| Investments In Affiliates Accounted For Using The Equity Method |
Investments in Affiliates Accounted for Using the Equity Method
Liberty has various investments accounted for using the equity method. The following table includes Liberty's carrying amount and percentage ownership of the more significant investments in affiliates at September 30, 2012 and the carrying amount at December 31, 2011:
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September 30, 2012 |
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December 31, 2011 |
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Percentage
ownership
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Market
value (level 1)
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Carrying
amount
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Carrying
amount
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dollars in millions |
Interactive Group |
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HSN, Inc. |
36 |
% |
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$ |
982 |
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$ |
241 |
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|
217 |
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Other |
various |
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N/A |
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64 |
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13 |
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Total Interactive Group |
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305 |
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230 |
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Ventures Group |
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Expedia, Inc. (a) |
26 |
% |
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2,002 |
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|
681 |
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621 |
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TripAdvisor, Inc. (b) |
18 |
% |
|
861 |
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|
199 |
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184 |
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Other |
various |
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N/A |
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124 |
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100 |
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Total Ventures Group |
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1,004 |
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905 |
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Consolidated Liberty |
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$ |
1,309 |
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1,135 |
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(a) |
Liberty entered into a forward sales contract on 12 million shares of Expedia common stock in March 2012 at a per share forward price of $34.316. The forward contract was settled in October 2012 for total cash proceeds of $412 million and the 12 million shares of Expedia common stock, held as collateral, were released to the counterparty. During the nine months ended September 30, 2012 the Company has recognized losses of $282 million on the forward contract in the realized and unrealized gains (losses) on financial instruments, net line item in the statement of operations. The carrying value of the shares, held as collateral by the counterparty, was $236 million and the fair value was $694 million as of September 30, 2012. At the time the forward contract is settled, in the fourth quarter of 2012, the difference between the fair value of the Expedia shares and the carrying value of the shares will be recognized in the gain (loss) on dispositions, net line item in the statement of operations.
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(b) |
In May 2012, Liberty sold approximately 8.5 million shares of TripAdvisor, Inc. for cash proceeds of $338 million. The sale resulted in a $288 million gain recorded in gain (losses) on dispositions, net, based on the average cost, in the statement of operations.
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The following table presents Liberty's share of earnings (losses) of affiliates:
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Three months ended
September 30, |
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Nine months ended
September 30, |
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2012 |
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2011 |
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2012 |
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2011 |
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amounts in millions |
Interactive Group |
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HSN, Inc. |
$ |
10 |
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10 |
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34 |
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30 |
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Other |
(4 |
) |
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(4 |
) |
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(8 |
) |
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(12 |
) |
Total Interactive Group |
6 |
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6 |
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26 |
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18 |
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Ventures Group |
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Expedia, Inc. (1) |
41 |
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56 |
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65 |
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104 |
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TripAdvisor, Inc. (1) |
10 |
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— |
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33 |
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— |
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Other |
(14 |
) |
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— |
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(35 |
) |
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(3 |
) |
Total Ventures Group |
37 |
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56 |
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63 |
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101 |
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Consolidated Liberty |
$ |
43 |
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62 |
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89 |
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119 |
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(1) |
During the fourth quarter of 2011 Expedia, Inc. completed the pro-rata split-off of TripAdvisor, Inc. ("TripAdvisor"), its wholly owned subsidiary. As of the TripAdvisor split-off date, the Company had a 26% economic ownership interest in each of Expedia, Inc. and TripAdvisor and, through ownership of class B common stock with 10 votes per share, had an approximate 58% voting interest in each respective company. Through a stockholders agreement, Liberty has given Barry Diller, Chairman and Senior Executive Officer of both companies, the right to vote all of the common stock owned by Liberty. Through a governance agreement, Liberty has the right to nominate up to 20% of the board members for each entity and currently two members on each company's 10 member board were nominated by Liberty. Because of Liberty's board representation, it was determined that the Company has significant influence over each respective company and the Company continues to apply the equity method of accounting to its interests in TripAdvisor. As discussed above, in May 2012 Liberty sold shares of TripAdvisor which decreased Liberty's ownership percentage below 20%. As Liberty's board representation on the TripAdvisor board continues to be 20%, subsequent to the sale of securities discussed above, it was determined that significant influence still exists and the application of the equity method of accounting is appropriate.
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Expedia
Summarized unaudited financial information for Expedia is as follows:
Expedia Consolidated Balance Sheets
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September 30,
2012 |
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December 31, 2011 |
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amounts in millions |
Current assets |
$ |
3,091 |
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2,274 |
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Property and equipment, net |
393 |
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320 |
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Goodwill |
3,007 |
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2,877 |
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Intangible assets |
828 |
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744 |
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Other assets |
189 |
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290 |
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Total assets |
$ |
7,508 |
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6,505 |
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Current liabilities |
$ |
3,299 |
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2,553 |
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Deferred income taxes |
353 |
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280 |
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Long-term debt |
1,249 |
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1,249 |
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Other liabilities |
135 |
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118 |
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Noncontrolling interest |
107 |
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105 |
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Equity |
2,365 |
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2,200 |
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Total liabilities and equity |
$ |
7,508 |
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6,505 |
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Expedia Consolidated Statements of Operations
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Three months ended
September 30, |
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Nine months ended
September 30, |
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2012 |
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2011 |
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2012 |
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2011 |
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amounts in millions |
Revenue |
$ |
1,199 |
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|
1,021 |
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3,055 |
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$ |
2,662 |
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Cost of revenue |
(243 |
) |
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(207 |
) |
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(673 |
) |
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(578 |
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Gross profit |
956 |
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814 |
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2,382 |
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2,084 |
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Selling, general and administrative expenses |
(717 |
) |
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(585 |
) |
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(1,925 |
) |
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(1,660 |
) |
Amortization |
(10 |
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(5 |
) |
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(22 |
) |
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(17 |
) |
Restructuring charges and other |
(2 |
) |
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(15 |
) |
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(5 |
) |
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(19 |
) |
Operating income (loss) |
227 |
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209 |
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430 |
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388 |
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Interest expense |
(22 |
) |
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(23 |
) |
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(65 |
) |
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(68 |
) |
Other income (expense), net |
(2 |
) |
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17 |
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— |
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13 |
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Income tax (expense) benefit |
(36 |
) |
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(31 |
) |
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(70 |
) |
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(67 |
) |
Income (loss) from continuing operations |
167 |
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|
172 |
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|
295 |
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|
266 |
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Earnings (loss) from discontinued operations |
2 |
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|
39 |
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(22 |
) |
|
138 |
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Net earnings (loss) |
169 |
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|
211 |
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|
273 |
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|
404 |
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Less net earnings (loss) attributable to noncontrolling interests |
2 |
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(1 |
) |
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— |
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(2 |
) |
Net earnings (loss) attributable to Expedia, Inc. shareholders |
$ |
171 |
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|
210 |
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|
273 |
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$ |
402 |
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