| Information About Liberty's Operating Segments |
(13) Information About Liberty's Operating Segments
The Company, through its ownership interests in subsidiaries and other companies, is primarily engaged in the media, communications and entertainment industries. The Company identifies its reportable segments as (A) those consolidated subsidiaries that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA (as defined below) or total assets and (B) those equity method affiliates whose share of earnings represent 10% or more of the Company's annual pre-tax earnings.
The Company evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue and Adjusted OIBDA. In addition, the Company reviews nonfinancial measures such as subscriber growth, churn and penetration.
The Company defines Adjusted OIBDA as revenue less operating expenses, and selling, general and administrative expenses excluding all stock-based compensation, separately reported litigation settlements and restructuring and impairment charges. The Company believes this measure is an important indicator of the operational strength and performance of its businesses, including each business's ability to service debt and fund capital expenditures. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock-based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. The Company generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.
For the nine months ended September 30, 2018, the Company has identified the following subsidiaries as its reportable segments:
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SIRIUS XM is a consolidated subsidiary that provides a subscription based satellite radio service. SIRIUS XM transmits 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 a larger set of music and other channels, SiriusXM On Demand featuring recent and archived shows, and SiriusXM Video, though its streaming service, available online and through applications for mobile devices, home devices and other consumer electronic equipment. SIRIUS XM also provides connected vehicle services. SIRIUS XM’s connected vehicle services are designed to enhance the safety, security and driving experience for vehicle operators while providing marketing and operational benefits to automakers and their dealers.
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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 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. The Company acquired a controlling interest in Formula 1 on January 23, 2017, at which time it began consolidating the results of the Formula 1 business.
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The Company's segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, differing revenue sources and marketing strategies. The significant accounting policies of the segments are the same as those described in the Company's summary of significant policies in the Company's annual financial statements filed on Form 10-K.
Performance Measures
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Three months ended September 30,
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2018
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2017
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Adjusted
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Adjusted
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Revenue
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OIBDA
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Revenue
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OIBDA
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amounts in millions
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Liberty SiriusXM Group
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SIRIUS XM
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$
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1,468
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587
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1,379
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549
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Corporate and other
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—
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(4)
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—
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(6)
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Total Liberty SiriusXM Group
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1,468
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583
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1,379
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543
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Braves Group
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Corporate and other
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200
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72
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185
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48
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Total Braves Group
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200
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72
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185
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48
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Formula One Group
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Formula 1
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647
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158
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501
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106
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Corporate and other
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—
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(2)
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—
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(2)
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Total Formula One Group
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647
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156
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501
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104
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Consolidated Liberty
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$
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2,315
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811
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2,065
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695
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Nine months ended September 30,
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2018
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2017
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Adjusted
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Adjusted
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Revenue
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OIBDA
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Revenue
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OIBDA
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amounts in millions
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Liberty SiriusXM Group
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SIRIUS XM
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$
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4,275
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1,659
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4,021
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1,568
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Corporate and other
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—
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(15)
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—
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(13)
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Total Liberty SiriusXM Group
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4,275
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1,644
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4,021
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1,555
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Braves Group
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Corporate and other
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410
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100
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366
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46
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Total Braves Group
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410
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100
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366
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46
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Formula One Group
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Formula 1
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1,346
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295
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1,213
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288
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Corporate and other
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—
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(12)
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—
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(29)
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Total Formula One Group
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1,346
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283
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1,213
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259
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Consolidated Liberty
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$
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6,031
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2,027
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5,600
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1,860
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Other Information
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September 30, 2018
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Total
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Investments
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Capital
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assets
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in affiliates
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expenditures
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amounts in millions
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Liberty SiriusXM Group
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SIRIUS XM
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$
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27,900
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661
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239
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Corporate and other
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576
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—
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—
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Total Liberty SiriusXM Group
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28,476
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661
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239
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Braves Group
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Corporate and other
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1,913
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97
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15
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Total Braves Group
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1,913
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97
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15
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Formula One Group
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Formula 1
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9,177
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—
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9
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Corporate and other
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2,306
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972
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2
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Total Formula One Group
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11,483
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972
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11
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Elimination (1)
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(248)
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—
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—
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Consolidated Liberty
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$
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41,624
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1,730
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265
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(1)
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This is primarily the intergroup interest in the Braves Group held by the Formula One Group, as discussed in note 3. The intergroup interest attributable to the Formula One Group is presented as an asset and the intergroup interest attributable to the Braves Group is presented as a liability in the attributed financial statements and the offsetting amounts between tracking stock groups are eliminated in consolidation.
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The following table provides a reconciliation of Consolidated segment Adjusted OIBDA to Operating income (loss) and Earnings (loss) before income taxes:
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Three months ended
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Nine months ended
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September 30,
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September 30,
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2018
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2017
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2018
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2017
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amounts in millions
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Consolidated segment Adjusted OIBDA
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$
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811
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695
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2,027
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1,860
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Legal settlement (note 12)
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—
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—
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(69)
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—
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Stock-based compensation
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(46)
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(85)
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(145)
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(182)
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Depreciation and amortization
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(234)
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(228)
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(681)
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(615)
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Operating income (loss)
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531
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382
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1,132
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1,063
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Interest expense
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(150)
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(159)
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(453)
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(448)
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Share of earnings (losses) of affiliates, net
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58
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155
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72
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167
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Realized and unrealized gains (losses) on financial instruments, net
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(31)
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18
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180
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(43)
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Other, net
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10
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(11)
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37
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2
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Earnings (loss) before income taxes
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$
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418
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385
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968
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741
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