| Information About Liberty's Operating Segments |
(18) 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. The segment presentation for prior periods has been conformed to the current period segment presentation.
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 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, separately reported litigation settlements 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 year ended December 31, 2014, Liberty has identified the following consolidated subsidiary as its reportable segment:
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QVC—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 and mobile transactions through its domestic and international websites.
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Additionally, for presentation purposes Liberty is providing financial information of the Digital Commerce businesses on an aggregated basis. The consolidated 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.
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Digital Commerce—the aggregation of certain consolidated subsidiaries and equity affiliate that market and sell a wide variety of consumer products via the Internet. Categories of consumer products include perishable and personal gift offerings (Provide, prior to December 31, 2014 and our equity affiliate, FTD, as of December 31, 2014), active lifestyle gear and clothing (Backcountry), fitness and health goods (Bodybuilding), digital invitations (Evite), infant and juvenile-related products (Right Start) and a drop-ship solutions company (CommerceHub).
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Due to the TripAdvisor Holdings Spin-Off completed on August 27, 2014, TripAdvisor is no longer considered a separate reportable segment. Prior to the completion of the TripAdvisor Holdings Spin-Off, BuySeasons was included in the Digital Commerce 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 that are also consolidated subsidiaries are the same as those described in the Company's summary of significant accounting policies.
Performance Measures
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Years ended December 31,
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2014
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2013
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2012
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Adjusted
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Adjusted
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Adjusted
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Revenue
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OIBDA
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Revenue
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OIBDA
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Revenue
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OIBDA
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amounts in millions
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QVC Group
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QVC
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$
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8,801
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1,910
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8,623
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1,841
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8,516
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1,828
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Digital Commerce (1)
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1,227
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53
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1,596
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103
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1,372
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102
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Corporate and other
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—
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(24)
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—
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(20)
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—
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(27)
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Total QVC Group
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10,028
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1,939
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10,219
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1,924
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9,888
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1,903
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Ventures Group
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Digital Commerce (1)
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471
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44
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NA
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NA
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NA
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NA
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Corporate and other
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—
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(18)
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—
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(11)
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—
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(5)
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Total Ventures Group
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471
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26
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—
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(11)
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—
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(5)
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Consolidated Liberty
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$
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10,499
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1,965
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10,219
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1,913
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9,888
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1,898
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(1)
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As discussed in note 2, on October 3, 2014, Liberty completed the reattribution from the QVC Group (formerly referred to as the Interactive Group, prior to the reattribution), to the Ventures Group its Digital Commerce companies. The reattribution of the Digital Commerce companies is presented on a prospective basis from the date of the reattribution in Liberty’s consolidated financial statements, with October 1, 2014 used as a proxy for the date of the reattribution. Accordingly, Revenue and Adjusted OIBDA attributable to the Digital Commerce companies are included in the QVC Group for the period through September 30, 2014 and are included in the Ventures Group for the period beginning October 1, 2014.
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Other Information
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December 31, 2014
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December 31, 2013
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Investments
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Investments
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Total
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in
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Capital
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Total
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in
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Capital
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assets
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affiliates
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expenditures
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assets (1)
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affiliates
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expenditures
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amounts in millions
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QVC Group
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QVC
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$
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12,466
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47
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183
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13,031
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51
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217
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Digital Commerce (1)(2)
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NA
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NA
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43
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1,218
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—
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74
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Corporate and other
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546
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328
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—
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613
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292
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—
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Total QVC Group
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13,012
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375
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226
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14,862
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343
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291
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Ventures Group
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Digital Commerce (2)
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693
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355
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15
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NA
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NA
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NA
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Corporate and other (1)
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5,135
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903
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—
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9,984
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894
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—
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Total Ventures Group
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5,828
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1,258
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15
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9,984
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894
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—
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Inter-group eliminations
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(199)
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—
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—
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(170)
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—
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—
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Consolidated Liberty
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$
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18,641
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1,633
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241
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24,676
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1,237
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291
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(1)
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Total assets of discontinued operations at December 31, 2013 are included in the table above. BuySeasons and TripAdvisor total assets are included in the Corporate and other line item in the QVC Group and Ventures Group, respectively.
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(2)
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As discussed in note 2, on October 3, 2014, Liberty completed the reattribution from the QVC Group (formerly referred to as the Interactive Group, prior to the reattribution), to the Ventures Group its Digital Commerce companies. The reattribution of the Digital Commerce companies is presented on a prospective basis from the date of the reattribution in Liberty’s consolidated financial statements, with October 1, 2014 used as a proxy for the date of the reattribution. Accordingly, total assets, investments and affiliates and capital expenditures attributable to the Digital Commerce companies are included in the QVC Group for the period through September 30, 2014 and are included in the Ventures Group for the period beginning October 1, 2014.
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The following table provides a reconciliation of segment Adjusted OIBDA to earnings (loss) from continuing operations before income taxes:
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Years ended December 31,
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2014
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2013
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2012
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amounts in millions
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Consolidated segment Adjusted OIBDA
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$
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1,965
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1,913
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1,898
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Stock-based compensation
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(108)
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(118)
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(91)
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Depreciation and amortization
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(662)
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(629)
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(591)
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Impairment of intangible assets
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(7)
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(30)
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(53)
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Interest expense
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(387)
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(380)
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(466)
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Share of earnings (loss) of affiliates, net
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39
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33
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47
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Realized and unrealized gains (losses) on financial instruments, net
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(57)
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(22)
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(351)
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Gains (losses) on transactions, net
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74
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(1)
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443
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Other, net
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(21)
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(29)
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47
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Earnings (loss) from continuing operations before income taxes
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$
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836
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737
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883
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Revenue by Geographic Area
Revenue by geographic area based on the location of customers is as follows:
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Years ended December 31,
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2014
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2013
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2012
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amounts in millions
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United States
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$
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7,617
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7,332
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6,873
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Japan
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912
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1,029
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1,251
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Germany
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1,003
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971
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957
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Other foreign countries
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967
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887
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807
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$
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10,499
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10,219
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9,888
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Long-lived Assets by Geographic Area
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December 31,
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2014
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2013
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amounts in millions
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United States
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$
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529
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550
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Japan
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176
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220
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Germany
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210
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245
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Other foreign countries
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178
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193
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$
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1,093
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1,208
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