Liberty Interactive Corporation ("Liberty Interactive") (Nasdaq:
QVCA, QVCB, LVNTA, LVNTB) today reported second quarter 2015
results. Highlights include(1):
Attributed to QVC Group
- Grew QVC US revenue by 4% and adjusted
OIBDA(2) by 7% in the second quarter
- QVC US operating income increased by
11%
- QVC.com revenue as a percent of total
US revenue increased to 47%, a 309 basis point increase
- QVC US mobile penetration was 48% of
QVC.com orders, a 1,013 basis point increase
- QVC consolidated mobile penetration was
49% of QVC.com orders, a 951 basis point increase
- QVC generated local currency revenue
growth and adjusted OIBDA improvement in all consolidated
markets
- QVC France launched with multi-platform
capabilities; TV programming began airing August 1
- From May 1, 2015 through July 31, 2015,
repurchased 12.2 million QVCA shares at an average price per share
of $28.39 and a total cost of $348 million
Attributed to Liberty Ventures Group
- Agreed to invest up to $2.4 billion in
Liberty Broadband as part of Charter’s transaction with Time Warner
Cable
- Completed sale of Backcountry.com on
June 30 for aggregate consideration of approximately $350
million
“QVC generated strong results across the board with local
currency growth in all consolidated markets. The expansion in
mobile orders continues at a rapid pace, comprising 49% of total
eCommerce orders worldwide. From May 1 through July 31, we
repurchased $348 million of QVCA shares, fully utilizing the funds
distributed in conjunction with the Liberty TripAdvisor Holdings
spin-off,” stated Greg Maffei, Liberty Interactive President and
CEO. “Attributed to Liberty Ventures, we agreed to invest up to
$2.4 billion in Liberty Broadband as part of Charter’s transaction
with Time Warner Cable, and the successful sale of Backcountry.com
was completed on June 30 for total consideration of approximately
$350 million.”
QVC GROUP – Excluding the pre-reattribution impact of the
Digital Commerce companies (see reconciling schedule 1), in the
second quarter, QVC Group's revenue decreased 1% to $2.0 billion,
adjusted OIBDA increased 3% to $445 million, operating income
increased 5% to $284 million, adjusted net income(3) increased 3%
to $161 million and net income increased 7% to $112 million.
QVC
QVC's consolidated revenue decreased 1% in the second quarter to
$2.0 billion. Adjusted OIBDA increased 2% to $449 million and
adjusted OIBDA margin increased 67 basis points. Operating income
increased 4% to $294 million. Consolidated eCommerce revenue
increased 9% to $848 million and grew to 42% from 39% of
consolidated revenue. Mobile orders were 49% of total eCommerce
orders in the quarter, compared to 40% a year ago.
US Dollar denominated results were negatively impacted by
exchange rate fluctuations in the second quarter. The US Dollar
strengthened against the Euro, Japanese Yen and British Pound
Sterling 19%, 16% and 9%, respectively. On a constant currency
basis, consolidated revenue increased 5% and adjusted OIBDA
increased 7% compared to a 1% decline and 2% increase in US
Dollars, respectively.
"We delivered a terrific quarter with strong and balanced
results across markets, platforms, product categories and customer
segments,” said QVC President and CEO Mike George. “We generated
local currency revenue growth and adjusted OIBDA improvement in
every one of our consolidated markets. Our eCommerce growth
accelerated significantly and we continued to extend our mobile
penetration. We produced strong margin expansion despite investing
in new shipping and handling policies in the US and start-up
expenses associated with the launch of QVC France. Our overall
customer base and our new customer additions increased at some of
the strongest rates in years. Our strong quarter reflects our
disciplined execution of strategies aimed at extending our leading
global video and eCommerce position.”
US revenue increased 4% to $1.4 billion in the second quarter.
Units sold increased 4%, average selling price per unit increased
3% to $58.51 and returns as a percentage of gross product revenue
were virtually flat. The US experienced growth in all categories
except electronics. eCommerce revenue increased 11% to $655 million
and grew to 47% from 43% of total US revenue. Despite the business’
investment in new shipping and handling policies, adjusted OIBDA
increased 7% to $349 million and adjusted OIBDA margin increased 78
basis points to 24.8%. These gains were primarily due to improved
product margins, higher credit card income and lower bad debt and
marketing expenses, which were partially offset by lower shipping
and handling revenue.
QVC's international revenue decreased 11% to $592 million,
adjusted OIBDA decreased 12% to $100 million and adjusted OIBDA
margin declined 33 basis points in the second quarter, reflecting
the aforementioned unfavorable exchange rate fluctuations. On a
constant currency basis, international revenue increased 6% and
adjusted OIBDA increased 5%. QVC France launched its TV broadcast
on August 1, 2015. The second quarter included $6 million of costs
related to the launch of QVC France. Excluding the costs related to
QVC France, international adjusted OIBDA increased 9% on a constant
currency basis in the quarter.
QVC Germany's revenue in local currency increased 4% in the
second quarter. Sales increased in local currency in every category
except electronics. Adjusted OIBDA in local currency increased 10%,
and adjusted OIBDA margin in local currency grew 88 basis points
primarily due to customer service and warehouse efficiencies and
lower bad debt expense, which were partially offset by higher
marketing expenses.
QVC Japan's revenue in local currency increased 6% in the second
quarter. QVC Japan experienced sales gains in local currency
primarily in home, jewelry and beauty, which were partially offset
by a decline primarily in apparel. Adjusted OIBDA in local currency
increased 2%. Adjusted OIBDA margin in local currency decreased 74
basis points primarily due to higher information technology,
commission and marketing costs, which were partially offset by
customer service efficiencies.
QVC UK's revenue increased 7% in local currency in the second
quarter. Sales increased in local currency primarily in home and
jewelry, which were partially offset by a decline in beauty.
Adjusted OIBDA in local currency increased 16% and adjusted OIBDA
margin in local currency increased 164 basis points primarily due
to fixed cost leverage, which was partially offset by lower product
margins and unfavorable inventory obsolescence expense.
QVC Italy's revenue increased 4% in local currency in the second
quarter. Sales increased in local currency primarily in beauty,
apparel and accessories, which were partially offset by a decline
in jewelry. Adjusted OIBDA deficit in local currency decreased 8%
and adjusted OIBDA margin in local currency improved 44 basis
points primarily due to lower freight and inventory obsolescence
expense, which were partially offset by lower product margins.
CNR Home Shopping Co., Ltd. ("CNRS"), QVC's joint venture in
China, increased local currency revenue 14% in the second quarter.
CNRS' adjusted OIBDA deficit in local currency increased 100%
primarily due to lower product margins and higher commissions,
warehouse, freight, marketing and customer service expenses as the
business continues to grow its presence in this nascent market. In
early July, CNRS added the strategically important Shanghai market
to its TV distribution, bringing its current reach to approximately
107 million homes. This joint venture is being accounted for as an
equity method investment, and as a result, QVC reported a $3
million reduction in net income for the quarter.
QVC's outstanding debt, net of original issue discount, was $4.4
billion at June 30, 2015, down from $4.6 billion at December 31,
2014.
Share Repurchases
From May 1, 2015 through July 31, 2015, Liberty Interactive
repurchased approximately 12.2 million Series A QVC Group shares
(Nasdaq: QVCA) at an average cost per share of $28.39 for total
cash consideration of $347.5 million. Since the creation of the QVC
Group stock (including its predecessor, Liberty Interactive Group)
in May 2006, Liberty Interactive has repurchased shares for
aggregate cash consideration of $5.8 billion, representing
approximately 38.9% of the shares outstanding at the time of the
creation of the QVC Group stock. All repurchases up to August 9,
2012, the date on which the QVC Group stock was recapitalized to
create the Liberty Ventures Group stock, were comprised of shares
of the combined stocks. The remaining repurchase authorization as
of August 1, 2015 for QVC Group stock was approximately $228
million. In addition, Liberty Interactive’s Board of Directors
authorized the repurchase of up to an additional $1 billion of QVC
Group stock.
QVC Group consists of Liberty Interactive’s subsidiary, QVC,
Inc., and Liberty Interactive’s interest in HSN, Inc.
LIBERTY VENTURES GROUP – In May 2015, Liberty Interactive
announced its entry into an agreement with Liberty Broadband
Corporation ("Liberty Broadband"), a separate publicly traded
company, whereby Liberty Interactive will invest $2.4 billion in
Liberty Broadband in connection with (and contingent upon) the
closing of the proposed merger of Charter Communications, Inc.
("Charter") and Time Warner Cable Inc. ("TWC"). The proceeds of
this investment will be used by Liberty Broadband to fund, in part,
its agreement to acquire $4.3 billion of Charter stock. Liberty
Broadband's acquisition will be made in support of (and contingent
upon) the closing of the Charter-TWC merger. In connection with
these transactions, it is expected that Charter will undergo a
corporate reorganization, resulting in New Charter, a current
subsidiary of Charter, becoming the publicly traded parent company.
Liberty Interactive's investment in Liberty Broadband will be
funded using cash on hand and short-term investments, and will be
attributed to the Liberty Ventures Group.
On June 30, 2015, Liberty Interactive closed the sale of
Backcountry.com, which was attributed to the Liberty Ventures
Group, for aggregate consideration of approximately $350 million,
including assumption of debt, amounts held in escrow and a
noncontrolling interest. Backcountry.com is included in the Digital
Commerce companies through June 30, 2015.
Revenue for the continuing consolidated Digital Commerce
companies (which now consist of Bodybuilding.com, CommerceHub,
Evite and Right Start) increased 7% to $149 million in the second
quarter. For the quarter, the increase in revenue was due to
increases at most of our subsidiaries, the most significant being
Bodybuilding.com ($5 million) and CommerceHub ($6 million). The
increase in Bodybuilding.com revenue was primarily due to increased
order volume on slightly decreased average order values. A portion
of the decreased average order values for Bodybuilding.com was due
to international sales and the foreign exchange impacts.
CommerceHub revenue growth was primarily attributed to an
acquisition during the first quarter of 2015 and growth in active
customers (vendors and suppliers) which increased the number of
aggregate transactions processed through the CommerceHub
platform.
Adjusted OIBDA for the continuing Digital Commerce companies
increased $2 million year-over-year in the second quarter. Adjusted
OIBDA as a percentage of revenue was relatively flat, representing
12.1% of revenue in the second quarter of 2015, as compared to
11.5% of revenue in the second quarter of 2014.
Operating loss for the continuing Digital Commerce companies was
$3 million in the second quarter as compared to a loss of $9
million in the same period in 2014.
Share Repurchases
There were no repurchases of Liberty Ventures Group common stock
(Nasdaq: LVNTA) from May 1, 2015 through July 31, 2015. The total
remaining repurchase authorization for Liberty Ventures Group stock
as of August 1, 2015 was $650 million.
The businesses and assets attributed to the Liberty Ventures
Group are all of Liberty Interactive's businesses and assets other
than those attributed to the QVC Group, including its interests in
Expedia, Interval Leisure, Lending Tree and FTD, its subsidiaries
Bodybuilding.com, CommerceHub, The Right Start and Evite, and
minority interests in Time Warner Inc. and Time Warner Cable.
FOOTNOTES
1) Liberty Interactive's President and CEO, Greg Maffei,
will discuss these highlights and other matters in Liberty
Interactive's earnings conference call which will begin at 12:15
p.m. (E.D.T.) on August 5, 2015. For information regarding how to
access the call, please see “Important Notice” later in this
document. 2) For a definition of adjusted OIBDA and applicable
reconciliations and a definition of adjusted OIBDA margin, see the
accompanying schedules. 3) For a definition of adjusted net income
and applicable reconciliations, see the accompanying schedules.
QVC GROUP
FINANCIAL METRICS – QUARTER
(amounts in millions) 2Q14 2Q15
% Change
Revenue(1) QVC US $ 1,352 $
1,406 4 % Germany 227 191 (16 )% Japan 223 199 (11 )% UK 178 173 (3
)% Italy 34 29 (15 )%
Total QVC
Group Revenue $ 2,014 $
1,998 (1 )% Adjusted
OIBDA(1) QVC US $ 325 $ 349 7 % Germany 40 35 (13 )%
Japan 43 37 (14 )% UK 33 35 6 % Italy (2 ) (1 ) 50 % France
- (6 ) NM Total QVC Adjusted OIBDA
$
439 $
449
2 % Corporate and other (6 ) (4
) 33 %
Total QVC Group Adjusted OIBDA $ 433
$ 445 3 %
Operating Income(1) QVC US $ 203 $ 226 11 % Germany
23 21 (9 )% Japan 36 29 (19 )% UK 26 28 8 % Italy (4 ) (4 ) - %
France - (6 ) NM Total QVC Operating
Income
$ 284 $ 294
4 % Corporate and other (13 ) (10 ) 23
%
Total QVC Group Operating Income $ 271
$ 284 5 %
Adjusted Net Income(1)(2) Total QVC Group Adjusted
Net Income $ 157 $ 161 3
% China JV(3) Revenue $ 33 $ 38 15 %
Adjusted OIBDA $ (3 ) $ (5 ) (67 )% (amounts in millions)
QVCA Shares
Outstanding
7/31/2014 7/31/2015 Outstanding A and B shares 482
461 (amounts in millions)
Quarter ended Quarter
ended
QVCA and QVCB
Basic and Diluted Shares
6/30/2014 6/30/2015 Basic Weighted Average Shares
Outstanding ("WASO") 486 469 Potentially dilutive Shares 10
7
Diluted WASO 496
476
1)
Non-GAAP presentation. For GAAP purposes,
the Digital Commerce companies were recorded as part of the QVC
Group through September 30, 2014 (the date of the reattribution).
For presentation purposes in this table, the results of the Digital
Commerce companies have been removed from the QVC Group for all
periods shown (see reconciling schedule 1).
2) GAAP net income was $105 million and $112 million for the three
months ended June 30, 2014 and 2015, respectively (see reconciling
schedule 4). 3) This joint venture is being accounted for as an
equity investment.
QVC OPERATING
METRICS – QUARTER
(amounts in millions) 2Q14
2Q15 % Change
QVC - Consolidated
eCommerce $ of total revenue $ 779 $ 848 9 % eCommerce % of
total revenue 38.68 % 42.44 % 376 bps Mobile % of total
eCommerce(1) 39.86 % 49.37 % 951 bps
QVC - US
eCommerce $ of US revenue $ 588 $ 655 11 % eCommerce % of US
revenue 43.49 % 46.59 % 309 bps Mobile % of US eCommerce(1) 37.48 %
47.61 % 1,013 bps Return Rate 19.24 % 19.33 % 9 bps (1)
Based on gross US Dollar orders.
DIGITAL COMMERCE
FINANCIAL METRICS – QUARTER
(amounts in millions) 2Q14
2Q15 % Change
Revenue(1) Digital
Commerce companies - continuing $ 139 $ 149 7 % Disposed
Businesses(2) 330 105 NM
Digital Commerce Companies Revenue $ 469
$ 254 NM
Adjusted OIBDA(1) Digital Commerce companies -
continuing $ 16 $ 18 13 % Disposed Businesses(2) 11
1 NM
Digital Commerce Companies Adjusted
OIBDA $ 27 $ 19
NM Operating Income(1) Digital
Commerce companies - continuing $ (9 ) $ (3 ) 67 % Disposed
Businesses(2) 2 (6 ) NM
Digital
Commerce Companies Operating Income $ (7 )
$ (9 ) NM (1)
Non-GAAP presentation. For GAAP purposes, the Digital Commerce
companies have been recorded as part of Liberty Ventures Group
subsequent to September 30, 2014 (the date of the reattribution).
For presentation purposes in this table, the results of the Digital
Commerce companies are included in Liberty Ventures Group for all
periods shown. In addition, Provide was included in the Digital
Commerce companies prior to the sale of Provide to FTD Companies,
Inc. on December 31, 2014. (2) Includes financial results of
Provide through December 31, 2014 and Backcountry.com through June
30, 2015.
NOTES
Unless otherwise noted, the foregoing discussion compares
financial information for the three months ended June 30, 2015 to
the same period in 2014.
The following financial information with respect to Liberty
Interactive's equity affiliates and available for sale securities
is intended to supplement Liberty Interactive's condensed
consolidated statements of operations which are included in its
Form 10-Q.
Fair Value of Public
Holdings
(amounts in millions)
3/31/2015
6/30/2015 HSN(1) $ 1,366 $ 1,405
Total Attributed
QVC Group $ 1,366 $ 1,405
Expedia(2) $ 2,197 $ 2,581 FTD(3) 305 288 Interval Leisure Group
and Tree.com(4) 592 598 Other Public Holdings(5) 1,193
1,358
Total Attributed Liberty Ventures Group
$ 4,287 $ 4,825 (1)
Represents fair value of QVC Group's investment in HSN. In
accordance with GAAP, QVC Group accounts for this investment using
the equity method of accounting and includes this investment in its
attributed balance sheet at its historical carrying value which
aggregated $146 million and $151 million at March 31, 2015 and June
30, 2015, respectively. (2) Represents fair value of Liberty
Ventures Group's investment in Expedia. In accordance with GAAP,
Liberty Ventures Group accounts for this investment using the
equity method of accounting and includes this investment in its
attributed balance sheet at its historical carrying value which
aggregated $496 million and $587 million at March 31, 2015 and June
30, 2015, respectively. (3) Represents fair value of Liberty
Ventures Group's investment in FTD. In accordance with GAAP,
Liberty Ventures Group accounts for this investment using the
equity method of accounting and includes this investment in its
attributed balance sheet at its historical carrying value which
aggregated $350 million and $358 million at March 31, 2015 and June
30, 2015, respectively. (4) Represents fair value of Liberty
Ventures Group's investments. In accordance with GAAP, Liberty
Ventures Group accounts for these investments using the equity
method of accounting and includes these investments in its
attributed balance sheet at their historical carrying values which
aggregated $109 million and $111 million at March 31, 2015 and June
30, 2015, respectively. (5) Represents Liberty Ventures Group's
other public holdings which are accounted for at fair value.
Excludes $13 million and $2 million of long-term marketable
securities as of March 31, 2015 and June 30, 2015, respectively.
Cash and Debt
The following presentation is provided to separately identify
cash and liquid investments and debt information.
(amounts in millions) 3/31/2015
6/30/2015
Cash and Liquid Investments Attributable to:
QVC Group(1)
$ 539 $ 505 Liberty Ventures Group(2)(3) 2,684 2,931
Total Liberty Consolidated Cash and Liquid Investments
$ 3,223 $ 3,436 Less:
Short-term marketable securities - QVC Group $ 9 $ 8 Short-term
marketable securities - Liberty Ventures Group 851 837 Long-term
marketable securities - Liberty Ventures Group 13 2
Total Liberty Consolidated Cash (GAAP) $ 2,350
$ 2,589 Debt: Senior notes and
debentures(4) $ 791 $ 792 Senior exchangeable debentures(5) 346 346
QVC senior notes(4) 4,050 3,550 QVC bank credit facility 450 895
Other 65 74
Total Attributed QVC Group Debt
$ 5,702 $ 5,657 Unamortized discount
and fair market value adjustment 46 37
Total
Attributed QVC Group Debt (GAAP) $ 5,748 $
5,694 Senior exchangeable debentures(5) $ 2,077 $
2,075 Other 70 44
Total Attributed Liberty
Ventures Group Debt $ 2,147 $ 2,119
Fair market value adjustment 25 168
Total
Attributed Liberty Ventures Group Debt (GAAP) $
2,172 $ 2,287 Total Liberty
Interactive Corporation Debt (GAAP) $ 7,920
$ 7,981 (1) Includes $9 million and $8
million of short-term marketable securities with an original
maturity greater than 90 days as of March 31, 2015 and June 30,
2015, respectively. (2) Includes $851 million and $837 million of
short-term marketable securities with an original maturity greater
than 90 days as of March 31, 2015 and June 30, 2015, respectively.
(3) Includes $13 million and $2 million of marketable securities
with an original maturity greater than one year as of March 31,
2015 and June 30, 2015, respectively, which is reflected in
investments in available-for-sale securities in Liberty Ventures
Group's condensed attributed balance sheet. (4) Face amount of
Senior Notes and Debentures with no reduction for the unamortized
discount. (5) Face amount of Senior Exchangeable Debentures with no
reduction for the fair market value adjustment.
Total cash and liquid investments attributed to the QVC Group
decreased by $34 million during the second quarter. Cash flow from
operations was more than offset by stock repurchases, debt
repayments and capital expenditures. Total debt attributed to the
QVC Group decreased by $45 million, primarily due to the repayment
of the 7.375% notes due 2020, partially offset by increased
borrowing on the QVC credit facility.
Total cash and liquid investments attributed to the Liberty
Ventures Group increased $247 million during the second quarter,
primarily due to proceeds from the Backcountry disposition,
partially offset by investment in cost and equity investees. Total
debt attributed to the Liberty Ventures Group decreased $28 million
primarily due to the Backcountry disposition.
Important Notice: Liberty Interactive (Nasdaq: QVCA,
QVCB, LVNTA, LVNTB) President and CEO, Greg Maffei, will discuss
Liberty Interactive's earnings release in a conference call which
will begin at 12:15 p.m. (E.D.T.) on August 5, 2015. The call can
be accessed by dialing (844) 307-2219 or (678) 509-7635 at least 10
minutes prior to the start time. The call will also be broadcast
live across the Internet and archived on our website. To access the
webcast go to http://www.libertyinteractive.com/events. Links to
this press release and replays of the call will also be available
on Liberty Interactive's website.
This press release includes certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements about business strategies, market
potential, future financial prospects, international expansion,
including the launch of QVC France and the expected expenditures in
connection therewith, new service and product offerings, the
completion of Charter's corporate reorganization, the TWC and
Bright House acquisition transactions, Liberty Broadband's
investment in Charter, Liberty Broadband's issuance of Series C
Shares to Liberty Interactive and other third party investors, the
monetization of our non-core assets, the continuation of our stock
repurchase program, the estimated liabilities under exchangeable
debentures and other matters that are not historical facts. These
forward-looking statements involve many risks and uncertainties
that could cause actual results to differ materially from those
expressed or implied by such statements, including, without
limitation, possible changes in market acceptance of new products
or services, competitive issues, regulatory matters affecting our
businesses, continued access to capital on terms acceptable to
Liberty Interactive, changes in law and government regulations that
may impact the derivative instruments that hedge certain of our
financial risks, the availability of investment opportunities, and
market conditions conducive to stock repurchases. These
forward-looking statements speak only as of the date of this
presentation, and Liberty Interactive expressly disclaims any
obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained herein to reflect any
change in Liberty Interactive's expectations with regard thereto or
any change in events, conditions or circumstances on which any such
statement is based. Please refer to the publicly filed documents of
Liberty Interactive, including the most recent Forms 10-K and 10-Q,
for additional information about Liberty Interactive and about the
risks and uncertainties related to Liberty Interactive's business
which may affect the statements made in this presentation.
SUPPLEMENTAL INFORMATION
As a supplement to Liberty Interactive's condensed consolidated
statements of operations, which are included in its Form 10-Q,
the following is a presentation of quarterly information and
operating metrics on a stand-alone basis for the largest business
owned by Liberty Interactive (QVC) at June 30, 2015, which Liberty
Interactive has identified as a reportable segment.
Please see below for the definition of adjusted OIBDA and a
discussion of why management believes the presentation of adjusted
OIBDA for QVC provides useful information for investors. See
Schedule 2 to this press release for a reconciliation of QVC’s
adjusted OIBDA to operating income for the same period, as
determined under GAAP.
QUARTERLY
SUMMARY
(amounts in millions) 2Q14 3Q14
4Q14 1Q15 2Q15
QVC
Group QVC Revenue - US $ 1,352 $ 1,368 $ 2,030 $ 1,342 $
1,406 Revenue - International 662 652
751 596 592 Revenue -
Total $ 2,014 $ 2,020 $ 2,781 $ 1,938 $
1,998 Adjusted OIBDA - US 325 329 474 306 349 Adjusted OIBDA
- International 114 110 146
101 100 Adjusted OIBDA - Total $
439 $ 439 $ 620 $ 407 $ 449
Operating income - US 203 203 349 177 226 Operating income -
International 81 73 110
69 68 Operating income - Total $ 284
$ 276 $ 459 $ 246 $ 294 Gross
margin - US 37.7 % 37.2 % 35.6 % 36.5 % 38.0 % Gross margin -
International 38.3 % 37.8 % 37.7 % 38.1 % 38.7 %
NON-GAAP FINANCIAL MEASURES
This press release includes a presentation of adjusted OIBDA,
which is a non-GAAP financial measure, for Liberty Interactive, the
QVC Group, QVC (and certain of its subsidiaries), and the Digital
Commerce companies together with a reconciliation to that entity or
such businesses’ operating income, as determined under GAAP.
Liberty Interactive defines adjusted OIBDA as revenue less cost of
sales, operating expenses, and selling, general and administrative
expenses, excluding all stock based compensation, and excludes from
that definition depreciation and amortization and restructuring and
impairment charges that are included in the measurement of
operating income pursuant to GAAP. Further, this press release
includes adjusted OIBDA margin which is also a non-GAAP financial
measure. Liberty Interactive defines adjusted OIBDA margin as
adjusted OIBDA divided by revenue.
Liberty Interactive believes adjusted OIBDA is an important
indicator of the operational strength and performance of its
businesses, including each business' ability to service debt and
fund capital expenditures. In addition, this measure allows
management to view operating results and perform analytical
comparisons and benchmarking between businesses and identify
strategies to improve performance. Because adjusted OIBDA is used
as a measure of operating performance, Liberty Interactive views
operating income as the most directly comparable GAAP measure.
Adjusted OIBDA is not meant to replace or supersede operating
income or any other GAAP measure, but rather to supplement such
GAAP measures in order to present investors with the same
information that Liberty Interactive's management considers in
assessing the results of operations and performance of its assets.
Please see the attached schedules for applicable
reconciliations.
In addition, this presentation includes references to adjusted
net income, which is a non-GAAP financial measure, for QVC Group.
Liberty Interactive defines adjusted net income as net income,
excluding the impact of purchase accounting amortization (net of
deferred tax benefit) and net income (loss) generated by the
Digital Commerce companies prior to the reattribution.
Liberty Interactive believes adjusted net income is an important
indicator of financial performance, in particular for QVC Group,
due to the impact of purchase accounting amortization and the
reattribution of the Digital Commerce companies. Because adjusted
net income is used as a measure of overall financial performance,
Liberty Interactive views net income as the most directly
comparable GAAP measure. Adjusted net income is not meant to
replace or supersede net income or any other GAAP measure, but
rather to supplement such GAAP measures in order to present
investors with a valuable supplemental metric of financial
performance. Please see the attached schedules for a reconciliation
of adjusted net income to net income (loss) calculated in
accordance with GAAP for QVC Group (Schedule 4).
SCHEDULE 1
The following table provides a reconciliation of QVC Group's
adjusted OIBDA to its operating income calculated in accordance
with GAAP for the three months ended June 30, 2014, September 30,
2014, December 31, 2014, March 31, 2015 and June 30, 2015,
respectively.
QUARTERLY
SUMMARY
(amounts in millions) 2Q14 3Q14
4Q14 1Q15 2Q15
QVC
Group QVC Group Adjusted OIBDA (ex. Digital Commerce)(1) $ 433
$ 433 $ 612 $ 401 $ 445 Digital Commerce Adjusted OIBDA(1)
27 (2 ) NA NA NA
Adjusted OIBDA $ 460 $ 431 612 401 445 Depreciation and
amortization (165 ) (166 ) (150 ) (152 ) (149 ) Stock compensation
expense (24 ) (18 ) (17 ) (12 ) (12 ) Impairment of intangible
assets (7 ) — — —
—
Operating Income $ 264
$ 247 $ 445 $
237 $ 284 (1) QVC
Group adjusted OIBDA presented exclusive of the impact of the
Digital Commerce companies and reconciled to both QVC Group
adjusted OIBDA and GAAP operating income. Under GAAP, the Digital
Commerce companies were only included as part of the QVC Group
through September 30, 2014.
SCHEDULE 2
The following table provides a reconciliation of adjusted OIBDA
for QVC (and certain of its subsidiaries) and the Digital Commerce
businesses to that entity or such businesses' operating income
(loss) calculated in accordance with GAAP for the three months
ended June 30, 2014, September 30, 2014, December 31, 2014,
March 31, 2015 and June 30, 2015, respectively. As there are no
material reconciling items between adjusted OIBDA and operating
income for the QVC China joint venture for the referenced periods,
no reconciliation has been provided.
QUARTERLY
SUMMARY
(amounts in millions) 2Q14 3Q14
4Q14 1Q15 2Q15
QVC
Group
QVC Adjusted OIBDA QVC US $ 325 $ 329 $ 474 $ 306 $ 349
QVC Germany 40 42 53 39 35 QVC Japan 43 41 45 39 37 QVC UK
33 31 50 28 35 QVC Italy (2 ) (1 ) 1 (2 ) (1 ) QVC France —
(3 ) (3 ) (3 ) (6 ) QVC
International adjusted OIBDA $ 114 $ 110 $ 146
$ 101 $ 100 Consolidated QVC adjusted OIBDA
439 439 620 407 449 Depreciation and amortization (145 ) (147 )
(151 ) (153 ) (148 ) Stock compensation (10 ) (16 )
(10 ) (8 ) (7 )
Operating Income
$ 284 $ 276 $
459 $ 246 $ 294
Liberty Ventures
Group
Digital Commerce Companies(1) Adjusted OIBDA $ 27 $
(2 ) $ 44 $ 22 $ 19 Depreciation and amortization (20 ) (19 ) (20 )
(15 ) (13 ) Stock compensation (7 ) 7 (16 ) (2 ) (15 ) Impairment
of intangible assets (7 ) — —
— —
Operating Income (Loss)
$ (7 ) $ (14 ) $
8 $ 5 $ (9
) (1) For GAAP purposes, the Digital Commerce
companies have been recorded as part of Liberty Ventures Group
beginning with the fourth quarter of 2014 (due to the
reattribution). For presentation purposes in this table, the
results of the Digital Commerce companies are included in Liberty
Ventures Group for all periods shown.
SCHEDULE 3
The following table provides a reconciliation of adjusted OIBDA
for QVC Group and the Digital Commerce companies to the Liberty
Interactive Corporation operating income (loss) calculated in
accordance with GAAP for the three months ended June 30, 2014,
September 30, 2014, December 31, 2014, March 31, 2015 and June 30,
2015, respectively.
QUARTERLY
SUMMARY
(amounts in millions) 2Q14 3Q14
4Q14 1Q15 2Q15 QVC Group
Adjusted OIBDA Consolidated QVC $ 439 $ 439 $ 620 $ 407 $ 449
Corporate and other (6 ) (6 ) (8 ) (6 )
(4 )
QVC Group Adjusted OIBDA(1)
$ 433 $ 433 $ 612 $ 401 $ 445
Liberty Ventures Group Adjusted OIBDA Digital Commerce(1) $ 27 $ (2
) $ 44 $ 22 $ 19 Corporate and other (4 ) (6 )
(6 ) (4 ) (5 ) Liberty Ventures Group Adjusted OIBDA
$ 23 $ (8 ) $ 38 $ 18 $ 14
Consolidated Liberty Interactive Corp. Adjusted OIBDA
$ 456 $ 425 $
650 $ 419 $ 459
Depreciation and amortization (164 ) (166 ) (169 ) (168 )
(161 ) Stock compensation (26 ) (20 ) (37 ) (15 ) (29 ) Impairment
of intangible assets (7 ) — —
— —
Consolidated Liberty Interactive
Corp. Operating Income $ 259 $
239 $ 444 $ 236
$ 269 1) For GAAP
purposes, the Digital Commerce companies have been recorded as part
of Liberty Ventures Group beginning with the fourth quarter of 2014
(due to the reattribution). For presentation purposes in this
table, the results of the Digital Commerce companies are included
in Liberty Ventures Group for all periods shown.
SCHEDULE 4
The following table provides a reconciliation of QVC Group's
adjusted net income to its net income calculated in accordance with
GAAP for the three months ended June 30, 2014, September 31, 2014,
December 31, 2014, March 31, 2015 and June 30, 2015, respectively.
Adjusted net income excludes the impact of the Digital Commerce
companies due to their reattribution to Liberty Ventures Group in
the fourth quarter of 2014.
QUARTERLY
SUMMARY
(amounts in millions) 2Q14 3Q14
4Q14 1Q15 2Q15
LTM
QVC Group Net income $ 105 $ 83 $ 222 $ 151 $ 112
$ 568
Purchase accounting amort., net of
deferred tax benefit(1)
51 51 51 51 49 202 Digital Commerce net income (loss) (1)
(16) — — — (16) QVC Group
Adjusted net income $ 157 $ 150 $ 273 $ 202 $ 161 $ 786
QVCA/B shares outstanding as of July 31, 2015 461 Adjusted LTM
earnings per share $ 1.71 1) Add-back relates to
non-cash, non-tax deductible purchase accounting amortization from
Liberty Interactive’s acquisition of QVC, net of book deferred tax
benefit.
LIBERTY INTERACTIVE CORPORATION
BALANCE SHEET INFORMATION June 30, 2015 - (unaudited)
Attributed
QVC Ventures Inter-group
Consolidated Group Group Eliminations
Liberty amounts in millions
Assets Current assets:
Cash and cash equivalents $ 497 2,092 — 2,589 Trade and other
receivables, net 800 59 — 859 Inventory, net 964 65 — 1,029
Short-term marketable securities 8 837 — 845 Other current assets
273 8 (204 ) 77 Total current assets
2,542 3,061 (204 ) 5,399
Investments in available-for-sale securities and other cost
investments 4 1,401 — 1,405 Investments in affiliates, accounted
for using the equity method 196 1,325 — 1,521 Property and
equipment, net 982 38 — 1,020 Intangible assets not subject to
amortization 7,592 127 — 7,719 Intangible assets subject to
amortization, net 976 38 — 1,014 Other assets, at cost, net of
accumulated amortization 59 5 — 64 Total
assets
$ 12,351 5,995 (204
) 18,142 Liabilities and Equity Current
liabilities: Intergroup payable (receivable) $ 1 (1 ) — — Accounts
payable 567 34 — 601 Accrued liabilities 570 45 — 615 Current
portion of debt 9 907 — 916 Current deferred tax liabilities —
1,244 (204 ) 1,040 Other current liabilities 155 82 —
237 Total current liabilities
1,302
2,311 (204 ) 3,409 Long-term
debt 5,685 1,380 — 7,065 Deferred income tax liabilities 949 790 —
1,739 Other liabilities 190 12 — 202 Total
liabilities
8,126 4,493 (204
) 12,415 Equity/Attributed net assets (liabilities)
4,130 1,509 — 5,639 Noncontrolling interests in equity of
subsidiaries 95 (7 ) — 88 Total liabilities and
equity
$ 12,351 5,995 (204
) 18,142 LIBERTY INTERACTIVE
CORPORATION STATEMENT OF OPERATIONS INFORMATION Three
months ended June 30, 2015 - (unaudited)
Attributed QVC
Ventures Consolidated Group Group
Liberty amounts in millions Revenue: Net retail sales $
1,998 254 2,252 Operating costs and expenses: Cost of sales
1,234 175 1,409 Operating, including stock-based compensation 174
24 198 Selling, general and administrative, including stock-based
compensation 157 58 215 Depreciation and amortization 149
12 161 1,714 269 1,983
Operating income (loss) 284 (15 ) 269 Other income
(expense): Interest expense (70 ) (20 ) (90 ) Share of earnings
(losses) of affiliates, net 9 78 87 Realized and unrealized gains
(losses) on financial instruments, net 8 24 32 Gains (losses) on
dispositions, net (note 1) — 111 111 Other, net (31 ) 2
(29 ) (84 ) 195 111 Earnings (loss)
before income taxes 200 180 380 Income tax benefit (expense)
(80 ) (42 ) (122 ) Net earnings (loss) 120 138 258 Less net
earnings (loss) attributable to noncontrolling interests 8
8 16 Net earnings (loss) attributable to
Liberty stockholders $ 112 130 242
LIBERTY INTERACTIVE CORPORATION STATEMENT OF
OPERATIONS INFORMATION Three months ended June 30, 2014 -
(unaudited) Attributed
QVC Ventures Consolidated
Group Group Liberty amounts in millions
Revenue:
Net retail sales
$ 2,483 — 2,483 Operating costs and expenses: Cost of sales
1,558 — 1,558 Operating, including stock-based compensation 217 —
217 Selling, general and administrative, including stock-based
compensation 272 6 278 Impairment of Long Lived Assets 7 — 7
Depreciation and amortization 165 (1 ) 164
2,219 5 2,224 Operating income (loss)
264 (5 ) 259 Other income (expense): Interest expense (79 )
(19 ) (98 ) Share of earnings (losses) of affiliates, net 7 (3 ) 4
Realized and unrealized gains (losses) on financial instruments,
net 6 (47 ) (41 ) Other, net (1 ) 4 3
(67 ) (65 ) (132 ) Earnings (loss) from continuing operations
before income taxes 197 (70 ) 127 Income tax benefit (expense)
(76 ) 36 (40 ) Net earnings (loss) from continuing
operations 121 (34 ) 87 Net earnings (loss) from discontinued
operations, net of tax (7 ) 26 19 Net earnings
(loss) 114 (8 ) 106 Less net earnings (loss) attributable to
noncontrolling interests 9 20 29 Net
earnings (loss) attributable to Liberty stockholders $ 105
(28 ) 77
LIBERTY INTERACTIVE
CORPORATION STATEMENT OF CASH FLOWS INFORMATION Six
months ended June 30, 2015 - (unaudited)
Attributed QVC
Ventures Consolidated Group Group
Liberty amounts in millions
CASH FLOWS FROM OPERATING
ACTIVITIES: Net earnings (loss) $ 280 130 410 Adjustments to
reconcile net earnings to net cash provided by operating
activities: Depreciation and amortization 301 28 329 Stock-based
compensation 24 20 44 Cash payments for stock based compensation —
(10 ) (10 ) Excess tax benefit from stock based compensation (14 )
(2 ) (16 ) Share of (earnings) losses of affiliates, net (33 ) (57
) (90 ) Cash receipts from return on equity investments 14 13 27
Realized and unrealized gains (losses) on financial instruments,
net 2 (30 ) (28 ) (Gains) losses on dispositions — (111 ) (111 )
Deferred income tax (benefit) expense (91 ) 61 (30 ) Other, net 25
7 32 Intergroup tax allocation 43 (43 ) — Intergroup tax payments
(55 ) 55 — Changes in operating assets and liabilities Current and
other assets 283 4 287 Payables and other current liabilities
(208 ) (38 ) (246 ) Net cash provided (used) by operating
activities 571 27 598
CASH
FLOWS FROM INVESTING ACTIVITIES: Cash paid for acquisitions —
(20 ) (20 ) Cash proceeds from dispositions — 271 271 Investments
in and loans to cost and equity investees (2 ) (96 ) (98 ) Cash
receipts from returns of equity investments 200 — 200 Capital
expended for property and equipment (80 ) (24 ) (104 ) Purchases of
short term and other marketable securities (80 ) (546 ) (626 )
Sales of short term and other marketable securities 93 584 677
Other investing activities, net (47 ) — (47 ) Net
cash provided (used) by investing activities 84 169
253
CASH FLOWS FROM FINANCING
ACTIVITIES: Borrowings of debt 1,098 369 1,467 Repayments of
debt (1,288 ) (340 ) (1,628 ) Repurchases of Liberty common stock
(377 ) — (377 ) Min. withholding taxes on net settlements of
stock-based comp (14 ) 1 (13 ) Excess tax benefit from stock-based
compensation 14 2 16 Other financing activities, net (4 )
(20 ) (24 ) Net cash provided (used) by financing activities
(571 ) 12 (559 ) Effect
of foreign currency rates on cash (9 ) — (9 ) Net
increase (decrease) in cash and cash equivalents 75 208 283 Cash
and cash equivalents at beginning of period 422 1,884
2,306 Cash and cash equivalents at end period
$ 497 2,092 2,589
LIBERTY INTERACTIVE CORPORATION STATEMENT
OF CASH FLOWS INFORMATION Six months ended June 30, 2014 -
(unaudited) Attributed
QVC Ventures Consolidated
Group Group Liberty amounts in millions
CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) $
234 (18 ) 216 Adjustments to reconcile net earnings to net cash
provided by operating activities: (Earnings) loss from discontinued
operations 11 (49 ) (38 ) Depreciation and amortization 327 — 327
Stock-based compensation 48 3 51 Cash payments for stock based
compensation (5 ) (1 ) (6 ) Excess tax benefit from stock-based
compensation (9 ) (1 ) (10 ) Share of losses (earnings) of
affiliates, net (28 ) 26 (2 ) Cash receipts from return on equity
investments 10 10 20 Realized and unrealized gains (losses) on
financial instruments, net (7 ) 73 66 Impairment of intangible
assets 7 — 7 Deferred income tax (benefit) expense (101 ) 35 (66 )
Other, net 4 3 7 Intergroup tax allocation 105 (105 ) — Intergroup
tax payments (276 ) 276 — Changes in operating assets and
liabilities Current and other assets 310 1 311 Payables and other
current liabilities (46 ) (5 ) (51 ) Net cash provided
(used) by operating activities 584 248 832
CASH FLOWS FROM INVESTING ACTIVITIES: Cash
proceeds from dispositions — 25 25 Investments in and loans to cost
and equity investees (2 ) (29 ) (31 ) Capital expended for property
and equipment (88 ) 3 (85 ) Purchases of short term and other
marketable securities (38 ) (219 ) (257 ) Sales of short term and
other marketable securities 27 210 237 Other investing activities,
net (10 ) 15 5 Net cash provided (used) by
investing activities (111 ) 5 (106 )
CASH
FLOWS FROM FINANCING ACTIVITIES: Borrowings of debt 1,895 —
1,895 Repayments of debt (1,739 ) (5 ) (1,744 ) Repurchases of
Liberty common stock (478 ) — (478 ) Min. withholding taxes on net
settlements of stock-based comp (14 ) — (14 ) Excess tax benefit
from stock-based compensation 9 1 10 Intergroup receipts
(payments), net 2 (2 ) — Other financing activities, net (36
) — (36 ) Net cash provided (used) by financing activities
(361 ) (6 ) (367 ) Net cash provided (used) by discontinued
operations: Operating (14 ) 269 255 Investing 1 (12 ) (11 )
Financing (1 ) (23 ) (24 ) Effect of foreign currency rates on cash
— 3 3 Change in available cash held by discontinued operations
2 (237 ) (235 ) Net cash provided (used) by
discontinued operations (12 ) — (12 ) Effect of foreign currency
rates on cash (5 ) — (5 ) Net increase (decrease) in
cash and cash equivalents 95 247 342 Cash and cash equivalents at
beginning of period 595 307 902 Cash
and cash equivalents at end period $ 690 554 1,244
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Liberty Interactive CorporationCourtnee Ulrich, 720-875-5420
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