猫咪社区

(1)听听Basis of Presentation

The accompanying consolidated financial statements of 猫咪社区 (formerly named 猫咪社区 Spinco,听Inc.; see discussion below pertaining to the Starz Spin-Off (defined below)) (鈥溍ㄟ渖缜�,鈥� 鈥渨e,鈥� 鈥渙ur,鈥� 鈥渦s鈥� or the 鈥淐ompany鈥� unless the context otherwise requires) represent a consolidation of certain media and entertainment related assets and businesses. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.

猫咪社区, through its ownership of interests in subsidiaries and other companies, is primarily engaged in the media and entertainment industries primarily in North America and the United Kingdom. Our significant subsidiaries include Sirius听XM Holdings Inc. (鈥淪IRIUS听XM鈥�), Formula听1 and Braves Holdings, LLC (鈥淏raves Holdings鈥�). Our significant investment accounted for under the equity method of accounting is Live Nation Entertainment, Inc. (鈥淟ive Nation鈥�). As discussed in notes听2 and 7, 猫咪社区 obtained a nearly 20% interest in Delta Topco Limited (鈥淒elta Topco鈥�), the parent company of Formula听1, a global motorsports business, during 2016 and acquired the remaining interests, other than a nominal number of shares held by certain Formula听1 teams, during January 2017.

In September 2011, 猫咪社区 Interactive Corporation (鈥溍ㄟ渖缜� Interactive鈥� and formerly named 猫咪社区) completed the split-off of its former wholly-owned subsidiary (then known as 猫咪社区) from its 猫咪社区 Interactive tracking stock group (the 鈥淪plit-Off鈥�).

In January 2013, Starz (now known as Starz Acquisition, LLC and formerly known as 猫咪社区) spun-off (the 鈥淪tarz Spin-Off鈥�) its then-former wholly-owned subsidiary, which, at the time of the Starz Spin-Off, held all of the businesses, assets and liabilities of Starz not associated with Starz, LLC (with the exception of the Starz, LLC office building). The transaction was effected as a pro-rata dividend of shares of 猫咪社区 to the stockholders of Starz.

Also in January 2013, 猫咪社区 obtained a controlling interest and began consolidating SIRIUS听XM. SIRIUS听XM, since the date of our investment, has repurchased approximately 2.5 billion SIRIUS听XM shares for approximately $9.4 billion. 猫咪社区 continues to maintain a controlling interest in SIRIUS听XM following the completion of the share repurchases. As of December听31, 2017, we owned approximately 70% of the outstanding equity interest in SIRIUS听XM.

During 2014, 猫咪社区鈥檚 board of directors approved the issuance of shares of its Series听C 猫咪社区 common stock to holders of its Series听A and Series听B 猫咪社区 common stock, effected by means of a dividend. On July听23, 2014, holders of Series听A and Series听B 猫咪社区 common stock received a dividend of two shares of Series听C 猫咪社区 common stock for each share of Series听A or Series听B 猫咪社区 common stock held by them as of July听7, 2014. Additionally, in connection with the Series听C 猫咪社区 common stock issuance and the Broadband Spin-Off (defined below), outstanding Series听A 猫咪社区 common stock warrants have been adjusted, as well as the number of shares covered by outstanding cash convertible note hedges and purchased call options (the 鈥淏ond Hedge Transaction鈥�). See note听10 for further discussion regarding the warrants and Bond Hedge Transaction.

On November听4, 2014, 猫咪社区 completed the spin-off to its stockholders common stock of a newly formed company called 猫咪社区 Broadband Corporation (鈥溍ㄟ渖缜� Broadband鈥�) (the 鈥淏roadband Spin-Off鈥�). In the Broadband Spin-Off, record holders of Series听A, Series听B and Series听C 猫咪社区 common stock received one share of the corresponding series of 猫咪社区 Broadband common stock for every four shares of common stock held by them as of the record date for the Broadband Spin-Off, with cash paid in lieu of fractional shares.

During August 2014, 猫咪社区 Interactive completed the distribution of 猫咪社区 TripAdvisor Holdings, Inc. (鈥溍ㄟ渖缜� TripAdvisor鈥�) (the 鈥淭ripAdvisor Spin-Off鈥�). During July 2016, 猫咪社区 Interactive completed the spin-off of CommerceHub, Inc. (鈥淐ommerceHub鈥�) (the 鈥淐ommerceHub Spin-Off鈥�). During November 2016, 猫咪社区 Interactive completed the split-off of 猫咪社区 Expedia Holdings, Inc. (鈥淓xpedia Holdings鈥�) (the 鈥淓xpedia Holdings Split-Off鈥�). Following the Split-Off, Starz Spin-Off, TripAdvisor Spin-Off, Broadband Spin-Off, CommerceHub Spin-Off and Expedia Holdings Split-Off, 猫咪社区, 猫咪社区 Interactive, Starz, 猫咪社区 TripAdvisor, 猫咪社区 Broadband, CommerceHub and Expedia Holdings operate as separate publicly traded companies, none of which has any stock ownership, beneficial or otherwise, in the other (except that 猫咪社区 Interactive owns shares of 猫咪社区 Broadband鈥檚 Series听C non-voting common stock). In connection with the Split-Off, Starz Spin-Off, TripAdvisor Spin-Off, Broadband Spin-Off, CommerceHub Spin-Off and Expedia Holdings Split-Off, 猫咪社区 entered into certain agreements with 猫咪社区 Interactive, Starz, 猫咪社区 TripAdvisor, 猫咪社区 Broadband, CommerceHub and Expedia Holdings, respectively, in order to govern ongoing relationships between the companies and to provide for an orderly transition. As a result, these entities are considered related parties of the Company for accounting purposes through the dates of the respective transactions. These agreements include Reorganization Agreements (excluding CommerceHub, Expedia Holdings and 猫咪社区 TripAdvisor), Services Agreements, Facilities Sharing Agreements (excluding CommerceHub), a Lease Agreement (in the case of the Starz Spin-Off only) and with respect to Starz and 猫咪社区 Broadband, Tax Sharing Agreements. The Reorganization, Services and Facilities Sharing Agreements entered into with 猫咪社区 Interactive were assigned from Starz to 猫咪社区 in connection with the Starz Spin-Off.

The Reorganization Agreements provide for, among other things, provisions governing the relationships between 猫咪社区 and each of 猫咪社区 Interactive, Starz and 猫咪社区 Broadband following the Split-Off, Starz Spin-Off and Broadband Spin-Off, respectively, including certain cross-indemnities. Pursuant to the Services Agreements, 猫咪社区 provides 猫咪社区 Interactive, Starz, 猫咪社区 TripAdvisor, 猫咪社区 Broadband, CommerceHub and Expedia Holdings with general and administrative services including legal, tax, accounting, treasury and investor relations support. 猫咪社区 Interactive, Starz, 猫咪社区 TripAdvisor, 猫咪社区 Broadband, CommerceHub and Expedia Holdings reimburse 猫咪社区 for direct, out-of-pocket expenses incurred by 猫咪社区 in providing these services and for 猫咪社区 Interactive鈥檚 and Starz鈥檚 allocable portion of costs associated with any shared services or personnel based on an estimated percentage of time spent providing services to each respective company. 猫咪社区 TripAdvisor, 猫咪社区 Broadband, CommerceHub and Expedia Holdings reimburse 猫咪社区 for shared services and personnel based on a flat fee. Under the Facilities Sharing Agreements, 猫咪社区 shares office space and related amenities with 猫咪社区 Interactive, Starz, 猫咪社区 TripAdvisor, 猫咪社区 Broadband and Expedia Holdings at 猫咪社区鈥檚 corporate headquarters. Under these various agreements, approximately $24听million, $21听million and $23听million of these allocated expenses were reimbursed to 猫咪社区 during the years ended December听31, 2017, 听2016 and 2015, respectively. Under the Lease Agreement, Starz leases its corporate headquarters from 猫咪社区. The Lease Agreement with Starz for their corporate headquarters requires a payment of approximately $4听million annually, subject to certain increases based on the Consumer Price Index. The Lease Agreement expires on December听31, 2023 and contains an extension option.

The Tax Sharing Agreements provide for the allocation and indemnification of tax liabilities and benefits between 猫咪社区 and each of Starz and 猫咪社区 Broadband as well as other agreements related to tax matters. Among other things, pursuant to the Tax Sharing Agreements, 猫咪社区 has generally agreed to indemnify Starz and 猫咪社区 Broadband for taxes and losses resulting from the failure of the Starz Spin-Off and the Broadband Spin-Off, respectively, to qualify for tax-free treatment. However, Starz will be responsible for any such taxes and losses related to the Starz Spin-Off which (i)听result primarily from the breach of certain restrictive covenants made by Starz, or (ii)听result from Section听355(e) of the Internal Revenue Code of 1986 (the 鈥淐ode鈥�) applying to the Starz Spin-Off as a result of the Starz Spin-Off being part of a plan (or series of related transactions) pursuant to which one or more persons acquire a 50-percent or greater interest (measured by vote or value) in the stock of Starz, and 猫咪社区 Broadband will be responsible for any such taxes and losses related to the Broadband Spin-Off which (i)听result primarily from the breach of certain restrictive covenants made by 猫咪社区 Broadband, or (ii)听result from Section听355(e) of the Code applying to the Broadband Spin-Off as a result of the Broadband Spin-Off being part of a plan (or series of related transactions) pursuant to which one or more persons acquire a 50-percent or greater interest (measured by vote or value) in the stock of 猫咪社区 Broadband. In February 2014, the IRS and Starz entered into a closing agreement which provided that the Starz Spin-Off qualified for tax-free treatment to Starz and 猫咪社区. In September 2015, 猫咪社区 entered into a closing agreement with the IRS which provided that the Broadband Spin-Off qualified for tax-free treatment.

The Company鈥檚 additional paid-in capital balance was in a deficit position as of December听31, 2015. In order to maintain a zero balance in the additional paid-in capital account, we reclassified the amount of the deficit ($499听million) to retained earnings as of December听31, 2015.