Liberty Interactive Corporation Reports Third Quarter 2012 Financial Results

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ENGLEWOOD, Colo.--()--Liberty Interactive Corporation ("Liberty") (Nasdaq: LINTA, LINTB, LVNTA, LVNTB) today reported third quarter results. Highlights include(1):

  • Grew consolidated QVC revenue by 2% and adjusted OIBDA(2) by 6%
    • Grew QVC US revenue by 3% and adjusted OIBDA by 7%
    • QVC.com revenue as a percent of total US revenue increased to 39%, a 4 point increase
    • Operating income increased 11%
  • Recapitalized our common stock into two tracking stocks, Liberty Interactive Group and Liberty Ventures Group
  • Shareholder value creation of $2.6 billion
  • Successfully completed rights offering at Liberty Ventures Group, raising $328 million

"QVC continues to produce strong results, especially on a constant currency basis, despite a challenging macroeconomic environment, and we are pleased with the performance of our newest market, China," stated Greg Maffei, Liberty President and CEO. "We successfully completed the recapitalization of the company's common stock into two tracking stocks, which increased shareholder value by $2.6 billion. Our share repurchases were lower this quarter, as we were out of the market for six weeks due to the recapitalization. But, we remain committed to repurchases at the Liberty Interactive Group and the board of directors has increased our repurchase authorization by $1 billion."

LIBERTY INTERACTIVE GROUP - Liberty Interactive Group's revenue increased 3% to $2.2 billion in the third quarter, adjusted OIBDA increased 5% to $397 million and operating income decreased 14% to $193 million. The increase in revenue was due to favorable results at QVC and the eCommerce companies. The increase in adjusted OIBDA for the quarter was due to favorable results at QVC, which was offset by unfavorable results at the eCommerce companies. The decrease in operating income for the quarter was primarily due to unfavorable results at the eCommerce companies and the impairment of goodwill of one of the eCommerce companies during the quarter.

QVC

QVC's consolidated revenue increased 2% in the third quarter to $1.9 billion. During the same period, adjusted OIBDA increased 6% to $397 million and operating income increased 11% to $260 million.

"QVC delivered strong results in the third quarter, with eCommerce continuing its double digit growth – now accounting for 33% of global revenue," said QVC President and CEO, Mike George. "With mobile commerce orders up 96% globally, we see these results as clear confirmation that our strategy to create a highly immersive digital shopping experience, with strong integration across TV, PC, tablet and mobile platforms, is not only succeeding, but significantly outpacing the industry."

QVC's U.S. revenue increased 3% to $1.2 billion in the third quarter as a result of strength in cooking and dining, beauty, apparel and accessories products, partially offset by a decline in electronics. Additionally, average selling price per unit ("ASP") increased 1% from $54.49 to $55.21 and units sold increased 1% compared to the prior year third quarter. Gross product revenue increased 2%; however, U.S. revenue grew 3% overall due to a 14% increase in shipping and handling revenue due, in part, to a price increase implemented in the fourth quarter of 2011. Third quarter returns as a percent of gross product revenue remained relatively flat. In the same period, eCommerce revenue increased 14% to $479 million and grew to 39% from 35% as a percentage of total U.S. revenue. Adjusted OIBDA increased 7% to $278 million and adjusted OIBDA margin(2) increased 81 basis points. The increase in adjusted OIBDA margin was primarily due to an improved gross margin as a result of a favorable net shipping and handling position including warehouse productivity, as well as lower commissions, credit card and customer service expenses as a percentage of revenue.

QVC's international revenue decreased 1% in the third quarter to $681 million. The third quarter results included the negative impact of the strengthening U.S. Dollar against the Japanese Yen, Euro and U.K. Pound Sterling. International adjusted OIBDA increased 4% to $119 million and adjusted OIBDA margin increased 95 basis points in the third quarter.

QVC Japan's revenue grew 9% in local currency in the third quarter primarily due to increased sales in home, apparel and accessories. QVC Japan's ASP in local currency decreased 1%, but units sold increased 10% in the third quarter. QVC Japan's third quarter returns as a percent of gross product revenue remained relatively flat. QVC Japan's adjusted OIBDA in local currency increased 12% and adjusted OIBDA margin increased 55 basis points in the third quarter. The increase in adjusted OIBDA margin was due primarily to lower warehouse expenses and fixed cost leverage.

QVC Germany's revenue declined 6% in local currency in the third quarter primarily due to decreased sales in health, apparel and accessories, somewhat offset by increased sales of beauty products. QVC Germany's ASP in local currency decreased 4% and units sold declined 4% in the third quarter. QVC Germany's third quarter returns as a percent of gross product revenue in local currency improved by 201 basis points and was primarily due to a shift in product mix from apparel to beauty. QVC Germany's adjusted OIBDA in local currency increased 2% and adjusted OIBDA margin increased 119 basis points in the third quarter. The improvement in OIBDA margin was driven by warehouse productivity, including the positive impact of lower returns processing, as well as lower commissions and fixed costs.

QVC U.K.'s revenue increased 3% in local currency in the third quarter primarily due to sales increases in home décor and beauty products. QVC U.K.'s ASP in local currency increased 1%, while units sold remained relatively flat for the third quarter. QVC U.K.'s third quarter returns as a percent of gross product revenue in local currency decreased by 78 basis points primarily due to a product mix shift to home and beauty products. QVC U.K.'s adjusted OIBDA in local currency decreased 9% and adjusted OIBDA margin decreased 224 basis points in the third quarter. The decrease in adjusted OIBDA margin was primarily due to lower product margins and higher transition and running costs associated with QVC U.K.'s new headquarters move in June 2012.

QVC Italy continued the trend upward with a 16% sequential revenue growth in local currency over the second quarter of 2012. QVC Italy's sales were primarily from the cooking and dining, beauty and apparel product categories.

On July 4, 2012, QVC entered into a joint venture with China Broadcasting Corporation, a limited liability company, owned by China National Radio ("CNR") for a 49% interest in a CNR subsidiary, CNR Home Shopping Co., Ltd. (''CNRS''). CNRS had an 85% growth in revenue over the prior year third quarter. This joint venture is being accounted for as an equity method investment, and as a result, QVC reported a $3 million reduction in net income for the period.

QVC's outstanding bank and bond debt was $3.4 billion at September 30, 2012. The increase of $1.1 billion from June 30, 2012 was primarily associated with borrowings to fund the Liberty Ventures Group as part of the Liberty Interactive Group's recapitalization of its common stock.

eCommerce Businesses

In the aggregate, Liberty Interactive Group's eCommerce businesses increased revenue 13% to $278 million for the third quarter. Adjusted OIBDA decreased 56% to $4 million for the quarter and operating income decreased to a loss of $56 million. All but one of our eCommerce businesses reported an increase in revenue for the quarter as a result of increased marketing efforts and increased conversion resulting from site optimization and broader inventory offerings. The decrease in adjusted OIBDA was the result of increased spending in paid search as a percentage of revenue, increased promotional activity to move seasonal inventory and lower advertising revenue due to pricing and a shift to mobile applications. The decrease in operating income was primarily due to an impairment of goodwill at Celebrate Interactive as a result of continued declining operating results and disappointing third quarter trends.

Share Repurchases

From August 1, 2012 through October 31, 2012, Liberty repurchased approximately 3.0 million Series A Liberty Interactive shares at an average cost per share of $18.37 for total cash consideration of $55.9 million. Since the creation of the Liberty Interactive stock in May 2006, Liberty has repurchased approximately 175.3 million shares at an average cost per share of $18.98 for aggregate cash consideration of $3.3 billion. These repurchases represent approximately 25.0% of the shares outstanding at the time of creation of the Liberty Interactive stock. On October 30, 2012, the Board of Directors voted to increase the stock repurchase authorization for the Liberty Interactive Group by an additional $1.0 billion. Including the newly authorized amount, the total current repurchase authorization for Liberty Interactive Group stock is approximately $1.4 billion.

Liberty Interactive Group holds controlling interests in companies that are engaged in digital commerce, including QVC, Provide Commerce, Backcountry.com, Bodybuilding.com, Celebrate Interactive, CommerceHub, MotoSport and Right Start, and also owns interests in HSN and Lockerz.

LIBERTY VENTURES GROUP – As of September 30, 2012 the fair value of the equity method securities and non-strategic AFS securities attributed to the Liberty Ventures Group was $3.2 billion and $1.6 billion, respectively. When compared to the prior quarter, the fair value of Liberty Ventures Group's equity method securities increased 1% and AFS securities increased 19%.

Share Repurchases

There were no repurchases of Liberty Ventures Group stock from August 10, 2012 through October 31, 2012. The Liberty Ventures Group does not have an outstanding stock repurchase authorization at this time.

The businesses and assets attributed to the Liberty Ventures Group are all of Liberty's businesses and assets other than those attributed to the Liberty Interactive Group and include its interests in TripAdvisor, Expedia, and minority interests in Time Warner and Time Warner Cable.

FOOTNOTES

(1)

 

Liberty's President and CEO, Gregory B. Maffei, will discuss these highlights and other matters in Liberty's earnings conference call which will begin at 11:00 a.m. (ET) on November 6, 2012. For information regarding how to access the call, please see "Important Notice" later in this document.

(2)

 

For a definition of adjusted OIBDA and applicable reconciliations and a definition of adjusted OIBDA margin, see the accompanying schedules.

LIBERTY INTERACTIVE GROUP FINANCIAL METRICS

                           

(amounts in millions)

        3Q11       3Q12       % Change
Revenue                          
QVC                          
US         $1,196         1,237         3 %
International         690         681         -1 %
Total QVC Revenue         1,886         1,918         2 %
eCommerce businesses         247         278         13 %
Total Liberty Interactive Group Revenue         $2,133         2,196         3 %
                           
Adjusted OIBDA                          
QVC                          
US         $ 259         278         7 %
International         114         119         4 %
Total QVC Adjusted OIBDA         373         397         6 %
eCommerce businesses         9         4         -56 %
Corporate and other         (4 )       (4 )       0 %
Total Liberty Interactive Group Adjusted OIBDA         $378         397         5 %
                           
Operating Income                          
QVC                          
US         $159         173         9 %
International         75         87         16 %
Total QVC Operating Income         234         260         11 %
eCommerce businesses         (2 )       (56 )       -2,700 %
Corporate and other         (7 )       (11 )       -57 %
Total Liberty Interactive Group Operating Income         $225         193         -14 %
                                 

QVC OPERATING METRICS

   
                               
(amounts in millions except average sale price amounts)         3Q11         3Q12       % Change  
QVC - US(1)                              
Revenue         $1,196         1,237         3 %
Adjusted OIBDA         $259         278         7 %
Adjusted OIBDA margin         21.66 %       22.47 %       81 bps
Average sale price (ASP)         54.49         55.21         1 %
Units sold         24.44         24.64         1 %
eCommerce % of US revenue         35.26 %       38.74 %       348 bps
Return rate         19.91 %       20.05 %       (14) bps
                               
QVC - Japan(1)                              
Revenue         $281         301         7 %
Adjusted OIBDA         $61         67         10 %
Adjusted OIBDA margin         21.71 %       22.26 %       55 bps
Average sale price (ASP)         ¥6,267         6,215         -1 %
Units sold         3.81         4.18         10 %
                               
QVC - Germany(1)                              
Revenue         $252         211         -16 %
Adjusted OIBDA         $40         36         -10 %
Adjusted OIBDA margin         15.87 %       17.06 %       119 bps
Average sale price (ASP)         €36.56         35.23         -4 %
Units sold         6.45         6.16         -4 %
                               
QVC - UK(1)                              
Revenue         $147         149         1 %
Adjusted OIBDA         $24         21         -13 %
Adjusted OIBDA margin         16.33 %       14.09 %       (224) bps
Average sale price (ASP)         £27.66         27.91         1 %
Units sold         3.60         3.61         0 %
                               
QVC - Italy(1)                              
Revenue         $10         20         100 %
Adjusted OIBDA         ($11 )       (5 )       55 %
Adjusted OIBDA margin         -110.00 %       -25.00 %       NM  
Average sale price (ASP)         €31.98         33.01         3 %
Units sold         0.22         0.54         145 %
(1)   Revenue and adjusted OIBDA change calculated in US dollars, not local currency

NOTES

Unless otherwise noted, the foregoing discussion compares financial information for the three months ended September 30, 2012 to the same period in 2011.

On September 23, 2011, Liberty completed the split-off of a wholly owned subsidiary, Liberty Media Corporation ("LMC") (formerly known as Liberty CapStarz, Inc. and Liberty Splitco, Inc.) (the "Split-Off"). At the time of the Split-Off, LMC owned all the assets, businesses and liabilities attributed to the Liberty Capital and Liberty Starz tracking stock groups immediately prior to the Split-Off. The Split-Off was effected by means of redemption of all of the Liberty Capital common stock and Liberty Starz common stock of Liberty for all of the common stock of LMC. This transaction was accounted for at historical cost due to the pro rata nature of the distribution. The financial information provided reflects LMC as discontinued operations. Accordingly, the relevant financial statement balances and activities of the businesses, assets and liabilities owned by LMC at the time of the Split-off (for periods prior to the Split-Off) have been excluded from the included financial information.

Following the Split-Off, Liberty and LMC operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other. In connection with the Split-Off, Liberty and LMC entered into certain agreements in order to govern certain of the ongoing relationships between the two companies after the Split-Off and to provide for an orderly transition. These agreements include a Reorganization Agreement, a Services Agreement, a Facilities Sharing Agreement and a Tax Sharing Agreement. Certain prior period amounts have been reclassified for comparability with the current presentation.

On August 9, 2012 Liberty Interactive completed the approved recapitalization of its common stock through the creation of the Liberty Interactive common stock and Liberty Ventures common stock as tracking stocks. In the recapitalization, each holder of Liberty Interactive common stock remained a holder of the same amount and series of Liberty Interactive common stock and received 0.05 of a share of the corresponding series of Liberty Ventures common stock, by means of a dividend, with cash issued in lieu of fractional shares of Liberty Ventures common stock.

In connection with the creation of the Liberty Ventures tracking stock, Liberty distributed subscription rights to purchase shares of Series A Liberty Ventures common stock at a per share subscription price of $35.99 for one share of Series A Liberty Ventures common stock pursuant to a basic subscription privilege and also entitled the holder to subscribe for additional shares pursuant to an oversubscription privilege. The rights offering commenced on September 12, 2012 and expired on October 9, 2012. In the fourth quarter, approximately 9 million Series A Liberty Ventures shares were issued in connection with the rights offering resulting in approximately $328 million of cash proceeds.

The following financial information is intended to supplement Liberty's condensed consolidated statements of operations which are included in its Form 10-Q.

Fair Value of Public Holdings

(amounts in millions)         6/30/2012       9/30/2012
HSN(1)       $ 808       982
Total Attributed Liberty Interactive Group       $ 808       982
                 
Expedia(2)       $ 1,664       2,002
TripAdvisor(2)         1,169       861
Interval Leisure Group and Tree.com(2)         348       358
Non Strategic Public Holdings(3)         1,380       1,639
Total Attributed Liberty Ventures Group       $ 4,561       4,860

(1)

 

Represents fair value of Liberty Interactive Group's investment in HSN. In accordance with GAAP, Liberty Interactive Group accounts for this investment using the equity method of accounting and includes this investment in its consolidated balance sheet at its historical carrying value which aggregated $233 million and $241 million at June 30, 2012 and September 30, 2012, respectively.

(2)

 

Represents fair value of Liberty Ventures Group's investments. In accordance with GAAP, Liberty Ventures Group accounts for these investments using the equity method of accounting and includes these investments in its consolidated balance sheet at their historical carrying values which aggregated $927 million and $975 million at June 30, 2012 and September 30, 2012, respectively.

(3)

 

Represents Liberty Ventures Group's non-strategic public holdings which are accounted for at fair value.

Cash and Debt

The following presentation is provided to separately identify cash and liquid investments and debt information.

(amounts in millions)           6/30/2012         9/30/2012  
Cash and Liquid Investments Attributable to:                  
Liberty Interactive Group         $ 790         558  
Liberty Ventures Group           --         1,235  
Total Liberty Consolidated Cash (GAAP)         $ 790         1,793  
                   
Debt:                  
Senior notes and debentures(1)         $ 1,100         1,070  
QVC senior notes(1)           2,000         2,500  
QVC bank credit facility           302         851  
Other           118         118  
Total Attributed Liberty Interactive Group Debt         $ 3,520         4,539  
Unamortized discount           (19 )       (19 )
Total Attributed Liberty Interactive Group Debt (GAAP)         $ 3,501         4,520  
                   
Senior exchangeable debentures(2)           2,854         2,852  
Total Attributed Liberty Ventures Group Debt         $ 2,854         2,852  
Fair market value adjustment           (306 )       (15 )
Total Attributed Liberty Ventures Group Debt (GAAP)         $ 2,548         2,837  
                   
Total Consolidated Liberty Debt (GAAP)         $ 6,049         7,357  
(1)   Face amount of Senior Notes and Debentures with no reduction for the unamortized discount or fair market value adjustment.
(2)   Face amount of Senior Exchangeable Debentures with no reduction for the unamortized discount or fair market value adjustment.
     

Total cash and liquid investments attributed to the Liberty Interactive Group decreased $232 million, primarily due to $1,346 million in cash reattributed to the Liberty Ventures Group, stock repurchases, debt repayments and capital expenditures. These cash outflows were partially offset by cash flow from operations at QVC and borrowings of debt at QVC. Total debt attributed to the Liberty Interactive Group increased by $1,018 million, primarily due to borrowings on the QVC bank credit facility and new 5.00% senior notes issued in the third quarter.

Total cash and liquid investments attributed to the Liberty Ventures Group increased $1,235 million, primarily due to cash reattributed from the Liberty Interactive Group offset by investing activities. Total debt attributed to the Liberty Ventures Group decreased by $2 million, primarily due to principal repayments.

Important Notice: Liberty (Nasdaq: LINTA, LINTB, LVNTA, LVNTB) President and CEO, Gregory B. Maffei will discuss Liberty's earnings release in a conference call which will begin at 11:00 a.m. (ET) on November 6, 2012. The call can be accessed by dialing (888) 455-2265 or (719) 457-2703 at least 10 minutes prior to the start time. Replays of the conference call can be accessed until 1:00 p.m. (ET) on November 13, 2012, by dialing (888) 203-1112 or (719) 457-0820 plus the pass code 7834540#. The call will also be broadcast live across the Internet and archived on our website. To access the webcast go to http://www.libertyinteractive.com/events. Links to this press release will also be available on Liberty's website.

This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about business strategies, market potential, future financial prospects, international expansion, new service and product offerings, the continuation of our stock repurchase program, and other matters that are not historical facts. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, possible changes in market acceptance of new products or services, competitive issues, regulatory matters affecting our businesses, continued access to capital on terms acceptable to Liberty Interactive, and market conditions conducive to stock repurchases. These forward-looking statements speak only as of the date of this press release, and Liberty Interactive expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty Interactive's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Please refer to the publicly filed documents of Liberty Interactive, including the most recent Forms 10-Q and 10-K, for additional information about Liberty Interactive and about the risks and uncertainties related to Liberty Interactive's business which may affect the statements made in this press release.

SUPPLEMENTAL INFORMATION

As a supplement to Liberty's consolidated statements of operations, which are included in its Form 10-Q, the following is a presentation of quarterly information and operating metrics on a stand-alone basis for the largest privately held business (QVC) owned by Liberty at September 30, 2012, which Liberty has identified as a reportable segment.

Please see below for the definition of adjusted OIBDA and a discussion of why management believes the presentation of adjusted OIBDA for QVC provides useful information for investors. Schedule 2 to this press release provides a reconciliation of adjusted OIBDA for each identified reportable segment to that segment's operating income for the same period, as determined under GAAP.

QUARTERLY SUMMARY

(amounts in millions)         3Q11       4Q11       1Q12       2Q12       3Q12
Liberty Interactive Group                                          
QVC                                          
Revenue – US         $ 1,196         1,792         1,240         1,280         1,237  
Revenue – International           690         857         692         694         681  
Revenue – Total         $ 1,886         2,649         1,932         1,974         1,918  
Adjusted OIBDA – US           259         401         270         315         278  
Adjusted OIBDA – International           114         178         120         123         119  
Adjusted OIBDA – Total         $ 373         579         390         438         397  
Operating income – US           159         254         171         214         173  
Operating income – International           75         143         87         87         87  
Operating income – Total         $ 234         397         258         301         260  
Gross margin – US           35.7 %       34.6 %       35.6 %       37.2 %       36.1 %
Gross margin – International           36.7 %       37.4 %       37.7 %       38.1 %       37.4 %
                                                       

NON-GAAP FINANCIAL MEASURES

This press release includes a presentation of adjusted OIBDA, which is a non-GAAP financial measure, for Liberty, QVC (and certain of its subsidiaries), and the eCommerce businesses together with a reconciliation to that entity's operating income, as determined under GAAP. Liberty defines adjusted OIBDA as revenue less cost of sales, operating expenses, and selling, general and administrative expenses (excluding stock and other equity-based compensation) and excludes from that definition depreciation and amortization and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Further, this press release includes adjusted OIBDA margin which is also a non-GAAP financial measure. Liberty defines adjusted OIBDA margin as adjusted OIBDA divided by revenue.

Liberty believes adjusted OIBDA is an important indicator of the operational strength and performance of its businesses, including each business' ability to service debt and fund capital expenditures. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. Because adjusted OIBDA is used as a measure of operating performance, Liberty views operating income as the most directly comparable GAAP measure. Adjusted OIBDA is not meant to replace or supersede operating income or any other GAAP measure, but rather to supplement such GAAP measures in order to present investors with the same information that Liberty's management considers in assessing the results of operations and performance of its assets. Please see the attached schedules for applicable reconciliations.

SCHEDULE 1

The following table provides a reconciliation of Liberty Interactive Group's adjusted OIBDA to its operating income calculated in accordance with GAAP for the three months ended September 30, 2011, December 31, 2011, March 31, 2012, June 30, 2012 and September 30, 2012, respectively.

QUARTERLY SUMMARY

(amounts in millions)         3Q11       4Q11       1Q12       2Q12       3Q12
Liberty Interactive Group                                          
Adjusted OIBDA         $ 378         619         419         455         397  
Depreciation and amortization           (151 )       (193 )       (143 )       (147 )       (147 )
Stock compensation expense           (2 )       (17 )       (17 )       (18 )       (18 )
Impairment of goodwill           --         --         --         --         (39 )
Operating Income         $ 225         409         259         290         193  
                                                       

SCHEDULE 2

The following table provides a reconciliation of adjusted OIBDA for QVC (and certain of its subsidiaries) and the eCommerce businesses to that entity or Group's operating income (loss) calculated in accordance with GAAP for the three months ended September 30, 2011, December 31, 2011, March 31, 2012, June 30, 2012 and September 30, 2012, respectively.

QUARTERLY SUMMARY

(amounts in millions)         3Q11       4Q11       1Q12       2Q12       3Q12

Liberty Interactive Group

                                         
QVC Adjusted OIBDA                                          
QVC US         $ 259         401         270         315         278  
                                           
QVC Japan           61         78         63         70         67  
QVC Germany           40         69         46         39         36  
QVC UK           24         40         20         21         21  
QVC Italy           (11 )       (9 )       (9 )       (7 )       (5 )
QVC International adjusted OIBDA         $ 114         178         120         123         119  
                                           
Consolidated QVC adjusted OIBDA         $ 373         579         390         438         397  
Depreciation and amortization           (133 )       (176 )       (127 )       (129 )       (129 )
Stock compensation           (6 )       (6 )       (5 )       (8 )       (8 )
Operating Income         $ 234         397         258         301         260  
                                           
eCommerce Businesses                                          
Adjusted OIBDA         $ 9         49         34         23         4  
Depreciation and amortization           (17 )       (17 )       (17 )       (16 )       (18 )
Stock compensation           6         (2 )       (2 )       (8 )       (3 )
Impairment of goodwill           --         --         --         --         (39 )
Operating Income (Loss)         $ (2 )       30         15         (1 )       (56 )
                                                       

LIBERTY INTERACTIVE CORPORATION

BALANCE SHEET INFORMATION

September 30, 2012 – (unaudited)

                   
          Attributed        
         

Interactive
Group

 

Ventures
Group

 

Inter-group
Eliminations

 

Consolidated
Liberty

ASSETS         amounts in millions
Current assets:                      
Cash and cash equivalents         $ 558     1,235     --     1,793
Trade and other receivables, net         711     --     --     711
Inventory, net         1,247     --     --     1,247
Other current assets         260     --     (165 )   95
Total current assets         2,776     1,235     (165 )   3,846
Investments in available-for-sale securities and other cost investments         3     1,639     --     1,642
Investments in affiliates, accounted for using the equity method         305     1,004     --     1,309
Property and equipment, net         1,207     --     --     1,207
Intangible assets not subject to amortization         8,493     --     --     8,493
Intangible assets subject to amortization, net         1,964     --     --     1,964
Other assets, at cost, net of accumulated amortization         82     --     --     82
Total assets         $ 14,830     3,878     (165 )   18,543
                       
LIABILITIES AND EQUITY                      
Current liabilities:                      
Intergroup Payable (Receivable)         $ 63     (63 )   --     --
Accounts payable         640     6     --     646
Accrued liabilities         672     15     --     687
Current portion of debt         300     1,251     --     1,551
Current deferred tax liabilities         --     951     (165 )   786
Other current liabilities         186     288     --     474
Total current liabilities         1,861     2,448     (165 )   4,144
Long-term debt         4,220     1,586     --     5,806
Deferred income tax liabilities         1,382     708     --     2,090
Other liabilities         221     --     --     221
Total liabilities         7,684     4,742     (165 )   12,261
Equity/Attributed net assets (liabilities)         6,995     (864 )   --     6,131
Noncontrolling interests in equity of subsidiaries         151     --     --     151
Total liabilities and equity         $ 14,830     3,878     (165 )   18,543
                               

LIBERTY INTERACTIVE CORPORATION

STATEMENT OF OPERATIONS INFORMATION

Three months ended September 30, 2012 - (unaudited)

               
          Attributed    
          Interactive

Group

  Ventures

Group

 

Consolidated
Liberty

          amounts in millions
REVENUE:                  
Net retail sales         $ 2,196     --     2,196  
Cost of sales         1,407     --     1,407  
Gross profit         789     --     789  
                         
OPERATING COSTS AND EXPENSES:                  
Operating         201     --     201  
Selling, general and administrative, including stock-based compensation         209     4     213  
Impairment of goodwill         39     --     39  
Depreciation and amortization         147     --     147  
          596     4     600  
Operating income         193     (4 )   189  
                   
OTHER INCOME (EXPENSE):                  
Interest expense         (84 )   (27 )   (111 )
Share of earnings (losses) of affiliates, net         6     37     43  
Realized and unrealized gains (losses) on financial instruments, net         14     (174 )   (160 )
Other, net         --     (2 )   (2 )
          (64 )   (166 )   (230 )
Earnings (loss) before income taxes         129     (170 )   (41 )
Income tax (expense) benefit         (65 )   80     15  
Net earnings (loss)         64     (90 )   (26 )
Less net earnings (losses) attributable to noncontrolling interests         15     --     15  
Net earnings (loss) attributable to Liberty stockholders         $ 49     (90 )   (41 )
                           

LIBERTY INTERACTIVE CORPORATION

STATEMENT OF OPERATIONS INFORMATION

Three months ended September 30, 2011 - (unaudited)

               
          Attributed    
          Interactive

Group

  Ventures

Group

 

Consolidated
Liberty

          amounts in millions
REVENUE:                  
Net retail sales         $ 2,133     --     2,133  
Cost of sales         1,364     --     1,364  
Gross profit         769     --     769  
                         
OPERATING COSTS AND EXPENSES:                  
Operating         209     --     209  
Selling, general and administrative, including stock-based compensation         184     1     185  
Depreciation and amortization         151     --     151  
          544     1     545  
Operating income (loss)         225     (1 )   224  
                   
OTHER INCOME (EXPENSE):                  
Interest expense         (76 )   (29 )   (105 )
Share of earnings (losses) of affiliates, net         6     56     62  
Realized and unrealized gains (losses) on financial instruments, net         12     (103 )   (91 )
Other, net         (12 )   3     (9 )
          (70 )   (73 )   (143 )
Earnings (loss) before income taxes         155     (74 )   81  
Income tax (expense) benefit         (86 )   30     (56 )
Earnings (loss) from continuing operations         69     (44 )   25  
Earnings (loss) from discontinued operations, net of taxes         (32 )   --     (32 )
Net earnings (loss)         37     (44 )   (7 )
Less net earnings (loss) attributable to the noncontrolling interests         12     --     12  
Net earnings (loss) attributable to Liberty stockholders         $ 25     (44 )   (19 )
                           

LIBERTY INTERACTIVE CORPORATION

STATEMENT OF CASH FLOWS INFORMATION

Nine months ended September 30, 2012 – (unaudited)

               
          Attributed    
          Interactive

Group

  Ventures

Group

 

Consolidated
Liberty

          amounts in millions
CASH FLOWS FROM OPERATING ACTIVITIES:                  
Net earnings (loss)         $ 336     (8 )   328  
Adjustments to reconcile net earnings to net cash provided by operating activities:                  
Depreciation and amortization         437     --     437  
Stock-based compensation         52     1     53  
Cash payments for stock based compensation         (9 )   --     (9 )
Share of (earnings) losses of affiliates, net         (26 )   (63 )   (89 )
Cash receipts from return on equity investments         8     13     21  
Realized and unrealized (gains) losses on financial instruments, net         (39 )   377     338  
(Gains) losses on disposition of assets, net         --     (288 )   (288 )
Impairment of goodwill         39     --     39  
Deferred income tax (benefit) expense         (119 )   85     (34 )
Other, net         11     (33 )   (22 )
Intergroup tax allocation         156     (156 )   --  
Changes in operating assets and liabilities                  
Current and other assets         162     --     162  
Payables and other current liabilities         27     (19 )   8  
Net cash provided (used) by operating activities         1,035     (91 )   944  
                   
CASH FLOWS FROM INVESTING ACTIVITIES:                  
Cash proceeds from dispositions         --     348     348  
Investments in and loans to cost and equity investees         (60 )   (132 )   (192 )
Capital expended for property and equipment         (237 )   --     (237 )
Net sales of short term investments         46     --     46  
Other investing activities, net         (41 )   1     (40 )
Net cash provided (used) by investing activities         (292 )   217     (75 )
                   
CASH FLOWS FROM FINANCING ACTIVITIES:                  
Borrowings of debt         2,043     --     2,043  
Repayments of debt         (1,123 )   (115 )   (1,238 )
Reattribution of cash between groups         (1,346 )   1,346     --  
Intergroup borrowings (payments)         122     (122 )   --  
Repurchases of Liberty common stock         (690 )   --     (690 )
Other financing activities, net         (30)     --     (30 )
Net cash provided (used) by financing activities         (1,024)     1,109     85  
                         
Effect of foreign currency rates on cash         (8 )   --     (8 )
Net increase (decrease) in cash and cash equivalents         (289 )   1,235     946  
Cash and cash equivalents at beginning of period         847     --     847  
Cash and cash equivalents at end period         $ 558     1,235     1,793  
                           

LIBERTY INTERACTIVE CORPORATION

STATEMENT OF CASH FLOWS INFORMATION

Nine months ended September 30, 2011 - (unaudited)

               
          Attributed    
          Interactive

Group

  Ventures

Group

 

Consolidated
Liberty

CASH FLOWS FROM OPERATING ACTIVITIES:         amounts in millions
Net earnings (loss)         $ 723     (62 )   661  
Adjustments to reconcile net earnings to net cash provided by operating activities:                  
(Earnings) loss from discontinued operations         (378 )   --     (378 )
Depreciation and amortization         448     --     448  
Stock-based compensation         32     --     32  
Cash payments for stock based compensation         (2 )   --     (2 )
Share of (earnings) losses of affiliates, net         (18 )   (101 )   (119 )
Cash receipts from return on equity investments         --     15     15  
Realized and unrealized (gains) losses on financial instruments, net         (57 )   118     61  
Deferred income tax (benefit) expense         (56 )   (5 )   (61 )
Other, net         (12 )   8     (4 )
Intergroup tax allocation         (40 )   40     --  
Changes in operating assets and liabilities                        
Current and other assets         106     --     106  
Payables and other current liabilities         (216 )   (27 )   (243 )
Net cash provided (used) by operating activities         530     (14 )   516  
                         
CASH FLOWS FROM INVESTING ACTIVITIES:                        
Capital expended for property and equipment         (192 )         (192 )
Net sales (purchases) of short term investments         (89 )   --     (89 )
Other investing activities, net         (21 )   --     (21 )
Net cash provided (used) by investing activities         (302 )   --     (302 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES:                        
Borrowings of debt         305     (110 )   195  
Repayments of debt         (673 )   --     (673 )
Intergroup borrowings (payments)         (124 )   124     --  
Repurchases of Liberty common stock         (87 )   --     (87 )
Other financing activities, net         (50 )   --     (50 )
Net cash provided (used) by financing activities         (629 )   14     (615 )
Effect of foreign currency rates on cash         (7 )   --     (7 )
Net cash provided (used) by financing activities                        
Net cash provided by (to) discontinued operations                        
Net cash provided (used) by operating activities         304     --     304  
Net cash provided (used) by investing activities         (104 )   --     (104 )
Net cash provided (used) by financing activities         (264 )   --     (264 )
Change in available cash held by discontinued operations         15     --     15  
Net cash provided by (to) discontinued operations         (49 )   --     (49 )
Net increase (decrease) in cash and cash equivalents         (457 )   --     (457 )
Cash and cash equivalents at beginning of period         1,353     --     1,353  
Cash and cash equivalents at end period         $ 896     --     896  

 

Contacts

Liberty Interactive Corporation
Courtnee Ulrich, 720-875-5420