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| LINTA > SEC Filings for LINTA > Form 10-Q on 8-Aug-2012 | All Recent SEC Filings |
8-Aug-2012
Quarterly Report
Certain statements in this Quarterly Report on Form 10-Q constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, including statements regarding our business,
product and marketing strategies; new service offerings; revenue growth at
QVC, Inc.; the recoverability of our goodwill and other long-lived assets; our
projected sources and uses of cash; and the anticipated non-material impact of
certain contingent liabilities related to legal and tax proceedings and other
matters arising in the ordinary course of business. Where, in any
forward-looking statement, we express an expectation or belief as to future
results or events, such expectation or belief is expressed in good faith and
believed to have a reasonable basis, but there can be no assurance that the
expectation or belief will result or be achieved or accomplished. The following
include some but not all of the factors that could cause actual results or
events to differ materially from those anticipated:
customer demand for our products and services and our ability to adapt to
changes in demand;
competitor responses to our products and services, and the products and services of the entities in which we have interests;
uncertainties inherent in the development and integration of new business lines and business strategies;
uncertainties associated with product and service development and market acceptance, including the development and provision of additional connections to consumers as technologies progress and shift consumer shopping behaviors;
our future financial performance, including availability, terms and deployment of capital;
our ability to successfully integrate and recognize anticipated efficiencies and benefits from the businesses we acquire;
the ability of suppliers and vendors to deliver products, equipment, software and services;
the ability to renew affiliate agreements on terms that are acceptable to us;
the outcome of any pending or threatened litigation;
availability of qualified personnel;
changes in, or failure or inability to comply with, government regulations, including, without limitation, regulations of the Federal Communications Commission, and adverse outcomes from regulatory proceedings;
changes in the nature of key strategic relationships with partners, vendors and joint venturers;
general economic and business conditions and industry trends including the current economic downturn;
consumer spending levels, including the availability and amount of individual consumer debt;
changes in distribution and viewing of television programming, including the expanded deployment of personal video recorders, video on demand and IP television and their impact on home shopping networks;
increased digital TV penetration and the impact on channel positioning of our channels;
rapid technological changes;
the regulatory and competitive environment of the industries in which we, and the entities in which we have interests, operate;
threatened terrorist attacks and ongoing military action in the Middle East and other parts of the world; and
fluctuations in foreign currency exchange rates and political unrest in international markets.
For additional risk factors, please see Part I, Item 1 of our Annual Report on
Form 10-K for the year ended December 31, 2011. These forward-looking statements
and such risks, uncertainties and other factors speak only as of the date of
this Quarterly Report, and we expressly disclaim any obligation or undertaking
to disseminate any updates or revisions to any forward-looking statement
contained herein, to reflect any change in our expectations with regard thereto,
or any other change in events, conditions or circumstances on which any such
statement is based.
The following discussion and analysis provides information concerning our
results of operations and financial condition. This discussion should be read in
conjunction with our accompanying condensed consolidated financial statements
and the notes thereto and our Annual Report on Form 10-K for the year ended
December 31, 2011.
Overview
We own controlling and non-controlling interests in a broad range of video and
on-line commerce companies. Our largest business, which is also our principal
reportable segment, is QVC, Inc. QVC markets and sells a wide variety of
consumer products in the United States and several foreign countries, primarily
by means of its televised shopping programs and via the Internet through its
domestic and international websites and mobile applications. Additionally, we
own entire or majority interests in consolidated subsidiaries which operate
on-line commerce businesses in a broad range of retail categories. The more
significant of these include Backcountry.com, Inc., Bodybuilding.com, LLC,
Celebrate Interactive Holdings, LLC and Provide Commerce, Inc. Backcountry
operates websites offering sports gear and clothing for outdoor and active
individuals in a variety of categories. Bodybuilding manages websites related to
sports nutrition, body building and fitness. Celebrate operates websites that
offer costumes, accessories, dιcor, party supplies and invitations. Provide
operates an e-commerce marketplace of websites for perishable goods, including
flowers, fruits and desserts, as well as upscale personalized gifts.
Our "Corporate and Other" category includes our corporate ownership interests in
other unconsolidated businesses and corporate expenses. We hold ownership
interests in Expedia, Inc., HSN, Inc., Interval Leisure Group, Inc. and
Tree.com, Inc. which we account for as equity method investments; and we
continue to maintain investments and related financial instruments in public
companies such as Time Warner Inc., Time Warner Cable Inc. and AOL, Inc., which
are accounted for at their respective fair market values and are included in
"Corporate and Other."
Liberty Interactive's board of directors has approved the recapitalization of
its common stock through the creation of a new tracking stock to be designated
the Liberty Ventures common stock. In the recapitalization, each holder of
Liberty Interactive common stock will receive 0.05 of a share of the
corresponding series of Liberty Ventures common stock, with cash issued in lieu
of fractional shares of Liberty Ventures common stock. In addition, holders of
Liberty Interactive common stock will also receive 1/3 of a subscription right
to purchase one share of Series A Liberty Ventures common stock for each share
of Liberty Ventures common stock they receive in the recapitalization. The
proposed recapitalization is intended to be tax-free to stockholders and its
completion will be subject to various conditions, including the affirmative vote
of at least a majority of the aggregate voting power of the shares of Liberty
Interactive common stock outstanding and entitled to vote at the annual
stockholder meeting in the third quarter of 2012, voting together as a single
class, to approve a proposal to amend and restate Liberty's certificate of
incorporation in order to effect the recapitalization. Subject to the
satisfaction or, where applicable, waiver, of such conditions, the
recapitalization is currently expected to occur in the third quarter of 2012.
The new Ventures Group will initially have attributed to it our interests in
Expedia, Inc., TripAdvisor, Inc., Interval Leisure Group, Inc., Tree.com, Inc.
and other smaller assets, investments in Time Warner Inc., Time Warner
Cable Inc. and AOL, Inc., as well as cash in the amount of approximately
$1,325 million (which includes proceeds from the sale of TripAdvisor, Inc.
shares in May 2012 and the impact of certain other post-March 31 business
activities). The Ventures Group will have attributed to it certain liabilities
related to our Exchangeable Debentures and certain deferred tax liabilities. The
Ventures Group will be primarily focused on the maximization of the value of
these investments and investing in new business opportunities.
The Interactive Group will initially have attributed to it the remainder of our
businesses and assets, including our operating subsidiaries QVC, Provide
Commerce, Inc., Backcountry.com, Inc., Bodybuilding.com, LLC, and Celebrate
Interactive Holdings, LLC, CommerceHub and LMC Right Start, Inc., as well as our
interest in HSN, Inc. and cash in the amount of approximately $500 million. The
Interactive Group will have attributed to it liabilities that reside with QVC
and the other entities listed as well as our outstanding senior notes and
certain deferred tax liabilities. The Interactive Group will be primarily
focused on our video and e-commerce operating businesses.
Discontinued Operations
Prior to the Split-Off (as defined below), Liberty's equity was structured into
three separate tracking stock groups. Tracking stock is a type of common stock
that the issuing company intends to reflect or "track" the economic performance
of a particular business or "group," rather than the economic performance of the
company as a whole. Liberty had three tracking stocks: Liberty Interactive
common stock, Liberty Starz common stock and Liberty Capital common stock, which
were intended to track and reflect the economic performance of the separate
businesses, assets and liabilities attributed to each group. These attributed
businesses, assets and liabilities were not separate legal entities and
therefore could not own assets, issue securities or enter into legally binding
agreements. Holders of the tracking stocks did not have direct claim to the
group's stock or assets and were not represented by separate boards of
directors.
On September 23, 2011, Liberty completed the split-off of its wholly owned
subsidiary, Liberty Media Corporation ("LMC") (formerly known as Liberty
CapStarz, Inc. and prior thereto known as Liberty Splitco, Inc.) (the
"Split-Off"). At the
time of the Split-Off, LMC owned all the assets, businesses and liabilities attributed to our former Capital and Starz tracking stock groups immediately prior to the Split-Off. The Split-Off was effected by means of a redemption of all of the Liberty Capital common stock and Liberty Starz common stock of Liberty for all of the common stock of LMC. This transaction has been accounted for at historical cost due to the pro rata nature of the distribution. Following the Split-Off, Liberty and LMC operate as separate, publicly traded companies and neither has any stock ownership, beneficial or otherwise, in the other. In connection with the Split-Off, Liberty and LMC entered into certain agreements in order to govern certain of the ongoing relationships between the two companies after the Split-Off and to provide for an orderly transition. The condensed consolidated financial statements of Liberty have been prepared to reflect LMC as discontinued operations. Accordingly, the assets and liabilities, revenue, costs and expenses, and cash flows of LMC (for periods prior to the Split-Off) have been excluded from the respective captions in the accompanying condensed consolidated balance sheets, statements of operations, comprehensive earnings and cash flows in such condensed consolidated financial statements.
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