Quarterly report pursuant to Section 13 or 15(d)

Investments in Affiliates Accounted for Using the Equity Method

v3.10.0.1
Investments in Affiliates Accounted for Using the Equity Method
 6 Months Ended
Jun. 30, 2018
Equity Method Investments and Joint Ventures [Abstract]  
Investments in Affiliates Accounted for Using the Equity Method
Investments in Affiliates Accounted for Using the Equity Method

Investment in LendingTree

The Company has various investments accounted for using the equity method. The following table includes the Company’s carrying amount and percentage ownership of the more significant investments in affiliates at June 30, 2018 and the carrying amount at December 31, 2017:
 
June 30, 2018
 
December 31, 2017
 
Percentage
ownership
 
Market
value
 
Carrying
amount
 
Carrying
amount
 
 
 
dollars in thousands
LendingTree
25.89
%
 
$
689,289

 
$
116,554

 
114,655

Other
various

 
NA

 
5,326

 
—

 
 
 
 
 
$
121,880

 
114,655


The Company’s share of LendingTree’s earnings (losses) was $7.7 million and $1.6 million for the three months ended June 30, 2018 and 2017, respectively. The Company's share of LendingTree's earnings (losses) was $5.3 million and $3.3 million for the six months ended June 30, 2018 and 2017, respectively. Both our ownership interest in LendingTree and our share of LendingTree's earnings (losses) are reported on a three month lag.

Investment in Liberty Broadband

On May 18, 2016, Qurate Retail completed a $2.4 billion investment in Liberty Broadband Series C non-voting shares (for accounting purposes a related party of the Company) in connection with the merger of Charter and Time Warner Cable Inc. ("TWC"). The proceeds of this investment were used by Liberty Broadband to fund, in part, its acquisition of $5 billion of stock in the new public parent company, Charter, of the combined enterprises. Qurate Retail, along with third party investors, all of whom invested on the same terms as Qurate Retail, purchased newly issued shares of Liberty Broadband Series C common stock at a per share price of $56.23, which was determined based upon the fair value of Liberty Broadband’s net assets on a sum‑of‑the parts basis at the time the investment agreements were executed (May 2015). Qurate Retail, as part of the merger described above, exchanged, in a tax‑free transaction, its shares of TWC common stock for shares of Charter Class A common stock, on a one‑for‑one basis, and Qurate Retail granted to Liberty Broadband a proxy and a right of first refusal with respect to the shares of Charter Class A common stock held by Qurate Retail following the exchange, which proxy and right of first refusal was assigned to GCI Liberty in connection with the completion of the Transactions.

As of June 30, 2018, the Company has a 23.5% economic ownership interest in Liberty Broadband. Due to overlapping boards of directors and management, the Company has been deemed to have significant influence over Liberty Broadband for accounting purposes, even though the Company does not have any voting rights. The Company has elected to apply the fair value option for its investment in Liberty Broadband (Level 1) as it is believed that investors value this investment based on the trading price of Liberty Broadband. The Company recognizes changes in the fair value of its investment in Liberty Broadband in realized and unrealized gains (losses) on financial instruments, net in the condensed consolidated statements of operations. Summarized financial information for Liberty Broadband is as follows:
 
 
June 30,
 
December 31,
 
 
2018
 
2017
 
 
amounts in thousands
Current assets
 
$
100,985

 
84,054

Investment in Charter, accounted for using the equity method
 
11,891,637

 
11,835,613

Other assets
 
10,306

 
12,122

Total assets
 
12,002,928

 
11,931,789

Long-term debt, including current portion
 
523,159

 
497,370

Deferred income tax liabilities
 
943,401

 
932,593

Other liabilities
 
14,885

 
14,925

Equity
 
10,521,483

 
10,486,901

Total liabilities and shareholders' equity
 
$
12,002,928

 
11,931,789

 
 
Three months ended
 
Six months ended
 
 
June 30,
 
June 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
amounts in thousands
Revenue
 
$
3,371

 
3,073

 
15,162

 
6,213

Operating expenses, net
 
(8,442
)
 
(10,406
)
 
(17,987
)
 
(19,908
)
Operating income (loss)
 
(5,071
)
 
(7,333
)
 
(2,825
)
 
(13,695
)
Share of earnings (losses) of affiliates
 
32,911

 
11,467

 
42,213

 
30,389

Gain (loss) on dilution of investment in affiliate
 
(5,205
)
 
(6,659
)
 
(31,962
)
 
(38,797
)
Realized and unrealized gains (losses) on financial instruments, net
 
(2,019
)
 
1,370

 
(2,019
)
 
2,351

Other income (expense), net
 
(5,842
)
 
(4,364
)
 
(10,654
)
 
(8,582
)
Income tax benefit (expense)
 
(4,194
)
 
2,542

 
757

 
10,912

Net earnings (loss)
 
$
10,580

 
(2,977
)
 
(4,490
)
 
(17,422
)