Liberty Interactive Corporation
Condensed Pro Forma Consolidated Financial Statements
(unaudited)
On March 9, 2018, Liberty Interactive Corporation (“Liberty” or the “Company”) completed the Agreement and Plan of Reorganization (as amended, the reorganization agreement and the transactions contemplated thereby) with General Communication, Inc. (“GCI”), an Alaska corporation, and Liberty Interactive LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Liberty Interactive (“LI LLC”). Pursuant to the reorganization agreement, GCI effected a restatement of its articles of incorporation (which resulted in GCI being renamed GCI Liberty, Inc. (“GCI Liberty”)) and a reclassification and auto conversion of its common stock. Following these events, Liberty Interactive acquired GCI (renamed “GCI Liberty”) through a reorganization in which certain Liberty Interactive interests, assets and liabilities, were contributed to GCI in exchange for a controlling interest in GCI. Liberty Interactive and LI LLC contributed to GCI Liberty its entire equity interest in Liberty Broadband Corporation, Charter Communications, Inc., and LendingTree, Inc., the Evite, Inc. operating business and certain other assets and liabilities (collectively, “HoldCo”), in exchange for (a) the issuance to LI LLC of (i) a number of shares of GCI Liberty Class A Common Stock and a number of shares of GCI Liberty Class B Common Stock equal to the number of outstanding shares of Series A Liberty Ventures common stock and Series B Liberty Ventures common stock outstanding on March 9, 2018, respectively, and (ii) cash and (b) the assumption of certain liabilities by GCI Liberty.
Following the contribution and acquisition of GCI Liberty, Liberty Interactive effected a tax-free separation of its controlling interest in the combined company, GCI Liberty, to the holders of Liberty Ventures common stock in full redemption of all outstanding shares of such stock (the “HoldCo Split-Off”), in which each outstanding share of Series A Liberty Ventures common stock was redeemed for one share of GCI Liberty Class A common stock and each outstanding share of Series B Liberty Ventures common stock was redeemed for one share of GCI Liberty Class B common stock.
The following unaudited condensed pro forma consolidated financial statements have been prepared giving effect to the HoldCo Split-Off as if it occurred as of December 31, 2017 for the condensed pro forma consolidated balance sheets and January 1, 2017 for the condensed pro forma consolidated statements of operation. The unaudited condensed pro forma consolidated financial statements do not purport to represent what Liberty’s financial position actually would have been had the HoldCo Split-Off occurred on the dates indicated or to project Liberty’s operating results for any future period. The unaudited condensed pro forma consolidated financial statements should be read in conjunction with the publicly available information of Liberty, including the Form 10-K, as filed on March 1, 2018 with the Securities and Exchange Commission (the “SEC”).
Liberty Interactive Corporation
Condensed Pro Forma Consolidated Balance Sheet
December 31, 2017
(unaudited)
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Liberty |
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Less: |
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Liberty |
| |
|
|
|
Interactive |
|
HoldCo |
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Interactive |
| |
|
|
|
Historical (1) |
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Historical (2) |
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Pro Forma |
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|
amounts in millions |
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Assets |
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Current assets: |
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|
|
|
|
|
| |
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Cash and cash equivalents |
|
$ |
903 |
|
573 |
|
330 |
|
|
Trade and other receivables, net |
|
1,726 |
|
7 |
|
1,719 |
| |
|
Inventory, net |
|
1,411 |
|
— |
|
1,411 |
| |
|
Other current assets |
|
125 |
|
1 |
|
124 |
| |
|
Total current assets |
|
4,165 |
|
581 |
|
3,584 |
| |
|
Investments in available-for-sale securities and other cost investments |
|
2,363 |
|
1,803 |
|
560 |
| |
|
Investments in affiliates, accounted for using the equity method |
|
309 |
|
115 |
|
194 |
| |
|
Investment in Liberty Broadband measured at fair value |
|
3,635 |
|
3,635 |
|
— |
| |
|
Property and equipment, net |
|
1,341 |
|
— |
|
1,341 |
| |
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Goodwill |
|
7,082 |
|
26 |
|
7,056 |
| |
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Trademarks |
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3,929 |
|
4 |
|
3,925 |
| |
|
Intangible assets subject to amortization, net |
|
1,248 |
|
4 |
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1,244 |
| |
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Other assets, at cost, net of accumulated amortization |
|
50 |
|
4 |
|
46 |
| |
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Total assets |
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$ |
24,122 |
|
6,172 |
|
17,950 |
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|
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Liabilities and Equity |
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Current liabilities: |
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| |
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Accounts payable |
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$ |
1,151 |
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— |
|
1,151 |
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Accrued liabilities |
|
1,125 |
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8 |
|
1,117 |
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Current portion of debt |
|
996 |
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— |
|
996 |
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Other current liabilities |
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169 |
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3 |
|
166 |
| |
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Total current liabilities |
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3,441 |
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11 |
|
3,430 |
| |
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Long-term debt |
|
7,553 |
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— |
|
7,553 |
| |
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Deferred income tax liabilities |
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2,803 |
|
639 |
|
2,164 |
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Other liabilities |
|
242 |
|
96 |
|
146 |
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Total liabilities |
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14,039 |
|
746 |
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13,293 |
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Equity |
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| |
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Combined equity: |
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|
|
| |
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Series A QVC Group common stock |
|
5 |
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— |
|
5 |
| |
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Series B QVC Group common stock |
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— |
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— |
|
— |
| |
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Series A Liberty Ventures common stock |
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1 |
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1 |
|
— |
| |
|
Series B Liberty Ventures Group common stock |
|
— |
|
— |
|
— |
| |
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APIC |
|
1,043 |
|
1,043 |
|
— |
| |
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AOCI, net of tax |
|
(133 |
) |
— |
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(133 |
) | |
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Retained earnings (accumulated deficit) |
|
9,068 |
|
4,379 |
|
4,689 |
| |
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Total combined equity |
|
9,984 |
|
5,423 |
|
4,561 |
| |
|
Noncontrolling interests in equity of combined company |
|
99 |
|
3 |
|
96 |
| |
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Total equity |
|
10,083 |
|
5,426 |
|
4,657 |
| |
|
Total liabilities and equity |
|
$ |
24,122 |
|
6,172 |
|
17,950 |
|
Liberty Interactive Corporation
Condensed Pro Forma Consolidated Statements of Operations
December 31, 2017
(unaudited)
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|
|
Liberty |
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Less: |
|
Liberty |
| |
|
|
|
Interactive |
|
HoldCo |
|
Interactive |
| |
|
|
|
Historical (1) |
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Historical (2) |
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Pro Forma |
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amounts in millions, except per share amounts |
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Total revenue, net |
|
$ |
10,404 |
|
24 |
|
10,380 |
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|
Operating costs and expenses: |
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|
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|
|
|
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Cost of retail sales (exclusive of depreciation shown separately below) |
|
6,789 |
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— |
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6,789 |
| |
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Operating expense |
|
659 |
|
11 |
|
648 |
| |
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Selling, general and administrative, including stock-based compensation |
|
1,153 |
|
65 |
|
1,088 |
| |
|
Acquisition and restructuring charges |
|
35 |
|
— |
|
35 |
| |
|
Depreciation and amortization |
|
725 |
|
3 |
|
722 |
| |
|
|
|
9,361 |
|
79 |
|
9,282 |
| |
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Operating income |
|
1,043 |
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(55 |
) |
1,098 |
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|
Other income (expense): |
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|
|
|
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|
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Interest expense |
|
(355 |
) |
— |
|
(355 |
) | |
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Share of earnings (losses) of affiliates, net |
|
(200 |
) |
7 |
|
(207 |
) | |
|
Realized and unrealized gains (losses) on financial instruments, net |
|
618 |
|
637 |
|
(19 |
) | |
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Gains (losses) on transactions, net |
|
410 |
|
— |
|
410 |
| |
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Other, net |
|
7 |
|
2 |
|
5 |
| |
|
|
|
480 |
|
646 |
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(166 |
) | |
|
Earnings (loss) from continuing operations before income taxes |
|
1,523 |
|
591 |
|
932 |
| |
|
Income tax (expense) benefit |
|
964 |
|
136 |
|
828 |
| |
|
Net earnings (loss) |
|
2,487 |
|
727 |
|
1,760 |
| |
|
Less net earnings (loss) attributable to the noncontrolling interests |
|
46 |
|
— |
|
46 |
| |
|
Net earnings (loss) attributable to Liberty Interactive Corporation shareholders |
|
$ |
2,441 |
|
727 |
|
1,714 |
|
|
Net earnings (loss) attributable to Liberty Interactive Corporation shareholders: |
|
|
|
|
|
|
| |
|
QVC Group common stock |
|
1,208 |
|
(506 |
) |
1,714 |
| |
|
Liberty Ventures common stock |
|
1,233 |
|
1,233 |
|
— |
| |
|
|
|
$ |
2,441 |
|
727 |
|
1,714 |
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|
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|
|
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Pro Forma basic net earnings (loss) attributable to Liberty stockholders per common share |
|
|
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| |
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Series A and Series B QVC Group |
|
2.71 |
|
|
|
3.85 |
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Series A and Series B Liberty Ventures |
|
14.34 |
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|
NA |
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Pro Forma diluted net earnings (loss) attributable to Liberty stockholders per common share |
|
|
|
|
|
|
| |
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Series A and Series B QVC Group |
|
2.70 |
|
|
|
3.83 |
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Series A and Series B Liberty Ventures |
|
14.17 |
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|
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NA |
| |
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| |
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QVC Group Common Stock |
|
|
|
|
|
|
| |
|
Basic |
|
445 |
|
|
|
445 |
| |
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Diluted |
|
448 |
|
|
|
448 |
| |
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| |
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Liberty Ventures Common Stock |
|
|
|
|
|
|
| |
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Basic |
|
86 |
|
|
|
NA |
| |
|
Diluted |
|
87 |
|
|
|
NA |
| |
(1) Represents the historical financial position and results of operations of Liberty. Such amounts were derived from the historical consolidated financial statements of Liberty Interactive Corporation as filed on Form 10-K on March 1, 2018 with the SEC.
(2) Represents the historical financial position and results of operations of HoldCo. Such amounts were derived from the unaudited historical combined financial statements of HoldCo.