Quarterly report pursuant to Section 13 or 15(d)

Sirius XM Transactions (Notes)

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Sirius XM Transactions (Notes)
 9 Months Ended
Sep. 30, 2013
Business Acquisition [Line Items]  
Business Combination Disclosure [Text Block]
Sirius XM Radio, Inc. Transactions
On January 18, 2013, Liberty settled a block transaction with a financial institution taking possession of an additional 50 million common shares of SIRIUS XM Radio, Inc. ("SIRIUS XM"), for cash consideration of approximately $161 million, as well as converting its remaining SIRIUS XM Convertible Perpetual Preferred Stock, Series B-1, par value $0.001 per share, into 1,293,509,076 shares of SIRIUS XM Common Stock. As a result of these two transactions Liberty holds more than 50% of the common stock of SIRIUS XM entitled to vote on any matter, including the election of directors. Following the transactions, Liberty designated and SIRIUS XM's board of directors appointed certain directors and Liberty controls the board as of January 18, 2013. This resulted in the application of purchase accounting and the consolidation of SIRIUS XM in the first quarter of 2013. Liberty recorded a gain in the nine months ended September 30, 2013 of approximately $7.5 billion associated with the application of purchase accounting based on the difference between fair value and the carrying value of the ownership interest Liberty had in SIRIUS XM prior to the acquisition of the controlling interest. The gain on the transaction was excluded from taxable income, additionally, the difference between the book basis and tax basis of SIRIUS XM, as previously accounted for under the equity method, was relieved as a result of the transaction. The fair value of our ownership interest previously held ($10,215 million) and the fair value of the initial noncontrolling interest ($10,286 million) was determined based on the trading price (level 1) of SIRIUS XM on the last trading day prior to the acquisition of the controlling interest. Additionally, the noncontrolling interest includes the fair value of SIRIUS XM's fully vested options (level 2), the fair value of warrants outstanding (level 2) and the intrinsic value of a beneficial conversion feature accounted for in purchase accounting. Following the transaction date SIRIUS XM is a consolidated subsidiary with just less than a 50% noncontrolling interest accounted for in equity and the condensed consolidated statements of operations.
Initial purchase price allocation for SIRIUS XM is as follows (amounts in millions):
Fair value of SIRIUS XM equity interests
$
10,372

Fair value of SIRIUS XM debt securities
253

Noncontrolling interest
10,841

 
$
21,466

 
 
Cash and cash equivalents
$
569

Receivables
210

Property, plant and equipment
1,714

Goodwill
14,003

FCC Licenses
8,600

Tradenames
930

Intangible assets subject to amortization
930

Other assets
480

Debt
(2,490
)
Deferred revenue
(1,565
)
Deferred income tax liabilities, net
(911
)
Other liabilities assumed
(1,004
)
 
$
21,466



The initial purchase price allocation is subject to change upon receipt of the final valuation analysis for SIRIUS XM. The primary balances still subject to analysis are the property, plant and equipment, deferred revenue and other liabilities. Goodwill is calculated as the excess of the consideration transferred over the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and noncontractual relationships. SIRIUS XM applied purchase accounting for the acquisition of XM Satellite Radio Holdings, Inc. in 2008 and has entered into many of its operating agreements at market rates in recent years, therefore, the carrying value of the identifiable net assets are reflected at amounts near their fair value. Accordingly, a large percentage of Liberty's purchase price was allocated to goodwill.
The pro forma summarized combined unaudited balance sheet and statement of operations of Liberty using the historical financial statements for SIRIUS XM, giving effect to purchase accounting related adjustments made at the time of acquisition and excluding the impact of the gain, as if the transaction discussed above occurred for the Balance Sheet data as of such date and for the Statement of Operations data as if they had occurred on January 1, 2012, are as follows:

Summary Pro Forma Balance Sheet Data:
 
December 31, 2012
 
amounts in millions
(unaudited)
Current assets
$
4,039

Investments in equity method affiliates
$
851

Property, plant and equipment, net
$
1,871

Intangible assets not subject to amortization
$
23,877

Intangible assets subject to amortization, net
$
1,038

Other assets
$
1,939

Total assets
$
33,615

Long-term debt
$
2,486

Deferred tax liabilities, net
$
2,933

Other liabilities
$
3,656

Noncontrolling interests in equity of subsidiaries
$
10,833

Stockholders' Equity
$
13,707


Summary Pro Forma Operations Data:
 
Three months ended September 30, 2012
 
Nine months ended September 30, 2012
 
amounts in millions
(unaudited)
Revenue
$
1,019

 
2,827

Operating income (loss)
185

 
536

Interest expense
(47
)
 
(153
)
Share of earnings (loss) of affiliates
(17
)
 
(33
)
Earnings (loss) attributable to the noncontrolling interests
26

 
1,655

Net Earnings (loss) from continuing operations attributable to Liberty stockholders
171

 
1,923

 
 
 
 
 
Pro Forma basic net earnings (loss) from continuing operations attributable to Liberty stockholders per common share (note 5):
 
 
 
 
Series A and B common stock
$
1.44

 
16.03

Pro Forma diluted net earnings (loss) from continuing operations attributable to Liberty stockholders per common share (note 5):
 
 
 
 
Series A and B common stock
$
1.39

 
15.51



This pro forma information is not representative of Liberty's future financial position, future results of operations or future cash flows nor does it reflect what Liberty's financial position, results of operations or cash flows would have been if these transactions happened previously and Liberty controlled or discontinued owning these entities during the periods presented.
On October 9, 2013, Liberty entered into a share repurchase agreement with SIRIUS XM in which SIRIUS XM will acquire a to be determined number of shares for $500 million, in three separate tranches between the fourth quarter of 2013 and second quarter of 2014, to be determined based on a 1.5% discount to the average of the daily volume weighted average price (VWAP) per share of SIRIUS XM common stock over a period of ten days beginning on the third trading day following the date of the public release of SIRIUS XM's third quarter 2013 earnings subject to a cap on the average VWAP of $4.18 and a floor on the average VWAP of $3.64. The repurchase of shares will approximate 1% of the outstanding shares of SIRIUS XM on an as adjusted basis as the shares will be retired at the SIRIUS XM level. The retirement of SIRIUS XM shares on a consolidated basis is not expected to significantly impact the consolidated results except for an adjustment to noncontrolling interest as the shares are repurchased and retired. Liberty is expects to continue holding a majority of the SIRIUS XM common stock after the completion of share repurchases.

On November 4, 2013, SIRIUS XM announced the completion of the acquisition of Agero, Inc. ("Agero"), pursuant to a stock purchase agreement in which SIRIUS XM agreed to acquire the connected vehicle business of Agero for an aggregate purchase price of approximately $530 million in cash. Agero's connected vehicle business is a leader in implementing the next generation of connected vehicle services. The business offers a portfolio of location-based services through two-way wireless connectivity, including safety, security, convenience, maintenance and data services and remote vehicle diagnostics.