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, 2015
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, 2015, 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 active lifestyle gear and clothing (Backcountry), fitness and health goods (Bodybuilding), a drop-ship solutions company (CommerceHub),  digital invitations (Evite),  perishable and personal gift offerings (Provide), and products for infants and toddlers (Right Start).  Due to the transactions discussed in note 3, the results of Provide are included in the Company’s results through December 31, 2014 and the results of Backcountry are included through June 30, 2015.

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, 2014.

Performance Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  September 30,

 

 

 

2015

 

2014

 

 

    

 

 

    

Adjusted

    

 

    

Adjusted

 

 

 

Revenue

 

OIBDA

 

Revenue

 

OIBDA

 

 

 

amounts in millions

 

QVC Group

 

 

 

 

 

 

 

 

 

 

QVC

 

$
2,007

 
430

 
2,020

 
439

 

Digital Commerce

 

 

NA

 

NA

 
310

 
(2)

 

Corporate and other

 

 

 —

 
(9)

 

 —

 
(6)

 

Total QVC Group

 

 
2,007

 
421

 
2,330

 
431

 

Ventures Group

 

 

 

 

 

 

 

 

 

 

Digital Commerce

 

 
146

 
17

 

NA

 

NA

 

Corporate and other

 

 

 —

 
(4)

 

 —

 
(6)

 

Total Ventures Group

 

 
146

 
13

 

 —

 
(6)

 

Consolidated Liberty

 

$
2,153

 
434

 
2,330

 
425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

 

2015

 

2014

 

 

    

 

 

    

Adjusted

    

 

    

Adjusted

 

 

 

Revenue

 

OIBDA

 

Revenue

 

OIBDA

 

 

 

amounts in millions

 

QVC Group

 

 

 

 

 

 

 

 

 

 

QVC

 

$
5,943

 
1,286

 
6,020

 
1,290

 

Digital Commerce

 

 

NA

 

NA

 
1,227

 
53

 

Corporate and other

 

 

 —

 
(19)

 

 —

 
(16)

 

Total QVC Group

 

 
5,943

 
1,267

 
7,247

 
1,327

 

Ventures Group

 

 

 

 

 

 

 

 

 

 

Digital Commerce

 

 
676

 
58

 

NA

 

NA

 

Corporate and other

 

 

 —

 
(13)

 

 —

 
(12)

 

Total Ventures Group

 

 
676

 
45

 

 —

 
(12)

 

Consolidated Liberty

 

$
6,619

 
1,312

 
7,247

 
1,315

 

 

Other Information

 

 

 

 

 

 

 

 

 

 

 

September 30, 2015

 

 

    

Total

    

Investments

    

Capital

 

 

 

assets

 

In affiliates

 

expenditures

 

 

 

amounts in millions

 

QVC Group

 

 

 

 

 

 

 

 

QVC

 

$
12,141

 
45

 
132

 

Corporate and other

 

 
447

 
159

 

 —

 

Total QVC Group

 

 
12,588

 
204

 
132

 

Ventures Group

 

 

 

 

 

 

 

 

Digital Commerce

 

 
783

 
343

 
32

 

Corporate and other

 

 
5,120

 
959

 

 —

 

Total Ventures Group

 

 
5,903

 
1,302

 
32

 

Inter-group eliminations

 

 
(206)

 

 —

 

—

 

Consolidated Liberty

 

$
18,285

 
1,506

 
164

 

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,

 

 

    

2015

    

2014

    

2015

    

2014

 

 

 

amounts in millions

 

Consolidated segment Adjusted OIBDA

 

$
434

 
425

 
1,312

 
1,315

 

Stock-based compensation

 

 
(37)

 
(20)

 
(81)

 
(71)

 

Impairment of intangible assets

 

 

 —

 

 —

 

 —

 
(7)

 

Depreciation and amortization

 

 
(150)

 
(166)

 
(479)

 
(493)

 

Interest expense

 

 
(88)

 
(99)

 
(273)

 
(292)

 

Share of earnings (loss) of affiliates, net

 

 
31

 
36

 
121

 
38

 

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

 

 
70

 
18

 
98

 
(48)

 

Gains (losses) on dispositions, net

 

 
(1)

 

 —

 
110

 

 —

 

Other, net

 

 
25

 
(38)

 
11

 
(28)

 

Earnings (loss) before income taxes

 

$
284

 
156

 
819

 
414