Certain statements in this Quarterly Report on Form 10-Q constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, including statements regarding our projected
sources and uses of cash; the payment of dividends by Sirius XM Holdings Inc.
("Sirius XM Holdings"); fluctuations in interest rates and stock prices; the
impacts of COVID-19 (as defined below); the impact of accounting policies and
pronouncements; and the anticipated non-material impact of certain contingent
liabilities related to legal and tax proceedings and other matters arising in
the ordinary course of business. Where, in any forward-looking statement, we
express an expectation or belief as to future results or events, such
expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the expectation or belief
will result or be achieved or accomplished. The following include some but not
all of the factors (as they relate to our consolidated subsidiaries and equity
affiliates) that could cause actual results or events to differ materially from
those anticipated:
the impact of the novel coronavirus ("COVID-19") pandemic and local, state and
? federal governmental responses to the pandemic on the economy, our customers,
our vendors and our businesses generally;
? consumer demand for our products and services and our ability to adapt to
changes in demand;
? competitor responses to our businesses' products and services;
? uncertainties inherent in the development and integration of new business lines
and business strategies;
uncertainties associated with product and service development and market
? acceptance, including the development and provision of programming for
satellite radio and telecommunications technologies;
? our businesses' significant dependence upon automakers;
? our businesses' ability to attract and retain subscribers in the future;
? our future financial performance, including availability, terms and deployment
of capital;
? our ability to successfully integrate and recognize anticipated efficiencies
and benefits from the businesses we acquire;
? the ability of suppliers and vendors to deliver products, equipment, software
and services;
interruption or failure of our information technology and communication
? systems, including the failure of Sirius XM Holdings' satellites, could
negatively impact our results and brand;
? royalties for music rights have increased and may continue to do so in the
future;
? the outcome of any pending or threatened litigation or investigation;
? availability of qualified personnel;
changes in, or failure or inability to comply with, government regulations,
? including, without limitation, regulations of the Federal Communications
Commission and consumer protection laws, and adverse outcomes from regulatory
proceedings;
? changes in the nature of key strategic relationships with partners, vendors and
joint venturers;
? general economic and business conditions and industry trends;
? consumer spending levels, including the availability and amount of individual
consumer debt;
? rapid technological and industry changes;
? impairments of third-party intellectual property rights;
? our indebtedness could adversely affect operations and could limit the ability
of our subsidiaries to react to changes in the economy or our industry;
failure to protect the security of personal information about our businesses'
? customers, subjecting our businesses to potentially costly government
enforcement actions or private litigation and reputational damage;
? the regulatory and competitive environment of the industries in which we, and
the entities in which we have interests, operate; and
? threatened terrorist attacks, political unrest in international markets and
ongoing military action around the world.
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For additional risk factors, please see Part I, Item 1A. Risk Factors of our
Annual Report on Form 10-K for the year ended December 31, 2019, Part II, Item
1A. Risk Factors of our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2020 and Part II, Item 1A. Risk Factors of this Quarterly Report on
Form 10-Q. Any forward-looking statements and such risks, uncertainties and
other factors speak only as of the date of this Quarterly Report, and we
expressly disclaim any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statement contained herein, to reflect any
change in our expectations with regard thereto, or any other change in events,
conditions or circumstances on which any such statement is based.
The following discussion and analysis provides information concerning our
results of operations and financial condition. This discussion should be read in
conjunction with our accompanying condensed consolidated financial statements
and the notes thereto and our Annual Report on Form 10-K for the year ended
December 31, 2019.
The information contained herein relates to Liberty Media Corporation and its
controlled subsidiaries ("Liberty," the "Company," "we," "us," or "our" unless
the context otherwise requires).
Overview
We own controlling and non-controlling interests in a broad range of media,
communications and entertainment companies. Our largest operating subsidiary,
which is also a reportable segment, is Sirius XM Holdings. Sirius XM Holdings
provides a subscription based satellite radio service through its Sirius XM
business and operates a music discovery platform through its Pandora business,
which was acquired by Sirius XM Holdings on February 1, 2019. Sirius XM
features music, sports, entertainment, comedy, talk, news, traffic and weather
channels as well as infotainment services in the United States on a subscription
fee basis through its two proprietary satellite radio systems and through the
internet via applications for mobile devices, home devices and other consumer
electronic equipment. The Pandora business operates a music, comedy and podcast
streaming discovery platform, offering a personalized experience for each
listener wherever and whenever they want to listen, whether through mobile
devices, car speakers or connected devices in the home. Formula 1 is a
wholly-owned consolidated subsidiary and is also a reportable segment. Formula 1
is a global motorsports business that holds exclusive commercial rights with
respect to the World Championship, an annual, approximately nine-month long,
motor race-based competition in which teams compete for the Constructors'
Championship and drivers compete for the Drivers' Championship. The World
Championship takes place on various circuits with a varying number of events
("Events") taking place in different countries around the world each
season. Formula 1 is responsible for the commercial exploitation and development
of the World Championship as well as various aspects of its management and
administration.
Our "Corporate and Other" category includes our consolidated subsidiary, Braves
Holdings, LLC ("Braves Holdings") and corporate expenses. Braves Holdings owns
the Atlanta Braves Major League Baseball Club ("ANLBC"), certain of the Atlanta
Braves' minor league clubs and certain assets and liabilities associated with
ANLBC's stadium and mixed use development project (the "Development Project").
In addition to the foregoing businesses, we hold ownership interests in Live
Nation Entertainment, Inc. ("Live Nation") and through Sirius XM Holdings,
Sirius XM Canada Holdings, Inc. ("Sirius XM Canada") and SoundCloud Holdings,
LLC ("SoundCloud"), which we account for as equity method investments; and we
hold investments and related financial instruments in public companies such as
AT&T, which are accounted for at their respective fair market values and are
included in the "Corporate and other" category.
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 (the "Braves Group") and Formula
One 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, Braves Group and Formula One 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
therefore, do not own, by virtue of their ownership of a Liberty tracking stock,
any equity or voting interest in a public company, such as Sirius XM Holdings or
Live Nation, in which Liberty holds an interest and that is attributed to
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a Liberty tracking stock group, such as the Liberty SiriusXM Group. Holders of
tracking stock are also 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.
On April 22, 2020, the Company's board of directors approved the immediate
reattribution of certain assets and liabilities between the Formula One Group
and the Liberty SiriusXM Group (collectively, the "reattribution").
The assets reattributed from the Formula One Group to the Liberty SiriusXM
Group, valued at $2.8 billion, consisted of:
? Liberty's entire Live Nation stake, consisting of approximately 69.6 million
shares of Live Nation common stock;
a newly-created Formula One Group intergroup interest, consisting of
? approximately 5.3 million notional shares of Liberty Formula One common stock,
to cover exposure under Liberty's 1.375% cash convertible senior notes due 2023
(the "Convertible Notes");
? the bond hedge and warrants associated with the Convertible Notes;
the entire Liberty SiriusXM Group intergroup interest, consisting of
? approximately 1.9 million notional shares of Liberty SiriusXM common stock,
thereby eliminating the Liberty SiriusXM Group intergroup interest; and
a portion, consisting of approximately 2.3 million notional shares of Liberty
? Braves common stock, of the Formula One Group's intergroup interest in the
Braves Group, to cover exposure under the Convertible Notes.
The reattributed liabilities, valued at $1.3 billion, consisted of:
? the Convertible Notes;
? Liberty's 2.25% exchangeable senior debentures due 2048; and
? Liberty's margin loan secured by shares of Live Nation ("Live Nation Margin
Loan").
Similarly, $1.5 billion of net asset value has been reattributed from the
Liberty SiriusXM Group to the Formula One Group, comprised of:
a call spread between the Formula One Group and the Liberty SiriusXM Group with
? respect to 34.8 million of the Live Nation shares that were reattributed to the
Liberty SiriusXM Group; and
a net cash payment of $1.4 billion from the Liberty SiriusXM Group to the
Formula One Group, which was funded by a combination of (x) cash on hand, (y)
an additional $400 million drawn from the Company's existing margin loan
secured by shares of common stock of Sirius XM Holdings, resulting in an
? aggregate outstanding balance of $750 million, and (z) the creation of an
intergroup loan obligation from the Liberty SiriusXM Group to the Formula One
Group in the principal amount of $750 million, plus interest thereon, which was
repaid with the proceeds from the rights offering described below (the
"Intergroup Loan").
The reattribution is reflected in the Company's financial statements on a
prospective basis.
The term "Liberty SiriusXM Group" does not represent a separate legal entity,
rather it represents those businesses, assets and liabilities that have been
attributed to that group. As of June 30, 2020, the Liberty SiriusXM Group is
primarily comprised of Liberty's interests in Sirius XM Holdings and Live
Nation, corporate cash, Liberty's 1.375% Cash Convertible Notes due 2023 and
related financial instruments, Liberty's 2.125% Exchangeable Senior Debentures
due 2048, Liberty's 2.25% Exchangeable Senior Debentures due 2048, Liberty's
2.75% Exchangeable Senior Debentures due 2049 and margin loan obligations
incurred by wholly-owned special purpose subsidiaries of Liberty. As of June 30,
2020, the Liberty SiriusXM Group has cash and cash equivalents of approximately
$1,924 million, which includes approximately $1,770 million of subsidiary cash.
Additionally, the Liberty SiriusXM Group retains an approximate 3.8% intergroup
interest in the Braves Group and an approximate 2.2% intergroup interest in the
Formula One Group as of June 30, 2020.
Sirius XM Holdings is the only operating subsidiary attributed to the Liberty
SiriusXM Group. In the event Sirius XM Holdings were to become insolvent or file
for bankruptcy, Liberty's management would evaluate the circumstances at such
time and take appropriate steps in the best interest of all of its stockholders,
which may not be in the best interest of a
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particular group or groups when considered independently. In such a situation,
Liberty's management and its board of directors would have several approaches at
their disposal, including, but not limited to, the conversion of the Liberty
SiriusXM common stock into another tracking stock of Liberty, the reattribution
of assets and liabilities among Liberty's tracking stock groups or the
restructuring of Liberty's tracking stocks to either create a new tracking stock
structure or eliminate it altogether. On February 1, 2019, Sirius XM Holdings
acquired Pandora. See note 3 to the accompanying condensed consolidated
financial statements for more information regarding the acquisition of Pandora.
The term "Braves Group" does not represent a separate legal entity, rather it
represents those businesses, assets and liabilities that have been attributed to
that group. As of June 30, 2020, the Braves Group is primarily comprised of
Braves Holdings, which indirectly owns ANLBC and certain assets and liabilities
associated with ANLBC's stadium and the Development Project, and corporate cash.
As of June 30, 2020, the Braves Group has cash and cash equivalents of
approximately $308 million. Additionally, the Liberty SiriusXM Group and the
Formula One Group retain intergroup interests in the Braves Group.
The term "Formula One Group" does not represent a separate legal entity, rather
it represents those businesses, assets and liabilities that have been attributed
to that group. As of June 30, 2020, the Formula One Group is primarily comprised
of all of the businesses, assets and liabilities of Liberty, other than those
specifically attributed to the Liberty SiriusXM Group or the Braves Group,
including Liberty's interest in Formula 1, an approximate 11.3% intergroup
interest in the Braves Group, Liberty's 1% Cash Convertible Notes due 2023 and
Liberty's 2.25% Exchangeable Senior Debentures due 2046. The Formula One Group
has cash and cash equivalents of approximately $1,767 million as of June 30,
2020, which includes $324 million of subsidiary cash.
On April 22, 2020, the Company's board of directors authorized management of the
Company to cause subscription rights (the "Series C Liberty SiriusXM Rights") to
purchase shares of Series C Liberty SiriusXM common stock, par value $0.01 per
share ("LSXMK"), in a rights offering (the "LSXMK rights offering") to be
distributed to holders of Series A Liberty SiriusXM common stock, par value
$0.01 per share, Series B Liberty SiriusXM common stock, par value $0.01 per
share, and LSXMK. In the LSXMK rights offering, Liberty distributed 0.0939 of a
Series C Liberty SiriusXM Right for each share of Series A, Series B or Series C
Liberty SiriusXM common stock held as of 5:00 p.m., New York City time, on May
13, 2020. Fractional Series C Liberty SiriusXM Rights were rounded up to the
nearest whole right. Each whole Series C Liberty SiriusXM Right entitled the
holder to purchase, pursuant to the basic subscription privilege, one share of
LSXMK at a subscription price of $25.47, which was equal to an approximate 20%
discount to the volume weighted average trading price of LSXMK for the 3-day
trading period ending on and including May 8, 2020. Each Series C Liberty
SiriusXM Right also entitled the holder to subscribe for additional shares of
LSXMK that were unsubscribed for in the LSXMK rights offering pursuant to an
oversubscription privilege. The LSXMK rights offering commenced on May 18, 2020,
which was also the ex-dividend date for the distribution of the Series C Liberty
SiriusXM Rights. The LSXMK rights offering expired at 5:00 p.m. New York City
time, on June 5, 2020 and was fully subscribed with 29,594,089 shares of LSXMK
issued to those rightsholders exercising basic and, if applicable,
oversubscription privileges. The proceeds from the LSXMK rights offering, which
aggregated approximately $754 million, were used to repay the outstanding
balance on the Intergroup Loan and accrued interest.
In December 2019, Chinese officials reported a novel coronavirus outbreak.
COVID-19 has since spread internationally. On March 11, 2020, the World Health
Organization ("WHO") assessed COVID-19 as a global pandemic, causing many
countries throughout the world to take aggressive actions, including imposing
travel restrictions and stay-at-home orders, closing public attractions and
restaurants, and mandating social distancing practices. As a result, the start
of the 2020 Formula 1 race calendar and the Major League Baseball season were
delayed until the beginning of July 2020 and end of July 2020, respectively. In
addition, in mid-March 2020, Live Nation suspended all large-scale live
entertainment events due to COVID-19. As a result, the Company's results of
operations have been negatively impacted by COVID-19 during the three and six
months ended June 30, 2020. Further, Formula 1, the Atlanta Braves and Live
Nation will continue to be materially impacted by COVID-19 and local state, and
federal government actions taken in response, which will have a negative impact
on our results of operations and financial condition in future periods. See Part
II, Item 1A. Risk Factors.
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Results of Operations-Consolidated
General. We provide in the tables below information regarding our consolidated
operating results and other income and expense, as well as information regarding
the contribution to those items from our reportable segments. The "Corporate and
other" category consists of those assets or businesses which do not qualify as a
separate reportable segment. For a more detailed discussion and analysis of the
financial results of our principal reportable segment see "Results of
Operations-Businesses" below.
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