| Investments In Affiliates Accounted For Using The Equity Method |
(9) Investments in Affiliates Accounted for Using the Equity Method
Liberty has various investments accounted for using the equity method. The following table includes Liberty's carrying amount and percentage ownership of the more significant investments in affiliates at December 31, 2015 and the carrying amount at December 31, 2014:
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December 31, 2015
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December 31, 2014
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Percentage
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Market
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Carrying
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Carrying
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ownership
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value
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amount
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amount
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dollars in millions
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QVC Group
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HSN, Inc. (2)
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38
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%
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$
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1,014
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$
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165
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328
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Other
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various
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N/A
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43
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47
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Total QVC Group
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208
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375
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Ventures Group
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Expedia (1)(2)
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16
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%
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$
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2,934
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927
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514
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FTD (3)
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37
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%
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$
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267
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267
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355
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Other (4)
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various
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N/A
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239
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389
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Total Ventures Group
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1,433
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1,258
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Consolidated Liberty
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$
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1,641
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1,633
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The following table presents Liberty's share of earnings (losses) of affiliates:
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Years ended December 31,
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2015
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2014
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2013
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amounts in millions
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QVC Group
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HSN, Inc.
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$
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64
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60
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61
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Other
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(9)
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(9)
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(13)
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Total QVC Group
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55
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51
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48
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Ventures Group
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Expedia, Inc. (1)
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118
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58
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31
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FTD, Inc.
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(83)
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—
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—
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Other (4)
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(150)
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(70)
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(46)
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Total Ventures Group
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(115)
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(12)
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(15)
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Consolidated Liberty
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$
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(60)
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39
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33
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(1)
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Liberty owns an approximate 16% equity interest and 52% voting interest in Expedia. Liberty has entered into governance arrangements pursuant to which Mr. Barry Diller, Chairman of the Board and Senior Executive Officer of Expedia, may vote its interests of Expedia, subject to certain limitations. Additionally, through our governance arrangements with Mr. Diller, we have the right to appoint and have appointed 20% of the members of Expedia's board of directors, which is currently comprised of 13 members. Therefore, we determined based on these arrangements that we have significant influence and have accounted for the investment as an equity method affiliate. The increase in our share of Expedia’s earnings during the year ended December 31, 2015 is primarily due to our share of a significant gain recognized by Expedia related to the sale of one of its subsidiaries.
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(2)
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During the years ended December 31, 2015, 2014 and 2013, Expedia, Inc. paid dividends aggregating $20 million, $15 million and $13 million, respectively, and HSN, Inc. (“HSNi”) paid dividends of $228 million, $22 million, and $16 million during the years ended December 31, 2015, 2014 and 2013, respectively, which were recorded as reductions to the investment balances. Dividends from HSNi during the year ended December 31, 2015 included a special dividend of $10 per share from which Liberty received approximately $200 million in cash.
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(3)
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FTD acquired Liberty’s formerly wholly-owned subsidiary, Provide, on December 31, 2014. In exchange for Provide, Liberty received approximately 10.2 million shares of FTD common stock representing approximately 35% of the combined company and approximately $145 million in cash. Subsequent to completion of the transaction, Liberty accounts for FTD as an equity-method affiliate based on the ownership level and board representation. The carrying value of Liberty’s investment in FTD was impaired to the fair value (based on the closing price (level 1)) as of December 31, 2015.
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(4)
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The Other category for the Ventures Group is comprised of investments in LendingTree, Interval Leisure Group, alternative energy investments and other investments. The alternative energy investments generally operate at a loss but provide favorable tax attributes recorded through the income tax (expense) benefit line item in the consolidated statements of operations. During the year ended December 31, 2015, Liberty recorded an impairment of approximately $98 million, based on a discounted cash flow valuation (level 3), related to one of its alternative energy investments which has underperformed operationally.
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Liberty recognized gains on dilution of investments in affiliates of $314 million during the year ended December 31, 2015, losses of $2 million during the year ended December 31, 2014 and gains of $1 million during the year ended December 31, 2013. The significant dilution gain in 2015 is due to an acquisition by Expedia that was executed through the issuance of stock. This diluted Liberty’s ownership percentage at a price greater than our cost basis.
Expedia, Inc.
Summarized unaudited financial information for Expedia, Inc. is as follows:
Expedia, Inc. Consolidated Balance Sheets
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December 31,
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December 31,
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2015
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2014
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amounts in millions
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Current assets
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$
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2,979
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2,924
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Property and equipment, net
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1,064
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553
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Goodwill
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7,993
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3,956
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Intangible assets
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2,794
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1,290
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Other assets
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674
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298
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Total assets
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$
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15,504
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9,021
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Current liabilities
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$
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5,926
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4,187
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Deferred income taxes
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474
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453
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Long-term debt
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3,201
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1,747
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Other liabilities
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973
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740
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Equity
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4,930
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1,894
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Total liabilities and equity
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$
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15,504
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9,021
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Expedia, Inc. Consolidated Statements of Operations
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Years Ending December 31,
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2015
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2014
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2013
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amounts in millions
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Revenue
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$
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6,672
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5,763
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4,771
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Cost of revenue
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(1,309)
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(1,179)
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(1,038)
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Gross profit
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5,363
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4,584
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3,733
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Selling, general and administrative expenses
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(4,785)
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(3,986)
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(3,295)
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Amortization
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(164)
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(80)
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(72)
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Operating income
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414
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518
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366
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Interest expense
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(126)
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(98)
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(87)
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Gain on sale of business
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509
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—
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—
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Other income (expense), net
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129
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45
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21
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Income tax (expense) benefit
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(203)
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(92)
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(84)
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Income (loss) from continuing operations
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723
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373
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216
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Net loss attributable to noncontrolling interests
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41
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25
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17
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Net earnings (loss) attributable to Expedia shareholders
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$
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764
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398
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233
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