Quarterly report pursuant to Section 13 or 15(d)

Investments in Affiliates Accounted for Using the Equity Method

v3.19.3
Investments in Affiliates Accounted for Using the Equity Method
 9 Months Ended
Sep. 30, 2019
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 September 30, 2019 and the carrying amount at December 31, 2018:
 
September 30, 2019
 
December 31, 2018
 
Percentage
ownership
 
Market
value
 
Carrying
amount
 
Carrying
amount
 
 
 
dollars in thousands
LendingTree (a)
26.6
%
 
$
1,069,118

 
$
166,819

 
174,002

Other
various

 
NA

 
2,020

 
3,028

 
 
 
 
 
$
168,839

 
177,030

 
 
 
 
 
 
 
 
(a) Both the Company's ownership interest in LendingTree and the Company's share of LendingTree's earnings (losses) are reported on a three month lag. The market value disclosed is as of September 30, 2019.

The Company’s share of LendingTree’s earnings (losses) was $2.0 million and $10.2 million for the three months ended September 30, 2019 and 2018, respectively. The Company's share of LendingTree's earnings (losses) was $(1.4) million and $15.5 million for the nine months ended September 30, 2019 and 2018, respectively.

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 September 30, 2019, 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 accompanying condensed consolidated statements of operations. Summarized financial information for Liberty Broadband is as follows:
 
 
September 30,
 
December 31,
 
 
2019
 
2018
 
 
amounts in thousands
Current assets
 
$
94,951

 
84,574

Investment in Charter, accounted for using the equity method
 
12,067,329

 
12,004,376

Other assets
 
9,767

 
9,487

Total assets
 
12,172,047

 
12,098,437

Long-term debt
 
572,619

 
522,928

Deferred income tax liabilities
 
972,005

 
965,829

Other liabilities
 
15,251

 
11,062

Equity
 
10,612,172

 
10,598,618

Total liabilities and shareholders' equity
 
$
12,172,047

 
12,098,437

 
 
Three months ended
 
Nine months ended
 
 
September 30,
 
September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
amounts in thousands
Revenue
 
$
3,713

 
3,518

 
10,918

 
18,680

Operating expenses, net
 
(11,301
)
 
(7,614
)
 
(31,873
)
 
(25,601
)
Operating income (loss)
 
(7,588
)
 
(4,096
)
 
(20,955
)
 
(6,921
)
Share of earnings (losses) of affiliates
 
61,633

 
84,739

 
141,882

 
126,952

Gain (loss) on dilution of investment in affiliate
 
(11,219
)
 
(3,203
)
 
(68,944
)
 
(35,165
)
Realized and unrealized gains (losses) on financial instruments, net
 
(433
)
 
5,678

 
(433
)
 
3,659

Other income (expense), net
 
(5,773
)
 
(5,717
)
 
(17,829
)
 
(16,371
)
Income tax benefit (expense)
 
(9,124
)
 
(17,762
)
 
(8,474
)
 
(17,005
)
Net earnings (loss)
 
$
27,496

 
59,639

 
25,247

 
55,149