Attached files
| file | filename |
|---|---|
| EX-99.2 - EX-99.2 - Qurate Retail, Inc. | lint-20160630ex9928012c4.htm |
| EX-32 - EX-32 - Qurate Retail, Inc. | lint-20160630xex32.htm |
| EX-31.2 - EX-31.2 - Qurate Retail, Inc. | lint-20160630ex31285dd11.htm |
| EX-31.1 - EX-31.1 - Qurate Retail, Inc. | lint-20160630ex31128903d.htm |
| 10-Q - 10-Q - Qurate Retail, Inc. | lint-20160630x10q.htm |
Unaudited Attributed Financial Information for Tracking Stock Groups
The following tables present our assets and liabilities as of June 30, 2016, revenue and expenses for three and six months ended June 30, 2016 and 2015 and cash flows for the six months ended June 30, 2016 and 2015. 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, 2016 included in this Quarterly Report on Form 10-Q.
As discussed in note 3 of the accompanying condensed consolidated financial statements, Liberty sold Backcountry.com, Inc. (“Backcountry”) on June 30, 2015. Backcountry is not presented as a discontinued operation as the sale did not represent a strategic shift that had a major effect on Liberty’s operations and financial results.
As discussed in note 2 of the accompanying condensed consolidated financial statements, on October 1, 2015, Liberty acquired all of the outstanding shares of zulily, inc. (“zulily”) (now known as zulily, llc). zulily is an online retailer offering customers a fun and entertaining shopping experience with a fresh selection of new product styles launched each day. zulily is attributed to the QVC Group.
The QVC Group common stock is intended to reflect the separate performance of our QVC Group which is comprised of our consolidated subsidiaries, QVC, Inc. (“QVC”) and zulily, and our approximate 38% interest in HSN, Inc. The Liberty Ventures common stock is intended to reflect the separate performance of our Ventures Group which is comprised primarily of our interests in Bodybuilding.com, LLC (“Bodybuilding”), CommerceHub (until July 22, 2016), Evite, Inc. (“Evite”) and Backcountry (through June 30, 2015), interests in Expedia, Inc., FTD Companies, Inc. (“FTD”), LendingTree, Inc. and Liberty Broadband Corporation (“Liberty Broadband”) and available-for-sale securities Charter Communications, Inc., Interval Leisure Group, Inc. and Time Warner 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, 2016 |
|
December 31, 2015 |
|
|
|
|
|
amounts in millions |
|
|||
|
Summary balance sheet data: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
394 |
|
426 |
|
|
Trade and other receivables, net |
|
$ |
861 |
|
1,379 |
|
|
Inventory |
|
$ |
1,043 |
|
945 |
|
|
Investments in affiliates, accounted for using the equity method |
|
$ |
225 |
|
208 |
|
|
Total assets |
|
$ |
14,630 |
|
15,141 |
|
|
Long-term debt, including current portion |
|
$ |
6,398 |
|
6,535 |
|
|
Deferred income tax liabilities |
|
$ |
1,226 |
|
1,359 |
|
|
Net assets attributable to QVC Group common stock shareholders |
|
$ |
5,066 |
|
5,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|
||||||
|
|
June 30, |
|
June 30, |
|
||||||
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
||
|
|
amounts in millions |
|
||||||||
|
Summary operations data: |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
2,424 |
|
1,998 |
|
4,791 |
|
3,936 |
|
|
|
Cost of sales |
|
1,538 |
|
1,234 |
|
3,073 |
|
2,455 |
|
|
|
Operating expenses |
|
157 |
|
142 |
|
310 |
|
280 |
|
|
|
Selling, general and administrative expenses (1) |
|
261 |
|
189 |
|
525 |
|
379 |
|
|
|
Depreciation and amortization |
|
214 |
|
149 |
|
423 |
|
301 |
|
|
|
Operating income (loss) |
|
254 |
|
284 |
|
460 |
|
521 |
|
|
|
Interest expense |
|
(71) |
|
(70) |
|
(147) |
|
(145) |
|
|
|
Share of earnings (losses) of affiliates, net |
|
9 |
|
9 |
|
30 |
|
33 |
|
|
|
Realized and unrealized gains (losses) on financial instruments, net |
|
5 |
|
8 |
|
4 |
|
(2) |
|
|
|
Other income (expense), net |
|
20 |
|
(31) |
|
25 |
|
(23) |
|
|
|
Income tax benefit (expense) |
|
(79) |
|
(80) |
|
(136) |
|
(104) |
|
|
|
Net earnings (loss) |
|
138 |
|
120 |
|
|
236 |
|
280 |
|
|
Less net earnings (loss) attributable to noncontrolling interests |
|
11 |
|
8 |
|
19 |
|
17 |
|
|
|
Net earnings (loss) attributable to Liberty Interactive Corporation shareholders |
$ |
127 |
|
112 |
|
217 |
|
263 |
|
|
|
(1) |
|
2
SUMMARY ATTRIBUTED FINANCIAL DATA (Continued)
Ventures Group
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|
December 31, 2015 |
|
|
|
|
|
amounts in millions |
|
|||
|
Summary balance sheet data: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
116 |
|
2,023 |
|
|
Investments in available-for-sale securities and other cost investments |
|
$ |
1,766 |
|
1,349 |
|
|
Investments in affiliates, accounted for using the equity method |
|
$ |
1,300 |
|
1,433 |
|
|
Investment in Liberty Broadband measured at fair value |
|
$ |
2,561 |
|
- |
|
|
Total assets |
|
$ |
6,064 |
|
6,039 |
|
|
Long-term debt, including current portion |
|
$ |
1,829 |
|
2,172 |
|
|
Deferred income tax liabilities |
|
$ |
2,531 |
|
2,143 |
|
|
Net assets attributable to Liberty Ventures common stock shareholders |
|
$ |
1,826 |
|
1,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|
|||||
|
|
|
June 30, |
|
June 30, |
|
|||||
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
amounts in millions |
|
|||||||
|
Summary operations data: |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
139 |
|
254 |
|
282 |
|
530 |
|
|
Cost of sales |
|
|
83 |
|
175 |
|
174 |
|
369 |
|
|
Operating |
|
|
20 |
|
24 |
|
37 |
|
46 |
|
|
Selling, general and administrative expenses (1) |
|
|
33 |
|
58 |
|
77 |
|
103 |
|
|
Depreciation and amortization |
|
|
7 |
|
12 |
|
15 |
|
28 |
|
|
Operating income (loss) |
|
|
(4) |
|
(15) |
|
(21) |
|
(16) |
|
|
Interest expense |
|
|
(21) |
|
(20) |
|
(38) |
|
(40) |
|
|
Share of earnings (losses) of affiliates, net |
|
|
(9) |
|
78 |
|
(51) |
|
57 |
|
|
Realized and unrealized gains (losses) on financial instruments, net |
|
|
338 |
|
24 |
|
332 |
|
30 |
|
|
Gains (losses) on dispositions, net |
|
|
2 |
|
111 |
|
9 |
|
111 |
|
|
Other, net |
|
|
79 |
|
2 |
|
101 |
|
9 |
|
|
Income tax benefit (expense) |
|
|
(136) |
|
(42) |
|
(110) |
|
(21) |
|
|
Net earnings (loss) |
|
|
249 |
|
138 |
|
222 |
|
130 |
|
|
Less net earnings (loss) attributable to noncontrolling interests |
|
|
— |
|
8 |
|
— |
|
8 |
|
|
Net earnings (loss) attributable to Liberty Interactive Corporation shareholders |
|
$ |
249 |
|
130 |
|
222 |
|
122 |
|
|
(1) |
Includes stock-based compensation of $5 million and $17 million for the three months ended June 30, 2016 and 2015, respectively. |
3
June 30, 2016
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributed (note 1) |
|
|
|
|
|
|||
|
|
|
QVC |
|
Ventures |
|
Inter-group |
|
Consolidated |
|
|
|
|
|
Group |
|
Group |
|
Eliminations |
|
Liberty |
|
|
|
|
|
amounts in millions |
|
|||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
394 |
|
116 |
|
— |
|
510 |
|
|
Trade and other receivables, net |
|
|
861 |
|
52 |
|
(1) |
|
912 |
|
|
Inventory, net |
|
|
1,043 |
|
45 |
|
— |
|
1,088 |
|
|
Other current assets |
|
|
190 |
|
14 |
|
— |
|
204 |
|
|
Total current assets |
|
|
2,488 |
|
227 |
|
(1) |
|
2,714 |
|
|
Investments in available-for-sale securities and other cost investments (note 2) |
|
|
4 |
|
1,766 |
|
— |
|
1,770 |
|
|
Investments in affiliates, accounted for using the equity method (note 3) |
|
|
225 |
|
1,300 |
|
— |
|
1,525 |
|
|
Investment in Liberty Broadband measured at fair value (note 3) |
|
|
— |
|
2,561 |
|
— |
|
2,561 |
|
|
Property and equipment, net |
|
|
1,194 |
|
36 |
|
— |
|
1,230 |
|
|
Intangible assets not subject to amortization |
|
|
9,396 |
|
128 |
|
— |
|
9,524 |
|
|
Intangible assets subject to amortization, net |
|
|
1,274 |
|
39 |
|
— |
|
1,313 |
|
|
Other assets, at cost, net of accumulated amortization |
|
|
49 |
|
7 |
|
— |
|
56 |
|
|
Total assets |
|
$ |
14,630 |
|
6,064 |
|
(1) |
|
20,693 |
|
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Intergroup payable (receivable) (note 7) |
|
$ |
221 |
|
(221) |
|
— |
|
— |
|
|
Accounts payable |
|
|
622 |
|
19 |
|
— |
|
641 |
|
|
Accrued liabilities |
|
|
586 |
|
48 |
|
— |
|
634 |
|
|
Current portion of debt (note 4) |
|
|
356 |
|
1,431 |
|
— |
|
1,787 |
|
|
Other current liabilities |
|
|
126 |
|
27 |
|
(1) |
|
152 |
|
|
Total current liabilities |
|
|
1,911 |
|
1,304 |
|
(1) |
|
3,214 |
|
|
Long-term debt (note 4) |
|
|
6,042 |
|
398 |
|
— |
|
6,440 |
|
|
Deferred income tax liabilities |
|
|
1,226 |
|
2,531 |
|
— |
|
3,757 |
|
|
Other liabilities |
|
|
273 |
|
15 |
|
— |
|
288 |
|
|
Total liabilities |
|
|
9,452 |
|
4,248 |
|
(1) |
|
13,699 |
|
|
Equity/Attributed net assets (liabilities) |
|
|
5,066 |
|
1,826 |
|
— |
|
6,892 |
|
|
Noncontrolling interests in equity of subsidiaries |
|
|
112 |
|
(10) |
|
— |
|
102 |
|
|
Total liabilities and equity |
|
$ |
14,630 |
|
6,064 |
|
(1) |
|
20,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4
STATEMENT OF OPERATIONS INFORMATION
Three months ended June 30, 2016
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributed (note 1) |
|
|
|
|||
|
|
|
QVC |
|
Ventures |
|
Consolidated |
|
|
|
|
|
Group |
|
Group |
|
Liberty |
|
|
|
|
|
amounts in millions |
|
|||||
|
Total revenue, net |
|
$ |
2,424 |
|
139 |
|
2,563 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
1,538 |
|
83 |
|
1,621 |
|
|
Operating |
|
|
157 |
|
20 |
|
177 |
|
|
Selling, general and administrative, including stock-based compensation (note 5) |
|
|
261 |
|
33 |
|
294 |
|
|
Depreciation and amortization |
|
|
214 |
|
7 |
|
221 |
|
|
|
|
|
2,170 |
|
143 |
|
2,313 |
|
|
Operating income (loss) |
|
|
254 |
|
(4) |
|
250 |
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(71) |
|
(21) |
|
(92) |
|
|
Share of earnings (losses) of affiliates, net (note 3) |
|
|
9 |
|
(9) |
|
— |
|
|
Realized and unrealized gains (losses) on financial instruments, net |
|
|
5 |
|
338 |
|
343 |
|
|
Gains (losses) on dispositions, net |
|
|
— |
|
2 |
|
2 |
|
|
Other, net |
|
|
20 |
|
79 |
|
99 |
|
|
|
|
|
(37) |
|
389 |
|
352 |
|
|
Earnings (loss) before income taxes |
|
|
217 |
|
385 |
|
602 |
|
|
Income tax benefit (expense) |
|
|
(79) |
|
(136) |
|
(215) |
|
|
Net earnings (loss) |
|
|
138 |
|
249 |
|
387 |
|
|
Less net earnings (loss) attributable to noncontrolling interests |
|
|
11 |
|
— |
|
11 |
|
|
Net earnings (loss) attributable to Liberty stockholders |
|
$ |
127 |
|
249 |
|
376 |
|
|
|
|
|
|
|
|
|
|
|
5
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 |
|
|
142 |
|
24 |
|
166 |
|
|
Selling, general and administrative, including stock-based compensation (note 5) |
|
|
189 |
|
58 |
|
247 |
|
|
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 |
|
6
STATEMENT OF OPERATIONS INFORMATION
Six months ended June 30, 2016
(unaudited)
|
|
|
Attributed (note 1) |
|
|
|
|||
|
|
|
QVC |
|
Ventures |
|
Consolidated |
|
|
|
|
|
Group |
|
Group |
|
Liberty |
|
|
|
|
|
amounts in millions |
|
|||||
|
Total revenue, net |
|
$ |
4,791 |
|
282 |
|
5,073 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
3,073 |
|
174 |
|
3,247 |
|
|
Operating, including stock-based compensation (note 5) |
|
|
310 |
|
37 |
|
347 |
|
|
Selling, general and administrative, including stock-based compensation (note 5) |
|
|
525 |
|
77 |
|
602 |
|
|
Depreciation and amortization |
|
|
423 |
|
15 |
|
438 |
|
|
|
|
|
4,331 |
|
303 |
|
4,634 |
|
|
Operating income (loss) |
|
|
460 |
|
(21) |
|
439 |
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(147) |
|
(38) |
|
(185) |
|
|
Share of earnings (losses) of affiliates, net (note 3) |
|
|
30 |
|
(51) |
|
(21) |
|
|
Realized and unrealized gains (losses) on financial instruments, net |
|
|
4 |
|
332 |
|
336 |
|
|
Gains (losses) on dispositions, net |
|
|
— |
|
9 |
|
9 |
|
|
Other, net |
|
|
25 |
|
101 |
|
126 |
|
|
|
|
|
(88) |
|
353 |
|
265 |
|
|
Earnings (loss) before income taxes |
|
|
372 |
|
332 |
|
704 |
|
|
Income tax benefit (expense) |
|
|
(136) |
|
(110) |
|
(246) |
|
|
Net earnings (loss) |
|
|
236 |
|
222 |
|
458 |
|
|
Less net earnings (loss) attributable to noncontrolling interests |
|
|
19 |
|
— |
|
19 |
|
|
Net earnings (loss) attributable to Liberty stockholders |
|
$ |
217 |
|
222 |
|
439 |
|
7
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 |
|
|
280 |
|
46 |
|
326 |
|
|
Selling, general and administrative, including stock-based compensation (note 5) |
|
|
379 |
|
103 |
|
482 |
|
|
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 |
|
8
STATEMENT OF CASH FLOWS INFORMATION
Six months ended June 30, 2016
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributed (note 1) |
|
|
|
|||
|
|
|
QVC |
|
Ventures |
|
Consolidated |
|
|
|
|
|
Group |
|
Group |
|
Liberty |
|
|
|
|
|
amounts in millions |
|
|||||
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
236 |
|
222 |
|
458 |
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
423 |
|
15 |
|
438 |
|
|
Stock-based compensation |
|
|
37 |
|
18 |
|
55 |
|
|
Cash payments for stock based compensation |
|
|
— |
|
(91) |
|
(91) |
|
|
Excess tax benefit from stock based compensation |
|
|
(7) |
|
(1) |
|
(8) |
|
|
Share of (earnings) losses of affiliates, net |
|
|
(30) |
|
51 |
|
21 |
|
|
Cash receipts from return on equity investments |
|
|
14 |
|
13 |
|
27 |
|
|
Realized and unrealized gains (losses) on financial instruments, net |
|
|
(4) |
|
(332) |
|
(336) |
|
|
(Gains) losses on dispositions |
|
|
— |
|
(9) |
|
(9) |
|
|
Deferred income tax (benefit) expense |
|
|
(94) |
|
390 |
|
296 |
|
|
Other, net |
|
|
22 |
|
(85) |
|
(63) |
|
|
Intergroup tax allocation |
|
|
274 |
|
(274) |
|
— |
|
|
Intergroup tax (payments) receipts |
|
|
(104) |
|
104 |
|
— |
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
|
Current and other assets |
|
|
369 |
|
23 |
|
392 |
|
|
Payables and other current liabilities |
|
|
(491) |
|
(17) |
|
(508) |
|
|
Net cash provided (used) by operating activities |
|
|
645 |
|
27 |
|
672 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Cash proceeds from dispositions |
|
|
— |
|
129 |
|
129 |
|
|
Investments in and loans to cost and equity investees |
|
|
— |
|
(42) |
|
(42) |
|
|
Capital expended for property and equipment |
|
|
(110) |
|
(15) |
|
(125) |
|
|
Purchases of short term and other marketable securities |
|
|
— |
|
(264) |
|
(264) |
|
|
Sales of short term and other marketable securities |
|
|
12 |
|
1,162 |
|
1,174 |
|
|
Investment in Liberty Broadband |
|
|
— |
|
(2,400) |
|
(2,400) |
|
|
Other investing activities, net |
|
|
(2) |
|
1 |
|
(1) |
|
|
Net cash provided (used) by investing activities |
|
|
(100) |
|
(1,429) |
|
(1,529) |
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Borrowings of debt |
|
|
778 |
|
587 |
|
1,365 |
|
|
Repayments of debt |
|
|
(923) |
|
(1,096) |
|
(2,019) |
|
|
Repurchases of QVC Group common stock |
|
|
(417) |
|
— |
|
(417) |
|
|
Minimum withholding taxes on net settlements of stock-based compensation |
|
|
(13) |
|
— |
|
(13) |
|
|
Excess tax benefit from stock-based compensation |
|
|
7 |
|
1 |
|
8 |
|
|
Other financing activities, net |
|
|
(13) |
|
3 |
|
(10) |
|
|
Net cash provided (used) by financing activities |
|
|
(581) |
|
(505) |
|
(1,086) |
|
|
Effect of foreign currency rates on cash |
|
|
4 |
|
— |
|
4 |
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(32) |
|
(1,907) |
|
(1,939) |
|
|
Cash and cash equivalents at beginning of period |
|
|
426 |
|
2,023 |
|
2,449 |
|
|
Cash and cash equivalents at end period |
|
$ |
394 |
|
116 |
|
510 |
|
|
|
|
|
|
|
|
|
|
|
9
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 losses (earnings) 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 QVC Group 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 |
|
10
Notes to Attributed Financial Information
(unaudited)
|
(1) |
At June 30, 2016, the QVC Group is comprised of our consolidated subsidiaries, QVC and zulily, 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 and zulily. 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, 2016, the QVC Group is primarily comprised of 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, 2016, the Ventures Group consists of all of our businesses not included in the QVC Group, including Bodybuilding, CommerceHub and Evite, interests in Expedia, Inc., FTD, LendingTree, Inc. and Liberty Broadband and available-for-sale securities Charter Communications, Inc., Interval Leisure Group, Inc. and Time Warner 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 Bodybuilding, CommerceHub and Evite. 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 2 to the accompanying condensed consolidated financial statements, on May 18, 2016, Liberty completed a $2.4 billion investment in Liberty Broadband Corporation (“Liberty Broadband”) in connection with the merger of Charter Communications, Inc. ("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 (“New Charter”) of the combined enterprises. Liberty, along with third party investors, all of whom invested on the same terms as Liberty, 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. Liberty's investment in Liberty Broadband was funded using cash on hand and is attributed to the Ventures Group.
As previously discussed, on October 1, 2015, Liberty acquired all of the outstanding shares of zulily for consideration of approximately $2.3 billion, comprised of $9.375 of cash and 0.3098 newly issued shares of Series A QVC Group common stock for each zulily share, plus cash paid in lieu of any fractional shares. Effective October 1, 2015, zulily is attributed to the QVC Group and we believe that its business is complementary to QVC’s.
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 condensed consolidated statement of operations.
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, |
|
|
|
|
|
2016 |
|
2015 |
|
|
|
|
|
amounts in millions |
|
|||
|
QVC Group |
|
|
|
|
|
|
|
Other |
|
$ |
4 |
|
4 |
|
|
Total QVC Group |
|
|
4 |
|
4 |
|
|
Ventures Group |
|
|
|
|
|
|
|
Charter Communications, Inc. (1) |
|
|
1,225 |
|
NA |
|
|
Interval Leisure Group (2) |
|
|
265 |
|
NA |
|
|
Time Warner Inc. |
|
|
201 |
|
284 |
|
|
Time Warner Cable Inc. (1) |
|
|
NA |
|
994 |
|
|
Other |
|
|
75 |
|
71 |
|
|
Total Ventures Group |
|
|
1,766 |
|
1,349 |
|
|
Consolidated Liberty |
|
$ |
1,770 |
|
1,353 |
|
____________________________________________________________________________________________________________________________________________________________
|
(1) |
As discussed in note 1, in connection with the merger of Charter and TWC, Liberty exchanged, in a tax-free transaction, its shares of TWC common stock for shares of New Charter Class A common stock, on a one-for-one basis, and Liberty has granted to Liberty Broadband a proxy and a right of first refusal with respect to the shares of New Charter Class A common stock held by Liberty in the exchange. |
|
(2) |
On May 12, 2016, Interval Leisure Group (“Interval”) completed an acquisition which was accomplished, in part, through the issuance of additional Interval shares. As a result of the share issuance, Liberty’s ownership interest in Interval was reduced from approximately 28.7% to approximately 12.8%. Prior to the transaction, Interval was accounted for as an equity method investment. As a result of the transaction, Liberty does not have ability to exercise significant influence. Accordingly, Interval is classified as available-for-sale and is carried at fair value. |
|
(3) |
The following table presents information regarding certain equity method investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of earnings (losses) |
|
||||||
|
|
|
June 30, 2016 |
|
Three months ended |
|
Six Months Ended |
|
||||||||||
|
|
|
Percentage |
|
Carrying |
|
Market |
|
June 30, |
|
June 30, |
|
||||||
|
|
|
ownership |
|
value |
|
value |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
||
|
|
|
dollar amounts in millions |
|
||||||||||||||
|
QVC Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HSN, Inc. |
|
38 |
% |
|
$ |
182 |
|
979 |
|
10 |
|
12 |
|
32 |
|
37 |
|
|
Other |
|
various |
|
|
|
43 |
|
NA |
|
(1) |
|
(3) |
|
(2) |
|
(4) |
|
|
Total QVC Group |
|
|
|
|
|
225 |
|
|
|
9 |
|
9 |
|
30 |
|
33 |
|
|
Ventures Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expedia, Inc. |
|
16 |
% |
|
|
888 |
|
2,509 |
|
2 |
|
76 |
|
(22) |
|
80 |
|
|
FTD |
|
37 |
% |
|
|
259 |
|
255 |
|
2 |
|
7 |
|
(1) |
|
5 |
|
|
Other |
|
various |
|
|
|
153 |
|
NA |
|
(13) |
|
(5) |
|
(28) |
|
(28) |
|
|
Total Ventures Group |
|
|
|
|
|
1,300 |
|
|
|
(9) |
|
78 |
|
(51) |
|
57 |
|
|
Consolidated Liberty |
|
|
|
|
$ |
1,525 |
|
|
|
— |
|
87 |
|
(21) |
|
90 |
|
12
Notes to Attributed Financial Information
(unaudited)
Investment in Liberty Broadband
As discussed in note 2 to the accompanying condensed consolidated financial statements, in connection with the merger of Charter and TWC, on May 18, 2016, Liberty invested $2.4 billion in Liberty Broadband Series C nonvoting shares. As of June 30, 2016, Liberty has a 24% economic ownership interest in Liberty Broadband. Due to overlapping boards of directors and management, Liberty has been deemed to have significant influence over Liberty Broadband even though Liberty does not have any voting rights. Liberty has elected to apply the fair value option for its investment in Liberty Broadband as it is believed that the Company’s investors value this investment based on the trading price of Liberty Broadband. Liberty recognizes changes in the fair value of its investment in Liberty Broadband in realized and unrealized gains (losses) on financial instruments, net in the condensed consolidated statements of operations.
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(4) |
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13
Notes to Attributed Financial Information
(unaudited)
|
(4) |
Debt attributed to the QVC Group and the Ventures Group is comprised of the following: |
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|
|
|
|
|
|
|
|
|
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June 30, 2016 |
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||||
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|
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Outstanding |
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Carrying |
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|
|
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principal |
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value |
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|
|
|
amounts in millions |
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||||
|
QVC Group |
|
|
|
|
|
|
|
|
8.5% Senior Debentures due 2029 |
|
$ |
287 |
|
|
285 |
|
|
8.25% Senior Debentures due 2030 |
|
|
504 |
|
|
501 |
|
|
1% Exchangeable Senior Debentures due 2043 |
|
|
345 |
|
|
346 |
|
|
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 4.85% 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 |
|
|
1,675 |
|
|
1,675 |
|
|
Other subsidiary debt |
|
|
76 |
|
|
76 |
|
|
Deferred loan costs |
|
|
|
|
|
(32) |
|
|
Total QVC Group debt |
|
|
6,437 |
|
|
6,398 |
|
|
Ventures Group |
|
|
|
|
|
|
|
|
4% Exchangeable Senior Debentures due 2029 |
|
|
436 |
|
|
276 |
|
|
3.75% Exchangeable Senior Debentures due 2030 |
|
|
437 |
|
|
266 |
|
|
3.5% Exchangeable Senior Debentures due 2031 |
|
|
342 |
|
|
297 |
|
|
0.75% Exchangeable Senior Debentures due 2043 |
|
|
204 |
|
|
588 |
|
|
Ventures Margin Loan |
|
|
375 |
|
|
375 |
|
|
Subsidiary level notes and facilities |
|
|
29 |
|
|
29 |
|
|
Deferred loan costs |
|
|
— |
|
|
(2) |
|
|
Total Ventures Group debt |
|
|
1,823 |
|
|
1,829 |
|
|
Total consolidated Liberty debt |
|
$ |
8,260 |
|
|
8,227 |
|
|
Less current maturities |
|
|
|
|
|
(1,787) |
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|
Total long-term debt |
|
|
|
|
$ |
6,440 |
|
|
(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 $8 million and $4 million for the three months ended June 30, 2016 and 2015, respectively, and $17 million and $8 million for the six months ended June 30, 2016 and 2015, 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.
14
Notes to Attributed Financial Information
(unaudited)
|
(6) |
The QVC Group common stock and the Liberty Ventures common stock have voting and conversion rights under our restated charter. Following is a summary of those 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 is 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.
15