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, 2012
Information About Liberty's Operating Segments  
Information About Liberty's Operating Segments
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 nine months ended September 30, 2012, Liberty has identified the following consolidated subsidiaries and equity method affiliates as its reportable segments:
•
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 through its domestic and international websites and mobile applications.
•
Expedia, Inc.—an equity method affiliate in which we hold a 26% ownership interest (see note 7) that operates an easily accessible global travel marketplace, allowing customers to research, plan and book travel products and services from travel suppliers and allowing these travel suppliers to efficiently reach and provide their products and services to Expedia customers.
Additionally, for presentation purposes, Liberty is providing financial information of the E-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.
•
E-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 perishable and personal gift offerings (Provide Commerce, Inc.), active lifestyle gear and clothing (Backcountry.com, Inc.), fitness and health goods (Bodybuilding.com, LLC) and celebration offerings from invitations to costumes (Celebrate Interactive Holdings, Inc.).
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
 
Nine months ended
September 30,
 
2012
 
2011
 
Revenue
 
Adjusted
OIBDA
 
Revenue
 
Adjusted
OIBDA
 
amounts in millions
QVC
$
5,824

 
1,225

 
5,619

 
1,154

E-commerce
1,051

 
61

 
918

 
74

Expedia, Inc.
3,055

 
623

 
2,662

 
561

Corporate and other
—

 
(20
)
 
—

 
(23
)
Total
9,930

 
1,889

 
9,199

 
1,766

Eliminate equity method affiliates
(3,055
)
 
(623
)
 
(2,662
)
 
(561
)
    Consolidated
$
6,875

 
1,266

 
6,537

 
1,205

 
Three months ended
September 30,
 
2012
 
2011
 
Revenue
 
Adjusted
OIBDA
 
Revenue
 
Adjusted
OIBDA
 
amounts in millions
QVC
$
1,918

 
397

 
1,886

 
373

E-commerce
278

 
4

 
247

 
9

Expedia, Inc.
1,199

 
298

 
1,021

 
279

Corporate and other
—

 
(8
)
 
—

 
(5
)
    Total
3,395

 
691

 
3,154

 
656

Eliminate equity method affiliates
(1,199
)
 
(298
)
 
(1,021
)
 
(279
)
    Consolidated
$
2,196

 
393

 
2,133

 
377


Other Information
 
September 30, 2012
 
Total
assets
 
Investments
in
affiliates
 
Capital
expenditures
 
amounts in millions
QVC
$
13,051

 
53

 
165

E-commerce
1,533

 
11

 
72

Expedia, Inc.
7,508

 
—

 
—

Corporate and other
3,959

 
1,245

 
—

    Total
26,051

 
1,309

 
237

Eliminate equity method affiliates
(7,508
)
 
—

 
—

    Consolidated
$
18,543

 
1,309

 
237


The following table provides a reconciliation of segment Adjusted OIBDA to earnings (loss) from continuing operations before income taxes:
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2012
 
2011
 
2012
 
2011
 
amounts in millions
Consolidated segment Adjusted OIBDA
$
393

 
377

 
1,266

 
1,205

  Stock-based compensation
(18
)
 
(2
)
 
(53
)
 
(32
)
Impairment of goodwill
(39
)
 
—

 
(39
)
 
—

  Depreciation and amortization
(147
)
 
(151
)
 
(437
)
 
(448
)
  Interest expense
(111
)
 
(105
)
 
(324
)
 
(326
)
  Share of earnings (loss) of affiliates, net
43

 
62

 
89

 
119

  Realized and unrealized gains (losses) on financial instruments, net
(160
)
 
(91
)
 
(338
)
 
(61
)
  Gains (losses) on dispositions, net
—

 
—

 
288

 
—

  Other, net
(2
)
 
(9
)
 
31

 
12

Earnings (loss) from continuing operations before income taxes
$
(41
)
 
81

 
483

 
469