Liberty Interactive Corporation ("Liberty") (Nasdaq: LINTA,
LINTB, LVNTA, LVNTB) today reported second quarter 2014 results.
Highlights include(1):
Attributed to Liberty Interactive Group
- QVC posted strong revenue and adjusted
OIBDA increases across all European operations
- Grew QVC US revenue by 3% and adjusted
OIBDA(2) by 2% in the second quarter
- QVC US operating income decreased by
2%
- QVC.com revenue as a percent of total
US revenue increased to 43%, a 157 basis points increase
- QVC US mobile penetration was 37% of
QVC.com orders
- Repurchased $274 million LINTA shares
from May 1 to July 31, 2014
- Announced combination of FTD Companies,
Inc. ("FTD") and Provide Commerce; upon closing Liberty will own
35% of FTD
- Continuing with plan to create QVC
Group tracking stock
- In light of Provide-FTD transaction,
along with other factors, re-evaluating the optimal structure of
the Liberty's digital commerce assets
Attributed to Liberty Ventures Group
- Filed amended S-1 for Liberty
TripAdvisor spin on July 25, 2014
"QVC posted strong revenue and adjusted OIBDA increases across
Europe, with exceptional results in the UK. Our Chinese joint
venture posted strong revenue growth, driven by both new and repeat
customer transactions and we remain excited about the potential for
this enormous market," stated Greg Maffei, Liberty President and
CEO. "We were pleased to announce the pending combination of FTD
and Provide Commerce in which we will become a 35% owner of FTD.
The complementary strengths of these businesses will offer
customers an outstanding gifting experience worldwide. This
transaction, along with other factors, has led us to re-evaluate
the optimal structure of Liberty's digital commerce assets.
However, we intend to continue with our plan to create the QVC
Group tracking stock, which will be comprised of our interests in
QVC and HSN. Regarding Liberty Ventures, we are proceeding with the
spin-off of Liberty TripAdvisor Holdings and recently filed an
amended S-1."
LIBERTY INTERACTIVE GROUP - Liberty Interactive Group's
revenue increased 4% to $2.5 billion in the second quarter,
adjusted OIBDA declined 1% to $452 million and operating income
decreased 5% to $255 million. Both QVC and the eCommerce companies
contributed to the increase in revenue for the quarter. The decline
in adjusted OIBDA was primarily due to margin declines at the
eCommerce companies.
QVC
QVC's consolidated revenue increased 3% to $2.0 billion in the
second quarter. Adjusted OIBDA increased 1% to $439 million and
operating income was essentially flat at $284 million.
"Our second quarter performance reflects the strategic actions
we are taking to extend our highly differentiated retail model
across geographies and commerce platforms," said QVC President and
CEO Mike George. "We generated solid results, with strong gains in
Europe and China and improved growth in the US, partially offset by
macro challenges in Japan. As we re-imagine the worlds of shopping,
entertainment and social as one, we continue to deliver a
high-quality value proposition to our customers, as evidenced by
our strong eCommerce and mobile penetration and excellent customer
retention."
QVC US's revenue increased 3% to $1.4 billion in the second
quarter primarily due to strength in all categories except
electronics and jewelry. Average selling price per unit ("ASP")
increased 1% to $57.05 from $56.39 and units sold increased 3%.
Returns as a percentage of gross product revenue increased 35 basis
points. eCommerce revenue increased 7% to $588 million and grew to
43% from 42% as a percentage of total US revenue. Adjusted OIBDA
increased 2% to $325 million and adjusted OIBDA margin(2) decreased
35 basis points. Adjusted OIBDA margin decreased primarily due to
continued investment in commerce platforms and eCommerce marketing,
which were partially offset by higher product margins.
QVC's international revenue in US Dollars increased 2% to $662
million in the second quarter. The results included the positive
impact of the weakening of the US Dollar against the Euro and UK
Pound Sterling, which was partially offset by the strengthening of
the US Dollar against the Japanese Yen. Adjusted OIBDA was flat at
$114 million and adjusted OIBDA margin decreased 35 basis
points.
QVC Japan's revenue declined 11% in local currency in the second
quarter primarily due to declines in all categories except
electronics. The declines in QVC Japan's sales in local currency
were primarily due to a local consumption tax increase that became
effective April 1, 2014. ASP in local currency decreased 3% and
units sold declined 8%. Returns as a percentage of gross product
revenue in local currency increased 46 basis points. Adjusted OIBDA
in local currency decreased 22% and adjusted OIBDA margin decreased
264 basis points. The decrease in adjusted OIBDA margin was
primarily due to lack of sales leverage on fixed costs, higher
programming distribution expenses and lower product margins.
QVC Germany's revenue increased 5% in local currency in the
second quarter. Germany experienced gains in the home category,
partially offset by declines in apparel and jewelry. ASP in local
currency increased 2% and units sold decreased 3%. Returns as a
percentage of gross product revenue in local currency improved 457
basis points primarily due to a positive mix shift from the apparel
and jewelry categories to home, which typically returns at lower
rates, and to a lesser extent, lower return rates in all
categories. Adjusted OIBDA in local currency increased 11% and
adjusted OIBDA margin increased 71 basis points. Adjusted OIBDA
margin increased primarily due to lower return volume and lower
obsolescence expense due to improved inventory management,
partially offset by lower product margins.
QVC UK's revenue grew 6% in local currency in the second quarter
primarily due to gains in the beauty, accessories, apparel and
jewelry categories, partially offset by a decline in electronics.
ASP in local currency was flat and units sold increased 6%. Returns
as a percentage of gross product revenue in local currency improved
27 basis points. Adjusted OIBDA in local currency increased 18% and
adjusted OIBDA margin increased 155 basis points. The increase in
adjusted OIBDA margin was primarily due to higher product
margins.
QVC Italy's revenue increased 9% in local currency in the second
quarter primarily due to gains in the beauty, accessories and
apparel categories. ASP in local currency increased 1% and units
sold increased 8%. Returns as a percentage of gross product revenue
in local currency improved 66 basis points. The adjusted OIBDA
deficit in local currency improved 68% and adjusted OIBDA margin
improved 791 basis points. The increase in adjusted OIBDA margin
was primarily due to the revenue growth, lower customer service
costs as a result of increased digital ordering and lower product
distribution costs.
CNRS, QVC’s joint venture in China, operating under the brand
CNR Mall, generated revenue growth of 27% in local currency in the
second quarter. Adjusted OIBDA deficit in local currency decreased
5% primarily due to revenue growth and higher product margins,
partially offset by higher programming distribution costs. This
joint venture is being accounted for as an equity method
investment, and as a result, QVC reported a $2 million reduction in
net income in the second quarter.
QVC's outstanding bank and bond debt was $3.9 billion at June
30, 2014, relatively flat with March 31, 2014.
eCommerce Businesses
In the aggregate, Liberty Interactive Group's eCommerce
businesses' revenue increased 10% to $481 million for the second
quarter. While Provide Commerce, Backcountry.com and
Bodybuilding.com all increased revenue, the increase came in below
anticipated levels due to softness in demand for their products and
slightly lower average order values. BuySeasons experienced a
decrease in revenue as they focused on more profitable channels and
cost containment. Adjusted OIBDA decreased 27% to $19 million. The
decrease in adjusted OIBDA was due to increased technology and
personnel costs at these subsidiaries to support anticipated
revenue growth which did not materialize in the quarter, slightly
lower product margins, increased packaging costs, increased
returns, and increased marketing spend that has not yielded
expected sales growth. Operating income decreased $14 million to a
loss of $16 million. The decrease in operating income was primarily
attributable to the items discussed above, as well as slightly
higher amortization and depreciation, the impairment of intangibles
at Evite, somewhat offset by a decline in stock-based compensation
based on slower than anticipated growth.
On July 30, 2014, Liberty and FTD announced the execution of a
definitive agreement under which FTD will acquire Liberty's Provide
Commerce floral and gifting businesses. Under the terms of the $430
million transaction, Liberty will receive 10.2 million shares of
FTD common stock representing 35% of the combined company and $121
million in cash. FTD and Liberty expect to complete the transaction
by the end of 2014. Provide Commerce's RedEnvelope business will be
excluded from the transaction.
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 Group common stock) to be
renamed the QVC Group common stock and the other to be designated
as the Liberty Digital Commerce Group common stock. The Liberty
Digital Commerce Group would have had attributed to it Liberty's
subsidiaries Provide Commerce, Backcountry.com, Bodybuilding.com,
CommerceHub, Right Start, and Evite, 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.
On July 30, 2014, Liberty provided an update on the proposed QVC
Group and Liberty Digital Commerce Group tracking stocks. Liberty
reaffirmed its plan to create the QVC Group tracking stock and
disclosed that, in light of the pending Provide Commerce
transaction discussed above, it was re-evaluating the optimal
structure and best alignment of Liberty's digital commerce assets.
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 May 1, 2014 through July 31, 2014, Liberty repurchased
approximately 9.5 million Series A Liberty Interactive Group shares
(Nasdaq: LINTA) at an average cost per share of $28.95 for total
cash consideration of $274 million. Since the creation of the
Liberty Interactive stock in May 2006, Liberty has repurchased
approximately 247.3 million shares at an average cost per share of
$20.63 for aggregate cash consideration of $5.1 billion. These
repurchases represent approximately 35.3% 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
Group stock, were comprised of shares of the combined stocks. The
total remaining repurchase authorization for Liberty Interactive
Group stock is approximately $599 million. In addition, in
connection with the approval of the spin-off of Liberty TripAdvisor
Holdings, Inc., Liberty's Board of Directors authorized the
repurchase of an additional $350 million worth of shares of Liberty
stock, subject to the completion of that spin-off, which
authorization may be used to repurchase either Liberty Interactive
Group stock or Liberty Ventures Group stock.
Liberty Interactive Group holds controlling interests in
companies that are engaged in digital commerce; including QVC,
Provide Commerce, Backcountry.com, Bodybuilding.com, BuySeasons,
Evite, CommerceHub, and also owns an interest in HSN.
LIBERTY VENTURES GROUP - As of June 30, 2014, the
fair value of the public equity method securities and other public
holdings attributed to the Liberty Ventures Group was $2.3 billion
and $1.1 billion, respectively. When compared to March 31, 2014,
the fair value of Liberty Ventures Group's public equity method
securities increased 3%. The Liberty Ventures Group's other public
holdings balance increased 8% primarily due to changes in market
prices of certain securities during the second quarter.
On October 10, 2013, Liberty announced that its board had
authorized management to pursue a plan to spin-off to holders of
its Liberty Ventures Group common stock shares of a newly formed
company to be called Liberty TripAdvisor Holdings ("TripAdvisor
Holdings"). TripAdvisor 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, and an
anticipated initial corporate level net debt balance of $350
million. On July 25, 2014, TripAdvisor Holdings filed an amended
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
June 30, 2014.
Share Repurchases
There were no repurchases of Liberty Ventures Group common stock
(Nasdaq: LVNTA) from May 1, 2014 through July 31, 2014. In
addition, in connection with the approval of the spin-off of
Liberty TripAdvisor Holdings, Inc., Liberty's Board of Directors
authorized the repurchase of an additional $350 million worth of
shares of Liberty stock, subject to the completion of that
spin-off, which authorization may be used to repurchase either
Liberty Interactive Group stock or Liberty Ventures Group
stock.
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.
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 August
5, 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) 2Q13
2Q14 % Change
Revenue QVC
US $ 1,312 $ 1,352 3 % International 649 662 2
%
Total QVC Revenue 1,961 $
2,014 3 % eCommerce businesses
439 481 10 %
Total Liberty Interactive
Group Revenue $ 2,400 $
2,495 4 % Adjusted
OIBDA QVC US $ 320 $ 325 2 % International 114 114
— %
Total QVC Adjusted OIBDA 434
439 1 % eCommerce businesses 26
19 (27
)
%
Corporate and other (5 ) (6 ) (20
)
%
Total Liberty Interactive Group Adjusted OIBDA $
455 $ 452 (1
)
%
Operating Income QVC US $ 207 $ 203 (2
)
%
International 78 81 4 %
Total QVC Operating
Income 285 284 —
% eCommerce businesses (2 ) (16 ) (700
)
%
Corporate and other (15 ) (13 ) 13 %
Total Liberty
Interactive Group Operating Income $ 268
$ 255 (5
)
%
(amounts in
millions)
LINT Shares Outstanding
7/31/2013 7/31/2014
Outstanding A and B shares 520 482
(amounts in millions)
Quarter
ended
Quarter
ended
LINTA and LINTB Basic and Diluted Shares
6/30/2013
6/30/2014
Basic Weighted Average Shares Outstanding ("WASO") 523 486
Potentially dilutive Shares 8 10
Diluted WASO 531 496
QVC OPERATING
METRICS - QUARTER
(amounts in millions except average sale price
amounts) 2Q13 2Q14
% Change
QVC - Consolidated(1)
Revenue $ 1,961 $ 2,014 3 % Adjusted OIBDA $ 434 $ 439 1 % Adjusted
OIBDA margin 22.13 % 21.80 % (33) bps Operating Income $ 285 $ 284
— %
eCommerce and Mobile
Metrics
eCommerce $ of total revenue $ 725 $ 779 7 % eCommerce % of total
revenue 36.97 % 38.68 % 171 bps Mobile % of total
eCommerce(2) 29.68 %
39.86 % 1,018 bps
QVC - US(1)
Revenue $ 1,312 $ 1,352 3 % Adjusted OIBDA $ 320 $ 325 2 % Adjusted
OIBDA margin 24.39 % 24.04 % (35) bps Operating Income $ 207 $ 203
(2
)
%
Average sale price (ASP) $ 56.39 57.05 1 % Units sold 25.36 26.14 3
% Return rate 18.89 % 19.24 % 35 bps
eCommerce and Mobile
Metrics
eCommerce $ of US revenue $ 550 $ 588 7 % eCommerce % of US revenue
41.92 % 43.49 % 157 bps Mobile % of US eCommerce(2) 28.15 %
37.48 % 933 bps
QVC OPERATING
METRICS - QUARTER (CONT'D)
(amounts in millions except average sale price
amounts) 2Q13 2Q14
% Change
QVC - Japan(1) Revenue
$ 260 $ 223 (14
)
%
Adjusted OIBDA $ 57 $ 43 (25
)
%
Adjusted OIBDA margin 21.92 % 19.28 % (264) bps Operating Income $
49 $ 36 (27
)
%
Average sale price (ASP) ¥ 6,191.41 6,016.95 (3
)
%
Units sold 4.73
4.35 (8
)
%
QVC - Germany(1) Revenue $ 207 $ 227 10 % Adjusted
OIBDA $ 35 $ 40 14 % Adjusted OIBDA margin 16.91 % 17.62 % 71 bps
Operating Income $ 18 $ 23 28 % Average sale price (ASP) € 35.16
35.81 2 % Units sold 6.22
6.02 (3
)
%
QVC - UK(1) Revenue $ 153 $ 178 16 % Adjusted OIBDA $
26 $ 33 27 % Adjusted OIBDA margin 16.99 % 18.54 % 155 bps
Operating Income $ 18 $ 26 44 % Average sale price (ASP) £ 29.26
29.24 — % Units sold 3.68
3.89 6 %
QVC -
Italy(1) Revenue $ 29 $ 34 17 % Adjusted OIBDA $ (4 ) $
(2 ) 50 % Adjusted OIBDA margin (13.79 )% (5.88 )% 791 bps
Operating Income $ (7 ) $ (4 ) 43 % Average sale price (ASP) €
32.18 32.49 1 % Units sold 0.77
0.83 8 %
China
JV(1)(3) Revenue $ 26 $ 33 27 % Adjusted OIBDA $ (2 ) $
(3 ) (50
)
%
Adjusted OIBDA margin (7.69 )% (9.09 )% (140) 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 June 30, 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) 3/31/2014 6/30/2014 HSN(1) $ 1,196
$ 1,186
Total Attributed Liberty Interactive Group
$ 1,196 $ 1,186
Expedia(2) $ 1,673 $ 1,818 Interval Leisure Group and Tree.com(3)
521 446 Other Public Holdings(4) 1,059 1,149
Total
Attributed Liberty Ventures Group $ 3,253
$ 3,413 (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 $311 million and $313 million at
March 31, 2014 and June 30, 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 $467 million and $476 million at
March 31, 2014 and June 30, 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 $105 million and $108 million at March 31, 2014
and June 30, 2014, respectively. (4) Represents Liberty Ventures
Group's other public holdings which are accounted for at fair
value. Excludes $407 million and $122 million of long-term
marketable securities as of March 31, 2014 and June 30, 2014,
respectively.
Cash and Debt
The following presentation is provided to separately identify
cash and liquid investments and debt information.
(amounts in millions) 3/31/2014
6/30/2014
Cash and Liquid Investments Attributable to:
Liberty Interactive Group (1) $ 682 $ 703 Liberty Ventures
Group(2)(3)(4) 1,891 1,909
Total Liberty
Consolidated Cash and Liquid Investments $ 2,573
$ 2,612 Less: Short-term
marketable securities - Liberty Interactive Group $ — $ 11
Short-term marketable securities - Liberty Ventures Group 682 646
Long-term marketable securities - Liberty Ventures Group 407
122
Total Liberty Consolidated Cash (GAAP) $
1,484 $ 1,833
Debt: Senior notes and debentures(5) $ 791 $ 791 Senior
exchangeable debentures(6) 400 400 QVC senior notes(5) 3,819 3,819
QVC bank credit facility 124 65 Other 145 157
Total Attributed Liberty Interactive Group Debt $
5,279 $ 5,232 Unamortized discount and fair
market value adjustment 8 2
Total Attributed
Liberty Interactive Group Debt (GAAP) $ 5,287
$ 5,234 Senior exchangeable
debentures(6) $ 2,086 $ 2,086 TripAdvisor debt facilities 361
353
Total Attributed Liberty Ventures Group
Debt $ 2,447 $ 2,439 Fair market
value adjustment (143 ) (5 )
Total Attributed Liberty Ventures
Group Debt (GAAP) $ 2,304 $
2,434 Total Liberty
Interactive Corporation Debt (GAAP) $ 7,591
$ 7,668 (1)
Includes $11 million of short-term marketable securities with an
original maturity greater than 90 days as of June 30, 2014. (2)
Includes $682 million and $646 million of short-term marketable
securities with an original maturity greater than 90 days as of
March 31, 2014 and June 30, 2014, respectively. (3) Includes $407
million and $122 million of marketable securities with an original
maturity greater than one year as of March 31, 2014 and June 30,
2014, respectively, which are reflected in investments in
available-for-sale securities in Liberty Ventures Group's condensed
attributed balance sheet. (4) Includes $745 million and $721
million of cash and liquid investments held at TripAdvisor as of
March 31, 2014 and June 30, 2014, respectively. (5) Face amount of
Senior Notes and Debentures with no reduction for the unamortized
discount. (6) 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 $21 million during the
second quarter. Cash flow from operations was partially offset by
stock repurchases, debt repayments in excess of borrowings, and
capital expenditures. Total debt attributed to the Liberty
Interactive Group decreased by $47 million, primarily due to
payments made on the QVC bank credit facility.
Total cash and liquid investments attributed to the Liberty
Ventures Group increased $18 million, primarily due to cash flow
from operations, partially offset by debt repayments, capital
expenditures and acquisitions at TripAdvisor during the quarter.
Included in the second quarter total cash and liquid investments
attributed to the Liberty Ventures Group is $721 million held at
TripAdvisor, which is comprised of $587 million of cash, $51
million of short-term marketable securities and $83 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 $8 million in the second quarter, primarily due to
repayments made on 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 August 5, 2014. The call can be accessed by
dialing (877) 719-9801 or (719) 325-4917 at least 10 minutes prior
to the start time. Replays of the conference call can be accessed
until 2:15 p.m. (E.D.T.) on August 12, 2014, by dialing (888)
203-1112 or (719) 457-0820 plus the passcode 3972738. 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 creation of the QVC Group 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
creation of the QVC Group tracking stock and the Liberty
TripAdvisor Holdings 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 condensed 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 June 30, 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) 2Q13 3Q13
4Q13 1Q14 2Q14
Liberty
Interactive Group QVC Revenue - US $ 1,312 $ 1,303 $
1,932 $ 1,305 $ 1,352 Revenue - International 649 644
809 681 662 Revenue - Total $ 1,961 $
1,947 $ 2,741 $ 1,986 $ 2,014 Adjusted
OIBDA - US 320 304 437 301 325 Adjusted OIBDA - International 114
104 158 111 114 Adjusted OIBDA -
Total $ 434 $ 408 $ 595 $ 412 $ 439
Operating income - US 207 191 323 186 203 Operating income -
International 78 68 118 74 81
Operating income - Total $ 285 $ 259 $ 441 $
260 $ 284 Gross margin - US 37.3 % 37.1 % 34.7 % 36.4
% 37.7 % Gross margin - International 37.8 % 37.4 % 37.8 % 37.4 %
38.3 %
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 June
30, 2013, September 30, 2013, December 31, 2013 and March 31, 2014
and June 30, 2014 respectively.
QUARTERLY
SUMMARY
(amounts in millions) 2Q13 3Q13 4Q13 1Q14 2Q14
Liberty
Interactive Group Adjusted OIBDA $ 455 $ 396 $ 618 $ 431 $ 452
Depreciation and amortization (158 ) (156 ) (165 ) (163 ) (166 )
Stock compensation expense (29 ) (22 ) (35 ) (24 ) (24 ) Impairment
of intangible assets — (19 ) (14 ) — (7 )
Operating Income $ 268 $
199 $ 404 $ 244
$ 255
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 June 30, 2013, September 30, 2013, December 31, 2013, March
31, 2014 and June 30, 2014, respectively. As there are no
material reconciling items between adjusted OIBDA and operating
income for the QVC China joint venture for the referenced periods,
no reconciliation has been provided.
QUARTERLY
SUMMARY
(amounts in millions) 2Q13 3Q13
4Q13 1Q14 2Q14
Liberty Interactive Group QVC Adjusted
OIBDA QVC US $ 320 $ 304 $ 437 $ 301 $ 325 QVC Japan 57
46 55 47 43 QVC Germany 35 37 58 39 40 QVC UK 26 26 47 27 33 QVC
Italy (4 ) (5 ) (2 ) (2 ) (2 ) QVC International adjusted OIBDA $
114 $ 104 $ 158 $ 111 $ 114
Consolidated QVC adjusted OIBDA 434 408 595 412 439
Depreciation and amortization (140 ) (139 ) (145 ) (144 ) (145 )
Stock compensation (9 ) (10 ) (9 ) (8 ) (10 )
Operating
Income $ 285 $ 259
$ 441 $ 260 $
284 eCommerce Businesses Adjusted OIBDA
26 (5 ) 25 23 19 Depreciation and amortization (18 ) (19 ) (18 )
(19 ) (21 ) Stock compensation (10 ) (3 ) (14 ) (5 ) (7 )
Impairment of intangible assets — (19 ) (14 ) — (7 )
Operating Income (Loss) $ (2 ) $
(46 ) $ (21 ) $ (1
) $ (16 ) LIBERTY
INTERACTIVE CORPORATION BALANCE SHEET INFORMATION
June 30, 2014 - (unaudited)
Attributed
Interactive
Ventures Inter-group Consolidated Group
Group Eliminations Liberty amounts in
millions
Assets Current assets: Cash and cash equivalents $
692 1,141 — 1,833 Trade and other receivables, net 785 188 — 973
Inventory, net 1,181 — — 1,181 Short-term marketable securities 11
646 — 657 Other current assets 252 20 (159 ) 113
Total
current assets 2,921 1,995 (159
) 4,757 Investments in available-for-sale securities
and other cost investments 4 1,271 — 1,275 Investments in
affiliates, accounted for using the equity method 363 873 — 1,236
Property and equipment, net 1,183 93 — 1,276 Intangible assets not
subject to amortization 8,389 5,399 — 13,788 Intangible assets
subject to amortization, net 1,396 871 — 2,267 Other assets, at
cost, net of accumulated amortization 90 33 — 123
Total assets $ 14,346 10,535
(159 ) 24,722 Liabilities and
Equity Current liabilities: Intergroup Payable (receivable) $
53 (53 ) — — Accounts payable 571 135 — 706 Accrued liabilities 681
123 — 804 Current portion of debt 39 1,009 — 1,048 Current deferred
tax liabilities — 1,137 (159 ) 978 Other current liabilities 199 63
— 262
Total current liabilities 1,543
2,414 (159 ) 3,798 Long-term
debt 5,195 1,425 — 6,620 Deferred income tax liabilities 1,100
1,615 — 2,715 Other liabilities 222 111 — 333
Total liabilities 8,060 5,565
(159 ) 13,466 Equity/Attributed net assets
(liabilities) 6,164 504 — 6,668 Noncontrolling interests in equity
of subsidiaries 122 4,466 — 4,588
Total
liabilities and equity $ 14,346 10,535
(159 ) 24,722 LIBERTY
INTERACTIVE CORPORATION STATEMENT OF OPERATIONS
INFORMATION Three months ended June 30, 2014 -
(unaudited) Attributed
Interactive Ventures
Consolidated Group Group Liberty
amounts in millions
Revenue: Net retail sales $ 2,495 —
2,495 Other revenue — 323 323 Total revenue
2,495 323 2,818
Operating costs and
expenses: Cost of sales 1,568 — 1,568 Operating, including
stock-based compensation 219 51 270 Selling, general and
administrative, including stock-based compensation 280 167 447
Impairment of long-lived assets 7 — 7 Depreciation and amortization
166 71 237 2,240 289 2,529
Operating income 255 34 289
Other income
(expense): Interest expense (79 ) (21 ) (100 ) Share of
earnings (losses) of affiliates, net 7 (3 ) 4 Realized and
unrealized gains (losses) on financial instruments, net 6 (47 ) (41
) Other, net (1 ) 4 3 (67 ) (67 ) (134 ) Earnings
(loss) before income taxes 188 (33 ) 155 Income tax benefit
(expense) (74 ) 25 (49 ) Net earnings (loss) 114 (8 ) 106
Less net earnings (loss) attributable to noncontrolling interests 9
20 29 Net earnings (loss) attributable to
Liberty stockholders $ 105 (28 ) 77
LINT Shares
Outstanding
Outstanding A and B shares as of July 31, 2014 (in millions)
482
Quarter
ended
LINTA and LINTB Basic and Diluted Shares (in
millions)
6/30/2014
Basic Weighted Average Shares Outstanding ("WASO") 486 Potentially
dilutive shares 10 Diluted WASO 496
LIBERTY
INTERACTIVE CORPORATION STATEMENT OF OPERATIONS
INFORMATION Three months ended June 30, 2013 -
(unaudited) Attributed
Interactive Ventures
Consolidated Group Group Liberty
amounts in millions
Revenue:
Net retail sales
$ 2,400 — 2,400 Other revenue — 247 247 Total
revenue 2,400 247 2,647
Operating
costs and expenses: Cost of sales 1,521 — 1,521 Operating,
including stock-based compensation 207 36 243 Selling, general and
administrative, including stock-based compensation 246 116 362
Depreciation and amortization 158 79 237 2,132
231 2,363 Operating income 268 16 284
Other income (expense): Interest expense (70 ) (20 ) (90 )
Share of earnings (losses) of affiliates, net 4 3 7 Realized and
unrealized gains (losses) on financial instruments, net 4 5 9
Other, net (15 ) (2 ) (17 ) (77 ) (14 ) (91 ) Earnings (loss)
before income taxes 191 2 193 Income tax benefit (expense) (69 ) 26
(43 ) Net earnings (loss) 122 28 150 Less net earnings
(loss) attributable to noncontrolling interests 13 17
30 Net earnings (loss) attributable to Liberty stockholders
$ 109 11 120
LINT Shares
Outstanding
Outstanding A and B shares as of July 31, 2013 (in millions) 520
Quarter
ended
LINTA and LINTB
Basic and Diluted Shares (in millions)
6/30/2013
Basic Weighted Average Shares Outstanding ("WASO") 523 Potentially
dilutive shares 8 Diluted WASO 531
LIBERTY
INTERACTIVE CORPORATION STATEMENT OF CASH FLOWS
INFORMATION Six months ended June 30, 2014 - (unaudited)
Attributed
Interactive Ventures
Consolidated Group Group
Liberty amounts in millions
CASH FLOWS FROM
OPERATING ACTIVITIES: Net earnings (loss) $ 234 (18 ) 216
Adjustments to reconcile net earnings to net cash provided by
operating activities: Depreciation and amortization 329 140 469
Stock-based compensation 48 37 85 Cash payments for stock based
compensation (5 ) (1 ) (6 ) Excess tax benefit from stock based
compensation (9 ) (15 ) (24 ) Share of (earnings) losses of
affiliates, net (28 ) 26 (2 ) Cash receipts from return on equity
investments 10 10 20 Realized and unrealized gains (losses) on
financial instruments, net (7 ) 73 66 Impairment of intangible
assets 7 — 7 Deferred income tax (benefit) expense (101 ) (1 ) (102
) Other, net 5 2 7 Intergroup tax allocation 105 (105 ) —
Intergroup tax payments (276 ) 276 — Changes in operating assets
and liabilities Current and other assets 308 (65 ) 243 Payables and
other current liabilities (50 ) 158 108
Net cash
provided (used) by operating activities 570
517 1,087 CASH FLOWS FROM
INVESTING ACTIVITIES: Cash proceeds from dispositions — 25 25
Investments in and loans to cost and equity investees (2 ) (29 )
(31 ) Capital expended for property and equipment (87 ) (42 ) (129
) Purchases of short term and other marketable securities (38 )
(438 ) (476 ) Sales of short term and other marketable securities
27 614 641 Acquisitions, net of cash acquired — (152 ) (152 ) Other
investing activities, net (10 ) 15 5
Net cash
provided (used) by investing activities (110 )
(7 ) (117 ) CASH FLOWS FROM
FINANCING ACTIVITIES: Borrowings of debt 1,895 5 1,900
Repayments of debt (1,739 ) (25 ) (1,764 ) Intergroup receipts
(payments), net 2 (2 ) — Repurchases of Liberty common stock (478 )
— (478 ) Minimum withholding taxes on net settlements of
stock-based compensation (14 ) (23 ) (37 ) Excess tax benefit from
stock-based compensation 9 15 24 Other financing activities, net
(36 ) — (36 )
Net cash provided (used) by financing
activities (361 ) (30 ) (391
) Effect of foreign currency rates on cash (5 ) 3
(2 ) Net increase (decrease) in cash and cash equivalents 94
483 577 Cash and cash equivalents at beginning of period 598
658 1,256
Cash and cash equivalents at end
period $ 692 1,141
1,833 LIBERTY INTERACTIVE
CORPORATION STATEMENT OF CASH FLOWS INFORMATION Six
months ended June 30, 2013 - (unaudited)
Attributed Interactive
Ventures Consolidated Group
Group Liberty CASH FLOWS FROM OPERATING
ACTIVITIES: amounts in millions Net earnings (loss) $ 229 (26 )
203 Adjustments to reconcile net earnings to net cash provided by
operating activities: Depreciation and amortization 311 156 467
Stock-based compensation 53 33 86 Cash payments for stock based
compensation (4 ) (1 ) (5 ) Excess tax benefit from stock-based
compensation (7 ) (5 ) (12 ) Share of losses (earnings) of
affiliates, net (20 ) 24 4 Cash receipts from return on equity
investments 7 8 15 Realized and unrealized gains (losses) on
financial instruments, net (17 ) 81 64 Gains (losses) on
dispositions of assets 1 1 2 Deferred income tax (benefit) expense
(86 ) (181 ) (267 ) Other, net 6 8 14 Intergroup tax allocation (33
) 33 — Intergroup tax payments 94 (94 ) — Changes in operating
assets and liabilities Current and other assets 324 (74 ) 250
Payables and other current liabilities (476 ) 102 (374 )
Net cash provided (used) by operating activities 382
65 447 CASH FLOWS FROM
INVESTING ACTIVITIES: Cash proceeds from dispositions — 1,136
1,136 Investments in and loans to cost and equity investees — (51 )
(51 ) Capital expended for property and equipment (111 ) (25 ) (136
) Purchases of short term and other marketable securities — (1,116
) (1,116 ) Sales of short term and other marketable securities 2
442 444 Acquisitions, net of cash acquired — (32 ) (32 ) Other
investing activities, net (7 ) (3 ) (10 )
Net cash provided
(used) by investing activities (116 ) 351
235 CASH FLOWS FROM FINANCING
ACTIVITIES: Borrowings of debt 2,246 848 3,094 Repayments of
debt (2,055 ) (2,342 ) (4,397 ) Shares repurchased by subsidiary —
(42 ) (42 ) Shares issued by subsidiary — 19 19 Excess tax benefit
from stock-based compensation 7 5 12 Minimum withholding taxes on
net settlements of stock-based compensation (7 ) (6 ) (13 )
Intergroup receipts (payments), net 2 (2 ) — Repurchases of Liberty
common stock (499 ) — (499 ) Other financing activities, net (39 )
— (39 )
Net cash provided (used) by financing
activities (345 ) (1,520 )
(1,865 ) Effect of foreign currency rates on
cash (29 ) — (29 ) Net increase (decrease) in cash and cash
equivalents (108 ) (1,104 ) (1,212 ) Cash and cash equivalents at
beginning of period 699 1,961 2,660
Cash
and cash equivalents at end period $ 591
857 1,448
Additional Information
Nothing in this press release shall constitute a solicitation to
buy or an offer to sell shares of Liberty's proposed QVC Group
tracking stock, Liberty Digital Commerce tracking stock or
Liberty's existing common stock. The offer and sale of shares of
the QVC Group or Liberty Digital Commerce 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 stock. 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 stock. 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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