Liberty Interactive Corporation ("Liberty Interactive") (Nasdaq:
QVCA, QVCB, LVNTA, LVNTB) today reported third quarter 2017
results. Highlights include(1):
Attributed to QVC Group
- QVC consolidated revenue up 3% to $2.0
billion and up 4% in constant currency(2)
- Operating income, constant currency(2)
revenue and adjusted OIBDA(3) up in all markets
- QVC US revenue up 3% to $1.4 billion
- Operating income up 14% and adjusted
OIBDA(3) up 2%
- QVC International grew constant
currency(2) revenue 5%, operating income 36% and adjusted OIBDA(3)
18%
- QVC consolidated mobile penetration was
64% of QVC.com orders, a 530 basis point increase
- QVC US mobile penetration was 63% of
QVC.com orders, a 490 basis point increase
- Advanced progress on planned
acquisition of HSN, Inc. ("HSNi"); HSR and FCC regulatory approvals
have been received
- From August 1, 2017 through October 31,
2017, repurchased 21.0 million QVCA shares at an average price per
share of $22.69 and total cost of $477 million
Attributed to Liberty Ventures Group
- Planned acquisition of General
Communication, Inc. (“GCI”) and subsequent split-off of combined
company, GCI Liberty, expected to close first quarter 2018
- Received requisite FCC and Alaskan
regulatory approvals on November 8th
“QVC had an excellent quarter, growing constant currency revenue
and adjusted OIBDA in every market,” said Greg Maffei, Liberty
Interactive President and CEO. “We made progress on the acquisition
of HSN and expect to close in the fourth quarter. We now expect the
acquisition of GCI, split-off of GCI Liberty and creation of two
asset-backed stocks, QVC Group and GCI Liberty, to occur in the
first quarter of 2018.”
Unless otherwise noted, the following discussion compares
financial information for the three months ended September 30, 2017
to the same period in 2016.
QVC GROUP – Approximately $12 million of corporate level
selling, general and administrative expense (“SG&A”) (including
stock-based compensation expense) was allocated to the QVC Group in
the third quarter of 2017.
On July 6, 2017, Liberty Interactive entered into an agreement
to acquire the 62% of HSNi it does not already own in an all-stock
transaction. Liberty Interactive currently owns approximately 38%
of HSNi and, upon acquisition of the remaining stake, HSNi will
become a wholly-owned subsidiary attributed to the QVC Group.
Additional information is available in the amended registration
statement on Form S-4 that Liberty Interactive filed with the SEC
on October 23, 2017.
The acquisition of HSNi is expected to be completed during the
fourth quarter of 2017 and is subject to certain customary
conditions, including, among other things, approval by a majority
of the outstanding voting power of HSNi stockholders. A voting
agreement has been obtained from Liberty Interactive to vote its
HSNi shares in-favor of the transaction. Approval of the Liberty
Interactive stockholders is not required, and is not being sought,
for the HSNi acquisition. In August 2017, the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act
expired. In September 2017, the Federal Communications Commission
granted requisite approvals to complete the acquisition.
QVC
“We are very pleased with our strong results,” said QVC
President and CEO, Mike George. “Our US business returned to growth
and our International segment continued its solid momentum. Our
performance demonstrates our ability to execute our strategic
initiatives to improve product freshness and discovery, leverage
our commerce content across platforms, increase customer engagement
and attract new customers. We remain excited about the pending
transaction to acquire HSNi and the formation of the new QVC
Group.”
The following table provides QVC’s consolidated financial and
operating results for the third quarter of 2017. US Dollar
denominated results were unfavorably impacted by exchange rate
fluctuations in the third quarter. The Dollar strengthened versus
the Japanese Yen and British Pound 8% and 1%, respectively, and
weakened against the Euro 5%. The following table also provides a
comparison of the year over year percentage change in QVC’s results
in constant currency(2) (where applicable) to the comparable
figures calculated in accordance with US GAAP for the three months
ended September 30, 2017.
(amounts in millions unless otherwise noted) 3Q16
3Q17 % Change
% ChangeConstantCurrency(3)
QVC – Consolidated Financial Metrics Revenue $ 1,948
$ 2,010 3 % 4 % Operating Income $ 231 $ 274 19 % 19 % Operating
Income Margin (%) 11.9 % 13.6 % 170bps Adjusted OIBDA $ 393 $ 412 5
% 5 % Adjusted OIBDA Margin (%) 20.2 % 20.5 % 30bps
Operating
Metrics eCommerce Revenue $ 882 $ 973 10 % 11 % eCommerce % of
Total Revenue 45.3 % 48.4 % 310bps Mobile % of eCommerce Revenue(1)
59.0 % 64.3 % 530bps LTM Total Customers(2) 12.7 12.6 (1 )%
(1) Based on gross US Dollar orders. (2) LTM: Last twelve
months. (3) For a definition of constant currency financial
metrics, see the accompanying schedules.
The following table provides QVC US’s financial and operating
results for the third quarter of 2017.
(amounts in millions unless otherwise noted) 3Q16
3Q17 % Change
QVC – US
Financial Metrics Revenue $ 1,338 $ 1,374 3 % Gross Margin
35.2 % 35.6 % 40bps Operating Income $ 175 $ 200 14 % Operating
Income Margin (%) 13.1 % 14.6 % 150bps Adjusted OIBDA $ 308 $ 313 2
% Adjusted OIBDA Margin (%) 23.0 % 22.8 % (20)bps
Operating
Metrics Average Selling Price $ 54.75 $ 52.82 (4 )% Units Sold
9 % Return Rate(1) 17.5 % 17.9 % 40bps eCommerce Revenue $ 684 $
744 9 % eCommerce % of Total Revenue 51.1 % 54.1 % 300bps Mobile %
of eCommerce Revenue(2) 58.0 % 62.9 % 490bps LTM Total Customers(3)
8.1 8.0 (1 )% (1) Measured as returned sales over
gross shipped sales. (2) Based on gross US Dollar orders. (3) LTM:
Last twelve months.
QVC US realized year-over-year gains in the apparel, beauty,
accessories and electronics categories in the third quarter. Home
was essentially flat and jewelry declined. Average selling price
(“ASP”) declined 4% in the quarter, primarily driven by product mix
within the electronics category, as several successful items sold
in the quarter carry lower price points than items sold in the
prior year. The number of US new customers increased 7% in the
quarter. Operating income margin and adjusted OIBDA margin
performance primarily reflect higher fixed costs associated with
incentive compensation and HSNi integration consulting services,
higher inventory obsolescence and marketing expense, which were
partially offset by higher product margins, lower bad debt and
lower amortization expenses. As noted last quarter, the US business
experienced a systems outage late in the second quarter of 2017,
which resulted in an estimated 1% shift in net revenue to the third
quarter.
The following table provides QVC International’s financial and
operating results for the third quarter of 2017, including the year
over year percentage change in QVC’s results in constant
currency(2) (where applicable) to the comparable figures calculated
in accordance with US GAAP due to the net impact of unfavorable
exchange rate fluctuations.
(amounts in millions unless otherwise noted) 3Q16
3Q17 % Change
% ChangeConstantCurrency(4)
QVC – International(1) Financial Metrics
Revenue $ 610 $ 636 4 % 5 % Gross Margin 37.0 % 37.4 % 40bps
Operating Income $ 56 $ 74 32 % 36 % Operating Income Margin (%)
9.2 % 11.6 % 240bps Adjusted OIBDA $ 85
$
99 16 % 18 % Adjusted OIBDA Margin (%) 13.9 % 15.6 % 170bps
Operating Metrics Average Selling Price (5 )% (5 )% Units
Sold 10 % eCommerce Revenue $ 198 $ 229 16 % 17 % eCommerce % of
Total Revenue 32.5 % 36.0 % 350bps Mobile % of eCommerce Revenue(2)
62.3 % 68.7 % 640bps LTM Total Customers(3) 4.6 4.6 0 % (1)
Includes QVC France, QVC Germany, QVC Italy, QVC Japan and
QVC UK. (2) Based on gross US Dollar orders. (3) LTM: Last twelve
months. (4) For a definition of constant currency financial
metrics, see the accompanying schedules.
In the third quarter of 2017, QVC International experienced
year-over-year constant currency(2) growth in the apparel,
accessories, beauty and home categories, which were partially
offset by declines in electronics and jewelry. Increases in
operating income margin and adjusted OIBDA margin in constant
currency(2) primarily reflect lower marketing and fixed costs,
higher product margins and lower amortization, which were partially
offset by higher freight costs.
CNR Home Shopping Co., Ltd. ("CNRS"), QVC's joint venture in
China, is being accounted for as an equity method investment. It
had no material impact to QVC’s net income for the quarter.
zulily
“We continue to be obsessively focused on our customer
experience and every day it is our mission to make every one of our
customers a passionate fan of zulily. We are pleased by the growth
of our active customer count to 5.3 million, the highest count
ever, which contributed to a strong finish during the third
quarter,” said zulily President and CEO, Darrell Cavens. “Driving
active customer growth and ensuring an amazing customer experience
will allow us to achieve the growth levels that this business has
the ability to deliver, and I am excited by our strong momentum
going into the holiday season.”
The following table provides zulily’s stand-alone financial and
operating results for the third quarter of 2017. Revenue was up 2%
in the third quarter, primarily attributed to a 6% increase in
orders placed driven by an increase in active customers, partially
offset by increased backlog due to timing of orders within the
quarter. In addition, units per order increased but was offset by
lower ASP. An active customer is defined as an individual who has
purchased at least once in the last twelve months, measured from
the last date of a period. Operating income margin improved, driven
primarily by decelerating amortization of intangible assets related
to purchase accounting. Adjusted OIBDA margin decreased primarily
due to a decline in ASP, increased promotional offers, and
increased supply chain expenses resulting from an increase in
international shipping, a shift in product mix, and ramping of
zulily’s Pennsylvania fulfillment center.
(amounts in millions unless otherwise noted) 3Q16
3Q17 % Change
zulily
Financial Metrics Net Revenue $ 359 $ 367 2 % Gross Margin
28.4 % 25.9 % (250)bps Operating Income (Loss) $ (52 ) $ (44 ) 15 %
Operating Income Margin (%) (14.5 )% (12.0 )% 250bps Adjusted OIBDA
$ 18 $ 12 (33 )% Adjusted OIBDA Margin (%) 5.0 % 3.3 % (170)bps
Operating Metrics Mobile % of Total Orders 65.5 % 67.3 %
180bps LTM Total Customers(1) 5.0 5.3 6 % (1) LTM:
Last twelve months.
Share Repurchases
From August 1, 2017 through October 31, 2017, Liberty
Interactive repurchased approximately 21.0 million Series A QVC
Group shares (Nasdaq:QVCA) at an average cost per share of $22.69
for total cash consideration of $477 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 $7.5 billion, representing
approximately 49% 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 common stock, were comprised of shares
of the combined stocks. On September 19, 2017, Liberty
Interactive’s board of directors authorized the repurchase of an
additional $1 billion of Series A QVC Group common stock. The
remaining repurchase authorization for Liberty Interactive as of
November 1, 2017 is approximately $1.5 billion, of which $822
million can be applied to repurchases of either QVC Group or
Liberty Ventures common stock and $650 million can only be applied
to Liberty Ventures common stock.
QVC Group has attributed to it Liberty Interactive’s
subsidiaries, QVC, Inc. and zulily, llc, and Liberty Interactive’s
interest in HSNi.
LIBERTY VENTURES GROUP – Approximately $10 million of
corporate level SG&A expense (including stock-based
compensation expense) was allocated to Liberty Ventures Group in
the third quarter of 2017.
On April 4, 2017, Liberty Interactive entered into an agreement
and plan of reorganization with GCI, the largest communications
provider in Alaska, whereby Liberty Interactive will acquire GCI
through a reorganization in which certain Liberty Ventures Group
assets and liabilities will be contributed to GCI in exchange for a
controlling interest in GCI, followed by a subsequent split-off of
the combined company, GCI Liberty. Additional information is
available in the amended registration statement on Form S-4 that
GCI filed with the SEC on September 26, 2017.
The transactions between Liberty Interactive and GCI are
expected to be completed during the first quarter of 2018, subject
to customary closing conditions including, among other things, the
requisite shareholder approvals. In June 2017, the Federal Trade
Commission granted early termination of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act. In
November 2017, the Regulatory Commission of Alaska and the Federal
Communications Commission granted requisite approvals to complete
the acquisition.
Pursuant to a recent amendment to the reorganization agreement
with GCI, Liberty Interactive’s outstanding 1.75% Charter
exchangeable debentures due 2046 (the “1.75% debentures”) will now
be reattributed to the QVC Group at the closing of the GCI
transactions and Liberty Interactive will not conduct the
previously contemplated exchange offer for mirror debentures of GCI
Liberty. At closing, the 1.75% debentures will be reattributed to
the QVC Group, together with approximately $590 million of cash
equal to the NPV of principal and cash interest payments through
the put/call date (October 2023). Such cash, together with any
other cash due to the QVC Group in the reattribution, will be
funded through cash attributed to Liberty Ventures and a $1 billion
LBRDK margin loan to be entered into by a subsidiary of GCI Liberty
at closing.
In addition, Liberty Interactive (which is expected to be
renamed QVC Group after closing) will benefit from an indemnity
obligation from GCI Liberty with respect to any payments made by
Liberty Interactive in excess of the adjusted principal amount of
the debentures to any holder that exercises its exchange right on
or before the put/call date, less any potential tax benefit to
Liberty Interactive from the retirement of such debentures at a
premium. GCI Liberty is supporting this obligation with a negative
pledge in favor of Liberty Interactive on 2.2 million Charter
shares at GCI Liberty that are referenced by the 1.75% debentures.
In addition, Liberty Interactive has agreed to use its commercially
reasonable efforts to repurchase the outstanding debentures within
6 months following the closing, on terms and conditions reasonably
acceptable to GCI Liberty. GCI Liberty will reimburse Liberty
Interactive for the difference between the purchase price of the
tendered debentures and the amount of cash delivered in the
reattribution with respect to the tendered debentures, less any
potential tax benefit to Liberty Interactive from retiring such
debentures at a premium. GCI Liberty's indemnity obligation and the
number of shares subject to the negative pledge will be ratably
reduced with respect to any debentures repurchased by Liberty
Interactive.
GCI Liberty may (but is not required to) complete an offering of
Charter exchangeable debentures, proceeds of which may be used to
reimburse Liberty Interactive with respect to the aforementioned
tender offer. Absent a concurrent offering, GCI Liberty will fund
its payment obligations with funds available under the $1 billion
LBRDK margin loan.
Simultaneous with the closing of the transactions with Liberty
Interactive and GCI, the QVC Group, including wholly-owned
subsidiaries QVC, Inc., zulily and HSNi (or, if the HSNi
acquisition has not yet closed, following such closing), will
become an asset-backed stock and Liberty Interactive will be
renamed QVC Group, Inc. Neither the proposed transactions involving
GCI nor the acquisition of HSNi is conditioned on the completion of
the other, and no assurance can be given as to which of these
transactions will be completed first.
Share Repurchases
There were no repurchases of Liberty Ventures common stock
(Nasdaq: LVNTA) from August 1, 2017 through October 31, 2017. The
remaining repurchase authorization for Liberty Interactive as of
November 1, 2017 is approximately $1.5 billion, of which $822
million can be applied to repurchases of either QVC Group or
Liberty Ventures common stock and $650 million can only be applied
to Liberty Ventures common stock.
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
Liberty Broadband Corporation and FTD, Liberty Interactive’s
subsidiary Evite, and minority interests in ILG, LendingTree and
Charter Communications.
FOOTNOTES
1) Liberty Interactive's President and CEO, Greg Maffei,
will discuss these highlights and other matters on Liberty
Interactive's earnings conference call which will begin at 11:00
a.m. (E.S.T.) on November 9, 2017. For information regarding how to
access the call, please see “Important Notice” later in this
document. 2) For a definition of constant currency financial
metrics, see the accompanying schedules. Applicable reconciliations
can be found in the financial tables at the beginning of this press
release. 3) For a definition of adjusted OIBDA and applicable
reconciliations and a definition of adjusted OIBDA margin, see the
accompanying schedules.
QVC GROUP
FINANCIAL METRICS – QUARTER
(amounts in millions) 3Q16 3Q17 % Change
Revenue QVC US $ 1,338 $ 1,374 3 % QVC International(1)
610 636 4 % Total QVC revenue 1,948
2,010 3 % zulily 359 367 2 % Intergroup eliminations (4 )
(2 ) 50 %
Total QVC Group Revenue $
2,303 $ 2,375 3 %
Operating Income QVC US $ 175 $ 200 14 % QVC
International(1) 56 74 32 % Total QVC
operating income 231 274 19 % zulily (52 ) (44 ) 15 % Corporate and
other (12 ) (12 ) - %
Total QVC Group Operating
Income $ 167 $ 218
31 % Adjusted OIBDA QVC US $ 308 $ 313
2 % QVC International(1) 85 99 16 %
Total QVC adjusted OIBDA 393 412 5 % zulily 18 12 (33 )% Corporate
and other (5 ) (8 ) (60 )%
Total QVC Group
Adjusted OIBDA $ 406 $ 416
2 % Net Income and Adjusted Net
Income Total QVC Group net income $ 61 $ 119 95 % Total QVC
Group adjusted net income(2) $ 148 $ 182 23 %
China
JV(3) Revenue $ 36 $ 40 11 % Adjusted OIBDA $ (3 ) $ 1
133 % (amounts in millions)
QVCA Shares
Outstanding 10/31/2016
10/31/2017 Outstanding A and B shares 467 430
(amounts in millions)
Quarter ended Quarter ended
QVCA and QVCB Basic and Diluted Shares
9/30/2016 9/30/2017 Basic
weighted average shares outstanding ("WASO") 473 448 Potentially
dilutive shares 5 4
Diluted WASO
478 452 (1)
Includes QVC France, QVC Germany, QVC Italy, QVC Japan and QVC UK.
(2) See reconciling schedule 4. (3) This joint venture is being
accounted for as an equity investment.
NOTES
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) 6/30/2017
9/30/2017 HSNi(1) $ 639 $ 782
Total Attributed QVC Group
$ 639 $ 782 Charter(2) $ 1,805 $
1,947 Liberty Broadband(2) 3,703 4,068 LendingTree(3) 557 788
ILG(2) 457 445 Other public holdings(4) 206 134
Total Attributed Liberty Ventures Group $
6,728 $ 7,382 (1) Represents
fair value of the investment in HSNi attributed to QVC Group. In
accordance with GAAP, this investment is accounted for using the
equity method of accounting and is included in the attributed
balance sheet of QVC Group at historical carrying value which
aggregated $193 million and $198 million at June 30, 2017 and
September 30, 2017, respectively. (2) Represents fair value of the
investments in Charter, Liberty Broadband and ILG attributed to
Liberty Ventures Group, which are accounted for at fair value. (3)
Represents fair value of the investment in LendingTree attributed
to Liberty Ventures Group. In accordance with GAAP, this investment
is accounted for using the equity method of accounting and is
included in the attributed balance sheet of Liberty Ventures Group
at historical carrying values which aggregated $111 million and
$113 million at June 30, 2017 and September 30, 2017, respectively.
(4) Other public holdings includes fair value of the investment in
FTD attributed to Liberty Ventures Group. In accordance with GAAP,
this investment is accounted for using the equity method of
accounting and is included in the attributed balance sheet of
Liberty Ventures Group at historical carrying values which
aggregated $213 million and $133 million at June 30, 2017 and
September 30, 2017, respectively.
Cash and Debt
The following presentation is provided to separately identify
cash and liquid investments and debt information.
(amounts in millions) 6/30/2017
9/30/2017
Cash and Liquid Investments
Attributable to: QVC Group $ 420 $ 383 Liberty Ventures Group
485 512
Total Liberty Consolidated
Cash and Liquid Investments $ 905 $
895 Debt: Senior notes and
debentures(1) $ 791 $ 791 QVC senior notes(1) 3,550 3,550 QVC bank
credit facility 1,611 1,690 Other 181 177
Total Attributed QVC Group Debt $ 6,133
$ 6,208 Unamortized discount, fair market value
adjustment and deferred loan costs (36 ) (33 )
Total Attributed QVC Group Debt (GAAP) $ 6,097
$ 6,175 Senior exchangeable
debentures(2) 1,955 1,949
Total
Attributed Liberty Ventures Group Debt $ 1,955
$ 1,949 Fair market value adjustment (156 )
(63 )
Total Attributed Liberty Ventures Group Debt
(GAAP) $ 1,799 $ 1,886
Total Liberty Interactive Corporation Debt
(GAAP) $ 7,896 $ 8,061
(1) Face amount of Senior Notes and Debentures
with no reduction for the unamortized discount. (2) 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 $37 million in the third quarter. Share repurchases,
inter-group tax payments and capital expenditures more than offset
cash from operations and additional borrowings. Total debt
attributed to the QVC Group increased by $75 million primarily due
to borrowings on QVC’s credit facility.
Total cash and liquid investments attributed to the Liberty
Ventures Group increased $27 million, primarily due to inter-group
tax payments received, partially offset by additional investments
related to green energy and other minority investments. Total debt
attributed to Liberty Ventures Group decreased by $6 million in the
third quarter.
Important Notice: Liberty Interactive (Nasdaq: QVCA,
QVCB, LVNTA, LVNTB) President and CEO, Greg Maffei, will discuss
Liberty Interactive's earnings release on a conference call which
will begin at 11:00 a.m. (E.S.T.) on November 9, 2017. 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,
including statements about business strategies, market potential,
future financial prospects, market conditions, sales demand,
statements about the proposed acquisition (the “HSNi acquisition”)
of HSNi by Liberty Interactive, including those about timing of the
HSNi acquisition, the proposed acquisition of GCI by Liberty
Interactive and the proposed split-off of GCI and certain Liberty
Ventures Group assets and liabilities (the “proposed split-off” and
together with the proposed acquisition of GCI, the “proposed
transactions”), the timing of the proposed transactions, the
renaming of Liberty Interactive, new service and product offerings,
the monetization of our non-core assets, the continuation of our
stock repurchase program 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, the satisfaction of conditions to complete each of
the HSNi acquisition and the proposed transactions and market
conditions conducive to stock repurchases. These forward-looking
statements speak only as of the date of this press release, 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 press release.
Additional Information
Nothing in this press release shall constitute a solicitation to
buy or an offer to sell shares of GCI Liberty, GCI common stock or
any of Liberty Interactive’s tracking stocks. The offer and
issuance of shares in the proposed transactions will only be made
pursuant to GCI Liberty’s effective registration statement. Liberty
Interactive stockholders, GCI stockholders and other investors are
urged to read the registration statement and the joint proxy
statement/prospectus regarding the proposed transactions (a
preliminary filing of which has been made with the SEC) and any
other relevant documents filed with the SEC, as well as any
amendments or supplements to those documents, because they contain
important information about the proposed transactions. Copies of
these SEC filings will be available free of charge at the SEC’s
website (http://www.sec.gov). Copies of the filings together with
the materials incorporated by reference therein will also be
available, without charge, by directing a request to Liberty
Interactive Corporation, 12300 Liberty Boulevard, Englewood,
Colorado 80112, Attention: Investor Relations, Telephone: (720)
875-5420. GCI investors can access additional information at
ir.gci.com.
Participants in a Solicitation
The directors and executive officers of Liberty Interactive and
GCI and other persons may be deemed to be participants in the
solicitation of proxies in respect of proposals to approve the
proposed transactions. Information regarding the directors and
executive officers of Liberty Interactive is available in its
definitive proxy statement, which was filed with the SEC on April
20, 2017. Information regarding the directors and executive
officers of GCI is available as part of its Annual Report on Form
10-K filed with the SEC on March 2, 2017. Other information
regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security
holdings or otherwise, will be available in the proxy materials
regarding the foregoing to be filed with the SEC. Free copies of
these documents may be obtained as described in the preceding
paragraph.
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), zulily and the
Liberty Ventures Group 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 press release 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).
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. 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 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).
This press release also references certain financial metrics on
a constant currency basis, which is a non-GAAP measure, for QVC
Group. Constant currency financial metrics, as presented herein,
are calculated by translating the current-year and prior-year
reported amounts into comparable amounts using a single foreign
exchange rate for each currency.
Liberty Interactive believes constant currency financial metrics
are an important indicator of financial performance, in particular
for QVC Group, due to the translational impact of foreign currency
fluctuations relating to its subsidiaries in the UK, Germany,
Italy, Japan and France, as well as its JV in China. We use
constant currency financial metrics to provide a framework to
assess how our businesses performed excluding the effects of
foreign currency exchange fluctuations. Please see the financial
tables at the beginning of this press release for a reconciliation
of the impact of foreign currency fluctuations on revenue,
operating income, adjusted OIBDA and average selling price.
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 September 30, 2016, December
31, 2016, March 31, 2017, June 30, 2017 and September 30, 2017,
respectively.
QUARTERLY SUMMARY
(amounts in millions) 3Q16 4Q16
1Q17 2Q17 3Q17
QVC Group
Adjusted OIBDA 406 610 445 488 416 Depreciation and amortization
(219 ) (208 ) (207 ) (205 ) (180 ) Stock compensation expense
(20 ) (18 ) (12 ) (18 ) (18 )
Operating Income $ 167 $
384 $ 226 $ 265
$ 218
SCHEDULE 2
The following table provides a reconciliation of adjusted OIBDA
for QVC (and certain of its subsidiaries) and zulily to that entity
or such businesses' operating income (loss) calculated in
accordance with GAAP for the three months ended September 30, 2016,
December 31, 2016, March 31, 2017, June 30, 2017 and September 30,
2017, 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) 3Q16 4Q16
1Q17 2Q17 3Q17
QVC
Group QVC Adjusted OIBDA QVC US $ 308 $ 438 $ 336
$ 361 $ 313 QVC International 85 131 98 107 99 Consolidated
QVC adjusted OIBDA 393 569 434 468 412 Depreciation and
amortization (154 ) (157 ) (157 ) (154 ) (129 ) Stock compensation
(8 ) (8 ) (6 ) (8 ) (9 )
QVC
Operating Income $ 231 $ 404
$ 271 $ 306
$ 274 zulily Adjusted OIBDA $ 18
$ 40 $ 15 $ 26 $ 12 Depreciation and amortization (65 ) (51 ) (50 )
(51 ) (51 ) Stock compensation (5 ) (3 ) (3 )
(4 ) (5 )
zulily Operating Income (Loss)
$ (52 ) $ (14 ) $
(38 ) $ (29 ) $
(44 )
SCHEDULE 3
The following table provides a reconciliation of adjusted OIBDA
for QVC Group and the Liberty Ventures Group to the Liberty
Interactive Corporation operating income (loss) calculated in
accordance with GAAP for the three months ended September 30, 2016,
December 31, 2016, March 31, 2017, June 30, 2017 and September 30,
2017, respectively.
QUARTERLY SUMMARY
(amounts in millions) 3Q16 4Q16
1Q17 2Q17 3Q17 QVC Group
adjusted OIBDA $ 406 $ 610 $ 445 $ 488 $ 416 Liberty Ventures Group
adjusted OIBDA (4 ) (5 ) (8 ) (7 )
(6 )
Consolidated Liberty Interactive Corp. Adjusted
OIBDA $ 402 $ 605
$ 437 $ 481 $
410 Depreciation and amortization (225 ) (211 ) (208
) (206 ) (180 ) Stock compensation (20 ) (22 )
(16 ) (21 ) (22 )
Consolidated Liberty Interactive
Corp. Operating Income $ 157 $
372 $ 213 $ 254
$ 208
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 September 30, 2016, December 31,
2016, March 31, 2017, June 30, 2017 and September 30, 2017,
respectively.
QUARTERLY SUMMARY
(amounts in millions) 3Q16 4Q16
1Q17 2Q17 3Q17 LTM
QVC Group Net income $ 61 $ 188 $ 91 $ 111 $ 119 $ 509 QVC
purchase accounting amort., net deferred tax benefit (1) 50 49 49
49 34 181 zulily purchase accounting amort., net deferred tax
benefit (2) 37 29 28 28 29
114 QVC Group adjusted net income $ 148 $ 266 $ 168 $ 188 $
182 $ 804 QVCA/B shares outstanding as of October 31, 2017
430 Adjusted LTM earnings per share $ 1.87 (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 (gross non-cash, non-tax
deductible purchase accounting amortization is expected to be $212
million for the twelve months ending December 31, 2017. The
majority of the intangible assets established in purchase
accounting as a result of the acquisition have been fully amortized
as of the end of the third quarter of 2017). (2) Add-back relates
to non-cash, non-tax deductible purchase accounting amortization
from Liberty Interactive’s acquisition of zulily, net of book
deferred tax benefit.
LIBERTY INTERACTIVE CORPORATION BALANCE SHEET
INFORMATION September 30, 2017 - (unaudited)
Attributed QVC Ventures Consolidated
Group Group Liberty amounts in millions
Assets Current assets: Cash and cash equivalents $ 383 512
895 Trade and other receivables, net 908 37 945 Inventory, net
1,197 — 1,197 Other current assets 79 2 81 Total
current assets 2,567 551 3,118 Investments in
available-for-sale securities and other cost investments 4 2,477
2,481 Investments in affiliates, accounted for using the equity
method 236 337 573 Investment in Liberty Broadband measured at fair
value — 4,068 4,068 Property and equipment, net 1,116 1 1,117
Intangible assets not subject to amortization 9,396 29 9,425
Intangible assets subject to amortization, net 631 4 635 Other
assets, at cost, net of accumulated amortization 30 —
30 Total assets $ 13,980 7,467 21,447
Liabilities and
Equity Current liabilities: Intergroup payable (receivable) $
46 (46 ) — Accounts payable 833 — 833 Accrued liabilities 621 20
641 Current portion of debt 17 994 1,011 Other current liabilities
158 3 161 Total current liabilities 1,675 971
2,646 Long-term debt 6,158 892 7,050 Deferred income tax
liabilities 1,024 2,991 4,015 Other liabilities 137 40
177 Total liabilities 8,994 4,894 13,888
Equity/Attributed net assets (liabilities) 4,871 2,583 7,454
Non-controlling interests in equity of subsidiaries 115 (10
) 105 Total liabilities and equity $ 13,980 7,467 21,447
LIBERTY
INTERACTIVE CORPORATION STATEMENT OF OPERATIONS
INFORMATION Three months ended September 30, 2017 -
(unaudited) Attributed QVC Ventures
Consolidated Group Group Liberty
amounts in millions Revenue: Total revenue, net $ 2,375 6 2,381
Operating costs and expenses: Cost of sales 1,554 — 1,554
Operating 156 4 160 Selling, general and administrative, including
stock-based compensation 267 12 279 Depreciation and amortization
180 — 180 2,157 16
2,173 Operating income (loss) 218 (10 ) 208 Other
income (expense): Interest expense (73 ) (15 ) (88 ) Share of
earnings (losses) of affiliates, net 11 (97 ) (86 ) Realized and
unrealized gains (losses) on financial instruments, net 1 368 369
Other, net 5 2 7 (56 ) 258
202 Earnings (loss) from continuing operations before
income taxes 162 248 410 Income tax benefit (expense) (31 )
(71 ) (102 ) Net earnings (loss) 131 177 308 Less net earnings
(loss) attributable to noncontrolling interests 12 —
12 Net earnings (loss) attributable to Liberty
Interactive Corporation shareholders $ 119 177 296
LIBERTY
INTERACTIVE CORPORATION STATEMENT OF OPERATIONS
INFORMATION Three months ended September 30, 2016 -
(unaudited) Attributed QVC Ventures
Consolidated Group Group Liberty
amounts in millions Revenue: Total revenue, net $ 2,303 109 2,412
Operating costs and expenses: Cost of sales 1,504 71 1,575
Operating 152 13 165 Selling, general and administrative, including
stock-based compensation 261 29 290 Depreciation and amortization
219 6 225 2,136 119
2,255 Operating income (loss) 167 (10 ) 157
Other income (expense): Interest expense (73 ) (19 ) (92 ) Share of
earnings (losses) of affiliates, net 8 (30 ) (22 ) Realized and
unrealized gains (losses) on financial instruments, net (6 ) 612
606 Other, net 6 (14 ) (8 ) (65 ) 549
484 Earnings (loss) from continuing operations before income
taxes 102 539 641 Income tax benefit (expense) (32 ) (158 )
(190 ) Net earnings (loss) from continuing operations 70 381 451
Earnings (loss) from discontinued operations — 27
27 Net earnings (loss) 70 408 478 Less net earnings
(loss) attributable to noncontrolling interests 9 —
9 Net earnings (loss) attributable to Liberty
Interactive Corporation shareholders $ 61 408 469
LIBERTY
INTERACTIVE CORPORATION STATEMENT OF CASH FLOWS
INFORMATION Nine months ended September 30, 2017-
(unaudited) Attributed QVC Ventures
Consolidated Group Group Liberty
amounts in millions CASH FLOWS FROM OPERATING ACTIVITIES: Net
earnings (loss) $ 354 657 1,011 Adjustments to reconcile net
earnings to net cash provided by operating activities: Depreciation
and amortization 592 2 594 Stock-based compensation 48 11 59 Share
of (earnings) losses of affiliates, net (31 ) 153 122 Cash receipts
from return on equity investments 21 — 21 Realized and unrealized
gains (losses) on financial instruments, net — (1,186 ) (1,186 )
Deferred income tax (benefit) expense (115 ) 471 356 Other, net 7 1
8 Intergroup tax allocations 167 (167 ) — Intergroup tax (payments)
receipts (231 ) 231 — Changes in operating assets and liabilities
Current and other assets 152 9 161 Payables and other current
liabilities (63 ) (4 ) (67 ) Net cash provided (used) by
operating activities 901 178 1,079
CASH FLOWS FROM INVESTING ACTIVITIES: Investments in and
loans to cost and equity investees — (140 ) (140 ) Capital expended
for property and equipment (124 ) (2 ) (126 ) Other investing
activities, net (35 ) (1 ) (36 ) Net cash provided (used) by
investing activities (159 ) (143 ) (302 ) CASH FLOWS
FROM FINANCING ACTIVITIES: Borrowings of debt 1,689 — 1,689
Repayments of debt (1,906 ) (11 ) (1,917 ) Repurchases of QVC Group
common stock (452 ) — (452 ) Withholding taxes on net settlements
of stock-based compensation (13 ) (1 ) (14 ) Other financing
activities, net (28 ) 2 (26 ) Net cash provided
(used) by financing activities (710 ) (10 ) (720 ) Effect of
foreign currency rates on cash 13 — 13
Net increase (decrease) in cash and cash equivalents 45 25 70 Cash
and cash equivalents at beginning of period 338 487
825 Cash and cash equivalents at end period $ 383
512 895
LIBERTY INTERACTIVE CORPORATION STATEMENT
OF CASH FLOWS INFORMATION Nine months ended September 30,
2016 - (unaudited) Attributed QVC
Ventures Consolidated Group Group
Liberty amounts in millions CASH FLOWS FROM OPERATING
ACTIVITIES: Net earnings (loss) $ 313 631 944 Adjustments to
reconcile net earnings to net cash provided by operating
activities: (Earnings) loss from discontinued operations — (14 )
(14 ) Depreciation and amortization 642 21 663 Stock-based
compensation 57 18 75 Cash payments for stock based compensation —
(92 ) (92 ) Share of losses (earnings) of affiliates, net (38 ) 59
21 Cash receipts from return on equity investments 21 3 24 Realized
and unrealized gains (losses) on financial instruments, net 2 (944
) (942 ) Deferred income tax (benefit) expense (167 ) 589 422
Other, net 31 (77 ) (46 ) Intergroup tax allocation 301 (301 ) —
Intergroup tax (payments) receipts (224 ) 224 — Changes in
operating assets and liabilities Current and other assets 312 37
349 Payables and other current liabilities (357 ) (27 ) (384
) Net cash provided (used) by operating activities 893
127 1,020 CASH FLOWS FROM INVESTING
ACTIVITIES: Cash proceeds from disposition — 350 350 Investments in
and loans to cost and equity investees — (67 ) (67 ) Capital
expended for property and equipment (158 ) (19 ) (177 ) Purchases
of short term and other marketable securities — (264 ) (264 ) Sales
of short term and other marketable securities 12 1,162 1,174
Investment in Liberty Broadband — (2,400 ) (2,400 ) Other investing
activities, net (11 ) (3 ) (14 ) Net cash provided (used) by
investing activities (157 ) (1,241 ) (1,398 ) CASH
FLOWS FROM FINANCING ACTIVITIES: Borrowings of debt 1,143 1,545
2,688 Repayments of debt (1,340 ) (2,289 ) (3,629 ) Repurchases of
QVC Group common stock (603 ) — (603 ) Withholding taxes on net
settlements of stock-based compensation (15 ) (1 ) (16 ) Other
financing activities, net (6 ) (22 ) (28 ) Net cash provided
(used) by financing activities (821 ) (767 ) (1,588 ) Effect
of foreign currency rates on cash 7 — 7 Net cash provided (used) by
discontinued operations: Cash provided (used) by operating
activities — 15 15 Cash provided (used) by investing activities — —
— Cash provided (used) by financing activities — — — Change in
available cash held by discontinued operations — —
— Net cash provided (used) by discontinued operations
— 15 15 Net increase (decrease) in cash
and cash equivalents (78 ) (1,866 ) (1,944 ) Cash and cash
equivalents at beginning of period 426 2,023
2,449 Cash and cash equivalents at end period $ 348
157 505
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171109005496/en/
Liberty Interactive CorporationCourtnee Chun, 720-875-5420
Qurate Retail (NASDAQ:QRTEA)
Historical Stock Chart
From Mar 2024 to Apr 2024
Qurate Retail (NASDAQ:QRTEA)
Historical Stock Chart
From Apr 2023 to Apr 2024
