Quarterly report pursuant to Section 13 or 15(d)

Information About Liberty's Operating Segments

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Information About Liberty's Operating Segments
 9 Months Ended
Sep. 30, 2014
Information About Liberty's Operating Segments  
Information About Liberty's Operating Segments

(13)   Information About Liberty's Operating Segments

Liberty, through its ownership interests in subsidiaries and other companies, is primarily engaged in the video and on-line commerce industries. Liberty identifies its reportable segments as (A) those consolidated subsidiaries that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA or total assets and (B) those equity method affiliates whose share of earnings represent 10% or more of Liberty's annual pre-tax earnings.

Liberty evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue, Adjusted OIBDA, gross margin, average sales price per unit, number of units shipped and revenue or sales per customer equivalent. In addition, Liberty reviews nonfinancial measures such as unique website visitors, conversion rates and active customers, as appropriate.

Liberty defines Adjusted OIBDA as revenue less cost of sales, operating expenses, and selling, general and administrative expenses excluding all stock-based compensation. Liberty believes this measure is an important indicator of the operational strength and performance of its businesses, including each business's 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. This measure of performance excludes depreciation and amortization, stock-based compensation and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Liberty generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

For the nine months ended September 30, 2014, Liberty has identified the following consolidated subsidiary as its reportable segment:

·

QVC - a consolidated subsidiary that markets and sells a wide variety of consumer products in the United States and several foreign countries, primarily by means of its televised shopping programs and via the Internet through its domestic and international websites and mobile applications.

Additionally, for presentation purposes, Liberty is providing financial information of the Digital Commerce businesses on an aggregated basis. The consolidated Digital Commerce businesses do not contribute significantly to the overall operations of Liberty on an individual basis; however, Liberty believes that on an aggregated basis they provide relevant information for users of these financial statements.  While these businesses may not meet the aggregation criteria under relevant accounting literature Liberty believes the information is relevant and helpful for a more complete understanding of the consolidated results.

·

Digital Commerce - the aggregation of certain consolidated subsidiaries that market and sell a wide variety of consumer products via the Internet.  Categories of consumer products include perishable and personal gift offerings (Provide), active lifestyle gear and clothing (Backcountry), fitness and health goods (Bodybuilding), digital invitations (Evite) and a drop-ship solutions company (CommerceHub). 

Due to the TripAdvisor Holdings Spin-Off during the period, TripAdvisor, Inc. is no longer considered a separate reportable segment.

Liberty's operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies.  The accounting policies of the segments are the same as those described in the Company's summary of significant accounting policies in the Annual Report on Form 10-K for the year ended December 31, 2013.

Performance Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  September 30,

 

 

 

2014

 

2013

 

 

    

 

 

    

Adjusted

    

 

    

Adjusted

 

 

 

Revenue

 

OIBDA

 

Revenue

 

OIBDA

 

 

 

amounts in millions

 

Interactive Group

 

 

 

 

 

 

 

 

 

 

QVC

 

$
2,020 

 
439 

 
1,947 

 
408 

 

Digital Commerce

 

 
310 

 
(2)

 
278 

 
(5)

 

Corporate and other

 

 

 —

 
(6)

 

 —

 
(6)

 

Total Interactive Group

 

 
2,330 

 
431 

 
2,225 

 
397 

 

Ventures Group

 

 

 

 

 

 

 

 

 

 

Corporate and other

 

 

 —

 
(6)

 

 —

 
(4)

 

Total Ventures Group

 

 

 —

 
(6)

 

 —

 
(4)

 

Consolidated Liberty

 

$
2,330 

 
425 

 
2,225 

 
393 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

 

2014

 

2013

 

 

    

 

 

    

Adjusted

    

 

    

Adjusted

 

 

 

Revenue

 

OIBDA

 

Revenue

 

OIBDA

 

 

 

amounts in millions

 

Interactive Group

 

 

 

 

 

 

 

 

 

 

QVC

 

$
6,020 

 
1,290 

 
5,882 

 
1,246 

 

Digital Commerce

 

 
1,227 

 
53 

 
1,144 

 
73 

 

Corporate and other

 

 

 —

 
(16)

 

 —

 
(17)

 

Total Interactive Group

 

 
7,247 

 
1,327 

 
7,026 

 
1,302 

 

Ventures Group

 

 

 

 

 

 

 

 

 

 

Corporate and other

 

 

 —

 
(12)

 

 —

 
(10)

 

Total Ventures Group

 

 

 —

 
(12)

 

 —

 
(10)

 

Consolidated Liberty

 

$
7,247 

 
1,315 

 
7,026 

 
1,292 

 

 

Other Information

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2014

 

 

    

Total

    

Investments

    

Capital

 

 

 

assets

 

In affiliates

 

expenditures

 

 

 

amounts in millions

 

Interactive Group

 

 

 

 

 

 

 

 

QVC

 

$
12,587 

 
49 

 
99 

 

Digital Commerce

 

 
1,149 

 

 —

 
43 

 

Corporate and other

 

 
557 

 
323 

 

—

 

Total Interactive Group

 

 
14,293 

 
372 

 
142 

 

Ventures Group

 

 

 

 

 

 

 

 

Corporate and other

 

 
3,583 

 
899 

 

—

 

Total Ventures Group

 

 
3,583 

 
899 

 

 —

 

Inter-group eliminations

 

 
(169)

 

 —

 

—

 

Consolidated Liberty

 

$
17,707 

 
1,271 

 
142 

 

 

The following table provides a reconciliation of segment Adjusted OIBDA to earnings (loss) before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

    

2014

    

2013

    

2014

    

2013

 

 

 

amounts in millions

 

Consolidated segment Adjusted OIBDA

 

$
425 

 
393 

 
1,315 

 
1,292 

 

Stock-based compensation

 

 
(20)

 
(23)

 
(71)

 
(80)

 

Impairment of intangible assets

 

 

 —

 
(19)

 
(7)

 
(19)

 

Depreciation and amortization

 

 
(166)

 
(154)

 
(493)

 
(463)

 

Interest expense

 

 
(99)

 
(89)

 
(292)

 
(295)

 

Share of earnings (loss) of affiliates, net

 

 
36 

 
29 

 
38 

 
25 

 

Realized and unrealized gains (losses) on financial instruments, net

 

 
18 

 
15 

 
(48)

 
(49)

 

Other, net

 

 
(38)

 
5 

 
(28)

 
(36)

 

Earnings (loss) before income taxes

 

$
156 

 
157 

 
414 

 
375