Attached files

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10-Q - 10-Q - Qurate Retail, Inc.lint-20150630x10q.htm
EX-31.2 - EX-31.2 - Qurate Retail, Inc.lint-20150630ex3129e132d.htm
EX-10.3 - EX-10.3 - Qurate Retail, Inc.lint-20150630ex10344ca8a.htm
EX-31.1 - EX-31.1 - Qurate Retail, Inc.lint-20150630ex311779aae.htm
EX-10.4 - EX-10.4 - Qurate Retail, Inc.lint-20150630ex1040ed126.htm
EX-32 - EX-32 - Qurate Retail, Inc.lint-20150630xex32.htm
EX-99.2 - EX-99.2 - Qurate Retail, Inc.lint-20150630ex9926dadf2.htm

Exhibit 99.1

Unaudited Attributed Financial Information for Tracking Stock Groups

The following tables present our assets and liabilities as of June 30, 2015, revenue and expenses for three and six months ended June 30, 2015 and 2014 and cash flows for the six months ended June 30, 2015 and 2014. The tables further present our assets, liabilities, revenue, expenses and cash flows that are attributed to the QVC Group and the Ventures Group, respectively.  The financial information in this Exhibit should be read in conjunction with our unaudited condensed consolidated financial statements for the six months ended June 30, 2015 included in this Quarterly Report on Form 10-Q.

As discussed in note 2 to the accompanying condensed consolidated financial statements, on October 3, 2014, the QVC Group (referred to as the “Interactive Group” prior to the reattribution) attributed to the Ventures Group its Digital Commerce companies (defined below), which were valued at $1.5 billion, and approximately $1 billion in cash. In return, Liberty Interactive common stock shareholders received a dividend of approximately 67.7 million shares of Liberty Ventures common stock, or 0.14217 of a Liberty Ventures share for each share of Liberty Interactive common stock outstanding on October 13, 2014, the record date of the dividend. The distribution date for the dividend was October 20, 2014, and the Liberty Interactive common stock began trading ex-dividend on October 15, 2014. The reattributed Digital Commerce companies were comprised of Liberty’s consolidated subsidiaries Backcountry.com (“Backcountry”), Bodybuilding.com, LLC, Provide Commerce, Inc. (“Provide”), CommerceHub, Evite.com and Right Start (collectively, the “Digital Commerce” companies). Following the reattribution, the name of the Interactive Group is now referred to as the QVC Group. Other than the issuance of Liberty Ventures shares in the fourth quarter of 2014, the reattribution had no consolidated impact on Liberty. The reattribution is reflected in Liberty’s condensed consolidated financial statements and attributed financial information on a prospective basis, with October 1, 2014 used as a proxy for the date of the reattribution.

Additionally, as discussed in note 3 and note 8 of the accompanying condensed consolidated financial statements, Liberty’s former wholly-owned subsidiary, Provide, was included in the Digital Commerce companies prior to the sale to FTD Companies, Inc. (“FTD”) on December 31, 2014, in exchange for cash and shares of FTD common stock representing approximately 35% of the combined company. Subsequent to this transaction, the Company’s interest in FTD, accounted for under the equity method, is included in the Digital Commerce companies. Given Liberty’s significant continuing involvement with FTD, Provide is not presented as a discontinued operation in the Company’s condensed consolidated financial statements.

As discussed in note 3 of the accompanying condensed consolidated financial statements, Liberty sold Backcountry, a Digital Commerce company attributed to the Ventures Group, on June 30, 2015.  Backcountry is not presented as a discontinued operation as the sale does not represent a strategic shift that has a major effect on Liberty’s operations and financial results.

As of June 30, 2015, our QVC Group common stock is intended to reflect the separate performance of our QVC Group which, subsequent to the reattribution, is comprised of our consolidated subsidiary, QVC, Inc. (“QVC”) and our approximate 38% interest in HSN, Inc. As of June 30, 2015, our Liberty Ventures common stock is intended to reflect the separate performance of our Ventures Group which, subsequent to the reattribution, consists of our Digital Commerce businesses and our interests in equity method investments of Expedia, Inc., FTD, Interval Leisure Group, Inc. and LendingTree, Inc. and available-for-sale securities Time Warner Inc. and Time Warner Cable Inc.

Notwithstanding the following attribution of assets, liabilities, revenue, expenses and cash flows to the QVC Group and the Ventures Group, our tracking stock structure does not affect the ownership or the respective legal title to our assets or responsibility for our liabilities. We and our subsidiaries are each responsible for our respective liabilities. Holders of QVC Group common stock and Liberty Ventures common stock are holders of our common stock and are subject to risks associated with an investment in our company and all of our businesses, assets and liabilities. The issuance of QVC Group common stock and Liberty Ventures common stock does not affect the rights of our creditors or creditors of our subsidiaries.

 

 

 


 

 

SUMMARY ATTRIBUTED FINANCIAL DATA

QVC Group

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

December 31, 2014

 

 

 

amounts in millions

 

Summary balance sheet data:

    

 

 

    

    

 

Cash and cash equivalents

 

$

497

 

422

 

Trade and other receivables, net

 

$

800

 

1,196

 

Inventory

 

$

964

 

882

 

Investments in affiliates, accounted for using the equity method

 

$

196

 

375

 

Total assets

 

$

12,351

 

13,012

 

Long-term debt

 

$

5,685

 

5,851

 

Deferred income tax liabilities

 

$

949

 

1,033

 

Net assets attributable to Liberty Interactive common stock shareholders

 

$

4,130

 

4,280

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Six months ended

 

 

June 30,

 

June 30,

 

 

2015

    

2014

    

2015

    

2014

 

 

amounts in millions

 

Summary operations data:

    

 

    

 

    

 

    

 

 

Revenue

$

1,998

 

2,483

 

3,936

 

4,917

 

Cost of sales

 

1,234

 

1,558

 

2,455

 

3,114

 

Operating expenses

 

174

 

217

 

343

 

430

 

Selling, general and administrative expenses (1)

 

157

 

272

 

316

 

525

 

Impairment of intangible assets

 

 —

 

7

 

 

 —

 

7

 

Depreciation and amortization

 

149

 

165

 

301

 

327

 

Operating income (loss)

 

284

 

264

 

521

 

514

 

Interest expense

 

(70)

 

(79)

 

(145)

 

(155)

 

Share of earnings (losses) of affiliates, net

 

9

 

7

 

33

 

28

 

Realized and unrealized gains (losses) on financial instruments, net

 

8

 

6

 

(2)

 

7

 

Other income (expense), net

 

(31)

 

(1)

 

(23)

 

 —

 

Income tax benefit (expense)

 

(80)

 

(76)

 

(104)

 

(149)

 

Net earnings (loss) from continuing operations

 

120

 

121

 

280

 

245

 

Net earnings (loss) from discontinued operations

 

 —

 

(7)

 

 

 —

 

(11)

 

Net earnings (loss)

 

120

 

114

 

 

280

 

234

 

Less net earnings (loss) attributable to noncontrolling interests

 

8

 

9

 

17

 

19

 

Net earnings (loss) attributable to Liberty Interactive Corporation shareholders

$

112

 

105

 

263

 

215

 


(1)

Includes stock-based compensation of $12 million and $24 million for the three months ended June 30, 2015 and 2014, respectively, and $24 million and $48 million for the six months ended June 30, 2015 and 2014, respectively.

 

2


 

 

SUMMARY ATTRIBUTED FINANCIAL DATA (Continued)

Ventures Group

 

 

 

 

 

 

 

 

 

June 30, 2015

 

December 31, 2014

 

 

 

amounts in millions

 

Summary balance sheet data:

    

 

    

    

    

 

Cash and cash equivalents

 

$

2,092

 

1,884

 

Investments in available-for-sale securities and other cost investments

 

$

1,401

 

1,220

 

Investments in affiliates, accounted for using the equity method

 

$

1,325

 

1,258

 

Total assets

 

$

5,995

 

5,828

 

Long-term debt, including current portion

 

$

2,287

 

2,191

 

Deferred income tax liabilities, including current portion

 

$

2,034

 

1,987

 

Net assets attributable to Liberty Ventures common stock shareholders

 

$

1,509

 

1,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Six months ended

 

 

 

June 30,

 

June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

amounts in millions

 

Summary operations data:

    

 

    

    

    

    

    

    

    

 

Revenue

 

$

254

 

 —

 

530

 

 —

 

Cost of sales

 

 

175

 

 —

 

369

 

 —

 

Operating, including stock-based compensation

 

 

24

 

 —

 

46

 

 —

 

Selling, general and administrative expenses (1)

 

 

58

 

6

 

103

 

9

 

Depreciation and amortization

 

 

12

 

(1)

 

28

 

 —

 

Operating income (loss)

 

 

(15)

 

(5)

 

(16)

 

(9)

 

Interest expense

 

 

(20)

 

(19)

 

(40)

 

(38)

 

Share of earnings (losses) of affiliates, net

 

 

78

 

(3)

 

57

 

(26)

 

Realized and unrealized gains (losses) on financial instruments, net

 

 

24

 

(47)

 

30

 

(73)

 

Gains (losses) on dispositions, net

 

 

111

 

 —

 

111

 

 —

 

Other, net

 

 

2

 

4

 

9

 

10

 

Income tax benefit (expense)

 

 

(42)

 

36

 

(21)

 

69

 

Net earnings (loss) from continuing operations

 

 

138

 

(34)

 

130

 

(67)

 

Net earnings (loss) from discontinued operations

 

 

 —

 

26

 

 —

 

49

 

Net earnings (loss)

 

 

138

 

(8)

 

130

 

(18)

 

Less net earnings (loss) attributable to noncontrolling interests

 

 

8

 

20

 

8

 

38

 

Net earnings (loss) attributable to Liberty Interactive Corporation shareholders

 

$

130

 

(28)

 

122

 

(56)

 

 


(1)

Includes stock-based compensation of $17 million and $2 million for the three months ended June 30, 2015 and 2014, respectively, and $20 million and $3 million for the six months ended June 30, 2015 and 2014, respectively.

3


 

 

BALANCE SHEET INFORMATION

June 30, 2015 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributed (note 1)

 

 

 

 

 

 

    

QVC

    

Ventures

    

Inter-group

    

Consolidated

 

 

 

Group

 

Group

 

Eliminations

 

Liberty

 

 

 

amounts in millions

 

Assets

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

497

 

2,092

 

 

2,589

 

Trade and other receivables, net

 

 

800

 

59

 

 

859

 

Inventory, net

 

 

964

 

65

 

 

1,029

 

Short-term marketable securities

 

 

8

 

837

 

 

845

 

Other current assets

 

 

273

 

8

 

(204)

 

77

 

Total current assets

 

 

2,542

 

3,061

 

(204)

 

5,399

 

Investments in available-for-sale securities and other cost investments (note 2)

 

 

4

 

1,401

 

 

1,405

 

Investments in affiliates, accounted for using the equity method (note 3)

 

 

196

 

1,325

 

 

1,521

 

Property and equipment, net

 

 

982

 

38

 

 

1,020

 

Intangible assets not subject to amortization

 

 

7,592

 

127

 

 

7,719

 

Intangible assets subject to amortization, net

 

 

976

 

38

 

 

1,014

 

Other assets, at cost, net of accumulated amortization

 

 

59

 

5

 

 

64

 

Total assets

 

$

12,351

 

5,995

 

(204)

 

18,142

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

Intergroup payable (receivable) (note 7)

 

$

1

 

(1)

 

 

 —

 

Accounts payable

 

 

567

 

34

 

 

601

 

Accrued liabilities

 

 

570

 

45

 

 

615

 

Current portion of debt (note 4)

 

 

9

 

907

 

 

916

 

Current deferred tax liabilities

 

 

 —

 

1,244

 

(204)

 

1,040

 

Other current liabilities

 

 

155

 

82

 

 

237

 

Total current liabilities

 

 

1,302

 

2,311

 

(204)

 

3,409

 

Long-term debt (note 4)

 

 

5,685

 

1,380

 

 

7,065

 

Deferred income tax liabilities

 

 

949

 

790

 

 

1,739

 

Other liabilities

 

 

190

 

12

 

 

202

 

Total liabilities

 

 

8,126

 

4,493

 

(204)

 

12,415

 

Equity/Attributed net assets (liabilities)

 

 

4,130

 

1,509

 

 

5,639

 

Noncontrolling interests in equity of subsidiaries

 

 

95

 

(7)

 

 

88

 

Total liabilities and equity

 

$

12,351

 

5,995

 

(204)

 

18,142

 

 

 

 

 

 

 

 

 

 

 

 

 

4


 

 

 

STATEMENT OF OPERATIONS INFORMATION

Three months ended June 30, 2015 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Attributed (note 1)

 

 

 

 

 

QVC

 

Ventures

 

Consolidated

 

 

 

Group

 

Group

 

Liberty

 

 

 

amounts in millions

 

Total revenue, net

 

$

1,998

 

254

 

2,252

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of sales

 

 

1,234

 

175

 

1,409

 

Operating, including stock-based compensation (note 5)

 

 

174

 

24

 

198

 

Selling, general and administrative, including stock-based compensation (note 5)

 

 

157

 

58

 

215

 

Depreciation and amortization

 

 

149

 

12

 

161

 

 

 

 

1,714

 

269

 

1,983

 

Operating income (loss)

 

 

284

 

(15)

 

269

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(70)

 

(20)

 

(90)

 

Share of earnings (losses) of affiliates, net (note 3)

 

 

9

 

78

 

87

 

Realized and unrealized gains (losses) on financial instruments, net

 

 

8

 

24

 

32

 

Gains (losses)  on dispositions, net (note 1)

 

 

 —

 

111

 

111

 

Other, net

 

 

(31)

 

2

 

(29)

 

 

 

 

(84)

 

195

 

111

 

Earnings (loss) before income taxes

 

 

200

 

180

 

380

 

Income tax benefit (expense)

 

 

(80)

 

(42)

 

(122)

 

Net earnings (loss)

 

 

120

 

138

 

258

 

Less net earnings (loss) attributable to noncontrolling interests

 

 

8

 

8

 

16

 

Net earnings (loss) attributable to Liberty stockholders

 

$

112

 

130

 

242

 

 

    

 

 

    

 

    

 

 

 

 

 

 

5


 

 

 

STATEMENT OF OPERATIONS INFORMATION

Three months ended June 30, 2014 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Attributed (note 1)

 

 

 

 

    

QVC

    

Ventures

    

Consolidated

 

 

 

Group

 

Group

 

Liberty

 

 

 

amounts in millions

 

Total revenue, net

 

$

2,483

 

 —

 

2,483

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of sales

 

 

1,558

 

 —

 

1,558

 

Operating, including stock-based compensation

 

 

217

 

 —

 

217

 

Selling, general and administrative, including stock-based compensation (note 5)

 

 

272

 

6

 

278

 

Impairment of Long Lived Assets

 

 

7

 

 —

 

7

 

Depreciation and amortization

 

 

165

 

(1)

 

164

 

 

 

 

2,219

 

5

 

2,224

 

Operating income (loss)

 

 

264

 

(5)

 

259

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(79)

 

(19)

 

(98)

 

Share of earnings (losses) of affiliates, net (note 3)

 

 

7

 

(3)

 

4

 

Realized and unrealized gains (losses) on financial instruments, net

 

 

6

 

(47)

 

(41)

 

Other, net

 

 

(1)

 

4

 

3

 

 

 

 

(67)

 

(65)

 

(132)

 

Earnings (loss) from continuing operations before income taxes

 

 

197

 

(70)

 

127

 

Income tax benefit (expense)

 

 

(76)

 

36

 

(40)

 

Net earnings (loss) from continuing operations

 

 

121

 

(34)

 

87

 

Earnings (loss) from discontinued operations, net of taxes

 

 

(7)

 

26

 

19

 

Net earnings (loss)

 

 

114

 

(8)

 

106

 

Less net earnings (loss) attributable to noncontrolling interests

 

 

9

 

20

 

29

 

Net earnings (loss) attributable to Liberty stockholders

 

$

105

 

(28)

 

77

 

 

6


 

 

 

STATEMENT OF OPERATIONS INFORMATION

Six months ended June 30, 2015

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributed (note 1)

 

 

 

 

 

QVC

 

Ventures

 

Consolidated

 

 

 

Group

 

Group

 

Liberty

 

 

 

amounts in millions

 

Total revenue, net

 

$

3,936

 

530

 

4,466

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of sales

 

 

2,455

 

369

 

2,824

 

Operating, including stock-based compensation (note 5)

 

 

343

 

46

 

389

 

Selling, general and administrative, including stock-based compensation (note 5)

 

 

316

 

103

 

419

 

Depreciation and amortization

 

 

301

 

28

 

329

 

 

 

 

3,415

 

546

 

3,961

 

Operating income (loss)

 

 

521

 

(16)

 

505

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(145)

 

(40)

 

(185)

 

Share of earnings (losses) of affiliates, net (note 3)

 

 

33

 

57

 

90

 

Realized and unrealized gains (losses) on financial instruments, net

 

 

(2)

 

30

 

28

 

Gains (losses)  on dispositions, net (note 1)

 

 

 —

 

111

 

111

 

Other, net

 

 

(23)

 

9

 

(14)

 

 

 

 

(137)

 

167

 

30

 

Earnings (loss) before income taxes

 

 

384

 

151

 

535

 

Income tax benefit (expense)

 

 

(104)

 

(21)

 

(125)

 

Net earnings (loss)

 

 

280

 

130

 

410

 

Less net earnings (loss) attributable to noncontrolling interests

 

 

17

 

8

 

25

 

Net earnings (loss) attributable to Liberty stockholders

 

$

263

 

122

 

385

 

 

7


 

 

STATEMENT OF OPERATIONS INFORMATION

Six months ended June 30, 2014

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributed (note 1)

 

 

 

 

    

QVC

    

Ventures

    

Consolidated

 

 

 

Group

 

Group

 

Liberty

 

 

 

amounts in millions

 

Total revenue, net

 

$

4,917

 

 —

 

4,917

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of sales

 

 

3,114

 

 —

 

3,114

 

Operating, including stock-based compensation

 

 

430

 

 —

 

430

 

Selling, general and administrative, including stock-based compensation (note 5)

 

 

525

 

9

 

534

 

Impairment of intangible assets

 

 

7

 

 —

 

7

 

Depreciation and amortization

 

 

327

 

 —

 

327

 

 

 

 

4,403

 

9

 

4,412

 

Operating income (loss)

 

 

514

 

(9)

 

505

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(155)

 

(38)

 

(193)

 

Share of earnings (losses) of affiliates, net (note 3)

 

 

28

 

(26)

 

2

 

Realized and unrealized gains (losses) on financial instruments, net

 

 

7

 

(73)

 

(66)

 

Other, net

 

 

 —

 

10

 

10

 

 

 

 

(120)

 

(127)

 

(247)

 

Earnings (loss) from continuing operations before income taxes

 

 

394

 

(136)

 

258

 

Income tax benefit (expense)

 

 

(149)

 

69

 

(80)

 

Net earnings (loss) from continuing operations

 

 

245

 

(67)

 

178

 

Earnings (loss) from discontinued operations, net of taxes

 

 

(11)

 

49

 

38

 

Net earnings (loss)

 

 

234

 

(18)

 

216

 

Less net earnings (loss) attributable to noncontrolling interests

 

 

19

 

38

 

57

 

Net earnings (loss) attributable to Liberty stockholders

 

$

215

 

(56)

 

159

 

 

8


 

 

STATEMENT OF CASH FLOWS INFORMATION

Six months ended June 30, 2015 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Attributed (note 1)

 

 

 

 

    

QVC

    

Ventures

    

Consolidated

 

 

 

Group

 

Group

 

Liberty

 

 

 

amounts in millions

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net earnings (loss)

 

$

280

 

130

 

410

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

301

 

28

 

329

 

Stock-based compensation

 

 

24

 

20

 

44

 

Cash payments for stock based compensation

 

 

 —

 

(10)

 

(10)

 

Excess tax benefit from stock based compensation

 

 

(14)

 

(2)

 

(16)

 

Share of (earnings) losses of affiliates, net

 

 

(33)

 

(57)

 

(90)

 

Cash receipts from return on equity investments

 

 

14

 

13

 

27

 

Realized and unrealized gains (losses) on financial instruments, net

 

 

2

 

(30)

 

(28)

 

(Gains) losses on dispositions

 

 

 —

 

(111)

 

(111)

 

Deferred income tax (benefit) expense

 

 

(91)

 

61

 

(30)

 

Other, net

 

 

25

 

7

 

32

 

Intergroup tax allocation

 

 

43

 

(43)

 

 —

 

Intergroup tax (payments) receipts

 

 

(55)

 

55

 

 —

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Current and other assets

 

 

283

 

4

 

287

 

Payables and other current liabilities

 

 

(208)

 

(38)

 

(246)

 

Net cash provided (used) by operating activities

 

 

571

 

27

 

598

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Cash paid for acquisitions

 

 

 —

 

(20)

 

(20)

 

Cash proceeds from dispositions

 

 

 —

 

271

 

271

 

Investments in and loans to cost and equity investees

 

 

(2)

 

(96)

 

(98)

 

Cash receipts from returns of equity investments

 

 

200

 

 —

 

200

 

Capital expended for property and equipment

 

 

(80)

 

(24)

 

(104)

 

Purchases of short term and other marketable securities

 

 

(80)

 

(546)

 

(626)

 

Sales of short term and other marketable securities

 

 

93

 

584

 

677

 

Other investing activities, net

 

 

(47)

 

 —

 

(47)

 

Net cash provided (used) by investing activities

 

 

84

 

169

 

253

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Borrowings of debt

 

 

1,098

 

369

 

1,467

 

Repayments of debt

 

 

(1,288)

 

(340)

 

(1,628)

 

Repurchases of Liberty common stock

 

 

(377)

 

 —

 

(377)

 

Minimum withholding taxes on net settlements of stock-based compensation

 

 

(14)

 

1

 

(13)

 

Excess tax benefit from stock-based compensation

 

 

14

 

2

 

16

 

Other financing activities, net

 

 

(4)

 

(20)

 

(24)

 

Net cash provided (used) by financing activities

 

 

(571)

 

12

 

(559)

 

Effect of foreign currency rates on cash

 

 

(9)

 

 —

 

(9)

 

Net increase (decrease) in cash and cash equivalents

 

 

75

 

208

 

283

 

Cash and cash equivalents at beginning of period

 

 

422

 

1,884

 

2,306

 

Cash and cash equivalents at end period

 

$

497

 

2,092

 

2,589

 

 

 

 

 

 

 

 

 

 

9


 

 

 

STATEMENT OF CASH FLOWS INFORMATION

Six months ended June 30, 2014 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Attributed (note 1)

 

 

 

 

    

QVC

    

Ventures

    

Consolidated

 

 

 

Group

 

Group

 

Liberty

 

 

 

amounts in millions

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net earnings (loss)

 

$

234

 

(18)

 

216

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

 

(Earnings) loss from discontinued operations

 

 

11

 

(49)

 

(38)

 

Depreciation and amortization

 

 

327

 

 —

 

327

 

Stock-based compensation

 

 

48

 

3

 

51

 

Cash payments for stock based compensation

 

 

(5)

 

(1)

 

(6)

 

Excess tax benefit from stock-based compensation

 

 

(9)

 

(1)

 

(10)

 

Share of losses (earnings) of affiliates, net

 

 

(28)

 

26

 

(2)

 

Cash receipts from return on equity investments

 

 

10

 

10

 

20

 

Realized and unrealized gains (losses) on financial instruments, net

 

 

(7)

 

73

 

66

 

Impairment of intangible assets

 

 

7

 

 

 

7

 

Deferred income tax (benefit) expense

 

 

(101)

 

35

 

(66)

 

Other, net

 

 

4

 

3

 

7

 

Intergroup tax allocation

 

 

105

 

(105)

 

 —

 

Intergroup tax (payments) receipts

 

 

(276)

 

276

 

 —

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Current and other assets

 

 

310

 

1

 

311

 

Payables and other current liabilities

 

 

(46)

 

(5)

 

(51)

 

Net cash provided (used) by operating activities

 

 

584

 

248

 

832

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Cash proceeds from dispositions

 

 

 —

 

25

 

25

 

Investments in and loans to cost and equity investees

 

 

(2)

 

(29)

 

(31)

 

Capital expended for property and equipment

 

 

(88)

 

3

 

(85)

 

Purchases of short term and other marketable securities

 

 

(38)

 

(219)

 

(257)

 

Sales of short term and other marketable securities

 

 

27

 

210

 

237

 

Other investing activities, net

 

 

(10)

 

15

 

5

 

Net cash provided (used) by investing activities

 

 

(111)

 

5

 

(106)

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Borrowings of debt

 

 

1,895

 

 —

 

1,895

 

Repayments of debt

 

 

(1,739)

 

(5)

 

(1,744)

 

Repurchases of Liberty Interactive common stock

 

 

(478)

 

 —

 

(478)

 

Minimum withholding taxes on net settlements of stock-based compensation

 

 

(14)

 

 —

 

(14)

 

Excess tax benefit from stock-based compensation

 

 

9

 

1

 

10

 

Intergroup receipts (payments), net

 

 

2

 

(2)

 

 —

 

Other financing activities, net

 

 

(36)

 

 —

 

(36)

 

Net cash provided (used) by financing activities

 

 

(361)

 

(6)

 

(367)

 

Net cash provided (used) by discontinued operations:

 

 

 

 

 

 

 

 

Operating

 

 

(14)

 

269

 

255

 

Investing

 

 

1

 

(12)

 

(11)

 

Financing

 

 

(1)

 

(23)

 

(24)

 

Effect of foreign currency rates on cash

 

 

 

 

3

 

3

 

Change in available cash held by discontinued operations

 

 

2

 

(237)

 

(235)

 

Net cash provided (used) by discontinued operations

 

 

(12)

 

 —

 

(12)

 

Effect of foreign currency rates on cash

 

 

(5)

 

 —

 

(5)

 

Net increase (decrease) in cash and cash equivalents

 

 

95

 

247

 

342

 

Cash and cash equivalents at beginning of period

 

 

595

 

307

 

902

 

Cash and cash equivalents at end period

 

$

690

 

554

 

1,244

 

 

 

 

 

 

 

 

 

 

 

 

 

10


 

Notes to Attributed Financial Information

(unaudited)

 

 

(1)

At June 30, 2015, the QVC Group is comprised of our consolidated subsidiary, QVC, and our approximate 38% interest in HSN, Inc., accounted for under the equity method.  Accordingly, the accompanying attributed financial information for the QVC Group includes the foregoing investment, as well as the assets, liabilities, revenue, expenses and cash flows of QVC.  We have also attributed certain of our debt obligations (and related interest expense) to the QVC Group based upon a number of factors, including the cash flow available to the QVC Group and its ability to pay debt service and our assessment of the optimal capitalization for the QVC Group.  The specific debt obligations attributed to each of the QVC Group and the Ventures Group are described in note 4 below.  In addition, we have allocated certain corporate general and administrative expenses among the QVC Group and the Ventures Group as described in note 5 below.

 

At June 30, 2015, the QVC Group is primarily focused on our merchandise-focused televised shopping programs, Internet and mobile application businesses.  Accordingly, we expect that businesses that we may acquire in the future that we believe are complementary to this strategy will also be attributed to the QVC Group.

 

At June 30, 2015, the Ventures Group consists of all of our businesses not included in the QVC Group including our Digital Commerce businesses and interests in equity method investments of Expedia, Inc., Interval Leisure Group, Inc., FTD and LendingTree, Inc. and available-for-sale securities Time Warner Inc. and Time Warner Cable Inc.  Accordingly, the accompanying attributed financial information for the Ventures Group includes these investments as well as the assets, liabilities, revenue, expenses and cash flows of the Digital Commerce businesses. In addition, we have attributed to the Ventures Group all of our senior exchangeable debentures (and related interest expense).  See note 4 below for the debt obligations attributed to the Ventures Group.

 

As discussed in note 1 to the accompanying condensed consolidated financial statements, Liberty entered into an agreement with Liberty Broadband Corporation (“Liberty Broadband”), whereby Liberty will invest $2.4 billion in Liberty Broadband in connection with the closing of the proposed merger of Charter Communications, Inc. and Time Warner Cable Inc. The proceeds of this investment will be used by Liberty Broadband to fund, in part, its agreement to acquire $4.3 billion of Charter stock.  However, Liberty Broadband has the right, and may determine, to incur debt financing (subject to certain conditions) to fund a portion of the purchase price for its investment in Charter, in which case Liberty Broadband may reduce the aggregate subscription for its Series C shares by up to 25%, with such reduction applied pro rata to all investors, including Liberty.  Liberty's investment in Liberty Broadband will be funded using cash on hand and short term investments and will be attributed to the Ventures Group.

 

As previously discussed, Liberty sold Backcountry on June 30, 2015 for aggregate consideration, including assumption of debt, amounts held in escrow, and a noncontrolling interest, of approximately $350 million.  The sale resulted in a $105 million gain, which is included in “Gains (losses) on dispositions, net” in the accompanying statement of operations information.

 

Any businesses that we may acquire in the future that we do not attribute to the QVC Group will be attributed to the Ventures Group.

 

 

 

 

 

 

 

 

11


 

Notes to Attributed Financial Information

(unaudited)

 

 

 

 

 

(2)

Investments in available-for-sale securities, including non-strategic securities, and other cost investments are summarized as follows:

 

 

 

 

 

 

 

 

 

    

June 30,

    

December 31,

 

 

 

2015

 

2014

 

 

 

amounts in millions

 

QVC Group

 

 

 

 

 

 

Other

 

$

4

 

4

 

Total QVC Group

 

 

4

 

4

 

Ventures Group

 

 

 

 

 

 

Time Warner Inc.

 

 

384

 

375

 

Time Warner Cable Inc.

 

 

955

 

815

 

Other

 

 

62

 

30

 

Total Ventures Group

 

 

1,401

 

1,220

 

Consolidated Liberty

 

$

1,405

 

1,224

 

 

 

(3)

The following table presents information regarding certain equity method investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share of earnings (losses)

 

 

 

June 30, 2015

 

Three months ended

 

Six months ended

 

 

 

Percentage

 

Carrying

 

Market

 

June 30,

 

June 30,

 

 

 

ownership

    

value

 

value

 

2015

 

2014

 

2015

 

2014

 

 

 

dollar amounts in millions

 

QVC Group

    

    

  

    

 

    

    

    

    

    

  

    

    

    

    

    

 

HSN, Inc.

 

38

%  

 

$

151

 

1,405

 

12

 

9

 

37

 

31

 

Other

 

various

 

 

 

45

 

NA

 

(3)

 

(2)

 

(4)

 

(3)

 

Total QVC Group

 

 

 

 

 

196

 

 

 

9

 

7

 

33

 

28

 

Ventures Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expedia, Inc.

 

18

%  

 

 

587

 

2,581

 

76

 

10

 

80

 

4

 

FTD (1)

 

36

%  

 

 

358

 

288

 

7

 

NA

 

5

 

NA

 

Other

 

various

 

 

 

380

 

NA

 

(5)

 

(13)

 

(28)

 

(30)

 

Total Ventures Group

 

 

 

 

 

1,325

 

 

 

78

 

(3)

 

57

 

(26)

 

Consolidated Liberty

 

 

 

 

$

1,521

 

 

 

87

 

4

 

90

 

2

 

(1)

As previously discussed, on December 31, 2014, Liberty announced the closing of the acquisition by FTD of Provide, which was one of Liberty’s wholly-owned Digital Commerce businesses. Under the terms of the transaction, Liberty received approximately 10.2 million shares of FTD common stock representing approximately 35% of the combined company and approximately $145 million in cash. Subsequent to completion of the transaction, Liberty accounts for FTD as an equity-method affiliate based on the ownership level and board representation.

12


 

Notes to Attributed Financial Information

(unaudited)

 

 

(4)

Debt attributed to the QVC Group and the Ventures Group is comprised of the following:

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

 

 

Outstanding

 

Carrying

 

 

 

principal

 

value

 

 

 

amounts in millions

 

QVC Group

    

 

    

    

 

    

 

8.5% Senior Debentures due 2029

 

$

287

 

 

285

 

8.25% Senior Debentures due 2030

 

 

505

 

 

501

 

1% Exchangeable Senior Debentures due 2043

 

 

346

 

 

392

 

QVC 3.125% Senior Secured Notes due 2019

 

 

400

 

 

399

 

QVC 5.125% Senior Secured Notes due 2022

 

 

500

 

 

500

 

QVC 4.375% Senior Secured Notes due 2023

 

 

750

 

 

750

 

QVC 4.850% Senior Secured Notes due 2024

 

 

600

 

 

600

 

QVC 4.45% Senior Secured Notes due 2025

 

 

600

 

 

599

 

QVC 5.45% Senior Secured Notes due 2034

 

 

400

 

 

399

 

QVC 5.95% Senior Secured Notes due 2043

 

 

300

 

 

300

 

QVC Bank Credit Facilities

 

 

895

 

 

895

 

Other subsidiary debt

 

 

74

 

 

74

 

Total QVC Group debt

 

 

5,657

 

 

5,694

 

Ventures Group

 

 

 

 

 

 

 

4% Exchangeable Senior Debentures due 2029

 

 

436

 

 

285

 

3.75% Exchangeable Senior Debentures due 2030

 

 

438

 

 

290

 

3.5% Exchangeable Senior Debentures due 2031

 

 

351

 

 

307

 

0.75% Exchangeable Senior Debentures due 2043

 

 

850

 

 

1,361

 

Subsidiary level notes and facilities

 

 

44

 

 

44

 

Total Ventures Group debt

 

 

2,119

 

 

2,287

 

Total consolidated Liberty debt

 

$

7,776

 

 

7,981

 

Less current maturities

 

 

 

 

 

(916)

 

Total long-term debt

 

 

 

 

$

7,065

 

 

(5)

Cash compensation expense for our corporate employees is allocated between the QVC Group and the Ventures Group based on the estimated percentage of time spent providing services for each group.  On a semi-annual basis, estimated time spent will be determined through an interview process and a review of personnel duties unless transactions significantly change the composition of companies and investments in either respective group, which would require a more timely reevaluation of estimated time spent.  Other general and administrative expenses will be charged directly to the groups whenever possible and are otherwise allocated based on estimated usage or some other reasonably determined methodology.  Amounts allocated from the QVC Group to the Ventures Group were determined to be $4 million and $4 million for the three months ended June 30, 2015 and 2014, respectively, and $8 million and $6 million for the six months ended June 30, 2015 and 2014, respectively.  We note that stock compensation related to each tracking stock group is determined based on actual options outstanding for each respective tracking stock group.

While we believe that this allocation method is reasonable and fair to each group, we may elect to change the allocation methodology or percentages used to allocate general and administrative expenses in the future.

(6)

The QVC Group common stock (formerly the Liberty Interactive common stock) and the Liberty Ventures common stock have voting and conversion rights under our restated charter.  Following is a summary of those

13


 

Notes to Attributed Financial Information

(unaudited)

 

rights.  Holders of Series A common stock of each group are entitled to one vote per share, and holders of Series B common stock of each group are entitled to ten votes per share.  Holders of Series C common stock of each group, if issued, are entitled to 1/100th of a vote per share in certain limited cases and will otherwise not be entitled to vote.  In general, holders of Series A and Series B common stock will vote as a single class. In certain limited circumstances, the board may elect to seek the approval of the holders of only Series A and Series B QVC Group common stock or the approval of the holders of only Series A and Series B Liberty Ventures common stock.

At the option of the holder, each share of Series B common stock will be convertible into one share of Series A common stock of the same group.  At the discretion of our board, the common stock related to one group may be converted into common stock of the same series that is related to the other group.

(7)The intergroup payable (receivable) is primarily attributable to intergroup income taxes payable from the QVC Group to the Ventures Group.

 

14