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Attributed Financial Information for Tracking Stock Groups
Our Liberty Interactive common stock is intended to reflect the separate performance of our Interactive Group which is comprised of our businesses engaged in video and on-line commerce, including our subsidiaries, QVC, Inc., Provide Commerce, Inc., Backcountry.com, Inc., Bodybuilding.com, LLC and BuySeasons, Inc. and our interests in IAC/InterActiveCorp, Expedia, Inc., HSN, Inc., Interval Leisure Group, Inc. and Tree.com, Inc. Our Liberty Starz common stock is intended to reflect the separate performance of our Starz Group which primarily includes our wholly-owned subsidiary Starz Entertainment, LLC. Our Liberty Capital common stock is intended to reflect the separate performance of our Capital Group which is comprised of all of our assets and businesses not attributed to the Interactive Group or the Starz Group.
The following tables present our assets, liabilities, revenue, expenses and cash flows as of and for the three months ended March 31, 2010 and 2009. The tables further present our assets, liabilities, revenue, expenses and cash flows that are attributed to the Interactive Group, the Starz Group and the Capital Group, respectively. The financial information should be read in conjunction with our unaudited condensed consolidated financial statements for the three months ended March 31, 2010 included in this Quarterly Report on Form 10-Q.
Notwithstanding the following attribution of assets, liabilities, revenue, expenses and cash flows to the Interactive Group, the Starz Group and the Capital Group, our tracking stock structure does not affect the ownership or the respective legal title to our assets or responsibility for our liabilities. We and our subsidiaries are each responsible for our respective liabilities. Holders of Liberty Interactive common stock, Liberty Starz common stock and Liberty Capital common stock are holders of our common stock and are subject to risks associated with an investment in our company and all of our businesses, assets and liabilities. The issuance of Liberty Interactive common stock, Liberty Starz common stock and Liberty Capital common stock does not affect the rights of our creditors or creditors of our subsidiaries.
1
SUMMARY ATTRIBUTED FINANCIAL DATA
Interactive Group
| | March 31, 2010 | December 31, 2009 | |||||
|---|---|---|---|---|---|---|---|
| | amounts in millions | ||||||
Summary balance sheet data: | |||||||
Current assets | $ | 3,819 | 3,379 | ||||
Cost investments | $ | 299 | 734 | ||||
Equity investments | $ | 841 | 895 | ||||
Total assets | $ | 17,149 | 17,343 | ||||
Long-term debt, including current portion | $ | 6,741 | 6,073 | ||||
Long-term deferred income tax liabilities | $ | 2,714 | 1,939 | ||||
Attributed net assets | $ | 5,691 | 6,794 | ||||
| | Three months ended March 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| | 2010 | 2009 | ||||||
| | amounts in millions | |||||||
Summary operations data: | ||||||||
Revenue | $ | 2,025 | 1,831 | |||||
Cost of sales | (1,294 | ) | (1,183 | ) | ||||
Operating expenses | (186 | ) | (172 | ) | ||||
Selling, general and administrative expenses(1) | (186 | ) | (145 | ) | ||||
Depreciation and amortization | (141 | ) | (147 | ) | ||||
Operating income | 218 | 184 | ||||||
Interest expense | (147 | ) | (96 | ) | ||||
Share of earnings (losses) of affiliates, net | 23 | (95 | ) | |||||
Realized and unrealized gains (losses) on financial instruments | 25 | (72 | ) | |||||
Gains (losses) on disposition, net | 364 | (2 | ) | |||||
Other expense, net | (26 | ) | (8 | ) | ||||
Income tax benefit (expense) | (137 | ) | 41 | |||||
Net earnings (loss) | 320 | (48 | ) | |||||
Less net earnings attributable to the noncontrolling interests | 10 | 9 | ||||||
Net earnings (loss) attributable to Liberty Media Corporation shareholders | $ | 310 | (57 | ) | ||||
- (1)
- Includes stock-based compensation of $22 million and $10 million for the three months ended March 31, 2010 and 2009, respectively.
2
SUMMARY ATTRIBUTED FINANCIAL DATA
Starz Group
| | March 31, 2010 | December 31, 2009 | |||||
|---|---|---|---|---|---|---|---|
| | amounts in millions | ||||||
Summary balance sheet data: | |||||||
Current assets | $ | 1,786 | 1,544 | ||||
Total assets | $ | 2,433 | 2,198 | ||||
Long-term debt, including current portion | $ | 47 | 48 | ||||
Attributed net assets | $ | 2,102 | 2,040 | ||||
| | Three months ended March 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| | 2010 | 2009 | ||||||
| | amounts in millions | |||||||
Summary operations data: | ||||||||
Revenue | $ | 307 | 297 | |||||
Operating expenses | (165 | ) | (162 | ) | ||||
Selling, general and administrative expenses(1) | (45 | ) | (48 | ) | ||||
Depreciation and amortization | (5 | ) | (6 | ) | ||||
Operating income | 92 | 81 | ||||||
Other income (expense), net | 1 | (3 | ) | |||||
Income tax expense | (36 | ) | (18 | ) | ||||
Earnings from continuing operations | 57 | 60 | ||||||
Earnings from discontinued operations | — | 21 | ||||||
Net earnings | $ | 57 | 81 | |||||
- (1)
- Includes stock-based compensation of $6 million and $17 million for the three months ended March 31, 2010 and 2009, respectively.
3
SUMMARY ATTRIBUTED FINANCIAL DATA
Capital Group
| | March 31, 2010 | December 31, 2009 | |||||
|---|---|---|---|---|---|---|---|
| | amounts in millions | ||||||
Summary balance sheet data: | |||||||
Current assets | $ | 3,012 | 4,087 | ||||
Cost investments | $ | 4,043 | 3,355 | ||||
Total assets | $ | 8,936 | 9,373 | ||||
Long-term debt, including current portion | $ | 2,446 | 3,653 | ||||
Deferred income tax liabilities, including current portion | $ | 1,266 | 2,260 | ||||
Attributed net assets | $ | 2,639 | 1,275 | ||||
| | Three months ended March 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| | 2010 | 2009 | ||||||
| | amounts in millions | |||||||
Summary operations data: | ||||||||
Revenue | $ | 166 | 125 | |||||
Operating expenses | (105 | ) | (93 | ) | ||||
Selling, general and administrative expenses(1) | (115 | ) | (65 | ) | ||||
Depreciation and amortization | (16 | ) | (20 | ) | ||||
Operating loss | (70 | ) | (53 | ) | ||||
Interest expense | (23 | ) | (40 | ) | ||||
Realized and unrealized gains (losses) on financial instruments, net | 143 | (199 | ) | |||||
Other income, net | 7 | 18 | ||||||
Income tax benefit (expense) | (35 | ) | 114 | |||||
Net earnings (loss) | 22 | (160 | ) | |||||
- (1)
- Includes stock-based compensation of $11 million and $1 million for the three months ended March 31, 2010 and 2009, respectively.
4
BALANCE SHEET INFORMATION
March 31, 2010
(unaudited)
| | Attributed (note 1) | | | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Interactive Group | Starz Group | Capital Group | Inter-group eliminations | Consolidated Liberty | |||||||||||||
| | amounts in millions | |||||||||||||||||
Assets | ||||||||||||||||||
Current assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 1,731 | 1,005 | 2,480 | — | 5,216 | ||||||||||||
Trade and other receivables, net | 1,004 | 190 | 99 | — | 1,293 | |||||||||||||
Inventory, net | 1,007 | — | — | — | 1,007 | |||||||||||||
Program rights | — | 507 | — | — | 507 | |||||||||||||
Financial instruments | — | — | 340 | — | 340 | |||||||||||||
Current deferred tax assets | — | 60 | — | (60 | ) | — | ||||||||||||
Other current assets | 77 | 24 | 93 | — | 194 | |||||||||||||
Total current assets | 3,819 | 1,786 | 3,012 | (60 | ) | 8,557 | ||||||||||||
Investments in available-for-sale securities and other cost investments (note 2) | 299 | 1 | 4,043 | — | 4,343 | |||||||||||||
Investments in affiliates, accounted for using the equity method (note 3) | 841 | — | 118 | — | 959 | |||||||||||||
Property and equipment, net | 1,012 | 105 | 161 | — | 1,278 | |||||||||||||
Goodwill | 5,859 | 133 | 200 | — | 6,192 | |||||||||||||
Trademarks | 2,492 | 2 | 14 | — | 2,508 | |||||||||||||
Other non-amortizable intangibles | — | — | 153 | — | 153 | |||||||||||||
Intangible assets subject to amortization, net | 2,737 | 2 | 176 | — | 2,915 | |||||||||||||
Deferred tax assets | — | 11 | — | (11 | ) | — | ||||||||||||
Other assets, at cost, net of accumulated amortization | 90 | 393 | 1,059 | — | 1,542 | |||||||||||||
Total assets | $ | 17,149 | 2,433 | 8,936 | (71 | ) | 28,447 | |||||||||||
Liabilities and Equity | ||||||||||||||||||
Current liabilities: | ||||||||||||||||||
Accounts payable | $ | 531 | 5 | 11 | — | 547 | ||||||||||||
Accrued liabilities | 651 | 164 | 157 | — | 972 | |||||||||||||
Intergroup payable (receivable) | 127 | (78 | ) | (49 | ) | — | — | |||||||||||
Financial instruments | 148 | 1 | 919 | — | 1,068 | |||||||||||||
Current portion of debt (note 4) | 716 | 4 | 483 | — | 1,203 | |||||||||||||
Current deferred tax liabilities | 54 | — | 1,254 | (60 | ) | 1,248 | ||||||||||||
Other current liabilities | 153 | 143 | 133 | — | 429 | |||||||||||||
Total current liabilities | 2,380 | 239 | 2,908 | (60 | ) | 5,467 | ||||||||||||
Long-term debt (note 4) | 6,025 | 43 | 1,963 | — | 8,031 | |||||||||||||
Deferred income tax liabilities | 2,714 | — | 12 | (11 | ) | 2,715 | ||||||||||||
Other liabilities | 220 | 49 | 1,412 | — | 1,681 | |||||||||||||
Total liabilities | 11,339 | 331 | 6,295 | (71 | ) | 17,894 | ||||||||||||
Equity/Attributed net assets | 5,691 | 2,102 | 2,639 | — | 10,432 | |||||||||||||
Noncontrolling interests in equity of subsidiaries | 119 | — | 2 | — | 121 | |||||||||||||
Total liabilities and equity | $ | 17,149 | 2,433 | 8,936 | (71 | ) | 28,447 | |||||||||||
5
STATEMENT OF OPERATIONS AND COMPREHENSIVE EARNINGS (LOSS) INFORMATION
Three months ended March 31, 2010
(unaudited)
| | Attributed (note 1) | | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Interactive Group | Starz Group | Capital Group | Consolidated Liberty | ||||||||||||
| | amounts in millions | |||||||||||||||
Revenue: | ||||||||||||||||
Net retail sales | $ | 2,025 | — | — | 2,025 | |||||||||||
Communications and programming services | — | 307 | 166 | 473 | ||||||||||||
| 2,025 | 307 | 166 | 2,498 | |||||||||||||
Operating costs and expenses: | ||||||||||||||||
Cost of sales | 1,294 | — | — | 1,294 | ||||||||||||
Operating | 186 | 165 | 105 | 456 | ||||||||||||
Selling, general and administrative, including stock-based compensation (note 5) | 186 | 45 | 115 | 346 | ||||||||||||
Depreciation and amortization | 141 | 5 | 16 | 162 | ||||||||||||
| 1,807 | 215 | 236 | 2,258 | |||||||||||||
Operating income (loss) | 218 | 92 | (70 | ) | 240 | |||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (147 | ) | — | (23 | ) | (170 | ) | |||||||||
Intergroup interest income (expense) | (4 | ) | 2 | 2 | — | |||||||||||
Share of earnings (losses) of affiliates, net (note 3) | 23 | — | (14 | ) | 9 | |||||||||||
Realized and unrealized gains (losses) on financial instruments, net | 25 | (1 | ) | 143 | 167 | |||||||||||
Gains (losses) on dispositions, net | 364 | — | (1 | ) | 363 | |||||||||||
Other, net | (22 | ) | — | 20 | (2 | ) | ||||||||||
| 239 | 1 | 127 | 367 | |||||||||||||
Earnings before income taxes | 457 | 93 | 57 | 607 | ||||||||||||
Income tax expense | (137 | ) | (36 | ) | (35 | ) | (208 | ) | ||||||||
Net earnings (loss) | 320 | 57 | 22 | 399 | ||||||||||||
Less net earnings attributable to the noncontrolling interests | 10 | — | — | 10 | ||||||||||||
Net earnings attributable to Liberty Media Corporation shareholders | $ | 310 | 57 | 22 | 389 | |||||||||||
Net earnings | $ | 320 | 57 | 22 | 399 | |||||||||||
Other comprehensive earnings (loss), net of taxes: | ||||||||||||||||
Foreign currency translation adjustments | (52 | ) | — | — | (52 | ) | ||||||||||
Unrealized holding gains arising during the period | 35 | — | 30 | 65 | ||||||||||||
Recognition of previously unrealized gains on available-for-sale securities, net | (112 | ) | — | — | (112 | ) | ||||||||||
Share of other comprehensive earnings of equity affiliates | 5 | — | — | 5 | ||||||||||||
Reattribution of other comprehensive earnings between tracking stocks | (30 | ) | — | 30 | — | |||||||||||
Other | 13 | — | — | 13 | ||||||||||||
Other comprehensive earnings (loss) | (141 | ) | — | 60 | (81 | ) | ||||||||||
Comprehensive earnings | 179 | 57 | 82 | 318 | ||||||||||||
Less comprehensive earnings attributable to the noncontrolling interests | 9 | — | — | 9 | ||||||||||||
Comprehensive earnings attributable to Liberty Media Corporation shareholders | $ | 170 | 57 | 82 | 309 | |||||||||||
6
STATEMENT OF OPERATIONS AND COMPREHENSIVE EARNINGS (LOSS) INFORMATION
Three months ended March 31, 2009
(unaudited)
| | Attributed (note 1) | | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Interactive Group | Starz Group | Capital Group | Consolidated Liberty | ||||||||||||||
| | amounts in millions | |||||||||||||||||
Revenue: | ||||||||||||||||||
Net retail sales | $ | 1,831 | — | — | 1,831 | |||||||||||||
Communications and programming services | — | 297 | 125 | 422 | ||||||||||||||
| 1,831 | 297 | 125 | 2,253 | |||||||||||||||
Operating costs and expenses: | ||||||||||||||||||
Cost of sales | 1,183 | — | — | 1,183 | ||||||||||||||
Operating | 172 | 162 | 93 | 427 | ||||||||||||||
Selling, general and administrative, including stock-based compensation (note 5) | 145 | 48 | 65 | 258 | ||||||||||||||
Depreciation and amortization | 147 | 6 | 20 | 173 | ||||||||||||||
| 1,647 | 216 | 178 | 2,041 | |||||||||||||||
Operating income (loss) | 184 | 81 | (53 | ) | 212 | |||||||||||||
Other income (expense): | ||||||||||||||||||
Interest expense | (96 | ) | (1 | ) | (40 | ) | (137 | ) | ||||||||||
Share of losses of affiliates, net (note 3) | (95 | ) | (2 | ) | (8 | ) | (105 | ) | ||||||||||
Realized and unrealized gains (losses) on financial instruments, net | (72 | ) | 7 | (199 | ) | (264 | ) | |||||||||||
Losses on dispositions, net | (2 | ) | — | — | (2 | ) | ||||||||||||
Other, net | (8 | ) | (7 | ) | 26 | 11 | ||||||||||||
| (273 | ) | (3 | ) | (221 | ) | (497 | ) | |||||||||||
Earnings (loss) from continuing operations before income taxes | (89 | ) | 78 | (274 | ) | (285 | ) | |||||||||||
Income tax benefit (expense) | 41 | (18 | ) | 114 | 137 | |||||||||||||
Earnings (loss) from continuing operations | (48 | ) | 60 | (160 | ) | (148 | ) | |||||||||||
Earnings from discontinued operations, net of taxes | — | 21 | — | 21 | ||||||||||||||
Net earnings (loss) | (48 | ) | 81 | (160 | ) | (127 | ) | |||||||||||
Less net earnings attributable to the noncontrolling interests | 9 | — | — | 9 | ||||||||||||||
Net earnings (loss) attributable to Liberty Media Corporation shareholders | (57 | ) | 81 | (160 | ) | (136 | ) | |||||||||||
Net earnings (loss) | (48 | ) | 81 | (160 | ) | (127 | ) | |||||||||||
Other comprehensive earnings (loss), net of taxes: | ||||||||||||||||||
Foreign currency translation adjustments | (87 | ) | — | — | (87 | ) | ||||||||||||
Unrealized holding gains (losses) arising during the period | (4 | ) | (1 | ) | 3 | (2 | ) | |||||||||||
Recognition of previously unrealized losses on available-for-sale securities, net | 1 | 1 | — | 2 | ||||||||||||||
Share of other comprehensive losses of equity affiliates | (15 | ) | — | — | (15 | ) | ||||||||||||
Other comprehensive loss from discontinued operations | — | (1 | ) | — | (1 | ) | ||||||||||||
Other | 17 | — | — | 17 | ||||||||||||||
Other comprehensive earnings (loss) | (88 | ) | (1 | ) | 3 | (86 | ) | |||||||||||
Comprehensive earnings (loss) | (136 | ) | 80 | (157 | ) | (213 | ) | |||||||||||
Less comprehensive loss attributable to the noncontrolling interests | (4 | ) | — | — | (4 | ) | ||||||||||||
Comprehensive earnings (loss) attributable to Liberty Media Corporation shareholders | $ | (132 | ) | 80 | (157 | ) | (209 | ) | ||||||||||
7
STATEMENT OF CASH FLOWS INFORMATION
Three months ended March 31, 2010
(unaudited)
| | Attributed (note 1) | | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Interactive Group | Starz Group | Capital Group | Consolidated Liberty | ||||||||||||
| | amounts in millions | |||||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net earnings | $ | 320 | 57 | 22 | 399 | |||||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 141 | 5 | 16 | 162 | ||||||||||||
Stock-based compensation | 22 | 6 | 11 | 39 | ||||||||||||
Cash payments for stock based compensation | — | (28 | ) | (1 | ) | (29 | ) | |||||||||
Noncash interest expense | 25 | — | — | 25 | ||||||||||||
Share of losses (earnings) of affiliates, net | (23 | ) | — | 14 | (9 | ) | ||||||||||
Cash receipts from return on equity investments | — | — | 5 | 5 | ||||||||||||
Realized and unrealized gains (losses) on financial instruments, net | (25 | ) | 1 | (143 | ) | (167 | ) | |||||||||
Losses (gains) on disposition of assets, net | (364 | ) | — | 1 | (363 | ) | ||||||||||
Intergroup tax allocation | 81 | 24 | (105 | ) | — | |||||||||||
Intergroup tax payments | (72 | ) | 43 | 29 | — | |||||||||||
Deferred income tax expense | 42 | 11 | 38 | 91 | ||||||||||||
Other noncash charges, net | 28 | 4 | 11 | 43 | ||||||||||||
Changes in operating assets and liabilities | ||||||||||||||||
Current and other assets | 204 | (58 | ) | (47 | ) | 99 | ||||||||||
Payables and other current liabilities | (216 | ) | 26 | 232 | 42 | |||||||||||
Net cash provided by operating activities | 163 | 91 | 83 | 337 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Cash proceeds from dispositions | 451 | 29 | 29 | 509 | ||||||||||||
Proceeds from settlement of financial instruments | (31 | ) | — | 445 | 414 | |||||||||||
Investments in and loans to cost and equity investees | — | — | (176 | ) | (176 | ) | ||||||||||
Repayment of loan by equity investee | — | — | 25 | 25 | ||||||||||||
Capital expended for property and equipment | (59 | ) | — | (2 | ) | (61 | ) | |||||||||
Net sales of short term investments | — | — | 35 | 35 | ||||||||||||
Net increase in restricted cash | (1 | ) | (20 | ) | (23 | ) | (44 | ) | ||||||||
Reattribution of cash | 807 | — | (807 | ) | — | |||||||||||
Other investing activities, net | (8 | ) | — | — | (8 | ) | ||||||||||
Net cash provided (used) by investing activities | 1,159 | 9 | (474 | ) | 694 | |||||||||||
Cash flows from financing activities: | ||||||||||||||||
Borrowings of debt | 1,021 | — | 38 | 1,059 | ||||||||||||
Repayments of debt | (1,142 | ) | (1 | ) | (524 | ) | (1,667 | ) | ||||||||
Intergroup debt borrowings/(repayments) | (316 | ) | 158 | 158 | — | |||||||||||
Repurchases of Liberty common stock | — | (40 | ) | (4 | ) | (44 | ) | |||||||||
Other financing activities, net | (27 | ) | (6 | ) | 46 | 13 | ||||||||||
Net cash provided (used) by financing activities | (464 | ) | 111 | (286 | ) | (639 | ) | |||||||||
Effect of foreign currency rates on cash | (11 | ) | — | — | (11 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 847 | 211 | (677 | ) | 381 | |||||||||||
Cash and cash equivalents at beginning of period | 884 | 794 | 3,157 | 4,835 | ||||||||||||
Cash and cash equivalents at end period | $ | 1,731 | 1,005 | 2,480 | 5,216 | |||||||||||
8
STATEMENT OF CASH FLOWS INFORMATION
Three months ended March 31, 2009
(unaudited)
| | Attributed (note 1) | | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Interactive Group | Starz Group | Capital Group | Consolidated Liberty | |||||||||||||
| | amounts in millions | ||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||
Net earnings (loss) | $ | (48 | ) | 81 | (160 | ) | (127 | ) | |||||||||
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | |||||||||||||||||
Earnings from discontinued operations | — | (21 | ) | — | (21 | ) | |||||||||||
Depreciation and amortization | 147 | 6 | 20 | 173 | |||||||||||||
Stock-based compensation | 10 | 17 | 1 | 28 | |||||||||||||
Noncash interest expense | 18 | — | — | 18 | |||||||||||||
Share of losses of affiliates, net | 95 | 2 | 8 | 105 | |||||||||||||
Realized and unrealized losses (gains) on financial instruments, net | 72 | (7 | ) | 199 | 264 | ||||||||||||
Losses on disposition of assets, net | 2 | — | — | 2 | |||||||||||||
Intergroup tax allocation | 37 | 32 | (69 | ) | — | ||||||||||||
Intergroup tax payments | (71 | ) | (5 | ) | 76 | — | |||||||||||
Other intergroup cash transfers, net | (1 | ) | (5 | ) | 6 | — | |||||||||||
Deferred income tax benefit | (102 | ) | (17 | ) | (82 | ) | (201 | ) | |||||||||
Other noncash charges, net | 12 | 8 | 19 | 39 | |||||||||||||
Changes in operating assets and liabilities, net of the effects of acquisitions: | |||||||||||||||||
Current assets | 250 | (4 | ) | 12 | 258 | ||||||||||||
Payables and other current liabilities | (314 | ) | (36 | ) | 52 | (298 | ) | ||||||||||
Net cash provided by operating activities | 107 | 51 | 82 | 240 | |||||||||||||
Cash flows from investing activities: | |||||||||||||||||
Cash proceeds from dispositions | 70 | — | 1 | 71 | |||||||||||||
Proceeds from settlement of financial instruments | — | 21 | 40 | 61 | |||||||||||||
Investments in and loans to cost and equity investees | (8 | ) | — | (410 | ) | (418 | ) | ||||||||||
Capital expenditures | (30 | ) | — | (5 | ) | (35 | ) | ||||||||||
Net sales of short term investments | — | — | 35 | 35 | |||||||||||||
Net decrease in restricted cash | 5 | — | 7 | 12 | |||||||||||||
Other investing activities, net | 2 | (11 | ) | (2 | ) | (11 | ) | ||||||||||
Net cash provided (used) by investing activities | 39 | 10 | (334 | ) | (285 | ) | |||||||||||
Cash flows from financing activities: | |||||||||||||||||
Borrowings of debt | 16 | — | 1,954 | 1,970 | |||||||||||||
Repayments of debt | (8 | ) | (1 | ) | (346 | ) | (355 | ) | |||||||||
Repurchases of Liberty common stock | — | — | (3 | ) | (3 | ) | |||||||||||
Other financing activities, net | (18 | ) | — | (4 | ) | (22 | ) | ||||||||||
Net cash provided (used) by financing activities | (10 | ) | (1 | ) | 1,601 | 1,590 | |||||||||||
Effect of foreign currency rates on cash | (29 | ) | (8 | ) | — | (37 | ) | ||||||||||
Net cash provided by discontinued operations: | |||||||||||||||||
Cash provided by operating activities | — | 5 | — | 5 | |||||||||||||
Cash provided by investing activities | — | 10 | — | 10 | |||||||||||||
Cash provided by financing activities | — | — | — | — | |||||||||||||
Change in available cash held by discontinued operations | — | 27 | — | 27 | |||||||||||||
Net cash provided by discontinued operations | — | 42 | — | 42 | |||||||||||||
Net increase in cash and cash equivalents | 107 | 94 | 1,349 | 1,550 | |||||||||||||
Cash and cash equivalents at beginning of period | 832 | 732 | 1,496 | 3,060 | |||||||||||||
Cash and cash equivalents at end period | $ | 939 | 826 | 2,845 | 4,610 | ||||||||||||
9
Notes to Attributed Financial Information
(unaudited)
- (1)
- The assets attributed to our Interactive Group include our consolidated subsidiaries QVC, Inc., Provide Commerce, Inc., Backcountry.com, Inc., Bodybuilding.com, LLC and BuySeasons, Inc., and our interests in IAC/InterActiveCorp, GSI Commerce, Inc., Expedia, Inc., HSN, Inc., Interval Leisure Group, Inc. and Tree.com, Inc. Accordingly, the accompanying attributed financial information for the Interactive Group includes our investments in IAC/InterActiveCorp, Expedia, GSI, HSN, Interval and Lending Tree, as well as the assets, liabilities, revenue, expenses and cash flows of QVC, Provide, Backcountry, Bodybuilding and BuySeasons. We have also attributed certain of our debt obligations (and related interest expense) to the Interactive Group based upon a number of factors, including the cash flow available to the Interactive Group and its ability to pay debt service and our assessment of the optimal capitalization for the Interactive Group. The specific debt obligations attributed to each of the Interactive Group, the Starz Group and the Capital Group are described in note 4 below. In addition, we have allocated certain corporate general and administrative expenses among the Interactive Group, the Starz Group and the Capital Group as described in note 5 below.
- •
- the change in attribution from the Interactive Group to the Capital Group of Liberty's 14.6% ownership interest in Live Nation Entertainment, Inc.;
- •
- the change in attribution from the Capital Group to the Interactive Group of the following debt securities:
- •
- $469 million in principal amount of 4% Exchangeable Senior Debentures due 2029 (the "2029 Exchangeables");
- •
- $460 million in principal amount of 3.75% Exchangeable Senior Debentures due 2030 (the "2030 Exchangeables"); and
The Interactive Group focuses on video and on-line commerce businesses. Accordingly, we expect that businesses that we may acquire in the future that we believe are complementary to this strategy will also be attributed to the Interactive Group.
The Starz Group consists primarily of our subsidiary Starz Entertainment, LLC and approximately $720 million of corporate cash. Accordingly, the accompanying attributed financial information for the Starz Group includes these investments and the assets, liabilities, revenue, expenses and cash flows of these consolidated subsidiaries.
The Starz Group focuses primarily on video programming. Accordingly, we expect that businesses we may acquire in the future that we believe are complementary to this strategy will also be attributed to the Starz Group.
The Capital Group consists of all of our businesses not included in the Interactive Group or the Starz Group, including our consolidated subsidiaries Starz Media, LLC, Atlanta National League Baseball Club, Inc., TruePosition, Inc. and certain cost and equity investments. Accordingly, the accompanying attributed financial information for the Capital Group includes these investments and the assets, liabilities, revenue, expenses and cash flows of these consolidated subsidiaries. In addition, we have attributed to the Capital Group all of our notes and debentures (and related interest expense) that have not been attributed to the Interactive Group or the Starz Group. See note 4 below for the debt obligations attributed to the Capital Group.
On February 25, 2010, Liberty announced that its board of directors had resolved to effect the following changes in attribution between the Capital Group and the Interactive Group, effective immediately (the "Reattribution"):
10
Notes to Attributed Financial Information (Continued)
(unaudited)
- •
- $492 million in principal amount of 3.5% Exchangeable Senior Debentures due 2031 (the "2031 Exchangeables", and together with the 2029 Exchangeables and the 2030 Exchangeables, the "Exchangeable Notes");
- •
- the change in attribution from the Capital Group to the Interactive Group of approximately $830 million in net taxable income to be recognized ratably in tax years 2014 through 2018 as a result of the cancellation in April 2009 of $400 million in principal amount of 2029 Exchangeables and $350 million in principal amount of 2030 Exchangeables; and
- •
- the change in attribution from the Capital Group to the Interactive Group of $807 million in cash.
Liberty has accounted for the Reattribution prospectively. This change in attribution had no effect on the assets and liabilities attributed to the Starz Group.
The reattribution between the groups resulted in the following impact to attributed net assets:
| | Interactive Group increase (decrease) | Capital Group increase (decrease) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| | amounts in millions | ||||||||||
Assets: | |||||||||||
Cash | $ | 807 | (807 | ) | |||||||
Investment in available-for-sale securities | (307 | ) | 307 | ||||||||
Net increase (decrease) to assets | 500 | (500 | ) | ||||||||
Liabilities (including accumulated other comprehensive earnings: | |||||||||||
Exchangeable senior debentures (including accrued interest) | 767 | (767 | ) | ||||||||
Deferred tax liabilities | 1,048 | (1,048 | ) | ||||||||
Accumulated other comprehensive earnings | (30 | ) | 30 | ||||||||
Net increase (decrease) to liabilities | 1,785 | (1,785 | ) | ||||||||
Impact to attributed net assets | $ | (1,285 | ) | 1,285 | |||||||
The assets and liabilities were reattributed at their book values versus the estimated fair values of those assets and liabilities that were considered by our board of directors, among other factors, in approving the reattribution. As a result, on a book value basis there is a transfer of net assets between the tracking stocks of $1,285 million. The principal reasons for the difference between fair value and book value is (i) the deferred tax liabilities under GAAP are required to be carried at the gross undiscounted basis difference multiplied by the company's effective tax rate whereas on a fair value basis, these future tax liabilities are not expected to be incurred for many years and therefore their present discounted value is substantially less, and (ii) the senior exchangeables are expected to continue to generate interest deductions for tax purposes in excess of the annual cash coupon over their remaining life, the present value of which is not reflected in the book values of the reattributed assets and liabilities.
Any businesses that we may acquire in the future that are not attributed to the Interactive Group or the Entertainment Group will be attributed to the Capital Group.
While we believe the allocation methodology described above is reasonable and fair to each group, we may elect to change the allocation methodology in the future. In the event we elect to transfer
11
Notes to Attributed Financial Information (Continued)
(unaudited)
assets or businesses from one group to the other, such transfer would be made on a fair value basis and would be accounted for as a short-term loan unless our board of directors determines to account for it as a long-term loan or through an inter-group interest.
During the second quarter of 2009, each of the Starz Group and the Capital Group made intergroup loans to the Interactive Group in the amount of $250 million. Such loans (i) are secured by various public stocks attributed to the Interactive Group, (ii) accrue interest quarterly at the rate of LIBOR plus 500 basis points and (iii) are due June 16, 2010. In the first quarter of 2010, the Interactive Group repaid the remaining balance of the intergroup loans by making payments of $158 million to each of the Starz Group and the Capital Group.
- (2)
- Investments in available-for-sale securities, including non-strategic securities, and other cost investments are summarized as follows:
| | March 31, 2010 | December 31, 2009 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | amounts in millions | |||||||||
Capital Group | ||||||||||
Time Warner Inc.(a) | $ | 1,070 | 997 | |||||||
Time Warner Cable Inc.(a) | 458 | 356 | ||||||||
Sprint Nextel Corporation(a) | 270 | 260 | ||||||||
Motorola, Inc.(a) | 364 | 403 | ||||||||
Viacom, Inc. | 261 | 226 | ||||||||
Live Nation Entertainment, Inc.(b) | 360 | — | ||||||||
CenturyTel, Inc./Embarq Corporation(a) | 191 | 195 | ||||||||
Other available-for-sale equity securities(a) | 218 | 220 | ||||||||
Sirius debt securities(c) | 450 | 300 | ||||||||
Other available-for-sale debt securities | 379 | 376 | ||||||||
Other cost investments and related receivables | 22 | 22 | ||||||||
Total attributed Capital Group | 4,043 | 3,355 | ||||||||
Interactive Group | ||||||||||
IAC/InterActiveCorp(d) | 292 | 492 | ||||||||
Other(e) | 7 | 242 | ||||||||
Total attributed Interactive Group | 299 | 734 | ||||||||
Starz Group | ||||||||||
Other | 1 | 31 | ||||||||
Total attributed Starz Group | 1 | 31 | ||||||||
Consolidated Liberty | $ | 4,343 | 4,120 | |||||||
- (a)
- Includes shares pledged as collateral for share borrowing arrangements.
- (b)
- On January 25, 2010, Live Nation, Inc. and Ticketmaster Entertainment, Inc. completed a merger transaction. Liberty owned approximately 29% of the outstanding common stock of Ticketmaster and received 1.474 shares of Live Nation Entertainment, Inc. for each share of Ticketmaster. As a result of the merger Liberty now owns approximately 15% of combined entity and accounts for the new investment as an AFS security. Liberty recorded the transaction at fair value and recorded a $178 million gain. At the time of the merger that
12
Notes to Attributed Financial Information (Continued)
(unaudited)
investment was attributed to the Interactive Group. As a result of the reattribution the Live Nation investment is attributed to the Capital Group.
- (c)
- During the three months ended March 31, 2010 Liberty acquired $150 million of Sirius 8.75% bonds due April 15, 2015 at par.
- (d)
- During the three months ended March 31, 2010, Liberty sold approximately 3.7 million shares of IAC in the open market for cash proceeds of approximately $77 million. Liberty also physically settled a derivative by delivering 7.5 million shares of IAC for proceeds of $153 million. The combined gain on the disposition of IAC shares, recorded in gains (losses) on dispositions, net was $53 million.
- (e)
- During the three months ended March 31, 2010, QVC sold its investment in GSI Commerce for aggregate cash proceeds of $220 million. QVC recognized a $132 million gain on the sale.
- (3)
- The following table presents information regarding certain equity method investments:
| | | | | Share of earnings (losses) three months ended March 31, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | March 31, 2010 | ||||||||||||||||
| | Percentage ownership | Carrying value | Market value | ||||||||||||||
| | 2010 | 2009 | |||||||||||||||
| | dollar amounts in millions | ||||||||||||||||
Interactive Group | |||||||||||||||||
Expedia | 24 | % | $ | 634 | $ | 1,727 | $ | 14 | $ | 9 | |||||||
Capital Group | |||||||||||||||||
Sirius(a) | 40 | % | $ | 22 | $ | 2,251 | $ | (8 | ) | $ | — | ||||||
- (a)
- As of March 31, 2010, the Sirius Preferred Stock had a market value of $2,251 million based on the value of the common stock into which it is convertible.
13
Notes to Attributed Financial Information (Continued)
(unaudited)
- (4)
- Debt attributed to the Interactive Group, the Starz Group and the Capital Group is comprised of the following:
| | March 31, 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| | Outstanding principal | Carrying value | |||||||
| | amounts in millions | ||||||||
Capital Group | |||||||||
3.125% Exchangeable Senior Debentures due 2023 | $ | 1,138 | 1,211 | ||||||
Liberty bank facility | 750 | 750 | |||||||
Liberty derivative loan | 379 | 379 | |||||||
Subsidiary debt | 106 | 106 | |||||||
Total attributed Capital Group debt | 2,373 | 2,446 | |||||||
Interactive Group | |||||||||
5.7% Senior Notes due 2013 | 803 | 801 | |||||||
8.5% Senior Debentures due 2029 | 287 | 284 | |||||||
8.25% Senior Debentures due 2030 | 504 | 501 | |||||||
4% Exchangeable Senior Debentures due 2029 | 469 | 248 | |||||||
3.75% Exchangeable Senior Debentures due 2030 | 460 | 230 | |||||||
3.5% Exchangeable Senior Debentures due 2031 | 492 | 295 | |||||||
3.25% Exchangeable Senior Debentures due 2031 | 541 | 338 | |||||||
QVC 7.125% Senior Secured Notes due 2017 | 500 | 500 | |||||||
QVC 7.5% Senior Secured Notes due 2019 | 1,000 | 984 | |||||||
QVC 7.375% Senior Secured Notes due 2020 | 500 | 500 | |||||||
QVC bank credit facilities | 1,996 | 1,996 | |||||||
Other subsidiary debt | 64 | 64 | |||||||
Total attributed Interactive Group debt | 7,616 | 6,741 | |||||||
Starz Group | |||||||||
Subsidiary debt | 47 | 47 | |||||||
Total attributed Starz Group debt | 47 | 47 | |||||||
Total debt | $ | 10,036 | 9,234 | ||||||
- (5)
- Cash and stock-based compensation expense for our corporate employees has been allocated among the Interactive Group, the Starz Group and the Capital Group based on the estimated percentage of time spent providing services for each group. Other general and administrative expenses are charged directly to the groups whenever possible and are otherwise allocated based on estimated usage or some other reasonably determined methodology. Amounts allocated from the Capital Group to the Interactive Group and the Starz Group, including stock-based compensation, are as follows:
| | Three months ended March 31, | ||||||
|---|---|---|---|---|---|---|---|
| | 2010 | 2009 | |||||
| | amounts in millions | ||||||
Interactive Group | $ | 17 | 6 | ||||
Starz Group | $ | 4 | 16 | ||||
14
Notes to Attributed Financial Information (Continued)
(unaudited)
While we believe that this allocation method is reasonable and fair to each group, we may elect to change the allocation methodology or percentages used to allocate general and administrative expenses in the future.
- (6)
- We have accounted for income taxes for the Interactive Group, the Starz Group and the Capital Group in the accompanying attributed financial information in a manner similar to a stand-alone company basis. To the extent this methodology differs from our tax sharing policy, differences have been reflected in the attributed net assets of the groups.
- (7)
- The Liberty Interactive common stock, the Liberty Starz common stock and the Liberty Capital common stock have voting and conversion rights under our amended charter. Following is a summary of those rights. Holders of Series A common stock of each group are entitled to one vote per share and holders of Series B common stock of each group are entitled to ten votes per share. Holders of Series C common stock of each group, if issued, will be entitled to 1/100th of a vote per share in certain limited cases and will otherwise not be entitled to vote. In general, holders of Series A and Series B common stock vote as a single class. In certain limited circumstances, the board may elect to seek the approval of only the holders of common stock related to our Interactive Group, our Starz Group or our Capital Group.
At the option of the holder, each share of Series B common stock is convertible into one share of Series A common stock of the same group. At the discretion of our board, the common stock related to one group may be converted into common stock of the same series that is related to one of our other groups.
15
Attributed Financial Information for Tracking Stock Groups
SUMMARY ATTRIBUTED FINANCIAL DATA
STATEMENT OF CASH FLOWS INFORMATION Three months ended March 31, 2010 (unaudited)
STATEMENT OF CASH FLOWS INFORMATION Three months ended March 31, 2009 (unaudited)
Notes to Attributed Financial Information (unaudited)