Investments In Affiliates Accounted For Using The Equity Method
|12 Months Ended|
Dec. 31, 2018
|Investments in Affiliates Accounted for Using the Equity Method|
|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, 2018, and the carrying amount at December 31, 2017:
The following table presents the Company’s share of earnings (losses) of affiliates:
SIRIUS XM Canada
On May 25, 2017, SIRIUS XM completed a recapitalization of Sirius XM Canada Holdings, Inc. (“SIRIUS XM Canada”), which is now a privately held corporation.
As of December 31, 2018, SIRIUS XM held a 70% equity interest and 33% voting interest in SIRIUS XM Canada, with the remainder of SIRIUS XM Canada’s voting and equity interests held by two shareholders. SIRIUS XM Canada is accounted for as an equity method investment as SIRIUS XM does not have the ability to direct the most significant activities that impact SIRIUS XM Canada’s economic performance. The total consideration from SIRIUS XM to SIRIUS XM Canada, excluding transaction costs, during the year ended December 31, 2017 was $309 million, which included $130 million in cash and SIRIUS XM issued 35 million shares of its common stock with an aggregate value of $179 million to the holders of the shares of SIRIUS XM Canada acquired in the transaction.
SIRIUS XM also made a contribution in the form of a loan to SIRIUS XM Canada in the aggregate amount of $131 million on May 25, 2017. The loan is denominated in Canadian dollars and is considered a long-term investment with any unrealized gains or losses reported within Accumulated other comprehensive (loss) income. Such loan has a term of fifteen years, bears interest at a rate of 7.62% per annum and includes customary covenants and events of default, including an event of default relating to SIRIUS XM Canada’s failure to maintain specified leverage ratios. In addition, the terms of the loan require SIRIUS XM Canada to prepay a portion of the outstanding principal amount of the loan within sixty days of the end of each fiscal year in an amount equal to any cash on hand in excess of C$10 million at the last day of the financial year if all target dividends have been paid in full.
SIRIUS XM also entered into a Services Agreement and an Advisory Services Agreement with SIRIUS XM Canada. Each agreement has a thirty year term. Pursuant to the Services Agreement, SIRIUS XM Canada will pay SIRIUS XM 25% of its gross revenue on a monthly basis through December 31, 2021 and 30% of its gross revenue on a monthly basis thereafter. Pursuant to the Advisory Services Agreement, SIRIUS XM Canada will pay SIRIUS XM 5% of its gross revenue on a monthly basis. These agreements supersede and replace the existing agreements between SIRIUS XM Canada and its predecessors and SIRIUS XM.
SIRIUS XM has approximately $11 million and $10 million in related party current assets as of December 31, 2018 and 2017, respectively. As of December 31, 2018 and 2017, the related party current asset balance included amounts due under the Service Agreement and Advisory Services Agreement and certain amounts due related to transactions outside of the scope of the new services arrangements. At December 31, 2018 and 2017, SIRIUS XM has approximately $9 million and $10 million in related party liabilities, respectively, related to the legacy agreements with SIRIUS XM Canada which are recorded in current and noncurrent other liabilities in the Company’s consolidated balance sheets. SIRIUS XM recorded approximately $97 million, $87 million and $46 million in revenue for the years ended December 31, 2018, 2017 and 2016, 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 $2 million, $4 million and $8 million during the years ended December 31, 2018, 2017 and 2016, respectively. These dividends were first recorded as a reduction to SIRIUS XM’s investment balance in Sirius XM Canada to the extent a balance existed and then as Other income for the remaining portion.
The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef