10-QPeriod: Q2 FY2014

Liberty Media Corp Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 5, 2014For Securities:FWONKFWONAFWONB

Summary

Liberty Media Corporation (FWONK) reported its second quarter 2014 results, with a significant focus on its consolidated subsidiary, SIRIUS XM Holdings. Overall revenue saw an increase driven primarily by SIRIUS XM's performance. SIRIUS XM reported solid subscriber growth and improved revenue from both subscription and other sources. The company's Adjusted OIBDA also showed an increase, reflecting operational efficiencies at SIRIUS XM, though this was partially offset by declines in other segments like TruePosition and ANLBC. Liberty Media's 'Corporate and Other' segment experienced revenue and Adjusted OIBDA declines, partly due to specific contractual arrangements and operational impacts at ANLBC. Key financial movements include a substantial increase in interest expense, largely attributable to the full consolidation of SIRIUS XM's debt. The company also experienced significant fluctuations in gains and losses on financial instruments, with a notable gain on transactions in the prior year related to the SIRIUS XM acquisition. Despite these complexities, Liberty Media's net earnings for the quarter were $106 million, a decrease from the prior year's $152 million, largely due to the absence of the significant gain recognized in Q2 2013 from the SIRIUS XM purchase accounting treatment. The company's liquidity remains solid, with substantial cash and cash equivalents, and it has an ongoing share repurchase program available.

Financial Highlights

49 data points
Beta

Revenue

$1.16B

Net Income

$50.00M

4.3% Net Margin

EPS (Diluted)

$0.14

Total Assets

$34.08B

Cash & Equivalents

$566.00M

Free Cash Flow

$225.00M

Financial Statements
Beta
Revenue$1.16B
SG&A Expenses$215.00M
Operating Expenses$929.00M
Operating Income$231.00M
Interest Expense$62.00M
Net Income$50.00M
EPS (Basic)$0.15
EPS (Diluted)$0.14
Shares Outstanding (Basic)341.00M
Shares Outstanding (Diluted)345.00M

Key Highlights

  • 1Consolidated revenue increased by $82 million and $304 million for the three and six months ended June 30, 2014, respectively, primarily driven by SIRIUS XM's revenue growth.
  • 2SIRIUS XM reported strong performance with subscriber revenue up 8% and other revenue up 24% (three months) and 26% (six months) year-over-year.
  • 3Consolidated Adjusted OIBDA increased by $10 million and $42 million for the three and six months ended June 30, 2014, respectively, largely due to SIRIUS XM's improved operating efficiencies.
  • 4Interest expense more than doubled for both the three-month ($62 million vs. $28 million) and six-month ($115 million vs. $39 million) periods ended June 30, 2014, mainly due to the inclusion of SIRIUS XM's debt.
  • 5Net earnings were $106 million for the three months ended June 30, 2014, down from $152 million in the prior year, primarily due to the absence of a $7.5 billion gain recognized in Q2 2013 related to the SIRIUS XM acquisition.
  • 6Liberty Media had $396 million in cash and cash equivalents and $332 million in unencumbered Fair Value Option AFS Securities at the corporate level as of June 30, 2014.
  • 7The company has $327 million remaining under its $450 million share repurchase program authorized in January 2013.

Frequently Asked Questions

The primary driver of Liberty Media's revenue growth for the three and six months ended June 30, 2014, was the strong performance of its consolidated subsidiary, SIRIUS XM Holdings. SIRIUS XM's revenue increased significantly due to subscriber growth and a full period of consolidation.

The decrease in net earnings from $152 million in Q2 2013 to $106 million in Q2 2014 is largely due to the absence of a significant one-time gain of approximately $7.5 billion recognized in the prior year's second quarter. This gain was related to the application of purchase accounting for Liberty Media's acquisition of a controlling interest in SIRIUS XM.

Liberty Media faces numerous risks, including fluctuations in consumer demand for its products and services, competitive responses, uncertainties in new business development, reliance on automakers for SIRIUS XM subscribers, the ability to attract and retain profitable subscribers, potential interruptions to IT and communication systems, increased royalty costs, and general economic conditions. These factors could materially impact future results.

Liberty Media manages market risk through established policies and procedures. For interest rate risk, it aims for an appropriate mix of fixed and variable rate debt and uses swap arrangements. For stock price risk, it monitors market changes and periodically uses financial instruments like equity collars to manage risk associated with its significant investment holdings.