Annual report pursuant to Section 13 and 15(d)

Investments In Affiliates Accounted For Using The Equity Method

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Investments In Affiliates Accounted For Using The Equity Method
12 Months Ended
Dec. 31, 2015
Investments in Affiliates Accounted for Using the Equity Method  
Investments In Affiliates Accounted For Using The Equity Method

 (7)   Investments in Affiliates Accounted for Using the Equity Method

 

Liberty has various investments accounted for using the equity method. The following table includes the Company's carrying amount and percentage ownership and market value (level 1) of the more significant investments in affiliates at December 31, 2015, and the carrying amount at December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

December 31, 2014

 

 

    

Percentage

    

Market

    

Carrying

    

Carrying

 

 

 

ownership

 

Value

 

amount

 

amount

 

 

 

dollar amounts in millions

 

Live Nation (a)(b)

 

35%

 

$

1,711

 

$

764

 

396

 

SIRIUS XM Canada

 

37%

 

 

142

 

 

153

 

237

 

Other

 

various

 

 

NA

 

 

198

 

218

 

 

 

 

 

 

 

 

$

1,115

 

851

 

 

The following table presents the Company's share of earnings (losses) of affiliates:

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

    

2015

    

2014

    

2013

 

 

 

amounts in millions

 

Charter (c)

 

$

NA

 

(94)

 

(83)

 

SIRIUS XM (d)

 

 

NA

 

NA

 

8

 

Live Nation (a)

 

 

(27)

 

(30)

 

(18)

 

SIRIUS XM Canada (d)

 

 

(1)

 

5

 

7

 

Other

 

 

(12)

 

6

 

54

 

 

 

$

(40)

 

(113)

 

(32)

 


(a)

During September 2014, Liberty entered into a forward contract to acquire up to 15.9 million shares of Live Nation common stock. Prior to the contract’s original expiration during March 2015, the Company extended the contract through October 15, 2015 with expiration occurring on the sixtieth day following the completion of the counterparty’s initial hedge, which was November 27, 2015 and settlement occurring on December 2, 2015.  The counterparty acquired the maximum number of Live Nation shares of common stock at a volume weighted average share price of $24.93 per share during September 2015.  Liberty settled the contract for $396 million paid to the counterparty. During the year ended December 31, 2014, Liberty acquired an additional 1.7 million shares of Live Nation for approximately $39 million. During the year ended December 31, 2013, Liberty acquired an additional 1.7 million shares of Live Nation for approximately $19 million.

(b)

See note 9 for details regarding the number and fair value of shares pledged as collateral pursuant to certain margin loan agreements as of December 31, 2015.

(c)

As discussed below, Liberty acquired its interest in Charter during May 2013 for approximately $2.6 billion. Our share of losses related to Charter included $60 million and $51 million of losses due to the amortization of the excess basis of our investment during the years ended December 31, 2014 and 2013, respectively. As discussed in note 1, Liberty’s investment in Charter was spun off to stockholders as part of the Broadband Spin-Off, which was completed on November 4, 2014.

(d)

On January 18, 2013, as discussed in note 3, Liberty acquired an additional 50 million common shares and acquired a controlling interest in SIRIUS XM and as a result consolidates SIRIUS XM as of such date. SIRIUS XM has an investment in SIRIUS XM Canada that was recorded at fair value in purchase accounting. See discussion below of SIRIUS XM Canada.

 

SIRIUS XM Canada

 

In the acquisition of SIRIUS XM, Liberty acquired an interest in SIRIUS XM Canada which SIRIUS XM accounts for as an equity method affiliate. Liberty recognized the investment at fair value, based on the market price per share (level 1), on the date of acquisition.

 

SIRIUS XM has entered into agreements to provide SIRIUS XM Canada with the right to offer SIRIUS XM satellite radio service in Canada. The various license and service agreements with SIRIUS XM Canada will expire in 2017 and 2020. SIRIUS XM receives a percentage-based royalty of 10% and 15% for certain types of subscriber fees earned by SIRIUS XM Canada for the distribution of Sirius and XM platforms, respectively, royalties for activation fees and premium services and reimbursement for other charges. SIRIUS XM recognizes these payments on a gross basis as a principal obligor. The estimated fair value of deferred revenue from SIRIUS XM Canada as of the acquisition date was approximately $21 million, which is amortized on a straight-line basis through 2020, the end of the expected term of the agreements. SIRIUS XM provides programming and chipsets as well other services and SIRIUS XM Canada reimburses SIRIUS XM for such costs. At December 31, 2015, SIRIUS XM has approximately $6 million and $14 million in related party assets and liabilities, respectively, related to these agreements described above with SIRIUS XM Canada which are recorded in other assets and other liabilities, respectively, in the consolidated balance sheet. At December 31, 2014, SIRIUS XM had approximately $7 million and $18 million in related party assets and liabilities, respectively, related to these agreements described above with SIRIUS XM Canada which are recorded in other assets and other liabilities, respectively, in the consolidated balance sheet. Additionally, SIRIUS XM recorded approximately $56 million, $50 million and $49 million in revenue for the years ended December 31, 2015, 2014 and 2013, respectively, associated with these various agreements in the other revenue line in the consolidated statements of operations. SIRIUS XM Canada declared and paid dividends to SIRIUS XM of $16 million,  $43 million and $17 million during the years ended December 31, 2015, 2014 and 2013, respectively.

 

Charter Communications, Inc.

 

In May 2013, Liberty completed a transaction with investment funds managed by, or affiliated with, Apollo Management, Oaktree Capital Management and Crestview Partners to acquire approximately 26.9 million shares of common stock and approximately 1.1 million warrants in Charter for approximately $2.6 billion, which represented an approximate 27% beneficial ownership (including the warrants on an as if converted basis) in Charter at the time of purchase and a price per share of $95.50. Liberty accounted for the investment in Charter as an equity method affiliate based on the ownership interest obtained and the board seats held by Liberty appointed individuals. Liberty funded the purchase with a combination of cash of approximately $1.2 billion on hand and new margin loan arrangements on approximately 20.3 million Charter common shares, approximately 720 million SIRIUS XM common shares, approximately 8.1 million Live Nation common shares and a portion of Liberty's available for sale securities. Liberty allocated the purchase price between the shares of common stock and the warrants acquired in the transaction by determining the fair value of the publicly traded warrants and allocating the remaining balance to the shares acquired, which resulted in an excess basis in the investment of $2.5 billion. The excess basis was primarily allocated to franchise fees, customer relationships, debt and goodwill based on a valuation of Charter's assets and liabilities. During the years ended December 31, 2014 and 2013, the Company recognized $72 million and $93 million, respectively, in losses in its investment in Charter shares and warrants due to warrant and stock option exercises at Charter below Liberty's book basis per share. Dilution losses are included in the other, net line in the accompanying consolidated statements of operations. As discussed in note 1, Liberty’s investment in Charter was spun off to stockholders as part of the Broadband Spin-Off, which was completed on November 4, 2014. Liberty ceased recording the results of Charter in its financial statements as of the date of the completion of the Broadband Spin-Off.