Liberty Interactive Corporation (“Liberty”) (Nasdaq: LINTA,
LINTB, LVNTA, LVNTB) today reported first quarter 2014 results.
Highlights include(1):
Attributed to Liberty Interactive Group
- Grew QVC US revenue by 1% and adjusted
OIBDA(2) by 3% in the first quarter
- QVC US operating income increased by
3%
- QVC.com revenue as a percent of total
US revenue increased to 45%, a 327 bps increase
- QVC US mobile penetration was 37% of
QVC.com orders
- Repurchased $224 million LINTA shares
from February 1 to April 30, 2014
Attributed to Liberty Ventures Group
- Reported strong first quarter results
at TripAdvisor
- Increased 2014 revenue guidance to high
20%/low 30% range
- EBITDA expected to grow at same
percentage as total revenue
- Completed two-for-one stock split of
the Liberty Ventures stock on April 11, 2014
- Filed S-1 related to proposed spin-off
of Liberty TripAdvisor Holdings with the SEC on May 6, 2014
“QVC expanded adjusted OIBDA margins in the US. On the
international front, QVC posted very strong results in the UK,
experienced rapid growth in its China joint venture, adding over 10
million homes in the quarter, and announced QVC France, with an
expected launch in the summer of 2015. We continue to progress with
the creation of the Liberty Digital Commerce Group tracking stock
and expect to file the S-4 with the SEC shortly," stated Greg
Maffei, Liberty President and CEO. “And at Liberty Ventures, we
filed the S-1 related to the Liberty TripAdvisor Holdings spin-off
with the SEC on May 6th.”
LIBERTY INTERACTIVE GROUP - Liberty Interactive Group's
revenue increased 1% to $2.4 billion in the first quarter, adjusted
OIBDA declined 1% to $431 million and operating income decreased 6%
to $244 million. The increase in revenue was due to favorable
results at QVC. The decline in adjusted OIBDA was primarily due to
unfavorable results at the eCommerce companies.
QVC
QVC's consolidated revenue increased 1% in the first quarter to
$2.0 billion. During the same period, adjusted OIBDA increased 2%
to $412 million and operating income remained flat at $260
million.
“We achieved solid first quarter results, with the U.S. market
expanding profitability in the midst of a difficult retail
environment,” said Mike George, President and CEO of QVC. “We
attribute part of this to QVC’s high-quality, differentiated
product offering and our ability to know what customers want, when
they want it. We look forward to bringing this expertise, as well
as our engaging multi platform shopping experience, to the French
market."
QVC's US revenue increased 1% to $1.3 billion in the first
quarter primarily as a result of strength in all categories except
electronics. Average selling price per unit (“ASP”) increased 1%
from $60.51 to $60.89 and units sold increased 1% compared to the
prior year first quarter. Returns as a percent of gross product
revenue increased by 106 basis points due to higher rates in
electronics, home and accessories. In the same period, eCommerce
revenue increased 8% to $590 million and grew to 45% from 42% as a
percentage of total US revenue. Adjusted OIBDA increased 3% to $301
million and adjusted OIBDA margin(2) increased 63 basis points in
the first quarter. Adjusted OIBDA margin increased primarily due to
higher product margins.
QVC's international revenue in US Dollars increased 1% in the
first quarter to $681 million. The first quarter results included
the negative impact of the strengthening of the US Dollar against
the Japanese Yen, which was somewhat offset by the weakening of the
US Dollar against the Euro and the UK Pound Sterling. Adjusted
OIBDA decreased 2% to $111 million and adjusted OIBDA margin
decreased 39 basis points in the first quarter.
QVC Japan's revenue grew 2% in local currency in the first
quarter due primarily to growth in the jewelry, home and beauty
categories, partially offset by declines in accessories. QVC
Japan’s ASP in local currency increased 1% and units sold increased
1% in the first quarter. QVC Japan’s first quarter returns as a
percent of gross product revenue in local currency improved by 57
basis points due primarily to lower return rates in jewelry, beauty
and accessories. QVC Japan’s adjusted OIBDA in local currency
decreased 2% and adjusted OIBDA margin decreased 100 basis points
in the first quarter. The decrease in adjusted OIBDA margin was
primarily applicable to higher programming distribution expenses
and lower product margins.
QVC Germany's revenue decreased 4% in local currency in the
first quarter due to sales declines in all categories. QVC
Germany's ASP in local currency decreased 3% and units sold
decreased 3% in the first quarter. QVC Germany's first quarter
return rate as a percent of gross product revenue in local currency
improved by 208 basis points from the prior year due primarily to
changes in prior period estimates based on actual experience, and
to a lesser extent, lower rates in all categories except
electronics. QVC Germany’s adjusted OIBDA in local currency
decreased 12% and adjusted OIBDA margin decreased 160 basis points
for the first quarter. Adjusted OIBDA margin decreased primarily
due to lower product margins and higher temporary operational
services expenses associated with the implementation of a new
customer relations management system, offset by a decrease in fixed
costs as a result of a prior year personnel tax accrual.
QVC UK's revenue grew 10% in local currency in the first quarter
primarily due to sales in the home, beauty and accessories
categories. QVC UK's ASP in local currency increased 12% and units
sold decreased 3% in the first quarter. QVC UK's first quarter
return rate as a percent of gross product revenue in local currency
improved by 165 basis points from the prior year due primarily to
changes in prior period estimates based on actual experience and
lower rates in electronics and beauty. QVC UK’s adjusted OIBDA in
local currency increased 32% and adjusted OIBDA margin increased
279 basis points in the first quarter. The increase in adjusted
OIBDA margin was primarily due to higher product margins and
warehouse efficiencies.
QVC Italy's revenue increased 2% in local currency in the first
quarter primarily due to sales in the beauty and accessories
categories, partially offset by declines in home. QVC Italy's ASP
in local currency increased 3% and units sold remained flat in the
first quarter. QVC Italy's first quarter return rate as a percent
of gross product revenue in local currency increased by 30 basis
points from the prior year. QVC Italy’s adjusted OIBDA deficit in
local currency improved by 21% and adjusted OIBDA margin improved
by 343 basis points in the first quarter. The increase in adjusted
OIBDA margin was primarily due to lower freight costs associated
with the new third-party logistics center and lower rent as a
result of the purchase of its existing headquarters in the first
quarter.
CNRS, QVC’s joint venture in China, experienced a revenue
increase of 27% in local currency in the first quarter. In the same
period, CNRS’ adjusted OIBDA deficit was flat primarily due to
higher programming distribution and fixed costs. This joint venture
is being accounted for as an equity method investment, and as a
result, QVC reported a $1 million reduction in net income for the
first quarter.
QVC's outstanding bank and bond debt was $3.9 billion at March
31, 2014, an increase of $0.2 billion since December 31, 2013. On
March 18, 2014, QVC issued $400 million principal amount of 3.125%
Senior Secured Notes due 2019 at 99.828% and $600 million principal
amount of 4.850% Senior Secured Notes due 2024 at 99.927%. The net
proceeds from the offerings were used to repay indebtedness under
QVC’s senior secured credit facility and for working capital and
other general corporate purposes.
eCommerce Businesses
In the aggregate, Liberty Interactive Group's eCommerce
businesses' revenue was flat at $461 million for the first quarter.
Winter storm Pax, which occurred around Valentine's Day, negatively
affected operations at Provide Commerce's businesses, including
causing delivery issues. This contributed to the revenue weakness
in the quarter. Additionally, Backcountry.com and Bodybuilding.com
experienced low first quarter demand for their products. Adjusted
OIBDA decreased 41% to $23 million. The decrease in adjusted OIBDA
was due to increased technology and personnel costs at the
subsidiaries to support anticipated revenue growth which did not
materialize in the first quarter, slightly lower product margins
during the period, somewhat due to increased packaging costs, and
increased marketing spend in the first quarter that did not yield
anticipated sales. Operating income decreased $20 million to a loss
of $1 million. The decrease in operating income was primarily
attributable to the items discussed above as well as higher
stock-based compensation during the quarter and slightly higher
amortization and depreciation.
On October 10, 2013, Liberty announced that its board had
authorized management to pursue a plan to recapitalize its Liberty
Interactive Group tracking stock into two new tracking stocks, one
(currently the Liberty Interactive common stock) to be renamed the
QVC Group common stock and the other to be designated as the
Liberty Digital Commerce common stock. The Liberty Digital Commerce
Group would have attributed to it Liberty's subsidiaries Provide
Commerce, Backcountry.com, Bodybuilding.com, CommerceHub, Right
Start, and Evite, which is currently a part of Liberty's subsidiary
Celebrate Interactive, along with cash and certain liabilities. The
QVC Group, which is currently known as the Liberty Interactive
Group, would have attributed to it Liberty’s subsidiary QVC, Inc.
and its approximate 38% interest in HSN, Inc., along with cash and
certain liabilities. Management continues to review the proposed
recapitalization and no assurance can be given as to when or if it
will be completed.
Share Repurchases
From February 1, 2014 through April 30, 2014, Liberty
repurchased approximately 7.9 million Series A Liberty Interactive
shares (Nasdaq: LINTA) at an average cost per share of $28.54 for
total cash consideration of $224.1 million. Since the creation of
the Liberty Interactive stock in May 2006, Liberty has repurchased
approximately 237.9 million shares at an average cost per share of
$20.29 for aggregate cash consideration of $4.8 billion. These
repurchases represent approximately 33.9% of the shares outstanding
at the time of creation of the Liberty Interactive stock. All
repurchases up to August 9, 2012, the date on which the Liberty
Interactive stock was recapitalized to create the Liberty Ventures
stock, were comprised of shares of the combined stocks. The total
remaining repurchase authorization for Liberty Interactive Group
stock is approximately $873 million.
Liberty Interactive Group holds controlling interests in
companies that are engaged in digital commerce, including QVC,
Provide Commerce, Backcountry.com, Bodybuilding.com, Celebrate
Interactive, CommerceHub, and also owns an interest in HSN.
LIBERTY VENTURES GROUP - As of March 31, 2014, the
fair value of the public equity method securities and other public
holdings attributed to the Liberty Ventures Group was $2.2 billion
and $1.1 billion, respectively. When compared to December 31, 2013,
the fair value of Liberty Ventures Group's public equity method
securities decreased 1%. The Liberty Ventures Group's other public
holdings balance decreased 3% primarily due to changes in market
prices of certain securities during the third quarter.
On October 10, 2013, Liberty announced that its board had also
authorized management to pursue a plan to spin-off to holders of
its Liberty Ventures common stock shares of a newly formed company
to be called Liberty TripAdvisor Holdings (“Trip Holdings”). Trip
Holdings would be comprised of, among other things, Liberty’s 22%
economic and 57% voting interest in TripAdvisor, as well as the
retail business BuySeasons which is currently a part of Celebrate
Interactive, and an anticipated initial corporate level net debt
balance of $350 million. On May 6, 2014, Trip Holdings filed a
registration statement with the SEC for this spin-off. For
TripAdvisor's stand-alone operating results as reported by
TripAdvisor, see TripAdvisor's Form 10-Q for the quarter ended
March 31, 2014.
On February 27, 2014, Liberty's board approved a two-for-one
stock split of Series A and Series B Liberty Ventures common stock,
effected by means of a dividend. The stock split was done in order
to bring Liberty into compliance with a Nasdaq listing requirement
regarding the minimum number of publicly held shares of the Series
B Liberty Ventures common stock. In the stock split, a dividend was
paid on April 11, 2014 of one share of Series A or Series B Liberty
Ventures common stock to holders of each share of Series A or
Series B Liberty Ventures common stock, respectively, held by them
as of 5:00 p.m., E.D.T. time, on April 4, 2014. Due to the Liberty
Ventures common stock split being completed prior to the issuance
of our first quarter financial statements the stock split was
recorded retroactively for all periods presented.
Share Repurchases
There were no repurchases of Liberty Ventures Group common stock
(Nasdaq: LVNTA) from February 1, 2014 through April 30, 2014. The
Liberty Ventures Group does not have an outstanding stock
repurchase authorization at this time.
The businesses and assets attributed to the Liberty Ventures
Group are all of Liberty's businesses and assets other than those
attributed to the Liberty Interactive Group and include its
subsidiary TripAdvisor, its interest in Expedia, and minority
interests in Time Warner and Time Warner Cable. TripAdvisor is a
separate publicly-traded company and additional information about
TripAdvisor can be obtained through its website and filings with
the Securities and Exchange Commission.
FOOTNOTES
1) Liberty's President and CEO, Greg Maffei, will
discuss these highlights and other matters in Liberty's earnings
conference call which will begin at 12:15 p.m. (E.D.T) on May 8,
2014. For information regarding how to access the call, please see
“Important Notice” later in this document. 2) For a definition of
adjusted OIBDA and applicable reconciliations and a definition of
adjusted OIBDA margin, see the accompanying schedules.
LIBERTY
INTERACTIVE GROUP FINANCIAL METRICS - QUARTER
(amounts in millions)
1Q13 1Q14 % Change
Revenue QVC US $ 1,297 $ 1,305 1 %
International 677 681 1 %
Total QVC Revenue
1,974 $ 1,986 1 %
eCommerce businesses 460 461 — %
Total Liberty
Interactive Group Revenue $ 2,434 $
2,447 1 % Adjusted OIBDA
QVC US $ 291 $ 301 3 % International 113 111 (2 )%
Total QVC Adjusted OIBDA 404 412
2 % eCommerce businesses 39 23 (41 )% Corporate and
other (6 ) (4 ) 33 %
Total Liberty Interactive Group Adjusted
OIBDA $ 437 $ 431
(1 )% Operating Income QVC US $ 180 $
186 3 % International 80 74 (8 )%
Total QVC
Operating Income 260 260 —
% eCommerce businesses 19 (1 ) (105 )% Corporate and other
(19 ) (15 ) 21 %
Total Liberty Interactive Group Operating
Income $ 260 $ 244
(6 )% (amounts in millions)
LINT
Shares Outstanding
4/30/2013
4/30/2014
Outstanding A and B shares 530 491 (amounts in
millions)
LINTA and LINTB Basic and Diluted Shares
Quarter
ended3/31/2013
Quarter
ended3/31/2014
Basic Weighted Average Shares Outstanding (“WASO”) 535 494
Potentially dilutive Shares 7 10
Diluted WASO
542 504
QVC OPERATING
METRICS - QUARTER
(amounts
in millions except average sale price amounts) 1Q13 1Q14 %
Change
QVC - Consolidated(1) Revenue $ 1,974 $ 1,986
1 % Adjusted OIBDA $ 404 $ 412 2 % Adjusted OIBDA margin 20.47 %
20.75 % 28 bps Operating Income $ 260 $ 260 — %
eCommerce and Mobile
Metrics
eCommerce $ of total revenue $ 715 $ 773 8 % eCommerce % of total
revenue 36.22 % 38.92 % 270 bps Mobile % of total
eCommerce(2) 27.73 %
38.47 % 1,074 bps
QVC - US(1) Revenue $
1,297 $ 1,305 1 % Adjusted OIBDA $ 291 $ 301 3 % Adjusted OIBDA
margin 22.44 % 23.07 % 63 bps Operating Income $ 180 $ 186 3 %
Average sale price (ASP) $ 60.51 60.89 1 % Units sold 23.53 23.81 1
% Return rate 18.83 % 19.89 % 106 bps
eCommerce and Mobile
Metrics
eCommerce $ of US revenue $ 544 $ 590 8 % eCommerce % of US revenue
41.94 % 45.21 % 327 bps Mobile % of US eCommerce(2) 26.99 %
36.53 % 954 bps
QVC OPERATING
METRICS - QUARTER (CONT'D)
(amounts
in millions except average sale price amounts) 1Q13 1Q14 %
Change
QVC - Japan(1) Revenue $ 256 $ 234 (9 )%
Adjusted OIBDA $ 54 $ 47 (13 )% Adjusted OIBDA margin 21.09 % 20.09
% (100) bps Operating Income $ 49 $ 41 (16 )% Average sale price
(ASP) ¥ 6,568.51 6,606.35 1 % Units sold
4.03 4.06
1 %
QVC - Germany(1) Revenue $ 250 $ 250 — %
Adjusted OIBDA $ 43 $ 39 (9 )% Adjusted OIBDA margin 17.20 % 15.60
% (160) bps Operating Income $ 27 $ 20 (26 )% Average sale price
(ASP) € 36.79 35.58 (3 )% Units sold
6.70 6.49
(3 )%
QVC - UK(1) Revenue $ 140 $ 165 18 % Adjusted
OIBDA $ 19 $ 27 42 % Adjusted OIBDA margin 13.57 % 16.36 % 279 bps
Operating Income $ 11 $ 19 73 % Average sale price (ASP) £ 29.46
33.14 12 % Units sold 3.35
3.26 (3 )%
QVC
- Italy(1) Revenue $ 31 $ 32 3 % Adjusted OIBDA $ (3 ) $
(2 ) 33 % Adjusted OIBDA margin (9.68 )% (6.25 )% 343 bps Operating
Income $ (7 ) $ (6 ) 14 % Average sale price (ASP) € 32.80 33.80 3
% Units sold 0.73
0.73 — %
China
JV(1)(3) Revenue $ 27 $ 35 30 % Adjusted OIBDA $ (1 ) $
(1 ) — % Adjusted OIBDA margin (3.70 )% (2.86 )% 84 bps (1)
Revenue change, adjusted OIBDA change and eCommerce and
Mobile Metrics calculated in US Dollars, not local currency. (2)
Based on gross US Dollar orders. (3) This joint venture is being
accounted for as an equity method investment.
NOTES
Unless otherwise noted, the foregoing discussion compares
financial information for the three months ended March 31,
2014 to the same period in 2013.
The following financial information with respect to Liberty's
equity affiliates and available for sale securities is intended to
supplement Liberty's condensed consolidated statements of
operations which are included in its Form 10-Q.
Fair Value of Public
Holdings
(amounts in
millions) 12/31/2013 3/31/2014 HSN(1) $ 1,247 $ 1,196
Total Attributed Liberty Interactive Group $
1,247 $ 1,196 Expedia(2) $ 1,608
$ 1,673 Interval Leisure Group and Tree.com(3) 606 521 Other Public
Holdings(4) 1,095 1,059
Total Attributed Liberty Ventures
Group $ 3,309 $ 3,253 (1)
Represents fair value of Liberty Interactive Group's
investment in HSN. In accordance with GAAP, Liberty Interactive
Group accounts for this investment using the equity method of
accounting and includes this investment in its attributed balance
sheet at its historical carrying value which aggregated $293
million and $311 million at December 31, 2013 and March 31, 2014,
respectively. (2) Represents fair value of Liberty Ventures Group's
investment in Expedia. In accordance with GAAP, Liberty Ventures
Group accounts for this investment using the equity method of
accounting and includes this investment in its attributed balance
sheet at its historical carrying value which aggregated $477
million and $467 million at December 31, 2013 and March 31, 2014,
respectively. (3) Represents fair value of Liberty Ventures Group's
investments. In accordance with GAAP, Liberty Ventures Group
accounts for these investments using the equity method of
accounting and includes these investments in its attributed balance
sheet at their historical carrying values which aggregated $101
million and $105 million at December 31, 2013 and March 31, 2014,
respectively. (4) Represents Liberty Ventures Group's other public
holdings which are accounted for at fair value. Excludes $402
million and $407 million of long-term marketable securities as of
December 31, 2013 and March 31, 2014, respectively.
Cash and Debt
The following presentation is provided to separately identify
cash and liquid investments and debt information.
(amounts in millions) 12/31/2013
3/31/2014
Cash and Liquid Investments
Attributable to: Liberty Interactive Group $ 598 $ 682 Liberty
Ventures Group(1)(2)(3) 1,603 1,891
Total Liberty
Consolidated Cash and Liquid Investments $ 2,201
$ 2,573 Less: Short-term
marketable securities - Liberty Ventures Group $ 543 $ 682
Long-term marketable securities - Liberty Ventures Group 402
407
Total Liberty Consolidated Cash (GAAP) $
1,256 $ 1,484
Debt: Senior notes and debentures(4) $ 791 $ 791 Senior
exchangeable debentures(5) 400 400 QVC senior notes(4) 2,819 3,819
QVC bank credit facility 922 124 Other 141 145
Total Attributed Liberty Interactive Group Debt $
5,073 $ 5,279 Unamortized discount and fair
market value adjustment 10 8
Total Attributed
Liberty Interactive Group Debt (GAAP) $ 5,083
$ 5,287 Senior exchangeable
debentures(5) $ 2,091 $ 2,086 TripAdvisor debt facilities 369
361
Total Attributed Liberty Ventures Group
Debt $ 2,460 $ 2,447 Fair market
value adjustment (159 ) (143 )
Total Attributed Liberty Ventures
Group Debt (GAAP) $ 2,301 $
2,304 Total Liberty
Interactive Corporation Debt (GAAP) $ 7,384
$ 7,591 (1) Includes $543
million and $682 million of short-term marketable securities with
an original maturity greater than 90 days as of December 31, 2013
and March 31, 2014, respectively. (2) Includes $402 million and
$407 million of marketable securities with an original maturity
greater than one year as of December 31, 2013 and March 31, 2014,
respectively, which are reflected in investments in
available-for-sale securities in Liberty Ventures Group's condensed
attributed balance sheet. (3) Includes $670 million and $745
million of cash and liquid investments held at TripAdvisor as of
December 31, 2013 and March 31, 2014, respectively. (4) Face amount
of Senior Notes and Debentures with no reduction for the
unamortized discount. (5) Face amount of Senior Exchangeable
Debentures with no reduction for the fair market value adjustment.
Total cash and liquid investments attributed to the Liberty
Interactive Group increased by approximately $84 million during the
first quarter. Cash flows from operations and borrowing of debt in
excess of repayments were partially offset by capital expenditures
and stock repurchases. Total debt attributed to the Liberty
Interactive Group increased by $206 million, primarily due to the
issuance of new senior notes at QVC during the quarter, partially
offset by payments made on the QVC bank credit facility.
Total cash and liquid investments attributed to the Liberty
Ventures Group increased $288 million, primarily due to cash flow
from operations, partially offset by capital expenditures. Included
in the first quarter total cash and liquid investments attributed
to the Liberty Ventures Group is $745 million held at TripAdvisor,
which is comprised of $319 million of cash, $142 million of
short-term marketable securities and $284 million of long-term
marketable securities. Although TripAdvisor is a consolidated
subsidiary, it is a separate public company with a significant
noncontrolling interest, therefore Liberty does not have ready
access to TripAdvisor's cash and liquid investments. Total debt
outstanding attributed to the Liberty Ventures Group decreased by
$13 million in the first quarter, primarily due to repayments made
on senior exchangeable debentures and the TripAdvisor debt
facilities.
Important Notice: Liberty (Nasdaq: LINTA, LINTB, LVNTA,
LVNTB) President and CEO, Greg Maffei will discuss Liberty's
earnings release in a conference call which will begin at 12:15
p.m. (E.D.T) on May 8, 2014. The call can be accessed by dialing
(800) 768-6570 or (785) 830-1942 plus the passcode 8678907 at least
10 minutes prior to the start time. Replays of the conference call
can be accessed until 12:15 p.m. (E.D.T) on May 15, 2014, by
dialing (888) 203-1112 or (719) 457-0820 plus the passcode 8768907.
The call will also be broadcast live across the Internet and
archived on our website. To access the webcast go to http://www.libertyinteractive.com/events. Links to
this press release will also be available on Liberty's website.
This press release includes certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements about business strategies, market
potential, the proposed spin-off of Liberty TripAdvisor Holdings,
the proposed recapitalization of the Liberty Interactive Group
tracking stock into the QVC Group tracking stock and a new Liberty
Digital Commerce tracking stock, future financial prospects,
international expansion, including the launch of QVC France and the
expected expenditures in connection therewith, new service and
product offerings, the monetization of our non-core assets, the
continuation of our stock repurchase program, the estimated
liabilities under exchangeable debentures and other matters that
are not historical facts. These forward-looking statements involve
many risks and uncertainties that could cause actual results to
differ materially from those expressed or implied by such
statements, including, without limitation, possible changes in
market acceptance of new products or services, competitive issues,
regulatory matters affecting our businesses, continued access to
capital on terms acceptable to Liberty Interactive, changes in law
and government regulations that may impact the derivative
instruments that hedge certain of our financial risks, our ability
to satisfy the conditions to the proposed recapitalization and
spin-off and market conditions conducive to stock repurchases.
These forward-looking statements speak only as of the date of this
presentation, and Liberty Interactive expressly disclaims any
obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained herein to reflect any
change in Liberty Interactive's expectations with regard thereto or
any change in events, conditions or circumstances on which any such
statement is based. Please refer to the publicly filed documents of
Liberty Interactive, including the most recent Forms 10-K and 10-Q,
for additional information about Liberty Interactive and about the
risks and uncertainties related to Liberty Interactive's business
which may affect the statements made in this presentation.
SUPPLEMENTAL INFORMATION
As a supplement to Liberty's consolidated statements of
operations, which are included in its Form 10-Q, the following is a
presentation of quarterly information and operating metrics on a
stand-alone basis for the largest business owned by Liberty (QVC)
at March 31, 2014, which Liberty has identified as a
reportable segment.
Please see below for the definition of adjusted OIBDA and a
discussion of why management believes the presentation of adjusted
OIBDA for QVC provides useful information for investors. Schedule 2
to this press release provides a reconciliation of adjusted OIBDA
for each identified reportable segment to that segment's operating
income for the same period, as determined under GAAP.
QUARTERLY
SUMMARY
(amounts in millions) 1Q13 2Q13
3Q13 4Q13 1Q14
Liberty
Interactive Group QVC Revenue - US $ 1,297 $ 1,312 $
1,303 $ 1,932 $ 1,305 Revenue - International 677 649
644 809 681 Revenue - Total $ 1,974 $
1,961 $ 1,947 $ 2,741 $ 1,986 Adjusted
OIBDA - US 291 320 304 437 301 Adjusted OIBDA - International 113
114 104 158 111 Adjusted OIBDA -
Total $ 404 $ 434 $ 408 $ 595 $ 412
Operating income - US 180 207 191 323 186 Operating income -
International 80 78 68 118 74
Operating income - Total $ 260 $ 285 $ 259 $
441 $ 260 Gross margin - US 36.1 % 37.3 % 37.1 % 34.7
% 36.4 % Gross margin - International 37.5 % 37.8 % 37.4 % 37.8 %
37.4 %
NON-GAAP FINANCIAL MEASURES
This press release includes a presentation of adjusted OIBDA,
which is a non-GAAP financial measure, for Liberty, QVC (and
certain of its subsidiaries), and the eCommerce businesses together
with a reconciliation to that entity's operating income, as
determined under GAAP. Liberty defines adjusted OIBDA as revenue
less cost of sales, operating expenses, and selling, general and
administrative expenses, excluding all stock based compensation,
and excludes from that definition depreciation and amortization and
restructuring and impairment charges that are included in the
measurement of operating income pursuant to GAAP. Further, this
press release includes adjusted OIBDA margin which is also a
non-GAAP financial measure. Liberty defines adjusted OIBDA margin
as adjusted OIBDA divided by revenue.
Liberty believes adjusted OIBDA is an important indicator of the
operational strength and performance of its businesses, including
each business' ability to service debt and fund capital
expenditures. In addition, this measure allows management to view
operating results and perform analytical comparisons and
benchmarking between businesses and identify strategies to improve
performance. Because adjusted OIBDA is used as a measure of
operating performance, Liberty views operating income as the most
directly comparable GAAP measure. Adjusted OIBDA is not meant to
replace or supersede operating income or any other GAAP measure,
but rather to supplement such GAAP measures in order to present
investors with the same information that Liberty's management
considers in assessing the results of operations and performance of
its assets. Please see the attached schedules for applicable
reconciliations.
SCHEDULE 1
The following table provides a reconciliation of Liberty
Interactive Group's adjusted OIBDA to its operating income
calculated in accordance with GAAP for the three months ended March
31, 2013, June 30, 2013, September 31, 2013, December 31, 2013 and
March 31, 2014, respectively.
QUARTERLY
SUMMARY
(amounts in millions) 1Q13 2Q13 3Q13 4Q13 1Q14
Liberty
Interactive Group Adjusted OIBDA $ 437 $ 455 $ 396 $ 618 431
Depreciation and amortization (153 ) (158 ) (156 ) (165 ) (163 )
Stock compensation expense (24 ) (29 ) (22 ) (35 ) (24 ) Impairment
of intangible assets — — (19 ) (14 ) —
Operating Income $ 260 $
268 $ 199 $ 404
$ 244
SCHEDULE 2
The following table provides a reconciliation of adjusted OIBDA
for QVC (and certain of its subsidiaries) and the eCommerce
businesses to that entity or such businesses' operating income
(loss) calculated in accordance with GAAP for the three months
ended March 31, 2013, June 30, 2013, September 31, 2013, December
31, 2013 and March 31, 2014, respectively.
QUARTERLY
SUMMARY
(amounts in millions) 1Q13 2Q13
3Q13 4Q13 1Q14
Liberty
Interactive Group
QVC Adjusted OIBDA QVC US $ 291 $ 320 $ 304 $ 437 $ 301
QVC Japan 54 57 46 55 47 QVC Germany 43 35 37 58 39 QVC UK
19 26 26 47 27 QVC Italy (3 ) (4 ) (5 ) (2 ) (2 ) QVC International
adjusted OIBDA $ 113 $ 114 $ 104 $ 158
$ 111 Consolidated QVC adjusted OIBDA 404 434 408 595
412 Depreciation and amortization (134 ) (140 ) (139 ) (145 ) (144
) Stock compensation (10 ) (9 ) (10 ) (9 ) (8 )
Operating
Income $ 260 $ 285
$ 259 $ 441 $
260 eCommerce Businesses Adjusted OIBDA
39 26 (5 ) 25 23 Depreciation and amortization (18 ) (18 ) (19 )
(18 ) (19 ) Stock compensation (2 ) (10 ) (3 ) (14 ) (5 )
Impairment of intangible assets — — (19 ) (14 ) —
Operating Income (Loss) $ 19
$ (2 ) $ (46 ) $
(21 ) $ (1 )
LIBERTY INTERACTIVE CORPORATION BALANCE SHEET
INFORMATION March 31, 2014 - (unaudited)
Attributed
InteractiveGroup
VenturesGroup
Inter-groupEliminations
ConsolidatedLiberty
amounts in millions
Assets Current assets: Cash and cash
equivalents $ 682 802 — 1,484 Trade and other receivables, net 885
155 — 1,040 Inventory, net 1,213 — — 1,213 Short-term marketable
securities — 682 — 682 Other current assets 248 21
(159 ) 110
Total current assets 3,028
1,660 (159 ) 4,529 Investments
in available-for-sale securities and other cost investments 4 1,466
— 1,470 Investments in affiliates, accounted for using the equity
method 362 882 — 1,244 Property and equipment, net 1,203 69 — 1,272
Intangible assets not subject to amortization 8,393 5,290 — 13,683
Intangible assets subject to amortization, net 1,498 854 — 2,352
Other assets, at cost, net of accumulated amortization 92 20
— 112
Total assets $ 14,580
10,241 (159 ) 24,662
Liabilities and Equity Current liabilities:
Intergroup Payable (receivable) $ 50 (50 ) — — Accounts payable 650
74 — 724 Accrued liabilities 651 95 — 746 Current portion of debt
36 947 — 983 Current deferred tax liabilities — 1,056 (159 ) 897
Other current liabilities 176 60 — 236
Total current liabilities 1,563 2,182
(159 ) 3,586 Long-term debt 5,251 1,357
— 6,608 Deferred income tax liabilities 1,151 1,680 — 2,831 Other
liabilities 197 74 — 271
Total
liabilities 8,162 5,293 (159
) 13,296 Equity/Attributed net assets (liabilities)
6,306 527 — 6,833 Noncontrolling interests in equity of
subsidiaries 112 4,421 — 4,533
Total
liabilities and equity $ 14,580
10,241 (159 ) 24,662
LIBERTY INTERACTIVE CORPORATION STATEMENT OF
OPERATIONS INFORMATION Three months ended March 31, 2014 -
(unaudited) Attributed
InteractiveGroup
VenturesGroup
ConsolidatedLiberty
amounts in millions
Revenue: Net retail sales $ 2,447 —
2,447 Other revenue — 281 281 Total revenue
2,447 281 2,728
Operating costs and
expenses: Cost of sales 1,566 — 1,566 Operating, including
stock-based compensation 217 48 265 Selling, general and
administrative, including stock-based compensation 257 132 389
Depreciation and amortization 163 69 232 2,203
249 2,452 Operating income 244 32 276
Other income (expense): Interest expense (77 ) (22 ) (99 )
Share of earnings (losses) of affiliates, net 21 (23 ) (2 )
Realized and unrealized gains (losses) on financial instruments,
net 1 (26 ) (25 ) Other, net 1 7 8 (54 ) (64 )
(118 ) Earnings (loss) before income taxes 190 (32 ) 158 Income tax
benefit (expense) (70 ) 22 (48 ) Net earnings (loss) 120 (10
) 110 Less net earnings (loss) attributable to noncontrolling
interests 10 18 28 Net earnings (loss)
attributable to Liberty stockholders $ 110 (28 ) 82
LINT Shares
Outstanding
Outstanding A and B shares as of April 30,
2014 (in millions)
491
LINTA and LINTB
Basic and Diluted Shares (in millions)
Quarter
ended3/31/2014
Basic Weighted Average Shares Outstanding
(“WASO”)
494
Potentially dilutive shares
10
Diluted WASO
504
LIBERTY INTERACTIVE CORPORATION
STATEMENT OF OPERATIONS INFORMATION Three months ended
March 31, 2013 - (unaudited)
Attributed
InteractiveGroup
VenturesGroup
ConsolidatedLiberty
amounts in millions
Revenue: Net retail sales $ 2,434 —
2,434 Other revenue — 230 230 Total revenue
2,434 230 2,664
Operating costs and
expenses: Cost of sales 1,553 — 1,553 Operating, including
stock-based compensation 208 36 244 Selling, general and
administrative, including stock-based compensation 260 106 366
Depreciation and amortization 153 77 230 2,174
219 2,393 Operating income 260 11 271
Other income (expense): Interest expense (84 ) (27 ) (111 )
Share of earnings (losses) of affiliates, net 16 (27 ) (11 )
Realized and unrealized gains (losses) on financial instruments,
net 13 (86 ) (73 ) Other, net (40 ) 2 (38 ) (95 ) (138 )
(233 ) Earnings (loss) before income taxes 165 (127 ) 38 Income tax
benefit (expense) (58 ) 73 15 Net earnings (loss) 107
(54 ) 53 Less net earnings (loss) attributable to noncontrolling
interests 12 14 26 Net earnings (loss)
attributable to Liberty stockholders $ 95 (68 ) 27
LINT Shares
Outstanding
Outstanding A and B shares as of April 30, 2013 (in millions) 530
LINTA and LINTB
Basic and Diluted Shares (in millions)
Quarter
ended3/31/2013
Basic Weighted Average Shares Outstanding (“WASO”) 535 Potentially
dilutive shares 7 Diluted WASO 542
LIBERTY INTERACTIVE CORPORATION STATEMENT OF CASH FLOWS
INFORMATION Three months ended March 31, 2014 -
(unaudited) Attributed
InteractiveGroup
VenturesGroup
ConsolidatedLiberty
amounts in millions
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 120 (10 ) 110 Adjustments to reconcile net
earnings to net cash provided by operating activities: Depreciation
and amortization 163 69 232 Stock-based compensation 24 18 42 Cash
payments for stock based compensation (3 ) (1 ) (4 ) Excess tax
benefit from stock based compensation (8 ) (11 ) (19 ) Share of
(earnings) losses of affiliates, net (21 ) 23 2 Cash receipts from
return on equity investments 5 5 10 Realized and unrealized gains
(losses) on financial instruments, net (1 ) 26 25 Deferred income
tax (benefit) expense (49 ) 2 (47 ) Other, net 1 — 1 Intergroup tax
allocation 50 (50 ) — Intergroup tax payments (225 ) 225 — Changes
in operating assets and liabilities Current and other assets 178
(33 ) 145 Payables and other current liabilities (59 ) 88 29
Net cash provided (used) by operating activities
175 351 526
CASH FLOWS FROM INVESTING ACTIVITIES: Cash proceeds from
dispositions — 25 25 Investments in and loans to cost and equity
investees — (18 ) (18 ) Capital expended for property and equipment
(41 ) (47 ) (88 ) Purchases of short term and other marketable
securities — (310 ) (310 ) Sales of short term and other marketable
securities — 165 165 Other investing activities, net (10 ) 2
(8 )
Net cash provided (used) by investing activities
(51 ) (183 ) (234 )
CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings of
debt 1,551 2 1,553 Repayments of debt (1,347 ) (15 ) (1,362 )
Intergroup receipts (payments), net 2 (2 ) — Repurchases of Liberty
common stock (213 ) — (213 ) Minimum withholding taxes on net
settlements of stock-based compensation (6 ) (20 ) (26 ) Excess tax
benefit from stock-based compensation 8 11 19 Other financing
activities, net (35 ) — (35 )
Net cash provided (used) by
financing activities (40 ) (24 )
(64 ) Effect of foreign currency rates on cash
— — — Net increase (decrease) in cash and cash
equivalents 84 144 228 Cash and cash equivalents at beginning of
period 598 658 1,256
Cash and cash
equivalents at end period $ 682 802
1,484 LIBERTY INTERACTIVE
CORPORATION STATEMENT OF CASH FLOWS INFORMATION Three
months ended March 31, 2013 - (unaudited)
Attributed
InteractiveGroup
VenturesGroup
ConsolidatedLiberty
CASH FLOWS FROM OPERATING ACTIVITIES: amounts in millions
Net earnings (loss) $ 107 (54 ) 53 Adjustments to reconcile net
earnings to net cash provided by operating activities: Depreciation
and amortization 153 77 230 Stock-based compensation 24 18 42 Cash
payments for stock based compensation (2 ) (1 ) (3 ) Excess tax
benefit from stock-based compensation (3 ) — (3 ) Share of losses
(earnings) of affiliates, net (16 ) 27 11 Cash receipts from return
on equity investments 4 3 7 Realized and unrealized gains (losses)
on financial instruments, net (13 ) 86 73 Deferred income tax
(benefit) expense (27 ) (192 ) (219 ) Other, net 11 — 11 Intergroup
tax allocation 41 (41 ) — Changes in operating assets and
liabilities Current and other assets 259 (53 ) 206 Payables and
other current liabilities (390 ) 82 (308 )
Net cash provided (used) by operating activities 148
(48 ) 100
CASH FLOWS FROM INVESTING ACTIVITIES: Cash proceeds from
dispositions — 37 37 Investments in and loans to cost and equity
investees — (38 ) (38 ) Capital expended for property and equipment
(50 ) (9 ) (59 ) Purchases of short term and other marketable
securities — (707 ) (707 ) Sales of short term and other marketable
securities — 49 49 Other investing activities, net (30 ) (6
) (36 )
Net cash provided (used) by investing
activities (80 ) (674 )
(754 ) CASH FLOWS FROM FINANCING
ACTIVITIES: Borrowings of debt 1,383 4 1,387 Repayments of debt
(1,251 ) (452 ) (1,703 ) Excess tax benefit from stock-based
compensation 3 — 3 Minimum withholding taxes on net settlements of
stock-based compensation (5 ) (6 ) (11 ) Intergroup receipts
(payments), net 2 (2 ) — Repurchases of Liberty common stock (252 )
— (252 ) Other financing activities, net (37 ) —
(37 )
Net cash provided (used) by financing
activities (157 ) (456 )
(613 ) Effect of foreign currency rates
on cash (23 ) — (23 ) Net increase (decrease)
in cash and cash equivalents (112 ) (1,178 ) (1,290 ) Cash and cash
equivalents at beginning of period 699 1,961
2,660
Cash and cash equivalents at end period
$ 587 783
1,370
Additional Information
Nothing in this press release shall constitute a solicitation to
buy or an offer to sell shares of the proposed QVC Group tracking
stock, the proposed Liberty Digital Commerce tracking stock or
Liberty's existing common stock. The offer and sale of shares of
the proposed new tracking stocks will only be made pursuant to an
effective registration statement. Liberty stockholders and other
investors are urged to read the registration statement to be filed
with the SEC, including the proxy statement/prospectus to be
contained therein, because they will contain important information
about the issuance of shares of the proposed tracking stocks.
Copies of Liberty's SEC filings are available free of charge at the
SEC's website (http://www.sec.gov). Copies of the filings together
with the materials incorporated by reference therein will also be
available, without charge, by directing a request to Liberty
Interactive Corporation, 12300 Liberty Boulevard, Englewood,
Colorado 80112, Attention: Investor Relations, Telephone: (720)
875-5408.
Participants in a Solicitation
The directors and executive officers of Liberty and other
persons may be deemed to be participants in the solicitation of
proxies in respect of proposals relating to the approval of the
issuance of the new tracking stocks. Information regarding the
directors and executive officers of Liberty and other participants
in the proxy solicitation and a description of their respective
direct and indirect interests, by security holdings or otherwise,
will be available in the proxy materials to be filed with the
SEC.
Liberty Interactive CorporationCourtnee Ulrich,
720-875-5420
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