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Exhibit 99.1
Unaudited Attributed Financial Information for Tracking Stock Groups
The following tables present our assets, liabilities, revenue, expenses and cash flows that are intended to be attributed to the Interactive Group and the Ventures Group, respectively. The financial information should be read in conjunction with our unaudited condensed consolidated financial statements for the quarters ended June 30, 2012 and 2011 and our audited financial statements for the years ended December 31, 2011, 2010 and 2009. The attributed financial information presented in the tables has been prepared assuming the reattribution had been completed as of January 1, 2009 (exclusive of the cash attribution described in note (1)). However this attribution of historical financial information does not purport to be what actual results and balances would have been if such attribution had actually occurred and been in place during these periods.
Notwithstanding the following attribution of assets, liabilities, revenue, expenses and cash flows to the Interactive Group and the Ventures Group, our tracking stock capital structure will not affect the ownership or the respective legal title to our assets or responsibility for our liabilities. We and our subsidiaries each continue to be responsible for our respective liabilities. Holders of Liberty Interactive Stock and Liberty Ventures Stock will be holders of our common stock and continue to be subject to risks associated with an investment in our company and all of our businesses, assets and liabilities. The issuance of Liberty Interactive Stock and Liberty Ventures Stock does not affect the rights of our creditors.
1
BALANCE SHEET INFORMATION
June 30, 2012
(unaudited)
Attributed (note 1) | |||||||||||||
Interactive | Ventures | Inter-group | Consolidated | ||||||||||
Group | Group | eliminations | Liberty | ||||||||||
Assets | amounts in millions | ||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | 790 | — | — | 790 | ||||||||
Trade and other receivables, net | 664 | — | — | 664 | |||||||||
Inventory, net | 1,096 | — | — | 1,096 | |||||||||
Other current assets | 248 | — | (161 | ) | 87 | ||||||||
Total current assets | 2,798 | — | (161 | ) | 2,637 | ||||||||
Investments in available-for-sale securities and other cost investments (note 2) | 4 | 1,380 | — | 1,384 | |||||||||
Investments in affiliates, accounted for using the equity method (note 3) | 254 | 959 | — | 1,213 | |||||||||
Property and equipment, net | 1,168 | — | — | 1,168 | |||||||||
Goodwill | 5,985 | — | — | 5,985 | |||||||||
Trademarks | 2,525 | — | — | 2,525 | |||||||||
Intangible assets subject to amortization, net | 2,045 | — | — | 2,045 | |||||||||
Other assets, at cost, net of accumulated amortization | 74 | — | — | 74 | |||||||||
Total assets | $ | 14,853 | 2,339 | (161 | ) | 17,031 | |||||||
Liabilities and Equity | |||||||||||||
Current liabilities: | |||||||||||||
Accounts payable | $ | 482 | — | — | 482 | ||||||||
Accrued liabilities | 638 | 44 | — | 682 | |||||||||
Current portion of debt (note 4) | 332 | 1,153 | — | 1,485 | |||||||||
Deferred tax liabilities (note 6) | — | 997 | (161 | ) | 836 | ||||||||
Other current liabilities | 204 | 168 | — | 372 | |||||||||
Total current liabilities | 1,656 | 2,362 | (161 | ) | 3,857 | ||||||||
Long-term debt (note 4) | 3,169 | 1,395 | — | 4,564 | |||||||||
Deferred tax liabilities (note 6) | 1,430 | 653 | — | 2,083 | |||||||||
Other liabilities | 218 | — | — | 218 | |||||||||
Total liabilities | 6,473 | 4,410 | (161 | ) | 10,722 | ||||||||
Equity/Attributed net assets (liabilities) | 8,248 | (2,071 | ) | — | 6,177 | ||||||||
Noncontrolling interests in equity of subsidiaries | 132 | — | — | 132 | |||||||||
Total liabilities and equity | $ | 14,853 | 2,339 | (161 | ) | 17,031 | |||||||
2
BALANCE SHEET INFORMATION
December 31, 2011
(unaudited)
Attributed (note 1) | |||||||||||||
Interactive | Ventures | Inter-group | Consolidated | ||||||||||
Group | Group | eliminations | Liberty | ||||||||||
Assets | amounts in millions | ||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | 847 | — | — | 847 | ||||||||
Trade and other receivables, net | 1,054 | — | — | 1,054 | |||||||||
Inventory, net | 1,071 | — | — | 1,071 | |||||||||
Deferred tax assets (note 6) | 155 | — | (155 | ) | — | ||||||||
Other current assets | 148 | — | — | 148 | |||||||||
Total current assets | 3,275 | — | (155 | ) | 3,120 | ||||||||
Investments in available-for-sale securities and other cost investments (note 2) | 3 | 1,165 | — | 1,168 | |||||||||
Investments in affiliates, accounted for using the equity method (note 3) | 230 | 905 | — | 1,135 | |||||||||
Property and equipment, net | 1,133 | — | — | 1,133 | |||||||||
Goodwill | 5,978 | — | — | 5,978 | |||||||||
Trademarks | 2,518 | — | — | 2,518 | |||||||||
Intangible assets subject to amortization, net | 2,209 | — | — | 2,209 | |||||||||
Other assets, at cost, net of accumulated amortization | 78 | — | — | 78 | |||||||||
Total assets | $ | 15,424 | 2,070 | (155 | ) | 17,339 | |||||||
Liabilities and Equity | |||||||||||||
Current liabilities: | |||||||||||||
Accounts payable | $ | 599 | — | — | 599 | ||||||||
Accrued liabilities | 762 | 39 | — | 801 | |||||||||
Current portion of debt (note 4) | 21 | 1,168 | — | 1,189 | |||||||||
Deferred tax liabilities (note 6) | — | 1,006 | (155 | ) | 851 | ||||||||
Other current liabilities | 128 | — | — | 128 | |||||||||
Total current liabilities | 1,510 | 2,213 | (155 | ) | 3,568 | ||||||||
Long-term debt (note 4) | 3,575 | 1,275 | — | 4,850 | |||||||||
Long-term financial instruments | 59 | — | 59 | ||||||||||
Deferred tax liabilities (note 6) | 1,493 | 553 | — | 2,046 | |||||||||
Other liabilities | 189 | — | — | 189 | |||||||||
Total liabilities | 6,826 | 4,041 | (155 | ) | 10,712 | ||||||||
Equity/Attributed net assets (liability) | 8,464 | (1,971 | ) | — | 6,493 | ||||||||
Noncontrolling interests in equity of subsidiaries | 134 | — | — | 134 | |||||||||
Total liabilities and equity | $ | 15,424 | 2,070 | (155 | ) | 17,339 | |||||||
3
STATEMENT OF OPERATIONS INFORMATION
Three months ended June 30, 2012
(unaudited)
Attributed (note 1) | ||||||||||||
Interactive | Ventures | Consolidated | ||||||||||
Group | Group | Liberty | ||||||||||
amounts in millions | ||||||||||||
Revenue: | ||||||||||||
Net retail sales | $ | 2,365 | — | 2,365 | ||||||||
Cost of sales (exclusive of depreciation shown separately below) | 1,488 | — | 1,488 | |||||||||
Gross profit | 877 | — | 877 | |||||||||
Operating costs and expenses: | ||||||||||||
Operating | 199 | — | 199 | |||||||||
Selling, general and administrative, including stock-based compensation (notes 1 and 5) | 241 | — | 241 | |||||||||
Depreciation and amortization | 147 | — | 147 | |||||||||
587 | — | 587 | ||||||||||
Operating income (loss) | 290 | — | 290 | |||||||||
Other income (expense): | ||||||||||||
Interest expense | (80 | ) | (27 | ) | (107 | ) | ||||||
Share of earnings (losses) of affiliates, net | 7 | 28 | 35 | |||||||||
Realized and unrealized gains (losses) on financial instruments, net | 11 | (171 | ) | (160 | ) | |||||||
Gains (losses) on dispositions, net | — | 288 | 288 | |||||||||
Other, net | (7 | ) | 37 | 30 | ||||||||
(69 | ) | 155 | 86 | |||||||||
Earnings (loss) before income taxes | 221 | 155 | 376 | |||||||||
Income tax benefit (expense) (note 6) | (82 | ) | (45 | ) | (127 | ) | ||||||
Net earnings (loss) | 139 | 110 | 249 | |||||||||
Less net earnings (loss) attributable to the noncontrolling interests | 15 | — | 15 | |||||||||
Net earnings (loss) attributable to Liberty Interactive Corporation stockholders | $ | 124 | 110 | 234 | ||||||||
4
STATEMENT OF OPERATIONS INFORMATION
Three months ended June 30, 2011
(unaudited)
Attributed (note 1) | |||||||||||
Interactive | Ventures | Consolidated | |||||||||
Group | Group | Liberty | |||||||||
Revenue: | |||||||||||
Net retail sales | $ | 2,245 | — | 2,245 | |||||||
Cost of sales (exclusive of depreciation shown separately below) | 1,398 | — | 1,398 | ||||||||
Gross profit | 847 | — | 847 | ||||||||
Operating costs and expenses: | |||||||||||
Operating | 209 | — | 209 | ||||||||
Selling, general and administrative, including stock-based compensation (notes 1 and 5) | 201 | 1 | 202 | ||||||||
Depreciation and amortization | 148 | — | 148 | ||||||||
558 | 1 | 559 | |||||||||
Operating income (loss) | 289 | (1 | ) | 288 | |||||||
Other income (expense): | |||||||||||
Interest expense | (82 | ) | (25 | ) | (107 | ) | |||||
Share of earnings (losses) of affiliates, net | 2 | 35 | 37 | ||||||||
Realized and unrealized gains (losses) on financial instruments, net | 14 | 75 | 89 | ||||||||
Other, net | 8 | (5 | ) | 3 | |||||||
(58 | ) | 80 | 22 | ||||||||
Earnings (loss) from continuing operations before income taxes | 231 | 79 | 310 | ||||||||
Income tax benefit (expense) (note 6) | (86 | ) | (29 | ) | (115 | ) | |||||
Net earnings (loss) from continuing operations | 145 | 50 | 195 | ||||||||
Earnings (loss) from discontinued operations, net of taxes | 74 | — | 74 | ||||||||
Net earnings (loss) | 219 | 50 | 269 | ||||||||
Less net earnings (loss) attributable to the noncontrolling interests | 12 | — | 12 | ||||||||
Net earnings (loss) attributable to Liberty Interactive Corporation stockholders | $ | 207 | 50 | 257 | |||||||
5
STATEMENT OF OPERATIONS INFORMATION
Six months ended June 30, 2012
(unaudited)
Attributed (note 1) | |||||||||||
Interactive | Ventures | Consolidated | |||||||||
Group | Group | Liberty | |||||||||
amounts in millions | |||||||||||
Revenue: | |||||||||||
Net retail sales | $ | 4,679 | — | 4,679 | |||||||
Cost of sales (exclusive of depreciation shown separately below) | 2,954 | — | 2,954 | ||||||||
Gross profit | 1,725 | — | 1,725 | ||||||||
Operating costs and expenses: | |||||||||||
Operating | 407 | — | 407 | ||||||||
Selling, general and administrative, including stock-based compensation (notes 1 and 5) | 479 | 1 | 480 | ||||||||
Depreciation and amortization | 290 | — | 290 | ||||||||
1,176 | 1 | 1,177 | |||||||||
Operating income (loss) | 549 | (1 | ) | 548 | |||||||
Other income (expense): | |||||||||||
Interest expense | (157 | ) | (56 | ) | (213 | ) | |||||
Share of earnings (losses) of affiliates, net | 20 | 26 | 46 | ||||||||
Realized and unrealized gains (losses) on financial instruments, net | 25 | (203 | ) | (178 | ) | ||||||
Gains (losses) on dispositions, net | — | 288 | 288 | ||||||||
Other, net | (4 | ) | 37 | 33 | |||||||
(116 | ) | 92 | (24 | ) | |||||||
Earnings (loss) before income taxes | 433 | 91 | 524 | ||||||||
Income tax benefit (expense) (note 6) | (161 | ) | (9 | ) | (170 | ) | |||||
Net earnings (loss) | 272 | 82 | 354 | ||||||||
Less net earnings (loss) attributable to the noncontrolling interests | 29 | — | 29 | ||||||||
Net earnings (loss) attributable to Liberty Interactive Corporation stockholders | $ | 243 | 82 | 325 | |||||||
6
STATEMENT OF OPERATIONS INFORMATION
Six months ended June 30, 2011
(unaudited)
Attributed (note 1) | |||||||||||
Interactive | Ventures | Consolidated | |||||||||
Group | Group | Liberty | |||||||||
amounts in millions | |||||||||||
Revenue: | |||||||||||
Net retail sales | $ | 4,404 | — | 4,404 | |||||||
Cost of sales (exclusive of depreciation shown separately below) | 2,775 | — | 2,775 | ||||||||
Gross profit | 1,629 | — | 1,629 | ||||||||
Operating costs and expenses: | |||||||||||
Operating | 412 | — | 412 | ||||||||
Selling, general and administrative, including stock-based compensation (notes 1 and 5) | 417 | 2 | 419 | ||||||||
Depreciation and amortization | 297 | — | 297 | ||||||||
1,126 | 2 | 1,128 | |||||||||
Operating income (loss) | 503 | (2 | ) | 501 | |||||||
Other income (expense): | |||||||||||
Interest expense | (168 | ) | (53 | ) | (221 | ) | |||||
Share of earnings (losses) of affiliates, net | 12 | 45 | 57 | ||||||||
Realized and unrealized gains (losses) on financial instruments, net | 45 | (15 | ) | 30 | |||||||
Other, net | 29 | (8 | ) | 21 | |||||||
(82 | ) | (31 | ) | (113 | ) | ||||||
Earnings (loss) before income taxes | 421 | (33 | ) | 388 | |||||||
Income tax benefit (expense) (note 6) | (145 | ) | 15 | (130 | ) | ||||||
Net earnings (loss) from continuing operations | 276 | (18 | ) | 258 | |||||||
Earnings (loss) from discontinued operations, net of taxes | 410 | — | 410 | ||||||||
Net earnings (loss) | 686 | (18 | ) | 668 | |||||||
Less net earnings (loss) attributable to the noncontrolling interests | 22 | — | 22 | ||||||||
Net earnings (loss) attributable to Liberty Interactive Corporation stockholders | $ | 664 | (18 | ) | 646 | ||||||
7
STATEMENT OF CASH FLOWS INFORMATION
Six months ended June 30, 2012
(unaudited)
Attributed (note 1) | |||||||||||
Interactive | Ventures | Consolidated | |||||||||
Group | Group | Liberty | |||||||||
amounts in millions | |||||||||||
Cash flows from operating activities: | |||||||||||
Net earnings | $ | 272 | 82 | 354 | |||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 290 | — | 290 | ||||||||
Stock-based compensation | 35 | — | 35 | ||||||||
Cash payments for stock-based compensation | (2 | ) | — | (2 | ) | ||||||
Share of losses (earnings) of affiliates, net | (20 | ) | (26 | ) | (46 | ) | |||||
Cash receipts from return on equity investments | 5 | 8 | 13 | ||||||||
Realized and unrealized losses (gains) on financial instruments, net | (25 | ) | 203 | 178 | |||||||
(Gains) losses on disposition of assets, net | — | (288 | ) | (288 | ) | ||||||
Deferred income tax expense (benefit) | (66 | ) | 92 | 26 | |||||||
Other, net | 9 | (34 | ) | (25 | ) | ||||||
Intergroup tax allocation | 83 | (83 | ) | — | |||||||
Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions: | |||||||||||
Current and other assets | 357 | — | 357 | ||||||||
Payables and other current liabilities | (167 | ) | 5 | (162 | ) | ||||||
Net cash provided (used) by operating activities | 771 | (41 | ) | 730 | |||||||
Cash flows from investing activities: | |||||||||||
Cash proceeds from dispositions | — | 348 | 348 | ||||||||
Investments in and loans to cost and equity investees | (11 | ) | (97 | ) | (108 | ) | |||||
Capital expended for property and equipment | (151 | ) | — | (151 | ) | ||||||
Net sales (purchases) of short term and other marketable securities | 46 | — | 46 | ||||||||
Other investing activities, net | (41 | ) | 1 | (40 | ) | ||||||
Net cash provided (used) by investing activities | (157 | ) | 252 | 95 | |||||||
Cash flows from financing activities: | |||||||||||
Borrowings of debt | 666 | — | 666 | ||||||||
Repayments of debt | (761 | ) | (112 | ) | (873 | ) | |||||
Cash (payments) receipts between Groups, net (note 1) | 99 | (99 | ) | — | |||||||
Repurchases of Liberty Interactive common stock | (637 | ) | — | (637 | ) | ||||||
Other financing activities, net | (26 | ) | — | (26 | ) | ||||||
Net cash provided (used) by financing activities | (659 | ) | (211 | ) | (870 | ) | |||||
Effect of foreign currency rates on cash | (12 | ) | — | (12 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | (57 | ) | — | (57 | ) | ||||||
Cash and cash equivalents at beginning of year | 847 | — | 847 | ||||||||
Cash and cash equivalents at end year | $ | 790 | — | 790 | |||||||
8
STATEMENT OF CASH FLOWS INFORMATION
Six months ended June 30, 2011
(unaudited)
Attributed (note 1) | ||||||||||
Interactive | Ventures | Consolidated | ||||||||
Group | Group | Liberty | ||||||||
amounts in millions | ||||||||||
Cash flows from operating activities: | ||||||||||
Net earnings | $ | 686 | (18 | ) | 668 | |||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||
(Earnings) loss from discontinued operations | (410 | ) | — | (410 | ) | |||||
Depreciation and amortization | 297 | — | 297 | |||||||
Stock-based compensation | 30 | — | 30 | |||||||
Cash payments for stock-based compensation | (2 | ) | — | (2 | ) | |||||
Share of losses (earnings) of affiliates, net | (12 | ) | (45 | ) | (57 | ) | ||||
Cash receipts from returns on equity investments | — | 10 | 10 | |||||||
Realized and unrealized losses (gains) on financial instruments, net | (45 | ) | 15 | (30 | ) | |||||
Deferred income tax expense (benefit) | (87 | ) | 43 | (44 | ) | |||||
Other, net | (59 | ) | 1 | (58 | ) | |||||
Intergroup tax allocation | 58 | (58 | ) | — | ||||||
Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions: | ||||||||||
Current and other assets | 230 | — | 230 | |||||||
Payables and other current liabilities | (303 | ) | 1 | (302 | ) | |||||
Net cash provided (used) by operating activities | 383 | (51 | ) | 332 | ||||||
Cash flows from investing activities: | ||||||||||
Investments in and loans to cost and equity investees | (7 | ) | — | (7 | ) | |||||
Capital expended for property and equipment | (103 | ) | — | (103 | ) | |||||
Net sales (purchases) of short term investments | (48 | ) | — | (48 | ) | |||||
Other investing activities, net | 1 | — | 1 | |||||||
Net cash provided (used) by investing activities | (157 | ) | — | (157 | ) | |||||
Cash flows from financing activities: | ||||||||||
Borrowings of debt | 192 | — | 192 | |||||||
Repayments of debt | (383 | ) | (10 | ) | (393 | ) | ||||
Cash (payments) receipts between Groups, net (note 1) | (61 | ) | 61 | — | ||||||
Other financing activities, net | (42 | ) | — | (42 | ) | |||||
Net cash provided (used) by financing activities | (294 | ) | 51 | (243 | ) | |||||
Effect of foreign currency rates on cash | 11 | — | 11 | |||||||
Net cash provided (used) by discontinued operations: | ||||||||||
Cash provided (used) by operating activities | 294 | — | 294 | |||||||
Cash provided (used) by investing activities | 144 | — | 144 | |||||||
Cash provided (used) by financing activities | (146 | ) | — | (146 | ) | |||||
Change in available cash held by discontinued operations | (276 | ) | — | (276 | ) | |||||
Net cash provided (used) by discontinued operations | 16 | — | 16 | |||||||
Net increase (decrease) in cash and cash equivalents | (41 | ) | — | (41 | ) | |||||
Cash and cash equivalents at beginning of year | 1,353 | — | 1,353 | |||||||
Cash and cash equivalents at end year | $ | 1,312 | — | 1,312 | ||||||
9
Notes to Attributed Financial Information
(unaudited)
(1) | The Interactive Group will initially comprise our consolidated subsidiaries QVC, Inc., Provide Commerce, Inc., Backcountry.com, Inc., Bodybuilding.com, LLC and Celebrate Interactive Holdings, Inc., and our interest in HSN, Inc. Accordingly, the accompanying attributed financial information for the Interactive Group includes the foregoing investments, as well as the assets, liabilities, revenue, expenses and cash flows of those consolidated subsidiaries. We have also attributed certain of our debt obligations (and related interest expense) to the Interactive Group based upon a number of factors, including the cash flow available to the Interactive Group and its ability to pay debt service and our assessment of the optimal capitalization for the Interactive Group. The specific debt obligations attributed to each of the Interactive Group and the Ventures Group are described in note 4 below. In addition, we have allocated certain corporate general and administrative expenses among the Interactive Group and the Ventures Group as described in note 5 below. |
The Interactive Group focuses on video and on-line commerce 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 Interactive Group.
The Ventures Group consists of all of our businesses not included in the Interactive Group including our interest in equity method investments of Expedia, Inc., TripAdvisor, Inc., Interval Leisure Group, Inc. and Tree.com, Inc. and available-for-sale securities Time Warner, Time Warner Cable and AOL. Accordingly, the accompanying attributed financial information for the Ventures Group includes these investments. 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.
Any businesses that we may acquire in the future that we do not attribute to the Interactive Group will be attributed to the Ventures Group.
The accompanying financial information does not reflect an anticipated reattribution of cash to the Ventures Group of approximately $1,325 million (which includes proceeds from the sale of TripAdvisor, Inc. shares in May 2012 and the impact of certain other post-March 31 business activities) funded by the Interactive Group which is expected to occur at the distribution date. A portion of this cash is not currently included on Liberty's balance sheet as it will be borrowed under QVC's credit facility in connection with the completion of the recapitalization. As a result of Ventures Group not having any attributed cash in any periods prior to the distribution date all cash needs have been funded by the Interactive Group, for purposes of these financials, and have been included in the financing section of the accompanying Statement of Cash Flows Information. Upon distribution the Ventures Group will have the cash necessary to fund its own cash needs. Cash related to tax attributes utilized by either group will continue to be reimbursed on a current basis and it is expected that the Ventures group will receive cash from the Interactive group for tax attributes associated with the exchangeable debentures.
10
(2) | Investments in AFS securities, which are recorded at their respective fair market values, and other cost investments are summarized as follows: |
June 30, | December 31, | ||||||
2012 | 2011 | ||||||
amounts in millions | |||||||
Interactive Group | |||||||
Other | $ | 4 | 3 | ||||
Total attributed Interactive Group | 4 | 3 | |||||
Ventures Group | |||||||
Time Warner Inc. | 839 | 787 | |||||
Time Warner Cable Inc. | 449 | 348 | |||||
AOL | 56 | 30 | |||||
Other | 36 | — | |||||
Total attributed Ventures Group | 1,380 | 1,165 | |||||
Consolidated Liberty | $ | 1,384 | 1,168 | ||||
(3) | The following table presents information regarding certain equity method investments attributed to each of the Interactive Group and the Ventures Group: |
Share of earnings (losses) | |||||||||||||||||||||
Three months | Six months | ||||||||||||||||||||
June 30, 2012 | ended | ended | |||||||||||||||||||
Percentage | Carrying | Market | June 30, | June 30, | |||||||||||||||||
ownership | value | value | 2012 | 2011 | 2012 | 2011 | |||||||||||||||
dollar amounts in millions | |||||||||||||||||||||
Interactive Group | |||||||||||||||||||||
HSN, Inc | 34 | % | $ | 233 | 808 | 9 | 7 | 24 | 20 | ||||||||||||
Other | various | 21 | N/A | (2 | ) | (5 | ) | (4 | ) | (8 | ) | ||||||||||
Total Interactive Group | 254 | 7 | 2 | 20 | 12 | ||||||||||||||||
Ventures Group | |||||||||||||||||||||
Expedia, Inc. (a)(b) | 26 | % | 643 | 1,664 | 26 | 35 | 24 | 48 | |||||||||||||
TripAdvisor, Inc (a)(c) | 18 | % | 189 | 1,169 | 12 | — | 23 | — | |||||||||||||
Other | various | 127 | N/A | (10 | ) | — | (21 | ) | (3 | ) | |||||||||||
Total Ventures Group | 959 | 28 | 35 | 26 | 45 | ||||||||||||||||
Consolidated Liberty | $ | 1,213 | 35 | 37 | 46 | 57 | |||||||||||||||
(a) | During the fourth quarter of 2011 Expedia, Inc. completed the pro-rata split-off of TripAdvisor, Inc. ("TripAdvisor"), its wholly owned subsidiary. As of the TripAdvisor split-off date, the Company had a 26% economic ownership interest in each of Expedia, Inc. and TripAdvisor and, through ownership of class B common stock with 10 votes per share, had an approximate 58% voting interest in each respective company. Through a stockholder's agreement, Liberty has given Barry Diller, Chairman and Senior Executive Officer of both companies, the right to vote all of the common stock owned by Liberty. Through a governance agreement, Liberty has the right to nominate up to 20% of the board members for each entity and currently two members on each company's 10 member board were nominated by Liberty. Because of Liberty's board representation, it was determined that the Company has significant influence over each respective company and the Company continues to apply the equity method of accounting to its interests in TripAdvisor. As discussed below, in May 2012 Liberty sold shares of TripAdvisor which decreased Liberty's ownership percentage below 20%. As Liberty's board representation on the TripAdvisor board continues to be 20%, subsequent to the sale of securities discussed above, it was determined that significant influence still exists and the application of the equity method of accounting is appropriate. |
11
(b) | Liberty entered into a forward sales contract on 12 million shares of Expedia common stock in March 2012 at a per share forward price of $34.316. The forward contract may be settled, in October 2012, in stock or cash, at the election of Liberty. Liberty delivered 12 million shares of Expedia as collateral under the forward contract. The carrying value of the shares, held as collateral by the counterparty, was $223 million and the fair value was $577 million as of June 30, 2012. |
(c) | In May 2012, Liberty sold approximately 8.5 million shares of TripAdvisor, Inc. for cash proceeds of $338 million. The sale resulted in a $288 million gain recorded in gain (losses) on dispositions, net in the statement of operations. |
(4) | Debt attributed to the Interactive Group and the Ventures Group is comprised of the following: |
June 30, 2012 | ||||||
Outstanding | Carrying | |||||
principal | value | |||||
amounts in millions | ||||||
Interactive Group | ||||||
5.7% Senior Notes due 2013 | $ | 309 | 308 | |||
8.5% Senior Debentures due 2029 | 287 | 285 | ||||
8.25% Senior Debentures due 2030 | 504 | 501 | ||||
QVC 7.125% Senior Secured Notes due 2017 | 500 | 500 | ||||
QVC 7.5% Senior Secured Notes due 2019 | 1,000 | 987 | ||||
QVC 7.375% Senior Secured Notes due 2020 | 500 | 500 | ||||
QVC bank credit facilities (a) | 302 | 302 | ||||
Other debt | 118 | 118 | ||||
Total attributed Interactive Group debt | 3,520 | 3,501 | ||||
Ventures Group | ||||||
3.125% Exchangeable Senior Debentures due 2023 | 1,138 | 1,395 | ||||
4% Exchangeable Senior Debentures due 2029 | 469 | 275 | ||||
3.75% Exchangeable Senior Debentures due 2030 | 460 | 254 | ||||
3.5% Exchangeable Senior Debentures due 2031 | 373 | 263 | ||||
3.25% Exchangeable Senior Debentures due 2031 | 414 | 361 | ||||
Total attributed Capital Group debt | 2,854 | 2,548 | ||||
Total debt | $ | 6,374 | 6,049 | |||
(a) | See note (1) above regarding additional incurrences to be drawn in connection with the closing of the recapitalization. |
The attribution of the debt between the two groups is intended: (i) in the case of a portion of the Senior Exchangeable Debentures being attributed to the Ventures Group, to match the attribution of the equity securities for which those Senior Exchangeable Debentures are exchangeable; (ii) in the case of the Senior Notes and Debentures being attributed to Interactive Group, which are not subject to the more complex contingencies and uncertainties applicable to the Senior Exchangeable Debentures, to simplify the attributed capital structure of that group; and (iii) to provide the Ventures Group with a source of cash flow from the Interactive Group expected to be paid in consideration of the tax benefits of the Senior Exchangeable Debentures expected to be used by the Interactive Group.
Additionally, in July 2012 QVC issued $500 million principal amount of 5.125% Senior Secured Notes due 2022 at par. The net proceeds from the issuance were used to reduce the outstanding principal under the QVC Bank Credit Facilities and for general corporate purposes.
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(5) | Cash compensation expense for our corporate employees will be allocated among the Interactive Group and the Ventures Group based on the estimated percentage of time spent providing services for each group. On an 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, due to their direct nature, from the Interactive Group to the Ventures Group was determined to be $1 million and $2 million for the six months ended June 30, 2012 and 2011, respectively. We note that stock compensation related to each tracking stock will be calculated based on actual options in the future once awards have been converted at the date of distribution. |
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 Liberty Interactive Stock and the Liberty Ventures Stock will 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 will be entitled to one vote per share, and holders of Series B common stock of each group will be entitled to ten votes per share. Holders of Series C common stock of each group, if issued, will be 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 Liberty Interactive Stock or the approval of the holders of only Series A and Series B Liberty Ventures 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.
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