Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2016

OR

 

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                to                

Commission File Number 001-35707

LIBERTY MEDIA CORPORATION

(Exact name of Registrant as specified in its charter)

 

 

 

 

State of Delaware

 

37-1699499

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

12300 Liberty Boulevard
Englewood, Colorado

 

80112

(Address of principal executive offices)

 

(Zip Code)

 

Registrant's telephone number, including area code: (720) 875-5400

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes     No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes     No 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

 

Large accelerated filer 

 

Accelerated filer 

 

Non-accelerated filer 
(do not check if smaller
reporting company)

 

Smaller reporting company 

 

Indicate by check mark whether the Registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes     No 

The number of outstanding shares of Liberty Media Corporation's common stock as of April 30, 2016 was:

 

 

 

 

 

 

 

 

 

 

 

Series A

 

Series B

 

Series C

 

Liberty SiriusXM common stock

 

102,276,938

 

9,870,966

 

222,735,331

 

Liberty Braves common stock

 

10,227,693

 

987,096

 

22,273,533

 

Liberty Media common stock

 

25,569,429

 

2,467,741

 

55,684,235

 

 

 

 

 

 


 

Table of Contents

 

Table of Contents

 

 

 

 

LIBERTY MEDIA CORPORATION Condensed Consolidated Balance Sheets (unaudited) 

I-3

LIBERTY MEDIA CORPORATION Condensed Consolidated Balance Sheets (Continued) (unaudited) 

I-4

LIBERTY MEDIA CORPORATION Condensed Consolidated Statements Of Operations (unaudited) 

I-5

LIBERTY MEDIA CORPORATION Condensed Consolidated Statements Of Comprehensive Earnings (Loss) (unaudited) 

I-6

LIBERTY MEDIA CORPORATION Condensed Consolidated Statements Of Cash Flows (unaudited) 

I-7

LIBERTY MEDIA CORPORATION Condensed Consolidated Statement of Equity (unaudited) 

I-8

LIBERTY MEDIA CORPORATION Notes to Condensed Consolidated Financial Statements 

I-9

 

 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

I-30

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

I-43

 

Item 4. Controls and Procedures

I-43

 

 

 

Part II - Other Information 

II-1

 

Item 1. Legal Proceedings

II-1

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

II-20

 

Item 6. Exhibits

II-21

 

 

 

SIGNATURES 

II-22

EXHIBIT INDEX 

II-23

 

 

I-2


 

Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

 

 

 

 

 

March 31, 2016

    

December 31, 2015

 

 

amounts in millions

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

602

 

201

 

Trade and other receivables, net

 

244

 

247

 

Short term marketable securities (note 5)

 

61

 

15

 

Other current assets

 

257

 

228

 

Total current assets

 

1,164

 

691

 

Investments in available-for-sale securities and other cost investments (note 6)

 

560

 

533

 

Investments in affiliates, accounted for using the equity method (note 7)

 

1,120

 

1,115

 

 

 

 

 

 

 

Property and equipment, at cost

 

2,698

 

2,587

 

Accumulated depreciation

 

(748)

 

(708)

 

 

 

1,950

 

1,879

 

Intangible assets not subject to amortization (note 8):

 

 

 

 

 

Goodwill

 

14,345

 

14,345

 

FCC licenses

 

8,600

 

8,600

 

Other

 

1,073

 

1,073

 

 

 

24,018

 

24,018

 

Intangible assets subject to amortization, net (note 8)

 

1,080

 

1,097

 

Other assets

 

434

 

465

 

Total assets

$

30,326

 

29,798

 

 

(continued)

 

See accompanying notes to condensed consolidated financial statements.

I-3


 

Table of Contents

 

 

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Continued)

(unaudited)

 

 

 

 

 

 

 

 

 

    

March 31, 2016

    

December 31, 2015

 

 

 

amounts in millions,

 

 

 

except share amounts

 

Liabilities and Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

763

 

758

 

Current portion of debt

 

 

256

 

255

 

Deferred revenue

 

 

1,880

 

1,797

 

Other current liabilities

 

 

66

 

3

 

Total current liabilities

 

 

2,965

 

2,813

 

Long-term debt, including $998 million and $995 million measured at fair value at March 31, 2016 and December 31, 2015, respectively (note 9)

 

 

6,862

 

6,626

 

Deferred income tax liabilities

 

 

1,788

 

1,667

 

Other liabilities

 

 

626

 

561

 

Total liabilities

 

 

12,241

 

11,667

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $.01 par value. Authorized 50,000,000 shares; no shares issued

 

 

 —

 

 —

 

Series A Liberty common stock, $.01 par value. Authorized 2,000,000,000 shares; issued and outstanding 102,261,278 shares at March 31, 2016 and 102,193,688 shares at December 31, 2015

 

 

1

 

1

 

Series B Liberty common stock, $.01 par value. Authorized 75,000,000 shares; issued and outstanding 9,870,966 shares at March 31, 2016 and December 31, 2015

 

 

 —

 

 —

 

Series C Liberty common stock, $.01 par value. Authorized 2,000,000,000 shares; issued and outstanding 222,701,709 shares at March 31, 2016 and 222,482,377 shares December 31, 2015

 

 

2

 

2

 

Additional paid-in capital

 

 

78

 

 —

 

Accumulated other comprehensive earnings (loss), net of taxes

 

 

(46)

 

(51)

 

Retained earnings

 

 

11,346

 

10,981

 

Total stockholders' equity

 

 

11,381

 

10,933

 

Noncontrolling interests in equity of subsidiaries

 

 

6,704

 

7,198

 

Total equity

 

 

18,085

 

18,131

 

Commitments and contingencies (note 10)

 

 

 

 

 

 

Total liabilities and equity

 

$

30,326

 

29,798

 

 

See accompanying notes to condensed consolidated financial statements.

I-4


 

Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements Of Operations

(unaudited)

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

 

 

March 31,

 

 

    

2016

    

2015

 

 

 

amounts in millions,

 

 

 

except per share amounts

 

Revenue:

 

 

 

 

 

 

Subscriber revenue

 

$

1,009

 

907

 

Other revenue

 

 

195

 

174

 

Total revenue

 

 

1,204

 

1,081

 

Operating costs and expenses, including stock based compensation (note 3):

 

 

 

 

 

 

Cost of subscriber services (exclusive of depreciation shown separately below):

 

 

 

 

 

 

Revenue share and royalties

 

 

252

 

213

 

Programming and content

 

 

85

 

62

 

Customer service and billing

 

 

97

 

92

 

Other

 

 

33

 

31

 

Subscriber acquisition costs

 

 

132

 

122

 

Other operating expense

 

 

47

 

30

 

Selling, general and administrative

 

 

201

 

202

 

Legal settlement, net (note 10)

 

 

(511)

 

 —

 

Depreciation and amortization

 

 

87

 

84

 

 

 

 

423

 

836

 

Operating income (loss)

 

 

781

 

245

 

Other income (expense):

 

 

 

 

 

 

Interest expense

 

 

(84)

 

(77)

 

Share of earnings (losses) of affiliates, net (note 7)

 

 

(12)

 

(37)

 

Realized and unrealized gains (losses) on financial instruments, net (note 5)

 

 

(8)

 

(28)

 

Other, net

 

 

7

 

2

 

 

 

 

(97)

 

(140)

 

Earnings (loss) before income taxes

 

 

684

 

105

 

Income tax (expense) benefit

 

 

(257)

 

(86)

 

Net earnings (loss)

 

 

427

 

19

 

Less net earnings (loss) attributable to the noncontrolling interests

 

 

62

 

38

 

Net earnings (loss) attributable to Liberty stockholders

 

$

365

 

(19)

 

 

 

 

 

 

 

 

Basic net earnings (loss) attributable to Liberty stockholders per common share (note 4)

 

$

1.09

 

(0.06)

 

Diluted net earnings (loss) attributable to Liberty stockholders per common share (note 4)

 

$

1.08

 

(0.06)

 

 

 

See accompanying notes to condensed consolidated financial statements.

I-5


 

Table of Contents

 

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements Of Comprehensive Earnings (Loss)

(unaudited)

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

 

 

March 31,

 

 

    

2016

    

2015

 

 

 

amounts in millions

 

Net earnings (loss)

 

$

427

 

19

 

Other comprehensive earnings (loss), net of taxes:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

8

 

 —

 

Share of other comprehensive earnings (loss) of equity affiliates

 

 

 —

 

(7)

 

Other comprehensive earnings (loss)

 

 

8

 

(7)

 

Comprehensive earnings (loss)

 

 

435

 

12

 

Less comprehensive earnings (loss) attributable to the noncontrolling interests

 

 

65

 

38

 

Comprehensive earnings (loss) attributable to Liberty stockholders

 

$

370

 

(26)

 

 

See accompanying notes to condensed consolidated financial statements.

I-6


 

Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements Of Cash Flows

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

 

 

March 31,

 

 

    

2016

    

2015

 

 

 

amounts in millions

 

Cash flows from operating activities:

 

 

 

 

 

 

Net earnings

 

$

427

 

19

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

87

 

84

 

Stock-based compensation

 

 

34

 

44

 

Excess tax benefit from stock-based compensation

 

 

(73)

 

(14)

 

Share of (earnings) loss of affiliates, net

 

 

12

 

37

 

Realized and unrealized (gains) losses on financial instruments, net

 

 

8

 

28

 

Losses (gains) on dilution of investment in affiliate

 

 

2

 

1

 

Deferred income tax expense (benefit)

 

 

114

 

70

 

Other, net

 

 

3

 

6

 

Changes in operating assets and liabilities

 

 

 

 

 

 

Current and other assets

 

 

(23)

 

(22)

 

Payables and other liabilities

 

 

223

 

62

 

Net cash provided (used) by operating activities

 

 

814

 

315

 

Cash flows from investing activities:

 

 

 

 

 

 

Investments in and loans to cost and equity investees

 

 

(11)

 

 —

 

Cash proceeds from sale of investments

 

 

2

 

113

 

Proceeds (payments) on financial instruments, net

 

 

 —

 

(17)

 

Capital expended for property and equipment

 

 

(67)

 

(64)

 

Purchases of short term investments and other marketable securities

 

 

(99)

 

(10)

 

Sales of short term investments and other marketable securities

 

 

53

 

136

 

Other investing activities, net

 

 

(3)

 

(14)

 

Net cash provided (used) by investing activities

 

 

(125)

 

144

 

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings of debt

 

 

335

 

1,275

 

Repayments of debt

 

 

(111)

 

(658)

 

Repurchases of Liberty common stock

 

 

 —

 

(58)

 

Subsidiary shares repurchased by subsidiary

 

 

(594)

 

(535)

 

Excess tax benefit from stock-based compensation

 

 

73

 

14

 

Taxes paid in lieu of shares issued for stock-based compensation

 

 

(4)

 

(16)

 

Other financing activities, net

 

 

13

 

10

 

Net cash provided (used) by financing activities

 

 

(288)

 

32

 

Net increase (decrease) in cash and cash equivalents

 

 

401

 

491

 

Cash and cash equivalents at beginning of period

 

 

201

 

681

 

Cash and cash equivalents at end of period

 

$

602

 

1,172

 

 

See accompanying notes to condensed consolidated financial statements.

I-7


 

Table of Contents

 

 

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statement Of Equity

(unaudited)

Three months ended March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

    

 

    

 

    

 

    

 

    

 

    

Accumulated

    

 

    

Noncontrolling

    

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

other

 

 

 

interest in

 

 

 

 

 

Preferred

 

 

 

 

 

 

 

Paid-in

 

comprehensive

 

Retained

 

equity of

 

Total

 

 

    

Stock

    

Series A

    

Series B

    

Series C

    

Capital

    

earnings

    

earnings

    

subsidiaries

    

equity

 

 

 

amounts in millions

 

Balance at January 1, 2016

 

$

 —

 

1

 

 —

 

2

 

 —

 

(51)

 

10,981

 

7,198

 

18,131

 

Net earnings

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

365

 

62

 

427

 

Other comprehensive loss

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

5

 

 —

 

3

 

8

 

Stock-based compensation

 

 

 —

 

 —

 

 —

 

 —

 

21

 

 —

 

 —

 

8

 

29

 

Minimum withholding taxes on net share settlements of stock-based compensation

 

 

 —

 

 —

 

 —

 

 —

 

(4)

 

 —

 

 —

 

 —

 

(4)

 

Excess tax benefits on stock-based compensation

 

 

 —

 

 —

 

 —

 

 —

 

71

 

 —

 

 —

 

(1)

 

70

 

Issuance of stock upon exercise of stock options

 

 

 —

 

 —

 

 —

 

 —

 

4

 

 —

 

 —

 

 —

 

4

 

Shares repurchased by subsidiary

 

 

 —

 

 —

 

 —

 

 —

 

(12)

 

 —

 

 —

 

(576)

 

(588)

 

Shares issued by subsidiary

 

 

 —

 

 —

 

 —

 

 —

 

(1)

 

 —

 

 —

 

1

 

 —

 

Contribution by noncontrolling interest

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

9

 

9

 

Other

 

 

 —

 

 —

 

 —

 

 —

 

(1)

 

 —

 

 —

 

 —

 

(1)

 

Balance at March 31, 2016

 

$

 —

 

1

 

 —

 

2

 

78

 

(46)

 

11,346

 

6,704

 

18,085

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

I-8


 

Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1)   Basis of Presentation

The accompanying condensed consolidated financial statements include all the accounts of Liberty Media Corporation and its controlled subsidiaries (formerly named Liberty Spinco, Inc.) ("Liberty" or the "Company" unless the context otherwise requires). All significant intercompany accounts and transactions have been eliminated.

Liberty, through its ownership of interests in subsidiaries and other companies, is primarily engaged in the media, communications and entertainment industries primarily in North America. The significant subsidiaries include Sirius XM Holdings Inc. ("SIRIUS XM") and Braves Holdings, LLC ("Braves Holdings"). Our significant investment accounted for under the equity method is Live Nation Entertainment, Inc. ("Live Nation"). 

The accompanying (a) condensed consolidated balance sheet as of December 31, 2015, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. Additionally, certain prior period amounts have been reclassified for comparability with current period presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in Liberty's Annual Report on Form 10-K for the year ended December 31, 2015.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company considers (i) fair value measurement, (ii) accounting for income taxes, (iii) assessments of other-than-temporary declines in fair value of its investments and (iv) the determination of the useful life of SIRIUS XM’s broadcast/transmission system to be its most significant estimates.

In March 2016, the Financial Accounting Standards Board ("FASB") issued new accounting guidance on share-based payment accounting. The areas for simplification in this update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeiture calculations, and classification on the statement of cash flows. The amendments in this update are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted. An entity that elects early adoption must adopt all of the amendments in the same period.   We are currently evaluating the impact and timing of adoption of this guidance on our consolidated financial statements.

In February 2016, the FASB issued new accounting guidance on lease accounting. This guidance requires a company to recognize lease assets and lease liabilities arising from operating leases in the statement of financial position. This guidance does not significantly change the previous lease guidance for how a lessee should account for leases. Additionally, the criteria for classifying a lease as a finance lease versus an operating lease are substantially the same as the previous guidance. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. We plan to adopt this guidance on January 1, 2019. Companies are required to use a modified retrospective approach to adopt this guidance.  We are currently evaluating the impact of the adoption of this new guidance on our consolidated financial statements.

In January 2016, the FASB issued new accounting guidance that is intended to improve the recognition and measurement of financial instruments. The new guidance requires equity investments with readily determinable fair values

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Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

(except those accounted for under the equity method of accounting or those that result in consolidation) to be measured at fair value with changes in fair value recognized in net income and simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. The new standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2017. The Company has not yet determined the effect of the standard on its ongoing financial reporting.

In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers.  The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In March 2016, the FASB issued additional guidance which clarifies principal versus agent considerations, and in April 2016, the FASB issued further guidance which clarifies the identification of performance obligations and the implementation guidance for licensing. The updated guidance will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either a full retrospective or modified retrospective transition method. This guidance is currently effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and early adoption is permitted only for fiscal years beginning after December 15, 2016. The Company currently does not plan to early adopt this new guidance and is evaluating the effect that the updated standard will have on its revenue recognition and has not yet selected a transition method.

Liberty holds investments that are accounted for using the equity method. Liberty does not control the decision making process or business management practices of these affiliates. Accordingly, Liberty relies on management of these affiliates to provide it with accurate financial information prepared in accordance with GAAP that the Company uses in the application of the equity method. In addition, Liberty relies on audit reports that are provided by the affiliates' independent auditors on the financial statements of such affiliates. The Company is not aware, however, of any errors in or possible misstatements of the financial information provided by its equity affiliates that would have a material effect on Liberty's condensed consolidated financial statements.

On November 4, 2014, Liberty completed the spin-off to its stockholders common stock of a newly formed company called Liberty Broadband Corporation ("Liberty Broadband") (the “Broadband Spin-Off”). Shares of Liberty Broadband were distributed to the shareholders of Liberty as of a record date of 5:00 p.m., New York City time, on October 29, 2014. Liberty Broadband is comprised of, among other things, (i) Liberty’s former interest in Charter Communications, Inc. (“Charter”), (ii) Liberty’s former subsidiary TruePosition, Inc. (“TruePosition”), (iii) Liberty’s former minority equity investment in Time Warner Cable, Inc. ("Time Warner Cable"), (iv) certain deferred tax liabilities, as well as liabilities related to Time Warner Cable call options and (v) initial indebtedness, pursuant to margin loans entered into prior to the completion of the Broadband Spin-Off. Prior to the transaction, Liberty Broadband borrowed funds under margin loans and made a final distribution to Liberty of approximately $300 million in cash. The Broadband Spin-Off was intended to be tax-free to stockholders of Liberty, and in September 2015, Liberty entered into a closing agreement with the IRS which provides that the Broadband Spin-Off qualified for tax-free treatment. In the Broadband Spin-Off, record holders of Liberty’s Series A, Series B and Series C common stock received one share of the corresponding series of Liberty Broadband common stock for every four shares of Liberty common stock held by them as of the record date for the Broadband Spin-Off, with cash paid in lieu of fractional shares. The Company’s former investments in and results of Charter and Time Warner Cable are no longer included in the results of Liberty from the date of the completion of the Broadband Spin-Off forward.

Liberty has entered into certain agreements with Liberty Interactive Corporation (“Liberty Interactive”), Starz, Liberty TripAdvisor Holdings, Inc. (“TripCo”) and Liberty Broadband, all of which are separate publicly traded companies, in order to govern relationships between the companies. None of these entities has any stock ownership, beneficial or otherwise, in any of the others. These agreements include Reorganization Agreements (in the case of Starz and Liberty

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Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Broadband only), Services Agreements, Facilities Sharing Agreements, a Lease Agreement (in the case of Starz only) and Tax Sharing Agreements (in the case of Starz and Liberty Broadband only).

The Reorganization Agreements provide for, among other things, provisions governing the relationships between Liberty and each of Liberty Interactive, Starz and Liberty Broadband, respectively, including certain cross-indemnities. Pursuant to the Services Agreements, Liberty provides Liberty Interactive, Starz, TripCo and Liberty Broadband with general and administrative services including legal, tax, accounting, treasury and investor relations support. Liberty Interactive, Starz, TripCo and Liberty Broadband reimburse Liberty for direct, out-of-pocket expenses incurred by Liberty in providing these services and, in the case of Liberty Interactive and Starz, Liberty Interactive's and Starz's respective allocable portion of costs associated with any shared services or personnel based on an estimated percentage of time spent providing services to each respective company, while TripCo and Liberty Broadband pay an annual fee for the provision of these services. Under the Facilities Sharing Agreements, Liberty shares office space and related amenities at its corporate headquarters with Liberty Interactive, TripCo and Liberty Broadband. Under these various agreements approximately $4 million and $3 million of these allocated expenses were reimbursed to Liberty during the three months ended March 31, 2016 and 2015, respectively. Under the Lease Agreement, Starz leases its corporate headquarters from Liberty. The Lease Agreement with Starz for their corporate headquarters requires a payment of approximately $4 million annually, subject to certain increases based on the Consumer Price Index.

(2) Tracking Stocks

During November 2015, Liberty’s board of directors authorized management to pursue a recapitalization of the Company’s common stock into three new tracking stock groups, one to be designated as the Liberty Braves common stock, one to be designated as the Liberty Media common stock and one to be designated as the Liberty SiriusXM common stock (the “Recapitalization”), and to cause to be distributed subscription rights related to the Liberty Braves tracking stock following the creation of the new tracking stocks.

 

The Recapitalization was completed on April 15, 2016 and the newly issued shares commenced trading or quotation in the regular way on the Nasdaq Global Select Market or the OTC Markets, as applicable, on Monday, April 18, 2016. Therefore, as of March 31, 2016 the Recapitalization had not been completed and the operating results prior to the Recapitalization are attributed to Liberty stockholders in the aggregate. Information in the following footnotes has been presented by tracking stock groups to enhance the information provided to users of these financial statements.

 

Following the creation of the tracking stocks, Series A, Series B and Series C Liberty Braves common stock trade under the symbols BATRA/B/K respectively, Series A, Series B and Series C Liberty Media common stock trade under the symbols LMCA/B/K, respectively, and Series A, Series B and Series C Liberty SiriusXM common stock trade under the symbols LSXMA/B/K, respectively. Series A and Series C of each of the Liberty Braves common stock and the Liberty Media common stock trade on the Nasdaq Stock Market and Series B of each of these stocks trades on the OTC Markets. In addition, each series (Series A, Series B and Series C) of the Liberty SiriusXM common stock trades on the Nasdaq Global Select Market.

 

In the Recapitalization, each issued and outstanding share of Liberty’s existing common stock was reclassified and exchanged for (a) 1 share of the corresponding series of Liberty SiriusXM common stock, (b) 0.1 of a share of the corresponding series of Liberty Braves common stock and (c) 0.25 of a share of the corresponding series of Liberty Media common stock on April 15, 2016. Cash was paid in lieu of the issuance of any fractional shares.

 

In addition, following the creation of the new tracking stocks, Liberty expects to distribute to holders of its Liberty Braves common stock subscription rights to acquire shares of Series C Liberty Braves common stock. The record date, distribution date, and distribution ratio for the distribution of subscription rights have not been finalized. The Company expects to issue subscription rights to raise capital to repay the Intergroup Note (as defined below) and for working capital

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Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

purposes.  The subscription rights will enable the holders to acquire shares of Series C Liberty Braves common stock at a 20% discount to the volume weighted average trading price of the Series C Liberty Braves common stock. Liberty expects the subscription rights to be publicly traded, once the exercise price has been established and the rights offering to expire twenty trading days following its commencement. The rights offering is subject to various conditions.

 

Additionally, as a result of the Recapitalization, the Convertible Notes (note 9) will be convertible into cash based on the product of the conversion rate specified in the indenture and the basket of tracking stocks into which each outstanding share of Series A Liberty common stock has been reclassified (the “Securities Basket”). Furthermore, the Company is currently in discussions with the counterparties with regard to adjustments related to the Recapitalization to the outstanding Series A common stock warrants as well as the outstanding cash convertible note hedges and purchased call options.

 

A tracking stock is a type of common stock that the issuing company intends to reflect or "track" the economic performance of a particular business or "group," rather than the economic performance of the company as a whole. While the Liberty SiriusXM Group, Liberty Braves Group and Liberty Media Group have separate collections of businesses, assets and liabilities attributed to them, no group is a separate legal entity and therefore cannot own assets, issue securities or enter into legally binding agreements. Therefore, the Liberty SiriusXM Group, Liberty Braves Group and Liberty Media Group do not represent separate legal entities, but rather represent those businesses, assets and liabilities that have been attributed to each respective group. Holders of tracking stock have no direct claim to the group's stock or assets and are not represented by separate boards of directors. Instead, holders of tracking stock are stockholders of the parent corporation, with a single board of directors and subject to all of the risks and liabilities of the parent corporation.

 

The Liberty SiriusXM common stock is intended to track and reflect the separate economic performance of the businesses, assets and liabilities attributed to the Liberty SiriusXM Group. Liberty attributed to the Liberty SiriusXM Group its subsidiary SIRIUS XM, corporate cash of $50 million and its margin loan obligation incurred by a wholly-owned special purpose subsidiary of Liberty.

The Liberty Braves common stock is intended to track and reflect the separate economic performance of the businesses, assets and liabilities attributed to the Liberty Braves Group. Liberty attributed to the Liberty Braves Group its subsidiary, Braves Holdings, LLC (“Braves Holdings”), which indirectly owns the Atlanta Braves Major League Baseball Club (“ANLBC”) and certain assets and liabilities associated with ANLBC’s stadium and mixed use development project (the “Development Project”), corporate cash of $50 million and all liabilities arising under a note from Braves Holdings to Liberty, with a total capacity of up to $165 million of borrowings by Braves Holdings (the “Intergroup Note”) relating to funds to be borrowed and used for investment in the Development Project. As of March 31, 2016, and December 31, 2015, $101 million and $31 million, respectively, was outstanding under the Intergroup Note. The Intergroup Note is expected to be repaid using proceeds from the proposed subscription rights offering (as described in more detail below).  Any remaining proceeds from the rights offering will be attributed to the Liberty Braves Group.

The Liberty Media common stock is intended to track and reflect the separate economic performance of the businesses, assets and liabilities attributed to the Liberty Media Group. Liberty attributed to the Liberty Media Group all of the businesses, assets and liabilities of Liberty other than those specifically attributed to the Liberty Braves Group or the Liberty SiriusXM Group, including Liberty’s interests in Live Nation, minority equity investments in Time Warner, Inc. and Viacom, Inc., the Intergroup Note, the recovery received in connection with the Vivendi lawsuit, cash, a 20% interest in the Liberty Braves Group as well as Liberty’s 1.375% Cash Convertible Notes due 2023 and related financial instruments. 

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Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

(3)   Stock-Based Compensation

Liberty grants, to certain of its directors, employees and employees of its subsidiaries, restricted stock, restricted stock units and stock options to purchase shares of its common stock (collectively, "Awards"). The Company measures the cost of employee services received in exchange for an equity classified Award (such as stock options and restricted stock) based on the grant-date fair value of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award). The Company measures the cost of employee services received in exchange for a liability classified Award based on the current fair value of the Award, and remeasures the fair value of the Award at each reporting date.

In connection with the Recapitalization, all outstanding Awards with respect to Liberty common stock (“Liberty Awards”) will be adjusted pursuant to the anti-dilution provisions of the incentive plans under which the equity awards were granted, such that a holder of a Liberty Award received new corresponding equity awards relating to shares of one or more of Liberty SiriusXM common stock (a “Liberty Sirius XM Award”), Liberty Braves common stock (a “Liberty Braves Award”) and Liberty Media common stock (a “Liberty Media Award”) (collectively, the “Adjusted Liberty Awards”).

The exercise prices and number of shares subject to the Adjusted Liberty Awards will be determined based on 1) the exercise prices and number of shares subject to the Liberty Award, 2) the distribution ratios, 3) the pre-Recapitalization trading price of Liberty common stock and 4) the post-Recapitalization trading prices of Liberty SiriusXM common stock, Liberty Braves common stock and Liberty Media common stock, such that all of the pre-Recapitalization intrinsic value of the Liberty Awards was allocated among the Adjusted Liberty Awards.

Included in the accompanying condensed consolidated statements of operations are the following amounts of stock-based compensation, a portion of which relates to SIRIUS XM, as discussed below:

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

 

 

March 31,

 

 

    

2016

    

2015

 

 

 

(amounts in millions)

 

Cost of subscriber services:

 

 

 

 

 

 

Programming and content

 

$

4

 

4

 

Customer service and billing

 

 

1

 

1

 

Other

 

 

1

 

2

 

Other operating expense

 

 

3

 

4

 

Selling, general and administrative

 

 

25

 

33

 

 

 

$

34

 

44

 

 

During the three months ended March 31, 2016, the Company granted a total of approximately 785 thousand options to purchase shares of Series C common stock. A portion of the options granted was comprised of 10 thousand options with a weighted average grant-date fair value (“GDFV”) of $8.33 per share that vest semi-annually over 4 years. 

 

In connection with our CEO’s employment agreement, Liberty granted approximately 775 thousand options of Series C common stock and 39 thousand performance-based restricted stock units of Series C common stock. Such options and restricted stock units had a grant-date fair value of $8.91 per share and $37.76 per share, respectively. These options mainly vest on December 31, 2016, and the performance-based restricted stock units cliff vest in one year, subject to satisfaction of certain performance objectives. Performance objectives, which are subjective, are considered in determining the timing and amount of the compensation expense recognized. As the satisfaction of the performance objectives becomes probable, the Company records compensation expense. The value of the grant is remeasured at each reporting period.

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Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

 

The Company did not grant any options to purchase Series A or Series B common stock during the three months ended March 31, 2016.

Liberty calculates the GDFV for all of its equity classified awards and the subsequent remeasurement of its liability classified and certain performance-based Awards using the Black-Scholes Model. Liberty estimates the expected term of the Awards based on historical exercise and forfeiture data. The volatility used in the calculation for Awards is based on the historical volatility of Liberty common stock and the implied volatility of publicly traded Liberty options. Liberty uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject Awards.

Liberty—Outstanding Awards

The following tables present the number and weighted average exercise price ("WAEP") of Awards to purchase Liberty common stock granted to certain officers, employees and directors of the Company and certain Awards of employees of Starz.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A

 

 

    

    

    

 

    

Weighted

    

Aggregate

 

 

 

 

 

 

 

average

 

intrinsic

 

 

 

Liberty

 

 

 

remaining

 

value

 

 

 

Awards (000's)

 

WAEP

 

life

 

(millions)

 

Outstanding at January 1, 2016

 

2,360

 

$

23.36

 

 

 

 

 

 

 

Granted

 

 —

 

$

 —

 

 

 

 

 

 

 

Exercised

 

(159)

 

$

22.73

 

 

 

 

 

 

 

Forfeited/Cancelled

 

 —

 

$

 —

 

 

 

 

 

 

 

Outstanding at March 31, 2016

 

2,201

 

$

23.40

 

2.9

years

 

$

34

 

Exercisable at March 31, 2016

 

2,117

 

$

23.29

 

2.8

years

 

$

32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series C

 

 

    

    

    

 

    

Weighted

    

Aggregate

 

 

 

 

 

 

 

average

 

intrinsic

 

 

 

Liberty

 

 

 

remaining

 

value

 

 

 

Awards (000's)

 

WAEP

 

life

 

(millions)

 

Outstanding at January 1, 2016

 

10,613

 

$

30.09

 

 

 

 

 

 

 

Granted

 

785

 

$

37.66

 

 

 

 

 

 

 

Exercised

 

(369)

 

$

22.51

 

 

 

 

 

 

 

Forfeited/Cancelled

 

 —

 

$

 —

 

 

 

 

 

 

 

Outstanding at March 31, 2016

 

11,029

 

$

30.88

 

5.0

years

 

$

81

 

Exercisable at March 31, 2016

 

4,960

 

$

25.17

 

3.3

years

 

$

64

 

 

As of March 31, 2016, the total unrecognized compensation cost related to unvested Awards was approximately $62 million.  Such amount will be recognized in the Company's condensed consolidated statements of operations over a weighted average period of approximately 2.3 years.

As of March 31, 2016, Liberty reserved 13.2 million shares of Series A and Series C common stock for issuance under exercise privileges of outstanding stock Awards.

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Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

SIRIUS XM - Stock-based Compensation

SIRIUS XM granted various types of stock awards to its employees and members of its board of directors during the three months ended March 31, 2016. As of March 31, 2016, SIRIUS XM has approximately 334 million options outstanding of which approximately 116 million are exercisable, each with a weighted-average exercise price per share of $3.28 and $2.43, respectively. The aggregate intrinsic value of SIRIUS XM options outstanding and exercisable as of March 31, 2016 is $226 million and $176 million, respectively. The stock-based compensation expense related to SIRIUS XM was $24 million and $37 million for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, the total unrecognized compensation cost related to unvested SIRIUS XM stock options and restricted stock units was $227 million. The SIRIUS XM unrecognized compensation cost will be recognized in the Company's condensed consolidated statements of operations over a weighted average period of approximately 2.6 years.

(4)   Earnings Attributable to Liberty Media Corporation Stockholders Per Common Share

Basic earnings (loss) per common share ("EPS") is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented.

Series A, Series B and Series C Common Stock

The basic and diluted EPS calculations are based on the following weighted average outstanding shares of common stock. 

 

 

 

 

 

 

 

 

 

Liberty Common Stock

 

 

 

Three months

 

Three months

 

 

 

ended

 

ended

 

 

    

March 31, 2016

    

March 31, 2015

 

 

 

numbers of shares in millions

 

Basic EPS

 

335

 

342

 

Potentially dilutive shares

 

2

 

3

 

Diluted EPS

 

337

 

345

 

Excluded from diluted EPS for the three months ended March 31, 2016 are 24 million potential common shares because their inclusion would be antidilutive.

 

(5)   Assets and Liabilities Measured at Fair Value

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.  Liberty does not have any assets or liabilities required to be measured at fair value considered to be Level 3.

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Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Liberty's assets and liabilities measured at fair value are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at

 

Fair Value Measurements at

 

 

 

March 31, 2016

 

December 31, 2015

 

 

    

 

 

    

Quoted

    

 

    

 

    

Quoted

    

 

  

 

 

 

 

 

prices

 

 

 

 

 

prices

 

 

 

 

 

 

 

 

in active

 

Significant

 

 

 

in active

 

Significant

 

 

 

 

 

 

markets

 

other

 

 

 

markets

 

other

 

 

 

 

 

 

for identical

 

observable

 

 

 

for identical

 

observable

 

 

 

 

 

 

assets

 

inputs

 

 

 

assets

 

inputs

 

Description

 

Total

 

(Level 1)

 

(Level 2)

 

Total

 

(Level 1)

 

(Level 2)

 

 

 

amounts in millions

 

Cash equivalents

 

$

441

 

441

 

 —

 

68

 

68

 

 —

 

Short term marketable securities

 

$

61

 

61

 

 —

 

15

 

15

 

 —

 

Available-for-sale securities

 

$

497

 

451

 

46

 

474

 

425

 

49

 

Financial instrument assets

 

$

204

 

 —

 

204

 

232

 

 —

 

232

 

Debt

 

$

998

 

 —

 

998

 

995

 

 —

 

995

 

 

The majority of Liberty's Level 2 financial assets and debt are primarily investments in debt related instruments and certain derivative instruments. The Company notes that these assets and liabilities are not always traded publicly or not considered to be traded on "active markets," as defined in GAAP.  The fair values for such instruments are derived from a typical model using observable market data as the significant inputs or a trading price of a similar asset or liability is utilized.  Accordingly, those available-for-sale securities, financial instruments and debt or debt related instruments are reported in the foregoing table as Level 2 fair value. The financial instrument assets classified as Level 2 in the table above are included in the Other assets line item in the condensed consolidated balance sheets.

Realized and Unrealized Gains (Losses) on Financial Instruments

Realized and unrealized gains (losses) on financial instruments are comprised of changes in the fair value of the following:

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

 

 

March 31,

 

 

    

2016

    

2015

 

 

 

amounts in millions

 

Fair Value Option Securities

 

$

24

 

(31)

 

Cash convertible notes (a)

 

 

(3)

 

 —

 

Change in fair value of bond hedges (a)

 

 

(28)

 

8

 

Other derivatives (b)

 

 

(1)

 

(5)

 

 

 

$

(8)

 

(28)

 


(a)

Liberty issued $1 billion of cash convertible notes in October 2013 which are accounted for at fair value (Level 2), as elected by Liberty at the issuance of the notes. Contemporaneously with the issuance of the convertible notes, Liberty entered into privately negotiated cash convertible note hedges, which are expected to offset potential cash payments Liberty would be required to make in excess of the principal amount of the convertible notes, upon conversion of the notes. The bond hedges are marked to market based on the trading price of underlying securities and other observable market data as the significant inputs (Level 2). See note 9 for additional discussion of the convertible notes and the bond hedges. 

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Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

(b)

Derivatives are marked to market based on the trading price of underlying securities and other observable market data as the significant inputs (Level 2). During September 2014, Liberty entered into a forward contract to acquire up to 15.9 million shares of Live Nation common stock. Prior to the contract’s original expiration during March 2015, the Company extended the contract through October 15, 2015 with the expiration to occur on the sixtieth day following the completion of the counterparty’s initial hedge, which was November 27, 2015 and settlement occurred on December 2, 2015. The counterparty acquired the maximum number of Live Nation shares of common stock at a volume weighted average share price of $24.93 per share during September 2015. Liberty settled the contract for $396 million paid to the counterparty.

(6)   Investments in Available-for-Sale Securities and Other Cost Investments

All marketable equity and debt securities held by the Company are classified as available-for-sale ("AFS") and are carried at fair value generally based on quoted market prices. GAAP permits entities to choose to measure many financial instruments, such as AFS securities, and certain other items at fair value and to recognize the changes in fair value of such instruments in the entity's statement of operations (the "fair value option"). The Company previously entered into economic hedges for certain of its non-strategic AFS securities (although such instruments were not accounted for as fair value hedges by the Company). Changes in the fair value of these economic hedges were reflected in the Company's statement of operations as unrealized gains (losses). In order to better match the changes in fair value of the subject AFS securities and the changes in fair value of the corresponding economic hedges in the Company's financial statements, the Company elected the fair value option for those of its AFS securities which it considers to be non-strategic ("Fair Value Option Securities"). Accordingly, changes in the fair value of Fair Value Option Securities, as determined by quoted market prices, are reported in realized and unrealized gains (losses) on financial instruments in the accompanying condensed consolidated statements of operations.

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Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

Investments in AFS securities, including Fair Value Option Securities separately aggregated, and other cost investments are summarized as follows:

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2016

 

2015

 

 

 

amounts in millions

 

Liberty SiriusXM Group

 

 

 

 

 

 

Other AFS and cost investments

 

$

 —

 

 —

 

Total attributed Liberty Sirius Group

 

 

 —

 

 —

 

 

 

 

 

 

 

 

Liberty Braves Group

 

 

 

 

 

 

Other AFS and cost investments

 

 

8

 

8

 

Total attributed Liberty Braves Group

 

 

8

 

8

 

 

 

 

 

 

 

 

Liberty Media Group

 

 

 

 

 

 

Fair Value Option Securities

    

 

 

    

 

 

Time Warner, Inc. (a)

 

 

309

 

275

 

Viacom, Inc. (b)

 

 

76

 

76

 

Other equity securities

 

 

66

 

74

 

Other debt securities

 

 

23

 

25

 

Total Fair Value Option Securities

 

 

474

 

450

 

AFS and cost investments

 

 

 

 

 

 

Live Nation debt securities

 

 

24

 

24

 

Other AFS and cost investments

 

 

54

 

51

 

Total AFS and cost investments

 

 

78

 

75

 

Total attributed Liberty Media Group

 

 

552

 

525

 

 

 

 

 

 

 

 

Consolidated Liberty

 

$

560

 

533

 


(a)

See note 9 for details regarding the number and fair value of shares pledged as collateral pursuant to the Braves Holdings mixed-use development facility as of March 31, 2016.

(b)

During the three months ended March 31, 2015, Liberty sold 1.3 million shares of Viacom common stock for approximately $86 million in proceeds.

Unrealized Holding Gains and Losses

There were no unrealized holding gains and losses related to investments in AFS securities as of March 31, 2016 or December 31, 2015.

 

 

 

 

 

 

 

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Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

(7)   Investments in Affiliates Accounted for Using the Equity Method

Liberty has various investments accounted for using the equity method. The following table includes the Company's carrying amount and percentage ownership of the more significant investments in affiliates at March 31, 2016 and the carrying amount at December 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2016

 

December 31, 2015

 

 

    

Percentage

    

Fair Value

    

Carrying

    

Carrying

 

 

 

ownership

 

(Level 1)

 

amount

 

amount

 

 

 

dollar amounts in millions

 

Liberty SiriusXM Group

 

 

 

 

 

 

 

 

 

 

 

SIRIUS XM Canada

 

37

%

$

169

 

$

168

 

153

 

Total Liberty SiriusXM Group

 

 

 

 

 

 

 

168

 

153

 

 

 

 

 

 

 

 

 

 

 

 

 

Liberty Braves Group

 

 

 

 

 

 

 

 

 

 

 

Other

 

various

 

 

NA

 

 

52

 

39

 

Total Liberty Braves Group

 

 

 

 

 

 

 

52

 

39

 

 

 

 

 

 

 

 

 

 

 

 

 

Liberty Media Group

 

 

 

 

 

 

 

 

 

 

 

Live Nation (a)

 

35

%

$

1,554

 

 

745

 

764

 

Other

 

various

 

 

NA

 

 

155

 

159

 

Total Liberty Media Group

 

 

 

 

 

 

 

900

 

923

 

Consolidated Liberty

 

 

 

 

 

 

$

1,120

 

1,115

 


(a)

See note 9 for details regarding the number and fair value of shares pledged as collateral pursuant to certain margin loan agreements as of March 31, 2016.

 

The following table presents the Company's share of earnings (losses) of affiliates:

 

 

 

 

 

 

 

 

 

Three months ended 

 

 

 

March 31,

 

 

    

2016

    

2015

 

 

 

amounts in millions

 

Liberty SiriusXM Group

 

 

 

 

 

 

SIRIUS XM Canada

 

$

7

 

(7)

 

Total Liberty SiriusXM Group

 

 

7

 

(7)

 

 

 

 

 

 

 

 

Liberty Braves Group

 

 

 

 

 

 

Other

 

 

2

 

2

 

Total Liberty Braves Group

 

 

2

 

2

 

 

 

 

 

 

 

 

Liberty Media Group

 

 

 

 

 

 

Live Nation

 

 

(17)

 

(18)

 

Other

 

 

(4)

 

(14)

 

Total Liberty Media Group

 

 

(21)

 

(32)

 

Consolidated Liberty

 

$

(12)

 

(37)

 

 

 

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Table of Contents

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

SIRIUS XM Canada

 

SIRIUS XM has entered into agreements to provide SIRIUS XM Canada with the right to offer SIRIUS XM satellite radio service in Canada. The various license and services agreements with SIRIUS XM Canada will expire in 2017 and 2020. SIRIUS XM receives a percentage based royalty of 10% and 15% for certain types of subscription revenue earned by SIRIUS XM Canada for the distribution of Sirius and XM platforms, respectively, royalties for activation fees and premium services and reimbursement for other charges. At March 31, 2016, SIRIUS XM has approximately $3 million and $10 million in current and noncurrent related party liabilities, respectively, related to these agreements described above with SIRIUS XM Canada which are recorded in current and noncurrent other liabilities, respectively, in the Company’s condensed consolidated balance sheet.  Additionally, SIRIUS XM has approximately $5 million in current related party assets at March 31, 2016 due to activation fees and programming and chipset costs for which SIRIUS XM Canada reimburses SIRIUS XM that are recorded in other current assets in the Company’s condensed consolidated balance sheet. SIRIUS XM recorded approximately $10 million and $14 million in revenue for the three months ended March 31, 2016 and 2015, respectively, associated with these various agreements in the other revenue line in the condensed consolidated statements of operations.  SIRIUS XM Canada declared dividends to SIRIUS XM of $4 million during each of the three months ended March 31, 2016 and 2015.

 

(8)   Intangible Assets

Goodwill and Intangible Assets Not Subject to Amortization

There were no changes in the carrying amounts of goodwill or other intangible assets not subject to amortization during the three months ended March 31, 2016. 

Intangible Assets Subject to Amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2016

 

December 31, 2015

 

 

    

Gross

    

 

    

Net

    

Gross

    

 

    

Net

 

 

 

carrying

 

Accumulated

 

carrying

 

carrying

 

Accumulated

 

carrying

 

 

 

amount

 

amortization

 

amount

 

amount

 

amortization

 

amount

 

 

 

amounts in millions

 

Customer relationships

 

$

838

 

(194)

 

644

 

838

 

(179)

 

659

 

Licensing agreements

 

 

316

 

(88)

 

228

 

316

 

(81)

 

235

 

Other

 

 

630

 

(422)

 

208

 

609

 

(406)

 

203

 

Total

 

$

1,784

 

(704)

 

1,080

 

1,763

 

(666)

 

1,097

 

Amortization expense for intangible assets with finite useful lives was $39 million and $32 million for the three months ended March 31, 2016 and 2015, respectively. Based on its amortizable intangible assets as of March 31, 2016, Liberty expects that amortization expense will be as follows for the next five years (amounts in millions):