release.
LIBERTY MEDIA CORPORATION
BALANCE SHEET INFORMATION
June 30, 2018 (unaudited)
Attributed Liberty
Formula SiriusXM Braves
One Intergroup Consolidated Group
Group Group Eliminations Liberty
amounts in millions Assets Current assets: Cash and cash
equivalents $ 174 113 198 — 485 Trade and other receivables, net
247 67 114 — 428 Other current assets 170 89
155 — 414 Total current assets 591
269 467 — 1,327 Intergroup
interest in the Braves Group — — 235 (235 ) — Investments in debt
and equity securities 1,103 8 318 — 1,429 Investments in
affiliates, accounted for using the equity method 642 97 920 —
1,659 Property and equipment, at cost 2,341 1,234 180 —
3,755 Accumulated depreciation (1,019 ) (78 ) (86 ) —
(1,183 ) 1,322 1,156 94 — 2,572
Intangible assets not subject to amortization
Goodwill 14,247 180 3,956 — 18,383 FCC licenses 8,600 — — — 8,600
Other 931 143 — — 1,074
23,778 323 3,956 — 28,057
Intangible assets subject to amortization, net 957 42 4,953 — 5,952
Other assets 121 44 646 — 811
Total assets $ 28,514 1,939 11,589 (235
) 41,807 Liabilities and Equity Current liabilities:
Intergroup payable (receivable) $ — (39 ) 39 — — Accounts payable
and accrued liabilities 997 56 176 — 1,229 Current portion of debt
4 14 — — 18 Deferred revenue 1,935 97 355 — 2,387 Other current
liabilities 4 8 9 — 21
Total current liabilities 2,940 136 579
— 3,655 Long-term debt 7,288 611 5,353 — 13,252
Deferred income tax liabilities 1,569 68 (86 ) — 1,551 Redeemable
intergroup interest — 235 — (235 ) — Other liabilities 283
508 93 — 884 Total liabilities
12,080 1,558 5,939 (235 ) 19,342
Equity / Attributed net assets 10,864 376 5,648 — 16,888
Noncontrolling interests in equity of subsidiaries 5,570
5 2 — 5,577 Total liabilities
and equity $ 28,514 1,939 11,589 (235 ) 41,807
LIBERTY MEDIA CORPORATION
STATEMENT OF OPERATIONS
Three months ended June 30, 2018
(unaudited)
Attributed
Liberty Formula SiriusXM
Braves One Consolidated Group
Group Group Liberty amounts in millions
Revenue: Subscriber revenue $ 1,139 — — 1,139 Formula 1 revenue — —
585 585 Other revenue 293 182 — 475 Total revenue 1,432 182
585 2,199 Operating costs and expenses, including stock-based
compensation: Cost of subscriber services (exclusive of
depreciation shown separately below): Revenue share and royalties
404 — — 404 Programming and content(1) 105 — — 105 Customer service
and billing(1) 95 — — 95 Other(1) 33 — — 33 Cost of Formula 1
revenue — — 414 414 Subscriber acquisition costs 119 — — 119 Other
operating expenses(1) 27 94 — 121 Selling, general and
administrative(1) 224 30 49 303 Depreciation and amortization
92 23 116 231 1,099 147 579 1,825 Operating income
(loss) 333 35 6 374 Other income (expense): Interest expense (99)
(7) (47) (153) Share of earnings (losses) of affiliates, net (1) 3
20 22 Realized and unrealized gains (losses) on financial
instruments, net 62 — (4) 58 Unrealized gains (losses) on
intergroup interest — (28) 28 — Other, net 12 1 8 21
(26) (31) 5 (52) Earnings (loss) from continuing operations before
income taxes 307 4 11 322 Income tax (expense) benefit (59)
(7) (1) (67) Net earnings (loss) 248 (3) 10 255 Less net earnings
(loss) attributable to the noncontrolling interests 83 (1) 1
83 Net earnings (loss) attributable to Liberty stockholders $ 165
(2) 9 172 (1) Includes stock-based compensation expense as
follows: Programming and content 10 — — 10 Customer service and
billing 1 — — 1 Other 2 — — 2 Other operating expenses 4 — — 4
Selling, general and administrative 25 5 6 36 Stock
compensation expense $ 42 5 6 53
LIBERTY MEDIA CORPORATION
STATEMENT OF OPERATIONS
Three months ended June 30, 2017
(unaudited)
Attributed Liberty
Formula SiriusXM Braves
One Consolidated Group Group
Group Liberty amounts in millions Revenue: Subscriber
revenue $ 1,111 — — 1,111 Formula 1 revenue — — 616 616 Other
revenue 237 176 — 413 Total
revenue 1,348 176 616 2,140 Operating costs and expenses, including
stock-based compensation: Cost of subscriber services (exclusive of
depreciation shown separately below): Revenue share and royalties
293 — — 293 Programming and content(1) 96 — — 96 Customer service
and billing(1) 95 — — 95 Other(1) 30 — — 30 Cost of Formula 1
revenue — — 414 414 Subscriber acquisition costs 126 — — 126 Other
operating expenses(1) 27 126 — 153 Selling, general and
administrative(1) 202 29 57 288 Depreciation and amortization
87 24 112 223 956
179 583 1,718 Operating income (loss) 392 (3 )
33 422 Other income (expense): Interest expense (85 ) (2 ) (62 )
(149 ) Share of earnings (losses) of affiliates, net (5 ) 1 20 16
Realized and unrealized gains (losses) on financial instruments,
net — — (49 ) (49 ) Unrealized gains (losses) on intergroup
interest — (3 ) 3 — Other, net (7 ) 2 1 (4 )
(97 ) (2 ) (87 ) (186 ) Earnings (loss) from continuing
operations before income taxes 295 (5 ) (54 ) 236 Income tax
(expense) benefit (110 ) 3 27 (80 ) Net
earnings (loss) 185 (2 ) (27 ) 156 Less net earnings (loss)
attributable to the noncontrolling interests 62 —
— 62 Net earnings (loss) attributable to
Liberty stockholders $ 123 (2 ) (27 ) 94 (1)
Includes stock-based compensation expense as follows: Programming
and content 7 — — 7 Customer service and billing 1 — — 1 Other 1 —
— 1 Other operating expenses 3 — — 3 Selling, general and
administrative 25 6 10 41 Stock
compensation expense $ 37 6 10 53
LIBERTY MEDIA CORPORATION
STATEMENT OF CASH FLOWS
INFORMATION
Six months ended June 30, 2018
(unaudited)
Attributed Liberty
Formula SiriusXM Braves
One Consolidated Group Group
Group Liberty amounts in millions Cash flows from
operating activities: Net earnings (loss) $ 530 (55 ) (7 ) 468
Adjustments to reconcile net earnings to net cash provided by
operating activities: Depreciation and amortization 181 39 227 447
Stock-based compensation 82 5 12 99 Share of (earnings) loss of
affiliates, net — (6 ) (8 ) (14 ) Unrealized (gains) losses on
intergroup interest, net — 33 (33 ) — Realized and unrealized
(gains) losses on financial instruments, net (120 ) — (91 ) (211 )
Noncash interest expense (benefit) (8 ) 2 — (6 ) Deferred income
tax expense (benefit) 123 (2 ) (49 ) 72 Intergroup tax allocation 1
3 (4 ) — Other charges (credits), net — 14 2 16 Changes in
operating assets and liabilities Current and other assets 1 (3 )
(97 ) (99 ) Payables and other liabilities 163 37
296 496 Net cash provided (used) by operating
activities 953 67 248 1,268 Cash
flows from investing activities: Investments in equity method
affiliates and debt and equity securities (395 ) — (4 ) (399 ) Cash
proceeds from sale of investments — — 243 243 Capital expended for
property and equipment (174 ) (14 ) (3 ) (191 ) Other investing
activities, net 3 36 8 47 Net
cash provided (used) by investing activities (566 ) 22
244 (300 ) Cash flows from financing activities:
Borrowings of debt 1,171 123 289 1,583 Repayments of debt (1,388 )
(180 ) (850 ) (2,418 ) Series C Liberty SiriusXM stock repurchases
(218 ) — — (218 ) Subsidiary shares repurchased by subsidiary (334
) — — (334 ) Cash dividends paid by subsidiary (29 ) — — (29 )
Taxes paid in lieu of shares issued for stock-based compensation
(79 ) — (2 ) (81 ) Other financing activities, net 50
— (4 ) 46 Net cash provided (used) by financing
activities (827 ) (57 ) (567 ) (1,451 ) Effect of foreign
exchange rate changes on cash, cash equivalents and restricted cash
— — (1 ) (1 ) Net increase (decrease) in cash, cash equivalents and
restricted cash (440 ) 32 (76 ) (484 ) Cash, cash equivalents and
restricted cash at beginning of period 625 140
282 1,047 Cash, cash equivalents and restricted cash
at end of period $ 185 172 206 563
LIBERTY MEDIA CORPORATION
STATEMENT OF CASH FLOWS
INFORMATION
Six months ended June 30, 2017
(unaudited)
Attributed Liberty
Formula SiriusXM Braves
One Consolidated Group Group
Group Liberty amounts in millions Cash flows from
operating activities: Net earnings (loss) $ 374 (51 ) (123 ) 200
Adjustments to reconcile net earnings to net cash provided by
operating activities: Depreciation and amortization 177 26 184 387
Stock-based compensation 71 8 18 97 Share of (earnings) loss of
affiliates, net 2 (4 ) (10 ) (12 ) Unrealized (gains) losses on
intergroup interest, net — 31 (31 ) — Realized and unrealized
(gains) losses on financial instruments, net — — 61 61 Noncash
interest expense (benefit) 3 1 2 6 Deferred income tax expense
(benefit) 215 23 (62 ) 176 Intergroup tax allocation (9 ) (33 ) 42
— Intergroup tax payments 4 15 (19 ) — Other charges (credits), net
2 (3 ) (3 ) (4 ) Changes in operating assets and liabilities
Current and other assets (15 ) (51 ) 29 (37 ) Payables and other
liabilities (39 ) 24 (120 ) (135 ) Net cash provided
(used) by operating activities 785 (14 ) (32 ) 739
Cash flows from investing activities: Investments in equity
affiliates and debt and equity securities (434 ) (2 ) (6 ) (442 )
Cash proceeds from the sale of investments — 5 1 6 Net cash paid
for the acquisition of Formula 1 — — (1,647 ) (1,647 ) Capital
expended for property and equipment (119 ) (145 ) (2 ) (266 ) Other
investing activities, net (114 ) 5 (10 ) (119 ) Net
cash provided (used) by investing activities (667 ) (137 )
(1,664 ) (2,468 ) Cash flows from financing activities: — — — —
Borrowings of debt 980 214 1,403 2,597 Repayments of debt (376 )
(42 ) (1,373 ) (1,791 ) Proceeds from issuance of Series C Liberty
Formula One common stock — — 1,938 1,938 Subsidiary shares
repurchased by subsidiary (784 ) — — (784 ) Cash dividends paid by
subsidiary (30 ) — — (30 ) Taxes paid in lieu of shares issued for
stock-based compensation (29 ) — (3 ) (32 ) Other financing
activities, net 7 — 1 8 Net cash
provided (used) by financing activities (232 ) 172
1,966 1,906 Effect of foreign exchange rates on cash,
cash equivalents and restricted cash — — 5 5 Net increase
(decrease) in cash, cash equivalents and restricted cash (114 ) 21
275 182 Cash, cash equivalents and restricted cash at beginning of
period 297 107 168 572 Cash,
cash equivalents and restricted cash at end of period $ 183
128 443 754
NON-GAAP FINANCIAL MEASURES
SCHEDULE 1
This press release includes a presentation of adjusted OIBDA,
which is a non-GAAP financial measure, for the Liberty SiriusXM
Group, the Braves Group and the Formula One Group, together with
reconciliations to operating income, as determined under GAAP.
Liberty Media defines adjusted OIBDA as revenue less operating
expenses, and selling, general and administrative expenses,
excluding all stock based compensation, and excludes from that
definition depreciation and amortization, restructuring and
impairment charges and separately reported legal settlements that
are included in the measurement of operating income pursuant to
GAAP.
Liberty Media believes adjusted OIBDA is an important indicator
of the operational strength and performance of its businesses,
including each business' ability to service debt and fund capital
expenditures. In addition, this measure allows management to view
operating results and perform analytical comparisons and
benchmarking between businesses and identify strategies to improve
performance. Because adjusted OIBDA is used as a measure of
operating performance, Liberty Media views operating income as the
most directly comparable GAAP measure. Adjusted OIBDA is not meant
to replace or supersede operating income or any other GAAP measure,
but rather to supplement such GAAP measures in order to present
investors with the same information that Liberty Media's management
considers in assessing the results of operations and performance of
its assets.
The following table provides a reconciliation of adjusted OIBDA
for Liberty Media to operating income calculated in accordance with
GAAP for the three months ended June 30, 2017 and June 30, 2018,
respectively.
QUARTERLY
SUMMARY
(amounts in millions) 2Q17 2Q18
Liberty SiriusXM Group Revenue $ 1,348 $ 1,432
Adjusted OIBDA 516 536 Depreciation and amortization (87 ) (92 )
Stock compensation expense (37 ) (42 ) Legal settlements and
reserves(1) — (69 )
Operating Income $
392 $ 333
Formula One Group Revenue $
616 $ 585 Adjusted OIBDA 155 128 Depreciation and
amortization (112 ) (116 ) Stock compensation expense (10 )
(6 )
Operating Income (Loss) $ 33 $ 6
Braves Group Revenue $ 176 $ 182 Adjusted
OIBDA 27 63 Depreciation and amortization (24 ) (23 ) Stock
compensation expense (6 ) (5 )
Operating Income
(Loss) $ (3 ) $ 35
Liberty Media Corporation
(Consolidated) Revenue $ 2,140 $ 2,199 Adjusted OIBDA
698 727 Depreciation and amortization (223 ) (231 ) Stock
compensation expense (53 ) (53 ) Legal settlements and reserves
— (69 )
Operating Income $ 422 $
374
______________________________________________
(1) During the second quarter of 2018, SiriusXM
recorded a $69 million charge related to a legal settlement that
resolved all outstanding claims, including ongoing audits, under
its statutory license for sound recordings for the period from
January 1, 2007 through December 31, 2017.
SCHEDULE 2
This press release also includes a presentation of adjusted
EBITDA of SiriusXM, which is a non-GAAP financial measure used by
SiriusXM, together with a reconciliation to SiriusXM's stand-alone
net income, as determined under GAAP. SiriusXM defines adjusted
EBITDA as follows: EBITDA is defined as net income before interest
expense, income tax expense and depreciation and amortization.
SiriusXM adjusts EBITDA to exclude the impact of other income as
well as certain other charges discussed below. Adjusted EBITDA is a
Non-GAAP financial measure that excludes (if applicable): (i)
certain adjustments as a result of the purchase price accounting
for the merger of Sirius and XM, (ii) share-based payment expense
and (iii) other significant operating expense (income) that do not
relate to the on-going performance of SiriusXM’s business. SiriusXM
believes adjusted EBITDA is a useful measure of the underlying
trend of its operating performance, which provides useful
information about its business apart from the costs associated with
its capital structure and purchase price accounting. SiriusXM
believes investors find this Non-GAAP financial measure useful when
analyzing past operating performance with current performance and
comparing its operating performance to the performance of other
communications, entertainment and media companies. SiriusXM
believes investors use adjusted EBITDA to estimate its current
enterprise value and to make investment decisions. As a result of
large capital investments in SiriusXM’s satellite radio system, its
results of operations reflect significant charges for depreciation
expense. SiriusXM believes the exclusion of share-based payment
expense is useful as it is not directly related to the operational
conditions of its business. SiriusXM also believes the exclusion of
the legal settlements and reserves related to the historical use of
sound recordings, loss on extinguishment of debt and loss on
disposal of assets, to the extent they occur during the period, is
useful as they are significant expenses not incurred as part of
normal operations for the period.
Adjusted EBITDA has certain limitations in that it does not take
into account the impact to SiriusXM’s statements of comprehensive
income of certain expenses, including share-based payment expense
and certain purchase price accounting for the merger of Sirius and
XM. SiriusXM endeavors to compensate for the limitations of the
Non-GAAP measure presented by also providing the comparable GAAP
measure with equal or greater prominence and descriptions of the
reconciling items, including quantifying such items, to derive the
Non-GAAP measure. Investors that wish to compare and evaluate
operating results after giving effect for these costs, should refer
to net income as disclosed in SiriusXM’s unaudited consolidated
statements of comprehensive income. Since adjusted EBITDA is a
Non-GAAP financial performance measure, SiriusXM’s calculation of
adjusted EBITDA may be susceptible to varying calculations; may not
be comparable to other similarly titled measures of other
companies; and should not be considered in isolation, as a
substitute for, or superior to measures of financial performance
prepared in accordance with GAAP. The reconciliation of net income
to the adjusted EBITDA is calculated as follows:
Unaudited For the Three Months Ended June 30, 2017
2018 ($ in thousands) Net income: $ 202,109 $ 292,352 Add
back items excluded from Adjusted EBITDA: Purchase price accounting
adjustments: Revenues 1,813 1,813 Sound recording legal settlements
and reserves(1) — 69,144 Share-based payment expense 30,251 36,215
Depreciation and amortization 73,519 74,623 Interest expense 82,794
86,917 Other (income) expense 11,937 (88,212 ) Income tax expense
119,513 70,570 Adjusted EBITDA $ 521,936 $
543,422
________________________________
(1)
During the second quarter of 2018,
SiriusXM recorded a $69 million charge related to a legal
settlement that resolved all outstanding claims, including ongoing
audits, under its statutory license for sound recordings for the
period from January 1, 2007 through December 31, 2017.
SCHEDULE 3
This press release also includes a presentation of free cash
flow of SiriusXM, which is a non-GAAP financial measure used by
SiriusXM, together with a reconciliation to SiriusXM's stand-alone
cash flow provided by operating activities, as determined under
GAAP. SiriusXM’s free cash flow is derived from cash flow provided
by operating activities, net of additions to property and equipment
and restricted and other investment activity. Free cash flow is a
metric that SiriusXM’s management and board of directors use to
evaluate the cash generated by its operations, net of capital
expenditures and other investment activity. In a capital intensive
business, with significant investments in satellites, SiriusXM
looks at its operating cash flow, net of these investing cash
outflows, to determine cash available for future subscriber
acquisition and capital expenditures, to repurchase or retire debt,
to acquire other companies and to evaluate its ability to return
capital to stockholders. SiriusXM excludes from free cash flow
certain items that do not relate to the on-going performance of its
business, such as cash outflows for acquisitions, strategic
investments and net loan activity with related parties. SiriusXM
believes free cash flow is an indicator of the long-term financial
stability of its business. Free cash flow, which is reconciled to
"Net cash provided by operating activities," is a Non-GAAP
financial measure. This measure can be calculated by deducting
amounts under the captions "Additions to property and equipment"
and deducting or adding Restricted and other investment activity
from "Net cash provided by operating activities" from the unaudited
consolidated statements of cash flows. Free cash flow should be
used in conjunction with other GAAP financial performance measures
and may not be comparable to free cash flow measures presented by
other companies. Free cash flow should be viewed as a supplemental
measure rather than an alternative measure of cash flows from
operating activities, as determined in accordance with GAAP. Free
cash flow is limited and does not represent remaining cash flows
available for discretionary expenditures due to the fact that the
measure does not deduct the payments required for debt maturities.
SiriusXM believes free cash flow provides useful supplemental
information to investors regarding its current cash flow, along
with other GAAP measures (such as cash flows from operating and
investing activities), to determine its financial condition, and to
compare its operating performance to other communications,
entertainment and media companies. Free cash flow is calculated as
follows:
Unaudited For the Three Months Ended
June 30, 2017 2018 ($ in thousands)
Cash flow
information Net cash provided by operating activities $ 483,211
$ 579,418 Net cash used in investing activities $ (606,862 ) $
(99,313 ) Net cash used in financing activities $ (63,667 ) $
(494,447 )
Free cash flow Net cash provided by operating
activities $ 483,211 $ 579,418 Additions to property and equipment
(66,152 ) (92,868 ) Purchases of restricted and other investments
(334 ) (307 ) Free cash flow $ 416,725 $
486,243
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