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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                             to

Commission File Number 001-36603

LIBERTY TRIPADVISOR HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

46-3337365
(I.R.S. Employer
Identification No.)

12300 Liberty Boulevard, Englewood, Colorado 80112

(Address, including zip code, of Registrant’s principal executive offices)

Registrant’s telephone number, including area code: (720875-5200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Series A common stock

LTRPA

The Nasdaq Stock Market LLC

Series B common stock

LTRPB

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer 

Non-accelerated Filer 

Smaller Reporting Company 

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes   No 

The number of outstanding shares of Liberty TripAdvisor Holdings, Inc. common stock as of July 31, 2021 was:

Series A

Series B

Liberty TripAdvisor Holdings, Inc. common stock

72,290,228

3,216,047

Table of Contents

Part I – Financial Information

Item 1. Financial Statements

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Balance Sheets (unaudited)

I-3

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements of Operations (unaudited)

I-5

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements of Comprehensive Earnings (Loss) (unaudited)

I-6

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements of Cash Flows (unaudited)

I-7

LIBERTY TRIPADVISOR HOLDINGS, INC. Condensed Consolidated Statements of Equity (unaudited)

I-8

LIBERTY TRIPADVISOR HOLDINGS, INC. Notes to Condensed Consolidated Financial Statements (unaudited)

I-10

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

I-28

Item 3. Quantitative and Qualitative Disclosures about Market Risk

I-40

Item 4. Controls and Procedures

I-40

Part II Other Information

Item 1. Legal Proceedings

II-1

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

II-1

Item 6. Exhibits

II-2

SIGNATURES

II-3

I-2

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

    

June 30,

    

December 31,

 

2021

2020

 

amounts in millions

 

Assets

Current assets:

Cash and cash equivalents

$

818

 

423

Accounts receivable and contract assets, net of allowance for credit losses of $35 million and $33 million, respectively

 

159

 

83

Income taxes receivable

47

50

Other current assets

 

25

 

23

Total current assets

 

1,049

 

579

Property and equipment, net

 

123

 

132

Intangible assets not subject to amortization:

Goodwill

 

2,233

 

2,240

Trademarks

 

731

 

732

 

2,964

 

2,972

Intangible assets subject to amortization, net

 

166

 

202

Other assets, at cost, net of accumulated amortization

 

192

 

201

Total assets

$

4,494

 

4,086

(continued)

See accompanying notes to condensed consolidated financial statements.

I-3

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Balance Sheets (Continued)

(unaudited)

    

June 30,

    

December 31,

 

2021

2020

 

amounts in millions

 

Liabilities and Equity

Current liabilities:

Deferred merchant and other payables

$

188

 

54

Deferred revenue

 

49

 

28

Accrued liabilities and other current liabilities

 

207

 

160

Total current liabilities

 

444

 

242

Long-term debt, including $291 million measured at fair value (note 5)

 

1,164

 

532

Deferred income tax liabilities

 

141

 

180

Financial instrument liabilities (note 4)

203

14

Preferred stock liability (note 6)

203

Other liabilities

 

332

 

339

Total liabilities

 

2,487

 

1,307

Redeemable preferred stock, $.01 par value. Authorized shares 50,000,000; issued and outstanding 187,414 shares at June 30, 2021 and 325,000 shares at December 31, 2020 (note 6)

472

Equity:

Series A common stock, $.01 par value. Authorized 200,000,000 shares; issued and outstanding 72,290,228 shares at June 30, 2021 and 72,227,256 at December 31, 2020

1

1

Series B common stock, $.01 par value. Authorized shares 7,500,000; issued and outstanding 3,216,047 shares at June 30, 2021 and 2,973,665 December 31, 2020

Series C common stock, $.01 par value. Authorized 200,000,000 shares; no shares issued.

Additional paid-in capital

290

257

Accumulated other comprehensive earnings (loss), net of taxes

 

(17)

 

(23)

Retained earnings

 

(585)

 

(278)

Total stockholders' equity

 

(311)

 

(43)

Noncontrolling interests in equity of subsidiaries

 

2,318

 

2,350

Total equity

 

2,007

 

2,307

Commitments and contingencies (note 8)

Total liabilities, redeemable preferred stock and equity

$

4,494

 

4,086

See accompanying notes to condensed consolidated financial statements.

I-4

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(unaudited)

Three months ended

 

Six months ended

 

June 30,

 

June 30,

 

    

2021

    

2020

    

2021

    

2020

 

amounts in millions, except

 

per share amounts

 

Total revenue, net

$

235

59

358

337

Operating costs and expenses:

Operating expense, including stock-based compensation (note 2)

 

73

 

61

140

149

Selling, general and administrative, including stock-based compensation (note 2)

 

173

 

99

288

281

Depreciation and amortization

 

38

 

42

76

85

Restructuring and other related reorganization costs

33

42

Impairment of goodwill and intangible assets

547

547

 

284

 

782

504

1,104

Operating income (loss)

 

(49)

 

(723)

(146)

(767)

Other income (expense):

Interest expense

 

(16)

 

(7)

(27)

(14)

Realized and unrealized gains (losses) on financial instruments, net

172

(2)

107

Other, net

 

1

 

(22)

(1)

(25)

 

157

 

(31)

79

(39)

Earnings (loss) before income taxes

 

108

 

(754)

(67)

(806)

Income tax (expense) benefit

 

6

 

89

23

103

Net earnings (loss)

 

114

 

(665)

(44)

(703)

Less net earnings (loss) attributable to noncontrolling interests

 

(39)

 

(501)

(107)

(520)

Net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders

$

153

 

(164)

63

(183)

Net earnings (loss) available to common shareholders (note 3)

$

153

(188)

(307)

(213)

Basic net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):

$

2.01

(2.51)

(4.09)

 

(2.84)

Diluted net earnings (loss) attributable to Series A and Series B Liberty TripAdvisor Holdings, Inc. shareholders per common share (note 3):

$

1.96

(2.51)

(4.09)

 

(2.84)

See accompanying notes to condensed consolidated financial statements.

I-5

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)

Three months ended

Six months ended

June 30,

June 30,

2021

2020

2021

2020

amounts in millions

Net earnings (loss)

$

114

(665)

(44)

(703)

Other comprehensive earnings (loss), net of taxes:

Foreign currency translation adjustments

 

3

13

(9)

(14)

Credit risk on fair value debt instruments gains (losses)

4

8

Reclassification adjustment for net losses included in net income

1

1

Other comprehensive earnings (loss)

 

7

14

(1)

(13)

Comprehensive earnings (loss)

 

121

(651)

(45)

(716)

Less comprehensive earnings (loss) attributable to the noncontrolling interests

 

(36)

(490)

(114)

(530)

Comprehensive earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders

$

157

(161)

69

(186)

See accompanying notes to condensed consolidated financial statements.

I-6

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

Six months ended

 

June 30,

 

2021

2020

 

amounts in millions

 

Cash flows from operating activities:

    

    

    

    

Net earnings (loss)

$

(44)

 

(703)

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities

Depreciation and amortization

 

76

 

85

Stock-based compensation

 

63

 

52

Realized and unrealized (gains) losses on financial instruments, net

(107)

Impairment of goodwill and intangible assets

547

Deferred income tax expense (benefit)

 

(29)

 

(59)

Other charges (credits), net

 

(10)

 

31

Changes in operating assets and liabilities

Current and other assets

 

(57)

 

71

Payables and other liabilities

 

209

 

(187)

Net cash provided (used) by operating activities

 

101

 

(163)

Cash flows from investing activities:

Capital expended for property and equipment, including internal-use software and website development

 

(25)

 

(36)

Other investing activities, net

(1)

1

Net cash provided (used) by investing activities

 

(26)

 

(35)

Cash flows from financing activities:

Borrowings of debt

 

675

 

740

Repayments of debt

 

 

(352)

Repurchase of Series A Preferred Stock

(281)

Shares repurchased by subsidiary

(115)

Payment of withholding taxes on net share settlements of equity awards

 

(29)

 

(17)

Issuance of redeemable preferred stock

325

Subsidiary purchase of capped calls

(35)

Other financing activities, net

(6)

(15)

Net cash provided (used) by financing activities

 

324

 

566

Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash

 

(4)

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

395

 

368

Cash, cash equivalents and restricted cash at beginning of period

 

423

 

341

Cash, cash equivalents and restricted cash at end of period

$

818

 

709

See accompanying notes to condensed consolidated financial statements.

I-7

LIBERTY TRIPADVISOR HOLDINGS, INC.

Condensed Consolidated Statements of Equity

(unaudited)

Stockholders' equity

Accumulated

Noncontrolling

Additional

other

interest in

Common Stock

paid-in

comprehensive

Retained

equity of

Total

Series A

Series B

Series C

capital

earnings (loss)

earnings

subsidiaries

equity

amounts in millions

Balance at January 1, 2021

    

$

1

    

    

    

257

    

(23)

    

(278)

    

2,350

    

2,307

Net earnings (loss)

 

 

63

    

(107)

    

(44)

Other comprehensive earnings (loss)

 

6

 

    

(7)

    

(1)

Stock-based compensation

17

 

 

    

53

    

70

Withholding taxes on net share settlements of stock-based compensation

(29)

 

 

    

    

(29)

Shares issued by subsidiary

(7)

15

8

Preferred stock adjustment (note 6)

(370)

(370)

Subsidiary purchase of capped calls, net of tax (note 5)

(6)

(20)

(26)

Preferred stock repurchased with subsidiary shares (note 6)

58

34

92

Balance at June 30, 2021

$

1

 

 

 

290

 

(17)

 

(585)

    

2,318

    

2,007

Stockholders' equity

Accumulated

Noncontrolling

Additional

other

interest in

Common Stock

paid-in

comprehensive

Retained

equity of

Total

Series A

Series B

Series C

capital

earnings (loss)

earnings

subsidiaries

equity

amounts in millions

Balance at March 31, 2021

$

1

289

(21)

(738)

2,324

1,855

Net earnings (loss)

153

(39)

114

Other comprehensive earnings (loss)

4

3

7

Stock-based compensation

8

28

36

Withholding taxes on net share settlements of stock-based compensation

(6)

(6)

Shares issued by subsidiary

(1)

2

1

Balance at June 30, 2021

$

1

290

(17)

(585)

2,318

2,007

I-8

Stockholders' equity

Accumulated

Noncontrolling

Additional

other

interest in

Common Stock

paid-in

comprehensive

Retained

equity of

Total

Series A

Series B

Series C

capital

earnings (loss)

earnings

subsidiaries

equity

amounts in millions

Balance at January 1, 2020

    

$

1

    

    

    

237

    

(29)

    

111

    

2,981

    

3,301

Net earnings (loss)

 

 

(183)

    

(520)

    

(703)

Other comprehensive earnings (loss)

 

(3)

 

    

(10)

    

(13)

Stock-based compensation

15

 

 

    

47

    

62

Withholding taxes on net share settlements of stock-based compensation

(17)

(17)

Shares repurchased by subsidiary

17

(132)

(115)

Preferred stock adjustment

(30)

(30)

Other, net

 

 

 

(8)

 

 

(1)

    

6

    

(3)

Balance at June 30, 2020

$

1

 

 

 

244

 

(32)

 

(103)

    

2,372

    

2,482

Stockholders' equity

 

Accumulated

Noncontrolling

 

Additional

other

interest in

 

Common Stock

paid-in

comprehensive

Retained

equity of

Total

 

Series A

Series B

Series C

capital

earnings (loss)

earnings

subsidiaries

equity

 

amounts in millions

 

Balance at March 31, 2020

$

1

 

 

 

242

 

(35)

 

85

    

2,838

    

3,131

Net earnings (loss)

 

 

(164)

    

(501)

    

(665)

Other comprehensive earnings (loss)

 

3

 

    

11

    

14

Stock-based compensation

6

 

 

    

23

    

29

Withholding taxes on net share settlements of stock-based compensation

(3)

(3)

Preferred stock adjustment

 

 

 

 

 

(24)

    

    

(24)

Other, net

    

    

    

(1)

    

    

    

1

    

Balance at June 30, 2020

$

1

244

(32)

(103)

2,372

2,482

See accompanying notes to condensed consolidated financial statements

I-9

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Liberty TripAdvisor Holdings, Inc. and its controlled subsidiaries (collectively, "TripCo," "Consolidated TripCo," the "Company," "we," "us," or “our,” unless the context otherwise requires). TripCo does not have any operations outside of its controlling interest in its subsidiary Tripadvisor, Inc. (“Tripadvisor”). Tripadvisor’s financial performance tends to be seasonally highest in the second and third quarters of a given year, which includes the seasonal peak in consumer demand, traveler hotel and rental stays, and travel activities and experiences taken, compared to the first and fourth quarters, which represent seasonal low points.

The accompanying (a) condensed consolidated balance sheet as of December 31, 2020, which has been derived from audited financial statements, and (b) the interim unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. Additionally, certain prior period amounts have been reclassified for comparability with the current period presentation. The results of operations for any interim period are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2020 as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company considers (i) recognition and recoverability of goodwill, intangible and long-lived assets and (ii) accounting for income taxes to be its most significant estimates. Some of the Company’s estimates and assumptions required increased judgment and carry a higher degree of variability and volatility as a result of COVID-19 (as defined below). As events continue to evolve and additional information becomes available, the Company’s estimates may change materially in future periods.

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China, and on March 11, 2020 was declared a global pandemic. Tripadvisor and the Company continue to be subject to risks and uncertainties as a result of the COVID-19 pandemic.

While we have seen varying degrees of containment of the virus in various countries and positive signs of growing travel demand recovery, the degree of containment and the recovery in travel has varied both region-to-region on a global basis, as well as state-to-state in the U.S. For example, when COVID-19 cases resurged during the fourth quarter of 2020, government restrictions and mandates were reinstated in certain geographies globally. Tripadvisor does not know the future path or rate of global or regional COVID-19 transmission, including various existing COVID-19 variants or any possible future variants, nor does it have visibility into when remaining or reinstated restrictions will be lifted, and where additional restrictions may be implemented or reinstated in the future due to resurgence of the virus. Correspondingly, Tripadvisor still does not have forward-looking visibility into what the long-term impacts may be related to consumer demand for travel, usage patterns on its platform, and travel behavior patterns when all travel bans and other government restrictions and mandates are fully lifted.

In the fourth quarter of 2020, multiple COVID-19 vaccines were approved for widespread distribution throughout various parts of the world, including the United States and in Europe, and in the first quarter of 2021, vaccination distribution programs were initiated around the world. Vaccine programs in Tripadvisor’s largest markets, the U.S. and Europe, appear to be progressing well, and Tripadvisor expects the same for much of the rest of the world. Tripadvisor is encouraged by these developments, however the timing of widespread vaccine distributions, efficacy against new variants

I-10

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

of COVID-19, whether there will be resurgences of the virus and subsequent government restrictions, the extent and effectiveness of containment actions taken, and whether consumers demand for travel and hospitality services will continue to be negatively impacted remain uncertain. Therefore, the continuing extent of the impact of the COVID-19 pandemic on Tripadvisor’s business, results of operations, liquidity and financial condition remains uncertain, and is dependent on future developments that cannot be accurately predicted at this time. Tripadvisor continues to believe the travel, leisure, hospitality, and restaurant industries (collectively, the “travel industry”), and consequently Tripadvisor’s financial results, will continue to be adversely and materially affected while the pandemic continues, new variants emerge, and lingering travel bans and other government restrictions and mandates continue to remain in place or be reinstated, all of which negatively impact consumer demand, sentiment and discretionary spending patterns.

In addition, due to the impact of COVID-19 on Tripadvisor’s business, which led to unfavorable working capital trends and material negative operating cash flow during the year ended December 31, 2020, Tripadvisor did not experience its typical seasonal pattern for revenue and profit during the calendar quarters within the year ended December 31, 2020. Although consumer demand, traveler hotel and rental stays, and travel activities and experiences taken generally remain materially lower than historic levels, these trends have improved during the first half of 2021, particularly in the second quarter of 2021, resulting in increased revenue, working capital and positive operating cash flow more akin to typical historical seasonality trends in the first half of the year. However, it is difficult to predict the seasonality for the upcoming quarters, given the sustained uncertainty related to the continued economic impact of the COVID-19 pandemic, and the ultimate shape and timing of a recovery in Tripadvisor’s key markets. In addition, significant shifts in Tripadvisor’s business mix or adverse economic conditions could result in future seasonal patterns that are different from historical trends.  

On March 26, 2020, TripCo issued and sold 325,000 shares of TripCo’s newly-created 8% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”) for a purchase price of $1,000 per share. On March 29, 2021 and April 6, 2021, TripCo repurchased a portion of the Series A Preferred Stock. See further discussion about the Series A Preferred Stock in note 6.  

Spin-Off of TripCo from Qurate Retail  

During October 2013, the Board of Directors of Liberty Interactive Corporation and its subsidiaries (subsequently renamed Qurate Retail, Inc. (“Qurate Retail”)) authorized a plan to distribute to the stockholders of its then-outstanding Liberty Ventures common stock shares of a wholly-owned subsidiary, TripCo (the “TripCo Spin-Off”). Following the TripCo Spin-Off, Qurate Retail and TripCo operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other. In connection with the TripCo Spin-Off, TripCo entered into certain agreements, including the services agreement, the facilities sharing agreement and the tax sharing agreement, with Qurate Retail and/or Liberty Media Corporation (“Liberty Media”) (or certain of their subsidiaries) in order to govern certain of the ongoing relationships between the companies after the TripCo Spin-Off and to provide for an orderly transition.

Pursuant to the services agreement (except as described below in respect to Gregory B. Maffei), Liberty Media provides TripCo with general and administrative services including legal, tax, accounting, treasury and investor relations support. TripCo reimburses Liberty Media for direct, out-of-pocket expenses incurred by Liberty Media in providing these services and TripCo pays a services fee to Liberty Media under the services agreement that is subject to adjustment semi-annually, as necessary.

In December 2019, TripCo entered into an amendment to the services agreement with Liberty Media in connection with Liberty Media’s entry into a new employment arrangement with Gregory B. Maffei, TripCo’s Chairman, President and Chief Executive Officer.  Under the amended services agreement, components of his compensation will either be paid directly to him by each of TripCo, Liberty Broadband Corporation, and Qurate Retail (collectively, the “Service Companies”) or reimbursed to Liberty Media, in each case, based on allocations among Liberty Media and the Service Companies set forth in the amended services agreement, currently set at 5% for the Company.

I-11

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Under the facilities sharing agreement, TripCo shares office space with Liberty Media and related amenities at Liberty Media’s corporate headquarters in Englewood, Colorado.

The tax sharing agreement provides for the allocation and indemnification of tax liabilities and benefits between Qurate Retail and TripCo and other agreements related to tax matters.

Under these agreements, approximately $1 million was reimbursable to Liberty Media for both of the three months ended June 30, 2021 and 2020, and approximately $2 million was reimbursable to Liberty Media for both of the six months ended June 30, 2021 and 2020.

(2) Stock-Based Compensation

TripCo Equity Awards

TripCo has granted to certain of its directors and employees restricted stock units (“RSUs”) and stock options to purchase shares of TripCo common stock (collectively, “Awards”). TripCo measures the cost of employee services received in exchange for an equity classified Award based on the grant-date fair value (“GDFV”) of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award).  The Company measures the cost of employee services received in exchange for a liability classified Award based on the current fair value of the Award, and remeasures the fair value of the Award at each reporting date.

TripCo has calculated the GDFV for all of its equity classified Awards and any subsequent remeasurement of its liability classified Awards using the Black-Scholes-Merton model. TripCo estimates the expected term of the Awards based on historical exercise and forfeiture data. The volatility used in the calculation for Awards is based on the historical volatility of TripCo common stock. TripCo uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.

Included in the accompanying condensed consolidated statements of operations are the following amounts of stock-based compensation, the majority of which relates to Tripadvisor as discussed below:

Three months ended

 

Six months ended

 

June 30,

 

June 30,

 

    

2021

    

2020

    

2021

    

2020

 

amounts in millions

 

Operating expense

$

13

10

25

21

Selling, general and administrative expense

 

20

 

15

38

 

31

$

33

 

25

63

 

52

Stock-based compensation expense related to Tripadvisor was $32 million and $25 million for the three months ended June 30, 2021 and 2020, respectively, and $61 million and $51 million for the six months ended June 30, 2021 and 2020, respectively.

I-12

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

TripCo - Outstanding Awards

The following tables present the number and weighted average exercise price (“WAEP”) of the Awards to purchase TripCo common stock granted to certain officers, employees and directors of the Company, as well as the weighted average remaining contractual life and aggregate intrinsic value of the Awards.

Weighted

average

remaining

Aggregate

contractual

intrinsic

Series A

WAEP

life

value

in thousands

in years

in millions

Outstanding at January 1, 2021

 

1,086

$

7.78

Granted

 

53

$

5.65

Exercised

 

$

Forfeited/Cancelled

 

(1)

$

35.05

Outstanding at June 30, 2021

 

1,138

$

7.67

 

5.4

$

Exercisable at June 30, 2021

 

366

$

14.33

 

3.5

$

    

    

    

    

    

Weighted

    

    

 

average

 

remaining

Aggregate

 

contractual

intrinsic

 

Series B

WAEP

life

value

 

in thousands

in years

in millions

 

Outstanding at January 1, 2021

 

2,397

$

21.93

 

Granted

 

$

 

Exercised

 

$

 

Forfeited/Cancelled

 

$

Outstanding at June 30, 2021

 

2,397

$

21.93

 

4.2

$

25

Exercisable at June 30, 2021

 

2,397

$

21.93

 

4.2

$

25

During the six months ended June 30, 2021, TripCo granted 154 thousand performance-based RSUs of Series B TripCo common stock to our CEO in connection with his employment agreement. The RSUs had a GDFV of $7.07 per share at the time they were granted.  The RSUs cliff vest one year from the month of grant, subject to the satisfaction of certain performance objectives. Performance objectives, which are subjective, are considered in determining the timing and amount of the compensation expense recognized. When the satisfaction of the performance objectives becomes probable, the Company records compensation expense. The probability of satisfying the performance objectives is assessed at the end of each reporting period.

As of June 30, 2021, the total unrecognized compensation cost related to unvested Awards was approximately $7.1 million. Such amount will be recognized in the Company's condensed consolidated statements of operations over a weighted average period of approximately 2.4 years.

As of June 30, 2021, TripCo reserved 3.5 million shares of Series A and Series B common stock for issuance under exercise privileges of outstanding stock Awards.

I-13

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Tripadvisor Equity Grant Awards

The following table presents the number and WAEP of the Awards to purchase Tripadvisor common stock (“TRIP common stock”) granted to certain officers, employees and directors of Tripadvisor.

Weighted

average

TripAdvisor

remaining

Aggregate

stock

contractual

intrinsic

options

WAEP

life

value

in thousands

in years

in millions

Outstanding at January 1, 2021

 

5,615

$

46.31

Granted

 

716

$

46.00

Exercised

 

(672)

$

34.40

Cancelled or expired

(152)

$

42.57

Outstanding at June 30, 2021

 

5,507

$

47.83

 

5.4

$

19

Exercisable at June 30, 2021

 

3,341

$

54.65

 

3.6

$

6

The weighted average GDFV of options granted was $20.39 for the six months ended June 30, 2021.

As of June 30, 2021, the total unrecognized compensation cost related to unvested Tripadvisor stock options was approximately $24 million and will be recognized over a weighted average period of approximately 2.5 years. The total intrinsic value of stock options exercised was $8 million and not material for the six months ended June 30, 2021 and 2020, respectively.

Additionally, during the six months ended June 30, 2021, Tripadvisor granted approximately 2 million units, vested and released approximately 3 million units, and had cancellations of less than a million units, which included primarily service-based RSUs, as well as a limited number of market-based restricted stock units (“MSUs”) under the 2018 Stock and Annual Incentive Plan. The RSUs’ fair value was measured based on the quoted price of TRIP common stock at the date of grant. As the MSUs provide for vesting based upon Tripadvisor’s total shareholder return, or “TSR,” performance, the potential outcomes of future stock prices and TSR of Tripadvisor and the Nasdaq Composite Total Return Index, was used to calculate the GDFV of these awards. The weighted average GDFV for RSUs and MSUs granted, vested and released, and cancelled during the six months ended June 30, 2021 was $45.77 per share, $33.15 per share, and $34.90 per share, respectively. As of June 30, 2021, the total unrecognized compensation cost related to Tripadvisor RSUs and MSUs was approximately $181 million and will be recognized over a weighted average period of approximately 2.4 years.

During the second quarter of 2020, Tripadvisor’s Compensation Committee of its Board of Directors approved a modification of Tripadvisor’s annual RSU grants issued to its employees in the first quarter of 2020, which consisted of reducing the original grant-date vesting period from four years to two years. This modification resulted in the acceleration and recognition of an additional $5 million of stock compensation expense during the three months ended June 30, 2020, given the modified vesting term.  There was no change to the original fair value of the impacted RSUs as a result of the modification.

(3) Earnings (Loss) Per Common Share (EPS)

Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) attributable to common shareholders by the weighted average number of common shares outstanding (“WASO”) for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented. Excluded from EPS for the both of the three and six months ended June 30, 2021 and June 30, 2020 are less than a million potential common shares due to stock options, because their inclusion would be antidilutive. Also excluded from EPS for the six months ended June 30, 2021, because their inclusion would be antidilutive, were 7 million shares that were contingently issuable at the Company’s election pursuant to an exercise of the Put Option

I-14

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(defined and described in note 6), as calculated in accordance with the terms of the Certificate of Designations for the Series A Preferred Stock. On March 29, 2021, pursuant to the Repurchase Agreement (described and defined in note 6), the Put Option no longer exists. The contingently issuable shares pursuant to the Put Option were calculated for the period that the Put Option was outstanding.

Liberty TripAdvisor Holdings Common Stock

Three months ended

Six months ended

June 30,

June 30,

2021

2020

2021

2020

number of shares in millions

Numerator

Net earnings (loss) attributable to Liberty TripAdvisor Holdings, Inc. shareholders

$

153

(164)

63

(183)

Less: Series A Preferred Stock carrying value adjustment and transaction costs

24

370

30

Net earnings (loss) available to common shareholders

$

153

(188)

(307)

(213)

Denominator

Basic WASO

 

76

 

75

 

75

75

Potentially dilutive shares

 

2

 

 

2

Diluted WASO

 

78

 

75

 

77

75

(4) Assets and Liabilities Measured at Fair Value

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company does not have any material recurring assets or liabilities measured at fair value that would be considered Level 3.

The Company’s assets and liabilities measured at fair value are as follows:

June 30, 2021

December 31, 2020

 

Quoted prices

Significant

Quoted prices

Significant

 

in active

other

in active

other

 

markets for

observable

markets for

observable

 

identical assets

inputs

identical assets

inputs

 

Description

Total

(Level 1)

(Level 2)

Total

(Level 1)

(Level 2)

 

amounts in millions

 

Cash equivalents

    

$

41

    

41

    

    

4

4

TripCo Exchangeable Senior Debentures due 2051

$

291

 

 

291

 

NA

NA

NA

Financial instrument liabilities

$

203

203

14

14

On March 9, 2020, TripSPV, a wholly owned subsidiary of the Company, entered into a variable prepaid forward transaction (the “VPF”) with a financial institution with respect to 2.4 million shares of TRIP common stock held by the Company with a forward floor price of $17.25 per share and a forward cap price of $26.84 per share. Pursuant to the terms of the VPF, TripSPV received a prepayment of $34 million on March 17, 2020 (see note 5). As a result of the Repurchase Agreement, as described in note 6, TripCo determined the Series A Preferred Stock required liability treatment and needed to be bifurcated between a debt host and derivative (the “Preferred Stock Derivative”). The Preferred Stock Derivative was recorded at fair value upon the reclassification from temporary equity.  Changes in the fair values of the VPF and Preferred

I-15

Table of Contents

LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Stock Derivative are recognized in realized and unrealized gains (losses) on financial instruments in the condensed consolidated statements of operations.

The fair value of the Debentures (as defined in note 5) is based on quoted market prices but the Debentures are not considered to be traded on “active markets.” Accordingly, they are reported in the foregoing table as Level 2 fair value.  The fair value of the VPF and Preferred Stock Derivative were derived from a Black-Scholes-Merton model using observable market data as the significant inputs.

Other Financial Instruments

Other financial instruments not measured at fair value on a recurring basis include trade receivables, trade payables, accrued and other current liabilities, long-term debt (excluding the Debentures). With the exception of debt, the carrying amount approximates fair value due to the short maturity of these instruments as reported on our condensed consolidated balance sheets. The carrying value of a portion of our debt bears interest at a variable rate and therefore is also considered to approximate fair value.  See note 5 for a description of the fair value of the Company’s fixed rate debt.

Realized and Unrealized Gains (Losses) on Financial Instruments

Realized and unrealized gains (losses) on financial instruments are comprised of changes in the fair value of the following:

Three months ended

Six months ended

June 30,

June 30,

    

2021

    

2020

    

2021

    

2020

amounts in millions

TripCo Exchangeable Senior Debentures due 2051

 

36

 

 

26

 

Financial instrument liabilities

136

(2)

81

(1)

Tripadvisor foreign currency forward contracts

1

$

172

 

(2)

 

107

 

The Company has elected to account for the Debentures using the fair value option. Changes in the fair value of the Debentures and financial instrument liabilities recognized in the condensed consolidated statement of operations are primarily due to market factors primarily driven by changes in the fair value of the underlying shares of the financial instruments. During the six months ended June 30, 2021, the fair value adjustment recognized in the condensed consolidated statement of operations included approximately $5 million of debt issuance costs related to the Debentures. The Company isolates the portion of the unrealized gain (loss) attributable to the change in the instrument specific credit risk and recognizes such amount in other comprehensive earnings (loss).  The change in the fair value of the Debentures attributable to changes in the instrument specific credit risk was a gain of $4 million and a gain of $8 million for the three and six months ended June 30, 2021, respectively.  

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(5) Debt

Outstanding debt at June 30, 2021 and December 31, 2020 is summarized as follows:

June 30,

December 31,

 

2021

2020

 

amounts in millions

 

TripCo Exchangeable Senior Debentures due 2051

$

291

TripCo variable prepaid forward

41

41

Tripadvisor Credit Facilities

Tripadvisor Senior Notes due 2025

500

500

Tripadvisor Convertible Senior Notes due 2026

345

Deferred financing costs

(13)

(9)

Total consolidated TripCo debt

1,164

 

532

Debt classified as current

 

 

Total long-term debt

$

1,164

 

532

TripCo Exchangeable Senior Debentures due 2051

On March 25, 2021, TripCo issued $300 million aggregate original principal amount of its 0.50% exchangeable senior debentures due 2051 (the “Debentures”).  Pursuant to the terms of the offering, on March 31, 2021, the initial purchasers notified the Company of their intention to exercise the option to purchase $30 million aggregate original principal amount of additional Debentures. The additional Debentures were issued on April 5, 2021. Upon an exchange of Debentures, TripCo, at its option, may deliver shares of TRIP common stock or the value thereof in cash or a combination of shares of TRIP common stock and cash. Initially, 14.3299 shares of TRIP common stock are attributable to each $1,000 original principal amount of Debentures, representing an initial exchange price of approximately $69.78 for each share of TRIP common stock. A total of approximately 4.7 million shares of TRIP common stock are attributable to the Debentures. Interest is payable quarterly on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 2021. The Debentures may be redeemed by TripCo, in whole or in part, on or after March 27, 2025. Holders of Debentures also have the right to require TripCo to purchase their Debentures on March 27, 2025. The redemption and purchase price will generally equal 100% of the adjusted principal amount of the Debentures plus accrued and unpaid interest to the redemption date, plus any final period distribution. As of June 30, 2021, a holder of the Debentures does not have the ability to exchange and, accordingly, the Debentures are classified as long-term debt in the consolidated balance sheets.

TripCo used a portion of the net proceeds from the sale of the Debentures to fund the cash portion of the purchase price for the repurchase of a portion of the Series A Preferred Stock (see note 6 below).

Variable Prepaid Forward  

In connection with the VPF entered into on March 9, 2020, as described in note 4, TripCo received a prepayment of $34 million on March 17, 2020. The term of the VPF is three years. At maturity, the accreted loan amount due will be approximately $42 million.  As of June 30, 2021, 2.4 million shares of TRIP common stock, with a value of approximately $97 million, were pledged as collateral pursuant to the VPF contract.

Tripadvisor Credit Facilities

Tripadvisor is party to a credit agreement with a group of lenders, initially entered into in June 2015 (as amended, the “Credit Agreement”), which, among other things, provides for a $500 million unsecured revolving credit facility (the “2015 Credit Facility”) with a maturity date of May 12, 2024. The 2015 Credit Facility, among other things, requires Tripadvisor to maintain a maximum leverage ratio and contains certain customary affirmative covenants and events of default, including a change of control.  

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Tripadvisor amended its 2015 Credit Facility both in May 2020 and December 2020 to, among other things:

suspend the leverage ratio covenant for quarterly testing of compliance beginning in the second quarter of 2020, replacing it with a minimum liquidity covenant through June 30, 2021 (requiring Tripadvisor to maintain $150 million of unrestricted cash, cash equivalents and short-term investments less deferred merchant payables plus available revolver capacity), until the earlier of (a) the first day after June 30, 2021 through maturity on which borrowings and other revolving credit utilizations under the revolving commitments exceed $200 million, and (b) the election of Tripadvisor, at which time the leverage ratio covenant will be reinstated (the “Leverage Covenant Holiday”);
decrease the aggregate amount of revolving loan commitments available to $500 million from $1.2 billion;
extend the maturity date of the 2015 Credit Facility from May 12, 2022 to May 12, 2024; and
secure the obligations under the agreement.

During the Leverage Covenant Holiday, any outstanding or future borrowings under the 2015 Credit Facility bear interest at LIBOR plus a 2.25% margin with a LIBOR floor of 1% per annum. Tripadvisor is also required to pay a quarterly commitment fee, at an applicable rate of 0.5%, on the daily unused portion of the revolving credit facility for each fiscal quarter during the Leverage Covenant Holiday and also additional fees in connection with the issuance of letters of credit. Tripadvisor may borrow from the 2015 Credit Facility in U.S. dollars, Euros and British pounds. In addition, Tripadvisor’s 2015 Credit Facility includes $15 million of borrowing capacity available for letters of credit and $40 million for Swing Line borrowings on same-day notice. As of June 30, 2021, Tripadvisor had issued $4 million of outstanding letters of credit under the 2015 Credit Facility.

As of June 30, 2021 and December 31, 2020, Tripadvisor had no outstanding borrowings under the 2015 Credit Facility. For both the three and six months ended June 30, 2021, Tripadvisor recorded total interest expense and commitment fees on its 2015 Credit Facility of $1 million, while for the three and six months ended June 30, 2020, Tripadvisor recorded total interest expense and commitment fees on its 2015 Credit Facility of $5 million and $6 million, respectively, to interest expense on the condensed consolidated statement of operations. During the six months ended June 30, 2020, Tripadvisor borrowed $700 million under the 2015 Credit Facility. These funds were drawn down as a precautionary measure to reinforce Tripadvisor’s liquidity position and preserve financial flexibility in light of uncertainty in the global markets resulting from COVID-19 and repaid by Tripadvisor during 2020.

The Credit Agreement contains a number of covenants that, among other things, restrict Tripadvisor’s ability to incur additional indebtedness, create liens, enter into sale and leaseback transactions, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions, make investments, loans or advances, prepay certain subordinated indebtedness, make certain acquisitions, engage in certain transactions with affiliates, amend material agreements governing certain subordinated indebtedness, and change its fiscal year. The Credit Agreement also limits Tripadvisor from repurchasing shares of its common stock and paying dividends, among other restrictions, during the Leverage Covenant Holiday. In addition, to secure the obligations under the Credit Agreement, Tripadvisor and certain subsidiaries have granted security interests and liens in and on, substantially all of their assets as well as pledged shares of certain of Tripadvisor’s subsidiaries.

2025 Senior Notes

On July 9, 2020, Tripadvisor completed the sale of $500 million aggregate principal amount of 7.0% Senior Notes due 2025 (the "2025 Senior Notes") pursuant to a purchase agreement, dated July 7, 2020, among Tripadvisor, the guarantors party thereto and the initial purchasers party thereto in a private offering to qualified institutional buyers. The 2025 Senior Notes were issued pursuant to an indenture, dated July 9, 2020 (the “2025 Indenture”), among Tripadvisor, the guarantors and the trustee. The 2025 Indenture provides, among other things, that interest will be payable on the 2025

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LIBERTY TRIPADVISOR HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)