Unaudited 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, Celebrate Interactive Holdings, Inc. and our interest in HSN, Inc. Our Liberty Ventures common stock is intended to reflect the separate performance of our Ventures Group which consists of all of our businesses not included in the Interactive Group including our consolidated subsidiary TripAdvisor, Inc. ("TripAdvisor"), as of December 11, 2012, and our interest in equity method investments of Expedia, Inc., Interval Leisure Group, Inc. and Tree.com, Inc. and available-for-sale securities Time Warner, Time Warner Cable and AOL.
The following tables present our assets and liabilities as of December 31, 2012 and 2011 and revenue, expenses and cash flows for the three years ended December 31, 2012, 2011 and 2010. The tables further present our assets, liabilities, revenue, expenses and cash flows that are attributed to the Interactive Group and the Ventures Group, respectively, as if those businesses and assets had been attributed to those respective groups at the beginning of each period, for comparative purposes. Therefore, the attributed earnings in the periods presented in the Unaudited Attributed Financial Information Statements are not the same as those reflected in the Liberty Interactive Corporation consolidated financial statements. The earnings attributed to the Liberty Interactive common stock and Liberty Ventures common stock for purposes of those financial statements only relate to the periods after the tracking stocks were issued. The financial information in this Exhibit should be read in conjunction with our consolidated financial statements for the year ended December 31, 2012 included in this Annual Report on Form 10-K.
Notwithstanding the following attribution of assets, liabilities, revenue, expenses and cash flows to the Interactive Group and the Ventures 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 and Liberty Ventures 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 and Liberty Ventures common stock does not affect the rights of our creditors or creditors of our subsidiaries.
SUMMARY ATTRIBUTED FINANCIAL DATA
Interactive Group
|
| | | | | | |
| | December 31, 2012 | | December 31, 2011 |
| | amounts in millions |
| Summary balance sheet data: | | | |
| Current assets | $ | 3,141 |
| | 3,275 |
|
| Investments in affiliates, accounted for using the equity method | $ | 304 |
| | 230 |
|
| Intangible assets not subject to amortization, net | $ | 8,431 |
| | 8,496 |
|
| Total assets | $ | 15,115 |
| | 15,424 |
|
| Long-term debt | $ | 4,277 |
| | 3,575 |
|
| Long-term deferred income tax liabilities | $ | 1,318 |
| | 1,493 |
|
| Attributed net assets | $ | 7,011 |
| | 8,464 |
|
|
| | | | | | | | | |
| | Years ended December 31, |
| | 2012 | | 2011 | | 2010 |
| | amounts in millions |
| Summary operations data: | | | | | |
| Revenue | $ | 10,018 |
| | 9,616 |
| | 8,932 |
|
| Cost of sales | (6,396 | ) | | (6,114 | ) | | (5,705 | ) |
| Operating expenses | (833 | ) | | (866 | ) | | (799 | ) |
| Selling, general and administrative expenses (1) | (977 | ) | | (858 | ) | | (746 | ) |
| Impairment of intangible assets | (92 | ) | | — |
| | — |
|
| Depreciation and amortization | (596 | ) | | (641 | ) | | (571 | ) |
| Operating income (loss) | 1,124 |
| | 1,137 |
| | 1,111 |
|
| Interest expense | (322 | ) | | (317 | ) | | (515 | ) |
| Share of earnings (losses) of affiliates, net | 28 |
| | 23 |
| | 8 |
|
| Realized and unrealized gains (losses) on financial instruments, net | 51 |
| | 75 |
| | 117 |
|
| Other income (expense), net | — |
| | 15 |
| | 311 |
|
| Income tax benefit (expense) | (352 | ) | | (353 | ) | | (160 | ) |
| Earnings (loss) from continuing operations | 529 |
| | 580 |
| | 872 |
|
| Earnings (loss) from discontinued operations, net of taxes | — |
| | 378 |
| | 1,101 |
|
| Net earnings (loss) | 529 |
| | 958 |
| | 1,973 |
|
| Less net earnings (loss) attributable to noncontrolling interests | 63 |
| | 53 |
| | 45 |
|
| Net earnings (loss) attributable to Liberty Interactive Corporation shareholders | $ | 466 |
| | 905 |
| | 1,928 |
|
______________________________________________
| |
| (1) | Includes stock-based compensation of $85 million, $49 million and $67 million for the years ended December 31, 2012, 2011 and 2010, respectively. |
SUMMARY ATTRIBUTED FINANCIAL DATA (Continued)
Ventures Group
|
| | | | | | |
| | December 31, 2012 | | December 31, 2011 |
| | amounts in millions |
| Summary balance sheet data: | | | |
| Cash and cash equivalents | $ | 1,961 |
| | — |
|
| Investments in available-for-sale securities and other cost investments | $ | 1,815 |
| | 1,165 |
|
| Investments in affiliates, accounted for using the equity method | $ | 547 |
| | 905 |
|
| Intangible assets not subject to amortization, net | $ | 5,449 |
| | — |
|
| Long-term debt, including current portion | $ | 3,342 |
| | 2,443 |
|
| Deferred tax liabilities, including current portion | $ | 2,959 |
| | 1,559 |
|
| Attributed net assets (liabilities) | $ | 551 |
| | (1,971 | ) |
|
| | | | | | | | | |
| | Years ended December 31, |
| | 2012 | | 2011 | | 2010 |
| | amounts in millions |
| Summary operations data: | | | | | |
| Revenue | $ | 36 |
| | — |
| | — |
|
| Operating expenses | (7 | ) | | — |
| | — |
|
| Selling, general and administrative expenses (1) | (32 | ) | | (4 | ) | | (3 | ) |
| Depreciation and amortization | (13 | ) | | — |
| | — |
|
| Operating income (loss) | (16 | ) | | (4 | ) | | (3 | ) |
| Interest expense | (110 | ) | | (110 | ) | | (111 | ) |
| Share of earnings (losses) of affiliates, net | 57 |
| | 117 |
| | 104 |
|
| Realized and unrealized gains (losses) on financial instruments, net | (402 | ) | | 9 |
| | (55 | ) |
| Gains (losses) on transactions, net | 1,531 |
| | — |
| | — |
|
| Other, net | 44 |
| | (6 | ) | | (3 | ) |
| Income tax benefit (expense) | (42 | ) | | 1 |
| | 32 |
|
| Net earnings (loss) | 1,062 |
| | 7 |
| | (36 | ) |
| Less net earnings (loss) attributable to noncontrolling interests | (2 | ) | | — |
| | — |
|
| Net earnings (loss) attributable to Liberty Interactive Corporation shareholders | $ | 1,064 |
| | 7 |
| | (36 | ) |
______________________________________________
| |
| (1) | Includes stock-based compensation of $6 million, zero and zero for the years ended December 31, 2012, 2011 and 2010, respectively. |
BALANCE SHEET INFORMATION
December 31, 2012
(unaudited)
|
| | | | | | | | | | | | |
| | Attributed (note 1) | | | | |
| | Interactive Group | | Ventures Group | | Inter-group eliminations | | Consolidated Liberty |
| | amounts in millions |
| Assets | | | | | | | |
| Current assets: | | | | | | | |
| Cash and cash equivalents | $ | 699 |
| | 1,961 |
| | — |
| | 2,660 |
|
| Trade and other receivables, net | 1,095 |
| | 106 |
| | — |
| | 1,201 |
|
| Inventory, net | 1,106 |
| | — |
| | — |
| | 1,106 |
|
| Other current assets | 241 |
| | 206 |
| | (156 | ) | | 291 |
|
| Total current assets | 3,141 |
| | 2,273 |
| | (156 | ) | | 5,258 |
|
| Investments in available-for-sale securities and other cost investments (note 2) | 4 |
| | 1,815 |
| | — |
| | 1,819 |
|
| Investments in affiliates, accounted for using the equity method (note 3) | 304 |
| | 547 |
| | — |
| | 851 |
|
| Property and equipment, net | 1,220 |
| | 15 |
| | — |
| | 1,235 |
|
| Intangible assets not subject to amortization, net | 8,431 |
| | 5,449 |
| | — |
| | 13,880 |
|
| Intangible assets subject to amortization, net | 1,934 |
| | 1,183 |
| | — |
| | 3,117 |
|
| Other assets, at cost, net of accumulated amortization | 81 |
| | 14 |
| | — |
| | 95 |
|
| Total assets | $ | 15,115 |
| | 11,296 |
| | (156 | ) | | 26,255 |
|
| Liabilities and Equity | | | | | | | |
| Current liabilities: | | | | | | | |
| Intergroup payable (receivable) | $ | 70 |
| | (70 | ) | | — |
| | — |
|
| Accounts payable | 705 |
| | 14 |
| | — |
| | 719 |
|
| Accrued liabilities | 819 |
| | 99 |
| | — |
| | 918 |
|
| Current portion of debt (note 4) | 265 |
| | 1,373 |
| | — |
| | 1,638 |
|
| Deferred tax liabilities | — |
| | 1,068 |
| | (156 | ) | | 912 |
|
| Other current liabilities | 267 |
| | 35 |
| | — |
| | 302 |
|
| Total current liabilities | 2,126 |
| | 2,519 |
| | (156 | ) | | 4,489 |
|
| Long-term debt (note 4) | 4,277 |
| | 1,969 |
| | — |
| | 6,246 |
|
| Deferred income tax liabilities | 1,318 |
| | 1,891 |
| | — |
| | 3,209 |
|
| Other liabilities | 234 |
| | 26 |
| | — |
| | 260 |
|
| Total liabilities | 7,955 |
| | 6,405 |
| | (156 | ) | | 14,204 |
|
| Equity/Attributed net assets (liabilities) | 7,011 |
| | 551 |
| | — |
| | 7,562 |
|
| Noncontrolling interests in equity of subsidiaries | 149 |
| | 4,340 |
| | — |
| | 4,489 |
|
| Total liabilities and equity | $ | 15,115 |
| | 11,296 |
| | (156 | ) | | 26,255 |
|
BALANCE SHEET INFORMATION
December 31, 2011
(unaudited)
|
| | | | | | | | | | | | |
| | Attributed (note 1) | | | | |
| | Interactive Group | | Ventures Group | | Inter-group eliminations | | Consolidated Liberty |
| | amounts in millions |
| Assets | | | | | | | |
| Current assets: | | | | | | | |
| Cash and cash equivalents | $ | 847 |
| | — |
| | — |
| | 847 |
|
| Trade and other receivables, net | 1,054 |
| | — |
| | — |
| | 1,054 |
|
| Inventory, net | 1,071 |
| | — |
| | — |
| | 1,071 |
|
| Deferred tax assets | 155 |
| | — |
| | (155 | ) | | — |
|
| Other current assets | 148 |
| | — |
| | — |
| | 148 |
|
| Total current assets | 3,275 |
| | — |
| | (155 | ) | | 3,120 |
|
| Investments in available-for-sale securities and other cost investments (note 2) | 3 |
| | 1,165 |
| | — |
| | 1,168 |
|
| Investments in affiliates, accounted for using the equity method (note 3) | 230 |
| | 905 |
| | — |
| | 1,135 |
|
| Property and equipment, net | 1,133 |
| | — |
| | — |
| | 1,133 |
|
| Intangible assets not subject to amortization, net | 8,496 |
| | — |
| | — |
| | 8,496 |
|
| Intangible assets subject to amortization, net | 2,209 |
| | — |
| | — |
| | 2,209 |
|
| Other assets, at cost, net of accumulated amortization | 78 |
| | — |
| | — |
| | 78 |
|
| Total assets | $ | 15,424 |
| | 2,070 |
| | (155 | ) | | 17,339 |
|
| Liabilities and Equity | | | | | | | |
| Current liabilities: | | | | | | | |
| Intergroup payable (receivable) | — |
| | — |
| | — |
| | — |
|
| Accounts payable | $ | 599 |
| | — |
| | — |
| | 599 |
|
| Accrued liabilities | 762 |
| | 39 |
| | — |
| | 801 |
|
| Current portion of debt (note 4) | 21 |
| | 1,168 |
| | — |
| | 1,189 |
|
| Deferred tax liabilities | — |
| | 1,006 |
| | (155 | ) | | 851 |
|
| Other current liabilities | 128 |
| | — |
| | — |
| | 128 |
|
| Total current liabilities | 1,510 |
| | 2,213 |
| | (155 | ) | | 3,568 |
|
| Long-term debt (note 4) | 3,575 |
| | 1,275 |
| | — |
| | 4,850 |
|
| Deferred income tax liabilities | 1,493 |
| | 553 |
| | — |
| | 2,046 |
|
| Other liabilities | 248 |
| | — |
| | — |
| | 248 |
|
| Total liabilities | 6,826 |
| | 4,041 |
| | (155 | ) | | 10,712 |
|
| Equity/Attributed net assets (liabilities) | 8,464 |
| | (1,971 | ) | | — |
| | 6,493 |
|
| Noncontrolling interests in equity of subsidiaries | 134 |
| | — |
| | — |
| | 134 |
|
| Total liabilities and equity | $ | 15,424 |
| | 2,070 |
| | (155 | ) | | 17,339 |
|
STATEMENT OF OPERATIONS INFORMATION
Year ended December 31, 2012
(unaudited)
|
| | | | | | | | | |
| | Attributed (note 1) | | |
| | Interactive Group | | Ventures Group | | Consolidated Liberty |
| | amounts in millions |
| Revenue: | | | | | |
| Net retail sales | $ | 10,018 |
| | 36 |
| | 10,054 |
|
| Cost of sales | 6,396 |
| | — |
| | 6,396 |
|
| Gross Profit | 3,622 |
| | 36 |
| | 3,658 |
|
| Operating costs and expenses: | | | | | |
| Operating | 833 |
| | 7 |
| | 840 |
|
| Selling, general and administrative, including stock-based compensation (note 5) | 977 |
| | 32 |
| | 1,009 |
|
| Impairment of intangible assets | 92 |
| | — |
| | 92 |
|
| Depreciation and amortization | 596 |
| | 13 |
| | 609 |
|
| | 2,498 |
| | 52 |
| | 2,550 |
|
| Operating income (loss) | 1,124 |
| | (16 | ) | | 1,108 |
|
| Other income (expense): | | | | | |
| Interest expense | (322 | ) | | (110 | ) | | (432 | ) |
| Share of earnings (losses) of affiliates, net (note 3) | 28 |
| | 57 |
| | 85 |
|
| Realized and unrealized gains (losses) on financial instruments, net | 51 |
| | (402 | ) | | (351 | ) |
| Gains (losses) on transactions, net | — |
| | 1,531 |
| | 1,531 |
|
| Other, net | — |
| | 44 |
| | 44 |
|
| | (243 | ) | | 1,120 |
| | 877 |
|
| Earnings (loss) before income taxes | 881 |
| | 1,104 |
| | 1,985 |
|
| Income tax benefit (expense) | (352 | ) | | (42 | ) | | (394 | ) |
| Net earnings (loss) | 529 |
| | 1,062 |
| | 1,591 |
|
| Less net earnings (loss) attributable to noncontrolling interests | 63 |
| | (2 | ) | | 61 |
|
| Net earnings (loss) attributable to Liberty Interactive Corporation shareholders | $ | 466 |
| | 1,064 |
| | 1,530 |
|
STATEMENT OF OPERATIONS INFORMATION
Year ended December 31, 2011
(unaudited)
|
| | | | | | | | | |
| | Attributed (note 1) | | |
| | Interactive Group | | Ventures Group | | Consolidated Liberty |
| | amounts in millions |
| Revenue: | | | | | |
| Net retail sales | $ | 9,616 |
| | — |
| | 9,616 |
|
| Cost of sales | 6,114 |
| | — |
| | 6,114 |
|
| Gross Profit | 3,502 |
| | — |
| | 3,502 |
|
| Operating costs and expenses: | | | | | |
| Operating | 866 |
| | — |
| | 866 |
|
| Selling, general and administrative, including stock-based compensation (note 5) | 858 |
| | 4 |
| | 862 |
|
| Depreciation and amortization | 641 |
| | — |
| | 641 |
|
| | 2,365 |
| | 4 |
| | 2,369 |
|
| Operating income (loss) | 1,137 |
| | (4 | ) | | 1,133 |
|
| Other income (expense): | |
| | |
| | |
| Interest expense | (317 | ) | | (110 | ) | | (427 | ) |
| Share of earnings (losses) of affiliates, net (note 3) | 23 |
| | 117 |
| | 140 |
|
| Realized and unrealized gains (losses) on financial instruments, net | 75 |
| | 9 |
| | 84 |
|
| Other, net | 15 |
| | (6 | ) | | 9 |
|
| | (204 | ) | | 10 |
| | (194 | ) |
| Earnings (loss) from continuing operations before income taxes | 933 |
| | 6 |
| | 939 |
|
| Income tax benefit (expense) | (353 | ) | | 1 |
| | (352 | ) |
| Earnings (loss) from continuing operations | 580 |
| | 7 |
| | 587 |
|
| Earnings (loss) from discontinued operations, net of taxes | 378 |
| | — |
| | 378 |
|
| Net earnings (loss) | 958 |
| | 7 |
| | 965 |
|
| Less net earnings (loss) attributable to noncontrolling interests | 53 |
| | — |
| | 53 |
|
| Net earnings (loss) attributable to Liberty Interactive Corporation shareholders | $ | 905 |
| | 7 |
| | 912 |
|
STATEMENT OF OPERATIONS INFORMATION
Year ended December 31, 2010
(unaudited)
|
| | | | | | | | | |
| | Attributed (note 1) | | |
| | Interactive Group | | Ventures Group | | Consolidated Liberty |
| | amounts in millions |
| Revenue: | | | | | |
| Net retail sales | $ | 8,932 |
| | — |
| | 8,932 |
|
| Cost of sales | 5,705 |
| | — |
| | 5,705 |
|
| Gross Profit | 3,227 |
| | — |
| | 3,227 |
|
| Operating costs and expenses: | | | | | |
| Operating | 799 |
| | — |
| | 799 |
|
| Selling, general and administrative, including stock-based compensation (note 5) | 746 |
| | 3 |
| | 749 |
|
| Depreciation and amortization | 571 |
| | — |
| | 571 |
|
| | 2,116 |
| | 3 |
| | 2,119 |
|
| Operating income (loss) | 1,111 |
| | (3 | ) | | 1,108 |
|
| Other income (expense): | |
| | |
| | |
| Interest expense | (515 | ) | | (111 | ) | | (626 | ) |
| Share of earnings (losses) of affiliates, net (note 3) | 8 |
| | 104 |
| | 112 |
|
| Realized and unrealized gains (losses) on financial instruments, net | 117 |
| | (55 | ) | | 62 |
|
| Gains (losses) on transactions, net | 355 |
| | — |
| | 355 |
|
| Other, net | (44 | ) | | (3 | ) | | (47 | ) |
| | (79 | ) | | (65 | ) | | (144 | ) |
| Earnings (loss) before income taxes | 1,032 |
| | (68 | ) | | 964 |
|
| Income tax benefit (expense) | (160 | ) | | 32 |
| | (128 | ) |
| Earnings (loss) from continuing operations | 872 |
| | (36 | ) | | 836 |
|
| Earnings (loss) from discontinued operations, net of taxes | 1,101 |
| | — |
| | 1,101 |
|
| Net earnings (loss) | 1,973 |
| | (36 | ) | | 1,937 |
|
| Less net earnings (loss) attributable to noncontrolling interests | 45 |
| | — |
| | 45 |
|
| Net earnings (loss) attributable to Liberty Interactive Corporation shareholders | $ | 1,928 |
| | (36 | ) | | 1,892 |
|
STATEMENT OF CASH FLOWS INFORMATION
Year ended December 31, 2012
(unaudited)
|
| | | | | | | | | |
| | Attributed (note 1) | | |
| | Interactive Group | | Ventures Group | | Consolidated Liberty |
| | amounts in millions |
| Cash flows from operating activities: | | | | | |
| Net earnings (loss) | $ | 529 |
| | 1,062 |
| | 1,591 |
|
| Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | 596 |
| | 13 |
| | 609 |
|
| Stock-based compensation | 85 |
| | 6 |
| | 91 |
|
| Cash payments for stock-based compensation | (12 | ) | | — |
| | (12 | ) |
| Excess tax benefit from stock-based compensation | (56 | ) | | (8 | ) | | (64 | ) |
| Noncash interest expense | 9 |
| | — |
| | 9 |
|
| Share of losses (earnings) of affiliates, net | (28 | ) | | (57 | ) | | (85 | ) |
| Cash receipts from return on equity investments | 11 |
| | 34 |
| | 45 |
|
| Realized and unrealized gains (losses) on financial instruments, net | (51 | ) | | 402 |
| | 351 |
|
| (Gains) losses on transactions, net | — |
| | (1,531 | ) | | (1,531 | ) |
| Impairment of intangible assets | 92 |
| | — |
| | 92 |
|
| Deferred income tax (benefit) expense | (179 | ) | | 192 |
| | 13 |
|
| Other, net | — |
| | (30 | ) | | (30 | ) |
| Intergroup tax allocation | 152 |
| | (152 | ) | | — |
|
| Intergroup tax payments | (33 | ) | | 33 |
| | — |
|
| Changes in operating assets and liabilities | | | | | |
| Current and other assets | (78 | ) | | 8 |
| | (70 | ) |
| Payables and other current liabilities | 433 |
| | (10 | ) | | 423 |
|
| Net cash provided (used) by operating activities | 1,470 |
| | (38 | ) | | 1,432 |
|
| Cash flows from investing activities: | | | | | |
| Cash proceeds from dispositions | — |
| | 1,030 |
| | 1,030 |
|
| Proceeds from settlements of financial instruments, net | — |
| | (258 | ) | | (258 | ) |
| Investments in and loans to cost and equity investees | (59 | ) | | (177 | ) | | (236 | ) |
| Capital expended for property and equipment | (338 | ) | | (1 | ) | | (339 | ) |
| Net sales (purchases) of short term and other marketable securities | 46 |
| | (76 | ) | | (30 | ) |
| Other investing activities, net | (111 | ) | | 97 |
| | (14 | ) |
| Net cash provided (used) by investing activities | (462 | ) | | 615 |
| | 153 |
|
| Cash flows from financing activities: | | | | | |
| Borrowings of debt | 2,316 |
| | — |
| | 2,316 |
|
| Repayments of debt | (1,392 | ) | | (120 | ) | | (1,512 | ) |
| Proceeds from rights offering | — |
| | 328 |
| | 328 |
|
| Reattribution of cash between groups | (1,346 | ) | | 1,346 |
| | — |
|
| Intergroup receipts (payments), net | 162 |
| | (162 | ) | | — |
|
| Repurchases of Liberty common stock | (815 | ) | | — |
| | (815 | ) |
| Taxes paid in lieu of shares issued for stock-based compensation | (112 | ) | | (16 | ) | | (128 | ) |
| Excess tax benefit from stock-based compensation | 56 |
| | 8 |
| | 64 |
|
| Other financing activities, net | (5 | ) | | — |
| | (5 | ) |
| Net cash provided (used) by financing activities | (1,136 | ) | | 1,384 |
| | 248 |
|
| Effect of foreign currency rates on cash | (20 | ) | | — |
| | (20 | ) |
| Net increase (decrease) in cash and cash equivalents | (148 | ) | | 1,961 |
| | 1,813 |
|
| Cash and cash equivalents at beginning of period | 847 |
| | — |
| | 847 |
|
| Cash and cash equivalents at end period | $ | 699 |
| | 1,961 |
| | 2,660 |
|
STATEMENT OF CASH FLOWS INFORMATION
Year ended December 31, 2011
(unaudited)
|
| | | | | | | | | |
| | Attributed (note 1) | | |
| | Interactive Group | | Ventures Group | | Consolidated Liberty |
| | amounts in millions |
| Cash flows from operating activities: | | | | | |
| Net earnings (loss) | $ | 958 |
| | 7 |
| | 965 |
|
| Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | |
| (Earnings) loss from discontinued operations | (378 | ) | | — |
| | (378 | ) |
| Depreciation and amortization | 641 |
| | — |
| | 641 |
|
| Stock-based compensation | 49 |
| | — |
| | 49 |
|
| Cash payments for stock-based compensation | (3 | ) | | — |
| | (3 | ) |
| Excess tax benefit from stock-based compensation | (19 | ) | | — |
| | (19 | ) |
| Noncash interest expense | 4 |
| | 5 |
| | 9 |
|
| Share of losses (earnings) of affiliates, net | (23 | ) | | (117 | ) | | (140 | ) |
| Cash receipts from return on equity investments | 3 |
| | 19 |
| | 22 |
|
| Realized and unrealized gains (losses) on financial instruments, net | (75 | ) | | (9 | ) | | (84 | ) |
| Deferred income tax (benefit) expense | (109 | ) | | 153 |
| | 44 |
|
| Other, net | (20 | ) | | 15 |
| | (5 | ) |
| Intergroup tax allocation | 154 |
| | (154 | ) | | — |
|
| Changes in operating assets and liabilities | | | | | |
| Current and other assets | (174 | ) | | — |
| | (174 | ) |
| Payables and other current liabilities | (20 | ) | | (7 | ) | | (27 | ) |
| Net cash provided (used) by operating activities | 988 |
| | (88 | ) | | 900 |
|
| Cash flows from investing activities: | | | | | |
| Cash proceeds from dispositions | — |
| | — |
| | — |
|
| Investments in and loans to cost and equity investees | (56 | ) | | (9 | ) | | (65 | ) |
| Capital expended for property and equipment | (312 | ) | | — |
| | (312 | ) |
| Net sales (purchases) of short term and other marketable securities | (46 | ) | | — |
| | (46 | ) |
| Other investing activities, net | (14 | ) | | — |
| | (14 | ) |
| Net cash provided (used) by investing activities | (428 | ) | | (9 | ) | | (437 | ) |
| Cash flows from financing activities: | | | | | |
| Borrowings of debt | 383 |
| | — |
| | 383 |
|
| Repayments of debt | (788 | ) | | (111 | ) | | (899 | ) |
| Intergroup receipts (payments), net | (208 | ) | | 208 |
| | — |
|
| Repurchases of Liberty common stock | (366 | ) | | — |
| | (366 | ) |
| Taxes paid in lieu of shares issued for stock-based compensation | (5 | ) | | — |
| | (5 | ) |
| Excess tax benefit from stock-based compensation | 19 |
| | — |
| | 19 |
|
| Other financing activities, net | (48 | ) | | — |
| | (48 | ) |
| Net cash provided (used) by financing activities | (1,013 | ) | | 97 |
| | (916 | ) |
| Effect of foreign currency rates on cash | (4 | ) | | — |
| | (4 | ) |
| Net cash provided by (to) discontinued operations | | | | | |
| Cash provided (used) by operating activities | 304 |
| | — |
| | 304 |
|
| Cash provided (used) by investing activities | (104 | ) | | — |
| | (104 | ) |
| Cash provided (used) by financing activities | (264 | ) | | — |
| | (264 | ) |
| Change in available cash held by discontinued operations | 15 |
| | — |
| | 15 |
|
| Net cash provided by (to) discontinued operations | (49 | ) | | — |
| | (49 | ) |
| Net increase (decrease) in cash and cash equivalents | (506 | ) | | — |
| | (506 | ) |
| Cash and cash equivalents at beginning of period | 1,353 |
| | — |
| | 1,353 |
|
| Cash and cash equivalents at end period | $ | 847 |
| | — |
| | 847 |
|
STATEMENT OF CASH FLOWS INFORMATION
Year ended December 31, 2010
(unaudited)
|
| | | | | | | | | |
| | Attributed (note 1) | | |
| | Interactive Group | | Ventures Group | | Consolidated Liberty |
| | amounts in millions |
| Cash flows from operating activities: | | | | | |
| Net earnings (loss) | $ | 1,973 |
| | (36 | ) | | 1,937 |
|
| Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | |
| (Earnings) loss from discontinued operations | (1,101 | ) | | — |
| | (1,101 | ) |
| Depreciation and amortization | 571 |
| | — |
| | 571 |
|
| Stock-based compensation | 67 |
| | — |
| | 67 |
|
| Cash payments for stock-based compensation | (20 | ) | | — |
| | (20 | ) |
| Excess tax benefit from stock-based compensation | (86 | ) | | — |
| | (86 | ) |
| Noncash interest expense | 85 |
| | 5 |
| | 90 |
|
| Share of losses (earnings) of affiliates, net | (8 | ) | | (104 | ) | | (112 | ) |
| Cash receipts from return on equity investments | 2 |
| | 19 |
| | 21 |
|
| Realized and unrealized gains (losses) on financial instruments, net | (117 | ) | | 55 |
| | (62 | ) |
| (Gains) losses on transactions, net | (355 | ) | | — |
| | (355 | ) |
| Deferred income tax (benefit) expense | (144 | ) | | 82 |
| | (62 | ) |
| Other, net | 14 |
| | 8 |
| | 22 |
|
| Intergroup tax allocation | 114 |
| | (114 | ) | | — |
|
| Changes in operating assets and liabilities | | | | | |
| Current and other assets | 247 |
| | — |
| | 247 |
|
| Payables and other current liabilities | 46 |
| | — |
| | 46 |
|
| Net cash provided (used) by operating activities | 1,288 |
| | (85 | ) | | 1,203 |
|
| Cash flows from investing activities: | | | | | |
| Cash proceeds from dispositions | 459 |
| | — |
| | 459 |
|
| Proceeds from settlement of financial instruments, net | (28 | ) | | — |
| | (28 | ) |
| Cash received in exchange transaction | 218 |
| | — |
| | 218 |
|
| Capital expended for property and equipment | (258 | ) | | — |
| | (258 | ) |
| Other investing activities, net | (47 | ) | | — |
| | (47 | ) |
| Net cash provided (used) by investing activities | 344 |
| | — |
| | 344 |
|
| Cash flows from financing activities: | | | | | |
| Borrowings of debt | 2,974 |
| | — |
| | 2,974 |
|
| Repayments of debt | (4,787 | ) | | (4 | ) | | (4,791 | ) |
| Intergroup receipts (payments), net | (89 | ) | | 89 |
| | — |
|
| Excess tax benefit from stock-based compensation | 86 |
| | — |
| | 86 |
|
| Other financing activities, net | (83 | ) | | — |
| | (83 | ) |
| Net cash provided (used) by financing activities | (1,899 | ) | | 85 |
| | (1,814 | ) |
| Effect of foreign currency rates on cash | 14 |
| | — |
| | 14 |
|
| Net cash provided by (to) discontinued operations | | | | | |
| Cash provided (used) by operating activities | 88 |
| | — |
| | 88 |
|
| Cash provided (used) by investing activities | 7 |
| | — |
| | 7 |
|
| Cash provided (used) by financing activities | (1,498 | ) | | — |
| | (1,498 | ) |
| Change in available cash held by discontinued operations | 1,054 |
| | — |
| | 1,054 |
|
| Net cash provided by (to) discontinued operations | (349 | ) | | — |
| | (349 | ) |
| Net increase (decrease) in cash and cash equivalents | (602 | ) | | — |
| | (602 | ) |
| Cash and cash equivalents at beginning of period | 1,955 |
| | — |
| | 1,955 |
|
| Cash and cash equivalents at end period | $ | 1,353 |
| | — |
| | 1,353 |
|
Notes to Attributed Financial Information
(unaudited)
| |
| (1) | The Interactive Group is comprised of our consolidated subsidiaries QVC, Inc., Provide Commerce, Inc., Backcountry.com, Inc., Bodybuilding.com, LLC and Celebrate Interactive Holdings, Inc. and our interest in HSN, Inc. Accordingly, the accompanying attributed financial information for the Interactive Group includes the foregoing investment, as well as the assets, liabilities, revenue, expenses and cash flows of those consolidated subsidiaries. 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 and the Ventures Group are described in note 4 below. In addition, we have allocated certain corporate general and administrative expenses among the Interactive Group and the Ventures Group as described in note 5 below. |
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 Ventures Group consists of all of our businesses not included in the Interactive Group including our consolidated subsidiary TripAdvisor, Inc. ("TripAdvisor") and interests in equity method investments of Expedia, Inc., Interval Leisure Group, Inc. and Tree.com, Inc. and available-for-sale securities Time Warner, Time Warner Cable and AOL. Accordingly, the accompanying attributed financial information for the Ventures Group includes these investments, as well as the assets, liabilities, revenue, expenses and cash flows of TripAdvisor. In addition, we have attributed to the Ventures Group all of our senior exchangeable debentures (and related interest expense). See note 4 below for the debt obligations attributed to the Ventures Group.
Any businesses that we may acquire in the future that we do not attribute to the Interactive Group will be attributed to the Ventures Group.
At the time of issuance of Liberty Ventures common stock, cash of $1,346 million was reattributed to the Ventures Group from the Interactive Group. The Interactive Group borrowed funds under QVC's credit facility in connection with the completion of the recapitalization to have the appropriate amount of cash available to be attributed to each Group.
| |
| (2) | Investments in available-for-sale securities, including non-strategic securities, and other cost investments are summarized as follows: |
|
| | | | | | |
| | December 31, 2012 | | December 31, 2011 |
| | amounts in millions |
| Interactive Group | | | |
| Other cost investments | $ | 4 |
| | 3 |
|
| Total Interactive Group | 4 |
| | 3 |
|
| Ventures Group | | | |
| Time Warner Inc. | 1,042 |
| | 787 |
|
| Time Warner Cable Inc. | 531 |
| | 348 |
|
| AOL | 59 |
| | 30 |
|
| Other AFS investments | 84 |
| | — |
|
| TripAdvisor AFS securities | 99 |
| | — |
|
| Total Ventures Group | 1,815 |
| | 1,165 |
|
| Consolidated Liberty | $ | 1,819 |
| | 1,168 |
|
| |
| (3) | The following table presents information regarding certain equity method investments: |
|
| | | | | | | | | | | | | | | | | | |
| | | | | | | | Share of earnings (losses) |
| | December 31, 2012 | | Years ended December 31, |
| | Percentage ownership | | Carrying value | | Market value | |
| | 2012 | | 2011 | | 2010 |
| | dollar amounts in millions | | |
| Interactive Group | | | | | | | | | | | |
| HSN, Inc. | 37 | % | | $ | 242 |
| | 1,102 |
| | 40 |
| | 38 |
| | 31 |
|
| Other | various |
| | 62 |
| | N/A |
| | (12 | ) | | (15 | ) | | (23 | ) |
| Total Interactive Group | | | 304 |
| | |
| | 28 |
| | 23 |
| | 8 |
|
| Ventures Group | | | | | | | | | | | |
| Expedia, Inc. (1)(2)(3) | 17 | % | | 431 |
| | 1,389 |
| | 67 |
| | 119 |
| | 103 |
|
| TripAdvisor, Inc. (1)(4) | N/A |
| | N/A |
| | N/A |
| | 38 |
| | — |
| | — |
|
| Other | various |
| | 116 |
| | N/A |
| | (48 | ) | | (2 | ) | | 1 |
|
| Total Ventures Group | | | 547 |
| | | | 57 |
| | 117 |
| | 104 |
|
| Consolidated Liberty | | | $ | 851 |
| | | | 85 |
| | 140 |
| | 112 |
|
___________________________
| |
| (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. |
| |
| (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 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 dispositions, net line item in the statement of operations. |
| |
| (3) | During the years ended December 31, 2012 and 2011, Expedia, Inc. paid dividends aggregating $23 million and $19 million, respectively, which were recorded as reductions to the investment balance. |
| |
| (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 1 in the accompanying consolidated financial statements for additional details of the fourth quarter transaction with TripAdvisor. |
| |
| (4) | Debt attributed to the Interactive Group and the Ventures Group is comprised of the following: |
|
| | | | | | | | |
| | | December 31, 2012 |
| | | Outstanding principal | | Carrying value |
| | | amounts in millions |
| Interactive Group | | | |
| Senior notes and debentures | | | |
| | 5.7% Senior Notes due 2013 | $ | 241 |
| | 240 |
|
| | 8.5% Senior Debentures due 2029 | 287 |
| | 285 |
|
| | 8.25% Senior Debentures due 2030 | 504 |
| | 501 |
|
| QVC 7.125% Senior Secured Notes due 2017 | 500 |
| | 500 |
|
| QVC 7.5% Senior Secured Notes due 2019 | 1,000 |
| | 988 |
|
| QVC 7.375% Senior Secured Notes due 2020 | 500 |
| | 500 |
|
| QVC 5.125% Senior Secured Notes due 2022 | 500 |
| | 500 |
|
| QVC Bank Credit Facilities | 903 |
| | 903 |
|
| Other subsidiary debt | 125 |
| | 125 |
|
| Total Interactive Group | 4,560 |
| | 4,542 |
|
| Ventures Group | | | |
| Exchangeable Senior Debentures | | | |
| | 3.125% Exchangeable Senior Debentures due 2023 | 1,138 |
| | 1,639 |
|
| | 4% Exchangeable Senior Debentures due 2029 | 469 |
| | 311 |
|
| | 3.75% Exchangeable Senior Debentures due 2030 | 460 |
| | 297 |
|
| | 3.5% Exchangeable Senior Debentures due 2031 | 371 |
| | 292 |
|
| | 3.25% Exchangeable Senior Debentures due 2031 | 414 |
| | 391 |
|
| TripAdvisor Debt Facilities | 412 |
| | 412 |
|
| Total Ventures Group | 3,264 |
| | 3,342 |
|
| | Total consolidated Liberty debt | $ | 7,824 |
| | 7,884 |
|
| | Less current maturities | | | (1,638 | ) |
| | Total long-term debt | | | $ | 6,246 |
|
At December 31, 2012, the intergroup payable/(receivable) balance includes a intergroup loan of approximately $71 million. The Ventures group acquired $68 million principal amount of the 5.7% Senior Notes due 2023, on the open market, which are attributed to the Interactive group and have been extinguished on a consolidated basis. The intergroup loan carries an interest rate that is equal to the effective yield on the 5.7% Senior Notes at the time of purchase.
| |
| (5) | Cash compensation expense for our corporate employees will be allocated among the Interactive Group and the Ventures Group based on the estimated percentage of time spent providing services for each group. On a semi-annual basis estimated time spent will be determined through an interview process and a review of personnel duties unless transactions significantly change the composition of companies and investments in either respective group which would require a more timely reevaluation of estimated time spent. Other general and administrative expenses will be 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 Interactive Group to the Ventures Group was determined to be $5 million and $4 million for the years ended December 31, 2012 and 2011, respectively. We note that stock compensation related to each tracking stock group is determined based on actual options outstanding for each respective tracking stock group, therefore, as it relates to periods prior to the Split-Off no stock compensation expense was recognized by the Ventures group. |
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 and the Ventures 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. |
Interactive Group
Income tax benefit (expense) consists of:
|
| | | | | | | | | |
| | Years ended December 31, |
| | 2012 | | 2011 | | 2010 |
| | amounts in millions |
| Current: | | | | | |
| Federal | $ | (365 | ) | | (310 | ) | | (199 | ) |
| State and local | (26 | ) | | (32 | ) | | 6 |
|
| Foreign | (140 | ) | | (120 | ) | | (111 | ) |
| | $ | (531 | ) | | (462 | ) | | (304 | ) |
| Deferred: | | | | | |
| Federal | $ | 152 |
| | 103 |
| | 113 |
|
| State and local | 20 |
| | 2 |
| | 17 |
|
| Foreign | 7 |
| | 4 |
| | 14 |
|
| | 179 |
| | 109 |
| | 144 |
|
| Income tax benefit (expense) | $ | (352 | ) | | (353 | ) | | (160 | ) |
Income tax benefit (expense) differs from the amounts computed by applying the U.S. federal income tax rate of 35% as a result of the following:
|
| | | | | | | | | |
| | Years ended December 31, |
| | 2012 | | 2011 | | 2010 |
| | amounts in millions |
| Computed expected tax benefit (expense) | $ | (309 | ) | | (327 | ) | | (363 | ) |
| Nontaxable exchange of investments for subsidiary | — |
| | — |
| | 112 |
|
| State and local income taxes, net of federal income taxes | (4 | ) | | (17 | ) | | 15 |
|
| Foreign taxes, net of foreign tax credits | 5 |
| | (3 | ) | | 48 |
|
| Change in valuation allowance affecting tax expense | (8 | ) | | (15 | ) | | — |
|
| Nontaxable gains (losses) related to the Company's common stock | 1 |
| | 8 |
| | 27 |
|
| Impairment of intangible assets | (29 | ) | | — |
| | — |
|
| Other, net | (8 | ) | | 1 |
| | 1 |
|
| Income tax benefit (expense) | $ | (352 | ) | | (353 | ) | | (160 | ) |
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are presented below:
|
| | | | | | |
| | December 31, |
| | 2012 | | 2011 |
| | amounts in millions |
| Deferred tax assets: | | | |
| Net operating and capital loss carryforwards | $ | 92 |
| | 60 |
|
| Foreign tax credit carryforwards | 87 |
| | 30 |
|
| Accrued stock compensation | 11 |
| | 44 |
|
| Other accrued liabilities | 80 |
| | 69 |
|
| Investments | 16 |
| | 20 |
|
| Other future deductible amounts | 133 |
| | 188 |
|
| Deferred tax assets | 419 |
| | 411 |
|
| Valuation allowance | (40 | ) | | (16 | ) |
| Net deferred tax assets | 379 |
| | 395 |
|
| | | | |
| Deferred tax liabilities: | | | |
| Intangible assets | 1,541 |
| | 1,661 |
|
| Other | — |
| | 72 |
|
| Deferred tax liabilities | 1,541 |
| | 1,733 |
|
| Net deferred tax liabilities | $ | 1,162 |
| | 1,338 |
|
The Company's deferred tax assets and liabilities are reported in the accompanying balance sheet information as follows:
|
| | | | | | |
| | December 31, |
| | 2012 | | 2011 |
| | amounts in millions |
| Current deferred tax assets | $ | 156 |
| | 155 |
|
| Long-term deferred tax liabilities | 1,318 |
| | 1,493 |
|
| Net deferred tax liabilities | $ | 1,162 |
| | 1,338 |
|
Ventures Group
Income tax benefit (expense) consists of:
|
| | | | | | | | | |
| | Years ended December 31, |
| | 2012 | | 2011 | | 2010 |
| | amounts in millions |
| Current: | | | | | |
| Federal | $ | 151 |
| | 154 |
| | 114 |
|
| State and local | (1 | ) | | — |
| | — |
|
| Foreign | — |
| | — |
| | — |
|
| | $ | 150 |
| | 154 |
| | 114 |
|
| Deferred: | | | | | |
| Federal | $ | (183 | ) | | (145 | ) | | (86 | ) |
| State and local | (9 | ) | | (8 | ) | | 4 |
|
| Foreign | — |
| | — |
| | — |
|
| | (192 | ) | | (153 | ) | | (82 | ) |
| Income tax benefit (expense) | $ | (42 | ) | | 1 |
| | 32 |
|
Income tax benefit (expense) differs from the amounts computed by applying the U.S. federal income tax rate of 35% as a result of the following:
|
| | | | | | | | | |
| | Years ended December 31, |
| | 2012 | | 2011 | | 2010 |
| | amounts in millions |
| Computed expected tax benefit (expense) | $ | (386 | ) | | (2 | ) | | 24 |
|
| State and local income taxes, net of federal income taxes | (7 | ) | | (5 | ) | | 3 |
|
| Consolidation of previously held equity method affiliate | 294 |
| | — |
| | — |
|
| Dividends received deductions | 10 |
| | 5 |
| | 5 |
|
| Alternative energy tax credits | 48 |
| | 3 |
| | — |
|
| Other, net | (1 | ) | | — |
| | — |
|
| Income tax benefit (expense) | $ | (42 | ) | | 1 |
| | 32 |
|
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are presented below:
|
| | | | | | |
| | December 31, |
| | 2012 | | 2011 |
| | amounts in millions |
| Deferred tax assets: | | | |
| Net operating and capital loss carryforwards | $ | 18 |
| | 10 |
|
| Other | 36 |
| | 9 |
|
| Deferred tax assets | 54 |
| | 19 |
|
| Valuation allowance | (12 | ) | | — |
|
| Net deferred tax assets | 42 |
| | 19 |
|
| | | | |
| Deferred tax liabilities: | | | |
| Investments | 508 |
| | 210 |
|
| Intangible assets | 1,209 |
| | — |
|
| Discount on exchangeable debentures | 890 |
| | 978 |
|
| Deferred gain on debt retirements | 321 |
| | 321 |
|
| Other | 73 |
| | 69 |
|
| Deferred tax liabilities | 3,001 |
| | 1,578 |
|
| Net deferred tax liabilities | $ | 2,959 |
| | 1,559 |
|
The Company's deferred tax assets and liabilities are reported in the accompanying balance sheet information as follows:
|
| | | | | | |
| | December 31, |
| | 2012 | | 2011 |
| | amounts in millions |
| Current deferred tax liabilities | $ | 1,068 |
| | 1,006 |
|
| Long-term deferred tax liabilities | 1,891 |
| | 553 |
|
| Net deferred tax liabilities | $ | 2,959 |
| | 1,559 |
|
| |
| (7) | The Liberty Interactive Stock and the Liberty Ventures Stock have voting and conversion rights under our restated charter. Following is a summary of those rights. Holders of Series A common stock of each group is 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, are 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 will vote as a single class. In certain limited circumstances, the board may elect to seek the approval of the holders of only Series A and Series B Liberty Interactive Stock or the approval of the holders of only Series A and Series B Liberty Ventures Stock. |
At the option of the holder, each share of Series B common stock will be 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 the other group.
