Liberty Interactive Corporation ("Liberty Interactive") (Nasdaq:
QVCA, QVCB, LVNTA, LVNTB) today reported first quarter 2017
results. Highlights include(1):
Attributed to QVC Group
- QVC consolidated revenue down 2% to
$2.0 billion
- QVC US revenue down 3%, operating
income flat and adjusted OIBDA(2) grew 3%
- Adjusted OIBDA margin(2) expanded 130
basis points
- QVC International grew constant
currency(3) revenue 2%, operating income 20% and adjusted OIBDA 15%
- Local currency sales gains in all
consolidated international markets except UK
- QVC consolidated mobile penetration was
62% of QVC.com orders, a 560 basis point increase
- QVC US mobile penetration was 61% of
QVC.com orders, a 520 basis point increase
- QVC Group to become asset-backed stock
following proposed acquisition and reorganization, described
below
Attributed to Liberty Ventures Group
- Liberty Interactive agreed to acquire
General Communication, Inc. (“GCI”), largest Alaskan communications
provider
- Certain Liberty Ventures Group assets
and liabilities to be contributed to GCI; Liberty Interactive to
effect tax-free separation of controlling interest in combined
company named GCI Liberty
- Transaction expected to close in the
first quarter of 2018
“We were thrilled to announce the planned acquisition of General
Communication and subsequent split-off of Liberty Ventures, which
will create two asset-backed stocks: QVC Group and GCI Liberty,”
said Greg Maffei, Liberty Interactive President and CEO. “This will
create real value for all shareholders and provide greater
flexibility for both companies going forward. QVC posted tangible
improvement in Q1 as US revenue declines mitigated and adjusted
OIBDA margin expanded.”
Unless otherwise noted, the following discussion compares
financial information for the three months ended March 31, 2017 to
the same period in 2016. Please note that the three months ended
March 31, 2016 include one extra day due to the leap year, which
fell on a Saturday, compared to the three months ended March 31,
2017.
QVC GROUP – Approximately $8 million of corporate level
selling, general and administrative expense (“SG&A”) (including
stock-based compensation expense) was allocated to QVC Group in the
first quarter of 2017.
QVC
“We are proud the US team delivered significant improvement in
our sales trend,” said QVC President and CEO Mike George. “While we
recognize further gains are needed, our first quarter results show
tremendous progress from the second half of 2016. Our International
business continued to generate strong results and we are very
pleased with our outstanding margin gains in both segments.”
The following table provides QVC’s consolidated financial and
operating results for the first quarter of 2017. US Dollar
denominated results were unfavorably impacted by exchange rate
fluctuations in the first quarter. The Dollar strengthened versus
the British Pound and Euro 14% and 3%, respectively, and weakened
against the Japanese Yen 1%. The following table also provides a
comparison of the year over year percentage change in QVC’s results
in constant currency(3) (where applicable) to the comparable
figures calculated in accordance with GAAP for the three months
ended March 31, 2017.
(amounts in millions unless otherwise noted)
1Q16 1Q17 % Change
% Change
Constant
Currency(3)
QVC - Consolidated Financial Metrics Revenue $ 2,013
$ 1,965 (2 ) % (1 ) % Operating Income $ 261 $ 271 4 % 5 %
Operating Income Margin (%) 13.0 % 13.8 % 80 bps Adjusted OIBDA $
415 $ 434 5 % 6 % Adjusted OIBDA Margin (%) 20.6 % 22.1 % 150 bps
Operating Metrics eCommerce Revenue $ 895 $ 943 5 % 5 %
eCommerce % of Total Revenue 44.5 % 48.0 % 350 bps Mobile % of
eCommerce Revenue(1) 56.6 % 62.2 % 560 bps LTM Total Customers(2)
12.7 12.7 - % (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 first quarter of 2017.
(amounts in millions unless otherwise noted)
1Q16 1Q17 %
Change
QVC - US Financial Metrics Revenue $ 1,407 $
1,370 (3 ) % Gross Margin 36.0 % 36.2 % 20 bps Operating Income $
201 $ 202 - % Operating Income Margin (%) 14.3 % 14.7 % 40 bps
Adjusted OIBDA $ 326 $ 336 3 % Adjusted OIBDA Margin (%) 23.2 %
24.5 % 130 bps
Operating Metrics Average Selling Price $
60.03 $ 57.14 (5 ) % Units Sold 1 % Return Rate(1) 18.5 % 17.4 %
(110 ) bps eCommerce Revenue $ 698 $ 733 5 % eCommerce % of Total
Revenue 49.6 % 53.5 % 390 bps Mobile % of eCommerce Revenue(2) 55.9
% 61.1 % 520 bps LTM Total Customers(3) 8.2 8.1 (1 ) % (1)
Measured as returned sales over gross shipped sales.
(2) Based on gross US Dollar orders. (3) LTM: Last twelve months.
QVC US experienced year over year declines in the home, jewelry,
electronics and accessories categories, which were partially offset
by gains in apparel and beauty. Increases in operating income
margin and adjusted OIBDA margin primarily reflect lower fixed
costs, higher product margins, higher credit card income and
customer service efficiencies.
The following table provides QVC International’s financial and
operating results for the first quarter of 2017, including the year
over year percentage change in QVC’s results in constant
currency(3) (where applicable) to the comparable figures calculated
in accordance with GAAP due to the net impact of unfavorable
exchange rate fluctuations.
(amounts in millions unless otherwise noted)
1Q16 1Q17 % Change
% Change
Constant
Currency(4)
QVC - International(1) Financial Metrics
Revenue $ 606 $ 595 (2 ) % 2 % Gross Margin 37.3 % 38.1 % 80 bps
Operating Income $ 60 $ 69 15 % 20 % Operating Income Margin (%)
9.9 % 11.6 % 170 bps Adjusted OIBDA $ 89 98 10 % 15 % Adjusted
OIBDA Margin (%) 14.7 % 16.5 % 180 bps
Operating Metrics
Average Selling Price (6 ) % (2 ) % Units Sold 4 % eCommerce
Revenue $ 197 $ 210 7 % 6 % eCommerce % of Total Revenue 32.5 %
35.3 % 280 bps Mobile % of eCommerce Revenue(2) 58.6 % 65.8 % 720
bps LTM Total Customers(3) 4.5 4.6 2 % (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 first quarter of 2017, QVC’s International revenue
reflected local currency gains in all markets except the UK. QVC
International experienced constant currency growth in all
categories except jewelry and electronics. Increases in operating
income margin and adjusted OIBDA margin in constant currency
primarily reflect lower fixed costs, higher product margins and
customer service efficiencies, which were partially offset by
higher commissions in the UK.
CNR Home Shopping Co., Ltd. ("CNRS"), QVC's joint venture in
China, is being accounted for as an equity method investment, and
as a result, QVC reported a $2 million reduction in net income for
the quarter.
zulily
“While sales came in lower than expected, we were primarily
challenged by comping the performance of a few large brands
year-over-year, and we saw improved sales growth later in the
quarter,” said zulily President and CEO Darrell Cavens. “We remain
excited about our upcoming calendar, new customer acquisition
strategies to grow our active customer base, and initiatives
focused on delivering an exceptional customer experience.”
The following table provides zulily’s stand-alone financial and
operating results for the first quarter of 2017. The increase in
revenue was primarily attributed to a 3% increase in total orders
placed, driven by a 4% increase in the number of orders placed per
active customer, partially offset by an increase in backlog due to
timing of orders within the quarter. 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 and adjusted OIBDA margin decreased primarily due to higher
supply chain expenses resulting from an increase in international
demand, a variation in zulily’s product mix, higher
personnel-related costs and higher technology-related expenses.
(amounts in millions unless otherwise noted)
1Q16 1Q17 % Change
zulily Financial Metrics Net Revenue $ 355 $ 359 1 %
Gross Margin 28.5 % 26.7 % (180 ) bps Operating Income (Loss) $ (43
) $ (38 ) 12 % Operating Income Margin (%) (12.1 ) % (10.6 ) % (150
) bps Adjusted OIBDA $ 23 $ 15 (35 ) % Adjusted OIBDA Margin (%)
6.5 % 4.2 % (230 ) bps
Operating Metrics Mobile % of Total
Orders 62.4 % 67.0 % 460 bps LTM Total Customers(1) 5.0 4.9 (2 ) %
(1) LTM: Last twelve months.
Share Repurchases
From February 1, 2017 through April 30, 2017, Liberty
Interactive repurchased approximately 4.0 million Series A QVC
Group shares (Nasdaq: QVCA) at an average cost per share of $19.20
for total cash consideration of $77 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 $7.1 billion, representing
approximately 46% 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. The remaining repurchase authorization for
Liberty Interactive as of May 1, 2017 is approximately $948
million, of which $298 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 HSN.
LIBERTY VENTURES GROUP – Approximately $9 million of
corporate level SG&A expense (including stock-based
compensation expense) was allocated to Liberty Ventures Group in
the first quarter of 2017.
Subsequent to quarter end, 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.
The following provides a summary of the transactions. Additional
information is available in the press release and Current Reports
on Form 8-K as filed with the SEC relating to the transactions
(collectively, the “Reference Documents”).
Liberty Interactive will contribute to GCI its entire equity
interests in Liberty Broadband, Charter and LendingTree, together
with the Evite operating business and certain other assets and
liabilities (including, subject to certain conditions, Liberty
Interactive’s equity interest in FTD) (the “Contribution”). Liberty
Interactive will then effect a tax-free separation of its
controlling interest in the combined company (to be named GCI
Liberty, Inc. (“GCI Liberty”)) to the holders of Liberty Ventures
common stock in full redemption of all outstanding shares of such
stock. As a result, the QVC Group will become an asset-backed stock
and it is expected that Liberty Interactive will be renamed QVC
Group, Inc.
Holders of GCI Class A Common Stock and GCI Class B Common Stock
each will receive (i) 0.63 of a share of reclassified GCI Class A
Common Stock and (ii) 0.20 of a share of new GCI Series A preferred
stock in exchange for each share of their existing GCI stock. The
exchange ratios were determined based on total consideration of
$32.50 per share, comprised of $27.50 per share in reclassified GCI
Class A Common Stock and $5.00 per share in newly issued GCI
Preferred Stock, and a Liberty Ventures reference price of $43.65
(with no premium paid for shares of GCI Class B Common Stock). The
shares of GCI Preferred Stock will accrue dividends at an initial
rate of 5% per annum (which would increase to 7% in connection with
a future reincorporation of GCI Liberty in Delaware) and will be
redeemable in cash upon the 21st anniversary of the closing.
Prior to the Contribution, Liberty Interactive will reattribute
certain assets and liabilities from Liberty Ventures Group to QVC
Group as described in the Reference Documents. Liberty Interactive
will complete the reattribution using similar valuation
methodologies to those used in connection with its previous
reattributions, including taking into account the advice of its
financial advisor.
Subsequent to quarter end, a subsidiary of GCI (the “Issuer”)
completed a solicitation of consents from holders of certain of its
bonds to amend documents governing those bonds (the “Indentures”).
The consent allows the Indentures to, among other things, (i)
permit the Issuer to be a Delaware limited liability company rather
than a corporation as currently required, which would be effected
through a merger with and into a new wholly owned limited liability
company subsidiary of GCI, (ii) result in the reorganization
transactions with Liberty Interactive not constituting a "Change of
Control" requiring the Issuer to make an offer to repurchase
certain of its bonds at a premium, and (iii) provide less
restrictive covenants than those set forth in the Indentures with
respect to certain actions of the Issuer and certain of its
subsidiaries holding the Liberty Ventures businesses, assets and
liabilities contributed by Liberty Interactive to GCI as part of
the Contribution described above.
The transactions are subject to certain termination rights for
Liberty Interactive and GCI as described in the Reference
Documents. The transactions are expected to be completed during the
first quarter of 2018, subject to customary closing conditions
including, among other things, receipt of regulatory approval and
the requisite stockholder approvals.
Share Repurchases
There were no repurchases of Liberty Ventures common stock
(Nasdaq: LVNTA) from February 1, 2017 through April 30, 2017. The
remaining repurchase authorization for Liberty Interactive as of
May 1, 2017 is approximately $948 million, of which $298 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 10:30
a.m. (E.D.T.) on May 9, 2017. For information regarding how to
access the call, please see “Important Notice” later in this
document. 2) For a definition of adjusted OIBDA and applicable
reconciliations and a definition of adjusted OIBDA margin, see the
accompanying schedules. 3) For a definition of constant currency
financial metrics, see the accompanying schedules. Applicable
reconciliations can be found in the financial tables at the
beginning of this press release.
QVC GROUP
FINANCIAL METRICS – QUARTER
(amounts in millions) 1Q16 1Q17 % Change
Revenue QVC
US $ 1,407 $ 1,370 (3 ) % QVC International(1) 606
595 (2 ) % Total QVC revenue 2,013 1,965 (2 ) %
zulily 355 359 1 % Intergroup eliminations (1 ) (1 )
- %
Total QVC Group Revenue $ 2,367
$ 2,323 (2 ) %
Operating Income QVC US $ 201 $ 202 - % QVC
International(1) 60 69 15 %
Total QVC operating income 261 271 4 % zulily (43 ) (38 ) 12 %
Corporate and other (12 ) (7 ) 42 %
Total
QVC Group Operating Income $ 206 $
226 10 % Adjusted
OIBDA QVC US $ 326 $ 336 3 % QVC International(1) 89
98 10 % Total QVC adjusted OIBDA 415
434 5 % zulily 23 15 (35 ) % Corporate and other (5 )
(4 ) 20 %
Total QVC Group Adjusted OIBDA $
433 $ 445 3
% Net Income and Adjusted Net Income Total QVC
Group net income $ 94 $ 91 (3 ) % Total QVC Group adjusted net
income(2) $ 180 $ 168 (6 ) %
China JV(3)
Revenue $ 41 $ 42 2 % Adjusted OIBDA $ (1 ) $ (2 ) (100 ) %
(amounts in millions)
QVCA Shares
Outstanding
4/30/2016 4/30/2017 Outstanding A and B shares 481
451 (amounts in millions)
Quarter ended Quarter
ended
QVCA and QVCB
Basic and Diluted Shares
3/31/2016 3/31/2017 Basic weighted average shares
outstanding ("WASO") 485 453 Potentially dilutive shares 6
2
Diluted WASO 491
455 (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)
12/31/2016
3/31/2017 HSN(1) $ 687 $ 743
Total Attributed QVC Group
$ 687 $ 743 Charter(2) $ 1,543 $
1,754 FTD(3) 243 205 Liberty Broadband(2) 3,161 3,688
LendingTree(4) 281 348 Other public holdings(2) 304
350
Total Attributed Liberty Ventures Group $
5,532 $ 6,345 (1)
Represents fair value of the investment in HSN 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 $184 million and $194 million at December 31, 2016
and March 31, 2017, respectively. (2) Represents fair value of the
investments in Charter, Liberty Broadband and other public holdings
attributed to Liberty Ventures Group, which are accounted for at
fair value. (3) Represents 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 value which aggregated $216 million
and $212 million at December 31, 2016 and March 31, 2017,
respectively. (4) 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 $31 million and $33 million at December 31, 2016 and
March 31, 2017, respectively.
Cash and Debt
The following presentation is provided to separately identify
cash and liquid investments and debt information.
(amounts in millions)
12/31/2016
3/31/2017
Cash and Liquid Investments Attributable to: QVC
Group $ 338 $ 379 Liberty Ventures Group 487
442
Total Liberty Consolidated Cash and Liquid
Investments $ 825 $ 821
Debt: Senior notes and debentures(1) $ 791 $
791 Senior exchangeable debentures(2) 1 1 QVC senior notes(1) 3,550
3,550 QVC bank credit facility 1,896 1,699 Other 174
180
Total Attributed QVC Group Debt $
6,412 $ 6,221 Unamortized discount, fair
market value adjustment and deferred loan costs (37 )
(37 )
Total Attributed QVC Group Debt (GAAP) $
6,375 $ 6,184 Senior
exchangeable debentures(2) 1,959 1,955
Total Attributed Liberty Ventures Group Debt $
1,959 $ 1,955 Fair market value adjustment
(292 ) (209 )
Total Attributed Liberty Ventures
Group Debt (GAAP) $ 1,667 $
1,746 Total Liberty Interactive Corporation
Debt (GAAP) $ 8,042 $ 7,930
(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
increased $41 million in the first quarter. Share repurchases, net
debt repayments and capital expenditures were more than offset by
cash provided from operations. Total debt attributed to the QVC
Group decreased by $191 million primarily due to repayments on
QVC’s credit facility.
Total cash and liquid investments attributed to the Liberty
Ventures Group decreased $45 million, primarily due to additional
cost and equity investments related to green energy and other
minority investments and net repayments on outstanding debt. Total
debt attributed to Liberty Ventures Group decreased by $4 million
due to net repayments on outstanding debt.
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 10:30 a.m. (E.D.T.) on May 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
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements about business strategies, market
potential, future financial prospects, market conditions, sales
demand, 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 contemplated
reincorporation of GCI Liberty, the renaming of Liberty
Interactive, new service and product offerings, the monetization of
our non-core assets, the continuation of our stock repurchase
program, the estimated liabilities under exchangeable debentures
and other matters that are not historical facts. These
forward-looking statements involve many risks and uncertainties
that could cause actual results to differ materially from those
expressed or implied by such statements, including, without
limitation, possible changes in market acceptance of new products
or services, competitive issues, regulatory matters affecting our
businesses, continued access to capital on terms acceptable to
Liberty Interactive, changes in law and government regulations that
may impact the derivative instruments that hedge certain of our
financial risks, the availability of investment opportunities, the
satisfaction of conditions to 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.
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 business’ 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 businesses' 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 March 31, 2016, June 30, 2016,
September 30, 2016, December 31, 2016 and March 31, 2017,
respectively.
QUARTERLY SUMMARY
(amounts in millions) 1Q16
2Q16 3Q16 4Q16
1Q17
QVC Group Adjusted OIBDA 433 487
406 610 445 Depreciation and amortization (209 ) (214 ) (219 ) (208
) (207 ) Stock compensation expense (18 ) (19 )
(20 ) (18 ) (12 )
Operating Income
$ 206 $ 254 $
167 $ 384 $ 226
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 March 31, 2016,
June 30, 2016, September 30, 2016, December 31, 2016 and March 31,
2017, respectively.
QUARTERLY SUMMARY
(amounts in millions) 1Q16
2Q16 3Q16 4Q16
1Q17
QVC
Group
QVC Adjusted OIBDA QVC US $ 326 $ 363 $ 308 $ 438 $ 336 QVC
International 89 100 85 131 98 Consolidated QVC adjusted
OIBDA 415 463 393 569 434 Depreciation and amortization (148 ) (146
) (154 ) (157 ) (157 ) Stock compensation (6 ) (10 )
(8 ) (8 ) (6 )
QVC Operating Income
$ 261 $ 307 $
231 $ 404 $ 271
zulily Adjusted OIBDA $ 23 $ 31 $ 18 $ 40 $ 15
Depreciation and amortization (61 ) (68 ) (65 ) (51 ) (50 ) Stock
compensation (5 ) (6 ) (5 ) (3 )
(3 )
zulily Operating Income (Loss) $ (43
) $ (43 ) $ (52 )
$ (14 ) $ (38 )
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 March 31, 2016,
June 30, 2016, September 30, 2016, December 31, 2016 and March 31,
2017, respectively.
QUARTERLY SUMMARY
(amounts in millions) 1Q16
2Q16 3Q16 4Q16
1Q17 QVC Group adjusted OIBDA $ 433 $
487 $ 406 $ 610 $ 445 Liberty Ventures Group adjusted OIBDA
4 8 (4 ) (5 ) (8 )
Consolidated Liberty Interactive Corp. Adjusted OIBDA
$ 437 $ 495 $
402 $ 605 $ 437
Depreciation and amortization (217 ) (221 ) (225 ) (211 )
(208 ) Stock compensation (31 ) (24 ) (20 )
(22 ) (16 )
Consolidated Liberty Interactive Corp.
Operating Income $ 189 $ 250
$ 157 $ 372
$ 213
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 March 31, 2016, June 30, 2016,
September 30, 2016, December 31, 2016 and March 31, 2017,
respectively.
QUARTERLY SUMMARY
(amounts in millions) 1Q16
2Q16 3Q16 4Q16
1Q17 LTM
QVC Group
Net income $ 94 $ 130 $ 61 $ 188 $ 91 $ 470
QVC purchase accounting amort., net
deferred tax benefit(1)
50 50 50 49 49 198
zulily purchase accounting amort., net
deferred tax benefit(2)
36 38 37 29 28 132 QVC
Group adjusted net income $ 180 $ 218 $ 148 $ 266 $ 168 $ 800
QVCA/B shares outstanding as of April 30, 2017 451 Adjusted
LTM earnings per share $ 1.78 (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 $211 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 will be fully amortized by 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
March 31, 2017 - (unaudited)
Attributed QVC Ventures
Consolidated Group Group Liberty
amounts in millions
Assets Current assets: Cash and cash
equivalents $ 379 442 821 Trade and other receivables, net 933 36
969 Inventory, net 1,050 — 1,050 Other current assets 78 2
80 Total current assets 2,440 480 2,920
Investments in available-for-sale securities and other cost
investments 4 2,181 2,185 Investments in affiliates, accounted for
using the equity method 233 334 567 Investment in Liberty Broadband
measured at fair value — 3,688 3,688 Property and equipment, net
1,123 1 1,124 Intangible assets not subject to amortization 9,347
30 9,377 Intangible assets subject to amortization, net 858 4 862
Other assets, at cost, net of accumulated amortization 35 —
35 Total assets $ 14,040 6,718 20,758
Liabilities and Equity Current liabilities: Intergroup
payable (receivable) $ 172 (172 ) — Accounts payable 727 — 727
Accrued liabilities 579 22 601 Current portion of debt 15 902 917
Other current liabilities 178 2 180 Total current
liabilities 1,671 754 2,425 Long-term debt 6,169 844
7,013 Deferred income tax liabilities 1,111 2,800 3,911 Other
liabilities 165 (3 ) 162 Total liabilities 9,116
4,395 13,511 Equity/Attributed net assets (liabilities)
4,830 2,332 7,162 Non-controlling interests in equity of
subsidiaries 94 (9 ) 85 Total liabilities and equity $
14,040 6,718 20,758
LIBERTY INTERACTIVE CORPORATION
STATEMENT OF OPERATIONS
INFORMATION
Three months ended March 31, 2017 -
(unaudited)
Attributed QVC Ventures
Consolidated Group Group Liberty
amounts in millions Revenue: Total revenue, net $ 2,323 4 2,327
Operating costs and expenses: Cost of sales 1,505 — 1,505
Operating 148 3 151 Selling, general and administrative, including
stock-based compensation 237 13 250 Depreciation and amortization
207 1 208 2,097 17
2,114 Operating income (loss) 226 (13 ) 213 Other
income (expense): Interest expense (75 ) (15 ) (90 ) Share of
earnings (losses) of affiliates, net 14 (41 ) (27 ) Realized and
unrealized gains (losses) on financial instruments, net (1 ) 702
701 Other, net (2 ) 3 1 (64 ) 649
585 Earnings (loss) from continuing operations before
income taxes 162 636 798 Income tax benefit (expense) (59 )
(220 ) (279 ) Net earnings (loss) from continuing operations 103
416 519 Less net earnings (loss) attributable to noncontrolling
interests 12 — 12 Net earnings (loss)
attributable to Liberty stockholders
$
91 416 507
LIBERTY INTERACTIVE CORPORATION
STATEMENT OF OPERATIONS
INFORMATION
Three months ended March 31, 2016 -
(unaudited)
Attributed QVC Ventures
Consolidated Group Group Liberty
amounts in millions Revenue: Total revenue, net $ 2,367 143 2,510
Operating costs and expenses: Cost of sales 1,535 91 1,626
Operating 153 17 170 Selling, general and administrative, including
stock-based compensation 264 44 308 Depreciation and amortization
209 8 217 2,161 160
2,321 Operating income (loss) 206 (17 ) 189
Other income (expense): Interest expense (76 ) (17 ) (93 ) Share of
earnings (losses) of affiliates, net 21 (18 ) 3 Realized and
unrealized gains (losses) on financial instruments, net (1 ) (6 )
(7 ) Other, net 5 33 38 (51 ) (8
) (59 ) Earnings (loss) from continuing operations before income
taxes 155 (25 ) 130 Income tax benefit (expense) (53 ) 15
(38 ) Net earnings (loss) from continuing operations 102 (10
) 92 Earnings (loss) from discontinued operations —
(16 ) (16 ) Net earnings (loss) 102 (26 ) 76 Less net earnings
(loss) attributable to noncontrolling interests 8 —
8 Net earnings (loss) attributable to Liberty
stockholders $ 94 (26 ) 68
LIBERTY INTERACTIVE CORPORATION
STATEMENT OF CASH FLOWS
INFORMATION
Three months ended March 31, 2017-
(unaudited)
Attributed QVC Ventures
Consolidated Group Group Liberty
amounts in millions CASH FLOWS FROM OPERATING ACTIVITIES: Net
earnings (loss) $ 103 416 519 Adjustments to reconcile net earnings
to net cash provided by operating activities: Depreciation and
amortization 207 1 208 Stock-based compensation 12 4 16 Share of
(earnings) losses of affiliates, net (14 ) 41 27 Cash receipts from
return on equity investments 7 — 7 Realized and unrealized gains
(losses) on financial instruments, net 1 (702 ) (701 ) (Gains)
losses on dispositions 2 (2 ) — Deferred income tax (benefit)
expense (25 ) 280 255 Other, net 2 1 3 Intergroup tax allocations
60 (60 ) — Changes in operating assets and liabilities Current and
other assets 244 10 254 Payables and other current liabilities
(154 ) (8 ) (162 ) Net cash provided (used) by operating
activities 445 (19 ) 426 CASH FLOWS
FROM INVESTING ACTIVITIES: Investments in and loans to cost and
equity investees — (21 ) (21 ) Capital expended for property and
equipment (29 ) (1 ) (30 ) Other investing activities, net
(1 ) — (1 ) Net cash provided (used) by investing activities
(30 ) (22 ) (52 ) CASH FLOWS FROM FINANCING
ACTIVITIES: Borrowings of debt 499 — 499 Repayments of debt (699 )
(5 ) (704 ) Repurchases of QVC Group common stock (152 ) — (152 )
Withholding taxes on net settlements of stock-based compensation (4
) — (4 ) Other financing activities, net (27 ) 1 (26
) Net cash provided (used) by financing activities (383 ) (4
) (387 ) Effect of foreign currency rates on cash 9 —
9 Net increase (decrease) in cash and cash
equivalents 41 (45 ) (4 ) Cash and cash equivalents at beginning of
period 338 487 825 Cash and cash
equivalents at end period
$
379 442 821
LIBERTY INTERACTIVE CORPORATION
STATEMENT OF CASH FLOWS
INFORMATION
Three months ended March 31, 2016 -
(unaudited)
Attributed QVC Ventures
Consolidated Group Group Liberty
amounts in millions CASH FLOWS FROM OPERATING ACTIVITIES: Net
earnings (loss) $ 102 (26 ) 76 Adjustments to reconcile net
earnings to net cash provided by operating activities: (Earnings)
loss from discontinued operations — 16 16 Depreciation and
amortization 209 8 217 Stock-based compensation 18 13 31 Cash
payments for stock based compensation — (10 ) (10 ) Share of losses
(earnings) of affiliates, net (21 ) 18 (3 ) Cash receipts from
return on equity investments 6 3 9 Realized and unrealized gains
(losses) on financial instruments, net 1 6 7 Deferred income tax
(benefit) expense (30 ) 36 6 Other, net (6 ) (30 ) (36 ) Intergroup
tax allocation 49 (49 ) — Intergroup tax (payments) receipts (54 )
54 — Changes in operating assets and liabilities Current and other
assets 268 13 281 Payables and other current liabilities
(297 ) (3 ) (300 ) Net cash provided (used) by operating activities
245 49 294 CASH FLOWS FROM
INVESTING ACTIVITIES: Cash paid for acquisitions — 9 9 Investments
in and loans to cost and equity investees — (22 ) (22 ) Capital
expended for property and equipment (43 ) (8 ) (51 ) Purchases of
short term and other marketable securities — (116 ) (116 ) Sales of
short term and other marketable securities 12 413 425 Other
investing activities, net (13 ) 1 (12 ) Net cash
provided (used) by investing activities (44 ) 277 233
CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings of
debt 515 108 623 Repayments of debt (438 ) (160 ) (598 )
Repurchases of QVC Group common stock (238 ) — (238 ) Withholding
taxes on net settlements of stock-based compensation (7 ) (1 ) (8 )
Other financing activities, net (6 ) 1 (5 ) Net cash
provided (used) by financing activities (174 ) (52 ) (226 )
Effect of foreign currency rates on cash (13 ) — (13 ) Net cash
provided (used) by discontinued operations: Cash provided (used) by
operating activities — 6 6 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 — 6
6 Net increase (decrease) in cash and cash
equivalents 14 280 294 Cash and cash
equivalents at beginning of period 426 2,023
2,449 Cash and cash equivalents at end period $ 440
2,303 2,743
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version on businesswire.com: http://www.businesswire.com/news/home/20170509005644/en/
Liberty Interactive CorporationCourtnee Chun, 720-875-5420
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