10-QPeriod: Q2 FY2013

Liberty Media Corp Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 6, 2013For Securities:FWONKFWONAFWONB

Summary

Liberty Media Corporation's (FWONK) Q2 2013 filing reveals significant strategic shifts, most notably the acquisition of a controlling interest in SIRIUS XM Radio, Inc. (SIRIUS XM) on January 18, 2013. This acquisition led to the consolidation of SIRIUS XM's financial results and a substantial impact on Liberty Media's revenue and profitability for the period. The company reported a significant gain of approximately $7.5 billion due to the application of purchase accounting for this transaction. As a result of these changes, Liberty Media's financial reporting now treats Starz operations as discontinued operations, with historical financial data reflecting Starz as the accounting successor. For investors, the consolidation of SIRIUS XM represents a major operational change, providing a significant boost to consolidated revenue and Adjusted OIBDA. However, it also brought increased interest expense due to acquired debt. The company also made substantial investments in Charter Communications, Inc., further diversifying its portfolio. While Liberty Media holds a significant stake in SIRIUS XM, it's important to note that direct access to SIRIUS XM's substantial operating cash flows is limited due to SIRIUS XM being a separate public company with a significant noncontrolling interest.

Financial Highlights

48 data points
Beta

Revenue

$1.08B

Net Income

$93.00M

8.6% Net Margin

EPS (Diluted)

$0.26

Total Assets

$33.88B

Cash & Equivalents

$937.00M

Free Cash Flow

$230.00M

Financial Statements
Beta
Revenue$1.08B
SG&A Expenses$186.00M
Operating Expenses$852.00M
Operating Income$226.00M
Interest Expense$28.00M
Net Income$93.00M
EPS (Basic)$0.26
EPS (Diluted)$0.26
Shares Outstanding (Basic)357.00M
Shares Outstanding (Diluted)363.00M

Key Highlights

  • 1Acquisition of controlling interest in SIRIUS XM on January 18, 2013, leading to its consolidation and a significant increase in reported revenue and Adjusted OIBDA.
  • 2A substantial gain of approximately $7.5 billion was recognized in the six months ended June 30, 2013, related to the application of purchase accounting for the SIRIUS XM acquisition.
  • 3Starz operations are now presented as discontinued operations following the spin-off on January 11, 2013, with Liberty Media acting as the accounting successor.
  • 4Investment of $2.6 billion in Charter Communications, Inc. during the first six months of 2013, acquiring approximately 27% beneficial ownership.
  • 5Consolidated revenue increased significantly to $1,078 million for the quarter and $1,867 million for the six months, largely driven by SIRIUS XM's inclusion.
  • 6Adjusted OIBDA saw a substantial increase to $372 million for the quarter and $643 million for the six months, primarily due to SIRIUS XM's contribution.
  • 7Liberty Media had a cash balance of $937 million as of June 30, 2013, with additional liquidity sources available.

Frequently Asked Questions

The most significant event was the acquisition of a controlling interest in SIRIUS XM Radio, Inc. on January 18, 2013. This led to the consolidation of SIRIUS XM's financial results into Liberty Media's statements, drastically increasing revenues and operational metrics. It also resulted in a large one-time gain due to purchase accounting adjustments.

The spin-off of Starz on January 11, 2013, resulted in Starz's historical financial statements being treated as those of Liberty Media for reporting purposes (Liberty Media as the 'accounting successor'). However, the operations of Starz that were spun off are now presented as 'discontinued operations' in Liberty Media's financial statements.

As of June 30, 2013, Liberty Media reported a cash balance of $937 million. Additionally, it had $516 million in unencumbered Fair Value Option securities, providing further liquidity. The company also has access to cash generated from operations and potential proceeds from asset sales and debt borrowings.

Key risks include consumer demand for products and services, competitor responses, uncertainties in new business development, reliance on automakers, subscriber retention at SIRIUS XM, the recoverability of goodwill, potential failures in IT and communication systems (including satellites), increased music royalty rates, litigation outcomes, regulatory changes, and general economic conditions. The report also notes potential limitations in managing business affiliates and the ability to access cash from operating subsidiaries.