Unaudited Attributed Financial Information for Tracking Stock Groups
The following tables present our assets and liabilities as of March 31, 2016, revenue and expenses for the three months ended March 31, 2016 and 2015 and cash flows for the three months ended March 31, 2016 and 2015. The tables further present our assets, liabilities, revenue, expenses and cash flows that are attributed to the QVC Group and the Ventures Group, respectively. The financial information in this Exhibit should be read in conjunction with our unaudited condensed consolidated financial statements for the three months ended March 31, 2016 included in this Quarterly Report on Form 10-Q.
As discussed in note 3 of the accompanying condensed consolidated financial statements, Liberty sold Backcountry.com, Inc. (“Backcountry) on June 30, 2015. Backcountry is not presented as a discontinued operation as the sale did not represent a strategic shift that had a major effect on Liberty’s operations and financial results.
As discussed in note 2 of the accompanying condensed consolidated financial statements, on October 1, 2015, Liberty acquired all of the outstanding shares of zulily, inc. (“zulily”) (now known as zulily, llc). zulily is an online retailer offering customers a fun and entertaining shopping experience with a fresh selection of new product styles launched each day. zulily is attributed to the QVC Group.
The QVC Group common stock is intended to reflect the separate performance of our QVC Group which is comprised of our consolidated subsidiaries, QVC, Inc. (“QVC”) and zulily, and our approximate 38% interest in HSN, Inc. The Liberty Ventures common stock is intended to reflect the separate performance of our Ventures Group which is comprised primarily of our interests in Bodybuilding.com, LLC, CommerceHub, Evite, Inc. and Backcountry (through June 30, 2015) (collectively, the “Digital Commerce” businesses), interests in equity method investments of Expedia, Inc., Interval Leisure Group, Inc., FTD Companies, Inc. (“FTD”) and LendingTree, Inc. and available-for-sale securities Time Warner Inc. and Time Warner Cable Inc.
Notwithstanding the following attribution of assets, liabilities, revenue, expenses and cash flows to the QVC Group and the Ventures Group, our tracking stock structure does not affect the ownership or the respective legal title to our assets or responsibility for our liabilities. We and our subsidiaries are each responsible for our respective liabilities. Holders of QVC Group common stock and Liberty Ventures common stock are holders of our common stock and are subject to risks associated with an investment in our company and all of our businesses, assets and liabilities. The issuance of QVC Group common stock and Liberty Ventures common stock does not affect the rights of our creditors or creditors of our subsidiaries.
SUMMARY ATTRIBUTED FINANCIAL DATA
QVC Group
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016 |
|
December 31, 2015 |
|
|
|
|
|
amounts in millions |
|
|||
|
Summary balance sheet data: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
440 |
|
426 |
|
|
Trade and other receivables, net |
|
$ |
1,040 |
|
1,379 |
|
|
Inventory |
|
$ |
1,032 |
|
945 |
|
|
Investments in affiliates, accounted for using the equity method |
|
$ |
223 |
|
208 |
|
|
Total assets |
|
$ |
14,825 |
|
15,141 |
|
|
Long-term debt, including current portion |
|
$ |
6,615 |
|
6,535 |
|
|
Deferred income tax liabilities |
|
$ |
1,290 |
|
1,359 |
|
|
Net assets attributable to QVC Group common stock shareholders |
|
$ |
5,098 |
|
5,195 |
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|||
|
|
March 31, |
|
|||
|
|
2016 |
|
2015 |
|
|
|
|
amounts in millions |
|
|||
|
Summary operations data: |
|
|
|
|
|
|
Revenue |
$ |
2,367 |
|
1,938 |
|
|
Cost of sales |
|
1,535 |
|
1,221 |
|
|
Operating expenses |
|
153 |
|
138 |
|
|
Selling, general and administrative expenses (1) |
|
264 |
|
190 |
|
|
Depreciation and amortization |
|
209 |
|
152 |
|
|
Operating income (loss) |
|
206 |
|
237 |
|
|
Interest expense |
|
(76) |
|
(75) |
|
|
Share of earnings (losses) of affiliates, net |
|
21 |
|
24 |
|
|
Realized and unrealized gains (losses) on financial instruments, net |
|
(1) |
|
(10) |
|
|
Other income (expense), net |
|
5 |
|
8 |
|
|
Income tax benefit (expense) |
|
(57) |
|
(24) |
|
|
Net earnings (loss) |
|
98 |
|
160 |
|
|
Less net earnings (loss) attributable to noncontrolling interests |
|
8 |
|
9 |
|
|
Net earnings (loss) attributable to Liberty Interactive Corporation shareholders |
$ |
90 |
|
151 |
|
|
(1) |
|
2
SUMMARY ATTRIBUTED FINANCIAL DATA (Continued)
Ventures Group
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016 |
|
December 31, 2015 |
|
|
|
|
|
amounts in millions |
|
|||
|
Summary balance sheet data: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,303 |
|
2,023 |
|
|
Investments in available-for-sale securities and other cost investments |
|
$ |
1,478 |
|
1,349 |
|
|
Investments in affiliates, accounted for using the equity method |
|
$ |
1,428 |
|
1,433 |
|
|
Total assets |
|
$ |
6,133 |
|
6,039 |
|
|
Long-term debt, including current portion |
|
$ |
2,261 |
|
2,172 |
|
|
Deferred income tax liabilities |
|
$ |
2,164 |
|
2,143 |
|
|
Net assets attributable to Liberty Ventures common stock shareholders |
|
$ |
1,568 |
|
1,592 |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|||
|
|
|
March 31, |
|
|||
|
|
|
2016 |
|
2015 |
|
|
|
|
|
amounts in millions |
|
|||
|
Summary operations data: |
|
|
|
|
|
|
|
Revenue |
|
$ |
143 |
|
276 |
|
|
Cost of sales |
|
|
91 |
|
194 |
|
|
Operating |
|
|
17 |
|
22 |
|
|
Selling, general and administrative expenses (1) |
|
|
44 |
|
45 |
|
|
Depreciation and amortization |
|
|
8 |
|
16 |
|
|
Operating income (loss) |
|
|
(17) |
|
(1) |
|
|
Interest expense |
|
|
(17) |
|
(20) |
|
|
Share of earnings (losses) of affiliates, net |
|
|
(42) |
|
(21) |
|
|
Realized and unrealized gains (losses) on financial instruments, net |
|
|
(6) |
|
6 |
|
|
Other, net |
|
|
29 |
|
7 |
|
|
Income tax benefit (expense) |
|
|
26 |
|
21 |
|
|
Net earnings (loss) attributable to Liberty Interactive Corporation shareholders |
|
$ |
(27) |
|
(8) |
|
|
(1) |
Includes stock-based compensation of $13 million and $3 million for the three months ended March 31, 2016 and 2015, respectively. |
3
March 31, 2016
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributed (note 1) |
|
|
|
|||
|
|
|
QVC |
|
Ventures |
|
Consolidated |
|
|
|
|
|
Group |
|
Group |
|
Liberty |
|
|
|
|
|
amounts in millions |
|
|||||
|
Assets |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
440 |
|
2,303 |
|
2,743 |
|
|
Trade and other receivables, net |
|
|
1,040 |
|
54 |
|
1,094 |
|
|
Inventory, net |
|
|
1,032 |
|
52 |
|
1,084 |
|
|
Short-term marketable securities |
|
|
— |
|
601 |
|
601 |
|
|
Other current assets |
|
|
79 |
|
8 |
|
87 |
|
|
Total current assets |
|
|
2,591 |
|
3,018 |
|
5,609 |
|
|
Investments in available-for-sale securities and other cost investments (note 2) |
|
|
4 |
|
1,478 |
|
1,482 |
|
|
Investments in affiliates, accounted for using the equity method |
|
|
223 |
|
1,428 |
|
1,651 |
|
|
Property and equipment, net |
|
|
1,164 |
|
37 |
|
1,201 |
|
|
Intangible assets not subject to amortization |
|
|
9,391 |
|
129 |
|
9,520 |
|
|
Intangible assets subject to amortization, net |
|
|
1,419 |
|
38 |
|
1,457 |
|
|
Other assets, at cost, net of accumulated amortization |
|
|
33 |
|
5 |
|
38 |
|
|
Total assets |
|
$ |
14,825 |
|
6,133 |
|
20,958 |
|
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Intergroup payable (receivable) (note 7) |
|
$ |
45 |
|
(45) |
|
— |
|
|
Accounts payable |
|
|
642 |
|
25 |
|
667 |
|
|
Accrued liabilities |
|
|
576 |
|
47 |
|
623 |
|
|
Current portion of debt (note 4) |
|
|
358 |
|
2,247 |
|
2,605 |
|
|
Other current liabilities |
|
|
184 |
|
111 |
|
295 |
|
|
Total current liabilities |
|
|
1,805 |
|
2,385 |
|
4,190 |
|
|
Long-term debt (note 4) |
|
|
6,257 |
|
14 |
|
6,271 |
|
|
Deferred income tax liabilities |
|
|
1,290 |
|
2,164 |
|
3,454 |
|
|
Other liabilities |
|
|
283 |
|
12 |
|
295 |
|
|
Total liabilities |
|
|
9,635 |
|
4,575 |
|
14,210 |
|
|
Equity/Attributed net assets (liabilities) |
|
|
5,098 |
|
1,568 |
|
6,666 |
|
|
Noncontrolling interests in equity of subsidiaries |
|
|
92 |
|
(10) |
|
82 |
|
|
Total liabilities and equity |
|
$ |
14,825 |
|
6,133 |
|
20,958 |
|
|
|
|
|
|
|
|
|
|
|
4
STATEMENT OF OPERATIONS INFORMATION
Three months ended March 31, 2016
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributed (note 1) |
|
|
|
|||
|
|
|
QVC |
|
Ventures |
|
Consolidated |
|
|
|
|
|
Group |
|
Group |
|
Liberty |
|
|
|
|
|
amounts in millions |
|
|||||
|
Total revenue, net |
|
$ |
2,367 |
|
143 |
|
2,510 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
1,535 |
|
91 |
|
1,626 |
|
|
Operating |
|
|
153 |
|
17 |
|
170 |
|
|
Selling, general and administrative, including stock-based compensation (note 5) |
|
|
264 |
|
44 |
|
308 |
|
|
Depreciation and amortization |
|
|
209 |
|
8 |
|
217 |
|
|
|
|
|
2,161 |
|
160 |
|
2,321 |
|
|
Operating income (loss) |
|
|
206 |
|
(17) |
|
189 |
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(76) |
|
(17) |
|
(93) |
|
|
Share of earnings (losses) of affiliates, net (note 3) |
|
|
21 |
|
(42) |
|
(21) |
|
|
Realized and unrealized gains (losses) on financial instruments, net |
|
|
(1) |
|
(6) |
|
(7) |
|
|
Other, net |
|
|
5 |
|
29 |
|
34 |
|
|
|
|
|
(51) |
|
(36) |
|
(87) |
|
|
Earnings (loss) before income taxes |
|
|
155 |
|
(53) |
|
102 |
|
|
Income tax benefit (expense) |
|
|
(57) |
|
26 |
|
(31) |
|
|
Net earnings (loss) |
|
|
98 |
|
(27) |
|
71 |
|
|
Less net earnings (loss) attributable to noncontrolling interests |
|
|
8 |
|
— |
|
8 |
|
|
Net earnings (loss) attributable to Liberty stockholders |
|
$ |
90 |
|
(27) |
|
63 |
|
|
|
|
|
|
|
|
|
|
|
5
STATEMENT OF OPERATIONS INFORMATION
Three months ended March 31, 2015
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributed (note 1) |
|
|
|
|||
|
|
|
QVC |
|
Ventures |
|
Consolidated |
|
|
|
|
|
Group |
|
Group |
|
Liberty |
|
|
|
|
|
amounts in millions |
|
|||||
|
Total revenue, net |
|
$ |
1,938 |
|
276 |
|
2,214 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
1,221 |
|
194 |
|
1,415 |
|
|
Operating |
|
|
138 |
|
22 |
|
160 |
|
|
Selling, general and administrative, including stock-based compensation (note 5) |
|
|
190 |
|
45 |
|
235 |
|
|
Depreciation and amortization |
|
|
152 |
|
16 |
|
168 |
|
|
|
|
|
1,701 |
|
277 |
|
1,978 |
|
|
Operating income (loss) |
|
|
237 |
|
(1) |
|
236 |
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(75) |
|
(20) |
|
(95) |
|
|
Share of earnings (losses) of affiliates, net (note 3) |
|
|
24 |
|
(21) |
|
3 |
|
|
Realized and unrealized gains (losses) on financial instruments, net |
|
|
(10) |
|
6 |
|
(4) |
|
|
Other, net |
|
|
8 |
|
7 |
|
15 |
|
|
|
|
|
(53) |
|
(28) |
|
(81) |
|
|
Earnings (loss) before income taxes |
|
|
184 |
|
(29) |
|
155 |
|
|
Income tax benefit (expense) |
|
|
(24) |
|
21 |
|
(3) |
|
|
Net earnings (loss) |
|
|
160 |
|
(8) |
|
152 |
|
|
Less net earnings (loss) attributable to noncontrolling interests |
|
|
9 |
|
— |
|
9 |
|
|
Net earnings (loss) attributable to Liberty stockholders |
|
$ |
151 |
|
(8) |
|
143 |
|
6
STATEMENT OF CASH FLOWS INFORMATION
Three months ended March 31, 2016
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributed (note 1) |
|
|
|
|||
|
|
|
QVC |
|
Ventures |
|
Consolidated |
|
|
|
|
|
Group |
|
Group |
|
Liberty |
|
|
|
|
|
amounts in millions |
|
|||||
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
98 |
|
(27) |
|
71 |
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
209 |
|
8 |
|
217 |
|
|
Stock-based compensation |
|
|
18 |
|
13 |
|
31 |
|
|
Cash payments for stock based compensation |
|
|
— |
|
(10) |
|
(10) |
|
|
Excess tax benefit from stock based compensation |
|
|
(5) |
|
— |
|
(5) |
|
|
Share of (earnings) losses of affiliates, net |
|
|
(21) |
|
42 |
|
21 |
|
|
Cash receipts from return on equity investments |
|
|
6 |
|
9 |
|
15 |
|
|
Realized and unrealized gains (losses) on financial instruments, net |
|
|
1 |
|
6 |
|
7 |
|
|
Deferred income tax (benefit) expense |
|
|
(30) |
|
24 |
|
(6) |
|
|
Other, net |
|
|
(2) |
|
(25) |
|
(27) |
|
|
Intergroup tax allocation |
|
|
49 |
|
(49) |
|
— |
|
|
Intergroup tax (payments) receipts |
|
|
(54) |
|
54 |
|
— |
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
|
Current and other assets |
|
|
268 |
|
13 |
|
281 |
|
|
Payables and other current liabilities |
|
|
(297) |
|
(3) |
|
(300) |
|
|
Net cash provided (used) by operating activities |
|
|
240 |
|
55 |
|
295 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Cash proceeds from dispositions |
|
|
— |
|
9 |
|
9 |
|
|
Investments in and loans to cost and equity investees |
|
|
— |
|
(22) |
|
(22) |
|
|
Capital expended for property and equipment |
|
|
(43) |
|
(8) |
|
(51) |
|
|
Purchases of short term and other marketable securities |
|
|
— |
|
(116) |
|
(116) |
|
|
Sales of short term and other marketable securities |
|
|
12 |
|
413 |
|
425 |
|
|
Other investing activities, net |
|
|
(13) |
|
1 |
|
(12) |
|
|
Net cash provided (used) by investing activities |
|
|
(44) |
|
277 |
|
233 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Borrowings of debt |
|
|
515 |
|
108 |
|
623 |
|
|
Repayments of debt |
|
|
(438) |
|
(160) |
|
(598) |
|
|
Repurchases of QVC Group common stock |
|
|
(238) |
|
— |
|
(238) |
|
|
Minimum withholding taxes on net settlements of stock-based compensation |
|
|
(7) |
|
(1) |
|
(8) |
|
|
Excess tax benefit from stock-based compensation |
|
|
5 |
|
— |
|
5 |
|
|
Other financing activities, net |
|
|
(6) |
|
1 |
|
(5) |
|
|
Net cash provided (used) by financing activities |
|
|
(169) |
|
(52) |
|
(221) |
|
|
Effect of foreign currency rates on cash |
|
|
(13) |
|
— |
|
(13) |
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
14 |
|
280 |
|
294 |
|
|
Cash and cash equivalents at beginning of period |
|
|
426 |
|
2,023 |
|
2,449 |
|
|
Cash and cash equivalents at end period |
|
$ |
440 |
|
2,303 |
|
2,743 |
|
|
|
|
|
|
|
|
|
|
|
7
STATEMENT OF CASH FLOWS INFORMATION
Three months ended March 31, 2015
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributed (note 1) |
|
|
|
|||
|
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QVC |
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Ventures |
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Consolidated |
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Group |
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Group |
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Liberty |
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amounts in millions |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
160 |
|
(8) |
|
152 |
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
152 |
|
16 |
|
168 |
|
|
Stock-based compensation |
|
|
12 |
|
3 |
|
15 |
|
|
Cash payments for stock based compensation |
|
|
— |
|
(2) |
|
(2) |
|
|
Excess tax benefit from stock-based compensation |
|
|
(13) |
|
— |
|
(13) |
|
|
Share of losses (earnings) of affiliates, net |
|
|
(24) |
|
21 |
|
(3) |
|
|
Cash receipts from return on equity investments |
|
|
7 |
|
6 |
|
13 |
|
|
Realized and unrealized gains (losses) on financial instruments, net |
|
|
10 |
|
(6) |
|
4 |
|
|
Deferred income tax (benefit) expense |
|
|
(79) |
|
25 |
|
(54) |
|
|
Other, net |
|
|
(9) |
|
1 |
|
(8) |
|
|
Intergroup tax allocation |
|
|
47 |
|
(47) |
|
— |
|
|
Intergroup tax (payments) receipts |
|
|
(6) |
|
6 |
|
— |
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
|
Current and other assets |
|
|
238 |
|
20 |
|
258 |
|
|
Payables and other current liabilities |
|
|
(268) |
|
(42) |
|
(310) |
|
|
Net cash provided (used) by operating activities |
|
|
227 |
|
(7) |
|
220 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions |
|
|
— |
|
(20) |
|
(20) |
|
|
Investments in and loans to cost and equity investees |
|
|
(1) |
|
(44) |
|
(45) |
|
|
Cash receipts from returns of equity investments |
|
|
200 |
|
— |
|
200 |
|
|
Capital expended for property and equipment |
|
|
(31) |
|
(13) |
|
(44) |
|
|
Purchases of short term and other marketable securities |
|
|
(54) |
|
(233) |
|
(287) |
|
|
Sales of short term and other marketable securities |
|
|
66 |
|
247 |
|
313 |
|
|
Other investing activities, net |
|
|
(44) |
|
— |
|
(44) |
|
|
Net cash provided (used) by investing activities |
|
|
136 |
|
(63) |
|
73 |
|
|
|
|
|
|
|
|
|
|
|
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CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
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Borrowings of debt |
|
|
351 |
|
180 |
|
531 |
|
|
Repayments of debt |
|
|
(466) |
|
(176) |
|
(642) |
|
|
Repurchases of QVC Group common stock |
|
|
(123) |
|
— |
|
(123) |
|
|
Minimum withholding taxes on net settlements of stock-based compensation |
|
|
(12) |
|
1 |
|
(11) |
|
|
Excess tax benefit from stock-based compensation |
|
|
13 |
|
— |
|
13 |
|
|
Other financing activities, net |
|
|
(8) |
|
1 |
|
(7) |
|
|
Net cash provided (used) by financing activities |
|
|
(245) |
|
6 |
|
(239) |
|
|
Effect of foreign currency rates on cash |
|
|
(10) |
|
— |
|
(10) |
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
108 |
|
(64) |
|
44 |
|
|
Cash and cash equivalents at beginning of period |
|
|
422 |
|
1,884 |
|
2,306 |
|
|
Cash and cash equivalents at end period |
|
$ |
530 |
|
1,820 |
|
2,350 |
|
8
Notes to Attributed Financial Information
(unaudited)
|
(1) |
At March 31, 2016, the QVC Group is comprised of our consolidated subsidiaries, QVC and zulily, and our approximate 38% interest in HSN, Inc., accounted for under the equity method. Accordingly, the accompanying attributed financial information for the QVC Group includes the foregoing investment, as well as the assets, liabilities, revenue, expenses and cash flows of QVC and zulily. We have also attributed certain of our debt obligations (and related interest expense) to the QVC Group based upon a number of factors, including the cash flow available to the QVC Group and its ability to pay debt service and our assessment of the optimal capitalization for the QVC Group. The specific debt obligations attributed to each of the QVC Group and the Ventures Group are described in note 4 below. In addition, we have allocated certain corporate general and administrative expenses among the QVC Group and the Ventures Group as described in note 5 below. |
At March 31, 2016, the QVC Group is primarily comprised of our merchandise-focused televised shopping programs, Internet and mobile application businesses. Accordingly, we expect that businesses that we may acquire in the future that we believe are complementary to this strategy will also be attributed to the QVC Group.
At March 31, 2016, the Ventures Group consists of all of our businesses not included in the QVC Group, including the Digital Commerce businesses, interests in equity method investments of Expedia, Inc., Interval Leisure Group, Inc., FTD and LendingTree, Inc. and available-for-sale securities Time Warner Inc. and Time Warner Cable Inc. Accordingly, the accompanying attributed financial information for the Ventures Group includes these investments as well as the assets, liabilities, revenue, expenses and cash flows of the Digital Commerce businesses. In addition, we have attributed to the Ventures Group all of our senior exchangeable debentures (and related interest expense). See note 4 below for the debt obligations attributed to the Ventures Group.
As discussed in note 2 to the accompanying condensed consolidated financial statements, Liberty entered into an agreement with Liberty Broadband Corporation (“Liberty Broadband”), whereby Liberty will invest up to $2.4 billion in Liberty Broadband in connection with the closing of the proposed merger of Charter Communications, Inc. and Time Warner Cable Inc. The proceeds of this investment will be used by Liberty Broadband to fund, in part, its agreement to acquire $4.3 billion of Charter stock. However, Liberty Broadband has the right, and may determine, to incur debt financing (subject to certain conditions) to fund a portion of the purchase price for its investment in Charter, in which case Liberty Broadband may reduce the aggregate subscription for its Series C shares by up to 25%, with such reduction applied pro rata to all investors, including Liberty. Liberty's investment in Liberty Broadband will be funded using cash on hand and short term investments and will be attributed to the Ventures Group.
As previously discussed, on October 1, 2015, Liberty acquired all of the outstanding shares of zulily for consideration of approximately $2.3 billion, comprised of $9.375 of cash and 0.3098 newly issued shares of Series A QVC Group common stock for each zulily share, plus cash paid in lieu of any fractional shares. Effective October 1, 2015, zulily is attributed to the QVC Group and we believe that its business is complementary to QVC’s.
As previously discussed, Liberty sold Backcountry on June 30, 2015 for aggregate consideration, including assumption of debt, amounts held in escrow, and a noncontrolling interest, of approximately $350 million.
Any businesses that we may acquire in the future that we do not attribute to the QVC Group will be attributed to the Ventures Group.
9
Notes to Attributed Financial Information
(unaudited)
|
(2) |
Investments in available-for-sale securities, including non-strategic securities, and other cost investments are summarized as follows: |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
|
|
|
2016 |
|
2015 |
|
|
|
|
|
amounts in millions |
|
|||
|
QVC Group |
|
|
|
|
|
|
|
Other |
|
$ |
4 |
|
4 |
|
|
Total QVC Group |
|
|
4 |
|
4 |
|
|
Ventures Group |
|
|
|
|
|
|
|
Time Warner Inc. |
|
|
309 |
|
284 |
|
|
Time Warner Cable Inc. |
|
|
1,096 |
|
994 |
|
|
Other |
|
|
73 |
|
71 |
|
|
Total Ventures Group |
|
|
1,478 |
|
1,349 |
|
|
Consolidated Liberty |
|
$ |
1,482 |
|
1,353 |
|
|
(3) |
The following table presents information regarding certain equity method investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of earnings (losses) |
|
||
|
|
|
March 31, 2016 |
|
Three months ended |
|
||||||||
|
|
|
Percentage |
|
Carrying |
|
Market |
|
March 31, |
|
||||
|
|
|
ownership |
|
value |
|
value |
|
2016 |
|
2015 |
|
||
|
|
|
dollar amounts in millions |
|
||||||||||
|
QVC Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HSN, Inc. |
|
38 |
% |
|
$ |
180 |
|
1,047 |
|
22 |
|
25 |
|
|
Other |
|
various |
|
|
|
43 |
|
NA |
|
(1) |
|
(1) |
|
|
Total QVC Group |
|
|
|
|
|
223 |
|
|
|
21 |
|
24 |
|
|
Ventures Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expedia, Inc. |
|
16 |
% |
|
|
894 |
|
2,545 |
|
(24) |
|
4 |
|
|
FTD |
|
37 |
% |
|
|
261 |
|
268 |
|
(3) |
|
(2) |
|
|
Other |
|
various |
|
|
|
273 |
|
NA |
|
(15) |
|
(23) |
|
|
Total Ventures Group |
|
|
|
|
|
1,428 |
|
|
|
(42) |
|
(21) |
|
|
Consolidated Liberty |
|
|
|
|
$ |
1,651 |
|
|
|
(21) |
|
3 |
|
|
(4) |
|
10
Notes to Attributed Financial Information
(unaudited)
|
(4) |
Debt attributed to the QVC Group and the Ventures Group is comprised of the following: |
|
|
|
March 31, 2016 |
|
||||
|
|
|
Outstanding |
|
Carrying |
|
||
|
|
|
principal |
|
value |
|
||
|
|
|
amounts in millions |
|
||||
|
QVC Group |
|
|
|
|
|
|
|
|
8.5% Senior Debentures due 2029 |
|
$ |
287 |
|
|
285 |
|
|
8.25% Senior Debentures due 2030 |
|
|
504 |
|
|
501 |
|
|
1% Exchangeable Senior Debentures due 2043 |
|
|
346 |
|
|
349 |
|
|
QVC 3.125% Senior Secured Notes due 2019 |
|
|
400 |
|
|
399 |
|
|
QVC 5.125% Senior Secured Notes due 2022 |
|
|
500 |
|
|
500 |
|
|
QVC 4.375% Senior Secured Notes due 2023 |
|
|
750 |
|
|
750 |
|
|
QVC 4.85% Senior Secured Notes due 2024 |
|
|
600 |
|
|
600 |
|
|
QVC 4.45% Senior Secured Notes due 2025 |
|
|
600 |
|
|
599 |
|
|
QVC 5.45% Senior Secured Notes due 2034 |
|
|
400 |
|
|
399 |
|
|
QVC 5.95% Senior Secured Notes due 2043 |
|
|
300 |
|
|
300 |
|
|
QVC Bank Credit Facilities |
|
|
1,894 |
|
|
1,894 |
|
|
Other subsidiary debt |
|
|
72 |
|
|
72 |
|
|
Deferred loan costs |
|
|
|
|
|
(33) |
|
|
Total QVC Group debt |
|
|
6,653 |
|
|
6,615 |
|
|
Ventures Group |
|
|
|
|
|
|
|
|
4% Exchangeable Senior Debentures due 2029 |
|
|
437 |
|
|
264 |
|
|
3.75% Exchangeable Senior Debentures due 2030 |
|
|
437 |
|
|
260 |
|
|
3.5% Exchangeable Senior Debentures due 2031 |
|
|
342 |
|
|
331 |
|
|
0.75% Exchangeable Senior Debentures due 2043 |
|
|
824 |
|
|
1,373 |
|
|
Subsidiary level notes and facilities |
|
|
33 |
|
|
33 |
|
|
Total Ventures Group debt |
|
|
2,073 |
|
|
2,261 |
|
|
Total consolidated Liberty debt |
|
$ |
8,726 |
|
|
8,876 |
|
|
Less current maturities |
|
|
|
|
|
(2,605) |
|
|
Total long-term debt |
|
|
|
|
$ |
6,271 |
|
|
(5) |
Cash compensation expense for our corporate employees is allocated between the QVC Group and the Ventures Group based on the estimated percentage of time spent providing services for each group. On a semi-annual basis, estimated time spent will be determined through an interview process and a review of personnel duties unless transactions significantly change the composition of companies and investments in either respective group, which would require a more timely reevaluation of estimated time spent. Other general and administrative expenses will be charged directly to the groups whenever possible and are otherwise allocated based on estimated usage or some other reasonably determined methodology. Amounts allocated from the QVC Group to the Ventures Group were determined to be $9 million and $4 million for the three months ended March 31, 2016 and 2015, respectively. We note that stock compensation related to each tracking stock group is determined based on actual options outstanding for each respective tracking stock group. |
While we believe that this allocation method is reasonable and fair to each group, we may elect to change the allocation methodology or percentages used to allocate general and administrative expenses in the future.
|
(6) |
The QVC Group common stock and the Liberty Ventures common stock have voting and conversion rights under our restated charter. Following is a summary of those rights. Holders of Series A common stock of each group are entitled to one vote per share, and holders of Series B common stock of each group are entitled to ten |
11
Notes to Attributed Financial Information
(unaudited)
votes per share. Holders of Series C common stock of each group, if issued, are entitled to 1/100th of a vote per share in certain limited cases and will otherwise not be entitled to vote. In general, holders of Series A and Series B common stock will vote as a single class. In certain limited circumstances, the board may elect to seek the approval of the holders of only Series A and Series B QVC Group common stock or the approval of the holders of only Series A and Series B Liberty Ventures common stock. |
At the option of the holder, each share of Series B common stock is convertible into one share of Series A common stock of the same group. At the discretion of our board, the common stock related to one group may be converted into common stock of the same series that is related to the other group.
(7)The intergroup payable (receivable) is primarily attributable to intergroup income taxes payable from the QVC Group to the Ventures Group.
12