| 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 December 31, 2013 and the carrying amount at December 31, 2012:
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December 31, 2013 |
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December 31, 2012 |
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Percentage
ownership
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Market
value
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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.(3) |
38 |
% |
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$ |
1,247 |
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$ |
293 |
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242 |
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Other |
various |
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N/A |
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50 |
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62 |
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Total Interactive Group |
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343 |
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304 |
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Ventures Group |
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Expedia (2)(3) |
18 |
% |
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$ |
1,608 |
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477 |
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431 |
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Other (4) |
various |
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N/A |
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417 |
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116 |
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Total Ventures Group |
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894 |
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547 |
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Consolidated Liberty |
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$ |
1,237 |
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851 |
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The following table presents Liberty's share of earnings (losses) of affiliates:
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Years ended December 31, |
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2013 |
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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. |
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$ |
61 |
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40 |
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38 |
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Other |
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(13 |
) |
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(12 |
) |
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(15 |
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Total Interactive Group |
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48 |
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28 |
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23 |
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Ventures Group |
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Expedia, Inc. (1)(2) |
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31 |
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67 |
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119 |
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TripAdvisor (1)(4) |
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NA |
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38 |
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NA |
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Other (5) |
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(46 |
) |
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(48 |
) |
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(2 |
) |
Total Ventures Group |
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(15 |
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57 |
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117 |
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Consolidated Liberty |
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$ |
33 |
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85 |
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140 |
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(1) |
During the fourth quarter of 2011 Expedia, Inc. completed the pro-rata split-off of TripAdvisor, a wholly owned subsidiary. Therefore, the Company had a 26% ownership interest in each of Expedia, Inc. and TripAdvisor as of December 31, 2011.
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(2) |
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, previously held as collateral, were released to the counterparty. In the fourth quarter of 2012, when the forward contract settled, the difference between the fair value of the Expedia shares and the carrying value of the shares ($443 million) was recognized in the gain (loss) on transactions, net line item in the statement of operations. Liberty owns an approximate 18% equity interest and 58% voting interest in Expedia. Liberty has entered into governance arrangements pursuant to which Mr. Barry Diller, Chairman of the Board and Senior Executive Officer of Expedia, may vote its interests of Expedia, subject to certain limitations. Additionally, through our governance arrangements with Mr. Diller, we have the right to appoint and have appointed 20% of the members of Expedia's board of directors, which is currently comprised of 10 members. Therefore, we determined based on these arrangements that we have significant influence and have accounted for the investment as an equity method affiliate.
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(3) |
During the years ended December 31, 2013 and 2012, Expedia, Inc. paid dividends aggregating $13 million and $23 million, respectively, and HSN, Inc. paid dividends of $16 million during the year ended December 31, 2013 which were recorded as reductions to the investment balances.
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(4) |
In May 2012, Liberty sold approximately 8.5 million shares of TripAdvisor for cash proceeds of $338 million. The sale resulted in a $288 million gain recorded in gain (losses) on transactions, net, based on the average cost, in the statement of operations. On December 11, 2012, we acquired approximately 4.8 million additional shares of common stock of TripAdvisor (an additional 4% equity ownership interest) for $300 million and obtained voting control of TripAdvisor, see note 5 for additional details of the fourth quarter transaction with TripAdvisor.
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(5) |
Liberty invested $300 million in a solar energy plant during 2013. Liberty expects to receive a portion of the initial investment back within a year as the entity expects to receive grant proceeds and other favorable tax attributes. The Company expects to record its share of losses of the solar plant but expects to record the impacts of favorable tax attributes (primarily accelerated depreciation) as a current tax benefit with an offsetting deferred tax expense in the tax expense (benefit) line item in the Statement of Operations.
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HSN, Inc.
Liberty records the share of earnings (loss) for HSN, Inc. on a quarter lag due to timeliness considerations and access to financial information. Summarized unaudited financial information for HSN, Inc., on a quarter lag, is as follows:
HSN, Inc. Consolidated Balance Sheets
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September 30, 2013 |
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September 30,
2012 |
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amounts in millions |
Current assets |
$ |
773 |
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776 |
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Property and equipment, net |
171 |
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159 |
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Goodwill |
10 |
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10 |
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Intangible assets |
266 |
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267 |
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Other assets |
6 |
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7 |
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Total assets |
$ |
1,226 |
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1,219 |
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Current liabilities |
$ |
412 |
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411 |
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Deferred income taxes |
90 |
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76 |
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Long-term debt |
231 |
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244 |
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Other liabilities |
11 |
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15 |
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Equity |
482 |
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473 |
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Total liabilities and equity |
$ |
1,226 |
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1,219 |
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HSN, Inc. Consolidated Statements of Operations
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Trailing twelve months ended September 30, |
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2013 |
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2012 |
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2011 |
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amounts in millions |
Revenue |
$ |
3,367 |
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3,206 |
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2,949 |
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Cost of revenue |
(2,152 |
) |
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(2,039 |
) |
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(1,865 |
) |
Gross profit |
1,215 |
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1,167 |
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1,084 |
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Selling, general and administrative expenses |
(898 |
) |
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(877 |
) |
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(816 |
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Amortization |
(40 |
) |
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(38 |
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(35 |
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Operating income |
277 |
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252 |
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233 |
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Interest expense |
(7 |
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(27 |
) |
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(32 |
) |
Other income (expense), net |
1 |
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(18 |
) |
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— |
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Income tax (expense) benefit |
(98 |
) |
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(78 |
) |
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(79 |
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Income (loss) from continuing operations |
173 |
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129 |
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122 |
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Discontinued operations, net of tax |
1 |
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(8 |
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(5 |
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Net earnings (loss) attributable to HSN shareholders |
$ |
174 |
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121 |
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117 |
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